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https://www.courtlistener.com/api/rest/v3/opinions/872668/ | Electronically Filed
Intermediate Court of Appeals
30747
28-JUN-2012
09:57 AM | 01-03-2023 | 05-25-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2745240/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1914
In re: TADARIAN RESHAWN NEAL,
Petitioner.
On Petition for Writ of Mandamus.
(3:09-cr-00017-FDW-DCK-1)
Submitted: October 21, 2014 Decided: October 23, 2014
Before SHEDD, DUNCAN, and FLOYD, Circuit Judges.
Petition denied by unpublished per curiam opinion.
Tadarian Reshawn Neal, Petitioner Pro Se.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Tadarian Reshawn Neal petitions for a writ of mandamus
seeking an order vacating his sentence pursuant to United States
v. Simmons, 649 F.3d 237 (4th Cir. 2011) (en banc). We conclude
that Neal is not entitled to mandamus relief.
Mandamus relief is a drastic remedy and should be used
only in extraordinary circumstances. Kerr v. U.S. Dist. Court,
426 U.S. 394, 402 (1976); United States v. Moussaoui, 333 F.3d
509, 516-17 (4th Cir. 2003). Further, mandamus relief is
available only when the petitioner has a clear right to the
relief sought. In re First Fed. Sav. & Loan Ass’n, 860 F.2d
135, 138 (4th Cir. 1988).
Because Neal filed an unsuccessful direct appeal of
the challenged criminal judgment, see United States v. Neal, 458
F. App’x 246 (4th Cir. 2011) (Nos. 09-5043, 09-5044), he may not
use this mandamus petition to obtain a second appeal.
Accordingly, although we grant leave to proceed in forma
pauperis, we deny the petition for writ of mandamus. We
dispense with oral argument because the facts and legal
contentions are adequately presented in the materials before
this court and argument would not aid the decisional process.
PETITION DENIED
2 | 01-03-2023 | 10-23-2014 |
https://www.courtlistener.com/api/rest/v3/opinions/1548590/ | 992 A.2d 624 (2010)
Georgia TUTTLE, M.D. & a.
v.
NEW HAMPSHIRE MEDICAL MALPRACTICE JOINT UNDERWRITING ASSOCIATION and another.
No. 2009-555.
Supreme Court of New Hampshire.
Argued: October 15, 2009.
Opinion Issued: January 28, 2010.
*629 Nixon Peabody, LLP, of Manchester (Kevin M. Fitzgerald, W. Scott O'Connell, and Gordon J. MacDonald on the brief, and Mr. Fitzgerald orally), for the petitioners.
Michael A. Delaney, attorney general (Anne M. Edwards, associate attorney general, and Glenn A. Perlow, assistant attorney general, on the brief), and Rackemann, Sawyer & Brewster, P.C., of Boston, Massachusetts (Eric A. Smith and J. David Leslie on the brief, and Mr. Leslie orally), for the State defendants.
William L. O'Brien, of Concord, & a. for the New England Legal Foundation and National Association of Mutual Insurance Companies, as amici curiae, joined by forty-nine members of the New Hampshire House of Representatives.
David I. Frydman, House Legal Counsel, for Terie Norelli, Speaker of the House, and Sylvia B. Larsen, Senate President, as amici curiae.
Sulloway & Hollis, PLLC, of Concord (Martin P. Honigberg and Amy Manzelli on the brief), for the New Hampshire Medical Society and the American Medical Association, as amici curiae.
CONBOY, J.
The State of New Hampshire, the Commissioner of Insurance, and the State Treasurer appeal an order of the Superior Court (McGuire, J.) declaring Laws 2009, 144:1 (the Act) unconstitutional. The Act requires the New Hampshire Medical Malpractice Joint Underwriting Association (JUA) to transfer a total of $110 million to the State's general fund during fiscal years 2009, 2010, and 2011. The trial court ruled that the Act constituted a taking without just compensation in violation of Part I, Article 12 of the State Constitution and the Fifth and Fourteenth Amendments to the Federal Constitution, and that it impaired the petitioners' contract rights in violation of Part I, Article 23 of the State Constitution and Article 1, Section 10 of the Federal Constitution. The trial court also decided that the State had no right to any "excess surplus" funds held by the JUA because the JUA is not a state agency. Because we find that the Act constitutes a retrospective law that results in impairment of contract rights in violation of the New Hampshire Constitution, we affirm.
*630 I. Procedural History
In June 2009, the petitioners, present and past policyholders of the JUA, on their own behalf and on behalf of a purported class of policyholders, filed a petition for a writ of mandamus against the JUA, its board of directors, the New Hampshire Insurance Department (Department) and its commissioner, and for a writ of prohibition against the Department, the New Hampshire State Treasury (Treasury) and the State Treasurer. The petitioners alleged that, pursuant to their contracts with the JUA and certain administrative rules, they had a vested right in any excess surplus premiums collected by the JUA. The Act is based upon the State's assertion that the excess surplus held by the JUA amounted to $110 million.
The request for mandamus asked that the court compel the JUA "to evaluate its current surplus and determine what in its judgment should be declared earnings and returned to the [petitioners]." The request for a writ of prohibition asked that the court prohibit the Department and Treasury "from taking action in furtherance of [their] erroneous interpretation[s] of the insurance contract[s] and [New Hampshire Administrative Rule] Ins 1703.07(d)."
Also in June 2009, the petitioners, on their own behalf and on behalf of a purported class of policyholders, filed a petition for declaratory and injunctive relief against the State of New Hampshire. They asked the court to declare the Act unconstitutional because: (1) it was a retrospective law that substantially impaired their vested contract rights and, therefore, violated Part I, Article 23 of the State Constitution; (2) it constituted a "taking" of property and, thus, violated Part I, Article 12 of the State Constitution and the Fifth and Fourteenth Amendments to the Federal Constitution; (3) it impaired their contracts with the JUA and, thus, violated Article I, Section 10, Clause 1 of the Federal Constitution; and (4) it represented an unconstitutional tax in violation of Part II, Article 5 of the State Constitution. The trial court consolidated the cases.
The parties filed cross-motions for summary judgment. The State argued that the petitioners do not have vested property rights in any excess surplus funds held by the JUA, but have, at most, only an expectancy interest that is contingent upon actions by the JUA's board of directors. The State also asserted that any excess surplus funds belong to the State because the JUA is a state agency. After a hearing, the trial court ruled that the JUA is not a state agency, and that the Act violates both the State and Federal Constitutions because it constitutes a taking of property belonging to the petitioners, and because it impairs their contract rights. This appeal followed.
II. Facts
In 1975, the insurance commissioner determined that professional medical liability insurance was not readily available in the voluntary market, and that the public interest required such availability. See RSA 404-C:1 (2006). Accordingly, the commissioner adopted regulations creating the JUA to provide insurance coverage addressing the public need. See generally N.H. Admin. Rules, Ins 1700 et seq. The regulations also establish the plan of operation (the plan) for the JUA. See id. 1703. The plan has been in place, with some modifications, since 1975.
The JUA "was established to make available medical malpractice insurance for eligible risks." N.H. Admin. Rules, Ins 1701.01 (eff.Dec.1, 2000, exp.Dec.1, 2008). An "eligible risk" is "any health care provider operating legally in the state of New Hampshire," other than those who fail to *631 timely pay premiums, have an outstanding judgment due for premiums, or who do not provide the information necessary to effect insurance coverage. N.H. Admin. Rules, Ins. 1703.01(e). Each eligible risk insured by the association must "receive the same level of service as is generally available in the voluntary market." Id. 1702.04. The petitioners, as healthcare providers and current and former JUA policyholders, are such eligible risks.
The JUA is governed by a board of directors. Id. 1703.04. The commissioner is required to "grant the board the authority to exercise all reasonable or necessary powers relating to the operation of the association." Id. 1703.04(l). The authority of the board includes the power to operate and manage JUA funds by investing premiums. Id. 1703.04(p). The actual insuring functions are carried out by a "servicing carrier" chosen by the commissioner from among member insurers or qualifying non-member insurers, and the board itself acts as a servicing carrier if, for any reason, the commissioner does not appoint one. Id. 1703.05(c), 1702.04. The JUA enters into contracts and conducts its business independently of the Governor and Council and of the commissioner. See id. 1703.04(o).
The plan requires all insurers authorized to write liability insurance in the state to be members of the JUA. Id. 1702.01; RSA 404-C:3. All member insurers are required to share in the JUA's premiums, expenses, servicing allowances and losses, based upon their portion of net direct premiums written in the state. Id. 1702.03(a).
The JUA's funding mechanism changed on January 1, 1986, in response to a finding by the commissioner that the JUA did not have sufficient assets to cover claims arising from policies written from 1975 to 1985. Compare id. 1703.07 with id. 1703.08. To cover the deficits incurred prior to 1986, a 15% surcharge was assessed on every medical malpractice liability insurance policy issued in the state beginning in 1986, and continuing until the commissioner should determine that a deficit no longer exists. Id. 1703.08(a), (b), (d). The JUA's reserves accrued, and policies issued, on and after January 1, 1986, are separately accounted for. Compare id. 1703.07 with id. 1703.08. The JUA reserves in question are funded by policy premiums and the interest earned thereon. See id. 1703.07(a), 1703.04(p). The State did not contribute funds to the JUA at the time of its creation, and has made no contributions to it at any other time. The State is not responsible for any JUA shortfalls, and does not guarantee performance of JUA obligations. Any deficits in the post-1985 fund are to be satisfied by assessments against the members, who are then to be reimbursed through assessments against policyholders and surcharges on subsequently sold policies. Id. 1703.07(f). The post-1985 JUA fund has not experienced a deficit and, therefore, no assessments or surcharges have been necessary.
In the event of fund excess, as is purportedly the case here, the plan provides as follows:
(c) If premiums written on association business exceed the amount necessary to pay losses and expenses, the board shall apply such excess to repay members for assessments previously levied, in proportion to the amount paid by each member.
(d) If premiums written on association business exceed the amount necessary to pay losses and expenses and to reimburse members for all assessments pursuant to Ins 1703.07(c), then with review and approval by the commissioner as being consistent with the purposes of this chapter, the board shall authorize *632 the application of such excess in one or both of the following ways:
(1) Against and to reduce future assessments of the association; or
(2) Distribute the excess to such health care providers covered by the association as is just and equitable.
Id. 1703.07(c), (d) (emphasis added). The phrase "with review and approval by the commissioner as being consistent with the purposes of this chapter," was added in January 2009. Id. Also in January 2009, the regulations were amended to provide that "the [JUA] will promote the public interest in ensuring that consumers of health care services have adequate access to needed care." N.H. Admin. Rules, Ins. 1701.01.
The JUA issues individual policies to its policyholders. The policies are titled, "LIABILITY POLICY (Assessable and Participating)," or "GENERAL LIABILITY POLICY (Assessable and Participating)." Each policy provides that it "has been issued by the [JUA] under the New Hampshire Medical Malpractice Joint Underwriting Association Plan established pursuant to the Authority granted by RSA 404-C:1 and by RSA 400-A:15, and is subject to the provisions of the Plan." The policy provisions relating to assessments and dividends provide in full:
12. Assessable Policy Provision. This policy has been issued by the [JUA] under the New Hampshire Medical Malpractice Joint Underwriting Association Plan established pursuant to the Authority granted by RSA 404-C:1 and by RSA 400-A:15, and is subject to the provisions of the Plan. The Plan provides, and the named insured agrees, that in the event an underwriting deficit exists at the end of any fiscal year the Plan is in effect, the board of directors of the [JUA] may make a premium contingency assessment against all policy-holders during such year, and the named insured shall pay to the [JUA] the named insured's part of the premium contingency assessment based upon the policy premium payment paid by the named insured to the [JUA] with respect to that year. The Plan further provides that the [JUA] shall cancel the policy of any policyholder who fails to pay the premium contingency assessment.
13. Participating Policy Provisions. The named insured shall participate in the earnings of the [JUA], to such extent and upon such conditions as shall be determined by the board of directors of the [JUA] in accordance with law and as made applicable to this policy, provided the named insured shall have complied with all the terms of this policy with respect to the payment of premium.
(Emphasis omitted.)
Since 1986, the JUA has sought to make three distributions of surplus to its policyholders. In 1999 and 2000, the board submitted proposals for distribution and received approval from the commissioner; distributions were then made. The board's 2001 application for a distribution, however, was denied. The board has not requested a distribution since that time.
In 2008 the JUA was one of the three largest writers of medical malpractice insurance in New Hampshire based on premiums written. It wrote approximately $8.8 million of the estimated $40 million in premiums written. Of approximately 11,000 health care providers in New Hampshire, the JUA insures about 900. It has accumulated assets of $152 million.
In March 2009, the Department prepared a report indicating that the JUA's 2008 year-end surplus "is expected to be in the range of $140 million to $145 million... [as] a result of very efficient operations, *633 good claims management and sound investments over a number of years by the [JUA] board." The Department concluded that the "surplus significantly exceeds the amount of capital needed to support the [JUA]." The report stated that "[t]he Department has not engaged in any formal actuarial exercise in reaching this conclusion." The report was premised upon an estimate of "risk-based capital" that the Department commissioned on behalf of the JUA, which was submitted to the JUA with the following caveat:
It is [the actuarial firm's] understanding that [JUA] management will consider [these] findings for the purposes of evaluating the level of surplus required to support its ongoing operations of providing medical malpractice coverage in New Hampshire.
[The] report is not intended or necessarily suitable for any other purposes.
Under the heading "DISTRIBUTION AND USE," the risk-based capital estimate report reiterated, "[The actuarial firm has] prepared this report solely for [the JUA's] use as described.... It is neither intended nor necessarily suitable for any other purpose." The Department nevertheless relied upon the risk-based capital estimate and reported that it "believes that it would be reasonable to retain a surplus of $55 million to support the [JUA], allowing the remainder of the surplus to be transferred to the General Fund without placing the [JUA] under any significant financial risk." The JUA has not made its own determination as to what amount, if any, constitutes excess surplus.
On June 24, 2009, the legislature passed House Bill 2, which the Governor signed into law on June 30, 2009. The legislature found that "the funds held in surplus by the [JUA] in the Post-1985 Account are significantly in excess of the amount reasonably required to support its obligations as determined by the insurance commissioner," and concluded that "the purpose of promoting access to needed health care would be better served through a transfer of the excess surplus of the Post-1985 Account to the general fund." Laws 2009, 144:1, II. The Act accordingly provides:
Notwithstanding any other provision of law, the [JUA], by and through its board of directors, and any person having responsibility and authority for the custody or investment of the assets of the [JUA] are hereby authorized and directed to transfer no later than July 31, 2009 for the fiscal year ending June 30, 2009 the sum of $65,000,000, and by June 30, 2010 the additional sum of $22,500,000, and by June 30, 2011 the additional sum of $22,500,000 from the Post-1985 Account to the general fund. This sum shall be used for the purpose of supporting programs that promote access to needed health care for underserved persons.
Laws 2009, 144:1, I.
III. The Parties' Arguments
The State asserts that, under the circumstances of this case, we need not determine whether any JUA excess surplus funds belong to the State. Rather, it argues, we need only determine whether the petitioners have a "vested right" in such funds. It asserts that "[t]he nature of the JUA is properly considered only as it reflects on the question whether a person purchasing insurance from the JUA can reasonably claim to have a vested right in surplus protected against state action...." Thus, the State argues that the Act does not constitute an unconstitutional "taking" under either the State or the Federal Constitution, since the petitioners do not have a vested property right in any JUA surplus under their policies, the regulations comprising the plan, or the statutes by whose authority the JUA was created. *634 The State likewise contends that the Act does not violate the State constitutional proscription against retrospective laws or the Federal Contracts Clause because the petitioners do not have the prerequisite vested property right in any JUA surplus. Furthermore, it argues, even if the Act were a retrospective law, it would nonetheless be constitutionally permissible under the common-law balancing test requiring that the court examine whether the Act is reasonable and necessary to serve an important public purpose. The State also contests the petitioners' ability to assert claims derivatively on behalf of the JUA.
The petitioners counter that the Act constitutes a taking of property in which they have vested beneficial rights under the plain language of their policies and the regulations in place at the time their policies were purchased, in violation of both the State and Federal Constitutions. They maintain that the JUA is not a state entity and that its funds are private funds comprised of premiums paid and the interest accumulated thereon. They assert that the Act's interference with their contract rights violates the Federal Contract Clause and constitutes a retrospective law prohibited by Part I, Article 23 of the New Hampshire Constitution. Furthermore, they contend, the fact that the regulations comprising the plan may be altered by the legislature does not permit impairment of the beneficial interests that have already vested under their policies. The petitioners also assert that they may bring claims not only in their own right, but also derivatively on behalf of the JUA.
IV. Analysis
This controversy centers upon the tension between the constitutional proscription against governmental impairment of contract rights and the State's sovereign authority to safeguard the welfare of its citizens. See, e.g., Energy Reserves Group v. Kansas Power & Light, 459 U.S. 400, 410, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983); United States Trust Co. v. New Jersey, 431 U.S. 1, 21, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977). The relevant analytical framework for assessing a constitutional challenge to legislative action is well-established. "Whether or not a statute is constitutional is a question of law, which we review de novo." Akins v. Sec'y of State, 154 N.H. 67, 70, 904 A.2d 702 (2006). "The party challenging a statute's constitutionality bears the burden of proof." State v. Pierce, 152 N.H. 790, 791, 887 A.2d 132 (2005). "[T]he constitutionality of an act passed by the coordinate branch of the government is to be presumed." Opinion of the Justices, 118 N.H. 582, 584, 392 A.2d 125 (1978) (quotation omitted). "It will not be declared to be invalid except upon [i]nescapable grounds; and the operation under it of another department of the state government will not be interfered with until the matter has received full and deliberate consideration." Id. (quotation omitted); see also City of Claremont v. Truell, 126 N.H. 30, 39, 489 A.2d 581 (1985) ("A statute will not be construed to be unconstitutional where it is susceptible to a construction rendering it constitutional." (quotation omitted)).
"In this case, however, there is no question of statutory interpretation. The effects of the legislation are obvious and acknowledged. If those effects infringe on constitutionally protected rights, we cannot avoid our obligation to say so." Alliance of American Insurers v. Chu, 77 N.Y.2d 573, 569 N.Y.S.2d 364, 571 N.E.2d 672, 678 (1991) (citations omitted). We address the petitioners' claims first under the State Constitution, citing federal opinions for guidance only. See State v. Ball, 124 N.H. 226, 231-33, 471 A.2d 347 (1983).
*635 Part I, Article 23 of the New Hampshire Constitution provides: "Retrospective laws are highly injurious, oppressive, and unjust. No such laws, therefore, should be made, either for the decision of civil causes, or the punishment of offenses." "Part I, Article 23 does not expressly reference existing contracts. However, we have held that its proscription duplicates the protections found in the contract clause of the United States Constitution." State v. Fournier, 158 N.H. 214, 221, 965 A.2d 1091 (2009) (quotation omitted). "Although the New Hampshire [retrospective law] provision affords more protection than its federal counterpart, this court has relied on federal contract clause cases to resolve issues raised under part I, article 23 where contract impairment, and not simply retroactive application of a law, was alleged." In re Grand Jury Subpoena (Issued July 10, 2006), 155 N.H. 557, 564, 926 A.2d 280 (2007). "We therefore understand article I, section 10 [of the Federal Constitution] and part I, article 23 [of the State Constitution] to offer equivalent protections where a law impairs a contract, or where a law abrogates an earlier statute that is itself a contract," and will refer to their equivalent protections as the Federal and State Contract Clauses, respectively. Opinion of the Justices (Furlough), 135 N.H. 625, 630, 609 A.2d 1204 (1992).
"The party asserting a Contract Clause violation must first demonstrate retroactive application of a law." Petition of Concord Teachers, 158 N.H. 529, 537, 969 A.2d 403 (2009). We have held that "every statute which takes away or impairs vested rights, acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past, must be deemed retrospective." In the Matter of Goldman & Elliott, 151 N.H. 770, 772, 868 A.2d 278 (2005) (quotation omitted). Thus, "[i]f application of a new law would adversely affect an individual's substantive rights, it may not be applied retroactively." Id.
The vested rights that the petitioners assert as the predicate for their claims are grounded in their contracts with the JUA. See, e.g., Hughes v. N.H. Div. of Aeronautics, 152 N.H. 30, 37, 871 A.2d 18 (2005) (contract rights can constitute vested property rights). The transfers required by the Act occur over fiscal years 2009, 2010, and 2011. However, because we find, for the reasons stated below, that the petitioners' contracts embody vested rights, and that the Act impairs those rights, the Act "must be deemed retrospective." In the Matter of Goldman & Elliott, 151 N.H. at 772, 868 A.2d 278 (quotation omitted).
Contract Clause analysis in New Hampshire requires a threshold inquiry as to whether the legislation operates as a "substantial impairment of a contractual relationship." Lower Village Hydroelectric Assocs. v. City of Claremont, 147 N.H. 73, 77, 782 A.2d 897 (2001). "This inquiry has three components: whether there is a contractual relationship, whether a change in law impairs that contractual relationship, and whether the impairment is substantial." Id. (quotation omitted). If the legislation substantially impairs the contract, "a balancing of the police power and the rights protected by the contract clauses must be performed, and ... [the] law... may pass constitutional muster only if it is reasonable and necessary to serve an important public purpose." Furlough, 135 N.H. at 634, 609 A.2d 1204 (quotation omitted).
We note that other courts reviewing Contract Clause claims have expressed the balancing test using an array of phraseologies and placing emphasis on a variety of factors. See, e.g., In re Certified *636 Question, 447 Mich. 765, 527 N.W.2d 468, 474 (1994), cert. denied, 514 U.S. 1127, 115 S.Ct. 2000, 131 L.Ed.2d 1001 (1995); Pomponio v. Claridge of Pompano Condominium, 378 So.2d 774, 780 (Fla.1979). Ultimately, "Contract Clause cases involve individual inquiries, for no two cases are necessarily alike." Buffalo Teachers Federation v. Tobe, 464 F.3d 362, 373 (2d Cir.2006), cert. denied, 550 U.S. 918, 127 S.Ct. 2133, 167 L.Ed.2d 864 (2007); see also Home Bldg. & L. Assn. v. Blaisdell, 290 U.S. 398, 430, 54 S.Ct. 231, 78 L.Ed. 413 (1934) ("Every case must be determined upon its own circumstances." (quotation omitted)). Accordingly, we take care to avoid a mechanical application of factors or criteria. Otherwise, we risk undermining the core task involved in resolving Contract Clause claims: striking a balance between constitutionally protected contract rights and the State's legitimate exercise of its reserved police power.
A. Substantial Impairment
1. Contractual Relationship
An insurance policy is a contract. See, e.g., Bates v. Phenix Mut. Fire Ins. Co., 156 N.H. 719, 722, 943 A.2d 750 (2008) ("The fundamental goal of interpreting an insurance policy, as in all contracts, is to carry out the intent of the contracting parties." (quotation omitted)). The undisputed facts of this case establish that some of the petitioners have current contractual relationships with the JUA, as documented by their insurance policies. It is these petitioners (hereafter "policyholders") whose Contract Clause claims we examine, because the petitioners whose contracts have expired may not assert such claims. See University of Hawaii Prof. Assembly v. Cayetano, 125 F.Supp.2d 1237, 1240 (D.Haw.2000) ("The contracts clause is only implicated when an existing contract is substantially impaired.").
2. Impairment of Contractual Relationship
Next, we must determine whether the Act constitutes a change in law that impairs the contractual relationships between the policyholders and the JUA.
We note that the trial court, after detailed analysis, concluded that the JUA is not a state entity. We need not, however, determine whether its conclusion was correct. Our examination of the policyholders' contract rights is not contingent upon the JUA's status as either a public or private entity, since Contract Clause protections apply in either case. See, e.g., In re Grand Jury Subpoena (Issued July 10, 2006), 155 N.H. at 564, 926 A.2d 280 ("Generally, the State and Federal Contract Clauses prohibit the adoption of laws that would interfere with the contractual arrangements between private citizens." (quotation, ellipsis and brackets omitted)); Furlough, 135 N.H. at 635-36, 609 A.2d 1204 (holding that individuals' contracts with the State are protected under the Contract Clause); Eckles v. State of Oregon, 306 Or. 380, 760 P.2d 846, 853 (1988), appeal dismissed, 490 U.S. 1032, 109 S.Ct. 1928, 104 L.Ed.2d 400 (1989); Fraternal Order of Police v. Prince George's Cty., 645 F.Supp.2d 492, 508 (D.Md.2009) ("the Contract Clause applies to private and public contracts alike").
"Generally, the construction of a written contract is a question of law for this court." Riblet Tramway Co. v. Stickney, 129 N.H. 140, 146, 523 A.2d 107 (1987) (quotations omitted). "When interpreting contracts, the intent of the parties is determined based upon an objective reading of the agreement as a whole. Contractual language is construed according to its common meaning, and this court will give a contract the same meaning as would a *637 reasonable person." Id. (citations omitted).
In this case, the relevant language in each policy is clear and unambiguous. The title of each is either "LIABILITY POLICY (Assessable and Participating)," or "GENERAL LIABILITY POLICY (Assessable and Participating)." Each policyholder's right to participate in excess earnings is also explicitly set out in the body of the policy, which provides that each insured "shall participate in the earnings of the [JUA], to such extent and upon such conditions as shall be determined by the board of directors of the [JUA] in accordance with law and as made applicable to this policy." We note that participating policies in other contexts have in common a policyholder's entitlement to share in the company's excess surplus. See, e.g., Prairie States Life Ins. Co. v. United States, 828 F.2d 1222, 1223 (8th Cir.1987) ("Although taxpayer is a stock insurance company, it issues `participating' policies which, like the policies issued by mutual insurance companies, entitle the policyholders to participate in distributions from the annual divisible surplus of the company."); Ohio State Life Insurance Company v. Clark, 274 F.2d 771, 773 (6th Cir.), cert. denied, 363 U.S. 828, 80 S.Ct. 1599, 4 L.Ed.2d 1523 (1960) ("Mutual plan policies are `participating' policies in that... such policies are entitled to share in the profits of the company to the extent that such profits are apportioned from time to time to the respective mutual plan policies by the company's Board of Directors."); Gulf Life Ins. Co. v. United States, 35 Fed.Cl. 12, 13 (1996), aff'd, 118 F.3d 1563 (Fed.Cir.1997) ("[A] participating policy has a higher stated premium than the nonparticipating policy for the same insurance, but the policyholder expects to receive premium rebates in the form of policyholder dividends. These dividends are returned to policyholders based on the company's experience or the discretion of its management."). The policyholders' insurance contracts are, therefore, by both their titles and their content, "assessable and participating," expressly obligating the policyholders to pay premium assessments in the event an underwriting deficit exists at the end of any fiscal year and, conversely, entitling the policyholders to participate in the earnings of the JUA.
The nature of the policyholders' participation in JUA earnings is qualified by the phrase "to such extent and upon such conditions as shall be determined by the board of directors of the [JUA] in accordance with law and as made applicable to this policy." The law that was in effect at the time the policies were issued, and that was incorporated into the policies by reference, includes the JUA regulations. Those regulations define the obligations of the contracting parties. See Worthen Co. v. Kavanaugh, 295 U.S. 56, 60, 55 S.Ct. 555, 79 L.Ed. 1298 (1935) ("To know the obligation of a contract we look to the laws in force at its making."); Blaisdell, 290 U.S. at 429-30, 54 S.Ct. 231 ("[T]he laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as if they were expressly referred to or incorporated in its terms." (quotation omitted)); Eckles, 760 P.2d at 858 n. 18 ("No law can impair the obligation of future contracts because the laws in existence when a contract is formed define the obligation of that contract.").
The regulations provide that, in the event of an excess surplus, "the board shall authorize the application of such excess in one or both of the following ways: (1) Against and to reduce future assessments of the association; or (2) Distribute the excess to such health care providers covered by the association as is just and *638 equitable." N.H. Admin. Rules, Ins 1703.07(d). These regulations, incorporated into the participating policies, provide no other alternative to the JUA board for disposition of any excess surplus JUA funds.
We find that the language of the policies and regulations, taken together, confers upon the policyholders a vested contractual right in the treatment of any excess surplus. The policies entitle the policyholders to "participate in the earnings of the [JUA]" and the incorporated regulations mandate the board's application of excess funds in one or both of two specified ways: either against future assessments, or distribution to the policyholders. Under either option, the policyholders have a direct financial interest, and not a mere expectancy, in any excess surplus. Thus, the policyholders have a vested right not necessarily in the distribution of the funds, but in the treatment of the funds for their benefit.
Importantly, the policyholders' vested rights are beneficial, rather than possessory. While a "beneficial interest is defined as a right or expectancy in something (such as a trust or an estate), as opposed to legal title to that thing," Nordic Inn Condo. Owners' Assoc. v. Ventullo, 151 N.H. 571, 575-76, 864 A.2d 1079 (2004) (quotation, brackets and emphasis omitted), such interest may, nonetheless, constitute a vested property right, subject to protection, see, e.g., Ohio State Life Insurance Company, 274 F.2d at 777 (holding that policyholders had "a vested contract right to the beneficial interest in the surplus" of the issuing non-mutual insurance company); Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 679 (finding a vested property right in the subject fund where the governing statute provided that the monies would either remain in the fund to accumulate interest or be distributed to the contributors). Here, the policyholders' interest in any JUA excess surplus is vested and not contingent: either they benefit from the surplus by its reinvestment for application against future assessments; or they benefit from the surplus by receipt of a dividend.
The significance of the policyholders' beneficial, rather than possessory, rights is twofold. First, because the policyholders' vested rights are in the treatment of any surplus funds for their benefit, but not necessarily in the distribution of such funds, the JUA board and the commissioner have the ability to protect against any undermining of the private market that could potentially result from immediate distribution. See N.H. Admin. Rules, Ins 1702.04, 1703.11(a); RSA 404-C:2, II (2006). Second, because the beneficial rights in the treatment of any excess surplus are contract rights, those rights vested in the policyholders upon issuance of their policies under the regulatory plan in place at that time, and are not contingent upon the declaration of a dividend, as argued by the State.
We draw support for our conclusion that the policyholders' beneficial contract rights are vested from the New York Court of Appeals' analysis in Methodist Hospital of Brooklyn v. State Insurance Fund, 64 N.Y.2d 365, 486 N.Y.S.2d 905, 476 N.E.2d 304 (1985), appeal denied, 474 U.S. 801, 106 S.Ct. 32, 88 L.Ed.2d 26 (1985), as contrasted to its analysis in Chu, 77 N.Y.2d 573, 569 N.Y.S.2d 364, 571 N.E.2d 672. In Methodist Hospital, the court upheld the transfer of $190 million from the state insurance fund to the state's general fund, concluding that, because the state alone was liable for the payment of claims upon that fund, because the policyholders had no responsibility to contribute to losses, and because the payment of dividends to policyholders *639 was discretionary, the policyholders had no property or contract rights in the assets or earnings of the fund. Methodist Hosp., 486 N.Y.S.2d 905, 476 N.E.2d at 309-10; see also Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 677. In Chu, however, where the legislation at issue diverted monies to the general fund in contravention of prior statutes which "provided that income earned on new contributions to the fund would be either returned to the contributors or credited toward future contributions," id. at 675, the court found the newly enacted law constituted an unconstitutional taking of vested property rights. Id. at 679.
The facts of this case distinguish it from Methodist Hospital and align it with Chu. Here, the JUA must satisfy claims out of its own assets and the State bears no liability for any deficit. N.H. Admin. Rules, Ins 1703.07(a). As the trial court found, "All of the money in the JUA fund has come from assessments of members, premiums paid by policyholders, and investment earnings. The State did not financially contribute to the creation of the JUA and has not contributed any funds since that time." It noted that "[i]f the JUA runs a deficit, as was the case in 1985, the members and policyholders are assessed to make it up. The State is not responsible for any JUA shortfalls and does not guarantee performance of JUA obligations." Further, the JUA regulations, rather than conferring discretion, mandate one or both of two options for application of any excess surplus, both of which inure to the policyholders' direct financial benefit. Compare N.H. Admin. Rules, Ins 1703.07(d), with Methodist Hosp., 486 N.Y.S.2d 905, 476 N.E.2d at 309. Thus, the plan here constitutes a nearly identical regulatory framework to that at issue in Chu.
In re Certified Question, 447 Mich. 765, 527 N.W.2d 468, to which the State attempts to analogize this case, is not only distinguishable, but in fact supports our conclusion as to the policyholders' vested rights. In that case, the plaintiff-policyholders of the state accident fund alleged that they had a property right to income from the sale of the accident fund, and that an act transferring all of the consideration for the sale to the general fund was, therefore, unconstitutional. In re Certified Question, 527 N.W.2d at 470. The Supreme Court of Michigan upheld the constitutionality of the legislation. Id. The facts of Certified Question, however, are significantly different from the facts here. First, although the Certified Question plaintiffs also had contracts with the accident fund, they alleged impairment of an asserted contract with the state, relying upon a statute to establish the contract provisions. Id. at 473-74. Here, the policyholders' rights arise directly from their contracts with the JUA. Further, the Certified Question plaintiffs relied upon an alleged implied contract right to surplus, in the absence of any contractual language entitling them to such surplus. Id. at 476. Here, the policyholders' participating policies expressly provide that the policyholders "shall participate in the earnings of the company" as the board determines, and the board's discretion is limited by regulation. Most significantly, the Certified Question court held, "Absent an explicit expression of the Legislature's intention that premiums collected and not used to pay liabilities either would earn interest or be refunded, we cannot read [the subject legislative provisions], either separately or together, as so promising." Id. at 477. In contrast, the plan before us provides such explicit regulatory expression.
We are not persuaded by the State's argument that the policies did not create vested rights because they are subject to *640 "applicable law," which may be changed. The three cases on which the State relies in support of its position, Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 106 S.Ct. 2390, 91 L.Ed.2d 35 (1986), Rhode Island Higher Education Assistance Authority v. Secretary, U.S. Department of Education, 929 F.2d 844 (1st Cir.1991), and Tancredi v. Metropolitan Life Insurance Company, 149 F.Supp.2d 80 (S.D.N.Y.2001), aff'd, 316 F.3d 308 (2d Cir.2003), are all distinguishable. Each involved constitutional, statutory, or contractual provisions explicitly providing that the regulatory scheme was subject to change. Bowen, 477 U.S. at 44, 106 S.Ct. 2390 ("Congress expressly reserved to itself `[t]he right to alter, amend, or repeal any provision of 'the Act. 42 U.S.C. § 1304."); Rhode Island Higher Educ., 929 F.2d at 847 (the subject agreements each stated that the parties "shall be bound by all changes in the Act or regulations in accordance with their respective effective dates"); Tancredi, 149 F.Supp.2d at 88 ("[T]he Constitution of the State of New York specifically reserves to the Legislature the right to alter laws under which corporations originally were formed" and thus constitutes notice that corporate charters may be amended by statute).
By contrast, the JUA policies provide:
8. Changes. Notice to any agent or knowledge possessed by any agent or by any other person shall not effect a waiver or a change in any part of this policy...; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part of this policy, signed by a duly authorized representative of the company.
Nor do the regulations, incorporated into the policies, make reference to any governmental reservation of power to amend the obligations established by the plan or the policies. The State points to the provision in RSA chapter 400-A delegating to the commissioner the "full power and authority to make, promulgate, amend and rescind reasonable rules and regulations for ... the administration or effectuation of any provision" of the title governing insurance in general. RSA 400-A:15, I (2006). However, this legislative delegation of authority to the commissionerto make, amend and rescind insurance regulationsdoes not vitiate the binding nature of the regulations incorporated into the JUA policies, or constitute notice to the policyholders that their contracts with the JUA are subject to any law other than the law in effect at the time of the issuance of their policies.
In Rhode Island Higher Education, the court explained the basis for its holding that a statute imposing conditions upon reimbursement to reserve funds did not constitute an unconstitutional taking:
The public nature of the reserve funds themselves, coupled with the express contractual reservation of the power to amend the terms of the [federal student loan] program and the fact that the legislative changes involve a comprehensive federal/state social welfare program, forecloses a finding that the state agencies have obtained unalterable vested property rights to certain payments.
Rhode Island Higher Educ., 929 F.2d at 851 (quotation and brackets omitted). By contrast, the JUA policies, including the incorporated regulations, contain no provision indicating that they are subject to amendment by the legislature. Further, the policyholders here are private parties and not state agencies. Moreover, the Act is not part of "a comprehensive federal/state social welfare program"; rather, it targets only one discrete fund for transfer to the general fund.
*641 We appreciate the generally broad powers of the legislature to "change, modify and repeal existing law, and to enact new laws." Goldman, 151 N.H. at 773, 868 A.2d 278. However, in light of the constitutional prohibition against retrospective laws, such legislative power is not without restriction.
Unless otherwise inhibited by either the State or Federal Constitutions, the Legislature may change existing laws, both statutory or common, at its pleasure, but in so doing, it may not deprive a person of a property right theretofore acquired under existing law. Those rights are designated as vested rights, and to be vested, a right must be more than a mere expectation based on an anticipation of the continuance of existing law; it must have become a title, legal or equitable, to the present or future enforcement of a demand, or a legal exemption from the demand of another.
Id. at 774, 868 A.2d 278 (quotation omitted). "This doctrine reflects the deeply rooted principles that persons should be able to rely on the law as it exists and plan their conduct accordingly and that the legal rights and obligations that attach to completed transactions should not be disturbed." Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 678 (citation omitted). Therefore, we conclude that, contrary to the State's assertion, the provisions of the regulations in effect at the time of the issuance of the policyholders' policies, and incorporated into the obligations of those contracts, may not be changed retroactively unless such change survives constitutional scrutiny.
Because the policyholders paid for and received participating policies, incorporating the regulations in effect at the time, their beneficial interest in the treatment of any JUA excess surplus vested upon the issuance of their policies. The Act, diverting $110 million of purportedly excess surplus, thus impairs their contracts with the JUA.
3. Substantiality of the impairment
Having found that the Act impairs the petitioners' contracts, we next consider whether the impairment is substantial. See Furlough, 135 N.H. at 633, 609 A.2d 1204. Although the United States Supreme Court has provided little specific guidance as to what constitutes a "substantial" contract impairment, Baltimore Tchrs. Un. v. Mayor, Etc. of Baltimore, 6 F.3d 1012, 1017 (4th Cir.1993), cert. denied, 510 U.S. 1141, 114 S.Ct. 1127, 127 L.Ed.2d 435 (1994), "[t]otal destruction of contractual expectations is not necessary for a finding of substantial impairment," Energy Reserves Group, 459 U.S. at 411, 103 S.Ct. 697.
The severity of an impairment of contractual obligations can be measured by the factors that reflect the high value the Framers placed on the protection of private contracts. Contracts enable individuals to order their personal and business affairs according to their particular needs and interests. Once arranged, those rights and obligations are binding under the law, and the parties are entitled to rely on them.
Furlough, 135 N.H. at 633, 609 A.2d 1204 (quotation omitted). The degree of the Act's impairment of the contracts is particularly pertinent because
[t]he severity of the impairment measures the height of the hurdle the state legislation must clear. Minimal alteration of contractual obligations may end the inquiry at its first stage. Severe impairment, on the other hand, will push the inquiry to a careful examination of the nature and purpose of the state legislation.
*642 Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 245, 98 S.Ct. 2716, 57 L.Ed.2d 727 (1978) (footnote omitted).
We recognize that the determination of whether a contract impairment is substantial may be influenced by whether the contracting parties relied on the abridged contract right. "[W]here the right abridged was one that induced the parties to contract in the first place, a court can assume the impairment to be substantial." Fraternal Order of Police, 645 F.Supp.2d at 510 (quotation omitted). The trial court found that "[t]he JUA has offered an assessable and participating policy approved by the Commissioner since its inception with no hint in the record that anyone had ever intended otherwise." The State does not contest this ruling, nor does it contend that any factual dispute exists regarding the participating nature of the policies. Neither does the State assert on appeal that the policyholders did not rely on the participating nature of the policies. Thus, under the circumstances of this case, whether any particular policyholders relied upon the participating nature of the policies is not relevant to our analysis.
In determining whether contract impairment is substantial, some courts look to whether the subject matter of the contract has been the focus of heavy state regulation. See, e.g., Energy Reserves Group, 459 U.S. at 413, 103 S.Ct. 697. If so, further regulation might be foreseeable and, thus, any change to the contract caused by such regulation would not necessarily constitute a substantial impairment. See, e.g., Mercado-Boneta v. Admin. del Fondo de Compensacion, 125 F.3d 9, 13-14 (1st Cir.1997). However, standing alone, "a history of regulation is never a sufficient condition for rejecting a challenge based on the contracts clause." Chrysler Corp. v. Kolosso Sales, Inc., 148 F.3d 892, 895 (7th Cir.1998), cert. denied, 525 U.S. 1177, 119 S.Ct. 1113, 143 L.Ed.2d 109 (1999); see also Mercado-Boneta, 125 F.3d at 14 n. 7 ("Contract Clause analysis would be enervated if the mere fact of regulation meant there was always foreseeability of more regulation and thus no substantial impairment.").
The simple fact that insurance is a heavily regulated industry does not preclude a conclusion that the Act substantially impairs the policyholders' vested contract rights to share in the JUA earnings. The policyholders did not "purchase[] into an enterprise already regulated in the particular to which [they] now object[]." Veix v. Sixth Ward Bldg. & Ln. Assn., 310 U.S. 32, 38, 60 S.Ct. 792, 84 L.Ed. 1061 (1940). The State cites no provision of the regulatory scheme in place prior to the passage of the Act that would suggest that private insureds should anticipate the transfer of monies retained by their insurer into the state's general fund. Neither the JUA policies, nor the insurance regulations incorporated in the policies, make reference to any governmental reservation of power to amend the rights and obligations established by the assessable and participating policies. On the contrary, the policyholders' contracts expressly entitle them to participate in the JUA's earnings, and the regulations incorporated into their contracts likewise leave no potential outlet for the accumulated funds other than application against future assessments, or distribution to the policyholders. Although insurance is a heavily regulated industry, the record does not reflect a basis in law for the policyholders to expect that the funds in which they have a beneficial interest would be transferred from the JUA into the general fund.
In Furlough, we held that a legislative requirement that certain public employees be furloughed would constitute a substantial *643 impairment because such a requirement "impairs the very heart of an employment contract: the promise of certain work for certain income. Its impact would likely wreak havoc on the finances of many of the affected workers. . . ." Furlough, 135 N.H. at 634, 609 A.2d 1204. We have also found substantial impairment of contract rights by the legislature's retroactive repeal of a statute permitting municipalities to contractually set alternatives to tax obligations where such action resulted in an additional tax burden of nearly $40,000 to a plaintiff. Lower Village Hydroelectric Assocs., 147 N.H. at 77, 782 A.2d 897; see also State v. Vashaw, 113 N.H. 636, 637-38, 312 A.2d 692 (1973) ("The underlying policy of this prohibition is to prevent the legislature from interfering with the expectations of persons as to the legal significance of their actions taken prior to the enactment of a law.").
Here, we conclude that the Act substantially impairs the policyholders' contract rights for at least two reasons. First, the Act effectively eliminates the "participating" character of the policies, thus changing the very nature of the contracts. The effect of the Act is to dramatically reduce, if not eliminate, the policyholders' rights to a fundamental contractual benefitsharing in any excess surplus funds created by their premium payments.
Second, the Act divests the JUA board of its obligation to the policyholders to treat any excess surplus for their benefit, including protecting against insolvency. As the JUA advised the trial court,
The JUA can only comfortably state today that it has earned a profit or lost money in 1986, 1987 and 1988. It is incumbent on the JUA to protect the policyholders in the interim to maintain adequate surplus and defend those claims that may yet arise by keeping funds available for those uncertainties, both legally and in terms of the market.. . . [The board maintains] this conservative sense of the need . . . to make sure that there are funds there available. . . that there are sufficient funds within our own capital to fulfill the purpose of the JUA.
The trial court recognized the importance of a JUA surplus, including its impact on the policyholders, finding:
The assessable nature of their policies and consistent regulations point to the present benefit provided by any excess surplus. The surplus guards against having insufficient assets to cover JUA obligations which would have to be covered by assessments against policyholders and members. Taking JUA funds would decrease investment earnings which are important to the JUA's ability to meet operating costs and malpractice claims.
The retention of, and access to, large sums of capital is critical to the function of any insurance plan. As the United States Supreme Court has observed:
These pension plans, like other forms of insurance, depend on the accumulation of large sums to cover contingencies. The amounts set aside are determined by a painstaking assessment of the insurer's likely liability. Risks that the insurer foresees will be included in the calculation of liability, and the rates or contributions charged will reflect that calculation. The occurrence of major unforeseen contingencies, however, jeopardizes the insurer's solvency and, ultimately, the insureds' benefits. Drastic changes in the legal rules governing pension and insurance funds, like other unforeseen events, can have this effect.
Allied Structural Steel, 438 U.S. at 246-47, 98 S.Ct. 2716 (quotation and brackets omitted).
*644 We note that it is not clear that the $110 million in fact represents excess surplus. However, whether some or all of the $110 million constitutes excess surplus is not dispositive of our analysis. Rather, the substantial character of the impairment flows, in part, from the fact that the Act contravenes the JUA board's contractual responsibility to its policyholdersthat is, to determine whether any excess surplus should be applied against future assessments or distributed to the policyholders.
In sum, we conclude that the Act substantially impairs the policyholders' contract rights because it effectively eliminates the participating character of the policies and divests the board of its obligation to treat any excess surplus funds for the policyholders' benefit.
B. Reasonable and Necessary Legislation
Because the Act substantially impairs the policyholders' contracts with the JUA, it technically violates Part I, Article 23 of the State Constitution. "Nevertheless, it is to be accepted as a commonplace that the Contract Clause does not operate to obliterate the [State's] police power. . . ." Furlough, 135 N.H. at 634, 609 A.2d 1204 (quotation omitted).
It is the settled law of this court that the interdiction of statutes impairing the obligation of contracts does not prevent the State from exercising such powers as are vested in it for the promotion of the common weal, or are necessary for the general good of the public, though contracts previously entered into between individuals may thereby be affected. This power, which in its various ramifications is known as the police power, is an exercise of the sovereign right of the Government to protect the lives, health, morals, comfort and general welfare of the people, and is paramount to any rights under contracts between individuals.
Allied Structural Steel, 438 U.S. at 241, 98 S.Ct. 2716 (quotation omitted).
"If the Contract Clause is to retain any meaning at all, however, it must be understood to impose some limits upon the power of a State to abridge existing contractual relationships, even in the exercise of its otherwise legitimate police power." Id. at 242, 98 S.Ct. 2716 (emphasis omitted). "Thus, a balancing of the police power and the rights protected by the contract clauses must be performed, and a bill or law which substantially impairs a contractual obligation may pass constitutional muster only if it is reasonable and necessary to serve an important public purpose." Furlough, 135 N.H. at 634, 609 A.2d 1204 (quotation omitted). We "must consider whether the [State's] proposed justification in fact serves public interests and whether its mechanisms to serve those interests reflect reasonable and necessary choices." Mercado-Boneta, 125 F.3d at 15.
We first examine whether the law serves an important public purpose. The Act requires that the funds be used "for the purpose of supporting programs that promote access to needed health care for underserved persons." Laws 2009, 144:1, I. Protection of the health of the people of New Hampshire is certainly a legitimate and important goal. However, "the finding of a significant and legitimate public purpose is not, by itself, enough to justify the impairment of contractual obligations." Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470, 505, 107 S.Ct. 1232, 94 L.Ed.2d 472 (1987). "Although deference is due to the legislature, and weight is given to the legislature's own statement of purposes for the law, a court must undertake its own independent inquiry to determine the reasonableness *645 of the law and the importance of the purpose behind it." Mercado-Boneta, 125 F.3d at 13. Accordingly, we examine whether the Act, despite its substantial impairment of contract rights, is reasonable and necessary to accomplish the stated public purpose.
In assessing the reasonableness and necessity of the Act, the threshold question is the degree of deference we must afford the legislature's decision as to the means chosen to accomplish its purpose. The general rule is that, "[u]nless the State itself is a contracting party, `as is customary in reviewing economic and social regulation, courts properly defer to legislative judgment as to the necessity and reasonableness of a particular measure.'" Furlough, 135 N.H. at 634-35, 609 A.2d 1204 (quotation, brackets and ellipses omitted). This deference serves to ensure that the constitutional prohibition against the impairment of contracts does not prevent the State from legitimate exercises of police power "to protect the vital interests of its people." W.B. Worthen Co. v. Thomas, 292 U.S. 426, 432-33, 54 S.Ct. 816, 78 L.Ed. 1344 (1934). As the United States Supreme Court has noted, "The exercise of that reserved power has repeatedly been sustained by this Court as against a literalism in the construction of the contract clause which would make it destructive of the public interest by depriving the State of its prerogative of self-protection." Id. at 433, 54 S.Ct. 816. The Supreme Court has also held, however, that "this essential reserved power of the State must be construed in harmony with the fair intent of the constitutional limitation, and that this principle preclude[s] a construction which would permit the State to adopt as its policy . . . the destruction of contracts or the denial of means to enforce them." Id.
In cases where the State is itself a party to the contract, heightened review is warranted and courts generally accord minimal deference to legislative acts affecting such contracts. See, e.g., Lower Village, 147 N.H. at 78, 782 A.2d 897; see also Furlough, 135 N.H. at 635, 609 A.2d 1204 ("When a State itself enters into a contract, it cannot simply walk away from its financial obligations. In almost every case, the Court has held a governmental unit to its contractual obligations when it enters financial or other markets." (quotation omitted)); National R. Passenger Corp. v. A.T. & S.F.R. Co., 470 U.S. 451, 472 n. 24, 105 S.Ct. 1441, 84 L.Ed.2d 432 (1985) ("[T]he Court has observed that in order to maintain the credit of public debtors, and because the State's self-interest is at stake, the Government's impairment of its own obligations perhaps should be treated differently." (quotations and citations omitted)).
We make no ruling as to whether the policyholders' contracts with the JUA constitute State contracts. We note, however, that the State's underlying justification for transferring funds from the JUA to the general fund is based upon the State's assertion that "the JUA is part of the State." If we were to assume, for the purposes of analysis, that the JUA is part of the State, then the petitioners' participating policies would be public contracts. The Act, which interferes with those contracts, would therefore be subject to the heightened standard of review we applied in Furlough and Lower Village. We invalidated the legislation in those cases as unconstitutional, reasoning that "financial necessity, though superficially compelling, has never been sufficient of itself to permit states to abrogate contracts." Lower Village, 147 N.H. at 78, 782 A.2d 897 (brackets omitted) (quoting Furlough, 135 N.H. at 635, 609 A.2d 1204). Although "less deference does not imply no deference" to the legislature's determination of reasonableness *646 and necessity, Buffalo Teachers, 464 F.3d at 370, "[t]he [C]ontract [C]lause, if it is to mean anything, must prohibit the State from dishonoring its existing contractual obligations when other policy alternatives are available," Furlough, 135 N.H. at 635-36, 609 A.2d 1204 (quotation and brackets omitted). "If governments could reduce their financial obligations whenever an important public purpose could be conceived for repudiating a contract[,] the Contract Clause would provide no protection at all." Id. at 635, 609 A.2d 1204 (quotations omitted). If, as the State contends, the JUA is a part of the State, less deference to legislative judgment is warranted.
If, on the other hand, the JUA is a private entity, as found by the trial court, more deference is warranted, but complete deference is unsupportable. As we have previously held, "the [C]ontract [C]lause is not a dead letter and does impose some limits upon the power of a State to abridge existing contractual relationships, even in the exercise of its otherwise legitimate police power." Smith Insurance, Inc. v. Grievance Committee, 120 N.H. 856, 863, 424 A.2d 816 (1980) (quotations omitted). For the Contract Clause to retain any vitality, we must be able to consider the reasonableness and necessity of the legislature's chosen action, particularly where the action's substantial impairment of contract rights inures to the State's financial benefit.
"[T]he absence of a contract with the state does not mean we thereby believe the [contract-impairing legislation] cannot be self-serving to the state. To the contrary, it can be." Buffalo Teachers, 464 F.3d at 370; see also Mercado-Boneta, 125 F.3d at 16 ("the real issue in determining the level of deference given to a legislative determination of reasonableness and necessity is not so much whether the state is arguably a nominal party to the contract, but whether the state is acting in its own pecuniary or self-interested capacity"). "The better rule therefore calls for focusing on whether the contract-impairing law is self-serving, where existence of a state contract is some indicia of self-interest, but the absence of a state contract does not lead to the converse conclusion." Buffalo Teachers, 464 F.3d at 370. Here, given the nature and effect of the Act, we conclude that the State's self-interest is at stake. Accordingly,
complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State's self-interest is at stake. A governmental entity can always find a use for extra money, especially when taxes do not have to be raised. If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.
Furlough, 135 N.H. at 635, 609 A.2d 1204 (quotation omitted).
We note also that the United States Supreme Court has distinguished the deference accorded state, as opposed to federal, legislation:
When the court reviews state economic legislation the inquiry will not necessarily be the same [as a deferential review of federal economic legislation]. . . . [W]e have never held that the principles embodied in the Fifth Amendment's due process guarantee are coextensive with the prohibitions against state impairment of contracts under the Contract Clause, and, we observed, to the extent the standards differ, a less searching inquiry occurs in the review of federal economic legislation.
*647 National R. Passenger Corp., 470 U.S. at 472-73 n. 25, 105 S.Ct. 1441; see also Nieves v. Hess Oil Virgin Islands Corp., 819 F.2d 1237, 1251 (3d Cir.1987) (contrasting "limitations imposed on States by the Contract Clause with the less searching standards imposed on [federal] economic legislation by the Due Process Clauses") (quotation and emphasis omitted). Thus, "[d]espite the customary deference courts give to state laws directed to social and economic problems, legislation adjusting the rights and responsibilities of contracting parties must be upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption." Allied Structural Steel, 438 U.S. at 244, 98 S.Ct. 2716 (quotation and brackets omitted). Moreover, the State bears the burden of proving that the contract impairment is reasonable and necessary, since it asserts the benefit of its own statute. In re Seltzer, 104 F.3d 234, 236 (9th Cir.1996); see also Univ. of Hawaii Professional Assembly v. Cayetano, 183 F.3d 1096, 1106 (9th Cir.1999), injunction dissolved, 125 F.Supp.2d 1237, 1242-43 (D.Haw.2000).
While the Act's stated purpose is to provide funds to support "programs that promote access to needed health care for underserved persons," Laws 2009, 144:1, I, it does not constitute broad-based social or economic regulation directed to meet a societal need. Rather, the Act singularly targets for transfer to the State's general fund discrete funds generated by premiums paid by a discrete class of private parties. Compare Buffalo Teachers, 464 F.3d at 368-69 (upholding legislation imposing a generally applicable public employee wage freeze), with Ass'n of Sur. & Sup.Ct. Rptrs. v. State, 79 N.Y.2d 39, 580 N.Y.S.2d 153, 588 N.E.2d 51, 54 (1992) (striking down legislation as unconstitutional where it imposed a payroll lag upon a narrow class of State employees); see also Exxon Corp. v. Eagerton, 462 U.S. 176, 192, 103 S.Ct. 2296, 76 L.Ed.2d 497 (1983) (noting that the statute at issue in Allied Structural Steel applied so narrowly that "its sole effect was to alter contractual duties"); Allied Structural Steel, 438 U.S. at 247-49, 98 S.Ct. 2716. The Act's funding scheme is qualitatively different from social or economic regulatory legislation which establishes a broad-based mechanism for addressing a public need.
The State offers two justifications for the Act. First, the State contends that "[t]he Act furthers the public purpose of the JUA by avoiding distortions of the market that would inevitably flow from the distributions sought by petitioners," because such distributions have "the potential to disrupt the voluntary market by reducing the price of JUA insurance and creating an incentive for providers to move to the JUA." In rejecting the identical argument, the trial court observed:
This argument is based on the unwarranted assumption that if the State does not get the $110 million, the policyholders will . . . thus receiv[e] a "windfall." As the Court made clear at the outset of the . . . hearing, it has no authority, and will not attempt, to order any distribution of the surplus funds. Dividends can only be distributed pursuant to the procedures contained in the policy and regulations: by request of the JUA board and approval of the Commissioner.
We likewise reject this argument. What the policyholders stand to gain by our ruling is the enforcement of their contract rights to the application of any excess surplus for their benefit in one or both of the ways specified by the regulations incorporated into their policies. The question of whether the JUA board should make distributions of any excess surplus is not before us, and we express no opinion on that issue.
*648 Second, the State contends that the purpose of the Act is "much more than merely financial," asserting that the legislature "reasonably concluded that the excess surplus [in the JUA fund] would be more useful in promoting access to health care through state programs for the medically underserved than if the funds remained `trapped' in the JUA or were distributed to those providers that happen to be insured through the JUA."
Although funding state programs for the medically underserved is an important public purpose, we conclude that the Act is not appropriately tailored to serve that purpose. First, it is not clear that all of the $110 million is in fact "excess surplus." Although a risk-based capital estimate was prepared for the JUA, the JUA board made no determination as to the amount of any excess surplus. Under these circumstances, any assessment of the reasonableness of the amount subject to transfer is questionable. Further, the State has not suggested, and nothing in the record indicates, that the Act was precipitated by an emergency, or that it constitutes a temporary measure, with future reimbursement of the funds contemplated. See, e.g., Garris v. Hanover Ins. Co., 630 F.2d 1001, 1008 (4th Cir.1980) (in evaluating the reasonableness and necessity of challenged legislation, court examines: "(1) [the legislation's] emergency nature; (2) its purpose to protect a broad societal interest, not a favored group; (3) the tailoring of its remedial effect to its emergency cause; (4) the reasonableness of its basic features; and (5) its limited effect in temporal terms."). Nor does the record reflect that other avenues of funding, which do not substantially interfere with the policyholders' contracts, have been exhausted, or even considered. See Buffalo Teachers, 464 F.3d at 371 ("Only after . . . more drastic steps were taken and a finding that the freeze was essential was made, did the [governmental authority] institute the wage freeze."); Fraternal Order of Police, 645 F.Supp.2d at 510-18 (examining various factors to determine reasonableness and necessity, including "efforts to exhaust numerous alternatives before resorting to" legislation that substantially impaired a contract). Thus, we cannot conclude that the means chosen to accomplish the Act's stated purpose are reasonable and necessary.
Our conclusion rests upon the retroactive effect of the Act; if the legislature had addressed policyholders' rights prospectively that is, effective upon issuance of new policiesour analysis would of necessity be different. See Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 678. To be sure, the Act expediently accomplishes the legislature's stated purpose of supporting programs that promote access to needed health care. But such expediency does not, in and of itself, render the transfer of these funds reasonable and necessary. The legislature has other reasonable alternatives to accomplish its goal, including amending the rights and responsibilities under newly-issued JUA policies. As "there is no showing in the record before us that this severe disruption of contractual expectations was necessary to meet an important general social problem[, t]he presumption favoring legislative judgment as to the necessity and reasonableness of a particular measure, simply cannot stand in this case." Allied Structural Steel, 438 U.S. at 247, 98 S.Ct. 2716 (quotation and citation omitted; emphasis added).
V. Conclusion
Because the Act substantially interferes with the current policyholders' contracts with the JUA, and is not reasonable and necessary to accomplish the legislature's stated public purpose, the Act constitutes a retrospective law that results in an impairment *649 of contract in violation of the New Hampshire Constitution and is, therefore, unenforceable. In view of this holding, we need not consider the merits of the former policyholders' claims, or the current policyholders' "takings" claim, the claims they assert derivatively on behalf of the JUA, or their claims under the Federal Constitution.
Affirmed.
BRODERICK, C.J., and HICKS, J., concurred; DALIANIS and DUGGAN, JJ., dissented.
DALIANIS and DUGGAN, JJ., dissenting.
The court today overturns a legislative decision to allocate $110 million to programs that promote access to needed health care for underserved persons and, instead, creates a potential $110 million windfall for the doctors, hospitals and other health care providers insured by the New Hampshire Medical Malpractice Joint Underwriting Association (JUA). Although one of the stated purposes of the JUA is to "promote the public interest in ensuring that consumers of health care services have adequate access to needed care," N.H. Admin. Rules, Ins 1701.01, and although the legislature has specifically found that this purpose "would be better served through a transfer of the excess surplus [in a certain JUA account] to the general fund," Laws 2009, 144:1, (the Act), the majority declines to defer to this legislative finding. Holding that only current policyholders with policies written on or after January 1, 1986 (policyholders) have a vested right in the surplus being used for their benefit, the majority concludes that the Act violates Part I, Article 23 of the State Constitution because it is a retrospective law that substantially impairs the policyholders' contractual rights. We respectfully believe that in so doing the majority errs.
First, the majority concludes that the policyholders have a vested right that is beneficial; it is well-established under New Hampshire law, however, that a beneficial right is not a vested right entitled to constitutional protection. Because the policyholders lack vested rights either to the surplus or to its use for their benefit, their constitutional claims must fail.
Second, even if we agreed with the majority that the Act in some way impaired the policyholders' insurance contracts, we believe that any impairment was insubstantial as a matter of law. The Act leaves intact the very purpose for which the policyholders entered into their contractsto obtain otherwise difficult or impossible to obtain coverage for medical malpractice claims. Moreover, there is no evidence that transferring $110 million from the JUA will in any way jeopardize its solvency. An actuarial study shows that, even without the $110 million, the JUA has more than enough assets to cover future claims.
Third, the majority subjects the Act to an unnecessarily stringent standard of review. When, as in this case, the State is not a party to a contract, this court is required to defer to the legislature's determination that a particular measure is reasonable and necessary to serve a legitimate public purpose. Instead, the majority makes its own de novo determination as to whether another alternative would have constituted a better solution to the problem at hand.
Fourth, this entire litigation may soon be moot and/or the petitioners may lack standing to bring it given the majority's holding that only petitioners with current JUA policies may assert Contract Clause claims. The record does not reveal whether any of the petitioners have current JUA *650 policies; thus, it is not clear whether any petitioner has standing to bring a Contract Clause claim. See University of Hawaii Prof. Assembly v. Cayetano, 125 F.Supp.2d 1237, 1240 (D.Haw.2000). Moreover, to the extent that the "current" policies were issued after the Act became effective, we believe that the petitioners with such policies cannot have a vested right to the excess surplus. Policies issued after the Act's effective date necessarily incorporate the Act's provisions. As to petitioners with such policies, the Act applies prospectively, not retrospectively.
In sum, we believe the majority misapplies settled New Hampshire law, ignores critical evidence in the record, and creates a new, expanded role for judicial review of economic legislation.
I. Part I, Article 23
A. In General
Part I, Article 23 of the State Constitution provides that "[r]etrospective laws are highly injurious, oppressive, and unjust. No such laws, therefore, should be made, either for the decision of civil causes, or the punishment of offenses." We have held that Part I, Article 23 contains two prohibitions: the making of retrospective laws and the impairment of contractual rights. See State v. Fournier, 158 N.H. 214, 218, 221, 965 A.2d 1091 (2009). Although our case law has not always viewed them as such, see Opinion of the Justices (Furlough), 135 N.H. 625, 630, 609 A.2d 1204 (1992), the prohibition against retrospective laws and the prohibition against legislation that impairs contractual rights are analytically distinct. We believe that the majority errs by combining its analysis of whether the Act is a retrospective law with its analysis of whether the Act unconstitutionally impairs contractual rights.
A retrospective law is one that "takes away or impairs vested rights, acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past." In re Grand Jury Subpoena (Issued July 10, 2006), 155 N.H. 557, 564, 926 A.2d 280 (2007) (quotation omitted). The other prohibition contained in Part I, Article 23 concerns impairment of contracts. This section of Part I, Article 23 "prohibit[s] the adoption of laws that would interfere with the contractual arrangements between private citizens." Id. (quotation, brackets and ellipsis omitted). Our State Constitution affords more protection than the Federal Constitution with respect to retrospective laws, and the same protection as the Federal Constitution with respect to contract impairment. See Fournier, 158 N.H. at 221, 965 A.2d 1091; Opinion of the Justices (Furlough), 135 N.H. at 630, 609 A.2d 1204.
Whether a vested right is impaired determines whether the law at issue operates retrospectively. It is not dispositive, however, of whether the law unconstitutionally impairs contractual rights. As will be discussed in more detail below, a law does not unconstitutionally impair contractual rights unless the impairment is substantial, the State lacks a significant and legitimate public purpose for it, and the adjustment of the contracting parties' rights and responsibilities is not based upon reasonable conditions and is not of a character appropriate to the public purpose justifying the law's adoption. Energy Reserves Group v. Kansas Power & Light, 459 U.S. 400, 411-12, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983). Accordingly, we will analyze the two prohibitions contained in Part I, Article 23 separately.
B. Retrospective Law
The majority concludes that the Act "constitutes a retrospective law," but, in *651 our view, does not fully analyze this issue. In testing legislation against Part I, Article 23, we conduct a two-part analysis to determine if it is unconstitutionally retrospective. Fournier, 158 N.H. at 218, 965 A.2d 1091. First, we discern whether the legislature intended the law to apply retroactively. Id. "When the legislature is silent as to whether a statute should apply prospectively or retrospectively, our interpretation turns on whether the statute affects the parties' substantive or procedural rights. There is a presumption of prospectivity when a statute affects substantive rights." In re Estate of Sharek, 156 N.H. 28, 30, 930 A.2d 388 (2007) (quotation omitted). "Where the statute is remedial or procedural in nature, however, the presumption is reversed, and the statute is usually deemed to apply retroactively to those pending cases which on the effective date of the statute have not yet gone beyond the procedural stage to which the statute pertains." Appeal of Wal-Mart Stores, 145 N.H. 635, 638, 765 A.2d 168 (2000) (quotation omitted). "In the final analysis, however, the question of retrospective application rest[s] on a determination of fundamental fairness, because the underlying purpose of all legislation is to promote justice." Id. (quotation and brackets omitted).
If we find that the statute applies retroactively, we then inquire whether such retroactive application is constitutionally permissible. Fournier, 158 N.H. at 218, 965 A.2d 1091. This second inquiry concerns whether the legislation at issue impairs vested rights. See In re Estate of Sharek, 156 N.H. at 30, 930 A.2d 388. "Unless otherwise inhibited by either the State or Federal Constitutions, the Legislature may change existing laws, . . . statutory or common, at its pleasure, but in so doing, it may not deprive a person of a property right theretofore acquired under existing law." Id. (quotation omitted). "Those rights are designated as vested rights, and to be vested, a right must be more than a mere expectation based on an anticipation of the continuance of existing law; it must have become a title, legal or equitable, to the present or future enforcement of a demand, or a legal exemption from the demand of another." Id. (quotation omitted).
Rather than analyze the issue, the majority apparently assumes that the Act applies retroactively. Even if we were to agree, we believe that the policyholders have failed to establish that they have a vested right to any excess surplus. We believe that the pertinent regulations and insurance policies do not confer upon the policyholders a vested right either to the surplus itself or to its use for their benefit.
To determine the nature of the policyholders' right to the surplus, we first set forth the pertinent regulatory language. New Hampshire Administrative Rules, Ins 1703.07 governs the policies at issue in this case (those issued on or after January 1, 1986). In light of the majority's holding that only policyholders with current JUA policies may bring Contract Clause claims, for the purposes of our discussion, we will assume that the regulations currently in effect are incorporated into the policies at issue. To the extent that the majority suggests that the policyholders have a "vested" right in the law regulating their JUA contracts remaining unchanged, the majority is mistaken. "No person has a vested interest in any rule of law, entitling him to insist that it shall remain unchanged for his benefit." Estabrook v. American Hoist & Derrick, Inc., 127 N.H. 162, 171, 498 A.2d 741 (1985) (quotation omitted), overruled on other grounds by Young v. Prevue Products, Inc., 130 N.H. 84, 88, 534 A.2d 714 (1987), and Thompson v. Forest, 136 N.H. 215, 219, 614 A.2d 1064 (1992); New York Cent. R.R. Co. v. White, *652 243 U.S. 188, 198, 37 S.Ct. 247, 61 L.Ed. 667 (1917).
Rule 1703.07(c) provides: "If premiums written on [JUA] business exceed the amount necessary to pay losses and expenses, the board shall apply such excess to repay [insurer] members for assessments previously levied, in proportion to the amount paid by each [insurer] member." See N.H. Admin. Rules, Ins 1702.01, 1703.01(b), (i). Rule 1703.07(d) provides:
If premiums . . . exceed the amount necessary to pay losses and expenses and to reimburse members for all assessments pursuant to Ins 1703.07(c), then with review and approval by the [Commissioner of the New Hampshire Insurance Department] as being consistent with the purposes of this chapter, the board shall authorize the application of such excess in one or both of the following ways:
(1) Against and to reduce future assessments of the [JUA]; or
(2) Distribute the excess to such health care providers covered by the [JUA] as is just and equitable.
We next set forth the policy language, which provides, in pertinent part: "The named insured shall participate in the earnings of the [JUA], to such extent and upon such conditions as shall be determined by the board of directors of the [JUA] in accordance with law and as made applicable to this policy. . . ."
The plain meaning of the regulatory and policy language demonstrates that the policyholders have no vested, enforceable right to any surplus amount. Under the regulation, the policyholders have a right to the surplus itself only if: (1) the board declares an excess; (2) the board decides that it need not retain the funds against and to reduce future assessments against insurer members; (3) the board decides to distribute the excess to the policyholders under such terms as are "just and equitable"; and (4) the insurance commissioner approves this distribution "as being consistent with the [regulatory] purposes" of the JUA. N.H. Admin. Rules, Ins 1703.07(d). Only if these contingencies occur, would the policyholders have a claim to the surplus. A contingent interest is, by definition, not a vested right, and, therefore, is not constitutionally protected. See In the Matter of Goldman & Elliott, 151 N.H. 770, 774, 868 A.2d 278 (2005).
Similarly, under the terms of the policy the policyholders "shall" participate in the JUA's earnings only "to such extent and upon such conditions as shall be determined" by the JUA's board "in accordance with law." The phrase "[t]he named insured shall participate" in the JUA's earnings is modified by the phrase "to such extent and upon such conditions" as the board may determine. In this context, the use of the word "shall" does not transform the policyholders' hopes for a future discretionary distribution into a "fixed, certain and absolute right" that the board must allow them to participate in the JUA's earnings. Id.
At best, the regulatory and policy language together confer upon the policyholders mere expectancies based upon "the anticipated continuance of the present laws, the existence of a . . . surplus," as well as the board's exercise of its discretion, with the commissioner's approval, to distribute the surplus to the policyholders. Butler Weldments v. Liberty Mut. Ins., 3 S.W.3d 654, 659 (Tex.Ct.App.1999). Mere expectancies are not vested rights as a matter of law. In the Matter of Goldman & Elliott, 151 N.H. at 774, 868 A.2d 278; see 2 N. Singer & J.D. Shambie Singer, Sutherland Statutory Construction § 41.6, at 456-57 (2009) ("The mere expectation of *653 a future benefit or contingent interest does not create a vested right.").
Perhaps to avoid this result, the majority holds that the regulatory and policy language "taken together confers upon the policyholders a vested contractual right in the treatment of any excess surplus." (Emphasis added.) The policyholders, the majority asserts, "have a vested right not necessarily in distribution of the funds, but in the treatment of the funds for their benefit." The majority explains that "the policyholders' vested rights are beneficial, rather than possessory. . . . [E]ither they benefit from the surplus by its reinvestment for application against future assessments; or they benefit from the surplus by receipt of a dividend."
We first observe that whatever benefit the policyholders would receive from the JUA's retention of the surplus is derivative. The "future assessments" to which the regulation refers are levied against insurers, not insureds. See N.H. Admin. Rules, Ins 1703.07, 1703.08, 1703.13. The primary beneficiaries of the JUA's decision to retain any surplus are, therefore, the JUA's member insurers, not the policyholders.
Additionally, we believe that the majority errs when it concludes that the policyholders' so-called "beneficial interest" in the surplus is entitled to constitutional protection under Part I, Article 23. Part I, Article 23 protects only vested rights. See In re Estate of Sharek, 156 N.H. at 30, 930 A.2d 388. By definition, a beneficial interest is not a vested right as a matter of law. See Nordic Inn Condo. Owners' Assoc. v. Ventullo, 151 N.H. 571, 575-76, 864 A.2d 1079 (2004); cf. Dubois v. Smith, 135 N.H. 50, 59, 599 A.2d 493 (1991) (noting that "beneficiary interest is not a vested property right"). To be vested, a right "must become a title, legal or equitable," and cannot be a "mere expecta[ncy]." In re Estate of Sharek, 156 N.H. at 30, 930 A.2d 388 (quotations omitted). A beneficial interest is only an expectancy and not legal title, and, therefore, is not a vested right. See Nordic Inn Condo. Owners' Assoc., 151 N.H. at 575-76, 864 A.2d 1079. Accordingly, a beneficial interest is not a vested right entitled to constitutional protection under Part I, Article 23. See In re Estate of Sharek, 156 N.H. at 31, 930 A.2d 388 (testator's right to name a beneficiary is no more vested than beneficiary's right to take under a will).
The majority concludes that the policyholders' "beneficial" rights are "vested" merely because they are contractual. The majority further concludes, without citation, that the policyholders' rights vested "upon issuance of their policies." To the contrary, not all rights created by contract are "vested," and, therefore, inviolable for the purposes of Part I, Article 23. See Hayes v. LeBlanc, 114 N.H. 141, 145, 316 A.2d 187 (1974) (Part I, Article 23's prohibition against retrospective laws "was not intended to prevent the legislature from amending laws which regulate contracts in the public interest where such laws have proven inadequate to accomplish their task.").
The United States Supreme Court "has long recognized that a statute does not violate the [Constitution] simply because it has the effect of restricting, or even barring altogether, the performance of duties created by contracts entered into prior to its enactment. If the law were otherwise, one would be able to obtain immunity from state regulation by making private contractual arrangements." Exxon Corp. v. Eagerton, 462 U.S. 176, 190, 103 S.Ct. 2296, 76 L.Ed.2d 497 (1983) (citation and quotation omitted); see East New York Bank v. Hahn, 326 U.S. 230, 232, 66 S.Ct. 69, 90 L.Ed. 34 (1945). As Justice Holmes put it: "One whose rights, such as they *654 are, are subject to state restriction, cannot remove them from the power of the State by making a contract about them. The contract will carry with it the infirmity of the subject matter." Hudson Water Co. v. McCarter, 209 U.S. 349, 357, 28 S.Ct. 529, 52 L.Ed. 828 (1908); see Exxon Corp., 462 U.S. at 190, 103 S.Ct. 2296.
The majority relies upon Ohio State Life Insurance Co. v. Clark, 274 F.2d 771 (6th Cir.), cert. denied, 363 U.S. 828, 80 S.Ct. 1599, 4 L.Ed.2d 1523 (1960), and Alliance of American Insurers v. Chu, 77 N.Y.2d 573, 569 N.Y.S.2d 364, 571 N.E.2d 672 (1991), to support its contention that the policyholders' beneficial interests are entitled to constitutional protection. Both cases are inapposite. In Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 678, the issue of whether the policyholders had vested rights was undisputed. The court stated that because it was "not disputed" that had the State failed to give the contributors payment or credits attributable to their contribution, they "could have asserted a legitimate claim of entitlement to the moneys, grounded in the statutory guarantee." Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 678 (quotation and citation omitted).
Moreover, Chu is factually distinguishable from the instant case. In Chu, the relevant statutes mandated that income earned would be either returned to the contributors or credited toward their future contributions. Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 675. Here, whether the policyholders receive a distribution from the surplus is entirely at the discretion of the JUA's board of directors. See Methodist Hosp. of Brooklyn v. State Ins. Fund, 64 N.Y.2d 365, 486 N.Y.S.2d 905, 476 N.E.2d 304, 309, appeal dismissed, 474 U.S. 801, 106 S.Ct. 32, 88 L.Ed.2d 26 (1985).
Clark is also factually distinguishable. In that case, ownership of the surplus retained by a life insurance company, which primarily wrote policies on a mutual plan, but also wrote policies on a stock plan, was expressly granted to its policyholders. Clark, 274 F.2d at 773, 777. The company's charter stated that the company's surplus "shall belong to the holders of policies on the mutual plan and shall be apportioned and distributed on such equitable plan as the directors may provide." Id. at 777. Neither the JUA's governing regulations nor its insurance policies contain similarly unconditional language granting the policyholders ownership of the surplus.
The majority's entire discussion of vested rights is premised upon its assumption that the JUA operates like a mutual insurance company. However, the JUA is not a mutual insurance company. "[A] mutual company is owned by the policyholders." [1 Essentials of Insurance Law] New Appleman on Ins. L. Libr. Ed. (MB) § 1.08[4][c], at 1-83 (Oct.2009) (emphasis omitted). It "is organized and operated for the benefit of its policyholders who are by virtue of their policies members of the company," Methodist Hosp. of Brooklyn, 486 N.Y.S.2d 905, 476 N.E.2d at 308, and is "managed by people elected by the policyholders." Kelso & Irwin, P.A. v. State Ins. Fund, 134 Idaho 130, 997 P.2d 591, 596 (2000). In a mutual insurance company:
Each member pays a premium in advance, usually in an amount slightly larger than what is necessary to cover that individual's expected loss plus a fair share of administrative expenses. In lieu of paid-in capital to guarantee solvency, the mutual company relies on an accumulated surplus. Depending on the company's losses and expenses and the amount of investment income earned on the reserves, the company may refund a portion of the premium to the policyholder *655 at the end of the year in the form of a dividend. . . . Some mutuals . . . have the option to assess the members for sums (usually not exceeding the amount of the premium) necessary to cover unanticipated large losses.
New Appleman on Ins. L. Libr. Ed., supra § 1.08[4][c], at 1-83.
Unlike the policyholders of a mutual insurance company, the policyholders here are not members of the JUA and "have no vote or say in [its] administration." Methodist Hosp. of Brooklyn, 486 N.Y.S.2d 905, 476 N.E.2d at 308-09; see N.H. Admin. Rules, Ins 1702, 1703.04. The JUA is administered by a board whose members are appointed by the insurance commissioner, pursuant to regulations adopted by the commissioner. See N.H. Admin. Rules, Ins 1703.04(a) (board is comprised of seven voting members appointed by commissioner), 1703.04(p) (requiring JUA to invest premiums in certain manner), 1703.12 (providing that JUA "shall be subject to examination by the Commissioner" and requiring JUA to submit certain reports to same). Nor is there any evidence in the record that the policyholders paid slightly larger premiums so as to cover administrative expenses. While the JUA has some of the features of a mutual insurance carrier, there is no indication that the legislature intended it to be "owned" by its policyholders in the same way that a private mutual insurance company is owned by its policyholders. See Kelso & Irwin, P.A., 997 P.2d at 596.
The majority also places great weight on the fact that the insurance policies at issue describe themselves as "participating." The majority observes "that participating policies in other contexts have in common a policyholder's entitlement to share in the company's excess surplus." See, e.g., Gulf Life Ins. Co. v. United States, 35 Fed. Cl. 12, 13 (1996) ("[A] participating policy has a higher stated premium than the nonparticipating policy for the same insurance, but the policyholder expects to receive premium rebates in the form of policyholder dividends. These dividends are returned to policyholders based on the company's experience or the discretion of its management."), aff'd, 118 F.3d 1563 (Fed. Cir.1997). The JUA policies, however, are not "participating" simply because they say they are. See Concord Hosp. v. N.H. Medical Malpractice Joint Underwriting Assoc., 137 N.H. 680, 683, 633 A.2d 1384 (1993). Moreover, nothing in the record demonstrates that the policyholders have paid higher premiums than they would have paid for non-JUA insurance.
Because the policyholders have failed to establish a vested, constitutionally protected right either to the surplus itself or to its use for their benefit, the Act does not violate Part I, Article 23's prohibition against retrospective laws. Having concluded that the Act is not an unconstitutional retrospective law, we next analyze whether it otherwise violates Part I, Article 23 because it substantially impairs the policyholders' contractual rights.
B. Contract Impairment
"[T]he general purpose of the [Contract] Clause [is] clear: to encourage trade and credit by promoting confidence in the stability of contractual obligations. Nevertheless, a State continues to possess authority to safeguard the vital interests of its people. This principle of harmonizing the constitutional prohibition with the necessary residuum of state power has had progressive recognition in the decisions of [the United States Supreme] Court." United States Trust Co. v. New Jersey, 431 U.S. 1, 15, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977) (quotation, citation and ellipsis omitted). Accordingly, resolving a Contract Clause claim entails "reconcil[ing] the *656 strictures of the Contract Clause with the essential attributes of sovereign power, necessarily reserved by the States to safeguard the welfare of their citizens." Id. at 21, 97 S.Ct. 1505 (quotation and citation omitted). Although the language of the Federal and State Contract Clauses is "facially absolute, [their] prohibition[s] must be accommodated to the inherent police power of the State." Energy Reserves Group, 459 U.S. at 410, 103 S.Ct. 697. The Contract Clause's prohibition "is not. . . the Draconian provision that its words might seem to imply," Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 240, 98 S.Ct. 2716, 57 L.Ed.2d 727 (1978), and "does not trump the police power of a state to protect the general welfare of its citizens, a power which is paramount to any rights under contracts between individuals." Buffalo Teachers Federation v. Tobe, 464 F.3d 362, 367 (2d Cir.2006) (quotation omitted), cert. denied, 550 U.S. 918, 127 S.Ct. 2133, 167 L.Ed.2d 864 (2007).
We employ a three-step analysis when determining whether legislation constitutes an impairment of contract. See Fournier, 158 N.H. at 221, 965 A.2d 1091. The first step is to analyze whether the law has operated as a substantial impairment of a contractual relationship. General Motors Corp. v. Romein, 503 U.S. 181, 186, 112 S.Ct. 1105, 117 L.Ed.2d 328 (1992). If the impairment is minimal, then it does not rise to a constitutional violation and our inquiry is at an end. Allied Structural Steel Co., 438 U.S. at 244, 98 S.Ct. 2716. If, however, we find substantial impairment, the next step is to determine whether "the State in justification, . . . [has] a significant and legitimate public purpose behind the regulation, such as the remedying of a broad and general social or economic problem." Energy Reserves Group, 459 U.S. at 411-12, 103 S.Ct. 697 (citation omitted). The third step is to determine "whether the adjustment of the rights and responsibilities of contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation's adoption." Id. at 412, 103 S.Ct. 697 (quotation and brackets omitted).
1. Substantial Impairment
We first examine whether the Act substantially impairs the policyholders' contractual rights. "This inquiry has three components: whether there is a contractual relationship, whether a change in law impairs that contractual relationship, and whether the impairment is substantial." Romein, 503 U.S. at 186, 112 S.Ct. 1105; see Fournier, 158 N.H. at 221, 965 A.2d 1091; Lower Village Hydroelectric Assocs. v. City of Claremont, 147 N.H. 73, 77, 782 A.2d 897 (2001).
The parties do not dispute the existence of a contract for professional liability insurance. Further, we assume, arguendo, that the majority correctly concludes that the Act impairs the contract. We disagree, however, that the policyholders have met their burden in proving that the impairment is substantial.
In the few opportunities we have had to consider whether a law substantially impairs a contract, we have examined: (1) the nature of the contract and the affected contractual terms; (2) the degree to which the parties reasonably relied upon those terms at the time they formed the contract; and (3) the practical effect the challenged law would have upon parties. See Lower Village Hydroelectric Assocs., 147 N.H. at 77, 782 A.2d 897; Opinion of the Justices (Furlough), 135 N.H. at 633-34, 609 A.2d 1204; Smith Insurance, Inc. v. Grievance Committee, 120 N.H. 856, 863, 424 A.2d 816 (1980); accord Mobil Oil Corp. v. Rossi, 138 Cal.App.3d 256, 187 Cal.Rptr. 845, 850 (1982) ("[S]pecific factors *657 which may be important in gauging the severity of impairment include the nature and significance of the right impaired,. . . whether the parties have relied on the preexisting contract right and the extent to which the statute violates the reasonable expectations of the parties; whether the law is temporary or indefinite in duration and whether the legislation is in a previously regulated area." (citations omitted)). For example, in holding that a law mandating forced unpaid leave for state employees substantially impaired employment contracts, we stated: "The bill under consideration here impairs the very heart of an employment contract: the promise of certain work for certain income. Its impact would likely wreak havoc on the finances of many of the affected workers and can only be considered substantial." Opinion of the Justices (Furlough), 135 N.H. at 634, 609 A.2d 1204. Contrary to the policyholders' assertions, the amount of money the Act seeks to transfer from the JUA to the general fund is not sufficient, by itself, to establish that impairment of the contract was substantial, and, accordingly, unconstitutional.
Although courts have not precisely defined what constitutes substantial impairment, see Coleman & Darden, The Constitutionality of Retroactive Franchise Laws, 21 Franchise L.J. 13, 14 (2001); Baltimore Tchrs. Un. v. Mayor, Etc., of Baltimore, 6 F.3d 1012, 1017 (4th Cir.1993), cert. denied, 510 U.S. 1141, 114 S.ct. 1127, 127 L.Ed.2d 435 (1994), they agree that the impairment need not necessarily "[t]otal[ly] destr[oy] . . . contractual expectations" to be considered substantial. Energy Reserves Group, 459 U.S. at 411, 103 S.Ct. 697. "[S]tate regulation that restricts a party to gains it reasonably expected from the contract does not necessarily constitute a substantial impairment." Id. Along similar lines, New Hampshire and other jurisdictions have held that an impairment is substantial when a statute affects the right to compensation in employment contracts or when it impairs a party's right to terminate a contract pursuant to its terms. See, e.g., Equipment Mfrs. Institute v. Janklow, 300 F.3d 842, 855-56 (8th Cir.2002); Baltimore Tchrs. Un., 6 F.3d at 1018; Fraternal Order of Police v. Prince George's Cty., 645 F.Supp.2d 492, 510 (D.Md.2009) ("Certainly, in the employment context, no right is more central to the contract's inducement than the right to compensation at the contractually specified level." (quotation, ellipses, and brackets omitted)); Kendall-Jackson Winery, Ltd. v. Branson, 82 F.Supp.2d 844, 873 (N.D.Ill.2000); Opinion of the Justices (Furlough), 135 N.H. at 634, 609 A.2d 1204; Grievance Committee, 120 N.H. at 863, 424 A.2d 816.
Courts have placed great weight upon the second consideration noted above: the degree to which the parties reasonably relied upon the impaired terms at the time they formed the contract, or put another way, their reasonable expectations. See, e.g., Houlton Citizens' Coalition v. Town of Houlton, 175 F.3d 178, 190 (1st Cir. 1999) ("In order to weigh the substantiality of a contractual impairment, courts look long and hard at the reasonable expectations of the parties."); Sal Tinnerello & Sons, Inc. v. Town of Stonington, 141 F.3d 46, 53 (2d Cir.) ("[T]he primary consideration in determining whether the impairment is substantial is the extent to which reasonable expectations under the contract have been disrupted."), cert. denied, 525 U.S. 923, 119 S.Ct. 278, 142 L.Ed.2d 230 (1998); Fraternal Order of Police, 645 F.Supp.2d at 510 ("[W]here the right abridged was one that induced the parties to contract in the first place, a court can assume the impairment to be substantial." (quotation omitted)).
*658 The majority acknowledges that evidence of a party's reliance upon the impaired contractual term is relevant in determining whether the impairment is substantial. It conducts no analysis, however, to determine whether, and to what degree, the policyholders may have relied upon the participating provision of the policy in contracting with the JUA for professional liability insurance. Instead, the majority simply quotes the trial court's ruling that "[t]he JUA has offered an assessable and participating policy approved by the Commissioner since its inception with no hint in the record that anyone had ever intended otherwise." It then concludes that, because the State does not "contest this ruling," or "contend that any factual dispute exists," or "assert on appeal that the policyholders did not rely upon the participating nature of the policies[,] . . . whether any particular policyholders relied upon the participating nature of the policies is not relevant to our analysis."
Perhaps the reason that the majority avoids this issue is that, in this case, the policyholders do not even attempt to argue that they relied upon the impaired provision when contracting with the JUA for professional liability insurance. Indeed, their own statement runs contrary to establishing reliance. The affidavit of Thomas Buchanan, Chief Executive Officer of policyholder Derry Medical Center, submitted with the policyholders' opposition to the respondents' summary judgment motion, concedes that "Derry Medical was constrained to do business with [the JUA], not because of the prospect of a return of surplus, but because the commercial carriers were not interested in selling coverage to our practice due to the greater risk they perceived in insuring a larger primary care provider with typical claims history." In other words, when contracting for insurance, the policyholders had no choice but to contract with the JUA, and were not in a bargaining position to choose a plan based upon any features other than liability coverage, including whether the plan contained the opportunity for surplus distribution.
Moreover, proving reliance upon a term affected by a change in law necessarily requires that the facts arising under the contract term and its impairment were foreseeable. Assuming, arguendo, the foreseeability of a surplus, it would not be reasonably foreseeable that any surplus would be distributed given that the disposition of surplus is subject to approval by the commissioner, see N.H. Admin. Rules, Ins 1703.07(d), the JUA's last request for distribution was denied in 2001, and no distributions have been requested since. Indeed, in the thirty-four years since the JUA was created, distributions to policyholders have only been made twice, in 1999 and 2000.
Even if we were to find that the policyholders relied upon the impaired provision, any reliance would be unreasonable because the JUA is part of a highly-regulated industry and is a creature of state regulation. Whether reliance is reasonable is greatly influenced by "whether the industry the complaining party has entered has been regulated in the past." Energy Reserves Group, 459 U.S. at 411, 103 S.Ct. 697. This is because "[w]hen regulation already exists, it is foreseeable that changes in the law may alter contractual obligations," thereby making it unreasonable to expect that the law would remain unchanged. Kittery Retail Ventures v. Town of Kittery, 856 A.2d 1183, 1195 (Me.2004), cert. denied, 544 U.S. 906, 125 S.Ct. 1603, 161 L.Ed.2d 279 (2005). "Of great, and we are inclined to say controlling, importance in the determination of whether a law violates the contracts clause is the foreseeability of the law when the *659 original contract was made." Chrysler Corp. v. Kolosso Auto Sales, Inc., 148 F.3d 892, 894-95 (7th Cir.1998), cert. denied, 525 U.S. 1177, 119 S.Ct. 1113, 143 L.Ed.2d 109 (1999). This is because "what was foreseeable then will have been taken into account in the negotiations over the terms of the contract." Id.
It is well-established that "[i]nsurance has long been a heavily regulated industry." Jost, Health Insurance Exchanges: Legal Issues, 37 J.L. Med. & Ethics 53, 56 (2009); see Brown, Constitutional Limits on State Insurance Regulation, 29 Tort & Ins. L.J. 651, 652 (1994); Mercado-Boneta v. Admin. del Fondo de Compensacion, 125 F.3d 9, 13-14 (1st Cir.1997). In New Hampshire specifically, the JUA was established in 1975 by the insurance commissioner, pursuant to his authority under RSA 404-C:1 (2006) "to provide such insurance coverage for any risks in this state which are equitably entitled to but otherwise unable to obtain such coverage." It is a State-created entity, and its operations are controlled by regulations promulgated by the insurance commissioner. All this is to say that, not only is the JUA part of the highly-regulated insurance industry, it is a creature of state regulation itself and would not exist but for the regulation that created it. Thus, in light of the State's pervasive and longstanding regulation, the legislative act at issue here was by no means unforeseeable. Accordingly, to the extent that the policyholders argue that they relied upon the law relevant to the disposition of the JUA's funds, beyond those that are necessary to cover their claims, any such reliance is, without question, unreasonable. Accord Veix v. Sixth Ward Assn., 310 U.S. 32, 38, 60 S.Ct. 792, 84 L.Ed. 1061 (1940) (When a party "purchase[s] into an enterprise already regulated in the particular to which he now objects, he purchase[s] subject to further legislation upon the same topic."); Blue Cross/Blue Shield of Rhode Island v. Rhode Island Dept. of Bus. Reg., No. 04-5769, 2005 WL 1530449, at *7-8 (R.I.Super. June 23, 2005) (finding no substantial impairment even though statute at issue "totally deprive[d] [non-profit corporation's] Directors of all compensation" in part because the non-profit was "a creature of special legislation in an industry that is extensively regulated").
The majority concedes that a history of regulation in the industry is one factor courts consider in determining whether impairment is substantial and that insurance is, in fact, a heavily-regulated industry. It fails, however, to apply this factor in determining whether the insurance industry's history of regulation has any impact on the reasonableness of the policyholders' purported reliance on the impaired contract term. Instead, it concludes only that "[t]he simple fact that insurance is a heavily regulated industry does not preclude a conclusion that the Act substantially impairs the policyholders' vested contract rights to share in the JUA earnings."
In reading the majority's analysis, one might conclude that the Contract Clause mandates that contracts between parties be governed by the statutes and regulations in effect at their formation unless the legislature expressly reserves the authority to change the applicable law. Such a conclusion is contradicted by well-settled precedent. See Bowen v. Agencies Opposed to Soc. Sec. Entrap., 477 U.S. 41, 52, 106 S.Ct. 2390, 91 L.Ed.2d 35 (1986) (noting that the State does not "waive[ ] the right to exercise one of its sovereign powers" if it fails to "expressly reserve[ ] the right to exercise that power. . . . [S]overeign power, even when unexercised, is an enduring presence that governs all contracts[,]. . . and will remain intact unless surrendered in unmistakable terms." (quotations *660 and citations omitted)); see also Hayes, 114 N.H. at 145, 316 A.2d 187.
The majority's reliance upon paragraph eight in the JUA policies is particularly misplaced. Paragraph 8 provides:
Notice to any agent or knowledge possessed by any agent or by any other person shall not effect a waiver or a change in any part of this policy . . .; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part of this policy, signed by a duly authorized representative of the company.
This paragraph defines the responsibilities of the JUA and its insured; it has no bearing whatsoever upon the commissioner's regulatory authority or the power of the legislature to amend laws regulating contracts. See Hayes, 114 N.H. at 145, 316 A.2d 187.
We observe also that, relevant to the third considerationthe practical effect the challenged law would have upon parties the record reflects that removing $110 million from the fund would have no practical effect upon the ability of the JUA to cover future policyholder claims. While the majority suggests that the surplus could be required to protect the JUA from insolvency, stating that "it is not clear that the $110 million in fact represents excess surplus," this proposition is squarely contradicted by the record. As the majority acknowledges, the record shows that the Department contracted with an independent actuarial consulting firm that produced a detailed report estimating the JUA's risk-based capital levels for 2009 through 2013. Risk-based capital is a method developed by the National Association of Insurance Commissioners to measure the amount of capital that an insurance company needs to support its overall business operations. To develop a range of risk-based capital levels for the years 2009 through 2013, the actuarial firm modeled four different scenarios reflecting different levels of anticipated JUA premium volume. The premium volume assumptions ranged from the JUA continuing to grow modestly, with five percent annual growth, to it having to expand its writings significantly because one or more carriers departed from the New Hampshire market. With the premium assumptions and other assumptions in place, the firm created a financial projection model that calculated expected financial results. Based upon this report, the Department determined that even after the $110 million is transferred to the general fund over a three-year period, the JUA will remain as well-capitalized as private insurers writing medical malpractice insurance in New Hampshire, at a risk-based capital level more than three times that of the industry minimum.
Moreover, given that the majority holds that only current policyholders have rights at stake, the solvency issue is not whether the JUA will be solvent in three years or later, as the majority appears to state, but whether the JUA will become insolvent during the term of the current policyholders' contracts. The record submitted on appeal reveals that these contracts lasted for only one year, and may have expired while this litigation was pending. Given the limited period during which the policyholders have any rights, the majority's concern regarding potential insolvency appears to be ephemeral.
We note that the impairment of contract in this case is unlike that at issue in Lower Village Hydroelectric Associates. That case concerned the retroactive repeal of a statute that had permitted qualifying businesses to negotiate payment-in-lieu-of-taxes (PILOT) agreements with the cities and towns in which they were located. Lower Village Hydroelectric Assocs., 147 N.H. at *661 74, 782 A.2d 897. The purpose of the statute was to encourage the propagation of local small power production and cogeneration facilities. Id. Pursuant to the statute, Lower Village Hydroelectric Associates, L.P. (LVHA) negotiated a PILOT agreement with Claremont under which it would pay 2.5% of gross revenues from 1997 to 2004 and 5% of gross revenues from 2005 to 2011. Id. Before the agreement was finalized and before the first payment had been tendered by LVHA, the statute permitting the PILOT agreements was repealed with a retroactive effective date. Id. The city, believing it was not bound by its agreement, assessed LVHA's facility $46,338.24 in ad valorem taxes, instead of $6,570.61, the amount that would have been due under the PILOT agreement. Id. at 75, 782 A.2d 897. Finding that there was a binding contract in effect, we held that the repeal of the statute was a retrospective law in violation of Part I, Article 23 of the New Hampshire Constitution. Id. at 75-77, 782 A.2d 897. Specifically, we stated that the law "nullified the PILOT agreement," and that, accordingly, "there can be no question that the contract. . . was substantially impaired." Id. at 77, 782 A.2d 897.
The retrospective law at issue in Lower Village Hydroelectric Associates totally destroyed LVHA's contractual expectations. LVHA contracted for a particular PILOT for a period of fourteen future tax years, presumably relying upon that reduced tax burden as it structured its business. Id. at 74-75, 77, 782 A.2d 897. The repeal of the law permitting the contract abridged a right "that induced the parties to contract in the first place," and, accordingly, we correctly "assume[d] the impairment to be substantial." Fraternal Order of Police, 645 F.Supp.2d at 510 (quotation omitted). Consistent with our holding in Opinion of the Justices (Furlough), where we also found substantial impairment, the repeal of the statute "impair[ed] the very heart" of LVHA's contract and "[i]ts impact would [have] likely wreak[ed] havoc on [LVHA's] finances." Opinion of the Justices (Furlough), 135 N.H. at 634, 609 A.2d 1204.
By contrast, there is no indication in the record that the right to a distribution of surplus induced the policyholders to contract for professional liability insurance with the JUA. The "very heart" of the contract at issue in this case is financial protection from professional liability in the amount contracted for, and there is nothing in the record indicating that transfer of the surplus to the general fund would affect the policyholders' finances, let alone "wreak havoc" on them. Id. The transfer of the surplus simply "restricts [the policyholders] to gains [they] reasonably expected from the contract," and, accordingly, there is no substantial impairment. Energy Reserves Group, 459 U.S. at 411, 103 S.Ct. 697.
2. Legitimate Public Purpose
Because there is no substantial impairment, there is no constitutional violation, and we could here end our inquiry. See Allied Structural Steel, 438 U.S. at 244, 98 S.Ct. 2716. However, even if we were to assume that the impairment is substantial, consideration of the remaining steps in the three-step analysis would still lead us to conclude that there is no constitutional violation.
The second step is to determine whether the State has established a legitimate public purpose for the Act. "The requirement of a legitimate public purpose guarantees that the State is exercising its police power, rather than providing a benefit to special interests." Energy Reserves Group, 459 U.S. at 412, 103 S.Ct. 697. The majority concedes, as it must, that the purpose *662 of the Act, which is to support programs that promote access to needed health care for underserved persons, is a "legitimate and important goal." We agree. An additional legitimate public purpose is to eliminate a potential unforeseen windfall to the JUA's insureds. See id. (observing that "[o]ne legitimate state interest is the elimination of unforeseen windfall profits").
3. Whether Legislation is Reasonable and Necessary
Finally, we determine whether the legislation is reasonable and necessary to achieve the legislature's legitimate public purpose. "Unless the State itself is a contracting party, as is customary in reviewing economic and social regulation, courts properly defer to legislative judgment as to the necessity and reasonableness of a particular measure." Id. at 412-13, 103 S.Ct. 697 (quotation, citation, brackets and ellipsis omitted); see Opinion of the Justices (Furlough), 135 N.H. at 634-35, 609 A.2d 1204. "If the state is a party to the contract, such deference is inappropriate, and the court may inquire whether a less drastic alteration of contract rights could achieve the same purpose and whether the law is reasonable in light of changed circumstances." Nieves v. Hess Oil Virgin Islands Corp., 819 F.2d 1237, 1243 (3d Cir.), cert. denied, 484 U.S. 963, 108 S.Ct. 452, 98 L.Ed.2d 392 (1987); see United States Trust Co., 431 U.S. at 25-26, 30-32, 97 S.Ct. 1505.
In this case, because the State is not a party to the agreements between the JUA and the policyholders, we must defer to the legislature's judgment that the Act is reasonable and necessary to achieve its legitimate public purpose. See Lower Village Hydroelectric Assocs., 147 N.H. at 78, 782 A.2d 897. Contrary to the majority's assertions, this does not mean that we give the legislature "complete deference," but rather that we examine whether the adjustment of contract rights is reasonable and appropriate to the public purpose underlying the Act. See Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470, 505, 107 S.Ct. 1232, 94 L.Ed.2d 472 (1987) (holding that "the finding of a significant and legitimate public purpose is not, by itself, enough to justify the impairment of contractual obligations"; rather, the court "must also satisfy itself that the legislature's adjustment of the rights and responsibilities of contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation's adoption" (quotations and brackets omitted)).
In analyzing the reasonableness of the legislation, courts have focused upon such as factors as whether: (1) the law meets an emergency need; (2) the law was enacted to protect a basic societal interest, rather than a favored group; (3) the law is appropriately tailored to the targeted emergency; (4) whether the imposed conditions are reasonable; and (5) whether the law is limited to the duration of the emergency. See Home Bldg. & L. Assn. v. Blaisdell, 290 U.S. 398, 444-47, 54 S.Ct. 231, 78 L.Ed. 413 (1934); Ken Moorhead Oil Co., Inc. v. Federated Mut. Ins., 323 S.C. 532, 476 S.E.2d 481, 488-89 (S.C. 1996); Kimball v. N.H. Bd. of Accountancy, 118 N.H. 567, 570, 391 A.2d 888 (1978). An emergency need not exist, however, before a state may enact a law that impairs a private contract. See Energy Reserves Group, 459 U.S. at 412, 103 S.Ct. 697 (observing that, to be legitimate, "the public purpose need not be addressed to an emergency or temporary situation"); Allied Structural Steel, 438 U.S. at 249 n. 24, 98 S.Ct. 2716.
In our opinion, the Act easily survives scrutiny under this deferential standard. The Act was passed to protect a basic *663 societal interestaffordable healthcare for underserved populations. "The protection of public health . . . serves broad societal interests, not merely some `favored' special interest group." Ken Moorhead Oil, 476 S.E.2d at 489.
In our view, the Act is a reasonable decision by the legislature that it can better meet this need by transferring funds to programs that provide such access instead of retaining them in the JUA's coffers. The legislature has determined that the funds held by the JUA in its account "are significantly in excess of the amount reasonably required to support its obligations as determined by the insurance commissioner." Laws 2009, 144:1. This determination is supported by evidence in the record, which includes an actuarial study that shows that the transfer will not jeopardize the JUA's solvency. The legislature has further determined that "the purpose of promoting access to needed health care would be better served through a transfer of the excess surplus . . . to the general fund," than by retaining the funds in the JUA's account. Id. As the majority concedes, "the Act expediently accomplishes the legislature's stated purpose."
Additionally, in our view, the State's adjustment of the policyholders' contractual rights (to the extent that any has occurred) to allow for the transfer of funds from the JUA to the general fund to support programs that provide access to healthcare serves this public purpose. Particularly given the actuarial study showing that transfer of the funds would in no way jeopardize the JUA's solvency, we believe that the State has reasonably adjusted the policyholders' contractual rights. Accordingly, we conclude that the impairment of the policyholders' contractual rights, to the extent that any has occurred, is amply justified by the public purposes served by the Act, and also that the legislature has reasonably adjusted the contract rights at issue. See Keystone Bituminous Coal Assn., 480 U.S. at 505, 107 S.Ct. 1232.
Although "[c]ourts are required to defer to the legislature's judgment concerning the necessity and reasonableness of economic and social legislation," the majority declines to do so. Nieves, 819 F.2d at 1249 (emphasis added). The majority contends that substantial judicial deference is unwarranted because the Act transfers money from the JUA to the general fund. But see Mercado-Boneta, 125 F.3d at 16 n. 8 (noting, "even where public contracts are at issue, some deference is due a legislature"); Local Div. 589, Etc. v. Comm. of Mass., 666 F.2d 618, 642 (1st Cir.1981) (even where public contracts are involved, courts are not required to "reexamine de novo all the factors underlying the legislation and to make a totally independent determination" regarding the necessity and reasonableness of the law), cert. denied, 457 U.S. 1117, 102 S.Ct. 2928, 73 L.Ed.2d 1329 (1982); but cf. United States Trust Co., 431 U.S. at 25, 97 S.Ct. 1505 (holding, "[t]he Contract Clause is not an absolute bar to subsequent modification of a State's own financial obligations"). This transfer to the general fund, the majority reasons, is not "broad-based social or economic regulation directed to meet a societal need," but a sign that the State's self-interest is at stake, thus, justifying reviewing the Act under a heightened standard.
In our view, the majority's reasoning is flawed in several respects. First, we fail to see how an act designed to support programs that promote public access to health care is not "broad-based social or economic regulation directed to meet a societal need." The legislature's justification for the Act, to support health care programs for underserved populations, *664 serves public interests. It stands "in stark contrast to the narrowly focused, private interest-oriented law" that the United States Supreme Court struck down in Allied Structural Steel, 438 U.S. at 248-49, 98 S.Ct. 2716. Mercado-Boneta, 125 F.3d at 15. The law at issue in Allied Structural Steel applied only to certain private employers with voluntary private pension plans and only when such employers closed their Minnesota offices or terminated their pension plans. Allied Structural Steel, 438 U.S. at 248, 98 S.Ct. 2716. As such, the law had an "extremely narrow focus" and was not enacted "to protect a broad societal interest rather than a narrow class." Id. at 248, 249, 98 S.Ct. 2716. By contrast, here, the State "was not legislating on behalf of private interests when it enacted [the Act], and sought only to protect the legitimate interests of the public" in having affordable health care. Mercado-Boneta, 125 F.3d at 15.
The majority concludes that the Act is not broad-based social or economic regulatory legislation because of its "funding scheme," which the majority describes as "singularly target[ing] for transfer to the State's general fund discrete funds generated by premiums paid by a discrete class of private parties." Regardless of its funding mechanism, the Act constitutes broad-based social or economic legislation because it was enacted "to protect a broad societal interest rather than a narrow class." Allied Structural Steel, 438 U.S. at 249, 98 S.Ct. 2716.
Moreover, the record refutes the majority's assertion that the funds were "generated by premiums paid by a discrete class of private parties." According to the deputy commissioner of the insurance department, while the excess surplus has resulted, in part, from the accumulation of premiums, it has also resulted from the accumulation of "investment income free of taxes and assessments paid by private insurers." The JUA is exempt from federal income tax and New Hampshire premium tax. It is also exempt from and has never paid the New Hampshire business profits tax, business enterprise tax, and the interest and dividends tax. It is also exempt from assessments levied upon private insurers that fund the insurance department.
Second, we believe that the majority construes the term "self-interest" too broadly. Under the majority's construction of the term, "virtually every state statute that impairs a purely private contract would be subject to heightened scrutiny." Ken Moorhead Oil Co., 476 S.E.2d at 488. "Presumably, every state statute is intended to serve [the State's] self-interest; otherwise the General [Court] would not enact the legislation in the first place." Id. The self-interest to which the United States Supreme Court has referred "is the state's interest as a party to a contract, rather than to its interests as a sovereign seeking to further important public policies." Id.; see Keystone Bituminous Coal Assn., 480 U.S. at 505, 107 S.Ct. 1232 (United States Supreme Court "has repeatedly held that unless the State is itself a contracting party, courts should properly defer" to the legislature's judgment (quotation omitted)); Peick v. Pension Ben. Guar. Corp., 724 F.2d 1247, 1270 (7th Cir. 1983) (holding that there is "no merit" to the argument that heightened scrutiny applies to legislative impairment of private contracts; such scrutiny applies only when the State is a contracting party), cert. denied, 467 U.S. 1259, 104 S.Ct. 3554, 82 L.Ed.2d 855 (1984); Lower Village Hydroelectric Assocs., 147 N.H. at 78, 782 A.2d 897 (judicial deference required unless State is contracting party). When, as in this case, "the state has in fact altered none of its own financial obligations," then the legislature's assessment of whether the *665 legislation is reasonable and necessary "deserves significant deference because the state is essentially acting not according to its economic interests, but pursuant to its police powers." Mercado-Boneta, 125 F.3d at 16 (emphasis added).
We disagree with the majority's conclusion that the Act "inures to the State's financial benefit." Unlike the majority, we give credence to the fact that the Act specifically earmarks the transferred funds to support programs that provide underserved populations with access to needed healthcare. Under such a scheme, "it [is] the public welfare, not the [State's] bank account, that [stands] to [gain]." Id. Contrary to the majority's implication, there is no evidence in the record that the legislature enacted the Act because of "an ill-motive of political expediency or unjustified welching." Buffalo Teachers, 464 F.3d at 373.
Third, even if a heightened standard of review were justified in this case, we disagree with the majority's application of this standard. "[L]ess deference does not imply no deference." Id. at 370. Even when the State's purported self-interest is at stake, courts are not required "to reexamine all of the factors underlying the legislation at issue and to make a de novo determination whether another alternative would have constituted a better statutory solution to a given problem." Id.; see Local Div. 589, Etc., 666 F.2d at 642. "Nor is the heightened scrutiny to be applied as exacting as that commonly understood as strict scrutiny." Buffalo Teachers, 464 F.3d at 371.
Finally, today's decision leaves a number of unresolved issues, including:
What now becomes of the $110 million surplus?
If it is to be distributed "to such health care providers covered by the [JUA]," does that include both current and past policyholders, even if, as the majority holds, only "current policyholders" have viable Contract Clause claims?
Once the policyholders' policies expire, does their supposed vested right to the $110 million surplus also expire? If so, does this mean that, as the majority suggests, if new legislation were passed that became effective upon issuance of the policyholders' new policies, the legislature could require the JUA to transfer the $110 million surplus without violating the policyholders' constitutional rights?
What effect will this decision have on the JUA's exemption from both State and Federal taxes?
If it is distributed to policyholders, what impact will this have on the private medical malpractice insurance market in New Hampshire?
III. Part I, Article 12
Our determination that the policyholders lack vested rights to the surplus itself or to its use for their benefit is dispositive of their claim that the Act constitutes a "taking." The New Hampshire Constitution provides that "no part of a man's property shall be taken from him . . . without his own consent." N.H. CONST. pt. I, art. 12. In the absence of a vested property right, no taking for purposes of Part I, Article 12 of the State Constitution has occurred. See Adams v. Bradshaw, 135 N.H. 7, 14, 599 A.2d 481 (1991), cert. denied, 503 U.S. 960, 112 S.Ct. 1560, 118 L.Ed.2d 208 (1992). Accordingly, because the policyholders lack vested rights, the Act does not operate as a "taking" for the purposes of Part I, Article 12.
IV. Conclusion
We believe that the majority's conclusion that the Act violates Part I, Article 23 *666 of the State Constitution is erroneous as a matter of law. We also believe that by failing to defer to the legislature's judgment that the Act is a reasonable and necessary measure to further an indisputably legitimate public purpose, the majority encroaches upon legislative decision-making.
"If there is one rule that is now ingrained in the doctrine of judicial review of legislative enactments it is this: that an act of the Legislature is presumed to be constitutional and may be struck down only when it is proven to be unconstitutional beyond a reasonable doubt." Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 690 (Hancock, J., dissenting); see N.H. Assoc. of Counties v. State of N.H., 158 N.H. 284, 288, 965 A.2d 1012 (2009). "Particularly since the Supreme Court's abandonment of the Lochner [v. New York, 198 U.S. 45, 25 S.Ct. 539, 49 L.Ed. 937 (1905)] era concept of economic due process as a justification for striking down regulatory legislation, courts have been mindful of this rule in recognition of the basic principle that under the doctrine of separation of powers, it is to their elected representatives, not to the members of the judiciary that the citizens have delegated the power to make the law." Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 690 (Hancock, J., dissenting) (citation omitted); see Appeal of Bosselait, 130 N.H. 604, 613, 547 A.2d 682 (1988) (observing, "legislation merely regulating economic benefits and burdens . . . is reviewable under the rational basis criterion when challenged . . . under the due process clause"), cert. denied, 488 U.S. 1011, 109 S.Ct. 797, 102 L.Ed.2d 788 (1989); Petition of Kilton, 156 N.H. 632, 645, 939 A.2d 198 (2007) (noting, "[m]atters of public policy are reserved for the legislature"). The majority's opinion is contrary to the rule that "[t]he wisdom, effectiveness, and economic desirability of a statute is not for us to decide." Grievance Committee, 120 N.H. at 863, 424 A.2d 816. We, therefore, cannot join it, and respectfully dissent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3765493/ | DECISION AND JUDGMENT ENTRY
{¶ 1} This case is before the court on appeal from a judgment of the Wood County Court of Common Pleas, which, after a jury trial, found appellant, Isreal Flores, guilty of attempted intimidation of a witness in a criminal case, a felony of the fourth degree, in violation of R.C. 2923.02 and R.C. 2921.04(B), and sentenced him to 17 months imprisonment. For the reasons that follow, we affirm the judgment of the trial court.
{¶ 2} The facts of this case mirror this court's factual recitation in our decision on the appeal of a companion case involving William Miller, the individual also convicted of attempted witness intimidation in association with the operative facts of this case. See State v. Miller,
6th Dist. No. WD-04-062, 2005-Ohio-3360. Those facts are as follows. On August 21, 2003, appellant was indicted for trafficking in marijuana under trial court Case No. 03 CR 330. Appellant had been housed in the same unit with William Miller, in the Wood County Justice Center, in early December 2003. On December 7, 2003, the day before a scheduled suppression hearing in appellant's drug trafficking case, a phone conversation initiated by appellant, while in jail, to Miller, was recorded and submitted into evidence at appellant's May 25, 2004 attempted intimidation trial. In the phone conversation, appellant explained to Miller that there would be a hearing the following day, on December 8, 2003, in the Wood County Court of Common Pleas, and appellant told Miller how to get there.
{¶ 3} After determining the time and location of the hearing, Miller discussed how to get money to appellant in jail and mentioned that it could not come directly from Miller. Miller then expressed a concern that no names would come out during the hearing. Appellant, however, assured him that the name of the informant would have to come out, otherwise the state could only get him on "possession." Appellant stated, "They are going to mention his name." Miller responded, "That's what we need." Miller then admonished appellant to "act innocent" and to keep matters between the two of them and not to tell anyone else in jail. Appellant stated, "I appreciate the help," and Miller responded, "There is no problem. We're working on it." A woman then got on Miller's phone and appellant expressed to her that he was "doing the right thing for the right people." Thereafter, Miller got back on the phone and told appellant that there would be a "little meeting" held after the hearing and that appellant should call him back.
{¶ 4} On the day of appellant's suppression hearing, December 8, 2003, two individuals were present in the audience at the courthouse. They were observed taking notes during the testimony. Miller was later identified as one of the individuals. The identity of the confidential informant in appellant's case was disclosed during this hearing.
{¶ 5} A second taped phone conversation, from December 9, 2003, between appellant and Miller, was entered into evidence. In this second taped phone conversation, Miller assured appellant that "we're going to take care of business." Miller again asked appellant if he had told anyone who was in court on the day of the hearing because it would "blow the cover." Appellant assured Miller that he told officers that he did not know who was present in court. Miller told appellant that "we sent you out some money today" under the name "Maria," and that appellant should put her on his "list" if the money order did not get through to him in jail.
{¶ 6} Miller and appellant then briefly discussed what had been disclosed at the hearing. They commented that "the guy" had been doing it for a long time, every time he got in trouble, since 1993. Miller stated that "we" played the tape loud and clear on the evening of December 8th, that "they" heard what they were "all" looking for, and that a lot of weight was taken off of a lot of people's shoulders. Appellant commented that "he" had cost him four years and that he could not believe what had been disclosed. Appellant stated that "something's gotta be done." Miller assured him, "It will be," but they had to wait for the right time. Miller then expressed to appellant that he "did good" and that "we" had a long talk about it "last night." Miller told appellant he knew that appellant was doing two extra years by just getting a name out, but that wherever he was imprisoned, there would be "boys" there to meet him and that he would be "welcomed with open arms." Appellant told Miller that the state had wanted him to turn state's evidence, to which Miller replied, "You ain't gonna have a life if you do that, Dude."
{¶ 7} A search warrant was executed for Miller's home on December 23, 2003. Officers found two small tape recorders and a copy of Agent Mike Ackley's officer notes, regarding information the confidential informant had provided Agent Ackley throughout his investigation. Ackley testified at the attempted intimidation trial that he knew nothing of Miller from his investigation and that the notes did not mention Miller. The notes, however, did mention other information the confidential informant had provided about "Knuckles" and "Big Bob" dealing drugs for the Iron Coffins in Northwest Ohio and Southeast Michigan, and that Ted Dean had a stolen tractor at his residence.
{¶ 8} Appellant now appeals the judgment against him, setting forth the following assignments of error:
{¶ 9} "First Assignment of Error. The trial court erred in overruling the defendants objection to the admission of certain hearsay statements.
{¶ 10} "Second assignment of error. The trial court erred in denying defendants [sic] motions for judgment of acquittal pursuant to Ohio Crim. R. 29(A).
{¶ 11} "Third assignment of error. The evidence was insufficient as a matter of law to support the verdict.
{¶ 12} "Fourth assignment of error. The verdict was against the manifest weight of the evidence."
{¶ 13} In his first assignment of error, appellant contends that the taped phone conversations between appellant and Miller were not admissible under either Evid. R. 801(D)(2)(e) or Evid. R. 804(B)(3). First, appellant argues that the trial court erred in finding that the requirements of Evid. R. 801(D)(2)(e) did not apply because appellant was not charged in the indictment with the specific criminal offense of conspiracy. Appellant further asserts in applying Evid. R. 801(D)(2)(e), that the taped phone conversations were not admissible because the state failed to present any independent proof of a conspiracy between appellant and Miller. Second, appellant asserts that the state's apparent alternate basis for admission of the phone conversations under Evid. R. 804(B)(3) fails because Miller was not "unavailable." Appellant contends that underState v. Madrigal (2000), 87 Ohio St.3d 378, the phone conversations are neither reliable nor do they fall within a firmly rooted hearsay exception.
{¶ 14} In response, the state appears to agree with appellant that the trial court erred in finding that Evid. R. 801(D)(2)(e) did not apply based on the lack of a conspiracy charge in the indictment. However, the state argues that it was harmless error because it did present independent proof of a conspiracy. The state cites both a witness identification of Miller in the courtroom on the day of the suppression hearing and Agent Ackley's officer's notes seized from Miller's house. The state makes no argument in its brief relative to admissibility under Evid. R. 804(B)(3) due to Miller's "unavailability."
{¶ 15} Evid. R. 801(D)(2)(e) provides that a statement is not hearsay if it was made by a co-conspirator during and in furtherance of the conspiracy. "Statements of co-conspirators are not admissible under Evid. R. 801(D)(2)(e), however, until the proponent of the statement has made a prima facie showing of the existence of the conspiracy by independent proof." State v. Skatzes, 104 Ohio St.3d 195, 2004-Ohio-6391
at ¶ 102 citing State v. Carter, 72 Ohio St.3d 545, 1995-Ohio-104, paragraph three of the syllabus and State v. Lindsey, 87 Ohio St.3d 479,481, 2000-Ohio-465. "There is no requirement that explicit findings be made on the record." Skatzes at ¶ 102 citing State v. Robb,88 Ohio St.3d 59, 70, 2000-Ohio-275. Further, even the early admission of statements that could have been deemed hearsay at the time they were elicited is rendered harmless if independent proof of the conspiracy is admitted into evidence before the case is submitted to the jury. SeeState v. Jalowiec, 91 Ohio St.3d 220, 2001-Ohio-26.
{¶ 16} We agree that the trial court erred in finding that Evid. R. 801(D)(2)(e) did not apply because there was no conspiracy charge in the indictment. Even if a substantive offense of conspiracy was not charged, the state can prove a conspiracy in order to introduce out-of-court statements by conspirators in accordance with Evid. R. 801(D)(2)(e).Robb, 88 Ohio St.3d 59, 68, 2000-Ohio-275; Skatzes, 104 Ohio St.3d 195,2004-Ohio-6391 at ¶ 105. With regard to proof of the existence of a conspiracy between appellant and Miller independent of the out-of-court statements themselves, Agent Ackley testified regarding jail phone records that established that appellant placed the two phone calls to a particular phone number. Agent Ackley further testified that upon executing the search warrant of Miller's residence, another officer found a phone bill that indicated the phone number for the residence matched the jail records of the outgoing call from appellant. Further, the search of Miller's residence produced a copy of Agent Ackley's notes that contained the confidential informant's name, some facts related to Agent Ackley's investigation of appellant's drug trafficking activities, as well as information regarding other illegal activity by other individuals. Agent Ackley testified that there was no discernable legitimate reason for Miller to have a copy of his officer notes related to appellant's drug trafficking case. Finally, two witnesses who were present in the courtroom at the time of the suppression hearing identified Miller as one of the persons in the audience taking notes during the suppression hearing.
{¶ 17} Based on the foregoing, the court finds that the state presented evidence of a conspiracy independent of the statements in the taped phone conversations. Therefore, the taped phone conversations were admissible under Evid. R. 801(D)(2)(e). Based on this finding, appellant's arguments relative to the state's alleged alternate basis for admission of the phone conversations under Evid. R. 804(B)(3) is moot. Appellant's first assignment of error is not well-taken.
{¶ 18} Next, the court will address appellant's second and third assignments of error which challenge the sufficiency of the evidence. Crim. R. 29(A) provides for an entry of a judgment of acquittal if the evidence is insufficient to sustain a conviction. Appellant not only claims error in the trial court's denial of his motion for judgment of acquittal, but also asserts that the evidence was insufficient as a matter of law to support the guilty verdict.
{¶ 19} We have recently stated:
{¶ 20} "When reviewing the denial of a Crim. R. 29(A) motion, an appellate court must evaluate whether `the evidence is such that reasonable minds can reach different conclusions as to whether each material element of a crime has been proven beyond a reasonable doubt.' See State v. Bridgeman (1978), 55 Ohio St.2d 261, 381 N.E.2d 184, syllabus. An appellate court reviews a denial of a Crim. R. 29 motion for acquittal using the same standard that is used to review a sufficiency of the evidence claim. See State v. Carter (1995), 72 Ohio St.3d 545, 553,1995-Ohio-104." State v. Reyes, 6th Dist. No. WD-03-059, 2005-Ohio-2100, at ¶ 21.
{¶ 21} We have further noted:
{¶ 22} "`The relevant inquiry is whether, after viewing the evidence in a light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime proven beyond a reasonable doubt.'" Reyes, at ¶ 22 quoting State v. Jenks (1991),61 Ohio St.3d 259, paragraph two of the syllabus.
{¶ 23} Finally, with reference to "sufficiency of the evidence," applicable to both appellant's second and third assignments of error, it is a legal standard that the court applies to determine if a case should go to a jury or to determine whether there is sufficient evidence to support a verdict. State v. Thompkins (1997), 78 Ohio St.3d 380, 386,1997-Ohio-52, quoting Black's Law Dictionary (6 Ed. 1990) 1433. According to the Supreme Court of Ohio, "sufficiency is a test of adequacy." Id. The issue of the sufficiency of evidence presents a purely legal question for the court. State v. Farr, 10th Dist. No. 02AP-167, 2002-Ohio-5523, at ¶ 65. In contrast, questions of credibility of witnesses are matters left to the trier of fact. State v. Wakely (May 21, 1999), 6th Dist. No. E-98-069, citing State v. DeHass (1967), 10 Ohio St.2d 230. These matters are addressed under a manifest weight standard. In re Martin (May 10, 2001), 8th Dist. No. 78184, citing State v. Martin (1983)20 Ohio App.3d 172, 175.
{¶ 24} Regarding the attempted intimidation offense, R.C. 2921.04
provides:
{¶ 25} "(B) No person, knowingly and by force or by unlawful threat of harm to any person or property, shall attempt to influence, intimidate, or hinder the victim of a crime in the filing or prosecution of criminal charges or an attorney or witness involved in a criminal action or proceeding in the discharge of the duties of the attorney or witness."
{¶ 26} Regarding attempt, 2923.02(A) provides:
{¶ 27} "No person, purposely or knowingly, and when purpose or knowledge is sufficient culpability for the commission of an offense, shall engage in conduct that, if successful, would constitute or result in the offense."
{¶ 28} Appellant argues that he knew the identity of the confidential informant prior to the suppression hearing. Therefore, the comments between appellant and Miller during the phone conversations were directed solely towards the confidential informant's credibility, rather than towards publishing his identity. In support appellant points to his trial counsel's subpoena of the confidential informant's criminal records. Said subpoena is dated prior to the suppression hearing. However, Agent Ackley testified that he believed that prior to the suppression hearing, appellant had suspicions, but was not positive of the identity of the confidential informant. Further, during the pre-suppression hearing conversation, appellant stated, "They are going to mention his name." Miller responded, "That's what we need." Clearly, confirmation of the confidential informant's identity was the focus of the taped phone conversations.
{¶ 29} Appellant also points to portions of Agent Ackley's testimony in which he describes his interpretation of the phone conversations between appellant and Miller. At one point Agent Ackley described Miller as "talking around" things and that some things Miller said could be taken two different ways. However, the court agrees with the state that Agent Ackley's testimony when viewed in total and in context, reveals the likely meaning of these conversations. Specifically, both appellant and Miller viewed getting definitive confirmation of the confidential informant's name and passing that information along as being helpful to other individuals who were subjects of an ongoing investigation by the authorities. Further, Agent Ackley testified in his professional opinion that certain statements implied that Miller was going to have the confidential informant hurt or killed.
{¶ 30} In addition, although appellant attempts to minimize his participation in the phone conversations by stating that he was "largely silent," a review of the tape reveals otherwise. In the December 7 conversation, appellant explained to Miller that there would be a hearing the following day and told Miller how to get to the Wood County Court of Common Pleas. Appellant assured Miller that the name of the informant would have to come out and that "They are going to mention his name." Appellant stated to Miller, "I appreciate the help." During the conversation on December 9, the day after the suppression hearing, appellant and Miller briefly discussed what had been disclosed at the hearing. Appellant commented that "he" had cost him four years and that he could not believe what had been disclosed. Appellant stated that "something's gotta be done." Clearly, appellant was an active participant in this conversation with Miller.
{¶ 31} Accordingly, we find, after viewing the evidence in a light most favorable to the prosecution, a rational trier of fact could have found the essential elements of the crime of attempted intimidation of a witness proven beyond a reasonable doubt. Therefore, appellant's second and third assignments of error are not well-taken.
{¶ 32} Finally, we consider appellant's fourth assignment of error in which he contends that the verdict was against the manifest weight of the evidence. Under a manifest weight standard, an appellate court sits as a "thirteenth juror" and may disagree with the fact finder's resolution of the conflicting testimony. State v. Thompkins (1997), 78 Ohio St.3d 380,387. The appellate court, "`reviewing the entire record, weighs the evidence and all reasonable inferences, considers the credibility of witnesses and determines whether in resolving conflicts in the evidence, the jury clearly lost its way and created such a manifest miscarriage of justice that the conviction must be reversed and a new trial ordered. The discretionary power to grant a new trial should be exercised only in the exceptional case in which the evidence weighs heavily against conviction.'" Id., quoting State v. Martin (1983), 20 Ohio App.3d 172,175.
{¶ 33} Appellant again asserts that the topic of the phone conversations was the confidential informant's credibility rather than his identity. Appellant also again describes Agent Ackley's interpretation of the "threatening" nature of the phone conversations as completely vague or contradictory. We disagree. After reviewing the tape and the transcript of the trial proceedings and considering the credibility of the witnesses, we find that the trier of fact did not "lose its way" and thereby create such a manifest miscarriage of justice that appellant's conviction should be reversed as being against the manifest weight of evidence. Appellant's fourth assignment of error is therefore, not well-taken.
{¶ 34} Upon due consideration, we find that substantial justice was done the party complaining, and the judgment of the Wood County Court of Common Pleas is affirmed. Appellant is ordered to pay the court costs of this appeal for which sum judgment is rendered against appellant on behalf of Wood County and for which execution is awarded. See App. R. 24.
JUDGMENT AFFIRMED.
A certified copy of this entry shall constitute the mandate pursuant to App. R. 27. See, also, 6th Dist. Loc. App. R. 4, amended 1/1/98.
Pietrykowski, J. Singer, P.J. Skow, J. Concur. | 01-03-2023 | 07-06-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/1548151/ | 992 A.2d 557 (2010)
The STATE of New Hampshire
v.
Brandon BILODEAU.
No. 2008-443.
Supreme Court of New Hampshire.
Argued: October 7, 2009.
Opinion Issued: March 10, 2010.
*558 Kelly A. Ayotte, Attorney General (Nicholas Cort, Assistant Attorney General, on the brief and orally), for the State.
William J. Schultz, Public Defender, of Manchester, on the brief and orally, for the defendant.
HICKS, J.
The defendant, Brandon Bilodeau, appeals his conviction of assault by a prisoner. See RSA 642:9 (2007). He argues that the Superior Court (Mangones, J.) erred in denying his motion to suppress his statements to the police. We affirm.
The following facts are supported by the record. On January 4, 2007, the defendant, an inmate in the Secure Psychiatric Unit at the State Prison, was accused of stabbing a fellow prisoner. The next day, *559 two state police detectives investigated the stabbing and sought to interview the defendant. He refused to speak to the detectives and asked for an attorney. On January 9 and January 12, 2007, the defendant sent "inmate request slips" inquiring about the status of the investigation and whether the State planned to pursue charges against him. The second slip read, "What is the current status of the incident ... ? No one has answered any requests in regards to this matter and I don't know if I should seek outside legal counsel. Please let me know what is going on." One officer responded to the notea response that the defendant characterizes in his brief as "[m]inimal."
On March 19, 2007, prison officials called the detectives to advise them that the defendant wished to speak with them. They returned to the prison to interview the defendant. The detectives read the defendant his Miranda rights from a standard form. See Miranda v. Arizona, 384 U.S. 436, 444-45, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966). The defendant stated he understood them and wanted to waive them. He then signed a form waiving his rights. Subsequently, he confessed that he had stabbed a fellow prisoner in the back with a sharpened toothbrush. Near the end of the fifteen-minute interview, one of the detectives wrote a summary of the defendant's statement on the waiver form, and read it to the defendant. The defendant then signed the statement.
At no point before or during this interview did the detectives inquire as to the defendant's mental health either from the defendant or the medical staff at the prison. The detectives testified that the defendant appeared "lucid" and that he spoke "pretty articulate[ly]." Specifically, one detective testified that the defendant "knew what he wanted to say, how he wanted to say it. You know, he seemed fine to me.... I didn't have any reason to believe he wasn't there of his own accord." The other detective testified that he had known the defendant for fourteen years and had no concerns about the defendant's demeanor.
The defendant moved to suppress the oral and written statements, arguing that he did not knowingly, intelligently and voluntarily waive his Miranda rights, and that his statements were involuntary under the Due Process Clause of the New Hampshire Constitution. He presented evidence that upon admittance to the Secure Psychiatric Unit, he suffered from depression, suicidal ideation, hallucinations, mood disorders, and an anti-social personality disorder. To treat these conditions, the defendant was receiving five medications daily at the time of his confession. The trial court denied the defendant's motion.
On appeal, the defendant contends that his statements were involuntary and, therefore, their admission at trial violated his due process rights under the New Hampshire Constitution. See N.H. CONST. pt. I, art. 15. Part I, Article 15 of the New Hampshire Constitution provides that "[n]o subject shall be ... compelled to accuse or furnish evidence against himself" and guarantees every citizen due process of law. Id. For a statement to be admissible at trial, the State must prove beyond a reasonable doubt that the statement was voluntary. State v. Rezk, 150 N.H. 483, 486, 840 A.2d 758 (2004). Whether a statement is voluntary is a question of fact for the trial court to determine. State v. Hammond, 144 N.H. 401, 404, 742 A.2d 532 (1999). We will not reverse the trial court's determination unless the manifest weight of the evidence viewed in the light most favorable to the State is to the contrary. Rezk, 150 N.H. at 486, 840 A.2d 758.
*560 No single definition of voluntariness exists that can be mechanically applied. State v. Damiano, 124 N.H. 742, 747, 474 A.2d 1045 (1984). The focus of the inquiry is "whether the actions of an individual are the product of an essentially free and unconstrained choice." Hammond, 144 N.H. at 405, 742 A.2d 532 (quotation omitted); Damiano, 124 N.H. at 747, 474 A.2d 1045. The decision to confess "must be freely self-determined." In re Wesley B., 145 N.H. 428, 430, 764 A.2d 888 (2000) (quotation omitted). A confession cannot be "the product of a will overborne by police tactics, or of a mind incapable of conscious choice." Hammond, 144 N.H. at 405, 742 A.2d 532 (quotation omitted).
The Due Process Clause of the State Constitution requires that we make a determination of voluntariness in light of "the totality of all surrounding circumstances." Rezk, 150 N.H. at 487, 840 A.2d 758 (quotation omitted). We analyze "both the characteristics of the accused and the details of the interrogation." Id. (quotation omitted). Here, the defendant argues that his psychiatric condition combined with subtle police coercion made his statements involuntary. He also contends that the State did not "verify a rational thought process" or establish that the defendant had "any ability to exercise meaningful discretion with the police."
Under the Due Process Clause, we consider a person's mental or developmental condition if it impairs his capacity for self-determination or his ability to resist police coercion. In re Wesley B., 145 N.H. at 430-32, 764 A.2d 888. The defendant may not be able to "make a meaningful choice" to confess or may have a heightened vulnerability to what otherwise would be acceptable police tactics. Id. at 431, 764 A.2d 888 (quotation omitted); see State v. Chapman, 135 N.H. 390, 400-01, 605 A.2d 1055 (1992) ("[P]roof of a deranged or deficient mental state may be highly significant in determining whether any given police conduct was overbearing in its effect." (quotation omitted)). Mental illness, however, "does not, as a matter of law, render a confession involuntary." Hammond, 144 N.H. at 405, 742 A.2d 532 (quotation omitted). The trial court still must determine "whether, given the totality of the circumstances, the defendant's statements were the product of a rational intellect and a free will." In re Wesley B., 145 N.H. at 431, 764 A.2d 888 (quotation omitted).
The trial court, after listening to the testimony of the officers, reviewing medical files provided by the defendant, and reading the defendant's communications with prison authorities, found that the State had proved beyond a reasonable doubt that the defendant's statements were voluntary based upon the totality of the circumstances. In its analysis, the trial court acknowledged that the defendant was housed in the psychiatric treatment unit at the time of the alleged crime and that he received medication for his psychiatric condition. Nevertheless, the trial court found that the defendant "was well able to sufficiently process information and make choices" and had the ability "to consider his legal rights and his options, including whether to waive his rights."
Based upon our review of the record, we cannot say that the trial court's finding was contrary to the manifest weight of the evidence when viewed in the light most favorable to the State. See Hammond, 144 N.H. at 405, 742 A.2d 532. There was evidence that the defendant's mental condition did not critically impair his capacity for self-determination and that his will was not overborne. See id. On January 5, 2007, one day after the alleged stabbing, *561 the defendant invoked his Miranda rights when the officers sought to interview him. One of the detectives testified that the defendant chose not to speak with him, stating that "he wanted to talk to an attorney but at some point in the future he may want to speak to us." The defendant also sent two "inmate request slips" on January 9 and January 12 inquiring about the ongoing investigation, even asking if he "should seek outside legal counsel." While admittedly occurring two months before the March 17, 2007 interview at issue, these actions indicate that the defendant understood his basic legal rights and could make a meaningful choice whether to invoke them.
The events surrounding the defendant's interview on March 19, 2007, also evidence that the defendant's decision to confess was "freely self-determined." Wesley B., 145 N.H. at 430, 764 A.2d 888 (quotation omitted). The interview only occurred after the defendant sent a message through prison personnel that he wished to speak with the detectives. The detectives responded to this request, went to the Secure Housing Unit where the defendant was held, and interviewed the defendant in the attorney conference room. At the start of the interview, the detectives read the defendant his Miranda warnings line by line from a standard form which he signed. The defendant wrote "yes" on the form next to the questions, "Do you understand each of these rights?" and "Understanding these rights are you willing to answer questions?"
While compliance with Miranda does not conclusively establish the voluntariness of a later confession, it is one factor that a trial court can consider. See State v. Rodney Portigue, 125 N.H. 352, 364, 481 A.2d 534 (1984). Police officers do not have to engage a defendant in a discussion of what those rights mean to verify that a defendant understands them, although this may be good practice when the officers know of a defendant's mental condition. Cf. State v. Dumas, 145 N.H. 301, 303, 761 A.2d 1063 (2000). The length of the interview was neither inordinate nor oppressive. Cf. State v. Spencer, 149 N.H. 622, 629, 826 A.2d 546 (2003); Hopkins v. Cockrell, 325 F.3d 579, 584-85 (5th Cir.) (holding confession involuntary because defendant isolated for fifteen days and interviewed nine times during that period), cert. denied, 540 U.S. 968, 124 S. Ct. 430, 157 L. Ed. 2d 314 (2003). The interview lasted only fifteen minutes and the defendant confessed immediately.
This case differs from Wesley B., where we held the trial court erred in admitting the inculpatory statement of an eleven-year-old boy with "low average intelligence" who was questioned for over two hours without the presence of legal counsel or a guardian. Wesley B., 145 N.H. at 431, 764 A.2d 888. In Wesley B., the juvenile's "will was overborne" rendering his confession involuntary. Id. at 432, 764 A.2d 888. Unlike in Wesley B., the defendant here did not deny the stabbing in the face of continued police questioning. Id. at 432, 764 A.2d 888. He confessed immediately and freely. A corrections officer also testified that the defendant asked him, "[H]ow bad did I f ... that guy up?" after the interview. The detectives here also testified that the defendant appeared "lucid" and spoke "pretty articulate[ly]," whereas the juvenile in Wesley B. was "`slow,' fidgety, and had trouble paying attention." Id. at 431, 764 A.2d 888. Here, unlike in Wesley B., we cannot say that the superior court's finding was contrary to the manifest weight of the evidence viewed in the light most favorable to the State.
The defendant argues that the detectives used "subtle coercion" that, combined with his mental condition, overbore his *562 will. The defendant points to the fact that he sent two inmate request slips inquiring about the possibility of charges in January 2007 and received only a "[m]inimal" response to one of them. While that response may have been "minimal," it did not, as the defendant argues, "forc[e] the defendant to speak with the officers to get the minimal information he desired." There was "nothing coercive, deceptive or overbearing in the police's conduct." Hammond, 144 N.H. at 405, 742 A.2d 532 (quotation omitted) (statement voluntary of a defendant suffering from depression, conducted in a cold parking lot by an officer who was a friend, partially because there was "nothing coercive, deceptive, or overbearing in the police's conduct"); see Chapman, 135 N.H. at 400-01, 605 A.2d 1055 (confession voluntary where the police knew the defendant was intoxicated but did not take advantage of the defendant's intoxication). At no point did the two detectives make any direct or implied promises in order to obtain the statement from the defendant. Cf. Rezk, 150 N.H. at 491, 840 A.2d 758 (confession involuntary where induced by specific promise of leniency).
In sum, based upon our review of the trial court's determination of voluntariness, construed in the light most favorable to the State, we cannot say that the trial court's finding was contrary to the manifest weight of the evidence. Accordingly, we affirm the trial court's ruling.
Affirmed.
DALIANIS, J., concurred; DUGGAN, J., concurred specially; BRODERICK, C.J., dissented.
DUGGAN, J., concurring specially.
I concur in the majority opinion with the understanding that the holding is not inconsistent with the United States Supreme Court's decision in Colorado v. Connelly, 479 U.S. 157, 107 S. Ct. 515, 93 L. Ed. 2d 473 (1986).
BRODERICK, C.J., dissenting.
Because I disagree, based upon the evidence presented, that the State proved beyond a reasonable doubt that the defendant's confession was voluntary, I respectfully dissent.
The New Hampshire Constitution provides in part that "[n]o subject shall be ... compelled to accuse or furnish evidence against himself." N.H. CONST. pt. I, art. 15. Part I, Article 15 guarantees every citizen due process of the law. State v. Damiano, 124 N.H. 742, 746, 474 A.2d 1045 (1984). Because "a defendant's constitutional guarantees of due process may not be violated without the involvement of a State actor," State v. Nickerson, 147 N.H. 12, 14, 780 A.2d 1257 (2001), some State action is required in order to trigger the protections of Part I, Article 15, see State v. Carroll, 138 N.H. 687, 691, 645 A.2d 82 (1994).
In determining whether the State's actions violated the defendant's due process rights under Part I, Article 15, we look to the dictates of fundamental fairness. See State v. Winslow, 140 N.H. 319, 321, 666 A.2d 946 (1995); State v. Denney, 130 N.H. 217, 220, 536 A.2d 1242 (1987). "Due process requires not only that the State act according to the laws of the land, but also that its actions be consistent with the fundamental principles of liberty and justice which lie at the base of all our civil and political institutions." Damiano, 124 N.H. at 746, 474 A.2d 1045 (quotation omitted). "Such fundamental principles are implicated when the State uses an individual's involuntary statements to obtain a conviction against that individual." Id.
*563 The factors underlying the belief that such statements should not be admitted into evidence are the unreliability of the confession, the lack of rational choice of the accused, and society's conclusion that the State should not take advantage of an individual who is incapable of making a free choice.
No single definition of voluntariness is sufficient to cover the range of situations in which the determination of voluntariness must be made. However, the nucleus of the inquiry is whether the actions of an individual are the product of an essentially free and unconstrained choice. If the statements are the product of a will overborne by police tactics, or of a mind incapable of a conscious choice, then the statements are inadmissible at trial.
Id. at 746-47, 474 A.2d 1045 (citations and quotation omitted).
Our State Constitution provides greater protection in this area than the Federal Constitution. Over thirty years ago, we expressly rejected the "preponderance of the evidence" standard to determine whether a defendant's statements were made voluntarily. State v. Phinney, 117 N.H. 145, 147, 370 A.2d 1153 (1977). The United States Supreme Court has held that the preponderance standard satisfies the federal constitutional requirements, but that the states are free to adopt a stricter standard because "[t]hey may indeed differ as to the appropriate restriction of the values they find at stake." Lego v. Twomey, 404 U.S. 477, 489, 92 S. Ct. 619, 30 L. Ed. 2d 618 (1972).
In rejecting the federal standard and holding that our State Constitution requires the State to prove beyond a reasonable doubt that the defendant's statements were made voluntarily, we explained:
As early as 1845, it was suggested [by the New Hampshire Supreme Court] that the reasonable doubt standard be used in determining the voluntariness of confessions....
The danger of admitting involuntary confessions is as great now as it was then and the policy considerations for excluding confessions which are involuntary are as compelling now as they ever were. There is always the danger that a defendant's involuntary confession will be admitted against him. The preponderance test does not provide a sufficient safeguard against that danger. The adoption of the preponderance standard would amount to a determination that it is no more serious for an involuntary confession to be admitted than it is for a voluntary one to be excluded.
Phinney, 117 N.H. at 146-47, 370 A.2d 1153 (citations omitted). We emphasized that:
A confession is a special type of evidence. Its acceptance basically amounts to conviction. Confessions are usually obtained in the psychological atmosphere of police custody and in the greatest secrecy in which the cards can be stacked against the accused. He has no means of combating the evidence produced by the police save by his own testimony. The stakes are too high and the risk of error too great to permit a determination of admissibility to be decided by a balance of probabilities.
Id. at 147, 370 A.2d 1153.
We have had few occasions to consider the effect of the mental condition of a defendant in a custodial setting on the voluntariness of his confession under our State Constitution. In State v. Chapman, we stated that although proof of a defendant's deficient mental condition, standing alone, is not dispositive of an inquiry into the voluntariness of a confession under Part I, Article 15, it is to be considered *564 "highly significant" in determining whether, under the totality of the circumstances, any official conduct was coercive, deceptive or overbearing in its effect. State v. Chapman, 135 N.H. 390, 400-01, 605 A.2d 1055 (1992). Subsequently, in In re Wesley B., 145 N.H. 428, 764 A.2d 888 (2000), we considered whether the trial court erred in admitting the inculpatory statement of a developmentally impaired juvenile. Regarding the significance of the juvenile's impairment to the analysis of whether his statement was voluntary, we stated:
If a person suffers from a mental or developmental condition that impairs that person's ability to comprehend his or her choices, that impairment must also be factored into a court's determination of voluntariness. The due process clause of the State Constitution requires us to label, as involuntary, the statements of an individual who, because of a mental condition, cannot make a meaningful choice. However, mental illness does not, as a matter of law, render a confession involuntary. Rather, the trial court still must determine whether, given the totality of the circumstances, the defendant's statements were the product of a rational intellect and a free will.
Id. at 430-31, 764 A.2d 888 (quotation omitted).
The juvenile, an eleven-year-old of low average intelligence, was interviewed by the police for close to two hours without the presence of his mother, legal counsel, guardian ad litem or psychological evaluator. See id. at 432, 764 A.2d 888. Although the officer's questioning was not verbally hostile or threatening, it was inconsistent with the procedures later suggested by the psychologist, and adopted by the court, to address the juvenile's language and attention deficits. See id. We concluded that "the trial court did not properly weigh all the relevant factors in conducting its review of voluntariness" because it "was required to address not simply whether the minor's will was overborne, but also whether the juvenile's capacity for self-determination was critically impaired." Id. at 431, 764 A.2d 888 (quotation and brackets omitted). An examination of the totality of the surrounding circumstances, including the juvenile's age, educational level, educational impairments, and the length of his solitary interview, demonstrated that the juvenile's "will was overborne." Id. at 432, 764 A.2d 888. Accordingly, we held that the State failed to establish beyond a reasonable doubt that the confession was voluntary. Id. at 433, 764 A.2d 888.
Pursuant to our case law, therefore, an individual's mental impairment is "highly significant" in determining whether any official conduct was overbearing in its effect, Chapman, 135 N.H. at 401, 605 A.2d 1055, and "that impairment must also be factored into a court's determination of voluntariness," Wesley B., 145 N.H. at 430, 764 A.2d 888. Furthermore, whether a police interview was coercive is "measured by the nature of the interview within the context of [the defendant's] abilities." Id. at 431, 764 A.2d 888. The totality of the circumstances test necessarily involves an inquiry into the effect of mental illness on a particular defendant. Circumstances which may pass constitutional muster when applied to a defendant free of impairment may not be constitutionally tolerable when applied to one who is mentally impaired.
The record before us demonstrates that when the defendant was admitted to the Secure Psychiatric Unit (SPU) of the state prison in August 2006, he suffered from severe depression, suicidal ideation, auditory and visual hallucinations, mood disorders, and an anti-social personality disorder. *565 Testing placed him in the "severe range of hopelessness." His Global Assessment Functioning Scale score indicated impairment in reality testing or communication, or major impairment in several areas such as work, school, family relations, judgment, thinking or mood. His judgment was labeled "poor." At the time of the interview with police on March 19, 2007, during which he confessed to an alleged assault, the defendant was incarcerated in the Secure Housing Unit (SHU). He was receiving numerous medications daily including medications to treat depression, anxiety, and certain psychiatric conditions. The latter medication had been doubled in dosage just three days prior to the interview.
At the hearing on the motion to suppress, Detective Puckett testified that he began investigating the incident on January 5, 2007, the day after the alleged assault, when he went to the SPU where the defendant was "being held in an isolation tank." According to Detective Puckett, the defendant chose not to speak to him, indicating that "he wanted to talk to an attorney but at some point in the future he may want to speak to us."
Three days later, the defendant sent an inmate request slip asking: "What is the current status of this alleged investigation for assault? I've been in SHU now five days.... No one's seen me since SPU, and then I was told outside charges were being pursued. Please let me know what is going on." The defendant did not receive a reply to this request. On January 12, the defendant sent a second inmate request slip asking: "What is the current status of the incident that brought me to SHU? No one has answered any requests in regards to this matter and I don't know if I should seek outside legal counsel. Please let me know what is going on." At some point a response was made by Sergeant Dinsmoor of the department of corrections investigation bureau. There is no evidence in the record concerning the specifics of the response, although the defendant's brief characterizes it as providing "minimal information."
On March 19, 2007, Detective Puckett and Sergeant Dinsmoor went to the SHU to interview the defendant in the "attorney visit room," after prison staff relayed a request from him that he wanted to speak with the investigating officers. The defendant maintains in his brief that he wanted to speak with them "to find out what was going on."
At the suppression hearing, Detective Puckett testified that on the day of the interview, the defendant "seemed good," although he "didn't really know him very well," having only met him once before. Although he knew that the SPU, where the alleged assault occurred, is a psychiatric treatment unit, Detective Puckett testified that he did not seek any information from the SPU medical staff regarding the defendant's mental illness diagnosis or any medications he was taking at that time.
Sergeant Dinsmoor testified that he had known the defendant for the past fourteen years, when the defendant had been in the general prison population, but not when he was in the SPU. According to Sergeant Dinsmoor, on the day of the interview, the defendant appeared "lucid." Sergeant Dinsmoor testified that he did not know that the defendant was diagnosed with auditory hallucinations or that he was suffering from visual hallucinations and paranoid delusions. He testified that he knew that the SPU is a psychiatric treatment unit. He did not ask the SPU medical staff what the defendant's mental diagnosis was or what medications he was taking and whether they could interfere with his abilities.
*566 The trial court's order denying the motion to suppress states that it "was presented with evidence that the defendant was well able to sufficiently process information and make choices." This evidence included "the interchanges that took place between the defendant and the investigators" and "other evidence such as Inmate Request Slips." In addition, the trial court noted that the defendant was "provided with his Miranda warnings and waived his rights," and had had time between the alleged incident and the interview to "reflect on whether he should speak with the investigating officials." Based upon the fact that there "was no overbearing or other impropriety in terms of the conduct of the investigating law enforcement officials," that the defendant "was described as being lucid during the interview," that one of the officers "had noted that he had known [the] defendant for some fourteen years while [the] defendant was at the State Prison and that the defendant's demeanor has not been out of the ordinary," the trial court concluded that the "defendant's statements to law enforcement concerning this matter were voluntarily and freely made."
When reviewing a trial court's ruling on a motion to suppress, we accept the trial court's factual findings unless they lack support in the record or are clearly erroneous. State v. Plch, 149 N.H. 608, 613, 826 A.2d 534, cert. denied, 540 U.S. 1009, 124 S. Ct. 546, 157 L. Ed. 2d 419 (2003). Our review of the court's legal conclusions, however, is de novo. Id. When the underlying subject of the suppression motion is the voluntariness of a confession, we will not reverse the trial court's decision unless it is "contrary to the manifest weight of the evidence, as viewed in the light most favorable to the State." State v. Spencer, 149 N.H. 622, 627, 826 A.2d 546 (2003) (quotation omitted).
We determine voluntariness by looking at the totality of the surrounding circumstances to assess whether the confession was the product of an essentially free and unconstrained choice. See Wesley B., 145 N.H. at 430, 764 A.2d 888. If a person suffers from a mental condition which impairs that person's ability to comprehend his or her choices, such impairment must be factored into the court's determination. Id. A deficient mental state may be highly significant in determining whether any given police conduct was overbearing in its effect. Chapman, 135 N.H. at 400-01, 605 A.2d 1055. "Both the characteristics of the accused and the details of the interrogation are considered. The court ... look[s] at the factual circumstances surrounding the confession, the psychological impact on the defendant, and the legal significance of how the defendant reacted, in order to determine whether the police exerted such an influence on the defendant that his will was overborne." Aubuchont, 147 N.H. at 146, 784 A.2d 1170 (quotation omitted).
"Mental illness ... is a complex psychological condition that is difficult to measure and is always changing in intensity." St. Florian, Note, Fifth Amendment Miranda Waiver and Fourteenth Amendment Voluntariness Doctrine in Cases of Mentally Retarded and Mentally Ill Criminal Defendants, 4 Suffolk J. Trial & App. Advoc. 271, 287 (1999). "The courts have recognized that an analysis of the totality of the circumstances must include not only a review of the interrogation techniques used, but also the mental characteristics of the defendant.... The focus in cases involving mentally ill ... defendants should not only be on whether the individual has the ability to understand what is being said to him, but also on his heightened vulnerability to otherwise acceptable police tactics." Id. at 288-89, 784 A.2d 1170.
*567 Despite evidence of mental illness such that the defendant was confined in the SPU, and evidence of the administration of multiple medications, the State provided no evidence concerning their effect on his ability to make an essentially free and unconstrained choice to confess. The only testimony at the suppression hearing was provided by laypersons who concluded that the defendant "seemed good" and was "lucid." In the absence of credible evidence from a medical professional familiar with the status of the defendant's mental health, the State has failed to establish beyond a reasonable doubt that the defendant's statement was voluntary. Cf. Wesley B., 145 N.H. at 431, 764 A.2d 888 (psychologist testified that juvenile's impairments rendered it substantially more difficult for him to decide whether or not to confess); State v. Dumas, 145 N.H. 301, 303, 761 A.2d 1063 (2000) (trial court relied upon State's expert's opinion to find that despite defendant's borderline intelligence, he was capable of understanding the meaning and effect of waiving his rights); Damiano, 124 N.H. at 747, 474 A.2d 1045 (after listening to testimony of the psychiatrist, the defendant, and the police officers, trial court found that State had proved beyond a reasonable doubt that statements were voluntary).
Accordingly, I would hold that in the presence of objective facts which, at the time of the confession, put the State on notice of the defendant's mental condition, the State bears the burden at the suppression hearing to offer medical evidence that the defendant's capacity for self-determination was not thereby impaired. In addition, the fact that the defendant was housed in solitary confinement, that he was provided with little information about the investigation, and the brief nature of the interview at which he confessed raise further concerns whether his will was overborne and his confession voluntarily given.
Detective Puckett testified that when he first went to speak with the defendant concerning the alleged assault, he was being held in an isolation tank. At oral argument before us, it was represented that between January 5, the day after the alleged assault, and March 19, the date of the confession, a span of approximately two-and-a-half months, the defendant was held in solitary confinement for twenty-three hours each day. Yet, there is no evidence in the record concerning the conditions in the SHU and what effect those conditions may have had upon the mental health of this defendant. See Aubuchont, 147 N.H. at 146, 784 A.2d 1170 (court must consider psychological impact on defendant of factual circumstances surrounding the confession); State v. Decker, 138 N.H. 432, 436, 641 A.2d 226 (1994) (trial court heard testimony about defendant's living conditions of confinement, viewed living quarters at prison and recognized that if court found these conditions to have overborne the defendant's will, his confession would have to be suppressed).
Despite the fact that the defendant initially stated that he wanted to speak with an attorney, there is no evidence in the record that he was allowed to do so. Although the defendant sent an inmate request slip seeking information about the investigation, it was not answered. A second inquiry about the investigation, specifically asking if he should seek outside legal counsel, apparently was answered with "minimal information." Thus, notwithstanding attempts to obtain basic information about the status of the investigation and whether he should invoke his right to counsel, the defendant's requests were largely ignored.
The defendant's subsequent request to speak with prison officials about the status *568 of the pending investigation resulted in a visit from the police over two months after the alleged incident, at which time during a fifteen-minute interview the defendant waived his rights and confessed to the alleged assault. There is no evidence in the record whether the defendant was aware that the police were coming on March 19 to speak with him. The trial court reasoned that the passage of over two months between the time of the alleged incident and the interview "allowe[d][the] defendant time to reflect on whether he should speak with the investigating officials." However, it is equally plausible that spending over two months in solitary confinement had the effect of exacerbating his underlying conditions of depression, anxiety and psychiatric disorders, thereby increasing the likelihood that the conduct of the officials was overbearing in its effect.
The State points to the fact that the interview with the defendant only lasted fifteen minutes in support of its position that it was not coercive. However, the brevity of the interview calls into question the true voluntary nature of the confession in this case where a mentally ill, medicated inmate who has spent over two months in solitary confinement is confronted by two police officers, without the presence of counsel and yet, in the span of just fifteen minutes, engages in an allegedly adequate discourse over the waiver of his rights, is sufficiently presented with the charges against him and approves a written confession prepared by the police officers. I further note that we have recognized that "videotaping custodial interrogation may lessen the inherent speculation, avoid unwanted claims of coercion, and generally assist all parties in assessing what transpired during the interrogation." State v. Farrell, 145 N.H. 733, 739, 766 A.2d 1057 (2001).
Considering the facts of the interview in light of all of the surrounding circumstances, as well as the State's failure to submit sufficient evidence addressing whether the defendant's mental health critically impaired his capacity for self-determination, I conclude that the trial court's decision is contrary to the manifest weight of the evidence when viewed in the light most favorable to the State. The evidence does not permit a conclusion that the State has established beyond a reasonable doubt that the defendant's will was not overborne and that his confession was voluntarily given. Accordingly, I would reverse the trial court's denial of the defendant's motion to suppress his confession.
The State suggests that even if admission of the confession was error, the error was harmless beyond a reasonable doubt because the alternative evidence of the defendant's guilt was overwhelming. I would hold that the State cannot meet its burden in this case. The victim testified that while watching television in the dayroom with other inmates, the defendant jumped on his back and started pounding him. When he returned to his room, he realized he was bleeding from multiple puncture wounds. No blood was found in the dayroom and no blood was found on the defendant. Aside from the victim's testimony, the State relied upon the defendant's confession. Without the confession, I disagree that the alternative evidence of the defendant's guilt was overwhelming beyond a reasonable doubt.
An underlying principle in the enforcement of our criminal law is that our system is accusatorial, not inquisitional. Under an accusatorial system, determinations of guilt are based upon "evidence independently and freely secured." Rogers v. Richmond, 365 U.S. 534, 541, 81 S. Ct. 735, 5 L. Ed. 2d 760 (1961). "[A] system of *569 criminal law enforcement which comes to depend on the `confession' will, in the long run, be less reliable and more subject to abuses than a system which depends on extrinsic evidence independently secured through skillful investigation." Escobedo v. Illinois, 378 U.S. 478, 488-89, 84 S. Ct. 1758, 12 L. Ed. 2d 977 (1964). I would hold that the admission of the confession at trial was not harmless error beyond a reasonable doubt and, accordingly, I would reverse the defendant's conviction. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548232/ | 162 F.2d 699 (1947)
HEADY
v.
COMMISSIONER OF INTERNAL REVENUE.
UNION TRUST CO. OF INDIANAPOLIS
v.
SAME.
Nos. 9029, 9030.
Circuit Court of Appeals, Seventh Circuit.
June 23, 1947.
C. Severin Buschmann, John A. Alexander, and William H. Krieg, all of Indianapolis, Ind., for petitioners.
Douglas W. McGregor, Asst. Atty. Gen., Sewall Key, J. Louis Monarch, and Helen Goodner, Assts. to Atty. Gen., and J. P. Wenchel, of Washington, D. C., for respondent.
Before SPARKS and KERNER, Circuit Judges, and LINDLEY, District Judge.
*700 SPARKS, Circuit Judge.
These petitions to review decisions of the Tax Court present the question whether the taxpayers who held all the stock of the Ready Mixed Concrete Corporation received income during the year 1939, either in the form of capital gain or dividends, from the distribution to them of debentures of the corporation. Petitioners contend that the debentures were distributed as part of the recapitalization of the corporation for a corporate business purpose, and are accordingly exempt from income tax under the provisions of section 112(b) and (g) of the Internal Revenue Code, 26 U.S. C.A. Int.Rev.Code, § 112(b, g).
The facts were for the most part stipulated. The corporation involved was engaged in the business of manufacturing and selling mixed concrete. It had been organized in 1931 by Harvey Tutewiler, a very successful business man, and its success had been largely due to his activities. 888 shares of its 1000 shares of no-par value stock were owned by him, and the remaining 112, by petitioner, Mrs. Heady.
Tutewiler was killed in an automobile accident in December, 1938, and petitioner, the Union Trust Company, became executor of his estate and trustee of a trust set up pursuant to the terms of his will. This will provided that his executor should sell all his interest in the corporation as promptly after his death as a purchaser for a fair consideration could be found, for cash or on terms satisfactory to the executor and his wife or daughter. He specifically enjoined the executor not to operate the business for any greater length of time after his death than was absolutely necessary.
In accordance with these directions the executor was ordered by the court to offer the 888 shares in his estate for sale for cash at not less than the full appraised value ($245 a share). In response to the published notices of sale, numerous offers were received, but all were unsatisfactory, the highest being for $88,800 for the 888 shares belonging to the estate, and $11,200 for Mrs. Heady's. The court thereupon terminated the authority to sell and directed that the executor hold the stock until its further order.
Following the attempts to sell, the executor endeavored to procure satisfactory management for the business. Since the corporation was one which depended primarily on management for its success rather than the actual value of the assets used in the business, it was necessary to find someone with experience and knowledge of the particular problems. Chesleigh Gray was considered to be the best qualified for the position. He was at that time manager of a company from which the corporation purchased all of the sand and gravel used in its operations. He had had considerable experience in the management and use of the kind of concrete produced by the corporation and had been a personal and business friend of Tutewiler for many years, having been somewhat responsible for the latter's decision to organize the corporation, and having advised him as to the arrangement of the plant. He was thoroughly familiar with the problems involved in the business which was closely related to the one in which he was then engaged, and he knew the clientele with which Tutewiler had done business. However, when he was asked to take over the management, he refused to consider it on a salary and bonus basis, being unwilling to leave his position unless he could acquire ownership of the corporation in the event that his management proved successful. He was not financially able to purchase it, however, and the stockholders were unwilling to enter into any arrangement contemplating the sale of the stock unless they could retain control over the corporation until the fair value was realized.
Under these circumstances, and motivated by the desire of the stockholders to obtain the services of Gray as manager, and at the same time realize the fair value of their stock, the parties worked out a plan involving the recapitalization here involved, and a contract of employment for Gray with a provision for the purchase by him of blocks of the stock from time to time.
The recapitalization consisted of the issuance of 1000 shares of new capital stock having a par value of one dollar a share, and $135,000 in 7% debentures maturing serially from five to twelve years after June 1, 1939, the new stock and debentures to be exchanged for the 1000 shares of the *701 old no-par value stock. The contract provided for salary and bonus for Gray and gave him the option to buy blocks of stock at specified prices as fixed amounts of the debentures were retired.[1] It also obligated him to devote all his income from the corporation in excess of the amount of his actual salary, whether from bonus or dividends, first to the purchase of the blocks of stock then available under the schedule, or, if none, then to lend it to the corporation for 1½% interest for the retirement of additional debentures. The contract was terminable on various conditions, including the death of Gray or termination of his employment by the corporation, and in the event of such termination before Gray had bought 475 shares of the stock, petitioners were granted an option to repurchase the stock theretofore bought under the contract, for $150 a share.
The plan was put into effect; petitioners received the new stock and the $135,000 debentures, which were found to have a fair market value of $120,000, in exchange for their old no-par value stock; Gray was employed as manager of the corporation.
According to the corporate books, prior to the recapitalization, the surplus amounted to $103,006, and net earnings for the first five months of 1939 were $37,325. The $103,006 surplus was extinguished on the books after the exchange. Under the contract, Gray could not purchase the last 525 shares enough to give him control of the corporation until the debentures had been reduced to $12,500. Thus as the Tax Court found, "the petitioners were assured that they, as stockholders, would receive the amount of the accumulated surplus and earnings existing on June 7, 1939, prior to the acquisition by Gray of the controlling interest in the corporation's stock."
The Tax Court found from these facts that, "The purpose of the exchange of stock of the corporation for stock and debentures was to segregate the accumulated corporate earnings and to make certain that petitioners, as stockholders, would receive them. No corporate business purpose for the transaction has been shown." It accordingly ruled that petitioners realized taxable income from the distribution of the debentures, and that such income was taxable as a dividend or its equivalent rather than as capital gain. Petitioners contend that this finding is contrary to the evidence, which, they argue, clearly shows a corporate business purpose, the engaging of Gray's services as manager, hence they assert error in the ruling of the court that they received taxable income from the exchange.
Section 112(b) (3) provides that no gain or loss shall be recognized upon an exchange of stock for stock or securities in the same corporation pursuant to a plan of reorganization, and section 112(g) (1) (E) provides that a recapitalization of a corporation is a statutory reorganization. In discussing these two provisions, the Tax Court stated that the readjustment of the capital structure here involved and the exchanges made by the petitioners constituted a literal compliance with them, but that since the decision in Gregory v. Helvering, 293 U.S. 465, 55 S. Ct. 266, 79 L.Ed 596, 97 A.L.R. 1355, in order for a taxpayer to secure the benefits of the reorganization provision it must appear that the reorganization had as its objective a legitimate business purpose, and that that purpose must be germane to the business of the corporation.
Petitioners contend that the Tax Court has unduly extended the scope of the Gregory decision which was never intended to cover such a situation as is here present, but was directed only to the case where the so-called reorganization was a sham executed only for the purpose of escaping a tax liability, and that a reorganization by way *702 of recapitalization may have as its primary objective the business interests of its shareholders if unrelated to tax avoidance that no necessity exists to show a corporate business purpose separate and distinct from the shareholders' business interests. We think this analysis wrongly emphasizes the motive of the transaction rather than the ultimate effect of it. It is quite true that there was nothing illegitimate about the arrangement here entered into. We note, however, that according to the testimony of two witnesses, the particular plan chosen was thought to be tax free and was worked out with that thought in mind.
As we view the facts, a purchaser willing and able to pay the $245 a share value of the stock (which reflected the accumulated earnings and profits) could not be found. Rather than accept the $100 offered, which did not properly reflect the actual value of the stock, another means was devised for transferring to the stockholders the equivalent of the fund accumulated as surplus during the period of their ownership, while at the same time receiving the benefits of good management. This plan consisted of a series of steps calculated to enable Gray to swing the purchase of the corporate stock, and, at the same time to enable the stockholders to realize the accrued profits of the business at that time tied up as surplus. The effect of this was to siphon off that part of the book value of the shares attributable to profits and earnings accumulated after February 28, 1913, thereby effecting a distribution of those earnings and profits. That this distribution took the form of a recapitalization does not alter its effect nor its consequences under the Revenue Act, section 115, 26 U.S.C.A. Int. Rev.Code, § 115, of which treats as a taxable dividend any distribution of earnings or profits accumulated after February 28, 1913, and defines dividend as any distribution made by a corporation to its shareholders, "whether in money or in other property, (1) out of its earnings or profits accumulated after February 28, 1913 * * *."
A very similar question was presented to the Court of Appeals for the Third Circuit in two cases recently decided by that court. See Bazley v. Commissioner, 155 F.2d 237, and Adams v. Commissioner, 155 F.2d 246, affirmed by the Supreme Court, June 16, 67 S. Ct. 1489. In both of those cases the court emphasized the effect of the distributions rather than the motives and plans of the taxpayers and their corporations, holding in the Bazley case [155 F.2d 241], that, "the net effect of the distribution of the debenture bonds was to distribute to the petitioner a substantial segment of the previous earnings of the corporation." The court further held that the petitioners were not entitled to the benefits of the reorganization exemption, referring to the legislative history of the section to show that it had been retained in the Revenue Act only in order to permit legitimate reorganizations required in order to strengthen the financial condition of the corporation, but to be strictly limited to such readjustments as were required by business exigencies and undertaken for reasons germane to the continuance of the business of a corporation a party to the reorganization. The court called attention to the fact that, as in the case at bar, the Tax Court found nothing in the calling in of the old common stock, issuance and distribution of new common stock, and issuance and distribution of debenture bonds which was required to strengthen the financial condition of the corporation. "Congress obviously did not intend to grant a tax exemption in such a situation merely because, qua corporate accounting, there was a `recapitalization' and thus a `reorganization' * * *. Clearly, a reversal of the Tax Court's holding would permit the use of the Section 112 exemption as a device for evading taxes Congress intended to impose under Section 115 * * *. In its last analysis, the `recapitalization-reorganization' here under consideration accomplished nothing other than a distribution to the Bazleys and Day which consumed a large portion of the corporation's earned surplus otherwise available for the subsequent declaration of dividends. This result was one which, whatever the motives of the Bazleys may have been, cannot have the effect desired by the recipients of freedom from tax liability."
The Supreme Court [67 S. Ct. 1492], in affirming said, "A `reorganization' which *703 is merely a vehicle, however elaborate or elegant, for conveying earnings from accumulations to the stockholders is not a reorganization under § 112." This language is equally applicable to the facts of the case at bar.
Decision affirmed.
NOTES
[1] Col. I of the schedule below shows the number of shares which might be purchased when the outstanding debentures had been reduced to the amounts shown in Col. III, and Col. II shows the amount per share which was to be paid.
Col. I Col. II Col. III
50 $200.00 $117,500
50 200.00 100,000
75 200.00 82,500
100 150.00 65,000
100 150.00 47,500
100 150.00 30,000
525 73.50 12,500 | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919577/ | 91 B.R. 317 (1988)
In re Jeffrey SANDERS, Trustee for Pentecostal Temple n/k/a Grace Community Temple, Debtor.
Christine SHUBERT, Trustee, Plaintiff,
v.
Jeffrey SANDERS, Defendant.
Bankruptcy No. 87-03375S, Adv. No. 88-0626S.
United States Bankruptcy Court, E.D. Pennsylvania.
September 14, 1988.
Christine Shubert, Camden, N.J., interim trustee.
Harold N. Kaplan, Cherry Hill, N.J., for trustee.
Johnny Ray Brown, Philadelphia, Pa., for debtor and defendant.
James J. O'Connell, Ass't. U.S. Trustee, Philadelphia, Pa.
Jeffrey D. Sanders, Philadelphia, Pa., pro se.
*318 OPINION
DAVID A. SCHOLL, Bankruptcy Judge.
This most unusual Chapter 7 bankruptcy filing and an adversary proceeding filed therein by the Trustee causes us to explore the issue of who the intended debtor in this case is and whether the intended debtor can in fact be a debtor in the configuration which he has chosen. We conclude, in light of the Debtor's explanatory Brief in this adversary proceeding, that the intended debtor is not the individual designated in the caption as "Trustee" of a church, but the church itself. We also conclude that this case can be properly maintained for the church by an individual designated as "Trustee." However, we also believe that this designation was not well-chosen, because it has apparently caused the Debtor's counsel to confuse the duties and responsibilities of the Chapter 7 Trustee appointed in the case under the Bankruptcy Code with those of the individual designated as "Trustee." As a result, we hold that the individual designated as "Trustee" owes $500.00 in rentals to the actual Debtor, i.e., the church, and may be liable for additional sums appropriated in his misdirected efforts at "administering" the case. However, we are compelled to defer disposition of any such liabilities pending legitimate administration of this case.
On July 6, 1987, the Debtor filed this voluntary case, captioned "Jeffrey D. Sanders, Trustee for Pentecostal Temple, now known as Grace Community Temple." An address of 4650 Edmund Street, Philadelphia, Pennsylvania 19124, was recited for the Debtor. The only activities in this case during its initial year of existence were as follows: (1) An unopposed motion for relief from the automatic stay was successfully filed by the mortgagee of the Edmund Street property; (2) A motion to dismiss this case was filed by the Philadelphia Missionary and Church Extension Society of the Eastern Pennsylvania Conference of the United Methodist Church (hereinafter referred to as "the Methodist Church") on the ground that neither schedules, a statement of affairs, nor a master list of creditors (matrix) had been filed by the Debtor. On February 18, 1988, the hearing date of the Methodist Church's motion, we denied same when schedules and a statement were filed that morning by the Debtor's counsel; and (3) The appointment of Christine Shubert, Esquire, as Interim Trustee of the Debtor's estate by the United States Trustee, (hereinafter "The Trustee") pursuant to 11 U.S.C. § 701(a)(1), on March 1, 1988.
The Statement of Financial Affairs for Debtor Engaged in Business, as filed on February 18, 1988, recites a business location of a church and parsonage at 4581 Torresdale Avenue, Philadelphia, Pennsylvania 19124. Almost every other question in the Statement is answered "Unknown." The only property listed on the Schedules is realty at the Torresdale Avenue address which includes, apparently, an adjoining parsonage, the address of which is 2046 Orthodox Street, Philadelphia, Pennsylvania 19124. The debts listed include a debt to the Methodist Church secured by a mortgage and about eighty (80) unsecured debts which appear to be congruent to a supplemental listing of "Church Bills," all of which are noted as "Disputed." Attached at the end of the papers is what purports to be a resolution by the sole member of the Board of Directors of the Grace Community Temple, i.e., Jeffrey D. Sanders (hereinafter "Sanders"), dated July 6, 1987, authorizing it to file the bankruptcy. The papers therefore give all indicia of listing church assets and liabilities, rather than individual assets of Sanders like, apparently, the Edmund Street property.
Unfortunately, no matrix was ever filed. This prevented the scheduling of a creditors' meeting pursuant to 11 U.S.C. § 341 in the case, which might have reduced the confusion enshrouding this matter since its inception.
On May 16, 1988, the Trustee filed the Complaint in the instant adversary proceeding against Sanders, apparently in his individual capacity, seeking to compel him to pay rent for residing in the parsonage on Orthodox Street and demanding that he turn over certain property of, apparently, the church. An Answer was filed for Sanders, *319 by the same counsel as is representing the Debtor, admitting that Sanders lived in the parsonage for three (3) months and denying all other asserted liabilities. The first listing for trial, on June 29, 1988, was continued until August 3, 1988. On that date, defense counsel requested a further continuance, alleging that, after Sanders moved from the parsonage, he had moved about to various addresses, impeding communications and resulting in his absence. However, since it was noted that Sanders was present in court when we continued the hearing to this date, we denied this request.
The Trustee called the Reverend Mary Dorin and her husband Anthony as his sole witnesses. Rev. Dorin identified herself as pastor of the Saints Delight Pentecostal Church. Her husband testified that, in early November, 1987, he observed a newspaper advertisement regarding a sale of church articles. In response, the Dorins went to the church premises on Torresdale Avenue and met there with Sanders, who was conducting what might be termed an indoor garage sale of religious artifacts.
After purchasing some small items during their first encounter with Sanders on November 6, 1987, the Dorins thereafter placed a deposit on a pulpit, cross, and "three-piece chair" (hereinafter "the pulpit set") priced at $1,500.00. Ultimately, in December, 1987, they also negotiated a lease to use the church premises for rental of $1,000.00 monthly. An opening service in mid-January, 1988, was planned.
This escalation of amicable dealings between Sanders and the Dorins came to an abrupt halt in January, 1988, when the pulpit set suddenly disappeared from the church. At first the Dorins believed that the pulpit set was stolen, but, ultimately, Sanders admitted that he had sold it to another minister. Sanders ultimately returned $2,350.00 in payments remitted to him by the Dorins and attempted to terminate the lease, retaining $2,000.00 as rentals for the church over the period through the end of February, 1988, that the Dorins had used it. The Dorins have continued to use the church thereafter, but have remitted the rents to the Trustee at her insistence instead of to Sanders.
Sanders' counsel presented no evidence at the August 3, 1988, hearing. He stipulated that Sanders had resided in the parsonage for three months and that $500.00 monthly was the fair rental value of the premises for the entire period. He attempted to argue that the refund of $2,350.00 to the Dorins had made them whole, and that therefore the Trustee had no cause of action against Sanders. However, he also offered no denial that Sanders had sold the church's property, nor did defense counsel contend that any sort of court permission to sell the church's property had been obtained or even sought before Sanders did so.
At the close of the hearing, we expressed our frank puzzlement at not only precisely what relief was sought in the adversary proceeding, but also of the nature of the entire underlying bankruptcy case. The papers were ambiguous in describing even such a basic concept as who the debtor actually was Sanders individually or the church. The questions of whether the church could be a debtor and what the significance of Sanders' designation in the papers as a "Trustee" of the church arose in our mind. We felt that resolutions of these questions were crucial to determining just what relief we possibly could grant to the Trustee in this proceeding. For example, we pointed out that, if Sanders individually were the Debtor, then no claim of rent for his residing in his own premises would have appeared appropriate. It was also unclear who owned the religious artifacts which Sanders had apparently sold, especially since they were clearly not listed at all in the schedules, even though they certainly appeared to have some relationship to the church.[1] We therefore entered *320 an Order of August 4, 1988, requesting counsel for the Trustee and the Debtor to submit Briefs, on or before August 15, 1988, and August 26, 1988, respectively, addressing what entity should be considered as the debtor in this case and to what relief the Trustee was entitled on behalf of whoever or whatever the debtor was. After a week's delay on the part of Sanders' counsel, the Briefs were submitted.
The Trustee, in her Brief, allowed that either Sanders individually or the church could be the debtor. She conceded that the rental claim was only viable if the church was the debtor. She further contended, apparently on the basis of the credible, but rather vague, testimony of the Dorins that the religious artifacts which they saw on sale were worth "approximately $3,000.00 to $5,000.00," that Sanders had removed items valued at this amount, and consequently, a judgment in this additional amount should be entered against Sanders.
In a responsive Brief, defense counsel clearly contended that the church was the intended debtor, and devoted much of the remainder of the Brief to attacks upon the Trustee. Some representative excerpts from the Defendant's Brief pursuant to Court's Order of August 4, 1988, appearing at pages 1-2, 4 and 5, are the following:
. . . the Trustee subsequently authorized said tenants [the Dorins] to remain on premises over the objections of Mr. Sanders and Trustees [sic] for the Church and counsel even though there was a perspective [sic] buyer interested in purchasing the property and taking immediate tenancy.
. . . . .
. . . Arguably, Mr. Sanders [sic] sale of the Church property and even temporarily residing on Church property could be a legitimate means to the collection of his salary. In which case [sic], the Trustee in bankruptcy is entitled to nothing additional.
. . . . .
The Trustee's position has been one of total disregard for the welfare of the Church entity.
. . . . .
The Trustee turned the second issue inside out in its Brief. The issue was not "What relief is the Trustee entitled to, if any," it was "What relief is Jeffrey Sanders entitled to, if any".[2]
If the welfare of the Church is disregarded, for whose benefit was the petition filed [sic].
The Church is the person for whom the petition was filed. Jeffrey Sanders is the Trustee. If Mr. Sanders had handled [sic] his duty as Trustee, Church [sic] should have an opportunity to appoint another Trustee. [?]
Finally, we should mention that, on September 6, 1988, the case was listed for dismissal because the matrix had still never been filed. Prognosticating that neither the Trustee nor Sanders desire dismissal of this case at this time, we direct the Clerk to type up the matrix and schedule a § 341 meeting for October 17, 1988, as a means of pointing the case towards proper administration, in our accompanying Order.
We initially address the issue of the identity of the debtor in this proceeding. Both the Trustee and defense counsel appear to agree that the intended debtor is the church and that Sanders had filed this case solely in his capacity as "Trustee" of the church. Despite this agreement of the parties, a case can only assume a form consistent with that permissible under the Bankruptcy Code. Therefore, we must determine whether the agreed intended designation of the Debtor in this case is permissible under the Code.
*321 The first question raised by us is who should be considered the debtor in this proceeding, Sanders individually or the church of which he is self-proclaimed "Trustee." With only a few exceptions obviously not pertinent here, any "person" may be a debtor in a Chapter 7 case. 11 U.S.C. § 109(b). Sanders obviously is a "person." However, it is not so clear that the church is a "person" and whether Sanders may "represent" it in the capacity of a "Trustee."
The Code provides that the term "`person' includes individual, partnership, and corporation, but does not include governmental unit, . . ." 11 U.S.C. § 101(35). However, the term "corporation" is thus broadly defined, in 11 U.S.C. § 101(8):
"corporation"
(A) includes
(i) association having a power or privilege that a private corporation, but not an individual or a partnership, possesses;
(ii) partnership association organized under a law that makes only the capital subscribed responsible for the debts of such association;
(iii) joint-stock company;
(iv) unincorporated company or association; or
(v) business trust; but
(B) does not include limited partnership;
The church would appear to fall within the definition of an "unincorporated . . . association." Such an entity can be a debtor. See In re Philadelphia Consistory Sublime Princes Royal Secret 32 Ancient Accepted Scottish Rite, 40 F. Supp. 645 (E.D.Pa.1941). Other churches have filed bankruptcies in their own name, without dispute, apparently under this definition. E.g., In re United Church of the Ministers of God, 84 B.R. 50 (Bankr.E.D.Pa.1988); and 74 B.R. 271 (Bankr.E.D.Pa.1987); In re Greater Pottstown Church of the Evangelical Congregational Church, 80 B.R. 706 (Bankr.E.D.Pa.1987); and In re Bible Deliverance Evangelistic Church, 39 B.R. 768 (Bankr.E.D.Pa.1984).
However, additional questions arise due to the fact that Sanders has designated himself as "Trustee" of the church. If he is in fact a trustee, then the church must be the res of the trust. Legislative history, if not the express words of the statute, indicate that "the definition [of "person"] does not include an estate or a trust" (emphasis added). H.REP. No. 595, 95th Cong., 1st Sess. 313 (1977); and S.REP. No. 989, 95th Cong., 2d Sess. 25 (1978), U.S. Code Cong. & Admin.News 1978, pp. 5787, 5811, 6270. See In re John M. Cahill, M.D. Associates Pension Plan, 15 B.R. 639, 639-40 (Bankr.E.D.Pa.1981); and In re Old Second National Bank of Aurora, 7 B.R. 37, 37 (Bankr.N.D.Ill.1980). The only exception to the exclusion of a trust as a debtor, set forth in 11 U.S.C. § 101(8)(A)(v), is a "business trust." Many cases, construing § 101(8), have held that if and only if a trust is a "business trust" is it permitted to file bankruptcy. Compare, e.g., In re Johnson, 82 B.R. 618 (Bankr.S.D.Fla. 1988); In re Walker, 79 B.R. 59 (Bankr.M. D.Fla.1987); and In re L & V Realty Trust, 61 B.R. 423 (Bankr.D.Mass.1986) (entities which are not "business trusts" cannot be debtors); with In re Arehart, 52 B.R. 308 (Bankr.M.D.Fla.1985); and In re Gonic Realty Trust, 50 B.R. 710 (Bankr.D. N.H.1985) (entities which are "business trusts" can be debtors).
Here, of course, it is not the church itself which has filed bankruptcy, but Sanders as its "Trustee." This raises the issue of whether a person can be a debtor in the capacity as a trustee, as opposed to the capacity of an individual. This issue is implicitly addressed in Old Second National Bank, supra, where the court points out that the named debtor-bank "as a corporation is an eligible debtor, but . . . as trustee is not an eligible debtor." 7 B.R. at 38.
A separate little line of local cases, concerning parents who owned their homes in trust for their children and attempted to save their homes by filing bankruptcy, is relevant to this issue. Federal Home Loan Mortgage Corp. v. Wynn, 29 B.R. 679 (Bankr.D.N.J.1983); In re Foster, 19 B.R. 28 (Bankr.E.D.Pa.1982); and In re Kirby, 9 B.R. 901 (Bankr.E.D.Pa.1981). In Kirby, the debtor filed her petition individually, but amended it to include the designation *322 "a/k/a . . . Trustee." Id. at 902. In Foster, the debtor filed the petition in both her name individually and as trustee. 19 B.R. at 29. In Wynn, the debtor filed two petitions, one as an individual and one as trustee. 29 B.R. at 679.
In Kirby, the court dismissed the case as to the debtor as trustee under 11 U.S.C. § 109(e) because it found that she had no income in that capacity. However, in so doing, the court noted that "we cannot categorically state that one who acts as a trustee or in any other fiduciary capacity may never file a petition under Chapter 13, . . ." 9 B.R. at 903. Foster is more positive, holding that there is no authority for the statement that a trustee cannot seek relief under Title 11. 19 B.R. at 30. Wynn is even more positive, holding that the language of Kirby is "too restrictive given the broad statutory language and analysis in the legislative history" and that, "since the Code allows a trust or a trustee to commence a case, an individual who is also a trustee must be allowed to file a Chapter 13 Petition." 29 B.R. at 681.
This latter statement seems, in turn, too broad. Only certain trusts are allowed to file a bankruptcy petition, as the cases cited at page 321 supra indicate. We believe the correct rule is that, if a trust is eligible to be a debtor, then an individual may file a bankruptcy as a trustee on behalf of it. This is the express holding of Old Second National Bank, supra, 7 B.R. at 38, and it is the implicit holding of Johnson, Walker, and Arehart, supra, where individuals named as trustees were permitted (Arehart) or not permitted (Johnson and Walker) to file bankruptcies on the basis of whether the entity of which they were the trustee was a "business trust" or not.
One other issue relevant to the disposition here and touched upon in Old Second National Bank, Kirby, Foster, Wynn, and In re Colin, 35 B.R. 904 (Bankr.S.D.N.Y. 1983), demands some attention. That is whether there is a distinction between a debtor's maintaining a case in the capacity as a trustee as opposed to the capacity of an individual. Wynn, which allowed the debtor to maintain a separate bankruptcy in both capacities, clearly held that such a distinction could be made. Kirby, allowing the debtor to maintain her case as an individual while dismissing the case under § 109(e) insofar as the debtor sought to maintain the case as a trustee, would appear to concur with Wynn on this point.
However, the court in Colin, ruling that the automatic stay arising from the debtor's bankruptcy applied to property that the debtor held in trust, cites Foster as support for the principle that a debtor who files a petition does so in every capacity, as an individual as well as a trustee, and is not subjected to "the `enforced schizophrenia' of the debtor into fragmented personalities." 35 B.R. at 908. Foster does include similar language, but, like Colin, only in the context of whether the automatic stay applies to property held by the debtor as trustee as well as individually.
We do not think that the observation that the automatic stay applies to a debtor in every capacity is inconsistent with the notion that a person may maintain a bankruptcy in solely a representative capacity, as opposed to an individual capacity, if that person so desires. The debtors in Colin and Foster argued that they intended to and were entitled to maintain their respective bankruptcies in both capacities, as an individual and as a trustee. However, where the debtor specifically expresses a desire to maintain a bankruptcy strictly in the capacity of a trustee, we perceive nothing in those decisions that would suggest that a debtor should be prevented from doing so. Kirby, Wynn, Old Second National Bank and also Arehart, supra, all suggest that a debtor can, indeed, institute a bankruptcy case strictly in the capacity as a trustee, as long as the entity on whose behalf the action is maintained could be a debtor.
Applying the principles which we glean from the foregoing cases to the instant factual matrix brings us to the conclusion that Sanders is indeed empowered to maintain this case in the capacity as trustee of the church. The church could be a debtor itself, as an unincorporated association, *323 even though it is not a "business trust," because it does not appear to be in the category of what would normally be considered a trust at all. Sanders could have filed this action on behalf of the church, without naming himself as an individual at all. However, since his intention is obviously to file on behalf of the church, we shall allow him to do so.
Unfortunately, this conclusion is at best a mixed blessing for Sanders. If the church is the debtor, and not him individually, much of his post-petition activities on behalf of the church are unauthorized, illegal, and subject to remedies which may not prove very pleasant to Sanders.
Regrettably, the self-designation of Sanders as the church's "Trustee" seems to have caused Sanders and defense counsel, as indicated in the passages from his Brief quoted at pages 7-8 supra, to have concluded that Sanders is the "real" trustee, and the Trustee, though duly appointed under 11 U.S.C. §§ 701-04, is some sort of officious interloper. Clearly, neither Sanders nor anyone else can set himself up as a duly-appointed trustee under the Bankruptcy Code simply by calling himself a trustee. Although this point would seem self-evident, Sanders appears to contest it.
The interim trustee envisioned by 11 U.S.C. § 701(a) must be a "disinterested person" appointed from a panel of private trustees by the United States Trustee. The interim trustee remains in place unless creditors, which may not include any "insiders," elect a trustee to replace the interim selection. 11 U.S.C. § 702(a)(3). Sanders clearly is not on our panel of private Trustees, was not appointed by the United States Trustee, and is not "disinterested." See 11 U.S.C. § 101(13). He clearly is an "insider." See 11 U.S.C. § 101(30). Therefore, he could neither be a trustee of the debtor-church under the Bankruptcy Code, nor could he vote in any election to replace the current interim Trustee.
Clearly, it is the Trustee duly appointed pursuant to 11 U.S.C. §§ 701-04 who alone has the duty and right to collect and liquidate the property of the estate, see 11 U.S.C. §§ 521(4), 704(1), and she is alone empowered to "use, sell, or lease" property of the estate. 11 U.S.C. § 363(b).
It is equally clear that Sanders, and possibly defense counsel, have not grasped the force of this apparent truism. Thus, Sanders leased the estate's property to the Dorins and conducted a sale of the estate's assets, to the Dorins or others (or both in the case of the pulpit set) post-petition. More than being merely bothersome, these actions of Sanders were illegal and may be voidable by the Trustee or other interested parties. See, e.g., Ray v. Norseworthy, 90 U.S. (23 Wall.) 128, 135-37, 23 L. Ed. 116 (1874); In re First Baptist Church, Inc., 564 F.2d 677, 679 (5th Cir.1977); In re Stanley Engineering Corp., 164 F.2d 316, 318-19 (3d Cir.1947), cert. denied, 332 U.S. 847, 68 S. Ct. 351, 92 L. Ed. 417 (1948); In re Fernwood Markets, 73 B.R. 616, 619-21 (Bankr.E.D.Pa.1987); and Foster, supra, 19 B.R. at 29. Cf. In re Shaffer Furniture Co., 68 B.R. 827, 830-31 (Bankr.E.D. Pa.1987) (court strongly disapproves Debtor's having conducted a post-petition "bankruptcy sale" of inventory of a debtor-furniture store without prior court approval). If Sanders has not already dissipated much of the estate's assets in this manner, it is clear that Sanders and defense counsel must cease and desist from doing so under penalty of civil and criminal sanctions. An accounting of what has been sold will clearly be required in the course of proper administration of this case.
The statements by defense counsel in his Brief represent an almost remarkable misunderstanding of the bankruptcy process. Sanders is not a trustee under the Bankruptcy Code. He cannot expect compensation for officious actions which may have benefited only himself, to the detriment of the debtor-church. The Trustee must administer the estate for the benefit of all interested parties, including creditors, and not simply Sanders. Nor can Sanders simply call off the bankruptcy if this enlightenment of the course that this matter must take under the aegis of the Trustee is so different from the conception of him and his counsel that they conclude that the entire bankruptcy filing has been a mistake. Court approval, after a motion pursuant *324 to 11 U.S.C. § 707(a), served on all interested parties, including the trustee, must precede the voluntary dismissal of a Chapter 7 case. See In re Geller, 74 B.R. 685, 689-90 (Bankr.E.D.Pa.1987).
Unfortunately, neither the Trustee's Complaint, not the piecemeal recitation of Sanders' activities from the limited perspective of the Dorins in this record supplies us with any comprehensive picture of Sanders' apparently grossly improper activities. This can occur only upon the Trustee's examination of Sanders, either at a § 341 meeting or an Examination pursuant to Bankruptcy Rule (hereinafter "B.Rule") 2004, in the course of her administration of this case in accordance with the Bankruptcy Code. We must, in fact, express some disappointment that the Trustee did not use these tools or a deposition pursuant to B.Rule 7030 and Federal Rule of Civil Procedure 30 before not only the trial of this proceeding, but also before the filing of this proceeding.
The only solid evidence of matters addressed by the Complaint involves the rent obligation of Sanders to the Debtor. Since the church is the actual Debtor, the stipulation that Sanders utilized the parsonage, having a fair rental value of $500.00 for three months, makes out an unrebutted prima facie case for the Trustee in support of an award of $500.00 against Sanders. However, the Trustee's other claims are, at this point, too vaguely supported to merit entry of any further judgment in her favor. We simply do not know (although we can guess, see page 319 n. 1 supra) whether Sanders or the church individually owned the religious artifacts which Sanders apparently sold. Nor do we have even more than a rough idea of the value of these items. On the other hand, Sanders should not be allowed to benefit from his wrongful actions by avoiding the processes of this court. We shall therefore dismiss all of the other claims of the Trustee against Sanders, but without prejudice.
An Order consistent with these conclusions will be entered.
ORDER
AND NOW, this 14th day of September, 1988, after trial of this proceeding on August 3, 1988, and upon review of the Briefs submitted by counsel, it is hereby ORDERED as follows:
1. Judgment is entered in favor of the Plaintiff, CHRISTINE SHUBERT, TRUSTEE, and against the Defendant, JEFFREY SANDERS, in the amount of $500.00, for rent for use of property of the estate.
2. All other claims of the Plaintiff against the Defendant are DISMISSED without prejudice.
3. The Clerk shall forthwith prepare a master list of creditors, in lieu of the preparation of same by the Debtor, and notify all interested parties of the scheduling of the meeting of creditors, pursuant to 11 U.S.C. § 341, as set forth in paragraph four infra.
4. A meeting of creditors, pursuant to 11 U.S.C. § 341, shall be conducted by the Plaintiff-Trustee and attended by Sanders and his counsel, on penalty of contempt of court, at the following date, time, and place:
MONDAY, OCTOBER 17, 1988, at 9:30 A.M. at the Office of the Assistant United States Trustee, Room 209, 200 Chestnut Street, Philadelphia, PA 19106.
NOTES
[1] This appears to have been because they had all been sold by the time that the Schedules were finally filed on February 18, 1988. However, the Schedules clearly should have disclosed property of the Debtor's estate as of the date of filing on July 6, 1987. See 11 U.S.C. § 541(a)(1) (property interests held by a debtor as of the commencement of the case are property of the estate); and 11 U.S.C. § 521(4) (debtor must surrender all property of the estate to the Trustee).
[2] Defense counsel apparently read the phraseology "what relief, if any, is the Trustee entitled to on behalf of Mr. Sanders individually or the church" as indicating that we believed that Sanders was entitled to relief. This is a most unlikely reading of our Order, since Sanders was the Defendant and did not file a counter-claim. Rather, we only meant that, as Trustee, the Trustee was entitled to relief "on behalf of" the estate of whoever the debtor was. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919598/ | 91 B.R. 423 (1988)
In re Donald E. STONE, Marjoray H. Stone, Debtors.
Bankruptcy No. B84-01044-Y.
United States Bankruptcy Court, N.D. Ohio.
July 21, 1988.
Jacob M. Abramovitz, Youngstown, Ohio, for debtors.
Mary Beth Houser, Youngstown, Ohio, for GMAC.
Michael A. Gallo, Youngstown, Ohio, trustee.
*424 MEMORANDUM OPINION
WILLIAM T. BODOH, Bankruptcy Judge.
On October 22, 1984, the Debtors filed their Petition for Relief under Chapter 13 of Title 11 of the United States Code. On November 28, 1984, GENERAL MOTORS ACCEPTANCE CORPORATION ("GMAC") filed a Proof of Claim in the amount of Five Thousand, One Hundred Thirteen & 74/100 Dollars ($5,113.74), which amount was fully secured by a lien on a 1980 Buick LeSabre. On the same date, the Debtors filed an Amended Plan which was subsequently confirmed on December 11, 1984.
In September 1985, as a result of medical exigencies, the Debtors found it necessary to modify their Plan in order to reduce their monthly payments and extend the term of the Plan. On October 18, 1985, the modified Plan was confirmed by this Court and GMAC subsequently filed a supplemental claim for additional interest in the amount of Three Hundred Sixty-Five & 37/100 Dollars ($365.37).
In July 1987, Mrs. Stone died. The surviving debtor, Mr. Stone, moved to amend the Plan in order to provide for reduced payments and abandonment of the vehicle upon which GMAC held its lien, which the Court approved on August 25, 1987. The Debtor evidently abandoned the vehicle in August, 1987, but failed to notify GMAC of its abandonment. It was not until February 1988 that the vehicle was sold at public auction. GMAC ultimately realized Seven Hundred Seventy-Eight & 50/100 Dollars ($778.50) from the sale of the vehicle, which leaves an as-yet undetermined deficiency owing to GMAC from the Debtor. GMAC now asserts that the deficiency amount ought to be paid as a secured claim, even though the collateral supporting GMAC's lien position has been liquidated. The Trustee contends that such treatment would be improper. A hearing was held on June 30, 1988.
The Court begins with the premise that a secured claim by definition requires collateral to secure the creditor's right to payment. In re Byrd, 92 B.R. 238, 239 (Bankr.N.D.Ohio 1988). As one court wrote:
A claim paid the amount it would receive if secured, but without access to underlying collateral, would simply be an unsecured claim paid on a priority basis outside the statutory priority scheme. By definition, `secured claim' requires availability of collateral to secure the creditor's right to payment. `The obvious fallacy of creditor's position is that it is not able in any way to look to the collateral assigned to it for repayment of its debt irrespective of any position taken by the debtor.' [citations omitted].
In re Elliott, 64 B.R. 429, 430 (Bankr.W.D. Mo.1986).
GMAC argues that confirmation of the Plan prohibits reclassification of a secured party's claim pursuant to 11 U.S.C. Sec. 1327(a). Indeed, GMAC's position appears to have been accepted by the courts in In re Abercrombie, 39 B.R. 178 (Bankr.N.D. Ga.1984) and In re Johnson, 25 B.R. 178 (Bankr.N.D.Ga.1982). For the following reasons, however, this Court declines to follow the Abercrombie and Johnson decisions.
11 U.S.C. Sec. 1327(a) provides:
a) The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.
It is upon this Section that GMAC bases its argument that "confirmation of the Plan forbids a reduction and reclassification of a secured claim." In re Abercrombie, 39 B.R. at 179. However, 11 U.S.C. Sec. 1329 provides, in part:
(a) At any time after confirmation of the plan . . ., the plan may be modified, upon request of the debtor, . . . to
(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan;
(2) extend or reduce the time for such payments; or
*425 (3) alter the amount of the distribution to a creditor whose claim is provided for by the plan, to the extent necessary to take account of any payment of such claim other than under the Plan.
(b)(1) Sections 1322(a), 1322(b), and 1323(c) of this Title and the requirements of Sec. 1325(a) of this Title apply to any modification under subsection (a) of this Section.
(2) The plan as modified becomes the plan unless, after notice and a hearing, such modification is disapproved.
Initially, it should be noted that a confirmed Plan does not unalterably and permanently define the rights and obligations of the parties involved. Section 1329(b)(2) provides that an approved, modified Plan automatically displaces the previously confirmed Plan. The provisions of Sec. 1327(a) must be construed in light of the rights to modification contained in Sec. 1329. Furthermore, Sec. 1329(a)(3) permits a debtor to request modification of a Plan in order to "alter the amount of the distribution to a creditor. . . ." The amount of distribution to a creditor can be altered not only by reducing the amount paid to a creditor due to payments received from outside the Plan, but also by reclassifying a previously secured claim as an unsecured claim. The right to post-confirmation alteration of the rights of secured claimants is recognized in 5 Collier on Bankruptcy, Sec. 1329.01 (rev. 15th ed. 1988):
Of course, a post-confirmation modification which changes the rights of a holder of an allowed secured claim provided for by the modified plan must either be accepted by the holder, relinquish the collateral to the holder, or contain a cram down provision meeting the requirements of section 1325(a)(5)(B).
Id. at 1329-7. In the present case, the Debtor surrendered the collateral to GMAC. Thus, this Court finds that a debtor is expressly authorized under Section 1329(a)(3) to reclassify a secured claim as unsecured when the creditor has liquidated its collateral but still claims a deficiency to be due from the debtor.
This conclusion is supported by other factors as well. Section 1329(b)(1) provides that a debtor's proposed modification must meet the same requirements for confirmation as an original Plan. Thus, we are persuaded that a hearing on a modification request is a new confirmation hearing which vacates the previous Order of Confirmation upon approval of the modification request. Furthermore, the Trustee points out that such a claim would be unsecured if the Debtor exercised its qualified right to dismiss the case and then refile a second Chapter 13 case. The Court sees no reason why a different result should follow when the debtor elects to modify a pending case rather than achieve the same result through dismissal and refiling.
Accordingly, GMAC's claim for deficiency against the Debtor shall be deemed to be an unsecured claim. GMAC also requested, in the event that the Court ruled as it has, that the Debtor be required to pay those payments on the creditor's claim which accrued prior to the creditor receiving its collateral. Apparently, the debtor failed to advise GMAC of its abandonment of the vehicle. As a result, GMAC was prejudiced by suffering further depreciation of its collateral and losing the time value of money which it would have received on an earlier auction of the Debtor's collateral. Therefore, GMAC shall be allowed an additional unsecured claim for payments due the movant which accrued prior to GMAC's recovery of the collateral.
This Memorandum Opinion shall constitute the Court's findings of facts and conclusions of law pursuant to Bankruptcy Rule 7052.
An appropriate Order will be entered.
ORDER
This matter comes before the Court on the Motion by GENERAL MOTORS ACCEPTANCE CORPORATION ("GMAC") in which it seeks an Order of the Court finding that the deficiency amount owing to GMAC from the Debtor ought to be paid as a secured claim, even though the collateral supporting GMAC's lien position has been liquidated. In the alternative, GMAC requests *426 that the Debtor be required to pay those payments on its claim which accrued prior to the creditor receiving its collateral. For the reasons set forth in the accompanying Memorandum Opinion, GMAC's Motion is hereby overruled in part and sustained in part. GMAC's request that its claim for a deficiency be recognized as a secured claim is hereby overruled. However, GMAC's Motion shall be sustained to the extent that it requests recognition of a claim for payments due to the Movant which accrued prior to GMAC's recovery of the Debtor's collateral.
IT IS SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548312/ | 992 A.2d 821 (2010)
413 N.J. Super. 70
STATE of New Jersey, Plaintiff-Respondent,
v.
E.W., Defendant-Appellant.
No. A-0146-08T4
Superior Court of New Jersey, Appellate Division.
Argued December 16, 2009.
Decided April 27, 2010.
*822 Christopher J. Turano, Designated Counsel, Newark, argued the cause for appellant (Yvonne Smith Segars, Public Defender, attorney; Sean R. Kelly, Designated Counsel, on the brief).
Nidara Y. Rourk, Assistant Prosecutor, argued the cause for respondent (Edward J. DeFazio, Hudson County Prosecutor, attorney; Ms. Rourk, on the brief).
Before Judges PAYNE, MINIMAN and WAUGH.
The opinion of the court was delivered by
PAYNE, J.A.D.
Defendant, E.W., a convicted sex offender, appeals from the denial of his petition for post-conviction relief (PCR) as untimely. See R. 3:22-12 (establishing a five-year *823 general time limitation). Defendant was indicted on January 8, 1992 for various sexual offenses committed on his daughter, L.W., commencing in 1977 when the daughter was four and continuing to 1991. He also was indicted for committing an act of sexual assault on T.E., his daughter's friend, in violation of N.J.S.A. 2C:14-2b and committing an act of criminal sexual contact on T.E. in violation of N.J.S.A. 2C:14-3b. The assaults against T.E. occurred in 1979. Following trial, defendant was found guilty on all counts.[1]
Defendant was sentenced on February 26, 1996 to concurrent twenty-year terms in custody at the Adult Diagnostic and Treatment Center (ADTC) with a ten-year parole disqualifier for crimes committed against his daughter consisting of two counts of first-degree aggravated sexual assault in violation of N.J.S.A. 2C:14-1a(1) and (2) and to a consecutive ADTC sentence of ten years with a five-year parole disqualifier for second-degree sexual assault against T.E. in violation of N.J.S.A. 2C:14-2b. Defendant's remaining convictions were merged with those upon which he was sentenced.
Defendant's convictions and sentence were affirmed on appeal to us in an unpublished opinion issued on March 22, 1999. State v. E.W., No. A-5109-95 (App.Div. March 22, 1999). A motion for reconsideration was denied on May 20, 1999. Defendant's petition for certification was denied as untimely.
On December 3, 2007, defendant filed a petition for post-conviction relief, which, as we have stated, was also denied as untimely. He has appealed.
On appeal, defendant sets forth, in Point I, the standard of review, and he then makes the following legal arguments:
II. DEFENDANT'S PETITION FOR POST-CONVICTION RELIEF IS TIMELY.
A. As to Convictions for Crimes Against T.E., the Five-Year Time Bar Should Be Relaxed Because Defendant's Sentences Are "Illegal Sentences" and May Be Corrected at Any Time.
B. As to Convictions for All Crimes, "Excusable Neglect" Exists to Explain Why Defendant Failed to File for PCR Within The Five-Year Time Period.
III. DEFENDANT'S CONVICTIONS AND SENTENCES FOR CRIMES AGAINST T.E. MUST BE REVERSED AND VACATED BECAUSE HE WAS INDICTED WELL BEYOND THE APPLICABLE STATUTE OF LIMITATIONS.
IV. DEFENDANT'S CONVICTIONS [AND] SENTENCES FOR CRIMES AGAINST L.W. MUST BE REVERSED, VACATED AND REMANDED FOR A NEW TRIAL BECAUSE THE STATE WRONGFULLY WITHHELD EXCULPATORY EVIDENCE.
A. The State Violated Its Duty To Disclose The Ramirez Report Pursuant To New Jersey Court Rule 3:13-3.
B. The State's Failure To Disclose The Ramirez Report Amounts To Wrongful Withholding of Exculpatory Evidence, Contrary To The Constitutional Principles of Brady v. Maryland, And Warrants A New Trial.
We affirm in part and reverse in part.
I.
We first address defendant's conviction for second-degree sexual assault on *824 T.E. in violation of N.J.S.A. 2C:14-2b. It is defendant's position that prosecution for that crime, which the victim agrees occurred during the school year that concluded in June 1979, was time barred. In this regard, defendant notes that, because his crime was committed prior to September 1, 1979 when the New Jersey Code of Criminal Justice was adopted as Title 2C, it should have been prosecuted under the prior version of the New Jersey Criminal Code set forth in Title 2A. The statute of limitations applicable at that time stated:
[N]o person shall be prosecuted, tried or punished for any offense not punishable with death, unless the indictment therefore shall be found within five years from the time of committing the offense.... This section shall not apply to any person fleeing from justice.
[N.J.S.A. 2A:159-2, repealed by L. 1978, c. 95, § 2C:98-2, eff. Sept. 1, 1979.]
Thereafter, N.J.S.A. 2C:1-6 provided in relevant part:
a. A prosecution for murder may be commenced at any time.
b. Except as otherwise provided in this section, prosecutions for other offenses are subject to the following periods of limitations:
(1) A prosecution for a crime must be commenced within 5 years after it is committed;
* * *
d. A prosecution is commenced for a crime when an indictment is found....
[L. 1979, c. 178, § 5.]
The statute remained in this form until 1986, when it was amended as follows:
a. A prosecution for murder may be commenced at any time.
b. Except as otherwise provided in this section, prosecutions for other offenses are subject to the following periods of limitations:
(1) A prosecution for a crime must be commenced within five years after it is committed;
* * *
(4) A prosecution for an offense set forth in N.J.S. 2C:14-2 or N.J.S. 2C:14-3, when the victim at the time of the offense is below the age of 18 years, must be commenced within two years of the victim's attaining the age of 18 years or within five years after the crime is committed, whichever date is later.
[L. 1986, c. 166, eff. December 3, 1986.]
As we have stated, defendant was indicted on January 8, 1992.
We discussed the applicability of the 1986 extended statute of limitations in State v. Nagle, 226 N.J.Super. 513, 545 A.2d 182 (App.Div.1988), a case involving a crime committed slightly less than five years before the effective date of the 1986 statute. There, we rejected defendant's argument that the amended statute should not be retroactively applied, determining that "the Legislature's purpose was to remedy what it saw as a serious problem arising in the prosecution of sexual crimes with young victims." Id. at 515, 545 A.2d 182. We noted that the Senate's Statement accompanying the original bill said:
Present law requires prosecution of these crimes to be commenced within five years after commission. Unfortunately some of the victims of these heinous crimes are so young, that they are unable to understand the nature of the crimes perpetrated against them within that time. This bill enables the victim to mature and understand the criminal nature of the actions prior to prosecution.
[Nagle, supra, 226 N.J.Super. at 515, 545 A.2d 182.]
*825 We held as a result that the Legislature intended the amended statute to apply to already committed crimes, and that it had no reason to withhold the remedial measure from reachable situations. Id. at 516, 545 A.2d 182.
No one can place legitimate reliance on the protection of a criminal statute of limitations that has not yet run. In these circumstances, the Legislature had no reason to withhold application of its amendment from crimes already committed but not yet prosecuted.
[Ibid.]
We next addressed whether our interpretation of the amended statute as retroactively applicable created an ex post facto problem. In doing so, we distinguished between applying an extended statute of limitations to a crime after the prior statutory period had expired and applying such a statute before the original period of limitations had ended. We found the latter to raise no ex post facto concerns, but reached a contrary conclusion with respect to the former. In doing so, we quoted Judge Learned Hand, who stated:
Certainly it is one thing to revive a prosecution already dead and another to give it a longer lease of life. The question turns upon how much violence is done to our instinctive feelings of justice and fair play. For the state to assure a man that he had become safe from its pursuit, and thereafter to withdraw its assurance, seems to most of us unfair and dishonest; but while the chase is on, it does not shock us to have it extended beyond the time first set, or if it does, the stake forgives it.
[Id. at 517, 545 A.2d 182 (quoting Falter v. United States, 23 F.2d 420, 425-26 (2d Cir.), cert. denied, 277 U.S. 590, 48 S.Ct. 528, 72 L.Ed. 1003 (1928)).]
If Nagle is applied to the present matter, it is clear that prosecution of defendant for the sexual assault committed on T.E. should have been barred. More than five years had elapsed between 1979 when the crime was committed and the passage in 1986 of the amended version of N.J.S.A. 2C:1-6 extending the statute of limitations for crimes violating N.J.S.A. 2C:14-2 and -3. Thus that amended statute of limitations did not serve to increase the period during which defendant could be prosecuted for this particular crime. Rather, prosecution was barred by N.J.S.A. 2A:159-2 and the initial version of N.J.S.A. 2C:1-6b.[2]
We have incorporated similar principles in discussing the issue of whether an indictment for murder, for which there is no statute of limitations, bars a conviction for the lesser included offense of manslaughter if the indictment is returned more than five years after the commission of the offense and is thus time barred pursuant to N.J.S.A. 2A:159-2. See State v. Stillwell, 175 N.J.Super. 244 418 A.2d 267 (App.Div. 1980). There, we held:
The majority rule is that a person cannot be convicted of a lesser offense on a prosecution for a greater crime which includes the lesser offense, commenced after the statute of limitations has run on the lesser offense. The rationale underlying the rule is that "a statute of limitations in a criminal case, unlike such a statute in civil matters, is not merely a statute of repose but creates a bar to prosecution." Chaifetz v. United States, 288 F.2d 133, 135-36 (D.C.Cir. 1960), cert. denied and rev'd on other *826 grounds, 366 U.S. 209, 81 S.Ct. 1051, 6 L.Ed.2d 233 (1961). It is well settled in this State that there is an absolute bar to prosecution after the statute has run, State v. Zarinsky, 75 N.J. [101,] 107[, 380 A.2d 685] [(1977)]; see In re Pillo, 11 N.J. 8, 17-18[, 93 A.2d 176] (1952); Moore v. State, 43 N.J.L. 203, 209 (E. & A. 1881), and, therefore the statute can be asserted at any time, before or after judgment.
[Stillwell, supra, 175 N.J.Super. at 251, 418 A.2d 267.]
The Supreme Court reached a similar result in State v. Short, 131 N.J. 47, 618 A.2d 316 (1993). In that case, the defendant, tried for murder, sought a jury instruction as to all lesser-included offenses, even though the statute of limitations had expired on the lesser-included offense of manslaughter. The judge agreed, but instructed the jury that if it found the defendant guilty of manslaughter, he would go unpunished as the result of the then-applicable five-year statute of limitations bar. Following his conviction for murder, the defendant appealed, arguing that he was entitled to the instructions on lesser-included offenses and to the preservation of his statute of limitations defense to manslaughter, but that the consequence of that defense should not have been disclosed to the jury. The Court agreed. Id. at 58, 618 A.2d 316.
The Court's discussion of the effect of the statute of limitations has particular relevance here. The Court stated:
We have ruled in civil cases that statutes of limitations create vested rights of which litigants cannot be deprived....
Those principles have even greater force in criminal cases, for in criminal cases, unlike civil cases, a person's liberty is at stake. Just as the constitutional prohibition against ex post facto laws would bar the legislature from taking away a right under a statute of limitations, See In re Coruzzi, 95 N.J. 557, 577-79[, 472 A.2d 546] (1984), so would the vested rights doctrine foreclose a court's unilateral deprivation of that right.
Moreover, in New Jersey, the statute of limitations in a criminal statute is tantamount to an absolute bar to the prosecution of the offense. State v. Zarinsky, 75 N.J. 101, 107[, 380 A.2d 685] (1977); In re Pillo, 11 N.J. 8, 17-18[, 93 A.2d 176] (1952); State v. Stillwell, 175 N.J.Super. 244, 249-50[, 418 A.2d 267] (App.Div.1980); Moore v. State, 43 N.J.L. 203, 209 (E. & A. 1881). The statute of limitations on criminal prosecutions is more than merely an affirmative defense to be asserted by a defendant, and the court cannot unilaterally nullify that protection. To be sure, the legislature need not have created any statute of limitations at all for the crime of manslaughter, but once it had, the statute became binding on the courts.
[Short, supra, 131 N.J. at 54-55, 618 A.2d 316.]
In discussing its determination that the jury should not be instructed as to the penal consequence of a finding of manslaughter, the Court observed that it was not endorsing the "tricking" or "deceiving" of juries. Id. at 60, 618 A.2d 316. The Court stated:
We agree with the Wisconsin Supreme Court's resolution of these issues. "Whether a defendant is entitled to a lesser included offense instruction and whether the statute of limitations has run on a crime are two separate questions." [State v.] Muentner, [138 Wis.2d 374,] 406 N.W.2d [415,] 420 [(Wis.1987).] In New Jersey, as in Wisconsin, the "jury operates independently of sentencing and punishment concerns." Id. at *827 423. And in New Jersey, as in Wisconsin, "the running of the statute of limitations does not preclude the jury from reaching a verdict convicting the defendant of a crime; it rather precludes the trial court from entering a judgment of conviction on the finding of guilt." Id. at 421.
[Short, supra, 131 N.J. at 62, 618 A.2d 316.]
As defendant notes, Rule 3:22-12 provides that: "A petition to correct an illegal sentence may be filed at any time." Moreover, Stillwell establishes that the statute of limitations may be asserted at any time before or after judgment. Stillwell, supra, 175 N.J.Super. at 251, 418 A.2d 267. While the jury reached a verdict against defendant in connection with the time-barred claim that defendant sexually assaulted T.E., if the bar of the statute of limitations had been asserted then, the trial court would have been precluded from entering a judgment of conviction on the jury's finding of guilt. See Short, supra, 131 N.J. at 62, 618 A.2d 316. The sentence is no less illegal because the bar of the statute of limitations has only now been raised. As a consequence, we reverse defendant's convictions in connection with crimes committed on T.E. in 1979 because they are time-barred, and we vacate the ten-year sentence imposed as a result.
II.
Rule 3:22-12 provides that, with the exception of a petition to correct an illegal sentence, "[n]o ... petition shall be filed pursuant to this rule more than 5 years after rendition of the judgment or sentence sought to be attacked unless it alleges facts showing that the delay beyond said time was due to defendant's excusable neglect." Defendant alleges "excusable neglect" in this case resulting from medical disabilities consisting of a substantial hearing loss, diagnosed in April 2008; glaucoma, diagnosed in 1995; cataracts, diagnosed in 2002-2003, with surgery to one eye in February 2008; acute retinopathy, diagnosed in July 2004; severe hypertension, diagnosed in 2001; diabetes, untreated until February 2007; and osteoarthritis at L4, diagnosed in 1999. Defendant also claims psychiatric disabilities associated with his underlying criminal conduct and conviction and post-traumatic stress disorder arising from service in Vietnam. As a final matter, he claims restrictions in his ability to conduct legal research at the ADTC, or to commission such research from others.
We note, however, that defendant's disabilities have not prevented him from mounting a legally sophisticated and extensive challenge to the use of religiously-based programmatic materials at the ADTC that is still ongoing. See E.W. v. N.J. Dept. of Corrections, No. A-4875-04 (App.Div. August 8, 2008). Further, we note that defendant has not supplied medical records in connection with his claims of disability, and he has not provided evidence that would permit us to conclude that his disabilities have substantially interfered with his ability to prosecute this matter. See State v. D.D.M., 140 N.J. 83, 100, 657 A.2d 837 (1995). When we consider the cause and extent of the delay in seeking PCR, the prejudice to the State in retrying a case of the age of this one, and the relative unimportance of defendant's claim of injustice, a matter that we will analyze next, we find inadequate grounds to relax the Rule's time limits in this case. State v. Murray, 162 N.J. 240, 249, 744 A.2d 131 (2000); State v. McQuaid, 147 N.J. 464, 485, 688 A.2d 584 (1997); State v. Mitchell, 126 N.J. 565, 580-81, 601 A.2d 198 (1992).
*828 III.
We nonetheless address defendant's claims that the State violated its duty to disclose discovery pursuant to Rule 3:13-3 when it allegedly failed to disclose the police report of P.C.T. Ramirez regarding his initial interview of defendant's daughter, L.W., on July 29, 1991; that the Ramirez report contained exculpatory Brady[3] material; and as the result of non-disclosure, a new trial must be ordered.
Defendant offers no proofs, such as a transmittal letter, a transcript reference, a certification by counsel, or other evidence, to support his claim that the Ramirez report was not supplied to defense counsel prior to trial. Further, defendant claims that he commenced his post-conviction requests for discovery in his case on February 26, 1993, and although he lists the persons to whom he addressed letters and motions and the dates of those letters and motions, he does not provide copies of any. That the correspondence and motions referenced the allegedly missing report or otherwise challenged the adequacy of the State's production of discovery thus cannot be verified. Additionally, defendant alleges that he first became aware of the Ramirez report during a therapy session in 1998 or 1999. However, he does not address why his therapist would have a copy of a police report that had not been supplied to defendant in discovery, and defendant does not address why he did not obtain a copy of the police report then, rather than in 2002 when the report was allegedly furnished to him. Finally, defendant does not give any substantial reason for the delay from 2002 to 2008 in seeking post-conviction relief on the basis of the report. We therefore question whether the report was in fact withheld and further question whether defendant understood the report to have the exculpatory value he now attributes to it.
Our examination of the report discloses that it was taken at 5:30 p.m. on July 29, 1991. The report states that, at the request of L.W.'s father, she went to his residence, where she was informed that her father and mother were divorcing. At that time, the father accused L.W. and her boyfriend of planning to kill him. He then stated that he was not going to wait for that to happen, but would kill her first. L.W. then left the house and came to the police station, crying and scared. At the police station, L.W. told Ramirez that her father had been molesting her since she was four years old, fondling her breasts, rear end and her vagina. Her father had also forced L.W. to have oral sex with him. When she was approximately ten years of age, her father forced L.W. to have oral sex with her female friend, J.Y., while he watched, and then he forced J.Y. to have oral sex with him. Additionally L.W. stated that her father had also molested her younger sister.
On one occasion, L.W.'s mother caught the father forcing L.W. to fondle him when L.W. was fourteen years of age. The mother threatened to call the police, but the father promised it would not happen again. Nonetheless, the father did molest L.W. the next day and continued molesting her until she was seventeen years of age. He stopped because L.W. threatened to go to the police. L.W. moved out of the house when she turned eighteen years of age.
At 9:08 p.m. on the same day, L.W. gave a more detailed recorded statement to Investigators Jamieson Antonio and Chris Webster at the Hudson County Prosecutor's Office that was marked as an exhibit at trial and utilized in the examination and cross-examination of witnesses.
*829 Our review of the initial police report and L.W.'s recorded statement satisfy us that, even if the initial police report was not produced, it was not material for Brady purposes. We are likewise satisfied that defendant has failed to establish that there was a reasonable probability that, had the evidence been disclosed, the result of the proceeding would have been different. State v. Knight, 145 N.J. 233, 246, 678 A.2d 642 (1996) (citing United States v. Bagley, 473 U.S. 667, 682, 105 S.Ct. 3375, 3383, 87 L.Ed.2d 481, 494 (1985)). The documents are substantially similar in their content, albeit L.W.'s recorded statement contains more detail. While elements are omitted from the Ramirez report that appear in the statement taken later on the same date, there are no material contradictions between the two, and thus the Ramirez report does not meaningfully undercut the content of L.W.'s more detailed statement incriminating defendant. Moreover, because of its detail, the recorded statement is, if anything, of greater value in impeaching the credibility of witnesses than is the Ramirez report. The Ramirez report represents merely cumulative evidence of little or no additional defensive value. Accordingly, we decline to order a new trial on the charges relating to L.W. as the result of its alleged nondisclosure.
Defendant's conviction for second-degree sexual assault of T.E. in violation of N.J.S.A. 2C:14-2b is reversed as barred by the applicable statute of limitations, and his sentence for that conviction is vacated. The denial of post-conviction relief respecting defendant's convictions for first-degree aggravated sexual assault of L.W. in violation of N.J.S.A. 2C:14-1a(1) and (2) and resultant concurrent sentences is affirmed.
NOTES
[1] Count 7, charging criminal sexual contact with L.W. by use of physical force or coercion, in violation of N.J.S.A. 2C:14-3b, was dismissed at trial.
[2] The United States Supreme Court has held that "a law enacted after expiration of a previously applicable limitations period violates the Ex Post Facto Clause when it is applied to revive a previously time-barred prosecution." Stogner v. California, 539 U.S. 607, 632-33, 123 S.Ct. 2446, 2461, 156 L.Ed.2d 544, 565 (2003).
[3] Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/734798/ | 106 F.3d 404
NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within the circuit.UNITED STATES of America, Plaintiff-Appellee,v.Larry W. SMITH and Gustavo R. Briseno, Defendants-Appellants.
Nos. 96-2966, 96-3021.
Seventh Circuit.
Submitted Sept. 25, 1996.*Decided Jan. 7, 1997.
Before ESCHBACH, KANNE and EVANS, Circuit Judges.
ORDER
1
Larry Smith and Gustavo Briseno face a situation common in the aftermath of the Supreme Court's decision in Bailey v. United States, 116 S.Ct. 501 (1995), which held that mere possession of a gun is insufficient to convict for the separate crime of using a firearm during a drug trafficking offense under 18 U.S.C. § 924(c). Smith and Briseno, and six others, conspired to possess marihuana with the intent to distribute it. Both were convicted not only on two counts of drug trafficking, but also of using a firearm in relation to a drug trafficking offense under § 924(c). Smith was convicted at trial; Briseno pled guilty. Both Smith and Briseno's § 924(c) gun-use convictions were vacated after Bailey. Smith did so pursuant to an appeal to this Court, United States v. Smith, 80 F.3d 215 (7th Cir.1996), in which we vacated the gun-use conviction and remanded for resentencing. Briseno filed a petition under 28 U.S.C. § 2255 to the district court which vacated his gun-use conviction. After vacation of the gun-use counts, the district court enhanced the drug trafficking sentences for both Smith and Briseno based on possession of a dangerous weapon pursuant to U.S.S.G. § 2D1.1(b)(1).1
2
Both defendants now appeal the enhancement of their sentences for possession of a firearm, but on different grounds. Smith argues that the district court committed clear error when it enhanced his sentence. According to Smith, there was insufficient evidence that he could reasonably foresee his co-conspirators' firearm possession (Smith himself did not possess one). Briseno argues that the district court lacked jurisdiction to enhance his sentence on unchallenged convictions based on a post-conviction challenge to a different charge (here, gun use during drug trafficking). Briseno also argues that enhancement under these circumstances violates double jeopardy.
I. Background2
3
On February 23, 1996, police became suspicious when they saw two vehicles with Arizona plates parked at an Illinois hotel and noticed that one, an old Ford Econoline van, had a sophisticated alarm system. The police later observed eight people leave the hotel together and then drive off in the same direction in three separate vehicles, two of which had the Arizona plates. The police stopped each vehicle for traffic violations. Benjamin Shepherd drove the first, in which the police found a handgun. In the second, driven by Ernesto Sanchez and in which Briseno was a passenger, police found unassembled weapons in the trunk. Finally, in the van Smith drove, police found 91 pounds of marihuana.
II. Smith's Challenge
4
After Smith successfully appealed his gun-use conviction under 18 U.S.C. § 924(c), Smith, 80 F.3d 215, the district court enhanced Smith's sentence for firearm possession under U.S.S.G. § 2D1.1(b)(1). Smith now challenges this enhancement as resting on clear error. For the enhancement to properly apply to Smith, based on his co-conspirator's possession of weapons, the government must prove by a preponderance of the evidence that firearm possession was reasonably foreseeable by Smith. United States v. Vold, 66 F.3d 915, 920 (7th Cir.1995). Smith claims it was not reasonably foreseeable.
5
During the resentencing hearing, the district court found that this was Smith's first involvement in the conspiracy. It further found that Smith did not know Shepherd before meeting him that night, did not know of the gun in his car, and may not have known of the guns in Sanchez's car.3 The district court correctly pointed out, however, that reasonable foreseeability, not knowledge, is the standard for the enhancement. The court found that it was reasonably foreseeable to Smith that these co-conspirators would possess firearms. The court gave no detailed reasons for so finding, merely stating that Smith was aware of the "overall scheme," and thus, the entire method of operation was reasonably foreseeable. The court also referenced the fact that because the jury had found Smith guilty under § 924(c), it must necessarily have found that the gun possession was reasonably foreseeable to Smith.
6
This case is similar to Vold, 66 F.3d 915, in which we held that the firearm-possession enhancement must be based on more than the mere association between firearms and drug trafficking. In Vold, as here, there was no evidence that the relevant co-conspirator "fired or brandished" any gun, nor that the co-conspirator made any mention of possession a gun. Vold, 66 F.3d at 921. Indeed, the district court found that Smith had just met Shepherd, the possessor of the handgun, for the first time that night in the hotel.
7
In sum, the court enhanced Smith's sentence based on Smith's awareness of the "overall scheme" and deference to the jury's findings. But no deference is due to jury findings based on insufficient evidence. And the "overall scheme" appears to be nothing more than transporting drugs from Arizona to Ohio via caravan. Other than the common association between guns and drugs, there appears no reason why it would have been foreseeable that co-conspirators in this scheme would possess firearms. This is not enough to support the finding that Smith could reasonably foresee firearm possession on the part of his co-conspirators. As in Vold, we hold here that the district court committed clear error when it enhanced Smith's sentence for possession of a firearm under § 2D1.1(b)(1) of the guidelines.
III. Briseno's Challenge
8
After successfully petitioning the court under 28 U.S.C. § 2255 to vacate his gun-use conviction, the court proceeded to enhance Briseno's sentence on the drug charges under U.S.S.G. § 2D.1(b)(1) for firearm possession. Briseno argues that the district court had no jurisdiction to resentence him on the unchallenged drug charges after his successful collateral attack on the gun-use conviction because the unchallenged charges were not before the court. According to Briseno, because he only challenged the gun-use count (and sentence), that was the only count over which the district court had authority.
9
If the district court had resentenced Briseno after a remand from a direct appeal--as it did Smith--it clearly would have had authority to increase his sentence on the unchallenged counts. This stems from the sentencing package doctrine delineated in United States v. Shue, 825 F.2d 1111 (7th Cir.1987). In Shue, the defendant had three counts of a four count conviction reversed on direct appeal; the fourth count was affirmed. On remand, the district court increase defendant's sentence on this fourth count by 15 years. Under his original sentence, defendant received five-year concurrent sentences on Counts III & IV, to be served consecutively to the sentences on Counts I & II. His total sentence equalled 30 years. On the government's motion after remand, the district court increased defendant's sentence on Count IV to 20 years. In upholding this resentencing, the Shue court explained that the district court (in most cases) does not just impose a series of unrelated sentences on individual counts. Id. at 1114. Rather, it constructs a coherent sentencing plan constituted by interdependent sentences on each count. Id. This is necessary because the sentence does not just reflect the crimes charged in those counts, but the individual characteristics of the defendant. See United States v. Mancari, 914 F.2d 1014, 1019 (7th Cir.1990) (quoting United States v. Pimienta-Redondo, 874 F.2d 9, 14 (1st Cir.1989)). As the Shue court explained, "[b]ecause the sentences are interdependent, the reversal of convictions underlying some, but not all, of the sentences renders the sentencing package ineffective in carrying out the district court's sentencing intent as to any one of the sentences on the affirmed convictions." Shue, 825 F.2d at 1114. Thus, the court held that the district court had authority to resentence the defendant, even on affirmed counts, in order to effectuate its original sentencing intent. Id.
10
Just as in Shue, the sentences in the instant case form one coherent sentencing plan.4 The original sentences on the individual counts were interdependent. First, they all stemmed from the same course of action: a specific drug conspiracy and the acts done in the course of that conspiracy, including possession (or "use") of a gun. Second, the judge's ability to sentence on the drug counts, as well, perhaps, as his willingness to do so, was circumscribed by the gun-use charge. He was unable to impose a gun possession enhancement when the defendant was convicted for using a gun during a drug crime under the terms of the sentencing guidelines. U.S.S.G. § 2K2.4, comment. (n. 2).
11
The main bone of contention is whether the district court also has authority to increase unchallenged counts when defendant has filed a successful § 2255 petition as opposed to a direct appeal. On direct appeal, the district court's authority to resentence on unchallenged counts stems from the appellate court's mandate to resentence on remand, authorized under 28 U.S.C. § 2106. United States v. Jefferson, 714 F.2d 689, 707 (7th Cir.1983) ("28 U.S.C. § 2106 vests in us, inter alia, the supervisory power to vacate and remand the entire sentencing package despite the fact that it includes an unchallenged sentence....").5 The question is: what is the source of the district court's authority over the sentences on unchallenged counts when the successful challenge was brought under § 2255?
12
This was an issue of first impression in this Circuit6 and research at the date of the writing of this order has revealed no case in any circuit addressing the issue.7 The district courts to address the issue have split. A number have held that there is no authority to resentence on unchallenged counts after a § 2255 petition, finding no source for such authority and holding that the court only has power over the issues brought before it, in this case, only the challenged convictions. See Gardiner v. United States, no. 4-96-251, 1996 WL 224798 (D.Minn. May 3, 1996); Beal v. United States, 924 F.Supp. 913 (D.Minn.1996); Rodriguez v. United States, 933 F.Supp. 279 (S.D.N.Y.1996); Warner v. United States, 926 F.Supp. 1387 (E.D.Ala.1996). Other courts have located that authority in § 2255 itself and/or the sentencing package doctrine. See Mixon v. United States, 926 F.Supp. 178 (S.D.Ala.1996); Pedretti v. United States, No. 3:96-CV-0146, 1996 WL 340769 (N.D.N.Y. Apr. 26, 1996); Merritt v. United States, 930 F.Supp. 1109 (E.D.N.C.1996); Woodhouse v. United States, 934 F.Supp. 1008 (C.D.Ill.1996); United States v. Tolson, 935 F.Supp. 17 (D.D.C.1996).
13
Defendant correctly maintains that the government has no right to appeal defendant's sentence at this stage in the game. Rule 35 only authorizes correction in seven days. Fed.R.Crim.Pro. 35(c). The time for the government to appeal passed long ago. Fed.R.App.Pro. 4(b). Obviously, the government has no authorization to appeal under § 2255, because that statute only grants federal prisoners the right to petition the court. In this case, however, the court appears to have scheduled resentencing on its own authority. The government did not seek an enhancement until the resentencing hearing, and the defendant had already filed a memorandum in opposition to an enhancement in anticipation of this move. Thus, the court must have some authority to sua sponte review the sentences of unchallenged counts of a multicount conviction after one of those counts was vacated pursuant to a § 2255 petition.
14
We agree with those courts that have held that § 2255 grants the district court authority to review sentences as a whole, even when only one count of a multicount conviction has been challenged. Section 2255 states that, upon granting a § 2255 petition, the court "shall vacate and set the judgment aside and shall discharge the prisoner or resentence him or grant a new trial or correct the sentence as may appear appropriate." Based on the sentencing package doctrine, the language of this provision authorizes the court reexamine the entire sentencing package, as it did here. The ability to "resentence" defendant, or to "correct the sentence as may appear appropriate," entails the ability to revise the entire sentencing plan under the sentencing package doctrine. See United States v. Bentley, 850 F.2d 327, 328 (7th Cir.1988) (interpreting similar language in rule 35 which allows court to "correct an illegal sentence" to authorize resentencing of entire sentencing plan); United States v. Wolf, 90 F.3d 191 (7th Cir.1996) (same). This power to resentence is, of course, constrained by due process considerations. "We are confident, however, that if illegal sentences in the original package foil the district court's original plans, the court may start anew and arrive at a punishment no more severe in aggregate than the first." Bentley, 850 F.2d at 328.8
15
Briseno also challenges his resentencing as violating double jeopardy. However, resentencing after a § 2255 petition does not present a double jeopardy problem. As we made clear in Shue, the double jeopardy clause is no bar to resentencing "so long as the new sentence conforms to statutory limits and effectuates the district court's original sentencing intent." Shue, 825 F.2d at 1115. The court did nothing but what was necessary to conform to its original sentencing plan. Originally, defendant was convicted for using a gun during a drug trafficking offense, based on his co-conspirator's possession of a gun. The Supreme Court since held mere possession does not qualify as the separate crime charged. But the facts remained the same. The gun possession still existed and still merited punishment. Because of the gun-use charge, using the firearm possession enhancement was not an option during the original sentencing; but the district court clearly intended there be some additional punishment based on the fact of firearm possession. Moreover, when a defendant appeals his sentence, he no longer has a legitimate expectation of finality. Id. The same can be said here because "[w]here the defendant challenges one of several interdependent sentences (or underlying convictions) he has, in effect, challenged the entire sentencing plan." Id.
IV.
16
For the foregoing reasons, we REVERSE Smith's § 2D1.1(b) sentence enhancement and REMAND for resentencing. Briseno's sentence, however, is AFFIRMED.
*
After an examination of the briefs and the record, we have concluded that oral argument is unnecessary, and the appeal is submitted on the briefs and the record. See Fed.R.App.P. 34(a); Cir.R. 34(f)
1
Smith was originally sentenced to 41 months on each of two drug counts, to run concurrently, and a 60 month consecutive sentence on the gun-use count, totaling 101 months in prison; he was resentenced to two concurrent 51 month terms on each drug count. Briseno was originally sentenced to two concurrent terms of 24 months on the two drug counts, and a 60 month consecutive sentence on the gun-use count, totaling 84 months in prison; he was resentenced to concurrent sentences on the drug counts of 30 months each
2
Because we assume familiarity with our previous opinion in this case, Smith, 80 F.3d 215, we review the background only briefly
3
In Briseno's resentencing, the court indicated it would not enhance based on the unassembled weapon's in Sanchez's car; thus the enhancement must be based on the gun in Shepherd's car
4
Unlike Shue, defendant did not challenge the convictions on which the sentences were increased. But this fact alone does not matter. See, e.g., United States v. Jefferson, 760 F.2d 821 (7th Cir.) (affirming increased sentence on unchallenged count after remand of entire sentence from direct appeal), vacated on other grounds, 106 S.Ct. 41 (1985). Moreover, the fact that the sentences in the instant case were consecutive does not place it outside of the sentencing package doctrine. See, e.g., Mancari, 914 F.2d 1014 (affirming resentencing of consecutive sentences to allow district court to conform to intent of original sentencing plan)
5
Contrary to some Circuits, see, e.g., United States v. Henry, 709 F.2d 298 (5th Cir.1983), this circuit does not require precise language vacating all aspects of a multicount sentence in order to authorize the district court to restructure the sentence as a whole. Shue, 825 F.2d at 1113 n. 7
6
Since the writing of this Order, our circuit issued its opinion in United States v. Smith, No. 96-2934, 1996 WL 729124 (Dec. 19, 1996) (involving a different Smith than the current defendant), which came to the same conclusion on this issue as this Order
7
Some courts have addressed whether such resentencing on unchallenged counts after a successful § 2255 petition violates double jeopardy. These courts necessarily assumed jurisdiction, but did not address the jurisdictional question presented here. See, e.g., Chandler v. United States, 468 F.2d 834 (5th Cir.1972) (holding resentencing on unchallenged count after successful § 2255 petition violates double jeopardy); United States v. L'Allier, 37 F.3d 1501 (7th Cir.1994) (unpublished order) (holding that resentencing of unchallenged count after successful § 2255 petition violated neither double jeopardy nor due process)
8
There is no due process problem here, and Briseno does not allege there is one. Although defendant's sentence on the drug conviction increased, his overall sentence decreased. Thus, defendants in this situation will not be chilled from challenging their gun-use convictions out of fear of receiving a longer sentence in the end. See Mancari, 914 F.2d at 1021. Further, as discussed below, the district court maintained consistency with its original sentencing intent. See id. at 1021-22 | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1548347/ | 9 B.R. 363 (1981)
In re Christine HUDSON, Debtor.
ILLINOIS DEPARTMENT OF PUBLIC AID, Plaintiff,
v.
Christine HUDSON, Defendant.
In re Mary McQUITTER, Debtor.
ILLINOIS DEPARTMENT OF PUBLIC AID, Plaintiff,
v.
Mary McQUITTER, Defendant.
Bankruptcy Nos. 80 B 07980, 80 A 1372, 80 B 08573 and 80 A 1492.
United States Bankruptcy Court, N.D. Illinois, E.D.
March 2, 1981.
*364 Kornfeld & Spitz, Chicago, Ill., for Christine Hudson.
Peter F. Geraci, Chicago, Ill., for Mary McQuitter.
Tyrone C. Fahner, Atty. Gen., State of Ill., Chicago, Ill., for Illinois Dept. of Public Aid.
OPINION AND ORDER
RICHARD L. MERRICK, Bankruptcy Judge.
The above-styled cases were consolidated for trial because they involve the same plaintiff and the same legal issues. Each cause came on to be heard on the complaint of the Illinois Department of Public Aid (hereinafter "the State") to determine dischargeability of debt.
In each case the debtor received more in public assistance payments from the State than was due to her because she failed to report all income from her employment. Each debtor had an affirmative duty to report such income. 1 Ill.Rev.Stat. ch. 23, § 11-18 (1979). Debtor Christine Hudson (hereinafter "Hudson") was overpaid $2,443.13 because of her failure to report this income. Judgment was entered against her by a state court for $4,886.26. Debtor Mary McQuitter (hereinafter "McQuitter") was overpaid $2,143.04; she later admitted the debt and signed a promissory note to the State for the amount of the overpayment. Subsequently, each debtor filed a petition for relief under Chapter 13 of the Bankruptcy Code. Hudson proposed a plan that provided for 20% repayment to unsecured creditors, while McQuitter's plan gave 10% to unsecured creditors. There were no objections to confirmation in either case; Hudson's plan was confirmed August 5, 1980, and McQuitter's was confirmed August 26, 1980.
*365 CONCLUSIONS OF LAW
The State has brought complaints against Hudson and McQuitter to determine dischargeability of debt under sections 523(a)(2) and 523(a)(7) of the Bankruptcy Code. Section 523(a)(2) excepts from discharge any debts for obtaining money, property, or services by false pretenses or false representation. 11 U.S.C. § 523(a)(2) (Supp. II 1978).
Provisions in Chapter 5 of the Code apply to Chapter 13 unless superseded by sections within Chapter 13. See 11 U.S.C. § 103(a) (Supp. II 1978). Section 1328 specifies only three types of debts that are not dischargeable upon successful completion of a Chapter 13 plan: (1) allowed claims not provided by the plan, (2) certain long-term obligations specifically provided for by the plan but which extend beyond the termination of the plan, and (3) claims for alimony and child support. 11 U.S.C. 1328(a) (Supp. II 1978). A Chapter 13 discharge is subject to the exceptions in section 523 only if the debtor fails to complete the payments required by the plan. 11 U.S.C. § 1328(c)(2) (Supp. II 1978). See 3 Collier on Bankruptcy ¶ 523.03 (15th ed. 1980); 5 Collier on Bankruptcy ¶ 1328.01 (15th ed. 1980).
Nevertheless, the State seeks to have its debts in these cases determined to be non-dischargeable even though the statute says that such debts are discharged upon successful completion of a Chapter 13 plan. The State contends that under Chapter 13 an unsecured creditor must be treated "at least as fairly" as he would be under a Chapter 7 liquidation. Since an unsecured creditor with a non-dischargeable debt has the possibility (no matter how remote) of collecting a larger part of its debt under Chapter 7 than under Chapter 13, the creditor is not being treated "as fairly" under Chapter 13, according to the State's theory.
The brief of the State asserts repeatedly that it would be illogical to assume that Congress had intended that fraudulent debts might be discharged by partial payment through a Chapter 13 plan. The illogic is to assume that Congress intended anything with respect either to exemptions or dischargeability. An abnormal number of compromises were involved in shaping a bill which could be passed by both Houses of Congress. The House and Senate Bills did not go through the customary series of subcommittee reports, committee reports, and votes at various levels of the legislative process so that it is more difficult than usual to attribute any given position to any given legislator, much less to assert that there was a consensus among the legislators on a particular matter. Nevertheless, it is fashionable to speak of the intent of Congress, and this Court is more persuaded by the reasoning of In re Keckler,[1]
"Congress surely was aware that Chapter 13 would make certain persons eligible for discharge of certain debts that would be nondischargeable debts under Chapter 7."
than of the State.
The legislative history has been considered with scholarship and insight on several occasions[2] and, with the exception of two decisions of Judge Pusateri (In re McMinn, 4 B.R. 150, 1 CBC 2d 1007 (Bkrtcy. D.Kan.1980), In re Chaffin, 4 B.R. 324, 2 CBC 2d 229 (Bkrtcy.D.Kan.1980), the other Bankruptcy Judges approach the issue in the same manner as does this Court. It might be that Judge Pusateri would follow the same approach if his two decisions had *366 dealt with more meaningful payments. One of them was a one per cent plan, and the other was a zero per cent plan. His reasoning was that the non-dischargeable claim in a Chapter 7 was greater than nothing in a Chapter 13 plan in one case, and that a $44,000 non-dischargeable claim in a Chapter 7 plan was greater than a $440 payment in a Chapter 13 plan in the other case. In effect, the result which Judge Pusateri reached, by taking a different route, was the same that this Court would have reached. This Court does not countenance Chapter 13 plans in which the unsecured creditors are scheduled to receive less than 10%. As a consequence, low payment plans are not confirmed, and the creditors allegedly defrauded are free to pursue their normal remedies, in the same manner as they may do if the plan of confirmation fails because of non-compliance with § 1325(a)(4).
Because composition plans under Chapter XIII of the former Bankruptcy Act usually contemplated payment of a significant portion of unsecured debt, and 100% extension plans were more common than composition plans, it may well have been the view of many of the legislators that if a debtor made his best effort and paid off all that he could, the debtor should be forgiven his past mistakes, moral and ethical as well as financial. Whether that was their reasoning or not, the legislators did not require that a Chapter 13 plan be a high payment plan in order to qualify the debtor for relief against the debts due to his creditors generally, which was considerably broader than the relief which would have been received by the debtor under present Chapter 7, or old Chapters I-VII, or XIII. In the two cases which have been consolidated here for argument and decision the plans provided for periodic payments aggregating, respectively, 20% and 10% to unsecured creditors.
Believing as we do that the provisions respecting dischargeability under Chapter 13 were intentional and not inadvertent, it is not necessary, and, in fact, might be impertinent, for this Court to express views as to whether the breadth of the discharge is sound, practical or wise. It exists, and it must be respected.
The State's brief characterizes as an issue of fairness § 1325(a)(4) of the Code:
"The value, as of the effective date of the plan, of property to be distributed under the plan on account of cash allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under Chapter 7 of this title on such date;"
(11 U.S.C. § 1325(a)(4)).
This Court always has construed that subsection as being a simple arithmetic comparison measured in dollars between the future equivalent of the present value of the payments to be received under Chapter 13 with a theoretical present cash distribution upon liquidation under Chapter 7. The use of the words "cash" and "paid" strongly suggests that the comparison intended is of liquidated amounts, that of Chapter 7 being a present cash payment and that of Chapter 13 being the present discounted value of future cash payments. The subsection is intended to be an objective minimum and not a subjective standard, such as "best effort" or "good faith."
In the cases presently before the Court the State has a judgment against Mrs. Hudson of $4,886, which under a 20% plan would produce total cash payments of $977, which, discounted at 10%, produces a present value of $729. The State's note against Mrs. McQuitter of $2,143 would produce payments of $214 on a 10% plan, which discounted at 10%, produces a present value of $160. This Court understands § 1325(a)(4) to mean that the Hudson plan may be confirmed if the liquidation amount which the State would receive under a Chapter 7 proceeding would be $729, or less; and that the McQuitter plan may be confirmed if the liquidation amount to be received by the State would be $160, or less. (For purposes of simplification, the examples given are the amounts required if the State were the only unsecured creditor). In fact because the allowable exemptions of both debtors exceed their respective assets, there would be no money distributed to *367 unsecured creditors under Chapter 7 plans of either debtor.
The State appears to be advancing a theory which demonstrates imaginative thinking and has been urged elsewhere. The idea is that a non-dischargeable debt has a value because of the fact of its non-dischargeability. Thus in a Chapter 7 plan the State would receive no cash distribution under either the Hudson or the McQuitter plan. In one case it would receive a nondischargeable judgment of $4,886 and in the other a non-dischargeable judgment of $2,143. If in the respective cases the State under Chapter 7 plans were to receive cash distributions of $729 and $160, plus a non-dischargeable judgment, the argument might be stronger that such distribution would be greater than the time weighted value of $729 and $160 alone, and that consequently the plan did not meet the requirement of § 1325(a)(4). The difficulty with the argument if the Chapter 7 liquidation in cash is less than the present value of the Chapter 13 planned distribution is that there is no feasible method of placing a value on a non-dischargeable debt. Although there are speculators who deal in future interest in land and in trusts, this Court is not aware of any market through which non-dischargeable debts might be liquidated or appraised. In the instant cases no evidence was offered. It may be that the State would have a better collection record than would a private debt collector because the latter always would be considering the cost/benefit ratio whereas the State would be using salaried employees and would be anxious to establish examples of determined pursuit in order that it might discourage future delinquencies.
At the present juncture there is no way of determining whether a non-dischargeable claim of $4,886 would be worth more, less, or the same as an extended payment of $977 from Mrs. Hudson, or a present payment of $729; similarly whether a non-dischargeable claim of $2,143 against Mrs. McQuitter would be worth more, less, or the same as an extended payment of $214, or a present payment of $160. The schedules filed by the respective debtors as a part of their respective petitions make out prima facie cases that unsecured creditors will receive more under the proposed Chapter 13 plans than they would under Chapter 7 liquidation plans. The State has done nothing to rebut that presumption other than to present a theory.
The brief of the State verges on saying that no criminal proceedings will be brought against a welfare fraud debtor if the State obtains a non-dischargeability judgment in a Chapter 7 proceeding, but that criminal proceedings may be instituted if the debt is discharged under Chapter 13. If that should be the basis for any decision by the State as to whether or not it should prosecute, certainly the prosecution would be enjoined as in violation of the supreme powers of the United States respecting the rights of bankrupts. Perez v. Campbell, 402 U.S. 637, 91 S.Ct. 1704, 29 L.Ed.2d 233 (1971). The argument seems rather farfetched that Congress would not have intended fraud debts to be dischargeable under Chapter 13 because the incarceration of the defrauding debtor would make it impossible for him to maintain his payments under a Chapter 13 plan, or that he would not be "an individual with regular income."
The Court can take judicial notice of the fact that there are many powerful interests within the country that believe that Congress went too far in many areas of the Bankruptcy Code, but particularly with respect to the breadth of discharges under Chapter 13 and the lack of a minimum percentage of payment under Chapter 13 plans. Undoubtedly Congress will be looking at those problem areas during its ensuing sessions, but until it acts all that the Courts can do is to deal with the existing legislation.
Finally, the debts to the State will be discharged only if the plan as confirmed is completed. If the plan is not completed,
(a) in the event of dismissal, the State may proceed by regular civil process to collect on the debt;
*368 (b) in the event of a conversion to Chapter 7, the State may present its case of non-dischargeability and if successful, follow normal civil process; or
(c) in the event of a hardship discharge, the situation respecting fraud debts is the same as under Chapter 7 discharges, (See §§ 1328(c) and 523(a) except that the creditor does not have to obtain a determination of non-dischargeability by the Bankruptcy Court before undertaking conventional collection process.
For better or for worse, Congress provided that in a Chapter 13 plan which is completed, under § 1328(a), all debts will be discharged except for the alimony and support debts described in § 523(a)(5) and long term debts described in § 1322(b)(5). In re Seely, 6 B.R. 309 (Bkrtcy.1980).
There is no provision in the Bankruptcy Code to contest the dischargeability of a debt under § 523 during the time that a Chapter 13 plan is pending after confirmation. In re Lewis, 5 B.R. 575 (Bkrtcy.1980). At the moment the State's complaints respecting the discharge of the welfare fraud debts are premature.
The complaints will be dismissed with prejudice toward refiling during such time as the plans are pending and permanently if the plans are completed according to their terms.
NOTES
[1] CBC 2d 574, 579, 3 B.R. 155 (Bkrtcy.N.D.Ohio 1980).
[2] In re Hurd, 4 B.R. 551, 2 CBC 2d 190 (Bkrtcy. W.D.Mich.1980);
In re Jenkins, 4 B.R. 278, 2 CBC 2d 129 (Bkrtcy.D.Colo.1980)
In re Cole, 3 B.R. 346, 1 CBC 2d 795 (Bkrtcy. S.D.W.Va.1980);
In re Marlow, 3 B.R. 305, 1 CBC 2d 705 (Bkrtcy.N.D.Ill.1980).
Lee: Chapter 13, nee Chapter XIII, 53 Am. Bank L.J. 303, Fall, 1979.
Of the persons who have written about the legislative background of substantive issues under the Bankruptcy Reform Act of 1978, Judge Lee is the best informed because he was a direct participant in all stages of the drafting process. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548364/ | 992 A.2d 1103 (2010)
295 Conn. 825
STATE of Connecticut
v.
Edward PARKER.
No. 18432.
Supreme Court of Connecticut.
Argued January 14, 2010.
Decided April 27, 2010.
*1104 Glenn W. Falk, special public defender, with whom, on the brief, was Elliot Morrison, law student intern, for the appellant (defendant).
Leon F. Dalbec, Jr., senior assistant state's attorney, with whom, on the brief, was Scott J. Murphy, state's attorney, for the appellee (state).
*1105 ROGERS, C.J., and NORCOTT, KATZ, PALMER, VERTEFEUILLE, ZARELLA and McLACHLAN, Js.
KATZ, J.
The sole issue in this appeal is whether the trial court properly dismissed the motion of the defendant, Edward Parker, seeking to correct his sentence, which he claimed had been imposed in an illegal manner because: (1) he had not been given an opportunity to review the presentence investigation report (pre-sentence report), thereby denying him an opportunity to address inaccuracies and mistakes in the report; and (2) he had been deprived of his constitutional right to the effective assistance of counsel because his attorney failed to review the presentence report with him and neglected to bring inaccuracies and mistakes in that report to the sentencing court's attention. We conclude that the defendant's claims do not fall within the limited circumstances under which the trial court has jurisdiction to correct a sentence imposed in an illegal manner and, therefore, we affirm the trial court's decision.
The record reveals the following undisputed facts and procedural history. The defendant was charged by way of substitute information with robbery in the first degree and murder. The defendant thereafter entered a plea under the Alford doctrine[1] to the charge of murder, an offense that carries a mandatory minimum sentence of twenty-five years imprisonment. See General Statutes § § 53a-35a and 53a-54a. Under the terms of the plea agreement, the defendant was to be sentenced to a term of imprisonment of thirty years. At the commencement of the plea hearing, the defendant stated that he had something to say to the court. The trial court, Iannotti, J., informed the defendant that, after canvassing him and accepting his plea, the court would continue the case for sentencing pending receipt of the defendant's presentence report, and that the sentencing proceeding would be the proper time for the defendant to make any statements to the court. Thereafter, the court canvassed the defendant and accepted his plea. It then noted for the record that a presentence investigation was to be conducted and the case was scheduled for sentencing on a specified date. Later that same day, after realizing that it had omitted certain questions from its canvass of the defendant, the trial court brought the parties back into court and advised the defendant of additional consequences of his plea. One such consequence was that the only circumstance under which the court would permit the defendant to withdraw his plea was if the court decided, after reading the presentence report, that it had to impose a term in excess of thirty years imprisonment. The defendant acknowledged that he understood this condition.
Thereafter, a probation officer attempted to interview the defendant for purposes of the presentence report. The defendant informed the probation officer that he did not wish to discuss anything about his case because he planned to obtain different counsel, open his case and take his case to trial.
Subsequently, the trial court held the sentencing hearing. At the commencement of the hearing, the defendant's counsel, *1106 Stephen Gionfriddo, informed the court that he had been advised by the defendant and the defendant's mother, Rose Parker, that they no longer wanted him to represent the defendant.[2] The defendant affirmed that he "was not happy with [his] lawyer" and that he was "pretty close" to retaining another attorney. The court noted that it had received the defendant's presentence report, which set forth the defendant's statement to that effect to the interviewing probation officer, and again explained to the defendant the effect of his previous plea canvass and that he would be permitted to withdraw his plea only if the presentence report convinced the court to impose a sentence in excess of thirty years imprisonment. The court rejected Gionfriddo's suggestion that the defendant should be allowed to have a different attorney represent him at sentencing, noting that the defendant had agreed to a plea under which there was an agreed sentence of thirty years imprisonment, with no right to argue for a lesser sentence. The court did, however, allow the defendant and his mother to address the court, both of whom remarked upon the reasons for their dissatisfaction with Gionfriddo's representation and the resulting plea.
The court then turned to the issue of sentencing. The court permitted the state's attorney, the girlfriend and sister of the victim and Gionfriddo to make statements, each of whom expressed reasons why the thirty year sentence was appropriate. The court took a moment to read letters submitted by other members of the victim's family and then asked the defendant if he had anything else to say. The defendant turned to the victim's family and expressed remorse for their loss, but asserted that he had not killed the victim. Thereafter, the court stated that, in light of everything it had read and the facts of the case, it intended to follow the agreed upon recommendation and, accordingly, imposed a sentence of thirty years imprisonment. The defendant subsequently unsuccessfully pursued an appeal from his judgment of conviction and other postconviction relief relating to the trial court's acceptance of his guilty plea and its subsequent refusal to allow him to withdraw that plea at the sentencing proceeding despite his expressions of dissatisfaction with his counsel. See State v. Parker, 67 Conn. App. 351, 786 A.2d 1252 (2001) (appeal), cert. denied, 281 Conn. 912, 916 A.2d 54 (2007); Parker v. Commissioner of Correction, 83 Conn.App. 905, 853 A.2d 652 (2004) (habeas relief), cert. denied, 281 Conn. 912, 916 A.2d 54 (2007).[3]
In September, 2007, the defendant filed a pro se motion to correct an illegal sentence pursuant to Practice Book § 43-22.[4] Pursuant to a request therein, in accordance with this court's holding in State v. Casiano, 282 Conn. 614, 627-28, 922 A.2d 1065 (2007), the trial court, Alexander, J., appointed counsel to represent the defendant.[5] In a subsequent motion to *1107 correct filed by his counsel in December, 2007, the defendant claimed that he had been deprived of an opportunity to review and correct inaccuracies in the presentence report and had been deprived of his constitutional right to effective assistance of counsel at the sentencing proceeding. Prior to a hearing on the defendant's motion, the trial court informed the parties that it questioned whether it had jurisdiction over the defendant's claims and, therefore, it determined that the hearing would be limited to that threshold issue.
At the hearing, the court permitted the defendant to make an offer of proof as to the specific basis of his claims. Testimony from the defendant and his mother adduced the following purported facts: shortly after the court had accepted the defendant's guilty plea, the defendant had informed Gionfriddo that he was not satisfied with Gionfriddo's representation and wanted to withdraw his guilty plea; the defendant had a pending habeas petition alleging that Gionfriddo had provided ineffective assistance of counsel relating to the guilty plea; the defendant had not seen the presentence report prior to the sentencing hearing; and Gionfriddo never had informed the defendant or his mother about the presentence investigation or the defendant's right to have an attorney present at that investigation, to review the presentence report or to address the court about any inaccuracies in that report. The defendant stated that he had seen the report for the first time just days before the hearing held pursuant to § 43-22. The lone reference to the contents of the presentence report was a one word affirmative response by the defendant to his counsel's question as to whether there were "issues" in the report that he would like to have corrected. The defendant's counsel argued that the record established that, "if there were corrections to be made or things to be raised concerning the [presentence report] it was never done."
The trial court then questioned how any of these deficiencies could have prejudiced the defendant, in light of the fact that he had no right under the plea agreement to argue for a lower sentence than the thirty year prison term agreed upon under the plea agreement. The defendant's counsel argued that no prejudice was required to be shown for purposes of a motion to correct, but suggested that prejudice could arise from having an inaccurate presentence report because: (1) that report is used after sentencing for making parole decisions and assigning security risk levels; and (2) a judge retains authority to impose any sentence within the permissible legal range and therefore the sentencing court arguably could have sentenced the defendant to less than the thirty year term of imprisonment. The state's attorney responded that the plea agreement had rendered the sentencing hearing a formality and, therefore, the defendant's claim of prejudice was not actually predicated on that hearing, but on the general principle that he has a right to an accurate presentence report because misinformation could have collateral consequences in the future.
Thereafter, the trial court issued a decision dismissing the defendant's motion to correct for lack of jurisdiction. Although the court acknowledged that a sentence is "imposed in an illegal manner" within the meaning of § 43-22 if the court has violated certain rights guaranteed a defendant during sentencing, it noted that *1108 "the sentencing was an agreed recommendation which would not have resulted in a different or lower sentence." The court concluded that the defendant's claim more appropriately should be raised in a habeas proceeding "because the claimed error is not related to the conduct of the sentencing court or the state, but rather the defense attorney's obligations." This appeal followed.[6]
On appeal, the defendant claims that the court properly had jurisdiction over the motion to correct because: (1) a sentence is imposed in an illegal manner if a defendant is denied a meaningful opportunity to review and comment on the information in the presentence report; and (2) a motion to correct is the proper vehicle to remedy the claimed defects because the interests of both the state and the defendant in an accurate presentence report, for inmate classification and other immediate purposes, cannot await a lengthy habeas proceeding for correction. We conclude that the trial court properly determined that it lacked jurisdiction over the defendant's motion.
I
The defendant claims that his sentence was imposed in an illegal manner. Because the present case provides this court's first opportunity to directly address this ground for correcting a sentence under § 43-22, and because there is a split of authority in the Appellate Court as to whether trial courts have jurisdiction to correct sentences on this basis; see State v. Dixson, 93 Conn.App. 171, 176 n. 6, 888 A.2d 1088 (recognizing split of authority but concluding that this court implicitly had acknowledged jurisdiction for specific claim in case before court), cert. denied, 277 Conn. 917, 895 A.2d 790 (2006); see also State v. Koslik, 116 Conn.App. 693, 706, 977 A.2d 275 (Alvord, J., concurring), cert. denied, 293 Conn. 930, 980 A.2d 916 (2009); we begin with some background on this Practice Book provision.
"The Superior Court is a constitutional court of general jurisdiction. . . . In the absence of statutory or constitutional provisions, the limits of its jurisdiction are delineated by the common law." (Citation omitted.) State v. Luzietti, 230 Conn. 427, 431, 646 A.2d 85 (1994). "[A] generally accepted rule of the common law is that a sentence cannot be modified by the trial court . . . if the sentence was valid and execution of it has commenced.[7]State v. Pallotti, 119 Conn. 70, 74, 174 A. 74 [1934]; 15 Am.Jur. 128 § 473[and] 130 § 474; note, 168 A.L.R. 706, 707 [1947]." Kohlfuss v. Warden, 149 Conn. 692, 695, 183 A.2d 626, cert. denied, 371 U.S. 928, 83 S.Ct. 298, 9 L.Ed.2d 235 (1962). In our earliest case to address the rationale for this rule, this court noted: "The reason for this rule has been variously assigned. According to one view, the rule rests on the principle of double jeopardy. According to another view, the rule is based on the proposition that the trial court has lost jurisdiction of the case. See cases cited in note, [supra] at 168 A.L.R. 709, 710." Kohlfuss v. Warden, supra, at 695-96, 183 A.2d 626. This court since repeatedly has *1109 deemed this limitation jurisdictional. See State v. Das, 291 Conn. 356, 362, 968 A.2d 367 (2009); State v. Lawrence, 281 Conn. 147, 153, 913 A.2d 428 (2007); Cobham v. Commissioner of Correction, 258 Conn. 30, 37, 779 A.2d 80 (2001); State v. Luzietti, supra, at 431-32, 646 A.2d 85; State v. Walzer, 208 Conn. 420, 424-25, 545 A.2d 559 (1988); see also State v. Nardini, 187 Conn. 109, 123, 445 A.2d 304 (1982) ("[t]he only constitutional problem [arising from the legislative exceptions to the rule barring a court from exercising jurisdiction after execution of the sentence has begun] would be double jeopardy but even that problem would be obviated if the court exercised its jurisdiction at the initiation of the defendant").[8]
Because this jurisdictional limitation presupposes a valid sentence, it long has been understood that, if a court imposes an invalid sentence, it retains jurisdiction to substitute a valid sentence. See annot., supra, at 168 A.L.R. 719; see also In re Bonner, 151 U.S. 242, 259-60, 14 S.Ct. 323, 38 L.Ed. 149 (1894) ("where the conviction is correct . . . there does not seem to be any good reason why jurisdiction of the prisoner should not be reassumed by the court that imposed the sentence in order that its defect may be corrected"); State v. Lawrence, 91 Conn.App. 765, 772, 882 A.2d 689 (2005) ("[u]nder the common law, the court has continuing jurisdiction to correct an illegal sentence"), aff'd, State v. Lawrence, supra, 281 Conn. at 147, 913 A.2d 428; see also 24 C.J.S. 200-202, Criminal Law § 2138 (2006). As one court noted: "Where there is a conviction, accompanied by a void sentence, the court's jurisdiction of the case for the purpose of imposing a lawful sentence is not lost by the expiration of the term at which the void sentence was imposed. The case is to be regarded as pending until it is finally disposed of by the imposition of a lawful sentence. . . . The theory seems to be that where the original judgment is void, it, in form of law, accomplished nothing, there was no final disposition of the case, and the court's power was therefore unexercised.. . ." (Citation omitted; internal quotation marks omitted.) De Benque v. United States, 85 F.2d 202, 205-206 (D.C.Cir.), cert. denied, 298 U.S. 681, 56 S.Ct. 960, 80 L.Ed. 1402 (1936). In early cases, sentences subject to such correction varyingly were described as erroneous, illegal, irregular or so defective in manner of substance as to be unenforceable. 24 C.J.S., supra, at pp. 200-202. Although courts generally construed this rule to permit correction of only void, but not voidable, sentences; see id.; some courts deemed the failure to provide rights essential to the fairness of the sentencing procedure as constituting a basis for vacating the sentence. See, e.g., Williamson v. United States, 265 F.2d 236, 239 (5th Cir. 1959) (lack of defendant's presence at resentencing); McCormick v. State, 71 Neb. 505, 506, 99 N.W. 237 (1904) (failure to ask defendant whether he had anything to say as to why judgment should not be imposed, in violation of statutory mandate); Powell v. Commonwealth, 182 Va. 327, 339-40, 28 S.E.2d 687 (1944) (lack of defendant's presence at sentencing).
In Connecticut, § 43-22 sets forth the procedural mechanism for correcting invalid sentences. As this court previously has noted: "Practice Book rules do not [however] ordinarily define subject matter jurisdiction. General Statutes *1110 § 51-14(a) [provides that] . . . [s]uch rules shall not abridge, enlarge or modify any substantive right nor the jurisdiction of any of the courts. . . . Because the judiciary cannot confer jurisdiction on itself through its own rule-making power, § 43-22 is limited by the common-law rule that a trial court may not modify a sentence if the sentence was valid and its execution has begun." (Citation omitted; internal quotation marks omitted.) State v. Lawrence, supra, 281 Conn. at 155, 913 A.2d 428; see also State v. Lawrence, supra, 91 Conn.App. at 773, 882 A.2d 689 (noting that § 43-22 "merely regulate[s] the procedure by which the court's jurisdiction may be invoked; [it does] not and cannot confer jurisdiction on the court to consider matters otherwise outside the court's jurisdiction").
Although this court had not defined the parameters of an invalid sentence prior to the adoption of § 43-22, the rules of practice are consistent with the broader common-law meaning of illegality, permitting correction of both illegal sentences and sentences imposed in an illegal manner.[9] See United States v. Rico, 902 *1111 F.2d 1065, 1067 (2d Cir.1990) ("[t]he common law, and later the Federal Rules of Criminal Procedure, authorized the district court to correct illegal sentences or sentences imposed in an illegal manner"). In State v. McNellis, 15 Conn.App. 416, 443-44, 546 A.2d 292, cert. denied, 209 Conn. 809, 548 A.2d 441 (1988), the Appellate Court aptly characterized the two types of illegality as follows: "An `illegal sentence' is essentially one which either exceeds the relevant statutory maximum limits, violates a defendant's right against double jeopardy, is ambiguous, or is internally contradictory. See 8A J. Moore, Federal Practice [2d Ed.1984], para. 35.03[2], pp. 35-35 through 35-36. . . . Sentences imposed in an illegal manner have been defined as being `within the relevant statutory limits but . . . imposed in a way which violates [a] defendant's right . . . to be addressed personally at sentencing and to speak in mitigation of punishment . . . or his right to be sentenced by a judge relying on accurate information or considerations solely in the record, or his right that the government keep its plea agreement promises. . . .' [Id.], at pp. 35-36 through 35-37." This latter category reflects the fundamental proposition that "[t]he defendant has a legitimate interest in the character of the procedure which leads to the imposition of sentence even if he may have no right to object to a particular result of the sentencing process." Gardner v. Florida, 430 U.S. 349, 358, 97 S.Ct. 1197, 51 L.Ed.2d 393 (1977).
We must, however, add one qualification to the description in McNellis. That case relied on a federal treatise, which had enumerated those rights attendant to sentencing previously identified by the courts as mandated by federal due process or legal mandates under federal law intended to ensure fundamental fairness in sentencing. See United States v. Luepke, 495 F.3d 443, 447 (7th Cir.2007) (noting that, although "the right of allocution is deeply rooted in our legal tradition and an important, highly respected right, it is neither constitutional nor jurisdictional" [internal quotation marks omitted]). Therefore, these enumerated examples would not encompass rights or procedures subsequently recognized as mandated by federal due process. See, e.g., Walsh v. State, 134 P.3d 366, 373-74 (Alaska App.2006) (holding that violation of rule set forth in Apprendi v. New Jersey, 530 U.S. 466, 490, 120 S.Ct. 2348, 147 L.Ed.2d 435 [2000], as applied in Blakely v. Washington, 542 U.S. *1112 296, 301, 124 S.Ct. 2531, 159 L.Ed.2d 403 [2004], constitutes illegal sentence); Benge v. State, 945 A.2d 1099, 1102 (Del.2008) (holding that Apprendi violation constitutes sentence imposed in illegal manner). Nor would those examples encompass procedures mandated by state law that are intended to ensure fundamental fairness in sentencing, which, if not followed, could render a sentence invalid. Therefore, the examples cited in McNellis are not exhaustive and the parameters of an invalid sentence will evolve. With these principles in mind, we turn to the specific jurisdictional issue in the present case, over which we exercise plenary review. State v. Alexander, 269 Conn. 107, 112, 847 A.2d 970 (2004).
II
As we previously have noted, in his motion to correct, the defendant alleged that: (1) he had been deprived of an opportunity to review his presentence report and to address inaccuracies therein; and (2) Gionfriddo had failed to review the presentence report with him or to bring any inaccuracies in the report to the court's attention. The defendant contends that the trial court improperly failed to consider whether these allegations were sufficient to establish a jurisdictional basis for correcting a sentence imposed in an illegal manner.[10] He also contends that jurisdiction should be found because defendants must be provided a more expedient remedy than habeas proceedings to correct inaccurate information in presentence reports, even if the inaccuracies were caused by counsel error, because of the significance of such reports in decisions relating to incarceration and parole. We conclude that the trial court properly dismissed the defendant's motion.
The following general principles regarding the requirements of due process in sentencing are relevant to the jurisdictional issue at hand. Prior to the enactment of the federal and state rules relating to the disclosure of all or part of presentence reports, numerous courts had held that the *1113 failure to disclose a presentence report to the defense does not violate due process.[11] See, e.g., United States v. Alexander, 498 F.2d 934, 935 (2d Cir.1974); United States v. Jones, 473 F.2d 293, 296 (5th Cir.), cert. denied, 411 U.S. 984, 93 S.Ct. 2280, 36 L.Ed.2d 961 (1973); United States v. Dockery, 447 F.2d 1178, 1182-83 and n. 9 (D.C.Cir.), cert. denied, 404 U.S. 950, 92 S.Ct. 299, 30 L.Ed.2d 266 (1971); State v. Moore, 49 Del. 29, 31-32, 108 A.2d 675 (1954); People v. McFadden, 31 Mich.App. 512, 517, 188 N.W.2d 141 (1971); State v. Benes, 16 N.J. 389, 395-96, 108 A.2d 846 (1954); People v. Peace, 18 N.Y.2d 230, 237, 219 N.E.2d 419, 273 N.Y.S.2d 64 (1966), cert. denied, 385 U.S. 1032, 87 S.Ct. 761, 17 L.Ed.2d 679 (1967). Nonetheless, the principle had been recognized that, "where a judge explicitly relies on certain information in assessing a sentence, the defendant must be given some opportunity to rebut that information." (Internal quotation marks omitted.) United States v. Garcia, 693 F.2d 412, 415 (5th Cir.1982); accord State v. Stevens, 278 Conn. 1, 12, 895 A.2d 771 (2006) ("due process requires that the defendant be given the opportunity to contest the evidence upon which the trial court relies for sentencing purposes").
As we alluded to in our discussion in part I of this opinion, due process precludes a sentencing court from relying on materially untrue or unreliable information in imposing a sentence. See Townsend v. Burke, 334 U.S. 736, 741, 68 S.Ct. 1252, 92 L.Ed. 1690 (1948) (defendant's sentence could not stand where trial court sentenced him on basis of "assumptions concerning his criminal record which were materially untrue"); see also United States v. Tucker, 404 U.S. 443, 447, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972) (same); United States v. Baylin, 696 F.2d 1030, 1040 (3d Cir.1982) ("as a matter of due *1114 process, factual matters may be considered as a basis for a sentence only if they have some minimal indicium of reliability"); United States v. Malcolm, 432 F.2d 809, 816 (2d Cir.1970) ("[m]isinformation or misunderstanding that is materially untrue regarding a prior criminal record, or material false assumptions as to any facts relevant to sentencing, renders the entire sentencing procedure invalid as a violation of due process"). To prevail on such a claim as it relates to a presentence report, "[a] defendant [cannot] . . . merely alleg[e] that his presentence report contained factual inaccuracies or inappropriate information.. . . [He] must show that the information was materially inaccurate and that the judge relied on that information."[12] (Citations omitted; emphasis in original.) United States v. Tooker, 747 F.2d 975, 978 (5th Cir.1984), cert. denied, 471 U.S. 1021, 105 S.Ct. 2032, 85 L.Ed.2d 314 (1985); accord Hili v. Sciarrotta, 140 F.3d 210, 216 (2d Cir.1998) ("[t]he mere presence of hearsay or inaccurate information in a presentence report does not constitute a denial of due process"); State v. Collette, 199 Conn. 308, 321, 507 A.2d 99 (1986) ("the mere reference to information outside of the record does not require a sentence to be set aside unless the defendant shows: [1] that the information was materially false or unreliable; and [2] that the trial court substantially relied on the information in determining the sentence"); State v. Taylor, 91 Conn.App. 788, 792-94, 882 A.2d 682 (concluding that, because motion to correct sentence sought relief in form of new or amended presentence report solely for use in hearing before sentence review board, it did not state basis for jurisdiction under § 43-22), cert. denied, 276 Conn. 928, 889 A.2d 819 (2005).
In Connecticut, these rights are protected by statute and by the rules of practice. See General Statutes § 54-91b;[13] Practice Book §§ 43-7[14] and 43-10(1);[15]State v. Arthur H., 288 Conn. *1115 582, 607, 953 A.2d 630 (2008) ("our rules of practice are intended to ensure that a defendant receives process that he is due during sentencing"). The rules of practice also set forth the obligations of defense attorneys relating to the development and use of the presentence report to protect the defendant's interests. See Practice Book §§ 43-5, 43-13 and 43-14;[16] see also State v. Harmon, 147 Conn. 125, 129, 157 A.2d 594 (1960) ("Under our practice, a defendant is not deprived of the right of challenging the statements made in the [presentence] report. His counsel is furnished, as in the instant case, with a copy of the report in order that its contents may be made known to the defendant and an opportunity afforded him to explain or controvert the statements contained in it."). Our case law establishes, however, that a failure to comply with procedures set forth under the rules of practice or the statutes relating to presentence reports does not necessarily, in and of itself, establish a violation of due process. See State v. Patterson, 236 Conn. 561, 568, 674 A.2d 416 (1996) (concluding that, despite statute and rule of practice directing trial courts to prepare presentence report, no due process right to such report); id., at 580, 674 A.2d 416 (noting that, in order to assess whether failure to comply with statute and rule of practice rises to level of due process violation, question is "whether the [s]tate [has] gone beyond issuing mere procedural guidelines and [has] used language of an unmistakably mandatory character such that the incursion on liberty would not occur absent specified substantive predicates" and whether "the deprivation be of a significant and atypical nature" [internal quotation marks omitted]).
In the present case, the defendant contends that these authorities establish that, "for a sentence to be imposed in a legal manner, the contents of the [presentence report] must be reviewed with the defendant." He further contends that the dearth of case law supporting this contention is due to the fact that "the obligation of counsel to review the [presentence report] with the defendant is carefully protected and too fundamental to be disregarded on a regular basis. . . ." Finally, *1116 the defendant asserts that "a defendant's inability to comment about a [presentence report] at sentencing because it has never been reviewed with him implicates both the right `to speak in mitigation of punishment' and `the right to be sentenced by a judge relying on accurate information or considerations solely in the record.'"
Turning to the rules of practice and the statutes on which the defendant specifically relies, we note that all but two of these provisions impose obligations on the defendant's attorney. Leaving aside for the moment the provisions relating to his attorney, the other authorities provide in relevant part that "the court shall provide the defendant or his attorney with a copy of the presentence investigation report at least twenty-four hours prior to the date set for sentencing and . . . shall hear motions addressed to the accuracy of any part of such . . . report"; (emphasis added) General Statutes § 54-91b; and that "[t]he judicial authority shall afford the parties an opportunity to be heard . . . and to explain or controvert the presentence investigation report. . . ." Practice Book § 43-10(1).
In the present case, these authorities do not provide a basis for jurisdiction. The defendant does not claim that the court failed to provide Gionfriddo with a copy of the report, and neither the General Statutes nor the rules of practice requires the sentencing court to inquire as to whether the defendant's attorney has reviewed the presentence report with him. Cf. Fed. R.Crim.P. 32(i)(1)(A) ("[a]t sentencing, the [c]ourt . . . must verify that the defendant and the defendant's attorney have read and discussed the presentence report and any addendum to the report"). The defendant never has claimed that the trial court refused to consider any motion or request to dispute facts in the presentence report, and the record is clear that none was made. The defendant also never has claimed that the sentencing court failed to afford him or his counsel an opportunity to address the court. Indeed, the record reflects that, after twice referencing the presentence report at the outset of the hearing, the sentencing court permitted the defendant, his mother and Gionfriddo each to make statements.
In his brief to this court, the defendant appears to suggest that he personally was entitled to a copy of the presentence report if Gionfriddo did not review it with him in order to bring any purported inaccuracies to the court's attention. Our statutes and rules of practice, however, like those of many other jurisdictions, do not require disclosure to both the defendant and his counsel.[17] See State v. *1117 Gibbs, 254 Conn. 578, 610, 758 A.2d 327 (2000) ("a defendant either may exercise his right to be represented by counsel . . . or his right to represent himself . . . but he has no constitutional right to do both at the same time" [citations omitted]). The defendant has pointed to no other authority demonstrating that he has such a personal right. See Kadlec v. State, 704 S.W.2d 526, 527 (Tex.App.1986) (rejecting defendant's claim as unsupported by any authority that rule directing copy of report to be provided only to defendant's counsel violated due process "because it does not guarantee [the defendant] the personal right to review the presentence report and object to its contents . . . [and] that this right, like the right to counsel and the right to [a] jury trial, should not be subject to waiver for a defendant by his attorney").
We are mindful that the accuracy of such reports undoubtedly is commensurate with their utility in sentencing. Although it may be the better practice, neither our rules of practice nor our statutes require a sentencing court to make an affirmative inquiry about the accuracy of the information in the presentence report. Indeed, the rules of practice do not obligate the sentencing court to correct all inaccurate information of which it is made aware. Rather, consistent with the constitutional concerns previously discussed, those rules direct the trial court to make corrections to the presentence report only when an inaccuracy affecting "significant information" is brought to its attention. Practice Book § 43-10(1). Therefore, it is clear that the sentencing court in the present case did not violate any of the rules of practice or statutes pertaining to presentence reports.
The defendant's claimed constitutional basis for jurisdictionthe right not to be sentenced on the basis of inaccurate information[18] is predicated entirely on his claim that the rules of practice and the statutes afford him a personal right to review, and an opportunity to seek corrections to, the presentence report, a claim that we have rejected. In his motion to correct, he did not advance an independent constitutional claim that the purported inaccuracies were materially false and that the sentencing court actually had relied on them in sentencing him.[19] Moreover, an *1118 essential fact that must be inferred from the defendant's claims is that no one alerted the court to any inaccurate information in the report. Therefore, all we are left with is the defendant's claim as it relates to the conduct of his counsel.
As one court has noted, if a trial court relies on the presentence report and "there was no opportunity afforded [the defendant] or his attorney to rebut the inaccuracies, the sentence may be invalid.. . . If, on the other hand, [the defendant's] attorney failed to avail himself of opportunities to discover the substance of the report, and to develop and present rebuttal material . . . it is possible that [the defendant] received ineffective assistance of counsel."[20] (Citations omitted; emphasis added.) Ryder v. Morris, 752 F.2d 327, 332 (8th Cir.1985). We are mindful that there is limited authority suggesting that a motion to correct can be a proper jurisdictional vehicle to resolve ineffective assistance of counsel claims solely relating to sentencing. See Barile v. Commissioner of Correction, 80 Conn.App. 787, 789-90, 837 A.2d 827 (concluding that petitioner had procedurally defaulted on habeas claim of ineffective assistance of counsel due to counsel's failure to obtain copies of victims' statements, which rendered petitioner's guilty plea not knowingly and voluntarily made, because petitioner had not raised his claim at sentencing, on direct appeal or pursuant to motion to correct illegal sentence under § 43-22), cert. denied, 268 Conn. 915, 847 A.2d 310 (2004).[21] Nonetheless, this court consistently has adhered to a rule that, absent either specific authorization to raise such claims in a forum other than a habeas court or construction of such a claim to implicate improper conduct by the trial court, the exclusive forum for adjudicating ineffective assistance of counsel claims is by way of habeas proceedings. See, e.g., State v. Arroyo, 284 Conn. 597, 643-44, 935 A.2d 975 (2007) (addressing defendant's ineffective assistance of counsel claim on appeal, but limiting focus to actions of trial court, *1119 not defendant's counsel); State v. Turner, 267 Conn. 414, 426-27, 838 A.2d 947 (addressing ineffective of assistance of counsel claim on appeal solely because "Practice Book § 39-27[4] provides an explicit exception to this general rule . . . and allows a defendant to withdraw a guilty plea after its acceptance if the `plea resulted from the denial of effective assistance of counsel"'), cert. denied, 543 U.S. 809, 125 S.Ct. 36, 160 L.Ed.2d 12 (2004).[22] There is no specific rule authorizing a defendant to bring his ineffective assistance of counsel claim by way of a motion to correct. For the reasons previously set forth herein, the conduct by Gionfriddo of which the defendant complains cannot be construed as a violation by the court of the defendant's rights at sentencing. Therefore, the trial court properly concluded that the defendant's motion to correct raised no claims over which the court had jurisdiction under § 43-22.[23]
In closing, however, we note that the defendant raises a legitimate concern about the potential adverse effect that inaccurate presentence reports could have on the conditions of an inmate's incarceration and release. We are mindful of the limitations on a defendant's ability to correct such defects through judicial relief. See State v. Dixon, 114 Conn.App. 1, 7-8, 967 A.2d 1242 (noting that case law "suggest[s] that a defendant who does not challenge his sentence has no judicial remedy, by way of direct appeal or habeas corpus, to redact inaccurate statements of fact in a [presentence] report," but leaving open possibility that "there might be some misstatements in a report that are so patently false, unreliable and harmful to the defendant's future incarceration, probation or parole that he could challenge them on direct appeal from the sentence"), cert. denied, 292 Conn. 910, 973 A.2d 108 (2009). Although this court previously has stated that "[the] sole purpose [of the presentence report] is to enable the court, within the limits fixed by statute, to impose an appropriate penalty, fitting the offender as well as the crime"; (internal quotation marks omitted) Steadwell v. Warden, 186 Conn. 153, 159, 439 A.2d 1078 (1982); our statutes and rules of practice make evident that the report will have other uses as it follows the defendant through the correctional system. See State v. Dixon, supra, at 8, 967 A.2d 1242 (noting that General Statutes § 54-91a [c] "requires that such a report accompany a defendant into that *1120 system" and that Practice Book § 43-10[1] "contemplates that a report will follow the defendant into the correctional system for appropriate use by those officials"); Board of Pardons v. Freedom of Information Commission, 19 Conn.App. 539, 543, 563 A.2d 314 ("[a] file on a prisoner-applicant for pardon is a full dossier of information such as the [presentence report]"), cert. denied, 212 Conn. 819, 565 A.2d 539 (1989). Several federal courts have acknowledged the significant concern raised by the defendant because of that fact. See, e.g., United States v. Katzin, 824 F.2d 234, 238-40 (3d Cir.1987); United States v. Petitto, 767 F.2d 607, 610-11 (9th Cir.1985), overruled in part on other grounds by United States v. Fernandez-Angulo, 897 F.2d 1514, 1517 n. 5 (9th Cir.1990); United States v. Velasquez, 748 F.2d 972, 974 (5th Cir.1984); see generally S. Fennell & W. Hall, "Due Process at Sentencing: An Empirical and Legal Analysis of the Disclosure of Presentence Reports in Federal Courts," 93 Harv. L.Rev. 1613, 1628 (1980). The federal scheme provides a mechanism for correcting such inaccuracies or indicating that the fact is disputed, even if the purported inaccuracy has no bearing on sentencing. See Fed.R.Crim.P. 32(i)(3) (providing that, when defendant alleges inaccuracies in presentence report, sentencing judge must make written findings as to allegations, or written determination that disputed matters will not be relied upon for sentencing, and must attach those findings or that determination to copy of presentence report made available to federal Bureau of Prisons); see also 28 C.F.R. § 2.19(c) ("[i]f the prisoner disputes the accuracy of the information presented, the [Parole] Commission shall resolve such dispute by the preponderance of the evidence standard; that is, the [Parole] Commission shall rely upon such information only to the extent that it represents the explanation of the facts that best accords with reason and probability").
To ameliorate in part this concern, we recommend that sentencing courts: inquire as to whether the defendant and his counsel have had an opportunity to review the presentence report; inquire as to whether there are any material inaccuracies that either of them wish to bring to the court's attention; and exercise their authority under our rules of practice and General Statutes to amend the report. See footnotes 13 and 15 of this opinion. To the extent, however, that other procedures might be implemented to allow a defendant to challenge or correct information solely relevant to correctional functions, that is a matter for the legislature, the department of correction or both.
The decision is affirmed.
In this opinion the other justices concurred.
NOTES
[1] "Under North Carolina v. Alford, 400 U.S. 25, 91 S.Ct. 160, 27 L.Ed.2d 162 (1970) . . . the defendant does not admit guilt but acknowledges that the state's evidence against him is so strong that he is prepared to accept the entry of a guilty plea nevertheless." (Internal quotation marks omitted.) State v. Fowlkes, 283 Conn. 735, 736 n. 1, 930 A.2d 644 (2007).
[2] It appears from the record that the defendant was twenty-one years old at the time he entered his guilty plea and that his mother had paid for Gionfriddo's services.
[3] In April, 2005, the defendant also filed a pro se motion to correct an illegal sentence relating to his guilty plea, which the trial court, Iannotti, J., denied in May, 2005.
[4] Practice Book § 43-22 provides: "The judicial authority may at any time correct an illegal sentence or other illegal disposition, or it may correct a sentence imposed in an illegal manner or any other disposition made in an illegal manner."
[5] In State v. Casiano, supra, 282 Conn. at 627-28, 922 A.2d 1065, this court held: "[A] defendant has a right to the appointment of counsel for the purpose of determining whether a defendant who wishes to file [a motion to correct an illegal sentence under § 43-22] has a sound basis for doing so. If appointed counsel determines that such a basis exists, the defendant also has the right to the assistance of such counsel for the purpose of preparing and filing such a motion and, thereafter, for the purpose of any direct appeal from the denial of that motion."
[6] The defendant appealed from the trial court's dismissal of his motion to the Appellate Court, and thereafter we transferred the appeal to this court pursuant to General Statutes § 51-199(c) and Practice Book § 65-1.
[7] "At common law, the trial court's jurisdiction to modify or vacate a criminal judgment was also limited to the `term' in which it had been rendered. State v. Pallotti, [119 Conn. 70, 74, 174 A. 74 (1934)]. Since our trial courts no longer sit in `terms,' that particular common law limitation no longer has vitality in this state." State v. Luzietti, supra, 230 Conn. at 432 n. 6, 646 A.2d 85.
[8] Although the legislature has the power to create exceptions to the rule barring jurisdiction over valid sentences; State v. Nardini, supra, 187 Conn. at 123, 445 A.2d 304; see State v. Lawrence, supra, 281 Conn. at 153-54, 913 A.2d 428 (setting forth limited statutory exceptions); none of these exceptions is relevant in the present case.
[9] The genesis of the distinction drawn between illegal sentences and sentences imposed in an illegal manner arises from Hill v. United States, 368 U.S. 424, 82 S.Ct. 468, 7 L.Ed.2d 417 (1962). At issue in that case was the rule of criminal procedure that permitted correction of "illegal" sentences. See Fed. R.Crim.P. 35. That rule, adopted in 1944, was a codification of the existing common law. See Hill v. United States, supra, at 430 n. 8, 82 S.Ct. 468; Duggins v. United States, 240 F.2d 479, 483 (6th Cir.1957). In Hill, a closely divided court held that rule 35 did not provide a basis for relief when the claim was that the defendant had not been permitted to address the court prior to imposition of the sentence, in violation of rule 32(a) of the Federal Rules of Criminal Procedure. Hill v. United States, supra, at 429-30, 82 S.Ct. 468. The majority in Hill determined that "the narrow function of [r]ule 35 is to permit correction at any time of an illegal sentence, not to re-examine errors occurring at the trial or other proceedings prior to the imposition of sentence. The sentence in this case was not illegal. The punishment meted out was not in excess of that prescribed by the relevant statutes, multiple terms were not imposed for the same offense, nor were the terms of the sentence itself legally or constitutionally invalid in any other respect." (Emphasis added.) Id., at 430, 82 S.Ct. 468; see United States v. Luepke, 495 F.3d 443, 447 (7th Cir.2007) (noting that, although "the right of allocution is deeply rooted in our legal tradition and an important, highly respected right, it is neither constitutional nor jurisdictional" [internal quotation marks omitted]).
The four dissenting justices in Hill had argued that "a sentence imposed in an illegal mannerwhether the amount or form of the punishment meted out constitutes an additional violation of law or notwould be recognized as an `illegal sentence' under any normal reading of the English language. And precisely this sort of common-sense understanding of the language of [r]ule 35 has prevailed generally among the lower federal courts that deal with questions of the proper interpretation and application of these [r]ules as an everyday matter. Those courts have expressed their belief that, even where the punishment imposed upon a defendant is entirely within the limits prescribed for the crime of which he was convicted, a sentence imposed in a prohibited manneras, for example, a sentence imposed upon an absent defendant in violation of the command of [r]ule 43 [of the Federal Rules of Criminal Procedure] that a defendant be present at sentencingis an `illegal sentence' subject to correction under [r]ule 35." Hill v. United States, supra, 368 U.S. at 432, 82 S.Ct. 468 (Black, J., dissenting).
In response, in 1966, rule 35 was amended to conform to the broader meaning of illegality advocated by the dissenting justices in Hill and the lower courts, permitting correction of both "illegal sentences" and "sentences imposed in an illegal manner." See United States v. Mack, 494 F.2d 1204, 1208 n. 5 (9th Cir.1974). Our rule of practice, § 43-22, adopted in 1976, was modeled on the then existing federal rule and the model rules of criminal procedure. See State v. Pina, 185 Conn. 473, 481 n. 6, 440 A.2d 962 (1981); see also State v. Lawrence, supra, 91 Conn.App. at 774 n. 10, 882 A.2d 689 ("Connecticut law can be understood to follow either the version of rule 35 as it existed between 1966 and 1984 or the position of the dissent in Hill"). Federal rule 35 subsequently was amended in 1985, and currently trial courts only have the authority to vacate, set aside or correct sentences by way of a collateral attack under 28 U.S.C. § 2255.
Although our rule of practice is modeled on the version of the federal rule in effect between 1967 and 1984, we note two substantive differences. First, that version of the federal rule permitted motions to correct illegal sentences to be brought at any time, whereas motions to correct a sentence imposed in an illegal manner had to be filed within 120 days of sentencing or exhaustion of appellate remedies. See Fed.R.Crim.P. 35(a) (1984). Under our rule, both grounds are subject to the same limits; originally, all motions to correct a sentence had to be filed within ninety days of final judgment and, after a 1983 amendment, all motions could be filed at any time. See State v. Pina, supra, 185 Conn. at 481 n. 6, 440 A.2d 962; State v. Walzer, 9 Conn.App. 365, 366, 518 A.2d 966 (1986), cert. denied, 202 Conn. 802, 519 A.2d 1207 (1987). Second, "[u]nlike the federal rules, which have been amended pursuant to congressional action; see United States v. Cook, 890 F.2d 672, 674-75 (4th Cir.1989) [superseded by statute on other grounds as stated in United States v. Fahm, 13 F.3d 447, 453-54 (1994)]; our rules of practice are promulgated by the Superior Court of this state and, as such, cannot abridge, enlarge or modify any substantive right. See General Statutes § 51-14(a)." State v. Lawrence, supra, 91 Conn.App. at 773 n. 8, 882 A.2d 689.
[10] We note that the defendant challenges the trial court's conclusion that dismissal of his motion to correct was required because "the sentencing was an agreed [upon] recommendation which would not have resulted in a different or lower sentence." It appears that the trial court determined that a sentence cannot be imposed in an illegal manner when that sentence conforms to a specified term in a plea agreement and the defendant did not retain the right to argue for any lesser term. The defendant contends that this conclusion is not compelled as a matter of law because, despite such an agreement, a sentencing court has discretion to impose a lesser sentence than the agreed upon term. See General Statutes § 51-195 (permitting application for review of sentence by "[a]ny person sentenced on one or more counts of an information to a term of imprisonment for which the total sentence of all such counts amounts to confinement for three years or more . . . except in any case in which a different sentence could not have been imposed or in any case in which the sentence or commitment imposed resulted from the court's acceptance of a plea agreement or in any case in which the sentence imposed was for a lesser term than was proposed in a plea agreement" [emphasis added]); Practice Book § 39-8 ("[i]f the judicial authority accepts the plea agreement, it shall embody in the judgment and the sentence the disposition provided for in the plea agreement or another disposition more favorable to the defendant than that provided for in the plea agreement" [emphasis added]). This argument presupposes that a sentence could be imposed in an illegal manner if a trial court has relied on a material inaccuracy in declining to exercise its discretion to impose a lesser sentence than the agreed upon term in the plea agreement. The defendant further contends that the trial court's reason relates to the merits of his claim, and not the court's jurisdiction to consider the claim. In light of our conclusion that the failure of defense counsel to review a presentence report with a defendant does not constitute a basis for jurisdiction under § 43-22, we need not address either of these contentions.
[11] In reaching this conclusion, many courts had relied on Williams v. New York, 337 U.S. 241, 69 S.Ct. 1079, 93 L.Ed. 1337 (1949), in which the United States Supreme Court held that a defendant who did not challenge the accuracy of the presentence report was not entitled under the due process clause to an opportunity to confront and cross-examine sources of information used in that report. In a subsequent plurality opinion, the Supreme Court qualified Williams in the specific context of capital cases, holding that the defendant had a due process right not to receive the death penalty on the basis of information that he had no opportunity to deny or explain. Gardner v. Florida, supra, 430 U.S. at 362, 97 S.Ct. 1197. Although there has been little need for the courts to reconsider whether due process requires disclosure, because almost every jurisdiction currently requires disclosure of the presentence report to the defense; see footnote 17 of this opinion; the few courts to have done so have reached inconsistent results. Compare United States v. Jackson, 453 F.3d 302, 305-306 (5th Cir.) (summarily stating that, "[a]t sentencing, a defendant has a protected due process right to review and object to a [presentence report], but no absolute right to present witnesses"), cert. denied, 549 U.S. 987, 127 S.Ct. 462, 166 L.Ed.2d 329 (2006), with Bridinger v. Berghuis, 429 F. Sup.2d 903, 909 (E.D.Mich.2006) ("[b]ecause there is no constitutional requirement that a court prepare or consider a presentence report, it follows that [the] petitioner has no constitutional right to review any such report"). A principal distinction may have developed between the right to see the actual report and the right to have access to the factual information therein; see State v. Galindo, 278 Neb. 599, 665, 774 N.W.2d 190 (2009) ("a court does not violate a defendant's due process rights by considering information in a presentence report when the defendant had notice and an opportunity to obtain access to the information in the report and to deny or explain the information to the sentencing authority"); as reflected in the extent of disclosure provided under the procedural rules of some states. See, e.g., Ark.Code Ann. § 5-4-102(d)(1) (2006) (requiring court to "advise the defendant or his or her counsel of the factual contents and conclusions of any presentence investigation"); Fla. R.Crim. P. 3.713 (West 2009) (conferring discretion on court whether to disclose contents of presentence report but requiring disclosure of all factual material).
[12] "A sentencing court demonstrates actual reliance on misinformation when the court gives explicit attention to it, [bases] its sentence at least in part on it, or gives specific consideration to the information before imposing sentence." (Internal quotation marks omitted.) Lechner v. Frank, 341 F.3d 635, 639 (7th Cir.2003).
[13] General Statutes § 54-91b provides: "In any case, without a showing of good cause, upon the request of the defendant or his attorney, prior to sentencing, the court shall provide the defendant or his attorney with a copy of his record of prior convictions and in any case wherein a presentence investigation is ordered, without a showing of good cause, the court shall provide the defendant or his attorney with a copy of the presentence investigation report at least twenty-four hours prior to the date set for sentencing and in both such cases shall hear motions addressed to the accuracy of any part of such record or report."
[14] Practice Book § 43-7 provides: "The presentence investigation or alternate incarceration assessment report or both shall be provided to the judicial authority, and copies thereof shall be provided to the prosecuting authority and to the defendant or his or her counsel in sufficient time for them to prepare adequately for the sentencing hearing, and in any event, no less than forty-eight hours prior to the date of the sentencing. Upon request of the defendant, the sentencing hearing shall be continued for a reasonable time if the judicial authority finds that the defendant or his or her counsel did not receive the presentence investigation or alternate incarceration assessment report or both within such time."
[15] Practice Book § 43-10 provides in relevant part: "Before imposing a sentence or making any other disposition after the acceptance of a plea of guilty or nolo contendere or upon a verdict or finding of guilty, the judicial authority shall, upon the date previously determined for sentencing, conduct a sentencing hearing as follows:
"(1) The judicial authority shall afford the parties an opportunity to be heard and, in its discretion, to present evidence on any matter relevant to the disposition, and to explain or controvert the presentence investigation report, the alternate incarceration assessment report or any other document relied upon by the judicial authority in imposing sentence. When the judicial authority finds that any significant information contained in the presentence report or alternate incarceration assessment report is inaccurate, it shall order the office of adult probation to amend all copies of any such report in its possession and in the clerk's file, and to provide both parties with an amendment containing the corrected information. . . ."
[16] Practice Book § 43-5 provides: "Defense counsel, on a prompt request, shall be notified of the time when the defendant shall be interviewed by probation officers regarding a presentence or alternate incarceration assessment report or both for the judicial authority and may be present:
"(1) To assist in answering inquiries of the probation officer;
"(2) To assist in resolving factual issues and questions;
"(3) To protect the defendant against incrimination regarding other pending indictments or investigations; and
"(4) To protect the defendant's rights with respect to an appeal of conviction."
Practice Book § 43-13 provides: "Defense counsel shall familiarize himself or herself with the contents of the presentence or alternate incarceration assessment report or both, including any evaluative summary, and any special medical or psychiatric reports pertaining to the [defendant]."
Practice Book § 43-14 provides: "Defense counsel shall bring to the attention of the judicial authority any inaccuracy in the presentence or alternate incarceration assessment report of which he or she is aware or which the defendant claims to exist."
[17] Although the federal rules require disclosure to both the defendant and his counsel; see Fed.R.Crim.P. 32(e)(2); a review of the rules of procedure and statutes of other states reveal that a majority of states follow the practice of Connecticut, requiring disclosure to a defendant's counsel or an unrepresented defendant. See, e.g., Ala. R.Crim. P. 26.3(c) (2003); Alaska R.Crim. P. 32.1(b) (2010); Ariz. R.Crim. P. 26.6(a) (2008); Ark.Code Ann. § 5-4-102(d)(1) (2006); Colo.Rev.Stat. § 16-11-102(1)(a) (2010); Del.Super. Ct. R.Crim. P. 32(c)(3) (2010); Haw.Rev.Stat. § 706-604(2) (Cum.Sup.2007); 730 Ill. Comp. Stat. Ann. 5/5-3-4 (b)(2) (West 2007); Ind.Code Ann. § 35-38-1-12(a) (LexisNexis 1998); Iowa Code Ann. § 901.4 (West Cum. Sup.2009); Kan. Stat. Ann. § 21-4605(a)(1) (2007); La.Code Crim. P. Ann. art. 877(B) (2008); Mass. R.Crim. P. 28(d)(3) (2009-2010); N.Y.Crim. P. Law § 390.50(2)(a) (McKinney Cum. Sup.2010); Pa. R.Crim. P. 703(A)(2) (West 2009); R.I. Super. Ct. R.Crim. P. 32(c)(3) (2009); Tex.Crim. P.Code Ann. art. 42.12, § 9(d) (Vernon Cum. Sup. 2009); Wash.Super. Ct.Crim. R. 7.1(a)(3) (West 2010); compare Idaho Crim. R. 32(g)(1) (2009) (providing copy to defendant and his counsel); Mich. Comp. Laws Serv. § 771.14(5) (LexisNexis Cum. Sup.2009) (same); Mont.Code Ann. § 46-18-113(1) (2007) (same); Nev.Rev.Stat. § 176.156(1) (2007) (same); N.M. Rules Ann. 5-703 (2009) (same); N.C. Gen.Stat. § 15A-1333 (b) (2009) (same); Ohio Rev.Code Ann. § 2951.03(D)(1) (West 2006) (same); Okla. Stat. Ann. tit. 22, § 982(D) (West 2003); S.D. Codified Laws § 23A-27-7 (2004) (same); Vt. R.Crim. P. 32(c)(3) (2003) (same); W. Va. R.Crim. P. 32(b)(6) (2009) (same); see also N.D. R.Crim. P. 32(c)(4) (2008-2009) (conferring discretion on court to decide whether to disclose report to either party). Other states' provisions are less clear, simply requiring that copies be provided to both parties; see Fla. R.Crim. P. 3.713 (West 2009); 49 Minn. R.Crim. P. 27.03(1) (West 2009); Tenn.Code Ann. § 40-35-208 (2006); or that a copy be made "available to the defendant through the defendant's counsel." D.C.Super. Ct. R.Crim. P. 32(b)(3) (2009).
[18] As we previously have noted, the defendant also contends that his lack of opportunity to review the presentence report implicated his right to present mitigating evidence to the court. Beyond this cursory assertion, the defendant did not address this ground independently from his claim that his inability to review the report affected his right not to have the trial court rely on inaccurate information. There also is no basis in the record to construe this as an independent claim that the defendant had a right to offer additional mitigating evidence because it is undisputed that the defendant relinquished his right to argue for a lesser sentence under the terms of his plea agreement, he refused to participate in the preparation of the presentence report, and he was afforded an opportunity to address the court prior to sentencing.
[19] As we previously have noted herein, the defendant testified at the hearing held pursuant to § 43-22 that he had seen the report for the first time days before that hearing, well after he had filed his motion to correct the sentence. The lone reference at that hearing to the purported inaccuracies occurred when the defendant responded "yes" to the following question from his counsel: "Are there issues in the presentence [report] that you would like to correct?" Therefore, there was not even a basis on which to infer that the purported inaccuracies are of a nature that would be relevant to sentencing considerations. Cf. Ryder v. Morris, 752 F.2d 327, 332 (8th Cir.1985) (concluding that, although "[the defendant] had failed to make any showing the sentencing judge had relied on the [presentence] report . . . the allegation that [the defendant], in effect, was responsible for the death of his wife, was serious enough to be at least rebuttably presumed to have affected the trial judge's sentencing decision" [citation omitted]).
[20] At the time the United States Supreme Court recognized the right to counsel in sentencing proceedings, it specifically linked that right to a defendant's right not to be sentenced on the basis of a materially false or inaccurate court record. See Mempa v. Rhay, 389 U.S. 128, 134, 88 S.Ct. 254, 19 L.Ed.2d 336 (1967) ("[i]n particular, Townsend v. Burke, supra, [334 U.S. at 736, 68 S.Ct. 1252] illustrates the critical nature of sentencing in a criminal case and might well be considered to support by itself a holding that the right to counsel applies at sentencing").
[21] In Barile v. Commissioner of Correction, supra, 80 Conn.App. at 789-90, 837 A.2d 827, the Appellate Court cited Cobham v. Commissioner of Correction, supra, 258 Conn. at 39, 779 A.2d 80, as authority for the defendant to file his § 43-22 motion to correct. Although, in Cobham, this court broadly stated that, "before seeking to correct an illegal sentence in the habeas court, a defendant either must raise the issue on direct appeal or file a motion pursuant to § 43-22 with the trial court"; id., at 38, 779 A.2d 80; the claim in that case directly related to the conduct of the court and did not involve ineffective assistance of counsel.
[22] We are mindful that the reason most often cited in our case law holding that ineffective assistance of counsel claims must be brought by way of a habeas petition is that such claims generally require an evidentiary hearing and fact finding, which are functions that appellate courts do not exercise. See State v. Beavers, 290 Conn. 386, 412, 963 A.2d 956 (2009); State v. Greene, 274 Conn. 134, 151, 874 A.2d 750 (2005), cert. denied, 548 U.S. 926, 126 S.Ct. 2981, 165 L.Ed.2d 988 (2006); State v. Turner, supra, 267 Conn. at 426-27, 838 A.2d 947; State v. Munoz, 233 Conn. 106, 131 n. 16, 659 A.2d 683 (1995). By declining to allow ineffective assistance of counsel claims to be adjudicated pursuant to a motion to correct an illegal sentence, we do not intend to state an opinion as to whether trial courts may consider evidence outside the record for purposes of § 43-22 motions, as that issue has not been briefed and is not before us in this case.
[23] The defendant's reliance on State v. Casiano, supra, 282 Conn. at 614, 922 A.2d 1065, for a contrary conclusion is misplaced. Although the motion to correct in that case had alleged that the defendant's plea was not knowing and voluntary because his trial counsel erroneously had advised him about the maximum sentence that he would serve; id., at 617, 922 A.2d 1065; we made clear that the issue before this court was unrelated to the merits of that claim and that we "express[ed] no opinion as to whether his motion [was] proper under . . . § 43-22. . . ." Id., at 620 n. 11, 922 A.2d 1065; see footnote 5 of this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4169455/ | Case: 16-60702 Document: 00513997179 Page: 1 Date Filed: 05/17/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 16-60702
Fifth Circuit
FILED
May 17, 2017
Lyle W. Cayce
Clerk
CHRISTINE R. SIMPSON,
Plaintiff–Appellant,
versus
KELLY SERVICES, INCORPORATED,
Defendant–Appellee.
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 3:14-CV-972
Before JOLLY, SMITH, and GRAVES, Circuit Judges.
PER CURIAM: *
Christine Simpson sued her former employer, Kelly Services, Incorpor-
ated (“Kelly”), claiming that her termination violated the Americans with
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in
5TH CIR. R. 47.5.4.
Case: 16-60702 Document: 00513997179 Page: 2 Date Filed: 05/17/2017
No. 16-60702
Disabilities Act and the Family Medical Leave Act. The district court granted
Kelly’s motion for summary judgment based on judicial estoppel because
Simpson had failed to disclose her claim against Kelly in her bankruptcy
proceedings.
We have reviewed the briefs, the record, and the applicable law and have
heard the arguments of counsel. The district court faithfully applied the re-
quirements of Love v. Tyson Foods, Inc., 677 F.3d 258 (5th Cir. 2012), regarding
judicial estoppel, to these facts. In particular, the court explained why, under
the applicable law, Simpson cannot reasonably contend that her failure to dis-
close was inadvertent.
The summary judgment is AFFIRMED, essentially for the reasons set
forth in the district court’s well-reasoned order entered on September 26, 2016.
2 | 01-03-2023 | 05-18-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/1548296/ | 992 A.2d 685 (2010)
The STATE of New Hampshire
v.
Gurrie FANDOZZI, Jr.
No. 2008-475.
Supreme Court of New Hampshire.
Argued: September 23, 2009.
Opinion Issued: March 10, 2010.
*688 Kelly A. Ayotte, Attorney General (Nicholas Cort, Assistant Attorney General, on the brief and orally), for the State.
Mark L. Sisti, of Chichester, on the brief and orally, for the defendant.
CONBOY, J.
The defendant, Gurrie Fandozzi, Jr., was convicted by a jury of seven counts of first-degree assault. See RSA 631:1 (2007). He appeals orders of the Trial Court (Nadeau, J.) denying his motions to dismiss, motions in limine, motion for a *689 mistrial, motions to set aside the verdict or for a new trial, and motion to conduct juror voir dire. We affirm.
The record evidences the following facts. When their six-month-old son, G.F., began exhibiting cold symptoms, the defendant and his wife, Tammy Fandozzi, brought him to their pediatrician. The pediatrician diagnosed G.F. with a viral cold. The child's condition worsened that night and he began to have difficulty breathing. The defendant called 911 early the next morning and, at the direction of the dispatcher, administered CPR to the child until the EMTs arrived. While en route to Parkland Medical Center in Salem, New Hampshire, the EMTs made three unsuccessful attempts to intubate G.F. The Parkland Medical staff determined that the child should be transported via helicopter to Children's Hospital in Boston, Massachusetts. At the hospital, a doctor informed the Fandozzis that although G.F. was in stable condition, he was suffering from several broken rib bones. A social worker told the Fandozzis that she was required to notify the State of New Hampshire of G.F.'s injuries.
In 2007, the defendant was indicted on twenty-six counts of first degree assault, alleging that he recklessly inflicted twenty-six bone fractures upon G.F. After a ten-day trial in November 2007, the defendant was convicted of seven charges and acquitted of the remaining nineteen. The court sentenced the defendant to fifteen to thirty years in the state prison.
I. Motion to Dismiss Indictments or Alternative Relief
The defendant argues that the trial court erred in denying his motion to dismiss the indictments or re-depose the State's primary witness. The State originally indicted the defendant on five counts of first-degree assault. Following the deposition of the State's medical expert, the State re-indicted the defendant on twenty-six counts of first-degree assault, one for each of the child's broken bones. The defendant asserts that the court should have dismissed the new indictments or permitted him to re-depose the witness.
"A trial court's decision to deny a motion for a deposition ... is reviewed by this court under the [unsustainable exercise] of discretion standard. Accordingly, we will overturn the trial court's rulings only if the defendant can show that they are clearly untenable or unreasonable to the prejudice of his case." State v. Chick, 141 N.H. 503, 504, 688 A.2d 553 (1996) (citations omitted). "[T]he court, in its discretion, may allow a deposition when a party has shown, by a preponderance of the evidence, that the deposition is needed to ensure a fair trial, avoid surprise or for other good cause shown." Id. at 505, 688 A.2d 553 (quotation omitted).
In denying the motion, the trial court found that "[t]he new indictments cover allegations contained within the old indictments and discovery" and "[d]efense counsel was able to question the Doctor with respect to each bone contained in each of the new indictments." Based upon these findings, we hold that the filing of the new charges did not impede the defendant's ability to prepare a defense. Because the defendant suffered no prejudice, we further hold that the trial court's ruling did not constitute an unsustainable exercise of discretion.
II. Motions in Limine
The defendant challenges the trial court's denial of his motions in limine to exclude certain evidence from trial. The defendant first argues that the trial court erred in denying his motion to exclude testimony from a pediatrician, arguing that she was unqualified to provide expert opinion *690 on the causes of the bone fractures. Specifically, he argues that the doctor lacked radiological training and she relied upon the opinion of another doctor to reach her conclusions.
Because the trial judge has the opportunity to hear and observe the witness, the decision whether a witness qualifies as an expert is within the trial judge's discretion. We will not reverse that decision absent a clearly unsustainable exercise of discretion. Our inquiry is whether the record establishes an objective basis sufficient to sustain the discretionary judgment made. To prevail on appeal, the defendant must demonstrate that the court's ruling was clearly untenable or unreasonable to the prejudice of his case.
Goudreault v. Kleeman, 158 N.H. 236, 245, 965 A.2d 1040 (2009) (citations and quotations omitted). In addressing the motion, the trial court determined that the doctor "ha[d] the appropriate special knowledge to evaluate how another doctor's reading of G.F.'s x-rays relate[d] to what she knows about the appearance of a child's bones when they are broken, healing or intact." Accordingly, the court ruled that the pediatrician was properly qualified as an expert pursuant to New Hampshire Rules of Evidence 702 and 703.
Rule 702 provides that, "if scientific, technical, or specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise." To determine whether a witness is qualified as an expert, the court considers whether the witness "by either study or experience, has knowledge on the subject-matter of his [or her] testimony so superior to that of people in general concerning it that the witness's views will probably assist the trier of fact." McMullin v. Downing, 135 N.H. 675, 679, 609 A.2d 1226 (1992) (quotations and brackets omitted).
Here, the trial court determined that the pediatrician has knowledge superior to that of a layperson regarding broken bones and "has focused her career on evaluating children's injuries to determine whether they are victims of abuse. Because it is her job to determine whether a child's injuries are accidental or inflicted, [the doctor] has meaningful experience working with other doctors to interpret x-rays." On the record, we find no error in the trial court's ruling permitting the pediatrician's testimony.
The defendant also challenges the trial court's denial of his motion to exclude evidence relating to: (1) marital conflict between him and his wife; (2) his strained relationship with his in-laws; and (3) evidence that the division of children, youth, and families (DCYF) had brought abuse and neglect petitions against him and his wife. He argues that all of this evidence was irrelevant and unfairly prejudicial.
All evidence must be relevant to be admissible. N.H. R. Ev. 402. Relevant evidence is that which has "any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." N.H. R. Ev. 401. As to the evidence of marital conflict, the court found that the evidence was probative of the defendant's state of mind and "how he handled the pressures of caring for a newborn and is relevant to whether he acted recklessly at the time." The court found the evidence regarding the defendant's strained relationship with his in-laws to be similarly probative. We conclude that given the nature of the charges against the defendant, the court reasonably found that such evidence was *691 relevant to prove that the defendant acted with a reckless state of mind.
As to evidence regarding the DCYF abuse and neglect petitions, the court found that such testimony was probative of the defendant's wife's and in-laws' motivation to lie. The court reasoned that because DCYF could secure a transcript of the criminal trial for use in later family court proceedings against the Fandozzis, the witnesses may have been motivated to lie at trial to protect the defendant and his wife. Under these circumstances, we conclude that the court did not err in finding the evidence relevant.
The defendant argues that, notwithstanding its relevance, the admission of all this evidence was unfairly prejudicial because it portrayed him as someone who is subject to "stressors" and is unable to control his emotions. New Hampshire Rule of Evidence 403 provides that "[a]lthough relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice." Evidence is unfairly prejudicial
if its primary purpose or effect is to appeal to a jury's sympathies, arouse its sense of horror, provoke its instinct to punish, or trigger other mainsprings of human action that may cause a jury to base its decision on something other than the established propositions in the case.
State v. Giddens, 155 N.H. 175, 179-80, 922 A.2d 650 (2007) (citation and quotation omitted).
Unfair prejudice is not, of course, mere detriment to a defendant from the tendency of the evidence to prove his guilt, in which sense all evidence offered by the prosecution is meant to be prejudicial. Rather, the prejudice required to predicate reversible error is an undue tendency to induce a decision against the defendant on some improper basis, commonly one that is emotionally charged.
Id. at 180, 922 A.2d 650. Under the circumstances of this case, we cannot conclude that this evidence had an undue tendency to induce the jury to find against the defendant based upon emotion or some other improper basis. Moreover, any danger of unfair prejudice from this evidence did not substantially outweigh its probative value. Accordingly, we hold that the trial court's admission of these statements was not unreasonable or untenable.
The defendant also moved to exclude certain testimony from an automobile mechanic. The trial court explained,
The defendant seeks to prevent the [S]tate from introducing testimony of an auto mechanic about what he saw when the defendant brought the three family vehicles to the garage for inspection. The inspections occurred on three separate days within a week to ten days of G.F.'s admission to the hospital. The mechanic will apparently testify about the defendant's disparate treatment of his two children, A.F. and G.F., as well as his observations of G.F. The defendant argues that the auto mechanic's testimony is not relevant or probative. The [S]tate counters that it is relevant because the mechanic will testify that he observed the defendant's favoritism of A.F., which explains the abuse of G.F. but not of A.F. In addition, the [S]tate argues that the mechanic's observations of G.F. in the days before his hospitalization showed that he was despondent and unresponsive.
The defendant argues that admission of this evidence was erroneous because it constituted impermissible propensity evidence prohibited by New Hampshire Rule of Evidence 404(b). Although "[e]vidence of other crimes, wrongs, or acts" is inadmissible "to prove the character of a person *692 in order to show that the person acted in conformity therewith," such evidence may be admissible "for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident." N.H. R. Ev. 404(b). The defendant asserts that the jury could have impermissibly concluded that he committed the crimes with which he was charged on the basis of "wrongful conduct" in leaving his son in the car during the automobile inspection.
In explaining its decision to allow the testimony, the trial court stated:
Testimony about the defendant's differing treatment of the two children is relevant to explain the defendant's motivation in harming one, but not the other. See N.H. R. Ev. 401. Moreover, the mechanic's description of the baby's appearance and demeanor is highly probative on the issue of whether the injuries were inflicted or accidental, and the danger of unfair prejudice does not outweigh the probative value. See N.H. R. Ev. 403.
Because the evidence was relevant, offered for reasons other than to prove the defendant's character, and the trial court found that its probative value was not outweighed by the danger of unfair prejudice, we conclude that the trial court's ruling was not clearly untenable or unreasonable.
III. Motion to Dismiss and Motion to Set Aside the Verdict
At the conclusion of the State's case, the defendant moved to dismiss based upon insufficient evidence and "lack of territorial jurisdiction." He also moved to set aside the verdict, asserting that the evidence was insufficient to prove beyond a reasonable doubt that he committed the offenses. The court denied each of the motions. "Our standard for review of the trial court's denial of a defendant's motion to dismiss based upon the sufficiency of the evidence is well established ..." State v. Flodin, 159 N.H. 358, 362, 986 A.2d 470 (2009).
To prevail upon his challenge to the sufficiency of the evidence, the defendant must prove that no rational trier of fact, viewing all of the evidence and all reasonable inferences from it in the light most favorable to the State, could have found guilt beyond a reasonable doubt. When the evidence is solely circumstantial, it must exclude all rational conclusions except guilt. Under this standard, however, we still consider the evidence in the light most favorable to the State and examine each evidentiary item in context, not in isolation.
Id. (quotation omitted). To succeed on his motion to set aside the verdict, the defendant has "the burden of establishing that the evidence, viewed in its entirety and with all reasonable inferences drawn in favor of the State, was insufficient to prove beyond a reasonable doubt that he was guilty of the crime charged." State v. Kousounadis, 159 N.H. 413, 421, 986 A.2d 603 (2009). Given that this standard is the same as that applied in reviewing the denial of the motions to dismiss, we address the defendant's arguments concurrently.
The defendant argues that the State failed to produce evidence that the injuries occurred in New Hampshire. The uncontroverted evidence at trial was that the only time G.F. was out of New Hampshire was when he was brought to Connecticut by the defendant's wife to visit her friends and family. All of the individuals who cared for G.F. while he was in Connecticut appeared at trial and testified that nothing improper occurred and that he was not injured while in their care. Because the jury could reasonably have accepted such testimony as true, the jury *693 could have concluded, beyond a reasonable doubt, that G.F.'s injuries occurred in New Hampshire.
The defendant also argued that the evidence was insufficient to convict him beyond a reasonable doubt. Specifically, he contends that all the evidence was circumstantial and failed to eliminate other possible causes of the child's injuries, including accidents, medical reasons, and the defendant's performance of CPR on the child. The test, however, is not whether the State ruled out all other potential causes of the injuries, but whether the State presented evidence sufficient to exclude all rational conclusions except the defendant's guilt. Flodin, 159 N.H. at 362, 986 A.2d 470. By the defendant's own admission, he was "with the kids ninety-nine point nine percent of the time." The State's medical expert testified that six of G.F.'s rib fractures were at least one week but less than six weeks old from the date he was examined at the hospital. Two other fractures were "aged" at zero to six weeks. Given this evidence, the jury could have reasonably rejected the suggestion by the defense that the injuries occurred when the defendant accidentally fell while holding G.F. four months prior to G.F.'s hospitalization. The State's medical expert also opined that the fractures were not caused by a genetic or metabolic condition. Ultimately, the expert concluded that all the fractures were the result of abuse. There was also evidence that after learning of G.F.'s injuries, the defendant's demeanor was uncharacteristic of a parent whose child was injured by unknown causes. Upon review of the entire record, and viewing all the evidence in the light most favorable to the State, we hold that there was sufficient evidence for the jury to conclude, beyond a reasonable doubt, that the defendant recklessly caused fractures to seven of G.F.'s bones.
IV. Motion for Mistrial
The defendant next argues that the court erred in denying his motion for a mistrial because a State's witness offered inadmissible evidence. Prior to trial, the defendant filed a motion in limine to preclude his wife's sister, Susan Egan, from testifying about the following statement she made to the police when she learned that G.F. had been injured: "When I first got the call about [G.F.] being at the hospital and that he was injured, I got a cramp in my stomach and said to myself, that bastard did something to that baby." The court granted the defendant's motion, ruling: "A layperson's testimony must be based on personal knowledge.... Accordingly, while Ms. Egan may testify about her observations, she may not give the opinion that G.F. was abused."
On direct examination at trial, Ms. Egan testified that the defendant "did a great job" as a full-time parent. On cross-examination by the defense, she stated that the defendant was "wonderful ... with the children" and she had no concerns regarding his ability to care for them. The court agreed with the State that these statements, in light of her testimony on direct examination, created a misleading impression "that this witness had no concerns about the defendant's ability to care for the children while her clear indication to the detective was that she did have concerns." The court therefore permitted the State, on rebuttal, to impeach Ms. Egan with her statement to the police. The court instructed the jury to consider Ms. Egan's inconsistent statements only to assess her credibility, not for their truth. The defendant moved for a mistrial, alleging that the court erred in permitting the State to impeach Ms. Egan with the statement. The court denied the defendant's motion.
*694 The defendant disputes that Ms. Egan's testimony created a misleading impression. Rather, he argues that Ms. Egan testified to her observations of the defendant and his children, not to her opinion of their interactions. The defendant asserts that no rebuttal was warranted and, therefore, the statements she made to the police were inadmissible. "Because the trial court is in the best position to gauge the prejudicial nature of the testimony being challenged, the court's ruling on a motion for mistrial will not be overturned absent an unsustainable exercise of discretion." State v. Gibson, 153 N.H. 454, 459-60, 897 A.2d 957 (2006).
The "specific contradiction" doctrine is "applied when one party has introduced admissible evidence that creates a misleading advantage and the opponent is then allowed to introduce previously suppressed or otherwise inadmissible evidence to counter the misleading advantage." State v. Wamala, 158 N.H. 583, 589, 972 A.2d 1071 (2009).
For the specific contradiction doctrine to apply, a party must introduce evidence that provides a justification, beyond mere relevance, for the opponent's introduction of evidence that may not otherwise be admissible. The initial evidence must, however, have reasonably misled the fact finder in some way.... The trial court is in the best position to gauge the prejudicial impact of particular testimony. Therefore, we will not upset the trial court's ruling on whether the defendant opened the door to prejudicial rebuttal evidence absent an unsustainable exercise of discretion.
Id. at 589-90, 972 A.2d 1071 (citations omitted).
Following Ms. Egan's statement on direct examination regarding the defendant's "great" parenting skills, the defense capitalized on this comment by eliciting on cross-examination further testimony from Ms. Egan to the effect that she had no concerns regarding the defendant's ability to care for the children. Because this further testimony, in the context of Ms. Egan's initial testimony, could reasonably have misled the jury, the trial court was warranted in permitting the rebuttal evidence to which the defense had "opened the door." Id. at 590, 972 A.2d 1071. Moreover, the trial court's limiting instruction to the jury mitigated the potential for unfair prejudice to the defendant resulting from admission of the rebuttal testimony. Id. at 591, 972 A.2d 1071. Accordingly, we find that the trial court did not unsustainably exercise its discretion in denying the defendant's motion for a mistrial.
V. Motion to Set Aside the Verdicts
The defendant argues that the trial court erred in denying his motion to set aside the verdict because the jury reached an impermissible "compromise" verdict. Following the defendant's conviction, a juror contacted the county attorney's office in response to the prosecutor's public comments that she was confused by the jury's verdicts. The juror's email stated in pertinent part:
I was juror # 4 on this case. The news media has said you may be a little baffled as to our decision.... Do not look at the verdict as anything but a win. Mr. Fandozzi will be going away for many years. I would be very willing to discuss our rationale for the verdict as we were very concerned about the message our verdict may sen[d].
After waiting the required thirty days from the verdict, an investigator from the county attorney's office called the juror, requesting clarification of his comments. The investigator reported, in pertinent part, as follows:
*695 [Juror # 4] said that they were having a problem with the fact that this was a circumstantial case and that they were struggling with the fact that Mrs. Fandozzi might have done this. He went on to say that there was nothing that was presented to them that would indicate she didn't do it....
[H]e said that there were "questions in their minds as to who actually did this" and they were "not convinced 100% that he did it." He told me that the jury felt that the parents were "in cahoots," and that whoever did this, the other one was covering up....
He said that there was some discussion by some members of the jury that there was no way they were going to find this guy guilty of all the charges and force him to spend the rest of his life in prison on a circumstantial case. [The juror] said that in the end, they "compromised" and found him guilty of a few of the charges, leaving the other charges on the table in the event [the State] wanted to prosecute the wife. He then told me that "if he didn't do it, then he's covering up for her and that at least they got one of them."
The investigator also questioned five other jurors. The first juror explained that during initial deliberations, the jury considered all twenty-six charges together to determine the defendant's guilt or innocence. Because they were unable to reach an early consensus, the jury decided to review and consider each charge separately. Applying this method, the jury unanimously decided that the defendant caused seven of the charged injuries. The juror told the investigator that while some of the jurors believed that the defendant's wife could have caused some of the injuries, they all agreed that only the defendant could have caused the seven injuries for which he was found guilty. The second juror similarly told the investigator that the jury focused on one indictment at a time, discussed "each individual bone," and agreed that the defendant was responsible for fracturing seven specific bones. Applying this process, the jury reached "a compromise" and agreed on the seven findings of guilty. When the investigator asked a third juror whether the jury "compromised" in reaching its verdict, the juror explained that "[t]he compromise was excluding the injuries that were not isolated to the father." A fourth juror stated that the jury was unanimous in concluding that the defendant's wife was not responsible for any of the injuries reflected in the seven guilty verdicts rendered against the defendant. The fifth juror explained that the jury "exclud[ed] some of the injuries that could have been caused by either the husband or the wife, and ultimately all agreed that the husband was the only one who could have caused the injuries he was found guilty of."
The investigator's reports of these juror communications were brought to the attention of the trial court, who ordered they be disclosed to the defendant. As a result, the defendant filed a motion to set aside the verdicts, alleging juror misconduct. The trial court considered the investigator's reports and the parties' post-trial pleadings, reconvened the jury, and interviewed each juror on the record, with the defendant and counsel present. The trial court ultimately found no juror misconduct, and denied the motion.
In asserting that denial of the motion was error, the defendant points to juror # 4's comments that "[the jury] compromised and found him guilty of a few of the charges, leaving other charges on the table in the event [the State] wanted to prosecute the wife." He argues that the comments demonstrate that the "State failed to meet its constitutional burden of *696 proof beyond a reasonable doubt." We will uphold a trial court's denial of a motion to set aside the verdict unless the ruling constitutes an unsustainable exercise of discretion. State v. Spinale, 156 N.H. 456, 466, 937 A.2d 938 (2007).
"It is a fundamental precept of our system of justice that a defendant has the right to be tried by a fair and impartial jury." State v. Goupil, 154 N.H. 208, 218, 908 A.2d 1256 (2006) (quotations omitted). When a trial court invokes its duty to investigate allegations of juror misconduct, the inquiry "is a fact-specific determination, which we will not reverse absent an unsustainable exercise of discretion or a finding that the decision is against the weight of the evidence." Id.
It is axiomatic that "jurors are not to reach compromise verdicts based on sympathy for the defendant or to appease holdouts." State v. Taylor, 141 N.H. 89, 95, 677 A.2d 1093 (1996) (quotation omitted). As the trial court noted, however, "[t]he use of the word `compromise' to describe the manner in which the jurors resolved the case[] does not mean the court should ascribe the technical, legal definition of `compromise' in evaluating the appropriateness of the verdicts." The fact that jurors describe the deliberative process as one of compromise does not necessarily render the verdicts unjust.
Here, the trial court reconvened the jury and conducted individual voir dire. Based upon the juror's testimony during voir dire, the court concluded that there had been no misconduct:
At that time, juror # 4 stated unequivocally that he followed the court's instructions, based his verdict only on the evidence presented and the law provided, understood that the verdicts must be unanimous, and determined that the defendant alone committed the 7 offenses for which he was found guilty. In addition, when questioned by the investigator, five other jurors explained that no compromise verdict occurred. Finally, the remaining 11 jurors all testified that the verdicts were a result of the proper application of the law and evidence, and not the result of a compromise in which they abandoned their beliefs about the defendant's guilt or innocence.
As the trial court explained, jurors' common use of the word "compromise" may appropriately describe the give and take which customarily occurs in jury deliberations. Having satisfied itself that the jury did not engage in misconduct, the trial court reasonably exercised its discretion in denying the defendant's motion to set aside the verdict.
VI. Motion to Conduct Juror Voir Dire
The defendant argues that the trial court erred in declining to ask his proposed questions of the jurors. Although the trial court conducted voir dire of each juror, the defendant contends that the questions were "insufficient to probe the specific issue; that is, the rationale for the jury's verdict."
Here, the trial court inquired of each juror: whether the jury followed the court's instructions during deliberations; whether the jury based its verdicts only upon evidence presented in court and the law provided by the judge; whether the jury agreed that the defendant was guilty beyond a reasonable doubt of the seven offenses for which he was convicted; whether the jury understood that any verdict must be unanimous; whether each verdict was unanimous; whether the potential punishment was a factor in deciding that the defendant was guilty of the crimes charged; and whether the jury decided beyond a reasonable doubt that it was the defendant, and not his wife, who committed the offenses for which he was convicted. *697 The jurors' responses to this inquiry were sufficient to satisfy the court that no misconduct occurred. In light of the trial court's thorough voir dire, its decision not to further inquire into the matter by asking the defendant's proposed voir dire questions did not constitute an unsustainable exercise of discretion. See Goupil, 154 N.H. at 221, 908 A.2d 1256.
Affirmed.
BRODERICK, C.J., and DALIANIS, DUGGAN and HICKS, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919609/ | 91 B.R. 486 (1987)
In re BOHLEN ENTERPRISES, LTD., d/b/a Central Office Equipment, Debtor.
Thomas G. McCUSKEY, Substitute Trustee for Wesley B. Huisinga, Plaintiff/Appellant/Cross-Appeal Appellee,
v.
NATIONAL BANK OF WATERLOO, Defendant/Appellee/Cross-Appeal Appellant.
No. C 87-2034, Bankruptcy No. 86-01665W.
United States District Court, N.D. Iowa, E.D.
September 23, 1987.
*487 George D. Keith, Waterloo, Iowa, for Nat. Bank of Waterloo.
Thomas G. McCuskey, Cedar Rapids, Iowa, trustee.
Michael Dunbar, Waterloo, Iowa, for debtor.
ORDER
HANSEN, District Judge.
This matter is before the court on appellant Thomas G. McCuskey's (hereinafter "Trustee") appeal, filed March 23, 1987, and the cross-appeal of the National Bank of Waterloo (hereinafter "Bank"), filed March 30, 1987, from a decision of the bankruptcy court[1] entered February 20, 1987, 78 B.R. 556 (Bkrtcy.N.D.Iowa). Both sides have filed briefs outlining their arguments.
The sole issue before the bankruptcy court was whether a payment by the debtor to the Bank in the amount of $191,777.27 constituted a preference which is avoidable by the trustee in bankruptcy under the provisions of Bankruptcy Code § 547(b). The bankruptcy court made the following findings of fact and conclusions of law and entered the following order.
FINDINGS OF FACT
1. At the time of the transactions concerned, the debtor owed the National Bank of Waterloo (NB) two debts in the principal amounts of $125,000 and $189,000, plus accrued interest. These obligations were secured under an agreement dated October 3, 1983, for which a financing statement was filed October 5, 1983.
2. On or about April 28, 1986, in response to insistence by NB that payments be made by the end of the month, the debtor applied for a $200,000 loan from the John Deere Community Credit Union of Waterloo (Credit Union).
3. At the time of the loan application, William Bohlen (Bohlen), president of the debtor corporation, and the Credit Union loan officer agreed that a part of the loan proceeds would be used for payment of the debtor's $125,000 loan obligation to the bank. The remainder was to be used for miscellaneous purposes. This agreement was confirmed by the issuance of a check by the Credit Union on Thursday, May 1, 1986 in the amount of $125,068.50 made payable to NB and the debtor. The existence of the debtor's $189,000 debt to NB was not then known to the Credit Union.
4. On Wednesday, April 30, 1986, a share draft account was established by the Credit Union for the debtor, and Bohlen received share drafts for use by the debtor. The share account balance was zero.
5. On the same date, and prior to the Credit Union's final approval of the $200,000 loan, Bohlen wrote a share draft in the amount of $192,000 for deposit in the debtor's business account at NB, and made the deposit on that date.
6. On the same date, Bohlen wrote three checks on the NB account, all payable to NB, covering the principal and interest due on the $189,000 obligation and the interest due on the $125,000 obligation. These checks were in the respective amounts of $189,000, $1,708.77 and $1,068.50.
7. On Thursday, May 1, 1986, the share draft which Bohlen had written the previous day for deposit in NB was presented to the Credit Union for payment. The draft was cleared by the Credit Union.
8. The $192,000 deposit by the debtor was not in the ordinary course of its business.
9. The debtor was insolvent at the time of the payment of the stated sums to the bank.
*488 10. The debtor filed a Chapter 7 bankruptcy petition on July 21, 1986, and that proceeding is now pending.
. . . .
CONCLUSIONS OF LAW
1. The Trustee is entitled to recover from the National Bank of Waterloo the sum of $66,708.77 on the basis that the payment of that sum to the bank by the debtor was a preferential transfer under Bankruptcy Code § 547(b).
2. The Trustee is entitled to interest on the sum of $66,708.77 at the rate of 6.18 percent dating from August 19, 1986, the date the complaint was filed, to the date payment is made.
3. The bank is entitled to retain the sum of $125,068.50 paid to it by the debtor, on the basis that said payment was made pursuant to a contractual arrangement between the debtor and the Credit Union for use of that portion of its loan for payment of an obligation of the debtor to the bank, and, as such, was not a preferential transfer.
ORDER
The National Bank of Waterloo is directed to pay to the Trustee, Wesley B. Huisinga, the sum of $66,708.77 plus interest at the rate of 6.18 percent for the period from August 19, 1986 to the date of payment.
Memorandum and order re: Trustee's claim of preference, filed February 20, 1987.
Bankruptcy Rule 8013 sets forth the standard used by this court when reviewing decisions of the bankruptcy court.
On appeal the district court or bankruptcy appellate panel may affirm, modify, or reverse a bankruptcy court's judgment, order, or decree or remand with instructions for further proceedings. Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of witnesses.
Conclusions of law are reviewed de novo.
This court has carefully reviewed the record and finds that the bankruptcy court's findings of fact are supported by the record and are not clearly erroneous. The next question is whether the bankruptcy court's conclusions of law are correct.
The Trustee contends that the bankruptcy court erred in holding that the Bank was entitled to retain $125,068.50 of the amount in dispute. The court found that, pursuant to the "earmark" doctrine, this amount did not constitute "property of the estate." The Bank, on the other hand, contends that the bankruptcy court erred in holding that $66,708.77 of the disputed amount constituted a preferential transfer.
This court finds that the bankruptcy court was correct in holding that the Bank was entitled to retain $125,068.50 as "earmarked" funds. In general, when a third party makes a loan to a debtor for the specific purpose of satisfying the claim of a designated creditor, the amount of this loan does not become the "property of the debtor" and no preference is created. 4 Collier on Bankruptcy, 547-03, 547-25 (21st ed. 1987). Although the manner in which the Bank was paid was not in conformance with the Credit Union's plan, it is evident that the Credit Union intended to earmark $125,068.50 for payment of Bohlen's debt with the Bank.
With regard to the remaining $74,931.50, the intent of the Credit Union was to place it in Bohlen's newly opened share draft account and give Bohlen discretionary power over the use of these funds. Tr. p. 37. There was no intent on the part of the Credit Union to "earmark" these funds. Id.
The Bank argues that by honoring the $192,000 share draft, the Credit Union extended an additional loan to Bohlen and that these funds were "earmarked" to pay off the $189,000 loan plus interest from the Bank to Bohlen. This court finds little merit in this contention.
*489 Mr. Garold Base, an officer of the John Deere Credit Union, testified before the bankruptcy court that debtor's share draft account was not overdrawn at the time of the presentation of the $192,000 share draft for payment on May 1, 1986. See Tr. pp. 43-44. As such, no "additional loan" was extended to debtor by the Credit Union.
The next dispute between the parties concerns the bankruptcy court's holding that $66,708.77 of the $191,777.27 transferred from Bohlen to the Bank constituted a preferential transfer under Bankruptcy Code § 547(b). The bankruptcy court properly found that this $66,708.77 was "property of the debtor" within the meaning of 11 U.S.C. § 547(b).
The Trustee may avoid transfer of the debtor's property made 90 days before the filing of the debtor's bankruptcy petition as preferential under 11 U.S.C. § 547(b), which provides:
(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 90 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;
(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.
Pursuant to subparagraph (5), the bankruptcy court compared what the Bank received by the transfer with what the Bank would have received in a Chapter 7 liquidation proceeding. This court finds no error in the math or logic of the bankruptcy court's conclusion that the Bank received $66,708.77 more by the debtor's payment than it would have received in a Chapter 7 proceeding.
The Bank also contends that the bankruptcy court erred in holding that the Bank had no right of setoff under 11 U.S.C. § 553. The bankruptcy court advanced three reasons for denying a right of setoff, any one of which is sufficient to deny the setoff. The court finds the bankruptcy court's reasoning to be correct. The bankruptcy court properly denied the Bank any setoff.
In short, the court finds no error in any part of the well-reasoned opinion of the bankruptcy court.
ORDER:
Accordingly, It Is Ordered:
The decision of the bankruptcy court, entered February 20, 1987, is affirmed.
NOTES
[1] The Honorable Thomas Wood, United States Bankruptcy Judge. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919618/ | 91 B.R. 156 (1988)
In re Billy CROSSWHITE d/b/a Cumberland Pizza Investments, Debtor.
Robert E. LEE, Plaintiff,
v.
Billy CROSSWHITE d/b/a Cumberland Pizza Investments, Defendant.
Bankruptcy No. 87-6624-8P7, Adv. No. 88-0074.
United States Bankruptcy Court, M.D. Florida, Tampa Division.
September 14, 1988.
*157 Michael P. Brundage, Tampa, Fla., for plaintiff.
David P. Carter, Largo, Fla., for defendant.
FINDINGS OF FACT CONCLUSIONS OF LAW AND MEMORANDUM OPINION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 7 case, and the matter under consideration is the dischargeability vel non of a debt allegedly owed by Billy Crosswhite (Debtor) to Robert E. Lee (Plaintiff) the Plaintiff who instituted this adversary proceeding. The claim of nondischargeability is asserted in a three count Complaint. The claim in Count I is based on the allegation that the Debtor committed larceny, or in the alternative "injury to a partnership" (sic) and is based on § 523(a)(4) of the Bankruptcy Code. The claim in Count II is based on an alleged conversion, thus the debt owed should be determined to be nondischargeable pursuant to § 523(a)(6) of the Bankruptcy Code. In Count III the Plaintiff seeks the imposition of an equitable lien. The Plaintiff abandoned his claims set forth in Count II and Count III and, therefore, only the claim set forth in Count I was tried, and submitted for consideration.
This claim, based on § 523(a)(4) of the Bankruptcy Code, asserts an alleged embezzlement by the Debtor, or in the alternative, a breach of a fiduciary duty by the Debtor.
The facts as developed at the final evidentiary hearing and which are relevant to the remaining issue are as follows:
Prior to the time relevant to the matter under consideration, the Debtor operated several pizza establishments in Fayetteville, N.C. One restaurant operated through C.B.L., Inc., under the trade name of "Pizza Transit Authority"; one through C & B Partnership, and another under the name of "Delivery Express" in Spring Lake through a partnership under the name of "Pizza Delivery Unlimited". On December 11, 1986, the Debtor, the Plaintiff and one David Howell entered into a partnership agreement by which the partnership known as Cumberland Pizza Investment was formed to operate a pizza delivery and take out business on Cliffdale Road in Fayetteville, N.C. (Pl's Exh. 1)
According to the terms of the agreement the Plaintiff and Howell contributed $22,500.00 each in exchange for a 25% ownership interest in the partnership (Pl's Exh. 21-22). Sometime later Howell conveyed his 25% interest to the Plaintiff. Under the agreement the Debtor was designated to be the managing partner of the store and was granted 50% interest in the partnership in exchange for his services. The agreement further provided that no distribution was to be made to the partners, without the unanimous consent of all partners and the Debtor was not to receive any salary or compensation during the first six months of the operation. It was the duty of the Debtor to maintain and keep the books and records of the business and to furnish a monthly profit and loss statement to the Plaintiff and Howell.
The Debtor opened the store of the partnership some time in January, 1987. Although initially all three partners were placed as signatories on the partnership bank account, the signature card was later changed and the names of the Plaintiff and Howell were removed and the Debtor became the only person with authority to write checks on the partnership bank account.
It appears that the Debtor wrote several checks on the partnership bank account, none of which were to pay the expenses of the partnership. On the contrary, they appear to be funds withdrawn for the Debtor's own personal use even though he was not to receive any compensation during the first six months of operation, and even after that not more than $100.00 per week (Pl's Exh. 1) The record reveals that the *158 Debtor wrote the following checks on the partnership bank account, all of which were not in payment of any legitimate obligations of the partnership business. In April, 1987, the Debtor drew a check, No. 137, in the amount of $2,000.00, a check which was payable to himself (Pl's Exh. 2). The Debtor claims the check represented a reimbursement of funds advanced by him for the purchase of food for the partnership store. The Debtor was unable to substantiate this claim either by invoices or by any other documentation. On February 16, 1987, the Debtor wrote a check to himself in the amount of $172.33 (Pl's Exh. 10) and another check to himself on July 20, 1987, in the amount of $1,000.00 (Pl's Exh. 6); and several checks totalling $4,094.78 (Pl's Exhs. 4, 5, 11-13). The Debtor also purchased a counter check in the amount of $9,000.00 (Pl's Exh. 8); a check in the amount of $2,159.10 (Pl's Exh. 7) and a check in the amount of $338.26 (Pl's Exh. 18) and also several checks to pay his personal expenses (Pl's Exh. 16-17), including a check written to pay for the painting of his home.
It further appears that not all receipts shown on the daily sheets (Pl's Exh. 19-20) were deposited in the bank account. Thus on June 10, 1987 the daily sheet indicates a receipt in the amount of $515.83 but no trace of a deposit. The same appears for July 20, 1987, the deposit was $120.00 less than the receipts shown on the daily sheet. Between August 10, 1987 and August 15, 1987, the daily sheets show the total receipt of $4,299.00, however, the actual deposit was $2,454.69. Lastly, on August 3, 1987 the daily sheet indicated a receipt of $621.56, but there is no record of a deposit in that amount.
While it is true that an accountant hired by the Plaintiff to examine the records of the partnership also found unexplained deposits totalling $11,000.00, that is, funds which were not reported on the daily sheets, it is clear that the Plaintiff used partnership funds as his own and did without doubt spend substantial sums for purposes other than for the payment of expenses of the pizza store owned and operated by the partnership. For example, the Debtor specifically claims that a check written by him in the amount of $9,000.00 and drawn on the partnership account on December 12, 1986 was merely a transfer of funds (Pl's Exh. 8). It is true that $5,000.00 of this check was in fact redeposited, but $4,000.00 was placed in a C.D. pledged with the power company to secure the payment of the utility bills of the several other stores controlled by the Debtor. It should be noted that these funds were ultimately lost due to the unpaid utility bills incurred by the stores other than the store operated by the partnership. The Debtor also contends that checks dated May 4, 1987, and June 26, 1987, each in the amount of $2,170.00 (Pl's Exh. 3 & 7) payable to one Phillip Grant were payments on a legitimate obligation assumed by the partnership. For support of this proposition, the Debtor introduced in evidence a copy of a document signed by the Plaintiff (Def's Exh. 1) in which all three partners agreed to assume on behalf of the partnership a debt on the Bragg Boulevard Store and a debt in the amount of $7,750.00 for the purchase of equipment. While the Plaintiff denies that he signed this document, this court is satisfied, after having compared the signature on the document with a sample of his signature, that his signature is, in fact, on the document. Be that as it may, the document is unclear whether the partnership ever actually received the equipment, and there is no question that the partnership never actually acquired any interest in any other stores, including the store on Bragg Boulevard mentioned in the document.
These are the basic facts based on which the Plaintiff's claim of nondischargeability is based, either on the theory of embezzlement or on breach of fiduciary duty, both being grounds for exception to the discharge pursuant to § 523(a)(4), which provides in pertinent part as follows:
§ 523. Exceptions to discharge
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt
*159 (4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
Embezzlement
§ 523(a)(4) excepts from the general discharge debts created by embezzlement by the Debtor. This is an independent ground for exception and it is not necessary to establish a fiduciary relationship in order to establish a claim of nondischargeability based on embezzlement. Applegate v. Shuler (In re Shuler), 21 B.R. 643 (Bkrtcy.D.Idaho 1982). Embezzlement has been defined as the "fraudulent appropriation of property by a person to whom such property has been entrusted, or into whose hands it has lawfully come." Savonarola v. Beran (In re Beran), 79 B.R. 493, at 496 (Bkrtcy.N.D.Fla.1987) citing, In re Michel, 74 B.R. 88, at 90 (Bkrtcy.N.D.Ohio 1986).
In support of its claim, the Plaintiff particularly relies on Savoranola, supra, in which the Debtor was placed in charge of the management of a rental property owned by the Plaintiff. The Debtor, contrary to his agreement, failed to establish a separate account for the rents collected and used some of the rent collected for his own benefit. The difficulty with the Plaintiff's reliance on Savonarola, supra, to support his claim based on embezzlement should be apparent even from a cursory examination of the facts of Savonarola and the facts involved in the matter under consideration.
In Savonarola the funds involved were the funds of the Plaintiff and in the present instance the funds were the funds of the partnership and not the funds of the Plaintiff. Thus, while the partnership, i.e., Cumberland Pizza Investments, no doubt would have a viable claim of nondischargeability against the Debtor based on embezzlement, the Plaintiff does not and cannot prevail unless his claim on the alternative theory, i.e., breach of fiduciary duty is supported by this record.
Defalcation by Fiduciary
Although the definition of "fiduciary" under Section 523(a)(4) is a matter of federal law, bankruptcy courts must consult applicable state law in determining whether a fiduciary relationship exists. Ragsdale v. Haller, 780 F.2d 794 (9th Cir. 1986).
In this instance, the partnership agreement was entered in North Carolina, the partnership business was operated in North Carolina and the partners were all North Carolina residents. Thus, North Carolina law governs on the question of whether Crosswhite had a fiduciary relationship with and a corresponding fiduciary duty to his partners.
N.C.Gen.Stat. § 59-51 entitled "Partner Accountable as a Fiduciary" states in part:
(a) Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct or liquidation of the partnership or from any use by him of its property.
N.C.Gen.Stat. § 59-41 (1987) (adopted in 1941).
Furthermore, N.C. Gen. Stat. § 32-2 entitled "Definitions of Terms" included in the North Carolina Uniform Fiduciaries Act states in part:
. . . `Fiduciary' includes a trustee under any trust, express, implied, resulting or constructive, executor, administrator, guardian, conservater, curator, receiver, trustee in bankruptcy, assignee for benefit of creditors, partner, agent, officer, of a corporation, public or private, public or private officer, or any person acting in a fiduciary capacity for any person trust or estate . . .
N.C. Gen. Stat. § 32-2(a) (1987).
In Casey v. Grantham, 239 N.C. 121, 79 S.E.2d 735 (N.C. 1954), the North Carolina Supreme Court said without qualification "it is elementary that the relationship of partners is fiduciary and imposes upon them the obligation of the utmost good faith in their dealings with one another in respect to partnership affairs." Id. at 738. See also, Prentzas v. Prentzas, 260 N.C. 101, 131 S.E.2d 678 (N.C. 1963) (managing partner has fiduciary duty to render full accounting to partners); Wolfe v. Hewes, *160 41 N.C.App. 88, 254 S.E.2d 204 (N.C. Ct. App. 1979) (Partner is fiduciary to other partners and where deals with partnership property in individual capacity fraud presumed, unless disproved.) This court is not unaware of the general proposition that before one can assert a viable claim based on breach of fiduciary duty under § 523(a)(4), it must establish a relationship ex contractu and not ex maleficio, that the trust must exist prior to the commission of the alleged wrong and not as a result of the commission of the alleged wrong. See Matter of Angelle, 610 F.2d 1335 (5th Cir. 1980). Notwithstanding, it is clear that certain relationships have been traditionally recognized to create a fiduciary relationship, either by basic common law principles or by Statute, e.g., attorney/client; corporate officer vis a vis the corporation and the stockholders; general partners vis a vis limited partners; or one partner vis a vis another partner. This is precisely the case in the present instance and this court is satisfied that this fiduciary relationship existed from the very beginning by virtue of creating a partnership and not as a result of the alleged unauthorized use of partnership funds by the Debtor.
This leads to the consideration of the ultimate issue which is whether or not the Debtor was guilty of defalcation while acting in a fiduciary capacity toward his partner, the Plaintiff. For purposes of § 523(a)(4) defalcation while acting in a fiduciary capacity is defined as "the slightest misconduct, and it need not be intentional conduct; negligence or ignorance may be defalcation." Morales v. Codias, 78 B.R. 344, at 346 (Bkrtcy. S.D.Fla.1987) citing, In re Owens, 54 B.R. 162 (Bkrtcy. S.C.1984).
Further, a defalcation may exist where even the merest deficit is caused by the Debtor's misconduct, even if the Debtor's conduct does not benefit him. See American Metals Corp. v. Cowley (In re Cowley), 35 B.R. 526 (Bkrtcy. D.Kan.1983). Clearly, the definition of defalcation would include the Debtor's failure to account for money or property entrusted to him. Id. The cases relied on by the Plaintiff, specifically Celone v. Dino (In re Dino), 82 B.R. 184 (Bkrtcy.D.R.I.1988) and Ragsdale v. Haller, supra, provide strong support for the Plaintiff's claims. In Celone v. Dino, supra, the Bankruptcy Court found that a partner's unauthorized use of his partner's money constitutes defalcation while acting in a fiduciary capacity. Further, in Ragsdale v. Haller, supra, the court found that a partner's breach of fiduciary duty to his partner in failing to disclose to his partner certain bonuses paid to himself from partnership receipts, created a nondischargeable debt pursuant to Section 523(a)(4).
The evidence is clear that based on their partnership relationship, the Debtor owed a fiduciary duty to the Plaintiff. It is equally clear that the Debtor breached that fiduciary duty and committed defalcation as a fiduciary by taking and using partnership funds without the knowledge or consent of his partners.
A separate Final Judgment shall be entered in accordance with the foregoing. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548633/ | 25 F.2d 653 (1928)
FRASER
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 232.
Circuit Court of Appeals, Second Circuit.
April 9, 1928.
*654 Fraser, Myers & Manley, of New York City (Arthur C. Fraser and Franklin G. Manley, both of New York City, of counsel), for appellant.
Mabel Walker Willebrandt, Asst. Atty. Gen., C. M. Charest, and V. J. Heffernan, all of Washington, D. C., for respondent.
Before MANTON, L. HAND, and AUGUSTUS N. HAND, Circuit Judges.
L. HAND, Circuit Judge (after stating the facts as above).
The record does not contain any findings by which the original cost can be ascertained of the 50 feet which remained after the sale of 1909, nor of the proper allocation of the expenses before that time. For this reason the respondent insists that the point is not before us. However, it is plain from the action of the board that their decision hinged upon the question now mooted, and before that tribunal the respondent conceded it to be relevant. Having led the appellant to suppose that the record was sufficient, the respondent raises the defect with scant grace. We proceed therefore to the merits.
The question is whether annual interest and taxes paid to "carry" real property before March 1, 1913, may be added to the cost in stating the profit on its sale in an income tax return. We are to distinguish assessments levied for permanent improvements, such as pavements, sewers, grading, and the like. These presumptively increase the value of the property and may be like improvements made at the will of the owner. Annual taxes and interest are not of this class; they do not improve the value of the property, but are payments necessary to the mere retention of ownership. Meanwhile the owner has the use of the property, which prima facie is a quid pro quo. It makes no difference how he employs it; that rests in his pleasure, and he gets his return in profit or in kind as he chooses to have it. The two sides of the account form a part of his income during the years in question. Since that income was not taxable before March 1, 1913, he retains his profits unimpaired and must bear his losses unrelieved.
It is quite true that the value of property, especially "unimproved" real property, is often in part made up of the discounted capitalization of greater future uses. It is expected to advance in value, and that expectation gives it a present value greater than is represented by any use to which it can now be put. So far as the value is so constituted, it is possible to regard the "carrying charges" as payments necessary to the eventual acquisition of the advance, and it does not wrench common usage to speak of them as entering into its cost, as in the case of aging wine or of land lying fallow. If a taxing act must conform to all the niceties of economic theory, or for that matter of economic fact, we might have to answer that question, but we think it need not, Lynch v. Hornby, 247 U.S. 339, 38 S. Ct. 543, 62 L. Ed. 1149. Obviously, any such division of value would introduce into the assessment of taxes inquiries, speculative, insusceptible of *655 any certain conclusion, and burdensome and dilatory in the extreme. No government is obliged so to clog its operation, particularly in its most vital function. Some gross accommodation to the economic reality is all that is demanded; it is not fatal that the fit is not perfect. The charges here involved are in form, and in part also in substance, necessary to the enjoyment of the property de die in diem; we think that enough to put them out of the class of costs.
This is the way that the statute treats them after March 1, 1913, although the same considerations apply thereafter as before. The inconsistency of applying one rule for one period and another for another might not necessarily be a fatal objection, but it gives us warrant to assume that the intention was the same in each case and to carry over the letter where the letter does not literally apply. As for constitutional implications, the power conferred is to be exercised with such latitude as is necessary to the realization of the purposes in view, Purity Extract Co. v. Lynch, 226 U.S. 192, 33 S. Ct. 44, 57 L. Ed. 184; Ruppert v. Caffey, 251 U.S. 284, 299, 40 S. Ct. 141, 64 L. Ed. 260. It is no objection that it may comprise more than economic theory might strictly justify.
Again, at least as to interest charges, we should have to include not only that actually paid upon borrowed money, but that calculated upon the amount invested. Otherwise the profit of a speculator would be less than that of an investor, a result contrary to common understanding. Certainly it can make no difference how the owner procures the purchase price, whether from funds in hand, or on his bare credit, or on security, or with the help of sureties. Hays v. Gauley Mountain Coal Co., 247 U.S. 189, 38 S. Ct. 470, 62 L. Ed. 1061, decided that interest upon the amount invested was not part of the cost, and the principle there settled seems to us to involve interest on borrowed money as well.
The appellant's reliance is and must be on Goodrich v. Edwards, 255 U.S. 527, 41 S. Ct. 390, 65 L. Ed. 758, and Walsh v. Brewster, 255 U.S. 536, 41 S. Ct. 392, 65 L. Ed. 762, decided under the Act of 1916 (Comp. St. § 6336a et seq.), and U. S. v. Flannery, 268 U.S. 98, 45 S. Ct. 420, 69 L. Ed. 865, and McCaughn v. Ludington, 268 U.S. 106, 45 S. Ct. 423, 69 L. Ed. 868, under the Act of 1918 (Comp. St. § 6336 1/8a et seq.). These cases held that in finding the "actual gain" recourse might be had to the cost before March 1, 1913, if that was more than the value at that time, and that in respect of losses the "actual loss" was to be similarly reckoned. While it is true that these cases would entitle the owner to include the cost of improvements made before March 1, 1913, we cannot see that they throw any light upon the question at bar. Westerfield v. Rafferty, 4 F.(2d) 590 (D. C. E. D. N. Y.), is the only case in the courts which deals with that question, and that accords with our views. The Treasury has undoubtedly fluctuated in its dealing with the matter, and we agree that it is not wholly free from doubt, but it appears to us that the Board of Tax Appeals has adopted the proper rule.
Order affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548750/ | 992 A.2d 343 (2010)
120 Conn.App. 489
STATE of Connecticut
v.
Osibisa HALL.
No. 30816.
Appellate Court of Connecticut.
Argued January 6, 2010.
Decided April 20, 2010.
*344 Erin M. Field, for the appellant (defendant).
Laurie N. Feldman, special deputy assistant state's attorney, with whom, on the brief, were Gail P. Hardy, state's attorney, and Anthony J. Spinella, assistant state's attorney, for the appellee (state).
BISHOP, DiPENTIMA and SCHALLER, Js.[*]
BISHOP, J.
The defendant, Osibisa Hall, appeals from the trial court's judgments of conviction, which were rendered following the denial of his motion to withdraw his guilty pleas to one count of possession of marijuana with intent to sell in violation of General Statutes § 21a-277 (b) and two counts of violation of a protective order in violation of General Statutes § 53a-223. On appeal, the defendant claims that the court abused its discretion in denying his motion because it failed to address him personally and determine that he fully understood the potential immigration consequences of his plea pursuant to General Statutes § 54-1j (a). We agree and, accordingly, reverse the judgments of the trial court.
The following factual and procedural history is relevant to our disposition of the defendant's appeal. On May 22, 2007, the defendant pleaded guilty, pursuant to the Alford doctrine,[1] to one count of possession of marijuana with intent to sell and two counts of violation of a protective order. During the plea hearing, the court questioned the defendant as to his understanding of the rights he was waiving, the meaning of his Alford plea and the agreed upon sentence. The court then addressed defense counsel and the following colloquy ensued:
"The Court: Any immigration issues here, [defense counsel]?
"[Defense Counsel]: Yes, there are, Your Honor.
"The Court: Have you talked to [the defendant]?
"[Defense Counsel]: Yes, I have.
"The Court: All right. And he understands the possible consequences of his pleas?
"[Defense Counsel]: Yes."
The court then accepted the defendant's pleas and found that they were made voluntarily. The court also made a finding that the defendant "has been advised by his counsel of the immigration consequences of his acts." The discussion then turned to the start date of the defendant's sentence, and the court asked again about immigration, as follows:
"The Court: Is there an immigration sticker on him?
"[Defense Counsel]: There is no immigration sticker as I know of. But I know that
"[The Prosecutor]: He's going to be deported. I looked into it when we did the.... [and] we talked and then when we did the [violation of probation] hearing that's what they told us.
"The Court: All right."
*345 After further discussion, the court sentenced the defendant to forty months incarceration.
On January 13, 2009, the defendant filed a motion to withdraw his guilty pleas and vacate the judgments of conviction, claiming that the court did not fulfill its obligation pursuant to § 54-1j (a) to address him personally and determine that he understood the immigration consequences of his pleas.[2] On January 27, 2009, the court denied the defendant's motion, stating, "In reading the transcript of the sentence, the issue of immigration was directly addressed to counsel for the defendant in which he indicates he discussed the immigration issues with his client and that the client understood the immigration consequence of his plea. Along in the canvass... the state brought up the fact that the defendant is going to be deported." (Internal quotation marks omitted.) This appeal followed.
The defendant claims that the court did not comply with § 54-1j (a) before accepting his plea. Specifically, the defendant contends that the court failed to address him personally or to determine that he understood that his immigration status might be adversely affected by his guilty pleas. The state contends that the court substantially complied with the mandates of § 54-1j (a) and that the defendant knew that his guilty pleas might subject him to deportation. We agree with the defendant.
"The burden is always on the defendant to show a plausible reason for the withdrawal of a plea of guilty. ... To warrant consideration, the defendant must allege and provide facts which justify permitting him to withdraw his plea. ... Whether such proof is made is a question for the court in its sound discretion, and a denial of permission to withdraw is reversible only if that discretion has been abused." (Citation omitted; internal quotation marks omitted.) State v. Carmelo T., 110 Conn.App. 543, 549, 955 A.2d 687, cert. denied, 289 Conn. 950, 960 A.2d 1037 (2008).
Generally, a guilty plea may not be withdrawn after the conclusion of the proceeding at which the sentence was imposed. See Practice Book § 39-26. An exception to that rule, however, is if the legislature grants the defendant the right to withdraw his plea after the time of sentencing. Section 54-1j (c) specifically requires the court to permit a defendant to withdraw a guilty plea within three years after the acceptance *346 of the plea "[i]f the court fails to address the defendant personally and determine that the defendant fully understands the possible consequences of the defendant's plea, as required in subsection (a) of this section. ..."
Section 54-1j (a) requires the court to address the defendant personally and instruct a defendant on possible immigration and naturalization consequences that may result from a guilty plea and to ensure that the defendant fully understands those potential consequences. Our Supreme Court has previously stated that the legislative intent behind § 54-1j, "rather than demanding that trial courts instruct defendants on the intricacies of immigration law, seeks only to put defendants on notice that their resident status could be implicated by the plea." State v. Malcolm, 257 Conn. 653, 663-64, 778 A.2d 134 (2001). The statute's purpose is simply to recognize that "this collateral consequence is of such importance that the defendant should be informed of its possibility." (Internal quotation marks omitted.) Id., at 663 n. 12, 778 A.2d 134. The court held that, in canvassing the defendant, it is not necessary for the trial court to read the statute verbatim. Rather, "only substantial compliance with the statute is required to validate a defendant's guilty plea." Id., at 662, 778 A.2d 134.[3]
Here, the court did not substantially comply with the mandates of § 54-1j (a).[4]*347 At no time during the plea hearing did the court personally address the defendant regarding the potential immigration consequences of his pleas. Nor did the court recite those consequences as part of its canvass. The court's inquiry of defense counsel as to whether there were "[a]ny immigration issues here" and whether counsel "talked to" the defendant cannot be construed as compliance with the requirement that the court personally address the defendant or the statutory advisement that the defendant's conviction "may have the consequences of deportation or removal from the United States, exclusion from readmission to the United States or denial of naturalization. ..." General Statutes § 54-1j (a).
The state argues that the court's lack of literal compliance with the mandates of § 54-1j (a) is irrelevant because the defendant knew that his pleas might result in deportation.[5] Acceptance of this argument would render the requirements of § 54-1j (a) meaningless as applied to the facts of this case. Even if substantial compliance can be shown by the defendant's actual knowledge of the immigration consequences of his pleas, the record does not reflect that the defendant had such knowledge at the time of his pleas. The state's contention that the defendant was aware of the immigration consequences of his pleas is based on his testimony at a violation of probation hearing held several months earlier, on October 30, 2006, during which the defendant testified that he is not an American citizen and that he is "deportable."[6] The defendant's testimony in October that he is deportable does not demonstrate that he was aware that his convictions could result in deportation, removal, denial of readmission or denial of naturalization. In fact, the defendant's testimony indicates merely that the defendant was aware of his legal status as deportable apart from the potential consequences of a criminal conviction.
The state also argues that the defendant knew of the immigration consequences of his pleas on the basis of the prosecutor's comment after the court accepted his pleas that the defendant was going to be deported. Because this comment was made after *348 the court's acceptance of the defendant's guilty pleas, it cannot be construed as part of the plea canvass.
On the basis of the foregoing, we conclude that the court did not substantially comply with the requirements of § 54-1j. Accordingly, the court abused its discretion in denying the defendant's motion to withdraw his guilty pleas.
The judgments are reversed and the case is remanded with direction to grant the defendant's motion to withdraw his guilty pleas and for further proceedings according to law.
In this opinion the other judges concurred.
NOTES
[*] The listing of judges reflects their seniority status on this court as of the date of oral argument.
[1] See North Carolina v. Alford, 400 U.S. 25, 35, 91 S. Ct. 160, 27 L. Ed. 2d 162 (1970).
[2] General Statutes § 54-1j provides: "(a) The court shall not accept a plea of guilty or nolo contendere from any defendant in any criminal proceeding unless the court first addresses the defendant personally and determines that the defendant fully understands that if the defendant is not a citizen of the United States, conviction of the offense for which the defendant has been charged may have the consequences of deportation or removal from the United States, exclusion from readmission to the United States or denial of naturalization, pursuant to the laws of the United States. If the defendant has not discussed these possible consequences with the defendant's attorney, the court shall permit the defendant to do so prior to accepting the defendant's plea.
"(b) The defendant shall not be required at the time of the plea to disclose the defendant's legal status in the United States to the court.
"(c) If the court fails to address the defendant personally and determine that the defendant fully understands the possible consequences of the defendant's plea, as required in subsection (a) of this section, and the defendant not later than three years after the acceptance of the plea shows that the defendant's plea and conviction may have one of the enumerated consequences, the court, on the defendant's motion, shall vacate the judgment, and permit the defendant to withdraw the plea of guilty or nolo contendere, and enter a plea of not guilty."
[3] Similarly, our courts repeatedly have held that "only substantial compliance is required when warning the defendant of the direct consequences of a ... plea pursuant to Practice Book § 39-19 in order to ensure that the plea is voluntary pursuant to Practice Book § 39-20." State v. Malcolm, supra, 257 Conn. at 662, 778 A.2d 134. "[A]s determined in a case-by-case evaluation, only substantial compliance with those rules of practice is necessary to arrive at the conclusion that the defendant's pleas were made knowingly and voluntarily. ..." State v. Irala, 68 Conn.App. 499, 510-11, 792 A.2d 109, cert. denied, 260 Conn. 923, 797 A.2d 519, cert. denied, 537 U.S. 887, 123 S. Ct. 132, 154 L. Ed. 2d 148 (2002).
[4] By contrast, we note that in State v. Malcolm, supra, 257 Conn. at 653, 778 A.2d 134, the defendant claimed that the trial court did not comply with § 54-1j because it advised him only of the possibility of deportation and denial of admission, but not of denial of naturalization. Our Supreme Court held that "[b]y instructing the defendant that he could be deported or excluded from readmission to the United States, the trial court ... substantially complied with § 54-1j" because the defendant "was warned adequately that his immigration status could be implicated by his guilty plea." Id., at 664, 778 A.2d 134.
In State v. Irala, 68 Conn.App. 499, 792 A.2d 109, cert. denied, 260 Conn. 923, 797 A.2d 519, cert. denied, 537 U.S. 887, 123 S. Ct. 132, 154 L. Ed. 2d 148 (2002), this court held that the trial court substantially complied with § 54-1j and adequately warned the defendant of the immigration consequences of her pleas in instructing the defendant that "her pleas could result in deportation if she was not a citizen of the United States." Id., at 519, 792 A.2d 109.
And in State v. Webb, 62 Conn.App. 805, 772 A.2d 690 (2001), this court found that the trial court substantially complied with § 54-1j when it advised the defendant, "[i]f you're not a citizen of the United States, you are advised that a conviction of the offense for which you are charged may have consequences of deportation, denial of naturalization or exclusion from the United States." (Internal quotation marks omitted.) Id., at 808, 772 A.2d 690.
Section 54-1j (a) was amended in 2003 to increase the court's obligation at the time of the plea canvass. The amendment replaced the requirement that the court "advise" the defendant with the greater requirement that the court not accept a plea until it "addresses the defendant personally and determines that the defendant fully understands" that the plea might have immigration consequences. See Public Acts 2003, No. 03-81, § 1. The amendment does not alter the applicability of the aforementioned cases to the case at hand where the court did not, in any meaningful way, comply with the mandates of § 54-1j (a).
[5] In making this argument, the state relies on the tests regarding substantial compliance with Practice Book §§ 39-19 and 39-20. In State v. James, 197 Conn. 358, 497 A.2d 402 (1985), our Supreme Court concluded that when determining whether there has been substantial compliance with Practice Book § 39-19(4), formerly Practice Book § 711(4), we must conduct a two part inquiry. Id., at 361-66, 497 A.2d 402. Our first inquiry is to determine whether the court accepted the defendant's pleas without first determining whether he was aware of and understood the maximum possible sentence to which he was exposed. Id., at 364, 497 A.2d 402. Next, if we conclude that the court failed to determine whether the defendant was aware of and understood the maximum possible sentence, we examine the record to determine whether, despite the court's failure, he nevertheless had actual knowledge of the maximum possible consequences of his pleas. See id.; see also State v. Bowden, 53 Conn.App. at 243, 247-52, 729 A.2d 795 (1999). If either prong is satisfied, the pleas were accepted with substantial compliance with Practice Book § 39-19(4).
The test for substantial compliance with Practice Book § 39-20 "is whether, in light of all of the circumstances, the trial court's literal compliance with [Practice Book] § 39-20 would have made any difference in the trial court's determination that the plea was voluntary." (Internal quotation marks omitted.) State v. Carmelo T., supra, 110 Conn.App. at 556, 955 A.2d 687.
In the case at hand, there was neither literal nor substantial compliance.
[6] The defendant's attorney attempted to follow up on the defendant's answer by asking, "So, does that meanwhat does that mean, as far as you understand that?" The state objected to that question, and the court sustained the objection. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536885/ | 207 B.R. 198 (1997)
In re OGDEN MODULARS, INC., Debtor.
Bankruptcy No. 93-43108-172.
United States Bankruptcy Court, E.D. Missouri, Eastern Division.
April 4, 1997.
*199 A. Thomas DeWoskin, Operating Trustee, St. Louis, MO.
Steven T. Stanton, Edwardsville, IL, for Debtor.
Peter D. Kerth, Clayton, MO, for Curt Ogden.
ORDER
JAMES J. BARTA, Chief Judge.
This matter is before the Court on the application for compensation and reimbursement filed by Steven T. Stanton ("Applicant"), attorney for the Debtor, for services and expenses provided between November 21, 1994 and March 3, 1995. The total amount requested is $7,498.44. The issue discussed here involves compensation from assets of a Chapter 7 estate for legal services provided by Debtor's Counsel after confirmation of a Chapter 11 Plan and prior to revocation under 11 U.S.C. § 1144.
Pursuant to comments made by the United States Trustee, the Applicant agreed to reduce the total amount requested by $2,000.00. The United States Trustee did not file a written objection.
After the Applicant gave notice of his request, Curt Ogden, a prepetition creditor, filed an objection to the allowance of the fees and expenses, contending that the Applicant's services did not benefit the Debtor but were primarily for the benefit of others. He argued further that the Applicant's services performed during the period of time that the Debtor was operating as a Reorganized Debtor under a confirmed plan, are not compensable as an expense of administration because the Order of Confirmation was subsequently revoked. The matter was submitted to the Court on the record as a whole, including brief oral argument by the Parties.
This is a core proceeding pursuant to Section 157(b)(2)(B) of Title 28 of the United States Code. The Court has jurisdiction over the parties and this matter pursuant to 28 U.S.C. Sections 151, 157 and 1334, and Rule 9.01 of the Local Rules of the United States District Court for the Eastern District of Missouri.
The Applicant was appointed Counsel for the Debtor In Possession in this case by Order of this Court dated January 13, 1994, effective January 1, 1994. The Debtor filed a liquidating Chapter 11 Plan on February 14, 1994 which was confirmed by Order of this Court on July 5, 1994. The Reorganized Debtor operated under the confirmed Plan until the Order of Confirmation was revoked by the Court on April 3, 1995. The basis for revocation of confirmation was the Debtor's failure to disclose material information which resulted in a finding that the confirmation had been procured by fraud. The order of revocation also directed the replacement of existing management by an Operating Trustee appointed by the United States Trustee. On June 21, 1996, the Operating Trustee's motion to convert the case to a case under Chapter 7 was granted. The Operating Trustee was appointed Interim Trustee in the converted case.
All of the services and expenses listed in the application at issue here were incurred during the period that the Reorganized Debtor was operating under the confirmed plan. The Applicant had previously been allowed approximately $19,700.00 as compensation and reimbursement for other postpetition Chapter 11 services and expenses. The confirmed plan provided for payment of attorneys fees under certain conditions. First, the Plan provided for payment of those attorney fees that were allowed as administrative *200 expenses under the Code and were filed no later than 30 days following the confirmation of the Plan. Additionally, in Article IX, the Plan provided authorization for the Reorganized Debtor to employ counsel for the purposes of implementing and enforcing the terms of the Plan, for the recovery of property of the estate, and for prosecuting objections to claims or to the priority of claims. The Reorganized Debtor was to retain a fund of $5,000.00 for the payment of such fees.
The effect of revocation under Section 1144 is to void the Order of Confirmation; to remove a debtor's authority to operate under the terms of the confirmed plan; and to question the legal consequences of a debtor's operations as a reorganized debtor. Anticipating the harsh consequences that could be imposed on innocent parties that may have dealt with the reorganized debtor, the Code provides that the order of revocation shall
contain such provisions as are necessary to protect any entity acquiring rights in good faith reliance on the order of confirmation....
11 U.S.C. § 1144(1).
Although the Bankruptcy Code provides no clear description of any other effect of revocation under Section 1144, two distinct alternatives are available. Either the case will be dismissed and the parties returned to their prepetition relationships, which may have become blurred by the Chapter 11 proceedings. Or the Court will construct a scheme that will permit the case to continue; preserve the positive results of the Chapter 11 case; provide a forum, if necessary, to sanction the perpetrator of the fraudulent conduct that was the basis of the revocation; and continue the promise of an equitable distribution of estate assets either through confirmation of an amended plan, or by conversion to Chapter 7. In most instances, a greater benefit will result from continuation of the case in a mode that is familiar and predictable. Therefore, revocation under Section 1144 returns the parties to their status prior to confirmation, subject to equitable adjustments that may be required to prevent further harm that might result from the fraudulent conduct that was the basis for the revocation. Any consideration of the post-confirmation/pre-revocation dealings between the Debtor and other parties will in the first instance assume the premise that the Debtor had been operating as a Debtor in Possession during that period.
With certain exceptions, an attorney for a Debtor in Possession employed pursuant to Section 327 represents a client that has the rights, powers and duties of a trustee under Chapter 11. 11 U.S.C. § 1107. These duties include the maximization of the value of the debtor's assets, and the recovery of property for the benefit of the bankruptcy estate. The legal services that are provided in connection with the performance of these duties, and that result in a benefit to the estate may be paid from estate assets. However, services that benefit other entities such as the debtor's officers, directors, principals, or shareholders are not compensable from estate assets. In re Pine Valley Machine, Inc., 172 B.R. 481, 488 (Bankr.D.Mass.1994). Fees for these services are payable by the entity that received the benefit.
The services provided by the Applicant in this matter fall into two categories. The first category includes those services associated with the recovery of an asset of the estate, specifically a judgment owed to the estate by Curt Ogden. The Court finds and concludes that these services were beneficial to the Debtor and to the estate and are allowed as a Chapter 11 expense of administration in this Chapter 7 case in the amount of $1,060.00.
The second category of services were those associated with opposition to the Adversary Complaint to revoke the Order of Confirmation and opposition to the motion to appoint a trustee. These matters were the vehicles that led to the Court's revocation of the Order of Confirmation. See In re Ogden Modulars, Inc., 180 B.R. 544, 545 (Bankr. E.D.Mo.1995). Substantially all of these services were performed between January 1, 1995 and March 31, 1995. These services were not beneficial to the Debtor. In view of the testimony and evidence presented at trial, and on consideration of the record as a whole, the Court finds and concludes that these services benefited the interests of officers and insider principals of the Debtor. Even though the interests of officers and *201 insiders frequently coincide with the interests of a debtor corporation, in the circumstances here, no mutual benefit was shown to have existed. Compensation for these services should be paid by the entities that received the benefit, and not from the limited assets that are available for allowed claims in the Chapter 7 case.
A significant amount of time for which compensation is requested here includes the Applicant's travel to and from the Court and other locations to attend hearings and to meet with the Debtor's officers. Unless unusual circumstances are shown to exist, travel time in the Metropolitan area is usually not compensable to debtor's counsel from Chapter 7 assets.
IT IS ORDERED that this matter is concluded; and that the objection to the Application for Payment of Administrative Expenses is SUSTAINED IN PART AND OVERRULED IN PART; and
That Steven T. Stanton is allowed the amount of $1,060.00 as compensation for legal services provided to the Debtor for the period from November 24, 1994 through April 3, 1995; and that such allowed amount is to be paid as a Chapter 11 expense of administration; and that all other requests in this matter are DENIED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548574/ | 992 A.2d 1272 (2010)
800 WATER STREET, INC., Petitioner,
v.
DISTRICT OF COLUMBIA ALCOHOLIC BEVERAGE CONTROL BOARD, Respondent.
No. 09-AA-238.
District of Columbia Court of Appeals.
Submitted March 17, 2010.
Decided April 15, 2010.
*1273 Simon M. Osnos, Falls Church, VA, was on the brief for petitioner.
Peter J. Nickles, Attorney General for the District of Columbia, and Todd S. Kim, Solicitor General, Donna M. Murasky, Deputy Solicitor General, and Richard S. Love, Senior Assistant Attorney General, were on the brief for respondent.
Before PRYOR, SCHWELB, and KING, Senior Judges.
PER CURIAM:
Petitioner 800 Water Street, Inc., challenges an order entered by the Alcoholic Beverage Control Board (the Board) revoking petitioner's license to serve alcoholic beverages. The revocation accompanied findings by the Board that petitioner had violated D.C.Code § 25-823 (2001), and D.C.Code § 25-446(e) (2001), relating to violent incidents that took place at petitioner's establishment in August 2008. Petitioner argues that the Board erred when it denied petitioner's request, while the case was pending Board review, to cancel its license pursuant to D.C.Code § 25-791(e) (2001) and thereby stave off the Board's revocation and the collateral consequences that accompanied it. We find the Board's interpretation of the statute reasonable and in accordance with the statutory framework, and therefore affirm.
I.
Because petitioner does not here contest the Board's findings of fact with respect to the events that brought about the revocation proceedings, we summarize them only briefly. On August 23, 2008, D.C. police responded to two stabbings and a third violent assault both in and directly outside of H2O, an establishment owned and operated by petitioner in Southwest Washington. The Chief of Police ordered the establishment closed and requested from the Board a summary suspension of petitioner's Class CR retailer's license, which the Board granted. The Chief stated in the request that "there would be an additional imminent danger to the health and welfare of the public if the establishment was not closed." An investigation conducted by the Alcoholic Beverage Regulation Administration (ABRA) confirmed the three incidents of violence. The summary suspension took effect on August 27, 2008. On that date the Board scheduled a hearing for October 22, 2008, to permit petitioner to show cause why its license should not be revoked.
In a letter dated October 10, 2008, petitioner informed the Board that petitioner had "abandoned efforts to resume business under the subject license." Therefore, the letter stated, "pursuant to D.C. Official Code § 25-791(e), the subject license, which is in summary suspension status, is to be marked as `cancelled.'" Petitioner had an obvious interest in attempting to have the Board designate its license as "cancelled" before the Board could revoke it. If the Board revoked the license, pursuant to D.C.Code § 25-821(c) (2001), petitioner likely would be barred from obtaining another license for a period of five years. Presumably this outcome could be *1274 avoided. The Board sought and obtained an opinion letter from the Office of the Attorney General (OAG) for the District of Columbia on this issue. Based, in part, on the legal guidance provided in the opinion letter and partly on arguments by the parties at an October 22 hearing, the Board rejected petitioner's statutory interpretation. The order, dated March 4, 2009, concluded, "the Board cannot be required to acquiesce in [petitioner's] request to cancel a license while that license is the subject of a pending enforcement action." It ordered petitioner's license revoked based on an ultimate conclusion that "the continued operation of [petitioner's] establishment presents an imminent danger to the health and safety of the public."
II.
Petitioner argues the Board's order should be vacated because "(a) the Board was without authority to revoke the license once the petitioner abandoned its business operation and so notified the Board . . . and (b) petitioner has a due process right to apply for future liquor licenses, which the revocation prevents."
We are deferential to an agency's findings of fact unless they are not supported by substantial evidence in the record. Levelle, Inc. v. District of Columbia Alcoholic Beverage Control Bd., 924 A.2d 1030, 1035 (D.C.2007). We accord considerable deference to the Board's interpretation of statutes it is charged with administering, and we will "uphold the Board's interpretation of Title 25 and legislative enactments affecting it as long as the interpretation is reasonable and not plainly wrong or inconsistent with the legislative purpose." Holzsager v. District of Columbia Alcoholic Beverage Control Bd., 979 A.2d 52, 58 (D.C.2009) (internal citations and quotation marks omitted). The judiciary, however, remains "the final authority on issues of statutory construction." Levelle, 924 A.2d at 1036.
The statute under review provides, in part, "If a licensee notifies the Board that the licensee has ceased to do business under the license or if the Board cancels the license under this section, the license shall be marked as `canceled.'" D.C.Code § 25-791(e) (2001). Petitioner argues that the statute is clear on its face, and "The Board has no discretionary authority to refuse cancellation of a license and a licensee has the absolute right to surrender a license for cancellation regardless of any pending license suspension or revocation proceedings." We begin our process of statutory interpretation by looking at the statute on its face. BSA 77 P Street LLC v. Hawkins, 983 A.2d 988, 995 (D.C.2009). If the meaning is clear from the face of the statute, we must give effect to that plain meaning. Id. If the analysis ended there, the argument could be deemed persuasive. However, statutory language cannot be read in a vacuum. See Odeniran v. Hanley Wood, LLC, 985 A.2d 421, 428 (D.C. 2009) (interpreting unemployment compensation statute); Mayberry v. Dukes, 742 A.2d 448, 450 (D.C.1999) (interpreting Police and Firefighters Retirement and Disability Act). "[I]ndividual words of a statute are to be read in the light of the statute taken as a whole, and where possible, courts should avoid constructions at variance with the policy of the legislation as a whole." District of Columbia v. Beretta U.S.A. Corp., 940 A.2d 163, 171 (D.C. 2008) (internal citations and quotation marks omitted).
When read as a whole, Title 25 of the D.C.Code provides a comprehensive mechanism for the Board "to issue and renew liquor licenses and to monitor the compliance by licensees with local statutes and regulations pertaining to the sale of alcohol." North Lincoln Park Neighborhood *1275 Ass'n v. Alcoholic Beverage Control Bd., 666 A.2d 63, 66 (D.C.1995). "[T]he Board has a variety of statutory powers, some discretionary, some mandatory." Id. One of these powers allows the Board to suspend or revoke a license if "[t]he licensee violates any of the provisions of this title, the regulations promulgated under this title, or any other laws of the District" or if "[t]he licensee allows the licensed establishment to be used for any unlawful or disorderly purpose." D.C.Code § 25-823 (2001). Additionally, § 25-821(c) directs that "If the Board revokes a license, no license shall be issued to the same person or persons whose license is so revoked for any other location for 5 years following the revocation."
The Board argues, we think persuasively, that "Construing D.C.Code § 25-791(e) to require the Board to abandon a pending enforcement action whenever a licensee offers to surrender its license would abrogate its investigative authority and render inoperative its power to suspend and revoke licenses." Further, construing the statutory language in petitioner's favor would lead to the absurd result that "the attendant consequence of a license revocation a five-year prohibition on issuing a license for any location would be nullified at the licensee's discretion." Finally, given the statutory scheme, the Board urges that § 25-791 read as a whole, which is entitled "Temporary surrender of licensesafekeeping," and which the Board argues is meant to allow a safe harbor for "a licensee whose business is temporarily discontinued because of a fire, rebuilding, or the like" was not meant to apply to petitioner's situation. Therefore, the Board argues, we should uphold its conclusion that it cannot be required to "acquiesce" to the license cancellation "while that license is the subject of a pending enforcement action," Because "[w]e agree that this construction is reasonable and consistent with the language" of the section at issue and the statutory scheme as a whole, "we defer to the Board's reading of the statute." Levelle, 924 A.2d at 1037.[1]
We briefly address petitioner's constitutional argument, made for the first time on appeal. Petitioner asserts, in a conclusory fashion, "The Board's incorrect action preventing petitioner from applying for another liquor license at any location for a period of five (5) years under D.C.Code § 25-821(c) deprives [petitioner] of a constitutionally-guarantied [sic] right." Since petitioner did not raise this argument below, it has waived the right to raise it on appeal. See Allen v. Schultheiss, 981 A.2d 610, 613 n. 3 (D.C.2009). Nevertheless, we observe that revocation of a license, and the statutory five-year ban on obtaining a license, does not take place unless the licensee has been given a hearing before the Board and an "opportunity to be heard in his or her defense." D.C.Code § 25-821(a) (2001). Petitioner does not contest that it was given a full opportunity to defend against the license revocation at the agency level, or that the Board's findings regarding the basis for revocation were reasonable. We see no reason to address petitioner's unpreserved *1276 due process argument further. The order of the Board is affirmed.
So ordered.
NOTES
[1] This court "may refuse to adhere strictly to the plain wording of the statute in order to effectuate the legislative purpose. . . ." Peoples Drug Stores, Inc. v. District of Columbia, 470 A.2d 751, 754 (D.C.1983) (internal citations and quotation marks omitted). This is particularly so when "the literal meaning would produce absurd results." Sullivan v. District of Columbia, 829 A.2d 221, 224 (D.C. 2003). In the context of a pending enforcement action, we agree with the Board that allowing a licensee to render moot the Board's enforcement authority by voluntarily "cancelling" its license would be at odds with the overall legislative scheme the Board is charged with administering. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548399/ | 9 B.R. 334 (1981)
In re Diane Marie KESTNER, Debtor.
Bankruptcy No. 79-01317.
United States Bankruptcy Court, E.D. Virginia, Alexandria Division.
February 27, 1981.
*335 Ethan Allen Turshen, Arlington, Va., Trustee.
Frederick W. Hoybach, Fairfax, Va., for debtor.
Francis P. Dicello, Alexandria, Va., United States Trustee.
MEMORANDUM OPINION AND ORDER
MARTIN V.B. BOSTETTER, Jr., Bankruptcy Judge.
This matter came on for hearing on an application by the trustee, Ethan Allen Turshen, Esquire, for an order to show cause for the failure of the debtor, Diane Marie Kestner, to cooperate by turning over certain items to the trustee.
The Court entered an Amended Order on March 10, 1980 directing the debtor to turn over certain items delineated therein within ten (10) days after entry of said Order. At the show cause hearing, the trustee indicated that he had previously requested the debtor to turn over the following items: (1) Federal tax refund in the sum of $493.13; (2) Virginia tax refund in the sum of $198.88; and (3) the balance in an account with Virginia National Bank in the sum of $127.54 a total sum due and owing of $819.55. The debtor declined to comply with the trustee's request.
The debtor opposes the trustee's request for turnover. Her counsel argued that although she was employed during the year in question, 1979, her income was substantially less than her husband's earnings. The debtor and her husband merged their incomes in their federal income tax return. However, a review of their Virginia income tax return reveals that in 1979 the debtor had income of $6,767.00 while her husband earned $16,515.00. These sums, when added together, comport with the couple's combined earnings as reflected in their federal tax return $23,282.00.
The debtor's counsel contends that had the debtor not joined in with her husband in filing the tax returns her tax liability would have been only $200.00. The trustee argues, on the other hand, that he is requesting only one-half of eleven-twelfths of the combined tax refunds.[1] He is of the opinion that the sum of $819.55 is a fair and equitable amount under the circumstances of this case.
The Court takes note of a 1976 decision rendered by the Bankruptcy Court for the Richmond Division of this District In the Matter of Andre Marc Hilliou, No. BK-75-1248-R (E.D.Va.R.D. May 3, 1976). In Hilliou, the bankrupt and his wife filed a joint federal income tax return prior to his filing a petition in bankruptcy. The federal tax refund was endorsed by the parties after the petition had been filed. The refund was turned over to the trustee who claimed the entire amount of the refund. The wife of the bankrupt later sought to recover one-half of the proceeds of the refund on the grounds that the filing of the joint return and the receipt of the refund check made payable to both her and the bankrupt gave her a vested one-half interest in the refund.
The Hilliou court rejected the wife's argument for two basic reasons. First, the *336 court declared that the trustee clearly "succeeds to any claim or right of action the bankrupt may have against the government for a refund of taxes paid." Second, although the court did acknowledge that by signing the joint return the wife was subject to certain liabilities, this was not thought to be a sufficient reason to find that there was a change of ownership of property between the bankrupt and his wife. Accordingly, the Hilliou court held that the mere act of the wife in joining in a joint filing, where she had "no earnings or other income whatsoever for the year in question" did not vest in the wife a title to any portion of the tax refund.
In the instant matter, however, the debtor did have income of $6,767.00 in 1979.[2] The Court agrees with the trustee that the circumstances of this case require a solution which is fair and equitable.
Section 1481 of Title 28 of the United States Code provides that courts of bankruptcy have the powers of a court of equity. This power is concomitant with the bankruptcy court's increased jurisdiction under the Bankruptcy Code, and it is necessary to enable it to effectively exercise that jurisdiction and its enhanced powers under the Bankruptcy Code. This is in addition to the powers granted to courts of bankruptcy under Section 105 of the Bankruptcy Code (11 U.S.C. § 105) and 28 U.S.C. § 1652 (the All Writs Statute).
The Court finds that the debtor did have income for 1979 which was substantially less than her husband's. Accordingly, in exercising its inherent equitable authority, the Court holds that the debtor shall turn over to the trustee the sum of $402.31[3] for her portion of the 1979 federal and Virginia income tax refunds. In addition, the sum of $127.54, reflecting the balance in the debtor's account with the Virginia National Bank, must also be turned over to the trustee.
Accordingly, IT IS ORDERED that the debtor, Diane Marie Kestner, turn over to the trustee, Ethan Allen Turshen, the sum of $529.85.
NOTES
[1] The debtor filed her voluntary petition in bankruptcy on December 19, 1979.
[2] This is an important consideration in light of the statement found in 4A Collier on Bankruptcy, § 70.18[7], p. 222, n. 43j (14 ed. 1978), wherein it was stated that "[w]here the wife has contributed to the taxed income . . . she may be entitled to a proportion of the tax refund. Snedecor, Comments on Income Tax Refunds (1956) 30 J. of Nat'l. Assn. of Ref. 135."
[3]
1. Federal income tax refund $1,076.00
2. Virginia income tax refund 434.00
_________
3. Combined income tax refund $1,510.00
4. Eleven-twelfths (11/12) of
combined returns $1,384.16
Based on the following fraction:
Wife's (debtor) income of $ 6,767.00 T
_____________________________________ × _______________
Combined income $23,282.00 Tax refund $1,384.16
T = $402.31 | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548426/ | 9 B.R. 110 (1981)
In re Robert E. CURTIS, Debtor.
DELAWARE VALLEY SAVINGS & LOAN ASSOCIATION, Plaintiff,
v.
Robert E. CURTIS, Defendant.
Bankruptcy No. 80-00739K, Adv. No. 80-0428K.
United States Bankruptcy Court, E.D. Pennsylvania.
March 5, 1981.
*111 Lonny Cades, Cornwells Hts., Pa., for plaintiff.
Roland J. Atkins, Philadelphia, Pa., for debtor/defendant.
Margaret Graham, Philadelphia, Pa., Standing Trustee.
OPINION
WILLIAM A. KING, Jr., Bankruptcy Judge.
Presently before the court is the Complaint of Delaware Valley Savings and Loan Association ("Delaware Valley") seeking relief from the automatic stay pursuant to § 362(d), 11 U.S.C. § 362(d). Because we find that debtor has equity in the property sufficient to adequately protect the interest of Delaware Valley, the automatic stay shall remain in effect.[1]
The facts as stipulated to by the parties are as follows:
Delaware Valley is the holder of a first mortgage on the premises 112 North Main Street, Yardley, Pennsylvania, executed by the debtor on August 9, 1979, in the principal amount of $35,000.00. Due to an alleged default in the mortgage, Delaware Valley filed a Complaint in Mortgage Foreclosure in state court. On February 11, 1980, a judgment was entered against the debtor for failure to file an answer to the Complaint, in the amount of $38,223.32. Prior to a scheduled sheriff's sale, the debtor filed a Chapter 13 petition on April 9, 1980, thereby staying the sale. On August 6, 1980, Delaware Valley filed the instant Complaint for Relief from the Stay. By agreement of counsel, the trial on the Complaint was cancelled and memoranda of law were filed. The parties agree that the fair market value of the premises at 112 North Market (sic Main) Street is at least seventy five thousand dollars ($75,000).
A request for relief from the automatic stay is governed by Bankruptcy Code § 362(d), 11 U.S.C. § 362(d), which states:
(d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay
(1) for cause, including the lack of adequate protection of an interest in property of such party in interest; or
(2) with respect to a stay of an act against property, if
(A) the debtor does not have an equity in such property; and
(B) such property is not necessary to an effective reorganization.
Delaware Valley, although admitting that equity exists in the property, alleges as a ground for lifting the stay, the lack of adequate protection of their interest in the property in that not a single mortgage payment has been made.
The term "adequate protection" is not defined in the Code. However, § 361 sets forth three (3) non-exclusive examples of *112 what may constitute "adequate protection" if secured property is to be used by a debtor, i.e., (1) periodic cash payments equivalent to decrease in value, (2) an additional or replacement lien on other property, or (3) other relief that provides the indubitable equivalent. None of these has been offered. Instead, debtor argues that the equity cushion of approximately forty thousand dollars ($40,000) adequately protects Delaware Valley.
The concept of adequate protection as found in § 361
is based as much on policy grounds as on constitutional grounds. Secured creditors should not be deprived of the benefit of their bargain. There may be situations in bankruptcy where giving a secured creditor an absolute right to his bargain may be impossible or seriously detrimental to the bankruptcy laws. Thus, this section recognizes the availability of alternate means of protecting a secured creditor's interest. Though the creditor might not receive his bargain in kind, the purpose of the section is to insure that the secured creditor receives in value essentially what he bargained for. H.R. Rep.No.95-595, 95th Cong., 1st Sess. 339 (1977), U.S.Code Cong. & Admin.News 1978, 5787, 6295.
This concept of adequate protection was first discussed in In re Murel Holding Corporation, 75 F.2d 941 (2nd Cir. 1935) where Judge Learned Hand stated:
It is plain that `adequate protection' must be completely compensatory; . . . a creditor . . . wishes to get his money or at least the property. We see no reason to suppose that the statute was intended to deprive him of that in the interest of junior holders unless by a substitute of the most indubitable equivalence. (Emphasis added.) Id., at p. 942
Although the existence of an equity cushion as a method of adequate protection is not specifically delineated in § 361, it is the classic form of protection for a secured debt justifying the restraint of lien enforcement by a bankruptcy court. See In re San Clemente Estates, 5 B.R. 605, 6 B.C.C. 838 (Bkrtcy., S.D.Calif.1980) citing to In re Blazon Flexible Flyer, Inc., 407 F.Supp. 861 (N.D.Ohio 1976). The conclusion that an equity cushion created by the excess of security over debt can itself constitute adequate protection with nothing more has been widely accepted. In re San Clemente Estates, supra; In re Tucker, 5 B.R. 180, 6 B.C.D. 699 (Bkrtcy., S.D.N.Y.1980); In re Rogers Development Corp., 2 B.R. 679, 5 B.C.D. 1392 (Bkrtcy., E.D.Va.1980); In re Sulzer, 2 B.R. 680, 5 B.C.D. 1314 S.D.N.Y.1980); In re Pitts, 2 B.R. 476, 5 B.C.D. 1129 (Bkrtcy., C.D.Calif.1979); 2 Collier on Bankruptcy, § 361.01[3]; § 362.01[1] (15th ed.).
In the case sub judice, we conclude that the amount of the equity cushion is sufficiently large at this time to make a granting of the relief from the stay a premature action. We have held in the past that "the concept of adequate protection requires that the secured creditor be completely compensated or be given a `substitute of the most indubitable equivalence' either now or in the near future". In re Heath, 9 B.R. 665 (E.D.Pa., 1981). Based on the present record, we can only conclude that the creditor's interest is adequately protected and will be completely compensated due to the substantial equity present here upon either the confirmation of a Chapter 13 plan or eventual sale of the property.
Although relief is being denied at this juncture, the safeguards of adequate protection to the secured creditor must remain paramount and thus, denial in no way precludes subsequent complaints should there be an erosion of the collateral.
Delaware Valley has failed to present evidence as to the current arrearage of the mortgage. Thus, we are unable to consider the feasibility of ordering periodic payments as protection against any possible erosion of the security.
In its Complaint, Delaware Valley has raised various objections to the debtor's plan. Those objections were neither argued nor tried. The court must decline consideration of those objections at this time pending *113 a formal objection to confirmation and hearing.
Accordingly, having found that the debtor has substantial equity in the property thus adequately protecting the security interest of Delaware Valley, the Complaint requesting relief from the stay is hereby denied.
NOTES
[1] This Opinion constitutes Findings of Fact and Conclusions of Law in accordance with Bankruptcy Rule 752. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548601/ | 161 B.R. 98 (1993)
In re THOMSON McKINNON SECURITIES INC. and Thomson McKinnon, Debtors.
THOMSON McKINNON SECURITIES, INC., Plaintiff,
v.
Arnold S. WARWICK, Defendant.
Bankruptcy Nos. 90 B 10914 (HS), 90 B 11805 (HS) and 91 B 13820 (HS). Adv. No. 93-5114A.
United States Bankruptcy Court, S.D. New York.
November 24, 1993.
*99 Briccetti & Calhoun, White Plains, NY, for debtor.
Berger & Kramer, New York, NY, for defendant.
DEFENDANT'S MOTION FOR MANDATORY ABSTENTION PURSUANT TO 28 U.S.C. 1334(c)(2)
HOWARD SCHWARTZBERG, Bankruptcy Judge.
Arnold S. Warwick, the defendant in this adversary proceeding ("Warwick"), has moved for mandatory abstention pursuant to 28 U.S.C. § 1334(c)(2). In support of his position, the defendant asserts that the adversary proceeding involves issues which are non-core and should be adjudicated in an identical action which is pending before the Civil Court of the City of New York. Thomson McKinnon Securities Inc., ("TMSI"), the Chapter 11 debtor and also the plaintiff in this action, has opposed defendant's abstention motion. The debtor argues that defendant's motion must be denied because this adversary proceeding concerns the turnover of property of the debtor's estate pursuant to 11 U.S.C. § 542, and is a core proceeding within the Bankruptcy Court's jurisdiction under 28 U.S.C. § 157(b)(2).
FACTUAL BACKGROUND
Prior to 1987, Warwick opened a securities account at TMSI and executed a signature card, Customer Agreement, and Thomson Money Management Program Agreement. The obligations stemming from this relationship form the basis for this dispute.
By Summons and Complaint dated June 2, 1989, TMSI commenced an action in the Civil Court of the City of New York, New York County, alleging that Warwick failed to comply with his contractual obligations to meet certain margin requirements. In his answer dated June 30, 1989, the defendant asserted affirmative defenses and counterclaims seeking damages in the amount of $100,000.00.
On March 28, 1990, the debtor filed with this Court its voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. The debtor continued in the operation and management of its property as a debtor-in-possession pursuant to 11 U.S.C. §§ 1107 and 1108.
By Summons and Complaint dated March 29, 1993, the debtor commenced an adversary proceeding pursuant to Federal Rule of Bankruptcy Procedure 7001 against Warwick, a former securities account holder at TMSI, for the recovery of $22,232.00 which was allegedly a debit balance from defendant's margin account. The complaint is substantially similar to the June 2, 1989 complaint filed in state court. The three causes of action are bottomed on unjust enrichment and restitution, money had and received and breach of contract. On August 24, 1993, the defendant filed an answer with a counterclaim seeking a setoff of any amounts found to be due to the debtor.
The debtor alleges as follows: (1) Prior to October, 1987, defendant opened a securities account at TMSI and executed a signature card and Customer Agreement; (2) During October 1987, defendant's account became under-margined; (3) Defendant failed to deposit funds to satisfy TMSI's margin requirements and to eliminate the insufficiency of margin; (4) Pursuant to the Customer Agreement, TMSI liquidated defendant's account in October, 1987, resulting in a debit balance of $22,232.00 due and owing to TMSI; and (5) Defendant has not paid the debit balance despite demands by TMSI.
DISCUSSION
The factors which a bankruptcy court must consider in determining a request for mandatory *100 abstention from the exercise of its jurisdiction are set forth in 28 U.S.C. § 1334(c)(2) which states:
(2) Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction. Any decision to abstain made under this subsection is not reviewable by appeal or otherwise. This subsection shall not be construed to limit the applicability of the stay provided for by section 362 of title 11, United States Code, as such section applies to an action affecting the property of the estate in bankruptcy.
No claim has been made that the defendant did not make a timely motion for abstention by this Court. The debtor's adversary proceeding was commenced on March 29, 1993. The defendant, Warwick, filed his answer and counterclaim on August 24, 1993. His notice of motion requesting abstention was also filed and served on August 24, 1993.
The adversary proceeding here is based upon state law causes of action. The debtor's complaint alleges that the defendant's account became under-margined pursuant to a written agreement with the debtor which has its principle place of business in the State of New York. The defendant's answer and counterclaim assert that the debtor failed to perform all of the terms and conditions of the written contract and breached its fiduciary duty in failing to liquidate promptly the margin account. Thus, the pleadings in the adversary proceeding are based on state law contract theories.
The adversary proceeding is "related to" this Title 11 proceeding but does not "arise under" the Title 11 case. In reaching this conclusion, the court must determine whether the right to relief in this adversary proceeding "depend[s] upon the construction or application of bankruptcy law as expressed in title 11." Allied Mechanical & Plumbing Corp. v. Dynamic Hostels, 62 B.R. 873, 877 (Bankr.S.D.N.Y.1986). In this case, the claims asserted are state law contract issues and do not depend upon the construction or application of bankruptcy law.
This adversary proceeding could not have been adjudicated in a federal court absent jurisdiction under 28 U.S.C. § 1334. Because there is no federal subject matter jurisdiction over a state breach of contract dispute, the bankruptcy filing is the only basis for federal jurisdiction.
The debtor commenced a prepetition action against the defendant in the Civil Court, New York County which is substantially similar to this adversary proceeding. In that action, which is still pending, the debtor seeks the same relief as claimed in the instant proceeding.
Finally, it appears that the statutory factor requiring that the pending state court action could be timely adjudicated in that forum has been satisfied here as well. Although it is unclear how much discovery, if any, has already taken place in the state court action, the defendant asserts that the Civil Court forum, which the debtor chose, is more convenient than this court for all parties. Also, defendant in his answer, has demanded a jury trial pursuant to Federal Rule of Bankruptcy Procedure 9015(b).
The debtor cites authority in support of its position in its opposition to Warwick's motion to abstain. Opposition Of Thomson McKinnon Inc. To Arnold S. Warwick's Motion to Abstain, Doc. No. 1682, Nov. 12, 1993. However, the debtor's reliance on these cases, which are each distinguishable from the instant case, is misplaced.
In re Leco Enterprises, Inc., 125 B.R. 385 (S.D.N.Y.1991), held that an action to recover an account receivable which was fixed, matured and not disputed until after the case commenced, was a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(E). In In re Thomson McKinnon, 126 B.R. 833 (Bankr.S.D.N.Y.1991), the Chapter 11 debtor filed a proceeding to recover under a note. The defendant moved to transfer venue under 28 U.S.C. § 1412. This Court held that *101 the debtor was seeking to recover money loaned to the defendant which was property of the estate. In the instant case, the debtor's claim is disputed. The debtor is seeking a judgment on the merits against the defendant and a recovery of a deficiency if it prevails with regard to its alleged right to liquidate the margin account.
In re Robb, 139 B.R. 791 (Bankr.S.D.N.Y. 1992), involved a suit brought by a creditor of the Chapter 13 debtor's former husband. The debtor's motion for mandatory or discretionary abstention pursuant to 28 U.S.C. § 1334(c)(2) or (c)(1) was denied. However, unlike the instant case, the state court action was commenced more than one year after the Chapter 13 petition was filed and was in violation of the automatic stay imposed by section 362. Thus, the court held that the debtor had "failed to establish the prerequisite pending state court action to satisfy the requirements for mandatory abstention." In re Robb, at 796.
A strikingly similar situation to the instant case may be found in this court's decision in Allied Mechanical and Plumbing Corp., at 62 B.R. 873. In that case, the debtor had commenced an adversary proceeding against a general contractor and bonding agency for work allegedly performed by the debtor prepetition in accordance with a written agreement between the parties. The defendants filed an answer and counterclaim. Prior to the filing of their Chapter 11 case, the debtor and another entity commenced a substantially similar action in the New York Supreme Court, Bronx County against the defendants. The defendants filed a counterclaim against the debtor in the prepetition state court action. This court reviewed the factors enunciated in 28 U.S.C. § 1334(c)(2) and held that the case was a "related to" proceeding based on a state law cause of action, and thus granted the motion for mandatory abstention.
As in Allied Mechanical, the debtor here originally chose to pursue its causes of action against this defendant in a state court forum. The debtor has shown no compelling reason why this bankruptcy court should now determine this state law dispute. Therefore, mandatory abstention is appropriate.
CONCLUSIONS OF LAW
1. This court has jurisdiction of the subject matter and the parties in this case in accordance with 28 U.S.C. § 157(a).
2. This adversary proceeding, in which a jury trial has been demanded, is related to the debtor's Chapter 11 case and is not a core proceeding within the meaning of 28 U.S.C. § 157(b)(2).
3. This adversary proceeding is based on state law claims or causes of action related to a case under Title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under the Bankruptcy Code.
4. The defendant's motion for mandatory abstention under 28 U.S.C. § 1334(c)(2) is granted.
SETTLE ORDER on notice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548463/ | 992 A.2d 403 (2010)
CHILDREN'S NATIONAL MEDICAL CENTER and Frank Gates Service Company/Avizent, Petitioners,
v.
DISTRICT OF COLUMBIA DEPARTMENT OF EMPLOYMENT SERVICES, Respondent,
Beverly McCormick, Intervenor.
No. 09-AA-58.
District of Columbia Court of Appeals.
Argued February 25, 2010.
Decided April 8, 2010.
*404 David M. Schoenfeld, Rockville, MD, for petitioner.
Richard S. Love, Senior Assistant Attorney General, with whom Peter J. Nickles, Attorney General for the District of Columbia, Todd S. Kim, Solicitor General, and Donna M. Murasky, Deputy Solicitor General, were on the brief, for respondent.
Douglas K. Allston, Jr., Greenbelt, MD, for intervenor.
Before RUIZ and FISHER, Associate Judges, and BELSON, Senior Judge.
FISHER, Associate Judge:
In the workers' compensation system, utilization review ("UR") is a statutory procedure for determining "the necessity, character, or sufficiency of any medical care or service furnished or scheduled to be furnished" to an injured employee. D.C.Code § 32-1507(b)(6)(A) (2001). In this case, the Department of Employment Services ("DOES") held that the UR process had been completed although the employee's physician had not sought reconsideration of an adverse opinion. Holding that the agency's decision was based on a permissible interpretation of the statute, we affirm.
I. Factual and Procedural History
In October 2007, Beverly McCormick, a housekeeper at Children's National Medical Center ("CNMC"), slipped on a wet floor and, although she did not fall, twisted her right knee. Following the accident, her knee was treated with rest, a steroid injection, and arthroscopic surgery. In July 2008, when the joint could no longer bear weight, she chose to have a total right knee replacement.
Prior to the accident, Ms. McCormick (sometimes referred to as "claimant") suffered from end-stage degenerative osteoarthritis in both knees. Dr. Samir Azer, an orthopaedic surgeon, began treating her in the fall of 2006, injecting a steroid first into her "more symptomatic" right knee, then into her left knee the following week. At that time he advised claimant that she would likely need to have both knees replaced in the "foreseeable future." In April 2007, he injected a steroid into her left knee after she complained of pain there, and then injected the right knee four weeks later. In August 2007, he began Synvisc[1] injections to both knees.
*405 After claimant slipped and twisted her right knee in October 2007, Dr. Azer examined the joint and diagnosed a sprain or strain, noting that her right knee had been "doing better" following the Synvisc injections but before she slipped. When the knee did not improve with rest, he ordered an MRI, which showed advanced degenerative arthritis and what Dr. Azer believed was a degenerative tear of the medial meniscus. He injected the knee with a steroid and, after it did not improve, performed an arthroscopy in January 2008. Dr. Azer described the arthroscopy as "a palliative procedure with no cure [for] ... the degenerative changes that she has." He did not find a torn medial meniscus during the surgery.
By May 2008, claimant reported constant and "excruciating" pain. When claimant declared in July that she could no longer put weight on the joint and wanted the operation, Dr. Azer scheduled her for a total right knee replacement.
The employer obtained the opinion of an independent medical examiner ("IME"), who recommended against knee replacement and found "no causal relationship between the work related injury and her current symptomatology[,]" stating "I don't think [the injury] hastened, exacerbated or made the arthritis progress in any way." The employer also initiated the UR process. Although the doctor conducting the utilization review agreed that replacement of the knee was medically necessary and appropriate, he determined that claimant was not an appropriate candidate for the surgery at that time because she weighed too much. Dr. Azer received a copy of the utilization report, but he did not request reconsideration, although he was entitled to do so under D.C.Code § 32-1507(b)(6)(C).
Dr. Azer testified during his deposition (which took place after the UR report was issued) that "having treated both [knees] with Synvisc injections, ... the fact that she has not complained of her left knee at all leads me to believe that the injury aggravated the preexisting degenerative arthritis [of her right knee] enough to at least accelerate significant[ly] the need for her total [right] knee [replacement]." Dr. Azer disagreed with the utilization reviewer's opinion that Ms. McCormick was not an appropriate candidate for the surgery. Referring to a recent NIH study, he testified that obesity was not a contraindication to total knee replacement, and explained that expecting obese patients to lose weight prior to knee replacement is "totally unrealistic" because such patients cannot move, exercise, or be active.
After a formal hearing, an administrative law judge ("ALJ") issued a compensation order approving the knee replacement. Relying upon Dr. Azer's opinion that the accident accelerated the need for the knee replacement, the ALJ concluded that the surgery was causally related to the workplace injury. Noting Dr. Azer's reference to the NIH study, the ALJ also concluded that total right knee replacement was "medically necessary." After the Compensation Review Board ("the Board") affirmed the compensation order, McCormick v. Children's Nat'l Med. Ctr., CRB No. 09-016, 2009 WL 345799, 2009 DC Wrk. Comp. Lexis 11 (Jan. 2, 2009), CNMC petitioned for review.
II. Standard of Review
We may reverse a Compensation Review Board decision "only if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." McNeal v. District of Columbia Dep't of Employment Servs., 917 A.2d 652, 656 (D.C.2007); see D.C.Code § 2-510(a)(3)(A) (2001), formerly D.C.Code § 1-1510(a)(3)(A) (1981). We will affirm the *406 decision if "(1) the agency made findings of fact on each contested material factual issue, (2) substantial evidence supports each finding, and (3) the agency's conclusions of law flow rationally from its findings of fact." Georgetown Univ. v. District of Columbia Dep't of Employment Servs., 971 A.2d 909, 915 (D.C.2009). As we have explained many times, substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." King v. District of Columbia Dep't of Employment Servs., 560 A.2d 1067, 1072 (D.C.1989) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938)). The debate does not have to be one-sided. "[T]here can be substantial evidence on both sides of a dispute." Johnson v. District of Columbia Office of Employee Appeals, 912 A.2d 1181, 1185 (D.C.2006).
We defer to an agency's interpretation of a statute it administers unless the interpretation "is unreasonable or in contravention of the language or legislative history of the statute...." Watergate East Comm. Against Hotel Conversion v. District of Columbia Zoning Comm'n, 953 A.2d 1036, 1043 (D.C.2008) (quotations and citations omitted); see Mushroom Transp. v. District of Columbia Dep't of Employment Servs., 761 A.2d 840, 844 (D.C.2000) ("[W]here DOES has analyzed the language, legislative history and purpose of a provision of the Workers' Compensation Act, and articulates a reasonable interpretation of that provision based on that analysis, that interpretation is authoritative.") (quotations and citations omitted). However, we will not defer to the agency if its decision "reflects a misconception of the relevant law or a faulty application of the law." Thomas v. District of Columbia Dep't of Labor, 409 A.2d 164, 169 (D.C.1979).
III. Causation
Petitioner contends that the ALJ's conclusion that the injury caused claimant to need a knee replacement is not supported by substantial evidence, arguing that Ms. McCormick needed that treatment anyway because she had end-stage degenerative arthritis. Of course, the fact that Ms. McCormick suffered from arthritis before the accident does not bar her claim. If a work-related injury aggravates an employee's preexisting condition, it may be compensable. D.C.Code § 32-1508(6)(A) (2001) ("If an employee receives an injury, which combined with a previous... disability or physical impairment causes substantially greater disability ..., the liability of the employer shall be as if the subsequent injury alone caused the subsequent amount of disability...." (emphasis added)); see also Ferreira v. District of Columbia Dep't of Employment Servs., 531 A.2d 651, 657 (D.C.1987) (citing Hensley v. Washington Metro. Area Transit Auth., 210 U.S.App.D.C. 151, 154-55, 655 F.2d 264, 267-68 (1981) (applying the "aggravation rule" to find aggravation of a claimant's preexisting psoriasis compensable under the Longshoremen's and Harbor Workers' Compensation Act)); see also Washington Vista Hotel v. District of Columbia Dep't of Employment Servs., 721 A.2d 574, 579 (D.C.1998) (cautioning that aggravation must still be proved).
Acceleration of a preexisting condition may constitute aggravation.[2]See *407 McCamey v. District of Columbia Dep't of Employment Servs., 947 A.2d 1191, 1197-98 (D.C.2008) (en banc) (quoting 1 LEX K. LARSON, LARSON'S WORKERS' COMPENSATION LAW § 9.02[1] (Matthew Bender, 2009) ("Preexisting disease or infirmity ... does not disqualify a claim under the `arising out of employment' requirement if the employment aggravated, accelerated, or combined with the disease or infirmity to produce the death or disability for which compensation is sought.")); see, e.g., Avignone Freres, Inc. v. Cardillo, 73 App. D.C. 149, 150, 117 F.2d 385, 386 (1940) (discussing the Longshoremen's and Harbor Workers' Compensation Act and stating: "To hasten death is to cause it."); Chevalier v. L.H. Bossier, Inc., 617 So.2d 1278, 1283 (La.Ct.App.1993) (where claimant inevitably would have developed arthritis, traumatic injury that accelerated and worsened the arthritis was compensable).
Petitioner's core argument is that Dr. Azer's opinion does not constitute substantial evidence because he was unreliable and his opinion was illogical. Petitioner emphasizes, among other things, that Dr. Azer diagnosed a torn posterior horn medial meniscus in claimant's knee but did not find such a tear during the arthroscopy. As the Board pointed out, it was the ALJ's role to assess credibility, and he was not required to discount Dr. Azer's opinion merely because the arthroscopy did not reveal the torn medial meniscus that both Dr. Azer and a radiologist thought they observed when reading the MRI.[3]See Washington Vista Hotel, 721 A.2d at 578 (a hearing examiner's decision to credit one physician's opinion over another's may be reversed only if it is unsupported by substantial evidence).
Petitioner argues that it was illogical for Dr. Azer to conclude that Ms. McCormick needed a total knee replacement because she twisted her knee, when she already had end-stage arthritis. Petitioner emphasizes that claimant was told several times that she would need a knee replacement. However, there is no evidence that claimant needed, or was told that she would need, a knee replacement by any specific date.[4]See Jackson v. District of Columbia Dep't of Employment Servs., 979 A.2d 43, 51 (D.C.2009) (reversing a compensation order denying a knee replacement for an arthritic claimant where the independent medical examiner incorrectly believed that surgery had already been scheduled prior to claimant's work-related injury).
*408 Petitioner also points to the IME's conclusion that the accident did not "hasten" the need for a knee replacement. This may be substantial evidence supporting a contrary finding, but, as we have pointed out, "there can be substantial evidence on both sides of a dispute." Johnson, 912 A.2d at 1185.[5]
The ALJ relied instead on Dr. Azer's opinion (as expressed in his deposition and in his progress notes) regarding causation. The doctor noted the claimant's report that both knees had been doing "somewhat better" before the accident. He testified that for a year following the injections Ms. McCormick had not complained of her left knee, but that he had been attempting to manage pain in her right knee since the accident. Claimant also testified that her knee had gotten worse after the accident.
Because the course of treatment for the two knees had been similar before the accident,[6] Dr. Azer's opinion that the injury had significantly accelerated claimant's need for replacement of her right knee is not illogical, as petitioner claims. Moreover, Dr. Azer's opinion carries additional weight because of the preference we give to the views of the treating physician. Jackson, 979 A.2d at 49. There was substantial evidence to support the ALJ's finding that the workplace injury to claimant's right knee on October 2, 2007, was "medically causally related to her current disability."[7]
IV. Utilization Review
If an employee suffers a workplace injury that is medically causally related to a disability that requires treatment, a distinct question may arise: is the proposed medical treatment reasonable and necessary? Utilization review is a process for addressing that question, and in this context it "means the evaluation of the necessity, character, and sufficiency of both the level and quality of medically related services provided an injured employee based upon medically related standards." D.C.Code § 32-1501(18A) (2001); see, e.g., Hisler v. District of Columbia Dep't of *409 Employment Servs., 950 A.2d 738, 746 (D.C.2008) (affirming the denial of reimbursement for megavitamin infusions even though causation was conceded, where an administrative law judge properly relied on the opinion of a utilization reviewer that the infusions were not necessary). The appropriateness of any medical care furnished, or scheduled to be furnished, to an employee through workers' compensation may be reviewed under the UR procedures contained in D.C.Code § 32-1507(b)(6).[8] The process may be initiated by an employer, the employee, or the Mayor, D.C.Code § 32-1507(b)(6)(B), and "[t]he review may be performed before, during or after the medical care or service is provided." 7 DCMR § 232.1 (1994).
Although the implementing regulations are sparse, it appears that the utilization reviewer accepts the diagnosis of injury, examines the claimant's medical records, and makes findings concerning "the necessity, character or sufficiency" of the medical services to treat the injury. 7 DCMR § 232.3. He or she then issues a report describing which records were reviewed and "set[ting] forth rational medical evidence to support each finding." 7 DCMR § 232.4. The regulations require that the report be issued to the agency, the employer, and the employee, but do not mention providing a copy to the treating physician. Id.
The Council of the District of Columbia added the utilization review process in order "[t]o stem the rising cost of medical care and services without jeopardizing appropriate medical care for injured workers."[9] D.C. Council, Report on Bill 8-74 *410 at 19 (July 6, 1990). Observing that the legislature's intent was to adopt "a utilization review paradigm," the Compensation Review Board has held that, if there is a dispute about the necessity of proposed medical treatment, utilization review is the mandatory first step in the resolution of that dispute. Gonzalez v. UNICCO Serv. Co., CRB No. 07-005, 2007 WL 867067, at *13, 2007 DC Wrk. Comp. Lexis 95, at *39 (Feb. 21, 2007) (Utilization review under § 32-1507(b)(6) is "the exclusive and mandatory procedure envisioned by the legislature for resolution of all disputes arising under the Act which relate to `the necessity, character, or sufficiency of any medical care or service furnished or scheduled to be furnished.'").[10] In this case petitioner initiated utilization review, and neither party asks us to decide that the UR process is optional, rather than mandatory. We therefore assume that it is mandatory, without deciding the question, and focus on whether the UR process was completed.
A medical care provider who disagrees with the UR report may request that the reviewer reconsider his or her decision. "The request for reconsideration shall be written and contain reasonable medical justification for the reconsideration." D.C.Code § 32-1507(b)(6)(C). "Disputes between a medical care provider, employee, or employer on the issue of necessity, character, or sufficiency of the medical care or service furnished, or scheduled to be furnished, ... shall be resolved by the Mayor upon application for a hearing on the dispute by the medical care provider, employee, or employer." D.C.Code § 32-1507(b)(6)(D). The Board has explained that the Act is "designed" to give the responsibility for resolving disputes about medical care "first to an accredited `utilization review' person or organization, and then, in the instance of a continuing dispute, to this Agency through a formal hearing." Gonzalez, 2007 WL 867067, at *15, 2007 DC Wrk. Comp. Lexis 95, at *45. The utilization review report is not binding on DOES, but we have held that if the agency disagrees, it must "address specifically this report and articulate reasons why this report is being rejected."[11]Sibley Mem'l Hosp. v. District of Columbia Dep't of Employment Servs., 711 A.2d 105, 107 (D.C.1998).
The Board has held that a party or medical care provider may seek a hearing before the agency to contest the UR determination only if the mandatory UR process has been completed. Haregewoin[12] v. *411 Loews Washington Hotel, CRB No. 08-068, 2008 WL 788313, at *3, 2008 DC Wrk. Comp. Lexis 32, at *8-9 (Feb. 19, 2008) (holding that if utilization review "procedures have not been exhausted, a formal hearing on the reasonableness and necessity of the requested medical care is premature"). The Board has also held that utilization review is complete only if there has been a request for reconsideration. Chaupis v. George Washington Univ., CRB 08-075, 2008 WL 965886, at *6, 2008 DC Wrk. Comp. Lexis 45, at *18 (March 4, 2008) ("a request for reconsideration ... is required by the statute"); Chaupis, 2008 WL 965886, at *6, 2008 DC Wrk. Comp. Lexis 45, at *17 ("failure to follow the reconsideration provisions results in the UR determination becoming dispositive").
Petitioner argues that Ms. McCormick was not entitled to agency review of her dispute over the appropriateness of the knee replacement because: 1) utilization review must be completed, 2) utilization review is completed only if there has been a request for reconsideration, 3) only the medical care provider may request reconsideration, and 4) Dr. Azer did not request reconsideration. The Board avoided the force of this syllogism by clarifying the process to permit a claimant or employer to seek a formal hearing regardless of whether the medical care provider requests reconsideration. It held "that the UR process is complete, for the purposes of obtaining a formal hearing by the claimant or employer, upon obtaining the initial UR report." McCormick, 2009 WL 345799, at *5, 2009 DC Wrk. Comp. Lexis 11, at *15.
The Board reached this conclusion by focusing on the statutory provision authorizing requests for reconsideration and thereafter reversing a portion of its holding in Chaupis.[13] It emphasized that, under D.C.Code § 32-1507(b)(6)(C), the right to request reconsideration "is not given to anyone other than the medical care provider. Specifically, it is not given to either the employer or the claimant."[14]McCormick, *412 2009 WL 345799, at *5, 2009 DC Wrk. Comp. Lexis, at *13. The Board therefore clarified "that the final step in the statutory [UR] process insofar as the parties [the claimant and the employer] are concerned is the UR report." McCormick, 2009 WL 345799, at *5, 2009 DC Wrk. Comp. Lexis, at *14.
The Board's clarification of the Act in this case is reasonable in light of the statute's purpose and its plain language. The statute does not explicitly address whether a physician's failure to request reconsideration could extinguish a claimant's right to apply for a formal hearing: although the provision for a hearing (§ 32-1507(b)(6)(D)) immediately follows the provision allowing the medical care provider to request reconsideration (§ 32-1507(b)(6)(C)), it does not refer to or mention reconsideration. This omission creates ambiguity which an agency charged with administering a statute may resolve. Moreover, the statute is not silent with respect to a claimant's right to seek a formal hearing: the Act unambiguously and plainly gives the claimant, as well as the employer and the medical care provider, the right to contest a utilization review determination before the agency. D.C.Code § 32-1507(b)(6)(D); see Chaupis, 2008 WL 965886, at *5, 2008 DC Wrk. Comp. Lexis 45, at *15 ("it is established that ... a formal hearing is available to resolve a dispute that remains following the UR process"). Finally, according to the plain language of the statute, only the medical care provider "shall have the right to request reconsideration of the opinion by the utilization review organization or individual...." D.C.Code § 32-1507(b)(6)(C).
Rather than permitting a medical care provider's inaction to deprive a claimant of his or her right to an agency hearing, the Board now allows a claimant to seek a hearing even if the medical care provider has not sought reconsideration: "the UR process is complete, for the purposes of obtaining a formal hearing by the claimant or employer, upon obtaining the initial UR report."[15] This interpretation is not plainly wrong, unreasonable, or inconsistent with the plain language of the statute, and we will not disturb it. Watergate East, 953 A.2d at 1043.
V. Conclusion
The judgment of the Compensation Review Board is hereby
Affirmed.
NOTES
[1] Synvisc is a compound used as a joint lubricant in the treatment of osteoarthritis.
[2] A few jurisdictions expressly limit this principle by requiring that, where there is a preexisting condition, the aggravating injury must "significantly" or "substantially" accelerate the need for treatment. See, e.g., N.D.CENT.CODE § 65-01-02(10)(b)(7) (2009) (a compensable injury does not include a preexisting condition "unless the employment substantially accelerates its progression or substantially worsens its severity"); ME.REV.STAT. ANN. tit. 39-A § 201(4) (2009) ("If a work-related injury aggravates, accelerates or combines with a preexisting physical condition, any resulting disability is compensable only if contributed to by the employment in a significant manner."). While our jurisdiction does not have such an express limitation specifically linked to acceleration, all forms of aggravation are subject to the "substantially greater disability" language in the statutory provision dealing with preexisting conditions. D.C.Code § 32-1508(6)(A).
[3] Petitioner further argues that Dr. Azer's opinion should be discounted because it was offered in an effort to get his bills paid. This is also a matter of assessing the weight of the evidence, which is the ALJ's role.
[4] Dr. Azer advised claimant in October 2006 that "in the foreseeable future she will most likely need a knee replacement." He later explained: "When in the future, obviously, is totally unpredictable because it depends upon symptoms." Notes from a visit to her primary care doctor almost a year later state only that she "may need knee surgery." And while petitioner asserts that "according to the treating physician, the Claimant's need for surgery was imminent, before the alleged injury," Dr. Azer, in an unusual choice of words, testified only that "total knee replacement is going to be imminent at some point."
[5] Petitioner also claims that the injury was not causally related because there was no direct trauma to the knee. However, petitioner points to no evidence that the absence of a direct blow means that the injury was necessarily insufficient to aggravate claimant's pre-existing condition. Moreover, we have held that compensable injuries may occur without direct trauma. See Ferreira, 531 A.2d at 656 ("This jurisdiction has repeatedly rejected the notion that a `specific traumatic injury' is necessary to establish a prima facie case of an `accidental injury.'"); see also King v. District of Columbia Dep't of Employment Servs., 742 A.2d 460, 468 (D.C.1999) (discussing aggravation caused by "cumulative trauma").
[6] In the year before the accident, Dr. Azer gave the same injections to both knees, although with some variations. In October 2006, he injected a steroid first into her right knee, then injected the left a week later; in April 2007, he injected a steroid into her left knee first, then injected the right a month later. When he gave her the Synvisc injections, he injected both knees at each of the three visits.
[7] The ALJ concluded that Dr. Azer's "assessment provides a more logical rationale for Claimant's medical condition" and relied as well on the treating physician preference. However, the ALJ also remarked that the IME "appears to concede [that the injury] aggravated the preexisting condition." Considered in isolation, this latter comment would cause us concern because, when the IME used the word "aggravate," he meant only that the injury caused a flare-upa temporary injury that subsided and left no net damage. While this passage of the compensation order could have been more clear, we are satisfied that the ALJ understood that the IME thought the injury did not cause or accelerate the need for a knee replacement. The ALJ accurately paraphrased the IME's view as stating the injury "in no way hastened the need for knee replacement" and acknowledged that the IME "ultimately concluded the work incident did not worsen Claimant's arthritic condition."
[8] The relevant portions of D.C.Code § 32-1507(b)(6) are as follows:
(6) Any medical care or service furnished or scheduled to be furnished under this chapter shall be subject to utilization review. Utilization review may be accomplished prospectively, concurrently, or retrospectively.
(A) In order to determine the necessity, character, or sufficiency of any medical care or service furnished or scheduled to be furnished under this chapter and to allow for the performance of competent utilization review, a utilization review organization or individual used pursuant to this chapter shall be certified by the Utilization Review Accreditation Commission.
(B) When it appears that the necessity, character, or sufficiency of medical care or service to an employee is improper or that medical care or service scheduled to be furnished must be clarified, the Mayor, employee, or employer may initiate review by a utilization review organization or individual.
(C) If the medical care provider disagrees with the opinion of the utilization review organization or individual, the medical care provider shall have the right to request reconsideration of the opinion by the utilization review organization or individual 60 calendar days from receipt of the utilization review report. The request for reconsideration shall be written and contain reasonable medical justification for the reconsideration.
(D) Disputes between a medical care provider, employee, or employer on the issue of necessity, character, or sufficiency of the medical care or service furnished, or scheduled to be furnished, or the fees charged by the medical care provider shall be resolved by the Mayor upon application for a hearing on the dispute by the medical care provider, employee, or employer. A party who is adversely affected or aggrieved by the decision of the Mayor may petition for review of the decision by the District of Columbia Court of Appeals.
[9] The District enacted utilization review at a time when many states were adding utilization review requirements, adapted from the procedures of managed care organizations, to their workers' compensation statutes. See Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 45-47, 119 S.Ct. 977, 143 L.Ed.2d 130 (1999) (discussing the adoption of utilization review by Pennsylvania in 1993); see also Gerald W. Tracy, The Importation of Managed Care to the Workers' Compensation System: Time for Re-evaluation and Re-direction, 9 HEALTH LAWYER 16 (1997).
[10] Although the Board used the term "exclusive" in this discussion from Gonzalez, it clarified in this case that "we did not hold, or intend to suggest or imply that such issues could never be brought to a formal hearing." McCormick, 2009 WL 345799, at *3, 2009 DC Wrk. Comp. Lexis 11, at *10 (citing Gonzalez, 2007 WL 867067, at *13, 2007 DC Wrk. Comp. Lexis 95, at *39).
[11] The Board has held that at a formal agency hearing on the necessity or sufficiency of care, as opposed to causation, there is no preference for the opinion of either the medical care provider or the utilization reviewer. Haregewoin, 2008 WL 788313, at *3, 2008 DC Wrk. Comp. Lexis 32, at *8 ("[W]e view [§ 32-1507(b)(6)] as placing an obligation upon the ALJ to weigh the competing opinions based upon the record as a whole, and to explain why the ALJ chose one opinion and not the other, but [the statute] does not require that either opinion be given an initial preference."); see also Green v. Washington Hosp. Ctr., CRB No. 08-208, 2009 WL 2058375, at *3, 2009 DC Wrk. Comp. Lexis 107, at *10 (June 17, 2009) ("On the question of reasonableness and necessity, the UR is not `dispositive,' but rather . . . stands on equal `preferential' footing with an opinion of a treating physician.").
[12] The claimant's last name is actually Desta. See Lopez v. The Chimes, Inc., AHD No. 07-295B, 2009 WL 5214395, n. 5, 2009 DC Wrk. Comp. Lexis 318 (Dec. 29, 2009).
[13] District of Columbia Municipal Regulations provide that agency review panels are not bound by stare decisis. 7 DCMR § 255.6 (2005) ("A Review Panel decision with respect to an issue constitutes persuasive authority for and with respect to, any subsequent Review Panel decision rendered addressing the same issue.")
The Board previously assumed that an "aggrieved party" could request reconsideration. Gonzales, 2007 WL 867067, at *9, 2007 DC Wrk. Comp. Lexis 95, at *28 ("[T]he reconsideration request is to be made either by a medical care provider directly, or by a party through the use of a medical report.") (dictum). Thus, the Board held in Chaupis that "[i]t is a requirement of [the UR] process that reconsideration be requested where a party wishes to contest the outcome of a review; failure to request such reconsideration renders the UR conclusion dispositive." 2008 WL 965886, at *6, 2008 DC Wrk. Comp. Lexis 45, at *18.
[14] The Board explained that "[t]he statutory `right to request reconsideration' is solely a right belonging under the Act to the physician (a right that he/she would not otherwise have, given that the UR process is a statutory creation in a workers' compensation adjudication system to which the physician is not a direct party)." McCormick, 2009 WL 345799, at *5, 2009 DC Wrk. Comp. Lexis 11, at *14. It "view[ed] the subsection as giving the physician the right to request reconsideration if he/she wants to advocate for the patient, or if he/she wants to assist in getting a Compensation Order in order to receive payment for a procedure already undertaken, if he/she wishes to assist in getting authorization for a procedure before undertaking to perform it so as to not risk performing it and not getting paid, or for some other purpose." McCormick, 2009 WL 345799, at *5, 2009 DC Wrk. Comp. Lexis 11, at * 13. In this discussion, the Board likely had in mind the provisions of D.C.Code § 32-1507(b)(7): "Medical care providers shall not hold employees liable for service rendered in connection with a compensable injury under this chapter."
[15] We observe that the Board's interpretation would in some cases permit a claimant or employer to proceed to a formal hearing contesting the UR report before the sixty-day window in which the medical provider may seek reconsideration has closed. Indeed, that is what happened herethe UR report was issued on September 19, and the formal hearing took place on October 2. We see nothing in the statute that precludes this result. If the medical provider seeks reconsideration, however, it would be important for the ALJ to consider the results of that process. The Board has sensibly remarked (in dictum) that if a medical care provider requests reconsideration within the sixty-day period, an ALJ should hold a formal hearing in abeyance "pending the results of that reconsideration." Yates v. The Washington Times, CRB No. 08-195, 2009 WL 345802, at *4, n. 5, 2009 DC Wrk. Comp. Lexis 10, at *10, n. 5 (Jan. 30, 2009). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548612/ | 25 F.2d 303 (1928)
SUN-MAID RAISIN GROWERS OF CALIFORNIA
v.
AVIS et al.
No. 7411.
District Court, N. D. Illinois, E. D.
April 12, 1928.
Cromwell Greist & Warden, of Chicago, Ill., for plaintiff.
Bartel & McCormick, of Chicago, Ill., for defendants.
LINDLEY, District Judge.
Plaintiff, a nonprofit, co-operative agricultural association, organized under the laws of the state of California, brought this suit against defendants to enjoin them from threatening plaintiff and its customers with suit for infringement by reason of the manufacture and sale of plaintiff's raisin syrup. Defendants Avis, Ameer, Younan, and Baboo are owners of patent 1,381,613, granted June 14, 1921, for grape syrup. Service was procured upon only one of them, Ameer; the others being nonresidents of this district. There is no evidence against defendant, Bartel, and the suit is dismissed as to him for want of equity, at the costs of plaintiff.
On March 31, 1926, defendant Ameer and his co-owners of the patent served a formal notice of infringement upon plaintiff and the Sun-Maid Raisin Growers' Association. Plaintiff denied the infringement, and suggested to defendants that, in order to determine whether there was infringement, the latter institute suit. On January 17, 1927, the patentees, having demanded $500,000 for a sale of the Avis patent, and having received an offer of only $10,000, sent to each member of the advisory council of plaintiff a letter, notifying them personally, and as representatives of the plaintiff and of the Sun-Maid Raisin Growers' Association, a Delaware corporation, and its subsidiaries, and as representatives of the individual members of the Sun-Maid Raisin Growers of California, that suit would be begun for infringement unless the manufacture and sale of grape syrup ceased. On August 15, 1927, patentees sent to various customers of plaintiff letters notifying them that they were infringing and threatening suit, and in September of 1927 plaintiff instituted this suit. Plaintiff has at all times denied the infringement, and stated that it is ready and anxious to defend any suit which defendants might elect to bring. No such suit had been brought, although acts sufficient to constitute infringement have occurred in this district.
Plaintiff has a membership of approximately 13,000 raisin grape growers, and its corporate activities are centered in the marketing of these grapes. It owns the stock of the Delaware corporation, Sun-Maid Raisin Growers' Association, which manufactures *304 for plaintiff into raisins and raisin syrup the grapes grown by plaintiff's members. The products are sold by Sunland Sales Co-operative Association and Sunland Sales Association. Plaintiff receives all of the profits from the manufacture and sale of its goods. The good will of the business is in plaintiff. The other corporations exist merely for the purpose of carrying out its corporate activities, and the products are put out under plaintiff's name. The notices complained of have been sent to the plaintiff, its subsidiaries, the advisory council of the plaintiff, and to plaintiff's customers, and have extended over a substantial period. The letter of August 15, 1927, was sent to a great number of customers, some of whom did not handle the syrup alleged to be an infringement but purchased only raisins, about which there was no complaint. Not being purchasers of syrup, some of these customers were immediately alarmed concerning the sale of such products of plaintiff as they were handling, and demanded guaranties. Plaintiff was compelled in many instances to execute such guaranties and to circularize its trade, advising its patrons that it stood ready and willing to protect them. The acts complained of, therefore, were of three characters: (1) To threaten plaintiff and its subsidiaries; (2) to threaten plaintiff's growers and source of supply; and (3) to threaten the trade. They were successive in time, covering a period of nearly two years. The customers thus far addressed are limited to the localities of Fresno, Los Angeles, and Chicago, and plaintiff contends that a similar letter sent to dealers in other important centers will have a most demoralizing effect upon its agents and selling organization. It avers a desire for the opportunity to conduct its business peacefully and without oppressive threats of infringement concerning it and its customers. The defendant contends it has no intention of sending further notices or making further threats.
The court is of the opinion that the application for injunction should be allowed. The law announced in the cases of Emack v. Kane et al. (C. C.) 34 F. 47; Racine Paper Goods Co. v. Dittgen (C. C. A.) 171 F. 631, at 633; Atlas Underwear Co. v. Cooper Underwear Co. (D. C.) 210 F. 347; Panay v. Aridor (C. C. A.) 292 F. 858; Adriance, Platt & Co. v. National Harrow Co. et al. (C. C. A.) 121 F. 827; and A. B. Farquhar Co., Limited, v. National Harrow Co. (C. C. A.) 102 F. 714, 49 L. R. A. 755 supports the plaintiff's basis for relief. In the first-mentioned case, Judge Blodgett remarked that a man should not be remediless against persistent and continued attacks upon his business; that, instead of such attacks, the one urging infringement should come into court and seek a determination of the validity of his patent and his rights thereunder; that he should not menace the alleged infringer in circulars, letters, or newspapers, but should exercise due diligence in the prosecution of his suit for damages. The language of the Court of Appeals for this circuit in Racine Paper Goods Co. v. Dittgen is similar. There, as here, plaintiff notified defendants to test their patent in court, and yet defendants failed so to do. The court said: "It is unconscionable that appellant should be permitted to use a grant from the government to work a wrong upon appellee without bringing suit to secure a judicial determination. An injunction granted in a proceeding for that purpose would have afforded clearly defined limits to appellant's claims. The course pursued by it herein, by reason of its very indefiniteness, is more onerous and oppressive than would be the order of a court. It was practically prohibitive. It is one of the well-established powers and duties of a court of equity to remedy wrongs such as are here disclosed." In the case of Atlas Underwear Co. v. Cooper Underwear Co. (D. C.) 210 F. 347, Judge Geiger said: "In view of the widespread infringement, according to the view of the defendant, and particularly in view of the rapid development which confessedly has taken place in the last two years, it would seem that the duty rested peculiarly upon the defendant promptly to assert its right by instituting suits to restrain wrongful infringement of its patent, rather than by inaugurating and carrying on a system of terrorizing the trade."
The proper forum for the trial of the controversy between plaintiff and defendants is the court, not circulars and futile correspondence. Only a chancellor receiving all of the evidence may adjudicate the controverted question. Where, as here, there is an entire failure thus upon the patentee's part to assert its rights in a proper forum, the court can only conclude there is some ulterior motive in his actions. As heretofore stated by the Circuit Court of Appeals for this circuit, "the practice of trying suits in newspapers or circulars, in order to scare or daunt competitors, is pernicious." See Panay v. Aridor (C. C. A.) 292 F. 858.
Defendant contends that his co-owners of the patent are necessary parties defendant, and that, because they are not served *305 with process, this court is without jurisdiction. The writer had occasion to consider the subject of indispensable parties in the recent case of Equitable Trust Co. v. Denney et al., in the Circuit Court of Appeals. The nonresident defendants are not indispensable parties. The court cannot be ousted of its jurisdiction to determine the merits as between plaintiff and defendant because it happens that certain other defendants live out of the district.
Defendant contends also that there is no jurisdictional amount involved. Plaintiff here seeks to continue its business free from oppressive interference by defendant. The evidence shows that business to be extensive and valuable; that some 800 tons of plaintiff's raisin syrup and 30,000 tons of plaintiff's raisins were sold in the territory of Chicago alone in the past two years. The case of Glenwood Light & Water Co. v. Mutual Light, Heat & Power Co., 239 U. S. 121, 36 S. Ct. 30, 60 L. Ed. 174, is directly in point. There the court said:
"We are unable to discern any sufficient ground for taking this case out of the rule applicable generally to suits for injunction to restrain a nuisance, a continuing trespass, or the like, viz. that the jurisdictional amount is to be tested by the value of the object to be gained by complainant. The object of the present suit is not only the abatement of the nuisance, but (under the prayer for general relief) the prevention of any recurrence of the like nuisance in the future. In Mississippi & M. R. Co. v. Ward, 2 Black, 492, 17 L. Ed. 311, 314, it was said: `The want of a sufficient amount of damage having been sustained to give the federal courts jurisdiction will not defeat the remedy, as the removal of the obstruction is the matter of controversy, and the value of the object must govern.' The same rule has been applied in numerous cases, and under varying circumstances. * * *
The District Court erred in testing the jurisdiction by the amount that it would cost defendant to remove its poles and wires where they conflict or interfere with those of complainant, and replacing them in such a position as to avoid the interference. Complainant sets up a right to maintain and operate its plant and conduct its business free from wrongful interference by defendant. This right is alleged to be of a value in excess of the jurisdictional amount, and at the hearing no question seems to have been made but that it has such value. The relief sought is the protection of that right, now and in the future, and the value of that protection is determinative of the jurisdiction."
In view of the foregoing, it follows that there will be a decree for the plaintiff against the defendant Ameer, as prayed, at defendant's costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548534/ | ATLE LYGREN, Appellant,
PARFI HOLDING AB, GUNNAR GILLBERG, PLENTEOUS CORP. and GRANDSEN, LTD., Plaintiffs Below-Appellants,
v.
MIRROR IMAGE INTERNET, INC., XCELERA.COM, INC., ALEXANDER M. VIK, GUSTAV VIK and HANS MAGNUS FAJERSON, Defendants Below-Appellees.
No. 10, 2010.
Supreme Court of Delaware.
Submitted: February 15, 2010.
Decided: February 23, 2010.
Before STEELE, Chief Justice, HOLLAND and BERGER, Justices
ORDER
RANDY J. HOLLAND, Justice.
This 23rd day of February 2010, it appears to the Court that:
(1) This is an appeal from the Court of Chancery's December 8, 2009 order denying the motion of the appellant, Atle Lygren, to reopen a derivative action in the Court of Chancery in order to permit him to join as a party plaintiff. On January 25, 2010, prior to the filing of Lygren's opening brief, the appellees filed a motion to dismiss the appeal on the grounds that Lygren forfeited any claim to appellate standing by failing to timely intervene in the Court of Chancery proceedings and Parfi Holding AB ("Parfi") and Plenteous Corp. ("Plenteous") may not appeal because they are not represented by counsel. We conclude that the motion to dismiss should be granted on those grounds.
(2) The record reflects that, in a memorandum opinion dated September 4, 2008 and in an order dated September 11, 2008, the Court of Chancery dismissed the derivative claims brought by Parfi and Plenteous. On October 14, 2008, Lygren filed a pro se notice of appeal in this Court in No. 518, 2008, even though he was not a party to the underlying action. Lygren, who is not an attorney, identified himself as the "representative" of appellants Parfi and Plenteous.
(3) On October 15, 2008, this Court directed Lygren to have counsel enter an appearance on behalf of the corporate appellants on or before October 27, 2008. Instead of obtaining counsel as directed by the Court, however, Lygren filed a "motion for substitution," which sought to substitute him for appellants Parfi and Plenteous on the basis of an alleged assignment of their rights to Lygren. The Court denied the motion on the grounds that a) Lygren's failure to intervene in the Court of Chancery had worked a forfeiture of any claim of appellate standing; and b) Lygren's claim was a transparent attempt to circumvent the Court's requirement that counsel be obtained.[1] The Court also denied Lygren's subsequent motions for reargument[2] and for a rehearing en banc.[3]
(4) Dismissal under Supreme Court Rule 29(b) "may be ordered . .. for failure to comply with any . . . order of the Court, or for any other reason deemed by the Court to be appropriate." The record in this case reflects that this Court previously ruled that Lygren forfeited any claim of appellate standing by failing to timely intervene in the Court of Chancery action. That ruling is the law of the case.[4] Moreover, corporate appellants Parfi and Plenteous may not pursue this appeal because they are not represented by counsel, as required by Delaware law.[5] Because neither Lygren nor the corporate entities may pursue this appeal, we conclude that it must be dismissed.
NOW, THEREFORE, IT IS ORDERED that the appellees' motion to dismiss is GRANTED.
NOTES
[1] Parfi Holding AB v. Mirror Image Internet, Inc., Del. Supr., No. 518, 2008, Berger, J. (Jan. 12, 2009).
[2] Parfi Holding AB v. Mirror Image Internet, Inc., Del. Supr., No. 518, 2008, Berger, J. (Jan. 29, 2009).
[3] Parfi Holding AB v. Mirror Image Internet, Inc., Del. Supr., No. 518, 2008, Berger, J. (Feb. 2, 2009).
[4] Cede & Co. v. Technicolor, Inc., 884 A.2d 26, 38-39 (Del. 2005).
[5] Transpolymer Indus., Inc. v. Chapel Main Corp., Del. Supr., No. 284, 1990, Horsey, J. (Sept. 18, 1990). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548939/ | 119 F.2d 157 (1941)
BLOOMFIELD VILLAGE DRAIN DIST. et al.
v.
KEEFE et al., and four other cases.
Nos. 8560, 8561, 8573, 8575, No. 8583.
Circuit Court of Appeals, Sixth Circuit.
March 14, 1941.
*158 *159 Nos. 8560, 8561:
Frank C. Cook and John P. O'Hara, both of Detroit, Mich. (Charles L. Wilson and Harry J. Merritt, both of Pontiac, Mich., and John Conway Cook, of Detroit, Mich., on the brief), for appellants.
Irvin Long, of Detroit, Mich., and David M. Wood, of New York City (Goodenough, Voorhies, Long & Ryan and Dykema, Jones & Wheat, all of Detroit, Mich., and Thomson, Wood & Hoffman, of New York City, on the brief), for appellees.
Nos. 8573, 8575, 8583:
Hugh Francis and John H. Yoe, both of Detroit, Mich., Charles Retzlaff, of East Detroit, Mich., and Bert V. Nunneley, of Mt. Clemens, Mich. (Alex J. Groesbeck, of Detroit, Mich., Kenneth J. McCallum, of East Detroit, Mich., and Younglove & Chockley, of Detroit, Mich., on the brief), for appellants.
Elroy O. Jones, of Detroit, Mich., David M. Wood, of New York City, and William N. Gall, of Detroit, Mich. (Goodenough, Voorhies, Long & Ryan and Dykema, Jones & Wheat, all of Detroit, Mich., and Thomson, Wood & Hoffman, of New York City, on the brief), for appellees.
Before ALLEN, HAMILTON, and MARTIN, Circuit Judges.
ALLEN, Circuit Judge.
Appellees, a committee for holders of bonds of certain Michigan drain districts, brought class suits against appellants, the five drain districts, Oakland County and Macomb County, the City of East Detroit, the Village of Centerline, and the Townships of Erin, Lake, and Warren, and various officials and taxpayers thereof, asking that the bonds be decreed to be valid obligations of the drain districts, that the special assessments therefor be held enforceable, and for other equitable relief. *160 Each of the drain projects has already been found in Michigan state court actions to be predominantly a sewer project and therefore illegal and void under Michigan law, the Bloomfield Village drain and the Bloomfield No. 1 storm sewer drain in Meyering Land Co. v. Spencer, 273 Mich. 703, 263 N.W. 777, and Detroit Fire & Marine Ins. Co. v. Oakland County, 284 Mich. 130, 278 N.W. 791, the Nine Mile-Halfway drain in Township of Lake v. Millar, 257 Mich. 135, 241 N.W. 237, and Center Line relief drain and the Martin drain and Branches drain in a judgment of the Circuit Court of Macomb County, Michigan, in Townshop of Erin v. County of Macomb, and other similar cases in which no appeal was taken from the judgment rendered in the Circuit Court. The question of the liability of the county is not present as to the Nine Mile-Halfway or Bloomfield Village bonds, since they antedated the enactment of Act 331 of Michigan Public Acts of 1927, c. 10, Section 15, p. 796, which provides in substance that if the amount available in the drain fund is insufficient, the county shall advance the sum out of its general fund. Otherwise the controlling questions are identical in all cases, and we decide them as one. The cases were referred to a special master, and his report in each case was confirmed by the court. The master decided that all of the projects are illegal under Michigan law; that the bonds are in the hands of purchasers in good faith without notice; that the drain commissioner had the power to issue them; that the bondholders were entitled to rely upon the truth of the recitals in the bonds, and that appellants were estopped to deny the truth of such recitals and to set up the defense of illegality. In each case the District Court held that the bonds were binding obligations; that the assessments levied to pay the bonds were legal and valid, and ordered the officials of the drain districts, and Oakland and Macomb counties, to enforce collection of the special assessments, and ordered that funds to pay the maturing bonds be advanced by the counties of Oakland and Macomb in the event the funds of the drain districts are insufficient. Appellants were enjoined from interfering in any manner with the collection of assessments or payment of the bonds. In the cases involving the two Bloomfield projects the decree specifically enjoined the institution of any proceedings to enforce the decrees of the Supreme Court of Michigan in Meyering Land Co. v. Spencer, supra.
Appellants urge that the judgments must be reversed because (1) under the Judicial Code, the federal court has no judisdiction; (2) appellees sought to confer jurisdiction upon the District Court by collusion; (3) the burden is on appellees to prove that they are holders in good faith and for value without notice of the illegality of the projects, and no such evidence exists in the record; (4) the bond issues are not negotiable under Michigan law; (5) the decisions in the state courts listed above are binding upon appellees because the county drain commissioner represented their interests in those cases.
The jurisdictional question arises under Section 24(1) of the Judicial Code, Title 28, U.S.C., Section 41(1), 28 U.S.C.A. § 41(1) which provides:
"* * * No district court shall have cognizance of any suit (except upon foreign bills of exchange) to recover upon any promissory note or other chose in action in favor of any assignee, or of any subsequent holder if such instrument be payable to bearer and be not made by any corporation, unless such suit might have been prosecuted in such court to recover upon said note or other chose in action if no assignment had been made. * * *"
While the bonds were originally purchased by residents of Michigan, they were resold to various individuals, some of them nonresidents, at not less than par and accrued interest. Since they were bearer bonds, the jurisdictional question turns upon the point whether they were issued by "any corporation."
The master decided that while the bonds were choses in action, the drain districts were corporations and that the case therefore falls within the exception of the statute. Appellants attack this conclusion upon the ground that the bonds clearly were not issued by a corporation, relying mainly upon the decision in Spiegel v. Barrett, 189 Mich. 111, 155 N.W. 456, rendered in 1915, to the effect that special assessment drainage districts are not corporations. The Supreme Court of Michigan stated in that case:
"Under our drainage law, the special assessment drainage districts are not corporations, as have been created in certain states Illinois, for example where the *161 statute bestows powers to contract and be contracted with, to sue and be sued, upon such districts. Here they have no corporate entity, and are created simply for the purpose of collecting taxes from the benefited land for the construction of the drain." 189 Mich. at page 114, 155 N.W. at page 456.
This opinion was announced at a time when under Michigan law a drainage district was not empowered to issue bonds. In 1917 the Michigan Constitution was amended to provide (Art. VIII, § 15a) that a drainage district "may issue bonds for drainage purposes within such district," and subsequently, but prior to the issuance of the bonds in suit, statutes were enacted specifically providing for the exercise of this power. Obviously the Spiegel case is not controlling here, for drainage districts now have the power to contract and be contracted with, to sue and be sued, as do the Illinois drainage districts alluded to in the Spiegel case.
Since no subsequent Michigan decision is cited upon the point, we lack the authoritative guidance of the state courts. Bearing in mind that the drain district is not denominated a corporation either in the Constitution or statutes of Michigan, we think that the holding of the master and the District Court is correct. Within the meaning of Section 24(1), the term "corporation" includes municipal corporations (Loeb v. Trustees of Columbia Tp., 179 U.S. 472, 21 S.Ct. 174, 45 L.Ed. 280) and counties. Scott County, Ark., v. Advance-Rumley Thresher Co., 8 Cir., 288 F. 739, 36 A.L.R. 937. In the Scott County case, a state statute had sought to repeal any laws making counties corporations and authorizing them to sue and be sued; but the court held that while counties are different and distinguishable from municipal corporations, and have generally a less measure of corporate life, they are corporations under the federal statute. Cf. Cowles v. Mercer County, 7 Wall. 118, 19 L.Ed. 86, which held the board of supervisors of a county to be a corporation within the meaning of the statute.
Under the reasoning of these cases, while the drain district has a less measure of corporate life than a city, it exhibits the essential characteristics of a public corporation. It is capable of acting as an entity (Royal Oak Drain Dist. v. Keefe, 6 Cir., 87 F.2d 786, 790), with an existence independent of its members and capable of being sued as obligor on its bonds. It acts in a single name fixed by law, and has succession. Hancock v. Louisville & N. R. Co., 145 U.S. 409, 12 S.Ct. 969, 36 L.Ed. 755. Bodies exercising similar functions have been held to be corporations, although not specifically so named in the statutes, as, for instance, trustees of schools and school lands (Connell v. Woodard, 5 How. 665, 6 Miss. 665, 37 Am.Dec. 173), a board of water commissioners (O'Leary v. Board of Fire & Water Com'rs, 79 Mich. 281, 44 N.W. 608, 7 L.R.A. 170, 19 Am.St.Rep. 169), a board of managers of an exposition. Gross v. Kentucky Board of Managers, 105 Ky. 840, 49 S.W. 458, 43 L.R.A. 703. The drain district has officers, for the county drain commissioner is an officer representing the drain district. Brooks v. County of Oakland, 268 Mich. 637, 256 N.W. 576. The drain district exercises property rights, and is treated by the Michigan Legislature as an entity for assessment purposes. Comp.Laws of Michigan, 1929, Sections 4917, 4940. The funds of the drainage district, while in the custody of the county, must be kept separate from other funds, and the commissioner must levy an additional assessment to make up deficiencies in the fund as bond installments mature.
We conclude that the District Court did not err in holding that the federal court has jurisdiction under Section 24(1).
Nor are we impressed by the contention that the appellees sought by collusion to confer jurisdiction upon the District Court. This argument is based upon the fact that after the Michigan court had held analagous drain proceedings void, a committee was formed in New York City, which by letter solicited all known holders of the bonds, both resident and nonresident, for deposit of their bonds, stating that suit should be instituted in the federal court, proposing that each depositing bondholder should bear a pro rata share of the expenses of such litigation, and enclosing a copy of the suggested deposit agreement.
Appellants urge that the committee created a diversity of citizenship not theretofore existing; that actual control of the bonds was in no way conferred upon the committee, and that the suit must necessarily be dismissed as to all holders of bonds, residents of Michigan. The record shows that only two of the individual holders in the Bloomfield cases were actually *162 nonresidents. However, under the federal decisions the facts do not constitute evidence of collusion. The deposit agreement is substantially identical with that passed upon by this court in Royal Oak Drain Dist. v. Keefe, supra, wherein upon the authority of Bullard v. Cisco, 290 U.S. 179, 54 S.Ct. 177, 78 L.Ed. 254, 93 A.L.R. 141, the court held that there was a valid transfer in trust of legal title to the deposited bonds and that jurisdiction of the federal court was lawfully invoked. The motive for the transfer, under familiar principles, is immaterial. Curb & Gutter Dist. No. 37 v. Parrish, 8 Cir., 110 F.2d 902. As in the Bullard case, the transactions were not colorable nor feigned, and the bondholders have the right to select the jurisdiction as between the state and federal courts. Cohens v. Virginia, 6 Wheat. 264, 278, 5 L.Ed. 257; Pennsylvania v. Williams, 294 U.S. 176, 55 S.Ct. 380, 79 L.Ed. 841, 96 A.L. R. 1166.
It is also urged that appellees are not holders in good faith because the original purchasers, the bond houses which negotiated the sale of the issues, knew of the illegality of the projects and therefore the burden is upon the holders to show purchase in good faith and without notice. The record shows that the bond house which negotiated the bonds for the Bloomfield projects put out a circular stating that "These bonds are issued to construct an adequate sewerage and drainage system for the district." However, this is far from indicating that it knew that sewerage was the primary purpose of the project, and that hence it was illegal and void. Par and accrued interest were paid for the bonds, and the Supreme Court of Michigan at the time when the bonds were marketed had not rendered its decisions in the Meyering Land Co. and Detroit Fire & Marine Ins. Co. cases, supra. The defense of mala fides is clearly untenable.
We do not pass upon the negotiability of the bonds. Whether or not these bonds are negotiable, the holders are entitled to claim that the recitals in the bonds estop the appellants from raising the defense of illegality of the projects. Royal Oak Drain Dist. v. Keefe, supra.
Appellees renew here their contention that the projects are legal, claiming that the recent decision of the Michigan Supreme Court in Detroit Trust Co. v. Dingman, 291 Mich. 170, 289 N.W. 118, requires that we hold that these sewers are primarily drains. This case, however, involves a separate drain project, and the opinion neither curtails not limits the effect of the Meyering Land Co., Detroit Fire & Marine Ins. Co., and Township of Lake, cases, supra, which specifically adjudicate the illegality of both of the Bloomfield drains and the Nine Mile-Halfway drain. The finding of the master, concurred in by the District Court, that the constructions under the applicable interpretation of the Michigan statute are predominantly for sewer purposes, compels us, in the absence of clear mistake, to conclude that the projects are illegal. Assuming that the District Court was correct in holding that the federal court is not bound by the decision of the state courts on factual questions, we think that the Michigan findings with respect to these identical projects are strongly persuasive, that the factual record shows them to be primarily sewers, and that the conclusion of the District Court upon this phase of the case must be affirmed.[1]
We come, then, to the principal question, which is whether, when the Michigan courts have held that these particular projects were constructed wholly without authority so that the projects and all proceedings thereunder are void, the recitals in the bonds estop appellants from defending against the bondholders upon the ground of the illegality of the projects and of the bonds. It was upon this phase of the case that the District Court gave judgment for the bondholders.
In all five drain districts the bonds are substantially identical in form. They contain recitals that the bonds are "issued under authority of and in full compliance with" cited provisions of the Michigan drain law; that they are issued for payment of the cost of construction of the drain in question "under and in pursuance of the statutes aforesaid and by lawful authority," and "that all acts, and conditions and things required to be done, precedent *163 to and in the issuance of this bond in order to make it a binding obligation * * * have been done, have happened and have been performed in due form and time as required by law, and for the prompt payment hereof and the interest hereon the full faith, credit and resources of said Drain District are hereby irrevocably pledged." The bonds of the storm sewer district in addition contain the statement that the county shall advance from its general fund money to pay the bonds and interest thereon under conditions set forth in Act 331, Michigan Public Acts, 1927. All the bonds were signed by the county drain commissioner and countersigned by the county clerk of the county where the particular project was located. The purpose of the bonds was stated to be "for the payment of the cost of construction of" or "in anticipation of the collection of said drain taxes levied for the payment of construction of" the particular project.
In the instant cases the District Court issued sweeping injunctions against the appellants, ordering levies of assessments and advancements by the counties into the drain district funds, enjoining all acts which might hinder or embarrass the collection of the bonds. As a preliminary to the main question, we therefore consider whether the District Court erred in the scope of its decrees.
The theory of estoppel by recital is that the holder of the instrument is entitled to rely upon the facts recited in the bond. Each of the bonds in question certified that all acts had been done in order to make the bonds a binding obligation of the drain district. No bond makes any recital with reference to its being an obligation of the township or municipality in which the project is situated. Only one set of bonds, that of the Bloomfield Storm Sewer Drain District, recites the statutory obligation of the county to advance funds on the projects. None of the bonds is executed by any township, municipal or county officer, with the exception of the county drain commissioner and the county clerk. Under Michigan law the drain commissioner does not represent any political entity except the drain district, and his representations are in no way binding upon the townships, the municipalities or the counties, for none of these political subdivisions is chargeable either with the acts of the drain commissioner or with the acts of its officers in the administration of the drain law. Township of Cooper v. Little, 220 Mich. 62, 64, 189 N.W. 914. Moreover, the county is not liable for the refund of void drain taxes, since the drain commissioner does not act for the county in the establishment of the project. Brooks v. County of Oakland, 268 Mich. 637, 639, 256 N.W. 576. The county clerk is merely the clerical officer of the county. He has no authority to pledge the faith and credit of the county nor to certify on behalf of the county to facts stated in the bonds. His signature is placed upon the instrument as a certification of the authenticity of the signature of the county drain commissioner.
We conclude that appellants other than the drain districts are not estopped to defend upon the ground of illegality of the various projects, and that as the proceedings are plainly null and void under Michigan law, the District Court erred (1) in ordering the appellants, municipal, township and county officials in all cases, to proceed to assess drain taxes in these projects; (2) in issuing injunctions against such officers, and (3) in ordering the counties to make advancements into the drain district funds.
The question of estoppel against the drain districts still remains to be decided.
The decree of the District Court is squarely at variance so far as its holding with reference to the validity of the bonds is concerned, with the decree in the Meyering Land Co. case, supra, in which all preceedings were set aside and held for nought and the drain commissioner for the County of Oakland was held to be without jurisdiction in the premises. The court in that case decreed:
"that the Bloomfield Village Drain District created by said Drain Commissioner for the County of Oakland, in so far as it affects or includes the premises involved in these proceedings, is hereby dissolved and set aside in like manner as if such district had never been included or affected said premises, and that all special assessments heretofore levied and spread upon the rolls of the Township of Bloomfield and County of Oakland against said premises, as a result of the construction of said Bloomfield Village Drain and Bloomfield No. 1 Storm Sewer Drain are hereby set aside and held for naught, and said premises are hereby freed and relieved *164 from any assessments and the liens thereof, in like manner as if such assessments had never been levied against said premises, and all such assessments against said premises shall be forthwith cancelled and removed from the books and records of the Treasurer of the Township of Bloomfield, the Treasurer of the County of Oakland, and the Auditor General of the State of Michigan."
The township treasurer of Bloomfield Township, the county treasurer of Oakland County, and the auditor general of Michigan, their successors in office, their agents, servants, representatives, and attorneys, were enjoined in the Meyering Land Co. case from taking any proceedings of any kind whatsoever to collect any of said assessments and from enforcing or attempting to enforce payment of any such assessments from the owners of such premises, or through sale of the premises against which the assessments were levied, in any manner whatsoever.
In arriving at this conclusion, the Michigan Supreme Court relied upon a number of previous Michigan decisions. In Township of Lake v. Millar, supra, 257 Mich. at pages 141, 142, 241 N.W. at page 239, the court said:
"The question is presented, whether a petition for a drain confers jurisdiction upon the drain commissioner to build a sewer; whether a petition to the drain commissioner to do something within the scope of his authority confers jurisdiction upon him to do something wholly without the scope of his authority; whether a petition to do something he has a right to do confers jurisdiction upon him to do something which he has no right to do; whether upon filing a petition for a drain which he has a right to build, the commissioner may lay out and construct a sewer which he has no right to build. * * * The drain commissioner had no jurisdiction to construct a sewer any more than to construct a Covert road. No one will contend that if the drain commissioner, when the petition for a drain was filed with him, had laid out an assessment district, established and constructed a Covert road, the plaintiffs would have been without remedy. The same legal question is here presented. The proceedings are void for want of jurisdiction."
To the same effect is Clinton v. Spencer, 250 Mich. 135, 229 N.W. 609, which held that such a sewer construction is not a mere irregularity, but that the entire proceedings were void from their inception.
In Kinner v. Spencer, 257 Mich. 142, 241 N.W. 240, the court stated that a petition for a sewer construction conferred no jurisdiction upon the drain commissioner.
In Village of Oak Park v. Van Wagoner, 271 Mich. 450, 260 N.W. 743, 746, the court held that since the statute did not authorize the construction of the projects in question or the assessment of the tax, "The acts of the drain commissioner were without warrant in law, and any tax levied and collected as a result thereof would constitute the taking of property without due process of law. Under such circumstances, no estoppel would arise to bar an action to restrain the collection of the void tax."
The decrees in the Meyering Land Co. and Detroit Fire & Marine Ins. Co. cases, supra, construing as they do the Michigan county drain law, are binding upon this court. Rulings of state courts construing state statutes were binding upon federal courts prior to the announcement of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. Certainly since that decision the federal courts are governed by state law to a greater extent than formerly; but the effect of the holding of the District Court in this case is to set at nought the judgment of the state courts that these projects are absolutely void. The bonds do not recite that the various projects have been determined to be drains rather than sewers, and hence the appellants, in seeking to show that they are in fact sewers and illegal, are not seeking to establish any facts inconsistent with the recitals. While in the Michigan cases involving these projects the bondholders were not joined as parties, it is the law of Michigan that where the projects are illegal not from mere procedural deficiency, but from total lack of authority to construct the projects, bonds issued to defray the expense of such projects are void in the hands of innocent holders, and this law we follow. Erie R. Co. v. Tompkins, supra; Ruhlin v. New York Life Ins. Co., 304 U.S. 202, 58 S.Ct. 860, 82 L.Ed. 1290. The rule that where the issuing officials are completely lacking in power to issue bonds for the particular purpose, bona fide purchasers are not entitled to rely upon recitals in the bonds to the effect that the legal and statutory prerequisites have been complied with, was recognized in Royal Oak Drain Dist. v. *165 Keefe, supra. There this court said that if the drain commissioner had no jurisdiction under Michigan law, he was without power to issue bonds or to create any legal liability whatsoever in the undertaking. In this we followed the Michigan decisions. As declared in Spitzer v. Village of Blanchard, 82 Mich. 234, 244, 46 N.W. 400, 403:
"It is not entirely accurate to say that holders of bonds issued by a municipal corporation will be protected as bona fide purchasers if the corporation could, under any circumstances, issue the same. This question was considered by the Supreme Court of the United States in Dixon County v. Field, 111 U.S. 89, 4 S.Ct. 315, [28 L.Ed. 360], where the proper distinction is drawn as to irregularities in the exercise of the power conferred and the total want of power to do the act. Where there is a total want of power, under the law, in the officers or board who issue the bonds, then the bonds will be void in the hands of innocent holders, the distinction being between questions of fact and questions of law. If it is a question of fact, and the board or officers are authorized by law to determine the fact, then their determination is final and conclusive. And although it may be contrary to the fact, yet, if recited in the bond that the necessary and proper steps required by law to be taken had been taken, then the municipality is estopped from denying that they were taken. But it is held that all persons are presumed to know the law, and if the law created conditions precedent upon which the right to act at all depended, and these conditions were not complied with, and the law appointed no board or officer to determine that fact, then there could not be an innocent holder of such bonds. [Bernards Township] v. Morrison [133 U.S. 523], 10 S.Ct. 333 [33 L.Ed. 766]."
This holding has never been reversed. Hence the test in Michigan as to estoppel raised by recitals in the bonds is whether the officials making the recitals are wholly without power in the premises. If so, no estoppel arises.
Appellants rely upon certain Michigan decisions which they claim are contra, but they are distinguishable in principle. In Thompson v. Village of Mecosta, 127 Mich. 522, 86 N.W. 1044, and Schmid v. Village of Frankfort, 131 Mich. 197, 91 N.W. 131, the villages themselves took part in a false recital, contrary to facts later sought to be asserted. In Gibbs v. School Dist., 88 Mich. 334, 50 N.W. 294, 26 Am.St.Rep. 295, there was not a total lack of power in the officials making the recitals, as here, but failure to comply with statutory provisions.
We are unable, under the Michigan decisions with reference to these drains, to avoid the conclusion that the drain commissioners had no jurisdiction. The holding of the Michigan courts upon this subject is a conclusion of law and binding here. Since the drain commissioners were without jurisdiction, they were totally without power to make recitals binding upon the drain district, and this circumstance is fatal to any claim of estoppel. First Wisconsin National Bank v. Bessemer Tp., 286 Mich. 426, 282 N.W. 203; Spitzer v. Village of Blanchard, supra; Chemical Bank & Trust Co. v. County of Oakland, 264 Mich. 673, 251 N.W. 395. The recital "that all acts, conditions and things required to be done have been performed as required by law" was a legal conclusion upon which no purchaser was entitled to rely. First Wisconsin National Bank v. Bessemer Tp., supra. An examination of the records which the statute required the drain commissioner to maintain (Section 10, c. 2, Act 316, Michigan Public Acts, 1923) would have revealed all the facts necessary for a determination that the project was illegal. A public official who is not empowered to issue bonds cannot create such power by recitals which he may incorporate in the bonds he issues. Portsmouth Savings Bank v. Ashley, 91 Mich. 670, 52 N.W. 74, 30 Am.St.Rep. 511.
The officers of the drain district represented all the creditors of the district, including the bondholders, in the state court cases, and thus appellants had notice and were given their day in court in those cases. In the cases where these projects have been found invalid by the Supreme Court of Michigan or lower state courts whose judgments have become final, the drain commissioners were parties and the holdings were to the effect that such illegality made the entire proceedings void, deprived the drain commissioner of jurisdiction in the premises, and required cancellation of the assessments. Appellees were not made parties to the suits in the state court, and the validity of the bonds was not there in issue, and upon this ground the District Court held that the Michigan decisions did not bind the appellees in the instant cases. However, under *166 the decision of the United States Supreme Court in Kersh Lake Drainage Dist. v. Johnson, 309 U.S. 485, 60 S.Ct. 640, 84 L.Ed. 881, 128 A.L.R. 386, announced subsequent to the decision of the District Court herein, those cases are res judicata as to the determinative facts of this controversy. In the cited case an order of permanent injunction had been issued against the drainage commissioners of a district in Arkansas in a state court action brought by a taxpayer who claimed to have fully paid his drainage assessment. In a later action to collect assessments pursuant to a decree in favor of nonresident bondholders, it was held that the drainage commissioners had represented the bondholders in the original case, so that notice and opportunity to be heard had been given the bondholders, and that the decision that the taxpayer had paid his assessment in full was res judicata as to the bondholders. This decision, we think, is controlling here. In the Kersh Lake case, as here, application of the principle of res judicata was contested upon the ground that the nonresident bondholders had not been made parties to the earlier proceedings and had had no notice of them. But the Supreme Court of the United States held that they were not necessary parties in a suit to collect assessments, or in a suit to question the validity of the assessments, provided only that the drain commissioners are parties to the suit and that no fraud or collusion exists. The Supreme Court said 309 U.S. at page 491, 60 S.Ct. at page 644, 84 L.Ed. 881, 128 A. L.R. 386:
"These certificate holders were not entitled to be made parties in the Lincoln chancery proceedings just as in practice creditors of a corporation are not, unless otherwise provided by statute, made parties in a suit between a stockholder and the corporation to determine liability on a stock subscription, between the corporation and a third person to recover corporate assets, or in a suit brought against the corporation by creditors, stockholders or officers."
There is no essential difference between the statutes of Arkansas and Michigan dealing with this situation. Neither statute provides that the creditors or bondholders shall be made party, the Michigan statute requiring only that in any suit brought to set aside any drain tax or in any way attacking the legality of any drain proceedings, the drain commissioner shall be joined as party to the suit (Section 14, c. 10, Act 316, Michigan Public Acts, 1923). In the Kersh Lake case, supra, the Supreme Court pointed out that the Arkansas statute contemplated "that the Commissioners should represent the collective and corporate interests of the District, in litigation between the District and a landowner involving matters personal to the landowner." The Supreme Court of Michigan has held that "The drain commissioner in a peculiar sense stands as the representative of those who are interested in the drain and in the collection of the tax." Godkin v. Rutterbush, 147 Mich. 116, 110 N.W. 505, 506. This holding makes the Kersh Lake case squarely applicable to the instant case.
In the Kersh Lake case the bondholders had no actual notice of the original proceedings, and yet they were held to be bound by the state court injunction. In the Meyering Land Co. case, supra, the drain commissioner in fact pleaded the existence of outstanding bonds, and counsel representing one of the bondholders here filed a brief which raised the question of estoppel by recitals held to be decisive of this litigation in the District Court. Thus one of the bondholders had actual notice of the proceeding and participated therein, and in that particular the case is stronger against the bondholders here than against the bondholders in the Kersh Lake case.
The appellees argue that the drain commissioner might not have protected their interests because he would be antagonistic to the bondholders. In the Meyering Land Co. case, supra, it appears that in fact he did protect their interest, and if not, they could have intervened in the litigation. Be that as it may, we are bound by the decision of the Supreme Court applicable here in the light of the Godkin case, supra, and hold that the cases of Meyering Land Co. v. Spencer and Detroit Fire & Marine Ins. Co. v. County of Oakland, supra, and similar state cases, are binding upon these appellees.
It follows that the decrees of the District Court in all five cases are erroneous. The decrees are reversed, and in each case the bill of complaint is dismissed.
NOTES
[1] In the Meyering Land Co. case, supra [273 Mich. 703, 263 N.W. 779], speaking of the two Bloomfield projects, the Supreme Court of Michigan said:
"This is not the case of a drain constructed through low land which it was necessary to drain in order to occupy. The land drained naturally. The sole purpose of the construction of the sewer in question was for sewerage purposes for the land which had been subdivided." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548421/ | JACK MANERCHIA, Plaintiff Below, Appellant,
v.
KIRKWOOD FITNESS AND RACQUETBALL CLUBS, INC., Defendant Below, Appellee.
No. 412, 2009.
Supreme Court of Delaware.
Submitted: February 17, 2010.
Decided: March 25, 2010.
Before STEELE, Chief Justice, HOLLAND and JACOBS, Justices.
ORDER
JACK B. JACOBS, Justice.
This 25th day of March 2010, upon consideration of the briefs of the parties and the record in this case, it appears to the Court that:
1. Jack Manerchia ("Manerchia") appeals from a Superior Court order entering summary judgment in favor of Kirkwood Fitness & Racquetball Clubs, Inc. ("Kirkwood Club" or "Club"), and denying Manerchia's motion for continuance.[1] On appeal, Manerchia claims that the Superior Court erred in granting summary judgment for Kirkwood Club because Manerchia had established facts that would enable a jury to find that the Club was negligent, and that its negligence was the proximate cause of Manerchia's injury. We find no error and affirm.
2. On February 27, 2006, Manerchia visited Kirkwood Club. During that visit Manerchia used the Club's hot-tubhe sat on edge of the hot-tub with his legs in the water for about 15 minutes. Manerchia testified that a few days after that visit his leg developed a rash and was swollen. On March 8, 2006, Manerchia visited Dr. Seth Ivins' ("Ivins") office for a follow-up examination involving a back problem from which Manerchia suffered. Dr. Ivins' records indicate that during that examination he found no pallor, jaundice, rashes, lesions or edema on Manerchia's ankles. On March 14, 2006, Manerchia went to the Christiana Care Health Services' emergency room because he had a rash on his right leg, which was swollen, and he was in pain. He was diagnosed with cellulitis, which resulted in permanent injuries.[2]
3. On April 10, 2007, Manerchia filed an action against Kirkwood Club, claiming that the Club negligently maintained the hot-tub that caused Manerchia's cellulitis. On April 4, 2008, the Superior Court issued a Trial Scheduling Order requiring Manerchia to produce expert reports by October 15, 2008,[3] and setting December 31, 2008 as the parties' discovery deadline. Trial was scheduled to commence on April 27, 2009.
4. Dr. Ivins was deposed in May 2008. He testified that the bacteria that caused Manerchia's cellulitis "could have come" from Kirkwood Club's hot-tub, but that "it is just as likely that it came from there as anywhere else."
5. On September 5, 2008, Manerchia's original counsel withdrew. In its order allowing counsel to withdraw the Superior Court warned Manerchia that the case would be dismissed if no activity occurred by November 2008. On October 27, 2008, Kirkwood Club moved to dismiss the case and for summary judgment. That motion was heard on November 6. Manerchia appeared at the hearing, accompanied by counsel who addressed the Court, but did not enter an appearance. The Superior Court noted that based on the then existing record, Kirkwood Club was entitled to summary judgment, but gave Manerchia 30 days to find new counsel and submit expert opinions addressing the cause of Manerchia's illness and the cleanliness of the hot-tub at Kirkwood Club.
6. On December 10, 2008, after the 30 day deadline had passed, Manerchia filed, pro se, a letter from Dr. Charles Hesdorffer ("Hesdorffer") opining:
with a reasonable degree of medical certainty ... and following [a] careful evaluation of [Manerchia's] medical records, his clinical perspective, and based on his laboratory studies, [that] the cellulitis that he developed was a direct result of his immersion in the hot tub at Kirkwood Health Club in February 2006.
7. Manerchia's current counsel entered his appearance on December 16, 2008. Correspondence between counsel and the Superior Court ensued. The Superior Court required Manerchia "to present evidence proving ... specific way(s) [Kirkwood Club] was negligent and a specific way that [the Club's] negligence caused [Manerchia's] cellulitis." Counsel responded that in his opinion expert testimony on negligence was not needed to avoid summary judgment. Counsel informed the Superior Court that he had retained a liability expert, but asked for additional time to perform discovery and to allow the expert to complete her report. On June 23, 2009, the Superior Court denied that request (which the Court treated as motion for a trial continuance) and entered summary judgment for Kirkwood Club.[4] The Superior Court explained that although Manerchia "could have shown a theoretical possibility that he was sickened by [Kirkwood Club's] hot-tub ... he could not prove that [the Club] probably was negligent and [that] its negligence probably caused" Manerchia's condition.[5] This appeal followed.
8. Manerchia claims that the Superior Court reversibly erred in granting Kirkwood Club summary judgment, because he was not legally required to present expert testimony on negligence and proximate causation to avoid summary judgment. Specifically, Manerchia argues that: (i) the standard of care owed by businesses to their invitees is well established under Delaware law; (ii) whether Kirkwood Club maintained its hot-tub in accordance with that standard of care is an issue for a jury to determine without the need for an expert; and (iii) he had established that Kirkwood Club's hot-tub caused his cellulitis by submitting the expert opinions of Dr. Ivins and Dr. Hesdorffer. Manerchia also claims that the Superior Court abused its discretion by refusing to grant him additional time to take discovery and submit an expert opinion establishing Kirkwood Club's negligence (to the extent such an opinion was required).
9. We review the Superior Court's decision granting summary judgment de novo, "to determine whether, viewing the facts in the light most favorable to the nonmoving party, the moving party has demonstrated that there are no material issues of fact in dispute."[6]
10. To prevail in his negligence action against Kirkwood Club, Manerchia had to establish that (i) Kirkwood Club owed him a duty of care, (ii) Kirkwood Club breached that duty, and (iii) that breach proximately caused Manerchia's injury.[7] "Generally speaking, issues of negligence are not susceptible of summary adjudication.... Similarly, questions of proximate cause except in rare cases are questions of fact ordinarily to be submitted to the jury for decision."[8] But where the nonmoving party fails to produce sufficient proof of an essential element of that party's case, the moving party is entitled to summary judgment.[9] Because Manerchia failed to offer any proof of Kirkwood Club's alleged negligence and proximate causation, this is one of those "rare" negligence cases that is susceptible of summary adjudication.
11. Manerchia's argument that the duty of care owed by business owners to their invitees is well established under Delaware law may be correct.[10] He fails, however, to offer any proof that Kirkwood Club breached that duty.
12. Manerchia claims that Kirkwood Club failed to comply with this State's regulatory safety requirements for the maintenance of hot-tubs, and that a violation of a regulation is negligence per se.[11] Manerchia offers no proof of that failure other than his recollection that (i) on February 27, 2006, the water in the hot-tub looked dirty, and (ii) when he next visited the club, on March 12, 2006, the hot-tub was closed off with caution tape.[12] Even if viewed in the light most favorable to Manerchia, those facts do not establish that Kirkwood Club failed properly to maintain the hot-tub.[13]
13. Nor can Manerchia avoid summary judgment by relying on an adverse inference from Kirkwood Club's inability to produce records showing that the Club complied with the State's regulatory requirements. The Club had discarded those records "in the regular course of business" in compliance with State regulations, before Manerchia filed his claim in April 2007.[14]
14. Manerchia offers no independent evidence that Kirkwood Club breached its duty of care to maintain a safe hot-tub.[15] Rather, he attempts to infer such a breach from his unfortunate injury, by claiming that if bacteria in a hot-tub causes an infection to a person entering that tub, then "the State regulatory safety requirements and standard of care must have been violated." That inference is flawed because it rests on unsubstantiated assumptions that the Club's hot-tub was contaminated with the bacteria that caused Manerchia's cellulitis. Although "a plaintiff may establish the negligence of the defendant by proof of circumstances from which an inference of negligence follows as a natural or very probable conclusion from the facts proven," no such facts were proven here.[16]
15. Even if we assume that Manerchia could prove that Kirkwood Club was negligent in maintaining the hot-tub, he has provided no proof that his use of the hot-tub proximately caused his injuryi.e., that but for that negligence Manerchia would not have developed cellulitis.[17] Specifically, Manerchia is unable to prove that the source of the bacteria that caused his cellulitis was the Club's hot-tub.
16. Because the identification of the source of bacteria is a matter that requires an understanding and analysis of issues beyond the ken of the typical jury, Manerchia had to present expert testimony to establish causation.[18] Manerchia cannot rely on Dr. Ivins as a causation expert because Dr. Ivins could not determine the source of the bacteria that caused Manerchia's cellulitis.[19] Dr. Hesdorffer's belatedly submitted opinion that Manerchia developed cellulitis as "a direct result of his immersion in the hot tub ... in February 2006," is insufficient, because it is conclusory. Dr. Hesdorffer offers no explanation as to how the facts and records that he relied upon (i.e., Manerchia's medical records, clinical perspective and laboratory studies) prove that Manerchia's cellulitis was a direct result of his immersion in the Club's hot-tub.[20] Dr. Hesdorffer did not testify that Manerchia's condition amounts to a "signature disease"[21] nor did he address other possible causes of cellulitis.[22] Further, the "laboratory studies" relied upon by Dr. Hesdorffer merely confirmed the medical diagnosis of Manerchia's condition, not the cause of that condition.[23] Therefore, Manerchia failed to provide any proof that his injury was caused by his use of a hot-tub, let alone the hot-tub in Kirkwood Club's facility.
17. In short, the record does not support two of three essential elements of Manerchia's case, despite being given an adequate time for discovery. Therefore, the Superior Court properly granted Kirkwood Club's motion for summary judgment.
18. Manerchia next claims that the Superior Court erred by denying his requests for additional time to conduct discovery and submit an expert opinion on negligencerequests that the Superior Court treated as a motion for trial continuance.
19. We review Superior Court rulings on scheduling issues for abuse of discretion.[24] If the Superior Court's judgment "was based upon conscience and reason, as opposed to capriciousness or arbitrariness," this Court may not substitute its own notions of what is right for those of the Superior Court.[25] Here, the Superior Court's decision not to grant Manerchia additional time for discovery was reasonable. The Superior Court put Manerchia on noticeon more than one occasionthat he would not be able to prevail without competent counsel and expert witnesses. The Superior Court gave Manerchia the opportunity to find such experts "until the last moment before trial," despite Manerchia's failure to comply with the Court's deadlines.[26] Therefore, there was no abuse of discretion in refusing to extend an additional deadline to Manerchia.
NOW, THEREFORE, IT IS ORDERED that the judgment of the Superior Court is AFFIRMED.
NOTES
[1] Manerchia v. Kirkwood Fitness & Racquetball Clubs, 2009 WL 2852600 (Del. Super. Ct. Jun. 23, 2009).
[2] Manerchia cannot stand for significant periods of time without developing marked swelling and pain in the right leg and lower abdomen.
[3] That order superseded a Case Scheduling Order issued on December 14, 2007, requiring Manerchia to produce expert reports by March 4, 2008.
[4] Manerchia, 2009 WL 2852600.
[5] Id. at *2.
[6] Estate of Rae v. Murphy, 956 A.2d 1266, 1269-70 (Del. 2008) (citing Green v. Weiner, 766 A.2d 492, 494 (Del. 2001)).
[7] Riedel v. ICI Americas, Inc., 968 A.2d 17, 20 (Del. 2009).
[8] Ebersole v. Lowengrub, 180 A.2d 467, 469 (Del. 1962).
[9] Burkhart v. Davies, 602 A.2d 56, 59 (Del. 1991) (applying Celotex Corp. v. Catrett, 477 U.S. 317 (1986)).
[10] See Wilmington Country Club v. Cowee, 747 A.2d 1087, 1092 (Del. 2000) (holding that a property owner owes a business invitee a duty to provide safe ingress and regress); DiOssi v. Maroney, 548 A.2d 1361, 1364 (Del. 1988) (holding that business owners owe a business invitee a duty to protect him from foreseeable dangers that he might encounter while on the premises).
[11] Capital Management Co. v. Brown, 813 A.2d 1094, 1099 (Del. 2002) ("It is long-settled Delaware law that the violation of a statute, or regulation having the force of a statute, enacted for the safety of others is negligence in law or negligence per se.") We do not address the question of whether the instructions found in the State of Delaware Public Pool Operator Handbookon which Manerchia reliesare regulations that may be used as a basis for finding negligence per se. See Toll Brothers, Inc. v. Considine, 706 A.2d 493 (Del. 1983).
[12] Kirkwood Club claims that "there is no record or recollection of hot tub closure to club members during the four weeks before or after February 27, 2006."
[13] See State of Delaware Public Pool Operator Handbook at 1 ("Pool water may ... look dirty and turbid and quite uninviting to swimmers but actually may be completely safe and free from pathogenic organisms.")
[14] See State of Delaware Regulations Governing Public Pools section 26.607 (providing that records of sample results be kept at the pool for at least one year).
[15] Therefore, it appears impossible that an expert witness would be able to find factual support for an opinion that Kirkwood Club was negligent.
[16] Wilson v. Derrickson, 175 A.2d 400, 402-03 (Del. 1961) (affirming judgment for defendants in personal injury action because there was more than one reasonable inference to be drawn concerning the manner in which the oily substance which caused plaintiff's fall came upon the floor).
[17] Mazda Motor Corp. v. Lindahl, 706 A.2d 526, 532 (Del. 1998).
[18] Campbell v. DiSabatino, 947 A.2d 1116, 1118 (Del. 2008) (holding that plaintiffs were required to present expert testimony to opine on the source of invisible airborne mold that caused plaintiffs' injuries); Campbell v. Stonebridge Life Ins. Co., 966 A.2d 347 (Table), 2009 WL 315687 at 3 (Del. Feb. 10, 2009) (holding that the absence of such expert testimony will preclude the issue from ever reaching the jury).
[19] Dr. Ivins testified that it is just as likely that the bacteria came from the Club's hot-tub as from any other source.
[20] See Money v. Manville Corp. Asbestos Disease Compensation Trust Fund, 596 A.2d 1372, 1377-78 (Del. 1991) (holding that expert opinion that plaintiffs' disease was caused by exposure to asbestos products was insufficient because it did not establish the causal nexus between each product and each related disease); Crookshank v. Bayer Healthcare Pharm., 2009 WL 1622828 (Del. Super. Ct. May 22, 2009).
[21] A "signature disease" is a disease uniquely related to exposure to a certain substance and rarely observed in individuals not exposed to that substance. Hurtado v. Purdu Pharma Co., 800 N.Y.S.2d 374 (Table), 2005 WL 192351, at *6 (N.Y. Sup. Ct. Jan. 24, 2005); Scaife v. Astrazeneca LP, 2009 WL 1610575, at *16 (Del. Super. Ct. Jun. 9, 2009) (defining a "signature disease" as a disease that has low background rate and limited risk factors); Torrejon v. Mobil Oil Co., 876 So.2d 877, 892 (La. Ct. App. 2004) ("A signature disease is one which is extremely rare in the general population but far more prevalent among those exposed to a particular substance; the disease in a sense bears the signature of the substance.")
[22] Manerchia, 2009 WL 2852600, at *2.
[23] Id.
[24] Coleman v. PricewaterhouseCoopers, LLC, 902 A.2d 1102, 1107 (Del. 2006).
[25] Id. at 1106.
[26] Manerchia, 2009 WL 2852600, at *3. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548990/ | 161 B.R. 969 (1994)
In re Roger and Julie WOODSIDE, Debtors.
Roger WOODSIDE, Movant,
v.
COUNTY OF WILLIAMSON, ILLINOIS, Respondent.
Bankruptcy No. BK 92-41365.
United States Bankruptcy Court, S.D. Illinois.
January 10, 1994.
Donald Samson, Belleville, IL, for debtor.
Williamson County State's Atty. Charles Garnatti, Marion, IL, for respondent.
OPINION
KENNETH J. MEYERS, Bankruptcy Judge.
Debtors, Roger and Julie Woodside, filed a Chapter 13 bankruptcy petition on October 23, 1992, and listed a debt of $952.80 owed to Williamson County, Illinois, as a traffic fine imposed against Roger Woodside for carrying an overweight load. On January 20, 1993, the debtors' plan was confirmed providing for 10% payment to unsecured creditors, including Williamson County. Subsequently, *970 in April 1993, debtor Roger Woodside received notice of a show cause hearing to be held on May 12, 1993, in Williamson County Circuit Court regarding his nonpayment of the traffic fine. Woodside's attorney contacted the Williamson County State's Attorney's office and forwarded copies of the notice of stay in his bankruptcy proceeding, as well as the Chapter 13 plan and the order confirming plan.
When the debtor failed to appear at the show cause hearing on May 12, the state court judge ordered that a bench warrant be issued against him. Woodside's attorney filed a motion to set aside the bench warrant and stay the action against the debtor. Hearing was held on this motion on May 26, 1993, and the debtor's attorney was given 10 days to submit authority concerning propriety of the stay. Finally, at hearing on June 29, 1993, the state court denied the debtor's motion to stay the action, and a bench warrant was issued against Roger Woodside at that time.
The debtor has filed a motion in this Court to enforce the automatic stay and to impose sanctions against Williamson County. He contends that Williamson County violated the automatic stay of § 362(a) in attempting to collect a prepetition debt and that the show cause action brought by the County, which sought to enforce a money judgment, did not come within the exceptions to stay of § 362(b). The debtor requests that the County be enjoined from taking further action against him and that it be assessed attorney's fees and damages for its willful violation of the stay.
Williamson County does not deny that the show cause action violated the stay but asserts that no sanctions should be imposed because it was required by the state court judge to pursue the enforcement action against the debtor. At hearing in this Court on the debtor's motion, counsel for the County conceded that there "would have to be a joint involvement" between the State's Attorney's office and the state court in collecting fines and that "it [the show cause proceeding] was not all the judge's doing."
Section 362(a) provides with certain exceptions that the filing of a bankruptcy petition operates to stay all proceedings to recover a claim against the debtor and, in particular, the enforcement of a judgment obtained before commencement of the case. See 11 U.S.C. § 362(a)(1), (2). Section 362(b) sets forth exceptions to the automatic stay, allowing for commencement or continuation of criminal actions against the debtor, 11 U.S.C. § 362(b)(1), and actions by a governmental unit to enforce its police or regulatory powers. 11 U.S.C. § 362(b)(4). Section 362(b)(5) provides that the filing of a petition does not stay
the enforcement of a judgment, other than a money judgment, obtained in an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power.
11 U.S.C. § 362(b)(5) (emphasis added). Section 362(b)(5) thus provides an "exception to the exception" for enforcement actions by governmental units, allowing these entities to enforce prepetition judgments unless such actions are for the collection of money.
In this case, it is not contested that the traffic fine, which had been imposed against the debtor at the time of bankruptcy, constituted a money judgment. Cf. In re Blair, 62 B.R. 650, 652 (Bankr.N.D.Ala.1986) (a fine, by its very definition as "pecuniary punishment," is a money judgment). Since the judgment was for monetary relief rather than injunctive or declaratory relief, the County's enforcement did not come within the exception to stay of § 362(b)(5) for governmental creditors. See In re Colon, 102 B.R. 421, 427 (Bankr.E.D.Pa.1989). Thus, in seeking to collect this judgment by means of its show cause action, the County violated the stay provision of § 362(a)(2), which forbids enforcement of a judgment obtained prior to bankruptcy.
Under § 362(c), the automatic stay of § 362(a) continues until the earliest of the time a bankruptcy case is closed or dismissed or, in a case under Chapter 13, the time a discharge is granted or denied. See 11 U.S.C. § 362(c)(2)(C). In the present case, none of these events has occurred, and the automatic stay remains effective. The County, therefore, is enjoined from taking action *971 to compel payment of the traffic fine against the debtor absent further order of the Court.
Section 362(h) provides that an individual injured by a "willful violation" of the stay shall recover damages, including costs and attorneys' fees. 11 U.S.C. § 362(h). No specific intent is required for a violation to be "willful." Rather, a violation is "willful" if the offending party knew of the bankruptcy filing and stay but nevertheless acted intentionally in proceeding against the debtor. See id. at 429 (violation was willful where there was deliberateness of conduct coupled with knowledge of the bankruptcy filing); see also In re Bloom, 875 F.2d 224 (9th Cir. 1989).
Here, the County proceeded with the show cause action despite having been informed of the bankruptcy stay by the debtor's counsel prior to the May 12, 1993, hearing. While the County attempts to excuse its conduct as having been required by the state court judge, the County was, at minimum, jointly responsible for pursuing the enforcement action against the debtor. The filing of a show cause action is a prosecutorial rather than a judicial function, and the County's contention that it did not act voluntarily in proceeding against the debtor is suspect at best. Rather, the County admits to a "joint involvement" in the show cause action and acknowledges that the state court judge could not have pursued the action on his own. The Court finds, therefore, that the County was a willing participant in the collection action against the debtor and that its conduct constituted a willful violation of the stay.
Under § 362(h), sanctions for violation of the stay may include compensatory damages, including costs and attorney fees, as well as punitive damages. No prayer is made for punitive damages, and the Court finds that such damages would be inappropriate. Additionally, although neither party has addressed the issue, there is some question as to whether compensatory damages may be imposed against the County as a governmental entity entitled to sovereign immunity. See In re Colon, 114 B.R. 890, 893-98 (Bankr.E.D.Pa.1990).[1] The debtor has submitted no evidence of damages resulting from lost wages, and the Court, accordingly, makes no award of damages for lost wages. The debtor has, however, submitted an affidavit of attorneys' fees and costs incurred in defending the show cause action in state court. Attorneys' fees are in the nature of prospective relief and, as such, are not barred by sovereign immunity. See id. at 892. The Court, therefore, awards the debtor his costs and attorneys' fees in defending the show cause action in state court in the total amount of $1,328.75.
NOTES
[1] The Colon court concluded that, even though sovereign immunity barred imposition of damages against a state entity under § 362(h), compensatory damages could be imposed pursuant to the court's civil contempt power, which remained viable notwithstanding enactment of § 362(h). See Colon, 114 B.R. at 898; see also In re Price, 130 B.R. 259 (N.D.Ill.1991) (governmental unit may waive sovereign immunity to imposition of damages for wilful violation of automatic stay under 11 U.S.C. § 106 by filing proof of claim in bankruptcy proceeding). | 01-03-2023 | 10-30-2013 |
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www.nebraska.gov/apps-courts-epub/
10/06/2017 08:10 AM CDT
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Nebraska Supreme Court A dvance Sheets
297 Nebraska R eports
KOZAL v. NEBRASKA LIQUOR CONTROL COMM.
Cite as 297 Neb. 938
Stuart Kozal, doing business as Jumping Eagle Inn,
et al., appellees and cross-appellees, v. Nebraska
Liquor Control Commission, appellant, and
A bram Neumann et al., appellees
and cross-appellants.
___ N.W.2d ___
Filed September 29, 2017. No. S-17-441.
1. Judgments: Jurisdiction: Appeal and Error. Determination of a juris-
dictional issue which does not involve a factual dispute is a matter of
law which requires an appellate court to reach its conclusions indepen-
dent from a trial court.
2. Jurisdiction: Appeal and Error. Before reaching the legal issues
presented for review, it is the duty of an appellate court to determine
whether it has jurisdiction over the matter before it.
3. ____: ____. Where a lower court lacks subject matter jurisdiction to
adjudicate the merits of a claim, issue, or question, an appellate court
also lacks the power to determine the merits of the claim, issue, or ques-
tion presented to the lower court.
4. ____: ____. When an appellate court is without jurisdiction to act, the
appeal must be dismissed. However, an appellate court has the power to
determine whether it lacks jurisdiction over an appeal because the lower
court lacked jurisdiction to enter the order; to vacate a void order; and,
if necessary, to remand the cause with appropriate directions.
5. Administrative Law: Liquor Licenses: Judgments: Appeal and
Error. Under the Nebraska Liquor Control Act, an order of the Nebraska
Liquor Control Commission granting, denying, suspending, cancel-
ing, revoking, or renewing or refusing to suspend, cancel, revoke, or
renew a license may be appealed in accordance with the Administrative
Procedure Act.
6. Administrative Law: Final Orders: Appeal and Error. Under the
Administrative Procedure Act, any person aggrieved by a final decision
in a contested case may obtain judicial review in district court.
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KOZAL v. NEBRASKA LIQUOR CONTROL COMM.
Cite as 297 Neb. 938
7. Administrative Law: Courts: Appeal and Error. An Administrative
Procedure Act proceeding in district court for review of a decision by an
administrative agency is not an “appeal” in the strict sense of the term,
meaning the power and authority conferred upon a superior court to
reexamine and redetermine causes tried in inferior courts, but, rather, is
the institution of a suit to obtain judicial branch review of a nonjudicial
branch decision.
8. Administrative Law: Judgments: Appeal and Error. In an
Administrative Procedure Act review proceeding, the district court
reviews the agency’s decision de novo on the record of the agency and
may affirm, reverse, or modify the decision of the agency or remand the
case for further proceedings.
9. ____: ____: ____. The Administrative Procedure Act provides that a
party initiating review in the district court must do so by filing a peti-
tion in the district court of the county where the action is taken within
30 days of service of the agency’s final decision and that all parties of
record shall be made parties to the proceedings for review.
10. Administrative Law: Jurisdiction: Appeal and Error. Where a dis-
trict court has statutory authority to review an action of an adminis-
trative agency, the district court may acquire jurisdiction only if the
review is sought in the mode and manner and within the time provided
by statute.
11. Administrative Law: Parties: Jurisdiction: Appeal and Error. The
Administrative Procedure Act’s requirement that a petitioner make all
parties of record in the agency proceeding parties to the proceeding
for review is necessary to confer subject matter jurisdiction on the dis-
trict court.
12. Administrative Law: Parties: Appeal and Error. Because the
Administrative Procedure Act is a procedural statute that applies to a
variety of agencies and types of agency proceedings, determining which
parties qualify as “parties of record” requires looking at the nature of
the administrative proceeding under review.
13. Legislature: Statutes: Intent. The Legislature may limit the scope of a
statutory definition to a particular section, act, or chapter.
14. Administrative Law: Liquor Licenses: Parties: Appeal and Error.
Neb. Rev. Stat. § 53-1,115 (Reissue 2010) defines which parties qual-
ify as “parties of record” in proceedings of the Nebraska Liquor
Control Commission and thus must be included in the district court’s
Administrative Procedure Act review of the commission’s proceedings.
15. Statutes: Intent. When interpreting a statute, the starting point and
focus of the inquiry is the meaning of the statutory language, understood
in context.
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KOZAL v. NEBRASKA LIQUOR CONTROL COMM.
Cite as 297 Neb. 938
16. ____: ____. A court ascertains the meaning of a statute by reading it
in pari materia, in light of the broader structure of the relevant act and
related statutes.
17. Statutes: Legislature: Intent. Where appropriate, a court may consider
legislative history in order to better understand a statute’s context.
18. Statutes. It is a fundamental rule of statutory interpretation that courts
should, if possible, avoid any interpretation that renders a portion of the
statute as superfluous.
19. Statutes: Words and Phrases. A statutory definition of a term found in
one statute may be considered when interpreting that same term as used
in a different statute.
20. Administrative Law: Parties: Jurisdiction: Appeal and Error. The
failure to make a party of record in the agency proceedings a party to the
proceedings for review as required by the Administrative Procedure Act
is a failure to seek review in the mode and manner provided by statute
that deprives the district court of jurisdiction.
Appeal from the District Court for Lancaster County:
A ndrew R. Jacobsen, Judge. Vacated and dismissed.
Douglas J. Peterson, Attorney General, James D. Smith, and
Milissa D. Johnson-Wiles for appellant.
David A. Domina, of Domina Law Group, P.C., L.L.O., for
appellees Abram Neumann et al.
Andrew W. Snyder, of Chaloupka, Holyoke, Snyder,
Chaloupka & Longoria, P.C., L.L.O., for appellees Stuart
Kozal, doing business as Jumping Eagle Inn, et al.
Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy,
K elch, and Funke, JJ.
Wright, J.
NATURE OF CASE
The often unremarkable process of renewing a liquor license
has involved considerable controversy for the four beer retail-
ers in this case. These retailers are located in the unincor-
porated border town of Whiteclay, Nebraska, which is just
across the state line from the Pine Ridge Indian Reservation
in South Dakota, where the sale and consumption of alcohol is
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KOZAL v. NEBRASKA LIQUOR CONTROL COMM.
Cite as 297 Neb. 938
prohibited. The Nebraska Liquor Control Commission
(Commission) denied the retailers’ license renewal applica-
tions. Pursuant to the Administrative Procedure Act (APA),1
the retailers petitioned for review to the Lancaster County
District Court, which vacated the Commission’s order. The
Commission and some of the citizen objectors appealed.
Our decision today does not address the merits of the par-
ties’ respective positions, but rests solely on jurisdictional
grounds. To obtain judicial review of an administrative agen-
cy’s order under the APA, a party must include all “parties
of record”2 from the agency proceeding. Under the Nebraska
Liquor Control Act,3 local residents who formally object to the
issuance of a liquor license (citizen objectors) are “parties of
record” in the licensure proceeding before the Commission.
In this case, when they sought review in the district court,
the retailers failed to include the citizen objectors. Thus, the
retailers did not comply with the requirements for judicial
review under the APA and the district court lacked jurisdic-
tion over the retailers’ petition for review. Because the district
court lacked jurisdiction, its order is void and we lack juris-
diction over this appeal from the district court. We vacate the
district court’s order and dismiss this appeal.
BACKGROUND
The appellees, Stuart Kozal, doing business as Jumping
Eagle Inn; Arrowhead Inn, Inc., doing business as Arrowhead
Inn; Clay Brehmer and Daniel Brehmer, doing business as
State Line Liquor; and Sanford Holdings, L.L.C., doing busi-
ness as D & S Pioneer Services (collectively the retailers), held
Class B liquor licenses, authorizing them to sell packaged beer
for consumption off the premises.4 The Commission required
the retailers to submit “long form” applications to renew their
1
Neb. Rev. Stat. §§ 84-901 to 84-920 (Reissue 2014 & Cum. Supp. 2016).
2
See § 84-917.
3
Neb. Rev. Stat. §§ 53-101 to 53-1,122 (Reissue 2010 & Cum. Supp. 2016).
4
See § 53-124(6)(a)(ii).
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KOZAL v. NEBRASKA LIQUOR CONTROL COMM.
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liquor licenses rather than allowing them to use the “short
form” automatic renewal process.
After the retailers submitted their applications, the
Commission received 13 written objections from citizens of
Sheridan County, protesting the renewal of the retailers’ licenses.
That number was later reduced to 12 when the Commission
determined in a prehearing order that one of the objectors was
not a resident of Sheridan County. Under § 53-133(1)(h), the
filing of “objections in writing by not less than three persons
residing within such city, village, or county, protesting the issu-
ance of the license” triggers a requirement that the Commission
hold a hearing on the contested applications.
The hearing was held on April 6, 2017. On April 19,
the Commission voted to deny the retailers’ applications and
issued a written order detailing its findings of fact and conclu-
sions of law on April 24.
The following day, the retailers filed a petition, pursuant to
§ 84-917 of the APA, in the Lancaster County District Court.5
The retailers argued that the Commission’s requirement that
they file “long form” applications and the denial of those
applications was arbitrary and capricious and contrary to the
Nebraska Liquor Control Act and the rulings of this court.
But in seeking review in the district court, the retailers failed
to make the citizen objectors parties to the petition for review
under the APA.
The retailers simultaneously filed a motion to stay the
Commission’s order during the pendency of the review, which
order was set to go into effect on April 30, 2017. A hearing
was scheduled and held on April 26 in the Lancaster County
District Court. Notice of the hearing was given only to the
assistant attorney general representing the Commission. The
only attorneys appearing at the hearing were those for the
retailers and the Commission. The citizen objectors were not
included at any point in the district court proceedings.
5
See § 53-1,116.
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KOZAL v. NEBRASKA LIQUOR CONTROL COMM.
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On April 27, 2017, the district court entered an order. In spite
of holding a hearing and receiving arguments on the motion to
stay, the district court ruled on the merits of the case. The dis-
trict court, relying on this court’s holdings in Pump & Pantry,
Inc. v. City of Grand Island 6 and Grand Island Latin Club v.
Nebraska Liq. Cont. Comm.,7 vacated the Commission’s order
and remanded the cause to the Commission with instructions
to allow the retailers to renew their licenses through the “short
form” automatic renewal process.
On April 27, 2017, the same day as the district court’s
order, the Commission appealed the order. We moved the
appeal from the Nebraska Court of Appeals’ docket to this
court’s docket.8
On May 26, 2017 (more than 30 days after the Commission’s
order but less than 30 days after the district court’s order), four
of the citizen objectors, represented by counsel, filed a notice
of appeal from the district court’s order. These citizen objectors
argued that they were “parties of record” in the Commission’s
licensure proceeding, but were not made parties to the APA
review in the district court. We docketed this appeal together
with the Commission’s appeal, designating the citizen objec-
tors as appellees and cross-appellants.
ASSIGNMENTS OF ERROR
The Commission and the citizen objectors claim the district
court lacked subject matter jurisdiction to enter its order vacat-
ing the Commission’s order.
STANDARD OF REVIEW
[1] Determination of a jurisdictional issue which does not
involve a factual dispute is a matter of law which requires an
6
Pump & Pantry, Inc. v. City of Grand Island, 233 Neb. 191, 444 N.W.2d
312 (1989).
7
Grand Island Latin Club v. Nebraska Liq. Cont. Comm., 251 Neb. 61, 554
N.W.2d 778 (1996).
8
See Neb. Rev. Stat. § 24-1106(3) (Reissue 2016).
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appellate court to reach its conclusions independent from a
trial court.9
ANALYSIS
[2-4] Before reaching the legal issues presented for review,
it is the duty of an appellate court to determine whether it
has jurisdiction over the matter before it.10 Where a lower
court lacks subject matter jurisdiction to adjudicate the merits
of a claim, issue, or question, an appellate court also lacks
the power to determine the merits of the claim, issue, or
question presented to the lower court.11 When an appellate
court is without jurisdiction to act, the appeal must be dis-
missed.12 However, an appellate court has the power to deter-
mine whether it lacks jurisdiction over an appeal because the
lower court lacked jurisdiction to enter the order; to vacate a
void order; and, if necessary, to remand the cause with appro-
priate directions.13
[5] Under the Nebraska Liquor Control Act, an order of
the Commission “granting, denying, suspending, canceling,
revoking, or renewing or refusing to suspend, cancel, revoke,
or renew a license” may be appealed “in accordance with
the [APA].”14
[6-8] Under the APA, “[a]ny person aggrieved by a final
decision in a contested case” may obtain judicial review in
district court.15 An APA proceeding in district court for review
9
deNourie & Yost Homes v. Frost, 295 Neb. 912, 893 N.W.2d 669 (2017).
10
In re Interest of Luz P. et al., 295 Neb. 814, 891 N.W.2d 651 (2017).
11
See, Midwest Renewable Energy v. American Engr. Testing, 296 Neb.
73, 894 N.W.2d 221 (2017); In re Estate of Evertson, 295 Neb. 301, 889
N.W.2d 73 (2016); Conroy v. Keith Cty. Bd. of Equal., 288 Neb. 196, 846
N.W.2d 634 (2014).
12
In re Estate of Evertson, supra note 11; Conroy v. Keith Cty. Bd. of Equal.,
supra note 11.
13
Id.
14
§ 53-1,116.
15
§ 84-917(1).
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of a decision by an administrative agency is not an “appeal” in
the strict sense of the term, meaning “the power and authority
conferred upon a superior court to reexamine and redetermine
causes tried in inferior courts,” but, rather, is “the institution of
a suit to obtain judicial-branch review of a nonjudicial-branch
decision.”16 In an APA review proceeding, the district court
reviews the agency’s decision “de novo on the record of the
agency” and “may affirm, reverse, or modify the decision of
the agency or remand the case for further proceedings.”17
[9] The APA provides that a party initiating review in the
district court must do so “by filing a petition in the district
court of the county where the action is taken” within 30 days
of service of the agency’s final decision.18 It further provides
that “[a]ll parties of record shall be made parties to the pro-
ceedings for review.”19
[10,11] Where a district court has statutory authority to
review an action of an administrative agency, the district court
may acquire jurisdiction only if the review is sought in the
mode and manner and within the time provided by statute.20
We have held that the APA’s requirement that a petitioner make
all “parties of record” in the agency proceeding parties to the
proceeding for review is necessary to confer subject matter
jurisdiction on the district court.21
Here, the citizen objectors were “parties of record” in the
Commission’s proceeding. The retailers failed to include the
16
Glass v. Nebraska Dept. of Motor Vehicles, 248 Neb. 501, 506, 536
N.W.2d 344, 347 (1995).
17
§ 84-917(5)(a) and (6)(b).
18
§ 84-917(2)(a)(i).
19
Id.
20
See, J.S. v. Grand Island Public Schools, ante p. 347, 899 N.W.2d 893
(2017); Nebraska Dept. of Health & Human Servs. v. Weekley, 274 Neb.
516, 741 N.W.2d 658 (2007).
21
See Shaffer v. Nebraska Dept. of Health & Human Servs., 289 Neb. 740,
857 N.W.2d 313 (2014).
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citizen objectors in the district court’s review. The result is that
the district court never acquired subject matter jurisdiction to
review the Commission’s order.
[12] The citizen objectors were “parties of record” in the
Commission’s hearing on the retailers’ license applications.
While the APA provides some guidance for when an agency is
considered a “part[y] of record” that must be included in APA
review of that agency’s decision,22 it provides no guidance for
when a nonagency party is a “part[y] of record.” Nor does it
include an all-encompassing definition of “parties of record,”
applicable to every type of administrative proceeding. Because
the APA is a procedural statute that applies to a variety of
agencies and types of agency proceedings, determining which
parties qualify as “parties of record” requires looking at the
nature of the administrative proceeding under review.23
Here, we must look to the Nebraska Liquor Control Act,
which governs the Commission and its liquor license appli-
cation proceedings, in order to determine whether the citi-
zen objectors were “parties of record.” And we must look
to the proceedings in this case to see whether the citizen
objectors acted as parties and were treated as parties by the
Commission.
Nebraska Liquor Control Act Defines
Citizen Objectors as Parties
of R ecord
The Nebraska Liquor Control Act, in § 53-1,115,
defines which parties qualify as “part[ies] of record” in the
22
See § 84-917(2)(a)(i).
23
See, generally, Shaffer v. Nebraska Dept. of Health & Human Servs.,
supra note 21, 289 Neb. at 750, 857 N.W.2d at 321 (reviewing underlying
regulations for “State fair hearing” Medicaid coverage proceeding before
Department of Health and Human Services to determine whether Medicaid
provider was “party of record” for purposes of APA review); McDougle v.
State ex rel. Bruning, 289 Neb. 19, 853 N.W.2d 159 (2014).
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Commission’s proceedings. It provides that “[i]n the case
of an administrative proceeding before the [C]ommission on
the application for a retail [liquor] license,” the “part[ies] of
record” include: the applicant, the local government (if it has
objected to the issuance of the license or requested a hearing),
the Commission itself, and each citizen objector.24 Thus, the act
itself defines citizen objectors as “part[ies] of record” in the
Commission’s license application proceedings.
[13,14] The retailers argue that the definition of a “party
of record” in § 53-1,115(4) “applies only to that particular
section.”25 Section 53-1,115(4) begins: “For purposes of this
section, party of record means . . . .” (Emphasis supplied.)
It is true that the Legislature may limit the scope of a statu-
tory definition to a particular section, act, or chapter.26 But
§ 53-1,115 defines which parties qualify as “part[ies] of
record” in the Commission’s proceedings. Thus, it defines
which parties are “parties of record” that must be included
in the district court’s APA review of the Commission’s
proceedings.
[15-17] When interpreting a statute, the starting point and
focus of the inquiry is the meaning of the statutory lan-
guage, understood in context.27 We ascertain the meaning of
a statute by reading it in pari materia,28 in light of the broader
24
§ 53-1,115(4)(a). See, also, § 53-133(1)(b).
25
Supplemental brief for appellees Kozal et al. at 3.
26
See, 2A Norman J. Singer and Shambie Singer, Statutes and Statutory
Construction § 47:7 (rev. 7th ed. 2014); Antonin Scalia & Bryan A.
Garner, Reading Law: The Interpretation of Legal Texts 225-33 (2012).
27
See, Doty v. West Gate Bank, 292 Neb. 787, 874 N.W.2d 839 (2016). See,
also, generally, Ross v. Blake, ___ U.S. ___, 136 S. Ct. 1850, 1856, 195
L. Ed. 2d 117 (2016) (“[s]tatutory interpretation, as we always say, begins
with the text”); State ex rel. Kalal v. Dane County, 271 Wis. 2d 633, 681
N.W.2d 110 (2004) (statutory language is interpreted in context in which
it is used); Scalia & Garner, supra note 26.
28
See Black’s Law Dictionary 911 (10th ed. 2014).
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structure of the relevant act and related statutes.29 And where
appropriate, we may consider legislative history in order to
better understand a statute’s context.30
Our conclusion that the definition of “party of record” in
§ 53-1,115(4) controls for purposes of the APA’s require-
ment that “[a]ll parties of record shall be made parties to the
proceedings for review”31 in a review of the Commission’s
proceedings is confirmed by a closer look at that statute. First,
the definition of “party of record” was enacted in the very
same bill that amended the Nebraska Liquor Control Act to
allow for review of the Commission through the APA.32 Prior
to that bill, § 53-1,116 provided for review through petition
in error33 and expressly stated that the APA did not apply.34
The fact that the Legislature adopted the definition of “party
of record” in § 53-1,115(4)—a key term of art in the APA—
in the very same bill in which it adopted APA review of the
Commission’s orders, leads to the conclusion that the defini-
tion in § 53-1,115(4) is the controlling definition of “party
of record” for purposes of APA review of the Commission’s
proceedings.
Second, the legislative history of the bill in which the “party
of record” definition was adopted in § 53-1,115 indicates that
29
See, e.g., King v. Burwell, ___ U.S. ___, 135 S. Ct. 2480, 2492, 192
L. Ed. 2d 483 (2015) (relying on “‘the fundamental canon of statutory
construction that the words of a statute must be read in their context and
with a view to their place in the overall statutory scheme’”); County of
Webster v. Nebraska Tax Equal. & Rev. Comm., 296 Neb. 751, 896 N.W.2d
887 (2017).
30
See, generally, Matter of Sinclair, 870 F.2d 1340, 1342 (7th Cir. 1989)
(“[c]larity [of a statute] depends on context, which legislative history may
illuminate”); Doe v. McCoy, ante p. 321, 899 N.W.2d 899 (2017).
31
See § 84-917(2)(a)(i).
32
See 1999 Neb. Laws, L.B. 267.
33
See Neb. Rev. Stat. §§ 25-1901 to 25-1910 (Reissue 2016).
34
§ 53-1,116(1) (Reissue 1998) (“[t]he [APA] shall not apply to review
under this section”).
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the definition applies to APA review. The bill as introduced
would have placed in § 53-1,115 both the definition of “party
of record” in the Commission’s proceedings and the provision
providing for APA review of the Commission’s proceedings.35
The bill was later amended so that the APA review provision
would be placed in § 53-1,116.36 This amendment made a
variety of changes, which, in the words of the amendment’s
introducer, “[we]re technical and intend[ed] for the purpose
of clarifying the provisions of [the bill].”37 Thus, the sec-
tion originally referred to by the language “[f]or purposes of
this section” included the provision regarding APA review of
the Commission’s orders.38 And the legislative history indi-
cates that the amendment which moved the APA provision
to the following section was not intended to change the fact
that the definition of “party of record” would apply to APA
review of the Commission’s proceedings.39 Thus, § 53-1,115
defines who are “parties of record” in a hearing before the
Commission that the APA requires be made parties to the pro-
ceeding for review.
For purposes of defining who are “parties of record” in a
hearing before the Commission, § 53-1,115 defines such par-
ties and § 53-1,116 provides that any order of the Commission
may be appealed in accordance with the APA.
[18] Third, the definition of “party of record” in § 53-1,115
includes the Commission itself.40 If the definition of “party
of record” for the Commission’s proceedings had no appli-
cation to APA review of those proceedings, it would seem
35
Introduced Copy, L.B. 267, General Affairs Committee, 96th Leg., 1st
Sess. 42-45 (Jan. 11, 1999).
36
See Legislative Journal, 96th Leg., 1st Sess. 1446 (Apr. 14, 1999).
37
Floor Debate, 96th Leg., 1st Sess. 5655-56 (May 3, 1999) (Senator Charlie
Janssen).
38
See Introduced Copy, supra note 35.
39
See Floor Debate, supra note 37.
40
§ 53-1,115(4)(a)(iv) and (c)(ii).
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odd that the Commission is defined as a party of record.
Section 53-1,115(1) through (3) addresses which parties are
entitled to receive notice of the Commission’s order, have the
right to move for rehearing, and may be assessed costs. The
Commission has no need to give itself notice of the hearings
it conducts, to move itself for rehearing, or to assess costs
against itself. To strictly limit the application of the defini-
tion of “party of record” in § 53-1,115(4) to that section alone
would render the definition of the Commission as a “party of
record” as superfluous. It is a fundamental rule of statutory
interpretation that courts should, if possible, avoid any inter-
pretation that renders a portion of the statute as superfluous.41
But the inclusion of the Commission as a “party of record”
in § 53-1,115(4) makes much more sense if that definition
applies not only to that section, but also to APA review of the
Commission’s proceedings.
[19] And even if we were to read the phrase “[f]or purposes
of this section” in § 53-1,115(4) such that the definition of
“party of record” did not expressly apply beyond § 53-1,115,
it could still be viewed as persuasive evidence of the mean-
ing of “parties of record” as used in the APA and applied to
review of the Commission’s proceedings. A statutory defini-
tion of a term found in one statute may be considered when
interpreting that same term as used in a different statute.42
41
See, State v. Artis, 296 Neb. 172, 893 N.W.2d 421 (2017), modified on
denial of rehearing 296 Neb. 606, 894 N.W.2d 349; Scalia & Garner,
supra note 26, 174-79 (discussing surplusage canon).
42
Matter of J.M.M., 890 N.W.2d 750, 754 (Minn. App. 2017) (“[w]e may
look to related statutes when interpreting an ambiguous statute. . . . More
specifically, we may borrow from other statutes’ definitions of terms that
are undefined in the statute at issue”); State v. Turner, 567 N.E.2d 783,
784 (Ind. 1991) (“a legislative definition of certain words in one statute,
although not conclusive, is entitled to consideration in construing the same
words in another statute”). See, also, Jaster v. Comet II Const., Inc., 438
S.W.3d 556 (Tex. 2014); Schaefer v. Putnam, 841 N.W.2d 68 (Iowa 2013)
(as corrected Dec. 18, 2013).
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Because the APA contains no definition of “parties of record”
and because there is no other definition of “party” or “party
of record” in the Nebraska Liquor Control Act, the definition
in § 53-1,115(4) is, at a minimum, strongly suggestive of the
conclusion that citizen objectors are “parties of record” that
must be included in a district court’s APA review.
And the retailers do not argue that the definition of “party
of record” in § 53-1,115 is entirely irrelevant to determin-
ing which parties are “parties of record” under the APA.
Rather, what they argue is that the controlling definition of
“party of record” is the one found in subsection (4)(c) of
§ 53-1,115, which applies to “administrative proceed ing[s]
before the [C]ommission to suspend, cancel, or revoke a retail
. . . license,” rather than subsection (4)(a), which applies
to “administrative proceeding[s] before the [C]ommission
on the application for a retail . . . license.” (Emphasis
supplied.)
The retailers argue that we should look to the definition
of “party of record” under § 53-1,115(4)(c), applicable to
proceedings to suspend, cancel, or revoke liquor licenses,
because “[t]he end result was the same as a cancelation [sic]
or revocation.”43 But the end result of this proceeding was not
the same as the cancellation or revocation of a liquor license.
The retailers’ licenses were set to expire, and their applications
for the following year were denied. Liquor licenses provide
an entitlement for the sale, distribution, or production of alco-
hol (depending on the type of license) for a period of only
1 year. As § 53-149(1) provides, “[a] license shall be purely
a personal privilege, good for not to exceed one year after
issuance unless sooner revoked as provided in the Nebraska
Liquor Control Act, and shall not constitute property . . . .”
(Emphasis supplied.) Thus, renewal applications (short form
or long form) and applications for new licenses are both
applications, because the applicant is seeking an entitlement
43
Supplemental brief for appellees Kozal et al. at 6.
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to which he or she is not currently entitled. This is different
from the cancellation or revocation of a license, which takes
away an existing entitlement from the license holder. The
denial of a license renewal application simply allows the exist-
ing 1-year entitlement to expire.
The Commission’s proceeding, in name and in substance,
was “an administrative proceeding before the commission on
the application for a retail . . . license.”44 Thus, the relevant
definition of “party of record” in § 53-1,115 is that found in
subsection (4)(a), not subsection (4)(c). The fact that citizen
objectors are defined by the Nebraska Liquor Control Act as
“parties of record” in license renewal proceedings establishes
that they are “parties of record” that the APA requires to be
included in an APA review proceeding.45
Citizen Objectors Acted As and Were
Treated As Parties of R ecord
in Commission H earing
Not only does the Nebraska Liquor Control Act define citi-
zen objectors as “parties of record” in the Commission’s liquor
license application proceedings, but the citizen objectors in this
case acted as and were treated as parties in the Commission’s
hearing on the retailers’ license renewal applications.
In Shaffer v. Nebraska Dept. of Health & Human Servs.,46
we concluded that a Medicaid provider was a “party of record”
in a Department of Health and Human Services hearing regard-
ing Medicaid coverage of nursing care that should have been
included in the district court’s APA review. One of the princi-
pal reasons we relied upon to conclude that the provider was a
“party of record” was that “it [was] clear from the administra-
tive record that [the provider] participated in the [department’s
Medicaid] hearing and was treated as a party by the hearing
44
See § 53-1,115(4)(a) (emphasis supplied).
45
See § 84-917.
46
Shaffer v. Nebraska Dept. of Health & Human Servs., supra note 21.
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officer.”47 We looked to the fact that the Medicaid provider’s
“representatives presented evidence, cross-examined witnesses,
entered into stipulations, and presented arguments” and that
“[a]t the beginning and conclusion of the hearing, the hearing
officer referred to [the Medicaid recipient] and [the Medicaid
provider] as the ‘parties.’”48
Here too, the citizen objectors acted as and were treated
as parties. The attorney for four of the objectors made a for-
mal appearance as an attorney of record and was listed as an
attorney of record in the record of the proceeding. The hearing
officer conducted the hearing by allowing the objectors to call
witnesses and make their case first, followed by the retailers’
case and response to the objectors’ arguments and evidence.
The citizen objectors’ attorney submitted pretrial witness
and exhibit lists, filed and responded to prehearing motions,
called witnesses at the hearing, made stipulations, objected to
evidence, and examined and cross-examined witnesses. The
primary examination of witnesses at the hearing was conducted
by the citizen objectors’ attorney and the retailers’ attorney,
with just a few questions asked by the hearing officer and the
commissioners. The hearing officer referred to citizen objectors
and the retailers as the “parties.” And he referred to the unrep-
resented objectors as “pro se litigant[s].”
And the Commission wrote in its order that in making its
decision, it “considered, foremost, the existence of citizen
protest, and the adequacy of existing law enforcement.” For
all practical purposes, the citizen objectors were “parties of
record” in the retailers’ licensure proceeding.
Conclusion: Citizen Objectors
A re Parties of R ecord
[20] Because citizen objectors are defined by the Nebraska
Liquor Control Act as “part[ies] of record” in the Commission’s
47
Id. at 751, 857 N.W.2d at 322.
48
Id.
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liquor license application proceedings and because the citi-
zen objectors acted as and were treated as parties in the
Commission’s hearing, we conclude that they are “parties of
record” for purposes of the APA. The APA requires all “par-
ties of record” in the agency proceeding to be made parties in
the district court’s review. Where a district court has statutory
authority to review an action of an administrative agency, the
district court may acquire jurisdiction only if the review is
sought in the mode and manner and within the time provided
by statute.49 The failure to make a “part[y] of record” a party to
the proceedings for review as required by the APA is a failure
to seek review in the mode and manner provided by statute that
deprives the district court of jurisdiction. Here, the result of the
retailers’ failure to include the citizen objectors is that the dis-
trict court never acquired subject matter jurisdiction to review
the Commission’s order.
CONCLUSION
The retailers failed to include all “parties of record” in
the Commission proceeding when they sought review in the
district court. The district court never acquired subject mat-
ter jurisdiction, and as a result, we lack jurisdiction over this
appeal. We vacate the judgment of the district court and dis-
miss this appeal.
Vacated and dismissed.
49
J.S. v. Grand Island Public Schools, supra note 20; Nebraska Dept. of
Health & Human Servs. v. Weekley, supra note 20. | 01-03-2023 | 10-06-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/1644805/ | 994 So. 2d 1229 (2008)
STATE of Florida, DEPARTMENT OF REVENUE, on behalf of, Tangee L. SAMPSON, Petitioner,
v.
Gregory J. SAMPSON, Respondent.
No. 1D08-1204.
District Court of Appeal of Florida, First District.
November 17, 2008.
William H. Branch, Assistant Attorney General, Tallahassee, for Petitioner.
No appearance for Respondent.
PER CURIAM.
The circuit court departed from the essential requirements of law in ordering Petitioner to prepare a second audit of the amount Respondent owes in arrearage on his child support obligations. Accordingly, we GRANT certiorari and QUASH the circuit court's order.
BARFIELD, DAVIS, and HAWKES, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548637/ | 25 F.2d 630 (1928)
YOUNG et al.
v.
SOUTHERN PAC. CO.
No. 280.
Circuit Court of Appeals, Second Circuit.
April 9, 1928.
Humes, Buck & Smith, of New York City (Gordon M. Buck, of New York City, of counsel), for appellant.
Dudley F. Phelps, of New York City (Frank M. Swacker, of New York City, of counsel), for appellees.
Before MANTON, L. HAND, and SWAN, Circuit Judges.
MANTON, Circuit Judge.
These appellees belong to the class of stockholders who sought to intervene in a stockholders' action and who are referred to in Southern Pacific Co. v. Bogert, 250 U.S. 483, 39 S. Ct. 533, 63 L. Ed. 1099, and Bogart v. Southern Pacific Co. (C. C. A.) 290 F. 727, certiorari denied 263 U.S. 708, 44 S. Ct. 36, 68 L. Ed. 517.
In 1888, the Houston & Texas Central Railroad Company was organized and new securities issued. The appellees, seeking to impress a trust upon a portion of the stock issued by the new Houston & Texas Central Railway Company which reached the hands of the appellant, began this suit May 10, 1926, in the state court. On May 24, 1926, the appellant filed a petition and bond removing the case to the federal court upon the ground that it contained a separable controversy. The appellees resisted, arguing that the cause was not removable, and insisted upon having the question of removability determined by the state court. The District Court issued an order to show cause on May 28, 1926, to the appellant, directing the appellees to show cause why the proceedings in the state court should not be restrained. On the return of that order, the appellees stipulated to extend the appellant's time to answer in the state court should the jurisdiction of the federal court not be sustained. The motion for an injunction was denied without prejudice. On January 16, 1926, the state court held that there was no separable controversy and that the alleged causes of action were joint, and attempted to retain jurisdiction. Thereupon a second order to show cause was obtained in the District Court with a stay of proceedings in the state court, and, when heard, it was decided that each plaintiff had a separate cause of action, and while, as a general rule, the removal of the separable controversy carried the entire case to the federal court, this was a case not containing several causes of action but of several separate suits united under state practice, and that therefore only the causes of action of those plaintiffs were removed in which the requisite diversity of citizenship existed. An order was accordingly entered on this decision, adjudging that the suit had been removed to the federal court with respect to all the plaintiffs excepting two, and enjoining the plaintiffs, with these two exceptions, from taking further proceedings in the state court. On appeal, this order was affirmed. ([C. C. A.] 290 F. 727.)
On June 24, 1926, after the decision in the District Court, the appellant moved to dismiss the complaint for laches. The motion was adjourned from time to time, and on November 29, 1928, after affirmance by this court of the order appealed from, the appellees moved for leave to discontinue the suit and dismiss the bill without prejudice. It was conceded by the appellees that they intended to institute a new suit in the state court and vary the allegations of the new complaint so as to avoid the removal of the proposed suit to the federal court. Both motions were heard on December 7, 1926, and later the appellee's motion to dismiss was granted without prejudice on the following memorandum: "Motion granted on payment of costs. See Ex parte Skinner & Eddy Corporation, 265 U.S. 86 [44 S. Ct. 446, 68 L. Ed. 912]."
Southern Pacific Co. v. Bogert, 250 U.S. 483, 39 S. Ct. 533, 63 L. Ed. 1099, was a suit by the minority stockholders of the railroad company whose property had been sold under foreclosure to the defendant corporation. The latter controlled the majority of the stock and had been decreed to be entitled to receive from the defendants stock in a reorganized corporation on surrender of *631 their original stock and payment to the defendant of the amounts expended for the benefit of the reorganized corporation, and it was held that the defendant was entitled to credit for the amount of the claims against the original corporation which were in fact held by it and which were inferior to the debt foreclosed and were lost by the foreclosure proceeding. This class of stockholders, of which the present appellees were members, were held to be entitled to recover from this appellant who, as a majority stockholder, had been responsible for the sale of the railroad company's property under foreclosure and to stock in a reorganized company on surrendering their own stock and paying their portion of the amounts expended by the appellant for the benefit of the new company. Also that the appellant was not entitled to the consequent acquisition, by the reorganized company, of branch lines and coal mines since they were but improvements had after they had been acquired, and whatever value there may be therein was reflected in the value of the new stock and that the loss resulting was similarly represented. It was also held that other stockholders of the class were not entitled, as a matter of right, to intervene in the stockholders' action and claim the benefits of the suit after final decree had been entered, and the final effect of the decree was not destroyed by an appeal therefrom which resulted in a remand for further determination of the amounts to be paid by stockholders. In Southern Pacific Co. v. Bogart (C. C. A.) 290 F. 727, minority stockholders who did not, during the period, intervene in the suit, were held not to be entitled to intervene as a matter of grace after filing the decree establishing their rights had been entered, because their demands were stale, having existed for more than 30 years, and that they were guilty of laches in enforcing them. The motion of the appellant, based on the claim that the appellees were guilty of laches, was grounded upon the right to have the cause tried in the District Court. The federal court had held that the stockholders who sought to intervene were guilty of laches. The application to discontinue was not with an idea of ending the litigation, but concededly for the sole purpose of a second litigation upon the subject-matter which would manifestly be annoying and might be prejudicial to the appellant. Leave to dismiss a bill and discontinue the action is not granted where such promised second litigation would constitute an annoyance and an avoidance of that which had been determined. Pullman's Car Co. v. Central Transp. Co., 171 U.S. 138, 146, 18 S. Ct. 808, 43 L. Ed. 108; Chicago, etc., A. R. R. Co. v. Union Rolling Hill Co., 109 U.S. 702, 713, 3 S. Ct. 594, 27 L. Ed. 1081; Welsbach Light Co. v. Mahler (C. C.) 88 F. 427. This adjudication which the appellant has secured fixing the rights and responsibilities of stockholders and the conditions under which they may have the benefits secured by stockholders' action, we think, was prohibitive of permitting a voluntary discontinuance against the protest of the appellant. Individual Drinking Cup Co. v. News Co. (C. C. A.) 250 F. 625; Amer. Bell Telephone Co. v. Western Union Tel. Co. (C. C. A.) 69 F. 666.
The authority relied upon below (Ex parte Skinner & Eddy Corp., 265 U.S. 86, 44 S. Ct. 446, 68 L. Ed. 912), was a case where suit was begun in the Court of Claims for a balance due on a construction contract. On August 15, 1921, no answer or notice of any counterclaim having been filed by the government, a general traverse was entered by the clerk of the court under one of its rules. No future pleadings were filed, and no proceedings were had until April 11, 1923, when the petitioner filed its motion to dismiss the suit without prejudice. On June 3, 1923, the government moved for a reargument of the petitioner's motion to dismiss and for leave to file a counterclaim, and thereafter the order of dismissal was vacated and leave granted to file a counterclaim. A petition was then filed by Skinner & Eddy Corporation to the Supreme Court for a rule on the Court of Claims directing it to show cause why it should not be required by mandamus or prohibition to restore the order dismissing the suit and to abstain from attempting exercise of further jurisdiction in the case. This petition was granted. At the time the discontinuance was asked, the defendant had done nothing to file a general denial. The case was at law and under the rule of the common law, when no affirmative relief is asked for by a defendant, the plaintiff may discontinue his action without prejudice at any time before trial as a matter of right. It should be recognized that the rules of law referred to in the opinion were intended to apply to the particular facts of that cause. In Barrett v. Virginian Ry. Co., 250 U.S. 473, 39 S. Ct. 540, 63 L. Ed. 1092, the court permitted the plaintiff to discontinue under the terms of the state statute, and pointed out that the practice in the federal courts was required to be the same as in the state courts.
United States Code, title 28, § 731 (28 *632 USCA § 731) Rev. Stat. § 918, authorizes the District Court to make rules regulating the practice in any manner not inconsistent with any law of the United States or with any rule prescribed by the Supreme Court under section 730 of this title. The special Equity Rule 4 of the Southern and Eastern Districts of New York authorizes the court, when justice requires, to refuse to permit a plaintiff to discontinue. It does not conflict with any rule prescribed by the Supreme Court. Equity Rule 79 of the Supreme Court permitted the District Court, with the concurrence of the majority of the Circuit Judges, to make and enforce special Equity Rule 4. That rule would as well have warranted the denial of the motion which was granted below.
We do not pass upon the motion to dismiss the complaint for laches. That is a matter which must be passed upon by the District Court. It was error to grant the motion to discontinue under these circumstances.
Order reversed.
SWAN, Circuit Judge, concurs in the result.
L. HAND, Circuit Judge (concurring).
The phrase, "issue joined," in Rule 4 of the Local Equity Rules of the Southern District of New York does not, I think, include a motion to dismiss the bill made under Equity Rule 29. The local rule was drawn after the Equity Rules were in force, and as Equity Rule 31 enacts that "the cause shall be deemed at issue upon the filing of the answer," "issue joined" in the local rule must refer to the "issue" so defined.
Perhaps the other basis of the majority opinion is enough to dispose of the case; that is, that the defendant got an affirmance by this court of its right to remove, and an injunction against any further proceedings in the state court, but I am not thoroughly persuaded that it is, and it seems to me safer to rest the decision upon a narrower ground. The whole immediate controversy really turns on the defendant's right to plead the plaintiff's laches, and this depends upon its power to remove the suit to the federal court and keep it here. The plaintiffs drew the bill at bar in such a way that, as they supposed, it would resist removal. They have been disappointed, and frankly avow that they hope to contrive another which will succeed if they can get rid of this.
The importance of all this lies in the fact that the defendant has never designated any one on whom process can be served in New York, and, being a foreign corporation, may not therefore plead the statute of limitations in that state. Comey v. United Surety Co., 217 N.Y. 268, 111 N.E. 832, Ann. Cas. 1917E, 424. If this were a case where the remedy sought were discretionary, laches would nevertheless be a defense (Groesbeck v. Morgan, 206 N.Y. 385, 99 N.E. 1046), but the cause of suit is a constructive trust, a creature of equity, for which only equitable remedies are available, and those not discretionary. It is at best extremely doubtful whether in such a situation there is any doctrine of laches independent of the statute. Galway v. Metropolitan Ry., 128 N.Y. 132, 28 N.E. 479, 13 L. R. A. 788; Cox v. Stokes, 156 N.Y. 511, 51 N.E. 316; Treadwell v. Clark, 190 N.Y. 51, 82 N.E. 505; Derby v. Yale, 13 Hun. 273; Cardwell v. Clark, 94 Misc. Rep. 433, 158 N. Y. S. 300. Pollitz v. Wabash Ry., 207 N.Y. 113, 100 N.E. 721, involved a legal right, and is perhaps beside the point, but at least it does not serve to lay the doubt. On the other hand, as this is a suit in equity, the District Court is not bound by the state statute of limitations, Benedict v. City of N. Y., 250 U.S. 321, 327, 39 S. Ct. 476, 63 L. Ed. 1005, and laches if proved would be a good bar.
Ordinarily the mere fact that a plaintiff prefers the state courts ought not to prevent his discontinuing his suit (Harding v. Corn Products Refining Co., 168 F. 658 [C. C. A. 7]); one court is as good as another. But the situation changes when there is substantial doubt whether the courts will not apply different rules, and when the plaintiff's purpose is so to maneuver the litigation that the defendant will lose his existing advantage. The loss of the federal forum then becomes a grave prejudice, quite as much as, and indeed more than, the expense and delay in trying the suit up to decree, or even the failure of a cross-bill. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548651/ | 992 A.2d 152 (2010)
COMMONWEALTH of Pennsylvania, Appellee
v.
Leabert George GRANT, Appellant.
Superior Court of Pennsylvania.
Submitted January 5, 2009.
Filed March 23, 2010.
*153 William C. Kaczynski, Pittsburgh, for appellant.
Michael W. Streily, Deputy District Attorney, Pittsburgh, for Commonwealth, appellee.
BEFORE: BOWES, DONOHUE and POPOVICH, JJ.
OPINION BY DONOHUE, J.:
¶ 1 Appellant Leabert George Grant ("Grant") appeals from the PCRA court's dismissal of his Amended Petition for Post Conviction Relief and Petition for Writ of Habeas Corpus. Grant contends that his constitutional rights were violated when the PCRA court refused to grant him a new trial after it was discovered that he was represented at trial by someone who was not licensed to practice law because of his repeated failure to fulfill mandatory continuing legal education requirements. For the reasons set forth herein, we conclude that Grant's rights to the assistance of counsel under the Sixth Amendment of the United States Constitution and Article I, Section 9 of the Pennsylvania Constitution were violated. Accordingly, we reverse the order of the PCRA court dated April 4, 2008, vacate the judgment of sentence dated August 16, 2004, and remand for a new trial.
¶ 2 On April 18, 2003, Grant was arrested and charged with one count each of rape, statutory sexual assault, indecent assault, and corruption of minors, and two counts of aggravated indecent assault of a child,[1] all in relation to an incident that occurred on January 18, 2003, while the victim was babysitting her cousin's four children and Grant's twin daughters. On July 10, 2003, he was formally arraigned, and on the same date William E. Papas ("Papas") entered his appearance as a privately retained attorney representing Grant. On March 24, 2004, Grant waived his right to a jury trial and was tried before the Honorable Kathleen A. Durkin of the Court of Common Pleas of Allegheny County. At trial, the Commonwealth presented testimony from the victim, her cousin, and her mother. The defense presented the testimony of Grant, his twin daughters, and his employer (as a character witness). Following trial, Grant was convicted of all charges.
¶ 3 Sentencing was scheduled for June 8, 2004, but Papas failed to appear. Sentencing was rescheduled for August 16, 2004, and on that date Judge Durkin made the following statement on the record:
Sentencing was originally scheduled for June 8, 2004, and a pre-sentence report was ordered. The attorney, Mr. Grant's at that time was William Pappas [sic]. He did not appear at that date. His *154 whereabouts were unknown. After checking around with the Disciplinary Board, we discovered that Attorney Pappas [sic] was on inactive status for several years. . . .
Notes of Testimony ("N.T."), 8/16/04, at 2-3. New privately-retained counsel appeared on behalf of Grant and moved the trial court for extraordinary relief requesting a new trial on the basis of Papas' ineffectiveness for holding himself out as a lawyer at a time when he was not licensed to practice law in Pennsylvania. Id. at 3-4. Judge Durkin denied the motion and sentenced Grant on the rape conviction to a term of not less than five years or more than ten years of imprisonment. No further penalties were imposed for the remaining convictions.
¶ 4 Grant filed a direct appeal with this Court, raising two issues relating to the sufficiency of the evidence and two issues related to Papas' ineffective assistance of counsel. We denied as meritless his claims relating to the sufficiency of the evidence and deferred to the PCRA stage his ineffectiveness claims. With respect to the latter, we stated that "[Grant] can raise the claims of ineffectiveness presented herein and any other such claims in a PCRA petition, wherein the PCRA court will be in a position to ensure that [Grant] receives an evidentiary hearing on his claims, if necessary." Commonwealth v. Grant, 909 A.2d 871 (Pa.Super.2006) (unpublished memorandum).
¶ 5 Grant then filed a timely pro se petition pursuant to the Post-Conviction Relief Act ("PCRA"), 42 Pa.C.S.A. §§ 9541-9546. Counsel was appointed and on October 24, 2007, an Amended Petition for Post-Conviction Collateral Relief and Petition for Writ of Habeas Corpus (the "PCRA Petition") was filed. The PCRA Petition sets forth in detail his claims of ineffective assistance of counsel by Papas, and has attached to it the affidavits of three witnesses who would testify at an evidentiary hearing. In addition, attached as exhibits A, C and D are two reports/recommendations of the Disciplinary Board of the Supreme Court of Pennsylvania and an order of disbarment. Based upon these documents, as well as the docket entries and transcripts in the record, the following timeline of Papas' misdeeds may be established for purposes of this appeal:
4/20/88: Papas is suspended from the practice of law for criminal convictions for the possession of cocaine, marijuana, and paraphernalia. (PCRA Petition, Exhibit A, p. 3).
8/23/89: Reinstatement granted. (PCRA Petition, Exhibit A, p. 3).
3/17/00: By Order of the Supreme Court of Pennsylvania dated March 17, 2000, with an effective date of April 18, 2000, served by certified letter, Papas is formally advised by the Pennsylvania Disciplinary Board that in order to resume active status he would have to comply with Continuing Legal Education ("CLE") requirements before a request for reinstatement to the Disciplinary Board would be considered. (PCRA Petition, Exhibit C, p. 4)
4/18/00: Papas is transferred to inactive status for failure to fulfill his CLE requirements or successfully apply for reinstatement, thus prohibiting him from practicing law until reinstated to active status. (PCRA Petition, Exhibit C, pp. 3-4)
6/18/01: Papas improperly represents a Mr. Koutsouflakis while on inactive status without informing his client of his inability to practice law. (PCRA Petition, Exhibit A, pp. 5-6)
11/1/01: Papas improperly represents a Mr. Wolfram while on inactive status without informing his client of his inability *155 to practice law. (PCRA Petition, Exhibit A, pp. 7-8)
11/1/01: Papas improperly represents a Mr. Fischer while on inactive status, without informing his client of his inability to practice law. (PCRA Petition, Exhibit A, p. 8)
7/10/03: Papas enters his appearance on behalf of Grant.
11/14/03: Papas attends a disciplinary hearing before a hearing committee of the Disciplinary Board, at which time he is again informed by Disciplinary Counsel that he is to cease and desist from representing clients and from holding himself out as an attorney permitted to practice law. (PCRA Petition, Exhibit C, p. 5)
3/24/04: Papas represents Grant in his non-jury trial.
6/8/04: Papas fails to appear for Grant's sentencing hearing.
8/16/04: Judge Durkin denies Grant's motion for a new trial on the grounds of ineffective assistance of counsel.
3/4/05: The Disciplinary Board sends Papas four formal letters of inquiry comprising 13 separate instances of his continuing violation of the Rules of Professional Conduct and Rule of Disciplinary Enforcement by engaging in the unauthorized practice of law while on inactive status. (PCRA Petition, Exhibit C, pp. 5-6).
9/12/05: Papas is suspended by the Supreme Court of Pennsylvania for a period of two years as a result of his unlawful representation of Koutsouflakis, Wolfram and Fischer while on inactive status, combined with other acts of client neglect and dishonest conduct. (PCRA Petition, Exhibit B, Per Curiam Order).
11/1/05: Papas is found to be in contempt by the Pennsylvania Supreme Court for his willful violation of the Supreme Court's Order of March 17, 2000, and his repeated and continuing practice of law while in violation of the Supreme Court's prohibition. (PCRA Petition, Exhibit C, p. 6).
11/21/06: Papas is disbarred by order of the Supreme Court of Pennsylvania. (PCRA Petition, Exhibit D, Per Curiam Order).
¶ 6 On March 13, 2008, the Commonwealth filed its response to Grant's PCRA Petition, and the next day (March 14, 2008) the PCRA court filed a notice of intent to dismiss without an evidentiary hearing pursuant to Pa.R.Crim.P. 907. On April 2, 2008, Grant filed a response to the Rule 907 notice, but the next day (April 3, 2008), the PCRA court dismissed Grant's PCRA Petition without an evidentiary hearing.
¶ 7 This timely appeal followed, in which Grant raises the following three issues for our consideration:
I. Whether [Grant] was improperly denied his constitutional rights to the assistance of counsel, due process and fair trial when he unwittingly was represented at trial by someone whose license to practice law had been revoked due to flagrant longterm refusal to attend mandatory continuing legal education.
II. Whether trial counsel was ineffective in failing to secure the services of a patois-creole interpreter for trial, given [Grant's] difficulty in reading and understanding colloquial American English.
III. Trial counsel was ineffective in coercing [Grant] into involuntarily waiving his right to jury trial by his obvious unpreparedness for jury trial and by improperly advising him shortly before commencement of jury selection that the *156 jury panel was "all white" and that therefore it would convict him because of his race.
Appellant's Brief at 5.
¶ 8 Our standard of review for a decision of a PCRA court in dismissing a PCRA petition is well-settled: "In reviewing the propriety of [a] PCRA court's order, we are limited to determining whether the court's findings are supported by the record and whether the order in question is free of legal error." Commonwealth v. Geer, 936 A.2d 1075, 1077 (Pa.Super.2007) (citing Commonwealth v. Halley, 582 Pa. 164, 170 n. 2, 870 A.2d 795, 799 n. 2 (2005)), appeal denied, 597 Pa. 703, 948 A.2d 803 (2008). "The PCRA court's findings will not be disturbed if there is any support for the findings in the certified record." Id. (citing Commonwealth v. Carr, 768 A.2d 1164, 1166 (Pa.Super.2001)).
¶ 9 With respect to Grant's first issue on appeal, the Sixth Amendment to the United States Constitution provides that "[i]n all criminal prosecutions, the accused shall enjoy the right . . . to have the Assistance of Counsel for his defence."[2] According to the United States Supreme Court, the Sixth Amendment provides the accused with the right to the effective assistance of counsel at all critical stages of a criminal proceeding, including the pretrial stages, trial, and sentencing. Strickland v. Washington, 466 U.S. 668, 684-86, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984); Mempa v. Rhay, 389 U.S. 128, 134, 88 S. Ct. 254, 19 L. Ed. 2d 336 (1967). Assistance of counsel is mandated by the Sixth Amendment because lawyers "are the means through which the other rights of the person on trial are secured," and through which the prosecution's case is subjected to "meaningful adversarial testing." United States v. Cronic, 466 U.S. 648, 653-56, 104 S. Ct. 2039, 80 L. Ed. 2d 657 (1984).
¶ 10 In Strickland, the United States Supreme Court ruled that a defendant must typically plead and prove two elements in order to gain relief for ineffective assistance of counsel under the Sixth Amendment: (1) that his "counsel's performance was deficient," and (2) that the "deficient performance prejudiced the defense." Strickland, 466 U.S. at 687, 104 S. Ct. 2052; see also Commonwealth v. Pierce, 515 Pa. 153, 158-59, 527 A.2d 973, 975 (1987). To demonstrate "actual" prejudice under the second element of the Strickland test, the defendant must show that "there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." Strickland, 466 U.S. at 694,104 S. Ct. 2052.
¶ 11 In Cronic, a case decided on the same day as Strickland, the Supreme Court concluded that when there has been an actual or constructive denial of counsel, i.e., when counsel's failure has been complete and it is as if the right to counsel has been wholly denied, prejudice may be presumed. Cronic, 466 U.S. at 659-662, 104 S. Ct. 2039; see also Florida v. Nixon, 543 U.S. 175, 190, 125 S. Ct. 551, 160 L. Ed. 2d 565 (2004). The Supreme Court of Pennsylvania has described the operation of *157 Cronic's presumption of prejudice as follows:
Cronic recognized that in some cases, the prejudice inquiry of Strickland is not required because there are certain circumstances `that are so likely to prejudice the accused that the cost of litigating their effect in a particular case is unjustified.' Cronic suggested that where there has been a complete denial of counsel or where the circumstances are such that any competent attorney would be unable to provide effective assistance, a defendant need not demonstrate that he was prejudiced by counsel's actions.
Commonwealth v. Reaves, 592 Pa. 134, 148, 923 A.2d 1119, 1128 (2007); see also Commonwealth v. Mallory, 596 Pa. 172, 194-95, 941 A.2d 686, 700, cert. denied, ___ U.S. ___, 129 S. Ct. 257, 172 L. Ed. 2d 146 (2008). In Reaves, our Supreme Court recognized that the presumption of prejudice has been found to apply in three circumstances: (1) where there was an actual or constructive denial of counsel, (2) where the state has interfered with counsel's assistance, and (3) where counsel had an actual conflict of interest. Id.
¶ 12 Grant contends that two of these three circumstances exist in his case, both of which entitle him to a presumption of prejudice. First, Grant argues that he was actually or constructively denied counsel. Second, Grant claims that his counsel had an actual conflict of interest that adversely affected his performance at trial.
¶ 13 With respect to the argument that he was actually or constructively denied counsel, Grant argues that the term "counsel" in the Sixth Amendment refers to "an individual duly licensed to practice law." Appellant's Brief at 27. Because Papas "was aware that he did not have a license to practice law at the time he represented [Grant] at trial, and that his license had been revoked," Grant contends that he was "therefore not represented by `counsel,' and that failure entitles him to relief." Id.
¶ 14 To this end, Grant relies upon several state and federal cases to establish the existence of a per se rule mandating a finding of the violation of the Sixth Amendment when the defendant is not represented by a person licensed to practice law. Solina v. United States, 709 F.2d 160 (2d Cir.1983); United States v. Novak, 903 F.2d 883 (2d Cir.1990); People v. Felder, 47 N.Y.2d 287, 293, 418 N.Y.S.2d 295, 297, 391 N.E.2d 1274, 1275-76 (1979). In Solina, the defendant was represented by someone who left law school to enter military service during World War II.[3] Though he later returned to law school and received a bachelor of laws degree, he failed twice to pass the New York State bar examination and was never admitted to the practice of law in New York or any other state. The Second Circuit concluded *158 that Solina's Sixth Amendment right had been violated because the guarantee of assistance of counsel means, at the very least, "representation by a licensed practitioner." Solina, 709 F.2d at 167. Accordingly, the Second Circuit vacated Solina's conviction despite "overwhelming" evidence of his guilt and without any showing that he was prejudiced by the unlicensed representation. Id. at 163.
¶ 15 In Novak, the defendant retained Joel Steinberg ("Steinberg") in 1981 to represent him in anticipation of his arrest and indictment on drug charges. Steinberg had been admitted to the practice of law in New York in 1970. He had not taken the bar examination but had instead obtained a certificate of dispensation based upon his representation that his law school education had been interrupted by his service in the armed forces. In actuality, he had left law school in May 1964 and did not enter the armed forces until April 1965, and his departure from law school had been based upon "poor scholarship" rather than entry into military service. In 1987, Steinberg was disbarred for obtaining his admission to the bar by fraud. The Second Circuit, relying on its decision in Solina, concluded that Novak's Sixth Amendment rights had been violated:
At the time of his admission to the bar, Steinberg had not met the State's normal substantive requirements for admission to the New York State Bar. His competence to practice law had never been tested, and he was not entitled to bypass such testing. Had the truth been known as to his early law-school career and the reason for its interruption, he plainly would have been denied admission to the bar unless he took the bar examination; had he taken the bar examination, there is no assurance that he would have passed. Thus here, as in Solina, there has been no foundation for an assumption that defense counsel had the legal skills necessary to permit him to become a "duly admitted" member of the bar.
Novak, 903 F.2d at 890.
¶ 16 The New York State Court of Appeals has likewise interpreted the Sixth Amendment as guaranteeing "nothing less than a licensed attorney at law." Felder, 47 N.Y.2d at 293, 418 N.Y.S.2d at 297, 391 N.E.2d at 1276. In Felder, the court considered the convictions of four defendants represented by a person "who was not, and had never been, admitted to the Bar of this State or of any other jurisdiction and who had not completed law school or otherwise satisfied the prerequisites for the practice of law." Id. at 291-92, 418 N.Y.S.2d at 296, 391 N.E.2d at 1275. In each case, the lower courts had rejected the defendants' motions to vacate their convictions, ruling that the pseudo-attorney had been competent and that no prejudice had been shown. The Court of Appeals reversed, ruling that the harmless error analysis was misplaced since "[a] lay person, regardless of his educational qualifications or experience, is not a constitutionally acceptable substitute for a member of the Bar." Id. at 293, 418 N.Y.S.2d at 297, 391 N.E.2d at 1276; see also Huckelbury v. State, 337 So. 2d 400 (Fla.App.1976) (conviction for first-degree murder and conspiracy to commit murder overturned where defendant was represented by public defender who was refused admission to the bar for lack of good moral character, despite graduation from accredited law school and receipt of a passing grade on the state bar examination).
¶ 17 In this case, the PCRA court refused to recognize a per se rule that an automatic violation of Sixth Amendment rights exists when a defendant is represented at trial by an unlicensed lawyer based upon two decisions from this Court, *159 Commonwealth v. Jones, 829 A.2d 345 (Pa.Super.2003), and Commonwealth v. Bretz, 830 A.2d 1273 (Pa.Super.2003). In these two cases, this Court found no violation of the right to counsel when counsel (the same lawyer in both cases) failed to pay his annual dues and thus had been placed on the inactive status list. We found instructive the decision of the Illinois Supreme Court when ruling on a substantially identical factual situation:
[Appellant's] admission to the bar allows us to assume that he has the training, knowledge, and ability to represent a client who has chosen him, and that he has retained the ability to render effective assistance to defendant at trial, notwithstanding his suspension for failure to pay his registration dues. To find a defendant's [S]ixth [A]mendment right to counsel to have been violated, there must be additional factors above and beyond a mere suspension for nonpayment of bar dues.
Bretz, 830 A.2d at 1278 (quoting People v. Brigham, 151 Ill. 2d 58, 70-71, 175 Ill. Dec. 720, 726-27, 600 N.E.2d 1178, 1184-85 (1992)).[4]
¶ 18 The PCRA court's reliance on Jones and Bretz in this case was misplaced. The failure to pay bar dues is a purely technical licensing defect unrelated to a person's competence to practice law. As the Illinois Supreme Court stated in Brigham, "lawyers who do not pay their dues violate a legal norm, but not one established for the protection of clients." Brigham, 151 Ill.2d at 65, 175 Ill.Dec. at 724, 600 N.E.2d at 1182 (quoting Reese v. Peters, 926 F.2d 668, 669-70 (7th Cir. 1991)).
¶ 19 Courts have consistently distinguished between technical licensing defects and serious violations of bar regulations reflecting an incompetence to practice law. Where the attorney's license has been suspended or his/her credentials to practice have otherwise been impaired as a result of mere technical defects, the constitutional right to counsel is not violated and prejudice is not presumed. See, e.g., United States v. Costanzo, 740 F.2d 251 (3d Cir.1984) (failure to be admitted pro hac vice), cert. denied, 472 U.S. 1017, 105 S. Ct. 3477, 87 L. Ed. 2d 613 (1985); State v. White, 101 N.M. 310, 313-14, 681 P.2d 736, 739-40 (1984) (failure of licensed out of state attorney to appear with in-state counsel, as per local rule); Wilson v. People, 652 P.2d 595 (Colo.1982) (failure to take the formal oath for membership in the bar), cert. denied, 459 U.S. 1218, 103 S. Ct. 1221, 75 L. Ed. 2d 457 (1983). Where the attorney's license has been suspended or he/she has been disbarred for substantive violations, however, constitutional rights to counsel are violated and harm is presumed. See, e.g., Solina, 709 F.2d at 163-67; Novak, 903 F.2d at 887; Felder, 47 N.Y.2d at 293, 418 N.Y.S.2d at 297, 391 N.E.2d at 1276; Ex Parte Williams, 870 S.W.2d 343, 348 (Texas Ct.App.1994) ("Representation by a disbarred lawyer is tantamount to no legal representation at all. If a criminal defendant has no lawyer, prejudice is legally presumed in every case."); People v. Hinkley, 193 Cal. App. 3d 383, 389, 238 Cal. Rptr. 272, 275 (1987) (attorney had been placed on an "inactive" *160 list prior to defendant's trial after both the state bar and an appellate court had determined that he was "incompetent to represent clients").
¶ 20 The present case, unlike Jones and Bretz, does not involve technical licensing defects, as we consider Papas' failure to fulfill his CLE requirements over an extended period of time to reflect directly on his lack of competence to practice law in this Commonwealth.[5] Our Supreme Court adopted the stringent requirements of the Pennsylvania Rules for Continuing Legal Education to "assure that lawyers admitted to practice in the Commonwealth continue their education to have and maintain the requisite knowledge and skill necessary to fulfill their professional responsibilities" and "to protect and secure the public's interest in competent legal representation." Kohlman v. Western Pennsylvania Hosp., 438 Pa.Super. 352, 652 A.2d 849, 851 (1994) (case citations omitted), appeal denied, 541 Pa. 640, 663 A.2d 692 (1995); Cole v. Price, 758 A.2d 231, 233-34 (Pa.Super.2000), reversed in part on other grounds, 566 Pa. 79, 778 A.2d 621 (2001); see also American Law Institute v. Commonwealth, 882 A.2d 1088, 1092 (Pa. Commw.2005) ("[T]he purpose of continuing legal education is professional responsibility, which helps ensure that attorneys are able to discharge their duties to the public.").
¶ 21 Moreover, unlike a simple failure to pay bar dues, Papas could not have regained his status as an active member of the Pennsylvania bar merely by taking the required CLE classes. Instead, pursuant to the Pennsylvania Rules of Disciplinary Enforcement, Papas could have been reinstated only by formal order of our Supreme Court after a showing that he had "the moral qualifications, competency and learning in the law required for admission to practice in the Commonwealth." Pa. R.D.E. Rule 218(c)(3)(ii); In re Rankin, 583 Pa. 38, 42, 874 A.2d 1145, 1147 (2005). Given Papas' non-compliance with his CLE requirements, his failure to advise his clients of his inactive status (in violation of Pa.R.D.E. Rule 217), his willful violation of orders and directives from the Supreme Court and the Disciplinary Board, and his unlawful representation of clients while on inactive status (in violation of Pa.R.D.E. Rule 218 and 42 Pa.C.S.A. § 2524), the likelihood that he would have been reinstated to active status is doubtful.
¶ 22 Based upon the reasoning of the cases discussed hereinabove, including Solina, Novak, and Felder, we agree with Grant that Papas' conduct actually and/or *161 constructively denied him the right to counsel under the Sixth Amendment of the United States Constitution and Article I, Section 9 of the Pennsylvania Constitution. Although we indicated in Bretz that an attorney's admission to the bar allows us to presume that he has the "training, knowledge, and ability to represent a client," we also held that this presumption may be rebutted where "additional factors" demonstrate that the attorney is not competent to practice law in this Commonwealth. Bretz, 830 A.2d at 1278. Such "additional factors" clearly exist in this case. By the time of trial in March 2004, Papas' license to practice law had been suspended for nearly three years (since April 2000), and under Pennsylvania law Papas was prohibited from practicing law. Moreover, by March 2004 Papas had not fulfilled his required CLE obligations for five years (since March 1999). Giving full credence to the importance of continuing legal education in this Commonwealth, a failure of this magnitude reflects directly on Papas' lack of competence to practice law in this Commonwealth. We consider the mandatory CLE requirements, as adopted by our Supreme Court, to constitute serious and essential obligations necessary for all lawyers in this Commonwealth to maintain the requisite skill and knowledge to provide effective representation to clients. As such, under the Sixth Amendment and Article I, Section 9 of the Pennsylvania Constitution, any person failing to comply for an extended period of time (in this case, five years) must be presumed to be incompetent to practice law in this Commonwealth and incapable of representing clients in our courtrooms.
¶ 23 In Holloway v. Arkansas, 435 U.S. 475, 98 S. Ct. 1173, 55 L. Ed. 2d 426 (1978), the Supreme Court concluded that the Sixth Amendment right to the assistance of counsel is among those "constitutional rights so basic to a fair trial that their infraction can never be treated as harmless error." Id. at 489, 98 S. Ct. 1173. Because Papas was neither licensed nor competent to practice law at the time of Grant's trial in March 2004, Grant's constitutional rights to the assistance of counsel were violated.[6] This violation may not be considered harmless error, and thus prejudice must be presumed per se.
¶ 24 At least two other states have also adopted a per se rule presuming prejudice in situations where an attorney is not licensed to practice law at the time of trial based upon serious violations of bar regulations reflecting an incompetence to practice law. See Cantu v. State, 897 S.W.2d 389 (Texas Ct.App.1994) (defendant denied his Sixth Amendment right to counsel where his attorney was suspended from practice at the time of trial); Ohio v. Newcome, 62 Ohio App. 3d 619, 577 N.E.2d 125 (1989) (same). We recognize that some courts in other jurisdictions have declined to adopt a per se rule, reasoning that whether "a lawyer's services were ineffective [should be considered] on a case [by case], not a per se, basis." See, e.g., United States v. Mouzin, 785 F.2d 682, 697-98 (9th Cir.), cert. denied, 479 U.S. 985, 107 S. Ct. 574, 93 L. Ed. 2d 577 (1986).[7] As our Supreme Court has recognized, however, *162 "there are certain circumstances `that are so likely to prejudice the accused that the cost of litigating the effect in a particular case is unjustified.'" Reaves, 592 Pa. at 148, 923 A.2d at 1128 (citing Cronic, 466 U.S. at 659-662, 104 S. Ct. 2039). We consider this case to be one such circumstance, since Grant was represented at trial by someone who had been suspended from the practice of law for nearly three years and had not taken a CLE class in five years. Representation by Papas did not fulfill the mandates of the Sixth Amendment or of Article I, Section 9 of the Pennsylvania Constitution.
¶ 25 For these reasons, the PCRA court erred in denying Grant's petition for relief. The order of the PCRA court dated April 4, 2008 is reversed.[8] The judgment of sentence dated August 16, 2004 is vacated and a new trial is hereby awarded. Case remanded. Jurisdiction relinquished.
NOTES
[1] 18 Pa.C.S.A. §§ 3121(a)(1), 3122.1, 3126(a)(8), 6301 and 3125(a)(8), respectively.
[2] Article I, Section 9 of the Pennsylvania Constitution provides in relevant part that "[I]n all criminal prosecutions the accused hath a right to be heard by himself and his counsel.. . ." Our Supreme Court has held that with respect to the right to counsel, Article I, Section 9 provides the same level of protection to criminal defendants as does the Sixth Amendment. Commonwealth v. Pierce, 515 Pa. 153, 161, 527 A.2d 973, 976-77 (1987) ("identical textual and policy considerations logically lead us to hold that together they constitute an identical rule of law in this Commonwealth.").
[3] In Solina, as in the present case, the representation at issue was provided by someone privately retained by the defendant rather than appointed by the state. This distinction does not alter the defendant's Sixth Amendment rights:
A proper respect for the Sixth Amendment disarms petitioner's contention that defendants who retain their own lawyers are entitled to less protection than defendants for whom the State appoints counsel. . . . The vital guarantee of the Sixth Amendment would stand for little if the often uninformed decision to retain a particular lawyer could reduce or forfeit the defendant's entitlement to constitutional protection. Since the State's conduct of a criminal trial itself implicates the State in the defendant's conviction, we see no basis for drawing a distinction between retained and appointed counsel that would deny equal justice to defendants who must choose their own lawyers.
Solina, 709 F.2d at 165 (quoting Cuyler v. Sullivan, 446 U.S. 335, 344-45, 100 S. Ct. 1708, 64 L. Ed. 2d 333 (1980)).
[4] We also cited to a large number of similar decisions by other state and federal courts involving similar failures to pay bar dues. See, e.g., Beto v. Barfield, 391 F.2d 275 (5th Cir.1968); People v. Medler, 177 Cal. App. 3d 927, 223 Cal. Rptr. 401 (1986); People v. Garcia, 147 Cal. App. 3d 409, 195 Cal. Rptr. 138 (1983); Dolan v. State, 469 So. 2d 142 (Fla. App.1985); White v. State, 464 So. 2d 185 (Fla. App.1985); Johnson v. State, 225 Kan. 458, 590 P.2d 1082 (1979); Jones v. State, 747 S.W.2d 651 (Mo.App.1988); Hill v. State, 393 S.W.2d 901 (Tex.Crim.App. 1965).
[5] In this regard, we decline to follow The People v. Ngo, 14 Cal. 4th 30, 57 Cal. Rptr. 2d 456, 924 P.2d 97 (Cal.1996) and State v. Lentz, 844 So. 2d 837 (La.2003), in which state courts in California and Louisiana refused to adopt per se rules granting a new trial to defendants represented by attorneys on inactive status due to non-compliance with CLE requirements. In Ngo, the California Supreme Court ruled that a per se rule was not appropriate since non-compliance with California's rules regarding continuing legal education could take effect as a result of simple clerical errors or other de minimus occurrences. Ngo, 14 Cal. 4th 30, 57 Cal.Rptr.2d at 460, 924 P.2d at 101 ("[N]oncompliance may consist of a simple failure to submit proof of attendance at approved programs or to remit noncompliance fees, neither of which establishes incompetence. As such, an attorney's noncompliance per se is no reflection on his or her professional competence."). Similarly, in Lentz, the Supreme Court of Louisiana was also concerned about minor violations of bar regulations unrelated to professional competence. Lentz, 844 So.2d at 841 ("[T]he mere absence of one hour of professionalism for the prior year's CLE requirements does not automatically equate to ineffective assistance of counsel.").
In the case sub judice, in significant contrast to Ngo and Lentz, Papas' violations resulting in his inactive status are clearly not de minimus or the result of clerical errors.
[6] Because Grant was unaware of Papas' suspension, he could not possibly have competently and intelligently waived his right to counsel.
[7] We acknowledge that this Court cited Mouzin with approval on this issue in Commonwealth v. Vance, 376 Pa.Super. 493, 546 A.2d 632, 637, appeal denied, 521 Pa. 620, 557 A.2d 723 (1989). This portion of our Vance decision was mere obiter dicta, however, since the attorney in Vance was a member in good standing of the bar during the trial and at sentencing.
[8] Grant's second and third issues on appeal involve claims of ineffective assistance of counsel during his trial. Because we grant a new trial, these claims are now moot. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548759/ | 992 A.2d 320 (2010)
2010 VT 21
STATE of Vermont
v.
Kenneth BAILEY, Sr.
No. 08-353.
Supreme Court of Vermont.
March 8, 2010.
Present: REIBER, C.J., DOOLEY, SKOGLUND, BURGESS and JOHSON, JJ.
*321 ENTRY ORDER
¶ 1. Defendant appeals the district court's order finding a violation of one of his probation conditions, as well as the administrative judge's denial of his motion to disqualify the trial judge. We affirm.
¶ 2. In May 2004, defendant pled guilty to one count of sexual assault and one count of domestic assault. The victim of his sexual assault was defendant's stepdaughter, whom he victimized when she was a child in his household. Pursuant to the plea agreement which suspended most of his sentence, defendant was subject to a number of special probation conditions, including one that he "not initiate or maintain contact with or reside with any children under the age of 18 years." In September 2008, while defendant was out on probation, the State filed a complaint and supporting affidavit alleging that defendant had violated the above-cited condition by engaging in contact with underage family members at a motel where his son and family were living. At the probation-violation hearing, witnesses for the State testified that on a number of occasions defendant had come to the motel, sat in front of the motel room where his son's family was living, and mingled with family members, including four granddaughters under the age of eighteen. Based on this evidence, the district court found a probation violation and revoked defendant's probation.
¶ 3. On appeal, defendant argues, through counsel, that (1) the court erroneously applied the above-cited probation condition to prohibit defendant's mere proximity to children in a public place; (2) the court's finding that defendant "freely mingled" with underage family members fails to support its conclusion that he violated the condition; and (3) the trial judge violated defendant's due process rights by not disqualifying himself from the probation-violation proceeding because of comments he had made during the original sentencing hearing. Defendant also argues in a supplemental pro se brief that the district court lacked jurisdiction to revoke his probation due to his timely appeal of the court's prior decision on his motion to modify the probation conditions.
¶ 4. Defendant first argues that the district court's finding of a probation violation in this case violates State v. Rivers, wherein we declined to find a probation violation based only upon the defendant's "mere proximity" to members of a generally prohibited class while in a public place. 2005 VT 65, ¶ 1, 178 Vt. 180, 878 A.2d 1070. We find this argument unavailing in that Rivers is readily distinguishable from the instant case. In Rivers, the defendant was prohibited from "having `contact' with children under the age of sixteen." Id. We held that such a no-contact provision was unduly restrictive when applied to prohibit the defendant's "mere proximity" to any member of a generally prohibited class of persons in a public place; accordingly, we reversed the trial court's finding of a probation violation based upon the defendant having been within close proximity of children at a state fair. Id. ¶¶ 1, 9. We concluded that a broad rule construing such a condition to prohibit "nothing more than incidental proximity-contact in a public place with numerous, unspecified individuals who are members of an ubiquitous class" would prevent a probationer from frequenting "grocery stores, movie theaters, libraries, fast-food restaurants, parks, or even downtown streets," which would severely restrict the probationer's liberty while doing little to rehabilitate him or prevent the behavior that led to the no-contact condition. Id. ¶ 13.
¶ 5. The instant case, in contrast, does not involve incidental proximity-contact in a public place. The evidence demonstrated *322 that on a number of occasions defendant visited his son's residence, where he knew young grandchildren would be, and visited in the yard in the midst of the children. The trial court also found that some of these visits lasted hours. The trial court found, as supported by eyewitnesses, that defendant freely mingled with the children. Defendant placed himself in direct contact with family members belonging to the prohibited class in front of their residence. That defendant's son and others realized that such contact was prohibited is borne out by their testimony explicitly found not credible by the trial court claiming that the children were kept isolated from defendant during these visits.
¶ 6. Much of defendant's arguments are based on his view that the trial court's use of the term "mingled" is akin to "mere proximity." Thus, defendant argues that this case is like Rivers because his behavior did not result in "anything more than `proximity contact.'" We believe that the term "mingle" means more than proximity contact; rather, as defined in Webster's New International Dictionary 1564 (2d ed. 1959), it means, "To associate or unite, as... persons by ties of relationship; to join in company." Therefore, defendant's conduct here plainly exceeded "mere proximity" to the prohibited class. See Rivers, 2005 VT 65, ¶ 1, 178 Vt. 180, 878 A.2d 1070.
¶ 7. Under these circumstances, Rivers is not controlling. For similar reasons, we reject defendant's argument that his actions could not be construed as violating the condition prohibiting him from initiating or maintaining contact with anyone in the prohibited class. By visiting his family at their home and staying for periods of up to two hours, during which time he mingled with underage family members, defendant plainly initiated and maintained contact with members of the prohibited class in violation of the probation condition.
¶ 8. Defendant also argues that the trial judge's refusal to disqualify himself from the probation-violation proceeding based on comments the judge had made at the original sentencing hearing violated his right to a fair trial. Again, we find this argument unavailing. At the original sentencing hearing, the judge accepted the parties' plea agreement, but expressed doubt about whether the agreed-upon sentence was long enough and warned defendant that if he did not abide by the probation conditions, the judge would see to it that he would serve as much of the remaining sentence as possible. Defendant argues that these comments demonstrate that the trial judge prejudged his case and particularly the sentencing decision once a violation was found. First of all, we note that, upon receiving defendant's motion to disqualify, the trial judge declined to recuse himself, instead passing the motion onto the administrative judge, who denied the motion. Here, on appeal, defendant does not argue that the administrative judge abused her discretion in denying the motion, even though we have stated that "the question of recusal hinges on the administrative judge's exercise of discretion," and that this Court will disturb the administrative judge's decision only if there is no reasonable basis for the decision. Ball v. Melsur Corp., 161 Vt. 35, 40, 633 A.2d 705, 710 (1993). In this case, while the trial judge's comments could have been better phrased, they appear to be a warning to defendant to abide by his probation conditions. We cannot conclude that the administrative judge abused her discretion by not presuming bias based on these comments. See id. at 39, 633 A.2d 705, 622 A.2d at 709 (stating that judge subject to disqualification motion is accorded presumption of honesty and integrity).
*323 ¶ 9. Finally, in a supplemental pro se brief, defendant argues that the district court did not have jurisdiction to find a probation violation while his appeal was pending from an earlier decision on a motion to amend his probation conditions. We find no merit to this argument. The fact that defendant was in the process of challenging a probation condition did not prevent the State from filing a complaint based on an alleged violation of the condition or deprive the court of jurisdiction to find a violation of such a condition.
Affirmed.
JOHNSON, J., dissents and files opinion.
JOHNSON, J., dissenting.
¶ 10. Ignoring the spirit and purpose of our holding in State v. Rivers, the majority has employed an elastic definition of contact to fit the facts of this case. Because I cannot agree that the probation condition in effect clearly prohibited defendant's "mingling" with children under the age of eighteen in a public yard, I respectfully dissent.
¶ 11. Defendant was charged with domestic assault and sexual assault. Pursuant to a plea agreement, the majority of defendant's sentence was suspended, subject to certain conditions of probation. One of these conditions provided:
33. Defendant shall not initiate or maintain contact with or reside with any children under the age of 18.
¶ 12. In September 2008, the State filed a complaint alleging that defendant had violated the above probation condition. The complaint included an affidavit signed by an officer stating that defendant had been observed at the motel where his son and son's family reside "sitting in front of [defendant's son's] unit on more than one occasion." The affidavit also stated that minor children had been observed "congregating directly in that area with [defendant] present including a young infant and teen-aged minors." During the probation violation hearing, the owner of the motel testified that defendant's two sons lived at the motel along with their families, including a number of grandchildren ranging in age from a few months to eighteen years. The owner testified that defendant frequently visited his sons and their families and that the owner had observed defendant sitting in front of his son's room and that various family members, including the grandchildren, would "form a little circle" and "socialize," sometimes for hours at a time. The owner's son also testified that defendant and the grandchildren "would all mingle together in front of their room." When asked to clarify what he meant by "mingle," the owner's son testified that "[t]hey would just be in front of the room and they were visiting together." The owner's son also testified that from the distance from which he observed defendant, he could not tell if he was speaking to the children.
¶ 13. Following the hearing, the trial court concluded that defendant had violated the above-cited probation condition. The court made the following findings in support of its conclusion: (1) defendant was a "frequent visitor" at the motel and some visits lasted in excess of two hours; (2) in the course of the visits, defendant "would sit in front or near the front of [his son's] unit"; and (3) during these visits, defendant's grandchildren "freely mingled with Defendant, their parents, and other guests." Defendant appealed, arguing that the court erroneously applied the probation condition to prohibit defendant's "mere proximity to children" in a public place and that the court's finding that defendant "freely mingled" with his minor *324 grandchildren was not enough to establish a probation violation.[*]
¶ 14. This Court has "repeatedly recognized that probation conditions should not be unduly restrictive of the probationer's liberty or autonomy" and that any restriction imposed "must be reasonably related to protecting the public from a recurrence of the crime that resulted in the imposition of probation." State v. Rivers, 2005 VT 65, ¶ 9, 178 Vt. 180, 878 A.2d 1070 (quotation omitted); State v. Moses, 159 Vt. 294, 297, 618 A.2d 478, 480 (1992). Thus, to fulfill due process requirements, a convicted offender must "be given fair notice as to what acts may constitute a violation of his probation, thereby subjecting him to loss of liberty." State v. Peck, 149 Vt. 617, 619, 547 A.2d 1329, 1331 (1988). Here, construing the above-cited probation condition to prohibit mere "mingling" in a public place with a large protected class violates both of these principles. Such a broad construction has no reasonable relationship to protection of potential victims as it would bar even incidental contact with the protected class, nor does it give a probationer fair notice of how to comply with the condition.
¶ 15. Contrary to the majority's holding, this case is largely governed by Rivers. In that case, we addressed whether a defendant violated a probation condition prohibiting him from having contact with children under the age of sixteen based on a finding that he had placed himself "in close physical proximity to minors under 16 years of age" while standing near them at a public fair. Rivers, 2005 VT 65, ¶ 1, 178 Vt. 180, 878 A.2d 1070 (quotation omitted). In finding for the defendant, we declined to apply the State's proffered "proximity-equals-contact" rule in determining whether the defendant had violated the no-contact condition. In support of our rejection of this rule, we noted that public incidental contact does not present the same dangers to a protected class as unapproved proximity-contact with minors in the context of a private residence, and we observed that "[i]n the public setting, a probationer is several steps removed from the opportunity to commit abuse." Id. ¶ 12.
¶ 16. Similarly, here, there was no evidence presented indicating that defendant was ever in his sons' motel rooms. Nor was there evidence presented that defendant ever talked with, touched, or in any way communicated with any minor child under the age of eighteen while at the motel. Instead, the evidence indicates that defendant sat in the public space outside his sons' motel rooms and carried on conversation with his sons and other motel residents. Moreover, the factual circumstances testified to by the witnesses do not suggest that any child was ever at risk. Though during these visits there were children orbiting around or "mingling" with defendant, these facts do not indicate that defendant either "initiated or maintained contact" with the protected class. I, therefore, cannot conclude that the trial court's finding that defendant "freely mingled" with the protected class in a public place amounts to any more than "mere proximity" and was not enough to trigger a probation violation. Indeed, such a broad construction of the condition appears to have no relationship to the rehabilitative purposes of probation. See State v. Jones, 49 Ohio St. 3d 51, 550 N.E.2d 469, 473 (1990) (Brown, J., dissenting) (arguing against broad construction of probation condition prohibiting "association" with *325 protected class and noting that purpose of condition "was not to force [the defendant] to live as a hermit, but to protect the public and encourage [the defendant's] rehabilitation by minimizing the risk that [the defendant] will repeat his offense").
¶ 17. Nevertheless, the majority attempts to draw a false distinction between the case at hand and Rivers. Ante, ¶ 6. Beyond summarily stating a distinction, however, the majority fails to articulate exactly how "mingling" is materially different from "mere proximity" and, instead, seems to suggest that being "in the midst of" a large protected class in a public yard is somehow different from the "incidental contact" at a public fair that we found insufficient to trigger the probation violation in Rivers. This conclusion amounts to a "mingling-equals-contact rule" that is just as overbroad and unduly restrictive here as the "proximity-equals-contact rule" we rejected in Rivers. 2005 VT 65, ¶ 13, 178 Vt. 180, 878 A.2d 1070; see also State v. Danaher 174 Vt. 591, 595 n. 3, 819 A.2d 691, 697 n. 3 (2002) (mem.) (Dooley, J., dissenting) (criticizing majority's "elastic" definition of contact, which would include both the defendant's "continuous presence in the home with a child" as well as his "presence in a car by a bus stop some unknown distance from the victim who is standing outside").
¶ 18. Moreover, the facts before us now, like the facts before us in Rivers, are readily distinguishable from circumstances we have found to support a violation of no-contact probation conditions. The key distinguishing factor in these cases is that they all involve some constellation of facts indicating that the defendant intended to contact the victim or the class of persons protected by the probation condition. See Danaher, 174 Vt. at 592-93, 819 A.2d at 694 (concluding that evidence indicating the defendant placed himself in physical proximity to a child with whom his probation condition prohibited all contact, would not leave after the child asked him to, and stared at the child, supported the trial court's conclusion that the defendant intentionally violated the no-contact probation condition); Benson v. Muscari, 172 Vt. 1, 4, 769 A.2d 1291, 1295 (2001) (noting that State must show only that defendant intended to do the act that constituted the violation); State v. Leggett, 167 Vt. 438, 441-42, 709 A.2d 491, 493 (1997) (concluding that evidence that the defendant was in a private residence with two minors on multiple occasions was enough to support finding that the defendant violated probation condition prohibiting contact with minors); see also Hunter v. State, 883 N.E.2d 1161, 1163 (Ind.2008) (concluding that evidence was insufficient to establish violation of probation condition prohibiting contact with minors where facts did not demonstrate a sufficient "quality and quantity of interactive contact," but rather indicated only a "momentary presence" and incidental contact). Notwithstanding the importance we have placed on a demonstration of a probationer's intent to contact a protected class, the trial court here made no findings indicating that the claimed contact was anything but incidental; nor did the court find that any child was ever placed at risk.
¶ 19. I respectfully dissent.
NOTES
[*] I agree with the majority that defendant's claims that the trial judge should have recused himself and that the trial court lacked jurisdiction over the matter have no merit. See ante, ¶¶ 8, 9. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919653/ | 91 B.R. 850 (1988)
In the Matter of Linda E. SINNARD, Debtor.
Bankruptcy No. Y-88-00613-D, Contested No. 80393.
United States Bankruptcy Court, N.D. Iowa.
September 30, 1988.
Victor V. Sprengelmeyer, Dubuque, Iowa, for Linda E. Sinnard.
F.L. Burnette, II, Nyemaster, Goode, McLaughlin, Emery and O'Brien, S.C., Des Moines, Iowa, for Key City Bank.
MEMORANDUM DECISION
ROBERT D. MARTIN, Bankruptcy Judge.
Linda E. Sinnard, the debtor in this chapter 7 case, has brought a motion under section 522(f)(1) to avoid a lien on her homestead held by the Key City Bank & Trust Company (the "Bank"). After a hearing was held on the debtor's motion on September 8, 1988, the matter was taken under advisement and the parties given leave to brief the issues.
The following facts are material and undisputed. On October 11, 1982, the debtor and John M. Walsh, then the debtor's husband, granted a mortgage on the debtor's homestead to the Bank as security for the repayment of a $138,293.65 loan. The debtor executed the relevant documents while intoxicated and as a result of Mr. Walsh's less than forthcoming entreaties.
*851 In the late spring of 1985, the debtor brought an action in state court against Mr. Walsh, now the debtor's former husband, the Bank, and Jack Roach, a bank officer, for fraudulent misrepresentations with respect to the granting of the mortgage. The Bank crossclaimed against the debtor and Walsh to foreclose its mortgage. The gravamen of the debtor's complaint against Mr. Walsh consisted of the allegation that he had fraudulently induced the debtor to sign the loan and mortgage documents without disclosing the true character of the transaction. The debtor's claim against the Bank and Mr. Roach was based on an alleged failure to fully disclose the magnitude of the transaction the debtor was entering.
After a jury verdict in favor of the debtor on her fraudulent misrepresentation claims, the trial court entered judgment against the defendants. Additionally, the trial court canceled the real estate mortgage and dismissed the Bank's crossclaim. After an affirmance by the Iowa Court of Appeals, the Iowa Supreme Court reversed the judgment against the Bank and Mr. Roach, finding that "substantial evidence did not support plaintiff's claim for fraudulent misrepresentation" against them. The Court did, however, affirm the judgment against Mr. Walsh. The Supreme Court, stating that "the mortgage and assignment of equity were procured for adequate consideration and without fraud," then remanded the case to the trial court with the instructions that the Bank be granted foreclosure of its mortgage against the debtor and Mr. Walsh. On March 3, 1988, the trial court entered judgment on the debt owed to the Bank and entered a decree of foreclosure of the debtor's and Mr. Walsh's interest in the debtor's homestead.
The debtor then filed a chapter 7 petition on April 18, 1988. She claimed her homesteadthe property subject to the Bank's foreclosed mortgage as exempt to the extent of $200,000 in value under Iowa Stat. § 561.16. Although the homestead likely was not exempt under Iowa law since the debtor had voluntarily conveyed her interest in the homestead to the Bank, see Iowa Stat. § 561.13, § 561.21(2), the Bank failed to object to the claimed exemption. On July 19, 1988, the debtor filed the motion now before this court to avoid the Bank's lien on her homestead under section 522(f)(1). The Bank has objected to the avoidance of its lien arguing that its mortgage lien, although judicially foreclosed prior to the bankruptcy filing, is not a "judicial lien" within the meaning of section 522(f)(1).
A. Validity of Mortgage and Foreclosure Judgment.
Although the debtor has styled her motion as one for the avoidance of liens, the debtor apparently wishes to dispute the validity of the Bank's mortgage ab initio. Why the debtor waited until this point to contest the secured nature of the Bank's claim is not clear to me. The debtor scheduled the Bank as a secured creditor with a claim in the approximate amount of $150,000 and having a mortgage on the debtor's homestead. Although the debtor's scheduled indicates that either the claim or the security for the claim is disputed (the schedules do not indicate which), the schedules suggest only that the debtor seeks to claim the homestead as exempt in spite of the Bank's mortgage.
While the facts considered in toto seem to contradict the debtor's contention that the Bank's mortgage is invalid, the debtor still argues that her homestead is not subject to the Bank's claim because (1) the debtor's former husband fraudulently induced the debtor to execute the mortgage instrument in favor of the Bank; and (2) even if the mortgage is valid, the debtor's waiver of her homestead exemption rights is ineffective because of the conditions under which it was given. The Bank's position is that the validity of the mortgage was upheld by the Iowa Supreme Court at the culmination of the debtor's fraudulent misrepresentation suit. Specifically, the Bank points to the Supreme Court's statement that
As already noted, the trial court sitting as a court of equity, simultaneously with the law action, entered an order cancelling the mortgage and assignment of equity *852 on plaintiff's home on the basis it had been obtained by the Bank through fraudulent misrepresentations. Because we have concluded there was no fraud established as against the Bank, that basis for cancellation of the mortgage and assignment of equity no longer exist [sic]. C.f. Kurth v. Van Horn, 380 N.W.2d 693, 698 (Iowa 1986) (reversing fraud verdict eliminated ground for canceling mortgage). . . . Finding that the mortgage and assignment of equity were procured for adequate consideration and without fraud, we conclude that it was error to order those instruments cancelled. This action by the court in equity is reversed. The case is remanded for entry of appropriate judgment on the note with interest and foreclosure of the mortgage.
Sinnard v. Roach, 414 N.W.2d 100, 107 (Iowa 1987).
Following the direction of the Supreme Court, on March 29, 1988, the trial court entered judgment against the debtor and Mr. Walsh for $138,293.65 and foreclosed their respective interests in the debtor's homestead. No appeal was taken from the entry of the personal judgment or the entry of the foreclosure judgment.
It seems clear to me that the Iowa Supreme Court's judgment and the actions of the Iowa district court on remand are res judicata on the claims the debtor now raises. Judgments of state courts are entitled to preclusive effect in bankruptcy courts. See 28 U.S.C. § 1738 ("The judicial proceedings of any court of any state . . . shall have the same full faith and credit in every court within the United States and its territories and possessions as they have by law or usage in the courts of such state."); see also In re Oulman (Oulman v. Rolling Green, Inc.), 851 F.2d 1032, 1035 (8th Cir. 1988) (implicit finding by state court that debtors' contract had been forfeited preclusive on claim asserted in bankruptcy court that vendor of contract was debilitated from forfeiting contract).
United States Supreme Court precedent directs that federal courts must determine the res judicata impact of a prior state court judgment by employing a two-step analysis. First, the federal court must determine the preclusive effect of the state court judgment under state law. Migra v. Warren City School District Bd. of Ed., 465 U.S. 75, 81, 104 S. Ct. 892, 896, 79 L. Ed. 2d 56, 63 (1984). Second, if state law indicates that the claim would be precluded, the federal court must determine if an exception to section 1738 should apply. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 386, 105 S. Ct. 1327, 1335, 84 L. Ed. 2d 274 (1985). No exception to the applicability of section 1738 is relevant to this case. See In re Comer, 723 F.2d 737, 740 (9th Cir.1984); In re Hogg, 76 B.R. 735, 741 (Bankr.D.S.D. 1987); cf. Heiser v. Woodruff, 327 U.S. 726, 737, 66 S. Ct. 853, 857, 90 L. Ed. 970 (1946); Kapp v. Naturelle, Inc., 611 F.2d 703, 708 (8th Cir.1979). Therefore, the outcome of this inquiry depends solely on Iowa's rules for claim preclusion.
The Iowa Supreme Court has stated that:
Res judicata as claim preclusion applies when a litigant has brought an action, an adjudication has occurred, and the litigant is thereafter foreclosed from further litigation on the claim. The doctrine is based on the principle that a party may not split or try a claim piecemeal, but must put in issue the entire claim or defense in the case on trial.
Selchert v. State, 420 N.W.2d 816, 818 (Iowa 1988) (citations omitted). For a claim or defense to be barred by the principles of res judicata under Iowa law, the following elements must be established. First, the adjudication in the prior suit must have been between the same parties to the present suit. Selchert v. State, 420 N.W.2d 816, 818 (Iowa 1988). Second, a final adjudication on the merits must have occurred in the prior suit. B & B Asphalt Co. v. T.S. McShane Co., 242 N.W.2d 279, 286 (Iowa 1976). Finally, the claim or defense sought to be precluded must be the same as that raised in the prior suit. Israel v. Farmers Mut. Ins. Ass'n of Iowa, 339 N.W.2d 143, 146 (Iowa 1983). This final element is satisfied when the claim or defense could have been, but was not, asserted *853 in the prior action. Id. ("An adjudication in a former suit between the same parties on the same claim is final as to all matters which could have been presented to the court for determination.").
The first two of these elements are clearly established. The only question is whether the claims or defenses the debtor now raises were or could have been raised in the state court proceeding.
In the state court action the debtor raised the fraudulent conduct of Mr. Walsh, the Bank, and its officer, Mr. Roach. The Supreme Court specifically held that fraudulent conduct on the part of either the Bank of Mr. Roach had not been established. The Supreme Court did affirm the finding of fraudulent conduct on the part of Mr. Walsh. Nevertheless, the Supreme Court reversed the trial court's cancelation of the real estate mortgage. Implicit in this ruling was a finding that Mr. Walsh's conduct did not merit granting the debtor the remedy requested; i.e., cancelation of the mortgage.
The debtor could have asserted her incapacity at the time of the execution of the mortgage as a defense to the Bank's crossclaim for foreclosure. See FirstCentral Bank v. White, 400 N.W.2d 534, 537 (Iowa 1987) (quoting 59 C.J.S. Mortgages § 506(c) (1949)) ("`The validity of a mortgage may be attacked, in foreclosure proceedings, for illegality, fraud, duress, or other such matters which undermine its very foundation.'"). Her failure to do so, constitutes a waiver of that defense. Because of the Iowa Supreme Court's implicit ruling on the effect of Mr. Walsh's conduct on the mortgage's validity, and because the debtor chose not to advance incapacity as a defense to the foreclosure claim, the debtor cannot now collaterally attack in this forum the ruling of the Iowa Supreme Court reversing the trial court's cancelation of the real estate mortgage and directing the trial court's entry of the foreclosure judgment.
For the same reasons the debtor's homestead claim is precluded by the state court's judgment. Under Iowa law, a person effectively may waive her homestead exemption rights by voluntarily encumbering her interest in the homestead property. See Iowa Code § 516.13; § 516.21(2). Such a conveyance, however, is not valid unless the debtor had the capacity to convey her interest. Incapacity by way of intoxication, see State Exchange Bank v. Nolan, 201 Iowa 722, 207 N.W. 745, 746 (1926), or fraud in the inducement, see Peoples Bank & Trust Co. v. Lala, 392 N.W.2d 179, 187-88 (Iowa Ct.App.1987), are defenses to a waiver of a party's homestead exemption rights.
Intoxication and/or fraud in the inducement are the defenses the debtor wishes to assert in this court. These defenses, however, should have been asserted in the state court proceeding. A debtor's homestead claim is a personal defense to a mortgage foreclosure action, and is waived by the putative claimant's failure to urge it in a foreclosure action. See Dodd v. Scott, 81 Iowa 319, 320, 46 N.W. 1057, 1058 (1890). See also P. Bauer, Iowa's Homestead Exemption at 7 (College of Law, University of Iowa).
In the recent Iowa case of Francksen v. Miller, 297 N.W.2d 375 (Iowa 1980), the court held that a party who failed to raise his homestead rights in a foreclosure action was precluded from raising a homestead defense in a subsequent forcible entry and detainer action brought against him by the successfully foreclosing mortgage. Francksen, supra, 297 N.W.2d at 377. Francksen seems to control in this case. The debtor had her opportunity to raise her lack of capacity and her former husband's fraudulent conduct as bases for a finding that she had homestead exemption rights in the property during the course of the Bank's foreclosure action. Her failure to do so constituted a waiver of her defense. She may not now collaterally attack the state court's foreclosure judgment in this court.
B. Avoidance of Foreclosure Mortgage Lien.
Before a lien may be avoided under section 522(f)(1), the debtor must prove three elements:
(1) that the lien is fixed on an interest of the debtor in property;
*854 (2) that the lien impairs an exemption to which the debtor would otherwise be entitled; and
(3) that the lien is a judicial lien.
In re Hart, 50 B.R. 956, 957 (Bankr.D.Nev. 1985). Whether the third element has been established is the dispositive issue in this proceeding. This precise issue has been addressed by a bankruptcy court sitting in Iowa and ruling on the basis of Iowa law. In the case of In re Miller, 8 B.R. 672 (Bankr.N.D.Iowa 1981), the late Judge Thinnes held that a mortgage on the debtor's homestead, which had been judicially foreclosed prior to the bankruptcy filing, was not a "judicial lien" under section 522(f)(1).
I have found only one case that suggests, must less holds, that Miller is bad law. See In re West, 54 B.R. 855, 856 (Bankr.M.D.Fla.1985) (equitable lien granted to third party intervenor in divorce proceeding held to be a "judicial lien" under section 522(f)(1)). With that noted exception, the cases establish the continued vitality of Miller. In re Sanders, 61 B.R. 381, 383 (Bankr.D.Kan.1983); In re Walker, 72 B.R. 552, 554 (Bankr.W.D.Pa.1987); In re Challinor, 79 B.R. 19. 21 (Bankr.D.Mont. 1987); In re Gugenhan, 55 B.R. 507 (Bankr.D.Kan.1985); Federal Land Bank of Omaha v. Blankemeyer, 422 N.W.2d 81 (Neb.1988).
The underpinnings of Miller have been upheld as well. As to Judge Thinnes' statement that section 522(f)(1) was intended to "apply to judgments on debtors that would otherwise be unsecured" rather than to consensual liens pre-existing any judicial action, Miller, supra, 8 B.R. at 673, the Minnesota district court has stated:
[A] judicial lien is an interest which encumbers a specific piece of property granted to a judgment creditor who was previously free to attach any property of the debtor's to satisfy his interest but who did not have an interest in a specific piece of property before the occurrence of some judicial action.
Boyd v. Robinson (In re Boyd), 31 B.R. 591, 594 (D.Minn.1983). See also In re Hart, supra, 50 B.R. at 961-62; In re Shands, 57 B.R. 49, 51 (Bankr.S.C.1985); In re Maus, 48 B.R. 948, 950 (Bankr.Kan. 1985); In re Scott, 12 B.R. 613, 617 (Bankr. W.D.Okla.1981).
Judge Thinnes based his determination that the foreclosure did not convert the mortgage into a judicial lien on the principle that, under Iowa law, the foreclosure decree does not extinguish the mortgage lien. Therefore, the consensual lien was in no way "converted" into a judicial lien. See Miller, supra, 8 B.R. at 673-74. This principle continues to be adhered to by the Iowa courts. See Zeman v. Canton State Bank, 211 N.W.2d 346, 351 (Iowa 1973) ("there is no merger of a mortgage lien into a judgment taken upon default"); compare Bank of Commerce v. Waukesha County, 89 Wis. 2d 715, 723, 279 N.W.2d 237, 241 (Wis.1979) (Wisconsin follows lien theory of mortgages) with Marshall & Ilsley Bank v. Greene, 227 Wis. 155, 164, 278 N.W. 425, 429 (Wis.1938) ("The judgment does not destroy the lien of the mortgage but rather judicially determines the amount thereof.").
For the reasons stated above the debtor's motion to avoid the lien of the Key City Bank & Trust Company must be denied. This memorandum shall be my findings of fact and conclusions of law on the motion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919657/ | 91 B.R. 705 (1988)
In re MOTOR FREIGHT EXPRESS, Debtor.
UNITED STATES of America, Plaintiff,
v.
MOTOR FREIGHT EXPRESS and First National Bank of Maryland, Defendants.
Bankruptcy No. 82-04944S, Adv. No. 84-1537S.
United States Bankruptcy Court, E.D. Pennsylvania.
October 6, 1988.
As Amended October 21, 1988.
Appeal on Reconsideration Dismissed, December 22, 1988.
*706 *707 Marc J. Sonnenfeld, Michael A. Bloom, Philadelphia, Pa., David Sperry, Louis Wade, Gen. Counsel, Kansas City, Mo., for Motor Freight Exp.
Michael J. Salem, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., Virginia Powel, Asst. U.S. Atty., Philadelphia, Pa., for the U.S.
Timothy E. McCormack, E. Stephen Derby, Baltimore, Md., for First Nat. Bank.
OPINION
DAVID A. SCHOLL, Bankruptcy Judge.
A. INTRODUCTION AND PROCEDURAL HISTORY
Given the context in which the instant adversary proceeding was presented, we believe that it is, in substance, a request that we consider a previous order classifying a Proof of Claim of the Internal Revenue Service (hereinafter referred to as "IRS") as a seventh-priority claim, pursuant to 11 U.S.C. § 507(a)(7)(A). In light of the failure of the IRS to aver or present any evidence of, or even aver, any cause or equitable considerations to prompt us to reconsider our prior disposition, compounded by its failure to provide evidence on a necessary element of its case i.e., that checks covering erroneous refund payments made by it to the Debtor were in fact cashed we deny any relief to the IRS in this proceeding.
This adversary proceeding, filed November 29, 1984, sought to establish the rights of the IRS to certain erroneous refund checks issued by the IRS to the Debtor, MOTOR FREIGHT EXPRESS (hereinafter "MFX"), in late 1982 in the total sum of $242,227.70. MFX, a truck carrier, had unsuccessfully attempted to remain in business after the filing of the underlying large and long-pending Chapter 11 case on October 14, 1982. Named as Defendants in this proceeding were MFX and the FIRST NATIONAL BANK OF MARYLAND (hereinafter "FNB"), which had provided MFX with post-petition financing, pursuant to 11 U.S.C. § 364(c), and which had allegedly wrongfully received the check proceeds.
Shortly after the filing of this proceeding, on December 14, 1984, the IRS filed Proof of Claim No. 2456 in MFX's main bankruptcy case, in which it sought allowance of the $242,227.70 sum represented by the refund checks as an administrative claim, pursuant to 11 U.S.C. § 507(a)(1), due to the alleged "tortious conversion" of the check proceeds by MFX and FNB.
However, on April 22, 1985, our predecessor, the Honorable William A. King, Jr., approved a Stipulation by counsel for IRS, MFX, and FNB continuing trial of this proceeding "generally." As a result, nothing except leisurely-paced discovery transpired thereafter prior to the filing of an Objection to Proof of Claim No. 2456 by MFX in its main bankruptcy case on December 1, 1987.
On February 11, 1988, we conducted a hearing on, inter alia, MFX's Objection to Claim No. 2456. A former MFX officer, John Lawyer, and IRS revenue officer Philip Marcella, who apparently had knowledge of all of the events relevant to this proceeding, appeared and testified. However, none of their testimony at the hearing touched on the events described in this lawsuit.
After briefing, we issued an unpublished Memorandum and Order on May 11, 1988, in which we sustained MFX's Objection to Claim No. 2456 and classified same as a seventh-priority claim pursuant to 11 U.S.C. § 507(a)(7). In so doing, we held as follows:
The IRS has not met its burden of proving any exception to the general rule that these claims are entitled to no more than the seventh-priority status to which the refund related. The existence of [the instant proceeding], any mention of which is absent from this record, cannot be considered by us. See In re Aughenbaugh, 125 F.2d 887, 889 (3d Cir.1942); and In re Nicolet, Inc., 80 B.R. 733, 742-44 (Bankr.E.D.Pa.1987). We also note that mere allegations in a long-neglected proceeding are entitled to little weight in themselves, even if the existence of this proceeding had been spread *708 out on the record. Thus, we shall grant the request of MFX to reclassify No. 2456 as entirely a seventh-priority claim.
See In re Lewis, 80 B.R. 39, 41 (Bankr.E.D. Pa.1987) (claimant has ultimate burden of proving the merits of a claim to which objection is raised). The IRS apparently appealed our Order of May 11, 1988, to the District Court, but subsequently withdrew that appeal. As a result, that decision is final.
In a separate Order of May 11, 1988, entered at the time that we issued the Memorandum and Order mentioned heretofore, we scheduled a status conference in this proceeding on June 7, 1988, in order to dispose of it in some fashion promptly. That conference was followed by an Order of June 8, 1988, listing this matter for trial on August 9, 1988. After conducting the trial on the latter date, we issued an Order of August 10, 1988, according the IRS and the Defendants until September 2, 1988, and September 23, 1988, respectively, to submit Proposed Findings of Fact, Proposed Conclusions of Law, and Briefs. These submissions were timely.
Bankruptcy Rule (hereinafter "B.Rule") 7052, incorporating Federal Rule of Civil Procedure (hereinafter "F.R.Civ.P.") 52(a), mandates that we present our decision in the form of Findings of Fact and Conclusions of Law. As our decision is based upon, primarily, procedural grounds, flowing from the procedural history already outlined, we shall present a very brief statement of Findings of Fact, such as are relevant only to our disposition. Conclusions of Law are incorporated in the headnotes of a Discussion thereafter.
B. FINDINGS OF FACT
1. On October 15, 1982 (one day after the Debtor's filing), and on November 10, 1982, this Court, per Judge King, entered Orders authorizing and approving extended post-petition financing, respectively, by MFX from FNB. In so doing, this Court granted the FNB a super-priority under 11 U.S.C. § 364(c) of the Bankruptcy Code to secure the indebtedness authorized therein.
2. On November 12, 1982, MFX ceased its normal business operations. Thereafter, on November 29, 1982, this Court entered an Order authorizing and approving extended post-petition financing by MFX from FNB to administer estate assets and close down its operations, also secured by a super-priority lien pursuant to 11 U.S.C. § 364(c) of the Bankruptcy Code.
3. On or about November 30, 1982, and December 14, 1982, due either to MFX's dispatching the wrong computerized deposit cards with its 1982 withholding tax remittances or to the IRS's misunderstanding that MFX's fiscal year was composed of three "quarters" of 12 weeks and one "quarter" of 16 weeks, or a combination of both reasons, the IRS erroneously sent three refund checks to MFX totaling $242,227.70.
4. Believing these checks to be erroneously issued, employees of MFX wrote two letters to the IRS in late 1982 attempting to ascertain the reason for the issuance of the checks, which were never answered.
5. On December 14, 1983, about a year later, Howard J. Eichenbaum, Esq., an attorney for MFX, met with Mr. Marcella of the IRS for the purpose of attempting to reconcile differences between several proofs of claim filed by the IRS and the lesser amount believed to be due and owing by MFX according to its records. At this meeting, Mr. Marcella told Mr. Eichenbaum that the IRS may have made certain erroneous refunds to MFX. Thereafter, Mr. Eichenbaum contacted Mr. Lawyer of MFX, learned that MFX had received the three refund checks in issue, and had Mr. Lawyer endorse them on their reverse side to MFX's counsel as its "escrow agent."
6. Thereafter, Mr. Eichenbaum and Mr. Marcella continued negotiations concerning the disposition of these checks. Originally, Mr. Eichenbaum told Mr. Marcella that MFX intended to return the checks to the IRS, but first desired to obtain court approval before doing so. However, by late March, 1984, counsel for MFX concluded that the checks were property of the estate of MFX under § 541(a)(7) of the Bankruptcy Code, and that the checks should be *709 remitted by MFX to FNB instead of the IRS.
7. On April 2, 1984, Michael A. Bloom, Esq., an associate of Mr. Eichenbaum, called Mr. Marcella and informed him that he would be transmitting the checks to FNB. During this telephone call and an ensuing telephone call on April 3, 1984, Mr. Bloom suggested to Mr. Marcella that either the IRS stop payment on the checks or seek relief from this court if it objected to the checks being transmitted to FNB.
8. On April 2, 1984, Mr. Bloom sent the three refunds checks, endorsed by MFX to its counsel, to Mr. Kenneth B. Lukens, Vice President of FNB.
9. Mr. Lukens testified that FNB has no records of its receipt or disposition of the three refund checks, and that, in assessing its subsequent settlement of all matters between MFX and it, FNB was unable to determine whether the checks had been factored in to the settlement.
10. The IRS did not present any evidence, such as the cancelled checks, which established that in fact FNB or any other party had negotiated the checks and applied them to its account with MFX.
C. CONCLUSIONS OF LAW/DISCUSSION
1. THE PROCEEDING, DESPITE ITS FORM, IS IN SUBSTANCE A REQUEST BY THE IRS TO RECONSIDER THE CLASSIFICATION OF CLAIM NO. 2456 PURSUANT TO OUR ORDER OF MAY 11, 1988.
During the course of the trial, MFX and FNB moved to amend their answers to implead the defense of res judicata arising from our Order of May 11, 1988, pursuant to B.Rule 9015 and F.R.Civ.P. 15(b).[1] In its post-trial submissions, the IRS responded that, irrespective of our disposition of the issue, we have the power to reconsider our Order of May 11, 1988, by reason of B.Rule 3008, which provides simply as follows:
A party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate. The court after a hearing on notice shall enter an appropriate order.
We agree with the IRS that B.Rule 3008 is relevant to the disposition here. However, we proceed to the next steps beyond the reasoning suggested by the IRS and point out that this proceeding, insofar as it relates to MFX, is merely the litigation of a claim. As we have indicated in the past, such litigation should not generally be maintained in the form of an adversary proceeding, but should properly be relegated to the claims process. See In re Clark, Williams v. Clark, 91 B.R. 324, 337-338 (Bankr.E.D.Pa. Sept. 21, 1988); In re Stelweck, 86 B.R. 833, 845 (Bankr.E. D.Pa.1988); In re New York City Shoes, Inc., 84 B.R. 947, 960 (Bankr.E.D.Pa.1988); and In re International Endoscope Manufacturers, Inc., 79 B.R. 620, 621 (Bankr.E. D.Pa.1987).
Since this adversary proceeding was presented to this court for disposition after our Order of May 11, 1988, which disposed of a Proof of Claim incorporating the substance of this adversary proceeding by reference, we conclude that this proceeding is, at least as to MFX, simply a proceeding in which the IRS seeks reconsideration of our disposition of Claim No. 2456.
2. THE IRS HAS FAILED TO ESTABLISH ANY "CAUSE" OR EQUITABLE REASONS JUSTIFYING OUR RECONSIDERATION OF OUR ORDER OF MAY 11, 1988, THEREBY REQUIRING A DECISION HEREIN AGAINST THE IRS.
We therefore conclude that this entire proceeding can be viewed as a motion seeking *710 reconsideration of an order disallowing a claim against MFX's estate, arising under B.Rule 3008. The dispositive issues are, therefore, the standards under which parties are entitled to reconsideration of determinations of proofs of claim under B.Rule 3008, and whether those standards have been met by the IRS here.
B.Rule 3008 has a Code cognate in the first two sentences of 11 U.S.C. § 502(j), emphasized in the following quote of the complete text of this Code provision:
A claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case. Reconsideration of a claim under this subsection does not affect the validity of any payment or transfer from the estate made to a holder of an allowed claim on account of such allowed claim that is not reconsidered, but if a reconsidered claim is allowed and is of the same class as such holder's claim, such holder may not receive any additional payment or transfer from the estate on account of such holder's allowed claim until the holder of such reconsidered and allowed claim receives payment on account of such claim proportionate in value to that already received by such other holder. This subjection does not alter or modify the trustee's right to recover from a creditor any excess payment or transfer made to such creditor (emphasis added).
The standards to be applied in determining "cause" and "the equities of the case," as set forth in the above Code Section, are not further spelled out in the Code or in the Rules. Obviously, however, there is a similarity between relief pursuant to 11 U.S.C. § 502(j) and B.Rule 3008 on one hand, and, on the other hand, relief pursuant to other rules pertinent to relief from judgments generally, i.e., B.Rule 9023, which incorporates F.R.Civ.P. 59 "except as provided in Rule 3008;" and B.Rule 9024, which incorporates F.R.Civ.P. 60 "except . . . for the reconsideration of an order allowing or disallowing a claim against the estate entered without a contest [which] is not subject to the one year limitation prescribed in Rule 60(b), . . ." Compare In re Dinh, 90 B.R. 743, 745 (Bankr.E.D.Pa.1988) (F.R.Civ.P. 59 and 60 compared; Rule 59 found to be broader, allowing correction of "judicial errors").
We have previously held that the only practical effect of the added language in B.Rule 9023 quoted in the foregoing paragraph is the elimination of the 10-day period in which a party seeking reconsideration of a claim in the nature of Rule 59 may proceed. In re Owens, 67 B.R. 418, 422 (Bankr.E.D.Pa.1986), aff'd, 84 B.R. 361 (E.D.Pa.1988). Accord, Karen-Richard Beauty Salon, Inc. v. Fontainebleau Hotel Corp., 36 B.R. 896, 897 (S.D.Fla.1983); In re Resources Reclamation Corp. of America, 34 B.R. 771, 773 (9th Cir. BAP 1983); and In re Miles, 39 B.R. 494, 497 (Bankr.W.D.N.Y.1984). We further hold that we have the power to correct "errors of law" in considering B.Rule 3008 motions. Contra, In re Excello Press, Inc., 83 B.R. 539, 542 (Bankr.C.D.Ill.1988). We believe that B.Rule 9023 applies generally to motions to reconsider claims, and that the only effect of the language added in B.Rule 9023 is to eliminate the 10-day limitation period for serving such a motion included therein.
Further, it seems clear that, pursuant to B.Rule 9024, the presence of the considerations set forth in F.R.Civ.P. 60(b) would also constitute sufficient "cause" or "equities" to render it appropriate for a bankruptcy court to reconsider a decision allowing or disallowing a proof of claim. See In re Colley, 814 F.2d 1008, 1010-11 (5th Cir. 1987); Karen-Richard, supra, 36 B.R. at 898-900; Resources Reclamation, supra, 34 B.R. at 773-74; and 3 COLLIER ON BANKRUPTCY, ¶ 502.10, at 502-107 (15th ed. 1988). Only the one-year limit set forth in F.R.Civ.P. 60(b)(1), (b)(2), and (b)(3), as to claims allowed or disallowed "without contest" are exempt from the terms of F.R. Civ.P. 60(b), pursuant to the added language in B.Rule 9024.
We therefore conclude that the circumstances in which the application pursuant to B.Rule 3008 can be maintained *711 should be construed broadly, and include "cause" and "equities" which would be grounds for relief under either F.R.Civ.P. 59 or 60(b). However, B.Rule 3008 must be applied in light of the strong contrary policy of encouraging prompt, final dispositions of objections to proofs of claims. Therefore, some "cause" for reconsideration, invoking at least one of the grounds set forth in F.R.Civ.P. 59 or Rule 60(b), must be articulated if B.Rule 3008 is to be successfully invoked. See Colley, supra (reconsideration request denied because insufficient cause pursuant to Rule 60(b) was set forth); and In re Rabzak, 79 B.R. 960, 964 (Bankr.E.D.Pa.1987) (pro se debtor's reconsideration request denied because he provided "no timely rationale for rehearing the matter"). Mere neglect is clearly insufficient cause for reconsideration. See In re Brielle Associates v. Graziano, 685 F.2d 109, 110, 112 (3d Cir.1982) (law firm proceeding pro se not excused from contesting motion to reduce claim by failure to carefully review motion served upon it); In re F/S Communications Corp., 59 B.R. 824, 827-28 (Bankr.N.D.Ga.1986) (failure to observe objection to claim among bulk of papers received in case not a justified "cause" for reconsideration of denial of claim); and In re Uiterwyk Corp., 57 B.R. 166 (Bankr.M.D.Fla.1986) (counsel's failure to attend hearing regarding objection to claim because of distraction by another case is not requisite "excusable neglect" such as to justify consideration). On the other hand, defective service of an objection to a proof of claim may be a proper ground for allowing reconsideration of same. See In re Green, 89 B.R. 466, 469-70 (Bankr.E.D.Pa.1988).
The IRS, though invoking B.Rule 3008, fails to articulate any "cause" or peculiar "equities" which would prompt us to reconsider our pertinent Order of May 11, 1988, disallowing the sought-after status of its claim pursuant to 11 U.S.C. § 507(a)(1). There was no perceptible reason either alleged or in fact present to explain why the IRS did not attempt to establish the bases for the merits of its contention as to why its claim should be classified under § 507(a)(1) instead of § 507(a)(7) in response to MFX's objection to Claim No. 2456 at the hearing on February 11, 1988. Both Messrs. Lawyer and Marcella were present in court on that date and testimony relevant to all of the pertinent facts therefore apparently could have been adduced by the IRS at that time.
The only potential grounds within F.R. Civ.P. 60(b) which could justify the IRS's actions (or inactions) are 60(b)(1) ("mistake, inadvertence, . . . excusable neglect") or 60(b)(6) ("any other reason justifying relief"). However, not even any of these grounds are supported with any of the requisite specific factual allegations. As the Colley court aptly states, B.Rule 3008 is not a license to "rehash . . . original objections to the claims." 814 F.2d at 1011. It is important that claims be resolved as quickly as possible, in order that all creditors can promptly receive their due distribution.
We fail to find any bases under Rule 60(b) which would justify reconsideration of our decision of May 11, 1988, regarding the classification of the claim in issue. As the courts in Breille Associates, F/S Communications, and Uiterwyk make clear, errors of omission by counsel which are not justified by some allegations of extraordinary causation factors are not sufficient. Not even the inadequate justifications presented in those cases are made out here, and we can perceive no justifications ourselves. Furthermore, the IRS does not articulate any error of law made by us in our disposition on May 11, 1988, justifying reconsideration of that decision pursuant to Rule 59. These conclusions mandate a dismissal of the IRS's causes asserted against MFX in the proceeding before us here.[2]
*712 3. ALTERNATIVELY, THE ABSENCE OF PROOF THAT EITHER MFX OR FNB OBTAINED THE CHECK PROCEEDS WOULD BE FATAL TO ANY CLAIM OF THE IRS ON THE RECORD MADE HERE.
Our disposition on the basis of our decision that the IRS has not satisfied its necessary burdens to seek reconsideration of our previous determination as to Claim No. 2456 is a procedural disposition which would permit us to avoid any discussion of the underlying merits whatsoever. However, we should note that, despite being presented with a second opportunity to establish the classification of this claim pursuant to § 507(a)(1), the IRS has failed to support its contentions by any evidence that the disputed refund checks in issue were in fact ever paid, and hence that the funds which they represented ever found themselves into the pockets of MFX or FNB. If these checks were in fact never negotiated, the $242,227.70 sum for which they were drawn must still be in the United States Treasury. It is not implausible to conclude that such stale checks might never have been presented or were dishonored, and hence that their proceeds remain in the Treasury. Clearly, no claim for recovery of funds, or for tortious conversion, or to establish a constructive trust concerning these funds, the causes of action asserted by the IRS here in its Amended Complaint, could succeed if the IRS retained the funds in issue.[3]
We recognize that the IRS's ability to prove that the checks were negotiated is hampered by the passage of time. However, by allowing this case, in which it is plaintiff, to languish until this court sua sponte resuscitated it is not indicative of the vigor which we could expect the IRS to display in support of a claim for a quarter-million dollars which the IRS was firmly convinced had merit. After years of discovery and the experience of the previous hearing and decision against it due to its failure to meet its evidentiary burden of proof, we would certainly have expected the IRS to have proven its claim with all due thoroughness in this proceeding if it were capable of doing so. Its inability to so do reflects adversely on its ability to do so and hence the strength of its claim. It should have been apparent to the IRS that proof of negotiation of the checks in issue was an important element of its case. Production of conclusive evidence that the checks were paid would certainly appear to have been within the unique power of the IRS to produce. It was not forthcoming. Lack of proof on this point is fatal to the IRS's claims against either of the Defendants.
We express no opinion as to whether, even had cause been presented by the IRS for us to reconsider its prior Order and even had the IRS proven payment of the check proceeds to MFX or FNB, the IRS would have prevailed. Contrary to the IRS's contentions, the checks would appear to be property of MFX's estate, at least to the extent of MFX's equitable interest in them. See In re Temp-Way Corp., 80 B.R. 699, 702 (Bankr.E.D.Pa.1987). However, this interest may have been even weaker than that of the debtor in Temp-Way as the co-drawee of a joint check, id. at 703-05, which we held had no interest in the check proceeds. Clearly, property stolen or improperly received by a debtor during a bankruptcy cannot be retained by a debtor on the ground that it is property of the estate. The advice that the checks should be remitted to FNB given by MFX's counsel, see Finding of Fact 6, page 708 supra, was therefore certainly subject to question. FNB's super-priority claim *713 would not be conclusive as to its rights to the check proceeds if these proceeds were not such property of the estate of which MFX had a right of retention. There may be claims to property of the estate which rise to even a higher level than that of super-priority status. Cf. In re American International Airways, Inc., 77 B.R. 490, 491-92 (Bankr.E.D.Pa.1987).
On the other hand, we have expressed our distaste for a creditor's contentions that it is required to receive favored treatment in distribution of estate assets due to the argument that certain funds of the debtor should be found to be held in trust by a claimant. See, e.g., In re American International Airways, Inc., 83 B.R. 324, 329 (Bankr.E.D.Pa.1988), aff'd, C.A. No. 87-3529 (E.D.Pa. August 15, 1988); In re Temp-Way Corp., 82 B.R. 747, 753 (Bankr. E.D.Pa.1988); and In re Rimmer Corp., 80 B.R. 337, 338-39 (Bankr.E.D.Pa.1987). Fortunately, our disposition here allows us to avoid choosing between these conflicting policies, as we would have had to do in making a decision on the merits in the event that the IRS had proven that the refund checks had been cashed and the proceeds had been retained by either of the Defendants.
D. CONCLUSION
For the reasons stated herein, an Order of judgment in favor of the Defendants will be entered.
NOTES
[1] The Answer of MFX also raised an issue of the liability of the Government for certain freight charges owed to MFX, an issue that was also raised in another separate proceeding in this case, Adversary No. 84-1416. The parties executed a Stipulation approved by us on September 20, 1988, allowing a claim to MFX in the amount of $129,429.04, but applying that sum to offset certain claims filed by Government agencies other than the IRS in the MFX bankruptcy case.
[2] While ultimately dismissing the entire Complaint on this basis, it should be noted that our decision is not a disposition on the merits as to the claim of the IRS against FNB. The dispute between these parties, when MFX is extracted from its center, is dismissed because it has no conceivable effect on the estate of MFX, is unrelated to the underlying Chapter 11 case, and is beyond our jurisdiction to resolve. See In re Bobroff, 766 F.2d 797, 802 (3d Cir.1985); and In re Pacor, Inc., 743 F.2d 984, 994 (3d Cir.1984). For that reason, we dismiss the claim against FNB with that against MFX.
[3] We are, however, not so convinced as to this point that we would be inclined to reconsider our Order of May 11, 1988, from the vantage point of MFX, and sua sponte strike the claim entirely. It does seem that FNB should have had the resources at its disposal to determine what happened to these checks. Its failure to do so may permit adverse inferences to be drawn as to it. However, this should not impact on our decision as to MFX, and we have already noted at page 711 supra, n. 2, that we do not consider this disposition to be on the merits as to FNB. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548681/ | 992 A.2d 889 (2010)
FOX
v.
MENGEL.
No. 150 WAL (2009).
Supreme Court of Pennsylvania.
April 14, 2010.
Disposition of Petition for Allowance of Appeal Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548679/ | 992 A.2d 1002 (2010)
William J. NYE
v.
Paul G. BROUSSEAU et al.
No. 2009-20-Appeal.
Supreme Court of Rhode Island.
April 29, 2010.
*1004 Charles D. Blackman, Esq., Providence, for Plaintiff.
Bruce E. Vealey, Esq., for Defendant.
Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, and ROBINSON, JJ.
OPINION
Justice FLAHERTY, for the Court.
"Good fences make good neighbours."[1]
William J. Nye appeals from a Superior Court judgment that fixed the boundary dividing his property from that of his neighbors, the defendants, Paul G. Brousseau and Susan J. Brousseau, enjoined Nye from trespassing on the Brousseaus' property, and awarded the Brousseaus damages on the basis of breach of contract. This case came before the Court for oral argument on April 8, 2010, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not summarily be decided. After hearing the parties' arguments and considering the memoranda they submitted, we are satisfied that cause has not been shown, and we proceed to decide this appeal without further briefing or argument. For the reasons set forth in this opinion, we affirm the Superior Court's judgment in part and vacate it in part.
I
Facts and Travel
Nye's parents, now deceased, purchased the property at 251 Tiffany Avenue, Warwick, *1005 Rhode Island in 1964. Nye himself resided at that address during his childhood, until 1977. As an adult, he resumed living at 251 Tiffany Avenue in 1992, until the present. He purchased the property from his father's estate in March 2003.
Between 1964 and 1966, Nye's mother planted evergreen bushes, known as Japanese yews, in a row extending from the northern to the southern end of the property and on the western edge of 251 Tiffany Avenue, abutting the next-door property of 265 Tiffany Avenue. The bushes are located adjacent to the properties' respective driveways. Over the years, the yews grew to be quite tall, at times reaching in excess of fifteen feet.
In 1979, Paul and V. Tang Lintereur purchased the property at 265 Tiffany Avenue. According to an affidavit signed by the Lintereurs, the couple did not consider themselves to be the owners of these bushes when they lived at that address and "did not consider the boundary bushes to be part of [their] former property." Rather, they "always believed [that the Nyes] owned the boundary bushes." According to Nye, he, too, "always considered the land to the east of the evergreen * * * to be our land."
In 2003, the Lintereurs sold the property at 265 Tiffany Avenue to the Brousseaus. In September or October 2003, Mr. Brousseau asked Nye if he could trim and remove bushes to improve his visibility while he exited and entered his driveway. Nye said that he appreciated that Brousseau asked for his permission before trimming the bushes, and so he assented to Brousseau's pruning and removal of those bushes that obscured the view from the Brousseaus' driveway. Later, in the spring of 2004, Brousseau discussed trimming the bushes again to shorten them, and Nye again agreed. Soon after, the pair discussed removing debris from the corner of their respective properties, extracting stumps from between their garages, and replacing a couple of defoliated yews with arborvitae shrubbery.
According to Brousseau, Nye assumed that the boundary between their properties "was somewhere near the bushes in a north-south direction," but that Nye thought that a survey should be conducted. Brousseau testified that he expressed his concern about the expense of a survey, and so Nye agreed to contribute half of the cost of the survey.[2] According to Nye, he "was being generous" when he agreed to pay half the survey's cost.
In early September 2005, Nye and Brousseau again discussed the maintenance of the row of bushes. During this conversation, they agreed to remove the bushes at the properties' southern end and replace them with arborvitae. Brousseau cut and removed the bushes, leaving several stumps near the adjacent driveways. Nye assisted Brousseau in removing one of the stumps, but Brousseau decided to hire a professional to remove the remaining stumps.
Sometime later, Brousseau broached the topic of extending his retaining wall, which, according to Brousseau, prompted Nye to again suggest that a survey be conducted before any extension was initiated. Brousseau agreed to have a survey conducted, and he hired a surveyor who completed the survey in November 2005. The surveyor discovered a granite boundary marker in the southeastern corner of the Brousseaus' property and placed a metal stake in a portion of Nye's driveway. *1006 The surveyor concluded that a portion of Nye's driveway and a portion of the southernmost bushes were actually on the Brousseaus' property. Brousseau provided Nye with a copy of the survey, but Nye disputed its accuracy and declined to reimburse the Brousseaus for any portion of the survey's cost. Nye maintained that "[i]t was [the Brousseaus'] project" and "it wasn't my survey." According to Nye, no agreement existed "as to payment."
Nye and Brousseau also disputed the placement of trash and recycling bins in the vicinity of what each perceived to be the boundary between their properties. Brousseau asked Nye to remove his trash cans, but, according to Brousseau, Nye refused. On one occasion, Brousseau moved Nye's trash cans to "the other side of the survey line," but Nye moved them back because they were damaging the grass. Nye also said that he showed Brousseau the affidavit from the Lintereurs memorializing their belief as to the location of the boundary, but Brousseau did not see any significance in that document. The men exchanged words, and Brousseau described himself as "emotional" at that time. According to Brousseau, Nye then informed him that he was going to have his own survey conducted.
Later, at the end of June 2006, Nye again contacted the Warwick police in connection with the dispute about the proper location of the trash and recycling containers. Brousseau showed the responding police officer a copy of the survey indicating that he owned the land in question, and the officer talked to Nye and departed. As a result, Nye moved his trash cans.
On August 14, 2006, Brousseau trimmed the remaining yews.[3] According to Brousseau, he placed the branches that he cut on the side of his driveway. Nye took issue with this work because he said that he had refused Brousseau's request to cut those bushes. In response, Nye contacted the Warwick Police Department "to make a record of the event." An officer came and talked to both parties, and, according to Nye, "that was basically the end of it."
Nye filed a pro se complaint against the Brousseaus in Superior Court on August 9, 2006, in which he alleged that he had requested that the Brousseaus obtain a survey of their property and asserted that he "contest[ed] the location of the disputed boundary." He claimed that "the boundary * * * between the Nye real estate and the Brousseau real estate is a line, which follows a row of bushes." He alleged that before the survey was completed, the Brousseaus did not believe that the area included within their surveyed boundary was part of their property. Nye further alleged that the Brousseaus are "liable in trespass for traveling in, and beyond, the disputed area, and for moving [his] recycling bins." He claimed that the parties "and former owners and users of both properties have demonstrated mutual acquiescence regarding their respect of [Nye's] asserted boundary." He sought a temporary restraining order and permanent injunctive relief to prevent the Brousseaus "from trespass of the asserted boundary line," "[a]n order declaring the true boundary line," and "[a]ny other such equitable relief as the Court may allow."
As part of their answer to Nye's complaint, the Brousseaus raised two counterclaims. First, they sought a declaratory judgment that the boundary line dividing the two properties was as determined in the survey conducted in November 2005. Second, they sought a temporary restraining order and injunction preventing Nye from entering their property, placing his *1007 personal property upon it, or parking motor vehicles on their property. For both counts of the counterclaim, the Brousseaus also requested that they "be granted such other and further relief as [the Superior Court] shall deem appropriate and the circumstances of the case may require."
A nonjury trial was held before a justice of the Superior Court on June 16, 17, 19, and 30, 2008, and July 7, 2008. Nye represented himself during these proceedings, while the Brousseaus were represented by counsel.[4] Nye called several witnesses, including his brother, a landscape arborist who testified about the value of the shrubbery, the Brousseaus' surveyor, who was under subpoena, and himself. The trial justice allowed video recordings of the Lintereurs' depositions into evidence. At the close of plaintiff's case, the Brousseaus moved for judgment as a matter of law. In response to defendants' motion, Nye argued to the trial justice that the boundary should run along the edge of the bushes' trunks so that each trunk is entirely on his property, but he acknowledged that that was the "ideal location" and that a boundary running through the center of the trunks was "a possible solution." The trial justice denied the motion because he wished to hear testimony from the Brousseaus, as well.
The trial justice's decision was entered on September 23, 2008. He issued an injunction preventing the Brousseaus "from passing onto Mr. Nye's property." He also ruled that because Nye "demonstrated that at the time of the August 2006 trimming, he was in possession of one-half of the shrubs near the border," Brousseau converted Nye's portion of ownership in the shrubbery when he undertook "his significant trimming" on August 14, 2006. Taking into consideration the positive effects that Brousseau's trimming had on the shrubbery, the trial justice set the value of the damage from the trimming of the nine shrubs at $2,200, and he awarded Nye damages in the amount of $1,100, reflecting his one-half ownership of the shrubbery.
With respect to the boundary question, the trial justice ruled that the row of shrubbery was "sufficiently obvious to command notice of [Nye's] claim of ownership." Therefore, because Nye "demonstrated that the row of shrubbery has existed for a sufficient period of time," the shrubbery represented the boundary between the properties under the doctrine of title by acquiescence. The trial justice found that
"[t]he new boundary shall run from the granite bound, which is the northernmost border of the two properties, southward until the northernmost yew, then turning and running along the centerline of the yews to the southernmost yew, then turning slightly eastward and running directly to the point which is the edge of Mr. Nye's paved driveway at its intersection with Tiffany Avenue."
However, the trial justice went on to say, "Any property interest clarified, confirmed or conveyed to Mr. Nye by this Decision shall be invalid until it is set forth in a Judgment, duly approved by the Court and sufficiently describing this line." He directed Nye to prepare a survey description for inclusion in the final judgment.
Acknowledging that the Brousseaus "prayed for an award of any other relief that the Court may deem equitable and just," the trial justice ruled that "[t]he Brousseaus established that Mr. Nye breached an agreement to pay for one-half of the cost of the surveyor's bill" and "[a]n *1008 award of costs for the [Brousseaus] is most appropriate here." Therefore, in recognition of the value of this survey to Nye in preparation for and during the trial proceedings, the trial justice ruled that the Brousseaus were to "be awarded one-half of the cost of the survey as Mr. Nye originally agreed." Finally, he enjoined Nye from entering the Brousseaus' "real estate without the consent of either Mr. or Mrs. Brousseau."[5]
Nye filed a motion to amend the decision on September 29, 2008, which the trial justice denied. Final judgment was entered on October 29, 2008. To comply with the trial justice's decision, Nye prepared and submitted an order with an attached surveyor's description of the new boundary line to the Superior Court on November 12, 2008. This legal description of the border was reflected in the amended final judgment that was entered on April 30, 2009.[6] Nye timely appealed to this Court.
II
Issues on Appeal
Nye raises three issues on appeal. First, he argues that, although the trial justice correctly ruled that the doctrine of acquiescence applied, he "erred in fixing the boundary between the two properties through the center of the trunks of the first and last bushes, rather than with reference to where the bushes were before the Brousseaus removed them in 2004, and by not locating the bushes entirely on the Nye property." Second, he contends that the trial justice erred when he issued an injunction preventing him from entering the Brousseaus' property without their consent. Third, he argues that the trial justice erred when he entered judgment in favor of the Brousseaus on an "unasserted" breach-of-contract claim.
III
Standard of Review
We "will not disturb the findings of a trial justice sitting without a jury in a civil matter `unless such findings are clearly erroneous or unless the trial justice misconceived or overlooked material evidence or unless the decision fails to do substantial justice between the parties.'" Union Station Associates v. Rossi, 862 A.2d 185, 193 (R.I.2004) (quoting Harris v. Town of Lincoln, 668 A.2d 321, 326 (R.I. 1995)). This is so because "[t]he task of determining the credibility of witnesses is peculiarly the function of the trial justice when sitting without a jury." Houde v. State, 973 A.2d 493, 498 (R.I.2009) (quoting McEntee v. Davis, 861 A.2d 459, 464 (R.I. 2004)). This Court also applies a deferential standard of review to the trial justice's "resolution of mixed questions of law and fact, as well as the inferences and conclusions drawn from the testimony and evidence * * *." Id. (quoting Narragansett Electric Co. v. Carbone, 898 A.2d 87, 97 (R.I.2006)). However, we review questions of law de novo. Id. (citing Fleet National Bank v. 175 Post Road, LLC, 851 A.2d 267, 273 (R.I.2004)).
IV
Discussion
A
Boundary Determination
Under the doctrine of acquiescence, "even when there has been no express *1009 agreement, adjoining landowners are `precluded from denying a boundary line recognized by both owners for a length of time equal to that prescribed by the statute of limitations barring a right of reentry.'" Acampora v. Pearson, 899 A.2d 459, 464 (R.I.2006) (quoting Locke v. O'Brien, 610 A.2d 552, 556 (R.I.1992)); see also O'Donnell v. Penney, 17 R.I. 164, 167, 20 A. 305, 306 (1890) (recognizing doctrine of acquiescence for the first time in Rhode Island). "A determination of acquiescence is a mixed question of law and fact." Acampora, 899 A.2d at 462 (citing Locke, 610 A.2d at 556). Specifically, "[a]lthough, `the issue of what constitute[s] the boundaries of a parcel of land is a question of law, the determination of where such boundaries are is a question of fact.'" Norton v. Courtemanche, 798 A.2d 925, 932 (R.I.2002) (quoting Rosa v. Oliveira, 115 R.I. 277, 279, 342 A.2d 601, 602 (1975)); see DeCosta v. DeCosta, 819 A.2d 1261, 1265 (R.I.2003) (vesting title in the entirety of the shrubbery that served as a boundary under the doctrine of acquiescence in the party who "located and planted the shrubbery," but remanding for a declaration of "where the hedgerow originally was located") (emphasis added).
Nye does not find fault with the trial justice's determination that the yews and arborvitae constituted the boundary between his and the Brousseaus' property under the doctrine of acquiescence. Consequently, he does not challenge certain findings of fact that the trial justice made in the context of determining this mixed question of law and fact, such as "whether the boundary is sufficiently obvious to command notice." Acampora, 899 A.2d at 465. He does, however, challenge "where" the trial justice determined the boundary to be. Nye argues that the proper boundary should hug the outside edge of the trunks of the shrubs so that the entire circumference of the trunks rests on his property. Because this is a question of fact, we afford deference to the trial justice's finding on this issue. Applying that standard of review, and after careful review of the record, it is our opinion that the trial justice did not misconceive or overlook material evidence when he determined that the boundary should bisect the trunks of the bushes.
In making findings of fact to support his decision, the trial justice considered the testimony of the witnesses and made several credibility determinations. He found that Nye "used the driveway and land up to the shrubbery." Additionally, the trial justice found that the shrubs "were rarely maintained." He perceived Nye's testimony to be "obviously self-serving," but "credible." As for Mr. Brousseau, the trial justice found him to be "highly credible." The trial justice acknowledged the Lintereurs' deposition testimony that they "`assumed' that the shrubbery was the border" and also that Nye's father never objected to "Mr. Lintereur trimming the bushes."
Nye asserts that "there was certainly not any evidence to suggest that the Lintereurs or the Brousseaus exercised dominion and control of the property up to the centerline of the bushesas though someone occasionally crawled under the bushes up to the centerline. People do not do that." However, there was no evidence that Nye exercised complete dominion of the entirety of the shrubbery to support his contention that he is entitled to a boundary determination that places the shrubbery completely on his property. For example, Nye did not maintain the bushes on the Brousseaus' side of the property; in fact, he rarely maintained the shrubbery at all. In addition, the Lintereurs and Brousseaus both trimmed the shrubbery that faced their property.
*1010 An authoritative treatise has said that mutual acceptance of the boundary line "is an objective test, without regard to what either party knew or thought." 9 Richard R. Powell, Powell on Real Property § 68.05[6][a] at 68-29, 68-30 (Michael Allen Wolf ed. 2000). Therefore, although Nye insists that he always believed that the shrubbery belonged to his family and the Lintereurs' affidavit contains the statement that they "always believed [that the Nyes] owned the boundary bushes," the trial justice's boundary determination is consistent with an objective factual determination of the location of the boundary. Based on the actions of the parties and the former owners of the respective properties in maintaining each side of the shrubbery, we cannot say that the trial justice's resolution of where the boundary runs was clearly wrong.
B
Injunction Against Nye
"A party seeking injunctive relief `must demonstrate that it stands to suffer some irreparable harm that is presently threatened or imminent and for which no adequate legal remedy exists to restore that plaintiff to its rightful position.'" National Lumber & Building Materials Co. v. Langevin, 798 A.2d 429, 434 (R.I.2002) (quoting Fund for Community Progress v. United Way of Southeastern New England, 695 A.2d 517, 521 (R.I. 1997)). "Irreparable injury must be either `presently threatened' or `imminent'; injuries that are prospective only and might never occur cannot form the basis of a permanent injunction." Id. (quoting Rhode Island Turnpike & Bridge Authority v. Cohen, 433 A.2d 179, 182 (R.I.1981)). Nye argues that there is no support for the permanent injunction imposed on him because "[t]here was no evidence that [he] ha[d] ever trespassed on the Brousseau property beyond the point that the Court agreed had become part of the Nye property." Therefore, he maintains that he presents no actual threat of imminent irreparable injury. We agree with Nye that the injunction against him is unnecessary.
"When reviewing the grant or denial of a permanent injunction, we will reverse the lower court on appeal only `when it can be shown that the trial justice misapplied the law, misconceived or overlooked material evidence or made factual findings that were clearly wrong.'" Holden v. Salvadore, 964 A.2d 508, 512-13 (R.I.2009) (quoting Renaissance Development Corp. v. Universal Properties Group. Inc., 821 A.2d 233, 236 (R.I.2003)). Currently, the amended final judgment reflects the boundary description as submitted by Nye in accordance with the trial justice's decision. Whatever imminent injury that the trial justice may have perceived at the time that he issued the injunction does not exist at this time, because the portion of the property that the Brousseaus challenged now belongs to Nye. This has been the case since the trial justice approved Nye's legal description of the boundary in accordance with the decision and incorporated it into the amended final judgment. As a result, there no longer is any imminent threat that Nye will trespass on the Brousseaus' property. Thus, we hold that the permanent injunction that continues to be in force against Nye is no longer called for, and that it should have been vacated when the trial justice approved Nye's submitted legal description of the boundary.
C
Damages for Breach of Agreement
Finally, Nye argues that the trial justice erred when he awarded the Brousseaus damages based on his finding that *1011 Nye breached the parties' agreement that they would share the cost of the survey. He maintains that he "was not on notice that this relief was within the realm of possibility" by the language of the counterclaim and that as a result he "did not argue his side of the story on this apparent non-issue." Although Nye did argue that there was no agreement about payment of the cost of the survey, maintaining that he was simply being "generous" in his offer to pay half the cost, and this statement was part of the evidence during the trial, we hold that the boilerplate language of the Brousseaus' counterclaim was not a sufficient basis for the trial justice's award in their favor for monetary damages.
In count one of their counterclaim, the Brousseaus alleged that the survey completed for their property on November 15, 2005, "delineate[d] the boundary lines of the parties' respective properties," and requested that they "be granted such other and further relief as [the Superior Court] shall deem appropriate and the circumstances of the case may require." The trial justice determined that an award of damages in favor of the Brousseaus for half the cost of the survey was appropriate in light of the circumstances of the case because Nye "met with [the surveyor], subpoenaed [the surveyor] for trial, and had [the surveyor] wait for several days to testify." He further found that the "survey was used as the basis for [the landscape arborist] to prepare his report."
Essentially, Nye argues before this Court that the trial justice erroneously awarded these damages sua sponte. We agree; "[o]ur caselaw consistently has mandated that when a trial justice considers and rules on an issue sua sponte, the parties must be afforded notice of the issue and allowed an opportunity to present evidence and argue against it." Catucci v. Pacheco, 866 A.2d 509, 515 (R.I.2005) (citing Vargas Manufacturing Co. v. Friedman, 661 A.2d 48, 55 (R.I.1995)) (holding that the trial justice erred when he sua sponte added additional defendants as parties "at the close of plaintiff's case" and defendants "were not prepared to offer any witnesses or otherwise defend"). In short, "a party should not be granted relief that it did not request." Providence Journal Co. v. Convention Center Authority, 824 A.2d 1246, 1248 (R.I.2003) (holding that the trial justice erred when she ordered unrequested redactions of certain information from several contracts) (citing Direct Action for Rights and Equality v. Gannon, 713 A.2d 218, 225 (R.I.1998); Vargas Manufacturing Co., 661 A.2d at 55, and Santos v. Santos, 568 A.2d 1010, 1011 (R.I.1990)); see Vargas Manufacturing Co., 661 A.2d at 54-55 (holding that the trial justice erred when he awarded punitive damages for threats amounting to the crime of extortion although the defendants mentioned and requested only punitive damages for knowing, intentional, and willful misrepresentations).
This Court has noted that "[a]ppellate courts are especially hesitant to read a particular claim into a complaint's general boilerplate prayer for relief." Bandoni v. State, 715 A.2d 580, 596 (R.I.1998) (citing Thomas R.W. v. Massachusetts Department of Education, 130 F.3d 477, 480 (1st Cir.1997)). In Bandoni, this Court viewed consideration of an award of declaratory and injunctive relief as "inappropriate" because it was not sought in the complaint, despite the complaint's general language that "prayed for monetary damages and `all such other relief deemed meet and just by this Honorable Court.'" Id. at 596. We characterized the complaint's "general boilerplate language [as] superfluous and simply insufficient to support any claim upon which other relief may be granted." Id. at 597.
*1012 Here, the similarly general boilerplate language in the Brousseaus' counterclaim cannot support an award of damages for breach of agreement. The Brousseaus' counterclaim was restricted to seeking declaratory and injunctive relief; nowhere does it allege the breach of an agreement to share the cost of a surveyor, nor does it request monetary damages. See Bandoni, 715 A.2d at 596-97. In addition, the Brousseaus were free to file a motion under Rule 15 of the Superior Court Rules of Civil Procedure to conform the pleadings to the evidence at trial regarding the alleged agreement between the parties to share the expense of the survey, but they did not do so. Therefore, we hold that the trial justice erroneously granted the Brousseaus relief that they did not request when he awarded them damages for a portion of the surveyor's fees. See Providence Journal Co., 824 A.2d at 1248.
IV
Conclusion
We affirm the Superior Court judgment in part and vacate the judgment in part. The record in this case shall be remanded to that court.
Justice Indeglia took no part in the consideration or decision of this appeal.
NOTES
[1] Robert Frost, "Mending Wall," North of Boston (1914), quoted in The Oxford Dictionary of Modern Quotations 86 (Tony Augarde ed. 1991).
[2] Nye also said that Brousseau asked him to pay only a quarter of the cost of the survey because the surveyor would be surveying the entirety of the Brousseaus' lot, most of which had nothing to do with the boundary issue.
[3] Currently, seven of the original Japanese yews and two stumps remain.
[4] Counsel filed an entry of appearance in Superior Court on behalf of Nye on December 22, 2008. That attorney represents Nye before this Court.
[5] The trial justice also enjoined Mr. Brousseau from entering "Mr. Nye's real estate without the consent of Mr. Nye."
[6] In an order that was entered on December 4, 2008, the trial justice appears to have denied Nye's filed survey map as insufficient to comply with the decision's requirement that he submit a survey description. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/872702/ | Electronically Filed
Intermediate Court of Appeals
CAAP-11-0000499
08-JUN-2012
08:46 AM | 01-03-2023 | 05-25-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548827/ | 161 B.R. 440 (1993)
In re ENVIRODYNE INDUSTRIES, INC., Sandusky Plastics, Inc., Sandusky Plastics of Delaware, Inc., Viskase Corporation, Viskase Holding Corporation, Viskase Sales Corporation, Clear Shield National, Inc., Envirodyne Finance Company, Debtors.
Bankruptcy Nos. 93 B 310, 93 B 312 thru 93 B 316, 93 B 318 and 93 B 319.
United States Bankruptcy Court, N.D. Illinois, E.D.
November 24, 1993.
*441 *442 Allan S. Brilliant, Holleb and Coff, Chicago, IL, for debtors.
James E. Spiotto, Chapman and Cutler, Chicago, IL, for Official Creditors Committee.
Steven E. Greenbaum, Berlack, Israels & Liberman, New York City, for Unofficial Committee of 13.5% Noteholders.
T. William Opdyke, Sheppard, Mullin, Richter & Hampton, Los Angeles, CA, for Bank of America, as successor Indenture Trustee under the Indenture governing the Old 13.5% Notes.
MEMORANDUM OPINION
JOHN D. SCHWARTZ, Chief Judge.
The matter before the court is the portion of the Objections of the Unofficial Committee of 13½% Noteholders (13½'s) and Bank Of America N.T. & S.T., As Indenture Trustee, ("Objectors"), to the Debtors' First Amended Joint Plan of Reorganization as Twice Modified ("Plan") as they pertain to the subordination provision contained in Section 15.02 paragraph three of the Indenture governing the 13.5% (originally 12.0%) Notes dated June 15, 1986 and due June 15, 1996. The Court has received and considered the Objections of the 13½'s and Bank of America, the Memorandum of Law in Support of the Objection of the 13½'s to the Debtors' First Amended Joint Plan of Reorganization as Twice Modified, the Debtors' Motion for a Hearing Regarding the Objections of the 13½'s and Bank of America Regarding the Provisions of the Debtors Plan Related to *443 The Subordination of the 13½% Notes, the Memorandum of Law of the Official Committee of Bondholders of Envirodyne Industries, Inc. Concerning the "X Clause" of the June 15, 1986 Envirodyne Indenture, the Response of State Street Bank and Trust Co., as Indenture Trustee in Behalf of the Holders of the 14% Senior Subordinated Notes Due 2001, to the Objection of the 13½'s to the Debtors' First Amended Joint Plan of Reorganization as Twice Modified, the Reply Brief of the 13½'s Regarding the 13.5% Noteholders' Entitlement to Pari Passu Treatment Under the Modified Cramdown Plan, the Reply Brief of Bank of America Regarding the Appropriate Interpretation of the "X" Clause, and permitted each party time to argue its or their positions. For the reasons set forth in open court and now more particularly in this memorandum, the Court overrules the Objectors' interpretation of the Indenture and adopts that of the Official Committee of Bondholders and the Debtor.
FACTS AND BACKGROUND
The relevant facts are as follows: On January 7, 1993 Envirodyne Industries, Inc., a holding company with numerous subsidiaries, converted an involuntary petition for reorganization under Chapter 11, filed the previous day by certain holders of the 13.5% Notes, into a voluntary petition under Chapter 11.[1] The Debtors continue to operate their various businesses as the debtors in possession, pursuant to 11 U.S.C. §§ 1107(a) and 1108[2] of the Bankruptcy Code.
On January 22, 1993, an Official Bondholders Committee[3] was formed to represent the interests of the three tranches of unsecured debt. The first tranch, the Senior Discount Notes Due 1997 dated August 1, 1989, with State Street Bank as Trustee ("Senior Notes"), is not affected by this dispute as they received New Notes in satisfaction of their claim. The second tranch, the 14% Senior Subordinated Debentures Due 2001 dated August 1, 1989, with Bankers Trust as Trustee ("14% Senior Debentures"), is indirectly affected by this dispute as they will receive New Common Stock under the Plan. These two tranches were issued to refinance the leveraged buyout (LBO) through which the current management obtained control of the company. The third tranch existed prior to the time of the LBO, having been issued on June 15, 1986 at an initial interest rate of 12%, increased to 13.5% subsequent to the LBO. The holders of the third tranch believe that they are entitled to a portion of the New Common Stock allocated to the second tranch. The Unofficial Committee of 13.5% Noteholders represents the holders of some of these Notes.
On June 2, 1993 the Debtors filed a Joint Plan of Reorganization and accompanying Disclosure Statement. On August 10, 1993, the Debtors filed the First Amended Joint Plan of Reorganization and accompanying Amended Disclosure Statement. On that same day this Court approved the Disclosure Statement as containing adequate information and authorized the distribution of the statement to all of the creditors and parties-in-interest. Finally, on October 12, 1993, the Debtors filed their First Amended Joint Plan of Reorganization as Twice Modified and accompanying Modified Disclosure Statement. Two days later this court approved the Plan and ordered it mailed to the creditors and parties-in-interest.
Each version of the Plan was premised on the assumption that the subordination provision contained in the Indenture for the 13.5% Notes ("Indenture")[4] required the payment of all Superior Indebtedness (the holders of the Senior Notes and the holders of the 14% Senior Debentures) ahead of the 13.5% Notes. The Debtors' First Amended Plan valued the 13½'s allowed claim at approximately $104 million. Under the Plan, the *444 13½'s were initially allocated $67 million of New Common Stock in the reorganized company in satisfaction of this claim.[5] However, pursuant to the subordination provision described below, the Debtor reclassified the common stock allocated to the 13½'s to the holders of Superior Indebtedness. Consequently, the 13½'s distribution under the original Plan was reduced to zero. As a result, the Objectors filed an objection to the Plan. The Debtors response, in the First Amended Plan as Twice Modified, was to allocate to the 13½'s a combination of New Common Stock and warrants worth approximately $19.1 million[6]. The 13½'s remained unsatisfied and therefore renewed their objection.
The dispute is whether the third paragraph of section 15.02 of the Indenture contains an exception to an exception which would allow the 13.5% Noteholders to retain or obtain New Common Stock under any plan that provided for the receipt of stock in lieu of debt, be it Superior Indebtedness[7] or otherwise. The provision states:
In the event that any Note is declared to be due and payable pursuant to Article Six before the date specified therein as the fixed date on which the principal thereof is due and payable, or upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal of, and premium, if any, on, and interest due or to become due on, all Superior Indebtedness shall first be paid in full before the Noteholders, or the Trustee, shall be entitled to retain any assets (other then shares of stock of the Company, as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated, at least to the same extent as the Notes, to the payment of all Superior Indebtedness which may at the time be outstanding) so paid or distributed in respect of the Notes (for principal, premium, if any, or interest); and upon such dissolution or winding up or liquidation or reorganization any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other then shares of stock of the Company as reorganized and readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinate, at least to the same extent as the Notes, to the payment of all Superior Indebtedness which may at the time be outstanding) to which the Noteholders or the Trustee would be entitled, except for the provisions of this section 15.02, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the Noteholders or the Trustee if received by them or it, directly to the holders of the Superior Indebtedness (pro rata on the basis of the respective amounts of Superior Indebtedness held by such holders, but subject to any subordination agreements to which such holders or their representative or representatives are subject), or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Superior Indebtedness may have been issued, to the extent necessary to pay in full all Superior Indebtedness after giving effect to any concurrent payment or distribution to or for the holders of Superior Indebtedness, before any payment or distribution is made to the Noteholders or to the Trustee; and the holders of Superior Indebtedness are hereby authorized to *445 file an appropriate claim for and on behalf of the holders of the Notes if they or any of them do not file a proper claim or proof of claim in the form required in any such proceeding prior to 30 days before the expiration of the time to file such claim or claims. (emphasis added)
The Objectors assert that the underscored provision of section 15.02 provides an exception for distributions of common stock to the 13.5% Noteholders under a plan of reorganization. They read the above provision to state that the 13½'s "shall be entitled to retain" all "shares of stock of the Company" to which they otherwise "would be entitled" under a plan of reorganization. Objection of the Unofficial Committee of 13.5% Noteholders to the Debtors' First Amended Plan of Reorganization at 13, In re Envirodyne Industries, Inc., 93 B 319 (Nov.1993). The Objectors maintain that this clause forbids the Debtors from giving effect to an otherwise valid subordination provision and prevents the "reallocation" of common stock distributions away from the 13½'s.[8] Objection of the Unofficial Committee of 13.5% Noteholders to the Debtors' First Amended Plan of Reorganization as Twice Modified at 16, In re Envirodyne Industries, Inc., 93 B 319 (Nov.1993). Therefore, according to the 13½'s, any distribution of common stock under a plan of reorganization is not subordinated to the claims of the holders of Superior Indebtedness.
On the other hand, the Debtors insist that the language, intent, and purpose of the subordination provision would be defeated if such a reading of the provision is adopted. They argue that the 13½'s can only retain stock or securities to the extent that they remain subordinate to full payment of Superior Indebtedness. Under the Plan, the claims of the holders of Superior Indebtedness have not been fully satisfied yet the 13½'s, as subordinated indebtedness, are receiving a distribution, albeit a small one, when they are not entitled to any distribution.
DISCUSSION
All of the parties agree that the subordination provision is unambiguous and the interpretation of this clause is a question of law that should be resolved by looking at the four corners of the document. In addition, the interpretation of the subordination clause is not affected by the bankruptcy proceedings. 11 U.S.C. § 510(a) (1993).
The parties also agree that New York law should be used to interpret the document.[9] Where a contract is clear and specific, as both parties assert, then the words of the contract must be given their plain, ordinary and usual meaning. Jamie Securities Co. v. The Limited, Inc., 880 F.2d 1572, 1576 (2d Cir.1989); Broad v. Rockwell Int'l. Corp., 642 F.2d 929, 948 (5th Cir.) (applying New York law), cert. denied 454 U.S. 965, 102 S.Ct. 506, 70 L.Ed.2d 380 (1981). When interpreting a contract, courts shall read the contract as a whole and consider all parts as part of the whole and not give undue force to certain words or phrases that would distort or confuse the primary and dominant purpose of the contract. Empire Properties Corp. v. Manufacturers Trust Co., 288 N.Y. 242, 248, 43 N.E.2d 25, 28 (1942). Finally, courts should construe an indenture as a whole to carry out the plain purpose and object of the indenture and not limit itself to *446 literal interpretations. Id. 288 N.Y. at 448-9, 43 N.E.2d at 28.
The clause that the 13½'s rely upon to support their claim to shares of stock of Envirodyne is commonly referred to as an "X Clause". While agreeing that the "X" clause in this Indenture is unambiguous and should be interpreted solely by looking at the four corners of the document, the Objectors maintain that the Debtors use of law reviews and the American Bar Foundation, Commentaries on Model Indenture Provisions 559 (1970) ("Commentaries") to interpret the "X" clause constitutes extrinsic evidence and should be ignored by the court. They argue that the use of such articles is an attempt by the Debtors to introduce evidence of intent, trade custom, and industry practice to interpret an unambiguous document.
However, the Debtors' use of the Commentaries and law review articles is in the form of corroborative evidence, not extrinsic evidence, as the use of the articles is limited to interpreting the nature of "X" clauses in general not in explaining this particular clause. The Commentaries have been consistently relied on when interpreting bond indentures. See, e.g., Harris Trust and Savings Bank v. E-II Holdings, Inc., 926 F.2d 636, 644 (7th Cir.), cert. denied ___ U.S. ___, 112 S.Ct. 192, 116 L.Ed.2d 152 (1991) (Commentaries relied on to interpret the scope of the indenture trustees power to investigate the issuer's books and records); Elliott Associates v. J. Henry Schroder Bank and Trust Co., 838 F.2d 66, 71 (2d Cir.1988) (Commentaries relied on to interpret the notice provision in the indenture). The Debtors' interpretation of the "X" clause is supported solely by the language of the clause without reference to the Commentaries or law review articles.
Returning to the "X" clause, the objective of such a clause in a subordination provision is best explained as follows:
In the event of any marshalling and distribution of assets of the borrower, whether voluntary or involuntary, whether because of the insolvency of the borrower [or a plan of reorganization] or for any other reason, the holders of the senior debt receive payment in full of all principal and interest on the senior debt before the holders of the subordinated debt receive any payment of principal or interest on the subordinated debt. (emphasis added)
Edward Everett, Analysis of Particular Subordination Provisions, 23 Bus.Law. 41, 44 (1967). The "X" clause is an exception to subordination that provides a method for junior debtholders to retain existing shares of stock or new shares of stock in a reorganized company allocated to them pursuant to a plan of reorganization in the event the senior indebtedness is paid in full or receives stock or securities that is senior to that received by the junior noteholders. Id. Accordingly, the Indenture for the 13.5% Notes allows junior indebtedness to retain stock or securities of the reorganized company provided such payment is subordinated at least to the same extent as the Notes to the payment of all Superior Indebtedness. Indenture at § 15.02.
The "X" clause in this Indenture contains the typical language used to insure that holders of senior indebtedness are paid in full before the junior indebtedness in the event of a reorganization. See Commentaries at 570. (The Commentaries provide examples of typical "X" clauses). The Commentaries explain:
In the case of a plan of reorganization which, for example, provides that mortgage bonds, preferred stock or similar higher class security be issued to the holders of senior debt, and common stock be issued to the debenture holders. The theory is that this kind of distribution gives practical effect to the subordination and therefore turnover is not required. (emphasis added)
Id. Therefore, "X" clauses allows junior indebtedness to retain subordinate stock or securities in a reorganization when the senior indebtedness receives a higher class of security, such as preferred stock. However, in the instant case, Envirodyne proposes to distribute common stock to all indebtedness. Accordingly, under the plain language of the subordination provision, the 13½'s are not entitled to any distribution until the holders of Senior Indebtedness are paid in full.
*447 Nevertheless, the Objectors assert that the "X" clause entitles them to pari passu treatment with regard to any common stock distributed under a plan of reorganization. Through the use of conclusory and argumentative language, the Objectors attempt to obliterate the meaning of the "X" clause in the subordination clause by creating an exception to the exception. As discussed above, an "X" clause is an exception to subordination that allows subordinated debtholders to retain certain interests in a reorganized company to the extent that such interests are and remain subordinate. The Objectors maintain that there is an exception within this exception that allows them to retain shares of stock of reorganized Envirodyne regardless of whether they are subordinate.
The Objectors read the language of the "X" clause to allow the 13½'s to "retain [certain] assets . . . (i) shares of stock of Envirodyne as reorganized or adjusted, or (ii) subordinated securities." Reply Brief of the Unofficial Committee of 13.5% Noteholders regarding the 13.5% Noteholders' entitlement to Pari Passu Treatment Under the Modified Cramdown Plan at 6, In re Envirodyne Industries, Inc., 93 B 319 (Nov.1993). They perceive the "X" clause to allow the 13½'s to retain all shares of stock distributed under a plan of reorganization. For example, suppose under a plan of reorganization, stocks A, B, C, & D are distributed to all Noteholders. Stocks A, B, and C are distributed to holders of superior indebtedness and Stock D is distributed to the junior indebtedness. Under the plan, the holders of hypothetical stock D would not receive a dime until stocks A, B, & C had been redeemed. According to the 13½'s, this distribution would violate the provisions of the "X" clause. Under the Indenture, if the Envirodyne plan of reorganization distributes any stock to any debt holder, then the 13½'s are entitled to such stock on a pari passu basis, without regard to any existing subordination agreements.
The 13½'s argue that any other reading of the provision would ignore the plain and ordinary meaning of the word "or" in the "X" clause and would in effect render the whole clause meaningless. The clause states that the 13½'s shall receive "shares of stock of the Company as reorganized or readjusted or securities of the Company . . . provided for by a plan of reorganization or readjustment, the payment of which is subordinated . . ." Indenture at § 15.02. They contend that the word "or" is used in the disjunctive to separate two mutually exclusive alternatives. Reply Brief of the Unofficial Committee of 13½% Noteholders Regarding the 13½% Noteholders' Entitlement to Pari Passu Treatment Under the Modified Cramdown Plan at 7, In re Envirodyne Industries, Inc., 93 B 319 (Nov.1993). As a result, only the payment of securities are subordinated and the payment portion of the clause does not modify the phrase "shares of stock".
The fallacy of the Objectors' argument is that they fail to read the "X" clause as a whole and that their interpretation ignores the intent and plain meaning of a subordination agreement. When read as a whole, it is clear that the phrase "payment of which is subordinated" ("payment clause") in the "X" clause modifies both "shares of stock" and "securities." The "X" clause contains a comma before the restrictive adjectival phrase "the payment of which is subordinated".[10] This grammar strongly suggests that the phrase was designed to apply to both preceding subjects "shares of stock" as well as "securities" and not just securities.[11]
*448 The payment clause explicitly subordinates the payment of both stock and securities to the payment of Superior Indebtedness and not stock or securities as the Objectors' suggest. Therefore, the exception within the exception that the Objectors create does not exist. The 13½'s may retain shares of stock or securities in reorganized Envirodyne only to the extent that they are subordinate to the Superior Indebtedness.
The Objectors also argue that only "securities" can be subordinated to a right of "payment" because common stock, by its nature is subordinate to all debt and had no right of payment. Reply Brief of Bank of America, N.T. & S.A., as Indenture Trustee, Regarding the Appropriate Interpretation of the "X" Clause at 5, In re Envirodyne Industries, Inc., 93 B 319 (Nov.1993). In this instance, the Objectors confuse the term "right to payment" as related to ordinary common stock (for example, common shareholders have no inherent right to a return of their investment) with the term "payment under the plan". Using the later phrase, the "X" clause is consistent in insuring that in a reorganization, the holders of Superior Indebtedness receive payment in full, regardless of the form of consideration, before the 13½'s are paid any consideration.
The Debtors' interpretation is bolstered by considering the plain meaning and intent of subordination agreements. The very purpose of subordination clauses is to allow holders of senior indebtedness to recover if the debtor cannot meet its obligations. In other words, in the case of a bankruptcy or a reorganization, the senior debt holders bargained to insure that they would recover on their claim before any junior debt holder could recover on their claim. The Objectors interpretation of the "X" clause, using the language of the Objectors, defies explanation and logic. A senior creditor simply would not agree to a subordination agreement in which its priority depended on the form of consideration chosen by the debtor. The Objectors argument must be rejected in order to effectuate the plain language and the intent of the subordination provision.
The subordination provision was part of the bargain by which the 13½'s advanced funds to Envirodyne. The 13½'s should not be able to escape this bargain because the holders of Superior Indebtedness are being paid in stock rather then cash or notes. The crater the Objectors' interpretation creates in the "X" clause is contrary to both the language and plain meaning of both the clause itself and of subordination clauses in general. Possible explanations as to why the "X" clause was poorly drafted range from the clause being on a computer disk and not carefully reviewed to the drafter's fourth grade grammar teacher being less than competent. Nevertheless, as the Court observed, the proceedings related to the payment of the Senior Indebtedness have been going on for the last 18 months and it was only in the last 2½ months that this creative and unique interpretation of the "X" clause was concocted. The Debtors' position was accepted upon the initial sale of the bonds through the first Disclosure Statement. In addition, the prospectus issued with the Indenture did not disclose that the Indenture contained a unique subordination provision limiting the holders of Superior Indebtedness right to recover in the case of a reorganization. It would be a disservice to the whole of the subordination provision to give the "X" clause in the Indenture the limitation the Objectors have read into it.
Although the "X" clause in the Indenture was not artfully drafted, the only interpretation of the clause within this Indenture which makes sense is to limit the 13½'s right to retain shares of stock or securities only after all holders of Senior Indebtedness have either been paid in full or received superior stock or securities.
CONCLUSION
For the reasons stated above, the Court overrules the objections of the Unofficial Committee and Bank of America as they relate to the "X" clause in the 13.5% Indenture Agreement.
ORDER No. 153
For the reasons set forth in the Memorandum Opinion entered of even date, the Court overrules the objections of the Unofficial *449 Committee of 13½% Noteholders and Bank of America N.T. & S.T., As Indenture Trustee (13.5% Notes) to the Debtors' First Amended Joint Plan of Reorganization as Twice Modified as such objections pertain to the subordination provision contained in Section 15.02 paragraph three of the Indenture Agreement governing the 13.5% (originally 12.0%) Subordinated Notes dated June 15, 1986.
NOTES
[1] In addition, voluntary petitions were filed for the several subsidiaries listed in the heading. All of the cases were consolidated for administrative purposes.
[2] All Code references are to 11 U.S.C. § 101-1330 (1993) unless otherwise stated.
[3] Although this committee is referred to as a Bondholders Committee, it is in fact a Noteholders Committee as the obligations are unsecured.
[4] The June 15, 1986 Indenture Agreement between Envirodyne Industries, Inc. and Continental Illinois National Bank & Trust Co. of Chicago as Trustee.
[5] See Debtors' First Amended Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code at 8-9.
[6] See Second Supplement to Debtors' First Amended Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code to Disclose Modifications to Debtors' First Amended Joint Plan if Reorganization as Twice Modified at 15.
[7] According to the definition of Superior Indebtedness in the Indenture agreement for the 13.5% Notes, the 13½'s claims are subordinate to the other two tranches of debt.
[8] In the Introduction to the Debtors' Disclose Statement pursuant to Section 1125 of the Bankruptcy Code, the Debtor uses a chart to show the distribution of value before and after giving effect to the various subordination clauses. The Objectors, before giving effect to the subordination provision in the Indenture, would have recovered 63.9% of their claim. In the First Amended Plan, after giving effect to the subordination provision, the Objectors did not receive any distribution. It is this "reallocation" that the Objectors are so vigorously opposed to. In an attempt to appease the Objectors, in the First Amended Plan as Twice Modified, the Objectors have the opportunity to receive a distribution worth approximately 10% of their claim. The Objectors remain disgruntled and insist they are entitled to recover on a pro rata basis with the 14% Senior Debenture holders. Under the Objectors interpretation, the number of shares allocated to the 14% Senior Debentures and the number of shares allocated to the 13.5% Notes should be totaled and then allocated pro rata so that the cash amount of allowed debt for each 13.5% Note and each 14% Debenture would be treated alike.
[9] See the Indenture Agreement § 14.04 at 73.
[10] See Memorandum of Law of the Official Committee of Bondholders of Envirodyne Industries, Inc. Concerning the "X Clause" of the June 15, 1986 Envirodyne Indenture at 11-12, In re Envirodyne Industries Inc., 93 B 319 (Nov.1993). When an adjectival phrase is essential to the meaning of the sentence, it is considered "restrictive." Chicago Manual of Style § 5.36 (13th ed. 1982). Id. The Official Committee further explains that the phrase "payment of which is subordinated" is essential to the meaning of the sentence. Rather then merely describing some general characteristic of "shares of stock" or "security," it restricts the kind of securities referred to in the provision to subordinated ones. Id.
[11] See Memorandum of Law of the Official Committee of Bondholders of Envirodyne Industries, Inc. at 12. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548992/ | 119 F.2d 874 (1941)
COLLEGE ENTRANCE BOOK CO., Inc.,
v.
AMSCO BOOK CO., Inc.
No. 221.
Circuit Court of Appeals, Second Circuit.
May 19, 1941.
Harry Weinberger, of New York City (Harold M. Weinberger, of New York City, on the brief), for plaintiff-appellant.
Philip Wittenberg, of New York City, for defendant-appellee.
Before SWAN, CHASE, and CLARK, Circuit Judges.
CLARK, Circuit Judge.
Plaintiff is the publisher and copyrighter of two paper-bound booklets, "High Points French Two Years" and "High Points French Three Years," compiled especially to facilitate review by New York high school students of their two or three years of French study in preparation for examinations given by the New York Board of Regents. The books are also sold generally for the use of students in preparation for college entrance board examinations. They are of 127 and 160 pages respectively, and include lessons and exercises in grammar and composition, sample copies of previous Regents' examinations, and lists of commonly used French words, with appropriate articles and English translations. Plaintiff hired for the work of compilation and arrangement two New York high school French teachers, who chose 1,590 French words for the two-year list from the Regents' syllabus of 1,623 elementary French words, and 775 for the three-year list from the Regents' syllabus of 778 more advanced words. They then supplied articles and translations from their own knowledge and from reference works.
Shortly after the publication of these books, defendant prepared for publication "French Two Years" and "French Three Years," books similarly designed and to be sold to the same trade at a price much lower than that of plaintiff's books. These, too, in addition to other material, contained word lists, compiled by Mr. Albert Beller, defendant's president. The lists in plaintiff's and defendant's books are so closely similar, according to plaintiff's contention, as to pass the bounds of coincidence and to show copying by Beller of plaintiff's lists, comprising French words, articles, and translations.
Beller admits that he owned copies of plaintiff's books at the time he arranged his own, and that he used them to some extent. He claims, however, that he relied on the Regents' syllabi for his choice of French words; on a Heath's and a Longman-Green's French-English dictionary for French articles; and on a list of English translations supplied by a French teacher, a Mr. Louis Goodman, and on the two dictionaries for translations. The similarities, he says, are only to be expected in the compilation of such stereotyped matter. The district court agreed, and dismissed the complaint. D.C.S.D.N.Y., 33 F.Supp. 276.
We think, however, that Beller's lists themselves are unimpeachable evidence that *875 Beller made them up from the lists in plaintiff's books. Even his choice of French words bears such evidence, although he obviously referred to the syllabi for this purpose, and partly relied on them, using about the same number 1,623 in the two-year list, and 778 in the three-year list and almost the identical words there found. But the fact that 7 French words of extremely common use, included in the syllabi, but inadvertently omitted from plaintiff's lists, were also omitted from Beller's first edition is hardly explicable except on the supposition that Beller resorted directly to plaintiff's list, and thereafter added syllabi words whose omission he happened to notice.
Beller's choice of articles offers much stronger evidence of copying, for here he was helped by neither Goodman's work nor the syllabi. Of course, the dictionaries would show whether or not a word may be used as a noun, and if so, which gender it bears; but that is at most only a beginning. Thus, many French words may be properly used either as nouns or as other parts of speech. Of at least 9 such words in the three-year books translated by Goodman by an English word equally ambiguous 2 were treated in both plaintiff's and defendant's books as nouns by prefixing the article, while the other 7 were treated in both as adjectives by omitting the article. Likewise, 39 such words in the two-year list were accorded identical treatment by plaintiff's compilers and by Beller, a certain 9 of them as nouns, the rest as adjectives or adverbs.
Again, if a word is to be used as a noun, and its gender is known, it is still necessary to choose between the definite and the indefinite article. A fairly common practice in works of this kind is to use the definite article before all words beginning with a consonant, and the indefinite article before those beginning with a vowel or an aspirate "h." But in several instances, plaintiff's lists show an inadvertent departure from this rule; and in every such instance the departure was reproduced in defendant's lists. Both use the indefinite article before the first four nouns beginning with "B." In both, "le," instead of "l'," or the indefinite article, is erroneously used before "homage." In both, the article is entirely omitted before "arriere," translated as "back." In both, "le" is erroneously used, instead of "les," before "frais," translated as "expense"; and in both, there was a failure to indicate, either by an article or by express reference, the gender of the same four words: "midi," "les vacances," "minuit," "les guillemets."
In the case of many abstract nouns, however, such as "l'argent," translated as "money" or "the money," use of the indefinite article would be less usual than the definite, or even meaningless. Consequently plaintiff's compilers departed from the above practice in the case of 31 out of a total of 84 abstract nouns beginning with a vowel, and Beller did the same in exactly the same instances. Of course, a certain degree of similarity might be explained by Beller's ability, along with plaintiff's compilers, to choose the better usage; but in the case of not over half of these words assigned the "l'" is the necessity of it clear. It is unbelievable that the complete identity of choice was a matter of coincidence. Moreover, many of these words before which both used the indefinite article might be thought by an independent compiler to be more frequently used with the definite article.
It was also a common practice to include the English article as a part of the translation, but in the same 14 instances this rule was ignored in both plaintiff's and defendant's lists, although the French article was given in every such instance. A case could hardly be made out that it is less customary to use the article with these particular words than with many other abstractions before which the article was used.
Equally strong evidence can be derived from Beller's choice of translations. In well over 100 instances in his three-year list of 778 words, he departs from Goodman's suggestion and uses exactly the translation or translations given in plaintiff's list. Most of these he might conceivably have obtained from his two dictionaries; but the dictionary translations average six to a dozen words, Beller had not the experience or the qualifications to identify the most common usage, and he did not regularly pick the first or second meaning. In 9 instances his translations, identical with plaintiff's, are not to be found at all in Goodman's list or in the dictionaries which he claims to have used. Of his translations in the two-year lists, 29 are not to be found in the dictionaries; but as Goodman's translations for this list were never produced, no definite conclusion is possible. For 5 words in the three-year list which required one translation if used as one part of speech, another translation if used as an alternate part, *876 Beller gave the same translation given by plaintiff's book, although Goodman had supplied a different one.
In all, 96 per cent of the 1,590 items in plaintiff's two-year list and 82 per cent of the 775 items in its three-year list were exactly reproduced in defendant's lists as to the French word, whether or not an article was used, what it was, the English translation or translations, whether or not an article was used with it, what it was, and whether or not "to" was used before English verbs. This accumulation of evidence convinces beyond any doubt that Beller copied plaintiff's lists, with only a comparatively trivial number of changes. Since the evidence itself was uncontradictable, the inferences drawn from it by the court below cannot be sustained.
Nor do we believe that any of the other reasons advanced by defendant can support the judgment. "All the writings of an author" are entitled to be copyrighted, 17 U. S.C.A. § 4, and this includes "composite and cyclopedic works, directories, gazetteers, and other compilations." 17 U.S.C.A. § 5. There was some originality even in plaintiff's choice of the French words to be included, still more in its choice of articles, and quite a considerable amount in its choice of translations appropriate for the purpose. This last step, at least, required ingenuity equal to that used in the arrangement of a "handwriting chart," Deutsch v. Arnold, 2 Cir., 98 F.2d 686; in the compilation of a list of jewelers and their trade-marks, Jeweler's Circular Pub. Co. v. Keystone Pub. Co., 2 Cir., 281 F. 83, 26 A.L.R. 571, certiorari denied 259 U.S. 581, 42 S.Ct. 464, 66 L.Ed. 1074; or in supplying case annotations to statutes, W. H. Anderson Co. v. Baldwin Law Pub. Co., 6 Cir., 27 F.2d 82. In United Dictionary Co. v. G. & C. Merriam Co., 208 U.S. 260, 28 S.Ct. 290, 52 L. Ed. 478, it was not questioned that a dictionary might be copyrighted.
Although the word lists constitute only a small proportion less than 15 per cent of the printed matter included in the present editions of both parties' publications, it is evident that they are of real importance (defendant's original edition comprised only a word list and sample examinations), and entitled to copyright protection. Oxford Book Co. v. College Entrance Book Co., 2 Cir., 98 F.2d 688 (cartoons in a school history text); King Features Syndicate v. Fleischer, 2 Cir., 299 F. 533 (one character of a cartoon strip).
Both plaintiff's and defendant's books met exactly the same demand on the same market, and defendant's copying was unquestionably to avoid the trouble or expense of independent work. This is an unfair use. West Pub. Co. v. Lawyers' Co-operative Pub. Co., 2 Cir., 79 F. 756, 35 L. R.A. 400; see Lawrence v. Dana, Fed.Cas. No. 8,136. There is nothing to the contrary in Oxford Book Co. v. College Entrance Book Co., supra, 98 F.2d at page 691, which reversed in part a judgment for plaintiff because "no sound reason remains for saying that the accused book in its text is a copy of any substantial part of the copyrighted book."
The judgment of dismissal is therefore reversed and the action is remanded to the district court for such relief against the offending word lists by way of injunction, damages, and an accounting as it shall find appropriate in the light of this opinion. Any issue concerning an attorney's fee in this Court, as well as below, may be settled by the district court in its final judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548724/ | 25 F.2d 1003 (1928)
UNITED STATES
v.
BARWIN REALTY CO.
No. 696.
District Court, E. D. New York.
February 6, 1928.
William A. Degroot, U. S. Atty., of Brooklyn, N. Y. (C. M. Charest, General Counsel, Bureau of Internal Revenue, and Ralph S. Scott, Special Attorney, Bureau of Internal Revenue, both of Washington, D. C., of counsel), for the United States.
Henry A. Ingraham, of New York City (Joseph B. Miller, of New York City, of counsel), for defendant.
MOSCOWITZ, District Judge.
This is an action to collect a tax alleged to be due to the United States for the taxable years 1910-11, which tax is sought to be imposed upon the defendant under the Corporation Tax Act of August 5, 1909, 36 Statutes at Large 112, c. 6, § 38 (Comp. St. 1913, § 6307).
The defendant was incorporated in 1906 under the laws of the state of New York. Its certificate of incorporation authorized it to do a general real estate business. The corporation was formed by Henry L. Batterman and his son, Henry Batterman, for their convenience in handling real estate owned by them in common. The company was incorporated with a capital stock of $10,000, which stock was entirely owned by the Battermans. Shortly after incorporation in 1906, properties worth approximately $2,000,000 were transferred to the corporation without any consideration.
In January, 1910, all the properties of the corporation, at the unanimous request of the stockholders, who were the Battermans, were transferred to one Thomas without consideration. The said Thomas thereupon executed and delivered to the Battermans bonds and purchase-money mortgages of $1,234,934.92, which was a sum equal to the then book value of the equities of said properties, some of which were incumbered by prior mortgages, which were not assumed by the defendant. These prior mortgages were held by the German Savings Bank and the Bond & Mortgage *1004 Guaranty Company. The plaintiff concedes the payment of interest to these companies as necessary expense. The properties were then reconveyed to the defendant without consideration, subject to the mortgages, but payment of which was not assumed.
The total interest paid by the defendant for the taxable year 1910 amounted to $112,954.37 of which $95,454.37 was paid to the Battermans. In the year 1911 the defendant paid the Battermans $94,330.07 as interest on the said mortgages.
The Corporation Tax Law of 1909, 36 Stat. at Large 112, c. 6, § 38, imposed a special excise tax upon the net income, which net income was to be ascertained by deducting
"1. All the ordinary and necessary expenses actually paid within the year out of income, * * * required to be made as a condition to the continued use or possession of property."
"3. Interest actually paid within the year on its bonded or other indebtedness * * * not exceeding the paid-up capital stock of such corporation."
In Anderson v. 42 Broadway Co., 239 U. S. 69, 36 S. Ct. 17, 60 L. Ed. 152, it was held that subdivision 1 was limited by section 3. Mr. Justice Pitney, in a learned opinion, stated: "It may well be that mortgage interest may, under special circumstances, be treated as among the `ordinary and necessary expenses,' * * * `required to be made as a condition to the continued use or possession of property.'"
In 28 Op. Attys. Gen. 198, which has been cited with approval by Mr. Justice Pitney in Anderson v. 42 Broadway Co., supra, the Attorney General of the United States rendered the following opinion:
"Where a realty corporation takes title to real property subject to a mortgage, but does not assume the indebtedness secured thereby, * * * `such mortgage is in no sense its indebtedness; * * * the real property and not the corporation, is liable for the * * * interest thereon; but in order that the corporation may maintain or keep possession of or not be ousted therefrom, the interest must be paid.' * * * The interest accruing upon such charge or incumbrance would * * * fall within the description in the first clause of [section 38], as one of the `charges * * * required to be made as a condition to the continued use or possession of property.'"
Nevertheless, as the corporation was formed for the sole benefit of the Battermans for their convenience in the handling and managing of their properties, the corporation was nothing more than a dummy for the Battermans.
Where the corporate form is used for the purpose of evading the law, this court will not permit the legal entity to be interposed so as to defeat justice. Therefore the payment of the interest charges to the Battermans was not a "payment required to be made as a condition to the continued use or possession of the properties," and I find that the net income of the defendant corporation for the taxable year 1910 is $48,865.20, and the net income for the taxable year 1911 is $59,936.97, which net income is to be taxed according to the corporation tax law of August 5, 1909.
Judgment for plaintiff. Settle decree on notice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1644809/ | 4 So. 3d 591 (2007)
WILLIAM CREWS
v.
STATE.
No. CR-06-0291.
Court of Criminal Appeals of Alabama.
March 2, 2007.
Decision of the alabama court of criminal appeals without opinion. Reh. denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548664/ | 992 A.2d 1120 (2010)
295 Conn. 802
WELLSWOOD COLUMBIA, LLC, et al.
v.
TOWN OF HEBRON et al.
No. 18284.
Supreme Court of Connecticut.
Argued January 11, 2010.
Decided April 27, 2010.
*1122 Mark K. Branse, Glastonbury, with whom was Brendan Schain, for the appellants (plaintiffs).
Michael A. Zizka, with whom was Kari L. Olson, Hartford, for the appellees (defendants).
Timothy S. Hollister and Ryan K. McKain, Hartford, filed a brief for the National Association of Home Builders as amicus curiae.
ROGERS, C.J., and NORCOTT, PALMER, VERTEFEUILLE, ZARELLA and McLACHLAN, Js.
ROGERS, C.J.
The narrow question presented in this appeal is whether a town may close a town road that provides the sole existing access to a property in an adjoining town in order to prevent traffic from a proposed subdivision on the property from overburdening the road. The planning and zoning commission of the town of Columbia granted the application of the plaintiffs, Wellswood Columbia, LLC (Wellswood), and Ronald Jacques, the managing member of Wellswood, to subdivide certain property (property) that Wellswood owned in the town of Columbia.[1] Thereafter, the defendants, *1123 the town of Hebron, the town's board of selectmen and Jared Clark,[2] the town manager, closed Wellswood Road in Hebron, which provided the sole currently existing access to the property. The plaintiffs then brought this action seeking a temporary and permanent injunction barring the defendants from closing Wellswood Road. After a trial to the court, the trial court denied the request for a permanent injunction and rendered judgment in favor of the defendants. The plaintiffs then appealed[3] claiming for a variety of reasons that the trial court improperly had denied their request for a permanent injunction. We conclude that the defendants lacked the power to close Wellswood Road under the circumstances in the present case. Accordingly, we conclude that the action of the defendants was void ab initio and reverse the judgment of the trial court.
The trial court found the following facts.[4] In early 2004, the plaintiffs were considering the purchase of the property, which consisted of approximately 188 acres of land in the town of Columbia, for purposes of constructing a six phase residential retirement community. The only currently existing access to the property is Wellswood Road in Hebron, which runs from Route 66 to the town line between Hebron and Columbia. At that point, Wellswood Road becomes Zola Road, which continues into the property and terminates in a dead end.[5] Several single-family homes, a small development and an apartment complex are located along Wellswood Road in Hebron. Zola Road is unimproved and the abutting land in Columbia is undeveloped.
Because the only access to the property was by way of Wellswood Road, the plaintiffs requested a meeting with Hebron town officials to discuss the proposed development. During a meeting on April 21, 2004, Hebron town officials expressed several concerns about the proposed development, including concerns about storm water runoff from Wellswood Road, the adequacy of the water supply and the feasibility of septic services. The parties also discussed whether access to the property would be through private or public roads. The Hebron town officials indicated that, because the sole access to the development, *1124 at least initially, would be Wellswood Road, the development did not comply with that town's subdivision regulations.
After several additional meetings with the Hebron town officials to discuss the development, Wellswood purchased the property in August, 2004, and decided to go forward with its development plans despite knowing of the defendants' concerns. In October, 2004, the plaintiffs began the subdivision approval process in Columbia. On December 9, 2004, Paul Mazzaccaro, then the town manager for Hebron, sent a letter to the Columbia planning and zoning commission in which he raised several concerns regarding the proposed development. Mazzaccaro stated that, as depicted in the plans that the plaintiffs had submitted, the proposed development "never could have access to other . . . development [in Columbia] or be connected to the present Columbia street system." He requested that future plans provide for such connection. Thereafter, the plaintiffs met separately with officials of both towns and it was determined that Mazzaccaro's letter had been based on outdated plans. Later subdivision plans showed several proposed new streets running from Zola Road to the property line. None of these streets, however, connected with existing roads in Columbia.[6]
Over the next several months, the plaintiffs continued the subdivision approval process in Columbia. On September 13, 2005, the Columbia planning and zoning commission conducted a public hearing on the proposed subdivision. Several town officials from Hebron attended the hearing and voiced concerns over the remote location of the subdivision, the difficulty of responding to emergencies at that location, the effect of additional traffic on the safety of Wellswood Road and the increased cost to Hebron of maintaining the road and providing emergency services.
On October 6, 2005, the Hebron planning and zoning commission held a special meeting and recommended closing and barricading Wellswood Road at the town line. The Hebron board of selectmen adopted the recommendation that night. Thereafter, the plaintiffs brought this action seeking a temporary and permanent injunction to prevent the defendants from closing Wells-wood Road. After the plaintiffs filed the action, the town of Hebron posted a "road closed" sign at the end of Wellswood Road. The defendants then filed a motion to dismiss the action for lack of subject matter jurisdiction, claiming, inter alia, that the plaintiffs' lacked standing, which the trial court, Peck, J., denied.
In April, 2006, the town of Columbia approved the plaintiffs' subdivision application.[7] The parties subsequently entered into a stipulation for a temporary injunction pursuant to which the town of Hebron was enjoined from obstructing the plaintiffs' *1125 use of Wells-wood Road for access to their property pending resolution of the action. Thereafter, the action was tried to the court, Hon. Lawrence C. Klaczak, judge trial referee, which rendered judgment for the defendants.[8] This appeal followed.[9]
The plaintiffs contend that the trial court, Hon. Lawrence C. Klaczak, judge trial referee, improperly denied their request for a permanent injunction barring the defendants from closing Wellswood Road because: (1) barring the road was an unreasonable and arbitrary exercise of police power; (2) equitable relief is an appropriate remedy for the destruction of access even without a showing of irreparable harm; (3) even if a showing of irreparable harm is required, the plaintiffs were irreparably harmed by the road closure because there is no other access to the property; (4) the road closure was inconsistent with the public policy underlying General Statutes § 13a-55;[10] and (4) contrary to the trial court's finding, the plaintiffs cannot use the property for purposes other than the subdivision if the road is closed. The defendants dispute these claims and claim as an alternate ground for affirmance that the plaintiffs lacked standing to bring this action. We conclude that the plaintiffs had standing to bring this action and that the trial court, Hon. Lawrence C. Klaczak, judge trial referee, improperly determined that the defendants had the police power to close Wellswood Road. Accordingly, we reverse the judgment of the trial court.
We first address the defendants' claim that the trial court, Peck, J., improperly concluded that the plaintiffs had standing to bring this action. We disagree. "The issue of standing implicates this court's subject matter jurisdiction. . . . Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy. . . . When standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of the issue. . . . Standing requires no more than a colorable claim of injury; a [party] ordinarily establishes . . . standing by allegations of injury. Similarly, standing exists to attempt to vindicate arguably protected interests" . . . .
"Standing is established by showing that the party claiming it is authorized by statute to bring an action, in other words statutorily aggrieved, or is classically aggrieved. . . . The fundamental test for determining [classical] aggrievement encompasses a well-settled twofold determination: [F]irst, the party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in [the challenged action], as distinguished from a general interest, such as is the concern of all members of the community *1126 as a whole. Second, the party claiming aggrievement must successfully establish that this specific personal and legal interest has been specially and injuriously affected by the [challenged action]. . . . Aggrievement is established if there is a possibility, as distinguished from a certainty, that some legally protected interest . . . has been adversely affected." (Citations omitted; internal quotation marks omitted.) Eder Bros., Inc. v. Wine Merchants of Connecticut, Inc., 275 Conn. 363, 368-70, 880 A.2d 138 (2005).
In support of their claim that the plaintiffs in the present case lacked standing to bring this action, the defendants rely on this court's decision in Clark v. Saybrook, 21 Conn. 313 (1851). In that case, as described in the facts preceding the opinion, the town of Saybrook planned to build a bridge over a certain creek. Id., at 314. The plaintiff quarry owner, who claimed that the bridge interfered with his use of the creek to transport stone and hay to market, brought an action for damages pursuant to a statute that authorized towns to compensate persons for the taking of their property for the construction of highways and bridges. Id., at 314, 322. This court concluded that the plaintiff "had no right to the use of the creek crossed by the new highway, except in common with the public generally; and it does not appear, that he would sustain any damage, except that, in consequence of the bridge across the creek, he would be deprived, to a certain extent, of the use of the creek for the transportation of stone from his quarry, and the produce of his land. In other words, he would, in consequence of the establishment of the contemplated highway, be incommoded only, in common with the public generally, in the use of another highway, which consisted of the creek, but would suffer no damage, which would be special, or peculiar to himself. It is now too well settled to require argument, that such an inconvenience or obstruction, even if unauthorized and illegal, does not constitute an injury, for which an individual can maintain a private action, but that the legal remedy is at the suit of the public, by indictment or information for a public nuisance." Id., at 326.
We conclude that Clark does not apply to the present case. "[T]he taking of [a] highway creates two easements: the public easement of travel, that permits the general traveling public to pass over the highway at will, and the private easement of access, that permits landowners who abut the highway to have access to the highway and to the connecting system of public roads." Luf v. Southbury, 188 Conn. 336, 341, 449 A.2d 1001 (1982). In Clark, this court determined that the plaintiff had been deprived only of his easement of travel, which is a right common to the public. Clark v. Saybrook, supra, 21 Conn. at 326. This court previously has held, however, that, "where a town, even though it is carrying out the governmental duty of maintaining highways, discontinues a public highway which. . . provides the abutting owner with his only practical access to the public highway system, it inflicts on that abutter a direct injury to his right of access. . . ." (Internal quotation marks omitted.) Cone v. Waterford, 158 Conn. 276, 279, 259 A.2d 615 (1969); see also Luf v. Southbury, supra, at 342, 449 A.2d 1001 ("A landowner who, as a result of governmental action, suffers a total and permanent loss of his right of access to the public way adjacent to his land and to the system of public roads is entitled to recover damages. Total deprivation of his right to access constitutes a taking of his property, an inverse condemnation of his property rights, in violation of article first, § 11 of the constitution of Connecticut and of the fifth amendment to the United States constitution."); Park *1127 City Yacht Club v. Bridgeport, 85 Conn. 366, 373, 82 A. 1035 (1912) ("the vacation of part of a street which destroys all access by property abutting on the remaining part of the street to the system of streets in one direction, thus putting the property on a cul-de-sac, has generally been held to constitute an actionable injury"); 4 Restatement (Second), Torts § 821C, p. 94 (1979);[11] 4 Restatement (Second), supra, at § 821C, comment (f), p. 97 ("The right of access to land, that is, the right of reasonable and convenient ingress and egress, is itself a property right in the land. If the public nuisance interferes with immediate ingress and egress to the plaintiff's land, the nuisance is a private as well as a public one and the harm suffered by the plaintiff is particular harm differing in kind from that suffered by the general public, so that the plaintiff can recover for the public nuisance.").
In the present case, the plaintiffs alleged in their complaint that "[i]f Wellswood Road is closed and said barricade is erected by Hebron, [the][p]laintiffs will be deprived of all access to the [subdivision site] and the [property]."[12] As we have indicated, the interference with the right of access to land is a "particular harm differing in kind from that suffered by the general public." 4 Restatement (Second), supra, at § 821C, comment (f), p. 97. Thus, the plaintiffs have alleged "a specific, personal and legal interest in [the challenged *1128 action], as distinguished from a general interest, such as is the concern of all members of the community as a whole" and they have made a colorable claim that "this specific personal and legal interest has been specially and injuriously affected by the [challenged action]." (Internal quotation marks omitted.) Eder Bros., Inc. v. Wine Merchants of Connecticut, Inc., supra, 275 Conn. at 369, 880 A.2d 138. We conclude, therefore, that the plaintiffs had standing to bring this action.
The defendants claim, however, that, even if the plaintiffs had standing to bring an action for damages, "landowners never [have] standing to force a town to keep a road open for their private benefit." In support of this claim, the defendants again rely on Clark v. Saybrook, supra, 21 Conn. at 326. As we discuss more fully later in this opinion, however, the plaintiffs in the present case, unlike the plaintiff in Clark, claim that the defendants lacked the power to close the road in the first instance, which would render the action of the defendants void ab initio.[13] Accordingly, we reject the defendant's claim.
We turn, therefore, to the merits of the plaintiffs' claim that the defendants acted in excess of their municipal powers when they closed Wellswood Road. It is well "settled that a municipality, as a creation of the state, has no inherent powers of its own, and has only those powers expressly granted to it by the state or that are necessary for it to discharge its duties and carry out its purposes." Ganim v. Smith & Wesson Corp., 258 Conn. 313, 367, 780 A.2d 98 (2001); see also Avonside, Inc. v. Zoning & Planning Commission, 153 Conn. 232, 236, 215 A.2d 409 (1965) ("As a creature of the state, the . . . [town of Avon, whether acting itself or through its planning commission] can exercise only such powers as are expressly granted to it, or such powers as are necessary to enable it to discharge the duties and carry into effect the objects and purposes of its creation. . . . In other words, in order to determine whether the [action] in question was within the authority of the commission to enact, we do not search for a statutory prohibition against such an [action]; rather, we must search for statutory authority for the [action]." [Citations omitted; internal quotation marks omitted.]). In the course of exercising the powers expressly granted to it, such as the power to discontinue a road[14] and to lay out a new road,[15] a municipality may deprive *1129 a landowner of an access easement.[16] See Cone v. Waterford, supra, 158 Conn. at 279-80, 259 A.2d 615 (town discontinued road that provided sole access to plaintiffs' property); Park City Yacht Club v. Bridgeport, supra, 85 Conn. at 373, 82 A. 1035 (access to plaintiff's property eliminated for all practical purposes when town moved road to new location). The statutes, however, do not expressly confer on municipalities the power to eliminate access easements. Accordingly, a municipality can eliminate an access easement only as a necessary incident to the proper exercise of an expressly granted power. See Ganim v. Smith & Wesson Corp., supra, at 367, 780 A.2d 98 (municipality can exercise unenumerated power only as "necessary for it to discharge its duties and carry out its purposes"). The scope of the powers delegated to municipalities by statute is a question of law over which our review is plenary. See Matzul v. Montville, 70 Conn.App. 442, 446, 798 A.2d 1002, cert. denied, 261 Conn. 923, 806 A.2d 1060 (2002).
In the present case, the defendants contend that their power to close Wellswood Road, thereby depriving the plaintiffs of the sole existing access to the property, is a necessary incident to the exercise of the town of Hebron's powers under General Statutes § 13a-99,[17] which authorizes towns to build roads "within [the towns'] respective limits," under General Statutes § 7-148(c)(6)(C)(i)[18] and (7)(B)(i),[19] which allow towns to control streets and to regulate and to prohibit traffic, and under General Statutes § 8-23(d)(1),[20] which authorizes municipal planning commissions to adopt a plan of development and to "provide for a system of . . . streets. . . ." The defendants also claim that they have the power to close Wellswood Road because the proposed development would violate Hebron's road *1130 regulations.[21] We address each claim in turn.
With respect to the defendants' claim under § 13a99, we agree that Hebron has the power to build roads within the limits of the town for the benefit of its own residents. That does not mean, however, that it has the power to close roads at the town border for the sole purpose of preventing residents of adjoining towns from using town streets.[22] Town roads are for the benefit of the general public, not just the residents of the town. See Rudnyai v. Harwinton, 79 Conn. 91, 94, 63 A. 948 (1906) ("[i]n maintaining and repairing the highways within their limits, municipalities act as agents of the [s]tate in the performance of a public duty, a duty imposed upon them by the [s]tate for the benefit of the general public"); Wolcott v. Pond, 19 Conn. 597, 604-605 (1849) ("the highways which are to be established by the towns, are not for their exclusive benefit, but also for that of the public at large" and legislature provided for judicial review of town's refusal to lay out road approved by selectmen because "the towns would have, or might imagine they had, a strong pecuniary interest in defeating a highway, from which the inhabitants supposed, that they might derive a benefit, not proportioned to the expense of its construction"). Accordingly, we reject this claim.
We turn next to the defendants' claim that they have the power to close Wellswood Road in order to prevent unsafe traffic conditions under § 7-148(c)(6)(C)(i), which confers "the power to. . . control . . . streets," and § 7-148(c)(7)(B)(i), which confers "the power to. . . [r]egulate and prohibit . . . traffic . . . [and] the operation of vehicles on streets and highways. . . ." We agree with the defendantsindeed, it is indisputablethat these statutes confer on municipalities the power to control streets and to regulate traffic in order to prevent unsafe traffic conditions. See Cohen v. Hartford, 244 Conn. 206, 207-208, 710 A.2d 746 (1998) (town has power to close road to automobile traffic for several hours each day to ensure pedestrian safety during peak use *1131 hours); Pizzuto v. Newington, 174 Conn. 282, 285-87, 386 A.2d 238 (1978) (town has power to close road to reroute traffic away from residential area). The municipality must exercise that power, however, "in a manner not inconsistent with the general statutes. . . ." General Statutes § 7-148(c)(7)(B)(i). We conclude that, under the particular facts of the present case, the defendants' exercise of the power conferred by these statutes to close Wellswood Road was inconsistent with the statutes governing the review of subdivision applications.
The authority to regulate the subdivision of land is conferred on planning commissions by General Statutes § 8-25. See Lord Family of Windsor, LLC v. Planning & Zoning Commission, 288 Conn. 730, 735, 954 A.2d 831 (2008). Most of the procedures governing review of subdivision applications are contained in General Statutes § 8-26, which authorizes a planning commission to hold a public hearing regarding any subdivision proposal if, in its judgment, specific circumstances require a hearing. Under General Statutes § 8-7d (f)(1) and (2),[23] planning commissions are required to give notice of subdivision applications to adjoining towns if "[a]ny portion of the property affected by a decision of such commission . . . is within five hundred feet of the boundary of the adjoining municipality" or if "a significant portion of the traffic to the completed project on the site will use streets within the adjoining municipality to enter or exit the site. . . ."[24] Adjoining towns that receive such notice may participate in any hearings on the subdivision application. General Statutes § 8-7d (f). In addition, there is little doubt that a town that is adversely affected by the decision of an adjoining town's planning commission to grant a subdivision application would have standing to appeal from the decision pursuant to General Statutes § 8-8(b).[25] See North Haven v. Planning & Zoning Commission, 220 Conn. 556, 560-61, 220 Conn. 556, 600 A.2d 1004 (1991) (implicitly holding that town would have standing to appeal from decision by adjoining town's planning and zoning commission when adjoining town has violated statutory requirement to give notice to adjoining municipalities of specific project); see also Torrington v. Zoning Commission, 261 Conn. 759, 766, 806 A.2d 1020 (2002) (implicitly holding that town had standing to appeal from stipulated judgment between landowner and adjoining *1132 town's zoning commission that operated as conditional approval of landowner's rezoning application). Thus, the legislature has provided specific procedures to address concerns that a new subdivision in one town may have an adverse effect on traffic in an adjoining town.
In the present case, the town of Hebron received notice of and participated in the hearings on the plaintiffs' subdivision application. The traffic concern that it raised during those proceedings was precisely the type of concern contemplated by § 8-7d (f)(2). Because the statutes governing review of subdivision applications provide specific procedures for the town of Hebron to pursue a claim that the proposed subdivision will adversely affect traffic within the town, we conclude that those statutes control, and that the defendants' exercise of its powers under § 7-148(c)(6)(C)(i) and (7)(B)(i) to control streets and regulate traffic was inconsistent with the legislative intent that land use disputes should be resolved in accordance with the procedures provided in the land use statutes. See McKinley v. Musshorn, 185 Conn. 616, 624, 441 A.2d 600 (1981) ("when general and specific statutes conflict they should be harmoniously construed so the more specific statute controls"); see also Sheehan v. Altschuler, 148 Conn. 517, 523-24, 172 A.2d 897 (1961) ("rule applicable to the corporate authorities of municipal bodies is that when the mode in which their power is to be exercised is prescribed, that mode must be followed"). Similarly, the fact that Hebron's planning and zoning commission has the power under § 8-23 to adopt a plan of development within the town and to provide for a system of streets in the town does not mean that the defendants have the power unilaterally to block access to property in an adjoining town for purposes of preventing traffic from a proposed subdivision from using the Hebron town streets. Accordingly, we conclude that the defendants lacked the power to close Wellswood Road under these circumstances. See General Statutes § 7-148(c)(7)(B)(i) (municipalities have power to regulate traffic only "in a manner not inconsistent with the general statutes").
With respect to the defendants' claim that they have the power to close Wellswood Road because the proposed development would violate Hebron's road regulations, it is clear that those regulations did not confer any power on the defendants, but merely guided the exercise of the powers conferred by § 7-148(c)(6)(C)(i) and (7)(B)(i). Having concluded that those statutes did not confer the power to close Wellswood Road under the particular circumstances of this case, we reject this claim.
We recognize that this court held in Pansy Road, LLC v. Town Plan & Zoning Commission, 283 Conn. 369, 379-80, 926 A.2d 1029 (2007), that, when a property is zoned residential and the proposed use is consistent with that zoning, there is a "conclusive presumption . . . that [the] proposed use does not adversely affect traffic within the zone, and the defendant therefore cannot deny the application because of existing off-site traffic congestion. [T]he agency cannot turn down a site plan [or subdivision application] because of traffic problems on streets adjacent to the property. R. Fuller, 9B Connecticut Practice Series: Land Use Law and Practice (3d Ed.2007) § 49.14, p. 139. Under . . . our prior case law, [a planning commission may] have considered the existing traffic problems . . . only for the limited purpose of reviewing the internal traffic circulation on the site and determining whether the location of the proposed intersection [of the proposed roads] with [the existing roads] would minimize any negative impact of additional traffic to the existing traffic. *1133. . ." (Internal quotation marks omitted.) The rationale of that case, however, was that, before a zoning commission adopts a zoning district, it will take into consideration the capacity and condition of the streets "within the zone"; (emphasis added) Pansy Road, LLC v. Town Plan & Zoning Commission, supra, at 379, 926 A.2d 1029; and determine that they are adequate for the permitted uses. Presumably, it will make this determination in consultation with all municipal agencies responsible for controlling streets and regulating traffic, which are therefore bound by the determination in later proceedings. See General Statutes § 8-3(a) ("[n]o such [zoning district] . . . shall become effective or be established or changed until after a public hearing in relation thereto, held by a majority of the members of the zoning commission or a committee thereof appointed for that purpose consisting of at least five members"). In the present case, Wellswood Road was not within the same zone, or even within the same town, as the property. It is implicit in § 8-7d (f)(2) that a zoning commission cannot unilaterally bind an adjoining town to a determination that its streets are adequate to handle the traffic from a permitted land use within the first town. Thus, the presumption in Pansy Road, LLC, that a proposed use that is consistent with existing zoning will not adversely affect traffic on adjoining roads within the zone, would not have arisen in an appeal from the decision of the Columbia planning and zoning commission in the present case. Accordingly, we reject the defendants' claim that it had no choice but to close Wellswood Road because any appeal from the decision of the Columbia planning and zoning commission would have been futile.
Finally, we conclude that the defendants' reliance on Nicoli v. Planning & Zoning Commission, 171 Conn. 89, 93-94, 368 A.2d 24 (1976) (when subdivision regulations required new subdivision roads to connect to existing roads within town, planning and zoning commission could condition approval of development on connection of public road within subdivision to street within town in order to ensure access to subdivision by town services), and Pizzuto v. Newington, supra, 174 Conn. at 285-86, 386 A.2d 238 (town could close road at town line in order to reroute traffic traveling to and from adjoining town), is misplaced. See also Crescent Development Corp. v. Planning Commission, 148 Conn. 145, 153, 168 A.2d 547 (1961) (planning commission could approve subdivision on condition that no road be constructed to portion of property located in another town until that portion of property had access to streets in second town). Although the use of the plaintiff's land was restricted by conditions relating to access to town roads in both Nicoli and Crescent Development Corp., the access issues were litigated within the context of land use proceedings.[26] Accordingly, unlike the present *1134 case, these cases did not involve any inconsistency between a towns' power to regulate traffic and the legislative intent that land use disputes be resolved according to the procedures provided in the land use statutes. In Pizzuto, the statutes governing review of subdivision applications were not implicated because the closing of the road at the town line had not affected the use of any land. See footnote 22 of this opinion.
When a municipality has acted in excess of its delegated powers, the plaintiff is not required to show that he has been irreparably harmed by the ultra vires act or that damages are not available in order to obtain relief. Rather, ultra vires acts by municipalities are void ab initio. See footnote 13 of this opinion. Under the unique facts of this case, we conclude that the resolution of the Hebron board of selectmen to close and barricade Wellswood Road was void ab initio and, therefore, that the trial court improperly concluded that the plaintiffs could not prevail. We conclude, therefore, that the trial court must render judgment in favor of the plaintiffs voiding the October 6, 2005 action of the Hebron board of selectmen adopting the recommendation of the Hebron planning and zoning commission to close and barricade Wellswood Road.
The judgment is reversed and the case is remanded to the trial court with direction to render judgment for the plaintiffs.
In this opinion the other justices concurred.
NOTES
[1] We refer to Wellswood and Jacques collectively as the plaintiffs and individually by name where necessary.
[2] The plaintiffs initially named Paul Mazzaccaro, who was then the Hebron town manager, as a defendant. The trial court subsequently granted the plaintiffs' motion to substitute Clark as a defendant. We refer to the town of Hebron, its board of selectmen, and Clark collectively as the defendants and individually by name where necessary.
[3] The plaintiffs appealed from the judgment of the trial court to the Appellate Court, and we transferred the appeal to this court pursuant to General Statutes § 51-199(c) and Practice Book § 65-1.
[4] Our recitation of facts includes several undisputed facts that were not expressly found by the trial court.
[5] The trial court found that it was not clear from the evidence presented at trial whether the property abuts the town line between Hebron and Columbia. The plaintiffs dispute this finding and claim that the evidence established that the property abuts Wellswood Road where it meets the town line. James Dutton, the plaintiffs' engineer and property surveyor, testified that the property abuts Wellswood Road, as shown in a subdivision plan prepared by Dutton. On cross-examination, Dutton testified that, as a surveyor, he was not required to determine the location of the town line and that the plans were not intended to certify the location of the town line. He testified, however, that the property "goes to the town line." He further testified that he had researched the deeds for all properties abutting the property and saw no evidence that any of those properties crossed town lines.
[6] The property is surrounded by properties owned by others and does not abut any street within the town of Columbia.
[7] The plaintiffs claim that their subdivision application was approved by vote of the Columbia planning and zoning commission on December 27, 2005, and that the subdivision map was "endorsed" in April, 2006. The plaintiffs filed a motion for articulation in which they requested that the trial court correct this finding and contended that the date was "important because the approvals predated the posting of Wellswood Road as `closed' on January 30, 2006." In its articulation, the trial court stated, "the final subdivision plans were endorsed by the town of Columbia in April, 2006, and the court deems that April date to be correct." Because the specific date that the Columbia planning and zoning commission approved the plaintiffs' subdivision application is irrelevant to our resolution of this appeal, and because this court does not find facts, we decline to resolve this factual dispute.
[8] After the trial court rendered judgment, the plaintiffs filed a motion for articulation, which the trial court granted in part and denied in part.
[9] After this appeal was filed, this court granted the motion of the National Association of Home Builders to appear as amicus curiae.
[10] General Statutes § 13a-55 provides: "Property owners bounding a discontinued or abandoned highway, or a highway any portion of which has been discontinued or abandoned, shall have a right-of-way for all purposes for which a public highway may be now or hereafter used over such discontinued or abandoned highway to the nearest or most accessible highway, provided such right-of-way has not been acquired in conjunction with a limited access highway."
[11] Section 821C of the Restatement (Second) of Torts provides in relevant part: "(1) In order to recover damages in an individual action for a public nuisance, one must have suffered harm of a kind different from that suffered by other members of the public exercising the right common to the general public that was the subject of the interference.
"(2) In order to maintain a proceeding to enjoin to abate a public nuisance, one must
"(a) have the right to recover damages, as indicated in Subsection (1) . . ."
[12] The defendants contend that the trial court, Peck, J., improperly concluded that the plaintiffs have an easement of access over Wellswood Road under § 13a-55 in its ruling denying the defendants' motion to dismiss. They point out that the trial court, Hon. Lawrence C. Klaczak, judge trial referee, concluded otherwise after trial on the ground that "there is no definitive evidence that the . . . property even abuts . . . Wellswood [Road]," and suggest that the court could have dismissed the plaintiffs' complaint on this ground. It is clear to us, however, that the trial court, Hon. Lawrence C. Klaczak, judge trial referee, concluded only that § 13a-55 did not operate to protect the plaintiffs' preexisting easement of access over Wellswood Road after the defendants closed the road because, among other reasons, the plaintiffs had not proved that they were abutting landowners, not that the plaintiffs had no preexisting easement of access over the road in the first instance. Indeed, it is implicit in the portion of the trial court's memorandum of decision in which it considered the plaintiffs' claim that the defendants lacked the power to close Wellswood Road that it believed the plaintiffs had an easement of access over both Wellswood Road and any portion of Zola Road running between their property and Wellswood Road. Otherwise, there would have been no need for the court to address the issue of the defendants' powerthe court simply could have concluded that the plaintiffs could not prevail because they had not proved that they ever had the easement of access with which the defendants allegedly had interfered. Moreover, the trial court expressly held that the plaintiffs could use Wellswood Road and Zola Road to access their property if they used the property for purposes other than the subdivision in support of its holding that the plaintiffs had not been irreparably harmed. Accordingly, we reject any suggestion that the complaint should be dismissed because the plaintiffs lacked an easement of access over Wellswood Road even before the defendants closed the road. Finally, we emphasize that we express no opinion in the present case as to whether the trial court, Hon. Lawrence C. Klaczak, judge trial referee, was correct that § 13a-55 would not operate to protect the plaintiffs' preexisting easement of access over Wellswood Road if their property did not directly abut the road.
[13] See Pepe v. New Britain, 203 Conn. 281, 293, 524 A.2d 629 (1987) ("[c]ontracts beyond the powers of a municipality are void" [internal quotation marks omitted]); Sauter v. Mahan, 95 Conn. 311, 314, 317, 111 A. 186 (1920) (votes of board of water and sewer commissioners purporting to reconsider assessment declared null and void when board had no authority to reconsider and rescind assessment); Andrews v. Planning & Zoning Commission, 97 Conn.App. 316, 324, 904 A.2d 275 (2006) (when planning and zoning commission lacked statutory authority to adopt subdivision regulation, amendment to subdivision regulations was void ab initio); Gay v. Zoning Board of Appeals, 59 Conn.App. 380, 388, 757 A.2d 61 (2000) (condition imposed by board on parcel that was not subject of variance application before it was void ab initio).
[14] General Statutes § 13a-49 provides in relevant part: "The selectmen of any town may, subject to approval by a majority vote at any regular or special town meeting, by a writing signed by them, discontinue any highway or private way, or land dedicated as such, in its entirety. . . ."
[15] General Statutes § 7-148(c)(6)(C)(i) provides in relevant part that any municipality shall have the power to "[l]ay out, construct, reconstruct, alter, maintain, repair, control, operate, and assign numbers to streets, alleys, highways, boulevards, bridges, underpasses, sidewalks, curbs, gutters, public walks and parkways. . . ."
[16] As we have indicated, in such cases, the elimination of the access easement constitutes a constitutional taking entitling the landowner to compensation. See Cone v. Waterford, supra, 158 Conn. at 279-80, 259 A.2d 615; Park City Yacht Club v. Bridgeport, supra, 85 Conn. at 373, 82 A. 1035.
[17] General Statutes § 13a-99 provides in relevant part: "Towns shall, within their respective limits, build and repair all necessary highways and bridges. . . ."
[18] See footnote 15 of this opinion.
[19] General Statutes § 7-148(c)(7)(B)(i) provides in relevant part that any municipality shall have the power to "[r]egulate and prohibit, in a manner not inconsistent with the general statutes, traffic . . . [and] the operation of vehicles on streets and highways. . . ."
[20] General Statutes § 8-23(d)(1) provides in relevant part: "Such plan of conservation and development shall (A) be a statement of policies, goals and standards for the physical and economic development of the municipality, (B) provide for a system of principal thoroughfares, parkways, bridges, streets, sidewalks, multipurpose trails and other public ways as appropriate, (C) be designed to promote, with the greatest efficiency and economy, the coordinated development of the municipality and the general welfare and prosperity of its people and identify areas where it is feasible and prudent (i) to have compact, transit accessible, pedestrian-oriented mixed use development patterns and land reuse, and (ii) to promote such development patterns and land reuse, (D) recommend the most desirable use of land within the municipality for residential, recreational, commercial, industrial, conservation and other purposes and include a map showing such proposed land uses, (E) recommend the most desirable density of population in the several parts of the municipality, (F) note any inconsistencies with the following growth management principles . . . (iii) concentration of development around transportation nodes and along major transportation corridors to support the viability of transportation options and land reuse. . . ." Effective July 1, 2010, subsection (d) of § 8-23 will be redesignated as subsection (e).
[21] The defendants refer to § 13.5H(4) of the Hebron Public Improvement Specifications, which provides that "[t]he maximum length of a dead end road shall be 2,000 feet as measured from the gutterline of the intersected roadway to the center of the turnaround." They also point to § 6.4(A) and (C) of the Hebron Subdivision Regulations, which provide, respectively, that "[a]ll streets shall conform to [§] 13, Public Improvement Specifications," and that "[w]here site conditions make through streets infeasible, cul-de-sacs may be permitted. Where a cul-de-sac is permitted and where it is feasible and desirable in the opinion of the [planning commission] to extend the road into adjoining properties, the road right-of-way shall extend to property lines for ultimate future extension. The maximum length of any cul-de-sac roadway shall be limited to 2,000 feet with a maximum [average daily traffic] of 200 vehicles per day."
[22] To the extent that the defendants rely on Pizzuto v. Newington, 174 Conn. 282, 386 A.2d 238 (1978), in support of their claim that they have no duty to residents of other towns, any such reliance is misplaced. In Pizzuto, the town of Newington barricaded a road at the town line between Newington and West Hartford in order to reroute traffic within the town of Newington away from a residential neighborhood in that town. Id., at 285, 386 A.2d 238. A number of Newington residents brought an action to enjoin the closing. Id., at 283, 386 A.2d 238. It is not clear from the opinion how the plaintiffs were harmed by the closing, but, presumably, they were deprived of the shortest route between their residences and certain newly constructed shops in West Hartford. See id., at 286, 386 A.2d 238. The barricade was not intended, however, to prevent residents of West Hartford from using Newington roads. Indeed, there is no evidence that the residents of West Hartford were significantly affected by the closing in any way.
[23] General Statutes § 8-7d (f) provides in relevant part: "The . . . planning commission. . . shall notify the clerk of any adjoining municipality of the pendency of any . . . plan concerning any project on any site in which: (1) Any portion of the property affected by a decision of such commission, board or agency is within five hundred feet of the boundary of the adjoining municipality; (2) a significant portion of the traffic to the completed project on the site will use streets within the adjoining municipality to enter or exit the site; (3) a significant portion of the sewer or water drainage from the project on the site will flow through and significantly impact the drainage or sewerage system within the adjoining municipality; or (4) water runoff from the improved site will impact streets or other municipal or private property within the adjoining municipality. . . . Such adjoining municipality may, through a representative, appear and be heard at any hearing on any such. . . plan."
[24] According to one authority, § 8-7d (f), formerly codified at General Statutes § 8-26f, shows "legislative intent to encourage cooperation between adjacent towns in approving subdivisions of land." R. Fuller, 9 Connecticut Practice Series: Land Use Law and Practice (3d Ed.2007) § 10:8, p. 287; see Public Acts 2003, No. 03-177, §§ 5 and 14.
[25] General Statutes § 8-8(b) provides in relevant part: "[A]ny person aggrieved by any decision of a board . . . may take an appeal to the superior court for the judicial district in which the municipality is located. . . ."
[26] Moreover, the impact of the Appellate Court's decision in Andrews v. Planning & Zoning Commission, 97 Conn.App. 316, 324, 904 A.2d 275 (2006) (planning and zoning commission lacked power to adopt regulation requiring new subdivision roads to connect to town roads) on Nicoli is unclear.
We further recognize that both Nicoli and Crescent Development Corp. have been criticized on the ground that they "encourage planning commissions to restrict or stop development of land by taking a Berlin wall approach along town boundaries." 9 R. Fuller, supra, at § 10.8, p. 287. Fuller goes on to state that "[t]his approach is not required, and development of land in two adjacent towns can occur with cooperation between their respective planning commissions, and provided . . . that each commission limit its actions to land within its borders. If essential services can be provided to the subdivision and there is access to it through public roads in another town, there is no valid reason for a commission to turn down an application which otherwise meets its own subdivision regulations. The fact that some emergency services may even be supplied by an adjacent town should not be a problem, provided the other town is willing to supply them." Id. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548674/ | 161 B.R. 902 (1993)
In re The DREXEL BURNHAM LAMBERT GROUP, INC., et al., Debtors.
Sandra F. BORCHERS, Appellant,
v.
The DBL LIQUIDATING TRUST, Appellee.
Nos. 90 Civ. 6954 (MP), 93 Civ. 6427 (MP). Bankruptcy No. 90 B 10421 (FGC).
United States District Court, S.D. New York.
December 22, 1993.
*903 Daniel A. Eigerman, Marc J. Isaacs, P.C., New York City, for appellant Sandra F. Borchers.
George Wailand, Gregg Kanter, Cahill Gordon & Reindel, New York City, for appellee DBL Liquidating Trust.
OPINION
MILTON POLLACK, Senior District Judge:
Sandra Borchers appeals from an order of the Bankruptcy Court, Francis G. Conrad, Bankruptcy Judge, disallowing her claim in bankruptcy against Drexel for the mishandling of her investment account. The claim asserted that Drexel was liable to Appellant as a controlling person for the misconduct of two employees. The claim had been the subject of an arbitration award in which the Appellant was awarded damages against the employee responsible, and the Bankruptcy Court held that Borchers was collaterally estopped from seeking damages from the Debtor based on the vicarious liability of Drexel necessarily involved in the arbitration. The arbitration award was paid. Borchers appeals the collateral estoppel ruling on the ground that the arbitration Award did not fully compensate her for the vicarious responsibility of Drexel in the circumstances.
The disallowance of the claim is affirmed.
BACKGROUND
Claimant-appellant Sandra Borchers ("Borchers") opened an investment account with Drexel, Burnham, Lambert, Inc. ("Drexel") in Florida in July 1987 using essentially all the assets she obtained in her divorce settlement. Her account executive was Mark Gilbert ("Gilbert"); Gilbert's supervisor was James Strainer ("Strainer"). In May 1989, Smith, Barney, Harris, Upham & Co. ("Smith Barney") took over Drexel's Florida office. Borchers' claim was that Gilbert induced her to purchase unsuitable investments and managed the account for his own benefit. As Borchers' account began to lose money, and as her margin indebtedness increased, she became alarmed. Both Gilbert and Strainer assured her that her investments were suitable and allegedly induced her to maintain the account. Borchers alleged that Strainer had failed to supervise Gilbert properly. Borchers alleged that *904 Drexel is vicariously liable for the actions of Gilbert and Strainer as a controlling person or under the theory of respondeat superior.
The customer agreement Borchers signed when she opened her trading account with Drexel required that all disputes be submitted to arbitration. In March 1990, Borchers instituted the required arbitration against Drexel on her claims before the National Association of Securities Dealers (NASD), naming as additional parties thereto the two employees responsible for her injuries, Gilbert and his supervisor, one, Strainer, and the firm of Smith Barney to which the Borchers account had been transferred. Borchers alleged churning, misrepresentations, fraud, unsuitable trading, and mismanagement of the account by Gilbert not restrained by Strainer. Borchers' losses were alleged to have resulted from "the trading of [her] account by Respondent Gilbert." Borchers Statement of Claim, In re Arbitration Between Borchers and Smith, Barney, Harris, Upham & Co., Inc. ("NASD Arbitration"), Case No. 90-00931 (Mar. 29, 1990) at ¶ 22. She posited causes of action for common law fraud, violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder, violations of Section 12 of the Securities Act of 1933 [15 U.S.C. § 77l], Florida statutory violations, negligence, breach of contract, and breach of fiduciary duty. Her claim sought compensatory damages and additional punitive damages.
In June 1990, Drexel having filed a petition for bankruptcy reorganization under Chapter 11 of the Bankruptcy Code, the NASD notified Borchers that the arbitration would be stayed as to Drexel pursuant to § 362 of the Bankruptcy Code.[1] Borchers did not seek relief from the stay from the Bankruptcy Court and Drexel was thereupon dismissed from the arbitration by the arbitrators. The arbitration was continued as to Drexel's employees and Smith Barney.
In September 1991, during the course of the arbitration proceeding, Smith Barney and Strainer settled with Borchers for a total of $60,000, which was paid. The arbitration was continued against Drexel's account executive Gilbert as the only remaining respondent in the arbitration. The NASD panel conducted twenty-one hearing sessions in the arbitration pursuant to the NASD rules, and Borchers, represented by counsel, presented documentary and testimonial evidence, expert witnesses, and cross-examined adverse witnesses. On October 22, 1991, the NASD's arbitration panel awarded Borchers $40,000 against Gilbert in the following language:
Gilbert is found liable and shall pay to the Claimant the amount $40,000.00, inclusive of interest. This amount was determined after the Panel took into consideration the fact and amount of Claimant's settlement with respondents SBHU and Strainer.
NASD Award, NASD Arbitration (Oct. 22, 1991). The panel further stated that it had "decided in full and final resolution of the issues submitted for determination." The arbitration panel's decision noted that, in light of Smith Barney and Strainer's settlements, "no findings regarding liability or damages were made regarding" Smith Barney or Strainer. Neither party moved to vacate or confirm this Award, and the Award was fully satisfied.
In November 1990, while the arbitration was still pending unresolved, Borchers had filed a protective proof of claim against Drexel in the bankruptcy proceeding. In March 1992 Drexel's plan of reorganization was confirmed, and on April 30, 1992 the Plan became effective. Borchers' claim lay dormant until June 1992. After Drexel's plan or reorganization was confirmed, it turned to the claims that had been filed in the bankruptcy. It issued Questionnaire Five to ascertain a more precise statement of what Borchers was still claiming after completion of the NASD proceeding. In response, Borchers asserted she was seeking $750,000 against Drexel for excessive commissions generated by Gilbert's churning, the losses resulting from the improper investments he recommended, and wrongful margin interest she was put to, and an equal amount in punitive *905 damages the very matters placed in controversy in the NASD arbitration. Answer of Sandra Borchers to Questionnaire Five, In re Drexel Burnham Lambert Group, 90 B 10421 (FGC) (June 1, 1992). Borchers acknowledged in testimony during the arbitration that she was "seeking recovery in the bankruptcy court in New York for the same losses." Transcript, NASD Arbitration (July 2, 1991) at 220. The NASD arbitration panel found that the liability of Drexel, Strainer, and all other parties being alleged by Borchers was "through Gilbert." NASD Award, NASD Arbitration at 1. Borchers did not allege below, nor does she do so now, that she sustained any damages other than those caused by Gilbert's alleged wrongdoing. In response to further interrogatories, Borchers stated that the legal bases for her claim were Section 10(b) of the Exchange Act, Section 12 of the Securities Act, and Florida state law. Borchers Answer to Interrogatory at 8 (Feb. 19, 1993). Borchers asserted that Drexel was additionally liable to her as a "controlling person" under the federal securities laws, and under the common law theories of respondeat superior and failure to supervise.
Drexel's objection to Borchers' claim was brought before the Bankruptcy Judge in June 1993 on Drexel's motion for summary judgment of disallowance.[2] Drexel argued that all of Borchers' damages were caused by the conduct of its employees and that the NASD Award against Gilbert to pay Borchers $40,000 and the $60,000 settlement by Strainer and Smith Barney taken into account by the arbitrators fully compensated her for all her injuries. Drexel contended that the NASD Award collaterally estopped Borchers from seeking further damages against Drexel; and that further recovery from Drexel would constitute double recovery. The Bankruptcy Judge granted the motion and disallowed Borchers' claim against Drexel, stating that:
It's clear from reading the various exhibits here and the arbitrator's decision and the facts and so on, is that the claimant here . . . is seeking to recover twice for the same injury.
There is no doubt what she's trying recover here comes from the same set of operative facts as what was in the arbitration, it involves the same issue, Gilbert's action.
Now, the issue totally concerns Gilbert and [Strainer's] actions . . .
When you go through piece by piece of everything that happened, there is no doubt that [these] same exact facts, operative facts and the same issues were decided in the arbitration proceeding.
Therefore, the claim here has to be disallowed because collateral estoppel applies.
In re The Drexel Burnham Lambert Group, Inc., Case No. 90 B 10421, (June 23, 1993).
Borchers appeals this resolution of her claim against Drexel by the Bankruptcy Court on the following grounds: (i) the Court erred in giving collateral estoppel effect to an arbitration Award that was not confirmed by a court; (ii) the NASD Award against Gilbert did not fully compensate Borchers for all her damages caused by Gilbert; and (iii) the NASD Award did not fully compensate Borchers for all her damages caused by Strainer.
ANALYSIS
In deciding a motion for summary judgment on a proof of claim, a Bankruptcy Court is bound by Fed.R.Civ.P. 56. See Bankr. Rule 9014 (making Bankr.Rule 7056 (incorporating Fed.R.Civ.P. 56) applicable to contested matters such as objections to proofs of claims). Whether a genuine issue of material fact exists is itself a question of law, subject to de novo review. Bryant v. Mafucci, 923 F.2d 979, 982 (2d Cir.), cert. denied ___ U.S. ___, 112 S. Ct. 152, 116 L. Ed. 2d 117 (1991). Summary judgment is proper if, viewing the facts in the light most favorable to the nonmovant, there is no genuine issue of material *906 fact and the moving party is entitled to judgment as a matter of law. Id. Borchers claims that the Bankruptcy Court improperly concluded that there were no "genuine issues of material fact" by according preclusive effect to the NASD arbitration. Thus, the core issue is whether the Bankruptcy Court improperly accorded preclusive effect to the NASD arbitration Award.
Appellant first argues that the Bankruptcy Court erred as a matter of law in according preclusive effect to the arbitration Award because it had not been confirmed by a court, although it was satisfied by payment. She contends that under federal law in this circuit, a judicially unconfirmed Award carries no collateral estoppel effect.
The preclusive effect of an arbitration Award depends on the basis of the federal court's subject matter jurisdiction. In the instant case, petitioners' claims are founded on alleged violations of federal securities laws, and the parties agree that federal law determines the preclusive effect to be given to the arbitration Award. See Blonder Tongue Laboratories v. Univ. of Illinois Foundation, 402 U.S. 313, 324 n. 12, 91 S. Ct. 1434, 1440 n. 12, 28 L. Ed. 2d 788 (1971) ("In federal question cases, the law applied is federal law [in determining the preclusive effect of a prior judgment]."); Cullen v. Paine Webber Group, Inc., 689 F. Supp. 269, 278 n. 12 (S.D.N.Y.) ("Because the basis for this court's jurisdiction is a federal question, rather than diversity, the federal courts' rule of res judicata governs.")
Under federal law, a confirmed arbitration award is deemed to have preclusive effect. See Benjamin v. Traffic Executive Assoc. Eastern RR, 869 F.2d 107, 110 (2d Cir.1989) ("the findings of arbitration boards can serve as the basis for collateral estoppel in a federal court proceeding") (giving collateral estoppel effect to findings of arbitration panel where award confirmed by district court); Hybert v. Shearson Lehman/Am. Express Inc., 688 F. Supp. 320, 325 (N.D.Ill.1988) ("[o]nce an arbitration decision has been confirmed by a district court, it is entitled to the same preclusive effect as would be given a decision of that court"); Cullen v. Paine Webber Group, Inc., 689 F. Supp. 269, 277 (S.D.N.Y.) ("the decision of arbitration panels addressing predicate acts underlying RICO claims . . . may be given preclusive effect") (award confirmed by district court).[3] The issue here is whether an arbitration award that has not been confirmed by a court can be given preclusive effect. As stated above, Borchers did not seek confirmation of the Award because Gilbert promptly paid the arbitration judgment.
Whether to accord preclusive effect to arbitrators' awards is an issue left to court-developed rules. See Chang v. Lin, 824 F.2d 219, 221 (2d Cir.1987). Although Borchers cites several cases where courts have given preclusive effect to confirmed arbitration awards, see e.g., Norris v. Grosvenor Marketing, Ltd., 803 F.2d 1281, 1285 n. 4 (2d Cir. 1986) ("collateral estoppel applies to issues adjudicated in arbitration where the arbitration award has been entered as a judgment"), she fails to cite any cases in which a court refused to give preclusive effect to a final but unconfirmed arbitration award.[4]
The fact that an arbitration award has been confirmed by a district court does not *907 add significant weight to the validity of the award. Confirmation is necessary only when the losing party to the arbitration fails to abide by the judgment. Under the Federal Arbitration Act, 9 U.S.C. §§ 9 and 10, confirmation of an arbitration award is a summary proceeding that makes what is already a final arbitration award a judgment of the court. Cf. Barbier v. Shearson Lehman Hutton, Inc., 948 F.2d 117, 120 (2d Cir.1991) ("judicial review of an arbitration award is narrowly limited. The award may be vacated only if at least one of the grounds listed in 9 U.S.C. § 10 is found to exist.")
In a number of cases decided in the Second Circuit, courts have accorded preclusive effect to unconfirmed binding arbitrations. In Yulio v. Moore McCormack Lines, Inc., 387 F. Supp. 872 (S.D.N.Y.1975), plaintiffs brought an action to enforce their rights under a collective bargaining agreement. However, the court found that the plaintiffs' rights under the collective bargaining agreement had already been decided in an arbitration decision sixteen months prior to their action. The Court held that the issue decided in the arbitration "is foreclosed by the determination made by the arbitrator." 387 F.Supp. at 876. In Yulio, the arbitration award had not been confirmed. Id. at 882. See also Hana Heating & Air Conditioning Co. v. Sheet Metal Workers Int'l Ass'n, 378 F. Supp. 1001 (S.D.N.Y.1974) (where neither party applied to any court to vacate, modify or set aside arbitration award, award became res judicata and plaintiff could not bring action for additional damages); Maidman v. O'Brien, 473 F. Supp. 25, 27 (S.D.N.Y.1979) (where defendant sought collateral estoppel based on unconfirmed arbitration award, court analyzed award, concluded that the defendant would have been entitled to have the award confirmed if he had sought confirmation; court then dismissed compliant based on collateral estoppel effect from arbitration award); Cullen v. Paine Webber Group, 689 F. Supp. 269, 272, 283-85 (S.D.N.Y.1989) (as an alternative ruling, the court granted defendant securities firm's motion for summary judgment on claims of three plaintiffs on collateral estoppel grounds where plaintiffs' claims were identical to claims that had already been rejected in prior arbitration; court noted confirmation of only one of the awards). In the instant case, as in Hana, Appellant did not object to the award handed down by the arbitration panel. She did not move to vacate or reconsider. Judge Brieant summed up a factually comparable situation in Hana thus:
The principal purpose of arbitration is to `resolve disputes speedily and to avoid the expense and delay of extended court proceedings.' Federal Commerce & Navigation Co. v. Kanematsu-Gosho, Ltd., 457 F.2d 387, 389 (2d Cir.1972). This purpose would be frustrated if Hana were permitted to apply to this Court for money damages more than 18 months after the Arbitration Panel [handed down its decision]. This action is nothing more than a belated application to this Court to set aside or modify the terms of the Panel's decision which dealt with the same facts raised here.
378 F.Supp. at 1003.
Federal courts in other jurisdictions have also given preclusive effect to unconfirmed arbitration awards. See, e.g., Wellons v. T.E. Ibberson Co, 869 F.2d 1166, 1169 (8th Cir. 1989) (affirming grant of summary judgment based on collateral estoppel effect of unconfirmed arbitration award); City of Bismarck v. Toltz, King, Duvall, Anderson & Assoc., Inc., 855 F.2d 580, 582-84 (8th Cir.1988) (affirming grant of summary judgment based on collateral estoppel effect of unconfirmed arbitration award where arbitrators had determined damages caused by joint tortfeasor and such award was satisfied); Kowalski v. Chicago Tribune Company, 1990 WL 43273, *5 (N.D.Ill. Apr. 4, 1990) ("[t]here is no doubt that even an unconfirmed arbitration award is generally entitled to be given preclusive effect for res judicata purposes").
Borchers' first argument that an unconfirmed arbitration award necessarily has no preclusive effect thus fails. In the instant case, if the other elements of collateral estoppel are met, the doctrine of collateral estoppel could be applied to the arbitration Award, notwithstanding the fact that it is unconfirmed.
*908 For the doctrine of collateral estoppel to apply in the instant case, four requirements must be met:
(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and necessarily decided, (3) there was full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits.
In re PCH Assoc., 949 F.2d 585, 593 (2d Cir.1991). Borchers contends that the second element for collateral estoppel is lacking here: she asserts that there is at least a genuine issue of material fact as to whether the full amount of her damages attributable to Gilbert was "actually litigated and necessarily decided" by the NASD panel.[5] Borchers contends that the arbitration Award did not fully compensate her for all her damages arising from Gilbert's conduct. She asserts that the arbitration panel may have limited its Award of damages to the amount of Gilbert's unjust enrichment. Borchers suggests that because Gilbert was only an account executive, the bulk of the profits from the alleged wrongdoing would have flowed to Drexel rather than to Gilbert; the arbitration panel may have reduced Gilbert's liability on this basis. Indeed, Borchers argues, because Gilbert's attorney speculated to the arbitration panel that damages could still be sought from Drexel in the Bankruptcy proceedings, the panel may have reduced the Award expecting Borchers to recover additional amounts from Drexel. Borchers asserts that the court should have held an evidentiary hearing to determine whether to give preclusive effect to the NASD Award. Cf. United States v. Diebold, 369 U.S. 654, 655, 82 S. Ct. 993, 993, 8 L. Ed. 2d 176 (1961) (stating that if "contrary inferences" from the evidence might be permissible, summary judgment is inappropriate). Drexel responds that the NASD arbitrators necessarily made a finding as to the amount of damages sustained by Borchers arising from the actions of its employees, and this finding is binding on Borchers in her proof of claim filed against Drexel.
Drexel sufficiently established that no genuine issue of material fact existed as to whether the full amount of Borchers' damages attributable to its employees was "actually litigated and necessarily decided" by the NASD panel. The NASD Award clearly assessed the full damages suffered from the action of the Drexel employees. Borchers sought the full extent of her damages in the arbitration proceeding, and the scope of the preclusive effect of an arbitration award is determined by the issues presented by the claimant in arbitration. See Norris v. Grosvenor Marketing Ltd., 803 F.2d 1281, 1286 (2d Cir.1986).[6] Borchers' NASD Statement of Claim sought damages for "all losses sustained" and rescission. The NASD Award states that Borchers alleged that Gilbert made unsuitable investments for Borchers' account, churned her account, failed to advise her of the risks of the investment, violated Section 12 of the Securities Act, and committed other state law violations. NASD Award, In re Arbitration Between Borchers and Smith, Barney, Harris, Upham & Co., Inc., Case No. 90-00931 (Oct. 22, 1991) (reproduced at A.104). She sought damages in the amount of $895,000, rescission, and punitive damages. Id. Borchers did not reduce her demand for damages when the arbitration *909 was stayed as to Drexel, and she maintained her claim for the full amount of damages. The NASD arbitration decision explicitly stated it was "in full and final resolution of the issues submitted for determination."
Moreover, there is no factual support or legal authority for the proposition advanced by Borchers that the arbitration panel limited her damages to Gilbert's unjust enrichment. The proper basis for damages for churning is "the amount of commissions, fees, interest, and taxes paid to the defendant because of the illegal activity." Zaretsky v. E.F. Hutton, 509 F. Supp. 68, 73 (S.D.N.Y.1981). Zaretsky does not suggest that the liability of either an individual broker or the brokerage firm would be capped by that defendant's own earnings on the excessive trading.[7] The measure of damages for unsuitability claims is the plaintiff's gross economic loss, adjusted for the overall market's performance. Rolf v. Blyth Eastman Dillon & Co., 570 F.2d 38, 49 (2d Cir.) (explicitly rejecting district court's "quasi-contractual" measure of damages in unsuitability case), opinion amended by 1978 WL 4098 (2d Cir. May 22, 1978), cert. denied, 439 U.S. 1039, 99 S. Ct. 642, 58 L. Ed. 2d 698 (1978).[8]
There is no question that the arbitrators determined Borchers' total loss attributable to the conduct of Drexel's employees because it determined the Award to be made against Gilbert after taking "into consideration the fact and amount" of Borchers' settlement with Strainer and Smith Barney. The arbitration panel's Award necessarily incorporates the finding that Borchers incurred only $100,000 in total damages, and that an Award in the amount of $40,000 against Gilbert, added to the $60,000 received in settlement with Strainer and Smith Barney, satisfied her claims in full. There is no evidence that the arbitration panel limited her recovery in any way.
If the NASD arbitration panel improperly determined Borchers' damages, Borchers' remedy was to move to vacate the Award. Borchers clearly had an opportunity to litigate this issue to its conclusion. Hammerman v. Peacock, 654 F. Supp. 71, 73 (D.D.C. 1987) (finding N.A.S.D. arbitration provided plaintiff with a full and fair opportunity to litigate claims, justifying the use of collateral estoppel). Borchers chose not to contest the Award when made. She cannot relitigate the issue of her damages a second time.
To prevail on its affirmative defense of collateral estoppel, Drexel had the burden of proof to establish that the total damages resulting from Gilbert's conduct were "necessarily and actually" litigated in the NASD arbitration. Drexel has met that burden. The NASD Award simply is not open to conflicting interpretations that should have been resolved in Borchers' favor under Fed. R.Civ.P. 56. Cf. American Int'l Group, Inc. v. London American Int'l Corp., 664 F.2d 348, 351 (2d Cir.1981) ("The courts should resolve all ambiguities and draw all inferences against the moving party"). Borchers' proposed alternative readings of the NASD Award do not satisfy her burden of opposing a motion for summary judgment under Rule 56(e). Roco Carriers, Ltd. v. M/V Nurnberg Express, 899 F.2d 1292 (2d Cir.1990) ("A party opposing a motion for summary judgment must set forth specific facts demonstrating the existence of a genuine issue of fact.") The NASD Award fully compensated Borchers for damages resulting from Gilbert's wrongdoing, and NASD Award collaterally *910 estops Borchers from seeking damages from Drexel based on Gilbert's conduct.
Borchers does not contest the fact that all the damages she sustained were the result of Gilbert's wrongdoing. In her proof of claim against Drexel, she seeks damages for excess commissions, wrongful margin interest, and portfolio loss. All these damages were caused by and were the result of Gilbert's conduct. In her claim against Drexel, she seeks to hold Drexel liable for Gilbert's actions on a theory of controlling person liability under the federal securities laws, 15 U.S.C. § 77o and 15 U.S.C. § 78t, or respondeat superior. However, the NASD Award already compensated her for her damages due to Gilbert's acts, and she cannot recover further from Drexel:
[W]here the legal relationship between two parties establishes vicarious liability for one party based on the acts of the other, a suit against either of the parties will foreclose a subsequent action against the other.
Murray v. Dominick Corp. of Canada, Ltd., 631 F. Supp. 534, 537 (S.D.N.Y.1986).
Borchers next contends that even if the Bankruptcy Court correctly found that Borchers was precluded from seeking damages from Drexel based on Gilbert's conduct, Borchers was not precluded from seeking damages from Drexel based on the conduct of Gilbert's supervisor Strainer. Borchers notes that the arbitration panel specifically stated that its decision did not address Drexel's or Strainer's liability. Borchers contends that Strainer was a primary wrongdoer in his own right, and that the NASD Award did not compensate Borchers for her injuries resulting from Strainer's primary wrongdoing.[9] Borchers asserts that Strainer agreed to supervise her investments but "was indifferent to whether they were suitable." Further, Strainer assured her that her investments were doing well after Borchers' attorney alerted her about her margin position. According to Borchers, Strainer's misconduct injured Borchers directly in that she might have withdrawn her money from the unsuitable accounts or cut back her margin position or even sought timely correction from a then-viable Drexel, Burnham, Lambert, Inc. but for Strainer's misrepresentations. Borchers claims these damages are in addition to anything done by Gilbert.
Strainer's liability is entirely derivative of the conduct of Gilbert. Although Strainer may have been directly liable to Borchers, Borchers fails to establish how Strainer caused additional damages distinct from those caused by Gilbert. Borchers states three bases of Strainer's liability: failure to supervise Gilbert, aiding and abetting Gilbert, and falsely inducing Borchers to maintain her unsuitable investments with Gilbert. Any damages for failure to supervise Gilbert or aiding and abetting Gilbert would be coextensive with the damages caused by Gilbert. The sole result of Strainer's alleged misrepresentations or "hand-holding" the last stated ground of Strainer's "independent" liability was that Borchers continued to invest through Gilbert, whereby she suffered losses. No matter how many people or entities might be liable for Borchers' damages, all her damages arise from the conduct of Gilbert. The NASD arbitration panel determined the full amount of Borchers' losses arising from Gilbert's conduct. Borchers has been fully compensated for all her losses and cannot seek additional damages from Drexel.
Accordingly, the Bankruptcy Court's order is
AFFIRMED.
NOTES
[1] The DBL Liquidating Trust is the successor in interest to Drexel, Burnham, Lambert, Inc. For the purposes of this opinion, both the DBL liquidating Trust and Drexel, Burnham, Lambert, Inc. will be referred to as "Drexel."
[2] Pursuant to the Bankruptcy Court's arbitration order of July 7, 1992, Borchers' claim was designated for arbitration. Because no arbitrator had been assigned to hear the claim, Borchers and Drexel stipulated that the Bankruptcy Court could hear the controversy on Drexel's motion for summary judgment of disallowance. Stipulation, In re The Drexel Burnham Lambert Group, Inc., Case No. 90 B 10421, (June 14, 1993).
[3] The Supreme Court has stated that the "it is far from certain that arbitration proceedings will have any preclusive effect on the litigation of nonarbitrable federal claims." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 222, 105 S. Ct. 1238, 1243, 84 L. Ed. 2d 158 (1985). However, Borchers' securities claims were clearly amenable to arbitration. Shearson/American Express v. McMahon, 482 U.S. 220, 228, 107 S. Ct. 2332, 2338, 96 L. Ed. 2d 185 (Exchange Act § 10(b) claims are arbitrable), reh'g denied, 483 U.S. 1056, 108 S. Ct. 31, 97 L. Ed. 2d 819 (1987); Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 109 S. Ct. 1917, 104 L. Ed. 2d 526 (1989) (Securities Act claims are arbitrable).
[4] Borchers relies heavily upon Pampano-Windy City Partners, Ltd. v. Bear Stearns & Co., [1992-1993] Fed.Sec.L.Rep. (CCH) ¶ 97,366, 1993 WL 42786 (S.D.N.Y. Feb. 16, 1993) in which the court refused to accord preclusive effect to an arbitration award that had been confirmed by the district court, but no final judgment of confirmation had been entered. Id. However, in that case the court stated that the confirmation of the award could not serve as the basis for preclusion because the confirmation was subject to appellate review and was not final. Id. In the instant case, no judicial confirmation was sought, and the award is no longer subject to further judicial review. Thus, the NASD award is final.
[5] Borchers does not contest that collateral estoppel may apply even though Drexel was dismissed as a party from the arbitration proceedings. Federal courts have long recognized the use of defensive collateral estoppel, and mutuality of parties is not required. Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 326-328, 91 S. Ct. 1434, 1441-1443, 28 L. Ed. 2d 788 (1971).
[6] In Norris v. Grosvenor Marketing Ltd., plaintiffs sought broader damages than those obtained in a satisfied arbitration award against the defendant's agent. 803 F.2d 1281 (2d Cir.1986). The agent's principal (defendant in the action) obtained summary judgment based on the collateral estoppel effect of the arbitration award. The Second Circuit upheld summary judgment based on collateral estoppel, and held whatever issues the claimant presented to the arbitrators were precluded from retrial:
[H]aving himself framed the issues, he cannot now avoid them.
[Plaintiff] was given his opportunity to argue his case to the arbitrator. He should not be given another bite of the cherry.
Id. at 1286 (quotations omitted).
[7] Courts often impose liability on a stockbroker for the full amount of plaintiff's churning and unsuitability losses even though the stockbroker shared the fruits of the violations with the brokerage firm (commissions) or the benefit went entirely to the brokerage firm (fees, margin interest). See, e.g., Henricksen v. Henricksen, 640 F.2d 880, 884 (7th Cir.) (stockbroker jointly liable for liable for total commissions and margin interest payments), cert. denied, 454 U.S. 1097, 102 S. Ct. 669, 70 L. Ed. 2d 637 (1981).
[8] The Supreme Court has stated that in some instances, where "the defendant received more than the seller's actual loss . . . damages are the amount of the defendant's profit" to prevent unjust enrichment. Randall v. Loftsgaarden, 478 U.S. 647, 663, 106 S. Ct. 3143, 3152, 92 L. Ed. 2d 525 (1986) (holding that tax benefits received by plaintiff in securities transaction should not be deducted from damage award under § 10(b) of Exchange Act or § 12(2) of Securities Act). However, this rule does not support the converse proposition that a plaintiff's damages are limited to the lesser of its losses or the defendant's profits.
[9] Borchers notes that Strainer's settlement does not insulate Drexel from liability for Strainer's failure to supervise Gilbert and Strainer's agreement to Gilbert's conduct. This is true, but irrelevant, because Drexel does not contend that this settlement estops Borchers from seeking damages from Drexel for Strainer's conduct. Rather, Drexel seeks to rely on the arbitration panel's determination to show that Borchers has been fully compensated for all her losses. The NASD arbitration panel determined the total damages caused by Gilbert and decided that an award of $40,000 against Gilbert, added to Borchers' $60,000 settlement with Strainer and Smith Barney, would fully compensate her. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548672/ | 25 F.2d 462 (1928)
ANCHOR COAL CO. et al.
v.
UNITED STATES et al. (INTERSTATE COMMERCE COMMISSION et al., Interveners).
District Court, S. D. West Virginia.
April 14, 1928.
*463 John W. Davis, of New York City, R. E. Quirk, of Washington, D. C., E. L. Greever, of Tazewell, Va., and J. V. Norman, of Louisville, Ky., for complainants.
Blackburn Esterline, Asst. Sol. Gen., of Washington, D. C., for the United States.
P. J. Farrell and Daniel W. Knowlton, both of Washington, D. C., for intervener Interstate Commerce Commission.
Herbert Fitzpatrick, of Huntington, W. Va., Theodore W. Reath, of Philadelphia, Pa., William A. Northcutt, of Louisville, Ky., and W. S. Bronson, D. Lynch Younger, and Charles J. Rixey, Jr., all of Washington, D. C., for defendants railway companies.
August G. Gutheim, of Washington, D. C., George Poffenbarger, of Charleston, W. Va., Ernest S. Ballard and Frank E. Harkness, both of Chicago, Ill., A. M. Belcher, of Charleston, W. Va., F. M. Livezey, of Huntington, W. Va., Howard B. Lee, of Charleston, W. Va., Andrew P. Martin, of Cleveland, Ohio, Harry I. Allen, of Chicago, Ill., Charles E. Elmquist, of St. Paul, Minn., Squire, Sanders & Dempsey and C. F. Taplin, all of Cleveland, Ohio, Leslie F. Laylin, of Columbus, Ohio, Charles R. Webber, of Baltimore, Md., W. N. King, of Cleveland, Ohio, James Stillwell, Guernsey Orcutt, and Alfred S. Knowlton, all of Pittsburgh, Pa., for sundry interveners.
Before PARKER and NORTHCOTT, Circuit Judges, and McCLINTIC, District Judge.
PARKER, Circuit Judge.
This suit was brought by coal producers engaged in mining and shipping coal from southern West Virginia, western Virginia, eastern Tennessee, and eastern Kentucky, against the United States and a number of railroad companies engaged in the transportation of coal from that territory to ports on Lake Erie. Its purpose is to enjoin the enforcement of an order of the Interstate Commerce Commission, entered February 21, 1928, which directs that the carriers cancel certain rate schedules which they have filed, reducing by 20 cents per ton the freight rate on "lake cargo" coal from the territory named to the lake ports. A special court of three judges has been convened pursuant to statute to hear the case, intervention has been allowed on the part of various interested parties, and it has been agreed that the court shall determine finally the rights of the parties with respect to the relief prayed, instead of hearing only the application for an interlocutory injunction.
The controversy before us, as already indicated, has relation to "lake cargo" coal, a term used to designate coal shipped to ports of the Great Lakes for transshipment *464 by vessel to various lake and river ports in the United States and Canada, whence it is distributed by rail. The rates on such coal are in the nature of proportional rates to the lake ports for part of a through movement to across-lake destinations. The coal is transported across the lakes only during the months from April to November; and, as this movement occurs during the summer months, when the coal trade is slack, it is of great importance to the mine operators, since it enables them to keep their mines in operation during the dull season. All of the lake cargo coals are more or less competitive, particularly for steam and domestic purposes; and those produced in the Pittsburgh district are highly competitive with those produced in the territory of complainants, so much so that a difference in price of a few cents will determine a sale. Pittsburgh Coal Producers' Ass'n v. Ashland Coal & Iron R. Co., 126 I. C. C. 344, 345. The importance of the trade to the producers may be judged from the fact that in 1925 the volume of the across-lake movement was 26,333,000 tons. In 1923 it was 29,840,000 tons. Its importance to complainants is shown by the fact that in 1925 they furnished practically 82 per cent. of this tonnage (126 I. C. C. 362), and that in 1924 it constituted 12.6 per cent. of their total production (126 I. C. C. 354).
As ability to compete in the sale of lake cargo coal depends in large measure upon the freight rate applied to shipments to the Lake Erie ports, there has been a long history of controversy over these rates. This controversy has been carried on by the operators in the coal producing region around Pittsburgh, Pa., which we shall refer to generally as the northern field, and by those operating in territory of complainants, which we shall refer to as the southern field. The haul from the southern field to the lake ports is considerably longer than that from the northern field (see map, 101 I. C. C. 516), and the rate has always been higher than from the northern field. The difference in rate, however, has never been so great as the difference in distance, due in part to the fact that the carriers from the southern field, being especially well equipped for carrying coal, could transport it at a lower cost, distance considered, than those serving the northern field, and in part to the necessity of fixing a low rate if they were to get any coal to haul. A rate based on anything like a mileage basis would have excluded the southern coal from the lake cargo market. These rates were fixed originally under competitive conditions, and, until the supervisory power of the Interstate Commerce Commission was invoked, the differential between them was very small, only 9 cents per ton between the Pittsburgh and Kanawha districts; the rate being 88 cents per ton from Pittsburgh and 97 cents from Kanawha.
In 1912, for the first time, the Commission took a hand in the fixing of the rates. In that year it denied the petition of the Chesapeake & Ohio that it be allowed to increase its rates from the southern field, 22 I. C. C. 604; and reduced by 10 cents the rates from the northern field, Boileau v. Pittsburg & Lake Erie R. Co., 22 I. C. C. 640, and Pittsburg Vein Operators' Ass'n v. Pa. Co., 24 I. C. C. 280. The effect of this was to spread the differential from 9 to 19 cents as between the two fields. In subsequent rate adjustments the differential was further increased to 25 cents, which was preserved in the various changes by which the rates were increased until those from the Pittsburgh district were $1.66 per ton and those from the Kanawha district were $1.91 per ton. This was the differential between the rates from the northern and southern fields at the time of the passage of the Transportation Act of 1920, and it was continued as the differential until the order of the Commission of May 9, 1927, which increased it to 45 cents per ton. If the proposed rates by the carriers from the southern field are allowed to go into effect, the reduction of 20 cents per ton will reduce the differential to 25 cents again. The question before us, therefore, is whether we shall enjoin the Commission from preventing a reduction of rates the effect of which will be to restore the old differential, which the Commission itself established.
The orders of the Commission, by which the differential between the northern and southern fields was increased from 25 to 45 cents, and by which the southern carriers were ordered to cancel schedules which would not only reduce rates, but would also restore the old differential of 25 cents, afford an interesting study, and present a question fraught, we think, with the gravest consequences to the future of the country, if the power asserted by the Commission can be sustained. To understand, however, exactly what the power is which the Commission has assumed to exercise, it is necessary that we go behind its merely formal conclusions that rates are reasonable or unreasonable, and ascertain exactly what it is that it has done, and upon what facts and upon the application of what principles it has arrived at its conclusions. This it is our duty to do. Southern Pacific Co. v. Interstate *465 Commerce Commission, 219 U.S. 433, 31 S. Ct. 288, 55 L. Ed. 283; U. S. v. N. Y. Central Railroad, 263 U.S. 603, 44 S. Ct. 212, 68 L. Ed. 470. And, in the performance of this duty, it is necessary that we analyze not only the report of the Commission accompanying the order whose enforcement we are asked to enjoin, but also the reports made in 1925 and 1927 with regard to the reductions of rates from the northern field, in the latter of which the differential between the two fields was increased from 25 to 45 cents.
In the case from the northern field, the first decision in which was rendered July 16, 1925 (Lake Cargo Coal Rates 1925, 101 I. C. C. 513), coal producers of the northern field had filed petitions alleging that the rates charged them on lake cargo coal were unjust and unreasonable per se, relatively unreasonable, and unduly prejudicial as compared with rates on this traffic from all other districts in the Appalachian region, and that the rates from other districts were unduly preferential, the other districts referred to being particularly the districts which we have referred to as the southern field. An extended hearing was had and the petitions were denied. The Commission summed up its conclusion in the last paragraph of its report as follows (101 I. C. C. 548):
"After full consideration and upon the entire record, we find that the present rates on lake cargo coal from the Pittsburgh, Ohio No. 8, Cambridge, and Fairmont districts do not exceed the maximum of reasonableness and are just and reasonable rates, and that the rates assailed on lake cargo coal from these and other districts are not unduly prejudicial, unduly preferential, or otherwise unlawful." (Italics ours.)
An examination of the report will show that the Commission compared the ton mile earnings of the carriers from the northern and southern fields (101 I. C. C. 522); compared the lake cargo rates with the local rates on coal (523) and with the rates on commercial coal (547); compared various differentials with the differentials involved and with the increased haul for which the differentials were imposed (524 to 525); considered the movement of ore in the cars returning to the northern field (526); considered transportation characteristics of the various hauls (527 to 529); considered costs of transportation from the various districts, computed according to various theories (529 to 531); compared lake cargo rates charged by carriers from southern fields with rates charged by them on coal to tidewater (537); considered the rate relationship of the northern and southern fields and how their competition was affected by the rates (540, 542); and fully discussed the relation of these various matters to the rates involved. On the contention that the existing rate adjustment was prejudicial to the carriers from the northern field, the Commission said (101 I. C. C. 545):
"It is apparent that the carriers controlling the rate adjustment from the southern West Virginia and Kentucky districts are not the same as those which control the adjustment from the complaining districts. The basis for a finding of undue prejudice is thus lacking, even if the facts adduced to support such a finding would in other respects support it, as they do not."
After thus disposing of the contention as to prejudice, the Commission proceeded to refuse to prescribe minimum rates for the carriers from the southern field as follows (101 I. C. C. 545, 546):
"Realizing this, complainants invoke our power to prescribe minimum rates. In Sugar Cases of 1922, 81 I. C. C. 448, 472, we said: `No doubt the power to fix such minimum rates can in some situations be employed to advantage and with propriety, for the purpose of averting rate wars, which are always injurious to the carriers and ordinarily, in the long run, to the public interest, or for the purpose of preventing an unjust burden upon other forms of traffic or upon other parts of the country. We believe, however, that this power should be sparingly exercised and only in cases where it clearly appears that its exercise is necessary in order that substantial public injury may be avoided.'
"No rate war is imminent. Allegations in the Ohio complaints that rates from the southern districts were unduly low were withdrawn at the hearing. Regulatory commissions of the states where most of this coal is consumed contend vigorously and earnestly that grave public injury would be caused by a widening of these differentials, and that the public interest would be promoted by narrowing them. In no proceeding before us have consumers and their representatives insisted more earnestly and forcibly than they have here that their interests be not submerged in the struggle between competing coal districts.
"In Galloway Coal Co. v. A. G. S. R. R. Co., 40 I. C. C. 311, we said: `Consumers may properly have the widest possible markets consistent with justice to the carriers, and to that end and also in their own interests carriers may, within reasonable limits, as a matter of traffic policy, accord competing *466 producing centers located at different distances from common centers of consumption identical rates.'
"And in Andy's Ridge Coal Co. v. Southern Ry. Co., 18 I. C. C. 405, we said: `Differentials between competing coal mines to various markets of consumption cannot be established upon distance alone; nor can one case be safely made the precedent for another. Much depends upon competitive conditions, and each situation must be considered and disposed of by itself. * * * In determining these differentials we must consider the interest of the consumer as well as the producer. Rates should be so adjusted as to permit the widest possible competition. * * * Coal rates are usually highly competitive. * * * The differentials from these different mines are the outgrowth of years of experiment and ought not to be disturbed by us unless we are certain that justice requires it.'
"The differentials here are not only the result of years of experiment, but in fact are those prescribed by us. They have not been shown to result in undue prejudice to the complainants."
After this decision was rendered the petitioners from the northern field asked for a rehearing, which was granted, and on May 9, 1927, an order was entered, concurred in by a majority of the Commission, reducing the rates on lake cargo coal from the northern field 20 cents per ton, and thereby widening the differential between the northern and southern field to 45 cents. The report which accompanied the order, while going into a comparison of the lake cargo rates from the northern field with local rates on coal and other commodities, went at great length into a comparison of the rates between the northern and southern fields and the shift in the lake cargo tonnage to the southern field. At the end of its long report, the Commission summarizes its conclusions (126 I. C. C. 360 to 365), from which we think it is apparent that the reduction in rate was allowed because of the holding that the rates from the northern field were "relatively" higher than those from the southern field (i. e., as compared with length of haul), although actually lower; that the shift of tonnage to the southern field, although due to the higher cost of producing and marketing coal in the northern field, justified the lowering of the rates to the northern field; and that it was the duty of the Commission to give consideration to such conditions in the industry because of the provisions of the Hoch-Smith resolution. After calling attention to the fact that further study had convinced the Commission that lake cargo coal was entitled to lower rates than commercial coal, the report proceeds (126 I. C. C. 361 to 364):
"Upon the more complete record now before us, we are of the opinion that the rates on the same class of traffic from other districts in the same region shipping a large amount of lake cargo coal are entitled to more weight in passing upon the reasonableness of the rates assailed than any other rate comparisons, although we take into consideration that such rates from the southern districts may not be reasonable maxima in all instances. In reaching our original decision, there was no doubt in the minds of at least some of those constituting the majority that the rates from the Pittsburgh and Ohio districts were relatively much higher than those from the southern districts; but, as stated, the majority did not then regard the rates assailed as unreasonable largely because of the comparisons with rates on commercial coal, the record did not justify the prescribing of minimum rates from the southern districts, and no undue prejudice or preference could be found because the rates from the complaining districts and from the southern districts were controlled by different carriers.
"The record on further hearing differs materially from the original record in respect to the trend of the movement of lake cargo coal from the various districts. In our original report we pointed out that in 1923 Ohio No. 8 shipped more lake cargo coal than all the Kentucky districts combined, but on further hearing it is shown that in 1924 Ohio No. 8 shipped 663,000 tons less than Kentucky, and in 1925, Kentucky shipped 5,291,000 tons more than Ohio No. 8, or about four times as much as the latter. Likewise, we pointed out that the rate of increase in the tonnage shipped from Ohio No. 8 and Cambridge up to 1923 was much greater than for southern West Virginia, but it is now shown that the combined tonnage from the two Ohio districts declined in 1924 and for 1925 was less than one-third that in 1923, while the tonnage from southern West Virginia increased in 1924 and for 1925 was nearly double that in 1923. Ohio No. 8 and Cambridge shipped more than one-half as many tons as southern West Virginia in 1923, but in 1925 southern West Virginia shipped ten times as much as the two Ohio districts. The tonnage shipped from the Pittsburgh district has continued to fall off since the original hearings but at a much more rapid rate, that for 1924 being less than one-half of 1923 and for 1925 less than one-third of 1923. In our *467 original report we stated that of the total lake cargo tonnage of high-volatile coal in 1923, Pennsylvania and Ohio districts taking rates of $1.66 or less shipped 60.4 per cent., while all of West Virginia and Kentucky shipped 39.6 per cent. In contrast to those figures, it now appears that in 1925 all of Ohio and Pennsylvania shipped only about 18 per cent. of the total tonnage, while West Virginia and Kentucky shipped practically all of the remaining 82 per cent. This marked change in conditions is evidently due principally to the higher cost of producing and marketing coal in the Ohio and Pennsylvania districts. The higher cost is no doubt due to various causes, but it is apparent that the freight rates contribute to the cost of producing and marketing coal in the complaining districts, and as stated, those from the Pittsburgh and Ohio districts are relatively much higher than those from the southern districts.
"At the time of the original hearings the coal-mining industry in Ohio and Pennsylvania was in a comparatively prosperous condition. Since then 12,000 to 15,000 miners have left the Ohio mines, there has been a large increase in the number of vacant houses in the mining communities, and merchants have large amounts of unpaid accounts upon their books. In the Pittsburgh district miners have been given help in getting transportation to the southern fields; from 1921 to 1925 the number of employees engaged in coal mining decreased 20 per cent., while employees in other industries increased 40 per cent., and the coal business is in a depressed condition. It does not appear that all this is due solely to the rate adjustment, but if that adjustment is improper it is our duty to correct it so far as possible, and we must give consideration to the conditions existing in the industry under the provisions of the Hoch-Smith Resolution. * * *
"Briefly summarizing, in reaching our conclusions upon the question of reasonableness, we have taken into consideration the unusually favorable circumstances and conditions surrounding the movement of lake cargo coal, which make the rates thereon in a class by themselves; the relatively much lower rates from the southern districts, which the carriers serving those districts find profitable to maintain; the very decided change in the relative tonnage of lake cargo coal shipped from the complaining Pittsburgh and Ohio districts and the southern districts, respectively; the present depressed condition of the coal-mining industry in the Pittsburgh and Ohio districts; and the fact that the cost of the service warrants a substantial reduction in the rates. We have taken into consideration particularly the changed conditions since our previous decisions regarding these rates, also to some extent the rates on ore from the ports to points in or near the complaining Pittsburgh and Ohio districts, and other evidence which need not be specifically referred to in the comprehensive record now before us." (Italics ours.)
As bearing upon the subsequent action of the Commission, the following extracts relating to the rates from the southern field and the question of the differential are significant (126 I. C. C. 365):
"We do not regard the present relationships between the rates from the complaining Pittsburgh-Ohio districts and the southern districts as proper, but the reductions required in the rates from the Pittsburgh and Ohio districts will go far toward removing the alleged undue prejudice to those districts, and following the principle of the Ashland Fire Brick Case, we adhere to our previous findings on the question of undue prejudice and preference. * * * Under the issues now presented, it is unnecessary for us to consider whether the rates from the southern districts are lower than reasonable minima, but we are of the opinion that the carriers would not be justified in reducing the present rates from those districts."
The reduced rates from the northern field were to become effective August 10, 1927. After the decision of the Commission fixing them was announced, the defendant carriers serving the southern field filed tariff schedules under the statute reducing their rates on lake cargo coal from the southern field 20 cents per ton and thereby restoring the old differential. The Commission at once suspended the operation of the schedules upon protests from certain of the operators in the northern field and ordered a hearing on the rates embraced therein. Upon this hearing certain of the complainants here intervened and opposed the cancellation of the schedules. On February 21, 1928, the Commission entered the order complained of directing that the schedules be canceled, and accompanying the order filed a report in which it set forth the grounds upon which it had proceeded. This report begins with a résumé of the decisions rendered on the petitions of the operators from the northern field, summing up the effect of these decisions as follows (Lake Cargo Coal Case, 139 I. C. C. 371):
"In the original report in that case, decided July 16, 1925, we found that the rates assailed did not exceed the maximum of reasonableness *468 and were just and reasonable, and that those and the rates from the districts alleged to be preferred were not unduly prejudicial, unduly preferential, or otherwise unlawful, and dismissed the complaints. The evidence of the complaining Pittsburgh and Ohio districts in that case in respect of the issue of undue prejudice and preference was practically limited to the principal districts in southern West Virginia, eastern Kentucky, and Tennessee from which reduced rates are here proposed, referred to herein as the southern districts. As to that issue we stated at page 545 of our original report that many of the coal-carrying roads did not participate in the rates from both those complaining districts and the districts in southern West Virginia, eastern Kentucky, and Tennessee alleged to be preferred, and that a basis for a finding of undue prejudice was lacking even if the facts adduced to support such a finding would in other respects have sustained it, which they did not.
"In our report on further hearing, made May 9, 1927, we adhered to our previous finding that there was no legal basis for a finding of undue prejudice and preference, but found unreasonable the rates from the Pittsburgh district and from the Ohio No. 8 and Cambridge districts to the extent that they, respectively, exceeded $1.46 and $1.43. We said that we did not regard the relationships then existing between the rates from the complaining Pittsburgh-Ohio districts and the southern districts as proper, and expressed the opinion that the carriers would not be justified in reducing the rates then, and now, in effect from the latter districts." (Italics ours.)
After adverting to the contention of the southern carriers that it was their right as well as their duty to stockholders and patrons to initiate rates with a view to meeting competitive conditions, and that in publishing rates they were exercising a managerial function which belonged to them, and to the contention of the southern operators that the reduced rates were necessary to insure to them their fair share of the lake cargo market, the Commission stated that it was not within its power to adjust rates to allow competing shippers to market their products and that although rates found lawful might have that effect, they must be based fundamentally upon conditions surrounding the transportation. It then considered the shift in tonnage of lake cargo coal to the southern field, and said that this shift appeared to have been due in large measure to lockouts, miners' strikes, and to higher cost of producing coal in the northern than in the southern field, and that these conditions still prevailed. It stated the position of the southern carriers with respect to the proposed rates as follows (139 I. C. C. 374, 375):
"The position of the southern respondents is that the proposed rates, although admittedly low and hence not reasonable maximum rates, are not unreasonably low per se or less than reasonable minimum rates, and would not cast a burden on other traffic. In support of that position respondents Chesapeake & Ohio, Hocking Valley, and Norfolk & Western rely upon comparisons of the earnings under the proposed rates with either the average revenues or expenses on all coal or on all freight traffic on their respective lines and upon operating and cost statistics, and, as does also respondent Louisville & Nashville, upon comparisons with divisions of certain rates on coal, with rates and earnings on coal from some of the same and other coal-producing districts to various destinations, and with the rates and earnings on other commodities."
After analyzing these contentions of the southern carriers, and comparing the proposed rates with earnings on other traffic, in the course of which it was shown that in this territory in 1926 the coal traffic constituted 82 per cent. of the total tonnage of the Chesapeake & Ohio, 80 per cent. of that of the Hocking Valley, 88.72 per cent. of that of the Norfolk & Western, and 59.5 per cent. of that of the Louisville & Nashville, the Commission did not find that the rates proposed were unreasonably low per se or that they would cast a burden upon other traffic, but came to what it evidently considered the controlling factor in the situation in the following language (139 I. C. C. 381 to 382):
"The rates on coal with which the proposed rates have heretofore been compared are not parts of the lake cargo coal-rate structure, but of other and different rate structures, and hence in the nature of collateral comparisons. The rates on lake cargo coal from the southern and other districts in the Appalachian region to Lake Erie ports constitute a definitely interrelated rate structure in which the rates on this traffic are, and for many years have been, made independently of those in other coal-rate structures generally. As demonstrating that interrelationship it may be noted that counsel for the Norfolk & Western and Virginian stated at the hearing that the reduced rates here proposed by those respondents would be withdrawn if the former higher rates in effect prior to August 10, 1927, from the northern districts to Lake Erie ports were restored. It remains to be determined whether the proposed *469 rates are just and reasonable measured by other rates on like traffic in the same rate structure." (Italics ours.)
After comparing the length of haul and the ton mile earnings on the lake cargo traffic from the various districts, the Commission still further narrowed the basis of its action in the following language (139 I. C. C. 385):
"It is clear from the evidence that the publication of the proposed rates from these southern districts was actuated primarily by the reduction in the rates on like traffic from the Ohio No. 8, Cambridge, and Pittsburgh districts established pursuant to our report and order on further hearing in Lake Cargo Coal Rates, 1925, and not by the reduction in the rate from these four southern Ohio districts. The southern operators admit that they are little concerned with competition from the Hocking district, and that commercially it makes no difference to them what the rate is from that district. It is apparent, therefore, that the primary concern in this proceeding is the rate relation between the Ohio No. 8, Cambridge, and Pittsburgh districts, on the one hand, and the southern districts, on the other." (Italics ours.)
The Commission then laid down the principle upon which its denial of the proposed rate reduction was based as follows (139 I. C. C. 386 to 387):
"Little or no effort was made by the southern respondents to prove that the proposed rates are just and reasonable, measured by the rates on like traffic from the Ohio No. 8, Cambridge, and Pittsburgh districts. Their position, in substance, is that in the absence of undue prejudice and preference the only limitation on the measure of the proposed rates is that they shall not be less than minimum reasonable rates per se or be so low as to cast a burden on other traffic. That construction of the law, as we view it, is too narrow. Section 1 [49 USCA § 1; Comp. St. § 8563] declares that rates shall be just and reasonable, and prohibits every unjust and unreasonable rate. In other words, it requires that rates shall not only be reasonable per se, but just and reasonable in their relation to other rates on like traffic in the same territory that afford a proper standard of comparison, and applies to instances in which rates are below that standard, distance and transportation conditions considered, no less than to those in which the rates exceed that standard. Prior to the enactment of the transportation act, 1920, violations of section 1 could be corrected only by the prescription of maximum reasonable rates. Under the interstate commerce act, as amended by the Transportation Act of 1920, we are empowered, whenever, after full hearing, we find that any rate is or will be unjust or unreasonable, or otherwise in violation of any of the provisions of that act, to determine and prescribe what will be the just and reasonable rate to be thereafter observed, or the maximum or minimum, or the maximum and minimum, to be charged. The provisions of section 1 are as broad in scope as the power conferred for its administration. * * *
"The rates on lake cargo coal from these districts are, as previously explained, parts of a definitely interrelated rate structure on like traffic. The rates from the Ohio No. 8, Cambridge, and Pittsburgh districts were prescribed by us as maximum reasonable rates. There is no contention that those rates exceed that limit. They afford, therefore, appropriate and fair standards for determining whether the proposed rates are just and reasonable, distance and transportation conditions considered." (Italics ours.)
That the real basis for denying the proposed reduction was the fact that the southern carriers had a much longer haul, and that the differential of 25 cents was considered too small as compared with the haul, even though the rates from the northern field were lower, and this because of the shift of traffic from the northern to the southern field, clearly appears from the following paragraph of the report (139 I. C. C. 389 to 390):
"We have frequently said that distance alone is only one of the elements which must be considered in determining upon a lawful rate adjustment; and in competitive adjustments the carriers may disregard distance even in substantial degree, so long as the competitor whose geographical location is largely disregarded is not injured thereby, but where it is made to appear in an interrelated adjustment such as that with which we are here dealing that such a competitor is injured and is complaining, we believe that a proper interpretation of the law which we administer demands a remedy. This does not mean that even then distance may not be to some extent disregarded, particularly in coal-rate adjustments, but it does mean that differences in distance such as those before us, which are 115.5 per cent. and 88.4 per cent., respectively, of the straight average distances from the Pittsburgh district and from the Hocking, Jackson county, and Pomeroy districts to the lake, require greater recognition than the proposed differences in rates, which are only 17.1 per cent. and 19.6 per cent., respectively, of the rates from the same districts, would accord to them." (Italics ours.)
Another principle laid down by the Commission *470 as controlling its action was that the burden of justifying the reduced rates was upon the carrier proposing them (139 I. C. C. 390), and it stressed the fact that the southern carriers did not show that the low differential for increased distance was justified by lower cost of operation than that of the northern carriers (387 to 388). It justified the testing of the reasonableness of a minimum rate by comparison of same with a maximum by comparing differentials established on other routes for other traffic.
The Commission pointed out that, under section 15 (a), par. 2, of the Interstate Commerce Act, as added by section 422 of the Transportation Act of 1920 (49 USCA § 15a, par. 2; Comp. St. § 8583a, par. 2), it had adjusted the rates from the Appalachian coal districts and had grouped the carriers as required by the act; that the reduction to the northern field was authorized by the proviso of that paragraph; but that the reduction to the southern field would create no new traffic and would reduce the aggregate income of the carriers. It held, further, that the carriers had not shown justification for the rates under the Hoch-Smith Resolution (49 USCA § 55; Comp. St. § 8583aa), saying (139 I. C. C. 395):
"To accord to a carrier the right to transport a substantial portion of its tonnage at rates upon the obviously low level here proposed, while giving no relief to the agricultural industry, including live stock, which Congress has declared to be in a depressed condition and entitled to the lowest possible lawful rates consistent with the maintenance of an adequate transportation system, is counter to that mandate. The Hoch-Smith Resolution is not directed to the carriers; it is directed to us. Carriers who seek our approval of rate proposals will be expected to show that a finding of justification can be made consistently with the policies outlined for us in the resolution. This has not been done in this proceeding. * * * We find that the proposed rates have not been justified. We shall require the cancellation of the suspended schedules and discontinue this proceeding." (Italics ours.)
On March 8th, the report of the Commission was amended so as to insert a finding that the proposed rates were unjust and unreasonable, which was not contained in the original report, the finding there being merely that the rates had not been justified.
It is perfectly evident from a study of the foregoing reports of the Commission that, in reducing the rates from the northern field, and in directing the cancellation of the reduction from the southern field, the Commission was primarily concerned, not in fixing rates, but in fixing the differential which was to prevail between the two fields, and that, in expanding the differential to 45 cents and in refusing to allow the old differential of 25 cents to be restored, the Commission based its action upon the shift of tonnage from the northern to the southern field and the industrial conditions resulting therefrom. That this was the basis of the Commission's action appears not only from the language of the reports which we have quoted, but also from an analysis of the existing situation and the necessary effect of the order. The rates proposed were not so low as to burden other traffic or prevent the carriers realizing a reasonable return on invested capital or value, and the Commission did not order their cancellation on any such ground. Even after the reduction they would be 25 cents higher than the rates from the northern field; consequently, considered independently of such matters as the cost of production of coal, they could not have interfered with the traffic of roads having a rate 25 cents per ton lower. The only way in which they could be said to interfere with the traffic from the northern field, would be that on account of the difference in industrial conditions in the two fields, the southern field would be able to undersell and get the business even though paying a rate 25 cents per ton higher, whereas it would not be able to undersell if the differential were made higher than that. But it must be manifest that increasing the differential to meet such a situation is not regulation of rates, but regulation of industrial conditions under the guise of regulating rates. It means nothing more nor less than that, because one community is able to produce coal more cheaply than another, and thereby get a large share of the business which has been going to the other, even though paying a considerable differential in freight, the Commission is placing upon it a handicap by increasing the differential in rates and thereby equalizing the advantage which it has in a low cost of production. It matters not what this may be called, it is in essence a regulation of industrial conditions through manipulation of rates.
It is said that the increase of the differential resulting from the lowering of the rates from the northern field and the cancellation of the reduced rates from the southern field is justified by the longer haul from the southern field; but rates are not fixed upon a mileage basis, and the rate for the longer haul, if higher than the rates of competing roads or rates from competing communities, cannot be of consequence to any one except *471 the carriers concerned, unless they result in such impairment of earnings as to make the rates unreasonably low per se; that is, so low as not to yield a reasonable return upon the investment of the carrier or throw an undue burden upon other traffic. The Commission recognizes that length of haul is not in itself a sufficient reason for increasing the differential or refusing a reduction which would leave the rate higher than rates from competing communities, and comes back to the proposition that the change is justified because of conditions in such communities. In a passage previously quoted it says: "In competitive adjustments the carriers may disregard distance, even in substantial degree, so long as the competitor whose geographical location is largely disregarded is not injured thereby; but where it is made to appear in an interrelated adjustment, such as that with which we are here dealing, that such a competitor is injured and is complaining, we believe that a proper interpretation of the law which we administer demands a remedy." How could a competitor who is complaining be injured by a rate higher than his rate? The question answers itself. He could not be injured by the higher rate. If there be injury, it is because of difference in other conditions, not rates; and if the differential be increased in favor of the community enjoying the lower rates, it is not the baneful effect of rates which is removed, but the effect of unequal industrial conditions, which is obviated by increasing the difference in rates in favor of the community already enjoying the lower rate.
In this connection it is of interest to note that in proceedings under section 3 of the Interstate Commerce Act (49 USCA § 3; Comp. St. § 8565), where it is unquestionably proper to consider length of haul in determining whether the rates fixed by the same carrier for different communities are unduly prejudicial, the Commission will not condemn rates on that ground, even where the rate relationship may appear improper measured by distance, in the absence of proof of injury. Boston Port Differential Case, 95 I. C. C. 539; Perry County Coal Corp. v. East St. Louis Ry. Co., 80 I. C. C. 711. As shown above, a rate relationship cannot be injurious to a community, where the rate which that community enjoys is lower than the rate from a competing community with which it is compared.
Much has been said as to the binding effect of the order entered by the Commission, but the law with regard thereto is well settled. If the determination of the Commission finds substantial support in the evidence, the courts will not weigh the evidence, nor consider the wisdom of the Commission's action, which, within the scope of its jurisdiction, is conclusive, unless there be some irregularity in the proceeding or some error in the application of rules of law. Chicago, R. I. & Pac. Ry. v. U. S., 274 U.S. 29, 33, 47 S. Ct. 486, 71 L. Ed. 911; Virginian Ry. Co. v. U. S., 272 U.S. 658, 47 S. Ct. 222, 71 L. Ed. 463; Western Paper Makers' Chem. Co. v. U. S., 271 U.S. 268, 46 S. Ct. 500, 70 L. Ed. 941. If, however, in making the order complained of, the Commission has exceeded its powers, or has proceeded upon an erroneous theory of law, or if its action is so manifestly arbitrary and unreasonable as virtually to transcend the authority conferred upon it, the courts are not bound by its action. Southern Pacific Co. v. I. C. C., 219 U.S. 433, 31 S. Ct. 288, 55 L. Ed. 283; I. C. C. v. Union Pacific Co., 222 U.S. 541, 32 S. Ct. 108, 56 L. Ed. 308; U. S. v. N. Y. C. R. R., 263 U.S. 603, 44 S. Ct. 212, 68 L. Ed. 470; U. S. v. New River Co, 265 U.S. 533, 540, 44 S. Ct. 610, 68 L. Ed. 1165.
We think that the enforcement of the order here complained of should be enjoined: (1) Because the Commission exceeded its powers, in that its action was based, in part, at least, upon industrial conditions, and was essentially an effort to equalize industrial conditions or offset economic advantages through adjustment of rates; (2) because it proceeded upon an erroneous theory of law, in holding that the burden was upon the southern carriers to justify a reduction of rates by a comparison of the reduced rates with lower maximum rates prescribed for a competing field; and (3) because it proceeded upon an erroneous theory of law, in holding that the burden was upon the carriers here to justify the proposed reduction of rates under section 15 (a) (2) of the Interstate Commerce Act, as added by section 422 of the Transportation Act of 1920 and the Hoch-Smith Resolution. We shall consider these in order.
If we are correct in our analysis of the reports of the Commission, there can be no doubt that it exceeded its powers. Of course, since the passage of the Transportation Act of 1920 (49 USCA § 71 et seq.; Comp. St. § 10071¼ et seq.), the Commission has the right to prescribe minimum rates, and we agree with the Commission that a construction of the law is too narrow which limits its right to prescribe such rates to cases where the rates proposed are unreasonable per se, or are so low as to cast a burden on other traffic. It has the right to prescribe minimum rates also to prevent ruinous rate wars and to guarantee reasonable earnings, not only to the *472 carriers affected, but also to competing carriers, who may labor under a higher cost of doing business. New England Divisions Case, 261 U.S. 184, 43 S. Ct. 270, 67 L. Ed. 605; Dayton-Goose Creek R. Co. v. U. S., 263 U.S. 456, 44 S. Ct. 169, 68 L. Ed. 388, 33 A. L. R. 472. And where the Commission fixes a rate or prescribes a minimum in the exercise of the powers conferred upon it, the courts will not interfere with its action, however much they may disagree with its reasoning. The Commission does not have the right, however, to regulate industrial conditions under the guise of regulating rates. And in a case like this, where there is no rate war, where there is no finding that the rates condemned will deprive the carriers of a fair return, and where they cannot injure competing carriers or carriers from a competing locality because they are actually higher than the maximum rates which such carriers may charge, the Commission does not have the right under the law to prohibit the reduction because of a shift in traffic which has occurred from the locality having the lower to the locality having the higher rate.
As pointed out above, for the Commission to fix rates upon such a basis is for it to assume the task of equalizing industrial conditions through rate adjustments. We do not think that Congress could give such power to the Commission. Hammer v. Dagenhart, 247 U.S. 251, 38 S. Ct. 529, 62 L. Ed. 1101, 3 A. L. R. 649, Ann. Cas. 1918E, 724. We are perfectly certain that it has not attempted to do so. It is provided that carriers shall establish "just and reasonable rates." U. S. C. tit. 49, § 1 (4), 49 USCA § 1 (4); Comp. St. § 8563(4). It is made unlawful for any carrier "to make or give any undue or unreasonable preference or advantage to any particular person * * * or locality" section 3 (1), 49 USCA § 3 (1), Comp. St. § 8565(1). The Commission is given power to determine and prescribe "what will be the just and reasonable * * * rate * * * to be thereafter observed * * * or the maximum or minimum, or maximum and minimum, to be charged." Section 15 (1), 49 USCA § 15 (1); Comp. St. § 8583(1). But nowhere is it provided that in doing so the Commission may prefer one section of the country over another, or that it may fix rates, or may prevent the fixing of rates by the carriers, with a view of placing competing producers upon an equality or of compensating for disadvantages under which competing communities may labor. Manifestly such a power is not conferred by the statutes referred to, for rates fixed with such an end in view are not "reasonable," but are unreasonable and constitute an unprecedented interference with the industrial conditions of the country.
In the Ashland Fire Brick Case, 22 I. C. C. 115, 121, Commissioner Franklin K. Lane said: "It seems unnecessary here to state that the power has not been lodged with this tribunal to equalize economic advantages, to place one market in competition with another, or to treat all railroads as a part of one great whole." And in I. C. C. v. Diffenbaugh, 222 U.S. 42, 46, 32 S. Ct. 22, 24, 56 L. Ed. 83, Mr. Justice Holmes says that the Interstate Commerce Act "does not attempt to equalize fortune, opportunities or abilities."
In the Willamette Valley Rate Case, 14 I. C. C. 61, So. Pac. Co. v. I. C. C., 219 U.S. 433, 31 S. Ct. 288, 55 L. Ed. 283, the Commission held a $5 rate on lumber unreasonable. Its report showed that the holding was based primarily on the view that the rate would be unjust to lumber dealers who had established their business in the Valley on the faith of a $3.10 rate. There was some evidence bearing upon the reasonableness of the $3.10 rate; but in that case, as we think in this, the report of the Commission showed that its action was based primarily upon a consideration of the effect of the rate on industry. The Circuit Court (177 F. 963) refused to enjoin the order of the Commission, but this was reversed by the Supreme Court in a unanimous decision, the opinion being written by Chief Justice White. What he said in that case is pertinent here. Said he:
"What was the nature and character of the order made by the Commission? That is, what, in substance, was the power which the Commission exerted in making the order? Coming to the consideration of that subject, we are of opinion that the court below erred in not restraining the enforcement of the order complained of, because we see no escape from the conclusion that the order was void because it was made in consequence of the assumption by the Commission that it possessed the extreme powers which the railroad companies insist the order plainly manifests. We proceed very briefly to state the reasons which compel us to this conclusion. In the first place, when the complaint which was made to the Commission and the answer of the railroad companies to that complaint are considered they give rise to the inference that in substance the subject complained of was not the intrinsic unreasonableness of the new rate which the railroad companies substituted for the former rate, but the injury it was thought would be suffered from not continuing the old rate in force, an injury arising from circumstances extrinsic to the new rate; *473 that is, a loss which would be suffered by substituting the higher rate, even if that rate was in and of itself reasonable and just. * * * While it is true that the opinion of the Commission may contain some sentences which, when segregated from their context, may give some support to the contention that the order was based upon a consideration merely of the intrinsic unreasonableness of the rate which was condemned, we think when the opinion is considered as a whole in the light of the condition of the record to which we have referred it clearly results that it was based upon the belief by the Commission that it had the right under the law to protect the lumber interests of the Willamette Valley from the consequences which it was deemed would arise from a change of the rate, even if that change was from an unreasonably low rate which had prevailed for some time to a just and reasonable charge for the service rendered for the future."
Although this decision was rendered prior to the passage of the Transportation Act of 1920, there is nothing in the Transportation Act which justifies the assumption of the power to raise and lower rates or to prevent rates being lowered in order that industries may be put upon a competing basis or that those near a market may enjoy the advantage of their location. That act does provide that in the exercise of its power to prescribe just and reasonable rates the Commission shall establish them so that carriers as a whole or in rate groups will earn a fair return upon the value of their property. Section 15 (a) (2). And in the exercise of this power the Commission can undoubtedly establish minimum rates higher than required for a fair return to the carriers more favorably situated in order that a fair return may be realized by competing carriers less favorably situated and that an efficient transportation system may be thus afforded to the sections served. Dayton-Goose Creek Ry. v. U. S., 263 U.S. 456, 44 S. Ct. 169, 68 L. Ed. 388, 33 A. L. R. 472; New England Divisions Case, 261 U.S. 184, 43 S. Ct. 270, 67 L. Ed. 605. But we are satisfied that it was never intended by the act that, in exercising this power, the Commission should consider the loss of business of one community due to industrial conditions and attempt to restore it by increasing the differential in the freight rates between that community and others which compete with it. As said by the Supreme Court, in construing section 3 of this act (49 USCA § 3; Comp. St. § 8565), in the Swift Lumber Company Case, U. S. v. Ill. Cent. R. Co., 263 U.S. 515, 524, 44 S. Ct. 189, 193, 68 L. Ed. 417: "The law does not attempt to equalize opportunities among localities; * * * the difference in rates cannot be held illegal, unless it is shown that it is not justified by the cost of the respective services, by their values, or by other transportation conditions." Of course, in that case the Supreme Court was dealing with a case of undue prejudice under section 3, where the rates were those of the same carrier; but the rule stated would seem to apply with greater force where the inquiry is merely as to reasonableness and the rates are offered to different communities by different carriers.
The Commission seems to have thought that it was justified in considering industrial conditions and the shift in traffic as a reason for widening the differential because of the provisions of the Hoch-Smith Resolution. 126 I. C. C., bottom page 362. And in condemning the reduced rates which would have restored the old differential it says that the carriers have not shown that they are justified under that resolution. We do not think, however, that the Hoch-Smith Resolution, 43 Stat. 801, c. 120, was intended to confer, or did confer, any such power upon the Commission. That resolution declared it to be the true policy in rate making that the Commission should consider the conditions which at any given time prevail in our several industries, in so far as it is legally possible to do so, "to the end that commodities may freely move." It then provided:
"That the Interstate Commerce Commission is authorized and directed to make a thorough investigation of the rate structure of common carriers subject to the Interstate Commerce Act, in order to determine to what extent and in what manner existing rates and charges may be unjust, unreasonable, unjustly discriminatory, or unduly preferential, thereby imposing undue burdens, or giving undue advantage as between the various localities and parts of the country, the various classes of traffic, and the various classes and kinds of commodities, and to make, in accordance with law, such changes, adjustments, and redistribution of rates and charges as may be found necessary to correct any defects so found to exist. In making any such change, adjustment, or redistribution the commission shall give due regard, among other factors, to the general and comparative levels in market value of the various classes and kinds of commodities as indicated over a reasonable period of years to a natural and proper development of the country as a whole, and to the maintenance of an adequate system of transportation. In the progress of *474 such investigation the commission shall, from time to time, and as expeditiously as possible, make such decisions and orders as it may find to be necessary or appropriate upon the record then made in order to place the rates upon designated classes of traffic upon a just and reasonable basis with relation to other rates. Such investigation shall be conducted with due regard to other investigations or proceedings affecting rate adjustments which may be pending before the Commission.
"In view of the existing depression in agriculture, the Commission is hereby directed to effect with the least practicable delay such lawful changes in the rate structure of the country as will promote the freedom of movement by common carriers of the products of agriculture affected by that depression, including live stock, at the lowest possible lawful rates compatible with the maintenance of adequate transportation service: Provided," etc.
So far as it affects the question here, this resolution does no more than authorize the Commission to grant relief against rates found to be unjustly discriminatory or unduly preferential, thereby imposing "undue burdens or giving undue advantages." But, as pointed out above, a rate could not be said to give an undue advantage to a locality as against a competing locality or to impose an undue burden on such competing locality where it is actually higher than the rate which the competing locality enjoys.
So far as the general language of the resolution is concerned, to the effect that the conditions which prevail in industry should be considered in adjusting freight rates, to the end that commodities may freely move, this is no more than a general declaration that freight rates shall be adjusted in such way as to provide the country with an adequate system of transportation, and Congress certainly did not intend by this language to create in the Commission an economic dictatorship over the various sections of the country, with power to kill or make alive. If the Commission has the right in a rate adjustment to consider the shift in traffic to a community already paying a higher rate, and act upon it as one of the factors in still further widening the rate differential, its power to control the economic development of the country is practically unlimited. The shift in cotton manufacturing, in fruit growing, in furniture manufacturing, in short in every branch of industry, will become a matter for consideration by the Commission; for all depend upon freight rates, all have rates in which the differential between long and short hauls is narrow, and all experience periods when there are shifts of traffic from one section to another, due to varying industrial conditions. We feel perfectly certain that Congress did not intend to vest such power in the Commission. And the fact that the Commission seemed to consider that the Hoch-Smith resolution required it to consider or give effect to industrial conditions and the shift of traffic, or at least showed a spirit and purpose in that regard which should be deferred to, is of itself sufficient to invalidate the order complained of. U. S. v. N. Y. Cent. R. R., 263 U.S. 603, 610, 44 S. Ct. 212, 68 L. Ed. 470.
2. Coming to the second ground of invalidity, which is that the Commission proceeded upon an erroneous theory of law in holding that the burden was upon the southern carriers to justify the proposed reduction by comparison of the proposed rates with lower maximum rates from another field, we would observe that an error as to the burden of proof in the sense of the duty to go forward with the evidence or to produce the preponderance thereof would not be ground to interfere with the action of the Commission, for, of course, we do not attempt to control matters of procedure before it. Here, however, the failure to meet the burden imposed to show certain things meant adverse action by the Commission on the proposed reduction of rates, and it therefore becomes a vital question as to whether it was legally necessary that these things be shown.
In the first place, the Commission placed upon the carrier the burden of justifying the proposed reduction and ordered the cancellation of the rates because they were not justified. (We are attaching no importance to the mere verbiage of the concluding portion of the report; for the finding that the rates were unjust and unreasonable because the carriers had not met the burden of justifying them is the same thing as finding that they were not justified.) In this we think there was error. Carriers still have the right to initiate rates. U. S. C. tit. 49, § 1 (4), 41 Stat. 475 (49 USCA § 1 (4); Comp. St. § 8563(4); U. S. v. Ill. Cent. R. Co., 263 U.S. 515, 522, 44 S. Ct. 189, 68 L. Ed. 417. The Commission, it is true, upon the filing of a new rate, has the right to suspend it and enter upon a hearing as to its lawfulness. U. S. C. tit. 49, § 15 (7), 41 Stat. 486 to 487 (49 USCA § 15 (7); Comp. St. § 8583(7). But upon such hearing the burden is upon the carrier to justify an increased rate, not to justify a rate reduction. The portion of the statute applicable thereto is as follows:
"At any hearing involving a rate, fare, *475 or charge increased after January 1, 1910, or of a rate, fare, or charge sought to be increased after the passage of this act, the burden of proof to show that the increased rate, fare, or charge, or proposed increased rate, fare, or charge, is just and reasonable shall be upon the carrier." (Italics ours.)
It will thus be seen that, in the very act which for the first time gave to the Commission the power to establish minimum rates and prevent reductions, there was incorporated a provision placing upon carriers the burden of justifying only an increased rate. This is of importance, not only upon the principle "Expressio unius est exclusio alterius," but also because it expresses a legislative policy favoring low rates. There is all of the difference imaginable between a proposition to raise and one to lower rates. In the former case, the natural presumption is that the carrier will charge what the traffic will bear, and before he is allowed to increase his charges he should show that the increase proposed is justified by cost of operation or other valid criterion. Furthermore, the matters justifying the increase are matters peculiarly within the knowledge of the carrier proposing it. In the case of a reduction of rates, however, the self-interest of the carrier can ordinarily be depended on to guard against too great a reduction; and the reasons for denying the reduction, such as the effect on other carriers, are matters which are not peculiarly within the knowledge of the carrier offering the reduction, and could be better shown by the carriers injuriously affected. Where carriers are willing to reduce rates and thus give the public the benefit of a lower cost of transportation, we think that the burden should be upon those who oppose the reduction to show that it should not be granted, and not upon those who offer it to show that it should be. A reduction of rates is ordinarily beneficial to the public, and before it is denied the contrary should be made to appear. Here, it is shown that the carriers voluntarily offered a reduction of rates which would give the public cheaper coal, and we think that the Commission acted upon an erroneous legal theory in requiring that the rates be rescinded, not on the ground that they were shown to be too low, but because they had not been justified by the carriers proposing them.
In this connection, we feel that the interest of the public or of the consumers of coal who will benefit by the reduction in rates offered by the carriers ought not be lost sight of. As said in Galloway Coal Co. v. A. G. S. R. R. Co., 40 I. C. C. 311, consumers should be given the widest possible markets consistent with justice to the carriers, and carriers, as a matter of traffic policy, may accord competing producing centers located at different distances from common centers of production identical rates. And with respect to the power to fix minimum rates the Commission said in the Sugar Cases of 1922, 81 I. C. C. 448, 472; "We believe, however, that this power should be sparingly exercised and only in cases where it clearly appears that its exercise is necessary in order that substantial public injury may be avoided." While the interest of consumers is not a matter of course, which establishes the burden of proof, it serves to illustrate the unsoundness of the rule applied by the Commission. Are the consumers of coal of the northwest to be denied the benefit of a reduction in rates which the carriers are willing to give them merely because the carriers have not carried the burden of showing that these rates are not unreasonably low as compared with other rates which are still lower? Congress could not have intended such a result. The provision placing the burden on the carrier to justify only an increase in rates, shows, we think, that it did not intend such a result.
But it appears that not only did the Commission place upon the carriers the burden of justifying the reduction in rates, but also what we think was the absurd and impossible burden of justifying them by comparison with a lower maximum rate prescribed for carriers from a competing community. The $1.91 rate from Kanawha and the $1.66 rate from Pittsburgh were established as reasonable maximum rates from these respective communities by the Commission itself. Later the Commission reduced the reasonable maximum from Pittsburgh to $1.46. This, of course, does not mean that the carriers from Pittsburgh may not fix a lower rate but merely that they may not fix a higher one. The Commission has not fixed a minimum for either Kanawha or Pittsburgh. Nevertheless, when the southern carriers themselves filed a rate only 20 cents under that fixed as a maximum for Kanawha, the Commission has ordered it rescinded merely because the carriers have not shown it reasonable as compared with the maximum rate established from Pittsburgh. We can see how logically a rate might be condemned as too low when compared with a minimum rate from a competing community; but there is certainly no criterion by which it can be thus condemned when compared with a maximum rate. The Commission is in the attitude of saying that it will refuse to allow one road to charge 20 *476 cents per ton less than $1.91 because it has refused to allow a road from a competing community to charge more than $1.46. We think that the standard was wrong, as well as the requirement that the road reducing the rates justify the reduction.
The Commission, in fixing rates, undoubtedly has the power to require that they be high enough to give the carrier a fair return, that they be not so low as to burden other traffic, and that they do not interfere with the earnings of competing carriers, as by being made lower than the rates upon which such carriers can earn a fair return; but there is neither reason nor law for the proposition that rates may be condemned as too low because of their relation to maximum rates from a competing community, where they are actually higher than such rates. Where prescribed by the same carrier, one rate can be condemned by comparison with another only where shown to be prejudicial. Surely a rate prescribed by one carrier may not be condemned by comparison with rates prescribed by another in the absence of such showing. And, a fortiori, the public in such case is not to be denied the benefit of a reduction in rates. We appreciate the fact that we have no power to enjoin action of the Commission because we do not approve of its reasoning; but here we think that there is more wrong with the decision than faulty reasoning. The Commission has imposed upon the carriers as a prerequisite to the reduction of rates the burden of meeting a test of reasonableness not prescribed by the law, and one which we think is repugnant to the law. At least the burden is wrongly imposed, and the criterion adopted accentuates the error with respect to the burden.
It is said that the fixing of maximum reasonable rates by comparison with other rates has been approved, citing Virginian Ry. Co. v. U. S., 272 U.S. 658, 47 S. Ct. 222, 71 L. Ed. 463. And it is argued that minimum rates may be established by the same comparison. The answer is that the Commission in the case at bar did not establish a minimum rate by comparing it with a minimum established for traffic conducted under similar circumstances, but condemned as too low a rate filed by a carrier by comparing it with still lower maximum rates prescribed for traffic from a different field admittedly handled under very different circumstances. It was condemned, not because it was actually too low, but because the carriers proposing it did not justify the lower differential by a comparison of the difference in circumstances; i. e., because they did not show that the rate which they proposed, 25 cents higher than the rate from the competing field, should not have been higher still, considering the length of haul. It is manifest that the authorities which support the fixing of maximum rates by comparison with rates charged for similar service under like conditions have no application to what was done here.
It is said that the salt rate case, Jefferson Island Salt Mining Co. v. U. S. (D. C.) 6 F. (2d) 315, supports the position of the Commission here, but we do not think so. In that case a system of minimum rates on salt from different localities to a competing market was established; but there was no condemnation of a rate as being too low in relation to a maximum rate from another locality, nor was it asserted that as a prerequisite to a reduction of rates the carrier must establish the reasonableness of the rates as reduced by comparison with such maximum rates. It appeared also in that case that the action of the Commission was taken to prevent ruinous cut rate wars between carriers and prejudicial discrimination between localities. 6 F.(2d) at page 316. Here the Commission expressly found that no rate war was imminent; and, as we have pointed out several times, a rate higher than the rate enjoyed by a community could not be said to constitute prejudicial discrimination against that community.
3. The third ground upon which we think the order of the Commission invalid is that it proceeded upon an erroneous theory of law, in holding that the burden was upon the carriers to justify the proposed reduction under section 15 (a) (2) of the Interstate Commerce Act, as added by section 422 of the Transportation Act of 1920, and the Hoch-Smith Resolution. We have already adverted to the error of this as regards the Hoch-Smith Resolution. We think it is equally erroneous as regards section 15 (a) (2) of the Interstate Commerce Act, as added by section 422 of the Transportation Act. That section provides:
"(2) In the exercise of its power to prescribe just and reasonable rates the Commission shall initiate, modify, establish or adjust such rates so that carriers as a whole (or as a whole in each of such rate groups or territories as the Commission may from time to time designate) will, under honest, efficient and economical management and reasonable expenditures for maintenance of way, structures and equipment, earn an aggregate annual net railway operating income equal, as nearly as may be, to a fair return upon the aggregate value of the railway *477 property of such carriers held for and used in the service of transportation: Provided, that the Commission shall have reasonable latitude to modify or adjust any particular rate which it may find to be unjust or unreasonable, and to prescribe different rates for different portions of the country."
In Dayton-Goose Creek R. Co. v. United States, 263 U.S. 456, 478, 44 S. Ct. 169, 172 (68 L. Ed. 388, 33 A. L. R. 472) which upheld the validity of section 15 (a) of the Interstate Commerce Act, as added by section 422 of the Transportation Act of 1920, with special reference to the recapture clause, the court said with respect to the new powers given the Commission by the Transportation Act of 1920:
"In both cases (Railroad Commission of Wis. v. C., B. & Q. R. R., 257 U.S. 563, 42 S. Ct. 232, 66 L. Ed. 371, 22 A. L. R. 1086; New England Divisions Case, 261 U.S. 184, 43 S. Ct. 270, 67 L. Ed. 605) it was pointed out that the Transportation Act adds a new and important object to previous interstate commerce legislation, which was designed primarily to prevent unreasonable or discriminatory rates against persons and localities. The new act seeks affirmatively to build up a system of railways prepared to handle promptly all the interstate traffic of the country. It aims to give the owners of the railways an opportunity to earn enough to maintain their properties and equipment in such a state of efficiency that they can carry well this burden. To achieve this great purpose, it puts the railroad systems of the country more completely than ever under the fostering guardianship and control of the Commission, which is to supervise their issue of securities, their car supply and distribution, their joint use of terminals, their construction of new lines, their abandonment of old lines, and by a proper division of joint rates, and by fixing adequate rates for interstate commerce, and in case of discrimination, for intrastate commerce, to secure a fair return upon the properties of the carriers engaged.
"It was insisted in the two cases referred to, and it is insisted here, that the power to regulate interstate commerce is limited to the fixing of reasonable rates and the prevention of those which are discriminatory, and that when these objects are attained, the power of regulation is exhausted. This is too narrow a view of the commerce clause. To regulate in the sense intended is to foster, protect and control the commerce with appropriate regard to the welfare of those who are immediately concerned, as well as the public at large, and to promote its growth and insure its safety."
The court held that the validity of the plan provided by the Transportation Act depended on (1) rates which "as a body" enable all the railroads, necessary to do the business of a rate territory or section, to enjoy not more than a fair net operating income on the value of their properties; and (2) on the fact that the carrier was not entitled as of constitutional right to more than such fair net operating income. With respect to the first proposition it said:
"It should be noted that, in reaching a conclusion, upon this first proposition, we are only considering the general level of rates and their direct bearing upon the net return of the entire group. The statute does not require that the net return from all the rates shall affect the reasonableness of a particular rate or a class of rates. In such an inquiry, the Commission may have regard to the service done, its intrinsic cost, or a comparison of it with other rates, and need not consider the total net return at all. Paragraph 17 of section 15a (49 USCA § 15a, par. 17; Comp. St. § 8583a, par. 17) makes this clear." (Italics ours.)
And in discussing the second proposition the court used language which seems controlling here. It quoted first with approval the following language of Mr. Justice Lamar in I. C. C. v. Union Pac. R. Co., 222 U.S. 541, 549, 32 S. Ct. 108, 111 (56 L. Ed. 308):
"Where the rates as a whole are under consideration, there is a possibility of deciding, with more or less certainty, whether the total earnings afford a reasonable return. But whether the carrier earned dividends or not sheds little light on the question as to whether the rate on a particular article is reasonable. For, if the carrier's total income enables it to declare a dividend, that would not justify an order requiring it to haul one class of goods for nothing, or for less than a reasonable rate. On the other hand, if the carrier earned no dividend, it would not have warranted an order fixing an unreasonably high rate on such article."
It then proceeded to say: "There is nothing in the act requiring the use of the net return as evidence to fix a particular rate." If the act does not require the use of the net return as evidence to fix a particular rate, it necessarily follows that the burden is not upon the carrier offering a reduction of rates to show that the reduction can be justified with reference to the net return.
We feel sure that no proper interpretation of the act requires that before a carrier *478 can reduce a particular rate to the public it must show how the net income of all the carriers in that part of the United States will be affected by the reduction. The act as construed gives the Commission power to fix a minimum rate to prevent rate wars, and to prevent the burdening of other traffic or the impairment of earnings either of the road itself or competing roads; but certainly this was as far as Congress intended to go. The railroads are still private property and are subject to private management. When one of them proposes a reduction of rates which is not shown to unduly impair its own earnings, burden other traffic, or injure its competitors, it is nothing short of absurd to say that it must justify the reduction with reference to its effect on the net income of all the carriers in the eastern part of the United States.
The absurdity of attempting to deny a reduction on the general ground that the net operating income of all the carriers in the group will be affected is well illustrated in this case. The Commission has lowered the rates from the northern field by 20 cents per ton. If this results in relieving the distress in the northern field, it means that traffic will be diverted thereto from the southern field. Every ton thus diverted will pay 45 cents per ton less than if hauled from the southern field, and the income of the carriers will be reduced by that amount. If, however, the southern rate is also reduced 20 cents, and the traffic is not diverted, the income of the carriers is reduced only 20, instead of 45, cents. How much would be diverted if the reduction by the southern carriers is not allowed, how much loss this would entail on the southern carriers as compared with gain by the northern carriers, how much, if anything, the net income of the carriers would be increased or diminished, are questions which no one could estimate with even a hope of approximate correctness. We cannot believe that Congress intended that the advantages of a reduction in rates should be made to depend upon the carrier showing anything so impossible of proof as this. When a reduction such as that involved here is offered, if it be shown that it will unduly impair the earnings of the carriers proposing it or will injure competing carriers, that it will unduly burden other traffic or will lead to a rate war, then the Commission may forbid it in the exercise of its power to fix minimum rates (U. S. v. Ill. Cent. R. Co., 263 U.S. 515, 525, 44 S. Ct. 189, 68 L. Ed. 417); but in the absence of such showing it seems clear that the Commission has no power to forbid it under the general grant of power contained in section 15 (a) (2).
The Question of Jurisdiction. Having reached the conclusion that in entering the order complained of the Commission exceeded its powers and proceeded upon erroneous principles of law, the question which presents itself is whether this court has power to grant relief. We think that it has. Suit is instituted by coal producers who are vitally affected by the rates. Some of them were residents of the Southern district of West Virginia, and were heard before the Commission in the proceeding in which the order complained of was entered, and, although not originally parties to the proceeding, they became parties by intervention and were heard as such. We think that the court has jurisdiction under U. S. C. tit. 28, §§ 46 and 47 (28 USCA §§ 46, 47). Chicago Junction Case, 264 U.S. 258, 267, 44 S. Ct. 317, 68 L. Ed. 667. And, although we do not understand that question is raised as to venue, but merely as to jurisdiction, we think that the venue is good under U. S. C. tit. 28, § 43 (28 USCA § 43). Skinner & Eddy Corp. v. U. S., 249 U.S. 557, 39 S. Ct. 375, 63 L. Ed. 772.
It is contended in behalf of the Commission that the court is without jurisdiction to grant the relief prayed for two reasons: (1) Because the order is in effect one denying relief, the enforcement of which cannot be enjoined; and (2) because complainants are not hurt by the order as it affects the railroads and not them. We think that neither of these positions is well taken. The order complained of is not a mere negative order, or one denying relief. It is a positive order to cancel the schedules filed which will put into effect the reduced rates. If they are not canceled as directed by the order, the rates prescribed by them automatically become the rates applicable on the traffic to which they are directed. To say that complainants are not hurt by the order, because it is addressed to the railroad companies, is to close one's eyes to the real situation. The complainant coal producers are served by the carriers. Their only means of reaching the lake ports is over the lines of the carriers and at such rates as they may charge. If, therefore, the order of the Commission is carried out, these producers must pay 20 cents per ton more on every ton of coal shipped than they will be required to pay if the reduced rates prescribed in the schedules are allowed to become effective.
On the first proposition, those who deny jurisdiction rely on U. S. v. New River Co., 265 U.S. 533, 44 S. Ct. 610, 68 L. Ed. 1165; *479 the Chicago Junction Case, 264 U.S. 258, 44 S. Ct. 317, 68 L. Ed. 667; Mfrs. R. Co. v. U. S., 246 U.S. 483, 38 S. Ct. 383, 62 L. Ed. 831; Lehigh Valley R. R. Co. v. U. S., 243 U.S. 412, 37 S. Ct. 397, 61 L. Ed. 819; Proctor & Gamble Co. v. U. S., 225 U.S. 282, 32 S. Ct. 761, 56 L. Ed. 1091. The rule laid down in the Proctor & Gamble Case, and approved in the other cases cited, is that the courts will not interfere with an order of the Commission denying affirmative relief, because to do so would be to grant the relief which the Commission, in the exercise of its jurisdiction, has denied. Here the order is an affirmative one. It directs the cancellation of the rate schedules which, if not canceled, will prescribe the applicable rate to the commerce in question. In directing their cancellation the Commission exceeded its authority and acted upon erroneous legal principles. If the enforcement of the order is enjoined, the effect is not to grant relief which the Commission has denied, but to prevent it from taking action which it had no legal right to take. See Chicago Grand Junction Case and U. S. v. New River Co., supra.
On the second proposition reliance is placed in the cases of Edward Hines Trustees v. U. S., 263 U.S. 143, 44 S. Ct. 72, 68 L. Ed. 216; Home Furniture Co. v. U. S., 271 U.S. 456, 46 S. Ct. 545, 70 L. Ed. 1033; and I. C. C. v. C., R. I. & P. Ry. Co., 218 U.S. 88, 30 S. Ct. 651, 54 L. Ed. 946. These cases establish the rule that one will not be heard to ask an injunction against the enforcement of an order of the Commission unless he is in some way injured by the order. Thus, in the Hines Case a lumber company was held to have no standing to enjoin the enforcement of an order the result of which was to cancel a demurrage charge which affected its rivals in business but did not affect it. In the Home Furniture Case a shipper was held to have no standing to attack an order of the Commission which permitted one railroad to acquire the stock of another, as the shipper showed no direct legal injury to itself resulting therefrom. In I. C. C. v. C., R. I. & P. Ry. Co., supra, it was held that railroads would be heard to complain of an order only so far as it affected their revenues, not because of its effect on shippers and localities. In the case at bar, however, the complaining shippers are directly injured by the order complained of. If carried out, it means that they must pay 20 cents additional on every ton of coal shipped to the lake ports. This means the loss of millions of dollars to the producers of the southern field and thousands to each of the individual complainants. To say that they have not a legal interest which will be injuriously affected by the illegal order of the Commission is a position which seems to us to answer itself. See Chicago Junction Case, 264 U.S. 258, 266, 44 S. Ct. 317, 68 L. Ed. 667.
To conclude, therefore, we think that in entering the order complained of the Commission exceeded its powers and proceeded upon erroneous theories of law. We think that its action was essentially an effort to equalize industrial conditions or to offset economic advantages by rate adjustments, not warranted by anything contained in the Transportation Act of 1920 or in the Hoch-Smith Resolution. We think that it erred, as a matter of law, in holding that the burden was upon carriers, who had filed schedules reducing rates, to show that the rates as reduced were not unreasonably low as compared with lower maximum rates prescribed for shipments from another field, and in holding that the schedules should be canceled for failure of the carriers to sustain this burden. We think that there was error of law also in the holding that the burden was upon the carriers proposing a reduction of rates to justify the reduction under section 15 (a) (2) of the Interstate Commerce Act, as added by section 422 of the Transportation Act of 1920 or the Hoch-Smith Resolution. For these reasons we think that the order complained of is void; and, as it is affirmative in its nature, commanding the cancellation of rate schedules which will become effective if not canceled, and as complainants will be injured if its enforcement is not enjoined, we have no doubt of the power of the court to grant the injunction prayed. The effect of the injunction will be, as we have already said, to restore the differential which the Commission itself established and which it approved before it reached the conclusion that it was its duty to consider the industrial conditions prevailing in the northern field and the shift of traffic resulting therefrom. It will result in a reduction of rates which the carriers are willing to make and will enable the public to obtain the benefit of a lower cost of transportation. It cannot injure the carriers which serve the competing northern field, because the maximum rate which they can charge is lower than the reduced rates from the southern field. In a word, its only effect will be to prevent the Commission from interfering with industrial conditions in the localities affected and from forbidding a reduction of rates which will preserve the differential that has prevailed for *480 many years. The injunction prayed will accordingly be granted.
Injunction granted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548773/ | 992 A.2d 569 (2010)
The STATE of New Hampshire
v.
Reno DEMESMIN.
No. 2008-702.
Supreme Court of New Hampshire.
Submitted: October 8, 2009.
Opinion Issued: January 28, 2010.
*570 Kelly A. Ayotte, attorney general (Nicholas Cort, assistant attorney general, on the brief), for the State.
David M. Rothstein, deputy chief appellate defender, of Concord, on the brief, for the defendant.
HICKS, J.
The defendant, Reno Demesmin, appeals his conviction of first degree assault. See RSA 631:1 (2007). He argues that the Superior Court (Smukler, J.) erred when it permitted the re-evaluation of his competency to stand trial. We affirm.
The record supports the following facts. In October 2006, a grand jury indicted the defendant on one count of first degree assault. Before trial, defense counsel moved for an evaluation of competency *571 because of possible intellectual disability. Dr. James J. Adams, chief forensic examiner for the State of New Hampshire, examined the defendant. Dr. Adams concluded that there was "no evidence that th[e] defendant [was] competent to stand trial." However, he expressed concern that the defendant was malingering during the evaluation.
Based upon Dr. Adams' findings, the parties submitted a stipulation to the trial court, which it accepted with modifications. The agreement stated that while "there is a question as to whether the Defendant is malingering," the defendant "shall be found incompetent." The agreement then called for a "[h]earing to be scheduled on whether the defendant should continue to remain in custody pursuant to RSA 135:17-a, V." RSA 135:17-a, V (Supp. 2009) permits a court to order a person to remain in custody for a reasonable time if the defendant is dangerous to himself in order to evaluate the appropriateness of involuntary treatment. Finally, the agreement provided that "should the Defendant be found to have been restored to competency during the next year that the State shall present an Indictment against the Defendant."
In June 2007, the trial court held a hearing to determine whether the defendant was dangerous to himself or others. See RSA 135:17-a, V. The trial court found the defendant dangerous and ordered that he be evaluated for the appropriateness of involuntary commitment. Dr. Eric G. Mart, a licensed psychologist, then examined the defendant and found that he was not eligible for civil commitment because he did not meet the diagnostic criteria for an intellectual disability. See RSA 171-B:2, IV (Supp.2009). Based upon these results, the State moved for a second competency assessment, contending that the defendant malingered during his first evaluation and was, in fact, competent to stand trial. Over the defendant's objection, the trial court granted the State's motion and the defendant was reevaluated for competency. Subsequently, the trial court found the defendant competent to stand trial. At trial, a jury found the defendant guilty of first degree assault.
On appeal, the defendant first asserts that the trial court lacked jurisdiction to order the re-assessment of his competency under the original indictment, because by ordering an evaluation of the defendant's dangerousness under RSA 135:17-a, V, the trial court impliedly dismissed without prejudice the original indictment by operation of law. According to the defendant, "[p]roceedings under RSA 135:17-a, V do not commence unless the case against the defendant [has been] dismissed" (quotation omitted). Therefore, before the State could resume prosecuting the defendant, the State had to reindict him.
The State disagrees, contending that the trial court never found by "clear and convincing evidence" that the defendant could not be restored to competency, a prerequisite for there to be a dismissal of the case without prejudice. Moreover, the State argues that the defendant did not preserve this argument for appeal because "it was never made below, and was never mentioned either in the notice of appeal or in any motion to add issue." We, however, will address the merits of this argument. Subject matter jurisdiction may be raised at any time in the proceedings, including on appeal, by the parties, or by the court sua sponte. See Route 12 Books & Video v. Town of Troy, 149 N.H. 569, 575, 825 A.2d 493 (2003).
The defendant's argument requires us to interpret RSA 135:17-a. In *572 matters of statutory interpretation, we are the final arbiter of legislative intent as expressed in the words of the statute considered as a whole. State v. Shannon, 155 N.H. 135, 137, 920 A.2d 1163 (2007). We first examine the language of the statute and ascribe the plain and ordinary meanings to the words used. Id. at 137-38, 920 A.2d 1163. Our goal is to apply statutes in light of the legislature's intent in enacting them, and in light of the policy sought to be advanced by the entire statutory scheme. Id. at 138, 920 A.2d 1163.
RSA 135:17-a, I, and V state,
I. If, after hearing, the district court or superior court determines that the defendant is not competent to stand trial, the court shall order treatment for the restoration of competency unless it determines, by clear and convincing evidence, that there is no reasonable likelihood that the defendant can be restored to competency through appropriate treatment within 12 months. If the court finds, by clear and convincing evidence, that the defendant cannot be restored to competency within twelve months, the case against the defendant shall be dismissed without prejudice and the court shall proceed as provided in paragraph V.
....
V. If the court has determined that the defendant has not regained competency, and the court determines that he or she is dangerous to himself or herself or others, the court shall order the person to remain in custody for a reasonable period of time, not to exceed 90 days, to be evaluated for the appropriateness of involuntary treatment pursuant to RSA 135-C:34 or RSA 171-B:2. The court may order the person to submit to examinations by a physician, psychiatrist, or psychologist designated by the state for the purpose of evaluating appropriateness and completing the certificate for involuntary admission into the state mental health services system, the state developmental services delivery system, or the secure psychiatric unit as the case may be....
RSA 135:17-a, I, specifically requires the trial court to find by "clear and convincing evidence[] that the defendant cannot be restored to competency" in order for the case against the defendant to be dismissed without prejudice. Here, the trial court made no such finding. The trial court merely accepted the parties' stipulation, which provided that "at this point, the Defendant shall be found incompetent" as a result of "Dr. Adams' lack of diagnosis of competency." The agreement then called for a dangerousness hearing pursuant to RSA 135:17-a, V. We will not infer from silence in the record that the trial court found by "clear and convincing evidence[] that the defendant cannot be restored to competency." RSA 135:17-a, I. Such a finding must be explicit. The trial court, therefore, never dismissed the original indictment against the defendant, and the State was not required to re-indict him to continue prosecuting him. "There is a presumption against divesting a court of its jurisdiction once it has properly attached, and any doubt is resolved in favor of retaining jurisdiction." 21 Am.Jur.2d Criminal Law § 434 (2008); see Com. v. Adkins, 29 S.W.3d 793, 795 (Ky.2000); People v. Veling, 443 Mich. 23, 504 N.W.2d 456, 460 (1993). Further, it is common practice that "[o]nce a court has acquired jurisdiction, no subsequent error or irregularity will remove that jurisdiction, so that a court may not lose jurisdiction because it makes a mistake in determining either the facts, the law, or both." 21 Am.Jur.2d Criminal Law § 434; see also People v. Davis, 156 Ill. 2d 149, 189 Ill. Dec. 49, 619 N.E.2d 750, 754 (1993).
*573 Second, the defendant contends that the trial court exceeded its statutory authority under RSA 135:17-a by ordering a second competency evaluation. Specifically, he argues that RSA 135:17-a does not authorize a trial court to order the re-assessment of a defendant's competency where the defendant has been found incompetent and dangerous but has not been involuntarily committed. According to the defendant, a re-evaluation may only occur during the period of involuntary commitment and before expiration of the limitations period. See RSA 135:17-a, VI (Supp. 2009).
RSA 135:17-a lays out the procedures a trial court should follow after making an initial determination that the defendant is not competent to stand trial. It includes provisions to order treatment for the restoration of competency, to order a person determined "dangerous to himself ... or others" to be held for up to ninety days for evaluation, and to order an intellectually disabled or mentally ill person involuntarily committed under RSA chapter 135-C or RSA chapter 171-B. RSA 135:17-a, V. RSA 135:17-a does not address specifically how a trial court should proceed if evidence exists that a defendant has procured a finding of incompetence through malingering or fraud. We, therefore, look to the common law for guidance.
It is a basic principle that "statutory enactments should be construed by courts as consistent with the common law." 15A Am.Jur.2d Common Law § 15 (2000). Indeed, we have stated that "we will not interpret a statute to abrogate the common law unless the statute clearly expresses that intent." State v. Elementis Chem., 152 N.H. 794, 803, 887 A.2d 1133 (2005) (quotation omitted). Here, RSA 135:17-a does not state a clear intent to abrogate the common law governing malingering.
Trial courts have the inherent authority and obligation to order an initial psychiatric or psychological evaluation of a defendant to determine competency to stand trial. See State v. Veale, 158 N.H. 632, 640, 972 A.2d 1009, cert. denied, ___ U.S. ___, 130 S. Ct. 748, ___ L.Ed.2d ___, 78 U.S.L.W. 3320 (U.S.2009). A court also has the authority to order a second competency evaluation upon request of the State where "the defendant has submitted to psychological or psychiatric examination by defense experts, and has indicated an intention to rely on that testimony at trial." State v. Briand, 130 N.H. 650, 653, 547 A.2d 235 (1988); see also RSA 135:17, II (Supp.2009) (permitting separate competency evaluations upon request of the parties). In reaching our holding in Briand, we rejected the defendant's argument that the State could not require her to submit to an examination by the State's expert "because there [was] no statute granting it the authority to do so." Id. at 652, 547 A.2d 235. Trial courts possess this inherent authority to protect the constitutional rights of the defendant, State v. Gagne, 129 N.H. 93, 96-97, 523 A.2d 76 (1986), and "to promote the ascertainment of truth and to insure the orderliness of judicial proceedings," Briand, 130 N.H. at 652-53, 547 A.2d 235. Whether a trial court has inherent authority to order a second evaluation and competency hearing when there is evidence of malingering is an issue of first impression in New Hampshire.
Concern that a defendant is fabricating or exaggerating the symptoms of intellectual disability or mental illness to avoid trial is not a recent phenomenon. For example, Sir Matthew Hale, a Lord Chief Justice of England, in his seventeenth century treatise, warned that "there may be great fraud" in determinations of mental competence. 1 M. Hale, Pleas of the Crown *35; see also King v. Dyson, 73 *574 Car. & P. 305, n. (a), 173 Eng. Rep. 135-36, n. (a) (1831). Courts presume that the legal process will eventually catch those who malinger and permit their trial. See Cooper v. Oklahoma 517 U.S. 348, 365, 116 S. Ct. 1373, 134 L. Ed. 2d 498 (1996) (observing that it would be "unusual for even the most artful malingerer to feign incompetence successfully for a period of time while under professional care").
Upon detecting evidence of malingering, trial courts often order the re-examination of a defendant and hold a subsequent competency hearing. See, e.g., United States v. Izquierdo, 448 F.3d 1269 (11th Cir.2006); United States v. Greer, 158 F.3d 228 (5th Cir.1998). For example, in Izquierdo, the trial court ordered the psychiatric re-evaluation of the defendant after hearing testimony from another inmate that the defendant told him he "planned `to act crazy'" to be found mentally incompetent. Izquierdo, 448 F.3d at 1273-74. The trial court then held a second competency hearing. Id. at 1275. Similarly, in Greer, the trial court held a second competency hearing after receiving a report from the defendant's treating doctor that he had malingered. Greer, 158 F.3d at 230-31. The Fifth Circuit subsequently upheld the trial court's application of an obstruction of justice enhancement to the defendant's sentence for feigning incompetence. Id. at 234-38. The court reasoned, "[W]hile a criminal defendant possesses a constitutional right to a competency hearing if a bona fide doubt exists as to his competency, he surely does not have the right to create a doubt as to his competency or to increase the chances that he will be found incompetent by feigning mental illness." Id. at 237.
In Cooper, the United States Supreme Court implicitly embraced the practice of a second competency hearing in the face of evidence of malingering. Cooper, 517 U.S. at 365-66, 116 S. Ct. 1373. The Court held unconstitutional Oklahoma's statutory requirement that a defendant prove his incompetence by clear and convincing evidence partially because "a conclusion that the defendant is incompetent when he is in fact malingering ... is subject to correction in a subsequent proceeding." Id. at 365, 116 S. Ct. 1373. Moreover, the public has a strong interest in ensuring that courts carefully scrutinize a claim of incompetency to proceed to trial. See W.R. LaFave, Criminal Law § 1.2(e) at 13 (4th ed. 2003).
We agree with the above-cited federal common law that trial courts possess the inherent authority to order a second evaluation and competency hearing when there is evidence of malingering. The common law governing malingering is consistent with a plain and ordinary reading of RSA 135:17-a. See 15A Am.Jur.2d Common Law § 12 (2000) (noting that "common law, to be part of the law of the state must not be inconsistent with the Federal constitution and laws, or the laws or political institutions of the state."). We conclude that RSA 135:17-a does not preclude a trial court from conducting necessary proceedings to determine whether a defendant is malingering. Accordingly, we hold that the trial court did not err by conducting such proceedings and that RSA 135:17-a provides no safe harbor for the artful malingerer.
Affirmed.
BRODERICK, C.J., and DALIANIS, DUGGAN and CONBOY, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548755/ | 119 F.2d 235 (1941)
UNITED STATES
v.
GLIDDEN CO. et al.
Nos. 8652, 8653.
Circuit Court of Appeals, Sixth Circuit.
April 18, 1941.
*236 *237 *238 *239 Frederick G. Rita, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key, Frederick G. Rita, and Paul F. Mickey, Sp. Assts. to Atty. Gen., and Emerich B. Freed and Francis B. Kavanagh, both of Cleveland, Ohio, on the brief), for appellant.
Roger Hinds, of New York City, and H. J. Crawford, of Cleveland, Ohio (Squire, Sanders & Dempsey and Frank Harrison, all of Cleveland, Ohio, on the brief), for appellees.
Before HICKS, ALLEN, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge.
Appellant, United States of America, appeals from judgments entered on the pleadings, dismissing its actions upon bonds given by the appellee Glidden Company, with the appellee United States Guarantee Company, surety in connection with the issuance to the Glidden Company of permits to use specially denatured alcohol in the manufacture of industrial products.
Appellee Glidden Company was a permittee under Treasury Regulations 61, promulgated by the Secretary of the Treasury, pursuant to Title 2, of the National Prohibition Act, 41 Stat. ch. 85, p. 307, 27 U.S.C. A. § 4 et seq., for the use of denatured alcohol in manufacturing industrial products.
Under the regulations, it was required to and did execute to the United States three bonds of the respective penalties of $100,000, $50,000 and $70,000, which are identical except as to the penal sums and are on form 1480 as prescribed by the Treasury Regulations. Each bond was given by the appellee Glidden Company as principal and the appellee United States Guarantee Company as surety, as a condition of the issuance of the permits. The recitals of the respective bonds are identical with the exception that the bond for $50,000 provides for the rate of $2 per wine gallon in case of breach whereas the other two provide for $4.50 per wine gallon, and are as follows: "Now, therefore, the condition of the obligation is such that if there be no material false statement in the application for such permit, and the said principal shall not violate the terms of such permit, and shall transport, store and use such denatured alcohol in accordance with the law and regulations made pursuant thereto, and shall in all respects fully and faithfully comply with all provisions of law now or hereafter enacted and all regulations promulgated thereunder respecting such transportation, storage and use, and shall pay for all such denatured alcohol illegally or unlawfully diverted, lost, or unaccounted for a violation of such permit and law and regulations at the rate of $4.50 per wine gallon, and in addition thereto shall pay all *240 penalties and fines imposed, then this obligation to be void; otherwise, to remain in full force and virtue."
Each of the permits provided that it was conditioned on the permittee and all of its agents and employees in good faith observing and conforming to all of its terms and conditions and to all the laws of the United States relating to the manufacturing, taxation, control and traffic in intoxicating liquors and in addition that the permittee would obey all regulations made pursuant to law or all laws then or thereafter in force in the states in which the permittee's business was located, or in which the privileges granted under the permits might be exercised.
In its second amended petition, appellant alleged that the permits were issued to the appellee Glidden Company on its representation that it would use all of the alcohol on which no tax had been paid in the manufacture of legitimate industrial products according to the formulae specified in the application for the permits and that the products, when manufactured, would be disposed of by the appellee solely for industrial uses and to supply the industrial market.
It is then alleged that appellee never intended to use the alcohol for the purpose represented, but intended at all times to, and did, divert it to beverage purposes in violation of the terms of the permit and the laws of the United States.
Appellant in its petition specifically states the substance of the Glidden Company's applications for permits, the substance of the permits, and the form of the respective bonds and the number of wine and proof gallons it received under them from distillers' bonded warehouses tax free. After these recitals, the appellant charges appellee with violating the terms of the permits in the following particulars:
That it falsely and fraudulently represented to the United States that it proposed to use the alcohol according to a formula attached to the permits in the manufacture of an industrial product under the tradename of "Zobelin Lacquer Thinner" when in fact it had theretofore entered into a fraudulent scheme and conspiracy with certain individuals to use the ethyl alcohol contained therein for beverage purposes. It then alleges the alcohol was diverted by the permittee and used for beverage purposes. Appellant's petitions contain two counts on each bond in the alternative, one asking damages at the rate per wine gallon stated in the bond, on each wine gallon diverted to beverage purposes and the other on the basic tax in force against the distiller or importer at the time of the diversion.
In action No. 8652, the petition is in four counts; in action No. 8653 it is in two counts. Appellees answered and admitted the allegations of appellant's petition as to the preliminaries prior to the issuance of the permits, their issuance, the form and execution of the respective bonds and the wine and proof gallons of the alcohol received by the principal pursuant to the permits. They denied all other allegations of the petition and alleged eight affirmative defenses as follows: (1) That the Commissioner of Internal Revenue, in requiring appellee Glidden Company to make payment at the rate of $4.50 or $2 per wine gallon in the event the alcohol was diverted to beverage purposes, exceeded his lawful authority, because no such tax was owing by appellee in case of diversion and that the bonds in no event could be in excess of the actual damages sustained by the United States due to appellees' violation of the permits; (2) that the appellant had theretofore instituted a civil action against appellee Glidden Company to recover all the taxes and penalties claimed to have been due by reason of the diversion of the alcohol described in appellant's petition and that the former action and the present action were based on identical facts and that an adjudication in favor of appellee in the former was a bar to this one and appellant was estopped to maintain a second action against appellees on the bonds herein; (3) that in the prior action it was adjudicated that the Glidden Company had no knowledge of any diversion of the alcohol to beverage purposes; (4) that the repeal of the Eighteenth Amendment to the Constitution of the United States abated the penalties provided in the respective bonds; (5) that appellee Glidden Company had, on a plea of nolo contendere, paid a fine of $10,000 in a criminal action under an indictment which was based on the identical facts alleged in appellant's petitions and that the payment of this sum was in compromise of all the penalties which appellant sought to recover in these actions; (6) that in the former criminal proceeding, appellant in writing indicated that the payment of the fine on appellee's plea of nolo contendere would satisfy all the claims of the United States for any penalties alleged to be due *241 for the conversion of the alcohol and appellant was thereby estopped to make the demands set out in these actions; (7) that appellant's action was barred by the applicable statute of limitations, U.S.C.A. Title 28, § 791, which requires all actions for penalties to commence within five years after they accrue; (8) that a part of the alcohol alleged to have been withdrawn and diverted under count 1 and all of it under count 3 of appellant's petition in action No. 8652 were withdrawn under permits not bonded by the appellee United States Guarantee Company. The appellant demurred to all of the above defenses, which demurrer was overruled. It then denied the allegations of appellees' answer as to defenses 1, 3, 4, 5, 6, 7 and 8, and as to defense 2 plead affirmatively that the former action was not a suit for taxes and no question relating to the liability of appellees on the present bonds was or could have been litigated.
Appellees made a motion for judgment on the pleadings and alleged as grounds therefor, (1) That appellant's second amended petition failed to allege facts sufficient to constitute a cause of action; (2) that appellant's reply to appellees' answer failed to deny any of the facts alleged in any of the affirmative defenses except by mere conclusion of law or by sham and frivolous denials of facts which had theretofore been conclusively adjudicated and were matters of record of which the court could take judicial notice. Their motion was sustained and the petitions dismissed.
Appellant raises no question on this appeal as to the power of the court to dispose of the matter by a summary judgment on the pleadings as provided in Rule 56 of Rules of Civil Procedure, Title 28 U.S.C.A. following Section 723c; Town of River Junction v. Maryland Casualty Company, 5 Cir., 110 F.2d 278. Under this state of the record, counsel agree that there is submitted for the court's determination the sufficiency of each of appellees' special defenses.
Title 3, Sections 1 to 9, inclusive, 41 Stat. ch. 85, pp. 319, 320, 27 U.S.C.A. § 71-79, provided for the manufacture and storage in bonded warehouses of industrial alcohol and Section 10 of the Act, 27 U.S.C.A. § 80, provided for its withdrawal free of tax when it was so denatured as to be unfit for use as an intoxicating beverage. Section 13 of the Act, 27 U.S.C.A. § 83, empowered the Commissioner of Internal Revenue to issue regulations, with approval of the Secretary of the Treasury, from time to time respecting the establishment, bonding and operation of industrial alcohol denaturing plants and bonded warehouses, and the distribution, sale, export and use of alcohol which were necessary, advisable or proper to secure the revenue, prevent diversion to illegal uses and to place the nonbeverage alcohol industry and other industries using such alcohol as a chemical, raw material or for other lawful purposes upon a high plane of scientific and commercial efficiency consistent with the interests of the government and to make available an ample supply of alcohol for the promotion of its use in scientific research.
Under the Revenue Act of 1926, ch. 27, 44 Stat. 9, § 900, 26 U.S.C.A. Int.Rev.Acts, page 302, the distiller or importer was required, until January 1, 1927, to pay a tax of $2.20 on each proof gallon, or wine gallon, when below proof, distilled or imported by him, when the liquor was withdrawn from bond and from January 1, 1927, until January 1, 1928, he was required to pay $1.65 per gallon and thereafter $1.10 per gallon. The Act also provided that on and after its effective date, there should be levied on all distilled spirits diverted to beverage purposes or for use in the manufacture or production of any article used or intended for use as a beverage, a tax of $6.40 on each proof gallon, or wine gallon when below proof, and a proportionate tax at a like rate on all fractional parts of such proof or wine gallon, said tax to be paid by the person responsible for the diversion. Where a basic tax of $2.20, $1.65 or $1.10 per proof or wine gallon had been paid, a credit for the amount paid was allowed in computing the tax.
Under the Denatured Alcohol Act of 1906, ch. 3047, 34 Stat. 217, 26 U.S.C.A. Int. Rev.Code, § 3070, denatured alcohol could be withdrawn from bonded warehouses tax free under regulations of the Secretary of the Treasury for its withdrawal and use. Pursuant to the statute, the Secretary promulgated Regulations 30 and under Article 78 thereof, all manufacturers wishing to withdraw tax free denatured alcohol were required to obtain a permit and give bond in a sum at least equal to the tax which would have accrued to the United States if the alcohol had been tax paid from the bonded warehouse. The official form *242 numbers of the permit and bond were 582 and 582a. The obligors under the form became liable if the alcohol was used for beverage purposes, to the amount of the tax which would have been due if the alcohol had first been withdrawn for beverage purposes. The form of the bonds here in question with the official number changed to 1480 are substantially as those provided under earlier regulations 30, except all reference to tax is omitted and a fixed sum per each wine gallon is inserted.
The parties agree that the present bonds are for indemnity and not penalty and that recovery cannot be had upon them without proof of damages. United States v. Zerbey, 271 U.S. 332, 341, 46 S. Ct. 532, 70 L. Ed. 973.
Clearly appellees are liable under the bonds, the condition having been breached, and the controlling question is whether the District Court erred in holding that the face amounts of the bonds constituted a penalty within the decision of this court in United States v. Glidden Company, 6 Cir., 78 F.2d 639, so that recovery under the bonds must be denied.
Appellees insist that the permittee was liable for a penalty at the rate of $6.40 per proof gallon or more than $12 per wine gallon, under the statute, supra, upon the diversion of the alcohol, but that this sum cannot be used as a measure of damages under the bond. Lipke v. Lederer, 259 U.S. 557, 562, 42 S. Ct. 549, 66 L. Ed. 1061. Appellant insists that the respective sums per wine gallon stated in the bonds are substantially equal to the taxes per proof gallon stated in the Revenue Act, supra, and that they are the criteria by which the damages recoverable are to be measured. Appellees respond that the basic tax is collectible only from the distiller or importer and from this premise argue it is no better measure of damages than the $6.40 per proof gallon because both are penalties.
Excluding the $6.40 tax enumerated in Section 900 of the Revenue Act, supra, the other taxes are true taxes and in no sense penalties. United States v. One Coupe Automobile, 272 U.S. 321, 328, 47 S. Ct. 154, 71 L. Ed. 279, 47 A.L.R. 1025. Under the Revenue Act of 1921, Section 600, 42 Stat. ch. 136, p. 285, a base tax of $2.20 per proof gallon was levied against the distiller and where diverted for beverage purposes, an additional tax of $4.20 on each proof gallon was required to be paid by the person responsible for such diversion. While the statute makes the distiller or importer solely liable for base taxes, it is inconceivable that the Congress intended to levy the tax on the distiller or importer of alcohol and relieve the diverter of it after he obtained the alcohol tax free from the distiller.
It has been the fixed policy of the Congress from the passage of the Denatured Alcohol Act of June 7, 1906, to the present time, to require the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, to promulgate regulations requiring bonds thereunder to secure the revenue. It must therefore be assumed that the Congress intended to substitute the bond of the permittee for the base tax in case of diversion to beverage purposes.
"Tax" in some connections is a word of comprehensive meaning and may include excises as well as a pecuniary burden laid directly on property or income and excise taxes may be measured by the penalties of a statutory bond. The bonds provided under the present act are to secure payments in the nature of excises paid for the privilege of withdrawing alcohol tax free for industrial purposes. Head Money Cases, 112 U.S. 580, 596, 5 S. Ct. 247, 28 L. Ed. 798. Under the Eighteenth Amendment, Congress had the power to prevent or regulate the sale of denatured alcohol which was not usable as a beverage, and to this end could provide for its taxation or for the execution of bonds as a prerequisite to its use in manufacture. Selzman v. United States, 268 U.S. 466, 469, 45 S. Ct. 574, 69 L. Ed. 1054. In the levying and collection of taxes Congress had the power within defined limits in order to secure the exact effect intended by its Acts of legislation, to use the officers of the Executive Branch of the government by vesting in such officers' discretion to make public regulations interpreting the statute and directing details of execution even to the extent of providing for the payment of excise taxes by the execution of performance bonds for the breach of such regulations. Hampton, Jr., & Company v. United States, 276 U.S. 394, 409, 48 S. Ct. 348, 72 L. Ed. 624.
Taking together the provisions of the statute levying the basic tax against the distiller and requiring bond from the permittee to protect the revenue, it is evident that when denatured alcohol is withdrawn tax free and subsequently diverted by the *243 permittee for beverage purposes, his bond is to be treated as securing tax exaction and has none of the characteristics of a penalty. The provision for the bond is to be considered as remedial and providing indemnity for loss. The act of withdrawing denatured alcohol tax free and afterwards removing the denaturing constituents so as to make the alcohol potable, interposed difficulties in the way of government seizure and impaired the value of the government's right to collect taxes. The bond is provided primarily as a safeguard for the protection of the revenue and to reimburse the government for the expense of investigation and the loss of revenue resulting from the permittee's fraud. Stockwell v. United States, 13 Wall. 531, 80 U.S. 531, 547, 20 L. Ed. 491; Helvering v. Mitchell, 303 U.S. 391, 406, 58 S. Ct. 630, 82 L. Ed. 917.
The condition that the permittee should pay $4.50 per wine gallon in the earlier bonds of $100,000 and $70,000 respectively, and $2 per wine gallon in the later bond of $50,000 for all denatured alcohol unlawfully diverted, was a measure intended for the protection of the revenue and to prevent diversion of alcohol to unlawful uses, which we do not think too drastic. The rates per wine gallon were slightly in excess of the non-beverage tax rate on distilled spirits but below the beverage tax rate.
When the alcohol was diverted to beverage purposes rather than used for industrial purposes for which ostensibly withdrawn, the government properly looked to the bond given by permittee on the tax free withdrawal of the alcohol, in order to recapture the revenues thereby lost. In our opinion, the face amounts of the present bonds correspond approximately to the actual cash damages sustained by the United States in lost taxes owing to the fraud of appellees and are to be regarded as liquidated damages. United States v. Bornn et al., 2 Cir., 104 F.2d 641; Rothensies v. Lichtenstein, 3 Cir., 91 F.2d 544.
Appellees' defenses 2, 3, 5 and 6 are closely related and will be considered together. In July, 1931, appellee Glidden Company, jointly with others, was indicted in the District Court of Maryland for a conspiracy to violate the Prohibition Act and the Denatured Alcohol Act of 1906. The offenses charged in the indictment consisted of a series of acts identical with those alleged in the petitions herein and covered the same period of time. By leave of court, appellee plead nolo contendere, which by order was treated the same as a plea of guilty for the purposes of the case, whereupon judgment was pronounced and appellee fined the sum of $10,000, which it paid. Subsequently the United States instituted in the District Court, from which this appeal is prosecuted, a suit against appellee Glidden Company (8 F. Supp. 177), seeking to recover from appellee more than $2,000,000 as taxes and interest under subdivision 4 of Section 900 of the Revenue Act of 1926. The basis of the suit was the diversion by the appellee of denatured alcohol to beverage purposes in violation of the terms of the permits which are the identical ones involved in these actions and the facts there alleged were substantially the same as here alleged except the United States sought to recover at the rate of $6.40 per proof gallon.
Appellee defended that action on several grounds, among which were, (1) that the sums sought to be collected were in the nature of a penalty and not a tax and the action was therefore barred by the five-year statute of limitation, 28 U.S.C.A. § 791; (2) that the prior indictment, conviction and punishment in the District of Maryland, both under the double jeopardy clause of the Fifth Amendment and that of the Willis-Campbell Act, 42 Stat. 222, 27 U.S.C.A. § 3, was a bar to the action. Its defenses on these grounds were sustained by this court and the action dismissed [6 Cir., 78 F.2d 639].
The court found it unnecessary to consider the other grounds. In the former action, appellee in its answer alleged that it was without knowledge that the alcohol withdrawn under its permits was to be cleaned and used for beverage purposes and that it had in good faith purchased the denatured alcohol to be used in the manufacture of lacquer thinner and had so used it and had sold it to others solely to be used as lacquer thinner, and that it had received no profit or benefit from the alleged diversion of the alcohol to beverage purposes and if so diverted, it was done by others in no way connected with appellee and for whose acts it was in no way responsible. The United States demurred to this answer which was overruled and it declined to plead further and its petition was dismissed.
Appellees allege that prior to the entry of the order in the criminal action, permitting *244 it to plead nolo contendere, the United States, through its attorneys, filed in said proceedings its written approval of said plea and requested that the court permit its entry and that the United States by its duly authorized and appropriate officers indicated that it would be satisfied with the punishment there imposed for all of said alleged acts, after which appellees entered said plea and paid the fine and became fully discharged from all penal liability by reason of said alleged acts. By reason of the aforesaid alleged facts appellees insist that the United States is estopped to maintain this action.
The foregoing defenses require the application of three principles of law, (1) res judicata, (2) former jeopardy, and (3) estoppel.
The rule prevails that where the former adjudication is relied on as an absolute bar to a subsequent action, it must be shown that the cause of action, the thing to be recovered and the parties are the same in both proceedings. However, the above rule is modified to the extent that where, although the cause of action is not the same and some fact or question has been determined and adjudicated in a former suit and the same fact or question is again put in issue in a subsequent suit between the same parties, the determination in the former suit of the fact or question, if properly presented and relied on, will be held conclusive on the parties in the latter suit, regardless of the identity of the cause of action or the lack of it in the two suits. When the second suit between the same parties is upon a different cause of action, claim or demand, it is well settled that the judgment in the first suit operates as an estoppel in the second one only as to the point or question actually litigated and determined and not as to other matters which might have been litigated and determined. Cromwell v. County of Sac, 94 U.S. 351, 354, 24 L. Ed. 195.
It is well settled that the judgment rendered upon sustaining a demurrer is equally conclusive by way of estoppel of the facts confessed by the demurrer as a verdict finding the same facts would have been and accordingly that where a demurrer goes to the merits, a judgment sustaining it is a bar to a subsequent suit on the same cause of action. Yates v. Utica Bank, 206 U.S. 181, 184, 27 S. Ct. 646, 51 L. Ed. 1015. It is equally well settled that the plea of res judicata, when based on the disposition of the former case by demurrer, extends only to the exact points raised by the pleadings and decided by the court, and does not operate as a bar to a second suit for other breaches of the identical covenant. Wiggins Ferry Company v. Ohio & M. Railway Company, 142 U.S. 396, 410, 12 S. Ct. 188, 35 L. Ed. 1055.
The former action (United States v. Glidden Company, supra) was disposed of by demurrer not on the merits but on two points, i.e., the statute of limitations and former jeopardy. The present action is unlike the former in that it is not a suit to recover a penalty, to impose a punishment or to declare a forfeiture. The only relief sought here is a money judgment to make whole a loss sustained by the United States. The former proceeding, although civil in form, was penal in its nature because it sought to recover a penalty. In the present case, the action against appellees is purely civil and depends entirely upon the breach of a civil contract. The parties are not the same. It is true that if the United States had succeeded in recovering all it sought in the former action, the liability of appellees in this action would have been discharged. United States v. Ulrici, 111 U.S. 38, 42, 4 S. Ct. 288, 28 L. Ed. 344, but this result flows from the efficacy of another provision of the statute imposing the base tax and additional penalty on the diverter, measured by the gallons. The former action included more than is sought in this action, and this court there said, "Since the defendants were neither distillers nor importers, and have paid no basic tax, the exaction here sought to be recovered is either wholly a penalty or wholly a tax, and is not partly penalty and partly tax." 78 F.2d page 641. The two suits, although seeking in part the same relief, rest upon different grounds and the adjudication in one therefore constitutes no bar to recovery in the other. County of Mobile v. Kimball, 102 U.S. 691, 705, 26 L. Ed. 238. Appellees' defense on the ground of res judicata is denied. The Haytian Republic, 154 U.S. 118, 129, 14 S. Ct. 992, 38 L. Ed. 930.
Turning to the question that the present suit is barred by the appellee Glidden Company's earlier punishment on its plea of nolo contendere in the District Court of Maryland, the rule prevails that a former adjudication in a criminal action is not generally a bar to a subsequent civil action, because of the different object of *245 the proceedings and their dissimilarity in parties, rules of decision and procedure, but when the subsequent action, although civil in form, is quasi criminal in its nature as in actions to recover penalties or declare forfeitures, it is regarded as a second prosecution for the same offense and barred by a prior conviction or acquittal. The latter rule is not applicable where the object of the civil action is compensation and not punishment. Helvering v. Mitchell, supra. A paid surety of a permittee under the National Prohibition Act and the Industrial Alcohol Act enters into his contract of suretyship with a view to the statutes which may affect his liability the provisions of which he is presumed to know and which become as much a part of his contract as if they were embodied in the bond. Smythe v. United States, 188 U.S. 156, 177, 23 S. Ct. 279, 47 L. Ed. 425.
As we view so much of the statute and regulations as apply to this case, they were enacted and promulgated to facilitate the collection of revenue from distilled spirits. An intent that untaxpaid denatured spirits could be removed freely from bonded warehouses and the alcohol extracted and sold free of tax while untaxpaid alcohol without denaturents should not be so removed, finds no support or reason in either statute or regulations. The acts alleged to have been committed by the appellee-permittee are clearly within the language of the statutes and regulations and no reason suggests itself why they should not apply to the present bonds. Revenue laws are not penal laws in the sense that requires them to be construed with great strictness in favor of appellees. They are rather to be regarded as remedial in character and intended to prevent fraud, suppress public wrong and promote lawful conduct. They should be so construed as to carry out the intention of the Congress in passing them and to most effectually accomplish their purpose.
The present bonds are obligations to pay a debt to the United States and not imposed primarily for punishment for a crime or an offense against the laws of the United States. It does not follow that because appellee Glidden Company was required to pay a fine in the criminal action and here required to make reparation in damages for the loss to the United States by reason of the diversion of alcohol that it is being twice punished for the same offense. Moore v. People of State of Illinois, 14 How. 13, 55 U.S. 13, 19, 14 L. Ed. 306.
The case of United States v. Choteau, 102 U.S. 603, 26 L. Ed. 246, relied on by appellees to support their position as a bar to recovery in the present action is inapplicable. In that case, a distiller's bond had been given under a statute which provided that for his failure to comply with the statutory requirements, he should be liable to a penalty of double the tax imposed on distilled spirits removed and concealed and a fine of not less than $200 nor more than $5,000 and imprisoned not less than three months nor more than three years. An action was brought on the bond against the sureties and in defense they plead that prior thereto an indictment had been returned against the distiller and pursuant to the statute of compromises the distiller had paid $10,000 in full satisfaction, compromise and settlement of the indictment and prosecution, which thereupon was dismissed and abandoned. The court held the sum so paid was a settlement and res judicata of the whole matter. Unlike the case at bar, in the cited case, the recovery sought was not as for a debt due the United States, but as a part of the penalty denounced against the offender for a violation of law and under a statute defining the offense and fixing the penalty. In our opinion the proceedings in the criminal action are in no way a bar to the present action. Stone v. United States, 167 U.S. 178, 189, 17 S. Ct. 778, 42 L. Ed. 127.
The repeal of the Eighteenth Amendment on December 5, 1933, did not terminate appellees' liability on the present bonds. These instruments were contracts to be enforced according to their terms. The liability of the parties became complete upon the breach of the express condition that the alcohol would not be diverted to beverage purposes and the liabilities thus perfected were not diminished or extinguished by the adoption of the Twenty-First Amendment. United States v. Mack, 295 U.S. 480, 485, 55 S. Ct. 813, 79 L. Ed. 1559.
Appellee's contention that the payment of the fine of $10,000 in the criminal action was in the nature of a compromise of its alleged liability in this action must be denied. Such a settlement would be invalid without the consent of the Secretary of the Treasury and the Attorney General *246 under the provisions of the Revised Statutes, Section 3229 and the Internal Revenue Code, § 3761, 26 U.S.C.A. Int.Rev.Code, § 3761. Botany Mills v. United States, 278 U.S. 282, 285, 49 S. Ct. 129, 73 L. Ed. 379. An agent of the United States has no power to agree upon a compromise of a claim of the United States in suit except under circumstances not presented in this case. United States v. Beebe, 180 U.S. 343, 351, 21 S. Ct. 371, 45 L. Ed. 563.
"The United States is neither bound nor estopped by acts of its officers or agents in entering into an arrangement or agreement to do or cause to be done what the law does not sanction or permit." United States v. San Francisco, 310 U.S. 16, 32, 60 S. Ct. 749, 757, 84 L. Ed. 1050.
Title 28 U.S.C.A. § 791, R.S. § 1047, has no application to a suit on bond to recover the penalty therein fixed for a breach thereof. The section applies to a penalty or forfeiture "imposed in a punitive way for an infraction of a public law." Meeker v. Lehigh Valley Railroad, 236 U.S. 412, 423, 35 S. Ct. 328, 332, 59 L. Ed. 644, Ann.Cas.1916B, 691; United States v. John Barth Company, 279 U.S. 370, 376, 49 S. Ct. 366, 73 L. Ed. 743.
This is an action brought upon the bond of a surety and not to recover a statutory penalty or forfeiture. It seems clear the statute relied upon by appellees has no application. Gulf State Steel Company v. United States, 287 U.S. 32, 45, 53 S. Ct. 69, 77 L. Ed. 150; United States v. Frost, 5 Cir., 80 F.2d 341.
Appellees' last defense that most of the alcohol specified in the third count and in the first count was withdrawn under permits not covered by the bonds, and that the risk under such permits was far greater and the obligation more burdensome than under the permits referred to in the bonds so that neither the principal nor surety became liable or could have become liable under the bonds in question, presents a question of fact and in the government's reply to this defense the facts are denied. This question does not lend itself to a decision on the pleadings and we leave it open.
In our opinion appellant's petition states a good and valid cause of action and the court committed error in dismissing its second amended petition. Judgment reversed and cause remanded for further proceedings consistent with this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548785/ | 992 A.2d 204 (2010)
COMMONWEALTH of Pennsylvania, Appellee
v.
William Henry GORDON, Appellant.
No. 594 MDA 2009.
Superior Court of Pennsylvania.
Submitted January 4, 2010.
Filed March 26, 2010.
*205 MaryJean Glick, Public Defender, for appellant.
Joseph P. McMahon, Asst. Dist. Atty., for Com., appellee.
BEFORE: FORD ELLIOTT, P.J., LAZARUS and FITZGERALD[*], JJ.
OPINION BY LAZARUS, J.:
¶ 1 William Henry Gordon appeals from his judgment of sentence after being convicted of violating a registration provision (failure to report address change)[1] of Pennsylvania's version of Megan's Law[2] ("Act") and sentenced to a mandatory minimum term of 3-6 years' incarceration.[3] On appeal he claims: (1) under a strict reading of the applicable Megan's Law provisions, he is not subject to prosecution for failure to comply with the registration provisions and (2) the trial court erred in admitting the testimony of a Pennsylvania State Police Trooper regarding a letter sent to Gordon explaining the registration process. Because we are bound by the statutory language of the Megan's Law registration provisions, we are constrained to vacate and discharge the defendant.
FACTS
¶ 2 In 1997, Gordon pled guilty in the state of Delaware to unlawful sexual penetration of the third degree (a crime substantially similar to Pennsylvania's sexual assault statute)[4] and registered with the Delaware State Sex Offender Registry as a lifetime registrant. He subsequently moved to Pennsylvania, where he became subject to the lifetime registration provision of this Commonwealth's version of Megan's Law, 42 Pa.C.S.A. § 9795.1(b)(4), due to his Delaware conviction.
¶ 3 On February 20, 2007, Gordon registered with the Pennsylvania State Police Megan's Law Unit ("the Unit") in compliance with section 9795.2 (registration provisions). On July 25, 2007, Gordon was apprehended by Pennsylvania State Police on an outstanding Delaware State warrant.[5] During an interview with the state police, Gordon revealed that he no longer resided at the address on file with the Unit.[6] He also stated that he had become *206 employed in the Spring of 2007 (Count 2) and had been terminated from that job in June 2007 (Count 3) without reporting either event to the Unit. Based upon that information, the Pennsylvania State Police filed the instant case charging him with non-compliance with our Commonwealth's Megan's Law registration provisions.[7]
¶ 4 Both the trial court and the Commonwealth concede that under a strict reading of 18 Pa.C.S.A. § 4915 (failure to comply with registration requirements), Gordon is not subject to punishment for failure to notify the authorities of his change of residence and employment status. Despite this literal reading, however, the trial court determined that it would be absurd not to subject Gordon to the provisions of section 4915 where individuals who are only required to register for ten years (unlike his lifetime requirement) are subject to the section 4915 sanctions for failure to register.
¶ 5 Because we must strictly construe criminal statutes and the clear language of section 4915 does not subject Gordon to punishment for failing to notify authorities that he had changed his residence and employment status, we must vacate his sentence.
ISSUES
(1) Applicability of Relevant Megan's Law Provisions
¶ 6 The crux of the issue on appeal is whether a lifetime registrant under section 9795.1(b)(4) should be subject to the penalty provisions of section 4915. Thus, this is a classic case of statutory interpretation. Under the Statutory Construction Act, 1 Pa.C.S.A. § 1501, et seq., the object of all statutory construction is to effectuate the General Assembly's intent. 1 Pa.C.S.A. § 1921(a). When the words of a statute are clear and free from all ambiguity, the letter of the statute is not to be disregarded under the pretext of pursuing its spirit. 1 Pa.C.S.A. § 1921(b).
¶ 7 According to 42 Pa.C.S. § 9795.1., Gordon was subject to lifetime registration in this Commonwealth under Megan's Law for his Delaware state offense:
(b) LIFETIME REGISTRATION. The following individuals shall be subject to lifetime registration:
(1) An individual with two or more convictions of any of the offenses set forth in subsection (a).
(2) Individuals convicted of any of the following offenses:
18 Pa.C.S. § 3121 (relating to rape).
18 Pa.C.S. § 3123 (relating to involuntary deviate sexual intercourse).
18 Pa.C.S. § 3124.1 (relating to sexual assault).
18 Pa.C.S. § 3125 (relating to aggravated indecent assault).
18 Pa.C.S. § 4302 (relating to incest) when the victim is under 12 years of age.
(3) Sexually violent predators.
(4) Individuals currently residing in this Commonwealth who have been convicted of offenses similar to the crimes cited in paragraph (2) under the laws of the United States or one of its territories or possessions, another state, the District of Columbia, the Commonwealth of Puerto Rico or a *207 foreign nation or under a former law of this Commonwealth.
42 Pa.C.S.A. § 9795.1(b) (emphasis added).[8]
¶ 8 Moreover, under 18 Pa.C.S.A. § 4915, the provision the court applied to sentence Gordon in the instant case, individuals who are required to register under Megan's Law and who fail to comply with the registration provisions set forth in § 9795.2 of the Act, commit a felony of either the second or third degree. Section 4915 states:
§ 4915. Failure to comply with registration of sexual offenders requirements:
(a) OFFENSE DEFINED.An individual who is subject to registration under 42 Pa.C.S. § 9795.1(a) (relating to registration) or an individual who is subject to registration under 42 Pa.C.S. § 9795.1(b)(1), (2) or (3) commits an offense if he knowingly fails to:
(1) register with the Pennsylvania State Police as required under 42 Pa.C.S. § 9795.2 (relating to registration procedures and applicability);
(2) verify his address or be photographed as required under 42 Pa.C.S. § 9796 (relating to verification of residence); or
(3) provide accurate information when registering under 42 Pa.C.S. § 9795.2 or verifying an address under 42 Pa.C.S. § 9796.
18 Pa.C.S.A. § 4915(a)(emphasis added).
¶ 9 Therefore, a literal reading of the statute clearly indicates that an individual who is subject to lifetime registration under 9795.1(b)(4) is not subject to the penalty provisions of section 4915. Although we can understand the trial court's and Commonwealth's argument that if ten-year registrants and all other lifetime registrants are subjected to the penalty provisions of section 4915, then it only makes sense to subject Gordon to the same provisions, we, as a Court, have no power to rewrite the statute by criminalizing Gordon's behavior.
¶ 10 Judgment of sentence vacated. Defendant discharged. Jurisdiction relinquished.[9]
NOTES
[*] Former Justice specially assigned to the Superior Court.
[1] See 42 Pa.C.S.A. § 9795.2(a)(2)(i) (change of residence or establishment of additional residence or residences).
[2] See 42 Pa.C.S.A. §§ 9791-9799.7.
[3] Gordon first challenged the charges in a pre-trial motion to dismiss that was denied by the trial court.
[4] The parties do not dispute that Gordon's Delaware crime is substantially similar to this Commonwealth's sexual assault statute, and, thus makes him subject to register under Megan's Law for his lifetime.
[5] The Delaware warrant had been issued on March 21, 2007 due to Gordon's failure to register or re-register as a sexual offender or otherwise comply with the provisions of sexual offender registration.
[6] The testimony at trial revealed that Gordon registered his home address with the state police as the Stonemill Apartments in February 2007; however, when he left that apartment in May 2007 he never notified the police of the change (Count 1). Moreover, the evidence showed that when Gordon initially registered with the Pennsylvania State Police in February 2007 he was listed as unemployed; however, he had been working at a Holiday Inn since October 2006, was let go, rehired in the Spring of 2007 and then terminated from that employ in June 2007 (Counts 2 & 3)all without notifying the state police of these changes in employment status.
[7] Although Gordon was only convicted of failure to report an address change, he was charged with (and ultimately acquitted of) failure to report employment and failure to report termination of employment. See 42 Pa.C.S.A. § 9795.2(a)(2)(ii).
[8] Similar to Megan's Law offenders under section 9795.1(b)(4), individuals who have been convicted of a less serious offense outside of this Commonwealth, but currently reside in Pennsylvania, are required to register with the state police for ten years. See 42 Pa.C.S.A. § 9795.1(a)(3). While it appears that the Legislature did not intend to treat lifetime registrants and ten-year registrants differently for purposes of punishment for non-compliance with registration requirements, this apparent oversight is best left to the Legislature to correct. See 2009 H.B. 1926, 193 Gen. Assem., Reg. Sess. (Pa. 2009) (current House Bill seeking to amend, in part, section 4915(a) to now include all individuals required to register under section 9595.1 (with no specific designation of subsections (a) or (b) offenders) to comply with section 4915 provisions).
[9] Having vacated Gordon's judgment of sentence, we need not address his remaining claim regarding the improper admission of a Trooper's testimony regarding a letter explaining the registration process under Megan's Law. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548799/ | 992 A.2d 613 (2010)
GENERAL INSULATION COMPANY
v.
ECKMAN CONSTRUCTION and another.
Nos. 2009-102, 2009-103.
Supreme Court of New Hampshire.
Argued: October 15, 2009.
Opinion Issued: January 28, 2010.
*615 Sherman Law, PLLC, of Portsmouth (John P. Sherman on the brief and orally), for the petitioner.
McLane, Graf, Raulerson & Middleton, P.A., of Manchester (Thomas J. Donovan and Michael J. Kenison on the brief, and Mr. Kenison orally), for respondents Eckman Construction, Northern Peabody, LLC and North American Specialty Insurance Company.
Devine, Millimet & Branch, P.A., of Andover, Massachusetts (George R. Moore and Anthony S. Augeri on the brief, and Mr. Moore orally), for respondents Youngblood Co., Inc. and International Fidelity Insurance Company.
DUGGAN, J.
The petitioner, General Insulation Company, appeals from an order of the Superior Court (Abramson, J.) granting the motions to dismiss filed by respondents Eckman Construction (Eckman), Northern Peabody LLC (Northern Peabody), North American Specialty Insurance Company (North American), Youngblood Co., Inc. (Youngblood) and International Fidelity Insurance Company (International Fidelity) (collectively, the moving respondents). The trial court dismissed the petitioner's petitions to enforce statutory performance bonds because the petitioner failed to provide the respondents with copies of the petitions within one year of filing its claims as required by RSA 447:18 (2002). See RSA 447:16,:17 (Supp.2009). The court also dismissed the petitioner's alternative claims for unjust enrichment/restitution and quantum meruit because the petitions failed to allege sufficient facts to support them. We affirm and remand.
I. Background
The record evidences the following facts. The petitioner claims that the respondents did not pay for insulation and related materials it supplied to respondent R & H Enterprises d/b/a Advanced Insulation *616 (Advanced Insulation) for a bonded project known as "Bedford Middle/High School Project" in Bedford. Eckman was the general contractor on the project. Northern Peabody and Youngblood were subcontractors to Eckman; Advanced Insulation was a subcontractor to Northern Peabody and Youngblood. According to the petitioner, North American was the surety on the statutory performance bond issued to Northern Peabody, and International Fidelity was the surety on the statutory performance bond issued to Youngblood. See RSA 447:16.
On March 15, 2007, the petitioner filed a notice of claim in superior court pursuant to RSA 447:17. It amended this notice of claim on May 3, 2007. On March 6, 2008, the petitioner filed petitions in superior court to enforce the statutory bonds and to assert common law claims for unjust enrichment/restitution and quantum meruit. See RSA 447:18. The petitioner did not provide the respondents with copies of its petitions, however, until August 2008, after the court issued orders of notice to the respondents. See id.; see also Super. Ct. R. 124. The moving respondents moved to dismiss the petitions, which the trial court granted, and this appeal followed. Advanced Insulation did not join the motions to dismiss filed by the other respondents and did not separately file a motion to dismiss. Accordingly, the petitioner's petitions against Advanced Insulation remain pending and we express no opinion as to their validity.
II. Discussion
A. Compliance with RSA 447:18
1. Standard of Review
The petitioner first argues that the trial court erroneously interpreted RSA 447:18 to require it to send copies of its petitions to the moving respondents within one year of filing its claim under RSA 447:17. We review the trial court's statutory interpretation de novo. Chesley v. Harvey Indus., 157 N.H. 211, 213, 949 A.2d 728 (2008).
We are the final arbiters of the legislature's intent as expressed in the words of the statute considered as a whole. Appeal of Parkland Med. Ctr., 158 N.H. 67, 72, 960 A.2d 352 (2008). We first examine the language of the statute, and, where possible, ascribe the plain and ordinary meaning to the words used. Id. When a statute's language is plain and unambiguous, we need not look beyond it for further indication of legislative intent, and we will not consider what the legislature might have said or add language that the legislature did not see fit to include. Id. We also interpret a statute in the context of the overall statutory scheme and not in isolation. Liam Hooksett, LLC v. Boynton, 157 N.H. 625, 628, 956 A.2d 304 (2008). Additionally, we do not consider words and phrases in isolation, but within the context of the statute as a whole. Franklin Lodge of Elks v. Marcoux, 149 N.H. 581, 585, 825 A.2d 480 (2003). This enables us to better discern the legislature's intent and to interpret statutory language in light of the policy or purpose sought to be advanced by the statutory scheme. Id.
2. Overview
We begin with a brief general discussion regarding bonds issued for public works projects and the statutory scheme that governs such bonds. "A bond is a three-party instrument by which one party (the surety) guarantees or promises a second party (the owner or general contractor) the successful performance of contract obligations owed to the second party by its principal (the contractor or subcontractor)." 3 S. Stein, Construction Law Appendix *617 9J, at App. 9-27 (Sept.2006). Three kinds of bonds are common in construction: bid bonds, performance bonds, and payment bonds. Id. A bid bond guarantees that the bidder will enter into the contract for the bid amount. Id. "A performance bond guarantees to the owner that a prime contractor will perform according to the contract referenced in the bond." Id.; see Wolfeboro Neck Prop. Owners Assoc. v. Town of Wolfeboro, 146 N.H. 449, 453, 773 A.2d 633 (2001). "A payment bond assures the owner that the prime contractor will pay its subcontractors and suppliers, who might otherwise file liens against the owner's property." 3 Stein, supra at App. 9-27. "A performance bond is one exacted for the protection of the public body to guarantee completion of a project," while "[a] payment bond is exacted for the protection of materialmen, suppliers, and laborers who otherwise might be without recourse for payment of their claims against the municipality." 14 P. Loughlin, New Hampshire Practice, Local Government Law § 789, at 45 (1995). In New Hampshire, "[a]ny municipal contracts, especially capital building contracts, must have provisions requiring the posting of performance and/or payment bonds." Id. "Performance and payment bonds can be separate documents or may be combined." 3 Stein, supra at App. 9-27.
RSA 447:16 to:18 govern bonding for public works projects. Although it appears that these statutes only apply to payment bonds, see Loughlin, supra § 789, at 46, no party argues that they do not govern the bonds at issue even though the petitioner characterizes them as performance bonds. We, therefore, assume for the purposes of this appeal that RSA 447:16 to:18 govern the bonds at issue.
RSA 447:16 provides:
Officers, public boards, agents or other persons who contract in behalf of the state or any political subdivision thereof for the construction, repair or rebuilding of public buildings, public highways, bridges or other public works shall if said contract involves an expenditure of $25,000, and may if it involves an expenditure of less amount, obtain as a condition precedent to the execution of the contract, sufficient security, by bond or otherwise, in an amount equal to at least 100 percent of the contract price, or of the estimated cost of the work if no aggregate price is agreed upon, conditioned upon the payment by the contractors and subcontractors for all labor performed or furnished, for all equipment hired, including trucks, for all material used and for fuels, lubricants, power, tools, hardware and supplies purchased by said principal and used in carrying out said contract, and for labor and parts furnished upon the order of said contractor for the repair of equipment used in carrying out said contract.
The purpose of this provision, which was first enacted in 1927, is "to furnish an alternative security to lienors, in general more practically adapted to protect them and at the same time to save the state or municipality from annoyance." Petition of Keyser, 97 N.H. 404, 407, 89 A.2d 917 (1952) (quotation omitted); Guard Rail Erectors Inc. v. Company, 86 N.H. 349, 350, 168 A. 903 (1933).
To obtain the benefit of bonds issued pursuant to RSA 447:16, a claimant must "within 90 days after the completion and acceptance of the project by the contracting party" file with the proper public entity "a statement of the claim." RSA 447:17. A copy of the statement of claim is then "sent by mail by the office where it is filed to the principal and surety." Id. We have held that the failure to comply with the statutory requirement that a statement of claim be filed with the designated *618 party "is usually held fatal." American Fidelity Co. v. Cray, 105 N.H. 132, 136, 194 A.2d 763 (1963); see Fastrack Crushing Servs. v. Abatement Int'l/Advatex Assocs., 149 N.H. 661, 666, 827 A.2d 1019 (2003) (Fastrack I). We have also held that giving notice within the ninety-day period required by RSA 447:17 is a condition precedent to any claim against a statutory bond. See Fastrack Crushing Servs. v. Abatement Int'l/Advatex Assocs., 153 N.H. 284, 287, 893 A.2d 674 (2006) (Fastrack II).
"[T]he main purpose of [this] notice requirement is to provide parties with an opportunity to settle the claim without resorting to litigation." Mountain Envtl. v. Abatement Int'l/Advatex Assocs., 149 N.H. 671, 674, 826 A.2d 556 (2003). Another purpose is to allow the prime contractor to pay his subcontractors "without fear of additional liability to sub-subcontractors or materialmen." Fastrack II, 153 N.H. at 287, 893 A.2d 674 (quotation omitted). The notice required by RSA 447:17 "thus prevents both double payments by prime contractors and the alternative of interminable delay in settlements between contractors and subcontractors." Id. (quotation omitted).
In the event that there is no settlement, a claimant may sue on a statutory bond provided that the claimant, "within one year after filing [the notice of claim]," files a petition in superior court to enforce the claim "with copy to the principal and surety, and such further notice as the court may order." RSA 447:18. The court then "shall examine all claims having been duly filed" and hold a hearing, "with notice to all creditors who have filed claims as herein provided, and to the principal and surety or sureties, and find the respective amounts due such party claimants." Id. The court may require "the attendance of any official with whom claims have been filed, with such claims, or require such official to furnish a copy of such claims" for the court's use. Id. As with the failure to comply with RSA 447:17, we have held that the failure to comply with RSA 447:18 is "usually held fatal." Cray, 105 N.H. at 136, 194 A.2d 763.
In addition to the remedy of seeking payment on the bond, RSA 447:15 (2002) allows for a mechanic's lien to attach "to any money due or to become due from the state or from any political subdivision thereof by virtue of any contract for any public work or construct, alteration, or repair, in the performance of which contract the lienor participated by performing labor or furnishing materials or supplies." The purpose of this lien provision "is to put those who supply materials [and labor] for the erection of state property on a parity, in respect to their liens, with those who perform a like service for private owners." American Bridge Co. v. Company, 87 N.H. 62, 63, 174 A. 57 (1934); see Lyle Signs, Inc. v. Evroks Corp., 132 N.H. 156, 158, 562 A.2d 785 (1989).
3. Interpretation of RSA 447:18
RSA 447:18 provides, in pertinent part: "Said claimant shall, within one year after filing such claim, file a petition in the superior court ... to enforce his claim or intervene in a petition already filed, with copy to the principal and surety, and such further notice as the court may order." "Pursuant to general rules of statutory construction, the word `shall' is a command, which requires mandatory enforcement." Fastrack I, 149 N.H. at 664-65, 827 A.2d 1019 (quotation omitted). Substantial compliance with this statute does not suffice. See id. at 666, 827 A.2d 1019. "Our law is well settled that in giving statutory notice the requirements of the statute must be strictly observed." Id. (quotation omitted).
*619 The petitioner concedes that it did not provide copies of its petitions to the moving respondents until August 2008, more than one year after filing its March 2007 claim. The petitioner argues that, nonetheless, it complied with RSA 447:18 because "[t]he one year statute of limitations contained in RSA 447:18 qualifies and relates only to the date of the filing for the Petition to Enforce" and "does not create a specific obligation to provide a Respondent a copy of such Petition within a specific timeframe (i.e., one year)."
"Although the legislature is not compelled to follow technical rules of grammar and composition, a widely accepted method of statutory construction is to read and examine the text of the statute and draw inferences concerning its meaning from its composition and structure." In re Richard M., 127 N.H. 12, 17, 497 A.2d 1200 (1985) (quotation omitted). Here, we must determine to what subject the phrase "within one year after filing such claim" applies.
"Where a sentence contains several antecedents and several consequents they are to be read distributively. The words are to be applied to the subjects that seem most properly related by context and applicability." 2A N. Singer & J.D. Singer, Statutes and Statutory Construction § 47.26, at 438 (7th ed.2007). Thus, "[w]here several words granting power, authority, and obligation are found at the beginning of a clause, it is not necessary that each of the words apply to the several branches of the clause. It may be construed reddendo singula singulis and the words giving power and authority limited to particular subjects and those of obligation applied to others." Id. at 441.
In this case, the subjects most properly related to the phrase "within one year after filing such claim" are "file a petition" and "with copy to principal and surety." It would not make sense to apply the phrase to "such further notice as the court may order" because a petitioner has no control over when a court will issue orders for further notice. As the petitioner contends: "[I]t is impossible for a party filing a Petition to predict when a particular Court might be able to receive, process, and return an Order of Notice for service on a Respondent." We will not interpret a statute to require such an illogical result. State v. Yates, 152 N.H. 245, 255, 876 A.2d 176 (2005); see General Electric Co. v. Dole, 105 N.H. 477, 479, 202 A.2d 486 (1964).
Further aiding our construction is the fact that the phrase "with copy to principal and surety" is separated from the phrase "file a petition" with a comma and that there is a conjunction separating "such further notice as ordered by the court" from the rest of the sentence. This indicates that the two phrases "file a petition" and "with copy to principal and surety" are to be read together, while the phrase "such further notice as ordered by the court" is to be read on its own.
The petitioner argues that it is "absurd" to require a petitioner to provide a respondent with "two (2) copies of the exact same pleading." We disagree. New Hampshire is not alone in requiring a petitioner to provide separate notice of the filing of a lawsuit under similar circumstances. See N.M. Stat. Ann. § 48-2A-9 (Michie 1995) (requiring that written notice of lawsuit to obtain satisfaction of stop notice be mailed to subject of lawsuit within five days after date suit was filed).
Moreover, construing the statute to require a petitioner to provide the principal and surety with a copy of the petition to enforce the bond in addition to "such further notice as the court may order" is consistent with the last antecedent rule. *620 See Mountain Valley Mall Assocs. v. Municipality of Conway, 144 N.H. 642, 652, 745 A.2d 481 (2000). The last antecedent rule, a subset of reddendo singula singulis, "is the general rule of statutory as well as grammatical construction that a modifying clause is confined to the last antecedent unless there is something in the subject matter or dominant purpose which requires a different interpretation." Id. (quotation omitted); see L. Jellum, Mastering Statutory Interpretation 84 (2008); Singer & Singer, supra § 47.33, at 487-89. This rule has been adopted by statute. See RSA 21:14 (2000); Piper v. Railroad, 75 N.H. 435, 442, 75 A. 1041 (1910). RSA 21:14 provides: "The words `said' and `such,' when used by way of reference to any person or thing, shall apply to the same person or thing last mentioned." See Piper, 75 N.H. at 442, 75 A. 1041. Applying this rule, "such further notice" means that the copy of the petition given to principal and surety when the petition is filed is in addition to any court-ordered notice. The copy of the petition given when the petition is first filed is the first notice and court-ordered notice given thereafter is "such further notice." In other words, the statute requires that the petitioner provide the respondents with two copies of the same pleading, once when the petitioner first files the petition and again when the petitioner is ordered to serve the respondents by the trial court.
In this case, because the petitioner did not provide the moving respondents with a copy of its petitions within one year after filing its notice of claim, the petitioner did not strictly comply with RSA 447:18, and the trial court did not err by dismissing its petitions. See Fastrack I, 149 N.H. at 666, 827 A.2d 1019.
B. Unjust Enrichment/Restitution and Quantum Meruit Claims
The petitioner next asserts that the trial court erred by dismissing its alternative claims for unjust enrichment/restitution and quantum meruit. The petitioner contends that, contrary to the trial court's decision, its petitions alleged sufficient facts to establish these claims against the moving respondents.
"In reviewing a motion to dismiss, our standard of review is whether the allegations in the petitioner['s] pleadings are reasonably susceptible of a construction that would permit recovery." McNamara v. Hersh, 157 N.H. 72, 73, 945 A.2d 18 (2008) (quotation and brackets omitted). We assume the petitioner's pleadings to be true and construe all reasonable inferences in the light most favorable to it. Id. We need not assume the truth of statements in the petitioner's pleadings, however, that are merely conclusions of law. In the Matter of Kenick & Bailey, 156 N.H. 356, 358, 934 A.2d 573 (2007). We then engage in a threshold inquiry that tests the facts in the petition against the applicable law, and if the allegations constitute a basis for legal relief, we must hold that it was improper to grant the motion to dismiss. McNamara, 157 N.H. at 73, 945 A.2d 18.
The petitioner's petitions failed to allege facts sufficient to state either a claim for restitution or for quantum meruit recovery against the moving respondents. Restitution and quantum meruit recovery based upon "unjust enrichment are allowed by the courts as alternative remedies to an action for damages for breach of contract." 26 R. Lord, Williston on Contracts § 68:1, at 5 (4th ed.2003); see Kondrat v. Freedom School Board, 138 N.H. 683, 686, 650 A.2d 316 (1994). We first address the petitioner's restitution claim.
"A plaintiff is entitled to restitution for unjust enrichment if the defendant received a benefit and it would be *621 unconscionable for the defendant to retain that benefit." Nat'l Employment Serv. Corp. v. Olsten Staffing Serv., 145 N.H. 158, 163, 761 A.2d 401 (2000). "The party seeking restitution must establish not only unjust enrichment, but that the person sought to be charged had wrongfully secured a benefit or passively received one which it would be unconscionable to retain, and unjust enrichment generally does not form an independent basis for a cause of action." 42 C.J.S. Implied Contracts § 10, at 17 (2007); see Kowalski v. Cedars of Portsmouth Condo. Assoc., 146 N.H. 130, 133, 769 A.2d 344 (2001).
The petitioner's petitions alleged only that the respondents "received a substantial benefit without compensating Petitioner for same," which it would be "unconscionable" for them to retain. These are legal conclusions, however, which we are not obliged to accept as true. See In the Matter of Kenick & Bailey, 156 N.H. at 358, 934 A.2d 573. The petitions alleged no predicate facts to support these legal conclusions, and, therefore, failed to state a claim for restitution. See Cray, 105 N.H. at 137, 194 A.2d 763 (concluding, even assuming that surety received benefit from materials furnished by respondent, "this is not sufficient in itself to impose a duty of restitution").
We next turn to the petitioner's claim for quantum meruit recovery. While "[d]amages in unjust enrichment are measured by the value of what was inequitably retained[,][i]n quantum meruit, by contrast, the damages ... are based on the value of the services provided by the plaintiff." Paffhausen v. Balano, 708 A.2d 269, 271 (Me.1998) (citation omitted). "A valid claim in quantum meruit requires [that]: ... (1) services were rendered to the defendant by the plaintiff; (2) with the knowledge and consent of the defendant; and (3) under circumstances that make it reasonable for the plaintiff to expect payment." Id. (quotation omitted). The petitioner's petitions did not allege any of these requisite facts, and, thus, failed to state a claim for quantum meruit recovery against the moving respondents.
For all of the above reasons, therefore, we affirm the trial court's dismissal of the petitioner's petitions against the moving respondents.
Affirmed and remanded.
HORTON, J., retired, specially assigned under RSA 490:3, concurred; BROCK, C.J., retired, specially assigned under RSA 490:3, dissented.
BROCK, C.J., retired, specially assigned under RSA 490:3, dissenting.
This case involves a petition to enforce a bond filed by the petitioner, General Insulation Company (General Insulation), for materials it supplied on the bonded project known as "Bedford Middle/High School" in Bedford. Despite General Insulation having timely filed its notice of claim pursuant to RSA 447:17 (Supp.2009) and its petition to enforce pursuant to RSA 447:18 (2002), the trial court still dismissed the petition as untimely merely because the principals and sureties on the project did not receive copies of the petition until General Insulation, complying with the court's order of notice, served copies on them. See Super. Ct. R. 124. The trial court ruled that, even though General Insulation's petition was filed within one year of its notice of claim, the fact that the principals and sureties did not obtain their copies of the petition until sometime later was fatal to General Insulation's petition. The plurality, elevating form over substance, affirms. I cannot join such a decision.
The filing of a claim to enforce a bond involves two steps. First, a statement of claim is filed "within 90 days after the *622 completion and acceptance of the project by the contracting party." RSA 447:17. The public entity with which the claim is filed is then responsible for sending a copy of the statement of claim to the principal and surety. Id. "[T]he main purpose of [this] notice requirement is to provide parties with an opportunity to settle the claim without resorting to litigation." Mountain Envtl. v. Abatement Int'l/Advatex Assocs., 149 N.H. 671, 674, 826 A.2d 556 (2003).
The second step, governed by RSA 447:18, is to file the petition to enforce the claim. To be timely, the petition must be filed "within one year after filing [the notice of claim]." RSA 447:18. As part of this process, the claimant must provide a copy of the petition to the principal and surety "and such further notice as the court may order." Id. (emphasis added).
In this case, it is undisputed that General Insulation timely filed both its notice of claim and its petition to enforce its claim. General Insulation filed its notice of claim on March 15, 2007, and its petition on March 6, 2008, well within one year of its notice of claim. Pursuant to Superior Court Rule 124 and RSA 447:18, the trial court issued its orders of notice on August 1, 2008, which were returnable on September 2, 2008. General Insulation diligently complied with the court's orders and served the principals and sureties on the project on August 6 and August 8, respectively.
Nonetheless, the trial court ruled, and the plurality agrees, that General Insulation's petition was untimely because the principals and sureties received copies of it in August 2008 instead of before March 15, 2008 (within one year of General Insulation's notice of claim). This result is not only unfair, but is contrary to the plain language of RSA 447:18.
RSA 447:18 provides, in pertinent part: "Said claimant shall, within one year after filing such claim, file a petition in the superior court ... to enforce his claim or intervene in a petition already filed, with copy to the principal and surety, and such further notice as the court may order." The meaning of this statute is plain. The phrase "within one year after filing such claim" is set off by commas, and, thus, modifies only the phrase "file a petition." Accordingly, as long as the petition is filed within this one-year period, it is timely under RSA 447:18.
The next phrases in RSA 447:18 must be read together. They require the claimant to provide a copy of the petition to the principal and surety "and such further notice as the court may order." The use of the words "and such further" makes clear that the claimant need not provide a copy of the petition to the principal and surety until the court issues its orders of notice as required by Superior Court Rule 124. The copy of the petition provided to the principal and surety is the first "notice" that the "court may order." The claimant, however, is also required to provide "such further notice as the court may order." (Emphasis added.)
Nothing in RSA 447:18 requires that the claimant's compliance with the court's orders of notice occur within one year after the claimant's notice of claim has been filed. The clear intent of this statutory provision is to set the date by which a claimant must file a petition, not the date by which copies of the petition must be given to the principal and surety.
Justices Duggan and Horton, using an analytical process grounded in linguistic sophistry and shrouded in Latin to divine legislative intent, conclude that "the statute requires that the petitioner provide the respondents with two copies of the same pleading, once when the petitioner first files the petition and again when the petitioner *623 is ordered to serve the respondents by the trial court." Unfazed by the lack of logic in its conclusion, the plurality argues that "New Hampshire is not alone in requiring a petitioner to provide separate notice of the filing of a lawsuit under similar circumstances." (Emphasis added.) In support of this statement, the plurality cites a New Mexico statute, which it describes as "requiring that written notice of lawsuit to obtain satisfaction of stop notice be mailed to subject of lawsuit within five days after date suit was filed." The New Mexico statute relied upon, however, involves the issuance of "stop notices," which require a construction lender or owner to withhold construction funds equal to the amount of the claim stated in the stop notice. See N.M. Stat. Ann. § 48-2A-8(A) (Michie 1998). Because the stop notice limits the ability of the lender or owner to disburse construction funds to the contractor until the claim is satisfied or adjudicated by a court of competent jurisdiction, the statute requires both that a lawsuit be filed between thirty and sixty days after the stop notice is delivered and that notice of the lawsuit be mailed within five days after the suit is filed. See N.M. Stat. Ann. § 48-2A-9(A). The purpose of requiring notice within five days is obviousit is important that the lender or owner know quickly whether a lawsuit has been filed since funds that could otherwise be disbursed are tied up by the stop notice, and the period for filing a lawsuit expires after sixty days. This sharply contrasts with the instant case, which simply involves a suit upon a bond that can be filed up to a year and ninety days after the completion and acceptance of the project. By no means are these situations remotely "similar."
In construing RSA 447:18, the plurality relies, in part, upon our rule that substantial compliance with the statutory notice requirements of RSA chapter 447 does not suffice; strict compliance is required. See Fastrack Crushing Servs. v. Abatement Int'l/Advatex Assocs., 149 N.H. 661, 666, 827 A.2d 1019 (2003). This reliance is misplaced. This rule is of no assistance in construing exactly what RSA 447:18 requires. Nothing in this rule compels the court to adopt a construction of the statute that is unjust and unfair.
Rather than slavishly following arcane canons of statutory construction, we should look to what the legislature intended. See Chagnon v. Union-Leader Co., 104 N.H. 472, 474, 190 A.2d 721 (1963) (legislative intent, not arbitrary canons of statutory construction, is controlling), superseded on other grounds by statute as stated in Hanchett v. Brezner Tanning Co., 107 N.H. 236, 221 A.2d 246 (1966). Because, as the petitioner rightly observes, no purpose of the statute would be advanced by construing the statute, as the plurality does, as requiring the petitioner to provide the respondents with two copies of the exact same pleading, we should reject that construction. This is particularly apt here, where a common sense reading of the statute, as set forth above, avoids absurdity and is consistent with the legislature's obvious intent. Moreover, the result reached by the plurality is draconian given the petitioner's and its attorney's reasonable interpretation and reliance upon the statutory language at issue.
Here, because the petitioner timely filed its petitions and provided the respondents with copies of them after the court issued orders of notice, the petitioner fully complied with RSA 447:18. I would hold, therefore, that the trial court erred when it dismissed the petitioner's petitions to enforce the bonds at issue. Accordingly, I respectfully dissent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548849/ | 992 A.2d 75 (2010)
In re ERIE GOLF COURSE.
Appeal of Lake Erie Region Conservancy, Inc., and Committee to Keep Erie Golf Course Open.
No. 12 WAP 2009.
Supreme Court of Pennsylvania.
Argued September 16, 2009.
Decided March 25, 2010.
*76 Paul Franklin Curry, Richard E. Filippi, Richard E. Filippi and Associates, P.C., for Lake Erie Region Conservancy & Committee to Keep EGC Open.
Kimberly A. Hummel, PA Department of Conservation & Natural Resources, for *77 amicus curiae Department of Conservation and Natural Resources.
Samuel C. Stretton, Law Office of Samuel C. Stretton, West Chester, for amicus curiae Pennsylvania Land Trust Association.
Henry Fintan McHugh, Petrikin, Wellman, Damico, Brown & Petrosa, P.C., Media, for amicus curiae Stewart Hall, LP.
Gregory Alan Karle, Dailey, Karle & Villella, for City of Erie.
Patrick C. O'Donnell, West Chester, for amicus curiae Borough of Downingtown.
Jeffrey Concini Clark, Wix, Wenger & Weidner, P.C., Harrisburg, for amicus curiae Pennsylvania State Association of Township Supervisors.
BEFORE: CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, GREENSPAN, JJ.
OPINION
Justice SAYLOR.
In this appeal, we consider whether the Donated or Dedicated Property Act applies to the sale of a municipal golf course and park.
In 1926, lands now known as the Erie Golf Course were conveyed to the City of Erie by a private club, on the municipality's payment of a nominal consideration of one dollar and assumption of a $15,000 mortgage. The recorded deed included a restrictive covenant, consistent with an authorizing ordinance, memorializing the City's commitment to preserve the property, indefinitely, as a golf course and/or for park purposes. The deed also formalized the parties' agreement that the restriction was to run with the land.
The City acted consistent with its covenant from 1926 until 2006. Indeed, in 2004, the governing body approved a multi-million dollar bond issue to perform improvements consistent with the original purposes. Shortly after the renovations, however upon a change in City administration and in the face of economic challenges the municipality permanently closed the golf course. Subsequently, the governing body authorized advertisements for sale of the property.
To support this course of action contrary to its recorded commitment, the City invoked the Donated or Dedicated Property Act.[1] In very general terms, and as relevant here, the enactment permits political entities to sell at least certain donated or dedicated property upon orphans' court approval, subject to conditions, where the original purposes are no longer practical and the property has ceased to serve the public interest. See 53 P.S. § 3384.
The City filed a petition seeking relief under the DDPA, and the orphans' court approved intervention by Appellants, Lake Region Conservancy and the Committee to Keep Erie Golf Course Open, which opposed a sale or other relief from the City's fiduciary responsibilities relative to the property. At the ensuing hearings, City witnesses testified that the golf course consistently operated at a net loss; losses would continue into the foreseeable future; the municipality had found it necessary to borrow from its general fund to maintain the golf course's operations; and it would likely have to continue to do so in the future to repay the multi-million dollar bond issue. See N.T., Mar. 26, 2007, at 43, 49-52; N.T., Apr. 16, 2007, at 30-33. Ultimately, the orphans' court denied relief on *78 the City's petition, determining that the property must remain in the public trust, and an appeal followed.
In its opinion under Rule of Appellate Procedure 1925(a), the orphans' court examined Section 2 of the Act, focusing, in particular, on the below-emphasized language:
All lands ... heretofore ... donated to a political subdivision for use as a public facility, or dedicated to the public use or offered for dedication to such use, where no formal record appears as to acceptance by the political division, ... shall be deemed to be held by such political subdivision, as trustee, for the benefit of the public with full legal title in the said trustee.
53 P.S. § 3382 (emphasis added). According to the court, the italicized term served to limit the application of the entire Act solely to circumstances in which no formal record of acceptance appears. Thus, the court rejected the City's contrary argument that the no-formal-acceptance proviso actually was intended to clarify that the DDPA applies, not only to fully-realized dedications, but also in circumstances where some degree of uncertainty might prevail concerning acceptance by a municipality.[2] The orphans' court found support for a restrictive construction of the DDPA's reach in a line of Commonwealth Court decisions. See, e.g., Vutnoski v. Redevelopment Auth. of Scranton, 941 A.2d 54, 58-59 (Pa.Cmwlth.2006); In re Conveyance of 1.2 Acres of Bangor Mem. Park to Bangor Area Sch. Dist., 130 Pa.Cmwlth. 143, 147-48, 567 A.2d 750, 753 (1989) (adopting, by incorporation, a narrow approach to the Act's scope).
The orphans' court elaborated that, under the common-law public trust doctrine, a political entity is prohibited from undermining the public's right of use of property after its dedication and acceptance. See Bd. of Trs. of Phila. Museums v. Trs. of Univ. of Pa., 251 Pa. 115, 123-24, 96 A. 123, 125 (1915); City of Easton v. Koch, 152 Pa.Super. 327, 339, 31 A.2d 747, 752 (1943). Here, the court reasoned that the Erie Golf Course was formally dedicated and accepted by the City for public enjoyment, evidenced by: the express language of the recorded deed; the ordinance accepting the dedication; the City's continuous and exclusive use of the property as a golf course for over eighty years; its contribution of funds toward the maintenance and improvement of the property consistent with the designated purposes; and the public's use of the property as such since 1926. Thus, the court determined that the public trust doctrine, and not the Act, controlled. Because the City held the property as a fiduciary for the benefit of the public, the court concluded that the municipality was prohibited from selling, conveying, or otherwise abandoning the specified uses, consistent with its recorded covenant.
The orphans' court also observed that even assuming, arguendo, that the Act applied the City's only support for its argument of impracticability rested on the debt service burden. The court was not convinced, however, by the City's financial evidence that the property no longer served the public interest, particularly as this evidence was substantially undermined upon adversarial testing. Likewise, the court indicated that the City failed to establish impracticability of the public-park use. Furthermore, the court found *79 that the recent renovations substantially enhanced the viability of the existing uses.[3]
In light of a conflict in prior panel decisions,[4] the Commonwealth Court considered the City's appeal en banc. See In re Erie Golf Course, 963 A.2d 605, 606 (Pa. Cmwlth.2009). In a divided opinion, the intermediate appellate court adopted the municipality's more expansive construction of the Act's scope and, accordingly, reversed the orphans' court's order. See id. at 612. In supportive reasoning, the majority implicitly deemed the statute ambiguous and invoked several tools of statutory construction. Primarily, the majority discerned the meaning of the controverted no-formal-acceptance proviso from the context surrounding its use. See id. (citing Phila. Hous. Auth. v. PLRB, 508 Pa. 576, 586, 499 A.2d 294, 299 (1985)). In this regard, the majority gleaned a legislative intent to address fully-realized dedications from the language of Section 2 following the no-formal-acceptance term,[5] as well as in other passages of the Act.[6] In particular, the majority referenced Section 4, which authorizes disposition of certain public trust property, in defined circumstances, as follows:
When, in the opinion of the political subdivision which is the trustee, the continuation of the original use of the particular property held in trust as a public facility is no longer practicable or possible and has ceased to serve the public interest, or where the political subdivision, as trustee for the benefit of the public, is in doubt as to the effectiveness or the validity of an apparent dedication because of the lack of a record of the acceptance of the dedicated land ..., the trustee may apply to the orphans' court of the county in which it is located for appropriate relief. The court may permit the trustee to
(1) Substitute other lands ... in exchange for the trust property in order to carry out the trust purposes.
(2) If other property is not available, sell the property and apply the proceeds to carry out the trust purposes.
(3) In the event the original trust purpose is no longer practicable or possible or in the public interest, apply the property or the proceeds therefrom in the case of a sale to a different public purpose.
*80 (4) Relinquish, waive or otherwise quitclaim all right and title of the public in and to such land ... as have been apparently dedicated but for which no formal acceptance appears of record. ...
53 P.S. § 3384 (emphasis added).
Examining this passage, the majority emphasized the disjunctive "or" between the distinct provisions addressing a change in circumstances, on the one hand, and uncertainties associated with a lack of record acceptance, on the other. See Erie Golf Course, 963 A.2d at 612 (explaining that the "lack of a record of acceptance plainly has no application to the first portion."). Furthermore, the majority observed that Section 4 delineates multiple forms of relief, only the last of which redresses the no-formal-acceptance scenario. See id. (elaborating, for example, that "Section 4(3) permits the property or proceeds of [a] sale to be applied to another public use `[i]n the event the original trust purpose is no longer practicable or possible or in the public interest' and mirrors the first portion of Section 4 and does not turn on lack of a record of acceptance."). Moreover, the majority opined, "if the legislature intended for the Act to apply only where there is no formal record of acceptance of an offer of dedication, it had only to list formal acceptance among the circumstances specifically excluded from the reach of the Act in Section 6[.]" Id. (referencing 53 P.S. § 3386 ("Nothing in this act shall be construed to limit or affect the control by a political subdivision of public lands ... acquired by such political subdivision by purchase or condemnation.")).
The Commonwealth Court majority derived additional support from the title of the Act:
Providing for the orderly disposition of properties situate within political subdivisions and donated, or otherwise dedicated or offered for dedication, where no formal record appears as to acceptance by the political subdivision, as public parks, squares or similar uses ..., and no longer necessary or practicable for such purposes, and granting orphans' courts jurisdiction with respect thereto.
Act of Dec. 15, 1959, P.L. 1772, title; see 53 P.S. § 3381, Historical and Statutory Notes. From this phraseology, the majority considered it clear that the General Assembly intended application to properties donated as public parks, squares, or similar uses; to properties otherwise so dedicated; and to properties offered for dedication where no formal record appears as to acceptance. Addressing the punctuation, the majority reasoned:
Indeed, but for the comma between "offered for dedication" and "where no formal record appears" the restrictive application of the qualifying language would be readily apparent. Another rule of construction states, however: "In no case shall the punctuation of a statute control or affect the intention of the General Assembly in the enactment thereof but punctuation may be used to aid in the construction thereof if the statute was finally enacted after December 31, 1964." 1 Pa.C.S. § 1923(b).
Erie Golf Course, 963 A.2d at 612.
Thus, as to both the Act's title and Section 2, the majority applied the conventional notion that the qualifier ("where no formal record appears as to acceptance") pertained only to the terms immediately preceding it ("offered for dedication") and did not displace the entire effect of the statute relative to fully-realized dedications. See Erie Golf Course, 963 A.2d at 612 (citing Commonwealth v. Packer, 568 Pa. 481, 491, 798 A.2d 192, 198 (2002)).
After holding that the DDPA applied, the en banc majority addressed the standard governing the orphans' court's assessment *81 of a petition for relief under the Act. From the opening passage of Section 4 ("When, in the opinion of the political subdivision which is the trustee, ..."), the majority gleaned a requirement of substantial judicial deference to a political subdivision's decision to dispose of donated or dedicated property. 53 P.S. § 3384. Moreover, the majority referenced the admonition that "courts will not review the actions of governmental bodies or administrative tribunals involving acts of discretion, in the absence of bad faith, fraud, capricious action or abuse of power." Goodman Appeal, 425 Pa. 23, 30, 227 A.2d 816, 820 (1967). Explaining that Appellants failed to offer evidence that the City's actions were ultra vires or wrongful, the majority determined that the orphans' court erred by failing to accord sufficient deference to the City.
Judge Pellegrini authored the dissenting opinion. See Erie Golf Course, 963 A.2d at 614-15 (Pellegrini, J., dissenting). While recognizing the fact of the conveyance to the City, the dissent took the position that the property was not donated as a gift or dedicated for public use.[7] Rather, appearing to consider purchase and dedication as mutually exclusive, the dissent highlighted the City's tender of consideration connected with the initial acquisition of the property. Evidently, pursuant to Section 6 of the Act ("Nothing in this act shall be construed to limit or affect the control by a political subdivision of public lands ... acquired by such political subdivision by purchase or condemnation."), Judge Pellegrini concluded that the statute simply did not apply and the orphans' court lacked jurisdiction to approve or disapprove a sale. See id. at 615.
Presently, Appellants advance the rationale that prevailed in the orphans' court, Vutnoski, and Bangor, maintaining that the public trust doctrineand not the DDPAgoverns fully-realized dedications. Appellants portray the public trust doctrine as vigorous, unwavering, and vital public policy, consistent with the strong pronouncements of Philadelphia Museums. According to Appellants, the Act's purpose was merely to supplement essential public-trust protection by confirming its application in circumstances where uncertainty otherwise might exist. Accord Brief for Amicus Stewart Hall, L.P. at 8 (positing that the Act "merely provides a relaxed standard of public trust due to the lacking element of public acceptance"). Appellants and their amici regard the Commonwealth Court's holding as marginalizing the public trust doctrine by destroying the irrevocable nature of acceptance across the broader category of fully-realized dedications.
While Appellants regard the DDPA as unambiguous on its terms, they also find support for their position in: rules of grammar;[8] the presumption that statutes are not intended to overturn well-established precedent without an express declaration of such purpose, see In re Holton's Estate, 399 Pa. 241, 247, 159 A.2d 883, 886 (1960); as well as the prescriptions that the General Assembly does not favor absurd *82 or unreasonable results,[9] does not wish to violate constitutional norms,[10] and means to favor public over private interests. See 1 Pa.C.S. § 1922(1), (3), (5). Appellants additionally contend that, if the Act were intended to apply to fully-realized dedications, the Legislature would not have found it necessary in Section 3 to specify that property subject to the Act "shall be deemed to be held by such political subdivision, as a trustee, for the benefit of the public." See Brief for Appellants at 25 ("Under the Commonwealth Court's reasoning, properties that were formally dedicated and accepted as public property would be `deemed' to be what they already are."). Like Judge Pellegrini, Appellants believe that Section 6 expressly exempts from the coverage of the DDPA property, such as the Erie Golf Course, which was purchased for valuable consideration and relegated to public use via authorizing ordinance and restrictive covenant.
As concerns the Act's scope, Appellants' amici offer a series of policy arguments, expressing a concern that increased alienability will discourage directed donations and dedications.[11] They also fear a depletion of vital public resources, particularly in light of current economic challenges facing governmental bodies.[12] Relatedly, in its amicus brief, the Department of Conservation and Natural Resources explains that it awards grants amounting to hundreds of millions of dollars to facilitate local community acquisition and development of parkland, recreation, and conservation areas. According to the Department, the commitments and deed restrictions required for participation in the program are an essential component, and "[t]he Commonwealth Court's broad application of the Act jeopardizes the large investment Commonwealth taxpayers have made through DCNR to make community parks and recreation facilities permanently available for the enjoyment of the citizens of the Commonwealth." Brief for Amicus DCNR at 2-3.
*83 To the degree the DDPA applies, Appellants also denounce the Commonwealth Court's adoption of a bad-faith standard curtailing the orphans' court review, contending that it lacks grounding in the Act and is tantamount to a conferral of "unfettered discretion" to dispose of public trust property. See, e.g., Brief for Appellants at 10 ("Here, under the Commonwealth Court's decision thousands of gifts and grants to the public use and purchases of property for the public use that have been formally accepted and dedicated to public use by political subdivisions are now at the risk of the whim of public officials who for financial concerns and/or political favors choose to liquidate public trust assets."). Appellants observe that the Goodman Appeal decision, relied on by the Commonwealth Court majority to support considerable deference to municipalities, actually stressed the substantial common-law and statutory protections applicable in public trust scenarios and ultimately disapproved a sale of trust property. See id. at 27, 227 A.2d 816 (citing Goodman Appeal, 425 Pa. at 30-31, 227 A.2d at 820-21). Appellants and their amici regard robust orphans' court review as integral to an essential system of checks and balances under the Act.
Along these lines, Appellants contend that the DDPA itself places it squarely within the purview of the orphans' court and not a municipality seeking to divest itself of its fiduciary obligationsto determine whether the designated use of dedicated property is no longer practicable and what relief, if any, should be afforded to a municipality. See id. at 29, 227 A.2d 816 ("If the intent of the legislature was to provide a political subdivision an unfettered right to make political decisions with no meaningful review, then the additional procedural protections afforded by the Act would be superfluous."). Appellants and their amici also reference the Act's provision for public involvement in the approval process, see 53 P.S. § 3385 (providing for various notice, intervention, protest, and public-hearing rights favorable to the Attorney General and private residents and organizations), as confirming that the Legislature intended close review of the disposition of public trust property. See, e.g., Brief for Amicus Stewart Hall, L.P. at 21 ("The right of the public to present evidence in opposition to such a sale would be a pointless concession if the [Act's] restrictions were replaced by the [highly deferential] standard of review applicable to administrative or legislative actions.").
The City, on the other hand, maintains that the Commonwealth Court's decision is fundamentally correct. According to the municipality, the Act essentially codifies the common-law public trust doctrine, while, at the same time, moderating its inflexibility by offering a "dispositional process for transfer of real property burdened by impracticable restrictions of unlimited duration." Brief for Appellee at 7. The City contends that, in light of the rules of statutory construction, the DDPA pertains to dedicated property where there is a formal record of acceptance, since statutory relief is favored over common law redress, see 1 Pa.C.S. § 1504; a statutory remedy is generally exclusive, see Lurie v. Republican Alliance, 412 Pa. 61, 63, 192 A.2d 367, 369 (1963); all aspects of a statute must be given due effect, see 1 Pa.C.S. § 1921(a); and, ordinarily, qualifying words are to be applied to the terms immediately preceding them. See Packer, 568 Pa. at 491, 798 A.2d at 198. Consistent with the reasoning of the Commonwealth Court majority, the City emphasizes the Act's multiple references to completed dedications and suggests these terms would be rendered meaningless by sharply restricting the Act's scope to the no-formal-acceptance scenario.
*84 According to the City and its amicus, the Pennsylvania State Association of Township Supervisors, the Act's legislative history strongly supports its broader applicability. With reference to the original bill, they explain that there was no question that it was intended to apply to the greater class of donated and dedicated property, since the bill did not contain the no-formal-acceptance proviso. This qualifier was integrated into the bill, throughout its various sections, via an amendment in the final stages of consideration, upon the third reading in the House of Representatives. See 1959 Pa. Leg. J.House, at 2825-26 (Aug. 11, 1959). The City and its amicus offer such history as strong evidence that the no-formal-acceptance language was not intended to severely curtail the application of the DDPA. Rather, they believe it was added merely to clarify the Act's extension to public-trust property, even where a political subdivision's records are incomplete. See Brief for Appellee at 14; Brief for Amicus Pa. State Ass'n of Twp. Supervisors at 18-19.
Citing Goodman Appeal, the City also maintains that the orphans' court erred by failing to defer to its own considered judgment in the impracticability assessment, particularly in terms of the economic considerations. Although the position is implicit in Appellants' arguments and in the Commonwealth Court's opinion, amicus Borough of Downingtown directly asserts that the DDPA empowers orphans' courts to free land titles from formal deed restrictions. See Brief for Amicus Borough of Downingtown at 18.
Responding to Appellants' policy arguments, the City contends that the Act contains sufficient safeguards to counter political "whims." See supra note 9. In particular, amicus Borough of Downingtown advises that donors will understand that gifts given in perpetuity are subject to the effect of unforeseen changes in circumstances. See Brief for Amicus Borough of Downingtown at 25. Perhaps in tension with the other arguments in defense of the Commonwealth Court's deferential perspective, the Borough highlights checks and balances under the Act, particularly in terms of the requirement of judicial involvement. Indeed, according to the Borough, Appellants' vision of an irrevocable trust would dissuade municipalities from accepting donations and dedications. See id. at 26 ("No rational political unit could accept a future offer of dedication if ... the economic obligations created thereby are inescapable even in the face of literal impossibility.").
Finally, Downingtown Borough supplies another worthy perspective. In the first instance, the Borough observes that the common law public trust doctrine was not as inflexible as portrayed by Appellants, since the inherent judicial authority to adapt perpetual gifts to changed circumstances was always recognized. See id. at 20 (citing Payne v. Kassab, 468 Pa. 226, 238, 361 A.2d 263, 269 (1976) ("It is equally well established ... that diversion of dedicated land from one public use to another may be approved in a proper case.")).[13] The Borough regards this limited and controlled latitude, as reflected in both the common law and the Act, as analogous to the cy pres doctrine prevailing in the charitable-trusts context. See, e.g., In re Miners' & Laborers' Beneficial Fund of Phila. and Reading Coal & Iron Co., 445 Pa. 65, *85 75, 282 A.2d 688, 693 (1971). Given that "eleemosynary gifts in perpetuity create unique difficulties," the Borough argues:
In these situations the public good demands a procedure by which an objective, respected, disinterested institution possessed of the requisite societal respect, power, experience, and expertise is granted the power and authority, on application of interested parties, to hear the factual particulars of the original gift and the changes that have rendered that gift impractical or impossible of fulfillment, indefinite of object, or otherwise no longer in the public interest[.] [T]hen, with suitable restrictions requiring only the minimum deviation necessary, [the chancellor may] allow the substitution of a new program or charitable/public object so that the grantor's original intent can be fulfilled over time as nearly as possible.
* * *
The Act is no more or less than the public analog of the rule of Cy Pres and the public interest will not be served if, as the trial court here held, the chancellor's authority with respect to public gifts is substantially narrower in its scope than the analogous power to address the identical difficulties faced in connection with testamentary charitable gifts.
Brief for Amicus Borough of Downingtown at 28-29.
We allowed appeal to address the sharp controversy over the DDPA's scope and the Commonwealth Court's remand decision. As these matters concern statutory construction, we are presented with questions of law subject to plenary review.
At the outset, the guiding principles of statutory construction are ably developed in the parties' arguments. Briefly, our task is to discern the intent of the Legislature, and, in doing so, we first look to the Act's plain language. As is evident from the arguments presented in this case, however, the Act contains substantial ambiguities which require the application of other approaches.
For example, and central to the present dispute, a core ambiguity arises out of the placement of the lack-of-acceptance qualifier at the end of a series of potential subjects. See 53 P.S. § 3382. For this reason, both parties are able to advance colorable arguments that the Act includes, or excludes, dedicated property where there is a formal record. Moreover, the statute lacks definitions for central concepts, such as "dedication" and "purchase." For instance, there is no guidance concerning whether "purchase" contemplates a fair-market-value exchange (as opposed to encompassing an exchange upon lesser or nominal consideration), and, particularly if not, whether the concepts of "dedication" and "purchase" are intended to be mutually exclusive.[14] The difficulty is compounded by the somewhat obscure direction, in Section 6, that a political subdivision's "control" is not limited or affected by the Act *86 in purchase scenarios. 53 P.S. § 3386.[15] This, in turn, raises the question of whether property that in any sense of the word can be regarded as "purchased" is entirely excluded from the DDPA's coverage.
In view of such apparent ambiguities, the Commonwealth Court's resort to additional principles of statutory construction was appropriate. See 1 Pa.C.S. § 1921(c).
Concerning its analysis of the threshold issue involving the Act's scope, we find the court's reasoning to be primarily correct. The Commonwealth Court majority ably contextualized the lack-of-acceptance proviso and persuasively reasoned that the narrowing construction favored by Appellants too greatly impacted the effectiveness of various other provisions of the statute. See Erie Golf Course, 963 A.2d at 611-12; 1 Pa.C.S. § 1921(a). This analysis is complemented by the legislative history of the DDPA, as developed by the City and Downingtown Borough. In answer to Appellants' argument that the Legislature never intended the Act to apply to fully-realized dedications, this history demonstrates that this, in fact, was intended from the outset. See 1 Pa.C.S. § 1921(c)(7) (authorizing consultation of the contemporaneous legislative history as a tool of statutory construction). The addition of the lack-of-acceptance qualifier as an eleventh-hour amendment, with no accompanying structural changes to the statute, strongly suggests that the modifier was designed to supply clarification to the Act, not to effectuate a dramatic revamping of its overall reach. The title, structure, substance, and history support the conclusion that the Donated or Dedicated Property Act was intended to extend across the broader class of dedications.
In response to the argument of Appellants and their amici that the Legislature would not have needed to provide rights in the DDPA that already existed under the public trust doctrine, we agree with the contrary perspective that the referenced provisions of the Act merely incorporate salient common-law principles. Such an approach to the drafting of statutes is neither unusual nor superfluous. We also agree with the Commonwealth Court and the City that, through the Act, the Legislature both specified the fiduciary nature of municipalities' obligations relative to donated and dedicated properties and provided for orderly relief therefrom in appropriate circumstances. See 53 P.S. §§ 3383-3384.[16]
The more difficult questions in the appeal concern the role of the orphans' court and the effect of the DDPA on restrictive covenants.
In terms of orphans' court review, we differ with the Commonwealth Court's finding that the primary discretion involved lies with a municipality seeking relief from its fiduciary obligations. In so holding, the court relied on the opening sentence of Section 4, 53 P.S. § 3384 ("When, in the opinion of the political subdivision which is the trustee, the continuation *87 of the original use of the particular property held in trust as a public facility is no longer practicable or possible and has ceased to serve the public interest, ... the trustee may apply to the orphans' court... for appropriate relief."). See Erie Golf Course, 963 A.2d at 613. Such passage, however, does not vest controlling discretion in the political subdivision; rather, it merely specifies under what circumstances the municipality, as trustee, may file an application in an orphans' court. The controlling discretion is squarely reposited in the court. See 53 P.S. § 3384 ("The court may permit the trustee to" substitute lands or sell the property subject to various prerequisites and conditions (emphasis added)).
In this regard, we agree with amicus Downingtown Borough, which argues (albeit for distinct purposes) that the Act shares considerable similarities with the cy pres doctrine applicable to charitable trusts. Notably, under the cy pres doctrine, a trustee has no discretion to divert from purposes specified by a settlor;[17] rather, the trustee may only lodge an application in a court of equitable jurisdiction, which then exercises its sound discretion in assessing the availability and nature of relief. Cf. In re Estate of Elkins, 888 A.2d 815, 823-24 (Pa.Super.2005) (explaining that the orphans' court is tasked with concluding whether the charitable purpose of a trust is no longer practical). See generally Chester, et al., BOGERT'S TRUSTS AND TRUSTEES § 435; 14 C.J.S. CHARITIES § 49 (2009) ("The application of the cy pres doctrine, with regard to a charitable trust, involves a great measure of judicial discretion[.]"). The decision of the court of original jurisdiction is subject to deferential appellate review. See, e.g., In re Women's Homeopathic Hosp. of Phila., 393 Pa. 313, 316, 142 A.2d 292, 293-94 (1958) (prescribing an error of law or manifest abuse standard).
The careful control exercised by the courts in the cy pres arena is on account of the extraordinary nature of a diversionary remedy impacting important rights and interests of the settlor and the public. Such concerns also pertain under the Donated or Dedicated Property Act, and, thus, we believe the Legislature reposited the appropriate discretion in the orphans' court, and not the trustee, for conventional, and very good, reasons.[18] While substantial deference may be due generally to discretionary administrative and legislative acts, presently, the sale of the property was not discretionary with the City in the first instance in light of its fiduciary obligations and recorded covenant.
Based on the above, we differ with the standard governing orphans' court review set by the Commonwealth Court, entailing a manifest abuse on the part of a *88 municipality seeking relief from its trust obligations. Rather, we hold that the essential discretion lay in the orphans' court, to which appellate court deference is due, and we will remand for further appellate review by the Commonwealth Court subject to this controlling principle.[19]
Lastly, we give our attention to two final matters touched upon by the parties, namely, the proper construction of Section 6 as it relates to "purchased" property, see 53 P.S. § 3386, and the impact of the DDPA on the formal deed restriction.
As to Section 6, we have observed that the statute is ambiguous and potentially paradoxical. See supra note 15. Further, we differ with the notion (which is at least implicit in the Commonwealth Court dissent) that a bright line separates dedications and purchases, since, under the governing principles, purchased property can be committed to the public trust. See supra note 14. Given the overlap, we find it most reasonable to construe Section 6 as redressing a concern for the preservation of such rights and interests as a political subdivision may have acquired in connection with a purchase. See Stozenski v. Borough of Forty Fort, 456 Pa. 5, 10, 317 A.2d 602, 606 (1974) (distinguishing between rights of a municipality as an offeree of a dedication and rights as a grantee resulting from a purchase). We do not believe, however, that the provision was intended to remove entirely from the Act's purview (and thus maintain inflexible irrevocability relative to) any and all trust property that may in any sense of the word be said to have been purchased.
With regard to the deed restrictions, in light of the orphans' court's limited construction of the DDPA, and the Commonwealth Court's directive for deferential judicial review, we find that relevant legal principles are not in sharp focus at the present time. Thus, at this juncture, we will say only that the argument that the General Assembly did not contemplate disrupting recorded restrictive covenants in the DDPA is colorable. We note particularly the absence of any express reference in the Act to deed restrictions;[20] the important interests they may protect, such as those advanced by DCNR; and the purpose of attachment to the land as providing the strongest assurance of security and longevity.[21] Thus, while, again, we defer our own consideration in light of the course this matter has taken, we recognize that approval of a sale of the property over the recorded restrictive covenant, at least against relevant objection, will require a *89 close examination of the authority conferred under the Act relative to property rights running with land and, to the degree the Act does not supply the necessary authority, governing property-law principles.
We hold that the DDPA applies to fully-realized dedications, as well as to ones where there may be uncertainty as to the acceptance. Further, we hold that the Commonwealth Court erred in remanding at this juncture, in the absence of deferential appellate review of the discretionary aspects of the orphans' court's decision.
The order of the Commonwealth Court is vacated, and the matter is remanded for further proceedings consistent with this opinion.
Former Justice GREENSPAN did not participate in the decision of this case.
Chief Justice CASTILLE, and Justices EAKIN, BAER, TODD and McCAFFERY join the opinion.
NOTES
[1] Act of Dec. 15, 1959, P.L. 1772 (as amended 53 P.S. §§ 3381-3386) (the "Act" or the "DDPA").
[2] Pursuant to the common law, a fully-realized dedication of property, like a contract, entails both an offer and an acceptance. See In re Altoona, 479 Pa. 252, 258, 388 A.2d 313, 315-16 (1978).
[3] Parenthetically, the orphans' court also determined that a number of the City's arguments pertaining to statutory construction were unpreserved. Nevertheless, the Commonwealth Court reviewed those arguments on their terms, and the City's central position that the Act applies appears to encompass most of the subsidiary arguments concerning why that is so. In any event, we did not accept review on issue-preservation matters; Appellants do not argue waiver; and we are not of a mind to embark on an independent review.
[4] The Vutnoski/Bangor line of decisions relied upon by the orphans' court is in tension with White v. Twp. of Upper St. Clair, 799 A.2d 188 (Pa.Cmwlth.2002), and Petition of Borough of Westmont, 131 Pa.Cmwlth. 530, 570 A.2d 1382 (1990), where the Commonwealth Court appears to have contemplated application of the Act to fully realized dedications and declarations. See White, 799 A.2d at 200; Westmont, 131 Pa.Cmwlth. at 535-36, 570 A.2d at 1384-85.
[5] See id. at 611 ("Section 2 is one sentence, and after the phrase in dispute it contains the words `regardless of whether such dedication occurred before or after the creation or incorporation of the political subdivision,' thereby indicating an actual dedication." (emphasis in original)).
[6] See id. at 611-12 ("Section 3 commands that lands ... held by a political subdivision as trustee `shall be used for the purposes for which they were originally dedicated or donated,' except as modified by court order pursuant to the Act, again referring to an actual dedication.").
[7] Curiously, although relying on a very broad dictionary definition of dedication, "to open for public use," see Erie Golf Course, 963 A.2d at 615 (Pellegrini, J., dissenting), the dissent appears to have rejected the opening, and long-term public use, of the property, consistent with an authorizing ordinance and restrictive covenant, as comprising such a dedication.
[8] See, e.g., Brief for Appellants at 22 ("Simple rules of grammar are all that are necessary to see that the phrase `where no formal record appears as to acceptance by the political subdivision...' modifies the entire clause preceding it.").
[9] Appellants invoke this principle in association with their perspective that the Commonwealth Court's construction subjugates the public trust to the "whims of public officials." Brief for Appellants at 23.
[10] In this regard, Appellants allude to property rights of donors, see Brief for Appellants at 23 ("[T]hose who donate or dedicate land to the public have a justifiable expectation that when a municipality accepts these gifts or other transfers under terms and conditions, that the municipality will remain true to its agreement."), as well as the public at large, id. at 23-24 ("[A]pplying the Act to properties clearly dedicated and formally accepted by the municipality ... essentially negates the public's interest in donating property to local governments.").
[11] See, e.g., Brief for Amici the Pa. Land Trust Ass'n, et al. at 18 ("People and organizations will not deed or donate property, particularly parkland if the City is going to sell it, particularly for short term economic gain or purposes."); Brief for Amicus Stewart Hall, L.P. at 9 ("If this precedent were allowed to stand, it would erode the public trust in political subdivisions to protect public properties such as parks, and this eroded trust would also have a chilling effect upon individuals who are considering a grant for the public benefit.").
[12] See Brief for Amici the Pa. Land Trust Ass'n, et al. at 30 ("Without the Public Trust Doctrine, the Pandora's Box of municipalities selling parkland for short term economic gain will be forever opened."); Brief for Amicus Stewart Hall, L.P. at 23 ("The [Commonwealth Court] majority's deference to economic feasibility, while appearing innocent enough in the context of an expensive and allegedly underused golf course, exposes all parklands and other public properties to temporary political needs. Parklands and other public properties rarely pay for themselves, and should be measured in terms other than their economic feasibility.").
[13] Cf. Ill. Cent. R.R. Co. v. Illinois, 146 U.S. 387, 453, 13 S. Ct. 110, 118, 36 L. Ed. 1018 (1892) ("The control of the state for the purposes of the trust can never be lost, except as to such parcels as are used in promoting the interests of the public therein, or can be disposed of without any substantial impairment of the public interest in the lands ... remaining.").
[14] In the decisional law, courts have considered purchased property to be "dedicated" upon a municipality's commitment of the property to public use and acceptance by the public. See, e.g., Phila. Museums, 251 Pa. at 123, 96 A. at 125; cf. Coffin v. Old Orchard Dev. Corp., 408 Pa. 487, 491, 186 A.2d 906, 909 (1962) ("Dedication of land results when a landowner offers property for public use and it is accepted by or in behalf of the public..."). In such cases, the landowner/dedicator is the political unit, as opposed to the original seller. Of course, this form of dedication would not be covered by the DDPA, despite the Act's facial applicability, if the fact of the purchase were disqualifying in the first instance.
[15] At least on its face, Section 6 appears intended to protect the rights a municipality may have acquired in connection with a purchase. Paradoxically, however, preexisting law was more restrictive than the Act concerning alienability of purchased property dedicated to public use, as the public trust doctrine applied. See supra note 14. Thus, applying Section 6 to all property that can in any sense of the word be considered "purchased" would appear to render the section self-defeating.
[16] To the extent the Act modifies the public trust doctrine, the prior common-law principles are superseded. See Sternlicht v. Sternlicht, 583 Pa. 149, 163, 876 A.2d 904, 912 (2005).
[17] An exception prevails where the trust instrument itself expressly grants the trustee the power to determine whether the original trust purposes have become impossible or impracticable and to devise a plan for carrying out charitable intentions different from those provided by the settlor. See Ronald Chester, et al., BOGERT'S TRUSTS AND TRUSTEES § 435 (2009).
[18] The present codification of the cy pres doctrine utilizes more mandatory terms relative to orphans' court approval. See 20 Pa.C.S. § 7740.3 (prescribing that, upon a finding that original charitable purposes have become unlawful, impracticable, or wasteful, the court "shall apply cy pres to fulfill as nearly as possible the settlor's charitable intention" (emphasis added)). Significantly, however, the DDPA utilizes the permissive phraseology, consistent with a wider conferral of discretion.
Moreover, as Appellants stress, the Goodman Appeal decision upon which the Commonwealth Court relied is more nuanced than was recognized. See Goodman Appeal, 425 Pa. at 30-31, 227 A.2d at 820-21.
[19] Although Appellants' position has not prevailed on the threshold issue, we note that the policy concerns raised by their amicus, see, e.g., supra note 11, are mitigated by appropriate recognition of the close review available to, as well as the discretionary prerogative of, the orphans' courts.
[20] Instead, the Act speaks only to dedications formalized through offer and acceptance, and not to the destruction of independent property rights running with the land. Cf. City of Huntington Woods v. City of Detroit, 279 Mich.App. 603, 761 N.W.2d 127, 143 (2008) (holding that, to the extent a municipality could obtain approval to sell a golf-course/park property, the land would remain burdened by the restrictive covenant providing for public use). Notably, as contrasted with recorded restrictive covenants, no particular formalities are necessary to accomplish dedication; all that is necessary are clear expressions of intention. See Coffin, 408 Pa. at 491-92, 186 A.2d at 909.
[21] While various of the advocates have suggested that relief from such covenants may be available pursuant to other property-law principles, see generally Vernon Twp. Volunteer Fire Dep't v. Connor, 579 Pa. 364, 375, 855 A.2d 873, 879 (2004), it is beyond the scope of this appeal to comment further on the availability of such remedies or the procedure for securing them. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548853/ | 992 A.2d 1071 (2010)
295 Conn. 707
STATE of Connecticut
v.
Solomon BOYD.
No. 17719.
Supreme Court of Connecticut.
Argued October 21, 2009.
Decided April 27, 2010.
*1075 Pamela S. Nagy, special public defender, for the appellant (defendant).
Raheem L. Mullins, deputy assistant state's attorney, with whom, on the brief, were David I. Cohen, state's attorney, and Paul Ferencek, senior assistant state's attorney, for the appellee (state).
ROGERS, C.J., and NORCOTT, PALMER, VERTEFEUILLE, ZARELLA and McLACHLAN, Js.
ROGERS, C.J.
After a jury trial, the defendant, Solomon Boyd, was convicted of murder in violation of General Statutes § 53a-54a. The trial court rendered judgment in accordance with the verdict, and the defendant now appeals[1] from the judgment of conviction. The defendant claims that the trial court improperly: (1) denied his motion to suppress certain evidence on the ground that it was seized in violation of his rights under the fourth amendment to the United States constitution[2] and article first, § 7, of the Connecticut constitution;[3] (2) admitted evidence of uncharged misconduct; (3) admitted evidence that the defendant had invoked his right to remain silent in violation of his rights under the fifth amendment to the United States constitution;[4] and (4) failed to give a special credibility instruction on the testimony of an informing witness. We conclude that, although the defendant had a legitimate expectation of privacy in his cell phone, the automobile exception to the constitutional requirement for a search warrant applied *1076 under New York law. We also reject the defendant's other claims. Accordingly, we affirm the judgment of conviction.
The jury reasonably could have found the following facts. In 2001 and early 2002, the defendant lived in Mamaroneck, New York, with his girlfriend, Melissa Gagliardi. The defendant was a drug dealer. Carlos Barradas, the victim, spent a large amount of time at the defendant's apartment, where he helped the defendant with his drug business. In return, the defendant provided drugs to the victim. The victim also purchased drugs from the defendant on an almost daily basis.
In early January, 2002, a gold bracelet belonging to the defendant was missing from the apartment. The defendant believed that the victim had stolen the bracelet and became upset with him. On the night of January, 16, 2002, at approximately 10 p.m., the defendant told Gagliardi that he and the victim were going to go to Mount Vernon, New York, to buy drugs. The defendant and the victim took the victim's car. Instead of driving to Mount Vernon, however, they drove to Norwalk. They arrived at an area near the intersection of Merritt Street and Chestnut Street at approximately 11:48 p.m. The defendant then shot the victim with a .45 caliber semiautomatic gun. The victim exited from the car and tried to flee, but a fence blocked his way. The defendant, who also had exited the car, shot the victim again. The victim then entered and exited the car again in an attempt to escape from the defendant. The defendant ultimately shot the victim several times in front of the car, where the victim fell. Police arrived at the scene within minutes of the shooting and found the victim still alive. They took him to Norwalk Hospital where he was pronounced dead at 12:15 a.m.
Later that morning, when the defendant arrived back at his apartment in Mamaroneck, he was wearing a woman's sweatshirt. Gagliardi asked him where he had acquired it, and the defendant told her that he had needed to change his clothes in order to get rid of "`evidence'" or "`gun's powder.'" At some point, Gagliardi asked the defendant where the victim was and the defendant told her that he had killed him by shooting him multiple times. He also indicated that his cousin, Kevin Thomas, had been present during the murder.
In March, 2004, the defendant was arrested and charged with murder. After a trial, the jury found him guilty of murder and the trial court rendered judgment in accordance with the verdict. This appeal followed.
I
We first address the defendant's claim that the trial court improperly denied his motion to suppress certain evidence that he claims was seized without a valid search warrant in violation of his rights under the fourth amendment to the United States constitution and article first, § 7, of the Connecticut constitution. We conclude that the evidence was admissible under the automobile exception to the constitutional requirement for a search warrant.
The following undisputed facts are relevant to this claim. In January and February, 2002, the Mamaroneck police department was investigating the defendant for suspected drug sales. On February 1, 2002, Joseph Comblo, a detective with the Mamaroneck police department, executed a search warrant in connection with the investigation. Both the warrant and the affidavit attached to the warrant were captioned: "FOR THE PREMISES AND PERSONS OF: SOLOMON BOYD, 627 MAMARONECK AVENUE, MAMARONECK, NEW YORK, APARTMENT # 3 *1077... AND FOR THE PERSON OF SOLOMON BOYD AND ANY PERSON THEREIN." The body of the search warrant stated: "You are therefore commanded... to make an immediate search of 627 Mamaroneck Ave ... Mamaroneck, New York... for crack cocaine and cocaine, narcotics paraphernalia, including but not limited to plastic bags, records of ownership or use of this location, including trace evidence, records of narcotics transactions, any safe and its contents, computers, computer programs, computer data, and [United States] [c]urrency used to purchase crack cocaine and cocaine...."
Because the Mamaroneck police were aware that the Norwalk police department was investigating the defendant in connection with the victim's murder, Robert Holland, a sergeant with the Mamaroneck police department, invited Arthur Weisgerber and Charles Chrzanowski, detectives with the Norwalk police department, to accompany the Mamaroneck police during the search of the defendant's apartment. The Mamaroneck police department executed the warrant at approximately 7:45 p.m. on February 8, 2002. Weisgerber and Chrzanowski arrived at the apartment after the search had begun. They did not participate in the search, but remained in the kitchen of the apartment.[5] They attended the search in the hope that, while the Mamaroneck police were searching for drugs, they would find in plain view evidence related to the victim's murder, such as a gun, ammunition or bloody clothes. The Mamaroneck police found crack cocaine, drug paraphernalia, a scale, a razor blade and a computer in the apartment. Gagliardi was present during the search and the police arrested her on drug charges. The police found no evidence related to the murder.
During the search, Holland received a radio call that other Mamaroneck police officers had stopped the defendant nearby as he was returning to the apartment in his car. Holland and Weisgerber went to the location where the defendant had been stopped. By the time they arrived, the other police officers already had arrested the defendant for drug offenses on the basis of the evidence seized at the apartment. Holland and Weisgerber noticed a cell phone on the passenger seat of the car that the defendant had been driving.
Later that night, Weisgerber and Chrzanowski went to the Mamaroneck police station to interview Gagliardi about the murder. While they were waiting to interview Gagliardi, Andy Genovese, a detective with the Mamaroneck police department, was at his desk nearby, scrolling through the numbers on the cell phone that had been taken from the defendant's car.[6] Genovese announced several telephone numbers that he had found on the cell phone, including the cell phone's subscriber number. Chrzanowski recorded the number in his notes.
Thereafter, Weisgerber prepared and executed a search warrant on Sprint Spectrum L.P., the wireless telecommunications company that serviced the cell phone for the telephone records related to the *1078 cell phone. The cell phone records revealed that the account for the cell phone was in the defendant's name. The records also showed that, in the hour before the victim's murder, calls from and to the cell phone had been routed through a series of telecommunications towers progressing in a northeasterly direction from Mamaroneck to Norwalk. A number of cell phone calls that had been made and received minutes before the murder had been routed through a tower located approximately five blocks north of the murder scene. The cell phone records further showed that, beginning minutes after the murder, a number of calls from and to the cell phone had been routed through a series of towers progressing in a southwesterly direction from Norwalk to Mamaroneck.
In addition, the cell phone records revealed that, shortly after the murder, several calls originating with the cell phone had been made to the telephone of Sally Williams, who is Gagliardi's mother. Gagliardi's cousin, Joanne Gentile, who was one of the defendant's drug customers, was living with Williams at that time. Gentile testified at trial that the defendant had called her in a panicked state on the night of the murder and had asked her to go to his apartment to tell Gagliardi to call him or to answer his telephone calls. Gagliardi testified that, after Gentile came to the apartment, she answered the telephone and the defendant asked her to call his sister to ask her to provide him with an alibi. The defendant also asked Gagliardi to say that he had been at his sister's house getting his hair done or that he had been at home with Gagliardi. Gagliardi refused and hung up the telephone.
Before trial, the defendant filed a motion to suppress the cell phone records and any other evidence to which the police had been led as the result of seizing the cell phone. At the suppression hearing, Holland testified that, although the warrant did not specifically authorize the police to seize cell phones, the Mamaroneck police department considered cell phones to constitute drug paraphernalia and records, which were covered by the warrant. Gagliardi testified that, when the Norwalk police interviewed her on the night of the search, she knew the defendant's cell phone number and that the carrier for the cell phone was "Sprint." The defendant testified about the circumstances surrounding certain statements that he had made after his arrest for murder, but he did not testify regarding the cell phone.
The defendant argued at the suppression hearing that the cell phone was not covered by the search warrant because the warrant authorized a search only of the defendant's apartment, not his person. He further argued that the seizure of the cell phone was not valid under any of the exceptions to the fourth amendment warrant requirement. The state argued that, because the search warrant referred to the defendant's person, it was not limited to his apartment. It further argued that, even if the search warrant did not authorize the seizure and search of the cell phone, the search was valid under the automobile exception to the constitutional requirement for a warrant, the search incident to lawful arrest exception, the doctrine of exigent circumstances and the inevitable discovery doctrine.
The trial court concluded that the search warrant had authorized the seizure and search of the cell phone because it authorized the search of the defendant for evidence of drug activity and the evidence presented at the suppression hearing showed that the Mamaroneck police had seized the cell phone on the basis of their experience that cell phones contain such information. The trial court further concluded that, even if the search warrant had *1079 not authorized the seizure and search of the cell phone, the inevitable discovery doctrine applied because Weisgerber and Chrzanowski would have learned the cell phone number from Gagliardi when they interviewed her on the night of the search if Genovese had not revealed the number to them. Accordingly, the trial court denied the defendant's motion to suppress all evidence developed as the result of the seizure of the cell phone.
The defendant now claims that the trial court improperly determined that the search warrant authorized the seizure and search of the cell phone and that, even if the warrant did not authorize the search, the inevitable discovery doctrine applied. The state disputes these claims and claims as alternate grounds for affirmance that the defendant had no reasonable expectation of privacy in his cell phone number and that the search was valid under both the automobile exception and the search incident to arrest exception. Finally, the state claims that, even if the search was unconstitutional, the admission of the evidence related to the cell phone was harmless. We conclude that the defendant had a reasonable expectation of privacy in the contents of his cell phone, but that the search of the cell phone was valid under the automobile exception. Accordingly, we need not address the defendant's claims that the trial court improperly concluded that the search warrant authorized the search of the cell phone and that the inevitable discovery doctrine applied.
We begin with the standard of review for a motion to suppress. "It is axiomatic that [u]nder the exclusionary rule, evidence must be suppressed if it is found to be the fruit of prior police illegality." (Internal quotation marks omitted.) State v. Santos, 267 Conn. 495, 511, 838 A.2d 981 (2004). "As a general matter, the standard of review for a motion to suppress is well settled. A finding of fact will not be disturbed unless it is clearly erroneous in view of the evidence and pleadings in the whole record.... [W]hen a question of fact is essential to the outcome of a particular legal determination that implicates a defendant's constitutional rights, [however] and the credibility of witnesses is not the primary issue, our customary deference to the trial court's factual findings is tempered by a scrupulous examination of the record to ascertain that the trial court's factual findings are supported by substantial evidence.... [W]here the legal conclusions of the court are challenged, [our review is plenary, and] we must determine whether they are legally and logically correct and whether they find support in the facts set out in the memorandum of decision...." (Citations omitted; internal quotation marks omitted.) State v. Mullins, 288 Conn. 345, 362-63, 952 A.2d 784 (2008).
A
We first consider the state's claim that the trial court's denial of the defendant's motion to suppress may be affirmed on the alternate ground that the defendant had no reasonable expectation of privacy in the contents of his cell phone under the fourth amendment.[7] We disagree.
"The touchstone to determining whether a person has standing to contest an allegedly illegal search is whether that person has a reasonable expectation of privacy in the invaded place.... Absent such *1080 an expectation, the subsequent police action has no constitutional ramifications.... In order to meet this rule of standing ... a two-part subjective/objective test must be satisfied: (1) whether the [person contesting the search] manifested a subjective expectation of privacy with respect to [the invaded premises]; and (2) whether that expectation [is] one that society would consider reasonable.... This determination is made on a case-by-case basis.... Whether a defendant's actual expectation of privacy... is one that society is prepared to recognize as reasonable involves a fact-specific inquiry into all the relevant circumstances." (Citations omitted; internal quotation marks omitted.) State v. Hill, 237 Conn. 81, 92, 675 A.2d 866 (1996). "The burden of proving the existence of a reasonable expectation of privacy rests on the defendant." State v. Gonzalez, 278 Conn. 341, 349, 898 A.2d 149 (2006).
"The courts have identified a number of factors indicating that a person's expectation of privacy in a particular place is one that society is not prepared to recognize as reasonable." State v. Mooney, 218 Conn. 85, 96, 588 A.2d 145, cert. denied, 502 U.S. 919, 112 S. Ct. 330, 116 L. Ed. 2d 270 (1991). "[A]n individual ... may have a constitutionally cognizable expectation of privacy in areas where his use is exclusive, that is, where he has the legal right to control access and to exclude others." (Internal quotation marks omitted.) State v. Sealy, 208 Conn. 689, 693, 546 A.2d 271 (1988).
"[A]lthough the inquiry in determining whether there is a reasonable expectation of privacy involves an inquiry into the particular place invaded, when the search is of a [container] the principal `place' for fourth amendment purposes is the interior of the [container] and its contents." State v. Mooney, supra, 218 Conn. at 103-104, 588 A.2d 145. "[I]t is the contents ... of ... closed containers in which a reasonable expectation of privacy may inhere, not the visible exterior or location of the containers." Id., at 102, 588 A.2d 145. Thus, in determining whether the defendant has a reasonable expectation of privacy in his cell phone, we focus on the contents of the cell phone, not on the cell phone itself or its visible exterior.
The state argues that the defendant failed to establish that he had a reasonable expectation of privacy in the contents of his cell phone because he presented no evidence that he owned it. The state further argues that, even if the defendant owned the cell phone, mere ownership or possession is not sufficient to establish a reasonable expectation of privacy; see United States v. Salvucci, 448 U.S. 83, 92, 100 S. Ct. 2547, 65 L. Ed. 2d 619 (1980) (mere possessory interest in seized item is not sufficient to establish fourth amendment interest); and he presented no evidence that he had taken steps to keep his cell phone number private. The defendant counters that he was not required to present evidence at the suppression hearing that the cell phone belonged to him because, even without such evidence, the record established that he owned the cell phone and had exhibited an expectation of privacy in its contents. See State v. Rodriguez, 223 Conn. 127, 133-34, 613 A.2d 211 (1992) (finding reasonable expectation of privacy on basis of information presented in search warrant affidavit and statements that defendant made to police before search warrant was issued). He further contends that his expectation of privacy was reasonable. We agree with the defendant.
The evidence presented at the suppression hearing established that the police seized the cell phone from the passenger seat of the car that the defendant had been driving. Gagliardi testified that the defendant *1081 possessed a cell phone at the time of the search. In addition, the cell phone records themselves indicated that the cell phone belonged to the defendant. Finally, the defendant's exclusive possession is implicit in the state's claim that the cell phone records showed that the defendant had traveled to Norwalk on the night of the murder and that the defendant had been in possession of the cell phone that night.[8] Accordingly, we conclude that the trial court reasonably could have concluded that the defendant owned the cell phone and exercised exclusive control over it, and that he therefore had a reasonable expectation that others would not have access to it without his permission. We conclude, therefore, that he had a reasonable expectation of privacy in the cell phone. Cf. State v. Sealy, supra, 208 Conn. at 693, 546 A.2d 271 (reasonable expectation of privacy exists when person has exclusive use of area, right to control access and right to exclude others); see United States v. Finley, 477 F.3d 250, 259 (5th Cir.) (defendant had reasonable expectation of privacy in cell phone because he had possessory interest in it, had right to exclude others and exhibited subjective expectation of privacy by taking normal precautions to maintain privacy, such as keeping cell phone on his person), cert. denied, 549 U.S. 1353, 127 S. Ct. 2065, 167 L. Ed. 2d 790 (2007).[9]
*1082 The state also claims, however, that even if the defendant owned and controlled the cell phone, he failed to establish that he had a reasonable expectation of privacy in the cell phone number because he presented no evidence that he had made any attempt to keep it private. In support of this claim, the state relies on United States v. Fierros-Alavarez, 547 F. Sup.2d 1206 (D.Kan.2008). In that case, the court concluded that, because the defendant had lawful possession and control of his cell phone when it was seized and searched by the police, he had a subjective expectation of privacy in it. Id., at 1210. The court also concluded, however, that the defendant had no reasonable expectation of privacy in the cell phone's recent call directory showing the numbers that the defendant had called from the cell phone because he had provided that information to third parties. Id., at 1210-11. In support of this conclusion, the court relied on Smith v. Maryland, 442 U.S. 735, 742-44, 99 S. Ct. 2577, 61 L. Ed. 2d 220 (1979) (no reasonable expectation of privacy in dialed telephone number because telephone company must receive telephone number to complete call and person has no legitimate expectation of privacy in information he voluntarily turns over to third parties), and United States v. Forrester, 512 F.3d 500, 509-10 (9th Cir.2008) (applying Smith to validate police surveillance of defendant's computer to obtain e-mail addresses of outgoing e-mails and addresses of web sites visited).
We do not find the court's reasoning in Fierros-Alavarez to be persuasive. In Smith and Forrester, the government had not obtained the dialed telephone numbers and e-mail addresses from an item or area in which the defendant had a reasonable expectation of privacy, but had obtained the information from, respectively, the telephone company and the Internet provider. See Smith v. Maryland, supra, 442 U.S. at 741, 99 S. Ct. 2577 (government installed pen register to record numbers dialed from defendant's telephone on telephone company property at telephone company's central offices); United States v. Forrester, supra, 512 F.3d at 505 (government installed "pen register analogue" at Internet provider's facility).[10] Thus, we understand the cases to stand for the proposition that the government can obtain information that the defendant has provided to a third party from that third party without implicating the defendant's fourth amendment rights. For example, in the present case, if the police had obtained the defendant's cell phone number from Gagliardi or from the cell phone carrier, there would have been no fourth amendment violation under Smith and Forrester because the defendant could have no reasonable expectation that Gagliardi and the *1083 carrier would not reveal the information. Contrary to the court's assumption in Fierros-Alavarez, however, nothing in either case supports a conclusion that, if a defendant has a reasonable expectation of privacy in an area or item, the government may search that area or item for any information that the defendant had provided to third parties without triggering fourth amendment protections. We conclude, therefore, that the fact that the defendant in the present case had provided his cell phone number to third parties and had not taken steps to ensure that it was confidential does not mean that he had no reasonable expectation that the police would not search the contents of his cell phone for the number without a warrant. We conclude, therefore, that the defendant had a reasonable expectation of privacy in all of the contents of his cell phone, including his subscriber number.
B
We next address the state's alternate ground for affirmance that the seizure of the cell phone and the search of its contents were valid under the automobile exception to the warrant requirement under the fourth amendment to the United States constitution. The state contends that, although the search would have been unconstitutional under article first, § 7, of the Connecticut constitution if conducted in Connecticut by Connecticut police; see State v. Miller, 227 Conn. 363, 386-87, 630 A.2d 1315 (1993) ("a warrantless automobile search supported by probable cause, but conducted after the automobile has been impounded at the police station, violates article first, § 7, of the Connecticut constitution"); this rule of state constitutional law does not apply to the search because the New York police officers conducted the search in accordance with New York law. See People v. Blasich, 73 N.Y.2d 673, 681, 541 N.E.2d 40, 543 N.Y.S.2d 40 (1989) (automobile exception "is equally applicable whether the search is conducted at the time and place where the automobile was stopped or whether, instead, the vehicle is impounded and searched after removal to the police station"). We agree with the state.
At the outset, we address the defendant's contention that the record is not adequate for review of the state's claimed alternate ground for affirmance because the trial court did not make factual findings regarding the applicability of the automobile exception. We disagree. The trial court found that the cell phone was on the front passenger seat of the defendant's car when he was arrested. The court also expressly found that it was not clear when the cell phone had been seized from the car on the basis of the evidence presented at the suppression hearing, but that the cell phone was in the possession of the Mamaroneck police when they returned to the police station. Finally, the trial court found that "the Norwalk police were not implicated in the determination of the [cell phone] number; it was solely the Mamaroneck police who did so." As we discuss subsequently in this opinion, we conclude that these factual findings are sufficient for this court to determine whether the state met its burden of proving the automobile exception to the warrant requirement.
Accordingly, we turn to a review of the law governing the automobile exception to the constitutional requirement for a warrant. "Under both the federal and the state constitutions, the police must first obtain a warrant before conducting a search, unless an exception to the warrant requirement applies." (Internal quotation marks omitted.) State v. Smith, 257 Conn. 216, 228, 777 A.2d 182 (2001), cert. denied, 278 Conn. 906, 897 A.2d 100 (2006). *1084 "[T]he burden is on the state to prove the existence of an exception to the warrant requirement." State v. Joyce, 229 Conn. 10, 27 n. 19, 639 A.2d 1007 (1994), cert. denied, 523 U.S. 1077, 118 S. Ct. 1523, 140 L. Ed. 2d 674 (1998).
"In Carroll v. United States, 267 U.S. 132, 153, 45 S. Ct. 280, 69 L. Ed. 543 (1925), the United States Supreme Court held that the fourth amendment is not violated by a roadside warrantless search of an automobile if the police have probable cause to search the automobile and if obtaining a warrant would be impracticable because of the possibility that the automobile will be moved out of the jurisdiction. The rule announced in Carroll has come to be called the automobile exception to the warrant requirement. Connecticut recognizes this exception as a matter of state constitutional law." State v. Miller, supra, 227 Conn. at 378, 630 A.2d 1315.
In Miller, this court rejected what it characterized as a request to expand the automobile exception to permit "a warrantless automobile search that is conducted after the automobile has been impounded at a police station."[11] Id., at 383, 630 A.2d 1315. The court reasoned that, because the exception is justified only by "the inherent mobility of automobiles and the latent exigency that that mobility creates"; id., at 384-85, 630 A.2d 1315; and because those circumstances no longer exist after the automobile has been impounded, "a warrantless automobile search supported by probable cause, but conducted after the automobile has been impounded at the police station, violates article first, § 7, of the Connecticut constitution." Id., at 386-87, 630 A.2d 1315.
In the present case, the state does not dispute that, if Connecticut police had seized and searched the defendant's cell phone in this state, the search would have been unconstitutional under Miller and, therefore, the evidence would have been inadmissible. Thus, the state implicitly concedes that the evidence would not support a finding that the police seized the cell phone when they arrested the defendant, and that it must therefore be presumed that they seized the cell phone from the defendant's car after it was impounded at the police station. The state argues, however, that, because the evidence was obtained in New York by New York police officers in compliance with New York law, the exclusionary rule does not bar its admission merely because the search would have violated this state's constitutional law if it had occurred in this state. We agree with the state that: (1) the legality of the search was governed by New York law; and (2) under New York law, the search was legal.
We first consider whether the legality of the search should be determined under Connecticut law or New York law. The majority of courts that have considered the issue have concluded that "it does not offend the constitutional principles of a forum jurisdiction to allow the transfer of criminal evidence from the officers of another jurisdiction to those of the forum when the evidence has been obtained lawfully by the former without any assistance by the latter," even when the search would have been illegal in the forum jurisdiction.[12]State v. Mollica, 114 N.J. 329, *1085 353, 554 A.2d 1315 (1989). A number of these courts have reasoned that, because the primary justification for the exclusionary rule is to deter illegal police conduct, no valid purpose is served by excluding evidence that has been obtained legally. See id., at 353-54, 554 A.2d 1315; Echols v. State, 484 So. 2d 568, 572 (Fla.1985) ("[a]ny rule of evidence that denies the jury access to clearly probative and reliable evidence must bear a heavy burden of justification, and must be carefully limited to the circumstances in which it will pay its way by deterring official [lawlessness]" [internal quotation marks omitted]), cert. denied, 479 U.S. 871, 107 S. Ct. 241, 93 *1086 L.Ed.2d 166 (1986); State v. Lucas, 372 N.W.2d 731, 737 (Minn.1985) (exclusion of legally obtained tapes not justified because it would not serve to deter illegal conduct by police officers in either forum state or state where search was conducted); State v. Evers, 175 N.J. 355, 380, 815 A.2d 432 (2003) (exclusion of legally obtained evidence not justified because it "would advance none of its purposesdeterrence, judicial integrity, and imposing a cost on illicit behavior"); see also State v. Cauley, 863 S.W.2d 411, 415-16 (Tenn.1993) (relying on Mollica). The courts have reasoned that, under these circumstances, the sole "effect of suppression would [be] to keep highly probative and lawfully obtained evidence from the jury." (Internal quotation marks omitted.) Commonwealth v. Sanchez, 552 Pa. 570, 578, 716 A.2d 1221 (1998); see also State v. Evers, supra, at 380, 815 A.2d 432 (exclusion of legally obtained evidence "would disserve the process of doing justice in this state by preventing the introduction of reliable and relevant evidence").
Like these courts, this court previously has recognized that "[t]he purpose of the exclusionary rule is not to redress the injury to the privacy of the search victim.... Instead, the rule's prime purpose is to deter future unlawful police conduct and thereby effectuate the guarantee of the [f]ourth [a]mendment against unreasonable searches and seizures.... Application of the rule is thus appropriate in circumstances in which this purpose is likely to be furthered." (Internal quotation marks omitted.) Payne v. Robinson, 207 Conn. 565, 570, 541 A.2d 504, cert. denied, 488 U.S. 898, 109 S. Ct. 241, 102 L. Ed. 2d 230 (1988). Moreover, we agree with these courts that the application of the exclusionary rule to evidence that was obtained legally by officers of another jurisdiction will not deter unlawful police conduct either in this state or in the other jurisdictions. Accordingly, we decline the defendant's invitation in the present case to expand the exclusionary rule to apply to such evidence.
The defendant contends, however, that even if the exclusionary rule ordinarily does not apply to evidence that was lawfully obtained in another jurisdiction when the official conduct at issue would have been illegal in this state, the exclusionary rule does apply when the officers from the other jurisdiction acted as agents for officers of this state. In support of this contention, the defendant relies on Lustig v. United States, 338 U.S. 74, 78-80, 69 S. Ct. 1372, 93 L. Ed. 1819 (1949) (federal officer's participation in illegal search conducted by state officials rendered evidence inadmissible in federal criminal proceeding), Gambino v. United States, 275 U.S. 310, 316-17, 48 S. Ct. 137, 72 L. Ed. 293 (1927) (when unconstitutional search and seizure was made solely for purpose of aiding United States in enforcement of its laws, evidence was inadmissible in federal criminal proceeding even though state officers were not acting under direction of federal officials), and Byars v. United States, 273 U.S. 28, 33, 47 S. Ct. 248, 71 L. Ed. 520 (1927) (when federal officer participated in illegal search conducted by state police, "effect is the same as though he had engaged in the undertaking as one exclusively his own").[13] The defendant *1087 contends that these cases support the general proposition that, when evidence was obtained in a search that was legal in the search jurisdiction but that would have been illegal in the forum jurisdiction, the evidence is inadmissible in the forum jurisdiction if officers from the forum jurisdiction participated in the search.[14]
We need not decide in the present case, however, whether participation by officials of this state in a search that is legal in the search jurisdiction, but which would be illegal in this state, renders the evidence inadmissible in this state and, if so, what level of participation by this state's officials is required, because, upon a careful review of the record, we conclude that the trial court's finding that "the Norwalk police were not implicated in the determination of the cell phone number; it was solely the Mamaroneck police who did so," was supported by substantial evidence. The evidence shows that Norwalk police were not present while the Mamaroneck police engaged in conduct that the defendant claims would have been unconstitutional if conducted by Connecticut officials, namely, the seizure of the defendant's cell phone after his automobile was impounded. Moreover, there was no evidence that the Norwalk police had any knowledge that the Mamaroneck police intended to engage in such conduct or that they had influenced the Mamaroneck police in any way.[15] In addition, although the Norwalk police were present in the police station when Genovese searched the contents of the cell *1088 phone and announced the cell phone number, they were there to interview Gagliardi, not to obtain information about the search from the Mamaroneck police. Indeed, there was no evidence that the Norwalk police knew that the Mamaroneck police had seized the cell phone, that they would search its contents or that they would announce their findings. We conclude, therefore, that there was no evidence to support a conclusion that the Norwalk police had intended to violate the state constitution by "circuitous and indirect methods." Byars v. United States, supra, 273 U.S. at 32, 47 S. Ct. 248. Because it is clear that, under any standard, the Mamaroneck police were not acting as agents for the Norwalk police, the legality of the search must be determined under New York law.
We turn, therefore, to that question. Under New York constitutional law, "when the occupant of an automobile is arrested, the very circumstances that supply probable cause for the arrest may also give the police probable cause to believe that the vehicle contains contraband, evidence of the crime, a weapon or some means of escape. If so, a warrantless search of the vehicle is authorized ... as a search falling within the automobile exception to the warrant requirement...." People v. Blasich, supra, 73 N.Y.2d at 678, 543 N.Y.S.2d 40, 541 N.E.2d 40; see also People v. Belton, 55 N.Y.2d 49, 54-55, 432 N.E.2d 745, 447 N.Y.S.2d 873 (1982) (under automobile exception, "a valid arrest for a crime authorizes a warrantless searchfor a reasonable time and to a reasonable extentof a vehicle and of a closed container visible in the passenger compartment of the vehicle which the arrested person is driving or in which he is a passenger when the circumstances give reason to believe that the vehicle or its visible contents may be related to the crime for which the arrest is being made [as possibly containing contraband or as having been used in the commission of the crime]").[16] When the automobile exception applies, police also may search closed containers located within the automobile that may contain evidence of the crime of arrest. See People v. Belton, supra, at 54-55, 447 N.Y.S.2d 873, 432 N.E.2d 745; People v. Langen, 60 N.Y.2d 170, 172, 456 *1089 N.E.2d 1167, 469 N.Y.S.2d 44 (1983) ("when the circumstances giving rise to probable cause to arrest a driver or passenger in the automobile also support the belief that the automobile contains [evidence] related to the crime for which the arrest is made, police may search, within a reasonable time after the arrest, any container, locked or otherwise, located in the automobile"), cert. denied, 465 U.S. 1028, 104 S. Ct. 1287, 79 L. Ed. 2d 690 (1984).[17]
The defendant in the present case does not dispute that, on the basis of the evidence that the Mamaroneck police *1090 found in his apartment, they had probable cause to arrest him for drug offenses. The trial court found that the cell phone was visible on the front seat of the defendant's car when he was arrested and that the Mamaroneck police consider cell phones to constitute drug paraphernalia and records because they are likely to contain information about drug transactions.[18] Because the police had probable cause to believe that the defendant was selling drugs, because the defendant's cell phone was visible in the defendant's car when the police arrested him and because the police had probable cause to believe that the cell phone contained evidence of drug activity, we conclude that the police had probable cause to seize and search the contents of the cell phone under the automobile exception as applied in New York.
In addition, as we have indicated, the New York Court of Appeals has held that the automobile exception "is equally applicable whether the search is conducted at the time and place where the automobile was stopped or whether, instead, the vehicle is impounded and searched after removal to the police station...." People v. Blasich, supra, 73 N.Y.2d at 681, 543 N.Y.S.2d 40, 541 N.E.2d 40; see also Chambers v. Maroney, 399 U.S. 42, 51-52, 90 S. Ct. 1975, 26 L. Ed. 2d 419 (1970) (fourth amendment permits warrantless automobile search supported by probable cause and conducted while automobile is impounded at police station). It is clear, therefore, that the seizure of the cell phone and search of its contents were not unconstitutional under New York law merely because the defendant's car had been impounded before the seizure and search. Accordingly, we conclude that the New York Court of Appeals would conclude that the seizure and search of the defendant's cell phone was valid under the automobile exception to the constitutional requirement for a warrant.
II
The defendant next claims that the trial court improperly admitted evidence of uncharged misconduct. We disagree.
The following facts and procedural history are relevant to this claim. Before trial, the state filed a motion in limine seeking to introduce evidence that the defendant previously had engaged in misconduct that was similar to the charged conduct in this case. The defendant filed a motion to exclude the evidence. At the suppression hearing, the state presented an offer of proof in the form of testimony by Gentile that the defendant had driven her to the same location in Norwalk where the victim had been murdered and had threatened her with harm. Specifically, Gentile testified that, in December, 2001,[19] after she *1091 had stolen money and cocaine from the defendant, the defendant told her that he wanted to go with her to the Bronx to obtain more drugs for his drug business. Gentile got into a car with the defendant and the defendant's cousin, Thomas, who was driving. Instead of driving south toward the Bronx, however, Thomas drove north toward Connecticut. At some point, the defendant pointed a gun at Gentile and placed handcuffs on her. After they entered Connecticut, Thomas stopped the car in an area where there were warehouses and a gate with two bars. The defendant then questioned Gentile about the theft of his money and his drugs. When Gentile refused to admit that she had stolen them, the defendant stated that he was going to get some gas and burn Gentile. He then got out of the car, left the area and returned with a can of gas. He then left again. Some time later, he called Thomas' cell phone, and Thomas told Gentile that the defendant was at her house with Gagliardi and Williams and he wanted Gentile to tell them to give him the money. Gentile did so. The defendant returned to the car a couple of hours later and they drove to Port Chester, where Gentile was released.
In April, 2005, Gentile told Weisgerber about the incident. Weisgerber brought Gentile to several locations in Norwalk to see if she could identify the location where the defendant had brought her. Gentile did not recognize the first three locations, but recognized the fourth one. Weisgerber then took Gentile around the corner from that location and told her that the police had found the victim there.
During argument on the state's motion in limine, the state argued that Gentile's testimony was relevant to the issue of identity because the defendant's treatment of Gentile was so similar to the perpetrator's treatment of the victim. The state agreed, however, that it would not elicit testimony about the defendant's threat to use gasoline to burn Gentile. The defendant argued that the evidence was highly prejudicial to the defendant in that it tended to show that the defendant had a propensity to engage in this type of conduct and that the incident with Gentile was not sufficiently similar to the murder to come within the exception to the bar on propensity evidence for signature crimes. The trial court concluded that the conduct was sufficiently similar to be probative on the issue of identity and that its probative value outweighed its prejudicial effect. Accordingly, it granted the state's motion to admit the evidence.
At trial, Gentile testified substantially in accordance with her offer of proof testimony at the suppression hearing, with the exception that she did not testify about the defendant's threat to burn her with gasoline. The trial court immediately cautioned the jury that the evidence was being introduced solely for the purpose of proving the identity of the perpetrator, not to show that the defendant was a person of bad character or had a propensity to commit crime. The court further instructed the jury that, if it determined that the uncharged misconduct was not similar to the charged conduct, it could not consider it for any purpose. The trial court repeated these instructions to the jury in its final jury charge.[20]
*1092 The defendant now claims that the trial court improperly admitted Gentile's testimony about the defendant's misconduct toward her because the conduct was not sufficiently similar to establish identity. We agree with the defendant that the trial court improperly admitted the evidence. We also conclude, however, that its admission was harmless.
Our standard of review for evidentiary claims is well settled. "To the extent [that] a trial court's admission of evidence is based on an interpretation of the Code of Evidence, our standard of review is plenary. For example, whether a challenged statement properly may be classified as hearsay and whether a hearsay exception properly is identified are legal questions demanding plenary review." State v. Saucier, 283 Conn. 207, 218, 926 A.2d 633 (2007). "We review the trial court's decision to admit evidence, if premised on a correct view of the law, however, for an abuse of discretion." Id. Because the defendant challenges the trial court's interpretation of § 4-5(b) of the Connecticut Code of Evidence,[21] our review is plenary.
"As a general rule, evidence of... other crimes is inadmissible to prove that a defendant is guilty of the crime charged against him.[22] ... The rationale [for] this rule is to guard against its use merely to show an evil disposition of an accused, and especially the predisposition to commit the crime with which he is now charged.... The fact that such evidence tends to prove the commission of other crimes by an accused does not render it inadmissible [however] if it is otherwise relevant and material.... Such evidence is admissible for other purposes, such as to show intent, an element [of] the crime, identity, malice, motive or a system of criminal activity." (Citations omitted; internal quotation marks omitted.) State v. Figueroa, 235 Conn. 145, 161-62, 665 A.2d 63 (1995); see also Conn.Code Evid. § 4-5(b).
"The first threshold for the use of evidence of other crimes or misconduct on the issue of identity is that the methods *1093 used be sufficiently unique to warrant a reasonable inference that the person who performed one misdeed also did the other .... McCormick points out that in proffering other crime evidence [t]o prove other like crimes by the accused so nearly identical in method as to earmark them as the handiwork of the accused ... much more is demanded than the mere repeated commission of crimes of the same class, such as repeated burglaries or thefts. The device used must be so unusual and distinctive as to be like a signature." (Citation omitted; internal quotation marks omitted.) State v. Figueroa, supra, 235 Conn. at 163, 665 A.2d 63.
"[T]he fact that some of the similarities between the offenses were legal or relatively common occurrences when standing alone does not ... negate the uniqueness of the offenses when viewed as a whole. It is the distinctive combination of actions which forms the signature or modus operandi of the crime ... and it is this criminal logo which justifies the inference that the individual who committed the first offense also committed the second.... The process of construing an inference of [i]dentity ... consists usually in adding together a number of circumstances, each of which by itself might be a feature of many objects, but all of which together make it more probable that they coexist in a single object only. Each additional circumstance reduces the chances of there being more than one object so associated." (Citations omitted; internal quotation marks omitted.) Id., at 164, 665 A.2d 63.
In the present case, the state argues that the misconduct evidence was sufficiently similar to the murder to establish that the defendant was the perpetrator because both Gentile and the victim were customers of the defendant's drug business; the defendant was angry at both Gentile and the victim because he believed that they had stolen from him; the defendant used the same ruse to lure Gentile and the victim to accompany him; the defendant brought both Gentile and the victim to the same place; and Thomas had accompanied the defendant during both incidents.
As we have indicated, however, evidence of other misconduct is admissible only for the purpose of raising an inference that "the person who performed one misdeed also did the other." (Internal quotation marks omitted.) Id., at 163, 665 A.2d 63. Thus, misconduct evidence is admissible only to show that the defendant, rather than another person, committed the charged crime. Regardless of how similar the uncharged misconduct is to the charged conduct, the uncharged misconduct may not be used to prove that, because the defendant committed the same type of conduct before, he committed the charged conduct. See State v. Vorhees, 248 S.W.3d 585, 591 (Mo.2008) ("[e]vidence of prior bad acts, regardless of the degree of their similarity to the acts in the charged case, may not be admitted to corroborate" evidence that defendant committed charged offense [emphasis in original]); id., at 590 ("[s]ignature evidence used for corroboration is, at base, propensity evidence masquerading under the well-recognized identity exception, a category of exception in which it does not belong").[23]
*1094 In the present case, it is obvious that the jury could not have concluded that a person other than the defendant had been angry with the victim because of the theft of the defendant's bracelet and had tricked the victim into accompanying him on a drive on the night of the murder. Rather, if it disbelieved the evidence tending to prove those facts, it could have concluded only that the conduct did not occur. Thus, the state was not using the similarity between the defendant's prior conduct with Gentile and the defendant's conduct with the victim to show the defendant, and not another person, had engaged in that conduct toward the victim, but to corroborate the evidence that he had engaged in that conduct by showing that he previously had engaged in extremely similar misconduct. As we have indicated, the evidence was not admissible for that purpose. We conclude, therefore, that the trial court improperly admitted the evidence.
We must determine, therefore, whether the improper admission of the misconduct evidence was harmful. "When an improper evidentiary ruling is not constitutional in nature, the defendant bears the burden of demonstrating that the [impropriety] was harmful.... [A] nonconstitutional [impropriety] is harmless when an appellate court has a fair assurance that the [impropriety] did not substantially affect the verdict." (Citation omitted; internal quotation marks omitted.) State v. Orr, 291 Conn. 642, 663, 969 A.2d 750 (2009).
We conclude that the admission of the misconduct evidence was harmless. First, Gentile's misconduct testimony did not cast the defendant in a significantly worse light than the other evidence presented at trial. Both Gagliardi and Gentile testified that the defendant ran a drug selling business. Moreover, contrary to the defendant's claim that the misconduct evidence was the only evidence tending to show that the defendant was a violent person, Gagliardi testified that she had discovered in December, 2001, that the defendant carried a gun. The defendant told her at that time that he needed the gun for protection. Gagliardi also testified that the defendant had told her that he had shot the victim multiple times.
Second, the jury had before it other strong evidence of the defendant's guilt. Again, Gagliardi testified that the defendant had confessed to her on the morning following the murder that he had killed the victim by shooting him multiple times and that he had asked her to provide him with an alibi. Gagliardi's testimony also showed that the defendant had a motive to kill the victim. In addition, the cell phone records provided strong evidence that the defendant had been in the area of Norwalk where the murder occurred at the time of the murder and corroborated the testimony that he had spoken by telephone to *1095 Gagliardi and Gentile shortly after the murder.
Third, the trial court forcefully instructed the jury that it could not use the evidence to infer that the defendant had a bad character or that he had a propensity to commit criminal acts both immediately after Gentile's misconduct testimony and during its final instructions. Under these circumstances, we have a fair assurance that the misconduct evidence did not substantially affect the verdict.
III
We next address the defendant's claim that the trial court violated his fifth amendment right to remain silent when it admitted evidence that he had invoked that right during questioning by the police. He further claims that the state violated his fifth amendment right when it commented on that evidence during closing arguments. We disagree.
The following facts and procedural history are relevant to our resolution of this claim. On March 29, 2004, Weisgerber and Andrew Gail, a lieutenant with the Norwalk police department, interviewed the defendant regarding the victim's murder. Before trial, the defendant filed a motion to suppress the statements that the defendant made during this interview on the ground that the defendant had made the statements without having been properly advised of his Miranda rights,[24] and that he had made them involuntarily. The defendant testified concerning the interview at the February 28, 2006 suppression hearing, and the state introduced the written police report of the interview. The trial court denied the motion to suppress on March 2, 2006.[25]
At trial, the prosecutor started to question Weisgerber about the interview and the police report and the defendant objected. The trial court excused the jury and noted that the statements that the defendant had made during the interview had been the subject of the defendant's motion to suppress, which the court had denied. The trial court acknowledged, however, that the defendant had reserved his right to object to the admission of the statements on grounds that he had not raised in the motion to suppress. Accordingly, it held a conference in chambers during which it heard the parties' arguments and ruled on the portions of the written police report about which Weisgerber would be permitted to testify.
After the conference in chambers, the parties returned to the courtroom and defense counsel placed on the record her objections to the court's rulings. With respect to the defendant's statement in the written police report that he was not ready to share his opinion about who had committed the murder, defense counsel objected to its admission on the ground that the defendant was entitled to invoke his right to remain silent. She also objected to the admission of the defendant's statement that Weisgerber had "asked a very good question" because it was intertwined with his statement that he was not going to discuss the crime scene, which the trial court had excluded as an invocation of the defendant's rights. Defense counsel further objected to the admission of the defendant's statements that he was not willing to divulge information because the police were not going to release him, claiming that the statements were invocations of his right to remain silent.
*1096 Thereafter, the prosecutor continued his examination of Weisgerber. Weisgerber testified that, at the beginning of the interview, he advised the defendant of his Miranda rights. The defendant waived those rights and Weisgerber asked him when he had learned about the victim's death and when he had last seen the victim. The defendant said that he could not recall. Weisgerber then asked the defendant whether he was willing to answer questions at that time or if he would prefer to answer them at another time. The defendant responded that there would be plenty of time to talk later. When Weisgerber responded that this would be his only opportunity to talk to the police, the defendant responded that there was no hurry to discuss details. After answering several more questions, the defendant stated that the police had arrested the wrong person. When Weisgerber asked why he had made that statement, the defendant responded that he did not want to answer the question at that time because he knew that the police would not release him that night.
Weisgerber further testified that the defendant initially had declined Weisgerber's request that he give a written statement about the night of the murder, but ultimately indicated that he would like to provide one. The defendant repeatedly denied in his written statement that he had hurt the victim. The defendant then asked Weisgerber whether he believed that the defendant had murdered the victim, and Weisgerber replied that he did. Weisgerber testified that the defendant's demeanor did not change when Weisgerber made this statement.
Weisgerber further testified that, after the defendant answered several more questions, Weisgerber asked him whether he had ever been to Norwalk. The defendant responded that he had family in Connecticut, but that he would not speak about his family. Weisgerber testified that he then asked the defendant if he had gone to Norwalk with the victim and the defendant answered that he had not. Weisgerber again asked the defendant if he had gone to Norwalk with the victim on the night of the murder, and the defendant stated twice that "that was a very good question." Defense counsel then interrupted Weisgerber and asked for "one moment with counsel." The prosecutor then asked Weisgerber to continue his testimony and Weisgerber stated that the defendant had advised him that, "at that point he was not going to speak about the crime scene." The trial court asked defense counsel whether she objected to this testimony, and she indicated that she had no objection.
Weisgerber then testified that, shortly after stating that he was not going to talk about the crime scene, the defendant asked to go to the bathroom. Upon his return, he indicated that he knew the truth about the murder. When the prosecutor asked Weisgerber whether the defendant had been willing to tell the police what he knew at that point, Weisgerber responded that he had not. The prosecutor then asked why the defendant had been unwilling to talk to the police and Weisgerber stated that the defendant had said that he wanted to speak to counsel first. Defense counsel again interrupted and stated that the trial court had granted the defendant's motion to exclude that portion of the written report of the interview. After conferring with counsel, the trial court directed the jury to "completely disregard" Weisgerber's testimony that the defendant was not going to tell the police what he knew about the murder without talking to an attorney first.
The next day, the defendant filed a motion for mistrial claiming that the state had violated the trial court's ruling excluding *1097 the defendant's statement that he would not tell the police what he knew about the murder until he talked to an attorney. She argued that the testimony suggested that the defendant had been "trying to hide something" by invoking his constitutional rights. The prosecutor conceded that Weisgerber inadvertently had violated the court's order, but argued that the defendant had not been prejudiced. The trial court concluded that the defendant had not been prejudiced by Weisgerber's brief reference to the defendant's request for counsel and denied the defendant's motion for a mistrial.
During closing arguments, the prosecutor referred to the statements made by the defendant during the March 29, 2004 interview. The prosecutor stated, "isn't it interesting that [the defendant] doesn't want to talk about where he was on the night [of the] murder nor what he did?"
The defendant now claims that the admission of Weisgerber's testimony about these matters violated his fifth amendment rights under Doyle v. Ohio, 426 U.S. 610, 611, 96 S. Ct. 2240, 49 L. Ed. 2d 91 (1976), which proscribed the use of post-Miranda silence or requests for an attorney against a defendant at trial. Specifically, the defendant claims that the trial court should not have permitted Weisgerber to testify that: (1) the defendant had told him that he was not yet ready to tell the police what he knew about the murder; (2) the defendant had initially refused to provide a written statement; and (3) the defendant's demeanor did not change when Weisgerber indicated that he believed that the defendant had killed the victim. In addition, the defendant claims that the trial court improperly ruled that Weisgerber's testimony that the defendant had stated that he wanted to talk to an attorney before he spoke about the murder was inadvertent and was not prejudicial. Finally, the defendant claims that the prosecutor violated Doyle when he commented on the defendant's silence during closing arguments.
We first address the defendant's claim that the trial court improperly allowed Weisgerber to testify that the defendant had stated repeatedly that he did not want to tell the police what he knew about the murder. "In Doyle ... the United States Supreme Court held that the impeachment of a defendant through evidence of his silence following his arrest and receipt of Miranda warnings violates due process. The court based its holding [on] two considerations: First, it noted that silence in the wake of Miranda warnings is insolubly ambiguous and consequently of little probative value. Second and more important[ly], it observed that while it is true that the Miranda warnings contain no express assurance that silence will carry no penalty, such assurance is implicit to any person who receives the warnings. In such circumstances, it would be fundamentally unfair and a deprivation of due process to allow the arrested person's silence to be used to impeach an explanation subsequently offered at trial." (Internal quotation marks omitted.) State v. Bell, 283 Conn. 748, 764-65, 931 A.2d 198 (2007).
Doyle is not applicable, however, when the defendant has waived his right to remain silent. See State v. Talton, 197 Conn. 280, 295, 497 A.2d 35 (1985). "Once an arrestee has waived his right to remain silent, the Doyle rationale is not operative because the arrestee has not remained silent and an explanatory statement assuredly is no longer `insolubly ambiguous.' By speaking, the defendant has chosen unambiguously not to assert his right to remain silent. He knows that anything he says can and will be used against him and it is manifestly illogical to theorize that he might be choosing not to assert the right to remain silent as to part of his *1098 exculpatory story, while invoking that right as to other parts of his story. While a defendant may invoke his right to remain silent at any time, even after he has initially waived his right to remain silent, it does not necessarily follow that he may remain `selectively' silent." Id.
In the present case, the defendant waived his Miranda rights and told the police that he could not recall how he had learned of the victim's death or when he had last seen the victim. He also stated that the police had arrested the wrong person and that he knew the truth about the murder. In addition, he gave a written statement in which he repeatedly denied that he had hurt the victim. Interspersed among these exculpatory statements, the defendant also made statements that he was not yet ready to tell the police everything that he knew about the murder and that he was not willing to discuss the crime scene.[26] He did not ask the police to end the interrogation, however, or indicate that he was reluctant to answer any inquiries until the point that he stated that he wanted to speak to an attorney, at which point the police ended the interview. Accordingly, we conclude that the defendant had not invoked his right to remain silent by stating that he was not yet ready to discuss everything that he knew about the murder and, therefore, Weisgerber's testimony about those statements did not violate Doyle.[27] See id., at 296, 497 A.2d 35 (when defendant refused to divulge certain information about crime to police, but "did not ask that the interrogation be ended or indicate reluctance to answer other inquiries" defendant failed to invoke fifth amendment right to remain silent).
We next address the defendant's claim that the admission of Weisgerber's testimony that the defendant initially declined to give a written statement violated Doyle. This claim was not preserved at trial and the defendant therefore seeks review under State v. Golding, 213 Conn. 233, 239-40, 567 A.2d 823 (1989).[28] We conclude that the claim is reviewable under the first two prongs of Golding, but that the defendant cannot prevail under the third prong.
The following additional facts are relevant to our resolution of this claim. When the prosecutor asked Weisgerber whether *1099 the defendant had been willing to give a written statement, Weisgerber responded that the defendant had declined to do so. The prosecutor then asked, "A written statement?", thereby suggesting that he was surprised by Weisgerber's answer. When Weisgerber repeated his response, the prosecutor asked, "Did there come [any time] where [the defendant] decided he wanted to put something down in writing?" and Weisgerber answered affirmatively. It is clear, therefore, that the prosecutor had elicited Weisgerber's testimony that the defendant had initially declined to give a written statement in an attempt to explain the process by which the police had obtained the defendant's written statement, not to raise an inference that the defendant had been reluctant to cooperate with the police. "We have held that evidence of a defendant's silence that is ... presented to show the investigative effort made by the police and the sequence of events as they unfolded, is not inadmissible under Doyle ...." State v. Jones, 215 Conn. 173, 186, 575 A.2d 216 (1990). We conclude, therefore, that this testimony did not violate the defendant's fifth amendment rights under Doyle.
We next address the defendant's claim that Weisgerber's testimony that the defendant's demeanor did not change when Weisgerber told him that he believed that he had murdered the victim violated Doyle. Because this claim was not preserved at trial, we review it under Golding. In support of this claim, the defendant relies on this court's decision in State v. Plourde, 208 Conn. 455, 545 A.2d 1071 (1988), cert. denied, 488 U.S. 1034, 109 S. Ct. 847, 102 L. Ed. 2d 979 (1989). In that case, the defendant raised two Doyle claims. First, he claimed that the trial court improperly had admitted evidence that he had failed to deny killing his wife. Id., at 462-63, 545 A.2d 1071. Second, he claimed that the trial court improperly had admitted evidence of his demeanor when the police confronted him with the evidence of his guilt. Id., at 464-65, 545 A.2d 1071. This court concluded that the record was inadequate for review of the first claim because it was not clear whether the defendant had invoked his right to remain silent at that point. Id., at 463, 545 A.2d 1071. We agreed with the defendant, however, that, because he clearly had invoked his right to remain silent before the police confronted him with evidence of his guilt, evidence of his demeanor at that time was inadmissible under Doyle. Id., at 468, 545 A.2d 1071. Thus, we explicitly recognized in Plourde that Doyle does not require the exclusion of testimony regarding the defendant's postarrest conduct unless the defendant has invoked his right to remain silent.
In the present case, we have already concluded that the defendant did not invoke his constitutional right to remain silent until he asked for an attorney, at which point the interview was terminated. We conclude, therefore, that Weisgerber's testimony about the defendant's demeanor when Weisgerber said that he believed that the defendant was guilty was not inadmissible under Plourde.
We next consider whether Weisgerber's testimony that the defendant had refused to provide any more information about the murder to the police until he spoke with an attorney violated Doyle. As we have indicated, although the trial court had ruled that Weisgerber would not be permitted to give this testimony, it concluded that the testimony did not violate the defendant's constitutional rights because it was inadvertent, brief, isolated and had not prejudiced the defendant.
This court held in State v. Hull, 210 Conn. 481, 491, 556 A.2d 154 (1989), that "the constitution does not permit ... extensive *1100 commentary on the defendant's invocation of his right to silence," including "the defendant's invocation of his right to counsel...." We conclude, therefore, that in the present case, it was within the trial court's discretion to exclude testimony on the portion of the police report referring to the defendant's request for an attorney. We agree with the trial court, however, that, because Weisgerber's comment was inadvertent,[29] brief and isolated, and because the trial court immediately gave a curative instruction to the jury, the testimony did not prejudice the defendant. See id., at 492, 556 A.2d 154 (testimony by three witnesses that defendant had invoked his right to counsel was harmless because testimony was not highlighted by prosecutor and evidence of defendant's guilt was overwhelming).
Finally, we address the defendant's claim that the prosecutor violated Doyle when he commented on the defendant's silence during closing arguments. We conclude that the prosecutor did not violate Doyle by stating "isn't it interesting that [the defendant] doesn't want to talk about where he was on the night [of the] murder nor what he did" because, as we have already concluded, the defendant had not invoked his constitutional right to remain silent before stating that he did not want to provide details about the night of the murder. Because the defendant chose to talk to the police, any statements that he made properly could be used against him. See State v. Talton, supra, 197 Conn. at 295, 497 A.2d 35.
IV
Lastly, we address the defendant's claim that the trial court inadequately instructed the jury regarding the credibility of Gagliardi's testimony. Specifically, he claims that the trial court should have given the cautionary instruction for jailhouse informants, as required by State v. Patterson, 276 Conn. 452, 469, 886 A.2d 777 (2005). See also State v. Arroyo, 292 Conn. 558, 569, 973 A.2d 1254 (2009) (extending requirement for special credibility instruction to testimony of all jailhouse informants, regardless of whether benefit has been promised), cert. denied, U.S., ___ U.S. ___, 130 S. Ct. 1296, 175 L. Ed. 2d 1086 (2010). We disagree.
The following additional facts are relevant to our resolution of this claim. Gagliardi testified at trial that, after she was arrested for drug offenses as the result of the search of the defendant's apartment, the Norwalk police interviewed her at the Mamaroneck police station. She gave two statements to the police that night. In the first statement, Gagliardi told that police that the defendant had been angry because he believed that the victim had stolen his bracelet, that the defendant and the victim had left the defendant's apartment together on the night of the murder, that the victim never returned to the apartment and that Gagliardi previously had found a gun in the defendant's jacket. After a break, the police informed Gagliardi that the defendant was not taking responsibility for the drugs that had been seized from his apartment. Gagliardi testified that this upset her and, because she was upset, she gave a second statement indicating that *1101 the defendant had told her that he had shot the victim and that the defendant had asked her to provide an alibi. Gagliardi testified that she had received no benefit from the state in exchange for her testimony. She also testified that the drug charges against her had been reduced to misdemeanor charges, that she had served no time in jail[30] and that she was not testifying at trial because the charges had been reduced to a misdemeanor. She further testified that she was not on probation and that, if she had not testified at the defendant's trial, there would have been no danger that the New York authorities would attempt to imprison her on the drug charges.
The defendant submitted a request to charge requesting that the trial court give a special credibility instruction regarding Gagliardi's testimony.[31] As legal authority for the charge, the defendant stated: "The charge is a compilation of the motive and accomplice charges approvingly cited in [D. Borden & L. Orland, 5 Connecticut Practice Series: Criminal Jury Instructions (4th Ed.2007) § 3. 10, pp. 192-93], and a number of Connecticut cases as follows: State v. Cooper, 182 Conn. 207, [210-12, 438 A.2d 418 (1980)]; State v. Keiser, 196 Conn. 122, [132-33, 491 A.2d 382 (1985)]."
The trial court specifically instructed the jury that Gagliardi was an informing witness and that the jury could consider whether she had motives for testifying other than truthfully.[32] It did not instruct the *1102 jury that Gagliardi's testimony must be viewed with "particular scrutiny and weighed . . . with greater care than the testimony of an ordinary witness," as requested by the defendant.
The defendant now claims that he was entitled to a special credibility instruction in accordance with State v. Patterson, supra, 276 Conn. at 465, 469, 886 A.2d 777. We conclude that this claim was not preserved for review. The defendant stated in his request to charge that a charge regarding Gagliardi's testimony was required under our cases requiring a special credibility instruction for the testimony of accomplices and complaining witnesses. He did not explain to the trial court, however, why such a charge was required for Gagliardi's testimony when there was no suggestion in the case that she was implicated in the murder.[33] He also did not argue that the charge was required under Patterson or explain to the trial court why the holding of that case, which required a special credibility instruction only for jailhouse informants; see id.; see also State v. Arroyo, supra, 292 Conn. at 569, 973 A.2d 1254; should be expanded to apply to all witnesses who testify that the defendant confessed to them.[34] "As we have observed repeatedly, [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.) Konigsberg v. Board of Aldermen, 283 Conn. 553, 597 n. 24, 930 A.2d 1 (2007). Moreover, the defendant is not entitled to review under Golding because he has made no claim that the trial court's failure to give a special credibility instruction violated his constitutional rights. Accordingly, we decline to review this claim.
The judgment is affirmed.
In this opinion the other justices concurred.
NOTES
[1] The defendant appealed directly to this court pursuant to General Statutes § 51-199(b)(3).
[2] The fourth amendment to the United States constitution provides: "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."
[3] Article first, § 7, of the Connecticut constitution provides: "The people shall be secure in their persons, houses, papers and possessions from unreasonable searches or seizures; and no warrant to search any place, or to seize any person or things, shall issue without describing them as nearly as may be, nor without probable cause supported by oath or affirmation."
[4] The fifth amendment to the United States constitution provides in relevant part that "[n]o person ... shall be compelled in any criminal case to be a witness against himself...."
[5] Weisgerber testified that he and Chrzanowski were in the kitchen of the apartment while the Mamaroneck police conducted the search. Although Holland testified that Weisgerber and Chrzanowski remained outside the apartment, we assume for purposes of this opinion that they were inside the apartment during part of the search.
[6] The record is unclear as to when the cell phone had been seized from the car and who had seized it. Weisgerber testified, however, that he believed that the cell phone was still on the front seat of the vehicle when it was brought to the Mamaroneck police station.
[7] The trial court did not rule explicitly on the question of whether the defendant had a reasonable expectation of privacy in his cell phone or its contents, but implicitly concluded that he did when the court concluded that the cell phone was covered by the search warrant.
[8] The United States Supreme Court has held that the fact that a defendant had a possessory interest in an item that was sufficient to prove a possessory offense is not necessarily sufficient to establish that the defendant had a reasonable expectation of privacy in the item. See United States v. Salvucci, supra, 448 U.S. 83, 100 S. Ct. 2547 (rejecting "unexamined assumption that a defendant's possession of a seized good sufficient to establish criminal culpability was also sufficient to establish [f]ourth [a]mendment `standing''). Similarly, in the present case, if the state had merely alleged that the defendant was in possession of the cell phone on the night of the murder, that allegation would not necessarily be sufficient to establish that the defendant had a reasonable expectation of privacy in the cell phone. The state's claim that the cell phone was in the defendant's possession that night, however, was premised on undisputed evidence that tended to show that the defendant owned the cell phone and used it exclusively. We do not think that the state should be able to claim simultaneously that: (1) the cell phone records proved that the defendant traveled to Norwalk on the night of the murder because it was undisputed that the defendant owned and exclusively used the cell phone; and (2) the defendant has not proved that he owned or exercised control over the cell phone. Cf. id. ("`vice' of prosecutorial contradiction" is not implicated when proof of government's case does not constitute proof of defendant's reasonable expectation of privacy).
[9] See also United States v. Zavala, 541 F.3d 562, 577 (5th Cir.2008) (individual has reasonable expectation of privacy in information contained in cell phone); United States v. Quintana, 594 F. Sup.2d 1291, 1299 (M.D.Fla.2009) ("[a]n owner of a cellphone generally has a reasonable expectation of privacy in the electronic data stored on the phone"); United States v. James, United States District Court, Docket No. 1:06CR134 CDP, 2008 WL 1925032, at *4, 2008 U.S. Dist. LEXIS 34864, *10 (E.D. Mo. April 29, 2008) ("it is reasonable for a person to expect the information contained in a cell phone especially information such as that contained in the address book, which is not available even to the service providerwill be free from intrusion from both the government and the general public" [internal quotation marks omitted]); United States v. Morales-Ortiz, 376 F. Sup.2d 1131, 1139 (D.N.M.2004) (individual has "an expectation of privacy in an electronic repository for personal data, including cell telephones and pager data memories"); see also United States v. Murphy, 552 F.3d 405, 410-11 (4th Cir.) (assuming without analysis that defendant had reasonable expectation of privacy in contents of cell phone), cert. denied, ___ U.S. ___, 129 S. Ct. 2016, 173 L. Ed. 2d 1109 (2009); United States v. Urbina, United States District Court, Docket No. 06-CR-336, 2007 WL 4895782, *13-14, 2007 U.S. Dist. LEXIS 96345, *37-38 (E.D.Wis. November 6, 2007) (same); United States v. Park, United States District Court, Docket No. CR 05-375 SI, 2007 WL 1521573, *5 and n. 3 (N.D.Cal. May 23, 2007) (same); United States v. Young, United States District Court, Docket No. 5:05CR63-01-02, 2006 WL 1302667 (N.D.W.Va. May 9, 2006) (same); United States v. Cote, United States District Court, Docket No. 03CR271, 2005 WL 1323343, *6 (N.D.Ill. May 26, 2005) (same); but see United States v. Mercado-Nava, 486 F. Sup.2d 1271, 1276 (D.Kan.2007) (when cell phones were taken from defendant's person but defendant did not assert ownership of cell phones, did not testify as to expectation of privacy in cell phones and did not present testimony that he had legitimate possessory interest in cell phones or had taken steps to insure his privacy in them, defendant had no reasonable expectation of privacy in content of cell phones).
[10] See also Quon v. Arch Wireless Operating Co., 529 F.3d 892, 905 (9th Cir.2008) (individual has reasonable expectation of privacy in content of text messages obtained from cell phone service provider, but not in addresses), cert. denied sub nom. USA Mobility Wireless, Inc. v. Quon, ___ U.S. ___, 130 S. Ct. 1011, 175 L. Ed. 2d 618 (2009).
[11] Before this court's decision in Miller, the United States Supreme Court had concluded in Chambers v. Maroney, 399 U.S. 42, 51-52, 90 S. Ct. 1975, 26 L. Ed. 2d 419 (1970), that the fourth amendment permits a warrantless automobile search supported by probable cause and conducted while the automobile was impounded at a police station.
[12] See D'Antorio v. State, 926 P.2d 1158, 1161 n. 4 (Alaska 1996) (law of state where search occurred governs validity); Echols v. State, 484 So. 2d 568, 571-72 (Fla.1985) (evidence lawfully obtained by Indiana police was admissible in Florida even though search would have been illegal under Florida law), cert. denied, 479 U.S. 871, 107 S. Ct. 241, 93 L. Ed. 2d 166 (1986); People v. Barrow, 133 Ill. 2d 226, 257-58, 139 Ill. Dec. 728, 549 N.E.2d 240 (1989) (evidence lawfully obtained in Maryland was admissible in Illinois even though means by which evidence was obtained would have been illegal in Illinois), cert. denied, 497 U.S. 1011, 110 S. Ct. 3257, 111 L.Ed.2d 767(1990); State v. Cooper, 223 Kan. 175, 177, 573 P.2d 1006 (1977) (law of state where search occurred governs validity); Helm v. Commonwealth, 813 S.W.2d 816, 818-20 (Ky.1991) (state constitutional law governing searches has no extraterritorial effect and evidence lawfully obtained by Ohio police was admissible in Kentucky); Frick v. State, 634 P.2d 738, 740 (Okla.Crim.App. 1981) (evidence that was legally obtained in Virginia was admissible in Oklahoma even though search would have been illegal under Oklahoma law); Commonwealth v. Sanchez, 552 Pa. 570, 575-78, 716 A.2d 1221 (1998) (evidence that was legally obtained in California was admissible in Pennsylvania even though search would have been illegal under Pennsylvania law); State v. Cauley, 863 S.W.2d 411, 416 (Tenn.1993) (law of jurisdiction where evidence was obtained governs validity of search); State v. Coburn, 165 Vt. 318, 324-25, 165 Vt. 318, 683 A.2d 1343 (1996) (Vermont constitution did not apply to evidence legally seized by federal customs officials); State v. Brown, 132 Wash.2d 529, 590, 940 P.2d 546 (1997) (evidence that was lawfully obtained in California was admissible in Washington even though police conduct might have been illegal in Washington), cert. denied, 523 U.S. 1007, 118 S. Ct. 1192, 140 L. Ed. 2d 322 (1998); see also People v. Orlosky, 40 Cal. App. 3d 935, 939, 115 Cal. Rptr. 598 (1974) (evidence obtained in search that was illegal under Indiana law was admissible in California, where search would have been legal); People v. Saiken, 49 Ill. 2d 504, 508-12, 275 N.E.2d 381(1971) (evidence obtained in search that was illegal under Indiana law was admissible in Illinois because search was legal under fourth amendment), cert. denied, 405 U.S. 1066, 92 S. Ct. 1499, 31 L. Ed. 2d 796 (1972); State v. Rivers, 420 So. 2d 1128, 1132 (La. 1982) (Louisiana law did not apply to search conducted in Alabama; dispositive inquiry was whether search was valid under fourth amendment); State v. Lucas, 372 N.W.2d 731, 736 (Minn.1985) ("[t]here is ... no requirement that evidence obtained in another state be excluded in [forum] state merely because it would be inadmissible if the prosecution were in that other state"); State v. Evers, 175 N.J. 355, 379, 815 A.2d 432 (2003) (same); Burge v. State, 443 S.W.2d 720, 723 (Tex.Crim.App.) (when evidence was obtained illegally in Oklahoma but search would have been legal in Texas, evidence was admissible because evidentiary rules of forum state apply), cert. denied, 396 U.S. 934, 90 S. Ct. 277, 24 L. Ed. 2d 233 (1969); but see Stidham v. State, 608 N.E.2d 699, 701 (Ind. 1993) (when confession was obtained legally in Illinois, but would have been illegal in Indiana, it was inadmissible in Indiana); State v. Lynch, 292 Mont. 144, 149, 969 P.2d 920 (1998) (when evidence was obtained legally in Nevada, but search would have been illegal in Montana, evidence was inadmissible in Montana because exclusionary rule is rule of evidence and evidentiary rules of forum state apply); People v. Griminger, 71 N.Y.2d 635, 641, 524 N.E.2d 409, 529 N.Y.S.2d 55 (1988) ("[s]ince [the] defendant has been tried for crimes defined by the [s]tate's [p]enal [l]aw, we can discern no reason why he should not also be afforded the benefit of our [s]tate's search and seizure protections"); State v. Davis, 313 Or. 246, 253-54, 834 P.2d 1008 (1992) (Oregon's constitutional law applies to all evidence presented in Oregon courts, regardless of whether search was legal under law of jurisdiction where obtained).
[13] Lustig, Gambino and Byars involved the so-called "`silver platter'" doctrine. See United States v. Janis, 428 U.S. 433, 444, 96 S. Ct. 3021, 49 L. Ed. 2d 1046 (1976). Under that doctrine, because "the [f]ourth [a]mendment [originally] did not apply to state officers... material seized unconstitutionally by a state officer could be admitted in a federal criminal proceeding." Id. In Elkins v. United States, 364 U.S. 206, 223, 80 S. Ct. 1437, 4 L. Ed. 2d 1669 (1960), the United States Supreme Court overruled the silver platter doctrine and held that "evidence obtained by state officers during a search which, if conducted by federal officers, would have violated the defendant's immunity from unreasonable searches and seizures under the [f]ourth [a]mendment is inadmissible over the defendant's timely objection in a federal criminal trial." In Mapp v. Ohio, 367 U.S. 643, 655, 660, 81 S. Ct. 1684, 6 L. Ed. 2d 1081 (1961), the United States Supreme Court held that, because the fourth amendment had been held applicable to the states through the fourteenth amendment, evidence seized by state officials in violation of the fourth amendment was inadmissible in state criminal proceedings. Nevertheless, the principles underlying the doctrine continue to provide guidance on the application of the exclusionary rule to evidence obtained outside the forum court's jurisdiction.
[14] A number of state courts have reached this conclusion. See State v. Cauley, supra, 863 S.W.2d at 416 ("[w]hen evidence is used in a Tennessee courtroom that has been obtained at the behest of Tennessee authorities pursuant to their own investigation of a crime occurring within our borders, as in the instant case, Tennessee's constitutional search and seizure principles should apply"); State v. Brown, 132 Wash.2d 529, 588, 940 P.2d 546 (1997) (whether statements legally obtained in California could be admitted under Washington law depended on whether California police had acted as agents of Washington police), cert. denied, 523 U.S. 1007, 118 S. Ct. 1192, 140 L. Ed. 2d 322 (1998). Other authorities have concluded, however, that, when the seizure of evidence was "valid under the law of the search jurisdiction but would be regarded as unlawful had it occurred in the forum ... the evidence should be admitted even if police agents of the forum participated in the extrajurisdictional search." R. Tullis & L. Ludlow, "Admissibility of Evidence Seized in Another Jurisdiction: Choice of Law and the Exclusionary Rule," 10 U.S.F. L.Rev. 67, 91 (1975); see also Echols v. State, supra, 484 So.2d at 571-72; State v. Lucas, supra, 372 N.W.2d at 737. Presumably, the rationale for this conclusion is that it would be unrealistic and counterproductive to require government officials of the search jurisdiction to comply with the law of the forum state. See, e.g., Echols v. State, supra, at 571-72 ("we do not believe that the interest of Florida is served by imperially attempting to require that out-of-state police officials follow Florida law, and not the law of the situs, when they are requested to cooperate with Florida officials in investigating crimes committed in Florida").
[15] Indeed, if the Norwalk police had intended to obtain the cell phone, they could have asked the Mamaroneck police to seize it from the defendant's automobile when he was arrested.
[16] Under federal constitutional law, when an occupant has been arrested and there is reason to believe that the automobile contains evidence related to the offense of arrest, a search of the automobile is valid under the search incident to arrest exception. See Arizona v. Gant, ___ U.S. ___, 129 S. Ct. 1710, 1719, 173 L. Ed. 2d 485 (2009) (under search incident to arrest exception, when there is "reasonable basis to believe the vehicle contains relevant evidence ... the offense of arrest will supply a basis for searching the passenger compartment of an arrestee's vehicle and any containers therein" [citations omitted]). The New York Court of Appeals has held that, under that state's constitution, the search incident to arrest exception "exists only to protect against the danger that an arrestee may gain access to a weapon or may be able to destroy or conceal critical evidence. Thus, we have held that the scope of such a search must be limited to the arrestee's person and the area from within which he might gain possession of a weapon or destructible evidence...." People v. Blasich, supra, 73 N.Y.2d at 678, 543 N.Y.S.2d 40, 541 N.E.2d 40. Accordingly, under New York law, that exception arguably would not apply in the present case, where the defendant was arrested and his car was impounded before the search, even though the automobile exception does apply under Belton. Id. (under Belton, when occupant of automobile has been arrested and there is probable cause to believe that automobile contains evidence of crime of arrest, "a warrantless search of the vehicle is authorized, not as a search incident to arrest, but rather as a search falling within the automobile exception to the warrant requirement"). Gant makes clear, however, that the search found valid by the New York Court of Appeals in Belton would be permissible as a search incident to arrest under the federal constitution.
[17] A number of courts have analogized cell phones to closed containers and concluded that a search of their contents is, therefore, valid under the automobile exception or the exception for a search incident to arrest. See United States v. Rocha, United States District Court, Docket No. 06-40057-01-RDR, 2008 WL 4498950 (D.Kan. October 2, 2008) (automobile exception); United States v. James, United States District Court, Docket No. 1:06CR134 CDP, 2008 WL 1925032, *4, 2008 U.S. Dist. LEXIS 34864, *10-11(E.D. Mo. April 29, 2008) (automobile exception); see also United States v. Finley, supra, 477 F.3d at 259-60 (search incident to arrest); United States v. McCray, United States District Court, Docket No. CR408-231 (S.D.Ga. December 5, 2008) (search incident to arrest); but see United States v. Park, United States District Court, Docket No. CR 05-375 SI, 2007 WL 1521573, *8-9 (N.D.Cal. May 23, 2007) (because cell phones can contain large amount of information and search of contents is not necessary to preserve safety of police or to prevent destruction of evidence, cell phones are not analogous to physical containers or items such as wallets and diaries for purposes of search incident to arrest exception); State v. Smith, 124 Ohio St. 3d 163, 166-68, 920 N.E.2d 949 (2009) (same).
In United States v. Murphy, 552 F.3d 405, 411 (4th Cir.), cert. denied, ___ U.S. ___, 129 S. Ct. 2016, 173 L. Ed. 2d 1109 (2009), the court expressly rejected the defendant's argument that he had a heightened expectation of privacy in his cell phone because it was capable of storing a large amount of information. The court stated that the defendant had "not provided the [c]ourt with any standard by which to determine what would constitute a `large' storage capacity as opposed to a `small' storage capacity, as he does not quantify these terms in any meaningful way. Second, [the defendant] has introduced no evidence that his cell phone had the requisite `large' storage capacity which he contends is subject to a heightened expectation of privacy. Third, even assuming that his cell phone does have a `large' storage capacity, his argument still fails because it is premised on the unwarranted assumption that information stored on a cell phone with a `large' storage capacity would be any less volatile than the information stored on a cell phone with a `small' storage capacity.
"Finally, [the defendant's] argument must be rejected because to require police officers to ascertain the storage capacity of a cell phone before conducting a search would simply be an unworkable and unreasonable rule. It is unlikely that police officers would have any way of knowing whether the text messages and other information stored on a cell phone will be preserved or be automatically deleted simply by looking at the cell phone.... Rather, it is very likely that in the time it takes for officers to ascertain a cell phone's particular storage capacity, the information stored therein could be permanently lost." (Citation omitted.) Id., at 411.
Moreover, we do not believe that the New York Court of Appeals would be persuaded by the reasoning of the court in Park that a search of the contents of a cell phone is not valid under the automobile exception because the search is not necessary to preserve the safety of police officers or to prevent the concealment or destruction of evidence, because the New York court has held that a primary justification for the exception is the reduced expectation of privacy in automobiles. See People v. Blasich, supra, 73 N.Y.2d at 678, 543 N.Y.S.2d 40, 541 N.E.2d 40 ("[t]wo considerations have generally been cited as justifying the exemption of car searches from the warrant requirement in appropriate circumstances: the reduced expectation of privacy associated with automobiles, and their inherent mobility which often makes it impracticable to obtain a warrant"); compare id. (under New York constitution, search incident to arrest exception to warrant requirement "exists only to protect against the danger that an arrestee may gain access to a weapon or may be able to destroy or conceal critical evidence" [emphasis added]).
[18] Indeed, the trial court expressly found that "[t]he [cell] phone was seized base[d] upon the experience of the police that it contained evidence of drug activity." The defendant contends that this finding was clearly erroneous because the Mamaroneck "police never obtained search warrants for cell phones but automatically seized them in narcotics cases and searched them in the hopes that it would help in their investigations." Even if we assume that the police are required to specify cell phones when requesting authority to seize records of drug activities, however, the fact that the Mamaroneck police customarily did not ask for such authority does not mean that they would not receive it if they asked for it based on their experience that cell phones are likely to contain such records. Holland testified at the suppression hearing that the police customarily seized cell phones to determine whether calls had been made to persons who were known to be drug users or drug dealers. We conclude, therefore, that the trial court's finding was supported by the record.
[19] Gentile testified at the suppression hearing that these events occurred in December, 2002. She also testified, however, that they occurred before she met with Norwalk police in February, 2002. At trial, Gentile testified that the events occurred in December, 2001.
[20] The trial court charged the jury that "[t]he evidence offered by the state of prior acts of misconduct of the defendant is not being admitted to prove the bad character of the defendant or the defendant's tendency to commit criminal acts. Such evidence is being admitted solely to show or establish the identity of the person who committed the crime which is the subject of this trial.
"You may not consider such evidence as establishing a predisposition on the part of the defendant to commit any of the crimes charged or to demonstrate a criminal propensity. You may consider such evidence if you believe it and further find it logically, rationally, and conclusively supports the issue for which it is being offered by the state, but only as it may bear here on the issue of identity. You have [to] independently assess the similarities between the offense involving ... Gentile and this offense.
"On the other hand, if you do not believe such evidence or even if you do, [if] the offenses are not similar in their circumstances, if you find that there's not logically, rationally, and conclusively support [for the] issue for which it is being offered by the state, namely, identity of the person who committed the matter, the homicide of [the victim] ... [t]hen you may not consider that particular testimony of ... Gentile for any purpose.
"You may not consider evidence of prior misconduct, except for the limited purpose of... attempting to prove identity, because it may predispose your mind uncritically to believe that the defendant [may be] guilty of the offense here charged, merely because of the alleged prior misconduct. So for this reason, you may consider the ... Gentile evidence only on the issue, that particular portion of her testimony, only as it bears on ... identity and for no other purpose."
[21] Conn.Code Evid. § 4-5(b) provides in relevant part: "Evidence of other crimes, wrongs or acts of a person is admissible ... to prove... identity...."
[22] See Conn.Code Evid. § 4-5(a) ("[e]vidence of other crimes, wrongs or acts of a person is inadmissible to prove the bad character or criminal tendencies of that person").
[23] In Missouri, the admission of propensity evidence has been found to violate the defendant's state constitutional right to be tried for the offense for which he was indicted. State v. Vorhees, supra, 248 S.W.3d at 587-88, 591. There is no constitutional prohibition on the admission of propensity evidence in Connecticut. As we have indicated, however, the admission of misconduct evidence to establish propensity is generally prohibited under § 4-5(a) of the Connecticut Code of Evidence. Although our cases have not expressly discussed the rationale for this prohibition, the rule presumably embodies "a long-standing element of American law. It is part of our jurisprudential tradition that an accused may be convicted based only upon proof that he committed the crime with which he is chargednot based upon poor character or uncharged sins of the past. The rule against use of other misconduct evidence to suggest that the defendant had a propensity to commit crimes of the type charged recognizes that such evidence may have a too-powerful influence on the jurors, and may lead them to determine guilt based upon either a surmise that if the defendant did it before, he must have done it this time, or a belief that it matters little whether the defendant committed the charged crime because he deserves to be punished in any event for other transgressions." State v. Wood, 126 Idaho 241, 244-45, 880 P.2d 771 (App.1994). Thus, the rationale for the rule barring propensity evidence is the same in Connecticut as it is in Missouri.
[24] See Miranda v. Arizona, 384 U.S. 436, 478-79, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966).
[25] The trial court later issued a written memorandum of decision explaining its decision. The defendant does not challenge this ruling on appeal.
[26] Defense counsel expressly stated that she did not object to Weisgerber's testimony that, after the defendant told Weisgerber that his question whether the defendant had been in Norwalk with the victim on the night of the murder was a very good one, the defendant stated that he was not going to discuss the crime scene. The defendant's objection to that testimony was, therefore, waived.
[27] The defendant cites several cases for the proposition that a defendant may reassert his right to remain silent after waiving it by refusing to respond to any more questions. He also cites several cases for the proposition that, when a defendant answers general questions by the police but refuses to discuss the crime, he has invoked his right to remain silent. Those cases are inapposite in the present case because the defendant did not refuse to answer questions about the crime until he asked for an attorney, at which point the police ended the interview.
[28] Under Golding, "a defendant can prevail on a claim of constitutional error not preserved at trial only if all of the following conditions are met: (1) the record is adequate to review the alleged claim of error; (2) the claim is of constitutional magnitude alleging the violation of a fundamental right; (3) the alleged constitutional violation clearly exists and clearly deprived the defendant of a fair trial; and (4) if subject to harmless error analysis, the state has failed to demonstrate harmlessness of the alleged constitutional violation beyond a reasonable doubt. In the absence of any one of these conditions, the defendant's claim will fail." State v. Golding, supra, 213 Conn. at 239-40, 567 A.2d 823.
[29] During argument on the defendant's motion for a mistrial, the prosecutor explained to the trial court that he had had only about ten minutes to review the court's rulings on the police report with Weisgerber before he testified. When the prosecutor asked Weisgerber during his testimony why the defendant had not been willing to divulge what he knew about the murder, he expected that Weisgerber would testify that the defendant did not want to talk because the police were not going to release him that night, not that he wanted to speak with an attorney first.
[30] Gagliardi could not remember if she had pleaded guilty to the misdemeanor drug charges.
[31] The defendant submitted the following request to charge: "In this matter it can clearly be said that the credibility of . . . Gagliardi, state's informant, is a pivotal issue for you to consider.
"An informer is one who claims to have heard another defendant make an admission about his case.
"In considering and weighing the testimony of an informer, you will test it by those rules of probability or improbability by which human conduct and the motives impelling or influencing people to do certain things are usually applied. You may consider his/her appearance and demeanor as a witness, the reasons she gave for telling the story to the state authorities, and among these tests, to consider whether any motive has appeared or any reason is apparent why she should seek to fasten so grave a crime upon the accused, if her story is untrue. The presence or absence of a motive is often an important factor to consider in a determination of the truth or falsity of a story. You may consider any promises that were made by a person in authority and the circumstances under which the informer's statement was made to any person in authority. You can also consider whether [her] complaint is retaliatory in nature and a response to her position that [the defendant] refused to exonerate her for illegally possessing narcotics.
"In other words, the testimony of an informer who provides evidence against a defendant must be reviewed with particular scrutiny and weighed by you with greater care than the testimony of an ordinary witness.
"Whether the informer's testimony has been affected by interest or prejudice against the defendant is exclusively for you to determine."
[32] The trial court instructed the jury that "[a]n informing witness is one who claims to have heard the defendant make an admission about his case. In this case you may consider whether . . . Gagliardi was an informing witness and whether she had any special interest in the matter.
"In considering and weighing the testimony of an informing witness, you will test it by those rules of probability and improbability by which human conduct in the motives impelling or influencing people to do certain things are usually applied. You may consider her appearance [and] demeanor as a witness, the reasons she gave for telling what she did to the state authorities, and among these tests to consider whether any motive has appeared for her to inform the authorities other than truthfully. It is for you to decide what credibility you will give . . . Gagliardi. Like all other questions of credibility, this is a question you must decide based on all the evidence presented to you."
[33] In State v. Cooper, supra, 182 Conn. at 211-12, 438 A.2d 418, this court held that a defendant is entitled to a special credibility instruction for the testimony of a "complaining witness [who] could himself have been subject to prosecution depending only upon the veracity of his account of this particular criminal transaction. . . ." We emphasized that, for the instruction to be required, "there must be evidence . . . to support the defendant's assertion that the complaining witness was the culpable party." Id., at 212, 438 A.2d 418. It is clear, therefore, that the complaining witness charge is required only when there is evidence that the witness committed the crime for which the defendant is being tried. Our research reveals no decisions by this court or the Appellate Court that have used the phrase "informing witness."
[34] Even on appeal, the defendant has cited no cases in which Patterson has been applied to the testimony of a witness who had not been incarcerated with the defendant. Rather, he contends that we should expand Patterson to apply to any witness who may have received a promise from the police or the prosecutor in exchange for his or her testimony. In State v. Arroyo, supra, 292 Conn. at 569, 973 A.2d 1254, however, we recognized that the credibility of jailhouse informants is particularly suspect because they "frequently have motives to testify falsely that may have nothing to do with the expectation of receiving benefits from the government." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1606996/ | 7 So. 3d 1105 (2009)
HART
v.
STATE.
No. 2D08-3063.
District Court of Appeal of Florida, Second District.
April 29, 2009.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919578/ | 660 So. 2d 242 (1995)
Raul CAMEJO, Petitioner,
v.
STATE of Florida, Respondent.
No. 83909.
Supreme Court of Florida.
May 25, 1995.
Rehearing Denied September 11, 1995.
Lister Witherspoon IV of the Law Offices of Lister Witherspoon IV, Miami, for petitioner.
*243 Robert A. Butterworth, Atty. Gen. and Belle B. Turner, Asst. Atty. Gen., Daytona Beach, for respondent.
Louis M. Jepeway, Jr. of Jepeway and Jepeway, P.A., Miami, amicus curiae for National Ass'n of Criminal Defense Lawyers.
PER CURIAM.
We have for review State v. Camejo, 641 So. 2d 109 (Fla. 5th DCA 1994), in which the district court of appeal certified the following as a question of great public importance:
WHAT STANDARDS SHOULD THE TRIAL COURT FOLLOW IN ORDERING AND COMPELLING WITNESSES TO UNDERGO PRETRIAL MEDICAL AND PSYCHIATRIC EXAMINATIONS; AND, WHAT STANDARD OF REVIEW SHOULD THE APPELLATE COURT APPLY IN SUCH CASES?
Id. at 114. We have jurisdiction under article V, section 3(b)(4) of the Florida Constitution.
The petitioner, Raul Camejo, was charged with one count of sexual battery and one count of battery against his live-in girlfriend. Camejo filed a motion to compel the alleged victim to undergo a psychological examination. The motion alleged that Camejo's counsel had uncovered facts pointing toward the mental and emotional instability of the alleged victim.[1] At the hearing on the motion, the trial court granted the motion and ordered the victim to submit to a psychological examination to be conducted by a court-appointed psychiatrist. The psychiatrist's evaluation report was to be sent to the court and then disclosed only to counsel for the state and the defense. An in-camera hearing was to be held later to determine the use, if any, of the evaluation in any further proceedings.
The Fifth District Court of Appeal granted the State's petition for writ of certiorari and quashed the ordered examination. In its opinion, the court first discussed pertinent cases on the subject from both within and without the State of Florida. The court then stated:
In summary, Florida law accords with the majority rule in other jurisdictions that trial courts have the inherent power to order psychological examinations. These examinations have been historically ordered in other jurisdictions, where one of three situations exists: (a) uncorroborated, testimony of victim; (b) competency of victim is in question; and (c) the victim's credibility is at issue. Section 794.022 specifically provides that testimony of a sexual abuse victim need not be corroborated; therefore, this would be an invalid reason to order such an examination in Florida. Of course the mental competency of a victim/witness would always be a valid reason to order such an examination in a criminal prosecution. See generally, Goldstein v. State, 447 So. 2d 903 (Fla. 4th DCA 1984). And lastly, credibility may be a reason to order such an examination, but only if there is strong and compelling evidence. [State v.] Coe [521 So. 2d 373 (Fla. 2d DCA 1988)]; Dinkins [v. State] [244 So. 2d 148 (Fla. 4th DCa 1971)].
Camejo, 641 So.2d at 113. Applying these principles to the case at hand, the court concluded that Camejo had failed to demonstrate any compelling or extreme circumstances which could establish the need for a psychological evaluation of the victim.
Clearly, Camejo's motion fell short of demonstrating that an examination was necessary to determine the competency of the victim to testify. Moreover, we agree with the court below that Camejo failed to present sufficiently compelling evidence to justify ordering the examination for the purpose of helping him attack her veracity and credibility. Upon careful consideration, we approve and adopt as our own the well-reasoned opinion of the court below. We have concluded *244 not to answer the certified question because it is worded more broadly than the scope of the opinion.
It is so ordered.
GRIMES, C.J., and OVERTON, SHAW, KOGAN, HARDING, WELLS and ANSTEAD, JJ., concur.
NOTES
[1] Camejo's motion included excerpts of deposition testimony from various witnesses allegedly indicating the mental and emotional instability of the victim. This testimony included allegations that the victim: (1) had been arrested for beating and biting her mother; (2) had herself been the victim of domestic violence at the hands of a former live-in boyfriend; (3) had formed a fantasy future with another former boyfriend and had followed him to Indiana after he broke up with her; (4) had put a shovel through the windshield of another former boyfriend's car; (5) had attempted suicide in the past; and (6) had a tendency to become loud and crazy when drinking. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919635/ | 91 B.R. 627 (1988)
In re David Larry DAVIS, Debtor.
Charles A. GOWER, Trustee, Plaintiff,
v.
FARMERS HOME ADMINISTRATION, Defendant.
Bankruptcy No. 81-60100-THOM, Adv. No. 82-6005-THOM.
United States Bankruptcy Court, M.D. Georgia, Thomasville Division.
September 23, 1988.
*628 *629 T. Jefferson Loftiss, II, Thomasville, Ga., Charles A. Gower, Columbus, Ga., J. Patrick Ward, Cairo, Ga., for plaintiff.
Lillian H. Lockary, Asst. U.S. Atty., Macon, Ga., for defendant.
CORRECTED MEMORANDUM OPINION
FINDINGS OF FACT AND CONCLUSIONS OF LAW
JOHN T. LANEY, III, Bankruptcy Judge.
On November 13, 1984 this Court entered an Opinion and Judgment in favor of the Trustee in this case, Charles A. Gower, ordering Farmers Home Administration (hereinafter "FMHA") to return to the Debtor's estate $282,847.39 plus interest and directing the Trustee to turn over to the estate an additional $52,327.07 plus interest held in escrow pending the outcome of the litigation. The Court found the money to be in part an illegal preference payment to FMHA under 11 U.S.C. § 547(b) and (c)(5), and found FMHA's total claim to be subject to equitable subordination under 11 U.S.C. § 510 because of FMHA's misconduct in obtaining the money. Those findings were affirmed by the District Court in an order dated November 5, 1986, and its decision was affirmed by the Court of Appeals for the Eleventh Circuit on September 23, 1987. Because the facts and conclusions on the merits of this Adversary Proceeding are stated in full in the Opinion of November 13, 1984, this Opinion will include only those facts necessary to the resolution of the instant request for attorney fees under 28 U.S.C. § 2412.
The Debtor in 1981 borrowed $985,000.00 from FMHA to finance his 1981 crop. FMHA prepared a "Farm and Home Plan" covering the Debtor's proposed disbursements for expenses and anticipated receipts from crops. It also directed the debtor to set up a supervised bank account which would require the signature of both an FMHA official and the Debtor to disburse funds. However, FMHA did not insist upon strict performance of the terms of the Farm and Home Plan. FMHA allowed payment from the supervised bank account in accordance with the debtor's bills as he brought them in. In some instances checks were simply endorsed by FMHA and delivered to the Debtor. FMHA took a crop lien on the Debtor's 1981 crops and filed security agreements and UCC-1 financing statements. The Debtor later expanded his 1981 operation with rented farmland and obtained loans from other creditors, giving them crop liens. FMHA was aware that the Debtor had planted crops on other land than that on which FMHA held crop liens.
During the summer of 1981, FMHA reverted to strict compliance with the Farm *630 and Home Plan. It began to retain part of the proceeds from the Debtor's crops. FMHA received crop proceeds as to which it was neither secured nor perfected from the rented properties. FMHA knew that it had no lien on these crops, but it notified all buyers of the Debtor's crops to make their checks out jointly, whether the crops came from properties with FMHA liens or not. FMHA made misleading statements to the Debtor's other creditors, leading them to believe that if they advanced services and supplies to allow the Debtor to harvest his crops, they would be paid from the crop proceeds. FMHA then retained the proceeds and did not pay the other creditors.
On November 16, 1981, the Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code. On February 12, 1982, the Trustee brought this Adversary Proceeding against FMHA to recover payments made to FMHA within 90 days prior to the Bankruptcy under 11 U.S.C. § 547(b) and 11 U.S.C. § 547(c)(5), for equitable subordination under 11 U.S.C. § 510 of other sums paid to FMHA within 90 days of the bankruptcy, and to subordinate FMHA's claim to the claims of the unsecured creditors. FMHA asserted that it was exempt from those actions of the Trustee under the doctrine of sovereign immunity and it moved to dismiss the case. This Court held that FMHA had waived sovereign immunity by asserting a claim in the case. In re Davis, 20 B.R. 519 (Bankr.M.D.Ga.1982). FMHA appealed that decision to the District Court, which upheld the decision of the Bankruptcy Court in an order dated October 22, 1982. FMHA then moved the District Court to certify the case for interlocutory appeal, and its motion was denied on February 28, 1983.
This case came on for trial on the merits on October 15, 1984. This Court held for the Trustee and found that FMHA had received preferential transfers and had engaged in misconduct requiring the equitable subordination of its claim. The Court also held that the Trustee does not simply stand in the shoes of the Debtor in an action to avoid preferential transfers. FMHA appealed the decision, and the District Court found that the Debtor had defrauded FMHA in obtaining the loan. It entered a summary judgment on July 10, 1985 dismissing the Trustee's claim under 28 U.S.C. § 2514 as forfeited because of the Debtor's fraud. This time the Trustee appealed, and the Eleventh Circuit Court of Appeals held that the Trustee's claims were for the benefit of the creditors and were not forfeited by the fraud of the Debtor. The case was remanded to the District Court for a ruling on the preference and equitable subordination findings. In re Davis, 785 F.2d 926 (11th Cir.1986). On November 5, 1986, the District Court affirmed the Findings of Fact and Conclusions of Law of the Bankruptcy Court. This decision was affirmed by the Eleventh Circuit Court of Appeals in an unpublished decision on September 23, 1987.
The attorneys for the Trustee in this case filed an application for attorney fees under the Equal Access to Justice Act (hereinafter "EAJA") on December 12, 1984. A hearing was originally set on the application for March 12, 1985, but was continued after the appeal of the Bankruptcy Court decision. After the final judgment in the matter, the Trustee again applied for attorney fees under EAJA on January 4, 1988. The Government objected. A hearing was held on February 25, 1988, and briefs were filed. There was an interim award of fees from the estate in this case on March 24, 1986 in the amount of $60,000.00 to Charles A. Gower, $30,000.00 to J. Patrick Ward, and $23,000.00 to T. Jefferson Loftiss, II. The Trustee agrees that any award of fees under EAJA would first be used to reimburse the estate for the previous fee award.
The Trustee's application requests attorney fees under EAJA at $150.00 per hour, with affidavits attached showing 812.35 hours for Mr. Gower, 747.73 hours for Mr. Ward, and 539.9 hours for Mr. Loftiss. He contends that special factors such as the limited availability of qualified attorneys and the length of the litigation warrant a higher rate than $75.00 per hour, and that bankruptcy is an "identifiable practice specialty" which was required in the case.
*631 The United States objects to the fee application on several grounds. It contends that the Trustee is not eligible to recover under EAJA, since he has other means of compensation, that the Trustee has not shown a qualified net worth under EAJA, that the Trustee is not a prevailing party on some issues, that the Government was substantially justified in all of its agency actions and litigation positions, that there are special circumstances making an award unjust, that the Trustee unduly prolonged the litigation, and that the fee application is inadequate.
The attorneys for the Trustee were employed as authorized under 11 U.S.C. § 327. The attorneys for the Trustee are seeking an award of attorney fees from the Government under 28 U.S.C. § 2412(d), known as the Equal Access to Justice Act. Section 2412(d)(1)(A) provides as follows:
Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.
Section 2412(d)(1)(B) requires that an application for fees:
show that the party is a prevailing party and is eligible to receive an award under this subsection, and the amount sought, including an itemized statement from any attorney or expert witness representing or appearing in behalf of the party stating the actual time expended and the rate at which fees and other expenses are computed. The party shall also allege that the position of the United States was not substantially justified. Whether or not the position of the United States was substantially justified shall be determined on the basis of the record (including the record with respect to the action or failure to act by the agency upon which the civil action is based) which is made in the civil action for which fees and other expenses are sought.
Section 2412(d)(2)(A) is on the amount of fees that will be allowed under EAJA: "The amount of fees awarded under this subsection shall be based upon prevailing market rates for the kind and quality of the services furnished, except that . . . attorney fees shall not be awarded in excess of $75.00 per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee."
Section 2412(d)(2)(B) covers who may receive an award of fees under EAJA: "[P]arty means (i) an individual whose net worth did not exceed $2,000,000.00 at the time the civil action was filed, or (ii) any owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization, the net worth of which did not exceed $7,000,000.00 at the time the civil action was filed, and which had not more than 500 employees at the time the civil action was filed."
Subsection (D) defines "position of the United States" to include: "in addition to the position taken by the United States in this civil action, the action or failure to act by the agency upon which the civil action is based; except that fees and expenses may not be awarded to a party for any portion of the litigation in which the party has unreasonably protracted the proceedings. . . ."
The purpose of EAJA was stated in § 202 of Pub.L. 96-481, the 1980 amendments to EAJA. "(c) It is the purpose of this title (1) to diminish the deterrent effect of seeking review of, or defending against, governmental action by providing in specified situations an award of attorney fees, expert witness fees, and other costs against the United States. . . ." Section 2412(d) became effective on October 1, 1981 *632 and expired on October 1, 1984. It was reenacted "as if [it] had not been repealed" in 1985. Pub.L. No. 99-80, § 6, 99 Stat. 183, 186 (1985). The 1985 amendments added the language including the action or failure to act by the agency upon which the civil action is based to the requirement that the position of the United States be substantially justified.
The government has contended that the Trustee is not an eligible party to receive an award of attorney fees under § 2412(d). Section 2412(d)(2)(B) included among eligible parties any association or organization with a net worth not exceeding $7,000,000.00. "Association" and "organization" are both broad terms. Black's Law Dictionary defines an organization as including "a corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, two or more persons having a joint or common interest, or any other legal or commercial entity." Estates are included in that definition. The organization's net worth must not exceed $7,000,000.00 at the time the civil action is filed. If the real party in interest here is the estate, its net worth is under the statutory amount, since the Chapter 7 estate was insolvent, except for the amounts recovered against the United States and others. The real party in interest is the party who will pay the attorney fees if the government does not. Unification Church v. I.N.S., 762 F.2d 1077, 1082 (D.C.Cir.1985). Since the trustee's claims are for the benefit of the unsecured creditors, In re Davis, 785 F.2d 926, 927 (11th Cir.1986), he is the proper party to proceed on behalf of the estate. Matter of First Colonial Corp., 544 F.2d 1291, 1297 (5th Cir.1977). Since the estate is the real party in interest and the trustee and his attorneys have acted on its behalf, the possibility of an award of attorney fees from the estate does not prevent an award of fees under EAJA. A party's attorney is not denied fees under EAJA merely because the party is able to pay his attorney. Duncan v. Poythress, 777 F.2d 1508, 1511 (11th Cir.1985).[1]
No cases have held that a trustee cannot be awarded attorney fees under the Equal Access to Justice Act. Flournoy v. Hershner does not stand for that proposition and is distinguishable. The Trustee was not eligible for an award of attorney fees in that case because it was not a civil action as required by 28 U.S.C. § 2412(d)(1)(A), but was an appeal of an administrative decision of the Bankruptcy Judge. Flournoy v. Hershner, 68 B.R. 165 (M.D.Ga. 1986). It was not an Adversary Proceeding brought by the Trustee in his representative capacity, as is this case.
One case has permitted the trustee of a bankruptcy estate to file an application under EAJA. In In re Estate of Lee, a partnership applied for attorney fees under EAJA, and the trustee of the bankruptcy estate of one of the partners was substituted for the partner as a plaintiff. The action was held to be property of the debtor's estate. Hill, Trustee of the Estate of Lee v. N.F.I.P., Case No. H-83-7013 (S.D.Tex., Jan. 23, 1986). The Fifth Circuit Court of Appeals reversed the District Court's decision on the amount of attorney fees, but did not hold that an award should have been denied or that the Trustee was not a proper party. In re Estate of Lee, 812 F.2d 253 (5th Cir.1987). A debtor in bankruptcy has been awarded attorney fees under EAJA for a violation of the automatic stay by the Social Security Administration. In re Hagan, 44 B.R. 59 (Bankr.D.R.I. 1984). Other cases have awarded attorney fees under EAJA to the representatives of decedents' estates. See Hoffman v. Heckler, 656 F. Supp. 1136 (E.D.Pa.1987). Including bankruptcy estates and their representative trustees among the parties entitled to awards under EAJA furthers the intent of the statute of encouraging organizations to seek review of unreasonable governmental action. Precluding trustees would discourage them from recovering estate assets from government creditor agencies. The trustee is therefore an eligible *633 party to recover attorney fees under EAJA.
The Trustee also meets the other threshold requirements under § 2412. The Adversary Proceeding is a civil action, and the Trustee is a prevailing party in the litigation. A party "prevails" for EAJA purposes when "he or she has received substantially the relief requested or has been successful on the central issue." Martin v. Heckler, 773 F.2d 1145, 1149 (11th Cir.1985). The Trustee received substantially the relief he requested from the Bankruptcy Court, and that decision was eventually upheld by the District Court and the Court of Appeals. His loss on one count and the fact that he dropped some counts from his original complaint in his recast complaint do not prevent him from being a prevailing party.
28 U.S.C. § 2412(d)(1)(A) states that "a court shall award to a prevailing party . . . fees . . . unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust." The position of the United States includes "the action or failure to act by the agency upon the which the civil action is based. . . ." The 1985 amendments including agency actions "shall apply to cases pending on or commenced on or after the date of the enactment of this Act," August 5, 1985. Pub.L. No. 99-80, § 7(a), 99 Stat. 183, 186. If the Court finds that the government's original agency action was not substantially justified, it need not continue to inquire into the substantial justification of the government's litigation position. Russell v. National Mediation Bd., 775 F.2d 1284, 1291-92 (5th Cir.1985). The government bears the burden of proof in showing that its position was substantially justified. Haitian Refugee Center v. Meese, 791 F.2d 1489, 1496 (11th Cir.1986). It also has the burden of proving the existence of any special circumstances. Martin v. Heckler at 1150.
The United States Supreme Court has defined "substantially justified" as "justified in substance or in the main that is, justified to a degree that could satisfy a reasonable person." Pierce v. Underwood, ___ U.S. ___, ___, 108 S. Ct. 2541, 2550, 101 L. Ed. 2d 490 (1988). The Supreme Court stated that that standard was no different than the "reasonable basis both in law and fact" standard that the Eleventh Circuit Court of Appeals had been using. See Haitian Refugee Center at 1497. Whether or not the position of the United States was substantially justified is to be determined on the basis of the record made in the case. 28 U.S.C. § 2412(d)(1)(B). This Court's opinion on the merits makes clear that FMHA's action was not substantially justified, and the government has presented no new evidence or arguments that would cause this Court to find otherwise. It found that FMHA knowingly collected proceeds from crops on which it had no lien, and that it made misleading statements to the debtor's other creditors to persuade them to advance services and supplies to the debtor to allow him to harvest his crops. It specifically held that FMHA had engaged in inequitable conduct. This can hardly be considered substantially justified action by the government agency.
"[T]he fact that one other Court agreed or disagreed with the Government does not establish whether its position was substantially justified." Pierce, ___ U.S. at ___, 108 S.Ct. at 2552. "The United States is not liable for the payment of fees and expenses merely because it lost. Neither is the United States exempted from the payment of fees and expenses merely because it prevailed at some point in the judicial process before a magistrate or in the District Court, for example." Martin v. Heckler, 754 F.2d 1262, 1264 (5th Cir.1985). The trustee originally lost in the District Court in this case, but the Court did not reach the reasonableness of FMHA's actions in that decision.
The trustee is seeking a rate of $150.00 per hour. Section 2412(d)(2)(A)(ii) sets a top rate of $75.00 per hour "unless the Court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee." The Court has not found *634 the evidence presented on market rates and special factors to be very persuasive. The trustee presented affidavits from Thomasville attorneys indicating that their standard flat rate is around $75.00 per hour, but that a rate of $125.00 per hour or more would be appropriate in this case, and he submitted evidence of rates received by Atlanta attorneys in an uncontested fee application in the Middle District of Georgia. The government presented a decision in which $50.00 per hour was awarded in a Middle District of Georgia case in 1985. The trustee presented no evidence of an increase in the cost of living.
The Supreme Court's opinion in Pierce v. Underwood discussed the $75.00 per hour cap set in the statute. The Supreme Court held that Congress had meant to limit EAJA fees to $75.00 per hour regardless of the prevailing market rate and it limited special factors to those "not of broad and general application." Pierce, ___ U.S. at ___, 108 S.Ct. at 2554. It found most special factors considered by the District Court to be too generally applicable. The factors that the District Court had considered in Pierce were taken from Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974). The Eleventh Circuit has held that the Johnson factors are to be applied in calculating EAJA fee awards, Florida Suncoast Villas v. United States, 776 F.2d 974, 975 (11th Cir.1985), although it had anticipated that Pierce would resolve the questions concerning the use of special factors in United States v. Prop. Located at 4880 S.E. Dixie Hwy., 838 F.2d 1558, 1566 (11th Cir.1988). The general standards for setting fees in the Eleventh Circuit are now found in Norman v. Housing Authority of City of Montgomery, 836 F.2d 1292 (11th Cir.1988). Norman uses a lodestar approach based on a reasonable hourly rate of "the prevailing market rate in the relevant legal community for similar services by lawyers of reasonably comparable skills, experience, and reputation." Id. at 1299. This reasonable hourly rate would be the market rate allowed in EAJA up to the $75.00 per hour cap. Norman, however, still allows the use of the Johnson factors to determine the lodestar rate. Id. at 1299-1300.
Pierce has ruled out the use of most of the Johnson factors as special factors to be used in setting a rate in EAJA cases. Pierce, ___ U.S. at ___, 108 S.Ct. at 2554. The unacceptable special factors included the novelty and difficulty of issues, the undesirability of the case, the work and ability of counsel, the results obtained, customary fees and awards in other cases, and the contingent nature of the fee. Id. Of the Johnson factors that Pierce did not consider, the time and labor required would determine the number of hours to award fees on, but would be of too broad and general application to use as special factors. The preclusion of other employment and the time limitations imposed are also probably too general to consider. As for experience and skills, Pierce requires "some distinctive knowledge or specialized skill needful for the litigation in question as opposed to an extraordinary level of the general lawyerly knowledge and ability useful in all litigation. Examples of the former would be an identifiable practice specialty such as patent law, or knowledge of foreign law or language." Id. While bankruptcy can be a specialty and is a distinct field of the law, all cases will involve skill in some area of the law. It is not the "identifiable practice specialty" that patent law is. The statute requires "limited availability of qualified attorneys for the proceedings involved." With the fairly strict standards set by the Supreme Court of "qualified for the proceedings involved in some specialized sense, rather than just in their general legal competence," this Court is not convinced that availability of qualified bankruptcy attorneys was limited.
The cost of living adjustment to $75.00 an hour is measured from the original enactment date of EAJA in 1981. Baker v. Bowen, 839 F.2d 1075, 1084 (5th Cir. 1988). Cost of living evidence can be presented by using the Consumer Price Index published by the Bureau of Labor Statistics. See Garcia v. Schweiker, 829 F.2d 396, 401 (3d Cir.1987); Faulkner v. *635 Bowen, 673 F. Supp. 1549, 1551 (D.Or.1987). The Trustee presented no evidence of an increase in the cost of living, except for a statement that the cost of living had obviously increased since 1981. This is not enough to justify an award at a higher rate than the statutory cap. Section 2412(d)(2)(A) does not require an adjustment for cost of living. Baker at 1084. A footnote in Norman suggests that the Court should not allow an applicant to supplement his fee application after hearing. Norman at 1303. The Court therefore holds that the appropriate rate in this case is $75.00 per hour.
The United States has objected that the trustee's fee application is inadequate. It objects that hours are undocumented and unsubstantiated, that there is duplication of hours, that fees are too high for travel and administrative matters, that the rate requested is too high, and that it is not itemized as to issues on which the trustee prevailed. The Court has determined that the rate will be limited to $75.00 per hour. The fee applicant bears the burden of establishing his entitlement to an award and of documenting the hours expended. Hensley v. Eckerhart 461 U.S. at 437, 103 S. Ct. at 1941.
Bankruptcy Rule 2016 sets forth the requirements for bankruptcy fee awards from the estate. It requires "an application setting forth a detailed statement of (1) the services rendered, time expended and expenses incurred, and (2) the amounts requested." The applicant must exclude excessive, redundant and otherwise unnecessary hours from the amount claimed. Hensley at 434, 103 S. Ct. at 1939-40; Norman at 1301. The Eleventh Circuit Court of Appeals in In re Beverly Mfg. Corp. required a statement which recites the number of hours worked and contains a description of how each of those hours was spent. Entries must not "lump" together different services in one time period. The descriptions of work done must be specific. In re Beverly Mfg. Corp., 841 F.2d 365, 370 (11th Cir.1988).
Fees may not be awarded for work on unsuccessful, unrelated claims. Hensley 461 U.S. at 435, 103 S. Ct. at 1940. However, where "the lawsuit cannot be viewed as a series of discreet claims", and the issues are intertwined, the attorneys should be fully compensated for their work on the case as a whole. Haitian Refugee Center at 1500. The original claims in this case were not unrelated and were all based on the allegedly unreasonable actions of FMHA. Under these circumstances, the Court does not find that it is necessary to reduce the award for unsuccessful claims.
No double recovery will be permitted and any award under EAJA must be used to reimburse the estate up to the amount previously awarded. Watford v. Heckler, 765 F.2d 1562, 1566 (11th Cir. 1985). Fees or time spent on the fee application and fee litigation may be awarded. Trichilo v. Secretary of H.H.S., 823 F.2d 702, 708 (2d Cir.1987); Haitian Refugee Center v. Meese, 791 F.2d 1489, 1500 (11th Cir.1986).[2] The Trustee agrees that no fees may be awarded for hours worked by the attorney whose employment was not authorized under Bankruptcy Rule 2014, Walter Van Heiningen. With a rate of $75.00 per hour, the Court does not feel that it needs to reduce fees for travel time. The statute specifically allows expenses to be awarded: "a court shall award to a prevailing party . . . fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action" § 2412(d)(1)(A). Mr. Gower and Mr. Loftiss have submitted no evidence of expenses. Mr. Ward included his expenses in his affidavit, so he may be awarded expenses as approved by the Court.
Where an inadequate fee application is submitted, a Court is permitted to deny the application for fees entirely. Beverly Mfg. at 371. The Court may attempt to identify specific hours that should be *636 eliminated, or it may simply reduce the award. See Hensley 461 U.S. at 436-37, 103 S. Ct. at 1941. The Court is not permitted to allow counsel to supplement the inadequate fee application after the hearing. Norman at 1303. The Court agrees with the United States that many hours in the fee applications are undocumented and unsubstantiated. All three affidavits lump together several items in a single entry. Entries are not detailed as to "the specific nature of each service performed and its relation to the Bankruptcy proceeding." Beverly Mfg. at 370. The Court cannot determine from the affidavits if there has been duplication, if hours were reasonably spent, or even if they were spent on this adversary proceeding. At the hearing on these fee applications, however, extensive testimony was given on the reasonableness and purpose of hours expended. Specific items were questioned and explained.
As to Mr. Gower's application, the Court is satisfied that all hours listed were reasonably spent on this case. Mr. Gower in testimony explained many of his entries. The number of hours listed are reasonable for all the litigation and appeals involved in this case, the years the case has been pending, and the results obtained. The Court has compared all three affidavits with the hours listed in the earlier interim fee application, and it is satisfied that Mr. Gower has included no hours in this fee application having to do with the other adversary proceedings and other matters involved in this case. The Court will therefore award to Mr. Gower fees for all hours listed at $75.00 per hour.
There are other problems with the affidavits submitted by Mr. Loftiss and Mr. Ward. They have apparently included hours that were actually spent on other aspects of the debtor's case. With the general lack of detail, it is impossible for the Court to determine specifically which hours were spent on the litigation with FMHA. There are some entries on each application that specifically say that time was spent on other cases. Examples in Mr. Loftiss' affidavit include an entry on July 17, 1982 of one and one-half hours on "review of Ford Motor Credit case", and an entry on August 6, 1984 of three-tenths of an hour for "telephone conversation from Jeff Loftiss in Columbus to Walter Van Heiningen in Thomasville re: Pippin and Rodenberry cases." Mr. Ward's affidavit includes an entry on August 30, 1983 for 8.5 hours of "travel to Columbus 160 × .20" and "conf. Charles Gower to file two law suits against Pippin and Rodenberry." Both applications attribute all telephone calls from the interim fee application that do not list a subject matter to the litigation with FMHA. Mr. Loftiss' affidavit on page 16 is a copy of a page from the interim fee application with some entries blanked out. All entries on that page in the interim fee application that list a subject matter indicate that they had to do with the Pippin and Rodenberry cases. The Court's docket sheet shows that the activities in the Davis case at that time had to do with the Pippin and Rodenberry adversary proceedings. However, all telephone conversations entries from that page of the interim fee application were included in the fee application for fees under EAJA. Most of the pages in Mr. Loftiss' interim fee application were transferred directly without subtractions into this fee application. Mr. Loftiss' application also includes entries that say they are for time spent by Walter Van Heiningen, who is not authorized as an attorney for the trustee in this case. Examples are on pages 8 and 10 of Mr. Loftiss' affidavit. The Court has no way of knowing how many other hours in this fee application were actually expended by Mr. Van Heiningen. Of 579.2 hours in the interim fee application Mr. Loftiss' claims to have spent 483.9 hours on FMHA litigation, calculated through February 13, 1986, even though there were six other adversary proceedings in this case, two of which also involved appeals.
Mr. Ward's interim fee application ostensibly removed hours not related to the litigation with FMHA. His original EAJA application included entries from other cases with the hours bracketed and subtracted out. The interim fee application, for reasons unknown to the Court, blanked out those bracketed hours and requested *637 fees only for the hours listed as related to FMHA. This fee application once again lists the entries on other cases with the hours bracketed out. However, the application does not actually exclude all hours related to other cases. Mr. Ward's interim fee application claims that of 731.1 total hours, 691.13 were spent on the FMHA litigation. Mr. Ward's affidavit includes several entries that say they are related to the other cases. Page 28 includes 1.5 hours reviewing the record in Pippin on the day before the Pippin pre-trial conference. The pre-trial itself was subtracted out, but the review of the record was not. Most pages have no subtractions for work on other cases at all. Most entries, especially the telephone calls, do not list the subject matter at all, so that the Court cannot determine which hours were actually spent on the litigation with FMHA. The problems are the same with his entries for expenses.
Under the authority of Beverly Manufacturing, the Court could deny the awards altogether to these two attorneys. Beverly Mfg. at 371. However, this would mainly serve to penalize the estate and to provide a windfall to FMHA. A large number of the hours listed in the fee application obviously were spent on the FMHA case. The Court therefore has gone over the fee applications and will award fees only for hours clearly spent on the FMHA case. These include entries that specifically mention FMHA or its attorneys, hours on activities such as hearings or preparations for filing of items like motions that the Court's docket sheet shows were on FMHA matters, and all time spent on the case after the last other adversary proceeding was concluded on January 10, 1986. Most of the entries subtracted are several pages of entries telephone calls with no subject matter listed.
Mr. Ward's expenses are treated the same way. Only expenses clearly related to this case are included in the Court's award. Some of the travel expenses and most of the long-distance telephone calls are excluded because the Court cannot determine if they are for work on the FMHA case. Some of his entries as listed would seem to involve no expense, such as $175.00 on January 2, 1982 for a conference "re records." There is no mention of travel involved. Expenses like these have not been included. He has also included expenses that are listed next to hours he bracketed and subtracted; examples are on pages 23 and 24 of his affidavit.
The amounts to be awarded are calculated as follows:
Charles A. Gower:
812.35 hours on FMHA
× 75.00
_______
$60,926.25 EAJA fee award
previous fee award: $60,000.00
hours up to hearing on interim fee
award
(entries through 1/31/86): 1160.34
hours on FMHA through 1/31/86
(last entry 9/2/85): 593.35
593 divided by 1160.34 = .5113 (percentage
of time on FMHA)
$60,000.00
× .5113
__________
$30,678.00
$30,678.00 of the EAJA fee award goes
into the estate to reimburse it for the
time in the first fee award spent on the
FMHA litigation. This prevents a double
recovery.
$30,248.25 of the EAJA fee award goes
to Mr. Gower for time spent on the
FMHA litigation that has not yet been
reimbursed.
T. Jefferson Loftiss II:
FMHA hours claimed: 539.9
FMHA hours allowed: 337.3
337.3 hours on FMHA
× 75.00
_______
$25,297.50 EAJA fee award
interim fee award: $23,000.00
hours up to hearing on interim fee award
(entries through 2/13/86): 579.2
allowed hours on FMHA through
2/13/86: 281.3
281.3 divided by 579.2 = .4856 (percentage
of time on FMHA)
$23,000.00
× .4856
__________
$11,168.80
$11,168.80 of the EAJA fee award goes
into the estate to reimburse it for the
time in the first fee award spent on the
FMHA litigation. $14,128.70 goes to Mr.
*638
Loftiss for time spent on the FMHA litigation
that has not yet been reimbursed.
J. Patrick Ward:
hours claimed on FMHA: 747.73
hours on FMHA allowed: 352.2
352.2 hours on FMHA
× 75.00
_______
$26,415.00 EAJA fee award
expenses claimed on FMHA: $ 2,422.15
expenses on FMHA allowed: $ 631.56
interim fee award: $30,000.00
hours up to hearing on interim fee award
(entries through 3/14/86): 691.13
(Since only FMHA entries were
shown on the applications, the Court
based its interim fee award only on
the FMHA total shown, not on the
total hours shown.)
allowed hours on FMHA through
3/14/86: 321.5
321.5 divided by 691.13 = .4652
(percentage of time on FMHA)
$30,000.00
× .4652
__________
$13,956.00
$13,956.00 of the EAJA fee award goes
into the estate to reimburse it for the
time spent on the FMHA litigation.
$12,459.00 goes to Mr. Ward for time
spent on the FMHA litigation that has
not yet been reimbursed along with the
award of $631.56 for expenses.
Accordingly, the Court finds that the attorneys for the trustee are entitled to an award of fees under 28 U.S.C. § 2412(d). The Court has determined that Charles A. Gower is entitled to an award of $60,926.25, T. Jefferson Loftiss, II is entitled to an award of $25,297.50, and J. Patrick Ward is entitled to an award of $26,415.00 for fees and $631.56 for expenses. The applicants are hereby awarded attorneys fees in the amount of $112,638.75 and expenses in the amount of $631.56, to be paid by the United States.
An Order in accordance with this opinion will be entered separately.
NOTES
[1] Duncan v. Poythress was decided under 42 U.S.C. § 1988, but the standards for fee applications are the same as in 28 U.S.C. § 2412. Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S. Ct. 1933, 1939, 76 L. Ed. 2d 40 (1983).
[2] "Fees for fees" were not awarded in Haitian Refugee Center under the circumstances of that particular case, but the Court did not hold that they would be denied in all cases. Haitian Refugee Center v. Meese, 804 F.2d 1573, 1574 (11th Cir.1986). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857939/ | Bordelon v. Herring
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-138-CV
JERRY AND JOYCE BORDELON,
APPELLANTS
vs.
CHARLES F. HERRING, ET AL.,
APPELLEES
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
NO. 451,347-A, HONORABLE PAUL R. DAVIS, JR., JUDGE PRESIDING
Jerry Bordelon and Joyce Bordelon ("the Bordelons") brought suit against Charles
F. Herring, Felder Thornhill, A.C. Bryant, R. Frank Siddons, Jr., Joe E. Simpson, Everett D.
Bohls, N.C.N.B. Austin, as Independent Executor of the Estate of Joe M. Teague, B. Clary
Bates, Ralph E. James, Jr., and Leon Stone, ("appellees") alleging fraudulent transfer of corporate
assets. The district court granted summary judgment in favor of appellees and this appeal
followed. We affirm the judgment of the district court.
THE CONTROVERSY
Appellees are shareholders of Austin Enterprises, Inc. ("the corporation"). The
appellants, the Bordelons, are judgment creditors of the corporation. In 1986, apparently due to
insolvency, the corporation sold its corporate assets for $900,000 to a partnership known as
Austin Enterprises ("the partnership"). The members of this partnership were also the shareholders of the corporation. The money from this sale was used to pay valid creditors of the
corporation. It is this sales transaction which forms the crux of the present controversy.
The Bordelons sued the corporation and each individual shareholder claiming that
the 1986 sale of corporate assets was a fraudulent conveyance. The Bordelons' original petition
set forth the grounds of relief as follows:
Defendants are shareholders of Austin Enterprises, Inc. On or about July 28,
1986, at a time when Plaintiffs were existing creditors of Austin Enterprises, Inc.,
Defendants caused all or virtually all of the assets of Austin Enterprises, Inc. to be
transferred to themselves, in return for inadequate consideration. Such transfer
was fraudulent as to Plaintiffs. In addition, Defendants effectively denuded Austin
Enterprises, Inc. of its assets, rendering them liable to Plaintiffs as creditors of
Austin Enterprises, Inc.
Appellees answered the petition with a general denial and subsequently filed a
motion for summary judgment. In support of the motion, appellees filed an uncontroverted
affidavit from Charles F. Herring, the corporation's president. The affidavit stated that the
$900,000 the partnership paid for the corporate assets was substantially more than the assets were
worth. It further stated that the purpose of the sale was to pay existing creditors, that all proceeds
went to creditors for debts due and owing, and that no proceeds were paid to any shareholders,
officers or directors of the corporation.
In response to appellees' motion and affidavit, the Bordelons did not file
controverting or opposing affidavits; instead, they merely argued that the stated value of the
transferred corporate property was a fact question which could not be properly disposed of by
summary judgment. After hearing oral arguments, the trial court granted appellees' motion for
summary judgment.
The Bordelons subsequently filed a motion for rehearing in which they singularly
argued that fact questions existed as to the valuation of the transferred assets. The Bordelons did
not raise other arguments. The district court denied the motion for rehearing. Next, upon proper
motion by appellees, the trial court severed the claims against the shareholders from the claims
against the corporation. This severance, along with the summary judgment, disposed of all claims
against the individual shareholders and judgment became final. The Bordelons responded by filing
a motion for new trial. In the motion for new trial, the Bordelons once again argued only the single point that fact questions existed in the summary judgment evidence.
The Bordelons' motion for new trial was overruled by operation of law.
The Bordelons have now perfected this appeal. In a single point of error, they
argue that the district court erred in granting appellees' motion for summary judgment because
the summary judgment proof did not establish, as a matter of law, that appellees are not liable to
the Bordelons under any theory pleaded in the Bordelons' petition.
DISCUSSION AND HOLDING
The Bordelons' pleading alleged that the transferred assets were undervalued. In
response, appellees offered an affidavit which stated that the assets were not undervalued but
were, in fact, overvalued. The Bordelons presented no summary judgment evidence to controvert
this affidavit or to create a fact question as to the valuation of the assets.
A trial court should grant a motion for summary judgment only if the movant
establishes by competent summary judgment evidence that there is no genuine issue of material
fact to be decided and that the movant is therefore entitled to judgment as a matter of law. Nixon
v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex. 1985). Further, a summary
judgment may be based on uncontroverted testimonial evidence even of an interested witness if
the evidence is clear, positive and direct, otherwise credible and free from contradictions and
inconsistencies, and could have been readily controverted. Tex. R. Civ. P. Ann. 166a(c) (Supp.
1992); see also Anderson v. Snider, 808 S.W.2d 54, 55 (Tex. 1991); Watkins v. Hammerman &
Gainer, 814 S.W.2d 867, 869-70 (Tex. App. 1991, no writ).
We hold that the affidavit appellees offered was clear, did not contain
contradictions, and could have been readily controverted by the Bordelons. In this regard,
appellees' evidence is sufficient as a matter of law to support a summary judgment and to dispose
of the Bordelons' claim that the transferred assets were undervalued.
The Bordelons assert for the first time on appeal a new theory to attack the
summary judgment. (1) They now contend that the transaction was fraudulent because it was performed to hinder, delay or defraud them as creditors. They assert that appellees' summary
judgment evidence did not dispose of this theory of recovery. The Bordelons contend that,
although this theory was not specifically pleaded, appellees were on notice of this theory because
of the broad language of the Bordelons' petition. Further, they assert that it was appellees' burden
on summary judgment to dispose of any theory fairly presented by the pleading.
The Bordelons did not raise the theory of fraudulent transfer based upon an intent
to hinder, delay or defraud a creditor in their original response to appellees' motion for summary
judgment, in their supplemental response to appellees' motion for summary judgment, in their
motion for rehearing, or in their motion for new trial. This theory is being urged for the first time
on appeal to this Court.
Issues not expressly presented to the trial court by written motion, answer or other
response shall not be considered on appeal as grounds for reversal. Tex. R. Civ. P. Ann. 166a(c)
(Supp. 1992); see also City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 676-77
(Tex. 1979). The Bordelons never expressly presented to the trial court the theory that appellees'
transfer of assets from the corporation to the partnership was fraudulent because of an intent to
hinder, delay or defraud the Bordelons. Consequently, the Bordelons have waived this issue and
we cannot address the merits of such a claim. The Bordelons' sole point of error is overruled.
We affirm the judgment of the district court.
Mack Kidd, Justice
[Before Chief Justice Carroll, Justices Aboussie and Kidd]
Affirmed
Filed: April 1, 1992
[Do Not Publish]
1. Two theories of recovery for fraudulent transfer were available to the Bordelons: (1) a
transfer made for inadequate consideration, 1967 Tex. Gen. Laws, ch. 785, sec. 1, § 24.03,
at 2598 (originally codified at Tex. Bus. & Com. Code Ann. § 24.03 (since repealed)); and (2)
a transfer made with the intent to delay, hinder, or defraud a creditor, 1967 Tex. Gen. Laws,
ch. 785, sec. 1, § 24.02, at 2598 (originally codified at Tex. Bus. & Com. Code Ann. § 24.02
(since repealed)). Until this appeal, the Bordelons consistently sought recovery solely on the
grounds of inadequate consideration. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2857946/ | IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-352-CR
JORGE Y. TREVINO,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF BASTROP COUNTY, 21ST JUDICIAL DISTRICT
NO. 7396, HONORABLE H. R. TOWSLEE, JUDGE PRESIDING
Appeal is taken from a conviction for sexual assault. See Tex. Penal Code Ann.
§ 22.011 (Supp. 1992). Trial was before the court upon a plea of not guilty. Punishment was
assessed at ten years' confinement.
Appellant asserts three points of error. In his first and second points of error,
appellant contends the court erred in overruling his objection to the admission of an extraneous
offense. In his third point of error, appellant asserts that the evidence is insufficient to prove that
his act was accomplished by the use of "threats, force and violence." We overrule appellant's
points of error and affirm the judgment of the trial court.
Appellant's third point of error, directed to the lack of sufficient evidence to
support a finding that his act was accomplished by "threats, force and violence," is addressed at the outset with the belief that a review of the evidence may lend clarity to our analysis of the
other points of error.
The victim, a Mexican national who does not speak English, was employed as a
domestic for appellant and his common-law wife in their home near Elgin. On April 3, 1990, the
victim received a telephone call from her cousins that they were coming to pick her up that night
and take her to Dallas for a visit with relatives. In response to an inquiry for directions in
reaching her place of employment, appellant took the telephone and advised the victim's cousins
that he would drive her to a store in Elgin.
Upon appellant and the victim arriving at the designated store in Elgin that night,
and determining that the cousins had not arrived, appellant continued driving. Appellant told the
victim that he saw a car that "he thought was immigration" and "took off on a little dirt road."
Appellant said they should stop since "somebody might have reported us to immigration." The
victim testified that appellant told her that he "was going to do as he pleased with me . . . he was
screaming at me loud." Despite the victim's efforts "to wrestle to keep them on . . . he ended up
taking [the pants] off." Victim related that appellant "forced" her undergarments off. The victim
"struggled" with appellant, who told her that he would "tear her legs apart" and drew his hand
back "as if to hit her." Prior to penetrating the victim's vagina with his penis, victim cried and
screamed to appellant to leave her alone. Appellant told the victim that he would "leave me there
without my clothes" and threatened her with immigration officials. Appellant testified that the
victim's account of what happened was untrue and that he had never made sexual advances toward
her.
Dr. John Moskow examined the victim in the Seton Hospital emergency room in
Austin "about sixty hours" after the occasion in question. Dr. Moskow's examination revealed
a recent tear at the base of the vagina that had not healed and that "her hymen had recently been
torn." Abrasions and scratches outside the lips of the vagina were compatible with a traumatic
entry. Dr. Moskow concluded that his findings were consistent with victim's allegations that she
had been sexually assaulted sixty hours earlier.
Sexual assault is without the consent of the other person if: "(1) the action compels
the other person to submit or participate by the use of physical force or violence; [or] (2) the actor
compels the other person to submit or participate by threatening to use force or violence against
the other person, and the other person believes the actor has the present ability to execute the
threat." Tex. Penal Code Ann. § 22.011(b)(1) and (2) (Supp. 1992).
The victim was threatened with being left on a country road without clothes and
reported to immigration authorities. Her fear of being left on a country road under these
circumstances was undoubtedly amplified by her inability to speak English and the fact that it was
about the middle of the night. Appellant screamed at the victim, told her he was going to do as
he pleased with her, threatened her by stating that he would "tear her legs apart" and by drawing
his hand back as if to strike her. The victim "struggled" and "wrestled" with appellant before he
forced her undergarments off. Medical testimony reflected that an examination revealed injuries
that were consistent with a sexual assault.
The court, as the exclusive judge of the facts, had the opportunity to observe the
victim carefully, to hear the fear projected from her, and to evaluate the credibility of her
testimony. See Hernandez v. State, 804 S.W.2d 168, 170 (Tex. App. 1991, pet. ref'd). We
conclude that a rational trier of fact could find beyond a reasonable doubt that appellant's act was
accompanied by the use of threats, force and violence sufficient to compel a reasonable person in
the victim's circumstances to submit to appellant's sexual advances. Appellant's third point of
error is overruled.
In point of error number one, appellant asserts the court erred in overruling his
objection to the admission of an extraneous offense contrary to the provisions of Tex. R. Crim.
Evid. Ann. 401 and 404 (Pamph. 1992). (1)
Appellant complains of the court's action in allowing the prosecutor, over
appellant's objection, to cross-examine appellant's common-law wife about appellant's entering
a plea of guilty to the offense of indecency with a child alleged to have been committed on her
sister's child. The witness testified on direct that she had accompanied appellant and the victim
on the occasion in question and that none of the victim's testimony regarding the sexual assault
was true. In response to a question from defense counsel as to whether she would lie to keep her
husband out of the penitentiary, the witness responded that she would not live with a rapist and
"he's not that kind of person." The State urges that this testimony opened the door for the
prosecutor to test her credibility with questions about the extraneous offense.
"When a cause is tried before the court and there is nothing to show that the
judgment was based upon inadmissible evidence, . . . it will be presumed that the trial judge
disregarded incompetent evidence admitted at trial and the judgment will not be reversed on
appeal . . . if sufficient admissible evidence was admitted to sustain the judgment." Arnold v.
State, 277 S.W.2d 106, 107 (Tex. Crim. App. 1955). In a more recent case, Deason v. State,
786 S.W.2d 711, 713 (Tex. Crim. App. 1990), the court stated, "even if improperly admitted
evidence is considered by the trial court [without a jury], a reversal of a conviction will not be
necessary if other admissible sufficient evidence is admitted to sustain the judgment."
The trial being before the court in the instant cause, and the testimony of the victim
and the doctor being sufficient to sustain the conviction, we need not determine whether evidence
of the extraneous offense was admissible. Appellant's point of error number one is overruled.
In his second point of error, appellant contends that the court erred in overruling
his objection to the admission of evidence complained of in point of error number one because it
was not admissible under Texas R. Crim. Evid. Ann. 403 (Pamph. 1992). (2)
We find our disposition of appellant's point of error number one dispositive of this
contention. Appellant's second point of error is overruled.
The judgment is affirmed.
Tom G. Davis, Justice
[Before Justices Jones, Kidd and Davis*]
Affirmed
Filed: March 25, 1992
[Do Not Publish]
* Before Tom G. Davis, Judge (retired), Court of Criminal Appeals, sitting by assignment.
See Tex. Gov't Code Ann. § 74.003(b) (1988).
1. Rule 401 defines "relevant evidence" and Rule 404 concerns the admissibility of
character evidence.
2. Rule 403 concerns instances when relevant evidence may be excluded such as when its
probative value is substantially outweighed by the danger of unfair prejudice.
No problem is presented by virtue of the court's considering the fact that appellant
was placed on deferred adjudication for the indecency with a child offense (even though the
court may have dismissed the proceedings) at the punishment phase of the trial. See Tex.
Code Crim. Proc. Ann. art. 42.12(5)(c)(1) (Supp. 1992). | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1549013/ | 992 A.2d 725 (2010)
Charles KALIL and another
v.
TOWN OF DUMMER ZONING BOARD OF ADJUSTMENT.
Charles Kalil and another
v.
Town of Dummer.
Nos. 2009-017, 2009-018.
Supreme Court of New Hampshire.
Argued: September 24, 2009.
Opinion Issued: February 11, 2010.
*727 Cooper Cargill Chant, P.A., of North Conway (Randall F. Cooper on the brief and orally), for the plaintiffs.
Gallagher, Callahan & Gartrell, P.C., of Concord (R. Matthew Cairns and Erik G. Moskowitz on the brief, and Mr. Cairns orally), and Gardner, Fuller & Waugh, of Lebanon (H. Bernard Waugh on the brief), for the defendants.
DALIANIS, J.
In these consolidated appeals, the plaintiffs, Charles and Brenda Kalil, contest two orders of the Superior Court (Vaughan, J.). In one, the court granted the motion to dismiss filed by defendant Town of Dummer (Town) on the ground that res judicata barred the plaintiffs' writ alleging an inverse condemnation claim. In the other, the court denied the plaintiffs' motion to amend their appeal of the denial of their variance request to add an inverse condemnation claim. We affirm.
This is the second appeal involving the plaintiffs' land in Dummer. See Kalil v. Town of Dummer Zoning Bd. of Adjustment, 155 N.H. 307, 922 A.2d 672 (2007). The following facts are taken from Kalil, or are evidenced in the record.
The plaintiffs own land located in both the Town's conservation and conservation overlay zones. Kalil, 155 N.H. at 309, 922 A.2d 672. In 2004, they applied for building permits to construct a barn, a bird barn with flying pen, and a farmhouse. Id. When this application was denied, they appealed to defendant Town of Dummer Zoning Board of Adjustment (ZBA), and, at the same time, sought a variance from the ZBA to construct a fish and game farm that would include the barn, bird barn and farmhouse. Id. After a hearing, the ZBA denied both the building permit appeal and the plaintiffs' request for a variance. Id. The plaintiffs appealed to superior court, which ruled that the ZBA's decision was "under developed," and, therefore, remanded the matter to the ZBA for further proceedings. Id.
We affirmed the superior court's decision to remand the variance request to the ZBA for it to clarify its decision based upon the pre-existing record. Id. at 312-13, 922 A.2d 672. We remanded the building permit appeal to the superior court for it to "either address the merits of the issues surrounding the building permits or explain why it is reserving its decision upon those issues." Id. at 313, 922 A.2d 672.
Upon remand, the trial court ruled that the building permits were properly denied. Upon review of the ZBA's report clarifying its earlier decision to deny the plaintiffs' variance request, the trial court affirmed the ZBA's decision. The plaintiffs moved for reconsideration, arguing that, without a variance, they "will be substantially deprived of the economically viable use of their land." See Burrows v. City of Keene, 121 N.H. 590, 598, 432 A.2d 15 (1981). The trial court denied the plaintiffs' motion. The plaintiffs did not appeal.
Shortly thereafter, the plaintiffs filed a new writ, seeking damages for alleged inverse condemnation arising from the ZBA's denial of their variance request. The Town raised res judicata as a defense *728 in its summary statement, filed August 8, 2008, but failed to raise it as a defense in its July 23, 2008 brief statement of defenses. In response to the plaintiffs' motion to preclude res judicata as a defense, the Town moved to amend its brief statement of defenses, which the trial court granted. Thereafter, the Town moved to dismiss the plaintiffs' new writ on res judicata grounds.
In October 2008, before the court had ruled upon the Town's motion to dismiss, the plaintiffs moved to amend their original appeal of the ZBA's variance decision to add an inverse condemnation claim. The trial court granted the Town's motion to dismiss and denied the plaintiffs' motion to amend. These consolidated appeals followed.
The plaintiffs first argue that the trial court erred by allowing the Town to raise res judicata as an affirmative defense. Relying upon Superior Court Rule 28, they assert that "as of July 31, 2008, the defendant, through its attorneys, had actual notice of [the] defense of res judicata and failed to file in a timely manner [a pleading that raised] that affirmative defense, thereby waiving the same as a matter of law."
Superior Court Rule 28 provides:
All special pleas and brief statements shall be filed within thirty days following the return date of the writ; otherwise the cause shall be tried upon the general issue. Failure to plead affirmative defenses, including the statute of limitations, within this time will constitute waiver of such defenses. No brief statement or special plea shall be afterwards received except by leave of court as justice may require.
Here, the plaintiffs' writ was returnable on the first Tuesday of July 2008. Within thirty days of this period, the Town filed its brief statement of defenses, but neglected to include res judicata as an affirmative defense. Eight days after the thirty-day period expired, however, the Town raised res judicata as a defense and, thereafter, sought leave to amend its statement of defenses to include this defense.
Although pursuant to the literal terms of Superior Court Rule 28, the Town may have waived its affirmative defense of res judicata, Superior Court Rule 28 grants the trial court authority to allow late filing of such a defense "as justice may require." Additionally, under the Preface to the Superior Court Rules, the trial court may waive the application of any rule "[a]s good cause appears and as justice may require." See RSA 514:9 (2007) ("Amendments in matters of substance may be permitted in any action, in any stage of the proceedings, upon such terms as the court shall deem just and reasonable, when it shall appear to the court that it is necessary for the prevention of injustice."). Accordingly, the question before us is whether the trial court erred when it determined that justice required allowing the Town to amend its brief statement of defenses.
Amendment of pleadings is liberally permitted, and the decision to grant or deny a motion to amend rests in the sound discretion of the trial court. Dent v. Exeter Hosp., 155 N.H. 787, 796-97, 931 A.2d 1203 (2007); see Attorney General v. Morgan, 132 N.H. 406, 408, 565 A.2d 1072 (1989). We will not overturn that decision unless it is an unsustainable exercise of discretion. Dent, 155 N.H. at 797, 931 A.2d 1203. The party asserting that a trial court's order is unsustainable must demonstrate that the ruling was unreasonable or untenable to the prejudice of its case. Foley v. Wheelock, 157 N.H. 329, 332, 950 A.2d 178 (2008).
Given our emphasis upon justice over procedural technicalities, see Whitaker v. *729 L.A. Drew, 149 N.H. 55, 59, 816 A.2d 984 (2003), we are unable to conclude that the trial court unsustainably exercised its discretion by allowing the Town to amend its brief statement. The record reveals that on August 8, 2008, only eight days after the thirty-day period expired, the Town alerted the plaintiffs to its intent to raise res judicata as an affirmative defense. The plaintiffs have failed to demonstrate any prejudice resulting from this brief delay. Under these circumstances, the trial court reasonably could have determined that justice required allowing the Town to amend its brief statement.
The plaintiffs next assert that the trial court erroneously denied their motion to amend their original appeal of the ZBA's denial of their variance request to add an inverse condemnation claim. We find no error in the trial court's decision.
The plaintiffs sought to amend their original appeal of the ZBA's denial of their variance long after the trial court's decision in the appeal had become a final judgment on the merits. The trial court issued its final order in the ZBA appeal on April 15, 2008. This order became a final judgment thirty-one days later. See Super. Ct. R. 74. The plaintiffs, however, did not move to amend their appeal until nearly six months after the judgment became final. By that time, "the trial court's power to allow amendment ... [had] ceased." Arsenault v. Scanlon, 139 N.H. 592, 594, 660 A.2d 1110 (1995). Accordingly, its denial of the plaintiffs' motion to amend their original appeal was not an unsustainable exercise of discretion.
The plaintiffs next contend that the trial court erred when it dismissed their new writ on res judicata grounds. "The applicability of res judicata is a question of law that we review de novo." Sleeper v. Hoban Family P'ship, 157 N.H. 530, 533, 955 A.2d 879 (2008). "Res judicata precludes the litigation in a later case of matters actually decided, and matters that could have been litigated, in an earlier action between the same parties for the same cause of action." Id. The doctrine applies when three elements are met: "(1) the parties must be the same or in privity with one another; (2) the same cause of action must be before the court in both instances; and (3) a final judgment on the merits must have been rendered in the first action." Id. The plaintiffs argue that res judicata does not apply because their appeal from the denial of a variance request is not the same cause of action as their inverse condemnation claim.
The plaintiffs acknowledge that in Shepherd v. Town of Westmoreland, 130 N.H. 542, 544, 543 A.2d 922 (1988), we squarely addressed this issue. There, the plaintiff appealed a zoning board's denial of a variance, and the superior court upheld the board's decision. Shepherd, 130 N.H. at 543, 543 A.2d 922. The plaintiff did not appeal the ruling of the superior court, but instead filed a petition for declaratory judgment, "alleging that the zoning ordinance [was] unconstitutional as applied to her and that the denial of a variance amounted to an inverse condemnation of her land." Id. The defendant argued that because the plaintiff had the opportunity, but failed to litigate her inverse condemnation claim on appeal of the zoning board's denial of her variance request, she was precluded from raising this claim in the present petition. Id. at 544, 543 A.2d 922. We agreed. Id. at 544-45, 543 A.2d 922.
In addressing whether res judicata barred the plaintiff's inverse condemnation claim, we relied upon Eastern Marine Construction Corp. v. First Southern Leasing, 129 N.H. 270, 274, 275, 525 A.2d 709 (1987), in which we embraced the modern trend "to define cause of action collectively to refer to all theories on which *730 relief could be claimed on the basis of the factual transaction in question," and "reject[ed] the view that the term is synonymous with the particular legal theory in which a party's claim for relief is framed." See Sleeper, 157 N.H. at 534, 955 A.2d 879; Restatement (Second) of Judgments § 24 comment a at 197 (1982). Based upon this definition of "cause of action," we concluded that the plaintiff's appeal of the denial of her variance request and her subsequent inverse condemnation claim were the same cause of action for res judicata purposes. Shepherd, 130 N.H. at 544-45, 543 A.2d 922. We explained:
[T]he constitutional and inverse condemnation claims raised by the plaintiff arise out of the same factual transaction as did her previous [appellate] claim for a variance. Indeed, the only fact to be added here is that, having been denied a variance, the plaintiff now contends that that denial constitutes a taking of her property. We have consistently barred such claims when, as here, the subsequent action is so closely related to the earlier action. The fact that the plaintiff attaches a new label to her cause of action is insufficient to remove the bar of the earlier adjudication against her.
Id. at 544, 543 A.2d 922 (citations omitted). Accordingly, we held that to have avoided res judicata as a bar, the plaintiff "should have raised her ... inverse condemnation claim[ ] in her 1984 appeal to the superior court." Id. at 545, 543 A.2d 922.
As the plaintiffs concede, Shepherd is dispositive. Like the claims at issue in Shepherd, the plaintiffs' inverse condemnation claim arises out of the same factual transaction as their prior appeal from the denial of the variance. See id. at 544, 543 A.2d 922. As in Shepherd, the only additional fact is that the plaintiffs now contend that the denial results in an unconstitutional taking of their property. See id. Because the plaintiffs' zoning appeal and inverse condemnation claim arise from the same factual transaction, they constitute the same cause of action for res judicata purposes. See id. The trial court, therefore, did not err when it granted the Town's motion to dismiss on this ground.
The plaintiffs urge us to "revisit" our holding in Shepherd, which necessarily would involve revisiting our holding in Eastern Marine. "We do not lightly overrule a prior opinion." State v. Duran, 158 N.H. 146, 153, 960 A.2d 697 (2008). "The doctrine of stare decisis demands respect in a society governed by the rule of law, for when governing legal standards are open to revision in every case, deciding cases becomes a mere exercise of judicial will with arbitrary and unpredictable results." Jacobs v. Director, N.H. Div. of Motor Vehicles, 149 N.H. 502, 504, 823 A.2d 752 (2003) (quotations omitted). Thus, when asked to reconsider a previous holding, we do not decide the issue de novo; rather, we review "whether the ruling has come to be seen so clearly as error that its enforcement was for that very reason doomed." Id. at 504-05, 823 A.2d 752 (quotation omitted). "While the stability of the law does not require the continuance of recognized error, it does call for settlement of principle and consistency of ruling when due consideration has been given and error is not clearly apparent." Glines v. Maine Central Railroad, 94 N.H. 299, 303, 52 A.2d 298 (1947) (quotation omitted).
Several factors inform our judgment, including: (1) whether the rule has proven to be intolerable simply in defying practical workability; (2) whether the rule is subject to a kind of reliance that would lend a special hardship to the consequences of overruling; (3) whether related principles of law have so far developed as to have left the old rule no more than a *731 remnant of abandoned doctrine; and (4) whether facts have so changed, or come to be seen so differently, as to have robbed the old rule of significant application or justification. Jacobs, 149 N.H. at 504, 823 A.2d 752; see Planned Parenthood of Southeastern Pa. v. Casey, 505 U.S. 833, 854-55, 112 S.Ct. 2791, 120 L.Ed.2d 674 (1992).
None of these factors convinces us that overruling Shepherd expressly and Eastern Marine impliedly is warranted. Our rule is not "abandoned doctrine," but is the rule in the vast majority of jurisdictions as well as the federal courts. Heiser, California's Unpredictable Res Judicata (Claim Preclusion) Doctrine, 35 San Diego L.Rev. 559, 569 n. 27 (1998); see Stanton v. District of Columbia Court of Appeals, 127 F.3d 72, 78 (D.C.Cir.1997); Friedman Prof'l Management v. Norcal Mut., 120 Cal.App.4th 17, 15 Cal.Rptr.3d 359, 366 (2004). At most, only nine jurisdictions do not define a cause of action for res judicata purposes the way we do, as coterminous with the underlying factual transaction. Heiser, supra at 569 n. 27.
Further, our rule is practical and workable. "The substantive efficiency" of defining a cause of action according to the transactional theory "is obvious." Id. at 606. Under such an approach, "a unitary transaction or occurrence ... give[s] rise to only one cause of action which must be pursued in one lawsuit." Id. The transactional approach is also easy to understand and predictable in its application. Id. The approach, as set forth in the Restatement (Second) of Judgments, is precise and well-explained, providing clear guidance to litigants and judges. See id. at 608.
The plaintiffs "make[ ] no argument specifically directed at any of the factors listed above." Hilario v. Reardon, 158 N.H. 56, 63, 960 A.2d 337 (2008). Instead, they merely contend that "strict application" of the rule in Shepherd is "unfair," and requires that we revisit Shepherd "to avoid unfairly barring claims." See id. It is unfair, they argue, to require a landowner to bring an inverse condemnation claim at the same time as an appeal from a denial of a variance request because: (1) the landowner is seeking to vindicate different rights in these claims; (2) the superior court acts as an appellate body when reviewing a zoning board's denial of a variance while it acts as the original fact finder when reviewing an inverse condemnation claim; and (3) the landowner must decide within thirty days after a zoning board has issued its final decision not only whether to appeal the decision, but also whether to pursue an inverse condemnation claim based upon that decision. See Hill-Grant Living Trust v. Kearsarge Lighting Precinct, 159 N.H. 529, ___, 986 A.2d 662 (2009) (holding that a state taking claim is ripe as soon as zoning board has issued its final decision).
We do not, generally, revisit cases merely because of perceived unfairness. In Hilario, we took this extraordinary step only because of the unusual facts in that case. In Hilario, the issue was whether a general rule we had adopted in Mahoney v. Shaheen, Cappiello, Stein & Gordon, P.A., 143 N.H. 491, 727 A.2d 996 (1999), applied to the very specific facts in Hilario. The general rule from Mahoney, 143 N.H. at 496, 727 A.2d 996, is that a criminal defendant must allege and prove actual innocence to prevail on a malpractice claim against a former criminal defense attorney. The question in Hilario was whether, and to what extent, this general rule applied when the alleged legal malpractice occurred after the plea and sentencing, the malpractice claim was unrelated to any strategic or tactical decision relating to the convictions, and the criminal defendant did not argue that, but for his attorney's negligence, *732 he would have obtained a different result in the criminal case. Hilario, 158 N.H. at 66-67, 960 A.2d 337. We concluded that Mahoney was distinguishable from Hilario, and, thus, the rule from Mahoney did not apply. Id. at 63-67, 960 A.2d 337.
By contrast, the issue here is whether this case is governed by a case that is directly on point. Under these circumstances, the alleged "unfairness" of applying Shepherd, a case that is on all fours with the instant case, does not justify revisiting Shepherd.
Even if unfairness, generally, would allow us to revisit Shepherd, we disagree that any of the above is "unfair." As the plaintiffs acknowledge, a trial court faced with both an appeal from the denial of a variance request and an inverse condemnation claim arising from the same factual transaction may bifurcate the proceedings, and decide the non-constitutional claim first. Further, a party often uses different claims to vindicate different rights and obtain different remedies. These differences do not render it "unfair" to treat the claims as the same for res judicata purposes when they arise from the same factual transaction. Under the transactional definition, which we adopted in Eastern Marine and applied in Shepherd, two claims are the same for res judicata purposes "regardless of the number of substantive theories, or variant forms of relief flowing from those theories ...; regardless of the number of primary rights that may have been invaded; and regardless of the variations in the evidence needed to support the theories or rights." Restatement (Second) of Judgments, supra § 24 comment a at 197, § 25; see Sleeper, 157 N.H. at 534, 955 A.2d 879. "The transaction is the basis of the litigative unit or entity which may not be split." Restatement (Second) of Judgments, supra § 24 comment a at 197.
Finally, we see nothing "unfair" in requiring a landowner to decide, within thirty days of a zoning board's final decision, both whether to appeal the decision to the superior court and whether to bring an inverse condemnation claim arising from that decision. Because the issue is not before us in this appeal, we express no opinion as to whether, as the plaintiffs contend, a landowner is required to exhaust administrative remedies by bringing an inverse condemnation claim first to the zoning board before bringing it to the superior court. See Blue Jay Realty Trust v. City of Franklin, 132 N.H. 502, 509, 567 A.2d 188 (1989).
We have reviewed the remainder of the plaintiffs' arguments concerning Shepherd and conclude that they lack merit and warrant no extended discussion. See Vogel v. Vogel, 137 N.H. 321, 322, 627 A.2d 595 (1993). As the plaintiffs have failed to persuade us that Shepherd "has come to be seen so clearly as error that its enforcement was for that very reason doomed," we decline their invitation to overrule it. Jacobs, 149 N.H. at 504-05, 823 A.2d 752 (quotation omitted).
Affirmed.
BRODERICK, C.J., and DUGGAN, HICKS and CONBOY, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549220/ | 140 B.R. 351 (1992)
In re CIS CORPORATION, Continental Information Systems Corp., et al., Debtors.
James P. HASSETT, as Chapter 11 Trustee of CIS Corp., et al., Plaintiffs,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Capitol Bank & Trust Company, Defendants.
No. 89 B10073-10084 (PBA), No. 91 Civ. 8736 (TPG), Adv. No. 91-6372A.
United States District Court, S.D. New York.
May 8, 1992.
*352 Edward S. Cowen, Kirkland & Ellis, New York City, for plaintiffs.
S. Robert Schrager, Kreindler & Relkin, P.C., New York City, for defendants.
OPINION
GRIESA, District Judge.
CIS Corporation and related companies are involved in Chapter 11 proceedings. Plaintiff James P. Hassett is the Chapter 11 Trustee. There is a dispute between CIS and Capitol Bank & Trust Company about whether the bank does or does not have a security interest in certain equipment. The FDIC has been appointed receiver of the Bank. Plaintiff Hassett has sued the FDIC in the Bankruptcy Court seeking a declaratory judgment.
The FDIC has moved in the Bankruptcy Court to dismiss the action on the ground that plaintiff failed to exhaust an administrative remedy provided by a statute known as FIRREA. 12 U.S.C. § 1821(d).
The FDIC has also moved in the District Court to have the Court "withdraw the reference to the Bankruptcy Court." The motion is denied.
The question is governed by 28 U.S.C. § 157(d), which provides:
(d) The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.
The first sentence provides for discretionary withdrawal. The second sentence provides for mandatory withdrawal, when the legal issues require consideration of both the Bankruptcy Code and other federal laws "regulating organizations or activities affecting interstate commerce."
Withdrawal is mandatory only when "substantial and material consideration" of non-bankruptcy statutes is necessary for the resolution of a case or proceeding. In *353 re Ionosphere Clubs, Inc., 922 F.2d 984, 995 (2d Cir.1990). Cf. Wills Motors, Inc. v. Volvo North America Corp., 131 B.R. 263, 268 (S.D.N.Y.1991). Withdrawal is not mandatory in cases that require only the straightforward application of a federal statute to a particular set of facts. In re Chateaugay Corp., 86 B.R. 33, 36 (S.D.N.Y.1987).
Here the underlying proceeding requires consideration of FIRREA only to determine whether the Bankruptcy Court has subject-matter jurisdiction. The issue is whether FIRREA bars the action because of a failure by plaintiff to use the procedures of FIRREA to resolve the claim involved in the suit. If this preliminary question is decided against plaintiff, the court will dismiss the action. If the court decides it has subject matter jurisdiction, it will go on to consider only the Title 11 issues raised in plaintiff's declaratory judgment action.
One district court has held that a jurisdictional issue arising under FIRREA mandates withdrawal from the Bankruptcy Court on the grounds that FIRREA is an important and significant statute and that the jurisdictional issue will be dispositive of the proceeding. In re Mid America Entertainment Plus, Inc., 135 B.R. 419 (D.C.Kan.1991).
This court, however, takes a different view. It is familiar law that a court always has jurisdiction to determine its own jurisdiction. See, e.g., United States v. United Mine Workers of America, 330 U.S. 258, 291-95, 67 S.Ct. 677, 694-97, 91 L.Ed. 884 (1947). It is this court's ruling on the present motion that the jurisdictional issue arising under FIRREA does not mandate withdrawal.
The application of law to fact on the issue of subject-matter jurisdiction is straightforward. To set a precedent providing for the withdrawal of bankruptcy proceedings to a district court whenever this issue arises would work against the purposes of FIRREA itself, which was enacted "to deal expeditiously" with the assets of failed depository institutions. Circle Industries, Division of Nastasi-White, Inc. v. City Federal Savings Bank, 749 F.Supp. 447, 451 (E.D.N.Y.1990); aff'd per curiam, 931 F.2d 7 (2d Cir.1991). The goal of speed would have been better served by a prompt resolution of the motion to dismiss that the FDIC filed in Bankruptcy Court. By moving to withdraw the reference to the Bankruptcy Court, the FDIC has suspended action on its motion to dismiss. The court finds that allowing a bankruptcy court to determine this straightforward issue of subject-matter jurisdiction is warranted both by the statute and by the interests of justice.
SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548836/ | 119 F.2d 500 (1941)
SCHNEIDERMAN
v.
UNITED STATES.
No. 9658.
Circuit Court of Appeals, Ninth Circuit.
April 28, 1941.
*501 Robert W. Kenny, of Los Angeles, Cal., George R. Andersen, Herbert Resner, and George Olshausen, all of San Francisco, Cal., and Abraham Unger, of New York City, for appellant.
Frank J. Hennessy, U. S. Atty., and R. B. McMillan and L. R. Mercado, Assts. U. S. Atty., all of San Francisco, Cal., for appellee.
Before GARRECHT, HANEY, and HEALY, Circuit Judges.
HANEY, Circuit Judge.
Appellant seeks reversal of a judgment cancelling and declaring void a decree of naturalization and certificate granted to appellant.
Appellant was born at Rumanov, Russia, on August 1, 1905, and emigrated with his father to the United States at the age of three, arriving in New York City on September 22, 1908. Appellant filed his declaration of intention to become a citizen of the United States on February 8, 1924, stating therein: "I am not an anarchist." He filed his petition for naturalization on January 18, 1927, in which he stated: "* * * I am not a disbeliever in or opposed to organized government or a member of or affiliated with any organization or body of persons teaching disbelief in or opposed to organized government. * * * I am attached to the principles of the Constitution of the United States * * *".
On June 10, 1927, the proper court found that appellant "had in all respects complied with the Naturalization Laws of the United States, and that he was entitled to be" admitted a citizen of the United States. It ordered that appellant "be admitted as a citizen of the United States of America". Certificate of Naturalization was issued.
On June 20, 1939, an attorney in the Immigration and Naturalization Service, Department of Labor, made an affidavit stating that before he was admitted to citizenship, appellant "declared on oath in open court that he would support the Constitution of the United States, and that he would support and defend the Constitution and laws of the United States against all enemies, foreign and domestic, and bear true faith and allegiance to the same"; that the naturalization of appellant was fraudulently and illegally procured because (a) at the time of filing his petition for naturalization and during the five-year period preceding it, and at the time of his admission to citizenship, appellant "was not attached to the principles of the Constitution of the United States and well disposed to the good order and happiness of the same"; and (b) at the time he took the oath of allegiance, appellant "did not in fact intend to support and defend the Constitution and laws of the United States against all enemies, foreign and domestic, and bear true faith and allegiance to the same"; and that during the period from a date five years prior to the filing of his petition for naturalization to the time of his admission to citizenship, appellant was a member of "the Workers (Communist) Party of America, which organization is opposed to the Government of the United States, and teaches and advocates the overthrow of the Government of the United States by force and violence".
On June 30, 1939, appellee filed a complaint in the court below, alleging the facts stated above, and that appellant had concealed from the court on the hearing of the petition for naturalization the fact of his membership in the party mentioned above and the "Young Workers (Communist) League of America" and believed in and supported the principles of such organizations.
*502 Appellant answered admitting membership in the Communist organizations and alleged, among other things, that such organizations, their principles, tenets, teachings and beliefs were not opposed or contrary to the principles of the Constitution, but supported the Constitution, and that such organizations did not believe in, teach or advocate the overthrow of the government, Constitution or laws of the United States by force and violence, or force or violence or otherwise, or at all.
The trial court held that appellant "by reason of his membership in such organizations and participation in their activities, was not `attached to the principles of the Constitution of the United States, and well disposed to the good order and happiness of the same'" and "obtained his certificate of citizenship illegally". D.C., 33 F.Supp. 510, 513.
The court below found that appellant's certificate of naturalization was illegally procured because he was not at the time of his naturalization, and for five years immediately preceding the filing of his petition had not behaved as, a person attached to the principles of the Constitution of the United States and well disposed to the good order and happiness of the same; that the decree and certificate of naturalization were fraudulently procured because appellant concealed from the court which entered the decree of naturalization the facts that at the time of the hearing of appellant's petition for naturalization, and during the five years immediately preceding the filing of such petition, he was a member of six communist organizations, and believed in and supported the principles of such organizations and of the Third International, of which the six organizations were a section; and that the decree and certificate of naturalization were illegally and fraudulently procured because before his admittance as a citizen, appellant declared on oath in open court that he would support the Constitution of the United States and that he absolutely and entirely renounced and abjured all allegiance and fidelity to any foreign state, whereas in truth and in fact appellant at such times intended to and did maintain allegiance and fidelity to the Union of Soviet Socialist Republics and to the Third International, and intended to adhere to and support and defend the principles of the Third International.
The court below further found that during all the times material herein, the principles of the six organizations and the Third International were opposed to the principles of the Constitution of the United States, and that such organizations advised, advocated and taught the overthrow of the government, Constitution and laws of the United States by force and violence and taught disbelief in and opposition to organized government. Judgment was entered cancelling and declaring void the decree and certificate of naturalization. This appeal followed.
This action was commenced pursuant to 8 U.S.C.A. § 405, which provides in part: "It shall be the duty of the United States district attorneys for the respective districts * * * upon affidavit showing good cause therefor, to institute proceedings in any court having jurisdiction to naturalize aliens * * * for the purpose of setting aside and canceling the certificate of citizenship on the ground of fraud or on the ground that such certificate of citizenship was illegally procured. * * *"
Appellant makes considerable argument to the effect that there was no proof of fraud. It is unnecessary to consider this contention. Cancellation of the certificate of naturalization is authorized by § 405 on the ground of illegality. Appellant concedes the distinction between the two grounds, by saying: "Fraud and illegality are here two entirely separate tests and apply to distinct subject matters". He further says: "To establish illegality, as contrasted with fraud, it is necessary for the Government to show that the alien had failed to comply with all of the statutory prerequisites, or that the Court granting naturalization had similarly deviated from statutory requirements".
Appellant contends that the findings of the court below are not supported by the evidence. We think and hold that the findings of the court below to the effect that the certificate of naturalization was illegally procured, are not clearly erroneous. Federal Rules of Civil Procedure, rule 52 (a), 28 U.S.C.A. following section 723c. See also Rule 81(a) (6).
In 8 U.S.C.A. § 381 it is provided regarding an applicant for citizenship: "He shall, before he is admitted to citizenship, declare on oath in open court that he will support the Constitution of the United States, and that he absolutely and entirely renounces and abjures all allegiance and fidelity to any foreign prince, potentate, *503 state, or sovereignty, and particularly by name to the prince, potentate, state, or sovereignty of which he was before a citizen or subject; that he will support and defend the Constitution and laws of the United States against all enemies, foreign and domestic, and bear true faith and allegiance to the same."
Under this statute, since the declaration of the alien is to be made "on oath", what he declares must be truthful. If he falsely makes the declaration, it seems clear to us that he obtains his citizenship illegally, if not by fraud, since the oath is a prerequisite to citizenship. (United States v. Schwimmer, 279 U.S. 644, 49 S. Ct. 448, 73 L.Ed. 889; United States v. Macintosh, 283 U.S. 605, 51 S.Ct. 570, 75 L.Ed. 1302), and the applicant does not, therefore, comply with the statute. That statute requires, among other things, that the applicant must honestly declare: (1) that he will support the Constitution of the United States; and (2) that he absolutely and entirely renounces all allegiance to any foreign state. The inquiry under that statute here is: Did appellant falsely declare (1) that he would support the Constitution of the United States; and (2) that he renounced absolutely and entirely all allegiance to any foreign state?
Supporting that view is the statement in United States v. Ginsberg, 243 U.S. 472, 475, 37 S.Ct. 422, 425, 61 L.Ed. 853, that if a certificate of naturalization is "procured when prescribed qualifications have no existence in fact, it is illegally procured". To the same effect is United States v. Siem, 9 Cir., 299 F. 582, 583, where it is said that "illegally procured" in § 405 "means procured contrary to the provisions of the law".
Appellant makes the further argument that he had complied with the procedural requirements set forth in 8 U.S.C.A. §§ 373, 379, 381 and 399, and that therefore there could be no illegality unless § 382 were violated. The latter section provides that at the hearing of the petition certain things must "be made to appear to the satisfaction of the court". Appellant argues, therefore, that since the court was satisfied as to his proof, no illegality is present. Such argument, however, is based on the assumption that appellant complied with § 381 requiring a truthful declaration as above stated. As stated above, the court below found that when appellant made the declaration on oath, he did not intend to support the Constitution of the United States, but intended to adhere to and support the principles of the Third International, and that appellant did not renounce his allegiance to foreign states, but maintained his allegiance to the Union of Socialist Soviet Republics and to the Third International. If these findings are sustained, then the judgment must be affirmed. Thus we arrive at the narrow question: Are such findings clearly erroneous?
Appellant testified that he was and is attached to the principles of the Constitution of the United States; that he did not believe in the overthrow of the government of the United States by force and violence; that he "undertook the obligations of citizenship in good faith"; that he was not opposed to organized government; and that he was not a member of an organization "incompatible with the obligations of American citizenship". He also testified that he was at the time of making the declaration on oath a member of the Communist Party and fully believed in and supported its principles. His testimony in that respect was corroborated by a history of his extensive activities in the support of that party.
There was no direct testimony that appellant had any other beliefs than those mentioned, but it does not follow, as appellant seems to contend, that the court below was required to accept his testimony. The principles of the Communist Party, to which appellant admittedly adhered, may have been such, that it was highly improbable, if not impossible, for appellant's testimony as to his beliefs to be true.
It is here unnecessary to discuss in detail all principles of the Communist Party, even if we were qualified to do so. It is sufficient here to point out wherein some of its principles are contrary to those expressed in our Constitution. The evidence consisted of testimony, and books, pamphlets and writings. There was substantial evidence which, if believed, leads to the conclusion that the Communist Party held and advocated that private ownership of the agents of production was wrong; that the agents of production should be confiscated by the government without compensation to the private owners thereof; that the government should be a dictatorship of the proletariat; that the present government here should be abandoned and one like that of the Soviet Union established; that the Supreme Court and the Senate should be abolished; *504 that the government should be controlled by one political party only, and all others should be suppressed; and that the various countries of the world should establish a world union of Soviet Socialist Republics. It is obvious that these views are not those of our Constitution.
As an example of the recognition by the Communist Party itself that its views are different from those expressed by our Constitution we quote the following from the program and constitution for the years 1921 to 1924, of the Workers Party of America, now known as the Communist Party: "The experience of the workers in the struggle against capitalism has proven that the workers cannot take over the readymade machinery of the Capitalist government and use this machinery to build up a Communist society. The form of organization of the existing government, constitutional basis, its laws, the bureaucracy, which has been built up over a century cannot be used by the workers. They are all of a character to aid the capitalists in the struggle against the workers and cannot be transformed into instruments of struggle of the workers against the capitalists."
In bringing these aims about, we find sharply conflicting views as to what method the Communist Party advocates. There is substantial evidence that the Communist Party expects to use and advocates overthrow of our government by force and violence. There is other evidence to support the view that such party neither contemplates nor advocates the use of force and violence in the overthrow of our government. In view of the direct conflict of evidence with respect to this question, we are unable to say that the finding of the trial court to the effect that the Communist Party advised, advocated and taught the overthrow of the Constitution and laws of the United States by force and violence was clearly erroneous.
The trial court believed that appellant's testimony as to his support of our Constitution and allegiance to this country was incredible in view of his admission that he fully believed in and supported the principles of the Communist Party, and in view of the principles of such party. We cannot say that the trial court's conclusions are clearly erroneous in view of the substantial evidence in the record before us.
Appellant argues that the attempt to deprive him of his citizenship lawfully and properly conferred is unconstitutional and in violation of the First, Fifth and Fourteenth Amendments. Such contention is based on the assumption that his citizenship was obtained "lawfully and properly". Such, we think, is not the case.
It is unnecessary to consider the remaining contentions of appellant relating to matters which are immaterial in view of our conclusions above stated.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548875/ | 119 F.2d 39 (1941)
ATLANTIC COAST LINE R. CO.
v.
POPE.
No. 4741.
Circuit Court of Appeals, Fourth Circuit.
April 7, 1941.
*40 Thomas W. Davis, of Wilmington, N. C. (L. J. Poisson and V. E. Phelps, both of Wilmington, N. C., on the brief), for appellant.
Aaron Goldberg and E. K. Bryan, both of Wilmington, N. C., for appellee.
Before PARKER, SOPER, and DOBIE, Circuit Judges.
SOPER, Circuit Judge.
By this appeal Atlantic Coast Line Railroad Company challenges the jurisdiction of the National Railroad Adjustment Board, Second Division, to make an award, whereby on October 7, 1938, the Railroad Company was required to reinstate one M. C. Pope to his former position of machinist in its shops, and pay him compensation from August 8, 1935, to the date of reinstatement. The contention of the Railroad Company is that jurisdiction of the dispute between it and Pope lay only in a Local or System Board of Adjustment, and that the National Board, therefore, had no power to make the award, and the District Court had no authority to make the award effective by its decree in the pending case.
Pope had been a machinist in the employ of the Railroad Company at Wilmington, North Carolina, for nearly thirteen years, when he was arrested and lodged in jail on July 4, 1935, charged with a serious crime. He was visited at the jail by a railroad police officer, who took away his annual railroad pass, and informed him that upon the order of the master mechanic of the company he would be held out of service until he was cleared of the criminal charge. The same day he was released on bail and, on August 8, 1935, he was tried and acquitted of the crime. He immediately wrote to the general foreman, his superior officer, that he had been vindicated and *41 asked for reinstatement with back pay for the period of his suspension. Thereafter, he applied in person to the general foreman for permission to go to work, but was informed that he must get permission from the superintendent of motive power, the chief operating officer of the carrier designated to handle such disputes. He sought this permission, but two weeks later, on August 21, 1935, permission was refused on the ground that the master mechanic had not in fact held him out of service pending the outcome of the case, but had reported him out of service for absenting himself without leave. Nothing further occurred until nearly three years later when on April 25, 1938, the Railway Employees Department of the American Federation of Labor filed on behalf of Pope a claim with the National Railroad Adjustment Board, Second Division, and secured the award which he seeks to enforce in this action.
The jurisdictional question requires a consideration of the Railway Labor Act of May 20, 1926, Chapter 347, 44 Stat. 577, as amended by the Act of June 21, 1934, Chapter 691, 48 Stat. 1185, 45 U.S.C.A. § 151 et seq. The Act was passed to secure the prompt and orderly settlement of disputes between carriers and their employees. It provided for the right of employees to organize and bargain collectively, through representatives of their own choosing, and established the National Railroad Adjustment Board, consisting of thirty-six members, eighteen to be selected by the carriers and eighteen by national labor organizations of employees formed under the provisions of the Act. The Board was composed of four divisions, of which the second, consisting of ten members, five selected by the carriers and five by the national labor organizations, was given jurisdiction over disputes involving machinists and other employees. The Act directed that disputes between an employee and a carrier should be handled in the usual manner up to and including the chief operating officer of the carrier designated to handle such disputes but failing to reach an adjustment in this manner, the disputes might be referred by petition of either party to the appropriate division of the Adjustment Board, which was empowered to conduct hearings and make an award to be enforced against a carrier, in case of its failure to comply, by the appropriate District Court, upon the petition of the wronged employee.
Section 3 (Second) of the Act as amended, 45 U.S.C.A. § 153, Second, made provision for an alternate mode of review by authorizing the establishment of Local or System Boards of Adjustment upon the following conditions:
"Second. Establishment of system, group or regional boards by voluntary agreement
"Nothing in this section shall be construed to prevent any individual carrier, system, or group of carriers and any class or classes of its or their employees, all acting through their representatives, selected in accordance with the provisions of this chapter, from mutually agreeing to the establishment of system, group, or regional boards of adjustment for the purpose of adjusting and deciding disputes of the character specified in this section. In the event that either party to such a system, group, or regional board of adjustment is dissatisfied with such arrangement, it may upon ninety days' notice to the other party elect to come under the jurisdiction of the Adjustment Board."
On May 20, 1925, prior to the enactment of the National Railway Labor Act, the Railroad Company and the employees of the Mechanical Department represented by an organization known as the Shopmen's Association of Atlantic Coast Line Railroad Company, had set up by agreement a System Board of Adjustment in accordance with the terms of Title III of the Transportation Act of 1920, 41 Stat. 456, 469-474, 45 U.S.C.A. §§ 131-146. On December 5, 1925, the parties to the agreement had formulated certain rules effective January 1, 1926, regarding hours and conditions of labor, and the settlement of disputes, including rules 20, 21 and 22 as follows:
"Rule 20. An employee who believes he has been unjustly dealt with shall endeavor to make an adjustment with his immediate foreman.
"Any further handling in person or through a representative of this Association may be with general foreman, Shop Superintendent or Master Mechanic.
"The right of appeal shall be granted; the appeal to be made, preferably in writing, to the next higher official.
"Rule 21. Should the highest designated railroad official or his duly authorized representative, and the aggrieved employee, or his representative, fail to agree, the *42 case shall then be handled in accordance with the Transportation Act of 1920.
"Prior to the assertion of grievances as herein provided, and while questions of grievances are pending, there will neither be a shutdown by the employer nor a suspension of work by the employees.
"Rule 22. No employee shall be disciplined without a fair hearing by a designated officer of the Company. Suspension in proper cases pending a hearing, which shall be prompt, shall not be deemed a violation of this rule. At a reasonable time prior to the hearing such employee will be apprised of the precise charge against him. The employee shall have reasonable opportunity to secure the presence of necessary witnesses and shall have the right to be there represented by counsel of this association."
The parties to the agreement of May 20, 1925, desired to avail themselves of the permission embodied in the Railway Labor Act of May 20, 1926, to continue the local settlement of disputes. Accordingly, they entered into a new agreement on June 24, 1926, in order to take into account the statutory changes. It was agreed (a) to continue the System Board of Adjustment for the same purpose and upon substantially the same basis as when organized in May, 1925; (b) to adopt revised rules governing the jurisdiction and functions of the Board which were incorporated in the agreement; and (c) that an appeal to the System Board of Adjustment must be submitted in writing to the Board within 60 days after the date of the decision below; otherwise the case should be closed.
Thereafter, on December 1, 1933, other changes in the agreement irrelevant to the present controversy were made, and on November 26, 1934, a further agreement was made for the "establishment of a System Board of Adjustment under the provisions of Section 3 (Second) of the Railway Labor Act, as amended by the Act of June 21, 1934". Under this amendment of the statute, Section 3 (Second) of the Railway Labor Act assumed the form above set out. The agreement of November 26, 1934, was in effect at the time of the circumstances in the pending case. It provided (a) for the continuance of the System Board of Adjustment upon substantially the same basis as when organized June 24, 1926, for the purpose of adjusting and deciding disputes; (b) for the adoption of certain revised rules governing the jurisdiction and functions of the Board; and (c) a time limit on appeals as follows: "c. That a case to be appealed to the System Board of Adjustment (hereinafter referred to as the Board) must be submitted in writing to the Board within 60 days after the date of the decision from which it is appealed; otherwise the case is closed and cannot be handled further. Such submission may be made either jointly or ex parte. It must be accompanied by a full statement of facts and all supporting data bearing upon the dispute."
Finally, it was agreed that either party might withdraw from the agreement by giving 90 days' notice to the other party. It is stipulated in the pending case that the System Board of Adjustment created by this agreement was in existence and effect on November 26, 1934, and so continued until, pursuant to Section 3 (Second) of the Act, it was terminated by a letter dated May 13, 1937 from the special representative of the International Association of Machinists to the General Manager of the Railroad Company, wherein was expressed the intention to have any grievances not settled locally referred to the National Adjustment Board for final settlement. By reason of this notice the jurisdiction of the System Board of Adjustment terminated on August 11, 1937. It thus appears that the period of 60 days, allowed to the aggrieved employee for an appeal from the final adverse decision of the carrier on August 21, 1935, expired long before the abolition of the System Board of Adjustment. It also appears that the jurisdiction of that Board had ceased to exist prior to the consideration of the case by the National Railroad Adjustment Board in October, 1938.
The argument on behalf of the appellee denies the jurisdiction of the System Board, and at the same time supports the jurisdiction of the National Board. The contention is threefold. It is said (1) that the System Board had no jurisdiction over Pope's case because at the time of his discharge he was not a member of the Shopmen's Association; (2) that although the Railway Labor Act provides for the establishment, by agreement, of a System Board of Adjustment, it does not empower the parties to impose a time limit upon appeals to the Board from an adverse decision of the highest designated officer of the Railroad Company; and hence the decision in Pope's case was still appealable in 1938, when the jurisdiction of the National *43 Board over disputes, "including cases pending and unadjusted on June 21, 1934", came into existence. See Section 3, First (i) of the Act of June 21, 1934, 45 U.S.C.A. § 153, First (i); (3) that the System Board had no jurisdiction over the case because the Railroad Company had failed to comply with Rule 22 of the agreement above set out, in that the Railroad Company had failed to accord Pope a fair hearing before disciplining him, or to apprise him in writing of the precise charge against him, and that until such a hearing, after notice, should be held, the period of 60 days for an appeal to the System Board would not begin to run.
It is clear at the outset that it was not the purpose of Section 3 (Second) of the Railway Labor Act to afford to an aggrieved employee the option to take his case either to the System or the National Board, at his pleasure. The purpose was to continue the local settlement of disputes, in accordance with the established practice, if a carrier and its employees, acting through their representatives, should so elect; but if either party should become dissatisfied, it was empowered upon 90 days' notice "to come under the jurisdiction of the (National) Board". While the agreement lasted, the National Board obviously had no jurisdiction.
It seems equally clear that the System Board of Adjustment had exclusive jurisdiction over all disputes between the Railroad Company and its employees, whether members of the Shopmen's Association or not. The power to agree to a System Board of Adjustment was conferred by Section 3 (Second) of the Act upon the representatives of the employees "selected in accordance with the provisions of this chapter". Other parts of the Act expressly provided for the complete independence of employees in the matter of self-organization, and the right of employees to organize and bargain collectively through representatives of their own choosing, and conferred upon the majority of any class of employees the right to determine who should be the representatives thereof. Section 2 (Fourth) of the Act of May 20, 1926, as amended by the Act of June 21, 1934, 45 U.S.C.A. §§ 151a and 152. Fourth. There can be no doubt that the action of a majority of employees in the selection of representatives and the action of the representatives themselves so selected were intended to be binding upon the whole class of employees. The duty of the minority to recognize the authority of representatives selected by the majority was as binding in this respect as the duty of the carrier to treat with the representatives so selected with respect to pay, rules, working conditions of employees, etc. See Virginian Railway Co. v. Federation No. 40, 300 U.S. 515, 57 S. Ct. 592, 81 L. Ed. 789, affirming 4 Cir., 84 F.2d 641; Association of C. E., etc., v. Brotherhood of Ry. and S. S. C., 7 Cir., 85 F.2d 152, 109 A.L.R. 345. In the pending case the Shopmen's association had been duly selected as the representative of the machinists, and its right to represent them had been certified by the National Mediation Board in exercise of the authority conferred by Sections 4, 5, of the Act, 45 U.S.C.A. §§ 154, 155, and in obedience to a decree of the Supreme Court of the District of Columbia issued on January 20, 1936, in litigation between the Shopmen's Association and the National Mediation Board.
Nor, is there merit in the contention that the carrier and its employees, although authorized by the Act to agree to the establishment of a System Board of Adjustment, had no power to limit the time within which the Board's jurisdiction might be invoked by appeal. The contracting parties, throughout the period covered by the statutes under consideration, always assumed the right to make the local tribunals effective by formulating rules of procedure for the settlement of disputes. Rules 20, 21 and 22, above set out, are examples; and the plaintiff himself has invoked Rule 22 as the basis of the argument, to be next considered, that the System Board had no jurisdiction of his case on appeal because he had been discharged without a fair hearing as required by the rule. Subsection (c) of the agreement of November 26, 1934, quoted above, and the substantially similar provision of the agreement of June 24, 1926, were inserted with the evident intent to expedite the settlement of labor disputes and thereby further one of the chief purposes of the legislation. Section 303, Title III of the Transportation Act of 1920, 45 U.S.C.A. § 134, required the Railroad Boards of Adjustment, which it established, to hear such disputes as the parties were unable to decide in conference "as soon as practicable and with due diligence". Among the five purposes set out in Section 2 of the Amendatory Act of June 21, 1934, 45 U.S.C.A. § *44 151a, under which the agreement of November 26, 1934, was drawn, are the purpose to provide for the prompt and orderly settlement of all disputes concerning rates of pay, rules of working conditions, and the purpose to provide for the prompt and orderly settlement of all disputes growing out of grievances. Section 2 (Second), 45 U.S.C.A. § 152, Second, also provides that all disputes between a carrier and its employees should be considered and, if possible, decided with all expedition in conference between representatives designated by the carrier and employees interested in the dispute. It cannot be said that the limitation period of 60 days was unreasonable, paralleling as it did similar provisions in divers federal and state statutes regulating the procedure of courts of appeals.
Seeing, then, that the limitation on appeals was a reasonable provision in harmony with the mutual interests of the contracting parties and with the major purposes of Congress, we have no doubt as to its validity. It is not unusual in certain types of contracts to find an article limiting the time within which suits growing out of the performance of the contract must be commenced, for example, contracts of shipment and contracts of insurance; and, it is well settled that such a provision, if reasonable in extent, is within the power of the parties and is binding upon them, even if the stipulated period is shorter than set up in the statutes of limitation otherwise applicable. Missouri, Kans. & Tex. Ry. Co. v. Harriman, 227 U.S. 657, 671, 33 S. Ct. 397, 57 L. Ed. 690; Schnell v. United States, 2 Cir., 30 F.2d 676; The Susquehanna, 4 Cir., 296 F. 461. The terms of the agreement setting up the System Board of Adjustment in the pending case were equally binding upon the parties. The Board was established as an appellate tribunal by virtue of the power conferred by the Act of Congress, and the limitation upon the period of appeals was merely an appropriate step taken in the exercise of the power to promote efficient administration.
We are convinced, also, that the period of limitation for the appeal began to run on August 21, 1935, when, in accordance with Section 2 (Sixth), and Section 3, First (i) of the statute, 45 U.S.C.A. §§ 152, Sixth, 153, First (i), the chief operating officer of the carrier, designated to handle such disputes, rendered his adverse decision; and that 60 days thereafter, no appeal having been taken, the case was finally closed. The appellee contends that this cannot be so because he was discharged without a fair trial as required by Rule 22 and that no appeal could be taken to the System Board until such a trial had been held and a decision had been rendered; and hence the case was still open when considered by the National Board in 1938. Such an interpretation of the rules of procedure incorporated in the agreement cannot in our opinion be fairly made. It would tend to destroy the very protection to wronged employees that the whole system was designed to afford. Unquestionably the reasonable requirement of a fair trial after due notice before disciplinary action should be taken, was in harmony with the fundamental conceptions of due process; and it would have been the duty of the System Board to reverse any disciplinary action taken without compliance with the rule, irrespective of the merits of the complaint. But, certainly, there was no intention to deprive the appellate body of its corrective power, if the carrier should fail to follow the proper procedure. Such a conclusion would defeat the purposes of the Act by putting it within the power of the Railroad Company to prolong a dispute indefinitely and to deny to the aggrieved party access to the tribunal especially set up for his relief.
At the end of 60 days after the adverse decision of the designated railroad official, the case became closed and could not be handled further under the express terms of the agreement. Obviously the controversy was no longer open almost three years later when, for the first time the aggrieved employee took action to upset the decision against him. The case was therefore not pending in 1937 when the System Board was abolished, and the general jurisdiction of the National Board attached. Nothing remained for it to adjudicate.
The Railroad makes the contention that the award of the National Board was invalid for the additional reason that the members of the Board, being unable to agree, called in a referee as a member of the Board to break the deadlock under the provisions of Section 3(l) of the Act, and thereafter the award was made, without notice to the parties and without further hearing, upon the presentation to the referee by the other members of the Board of such summaries of the evidence as they deemed sufficient. But, in view of the conclusions stated above, it is unnecessary to *45 decide whether the Board's course of action in this respect was in accordance with essential procedural requirements.
The judgment of the District Court will therefore be reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548880/ | 161 B.R. 953 (1993)
In re SMEC, INC., Debtor.
Susan R. LIMOR, Trustee, Plaintiff,
v.
WEINSTEIN & SUTTON, et al., Defendants.
No. 2:92-0095.
United States District Court, M.D. Tennessee, Northeastern Division.
December 8, 1993.
*954 Roy Clarence DeSha, Jr., Crocker & DeSha, Nashville, TN and F. Dean Armstrong, Flossmoor, IL, for plaintiff.
Joyce M. Grimes, Ortale, Kelley, Herbert & Crawford, and Raymond Dale Bay and Maria M. Salas, Lewis, King, Krieg & Waldrop, Nashville, TN, for defendants.
MEMORANDUM
WISEMAN, District Judge.
Before the court is the defendants' motion for reconsideration of this court's earlier Memorandum and Order denying their motion for summary judgment, 160 B.R. 86, or in the alternative for an amendment of this Order granting defendants permission to take an interlocutory appeal. For the reasons stated below, the earlier decision of this court remains intact and certification of an interlocutory appeal is denied.
*955 I
On October 27, 1993, this court denied the defendants' motion for summary judgment. Defendants argued that Tennessee law controlled plaintiff's legal malpractice action and that under this law the present action is time-barred. Contrary to the position advocated by the defendants, this court applied New Jersey's malpractice law. Under New Jersey law, the present action was not time-barred. The court based its choice of law on an analysis of which state has the most significant interest in seeing its laws applied. This choice of law rule flowed from an analysis of the wisdom of deviating from the procedural-substantive law distinction applicable in diversity cases when a federal court is sitting in bankruptcy. As discussed in the earlier Memorandum, this conclusion was strongly bolstered as well by dicta in the Supreme Court's Vanston opinion. Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 67 S. Ct. 237, 91 L. Ed. 162 (1946).
The defendants, in their motion to reconsider, argue that this court ignored the procedural law-substantive law distinction in considering how to choose between conflicting statutes of limitation. The core of defendants' argument, as previously stated and as now reiterated, is that the choice of law rules applied in diversity cases should also be applied in bankruptcy cases. Under the diversity rule, the procedural law of the forum state controls. Given that statutes of limitation are generally procedural in nature, defendants contend that Tennessee's statute of limitations should control as this bankruptcy court is situated in Tennessee.
As this court previously stated, the rationale for applying the choice of law rules of diversity cases does not extend to bankruptcy cases. A federal court sitting in diversity sits as an adjunct state court; thus the forum state has an interest in seeing its procedural laws applied. This is not necessarily so in bankruptcy cases. A bankruptcy court sits as a federal court, with its own set of procedural rules and its own unique, federal mission. Whereas diversity jurisdiction was designed to ameliorate any prejudicial effects that may arise from forcing foreign parties to sue or be sued in a resident's state court, see Schwartz v. Elec. Data Sys., 913 F.2d 279, 287 (6th Cir.1990) (Merritt, C.J., dissenting), bankruptcy jurisdiction was designed to centralize and expedite claims against a debtor's estate, see Elizabeth Warren, "Bankruptcy Policymaking in an Imperfect World," 92 Mich.L.Rev. 336 (1993) (discussing the purposes of the bankruptcy system). As a court of equity, a bankruptcy court seeks to resolve creditors' claims in the fairest and most efficient manner possible. It may be necessary to invoke state laws to resolve these claims at times, but there is simply no reason why the forum state's laws, including its procedural rules, should presumptively be the laws chosen. Instead, a court should look to the equities of a case and balance the interests of the states in having their laws applied in order to decide which state's law controls. See Vanston, 329 U.S. at 161-62, 67 S.Ct. at 239. As the Court in Vanston made clear, the Erie doctrine has no application to choices of law made in bankruptcy courts. See id. 329 U.S. at 162-63, 67 S.Ct. at 239-40.
In fact, it may be manifestly unfair to resort to the procedural law-substantive law distinction of Erie in bankruptcy cases. The facts of the present case illustrate how mechanically applying the procedural law of the forum state may work an injustice. The defendants provided legal services under the auspices of New Jersey law. Defendants acknowledge that New Jersey's law on legal malpractice, except for its statute of limitation, may conceivably control the case. The only part of Tennessee law that defendants urge is unavoidably controlling is that part which could eliminate the claim against them entirely.[1] If this court unjustifiably resorted to the procedural law-substantive law distinction, the defendants could possibly reap the benefits of the "accident of geography" that led to the debtor's filing for bankruptcy in a federal court within Tennessee. The parties *956 to a case should be held up to the light of the laws under which they transacted, especially when a choice of law may be outcome determinative and regardless of whether this choice involves nominally "procedural" or "substantive" laws.[2]
The position taken by this court is not unique. The Northern District of Georgia reached the same conclusion in In re Ovetsky, 100 B.R. 115 (Bankr.N.D.Georgia 1989). As here, the Georgia bankruptcy court recognized that there was no justification for unthinkingly applying the statute of limitations of the forum state; as that court aptly observed: "A claim which was valid prior to bankruptcy should not be disallowed solely because the state law of the state in which the debtor has chosen to reside and file bankruptcy and which has no relation to the claim would not allow recovery." Id. at 118. The claim against the defendants could have validly been brought in a New Jersey court. Due to the bankruptcy filing, however, this action now happens to be in a federal court within Tennessee. Under defendants' argument, this filing alone confers on them the right to invoke a Tennessee law that could bar the action, even though the defendants had virtually no contact with Tennessee and even though defendants previously have strongly argued against the propriety of jurisdiction in a Tennessee state court.[3]
Defendants' arguments are transparent attempts at forum shopping. If New Jersey had the shorter statute of limitations, no doubt defendants would agree with the court's analysis. Such forum shopping, especially when it would work an injustice to the bankrupt estate, should be discouraged. A rule that looks beyond the simplistic procedural law-substantive law distinction to impose on parties the laws under which their behavior occurred deters such maneuvering. Moreover, such a rule acknowledges that the logic for applying the procedural rules of the forum state in diversity simply does not apply to bankruptcy cases. Given these considerations, the conclusion of this court on October 27, 1993 as to controlling statute of limitation shall not be altered.
II
Failing a reconsideration of the previous outcome, defendants request an amendment to the previous Order certifying an interlocutory appeal on the choice of law question. This request shall likewise be denied.
"Certification [under 28 U.S.C. § 1292(b)] is appropriate where the order to be appealed involves (1) a controlling question of law, (2) as to which there is substantial ground for difference of opinion, and (3) immediate appeal may materially advance the ultimate termination of the litigation." United States v. Summit Equip. & Supplies, Inc., 805 F. Supp. 1422, 1433-34 (N.D.Ohio 1992). Additionally, within this district interlocutory appeal is appropriate only in "protracted and expensive litigation," where a court's false move early on in a case could lead to an enormous burden being placed on the parties who have to follow the normal routes of appeal. Ockerman v. May Zima & Co., 785 F. Supp. 695, 706 (M.D.Tenn.1992).
The Order in question does involve a controlling question of law about which there exists a difference of opinion. Moreover, immediate consideration of the correctness of the court's conclusion could advance the ultimate *957 termination of this litigation. However, this case is not so complex or protracted that it falls within the category of exceptional cases that should be granted a special right of appeal. Certainly the defendants would rather not invest further monies in the case if they could avoid doing so, but in fact, proceeding with this case in the district court may lead to a speedier disposition than if a delay were allowed for interlocutory appeal. Moreover, allowing the case to run its normal course allows all possibly appealable issues to be consolidated in one appeal.
III
For the reasons stated above, the defendants' motion for reconsideration or in the alternative for amendment to include certification for interlocutory appeal shall be denied in an accompanying Order. Oral argument on these issues is unnecessary, and so the defendants' request therefor shall also be denied.
NOTES
[1] It should be noted that plaintiff contends her action is sustainable under Tennessee or New Jersey law. Whether the action is time-barred under Tennessee law has not been addressed by the court.
[2] The defendants' citation of Sun Oil Co. v. Wortman, 486 U.S. 717, 108 S. Ct. 2117, 100 L. Ed. 2d 743 (1988), is unavailing. Sun Oil dealt with the right of a state court to apply its own statute of limitations to claims over which another state's substantive law controlled. This question bears no relation to the present question of whether a federal court must apply the forum state's statute of limitation where that court is not sitting in diversity as a state court and where the claims in question bear little relation to the forum state.
[3] In addition to the concerns that defendants not be given an unfair advantage are the concerns that full resolution of creditors' claims occur. It is evident from Congress' providing for an enlargement of the time in which trustees may file actions on behalf of bankrupt estates that Congress meant to keep the doors of the bankruptcy court open longer than those of a typical court. If the door were now to be closed on the trustee, the creditors of the bankrupt estate would have no chance of recovery against the defendants, for it is only through this enlargement of time provision that the current action remains in court. The interest in seeing a fair distribution of resources thus favors that choice of law which continues the action. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548898/ | 992 A.2d 1 (2010)
201 N.J. 444
ASSOCIATION OF NEW JERSEY RIFLE & PISTOL CLUBS, INC.; Caso's Gun-A-Rama, Inc.; Lisa M. Caso; and Scott L. Bach, Plaintiffs-Respondents,
v.
The CITY OF JERSEY CITY; Jerramiah T. Healy, Mayor of Jersey City; and Thomas Comey, Chief of Police of Jersey City, Defendants-Appellants, and
Associated Community Organizations For Reform Now (Acorn New Jersey), Greenvile Chapter, Defendant-Intervenor-Appellant.
A-75/76 September Term 2008.
Supreme Court of New Jersey.
January 4, 2010.
ORDER
This matter having come before the Supreme Court on a grant of defendants' petition for certification of the judgment of the Appellate Division, reported at 402 N.J.Super. 650, 955 A.2d 1003 (App.Div. 2008),
And the Court having reviewed the record and heard the oral arguments of the parties,
And the Court thereafter having been informed that Governor Jon S. Corzine signed A-339 into law as L. 2009, c. 104, on August 6, 2009,
And § 1 of L. 2009, c. 104, having amended N.J.S.A. 2C:58-2(a) to include the following provision:
A dealer shall not knowingly deliver more than one handgun to any person within any 30-day period. This limitation shall not apply to:
(a) a federal, State, or local law enforcement officer or agency purchasing handguns for use by officers in the actual performance of their law enforcement duties;
(b) a collector of handguns as curios or relics as defined in Title 18, United States Code, section 921(a)(13) who has in his possession a valid Collector of Curios and Relics License issued by the federal Bureau of Alcohol, Tobacco, Firearms and Explosives; or
(c) transfers of handguns between licensed retail dealers[,]
And § 2 of L. 2009, c. 104, having amended N.J.S.A. 2C:58-3(i) to read:
Restriction on number of firearms person may purchase. Only one handgun shall be purchased or delivered on each permit and no more than one handgun shall be purchased within any 30-day period, but this limitation shall not apply to:
(1) a federal, State or local law enforcement officer or agency purchasing handguns for use by officers in the actual performance of their law enforcement duties;
(2) a collector of handguns as curios or relics as defined in Title 18, United States Code, section 921(a)(13) who has in his possession a valid Collector of Curios and Relics License issued by the federal Bureau of Alcohol, Tobacco, Firearms and Explosives; or
(3) transfers of handguns between licensed retail dealers.
A person shall not be restricted as to the number of rifles or shotguns he may purchase, provided he possesses a valid firearms purchaser identification card and provided further that he signs the certification required in subsection b. of this section for each transaction[,]
*2 And § 3 of L. 2009, c. 104, having provided that "[t]his act shall take effect on the first day of the fifth month following enactment[,]"
And good cause appearing;
IT IS ORDERED that the opinion and judgment of the Appellate Division are vacated; and it is further
ORDERED that the within appeal is dismissed as moot.
Chief Justice RABNER and Justices LONG, LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO, and HOENS join in the Court's Order. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548894/ | ALLEN CANNON, Defendant Below-Appellant,
v.
STATE OF DELAWARE, Plaintiff Below-Appellee.
No. 596, 2009.
Supreme Court of Delaware.
Submitted: February 12, 2010.
Decided: April 1, 2010.
Before HOLLAND, BERGER and JACOBS, Justices.
ORDER
CAROLYN BERGER, Justice.
This 1st day of April 2010, upon consideration of the briefs on appeal and the record below, it appears to the Court that:
(1) The defendant-appellant, Allen Cannon, filed an appeal from the Superior Court's September 24, 2009 order accepting in whole the August 11, 2009 report of the Superior Court Commissioner, which recommended that Cannon's motion for postconviction relief pursuant to Superior Court Criminal Rule 61 be denied.[1] We find no merit to the appeal. Accordingly, we affirm.
(2) In February 2007, Cannon was found guilty by a Superior Court jury of Reckless Endangering in the First Degree, Criminal Mischief and two weapon offenses in connection with the July 31, 2006 shooting of Terrence Dendy outside a store on Tenth Street in Wilmington, Delaware. He was sentenced to 5 years incarceration at Level V on each of the two weapon convictions and to probation on the remaining two convictions. This Court affirmed Cannon's convictions on direct appeal.[2]
(3) Cannon's claims in this appeal center on two out-of-court statements to police identifying Cannon as the shooter, which were admitted into evidence at his trial. The first statement was from the victim, Terrence Dendy. The second statement was from Terrence Dendy's father, Richard Dendy. The witnesses later recanted their identification of Cannon as the shooter and so testified at Cannon's trial. The jury chose to credit the witnesses' out-of-court statements rather than their live testimony, however, and found Cannon guilty of the charges against him.
(4) In this appeal, Cannon asserts several claims, which may fairly be summarized as follows: his trial attorney provided ineffective assistance by failing to a) object, under Del. Code Ann. tit. 11, §3507, to the State's introduction of the witnesses' statements at trial; b) request an instruction limiting the jury's consideration of the statements to weighing the witnesses' credibility; c) raise an objection to the statements based upon a violation of his rights under the Confrontation Clause; d) raise an objection to Richard Dendy's testimony regarding what he had heard from "people on the street" as hearsay; e) request precautionary instructions regarding the statements under Acosta v. State, 417 A.2d 373 (Del. 1980); f) arrange for a forensic investigation of the crime scene; and g) properly subpoena the evidence detection officer as a defense witness to testify that the shell casings found at the scene had not been tested for fingerprints.[3]
(5) In order to prevail on a claim of ineffective assistance of counsel, a defendant must demonstrate that his counsel's representation fell below an objective standard of reasonableness and that, but for his counsel's unprofessional errors, there is a reasonable probability that the outcome of the proceedings would have been different.[4] Although not insurmountable, the Strickland standard is highly demanding and leads to a "strong presumption that the representation was professionally reasonable."[5] The defendant must make concrete allegations of ineffective assistance, and substantiate them, or risk summary dismissal.[6]
(6) Cannon first claims that his trial counsel provided ineffective assistance by failing to object to the State's introduction of the witnesses' out-of-court statements. In order for an out-of-court statement to be admitted into evidence under §3507, the declarant must be available to testify, both on direct examination and on cross-examination, concerning the events perceived and the statement itself.[7] Because the record reflects that Terrence and Richard Dendy both testified on direct and cross-examination concerning the shooting as well as their original statements to police, there was no basis upon which to object to the admission of the statements. In the absence of any evidence of error on the part of Cannon's counsel, we conclude that Cannon's first claim is without merit.
(7) Cannon next claims that his counsel should have asked for an instruction limiting the jury's consideration of the statements to the witnesses' credibility. However, under §3507, an out-of-court statement by a witness is admissible as substantive evidence of guilt.[8] As such, there was no basis upon which to request a limiting instruction and, therefore, no error on the part of Cannon's counsel. Cannon's second claim is, therefore, without merit.
(8) Cannon's third claim of ineffective assistance is that his attorney failed to raise an objection to the witnesses' statements under the Sixth Amendment's Confrontation Clause. However, because Cannon's attorney had the opportunity to cross-examine both witnesses at trial, there was no violation of the Confrontation Clause. Because there was no constitutional basis for objecting to the statements, there was no error on the part of Cannon's counsel for not doing so. Cannon's third claim is, therefore, without merit.
(9) Cannon next claims that his attorney erred by failing to object to Richard Dendy's testimony about what he had heard from "people on the street" as hearsay. Because the identical issue was unsuccessfully raised in Cannon's direct appeal, it is barred in this proceeding as formerly adjudicated.[9]
(10) Cannon's fifth claim is that his attorney provided ineffective assistance by failing to request precautionary instructions regarding the statements under Acosta v. State, 417 A.2d 373, 376-77 (Del. 1980). In Acosta, this Court held that precautionary instructions were required where two sexual assault victims denied at trial that two of four charged offenses had taken place, and where the only evidence of guilt for those two offenses was the victims' out-of-court statements. This Court's ruling in Acosta is not relevant to the situation here. First, it was never disputed that the shooting of Terrence Dendy took place. Second, both Terrence and Richard Dendy testified at length at trial concerning why they had changed their story. Because the highly unusual circumstances of Acosta were not present in Cannon's case, there was no need for precautionary instructions and no error on the part of Cannon's counsel in not requesting such instructions. Cannon's fifth claim is, therefore, without merit.
(11) Cannon's sixth claim is that his attorney erred by not conducting a forensic examination of the crime scene. Again, the circumstances under which the shooting took place were never at issue at trial. The only issue in dispute was the identity of the shooter. Under such circumstances, it is presumed that Cannon's attorney determined not to conduct a forensic examination of the crime scene as a matter of sound trial strategy.[10] In the absence of any evidence rebutting that presumption, we conclude that Cannon's sixth claim also is unavailing.
(12) Cannon's seventh, and final, claim is that his counsel failed to properly subpoena the evidence detection officer as a defense witness to testify that the shell casings found at the scene had not been tested for fingerprints. The record reflects that the officer had been subpoenaed to testify at trial by the State, but had not been subpoenaed by defense counsel. By the time the prosecutor announced that he had decided to call the chief investigating officer to testify instead of the evidence detection officer, the evidence detection officer already had been told he would not be needed and was unavailable. Ultimately, however, defense counsel was able to elicit the testimony he needed from the chief investigating officer. As such, even assuming that counsel's performance was deficient in failing to subpoena the officer, there is no evidence that Cannon suffered any prejudice as a result. In the absence of any evidence of prejudice, we conclude that Cannon's final claim also is without merit.
NOW, THEREFORE, IT IS ORDERED that the judgment of the Superior Court is AFFIRMED.[11]
NOTES
[1] Del. Code Ann. tit. 10, §512(b); Super. Ct. Crim. R. 62.
[2] Cannon v. State, Del. Supr., No. 295, 2007, Steele, C.J. (May 6, 2008) (en banc).
[3] To the extent that Cannon has not presented claims in this appeal that were raised previously in the Superior Court, those claims are deemed to be waived and will not be considered in this appeal. Somerville v. State, 703 A.2d 629, 631 (Del. 1997).
[4] Strickland v. Washington, 466 U.S. 668, 688, 694 (1984).
[5] Flamer v. State, 585 A.2d 736, 753 (Del. 1990).
[6] Younger v. State, 580 A.2d 552, 556 (Del. 1990).
[7] Keys v. State, 337 A.2d 18, 22-23 (Del. 1980).
[8] Del. Code Ann. tit. 11, §3507(a).
[9] Super. Ct. Crim. R. 61(i)(4).
[10] Strickland v. Washington, 466 U.S. at 689.
[11] On February 1, 2010, Cannon filed a motion to remand, requesting an evidentiary hearing on the issue of whether he voluntarily waived his right to a jury trial on one of the weapon charges. Cannon's motion for remand is hereby denied as moot. Cannon's motion is without merit in any case. The motion was filed after briefing was completed and the appeal had been submitted for decision. Cannon failed to demonstrate good cause for a remand at that stage of the proceedings. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548903/ | 161 B.R. 101 (1993)
In the Matter of CONTINENTAL AIRLINES, INC., et al., Debtors.
Bankruptcy Nos. 90-932 to 90-984.
United States Bankruptcy Court, D. Delaware.
October 7, 1993.[*]
*102 Christian C. Onsager, Faegre & Benson, Denver, CO, Laura Davis Jones, Robert S. Brady, Young, Conaway, Stargatt & Taylor, Wilmington, DE, for debtors.
David J. Epstein, Robert P. Krenkowitz, Boston, MA, for the States of Alabama, Arkansas, Colorado, Delaware, Florida, Iowa, Idaho, Kansas, Louisiana, Mississippi, Montana, North Carolina, North Dakota, Nevada, and Oregon.
Marla Becker, Latham & Watkins, New York City, for Post-Confirmation Committee.
MEMORANDUM OPINION AND ORDER
HELEN S. BALICK, Bankruptcy Judge.
This is the Court's decision on the Objection of Continental Airlines, Inc., et al. (Continental or Debtors) to Escheat Claims, made pursuant to Continental's Seventeenth Omnibus Objection to Claims.
I. Background:
The States of Alabama, Arkansas, Colorado, Delaware, Florida, Iowa, Idaho, Kansas, Louisiana, Mississippi, Montana, North Carolina, North Dakota, Nevada, and Oregon (the States) have filed proofs of claim against the estate of Continental based on the States' unclaimed property or escheat laws (escheat claims).
On or before September 27, 1991, the bar date established by this Court for the filing of proofs of claim in the Continental case, the States filed proofs of claim as general unsecured creditors of the Debtors. The subject matter of the States' claims are pre-petition and pre-confirmation obligations of the Debtors to equity and debt security holders, employees, vendors, consumers, and individuals or entities with which the Debtors had done business prior to the commencement of this bankruptcy case. These obligations would be represented by checks issued by the *103 Debtors and subsequently returned as undeliverable or which otherwise remained uncashed; or by unexchanged shares held by the Debtors or their agents; or by entries upon the stock, debt, or other financial records of the Debtors and/or their agents.
II. Procedural History:
On May 28, 1993 Continental filed its Seventeenth Omnibus Objection to these claims, among others, and requested that such claims be disallowed on the basis that said claims have no corresponding amount due on the Debtors' books and records. On June 22, 1993 the States filed their Opposition to Disallowance of Claims, setting forth the States' position that their claims derive from those of the missing owners of the unclaimed property of the Debtor, so that the books and records of the Debtors would show not the names of the States themselves, but the names of those missing owners. On August 27, 1993 Debtors served their Memorandum in support of their Objections to the States' claims, asserting that the States' unclaimed property law on which the escheat claims are premised is preempted by the Bankruptcy Code. On September 7, 1993 the States filed their brief in Opposition to Debtors' Objection to Pre-petition Claims of the States. The Court heard oral argument on Continental's Objection on September 14, 1993 and subsequently took the matter under advisement.
III. Contentions of the Parties:
Continental maintains that the States' escheat claims should be disallowed because the state escheat or unclaimed property laws upon which the claims are based are preempted by the Bankruptcy Code pursuant to the Supremacy Clause, Art. VI of the Constitution. Specifically, Continental contends that (a) the States' claims are filed on behalf of persons other than the States in contravention of 11 U.S.C. §§ 501 and 502; (b) the States' claims contravene the filing requirements for proofs of claim under 11 U.S.C. § 1111(a) and F.R.Bankr.P. 3003; (c) the States' claims are inconsistent with Continental's confirmed Revised Second Amended Joint Plan of Reorganization (Plan); and (d) allowance of the States' escheat claims would result in a distribution scheme in contravention of 11 U.S.C. § 1123(a). Additionally, during oral argument on Continental's objection, Continental argued that the States' escheat claims were also preempted by section 347 of the Code.
For its part, the States assert that, with regard to property unclaimed pre-petition, the State escheat statutes are not preempted by the Bankruptcy Code. The States maintain that they are entitled to recover unclaimed property which was deemed abandoned pursuant to the States' escheat laws either prior to Continental's petition for bankruptcy or subsequent to that petition but before confirmation of Continental's Plan. Moreover, because Continental failed to report and deliver this abandoned property to the States as mandated by law, the States, as creditors in their own right, possess claims against Continental. The States, thus, argue that they are not attempting to file claims on behalf of missing creditors, but rather have filed their claims as creditors pursuant to sections 501 and 502 of the Bankruptcy Code.
Furthermore, the States contend that their proofs of claim do not contravene section 1111(a) of the Bankruptcy Code and F.R.Bankr.P. 3003. Because the claims of the missing creditors were listed as undisputed on Continental's schedules, those creditors' claims were deemed filed under section 501. The States' escheat claims were not scheduled, however, and thus, the States were required to and did comply with section 1111 and Rule 3003 by filing proofs of claim in their own names on or before the bar date.
Additionally, the States assert that any distribution to the States and subsequent distribution by the States to the missing creditors post-bankruptcy, does not conflict with the provisions of Continental's confirmed Plan and section 1123(a)(4) of the Code. This is because, having succeeded to the creditors' rights to possession of the unclaimed property by operation of state law and having filed proofs of claim in their own names, the States are creditors and are treated equally with similarly situated creditors. Any subsequent distribution by the *104 States or other creditors is outside the parameters of Continental's Plan and the provisions of the Bankruptcy Code.
Alternatively, the States maintain that, even if the States' claims are not viewed as independent claims, those claims should be allowed on the ground that the States act as conservators for persons who have not claimed their property for a specified period of time. According to the States, a conservator, like an executor of an estate or the guardian of a minor child, may recover from the bankruptcy estate a claim owed to the person on whose behalf the conservator acts.
IV. Discussion:
A. Preemption Doctrine.
The preemption doctrine has its origins in the Supremacy Clause of the U.S. Constitution, Article VI, section 2, which provides as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof, and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land." The United States Supreme Court has identified six situations in which the preemption doctrine applies:
1. when Congress, in enacting a federal statute, expresses a clear intent to preempt state law;
2. when there is outright or actual conflict between federal and state law;
3. where compliance with both federal and state law is in effect physically impossible;
4. where there is implicit in federal law a barrier to state regulation;
5. where Congress has legislated comprehensively, thus occupying an entire field of regulation and leaving no room for the states to supplement federal law; and
6. where the state law stands as an obstacle to the accomplishment and execution of the full objectives of Congress.
Arkansas v. Federated Department Stores, Inc., No. C-1-92-195, slip. op. at 5 (S.D.Ohio October 20, 1993) (citing Louisiana Public Service Commission v. F.C.C., 476 U.S. 355, 368-69, 106 S. Ct. 1890, 1898-99, 90 L. Ed. 2d 369 (1986).
In considering whether the States' escheat laws are preempted by the Bankruptcy Code, this Court notes the following:
Congress has generally left the determination of property rights and the assets of a bankrupt's estate to state law. Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding.
Butner v. United States, 440 U.S. 48, 50, 99 S. Ct. 914, 918, 59 L. Ed. 2d 136 (1979).
Thus, since Congress has not expressed a clear intent to preempt state property law nor legislated comprehensively in the field, the issue becomes whether the States' escheat laws conflict with or stand as an obstacle to the implementation of specific provisions of the Bankruptcy Code and therefore, by implication, are preempted by the Bankruptcy Code.
B. Property Deemed Abandoned Pre-Petition.
First, Continental asserts that the States' proofs of claim filed . . . as conservator or custodian on behalf of the classes of persons . . . who have failed to claim the property owing to them for the statutory period of abandonment" contravene sections 501 and 502 of the Code.
Section 501 of the Bankruptcy Code limits those who may file a proof of claim; its relevant provisions are as follows:
(a) A creditor or an indenture trustee may file a proof of claim. . . .
(b) If a creditor does not timely file a proof of such creditor's claim, an entity that is liable to such creditor with the debtor, or that has secured such creditor, may file a proof of such claim.
(c) If a creditor does not timely file a proof of such creditor's claim, the debtor or the trustee may file a proof of such claim.
*105 ....
11 U.S.C. § 501.
The Bankruptcy Code defines "creditor" as an "entity that has a claim against the debtor at the time of or before the order for relief concerning the debtor." 11 U.S.C. § 101(10)(A) (emphasis added). Claim is defined as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." 11 U.S.C. § 101(5)(A). Section 502 of the Code provides in relevant part that if "objection to a claim is made, the court . . . shall determine the amount of such claim . . . as of the date of the filing of the petition . . ." 11 U.S.C. § 502(b) (emphasis added).
Under the States' respective unclaimed property laws, unclaimed property is deemed abandoned after a specified dormancy period. At the time the property is deemed abandoned, the States become entitled to custody of the property. Thus, with respect to the property deemed abandoned pre-petition, the States were entitled to possession of the property pre-petition. In re Drexel Burnham Lambert Group Inc., 151 B.R. 684, 688 (Bankr.S.D.N.Y.1993). Where the Debtors did not report and deliver possession of the unclaimed property pre-petition, the States acquired claims against the Debtors that arose pre-petition in the amount of the missing persons' property held by Continental and deemed abandoned under the respective States' escheat laws. Id. at 688-89. Thus, with respect to the property deemed abandoned pre-petition, the States were creditors within the meaning of the Bankruptcy Code. They correctly filed proofs of claim as creditors in their own right in compliance with sections 501 and 502 of the Code.
Continental's second assertion is that the allowance of the States' escheat claims would contravene the filing requirements for proofs of claim under section 1111(a) and Rule 3003. According to Continental, since the missing creditors could later claim their property under their respective state's laws, allowance of their claims would permit missing creditors whose claims were not scheduled and who did not file proofs of claim to circumvent the bar date.
Section 1111(a) and Rule 3003, inter alia, require a creditor to file a proof of claim on or before the bar date unless his claim is listed on the debtor's schedules as undisputed. 11 U.S.C. § 1111(a); F.R.Bankr.P. 3003. These requirements of the Bankruptcy Code were met by the States when they timely filed their proofs of claim. "It is the states who have the claims and are therefore, entitled to file proofs of claims, by virtue of their abandoned property laws." Federated Department Stores, No. C-1-92-195, slip op. at 9. Contrary to Continental's assertion, the fact that the missing creditors may later seek property from the States does not implicate section 1111 and Rule 3003(c). Id.
Continental next asserts that the States' escheat claims must be disallowed because they are inconsistent with Continental's confirmed Plan, i.e., section 10.5 of the Plan provides that after two years from the earlier of any Distribution Date or the Final Distribution Date, "unclaimed distributions" will be redistributed for the benefit of all other Allowed General Unsecured Claims. Any distributions remaining unclaimed for two years after the Final Distribution Date revert to Continental. Because none of the States objected to confirmation of the Plan on the basis of these unclaimed distribution provisions, Continental maintains they are barred now from claiming that such distributions should be made to them. In light of this Court's finding that, with regard to property deemed abandoned pre-petition, the States are creditors in their own right who have properly filed proofs of claim, the property at issue does not fall within the Plan's "unclaimed distributions."
In the same vein, Continental contends that allowance of the States' escheat claims would contravene the distribution scheme of section 1123(a)(4) of the Code. It is the position of the Debtors that since each State has its own method of distributing funds, Debtors' similarly situated creditors would receive different treatment. The Court also finds this argument without merit with respect to the States' claims for property deemed abandoned prepetition. As creditors *106 in their own right, the States are the subject of the distributions under the Plan and receive those distributions in accordance with section 1123(a)(4). Federated Department Stores at 16. Any subsequent distributions by the States to now missing creditors does not implicate the provisions of the Code. Id.
For the same reason, i.e., that the States properly filed proofs of claims as creditors in their own name, section 347(b) does not apply to the States' escheat claims for property deemed abandoned pre-petition.
C. Property Deemed Abandoned Post-Petition.
The States assert without legal argument that they are also entitled to recover property unclaimed pre-petition but deemed abandoned post-petition upon expiration of the States' respective dormancy periods but prior to confirmation of Continental's Plan. The Court finds this position without merit, however. With respect to the property deemed abandoned post-petition but prior to Continental's bankruptcy discharge, the States are not creditors as defined in the Code, i.e. entities that have claims against the debtor "that arose at the time of or before the order for relief concerning the debtor." Federated Department Stores at 18 (emphasis in original); see also, Drexel Burnham Lambert, 151 B.R. at 689. This is because the Debtors do not have a legal obligation to turn the property over under the States' unclaimed property statutes until the dormancy period expires. Federated Department Stores at 18. It is therefore, the opinion of the Court that, to the extent the States' proofs of claim relate to property to which the States assert a right that arose post-petition, the States' statutes on which those claims are based are in conflict with and consequently, preempted by the Bankruptcy Code. Id.
Based on the foregoing analysis, it is unnecessary for the Court to reach the States' alternative argument that, even if their claims are not viewed as independent claims, those claims should be allowed on the ground that the States act as conservators for persons who have not claimed their property for a specified period of time.
V. Conclusion:
For the foregoing reasons, Continental's objection to the States' escheat claims is OVERRULED IN PART AND SUSTAINED IN PART. The States' escheat claims are not preempted by the Supremacy Clause in so far as they are claims for property which under the respective state laws was deemed abandoned pre-petition. The States' escheat claims are preempted by the Supremacy Clause in so far as they are claims for property which under the respective state laws was deemed abandoned post-petition.
An Order in accordance with this Memorandum Opinion is attached.
ORDER
AND NOW, October 7, 1993, for the reasons stated in the attached Memorandum Opinion,
IT IS ORDERED THAT:
1. The objection of Continental Airlines, Inc., et al. to the States' escheat claims is SUSTAINED in-so-far as it relates to property deemed abandoned post-petition.
2. The objection of Continental Airlines, Inc., et al. to the States' escheat claims is OVERRULED in so far as it relates to property deemed abandoned pre-petition.
ORDER
AND NOW, November 16, 1993, the Treasury Department of the State of Texas having been inadvertently omitted in the Memorandum Opinion and Order dated October 7, 1993,
IT IS ORDERED THAT:
1. The objection of Continental Airlines, Inc., et al. to the Treasury Department of the State of Texas' escheat claims is SUSTAINED in-so-far as it relates to property deemed abandoned post-petition.
*107 2. The objection of Continental Airlines, Inc. et al. to the Treasury Department of the State of Texas' escheat claims is OVERRULED in-so-far as it relates to property deemed abandoned pre-petition.
NOTES
[*] Reissued Nov. 16, 1993, as to the Treasury Department of the State of Texas which was inadvertently omitted Oct. 7, 1993. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548901/ | 161 B.R. 557 (1993)
In re BANK OF NEW ENGLAND CORPORATION, Debtor.
Ben S. BRANCH, Trustee, Plaintiff,
v.
ROPES & GRAY, Defendant.
Bankruptcy No. 91-10126. Adv. No. 93-1017.
United States Bankruptcy Court, D. Massachusetts.
November 18, 1993.
*558 Van Oliver, Andrews & Kurth, Dallas, TX, for plaintiff.
Richard W. Renehan, Sara Miron Bloom, Kurt S. Kusiak, Hill & Barlow, Boston, MA, for defendant.
Memorandum Decision on Defendant's Motion for Summary Judgment
WILLIAM C. HILLMAN, Bankruptcy Judge.
On January 8, 1993, the trustee commenced an adversary proceeding pursuant to 11 U.S.C. § 547(b) against defendant, Ropes & Gray ("R & G") to avoid a series of ten allegedly preferential transfers. The defendant filed an answer and later a motion for summary judgment (the "motion") pursuant to FRCP 56, made applicable to these proceedings by FRBP 7056. The trustee filed an objection.
The Court held a hearing on the motion and the opposition on September 8, 1993. At the hearing, both parties agreed that this case was an appropriate one for summary judgment, and the Court indicated that it could award summary judgment to either party despite the fact that the trustee did not file a cross motion. See National Expositions Inc. v. Crowley Maritime Corp., 824 F.2d 131, 133 (1st Cir.1987); Piccicuto v. Rex (In re Rex), 150 B.R. 505 (Bankr.D.Mass. 1993). The Court then took the matter under advisement.
The Court finds that this case is an appropriate one for summary judgment as to most issues. The material facts are not disputed; only the legal significance and interpretation of those facts is in question.
The statements of fact which appear below constitute the Court's findings of fact. Conclusions of law will appear as appropriate.
FACTS
On January 7, 1991, the Bank of New England Corporation ("BNEC" or the "Debtor") filed its petition under Chapter 7 of the Code. In November 1989, R & G had been retained by BNEC to provide legal services with relation to three specific matters: a shareholder derivative suit; an investor class action; and litigation involving the SEC.
From October 10, 1990 through December 21, 1990, BNEC made ten payments (the "challenged payments") to R & G by check or wire transfer totalling $614,889.08. All of these transfers occurred within ninety (90) days of BNEC's petition date. Each of the ten payments was for services provided by R & G in the matters mentioned above. BNEC made all of the subject payments pursuant to invoices issued to it by R & G. The trustee contends that the ten payments constitute voidable preferences under 11 U.S.C. § 547(b).
DISCUSSION
FRCP 56 provides that summary judgment shall be granted:
"forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party *559 is entitled to judgment as a matter of law."
The burden of proof is on the moving party to demonstrate the lack of a genuine issue of material fact. In re Wang Laboratories, Inc., 155 B.R. 289, 290 (Bankr.D.Mass.1993), and cases cited. The trustee has the burden of establishing the elements of a preferential transfer under § 547(b). 11 U.S.C. § 547(g). The burden of proving the elements of affirmative defenses under § 547(c) rests with the defendant. Hickey v. Nightingale Roofing, Inc. (In re Alter-Hall Construction Co., Inc.), 73 B.R. 989, 992 (Bankr.D.Mass.1987), aff'd 83 B.R. 180 (1988).
In its answer and motion for summary judgment, R & G does not dispute that the subject payments satisfy the conditions of § 547(b). However, R & G asserts an affirmative defense of "ordinary course of business" payments under § 547(c)(2). For purposes of the motion for summary judgment, the Court will consider the § 547(b) preference elements to be admitted and will direct its discussion to the merits of R & G's affirmative defense.
The trustee may not avoid a transfer to the extent that the transfer (1) was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of both the debtor and the transferee; (2) the transfer was made in the ordinary course of business or financial affairs of the debtor and the transferee; and (3) according to ordinary business terms. § 547(c)(2)(A-C).
The focus of the parties in this case is upon the second element, whether payment was made in the ordinary course of the parties' business. The other two factors are not in dispute.
The purpose of the "ordinary course" exception is "to leave undisturbed normal financial relations . . ." Courtney v. Octopi, Inc. (In re Colonial Discount Corp.), 807 F.2d 594 (7th Cir.1986), cert. denied, 481 U.S. 1029, 107 S. Ct. 1954, 95 L. Ed. 2d 526 (1987), because an otherwise preferential transfer made "in the ordinary course of business" does not detract from the general policy of § 547(b) of discouraging unusual action by the debtor or its creditors during the debtor's slide into bankruptcy. WJM, Inc. v. Massachusetts Department of Welfare, 840 F.2d 996, at 1010 (1st Cir.1988).
The Code does not define "ordinary course," but, the courts have considered the issue in a multitude of cases. "To qualify for the ordinary course exception, a creditor must prove that: (1) a debt and its payment are ordinary in relation to past practices between the debtor and the particular creditor; and (2) the payment was ordinary in relation to prevailing business standards." WJM, Inc. v. Massachusetts Department of Welfare, 840 F.2d 996, 1010-11 (1st Cir.1988); Mordy v. Chemcarb, Inc., (In re Food Catering & Housing, Inc.), 971 F.2d 396, 398 (9th Cir.1992).
R & G's employment began in November 1989. R & G submitted to the Court a "Billing/Payment Summary" (see below) which illustrates R & G's billing history of BNEC during the year prior to the BNEC bankruptcy. From January 26, 1990 to August 8, 1990, R & G sent fifteen (15) invoices to BNEC for legal services. All of the payments made by BNEC during this period were made outside of the ninety (90) day preference period and are not the subject of this adversary proceeding.
Invoice Date Amount Paid On # of Days Outstanding
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1/26/90 $12,744.11 2/26/90 31
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3/21/90 $25,954.71 6/20/90 91
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4/24/90 $12,626.82 5/21/90 27
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5/04/90 $50,541.24 7/13/90 70
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5/15/90 $15,560.20 6/18/90 34
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5/16/90 $14,685.72 6/18/90 33
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6/11/90 $ 2,657.31 6/16/90 5
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7/02/90 $ 2,343.83 7/26/90 24
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7/02/90 $35,717.03 7/26/90 24
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*560
Invoice Date Amount Paid On # of Days Outstanding
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7/02/90 $40,124.42 7/26/90 24
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7/13/90 $50,864.17 9/20/90 69
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7/13/90 $44,764.27 8/28/90 46
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7/16/90 $44,459.92 8/28/90 43
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8/24/90 $30,942.23 9/21/90 28
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8/24/90 $38,496.83 9/21/90 28
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R & G submits that this evidence should be relevant to the Court's analysis because the twelve month period preceding the preference period is an appropriate standard for determining the ordinary course of business between parties, citing Lovett v. St. Johnsbury Trucking, 931 F.2d 494, 498 (8th Cir.1991). This Court agrees.
For purposes of comparison, R & G also provided the Court with a billing chart of the ten payments made by BNEC to R & G during the preference period.
Invoice Date Amount Paid On # of Days Outstanding
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8/24/90 $ 74,411.12 10/15/90 52
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8/27/90 $ 82,073.20 12/29/90 124[1]
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9/07/90 $114,614.27 11/01/90 55
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9/07/90 $ 35,644.09 10/19/90 42
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10/12/90 $ 33,841.39 11/28/90 47
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10/12/90 $ 86,977.28 12/10/90 59
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11/16/90 $ 52,484.28 12/28/90 42
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11/16/90 $ 27,397.50 12/28/90 42
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11/16/90 $ 80,197.88 12/28/90 42
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R & G argues that the payment practices of BNEC during the pre-preference period and during the preference period were sufficiently consistent with each other to establish the "ordinary course of business" standard. In opposition, the trustee argues that the difference between the 54.7 day average outstanding during the preference period and the 38.4 day pre-preference average is significant enough to render the challenged payments outside of the ordinary course of business. In support, the trustee argues that all ten of the challenged payments were made outside the 38.4 pre-preference average, and he adds that the statistical probability of this occurring is approximately one in 10,000.[2]
While the Court does not question the accuracy of the trustee's mathematics or statistical computations, the Court does not find that the difference between the two averages is significant, with the exception of the payment made on December 29, 1990. The pre-preference practice of BNEC was to pay its R & G bills a little more than one month after the invoice date; the preference period practice was for BNEC to pay its R & G bills less than two months after the invoice date. Even though the preference period average is higher, the timing is still consistent with BNEC's general goal of paying its R & G bills "between 30 and 60 days after receipt of *561 the bill." (Affidavit of Donald Williams, a member of the BNEC legal department at all relevant times).
A comparison of the averages of both periods gives this Court a holistic view of the parties' ordinary business conduct, and the Court finds that the average timing of the payments made during the preference period to be consistent with the prior practices of the parties.[3]
The trustee asserts a number of counter arguments to R & G's "ordinary course of business" defense. First, he argues that the R & G bills for services supplied from December 1989 through July 1990 were issued by R & G 29 days after the end of the month in which services were supplied, but on average, bills for services paid within the preference period were issued 11.25 days after the month of service ended. This was done, the trustee argues, to suit R & G's need to obtain payment before BNEC's ability to pay would evaporate.
The Court does not find the difference between billing dates to be sufficient to render BNEC's preference payments outside the ordinary course. To qualify for the ordinary course exception, a creditor must prove that a debt and its payment are ordinary in relation to past practices between the parties. The fact that R & G issued its bills to BNEC an average of 17.75 days more quickly during the preference period does not suggest that the debts they represented were not incurred in the ordinary course, nor does it change the fact that the payment of these bills was consistent with the prior practices of the parties, as noted above.
Next, the trustee alleges that R & G augmented its collection efforts during the preference period as it became aware of BNEC's worsening financial condition. According to the trustee, the challenged payments were paid to R & G in response to the "heightened efforts," and such efforts render the challenged payments outside the ordinary course, citing Marathon Oil Co. v. Flatau (In re Craig Oil), 785 F.2d 1563 (11th Cir.1986).
In Craig, the Court stated that § 547(c)(2) should not protect payments made in response to "unusual" debt collection practices. "Thus, whenever the bankruptcy court receives evidence of unusual collection efforts, it must consider whether the debtor's payment was in fact a response to those efforts." Id. at 1566.
In support of his argument, the trustee points to eleven cover letters sent to BNEC with R & G bills which noted that some amounts remained outstanding. The first letter (listed as "Plaintiff's Dep. Ex. 15 at 2) dated August 2, 1990, states in part: "Our Accounting Department has informed me that our May 1990 statements remain outstanding. I greatly would appreciate any help that you could gave us with respect to them." The second letter (listed as "Plaintiff's Dep. Ex. 17 at 2") dated September 10, 1990 states in part: "I understand that our June 1990 . . . and our July 1990 statements are now with your accounts payable department. Thank you for your assistance with respect to them." The subsequent letters make substantially the same request of BNEC, i.e. to pay the outstanding bills.
The trustee argues that the pattern established in these letters "contrasts sharply" with cover letters and billing statements sent to BNEC in the pre-preference period, wherein no mention was made of outstanding invoices.
The Court does not find that R & G's requests rise to the status of "unusual collection efforts;" R & G requests were, in fact, quite mild. In Lovett v. St. Johnsbury Trucking, 931 F.2d 494 (8th Cir.1991), the court held: "[the creditor's request] . . . that [the debtor] accelerate its payments `as much as possible' [does] not undermine our conclusion that the 12-month period fairly reflected the parties' ordinary course of business. It is hardly unusual for a creditor to urge its *562 debtor to pay more promptly." Id., at 499. This Court agrees with Lovett and does not find R & G's collection efforts during the preference period sufficient to render the challenged payments outside the ordinary course of business.
The trustee's next argument involves the circumstances and nature of the legal matters for which R & G was hired. In November 1989, R & G was hired by BNEC to defend it in a shareholder derivative suit (the "shareholder action") and in a class action (the "class action") commenced by purchasers of BNEC securities. In May 1990, R & G was asked to represent BNEC in connection with an investigation by the Securities and Exchange Commission (the "SEC litigation").
When R & G began its representation of BNEC in the shareholder and class actions, it was aware that BNEC's directors' and officers' liability insurance policy might cover the legal bills associated with the defense. No such coverage was available for legal bills incurred on the SEC litigation. The directors' and officers' policy had a $1 million deductible, requiring R & G to bill at least $1 million for work done on behalf of the officers and directors before R & G could seek payment from the insurance company.
The trustee avers that although R & G was under pressure to bill at least $1 million on the shareholder and class actions, it found itself in a position where it needed to devote most of its time to the SEC matter. According to the trustee, R & G adopted a new billing strategy to meet the $1 million mark so that it could seek reimbursement from BNEC's insurance policy.
R & G's "new billing strategy" was to revise its previous bills by allocating to the shareholder and class actions $42,000 which had previously been allocated to the SEC litigation. The trustee adds that R & G began to allocate from 50-66% of its time on the SEC litigation to the shareholder and class action bills in order to meet the $1 million mark.
R & G's bill revisions were described in the deposition of John D. Donovan Jr., a partner at R & G who supervised the BNEC defense. Pages 113-116 of Donovan's state, in relevant part:
Q: "Do you have any knowledge . . . regarding rates of attorneys working on BNEC matters during May 1990 or a need to revise the May 1990 professional statement?"
A: "Yes"
Q: "Do you know why Mr. Cameo requested revised May 1990 professional statements?"
A: "Yes, . . . My memory is that attorneys at Ropes and Gray working on the various matters . . . tended to record their time to a single file symbol although the work could properly be attributed to either the class action or the derivative action, or starting the end of May, the SEC investigation. We wanted to make sure the most accurate allocation of attorney time to these three matters occurred, particularly insofar as the work done on the SEC investigation was also useful in the defense of the derivative and class action litigation in order to have the best argument with Aetna about when their first dollar of coverage would kick in."
Q: "Do you recall who raised the issue in the first instance as between BNEC and Ropes and Gray?"
A: "I just don't remember."
The revised billing method was first memorialized in a cover letter sent to BNEC by R & G, dated August 2, 1990, which stated in part:
"Pursuant to our discussion last week, I enclose revised June 1990 professional statements that reallocate certain of our charges for services rendered in responding to this summer's SEC subpoena duces tecum. We agree that much of the information that we have gained during the SEC document production is of direct benefit to our defense of the two private actions, and that it is accordingly appropriate for a certain amount of our document production time charges to be reallocated to each of the private suits."
It is clear from both Donovan's deposition and the August cover letter that work done on all three of the actions could have been allocated to the two actions which were covered by insurance, and the Court does not *563 find anything unusual about R & G's billing conduct in that regard. In addition, the Court notes that the revised billing method was conceived in May 1990, first applied to invoices for June 1990, and first implemented and explained to BNEC in August 1990. The practice continued throughout the preference period. All of these dates precede the preference period which began on October 8, 1990, and therefore the practice during the preference period did not alter the prior course of dealings between the parties.
The payment dated December 29, 1990 in the amount of $82,073.20 was made by the Debtor on behalf of one of its subsidiaries, BNE, N.A. This bill was paid by the Debtor's check, but it was for services rendered to the subsidiary. According to the defendant, although such a legal expense was routinely paid from the Debtor's operating account, it should have been allocated back to BNE, N.A. and is not properly sought by the trustee as a transfer of an interest of the Debtor. The Court finds, however, that the payment represented a transfer of the Debtor's property under 11 U.S.C. § 541 and is rightly a part of the Court's analysis on the instant motion.
R & G has sustained its burden of proving the "ordinary course" exception as to nine of the ten challenged payments. However, it has not sustained this burden with respect to the December 29th payment, nor has it sustained its burden of establishing an absence of disputed material facts with regard to this payment.
This payment was made 124 days from the date of its corresponding invoice, or 85.6 days more than the pre-preference average payments. The variation is too high for the Court to accept in the absence of mitigating factors. R & G argues that this payment was delayed because it represented the total bill for work done on a lender liability case for BNE, N.A., and that such bill needed to be approved by a bank officer. R & G also suggests as an explanation that payment was delayed because confusion existed as to which BNEC "cost center" to charge the expense. The trustee disputes both arguments and asserts that no such confusion existed, and even if it did that the 124 day delay was not consistent with BNE, N.A. payment history. This is a disputed issue of fact which makes summary judgment inappropriate as to this payment.
Conclusion
The Court finds that except for the December 29, 1990 payment, R & G has sustained its burden in its motion for summary judgment. Summary judgment will be entered in favor of R & G as to all payments except the December 29, 1990 payment. A pre-trial conference will be scheduled in the ordinary course with regard to this payment.
NOTES
[1] This invoice will be considered separately, infra.
[2] The Court appreciates that the trustee's statistical analysis includes the December 29, 1990 payment, but this is not important, as will be seen.
[3] The trustee argues that the Court's analysis should also be directed to an examination of the three payments made by BNEC closest in time to the beginning of the preference period. According to the trustee, such an examination would reveal that the average lapse between invoicing and payment in the three months before the start of the preference period is reduced to 31 days, more than 23 days less than the lapse of 54.7 days that was the pattern during the preference period. Even if the Court were to accord more weight to the payments made closest to the preference period, the amount of the variance is still insufficient to convince the Court that the challenged payments were outside of the ordinary course of business. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548893/ | 161 B.R. 563 (1993)
In re CONSTITUTION PLAZA ASSOCIATES LIMITED PARTNERSHIP, Debtor.
Bankruptcy No. 92-52031. Document Nos. 138-1, 138-2.
United States Bankruptcy Court, D. Connecticut.
December 15, 1993.
*564 Richard F. Casher, Hebb & Gitlin, P.C., Hartford, CT, for movant UNUM.
James Berman, Zeisler & Zeisler, P.C., Bridgeport, CT, for respondent debtor.
Joseph L. Clasen, Robinson & Cole, Stamford, CT, for respondent FNB.
Robert S. Matlin, Camhy, Karlinsky & Stein, New York City, for respondent Gaincred.
MEMORANDUM AND ORDER ON MOTION OF UNUM LIFE INSURANCE COMPANY OF AMERICA FOR ORDER (1) DETERMINING THAT CLASSIFICATION OF ALLEGED DEFICIENCY CLAIMS OF FIRST NATIONWIDE BANK AND GAINCRED III CORP. IN THE DEBTOR'S AMENDED PLAN IS IMPROPER AND (2) COMPELLING DELETION OF SUCH CLAIMS FROM CLASS 4 OF DEBTOR'S AMENDED PLAN
ALAN H.W. SHIFF, Bankruptcy Judge.
BACKGROUND
The debtor commenced this case by filing a voluntary chapter 11 petition on June 17, 1992. On May 18, 1993, the debtor filed an Amended Plan of Reorganization (the "Plan"). The movant UNUM Life Insurance Company of America ("UNUM") filed a proof of claim alleging that it holds a $17,471,874.03 non-recourse claim secured by a first priority lien in certain real property of the debtor. First Nationwide Bank ("FNB") and Gaincred III Corp. ("Gaincred") each hold non-recourse secured claims, and Hoosac Property Corp. ("Hoosac") holds an unsecured claim. The Plan proposes to treat each of the claims of UNUM, FNB, and Gaincred as undersecured with the result that those claims will be bifurcated, see § 506(a), and treated in part as secured claims and in part as unsecured claims.
The Plan proposes the following classification and treatment of the claims described above:
Class 1: The secured portion of UNUM's claim. The Plan proposes that the debtor will retain UNUM's collateral subject to its lien and pay its secured claim in deferred cash payments. Plan at ¶ 5.01.
Class 2: The secured portion of FNB's claim. The Plan provides: "In full, complete and final satisfaction of all secured claims of FNB, the Debtor shall permit FNB to liquidate its collateral." Plan at ¶ 5.02.
Class 3: The secured portion of Gaincred's claim. The proposed treatment is identical to that of FNB. Plan at ¶ 5.03.
*565 Class 4: The deficiency claims of UNUM, FNB, and Gaincred, and the claim of Hoosac. These claims will receive their pro rata share of 60 percent of certain "new equity" to be issued under the Plan. Plan at ¶ 5.04.
UNUM filed the instant motion on July 12, 1993, seeking a determination that the foregoing classification scheme is improper and compelling the debtor to delete the alleged deficiency claims of FNB and Gaincred from Class 4. See Rule 3013 F.R.Bankr.P.[1] UNUM argues that under the so-called "sale exception" to § 1111(b), the claims of FNB and Gaincred may not be allowed as though those creditors had recourse against the debtor, and that the Plan therefore improperly proposes to pay the alleged deficiency claims of those creditors in Class 4. For the reasons that follow, I concur with that argument.
DISCUSSION
Section 1111(b)(1)(A) provides in relevant part:
A claim secured by a lien on property of the estate shall be allowed or disallowed under section 502 of this title the same as if the holder of such claim had recourse against the debtor on account of such claim, whether or not such holder has such recourse, unless
. . . . .
(ii) such holder does not have such recourse and such property is sold under section 363 of this title or is to be sold under the plan. (emphasis added).
Thus, while the non-recourse claims of FNB and Gaincred must generally be allowed as though they are recourse claims, that rule does not apply if their collateral "is to be sold under the plan." The issue is whether the collateral is to be "sold" within the meaning of § 1111(b)(1)(A)(ii) where the Plan provides that the creditors may "liquidate" the collateral in "full, complete and final satisfaction" of their secured claims.
Section 1111(b) is designed to prevent a nonrecourse secured creditor from being "`cashed out' by a payment equal to the value of its collateral." In re Broad Assocs. Ltd. Partnership, 125 B.R. 707, 712 (Bankr. D.Conn.1991). Congress enacted the provision to prevent the result in Great Nat'l Life Ins. Co. v. Pine Gate Assocs., Ltd., 2 B.C.D. 1478 (Bankr.N.D.Ga.1976), in which a plan of arrangement limited non-recourse creditors' secured claims to the appraised value of the property and made no provision for any deficiency claim. The creditors argued to no avail that they had not received the benefit of their bargain, which was either to be paid in full or to be allowed to foreclose on their collateral. See Tampa Bay Assocs., Ltd. v. DRW Worthington, Ltd. (Matter of Tampa Bay Assocs., Ltd.), 864 F.2d 47, 50 (5th Cir. 1989). Congress intended that § 1111(b) would ensure that non-recourse secured creditors would receive the full benefit of their bargain. The holder of a claim secured by property to be sold under § 363 or the plan is excluded from recourse benefits because of that holder's right to bid in the full amount of its allowed claim under § 363(k). See Statement of Congressman Edwards, 124 Cong.Rec. H11089 (Sept. 28, 1978), reprinted in 1978 U.S.Code Cong. & Admin.News 6436, 6474; Statement of Senator DeConcini, 124 Cong.Rec. S17406 (October 6, 1978), reprinted in 1978 U.S.Code Cong. & Admin.News 6505, 6543.
In recognition of that unambiguous congressional intent, courts have uniformly held that if a creditor is afforded the right to foreclose on or otherwise receive the return of its collateral, whether pursuant to a plan or otherwise, the creditor is not entitled to receive recourse treatment under § 1111(b). For example, in Nat'l Real Estate Ltd. Partnership-II v. Consolidated Capital Properties (In re Nat'l Real Estate Ltd. Partnership-II), 104 B.R. 968, 974 (Bankr.E.D.Wis. 1989), the court found that § 1111(b) was intended to "protect the nonrecourse, undersecured creditor where that creditor is *566 not given an opportunity to purchase the collateral at a sale or where the debtor intends to retain the property and not repay the debt in full." The court held that where a nonrecourse creditor obtained relief from stay and was the successful bidder at a sheriff's auction, the creditor had exercised its right to a credit bid and received all of the protections to which it was entitled under § 1111(b), and the foreclosure sale was the functional equivalent of a § 363 sale. Accord T-H New Orleans Ltd. Partnership v. Fin. Sec. Assurance, Inc. (Matter of T-H New Orleans Ltd. Partnership), 5 F.3d 86, 89 (5th Cir.1993) (a plan need not treat a non-recourse creditor's § 1111(b) deficiency claim where the plan provided that the debtor would market the property for two years, with the secured creditor to have the right to a credit bid at any sale, and then deed the property to the secured creditor at the end of the two year period if no purchaser could be found); Matter of Tampa Bay Assocs., Ltd., supra, 864 F.2d at 50 (the purported deficiency claim of a non-recourse creditor was properly disallowed where the creditor had obtained relief from stay and foreclosed on its collateral); In re Union Meeting Partners, 160 B.R. 757, 770 (Bankr.E.D.Pa.1993) (a non-recourse secured creditor's plan could not be confirmed where it provided that the debtor return the collateral and preserved the creditor's deficiency claim under § 1111(b)); In re Western Real Estate Fund, Inc., 109 B.R. 455, 465 (Bankr.W.D.Okl.1990) (a plan that transferred collateral to a nonrecourse secured creditor was found to be the equivalent of a "sale" so that the creditor was not also entitled to a deficiency claim as a creditor with recourse); In re Woodbridge North Apartments, Ltd., 71 B.R. 189, 191-92 (Bankr.N.D.Cal.1987) (where a plan proposed to sell a nonrecourse creditor's collateral to a new entity, and the creditor had no right to credit bid at the sale, the creditor did not lose its right to be treated as a recourse creditor because the creditor was stripped of its right to receive the collateral unless it was outbid at auction); Matter of DRW Property Co. 82, 57 B.R. 987, 993 (Bankr.N.D.Tex. 1986) ("The failure to include abandonments or motions to lift stay in the specific statutory exceptions to the recourse treatment of non-recourse claims under § 1111(b) has been considered an unintentional omission, rather than an expression of Congressional intent, because the effect of abandonment or relief from the stay is the same as the effect of a sale under § 363 or the plan."); 5 Lawrence P. King, ed., Collier on Bankruptcy ¶ 1111.02[3], at p. 1111-33 (15th ed. 1993) ("The effect of abandonment is the same as the effect of a sale under section 363 or under the plan.").
The respondents cite no authority that contradicts the foregoing authority but argue that under the plain language of § 1111(b)(1)(A)(ii) property is not "sold" under the Plan if it merely provides that the creditors may "liquidate" their collateral. They argue that there is a distinction between a "sale" and an "abandonment." Compare, e.g. § 363 with § 554. They also point out that Congress chose not to use the broadly defined term "transfer" in § 1111(b)(1)(A)(ii). See § 101(58)[54].
It is of course true that "[t]he plain meaning of legislation should be conclusive, except in the `rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.'" United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 242, 109 S. Ct. 1026, 1031, 103 L. Ed. 2d 290 (1989) (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S. Ct. 3245, 3250, 73 L. Ed. 2d 973 (1982)). In light of the legislative history described above, this may be such a rare case. The court in Matter of DRW Property Co. 82, supra, 57 B.R. at 993, reached that conclusion. That court decided that foreclosures or abandonments outside of the context of any plan were the functional equivalent of sales under § 363. I need not reach that conclusion here, however, because I agree with UNUM that the plain language of § 1111(b)(1)(A)(ii) indicates that the sale exception applies.
In the instant case, and unlike the court in Matter of DRW Property Co. 82, I must decide not whether the proposed disposition is the functional equivalent of a § 363 sale, but rather whether the collateral "is to be sold under the plan." I conclude that it *567 is. "Courts properly assume, absent sufficient indication to the contrary, that Congress intends the words in its enactments to carry `their ordinary, contemporary, common meaning.'" Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. Partnership, ___ U.S. ___, ___, 113 S. Ct. 1489, 1495, 123 L. Ed. 2d 74 (1993) (quoting Perrin v. United States, 444 U.S. 37, 42, 100 S. Ct. 311, 314, 62 L. Ed. 2d 199 (1979)); cf. First Brandon Nat'l Bank v. Kerwin (In re Kerwin), 996 F.2d 552, 558 (2d Cir.1993) ("Absent any evidence that Congress . . . sought to restrict what property could be transferred under § 1225(a)(5)(B), we are unwilling to read narrowly its broad language to restrict the usual expansive understanding comprised by the term `property.'"). As ordinarily used, a sale is "`a transfer of property for a fixed price in money or its equivalent.'" Commissioner v. Brown, 380 U.S. 563, 571, 85 S. Ct. 1162, 1166, 14 L. Ed. 2d 75 (1965) (construing the Internal Revenue Code) (quoting Iowa v. McFarland, 110 U.S. 471, 478, 4 S. Ct. 210, 215, 28 L. Ed. 198 (1884)); accord Black's Law Dictionary 1200 (5th ed. 1979).
Under the Plan, the collateral of FNB and Gaincred or its money equivalent will be transferred to them, either by direct transfer or by the debtor's relinquishment of its property rights and its right to protection of the automatic stay.[2] In consideration of that transfer, valuable secured claims held by the creditors will be fully satisfied. The debtor may not avoid the characterization of the transaction as a sale by couching it in terms that suggest the debtor's role will be a passive one. Further, the fact that Congress did not use the term "abandonment" or "transfer" provides no support for the debtor's position. Neither term describes what the Plan proposes to do as accurately as the term "sale." An abandonment under § 554 returns the abandoned property to the control of the debtor as though there had been no bankruptcy. In re McGowan, 95 B.R. 104, 106 (Bankr.N.D.Iowa 1988); H.R.Rep. No. 595, 95th Cong., 1st Sess. 377 (1977), reprinted in 1978 U.S.Code Cong. & Admin.News 5963, 6333; S.Rep. No. 989, 95th Cong., 2nd Sess. 92 (1978), reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5878 ("Abandonment may be to any party with a possessory interest in the property abandoned."); cf. Black's Law Dictionary, supra, at 1200 ("An abandonment must be made without any desire that any other person shall acquire the thing abandoned, since if it is made for a consideration it is a `sale' or `barter,' and if made without consideration, but with an intention that some other person shall become the possessor, it is a `gift.'"). Here, the Plan clearly contemplates that the collateral, or at least its worth in money if the creditors are outbid at any sale of the collateral, will be returned to the creditors in consideration for the satisfaction of their secured claims. The debtor's argument to the contrary notwithstanding, the defined term "transfer" is unnecessarily broad in this context in that it would include conditional dispositions, the retention of title as a security interest, and dispositions where no consideration flowed to the estate.
Irrespective of whether the creditors' "liquidation" of their collateral is to occur through the taking or retention of possession of the collateral, public or private sale, or conveyance in lieu of such sale, the property is to be "sold" under the Plan, the creditors will receive the full benefit of their bargain, and they therefore have no right to recourse treatment under § 1111(b).
ORDER
Because the Plan impermissibly provides for both the return of collateral to FNB and Gaincred and the treatment of their alleged deficiency claims in Class 4, it is determined that the Plan is not confirmable as a matter of law, and IT IS SO ORDERED.
NOTES
[1] Rule 3013 Fed.R.Bankr.P. provides: "For the purposes of the plan and its acceptance, the court may, on motion after hearing on notice as the court may direct, determine classes of creditors . . . pursuant to § 1122. . . ." That rule "recognizes that it may be desirable or necessary to establish proper classification before a plan can be formulated." Advisory Committee Note (1983).
[2] It appears that the collateral of FNB and Gaincred includes certain promissory notes executed by the debtor's limited partners, Plan at ¶¶ 4.02, 4.03, and, at least in the case of Gaincred, certain limited partnership interests in the debtor. See Memorandum of Gaincred, August 27, 1993, at p. 3. The respondents do not argue that applicable law limits the creditors' right to either retain that collateral or receive payment of their allowed claims in full at a public or private sale of the collateral. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857977/ | IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-90-323-CR
KIRK ANDREW WRIGHT, a/k/a KURT ALLEN WHITE
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 167TH JUDICIAL DISTRICT
NO. 104,554, HONORABLE BOB JONES, JUDGE
Appellant entered a plea of guilty before the court to the offense of possession of
a controlled substance, cocaine, in an amount less than 28 grams. See Texas Controlled
Substances Act, Tex. Health & Safety Code Ann. § 481.115(b) (Pamph. 1992). Punishment was
assessed at ten years, probated.
In a single point of error, appellant asserts the court erred in refusing appellant's
motion to suppress evidence seized in violation of both Texas and United States law. We overrule
appellant's point of error and affirm the judgment of the trial court.
Austin Police Officer Douglas Osgood, the sole witness at the motion to suppress
hearing, testified that he and a fellow officer were on foot patrol about 11:30 p.m. on August 3,
1990, on East Sixth Street in Austin when "we heard some loud noises that sounded like either
backfires or gunshots." The officers turned on to Brazos Street where Osgood observed two men
standing next to a white van at the intersection of Seventh Street. The officers assumed the noises
they had heard came from the van. The van started rolling backward, a distance Osgood
estimated to be "roughly, 200 feet." Osgood related "the van was rolling backward, obviously
too fast -- to being going backwards, because the driver obviously didn't have complete control
of it, from the way it was swerving in the lane."
Upon arriving at the place where the vehicle ultimately came to a stop, Osgood
"looked inside" the van and observed "a 12-pack of Budweiser beer in cans that had been opened
up." Osgood asked the driver, identified as the appellant, for identification and he responded that
he didn't have any. At this point, Osgood asked the appellant to exit the vehicle. After
complying with the officer's request, Osgood "frisked his pockets for I.D." Osgood "felt in his
left front pocket a small, round, cylinder-shaped object, which I believed to be a vial used to carry
narcotics." Osgood had worked in "narcotics detail" and had seen narcotics carried in this type
of device on numerous occasions.
Upon removing the vial from appellant's pocket, Osgood was able to see that it
contained a white powder substance the officer believed to be cocaine. Following this discovery,
the officer placed appellant under arrest. Osgood stated he originally approached the van to
investigate a traffic violation and intended to issue a traffic citation rather than arrest the driver.
A peace officer may arrest an offender without a warrant for a traffic offense, other
than speeding, committed in his presence or within his view. Tex. Code Crim. P. Ann. art. 14.01
(1977). Additional authority for arresting a violator of a traffic offense is given by Tex. Rev.
Civ. Stat. Ann. art. 6701d, § 153 (1977). § 153 provides: "Any peace officer is authorized to
arrest without a warrant any person committing a violation of any provision of [the Uniform Act
Regulating Traffic on Highways]."
In addressing the matter of an officer's authority to arrest a person for a traffic
violation and conduct a search incident thereto, the court in Snyder v. State, 629 S.W.2d 930, 934
(Tex. Crim. App. 1982) stated:
Due to the absence of brake lights and a valid inspection sticker, Garrison
was authorized to arrest appellant without a warrant. See Art. 6701d, Secs. 118,
140 and 153, V.A.C.S. Likewise, the officer had probable cause to arrest
appellant due to his failure to produce a valid driver's license. See Art. 6687b,
Sec. 13, V.A.C.S. A search incident to a lawful arrest requires no warrant if it is
restricted to a search of the person or of objects immediately associated with the
person of the arrestee [citations omitted].
It is an offense to back a vehicle unless such movement can be made with safety
and without interfering with other traffic. Tex. Rev. Civ. Stat. Ann. art. 6701d, § 173 (1977).
The failure of a person to have a drivers license in his immediate possession at all times when
operating a vehicle and to display the same upon the demand of an officer constitutes an offense
under Tex. Rev. Civ. Stat. Ann. art. 6687b, § 13. (Supp. 1992).
Where searches have occurred incident to an officer's intent to issue a traffic
citation, objective reasonableness will justify the search without regard to the underlying
motivation of the officer. Scott v. United States, 436 U.S. 128, 137-38 (1978); Williams v. State,
726 S.W.2d 99, 101 (Tex. Crim. App. 1986); Stoneham v. State, 764 S.W.2d 13, 15 (Tex. App.
1988, no pet.). Also, courts have had "no difficulty" in upholding searches as incident to a
defendant's arrest where the formal arrest "followed quickly on the heels of the challenged
search." Rawlings v. Kentucky, 448 U.S. 98, 110-11 (1980); Williams, 726 S.W.2d at 101;
Stoneham, 764 S.W.2d at 14.
We believe that Osgood and his fellow officer would have been remiss as peace
officers if they had failed to make an investigation after observing a van back "roughly, 200 feet"
at a speed and in a manner which obviously reflected that the driver did not have control of the
vehicle. Following the appellant's inability to furnish a driver's license, the officers were
authorized to arrest appellant for this offense in addition to a backing violation they had earlier
observed. Because they had authority to arrest appellant, it is of no consequence that the officers
may have intended to issue traffic citations. Nor do we have any problem with the "frisks" of
appellant since the officers were authorized to search incident to an arrest. The fact that the
"frisks" occurred immediately prior to the formal arrest is of no importance. We conclude that
the officer's conduct which resulted in the discovery of cocaine was incident to a valid arrest and
did not constitute an invalid seizure under either Texas or United States law. Accordingly,
appellant's point of error is overruled.
The judgment is affirmed.
Tom G. Davis, Justice
[Before Chief Justice Carroll, Justices B. A. Smith and Davis*]
Affirmed
Filed: March 4, 1992
[Do Not Publish]
* Before Tom G. Davis, Judge (retired), Court of Criminal Appeals, sitting by assignment.
See Tex. Gov't Code Ann. § 74.003(b) (1988). | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2857995/ | CLARDY
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-004-CV
CLYDE CLARDY, d/b/a BASTROP WEST WATER SYSTEM,
APPELLANT
vs.
AQUA WATER SUPPLY CORPORATION,
APPELLEE
FROM THE DISTRICT COURT OF BASTROP COUNTY, 21ST JUDICIAL DISTRICT
NO. 19,114, HONORABLE HAROLD R. TOWSLEE, JUDGE PRESIDING
Clyde Clardy, d/b/a Bastrop West Water System, sued Aqua Water Supply
Corporation in district court for damages arising out of four causes of action. The trial court
rendered a take-nothing summary judgment on all four causes and Clardy now appeals. We affirm
the trial-court judgment.
BACKGROUND
Clyde Clardy is the developer of two subdivisions, Bastrop County West
Subdivision ("County West") and Bastrop County West Oaks Subdivision ("West Oaks"), both
located in Bastrop County. When Clardy first developed County West in 1979, he allegedly
entered into an agreement with Aqua Water Supply Corporation ("Aqua") whereby Aqua would
provide retail water service to the subdivision. Clardy claims that he and Aqua formed a similar
contract with respect to the West Oaks subdivision in 1984.
In June 1985, the Texas Department of Health imposed a moratorium which
prevented Aqua from adding any new water connections until Aqua enlarged its facilities to
maintain proper water conditions. The moratorium lasted until October 1986. During that time,
Clardy installed his own water system so that he could provide water service to new purchasers
within his subdivisions.
In June 1986, after installing the water system, Clardy applied to the Texas Water
Commission ("Commission") for a certificate of convenience and necessity ("CCN"). Aqua
opposed Clardy's application, claiming that Clardy was seeking to provide water service to an
area already certified to Aqua, and requesting that the Commission issue a cease and desist order
preventing Clardy from adding customers to his water system.
In October 1987, the Commission granted Clardy's CCN application as to West
Oaks and thirteen lots in County West. The Commission granted Aqua the right to provide water
to the remaining lots in County West. Clardy subsequently filed suit against Aqua, alleging that
Aqua: (1) breached a contract to supply water service to County West subdivision; (2) breached
a contract to provide water service to West Oaks subdivision; (3) tried to monopolize the retail
water service business in Bastrop County; and (4) wrongfully interfered with Clardy's existing
and prospective business relationships, and with Clardy's right to petition the government to
provide water service. The trial court entered judgment that Clardy take nothing as to each of the
four causes of action. Clardy now appeals.
DISCUSSION
A. Reply Point.
Before addressing the merits of Clardy's points of error, we first address Aqua's
reply point in which Aqua urges that this Court erred in allowing Clardy to file his transcript after
Clardy filed an untimely motion for extension of time. The district-court judge signed the
judgment in this cause on November 5, 1990, and neither party filed a motion for new trial nor
a request for findings of fact or conclusions of law. Thus, Clardy should have filed the transcript
with this Court on or before January 4, 1991. See Tex. R. App. P. 54(a) (Pamph. 1991). On
January 14, 1991, Clardy filed a motion for extension of time to file the transcript pursuant to
Rule 54(c). See Tex. R. App. P. 54(c) (Pamph. 1991). Because the motion did not explain the
delay in filing the transcript, this Court ordered Clardy to file an amended motion for extension
and set January 30, 1991, as the filing date. Clardy timely filed the amended motion, which this
Court granted. Aqua contends that this Court had no authority to extend the time for filing a
motion for extension of time beyond the fifteen-day period prescribed in rule 54(c).
We agree that this Court has no authority to consider an untimely motion for
extension of time to file a transcript. See Chojnacki v. Court of Appeals, 699 S.W.2d 193, 193
(Tex. 1985). We further agree that if this Court had denied Clardy's original motion, the denial
would not have extended the time period to file a second motion curing the defect. See Sifuentes
v. Texas Employer's Ins. Ass'n, 754 S.W.2d 784, 788-89 (Tex. App. 1988, no writ). But here,
Clardy filed his motion within the prescribed time period and this Court ordered that Clardy file
an amended motion. In requesting an amended motion without denying Clardy's original motion,
this Court impliedly granted the original motion.
The Texas Supreme Court has consistently held with respect to methods of
perfecting appeal that the factor which determines whether jurisdiction has been conferred on the
appellate court is not the form or substance of the instrument, but whether the instrument was
"filed in a bona fide attempt to invoke appellate court jurisdiction." Grand Prairie Sch. Dist. v.
Southern Pines, 813 S.W.2d 499, 500 (Tex. 1991); Walker v. Blue Water Garden Apartments,
776 S.W.2d 578, 581 (Tex. 1989). Timely filing of a transcript is another step in invoking
appellate jurisdiction. See Oldaker v. Locke, 528 S.W.2d 71, 76 (Tex. Civ. App. 1975, writ ref'd
n.r.e.). We believe that Clardy made a bona fide attempt to timely file his motion, and we
conclude that it is proper to avoid a narrow construction of rule 54(c), which would end an appeal
that should be heard on the merits. Accordingly, we overrule Aqua's reply point.
B. Summary Judgment.
In a single point of error, Clardy contends that the trial court erred in granting
Aqua's motion for summary judgment. In a summary judgment case, this Court must determine
whether the movant met his burden for summary judgment by establishing that there exists no
genuine issue of material fact and that he is entitled to judgment as a matter of law. Nixon v. Mr.
Property Management Co., 690 S.W.2d 546, 548 (Tex. 1985). The court must decide whether
a disputed material fact issue precludes summary judgment, accepting as true the non-movant's
version of the facts as shown by the record and the admissible summary judgment proof. The
court must indulge every reasonable inference in favor of the nonmovant and resolve any doubt
in his favor. Id. at 548-49. Clardy asserts four claimed issues of material fact to which we apply
this standard.
1. Breach of Contract--County West Subdivision.
Clardy asserts a claim against Aqua for breach of a contract to provide water
services to the County West subdivision. In its motion for summary judgment, Aqua alleged that
because there was no contract, Aqua is entitled to summary judgment as a matter of law on this
claim. Aqua contends that it could not have formed a contract with Clardy because the parties
had no "meeting of the minds" as to the essential terms of this alleged contract. The trial court
granted summary judgment in favor of Aqua on this cause of action.
Now Clardy contends on appeal that there are genuine issues of material fact
regarding whether Aqua contracted with Clardy to provide water service upon request to
purchasers of lots within County West. Clardy argued in his response to the motion for summary
judgment that such a contract was established through a series of letters between Clardy and Aqua
representatives.
The question of whether correspondence constitutes a contract, rather than
preliminary negotiations without binding force until reduced to formal contract form, is one of
law. Hegar v. Tucker, 274 S.W.2d 752, 754 (Tex. Civ. App. 1955, writ ref'd n.r.e.). We have
reviewed this series of letters. The trial court could have concluded, and we agree, that the letters
do not rise to the level of a contract because they do not contain the essential terms of an
agreement. They are, at best, evidence of preliminary plans or negotiations to provide water
service to this subdivision.
2. Breach of Contract -- West Oaks Subdivision.
Next, Clardy asserts that there is a genuine issue of material fact as to whether
Aqua contracted with Clardy to provide water service to his second subdivision, West Oaks. In
a deposition, Clardy recounted a conversation he had with Jim Trigg, Aqua's general manager,
before purchasing the land for West Oaks. During that conversation, Clardy asked Trigg whether
Aqua would have the capacity to provide water service if Clardy chose to purchase and develop
the land, and Trigg replied that Aqua would provide water to the subdivision if Clardy complied
with Aqua's written rules and requirements for adding land developments to Aqua's system.
Clardy asserts that this conversation, combined with Aqua's rules and regulations for extending
water utility service into new developments, created the contract at issue. Clardy contends that
Aqua's development rules constituted an offer to make a contract and that he accepted Aqua's
offer as provided by the development rules.
Aqua does not dispute the substance of this conversation between Trigg and Clardy.
To the contrary, Aqua successfully moved for summary judgment on the strength of Clardy's
deposition, contending that the parties never formed a contract because Clardy never accepted
Aqua's offer or, alternatively, because there was no mutuality of obligation.
We believe that this conversation, rather than creating a contract, also represents
preliminary negotiations by the parties. But even if we accept as true Clardy's assertion that
Aqua's development rules constituted an offer to do business, the record firmly establishes that
Clardy never performed the conditions precedent to contract formation. A condition precedent
in the law of contracts may be either a condition which must be performed before the parties'
agreement becomes a binding contract or a condition which must be fulfilled before the duty to
perform an existing contract arises. City of Houston v. West, 563 S.W.2d 680 (Tex. Civ. App.
1978, writ ref'd n.r.e.).
Before Aqua would provide water service, Clardy knew that he had to perform the
following duties and services as set forth in Aqua's rules and regulations for extending water
utility service into new developments: (1) hire an engineer and design internal water lines to the
subdivision; (2) obtain Aqua's approval of the engineering design; (3) install the lines according
to the approved design; and (4) pay Aqua a $600 per lot capital recovery fee. The uncontroverted
summary judgment proof shows that Clardy never complied with any of these rules and
regulations, that Clardy believed Aqua had no commitment to provide water until Clardy
performed these duties, and that Clardy never undertook any other obligation to Aqua. Because the summary judgment proof in this case is uncontroverted, it is the duty
of the trial judge to decide whether the facts in evidence give rise to a contract. See El Paso
County Water Improvement Dist. v. Grijalva, 783 S.W.2d 736, 739 (Tex. App. 1990, writ
denied). The trial judge could have determined that because the summary judgment proof shows
that Clardy did not perform the conditions relating to contract formation, the parties had no
contract as a matter of law. We agree.
3. Monopoly.
Clardy next claims that there are genuine issues of material fact as to whether Aqua
attempted to monopolize the retail water business in Bastrop County in violation of the Texas
Antitrust Act, Tex. Bus. & Com. Code Ann. § 15.05(b) (1987). However, one of the grounds
upon which Aqua moved for summary judgment on this monopoly claim is that Clardy failed to
state a cause of action for violations of the Texas antitrust statutes. Aqua filed a special exception
to Clardy's third amended original petition because Clardy failed to allege that Aqua does not fall
within any of the statutory exceptions to the antitrust statute. The trial court's order on special
exceptions directed Clardy to amend his pleadings to cure the pleading defects on the antitrust
cause of action. Nevertheless, Clardy's fourth amended original petition again lacked allegations
that Aqua does not fall within any of the statutory exceptions to the antitrust statute.
Ordinarily, a court should not grant summary judgment on the basis of a pleading
deficiency that can be cured by amendment. Texas Dept. of Corrections v. Herring, 513 S.W.2d
6, 10 (Tex. 1974). However, summary judgment is proper when a party, after given the
opportunity to amend, still fails to state a cause of action. Id.
Because the Texas antitrust law is a penalty statute, allegations that a party has
violated the statute must state all of the statutory requirements with the same degree of certainty
required in criminal cases. Ford Motor Co. v. State, 175 S.W.2d 230, 233 (Tex. 1943); Sessions
Co. v. W. A. Shaeffer Pen Co., 344 S.W.2d 180, 183 (Tex. Civ. App. 1961, writ ref'd n.r.e.).
The state must negate statutory exceptions in a criminal indictment, and correspondingly, a
plaintiff alleging an antitrust statute violation must specifically plead and prove that the defendant
does not fall within a statutory exception. Cf. McElroy v. State, 720 S.W.2d 490, 493 (Tex.
Crim. App. 1986).
The Texas Antitrust Act contains the following express exemption:
Nothing in this section shall apply to actions required or affirmatively approved by
any statute of this state or of the United States or by a regulatory agency of this
state or of the United States duly acting under any constitutional or statutory
authority vesting the agency with such power.
Tex. Bus. & Com. Code Ann. § 15.05(g) (Supp. 1992). Because Clardy did not specifically plead
and prove this statutory exception after being given the opportunity to amend, the trial court could
have granted summary judgment for failure to state a cause of action.
4. Tortious Interference.
Finally, Clardy asserts that there exist genuine issues of material fact as to whether
Aqua tortiously interfered with Clardy's existing and prospective business relationships, and with
Clardy's right to petition the government to provide water service.
According to Clardy, at the time he installed his water system, there was
considerable demand for water service in Bastrop County which Aqua could not meet because the
health department moratorium prevented Aqua from adding new connections. After Clardy
completed construction of Bastrop West Water System, he applied to the Commission for a CCN.
Aqua intervened and opposed this application on the basis that Aqua already held a CCN covering
Clardy's subdivisions. Aqua also filed with the Commission a motion requesting that the
Commission order Bastrop West Water System to cease and desist construction because it
interfered with Aqua's service to County West. Although Bastrop West Water System was
ultimately awarded a CCN, Clardy asserts that Aqua's actions effectively delayed Clardy's ability
to provide water service to prospective purchasers in West Oaks until there was a diminished
market for sales. Clardy also alleges that some purchasers of lots in County West threatened him
with lawsuits because they were unable to obtain water service from Aqua.
Texas law protects existing as well as prospective contracts from tortious
interference. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 689 (Tex. 1989). However, a
defendant may assert a claim of legal justification or excuse as an affirmative defense to
interference with contractual relations. Id. at 690. Under this defense, "one is privileged to
interfere with another's contract (1) if it is done in the bona fide exercise of his own rights, or (2)
if he has an equal or superior right in the subject matter to that of the other party." Id. at 691.
Aqua successfully moved for summary judgment on the basis that it had an equal
or superior right to provide water service to the area for which Clardy sought a CCN. Although
Aqua did not have a CCN for the area encompassing Clardy's subdivisions at the time Clardy filed
his application, Texas law provides that a water utility may extend its lines into contiguous
territory without first securing a CCN if no other utility is serving the territory or has a CCN for
it. 1985 Tex. Gen. Laws, ch. 795, § 3.005, at 2799 (Tex. Water Code Ann. § 13.243(a) (1988),
since amended). The summary judgment proof established that Aqua had a CCN to serve portions
of Bastrop County and, through a contiguous extension, was legally providing water to County
West subdivision at the time Clardy sought a CCN for that area.
Texas law allows "affected persons" to intervene in CCN hearings. Tex. Water
Code § 13.246(a). The Water Code defines "affected persons" to include competing utilities and
utilities that desire to enter into competition. Tex. Water Code § 13.002(7). Aqua's intervention
at the TWC was a legitimate means of protecting its existing rights to provide water service and
establishing its desire to expand service. Because Clardy and Aqua were competing to serve the
same areas, Aqua had a legal right to intervene at the hearing on the CCN application for Bastrop
West Water System. We believe that, as a matter of law, Aqua had at least an equal right in the
subject matter that forms the basis of Clardy's tortious interference claim. Therefore, Aqua
established its defense of legal justification or excuse.
On appeal, Clardy contends that the trial judge incorrectly granted summary
judgment because Clardy successfully controverted Aqua's defense. First, Clardy asserts that
because the health department moratorium denied Aqua the right to add new connections, Aqua
could not have had an equal or superior right to supply water to the areas in question. However,
the Health Department's letter to Aqua regarding the moratorium stated in relevant part:
It is our recommendation that no new connections to the Aqua Water System be
permitted until adequate facilities are provided to ensure the maintenance of proper
water pressures throughout the system.
Any requests for additional connections must be accompanied by a statement from
your engineer documenting that no adverse effects on the water quantity or
pressure would result from the connection to the system.
This letter indicates that Aqua could add new connections as long as it enlarged its facilities to
maintain proper water conditions. The summary judgment proof established that Aqua was in the
process of expanding its capacity at the time Clardy sought his CCN application and that the
Commission ultimately granted Aqua the right to serve future County West customers. Because
the moratorium conditioned, but did not extinguish, Aqua's right to supply water, we conclude
that this point does not raise a material issue of fact regarding Aqua's affirmative defense.
Next, Clardy asserts that he controverted Aqua's defense by showing that Aqua
falsely claimed to the Commission that it possessed a CCN to serve the two subdivisions. Aqua
admits that it incorrectly stated in letters and in motions to the Commission that it held a CCN to
serve customers on all land west of Bastrop, Texas. During the TWC hearing on the Bastrop
West Water System CCN application, the Commission offered evidence that Aqua's CCN did not
cover Clardy's subdivisions. Aqua subsequently filed its own CCN application for County West
and withdrew opposition to Clardy's request that Bastrop West Water System have exclusive water
rights in West Oaks.
Since the Commission itself clarified the scope of Aqua's CCN during the
administrative hearings on the Bastrop West Water System CCN, the Commission clearly had
accurate information upon which to base its decision. Moreover, Clardy does not contend that
Aqua knowingly misrepresented the scope of its certificated area and even concedes that Aqua
could have made the misrepresentation mistakenly. We cannot say that the misrepresentation
creates a material fact issue which negates Aqua's affirmative defense.
Clardy also asserts that Aqua's breach of contract with Clardy to supply water is
a fact which controverts Aqua's affirmative defense. Since we hold that there was no contract,
and thus no breach of contract, we find this argument without merit. Moreover, the courts have
held that a defendant's breach of his own contract with a plaintiff is not a basis for the tort of
interference with contractual rights. Barker v. Brown, 772 S.W.2d 507, 510 (Tex. App. 1989,
no writ).
Finally, Clardy asserts that he controverted Aqua's defense by showing that Aqua
was trying to make an example out of Clardy in order to deter others from putting in competing
water systems. However, Clardy points us to no summary judgment proof in support of this
assertion.
We conclude that Aqua established its legal justification for intervening in Clardy's
efforts to obtain a CCN for Bastrop West Water System, but Clardy produced no summary
judgment evidence to raise a fact question regarding the lack of justification.
CONCLUSION
For the preceding reasons, we overrule Clardy's point of error. We affirm the
trial-court judgment.
Jimmy Carroll, Chief Justice
[Before Chief Justice Carroll, Justices Aboussie and Kidd]
Affirmed
Filed: February 26, 1992
[Do Not Publish] | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1919638/ | 91 B.R. 587 (1988)
In re William BURKHART, Debtor.
Bankruptcy No. BK-88-03993-LN.
United States Bankruptcy Court, W.D. Oklahoma.
October 18, 1988.
*588 Lyle R. Nelson, of Jones, Blaney & Williams, Oklahoma City, Okl., for Tandy.
Leroy Powers, Oklahoma City, Okl., for debtor.
ORDER DENYING MOTION TO RECONSIDER
PAUL B. LINDSEY, Bankruptcy Judge.
On September 28, 1988, Tandy Computer Leasing ("Tandy"), a creditor in this bankruptcy case, filed its "Motion to Reconsider," requesting that this court reconsider its order granting discharge to debtor. In support of its motion, Tandy asserts that since it had timely filed a complaint under 11 U.S.C. § 523 prior to the granting of the discharge, it was "inappropriate for the Court to issue its Order discharging the debtor." Tandy urges the court to "withdraw its Order, or modify the same to expressly provide that the indebtedness of Tandy is not discharged until such time as Tandy's complaint can be heard on the merits."
Tandy's motion correctly states that its complaint, in Adversary Proceeding 88-0357, was filed pursuant to 11 U.S.C. § 523, seeking to except from debtor's discharge certain indebtedness allegedly owed by debtor to Tandy. The complaint does not seek the denial of a discharge to debtor, and makes no reference to 11 U.S.C. § 727, under which denial of a discharge may be appropriate. In these circumstances, the filing of the motion points up the confusion and lack of understanding which exists, in the bar and elsewhere, as to the differences in effect between an action seeking an exception to discharge under § 523 and an objection to discharge under § 727. The former merely involves a determination as to whether a particular debt is included within a debtor's discharge, while the latter requires a determination of whether the debtor should be granted a discharge at all.
Bankruptcy Rule 4004(a) requires that a complaint objecting to debtor's discharge under § 727(a) be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to § 341(a). Rule 4004(c) requires that in a Chapter 7 case, as here, the debtor be granted a discharge "forthwith" upon expiration of the time fixed for filing a § 727(a) complaint, unless such a complaint has been filed, the debtor is not an individual, or the debtor has filed a waiver of discharge.
Inasmuch as no § 727(a) complaint was filed within the requisite period in this case, and neither of the remaining exceptions set out in Rule 4004(c) is applicable, the court's granting of debtor's discharge was mandatory, and clearly not "inappropriate," as Tandy contends.
Further, it is neither necessary nor appropriate that the discharge order be modified as Tandy requests. As is noted above, a § 523 complaint, such as that filed by Tandy, has no effect whatever upon the right of a debtor to a discharge. It simply seeks an exception from that discharge for the particular indebtedness to which it relates. Moreover, the discharge order entered, conforming to Official Form No. 27, as required by Bankruptcy Rule 4004(e), releases debtor from dischargeable debts; voids any judgment obtained in any court other than this court as a determination of the personal liability of debtor with respect to debts dischargeable under § 523, debts determined by this court to be discharged under § 523 and, unless heretofore or hereafter determined by order of this court to be nondischargeable, debts alleged to be excepted from discharge under 11 U.S.C. §§ 523(a)(2), (4) and (6).
It is clear from the foregoing that Tandy's alleged debt has not been discharged by the order entered in this case and that the effect of such order on the alleged debt will not be determined until Tandy's § 523 complaint has been resolved. Should Tandy prevail, at trial or otherwise, the debt so *589 established will be excepted from the discharge. Conversely, should debtor prevail, any debt owed to Tandy to which the complaint relates will be discharged in its entirety. These results will obtain without any modification to the discharge order already entered.
In view of the apparent lack of understanding of the distinctions between §§ 523 and 727 and the imprecision with which complaints under one or the other of such sections are drawn, the court feels compelled to make certain observations. First, although many creditors seek to invoke both §§ 523 and 727 in their complaints, it is this court's experience that factual circumstances under which both provisions would be applicable are rare. Most § 523(a) actions are based upon actions taking place before the petition was filed, typically involving only the debtor and the complaining creditor. Complaints under § 727, conversely, more frequently arise from debtor's conduct affecting creditors in general, in connection with the bankruptcy case itself, and such conduct may occur either before or after the filing of the petition. In spite of the distinction between the two provisions, it is unfortunately quite common for creditors' counsel to assert in their complaints fact supportive only of an action under § 523, but to request alternative or additional relief under § 727. Such a prayer for relief, even though without any argueable basis in fact or law, has the effect of denying debtor a discharge as to any of his debts until such time as the complaint is amended or adjudicated, and constitutes an unjustified denial to debtor of a timely "fresh start." Bankruptcy Rule 4004(c) was designed to insure to debtors this basic concept of bankruptcy policy, and its purpose is frustrated by these "scatter-gun" complaints..
Creditors and their counsel instituting actions requesting the denial to debtor of any discharge under § 727, without any legal or factual basis for such request, should be cognizant of the provisions of Bankruptcy Rule 9011 and the penalties and sanctions which may, and in some instances must, be imposed for violations of that rule.
In view of the foregoing, the Motion to Reconsider filed by Tandy on September 28, 1988 should be denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549161/ | 50 F.2d 806 (1931)
LUCAS, Commissioner of Internal Revenue,
v.
BAUCUM.
No. 6048.
Circuit Court of Appeals, Fifth Circuit.
June 22, 1931.
G. A. Youngquist, Asst. Atty. Gen., Sewall Key, Sp. Asst. to the Atty. Gen., C. M. Charest, Gen. Counsel Bureau of Internal Revenue and E. Riley Campbell, Sp. Asst. Bureau Internal Revenue, both of Washington, D. C., and A. H. Conner, Sp. Asst. to the Atty. Gen., for petitioner.
Ralph W. Baucum, of Shreveport, La. (Craig, Bolin & Magee, of Mansfield, La., on the brief), for respondent.
Before BRYAN, SIBLEY, and HUTCHESON, Circuit Judges.
HUTCHESON, Circuit Judge.
Petitioner comes here complaining of the finding and order of the Board of Tax Appeals that money, to wit, $43,000 paid to respondent's husband as the purchase price of a 3/32 mineral interest which respondent owned in land located in the Haynesville oil field in Louisiana, was community property, respondent insisting that the mineral interest was though incorporeal an interest in the land owned by respondent as her separate property, and that the cash received in lieu of it was therefore likewise so. The facts are undisputed. They are set out fully in the board's findings of fact 17 B. T. A. 1312. Summarized and briefly stated, they are:
Respondent and her husband were married in Louisiana in 1900 and have lived together there as husband and wife since that date, during all of which time the husband has acted as the manager of the community of acquests and gains which has during all of that time existed between him and his wife. In 1906, respondent inherited from her father a tract of farm land in Louisiana. In 1921, oil was discovered near the farm and respondent, with the aid and assistance of her husband, leased the entire property to oil companies, reserving a 1/8 or 4/32 mineral interest.
Thereafter, in the same year, respondent executed instruments in the form of deeds, wherein she granted subject to the oil lease, *807 not interests in the royalty reserved in the lease, but mineral rights. In addition to the $43,000 from the sales of mineral interests, respondent received in 1922 royalty checks from the oil companies on account of the 1/32 interest still owned by respondent.
Details aside, the facts found by the board are sufficient to support the conclusion that the property in question was under the full management of the husband, both during the time that he farmed it in person and by tenants, and during the time that he busied himself with negotiating leases on it, making sales of the mineral interests and collecting and handling the proceeds. Respondent and her husband filed separate income tax returns for 1922. Respondent reported as her own income, not only the $43,000 received from the sale of the 3/32 mineral interest, but that received as royalty from the 1/32 interest not conveyed by her. Respondent was allowed for depletion purposes against the sums returned as royalty more than the amount received, and she and her husband testified that they did not claim the $43,000 as community because they understood they would have a depletion allowance more than sufficient to absorb it. When this was denied them, they set up the claim which before the board and here is the subject of this controversy, that the sums received from the sale of mineral interests were not her separate, but were community, property, and that they should be returned one-half each by her and her husband.
The board found that the deeds had operated as sales of property, that the profits from them were taxable as capital gains, section 202, Revenue Act of 1921 (42 Stat. 229); Appeal of Anna Taylor, 3 B. T. A. 1201, but that the proceeds of the sale were fruits of the wife's paraphernal property under the administration of her husband, and hence community property, and it sustained the claim of respondent that she and her husband might each return one-half thereof.
The courts of Louisiana have not, as we are advised, ruled upon the precise point here involved, the status as between the separate and the community estates of the proceeds of the sale by the wife of mineral interests in her separate land, nor have the courts of the state discussed the character, whether separate or community, of receipts from oil from such property, whether these receipts are from royalties, from bonuses, or from the sale of the mineral interests itself. The courts of Texas, in which state the fugacious theory of oil is not accepted, and leases are regarded as substantial sales of minerals in place and not as in Louisiana, mere grants of the right to extract the oil and take it when extracted, have held that oil royalties from land, the separate property of either spouse, remains separate property. Stephens v. Stephens (Tex. Civ. App.) 292 S. W. 290, 291; Ferguson v. Commissioner (C. C. A.) 45 F.(2d) 573.
Petitioner insists that though the legal nature of mineral interests and the legal effect of leases, sales, or reservations of such interests are differently stated in Louisiana than in Texas, the substantial, the practical result upon the disposition of the real interest involved, the right to the minerals, of leases, sales, and reservations of such interests are in both states substantially the same. Logan v. State Gravel Co., 158 La. 105, 103 So. 526; Bodcaw Lbr. Co. v. Cox, 159 La. 810, 106 So. 313. He declares that whether a mineral right be denominated as in Texas, a corporeal right in the minerals, or as in Louisiana, a right to extract such minerals from the soil, "an incorporeal right a real right or servitude" (Bodcaw Lbr. Co. v. Cox, 159 La. 810, 106 So. 313, 314), it is in each state a thing owned, a species of immovable real property, in one state property in oil, in the other property in a servitude, a real right, a right to enter the land and take the oil, in each just as definitely real, immovable property as the land itself. That in each state, in Louisiana as in Texas, this ownership, whether you call it title in the oil, or the right to take it when conveyed, is "separate and distinct from the land and does not follow the ownership of the land." Wilkins v. Nelson, 155 La. 807, 99 So. 607, 609, and he who has the right in Louisiana, has "a standing in court to vindicate and protect" it even to the extent of a decree "quieting it in its possession of all of the oil, gas, and other mineral rights in and to the property in question." Bodcaw Lbr. Co. v. Cox, 159 La. 810, 106 So. 313, 314.
Respondent, conceding that the courts of Louisiana have not directly determined the matter at issue here, insists that the state of the law in Louisiana upon the character and quality of an oil interest in the light of the jurisprudence of Louisiana upon community and separate property makes it clear that both royalties received from oil wells and the proceeds of their sale are fruits of the land, and fall into the community.
Assuming, but not deciding, that if the question here were as to the status of royalties reserved in oil leases, that is, returns to *808 respondent as rents paid her for the right to take the minerals from her land, or even as to the status of the proceeds from the sale in bulk at an estimated figure of the royalties to be received, that the law in Louisiana might be different from that in Texas. It is perfectly clear, we think, that the facts presented here defeat respondent's claim. Here the respondent owning as her separate property the lands and minerals, first through the medium of a lease conveyed to the extent of 7/8 the real incorporeal right to extract the minerals from the land, Logan v. State Gravel Co., 158 La. 105, 103 So. 526, 527; Wilkins v. Nelson, 155 La. 807, 99 So. 607; Bodcaw Lbr. Co. v. Cox, 159 La. 810, 106 So. 313, 314, reserving in herself, in separate and distinct ownership, 1/8 of the minerals in and under the land (Bodcaw v. Cox, supra). Thereafter, she parted this time, not by lease, but by sale having however the same effect, (Logan v. State Gravel Co., 158 La. 105, 103 So. 526) with 3/32 of her mineral rights, vesting the purchaser with the incorporeal right, the real right or servitude, not as she had theretofore herself owned it, as a part of and appurtenant to the land, but separate and distinct from the land. Wilkins v. Nelson, 155 La. 807, 99 So. 607. Thus, in effect, by two separate conveyances she sold to various purchasers, not an interest in royalties, but 31/32 of her mineral rights in the land. Leydig v. Comm. (C. C. A.) 43 F.(2d) 494; Bellport v. Harrison, 123 Kan. 310, 255 P. 52.
Certainly it would not be contended by respondent that if she had sold the land without reservation of the minerals she had thereby converted her separate property into community; nor had she sold her land reserving her minerals, or her minerals reserving her land, would it be contended by her that either of these transactions would have converted the proceeds from separate to community. It cannot be any more contended that because the minerals were disposed of by fractional sales such a result would come about.
Whatever then may be the law, which we do not at all undertake to decide, as to the status, whether separate or community property, of royalties which respondent received from her lease, or as to the status of the proceeds if respondent, instead of selling her mineral interests had merely sold the right to receive the royalties to accrue under the lease, we think it perfectly plain that upon no reasonable theory can a sale, as here, by the wife of a part of her mineral interests operate to convert separate into community property, and that the ruling of the board has the effect of a spoliation of the wife's property in favor of the community, upon facts which do not at all sustain it.
The petition for review is granted; the judgment of the board is reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549162/ | 140 B.R. 605 (1992)
In re Edward J. TOONE, Debtor.
Bankruptcy No. 91-20593-WCH.
United States Bankruptcy Court, D. Massachusetts.
April 29, 1992.
George R. Desmond, Framingham, Mass., for debtor.
Mark K. Temin, Foley, Hoag & Eliot, Boston, Mass. (John M. Dorsey, III, of counsel), F.D.I.C., Washington, D.C., for F.D.I.C.
DECISION REGARDING DEBTOR'S CLAIM OF EXEMPTION OF ALLEGED RETIREMENT FUNDS
WILLIAM C. HILLMAN, Bankruptcy Judge.
The debtor claimed as exempt approximately $220,000 in funds being held in accounts in Bank of Boston in the name of "Edward J. Toone By David G. Toone Power of Attorney. . . ." The exemption is claimed pursuant to Mass.G.L. c. 235, § 34A, and 29 U.S.C. § 1056(d). The Federal Deposit Insurance Corporation ("FDIC"), an unsecured creditor of the debtor in its capacity as receiver of First National Bank of Marlboro ("FNBM"), objected. The facts underlying the claim and objection are rather convoluted but not in dispute.
Debtor was president and chief executive officer of FNBM and, in that capacity, a participant in its pension and profit-sharing plans.
As a result of certain activities of the debtor during his tenure at the bank, FDIC brought suit against him and, on December 6, 1989, recovered a judgment in the amount of $48,000,000.
In that same month the debtor elected to take his accumulated benefits in a lump *606 sum,[1] and requested that the payments be paid to David Toone as his attorney.
Worcester County Institution for Savings ("WCIS") was administering the plans as agent of FDIC. It issued two cashier's checks payable to David Toone.
Before the WCIS checks could be presented for payment, FDIC commenced another action against the debtor, to reach and apply the proceeds of the cashier's checks against its prior judgment.[2] It obtained a temporary restraining order followed by a preliminary injunction.
Responding to requests of the debtor and his wife (who had intervened in the new FDIC action), FDIC permitted the checks to be presented and the funds deposited into an IRA and a non-IRA account with Bank of Boston in the name of David Toone as attorney for the debtor.
The order entered in the District Court to permit the agreement provided in part:
(a) that modification of the Preliminary Injunction as requested . . . and the resulting transfer of the funds from their present status to their status as deposits in the Bank of Boston . . . shall have no effect whatsoever on the claims, defenses or cross-claims in this action or the [District] Court's disposition thereof of (sic?) the validity vel non of FDIC's claims. . . .
. . . .
(c) that the [District] Court shall treat any legal and factual issues that may arise in the course of this action . . . as if the funds retained their present legal and factual status prior to execution of this Stipulation
. . . .
At the time of the execution of the stipulation and order on February 23, 1990, debtor admits that he claimed as his only defense the anti-alienation provision of ERISA, 29 U.S.C. § 1056(d).[3] FDIC contends, and debtor admits, that debtor "was not . . . defending against FDIC's claim on the grounds that the funds were entitled to the protection from creditors provided by Mass.G.L. c. 235, § 34A, since such a defense was ruled out by the Stipulation and Order."[4] Debtor points out that the Massachusetts statute was not approved by the governor until June 20, 1990.
The Court agrees that it must look at the nature of the funds as they were prior to the approval of the stipulation, in accordance with provision (a) quoted above. It is more troubled by the effect of (b), which would appear to freeze the law of the case at February 23, 1990, which would rule out any benefit to debtor arising from Mass. G.L. c. 235, § 34A, but which would allow him to claim that the ERISA immunity extends to the roll-over period. Debtor appears to be making both arguments in his memorandum.
The first inquiry must be treated as subissues. The first consideration is whether, since the checks were never cashed, the funds still remain in the FNBM pension and profit-sharing accounts. If so, the funds "may not be reached by judicial process in aid of a third-party creditor," Tenneco, Inc. v. First Virginia Bank, 698 F.2d 688, 689 (4th Cir.1983), and may have some form of protection under the Bankruptcy Code.
Assuming the inquiry is answered in the negative, the next issue is whether the funds remained protected during the roll-over period.
THE ISSUE OF THE UNCASHED CHECKS
Since the checks representing the withdrawals from the pension and profit-sharing accounts were not cashed at the moment *607 in issue, did the funds ever leave the shelter accorded to the funds?
Attention must first focus on Barnhill v. Johnson, 502 U.S. ___, 112 S.Ct. 1386, 118 L.Ed.2d 39 (1992), decided just one month ago. In that case, the Supreme Court held that, for purposes of 11 U.S.C. § 547(b), a transfer made by check is deemed to occur on the date the check is honored. However, the case is readily distinguished. As the opinion notes, "For the purposes of payment by ordinary check . . . a `transfer' is defined by § 101(54) occurs on the date of honor, and not before." Id. at ___, 112 S.Ct. at 1390 (emphasis added). The checks in the present case were not ordinary, but cashier's checks.
The distinction is resolved by reference to state law,[5] the Uniform Commercial Code. Id. at ___, 112 S.Ct. at 1390.
As the Supreme Court noted, an ordinary check gives the recipient no recourse against the drawee. Barnhill, at ___, 112 S.Ct. at 1389. The opposite is true of a cashier's check.
A cashier's check is "a draft with respect to which the drawer and drawee are the same bank. . . ." U.C.C. § 3-104(g). It is accepted upon issuance. Pennsylvania v. Curtiss Nat'l Bank, 427 F.2d 395 (5th Cir.1970). Once the cashier's check is issued, the bank cannot refuse to pay. See Mass.G.L. c. 106, § 4-303(1)(a); Louis Falcigno Enterprises, Inc. v. Massachusetts Bank & Trust Co., 14 Mass.App. Ct. 92, 94, 436 N.E.2d 993 (1982).
The total liability of the bank, being wrapped in the cashier's check, must eliminate any liability of WCIS as plan administrator. Accordingly, the funds were no longer part of the ERISA-qualified plans and debtor cannot claim such protection as may be available under 29 U.S.C. § 1056(d) and related legislation.[6]
THE ROLL-OVER PERIOD
Debtor next argues that, notwithstanding the withdrawal, the funds retained their character as protected benefits since the effective date of the stipulation was within the roll-over period. That is to say, at the time rights were fixed under the stipulation, debtor still had the option (absent the preliminary injunction) to roll-over the funds into certain types of savings vehicles and avoid immediate taxation.[7] He cites the following language from Tenneco, Inc. v. First Virginia Bank, supra, in support:
The evidence discloses that Sweeney made a preretirement withdrawal and that he did not roll over the proceeds by investing them in another ERISA approved account within the 60-day period allowed for this purpose. The district court denied the relief which Sweeney requested, holding that although the funds originated in an ERISA account, they were not exempt from garnishment under the circumstances disclosed by this record. No provision of ERISA supports Sweeney's claim.
Id. at 691.
From this concept that funds once protected are no longer protected after the 60-day period has expired debtor argues that such funds are protected during that period, since an ERISA exemption may be "reclaimed" by an appropriate deposit. The Court disagrees.
Whatever the status of the funds may be during the roll-over period for purposes of taxation, the Court finds that they are no longer within the protection afforded by ERISA and the Internal Revenue Code. In re Donaghy, 11 B.R. 677 (Bankr. S.D.N.Y.1981), cited by debtor, actually involved a claim of exemption under 11 U.S.C. § 522(d)(10)(E). To the extent that any of the language in that decision is *608 supportive of debtor's position, the Court declines to follow it.
CONCLUSION
Having concluded that the funds in question were not protected funds at the time of the stipulation, when debtor agreed that rights would be fixed, it becomes unnecessary to discuss the issues arising under Mass.G.L. c. 235, § 34A. The objection of the FDIC to the claim of exemption is sustained. An appropriate order will be entered.
NOTES
[1] His wife consented to this election as required by ERISA.
[2] Mass.G.L. c. 214, § 3(6); F.R.C.P. 64, 65, and 69.
[3] "Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated." 29 U.S.C. § 1056(d)(1). Also relevant are provisions of the Internal Revenue Code and regulations thereunder, 26 U.S.C. § 401(a)(13), Treas.Reg. § 1.401(a)(13)(b)(1).
[4] FDIC Objection, § 5; Debtor's Response, § 5.
[5] The Supreme Court makes clear that Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979) remains alive and well under the Bankruptcy Code. 502 U.S. at ___, 112 S.Ct. at 1389.
[6] See Agin, Protecting Pension Plans and Individual Retirement Accounts in Bankruptcy, 35 Boston B.J. 10 (July/August 1991).
[7] No purpose would be served in detailing the tax law authorities for this proposition. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549181/ | 462 Pa. 348 (1975)
341 A.2d 114
ARCHBISHOP MOST REVEREND METROPOLITAN AMBROSE SENYSHYN, Appellee,
v.
Andrew KARLAK, et al., Appellants.
Supreme Court of Pennsylvania.
Argued April 15, 1974.
Decided June 7, 1975.
*349 Paul Matzko Erskine, Wolfson, Matzko & Pierson, Philadelphia, for appellants.
Joseph N. Bongiovanni, Jr., James E. Riely, Speese, Kephart & Bongiovanni, Philadelphia, for appellee.
Before JONES, C.J., and EAGEN, O'BRIEN, ROBERTS, POMEROY, NIX and MANDERINO, JJ.
*350 OPINION OF THE COURT
EAGEN, Justice.
This is an appeal from a final decree in equity holding that Sts. Peter and Paul Greek Catholic Church of Mount Carmel, Pennsylvania, a corporation, is and has been since its founding a uniate Greek Catholic Church in union with Rome. The appellants are former officers of the church corporation. The appellee is Ambrose Senyshyn, Archbishop of The Philadelphia Metropolitan of the Ukrainian Catholics of the Byzantine Rite of the United States, who instituted this action to enjoin the appellants from interfering with "the operation" of the church and to secure from the appellants an accounting of certain church assets alleged to be in their possession.
The dispute arose when two separate factions of the congregation elected different sets of officers and directors of the church corporation. On November 15, 1969, an annual meeting was called by the appellants, the then officers and directors, for the purpose of electing new officers and a Board of Directors. This meeting was, however, adjourned without any balloting. When appellants, after repeated requests, failed to reconvene a meeting for the aforementioned purpose, the pastor of the church, Father Paul Burak, called a meeting of the congregation. This meeting was conducted May 31, 1970, and resulted in the election of certain officers and directors. On June 18, 1970, the appellants convened another meeting at which they were re-elected to the offices they had previously held. Thus, there were two competing groups laying claim to the same offices. The appellants remained in control of the church property and assets.
In an effort to resolve the controversy, the appellee, in his official capacity as head of the Philadelphia Archparchy, convened a Board of Inquiry. After two meetings at the church, the Board of Inquiry issued a written report *351 containing its findings and recommendations. Pursuant to the report, the appellee on December 13, 1970, issued an official written order: (1) appointing a committee of advisory councilors to the church, effective immediately; (2) directing that all property of the church be delivered to the custody of the pastor; and (3) authorizing church collections to be taken only by ushers duly designated by the pastor. After appellants failed to comply with appellee's order, the appellee brought this action.
The crucial issue on this appeal is whether Sts. Peter and Paul is a uniate church under Archbishop Senyshyn's jurisdiction.[1]
Our inquiry must begin with a determination of the ecclesiastical nature of Sts. Peter and Paul on the date of founding, inasmuch as Pennsylvania law prohibits a diversion of church property from a use to which it was initially dedicated to an inconsistent use. See the Lay Control of Church Property Act, Act of April 26, 1855, P.L. 328, as amended, 10 P.S. § 81. See also St. John Chrysostom Creek Catholic Church of Pittsburgh v. Elko, 436 Pa. 243, 259 A.2d 419 (1969), cert. denied 399 U.S. 920, 90 S.Ct. 2258, 26 L.Ed.2d 786 (1970); Gabster v. Mesaros, 422 Pa. 116, 220 A.2d 639 (1966); Schnorr's Appeal, 67 Pa. 138 (1870). Accordingly, if Sts. Peter and Paul were at its inception uniate, it remains so today. On the other hand, if it were founded as an independent church, it is and remains autonomous.
On April 9, 1973, following an extended hearing, the chancellor entered a decree nisi[2] pursuant to Pa.R.Civ.P. *352 1517 based upon his conclusion that Sts. Peter and Paul had been founded as a uniate church in union with Rome and was subject to the ecclesiastical jurisdiction of the Pope of Rome. Exceptions to this adjudication and decree were dismissed by the court en banc,[3] and the chancellor's decree was made final.
The appellant's main argument is that the chancellor erred in going beyond the 1893 charter of the church corporation to resolve the instant dispute. The chancellor, relying in part upon our decision in St. John Chrysostom Greek Catholic Church of Pittsburgh v. Elko, supra, ruled that the charter was inconclusive as to the ecclesiastical nature of Sts. Peter and Paul and in his search for the ultimate authority in the church admitted evidence of subsequent rituals and practices.
Specifically, the appellants urge the following four aspects of the charter conclusively determine the intent of the church founders to establish an independent church free of hierarchical authority: (1) the name given the church; (2) the purpose expressed; (3) a consideration of what the charter omits to state; and (4) the provision vesting control of church property in the majority of lay members of the congregation.
The charter recites the name of the church as "The Greek Catholic Church of Mount Carmel". This Court has previously noted that the term "Greek Catholic" can refer to: (1) an independent church; (2) an orthodox church under a patriarch; or (3) a uniate church (i.e. *353 in union with Rome). St. John Chrysostom Greek Catholic Church of Pittsburgh v. Elko, supra, 436 Pa. at 250, n. 4, 259 A.2d at 422, n. 4. Hence, the ambiguity of this term prevents the drawing of a definitive conclusion as to the type of church the founders intended to create.
The purpose of the charter suffers from the same ambiguity. The charter recites the purpose of the proposed corporation to be "the support of the public worship of Almighty God according to the faith and the doctrines of the Greek Catholic Church in the United States. . . ." Again, since the term "Greek Catholic" is not clear and free of ambiguity, a definitive conclusion cannot be deduced from the purpose clause.
The appellants urge that the omission of any words such as "uniate" or "united" demonstrates a lack of intention on the founders' part to affiliate with any hierarchical organization. If the founders' intent were so to affiliate, appellants argue, there would have been no simpler way to express that intent than by the inclusion of such words. This argument, however, is a two-edged sword. It can just as readily be inferred that the absence of the term "independent" or "autonomous" or words of like import indicates a lack of intention on the founders' part to be independent of any hierarchical affiliation.
Finally, the appellants assert the inclusion of the following language in the charter militates against a finding of any intent to be a constituent part of a hierarchy:
"Any property, real or personal, which shall hereafter be bequeathed, devised, or conveyed to said corporation, shall be taken and held, or enure to it, subject to the control and disposition of the lay members or such constituted officers or representatives thereof, as shall be composed of a majority of lay members, citizens of Pennsylvania, having a controlling power according to the rules, regulations, usages or corporate requirements thereof."
*354 This language is merely a reiteration of the relevant portions of the Lay Control of Church Property Act, Act of April 26, 1855, P.L. 328, § 7, 10 P.S. § 81, in force at the time Sts. Peter and Paul was incorporated. Since, at that time, power of control over church properties was by force of this statute lodged in the lay members of the church or their authorized representatives, the incorporation of the language of this statute into the corporate charter merely described the situation that would have obtained in the absence of such language. We fail to discern how the manner in which the church properties were to be held was, under the circumstances, definitive of the ecclesiastical nature of the church.[4]
We conclude, therefore, that the chancellor was fully justified in going beyond the church's charter to an examination of subsequent rituals and practices to determine what kind of church Sts. Peter and Paul is.
In looking to evidence of the church's subsequent rituals and practices during its entire existence, the chancellor made extensive findings of fact which can be summarized as follows:
In the 1870's emigrants from that part of the Austro-Hungarian Empire, known as Galicia, came to America and settled in the area of Mount Carmel and the neighboring communities of Shamokin and Shenandoah. In 1884, a group of people from Shenandoah wrote to the then Archbishop Sembratovich in Galicia, who was the *355 Archbishop of all Greek Catholics united under the Pope in Central Europe, and requested that a priest be sent to Shenandoah so that the emigrants could practice their faith according to the custom of their homeland. Archbishop Sembratovich sent a Father Ivan Volansky to the Shenandoah area in December 1884. Father Volansky had the jurisdictional faculties granted to him by Archbishop Sembratovich, and also jurisdiction from the Pope to act as a missionary in the United States. Following his arrival Father Volansky established parishes in Shenandoah, Shamokin, and also Mount Carmel. On February 10, 1893, a corporate charter, issued in the name of "The Greek Catholic Church of Mount Carmel", was granted by the Court of Common Pleas of Northumberland County. The church later became known as Sts. Peter and Paul Greek Catholic Church to signify the Saints' names assigned to it.
The official Roman Catholic Directories for the United States, for the years 1894 and 1895 list, Sts. Peter and Paul Greek Catholic Church of Mount Carmel as part of the Diocese of Harrisburg, and as a mission parish served by a priest from the Shamokin parish.
Official Roman Catholic Directories for different years between 1896 and 1900 list the pastor and rector of Sts. Peter and Paul Greek Catholic Church, Mount Carmel.
In 1907 Bishop Soter Ortynsky was named to the newly created office of Bishop for the Ruthenian Greek Catholics in the United States (successor to the Greek Catholic Church in the United States), a jurisdictional entity created to administer the parishes in the United States who follow the Eastern Rite. Bishop Ortynsky and his successor (in 1924 the Ruthenian Greek Catholic Church in the United States became the Ukrainian Catholic Church in the United States) have made continuous appointments of priests to Sts. Peter and Paul. All the priests appointed have been uniformly uniate under the *356 jurisdiction of Rome, and their services have been conducted according to the rites, usages and customs of the uniate church under the Pope of Rome.
While Sts. Peter and Paul Church has been in existence there is a record of: (1) continuous communication between the priests assigned to Sts. Peter and Paul and diocesan officials, concerning matters of church government and administration including matrimonial dispensations, reports by priests, faculties permitting reception of converts, and consecration of church property; (2) audiences with or visits by different Bishops of the Diocese and other members of the Roman Catholic hierarchy for a variety of purposes including church administration, canonical visitation and dedications of church property; and (3) constant communication between the members of the congregation or lay officials of the church and officials of the Diocese regarding church matters; (4) liberal support of the Diocese on account of various church causes including cathedraticum for support of the Bishop, payments for the expenses of the Diocese and contributions to new cathedrals.
The record discloses that the appellants themselves in the 1960's sought to effect a transfer of the then pastor and assignment of a new priest in his stead through established hierarchical channels rather than through self-action as would occur in an independent parish. Compare St. John Chrysostom Greek Catholic Church of Pittsburgh v. Elko, supra, with Saint John The Baptist Greek Catholic Church of Allentown v. Musko, 448 Pa. 136, 292 A.2d 319 (1972).
Based upon these findings, the chancellor reached the conclusion that Sts. Peter and Paul is a uniate church under Rome. It is fundamental that the chancellor's fact findings approved by a court en banc have the effect of a jury verdict, and absent an error of law, will not be disturbed on appeal if supported by competent *357 evidence. See Hatalowich v. Redevelopment Authority of Monessen, 454 Pa. 481, 312 A.2d 22 (1973).
Our review of the record indicates the chancellor's findings are supported by competent evidence, and the chancellor's conclusion that Sts. Peter and Paul is a uniate church was legally warranted.
Again, we take pains to point out that our decision here, as in St. John Chrysostom Greek Catholic Church of Pittsburgh v. Elko, supra, does no violence to the United States Supreme Court decision in Presbyterian Church in United States v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440, 89 S.Ct. 601, 21 L.Ed.2d 658 (1969). We have not entered into any constitutionally prohibited interpretation of church doctrine to resolve the instant dispute, but have considered purely factual matters in order to ascertain the ecclesiastical nature of Sts. Peter and Paul.
Decree affirmed. Each side to pay own costs.
ROBERTS, J., filed a dissenting opinion.
MANDERINO, J., filed a dissenting opinion.
MANDERINO, Justice (dissenting).
The majority arrives at its decision by a consideration of whether a church corporation a legal entity in Pennsylvania is a "uniate church" and by ascertaining the "ecclesiastical nature" of the church corporation. Such an approach is unlike any used when we have before us the problems of any other legal person including profit and nonprofit corporations. When we consider a dispute involving the control of a business corporation, we do not consider whether that corporation is a "uniate" with its parent corporation. We do not consider any kind of "nature" eccesiastical or otherwise about the business corporation. When we have before us a dispute involving a nonprofit corporation for example, a charity we *358 do not consider whether that corporation is in "uniate" with some national or international organization interested in a particular charitable purpose. We do not consider the benevolent "nature" of the nonprofit corporation.
This appeal involves a dispute about who controls a corporation a legal entity under the law of Pennsylvania. There is absolutely no need to consider the dispute in mysterious nomenclature, which has its proper purpose in other sciences, but not the law. Our law recognizes individual persons and corporate persons, and we have laws and regulations which tell us how to determine who properly has control of a corporation at any given moment. My review of this record indicates that the appellants are the duly elected officers and directors of the corporation. Until they are legally removed, a court should not interfere.
The majority opinion speaks of "uniate," "ecclesiastical nature," "hierarchical," "rituals and practices," "allegiance," "religious authority": language proper to the world of theology and religion a world in which the constitution says we do not belong. Unless we analyze legal problems involving church groups like we analyze problems involving other kinds of groups, we will continue to be lost in a maze of mysterious language such as this.
What does "in uniate" mean? What does "ecclesiastical nature" mean? I cannot agree that the findings of fact of the lower court sustain the decision because in all candor I haven't the slightest idea as a Justice of this Court what the concepts of "ecclesiastical nature" and "uniate" mean.
The majority opinion begins by stating that this is an appeal from a final decree holding "that Sts. Peter and Paul Greek Catholic Church of Mount Carmel, Pennsylvania, a corporation, is and has been since its founding a uniate Greek Catholic Church in union with Rome." The *359 opinion ends by saying that "we have not entered into any constitutionally prohibited interpretation of church doctrine to resolve the instant dispute . . . ." The beginning and the ending of the opinion are in strict contradiction. If the lower court decree made a determination that the church corporation in this case is "a uniate Greek Catholic Church in union with Rome," the instant dispute has definitely been resolved by entering into the prohibited area of interpreting church doctrine.
ROBERTS, Justice (dissenting).
The majority today continues the practice of impermissibly deciding disputes over control of church property on ecclesiastical grounds. See Saint John the Baptist Greek Catholic Church v. Musko, 448 Pa. 136, 143, 292 A.2d 319, 322 (1972) (concurring opinion of Roberts, J., joined by Nix & Manderino, JJ.); St. John Chrysostom Greek Catholic Church v. Elko, 436 Pa. 243, 256, 259 A. 2d 419, 425 (1969) (dissenting opinion). Under what I view as the proper rule of law, appellee has failed to show any basis for relief and the decree in his favor must be reversed. I therefore dissent.
Appellants claim to be the duly elected officers of the Saints Peter and Paul Greek Catholic Church of Mount Carmel (Church), a Pennsylvania corporation. Appellee, Archbishop Senyshyn, is the head of the Archparchy of Philadelphia and claims ecclesiastical jurisdiction over the Church. When a dispute arose as to whether appellants or others were the duly elected officers of the Church, appellee sought to exercise his claimed jurisdiction by appointing a board of inquiry to determine the question. Appellants denied that appellee had any authority over the Church and refused to participate in the inquiry. The board concluded that the other contenders were the duly elected officers of the Church, but recommended that appellee supersede the corporate structure and vest control of the property of the Church in its pastor, *360 appointing those found to be the duly elected officers of the Church as advisory councilors. Appellee issued an order to that effect, but appellants refused to comply with it. Appellee then commenced this action seeking to enjoin appellants from "interfering" with the operation of the Church and to compel them to account for assets of the Church in their possession. The trial court granted this relief.
The majority affirms this decree on the basis of its conclusion as to "the ecclesiastical nature" of the Church. In my view, such an inquiry is forbidden by the First Amendment, which leaves "the civil courts no role in determining ecclesiastical questions in the process of resolving property disputes." Presbyterian Church in United States v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 447, 89 S.Ct. 605 (1969) [hereinafter Presbyterian Church].
In Presbyterian Church, the United States Supreme Court unanimously held that the First Amendment
"commands civil courts to decide church property disputes without resolving underlying controversies over religious doctrine. Hence, States, religious organizations, and individuals must structure relationships involving church property so as not to require the civil courts to resolve ecclesiastical questions."
393 U.S. at 449, 89 S.Ct. at 606.
As I observed in my dissent in Saint John Chrysostom Greek Catholic Church, supra, the doctrine applied by the majority inevitably requires this forbidden type of inquiry. In order to avoid any determination of ecclesiastical questions, I adhere to the position expressed in that dissent:
"I would adopt instead the `formal title' approach to church property controversies. Under that approach, `the title holder of the property has the right to determine the use of the property with neither theology *361 nor administrative church law as relevant considerations. Churches need not be classified as either hierarchical or congregational as in the Watson v. Jones [13 Wall. 679, 20 L.Ed. 666] approach. The civil courts under this alternative would enforce deeds, reverter clauses, and general state corporation laws in the same manner as in resolving any property dispute.' Comment, 55 Iowa L.Rev. 899, 907, n. 5 (1969). Cf. Presbyterian Church, 393 U.S. at 452, 89 S.Ct. at 607, 21 L.Ed.2d 658 (HARLAN, J., concurring).
"This theory has the advantage of almost never involving a court with the vexing problem of whether proffered evidence is admissible under the First Amendment. Further, adjudicating church property disputes by relying on formal title will ensure a more even-handed administration of justice, since the necessary evidence will almost always be admissible. Unlike the majority's approach, the formal title approach will never involve civil courts in deciding what the polity of a given church is, a determination which will almost inevitably involve ecclesiastical considerations.
"One final advantage inherent in this approach is that it invites and encourages religious organizations to title their property as clearly and unambiguously as possible. Such a result was obviously within the contemplation of Presbyterian Church wherein the United States Supreme Court admonished that `[s]tates, religious organizations and individuals must structure relationships involving church property so as not to require the civil courts to resolve ecclesiastical questions.' 393 U.S. at 449, 89 S.Ct. at 606."
436 Pa. at 260-61, 259 A.2d at 427-28.
Under this approach, the resolution of this case presents no difficulties. Appellee makes no claim to the formal title to the property of the Church; that title is conceded by all to be in the Church itself. The other claimants to the offices which appellants claim to hold *362 are not parties to this action, so there is no occasion to determine that dispute. Consequently, it is clear that appellee is entitled to no relief in this action.
The majority contends that its action is dictated by the Act of June 20, 1935, P.L. 353, § 1, 10 P.S. § 81 (1963), which provides in pertinent part:
"Whensoever any property, real or personal, has heretofore been or shall hereafter be bequeathed, devised, or conveyed to any ecclesiastical corporation. . . for the use of any church . . . the same shall be taken and held subject to the control and disposition of such officers or authorities of such church . . . having a controlling power according to the rules, regulations, usages, or corporate requirements of such church . . . which control and disposition shall be exercised in accordance with and subject to the rules and regulations, usages, canons, discipline and requirements of the religious body, denomination or organization to which such church. . . shall belong . . . ."
To the extent that this statute requires the courts of the Commonwealth to engage in inquiries forbidden by the First Amendment, it is simply invalid. However, the statute is entirely susceptible to a construction mandating the determination of such questions in the same manner as if the corporation involved not a church corporation. That is, the "rules, regulations, usages, or corporate requirements" referred to by the statute can be understood to mean the corporation's charter, bylaws, and customary rules of procedure. The "denomination. . . to which such church . . . shall belong," if any, can then be determined from these authorities and its "rules and regulations, usages, canons, discipline and requirements" ascertained in a similar manner. While the majority's construction of the statute might also be a permissible one in the absence of constitutional *363 constraint, we are bound to construe statutes in a manner which will preserve their validity. Statutory Construction Act, 1 Pa.C.S. § 1922(3) (Supp. 1974); Bentman v. Seventh Ward Democratic Executive Committee, 421 Pa. 188, 218 A.2d 261 (1966). Consequently, I conclude that the statute should be construed in the manner indicated. As so construed, it supports the position of appellants in this case and dictates reversal.
NOTES
[1] The appellants assert that the only real issue involved here is which group of officers and directors are the duly elected officeholders. The resolution of this issue necessarily depends upon resolution of the larger questions as to the ecclesiastical nature of Sts. Peter and Paul.
[2] Initially, a decree nisi was entered April 14, 1971. The appellants excepted but the court en banc dismissed all exceptions on the ground that the decree was a consent decree. On appeal to this Court, we held that an attorney has no authority to enter a consent decree for his client without the client's direction, knowledge and consent, and, hence, the consent decree in the absence of any of these factors was not binding upon the appellants. We, therefore, vacated the decree and remanded the record to the court below with directions to the court en banc to prepare a decree in conformity with Pa.R.Civ.P. 1517. See Archbishop v. Karlak, 450 Pa. 535, 299 A.2d 294 (1973).
[3] The parties had stipulated previously that the chancellor could sit alone as the court en banc. See Archbishop v. Karlak, supra.
[4] We are buttressed in this conclusion by the text of the Act of June 20, 1935, P.L. 353, 10 P.S. § 81. That act vests control and disposition of church properties in the officers or authorities of the church, congregation or religious society having a controlling power according to the rules thereof; this control shall be exercised in accordance with and subject to the rules and regulations of the religious body, denomination or organization to which such church congregation or religious society shall belong, any provision in the charter to the contrary notwithstanding. The legislature was thus of the opinion that a charter provision providing for lay control of church property did not exclude the possibility of hierarchical control. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549186/ | 134 N.J. Super. 426 (1975)
341 A.2d 670
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
PHILLIP SIDOTI, JOHN GUANCIONE AND RAYMOND DE FILIPPIS, DEFENDANTS-APPELLANTS.
Superior Court of New Jersey, Appellate Division.
Argued May 12, 1975.
Decided May 22, 1975.
*427 Before Judges LEONARD, SEIDMAN and BISCHOFF.
Mr. Donald S. Goldman argued the cause for appellants Sidoti and Guancione (Messrs. Goldman, Goldman and Caprio, attorneys).
Mr. Raymond DeFilippis, Jr., appellant, joined in the brief filed on behalf of the appellants Sidoti and Guancione.
*428 Mr. David L. Rhoads, Assistant Prosecutor of Essex County, argued the cause for respondent (Mr. Joseph P. Lordi, Essex County Prosecutor, attorney).
PER CURIAM.
This is an appeal by three defendants, Phillip Sidoti, John Guancione and Raymond DeFilippis, from convictions for gambling offenses in violation of N.J.S.A. 2A:98-1. Defendant Sidoti also appeals from his conviction for additional gambling offenses in violation of N.J.S.A. 2A:112-3 and N.J.S.A. 2A:121-3A. The factual background is detailed in two reported opinions, 116 N.J. Super. 70 (Cty. Ct. 1971), and 120 N.J. Super. 208 (App. Div. 1972), and need not be restated here.
Our decision reported at 120 N.J. Super. 208 remanded the matter "to the trial court to hold a plenary hearing to determine the means used and the circumstances under which the Mitarotonda wiretap was executed * * *." Id. at 214.
Following that remand a rehearing was held by the trial judge, who found that the wiretap was executed in good faith and in compliance with the wiretap order. Defendant at the hearing also contended that the contents of the wiretap should be excluded because the State failed to serve an inventory within 90 days of the termination of the original order, in violation of N.J.S.A. 2A:156A-16. The trial judge rejected that contention and denied the motion to suppress. Trial, conviction, sentence and this appeal followed.
Defendants contend on this appeal that (1) the failure of the State to comply with the inventory requirements of N.J.S.A. 2A:156A-16 and 18 U.S.C.A. § 2518(8)(d) "vitiates the legality of the Mitarotonda wiretap"; (2) it was error to allow into evidence taped conversations between defendant Sidoti and his wife; (3) the New Jersey Wiretap and Electronic Surveillance Control Act fails to conform to federal law and is, therefore, illegal; (4) all evidence seized from the Mitarotonda wiretap should have been suppressed; *429 (5) the Mitarotonda wiretap was unlawful because the order was in violation of the Fourth Amendment standards of particularity and reasonableness, and (6) the application for the wiretap did not demonstrate a special need.
We note at the outset that many of the grounds upon which this wiretap and the evidence obtained therefrom are attacked are beyond the scope of our limited remand, and we could for that reason refuse to consider them. We elect, however, to dispose of this appeal on its merits.
One requirement of the New Jersey Wiretapping and Electronic Surveillance Control Act, N.J.S.A. 2A:156A-1 et seq., is that:
Within a reasonable time but not later than 90 days after the termination of the period of the order * * * the issuing or denying judge shall cause to be served on the person named in the order or application, and such other parties to the intercepted communications as the judge may in his discretion determine to be in the interest of justice, an inventory [containing certain facts relating to the wiretap order]. [N.J.S.A. 2A:156A-16].
A similar provision appears in Title III of the Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S.C.A. § 2510 et seq., at § 2518(8)(d).
It is conceded by the State that the application for an order for service of the inventory was not made until six weeks beyond the time period provided in the statute. Defendant contends this delay, even though inadvertent and unintentional and without proof of prejudice resulting therefrom, mandates suppression of the evidence received from the tap. While this statutory provision has not been construed in any reported New Jersey decision, it has received considerable attention in the federal courts where it has generally been held that an inadvertent delay in service of an inventory does not require suppression of the fruits of the wiretap. United States v. Wolk, 466 F.2d 1143 (8 Cir.1972); United States v. Lucido, 373 F. Supp. 1142, 1144 (E.D. Mich. 1974); United States v. LaGorga, 336 F. Supp. *430 190, 194 (W.D. Pa. 1971); cf. United States v. Chun, 503 F. 2d 533, 542, n. 20 (9 Cir.1974); United States v. Eastman, 465 F.2d 1057, 1062 (3 Cir.1972). The reasoning stated in these cases is that the purpose of the time limit is to prevent governmental abuse. Where no prejudice results to defendant from an inadvertent delay, no purpose would be served by excluding evidence.
We are not here concerned with a failure or refusal to file an inventory, as appeared in the case of United States v. Eastman, supra. Here the delay was inadvertent there was no intentional or insolent flouting of the statute. Further, defendants do not demonstrate any prejudice resulting from the delay, and we affirm the action of the trial judge in refusing to suppress the evidence obtained from the wiretap for that reason.
During the course of the trial certain tapes were played to the jury over defendant's objection which contained recorded conversations between defendant Sidoti and his wife. Defendant, while conceding that the conversations thus admitted into evidence did not contain confidential communications and did not in any way refer to illegal activity, contends that the admission of the conversations constituted a violation of N.J.S.A. 2A:156A-11, which provides in part:
No otherwise privileged wire or oral communication intercepted in accordance with, or in violation of, the provisions of this act, shall lose its privileged character,
and Evid. R. 23. We disagree.
It is generally held that a third person overhearing a confidential communication between a husband and wife may testify as to it. 8 Wigmore, Evidence (McNaughton rev. 1961), § 2339(1) at 667; 3 Jones, Evidence (6 ed. 1972), § 21:5 at 754; 97 C.J.S. Witnesses § 271 at 778.
Evid. R. 23(2), to which defendant refers, bars one spouse from testifying against the accused in a criminal action but *431 does not bar third persons from testifying as to the conversation overheard. See Narten v. Eyman, 460 F.2d 184, 191 (9 Cir.1969); State v. Young, 97 N.J.L. 501, 505 (E. & A. 1922), and Commonwealth v. Wakelin, 230 Mass. 567, 120 N.E. 209, 212 (Mass. 1918). In similar fashion, Evid. R. 28 bars a disclosure by a spouse of a confidential communication and is, therefore, not applicable here, for defendant concedes the taped conversations were not confidential.
Defendant admits the conversations were used only as corroboration of his identity. In view of other evidence of identity in the record, we find the admission of these conversations, even if error, was harmless beyond a reasonable doubt. State v. Macon, 57 N.J. 325, 339-341 (1971); Chapman v. California, 386 U.S. 18, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967).
Defendant's attack on the New Jersey statute as being unconstitutional since it is less restrictive than the federal act is without merit. State v. Dye, 60 N.J. 518, 535 (1972), cert. den. 409 U.S. 1090, 93 S.Ct. 699, 34 L.Ed.2d 675 (1972). The further arguments that the evidence obtained from the wiretap should be suppressed as coming from an illegal wiretap, the application for the Mitarotonda tap did not demonstrate a special need and that the Mitarotonda wiretap was unlawful because it was in violation of Fourth Amendment standards of particularity and reasonableness, were decided adversely to defendant in our former opinion, State v. Sidoti, supra, and are not properly raised here. State v. Cusick, 116 N.J. Super. 482, 485 (App. Div. 1971); Deverman v. Stevens Builders, 35 N.J. Super. 300 (App. Div. 1955).
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549017/ | 992 A.2d 889 (2010)
COM.
v.
TURNER.
No. 488 WAL (2009).
Supreme Court of Pennsylvania.
April 8, 2010.
Disposition of Petition for Allowance of Appeal Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549023/ | 992 A.2d 950 (2010)
Charles O. MILLER, Jr., and Dorothy M. Miller, Petitioners
v.
COMMONWEALTH of Pennsylvania, Respondent.
No. 757 F.R. 2007
Commonwealth Court of Pennsylvania.
Argued December 8, 2009.
Decided April 8, 2010.
Lowell R. Gates and Sarah E. McCarroll, Lemoyne, for petitioners.
Jo Ann P. Collins, Sr. Deputy Attorney General, Harrisburg, for respondent.
BEFORE: SIMPSON, Judge, and LEAVITT, Judge, and KELLEY, Senior Judge.
OPINION BY Judge LEAVITT.
Charles and Dorothy Miller petition for review of an adjudication of the Board of Finance and Revenue imposing a realty transfer tax on the Millers' conveyance of realty to a living trust. The Board held that the statutory exclusion for the transfer of real property to a living trust did not apply to the Millers' trust because it was an irrevocable living trust. Concluding that the Tax Reform Code of 1971 (Realty Transfer Tax Act)[1] does not require a living trust to be revocable in order to qualify for exclusion from tax, we reverse the Board of Finance and Revenue.
*951 The stipulated facts are as follows. Charles and Dorothy Miller, husband and wife, created The Dorothy M. Miller Family Irrevocable Trust (Miller Trust) in October 2005. The Miller Trust Agreement names Dorothy Miller as settlor, and Charles and Dorothy Miller as co-trustees. The sole beneficiaries of the trust are Mr. and Mrs. Miller and their only child, Sharon M. Gregg. In pertinent part, Section 2.01 of the Trust Agreement states:
2.01. Initial Principal. Settlor, desiring to establish an irrevocable trust, does hereby irrevocably transfer, assign and deliver to the Trustees and their successors and assigns the assets listed on Schedule "A", attached hereto and made a part hereof.
Respondent's Brief, Appendix A, Exhibit A, at 2. Section 10.01 of the Trust Agreement states:
10.01. Irrevocability. Settlor has been advised of the consequences of an irrevocable trust and hereby declares that this Trust shall be irrevocable and shall not be altered, amended, revoked, or terminated by Settlor or any other person or persons.
Id. at 12.
By deed recorded November 30, 2005, Mr. and Mrs. Miller transferred title to their house and farm located in Carlisle to the Miller Trust.[2] The Millers did not pay realty transfer tax on the transfer, claiming that it was an excluded transaction under the Realty Transfer Tax Act because it was a transfer to the trustee of a "living trust."
On April 12, 2006, the Department of Revenue issued a Realty Transfer Tax Notice of Determination providing that the transfer of the Millers' realty, valued at $218,540, was subject to $4,370.80 in state and local realty transfer taxes, plus applicable interest and fees. The Department advised the Millers that their claimed exclusion was disallowed because the Miller Trust did not "qualify as an ordinary or living trust." Respondent's Brief, Appendix A, Exhibit D, at 2.
The Millers filed a petition for redetermination with the Department's Board of Appeals. On February 16, 2007, the Board of Appeals issued its decision, holding that the transaction was not excluded from realty transfer tax. The Board reasoned that because the Miller Trust is irrevocable, it is not a "will substitute" and, therefore, is not a living trust for purposes of the Realty Transfer Tax Act. On further appeal, the Board of Finance and Revenue affirmed the imposition of the realty transfer tax on the same grounds. The Millers now petition for this Court's review.
On appeal,[3] the Millers argue that the Board of Finance and Revenue erred in determining that the transfer of their farmstead to the Miller Trust was a taxable transaction. The Realty Transfer Tax Act provides an exclusion for the transfer of realty to the trustee of a "living trust," and the Millers argue that their transaction falls into that category. They note that a living trust addresses a future event, i.e., what happens to property upon *952 the death of the settlor, regardless of whether the trust is revocable or irrevocable. The Department counters that an irrevocable trust like the Miller Trust is not a substitute for a will and, therefore, does not constitute a "living trust" for purposes of the statutory exclusion.
The issue presented in this case poses a question of statutory construction, for which our review is plenary. Malt Beverages Distributors Association v. Pennsylvania Liquor Control Board, 918 A.2d 171, 175 (Pa.Cmwlth.2007). The object of all statutory interpretation and construction is to ascertain and effectuate the intention of the General Assembly. 1 Pa. C.S. § 1921(a). In pursuing that end, we are mindful that the plain language of a statute generally provides the best indication of legislative intent. Malt Beverages Distributors, 918 A.2d at 175. Further, in reviewing the plain language of a statute, "[w]ords and phrases shall be construed according to rules of grammar and according to their common and approved usage." 1 Pa.C.S. § 1903(a). Every statute must be construed to give effect to all its provisions so that no provision is "mere surplusage." Malt Beverages Distributors, 918 A.2d at 176 (citing 1 Pa.C.S. § 1921(a)). Likewise, this Court will not insert a word the legislature failed to supply into a statute. Id.
With the above principles in mind, we turn to the relevant statutory provisions in this case. Section 1102-C of the Realty Transfer Tax Act, 72 P.S. § 8102-C,[4] imposes a tax equal to one percent of the value of the property upon the transferor of real property in the Commonwealth. The statute contains the following exclusion for transfers of real estate to a living trust:
The tax imposed by section 1102-C shall not be imposed upon:
* * *
A transfer for no or nominal actual consideration to a trustee of a living trust from the settlor of the living trust. No such exemption shall be granted unless the recorder of deeds is presented with a copy of the living trust instrument.
Section 1102-C.3(8.1) of the Realty Transfer Tax Act, 72 P.S. § 8102-C.3(8.1) (emphasis added). A "living trust" is defined as follows:
Any trust, other than a business trust, intended as a will substitute by the settlor which becomes effective during the lifetime of the settlor, but from which trust distributions cannot be made to any beneficiaries other than the settlor prior to the death of the settlor.
Section 1101-C of the Realty Transfer Tax Act, 72 P.S. § 8101-C (emphasis added).[5]
*953 As noted by the Millers, the definition of "living trust" in Section 1101-C is clear and unambiguous; a living trust is any trust arrangement that the settlor intends to be a substitute for his or her will. Implicit in this definition is the notion that the settlor's subjective intent is determinative. Any other interpretation would render the language "intended ... by the settlor" mere surplusage. In this case, the Millers offered evidence that the settlor of the Miller Trust, Dorothy Miller, intended that the trust be a substitute for her will. Mrs. Miller testified via deposition that the purpose of the Miller Trust is "[t]o guarantee that our daughter would have the ... property when we passed away." Dorothy Miller Deposition, at 8. Mrs. Miller also responded affirmatively when counsel asked if she intended the Trust to be an alternative to her will. Id. at 13. Mrs. Miller's subjective intent could not be clearer.[6] Mr. Miller offered similar testimony.
In addition, the Miller Trust Agreement provides objective evidence that Mrs. Miller intended to create a "will substitute." The Restatement defines a "will substitute" as follows:
A will substitute is an arrangement respecting property or contract rights that is established during the donor's life, under which (1) the right to possession or enjoyment of the property or to a contractual payment shifts outside of probate to the donee at the donor's death; and (2) substantial lifetime rights of dominion, control, possession, or enjoyment are retained by the donor.
RESTATEMENT (THIRD) OF PROP.: WILLS AND OTHER DONATIVE TRANSFERS § 7.1(a) (2003) (emphasis added). We adopt the Restatement definition for purposes of reviewing the key provisions of the Miller Trust Agreement, which support the conclusion that it was intended as a will substitute.
Broadly speaking, the purpose of the Trust is to govern the Millers' property rights during the life of the settlor, Mrs. Miller, and to shift possession of any property held in trust to the Millers' daughter, Sharon Gregg, outside of probate. Much like a will, Section 4.03 of the Trust Agreement explains the distribution of trust assets depending upon a number of contingencies, including the death of either Mr. or Mrs. Miller before the other.[7]
Additionally, Mr. and Mrs. Miller, as co-trustees, retain substantial lifetime rights of dominion, control, possession and enjoyment of the property. These rights include *954 the ability to sell the real property. For example, Section 5.01(A)(1) of the Trust Agreement states:
(A) In the management, care and disposition of this Trust, the Trustees shall have the power to do all things and to execute such deeds, mortgages, instruments, and documents as may be deemed necessary and proper, including the following powers, all of which may be exercised without order of or report to any court:
(1) To sell, exchange, or otherwise dispose of any property, real, personal or mixed, at any time held or acquired hereunder, at public or private sale, for cash or on terms, without advertisement, including the right to lease for any term notwithstanding the period of the Trust, and to grant options, including an option for a period beyond the duration of the Trust; and to execute such deeds or other instruments as are necessary.
Respondent's Brief, Appendix A, Exhibit A, at 7 (emphasis added).[8]
In sum, the Miller Trust Agreement satisfies the Restatement's definition of a will substitute. It shifts real property to another at the donor's death outside probate, and it gives the donor substantial lifetime rights of dominion and control.
The Department argues that a revocable trust is like a will because both instruments are ambulatory and transfer only a right to a future possessory interest. It is because a will effects no current transfer of ownership that it is not taxable. Transfer of property to an irrevocable trust, on the other hand, is an immediate and final transfer of ownership. Therefore, the Department argues, it should be subject to realty transfer tax like any other sale or gift of real estate.
The problem with the Department's argument is that it fails to recognize the true nature of the Miller Trust. Here, the settlor, trustees and beneficiaries are a single family unit. Mr. and Mrs. Miller will continue to live in their residence and enjoy dominion, control, possession and enjoyment of the property for their lifetimes. As a practical matter, there is no present transfer of use or enjoyment of the property to Sharon Gregg until the death of the settlor. In addition, distributions from the trust can only be made to the settlor prior to the settlor's death. Section 1101-C of the Realty Transfer Tax Act, 72 P.S. § 8101-C.
The Department, and the dissent, direct this Court to foreign authority for the proposition that a trust must be revocable in order to function as a will substitute. This foreign authority includes Restatements of the law; decisions from other state courts; American Bar Association publications; and law review articles. We need not look outside Pennsylvania for guidance on this issue, however, because the statutory language before us is clear and unambiguous. There is no requirement in Section 1101-C of the Realty Transfer Tax Act that a living trust must be revocable by the settlor in order to be treated as a will substitute for tax purposes. Whether such a requirement should be added to the Act is for the legislature to decide.[9]
*955 In short, the Trust Agreement functions like a will by distributing the Millers' farmstead and any other assets in the trust to Sharon Gregg upon the death of her parents. Until that time, Mr. and Mrs. Miller will continue to live in their home and retain control and possession of the property, including the ability to sell or lease the home. Whether the Miller Trust is revocable or irrevocable matters not in assessing its function.
For all of the foregoing reasons, we reverse the order of the Board of Finance and Revenue.
ORDER
AND NOW, this 8th day of April, 2010, the order of the Board of Finance and Revenue in the above-captioned matter, dated October 16, 2007, is REVERSED.
Unless exceptions are filed within 30 days pursuant to Pa. R.A.P. 1571(i), this order shall become final.
DISSENTING OPINION BY Judge SIMPSON.
I respectfully dissent. I would find as a fact that the Miller Trust was not intended as a will substitute. Unlike a will, which does not immediately transfer ownership and can be changed or revoked before death, transfer of property to the Trust is immediately effective and cannot be changed. As a result, I would affirm the assessment of transfer taxes on the irrevocable conveyance from the settlor to the Trust.
The majority analyzes this case through statutory construction. In contrast, I view this as a matter of fact finding. Although we sit in our appellate jurisdiction, we function as a trial court. We make findings of fact and conclusions of law based on stipulations of the parties and the record as a whole. Here, the parties did not stipulate as to whether the Trust was intended as a will substitute; therefore, we must make that finding of fact.
The majority concludes that the subjective intent of the settlor controls. However, as fact finder I would also consider the instrument and how it functions. On transfer to the Trust, legal title to the property here leaves the settlor and never returns. Also, the settlor can never change her plans as to disposition of the property. In these significant ways the Trust is not like a will. Further, I would give greater weight to the objective evidence of the instrument and its operation, and I would give less weight to the self-serving testimony of subjective intent.
There are additional reasons supporting my approach to fact-finding. First and foremost, my proposed finding is consistent with legal authority that an irrevocable trust, like the Trust here, is not a will *956 substitute. See, e.g., RESTATEMENT (THIRD) OF TRUSTS § 11 cmt. b (2003) (revocable trust is will substitute), § 25 cmt. a (revocable trust widely used as legally accepted substitute for will); RESTATEMENT (THIRD) OF PROP.: WILLS AND OTHER DONATIVE TRANSFERS § 7.1 cmt. a (2003) (irrevocable trusts do not serve the function of a will).
Second, my proposed finding is more practical. In this regard, I entirely agree with the Commonwealth that relying solely on self-serving declarations of subjective intent is unworkable. In sum, based on my proposed finding that the Trust was not intended as a will substitute, I would affirm the assessment of transfer taxes.
NOTES
[1] Act of March 4, 1971, P.L. 6, as amended, 72 P.S. §§ 8101-C-8114-C.
[2] More specifically, Charles O. Miller and Dorothy M. Miller, co-trustees of The Dorothy M. Miller Family Revocable Trust, transferred title to 7252 Wertzville Road, Carlisle, to Charles O. Miller and Dorothy M. Miller, co-trustees of The Dorothy M. Miller Family Irrevocable Trust. Respondent's Brief, Appendix A, Partial Stipulation of Facts, at 2.
[3] This Court reviews de novo the determinations of the Board of Finance and Revenue. Kelleher v. Commonwealth, 704 A.2d 729, 731 (Pa.Cmwlth.1997). Stipulations of fact are binding upon both the parties and the Court. Id. However, this Court may draw its own legal conclusions. Id. (citing PA. R.A.P. 1571 (review of determinations of the Board)).
[4] Section 1102-C states:
Every person who makes, executes, delivers, accepts or presents for recording any document or in whose behalf any document is made, executed, delivered, accepted or presented for recording, shall be subject to pay for and in respect to the transaction or any part thereof, or for or in respect of the vellum parchment or paper upon which such document is written or printed, a State tax at the rate of one per cent of the value of the real estate represented by such document, which State tax shall be payable at the earlier of the time the document is presented for recording or within thirty days of acceptance of such document or within thirty days of becoming an acquired company.
72 P.S. § 8102-C.
[5] We note that the only issue in this case is whether the Miller Trust could be "intended as a will substitute." The Department does not dispute that the Miller Trust satisfies all of the other requirements for a living trust, i.e., it is not a business trust, it is effective during Mrs. Miller's lifetime, and distributions are not permitted to anyone during Mrs. Miller's lifetime.
[6] The Department argues that relying upon a settlor's subjective intent that a trust be a will substitute results in an unworkable standard because every settlor of every trust will make this assertion in order to avoid taxation. The dissent echoes this view by suggesting that Mrs. Miller's testimony was "self-serving," but this describes the testimony of every witness who is a party to litigation. Whether the Department's concerns are valid is irrelevant because the statute says what it says, and we cannot disregard the legislature's express direction to consider the settlor's intent.
[7] For example, Section 4.03(A) of the Trust Agreement provides that if Mr. Miller predeceases Mrs. Miller, the trust shall terminate and the remaining trust estate shall be distributed to Sharon Gregg, per stirpes. Respondent's Brief, Appendix A, Exhibit A, at 5. If Sharon Gregg has already predeceased her mother without leaving issue, the principal and accrued income of the trust will be distributed to other family members. Pursuant to Section 4.03(B) of the Trust Agreement, if Mr. Miller survives his wife, the trust shall terminate and the remaining trust estate shall be placed in a by-pass trust and held undivided by the trustees for the benefit of Mr. Miller during his lifetime. Section 4.03(B) also requires the trustees to distribute the income and principal of the trust as they deem necessary for the support and maintenance of Sharon Gregg, after first taking into consideration Mr. Miller's needs.
[8] The dissent asserts that the Miller Trust was not intended as a will substitute. However, the dissent does not reconcile that conclusion with the language in Section 5.01(A)(1), which gives the Millers lifetime possession and enjoyment of the property, and the testamentary language in Section 4.03 of the Miller Trust.
[9] The Department also urges this Court to defer to its view that an irrevocable trust can never be a living trust for tax purposes. It is well established that an administrative agency's interpretation of a statute for which it has enforcement responsibility is entitled to substantial deference. Borough of Pottstown v. Pennsylvania Municipal Retirement Board, 551 Pa. 605, 611, 712 A.2d 741, 744 (1998). However, where the meaning of a statute is a question of law for the court, such deference is unwarranted if the agency's interpretation is unwise or erroneous. Rosen v. Bureau of Professional and Occupational Affairs, State Architects Licensure Board, 763 A.2d 962, 968 (Pa.Cmwlth.2000). Such is the case here, where the legislature has not required that a trust must be revocable to be a living trust.
Further, "the rules of [statutory] construction are clear that exclusions in tax statutes are to be strictly construed against the taxing body and in favor of the taxpayer to the extent that there is any reasonable doubt regarding the meaning of the statutory language." BFC Hardwoods, Inc. v. Board of Assessment Appeals of Crawford County, 565 Pa. 65, 72 n. 5, 771 A.2d 759, 763 n. 5 (2001) (quoting City of Philadelphia v. Tax Review Board ex rel. Ace Dump Truck Service, 158 Pa.Cmwlth. 402, 631 A.2d 1072, 1074 (1993)). Applying this axiom in the case sub judice requires that we find in favor of the Millers. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/562668/ | 935 F.2d 850
James BREWER, Petitioner-Appellee,v.James E. AIKEN, Commissioner, Indiana Department ofCorrections, and G. Michael Broglin, Director,Diagnostic Center, Plainfield, Indiana,* Respondents-Appellants.
No. 90-2530.
United States Court of Appeals,Seventh Circuit.
Argued Oct. 30, 1990.Decided June 14, 1991.
Jessie A. Cook, Trueblood, Harmon, Carter & Cook, Terre Haute, Ind., for petitioner-appellee.
Linley E. Pearson, Atty. Gen., David A. Arthur, Deputy Atty. Gen., Federal Litigation, Indianapolis, Ind., for respondents-appellants.
Before COFFEY, EASTERBROOK and KANNE, Circuit Judges.
COFFEY, Circuit Judge.
1
James Brewer was convicted of murder February 17, 1978, after a jury trial and was sentenced to death on March 1, 1978, in accordance with the jury's recommendation. After exhausting his state court remedies, see Brewer v. State, 496 N.E.2d 371 (Ind.1986) (Brewer II ), Brewer petitioned the federal district court for a writ of habeas corpus pursuant to 28 U.S.C. Sec. 2254. The district court rejected Brewer's assertion that the guilt phase of his trial was constitutionally defective, but found that Brewer received ineffective assistance of counsel during the penalty phase of his trial, and the judge entered an order granting the writ of habeas corpus unless the State of Indiana provided Brewer a new sentencing hearing within 90 days. The district court ordered a permanent stay of execution pending the outcome of the new sentencing hearing. We affirm.
I. BACKGROUND
2
The facts underlying Brewer's murder conviction are uncontested on appeal. About 5:00 p.m. on December 4, 1977, Brewer and an accomplice, Kenneth Brooks, gained entrance into the Skirpan residence in Gary, Indiana, by representing that they were police detectives investigating an accident involving one of the Skirpan cars. Once inside the house, the two well-dressed men announced a robbery and held the family at gunpoint. During the robbery, Brewer fatally wounded 29-year old Steven Skirpan.
3
During the investigation witnesses identified Brewer as the man who, along with Brooks, perpetrated an armed robbery of a gas station at 4:30 p.m. and three other armed robberies in an apartment building about 7:45 p.m. earlier during the day of the Skirpan murder. Nonetheless, when questioned by law enforcement officers Brewer initially denied being present during the Skirpan murder and later informed his court-appointed attorney that he was at his girlfriend's house when Brooks and another man robbed the Skirpans in their home. Brewer asked his attorney to present his girlfriend and another woman as alibi witnesses at trial, but shortly before trial he informed his attorney that he had participated in the Skirpan robbery and also that he had written a letter to his girlfriend instructing her and her friend to present a fictitious alibi. In spite of the fact that Brewer's counsel had knowledge that the two alibi witnesses would provide perjured testimony, he called both women to testify. Upon cross-examination, it became evident that the alibi had been contrived.
4
The jury reached a verdict of guilty in short order, and the trial moved into the sentencing phase. Although Brewer's counsel was an experienced criminal defense attorney, he was unaware that the sentencing hearing would immediately follow the guilt phase, but it should be pointed out that Brewer was the first defendant prosecuted under the new Indiana death penalty statute. Shortly after the guilty verdict, the judge held an informal conversation with the prosecutor and the defense counsel at which time they discussed the method of procedure to be followed during the sentencing phase of the newly instituted bifurcated trial procedure. During this conference defense counsel requested a continuance of a week or more for the purpose of collecting his thoughts in preparation for the penalty phase and to follow up on information he had just received regarding Brewer's extensive psychiatric history and problems commencing with his boyhood. According to the trial judge's recollection of counsel's informal request, the court refused because the jury was sequestered. This off-the-record conference occurred about 2:45 p.m. Friday afternoon, and the court reconvened for the penalty phase on the following day around 9:00 a.m.
5
Since the defense attorney had so little time to prepare for the sentencing phase,1 he stated he was unable to verify and investigate the information he received regarding Brewer's mental history. Under the court order to proceed at once, the defendant's counsel felt that his only hope of avoiding a jury recommendation of the death penalty would be to "humanize" Brewer in the eyes of the jury through putting him on the stand as a truthful witness denying that he was the one who pulled the trigger at the time of the murder, as he (defense counsel) believed that the jury was undecided as to which robber shot Skirpan. Brewer's counsel waived opening argument at the penalty phase without explanation and deliberately chose not to present character witnesses, for he was of the opinion that placing the defendant's character at issue would do more harm than good. Based upon the discussion during the aforementioned informal conference among the prosecutor, defense counsel and the judge, Brewer's attorney believed that cross-examination would be limited in scope and thus other crimes testimony would not be allowed. Relying on this expectation of limited cross examination testimony, counsel persuaded Brewer to testify at the penalty phase of the bifurcated trial despite the defendant's misgivings. Nevertheless, in view of Brewer's testimony that it was Brooks who shot Skirpan, the court ruled that questions concerning another robbery in which Brewer and Brooks participated that day would be admissible only as to the question of impeachment. While being questioned concerning the robbery, which occurred earlier on the date of the Skirpan murder, Brewer admitted having knowledge that Brooks would shoot at people during the course of a robbery because of his conduct during the shooting incident in the earlier robbery that day. Brewer on cross-examination also admitted that he fired his pistol at the police officers who arrested him and that he had been deliberately vague in telling the police where his alibi witness lived because he wanted the opportunity to speak with her and give her the false alibi before the police had an opportunity to question her. Brewer's cross-examination was also damaging concerning the details of the murder and robbery, including the fact that Brewer had to step over the body of the murder victim in order to perpetrate the robbery. Despite the devastating testimony and his recently acquired knowledge regarding Brewer's psychiatric problems, defense counsel chose not to question Brewer about his mental history while he was on the stand, and in counsel's closing argument he merely focused on the issue of who actually pulled the trigger and highlighted the evidence that he believed demonstrated that Brooks shot Stephen Skirpan. So in their sentencing deliberations, the jury was faced with a self-admitted prevaricator (Brewer confessed concocting the alibi) and a thief who was willing to shoot at police and walk over a murder victim's body to commit another crime. For some reason Brewer's attorney decided not to present any mitigating evidence to counter the negative impression this evidence would most certainly have engendered. To the surprise of no one, the jury recommended the death sentence.
6
As part of the presentence investigation, the court ordered a psychological exam of Brewer "to determine the performance I.Q. of the defendant." The psychologist's report stated that he
7
"examined Mr. James Brewer and tested him with the Wechsler Adult Intelligence Scale (WAIS), the Rorschach and the Thematic Apperception Test.
8
"His intelligence as obtained on the WAIS is:
Verbal I.Q. 73
Performance I.Q. 82
Full Scale I.Q. 76
9
"He reaches into the dull-normal range of intelligence in some of his tests but has overall intellectual functioning in the borderline range of intelligence. That is, that range which includes the lowest seven (7%) percent of the population.
10
"In his personality as obtained on the other two tests, he reveals a shallow mind that perceives the superficial aspects of reality. Does not analyze. Does not reflect within himself the events of his life or of others. Consequently, he lacks real understanding. He simply acts on feeling and impulse. He appears to live pretty much on the moment without thinking ahead nor looking much behind. Consequently, he tends not to learn from his experiences."
11
The presentence investigation report included information to the effect that Brewer had received two or three shock therapy treatments at about the age of 10, that he participated in a number of psychiatric conferences (the presentence report failed to mention the psychiatric reports generated from the interviews) and that he failed to complete the 9th grade in school.
12
After considering the jury's recommendation as well as the presentence report, the state judge sentenced Brewer to death:
13
"Having given this matter thoughtful and prayerful consideration for the last ten (10) days, having undertaken a truly agonizing reappraisal of my personal values and judgments, and being fully cognizant of the awesome responsibility that is mine, I am now prepared to follow the recommendation of the jury.
14
"James Brewer was introduced to the system at the age of 11. Eleven years old, he was committed to Indiana Boys' School. He was there for a short period of time, paroled, returned again as a parole-violator at age 12. Paroled for a short time, returned again at age 14 as a parole-violator. Was again paroled, returned again at the age of 15 for the fourth time to the Indiana Boys' School. Thereafter, James Brewer graduated from Indiana Boys' School, went to the Indiana State Farm for the crime of theft. Was paroled, thereafter, returned again for Assault and Battery With Intent to Commit a Robbery. Entering with Intent to Commit a Felony; was again returned to the Indiana State Farm. Released again. Now, he is before the Court with an ultimate charge.
15
"I had your client examined, not to determine comprehension, but to get some idea of the intelligence level of your client. I find him to be of borderline intelligence. I find that our institutions in the State of Indiana, who is now requesting that the Defendant be put to death, had an opportunity to work with the Defendant from the age of 11. Again, having been returned four times to the Indiana Boys' School, served a total of two years during that period of time. He was sent to the Indiana State Farm twice. He has been unable to probe the mind of James Brewer. We have been unable to find any potential to rehabilitate him. It is unfortunate; his life has been a brutal life. He lost his mother, father at an early age. But we cannot tolerate the James Brewers of our community. We cannot tolerate their commission of crimes, for which he is here before the Court today. I am sure there will be tears shed for James Brewer. But there also were tears shed for Stephen Skirpan, the 29-year old man who did nothing at all. Who happened to be in his living room at the time James Brewer came to rob him."
16
The trial judge substituted a replacement counsel to present Brewer's automatic appeal of the death sentence to the Indiana Supreme Court. Brewer's second counsel presented numerous allegations of error on appeal, which the Court rejected in Brewer v. State, 275 Ind. 338, 417 N.E.2d 889 (1981) (Brewer I ). Brewer subsequently moved for, and was denied, post-conviction relief in the Superior Court. The Indiana Supreme Court also affirmed Brewer's conviction and sentence on his appeal of the denial of post-conviction relief. In rejecting Brewer's argument that it was error for the trial judge to refuse to grant a continuance for the trial attorney to investigate and prepare evidence regarding his psychiatric history, the Indiana Supreme Court held that there was no prejudice arising from trial counsel's failure to present Brewer's mental history to the jury during the penalty phase.
17
"Petitioner also fails to demonstrate any prejudice warranting relief. He introduced twelve (12) documents at the post-conviction hearing, alleging they comprised the material for which he requested a continuance. The materials consisted of reports dated no later than Petitioner's sixteenth (16th) year, primarily demonstrating a record of juvenile delinquency and a low I.Q., often labeling Petitioner as mentally retarded. However, the trial court, having denied the motion for a continuance due to the sequestration of the jury, appointed a psychologist to examine Petitioner before the trial court imposed sentence. The psychologist's report contained mitigating information equivalent to the reports entered at the post-conviction hearing. Therefore, the trial court took into consideration the psychologist's opinion that Petitioner is in the lowest seven percent of the population as to general intelligence, acts on feelings and impulses without intelligent reflection or analysis and tends not to learn from experiences. Further, the trial court had before it the pre-sentence report demonstrating that Petitioner had problems conforming his behavior to the law from an early age. Accordingly, Petitioner was not prejudiced as the major factors he desired to have considered were presented before a final determination of sentencing was made by the trial judge."
18
Brewer II, 496 N.E.2d at 374.
19
In this habeas action, the district court rejected Brewer's claim of ineffective assistance of counsel during the guilt phase of the trial, but held that Brewer received ineffective assistance of counsel during the penalty phase because of the false alibi presented during the guilt phase and because of defense counsel's failure to present evidence in mitigation to the jury. The trial judge stated that
20
"Counsel acknowledged that he knew petitioner was of 'borderline intelligence' and 'minimal educational level.' A reasonable preparation for the penalty phase would have included the discovery of this evidence and the procurement of testimony on these issues. Such testimony was readily available as the conduct of the hearing on the Belated Motion to Correct Errors and the Post-Conviction Remedy revealed.
21
"Counsel's failure to present the evidence of low intelligence and an excessively compliant personality and the choice to make petitioner the only witness at the penalty phase, after being shown to have suborned perjury, effectively left petitioner with no defense at all."
22
In response to arguments from the state that counsel's failure to present Brewer's psychiatric history to the jury was cured by presenting the information to the state sentencing judge, the district court held that "the failure to present an adequate defense to the sentencing jury is not rendered non-prejudicial by its advisory nature or the sentencing judge's subsequent consideration of similar evidence." The State of Indiana appeals the district court's holding that Brewer received ineffective assistance of counsel during the penalty phase of his trial.
II. ISSUES
23
The issues we shall consider on appeal are whether Brewer received ineffective assistance of counsel during the penalty phase of his bifurcated trial as a result of trial counsel putting witnesses on the stand during the guilt phase who presented a false alibi and whether Brewer received ineffective assistance of counsel as a result of his attorney failing to present mitigating evidence to the jury during the penalty phase of the trial.
III. DISCUSSION
24
Initially, we note that our habeas corpus jurisdiction under 28 U.S.C. Sec. 2254 "is limited to questions of federal and constitutional custody. In other words, 'federal courts can grant habeas relief only when there is a violation of federal statutory or constitutional law.' " Haas v. Abrahamson, 910 F.2d 384, 389 (7th Cir.1990) (quoting United States ex rel. Lee v. Flannigan, 884 F.2d 945, 952 (7th Cir.1989)). "We do not sit as a super state supreme court to review error under state law," Skillern v. Estelle, 720 F.2d 839, 852 (5th Cir.1983), so our review of the issues will focus only on the federal issues involved in this appeal. Under Sec. 2254(d), we presume that state court findings of historical fact are correct, Sotelo v. Indiana State Prison, 850 F.2d 1244, 1247 (7th Cir.1988), but questions of law or mixed questions of law and fact lack that presumption. See Sumner v. Mata, 455 U.S. 591, 597, 102 S. Ct. 1303, 1306, 71 L. Ed. 2d 480 (1982). Thus, we review such legal questions under a de novo standard of review. See Sotelo, 850 F.2d at 1247.
25
In order for Brewer to establish his claim that he received ineffective assistance of counsel, he "must show that counsel's representation fell below an objective standard of reasonableness" and "that the deficient performance prejudiced the defense." Strickland v. Washington, 466 U.S. 668, 687-88, 104 S. Ct. 2052, 2064, 80 L. Ed. 2d 674 (1984). "The bench mark for judging any claim of ineffectiveness must be whether counsel's conduct so undermined the proper functioning of the adversarial process that the trial cannot be relied on as having produced a just result." Id. When a defendant claims ineffective assistance of counsel at the penalty phase of a capital trial,
26
"the question is whether there is a reasonable probability that, absent the errors, the sentencer--including an appellate court, to the extent it independently reweighs the evidence--would have concluded that the balance of aggravating and mitigating circumstances did not warrant death."
27
Strickland, 466 U.S. at 695, 104 S.Ct. at 2069.
A. Mitigating Evidence
28
Under the Indiana Death Penalty Statute,
29
"(a) The state may seek a death sentence for murder by alleging, on a page separate from the rest of the charging instrument, the existence of at least one of the aggravating circumstances listed in subsection (b) of this section. In the sentencing hearing after a person is convicted of murder, the state must prove beyond a reasonable doubt the existence of at least one of the aggravating circumstances alleged.
30
"(b) The aggravating circumstances are as follows:
31
"(1) The defendant committed the murder by intentionally killing the victim while committing or attempting to commit arson, burglary, child molesting, criminal deviate conduct, kidnapping, rape, or robbery.
32
* * * * * *
33
"(c) The mitigating circumstances that may be considered under this section are as follows:
34
"(1) The defendant has no significant history of prior criminal conduct.
35
"(2) The defendant was under the influence of extreme mental or emotional disturbance when he committed the murder.
36
"(3) The victim was a participant in, or consented to, the defendant's conduct.
37
"(4) The defendant was an accomplice in a murder committed by another person, and the defendant's participation was relatively minor.
38
"(5) The defendant acted under the substantial domination of another person.
39
"(6) The defendant's capacity to appreciate the criminality of his conduct or to conform his conduct to the requirements of law was substantially impaired as a result of mental disease or defect or of intoxication.
40
"(7) Any other circumstances appropriate for consideration.
41
"(d) If the defendant was convicted of murder in a jury trial, the jury shall reconvene for the sentencing hearing; if the trial was to the court, or the judgment was entered on a guilty plea, the court alone shall conduct the sentencing hearing. The jury, or the court, may consider all the evidence introduced at the trial stage of the proceedings, together with new evidence presented at the sentencing hearing. The defendant may present any additional evidence relevant to:
42
"(1) The aggravating circumstances alleged; or
43
"(2) Any of the mitigating circumstances listed in subsection (c) of this section.
44
"(e) If the hearing is by jury, the jury shall recommend to the court whether the death penalty should be imposed. The jury may recommend the death penalty only if it finds:
45
"(1) That the state has proved beyond a reasonable doubt that at least one of the aggravating circumstances exists; and
46
"(2) That any mitigating circumstances that exist are outweighed by the aggravating circumstance or circumstances.
47
"The court shall make the final determination of the sentence, after considering the jury's recommendation, and the sentence shall be based on the same standards that the jury was required to consider. The court is not bound by the jury's recommendation."
48
I.C. 35-50-2-9 (emphasis added). At the sentencing hearing, rather than present new evidence to justify its request for the death sentence, the state requested that all evidence introduced during the guilt phase of the trial be incorporated into the record of the penalty phase by reference. The prosecutor argued that it carried its burden of proving an intentional killing during a robbery in the guilt phase of the trial. In opposition to the death penalty, defense counsel presented Brewer as a witness in an attempt to "humanize" him in the eyes of the jury. His strategy was to persuade the jury that Brewer was not the one who killed Stephen Skirpan during the robbery and thus the aggravating circumstance of intentionally killing a person during a robbery was absent. Counsel believed that the jury had not made up their minds about whether Brewer in fact was the trigger man, and that the best defense at this point was to present a truthful Brewer who would deny shooting Steven Skirpan. On the witness stand Brewer testified that although he was present during the Skirpan robbery, it was his co-defendant, Kenny Brooks, who fired the murder weapon. In his closing argument, defense counsel attempted to negate the aggravating circumstance of intentional killing during a robbery through raising a reasonable doubt as to the identity of the person who actually killed Stephen Skirpan. Counsel also contended that the murder was not intentional, that is, that neither Brewer nor Brooks intended to kill anyone when they entered the Skirpan residence. Further, defense counsel argued that the ballistic evidence proved that it was Brooks rather than Brewer who shot Stephen Skirpan--Brewer was carrying an automatic as opposed to Brooks' revolver, and counsel argued that the cartridge found at the scene of the crime would not even fit into the chambers of Brewer's gun. Obviously, the jury chose neither to believe Brewer nor the ballistic evidence offered and recommended that Brewer receive the death penalty.
49
In regard to the statutory mitigating factors, the original defense counsel, James J. Frank, testified at the hearing on Belated Motion to Correct Errors that he decided not to present mitigating evidence because he felt that none of the seven factors applied: 1) no significant history of prior criminal conduct--Brewer had a history of criminal conduct from the age of 11; 2) "the defendant was under the influence of extreme mental or emotional disturbance at the time of the murder"--there was no evidence of Brewer being under mental or emotional disturbance at the time of the murder; 3) the victim participated or consented to the defendant's conduct--Frank stated that Stephen Skirpan certainly did not consent to the murder; 4) "the defendant's participation was relatively minor"--the evidence established that Brewer was more than a minor participant in the robbery (but counsel did argue that Brewer did not intend nor actually commit the murder); 5) "the defendant acted under the substantial domination of another"--counsel did not feel that Brewer had been substantially dominated by Brooks to the extent of "having been robbed of his free will"; 6) substantial impairment of capacity to appreciate the criminality of conduct or conform conduct to law because of mental disease, defect, or intoxication--from his dealings with Brewer, counsel did not suspect that "the defendant's capacity to appreciate the criminality of his conduct or to conform his conduct to the requirements of law was substantially impaired as a result of mental disease or defect or of intoxication"; and 7) any other appropriate circumstances--defense counsel testified that he deliberately chose not to present character witnesses because he felt that they would do Brewer more harm than good, since putting Brewer's character in issue would allow the state to present additional evidence of other crimes--"[t]here were other victims present in the Courtroom during the course of his trial ... and had we put his character in issue ... [the state] would have brought those people and placed them in front of the jury also."
50
Brewer argues that defense counsel's failure to search for and present mitigating evidence such as Brewer's prior employment record, his history of mental problems, his disruptive family background, his susceptibility to being easily led and the failure to present character witnesses constitutes ineffective assistance of counsel. The defense attorney's deliberate decision to forego presenting character witnesses, reasoning that placing Brewer's character in issue would have done more harm than good may well fall within "the presumption that, under the circumstances, the challenged action 'might be considered sound trial strategy.' " Strickland, 466 U.S. at 689, 104 S.Ct. at 2065 (citation omitted). Moreover, Brewer has failed to make an argument as to how his employment record could have contributed to a reasonable probability that the jury "would have concluded that the balance of aggravating and mitigating circumstances did not warrant death." Id., 466 U.S. at 695, 104 S. Ct. at 2069, and we are unconvinced that the failure to present a defendant's work record, standing alone, would have had an impact or influence on Brewer's sentence. But we find Brewer's arguments regarding factors relating to his psychiatric history compelling. In Kubat v. Thieret, 867 F.2d 351, 369 (7th Cir.1989), cert. denied sub nom., Kubat v. Greer, --- U.S. ----, 110 S. Ct. 206, 107 L. Ed. 2d 159 (1989), we held that:
51
"Viewing the performance of counsel solely from the perspective of strategic competence, we hold that defense counsel must make a significant effort, based on reasonable investigation and logical argument, to ably present the defendant's fate to the jury and to focus the attention of the jury on any mitigating factors. Mitigating factors brought out at trial might be emphasized, a coherent plea for mercy might be given, or new evidence in mitigation might be presented. But counsel may not treat the sentencing phase as nothing more than a mere postscript to the trial. While the Strickland threshold of professional competence is admittedly low, the defendant's life hangs in the balance at a capital sentencing hearing. Indeed, in some cases, this may be the stage of the proceedings where counsel can do his or her client the most good."
52
(Emphasis added). In our opinion, defense counsel's failure to investigate the mental history of a defendant with low intelligence demonstrates conclusively that he did not "make a significant effort, based on reasonable investigation and logical argument, to ably present the defendant's fate to the jury and to focus the attention of the jury on any mitigating factors." Id. We note that since Brewer's bifurcated trial was the first one under Indiana's new death penalty scheme, we view the state judge's refusal to grant a continuance for the purpose of inquiring into Brewer's psychiatric history to have been a far more significant problem (albeit one not asserted to us) than errors we sometimes view and classify as merely harmless. Even a cursory investigation of Brewer's mental history would have revealed the following: a) Brewer received several shock therapy treatments at age 10; b) he had brain damage (apparently as a result of blows to the head as a young boy) and was classified as mentally defective; c) at age 11, Brewer was evaluated as "fixated at a very dependent and infantile level, a level of development that comes prior to any real concern or ability to control impulses, in short, self-control"; and d) at age 12 Brewer's I.Q. was rated from 58 to 67, depending on the test. Although the district court stated that Brewer "was mildly retarded having a I.Q. of 76" on the basis of a report from Dr. Vargus (a state-court appointed psychologist) submitted prior to sentencing, the record reveals that another evaluation performed by the same psychologist some 7 months later resulted in a score of 68, an I.Q. more consistent with that attributed to Brewer at age 12.
53
Defense counsel's failure to investigate Brewer's mental history appears even more egregious when viewed in conjunction with the testimony of the court-appointed psychologist at the hearing on the Belated Motion to Correct Errors. The psychologist testified that Brewer "was like a little sheep to people he liked or considered his friends.... He needs companionship and took [sic] it any way he could." Dr. Vargus further testified that Brewer is so easily led that while "there might be times when somebody told him to jump off a 10-story building, he might not. But if it had been a companion or a certain friend, he would most likely go along with it.... We are subject to the influence of other people. He is especially susceptible to that." (Emphasis added). If the jury had been presented with this evidence of Brewer's tendency to be influenced by others, it might well have decided that he was under the influence of Kenny Brooks during the crime spree or that Brewer was simply not the type of individual, because of his impaired mental capacity, who deserved the death sentence.
54
In addition to the evidence regarding Brewer's I.Q. and his propensity for being easily led, there was also evidence that could have been presented about his disadvantaged childhood that might have placed him in a more sympathetic light before the jury. Brewer's mother died when he was 12, and after that he was shuttled "from one member of the family to another." His father was 70 at the time, and demonstrated minimal interest at best in his welfare. Several months after his mother's death Brewer was returned to the Indiana Boys' School for parole violations, and it was recommended that he "not be placed under the supervision of the Gary District Office, due to the criminal and anti-Social behavior of the entire family.... [T]here is no family life--the family serves the purpose of room and board to each other, and if returned to this area any constructive assistance or treatment given him would be of no value." As one report described Brewer, he was "an emotionally needy, dependent, deprived, sad, overwhelmed, confused young lad who has little going for him socially, physically, intellectually, personality-wise or family-wise." In view of Brewer's attorney's failure to make a reasonable investigation to discover this readily available evidence regarding Brewer's low I.Q., susceptibility to the influence of friends and disadvantaged background, we hold that "counsel's representation fell below an objective standard of reasonableness." Strickland, 466 U.S. at 688, 104 S.Ct. at 2064; see Kubat, 867 F.2d at 369.
55
In order to justify the granting of a habeas petition, we must also conclude that Brewer was prejudiced through his attorney's deficient performance. The Indiana Supreme Court held that Brewer "was not prejudiced [by his attorney's failure to present mitigating evidence to the jury] as the major factors he desired to have considered were presented before a final determination of sentencing was made by the trial judge." Brewer II, 496 N.E.2d at 374. We are unpersuaded that the sentencing judge's consideration of the mitigating factors precludes prejudice to the defendant. In our opinion "there is a reasonable probability that [if the jury had been aware of Brewer's low I.Q. and deprived background, it] ... would have concluded that the balance of aggravating and mitigating circumstances did not warrant death." Strickland, 466 U.S. at 695, 104 S.Ct. at 2069. While the sentencing judge did not find the above evidence sufficiently mitigating to overcome the aggravating circumstance of the murder, there is a reasonable probability that the jury, if presented with the evidence of Brewer's entire history--troubled childhood, low I.Q., deprived background, and myriad of other psychiatric problems--might very well have felt differently. The state has failed to establish any likelihood that the sentencing judge would have refused to follow the jury's recommendation if it had recommended a sentence of years as opposed to death. Thus, we agree with the district court that the writ should issue unless the State of Indiana provides Brewer with a new sentencing hearing.
B. False Alibi
56
The false alibi issue presents the anomalous and absurd situation of the government arguing, for the purpose of persuading us that Brewer received effective assistance of counsel, that the defense attorney's presentation of perjured testimony during the guilt phase of the trial was ethical, an argument that is at best questionable from the perspective of what a lawyer must do under the instruction of the Model Code of Professional Responsibility. As stated above, a defendant asserting an ineffective assistance of counsel claim must demonstrate that his attorney's representation "fell below an objective standard of reasonableness," and that "the deficient performance prejudiced the defense." Strickland, 466 U.S. at 687-88, 104 S.Ct. at 2064. The prevailing norm regarding perjured testimony in Indiana during 1978 was Disciplinary Rule 7-102 of the Model Code of Professional Responsibility, which provides:
57
"(A) In his representation of a client, a lawyer shall not:
58
* * * * * *
59
(4) Knowingly use perjured testimony or false evidence.
60
* * * * * *
61
(7) Counsel or assist his client in conduct that the lawyer knows to be illegal or fraudulent."
62
The district judge held that "[b]ecause counsel knowingly called witnesses who testified falsely, this Court concludes that counsel's performance did not satisfy an objective standard of reasonableness."2 The district court further held that if Brewer
63
"had not been caught in a scheme to deceive the jury [he] might well have been believable in his denial of shooting the victim since there was physical evidence at trial that corroborated his denial. However, counsel's plea for mercy on behalf of his client, proved a thief and a murderer and now admitted [sic] a liar, simply fell flat. Under these circumstances, the Court cannot say that this result would be no different without the perjured testimony. Instead there is a reasonable probability that a jury, unburdened by the perjury, might have declined to impose the death penalty and thus this Court's confidence in the penalty phase is in fact undermined by the effects of counsel's misconduct. Accordingly, on this ground, the writ should issue unless petitioner is resentenced."
64
We disagree. Regardless of whether the attorney knew that the alibi testimony was contrived, the entire argument over whether presenting false alibi testimony constitutes ineffective assistance of counsel is immaterial. The purpose of the rule against presenting false evidence is to protect the integrity of the truth-finding function of courts rather than the rights of the defendant. Cf. Nix v. Whiteside, 475 U.S. 157, 174, 106 S. Ct. 988, 998, 89 L. Ed. 2d 123 (1986) (attorney's responsibility to prevent perjured testimony is a duty to the court). The rule protects the public from allowing defendants to subvert the criminal justice system through fabricating evidence. Ineffective assistance of counsel claims have validity only to the extent that the attorney has departed from a professional norm established for defending a law violator. It would be absurd to create a rule allowing a defendant to go free if perjured testimony succeeds while at the same time providing for a new trial if the witness is a poor liar. Thus, we refuse to hold that the presentation of perjured testimony at the request of the defendant is adequate to constitute ineffective assistance of counsel.
65
The state's peculiar and unusual position that the presentation of the false alibi was ethical is especially surprising in view of the fact that the Indiana Supreme Court specifically held that Brewer waived the false alibi argument when he failed to raise it on direct appeal and was unable to justify the failure (show cause) on collateral attack:
66
"Although this particular argument [that the alibi witnesses prejudiced Brewer's case] was not advanced on appeal, Petitioner has failed to indicate why he was precluded from raising it at that time. Because post-conviction relief is unavailable for issues available to Petitioner upon original appeal, Petitioner in the instant case has waived this issue. Bailey v. State (1985), Ind., 472 N.E.2d 1260, reh. denied."
67
Brewer II, 496 N.E.2d at 373. Thus, the argument would have been unreviewable in a habeas action if the state had raised the defense of procedural default in the district court, or perhaps even in this court. See Wainwright v. Sykes, 433 U.S. 72, 97 S. Ct. 2497, 53 L. Ed. 2d 594 (1977) (absent a showing of "cause and prejudice" a state procedural default may not be reviewed on a federal habeas corpus petition); Burgin v. Broglin, 900 F.2d 990, 997 (7th Cir.1990) (district court may raise state procedural default sua sponte ). Hence, the state's untenable position (in the face of Disciplinary Rule 7-102's prohibition of the use of perjured testimony) that the presentation of the false alibi testimony was a valid choice was entirely unnecessary.3
IV. CONCLUSION
68
We hold that defense counsel's almost complete lack of investigation into Brewer's mental and family history and thus lack of knowledge regarding it as well as his failure to argue mitigating factors to the jury constitute ineffective assistance of counsel sufficient to undermine our confidence in the outcome of the jury's death penalty recommendation. "The defendant [has] show[n] that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the [sentencing] proceeding would have been different." Strickland, 466 U.S. at 694, 104 S.Ct. at 2068. The order of the district court is
69
AFFIRMED.
70
EASTERBROOK, Circuit Judge, concurring.
71
The court's opinion, which I join, concludes that Brewer did not receive the sort of legal assistance that was his due at the sentencing hearing. Counsel invested all his time in attempting to get Brewer off and treated sentencing as an afterthought--a blunder, because counsel should have appreciated from the beginning that there was not much chance of acquittal. Sentencing was to be the main event.
72
Perhaps a canny lawyer would have proceeded just as Brewer's did, trying to maximize the chances of acquittal while counting on the courts to protect his client from execution in the event of conviction. In capital cases, the best defense at sentencing may be no defense, leading to an order annulling the death sentence. Once guilt is established the options are death or extended imprisonment. The lack of a stirring defense at the sentencing phase increases the likelihood that a capital sentence will be converted to a life sentence, while an impeccable performance may doom the client to the gallows.
73
Deliberately sub-par performance is unethical, but some lawyers are willing to break rules to prevent capital punishment, which they view as a sin greater than any they could commit in the client's behalf. Brewer's lawyer disregarded his legal obligations in order to assist his client: the lawyer submitted perjured testimony. That maneuver backfired. Maybe the lackadaisical performance at sentencing was just another stratagem--properly treated, when discovered, as forfeiting any right to a new sentencing hearing. Indiana does not contend, however, that counsel was trying to pull this stunt, and if we take things at face value we must conclude that counsel botched the job.
74
Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984), holds that even in a capital case the defendant must establish that his lawyer's shortcomings led to prejudice. This means "a reasonable probability that, absent the errors, the sentencer ... would have concluded that the balance of aggravating and mitigating circumstances did not warrant death." 466 U.S. at 695, 104 S. Ct. at 2069. In Indiana the sentencer is the judge; juries recommend but do not impose sentences. Ind.Code Sec. 35-50-2-9. Indiana naturally contends that counsel's failure to present the psychological evidence to the jury was immaterial, because before imposing sentence the judge obtained the information that Brewer says his lawyer should have furnished.
75
The state would have a good argument, if the judge made an independent decision--if the recommendation of the jury were no different from the recommendation of the judge's law clerk. Indiana's brief depicts it so. Yet Martinez Chavez v. State, 534 N.E.2d 731, 735 (Ind.1989), holds that "to sentence a defendant to death after the jury has recommended against death, the facts justifying a death sentence should be so clear and convincing that virtually no reasonable person could disagree that death was appropriate in light of the offender and his crime. A trial court cannot override the jury's recommendation unless the facts meet this standard." In denying the petition for rehearing, the Supreme Court of Indiana rejected the argument that a judge could sentence a defendant to death if the jury's recommendation for mercy is "unreasonable". 539 N.E.2d 4 (1989). The brief filed in this court by the Attorney General of Indiana, asserting that the judge may freely reject the jury's recommendation, cites no cases.
76
Reasonable persons could believe death an inappropriate penalty for Brewer, so the judge could not have imposed the death sentence in the face of a contrary recommendation from the jury. That leaves only the question whether there is a "reasonable probability" that the jury would have recommended against death had it known of Brewer's limited intellect and passive personality. This is an empirical inquiry. How do juries react to such information? On the one hand, it shows the defendant to be less culpable; on the other, it shows the defendant to be less deterrable. These cut in different directions. Jurors who see capital punishment as the just desert of the wicked will be swayed in favor of lenience; jurors with more instrumental views will incline toward execution as the only way to incapacitate such a person.
77
Brewer's current lawyers, like those representing the state, offer up confident (and divergent) assertions about how juries respond to claims of diminished mental capacity. Neither of these incompatible beliefs has any visible means of support. Lawyers see but a few capital cases during their lifetimes. They acquire anecdotes, not data. You need to study hundreds of similar cases to learn the probable effects of presenting different kinds of evidence to juries. As it turns out, social scientists have carried out such studies--studies neither side bothered to consult, each preferring asseveration to fact.
78
Trying to persuade the jury that the accused is mentally ill is worse than no defense at all. Jurors distrust insanity defenses, believe that the defendants are trying to bamboozle them; if persuaded that the defendants are indeed nutty, jurors believe that death is the only sure way to prevent future crimes. Lawrence White, Juror Decision Making in the Capital Penalty Trial: An Analysis of Crimes and Defense Strategies, 11 L. & Human Behavior 113, 122-25 (1987). Accord, Project, Standardless Sentencing, 21 Stan.L.Rev. 1297, 1361-63 (1969). Drawing to the jury's attention an organic problem such as mental retardation, though, cuts the other way; jurors are more likely to credit these claims and to express sympathy. Ellsworth, Bukaty, Cowan & Thompson, The Death-Qualified Jury and the Defense of Insanity, 8 L. & Human Behavior 45 (1984). Whether such defenses actually help the accused is a close question. The Stanford study finds no effect, 21 Stan.L.Rev. at 1383, and the Ellsworth study a small one.
79
Brewer has an organic intelligence problem, no one doubts. His "passivity" too may have an organic source, although a jury also might think this so much psychiatric mumbo-jumbo. Presenting to the jury the congeries of facts and diagnoses laid before the judge could not have done much harm, and might have helped if Ellsworth and colleagues are right. The impetus for death may have been so strong that Brewer had little to lose. I therefore agree with my colleagues that there is a "reasonable probability" that the jury would have recommended against death had it known of Brewer's limited intellect and passive personality. Indiana might have been able to make a contrary showing by analyzing the results of defenses presented to Indiana juries. It did not try; as I have emphasized, the prosecutors thought that they could rescue this sentence by thumping on the table and hoping that our gestalt would match theirs. Intuition is a poor substitute for data. Before sending a man to his death a state should have more regard for both law and fact than Indiana has shown.
*
Since this appeal was filed, James E. Aiken has succeeded John T. Shettle as Commissioner, Indiana Department of Corrections, and G. Michael Broglin has succeeded Norman Hunt as Director, Diagnostic Center, Plainfield, Indiana. We have substituted Mr. Aiken's name for Mr. Shettle's and Mr. Broglin's name for Mr. Hunt. See Fed.R.App.P. 43(c)(1)
1
At a hearing on a Belated Motion to Correct Errors filed in the state court by appellate counsel, Dennis Kramer, defense counsel testified that he spent 150 to 200 hours preparing for the guilt phase, but his preparation for the penalty phase consisted of only "a couple of hours of discussion with Mr. Brewer."
2
The government argues that this holding of the district court fails to give adequate deference to the Indiana Supreme Court's holding that the "attorney did not know which version [of the events surrounding the murder Brewer] had given him was the truth." Brewer II, 496 N.E.2d at 373. In view of our disposition of this issue, it is unnecessary for us to determine whether the Indiana Supreme Court's finding was "fairly supported by the record" as required for deference under 28 U.S.C. Sec. 2254(d)(8)
3
It is surprising that during oral argument the attorney for the State of Indiana insisted on pursuing the argument that the defense attorney's conduct was ethical even after we clearly pointed out that the unethical act of presenting false evidence fails to constitute ineffective assistance of counsel | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1548936/ | 119 F.2d 712 (1941)
BOARD OF PUBLIC INSTRUCTION FOR COUNTY OF HERNANDO, STATE OF FLORIDA,
v.
MEREDITH et al.
No. 9803.
Circuit Court of Appeals, Fifth Circuit.
May 15, 1941.
Morris E. White and Calvin Johnson, both of Tampa, Fla., for appellant.
Robert J. Pleus, of Orlando, Fla., for appellees.
Before FOSTER, SIBLEY, and McCORD, Circuit Judges.
FOSTER, Circuit Judge.
Appellee brought this suit to recover on interest coupons clipped from bonds issued by the Board of Public Instruction for the county of Hernando, Florida, on June 1, 1925. An adverse decision holding the bonds and coupons invalid was reversed by us, 5 Cir., 112 F.2d 914. After the mandate went down, plaintiffs filed, under the provisions of Rule 36, Rules of Civil Procedure, 28 U.S.C.A. following section 723c, a request for admission by defendant that the coupons were genuine and attached to and delivered with the bonds bearing corresponding numbers, as indicated on the coupons. By answer, not verified, defendant, in substance, replied that it could not admit or deny this statement because it was not possible to determine from an examination of the coupons whether they were genuine or not, since the coupons had been detached from the bonds and did not bear upon their face any means of identification. Plaintiff then gave notice of a motion for summary judgment on the pleadings, the request for admission and supporting affidavits, under the provisions of Rule 56, Rules of Civil Procedure.
*713 On the hearing, in support of the motion, plaintiffs filed affidavits which showed that the bonds with the coupons attached had been deposited with plaintiffs as members of a bondholders' committee; that plaintiffs had the legal title to the securities as trustees of an express trust created by a bondholders' agreement and were entitled to sue thereon; that J. Bowerman had personally clipped the interest coupons from the respective bonds for the purpose of making the coupons available for the institution of the suit; and that L. K. Stephens was competent to do so and had personally computed the amounts due upon the coupons involved in the suit, both in principal and interest, which aggregated $29,624.87. Defendant filed no opposing affidavits or evidence of any kind to offset the prima facie showing made by the just described affidavits. Summary judgment was granted in the amount of $29,624.87. This appeal followed.
Appellant contends that ex parte affidavits may not be received as proof of the material facts in issue in any suit and Rule 56 does not imply that this may be done; that a genuine issue of material fact was presented by the pleadings as the signatures on the coupons were printed or lithographed thereon and were not made by the hand of the officers whose names appear thereon; and that they were deprived of an opportunity to cross examine the witnesses. In support of this contention appellant cites City of Hialeah v. Groves, 5 Cir., 101 F.2d 951, 954. In that case we reversed the judgment in part on the ground there was no evidence to show the coupons were attached when the bonds were delivered but allowed recovery on the bonds. The decision is not in point.
It is evident that, after the original judgment was reversed and the bonds were held to be valid, the only facts remaining to be shown were that the coupons had been actually attached to the respective bonds when the bonds were issued and delivered, and the amount due in principal and interest.
The act under which the bonds were issued (chapter 10655, Laws of Florida, Special Acts of 1925), provides that it shall be sufficient for each interest coupon to bear the printed or lithographed facsimile signature of the chairman and secretary of the state board. Conceding that usually ex parte affidavits are not sufficient to prove material facts in a contested case they are admissible when they conform to a statute or rule having the same effect permitting their introduction.
The intent and purpose of Rule 56 is to promote the prompt disposal of actions in the interest of justice where there is no genuine issue as to any material facts. See Holtzoff, New Fed.Procedure, pp. 143 et seq. It provides for summary judgment on the pleadings, supported by affidavits. The contention that the coupons were not identified with the bonds from which they were detached is without merit. The liability of appellant on the bonds and coupons was conclusively established by our previous decision. Nothing remained to be shown except that the coupons were actually clipped from the genuine bonds and the amount for which judgment should be entered. It was entirely in keeping with the letter and spirit of Rule 56 that this could be done by ex parte affidavits which were not offset by opposing affidavits. Port of Palm Beach Dist. v. Goethals, 5 Cir., 104 F.2d 706.
The record presents no reversible error.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548938/ | 992 A.2d 666 (2010)
THE LLK TRUST, Thomas R. Walker, Trustee
v.
TOWN OF WOLFEBORO.
No. 2009-097.
Supreme Court of New Hampshire.
Argued: November 17, 2009.
Opinion Issued: February 11, 2010.
*668 Walker & Varney P.C., of Wolfeboro (Thomas R. Walker on the brief and orally), for the petitioner.
Preti, Flaherty, Beliveau & Pachios, PLLP, of Concord (Mark H. Puffer on the brief and orally), for the respondent.
CONBOY, J.
The petitioner, The LLK Trust, Thomas R. Walker, trustee, appeals an order of the Superior Court (Fauver, J.) denying its request for an abatement from property taxes assessed by the respondent, Town of Wolfeboro. We affirm.
The record evidences the following facts. The petitioner owns property in Wolfeboro consisting of a residence with an attached barn and ninety-three acres of land, including 1,100 feet of frontage on Lake Wentworth. Approximately ninety-one and one-half acres of the property, including nearly the entire lake frontage, has been in current use since 1980. The house and barn are located in the middle of the property on one and one-half acres that are not in current use. Another acre, which is also not in current use, comprises the road leading to the house site, and the road from the house site to both the waterfront and the dock site.
In January 2006, when the petitioner purchased the property for $4,600,000, its total assessed value was $362,151. The assessed value of the one acre on which the house alone sits (the house site) was $104,500. In August 2006, the Town increased the property's total assessed value from $362,151 to $3,342,151. The assessment increased because the Town reclassified the house site from "shorefront residential" to "waterfront estate." Reclassifying the house site caused its assessment to increase from $104,500 to $2,979,500. The petitioner's July 2006 tax bill, based upon the property's total assessed value of $362,151, was $1,987; its December 2006 bill, based upon the property's total assessed value of $3,342,151, was $37,651.
Because it is undisputed, we assume that the petitioner timely applied to the Town for an abatement of the 2006 property tax due on the house site, and timely appealed the Town's denial to the superior court. See LSP Assoc. v. Town of Gilford, 142 N.H. 369, 371, 702 A.2d 795 (1997). At trial, the Town conceded that it should not have reclassified the house site. The Town argued that even if the house site remained classified as "shorefront residential," the Town had undervalued it significantly. The Town contended that the proper valuation of the house site for tax year 2006 should have been $1,214,351.
Based upon the testimony of the Town's assessor, the trial court concluded that the Town's new valuation of the house site was consistent with its fair market value, which the trial court found was $1,275,000 as of April 1, 2006. Accordingly, the trial court ruled that the petitioner had failed to prove by a preponderance of the evidence that, using the new assessed value of $1,214,351, the Town had taxed the house site disproportionately. This appeal followed.
*669 The petitioner first argues that the trial court erred by upholding the Town's decision to change the house site's assessment in August 2006. The petitioner claims that the Town lacked authority to do this. "Because the power to tax arises solely by statute, the right to tax must be found within the letter of the law and is not to be extended by implication." Pheasant Lane Realty Trust v. City of Nashua, 143 N.H. 140, 143, 720 A.2d 73 (1998) (quotation and citations omitted). "As such, mistaken property tax valuations can be corrected only through legislatively authorized remedies." Id. Thus, resolving the petitioner's appeal requires us to construe the pertinent statutes.
The interpretation of a statute is a question of law, which we review de novo. Zorn v. Demetri, 158 N.H. 437, 438, 969 A.2d 464 (2009). In matters of statutory interpretation, we are the final arbiters of the legislature's intent as expressed in the words of the statute considered as a whole. Id. We first look to the language of the statute itself, and, if possible, construe that language according to its plain and ordinary meaning. Id. We interpret legislative intent from the statute as written and will not consider what the legislature might have said or add language that the legislature did not see fit to include. Id. We construe all parts of a statute together to effectuate its overall purpose and avoid an absurd or unjust result. Id. Moreover, we do not consider words and phrases in isolation, but rather within the context of the statute as a whole. Id. at 438-39, 969 A.2d 464. This enables us to better discern the legislature's intent and to interpret statutory language in light of the policy or purpose sought to be advanced by the statutory scheme. Id. at 439, 969 A.2d 464.
Pursuant to RSA 76:2 (2003), a tax year runs from April 1 to March 31. Taxes are assessed based upon the value of property located in a town as of April 1. See RSA 74:1 (Supp.2009) (selectmen of each town must "take an inventory of all estate liable to be taxed in such town as of April 1"); White v. Lee, 124 N.H. 69, 76, 470 A.2d 849 (1983) ("Assessment of the tax is performed annually by each city and town, based upon their property inventory as of April 1."). The Town must adjust assessments annually "so that all assessments are reasonably proportional within that municipality." RSA 75:8, I (Supp.2009). Additionally, "[a]t least as often as every fifth year, . . . the assessors and/or selectmen shall value all real estate within a municipality so that the assessments are valued in accordance with RSA 75:1." RSA 75:8-a (2003).
The Town collects taxes semi-annually pursuant to RSA 76:15-a (2003), which allows a town to collect taxes "assessed on April 1" in two installments, the first due on July 1, and the second on December 1. Bills for the July 1 installment must be mailed by June 15. RSA 76:15-a, II. In order for the bills to be prepared, "the lists of assessed property shall be committed by the selectmen with a warrant under their hands and seal directed to the collector of such town no later than May 15." Id. The first installment may be based upon "the prior year's assessed valuation times 1/2 of the previous year's tax rate." RSA 76:15-a, I. If, however, "it shall appear to the selectmen or assessors that certain individual properties have physically changed in valuation, they may use the current year's appraisal times 1/2 the previous year's tax rate to compute the partial payment." Id. Upon receipt of the July payment, the tax collector must credit it "toward the amount of the taxes eventually assessed against the property." RSA 76:15-a, II. "A payment of the remainder of the taxes assessed April 1, minus the *670 payment due on July 1 of that year, shall be due and payable December 1." Id.
The trial court did not issue a specific finding as to whether the Town erred when it revised its assessment of the house site in August 2006. "Although the trial court did not expressly make this finding, we assume it made all subsidiary findings necessary to support its decision." Smith v. Lillian V. Donahue Trust, 157 N.H. 502, 508, 953 A.2d 753 (2008). "We sustain the findings and rulings of the trial court unless they are lacking in evidential support or tainted by error of law." Tennessee Gas Pipeline Co. v. Town of Hudson, 145 N.H. 598, 600, 766 A.2d 672 (2000) (quotation omitted). The record supports a finding that the Town did not violate the statutory scheme described above by revising the assessment in August.
As allowed under RSA 76:15-a, the record shows that the Town based the petitioner's July 1, 2006 semi-annual tax bill upon the prior year's assessment of $362,151. The petitioner's December 1, 2006 semi-annual tax bill was based upon the property's assessment as of April 1, 2006. As the Town's current assessor explained:
A. [T]he second tax bill [is] the actual tax bill of the year, which is . . . after the State sets the tax rate and the second bill is your legal bill of the year. . . .
. . . .
A. The first tax bill is only an appropriation for money for the Town. . . . [W]hatever we dowe're looking at April 1st as the tax date, so let's say if you're building a new house . . . [we look at] [w]here were you as of April 1st? It may not be changed on the tax card until September or . . . August . . . or some time after . . . that first tax bill went out. But it still reflects what was happening . . . on April 1st of . . . that year.
The record does not support the petitioner's contention that the Town twice assessed the value of the house site as of April 1, 2006. Contrary to the petitioner's assertions, the assessment reflected on the January and June 2006 tax cards is from the prior year; the assessment reflected on the September 2006 tax card was the property's assessed value as of April 1, 2006. Although the petitioner also contests the Town's decision to reclassify the house site from "shorefront residential" to "waterfront estate," this argument is moot given the Town's concession that reclassifying the property was error.
To the extent that the petitioner contests the Town's assessment of other property that is not in current use, we observe that the trial court found that the only assessment in dispute concerned the house site. The petitioner's tax abatement petition confirms that the petitioner's appeal to the superior court was limited to this assessment. As the petitioner has failed to argue that the trial court's finding in this regard was erroneous, we decline to address the validity of any other assessment.
The petitioner next argues that the trial court erred when it concluded that the value of the house site is enhanced by the fact that it is surrounded by current use land. He contends that this court, in reviewing the trial court's order, should "disregard any enhancement factors regarding the valuation" of the house site. However, the petitioner's own experts testified that such enhancement was proper. One of the petitioner's experts testified:
Q. What's the benefit that's derived from a piece of property in your opinion that is not in current use, but [is] surrounded by land like this place?
*671 A. Okay. It's not substantial. I would say it's about five percent.
This expert also testified that in choosing sale properties to which to compare the petitioner's property, she "wanted to acknowledge that" because of the current use land "the home site had privacy and control over that privacy." The petitioner's other expert also testified that the fact that the house site was surrounded by current use land "boost[ed]" the value of the house site by five percent.
Moreover, the other experts testifying at trial agreed that the fact that the house site is surrounded by current use land enhanced its value. The Town's previous assessor, Alice McKinnon, who had set the prior year's assessment at $104,500, testified that "the house lot would be worth more . . . with the current use land around it." She testified that if the house lot "were located somewhere else and . . . wasn't surrounded by land in current use, it would have been valued at $40,000," but that because it was surrounded by current use land, she "enhanced that value by more than two . . . and a half times." Additionally, the Town's expert testified that it would be proper to enhance the value of the house site because it is surrounded by current use land, although he did not testify that he used such an enhancement in his appraisal.
Given this factual record, we conclude that the petitioner has not demonstrated that it preserved for our review the question of whether, as a matter of law, it is proper to enhance the value of land that is not in current use because it is surrounded by current use land. Not only did the petitioner fail to object to testimony that enhancing the value of the house site was proper, the petitioner was, in fact, the proponent of such testimony. Under these circumstances, we conclude that the issue is not preserved for our review, and we decline to address it. See State v. Pepin, 156 N.H. 269, 279-80, 940 A.2d 221 (2007).
Alternatively, the petitioner asserts that we should allow only privacy and location to enhance the value of land surrounded by current use land and should not allow "passive recreational uses" to enhance the value. As there is no evidence in the record submitted on appeal that the appraisal by the Town's expert, upon which the trial court relied, enhanced the value of the house site for this reason, we similarly decline to address this argument.
The petitioner next contends that the trial court erred by adopting the opinion of the Town's expert because his methodology was flawed. The petitioner's assertions in this regard concern the proper weight to be accorded the testimony of the Town's expert. However, we defer to the trial court's judgment on such issues as resolving conflicts in the testimony, measuring the credibility of witnesses, and determining the weight to be given evidence. Syncom Indus. v. Wood, 155 N.H. 73, 86, 920 A.2d 1178 (2007). To the extent that the petitioner argues that it met its burden of proving disproportionality solely by showing that the methodology used by the Town's expert was flawed, we disagree. "[D]isproportionality, and not methodology, is the linchpin in establishing entitlement to a petition for abatement." Verizon New England v. City of Rochester, 151 N.H. 263, 272, 855 A.2d 497 (2004); see Porter v. Town of Sanbornton, 150 N.H. 363, 369, 840 A.2d 778 (2003). "[W]hile it is possible that a flawed methodology may lead to a disproportionate tax burden, the flawed methodology does not, in and of itself, prove the disproportionate result." Verizon New England, 151 N.H. at 272, 855 A.2d 497.
*672 The petitioner next asserts that the trial court erred by accepting the assessment offered by the Town's expert and rejecting that offered by other experts. When faced with conflicting testimony, a trier of fact is free to accept or reject an expert's testimony, in whole or in part. Tzimas v. Coiffures by Michael, 135 N.H. 498, 501, 606 A.2d 1082 (1992). Accordingly, we find no error in the trial court's decision to credit the opinion of one expert over the opinions of other experts.
Affirmed.
BRODERICK, C.J., and DALIANIS, DUGGAN and HICKS, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548944/ | 161 B.R. 297 (1993)
In re SERVICO, INC., et al.
Sunyoung CHANG, as Special Administrator for the Estate of Fernando Chang, deceased, Appellant,
v.
SERVICO, INC., et al., Appellees.
No. 93-1376-CIV-ATKINS. Bankruptcy No. 90-36655-BKC-AJC. Adv. No. 92-0687-BKC-AJC-A.
United States District Court, S.D. Florida.
October 7, 1993.
*298 L. Louis Mrachek, Gunster, Yoakley & Stewart, PA, West Palm Beach, FL, Alan R. Gordon, Saul, Ewing, Remick & Saul, Philadelphia, PA, for appellant.
John K. Olson, Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A., Tampa, FL, Harold D. Moorefield, Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A., Miami, FL, for appellees.
*299 ORDER GRANTING DEFENDANTS-APPELLEES' MOTION TO DISMISS APPEAL AS MOOT
ATKINS, District Judge.
THIS MATTER is before the court on Appellees' Motion to Dismiss Appeal as Moot (D.E. 8). After careful consideration of the motion, memorandum of law in support thereof, responses and replies thereto, the parties' oral argument and the record, it is
ORDERED AND ADJUDGED that Appellees' Motion to Dismiss Appeal as Moot is GRANTED. It is further ORDERED AND ADJUDGED that the above-referenced bankruptcy appeal is hereby DISMISSED.
This case involves an appeal from an order of Bankruptcy Judge Jay Cristol granting defendants Servico, Inc., et al.'s Motion for Summary Judgment. This court is confronted with the issue of whether plaintiff Sunyoung Chang's (as Special Administrator for the Estate of Fernando Chang) appeal in this 11 U.S.C. § 1144 case has been rendered moot.
Background
Servico, Inc. and its 66 affiliate entities ("Servico") filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on September 18, 1990. The Servico case represented one of the largest and most complex reorganizations ever filed in the United States Bankruptcy Court for the Southern District of Florida, involving more than 5,000 creditors and equity interest holders.
Prior to the bankruptcy proceedings, plaintiff Fernando Chang ("Chang") was the majority shareholder of FCD/Chang, Inc. ("FCD/Chang"). FCD/Chang owned one hundred percent of the outstanding stock of FCD Hospitality, Inc. ("FCD Hospitality"). Through these corporations, Chang controlled the equity interests in Servico. Chang was a party in interest in Servico's bankruptcy proceedings pursuant to section 1109 of the Bankruptcy Code.[1]
Chang, as a party in interest, was duly noticed regarding every evidentiary hearing in the Servico bankruptcy proceedings, including the hearings on the Disclosure Statement and the Order Confirming the Reorganization Plan ("Confirmation Order" or "Plan"). Chang, in the instant action, is claiming that both the Disclosure Statement and the Confirmation Order in the Servico bankruptcy proceedings were procured fraudulently. However, Chang never took any action on either the Disclosure Statement or the Confirmation Order. Chang never appealed the Order Approving the Disclosure Statement. Chang never appealed the Confirmation Order. In fact, Chang and his counsel remained silent at the hearing on the Confirmation Order. Chang never attempted to stay the effectiveness of the Confirmation Order. Chang took no action whatsoever in any of the bankruptcy proceedings despite his opportunity and obligation to do so; Chang only filed a Proof of Claim and cast a ballot rejecting the Plan.
Indeed, Chang never took any action in the Servico case until after his negotiations with Servico's President to purchase all the assets and stock of the Reorganized Debtors broke down. Apparently, Chang threatened to bring this suit during the negotiations. When Servico's President refused to negotiate further, Chang did bring the threatened suit. Chang's suit sought to revoke the Confirmation Order under 11 U.S.C. § 1144 ("§ 1144")[2] on the basis of fraud regarding the Disclosure Statement and the Plan, neither of which Chang had objected to before.
Defendants filed a Motion for Summary Judgment in the § 1144 action. The Bankruptcy *300 Judge granted Defendants' Motion for Summary Judgment on the grounds of res judicata, collateral estoppel, estoppel, waiver, and laches on November 24, 1992. Plaintiff Chang appeals that order.
The effective date for the Plan was August 5, 1992 ("Effective Date"). Since that date, several corporate mergers have taken place to form the Reorganized Debtors. Almost 6.5 million shares of the 7 million to be issued under the Plan have been issued to approximately 3,600 creditors. More than 3.6 million shares have been publicly traded on the American Stock Exchange. Payments totalling over $4 million have been made to creditors and only 186 (less than 2%) of the 10,000 claims remain unresolved. The Reorganized Debtors have commenced making payments on the long-term indebtedness. Most of the properties to be transferred under the Plan have been transferred.
The Bankruptcy Judge ruled in his Order Granting Defendants' Motion for Summary Judgment that the Plan had been substantially consummated as a matter of law. See Order Granting Defendants' Motion for Summary Judgment at p. 6. Since the date of the Order Granting Defendants' Motion for Summary Judgment, more has been accomplished under the Plan. Further, the Bankruptcy Judge stated that he will not revoke the Confirmation Order, even if Chang could prove fraud because there is no relief under § 1144 that he can fashion to protect those parties who have relied in good faith on the Confirmation Order. See Order Granting Defendants' Motion for Summary Judgment at p. 6, 17; Order Denying Motion for Rehearing of Order Granting Defendants' Motion for Summary Judgment at p. 2.
Discussion
The principal issue here is whether Chang's appeal is moot and should thus be dismissed. Several related considerations dictate that this appeal should be dismissed: constitutional principles of mootness; the substantial consummation of the Plan; the lack of effective relief available in this case; and, the inaction of Chang prior to this § 1144 action.
Mootness is premised on the constitutional jurisdictional notion that federal courts can only hear live controversies. U.S. Const. art. III. An "actual controversy must be extant at all stages of review, not merely at the time the complaint is filed." Preiser v. Newkirk, 422 U.S. 395, 401-402, 95 S.Ct. 2330, 2334-35, 45 L.Ed.2d 272 (1974) (quoting Steffel v. Thompson, 415 U.S. 452, 459 n. 10, 94 S.Ct. 1209, 1215 n. 10, 39 L.Ed.2d 505 (1974)). If a court finds in favor of the plaintiff, but it is impossible to grant any effectual relief, the court will not proceed to formal judgment and will dismiss the appeal as moot. Mills v. Green, 159 U.S. 651, 16 S.Ct. 132, 40 L.Ed. 293 (1895). Therefore, even if Chang presented a live controversy at the time he filed his § 1144 action, if the appeal is moot, it must be dismissed.
The constitutional principle of mootness retains its vitality in the context of a bankruptcy appeal. Miami Center Ltd. Partnership v. Bank of New York, 838 F.2d 1547, 1553-1556 (11th Cir.), cert. denied, 488 U.S. 823, 109 S.Ct. 69, 102 L.Ed.2d 46 (1988) ("Miami Center II"). It is appropriate for a court to dismiss a bankruptcy appeal when the reorganization plan has been substantially consummated and it has "become legally and practically impossible to unwind the consummation of the plan or otherwise to restore the status quo before the confirmation." Miami Center II, 838 F.2d at 1557; See also In re Club Associates, 956 F.2d 1065, 1069 (11th Cir.1992).
Chang's argument that mootness does not apply to § 1144 cases fails. Chang argues that since § 1144 provides a 180-day statute of limitations, the legislature created the absolute right to bring such an action within that period regardless of whether effective relief can be granted. While there is a slight difference between appeals from confirmation orders and appeals in § 1144 cases,[3] that difference does not render meaningless the constitutional requirement that federal courts may only hear live controversies. *301 Therefore, the doctrine of mootness does apply in § 1144 cases if the reorganization plan has been substantially consummated and no effective relief can be fashioned. See Miami Center II, supra; Club Associates, supra; See also In re Seeburg Corp., 10 B.R. 326 (N.D.Ill.1981).
Confirmation plans eventually reach a point of completion where to reverse the confirmation order would be to "knock the props out from under the authorization for every action that has taken place" under the plan. Miami Center II, 838 F.2d at 1555. This is the point of substantial consummation. "Substantial consummation" is specifically defined by the Bankruptcy Code as:
(A) transfer of all or substantially all of the property proposed by the plan to be transferred; (B) assumption by the debtor or by the successor to the debtor under the plan of the business or of the management of all or substantially all of the property dealt with by the plan; and (C) commencement of distribution under the plan.
11 U.S.C. § 1101(2). When a plan that is being appealed has been substantially consummated, it becomes impossible to unwind the consummation or otherwise restore the status quo and the appeal is moot. Miami Center II, 838 F.2d at 1557.
In this case, the Bankruptcy Judge ruled, as a matter of law, that the Plan had been substantially consummated. Order Granting Defendants' Motion for Summary Judgment at p. 6; See also 11 U.S.C. § 1101(2). Of course, conclusions of law are reviewed de novo. U.S. v. Goolsby, 908 F.2d 861, 863 (11th Cir.1990). However, after an independent review of what has been accomplished under the Plan, this court finds that the Plan has been substantially consummated.[4]
All three prongs of § 1101(2) have been met here. First, all or substantially all of the hotel properties to be transferred under the Plan have been transferred. See 11 U.S.C. § 1101(2)(A). Second, a new Board of Directors and management team have assumed responsibility for the business of the Reorganized Debtors Servico. See 11 U.S.C. § 1101(2)(B). Finally, distribution has commenced and is close to completion under the Plan: 6.5 million of the 7 million shares to be issued have been issued and payments of cash have been made to creditors. See 11 U.S.C. § 1101(2)(C). Thus, the Plan has been substantially consummated and Chang's appeal is moot. See Club Associates, 956 F.2d 1065; Miami Center II, 838 F.2d 1547.
Further, no effective relief can be granted in this case, which also renders the appeal moot. See Id. Chang's action is for revocation of the Confirmation Order. Relief can only be afforded under § 1144 if entities acquiring rights in reliance on the confirmation order did so in bad faith.[5] Since there is no evidence here that any of the entities acquiring rights in Servico after the Effective Date acted in bad faith, no effective relief can be granted and the appeal is moot. Seeburg, 10 B.R. 326 (where plaintiff did not allege that any entities purchasing assets of the debtor acted in bad faith, there was no effective relief to be granted under § 1144 and the appeal was moot).
Further, it would be impossible to unwind the transactions under the Plan. To attempt to do so would only create an unmanageable and uncontrollable situation for the bankruptcy court. In re Roberts Farms, 652 F.2d 793, 797 (9th Cir.1981). Countless transactions have taken place under the Plan, including the trading of millions of shares of Servico stock on the American Stock Exchange. In fact, the Bankruptcy Judge has already stated that he will not revoke the Plan and cannot undo what has been done under the Plan (See Order Granting Defendants' Motion for Summary Judgment at p. 17; Order Denying Motion for Rehearing of Order Granting Defendants' Motion for Summary Judgment at p. 2), the precise relief Chang is seeking. Thus, no effective relief *302 can be granted in this case. Under the general principles of mootness as well as those particular to bankruptcy cases, this appeal is moot. See Club Associates, 956 F.2d 1065; Miami Center II, 838 F.2d 1547.
In addition to the above considerations, Chang's inaction in the Servico bankruptcy proceedings until this § 1144 action, estops him from attempting to dismantle everything that has been accomplished under the Plan. First, Chang never attempted to stay the effectiveness of the Confirmation Order. It is well-settled that where no stay pending appeal is obtained and action is taken under the reorganization plan by good faith purchasers in reliance on the confirmation order, the appeal becomes moot. Miami Center II, 838 F.2d at 1553-1554. There is an "important policy of bankruptcy law that court-approved reorganization plans be able to go forward based on court approval unless a stay is obtained." Id. at 1555. Thus, Chang's failure to obtain a stay pending his § 1144 action is fatal to this appeal. See id.
Second, as stated above, Chang had numerous opportunities to raise objections to the Disclosure Statement and to the Confirmation Order. Yet, Chang chose not to for reasons that are unclear to this court, despite the fact that the very issues Chang raises in the § 1144 action were addressed in the bankruptcy proceedings. Because Chang did not raise these issues in a timely manner and instead allowed the Plan to become substantially consummated, he should be estopped from pursuing this § 1144 action. See Matter of Garfinkle, 672 F.2d 1340 (11th Cir. 1982); Travelers Indem. Co. v. Swanson, 662 F.2d 1098 (5th Cir.1981) (party may be estopped where a duty to speak exists, but the party to be estopped fails to speak); In re Nyack Autopartstores Holding Co., Inc., 98 B.R. 659 (Bankr.S.D.N.Y.1989) (where party in interest failed to take action in a timely manner, party acquiesced in and ratified the allegedly ultra vires acts).
In sum, under the doctrine of mootness because the Plan has been substantially consummated and no effective relief can be granted in this case, this appeal is moot and should be dismissed. Moreover, equitable concerns mandate that Chang not be permitted to pursue his efforts to dismantle the reorganization of Servico. Accordingly, Servico's Motion to Dismiss Appeal as Moot is GRANTED and Chang's Appeal is DISMISSED AS MOOT.
DONE AND ORDERED.
NOTES
[1] Parties in interest may appear and raise and be heard on any issue in a case, including the approval of a disclosure statement and reorganization plan. See 11 U.S.C. §§ 1109, 1128.
[2] § 1144 reads:
On request of a party in interest at any time before 180 days after the date of the entry of the order of confirmation, and after notice and a hearing, the court may revoke such order if and only if such order was procured by fraud. An order under this section revoking an order of confirmation shall
(1) contain such provisions as are necessary to protect any entity acquiring rights in good faith reliance on the order of confirmation; and
(2) revoke the discharge of the debtor.
11 U.S.C. § 1144 (emphasis added).
[3] The only meaningful difference being the basis of the action; § 1144 actions must be predicated on fraud while appeals from confirmation orders need not be based on fraud.
[4] This conclusion is buttressed by the fact that Chang has never challenged the conclusion that the Plan has been substantially consummated. Rather, Chang's sole contention is that the doctrine of mootness does not apply to this case.
[5] § 1144 requires all "good faith purchasers" to be protected if revocation of the reorganization plan is granted. 11 U.S.C. § 1144(1). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548958/ | 992 A.2d 837 (2010)
413 N.J. Super. 94
NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Plaintiff-Respondent,
v.
NATIONAL CASUALTY COMPANY, Defendant-Appellant.
No. A-0737-09T3
Superior Court of New Jersey, Appellate Division.
Argued March 23, 2010.
Decided April 29, 2010.
*838 Allan Maitlin, West Orange, argued the cause for appellant (Sachs, Maitlin, Fleming & Greene, attorneys; Mr. Maitlin, of counsel and on the briefs; Christopher Klabonski, on the briefs).
Loren L. Pierce, Morristown, argued the cause for respondent (McElroy, Deutsch, Mulvaney & Carpenter, attorneys; Ms. Pierce, of counsel; Lisbeth W. Cload, on the brief).
Before Judges SKILLMAN, FUENTES and GILROY.
The opinion of the court was delivered by
SKILLMAN, P.J.A.D.
This appeal requires us to consider the circumstances under which a primary insurer may be held liable to an excess insurer for prejudgment interest awarded to the plaintiff in an underlying tort action based on the primary insurer's alleged failure to engage in good faith settlement negotiations.
In the early morning hours of February 16, 1998, an employee of Grinnell Haulers sideswiped a vehicle occupied by Bernard and Gloria Brodsky, causing it to come to a rest on a shoulder of the highway facing oncoming traffic. Brodsky v. Grinnell Haulers, Inc., 181 N.J. 102, 106, 853 A.2d 940 (2004). The Brodskys exited their car and stood on the shoulder. Minutes later, a vehicle driven by William Horsman hit Mr. Brodsky and then the disabled car, which struck Mrs. Brodsky. Id. at 106-07, 853 A.2d 940. Mr. Brodsky died soon after, and Mrs. Brodsky suffered severe permanent injuries. Id. at 107, 853 A.2d 940.
The Brodskys filed a personal injury and wrongful death action against Grinnell and Horsman. Ibid. Horsman, who was not insured, filed for bankruptcy, and the bankruptcy court discharged Horsman from any debt arising from the accident. Ibid.
Grinnell had a primary insurance policy with plaintiff New Jersey Manufacturers Insurance Company (NJM), with a coverage limit of $1 million, and an excess policy with defendant National Casualty Company (NCC), which provided an additional $4 million in coverage.
In October 1999, the Brodskys made a settlement demand of $5 million against Grinnell, which was lowered to $3.5 million in September 2000. This demand remained firm in the face of offers by Grinnell for $400,000 and $750,000 before the first trial in December 2001.
At that trial, the only issues were the apportionment of fault between Grinnell and Horsman and the extent of the Brodskys' damages. Brodsky, supra, 181 N.J. at 107, 853 A.2d 940. The jury found Grinnell sixty percent negligent and Horsman *839 forty percent negligent, and awarded the Brodskys $1,640,000 in damages, plus prejudgment interest, for a total judgment of $1,945,533.17. Ibid.
On appeal, we concluded that the trial court erred in giving an ultimate outcome instruction and therefore reversed and remanded for a new trial on the apportionment of liability. Brodsky v. Grinnell Haulers, Inc., 362 N.J.Super. 256, 262, 284, 827 A.2d 1104 (App.Div.2003). The Supreme Court affirmed this decision. Brodsky, supra, 181 N.J. at 128, 853 A.2d 940.
Before the trial on remand, Grinnell's counsel informed NCC's counsel in September 2004 that NJM had authorized payment of its full $1 million policy limit to settle the Brodskys' claims. However, NCC's counsel allegedly asked Grinnell's counsel to withhold this offer from the Brodskys' counsel in order to convince the Brodskys to settle for less than $1 million.
Around the same time, the Brodskys lowered their settlement demand to $1.5 million. However, NCC allegedly offered to contribute only $100,000 to meet this demand, insisting that NJM pay the remaining $1.4 million. NJM refused to pay this amount, taking the position that it was not obligated to pay anything above its $1 million policy limit to settle the case. The communications between NCC and NJM regarding the Brodskys' $1.5 million settlement demand are discussed in greater detail later in this opinion.
In December 2004, the trial on remand took place, which resulted in the same apportionment of liability as the first trial: Grinnell was again found sixty percent negligent and Horsman was again found forty percent negligent. Thus, a judgment in the amount of $1,640,000 was entered against Grinnell, plus $580,322.07 of prejudgment interest.
NJM paid its $1 million policy limit and NCC paid the remaining $640,000 of the damages award. The carriers agreed to equally divide responsibility for payment of the $580,322.07 in prejudgment interest on a temporary basis, reserving the right to litigate their obligation for payment of this obligation.
NJM subsequently brought this action seeking a determination that NCC is obligated to pay the full amount of the prejudgment interest awarded to the Brodskys. NCC filed a counterclaim seeking a determination that NJM is responsible for payment of the prejudgment interest. The trial court decided the case on NJM's motion for summary judgment, determining that NJM was only responsible for its $1 million policy limit and that NCC was responsible for the entire judgment above this amount, including $580,322.07 in prejudgment interest awarded the Brodskys.
On appeal, we reversed this summary judgment. N.J. Mfrs. Ins. Co. v. Nat'l Cas. Co., 393 N.J.Super. 340, 923 A.2d 315 (App.Div.), certif. denied, 192 N.J. 481, 932 A.2d 31 (2007). We concluded that a primary carrier such as NJM may be held "liable for the payment of prejudgment interest, even if such payment exceeds its policy's coverage limit, [if the] trial court... find[s] ... that the carrier did not engage in good faith negotiations to settle the claim within the policy's coverage limit." Id. at 344, 923 A.2d 315. In reaching this conclusion, we stated:
[A] carrier may be found liable for prejudgment interest under R. 4:42-11(b), even if such payment exceeds the policy's coverage limit, if the manner it has handled a claim against its insured evidences "misconduct" or "bad faith." This duty of good faith is a well-established part of our State's insurance law.
....
*840 ... The existence of excess coverage does not in any way extinguish or diminish a primary carrier's fiduciary duty to its insured to take all reasonable steps to settle a case within the scope of the primary coverage, including offering the policy limit.
[Id. at 353-55, 923 A.2d 315 (citations omitted).]
We also concluded that it could not be determined based on the evidentiary material presented to the trial court on NJM's motion for summary judgment "whether NJM violated its fiduciary duty to engage in meaningful, timely, good faith efforts to settle the claims asserted by the party suing its insured within the policy's coverage limit." Id. at 344, 923 A.2d 315. Accordingly, we remanded for an evidentiary hearing.
On the remand, NJM undertook to obtain discovery regarding NCC's own course of conduct in the negotiations for settlement of the Brodskys' claims, focusing particularly on the period following NJM's decision to offer its $1 million policy limit to settle the case. NCC resisted such discovery on the ground that only NJM's conduct was relevant to NJM's obligation to pay the entire amount of prejudgment interest.
NJM served a subpoena on NCC's counsel, Allan Maitlin, requesting his deposition and production of his file regarding his representation of NCC during the Brodsky litigation. NJM also sought to depose James Lavigne, NCC's Senior Litigation Specialist who monitored the Brodsky litigation for NCC.
NCC moved to quash the subpoena served on Maitlin and for a protective order barring Lavigne's deposition. NJM filed a cross-motion for an order compelling NCC to produce a detailed privilege log. NCC also filed a motion to strike NJM's fourth and fifth affirmative defenses to its counterclaim, which asserted that NCC had denied the coverage it owed to Grinnell and NJM in bad faith and breached its fiduciary duties to Grinnell and NJM.
The trial court denied NCC's motions to quash Maitlin's subpoena and for a protective order as to the discovery related to Lavigne and granted NJM's motion for production of a privilege log. The court also denied NCC's motion to strike NJM's fourth and fifth affirmative defenses to its counterclaim.
NCC filed a motion for leave to appeal these orders, which we denied. NCC then filed a motion for leave to appeal with the Supreme Court, which granted the motion and "summarily remanded to the Appellate Division to consider on the merits."
I.
The primary issue presented by this appeal is whether NCC's conduct relating to the negotiations for settlement of the Brodskys' claims is relevant to NCC's claim against NJM for the entire amount of prejudgment interest awarded the Brodskys. We did not decide this issue in NCC's prior appeal because the only issue before us was whether the trial court had properly granted NJM summary judgment denying NCC's claim without conducting an evidentiary hearing on the question of whether NJM violated its fiduciary duty to engage in meaningful, timely, good faith efforts to settle the Brodskys' claims. 393 N.J.Super. at 344, 923 A.2d 315.
In determining the relevance of NCC's conduct relating to the negotiations for settlement of the Brodskys' claims, we start with Rova Farms Resort, Inc. v. Investors Insurance Co. of America, 65 N.J. 474, 323 A.2d 495 (1974), which is the seminal case dealing with an insurer's obligation to engage in good faith negotiations *841 with a party asserting a claim against its insured, in default of which the insurer may become liable for the full amount of a judgment against its insured even though it exceeds the policy's coverage limit. In Rova Farms, the Court held:
An insurer, having contractually restricted the independent negotiating power of its insured, has a positive fiduciary duty to take the initiative and attempt to negotiate a settlement within the policy coverage. Any doubt as to the existence of an opportunity to settle within the face amount of the coverage or as to the ability and willingness of the insured to pay any excess required for settlement must be resolved in favor of the insured unless the insurer, by some affirmative evidence, demonstrates there was not only no realistic possibility of settlement within policy limits, but also that the insured would not have contributed to whatever settlement figure above that sum might have been available.
[Id. at 496, 323 A.2d 495 (emphasis added).]
Thus, under Rova Farms, an insurer that fails to negotiate in good faith with a party who asserts a claim against its insured is not automatically liable for any judgment in excess of the policy limit. Instead, the insurer may avoid such liability if it can show that there was no realistic possibility of a settlement within the policy limits and that its insuredor in this case the excess carrierwould not have contributed whatever amount above the policy limit would have been required to settle the case.
In Courvoisier v. Harley Davidson of Trenton, Inc., 162 N.J. 153, 164, 742 A.2d 542 (1999), the Court reaffirmed the availability of this affirmative defense to an insurer against which a Rova Farms claim is asserted:
Under Rova Farms, it is the insured's burden to "establish bad faith on the part of the insurer" in a separate trial. Once the insured establishes such bad faith,
a prima facie case of damages for the difference between the policy limit and the excess verdict has also been shown. It is then up to the insurer to demonstrate that settlement could not have been achieved within the policy limit or for the policy limit plus any amount the insured would have been able and willing to contribute.
[Emphasis added; citations omitted.]
Therefore, NJM is entitled to conduct appropriate discovery to support this defense to liability.
Moreover, even without whatever additional evidence may be revealed by the discovery authorized by the orders that are the subject of this appeal, there is already evidence in the record that could support such a defense. Before the first trial in 2001, the Brodskys' counsel made a settlement demand of $3.5 million, and advised Grinnell's counsel that "this case will never settle for $1 million or less, but will only settle, if ever, well into the excess policy." A trier of fact could find based on this evidence that "there was ... no realistic possibility of settlement [of the Brodskys' claims before the first trial] within [the $1 million NJM] policy limits[.]" Rova Farms, supra, 65 N.J. at 496, 323 A.2d 495. In addition, although there is no direct evidence whether NCC expressed a willingness to contribute to a settlement before the first trial, the record contains a document entitled "[NCC] Reinsurance Claim Status Report," dated July 1, 2002, which states in part:
After further consideration, we have advised the underlying carrier [NJM] that they are not to expect indemnification of the Insured from our *842 policy, unless it will require more than $2,000,000 to settle the claim.[1]
Thus, this document indicates that NCC was unwilling to contribute to a settlement of the Brodskys' claim unless NJM first agreed to contribute $2 million. There is no evidence that NCC changed this settlement position prior to September 2004.
We also note that the July 1, 2002 report refers to a previous report, dated December 21, 2001, which would have been around the time of the first trial. This document is not part of the record before us, but presumably would be discoverable under the orders that are the subject of this appeal and may indicate whether NCC expressed any willingness to contribute to a settlement before or immediately after the first trial.
Although our discussion thus far has focused upon the relevance of NCC's conduct with respect to its claim for prejudgment interest based on NJM's alleged bad faith in the settlement negotiations preceding the first trial, NCC's conduct with respect to the settlement negotiations preceding the second trial is also relevant. On September 3, 2004, NJM authorized the payment of its full $1 million policy limit towards the settlement of the Brodskys' claims, which was confirmed by a letter from Grinnell's counsel, dated September 9, 2004. However, NCC's counsel allegedly requested Grinnell's counsel to withhold disclosure of this authorization from the Brodskys' counsel in the hope that the case could still be settled for less than NJM's policy limit. Furthermore, when the Brodskys' counsel made a settlement demand of $1.5 million, NCC only offered to contribute $100,000 towards such a settlement, taking the position that NJM should contribute the remaining $1.4 million, which was $400,000 above its $1 million policy limit.
These allegations, if established at trial, could justify a conclusion that even if NJM acted in bad faith in failing to offer its policy limits to settle the Brodskys' claims before the first trial, and NJM failed to establish the previously discussed affirmative defense to NCC's claim, thus subjecting NJM to liability for prejudgment interest for the period after the case could have been settled by an offer of NJM's policy limits before the first trial, such liability should terminate as of September 2004, when NJM offered its policy limits but NCC refused to contribute more than $100,000 to a settlement. 1 Allan D. Windt, Insurance Claims and Disputes: Representation of Insurance Companies and Insureds § 5.26 (5th ed. 2007) (stating that "[w]hen a primary insurer ... is willing to contribute its limit of liability to a settlement and makes that fact known to an excess insurer, ... the excess insurer should be subject to the same duty to settle principles as a primary insurer"). Therefore, NCC's settlement position before the second trial is also relevant, and NJM is entitled to conduct discovery to obtain additional evidence regarding that position.
II.
NCC argues that the discovery orders from which this interlocutory appeal has been taken violate the attorney-client privilege and the confidentiality of "mediation communications" provided by N.J.S.A. 2A:23C-1 to -13, and Rule 1:40-4(c) and (d). These arguments are clearly without merit and do not warrant extended discussion. R. 2:11-3(e)(1)(E). We only note *843 that those orders simply require NCC's counsel and "Senior Litigation Specialist" to appear for depositions, without ruling upon any specific questions of privilege that may arise during the course of those depositions, and require NCC to produce a more detailed privilege log, without ruling upon whatever privilege claims that log may present.
III.
For the guidance of the trial court, we also make several additional observations about NCC's claim against NJM.
First, we note that the Court in Rova Farms discussed the "various difficulties" presented by a claim for prejudgment interest based on an insurer's breach of its duty of good faith in settlement negotiations. 65 N.J. at 503, 323 A.2d 495. One of those difficulties is establishing the "point in time" at which "an insurer's failure to settle [may] be said to [have] occur[red]." Id. at 504, 323 A.2d 495.
The Brodskys were presumably awarded prejudgment interest from May 18, 1999, which was "the date of the institution of [their] action." R. 4:42-11(b). However, NCC's claim that NJM should be liable for prejudgment interest because it failed to engage in good faith negotiations to settle the Brodskys' claim appears to be based solely on NJM's failure to offer the full amount of its policy in settlement negotiations in the fall of 2001. Therefore, even if NCC establishes this claim, it is difficult to see how it could support imposition of liability upon NJM for prejudgment interest that accrued before it breached its fiduciary duty to its insured.
Second, NCC places substantial reliance upon the fact that NJM had use of the $1 million it paid in partial satisfaction of the judgment against Grinnell for the more than five-year period between the filing of the complaint and entry of final judgment after the second trial. However, we see no basis in Rova Farms or its progeny for the imposition of any liability upon a primary insurer beyond its policy limits without a showing of the bad faith and the failure to establish the previously discussed affirmative defense. To the contrary, Kotzian v. Barr, 81 N.J. 360, 366-67, 408 A.2d 131 (1979) indicates that imposition of liability upon a primary insurer for prejudgment interest beyond its policy limit is impermissible in the absence of a showing of bad faith. In any event, to the extent NJM's use of the $1 million provided under its policy during the entire course of this prolonged litigation may be relevant, it must be noted that NCC also had use during that same period of the $640,000 it ultimately had to pay to satisfy the judgment.
The interlocutory orders from which this appeal was taken are affirmed. The case is remanded to the trial court.
NOTES
[1] The basis for this position, explained in the July 1, 2002 status report, was that the claims on behalf of Mrs. Brodsky and the estate of Mr. Brodsky involved "two separate accidents, two separate claims and two separate losses." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548996/ | 992 A.2d 310 (2010)
2010 VT 15
STATE of Vermont
v.
Justin S. SMITH.
No. 08-396.
Supreme Court of Vermont.
February 22, 2010.
*311 Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.
ENTRY ORDER
¶ 1. Defendant appeals from a judgment of conviction, based on a jury verdict, of sexual assault and possession and sale of *312 marijuana. Defendant contends that the court erred in: (1) denying a motion for mistrial based on the erroneous admission of evidence of uncharged prior sexual misconduct; and (2) admitting certain photographs. We reverse and remand.
¶ 2. The record evidence may be summarized as follows. The victim, B.H., testified that, on March 19, 2007 she visited defendant's trailer in St. Albans, Vermont, to purchase marijuana. B.H. had known defendant for a number of years her best friend was the sister of defendant's girlfriend and had purchased marijuana from him on several occasions in the past. B.H. recalled that she gave defendant money for a "nickel bag," that defendant offered to share a marijuana cigarette with her, and that she "took a couple of hits." According to B.H., defendant then stood up and pulled down her shirt, which she thought was to check for a hidden wire. However, defendant then grabbed her by the arms, pushed her down a hall and into a bedroom, forcibly removed her clothes, and pushed her onto a bed. Defendant compelled B.H. to engage in oral sex, and then raped her.
¶ 3. According to B.H., defendant thereafter acted as though "nothing [had] happened," offered her a towel, and said something to her about not telling his girlfriend. B.H. left the trailer and returned home to take her child to a prearranged play-date, where she told a friend, E.C., about what had happened. She then returned home, informed her mother and boyfriend about the incident, and went to a hospital for an examination. B.H. later contacted the police, who took a statement and had her place a number of "monitored" telephone calls to defendant, in which she attempted without success to elicit admissions concerning the incident. Among other witnesses, the State called defendant's girlfriend, who testified that, during a police search of her residence, defendant admitted to having sex with B.H. A police officer present during the search testified that he overheard the conversation in which defendant "stated that he had fucked up. That he had fucked [B.H.] and now she was trying to say that it was rape." The investigating officer also secretly recorded a conversation with defendant in which he suggested that any sexual intercourse with B.H. was consensual.
¶ 4. As noted, the jury returned a verdict of guilty on charges of sexual assault and possession and sale of marijuana. Defendant was sentenced to an aggregate term of ten years to life. This appeal followed.
¶ 5. Defendant contends that he was denied a fair trial by the erroneous admission of evidence of prior uncharged sexual misconduct. The claim arose out of events occurring on the first day of trial, during defendant's cross-examination of E.C., the friend to whom B.H. first reported the assault. Defense counsel informed the court that, the night before trial, she had received from the state's attorney a CD recording of the police interview of E.C. To show certain alleged discrepancies between E.C.'s trial testimony and the interview, defense counsel proposed to play the recording for the witness. The state's attorney had no objection and accordingly played the CD in open court up to a certain point, when he abruptly stopped it in mid-recording. The court then observed that the recording was "getting into" certain objectionable areas, referring to E.C.'s clearly audible statement that B.H. had discussed "the fact that [defendant] was molesting [his] wife or girlfriend's daughter." Shortly thereafter, E.C. repeats the allegation, recalling that B.H. "had also mentioned that [defendant] had raped or molested his wife or girlfriend's daughter."
*313 ¶ 6. A bench conference followed, in which the state's attorney requested a cautionary instruction and defense counsel moved for a mistrial. The court denied the mistrial motion on the basis that the recording had been "admitted by agreement," but invited defense counsel to comment on the prosecutor's request that it direct the jury to ignore the last part of the recording. Defense counsel declined to join in the request and renewed her motion for a mistrial, which the court again denied. The court then instructed the jury that the "last portion of the recording... was not meant for you to hear" and that it should "ignore that last statement that was made." The court further informed the jury that it would review the balance of the CD outside the presence of the jury and "figure out if there's anything else on there that we don't want you to hear."[1]
¶ 7. The court and counsel then listened to the rest of the recording and identified two additional statements by the witness alluding to B.H.'s allegation that defendant had sexually assaulted his girlfriend's daughter. Although the state's attorney suggested that they refrain from playing the CD, the court agreed with defense counsel that they would "have to continue it now because we started it for the jury" and that the two statements in question would "need to be excluded."[2] The jury then returned, the court explained that they would hear the balance of the CD except for certain "objectionable material," and the CD was played in open court. Although defense counsel then completed her cross-examination of E.C. without further incident, a subsequent bench conference reveals that one of the additional "objectionable" statements was inadvertently played, thus bringing to three the number of references to defendant's alleged molestation of his girlfriend's daughter heard by the jury.[3] Defendant renewed his motion for a mistrial the following the day, which the court denied.
¶ 8. It is against this factual backdrop that we consider defendant's claim of unfair prejudice. Preliminarily, however, we note that while the record discloses the CD was played at defendant's request the State agreed at oral argument that defendant did not "invite" the error or waive the claim as a matter of law. We agree. As we have explained, "[t]he invited error doctrine, which applies in both civil and criminal cases, is a branch *314 of the doctrine of waiver by which courts prevent a party from inducing an erroneous ruling and later seeking to profit from the legal consequences of having the ruling set aside." State v. Longe, 170 Vt. 35, 39 n. *, 743 A.2d 569, 572 n. * (1999) (emphasis added) (citation and quotation omitted). Accordingly, we find no basis to conclude that defendant "invited" the error.[4]
¶ 9. The State further acknowledged at oral argument that, standing alone, the multiple references to defendant's prior sexual misconduct with his girlfriend's daughter would constitute plain error. We need not dwell, therefore, on the prejudice to a defendant's right to a fair trial that may result from evidence of prior sexual misconduct, which we have described as "the most prejudicial evidence imaginable" because of its significant potential to alter the jury's deliberative calculus. State v. McCarthy, 156 Vt. 148, 155, 589 A.2d 869, 873 (1991) (citation omitted).
¶ 10. The question before us is not whether defendant was prejudiced by the erroneous admission of the evidence, therefore, but whether other factors allow us to conclude beyond a reasonable doubt that the error was harmless. State v. Lipka, 174 Vt. 377, 384, 817 A.2d 27, 33 (2002) (we may uphold a criminal conviction "if we find that the error was harmless beyond a reasonable doubt"). The State relies principally, in this regard, on the cautionary instruction which the court gave to the jury after the first two statements were heard. Even under a plain-error standard, however, we are compelled to conclude that the instruction was patently inadequate to negate the potential prejudice inherent in the offending statements. Although the court understandably did not wish to repeat the statements, its limiting instruction was so vague as to be pointless. The instruction was given several minutes after the recording was played and referred simply to "that last portion" and "that last statement" on the recording although the objectionable statements were multiple and were not actually the witness's last remarks. Moreover, the instruction provided no clear and specific direction to the jury, by instructing, for example, that defendant was not on trial for any actions other than those specifically charged and that under no circumstances was the jury to consider for any purpose the inadvertent allusions to defendant's alleged misconduct. Cf. State v. Laprade, 2008 VT 83, ¶ 9, 184 Vt. 251, 958 A.2d 1179 (court's limiting instruction concerning prior bad acts directed the jury that "[o]ne, you cannot use the evidence to conclude that the defendant is a bad person or a person of bad character, and two, you cannot use the evidence to conclude that ... he assaulted [the victim] on this occasion"); State v. Hendricks, 173 Vt. 132, 140, 787 A.2d 1270, 1276-77 (2001) (rejecting a claim that a limiting instruction regarding prior bad acts was inadequate where the court explained, inter alia, that "[y]ou should distinctly understand that the Defendant is not on trial for any actions other than the charged offense"); see generally J. Dinse et al., Vermont Jury *315 Instructions: Civil and Criminal § 5.30, at 5-63 (1993) (setting forth a model instruction for prior wrongs informing the jury that it "may not consider such evidence as tending to show that [defendant] has a certain character and that he acted in conformity with that character in committing the alleged crime" or that it was "more probable that he committed the alleged offense for which he is now on trial").
¶ 11. Any residual value in the court's limiting instruction was undermined, moreover, when it played the balance of the recording containing the third reference to defendant's prior sexual misconduct immediately after informing the jury that it had removed "anything else ... that we don't want you to hear." The implication, of course, was that the balance of the recording, including the additional reference, was unobjectionable. We thus find no reliable basis to conclude that the jury was clearly informed of, or properly understood, the imperative to ignore the statements. The instruction did not, in short, mitigate the prejudice.
¶ 12. Apart from the prejudicial effect of the offending evidence, the most important factor we employ in the harmless error equation is "the strength of the prosecution's case without the offending evidence." Lipka, 174 Vt. at 385, 817 A.2d at 34. While there was ample evidence here of fresh reports by the victim after the incident, and a reasonably detailed statement to the police, the State's case essentially rested on a credibility contest. Apart from the victim's statements and testimony, there were no witnesses or other evidence to corroborate the sexual assault. Defendant did not testify, but nevertheless adduced evidence in which he admitted the sexual encounter but claimed that it was consensual. A series of police-monitored telephone calls from the victim to defendant yielded no damaging admissions. There were also some discrepancies in the testimony of the victim, who acknowledged that her purpose in visiting defendant's home was to buy marijuana, and that she shared a marijuana cigarette with defendant before the disputed encounter.
¶ 13. We cannot avoid the conclusion, therefore, that the evidence of defendant's prior sexual molestation of a child could have affected the verdict in this case, which essentially turned on the credibility of the accuser and the accused. See McCarthy, 156 Vt. at 157, 589 A.2d at 875 (finding that erroneous admission of defendant's prior sexual misconduct was not harmless where the "case could have gone either way, depending upon whether the jury believed complainant beyond a reasonable doubt or believed defendant"). Although objections were not timely raised at every point below, the inherently inflammatory nature of the offending evidence in a case that turned principally on credibility renders this the relatively rare case in which "the error so affects the substantial rights of the defendant that we cannot find the trial overall to be fair." Id. at 154, 589 A.2d at 873. Accordingly, we conclude that the judgment must be reversed.
¶ 14. For the guidance of the court in the event of a retrial, we address defendant's additional argument that the trial court erred in admitting several photographs. The issue requires no extended discussion. The victim testified that defendant's penis appeared to be either uncircumcised or surrounded by "a lot of skin," and the State offered several photographs of defendant's genitalia to corroborate the testimony. Defendant objected that the photographs were irrelevant and prejudicial. The State acknowledged that defendant admitted having sexual intercourse with B.H. so that identity was not *316 at issue. Under the circumstances, therefore, we agree with defendant that the photographs were not material to any disputed issue, and should not have been admitted. State v. Lee, 2005 VT 99, ¶ 8, 178 Vt. 420, 886 A.2d 378 (to be relevant and admissible, evidence must make "the existence of a fact that is `of consequence to the determination of the action' more probable than not" (quoting V.R.E. 401)).
Reversed and remanded.
NOTES
[1] The court's instruction in its entirety was as follows:
That last portion of the recording before Mr. Lavoie rushed to turn it off I think the attorneys forgot that that part was on there and it was not meant for you to hear. I'm not going to try to rephrase it or restate it but I want you to ignore that last statement that was made. And what we're going to do is we're going to send you back to the jury room, we're all going to listen to the rest of this and figure out if there's anything else on there that we don't want you to hear. So that will take just a few minutes I think but again don't discuss the case among yourselves.
[2] The prosecutor also subsequently suggested that they play the CD for the witness outside the presence of the jury, and that defense counsel then cross-examine her about the two alleged discrepancies between her statement to the police and her trial testimony. The court did not address this additional suggestion.
[3] The bench-conference colloquy was as follows:
Mr. Lavoie: How are you doing? Blame her.
The Court: I blame myself for being stupid.
Ms. Shingler: I blame John for not having a transcript.
The parties agree that the subject of discussion was the inadvertent playing of the third statement alluding to defendant's alleged assault of his girlfriend's daughter.
[4] Although the State agreed at oral argument that the claim was waived, it continued to urge the relevance of the fact that the evidence was introduced by defendant. We can only make sense of this as an argument for applying a plain error standard, since defendant's inadvertence in admitting the evidence was essentially the affirmative equivalent of a negligent failure to object. See, e.g., United States v. Cruz-Rodriguez, 570 F.3d 1179, 1183 (10th Cir.2009) (explaining the basic distinction between invited error, which bars review where a party "deliberately considers an issue and makes an intentional decision to forego it," and plain error, which is subject to review when a party through neglect "fail[s] to make a proper objection"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548997/ | 161 B.R. 927 (1993)
In re Fred A. NAHAS and Virginia Nahas, his wife, Debtors.
A.K. NAHAS SHOPPING CENTER, INC., Plaintiff,
v.
Mary REITMEYER, Trustee for Fred A. Nahas and Virginia Nahas, his wife, Defendants.
Bankruptcy No. 90-00363 JKF. Adv. No. 92-0149.
United States Bankruptcy Court, W.D. Pennsylvania.
December 22, 1993.
*928 *929 Gary W. Short, Pittsburgh, PA, for plaintiff.
Holly J. Ford, Brodie Techner Rubinsky & Ford, Philadelphia, PA, Bernadette Puzzuole, Rothman, Gordon, Foreman & Groudine, P.C., Pittsburgh, PA, for Trustee.
MEMORANDUM OPINION
JUDITH K. FITZGERALD, Bankruptcy Judge.
The matter before the court is a declaratory judgment action brought by A.K. Nahas Shopping Center, Inc. (hereafter "Shopping Center") seeking a determination that it is entitled to insurance proceeds resulting from a fire which damaged a building located at 407 State Street, Vanport, Pennsylvania. At the time of the fire, the building was owned by Debtors by the entireties and used by the Shopping Center as its warehouse. If the Shopping Center is found to be the intended beneficiary, the insurance proceeds will not be subject to distribution to creditors of this bankruptcy estate. Following trial, briefs and arguments of counsel and for the reasons which follow, we find that the Shopping Center is the intended beneficiary and is entitled to the insurance proceeds.
Facts
A.K. Nahas Shopping Center, Inc., is family owned and was incorporated under the laws of Pennsylvania on or about June 22, 1963, to conduct retail sales of groceries, furniture and appliances. Stipulation of Facts ¶ 1, Docket Entry 21.[1] The Shopping Center was named after Debtor Fred Nahas's father, Albert K. Nahas, who died on September 22, 1976. Fred Nahas was executor of the estate. Before his death, Albert K. Nahas was the owner of the real property at 407 State Street, Vanport, Pennsylvania ("407 State Street"). Upon his death, Albert's wife, Tamam Nahas, inherited the property.
On December 1, 1976, Debtors executed a 50-year lease of 407 State Street to the Shopping Center in consideration of one dollar. At the time, Debtors did not own the property nor did they have written authority from Tamam Nahas to act as her agents. Fred Nahas testified that in executing the lease he and his wife were acting as agents of Tamam Nahas. Although there was no written agreement establishing an agency relationship, Debtors believed that they were acting according to Tamam's wishes.[2] On August 29, 1980, Tamam Nahas conveyed 407 State Street to Fred Nahas and on April 27, 1984, Fred Nahas conveyed the property to himself and his wife as tenants by the entireties. Debtors filed a chapter 11 on February 12, 1990. The premises at 407 State Street, which the Shopping Center used to store inventory, was destroyed by fire on July 1, 1990.[3] The case was converted to chapter 7 on November 20, 1990.
*930 The issue arises because of an ambiguity in the insurance policy summary sheet and in documents submitted in this case by Debtors as their proof of insurance on estate assets.
The Shopping Center contends that it was the named insured and the intended beneficiary of the fire insurance proceeds. The trustee asserts that Debtors' estate is entitled to the proceeds because Fred Nahas's "statements, omissions and filed schedules and attachments" led creditors and the trustee to reasonably believe that the property was insured for the benefit of the estate. See Trustee's Answer and Affirmative Defenses to Complaint for Declaratory Judgment at ¶ 26, Adv. No. 92-149, Docket Entry 5. Alternatively, the trustee asks that we pierce the corporate veil if it is determined that the Shopping Center is entitled to the insurance proceeds or that we apply the doctrine of equitable estoppel to prohibit it from acquiring the proceeds.
At all times from January 19, 1982, to the present, there was insurance on the property. Between 1982 and 1986 the named insured was A.K. Nahas Furniture Store. From 1986 forward when the insurance agent changed insurance companies, the name on the policy was A.K. Nahas. The trustee argues that Fred Nahas personally is the intended beneficiary of the policy because she interprets the proof of insurance that Fred Nahas submitted to the United States Trustee in the chapter 11 proceeding as listing Fred Nahas as the named insured.
The proof of insurance submitted to the office of the United States Trustee in accordance with the guidelines for chapter 11 debtors consisted of a binder or summary sheet. See Defendants' Exhibit BB-2 at 14. It identified the named insured with a number. Next to the word "name" on this document appeared "Fred Nahas". Id. Although the trustee's interpretation of the face of the document is a reasonable one, it is not the only possible one. Thus, there is an ambiguity which requires further evidence to resolve. Debtors' insurance agent, Edward Luckey, testified at trial that the "name" category on the form signified the contact person for the business and not the named insured. Luckey described the policy as a "business package." From January 19, 1982, to July 3, 1986, Luckey placed the fire insurance with Firemens Insurance Company. The policies identified the named insured as A.K. Nahas Furniture Store. In 1986, Luckey switched the insurance policy to The Travelers Insurance Company. The new policy and all renewals since that time listed the named insured as "A.K. Nahas" instead of "A.K. Nahas Furniture Store". However, when the Travelers policy was issued, A.K. Nahas had been dead for ten years. Luckey testified that the policy always was intended to insure the interests of the business, not those of any individual.
Pennsylvania law provides that the construction and interpretation of an insurance contract is governed by the parties' intent "as it is reasonably manifested by the language of the[] written contract". O'Brien Energy Systems, Inc. v. American Employers' Insurance Co., 427 Pa.Super. 456, 629 A.2d 957, 959 (1993). There are several facts in this case which establish that the Shopping Center is the intended beneficiary under the policy:
1. A.K. Nahas died in 1976, more than ten years before the 1990 Traveler's policy was issued.
2. The policy, originally issued in 1986, was intended only to replace the Firemens policy under which the named insured was "A.K. Nahas Furniture Store."
3. Edward Luckey, the insurance agent, testified at trial that the Shopping Center was the intended beneficiary.
4. Luckey testified that he did not know how the name change occurred, but it must have occurred when he switched the policy from Firemens to Travelers. He also testified that Fred Nahas was his contact for the Shopping Center's insurance.
5. The policy lists the address of the named insured as "463 State Street" which is the Shopping Center's main showroom.[4]*931 This was not the Debtors' residence. Debtors lived at 416 Jefferson Street.
6. Luckey testified that the policy was a "business insurance package" which is not issued to cover personal needs.
7. The 1986 version of the policy contained an exclusion declaration which was signed "Fred Nahas, Mgr.," and had "A.K. Nahas" written on the line identifying the named insured. Plaintiff's Trial Exhibit 8 at 54.
8. The checks in payment of the insurance premiums were drawn on the corporate account and signed by Fred Nahas as treasurer. Plaintiff's Trial Exhibit 13.[5]
9. The Shopping Center was the tenant in the building and had been since at least 1976.
10. Fred Nahas, as a corporate officer, used Luckey as the agent for business insurance, but not for his personal insurance.[6]
11. The proof of insurance submitted to the United States Trustee's office was not a document created by the Shopping Center or by Debtors. Although the proof of insurance is ambiguous on its face, until the fire no party in interest, including the United States Trustee, the creditors or the chapter 7 trustee, attempted to verify or clarify the terms of the policy.
Although the proof of insurance functions as evidence of the identity of the named insured, we find that the ambiguity in the policy requires examination into the terms and the facts surrounding the issuance of the policy. In this case, the credible evidence and circumstances surrounding the acquisition of the policy establish that the Shopping Center was the named insured and intended beneficiary. The notation on the policy that the named insured was "A.K. Nahas" rather than "A.K. Nahas Furniture Store" was a mistake which occurred when the insurance agent switched the policy from Firemens to Travelers. The Shopping Center paid the insurance premiums out of the corporate account and the checks were signed "Fred Nahas, Treas[urer]." See Plaintiff's Trial Exhibit 13.
The trustee argues that the Shopping Center does not have an insurable interest because the lease between it and Debtors for 407 State Street was void ab initio inasmuch as it was executed before Debtors owned 407 State Street. However, Pennsylvania law provides that "a person need not have any property interest in the subject matter insured and that a person [has] an insurable interest in property `if he holds such relation to the property that its destruction by the peril insured against involves pecuniary loss to him.'" Commonwealth v. Rodebaugh, 102 Pa.Cmwlth. 592, 519 A.2d 555, 563 (1986). In other words, "[i]t is an elementary principle of insurance law that an insurable interest exists in any party who would be exposed to financial loss by the destruction of a certain property." Kellner v. Aetna Casualty and Surety Co., 605 F.Supp. 331, 333 (M.D.Pa.1984). Because the Shopping Center used 407 State Street as a warehouse, it "derived a benefit from the property's existence and . . . suffer[ed] a loss from its destruction." Luchansky v. Farmers Fire Insurance Co., 357 Pa.Super. 136, 515 A.2d 598, 600 (1986).[7]
The trustee cites the statute of frauds, 33 Pa.Stat. § 1, in support of her argument that because Debtors were not the owners of the property when the lease was executed, there is no valid written lease and, therefore, the statute of frauds is violated. However, there is no dispute that the Shopping Center had possession of and used the building as a warehouse, nor is there an allegation that the insurance contract violates the statute of frauds. Thus, while we address the argument, *932 we find it to be inconsequential to the result in this case.
Pennsylvania landlord-tenant law states:
Real property . . . may be leased for a term of more than three years by a landlord to a tenant or by their respective agents lawfully authorized in writing. Any such lease must be in writing and signed by the parties making or creating the same, otherwise it shall have the force and effect of a lease at will only . . . unless the tenancy has continued for more than one year and the landlord and tenant have recognized its rightful existence by claiming and admitting liability for the rent, in which case the tenancy shall become one from year to year.
68 Pa.Stat.Ann. § 250.202. The quoted language militates against the trustee's argument that the lease for 407 State Street was void ab initio. Although the Shopping Center did not always pay rent, it paid the insurance premiums on the building and contents, maintained the building, and made some capital improvements, including carpeting and a roof. The fact that Debtors did not own the property or have written authority to act as Tamam Nahas's agents when they signed the lease does not vitiate the Shopping Center's insurable interest in the leasehold. We find that the credible evidence established that, in executing the lease to the Shopping Center, Debtors acted in accordance with Tamam Nahas's wishes and, as executor of A.K. Nahas's estate, Fred Nahas had apparent authority to enter into the lease.
The trustee further asserts that even if the Shopping Center is the intended beneficiary under the policy, it should be equitably estopped from collecting the proceeds. Under Pennsylvania law,
equitable "estoppel arises when one by his acts, representations, or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts."
Zivari v. Willis, 416 Pa.Super. 432, 611 A.2d 293, 295 (1992) (quoting Northwestern National Bank v. Commonwealth, 345 Pa. 192, 196-97, 27 A.2d 20, 23 (1942)).
The trustee argues that Fred Nahas acted inequitably in failing to disclose the lease of 407 State Street with the Shopping Center in his schedules and by submitting a misleading proof of insurance. However, assuming without deciding that inequitable conduct existed, it was not conduct by the Shopping Center or by Fred Nahas in his corporate capacity. Thus, the conduct is not imputable to the Shopping Center. The schedules were filed in Debtors' personal bankruptcy case. In executing the schedules, Debtors, and Fred Nahas in particular, acted in their individual capacities. The Shopping Center is not a debtor and there was no evidence that in engaging in the allegedly inequitable conduct, Fred Nahas was acting in his capacity as a corporate officer or director.[8]
The trustee also argues that if this court determines that the Shopping Center is entitled to the insurance proceeds, the court should pierce the corporate veil and give the proceeds to Debtors' estate. The trustee's theory is that the Shopping Center engaged in inequitable conduct through Fred Nahas. Pennsylvania law permits the corporate veil to be pierced "once it is established that the dominant shareholder or the controlling corporation wholly ignored the separate status of a corporation and so dominated and controlled its affairs that its separate existence was a mere sham." Wheeling-Pittsburgh Steel Corp. v. Intersteel, Inc., 758 F.Supp. 1054, 1057 (W.D.Pa.1990). "The party wishing to prove that the corporate entity should be disregarded . . . has the burden of establishing by a preponderance of the evidence that the corporation was an artifice and a sham to execute illegitimate purposes and abuse of the corporate fiction and the immunity *933 that it carries." Id. at 1058. Relevant factors include:
(1) failure to observe corporate formalities;
(2) non-payment of dividends;
(3) insolvency of the debtor corporation;
(4) siphoning funds from the corporation by dominant shareholders;
(5) non-functioning of other officers and directors;
(6) absence of corporate records;
(7) whether the corporation is a mere facade for the operations of a common shareholder or shareholders; and
(8) gross undercapitalization.
Id. at 1059. See also Solomon v. Klein, 770 F.2d 352 (3d Cir.1985); National Precast Crypt Co. v. Dy-Core of Pennsylvania, Inc., 785 F.Supp. 1186 (W.D.Pa.1992). During the chapter 11, Debtors' monthly statements recited that insurance was in place. In fact, there was insurance on the building and its contents. The problem is that Debtors were not the named insureds or intended beneficiaries. Therefore, any proceeds would not be subject to distribution to their creditors. Although it is incumbent upon bankruptcy debtors to be accurate in the information they provide, there is no evidence that Debtors intended to mislead the trustee, the creditors, or the court. It is apparent to the court from having observed and heard the witnesses and the evidence in this case that Fred and Virginia Nahas did not understand the details and ramifications of the requirement that they submit proof of insurance on estate assets. The credible evidence established that at all times from 1982 to the time of the fire the Shopping Center was the named insured and the intended beneficiary. It paid the premiums, and there is insufficient evidence to support a result that would deprive it of the insurance proceeds.
We also find that the Shopping Center observed the corporate formalities. It held annual shareholder's meetings and the corporate secretary kept minutes at these meetings. The corporation filed its own returns and had a bank account separate from that of Fred and Virginia Nahas.
The trustee asserts that there was commingling of corporate and personal assets through the A.K. Nahas Building Fund Account. The evidence established, however, that this was not a corporate account but a personal bank account maintained by the Nahas family.[9] Fred Nahas, his sister Olga Nahas, and his two sons deposited their personal money into this account and used the money to pay personal expenses as well as expenses on various parcels of real property in which Fred Nahas had an interest, including 407 State Street. In at least one instance, the family members used the Building Fund Account to make a loan to the corporation. The loan was documented in the Shopping Center's corporate minutes. The Building Fund Account was sometimes used to pay expenses of the Shopping Center, and thus has been used for the benefit of the corporation as well as individual family members since the corporation was created in the 1960s. Debtors' children, as the majority shareholders,[10] ultimately will benefit from the use of these funds but that fact is not dispositive of the issue. The deposits into the Building Fund were not corporate funds and did not involve use of corporate assets by Debtors for their personal or family benefit.
*934 Finally, the trustee argues that this court should equitably subordinate the Shopping Center's claim. However, the trustee raised the issue only in her post-trial brief. Section 510(c) of the Bankruptcy Code requires notice and a hearing before a bankruptcy court can equitably subordinate a claim. Merely raising the issue in a brief does not provide sufficient notice to parties in interest. Therefore, the request for equitable subordination will be denied. Even if equitable subordination was properly raised, it still would not apply in this case because the Shopping Center's right to the insurance proceeds is not a "claim" against the bankruptcy estate within the meaning of § 510(c) of the Bankruptcy Code. Rather, it is a "claim" to insurance proceeds as to which we find it is and at all relevant times was the named insured on the policy and the intended beneficiary of the proceeds. The insurance proceeds are not property of this estate or subject to the claims of creditors of this estate.
An appropriate order will be entered.
ORDER
And now, to-wit, this 22nd day of December, 1993, for the reasons set forth in the foregoing Memorandum Opinion, it is ORDERED, ADJUDGED and DECREED that the relief requested in the Complaint for Declaratory Judgment is GRANTED and this court declares that A.K. Nahas Shopping Center, Inc., is the named insured and sole beneficiary under Travelers Insurance Company Policy No. 779J8334.
It is FURTHER ORDERED that the trustee shall remit the proceeds to A.K. Nahas Shopping Center, Inc., within ten (10) days of this order.
NOTES
[1] The grocery portion of the business was phased out in 1985. Fred Nahas Deposition of October 3, 1990, at 20.
[2] Fred Nahas was the executor of Albert K. Nahas's estate.
[3] On February 6, 1991, Travelers filed a complaint for interpleader, paid the balance of the proceeds into court, and was discharged of all liability under the policy.
[4] The policy listed the mailing address as 463 State Street, Vanport, Pennsylvania, but covered 463 and 407 State Street. Fred Nahas and his sister, Olga Nahas, own 463 State Street as joint tenants and the Shopping Center used it as a commercial showroom. The building also contains some apartments.
[5] The memo portion of some checks bear policy number 779J8334 which is the number of the 1990 policy.
[6] The sole exception was Fred Nahas's notary bond.
[7] Because we conclude that the Shopping Center had an insurable interest in 407 State Street, we need not resolve the Shopping Center's contention that the trustee lacks standing to challenge its insurable interest.
[8] We also note that, by the time the chapter 11 case was filed, Fred Nahas, a corporate officer, held only six per cent of the Shopping Center's stock. Virginia Nahas held no stock at all and did not take part in corporate matters.
[9] Although at one point Fred Nahas stated that the account was "personal to the corporation", Fred Nahas Deposition of December 18, 1992, at 46, it is clear from the record as a whole that it was not a corporate account but an individual account to which many family members had access. Furthermore, the money in the Building Fund Account came from the personal funds of various family members. The Shopping Center did not deposit funds.
[10] Fred Nahas testified that he, as his father before him, began transferring his business interests to his sons over a period of years as he approached retirement. He was semi-retired at the time of trial. Although Fred Nahas is a corporate officer and a shareholder, at the time of the fire he held only six per cent of the stock. Debtors' sons have controlled the corporation since approximately 1987, well before the bankruptcy case was filed in 1990. There were no fraudulent transfers or preferential transfers alleged and, in view of the uncontradicted testimony regarding the timing of stock transfers, there was no proof of impropriety. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548998/ | 119 F.2d 991 (1941)
BRAMAN
v.
WILEY.
No. 7444.
Circuit Court of Appeals, Seventh Circuit.
May 5, 1941.
Rehearing Denied June 10, 1941.
*992 Floyd O. Jellison and Max Buntman, both of South Bend, Ind., for appellant.
Milton A. Johnson and L. M. Hammerschmidt, both of South Bend, Ind., for appellee.
Before EVANS and MAJOR, Circuit Judges, and BRIGGLE, District Judge.
MAJOR, Circuit Judge.
This is an appeal from a judgment entered March 28, 1940, upon a jury verdict, in a suit to recover damages occasioned by the alleged negligence of the defendant in driving his automobile. The errors now urged for reversal have to do with the court's charge to the jury, rulings on evidence, refusal to withdraw the cause from the jury for alleged misconduct on the part of plaintiff's counsel, and the court's questioning on the voir dire examination of the jury.
The complaint alleged that the plaintiff was driving south on United States Highway No. 31 at a point about three and one-half or four miles north of the City of Rochester, Indiana, and that at the same time and place the defendant was driving north on said highway. The negligence, as alleged, was to the effect that the defendant was driving on the wrong side of the highway and, as a result, the cars driven by the plaintiff and the defendant collided. By answer, the defendant denied negligence *993 and charged that the collision and resultant damages were occasioned by contributory negligence on the part of the plaintiff.
Plaintiff, driver of the car, was accompanied by two other persons. Defendant was driving his car alone. Just prior to the collision, defendant had passed another car, and the driver of this car, the defendant, plaintiff, and the persons riding with him were the only eyewitnesses to the collision. Much of the testimony has to do with the position of the automobile shortly after the collision. Much of the argument is predicated upon such testimony, each side contending that it supports the respective contentions as to the circumstances of the collision.
Inasmuch as the questions raised are legal, there is no occasion to further detail the facts. In our view the only question of consequence arises from defendant's contention that the jury was prejudiced by reason of the alleged inferences and intimations that he was indemnified by insurance. The complaint in this respect is twofold: (1) that the court and plaintiff's counsel asked improper questions on the voir dire examination of the jury, and (2) that plaintiff's counsel, in argument to the jury, made improper statements.
Prior to the voir dire examination, the court overruled defendant's motion, suggesting that any juror's connection or affiliation with any insurance company be ascertained by first asking if the juror had any affiliation or connection with any corporation, firm or association. Upon receiving an affirmative answer, it was proposed that the juror be asked the name of the company, corporation or association, and the character of its business. If it was then disclosed that the business be that of insurance, that the name of the company and his connection or affiliation therewith be ascertained. It is contended that the denial of this motion was prejudicial error. Some authorities are cited which suggest the desirability of the practice suggested by this motion, but we know of no authority where its denial has been held erroneous. Certainly, as we shall shortly point out, there is no such rule of law or practice in Indiana.
The court then proceeded to interrogate each of the prospective jurors as to whether or not they had automobile insurance and, if so, the name of the particular company. It is contended this was highly improper and was a plain intimation to the jury that the defendant was indemnified. While the rule in Indiana is, as in most jurisdictions, that evidence of the defendant's insurance constitutes reversible error, it is not the rule that a plaintiff is precluded, during the voir dire examination, from ascertaining the information complained of in the instant case. In fact, in Goff v. Kokomo Brass Works, 43 Ind. App. 642, 88 N.E. 312, the case was reversed for the reason that the trial court refused plaintiff the right to inquire of the jurors as to their interest in, and relationship to, the defendant's indemnifying insurance company. The Supreme Court in Gerlot et al. v. Swartz et al., 212 Ind. 292, 304, 7 N.E.2d 960, held that a similar question was not reversible error. The appellate courts of that State have frequently recognized that the examination of jurors on their voir dire is largely in the discretion of the trial court and limited only by the good faith of the lawyer propounding the question. Martin v. Lilly, 188 Ind. 139, 121 N.E. 443; Beyer v. Safron, 84 Ind.App. 512, 515, 151 N.E. 620; Fort Wayne Checker Cab Co. v. Davis, 90 Ind.App. 30, 165 N.E. 764, 765, 168 N.E. 41. It is also pointed out that when it was ascertained that one of the jurors wrote automobile insurance, plaintiff's counsel, in excusing this juror, stated: "I believe we had better excuse Mr. Miller; he is an insurance company and kind of lined up with the company in order to take statements." There was no excuse for the making of such statement, but we do not believe that its import is as serious as claimed by the defendant.
There are a number of statements contained in counsel's argument to the jury, which it is contended inject the insurance issue and demonstrate counsel's lack of good faith. One of such statements occurred when counsel was discussing the defendant and, in part, is as follows: "* * * I am not criticizing you Bob, I want to say I do not think he is a bad fellow, and I want to say another thing, if you men of the Jury think Harvey Braman should recover and you bring in a substantial reasonable judgment in this case, and you see Bob Wiley next week, Bob Wiley will say, I think you did just exactly right, I am glad to see you give the money, yes, that is what Bob Wiley will say about this thing after it is all over. * * *"
Another statement "the evidence is undisputed that he had been stout as a bull, *994 if it was not your investigators would have found it." In referring to defendant's counsel, this statement was made: "So, Mr. Johnson, in looking over this case, after he gets it to put up his defense for his principal, for the person that hired him, he has a notice right away that he has got to get this scene down around that hill and get it back. * * *"
It will be observed that no direct mention was made of insurance and we do not believe it can reasonably be inferred from such statements that the defendant was indemnified. We have read all of the argument and, taken as a whole, we doubt if it is either enlightening or prejudicial.
Furthermore, no objection was made to the argument, and no question raised until after the jury had been instructed and retired. Defendant then moved to withdraw the submission on the ground of the alleged improper inference contained in the argument of plaintiff's counsel. It was pointed out by the court that he did not think the argument was susceptible of such construction, but that if defendant's counsel thought otherwise, he would recall the jury and give an instruction on this point. Counsel did not avail himself of such offer. We are of the opinion that the trial court was in a better position to evaluate the situation than we, and as pointed out in the Indiana authorities cited heretofore, his discretion should not be disturbed unless clearly abused. We can not say it was abused in the instant situation.
In addition to the cases cited, the Appellate Court of Indiana in Coats v. Strawmeyer, 107 Ind.App. 102, 21 N.E.2d 433, 435, considered an alleged improper statement made by counsel in argument similar to, but more damaging than, those here complained of, and while the court severely criticized counsel in the matter, held that it did not require a reversal of the judgment. It therefore appears, from a reading of the Indiana cases, that no reversible error was committed with respect to the manner in which the jury was interrogated, or in the argument made by plaintiff's counsel.
There was some evidence to the effect that the defendant was under the influence of intoxicating liquor. It is claimed the court erred in refusing to permit a witness to testify as to a conversation had with the defendant shortly after the accident. The purpose of this conversation, so it is claimed, was to negative the proof with reference to the defendant's intoxication. The witness was not asked to express an opinion, however, as to whether the defendant was intoxicated, and we do not believe the conversation was material for the purpose stated. It is also claimed the court should have permitted the same witness to relate a conversation had with one Keller, who was a witness for the plaintiff and an occupant of plaintiff's automobile at the time of the collision. Its purpose was to impeach Keller who had testified he was unconscious following the accident. It appears no ground had been laid for impeachment, but at any rate, we do not believe defendant was harmed by the court's ruling.
Error is also assigned to the admission of testimony as to the purpose of a yellow line in the center of the highway over a hill, for the reason that there was no basis in the pleading for such testimony. We do not believe this evidence was inadmissible for the reason assigned. After the admission of such testimony, however, it developed, without dispute, that at the time of the collision in question, there was no yellow line at or near the scene of the accident, but that it was placed there later. Even though the testimony was improperly admitted, it is difficult to see how defendant could have been harmed in view of the subsequent disclosure.
Complaint is also made of an instruction which permitted the jury to consider permanent damages and the court's refusal to instruct that the question of permanency was not involved. There was evidence to the effect that the plaintiff suffered a severe head injury which necessitated the removal of a portion of the skull bone; that there was a scar which extended from the frontal region of his head to his left ear, and that one-third of the ear was cut off. He also had a scar four inches in length over his left shoulder. Plaintiff testified that he was nervous, suffered dizzy spells and headaches; that he had lost twenty-five pounds in weight and that he was able to work only part time. A physician who had treated him testified, in effect, that plaintiff's dizziness and nervous condition might be permanent. We are of the opinion there was no error in the charge in this respect. The record discloses substantial amounts expended by the plaintiff on account of medical, nurse and hospital services. When these are considered in connection with the nature of plaintiff's *995 injuries, the amount awarded, $2750, would indicate that little, if anything, was allowed on account of permanent injuries. At any rate, the amount can not be said to be excessive, nor does it indicate that the verdict was the result of prejudice.
The facts presented a typical jury problem and we are of the view that no error was committed which requires a reversal.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549001/ | 119 F.2d 764 (1941)
NOVADEL-AGENE CORPORATION
v.
PENN et al. SAME
v.
TEX-O-KAN FLOUR MILLS CO.
No. 9826.
Circuit Court of Appeals, Fifth Circuit.
May 16, 1941.
Rehearing Denied June 16, 1941.
*765 Brady Cole and Garrett R. Tucker, Jr., both of Houston, Tex., and Loren N. Wood, Robert S. Dunham, and Drury W. Cooper, all of New York City, for appellant Novadel-Agene Corporation.
Samuel E. Darby, Jr., and Louis D. Fletcher, both of New York City, and Robert Allan Ritchie, of Dallas, Tex., opposed.
Before HUTCHESON, HOLMES, and McCORD, Circuit Judges.
McCORD, Circuit Judge.
Fredric H. Penn and Tex-O-Kan Flour Mills Company were sued for infringement of two patents owned by Novadel-Agene Corporation. The patents in suit were No. 1,539,701 issued to Egbert Cornelis Sutherland on May 26, 1925, and No. 1,555,805 issued to Thilo Kroeber on September 29, 1925.
The claims declared upon by Novadel-Agene Corporation were the following:
Sutherland, No. 1,539,701.
"5. A process for treating flour, meal or other cereal or analogous milling product, consisting in mixing the product with a benzoyl peroxide compound and thereafter effecting a reaction of this compound on the said product while in the mixture, and while maintaining the said product in a substantially dry and pulverulent condition.
"11. An intimate mixture comprising an edible cereal milling product incorporated with a small quantity of a benzoyl peroxide compound.
"12. An intimate mixture comprising a milling product intimately incorporated with a small amount of benzoyl peroxide.
"24. A process which comprises the step of treating flour, meal and like edible milling products with a percentage of benzoyl peroxide not substantially greater than 0.02%."
Kroeber, No. 1,555,805.
"5. An organic peroxide the bulk of which is comminuted to a grain size much finer than ordinary flour."
Fredric H. Penn conducts a business under the name of "Superlite Company", and manufactures a benzoyl peroxide bleaching compound known as "Superlite." On July 16, 1940, a patent, No. 2,208,471, was issued to Penn for his "Method and Composition for Bleaching Milling Products." The infringement charged against Penn by Novadel-Agene Corporation is the manufacture and sale of "Superlite" with "knowledge and intent that it should be used, and particularly that it be mixed with flour to bleach the same." It was charged that Tex-O-Kan Flour Mills, one of Penn's customers, had infringed the patents by (a) mixing "without consent or license" an organic peroxide with flour "to treat or improve the same", or otherwise performing the processes claimed in letters patent No. 1,539,701; and by (b) utilizing for the treatment of flour an organic peroxide "the bulk of which is comminuted to a grain size much smaller than flour, or other products as embodied and claimed in letters patent No. 1,555,805."
The cases against Penn and Tex-O-Kan were consolidated and tried together. After an exhaustive hearing the court found both patents invalid and entered a decree dismissing the complaints. Novadel-Agene Corporation has appealed.
It is conceded by the appellees that if the patents are valid they are guilty of infringement. Therefore, the only question now before us is whether the patents are valid, and if so, whether the suit against appellees for infringement is barred by the defense of improper use or unclean hands.
We agree with the court below that Claim 5 of the Kroeber patent is invalid for want of invention. The appellant contends that the product of Claim 5 is an invention of real merit, and that the change in the art taught by Kroeber produced remarkable and unexpected results. Benzoyl peroxide was used as a flour bleaching *766 agent prior to the filing of Kroeber's application. The mere mechanical division of the benzoyl peroxide did not change the character or properties of the chemical, and the facts shown in the record sustain the finding that Kroeber's Claim 5 did not show invention. Cf. Kessler v. Buick Motor Company, 5 Cir., 64 F.2d 599.
As to the Sutherland patent the case is different. The record shows that prior to the issuance of the patent in suit a prior patent, No. 1,380,334, Reissue 116, had been issued to Sutherland on May 31, 1921. The court below felt that the patent in suit covered the same invention as Reissue 116, and accordingly held that when the first Sutherland patent expired on May 31, 1938, the invention "so far as organic and inorganic peroxide are concerned" passed into the public realm on that date. This issue of double patenting by Sutherland was tried and found in favor of the patentee over twelve years ago by the United States District Court for the Southern District of New York. This decision was affirmed by the Second Circuit Court of Appeals on November 4, 1929, Novadel Process Corporation v. J. P. Meyer & Co., 35 F.2d 697, 701. That court found, "The inventor's two patents are for distinct subject-matters". It further upheld all the claims involved in the cases at bar.
The worth and validity of the invention described in patent No. 1,539,701 has been recognized and accepted by the trade for many years, and it is clear that Sutherland did make an invention of far-reaching importance to the manufacturers of flour, meal, and other edible cereal products. Moreover, the presumption of validity arising from the issuance of the letters patent was greatly reinforced by the clear-cut decision of the Second Circuit Court of Appeals in the Meyer case supra, which decision has stood the test of time for twelve years. The patent in suit has only one more year to run and we see no good reason for departing from the decision of the Second Circuit Court of Appeals and declaring the patent invalid at this late date. Gormley & Jeffrey Tire Co. v. United States Agency, 2 Cir., 177 F. 691; Cincinnati Butchers' Supply Co. v. Walker Bin Co., 6 Cir., 230 F. 453; Hughes Tool Co. v. United Mach. Co., D.C., 35 F.Supp. 879.
The appellees further insist that the Sutherland patent is invalid under the Disclaimer Statute, R.S. 4922, 35 U.S.C.A. § 71, for failure to disclaim subject matter, "the invalidity of which is apparent on the face of the patent." In view of the long recognition and judicial approval of the patent we find that the point is not made out, and that there is not a strong enough showing that the controverted claim, No. 10, is invalid and that its invalidity invalidates the patent under the statute. Ensten v. Simon Ascher & Co., 282 U.S. 445, 51 S.Ct. 207, 75 L.Ed. 453; Excelsior Steel Furnace Co. v. Williamson Heater Co., 6 Cir., 269 F. 614; Cf. Maytag Co. v. Hurley Co., 307 U.S. 243, 57 S.Ct. 857, 81 L.Ed. 1264.
On the record before us we find the Sutherland patent, No. 1,539,701, to be valid.
The appellees contend that the Sutherland patent, if valid, cannot be enforced against them because of "the improper use to which it has been put by appellant, to create a limited monopoly in an article of commerce which is not the thing patented." As to the method in which the patent was being used the court below found that Novadel-Agene Corporation had not granted licenses to any miller without selling that miller its product, and that it did not change that method of doing business until after the filing of the suit against Penn when it sent out letters and advertised in trade journals that it would issue licenses without purchase from it of the product. These findings are supported by the evidence in the record. The court, however, having found that the patents were invalid, did not rest decision upon these findings.
The "improper use" or "unclean hands" doctrine was clearly stated by the Supreme Court in Carbice Corporation of America v. American Patents Development Corporation, 283 U.S. 27, 31, 51 S.Ct. 334, 335, 75 L.Ed. 819, where it was held that a patent owner may not "exact as the condition of a license that unpatented materials used in connection with the invention shall be purchased only from the licensor; and if it does so, relief against one who supplies such unpatented materials will be denied." To the same effect is Leitch Mfg. Co. v. Barber Co., 302 U.S. 458, 58 S.Ct. 288, 82 L.Ed. 371; Philad Co. v. Lechler Labs, 2 Cir., 107 F.2d 747; B. B. Chemical Co. v. Ellis, 1 Cir., 117 F.2d 829; American Lecithin Co. v. Warfield Co., 7 Cir., 105 F.2d 207; Slayter & Co. v. Stebbins-Anderson Co., D.C., 31 F.Supp. 96, affirmed 4 Cir., 117 F.2d 848.
Improper use does not invalidate a patent, but the courts will not assist an offending *767 patent owner against persons who infringe the patent while such improper practices continue. Improper use does not vest an infringer with a license for the life of the patent, for if a patent owner purges himself of the improper business practices he may then enforce his patent and recover damages for infringement occurring thereafter. B. B. Chemical Co. v. Ellis, D.C. 32 F.Supp. 690, affirmed 1 Cir., 117 F.2d 829, concurring opinion, 835; American Lecithin Co. v. Warfield Co., D.C., 23 F.Supp. 326, affirmed 7 Cir., 105 F.2d 207; Celanese Corp. v. Ribbon Narrow Fabrics Co., D.C., 33 F.Supp. 137.
In view of our finding that the Sutherland patent is valid, the case will be remanded to the District Court for a hearing and determination of plaintiff's right to recovery in the light of the defense of monopolistic practices, and of the evidence as to those practices, their discontinuance, and the effect of that discontinuance.
As to the Kroeber patent, No.1,555,805, the judgment is affirmed. As to the Sutherland patent, No. 1,539,701, the judgment of invalidity is reversed, validity is found, and the cause is remanded for further proceedings in conformity with this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549212/ | 115 N.H. 367 (1975)
MARIE HANSON & a.
v.
BERNARD MANNING & a.
No. 7071
Supreme Court of New Hampshire
June 30, 1975
McLane, Graf, Greene & Brown and Arthur G. Greene (Mr. Greene orally) for the plaintiffs.
Leo R. Lesieur, by brief and orally, for defendant Manning.
GRIMES, J.
The issue in this appeal from the granting of a variance by the Derry Zoning Board of Adjustment is whether the *368 evidence supports the decision of the board. We hold that it does not.
Defendant Manning owns about 130 acres of land in Derry lying on both sides of Walnut Hill Road, also called Damaron Road. It is a residential zone. The entire area is thinly settled, but some houses have been built on single lots in recent years along the roads in the general vicinity. On June 29, 1972, defendant was granted permission by the board of adjustment to establish a recreation and camping area on his land, subject to certain conditions. It appeared by the form used by the board, that it granted both a variance and an exception. After rehearing was denied, Marie Hanson, an abutter, and the Citizen Action Committee Inc., appealed to the superior court. A Master (Robert W. Pillsbury, Esq.) found conditions did not support the granting of an exception but upheld the board's action on a variance. A decree in accordance with the report was entered and plaintiffs' exceptions were transferred by Mullavey, J.
No question is raised in this court regarding the rulings on the exception. On the variance question, plaintiffs argue that the master failed to consider hardship as an independent element, that there was no evidence upon which such a finding of hardship could be based, and that the granting of the variance adversely affects other property and therefore violates the spirit of the ordinance.
The scope of review in zoning cases is limited. All findings of the board are deemed prima facie lawful and reasonable and they shall not be set aside except for errors of law unless the court is persuaded by a balance of probabilities that the order is unjust or unreasonable. RSA 31:78; Glidden v. Nottingham, 109 N.H. 134, 244 A.2d 430 (1968). Although plaintiffs bear a heavy burden, we find it has been met.
The land in question is located at the edge of the town of Derry, abutting the Chester town line. The road running through it is either an extension of Walnut Hill Road or of Damaron Road. These two roads meet near the edge of defendants' property. The status of the road beyond this intersection is not clear. In any event, it appears not to have been maintained by the town for some years. One of the conditions of the variance is that the applicant upgrade this road which leads to the campground at no cost to the town. Plans call for the campsite to be located on about twenty-four acres adjacent to the Chester town line, east of the Damaron extension. The rest of the 100-plus acres would be used for recreation.
Although there was evidence that parts of the land would be unsuitable for building purposes because of shallow soil with respect *369 to ledge, the same witnesses testified that by selecting sites the land could be developed for residential purposes. There is no evidence that there is anything about the defendants' land to distinguish it from other land in the same area with respect to its suitability for the use for which it is zoned. Although RSA 31:72 authorizes the granting of a variance when literal enforcement of the ordinance will result in "unnecessary hardship" it does so only when that hardship is "owing to special conditions." Absent "special conditions" which distinguish the property from other property in the area, no variance may be granted even though there is hardship. Sweeney v. Dover, 108 N.H. 307, 310, 234 A.2d 521, 523 (1967); Mills v. Manchester, 109 N.H. 293, 295, 249 A.2d 679, 681 (1969); Simoneau v. Nashua, 112 N.H. 18, 20, 287 A.2d 620, 621-22 (1972). The variance therefore cannot be upheld.
Exceptions sustained.
DUNCAN J., did not sit; the others concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549213/ | 140 B.R. 1000 (1992)
In re Richard Harmes ROSSMILLER, Debtor.
RESOLUTION TRUST CORPORATION, as Receiver for Hill Financial Savings Association and Federal Deposit Insurance Corporation, as Receiver for Buena Vista Bank & Trust, Plaintiffs-Appellees,
v.
Richard Harmes ROSSMILLER, Defendant-Appellant.
No. 91-K-1211, Bankruptcy No. 89-B-13973-C, Adv. No. 90 D 391.
United States District Court, D. Colorado.
May 28, 1992.
*1001 James V. Pearson, Pearson, Milligan & Horowitz, Denver, Colo., Mark W. McGrory, Morrison & Hecker, Overland Park, Kan., for Resolution Trust Corp.
Pamela J. Strauss, F.D.I.C., Denver, Colo.
Mathew D. Skeen, Denver, Colo., for Richard Harmes Rossmiller.
Clifford Eley, Denver, Colo., Trustee.
MEMORANDUM DECISION ON APPEAL
KANE, Senior District Judge.
This case is before the court on Richard Rossmiller's ("debtor") appeal from an order of the bankruptcy court entering a default judgment against the debtor as a sanction for his failure to comply with the court's discovery orders. The debtor asserts that the bankruptcy court abused its discretion in entering the default order and in refusing to reconsider the default order in the face of certain alleged governmental misconduct. I review the bankruptcy court's decision only to determine whether it abused its discretion. Perceiving no abuse of discretion, I affirm the entry of default.
I. Facts and Procedural History
On October 13, 1989, the debtor filed a petition under chapter 7 of the bankruptcy code. He sought to discharge debts of approximately 25 million dollars. On May 14, 1990, the Resolution Trust Company ("RTC") and the Federal Deposit Insurance Corporation ("FDIC") (collectively "receivers") filed a complaint to determine dischargeability of debt. The complaint was lengthy and factually complicated. It alleged thirteen claims for relief under 11 U.S.C. § 727(a)(2)(A), § 727(a)(3), § 727(a)(4)(A), § 727(a)(4)(D), § 727(a)(5), and 11 U.S.C. § 523(a)(2)(B). The debtor filed an appropriate answer on July 18, 1990. His attorneys at the time were Skeen & Pearlman, P.C.
On September 20, 1990, the receivers served written interrogatories and requests for production of documents on the debtor. Before filing their adversary complaint, the receivers had received approximately four boxes of documents from the debtor directly, had conducted a three day deposition of respondent, sought and received numerous documents under rule 2003, and received from the debtor numerous signed waivers and releases directed to the platoon of lawyers and accountants who had previously assisted the debtor in his corporate and personal dealings. The receivers' discovery requests sought identification of certain personal and corporate bank accounts, *1002 information concerning the alleged fraudulent transfers to certain family trusts, and information concerning the formal corporate identities through which the debtor had operated before filing his petition in bankruptcy.
The debtor sought and received extensions of time within which to respond to the receivers' discovery request until December 7, 1990. By that date, new counsel, J. Scott Detamore, Esq., had substituted for Skeen and Pearlman, P.C. on behalf of the debtor. The debtor sought substitution of counsel because he thought that his former attorneys would be necessary witnesses in the adversary proceeding. On December 7, 1990, the debtor filed a motion for protective order, seeking to avoid any response to the interrogatories and requests for production. Germane to this appeal, the debtor claimed that many of the documents the receivers sought were no longer in his possession and control. Before he moved to California in 1989, the debtor arranged to store commercially approximately 600 boxes of corporate and personal records at Security Archives of Denver ("the archives"). Because the debtor was in California and because he could not afford the retrieval fees for the boxes, he claimed he could not produce all the documents the receivers sought nor give complete, thorough and unqualified answers to written or oral interrogatories.
On December 17, 1990, the debtor made some partial responses to some of the receivers' discovery requests. After the receivers moved to compel responses, the bankruptcy court held a hearing on January 15, 1991. After extensive argument, the bankruptcy court determined that the debtor's answers were incomplete and evasive. It overruled the bulk of the debtor's objections to the receivers' discovery requests. It went through each of the discovery requests in detail and entered specific orders as to each request for production and each interrogatory. The court specifically determined that the debtor had the obligation to determine whether and where certain responsive documents could be located. He ordered the debtor either to identify the specific box at the archives in which the relevant documents could be located or to state that no responsive documents existed. The bankruptcy court ordered the debtor to respond by February 14, 1991. He did not. The receivers then filed for default judgment on March 28, 1991, claiming that such a sanction was appropriate in light of the debtor's pattern of behavior with respect to interrogatories and requests for production of documents.
On March 29, 1991, the debtor's counsel, J. Scott Detamore, Esq., moved to withdraw. On April 17, 1991, the bankruptcy court granted the request to withdraw, but only after resolution of the pending motion for default. On April 15 and 24, 1991, the debtor submitted additional responses to the receivers' discovery requests. On May 20, 1991, the bankruptcy court heard argument on the motion for default. The debtor's counsel advised the court that the debtor had "done all that he could do."
THE COURT: How much longer should I give you?
MR. DETAMORE: at this point, the answer that Mr. Rossmiller would give is he's done all he can do.
THE COURT: Well, that's fine. If that's his answer, then he's going to be defaulted.
MR. DETAMORE: That is his answer, Your Honor.
THE COURT: All right.
MR. DETAMORE: He tells me that he's given everything that he has or has access to, and anything else that he hasn't given would be in those boxes.
The bankruptcy court again found that the debtor had not answered fully, completely and satisfactorily. It observed that the debtor had
chosen to use this Bankruptcy Court for his own purposes. He then moves to California and pleads an inability to respond to discovery.
The Court believes that that is nonsense. There is no evidence to support his inability to come back here to assist in obtaining the information. He has not made a good faith effort to answer the discovery. . . .
[T]he Court is satisfied that Mr. Rossmiller has engaged in bad faith in failing to *1003 obey the Court's order of January 15. The Court also notes that the that Mr. Rossmiller filed his voluntary petition under Chapter 7 on October 13, 1989. There were many inaccuracies and omissions in his schedules, and that the plaintiffs have attempted to piece in since the schedules were filed and since the Section 341 meeting . . . was held, and at every turn, Mr. Rossmiller has obstructed their attempt to obtain information to which they are clearly entitled.
III, Record on Appeal at 27-28. The court then denied discharge under § 727 and entered judgment under § 523 of the code in an aggregate principal amount of $26,397,858.84 plus interest.
The debtor moved for reconsideration on June 10, 1991. The debtor, through his original lawyers, Skeen & Pearlman, P.C., asserted that he had never authorized Mr. Detamore "to tell the court that he would not or could not comply with the discovery requests and Court order." He claimed that he had always planned and intended to comply fully with the discovery requests and that any failure to do so was Mr. Detamore's responsibility. He intimated that Mr. Detamore had been less than prepared and zealous at the May 20, 1991 hearing because he had not been paid and had been allowed to withdraw upon completion of the hearing on the motion for default. The debtor also sought an additional sixty days within which to answer the discovery requests.
Thereafter, on June 18, 1991, the debtor filed a motion to require plaintiffs to turn over documents, for sanctions and renewed his motion for a protective order. In it, the debtor alleged that the receivers had misled the bankruptcy court throughout their attempts to compel discovery. In particular, the debtor claimed he learned on June 14, 1991 that in August, 1990 the archives had destroyed many of the documents previously stored and that the receivers had actual knowledge of the archives' intent to destroy the documents and took no action to prevent their destruction. He also claimed that the FDIC and the FBI had removed, respectively, 16 and 196 boxes of records from the archives when destruction was threatened. Finally, debtor claimed that the receivers had been dishonest in their presentations to the court at the hearings in January and May, 1991 by their failure to disclose that the very documents they sought were either under their own control, in the hands of the F.B.I., or already destroyed by the archives.
The bankruptcy court heard argument on the motion for reconsideration on July 1, 1991. It heard an offer of proof from the debtor to the effect that the debtor had never authorized Mr. Detamore to refuse to produce the discovery requested. It also heard an offer of proof with respect to the removal and destruction of the documents formerly located at the archives. The court rejected the debtor's claim that Mr. Detamore was not authorized to speak for him. The court also concluded that the debtor had not established its burden of showing a manifest error of law or fact and thus refused to overturn the default judgment. This appeal followed.
II. Discussion
Federal R.Civ.P. 37(b)(2)(C) and 37(d) permit a court to enter a default judgment against a party who fails to obey an order to provide discovery or who fails to respond to interrogatories or requests for production. I review the imposition of sanctions for abuse of discretion under the totality of the circumstances.[1]M.E.N. Co. v. Control Fluidics, Inc., 834 F.2d 869, 872 (10th Cir.1987). A default judgment is a harsh sanction that will be imposed only when the failure to comply with discovery demands is the result of "`wilfulness, bad faith, or [some] fault of petitioner' rather than inability to comply." Id. (quoting Societe Internationale Pour Participations Industrielles Et Commerciales, S.A. v. Rogers, 357 U.S. 197, 212, 78 S.Ct. 1087, 1095, 2 L.Ed.2d 1255 (1958)). A "wilful failure" is an intentional failure rather than involuntary noncompliance. 834 F.2d at 872-73. "If the fault lies with the attorneys, *1004 that is where the impact of sanction should be lodged." Mulvaney v. Rivain Flying Serv., Inc. (In re Baker), 744 F.2d 1438, 1442 (10th Cir.1984) (en banc), cert. denied, 471 U.S. 1014, 105 S.Ct. 2016, 85 L.Ed.2d 299 (1985). However, a client is bound by his lawyer's representation "when the lawyer (or the client) makes a tactical decision and his noncompliance with the court's directive is not a product of inadvertence." Smith v. U.S., 834 F.2d 166, 171 (10th Cir.1987). A court must determine whether a course of conduct results from mere inattention by counsel or is a deliberate strategy. In making findings on the issue of fault, a court should consider the factors set forth in Ocelot Oil Corp. v. Sparrow Industries, 847 F.2d 1458, 1465 (10th Cir.1988). Those factors include (1) the degree of actual prejudice to other party; (2) the amount of interference with the judicial process; and (3) the culpability of the litigant. Finally, the cases teach that a court should not enter a default judgment without first considering if lesser sanctions would be effective. In re Rains, 946 F.2d 731, 733 (10th Cir.1991); Ocelot, 847 F.2d at 1465.
A. Sanctions for Discovery Abuse
The debtor argues that the bankruptcy court failed to make sufficient findings concerning wilfulness, failed to distinguish between his lawyer's culpability and his own, and failed to consider whether lesser sanctions would have been effective. I disagree. The record is replete with evidence of the debtor's bad faith. The debtor originally received the discovery requests in September, 1990. He sought extensions to respond until December, then filed for a protective order on the grounds that he had essentially provided the material sought by dint of his voluntary surrender of documents, his deposition, and by waiving any professional privileges with respect to his former lawyers and accountants. After an extensive question by question review of the interrogatories and requests for production, the bankruptcy court ordered the debtor to answer the discovery requests within thirty days. He specifically ordered the debtor to provide the documents under the custody and control of the archives.
Again, the debtor did not. Instead, he again tried to argue that the discovery requests were overbroad, unduly burdensome, and impossible to fulfill since many of the documents were located in the archives. The debtor even filed an affidavit to that effect in opposition to the motion for default judgment. In point of fact, the debtor never produced the ante-nuptial agreement the receivers requested, never produced expense reports for the year before bankruptcy, and never provided certain insurance policies the receivers sought. Furthermore, his other answers were both unbelievable and disingenuous. He claimed to be unaware of any documents that would reflect his compensation and interest in six business entities he owned and operated in the year before bankruptcy. He initially failed to identify in his schedules any business or personal bank account information. In his answers he identified some thirteen accounts, but again failed to provide the account number for the personal account listed. He left out critical detail about the transfer of automobiles to his wife. He provided less than full disclosure about certain tap fees which had been held in trust for him. He repeatedly referred the receivers to the archives, even in the face of the bankruptcy court's specific order to the contrary. I need not go on. There was ample evidence to support the bankruptcy court's conclusion that the debtor had wilfully refused to comply with its orders. His conduct is a study in arrogance.
I also find that the court properly distinguished between attorney and client in imposing sanctions. First, the court specifically rejected, as incredible, the debtor's offer of proof that Mr. Detamore was not authorized to speak for the debtor as he did during the May hearing. In this regard, the court expressed its willingness to hear and consider testimony from Mr. Detamore to the effect that he made unauthorized statements on his client's behalf. The debtor chose never to produce Mr. Detamore for such testimony. Second, the court specifically noted in the May 20 hearing that the debtor "had not made a good faith effort to answer the discovery, and *1005 that I am not suggesting that you [the lawyer] are in any way responsible." Further, the court specifically referred to both the Supreme Court's decision in National Hockey League v. Metropolitan Hockey Corp., Inc., 427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976), and to this circuit's decision in Bud Brooks Trucking v. Bill Hodges Trucking, 909 F.2d 1437 (10th Cir. 1990). While the court used some ambiguous language in apportioning relative responsibility, it is clear to me that he distinguished between lawyer and client, and properly held the debtor, not the debtor's lawyer, responsible for the course and plan of the discovery abuse.
In the context of this case, there was no reason to make extensive findings about the effectiveness of sanctions other than dismissal. The debtor's counsel's colloquy with the court on May 20, 1991 convinces me that the debtor had no intention of complying with the court's orders, even if given additional time within which to respond. It was not until default entered that the debtor, himself, even bothered to make an appearance in the bankruptcy court. Under such circumstances, no specific findings are essential.
B. Reconsideration
Under Fed.R.Civ.P. 59, a trial court may reconsider a judgment previously entered upon a showing that a manifest error of law or fact caused the entry of the earlier judgment. I review the bankruptcy court's decision on the abuse of discretion standard. The debtor argues that he could not have complied with the bankruptcy court's order of January, 15, 1991, because the archives had destroyed all remaining documents as early as August, 1990. He also claims that the receivers were dishonest in their arguments to the court in January because they did not disclose that they knew the documents had been destroyed or removed from the archives by the F.D.I.C. and the F.B.I. The debtor thus argues that the default judgment should be reversed because the bankruptcy court premised it on a faulty assumption of fact, namely that the records necessary for the debtor to answer the discovery requests were in the archives in Denver. The receivers acknowledged that they were aware that some of the documents had been removed from the archives but affirmatively stated that they believed, at the time of the January 15, 1991 argument that the bulk of the documents were still at the archives. The bankruptcy court found the debtor's argument unpersuasive as do I.
The bankruptcy court ruled that the debtor had an obligation both to produce the documents requested and to answer the interrogatories asked. The bankruptcy court did not rule conditionally. It did not rule that the debtor should produce the documents and answer the interrogatories only if the documents were in the archives. The debtor's obligation after the January 15, 1991 ruling was to make a good faith effort to answer the interrogatories and produce the requested documents. The debtor made desultory efforts at best. The bankruptcy court imposed sanctions to punish this debtor and to prevent similar discovery abuse from happening in any other case. The bankruptcy court did not abuse its discretion.
The judgment of the bankruptcy court is affirmed.
NOTES
[1] I am also mindful that a party's failure to produce information to which it has access may justify a finding that the information would be contrary to the recalcitrant party's position. Mammouth Oil Co. v. United States, 275 U.S. 13, 51, 48 S.Ct. 1, 9, 72 L.Ed. 137 (1927). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549225/ | 140 B.R. 812 (1992)
In re T.S. NOTE COMPANY TFC International, Twenco Financial, Debtors.
Bankruptcy Nos. 88-40714-11 to 88-40716-11.
United States Bankruptcy Court, D. Kansas.
April 8, 1992.
Paul M. Hoffman, Smith, Gill, Fisher & Butts, Kansas City, Mo., for creditors.
Don E. Bucher, Moore, Bucher & Morrison, Kansas City, Mo., for debtors.
John Foulston, Wichita, Kan., U.S. Trustee.
MEMORANDUM OF DECISION
JAMES A. PUSATERI, Bankruptcy Judge.
These cases are before the Court on a motion to convert them to ones under chapter 7. The motion was filed by three creditors, Jack Webb, Paul Gitterman and Jerry Lapid, through counsel Paul Hoffman of Smith, Gill, Fisher & Butts. The debtors, through counsel Don E. Bucher of Moore, Bucher & Morrison, oppose conversion but *813 suggest that dismissal might be appropriate.
FINDINGS OF FACT
These cases were initiated by voluntary filings on May 27, 1988. The cases culminated in the confirmation of plans of reorganization on July 6, 1989. As relevant here, the plans provided for the payment of unsecured claims on a quarterly basis over seven years at 9% interest. The debtors transferred property as required by the plans and began making payments to the unsecured creditors in accordance with the plans. The debtors are now in default of their proposed plan payments and were at the date the creditors' motion was filed. The debtors are not likely to be able to complete their plans as confirmed.
DISCUSSION AND CONCLUSIONS OF LAW
After the motion was filed, the parties agreed to submit stipulations and briefs in lieu of a live appearance before the Court. The creditors sought conversion, but the debtors sought dismissal instead. Neither side addressed the effect of conversion or dismissal on a confirmed and substantially consummated chapter 11 plan. Since at least one of the attorneys was aware of a prior ruling of the Court on this issue, the Court requested supplemental memoranda addressing the issue. Both sides have submitted additional verbiage and the Court is prepared to rule.
The creditors seek conversion pursuant to 11 U.S.C.A. § 1112(b)(7), the inability of the debtors to effectuate substantial consummation of their confirmed plans, and (8), the debtors' material default with respect to their confirmed plans.
Substantial consummation is a defined term. 11 U.S.C.A. § 1101. In this case, the stipulations and attachments to the motion and memoranda of the creditors and the two year time lag between confirmation and the creditors' motion allow the court to determine that substantial consummation has occurred in these cases, see In re Burlingame, 123 B.R. 409, 411-12 (Bankr.N.D.Okla.1991) (substantial consummation found so no modification of plan allowed under § 1127); In re Fansal Shoe Corp., 119 B.R. 28, 30-31 (Bankr. S.D.N.Y.1990) (substantial consummation found so no modification of plan allowed under § 1127); In re Bedford Springs Hotel, Inc., 99 B.R. 302, 303-05 (Bankr. W.D.Pa.1989) (in essence, granting declaratory judgment that substantial consummation had occurred); thus, conversion pursuant to § 1112(b)(7) would be inappropriate.
However, the debtors have materially defaulted with respect to their confirmed plans, and thus, conversion pursuant to § 1112(b)(8) is appropriate. Dismissal as requested by the debtors may well be inappropriate as it would cause the estate to lose the ability to utilize a trustee's avoiding powers in possible proceedings brought under §§ 544, 545, 547 or 553 of the Code. See 11 U.S.C.A. §§ 348(a) and 546(a).
Though conversion is appropriate, an explanation of what is being converted seems advisable because the pleadings indicate that the creditors may expect the confirmed debtors' assets to be available to the chapter 7 trustee and the debtors assume that the receivables and other assets of the debtors will be controlled by the trustee upon conversion. In the case of In re Helms, Case No. 86-41222-7, Adv. No. 90-7084, Order Dismissing Various Claims (February 5, 1991), this Court ruled that conversion after substantial consummation of a confirmed chapter 11 plan converts only the preconfirmation debtor-in-possession and the case that was before the court, not the post-confirmation debtor which by legal fiction is a separate entity, much as was the pre-filing entity. Thus, what is being converted here are the cases and the assets, if any, whether tangible or intangible, remaining in the debtors' pre-confirmation estates. See In re H.R.P. Auto Center, Inc., 130 B.R. 247, 256-57 (Bankr. N.D.Ohio 1991) (reaching similar conclusion). In these cases, it would seem only non-administered assets such as possible causes of action may remain. If the post-confirmation entities and their assets are to be administered under chapter 7, new voluntary *814 or involuntary filings must be made.
The following discussion may shed more light on the Court's reasoning in this matter. When the debtor files a bankruptcy petition, § 301, an estate is created, § 541. When the plan is confirmed under § 1129, that property (to the extent not otherwise provided) revests in the debtor. All creditors and the debtor, among others, are bound by the terms of the plan. A non-liquidating debtor receives a discharge. § 1141. After 180 days from the entry of the order of confirmation, neither the plan nor the discharge may be revoked. § 1144. Should the plan and discharge be revoked, entities, as defined by § 101(15), acquiring rights in good faith reliance on the confirmation order are to be protected. § 1144.
While the Court kept jurisdiction to determine matters affecting the estate such as claim adjudication, questions concerning the plan and its language, pending litigation, administrative matters, and so forth, it did not retain jurisdiction ad infinitum of the post-discharge, former chapter 11 debtors any more than it would keep jurisdiction over any other post-discharge debtor under chapters 7, 12 or 13. See In re Jartran, 886 F.2d 859, 866-70 (7th Cir. 1989) (so long as acting in good faith, post-chapter-11-confirmation debtor could file subsequent chapter 11); In re Northampton Corp., 37 B.R. 110 (Bankr.E.D.Pa.1984) and 39 B.R. 955 (Bankr.E.D.Pa.1984), aff'd 59 B.R. 963 (E.D.Pa.1984) (in later chapter 11, post-confirmation debtor may not cure defaults under substantially consummated chapter 11 plan since that would be modification of plan not permitted by § 1127). It is not uncommon for a plan to continue for 20 years or more; obviously, the Court should not retain jurisdiction of cases for that long. In addition, if conversion of the post-confirmation debtor and its assets were possible, there would be a gap in the trustee's strong-arm powers since, as provided by § 348, conversion does not effect a change in the date of the filing of the petition, the commencement of the case, or the order for relief. Thus, during the period the entities were operating post-confirmation, all transfers which the trustee might otherwise avoid would be insulated therefrom since they would have occurred post-petition and not pre-petition. Section 549 would not apply because the post-confirmation debtor is vested with the estate's property and no longer needs court or statutory authority to conduct its business.
For these reasons, these cases will be converted to chapter 7, but on the described basis rather than the terms apparently contemplated by the parties.
The foregoing constitutes Findings of Fact and Conclusions of Law under Rule 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52(a) of the Federal Rules of Civil Procedure. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549002/ | 992 A.2d 263 (2010)
George KAROUSOS et al.
v.
Jonathan PARDEE et al.
Nos. 2008-174-Appeal, 2008-188-Appeal.
Supreme Court of Rhode Island.
April 23, 2010.
*264 Joseph R. Palumbo, Esq., Middletown, for Plaintiff.
Gerald J. Petros, Esq., Providence, for Defendant.
Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, and ROBINSON, JJ.
OPINION
Justice FLAHERTY, for the Court.
A Superior Court judgment arising from the filing of an abuse-of-process claim and the affirmative defense provided by the anti-SLAPP (strategic litigation against public participation) statute, G.L. 1956 chapter 33 of title 9, has precipitated appeals both from the plaintiffs and the defendants. The Superior Court granted summary judgment in favor of Jonathan Pardee and the remaining defendants[1] (defendants or Pardee)[2] holding that they were immune from civil liability on an abuse-of-process action brought against *265 them because their actions were not subjectively baseless and, therefore, they were cloaked with immunity by the anti-SLAPP statute. In accordance with the statute, the Superior Court awarded Pardee what it deemed to be reasonable attorneys' fees and costs. George and Anna Karousos (collectively Karousos) appeal from the entry of summary judgment and the award of costs and attorneys' fees to Pardee.[3] Pardee cross-appeals the amount of the attorneys' fees awarded to his counsel. We carefully have reviewed the record and considered the arguments raised by the parties. After doing so, we affirm the judgment of the Superior Court.
I
Facts and Travel
Bellevue Avenue in Newport traverses a genteel section of that city. It is the address of the so-called "mansions" that served as summer homes for those who were this country's financial elite during the gilded age. Bellevue Avenue has become one of the city's showpieces, and is a major tourist attraction. The central dispute in this case is about how a building, known as Fairlawn, at 518 Bellevue Avenue, may be used. In the 1950s, 1960s, and 1970s, Fairlawn was used as a preparatory school and, for part of that time, as Vernon Court Junior College. In 1972, Fairlawn's school use ceased and the building was used exclusively as a residence. The zoning ordinance of the City of Newport permits the use of the building for residential purposes, but considers its use for educational purposes to be nonconforming.
In 1991, Karousos leased the property, with an option to purchase, with the expectation that he could use the building as a culinary school. Karousos based his expectation on a 1989 letter from Newport Zoning Enforcement Officer Guy Weston (Weston) to Fairlawn's then owners, George and Rosalyn Rosner. In that correspondence, Weston indicated that the use of Fairlawn as a school had not been abandoned, even though it had not been used as such since 1972. In Weston's opinion, because the school use was never abandoned, the use of the property as a school remained a legal nonconforming use.
As soon as they leased Fairlawn, Karousos began making substantial improvements to the property, and at one point approached Salve Regina University about a possible affiliation with the school. In 1993, Karousos also began to advertise his intention to open an International Institute for Culinary Arts at Fairlawn. However, the City of Newport objected to the use of Fairlawn as a culinary school, and it initiated a zoning enforcement action against Karousos. In September 1994, Weston sent Karousos a letter, in which he detailed the actions that were necessary before the City of Newport would approve of the use of Fairlawn as a culinary school, including affiliating with Salve Regina.[4] After Karousos complied, Weston further corresponded with Karousos, informing him that the City of Newport now approved of the use of Fairlawn as a culinary school; the enforcement action was dismissed, as well. Subsequently, Karousos exercised his option to purchase Fairlawn.
*266 In December 1994, Jonathan Pardee purchased a lot at the corner of Bellevue Avenue and Marine Avenue, adjacent to Fairlawn. In early 1996, Roger King, a former owner of Fairlawn, informed Pardee that Karousos intended to operate a culinary school there. In March 1996, Pardee, through his attorney Alexander Walsh, inquired of Weston about whether Fairlawn's use as a culinary school was a permissible use under the city's zoning ordinance. In correspondence dated March 19, 1996, Weston wrote that such a use was permitted, and he reiterated his opinion from his 1989 letter and attached a copy of it. On March 28, 1996, Pardee appealed to the Newport Zoning Board (the board), asking that it determine that the use of Fairlawn as a culinary school was not permissible under the zoning ordinance.
The board held multiple hearings between June 1996 and January 1997. After first ruling that Pardee's appeal was timely, the board decided that the school use had been abandoned and that Karousos's use of Fairlawn as a culinary school was an illegal nonconforming use.[5] Karousos appealed the board's decision to the Superior Court. A Superior Court justice reversed the board, ruling that the board had erred when it determined that Pardee's appeal was timely. The hearing justice concluded that the only appealable action was Weston's 1989 letter, and that the time to appeal from that letter had long passed.
On December 12, 1996, while the hearings before the board were still ongoing, Karousos filed an abuse-of-process complaint in the Superior Court against Pardee and eleven other defendants. In his complaint, Karousos alleged that defendants used the March 19, 1996 letter from Weston as a pretext to "appeal" the 1989 and 1994 letters detailing Weston's opinion that the use of Fairlawn as a school was permissible. The defendants, the complaint alleged, long since had waived any right to object to the use of Fairlawn as a school, and their appeal to the board "constitutes a gross misuse of the administration appellate process" for a "wrongful purpose." Pardee and four other defendants answered the complaint; they asserted an affirmative defense that their actions in seeking review of the 1996 letter from Weston to Walsh (Walsh was acting on Pardee's behalf) entitled them to immunity from civil liability, based upon § 9-33-2, the anti-SLAPP statute.
In the spring of 1997, Pardee, along with the same four codefendants, moved for summary judgment, arguing that the anti-SLAPP statute's grant of immunity applied to them because their seeking review of Weston's 1996 letter was not objectively baseless. The motion justice denied the motion, ruling that because Pardee's appeal was deemed untimely by the Superior Court, a question of fact remained about whether Pardee's appeal was objectively baseless. Pardee petitioned this Court for a writ of certiorari, which we denied.
After we denied certiorari, the parties conducted discovery and the case languished for six more years. Jonathan Pardee and Alexander Walsh were deposed, and, at least based in part on their deposition testimony, Pardee filed a renewed motion for summary judgment in March 2003.[6] He again argued that his appeal to the board entitled him to immunity under *267 the anti-SLAPP statute because his actions were neither objectively nor subjectively baseless. In the motion, Pardee's primary arguments were that (1) his appeal was not objectively baseless because he was successful before the board and (2) his appeal was not subjectively baseless because he pressed the appeal in an effort to prevent Fairlawn's use as a culinary school, with no ulterior motive. Karousos opposed Pardee's motion for summary judgment. Karousos argued that Pardee's appeal to the board was objectively baseless because it was untimely, and the gross untimeliness of the appeal demonstrated that Pardee tried to use the administrative appeal process for a wrongful purpose in an effort to cause unjust delays to Karousos.
This time, a different hearing justice granted summary judgment to Pardee. In a written decision, the motion justice determined that Pardee's appeal was objectively baseless because, in her opinion, Pardee had no right to appeal any of the letters from Weston. The motion justice ruled that zoning enforcement officers derive their authority to provide advisory information from G.L. 1956 § 45-24-54, but that such information is only for "guidance or clarification." The motion justice reasoned that because such a letter is not binding, it does not aggrieve anyone, and therefore it cannot be appealed. Consequently, she determined that there was no enforceable right to appeal Weston's letter to the board; and the motion justice ruled that Pardee's attempt to be objectively baseless.
Nonetheless, the motion justice granted Pardee's summary-judgment motion because she concluded that Pardee's appeal was not subjectively baseless. She reasoned that the stated basis for the appeal, namely, to halt the use of Fairlawn as a culinary school, was the only motive behind Pardee's actions. Finally, the motion justice further found that even if Pardee was not entitled to immunity under the anti-SLAPP statute, the abuse-of-process claim would be unsuccessful because Karousos had failed to offer any ulterior motives for Pardee pursuing the zoning appeal, and thus he could not satisfy the elements of the claim.[7]
In 2007, the parties appeared before yet another Superior Court justice to determine whether Pardee was entitled to costs and reasonable attorneys' fees as provided for in the anti-SLAPP statute. The motion justice determined that the award of costs and attorneys' fees is mandatory with respect to a defendant who prevails at trial or by motion in successfully asserting immunity under the statute. But, she also ruled that the reasonableness of the attorneys' fees and the costs were within the court's equitable discretion. The motion justice ruled that Pardee was entitled only to those costs and attorneys' fees related to their successful motions, but not for the *268 unsuccessful summary-judgment motion in 1997 or the petition for a writ of certiorari to this Court. Karousos timely appealed the grant of summary judgment and the award of costs and attorneys' fees. Subsequently, Pardee timely filed a cross-appeal on the amount of attorneys' fees and costs.
II
Issues on Appeal
On appeal, Karousos raises two arguments. First, he argues that whether defendants' actions were subjectively baseless is a matter for a fact-finder and that the motion justice erred by determining that issue as a matter of law. Second, Karousos seeks to have the award of attorneys' fees vacated if the Court reverses the motion justice's ruling that defendants' actions were not subjectively baseless. In the cross-appeal, Pardee and the remaining defendants argue that they are entitled to the attorneys' fees and costs that they incurred, including those relating to this appeal, as well as those incurred in the unsuccessful summary judgment motion and petition for a writ of certiorari, because these unsuccessful motions were, nonetheless, reasonable.
III
Analysis
A
Summary Judgment and the Anti-SLAPP Statute
1
Standard of Review
This Court reviews the grant of a motion for summary judgment de novo. Berardis v. Louangxay, 969 A.2d 1288, 1291 (R.I.2009). We apply the same standard as the motion justice: we view the evidence in the light most favorable to the nonmoving party, and if we conclude that no genuine issue of material fact exists, then the moving party is entitled to judgment as a matter of law, and we affirm the grant of summary judgment. Id.
2
The "Sham" Exception
"The anti-SLAPP statute was enacted to prevent vexatious lawsuits against citizens who exercise their First Amendment rights of free speech and legitimate petitioning by granting those activities conditional immunity from punitive civil claims." Alves v. Hometown Newspapers, Inc., 857 A.2d 743, 752 (R.I.2004) (citing Hometown Properties, Inc. v. Fleming, 680 A.2d 56, 61 (R.I.1996)). Rhode Island's anti-SLAPP statute derived from several United States Supreme Court cases: Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961) (Noerr), and United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), and Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993).
In Noerr, 365 U.S. at 129, 81 S.Ct. 523, the United States Supreme Court considered whether a railroad association's unfavorable publicity campaign against the trucking business constituted an antitrust violation. The Noerr Court held that the actions did not constitute an antitrust violation, but it also noted that "[t]here may be situations in which a publicity campaign, ostensibly directed toward influencing governmental action, is a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor * * *." Id. at 144, 81 S.Ct. 523. Four years later, in Pennington, 381 U.S. at 670, 85 S.Ct. 1585, the Court interpreted *269 Noerr to "shield [] from [antitrust violations] a concerted effort to influence public officials regardless of intent or purpose."
In Professional Real Estate Investors, Inc., 508 U.S. at 60, 61, 113 S.Ct. 1920, the Court established a "two-part definition" of actions constituting what the Noerr Court referred to as a "mere sham." Noerr, 365 U.S. at 144, 81 S.Ct. 523. "First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits." Professional Real Estate Investors, Inc., 508 U.S. at 60, 113 S.Ct. 1920. Second, the court must inquire whether the lawsuit is subjectively an attempt to interfere directly with an adversary's business through the use of the governmental process rather than an effort to use the outcome of the governmental process for its legitimate ends. Id. at 60-61, 113 S.Ct. 1920. If the definition's "two-part definition" is satisfied, the challenged conduct is deemed a sham, and is not entitled to immunity. Id. at 61, 113 S.Ct. 1920.
By amending § 9-33-2 in 1995 (P.L. 1995, ch. 386, § 1), the Rhode Island General Assembly essentially adopted the two-part definition of sham participation outlined in Professional Real Estate Investors, but broadened its application to contexts beyond the field of antitrust. See Hometown Properties, Inc., 680 A.2d at 60-62. Section 9-33-2(a) provides that "[t]he petition or free speech constitutes a sham only if it is not genuinely aimed at procuring favorable government action, result, or outcome, regardless of ultimate motive or purpose." The statute specifies that a petition or free speech constitutes a sham only if it is both objectively and subjectively baseless, as both of those terms are defined in the statute. Section 9-33-2(a)(1)(2). We will consider separately whether Pardee's appeal was objectively or subjectively baseless.
a
Objectively Baseless
Section 9-33-2(a)(1) defines objectively baseless as meaning that "no reasonable person exercising the right of speech or petition could realistically expect success in procuring the government action, result, or outcome * * *." It is worth noting that this Court has had several occasions to address this definition, and we never have held that a defendant's actions were objectively baseless. In Cove Road Development v. Western Cranston Industrial Park Associates, 674 A.2d 1234, 1239 (R.I.1996), we held that an appeal by landowners and industrial park members of a zoning amendment that was beneficial to a residential real estate developer that could have negatively impacted the industrial park operations "was not objectively baseless, in that an objective litigant could reasonably have expected a successful outcome." In Hometown Properties, Inc., 680 A.2d at 58-59, 64, we held that letters and statements made to the Department of Environmental Management and other state and federal agencies opposed to a proposed landfill were not objectively baseless because, in part, they were grounded in scientific reports and studies.
In Global Waste Recycling, Inc. v. Mallette, 762 A.2d 1208, 1210-13 (R.I.2000), we affirmed the grant of conditional immunity under the anti-SLAPP statute to neighbors who made statements to a newspaper that were critical of the handling of flammable materials at a waste recycling plant after a fire broke out at the plant, because the statements were based on personal knowledge and publicly available information, and, therefore, were not objectively baseless. Most recently in Alves, 857 A.2d at 754, this Court determined that letters *270 to the editor of a newspaper that addressed an issue of public concern that was currently under consideration by the local government were not objectively baseless because they were a reasonable attempt to petition the government to address the defendant's concerns.
Indeed, only once, in Pound Hill Corp. v. Perl, 668 A.2d 1260, 1264 (R.I.1996) (Pound Hill), has this Court determined that there were genuine issues of fact that required the denial of summary judgment and remand to the Superior Court for trial on the issue of whether a defendant's petitioning activities constituted a sham. In Pound Hill, a landowner protested a town council's vote to rezone a parcel of land even though the council vote clearly met the ordinances requirement of a three-fifths majority to rezone land. Id. at 1262. Additionally, the landowner in that case filed an action in the Superior Court to enjoin the town council from taking further action after the time for filing an appeal had expired, and also sought a further administrative appeal that lacked substantive merits, and an appeal to the Superior Court that was untimely. Id. at 1262, 1264. We vacated a grant of summary judgment on the ground that genuine issues of fact remained about whether the landowner's actions "were objectively baseless and utilized the process itself rather than the intended outcome in order to hinder and delay plaintiff." Id. at 1264, 1264-65.
Here, the motion justice determined that Pardee's actions were objectively baseless because she ruled that Pardee had no right to appeal Weston's letters. She reasoned that the letters were purely informational and nonbinding, because such letters were statutorily restricted to be for "guidance or clarification" only. Reasoning that Pardee had not been aggrieved by a decision, and that only an aggrieved party can appeal to the board, the motion justice ruled that Pardee's attempt to appeal lacked a legal basis and was thus objectively baseless.
Before this Court, Pardee argues that even if there was no clear right to appeal Weston's letters under the zoning ordinance, his appeal was not objectively baseless because the board, as well as the motion justice who heard the 1997 motion for summary judgment, agreed that Pardee had the right to appeal from Weston's letter. In other words, he asks how his appeal can be categorized as objectively baseless if the board granted it and the motion justice overruled the Board only because she said the appeal was untimely. In his appeal, Karousos embraces the 2003 motion justice's rationale that Pardee's actions were objectively baseless because Pardee had no statutory right to appeal from any of Weston's letters.
Because we agree with the motion justice's ruling that Pardee's appeal to the zoning board of review did not meet the second prong of the sham exception in that it was not subjectively baseless, we need not, and do not reach the issue of whether his efforts were objectively baseless.
b
Subjectively Baseless
Section 9-33-2(a)(2) defines a subjectively baseless activity as that which "is actually an attempt to use the governmental process itself for its own direct effects." However, "[u]se of outcome or result of the governmental process shall not constitute use of the governmental process itself for its own direct effects." Id. In Pound Hill, 668 A.2d at 1264, this Court addressed the elements of "sham" litigation in a decision that predated the enactment of § 9-33-2's definition of subjectively baseless. The Pound Hill Court suggested that courts must inquire into *271 whether the litigants "utilized the process itself rather than the intended outcome in order to hinder and delay plaintiff." Pound Hill, 668 A.2d at 1264.
The 2003 motion justice found that:
"[The Karousoses] do not allege that Pardee's appeal was meant to harass, blackmail, or otherwise serve a purpose other than to contest what the parties appear to have taken to be a binding determination of the Zoning Officer. Rather, their suit is based solely upon the existence of the 1989 letter and Pardee's alleged desire to appeal that determination. However, where, as here, a potential litigant's motivation in seeking review of a governmental action, albeit non-binding governmental action, relates solely to the substance of that action, the existence of a previous action to the same effect does not render the appeal any less an attempt to use the outcome or result of the process, rather than the direct effects."
The motion justice determined that in his objection to the motion for summary judgment Karousos was unable to offer any facts that would suggest that Pardee's appeal was motivated by anything other than outcome of the process. She therefore found that Pardee's appeal was not subjectively baseless and ruled that summary judgment must be granted. We agree with the motion justice's conclusions, and affirm the grant of summary judgment.
A "party opposing a summary judgment motion may not simply rest on the allegations and denials in his or her pleadings, but must prove by competent evidence the existence of a disputed material issue of fact." Brito v. Capone, 819 A.2d 663, 666 (R.I.2003) (citing Accent Store Design, Inc. v. Marathon House, Inc., 674 A.2d 1223, 1225 (R.I.1996)). "Therefore, we will affirm the grant of summary judgment `against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case * * *.'" Berardis, 969 A.2d at 1291 (quoting Lavoie v. North East Knitting, Inc., 918 A.2d 225, 228 (R.I. 2007)).
In his 2003 motion for summary judgment, Pardee submitted the transcripts from two depositions, his own and that of Alexander Walsh, who was Pardee's attorney and an original defendant in this action.[8] In those depositions, both Pardee and Walsh testified that Weston's 1996 letter was appealed because Pardee wanted to prevent Fairlawn's use as a culinary school. In Pardee's words, "I didn't want any commercial activity next to my planned home." Neither Pardee nor Walsh testified to any other motive for pressing the appeal. Once Pardee came forward with this evidence, the burden shifted to Karousos to offer some evidence to establish that Pardee sought the appeal for its direct effects and not for its outcome. See § 9-33-2(a)(2); Brito, 819 A.2d at 666.
In his opposition to Pardee's 2003 motion for summary judgment, Karousos merely repeated his allegations that, given the long delay between Weston's 1989 letter and his 1996 letter, Pardee could have been motivated only by an interest in causing further burdens and delays to the opening of Karousos's culinary school. Karousos's mere allegations were insufficient to rebut the statements under oath offered by Pardee, and therefore Karousos failed to meet his burden of showing the existence of a disputed material issue of *272 fact. See Casco Indemnity Co. v. Gonsalves, 839 A.2d 546, 548 (R.I.2004) ("the party opposing the motion for summary judgment, carries the burden of proving by competent evidence the existence of a disputed material issue of fact and cannot rest on allegations or denials in the pleadings or on conclusions or legal opinions"). As a result, Pardee's petitioning activity was not a sham and warrants immunity under the anti-SLAPP statute. Consequently, Pardee was entitled to summary judgment in his favor because his appeal to the board was not subjectively baseless.
B
Attorneys' Fees and Costs
Section 9-33-2(d) provides that "[i]f the court grants the motion asserting the immunity established by this section, * * * the court shall award the prevailing party costs and reasonable attorney's fees, including those incurred for the motion and any related discovery matters." In Alves, 857 A.2d at 757, we said that when a party "prevail[s] under the anti-SLAPP statute * * * an award of costs and reasonable attorneys' fees [is] mandatory."
The statute does not provide, however, what costs are mandatory or a specific measure of reasonable attorneys' fees. We said in Alves that we would not disturb the motion justice's award of attorneys' fees and costs. Alves, 857 A.2d at 757. This deference to the lower court justice's determination of what constitutes reasonable attorneys' fees is consistent with our case law. See Schroff, Inc. v. Taylor-Peterson, 732 A.2d 719, 721 (R.I.1999) ("the amount awarded in counsel fees is within the sound discretion of the trial judge in light of the circumstances of each case") (citing Annunziata v. ITT Royal Electric Co., 479 A.2d 743, 744 (R.I.1984)).
In Alves, 857 A.2d at 747, 757, the motion justice considered affidavits and exhibits concerning the costs and fees incurred in preparing the defendant's response to a complaint for one slander count, two libel counts, and two false-light counts, and adjusted the total award to what she deemed reasonable. The motion justice granted to the defendant, who benefited from conditional immunity, all his fees for defending the slander count but half his fees for defending the libel and false-light claims. Id. at 757.
In his 2007 motion for attorneys' fees and costs, Pardee's counsel submitted affidavits and exhibits detailing the attorneys' fees incurred. The 2007 motion justice agreed with Pardee that costs and reasonable attorneys' fees were mandatory under the anti-SLAPP statute but awarded an amount for those fees based upon what she deemed to be equitable. After reviewing Pardee's request, the motion justice determined that Pardee should receive fees only for the successful assertion of anti-SLAPP immunity, and she denied awarding the costs and attorneys' fees that were related to his unsuccessful 1997 motion for summary judgment and the petition for a writ of certiorari that was denied.
In his appeal of that ruling, Pardee argues that the motion justice "committed legal error" when she limited his award of attorneys' fees and costs only to the successful motions. Pardee emphasizes that the statute's only limitation on the amount of the award of attorneys' fees is whether the fees were reasonable; whether the litigant was successful in every tactical move is not a consideration. In particular, Pardee argues that the 1997 summary judgment motion and subsequent petition for a writ of certiorari were reasonable efforts to comply with the statute's purpose in granting conditional immunity at the onset *273 of litigation, even if those particular efforts did not bear fruit. See § 9-33-1 (acknowledging the rise of lawsuits aimed at suppressing legitimate exercises of constitutional rights and declaring that resolutions of such lawsuits "should be resolved quickly with minimum cost to citizens who have participated in matters of public concern"). Pardee contends that the 1997 summary judgment motion and petition for a writ of certiorari both were reasonable because the 1997 motion justice thought the motion had "considerable merit" and "she encouraged the petition" for a writ of certiorari. Additionally, Pardee argues that he is also entitled to attorneys' fees and costs for this appeal.
After considering the record and the motion justice's decision, we hold that the motion justice did not abuse her discretion in finding that Pardee's reasonable attorneys' fees should not include the fees incurred in his unsuccessful 1997 summary judgment motion and his unsuccessful petition for a writ of certiorari to this Court. The motion justice was correct when she concluded that the anti-SLAPP statute's attorneys' fees and costs provision was mandatory, but that the amount of the fees and costs were subject to her determination of what was reasonable. See § 9-33-2(d); Alves, 857 A.2d at 757; Schroff, Inc., 732 A.2d at 721. Here, the motion justice appropriately considered the affidavits and exhibits submitted by Pardee's counsel in determining the reasonableness of the award of attorneys' fees and costs. We find no fault in her reasoning or her conclusion, and affirm her judgment.
Finally, Pardee asks this Court for attorneys' fees and costs in connection with this appeal. We agree that the anti-SLAPP statute entitles him to reasonable attorneys' fees for the defense of the judgment. We remand this case to the Superior Court for a determination of what those fees and costs should be.
IV
Conclusion
The judgment of the Superior Court is affirmed. The record in this case is remanded to the Superior Court for further proceedings not inconsistent with this opinion.
ROBINSON, J., concurring in part and dissenting in part.
I readily concur in the Court's holding to the effect that the defendants should not be awarded attorneys' fees in connection with either their unsuccessful first motion for summary judgment or their unsuccessful petition for certiorari; in my view, the anti-SLAPP statute should not be construed as authorizing the payment of attorneys' fees for such unsuccessful quests.
However, I respectfully part company from the majority with respect to its sustaining the Superior Court's later grant of summary judgment in favor of defendants under the anti-SLAPP statute and its consequent award of attorneys' fees. As I understand Rule 56 of the Superior Court Rules of Civil Procedure and the copious body of jurisprudence relative to the summary judgment mechanism, I do not believe that the hearing justice should have granted summary judgment on the basis of her ruling that defendants' actions were "not subjectively baseless." I am firmly convinced that summary judgment is not an appropriate mechanism for resolving controversies that turn on an assessment of the subjective intent of a partyand certainly the issue of subjective baselessness vel non involves a determination of subjective intent.[9]
*274 It is my view that the determination of whether defendants' actions were subjectively baseless (vel non) should have been grist for the mill of a fact-finder. In my judgment, such a determination is simply not susceptible to summary disposition. It is noteworthy that, in his supplemental memorandum in opposition to defendants' successful 2003 motion for summary judgment, Karousos explicitly argued that "[t]he gross untimeliness alone of the defendants' concerted efforts to burden and delay Mr. Karousos from opening his culinary school * * * creates a triable issue regarding the propriety of the defendants' actions." (Emphasis added.) In my opinion, it is very much a question of fact as to whether it was defendants' subjective intention to legitimately petition the zoning board or whether, alternatively, the petition was a "mere sham." See G.L. 1956 § 9-33-2.
Numerous issues (including, I submit, the issue of subjective baselessness vel non) are, by their very nature, inherently incapable of being decided by summary judgment. See, e.g., Gliottone v. Ethier, 870 A.2d 1022, 1028 (R.I.2005) ("[I]ssues of negligence are ordinarily not susceptible of summary adjudication, but should be resolved by trial in the ordinary manner.") (quoting Rogers v. Peabody Coal Co., 342 F.2d 749, 751 (6th Cir.1965)); see generally Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962) ("We believe that summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot."); Schmidt v. McKay, 555 F.2d 30, 37 (2d Cir.1977); see also Hunt v. Cromartie, 526 U.S. 541, 552, 119 S.Ct. 1545, 143 L.Ed.2d 731 (1999) (holding that whether the gerrymandering at issue was the product of impermissible racial motivation was a disputed fact and that "it was error in this case for the District Court to resolve the disputed fact of motivation at the summary judgment stage"); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ("Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions * * *."); Santana v. Rainbow Cleaners, Inc., 969 A.2d 653, 658 (R.I.2009); Pontbriand v. Sundlun, 699 A.2d 856, 865 (R.I.1997).[10]
*275 It is self-evident to me that the determination of the presence of subjective baselessness vel non requires the scrutiny of the human heart and mind.[11] It has long been held that the summary judgment procedural mechanism is ordinarily inappropriate for resolving such issues of intent and state of mind. See Aetna Casualty & Surety Co. v. Farr, 594 A.2d 379, 381 (R.I.1991) ("If a dispute about intent is apparent in the record, then a genuine issue of material fact has been discovered and it may not be decided in a motion for summary judgment."); see also Equal Employment Opportunity Commission v. Home Insurance Co., 672 F.2d 252, 257 (2d Cir.1982) ("In light of the court's obligation to draw all reasonable inferences against the moving party, summary judgment is rarely appropriate where the moving party's state of mind is a material issue."); Maiorana v. MacDonald, 596 F.2d 1072, 1076-77 (1st Cir.1979) ("We are well aware * * * that cases like this one in which state of mind is at issue do not usually lend themselves to summary judgment."); Croley v. Matson Navigation Co., 434 F.2d 73, 77 (5th Cir.1970) ("The court should be cautious in granting a motion for summary judgment when resolution of the dispositive issue requires a determination of state of mind."); Brett T. Reynolds, Comment: Appellate Review of Lanham Act Violations: Is Likelihood of Confusion a Question of Law or Fact?, 38 Southwestern L.J. 743, 772 (1984) ("Summary judgment is usually inappropriate to resolve disputes concerning state of mind and conflicting interpretations of perceived events because state of mind is normally an inference drawn from facts.").
For the foregoing reasons, it is my opinion that summary judgment was not an appropriate procedural mechanism for evaluating the subjective baselessness component of the anti-SLAPP statute. I would have remanded the case to the Superior Court for fact-finding with regard to the issue of the defendants' subjective intent.
NOTES
[1] The complaint listed twelve defendants. Only Jonathan Pardee, Leonard Decof, Alfred Carpionato, Sidney S. Gorham III, and Jay Schochet answered the complaint. The seven remaining defendants, Alexander G. Walsh, Frank DeFruscio, Sr., Richard C. Angelone, Ian McColough, Frank Marinelli, Turner C. Scott, and James F. Hyman, never answered the complaint, but no default judgment ever was entered against them. Only four defendants, Pardee, Schochet, Gorham, and Carpionato, are appellees and cross-appellants before this Court.
[2] We refer to Pardee and the three other appellees and cross-appellants in the singular. We do so for clarity and convenience only.
[3] Anna Karousos died while this action was pending.
[4] In addition to affiliating with Salve Regina, Weston said that Karousos and Salve Regina must comply with several requests, including that Salve Regina license Fairlawn from Karousos, that Salve Regina offer certain courses in the pertinent curriculum, that Salve Regina issue certificates of attendance, and that the facility could not offer public dining.
[5] In March 1997, Karousos sold the property at 518 Bellevue Avenue to Salve Regina University. This property currently houses the Pell Center for International Relations and Public Policy.
[6] In 2001, Karousos's claim against Leonard Decof was dismissed.
[7] An abuse-of-process claim requires proof "(1) that the defendant instituted proceedings or process against the plaintiff and (2) that the defendant used these proceedings for an ulterior or wrongful purpose that the proceedings were not designed to accomplish." Fiorenzano v. Lima, 982 A.2d 585, 590 (R.I. 2009) (quoting Palazzo v. Alves, 944 A.2d 144, 154 (R.I.2008)). Here, the motion justice found that Pardee's stated reason for the appeal to the board was to seek review of Weston's 1996 letter, and in turn, to prevent the use of Fairlawn as a culinary school. If Pardee was successful in his appeal, the property could not have been used to house a culinary school. Therefore, the motion justice held that Pardee appealed to the board to prevent what he believed to be an impermissible use of the land. The motion justice ruled that no ulterior motive reasonably can be drawn from the record and that Karousos was unable to meet his burden on the second element of the abuse-of-process claim.
[8] Although Walsh was a defendant with respect to the abuse-of-process claim, he is not an appellee or cross-appellant in this appeal.
[9] Furthermore, prescinding from the procedural (i.e., Rule 56 of the Superior Court Rules of Civil Procedure) issue, I wish to indicate that I am troubled by the provision in the anti-SLAPP statute that requires the awarding of attorneys' fees to a party whose actions have been found to have been "objectively baseless" (provided only that those actions are also found not to have been subjectively baseless). See G.L. 1956 § 9-33-2. Our law does not usually grant attorneys' fees to a party that has engaged in "objectively baseless" activity. However, I realize that we are faced here with a statutory mandate, and I also realize "[t]he remedy for a harsh law is not in interpretation, but in amendment or repeal." State v. Duggan, 15 R.I. 403, 409, 6 A. 787, 788 (1886).
Anti-SLAPP statutes undoubtedly serve a useful purpose, but it is important that they not improperly thwart the constitutional right of access to the courts. See Palazzo v. Alves, 944 A.2d 144, 150 & nn. 10 & 11 (R.I.2008).
[10] In addition, this Court has on numerous occasions emphasized the drastic nature of the summary judgment mechanism. See, e.g., Estate of Giuliano v. Giuliano, 949 A.2d 386, 390 (R.I.2008) ("Summary judgment is a drastic remedy, and a motion for summary judgment should be dealt with cautiously.") (Internal quotation marks omitted.); DePasquale v. Venus Pizza, Inc., 727 A.2d 683, 685 (R.I.1999) ("This Court has consistently acknowledged that summary judgment is a harsh remedy that must be applied cautiously."); Sjogren v. Metropolitan Property and Casualty Insurance Co., 703 A.2d 608, 610 (R.I. 1997) ("Summary judgment is an extreme remedy that should be applied cautiously.").
Moreover, this Court has repeatedly emphasized that the "purpose of the summary judgment procedure is issue finding, not issue determination." Industrial National Bank v. Peloso, 121 R.I. 305, 307, 397 A.2d 1312, 1313 (1979); see also Estate of Giuliano, 949 A.2d at 391; Saltzman v. Atlantic Realty Co., Inc., 434 A.2d 1343, 1345 (R.I.1981).
[11] One can conceive of a case where subjective baselessness is entirely clearfor example where there is an unambiguous admission by a party to that effect. But this is no such case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549109/ | Morris Willis, Appellant,
v.
R.M. Desanti, Paul Sosna, Brenda Tritt, James E. Unell, George Clements, John Kerestes and Dorina Varner
No. 1764 C.D. 2009.
Commonwealth Court of Pennsylvania.
Submitted: January 29, 2010.
Filed: April 1, 2010.
Before: McGINLEY, Judge; BROBSON, Judge; FLAHERTY, Senior Judge;
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE McGINLEY
Morris Willis (Appellant) appeals, pro se, from the order of the Court of Common Pleas of Schuylkill County (common pleas court) which granted the Preliminary Objections of R.M. Desanti, Paul Sosna, Brenda Tritt, James E. Unell, George Clements, John Kerestes, and Dorina Varner (collectively Appellees) and dismissed Appellant's Amended Complaint, with prejudice.
Appellant is an inmate currently incarcerated at the State Correctional Institution at Mahanoy (SCI-Mahanoy). The Appellees were all employees of the Department of Corrections at the time of the events pertaining to this matter.
On February 6, 2009, Appellant, pro se, filed an Amended Complaint under the Civil Rights Statute, 42 U.S.C. §1983,[1] and alleged that he was subjected to retaliation, conspiracy, defamation, and negligent infliction of emotional distress.
Appellant alleged that on August 22, 2008, he was working at his SCI-Mahanoy prison job, "maintenance repair," under the supervision of Paul Sosna. On this date, James Bennet, another inmate, was accused of stealing food from the kitchen. Appellant was named as a witness to the incident and asked to cooperate with an investigation by R.M. Desanti. Appellant refused to answer any questions or participate in the investigation. A number of days later, Appellant was removed from his prison job. Appellant alleged in his Amended Complaint that he lost his job because he "exercised his Fifth Amendment right to remain silent," when he refused to participate in the investigation, and that the loss of his job was improper and caused him harm.[2]
On May 5, 2009, Appellees filed Preliminary Objections in the nature of a demurrer.[3] Appellees asserted that the Amended Complaint failed to state any claim for which relief may be granted and that the claims were barred by sovereign immunity.
On August 24, 2009, the common pleas court entered a 12-page order and opinion which granted the Preliminary Objections and dismissed all the Counts of the Amended Complaint with prejudice. Specifically, the common pleas court found that (1) Appellant's retaliation claim must be dismissed because he failed to allege facts sufficient to demonstrate that he was engaged in any constitutionally protected activity when he refused to cooperate with the investigation, or that he was deprived of an established constitutional, statutory, or other right arising from federal law when he lost his prison job; (2) Appellant's conspiracy claim must be dismissed because he failed to allege any particularized facts that supported the existence of a conspiracy or that he suffered a deprivation of his civil rights; and (3) Appellant's defamation and negligent infliction of emotional distress must be dismissed because they were barred by the doctrine of sovereign immunity and did not fall within one of the eight exceptions set forth in 42 Pa.C.S. §8522.
On appeal, Appellant asserts that the common pleas court erred when it dismissed his Amended Complaint with prejudice. Appellant argues that the common pleas court's determination was not supported by the evidence or the applicable law.
The common pleas court's opinion was thorough and explained in detail the reasons why each count of the Amended Complaint must fail as a matter of law. This Court has reviewed the common pleas court's opinion and the cases cited therein and concludes that it adequately addressed the issues and applied sound legal reasoning. Accordingly, the Court adopts in full the Opinion of the common pleas court and affirms on this basis of the Opinion at Morris Willis v. R.M. Desanti, Paul Sosna, Brenda Tritt, James E. Unell, George Clements, John Kerestes, and Dorina Varner, Court of Common Pleas of Schuylkill County, No. S- 312-2009 (filed August 25, 2009).
The common pleas court is affirmed.
ORDER
AND NOW, this 1st day of April, 2010, the Order of the Court of Common Pleas of Schuylkill County in the above-captioned matter is hereby affirmed.
NOTES
[1] In order to establish a prima facie case under 42 U.S.C. §1983, a plaintiff must plead and prove, inter alia, that he or she has been deprived of an established statutory, constitutional, or other right arising from federal law. West v. Atkins, 487 U.S. 42 (1988).
[2] Appellant filed a grievance which was ultimately denied.
[3] Rule 1028(a)(4) of the Pennsylvania Rules of Civil Procedure provides that a preliminary objection may be filed for legal insufficiency of a pleading. When ruling on a demurrer, a court may sustain the objections and dismiss the case only when such relief is clear and no doubt exists that the law will not permit a recovery. Stone and Edwards Insurance Agency v. Department of Insurance, 616 A.2d 1060 (Pa. Cmwlth 1992). A demurrer will not be sustained unless the face of the complaint shows that the law will not permit recovery, and any doubts should be resolved against sustaining the demurrer. Id. In coming to such a determination, the court must accept as true all well-pled allegations in the complaint and all inferences reasonably deduced therefrom. Doxsey v. Commonwealth, 674 A.2d 1173 (Pa. Cmwlth. 1996). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549114/ | 992 A.2d 224 (2010)
The PIPER GROUP, INC., Charles E. Sigety, Katharine S. Sigety, Nero Enterprises, Sigety Trust c/o Trustees Charles Birge Sigety and Katharine K. Yon, Piperlands Properties, L.P., 110 Dark Hollow Road, LLC, Robert G. Sigety, Cornelius E. Sigety, Elizabeth D. Sigety, and Robert G. Sigety, as Tenants by the Entireties, and Robert G. Sigety GRAT c/o Trustee Cornelius E. Sigety, Appellants,
v.
BEDMINSTER TOWNSHIP BOARD OF SUPERVISORS and Bedminster Township.
No. 1824 C.D. 2009.
Commonwealth Court of Pennsylvania.
Argued February 9, 2010.
Decided March 12, 2010.
Reargument En Banc Denied May 10, 2010.
*228 Robert W. Gundlach, Jr., Warrington, for appellants.
John B. Rice, Perkasie, for appellees.
BEFORE: PELLEGRINI, Judge, BUTLER, Judge, and FRIEDMAN, Senior Judge.
OPINION BY Senior Judge FRIEDMAN.
The Piper Group, Inc., Charles E. Sigety, Katharine S. Sigety, Nero Enterprises, Sigety Trust c/o Trustees Charles Birge Sigety and Katharine K. Yon, Piperlands Properties, L.P., 110 Dark Hollow Road, LLC, Robert G. Sigety, Cornelius E. Sigety, Elizabeth D. Sigety and Robert G. Sigety, as Tenants by the entireties, and Robert G. Sigety GRAT c/o Trustee Cornelius E. Sigety (collectively, the Piper Group) appeal from the August 27, 2009, order of the Court of Common Pleas of Bucks County (trial court), which denied the Piper Group's land use appeal and affirmed the decision of the Board of Supervisors of Bedminster Township (Board) to deny the Piper Group's curative amendment application (Application). In the Application, the Piper Group challenged the constitutional validity of the Bedminster Township Zoning Ordinance (Ordinance) as imposing unreasonable restrictions upon the development of single-family detached housing in the Township's AP-Agricultural Preservation Zoning District (AP District).
On August 12, 1996, Bedminster Township (Township) adopted Ordinance 118, creating the Township's AP District with the intent to protect and preserve the agricultural nature of the area. In furtherance of this goal, Ordinance 118 required landowners with tracts of ten or more acres in the AP District to limit the density of development on their property. Specifically, Ordinance 118 required such landowners to identify and set aside between fifty and sixty percent of farmland soil as non-buildable site area (soil set-aside). After the non-buildable site area was subtracted from the tract's base site area, single-family residences could be built on the remaining buildable site area, provided that the lot size was at least one acre, excluding certain protected natural features. Further, a landowner was required to create a contiguous "building envelope" around the residence of at least 10,000 square feet. The Piper Group owns two separate tracts of land in the Township, which, together, cover approximately 400 acres situated entirely within the Township's AP District.
On August 20, 1996, C & M Developers, Inc. (C & M Developers) filed a substantive challenge with the Township Zoning Hearing Board (ZHB), arguing that the soil set-aside and other dimensional provisions in Ordinance 118 were unreasonable. Following three years of hearings on the matter, the ZHB denied C & M Developers' validity challenge, and this decision was affirmed by the trial court and by Commonwealth Court. However, our Supreme Court granted allocatur and, by decision dated November 1, 2002, reversed. C & M Developers, Inc. v. Bedminster Township Zoning Hearing Board, 573 Pa. 2, 820 A.2d 143 (2002). The Supreme Court determined that Ordinance 118's soil set-aside restrictions were reasonable and related to the Township's legitimate *229 interest in preserving its agricultural lands. However, the Court held that, when required in addition to the soil set-aside, Ordinance 118's one-acre minimum lot size unduly limited a landowner's ability to develop the remaining portion of his tract, and this further restriction was not reasonable or substantially related to the Township's agricultural preservation interest or any other welfare interest of the Township. Citing the testimony of one of the Township's witnesses, the Court observed that the Township adopted this one-acre minimum merely because it was a "good number" and would stall the development of large houses on small lots. Based on this expressed motivation, the Court characterized the limiting effect of the dimensional restrictions as a matter of private desire, rather than a matter of public welfare, and held that the Township could not employ zoning regulations to effectuate such an aim.[1]Id.
On November 7, 2002, six days after the decision in C & M, the Piper Group filed its Application with the Board pursuant to sections 609.1, 909.1(b)(4) and 916.1(a)(2) of the Pennsylvania Municipalities Planning Code (MPC),[2] substantively challenging the dimensional requirements set forth in sections 408(2)(b) and 513 of the Ordinance, the identical provisions that were challenged and found invalid in C & M. The Piper Group's Application applies to both its sites and includes a proposed curative amendment ordinance and development plans. In accordance with the Piper Group's proposed ordinance, the development plans permit the construction of 174 single-family dwelling units on a minimal lot area of 6,500 square feet on one site, and 179 single-family dwelling units on a minimal lot area of 6,500 square feet on the other site. The Piper Group also proposed the construction of a small sewage treatment plant and community water facility on both sites.
On November 12, 2002, in response to the C & M decision filed eleven days earlier, the Township entered into a settlement agreement with C & M Developers to resolve the case. In addition, on November 14, 2002, at the first available public meeting, the Township declared that it would undertake a municipal curative amendment pursuant to section 609.2 of the MPC.[3] On April 30, 2003, the Township adopted Ordinance 149 to cure the infirmities identified in C & M. Most notable among the changes made, Ordinance 149 reduces the minimum lot size twenty-six percent, from one acre to 32,000 square feet.
*230 Thereafter, between May 12, 2003, and January 15, 2007, fifty-four hearings were held before the Board on the Piper Group's Application. Throughout these proceedings, the Board was represented by the Township Solicitor, who had represented the Township in C & M but assumed the role of the Board Solicitor; Special Township Counsel was appointed to represent the Township in opposition to the Piper Group's Application.[4] During this period, the Township further amended its Ordinance by adopting Ordinance 162 on July 20, 2005, thereby facilitating more development within the AP District.
On March 26, 2007, the Board issued a lengthy adjudication denying the Piper Group's Application, and the Piper Group filed a land use appeal with the trial court, appealing the Board's decision. Following oral argument and the filing of briefs,[5] the trial court, by opinion and order dated August 27, 2009, denied the Piper Group's appeal and affirmed the Board. The Piper Group now appeals to this court.[6]
The critical issues raised here are: (1) whether the Piper Group is entitled to approval of its November 7, 2002, Application based solely on the Supreme Court's decision in C & M and the Board's settlement agreement with C & M Developers; (2) whether a de novo standard of review should be applied in this case because the Board, and the Board Solicitor in particular, conducted the hearings in a manner that violated the Piper Group's due process rights; (3) whether the trial court erred in holding that the Piper Group's requested relief is unreasonable and in failing to discuss whether the Piper Group's proposed use and development plans satisfied the criteria set forth in section 609.1(c) of the MPC, 53 P.S. § 10609.1(c); and (4) whether the trial court erred in determining that Ordinance 149 cured the defects identified by the Supreme Court in C & M.
The trial court ably addressed and correctly decided each of these issues in its thorough and thoughtful opinion. Accordingly, we affirm, adopting the well-reasoned opinion of Judge C. Theodore Fritsch, Jr., entered in The Piper Group, Inc. v. Bedminster Township Board of *231 Supervisors, (Bucks County, No. 07-3457-29-5, filed August 27, 2009).
ORDER
AND NOW, this 12th day of March, 2010, the order of the Court of Common Pleas of Bucks County is affirmed on the basis of the opinion issued by Judge C. Theodore Fritsch, Jr. in The Piper Group, Inc. v. Bedminster Township Board of Supervisors, ___ Pa. D. & C. 4th ___ (2010), Court of Common Pleas of Bucks County, No. 07-3457-29-5, filed August 27, 2009.
APPENDIX
IN THE COURT OF COMMON PLEAS OF BUCKS COUNTY, PENNSYLVANIA
CIVIL ACTIONLAW
THE PIPER GROUP, INC., CHARLES E. SIGETY, KATHARINE S. SIGETY, NERO ENTERPRISES, SIGETY TRUST C/O TRUSTEES CHARLES BIRGE SIGETY AND KATHERINE K. YON, PIPERLANDS PROPERTIES, L.P., 110 DARK HOLLOW ROAD, LLC, ROBERT G. SIGETY, CORNELIUS E. SIGETY, ELIZABETH D. SIGETY AND ROBERT G. SIGETY, AS TENANTS BY THE ENTIRETIES and ROBERT G. SIGETY GRAT C/O TRUSTEE CORNELIUS E. SIGETY
vs.
BEDMINSTER TOWNSHIP BOARD OF SUPERVISORS and BEDMINSTER TWP.
NO. 07-3457-29-5
LAND USE APPEAL
ORDER
AND NOW, this 27th day of August, 2009, upon consideration of the Land Use Appeal filed by The Piper Group, et. al., briefs filed by both parties, and after oral argument, it is hereby ORDERED and DECREED that the Land Use Appeal is DENIED. The April 7, 2007 Decision of the Bedminster Township Board of Supervisors is AFFIRMED.
BY THE COURT:
/s/ C. THEODORE FRITSCH, JR.
C. THEODORE FRITSCH, JR., J.
IN THE COURT OF COMMON PLEAS OF BUCKS COUNTY, PENNSYLVANIA
CIVIL ACTIONLAW
THE PIPER GROUP, INC., CHARLES E. SIGETY, KATHARINE S. SIGETY NERO ENTERPRISES, SIGETY TRUST C/O TRUSTEES CHARLES BIRGE SIGETY AND KATHERINE K. YON, PIPERLANDS PROPERTIES, L.P., 110 DARK HOLLOW ROAD, LLC, ROBERT G. SIGETY, CORNELIUS E. SIGETY, ELIZABETH D. SIGETY AND ROBERT G. SIGETY, AS TENANTS BY THE ENTIRETIES and ROBERT G. SIGETY GRAT C/O TRUSTEE CORNELIUS E. SIGETY
vs.
BEDMINSTER TOWNSHIP BOARD OF SUPERVISORS and BEDMINSTER TWP.
NO. 07-3457-29-5
LAND USE APPEAL
OPINION
The Piper Group, Inc., Charles E. Sigety, Katharine S. Sigety, Nero Enterprises, Sigety Trust c/o Trustees Charles Birge Sigety and Katharine K. Yon, Piperlands Properties, L.P., 110 Dark Hollow Road, LLC, Robert G. Sigety, Cornelius E. Sigety, *232 Elizabeth D. Sigety and Robert G. Sigety, as tenants by the entireties, and Robert G. Sigety GRAT c/o Trustee Cornelius E. Sigety (collectively "Piper Group" or "Appellants") have appealed from the April 7, 2007 decision of the Bedminster Township Board of Supervisors denying Appellants' curative amendment challenge. For the reasons stated herein, we dismiss the appeal, affirm the decision of the Board of Supervisors and issue the attached Order.[1]
BACKGROUND
Appellants are the owners of two tracts of land in Bedminster Township, Bucks County, Pennsylvania. The tracts, together, cover approximately 400 acres of land. Each is made up of several separate tax parcels. For ease of discussion, we will refer to the sites as they have been identified throughout these proceedings, as the "Pipersville" site and the "Kellers Church" site.[2] Both properties are located within the Township's Agricultural Preservation Zoning District (hereinafter "AP District").
Bedminster Township (hereinafter the "Township") is a predominantly rural municipality located in Upper Bucks County. Retaining the agricultural nature of the area is one of the Township's primary goals, as is clearly set forth in the Township's Comprehensive Plan. In 1996, with the intent to protect its unique rural character, the Township Board of Supervisors amended the Township Zoning Ordinance to establish an AP District. Approximately ninety percent of the Township is located within the AP District. Ordinance 118, which created the AP District, preserved the area's prime farmland in part by controlling the density of permitted development. As is indicated in the Comprehensive Plan, the AP District is not an area in which growth is to be concentrated, rather high density development is provided for in the Township's R-3 Residential District. Ordinance 118 provided that prior to subdivision or development, a landowner of a tract of land containing more than ten acres was required to identify certain high quality farm soils and set aside between sixty percent of prime farmlands and fifty percent of other farmlands on a contiguous tract as non-buildable area (hereinafter "farmland tract" or "soil set-aside"). Single family residences could be developed on the remaining portion of the land, the buildable-site area, provided that the lot size was at least one acre. Said lots could not include certain natural features, including watercourses, flood plains, wetlands or ponds. Additionally, under Ordinance 118, the landowner was required to create a building envelope around the residence of at least 10,000 square feet.
A brief recitation of the history of litigation surrounding Ordinance 118 is warranted in our discussion. In 1996, C & M Developers, Inc. (hereinafter "C & M Developers") filed a substantive challenge to Ordinance 118 with the Township Zoning Hearing Board, arguing that the aforementioned soil set-aside and dimensional requirements were unreasonable. The Board denied the challenge, finding that C & M Developers had failed to meet its burden of establishing that the Ordinance *233 was constitutionally invalid and upholding the regulations as a reasonable means of accomplishing the Township's interest in preserving agricultural lands. The Board decision was affirmed on appeal by both the Bucks County Court of Common Pleas and the Commonwealth Court of Pennsylvania. C & M Developers then filed an appeal to the Pennsylvania Supreme Court (hereinafter "Supreme Court"), which granted allocator.
On November 1, 2002, the Supreme Court issued a decision overturning, in part, the decisions of the lower courts. C & M Developers, Inc. v. Bedminster Township Zoning Hearing Board, 573 Pa. 2, 820 A.2d 143 (2002). The Supreme Court recognized that under the soil set-aside requirement, a landowner is precluded from using approximately fifty percent of his land for development. Nevertheless, the Court declared that the soil set-aside regulation was valid and rationally related to the Township's interest in preserving its agricultural lands. The Court, however, found that the one acre minimum lot size restriction, coupled with the other dimensional requirements, unduly limited a landowner's ability to sell, subdivide, or develop the buildable-site area that remained after the farmland tract was set aside. The Court expressly struck down the Township's justification for the minimum lot size as unreasonable. The testimony elicited at the C & M Developers proceedings showed that the one acre lot size was adopted solely because it "seemed like a good number" and was enacted with the intention to stall the development of large houses on small lots. The Court found that the Township's motivation to regulate beyond the farmland set-aside requirements "exudes an exclusionary purpose" and was not substantially related to the general welfare of the community. As the Township failed to adequately justify why the greater protection was required, the Court found that it had exceeded its police power. The Court did not comment on what dimensional requirements would be reasonable or what type of interest could have justified the Township's dimensional requirements. Reargument was requested and subsequently denied on December 30, 2002.
Prior to the Supreme Court decision in C & M Developers, the Township had no reason to question its ordinance or reduce its dimensional restrictions, which had been upheld by both the Court of Common Pleas and Commonwealth Court. During the time period that the C & M appeal proceeded through the Pennsylvania judicial system, Bedminster Township revised several sections of its Zoning Ordinance. Included in the changes, soils of local importance were removed from protection and the Township authorized a Transferable Development Rights ("TDR") program permitting landowners in the AP District to transfer development rights to the Township's Industrial District. Although the revisions as a whole undoubtedly affected development in the AP District, the language of Sections 408 and 513 dealing with dimensional restrictions remained identical to the provisions challenged by C & M Developers.
On November 7, 2002, six days after the Supreme Court overturned the Zoning Hearing Board's decision in C & M Developers and declared the minimum lot size requirement of Ordinance 118 unjustified and constitutionally invalid, Appellants filed a Curative Amendment Challenge with the Township Board of Supervisors pursuant to Section 609.1 of the Pennsylvania Municipalities Planning Code (hereinafter "MPC"), 53 P.S. § 10609.1. (Exhibit B-1). Relying on the C & M Developers decision, Appellants *234 substantively challenged the constitutionality of the dimensional requirements set forth in the August 14, 2002 Zoning Ordinance, specifically Sections 408(2)(b)(iv), (v), and (vi) and Section 513, line 2. These provisions set forth the minimum lot size, building envelope, and other dimensional restrictions on development in the AP District on tracts of land greater than ten acres. These are the same provisions that were analyzed in the Opinion issued by the Supreme Court just days earlier.
As part of the cure challenge, Appellants submitted a Curative Amendment Ordinance which would create a new use within the AP District. The proposed ordinance would respect the agricultural set-aside provisions of the Ordinance but would allow single-family detached dwellings to be constructed in the non-preserved lands at a density of 1 unit per acre of the base-site area of the property, which is the area of the entire property, not just the buildable-site area. The proposed amendment also provides for development with less restrictive dimensional regulations and would allow multiple landowners in the AP District to consolidate their properties in order to maximize the base-site area and also to maximize the size of the farmland set-aside tracts. Appellants submitted development plans in accordance with their Curative Amendment, proposing 180 single family dwelling units on the Pipersville Property and 181 on the Kellers Church Property. The proposed minimum lot size would be 6,500 square feet. The plans also included the construction of a small sewage treatment plant and water facilities on each site. Appellants proposed to preserve 80 acres of farmland and 65 acres of homeowner association open space on the Pipersville Property and 122 acres of farmland and 9 acres of homeowner association open space on the Kellers Church Property.
On November 14, 2002, the Township responded to the C & M Developers case and declared a Municipal Curative Amendment pursuant to Section 609.2 of the MPC. This action took place thirteen days after the C & M Developers decision was rendered and at the first available public meeting. The Planning Commission and the Township then analyzed their obligations under the decision of C & M Developers, taking the bulk of the 180 day grace period allotted under Section 609.2 of the MPC to consider and draft an amendment. On April 30, 2003, the Township adopted Ordinance 149 to cure the deficiencies identified in the C & M Developers case. Ordinance 149 directly addresses the concerns of the Supreme Court in C & M Developers and reduces the minimum lot size from 43,560 square feet (one acre) to 32,000 square feet. This is a 26% reduction in lot size.
Hearings on Appellants' Curative Amendment Challenge began before the Board of Supervisors on May 12, 2003, and continued through January 15, 2007. The several month delay between the application and the first hearing was at the behest of Appellants. Fifty hearings were held in this matter over the course of three and one half years and the transcripts of eight additional hearings from the related Bedminster Associates Curative Amendment Proceeding, Court of Common Pleas Docket No. 07-02636-29-5, were incorporated into the Record. Throughout the proceedings the Township Solicitor, the law firm of Grim, Biehn & Thatcher, represented the Board. Special Township Counsel, Stephen P. Imms, was appointed to represent the Township at the hearings. Appellants have been represented by their current counsel since the inception of this matter.
*235 During the course of the proceedings, on July 20, 2005, the Township further amended its Zoning Ordinance by adopting Ordinance 162. The prior Ordinance only permitted for development of tracts greater than 10 acres. Ordinance 162, however, regulates the development of tracts containing five or more acres, thereby facilitating more development within the AP District. (Exhibit A-59). Additionally, farmland soils may now be approved for protection on one or more preservation tracts, rather than solely on one contiguous tract. Ordinance 162 also decreases the minimum building envelope from 10,000 square feet to 7,000 square feet and reduces the minimum lot width from 175 feet to 150 feet.
On April 2, 2007, the Board of Supervisors issued a written Adjudication denying Appellants' challenge for (1) failing to prove that the Zoning Ordinance was unconstitutional; (2) failing to show that Ordinance 149, taken with later enacted Ordinance 162, did not cure the defects; and (3) failing to show that the proposed Curative Ordinance was reasonable. The Adjudication is a comprehensive decision, spanning 52 pages, containing 160 findings of fact, 25 conclusions of law, and an in depth discussion of the merits of Appellants' curative amendment challenge.
On May 2, 2007, Appellants filed their Notice of Land Use Appeal with the Bucks County Court of Common Pleas, commencing the matter now before this Court. Appellant raised numerous issues on appeal, alleging due process violations, substantive defects and procedural defects. The delineation of alleged errors spans 26 pages of Appellants' Notice of Appeal. Due to the volume, we will not separately address each issue in this Opinion, but rather will address them in small groupings in the course of our analysis.
Appellants filed a Motion for Leave to Present Additional Evidence on March 13, 2008. A briefing schedule on the issue of supplementation was issued on June 4, 2008. Oral argument was held on the issue on July 21, 2008. After both parties filed multiple briefs on the issue of supplementation, we denied Appellants' Motion, finding that the nearly four-year record was more than adequate upon which to decide the substantive appeal. The Order denying supplementation was issued on October 21, 2008. A briefing schedule was issued on November 14, 2008 and both parties filed detailed briefs on the complex issues of this land use appeal. Oral argument was requested by Appellants and was held on the record on March 31, 2009.
DISCUSSION
We begin our discussion by addressing the unique chronology of this case. To restate the timeline, the Pennsylvania Supreme Court rendered its decision in the C & M Developers case on November 1, 2002. Six days later, on November 7, Appellants had prepared and filed their Curative Amendment Challenge with the Board of Supervisors. Their allegations of constitutional invalidity relied squarely and solely on the C & M Developers decision. The Board of Supervisors, acting on the holding of our highest Court, assembled at the next available public meeting to declare that the Township would amend its Zoning Ordinance to correct the defects illuminated by the Supreme Court. This meeting took, place on November 14, 2002.
The issue of timing in matters of zoning challenges has been addressed at length by the courts of this Commonwealth. In 1974, the Pennsylvania Supreme Court created the "pending ordinance doctrine," stating that a municipality is prohibited from thwarting "a valid challenge to its zoning ordinance by adopting a curative provision, which was not considered or advertised *236 prior to the time of the challenger's application." Casey v. Zoning Hearing Bd. of Warwick Twp., 459 Pa. 219, 328 A.2d 464, 469 (1974). In defining the doctrine, the Supreme Court explained that when a landowner is successful in his constitutional challenge to a zoning ordinance, the municipality is prohibited from denying him meaningful relief by amending its ordinance to zone around the landowner or by requiring the landowner to comply with the amended ordinance. To do so, the Court recognized, would effectively deny a successful challenger relief and would discourage landowners from bringing valid constitutional challenges. Therefore, municipalities are not permitted a stay after a judicial declaration of invalidity so that they may amend their ordinance and apply the new provisions to the developer's proposed plan. However, when the amended ordinance is already pending at the time of the applicant's challenge, the unconstitutionality of the unamended ordinance is irrelevant and only the amended ordinance shall be considered. Under those circumstances, the landowner's rights to challenge the constitutionality of the unamended ordinance do not vest.
In explaining why the municipality is not permitted additional time to amend its ordinance to thwart a successful applicant's development plans, the Casey Court interpreted a now repealed section of the MPC which provided for a judicial stay to give the municipality time to correct its defect. The Casey Court determined that the Legislature had not intended to provide for an interim period after judicial determination has been made within which the municipality may remedy its ordinance. As explained above, to allow for such would permit the municipality to zone around the successful challenger and would strip him of any meaningful relief. This policy does not apply to all subsequent applicants, but only to the applicant who brought the challenge. The Court explained that the purpose of the stay provision is to protect the municipality, not obstruct the relief entitled to a successful challenger. The Court stated:
Once a zoning ordinance is found to be constitutionally defective, the judgment invalidates the entire ordinance, not merely the zoning on a particular tract of land. By staying the `effect' of its judgment for a limited time, a court can avoid the chaotic situation which would arise if the municipality remained temporarily unzoned. The municipality is given an opportunity to cure the defective ordinance in accordance with the determination of the court without fear of a flood of applications by landowners seeking to take advantage of the invalidity. The original ordinance would remain in effect and subsequent applicants would be on constructive notice of the municipality's intent to amend the defective ordinance and, therefore, would be unable to obtain vested rights based upon the ordinance's invalidity. In effect, a moratorium would be effectuated upon the challenging of the zoning ordinance and the application ... until an amended, constitutionally permissible ordinance could be enacted.
Casey, 328 A.2d at 468-69.
Although the provision interpreted by the Casey Court has been repealed, the reasoning remains sound. Fernley v. Board of Supervisors of Schuylkill Township, 509 Pa. 413, 502 A.2d 585, 589 (1985) (quoting Casey, 328 A.2d at 468-69). The Supreme Court in Fernley specifically stated that the underlying policy set forth in Casey remains valid and is reflected in Section 609.2 of the MPC. Fernley, 502 A.2d at 589. The language in current Section 609.2(3) of the MPC permitting a *237 municipality to disregard curative applications after it has declared its intention to amend its ordinance, also supports this conclusion. By allowing time for the municipality to draft its own cure, the Legislature protected the municipality from a flood of landowners hoping to piggy back on the applicant who initiated the successful constitutional challenge. Surely, the Legislature did not intend for an alternative result when a court of law declares an ordinance invalid. Therefore, we believe that the policy language set forth in Casey remains applicable today.
Accordingly, once a court has determined that a zoning ordinance or provision is constitutionally invalid, subsequent applicants are put on constructive notice of the municipality's intent to enact an amendment. This does not contravene the reasoning behind the pending ordinance doctrine because the party who brought the successful challenge is not thwarted from obtaining the relief sought. Rather, only subsequent applicants are prevented from lying in wait for court decisions in order to submit their plans before the municipality has a chance to act at the directive of the court.
As C & M Developers, Inc. successfully challenged the dimensional regulations of the Bedminster Township Zoning Ordinance, once the Supreme Court declared the ordinance unconstitutional, the Township could not amend its ordinance to zone around the application by C & M Developers. As the successful challenger, C & M Developers was entitled to reasonable relief in accordance with its proposed plans. We do not believe that the Legislature or the Courts intended for subsequent landowners who are unrelated to the C & M Developers case to be afforded such automatic relief. As discussed by the Casey Court, to find otherwise would bring chaotic results and permit any number of landowners to race to file development plans the moment that the court strikes down an ordinance. It is unreasonable for municipalities to have to fear such a result, or to be punished for otherwise expeditiously and reasonably acting in response to a judicial invalidation of an ordinance.
We find that it was reasonable in the case at bar for the Township to declare its intent to amend the zoning ordinance at its next available public meeting. Said meeting was held only thirteen days from the date of the C & M Developers decision. We note that under the Rules of Appellate Procedure, R. 2542, a litigant has fourteen days from the date of a decision to file for reargument. The Township acted swiftly, organizing a public meeting and announcing its cure even before its petition for reargument before the Supreme Court was due. We find that the Township's actions were reasonable and therefore, under the specific circumstances of this case, we will not place the burden on the municipality to outrace landowners to announce a cure amendment first.
We further note that in anticipation that their reliance on the decision in C & M Developers would be struck down, Appellants presented independent evidence at the hearing to show that the Sections 408(2)(b) and 513 of the Bedminster Township Ordinance were constitutionally invalid. As the Supreme Court had already declared these precise Ordinance provisions unconstitutional, said presentation was unnecessary.
In sum, we find that under the facts of this particular case, the Township acted quickly and within a reasonable time period to declare their intention to amend the zoning ordinance in accordance with the C & M decision. To find that Appellants should be placed in the same position *238 as C & M Developers, the party whose challenge led to the declaration of unconstitutionality, would contravene the long recognized policy of the Supreme Court protecting a municipality from the fear of a flood of applications by landowners taking advantage of a finding that an ordinance is invalid. We therefore refuse to grant Appellants' appeal on the sole basis of the holding in the C & M Developers case. To find otherwise contravenes sound policy, equity, and logic.
I. Supplementation.
On March 13, 2008, Appellants filed a Motion for Leave to Present Additional Evidence, requesting that this Court permit them to supplement the record to take evidence that was precluded at the hearing before the Board. This Court received comprehensive briefs from both parties on the issue of supplementation and subsequently held oral argument on July 21, 2008. By Order dated October 21, 2008, we denied Appellants' request to open the record.
With respect to supplementation of the record in a land use appeal, the MPC provides that:
If, upon motion, it is shown that proper consideration of the land use appeal requires the presentation of additional evidence, a judge of the court may hold a hearing to receive additional evidence, may remand the case to the body, agency, or officer whose decision or order has been brought up for review, or may refer the case to a referee to receive additional evidence ...
53 P.S. § 11005-A.
It is a matter within the discretion of the trial court to determine whether supplementation of the record is appropriate under this statute. Eastern Consolidation and Distribution Services, Inc. v. Bd. of Commissioners of Hampden, 701 A.2d 621, 624 (Pa.Commw.Ct.1997). "Only where the party seeking the hearing demonstrates that the record is incomplete because the party was denied an opportunity to be heard fully, or because relevant testimony was offered and excluded" is a court compelled to open the record. Id. (emphasis in original). Therefore, where the court finds that the record was sufficient to effectively review and address the appeal, it is not required to hear additional evidence.
In the present matter, Appellants alleged that because of the biased nature of the hearings before the Board they was precluded from eliciting certain testimony and making certain exhibits part of the record.[3] Specifically, Appellants argued that evidence concerning the following subjects was precluded: negotiations and plans for future conservation easements and deed restrictions in the AP District, a community project in Chester County, the effect of the C & M Developers settlement agreement, the effectiveness of the Township's TDR program in preserving agricultural land, and evidence regarding the motivation behind the adoption of Ordinance 149.
In support of its argument asserting bias, Appellants relied heavily on Crystal Forest Associates, LP v. Buckingham Township Supervisors, 872 A.2d 206 (Pa.Commw.Ct.2005). In Crystal Forest, the trial court opened the record because the hearing below reflected a constant adversarial and biased spirit toward the petitioning *239 party's witnesses. The township's counsel used the hearing to "filibuster" by objecting to each question posed by the petitioner and following said objections with long drawn-out argument. The trial court found that the township's and the board's conduct effectively prevented the applicant from creating a complete record. By contrast, the township's witnesses were permitted to testify at length on a number of issues that were only tangentially related to the case. On appeal, the Commonwealth Court affirmed the trial court's decision to open the record so that the petitioner could be fully heard.
We note once more the voluminous record created before the Board of Supervisors in the present case. More than fifty hearings were held before the Board below. The record includes testimony spanning three years, hundreds of objections by counsel and corresponding argument, and 151 admitted exhibits. Unlike in Crystal Forest, our Appellants were provided the opportunity to create a substantial record. A review of the record shows that while there were many objections made by both parties, Appellants were not thwarted from eliciting relevant testimony, nor were the objections by opposing counsel categorically sustained.
Furthermore, there was sufficient evidence in the record to allow us to fully address Appellants' arguments concerning specific evidentiary rulings, which they suggest justify supplementation of the record. We determined that evidence concerning the conflict between agricultural and residential uses in a development in Chester County was irrelevant and properly excluded by the Board. That land is located in a different county, governed by a different ordinance, and would not be probative to the issues before us. Similarly, information regarding the settlement agreement reached in the C & M Developers case was also properly barred in the hearings below. For reasons set forth in detail herein, Appellants should not be afforded the same considerations as C & M Developers. As Appellants stand in a different place procedurally, the Township's actions with respect to C & M Developers are irrelevant.
We also find that evidence concerning the TDR program was rightly precluded as speculative and irrelevant as the witness on the stand testified that he did not perform a study on the Township's current TDR program. Testimony with respect to other programs in other municipalities was rightly determined to be irrelevant. Testimony regarding potential deed restrictions and open space easements in negotiation by the Township were also irrelevant to the issues in this case. The locations of then existing easements were of public record and discoverable, however restrictions that were not in place at the time of the curative amendment challenge have no bearing on this matter and their potential effect on the AP District would be speculative at best. Finally, we believe that evidence of the motivation behind the adoption of Ordinance 149 is irrelevant and was properly objected to by the Township and excluded from the hearings before the Board. The manner in which the ordinance affects and governs the development in the AP District depends not on the motivation of the Township Planning Commission, but rather the express words of the ordinance. Our inquiry is whether the Township Ordinance unconstitutionally restricts Appellants' ability to develop their land. We are not concerned with discussions of the Commission prior to adopting the ordinance and find that the exclusion of this evidence did not bias Appellants nor did it prejudice this Court's ability to adequately address the issues before us.
*240 We note that all of the issues raised by Appellants in their motion for supplementation were also raised substantively as part of the land use appeal. Our decisions with respect to these evidentiary rulings are consistent with those set forth herein as to the substantive issues.
Finding that the record did not require supplementation in order to allow us to fairly and comprehensively address the substantive land use appeal, and that Appellants had failed to establish that they were denied the opportunity to be heard or that relevant testimony was excluded, we acted within our discretion and properly denied Appellants' motion.
II. Standard of Review.
Appellants requested that this Court review the present matter de novo. As to this issue, we reiterate that the record in this matter is substantial. As noted herein, we found that Appellants were afforded the opportunity to create a complete record, and that no violations of due process occurred. Accordingly, we declined to make a de novo review.
Where a trial court has not received additional evidence, appellate review is limited to determining whether the Board abused its discretion or committed an error of law. Petition of Dolington Land Group, 576 Pa. 519, 839 A.2d 1021 (2003). The findings of the governing body shall not be disturbed by the Court if supported by substantial evidence. MPC, § 11005-A. We follow this clearly stated and long followed standard in our review of the decision of the Board of Supervisors.
Furthermore, the Board, as the factfinder is the sole judge of credibility with the power to resolve conflicts in the testimony and to reject even uncontradicted testimony if it should find said testimony lacking in credibility. Dolington, 839 A.2d at 1026; Nettleton v. Zoning Board of Adjustment, 574 Pa. 45, 828 A.2d 1033, 1041 (2003). This Court is therefore bound by the credibility findings of the Bedminster Township Board of Supervisors.
III. Due Process.
Due process requires that an individual be afforded notice and an opportunity to be heard before being deprived of his property rights. Included in this protection is the right to a hearing before a fair and impartial tribunal. Accordingly, when a municipal tribunal is acting in an adjudicatory role it must abide by due process standards and avoid the appearance of impropriety. Appellants raise several issues on appeal alleging due process violations, all of which are based on the underlying contention that Appellants were not afforded a fair hearing. We note initially that this matter has been highly adversarial since its inception. More than three years of hearings ensued in this case and both sides zealously litigated their position, raising hundreds of objections that resulted in hundreds of evidentiary rulings by the Board. Despite the plethora of objections and argument evidenced on the record, Appellants were never prevented from coherently and effectively presenting their case before the Board or from creating a substantial and complete record. Considering these proceedings as a whole, we do not find that Appellants were denied a fair hearing so as to violate their right to due process.
With respect to their specific allegations, Appellants argue that the Board Solicitor impermissibly comingled his adversarial and adjudicatory functions. In a hearing before a municipal tribunal, the township solicitor is prohibited from acting as a legal advisor to the board and *241 also in an adversarial capacity on behalf of the municipality. Newtown Twp. Bd. of Supervisors v. Greater Media Radio Co., 138 Pa.Cmwlth. 157, 587 A.2d 841 (1991). Such comingling of functions is impermissible as it makes the proceedings susceptible to prejudice and exudes the appearance of impropriety. Id.; see also Horn v. Hilltown Twp., 461 Pa. 745, 337 A.2d 858, 859-60 (1975), Sultanik v. Board of Sup'rs of Worcester Tp., 88 Pa.Cmwlth. 214, 488 A.2d 1197 (1985). Appellants argue that Township Solicitor, the law firm of Grim, Biehn & Thatcher, as represented by John Rice, Esquire and Peter Nelson, Esquire (hereinafter "Solicitor"), unlawfully commingled its roles by advising the Board in the hearings before it. We disagree.
Pursuant to the MPC Section 916(c)(3), if a challenge to the validity of an ordinance is to be heard by the governing body, "the municipal solicitor shall represent and advise it at the hearing." The Solicitor, therefore, acted in accordance with the MPC when stepping into the role of Board Solicitor. In order to avoid bias, Special Counsel Imms was appointed to represent the Township in the challenge. Contrary to Appellants' contentions, the Solicitor specifically avoided commingling the roles of advocate and adversary by appointing counsel to independently represent the Township. That decision was within the bounds of the law and did not prejudice Appellants. Furthermore, once the proceedings before the Board of Supervisors were adjourned, the Solicitor was not barred from again representing the Township in any further proceedings initiated by Appellants.
We also do not find it unreasonable that the Solicitor acted as legal advisor in the preparation of Ordinance 118 and the subsequent Township cure ordinances. It is the role of the Solicitor to provide a legal review of the ordinances proposed by the municipal governing body. Such legislative involvement does not taint the fairness of the Solicitor's role in subsequent challenges to those ordinances. We acknowledge Appellants' concern, that the Township counsel who drafted Ordinance 118 became the Board's legal advisor and ruled on evidentiary issues. However, such is the nature of proceedings before municipal bodies. The adjudicative structure used by the Township was appropriate and Appellants have not challenged the constitutionality of the MPC sections providing for such structure, but rather rely on various allegations of impropriety. We do not find that the Township acted impermissibly and we will not undermine the MPC provisions providing for such procedural framework.
Appellants also raise several allegations relating to Township witnesses and their relationships with the Board and with the Township. Specifically, Appellants allege that the witnesses were biased, had ex-parte contacts with Board members and impermissibly consulted with Township counsel during the course of their testimony, which at times spanned several hearings. We find that the circumstances underlying each allegation do not support a finding that any wrongdoing took place. With respect to the allegations of ex-parte contacts, we find that the contact between Special Counsel Imms and the Board was solely to obtain financial authorizations for litigation costs. Regarding the other alleged contacts, between Township witness Michael Frank and Board member Morgan Cowperthwaite and also between Mr. Frank and the Township Solicitor, we find said contacts were appropriate and involved only a search for zoning ordinances and maps. These alleged contacts did not involve attempts to unduly influence the Board or address the specifics of the underlying matter.
*242 We also note that in a relatively small rural township in Upper Bucks County, it is inevitable that township officials, board members, and potential witnesses will interact outside of the courtroom setting. We do not find that any of the contacts alleged were inappropriate or related to the matter at hand. Further, we do not find that the witnesses' prior relationships with the township caused bias. It is a certainty at a municipal hearing, specifically one related to an ordinance issue, that witnesses such as the township engineer and planner will be called to testify. To find that their current or former employment by the Township creates an automatic bias or invalidates the proceedings would restrict a municipality by limiting whom it is able to call to the stand, making it highly difficult for a municipality to effectively litigate its case.
Appellants also allege that the actions of one Board Member tainted the hearings. Board Supervisor Holland resigned during the course of the hearings as a result of criminal charges which were filed against him. We note that Mr. Holland was not the sole member of the Board and we find nothing in the record indicating that his administration of the hearings was biased or prejudiced Appellants.
On appeal, Appellants also challenge eight specific evidentiary rulings by the Board Solicitor over the course of the 58 hearings in this matter. Appellants assert that these rulings demonstrate that they were not afforded a fair hearing. As discussed herein with respect to the issue of supplementation, which addressed the same evidentiary rulings, we find Appellant's allegations without merit.
Preliminarily, we note that proceedings before a municipal governing body are less formal than those held in a court of law. See MPC, § 908(6) (stating that the formal rules of evidence do not apply). With respect to the rulings on Appellants' requests for the issuance of various subpoenas, a memo penned by Special Counsel Imms and a letter from the Solicitor, we find that the Board did not abuse its discretion by denying Appellants these documents. With respect to testimony regarding affordable housing and the transferable development rights program, we find that the Board ultimately did permit Appellants to create a record on these issues and that any precluded evidence was appropriately excluded as speculative or irrelevant. We also do not find that these few evidentiary rulings tainted the fairness of the entire hearing, prevented Appellants from creating a complete record, or deny them due process.
In sum, the actions of the Board as a whole do not evidence an unfair hearing. Rather, they show a balanced, yet adversarial proceeding before a municipal administrative tribunal. We therefore do not find that the Board of Supervisors denied Appellants a fair hearing in violation of their due process rights.
IV. Appellants' proposed ordinance and plan are unreasonable.
Assuming, arguendo, that Appellants' constitutional attack on the Bedminster Township Ordinance has merit, we nevertheless find that the relief they seek is not reasonable. We preliminarily note that Appellants seek relief similar to that obtained by C & M Developers after the Pennsylvania Supreme Court ruled in their favor, no more and no less. As stated above, we find that Appellants are not entitled to stand in the same position as C & M Developers, as they did not bring the claim which ultimately invalidated Sections 408(2)(b) and 513 of the Bedminster Township Ordinance. We therefore are not bound to duplicate the relief granted to C *243 & M Developers as part of their settlement with Bedminster Township.
As part of their challenge, Appellants filed a proposed ordinance that would, if adopted, be applicable to the entire AP District. Appellants attempt to draw all focus to the effect of this ordinance on the property in question as opposed to the district as a whole. However, the proposed curative amendment undeniably affects the entire AP District and would create a use that is inconsistent with both the character of the land in that zoning district and the Township's interest in preserving farmland.
As discussed at length in the Board Adjudication, Bedminster Township has a strong interest in preserving its agricultural land and maintaining the rural nature of its municipality. (Board Adjudication, F.F. 122-160). This interest is vast, encompassing national policy issues, state-level conservation missions, and local preservation goals. For example, the Board brought to our attention that this Commonwealth has some of the most comprehensive farmland preservation programs in the United States. As part of its dedication to preservation, Pennsylvania has spent $415,812,173.00 acquiring conservation easements on more than 275,594 acres of farmland. The residents of Bedminster have joined in the effort, approving $2.5 million to enable the Township to purchase conservation easements beyond those set aside by the state. Consistent with the history of agricultural preservation across this Commonwealth, Bedminster crafted its zoning ordinance to preserve prime agricultural soils and to limit the density of non-farm residential development in areas of the Township where farming is a primary use. Appellants' proposed cure ordinance would effectively destroy the policies and actions taken by the taxpayers to maintain the character of their land.
Appellants' proposed ordinance respects the agricultural set-aside provisions mandated by the Township and upheld by the Supreme Court. However, it allows for single-family detached dwellings to be constructed in the non-preserved lands at a density of 1 unit per acre of the base-site area of the property, which is calculated by the area of the entire property, not just the buildable-site area.[4] Therefore, although roughly 60 percent of the farmland is set aside, the remaining portion of the land would have, at the very least, a density of 2.5 houses per acre. Appellants also propose a minimum lot size of 6,500 square feet. Recognizing the use of land for open space, roads, and other necessities, the potential density for residential developments with such a minimum lot size could be as high as 6.7 dwellings per acre in some areas. (Board Adjudication, F.F. 160). Furthermore, the proposed amendment permits multiple landowners in the AP District to consolidate their properties in order to maximize the base-site area and also to maximize the size of the farmland set-aside tracts. By maximizing base-site area, Appellants' proposal increases total acreage, in turn increasing the number of proposed dwellings they would be permitted to build on the buildable-site area.
Under the current dimensional provisions, Section 513 of Ordinance 162, high performance subdivision development in the residential (R-3) zoning district is permitted at a density of 3.0 units per acre. The density calculations are based on the net buildable-site area, not base-site area. *244 Additionally, while the minimum lot size for the performance subdivision development varies, cluster developments are permitted a minimum lot size requirement of 15,000 square feet. (Exhibit A-59, p. 14). Given the current R-3 zoning requirements, we find that Appellants' proposed ordinance seeks development that would be inconsistent with even the higher density construction permitted for in the R-3 zoning district. Appellants' proposal would place the highest density development in Bedminster Township squarely in the area marked for low density development and agricultural preservation. This contravenes the Township policies protecting farmland and preventing overdevelopment in the AP District, which were recognized by the Supreme Court as valid. In light of the interests shown by the Township and the long history of conservation of farmland in this Commonwealth, we affirm the determination of the Board in these respects and find that Appellants' proposed Cure Ordinance is unreasonable.
We note that both parties briefed the issue concerning whether Appellants' development plans satisfied the criteria set forth in Section 609.1(c) of the MPC. In light of our finding that Appellants' proposed Ordinance is unreasonable and would harm the integrity of the AP District, we will not further address this issue.
V. Reasonableness of the Township's Cure Ordinance.
When a landowner files a substantive challenge to a zoning ordinance, the ordinance at issue is the one in existence at the time of the challenge. However, as discussed in detail above, when the ordinance has already been invalidated, the constitutionality of the unamended ordinance is no longer relevant. Instead, the focus of this Court should be on the ordinance in its amended form. Casey, 328 A.2d at 466 (when ordinance is pending at time of challenge, the court's concern is with the ordinance as amended). We acknowledge that in the present matter we do not have an ordinance that is "pending" as technically defined by case law. Nevertheless, under the unique chronology of this case, we will consider the Township's Cure Ordinance and will determine whether it provides an adequate, reasonable, and constitutional remedy in the case at hand.
We find that Bedminster Township has cured the defects delineated by the Supreme Court in the C & M Developers decision. Specifically, the Supreme Court invalidated the one acre minimum lot size restriction, finding that such a lot size, when coupled with the other dimensional requirements, unduly limits a landowner's use of his property. The Court expressly found that the Township's justification for the minimum lot size was unreasonable.
The Township enacted Ordinance 149 on April 30, 2003 in order to correct the unconstitutional provisions of its prior ordinance. Ordinance 149 created new ways in which to develop property in the AP District, reduced minimum width size to 150 feet, eliminated the building envelope requirement, and most notably, reduced the minimum lot size from "one good acre" to 32,000 square feet (slightly less than ¾ of an acre). In addition to this 26% minimum lot size reduction, Ordinance 149 created a maximum density of one dwelling unit for every two acres. (Exhibit A-50, tab "M"). By significantly reducing the minimum lot size requirement, the Township addressed the concern articulated by the Supreme Court.
We also find that the Township has adequately justified the new minimum lot size. As mentioned herein, the Township's Comprehensive Plan demonstrates the desire to keep rural areas less densely developed *245 in order to protect farmland and local farming operations. Expert testimony was presented that the purpose of reducing the minimum lot size to 32,000 square feet was to permit an increase in density while at the same time maintaining the integrity of the area by discouraging the construction of an unreasonably large number of new dwellings that would interfere with local agricultural activities. (N.T. 6/7/05, pp. 49-66).
In high density development districts, lot sizes are too small to contain individual water and sewage facilities. Therefore, dense residential developments must generally receive public water and sewage. When community water and sewage treatment systems are extended into the AP District there will inevitably be more residential development requested in that area. (Board Adjudication, F.F. 64). As the AP District is not an area marked for the type of residential growth that would justify extending such public facilities, permitting lot sizes that would require shared facilities runs contrary to the overall interest in discouraging high density residential growth. Therefore, for development in the AP District to be consistent with the Township's policies, lot sizes must be large enough to house on-site water supply and sewage disposal facilities.
On lot sizes smaller than one acre, special care must be taken to insure that the land has the capacity to protect the water supply from pollution from on-site septic tanks and other sewage treatment and disposal systems. In a memorandum prepared and submitted by Township expert Professor John Keene, the smaller the lot size, the more difficult it is to comply with state regulations maintaining certain distance requirements between water and sewage systems. The purpose of these regulations is to insure that the water supply is not contaminated by the sewage system. According to Professor Keene, the 32,000 square foot minimum lot size is a bright-line requirement enacted in order to assure that problems resulting from placing water and sewage facilities too close together do not occur. (Exhibit A-68). We find that both maintaining lower density development in the AP District in order to avoid conflicts between residential and agricultural uses, and the safety of the water supply are legitimate and reasonable justifications for enacting the 32,000 square feet minimum lot size.
As we find that Ordinance 149 cured the constitutional defects illuminated in the C & M Developers decision, and provides a reasonable framework for development, we need not discuss the impact of the Township's subsequently enacted ordinances. We note, however, that Ordinance 162, enacted during the course of the proceedings before the Board, did further amend the zoning ordinance to permit more reasonable and flexible development in the AP District.
For the above reasons we find that the Township cured all constitutional defects and currently has a zoning ordinance that permits reasonable development in the AP District, while maintaining the strong interests in preserving farmland and the integrity of farming operations in Bedminster Township.
CONCLUSION
For the reasons set forth in this Opinion, we find that the Bedminster Township Board of Supervisors did not err in dismissing Appellants' Curative Amendment Challenge. Accordingly, we deny the appeal of The Piper Group, Inc., et. al., and issue the attached Order.
BY THE COURT:
/s/ C. THEODORE FRITSCH, JR.
C. THEODORE FRITSCH, JR., J.
*246
8/27/09
Date
NOTES
[1] A zoning ordinance is a valid exercise of the police power when it promotes public health, safety or welfare and its regulations are substantially related to the purpose the ordinance purports to serve. In applying that formulation, Pennsylvania courts use a substantive due process analysis that requires a reviewing court to balance the public interest served by the zoning ordinance against the confiscatory or exclusionary impact of regulation on individual rights. The party challenging the constitutionality of certain zoning provisions must establish that they are arbitrary, unreasonable and unrelated to the public health, safety, morals and general welfare. Where their validity is debatable, the legislature's judgment must control. Boundary Drive Associates v. Shrewsbury Township Board of Supervisors, 507 Pa. 481, 491 A.2d 86 (1985).
[2] Act of July 31, 1968, P.L. 805, as amended, 53 P.S. §§ 10609.1, 10909.1(b)(4), 10916.1(a)(2). Section 609.1 of the MPC was added by section 10 of the Act of June 1, 1972, P.L. 333, as amended; section 909.1(b)(4) of the MPC was added by section 87 of the Act of December 21, 1988, P.L. 1329, as amended; and section 916.1(a)(2) of the MPC was added by section 99 of the Act of December 21, 1988, P.L. 1329, as amended.
[3] Added by section 2 of the Act of October 5, 1978, P.L. 1067, as amended, 53 P.S. § 10609.2.
[4] Section 916.1(c)(3) of the MPC provides that, where a validity challenge is heard by the governing body, it shall be represented and advised at the hearings by the municipal solicitor. 53 P.S. § 10916.1(c)(3). As permitted by section 916.1(c)(4) of the MPC, 53 P.S. § 10916.1(c)(4), the Township engaged Special Township Counsel to present its case.
[5] Previously, the Piper Group had filed a motion with the trial court for leave to supplement the record and present evidence it claimed was improperly precluded at the Board hearings. After the submission of briefs and oral argument on the issue of supplementation, the trial court denied the motion, concluding that the Piper Group failed to establish that it was denied the opportunity to include relevant testimony and that the voluminous record was adequate to allow for appellate review. See section 1005-A of the MPC, added by section 101 of the Act of December 21, 1988, P.L. 1329, 53 P.S. § 11005-A (relating to hearing and argument on land use appeal). The parties then filed briefs and conducted argument on the merits of the Piper Group's land use appeal.
[6] Where, as here, the trial court takes no additional evidence, our scope of review is limited to determining whether the Board committed an abuse of discretion or an error of law. Baker v. Chartiers Township Zoning Hearing Board, 677 A.2d 1274 (Pa.Cmwlth.1996), appeal denied, 547 Pa. 738, 690 A.2d 238 (1997). The Board abuses its discretion when its findings of fact are not supported by substantial evidence. Valley View Civic Association v. Zoning Board of Adjustment, 501 Pa. 550, 462 A.2d 637 (1983). Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Id.
[1] We acknowledge that our analysis differs in some respects from the reasoning of the Bedminster Township Board of Supervisors as set forth in the Adjudication (hereinafter "Board Adjudication") below. We nevertheless reach the same result.
[2] We acknowledge the argument raised by Appellants regarding the Board's decision not to include various parcels of land in making its determination. As we deny the present appeal for other reasons, we will not address this issue.
[3] Appellant's allegations of due process violations are addressed specifically herein, in Section IV.
[4] The Board determined that the density of one dwelling unit per acre base-site area was adopted by Appellants without undertaking any study of the appropriateness of this number. No legal or technical reason was provided at the hearing for this choice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1644816/ | 994 So. 2d 307 (2008)
WRIGHT
v.
STEUBE.
No. SC08-1604.
Supreme Court of Florida.
October 7, 2008.
Decision without published opinion. Hab.Corp.dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549090/ | 992 A.2d 413 (2010)
413 Md. 230
Shirley L. SUDER
v.
WHITEFORD, TAYLOR & PRESTON, LLP, et al.
No. 15, September Term, 2009.
Court of Appeals of Maryland.
April 9, 2010.
*414 Howard J. Schulman (Daniel P. Doty of Schulman & Kaufman, LLC, Baltimore), on brief, for petitioner.
Alvin I. Frederick (James E. Dickerman and Daniel R. Hodges of Eccleston & Wolf, P.C., Hanover), on brief, for respondents.
Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, MURPHY, ADKINS and JOHN C. ELDRIDGE, (Retired, Specially Assigned), JJ.
ADKINS, Judge.
The trial-within-a-trial doctrine is unique to legal malpractice cases. The doctrine provides a mechanism we do not see elsewhere for a tribunal to resolve a proximate cause query. When the doctrine is applicable, the litigants reconstruct the underlying action, absent the supposed breach of duty. The tribunal must not only determine how the parties would have proceeded had there been no breach, but must also assume the role of the earlier adjudicator in order to ascertain the probable outcome of the action. Simply put, the court must try a case within a case.
We have previously recognized the trial-within-a-trial doctrine when the legal malpractice claimant was denied a trial due to the attorney's alleged malpractice. In this appeal, we are asked to determine whether the doctrine may apply when the underlying trial or other proceeding has already been litigated. We hold that it can. We also hold that, in applying the doctrine, the attorney is not limited to the defenses actually raised by the underlying defendant, but may assert those defenses that the original defendant would have raised if the attorney had never breached his or her duty.
*415 Here, Respondent Whiteford, Taylor & Preston ("Whiteford") defends against a malpractice action brought by its former client, Shirley Suder, in connection with the administration of her deceased husband's estate. Suder filed a complaint for malpractice against Whiteford in the Circuit Court for Talbot County, alleging that Whiteford committed legal malpractice when it missed the deadline to request an extension of time to file Suder's request to elect her statutory share of her late husband's estate. Whiteford does not contest that it breached its duty by failing to file for an extension until after the deadline, resulting in the Orphans' Court's denial of Suder's motion for statutory election. Whiteford does dispute, however, that its negligence was the proximate cause of her injury, contending that the Orphans' Court could not have granted the extension in any event, because its earlier order granting a previous extension was void. The Circuit Court for Talbot County granted summary judgment in favor of Suder, which the Court of Special Appeals ("CSA") reversed and remanded with an instruction to enter a judgment in favor of Whiteford. We reverse the judgment of the CSA and remand the case to the CSA for it to remand to the Circuit Court for a trial on the merits.
FACTS AND LEGAL PROCEEDINGS
This legal malpractice action arises from an estate administration dispute between Petitioner Suder and Gregory Downes ("Downes"). In Downes v. Downes, 388 Md. 561, 880 A.2d 343 (2005), Judge Wilner, writing for this Court, summarized the underlying controversy as follows:
[Suder, formerly known as Shirley Downes] is the surviving spouse of Eldridge Downes IV.... In his Will, [the decedent] left all of his tangible personal property to [Suder] and named her as his personal representative.... On November 3, 1997, the Orphans' Court admitted the Will to probate and, pursuant to the Will, appointed [Suder] as personal representative....
On June 2, 1998one day prior to the then seven-month deadline for her to decide whether to renounce the Will and take her statutory share of the Estate [Suder], acting pro se, filed a petition for an extension of that time.... [O]n June 9, 1998, [six days after the deadline,] the court granted [it].... [[1]] On August 27, 1998, [Suder], again acting pro se, filed a petition for a second extension of time to elect her statutory share [which the court also granted until December 1, 1998].
[On November 23, 1998, Suder retained Respondents, Whiteford, Taylor & Preston, LLP and Ascanio S. Boccutti, an attorney employed by Whiteford, "to represent and advise her concerning whether or not to renounce her late husband's will and take her statutory share."]
On November 30, 1998one day before the expiration of the current extension [Suder], this time through [Whiteford and Boccutti], filed a petition for a third extension.... She claimed that, due to a lack of cooperation on the part of [three businesses in which her late husband had an interest], she had been unable to determine the value of the assets or the extent of the liabilities. On December 1, the court granted another three-month extension, until March 1, 1999. On February 24, 1999, again through counsel, [Suder] requested a fourth extension, for the same reason. On March 2, the court *416 granted the extension, until June 2, 1999.
* * *
For whatever reason, [Suder, through Whiteford and Boccutti,] allowed the fourth extension to expire. On June 24, 1999twenty-two days after the expiration of the extension periodshe filed a petition for a fifth extension.... On July 6, 1999, the court, citing [Estates & Trusts Article ("ET")] § 3-206(a), denied the petition. [Suder] moved for reconsideration of that denial, claiming that she had substantially complied with the deadline requirement. In October, 1999, the court, citing Simpson v. Moore, 323 Md. 215, 228, 592 A.2d 1090, 1096 (1991), denied the motion, holding that the problem was not one of substantial compliance but of non-compliance with the statutory requirement.
[Suder] did not seek any immediate review of the Orphans' Court's denial of her petition for fifth extension, but rather completed the administration of the Estate. On February 13, 2001, the court approved the Fifth and Final Administration Account showing a gross Estate of $3,228,701 and a net Estate after payment of taxes and expenses of $945,291. On March 15, 2001, she filed an appeal to the Circuit Court from the denial of her petition for fifth extension and her motion to reconsider that denial. [Decedent's son, Downes], as sole surviving beneficiary of the residuary trust, moved to intervene in the Circuit Court action, noting that, if [Suder] were permitted to renounce the Will, the value of the residuary trust would be decreased by about one-third. He also moved to dismiss the appeal as untimely, arguing that the denial of [Suder's] request for a fifth extension constituted a final judgment and that an appeal should have been taken within 30 days after that order.
On November 15, 2001, the Circuit Court granted [Downes's] motions to intervene in and to dismiss the appeal. The court concluded that the order of July 6, 1999 that denied [Suder's] petition for fifth extension was a final, appealable judgment ... and that her appeal from that order in March, 2001, was untimely.
[Suder] then appealed to the [CSA] which, in an unreported Opinion filed November 14, 2002, reversed the Circuit Court ruling. The intermediate appellate court concluded that the effect of the July, 1999 order was simply "to preclude [Suder] from electing an alternative method of calculation" and that nothing in that order "suggests a final adjudication of [Suder's] claim, or even a specific valuation as to [Suder's] award." Because that order did not finally adjudicate her claim in regard to the Estate, it was not immediately appealable. The final, appealable judgment, the court held, was the order approving the Fifth and Final Administration Account. The case was thus remanded to the Circuit Court for further proceedings on [Suder's] appeal.
* * *
[On remand, the circuit court] read what is now [ET] § 3-206(a)(2) as not allowing the court to grant a subsequent extension once the allowable period or current extension expired. The court noted that [Suder] was aware of that fact, having complied with the requirement on four prior occasions, and observed that if the law created a harsh result, the remedy lay in a legislative change, not one crafted by the Judiciary.
[Suder] appealed again, but this time the [CSA], in a reported Opinion, affirmed. *417 Downes v. Downes, 158 Md.App. 598, 857 A.2d 1155 (2004).... [T]he intermediate appellate court held that the period prescribed in [ET] § 3-206 for extending the time for a spousal election may not be enlarged by either an orphans' or circuit court. It rejected [Suder's] argument that a circuit court had greater authority in this regard than an orphans' court, either under the Maryland Rules or under equitable principles, and declared that "if a surviving spouse does not file a petition for extension of time within the originally prescribed period or, as here, the previously extended period, the spouse is foreclosed from thereafter obtaining additional time to make the election." Downes v. Downes, supra, 158 Md.App. at 610, 857 A.2d at 1161. We granted certiorari to consider the single question of whether an orphans' court, or a circuit court in a de novo appeal, has discretion to accept a surviving spouse's petition for extension of time to make an election under ET § § 3-203(a) and 3-206(a) and Maryland Rule 6-411(c) when the petition seeking the extension is filed after the previous election period has already expired.
Id. at 566-70, 880 A.2d at 345-48 (footnotes omitted) (footnote added). This Court went on to affirm the CSA judgment. Id. at 578, 880 A.2d at 353.
Thereafter, Suder brought this suit against Whiteford, alleging that the firm's failure to file the fifth petition for an extension before the previous election period had expired resulted in her loss of the right to disclaim her husband's Will and elect a statutory share of his estate. Whiteford countered, arguing that its untimely filing was not the proximate cause of Suder's injuries, because she lost the right to elect a statutory share of her husband's estate when her first pro se request for an extension was not granted by the Orphans' Court until after the expiration of the election period, even though it was timely filed. Whiteford filed a motion to dismiss the case, and Suder filed a motion for summary judgment. The Circuit Court for Talbot County denied Whiteford's motion, and granted summary judgment and entered a final judgment in favor of Suder after determining that the first extension was valid for public policy reasons, namely, that "[i]t would seem to be wrong, maybe even against public policy to hold this litigant in any way at fault for doing what she needed to do on time because an entity, the Orphans' Court, didn't respond before June 3rd for whatever reason." The court also ruled that, because Downes never challenged the first extension during the entire time the estate remained open, Whiteford could not now raise the issue.
In an unreported opinion, the CSA reversed the Circuit Court, holding that the grant of the first extension was a voidable order that could be contested by Downes at any time. It also approved use of the trial-within-a-trial doctrine to determine Whiteford's liability. In this regard, it concluded that, although Downes based his challenge of Suder's election on the fifth extension, Whiteford was not limited to those grounds and could challenge proximate cause by raising the validity of the first extension. Reasoning that no reasonable legatee would disregard the opportunity to prevail on the erroneous grant of the first extension if the fifth petition had been timely filed, the CSA reversed the Circuit Court's denial of Whiteford's motion to dismiss and remanded the case to that court to enter a judgment in favor of the firm. Suder noted this timely appeal.
We granted certiorari to consider the *418 following issues:[2]
I. Whether the trial-within-a-trial doctrine of proving proximate cause is appropriate in a malpractice action in which the client is not denied the opportunity to proceed to trial.
II. Whether the CSA correctly concluded that, as a matter of law, Whiteford's conduct was not the proximate cause of Suder's damages.
DISCUSSION
I. Standard of Review
When reviewing a trial court's grant of summary judgment, the appellate court must determine whether there is a dispute as to a material fact sufficient to require an issue to be tried. See Frederick Rd. Ltd. P'ship v. Brown & Sturm, 360 Md. 76, 93, 756 A.2d 963, 972 (2000). "Summary judgment is not a substitute for trial.... Evidentiary matters, credibility issues, and material facts which are in dispute cannot properly be disposed of by summary judgment." Id.
The question of whether a trial court's grant of summary judgment was proper is a question of law subject to de novo review on appeal. In reviewing a grant of summary judgment under Md. Rule 2-501, we independently review the record to determine whether the parties properly generated a dispute of material fact, and, if not, whether the moving party is entitled to judgment as a matter of law. We review the record in the light most favorable to the nonmoving party and construe any reasonable inferences that may be drawn from the facts against the moving party.
Haas v. Lockheed Martin Corp., 396 Md. 469, 479, 914 A.2d 735, 741 (2007) (quotation marks and citations omitted).
II. Analysis
To prevail on a claim for legal malpractice, a former client must prove "(1) the attorney's employment, (2) the attorney's neglect of a reasonable duty, and (3) loss to the client proximately caused by that neglect of duty." Thomas v. Bethea, 351 Md. 513, 528-29, 718 A.2d 1187, 1195 (1998). Here, Whiteford does not contest that it was employed by Suder and that it breached its duty by failing to file a fifth petition for an extension until 22 days after the deadline. Nor does it dispute that Suder received less under the will than she would have received as her elective share under ET Section 3-203(a), a loss of at least $269,920.06.[3]See Md.Code (1974, 1991 Repl.Vol., 1992 Suppl.) § 3-203(a) of the Estates and Trusts Article ("ET"). Rather, Whiteford challenges Suder's assertion that its failure to timely file the request for an extension was the proximate cause of her damages.
Whiteford contends that Suder cannot satisfy the proximate cause requirement for legal malpractice because her right to elect to take a statutory share was lost when the Orphans' Court erroneously granted her first request to extend the *419 elective period after the first statutory period had already expired. Whiteford's representation of Suder did not begin until well after this. Whiteford asserts that Downes would have challenged the validity of the first extension, and would have prevailed, had the Circuit Court not already denied Suder's fifth extension as untimely.[4] To prove that denial of the fifth extension was not the proximate cause of Suder's damages, Whiteford seeks to apply the trial-within-a-trial doctrine, albeit asserting that no actual trial is required because a motion to dismiss should have been granted.[5] The firm argues that even if it had timely filed the petition for the fifth extension, Downes would have successfully prevented Suder from collecting her statutory share because of the invalidity of the first extension. Thus, it maintains, Suder was not actually placed in a worse position because of Whiteford's conduct.
Suder, on the other hand, contends that Whiteford is precluded from basing its defense on the Circuit Court's improper grant of a first extension because Downes never challenged that petition. She argues that allowing Whiteford to employ the trial-within-a-trial doctrine and present a hypothetical situation where Downes could not challenge the fifth extension is an improper rewrite of history. As the case had already been litigated, there is no question as to how Downes would have proceeded, i.e., without challenging the first extension. Alternatively, Suder argues that even if the trial-within-a-trial doctrine can be applied, Downes waived his right to challenge the first extension, and if Whiteford is to stand in his shoes, it is restricted to Downes's chosen course of attack.
A. Trial-Within -A-Trial Doctrine
The trial-within-a-trial doctrine is "the accepted and traditional means of resolving issues involved in the underlying proceeding in a legal malpractice action." Thomas, 351 Md. at 533, 718 A.2d at 1197 (quoting Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 32.8 (4th ed. 1998 Supp.)). It should be applied where there is no bright line malpractice. Cf. Thomas, 351 Md. at 520, 718 A.2d at 1190 (describing doctrine as proper in a settlement malpractice action because there is "a range for honest differences of opinion in making settlement recommendations, and that, accordingly, a recommendation to settle or not to settle on particular terms is not malpractice simply because another lawyer, or even many other lawyers, would not have made the same recommendation under the alleged circumstances.") (quotation marks and citation omitted). The trial-within-a-trial doctrine is summarized in Section 53 of the Restatement (Third) of the Law Governing Lawyers. Comment b to that section ("Action by a civil litigant: loss of a judgment") provides in relevant part:
In a lawyer-negligence or fiduciary-breach action brought by one who was the plaintiff in a former and unsuccessful civil action, the plaintiff usually seeks to recover as damages the damages that would have been recovered in the previous action or the additional amount that would have been recovered but for the defendant's misconduct. To do so, the *420 plaintiff must prove by a preponderance of the evidence that, but for the defendant lawyer's misconduct, the plaintiff would have obtained a more favorable judgment in the previous action. The plaintiff must thus prevail in a "trial within a trial." All the issues that would have been litigated in the previous action are litigated between the plaintiff and the plaintiff's former lawyer, with the latter taking the place and bearing the burdens that properly would have fallen on the defendant in the original action. Similarly, the plaintiff bears the burden the plaintiff would have borne in the original trial....
Restatement (Third) of Law Governing Lawyers § 53 cmt. b (2000). The trial-within-a-trial doctrine exposes "what the result `should have been' or what the result `would have been'" had the lawyer's negligence not occurred. Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 35:12 (2010).
Suder argues that the trial-within-a-trial doctrine cannot be utilized here, where the underlying case has been litigated because history has already established Downes's course of action, which was to challenge the request for a fifth extension rather than the first extension. As support, she cites several cases in which courts have applied the doctrine to investigate allegations that the attorney's malpractice prevented a trial from ever taking place. See Thomas, 351 Md. at 513, 718 A.2d at 1187 (attorney negligently advised his clients to settle rather than proceed to trial); Central Cab Co. v. Clarke, 259 Md. 542, 270 A.2d 662 (1970) (ordering additional proceedings where the client could prove that it had a meritorious defense in the underlying matter and thus the default judgment resulting from the attorney's negligence was the proximate cause of the client's damages); Bongiorno v. Liberty Mut. Ins. Co., 417 Mass. 396, 630 N.E.2d 274 (1994) (attorney's malpractice resulted in dismissal of client's claim). These cases, however, do not say that the doctrine is limited to "no-trial" situations, as Suder contends.
Indeed, in other cases, outside of Maryland, the doctrine has been applied after the completion of a trial in the underlying case. See McIntire v. Lee, 149 N.H. 160, 816 A.2d 993 (2003) (malpractice established after jury determined that evidence that was not introduced in the underlying trial was relevant and should have been introduced); Prince v. Garruto, Galex & Cantor, Esqs., 346 N.J.Super. 180, 787 A.2d 245 (App.Div.2001) (ordering a trial on the merits to determine when omission of a witness in previous trial constituted malpractice); see also Meyer v. Maus, 626 N.W.2d 281, 287 (N.D.2001) ("The case-within-a-case doctrine requires that, but for the attorney's alleged negligence, litigation would have ended with a more favorable result for the client."); Aubin v. Barton, 123 Wash.App. 592, 98 P.3d 126, 134 (2004) ("[T]he trial court hearing the malpractice claim retries, or tries for the first time, the client's cause of action that the client contends was lost or compromised by the attorney's negligence, and the trier of fact decides whether the client would have fared better but for the alleged mishandling."). Furthermore, Suder's rationale does not comport with the purpose of the doctrine, which, as stated above, is to determine what would have occurred had Whiteford timely filed the petition for the fifth extension. Thus, the question is whether Downes would have challenged the validity of the first extension had Whiteford timely filed the fifth request for extension. The trial-within-a-trial doctrine is designed to resolve that question.
We are not persuaded otherwise by Suder's interpretation of Section 53 of the *421 Restatement (Third) of the Law Governing Lawyers. Comment b to that section provides in relevant part:
The plaintiff in a previous civil action may recover without proving the results of a trial if the party claims damages other than loss of a judgment. For example, a lawyer who negligently discloses a client's trade secret during litigation might be liable for harm to the client's business caused by the disclosure.
Restatement (Third) of the Law Governing Lawyers § 53 cmt. b (2000). Suder narrowly interprets the Restatement's "loss of a judgment" to mean the loss of the chance to litigate at all. We see nothing in Comment b that proposes such a limitation. Rather, the example provided by the Restatement suggests that when the plaintiff is damaged in a way other than receipt of a less favorable judgment, the trial-within-a-trial approach is not necessary to prove malpractice.
Ultimately, the triggering mechanism for the trial-within-a-trial doctrine is a dispute over proximate cause, not whether the client lost the chance of a trial. As causation is the question in this case, we agree with the CSA that the doctrine should be applied.
B. Whiteford's Right To Raise The Defense Of The Improper Grant Of The First Petition For Extension
Both parties characterize the first erroneously granted extension as voidable, not void. This is consistent with this Court's holding in Downes regarding the fifth extension:
If the court improperly grants an extension in violation of [the time limitation in ET § 3-206(a)(2)] and a proper appeal is noted, its action will be reversed by the appellate court and all will be made right. To regard an improper extension as an excess of jurisdiction [i.e., to classify it as void], however, would allow anyone at any time to challenge it. Years later, title to both real and personal property, even in the hands of innocent third parties, could be challenged. There is no need, and no justification, for an approach that might lead to that result.
Downes, 388 Md. at 575, 880 A.2d at 351. Thus, Downes was permitted to challenge the validity of the first extension throughout the appellate process, up until the close of the estate administration.
Whiteford argues that although Downes did not attack the first extension during the underlying case, the firm should not be precluded from asserting that defense because it was one that was available to Downes. We agree only partially, and explain.
Whiteford is not precluded from challenging the first extension simply because Downes chose to challenge the fifth extension rather than the first. In other words, Whiteford is not limited by the manner in which Downes actually handled his own defense. This, however, does not mean that Whiteford is necessarily entitled to raise all possible defenses that were available to Downes. As we stated above, in a malpractice action, a court should attempt to ascertain what would have happened had the attorney not breached his or her duty. See Legal Malpractice, supra, at § 35:12. Therefore, Whiteford is limited to those defenses that Downes would have raised in the underlying action if he could not attack the fifth petition, rather than those he actually raised. As we discuss in the next section, this is a question for the finder of fact.
We hasten to point out that allowing Whiteford to rely on Downes's other defenses will not affect the outcome of the underlying estate administration. Suder *422 incorrectly asserts that allowing Whiteford the opportunity to challenge the first petition constitutes a collateral attack on a closed order and that "[u]nder the law-of-the-case doctrine, litigants cannot raise new defenses once an appellate court has finally decided a case if these new defenses could have been raised on the facts as they existed prior to the first appeal." Suder misinterprets the purpose of permitting Whiteford to raise that defense. To be sure, the invalidity of the first extension cannot be asserted against Suder to alter the outcome of the estate administration; it was never advanced by Downes with regards to that action, and thus he cannot resurrect it to affect the disposition of the estate. See generally Kent County Bd. of Educ. v. Bilbrough, 309 Md. 487, 490, 525 A.2d 232, 233 (1987) (quoting Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n. 1, 104 S. Ct. 892, 894 n. 1, 79 L. Ed. 2d 56 (1984)) ("Claim preclusion refers to the effect of a judgment in foreclosing litigation of a matter that never has been litigated, because of a determination that it should have been advanced in an earlier suit.").
Here, Whiteford is given the chance to present the defense as merely the knife that severs the causal link between its own negligence and Suder's damages in this malpractice action. Relitigating the underlying action for the purposes of a malpractice suit is simply a tool by which the litigants are able to wind back the clock to determine whether the attorney proximately caused the injury.[6]
C. Suder's Motion for Summary Judgment and Whiteford's Motion to Dismiss
Whether Downes would have actually challenged the first extension if the defense of the improperly granted fifth extension was not available to him, is a question of fact. As Comment b to Section 53 of the Restatement (Third) of the Law Governing Lawyers explains, "What would have been the result of a previous trial presenting issues of fact normally is an issue for the factfinder in the negligence or fiduciary-breach action." To ascertain what would have happened, the trier of fact should examine the record of the underlying controversy and hear testimony from the parties and counsel. Yet
[t]he judges or jurors who heard or would have heard the original trial or appeal may not be called as witnesses to testify as to how they would have ruled. That would constitute an inappropriate burden on the judiciary and jurors and an unwise personalization of the issue of how a reasonable judge or jury would have ruled.
Restatement (Third) of the Law Governing Lawyers § 53 cmt. b (2000).
We will not venture as far as the CSA did in concluding that there is "no rational reason Gregory Downes would not have challenged the original extension if he did not have available the easier target presented by the late request for a fifth extension." Perhaps Downes would have proceeded against Suder in a different manner if he believed that he could not *423 attack the fifth extension. Or maybe he was simply oblivious to the invalidity of the first extension, a possibility indicated by a passage in his CSA brief: "The legal effect of [the first] petition was to preserve the surviving widow's option to take under the will of the decedent or to elect a statutory share...." He may have made this statement because he was actually unaware of the invalidity of the first extension. This is evidence for the trier of fact to consider in deciding what likely would have occurred had Whiteford not breached its duty. Accordingly, we reverse the judgment of the CSA and remand this case to the CSA, for it to remand to the Circuit Court for Talbot County for a trial on the merits.
THE JUDGMENT OF THE COURT OF SPECIAL APPEALS IS REVERSED. CASE REMANDED TO THAT COURT TO VACATE THE JUDGMENT OF THE CIRCUIT COURT FOR TALBOT COUNTY AND REMAND FOR TRIAL IN ACCORDANCE WITH THIS OPINION. COSTS TO BE DIVIDED EQUALLY BETWEEN THE PARTIES.
NOTES
[1] The Court noted that no issue had been raised about the validity of the untimely order for extension. Downes v. Downes, 388 Md. 561, 566 n. 3, 880 A.2d 343, 346 n. 3 (2005).
[2] We have re-phrased the issues stated in the Petition for Certiorari, which were:
(1) Can a defendant in a legal malpractice case rely on an affirmative or mandatory defense that was conclusively waived by the party-opponent in the underlying case?
(2) Does the "case-within-a-case" methodology permit a court to speculate about what might have happened in the absence of a lawyer's negligence?
(3) Did the lower court err in reversing the trial court's determination that Respondent's negligence was the proximate cause of Petitioner's damages?
[3] The language of then-Section 3-203(a) of the Estates and Trusts Article is now codified at Section 3-203(b) of that same Article. See Md.Code (1974, 2001 Repl. Vol., 2009 Suppl.) § 3-203(b) of the Estates and Trusts Article.
[4] Whiteford proposes that Downes did not immediately challenge the first extension because, at that point, he did not know whether Suder would disclaim the will to his detriment. By the time Downes decided to intervene, he had no "need to object to the first extension as there [was] no set of circumstances where the court would have concluded that the fifth extension was valid[.]"
[5] The trial-within-a-trial doctrine, which we further discuss infra, contemplates use of motions under Maryland Rules 2-322 and 2-501.
[6] Suder also argues that Whiteford is precluded from challenging the first extension because it proceeded as if the first extension was properly granted, noting that Whiteford would have violated the Maryland Rules of Professional Conduct to proceed with a claim for an elective share if it had reason to know that Suder had lost her right to elect at the onset of the representation. We disagree. The fact-finder is the proper gatekeeper as to what defenses are available to Whiteford, and shall do so by determining what Downes believed and how he would have likely acted. The erroneous belief of Suder's counsel, while conceivably relevant, does not dictate this determination. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549096/ | 992 A.2d 1014 (2009)
2009 VT 98
In re EASTVIEW AT MIDDLEBURY, INC. (Miriam Roemischer, Appellant).
No. 08-166.
Supreme Court of Vermont.
October 1, 2009.
Motion to Amend Granted January 15, 2010.
*1016 Stephanie J. Kaplan, East Calais, for Appellant.
Mark G. Hall and David M. Pocius of Paul Frank + Collins P.C., Burlington, for Appellee.
Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.
¶ 1. JOHNSON, J.
Dr. Miriam Roemischer appeals the Environmental Court's decision granting Eastview at Middlebury, Inc. a permit to construct a residential retirement community (the Project) in Middlebury, Vermont. We affirm.
¶ 2. Eastview plans to build a residential retirement community on a forty-acre portion of land in Middlebury. The land is part of a larger 384-acre tract owned by Middlebury College. The Project, as proposed, would be sited adjacent to the Porter Hospital and the Porter Nursing Home and near Dr. Roemischer's residence. The hospital and nursing home are located on land leased on a long-term basis from the college. Middlebury College and Porter Medical Center, Inc., the owner and operator of the hospital and the nursing home, *1017 purport to have agreed on a similar arrangement for the Project whereby the college would lease the forty acres to Porter Medical Center, which would in turn sublease the land to Eastview. These arrangements, however, have not yet been finalized.
¶ 3. In November 2005, Eastview filed its Act 250 application with the District 9 Environmental Commission. While Eastview's permit was before the Commission, Dr. Roemischer, who lives across the street from the proposed site, was granted party status to lodge her objections to the development. Notwithstanding her objections, on October 6, 2006, the Commission issued Land Use Permit # 9A0314, having found that the Project complied with all applicable Act 250 criteria. See 10 V.S.A. § 6086(a)(1)-(10) (setting forth criteria and noting that compliance with same a prerequisite to a district commission's grant of a permit).[1] The Commission's order also concluded that, in addition to the forty acres proposed to be leased to Eastview for the Project, a further 207 acres of the original 384-acre tract owned by the college would be subject to Act 250 jurisdiction. These 207 acres, would not, however, be subject to any of the specific permit conditions imposed on the Project.[2] The permit's preamble, however, states that it "applies to the land identified in the land records of Middlebury, Vermont, as the subject of a deed to a 384.7 acre tract or tracts of land," and condition 3 of the permit likewise declared that "[n]o material or substantial changes shall be made to the 384.7 acre tract or tracts of land without the written approval of the District Environmental Commission."
¶ 4. Neither Dr. Roemischer nor Eastview were satisfied with the Commission's decision. Dr. Roemischer timely appealed the grant of the permit to the Environmental Court, arguing that the Project did not meet several Act 250 criteria. Eastview, joined by Middlebury College and Porter Medical Center, filed a cross-appeal, arguing, in the words of the Environmental Court, that the Commission "[erred] in its determination concerning the amount of land to be covered by its [p]ermit." Eastview also contested Dr. Roemischer's standing to challenge the Commission's determination on Criterion 9(B), 10 V.S.A. § 6086(a)(9)(B), and the Commission's findings on this criterion in light of its conclusions regarding the scope of its jurisdiction and reach of the permit's conditions.
¶ 5. The Environmental Court found that Dr. Roemischer had preserved five issues for appeal, each regarding a specific Act 250 criterion, and that Eastview had preserved the claims set forth above for appeal. More specifically, the court concluded that Dr. Roemischer preserved challenges to the Commission's determinations regarding: Act 250 "Criterion 5, concerning the proposed Project's impact on traffic; Criterion 8, concerning the proposed Project's impact on aesthetics, scenic or natural beauty of the area; Criterion 9(A), concerning the Project's impact upon area growth; Criterion 9(B), concerning the Project's impact upon primary agricultural soils; and Criterion 10, concerning *1018 the Project's conformance with [Middlebury's] Town Plan."
¶ 6. The Environmental Court's decision was decidedly favorable to Eastview. Although it rejected Eastview's argument that Dr. Roemischer lacked party standing with respect to Criterion 9(B), it upheld the Commission's determinations on all five contested Act 250 criteria. The court further ruled that, contrary to the decision of the Commission, the "permit's encumbrance" is limited "to only the lands to be leased to Eastview for its project, since no other portion of the [c]ollege's lands will be included in the Eastview development." It then remanded the matter to the Commission to issue a permit allowing the Project to proceed.
¶ 7. Dissatisfied with this outcome, Dr. Roemischer filed a motion requesting that the Environmental Court alter its judgment. In support of her motion, she argued: (1) the court erroneously calculated the amount of primary agricultural soils affected by the Project; (2) the court applied the wrong version of Criterion 9(B); and (3) it was improper for the court to rely on site observations without placing them on the record. According to Dr. Roemischer's motion, applying the correct version of Criterion 9(B)the version in effect in 2005 when Eastview filed its applicationis particularly important.[3] The 2005 version of Criterion 9(B), she contended, does not allow for offsite-mitigation agreements, such as the one entered into by Eastview, the Vermont Agency of Agriculture, Food and Markets, and the Vermont Housing and Conservation Board in connection with the Project, as a means of complying with subsection (i) of Criterion 9(B). Additionally, the 2005 version of Criterion 9(B) requires a showing not made by Eastview, that "the applicant can realize a reasonable rate of return on the fair market value of [its] land only by devoting the primary agricultural soils to uses which will significantly reduce their agricultural potential." 10 V.S.A. § 6086(a)(9)(B)(i).
¶ 8. The court disagreed with Dr. Roemischer's first and third contentions, as set forth above, but acknowledged that it had applied the wrong version of Criterion 9(B). It concluded that the correct version of Criterion 9(B), for purposes of evaluating Eastview's permit, was that in effect in 2005 when Eastview first submitted its permit application. Its earlier decision had applied the 2007 version of the criterion. Nevertheless, the court held that, under either version, Eastview was entitled to its permit.
¶ 9. Following the Environmental Court's ruling on her motion, Dr. Roemischer appealed to this Court. On appeal, she makes four principal arguments, which we set forth in detail below and address, in turn, after setting forth the applicable standard of review.
¶ 10. We review decisions of the Environmental Court deferentially. In re Route 103 Quarry, 2008 VT 88, ¶ 4, 184 Vt. 283, 958 A.2d 694. Because the Environmental Court "determines the credibility of witnesses and weighs the persuasive effect of evidence," we will not overturn its factual findings "unless, taking them in the light most favorable to the prevailing party, they are clearly erroneous." Id. (quotations omitted). This means that its factual findings "will not be disturbed merely because they are contradicted by substantial evidence." In re Miller Subdivision Final Plan, 2008 VT 74, ¶ 13, 184 Vt. 188, 955 A.2d 1200. Instead, we will overturn such findings only where the party contesting them demonstrates "that there is *1019 no credible evidence to support them." Id. Moreover, we will uphold the court's legal conclusions with respect to compliance with Act 250 criteria where such conclusions "are reasonably supported by the findings." Id.
I.
¶ 11. On appeal, Dr. Roemischer first argues that the Environmental Court erred in overturning the Commission's determination that the scope of the permit embraced more than the forty-acre site on which the Project will be built. We disagree with Dr. Roemischer and affirm the result reached by the Environmental Court, but on a different rationale. See Bloomer v. Gibson, 2006 VT 104, ¶ 26 n. 4, 180 Vt. 397, 912 A.2d 424 (noting "that this Court may affirm a trial court's decision if the correct result is reached" pursuant to a different rationale (citation omitted)).
¶ 12. Initially, we note that there is no dispute that the Project is a "development," as that term is defined by 10 V.S.A. § 6001(3)(A)(i) ("`Development' means: The construction of improvements on a tract or tracts of land, owned or controlled by a person, involving more than 10 acres of land within a radius of five miles of any point on any involved land, for commercial or industrial purposes."). It is beyond peradventure that erecting a planned residential retirement community is "[t]he construction of improvements ... for commercial... purposes," and the forty-acre Project exceeds the jurisdictional minimum acreage without even taking into consideration "involved land." 10 V.S.A. § 6001(3)(A); Envtl. Bd. R. 2(A)(F) (2004) (defining "involved land"). Thus, lacking an exemption, Eastview was required to apply for an Act 250 permit, 10 V.S.A. § 6081, and the District Environmental Commission had initial jurisdiction to review the Project's compliance with the ten Act 250 criteria. Id. § 6086(a). Indeed, that the Project triggered initial Act 250 jurisdiction is not in dispute.
¶ 13. The first issue is whether the Commission was entitled to assert jurisdiction over the entire 384 acres, even though the project is limited to forty acres. Dr. Roemischer asserts that the permit condition imposed by the Commission is supported by our decision in In re Stokes Communications Corp., 164 Vt. 30, 664 A.2d 712 (1995). That decision neither controls nor is relevant here because the concept of involved land in Stokes is addressed to whether Act 250 jurisdiction is triggered initially, not to the proper scope of a permit. In Stokes, we addressed a project situated on an acre of leased land that was part of a larger, over ninety-acre parcel that the developer did not own. We affirmed the Environmental Board's assertion of initial jurisdiction only after concluding that the entire ninety-acre parcel was "involved land." Id. at 36, 664 A.2d at 716. Were we to have held otherwise, we reasoned, "developers could circumvent the administrative process by simply leasing parcels which do not exceed the jurisdictional thresholds." Id. at 37, 664 A.2d at 717. Because Stokes relates to initial Act 250 jurisdiction, it has no bearing on the Commission's decision pertaining to the scope of the permitted project.
¶ 14. Instead, our analysis of the propriety of the Environmental Court's conclusion on the scope of the permit is guided by our maxim that permit conditions and requirements must be reasonable, In re Eustance Act 250 Jurisdictional Opinion, 2009 VT 16, ¶ 19, 185 Vt. ___, 970 A.2d 1285, and by decisions of the former Environmental Board establishing the meaning of a "permitted project."
¶ 15. In Stonybrook Condominium Owner's Ass'n, the former Environmental Board faced a situation substantially analogous *1020 to the one faced here. Declaratory Ruling #385, Findings of Fact, Conclusions of Law, and Order at 9-21 (Vt. Envtl.Bd. May 18, 2001), at http://www. nrb.state.vt.us/lup/decisions/2001/dr385-fco. pdf. There, jurisdiction over the project in question had already been triggered, and the Board faced the question of "whether further activity on the tract whether or not it has a nexus to the initial construction on the tractrequires a permit amendment." In Stonybrook, the Board ruled that answering the question of whether an amendment is required in those circumstances entails first determining the scope of the "permitted project," generally a simple matter involving the use of a bright line test: the "permitted project" is the "entire tract of land on which the construction occurs, even if construction only occurs on a portion of it." Id. at 14-17. The Board reasoned that this method "informs the worldthe District Commission, the permittee, and all other interested personsas to the lands that will be subject to scrutiny when further activities occur." Id. at 15. Eastview sought an answer on essentially the same issue in its cross-appeal at the Environmental Court in light of the conditions attached to its permit and the Commission's order, as set forth in detail above. Supra, ¶ 3.
¶ 16. Were there no exception to the bright-line rule, its application here would appear to support the Commission's ruling that the permit burdened the entire 384-acre tract of land owned by Middlebury, its permit condition prohibiting "material or substantial changes" on the tract "without the written approval of the District Environmental Commission." The Board further held in Stonybrook, however, that to mechanistically apply the "bright line" rule would be "neither wise nor fair." Id. at 17. To avoid "absurd results," the definition of a "permitted project" must "be tempered by reason and reality." Id. at 17-18. A "permitted project," therefore, may ultimately encompass "something less than the entire tract" where construction on a portion of the tract bears an insufficient relationship with, or nexus to, the rest of the tract. Id. at 18.
¶ 17. The Board elaborated on the requirement of a nexus between the permitted project and the remainder of the tract in West River Acres, Inc., Findings of Fact, Conclusions of Law, and Order 8-10 (Vt.Envtl.Bd. July 16, 2004), at http://www. nrb.state.vt.us/lup/decisions/2004/2w1053-fco.pdf. There, the applicants owned several contiguous tracts of land and applied for a permit to develop a horse-showing and riding business on one 54.2-acre tract. The Commission found that all horse showing and almost all horse riding would occur on the 54.2-acre tract, although riders could ride on the other tracts, if they so chose. The Commission granted the permit but deemed all of the contiguous tracts within the scope of the "permitted project." The applicants appealed the permitted project ruling to the Board. The Board observed that the only environmental impact that the development would have on neighboring tracts would be occasional horse riding and observed that the West River Acres had no agreement allowing it to otherwise use the other tracts. It concluded, therefore, that there was not a sufficient nexus to satisfy Stonybrook and limited the scope of the "permitted project" to the 54.2-acre tract.
¶ 18. In this case, we agree with the Environmental Court's conclusion that including the entire 384-acre tract of land as within the scope of the permitted project is unreasonable and would result in inequitable and absurd results. For example, construed literally, Condition 3 of the permit could require Eastview to amend *1021 its permit by virtue of actions taken by third parties amounting to a material or substantial change elsewhere on the tract and completely unrelated to the Project. After conducting an extensive Act 250 review of the Project, the Environmental Court found that "no activity connected to the Eastview Project will occur on or impact upon the remaining [acreage]" of the 384-acre tract. It further found that Eastview will not "have authority to enter upon, develop or control any portion of [the tract] in any way." The impact here is even less than the minimal impact found in West River Acres, where the Board refused to define the scope of the permitted project as encompassing contiguous tracts. This situation reasonably supports the Environmental Court's conclusion that the scope of the permitted project here, and thus the permit itself, cannot extend to the entire 384-acre tract.[4]
II.
¶ 19. Dr. Roemischer next argues that the Environmental Court erred in ruling that applicant was in compliance with Criterion 8. More specifically, she asserts that the court misapplied the applicable legal standard, improperly sustained an objection to a portion of the testimony of her expert witness on this criterion, and made a variety of other evidentiary determinations and factual findings that, taken together, require us to reverse the court's conclusion on this criterion. We find no merit in Dr. Roemischer's contentions.
¶ 20. Criterion 8 mandates that, before the court may sanction the grant of an Act 250 permit, it must conclude that the development "[w]ill not have an undue adverse effect on the scenic or natural beauty of the area, aesthetics, historic sites or rare and irreplaceable natural areas." 10 V.S.A. § 6086(a)(8). To guide its analysis, we observed in In re Times & Seasons, LLC that the court should "employ[] a two-pronged approach," the so-called "Quechee test," whereby it "determines if the proposed project will have an adverse aesthetic impact, and if so, it considers whether the adverse impact would be undue." 2008 VT 7, ¶ 8, 183 Vt. 336, 950 A.2d 1189; see also In re Halnon, 174 Vt. 514, 515, 811 A.2d 161, 163 (2002) (mem.) (same). We further noted that "[a]n adverse impact is considered undue" if the project (1) violates a clear, written community standard intended to preserve the aesthetics or scenic, natural beauty of the area, (2) offends the sensibilities of the average person, or (3) the applicant has failed to take generally available mitigating steps that a reasonable person would take to improve the harmony of the proposed project with its surroundings. In re *1022 Times & Seasons, LLC, 2008 VT 7, ¶ 8, 183 Vt. 336, 950 A.2d 1189.
¶ 21. In assessing the Project's compliance with Criterion 8, the Environmental Court correctly identified and applied the Quechee test as set forth above. The court began its analysis by assessing whether the Project would have an adverse aesthetic impact on the area to the north of the Project before addressing its aesthetic impact on the area south of the Project. With respect to the developed area north of the Project, the court concluded that it would be a "suitable addition" and would not have an adverse impact on the area's aesthetics. Regarding the undeveloped areas south of the Project, however, the court determined that the Project would "be a significant departure from the pre-existing natural beauty of the area" and ruled that it would adversely impact the area's aesthetic qualities. But the court concluded that the adverse impact would not be undue. In support of this conclusion, it first noted its finding that the Project, as proposed, complies with all applicable Middlebury zoning regulations. The court also noted that Middlebury's town plan contemplates the existence of the Project. Thus, the court did not have before it any evidence that the Project specifically violated a written community standard. Quite the opposite, the court had evidence that the Project was in accordance with Middlebury's written standards, as reflected in its zoning ordinances and town plan. Additionally, the court found that the Project's adverse effects on the area's aesthetics would not offend the sensibilities of the average person in light of the Project's architecture, siting, and landscaping, which "incorporated... design characteristics from area homes" in a manner that provides a complement and not an "offense to the area" and preserved scenic views. Finally, the court noted the numerous steps Eastview took to mitigate the Project's impact on the area's aesthetic qualities. For example, it reduced the number of stand-alone cottages and further clustered the remaining cottages to obscure less of the scenic view. In sum, the Environmental Court's conclusion that the Project complied with Criterion 8 is amply supported by its findings, and we must, therefore, uphold it. In re Miller, 2008 VT 74, ¶ 13, 184 Vt. 188, 955 A.2d 1200.
¶ 22. Dr. Roemischer's attempts to cast doubt on the court's factual findings, evidentiary rulings and, by extension, its ultimate legal conclusion regarding the Project's compliance with Criterion 8, are wholly unpersuasive. For example, she asserts that the Environmental Court improperly sustained Eastview's objection to the portion of the testimony of her expert witness, a landscape architect, wherein he conclusorily opined that Eastview had not taken generally available mitigating steps to minimize the Project's aesthetic impact on the surrounding area. The expert's testimony effectively stated a legal conclusionthe Project could not satisfy the Quechee test and, therefore, could not comply with Criterion 8. While Dr. Roemischer correctly observes that Vermont Rule of Evidence 704 generally allows an expert to offer testimony as to "an ultimate issue to be decided by the trier of fact," her argument fails to acknowledge important qualifiers to this general rule. The proffered testimony must be "otherwise admissible," V.R.E. 704, and "helpful." Reporter's Notes, V.R.E. 704. Here, the Environmental Court sustained Eastview's objection to Dr. Roemischer's expert's testimony because it "jumped to [a] legal conclusion." Such testimony is inadmissible. See Riess v. A.O. Smith Corp., 150 Vt. 527, 532, 556 A.2d 68, 72 (1988) (holding that questions "ask[ing] for *1023 the ultimate conclusion at law" are inadmissible under V.R.E. 704). The court further noted that it did not "find [the expert's testimony] helpful because there is no substance there." We discern no error in the court's exercise of its discretion to sustain Eastview's objection. Even if the court had erred in its ruling, Dr. Roemischer fails to explain whyin light of the fact that her expert's entire report on the aesthetic impact of the Project, including his conclusion that the Project "would have an undue adverse impact on [the area's] scenic qualities," was admitted into evidencethe failure to admit the expert's presumably cumulative testimony prejudiced her in this bench trial.[5] See Griffis v. Cedar Hill Health Care Corp., 2008 VT 125, ¶ 18, 185 Vt. 74, 967 A.2d 1141 ("Rulings on the admission or exclusion of evidence are highly discretionary, and we will reverse only where discretion has been abused or withheld and prejudice has resulted.").
¶ 23. Dr. Roemischer also puts forth a veritable laundry list of the Environmental Court's findings that she contends are contradicted either by her testimony or that of Eastview's witnesses and require reversal of the court's ruling on Criterion 8. Dr. Roemischer misapprehends our standard of review on appeal. Our inquiry is limited to assessing whether there is any credible evidence supporting the court's findings, not whether they are contradicted by substantial evidence. In re Miller, 2008 VT 74, ¶ 13, 184 Vt. 188, 955 A.2d 1200. Thus, even assuming that the record supports her assertion that these findings are contradicted, she does not contend that they lack support by credible evidence. Absent such a showing, we will not disturb the Environmental Court's findings. Id. Further, were we to construe her briefing on the matter to make this argument, she would still fail in persuading us to overturn the Environmental Court's legal conclusion regarding Criterion 8. She has made no attempt to explain why these purportedly unsupported findings are material to the court's analysis under the Quechee test.
¶ 24. She also contests the Environmental Court's ruling to admit one page of Eastview's multi-page exhibit 25, which featured a computer rendering of the Project. She claims that Eastview's witness was unable "to provide critical foundation information about [this] computer simulation." Dr. Roemischer does not elucidate how the court abused its discretion in admitting this portion of the exhibit or how its admission prejudiced her. We thus see no basis for second-guessing the court's ruling with respect to this document. See Griffis, 2008 VT 125, ¶ 18, 185 Vt. 74, 967 A.2d 1141; see also Green Mountain Marble Co., v. State Highway Bd., 130 Vt. 455, 468, 296 A.2d 198, 206 (1972) ("It is a well established rule that the party who alleges error has the burden of showing that he has been prejudiced thereby. Otherwise it is presumed to be harmless, if it is error at all." (quotation omitted)).
¶ 25. Finally, Dr. Roemischer makes a sweeping argument that the entire testimony of all of Eastview's experts on Criterion 8 was inadmissible under Rule 702 and "should be stricken or disregarded" because their testimony "was not based upon any demonstrated reliable *1024 principle or method." Her claim is fundamentally flawed. She has not demonstrated with specific references to the record that she preserved this argument for appeal. See V.R.A.P. 28(a) ("The brief of the appellant shall contain ... (4) [a]n argument.... The argument shall contain the issues presented [and] how the issues were preserved ... with citations to the ... parts of the record relied on."); cf. Quazzo v. Quazzo, 136 Vt. 107, 111, 386 A.2d 638, 641 (1978) ("[W]e do not search the record for error not adequately ... referenced."). In response to Eastview's assertion that she did not, in fact, preserve the issue, Dr. Roemischer, in her reply brief, directs us to her post-trial Proposed Findings of Fact, Conclusions of Law, and Order wherein she makes the same generalized argument that she does on appeal. This does not suffice. To preserve an objection to testimony for appellate review, a party must lodge a timely, substantive objection at trial. See V.R.E. 103(a)(1) ("Error may not be predicated upon a ruling which admits ... evidence unless a substantial right of the party is affected, and ... a timely objection or motion to strike appears of record, stating the specific ground of objection"); In re Estate of Peters, 171 Vt. 381, 390, 765 A.2d 468, 475 (2000) ("In order to preserve a claim of error in the introduction of evidence, the party opposing the introduction must make a timely objection or motion to strike. This means that the objection must have been made at the time the evidence was offered or the question was asked." (citations omitted)). Neither Dr. Roemischer's brief nor her reply brief indicate where (or whether) she timely objected to these experts' testimony. We thus find her argument inadequately briefed and do not reach its merits. See In re Boardman, 2009 VT 42, ¶ 20, 186 Vt. ___, 979 A.2d 1010 (per curiam) (where claim inadequately briefed, it "need not be addressed on appeal").
III.
¶ 26. Dr. Roemischer next argues that the Environmental Court erred in its determination that applicant was in compliance with Criterion 9(B).[6] Her argument has two main parts. First, she asserts that the trial court erred in finding compliance with three of Criterion 9(B)'s four subsections. Second, to the extent that the Environmental Court relied upon Eastview's mitigation agreement to demonstrate compliance with Criterion 9(B)(i), she claims that it erred in so doing because this subsection does not explicitly contemplate compliance by means of such agreements. Nor, Dr. Roemischer argues, could the Environmental Court rely upon decisions of the former Environmental Board concluding that such agreements could satisfy Criterion 9(B)(i)'s requirements because these decisions, made in the context of adjudicatory proceedings, were invalid; to make such a determination, Dr. Roemischer insists that the Board needed to have promulgated a rule according to the procedures specified in Vermont's Administrative Procedure Act.
*1025 ¶ 27. The 2005 version of Criterion 9(B) reads as follows:
A permit will be granted for the development or subdivision of primary agricultural soils only when it is demonstrated by the applicant that, in addition to all other applicable criteria, either, the subdivision or development will not significantly reduce the agricultural potential of the primary agricultural soils; or,
(i) the applicant can realize a reasonable return on the fair market value of his land only by devoting the primary agricultural soils to uses which will significantly reduce their agricultural potential; and
(ii) there are no nonagricultural or secondary agricultural soils owned or controlled by the applicant which are reasonably suited to the purpose; and
(iii) the subdivision or development has been planned to minimize the reduction of agricultural potential by providing for reasonable population densities, reasonable rates of growth, and the use of cluster planning and new community planning designed to economize on the cost of roads, utilities and land usage; and
(iv) the development or subdivision will not significantly interfere with or jeopardize the continuation of agriculture or forestry on adjoining lands or reduce their agricultural or forestry potential.
10 V.S.A. § 6086(a)(9)(B)(i)-(iv). A court assessing compliance with 9(B) employs a two-part analysis. In re Spear St. Assocs., 145 Vt. 496, 500, 494 A.2d 138, 141 (1985). First, the court must evaluate "whether the development will significantly reduce the agricultural potential of the primary agricultural soils." Id. If there is no significant impact, the development satisfies the general criterion. Id. On the other hand, if agricultural soils are affected significantly, the four subcriteria must be satisfied to obtain a permit.
¶ 28. Here, the parties do not contest the Environmental Court's determination that the Project will significantly reduce the agricultural potential of the primary agricultural soils located on the land slated for its development but instead quarrel over whether the Environmental Court correctly concluded that the Project complies with certain of the subsections of the 2005 codification of Criterion 9(B). We address each contested subsection in turn.
¶ 29. The Environmental Court ruled in its decision on Dr. Roemischer's post-trial motion that the Project complied with Criterion 9(B)(i), reasoning that mitigation agreements are an accepted basis for conformance with this subsection. We affirm the Environmental Court's ruling on this subsection, though for a different reason. See Bloomer, 2006 VT 104, ¶ 26 n. 4, 180 Vt. 397, 912 A.2d 424. In so concluding, we note also that we need not decide whether such agreements may offer a substitute means for complying with Criterion 9(B)(i) because the record reveals that, even without such an agreement, Eastview has demonstrated compliance with this subsection. Nor need we address Dr. Roemischer's argument that the former Environmental Board exceeded its authority in concluding that an offsite mitigation agreement could provide an alternative means of complying with subsection (i).
¶ 30. As previously noted, Criterion 9(B)(i) requires Eastview to demonstrate that it "can realize a reasonable return on the fair market value of [its] land only by devoting the primary agricultural soils to uses which will significantly reduce their agricultural potential." 10 V.S.A. § 6086(a)(9)(B)(i). Based on the testimony *1026 of a representative of Middlebury College, the parcel's owner, the Environmental Court found in its original decision, and reiterated in its decision on Dr. Roemischer's post-trial motion to alter, that the land in question has been used only intermittently for agricultural purposes and attracts agricultural tenants only at below-market-rate rents. Thus we conclude that this finding was supported by credible evidence, and we have little difficulty in further holding that the below-market-rate rent generated by uses that do not reduce the agricultural potential of the soils does not provide a "reasonable return on the fair market value" of the parcel.
¶ 31. Further, our decision in In re Times & Seasons does not compel a contrary result, as Dr. Roemischer asserts. In that case, we concluded that we would not disturb the former Environmental Board's factual findings and ultimate conclusion that the applicant had not complied with Criterion 9(B)(i) where the applicant had "simply reiterate[d] the same conclusory arguments that it made before the Board." 2008 VT 7, ¶ 20, 183 Vt. 336, 950 A.2d 1189. We expressed no opinion with respect to Dr. Roemischer's contention that a conclusion that a development complies with subsection (i) must always be preceded by an applicant affirmatively demonstrating (1) the fair market value of the tract proposed for development, (2) a reasonable rate of return, and (3) alternative projects that would have less of an impact on primary agricultural soils as its proposed projectthe showings found lacking by the former Environmental Board in In re Times & Seasons. Id. ¶ 18. Put differently, the case cannot be read as setting forth a required list of findings sufficient for a court to conclude that a development has complied with Criterion 9(B)(i). Thus, it is of no consequence that, in assessing compliance with subsection (i), the Environmental Court did not explicitly find, for example, that Eastview explored alternative projects with lesser impacts on the parcel's primary agricultural soils. What matters is that the factual finding the court did makenamely, that the parcel does not support market-rate rents when used for agricultural purposesreasonably supports its conclusion that it does not provide a reasonable return.
¶ 32. With respect to subsection (iii) of Criterion 9(B), Dr. Roemischer maintains that the Environmental Court erroneously concluded that the Project complied with its requirement that a development be "planned to minimize the reduction of agricultural potential" of the land on which it is located by, among other things, "providing for reasonable population densities, reasonable rates of growth, and the use of cluster planning and new community planning designed to economize on the cost of roads, utilities and land usage." 10 V.S.A. § 6086(a)(9)(B)(iii). The court's conclusion was erroneous, insists Dr. Roemischer, primarily because "the court made no findings" with respect to this subsection. This assertion is demonstrably incorrect.
¶ 33. The Environmental Court made numerous findings that support its conclusion that the Project complies with subsection (iii). For example, it found that the Project was specifically designed to incorporate cluster planning, situating its thirty cottages in a cluster around the main building thereby minimizing its overall footprint and its impact on primary agricultural soils. The court also found that, to serve the Project, municipal water and sewer lines need only be extended from an adjacent lot and will not be expanded beyond the development, economizing on the cost of establishing these services, which, in any event will be borne by Eastview. In turn, the proposed minimal expansion of *1027 essential utilities also decreases the likelihood that the Project will spur additional growth and development in the area. According to the Environmental Court, such growth is "encouraged when municipal services are extended over a multi-lot distance, thereby making development more attractive and affordable on the intervening lots." With respect to roads, the Environmental Court found further attempts at economizing and incorporating elements of community planning. Specifically, it noted that "the cottages will be accessed by the same drive that serves the [main building] along private interior roads" that are "aligned close to the clustered cottages" to encourage the Project's residents "to walk to and from the cottages and the [main building]." Moreover, the court found that Eastview will pay for the minimal improvements needed on nearby roads outside the bounds of the development to mitigate the admittedly "minimal additional traffic" the Project is expected to generate. In light of these findings, we concur with Eastview that the Environmental Court's conclusion that the Project satisfied Criterion 9(B)(iii) was amply supported.
¶ 34. To further bolster her argument that the Project fails to comply with Criterion 9(B)(iii), Dr. Roemischer again cites In re Times & Seasonsthis time for the proposition that any development that will transform two-thirds of the primary agricultural soils on the parcel slated for its development cannot comply with this subsection. Simply put, she misreads our decision in In re Times & Seasons. We noted that the former Environmental Board concluded "that the loss of two-thirds of the primary agricultural soils on the site constituted a significant reduction in the agricultural potential of such soils." In re Times & Seasons, 2008 VT 7, ¶ 11, 183 Vt. 336, 950 A.2d 1189. The Board did not make its finding in connection with deciding whether the development in question complied with subsection (iii), nor did we rely on it in that context. Instead, the Board's finding was made in the context of assessing the threshold inquiry regarding compliance with Criterion 9(B) whether the development would significantly reduce primary agricultural soils. See In re Spear St. Assocs., 145 Vt. at 500, 494 A.2d at 141. Only after concluding that a development will indeed result in such a reduction must one examine Criterion 9(B)'s subsections. Dr. Roemischer's reliance on this portion of In re Times & Seasons is, therefore, misplaced.
¶ 35. Nor does the former Environmental Board's decision in Southwestern Vermont Health Care Corp. alter our opinion with respect to subsection (iii). Land Use Permit Application # 8B0537, Findings of Fact, Conclusions of Law, and Order, (Vt. Envtl.Bd. Feb. 22, 2001), at http://www. nrb.state.vt.us/lup/decisions/2001/8b0537-eb-fco.pdf. Dr. Roemischer asserts that, given the similarities of scope and design between the proposed development at issue in Southwestern Vermont and Eastview's proposal, we must conclude that the Project does not comply with Criterion 9(B)(iii) as did the Board. Her argument does not succeed, however, because she fails to detail the similarities of scope and design between the projects that she maintains compel us to overturn the Environmental Court's conclusion regarding this subsection.
¶ 36. Additionally, we find no merit in Dr. Roemischer's assertion that the Environmental Court erred in finding compliance with Criterion 9(B)(iv), which requires that "the development or subdivision will not significantly interfere with or jeopardize the continuation of agriculture... on adjoining lands or reduce their agricultural ... potential." 10 V.S.A. § 6086(a)(9)(B)(iv). The basis for her argument *1028 is twofold: first, the court erred in assessing the credibility of one of Eastview's witnesses whose testimony touched on this subsection; second, the court's only finding with respect to this subsection is insufficient to support its conclusion. Dr. Roemischer's attempt to discredit the testimony on this point of Eastview's witness, a former land use and policy analyst with the Vermont Agency of Agriculture, is hindered by conclusory argumentation, selective, out-of-context references to the record, and, most significantly, our standard of review. While it is true that this witness answered in the negative when asked if she conducted an "inquiry" into whether the Project complied with Criterion 9(B)(iv), other portions of her testimony although not referenced by Dr. Roemischerindicate that she visited the site several times in the process of reviewing Eastview's application and based her testimony on those visits. Also, it does not automatically follow, as Dr. Roemischer posits, that the witness' credibility was diminished merely because she did not speak with a farmer who leases adjoining lands and did not happen to know that corn had been grown on the land in the past. Even if it did, or had Dr. Roemischer explained why these purported flaws in the witness' testimony should be deemed deleterious to its overall weight, the Environmental Court enjoys broad discretion in assessing the credibility and weight of a witness' testimony, and we will not second-guess these determinations on appeal. See In re Route 103 Quarry, 2008 VT 88, ¶ 4, 184 Vt. 283, 958 A.2d 694. Furthermore, regardless of whether the Environmental Court's finding that Eastview is committed to imposing restrictions on residents' right to object to future agricultural uses of adjoining lands lacks support in the record, we find the evidence in support of the court's numerous factual findings on subsection (iv) to be sufficient to sustain its conclusion. There was no error.
IV.
¶ 37. Dr. Roemischer's final argument is that the presiding judge acted with bias towards her in his evidentiary rulings and otherwise, and the cumulative effect of this bias was to deny her a fair trial. After reviewing the record, we conclude there is no support for this accusation.
Affirmed.
NOTES
[1] For reasons discussed below, all references to this statutory provision are to the 2005 version.
[2] The Commission declared:
these [207 ±] acres are subject to Commission jurisdiction and will require an amendment if there are any material changes to [them] that "[have] a significant impact on any finding, conclusion, term or condition of the [P]roject's permit and which may result in an impact with respect to any of the [Act 250] criteria."
[3] The statute was amended in 2006.
[4] In her reply brief, Dr. Roemischer argues that the Environmental Board lacked the administrative authority to interpret "permitted project," as it did in Stonybrook, without formal rulemaking procedures. We need not consider this claim, as it was first raised in Dr. Roemischer's reply brief, and arguments first raised in reply briefs are not preserved. Agency of Natural Res. v. Glens Falls Ins. Co., 169 Vt. 426, 435, 736 A.2d 768, 774 (1999). Dr. Roemischer's reply brief argues that Dr. Roemischer raised the issue in her brief by including a footnote directing us to a document that she had filed with the Environmental Court and also included in the printed case. Using a footnote to direct us to another document is not briefing an issue. In re Cent. Vt. Pub. Serv. Corp., 2006 VT 70, ¶ 12, 180 Vt. 563, 905 A.2d 616 (mem.) (ruling that arguments made in footnotes of briefs are not raised as error on appeal); cf. Graphic Controls Corp. v. Utah Med. Prods., Inc., 149 F.3d 1382, 1385 (Fed.Cir.1998) (finding an argument waived when a party used a footnote to incorporate the argument by reference from the appendix, as such an argument did not comply with F.R.A.P. 28(a)(6) (1998), which uses the same language as current V.R.A.P. 28(a)(4)).
[5] We further note with respect to prejudice that, notwithstanding the court's decision to sustain Eastview's objection, the court specifically prompted and then allowed Dr. Roemischer's attorney to ask the expert questions regarding examples of "mitigation steps that could have reasonably been taken in this project given the lay of the land and the structure of the site that would serve the lot and the neighborhood better."
[6] The parties dispute which version of Criterion 9(B) should apply as it was amended in 2006after Eastview filed its Act 250 permit application in November 2005. Dr. Roemischer insists that we apply the version of Criterion 9(B) in effect in 2005, whereas Eastview contends that we should look to the 2006 amended version. We agree with the Environmental Court that the only material difference between the two versions, for purposes of this case, is that subsection (i) of the 2005 version sets forth a requirement that the 2006 amended version does nota view that neither party contests. Thus, for the sake of argument, we assume, without deciding, that the 2005 version of the statute applies and assess the Project's compliance with it. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549056/ | 992 A.2d 907 (2010)
Michael MOORE, Petitioner
v.
OFFICE OF OPEN RECORDS, Respondent.
No. 1638 C.D. 2009
Commonwealth Court of Pennsylvania.
Submitted on Briefs February 26, 2010.
Decided March 25, 2010.
*908 Michael Moore, petitioner, pro se.
Corinna V. Wilson, Chief Counsel, Harrisburg, for respondent.
Maria G. Macus-Bryan, Asst. Counsel and Suzanne N. Hueston, Chief Counsel, Camp Hill, for intervenor, Pennsylvania Department of Corrections.
BEFORE: PELLEGRINI, Judge, and BUTLER, Judge, and KELLEY, Senior Judge.
OPINION BY Judge PELLEGRINI.
Michael Moore (Moore) petitions pro se for review of a final determination of the Office of Open Records (OOR) granting in part and denying in part his request for records held by the Pennsylvania Department of Corrections (Department). Discerning no error in the OOR's decision, we affirm.
Moore is an inmate currently incarcerated at the State Correctional Institute at Dallas. On May 12, 2009, he filed a right-to-know request with the Department pursuant to the Right-to-Know Law (RTKL)[1] seeking copies of his "Order of Commitment" and "Judgment of Sentence." When an Agency Open Records Officer (AORO) receives a right-to-know request, he or she must first determine whether the information requested falls within the RTKL's definition of "record," which is:
Information, regardless of physical form or characteristics, that documents a transaction or activity of an agency and that is created, received or retained pursuant to law or in connection with a transaction, business or activity of the agency. The term includes a document, paper, letter, map, book, tape, photograph, film or sound recording, information stored or maintained electronically and a data-processed or image-processed document.
Section 102 of the Law, 65 P.S. § 67.102. If the information requested is indeed a record and is in the possession of a Commonwealth agency, it must be made accessible for inspection and duplication unless the record is protected by a privilege, exempt under Section 708 of the RTKL, or exempt from disclosure under other law or court order. Section 305(a) of the Law, 65 P.S. § 67.305(a).
The Department's AORO determined that Moore's "Order of Commitment" was a record in the Department's possession, granted Moore's request in part and provided him with a copy of the record free of charge. However, citing to 65 P.S. § 67.705,[2] the AORO denied Moore's request for a copy of his "Judgment of Sentence" on the grounds that the record "does not currently exist" and that the agency was not required to create a record.
Moore appealed to the OOR claiming that the Department's use of the phrase "does not currently exist" indicated to him that at one point the record did exist and that the Department was required to provide him with a copy of the record. The Department provided the OOR with both an unsworn attestation made subject to the *909 penalty of perjury and a notarized Affidavit of Nonexistence of Record swearing to the non-existence of the "Judgment of Sentence" within the Department's possession.[3] The OOR determined that through submission of these documents,[4] the Department demonstrated that the requested record does not currently exist and that the Department had satisfied its responsibilities under the RTKL. The OOR issued a final determination on July 14, 2009, denying Moore's appeal. Moore now appeals the OOR's final determination to this Court,[5] and the Department appears as Intervenor.
Moore's sole argument on appeal is that the Department's statement that a judgment of sentence does not currently exist leads him to believe that such a record must have existed at some time and, therefore, either the Department or the OOR has a duty to produce the record under the RTKL. However, Moore misinterprets the statutory language, specifically, the use of the word "currently" as used in Section 705 of the RTKL, stating that "an agency shall not be required to create a record which does not currently exist." 65 P.S. § 67.705. Under this provision, whether or not a judgment of sentence existed at some point in time is not the proper standard the standard is whether such a record is in existence and in possession of the Commonwealth agency at the time of the right-to-know request. The Department searched its records and submitted both sworn and unsworn affidavits that it was not in possession of Moore's judgment of sentence that such a record does not currently exist. These statements are enough to satisfy the Department's burden of demonstrating the non-existence of the record in question, and obviously the Department cannot grant access to a record that does not exist.[6] Because under the current RTKL the Department cannot be made to create a record which does not exist, the OOR properly denied Moore's appeal.
Moore also attempts to raise a due process challenge to his continued confinement. According to Moore, if the record does not exist, then his confinement is invalid because it is illegal for the Department to hold him without a signed judgment *910 of sentence.[7] However, an appeal from an OOR order denying Moore's request for access to a public record is not the proper forum to challenge the constitutionality of his continued incarceration.
Accordingly, the final determination of the OOR is affirmed.
ORDER
AND NOW, this 25th day of March, 2010, the final determination of the Office of Open Records, dated July 14, 2009, is hereby affirmed.
NOTES
[1] Act of February 14, 2008, P.L. 6, 65 P.S. §§ 67.101-67.3104. The new RTKL repealed the former Right-to-Know Law, Act of June 21, 1957, P.L. 390, as amended, formerly 65 P.S. §§ 66.1-66.4.
[2] Section 705 of the Law, 65 P.S. § 67.705 provides: "[w]hen responding to a request for access, an agency shall not be required to create a record which does not currently exist or to compile, maintain, format or organize a record in a manner in which the agency does not currently compile, maintain, format or organize the record."
[3] The unsworn attestation was made by the employee who personally searched the Department's files for any records which would be responsive to Moore's request. The notarized affidavit was made by Andrew Filkosky, the Department's AORO.
[4] Under Section 1102 of the RTKL, a requester and the assigned open records officer are permitted "to submit documents in support of their positions" and "[t]he appeals officer may admit into evidence testimony, evidence and documents that the appeals officer believes to be reasonably probative and relevant to an issue in dispute." 65 P.S. §§ 67.1102(a)(1) and (2). The attestation and affidavit of non-existence were certainly probative and relevant to the issue of the existence of Moore's judgment of sentence.
[5] In the recently decided case, Bowling v. Office of Open Records, 990 A.2d 813 (Pa. Cmwlth.2010), this Court examined for the first time what our standard and scope of review should be when reviewing orders of the OOR. We determined that for our standard of review, "a reviewing court, in its appellate jurisdiction, independently reviews the OOR's orders and may substitute its own findings of fact for that of the agency." Bowling, 990 A.2d at 818. As for the appropriate scope of review, we determined "that a court reviewing an appeal from an OOR hearing officer is entitled to the broadest scope of review." Bowling, 990 A.2d at 820.
[6] While decided under the previous RTKL, our decision in Bargeron v. Unemployment Compensation Board of Review, 720 A.2d 500 (Pa.Cmwlth.1998), is instructive on this matter.
[7] In support of this position, Moore refers in his brief to 42 Pa.C.S. § 9764(a)(8), which states that "[u]pon commitment of an inmate to the custody of the Department of Corrections, the sheriff or transporting official shall provide to the institution's records officer or duty officer . . . [a] copy of the sentencing order and any detainers filed against the inmate which the county has notice." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549041/ | 50 F.2d 175 (1931)
RUSSELL
v.
EDMONDSON et al.
In re GODFREY MARBLE CO.
No. 6155.
Circuit Court of Appeals, Fifth Circuit.
May 29, 1931.
Frank A. Holden, of Atlanta, Ga., Horace M. Holden, of Athens, Ga., and Frank R. Martin, of Atlanta, Ga., for appellant.
John L. Tye, Jr., of Atlanta, Ga. (Tye, Thomson & Tye, of Atlanta, Ga., on the brief), for appellees.
Before BRYAN, FOSTER, and HUTCHESON, Circuit Judges.
FOSTER, Circuit Judge.
This is an appeal from a judgment vacating a restraining order, issued by the referee, which enjoined the sale of certain real estate belonging to the Godfrey Marble Company, against which a petition for involuntary bankruptcy had been filed, and dismissing the petition of a receiver appointed to said company for an injunction to permanently stay the sale.
It appears without dispute from the record that on December 1, 1926, the Godfrey Marble Company executed and sold a series of bonds secured by a first mortgage on certain real estate in Fulton county, Ga., naming appellee the Atlanta Trust Company as trustee. A default occurred and the trustee instituted foreclosure proceedings in the superior court of Fulton county on July 2, 1930. A decree of foreclosure was entered on November 4, 1930, and appellee Edmondson was appointed commissioner to make the sale. The property was advertised for sale on December 2, 1930. On that date the proceedings in bankruptcy were instituted, and appellant was named as receiver. He immediately applied to the referee for a restraining order to stop the sale, on the ground that the outstanding bond issue was approximately $23,000, while the property was carried on the books of the company at a net value of $97,000, and that he believed that it could be administered to the best interests of the creditors in the bankruptcy court. No allegation of fraud in the execution of the mortgage was made, nor was the good faith of the trustee in instituting the foreclosure proceedings attacked.
It is evident that the jurisdiction of the state court attached more than five months before the bankruptcy proceedings were instituted. The proceedings in the state court were to enforce a valid existing lien, not dependent upon the institution of that suit. Regardless of any conflict of authorities that may have heretofore existed, it is now settled that in the circumstances shown the federal courts will not interfere with the orderly procedure in the state courts because of the intervention of bankruptcy. Straton et al., Special Commissioners, v. New, Trustee, 51 S. Ct. 465, 75 L. Ed. ___, decided April 20, 1931. If there is any equity for the general creditors in the property, the trustee may obtain it by proper proceedings without bringing about an unseemly conflict of jurisdiction between the state and the federal courts.
The record presents no reversible error.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549062/ | 161 B.R. 73 (1993)
In re John Allen LAURIN and June Irene Laurin, Debtors.
John Allen LAURIN and June Irene Laurin, Plaintiffs,
v.
UNITED STATES of America, Defendant.
Bankruptcy No. 92-20749. Adv. No. 92-2053.
United States Bankruptcy Court, D. Wyoming.
September 1, 1993.
Janet L. Tyler, Laramie, WY, for plaintiffs.
Donald R. Wrobetz, Asst. U.S. Atty., Cheyenne, WY, Karen Lynne Baker, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, DC, for defendant.
DECISION GRANTING IRS' MOTION FOR SUMMARY JUDGMENT
HAROLD L. MAI, Chief Judge.
THIS MATTER is before the court on Cross Motions for Summary Judgment.
The court having considered the Debtors' Motion for Summary Judgment, the IRS's Motion for Summary Judgment, the attachments, exhibits, and deposition transcript, having heard argument of counsel, being fully advised, does hereby render its decision as follows.
FINDINGS OF FACT
1. John Allen Laurin is a retired iron worker. He is married to June Irene Laurin. Mr. Laurin has an eighth grade education.
2. In 1979, Mr. Laurin was working in Denver, Colorado. Some of his co-workers were talking about lectures they had attended about income taxes. One of his co-workers said he had not paid income taxes for 15 years. Mr. Laurin became interested in figuring out how that was done.
3. Mr. Laurin attended a "tax protestor's lecture" put on by one John Grambush. Mr. Grambush told Mr. Laurin he did not have to file an income tax return.
4. Mr. Laurin had previously filed income tax returns. He had previously filed true W-2 forms.
5. Mr. Laurin chose to believe Mr. Grambush's representation that he could claim he was exempt from the requirement to file taxes. Mr. Laurin characterizes Mr. Grambush as a tax protestor and the meetings as "tax protestor lectures."
6. Accordingly, beginning in 1980, Mr. Laurin mailed various statements to the IRS claiming that he was not required to file *74 income tax returns. These reasons include that there was no jurisdiction over him, that he had no "income" within the meaning of the IRS code, and that federal income taxes were "excise taxes" which the federal government had no authority to levy against him.
7. Mr. Laurin did not file timely tax returns for 1979, 1980, 1981, or 1982. He also signed W-4 for those same years that claimed he was exempt from federal income taxes.
8. In 1983, Mr. Laurin became disabled and retired from his work as an ironworker.
9. On June 30, 1983, the government sent Mr. Laurin a letter notifying him that the IRS had no record of receiving his tax returns for the years 1979 through 1981.
10. Mr. Laurin did not file timely tax returns for the years 1983, 1984, 1985, or 1986.
11. On June 19, 1986, the Internal Revenue Service (IRS) issued a Notice of Deficiency against John A. Laurin. This notice assessed tax in the amount of $3,554 for the 1979 tax year, $5,811 for the 1980 tax year, and $13,542 for the 1981 tax year. In addition, negligence penalties under sections 6651(a), 6654, and 6653(a)(1) of the Internal Revenue Code were assessed.
12. On May 22, 1989, the IRS sent Mr. Laurin a statutory notice of deficiency for the 1982 tax year.
13. In 1989, Mr. and Mrs. Laurin consulted a lawyer. This lawyer advised them to file tax returns.
14. On September 7, 1990, Mr. Laurin filed his individual tax returns for the years 1979 through 1983. On September 7, 1990, the Laurins filed joint tax returns for the years 1984, 1985, and 1986.
15. The Laurins timely filed their joint income tax returns for 1989 and 1991.
16. On October 7, 1991, the Laurins signed a Tax Court Decision regarding the years 1984, 1985, and 1986 in which minimal additional taxes were assessed for each of those years.
17. On October 23, 1991, Mrs. Laurin signed a Form 870 waiver agreeing to the immediate assessment of the deficiencies based upon the previous tax court decision.
18. On February 24, 1992, the IRS assessed John Laurin for the amount of his 1984 income taxes, including interest and penalty.
19. On February 3, 1992, the IRS assessed John Laurin for the amount of his 1985 and 1986 income taxes, including taxes and penalties.
20. On September 18, 1992, the Laurins filed a joint voluntary petition for relief under Chapter 7 of the Bankruptcy Code.
21. On October 1, 1992, the Laurins filed this adversary proceeding seeking a determination that their debt to the IRS is dischargeable.
22. Mr. Laurin did have an income for the years 1979 through 1985. Mr. Laurin did have a duty to pay federal income tax for those years and to file tax returns for those same years.
23. Mr. Laurin attempted to avoid paying income tax for years, 1979, 1980, 1981, 1982, 1983, 1984, 1985, and 1986.
24. There is no evidence that would support a finding that Mrs. Laurin attempted to avoid federal income tax for the years 1979 through 1986 or that she attempted to avoid payment of taxes for these same years.
CONCLUSIONS OF LAW
This court has jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157. A Complaint to Determine the Dischargeability of a Debt is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(I).
Section 523(a)(1) of the Bankruptcy Code provides that a discharge in bankruptcy does not discharge a debtor's liability for any debt
(1) for a tax . . .
(B) with respect to which a return, if required
(i) was not filed; or
(ii) was filed after the date on which such return was last due, under applicable law or under any extension, and after two years before the filing of the petition; or
*75 (C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax;
The parties agree that there are no material issues of fact. They disagree, however, on the conclusions that should be drawn from the assembled exhibits, especially Mr. Laurin's deposition testimony.
In order to establish "willfulness" of an attempt to avoid taxes, the government must show that the taxpayer had a duty under the law, that he knew he had a duty, and that he voluntarily and intentionally violated that duty. Cheek v. United States, 498 U.S. 192, 200, 111 S. Ct. 604, 610, 112 L. Ed. 2d 617 (1991).
Viewed in the light most favorable to Mr. Laurin, the evidence establishes that he knew he had a duty to pay taxes and file income tax returns prior to 1979. In 1979 he found out that others were not paying taxes. He went to the "tax protestor's lecture" for the purpose of figuring out how he too could stop paying taxes. The tax protestor provided him with forms of documents to file with a laundry list of reasons why he was exempt.
At his deposition, Mr. Laurin could not recount the basis for his claim of exemption. Instead, he simply stated that he claimed he was exempt because he thought he could.
Thereafter, the IRS sent the debtor notification stating his duty to file returns. (Government's ex. 4) ("We have determined you were required to file a federal income tax return for 1979, 1980 and 1981"). In June of 1983, he sent the IRS a letter stating that "I do not have an income and not one required to file." Attached to this letter are various documents setting forth arguments about jurisdiction and the nature of "income." Mr. Laurin testified at his deposition that he merely copied the attachments from documents which had been sent to him by the organization. His deposition testimony states that he can't define exempt, that he doesn't know what was said at the taxpayer lecture that convinced him of the position, in short he can't answer any questions about his purported belief.
The only conclusion to be drawn from this record is that he heard that others were avoiding income tax, he decided to find out how it was done, and found out it was done by claiming he was exempt.
The court cannot find that the taxpayer didn't know he had a duty to file and pay taxes when Mr. Laurin testified he didn't understand the position Grambush espoused. Mr. Laurin testified that his belief he didn't have to file was "because I believed Mr. Grambush was right and I believe he told me, but I don't know why he'd tell me that because I had an income."
Mr. Laurin looked into the tax protestors for the purpose of figuring out how he could evade the taxes. He did stop filing and stop paying, even when faced with regular notification from the IRS that he had a duty to file and that various amounts were due. It simply is not credible or plausible that he would believe that he no longer had a duty to file and pay when he was getting regular notices from the IRS that indicated he did have a duty and various amounts were due. Instead, the clear conclusion from the record is that he thought he could avoid his known duty to file and pay by simply sending in to the IRS various materials prepared by a tax protestor organization.
The court must conclude that Mr. Laurin willfully attempted to avoid payment of his taxes for the years 1979 through 1986, within the meaning of 11 U.S.C. § 523(a)(1)(C).
In addition to being nondischargeable pursuant to 11 U.S.C. § 523(a)(1)(C), Mr. Laurin's income tax for the years 1984, 1985, and 1986 was non-dischargeable because it was assessed against him within 240 days of the petition date. 11 U.S.C. §§ 523(a)(1)(A) and 507(a)(7)(A)(ii).
Based upon the foregoing, the court will enter an order granting the defendant IRS's Motion for Summary Judgment and denying the plaintiffs/debtors' Motion for Summary Judgment. The court will also enter a separate judgment declaring Mr. Laurin's tax debt for the years 1989 through 1986 to be non-dischargeable and declaring Mrs. Laurin's tax debt for the years 1979 through *76 1986, if any, to be dischargeable in bankruptcy. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549036/ | 992 A.2d 348 (2010)
120 Conn.App. 497
STATE of Connecticut
v.
Terrell STATON.
No. 29607.
Appellate Court of Connecticut.
Argued February 4, 2010.
Decided April 20, 2010.
*350 Glenn W. Falk, special public defender, with whom was Jennifer Rae Taylor, law student intern, for the appellant (defendant).
Michele C. Lukban, senior assistant state's attorney, with whom, on the brief, was Stephen J. Sedensky III, state's attorney, for the appellee (state).
DIPENTIMA, ALVORD and FRANCIS X. HENNESSY, Js.[*]
FRANCIS X. HENNESSY, J.
The defendant, Terrell Staton, appeals from the judgment of conviction, rendered after a jury trial, of sale of narcotics by a person who is not drug-dependent in violation of General Statutes § 21a-278 (b), sale of narcotics in violation of General Statutes § 21a-277 (a), sale of narcotics within 1500 feet of a school in violation of General Statutes § 21a-278a (b), possession of narcotics in violation of General Statutes § 21a-279 (a) and possession of narcotics within 1500 feet of a school in violation of General Statutes § 21a-279 (d). On appeal, the defendant claims that the trial court improperly denied his motion to suppress the evidence obtained following his detention because the police lacked a sufficient reasonable suspicion of criminal conduct to stop him. Additionally, the defendant claims that his subsequent detention by the police was unconstitutionally prolonged. We affirm the judgment of the trial court.
The record reveals the following facts and procedural history. Lieutenant Shaun McColgan, a Danbury police officer with over twenty three years experience as an officer in New York City and Connecticut, and with over 500 drug arrests, went on patrol in an unmarked police station wagon after 3 a.m. on the morning of November 9, 2006. He was aware that the police had been watching a brown car with Colorado license plates earlier that morning and that he was to be on the lookout for suspicious activity associated with that vehicle. Thus, when he saw a brown Chrysler with Colorado license plates, occupied by a driver and a passenger, turn left down Davis Street, McColgan followed.
The Chrysler proceeded slowly down Davis Street, past the Morris Street School, onto Rogers Avenue and then right onto Westville Avenue. After McColgan *351 turned left onto Westville Avenue to avoid detection, he observed the Chrysler turn around in a driveway and then head back up Rogers Avenue before ultimately stopping in front of the Morris Street School. At this point, given that the Chrysler was a known suspicious vehicle driving slowly in the early morning hours and because he believed the vehicle was "casing" the neighborhood, he turned off his vehicle's headlights, backtracked up Rogers Avenue and stopped approximately 200 feet behind the Chrysler on Davis Street. He had an unobstructed view of the Chrysler, and no other vehicles were parked on the road at that time.
McColgan initially thought he saw someone exit the Chrysler and that a burglary of the school was going to occur. Within seconds, however, he realized that the defendant, wearing a black hooded sweatshirt, had approached the Chrysler's front passenger window, leaned into the car and placed his hands on the door. McColgan could not see what was happening inside the vehicle and did not observe the exchange of drugs or money. About ten seconds later, the defendant walked away from the car and into a school parking lot. McColgan testified that, in light of his experience, he suspected a hand-to-hand drug transaction had occurred.
Immediately after the defendant walked away from the vehicle, the Chrysler proceeded north on Davis Street. McColgan turned his vehicle's headlights on and began to follow the Chrysler. As he drove slowly past the defendant, the defendant looked directly at McColgan, who had a clear view of the defendant's face.
McColgan next radioed for assistance, requesting that nearby officers detain the defendant and follow the Chrysler. He gave a very general description of the defendant as a black male and provided his location for the officers. Within one minute, two officers detained the defendant and notified McColgan, who was still following the Chrysler, of the detention. The defendant provided identification to the officers and told them that he was coming from his girlfriend's house and heading to his mother's house. The officers did not handcuff him, they did not place him in a police car, and they did not display their weapons. The defendant, however, was not free to leave.
Concurrent with the investigatory stop of the defendant, two additional undercover officerswho had responded to McColgan's call and closely were following the Chryslersaw the Chrysler commit a traffic infraction. The officers notified McColgan of the traffic infraction, and he instructed them to make a motor vehicle stop. McColgan then caught up to the Chrysler, which the officers had stopped, received permission from the driver to search the vehicle and found crack cocaine on the passenger side floor. The driver told him that the passenger in the Chrysler had just purchased the drugs from a black male at the Morris Street School.
As a result, McColgan radioed the officers who were detaining the defendant and instructed them to arrest him. McColgan then went to Tomlinson Avenue, where the defendant had been detained, and identified the defendant as the black male he had seen at the Chrysler's passenger window in front of the Morris Street School. The defendant was brought to the police station and subsequently searched. A cellular telephone, two $50 bills in one pocket and a total of $30 cash in another pocket were found. Approximately twelve to fifteen minutes elapsed from the initial detention of the defendant until he was arrested on Tomlinson Avenue.
On August 10, 2007, the defendant filed a motion to suppress all evidence that the *352 police had obtained as a direct consequence of the investigative stop, including the drugs seized in the Chrysler, the money and the cellular telephone. The court held an evidentiary hearing on the matter on August 14 and 16, 2007. In an oral ruling, the court denied the defendant's motion to suppress.[1] The court stated that a "police officer may, in appropriate circumstances ... and in an appropriate manner, detain ... an individual for investigative purposes, even though there is no probable cause to make an arrest. The state has the burden of showing that when the initial seizure of the defendant occurred, the police had sufficient objective indicia of criminal activity [given the totality of the circumstances] to justify an intrusion on the defendant's freedom of movement." According to the court, a reasonable and articulable suspicion could not be based on a mere hunch but, rather, had to be based on specific reasonable inferences that the officer could draw from the facts in light of his experience.
Given this legal standard and the facts of the case, the court concluded that the officers had a reasonable and articulable suspicion to detain the defendant. Among the factors the court considered was McColgan's twenty plus years of experience as a police officer. Specifically, the court pointed out that McColgan worked for years in a New York City police department street narcotics unit where he had observed drug transactions involving motor vehicles. Additionally, the court noted the following reasonable inferences: there were no other pedestrians in the area when the defendant was detained, and he was in a residential area at a quiet time of dayapproximately 3:30 a.m.
The court then went on to conclude that the approximately twelve to fifteen minute detention of the defendant was not too intrusive or too lengthy to violate his constitutional rights. The court stated that "[t]he purpose of detaining the defendant was to conduct an investigation. [After completing the investigation] the police had probable cause to arrest the defendant for sale of narcotics, when the police obtained the information, which rose to probable cause, the defendant's detention [then] turned into an arrest when ... McColgan radioed the officers near [the school] that the defendant should [be placed under arrest]." As a result, the court denied the defendant's motion to suppress.
Following a jury trial, the defendant was found guilty of all the drug related charges and not guilty of loitering in or about school grounds. He was sentenced to twenty years in prison, execution suspended after twelve years, and five years of probation.[2] This appeal followed.
We first set forth our standard of review. "[O]ur standard of review of a trial court's findings and conclusions in connection with a motion to suppress is well defined. A finding of fact will not be disturbed unless it is clearly erroneous in view of the evidence and pleadings in the whole record. ... [When] the legal conclusions of the court are challenged, [our review is plenary, and] we must determine whether they are legally and logically correct and whether they find support in the facts set out in the court's [ruling]. ... Because a trial court's determination of the validity of a ... search [or seizure] *353 implicates a defendant's constitutional rights ... we engage in a careful examination of the record to ensure that the court's decision was supported by substantial evidence. ... However, [w]e [will] 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." (Citation omitted; internal quotation marks omitted.) State v. Kimble, 106 Conn.App. 572, 579, 942 A.2d 527, cert. denied, 286 Conn. 912, 950 A.2d 1289 (2008).
I
The defendant claims that the court improperly denied his motion to suppress the evidence obtained following his detention because the police lacked a sufficient reasonable suspicion of a drug transaction to stop him. We disagree.
"The law regarding investigative detentions is well settled in federal and state jurisprudence. Article first, §§ 7 and 9 of our state constitution permit a police officer in appropriate circumstances and in an appropriate manner to detain an individual for investigative purposes even though there is no probable cause to make an arrest. ... In determining whether the detention was justified in a given case, a court must consider if [b]ased upon the whole picture the detaining officers [had] a particularized and objective basis for suspecting the particular person stopped of criminal activity. ... A court reviewing the legality of a stop must therefore examine the specific information available to the police officer at the time of the initial intrusion and any rational inferences to be derived therefrom. ... These standards, which mirror those set forth by the United States Supreme Court in Terry v. Ohio, [392 U.S. 1, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968)], with regard to fourth amendment analysis, govern the legality of investigatory detentions under article first, §§ 7 and 9 of our state constitution."[3] (Internal quotation marks omitted.) State v. Kimble, supra, 106 Conn.App. at 596-97, 942 A.2d 527.
"[I]n justifying [a] particular intrusion the police officer must be able to point to specific and articulable facts which, taken together with rational inferences from those facts, reasonably warrant that intrusion. ... In determining whether a detention is justified in a given case, a court must consider if, relying on the whole picture, the detaining officers had a particularized and objective basis for suspecting the particular person stopped of criminal activity. When reviewing the legality of a stop, a court must examine the specific information available to the police officer at the time of the initial intrusion and any rational inferences to be derived therefrom. ... A recognized function of a constitutionally permissible stop is to maintain the status quo for a brief period of time to enable the police to investigate a suspected crime. ...
"[E]ffective crime prevention and detection ... [underlie] the recognition *354 that a police officer may in appropriate circumstances and in an appropriate manner approach a person for purposes of investigating possibly criminal behavior even though there is no probable cause to make an arrest. ... Therefore, [a]n investigative stop can be appropriate even where the police have not observed a violation because a reasonable and articulable suspicion can arise from conduct that alone is not criminal. ... In evaluating the validity of such a stop, courts must consider whether, in light of the totality of the circumstances, the police officer had a particularized and objective basis for suspecting the particular person stopped of criminal activity." (Citations omitted; internal quotation marks omitted.) State v. Lipscomb, 258 Conn. 68, 75-76, 779 A.2d 88 (2001).
Accordingly, "[t]he Fourth Amendment does not require a policeman who lacks the precise level of information necessary for probable cause to arrest to simply shrug his shoulders and allow a crime to occur or a criminal to escape. On the contrary, Terry recognizes that it may be the essence of good police work to adopt an intermediate response. ... A brief stop of a suspicious individual, in order to determine his identity or to maintain the status quo momentarily while obtaining more information, may be most reasonable in light of the facts known to the officer at the time." (Internal quotation marks omitted.) State v. Ward, 83 Conn.App. 377, 388, 849 A.2d 860, cert. denied, 271 Conn. 902, 859 A.2d 566 (2004).
"When considering the validity of [an investigatory] stop, our threshold inquiry is twofold. ... First, we must determine at what point, if any, did the encounter between [the police officer] and the defendant constitute an investigatory stop or seizure. ... Next, [i]f we conclude that there was such a seizure, we must then determine whether [the police officer] possessed a reasonable and articulable suspicion at the time the seizure occurred." (Citations omitted; internal quotation marks omitted.) State v. Santos, 267 Conn. 495, 503, 838 A.2d 981 (2004). Because there is no dispute in this case regarding the court's determination that the defendant was subject to an investigatory stop or seizure, we move directly to the reasonable and articulable suspicion analysis.
On appeal, the defendant does not challenge the court's findings of fact.[4] The defendant claims that his rights under the fourth amendment to the United States constitution,[5] and under article first, §§ 7[6] and 9,[7] of the Connecticut constitution, were violated because there was no objective, particularized suspicion that he was involved in criminal activity at the time the police stopped him. According to the defendant, *355 he could have been giving directions to the out-of-state car on the morning in question, and, additionally, it was significant that the police did not observe an exchange of money or drugs. The defendant argues that the police had, at most, an unparticularized suspicion or hunch that he was engaged in criminal activity, and, therefore, all the evidence that the police obtained as a direct consequence of the investigative stop should be suppressed. We are not persuaded.
Our review of the record indicates that the court, consistent with the reasonable suspicion standard established by our jurisprudence, properly concluded that the officers had a reasonable basis for their investigative stop. This conclusion is supported by the testimony presented at the suppression hearing and the court's findings. The police were on the lookout for suspicious activity associated with a brown car with Colorado license plates. When McColgan saw a brown Chrysler with Colorado license plates after 3 a.m., he began to follow the vehicle. The Chrysler was proceeding slowly, then turned around in a driveway, immediately retraced its route and stopped at a school it had just passed, as if it were "casing" the neighborhood. At this time, McColgan already was suspicious of potential illegal activity. After the Chrysler stopped in front of the school, the defendant suddenly appeared, leaned into the vehicle and ten seconds later walked away. The court pointed out that there were no other pedestrians in the area, it was a residential neighborhood, and it was a quiet time of day.
The court specifically cited to McColgan's twenty plus years of police experience, both in New York City, where he worked on a street narcotics unit observing drug sale transactions involving motor vehicles, and in Danbury, as a relevant factor in determining whether he possessed a reasonable and articulable suspicion to detain the defendant. Our Supreme Court has stated that part of the totality of circumstances that a court considers "are those inferences and deductions made by officers under the particular circumstances, since law enforcement officials are trained to cull significance from behavior that would appear innocent to the untrained observer." (Internal quotation marks omitted.) State v. Nash, 278 Conn. 620, 635, 899 A.2d 1 (2006); see State v. Tuck, 90 Conn.App. 872, 879 n. 1, 879 A.2d 553 (2005).
Furthermore, in determining whether police have reasonable suspicion to stop a vehicle, the United States Supreme Court has stated that reviewing courts "must look at the totality of the circumstances of each case to see whether the detaining officer has a particularized and objective basis for suspecting legal wrongdoing.... This process allows officers to draw on their own experience and specialized training to make inferences from and deductions about the cumulative information available to them that might well elude an untrained person." (Citation omitted; internal quotation marks omitted.) United States v. Arvizu, 534 U.S. 266, 273, 122 S. Ct. 744, 151 L. Ed. 2d 740 (2002). This is precisely what McColgan did in this case. He testified that, in light of his experience, he suspected a hand-to-hand drug transaction had occurred.
Finally, to the extent that the defendant deems it significant that the police did not see the actual exchange of money and drugs and that there were plausible noncriminal justifications for the conduct that the police did observe, such arguments are not persuasive. "The fact that an innocuous explanation for the conduct observed may have existed is of no consequence to our analysis when ... there was a reasonable basis for the police to suspect *356 criminal activity. Suspicious activity, by its very nature, is equivocal and ambiguous.... The possibility of an innocent explanation does not deprive the officers of the capacity to entertain a reasonable suspicion of criminal conduct." (Citation omitted; internal quotation marks omitted.) State v. Days, 89 Conn.App. 789, 802, 875 A.2d 59, cert. denied, 275 Conn. 909, 882 A.2d 677 (2005).
The foregoing circumstances yielded sufficient specific and articulable facts to render the investigatory stop of the defendant constitutionally reasonable. On the basis of the totality of the circumstances, which includes McColgan's vast police experience and the rational inferences he derived from the information available to him, it is clear that he had a particularized and objective basis for suspecting that the defendant was involved in criminal activity. We conclude that the court properly found that the facts justified the initial stop of the defendant.[8]
II
Having determined that the investigative stop was "justified at its inception"; Terry v. Ohio, supra, 392 U.S. at 20, 88 S. Ct. 1868; we next must consider "whether it was reasonably related in scope to the circumstances which justified the interference in the first place." Id. The defendant claims that the officers' minimal level of suspicion, even if it was enough for an investigative stop pursuant to Terry, did not justify the prolonged detention of him after he provided identification and answered questions regarding where he was coming from and where he was going. He argues that McColgan's direction to the officers to detain him indefinitely, while McColgan pursued the Chrysler, violated both his federal and state constitutional rights. Because his behavior did not confirm or arouse the existing level of suspicion, the defendant argues, the officers should have released him immediately. We disagree.
The limit of an investigative stop is grounded in the standard of reasonableness embodied in the fourth amendment. The test "balances the nature and quality of the intrusion on personal security against the importance of the governmental interests alleged to justify the intrusion. ... Determination of the means and duration that are reasonably necessary for an investigative stop depends on a fact-bound examination of the particular circumstances." (Citations omitted; internal quotation marks omitted.) State v. Foster, 13 Conn.App. 214, 218, 535 A.2d 393 (1988). "In assessing whether a detention is too long in duration to be justified as investigative, we consider it appropriate to examine whether the police diligently pursued a means of investigation that was only to confirm or dispel their suspicion quickly, during which time it was necessary to detain the defendant." (Internal quotation marks omitted.) State v. Ward, supra, 83 Conn.App. at 389, 849 A.2d 860.
We find nothing in this record to persuade us that the approximately twelve to fifteen minute investigatory stop of the defendant was illegal. Within one minute after the defendant left the Chrysler, he was detained by officers on Tomlinson Avenue. *357 While the officers detained the defendant, McColgan was following the Chrysler. After additional officers stopped the Chrysler for a traffic infraction, the driver gave McColgan permission to search the car. Immediately after crack cocaine was found in the car, McColgan radioed the officers who were detaining the defendant and instructed them to arrest him. McColgan then went to Tomlinson Avenue and identified the defendant as the black male he had seen at the Chrysler's passenger window in front of the Morris Street School.
McColgan's diligent conduct strictly was tied to, and justified by, the circumstances that gave rise to his reasonable and articulable suspicion that the defendant was involved in a drug transaction. Thus, the detention of the defendant for approximately twelve to fifteen minutes reasonably was calculated to maintain the status quo for a brief period of time to enable the police to investigate a suspected crime. See id., at 388, 849 A.2d 860.
Because the investigatory detention was supported by a reasonable and articulable suspicion of criminal conduct and the duration of the stop was appropriate under the circumstances, we conclude that the defendant's constitutional rights were not violated. Accordingly, the court properly denied the defendant's motion to suppress.
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[*] The listing of judges reflects their seniority status on this court as of the date of oral argument.
[1] The court subsequently signed a transcript of its ruling, thereby bringing its decision into compliance with Practice Book § 64-1.
[2] The defendant entered guilty pleas to the state's part B information, in which the state alleged that he previously had been twice convicted of the offense of possession of narcotics.
[3] In his brief, the defendant correctly states that article first, §§ 7 and 9, of the constitution of Connecticut afford greater protection to the citizens of this state than the federal constitution in determining what constitutes a seizure. See State v. Oquendo, 223 Conn. 635, 649-50, 613 A.2d 1300 (1992). The defendant also acknowledges in his brief, however, that there is no dispute in this case that he was subject to a seizure. Consequently, because the constitutional principles that govern what constitutes reasonable and articulable suspicion are the same under both the state and federal constitutions, we need not separately analyze this claim under each constitution. See State v. Richards, 113 Conn. App. 823, 832 n. 6, 968 A.2d 920, cert. granted on other grounds, 292 Conn. 905, 973 A.2d 107 (2009).
[4] Although the defendant contests whether he was detained in a high crime area, the court did not make a finding on this issue. Because we conclude that the uncontested facts sufficiently support the court's denial of the defendant's motion to suppress, we need not address this unresolved factor on appeal.
[5] The fourth amendment to the United States constitution provides in relevant part: "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated. ..."
[6] Article first, § 7, of the constitution of Connecticut provides in relevant part: "The people shall be secure in their persons, houses, papers and possessions from unreasonable searches or seizures. ..."
[7] Article first, § 9, of the constitution of Connecticut provides: "No person shall be arrested, detained or punished, except in cases clearly warranted by law."
[8] Although the defendant relies on State v. Donahue, 251 Conn. 636, 742 A.2d 775 (1999), cert. denied, 531 U.S. 924, 121 S. Ct. 299, 148 L. Ed. 2d 240 (2000), and State v. Oquendo, 223 Conn. 635, 613 A.2d 1300 (1992), the circumstances justifying the investigative stop in this case exceed those circumstances that our Supreme Court rejected in Donahue and Oquendo. See State v. Lipscomb, supra, 258 Conn. at 77-78, 779 A.2d 88, for a relevant discussion of the minimal circumstances present in those two cases. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549085/ | 992 A.2d 733 (2010)
The STATE of New Hampshire
v.
Sheila K. LABARRE.
No. 2008-494.
Supreme Court of New Hampshire.
Argued: January 13, 2010.
Opinion Issued: March 25, 2010.
*734 Michael A. Delaney, attorney general (Ann M. Rice, associate attorney general, on the brief and orally), for the State.
David M. Rothstein, deputy chief appellate defender, of Concord, on the brief and orally, for the defendant.
DUGGAN, J.
The defendant, Sheila LaBarre, was convicted of the first-degree murders of Kenneth Countie and Michael DeLoge, see RSA 630:1-a (2007), following a jury trial in the Superior Court (Nadeau, J.). She appeals, arguing that the trial court erred by admitting certain evidence. We affirm.
I
The record supports the following. On February 24, 2006, Sergeant Shawn Gallagher of the Epping Police Department received two phone calls from the family of Kenneth Countie. They reported that their son had been taken from Wilmington, Massachusetts, by the defendant. Gallagher knew the defendant, having dealt with her approximately two dozen times since 1995.
Gallagher confirmed through the National Crime Information Center (NCIC) that the Wilmington Police Department listed Countie as a missing person. At around 1:00 p.m., Gallagher and Detective Richard Cote went to the defendant's home in Epping to check on Countie.
The defendant's home was located on Red Oak Hill Lane, a public dirt road. The road continued through the defendant's property, although there was a gate in front of the defendant's home, that, when closed, blocked the road. On her property were a single-family dwelling with a barn, outbuildings, and pastureland. Her property was bordered by a fence, barbed wire, and the gate between her property and the road.
When the officers arrived at the defendant's home, the gate was closed. They *735 parked their cruiser outside the gate, and climbed through the gate's rungs. They walked to the door and spoke with the defendant through a window. Gallagher asked if Countie was there, and the defendant said he was not. Gallagher told the defendant they had an NCIC report from Wilmington and asked again if Countie was present. The defendant then admitted he was. Gallagher asked if they could see Countie to check on his well-being. The defendant initially refused, saying Countie was naked and in the bathtub. She then left the window, however, and brought Countie to the door. Gallagher testified that Countie appeared "fine" and told the officers that he was there of his own free will. The defendant told the officers to leave her property, which they did.
On February 26, 2006, the defendant made three phone calls to Gallagher, stating that the police had no right to go onto her property, requesting a copy of the NCIC report that listed Countie as a missing person, and threatening to sue anyone who went onto her property again.
On March 17, 2006, Gallagher and Cote responded to a call that a suspicious person was acting disruptively inside the Wal-Mart Supercenter in Epping. When they arrived, they found the defendant with Countie, who was slumped over in a wheelchair. Countie's skin was ashen, he had cuts on his face and hands, and one of his hands was swollen and not functioning normally. The defendant told Gallagher that Countie received his injuries in a car accident. When Cote attempted to speak with Countie, the defendant told Countie not to say anything to him. The officers accompanied the defendant and Countie out of the store, and Gallagher observed that Countie was leaning on a shopping cart and "not walking properly." The defendant helped Countie into her truck.
On March 22, 2006, the defendant called Gallagher to complain that he had characterized her as a "suspicious person" in his report about the Wal-Mart incident. She also told him that Countie had left her house. The next day, Countie's mother called Gallagher. She said she was concerned because the defendant had stated that Countie was no longer living with her, and Countie would have contacted someone if he were on his own. She also told Gallagher that her son could not be on his own because he had some "mental deficiencies since birth." Gallagher and Cote called the defendant several times and left messages to find out where Countie was.
At approximately 1:00 a.m. on March 24, 2006, the defendant called Gallagher. She told him that Countie had left and then played a tape recording over the phone. On the tape, the defendant identified herself as a justice of the peace in New Hampshire and questioned Countie about raping children. Countie replied "yes" to the defendant's questions in a soft, muffled voice. At the end of the tape, Gallagher heard a heaving sound, and the defendant told Countie to stop faking that he was "throwing up." Then on the tape she said, "Kenneth Countie is now faking that he's throwing up." Shortly thereafter the defendant told Countie to stop faking that he fainted, and then said, "Kenneth Countie is now faking that he fainted." While this tape was playing, Gallagher heard the defendant in the background "crying hysterically," and saying "why, why, why?" Then the tape ended.
Concerned for Countie's safety, Gallagher and Cote went to the defendant's home at 6:00 p.m. Although the defendant had told them Countie was gone, the police went to her residence because in the past, she had had domestic disputes and told the police that the person had left, but the police later found the person there. When *736 they arrived, the gate was closed but not locked. There were no lights on in the house and all of the defendant's vehicles were parked in her yard. From outside the gate, Gallagher saw a burnt mattress in the front yard.
Gallagher and Cote climbed through the rungs of the gate and began walking toward the house. They passed the burnt mattress and a second burn pile. Using a flashlight to illuminate the pile, they saw what appeared to be a knife handle with a melted blade, tree limb clippers, a partially burnt chair, and a piece of bone. The bone was approximately three and a half inches long with a large piece of fleshy material attached to it.
The officers walked to the door and knocked several times, identifying themselves as Epping police officers. No one answered the door, so they returned to their cruiser. Gallagher was concerned that the bone was part of Countie's remains. Gallagher called an assistant county attorney who told him he had sufficient evidence to conduct a "well-being check" concerning Countie.
Cote called for assistance and Officer Bradley Jardis responded. Officer Jardis took his patrol rifle from his cruiser and carried it pointing down in an "administrative carry," and the three officers walked to the home. Gallagher knocked on the door while the other two officers banged on the side of the house and windows. When no one responded, they went back to the door and Gallagher kicked it open. Simultaneously, Gallagher heard a commotion and saw the defendant walking from the gate toward them.
The defendant told the officers that Countie was not there. Gallagher asked if they could go inside to check. The defendant invited them in and gave the officers a room-by-room tour of the house. Gallagher testified that she seemed "happy" as she gave the tour. In the basement, the officers found a pair of sneakers that the defendant said belonged to Countie. She told the officers they could not take them.
After the tour, the defendant and the officers walked outside. Cote asked the defendant about the bone. The defendant replied that it was from a rabbit and explained that she usually cremated her rabbits. When Cote observed that the bone was too big to have come from a rabbit, the defendant became agitated and said that it was from either "a rabbit or a pedophile." Gallagher asked her why she said it was from a pedophile and the defendant denied that she had said that. The officers asked if they could take the bone, but the defendant refused. The defendant asked them to leave, which they did.
Based upon his observations on March 24, Gallagher obtained a warrant to search the exterior of the defendant's home. Officers from the Epping Police Department and the New Hampshire State Police executed the search warrant on the morning of March 25, 2006. They seized several items and interviewed the defendant, who signed a consent-to-search form for her home.
On March 27, 2006, the defendant was interviewed by Sergeant Robert Estabrook and Chief Gregory Dodge of the Epping Police Department. During the interview, the defendant discussed the events of March 24. She told the officers that when she arrived home that night she found the police were already there and she let them inside her home. She described Officer Jardis as being quiet and did not mention he was carrying his firearm. At the end of the interview, she was released.
Before trial, the defendant moved to suppress the physical evidence seized during searches of her home and property. *737 She argued that the officers' entries onto her property on February 24, 2006, and March 24, 2006, violated her state and federal constitutional rights to be free from unreasonable searches and seizures because the police entered her property without a warrant and no exceptions to the warrant requirement applied.
After a two-day evidentiary hearing, the court denied the motion. The court found that because the police "neither entered nor searched the defendant's home" on February 24, the police did not violate the defendant's constitutional rights. The court also found that the community caretaking and emergency aid doctrines justified the March 24 entry. The court further concluded that the "defendant freely, knowingly, and voluntarily consented to the search of her home."
The defendant was indicted on one count of first-degree murder for the death of Kenneth Countie. She entered a non-negotiated plea of not guilty by reason of insanity and filed a notice of insanity defense. At the same time, she waived indictment and pleaded not guilty by reason of insanity to first-degree murder for the death of Michael DeLoge. The jury found her sane and guilty of both charges. This appeal followed.
On appeal, the defendant does not challenge the police entry onto her property on February 24. She argues, however, that the trial court erred in finding the officers' actions on March 24 were justified under either the community caretaking or emergency aid exceptions to the warrant requirement. She also challenges the trial court's finding that she voluntarily consented to the officers' entry of her home that night. The State contends that the defendant waived her right to challenge the denial of her motion to suppress by pleading not guilty by reason of insanity and foregoing the guilt phase of the trial. Alternatively, the State argues that the community caretaking and emergency aid exceptions apply, and the defendant consented to the search of her home. We hold that the defendant did not waive her right to appeal, but that the search on March 24 was justified by the police's community caretaking function and the defendant's consent.
II
We first address the State's argument that the defendant waived her right to appeal the trial court's ruling on her motion to suppress. The State relies upon the acknowledgment and waiver of rights form the defendant signed before pleading not guilty by reason of insanity and the plea colloquy. Specifically, the State points to language in the acknowledgment of rights form which lists the constitutional rights a defendant gives up by pleading guilty, including the "RIGHT to appeal, if convicted."
The defendant argues that she did not waive this right. Before she signed the form, defense counsel altered the form to clarify that the defendant was pleading "not GUILTY by reason of insanity" and that the waiver of rights was specifically limited to "the non-insanity issues/phase only." Therefore, the defendant argues that she did not waive her right to appeal the admissibility of the evidence the State introduced to prove she was sane at the time she committed the murders. We agree.
When a defendant in a criminal case waives the right to appeal, it must be knowing and intelligent. See, e.g., United States v. Hahn, 359 F.3d 1315, 1325 (10th Cir.2004), cert. denied, ___ U.S. ___, 129 S. Ct. 212, 172 L. Ed. 2d 158 (2008); United States v. Andis, 333 F.3d 886, 890 (8th Cir.), cert. denied, 540 U.S. 997, 124 S.Ct. *738 501, 157 L. Ed. 2d 398 (2003); United States v. Khattak, 273 F.3d 557, 561 (3d Cir.2001). A knowing and intelligent waiver must be clear and unambiguous. See United States. v. Jones, 381 F.3d 615, 619 (7th Cir.2004).
Here, the defendant's waiver of her right to appeal was not unambiguous. The defendant's alteration of the waiver form conveyed her intent to waive only the rights associated with the non-insanity or guilt phase. The motion to suppress, however, concerned evidence that was relevant to both the guilt and sanity phases of the trial. Accordingly, the defendant's waiver of her right to appeal issues related to the guilt phase of the trial was insufficient to waive her right to appeal the trial court's ruling on the motion to suppress. In addition, at the plea hearing there was no discussion by the court, and no acknowledgment by the defendant, that she was in any way giving up her right to appeal the ruling on the motion to suppress. Therefore, we cannot conclude that the defendant waived her right to appeal the trial court's ruling on her motion to suppress.
III
Next, we address the defendant's argument that the trial court should have suppressed the evidence and statements the police gathered as a result of an illegal search of her property. See N.H. CONST. pt. I, art. 19; U.S. CONST. amend. IV. "Our review of the superior court's order on a motion to suppress is de novo, except as to any controlling facts determined by the superior court." State v. Denoncourt, 149 N.H. 308, 309, 821 A.2d 997 (2003). We first address the defendant's claim under the New Hampshire Constitution, citing federal cases only to aid in our analysis. See State v. Ball, 124 N.H. 226, 232, 471 A.2d 347 (1983).
Part I, Article 19 of the New Hampshire Constitution protects against unreasonable searches and seizures. "Under Part I, Article 19, ... warrantless searches are per se unreasonable unless they fall within the narrow confines of a judicially crafted exception." Denoncourt, 149 N.H. at 310, 821 A.2d 997. The State bears the burden of establishing that a search falls within one of these exceptions. Id. Here, the trial court found that the officers' warrantless search of the defendant's property on March 24 was justified by the community caretaking exception to the warrant requirement. We agree.
We first adopted the community caretaking exception to the warrant requirement in State v. Psomiades, 139 N.H. 480, 482, 658 A.2d 1190 (1995). "Separate and apart from conducting criminal investigations," police engage in community caretaking functions such as "helping stranded motorists, returning lost children to anxious parents, [and] assisting and protecting citizens in need." State v. Seavey, 147 N.H. 304, 311, 789 A.2d 621 (2001) (Duggan, J. dissenting) (quotation omitted). "Evidence found in the course of caretaking activities is usually admissible at trial." Denoncourt, 149 N.H. at 310, 821 A.2d 997.
We explained in State v. Boyle that, to justify a search under the community caretaking exception, the police officer
must be able to point to specific and articulable facts which, taken together with rational inferences from those facts, reasonably warrant the intrusion. We judge these facts by an objective standard: would the facts available to the officer at the moment of the seizure warrant a person of reasonable caution to believe that the action taken was appropriate.
*739 State v. Boyle, 148 N.H. 306, 308, 807 A.2d 1234 (2002) (quotation and citation omitted). "To determine whether the grounds for a particular [search] meet constitutional requirements, we balance the governmental interest that allegedly justified it against the extent of the intrusion on protected interests." State v. Craveiro, 155 N.H. 423, 427, 924 A.2d 361 (2007). "[T]he [search] must be totally separate from the detection, investigation or acquisition of evidence relating to a criminal matter." Id.; cf. State v. D'Amour, 150 N.H. 122, 126, 834 A.2d 214 (2003) (separation of community caretaking function from investigation of criminal matter "need only relate to a sound and independent basis for each role").
The circumstances in this case justified police entry onto the defendant's property under the community caretaking exception. Countie's family made numerous phone calls to the Epping Police Department indicating concern for his safety because Countie could not care for himself. When the officers first met Countie on February 24, he appeared fine, but when they saw him on March 17, he was visibly injured. Furthermore, Countie's mother stated that the defendant told her that Countie had left the defendant's home to go to Massachusetts but he had not contacted his family, which was unusual for him.
The events of March 24 reinforced the possibility that Countie was injured. In the defendant's phone call at 1:00 a.m., Countie could be heard vomiting on the audio tape and the defendant said he had fainted. Although the defendant told the officers and Countie's family that he had left, the police had reason to believe she was lying. She had previously lied to the police when they went to her home on February 24 to see if Countie was there. The defendant initially told them he was not there but then brought him to the door. The officers also knew that the defendant had a history of arguing with partners who left her home but returned later. All of these facts were enough to cause "a person of reasonable caution" to believe that Countie might have been injured and at the defendant's residence. See Boyle, 148 N.H. at 308, 807 A.2d 1234.
The record also demonstrates that the police entered the defendant's property to check on Countie's well-being, not to investigate a crime. When they pulled up to the defendant's gate on March 24, they had no reason to suspect that a crime had been committed. D'Amour, 150 N.H. at 126, 834 A.2d 214. Given the circumstances outlined above, however, the police had reason to believe that Countie could be injured. The officers' concerns for Countie's well-being, and the likelihood that he was still at the defendant's home, outweighed the intrusion onto the defendant's property. See Craveiro, 155 N.H. at 427, 924 A.2d 361. Therefore, police entry onto the defendant's property on March 24 was justified under the community caretaking exception to the warrant requirement.
Because we find that the officers' actions were justified under the community caretaking exception we need not consider the State's argument that the emergency aid exception applied. We also need not address the State's argument that the police were justified in forcibly opening the door to the defendant's home under the community caretaking exception because the police did not enter the defendant's home at that point and their actions did not lead to the seizure of any evidence.
IV
We next consider whether the defendant consented to the officers' entry into her home on March 24. The defendant *740 argues her consent was invalid because: (1) her consent was vitiated by the unlawful police entry onto her property; and (2) she was intimidated by the three officers, one with a gun, who had just forcibly opened her door. As discussed above, however, her first argument fails because the entry was lawful. The State counters that the defendant's interactions with the police that evening demonstrate that she voluntarily consented to the search of her house. We agree.
Like community caretaking, a "voluntary consent free of duress and coercion is a recognized exception to the need of both a warrant and probable cause." State v. Johnston, 150 N.H. 448, 453, 839 A.2d 830 (2004) (quotation omitted). The State must prove, by a preponderance of the evidence, that the defendant's "consent was free, knowing and voluntary." Id. "Voluntariness is a question of fact, based on the totality of the circumstances." State v. Watson, 151 N.H. 537, 540, 864 A.2d 1095 (2004). "We will disturb the trial court's finding of consent only if it is not supported by the record." Id.
The trial court concluded that the evidence "show[ed] that the defendant was not ... threatened, frightened, intimidated or coerced into giving consent." This finding is supported by the record. Gallagher testified that Officer Jardis "held the weapon in an administrative carry, pointing at the ground," and the defendant described Jardis as "quiet" in her interview with police on March 27. Moreover, in that same interview, the defendant told Dodge that she "let [the officers] in." Finally, when Gallagher stood with the defendant on the porch and she said Countie was not there, he asked her if the officers could go inside and check. The defendant, without hesitation, invited them in.
In addition, the defendant was familiar with the police and the officers testified that she had been assertive with them in the past. On March 24, the defendant refused to let the police take Countie's sneakers or the bone from the burn pile, and when the defendant told the police to leave, they did. Based upon the totality of the circumstances, we hold that the trial court did not err in ruling that the defendant freely, knowingly and voluntarily consented to the search of her home. Accordingly, the trial court's finding that the defendant consented to the search of her home is supported by the record and will not be disturbed. Watson, 151 N.H. at 540, 864 A.2d 1095.
Because the State Constitution provides at least as much protection as the Federal Constitution under these circumstances, see Boyle, 148 N.H. at 307, 807 A.2d 1234, we reach the same result under the Federal Constitution as we do under the State Constitution.
Affirmed.
BRODERICK, C.J., and DALIANIS, HICKS and CONBOY, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549240/ | 140 B.R. 336 (1992)
In re PAN AMERICAN CORPORATION, et al., Debtors.
PAN AMERICAN WORLD AIRWAYS, INC., Appellant,
v.
AIR LINE PILOTS ASSOCIATION, Appellee.
No. 91 CV 3862(KMW).
United States District Court, S.D. New York.
April 9, 1992.
*337 Joseph R. Knock, Morgan, Lewis & Bockius, New York City, for appellant.
Gene Granof, Air Line Pilots Ass'n, Washington, D.C., Babette S. Ceccotti, Cohen, Weiss & Simon, New York City, for appellee.
MEMORANDUM OPINION AND ORDER
KIMBA M. WOOD, District Judge.
This case is an appeal from the decision of the Hon. Cornelius Blackshear of the United States Bankruptcy Court for the Southern District of New York. Appellant appeals the final order entered by the bankruptcy court on May 31, 1991, confirming an arbitration award rendered by the Pan American World Airways ("Pan Am") and the Air Line Pilots Association ("ALPA") System Board of Adjustment ("Board"). Appellant argues that the arbitration award should be vacated and remanded to a new Adjustment Board. Appellee argues that the bankruptcy decision should be affirmed. For the reasons stated below, Judge Blackshear's order confirming the arbitration award is hereby affirmed.
BACKGROUND
In late November, 1988, Appellant learned of allegations that Captain Harold Gay, Jr. permitted a flight attendant to manipulate the flight controls of a 747 aircraft during Appellant's Flight 81 on September 25, 1988, a regularly scheduled flight from New York to Los Angeles. After Regional Chief Pilot Daniel Condon conducted an investigation of the allegations, Appellant discharged Gay effective December 31, 1988. Appellant discharged Gay for allegedly violating certain Federal Aviation Regulations and Appellant's Flight Operations Manual, as well as standards imposed on all Appellant's employees by the Employee Rules of Conduct.
Appellee, Captain Gay's union, filed a grievance regarding Gay's discharge before the Board, which was established by the Pan Am-ALPA collective bargaining agreement ("Agreement"), pursuant to Section 204 of the Railway Labor Act, as amended, 45 U.S.C. § 184. The question presented to the Board by the grievance was "whether the Carrier [Pan Am] had just and/or sufficient cause to discharge Captain Gay." 3/17/89 Letter from Henry Duffy to Captain R. Anderson, at 1.
On November 29, 1990, after hearing testimony from twenty-three witnesses and considering some seventy-one exhibits, the five-member Board rendered a seventy-five page decision sustaining Gay's grievance based on its finding that Gay was deprived of a full and fair investigation of the charges against him ("Award"). The Board did not make a finding regarding *338 whether or not Gay had actually committed the conduct with which he was charged; instead, it stated that, although it was "not inconceivable, and in fact there is some reasonable cause to believe, that Captain Gay did not act appropriately, . . . it is equally likely that Captain Gay was always in control of the aircraft. . . ." Award at 67. The Board also stated that Captain Gay's denial that he allowed a flight attendant to fly the plane had "not been proven, by substantial and convincing evidence, to have been untruthful." Award, at 72. In contrast to its refusal to decide whether Gay committed the alleged misconduct, the Board made numerous findings regarding serious flaws in Appellant's pre-discharge investigation into Appellant's misconduct. The Board found, for example, that there was a delay in instigating the investigation, that Condon instituted the investigation only after being threatened with publicity about the alleged incident if he did not do so, and that Condon improperly used leading questions in conducting the investigation. After concluding that "Captain Gay's rights to a full and fair investigation were sufficiently violated to require that the grievance be sustained," the Board ordered that Gay be reinstated with back pay and full seniority. Award, at 74-75.
On December 12, 1990, Appellant commenced this action in the Eastern District of New York to vacate the Award and to remand the Gay grievance for further proceedings before a different Board. In particular, Appellant requested that a new Board be ordered to determine whether Gay committed the alleged safety violations during Flight 81. On December 28, 1990, Appellee counterclaimed, seeking to have the Award enforced.
Appellant filed for protection under Chapter 11 of the Bankruptcy Code on January 8, 1991. This case was transferred to the United States Bankruptcy Court for the Southern District of New York, and the parties filed cross-motions for summary judgment, respectively seeking to vacate and to enforce the Award. On May 23, 1991, Judge Blackshear heard argument on the cross-motions and rendered his decision denying Appellant's motion to vacate and granting Appellee's motion to enforce the Award. The bankruptcy court emphasized the limited scope of judicial review of arbitration awards stemming from collective bargaining agreements. The court considered not whether Gay's grievance had merit but rather whether it was proper for the Board to focus on Appellant's investigatory process in determining whether Appellant had just cause to fire Gay. The court held that the Board acted properly in considering this due process issue because § 32(E)(1) of the collective bargaining agreement implies a due process requirement. Accordingly, the court concluded that "the Adjustment Board did render a clear and final determination of the issue presented to it. It determined that Captain Gay was not discharged for just cause." Tr. of Oral Op. at 94.
On June 7, 1991, Appellant filed a notice of appeal with respect to the bankruptcy court's May 23, 1991 decision. Appellant argues that this Court should reverse the bankruptcy court's decision and enter an order vacating the Gay Award and remanding the Gay grievance to a new board to determine: (i) whether Gay was guilty of the misconduct set forth in Appellant's December 21, 1988 discharge letter to Gay; and (ii) if so, whether Appellant properly discharged Gay for just cause. Appellee argues that this Court should affirm the bankruptcy court order. For the reasons stated below, the Court affirms the bankruptcy court order.
DISCUSSION
The Railway Labor Act promotes efficiency in the context of labor-management relations by creating a preference for the resolution through arbitration of grievances arising out of collective bargaining agreements. See Union Pacific R.R. Co. v. Sheehan, 439 U.S. 89, 94, 99 S. Ct. 399, 402, 58 L. Ed. 2d 354 (1978), reh. denied 439 U.S. 1135, 99 S. Ct. 1060, 59 L. Ed. 2d 98 (1979). Adjustment Board decisions issued pursuant to the Railway Labor Act are "final and binding upon both parties to the dispute." 45 U.S.C. § 153, First(m).
*339 It is well established that "judicial review of Adjustment Board decisions is `among the narrowest known to the law.'" Sheehan, 439 U.S. at 91, 99 S.Ct. at 401 (citations omitted). "[C]ourts are not authorized to reconsider the merits of an award even though the parties may allege that the award rests on errors of fact or on misinterpretation of the contract." United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 108 S. Ct. 364, 370, 98 L. Ed. 2d 286 (1987). "As long as the arbitrator's award `draws its essence from the collective bargaining agreement,' and is not merely `his own brand of industrial justice,' the award is legitimate." Id. (citations omitted).
Although "the findings and order of the [Board] shall be conclusive on the parties," a district court may, upon application of one of the parties, review an Adjustment Board decision. 45 U.S.C. § 153, First (q). A court may set aside or remand an Adjustment Board decision only on three grounds: "[1] for failure of the [Board] to comply with the requirements of [the RLA], [2] for failure of the order to conform, or confine itself, to matters within the scope of the [Board's] jurisdiction, or [3] for fraud or corruption by a member of the [Board] making the order." 45 U.S.C. § 153, First (q). In addition, a court may overturn an arbitration award if enforcement of the award would violate some explicit public policy of the United States that is "`well defined and dominant, and is to be ascertained "by reference to the laws and legal precedents and not from general considerations of supposed public interests."'" Misco, 108 S.Ct. at 373 (citations omitted).
I. Jurisdiction
Appellant first argues that the Adjustment Board exceeded its jurisdiction because it never answered the question presented by the parties of whether Appellant had just cause to fire Captain Gay. (Appellant's Mem. at 13). According to Appellant, a finding regarding just cause necessarily includes a determination of the underlying issue of whether Captain Gay in fact permitted a flight attendant to manipulate the controls of Flight 81, and if so, whether that misconduct warranted Appellant's discharge of Gay. (Transcript of August 6, 1991 Hearing ("Tr.") at 7-8, 19-20). Appellee argues that, in finding that Appellant did not have just cause to discharge Gay, the Board made an implicit determination that Appellant did not meet its burden of proving that Gay had undertaken the alleged misconduct. (Tr. at 35).
In arguing that a just cause determination requires a decision regarding whether the employee committed the alleged wrongdoing, Appellant cites one authority, Stroehmann Bakeries, Inc. v. Local 776 Int'l Bhd. of Teamsters, 762 F. Supp. 1187 (M.D.Pa.1991). In Stroehmann, an employee was discharged for allegedly sexually assaulting another employee. Id. at 1188. The employee's union filed a grievance, which was sent to arbitration. Although the arbitrator made no finding regarding whether the employee committed the alleged assault, he ordered that the employee be reinstated because of flaws in the employer's investigation. Id. A Pennsylvania district court vacated and remanded the arbitration award because the arbitrator had not decided whether the alleged assault occurred and because the court thought that the award would violate the strong public policy against harassment. Id. at 1189-90. However, the decision in Stroehmann reflects the court's concern with (1) evidence that the arbitrator himself was biased and insensitive, and (2) the arbitrator's failure to explain how the employer's investigation was deficient. Id. at 1189. In contrast, Appellants have presented no evidence that the Adjustment Board in this case was biased, and the Board provided a detailed explanation of why the employer's investigation was inadequate. Award at 73-74 (summarizing the flaws in the investigation).
Furthermore, the Pennsylvania district court decision in Stroehmann appears to conflict with the Second Circuit's holding that it may be "unnecessary" to make a finding on the underlying facts if a just cause determination can be made on other grounds. See Perma-Line Corp. v. Sign Pictorial and Display Union, Local 230, 639 F.2d 890, 894 (2d Cir.1981). In PermaLine, *340 the Second Circuit stated that "the arbitrator's decision . . . that there could be no just cause for the discharge of a shop steward without union consent . . . made it unnecessary for the arbitrator to decide whether, on the facts, [the employee] was an `aggressor' under Work Rule 11." Id. In other words, the Second Circuit upheld an arbitration decision that an employer did not have just cause for discharging an employee, in spite of the arbitrator's failure to make a finding with respect to the alleged misconduct, because the employer's discharge decision was procedurally defective.
After reviewing the Board's decision, the Court agrees with Judge Blackshear that the Board did not decide the underlying question of whether Captain Gay allowed a flight attendant to fly the plane. (Bankruptcy Court Transcript, D 387). The Court further finds that the Board did not exceed its jurisdiction by failing to reach the underlying issue, because it found a sufficient basis for sustaining the grievance in the lack of due process provided during the investigation.[1]
Appellant further argues that the Board exceeded its jurisdiction by imposing on Appellant procedural due process requirements that do not draw their essence from the collective bargaining agreement. (Tr. at 23). The Board directed Appellant to reinstate Gay in accordance with Section 32K of the collective bargaining agreement, which provides that "[i]f, as a result of any Grievance Hearing . . . a pilot who has been held out of service, with or without pay, is exonerated, he shall be reinstated without loss of seniority." Award at 75; § 32K of Agreement. Appellant argues that, because the Board did not "exonerate" Captain Gay, its reinstatement order did not "draw its essence" from the Agreement. (Appellant's Mem. at 43-44).
In making this argument, Appellant overlooks a crucial point. The Board based its decision that Appellant lacked just cause for discharging Gay and that Gay must be reinstated not simply on Section 32K of the collective bargaining agreement, but also on Section 32E, which states that "[a] pilot shall not be disciplined or discharged without an investigation and an opportunity for a Preliminary Hearing." Award, at 53, 69; § 32E of Agreement. Contrary to Appellant's contention that the Board erroneously injected due process considerations into the grievance process, and that the Award did not "draw its essence" from the Agreement, Section 32E requires an adjustment board to include such procedural considerations in its just cause determination. As the Second Circuit stated in Perma-Line, "[a]n arbitrator need not determine the facts in a vacuum. He must have freedom to consider and decide the submitted issues in light of all relevant data, which . . . includes the collective bargaining agreement." Perma-Line, at 894.
Moreover, the courts of several circuits have held that arbitration regarding whether there is just cause to discharge an employee includes considerations of procedural due process even if there is no explicit due process provision in the contract. See, e.g., Perma-Line, 639 F.2d at 894; Chauffeurs, Teamsters and Helpers v. Coca-Cola Bottling Co., 613 F.2d 716, 719-21 (8th Cir.), cert. denied, 446 U.S. 988, 100 S. Ct. 2975, 64 L. Ed. 2d 847 (1980); Federated Dep't Stores v. United Food and Commercial Workers Union, Local 1442, 901 F.2d 1494, 1497-98 (9th Cir.1990); Super Tire Engineering Co. v. Teamsters Local Union No. 676, 721 F.2d 121, 125 (3d Cir. 1983), cert. denied, 469 U.S. 817, 105 S. Ct. 83, 83 L. Ed. 2d 31 (1984). Additionally, even when arbitrators have found that the alleged misconduct occurred, courts have upheld reinstatement decisions when the employer's investigation failed to accord procedural due process to the employee. See, e.g., Coca-Cola, 613 F.2d at 717, 721; Federated Dep't Stores, 901 F.2d at 1498; *341 Super Tire, 721 F.2d at 122, 125. Therefore, the Court rejects Appellant's argument that the Board exceeded its jurisdiction by failing to render a decision regarding the underlying misconduct and by basing its decision on due process grounds.
II. Public Policy
Finally, Appellant argues that even if the arbitrator acted within his jurisdiction, the Award must be vacated because it violates the strong, explicit public policy of fostering airline safety. Appellant's Mem. at 23-37. Appellee responds that the Award cannot be vacated on public policy grounds and that Appellant is attempting improperly to reargue the facts of the case. Appellee's Mem. at 29-40.
It is well established that "a court may refuse to enforce an arbitrator's award under a collective bargaining agreement if the award is contrary to public policy." Newsday, Inc. v. Long Island Typographical Union, No. 915 CWA, 915 F.2d 840, 844 (2d Cir.1990), cert. denied ___ U.S. ___, 111 S. Ct. 1314, 113 L. Ed. 2d 247 (1991), citing Misco, 108 S.Ct. at 373. The public policy must stem from "`"laws and legal precedents and not from general considerations of supposed public interests."'" Misco, 108 S.Ct. at 374 (citations omitted). The public policy strongly favoring safety in the airline industry has been recognized repeatedly in legal decisions. See, e.g., Delta Air Lines, Inc. v. Air Line Pilots Ass'n, Int'l, 861 F.2d 665, 672-674 (11th Cir.1988), reh. denied, en banc, 867 F.2d 1431, and cert. denied Air Line Pilots Ass'n, Int'l v. Delta Air Lines, Inc., 493 U.S. 871, 110 S. Ct. 201, 107 L. Ed. 2d 154 (1989); Robinson v. American Airlines, Inc., 908 F.2d 1020, 1023 (D.C.Cir.1990); World Airways, Inc. v. Int'l Bhd. of Teamsters, etc., 578 F.2d 800, 803 (9th Cir.1978).
On the other hand, the risk that an arbitration award may violate some explicit public policy is not an "excuse" for courts to perform the work of arbitrators. Id.[2] The issue for the court "is not whether grievant's [alleged mis]conduct . . . violated some public policy or law, but rather whether the award requiring the reinstatement of a grievance . . . violated some explicit public policy." Interstate Brands Corp., Butternut Bread Div. v. Chauffeurs, Teamsters, etc., Local Union No. 135, 909 F.2d 885, 893 (6th Cir.), reh. denied, en banc, 1990 WL 102873, (1990) and cert. denied ___ U.S. ___, 111 S. Ct. 1104, 113 L. Ed. 2d 214 (1991). Furthermore, the cases in which courts have vacated arbitration awards on airline safety public policy grounds generally involve awards that contain specific findings that the employee committed the alleged offense. See, e.g., Delta, 861 F.2d at 666; World Airways, 578 F.2d at 802.
In contrast, the Board in this case refused to make a finding regarding whether Gay allowed a flight attendant to fly the plane. Appellant's argument that the Board's reinstatement decision violates the public policy of airline safety assumes that Gay committed the alleged offense, because Condon so concluded. Appellant's Mem. at 36; Appellee Gay's Opp.Mem. at 10. Appellant argues that, because the Board "did not exonerate Gay of misconduct[,] . . . Condon's conclusion [that Gay did permit a flight attendant to fly the plane] still stands." Appellant's Mem. at 36. However, Appellant's reliance on Condon's conclusion is substantially undermined by the Board's finding that there were serious flaws in the underlying investigation. Furthermore, on November 26, 1991, the Chief Administrative Law Judge of the National Transportation Safety Board ("NTSB") issued a bench decision finding that the flight attendant did not manipulate the controls of Flight 81 and "concluding that Captain Gay `did not violate' Federal Aviation Regulations as alleged by the [Federal Aviation Association ("FAA")]." 12/12/91 Letter from Eugene Granof to the Court, at 1, citing Transcript of Oral Initial Decision and Order at 926, lines 18-20 & 22. In light of the Board's findings regarding the flaws in Condon's investigation of the alleged misconduct and *342 in light of the recent NTSB finding that the misconduct did not occur, the Court cannot conclude that Captain Gay allowed a flight attendant to fly the plane. Cf. Northwest Airlines v. Air Line Pilots Ass'n, 808 F.2d 76, 83 (D.C.Cir.1987), cert. denied, 486 U.S. 1014, 108 S. Ct. 1751, 100 L. Ed. 2d 213 (1988) (deferring to FAA finding that pilot was fit and qualified to fly and stating that "[i]t would be the height of judicial chutzpah for [the court] to second-guess the present judgment of the FAA, . . . the agency that is charged with the enforcement of the public policy at issue"). Therefore, the Court cannot conclude that an affirmation of the bankruptcy court decision would violate the public policy favoring airline safety.[3]
CONCLUSION
For the reasons stated above, the Court affirms the bankruptcy court decision confirming the Adjustment Board decision to reinstate Captain Gay with seniority and back pay.
SO ORDERED.
NOTES
[1] Appellant argues that arbitration awards are not final unless they decide every issue presented to them by the parties. Appellant's Mem. at 39, citing Trade & Transport, Inc. v. Natural Petroleum Charterers Inc., 931 F.2d 191, 195 (2d Cir.1991). This argument merely begs the question, given that the parties disagree as to the scope of the issue presented to the Board for decision.
[2] Appellee aptly argues that the court should not remand the case to a new Board because of an alleged public policy violation if the result is simply a rehearing on the merits. Appellee's Opp.Mem. at 30. A remand for the purposes of retrying the case would undercut the efficiency of labor arbitration. See, e.g., Sheehan, 439 U.S. at 94, 99 S.Ct. at 402.
[3] The Court also notes that had Appellant been particularly concerned about the public policy favoring airline safety, it could have created an exception to the arbitration provision of the collective bargaining agreement, for example, forbidding the arbitration of grievances involving airline safety issues. See Northwest, 808 F.2d at 80-81, 83-84 (finding "nothing" in the collective bargaining agreement that excluded safety-related grievances from arbitration and stating that the airline was "free to negotiate with ALPA to remove the application of safety rules from the jurisdiction of the Board or to reduce the amount of discretion given to the Board in such matters"). | 01-03-2023 | 10-30-2013 |
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