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https://www.courtlistener.com/api/rest/v3/opinions/541083/ | 902 F.2d 1134
Barney K. HUANG, Plaintiff-Appellant,v.The BOARD OF GOVERNORS OF THE UNIVERSITY OF NORTH CAROLINAand Its Constituent Institution, North CarolinaState University; Bruce R. Poulton;F.J. Humenik, Defendants-Appellees.
No. 88-1374.
United States Court of Appeals,Fourth Circuit.
Argued Feb. 5, 1990.Decided May 4, 1990.As Amended May 8, 1990.Rehearing and Rehearing In Banc Denied June 12, 1990.
1
Dean A. Shangler, Berman & Shangler, Durham, N.C., for plaintiff-appellant.
2
Thomas J. Ziko, Asst. Atty. Gen., Raleigh, N.C., for defendants-appellees.
3
Lacy H. Thornburg, Atty. Gen., Raleigh, N.C., on the brief, for defendants-appellees.
4
Before HALL and WILKINSON, Circuit Judges, and ELLIS, United States District Judge for the Eastern District of Virginia, sitting by designation.
ELLIS, District Judge:
5
Dr. Barney K. Huang, a tenured full professor at North Carolina State University ("NCSU"), was a member of the Department of Biological and Agricultural Engineering ("BAE") from 1963 until 1986. In 1986, he was involuntarily transferred from BAE to the Division of University Studies ("DUS") in the School of Humanities and Social Sciences. University Chancellor Bruce R. Poulton concluded the transfer was in the best interests of Dr. Huang and BAE. He reached this conclusion only after (i) requesting and receiving a report concerning Dr. Huang's performance and productivity in BAE; (ii) receiving a recommendation to terminate Dr. Huang from BAE's 21 full professors; (iii) engaging in substantial conciliation efforts with Dr. Huang; and (iv) providing Dr. Huang with an opportunity to present his grievances to the Faculty Mediation Committee, which, after a nine-day hearing, concluded that Dr. Huang's grievances were not substantiated and that the transfer was in the parties' best interests.
6
Aggrieved by the transfer, Dr. Huang filed suit pursuant to 42 U.S.C. Secs. 1981 and 1983, alleging that his rights to due process and free speech were violated by appellees'1 conspiracy to transfer or dismiss him and that he was discriminated against in salary on the basis of his national origin (Chinese). In addition, Dr. Huang's suit included pendent state claims against appellees for intentional infliction of mental distress, defamation, and interference with contractual relations. The district court granted summary judgment for appellees on all claims except the Sec. 1981 salary discrimination claim and the claims against the acting head of BAE in his personal capacity.2 Those claims were tried to a jury, which rendered verdicts in favor of appellees. Dr. Huang now appeals certain aspects of the district court's summary judgment rulings. Finding no reversible error in those rulings, we affirm.
7
* NCSU hired Dr. Huang as an assistant professor in 1963. In 1967, he received tenure, and in 1973 he was promoted to full professor. Throughout this period, and until 1986, he was a member of BAE. Sometime circa 1976, relations between Dr. Huang and BAE soured. In Dr. Huang's view, certain BAE members created obstacles to the discharge of his duties, attempted to block his merit raise and research funding, and generally sought to make his life difficult. BAE members saw matters differently. In their view, Dr. Huang's discharge of his professional duties was unsatisfactory in certain important respects. In January 1985, the situation had deteriorated to the point that Dr. Huang was involved in a physical confrontation with another BAE faculty member.
8
At about this time, Chancellor Poulton learned about the BAE faculty members' concerns regarding Dr. Huang's professional performance. As a result, the Chancellor requested and received a report from the Dean of the School of Agriculture and Life Sciences ("SALS") on the physical confrontation incident and Dr. Huang's performance and problems in BAE. The report recommended an outside, independent review of Dr. Huang's work. Dr. Huang rejected NCSU's proposal for such a review. Thereafter seventeen of the twenty-one BAE full professors met to consider the situation and, as a result, recommended to the SALS Dean "that procedures be initiated for the dismissal of [Dr. Huang] ... because of neglect of duty and improper conduct with departmental faculty, graduate students and staff." The four BAE full professors absent from the meeting later added their endorsements to this recommendation. Following receipt of this recommendation, Chancellor Poulton met first with the BAE professors and then with Dr. Huang. In the latter meeting, Dr. Huang suggested that his transfer to another NCSU department might resolve the matter. Seizing on this suggestion, the Chancellor sought an academic home for Dr. Huang in another NCSU department. When the success of this effort appeared in doubt, the Chancellor advised Dr. Huang that, unless he agreed to an independent review of his professional work, the Chancellor would be compelled to initiate his discharge. Dr. Huang at first agreed to, but ultimately rejected, the Chancellor's proposal. Further efforts to negotiate a mutually satisfactory solution failed.
9
Shortly thereafter, the Division of University Studies, a department devoted to interdisciplinary research and teaching, agreed to accept Dr. Huang. Chancellor Poulton, after determining that Dr. Huang's expertise in biological and agricultural engineering would be effectively employed in DUS, decided to transfer Dr. Huang to DUS. Dr. Huang, despite having initially suggested a transfer, resisted the Chancellor's decision. Chancellor Poulton then postponed the effective date of the transfer in order to grant Dr. Huang's request for an opportunity to present his grievances to the Faculty Mediation Committee, a faculty-elected standing committee designated to hear faculty grievances not involving discharges, suspensions or reductions in grade. The Committee heard Dr. Huang's case over a nine-day period involving approximately forty hours of testimony from eighteen witnesses. Dr. Huang appeared, was represented by counsel, and was permitted to present evidence and witnesses to support his grievances. The Committee also heard Chancellor Poulton, various NCSU administrators, and BAE members. After hearing all the witnesses and evidence, the Committee gave Dr. Huang and his counsel an opportunity to present closing arguments.
10
In the report it filed following the hearing, the Committee concluded that the evidence did not substantiate Dr. Huang's claims that NCSU officials had "obstruct[ed] his normal University duties and professional development, [and] ... [engaged in] unethical means to accomplish his dismissal or resignation." Beyond this, the Committee concluded that Dr. Huang's transfer from BAE was in the interests of Dr. Huang and the department. Consistent with this conclusion, the Committee proposed terms of transfer and recommended the appointment of a committee to explore negotiated resolutions. Chancellor Poulton accepted this recommendation, appointed a three-member negotiating committee, and charged it with negotiating a mutually agreeable resolution with Dr. Huang. This effort failed. Therefore, in September 1986, Chancellor Poulton transferred Dr. Huang to DUS.3 Coincident with the transfer, NCSU reduced Dr. Huang's contractual obligation to the university from twelve months to nine months without a corresponding pay reduction.
II
11
The district court dismissed Dr. Huang's monetary damage claims against the state defendants as barred by the Eleventh Amendment. As Dr. Huang correctly concedes, it is well settled that the Eleventh Amendment bars a suit by private parties to recover money damages from the state or its alter egos acting in their official capacities. See, e.g., Edelman v. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347, 1355, 39 L.Ed.2d 662 (1974). Dr. Huang also properly concedes that the Eleventh Amendment bars the pendent state monetary damage claims as well as the Sec. 1981 and Sec. 1983 damage claims. See Papasan v. Allain, 478 U.S. 265, 277, 106 S.Ct. 2932, 2939, 92 L.Ed.2d 209 (1986); Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 106, 120-21, 104 S.Ct. 900, 911, 918-19, 79 L.Ed.2d 67 (1984); see also Actmedia, Inc. v. Stroh, 830 F.2d 957, 964 (9th Cir.1986) (Eleventh Amendment protection applies even where state officials alleged to have acted in excess of their authority). Seeking to avoid this result, Dr. Huang contends that North Carolina's enactment of N.C.Gen.Stat. Sec. 116-3 operates as a waiver of the state's Eleventh Amendment immunity.4 The district court correctly ruled to the contrary.
12
While it is clear that a state may waive the Amendment's protection, it is equally clear that courts may find a waiver "only where stated 'by the most express language or by such overwhelming implication from the text as [will] leave no room for any other reasonable construction.' " Edelman, 415 U.S. at 673, 94 S.Ct. at 1361 (quoting Murray v. Wilson Distilling Co., 213 U.S. 151, 171, 29 S.Ct. 458, 464, 53 L.Ed. 742 (1909)); see also Welch v. Texas Dept. of Highways & Pub. Transp., 483 U.S. 468, 473, 107 S.Ct. 2941, 2945-46, 97 L.Ed.2d 389 (1987); Pennhurst State School & Hosp., 465 U.S. at 99, 104 S.Ct. at 907. And it is settled that a statute waiving a state's sovereign immunity in its own courts is insufficient to waive its Eleventh Amendment immunity; the statute must specify the state's intention to be sued in federal court. See Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241, 105 S.Ct. 3142, 3146, 87 L.Ed.2d 171 (1985).
13
N.C.Gen.Stat. Sec. 116-3 does not meet these rigorous standards. It contains no express language waiving North Carolina's constitutional immunity, nor does its language justify any inference of a waiver. Moreover, even if this provision could be construed as a waiver of North Carolina's sovereign immunity in its own courts, it lacks any indication that North Carolina has consented to suit in federal court. As the North Carolina Court of Appeals has noted, the provision, correctly construed, does no more than "allow UNC and its constituent institutions to sue and be sued in their own names but only as otherwise specifically provided by law." Truesdale v. University of North Carolina, 91 N.C.App. 186, 192, 371 S.E.2d 503, 507 (1988) (emphasis added), appeal and disc. rev. denied, 323 N.C. 706, 377 S.E.2d 229 (1989), cert. denied, --- U.S. ----, 110 S.Ct. 50, 107 L.Ed.2d 19 (1989).
14
Although no reported North Carolina decision squarely considers and decides that Sec. 116-3 does not waive Eleventh Amendment immunity, North Carolina law points unmistakably to that conclusion. The North Carolina Supreme Court in MacDonald v. University of North Carolina, 299 N.C. 457, 263 S.E.2d 578 (1980), implicitly rejected the related argument that Sec. 116-3 waives North Carolina's sovereign immunity in its own courts. That case, decided nine years after Sec. 116-3's passage, held sovereign immunity barred a professor's breach of employment contract case against UNC.5 While MacDonald did not expressly consider Sec. 116-3, its holding makes clear that the nine-year-old provision did not waive the state's sovereign immunity. The North Carolina Court of Appeals subsequently made this conclusion explicit in Truesdale, noting that the General Assembly did not intend to abolish sovereign immunity for tort liability by passing Sec. 116-3. See 371 S.E.2d at 507; see also Corum v. University of North Carolina, 97 N.C.App. 527, 389 S.E.2d 596 (1990). Yet, if Sec. 116-3 is construed as Dr. Huang advocates, it would serve to waive all the state's immunity, including sovereign immunity. MacDonald and Truesdale preclude this result.
15
Accordingly, Sec. 116-3 does not waive North Carolina's sovereign immunity in its own courts, let alone its Eleventh Amendment immunity in federal court. Since North Carolina law nowhere specifically provides for waiver of Eleventh Amendment immunity, Sec. 116-3 is of no avail to Dr. Huang. Thus his money damage claims against appellees, as the district court correctly ruled, are barred.6
III
16
In Count I, Dr. Huang asserts a Sec. 1983 claim based on his allegation that appellees violated his First Amendment rights by transferring him in retaliation for his "blowing the whistle" on an improper business arrangement between the BAE department head and a BAE member. The district court granted summary judgment on the ground that a transfer to another department did not deprive Dr. Huang of any constitutionally protected property interest, including any First Amendment interest. In this respect, the district court was mistaken, for Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972), makes clear that possession of a property right is immaterial to a plaintiff's claim that he was deprived of some valuable benefit as a result of exercising his First Amendment rights. See id. at 597-98, 92 S.Ct. at 2697-98. Even so, the district court did not err in granting summary judgment for its decision "is not to be reversed if it has reached the correct result, even though the reason assigned by it may not be sustained." Stern v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 603 F.2d 1073, 1093 (4th Cir.1979); see also Beck v. Communications Workers of America, 800 F.2d 1280 (4th Cir.1986) (en banc), aff'd, 487 U.S. 735, 108 S.Ct. 2641, 101 L.Ed.2d 634 (1988). Here, settled principles confirm that the district court reached the right result.
17
Plaintiffs asserting First Amendment whistle-blower claims under Sec. 1983 must show first that the expressions which are alleged to have provoked the retaliatory action relate to matters of public concern.7 See Connick v. Myers, 461 U.S. 138, 146, 103 S.Ct. 1684, 1689, 75 L.Ed.2d 708 (1983). Whether an expression involves a matter of public concern is a question of law. Id. at 148 n. 7, 103 S.Ct. at 1690 n. 7; Joyner v. Lancaster, 815 F.2d 20, 23 (4th Cir.), cert. denied, 484 U.S. 830, 108 S.Ct. 102, 98 L.Ed.2d 62 (1987). And it is settled that a public employee's expression of grievances concerning his own employment is not a matter of public concern. See, e.g., Connick, 461 U.S. at 148, 154, 103 S.Ct. at 1690, 1693; Piver v. Pender County Bd. of Ed., 835 F.2d 1076, 1080 (4th Cir.1987), cert. denied, 487 U.S. 1206, 108 S.Ct. 2847, 101 L.Ed.2d 885 (1988); Daniels v. Quinn, 801 F.2d 687, 690 (4th Cir.1986); Johnson v. Town of Elizabethtown, 800 F.2d 404, 406 (4th Cir.1986); Lewis v. Blackburn, 759 F.2d 1171 (4th Cir.1985) (en banc) (per curiam), adopting view of panel dissent per Ervin, J., 734 F.2d 1000, 1008 (4th Cir.1984), cert. denied, 474 U.S. 902, 106 S.Ct. 228, 88 L.Ed.2d 228 (1985); Jurgensen v. Fairfax County, 745 F.2d 868, 879-80 (4th Cir.1984). Second, claimant must show that the alleged retaliatory action deprived him of some valuable benefit. Perry, 408 U.S. at 597, 92 S.Ct. at 2697. Third, claimant must show a causal relation between the expression of public concern and the retaliatory action. The causation requirement is rigorous; it is not enough that the protected expression played a role or was a motivating factor in the retaliation; claimant must show that "but for" the protected expression the employer would not have taken the alleged retaliatory action. See Givhan v. Western Line Consol. School Dist., 439 U.S. 410, 417, 99 S.Ct. 693, 697, 58 L.Ed.2d 619 (1979); Jurgensen, 745 F.2d at 878; Johnson, 800 F.2d at 406.
18
In the context of this case, therefore, Dr. Huang can survive summary judgment only if the record reflects that he made a statement on a matter of public concern, that this expression was the "but for" cause of his transfer, and that the transfer from BAE to DUS deprived him of a valuable benefit. It is the causation requirement on which Dr. Huang's claim most clearly fails. Dr. Huang alleged that in 1980, some six years prior to his transfer, he "blew the whistle" about an improper business arrangement between two BAE members involving state funds. Appellees do not seriously contest that such an accusation relates to a matter of public concern. They contend, however, that the record facts do not support the allegation that Dr. Huang made any statements or accusations concerning the misuse of public funds. Even assuming, arguendo, that Dr. Huang made the disputed statements and that they related to a matter of public concern, it remains pellucidly clear that the record presents no triable issue as to causation. According to the record, Chancellor Poulton did not become involved until 1985, following Dr. Huang's physical altercation with another BAE member. Even then, he did not make a final decision to transfer Dr. Huang until, some twenty months later, he had completed a thorough review of the matter and assembled a substantial record. Included in this record were (i) the report of the SALS Dean detailing the numerous conflicts and problems concerning Dr. Huang's professional performance in BAE, (ii) the unanimous BAE senior faculty recommendation calling for Dr. Huang's discharge on professional performance grounds, and (iii) the Faculty Mediation Committee's report and unanimous conclusion that a transfer would be in the best interests of Dr. Huang and the university. There is not a scintilla of evidence that the Chancellor's decision was infected with a retaliatory motive traceable to the alleged 1980 whistle-blowing incident. A jury could not reasonably have found the requisite "but for" causation. In these circumstances, summary judgment was plainly appropriate. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).
IV
19
The district court correctly rejected Dr. Huang's procedural and substantive due process claims. To have a property interest subject to procedural due process protection, an individual must be entitled to a benefit created and defined by a source independent of the Constitution, such as state law. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972); Bradley v. Colonial Mental Health & Retardation Servs. Bd., 856 F.2d 703, 707 (4th Cir.1988). Here, Dr. Huang's position as a tenured professor is indisputably a property right entitled to procedural due process protection. Also beyond dispute is that there is no evidence that he has been deprived of this right. He remains a tenured full professor in the University at the same or effectively greater salary. Moreover, Dr. Huang received all the process he was due and more. He had ample opportunity to meet with Chancellor Poulton and other administrators in connection with NCSU's mediation efforts. He also had ample opportunity to air his grievances and claims in a nine-day hearing before an impartial Faculty Mediation Committee. His contention that the hearing was conducted under the wrong University code provision is baseless. Section 603, the provision invoked by Dr. Huang, applies only in cases of dismissal, demotion in rank, or serious sanction. No evidence supports the claim that the transfer fits any of these categories. In any event, the process accorded Dr. Huang met even the standard he suggests, as it ensured that the decision to transfer him was not arbitrary and that it "was reached in a fair and impartial manner ... after careful and deliberate consideration and that the process was not so lacking in reasonableness that notions of fairness are offended." Brief of Appellant, p. 30; see Regents of the University of Michigan v. Ewing, 474 U.S. 214, 225, 106 S.Ct. 507, 513, 88 L.Ed.2d 523 (1985). Dr. Huang's procedural due process claim, therefore, fails.
20
Dr. Huang contends, however, that he had a property right in his BAE position. This argument is unpersuasive. As this Circuit has previously noted:
21
[N]o authority ... supports the proposition that a property interest in the continued expectation of public employment includes the right to physically possess a job, in defiance of the stated desire of the employer.... Indeed, to hold that [an employee] had a constitutionally protected property interest in continuing to perform his services would make it impossible for a public employer, dissatisfied with an employee's performance, but without specific contractual cause to discharge him, to relieve the employee from his duties although willing to compensate the employee in full....
22
We are convinced that any constitutionally protected property interest [an employee has] as a result of his employment contract [is] satisfied by payment of the full compensation due under the contract.
23
Royster v. Board of Trustees, 774 F.2d 618, 621 (4th Cir.), cert. denied, 475 U.S. 1121, 106 S.Ct. 1638, 90 L.Ed.2d 184 (1985). As Dr. Huang remains more than fully compensated in his DUS position, we are unable to conclude that the inter-departmental transfer resulted in an infringement of a constitutionally protected property interest.
24
We agree, therefore, with the Eleventh Circuit, which sensibly concluded that the transfer of tenured professors from one department to another, without loss of rank or pay, does not implicate any property interest protected by the Due Process Clause. See Maples v. Martin, 858 F.2d 1546, 1550-51 (11th Cir.1988).8 And this position is also consistent with that of the Fifth and Sixth Circuits, which have held that certain intra-departmental demotions do not implicate property interests subject to procedural due process protection. See Garvie v. Jackson, 845 F.2d 647, 651 (6th Cir.1988) (demotion from department chairman to professor not a denial of a protected property interest); Kelleher v. Flawn, 761 F.2d 1079, 1087 (5th Cir.1985) (reduction of graduate student's teaching duties is not denial of a protected property interest).
25
Beyond this, Dr. Huang also urges that his transfer violated his substantive due process right to continued employment in BAE free from arbitrary state action.9 Even assuming, arguendo, that Dr. Huang's position as a BAE professor is a right subject to substantive review under the Due Process Clause,10 this claim fails. As the Supreme Court noted:
26
When judges are asked to review the substance of a genuinely academic decision, such as this one, they should show great respect for the faculty's professional judgment. Plainly, they may not override it unless it is such a substantial departure from accepted norms as to demonstrate that the person or committee responsible did not actually exercise professional judgment.
27
Regents of the University of Michigan v. Ewing, 474 U.S. 214, 225, 106 S.Ct. 507, 513, 88 L.Ed.2d 523 (1985). And evidence that a decision was unwise or mistaken cannot establish a substantive due process claim. See Bishop v. Wood, 426 U.S. 341, 350, 96 S.Ct. 2074, 2080, 48 L.Ed.2d 684 (1976) ("the Due Process Clause of the Fourteenth Amendment is not a guarantee against incorrect or ill-advised personnel decisions"). Here, it is plain that a reasonable jury could not find that University officials failed to exercise their professional judgment or ventured "beyond the pale of reasoned academic decision-making." Ewing, 474 U.S. 214, 227-28, 106 S.Ct. 507, 514-15, 88 L.Ed.2d 523 (1985). Thus, the district court correctly granted summary judgment on the substantive due process claim.
V
28
Finally, Dr. Huang claims that the district court abused its discretion when it refused to permit defense counsel to withdraw on the morning of trial. This claim is baseless. Defense counsel moved for leave to withdraw out of concern that a witness had made misrepresentations in an affidavit. Such a motion, as the parties agree, lies within the sound discretion of the trial judge. See Ohntrup v. Firearms Center, Inc., 802 F.2d 676, 679 (3rd Cir.1986); Andrews v. Bechtel Power Corp., 780 F.2d 124, 135 (1st Cir.1985), cert. denied, 476 U.S. 1172, 106 S.Ct. 2896, 90 L.Ed.2d 983 (1986); Washington v. Sherwin Real Estate, Inc., 694 F.2d 1081, 1087 (7th Cir.1982). Significantly, Dr. Huang vigorously opposed his counsel's motion. This, in itself, is sufficient to support the trial judge's decision to deny the motion to withdraw. A party cannot have it both ways; he may not vigorously oppose his counsel's motion to withdraw and then later, when he is dissatisfied with the result of a trial, claim that the trial court abused its discretion by ruling as he requested. See Washington, 694 F.2d at 1088 (abuse of discretion unlikely where client acquiesced in decision to permit counsel to withdraw); Thonen v. Jenkins, 455 F.2d 977 (4th Cir.1972) (a party cannot appeal from an order entered with his consent unless he establishes facts to nullify the consent). Thus the district court did not abuse its discretion when it agreed with Dr. Huang and denied his counsel's eleventh hour withdrawal motion.
VI
29
For all the reasons stated herein, the district court's grant of summary judgment is
30
AFFIRMED.
1
Named as defendants and referred to here collectively as "appellees" are NCSU, the governing board of NCSU, the Board of Governors of the University of North Carolina, NCSU Chancellor Poulton and Frank J. Humenik, acting BAE chairman
2
The district court concluded that triable fact issues existed with respect to the qualified immunity defense asserted by the acting BAE head. See Anderson v. Creighton, 483 U.S. 635, 107 S.Ct. 3034, 97 L.Ed.2d 523 (1987); Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982)
3
Such involuntary transfers were not unprecedented at NCSU. The record reflects that since 1970, nineteen faculty members were involuntarily transferred to other NCSU departments
4
North Carolina General Statute Sec. 116-3 provides in pertinent part:
The Board of Governors of the University of North Carolina shall be known and distinguished by the name of "the University of North Carolina" and shall continue as a body politic and corporate and by that name shall have perpetual succession and a common seal.... The corporation ... shall be able and capable in law to sue and be sued in all courts whatsoever; and ... in general may do all such things as are usually done by bodies corporate and politic, or such as may be necessary for the promotion of learning and virtue.
5
It is important to note, however, that at the time MacDonald was decided, the doctrine of sovereign immunity had already been abrogated in North Carolina for breach of contract actions against the state. In Smith v. State, 289 N.C. 303, 222 S.E.2d 412 (1976), the North Carolina Supreme Court held that, by entering into a valid contract, the state implicitly consents to be sued for damages that arise from a subsequent breach. Id., 222 S.E.2d at 425-26. MacDonald did not overturn Smith. Rather, in a narrow holding, it merely held that the decision in Smith would be given prospective effect only. As the MacDonald plaintiff's cause of action had accrued before the decision in Smith, his suit was barred. Smith has no application here; the narrow waiver of immunity authorized there is no authority for the broad waiver of the Eleventh Amendment sought here
6
An alternative and potentially dispositive basis for denial of the Sec. 1983 claims against NCSU, the NCSU governing board, the Board of Governors of the University of North Carolina, and the individual defendants in their official capacities is that, as alter egos of the state, they are not "persons" within the meaning of Sec. 1983. See Will v. Michigan Dept. of State Police, --- U.S. ----, 109 S.Ct. 2304, 2311-12, 105 L.Ed.2d 45 (1989). Because this ground was not advanced or argued by the parties, the Court does not here rely on it
7
If the expressions relate to a matter of public concern, First Amendment protection attaches only if the employee's interest in the speech outweighs the employer's interest in "effective and efficient fulfillment of its responsibilities to the public." Connick, 461 U.S. at 150, 103 S.Ct. at 1692; see also Johnson v. Town of Elizabethtown, 800 F.2d 404, 406 (4th Cir.1986)
8
The Seventh and Tenth Circuits have reached essentially the same result outside the university context. See Volk v. Coler, 845 F.2d 1422, 1430 (7th Cir.1988) (no property interest in employment in a particular state welfare agency office); Childers v. Independent School District No. 1, 676 F.2d 1338, 1341 (10th Cir.1982) (tenured secondary school teacher has no property interest in particular teaching assignment)
9
Since Dr. Huang remains employed by NCSU, his only possible substantive due process claim must pertain to his transfer from BAE to DUS
10
It is doubtful that Dr. Huang's position in BAE is a right properly subject to substantive due process review. Unlike rights subject to procedural due process protection, which arise from sources other than the Constitution, substantive due process rights arise solely from the Constitution. Dr. Huang's entitlement to a position in BAE, if it exists, is essentially a state law contract right, not a fundamental interest embodied in the Constitution. See Ewing, 474 U.S. at 229-30, 106 S.Ct. at 515-16 (Powell, J., concurring) | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1550312/ | 193 Pa. Superior Ct. 301 (1960)
Bumbarger
v.
Walker, Appellant.
Superior Court of Pennsylvania.
Argued June 17, 1960.
September 20, 1960.
*302 Before RHODES, P.J., GUNTHER, WRIGHT, WOODSIDE, ERVIN, WATKINS, and MONTGOMERY, JJ.
*303 Joseph J. Lee, for appellants.
F. Cortez Bell, with him F. Cortez Bell, Jr., and Bell, Silberblatt & Swoope, for appellees.
OPINION BY RHODES, P.J., September 20, 1960:
Plaintiffs, Harvey Bumbarger, Jr., and Lillian A. Bumbarger, his wife, and Lewis E. Bumbarger and Anna Marie Bumbarger, his wife, brought these actions of trespass against defendants, Ray S. Walker and Robert Bailey, for damages resulting from ruination of the spring which supplied water to their properties. The complaints alleged that defendants, in conducting an open pit or strip mining operation on the Albert Smith farm at a higher elevation and about 2,250 feet distant from a spring used by plaintiffs for a domestic water supply, had caused water with a high sulphur content from the mining operation to flow into the spring and render the water unfit for use by plaintiffs in their respective dwellings.
Lewis E. Bumbarger and Harvey Bumbarger, Jr., are sons of Harvey Bumbarger, Sr., on whose land the spring in question is located. Plaintiffs each purchased a lot of ground from their father. These lots adjoin each other. Harvey Bumbarger, Jr., erected a dwelling on his land in 1949, while Lewis E. Bumbarger built in 1951. Under parol permission plaintiffs constructed a pipeline from the spring to their *304 respective lots. They subsequently received express grants of the easement appurtenant to use of the spring by deeds from their father given in confirmation of the previous parol grants between the parties.
Defendants' strip mining operation lies generally northwest of the spring on the farm of Harvey Bumbarger, Sr., and approximately 2,250 feet distant therefrom. The approximate elevation of the bottom of the pit is 1,728 feet, while that of the springhouse is 1,640 feet. The strata of the area has a general slope from the northwest to the southeast, that is, from defendants' operation downgrade to the springhouse. A watercourse begins at the eastern edge of defendants' mining pit, extends over the property of Harvey Bumbarger, Sr., and passes within fifty feet of the spring in question. On the northeast portion of the lands of Harvey Bumbarger, Sr., are some old strippings and mining operations which have been largely filled in, and are approximately 600 feet from the spring and 30 to 40 feet above the level of the spring. The mining operations ceased at least seven years prior to 1955.
The pit resulting from defendants' strip mining was 200 to 300 feet in length, 40 to 50 feet in width, and 40 to 50 feet deeper than the adjacent highway. A considerable amount of water accumulated in the pit.
The testimony indicates that on several occasions there had been drilling and blasting in the pit, and following the blasting the water disappeared from the bottom of the pit. Concussions from the blasting were felt by the home owners in the area. In one instance five windows were shattered; in another a portion of a cellar wall was damaged. In 1955, subsequent to the blastings in the open pit, the spring on the property of Harvey Bumbarger, Sr., became unfit for domestic use due to the sulphur in the water. The walls of the springhouse turned reddish in color. *305 Cooking utensils and plumbing were eaten by the acid. Defendants produced evidence that the spring in question was fed by percolating water as distinguished from surface water.
Testimony of both lay and expert witnesses offered to establish the cause of the contamination was conflicting. Plaintiffs contended, inter alia, that defendants had shattered the underground strata of rock by blastings in the open pit thereby disturbing the flow of subterranean or percolating waters and causing sulphur or acid water to flow into the spring. On the other hand, defendants asserted that the water which caused the contamination of plaintiffs' water supply came from the percolating waters of the old strippings and deep mining operations in the vicinity.
At the conclusion of the trial, eight special questions[1] were submitted to the jury.
*306 The jury, after answering the special questions, returned a general verdict in favor of Harvey Bumbarger, Jr., in the amount of $4,800, and in favor of Lewis E. Bumbarger in the amount of $3,200. Motions for new trial were not pressed in the court below beyond the formal filing within the four-day limitation. The motions for judgment notwithstanding the verdicts were dismissed by the court below, and judgments were entered on the verdicts. Each defendant appealed from both verdicts.
On these appeals defendants maintain (1) that, when a spring depends for its supply upon percolations through land of others and explosives are employed in the use of that land for mining coal and the quality of the water supply is changed in the absence of malice, negligence, and foreseeability of harm, the actor is not liable for injury to the spring; (2) that a parol grant to use a spring on the lands of a grantor does not vest in the grantee a cause of action against the one who changes the quality of the spring; (3) *307 that, where plaintiffs have obtained water comparable to or better than the original supply of water without proof of acquisition expenses, plaintiffs are not entitled to damages; and (4) that the jury made special findings on controverted questions and returned a general verdict inconsistent with the findings, and that therefore the general verdict should be reversed.
The general verdict prevails. At most, the result of the jury's special findings is to confine the cause of the contamination of the spring to the blasting by defendants. That acts by an adjoining owner can destroy or damage a spring which depends for its supply upon filtrations and percolating waters running through his land has been recognized by our courts. See Rothrauff v. Sinking Spring Water Company, 339 Pa. 129, 132-135, 14 A. 2d 87; Zimmerman v. Union Paving Company, 335 Pa. 319, 322, 6 A. 2d 901. The verdicts of the jury established defendants' liability for the ultrahazardous activity of blasting carried on by them. Cf. Bumbarger v. Walker, 393 Pa. 143, 148, 142 A. 2d 171.
Furthermore, it appears that defendants might have disposed of the water in the bottom of the pit by pumping it to the west where the watershed sloped in a direction away from plaintiffs' spring. Thus any question of injury to plaintiffs' spring could have been avoided. Cf. Collins v. Chartiers Valley Gas Company, 131 Pa. 143, 18 A. 1012; 139 Pa. 111, 21 A. 147. As we said in Evans v. Moffat, 192 Pa. Superior Ct. 204, 220, 160 A. 2d 465, 473 (allocatur refused): ". . . but mere economic advantage offers no excuse for causing substantial harm to another's property if such harm can be avoided by proper measures."
Section 519 of Restatement, Torts, vol. 3, p. 41, defines the liability for ultrahazardous activities as follows: "Except as stated in §§ 521-4, one who carries *308 on an ultrahazardous activity[2] is liable to another whose person, land or chattels the actor should recognize as likely to be harmed by the unpreventable miscarriage of the activity for harm resulting thereto from that which makes the activity ultrahazardous, although the utmost care is exercised to prevent the harm."
In Laventhol v. A. DiSandro Contracting Company, 173 Pa. Superior Ct. 522, 525, 98 A. 2d 422, 423, Judge WRIGHT said: "Liability for concussion damage resulting from non-negligent blasting operations has now been established by Federoff v. Harrison Construction Co., 362 Pa. 181, 66 A. 2d 817."
The record indicates that the spring on the property of Harvey Bumbarger, Sr., had been used for domestic purposes at least from 1917, and that the contamination did not develop until 1955 and 1956, which was subsequent to the strip mining and blasting by defendants. After the coal had been removed by defendants, they drilled a hole 40 to 50 feet deep below the bottom of the pit and exploded dynamite therein which successfully removed the accumulated water therefrom. Admittedly the bottom of the open pit of defendants' strip mining was at a higher elevation than the Bumbarger spring. Where conditions which have continued for a long period of time change coincidentally with the occurrence of a new event, which in common experience may have caused the change, there is sufficient evidence of causation present for the case to go to the jury. Richard v. Kaufman, 47 F. Supp. 337, 338; Alwine v. Valley Smokeless Coal Company, 271 Pa. 571, 573, 115 A. 882. In addition, there was expert testimony presented by both plaintiffs and defendants that the ground surface and rock *309 strata underneath sloped downward in a southeasterly direction from the mining operation and toward the Bumbarger spring, and that there was visible seepage of sulphur or mine water appearing at five places at elevations of 11 to 30 feet above the spring and 900 feet or less distant therefrom after the blasting. New seepage discolored and killed the grass. There was expert testimony that the change in the rock strata by blasting would change the course of subterranean waters and cause damage to the spring. We think the evidence of plaintiffs and their expert, if accepted by the jury, was sufficient in its totality to show that defendants' blasting and removal of the accumulated water from the bottom of the pit by drilling and blasting so altered the underground strata and percolating waters as to pollute and cause damage to the spring used by plaintiffs.
The following statement of Mr. Justice LINN, speaking for the Supreme Court in Federoff v. Harrison Construction Company, 362 Pa. 181, 183, 66 A. 2d 817, is controlling and applies to the blasting described in this record: "We think the record supports a finding that the damage was caused by the blasting, thus bringing the case within the rule stated in section 519 of the Restatement of Torts: . . ."
In Richard v. Kaufman, 47 F. Supp. 337, supra, the water in a spring disappeared after blasting operations were carried on by the defendant. The evidence indicated that tremors were felt on the farm of the plaintiff at the time of the explosion together with vibrations in the farmhouse and the rattling of the windows. The District Court of the Eastern District of Pennsylvania affirmed the trial court's verdict for the plaintiff basing its decision on section 519 of Restatement, Torts. The Richard case deals with the diminution of water supply, while the instant case is *310 concerned with the change in the quality of the water supply.
Plaintiffs' property rights in the spring on their father's land was sufficiently established. The right or easement of plaintiffs as grantees of lands from their father's farm to use water from the spring was at first a parol grant or license and was subsequently formalized by the deeds as set forth in plaintiffs' amended complaints. Pipes were laid and the use of the water from the spring to supply plaintiffs' premises was open and notorious and existed some time prior to suit. Even if we ignore the express grants of the water rights contained in the subsequent deeds by the father to the sons, the apparently permanent and obvious servitude was reasonably necessary to the enjoyment of plaintiffs' properties as a dominant estate, and an easement appurtenant for use of the spring could well arise by operation of law. An executed parol license becomes irrevocable when acts have been done by one party in reliance upon the other. Leininger v. Goodman, 277 Pa. 75, 78, 120 A. 772; Dark v. Johnston, 55 Pa. 164, 169.
Moreover, as early as Held v. McBride, 3 Pa. Superior Ct. 155, 158, and as recently as Paci v. Shipley, 166 Pa. Superior Ct. 374, 377, 71 A. 2d 844, 846, this Court held: "`It is settled law in Pennsylvania that an owner of land may arrange it as he pleases, doing no injury to others, and that any ways or other privileges which he may provide for the necessary or convenient use of the different parts of the land, or of structures on it, will remain as servitudes upon the parts subjected to them by him, in the hands of subsequent purchasers with notice, or when the easements are continuous and apparent. The easements thus created, being for the specific use of the lands for which they were provided, become appurtenances of those dominant *311 estates, and require no deed or writing to support them; they pass by a conveyance of the estates to which they are appurtenant.'"
It is also argued that the damages recovered by plaintiffs are excessive.
When the injury to property is permanent the measure of damages is the difference in market value before and after the injury or the cost of removing the obstruction whichever is the lower amount. Rabe v. Shoenberger Coal Company, 213 Pa. 252, 256, 62 A. 854; Zimmerman v. Union Paving Company, 134 Pa. Superior Ct. 373, 383, 4 A. 2d 319; Hoffman v. Berwind-White Coal Mining Company, 265 Pa. 476, 479, 109 A. 234.
Apparently the spring is permanently destroyed, and thus a permanent injury exists. Zimmerman v. Union Paving Company, supra, 134 Pa. Superior Ct. 373, 383, 4 A. 2d 319. The expert witness for plaintiffs established the "before" value of the property of Harvey Bumbarger, Jr., as $12,600, and the property of Lewis E. Bumbarger as $8,400. The "after" value was fixed at one half, or $6,300 for the former, and $4,200 for the latter. The jury's verdicts, being $4,800 for Harvey Bumbarger, Jr., and $3,200 for Lewis E. Bumbarger, were considerably less than the losses testified to by the real estate expert. We do not believe that the verdicts are grossly excessive or that there is any basis for setting them aside.
Moreover, the jury was not obliged to conclude that plaintiffs could obtain sufficient water from the Leroy Hubler spring of a comparable quality on a permanent basis or that plaintiffs' damages were limited to the cost of piping water from the Hubler spring.
Under the evidence in this record, the question of damage to plaintiffs' property interests in the use of the spring was a question for the jury.
*312 Finally, defendants argue that the special findings were inconsistent with the general verdict. Where the complaints state a cause of action and the evidence supports the allegations, plaintiffs' verdicts may be sustained whatever the legal theory on which liability might be based. Kopka v. Bell Telephone Company of Pennsylvania, 371 Pa. 444, 449. 91 A. 2d 232; Federoff v. Harrison Construction Company, supra, 362 Pa. 181, 66 A. 2d 817.
A general verdict accompanied by answers to specific questions is not a special verdict. Schmidt v. Campbell, 136 Pa. Superior Ct. 590, 596, 7 A. 2d 554. The jury's special findings here do not negate the general verdict which is controlling. The special findings, which are looked upon with favor by our courts (Abraham Fur Company v. Cameron, 295 Pa. 408, 418, 145 A. 578), are generally consistent with the general verdict. There is no error in this respect.
Judgments are affirmed as entered.
DISSENTING OPINION BY WRIGHT, J.:
The question here involved is one which materially affects property rights in this Commonwealth. A spring depends for its water supply upon percolations beneath the surface of the ground, and the owner of adjoining land employs explosives in the lawful use of his property for mining purposes. It is my view that, in holding the adjoining owner liable for a change in the quality of the water supply, the majority is extending the doctrine of tort liability to an unwarranted extent.
It is important to bear in mind (1) that the damage claimed by these plaintiffs was not the result of diversion of mine drainage water from its natural *313 water course, which was the situation in Bumbarger v. Walker, 393 Pa. 143, 142 A. 2d 171; (2) that the alleged contamination of the water supply occurred in the mining process, and was not the result of a trespass on and invasion of plaintiffs' property by vibrations in the ground; and (3) that the defendants were not negligent in the mining operation, and harm was not intended or foreseeable. As stated by President Judge PENTZ: "The result of the special findings is to confine the cause of the contamination of the spring to the blasting by the defendants in their stripping operation, blasting being a normal activity in mining, without negligence, or intent to harm plaintiffs and without disregard of the rights of the plaintiffs in and to underground or percolating waters".
It has always been settled law in this Commonwealth "that where a spring depends for its supply upon filtrations or percolations of water through the land of an owner above, and in the use of the land for mining or other lawful purposes the spring is destroyed, such owner is not liable for the damages thus caused to the proprietors of the spring, unless the injury was occasioned by malice or negligence. To such percolations or filtrations, then, the inferior owner has no right": Haldeman v. Bruckhart, 45 Pa. 514. See also Lybe's Appeal, 106 Pa. 626; Williams v. Ladew, 161 Pa. 283. The majority opinion cites Rothrauff v. Sinking Spring Water Co., 339 Pa. 129, 14 A. 2d 87, and Zimmerman v. Union Paving Co., 335 Pa. 319, 6 A. 2d 901, but these cases support the established rule. In the Rothrauff case our Supreme Court said: "This much is settled, that when a spring depends for its supply upon filtrations and percolations through the land of an adjoining owner, and in the use of that land for lawful purposes the spring is destroyed, such owner, in the absence of malice and negligence on his *314 part, is not liable for the damage thus occasioned". In the Zimmerman case, wherein it was held that defendant's conduct had not resulted in any legal damage, our Supreme Court said "that the subterranean sources of a spring are not perceptible, and damage caused by operations in their vicinity cannot usually be foreseen or avoided". In Collins v. Chartiers V. Gas Co., 131 Pa. 143, 18 A. 1012; 139 Pa. 111, 21 A. 147, also cited in the majority opinion, our Supreme Court said: "Hence the practical inquiry is, first, whether the damage was necessary and unavoidable; secondly, if not, was it sufficiently obvious to have been foreseen, and also preventable by reasonable care and expenditure"? There is therefore merit in the suggestion that the theory of liability must be that an actor is responsible only for injuries which he can foresee. See Harclerode v. Detwiler, 61 Pa. D. & C. 541.
It is of course true that liability for concussion damage resulting from non-negligent blasting operations has now been established: Federoff v. Harrison Construction Co., 362 Pa. 181, 66 A. 2d 817; Laventhol v. A. DiSandro Contracting Co., 173 Pa. Superior Ct. 522, 98 A. 2d 422. However, as initially emphasized, that is not the situation in the case at bar. These plaintiffs did not establish concussion damage. The contamination of the spring did not result from a trespass on or invasion of their property by vibrations in the ground. It is clear from the record that there was no reduction in the quantity of the water supply. It is equally clear that the change in its quality was a natural consequence of the mining operation, something totally unrelated to the method used in removing the coal. Since the contamination of percolating waters occurs in the mining process regardless of the use of explosives, and since there is no liability without negligence when explosives are not used, it is my *315 view that it is unreasonable to impose liability for the same result simply because of the use of explosives.
GUNTHER and WATKINS, JJ., join in this dissent.
NOTES
[1] "(1) Is there a water course which leads from the culvert under the Deer Creek Road at the Maguire property, and thence through the property of Harvey Bumbarger, Sr., which has a well defined location, and well defined banks?
"A. Yes.
"(2) Did percolating or underground water from the Walker-Bailey strip mine on the Smith land cause injury to the spring on the property of Harvey Bumbarger, Sr.?
"A. Yes.
"(3) If your answer to No. 2 is Yes, did the blasting on the Walker-Bailey strip mining operation on the Albert Smith property cause injury to the percolating waters eventually flowing into the Harvey Bumbarger, Sr., spring?
"A. Yes.
"(4) Did the surface waters pumped from the Walker-Bailey strip mine operation cause an injury to the spring on the property of Harvey Bumbarger, Sr.?
"A. No.
"(5) Were the Walker-Bailey mining operations on the Albert Smith property carried on negligently, or with malice and intent to deprive Lewis Bumbarger and Harvey Bumbarger, Jr. and their wives, of their respective property rights in the Harvey Bumbarger, Sr., spring?
"A. No.
"(6) Were the Walker-Bailey strip mining operations on the Albert Smith property conducted without regard to the rights of the plaintiffs, Lewis Bumbarger and Harvey Bumbarger, Jr. in and to the surface or underground and percolating waters?
"A. No.
"(7) Have Harvey Bumbarger, Jr. and his wife, and Lewis E. Bumbarger and his wife, obtained the right to use water in their respective homes from a spring on the Leroy Hubler property, which water is comparable to or better than the water originally obtained by them from the Harvey Bumbarger, Sr. spring?
"A. Yes.
"(8) Did the percolating waters from the strip mining operations on the Harvey Bumbarger, Sr. property cause injury to the spring on the property of Harvey Bumbarger, Sr.?
"A. No."
[2] Defined in section 520. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550322/ | 164 A.2d 340 (1960)
Ira I. SAWYER, Appellant,
v.
MONARCH CAB COMPANY, Inc., Appellee.
No. 2590.
Municipal Court of Appeals for the District of Columbia.
Argued July 25, 1960.
Decided October 21, 1960.
John F. Gionfriddo, Washington, D. C., with whom Charles C. Collins and Robert E. Anderson, Washington, D. C., were on the brief, for appellant.
George J. Charles, Washington, D. C., with whom Jules H. Sigal, Washington, D. C., was on the brief, for appellee.
Before ROVER, Chief Judge, and HOOD and QUINN, Associate Judges.
QUINN, Associate Judge.
This case arose out of a collision between appellant's automobile and appellee's taxicab at an uncontrolled intersection. The trial court found that the collision was caused by appellant's negligence *341 and awarded appellee damages in the amount of $1,666.46. On this appeal appellant first contends that the court erred in not finding the driver of appellee's vehicle negligent. As we have stated time and again, questions of negligence and contributory negligence generally fall within the province of the trier of fact and its determinations will not be disturbed unless plainly contrary to the weight of the evidence.[1] After carefully reviewing the transcript of proceedings, we are convinced that there was ample evidence to support the decision with respect to fault.
We consider that the paramount issue here concerns the proof and the computation of damages. This court has ruled that where an automobile is practically destroyed or so extensively damaged as to be beyond repair, the measure of liability therefor is the difference between the fair market value immediately before the loss less its salvage value immediately afterwards.[2] Appellant does not quarrel with the rule but argues that appellee did not establish by competent testimony that he was entitled to recover thereunder. Appellant challenges the admissibility of certain testimony by a Mr. Rubin, appellee's office manager and bookkeeper, on the basis that the witness was not qualified to voice an opinion as to the condition of the taxicab after the collision or to state his estimate of its value. Moreover, appellant urges that the trial court failed to correctly apply the aforementioned measure of damages since, in ascertaining the reasonable market value of the vehicle just prior to the collision, no allowance was made for depreciation from the date of purchase.
It is plainly evident from the record that the trial court regarded Mr. Rubin as an expert witness and so accepted his testimony that the taxicab was a total wreck and that its salvageable parts were worth $315. On examination he declared that he had acted as appellee's office manager for seven years and that his duties entailed the maintenance of the company's ten cabs, as well as caring for the office. He stated specifically that he had experience in purchasing automobile parts, that he was familiar with the cost of such parts, that he had in the past made estimates of automobile repairs, and he professed the ability to appraise the value of damaged automobiles. We cannot say therefore that the trial court abused its discretion in ruling that the witness was qualified to express his opinions on this subject. Appellant counters with the accusation that the figure of $315 actually constituted the estimate of two professional appraisers that Rubin had admittedly consulted and for that reason was inadmissible. There is no evidence which would justify the conclusion that Rubin adopted or relied on these outside estimates in computing the value of the wrecked cab and we do not feel that the mere fact of consultation would discredit his opinion.
Regarding the reasonable market value of the cab prior to the collision, the following information was elicited from the testimony of Rubin. He stated that the vehicle, a 1959 four-door Studebaker, was purchased on January 29, 1959, for the sum of $1,931.46. The invoice confirming the purchase price was introduced into evidence, as well as two additional bills totaling $50 for work done in preparing the automobile for the road. The automobile was parked on a lot and remained "in inventory" until May 27, when it was put into service. Ten days later on June 7, after having been driven about 500 miles, the car was involved in the collision here in question.
The facts just recited furnished the trial court with sufficient evidence to calculate the reasonable market price of the taxicab immediately prior to the collision. The court had before it the purchase price of the vehicle, the distance it had traveled, the *342 length of time it was in actual operation, the period between its purchase and the date of the collision, and the manner of its use. Yet the trial court ignored these pertinent factors and accepted only the purchase price as equivalent to the reasonable market price before the collision. This failure to take into account and to deduct the value of depreciation was error[3] and requires that the case be remanded for the sole purpose of determining the proper measure of damages. Appellee protests in his brief that appellant has no cause to complain because the sale price was a discount and lower than the true depreciated value at the time of the collision. While this may be true, there is no indication from the record that the purchase price represented anything other than the prevailing retail price at the time of sale. However, appellee will now have a full opportunity to make this showing.
Reversed and remanded with instructions to grant a new trial limited to damages only.
NOTES
[1] E.g., Custom Taxicabs v. Hatch, D.C. Mun.App. 1955, 110 A.2d 690.
[2] Royer v. Deihl, D.C.Mun.App. 1947, 55 A.2d 722.
[3] See Bailey v. Ford, 1927, 151 Md. 664, 135 A. 835; Teets v. Hahn, 1927, 137 A. 559, 5 N.J.Misc. 538. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550188/ | 63 N.J. Super. 225 (1960)
164 A.2d 357
J.J. BAUER AND LOIS BAUER, HIS WIFE, PLAINTIFFS-APPELLANTS,
v.
ROBERT N. BOWEN, M.D., DEFENDANT-RESPONDENT.
Superior Court of New Jersey, Appellate Division.
Argued September 26, 1960.
Decided October 10, 1960.
*227 Before Judges GOLDMANN, FREUND and KILKENNY.
*228 Mr. Michael N. Kouvatas argued the cause for the plaintiffs-appellants.
Mr. William G. Bischoff argued the cause for defendant-respondent (Messrs. Taylor, Bischoff, Neutze & Williams, attorneys).
The opinion of the court was delivered by KILKENNY, J.A.D.
The Camden County Court, Law Division, granted defendant's motion for summary judgment and dismissed plaintiffs' malpractice suit on the sole ground that it was barred by the statute of limitations. The plaintiffs appeal therefrom.
While the motion was one for summary judgment under R.R. 4:58, it was more in the nature of a motion for judgment on the pleadings under R.R. 4:12-3. It was based solely on the amended complaint, answer, pretrial order, and the memoranda of law submitted by the respective parties. Unlike the usual motion for summary judgment, neither party submitted any affidavits, depositions or exhibits to the trial court. Hence, in reviewing the propriety of the judgment below, we limit ourselves to a consideration of the same papers which were submitted below.
The original complaint was filed on March 23, 1959, a Monday, but was never served upon the defendant. In it, the female plaintiff and her plaintiff husband, who sued per quod, charged the defendant doctor with negligence, in performing a therapeutic abortion on the female plaintiff in March 1957 at the West Jersey Hospital, Camden, New Jersey, and with fraud, in knowingly and intentionally making false and fraudulent representations to the plaintiff that he had, in that operation, removed and aborted the unborn child being carried by her. She alleged that his fraud was not discovered until March 21, 1957, when she was re-admitted to the hospital and the removal of the foetus was then completed.
The plaintiffs filed an amended complaint on March 30, 1959, a copy of which, together with summons, was served *229 upon the defendant. The first count of the amended complaint, which also charges both negligence and fraud, is exactly the same as the first count of the original complaint, except that paragraph 5, alleging an element of damages, has been deleted and paragraph 6 has become paragraph 5 of the amended complaint. Further, the original complaint did not contain the second count of the amended complaint, which is, in substance, the deleted paragraph 5 above. The second and third counts of the original complaint are the third and fourth counts of the amended complaint. The substance of both complaints is the same.
We need concern ourselves on this appeal only with the first count of the amended complaint, which charges both negligence and fraud, in its relationship to the statute of limitations. The amended complaint filed on March 30, 1959 does not set forth a new cause of action, but the same cause of action in somewhat different form. Therefore, the time of its filing relates back to the time of the filing of the original complaint on March 23, 1959 and the latter governs.
The applicable statute of limitations in a suit for personal injuries based upon the alleged malpractice of a doctor, N.J.S. 2A:14-2, provides:
"Every action at law for an injury to the person caused by the wrongful act, neglect or default of any person within this state shall be commenced within 2 years next after the cause of any such action shall have accrued."
The important issue on this appeal is when did the plaintiff's cause of action "accrue." It was conceded on the oral argument that the defendant operated on the female plaintiff on March 6, 1957, performing a lawful, therapeutic abortion. His answer denies her charge of fraud, so that the pleadings raise an issue of fact as to whether he falsely represented that he had completely removed the foetus in the operation. Her complaint alleges that she imposed a trust in him and believed in him and relied upon his superior means of information as to what had been done to her body. *230 The respective briefs concede that she remained at the hospital under his care until March 16, 1957, when she was discharged and returned to her home. On March 21, 1957, while the female plaintiff was at home, there appeared from her body a part of the foetus, which would establish the falsity of his representations, if he ever made them. Plaintiff was immediately transported back to the hospital. The defendant was called, came to the hospital, and on March 22, 1957 performed what is known as a "D. & C.," a scraping of the uterus.
If the statute of limitations is to be computed from March 6, 1957, when the defendant allegedly performed a negligent operation, then obviously the complaint filed on March 23, 1959, or the amended complaint, was not within the time limitation fixed by the statute. On the other hand, if the cause of action accrued on March 21, 1957, when the female plaintiff discovered that the defendant had perpetrated the alleged fraud, or if it accrued on March 22, 1957 when the defendant last treated the female plaintiff, then the suit would have been within time.
It must be observed at this point that March 21 and March 22, 1959 were respectively a Saturday and a Sunday. Hence, N.J.S.A. 36:1-1.1 would apply. That statute provides that when the last day prescribed by law for an act to be done falls on a Saturday, or a Sunday, or a legal holiday, when the public offices are closed to transactions of business, if the act is done on the next day when the public office is open, it is done within time. Therefore, a filing of the complaint on Monday, March 23, 1959 would be within time, if it is concluded that plaintiffs' cause of action accrued either on March 21, or March 22, 1957. See Poetz v. Mix, 7 N.J. 436 (1951).
Generally, by New Jersey case decisions, in a malpractice action, where an operation has been performed, the statute of limitations begins to run from the day of the negligent performance of the operation, even though the negligence of the doctor may not be discovered until some *231 time thereafter. Thus, in Weinstein v. Blanchard, 109 N.J.L. 332 (E. & A. 1932), it was held that an action against a physician based on negligence was barred by the statute after the two-year period following the operation, even though the physician's wrongful conduct in leaving a drainage tube in plaintiff's body was not discovered until about 19 years later.
This doctrine was followed in Tortorello v. Reinfeld, 6 N.J. 58 (1950), where the plaintiff contended that the alleged negligent operation and the post-operative treatment comprised a continuous tort, thereby giving rise to a cause of action as of the time the treatment ended. However, the Supreme Court brushed aside this contention and held that the mere fact of treatment following the single negligent act does not toll the statute. It decided that "accrual of cause of action" means the time when a right first arises to institute and maintain an action for invasion of one's rights against a wrongdoer. The period is computed from that time. In the Tortorello case, the Supreme Court decided that the mere fact that treatment continues after a single act of negligence, or that the confidential relationship of patient and physician continues, does not postpone the running of the statute.
However, in Tortorello, two exceptions to the foregoing fundamental rule were listed. First, if injurious consequences arise from a continuing course of negligent treatment, the statute does not ordinarily begin to run until the treatment is terminated, unless the patient shall have earlier discovered the injury. The allegations of the amended complaint do not bring this case within that exception. If the defendant were guilty of any negligence, it would have been on March 6, 1957, when the operation was allegedly negligently performed. There is no valid assertion of any continuing course of negligent treatment thereafter. Apparently there was none, since what was done on March 22, 1957 by the defendant doctor was corrective, properly done, and not negligent.
*232 The second exception to the basic rule pointed out in Tortorello, supra, covers a situation where "the physician is guilty of fraudulent concealment." Then the statute is tolled pending discovery of the fraud. The amended complaint in this case charges fraudulent representations and fraudulent concealment of the truth from plaintiffs, viz., that the female plaintiff had been informed by defendant that the foetus had been completely removed in the course of the abortion operation, when in fact that was false, and that the truth was concealed from her, until her own discovery of March 21, 1957. We do not pass on the truth of her asserted claim. The exception to the statute of limitations rule in the Tortorello case is controlling here. The trial court should not have dismissed the amended complaint, as barred by the statute of limitations, because it contained within its allegations a charge of fraud by the defendant and non-discovery of the truth by the female plaintiff until March 21, 1957.
In the appeal record the plaintiffs included the depositions of the defendant which negate the charge of fraud. However, it must be noted, in fairness to the trial judge, that these depositions were not submitted to or considered by him. If they had been, and if no contradictory depositions or affidavits were submitted by the plaintiffs to establish a prima facie case of fraudulent concealment, then the summary judgment might properly have been granted, because of a lack of showing that the case came within the fraud exception.
Therefore, the judgment below will be reversed and the matter remanded without prejudice to the right of the defendant to renew his motion for dismissal of the amended complaint on the ground that it is barred by the statute of limitations, at which time depositions or affidavits in support of or in opposition to the motion may be submitted. Thus, the trial court may then order summary judgment on the issue of the statute of limitations, if there is no genuine issue of fact to bring the case within the exceptions noted above. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550222/ | 223 Md. 251 (1960)
164 A.2d 268
HINES
v.
STATE
[No. 22, September Term, 1960.]
Court of Appeals of Maryland.
Decided October 14, 1960.
The cause was argued before BRUNE, C.J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.
David Kimmelman, for appellant.
James H. Norris, Jr., Special Assistant Attorney General, with whom were C. Ferdinand Sybert, Attorney General, Saul A. Harris and Joseph G. Koutz, State's Attorney and Assistant State's Attorney of Baltimore City, respectively, on the brief, for appellee.
PER CURIAM:
The appellant, Hollis Hines, was convicted by a jury of murder in the first degree for the shooting of his former sweetheart on a Baltimore street, late at night. He was represented by a lawyer who has had long and wide experience in the trial of criminal cases. When Hines, alleging and showing that he was indigent, appealed, another lawyer was *252 appointed to represent him. His counsel on appeal went over the transcript with Hines to determine what points should be made and what testimony printed, and after obtaining his agreement on these points, prepared a thorough brief in which it is ably contended that the evidence was insufficient to justify submitting the issue of murder in the first degree to the jury.
At the argument, appellant's counsel informed us that his client had written him that he was dissatisfied with the brief and wished him to withdraw from the case because he had not presented the point of the perjury of the State's witnesses. We asked counsel to argue and heard him and the State. The appellant was then sent a copy of the transcript and advised by the Court as to what had occurred and told that decision would be deferred, pending the submission by him of any additional data and argument he wished to present. Appellant, in due course, submitted a long memorandum, much of which is a reproduction of testimony in the transcript. He reiterates the argument that the evidence was insufficient on the question of first degree murder and argues at length that key witnesses, whose testimony was hurtful to him, were not telling the truth and that this was known to the State.
Appellant seeks to support his allegations of perjury in three ways. Either he points out differences in accounts of witnesses on inconsequential or insignificant details, or he flatly says that what a witness has testified to is untrue or did not occur, or he argues that what a witness said was so incredible it must have been false. We have carefully considered appellant's memorandum and find nothing in it to indicate that perjury was committed, much less that the State knew that any testimony was false, if any was.
There remains only the question of the sufficiency of the evidence of first degree murder. The State showed the following: Hines had been in love with Rosa Sutton for several years. She left him for another man, which he resented very much. He tried to see her many times but she told him she had nothing to say to him. In a tavern in Baltimore, where she worked, she talked to him only two minutes out of his three-hours' stay, although he had come over from Washington to see her. She proclaimed publicly that she was afraid of him. He had said to her sister that if he could not have *253 her, life was not worth living and "before he saw anyone else with her, he would kill her and himself, too." On the evening of the shooting, he sat in Washington after supper thinking about Rosa and decided to come to Baltimore. He went up to his room, got his pistol, and bought a one-way train ticket to Baltimore. He arrived about eleven-thirty, went to Rosa's apartment, found nobody home, walked towards the cafe where she worked and saw Rosa walking down the street with a fellow employee of the cafe. The employee testified that Hines said to Rosa: "`Why did you leave me for?'" and she replied: "`You beat me and accused me of something I didn't do.'" The employee walked away, leaving the pair together on the street, and the shooting took place shortly afterwards.
We think it is clear that the evidence was sufficient to go to the jury and that the question of malice, wilfulness, deliberation and premeditation was for the jury to determine. Chisley v. State, 202 Md. 87; Grammer v. State, 203 Md. 200, 225; Briley v. State, 212 Md. 445, 447; Brown v. State, 220 Md. 29, 38. The jury was not required to believe Hines' statement that he took the gun with him on the evening of the shooting for his own protection or his claim that the shooting was accidental, having occurred when he heard footsteps coming up behind him as he stood on the street with Rosa, and pulled his pistol out of his right hand jacket pocket, causing it to go off. Brown v. State, supra.
Judgment affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550151/ | 97 F.2d 662 (1938)
SCHRAM
v.
SMITH et al.
No. 8530.
Circuit Court of Appeals, Ninth Circuit.
June 27, 1938.
*663 John H. Rapp, of Tucson, Ariz. (Robert S. Marx, of Cincinnati, Ohio, of counsel), for appellant.
Charles Woolf and G. W. Shute, both of Phnix, Ariz., for appellees.
Before GARRECHT, HANEY, and STEPHENS, Circuit Judges.
HANEY, Circuit Judge.
This is a companion case to Schram v. Poole, 9 Cir., 97 P.2d 665, June 16, 1938. A motion to dismiss a bill, filed by appellant as receiver of the First National Bank-Detroit, a national banking association, to recover liability of shareholders, having been sustained, the receiver appeals.
The history of the bank and its insolvency is set forth in Schram v. Poole, 9 Cir., supra, and need not be repeated here. The bill alleges that the stock of the above-named bank was held by Detroit Bankers' Company, a Michigan corporation, hereinafter called the holding company; and that the holding company's articles of association in Article IX-A provided:
"The holder of each share of common stock of this corporation shall be individually and severally liable for such stockholder's ratable and proportionate part (determined on the basis of their respective stockholdings of the total issued and outstanding stock of this corporation) for any statutory liability imposed upon this corporation by reason of its ownership of shares of the capital stock of any bank or trust company, and the stockholders of this company, by the acceptance of their certificates of stock of this company, severally agree that such liability may be enforced in the same manner and to the same extent as statutory liability may now or hereafter be enforceable against stockholders of banks or trust companies under the laws under which said banks or trust companies are organized to operate. * * *" It is also alleged that the substance of such article was contained on the face of the stock certificates, and on the back thereof the same was printed in full.
It further appears from the bill that the stockholders of the holding company, by accepting the certificates, representing stock in the holding company, "entered into a contract whereby they severally agreed to pay their ratable and proportionate part of any assessment levied by the Comptroller of the Currency upon the shareholders of record of the capital stock of said First National Bank-Detroit; that there was a good and valid consideration therefor, and all of the parties necessary to the making of said contract imposing said liability upon the stockholders of the Detroit Bankers Company, *664 and in favor of and for the benefit of the creditors of First National Bank-Detroit were parties to said contract."
It is further alleged that the Comptroller of the Currency on May 16, 1933, levied a 100% assessment on the bank's stockholders, due on June 23, 1933, which date was extended several times, so that the liability was finally due on July 31, 1933. There were further allegations sufficient to impose liability directly on appellees by considering them the "actual" owners of bank stock. It was also alleged that appellee Smith owned 700 shares of stock in the holding company, and was liable for $9,839.04; that appellee Sands owned 200 shares of stock, and was liable for $2,811.16. Finally, it was alleged that "Notwithstanding their liability and duty to pay said assessments * * * said [appellees] * * * have failed and refused and continue to refuse to do so."
The bill herein was filed on May 12, 1936. Appellee filed a motion to dismiss, which as supplemented was based on three grounds, one of which was that the cause was barred by the Arizona statute of limitations. The court below so held and dismissed the bill. The receiver has appealed.
Insofar as the bill alleged liability by considering appellees as the actual owners of the bank's stock, we think the trial court correctly held that the cause was barred by Rev.Code of Arizona 1928, § 2058(3), which limits the bringing of such causes of action to one year. Donald v. Bird, 9 Cir., 85 F.2d 663. However, there is yet to be considered the contractual theory of the case. An action for debt not evidenced by a contract in writing must be brought within three years in Arizona, and an action for debt in that state founded upon a contract in writing executed in Arizona, must be brought within six years. Rev.Code of Ariz. §§ 2060(1), 2062. If there is a contractual liability here, it is clear that the action was not barred, whether such liability arose by a contract in writing or not.
In considering the effect of Article IX-A of the holding company's articles of association, we are to apply the law of Arizona. Erie Railroad Co. v. Tompkins, 58 S.Ct. 817, 82 L.Ed. ___, 114 A.L.R. 1487, April 25, 1938; Ruhlin v. New York Life Ins. Co., 58 S.Ct. 860, 82 L.Ed. ___, May 2, 1938. It is indicated in Orme v. Salt River Valley Users' Ass'n, 25 Ariz. 324, 217 P. 935, 939, that the articles of association would be considered as a contract. Compare: The Binghamton Bridge, 70 U.S. 51, 3 Wall. 51, 73, 18 L.Ed. 137. Likewise, it is held in Arizona that the "law as to the validity and interpretation of personal contracts is that of the place where they were made, the lex loci contractu, unless the parties thereto intended they should be governed by the law of some other place". Forgan v. Bainbridge, 34 Ariz. 408, 274 P. 155, 158. See, also, Gaston, etc., Ltd., v. Warner, 260 U.S. 201, 203, 43 S.Ct. 18, 67 L.Ed. 210. Therefore, we think that the Arizona courts would apply the law of Michigan, interpreting the provision in the articles of association.
Appellees contend here, as was contended in Schram v. Poole, 9 Cir., supra, that the provision of the articles of association creates no liability independent of the liability imposed by the National Banking Act (12 U.S.C.A. § 64). We believe, however, that the Supreme Court of Michigan has, as stated in Schram v. Poole, 9 Cir., supra, "construed the article as creating an independent contractual liability". Simons v. Groesbeck, 268 Mich. 495, 256 N.W. 496. Appellees' entire argument is based on the contention to the contrary, and it is therefore unnecessary to consider their argument further.
It is not impossible to have a liability originating by statute, but acquiring "an independent existence" by contract. Coombes v. Getz, 285 U.S. 434, 435, 442, 52 S.Ct. 435, 436, 76 L.Ed. 866. Under the circumstances here, we think the applicable law reveals that the bill alleges a contractual liability, and that the motion to dismiss was improperly granted. Whether the receiver may be compelled to elect which of the several remedies he will pursue, and when such election is made, whether the cause should be transferred to the law side of the calendar (see American Trust Co. v. Grut, 9 Cir., 80 F.2d 155) are questions which should not be decided by us now.
Reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550172/ | 63 N.J. Super. 153 (1960)
164 A.2d 179
MICHAEL KAVANAUGH, PLAINTIFF-APPELLANT,
v.
ROBERT QUIGLEY, DEFENDANT-RESPONDENT.
Superior Court of New Jersey, Appellate Division.
Argued September 19, 1960.
Decided October 3, 1960.
*156 Before Judges CONFORD, FOLEY and MINTZ.
Mr. Horace G. Davis argued the cause for plaintiff-appellant (Mr. Vincent T. Frank, attorney).
Mr. Edward C. Hillis argued the cause for defendant-respondent (Messrs. Marley, Winkelried & Hillis, attorneys).
The opinion of the court was delivered by FOLEY, J.A.D.
In this negligence case the jury returned a verdict of no cause of action by a vote of ten jurors to one. The twelfth juror had been excused by consent during the trial. Appeal is taken from the denial of plaintiff's motion for a new trial.
It appears that after the jury was dismissed the plaintiff's attorney learned that in the course of the deliberations one or more of the jurors had informed a bailiff in whose charge they were, that they desired additional instructions from the trial judge; further, that this request was not communicated to the judge by the bailiff. Thereupon, plaintiff moved for a new trial alleging inter alia this irregularity. The motion was supported by the affidavit of Elizabeth S. DePutron, one of the jurors. She deposed that approximately three hours after the jury had retired one of the jurors requested a bailiff to inform the court that the jury wished further instructions and that, in response to this request, the jury was told by the officer in charge that "they had to bring in a verdict one way or another."
On the return of the motion the court properly considered the affidavit of the juror, see State v. Kociolek, 20 N.J. 92, *157 105 (1955), and received the testimony of Matthew Malone and John Kiely, two of the bailiffs who had been in charge of the jury. Officer Malone testified that "after about two hours * * * [t]here was a knock on the door, and one of the jurors * * * requested some further information," and he (Malone) "informed them that they should write on a piece of paper what information they desired" and that he "would see that the Court got it." He said that he did not hear from the jury again; that a written request was not given to him, and that he did not at any time advise the judge of the jury's oral request. Officer Kiely testified generally to the same effect. Neither officer appears to have been examined directly concerning the juror's version of what occurred as above set forth. It is noted that the court made no specific finding with reference to the cleavage between the versions of the bailiffs and that of the juror as to precisely what was said. Since plainly the court would have been required to grant the motion had it found that the jury had been subjected to the coercion described by the juror, we conclude that the court found the juror to have been mistaken in that regard.
A truncated recital of the reasons given by the court for its denial of the motion appears in the appendix as follows:
"The Court: I believe from the evidence before me that if either the jury or a member of the jury desired to have some further instruction, the failure to write it out indicates an abandonment of the desire for such instructions."
Preliminarily, the ambit containing the judicial functions, at both the trial and appellate levels, in circumstances such as are here presented should be surveyed. Generally speaking, the granting or denial of a motion for new trial rests in the sound discretion of the trial court and is not reviewable unless it clearly appears that the action taken constituted an abuse of discretion or, as expressed in recent cases, that it represented a manifest denial of justice. Fisch v. Manger, 24 N.J. 66, 80 (1957); Hartpence v. Grouleff, *158 15 N.J. 545, 549 (1954). See also R.R. 1:5-3. So, too, is the trial judge considered the final arbiter of disputes arising from conflicts in testimony given on the motion for new trial, just as in a non-jury trial his findings with respect to the credibility of witnesses are ordinarily regarded as conclusive. Thus, if the result reached here by the trial judge had hinged on the resolution of the factual dispute as to what the bailiff said to the jury, we would regard the court's implied acceptance of the bailiffs' version as a finality. However, as we shall point out, the area in which the court's discretion operated embraced not only factual findings but the legal effect of the same as well. It is well settled that discretion means legal discretion, in the exercise of which the trial judge must take account of the law applicable to the particular circumstances of the case and be governed accordingly. Implicit is conscientious judgment directed by law and reason and looking to a just result. Sokol v. Liebstein, 9 N.J. 93, 99 (1952), Rossetti v. Public Service Coord. Transport, 53 N.J. Super. 293, 298 (App. Div. 1958). Consequently, if the trial judge misconceives the applicable law, or misapplies it to the factual complex, in total effect the exercise of the legal discretion lacks a foundation and becomes an arbitrary act, however conscientious may have been the judge in the performance of it. When this occurs it is the duty of the reviewing court to adjudicate the controversy in the light of the applicable law in order that a manifest denial of justice be avoided.
We think that the trial judge fell short of fully appreciating the deep implications of the uncontroverted facts, and of their impact upon legislative and judicial procedures designed to promote justice in a trial by jury. Two things are clear. The bailiff in response to the jury's request for instructions by the court, without authorization to do so, directed the jury to reduce to writing "what information they desired"; and perhaps more important, the bailiff did not then or at any time thereafter inform the court of the juror's request. To bring into focus the *159 capacity of this conduct to have influenced a verdict, or to have produced one ill advised, we need only consider the respective duties of the bailiff and the judge in relation to the deliberations of the jury and the reasons for the imposition of the same.
N.J.S. 2A:74-7 prescribes the oath to be administered to the bailiff as follows:
"You do swear, in the presence of Almighty God, that you will, to the utmost of your ability, keep every person sworn on this jury together in some private or convenient place, and that you will not suffer any person to speak to them, nor speak to them yourself, except by order of the court, and except to ask them if they have agreed on a verdict, until they have so agreed." (Emphasis added.)
Obviously the information communicated to the jury by the bailiff constituted a violation of this oath and cannot be condoned as far as the bailiff is concerned, whichever of the factual versions is credited. The only proper course open to the bailiff upon being told that the jury desired "information" from the judge was to close the door of the jury room and immediately convey the request to the trial judge. Yet one might ask: Should this misconduct of the bailiff, which the parties were powerless to prevent, vitiate a trial the fairness of which is not otherwise challenged? If we could be certain that all of the jury fully comprehended what the bailiff told them (accepting his version), understood what they were to do, and found no difficulty in agreeing upon the phraseology of their request, some justification might be found for the trial court's assumption that prior to, or in the course of, preparing the writing the jurors resolved their differences and found no need of aid from the judge. But in the given circumstances such assumption would rest upon an uneasy foundation. The very fact that the juror affiant was mistaken in her understanding of what the bailiff said points up the danger inhering in a practice of this kind. As was aptly said by Judge Jayne in Guzzi v. Jersey Central Power & Light Co., 36 N.J. Super. 255, 259 (App. Div. 1955), certification *160 denied 19 N.J. 339 (1955): "words are the materials with which ideas and mental concepts are constructed." And in the same case, in criticizing the action of the trial judge who in response to a request from a jury that they be fed and also that the testimony of a witness be sent in to them, deputized a court officer to take orders for food and to inform the jurors that they would have to rely upon their own recollection of the witness's testimony, the court observed:
"In the present instance we accept without hesitation the explanatory account of the highly scrupulous and conscientious trial judge, but the impropriety of the procedure is accentuated by the realization that neither he nor we know ad verbatim either what the jury or its spokesman said to the court attendant, or in what verbiage the officer conveyed to the jury his response.
"Conceivably the jury may have imparted to the officer cogent and determinative reasons for requesting a recitation of the testimony which he omitted to express to the judge. Unintentionally may the officer in communicating the court's denial have by his language left with the jury the implication that the testimony was not of sufficient importance to be rehearsed. To indulge in communications of this fashion is precarious." 36 N.J. Super., at p. 265.
Moreover, it is entirely possible that the state of disagreement which induced the request for instructions was expanded by further disagreement among the jurors (after the bailiff advised them) as to the precise problem or problems by which they were beset, how they should be stated, and other details important or picayune, produced by minds which were discordant in the first place. These contingencies, realistically assayed, impugn the finding by the trial court that the failure of the jury to reply to the bailiff's unauthorized and illegal advice evinced an abandonment by the jury of the request for help from the court. We may add that if there was in fact such an "abandonment" it seems no more likely to us that it was the result of accord than that it was the product of frustration.
The delicate nature of the relationship between the judge and the jury throughout the trial, particularly during *161 the deliberations of the jury, needs scarcely be expounded. At all times it is a substantial part of the judicial duty to give all possible assistance to the jury in the aid of the full discharge of its sworn duty, and during the deliberation stage the rendering of such aid upon request and ultimately receiving the jury's verdict become the sole remaining duties of the judge. See R.R. 4:40-4.
So it is that the failure of the bailiff to inform the judge that the jury found itself in need of the services which he alone was empowered to perform severed the life line of communication between the jury and the judge. As a result the jury was deprived of the help to which it was entitled and the judge was prevented from fulfilling his duty to respond to the jury in open court, consider the nature of its problem, and guide it accordingly. The imperative necessity of maintaining unfettered collaboration of the judge and jury, both acting within their respective spheres to the end that an informed verdict intelligently arrived at be returned, precludes our regarding the bailiff's omission to carry the jury's message to the judge as a non-prejudicial infraction of an administrative court procedure.
The rationale of the earlier cases in this State seems to have been that unless irregularities in procedures governing jury deliberations were affirmatively shown to have actually influenced the verdict they furnished no ground for a new trial. See Baizley v. Welsh, 71 N.J.L. 471 (Sup. Ct. 1904), Duffy v. McKenna, 82 N.J.L. 62 (Sup. Ct. 1911). This approach has given way to one which is far more realistic. In modern view the test whether an act of irregularity in this area is to be considered prejudicial and so to require a new trial is whether the irregular act had the capacity to influence the result, not whether influence in fact resulted. If the record affirmatively shows that a party is prejudiced thereby reversible error is present. But if the record fails to show whether or not the irregularity was prejudicial, as is the case here, it is presumed to be so and to be cause for reversal. It is only when the irregularity *162 is affirmatively shown to have had no tendency to influence the verdict that reversal is not required. See Panko v. Flintkote Co., 7 N.J. 55, 61 (1951); State v. Auld, 2 N.J. 426 (1949); Guzzi v. Jersey Central Power & Light Co., supra; Palestroni v. Jacobs, 10 N.J. Super. 266 (App. Div. 1950); Falzarano v. D.L. & W.R.R. Co., 119 N.J.L. 76 (E. & A. 1937).
As a footnote to our holding we observe that we are not unmindful of the hardship of a retrial imposed on the defendant through no fault on his part. However, the overriding consideration is the firmly established public policy that a new trial should be granted or refused "with a view, not so much to the attainment of exact justice in the particular case, as to the ultimate effect of the decision upon the administration of justice in general." Palestroni v. Jacobs, supra; Hutchinson ads. Consumers Coal Co., 36 N.J.L. 24 (Sup. Ct. 1872). Apart from the question of prejudice we think that in the service of this policy the court can ill afford to rationalize illegal conduct which not only is an affront to the dignity of the court, but in addition removes the trial judge from his control of the case.
Reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550173/ | 97 F.2d 237 (1938)
PRICE et al.
v.
SPOKANE SILVER & LEAD CO.[*]
No. 10968.
Circuit Court of Appeals, Eighth Circuit.
June 13, 1938.
*238 *239 E. B. Adams, of Hot Springs, S. D. (W. P. Rooney and C. S. Eastman, both of Hot Springs, S. D., on the brief), for appellants.
Charles C. Goldman, of Cleveland, Ohio (Goldman & Wyman, of Cleveland, Ohio, and Gale B. Wyman, of Deadwood, S. D., on the brief), for appellee.
Before GARDNER, SANBORN, and THOMAS, Circuit Judges.
SANBORN, Circuit Judge.
This appeal from an order confirming a plan of reorganization of the Spokane Silver and Lead Company, a debtor corporation which filed a petition for reorganization under Section 77B of the Bankruptcy Act (48 Stat. 911, 912, 11 U.S.C. § 207, 11 U.S.C.A. § 207), is taken by objecting creditors.
Since confirmation of a plan of reorganization is a "proceeding in bankruptcy," the petition for the allowance of the appeal was properly made to this Court, under section 24b of the Bankruptcy Act, 11 U. S.C. § 47(b), 11 U.S.C.A. § 47(b). Meyer v. Kenmore Granville Hotel Co., 297 U.S. 160, 56 S.Ct. 405, 80 L.Ed. 557.
The debtor has moved to dismiss the appeal as having been taken out of time. The record discloses that the order appealed from was entered May 3, 1937; that the petition for allowance of the appeal was filed in this Court on June 2, 1937; that notice of a hearing upon the petition to be held June 14, 1937, was served upon an attorney of record of the debtor on June 8, 1937; and that, after the hearing held on June 14, this Court entered an order on June 29, 1937, allowing the appeal.
Section 24c of the Bankruptcy Act, 11 U.S.C. § 47(c), 11 U.S.C.A. § 47(c), provides: "All appeals under this section [24] shall be taken within thirty days after the judgment, or order, or other matter complained of, has been rendered or entered." The debtor argues that the failure of the appellants to notice the petition for hearing and to secure the allowance of the appeal by this Court within thirty days from the date of the challenged order requires a dismissal of the appeal. It is our opinion that an appeal is "taken" within the meaning of section 24c when a proper petition therefor is filed within thirty days from the date of the entry of the order. The failure of this Court to act upon such a petition within the thirty-day period does not require nor permit the dismissal of an appeal allowed after the expiration of the *240 thirty-day period. This is nothing more than a common-sense interpretation of the applicable section and is in accord with the rulings in other Circuits. In re Hoffman, 7 Cir., 82 F.2d 58, 59; In re National Lock Co., 7 Cir., 82 F.2d 600, 605; In re Foster Construction Corporation, 2 Cir., 49 F.2d 213, 214. In the First Circuit it is regarded as permissible practice to set down for hearing the petition for leave to appeal and the merits of the case at the same time and to dispose of both in one decision. Downtown Inv. Ass'n v. Boston Metropolitan Bldgs., Inc., 1 Cir., 81 F.2d 314, 317.
The debtor corporation was organized under the laws of South Dakota. Its business was the development and operation of mining claims and mining property owned by it and located entirely within Custer County, South Dakota. On January 27, 1933, in a suit brought by Steve Ainslie and Mark J. Kelly against the debtor and others, in the Circuit Court of the Seventh Judicial Circuit in Custer County, South Dakota, Thomas W. Delicate was appointed receiver for the debtor, to take possession of all of its property. Thereafter such proceedings were had in that court that on January 31, 1933, a decree was entered directing the receiver to sell all of the property of the debtor and to pay, from moneys received by him, claims according to the following priorities:
(1) The costs of the receivership and taxes, which the court adjudged to be liens superior to all other claims and liens.
(2) The miner's lien claim of Harry S. Price and T. A. Ferneding for $56,163.58 and interest, which the court decreed to be a valid and subsisting lien upon all property and money of the debtor.
(3) The miner's lien of A. W. Margileth for $2200 with interest, which was decreed to be a valid and subsisting lien upon all such property.
(4) The miner's lien of W. D. Philips for $1500 and interest, which was decreed to be a valid and subsisting lien upon all such property.
(5) The lien of Lorain Street Savings and Trust Company, as trustee under a deed of trust securing an issue of $250,000 of 7%, ten-year gold bonds, which was decreed to be a valid and subsisting lien.
(6) The judgment of Mark J. Kelly for $8,627 and interest, which was decreed to be a valid lien.
(7) The judgment of Steve Ainslie for $11,905 and interest, which was decreed to be a valid lien.
(8) The judgment of the Mine and Smelter Supply Company for $605.56 and interest, which was decreed to be a valid lien.
(9) The judgment of George Williams and F. W. Sellers for $4,025.58 and interest, which was decreed to be a valid lien.
The State court further decreed that, after the payment of these liens, any moneys remaining in the hands of the receiver should be applied to the payment of the claims of Rapid City Lumber and Machinery Company, Shann & Welty Lumber Company, the Superior Creamery, C. X. Covertson, and the Black Hills Wholesale Grocery, which were decreed to be general claims; and that, if, after the payment of the liens and general claims as determined by the decree, there were any moneys left in the hands of the receiver, such moneys should be paid to the debtor.
The record shows that the Lorain Street Savings and Trust Company, trustee, was granted an exception to the decree, but that no appeal was ever taken.
After the entry of the decree, the receiver, as thereby directed, sold the property of the debtor to a new corporation known as Spokane Silver and Lead Company, Incorporated, upon its offer to pay "$4,253.62 in cash, together with its receipt for credit on first liens it is now the lawful owner of, the sum of $51,909.96;" to give preferred stock to bondholders equal to the face of their bonds plus 10%; to give to judgment creditors and lienholders preferred stock and two shares of common stock up to the full value of their respective claims; to give preferred stock in satisfaction of general claims; to give certain noteholders 122,696 shares of common stock, and to give the stockholders of the debtor 405,000 shares of such stock. This sale was confirmed by the State court on August 29, 1933, but the terms of the offer were not carried out, and, by a decree of the State court, filed December 6, 1935, the sale was vacated and declared void and the receiver directed to repossess himself of the property of the debtor and to resell it. The receiver sold the property on January 14, 1936, one day after the petition of the debtor for reorganization under § 77B was filed.
In this petition the debtor stated that its properties are "subject to a mortgage bond *241 issue of $250,000, various miners' and judgment liens, notes and open accounts, all as more particularly shown on said Exhibit `A'."[1]
As grounds for relief under § 77B the petitioner stated that "its assets consist of said mining claims and property which are only of value in case the same are further developed and operated"; that "it is unable to borrow or otherwise procure funds at this time sufficient to meet and discharge the said debts, or to protect said property, and that because thereof, reorganization of the debtor is clearly necessary"; and that it "believes that such reorganization can be carried out more economically and expeditiously, and for the benefit of all parties interested therein and having claims against said [debtor] Company, under and in pursuance to Section 77B, Chapter 8 of the Acts of Congress relating to Bankruptcy, 11 U.S.C.A. § 207 and that reorganization under said section would be for the best interests of the creditors and security holders of all classes of the debtor."
Thereafter, on August 14, 1936, the debtor filed a plan of reorganization in which it is stated:
"This company and its predecessors, namely The Spokane Lead and The Cuyahoga Mining Company (both having merged into The Spokane Silver and Lead Company), have been engaged for more than thirty years last past in the mining of lead, gold and silver on forty-nine mining claims covering 910 acres of land located in Section 26-27 and 35 T. 2S.-R. 6E., Custer County, South Dakota, and in Section 20, 21, 28, 29, 32 and 35 T. 2S.-R. 6E., Custer County, South Dakota, the former location comprising the so-called `Spokane Group' and the latter location comprising the so-called `Cuyahoga Group'. Substantial sums have been expended for a main shaft on the Spokane mine property which is now 340 feet deep. Long tunnels leading therefrom on the one hundred, two hundred and three hundred feet levels have been drifted. These tunnels extend in some instances over 500 feet long. The total footage being 1440 feet. These excavations together with a 54 foot raise from the 300 foot level, proved the existence of vast ore bodies easily accessible.
"There are considerable permanent buildings on the property, all in a good state of repair, consisting of: the superintendent's house, bunk house, flotation plant, forge, boiler room, power house, mess hall, one hundred ton four story mill, assay office, commissary, and general office, besides numerous other small buildings. There is also considerable equipment and tools used and employed in mining operations.
"It is further estimated that there is approximately 10,000,000 feet of standing timber on this property, which timber is necessary and required in mine operation. There is an estimated and blocked out 96,000 lead ore tonnage in the east drift of the main shaft of the Spokane Group, as set forth in plans prepared January 1, 1931 by W. J. Wilbur Harris, Engineer, and approved *242 by Minor T. Phillips, the then superintendent of the mine property, and there are other vast ore bodies in this group. There are also vast ore bodies as evidenced by outcroppings and diamond drills in the Cuyahoga Group, consisting of iron, gold, paint ores and almost inexhaustible deposits of [sulpher], graphite and other commodities. Withall, this property is very rich in lead, silver and other metal bearing ores, and can be profitably operated as soon as prices improve, which it is hoped will be soon."
It is further set forth in the plan: That the debtor has the following assets: Cash, $121.78; notes receivable, $7,000; securities, $12,000; development buildings, equipment and roadways, $911,358.41; Spokane Mine Property, $1,228,893; Cuyahoga Mine Property, $1,036,039.17. That it has the following liabilities: Accounts payable, $239,047.36; liability on bonds, $204,470.00; capital stock liability, $2,751,895. That bondholders, lienholders unsecured creditors, secured creditors and stockholders will be affected by the plan, but that debts entitled to priority under the law and the unpaid obligations incurred by the State court receiver and those incurred by the debtor in the § 77B proceedings will not be affected; that it is proposed (1) that bondholders shall agree to extend the payment of the principal due upon their bonds to April 1, 1945, and shall waive interest until the debtor shall be on a "profit-paying basis of an amount sufficient to pay its current obligations plus interest on said bonds"; (2) that stockholders shall retain their present stockholdings; (3) that unsecured creditors shall receive common stock in an amount equal to the principal of their claims, in full payment, except that any of such creditors who desire payment in cash may have the option of accepting one-half of their claims in cash over a period of 6½ years without interest; (4) that secured creditors and lienholders shall be treated on a parity and shall receive two shares of common stock for each dollar of such lien and secured claims; (5) that the debtor shall assume the obligations incurred by the State court receiver and the expenses of the § 77B proceeding, to be paid in cash as and when due. The plan of reorganization prayed that creditors, stockholders, bondholders and other interested parties should file their claims on or before September 14, 1936, if they desired to vote upon the plan, on which day a hearing would be held for that purpose.
Notice was given to interested parties to file their claims on or before September 14, 1936, on which day the question of retaining the debtor in possession, and classification of all parties affected by the plan, would come before the Court.
On September 14, 1936, Mark H. Kelly, deceased, by his successor in interest Mary Bell Kelly, S. E. Ainslie, W. P. Rooney, et al., Harry S. Price, T. A. Ferneding, P. J. Sheridan, et al., and Price Brothers Company, some of whom were judgment creditors and others general creditors, filed answers to the petition of the debtor, asserting that each of them was a creditor and that each objected to the plan of reorganization for various reasons and in general; that the plan was not proposed in good faith and impaired the security of lienholders; that the debtor could not finance the proposed reorganization and could not pay the expenses of the State court receivership, and that the debtor's petition was filed and the reorganization proposed for the purpose of hindering and delaying creditors. Each answer prayed a dismissal of the petition.
On December 14, 1936, the court filed an order as of November 5, 1936, which recited that the cause was heard on November 5, 1936, on the pleadings and upon the evidence; that the court finds that the plan of reorganization was duly voted upon and accepted as provided by § 77B; that application for confirmation of the plan has been filed; that the creditors are classified as set forth in "`Order Classifying Creditors, etc.' heretofore filed herein and that the written acceptances and consents to the Plan of Reorganization as filed herein have been received as set forth in said Order"; that the plan is fair and equitable and does not discriminate against any class of creditors, stockholders or bondholders, and is feasible; that a hearing on confirmation of the plan and application for the allowance of attorneys' fees and costs will be had on the 9th day of December, 1936; that the following claims are the only claims which have the right to participate as Class B (general creditors): Charles A. Somers, $68,239.70; A. W. Margileth, $2,200.00; John A. Foerstner, $43,565.63; Henry & Boldorf, $491.81; Mark J. Kelly (judgment lien claimant), $8,627.00; Steve Ainslie (judgment lien claimant), $11,905.00.
*243 The order classifying creditors seems to have been endorsed as filed on November 5, 1936, and also as filed on May 3, 1937. It was excepted to by the objecting creditors on May 3, 1937. It recites that a hearing was had on November 5, 1936, upon the plan of reorganization; that notice was given to creditors and stockholders by mail and publication; that officers of the debtor offered themselves and all of the records of the debtor for examination; that the President of the debtor corporation was sworn and examined; that various creditors not named were represented by counsel; and that, upon evidence and the allegations of the debtor's petition, the court finds that the debtor, at the time the petition was filed, was insolvent; that creditors are classified as follows: Class A, bondholders; Class B, general creditors; Class C, common stockholders; Class D, creditors having tax claims; that the first three classes are affected by the plan; that 66 2/3% of each of the first two classes have accepted the plan; and that more than 50% of Class C have accepted it. The order directed that application for the confirmation of the plan be filed, and that notice be given to creditors and stockholders of a hearing to be held on December 5, 1936, to consider confirmation and acceptance of the plan, classification of creditors and stockholders, and allowance of attorneys' fees. This hearing was had on May 3, 1937. The debtor appeared, and certain creditors also appeared and objected to the classification of creditors and confirmation of the plan.
The objecting creditors introduced in evidence certain of the proceedings in the State court, including the decree establishing liens and priorities.
The debtor produced its President, who gave testimony, a part of which is set forth in the margin.[2]
*244 In considering objections to the classification of creditors, the court said:
"A judgment creditor isn't a secured creditor; there isn't any question about that. If there were secured creditors here your objection [that the proposed plan did not preserve the interests of secured creditors] would be well taken, but there isn't."
At the time the debtor offered to the court a proposed order approving confirmation of the plan as workable and feasible, the court was asked whether argument was desired, and said:
"No, I don't care to hear argument. There has been no evidence to show the lack of feasibility of this plan. If this plan is not workable on paper, the Court would be justified in refusing to approve it. The more I hear about this, the more I see the adverse interests sparring at one another for an opportunity to better themselves at the other fellow's expense. I doubt whether a stockholder is in anywhere near as good position as some fellow that hasn't anything to do with the mine at all. They haven't got anything, and I don't know that they have anything to give up."
The court approved the classification of creditors, confirmed the plan, and made an allowance for the fees and expenses of the debtor's attorneys. Thereupon this appeal followed.
Since this is an appeal under § 24b, 11 U.S.C.A. § 47(b), only questions of law are before us for consideration. Downtown Inv. Ass'n v. Boston Metropolitan *245 Bldgs., 1 Cir., 81 F.2d 314, 317. We review the evidence only to ascertain if the order appealed from is wholly unsupported thereby, is contrary to law, or clearly erroneous. In re Cole, 1 Cir., 144 F. 392, 393; Shea v. Lewis, 8 Cir., 206 F. 877, 881; Good v. Kane, 8 Cir., 211 F. 956, 958; Reiss v. Reardon, 8 Cir., 18 F.2d 200, 202; Brockett v. Winkle Terra Cotta Co., 8 Cir., 81 F. 2d 949, 952; O'Connor v. Mills, 8 Cir., 90 F.2d 665; Collier on Bankruptcy (13th Ed.), Volume I, page 835.
It is apparent that the court below erred in assuming that creditors who had obtained judgment liens antedating the filing of the debtor's petition were not secured creditors. They were secured creditors within the meaning of the Bankruptcy Act. Oilfields Syndicate v. American Improvement Co., 9 Cir., 260 F. 905; In re Cale, D.C., 182 F. 439, affirmed 8 Cir., 191 F. 31; In re Levinson, D.C., 5 F.2d 75, 77; In re Schwab Printing Co., 7 Cir., 59 F.2d 726; In re Lake County Fuel & Supply Co., 7 Cir., 70 F.2d 391; Atchison, T. & S. F. Ry. Co. v. Hurley, 8 Cir., 153 F. 503, 509; In re New York Economical Printing Co., 2 Cir., 110 F. 514; In re Fay Stocking Co., 6 Cir., 95 F.2d 961, 962.
Under the statutes of South Dakota (§ 2569, Compiled Laws South Dakota 1929), a judgment became a lien upon the real property of the debtor from the time it was docketed in the county where the real estate was situated. Moreover, the State court in the receivership proceedings, at a time when it had complete jurisdiction of the parties and of the subject matter, had adjudged the validity and priority of liens upon the debtor's property. We find in the record no basis for disregarding the liens and priorities as fixed by the decree of that court. It was the duty of the court below to deal with the interests of creditors as they existed at the time the petition was filed. Glenn v. Hollums, 5 Cir., 80 F.2d 555, 557.
It is clear that the court below erred in classifying the creditors having liens upon the debtor's property as unsecured creditors.
The court also erred in confirming the plan of reorganization, which made no distinction between creditors and stockholders, and placed them on a substantial parity. Unless the property of the debtor exceeded in value the amount of the claims of creditors, the stockholders had no interest to protect or preserve. In re 620 Church Street Building Corporation, 299 U.S. 24, 27, 57 S.Ct. 88, 89, 81 L.Ed. 16. We find nothing in the evidence, except generalizations and prophecies, to warrant any conclusion that the value of the assets of the debtor even equalled its liabilities, excluding its stock liability. To justify a retention of a stock interest by present stockholders of the debtor, it should appear that they have furnished an additional consideration or have an equity in the estate of the debtor after the rights of creditors are fully provided for. In re Barclay Park Corporation, 2 Cir., 90 F.2d 595. See, also, In re Day & Meyer, Murray & Young, Inc., 2 Cir., 93 F.2d 657; O'Connor v. Mills, 8 Cir., 90 F.2d 665, 667; Reading Hotel Corporation v. Protective Committee, 3 Cir., 89 F.2d 53; Wayne United Gas Co. v. Owens-Illinois Glass Co., 4 Cir., 91 F.2d 827. Stockholders are not ordinarily entitled to participate in a plan of reorganization if the debtor is clearly insolvent. Jamieson v. Watters, 4 Cir., 91 F. 2d 61, 63.
The court also erred in assuming that if, upon its face, the plan proposed appeared to be feasible, it was to be approved unless the objecting creditors could show that it was not feasible.
"It is the duty of the court to scrutinize the plans of reorganization proposed for insolvent companies to make certain that the assets belonging to creditors are not by indirection diverted to stockholders. In re New York Rys. Corporation, 2 Cir., 82 F.2d 739; In re Barclay Park Corporation, supra [2 Cir., 90 F.2d 595]." In re Day & Meyer, Murray & Young, Inc., 2 Cir., 93 F.2d 657, 659.
Even if a large majority of the creditors had approved the plan, that would be of no avail to sustain it. In re Barclay Park Corporation, supra; First National Bank v. Flershem, 290 U.S. 504, 54 S.Ct. 298, 78 L.Ed. 465, 90 A.L.R. 391; In re Day & Meyer, Murray & Young, Inc., supra, page 659. It was vitally important that the court should be fully and accurately informed by reliable evidence as to the value of the property with which it was dealing, and not obliged to rely entirely on expert evidence produced by the proponents of the plan. Jamieson v. Watters, 4 Cir., 91 F.2d 61, 63.
*246 In Warner Bros. Pictures, Inc., v. Lawton-Byrne-Bruner Ins. Agency Co., 8 Cir., 79 F.2d 804, at page 815, Judge Stone, in delivering the opinion of this Court, said with reference to a plan of reorganization:
"Obviously, this problem involves consideration and determination of many matters related to the particular business and is very largely a problem individual to the particular business. Among other elements, it involves an understanding of how and why the business came into difficulty; of what the difficulty is; of the present condition of the business and of the property; of whether there is a fair prospect that the business can be continued under some readjustment of rights; of what readjustment is workable to that end. Such understanding requires knowledge of the financial, management, and business history of the concern; of the extent, character, and condition of both assets and liabilities; of the past, present, and probable prospective earnings and expenses. Based upon such knowledge and understanding, a plan must be evolved which offers a reasonable prospect of success. In working out such plan, the rights of interested parties must be preserved through a `fair' right of participation therein."
In order to acquire knowledge of the financial, management and business history of a concern; of the extent, character and condition of both assets and liabilities; of the past, present and probable prospective earnings and expenses, and of whether a plan proposed offers a reasonable prospect of success and is workable, there must be competent, definite, concrete, and reliable evidence from which such facts may be ascertained by the court. From the evidence in the record before us, it is impossible to gather any knowledge of the business history of the debtor, or of its past, present and probable prospective earnings and expenses. About all that the record shows is that from some time in 1933 the debtor has been in the hands of the courts. There is no evidence to show that if it is reorganized it can be operated profitably or that it has at any time been operated profitably. There is no evidence to justify a conclusion that it can obtain the necessary funds without which, concededly, no further development or operation of the mines can take place.
In First Nat. Bank v. Conway Road Estates Co., 8 Cir., 94 F.2d 736, 739, Judge Thomas, in delivering the opinion of this Court said:
"In a reorganization proceeding under section 77B [11 U.S.C.A. § 207] good faith means more than honesty of purpose. It also requires that there be a reasonable possibility of successful reorganization. Wright v. Vinton Branch Bank, 300 U.S. 440, 463, 57 S.Ct. 556, 562, 81 L.Ed. 736 [112 A.L.R. 1455]; Tennessee Publishing Co. v. American Bank, supra [299 U.S. 18, 57 S.Ct. 85, 81 L.Ed. 13]; In re Tennessee Publishing Co., 6 Cir., 81 F.2d 463; In re Loeb Apartments, 7 Cir., 89 F.2d 461; Manati Sugar Co. v. Mock, 2 Cir., 75 F. 2d 284; O'Connor v. Mills, 8 Cir., 90 F.2d 665; Provident Ins. Co. v. University Church, 9 Cir., 90 F.2d 992.
"Whenever want of good faith appears the debtor's petition should be dismissed even though a plan of reorganization has not been submitted. The District Court was reversed for failure to dismiss in such a case in Provident Ins. Co. v. University Church, supra, in Re Wisun & Golub, 2 Cir., 84 F.2d 1, and in Re North Kenmore Corporation, 7 Cir., 81 F.2d 656. The judgment of the District Court dismissing the petition for want of good faith was affirmed in O'Connor v. Mills, supra; in Manati Sugar Co. v. Mock, supra; and in Re Grigsby-Grunow Co., 7 Cir., 77 F.2d 200.
"In Brockett v. Winkle Terra Cotta Co., 8 Cir., 81 F.2d 949, 953, Judge Van Valkenburgh, speaking for this court, said in reference to section 77B: `"The outstanding purpose of the Amended Act, upon which this case rests, was to afford aid in the effort to rehabilitate corporations solvent in fact but unable to meet maturing obligations." It was not the purpose to lend its aid generally and without discrimination to corporations hopelessly insolvent, and without legal resources to prosecute their business with reasonable prospect of success.'
"Considering the act itself and all these decisions it is apparent that it is the duty of the District Court to bear in mind the purpose and function of 77B at every step of the proceedings; and whenever it appears that rehabilitation of the debtor is impracticable or that injunctive relief is not sought in good faith the court in the exercise of a sound discretion should refuse the debtor further aid in harassing lienholders."
*247 In Tennessee Publishing Co. v. American National Bank, 299 U.S. 18, 22, 57 S. Ct. 85, 87, 81 L.Ed. 13, the Supreme Court said:
"Nor do we need to inquire as to the precise limits of the concept of `good faith' as required by section 77B. Whatever these limits may be, the statute clearly contemplates the submission of a plan of reorganization which admits of being confirmed as `fair and equitable' and as `feasible.' However honest in its efforts the debtor may be, and however sincere its motives, the District Court is not bound to clog its docket with visionary or impracticable schemes for resuscitation. Subsection (f) of § 77B (11 U.S.C.A. § 207 (f) provides for the confirmation of a plan only if the District Judge is satisfied `that (1) it is fair and equitable and does not discriminate unfairly in favor of any class of creditors or stockholders, and is feasible.' These are prime conditions. Unless the District Judge finds that the plan has these qualities, he need go no further. Unless he so finds, he has no authority to proceed."
We think it also may be safely said that it was not the intention of Congress in enacting § 77B to place crutches under corporate cripples, fit subjects for liquidation, and send them out into the business world to be a menace to all who might purchase their securities or deal with them on credit.
It may be unfortunate in this case that counsel evidently employed by the stockholders to draft, and secure the approval of, the proposed plan of reorganization, cannot be compensated for their services out of the debtor's estate, but there is nothing in the record before us to justify a finding that one dollar has been added to that estate by their efforts, and we see no justification for diminishing its assets further.
The debtor having failed to show that the proposed plan of reorganization was either fair, equitable or feasible, and also having failed to show that the stockholders of the debtor have any real interest in its assets or a right to participate in the plan of reorganization, we think the objecting creditors were entitled to a dismissal of the debtor's petition on the ground that it had not been filed in "good faith". We fail to see how any useful purpose could be served by any other disposition of the case.
The motion to dismiss the appeal is denied.
The order appealed from is reversed and the case remanded with directions to dismiss the proceedings.
NOTES
[*] Rehearing denied July 5, 1938.
[1] A."
"An approximate statement of the indebtedness of the Spokane Silver & Lead Company as of December 31st, 1935.
Bonds secured by mortgage
on the Company's property
in South Dakota .................. $250,000.00
(together with unpaid interest
thereon)
Various Miners' and Mechanics'
Liens and Judgments .............. 86,708,87
(The validity of the above liens
is disputed by the Debtor)
Lien of Jos. H. Winterbottom
and The Winterbottom
Company ........................... 81,763.72
(Released of record in connection
with agreement referred
to in the petition). This lien
also includes much of the
unsecured indebtedness hereinafter
set out.
Various notes as follows:
Lorain Street Savings &
Trust Co., Cleveland, O. ..... 22,000.00
Standard Trust Bank,
Cleveland, Ohio .............. 17,000.00
Frank Korte, Detroit,
Michigan, ................. 2,500.00
Harry S. Price and T. A.
Ferniding, Dayton, O. ........ 6,000.00
C. W. Sommers Estate,
Cleveland, O. ................ 43,240.00
J. A. Foerstner, Cleveland,
Ohio ......................... 42,115.00
Jos. W. Winterbottom,
Cleveland, Ohio .............. 37,341.00
Unsecured claims largely in
and about Custer and Rapid
City, South Dakota ............. 54,000.00
___________
Approximate Total. $642,668.59
(Less duplication of $54,000.00 of unsecured
claims which are included in
Winterbottom Company claim.)"
[2] "I am familiar with the plan which is now being considered by the Court for adoption. I was present when that plan was considered and adopted by the proposers. I would say off-hand that the stockholders were the original proposers of the plan. The stockholders were all notified as to what we were going to do. We had meetings, what you would call local meetings, and those local meetings were supposed to appoint a representative from those various meetings to consider some form of procedure, and the result of these meetings local meetings they appointed a so-called stockholders representative to work out a plan that would be feasible and that would be fair to everyone concerned. I was not on that committee. I believe Mr. Forchner and Mr. Motter were on that committee. I can't recall any others. The stockholders were scattered over Michigan and Ohio. I attended the meeting of the committee which adopted the plan at the time the plan was adopted. We had some money in the treasury. I couldn't say how much. I haven't any records here to tell me that. Mr. Goldman has, I haven't. We received some contributions at various times from the stockholders interested, to carry our current expenses as we went along. I was consulted about how the plan was to operate.
"Q. Are you able to tell the Court how much it was proposed to raise in cash to start the operation of this plan?
"A. There was no fixed price set.
"Q. Has that amount been ascertained as yet?
"A. My own personal opinion would be not less than seventy-five thousand dollars.
"[Continuing] Tentative plans have been made. We haven't been able to formulate any definite plans because we haven't gotten our house in order. There is no use starting out trying to do something until you know you can do it. We haven't made any final last minute intimate details to raise the cash. We are reorganizing our directorship first. I have one offer from a gentleman who will come in. The last time I had word, he was ready to move in on the property, prove the property, and raise the money without costing us a nickel. In other words, we have a promise from somebody to raise the money, a Mr. A. E. Morose. He has been in the mining game several years. At the present time he is operating in Kingman, Arizona.
"Q. How much money has he agreed to advance?
"A. I am not saying we are going to accept this deal.
"Q. What are the arrangements?
"A. He agreed to put the mine on a paying basis and help to operate it.
"Q. There wasn't any definite amount fixed?
"A. No, Sir.
"[Continuing] We have no definite and fixed agreement with Mr. Morose because there are two propositions, one by which we would pay or raise sufficient money to do a little additional development work, and the other was that he would finance the entire proposition the entire capital financing. We didn't come to any definite terms. We haven't any plan at this time as to what the entire financing needs would be, but he stated that it would be a very reasonable and fair deal. The committee figured on spending about seventy-five thousand dollars; that is, initial expenses. That isn't all the money it will to take to operate the mine by any means. Before we are all through we may spend several millions or a million anyway. In my opinion it is necessary to raise seventy-five thousand dollars or less to put the plan in complete operation. We have assurance that we can raise that money from the stockholders alone if necessary. At least that is my intention. We may go to outsiders but it is my intention that the stockholders will finance it. We haven't any agreement or subscription list for the money at this time.
"In the proposed plan we have placed certain valuations on the property. We arrived at these valuations from various reports. I am not sure what that thing is valued on. I think it is on Mr. Price's engineer, but I am not certain because I don't remember those figures. It was made from information we have available in our files. We have several engineers' reports and I am not sure where these figures were arrived at.
"Q. You now think this property is valued at $2,264,932.17, do you?
"A. It all depends upon what you consider valuation.
"Q. What is your idea about it, Mr. Clair?
"A. In other words, if you were trying to sell the property tomorrow, you probably would not get fifty cents. I think it is worth several million dollars; otherwise I would not be out here.
"[Continuing] To insure the continuity of the corporation for the protection of those interested under this proposed plan, by way of finances and operation, we figure on reorganizing the directorship. They expect to have representation on that board of directors with money. One representation alone is worth about three million dollars, and we expect to have other moneyed men on that board, well able to finance the mine if they desire. They have a considerable interest in it right now. The proposed management of this concern is up to the directors after they are elected. I have had enough experience in mining to know that you have to have a management and you have to have a good management. I am not going to start in with any such organization as we have had in the past. We haven't been in a position to raise money since 1928.
"Liabilities listed in this plan are correct to the best of my knowledge. Under the liabilities we have three sub-totals and considering all these three sub-totals, the total of them amounts to $3,195,413.36, which includes bonds and outstanding stock.
"I don't know if there is any market value for this property. I know I would not sell it if I could help it for any value.
* * * * * *
"I don't think it will be necessary to get any additional money. The mine ought to be in such shape by that time that we wouldn't have any difficulty getting additional money. We have no actual commitments for the raising of any money. We haven't been in shape to make any plan. We have no actual commitments in writing for the raising of any money up to date." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550174/ | 164 A.2d 595 (1960)
Larry BOWDEN, Petitioner,
v.
SUSSEX STUDEBAKER, INC., Defendant.
Superior Court of Delaware, Sussex County.
February 2, 1960.
Howard T. Ennis (of McNeilly & Ennis), Georgetown, for petitioner.
Paul R. Reed (of Tunnell & Raysor), Georgetown, for defendant.
*596 STIFTEL, Judge.
On December 23, 1957, Larry Bowden, the petitioner, purchased a used 1950 Buick 4-door sedan from the defendant, Sussex Studebaker, Inc. (Sussex), for the sum of $328.42. Bowden paid Sussex $100 cash and signed a judgment note for the balance, and at the same time executed a conditional sales contract with Sussex. The balance of $228.42, which included financing and insurance charges, was to be paid in six monthly installments of $38.07 each. As a consequence of Bowden's failure to pay any installment, the defendant repossessed the 1950 Buick on March 11, 1958.
Sussex then proceeded to sell the Buick pursuant to 6 Del.Code Ann. § 920. It posted notices at three local public places on March 27 or March 28, 1958; and a notice of the contemplated sale was sent to Bowden by registered mail on March 27, 1958. A receipt, signed by the petitioner on March 28, 1958, was received by Sussex before the resale. The resale itself took place on April 8, 1958.
On April 18, 1958, the note was entered as a judgment in the Prothonotary's office in Georgetown, Delaware, and execution was issued thereon for the balance of $228.42. Bowden then petitioned this court to vacate its judgment and execution on the judgment was stayed. Sussex moved for summary judgment, claiming that the Buick was repossessed and sold according to the provisions of the Conditional Sales Act. On the other hand, Bowden argues as follows:
(1) That Sussex failed to comply with 6 Del.C.Ann. § 917 in that it failed to serve upon Bowden personally or by registered mail a notice of intention to retake on account of Bowden's default not more than 40 nor less than 20 days prior to the retaking of the Buick by Sussex;
(2) That in any event the sale conducted by Sussex wherein Sussex purchased the car at its own sale was inequitable for the following reasons:
(a) The posting of the public notices was improper in that one notice of sale was improperly *597 posted as Sussex's place of business;
(b) That Sussex acted improperly in bidding at its own sale for the Buick automobile;
(c) That the highest bid offered by Sussex at its own sale was grossly inadequate and unconscionable.
This court is called upon to answer the following questions:
1. Was Sussex required to give Bowden a "notice of intention to retake" the automobile as provided in 6 Del.C. § 917?[1]
2. Was the procedure for the public sale of the Buick proper and furthermore was the sale properly conducted?
Bowden's principal arguement centers on Sussex's failure to comply with the provisions of 6 Del.C. § 917, which provides, inter alia, for "a notice of intention to retake" goods on account of the buyer's default. The record is clear, however, that Sussex did not follow the procedure outlined in 6 Del.C. § 917, but instead used the provisions of 6 Del.C. § 918.[2] Section 918 does not require a "notice to retake". It specifically provides that in the event the seller fails to give a notice of intention to retake, as required in § 917, that he shall retain the goods for 10 days after retaking, during which period the buyer is given certain rights of redemption, as specified in the section. The seller has the option to use either Section 917 or Section 918. Section 917 provides a period in advance of retaking during which the buyer is warned of the likelihood of loss of goods and advised to make a renewed effort to perform. Section 918 gives the buyer a similar period after the retaking. The objects of both sections are the same. Where 918 is used there is no need to use 917, Vol. 2A U.L.A., Commentaries on Conditional Sales, §§ 113, 114. *598 In this case, Sussex properly complied with the provisions of Section 918.
I now consider the resale procedure used by Sussex.
Section 920 does not require the seller to resell the automobile if the buyer has paid less than 50% of the purchase price, unless the buyer demands it. However, the seller may voluntarily resell the goods for the account of the buyer on compliance with the applicable requirements of Section 919.[3] H. L. Braham & Co. v. Zittel, 232 App.Div. 406, 250 N.Y.S. 44, 47. The purpose of the voluntary resale is to give the seller the right to hold the buyer to the obligation for any deficiency. Ellner v. Commercial Credit Corporation, 137 Misc. 251, 242 N.Y.S. 720, 721.
Section 921 governs the application of the proceeds of the resale, and section 922 provides that where the proceeds have not been sufficient to meet the balance of the purchase price, "the seller may recover the deficiency from the buyer * * *". Section 924 restricts the liability of the buyer to the deficiency as shown after the resale. Continental Guaranty Corporation v. People's Bus Line, 31 Del. 595, 117 A. 275, 278.
In order to hold Bowden for the deficiency, it was necessary for Sussex to comply with the resale requirements of Section 919 that pertain to property where less than $500 has been paid. Section 919 requires, inter alia, notice of the sale by three notices posted in different public places within the filing district where the goods are to be sold, at least five days before the sale. There are three affidavits filed pertaining to the posting. One affidavit shows a posting at the place of business of Sussex; another affidavit shows a posting at the office of Citizens' Acceptance Corporation. The third affidavit, signed by "Ray W. Lynch", states that he trades under the style of Ray's Paint & Body Shop, Georgetown, Delaware. The affidavit then states: "That on March 28, 1958, written notice was posted in a prominent place of public auction of a certain 1950 Buick, four door Sedan, Serial Number 3558619, to be held at Georgetown, on April 8, 1958."
Although it is unknown from the Raymond W. Lynch affidavit whether or not the posting of the notice by Raymond W. Lynch was either in a public place or in the filing district, for the reason that the affidavit itself fails to state where the notice was posted, Bowden, nevertheless, cures this possible defect by admitting in his brief that the notice was posted in the auto repair shop.
In his petition, Bowden states that the notices were not posted in a public place, as is required by statute. 35 Words & Phrases, public places, p. 258, etc., and *599 Pocket Part; Annotation: Conditional Sale Resale, 49 A.L.R.2d 15, 37-41 (place of posting). Sussex produced three affidavits where the affiants allege that the notices were posted in a public place. Bowden supplied no counter-affidavits which took issue with this fact. Petitioner had the obligation to come forward on defendant's motion for summary judgment and demonstrate an issue of fact on the question of public place. This, he failed to do.
Bowden next argues that there is an issue of fact on the question of the fairness of the sale conducted by Sussex on April 8, 1958. There is no evidence supplied regarding any irregularity in the sale procedure. The sole complaint of Bowden is that the price obtained at the resale was grossly inadequate.
As I have stated earlier, Section 920 allows the seller to resell for the account of the buyer. Section 919 permits the seller to bid for the goods at resale. Consequently, the seller may purchase at the sale.
The facts reveal that the only person that bid at the public sale at the business place of Sussex was the agent of Sussex. Sussex, consequently, became the purchaser of the Buick on April 8, 1958 at its resale price of $25. Four months prior to this resale, on December 23, 1957, Sussex had sold this same Buick to Bowden for $328.42. At this time, Bowden paid $100 down and also paid $11.82 at a later date as a part-payment on a monthly installment. On the deficiency judgment, Sussex has executed against Bowden for $228.42, which is more than the amount due and unpaid by Bowden. Apparently Sussex did not credit the $11.82 which was paid as part of a monthly installment; nor is it clear whether Sussex credited the $15 to Bowden on the original purchase price after sale wherein the expenses were $10.
Bowden's contention that the resale price was grossly inadequate has no evidentiary support except the bare facts of difference in price obtained by Sussex at the time of sale on December 23, 1957 to Bowden and the price obtained at the resale to itself on April 8, 1958. Bowden has not established in the record that the car was in the same condition or approximately the same condition that it had been when he purchased the vehicle. There is no evidence in the record upon which to base a finding of the market value at the time of resale. Sussex established a prima facie case by showing that it had complied with the requirements of sale set down in Section 919. Bowden had the burden of coming forward and showing in the record that the price obtained was grossly inadequate. The mere fact that $25 was the price paid at the resale is not sufficient evidence, in and of itself, of a grossly inadequate price, absent other circumstances. Millick v. Peer, 130 Cal.App.2d Supp. 894, 279 P.2d 212, 214. While it has been recognized in some jurisdictions that a conditional vendor is required to deal fairly so as to secure the best price possible in order to protect the buyer's equity in the property when he sells repossessed property for the conditional purchaser's account, Annotation: Conditional Sale Resale, 49 A.L.R.2d 17, 57-60 (price obtained), nevertheless, it is the obligation of the buyer to come forward with evidence on defendant's motion for summary judgment which would justify this court in considering the invalidating of the sale for unfair dealing by the seller.
However, I can not decide from the record that Sussex is entitled to the deficiency of $228.42, which it now claims to be due to it on execution. Sussex has not *600 satisfactorily demonstrated its reason for not crediting to Bowden's account $11.82 paid by him as a part-installment, nor has it explained its reason for failing to credit him with the $15 net it obtained at the resale on April 8, 1958. It is, therefore, required that I deny Sussex's motion for summary judgment for the amount of deficiency of $228.42, and I order a hearing to determine the failure of Sussex to properly allow the credits described to the account of the buyer.
NOTES
[1] § 917 reads as follows:
"Notice of intention to retake
"Not more than 40 nor less than 20 days prior to the retaking, the seller, if he so desires, may serve upon the buyer personally or by registered mail a notice of intention to retake the goods on account of the buyer's default. The notice shall state the default and the period at the end of which the goods will be retaken, and shall briefly and clearly state what the buyer's rights under this chapter will be in case they are retaken. If the notice is so served and the buyer does not perform the obligations in which he has made default before the day set for retaking, the seller may retake the goods upon paying any rent or storage due thereon, and hold them subject to the provisions of sections 919-923 of this title regarding resale, but without any right of redemption."
[2] § 918 reads as follows:
"Redemption
"If the seller does not give the notice of intention to retake described in section 917 of this title, he shall retain the goods for ten days after retaking within the state in which they were located when retaken, during which period the buyer, upon payment or tender of the amount due under the contract at the time of retaking and interest, or upon performance or tender of performance of such other condition as may be named in the contract as precedent to the passage of the property in the goods, or upon performance or tender of performance of any other promise for the breach of which the goods were retaken, and upon payment of the expenses of retaking, keeping and storage, may redeem the goods and become entitled to take possession of them and to continue in the performance of the contract as if no default had occurred. Upon written demand delivered personally or by registered mail by the buyer, the seller shall furnish to the buyer a written statement of the sum due under the contract and the expense of retaking, keeping and storage. For failure to furnish such statement within a reasonable time after demand, the seller shall forfeit to the buyer $10 and also be liable to him for all damages suffered because of such failure. If the goods are perishable so that retention for ten days as herein prescribed would result in their destruction or substantial injury, the provisions of this section shall not apply, and the seller may resell the goods immediately upon their retaking. The provision of this section requiring the retention of the goods within the state during the period allowed for redemption shall not apply to the goods described in section 908 of this title."
[3] § 919 reads as follows:
"Compulsory resale by seller
"If the buyer does not redeem the goods within ten days after the seller has retaken possession, and the buyer has paid at least 50 per cent of the purchase price at the time of the retaking, the seller shall sell them at public auction in the state where they were at the time of the retaking, such sale to be held not more than 30 days after the retaking. The seller shall give to the buyer not less than ten days' written notice of the sale, either personally or by registered mail, directed to the buyer at his last known place of business or residence. The seller shall also give notice of the sale by at least three notices posted in different public places within the filing district where the goods are to be sold, at least five days before the sale. If at the time of the retaking $500 or more has been paid on the purchase price, the seller shall also give notice of the sale at least five days before the sale by publication in a newspaper published or having a general circulation within the filing district where the goods are to be sold. The seller may bid for the goods at the resale. If the goods are of the kind described in section 908 of this title, the parties may fix in the conditional sale contract the place where the goods shall be resold." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4204334/ | Order Michigan Supreme Court
Lansing, Michigan
September 15, 2017 Stephen J. Markman,
Chief Justice
Brian K. Zahra
Bridget M. McCormack
154505 David F. Viviano
Richard H. Bernstein
Joan L. Larsen
KIM METHNER and CONNIE METHNER, Kurtis T. Wilder,
Plaintiffs-Appellees, Justices
v SC: 154505
COA: 326781
Midland CC: 12-009082-CH
VILLAGE OF SANFORD,
Defendant/Cross-Defendant-
Appellant,
and
MID-VALLEY AGENCY, INC.,
Defendant/Cross-Plaintiff-
Appellee,
and
MALLEY CONSTRUCTION, INC.,
Defendant.
_________________________________________/
On order of the Court, the stipulation signed by counsel for the parties agreeing to
the dismissal of this application for leave to appeal is considered, and the application for
leave to appeal is DISMISSED with prejudice and without costs.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
September 15, 2017
d0912
Clerk | 01-03-2023 | 09-19-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/1550212/ | 223 Md. 475 (1960)
164 A.2d 877
STANSBURY
v.
STANSBURY (Two Appeals In One Record)
[No. 61, September Term, 1960.]
Court of Appeals of Maryland.
Decided November 14, 1960.
Motion for rehearing filed December 2, 1960.
Denied December 9, 1960.
*476 The cause was argued before BRUNE, C.J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.
Charles G. Page, with whom were White, Page & Lentz on the brief, for appellant.
Charles D. Harris, with whom were Joseph M. Roulhac and France, Rouzer, Mundy & Harris on the brief, for appellee.
Denied December 9, 1960., and opinion modified.
HAMMOND, J., delivered the opinion of the Court.
This appeal is concerned with an oft recurring phase of the war of the sexes the primeval struggle for division of the husband's financial productivity after the couple have separated.
When the husband, the appellee, deserted his wife, the appellant, he agreed to pay her $100.00 a week. Temporary alimony was set at $75.00 a week when her bill for divorce was filed, and on June 25, 1959, Judge Niles granted her an a mensa divorce and awarded permanent alimony of $125.00 a week. An appeal was noted on July 2, and the time for filing the record in this Court later was extended to September 28. Just before this deadline, the husband employed a new lawyer who dismissed the appeal and filed a petition for modification of the decree of June 25, alleging "a drastic change" in the financial condition of both the husband and the wife.
The matter came on for hearing before Judge Cullen, who in an ordinary course of rotation of the members of the Supreme Bench had succeeded Judge Niles in the equity court. Judge Cullen estimated the husband's income from his business *477 at $10,000 a year instead of the $20,000 which Judge Niles had found, and reduced the alimony from $125.00 a week to $75.00 a week. When his decree was appealed by the wife, Judge Cullen, on February 19, 1960, refused to order the husband to advance the cost of preparing the record, saying that there was no reasonable ground for the appeal and that the wife had independent means. The appeal is from both the decree reducing the alimony and the order refusing the costs.
Since the dismissal of the appeal from the decree of June 25 made that decree final and in full force and effect, it must be accepted as having been correct when it was entered. "It is not within the province of this Court, in considering a petition for modification, to review the propriety or sufficiency of the original award." Warren v. Warren, 218 Md. 212, 214. In Hughes v. Hughes, 216 Md. 374, 379, Judge Henderson, for the Court, adopted the words of 17 Am.Jur. Divorce and Separation Sec. 719, p. 764, that "* * * all questions concerning alimony which are or ought to be determined in a divorce proceeding are res judicata in a subsequent proceeding in the same jurisdiction."
It is, of course, equally established that the equity court which made the original award of alimony may modify that award if thereafter there comes about material change in circumstances which justify the action. Langrall v. Langrall, 145 Md. 340, 345; Moore v. Moore, 218 Md. 218; Warren v. Warren, supra.
The case turns, then, on whether there had occurred such material change in conditions as to justify Judge Cullen in reducing the alimony set by Judge Niles.
In his answer to the original bill of the wife for divorce and alimony, the husband alleged that his business (Nationwide Service, Inc., an employment agency at the executive level, with offices in Baltimore and Philadelphia) was, and for some time had been, operating at a loss, that he was in debt to the amount of $10,000, that his net earnings did not equal his wife's and his expenses greatly exceeded hers. He attempted to sustain these allegations at the trial.
Judge Niles found that the couple, during their married life *478 together of some twenty-three years, had spent $18,000 a year, that "his earning capacity is in the neighborhood of $20,000 to $21,000 a year," that he was the beneficiary of a trust fund worth some $140,000, which produced an annual income of about $3,500 and made distributions of capital to the husband every two years of about $14,000, that since the separation the wife had become a school teacher; he knew the wife was earning $4,000 a year and might not be reemployed next year and apparently that she might be reemployed with a $200.00 raise, and that her financial needs called for the alimony awarded.
Before Judge Cullen, the husband made essentially the same contentions as to a decrease in his business income he had made before Judge Niles. Before Judge Cullen he blamed the decrease on a strike in the steel industry and the fact a key employee in his Philadelphia office had left him and started a competing business. He relied on the fact that the wife had been reemployed as a teacher and had received the $200.00 raise. In rebuttal, the wife showed that the husband's Baltimore and Philadelphia offices had produced an income of $17,329.00 from January 1 to September 30, 1959, even though, as the husband earnestly pointed out, October produced a loss of $9,750.30. The husband's accountant, however, explained that no customer had been billed in October. The wife intimates that the October loss was the result of "litigation accounting." In any event, without suggesting that we agree, we note that the decrease in income of a business which had produced a substantial income over the years was not shown to be more than temporary.
The facts are in general not unlike those in Langrall v. Langrall, supra, where this Court held that a decrease in the husband's income, because of a dip in the income of his firm which appeared merely temporary, would not justify a revision of alimony.[1]
*479 There was no evidence of change in the wife's income or needs, which had not been taken into account by Judge Niles. The record makes it appear clearly that there were no material changes in conditions or in the circumstances of the husband or wife between June 25, when Judge Niles made the original award, and December 9, when Judge Cullen modified it. On essentially the same facts Judge Cullen reached a conclusion different from that arrived at by Judge Niles. This he had no right to do since his function was only to determine whether there had been a change in circumstances, and his action in modifying the original decree was unwarranted.
Our holding establishes that the wife had good grounds for appeal, and the costs thereof, and a reasonable fee to her lawyer for prosecuting it, to be fixed below on remand, must be paid by the husband. Timanus v. Timanus, 178 Md. 640, 644.
Case remanded, decree of December 9, 1959, and order of February 19, 1960, denying costs, reversed and decree of June 25, 1959, reinstated, appellee to pay the costs.
NOTES
[1] Judge Urner said for the Court at page 344 of 145 Md.: "* * * the business which produced the appellee's income was still in active existence, and while he testified it had been conducted at a loss for several years preceding his petition to have the alimony abated, there was no satisfactory proof that its prospects for the immediate future were unfavorable. * * * It was not suggested in the testimony, and it could not be assumed, that the depression in the canning industry to which the appellee referred would be permanent. The business of this firm had continued for a period of twelve years and appeared to have ample credit and financial support. During the season following the reduction of the alimony by the court below the business may have been very profitable. The proof does not prevent that supposition." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550225/ | 401 Pa. 222 (1960)
Commonwealth
v.
Schuck, Appellant.
Supreme Court of Pennsylvania.
Argued May 26, 1960.
September 26, 1960
Before JONES, C.J., BELL, MUSMANNO, JONES, COHEN, BOK and EAGEN, JJ.
*223 John V. Snee, for appellant.
Joseph S. Walko, First Assistant District Attorney, with him Clarence D. Neish, Assistant District Attorney, and Richard P. Steward, District Attorney, for Commonwealth, appellee.
OPINION BY MR. JUSTICE EAGEN, September 26, 1960:
The defendant, Arthur Grover Schuck, was indicted and tried before a jury for the murder of Vincent J. Quigley in Beaver County, Pennsylvania. He was found guilty of murder in the first degree and the penalty was fixed at death. From the judgment of sentence and denial of a new trial, this appeal was filed.
We have examined the record, as required under the provisions of the Act of February 15, 1870, P.L. 15, § 2, 19 PS § 1187, for the purpose of determining whether the essential ingredients of murder in the first degree affirmatively appear therein and we are completely satisfied that the facts and circumstances of the crime, as shown by the testimony, definitely support the conviction.
On Sunday, April 27, 1958, shortly after two o'clock a.m., William Engle, Angeline J. Pugliano and Quigley were riding in the front seat of an automobile *224 operated by Engle on Ann Street in the village of Brownsdale, Economy Borough, Beaver County. Engle and Miss Pugliano were engaged to be married the following June. Quigley resided in a dwelling on Ann Street and Engle was in the process of driving him from his place of employment to his home. He drove the automobile a short distance beyond the Quigley residence and turned into a private driveway on property of one Mrs. Olga S. Ray, intending to turn around and proceed down Ann Street to permit Quigley to alight. As the vehicle was stopped momentarily, shots were fired from a .348 caliber Winchester rifle into the rear and side portions of the vehicle. Engle and Quigley were struck by some of the bullets and both died instantly.[1] Miss Pugliano was injured.
The latter testified that as Engle's car started to back out of the Ray driveway, a loud bang or shot sounded. Then, a second shot followed and a bullet came through the back of the car. There was a splatter of blood. Quigley got out of the car and yelled, "Hey, Cook, what are you doing? Are you crazy?" Then, there was a third shot as Quigley fell back into the car, grabbing himself about the abdomen and slumping over. Miss Pugliano then crouched down on the floor at the middle portion of the seat with her back towards the front of the car. Looking through the front window on the passenger side, she saw a man spreading his legs, leveling a rifle, and firing two more shots into the car. The man then walked around to the driver's side of the car, put his face very close to the glass and looked in. He then walked back to a car parked a short distance away, started the motor, *225 backed up the street with the headlights on and then turned them off while driving away.
The accused denied being in the vicinity of the shooting and committing the murders. He testified that he had been drinking heavily Saturday afternoon and night, and could not specifically account for his actions during the important hours involved. He suffered a complete lapse of memory for the period of from about twelve midnight, when he left a tavern in Ambridge, until he was in his home and knocked over an ash tray while preparing for bed. His wife testified that he arrived home about two-fifteen o'clock in the morning (Sunday) and that he was "real drunk." Other witnesses testified to seeing him drinking in taverns in Ambridge during the course of Saturday night. Some testified that at the time he was not intoxicated; one testified that he appeared to be intoxicated.
Following the shooting, state and local police went to the defendant's residence about four o'clock a.m. and found him in bed. He awakened swinging and kicking. In the kitchen under a couch or daybed, they found a .348 caliber Winchester rifle, admittedly the defendant's property. Four rounds of ammunition were in the magazine. In the right front pocket of a pair of trousers on the chair near his bedside, they found three loaded .348 caliber cartridges. Five such discharged shells were found at the scene of the shooting. Expert testimony was offered to the effect that tests proved these shells had been discharged from the defendant's rifle.[2]
*226 Miss Pugliano, at the trial, positively identified the defendant as the man she saw firing the shots into the death car. She had never known the defendant before. As a result of her injuries, she was hospitalized for three weeks and, following her release, she was taken to police headquarters to observe a lineup consisting of six males. On this occasion, she definitely picked out and identified the defendant as the murderer.
Mrs. Ray, in whose driveway this tragedy occurred, was awakened by the first shot and ran to the front bedroom window. She saw the man firing shots from a rifle into the car and telephoned the police. She described the man in detail to the investigating officers. At a police line-up, she identified the defendant as being that man. At the trial, she testified that the defendant looked similar to the man she saw doing the shooting.
Witnesses also described the automobile parked at the scene of the shooting in which the slayer made his escape. The descriptions substantially fitted the automobile the defendant was driving that night.
Edward and Rose Ragozine reside in a house fronting on Ann Street, a few houses and a short distance away from the Ray property, the scene of the shooting. Almost immediately after the shooting, Mr. and Mrs. Ragozine arrived at their home in their automobile, after being out for the evening. It was to them that Miss Pugliano ran screaming for help. Testimony at the trial indicated a strong similarity of appearance between the Engle automobile and the Ragozine automobile.
The defendant and Mrs. Ragozine had been having a close association for sometime previously. The details, most of which the defendant admitted, were outlined in her testimony at the trial. She testified, inter *227 alia, that she had been trying to bring this relationship to an end for months and on one occasion had caused the defendant's arrest; that the defendant told her that if he could not have her, no one else would; that he threatened to kill her and her family; that he frequently called her on the telephone; and, that he drove his automobile up and down the street in the block where she resided, tooting the horn. On one occasion, he told her that he had hired some men to kill her husband. On another occasion, he drove her to the vicinity of his home, asked her if she was going to go away with him, and she said she would if he didn't hurt her husband. He said he would anyhow. When she attempted to leave the automobile, he hit her with a hammer and threatened her with a revolver which he pressed to her body. On another occasion, he threatened to blow her husband's head off, and said he had a weapon which could get him from a mile away. He warned her this would happen if more than five days elapsed without her contacting him. On the Sunday before the shooting, he told her over the phone, "I am going to do what I said I would, I am going to kill all of you." She replied, "If that is the way you feel, go ahead and do it. . . . I'll never talk to or see you again."
In view of the overwhelming evidence, there can be no reasonable doubt as to the defendant's guilt. The record depicts the mind of a malicious man long bent on murder. The two unfortunate victims, undoubtedly, died because of mistaken identity.
The defendant was given a very fair trial. His defense was presented in adequate fashion. In support of the motion for a new trial several reasons are assigned but careful consideration indicates lack of merit in each and every one of them.
Miss Pugliano suffered from two or three small particles of glass in the surface of each eye from the *228 shattering of the automobile window glass during the shooting. An effort seriously to impugn her physical competency to see and later identify the defendant was made by defendant's counsel during her cross-examination. A medical doctor, an eye specialist, who removed these foreign substances and treated her for these injuries during her stay in the hospital, was permitted to testify that, in his opinion, these injuries and the presence of these foreign substances did not impair her vision on the occasion involved. This testimony was clearly admissible under the circumstances. Whether or not Miss Pugliano's testimony was correct and credible, particularly her identification of the accused, was for the jury to decide in the light of all the attending facts which were explicitly brought forth at the trial. On appeal, it is not within the province of the appellate court to pass upon the credibility of the testimony: Commonwealth v. Logan, 361 Pa. 186, 191, 192, 63 A.2d 28 (1949).
It is argued that the lower court erred in not awarding a new trial because of after-discovered evidence. The defendant, approximately seven months after trial, submitted an affidavit made by a man named Hickey. It states, in the part most material here, that the affiant saw the defendant engaged in a fist fight at approximately one forty-five a.m. at or near the intersection of 24th Street and Duss Avenue in the town of Ambridge. (The time is fixed from memory of a conversation with a girl in whose company he had been minutes before, who indicated, after looking at her wrist watch, that it was then one forty-five a.m.). Further, that the defendant appeared to be under the influence of alcohol. The scene of the shooting is only a short distance and a few minutes away from this area of Ambridge. We cannot see how this evidence would, in view of the guilt-convincing testimony, produce *229 an iota of a change in the result. It does not raise a substantial doubt as to the guilt of the defendant. The defendant, according to the testimony offered at the trial, was in the area of Ambridge as late as twelve-thirty o'clock a.m. on the morning of the shooting. He and his counsel had ample opportunity to, and did in fact, produce for the consideration of the jury quantitive testimony of his drinking and visitations in that community on the previous night. Hickey's testimony as to the defendant's insobriety was merely corroborative and cumulative. It is, also, well within the range of that type of testimony which was available to the defendant without difficulty and through the exercise of reasonable diligence before trial. In order to justify the grant of a new trial on the basis of after-discovered evidence, the evidence must have been discovered after the trial and must be such that it could not have been obtained at the trial by reasonable diligence, must not be cumulative or merely impeach credibility, and must be such as would likely compel a different result: Hagopian v. Eskandarian, 396 Pa. 401, 407, 408, 153 A.2d 897 (1959); Commonwealth v. Clanton, 395 Pa. 521, 526, 151 A.2d 88 (1959); Commonwealth v. Green, 358 Pa. 192, 199, 56 A.2d 95 (1948). As to the defendant's presence in Ambridge as late as one forty-five o'clock a.m. or even minutes later (although the time is fixed by hearsay), this would not physically prevent the defendant from driving to and arriving at the scene of the shooting before two-ten o'clock a.m., the approximate time of the slayings.
Defendant's counsel also argues that those portions of the charge of the trial judge relating to circumstantial evidence, the burden of proof and the meaning of reasonable doubt were inadequate and misleading. An examination of the charge discloses correct and complete *230 instructions in regard to each and every relevant principle of law, and the application thereof was explained in fair and understandable language. Assignment of these alleged errors indicates merely a desperate grasping for straws in an effort to arrest the effect of a just verdict.
Judgment and sentence affirmed.
NOTES
[1] Quigley's face was almost completely blown off and another projectile entered the left side of the chest, passed through the body, completely severing the spinal column in the second and third thoracic region.
[2] In the State Police laboratory in Harrisburg loaded cartridges were fired from the defendant's rifle. Examination disclosed markings across the primers identical to those which existed on the discharged shells found at the murder scene. The firing pin indentation was off center and was in the same location on each discharged shell. The heads and rims manifested similar extractor markings. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550504/ | 229 B.R. 606 (1999)
In re Gabriel Eduardo FLORIO, Debtor.
Ford Motor Credit Company, Appellant,
v.
Gabriel Eduardo Florio, Appellee.
No. 98 Civ. 8341(BDP).
United States District Court, S.D. New York.
January 25, 1999.
*607 C. Stephen Hackeling, Macco Hackeling & Stern, Huntington, NY, for appellant.
John E. Oliva, Michael H. Schwartz & Associates, P.C., White Plains, NY, for appellee.
MEMORANDUM DECISION AND ORDER
BARRINGTON D. PARKER, Jr., District Judge.
This matter comes before this Court on appeal from an October 16, 1998 Order of Judge Adlai S. Hardin, Jr., of the United States Bankruptcy Court for the Southern District of New York. That Order granted the motion of Gabriel Florio, the Debtor, to compel Ford Motor Credit Company ("FMCC") to return two vehicles that FMCC had repossessed from the Debtor, and awarded the Debtor damages of $8,699.85, and attorneys' fees and costs pursuant to 11 U.S.C. § 362(h), for FMCC's willful violation of the automatic stay.
On April 16, 1998, the Debtor filed a voluntary petition for relief pursuant to Chapter 13 of Title 11 of the United States Code. By a June 9, 1998 Notice of Presentment, FMCC moved to vacate the automatic stay with respect to the Debtor's 1996 Ford F350, 1997 Ford Pick-up truck, and 1996 Ford Explorer. On July 2, 1998, Judge Hardin, Debtor's counsel, and FMCC counsel signed a Conditional Order, which vacated the automatic stay with respect to the 1996 Ford Explorer. The Conditional Order also required the Debtor to 1) cure the post-petition arrears by certain dates, and 2) tender regular future post-petition payments. The Conditional Order provided that if the Debtor failed to comply with the conditions of the Order, FMCC was to serve a Notice of Default upon Debtor and his counsel, and, if the Debtor failed to cure the default within ten days, the automatic stay would be vacated upon the filing of an Affidavit of Non-Compliance with the Bankruptcy Court.
When the Debtor failed to tender the payments under the Conditional Order, FMCC gave written notice of the default by a July 31, 1998 letter to the Debtor's attorney, which stated that if the Debtor failed to cure the default by August 10, the stay would be lifted and FMCC would have the right to proceed with its state law remedies. On the night of September 10, 1998, FMCC repossessed the remaining two vehicles.
On October 6, 1998, Judge Hardin held a hearing to determine whether FMCC had willfully violated the automatic stay. During that hearing, Judge Hardin found by a preponderance of credible evidence that on August 10, 1998, the Debtor delivered a check for $4500.00 to the FMCC office in Tarrytown, New York. That payment, however, was not entered into FMCC's books until August 12, 1998, after the Debtor clarified to which accounts FMCC should apply the check. FMCC then cashed the check and retained the funds. Approximately one *608 month later, FMCC repossessed Debtor's vehicles.
As the check was timely delivered, Judge Hardin found that Ford's retention of the check and seizure of the vehicles on the night of September 10 was a willful violation of the automatic stay, and entitled the Debtor to the relief provided in § 362(h) of the Bankruptcy Code. Accordingly, Judge Hardin ordered FMCC to pay to the Debtor 1) $7500.00 in lost business income, 2) $1,199.85 for the cost of renting a replacement truck, and 3) reasonable attorneys' fees after proper application to the Bankruptcy Court. A written Order finding a willful violation was signed by Judge Hardin on October 16, 1998. This appeal followed.
Under 28 U.S.C. § 158(a) and (c), the District Court is authorized to exercise appellate jurisdiction over final orders of the Bankruptcy Court. See Bankr.Rule 7052 (incorporating Fed.R.Civ.P. 52); Bankr.Rule 8013. This Court will review the Bankruptcy Court's conclusions of law de novo and its factual findings under a "clearly erroneous" standard. In re Maxwell Newspapers, Inc., 981 F.2d 85, 89 (2d Cir.1992).
11 U.S.C. § 362(h) provides: "An individual injured by a willful violation of a stay provided by this section shall recover actual damages, including costs and attorney's fees, and in appropriate circumstances, may recover punitive damages." FMCC initially contended that the Bankruptcy Court used the wrong standard to determine whether the automatic stay had been violated, arguing that to prevail on an action for a violation of an automatic stay, the moving party must prove his case by clear and convincing evidence. At oral argument, however, appellant conceded that Judge Hardin had applied the correct standard.
It is well established that the "clear and convincing" standard applies only when there is an adjudication of contempt for the violation of an automatic stay; if that is not the case, the "clear and convincing" standard of proof does not apply. In re Crysen/Montenay Energy Co., 902 F.2d 1098, 1104 (2d Cir.1990) (rejecting standard of proof governing contempt proceedings as equivalent to that governing imposition of sanctions pursuant to 11 U.S.C. § 362(h), holding that "any deliberate act taken in violation of a stay, which the violator knows to be in existence, justifies an award of actual damages. An additional finding of maliciousness or bad faith on the part of the offending creditor warrants the further imposition of punitive damages pursuant to 11 U.S.C. § 362(h)"); see also Budget Service Co. v. Better Homes of Virginia, Inc., 804 F.2d 289, 293 (4th Cir.1986) ("a finding of civil contempt is not a necessary predicate in order to impose the sanctions of § 362(h)"); Cf. In re Stockbridge Funding Corp., 158 B.R. 914, 917 (S.D.N.Y. 1993) (reviewing bankruptcy court's finding of contempt against appellants under clear and convincing evidence standard). In this case, the Bankruptcy Court awarded only actual damages and attorneys' fees; no finding of contempt was either sought or imposed. Accordingly, the "clear and convincing" standard of proof does not apply, and the Bankruptcy Court needed only to find a willful violation of the automatic stay in order to impose sanctions under 11 U.S.C. § 362(h). See In re Crysen/Montenay Energy Co., supra.
FMCC next contends that the debtor failed to prove that FMCC's violation of the automatic stay was willful. As noted above, in our Circuit, "if a party charged with violating the stay knows that the stay is in effect, any deliberate act taken in violation of the stay justifies an award of actual damages." In the Matter of Karen A. Robinson, 228 B.R. 75, 80 (Bankr.E.D.N.Y.1998) (citing In re Crysen/Montenay Energy Co., 902 F.2d at 1105). In this case, then, in order to show willfulness, the Debtor had to show that FMCC 1) knew that the stay was in effect, and 2) deliberately violated the terms of that stay. As Judge Hardin found, and this Court cannot say his factual findings were clearly erroneous, the Debtor timely delivered his check to FMCC on August 10, 1998, a fact that FMCC should have known when it received the funds, and that indicated to FMCC that the stay remained in effect. In addition, as previously noted, FMCC cashed the check, retained payment, and waited until a month after receipt of the check to repossess the Debtor's vehicles. Accordingly, *609 Judge Hardin correctly found that FMCC deliberately violated the terms of the stay.
The Bankruptcy Court's Order of October 16, 1998 is therefore affirmed. As the Debtor's attorneys' fees and costs in defending this appeal flow from FMCC's violation of the stay, Debtor is entitled to recover attorneys' fees and costs expended in defending this appeal. See 11 U.S.C. § 362(h).
SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550511/ | 5 F.2d 723 (1925)
KENTUCKY TOBACCO PRODUCTS CO.
v.
LUCAS, Collector of Internal Revenue.
No. 757.
District Court, W. D. Kentucky.
April 17, 1925.
*724 Humphrey, Crawford & Middleton, of Louisville, Ky., for plaintiff.
W. S. Ball, U. S. Dist. Atty., of Louisville, Ky., and Floyd Toomey, of Washington, D. C., for defendant.
DAWSON, District Judge.
In this action the plaintiff, Kentucky Tobacco Products Company, a New Jersey corporation, which during its active business existence was engaged in business in Kentucky, seeks to recover from the defendant, Robert H. Lucas, collector of internal revenue of the United States for the district of Kentucky, the sum of $209,378.84, paid by it under protest on March 13, 1923, to the defendant as income and profit taxes for the years 1917, 1918, and 1919, in excess of the amount plaintiff claimed it owed for those years, with interest on said sum from March 13, 1913, and the sum of $24,253.05 interest on the first-named sum, paid by the plaintiff under protest on March 23, 1923, and interest on this sum from March 23, 1923. By written stipulation the case is submitted to the court for trial without the intervention of a jury, and plaintiff has asked for a separate finding of facts and conclusions of law.
As disclosed by the record, the uncontradicted facts are, that prior to July 17, 1899, the Louisville Spirit Cured Tobacco Company, a Kentucky corporation, was engaged in the leaf tobacco business, in the manipulation of Virginia wrappers under patents, and in the manufacture of certain extracts and products of tobacco stems, and this company used in its business tobacco stems from which the leaf proper had been taken. The stems used and required in use were in large part Burley stems.
At the inception of this company's business, and up to as late as 1895, it had been able to create but little demand for the product of the stems, nor was there any other company in the United States at that time with any considerable market for the product of Burley stems. As a result of this situation, up to 1895 the stems could be procured from the various companies producing them at a very nominal figure. At that time the Continental Tobacco Company and its constituent companies produced about 85 per cent. of the Burley stems of the United States, and this ratio has been approximately maintained at all times since that date by that company, or its successor, the American Tobacco Company, and its constituent companies, which were later, by virtue of the decision of the Supreme Court in the case of United States v. American Tobacco Co. *725 et al., 221 U. S. 106, 31 S. Ct. 632, 55 L. Ed. 663, dissolved into separate units.
As the processes of the Louisville Spirit Cured Tobacco Company for the manufacture of extracts were perfected, and as its market expanded, and with the entry of other companies into the same field of endeavor, the demand for Burley stems became more active, with a resulting increase in price. Due to the fact, however, that the Continental Company required competitive bidding for its output of stems, no one company could be assured from year to year that it would obtain the stems necessary for its business. Therefore it became evident, for the business to be successful and to grow, that it would be necessary to have a continuing and assured supply of stems at a stable price, of sufficient volume to justify development and exploitation.
To meet this situation, on the 17th day of July, 1899, a written contract was entered into between the Louisville Spirit Cured Tobacco Company, as party of the first part, G. H. Lindenberger and Walker Bowman, the principal stockholders of the Louisville Spirit Cured Tobacco Company, parties of the second part, and the Continental Tobacco Company, party of the third part, by the terms of which it was agreed that a New Jersey corporation, to be known as "Tobacco Dip & Powder Company," should be organized, with an authorized capital stock of $1,000,000, and that the Louisville Spirit Cured Tobacco Company, in consideration of $450,000 of the capital stock of the new corporation, to be distributed to the stockholders of the Louisville Spirit Cured Tobacco Company in proportion to their respective stockholdings in said company, would convey to the new corporation all the patents, good will, business, trade-marks, property, assets, effects, and estate of the said Louisville Spirit Cured Tobacco Company, and that of this $450,000 worth of capital stock of the new corporation a sum equal to the inventory of the tangible assets of the Louisville Spirit Cured Tobacco Company should be in preferred stock and the balance in common stock. As to the remaining $550,000 of stock in the new company, the following provision was made:
"The balance of the stock of said new company, to wit, five hundred and fifty thousand dollars ($550,000), shall be issued to the Continental Company, in consideration of the Continental Company agreeing to enter into and entering into contracts with the new company as hereinafter set out and provided for."
In so far as material to this case, the provision referred to above, concerning contracts which the Continental Company should enter into with the new company, was in the following language:
"The new company shall purchase from the Continental Company its entire output of Burley tobacco stems for a period of ten years from July 1, 1899, at the following prices: The first year of said ten-year term five dollars and seventy-five cents ($5.75) per ton of said stems; and thereafter at eight dollars and fifty-one cents ($8.51) per ton of said stems; to be furnished in the same condition commercially as the stems now being made by the Continental Company and uncleaned by any stem-cleaning machine, or otherwise, except by the hand of the stemmer in the first separation of the stem from the leaf; payments to be made monthly, according to the statements rendered by the Continental Company to said new company; said payments to be made on or before the 10th day of each month for the stems furnished during the preceding month; in case the new company fails to make payment by the 10th of said month, the contract, at the option of the Continental Company, shall be forfeited. This contract shall, at the option of said new company, at the expiration of said first ten-year term, if it has not in the meanwhile been forfeited as above provided, be renewed for another term of ten years, but a forfeiture of said contract by the default of said new company, as hereinbefore provided for, shall not be taken as an abrogation of this contract, and shall not affect the right and title of the Continental Company's said five hundred and fifty thousand dollars ($550,000) stock in the new company hereinbefore provided for."
The contract contained this further provision:
"It is especially agreed that the only issue of preferred stock shall be for the tangible available assets of the Louisville Company (Louisville Spirit Cured Tobacco Company), as hereinbefore provided for, and that the new company shall be and it is hereby prohibited from issuing any other or further preferred stock."
Promptly following the execution of this contract, the New Jersey Company, with an authorized capital stock of $1,000,000, was organized, and apparently without objection upon the part of any of the parties to the contract of July 17, 1899, it was named the "Kentucky Tobacco Products Company," instead of "Tobacco Dip & Powder Company." This new company issued to the stockholders *726 of the Louisville Spirit Cured Tobacco Company, in proportion to their holdings in the last-named company, $190,000 of its preferred stock, representing the value of the tangible assets conveyed to it by the Louisville Spirit Cured Tobacco Company, and $260,000 of its common stock, and proper conveyances were executed, conveying to the new company all the patents, good will, business, trade-marks, property, and assets of the Louisville Spirit Cured Tobacco Company. The new company issued to the Continental Tobacco Company the remaining $550,000 of the authorized capital stock.
Thereupon, according to the terms of the contract of July 17, 1899, the new corporation commenced to purchase, and the Continental Tobacco Company commenced to sell to the new company, its entire output of Burley stems, and this was continued by the American Tobacco Company and later by its constituent units, following the dissolution of the so-called tobacco trust. No written contract was executed between the Continental Tobacco Company, or its successors, and the Kentucky Tobacco Products Company during the first ten-year period of the contract, as provided in the contract of July 17, 1899, the parties apparently proceeding upon the idea that the contract of July 17, 1899, was a sufficient memorial evidencing their relation. However, on March 19, 1909, which was shortly before the expiration of the first ten-year period of the contract, the Kentucky Tobacco Products Company, by letter of that date addressed to the American Tobacco Company, notified that company of its election to continue in effect the provisions of the contract of July 17, 1899, for another ten years, and the American Tobacco Company, under date of April 5, 1909, acknowledged the letter of the Kentucky Tobacco Products Company in the following language:
"We acknowledge receipt of your letter dated March 19, 1909, signed by Mr. Lindenberger, your president, and delivered personally to the subscriber hereto, and the letter has been filed with the contract to which it refers."
The Kentucky Tobacco Products Company, as well as its successor, the American Tobacco Company, and, after its dissolution, its constituent units, during the entire period of twenty years, ending in 1919, fully observed the provisions relative to the buying and selling of the Burley stems referred to in the contract of July 17, 1899; all the parties apparently recognizing as binding upon them the provisions contained in that contract. After the Kentucky Tobacco Products Company commenced to operate under the provisions of the contract of July 17, 1899, its business developed very rapidly, and the proof shows that during its existence it had practically a monopoly of the business of treating Burley stems, and by March 1, 1913, it was apparent that its control of available Burley stems gave it such an advantage in the field occupied by it as to free it from competition. No inconsiderable part of its profit was due to the fact that it was discovered that enough Burley scrap could be recovered from the stems in the condition they were required to be left under the contract of July 17, 1899, to more than pay for the entire cost under the contract of the stems themselves. The plaintiff has proven, and this is not controverted, that the control of 85 per cent. of the Burley stems of the United States assured by this contract made it possible for plaintiff to operate at a profit, and that without the benefits of such contract, it could not profitably continue its business, and that therefore, when the contract terminated in 1919, it ceased business and went into voluntary liquidation, after unsuccessfully attempting to get a renewal of the contract.
Under this state of facts, the plaintiff contends that as of March 1, 1913, the contract referred to was of the fair value of $1,225,000, and inasmuch as on that date it had only 76 months to run, it was entitled, in computing its income tax for the years 1917, 1918, and 1919, to have deducted from the gross income for each of those years 12/76 of the value of said contract as of March 1, 1913. The government, in computing plaintiff's tax for the years in question, refused to allow any such deduction. It is agreed that this ruling of the government resulted in plaintiff being required to pay the amounts in taxes and interest which are sought to be recovered in this case.
Plaintiff's contention may be stated under the following heads:
(1) That the contract referred to was a part of its invested capital, and inasmuch as on March 1, 1913, the effective date of the Sixteenth Amendment, it had only 76 months to run, in computing any income taxes against it, it was entitled to have that contract so amortized over the 76 months, and such a proportionate part of its value deducted from its gross income each year, as to result in restoring untaxed to the plaintiff at the expiration of the contract its entire value as of March 1, 1913, and that the proper deduction for each year was 12/76 of *727 the entire value of the contract. Plaintiff contends that to compute its income and profit tax for the years 1917, 1918, and 1919 without such deduction would result in taxation of its capital, and to that extent would be a direct tax without apportionment, in violation of the federal Constitution.
(2) That the contract in question was "property," within the meaning of the Revenue Act of 1916 (Act Sept. 8, 1916, § 12[a], being Comp. St. § 6336l), which authorized a deduction from gross income of "a reasonable allowance for exhaustion, wear and tear of property arising out of its use or employment in the business or trade," and within the meaning of the Act of 1918, c. 18 (40 Stat. 1057), which authorized to be deducted from gross income "a reasonable allowance for exhaustion, wear and tear of the property used in the trade or business, including a reasonable allowance for obsolescence"; these two acts being the ones applicable to the years involved in this case.
In opposition to the contention of the plaintiff, it is contended by the government:
1. That the plaintiff had no valid contract on March 1, 1913, because: (a) The plaintiff and the Continental Tobacco Company never entered into the written contract provided for by the agreement of July 17, 1899. (b) The written agreement of July 17, 1899, so far as it affected the plaintiff and the Continental Tobacco Company, was a unilateral one, and therefore unenforceable.
2. That there is no constitutional objection to taxing as income the receipts from the use of capital without restoring the loss of capital value in the form of a depreciation or amortization allowance, and that if such deduction from gross income is allowed, it must be found in the provisions of the acts of 1916 and 1918, which determine the amount of taxes to be paid by the plaintiff for the years in question in this case.
3. That neither the act of 1916 nor the act of 1918 authorizes a deduction from gross income of any amount for depreciation or exhaustion of the value of a contract such as the one involved in this case.
4. That even if the acts of 1916 and 1918 should be construed to authorize such deduction, plaintiff has failed to establish by any satisfactory proof the value of the contract as of March 1, 1913.
This contract was under fire in the case of United States v. American Tobacco Co. et al., supra, as tending to create a monopoly, but as neither the lower court, nor the Supreme Court in that case, declared it to be illegal on that ground, its legality here will be tested solely on the grounds here urged.
The court has had no difficulty in reaching the conclusion that the first objection urged by the government is without merit. The contract of July 17, 1899, in contemplation of the parties thereto, was as much for the benefit of the new company which that contract provided should be organized, as for the benefit of those signing that instrument, and under the generally recognized rule in this country, where a contract between parties is for the benefit of a third party, such third party, by appropriate action, may enforce any rights secured to it by such contract, even though such third party was not in being at the time of the execution of such contract. Nor is the contract a unilateral one. It is true that the contract provides, "The new company shall purchase from the Continental Company its entire output of Burley tobacco stems for a period of ten years from July 1, 1899," etc., and that there is no express provision that the Continental Company shall sell such entire output to the new company, but the contention of the government, that the failure of the contract in express words to impose this obligation upon the Continental Company makes the contract a unilateral one, is the utmost refinement of construction. In construing all contracts it is the duty of the court to arrive at the intention of the parties, if such intention can be gathered from the language of the contract itself, and the court has no hesitation in holding that the Continental Company, by the contract in question, intended to and did obligate itself to furnish its entire output of Burley stems, during the period covered by the contract, to the new company, as fully as if it had so undertaken in express language.
Neither is the contract so indefinite as to the amount of stems to be furnished as to make it unenforceable. That a contract for the sale or purchase of a commodity, the quantity to be delivered or received to be measured by the output or requirements of an established plant or business, is not void for indefiniteness or for lack of mutuality, is too well settled to be open to serious question.
Nor is the court impressed with the suggestion of the government that the Continental Company might have gone out of business, and thereby terminated the contract before it expired by its terms. The Continental Tobacco Company received $550,000 of the stock of plaintiff as consideration *728 for entering into the contract, and there was incorporated therein an express stipulation that its title to this stock should not be affected by any forfeiture of the contract occasioned by default of the plaintiff. Certainly the Continental Company was under an equally binding obligation to carry out the contract, or pay the plaintiff the damages sustained by it for failure so to do. Moreover, neither the Continental Company, nor its successors, ever questioned the binding effect of the obligation assumed by the Continental, and when the plaintiff, on March 19, 1909, in writing notified the successor of the Continental Company that it desired to exercise its option to continue the contract in force for another ten years, the American Tobacco Company, the successor of the Continental, in writing, acknowledged receipt of the notice of such election, and neither by word nor act questioned the right of the plaintiff to make such election. The conduct of the Continental Company and its successors had been such that on March 1, 1913, it was estopped to assert the invalidity of the contract upon any of the grounds urged by the government in this case.
We are thus brought to the first contention of the plaintiff, that to compute the income and profit taxes for the years 1917, 1918, and 1919 without allowing it any deduction from gross income so as to amortize the March 1, 1913, value of such contract over the 76 months that contract had to run after the 1st day of March, 1913, would result in taxation of its capital, and to that extent would be a direct tax without apportionment, in violation of the federal Constitution. If any part of the income of the plaintiff taxed by the government for the years 1917, 1918, and 1919 had been derived from a sale of capital assets, there would be merit in this contention of the plaintiff; but the income taxed for those years was not either in whole or in part derived from any such sale of capital assets. This income was solely and alone the result of the earnings of capital invested, combined with the use of labor, and under the Sixteenth Amendment the Congress had the power to require the payment of the tax without allowing any deduction for the purpose of returning to the taxpayer his entire invested capital at the expiration of the life of the property from which the income was derived. If any part of the income for either of these years had been the result of a sale by plaintiff to another of an interest in the contract itself, a different question would be presented. Therefore the principle laid down in the case of Doyle v. Mitchell Bros. Co., 247 U. S. 179, 38 S. Ct. 467, 62 L. Ed. 1054, has no application to the facts of this case. It follows that if plaintiff has any right to any such deduction from the gross income for the years in question as is claimed by it, that right must be found in the acts of 1916 and 1918, under which the income and profit taxes for the plaintiff must be computed.
Section 12 of the Revenue Act of 1916 (Comp. St. § 6336l) in part provides as follows:
"(a) In the case of a corporation, joint-stock company or association, or insurance company, organized in the United States, such net income shall be ascertained by deducting from the gross amount of its income received within the year from all sources. * * *
"Second. All losses actually sustained and charged off within the year and not compenstated by insurance or otherwise, including a reasonable allowance for the exhaustion, wear and tear of property arising out of its use or employment in the business or trade."
Section 234 of the Revenue Act of 1918 (Comp. St. Ann. Supp. 1919, § 6336 1/8pp) provides, in part, as follows:
"(a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: * * *
(7) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence."
(The italics in both quotations are ours.)
If the italicized words contained in the foregoing quotations from the two acts in question do not authorize the deductions claimed by plaintiff, then plaintiff is not entitled to same.
The Revenue Act of 1916 determined the deductions to which plaintiff was entitled for the year 1917, and, after a careful consideration of subdivision 2, paragraph (a), of section 12 of that act, quoted above, the court is forced to the conclusion that no authority can be found in the act for allowing the deduction claimed by the plaintiff for that year. It will be observed that this act authorized a reasonable allowance for exhaustion, wear and tear of the property, arising out of its use or employment in the business or trade. As the court views it, this language can have but one meaning, and that is that if the exhaustion or the wear or the tear of the property was caused *729 by its use in the business and in the accumulation of the income sought to be taxed, then the deduction should be allowed; otherwise, it should not be. How can it be said that the diminished value of the contract on the last day of 1917, as compared to the first day of 1917, was caused by the use of this contract in the business? This loss of value in the contract would have been sustained, even if the plaintiff had conducted no business in 1917 and had not received a single dollar of income. The shrinkage in value of the contract arose solely out of the fact that on the last day of 1917 that contract had one year less to run than it did at the beginning of 1917.
The contract was undoubtedly "property" used in the business of the plaintiff, but the court cannot accede to the contention that the exhaustion of this property, by virtue of its constantly diminishing life, was exhaustion "arising out of its use or employment in the business or trade" of the plaintiff, as provided by the act of 1916. Nor is this conclusion at variance with the decision of the Supreme Court in the recent case of Lynch v. Alworth-Stephens Co., 45 S. Ct. 274, 69 L. Ed. ___, decided on March 2, 1925. In that case the Supreme Court held that the word "exhaustion," as used in the act of 1916, had a very different meaning from the word "depreciation," used in the Corporation Excise Tax Law of 1909 (chapter 6, 36 Stat. 112), which had been construed by the Supreme Court in the cases of Von Baumbach v. Sargent Land Co., 242 U. S. 509, 37 S. Ct. 201, 61 L. Ed. 460, and United States v. Biwabik Mining Co., 247 U. S. 116, 38 S. Ct. 462, 62 L. Ed. 1017, not to authorize a deduction on account of exhaustion of ore in mines, resulting from mining operations. The court pointed out that a mining lease is property, and, conferring as it does upon the lessee "the exclusive possession of the deposits and the valuable right of removing and reducing the ore to owner ship, created a very real and substantial interest" in the ore itself. The court further pointed out that as the ore was mined out, it exhausted this property interest of the lessee, and that there was a corresponding exhaustion of the property interest of the land owner in the same ore. The court nowhere intimates that the depreciation in the value of a lease, occasioned solely because of the shortening of its life as fixed by its terms, would be exhaustion within the meaning of the act of 1916. The exhaustion of the property in the Lynch v. Alworth-Stephens Co. Case, supra, was exhaustion arising out of the use of the property interest involved in the business, and not merely exhaustion arising from the running of time. In this, it would seem, lies the real distinction between that case and the case at bar.
For the reasons indicated, the court holds that the plaintiff is entitled to no deduction from its gross income for the year 1917, on account of the diminished value of the contract at the end of that year.
The income and profit taxes of the plaintiff for the years 1918 and 1919 were imposed under the provisions of the act of 1918, and an examination of the language of subdivision 7, paragraph (a), of section 234 of that act, discloses a very substantial difference between it and the corresponding section of the act of 1916, already referred to. It will be noted that the 1918 act authorizes to be deducted "a reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence." It is significant that this later act of Congress, passed after Congress had had an opportunity to observe the workings of the previous income and profit tax laws and the administration of these laws by the Treasury Department, and probably its construction by some of the District Courts omitted the words, "arising out of its use or employment in the business or trade," found in the corresponding section of the act of 1916. It is a matter of common knowledge that the decision of the Supreme Court in the cases of Von Baumbach v. Sargent Land Co., 242 U. S. 503, 37 S. Ct. 201, 61 L. Ed. 460, and United States v. Biwabik Mining Co., 247 U. S. 116, 38 S. Ct. 462, 62 L. Ed. 1017, construing the word "depreciation," as used in the Corporation Excise Tax Law of 1909, and the rulings of the Treasury Department, in construing the rights of taxpayers to deductions under the Revenue Acts of Oct. 3, 1913, c. 16 (38 Stat. 114), and 1916, impressed many thoughtful people with the necessity of a more liberal attitude toward the taxpayer in future legislation, and it is fair to assume that when Congress passed the act of 1918, it held the same viewpoint and purposely omitted from the act of 1918 the words, "arising out of its use or employment in the business or trade," found in the act of 1916. Congress certainly knew that there are many species of property, such as the contract in this case, copyrights, and patents, which are used in connection with the business which produces the income taxed, and which depreciate in value as the end of their life approaches, and yet which *730 lose none of their value as the result of their use or employment in the business. It is a fair deduction to conclude that the difference in the corresponding sections of the acts of 1916 and 1918, heretofore referred to, arose out of the desire of Congress to put such contracts and property rights upon the same footing as is given by the act of 1916 to property which is exhausted by reason of its use in the business. Whatever may have been the purpose of Congress, however, it remains that there is a very substantial difference between the corresponding provisions of the two acts, and the court is convinced that the act of 1918 authorizes a reasonable deduction from gross income to cover exhaustion of property used in the business, whether that exhaustion is caused by the use itself or from other causes, and that, so construed, the plaintiff in this case was entitled to have deducted, from the gross income for each of the years 1918 and 1919, 12/76 of the March 1, 1913, value of the contract in question. Having reached this conclusion, there yet remains the question of fact as to what was the value of that contract on March 1, 1913.
The contract was undoubtedly of great value on March 1, 1913. The proof is not very satisfactory, as to what its exact value was, but it is so evident that it did have a large value as of that date that the plaintiff should not be deprived of its right to deduct the proper proportion of that value from its gross income for the years 1918 and 1919 because of its inability to establish to a mathematical certainty that value. The plaintiff has attempted to establish its value by two methods: One, by using the profits of the previous 6-year period as a basis for fixing its value for the remaining 6 1/3 years it had to run; the other, by proving the difference between the contract price and the fair market value as of March 1, 1913, of the stems covered by said contract, and multiplying this result by the number of tons of stems it was reasonably apparent would be received under the contract during the remainder of its life. Due to the fact that the profits of the company did not come entirely from the handling of the stems covered by the contract, and to the further fact that the proof does not show just what was the profit realized on the stems covered by the contract, the first method must be rejected. Nor is the second method entirely satisfactory, but is one which the court under all the circumstances feels justified in adopting. The proof shows that about March 1, 1913, the plaintiff was offered as high as $35 per ton for a limited quantity of the stems it was receiving under the contract, but this price cannot be accepted as the market value of the entire volume of Burley stems covered by the contract. The fair inference, from the testimony of the witnesses Clinton W. Toms, Charles F. Neiley, and Thomas J. Malone, who had exceptional opportunities to know the value of Burley stems on March 1, 1913, is that a fair value for the stems covered by the contract over the period running from March 1, 1913, to the date of its expiration, would have been $26 per ton. However, in view of the fact that the proof shows that about 1913, and prior thereto, the prevailing price of the 15 per cent. of available Burley stems not covered by the contract was about $8.50 per ton, the court thinks that an average of these two prices, figuring 85 per cent. at $26 per ton and 15 per cent. at $8.50 per ton, would represent a fair price for the stems to be delivered under the contract from March 1, 1913, to the date of its expiration. On this basis the average would be $23.38 per ton. At this figure, the net profit on the stems would be $14.87 per ton. The proof shows that on March 1, 1913, it was reasonably certain that during the remaining 6 1/3 years the contract had to run, there would be furnished under it 70,000 tons of stems, which at a profit of $14.87 per ton would have yielded during that period a total profit of $1,040,900. The present value of this sum on March 1, 1913, on a 5 per cent. interest basis, compounded monthly, which the court deems fair, would have been $890,620.58, and this sum is fixed by the court as the value of the contract on March 1, 1913.
It follows, therefore, that in determining the taxable net income of the plaintiff for each of the years 1918 and 1919, in addition to the other deductions made from the gross income for each of said years, there should have been deducted 12/76 of the March 1, 1913, value as herein fixed, amounting to the sum of $140,624.31 for each of said years.
Counsel will prepare a judgment with a separate finding of facts and conclusions of law, as herein indicated, and submit same for entry. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8304427/ | MR. Justice Dyer
delivered the opinion of the Court.
Dr. Douglas H. Sprunt appeals from the action of the chancellor in dismissing his original bill upon demurrer. The chancellor granted a discretionary appeal.
In 1944 the University of Tennessee employed Dr. Sprunt as Professor in and Chairman of the Department of Pathology, being one of the departments of the University’s medical units located in Memphis, Tennessee. Dr. Sprunt remained continuously in this position until he retired on August 31,1968, and from the record before us it is apparent his administration of this department has been very successful.
On August 3, 1968, Dr. Sprunt reached his 68th birthday. Prior to February 2, 1968, Dr. Sprunt’s superiors at the Medical Unit recommended to the Board of Trustees of the University that Dr. Sprunt be retired as an employee effective August 31,1968. Dr. Sprunt was given notice of this action. The Trustees met on February 2, 1968, with the matter of Dr. Sprunt’s retirement on the agenda. Dr. Sprunt with counsel appeared before the Board at this meeting and by oral and written statements supported his plea that he be allowed to continue in his present position until he reached age seventy. Upon consideration of the matter the Board of Trustees voted to retire Dr. Sprunt effective August 31, 1968.
*212On June 13, 1968, Dr. Sprunt filed his original bill, later amended, which inter alia, prayed for a writ of certiorari under authority of T.C.A. 27-901, to review the action of the Board of Trustees. The chancellor granted the writ and the Minutes of the Board of Trustees were filed. In response to the bill the Board of Trustees filed a motion to dismiss which was treated by the chancellor as a demurrer. The chancellor sustained the demurrer on the ground Dr. Sprunt had no right of tenure by any statute or regulation of the University beyond age 65, and further that the Board of Trustees in retiring Dr. Sprunt simply exercised an administrative function. The chancellor also found that since the Board of Trustees did not retire Dr. Sprunt on the ground of any charges against him, the hearing before the Board was a mere courtesy, and under these circumstances there would be no right of review under T.C.A. 27-901.
In 1941 the Board of Trustees, pursuant to statutory authority (Chapter 42, Public Acts of 1941), instituted a retirement system for all employees of the University and promulgated regulations governing same. Under these regulations an employee at his option could retire upon reaching age 65. The Board of Trustees had an option of retiring any employee between the ages of 65 and 70. Upon reaching the age of 70 the employee was automatically retired unless by proper action his tenure was extended on a year-to-year basis. In 1958 the Board of Trustees amended the regulations in regard to retirement of employees. After this amendment the automatic age of retirement was set at 65 with the right of the Board of Trustees to extend employment on a year-to-year basis until age 70.
The minutes of the Board of Trustees for February 2, 1968, reflect without doubt the Board either under retire*213ment regulations of 1941, or as amended in 1958, acted within its authority in the retirement of Dr. Sprunt, since at that time he had reached an age beyond 65.
Dr. Sprunt insists his retirement was due to cause, which we construe to claim, in effect, there were charges against him. This claim is based primarily upon a memorandum dated September 14, 1967, from Dr. Rowland H. Alden, Dean of the School of Basic Scientists, of which the Pathology Department is a part, to Dr. Homer F. Marsh, Chancellor of the Medical Units, with a copy to Dr. Sprunt. This memorandum recommending the retirement of Dr. Sprunt does reflect- a serious difference between Dr. Alden and Dr. Sprunt in the employment of personnel and the operation of the Pathology Department. As we understand the argument these differences of opinion caused Dr. Alden and Dr. Marsh to recommend to the Board of Trustees the retirement of Dr. Sprunt, which is the same as recommending his retirement for cause and presents a matter upon which Dr. Sprunt should be heard. This argument really goes to the motives of Dr. Alden and Dr. Marsh in recommending Dr. Sprunt’s retirement. Presuming Dr. Sprunt is correct in his difference of opinion with Dr. Alden, this does not alter the fact the Board of Trustees has a lawful right to retire any employee of the University of Tennessee upon the employee reaching the age of 65, whatever the motives of the Trustees in so doing. As to whether this situation should exist does not address itself to the judiciary.
We affirm the chancellor in dismissing the original bill insofar as it sought a review of the action of the Board of Trustees in retiring Dr. Sprunt, but this opinion is not to be construed as holding the action of the Board *214of Trustees under any circumstances cannot be reviewed under T.C.A. 27-901.
The original bill as amended also alleges a breach of contract on allegations that when Dr. Sprunt was employed in 1944, it was agreed by the then representatives of the University that unless terminated for cause or by mutual consent, Dr. Sprunt could remain with the University until he reached the age of 70. The chancellor upon demurrer dismissed the original bill as amended insofar as it sought specific performance of this alleged contract. The action of the chancellor is correct. This is an alleged contract for personal services and such is not a proper case for specific performance. See 81 C.J.S. Specific Performance sec. 82, pp. 591-592.
The chancellor reserved judgment on the right of Dr. Sprunt to amend his pleadings to sue for damages for breach of contract. The judgment of the chancellor is affirmed and the cause remanded for any further proceedings consistent with this opinion.
Burnett, Chief Justice, and Chatttn, CREson and Humpheeys, Justices, concur. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/1550627/ | 114 F.2d 248 (1940)
COMMERCIAL MOLASSES CORPORATION
v.
NEW YORK TANK BARGE CORPORATION.
No. 331.
Circuit Court of Appeals, Second Circuit.
July 30, 1940.
Writ of Certiorari Granted December 16, 1940.
*249 Bingham, Englar, Jones & Houston, of New York City (Leonard J. Matteson and Charles A. Van Hagen, Jr., both of New York City, of counsel), for claimant-appellant.
Kirlin, Campbell, Hickox, Keating & McGrann, of New York City (Robert S. Erskine, of New York City, of counsel), for petitioner-appellee.
Before L. HAND, AUGUSTUS N. HAND, and CLARK, Circuit Judges.
Writ of Certiorari Granted December 16, 1940. See 61 S.Ct. 394, 85 L.Ed. ___.
L. HAND, Circuit Judge.
This appeal is from a decree in the admiralty disposing of a petition for limitation of liability, filed by the New York Tank Barge Corporation, as owner of the barge, "T. N. No. 73". This company filed the customary petition and stipulation and the cause was referred to a commissioner to receive proofs of claim; only one claim was filed that of the Commercial Molasses Corporation, the owner of the cargo at the time the barge sank. The facts as developed upon the trial were in substance as follows: On October 11, 1928, the petitioner, the Barge Corporation, and the claimant's predecessor, the Dunbar Molasses Corporation, entered into a contract for five years from February 1, 1929, to January 31, 1934, by which the Barge Corporation agreed to carry, and the Molasses Corporation agreed to ship, all molasses of the Molasses Corporation, or its subsidiaries, in New York Harbor from steamers or tide water terminals or refineries, to the Molasses Corporation's customers in the Harbor. The contract fixed the price for various points of destination, and contained the following two clauses on which the controversy turned in the district court: "The barge owners undertake and agree that barges owned and/or chartered are tight, staunch, strong and in every way fitted for the carriage of molasses within the limits above mentioned and will maintain the barges in such condition during the life of this contract." Several paragraphs further on in the contract occurred the other clause: "The Dunbar Molasses Corporation shall insure the cargoes carried by the New York Tank Barge Co. Inc., in its own, or chartered or operated barges, for the account of New York Tank Barge Co. Inc. and/or the owners of such barges; and * * * neither the New York Tank Barge Co. Inc., nor such barges shall be liable for any loss in respect of which insurance has been or could have been effected." This contract was extended to cover the year 1937, and was in force when the loss happened. On October 23rd of that year, the Barge Company delivered alongside the SS. "Athelsultan" in New York Harbor the barge, "T. N. No. 73" to be filled with molasses. She lay along the port side of the ship, made fast by four lines; and the molasses was pumped into her through a hose from the tanks of the "Athelsultan". The barge had a rake at either end, beginning 23 inches below the deck, and making forward and aft peak tanks, but the main cargo holds were four tanks, made by two bulkheads, one running fore and aft, and the other, thwartships. Between 8:30 and 9:00 on the evening of the 23rd, the "Athelsultan" began to fill the two forward tanks; this continued until some time between 11:00 and 11:30, when the valves to the forward tanks were closed and those to the after tanks were opened, and the molasses began to flow into these. The ship continued to pump into the after tanks until about five minutes after one in the morning of the 24th, when, for some unexplained reason, the barge unexpectedly lurched and shortly afterwards sank. The valve leading to the after tanks had never been shut off after the ship began to fill them.
The customary method of stowing the barge was as follows: molasses was pumped into the forward tanks until the barge had a fixed freeboard forward; then into the stern tanks until the stern had another *250 fixed freeboard; then back once more into the forward tanks until she was trimmed fore and aft. Shortly before one in the morning, the stern had about the proper freeboard, and the mate went forward to tell the men on the ship to open the forward valve to trim the barge. He engaged in some talk on the way which delayed him, and the Barge Company attributed the sinking to his negligence in waiting too long. Both parties put in a great deal of evidence; both by experts, as to the theoretical capacity of the barge at various freeboards, and by lay witnesses as to the facts. The judge examined all the evidence with great care and thoroughness of his own motion requiring the case to be reopened for further light but in the end concluded "that the cause of the accident has been left in doubt". From this he held the Barge Company liable because of the "presumption" of unseaworthiness, arising from the barge's sinking without adequate explanation. However, as he concluded that the second clause of the contract quoted above, relieved the Barge Company of the covenant of seaworthiness contained in the first (the Molasses Company having failed to take out any insurance for the Barge Company) he dismissed the claim (1939) A.M.C. 673. The Molasses Company appealed.
The finding that the "cause of the accident has been left in doubt" means, we take it, that the evidence as to whether or not the barge sank because of unseaworthiness, was so evenly matched that the judge could come to no conclusion upon the issue. Though negative in form, it was as much a "finding" as an affirmative finding, and we are to respect it as such. Nashville Interurban Ry. v. Barnum, 2 Cir., 212 F. 634. Although Admiralty Rule 46 ½, 28 U.S.C.A. following section 723, does not lay down the measure of conclusiveness of findings in the admiralty, it prescribes nothing different from Rule 52 (a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c. The Niel Maersk, 2 Cir., 91 F.2d 932; Barlow v. Pan Atlantic SS. Co., 2 Cir., 101 F.2d 697. Therefore, since we cannot say that the finding was "clearly erroneous" in holding that no conclusion was possible upon the issue; we are to dispose of the case with that as datum.
It is well settled that the owner of a vessel always impliedly covenants that she is seaworthy unless he expressly stipulates the contrary (Cullen Fuel Co. v. Hedger Co., 290 U.S. 82, 54 S.Ct. 10, 78 L.Ed. 189) and unless there is somthing exceptional in the situation at bar of which more hereafter the promisee has the burden of proving the breach, by which we mean that, if the judge is unable to make up his mind upon the issue, the promisee fails. It must, however, be owned that the matter has become somewhat embroiled by the loose use of the phrase, "burden of proof", and the word, "presumption" the particular offender being the second. It has for long been the custom of judges to say, when a ship founders, or developes some defect, shortly after her voyage begins, that there is a "presumption" that she was unseaworthy when she broke ground. The question here is whether this "presumption" has any effect upon the "burden of proof".
In England at any rate the law is plain, though at the start there was confusion. Watson v. Clark, 1 Dow. 336, arose on a maritime insurance policy; the insured ship had turned back, clearly unseaworthy, within a fortnight after leaving Belize, Honduras, and the underwriter alleged that she had been unseaworthy at the outset of the voyage. Both Lord Eldon and Lord Redesdale said that when a ship becomes unable to go on with her venture "a short time" after leaving port, there is a "presumption" that she was unseaworthy when she started, and that "the onus probandi" is thereafter upon the assured to prove the contrary. This may have only meant that the owner must put in some explanatory evidence on penalty of having the issue taken against him; but it must be confessed that the phrase, "onus probandi", in all probability meant more than that. The point was cleared up in Pickup v. Thames & Mersey Marine Insurance Co., 1878, L.R. 3 Q.B. 594. In that case the judge at nisi prius had answered a question of the jury in the language of Lord Eldon, and both appellate courts held that this was wrong; they declared that while the development of unexplained defects shortly after the ship breaks ground, will justify relating them back to that time, yet the assurer must satisfy the jury that she was unseaworthy, and that it was an error to tell the jury anything else. The Privy Council made the same ruling in Ajum Goolam Hossen & Co. v. Union Marine Insurance Co., 1901, App.Cas. 362, 366; and the last word is *251 Lindsay v. Klein, 1911, App.Cas. 194, 203-205. In that case also the ship broke down soon after the beginning of the voyage and had to put back; and the owners sought to charge the cargo with a contribution in general average which the shippers resisted on the ground that the ship was unseaworthy. So the House of Lords held on the evidence; and while it is true that the speech of Lord Shaw of Dumfermline was dictum, nevertheless at some length he discussed the question and overruled Watson v. Clark, supra (1 Dow. 336), so far as the House of Lords can ever be said to overrule its own decisions. There can be no doubt that by the law of England (and of Scotland as well) although the development of a defect early in the voyage is proper evidence on which to base a claim of unseaworthiness, it is nothing more, and the promisee loses, if the evidence as a whole is too evenly balanced to admit an affirmative conclusion.
The law is not so clear in this country. Before 1813 (when Watson v. Clark, supra (1 Dow. 336), was decided) several courts had indeed held that if a vessel became unfit shortly after she broke ground and no explanation was offered, she would be "presumed" to have been unseaworthy when she started out. Barnewall v. Church, 1803, 1 Caines 217, 234, 235; Talcot v. Commercial Insurance Co., 1807, 2 Johns. 124; Cort v. Delaware Insurance Co., 1809, 2 Wash. C.C. 375 (semble). And since 1813 the same ruling has been made again and again. Paddock v. Franklin Insurance Co., 1831, 11 Pick. Mass., 227, 237; Walsh v. Washington Marine Ins. Co., 1865, 32 N.Y. 427, 436, 437; Work v. Leathers, 1878, 97 U.S. 379, 24 L.Ed. 1012; The Arctic Bird, D.C., 1901, 109 F. 167; Forbes v. Merchants' E. & T. Co., D.C., 1901, 111 F. 796, 800, affirmed 2 Cir., 120 F. 1019; Oregon Round Lumber Co. v. Portland & Asiatic SS. Co., D.C. 1908, 162 F. 912, 920, 921; Sanbern v. Wright & Cobb Lighterage Co., D.C. 1909, 171 F. 449, affirmed 2 Cir., 179 F. 1021; The Kathryn B. Guinan, 2 Cir., 1910, 176 F. 301; The Loyal, 2 Cir., 1913, 204 F. 930; United States Metals Refining Co. v. Jacobus, 2 Cir., 205 F. 896; The Jungshoved, 2 Cir., 1923, 290 F. 733; S. C. Loveland Co. v. Bethlehem Steel Co., 3 Cir., 33 F.2d 655; The Harper No. 145, 2 Cir., 42 F.2d 161. (Dupont v. Vance, 19 How. 162, 15 L.Ed. 584, has been several times erroneously cited as in accord with this. The mistake apparently arose because the quotation marks in The Arctic Bird, supra, which correctly indicate the end of the quotation from Dupont v. Vance, supra, were misplaced in Oregon Round Lumber Co. v. Portland & A. S. S. Co., supra.) We have not tried to collect all the cases; but there can be no question that they amply establish the "presumption"; and a number of them say that it shifts the "onus probandi" or "burden of proof" to the other side. We need not, however, take these statements as necessarily intended to mean that it is the owner which must persuade the court of the ship's seaworthiness; in none of the cases was exactness of expression as crucial as it is here, and was in Pickup v. Thames & Mersey M. I. Co., supra (L. R. 3 Q. B. 594). And indeed it is notorious that judges often speak of the "shifting" of the "burden of proof" when they mean no more than that, if the trial had ended with the evidence that is said to "shift" the "burden", that party would lose to whose shoulders it had been shifted. Even in cases like The Harper No. 145, supra, 2 Cir., 42 F.2d 161, where we did indeed use the phrase in a way that seemed to mean that the shipowner must satisfy the court that the barge was seaworthy, it is impossible to be sure that we meant more than this. At any rate, if we did, it would certainly be wrong to apply it here.
In the case at bar the Barge Company was acting as a private carrier and was therefore only a bailee; it is well settled that the burden rests upon the bailor to prove some breach of duty by the bailee other than his mere failure to return. Kohlsaat v. Parkersburg & M. Sand Co., 4 Cir., 266 F. 283; Alpine Forwarding Co. v. Pennsylvania R. R., 2 Cir., 60 F.2d 734; Gerhard & Hey Inc. v. Cattaraugus T. Co., 241 N. Y. 413, 150 N. E. 500. The Molasses Company acknowledged this by alleging in its claim as a fault that the barge was unseaworthy; it was obliged to do so; and, having done so, it had to persuade the judge or fail. It is true that the facts necessary to create any legal liability are what the law chooses to make them, and what we call a "defence" may theoretically quite as well be treated as part of the constituent facts of the liability; it is mere convention whether the plaintiff must show that it does not exist, or the defendant that it does; or vice versa. This is well illustrated by the controversy of contributory negligence. *252 But once the law has established which party shall prove a fact, that party must do so, and the duty of doing so does not shift, save possibly in extraordinary circumstances of which we cannot at the moment recall an instance. In all cases, therefore, where the shipper must show the ship unseaworthy, that duty remains upon him throughout. It is enough on his case in chief if he shows that she developed an unaccounted for defect early in the voyage, because it is reasonable to infer from that that the defect must have existed before, but he must lay any doubts which remain when the whole evidence is in. Del Vecchio v. Bowers, 296 U.S. 280, 286, 56 S.Ct. 190, 80 L.Ed. 229; New York Life Ins. Co. v. Gamer, 303 U.S. 161, 170, 58 S.Ct. 500, 82 L.Ed. 726, 114 A.L.R. 1218. The question as to the burden of proof under § 3 of the Harter Act, 46 U.S.C.A. § 192, is not to be confused with this. That section gives the owner an excuse for a fault which by hypothesis the shipper has proved; and the owner must prove it, as anyone must prove an excuse. The Southwark, 191 U.S. 1, 12, 24 S.Ct. 1, 48 L.Ed. 65; The Wildcroft, 201 U.S. 378, 386, 26 S.Ct. 467, 50 L.Ed. 794; May v. Hamburg, 290 U.S. 333, 346, 54 S.Ct. 162, 78 L.Ed. 348. But the question here is whether the ship was at fault at all; and she was not unless she was unseaworthy.
We need not examine whether this was a "presumption of fact", or a "presumption of law". Strictly the first phrase is misleading, and has caused much confusion, though it accords with colloquial usage. Pariso v. Towse, 2 Cir., 45 F.2d 962, 964. What we are here dealing with is a rational inference, unlike a true "presumption" which presupposes that no inference can safely be drawn from the facts which make it up, and which merely relieves the party from proving the issue unless his antagonist moves. We do not understand that the judge in declaring that he could not decide whether the barge was seaworthy, did not consider her unexplained sinking as part of the evidence before him; but that, on the contrary, having weighed everything, including her sinking when she did, he was left in doubt. He then took recourse to the presumption which he supposed to persist as a determining legal factor. So far as we can see, that was the exact equivalent of putting the burden upon the Barge Company to prove that the barge was seaworthy.
The Molasses Company also argues that if the barge sank because her hatches were left open during the lading, she was not seaworthy for that reason. This wholly misapprehends our ruling in the Fred E. Hasler, D. C., 55 F.2d 919, which merely applied the well-settled doctrine that a ship is unseaworthy, if. when she breaks ground, some part of her gear is not in place which her officers suppose to be in place. We did not decide that negligence of the crew in failing to attend to the gear during lading makes the ship unseaworthy. Here the bargees deliberately kept the hatch covers unfastened, and if that was a fault, it was one of management.
Since therefore we think that the claimant did not prove its case, even if the clause in the charter regarding insurance did not cancel the warranty of seaworthiness, it is not necessary to pass upon that question.
Decree affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550305/ | 164 A.2d 152 (1960)
Richard PARKER, b.n.f. John Parker
v.
John G. GUNTHER and Walter King.
No. 1104.
Supreme Court of Vermont. Rutland.
September 6, 1960.
*153 Ryan, Smith & Carbine, George W. F. Cook, Rutland, for plaintiff.
Edwin W. Lawrence, Donald M. French, Rutland, for defendant.
Before HULBURD, C. J., and HOLDEN, SHANGRAW, BARNEY and SMITH, JJ.
SMITH, Justice.
This is an action of tort to recover damages on account of personal injuries sustained by the infant plaintiff, Richard Parker, as a result of his being involved in a motor vehicle accident with a tractor-trailer truck. The tractor-trailer truck was driven by the defendant Walter King while King was engaged in the duties of his employment for defendant, John Gunther. A jury trial of the case in the Rutland County Court resulted in a verdict and judgment for the plaintiff against both defendants. The case is brought here by notice of appeal duly filed by the defendants.
The defendants at the close of the evidence for the plaintiff, and again at the close of all the evidence in the case, moved the court to direct a verdict in their favor on two grounds. The first ground for the motion was that there was no evidence of failure on the part of the defendants to perform any legal duty, and that there was no evidence of negligence on the part of the defendants which acted as a proximate cause of the accident. The other ground advanced on the motion for a directed verdict in favor of the defendants was that there was evidence of negligence as a matter of law on the part of the plaintiff, and that such negligence served as a proximate cause of the accident.
In considering the denial by the lower court of defendant's motion we must take the evidence in the light most favorable to the plaintiff. Callahan v. Disorda, 111 Vt. 331, 337, 16 A.2d 179.
On Jan. 29, 1953, the defendant, Walter King, was driving the tractor-trailer truck of the defendant, John G. Gunther. He was on a return trip from Boston, Mass., and as he came into West Rutland, he stopped at Sevigny's Drug Store. The route which he was following was Route 4, which runs in an easterly-westerly direction through West Rutland. He had travelled this route through West Rutland hundreds of times before, and was familiar with the fact that a School Zone, so marked, existed a short distance ahead on his westerly journey from the drug store.
Leaving the store he resumed his journey westward, entering the school zone area at about ten minutes of nine in the morning. His tractor-trailer truck was travelling at a speed of 15 to 18 mph. in the school zone, and he proceeded straight ahead on the extreme right, or northerly side of Route 4. There was no other traffic on Route 4 in that vicinity at that time.
At about this same time on the morning of January 29, 1953, the plaintiff, then a child of between six and seven years of age was on his way to school in the company of an older brother and sister. The children were walking westward on the north side of Route 4 on the sidewalk on that side of the street. This sidewalk, upon which the children were walking, is only three feet from the paved edge of Route 4. There is no curbing between walk and highway in that vicinity, merely a three-foot strip of dirt or gravel between the walk and the highway.
The plaintiff was going on his way to school in a manner of progress peculiar to the very young. He was attempting to walk on the southerly edge of the sidewalk, which was the part of the walk nearest *154 the road, by placing one foot directly in front of the other, a mode of travel described by a youthful witness as "catwalking." Witnesses of more adult years described the plaintiff's progress as "cantering backways and sideways", "dogtrotting", "cavorting" and "dancing along the edge of the sidewalk".
The defendant King saw the plaintiff so playing when about two hundred feet ahead of him. He did not look that way again but kept his eyes only on the road ahead. The defendant continued on his same course at the edge of the road, at the same speed, and without a signal of any nature, until he was informed by a bystander that the boy had been hit by his truck at which time he stopped. It was only after the accident that he saw the plaintiff for a second time.
The accident actually happened when the plaintiff backed, fell or otherwise moved from his "catwalking" at the edge of the sidewalk, in such manner as to come into contact with the right rear wheel of the tractor-trailer, and was thrown to the ground between the edge of the sidewalk and the road.
It is the contention of the defendants that there was nothing that the driver, King, could have done to avoid the accident; that he was where he has a lawful right and duty to be on his own right hand side of the road, that his speed was lawful and reasonable under the circumstances, and that the accident was caused solely by the contributory negligence of the infant plaintiff.
In the Maryland case of Ottenheimer v. Molohan, 146 Md. 175, 126 A. 97, 100, the Court of Appeals of that State was confronted with a similar situation. The defendant in that case was travelling at a speed of 18 mph. on his own right hand side of the road. A boy of six and a half years of age was playing alongside the road some six or seven feet from the highway where he was observed by the defendant. The road was free from other traffic. As the defendant's automobile came opposite the boy the youth jumped in front of it and was injured. On the matter of the defendant being free from negligence as a matter of law the Maryland court stated:
"It cannot be said as a matter of law that defendant was free from negligence in passing on the very edge of the road at a rapid rate of speed, small children playing at the roadside, when there was nothing to prevent him from turning to the middle or farther side of the road. The well-known habit of children when playing to become oblivious to dangers of this character, should have been a warning to defendant to slow down and turn as far away as practicable under the circumstances."
The signs on every public road warning automobilists to "go slow" upon approaching school houses recognize this characteristic of children.
This Court, in the case of Callahan, b. n. f. v. Disorda, [16 A.2d 181] where the evidence disclosed that a three year old child was injured when the defendant backed her car into the child who suddenly dashed out behind her, said:
"Taking the evidence in the light most favorable for the plaintiff, as it must be taken, the jury would have been justified in finding that the defendant knew or ought to have known that the child was in the immediate neighborhood. She was charged with the common knowledge that very young children are erratic and likely to move quickly and without regard for their own safety."
In the case at hand the accident happened within a school zone, which was so marked, and with which the defendant was familiar, and at a time when children were on their way to school. A motorist driving his vehicle near a schoolhouse or through a school zone is under duty to exercise a high or greater degree of caution, particularly at the hour when children may be expected to be going to, or returning *155 from school, keeping his car under such control that it can be stopped on as short as possible notice. He must anticipate childish conduct and drive with the knowledge that children of tender years may be expected to act upon childish impulses. He should drive at a reduced rate of speed, maintaining a vigilant lookout, and being alert to sound warnings of his approach. 5A Am.Jur. Automobiles and Highway Traffic, p. 509.
In the circumstances of this case, taking into consideration that the accident happened within a school zone, the constant speed of the defendant's vehicle, the route of the vehicle at the edge of the road, the absence of traffic in the vicinity, the non-use of any warning device by the driver, coupled with the evidence that the defendant King saw the child playing within a few feet of the highway prior to the accident, but failed to observe him again until after the accident made the negligence of the defendants a question of fact for the jury. It was for the jury to say whether, under the circumstances then existing, the defendant King acted as a prudent man.
On the question of whether the lower court should have charged, as a matter of law, that the plaintiff was contributorily negligent in such manner as to form part of the proximate cause of this accident, both parties have cited the case of Johnson's Adm'r v. Rutland R. R. Co., 93 Vt. 132, 106 A. 682.
The Johnson case was brought as the result of the death of a child by a train at a railroad crossing. The age of the child was 6 years and 9 months, almost identical with the age of the infant plaintiff in the case now before us. This Court, after refusing to adopt the rule of some jurisdictions that all children under seven years of age are incapable of any care or discretion, in the quotation that follows set forth the doctrine of this State on the contributory negligence of children:
"A more satisfactory doctrine, and one in harmony with our former decisions, is that a child may be of such tender years that he should be conclusively presumed incapable of judgment and discretion. On the other hand he may be so mature in age and intelligence that the court should say as matter of law that he is capable of exercising some degree of care for his own safety under circumstances like those in question; in which case, under the rule that prevails with us, if there is no evidence that any care was exercised, the question of contributory negligence is one of law and not of fact. Lying between these limits, necessarily undefined as to age, are the cases where the question of capacity to encounter and avoid a given danger cannot be ruled as a matter of law, either that the child has or does not have any capacity for caution, or was capable or incapable of exercising care for his safety in the circumstances."
The Court then went on to say:
"The controlling question here is, then, whether it should be held on the evidence, as a matter of law, that the decedent had sufficient capacity to grasp understandingly the nature and extent of the danger which she encountered. We think it should not be so held, and that the case was for the jury on that question under proper instructions."
The evidence in the present case is that the plaintiff was a first grade student, described as "average" by his school supervisor in intelligence, and "like any other kid" by his father. No evidence appears in the case that he was aware of the approach of the defendant's tractor-trailer, nor is the evidence that he was trying to cross the road when he was struck.
The circumstances of danger which the plaintiff encountered in his play on the edge of the sidewalk was the very short width of the strip of land between the walk and the highway, and the approach of the defendant's vehicle, from his rear, in immediate *156 proximity to the edge of this strip of land. Having in mind the age of the boy, his average intelligence, and the unusual aspects of the danger that he encountered, we believe that, just as in the Johnson case, the question of his capacity to understand the nature and extent of the danger which he might encounter while he was thus playing was one of fact for the jury. No error is found in the denial of the motion for a directed verdict by the court below.
The defendants have briefed their exception to the lower court's refusal to charge in compliance with their request to charge, No. 6, which states: "The evidence discloses that the place where the plaintiff came out on the highway was not a place for pedestrians to cross. Whereas, at regular crossings where pedestrians usually cross, the driver of a motor vehicle is required to be more vigilant in keeping a lookout for foot travellers, at points between crossings, such as in this case, the vigilance of the driver may be more relaxed and the vigilance and watchfulness required of the foot travellers is correspondingly increased." The defendants cite Howley v. Kantor, 105 Vt. 128, 131, 163 A. 628, as authority for this request to charge.
The Howley v. Kantor case, supra, was an action brought by a pedestrian who was struck by a motor vehicle while crossing a street in the business section of the City of Rutland "between crossings." As we have before noted there is no evidence in the case before us now that this plaintiff was attempting to cross the street at the time he was injured. The citation from the Howley case in the defendants' request was made by this Court relative to the degree of vigilance that a pedestrian must use for his own safety in crossing a street between points which are duly set out for such crossing by foot travellers, rather than the setting forth of a rule for the conduct of motor vehicle operators between such regularly constituted cross-walks as the defendants would claim. The request was properly refused.
The final exception briefed by the defendants is to the admission of the testimony of Dr. Smolinski, a general practitioner of medicine in the Town of West Rutland, on brain damage suffered by the plaintiff as a result of the accident. The defendants' objection is that Dr. Smolinski, by reason of the fact that he is admittedly not a specialist in injuries or diseases of the brain, was not qualified to testify on that subject.
The defendants cite no law, nor do they refer us to any specific part of the record, in support of their contention. The question of the competency of the witness was a preliminary matter for the court to decide. We are concluded by the ruling of the trial judge on the point unless it is made to appear from the evidence that his decision was clearly wrong. The defendants do not refer us to any part of the record to indicate that the court's treatment of the matter was erroneous. Fournier v. Burby, 121 Vt. 88, 93, 148 A.2d 362. No error appears.
Judgment affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550313/ | 97 F.2d 749 (1938)
WARBENDE
v.
PRUDENTIAL INS. CO. OF AMERICA.
No. 6419.
Circuit Court of Appeals, Seventh Circuit.
May 27, 1938.
*750 Nathaniel Rubinkam and William S. Allen, both of Chicago, Ill., for appellant.
Philip Baim, of Chicago, Ill., for appellee.
Before SPARKS and TREANOR, Circuit Judges, and LINDLEY, District Judge.
TREANOR, Circuit Judge.
This is an appeal from a judgment of the District Court in favor of the plaintiff rendered in a suit on double indemnity riders attached to two policies in which the plaintiff was named as the beneficiary. Each policy provided for the payment of $2000 which was termed the "face amount of insurance"; and each policy also provided that in event of death by accidental means an additional $2000 should be paid to the beneficiary as "accidental death benefit." The instant suit involves only the sum payable in the event of death by accidental means. The only provision in the policies of insurance which is material to the determination of this appeal is as follows: "* * * (the Accidental Death Benefit) * * * shall be payable in addition to the Face Amount of Insurance immediately upon receipt of due proof that the death of the Insured occurred * * * as a result, directly and independently of all other causes, of bodily injuries, effected solely through external, violent and accidental means, of which, except in case of drowning or of internal injuries revealed by an autopsy, there is a visible contusion or wound on the exterior of the body * * * provided however, that no Accidental Death Benefit shall be payable if the death of the Insured resulted from suicide, while sane or insane; * * *"
The propositions relied upon by defendant, and to which are related all the alleged errors of the trial court, may be summed up as follows: (1) The plaintiff did not prove that death was not the result of suicide; (2) there was no visible contusion or wound on the exterior of the body; (3) there was no proof that death resulted from internal injuries which were revealed by an autopsy, and (4) the burden was on the plaintiff to prove that death was caused in the manner and by the means specified in the double indemnity riders.
We are of the opinion that the evidence bearing on the question of suicide or accidental death was sufficient to require the trial court to submit that question to the jury.
The insured's body was found on the floor of his garage at the rear of his automobile and about two feet from the exhaust pipe. The body was in a sitting posture supported by the rear wall of the garage and wire netting which divided *751 the garage into two parking spaces. In the words of one witness, "he was sitting flat on the floor with his head kind of slumped and his body all slumped down." The body was discovered in the forenoon of July 3. The insured had left his home on the morning of July 1 and had gone to his place of employment. He telephoned to his wife at noon, as was his custom, but did not return to the house that evening. The garage was a block away from deceased's house. About three o'clock in the afternoon of July 1st the insured asked permission of his employer to go downtown for the rest of the afternoon. His general appearance was as usual. A week or ten days prior to July 1st the insured had indicated to his employer that he would like to take his wife on an automobile trip. The employer noticed no change in insured's demeanor during the week prior to his death. There was no testimony on which the jury could have determined when the insured returned to the garage, but the physical condition of the body, when found, was such that it was apparent that death must have occurred not later than the evening or night of July 1st or early in the morning of July 2nd.
The automobile engine was not running when the body was discovered, but the key was in the ignition lock and the gas tank was half full. One witness testified that the ignition switch was on and another testified that it was turned off. The deceased's coat and hat were lying on the seat of the automobile. It may be that the insured sat down on the floor of the garage and inhaled the exhaust fumes for the purpose of causing his death. But the facts are not inconsistent with a reasonable hypothesis of accident; and we cannot say that the hypothesis suggested in plaintiff's brief is unreasonable.[1]
The conclusion is inevitable that the deceased's death was caused by carbon monoxide poisoning; and the only reasonable inference from the evidence is that the poisoning resulted from the inhaling of fumes which came from the exhaust pipe of the automobile. But the condition and position of the body and the physical facts and circumstances existing at the time of the discovery of the body do not compel the inference that the insured deliberately inhaled the exhaust fumes for the purpose of causing his death. And the activities and conduct of the insured immediately prior to his death tend to show an absence of any formed intention to take his own life and the absence of any reason or motive for such an act.
Whether death is accidental or suicidal is a question of fact to be determined by the jury or court from all the evidence; and there is no general presumption of law that death is accidental. The Supreme Court of Illinois has held that when the evidence shows that the condition of the deceased prior to his death is such as to show no reason or motive for self-destruction, there is a presumption that the deceased did not take his own life. In Wilkinson v. Aetna Life Insurance Company,[2] the opinion of the court sets out some of the evidence which related to the question of the manner of death of the deceased, and added the following statement (pages 211, 212, 88 N.E. page 552): "In addition to those facts the plaintiff, in support of the theory that Wilkinson's injuries were accidental and not self-inflicted, had the right to invoke the presumption that men in the condition in which the evidence showed Wilkinson to be just prior to his injury do not ordinarily take their own lives. In the Weise Case [Fidelity & Cas. Co. v. Weise] (182 Ill. 496) on page 498 *752 [55 N.E. 540] this court said: `The presumption of the law is that all men are sane and possessed of the love of life, are animated by the instincts of self-preservation and the natural desire to avoid personal injuries and death. This presumption, in the absence of countervailing proof, may be sufficient, within itself, to establish prima facie that death occurred otherwise than by self-destruction and to cast upon the defendant company the burden of producing evidence on the point.' While this presumption is a rebuttable presumption and may be overcome by proof, when not rebutted by proof or the circumstances in evidence surrounding the death, such presumption, when taken with the admission that the injuries which caused death were violent and external, is sufficient to require the court to submit to the jury the question whether the injuries which caused the death of Wilkinson were accidental or self-inflicted."
It is our opinion that there was sufficient evidence to create a question of fact for the jury on the issue of accidental death or suicide; and the jury having found in favor of the plaintiff on this issue, we cannot disturb that finding.
The evidence discloses that there were scarlet blotches on the skin of the face and on the trunk and extremities of the deceased, and that these scarlet blotches were characteristic of carbon monoxide poisoning.[3] The blotches constituted visible marks on the exterior of the body and were evidence that the bodily injuries, which resulted in death, were effected by carbon monoxide poisoning. But the defendant contends that the scarlet blotches were not contusions or wounds within the meaning of those words as used in the policy. In the case of Mutual Life Insurance Company v. Schenkat[4] this court had occasion to construe the words "contusion or wound" in an accidental death provision which required that there be "evidence by a visible contusion or wound on the exterior of the body." In that case death had been caused by sodium fluoride poison. The stipulation of facts recited: "* * * lips and tongue swollen; became pale; body discolored, * * *" This court concluded that the foregoing physical marks satisfied the requirement of "evidence by visible contusion or wound on the exterior of the body." In reaching such conclusion this court cited and quoted with approval from the case of Thompson v. Loyal Protective Association.[5] In the policy which was involved in the Thompson Case there was a provision that "* * * the injury includes only the result of external violent and accidental means leaving on the body marks of contusions or wounds visible to the naked eye." The trial court had instructed the jury that in legal medicine the word "wounds" meant "injuries of every description that affect either the hard or soft parts of the body," and that it comprehended "bruises, contusions, fractures, luxations, etc.," and that "in law the word means any lesion of the body." The Supreme Court of Michigan held that the trial court's instruction correctly stated the meaning of the word "wounds." And it appears from the facts of that case that the contusion or wound consisted of a "discoloration of the skin, swelling and redness over the right kidney and hip;" and there was no contention that the "contusion or wound" was caused by the impact of any solid body upon the body of the deceased.
It is true that "contusion," etymologically considered, suggests an injury which is the result of the impact of a blow upon the exterior of the body.[6] But for the purpose of our present inquiry the *753 meaning cannot be so restricted. It is obvious that the purpose of requiring that there be a "visible contusion or wound on the exterior of the body" is to have visible, physical evidence of the operation of the "external, violent and accidental means," which are alleged to have effected the bodily injuries. In our opinion "visible contusion," as used in the policy, includes any morbid change in, or injury to, either the subcutaneous tissue, or the skin, which produce markings or discolorations that are visible upon the exterior of the body. It is not material whether the "visible contusion" results directly from the operation of the "means" upon the exterior of the body, or indirectly from internal injuries which are effected by the action of the "means." "The accidental operation of external means may be wholly internal,"[7] and yet the internal injuries may extend to the subcutaneous tissue or into the layers of the skin. The visibility of the "contusion" may be due to the discoloration either of the injured tissue under the skin, or of the injured skin itself, or of both.
The scarlet blotches which were upon the exterior of the body of the insured were caused by the action of the carbon monoxide and were connected with the "internal injuries" which resulted in the death of the insured. When carbon monoxide is inhaled into the lungs it passes into the blood and combines with the hemoglobin contained in the red blood cells and cuts off the supply of oxygen to tissue cells. According to medical testimony the scarlet blotches were the result of death and decomposition of tissue cells, the death and decomposition of the cells resulting from the absence of oxygen in the red blood cells.
The Supreme Court of Illinois has had occasion to discuss and define the word "wounds."[8] It was stated in the opinion that "in law the word means lesion of the body, and the correct definition of a lesion is a hurt, loss or injury." The word "lesion" is defined in Webster's New International Dictionary as "Any morbid change in the structure of organs or parts; hence the diseased or injured region." The Illinois Supreme Court's definition of "wound" excludes the necessity of a breaking or cutting of the skin and is broad enough to include an injury to the subcutaneous tissue and to the skin, which has resulted from carbon monoxide poisoning and is revealed by scarlet blotches.
We are of the opinion that the scarlet blotches were visible contusions or wounds within the intent and meaning of the accidental death provisions in the policies.
Death from carbon monoxide poisoning which results from the inhalation of carbon monoxide is death "through external, violent and accidental means," within the intent and meaning of the policies under consideration. The Supreme Court of Illinois, in Healey v. Mutual Accident Association,[9] held that death by accidentally taking and drinking poison is a death produced by bodily injuries resulting from "external, violent, and accidental means." In reaching that conclusion the court relied upon, and approved, decisions which had held that death from drowning, or from inhaling gas, was the result of injury received by external and violent means.[10]*754 The decisions of this and other Federal Circuit Courts of Appeals are in accord.[11]
We conclude that the evidence was sufficient to support a finding that the plaintiff furnished "due proof that the death of the insured occurred * * * as a result directly and independently of all other causes, of bodily injuries, effected solely through external, violent and accidental means, * * *" And in view of our construction of the language, "visible contusion or wound on the exterior of the body," unquestioned evidence established that there were visible contusions and wounds upon the exterior of the body which were evidence of the "means" and were the result of the bodily injuries which were effected by the "means."
The provision in the policy, "of which, except in case of drowning or of internal injuries revealed by an autopsy there is a visible contusion or wound on the exterior of the body," evidently is intended to require that the fact of "external, violent and accidental means" be evidenced by "a visible contusion or wound on the exterior of the body," except in case of drowning or of internal injuries which are revealed by an autopsy. That is, if the internal injuries, which cause death, are revealed by an autopsy, it is immaterial whether there be a visible contusion or wound upon the exterior of the body. But if there is a visible contusion or wound on the exterior of the body which evidences "the means," it is immaterial whether "internal injuries" be revealed by an autopsy or by other satisfactory evidence. The provision "except in case of drowning or of internal injuries revealed by an autopsy" does not impose a burden upon the claimant, but when there are internal injuries revealed by an autopsy the provision relieves the claimant of any disadvantage in making proof of the claim in case the "means" have not caused a contusion or wound on the exterior of the body. Of course, in either case, the plaintiff must establish that the "bodily injuries," which cause death, are effected solely through external, violent and accidental means.
In view of the foregoing it is not material whether there was proof of an autopsy, and it is unnecessary to consider the alleged errors of the trial court in refusing to give certain proffered instructions on the subject of autopsy, and in excluding evidence which was offered for the purpose of defining an autopsy.
The judgment of the District Court is
Affirmed.
NOTES
[1] "The fact that the insured before going to the rear of the car took off his hat and coat and placed them neatly in the car, and having gone to the rear of the car, placed newspapers on the floor where he was going to sit, is certainly not indicative of the actions of a person about to commit suicide. It does not seem reasonable that a man about to commit suicide would be so meticulous about his clothing, and take such precautions to keep them from becoming soiled, especially if he did not intend to be alive to wear them again. The evidence disclosed that there was only about a foot and a half between the car and the wire mesh, and that the car was closer to the other end of the stall and the insured, it appeared, was a big man about 6 feet tall and weighing about 200 pounds. It does not seem reasonable that a large man would squeeze through a narrow aperture and burden himself with such inconvenience, and then put newspapers on the floor and sit on the hard concrete, if as appellant contends he were going to commit suicide, when he could have accomplished such an intention by sitting comfortably in his car." (Quoted from Appellee's brief.)
[2] 240 Ill. 205, 211, 88 N.E. 550, 25 L. R.A.,N.S., 1256, 130 Am.St.Rep. 269.
[3] "The causes of blotches of this kind is usually carbon monoxide. It is an odorless gas. It affects the body by combining with the hemoglobin that is contained in the red blood cells in the blood and produces carbon monoxide hemoglobin. It prevents the red blood cells from carrying oxygen, and without the oxygen the organism dies." (Testimony of Dr. Kiley, Coroner's physician of Cook County.)
"A person who had died from carbon monoxide poisoning we observe a very peculiar characteristic, scarlet color of the skin and mucous membrane, which is due to the fact that the blood has become a carbon monoxide mixture in the hemoglobin with which it is united. It appears more or less evenly throughout the entire surface of the body." (Testimony of Dr. A. C. Tenney.)
[4] 7 Cir., 62 F.2d 236.
[5] 167 Mich. 31, 132 N.W. 554, 557.
[6] In Webster's New International Dictionary the word "contusion" is defined as follows: "A bruise; an injury attended with more or less disorganization of the subcutaneous tissue and effusion of blood beneath the skin, but without breaking of the skin."
[7] Miller v. Fidelity & Casualty Co., C. C., 97 F. 836, 837. "The taking of poison; * * * the inhaling of gas; * * * under ordinary circumstances are all accidental means by which bodily injuries are produced through which death sometimes results." Christ v. Pacific Mutual Life Ins. Co., 312 Ill. 525, 531, 144 N.E. 161, 163, 35 A.L.R. 730.
[8] People v. Durand, 307 Ill. 611, 624, 139 N.E. 78, 83. "In medicine the word wounds means injuries of every description that affect either the hard or soft parts of the body, and it comprehends bruises, contusions, fractures, luxations, etc. In law the word means any lesion of the body, and the correct definition of a lesion is a hurt, loss or injury. 2 Pope's Legal Definitions, 1684; Thompson v. Loyal Protective Ass'n, 167 Mich. 31, 132 N.W. 554. Under the statute of 9 Geo. IV, (chapter 21, § 12,) it has been held in England that in criminal cases to make a wound there must be an injury to the person by which the skin is broken through. 2 Bouvier's Law Dict. p. 851. The decisions under this statute have no binding force in this state, as the statute in question was never the law in this state."
[9] 133 Ill. 556, 25 N.E. 52, 9 L.R.A. 371, 23 Am.St.Rep. 637.
[10] "It is firmly established that an injury or death caused by the unconscious or involuntary inhalation of poisonous gases, is an injury or death caused by accidental means. * * *" Cantrall v. Great American Casualty Co., 256 Ill. App. 47, 50. See, also, Mutual Accident Association of the Northwest v. Tuggle, 39 Ill.App. 509; Pixley v. Illinois Commercial Men's Association, 195 Ill.App. 135: Sturm v. Employers' Liability Assurance Corporation, Ltd., 212 Ill.App. 354.
[11] Mutual Life Insurance Co. of New York v. Schenkat, 7 Cir., 62 F.2d 236; Metropolitan Life Ins. Co. v. Broyer, 9 Cir., 20 F.2d 818; Standard Accident Ins. Co. v. Van Altena, 7 Cir., 67 F.2d 836; Wells Fargo Bank & Union Trust Co. v. Mutual Life Ins. Co. of New York, D.C., 8 F.Supp. 916; Fidelity Mutual Life Ins. Co. v. Powell, 4 Cir., 74 F.2d 525. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550337/ | 223 Md. 229 (1960)
164 A.2d 281
HARDY ET AL.
v.
DAVIS
[No. 3, September Term, 1960.]
Court of Appeals of Maryland.
Decided October 12, 1960.
The cause was argued before BRUNE, C.J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.
Russell Hardy, Jr., with whom was Russell Hardy, Sr., pro se, on the brief, for the appellants.
Frank P. Flury for the appellee.
HAMMOND, J., delivered the opinion of the Court.
In April 1955, appellants, the owners of a dwelling, employed the appellee, a real estate broker, to effect its sale. He sold it for $16,950, of which a deposit of $50.00 was paid when purchasers signed the contract; $450.00 was to be paid after the owners signed the contract; $11,000 was to be provided by a first trust lender, and the balance of $5,450 was to be in the form of two promissory notes of the buyers in the amount of $2,725 each, secured by a second deed of trust.
After the contract was signed by both owners and buyers, the broker lent the buyers $205 of the $450 payment, and thereafter lent them $432.25 to pay part of the settlement expenses. The owners were not told, and did not learn, of these loans until some time after the settlement. The purchasers did not meet the payments due under the first or second trusts (the broker says this was because the owners did not deliver a valid deed, and in writing ordered buyers to move from the property some three months after the settlement) and the property was sold under the first trust. The owners neither foreclosed the second trust nor bid up the property at the sale under the first trust in order to protect their interest.
*232 In March 1959, the owners sued the broker for breach of his alleged duty to disclose to them the making of the loans to the buyers, claiming damages for the difference between the sales price of the house and the amount of the sales price they had actually received. The broker filed a plea of limitations, general issue pleas, a plea of res judicata by reason of a prior suit by the owners against him for a claimed violation of his obligations as agent, in which the broker prevailed, and a plea on the equitable grounds that the owners were estopped because any losses suffered by them were "the direct and proximate result" of their failure to deliver the deed, and in ordering buyers to vacate prior to default.
The broker moved for summary judgment and filed a supporting affidavit. The owners filed contravening affidavits which, aside from statements designed to refute the defense of limitations, essentially were claims that had they known prior to "the transfer of title" that the broker had made the loans to the buyers they would "have realized" the buyers would default, and would have rescinded the contract of sale.
The trial court granted the broker's motion for summary judgment on the ground there was no breach of duty. We agree and therefore do not reach the questions of limitations, res judicata or the cause or mitigation of damages.
The owners concede the broker's assertion that he procured a report from a national credit reporting agency which showed that the buyer held a permanent job as designer with an engineering company, that he had a good record and was a good credit risk, as well as that the broker had no knowledge, or reason to know, the buyers would not make payments as agreed, and no reason to anticipate before the contract was signed that they would seek a loan from him or anyone else.
During the term of the agency, a real estate broker cannot act for both vendor and vendee in respect of the same transaction because of possible conflict between his interest and his duty in such case, and he must disclose to his principal all facts or information which may be relevant or material in influencing the judgment or action of the principal in the matter. Coppage v. Howard, 127 Md. 512, 523; Restatement (Second), Agency Sec. 381.
*233 It has been opined, and held, that the fact a broker lends money to the purchaser to help consummate the sale he has arranged, does not make him the purchaser's agent and does not constitute action adverse to his principal, the seller. "An agent can properly deal with the other party to a transaction if such dealing is not inconsistent with his duties to the principal. Thus, an agent employed to sell can properly lend money to the buyer to complete the purchase * * *." Restatement (Second), Agency Sec. 391, Comment b. To the same effect are Goodson v. Embleton (Kan. City Ct. of App.), 80 S.W. 22, 24; Hall v. Williams (Mo.), 50 S.W.2d 138. Compare Helwig v. Fogelsong (Iowa), 148 N.W. 990; Lawson v. Thompson (Utah), 37 P. 732.
The owners argue that even if it be conceded that a broker employed by the seller properly may lend money to the buyer to complete the contract, the fact that he does is material and must be disclosed to the seller. It may be assumed that this would be a sound proposition if the loan or the agreement to loan was made before the contract was signed but that is not the situation in this case. Here, it is conceded that not until after the signing of the contract did the broker have information as to the buyers' financial status not known equally well to the owners and, also, that he acted fairly and frankly up to the signing.
The rule is that after the agency has terminated, the obligations the agent bears during the agency, including the duty of disclosure, generally no longer exist.[1] The books spell out the accepted rule that an authority created to perform a specific act or accomplish a particular result is terminated when the purpose which called it into being is achieved. Mechem, Agency (2nd Ed.), Secs. 552b, 553. Thus, where an agent, employed to sell property, has procured a purchaser and the *234 sale has been made, absent particular agreement to the contrary or unusual circumstances, the agency is terminated and the agent is free to act for himself or the opposing party as long as he does not hinder, delay or interfere with the sale which has been entered into by the seller and the purchaser. An instruction to this effect, in a case where a broker originally employed by the seller represented the purchaser at the settlement, was approved in Mayne v. Eig, 215 Md. 270, 282, because the instruction "* * * relates only to actions subsequent to the signing of the contract." In Owners Realty Co. v. Cook, 123 Md. 1, 4, the broker was a lawyer and the buyer he produced was his father. After the contract was signed, the broker examined the title as lawyer for his father, the purchaser. He raised several questions which did not appear unreasonable or designed to avoid the sale. The general rule against dual representation during the agency was recognized but found inapplicable because when the contract was reduced to writing "The sale was then virtually accomplished and the agency of the appellee for that purpose was at an end. There was no subsisting or continuing duty with which his subsequent service to the purchaser was in conflict." The Court concluded: "The agencies he accepted for the parties to the sale were successive and not simultaneous."
Cases in other states that hold the agency terminates when the contract is signed and that the agent is thereafter free to act in ways that might otherwise be adverse to his principal, include Moore v. Stone, 40 Iowa 259; Short v. Millard, 68 Ill. 292; Cockrell v. Maxcey (Tex. Civ. App.), 202 S.W.2d 293; Jones v. Allen (Tex. Civ. App.), 294 S.W.2d 259.
We see nothing in the case to vary the usual rule that the agency terminated when the purpose for which it was created was accomplished when the sale was made and the contract evidencing it was signed. Thereafter, the broker no longer had any "subsisting and continuing duty" (to use the words of the Owners Realty Co. case, supra) to disclose the making of the loans to the buyers to enable them to complete the purchase, since the loans did not hinder, delay or interfere with, but rather facilitated, the consummation of the sale.
Judgment affirmed, with costs.
NOTES
[1] An agent may be under a duty to give information to his principal after the termination of his relationship, as where he does not account to the principal until such time. Restatement (Second), Agency Sec. 381, Comment f; Sec. 382d. The agent has a continuing duty not to take advantage of a still subsisting confidential relation created during the prior agency relation or acknowledged thereafter. Restatement (Second), Agency Sec. 396. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550430/ | 5 F.2d 492 (1925)
UNVERZAGT
v.
BENN, U. S. Marshal.
No. 4398.
Circuit Court of Appeals, Ninth Circuit.
May 5, 1925.
Marshall B. Woodworth, of San Francisco, Cal., and John T. Casey, John F. Dore, and F. C. Reagan, all of Seattle, Wash., for appellant.
Thos. P. Revelle, U. S. Atty., and John A. Frater, Asst. U. S. Atty., both of Seattle, Wash., for appellee.
Before GILBERT, ROSS, and RUDKIN, Circuit Judges.
RUDKIN, Circuit Judge.
This is an appeal from an order discharging a writ of habeas corpus. The petition for the writ averred that the petitioner was imprisoned and restrained of his liberty by color of authority of the United States; that the sole claim and authority for his detention was a commitment issued by a United States commissioner; that the commitment was so issued in a certain proceeding instituted on behalf of the United States District Court for the Western District of New York, for *493 the removal of the petitioner to that district for trial, for the crime of using the mails of the United States with intent to defraud; that the petitioner did not commit the crime attempted to be charged in the indictment; that on April 24, 1924, the petitioner was, by artifice and physical violence, abducted and kidnapped from the city of Vancouver in the Dominion of Canada by certain officials of the United States; that the attorney for the petitioner, in Vancouver, had communicated the facts surrounding the abduction to the Department of Foreign Affairs at Ottawa, Canada; that the petitioner was informed and believed that the Canadian government was preparing to make a protest to the United States against the unlawful acts and removal of the petitioner from that country; and that the district attorney of the United States for the Western district of Washington planned to return the petitioner to the Western district of New York, without giving him an opportunity to present his case to the court, and without giving the Canadian government time or opportunity to protest against the removal of the petitioner from the Dominion of Canada.
The prayer of the petition was that a writ of habeas corpus issue; that the court fix a time for hearing, at some date subsequent to May 15, 1924; that in the meantime the petitioner be permitted to remain in the county jail of Whatcom county, unless admitted to bail by the court; that all proceedings for the removal of the petitioner from the Western district of Washington be stayed until a hearing was had; and for such other relief as might be just and proper in the premises. The petition was dated May 1, 1924. A copy of the commitment under which the petitioner was held was attached to the petition. From this it appeared that on April 25, 1924, the petitioner was required to give bond in the sum of $25,000 for his appearance before the United States commissioner on May 1, 1924, at the hour of 10 o'clock a. m., and from time to time as thereafter required, pending examination, and was committed to the jail of Whatcom county for failure to give such bond. On May 6, 1924, a writ of habeas corpus issued as prayed, returnable on the following day. The marshal made return that on May 1, 1924, the United States commissioner determined that there was probable cause to believe that the petitioner committed the offense charged in the exemplified copy of the indictment upon which the original warrant of arrest was predicated, and held him to abide the order of the United States District Court for the Western District of Washington, committing him to the jail of Whatcom county in the meantime.
It will be seen from the foregoing that the petition raised no question as to the validity or sufficiency of the indictment, no question as to the identity of the accused or of probable cause, and no question as to the regularity of any hearing theretofore had, or as to the sufficiency of the testimony to support any order theretofore made. The writ of habeas corpus was sought for the sole purpose of preventing the removal of the appellant from the Western district of Washington to the Western district of New York without a hearing or an opportunity to be heard. Of course, there could be no removal without a hearing as a matter of law, and there was no attempt at removal without a hearing as a matter of fact. At the time the writ was applied for the petitioner was detained in the county jail in default of bail until a hearing could be had before the United States commissioner, and at the time of the hearing in the court below a hearing had already been had before the commissioner, and the appellant was detained to await a further hearing before the court below, pursuant to section 1014 of the Revised Statutes (Comp. St. § 1674).
For these reasons, if the petition stated any grounds for the issuance of the writ in the first instance, the writ had fully accomplished its purpose at the time of the hearing in the court below.
The judgment is therefore affirmed. Mandate forthwith.
ROSS, Circuit Judge (dissenting).
I am unable to agree to the affirmance of the judgment appealed from dismissing the writ of habeas corpus. I understand the law to be well settled that, when a person is restrained of his liberty in any state to answer an indictment found against him in another state for a crime alleged to have been committed therein, and is taken before a court commissioner for an order of removal to answer the charge, while the indictment constitutes prima facie evidence of probable cause of his guilt, it is not conclusive, but, on the contrary, that the accused person is legally entitled to rebut that presumption, and to show, if he can, that he was not in the state when and where the crime charged against him is alleged to have been committed, that he is not in fact the person so indicted, or any other fact that he is able to show tending to overcome the prima facie *494 case made by the indictment of his probable guilt. See Tinsley v. Treat, 205 U. S. 20, 27 S. Ct. 430, 51 L. Ed. 689; Beavers v. Henkel, 194 U. S. 73, 24 S. Ct. 605, 48 L. Ed. 882; Benson v. Henkel, 198 U. S. 1, 25 S. Ct. 569, 49 L. Ed. 919; Hyde v. Shine, 199 U. S. 62, 25 S. Ct. 760, 50 L. Ed. 90; Greene v. Henkel, 183 U. S. 249, 22 S. Ct. 218, 46 L. Ed. 177; In re Burkhardt (D. C.) 33 F. 25; Erwin v. U. S. (D. C.) 37 F. 470, 2 L. R. A. 229; U. S. v. Dana (D. C.) 68 F. 886; U. S. v. Karlin (D. C.) 85 F. 963; Price v. McCarty, 89 F. 84, 32 C. C. A. 162.
To make such showing against his removal the indicted party is obviously entitled to a hearing before the commissioner. I find in the record no evidence that the appellant in the present case had such hearing before the commissioner ordering his removal to the district of the state where the indictment against him is pending, although it is contended upon the part of his attorneys that he insisted both before the commissioner and before the court below upon such right. It is true that the record contains the return of the marshal to the writ of habeas corpus that was issued in the case, in which it is stated that the defendant to the indictment the present appellant "was taken before United States Commissioner F. W. Radley, at Bellingham, Wash., who on May 1, 1924, determined that there was probable cause to believe" that he committed the crime charged against him in the indictment that has been mentioned. For all that appears, such determination by the commissioner may have been made upon the prima facie evidence afforded by the indictment. It does not at all show, in my opinion, that the indicted party was given any hearing of any character against the application for his removal, which, as I understand the law, was essential and jurisdictional. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550353/ | 223 Md. 417 (1960)
164 A.2d 913
SATINE ET AL.
v.
KOIER ET AL.
[No. 52, September Term, 1960.]
Court of Appeals of Maryland.
Decided November 10, 1960.
The cause was argued before BRUNE, C.J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.
Leonard R. Snyder, with whom was Paul Ackerman on the brief, for appellants.
Alger Y. Barbee, with whom were Ginsberg & Ginsberg and Hyman Ginsberg on the brief, for appellees.
HENDERSON, J., delivered the opinion of the Court.
This appeal is from the decree of an equity court enjoining the appellants from foreclosing a deed of trust, ordering that certain trust notes be marked "paid" and the trust released, and awarding compensatory damages to the appellees.
In 1956 the R & L Development Corporation, of which Merton I. Berman was an officer, purchased 24 lots from Thomas D. Zibelli, giving back a first deed of trust for $48,000 and cash from the sale of two notes to appellants, secured by a second deed of trust. These notes were for $6,600 each, but were assigned to the appellants at a discount without recourse for $12,000. R & L Corporation began to develop the property but was unable to keep up the payments due under the first and second trusts, or taxes due on the property. Neither Zibelli nor the appellants attempted to foreclose. Instead, the R & L Corporation, with the knowledge and consent of the lienholders, listed the property for sale with the Conley Company, for whom Earl Watterson was a salesman. Eventually Watterson received a satisfactory offer from the appellees, who stipulated, however, that the property be reconveyed to Zibelli and conveyed to them by him. Two lots on which sample houses had been built were excluded from the proposal. *419 According to Watterson, he agreed to take less commission, Zibelli agreed to yield some interest in arrears, and Berman agreed to pay some interest and to try to persuade the appellants to accept a $7,700 second trust note in place of the $6,600 notes, in order that the deal might go through. A contract of sale was executed on February 18, 1958, by the appellees and Zibelli, calling for a first trust of $47,300 and a second trust of $7,700.
On February 19, 1958, the appellants signed a written agreement, referred to in the record as an "addendum", addressed to the Conley Company, attention Mr. Earl Watterson, reading as follows:
"We, John L. Lauritsen and Charles Satine, agree to accept from Koier & Collins, a partnership, it's [sic] note for $7,700.00 at 6% per annum, secured by a deed of trust on lots 9 thru 16 exclude lot 10 Block `q' and lots 1 thru 16 exclude lot 9 Block `T' Garrett Park Estates, to be subordinated to construction loans at the rate of $350.00 per lot, said subordination to be paid when house is sold or within 12 months from date of note whichever is sooner. Trustees agree there shall be no release fee."
The two lots excluded were subsequently conveyed to the appellants by R & L Development Corporation. The written agreement was produced at the settlement on May 28, 1958, where the appellees accepted a deed of conveyance from Zibelli. They immediately began development of the property and obtained a construction loan. But the appellants refused to release their second deed of trust for $13,200, or to accept a new deed of trust for $7,700. This caused the lending corporation to withhold funds, and the work was brought to a halt for some months until winter weather had set in. The appellants took the position that their purpose and intent in signing the agreement dated February 19, 1958, was simply to help the financing of a prospective sale by taking back in part payment of the $6,600 notes, a second trust note from the purchasers. They attempted to explain the conveyance of the two excluded lots to them, as in connection with a release *420 of other claims they had against those houses. The controversy in the instant case turns on the construction and effect of the so-called "addendum".
The appellants contend that the paper writing is so vague and indefinite as to be unenforceable and that in the absence of an express undertaking to release the old notes, the acceptance of a new one would not necessarily extinguish the old. It is true that the writing does not expressly call for a release, but in the light of all the surrounding circumstances, fully known to the appellants, it is difficult to conceive how the acceptance of a new second note, from a responsible purchaser, would facilitate financing of a deal they were anxious to see consummated, if they were to retain a lien upon the property in the full amount of their original claim. The chancellor took the position that "reasonable minds would deduct that the addendum * * * could only indicate release of the existing trust." The conduct of the parties can hardly be explained on any other hypothesis.
The chancellor pointed out that the settlement sheet offered in evidence stated: "2nd Trust Note to be subordinated to $7,700.00 (old trust to be released)." There was testimony that all parties attending the settlement so understood. The appellants say they did not attend the settlement and are not bound by any representations there made by Berman or Watterson. It is true that the appellees would not be bound by an erroneous interpretation placed upon the document in question by other parties. For present purposes we may assume that neither Berman nor Watterson were agents of the appellees. But it is equally true that parties to a contract will not be allowed to place their own interpretation on what it means or was intended to mean. The test is what a reasonable person in the position of the parties would have thought it meant. Ray v. Eurice, 201 Md. 115, 127; Weil v. Free State Oil Co. of Md., 200 Md. 62, 70. There is also force in the appellees' contention that the conduct of the appellants in signing the addendum, with knowledge that it would be used to induce a consummation of the sale, raises an equitable estoppel. Cf. Solomon's Marina, Inc. v. Rogers, 221 Md. 194, 198, and cases cited. See also Machovec v. Shipley, 171 Md. *421 339, 345. The appellees were justified in believing, upon the faith of the document whereby the appellants agreed to accept their note for $7,700, that its acceptance was to be in substitution for, and not in addition to, or as a further security for, the old obligation which was in default. Watterson's testimony indicates that he informed Satine that that was the whole purpose of the addendum at the time of its execution. Under all the circumstances it is difficult to see what other useful purpose it might have served.
On the question of damages, we find no error. The chancellor did not allow loss of profits. His allowance of $4,228.63, out of a claimed loss of $10,000, was based almost entirely on increased cost of labor and materials occasioned by the delay in obtaining construction loans and proceeding with the building operations. The appellants complain that the testimony on the point by the appellee Koier, admittedly an expert on construction, was not supported by documentary proof and hence was speculative. They further contend that the appellees were under a duty to mitigate damages and could have done so by insisting on clear title before proceeding with construction. On the second point, we have already indicated that the appellees were justified in relying upon the written addendum as a commitment to release. They were not compelled to wait for the actual recordation of the document before making commitments to others on their own part. The damage due to rising prices during the period of delay was thus occasioned by the appellants' breach, which the buyer was not bound to anticipate. It is well settled that where a construction contract is breached by delay, the other party is entitled to recover for the additional expense and cost occasioned thereby. L & S Const. Co. v. Bradbury Homes, 208 Md. 476, 480. The argument that the appellees might have avoided the damage by declining to accept title or forbearing to begin construction until the release was actually secured and recorded is without merit. On the first point, Koier's testimony was quite specific and detailed, and his qualifications as an expert were admitted. The appellees did not attempt to challenge or even question the figures he gave. They offered no testimony to the contrary.
Decree affirmed, with costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550380/ | 223 Md. 376 (1960)
164 A.2d 716
SCOTT
v.
STATE
[No. 39, September Term, 1960.]
Court of Appeals of Maryland.
Decided November 8, 1960.
The cause was argued before BRUNE, C.J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.
George L. Russell, Jr., with whom were Benjamin L. Brown and Brown, Allen & Watts on the brief, for the appellant.
Lawrence F. Rodowsky, Assistant Attorney General, with whom were C. Ferdinand Sybert, Attorney General, Saul A. *378 Harris, State's Attorney for Baltimore City, and Charles E. Moylan, Jr., Assistant State's Attorney, on the brief, for the appellee.
PRESCOTT, J., delivered the opinion of the Court.
In some of its aspects, this is an unusual case. On December 16, 1959, Charles Scott was tried for, and convicted of, statutory burglary, by a judge of the Criminal Court of Baltimore, sitting without a jury. From a three years' sentence in the Maryland Penitentiary, he has appealed.
The Attorney General has filed a motion to dismiss the appeal, which we shall dispose of first. The appellant was sentenced by the court on January 20, 1960. He then filed a motion to vacate the judgment and set aside the sentence. This motion was denied by the trial judge on February 9, 1960. On February 15th, following, the clerk received from the appellant a "Notice of Appeal." It would serve no present purpose to set forth its contents in detail. As a result of its receipt, the clerk, on February 17th, wrote the appellant and stated:
"I gather from the contents of your Notice of Appeal received on February 15th, that you wish the Court of Appeals to review your conviction and sentence of three years imposed on January 20th. If this is correct, you are within the thirty days allowed by law to do so and, in order to protect your rights, I am making the appropriate entry on the docket." (Emphasis added.)
The clerk, also, called to the appellant's attention that the denial of his motion to vacate the judgment appeared on the docket, and inquired whether he wanted to note an appeal from this denial. The appellant replied that he did.
The State contends that the defendant's first notice of appeal (as well as his reply to the clerk) only applied to his motion to vacate the judgment, and there has, in fact, never been any appeal from the judgment of January 20th. In view of the quoted portion of the clerk's letter, whereby the defendant, who was confined in prison, was informed that the clerk was *379 making an appropriate entry on the docket to have the Court of Appeals review his conviction and sentence of January 20th, we think the contention is unsustainable. The motion to dismiss will, therefore, be denied. Cf. Cahill v. Baltimore City, 93 Md. 233, 48 A. 705.
At the conclusion of the presentation of the State's evidence at the trial below, the defendant, who was represented by counsel, rested his case. The trial court took a short recess, and, upon his return to the courtroom, rendered a verdict of "guilty generally," and inquired of defendant's attorney if he wished to file a motion for a new trial. The attorney replied, "We request a motion for a new trial," and the court said, "All right."
At this point, the defendant asked if he could address the court. His lawyer stated that although he had advised his client (who had a record of previous convictions) not to do so, the defendant desired to take the stand and deny certain of the testimony presented by the State. The court stated that if the case were a jury trial, "it would not be possible to do this," but if "he has no objection and wants to testify, I believe I could still reopen the case." "I cannot strike out the verdict." "I can only hear what he has to say in mitigation of sentence * * *." (Emphasis supplied.) A colloquy between the court, Scott and his attorney followed, during which the court stated: "Frankly, I would like to hear from you [the defendant], too, but it is a bit irregular at this time in view of the fact that you have been convicted and that your counsel has stated that he is going to file a motion for a new trial. The only issue before me under the circumstances would be the nature of the sentence to give you." Further colloquy ensued, and, just before Scott was sworn, the following occurred:
(Scott), "I feel after I testify you [the court] would have an opportunity to reconsider your finding."
(The court), "I don't know whether it is within my power to do that now since you did not testify before."
*380 (Scott), "I was not given the opportunity. I sure requested it."
(The court), "Right or wrong, I will let you testify. I will take whatever you say under advisement."
Scott was then sworn, and he testified, relative to his guilt or innocence, at some length. Court was, thereafter, adjourned for the day, accompanied by a statement that the case would be resumed on the following morning, December 17, 1959, at 10:00 A.M. During the night, the police officers had obtained another witness for the State, who was permitted to testify, without objection. The testimony of this witness did not relate to the question of prospective punishment of the accused, but bore directly on the question of his guilt. The defendant again took the stand, and, towards the end of his testimony told the court that he had two or three witnesses, who lived in Washington, D.C., and whom he would like the court to hear. The court stated that this "is a most unusual case." "If you want additional time I want to be sure I make no mistake my mind is unchanged to this minute if you want additional time, I will give it to you." "I will direct that this case be held sub curia for one week." "The clerk will reset the case at that time." "If you produce your witnesses, I will hear them even then."
The defendant, who had become dissatisfied with his then attorney, requested and was granted permission to engage new counsel.[1]
The case was not reset in a week's time, and it was not until January 20, 1960, that it was resumed. In the meantime, the defendant had been unable to obtain new counsel, although he had written "several organizations to help [him] contact [his] family." The court informed the defendant that he intended to impose sentence. The defendant requested an opportunity to file a motion for a new trial, but he was informed *381 that his request came too late, as the verdict had been rendered on December 16, 1959.[2]
The record makes it crystal clear that the learned trial judge "leaned over backwards" in his efforts to afford the appellant every opportunity for a full, fair and impartial trial. We think, however, that he fell into error when he stated, on December 16th, that he could not strike out his verdict.[3] There is no doubt that he had discretionary revisory power over his verdict until the expiration of the term of court at which it was rendered. Seth v. Chamberlaine, 41 Md. 186, 194; State v. Butler, 72 Md. 98, 18 A. 1105; Madison v. State, 205 Md. 425, 431, 109 A.2d 96. Cf. Jones v. State, 214 Md. 525, 529, 136 A.2d 252. And we think it was irregular to resume the taking of testimony as to the defendant's guilt or innocence, without striking out the verdict of "guilty generally." The record clearly shows (and we have recited a part of it above) that the defendant desired to reserve his right to move for a new trial before the Supreme Bench. The simple and proper procedure for the court to have pursued was to have stricken out the verdict (provided it was done during the term), then to have received any further evidence relating to the guilt or innocence of the accused that he, in his discretion, deemed proper, and then to have entered a new verdict consistent with all of the evidence that had been adduced. This would have permitted the trial judge to have received in an orderly manner all of the evidence that he desired, and, at the same time, afforded the defendant an opportunity to file his motion for a new trial.
We think the erroneous belief of the trial judge that he did not have the power to strike out his verdict, coupled with the other irregularities, in practical effect, denied to the appellant *382 his right to prosecute his motion for a new trial, and this constituted prejudice.
Having reached this conclusion, it becomes unnecessary to consider the other questions raised by the appellant.
Motion to dismiss appeal denied. Judgment reversed, and case remanded for a new trial.
NOTES
[1] We think it only fair to comment that the trial court pointed out to the defendant that his attorney was trying to represent him diligently and faithfully.
[2] Rule 502 of the Rules of the Supreme Bench of Baltimore City provides that a motion for a new trial must be filed within three days after verdict.
[3] There is authority to the effect that, technically, a "verdict" can only be rendered by a jury, as distinguished from a "decision" by the court. Black's Law Dictionary (3rd Ed.), pp. 1807, 1808. The distinction seems to have little practical significance. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550295/ | 223 Md. 362 (1960)
164 A.2d 703
LEMONS, TO OWN USE AND USE OF BANKERS MUTUAL INSURANCE CO.
v.
MARYLAND CHICKEN PROCESSORS, ET AL.
[No. 7, September Term, 1960.]
Court of Appeals of Maryland.
Decided November 8, 1960.
The cause was argued before BRUNE, C.J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.
Paul F. Due, with whom was Max R. Israelson on the brief, for appellant.
*364 Jeffrey B. Smith, with whom were Paul E. Burke, Jr., and Smith, Somerville & Case on the brief, for appellees.
BRUNE, C.J., delivered the opinion of the Court.
The chief question in this case, which grows out of a collision between a tractor-trailer and a passenger car, is whether or not the plaintiff-appellant, owner of the passenger car, was entitled to a specific instruction to the jury based upon the great size and weight of the tractor-trailer and its lesser maneuverability. Such a specific instruction was requested, but was not given. The case was submitted to the jury upon instructions relating to burden of proof, causation, negligence, contributory negligence and damages, which did not go into the particular facts of the case in any detail. The jury returned a verdict in favor of the defendants, the owner and the operator of the tractor-trailer, and the plaintiff appeals from the judgment entered thereon.
Just before the collision occurred the plaintiff's automobile in which she, Mrs. Lemons, was a passenger, was being driven by her agent south on Monroe Street, in Baltimore, in the westernmost traffic lane, and the tractor-trailer owned by the defendant, Maryland Chicken Processors, Inc., was also being driven south by its employee, Dennis, on the same street, and in the same direction, either wholly or partly in the next traffic lane. There is some dispute as to whether or not the tractor-trailer was partly in the first (westernmost) lane or partly in that lane and partly in the second. As the vehicles approached the intersection with Lafayette Avenue, both drivers intended to turn west i.e., to the right into Lafayette Avenue. The driver of the passenger car said that he thought that the tractor-trailer was going straight ahead when a traffic light turned green. The accident happened at about nine o'clock on a night in March. There is some conflict in the testimony as to whether or not the tractor-trailer's turn signals were turned on prior to the accident. As the tractor-trailer started to make the turn, the passenger car collided with about the middle of the trailer and was pressed over or against the curb, with the front wheels in Lafayette Avenue *365 and the rear wheels in Monroe Street. The plaintiff claims she was injured, and her car was considerably damaged.
The court instructed the jury, in part, (a) that negligence "mean[t] lack of ordinary care; and by ordinary care, is understood that degree of caution, attention, ability and skill which are ordinarily employed by or may reasonably be expected of persons in the situation of the respective parties under all the circumstances surrounding them at the time;" (b) that there was no sufficient evidence to prove that Mrs. Lemons was herself guilty of any negligence which contributed to the accident; and (c) that if, however, the jury should find that her driver, who was her agent, was guilty of any negligence which contributed to the accident, his negligence would be imputed to her and she could not recover. The court further instructed the jury with regard to (d) the duty of the driver of a motor vehicle intending to make a right turn at an intersection so to operate his vehicle that both the approach for the turn and the turn itself should be as close as practicable to the right-hand curb or edge of the street; (e) the duty not to make a turn from a direct course until such turn could be made with reasonable safety and the duty to give an adequate signal of an intention to make such a turn for at least 100 feet before turning; and (f) the duty of a motor vehicle operator to observe all persons and objects which might be seen by the exercise of reasonable care and diligence. Each of these instructions designated as (d), (e) or (f) was accompanied by a further instruction to the effect that if the collision was due to a breach of the stated duty on the part of the driver of the tractor-trailer, without negligence on the part of the plaintiff's driver contributing thereto, the plaintiff was entitled to a verdict.
The prayer of the appellant which she insists should have been granted reads as follows:
"The Court instructs the Jury that the law of Maryland recognizes that the operation of large trucks, tractors and trailers over the public highways because of their great size, weight and lesser maneuverability involves a greater potential danger for injury *366 to others than does an automobile and, therefore, reasonable care in the operation of such large trucks, tractors and trailers requires that the driver shall at all times maintain a vigilant and careful watch to avoid injury to others in the lawful use of the highway and that the operator thereof shall at all times have the machine under such control as will permit its safe operation over such highways under modern traffic conditions; and if the Jury find that the Defendant, Maryland Chicken Processors, Inc., by its agent, servant or employee, the Defendant, Dennis, failed to use that reasonable degree of care required by the law and that such failure on their part solely and proximately caused the collision described in the testimony and the Plaintiff's injuries ensuing therefrom, then their verdict shall be for the Plaintiff."
The text of the above requested instruction follows closely language used in the opinions of this Court in the following cases, upon which the appellant relies: Campbell & Sons v. United Rys. & Elec. Co., 160 Md. 647, 154 A. 552; National Hauling Contractors Co. v. Baltimore Transit Co., 185 Md. 158, 44 A.2d 450; York Motor Express Co. v. State, Use of Hawk, 195 Md. 525, 74 A.2d 12; Meldrum v. Kellam Distributing Co., 211 Md. 504, 128 A.2d 400. Each of these involved a discussion of the care required in the operation of a ponderous vehicle, and we might add to them another such case, Baltimore Transit Co. v. Prinz, 215 Md. 398, 137 A.2d 700.[1] The appellees concede that "[n]o one would argue that the abstract statement of law contained in plaintiff's requested instruction is not good law in Maryland"; but they point out that none of the cases relied on by the appellant involved [nor did the Prinz case] the granting or refusal of such an instruction as that here sought and they contend that the trial court submitted the case to the jury on adequate instructions *367 and did not commit any reversible error in declining to give the specific instruction requested by the appellant.
Although the rejected instruction does not use the term "higher degree of care," the appellant's brief and argument in this Court seem to be predicated, at least in part, upon the theory that a higher degree of care is required of the operators of large and unwieldy motor vehicles than is required of the operators of other motor vehicles and upon the view that this theory is embodied or implicit in the disputed instruction. Thus, she argues in her brief that "[t]here is nothing in the Trial Court's charge from which the Jury would infer, or which would have permitted Appellant's counsel to argue that there is any different or greater degree of care required of the drivers of tractor-trailers." This contention, we think, makes two fallacious assumptions: first, that a higher degree of care is required of the operators of ponderous motor vehicles than of the operators of other types; and second, that counsel for the owner of the passenger car were precluded from making an argument to the jury as to facts showing negligence based upon the great weight, size and relative non-maneuverability of the tractor-trailer.
At this point we shall direct our attention to the first of these assumptions. We know of no statutory rules relating to the operation of motor vehicles pertinent to this case which differ as between large, heavy and unwieldy vehicles and other motor vehicles.[2] We therefore find no statutory basis or requirement upon which to rest any different test of negligence to be applied to the operation of ponderous vehicles. As this Court recently said in Christ v. Wempe, 219 Md. 627, 640, 150 A.2d 918: "The degree of care required of all operators of motor vehicles, other than public carriers, is that of ordinary care. What action or precaution is required to meet the *368 standard of ordinary care may and does vary, depending on the then existing circumstances; but the standard itself remains constant. People's Drug Stores v. Windham, 178 Md. 172, 185." To the same effect, see Warnke v. Essex, 217 Md. 183, 187, 141 A.2d 728; Lehmann v. Johnson, 218 Md. 343, 346, 146 A.2d 886; and Finlayson v. Gruzs, 222 Md. 192, 195, 159 A.2d 864. See also Associated Petroleum Carriers v. Beall, 217 F.2d 607 (C.A. 5), which involved an instruction similar to that here sought. It was there held erroneous to have granted such an instruction in a case growing out of a collision between a passenger car and a tank truck, because it placed upon the operator of the tank truck a duty to exercise more than ordinary care by directing the attention of the jury to the size, type and kind of truck operated by the appellant.
On the general subject of the degree of care, see also Prosser, Torts (2nd Ed., 1955), § 33, where (at p. 147) the author states: "The amount of care demanded by the standard of reasonable conduct must be in proportion to the apparent risk. As the danger becomes greater, the actor is required to exercise caution commensurate with it."
We are also unable to agree with the second assumption contained in the appellant's argument mentioned above, that the denial of the requested instruction precluded an argument to the jury based upon the size, weight and lack of maneuverability of the tractor-trailer as facts to be considered in determining the issue of negligence on the part of the driver thereof. See Ager v. Baltimore Transit Co., 213 Md. 414, 425-426, 132 A.2d 469, a passage from which we quote in part infra. Each of the four cases relied upon by the appellant in support of the requested instruction, and Baltimore Transit Co. v. Prinz, supra, as well, took those factors into account in passing upon an issue of negligence or contributory negligence. None of those cases involved the giving or refusal of an instruction such as that here requested, nor has any decision of this Court involving what may be called a "ponderous vehicle" instruction, been called to our attention, nor have we found any. The case most like the present which has come to attention is Associated Petroleum Carriers v. Beall, supra.
*369 The cases cited by the appellant clearly show that "ponderous vehicle" factors are among those which the jury may properly consider in determining the question of negligence. So are other factors which may have a direct bearing upon what precautions must be taken to attain the standard of ordinary care required in the circumstances of a particular case. Among such other factors which have been held material in particular cases are light or darkness, weather or other atmospheric conditions, such as fog or smoke, which may affect visibility, and other weather conditions that may affect the condition of the road. See, for example, Vizzini v. Dopkin, 176 Md. 639, 6 A.2d 637, and the People's Drug Stores and York Motor Express cases above cited.
This brings us back to the basic question whether the plaintiff was entitled to a specific instruction based upon the size, weight and unwieldiness of the tractor-trailer. If the trial court had undertaken to discuss the facts in detail in the charge to the jury, we may assume that an instruction along the lines requested, not overemphasizing any one factor or carrying the implication of any higher degree of care being required, would have been proper and, indeed, should have been given. But in the instant case, the trial judge did not give a charge reviewing the facts in detail, and we do not think that he was bound to do so. Sometimes a charge embodying a particular rule of law may be necessary in order to prevent an abstract, general charge which is granted, and which may in itself be a correct charge, from being misleading. State, Use of Taylor v. Barlly, 216 Md. 94, 99, 140 A.2d 173. In the present case, however, we find no such situation. The type of charge to be given whether detailed or general was within the discretion of the trial judge, and he was not required to include the requested instruction in it. Ager v. Baltimore Transit Co., supra. In that case we said (213 Md. at 425-426): "The appellant * * * contends that she was entitled as a matter of right to have the jury instructed as to every detail of the duties of the operator of the motor-car, such as his duty to keep a proper lookout, to have the car under proper control and to regulate the speed of his car according to what is reasonable and proper in view of the *370 circumstances, etc. While there is no objection to the trial court's pointing out any and all of the reciprocal duties and obligations of the respective parties in minute detail, there is no obligation that it do so, provided the subject is fully and comprehensively covered in the charge to the jury. * * * [Maryland Rules, Rule] 554 b 1. Singleton v. Roman, 195 Md. 241, 248, 72 A.2d 705. * * * Her counsel * * * could have argued any legal duty or obligation on the part of the operator of the street-car that did not contravene the instructions of the court." Here as there, we think the instructions given by the trial judge did adequately inform the jury concerning the duties of the defendants, and that it was discretionary with him as to whether or not each detailed obligation should be mentioned in his charge. The Ager case is cited with approval on the subject of the kind of instructions to be given in State, Use of Taylor v. Barlly, supra, (216 Md. at 283, though the rule of the Ager case was not there found applicable), in Kantor v. Ash, 215 Md. 285, 291, 137 A.2d 661, in Casey v. Roman Catholic Archbishop, 217 Md. 595, 612, 143 A.2d 627, and in Ruella v. MacCauley, 220 Md. 461, 463, 154 A.2d 715. The last seems directly in point here. We think that the instructions given were sufficient and that the trial court did not commit error in declining to grant the plaintiff's prayer based upon the size, weight and lack of maneuverability of the tractor-trailer.
In view of the conclusion just stated we need not go into the appellees' contention that the evidence was sufficient in any event to sustain the jury's verdict on the basis of contributory negligence on the part of the plaintiff's agent or employee.
Judgment affirmed, with costs to the appellees.
NOTES
[1] Though most of the cases just cited involved vehicles owned by common carriers, none of them involved any question of the degree of care which such carriers owed to their patrons.
[2] See Code (1957), Art. 66 1/2, § 2 (27), § 2 (67), definitions, and §§ 181-317. There are or may be some differences which we shall not undertake to enumerate, since none of them seems pertinent here. See, for example, § 211 (1) (authorizing lower speed limits for trucks of 7,500 pounds weight or more); § 217 (b) (slow moving vehicles to keep to right); and § 252 (b) (coasting by commercial vehicles). See also §§ 273-275; 300-302; 308-317. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550383/ | 5 F.2d 793 (1925)
INVESTORS' GUARANTY CORPORATION
v.
LUIKART et al.
No. 6747.
Circuit Court of Appeals, Eighth Circuit.
April 14, 1925.
*794 W. C. Mentzer, of Cheyenne, Wyo., and H. C. Brome and Thomas M. Hyde, both of Basin, Wyo., for appellant.
A. C. Allen and O. N. Gibson, both of Riverton, Wyo., for appellees.
Before STONE and KENYON, Circuit Judges, and SCOTT, District Judge.
KENYON, Circuit Judge.
This appeal is from the order of the United States District Court for the District of Wyoming, dismissing a certain amended bill of complaint brought by the Investors' Guaranty Corporation against Edwin H. Luikart, Oscar W. Nicholson, and the Farmers' State Bank of Riverton, Wyo. The bill is voluminous and involved. It was stipulated between the parties that the case should be set down for hearing and determination upon the point of law raised by the first defense set up in the amended answer, which is that the amended bill of complaint fails to state facts sufficient to constitute a valid cause of action in equity. A hearing was had upon this question, and the court held that the bill of complaint failed to state facts sufficient to entitle plaintiff to the relief sought in equity, and disclosed that plaintiff had an adequate remedy at law. The question here is therefore reduced to narrow limits, but requires a review of the amended bill.
Appellant is a corporation of the state of Utah, and will be herein designated as plaintiff. Defendant Farmers' State Bank of Riverton is a banking corporation, organized under the laws of the state of Wyoming, and will be herein designated as defendant bank. The other defendants, Edwin H. Luikart and Oscar W. Nicholson, are citizens of Wyoming, and will be termed defendants. Briefly the allegations of the amended bill are:
That plaintiff was a corporation dealing in real estate mortgages, stocks, bonds, etc., and during the latter part of the year 1917 or the early part of 1918 acquired the stock of defendant bank, and became the owner of it; that it was the owner of about 4,000 acres of agricultural land in the vicinity of Riverton; that during the period of time in which the transaction complained of took place Luikart was the managing officer of both corporations, being Western manager of plaintiff and president of defendant bank. The bill claims that he did not faithfully serve both masters, but that with defendant Nicholson he conspired in January, 1921, to fraudulently purchase the defendant bank; that he managed the matter as far as plaintiff was concerned; that he advised the directors and stockholders to make the sale, and that through his advice and manipulation the defendant bank was sold to Nicholson, he to pay plaintiff $5,000 in cash, and to deliver to it 50 shares of its common and 200 shares of its preferred stock; that he was also to assume stockholders' liabilities and the rediscounts of the bank; that plaintiff on its part guaranteed certain bills receivable of the bank, amounting to about $93,000, all of which was set forth in a schedule attached to the complaint; that, at the time when plaintiff owned the capital stock of the bank, defendant Luikart exchanged a note of approximately $17,000, belonging to the defendant bank, for notes of an equal amount belonging to plaintiff; that the note belonging to the defendant bank was worth only $4,000, while the notes belonging to plaintiff, for which it was exchanged, were worth their face value. Other transactions in the exchange of notes were carried on by Luikart.
It is alleged that the other notes exchanged by the bank for the notes of plaintiff were worthless, while the notes secured in the exchange were worth their face value; that Luikart took from the treasury of appellant a certain hotel bond of the value of $3,000 and placed it among the assets of the bank; that he also placed on the notes set forth in Schedule B (being a large number) an indorsement of plaintiff guaranteeing payment, and it is claimed that, while he had express authority to make indorsements for rediscount purposes, he had no authority to make the same for any other purposes; that *795 such indorsements were made without authority, or without consideration, or without the knowledge or consent of the officers or stockholders of plaintiff, other than Luikart and Nicholson, and that they were made in pursuance of the conspiracy to secure the bank; that in March, 1922, the defendant bank instituted in the district court of Fremont county, Wyo., 18 separate suits against plaintiff, aided by attachment, and levied on its real estate before referred to. All of these suits, excepting one, were founded upon the contracts of guaranty in question. Fifteen of them have been tried, and judgments obtained against plaintiff. Appeals were taken, but no supersedeas bond was given. Executions have been issued and the real estate of plaintiff sold upon execution.
The amended bill further alleges that the judgments in these suits aggregated approximately $55,000, and the prices paid at sheriff's sale under execution were $53,395; that two of the suits originally instituted in the District Court were transferred to the United States District Court for the District of Wyoming, and judgment rendered against plaintiff. In one of these suits plaintiff admitted liability on the note, but by way of counterclaim asked to recover from the defendant bank the value of the securities alleged to have been wrongfully transferred to it. The court rendered judgment against plaintiff on this counterclaim. The amended bill further alleges that on October 10, 1923, defendant bank instituted another suit against plaintiff in the district court of Fremont county, Wyo., to recover the sum of $15,000 on account of other alleged contracts of guaranty indorsed upon notes of third parties held by the defendant bank; that since filing the original bill of complaint defendant bank has commenced 5 additional suits on notes, alleged to be guaranteed by plaintiff, seeking to recover approximately $17,500; that since June 9, 1921, Luikart and Nicholson have owned all the stock of the bank and have been in exclusive control of its affairs; that no record on the books of plaintiff was ever made of the contracts of guaranty; that the various suits are based upon contracts of guaranty made by Luikart purporting to act for the plaintiff, but that he was without authority so to do; and that it was all done to permit Luikart and Nicholson to defraud appellant.
The bill alleges that plaintiff has no plain, adequate, and speedy remedy at law; asks for an accounting to be had and a multiplicity of suits avoided; alleges that Luikart and Nicholson should be required to pay what may be found due from plaintiff to the bank; and the bill concludes: "Wherefore plaintiff prays that an accounting be had between said plaintiff and said defendant bank and defendants Luikart and Nicholson; that the amount, if any, due and owing from this plaintiff to said bank be ascertained; that the defendants Edwin H. Luikart and Oscar W. Nicholson be required to pay said sums and all thereof; that the said defendants Edwin H. Luikart and Oscar W. Nicholson be further required to reimburse this plaintiff for all expenses or liabilities incurred in and about the defense of the several suits brought by said bank against said this plaintiff; that the defendant bank be decreed to have no interest in or claim upon the real estate hereinbefore described or the shares of stock of the Arapahoe Ranch Company hereinbefore described, but that said property and all thereof be decreed to be property of this plaintiff; and that plaintiff have such other and further relief as may be just and proper in the premises."
We have endeavored to analyze this lengthy and involved amended bill, to discover the basis for the claimed equitable cognizance of the suit. Evidently there is an attempt to state several grounds for equitable relief, viz.: (a) An accounting; (b) the prevention of a multiplicity of suits; (c) fraud; (d) quieting title to real estate, or removal of cloud thereon. The burden was on plaintiff to show that it had no plain, speedy, and adequate remedy at law. The distinction between legal and equitable actions is preserved in the federal courts, necessarily so by virtue of the constitutional requirement of the Seventh Amendment giving the right of jury trial in certain cases.
Section 267 of the Judicial Code (Comp. St. § 1244) is as follows: "Suits in equity shall not be sustained in any court of the United States in any case where a plain, adequate, and complete remedy may be had at law." This statute is merely declaratory of long-established principles of equity jurisprudence. 21 C. J. p. 41, § 16; Hipp et al. v. Babin et al., 19 How. 271, 15 L. Ed. 633; Alger v. Anderson et al. (C. C.) 92 F. 696.
Equity has no jurisdiction where "complainant has a full and adequate remedy at law for the wrongs complained of." United States v. Bitter Root Development Co., 200 U. S. 451, 472, 26 S. Ct. 318, 50 L. Ed. 550. 21 C. J. p. 40, § 15, states the doctrine as follows: "But, even in this common field, it is in the sound discretion of the chancellor whether or not he will assume jurisdiction in a particular case, and, as a rule, he will *796 not do so if the remedy at law is plain, adequate, and complete, unless there are some features of the case which make it more appropriate for a court of equity than a law court to handle. This is practically and peculiarly so in those cases where the only thing sought is a pecuniary recovery." Buzard v. Houston, 119 U. S. 347, 7 S. Ct. 249, 30 L. Ed. 451; Scott v. Neely, 140 U. S. 106, 11 S. Ct. 712, 35 L. Ed. 358; Curriden v. Middleton, 232 U. S. 633, 34 S. Ct. 458, 58 L. Ed. 765; Security Savings & Loan Ass'n v. Buchanan et al., 66 F. 799, 14 C. C. A. 97.
This remedy at law must be as certain, prompt, and efficient to attain the ends of justice as that afforded by equity. Williams et al. v. Neely et al., 134 F. 1, 67 C. C. A. 171, 69 L. R. A. 232; McMullen Lumber Co. v. Strother et al., 136 F. 295, 69 C. C. A. 433; Monmouth Inv. Co. et al. v. Means, 151 F. 159, 80 C. C. A. 527; Wright v. Barnard et al. (D. C.) 233 F. 329; Risty et al. v. Chicago, R. I. & P. Ry. Co. (C. C. A.) 297 F. 710; McConihay v. Wright, 121 U. S. 201, 7 S. Ct. 940, 30 L. Ed. 932; Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 19 S. Ct. 77, 43 L. Ed. 341; Boise Artesian Hot & Cold Water Co. v. Boise City, Idaho, 213 U. S. 276, 31 S. Ct. 720, 55 L. Ed. 611; Castle Creek Water Co. v. City of Aspen, 146 F. 8, 76 C. C. A. 516, 8 Ann. Cas. 660.
Does the bill show any peculiar circumstances or claims especially cognizable in equity upon which complainant was entitled to relief which could not be secured at law? We turn first to the claim for an accounting. Wherever at law the subject-matter cannot be fully investigated, a court of equity has discretion to decree an accounting. 1 C. J. p. 612, § 56. The general rule is "that a proper case is presented when the remedies at law are inadequate."
Equity jurisdiction for an accounting is quite generally based on one of three grounds, viz.: (1) Need of a discovery; (2) complicated character of accounts; (3) existence of fiduciary or trust relationship. The rule is clearly stated, 1 C. J. p. 633, § 98, as follows: "The bill or complaint must take a case calling for the exercise of the peculiar powers of a court of equity; that is to say, it must show either that no legal remedy exists, or that the legal remedy is not complete, or is not as efficient and practicable as the remedy in equity, as that a discovery is necessary, or that the accounts are mutual or complicated, or that a fiduciary relation exists between the parties." London Guarantee & Accident Co., Ltd., v. Bell Telephone Co. of Buffalo (C. C.) 171 F. 278; Butler Bros. Shoe Co. v. United States Rubber Co., 156 F. 1, 84 C. C. A. 167.
While the jurisdiction of equity as to accounting has been much enlarged, and is generally concurrent with courts of law, not every controversy as to accounting is cognizable in equity. The mere existence of an account or the claim for accounting does not of itself confer jurisdiction in equity to the exclusion of law. Each particular case must be determined by the facts peculiar to it, having in mind the adequacy or inadequacy of the remedy at law.
No discovery is prayed in this complaint, and no facts alleged upon which discovery could properly be had. The statement of 1 Pomeroy's Equity Jurisprudence (4th Ed.) § 229, enunciates the doctrine as to discovery as follows: "In the first place, the rule is settled in those American courts which admit the general doctrine that when the action is one cognizable at law, in which the rights and remedies are legal, and which does not otherwise belong to the equitable jurisdiction, but which the plaintiff brings in a court of equity under the doctrine that a discovery of itself enables equity to extend its concurrent jurisdiction over the whole cause, he must allege that the facts concerning which he seeks a disclosure are material to his cause of action, and that he has no means of proving those facts by the testimony of witnesses or by any other kind of evidence used in courts of law, that the only mode of establishing them is by compelling the defendant to make disclosure, and therefore that a discovery by suit in equity is indispensable. Without these allegations the plaintiff cannot avail himself of the doctrine, and obtain relief as a consequence of the discovery. Nor are these allegations a mere empty form, a mere fiction of pleading; they may be controverted, must be supported by proof, and, if disproved, the whole foundation for the equitable interference in the case would fail." See, also, Galion Iron Works Co. et al. v. Ohio Corrugated Culvert Co. et al., 244 F. 427, 157 C. C. A. 53.
The court in its memorandum opinion said: "Neither does there appear by the bill of complaint a situation in which an accounting could be sought in equity. The accounts are not complicated, but, on the other hand, the alleged obligations are well-defined and distinct, and the accounts are all on one side." No mutual, intricate, or complicated accounts are shown by this bill, such as are necessary to support an accounting in equity Hunton et al. v. Equitable Life Assur. Soc. of the United States (C. C.) 45 F. 661; *797 Pittsburgh, C. & St. L. R. Co. et al. v. Keokuk & H. Bridge Co., 68 F. 19, 15 C. C. A. 184; American Spirits Mfg. Co. v. Easton et al. (C. C.) 120 F. 440; Peters v. Equitable Life Assurance Society of the United States (C. C.) 149 F. 290; Morris & Co. v. Whitley et al. (C. C.) 182 F. 286; Carey v. McMillan (C. C. A.) 289 F. 380.
Any recovery by plaintiff against the bank is based on certain promissory notes a purely legal demand. There is nothing intricate nor complicated about them. There is no allegation for an accounting for profits realized by Luikart and Nicholson from their alleged fraudulent transactions. The question of recovery on these notes is one to be determined at law, and already has been determined as to 17 of them. There is no fiduciary relationship alleged as between plaintiff and the bank, and no allegation as to the other defendants for an accounting between them, as trustees, and plaintiff. For the reasons we have stated, we conclude that equity jurisdiction could not be sustained on the theory that the suit was one for an accounting.
To avoid a multiplicity of suits is a common ground of equitable jurisdiction. It is based on the theory of protecting complainant against vexatious litigation. Here it is to be observed that 24 suits have been brought and 17 disposed of. Seven are now pending, so that the multiplicity has been somewhat reduced. Speaking of this cause for equity jurisdiction in Hale v. Allinson, 188 U. S. 56, 77, 23 S. Ct. 244, 252, 47 L. Ed. 380, the Supreme Court said: "It is easy to say it rests upon the prevention of a multiplicity of suits, but to say whether a particular case comes within the principle is sometimes a much more difficult task. Each case, if not brought directly within the principle of some preceding case, must, as we think, be decided upon its own merits, and upon a survey of the real and substantial convenience of all parties, the adequacy of the legal remedy, the situations of the different parties, the points to be contested, and the result which would follow if jurisdiction should be assumed or denied." Watson et al. v. Huntington et al., 215 F. 472, 131 C. C. A. 520; Galion Iron Works Co. et al. v. Ohio Corrugated Culvert Co. et al., 244 F. 427, 157 C. C. A. 53; Carey v. McMillan (C. C. A.) 289 F. 380.
It is reasonably apparent, and is urged with force, that these 7 suits now pending could be joined under the Wyoming statutes; hence that equity would be merely awarding the same relief as provided by law. It is a fundamental proposition that "equity will not take jurisdiction for the purpose of awarding substantially the same relief that may be obtained at law." Pomeroy's Eq. Jurisprudence (4th Ed.) § 251¾.
Section 5606 of the Compiled Statutes of Wyoming provides for uniting causes of action under certain circumstances, and section 5713 of said Compiled Statutes of 1920 is as follows: "When two or more actions are pending in the same court, the defendant may, on motion and notice to the adverse party, require him to show cause why the same shall not be consolidated; and if it appears that at the time the motion is made the actions could have been joined, and if the court, or a judge thereof, find that they ought to be joined, the several actions shall be consolidated."
Under the facts of this case, the question of a multiplicity of suits not being raised until 17 of them had been disposed of and judgments rendered against plaintiff, 7 only now remaining, and further, in view of the Wyoming statute relating to consolidation thereof, we do not think that the question of a multiplicity of suits is sufficient to give the court jurisdiction to entertain this bill as one in equity. Town of Mt. Zion et al. v. Gillman (C. C.) 14 F. 123.
As to the question of fraud, upon which plaintiff bases claim to equitable jurisdiction, it may be said that, if there is a plain, speedy and adequate remedy at law, there is no concurrent jurisdiction in equity, and the courts have quite generally held that where a money recovery only is sought, and the amount can be recovered in a law action, the ground of fraud will not be sufficient in itself to maintain a bill in equity, nor will it be where the fraud as a defense at law can be pleaded in complete relief. 21 C. J. p. 109; Buzard v. Houston, 119 U. S. 347, 352, 7 S. Ct. 249, 30 L. Ed. 451; Manchester Fire Assur. Co. v. Stockton Combined Harvester & Agricultural Works (C. C.) 38 F. 378.
The bill alleges fraudulent conduct of Luikart and Nicholson, by virtue of which they secured a transfer of the bank from plaintiff to them, and augmented its assets by the wrongful transfer of securities from plaintiff to the bank. Were these the facts, then plaintiff could have tendered back what it had received under the contract and sued for cancellation thereof, or it could have sued for damages sustained by reason of the fraud. As far as the complaint shows, there has been no attempt to cancel and rescind the contract transferring the bank from plaintiff to Nicholson.
*798 One other ground remains for consideration, viz. the question of whether equitable jurisdiction can be sustained on the theory that this is an action to quiet title. The bill of complaint is most indefinite in that there is no allegation that either plaintiff or defendants are in possession of, or that the premises are unoccupied. 5 Ruling Case Law, p. 642, § 10, says as to this: "It is the familiar doctrine of the federal courts that there is no jurisdiction of bills quia timet, unless their aid is required to remove obstacles that prevent a successful resort to an action of ejectment, or when, after repeated actions at law, their jurisdiction is invoked to prevent a multiplicity of suits, or there are other specific equitable grounds of relief; that bills quia timet or to remove a cloud from a legal title cannot be maintained in such courts by one not in possession, because the law gives a remedy by ejectment, which is plain, adequate, and complete." United States Min. Co. v. Lawson et al. (C. C.) 115 F. 1005; Whitehead v. Shattuck, 138 U. S. 146, 11 S. Ct. 276, 34 L. Ed. 873.
The bill alleges that judgments have been obtained against plaintiff in the state court and executions issued and the land of plaintiff sold. There was no supersedeas in said cases, although appeals were taken. The Wyoming statute on this subject is as follows:
"Sec. 5989. Reversal Not to Affect Sale. Restitution. If a judgment, in satisfaction of which lands or tenements are sold, be thereafter reversed, such reversal shall not defeat or affect the title of the purchaser; but in such case restitution shall be made by the judgment creditor of the money for which such lands or tenements were sold, with lawful interest from the day of sale."
Therefore if the appeals result in a reversal of the judgments the title of the purchasers at execution sale will not be affected under the Wyoming law. Under the allegations of the bill and the applicable law of Wyoming, the contention as a basis of equitable jurisdiction that the bill seeks to quiet title is not sufficient.
The question of estoppel is raised by appellees. As it is not involved in the question of the sufficiency of the complaint, we do not discuss it.
We agree with the trial court that the amended bill fails to state facts sufficient to entitle plaintiff to the relief sought in equity, and discloses that plaintiff has an adequate remedy at law. While it is urged that equity has jurisdiction of this cause as an action for an accounting, or to prevent a multiplicity of suits, or on account of fraud, or to quiet title, the fact is that this case (whatever it may be called) is based on the alleged fraudulent acts of defendant Luikart in conjunction with defendant Nicholson with relation to the transfer of securities from plaintiff to defendant bank, which acts plaintiff asserts have caused it damage, and for which damage it is seeking to recover. Such damages, however, are recoverable, if at all, in an action at law. United States v. Bitter Root Development Co., 200 U. S. 451, 26 S. Ct. 318, 50 L. Ed. 550; Curriden v. Middleton, 232 U. S. 633, 34 S. Ct. 458, 58 L. Ed. 765.
Plaintiff suggests in its brief that the order dismissing the bill was erroneous in any event; that under equity rule 22 a suit in equity that should have been brought at law must be transferred to the law side of the court and not dismissed. Said rule is as follows: "If at any time it appear that a suit commenced in equity should have been brought as an action on the law side of the court, it shall be forthwith transferred to the law side, and be there proceeded with, with only such alteration in the pleadings as shall be essential."
In Pierce v. National Bank of Commerce in St. Louis (C. C. A.) 268 F. 487, 489, this court said: "Did the complaint state facts sufficient to constitute a cause of action, either at law or in equity, for if it stated a cause of action at law, this case should have been transferred to the law side of the court, and there proceeded with. The fact that a complainant in equity has an adequate remedy at law is no longer sufficient ground for the dismissal of the suit." United States v. Utah Power & Light Co. (D. C.) 208 F. 821; Equitable Trust Co. of New York v. Denver & R. G. R. Co., 250 F. 327, 162 C. C. A. 397.
If the bill stated a cause of action at law it would have been the court's duty to transfer the case to the law side, or if the plaintiff had asked permission of the court to file an amendment to the bill, or a substituted bill conforming the suit brought in equity to one at law it would have been the court's duty to grant the same. Section 274a of the Judicial Code (Comp. St. § 1251a) provides as follows: "That in case any of said courts shall find that a suit at law should have been brought in equity or a suit in equity should have been brought at law, the court shall order any amendments to the pleadings which may be necessary to conform them to the proper practice. Any party to the suit shall have the right, at any stage of the cause, to *799 amend his pleadings so as to obviate the objection that his suit was not brought on the right side of the court. The cause shall proceed and be determined upon such amended pleadings. All testimony taken before such amendment, if preserved, shall stand as testimony in the cause with like effect as if the pleadings had been originally in the amended form." Referring to this section, and also to section 274b of the Judicial Code (Comp. St. § 1251b), the Supreme Court said in Liberty Oil Co. v. Condon Nat. Bank, 260 U. S. 235, 243, 43 S. Ct. 118, 121, 67 L. Ed. 232: "To be sure, these sections do not create one form of civil action as do the Codes of Procedure in the states, but they manifest a purpose on the part of Congress to change from a suit at law to one in equity, and the reverse, with as little delay and as little insistence on form as possible, and are long steps toward Code practice."
In view of the fact, however, that the amended bill does not state a cause of action at law, and further that plaintiff did not ask to be permitted to amend the same to conform to the proper practice, but stood on the bill, and waived its right to amendment there was nothing for the court to do but to dismiss the bill of complaint.
The case is affirmed.
STONE, Circuit Judge (concurring).
I concur in the opinion of Judge KENYON, and wish to add only emphasis to one or two matters covered therein.
The bill does not deal with one legal transaction, but with many. These transactions are of different characters; they differ as to legal stages and conditions; they do, or may, differ as to many material facts. As to the suits which have gone to judgment, it is obvious that appellant has presented and litigated the very questions here sought to be raised. These questions are now before the Supreme Court of Wyoming and will be before this court if appellant has carried out its expressed intention of bringing here for review the judgments in the two cases determined against it in the federal District Court. Where a party has thus had ample opportunity to present, and has presented, his contention to other courts of competent jurisdiction, it would lead only to confusion and conflict to permit these same contentions between the same parties and concerning these same matters to be again litigated. To grant the relief asked concerning the title to the land sold under execution would be to afford appellant the benefit of a supersedeas in litigation in the state court, where it had an opportunity to secure such and had not done so, and would be unjustifiable interference with the orderly processes of the state court. Other of the transactions are based on separate promissory notes given, and dealt with at different times.
I can see no basis for legally combining them in a single bill in equity or in one petition at law. If these various matters had been lodged as different actions at law, there might be reasons of practical convenience to consolidate such actions for trial. If a single action at law for damages had been filed, and these various transactions treated as separate items of damage, there might possibly have been stated some common basis or ground for recovery. However, neither of these things was done, so the court could not hear the cause in equity, nor transfer it to the law side of the court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550384/ | 33 N.J. 300 (1960)
164 A.2d 481
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
FORD HIPPLEWITH, DEFENDANT-APPELLANT.
The Supreme Court of New Jersey.
Argued September 12, 1960.
Argued September 13, 1960.
Decided October 10, 1960.
*304 Mr. James P. Dugan argued the cause for the defendant-appellant (Mr. Richard M. Glassner, attorney; Mr. James Dorment, Jr., on the brief).
Mr. Brendan T. Byrne, Essex County Prosecutor, argued the cause for the plaintiff-respondent (Mr. Martin L. Greenberg, on the brief).
The opinion of the court was delivered by PROCTOR, J.
Defendant Ford Hipplewith seeks reversal of a first degree murder conviction with recommendation of life imprisonment on the grounds that remarks of the prosecutor in his opening and summation and instructions of the trial court were so improper and prejudicial as to warrant a finding of plain error.
Defendant admits that he stabbed and killed one Franklin Callis but contends that the killing was in self-defense and to prevent Callis from perpetrating a robbery. According to defendant's signed statement made to the police the day after the homicide and admitted in evidence without objection, the following occurred:
On May 11, 1959, the day before the killing, defendant attended the Rialto Theater in Newark. He fell asleep in the balcony, and when he awakened, found that $12 had been taken from his left trouser pocket. His plastic cigarette case and papers from his wallet were lying on the floor, and his wallet was lying on the back of his seat. He complained to the doorman and the theater maintenance man and was informed that they could do nothing for him.
On May 12, 1959 defendant arose at 8:00 A.M., drank a half pint of wine, and about 12:30 P.M. decided to attend the Rialto Theater, where the program had changed since the previous day. Before leaving the house, he took a butcher knife from the kitchen sink and put it in his belt under his jacket. His explanation for the taking of the knife was that it was on an "impulse." After entering the theater, defendant took a seat in the third row of the balcony on the *305 left side facing the screen, a different location from the one occupied the previous day. There were no other persons sitting in his row. He had 25¢ in his right trouser pocket, and a pack of cigarettes in a plastic cigarette case and his wallet in his left trouser pocket.
After watching one picture he dozed off. He felt "something annoying" near his left trouser pocket. He shifted his position and dozed off again. Shortly thereafter, he felt a hand inside his left trouser pocket and seized it about the wrist. He remembered he had a knife with him and took it out. Callis (owner of the intruder hand and subsequent deceased) pulled his hand away. The defendant told him, "You robbed me yesterday and you are not going to get away with it today." His statement continues:
"Then I started to get up and he started to move away from me and then I swung twice at him with the knife and I am not sure if I hit him with the knife at that time. Then he ran out from the seats where we were at and he ran into the lobby and when he ran I ran out behind him but I couldnt find him and then somebody said a man fell down on the other side of the lobby and then I walked over to where the man was laying and I saw that he was bleeding and then I told him to get up because he robbed me and he didnt answer and he didnt get up and then I turned around and I walked out of the movies and I put the knife in my belt * * *."
He was arrested while walking on a nearby street. At the police station he identified his plastic cigarette case, which he did not have on him when arrested.
Persons present in the theater testified for the State that they saw the defendant chasing Callis out of the balcony into the lobby. One witness heard a scream coming from the left side of the balcony, followed by a voice (later identified as defendant's) exclaiming: "I'll kill you, you son of a bitch." He testified that he saw the defendant chase Callis out of the balcony into the lobby, and that after Callis fell in the aisle leading back into the interior of the theater the defendant walked over to Callis, took hold of him while he *306 was lying face down, and dragged him a short distance exclaiming, "You son of a bitch. Come on. Do that again. Do that again. Come on, you son of a bitch. I kill you. I kill you."
Another witness testified that he heard a commotion in the third row of the balcony and someone said: "You ____ ____, you done this to me before and got away with it but you are not getting away with it again."
Ernest Rumph, an usher, testified that he saw Callis emerge from the balcony holding his chest and run across the lobby into an aisle leading into the theater proper. He then saw the defendant coming into the lobby from the balcony with a knife in his hand. The latter asked him, "Where did he go?" Rumph asked, "Who?" Defendant replied, "You one of them?" The defendant then went to the entrance door and looked into the street. The defendant then heard someone mention that a man was lying in an aisle in the theater. He crossed the lobby and went into that aisle, took hold of Callis, who was lying face down and pulled him by the back of the coat for about two yards. Rumph further testified that "it seemed like he [defendant] was in the motion of stabbing him [Callis] * * *. Maybe about two times." Rumph did not at anytime see the defendant stab the deceased.
Fred Ruff, the theater maintenance man, corroborated the other witnesses as to the events occurring in the balcony. He added that the defendant held Callis' right arm and that while Callis was struggling to get away, the defendant appeared to be punching him. After the two ran out of the balcony the witness saw the defendant re-enter the lobby from outside, carrying a knife in his right hand. The defendant, after questioning Rumph, the usher, pointed the knife at Ruff, and asked him, "Are you one of them too?" Ruff told the defendant that the whole theater was in an uproar and to put the knife away and get out. The defendant then heard someone say that Callis was lying in the aisle bleeding, and ran across the lobby into the aisle. Ruff *307 further testified that a cigarette case and gray hat were found on the floor of the theater proper.
Robert Cantwell, a police officer who had participated in defendant's arrest, testified that at police headquarters he asked defendant why the cutting occurred. The defendant replied that "he was asleep in the theater, the Rialto Theater, and that he was awakened by what he thought was a hand in his left hand pocket. He said that when he woke up he stabbed at the person twice."
According to Dr. Edwin H. Albano, Chief Medical Examiner for Essex County, Callis' death was caused by a stab wound, 4 3/4" in depth on "the left side of the chest perforating the diaphragm producing massive hemothorax; that's hemorrhage in the left chest cavity and hemoperitoneum, internal bleeding in the abdominal cavity." The fatal wound was so located that the deceased "would have to be facing the assailant." There were four other superficial wounds: One on the right side of the chest; one on the middle finger of the left hand; one below the left side of the chin; and one in the back of the left shoulder. There was also a bruise on the left side of the forehead and two abrasions, one on the left knee and one below the right knee. Dr. Albano characterized the wound on decedent's middle finger of the left hand as a "defense cutting wound * * *. A wound that is sustained by an individual while trying to defend himself." He also testified that he found an open pen knife in the left lower pocket of Callis' jacket, and that the wound on Callis' middle finger of his left hand could have been sustained while putting his hand in the pocket containing the pen knife.
The defense relied primarily upon the testimony of defendant at the trial. Hipplewith repeated the circumstances of the theft on May 11, 1959. He testified that on the following morning, he arose at about 5:45 A.M. and went out to "shape up" for construction work. Since he was not selected for employment that day, he returned home, and lay on his bed listening to the radio and drank a half pint of *308 wine. At 8:00 A.M. he arose, performed household chores, and talked with his mother until about 12:30 P.M. He then decided to return to the Rialto Theater, where the program had changed since the previous day. Before leaving the house he took with him a knife for protection.
The defendant's theater seat was at the extreme right of a row, abutting a metal railing. The only free avenue of egress was to his left. There was no one sitting in the row when he took his seat. He watched one of the pictures through to its conclusion. When the next one came on, he became drowsy and started dozing. He felt a brushing sensation near his left hip, glanced around, saw nothing, shifted his position, and went back to sleep. Later, he felt something inside his left trouser pocket and upon reaching down discovered it was a hand. He became "scared" and grabbed the hand by the wrist. He started to rise from his seat and the intruder did likewise. The defendant testified that he saw the intruder reach into his own left hand pocket with his free left hand. This motion further frightened the defendant, who did not know what Callis might have in his pocket. Defendant released Callis' right hand. Callis did not try to leave the row but remained crouching beside defendant, and raised his right arm to a horizontal position. The defendant thought Callis intended to hurt him. While Callis' left hand was still in his jacket pocket, the defendant drew his knife and swung it twice at Callis. Callis pushed the defendant down into his seat and ran out the row and down the balcony steps. Defendant called after him, "You robbed me yesterday but you ain't going to get away with it today," and followed Callis.
The ensuing events are the same as those portrayed by the State except that the defendant testified that when he came upon the body of Callis lying face down in the passageway leading into the theater proper, he reached down, turned Callis over, saw he was bleeding, made no effort to stab him again and left the theater. Later, defendant discovered that his cigarette case was missing from his left trouser pocket. *309 He next saw it when he was being interrogated at police headquarters the following day when it fell out of a pile of Callis' clothing.
With the exception of a character witness and two witnesses who were not present at the theater and whose testimony was insignificant, this concluded the defendant's case.
I.
Defendant urges as his first general ground for reversal that the prosecutor in his opening and summation made improper and prejudicial remarks which deprived defendant of a fair trial. Defense counsel did not interpose objections to these remarks. Therefore, to warrant a reversal such remarks must constitute plain error that is, they must so grievously affect the substantial rights of the defendant as to convince us that they possessed a clear capacity to bring about an unjust result. State v. Corby, 28 N.J. 106, at p. 108 (1958); R.R. 1:5-1(a).
(A).
In his opening, the prosecutor stated that the defendant formulated the intent to kill the day before the homicide. The defendant argues that this assertion constituted plain error because it was not subsequently supported by the evidence and the prosecutor knew or should have known that it could not be so supported. A prosecutor may state in his opening only facts he intends in good faith to prove by competent evidence. State v. Haines, 103 N.J.L. 534 (Sup. Ct. 1927). Proof often fails to meet expectations. But such failure is not ground for reversal unless allegations in the opening statement are completely unsupported by the evidence and there is a showing of prejudice to the defendant and bad faith by the prosecutor. Annotation 28 A.L.R.2d 972 (1953). In the present case, evidence was introduced which supports the challenged remark and which therefore negates prejudice to the defendant and bad faith by the *310 prosecutor. In his statement made to the police on May 13, 1959, the defendant said that he had been victimized on May 11 at the theater; that he had complained to the management and received no satisfaction; that on May 12 he arose at 8:00 A.M. (rather than his accustomed hour of 6:00 A.M. when he usually reported for the daily shape up); that before leaving for the theater on May 12, he took a butcher knife with him; and that when confronted by Callis in the theater on May 12 he said, "You robbed me yesterday, and you are not going to get away with it today." From the above facts, a jury could reasonably conclude that the defendant was furious about his victimization on May 11, returned home, brooded about it, and determined to locate and execute the thief on the following day. Moreover, from the evidence a jury could at least reasonably conclude that the defendant formed the intent to kill at some time before his meeting with Callis in the theater. Since it is sufficient to sustain a conviction of first degree murder (assuming premeditation and deliberation) that defendant formulated an intent to kill at any time prior to the act of killing, we fail to see how he could be prejudiced by the State's assertions that he formulated the intent on May 11.
(B).
Defendant also urges reversal on the ground that the prosecutor in his summation improperly stated his personal belief in the guilt of defendant and insinuated that such belief was based on facts not before the jury. The prosecutor said:
"If ever there is a breakdown in any part of our overall law enforcing agencies then our society then becomes an anarchy. You are as important as the police officers, the Judge, the prosecutor, and everyone else connected with this, and we all, we all have a duty to perform and we have to perform it with a definite idea that we are a part of our overall society. If either one of us fail then our society is no longer a society that says it will protect all citizens. These are the things that we have to think about. These are the things that although this trial has lasted five days, I have *311 been living with it much longer than five days, this particular trial, and in doing so, in living with it and thinking about the factual situation, it puts pressure on all of us to determine whether or not we have the facts and the evidence. After they are added up do they add up to a guilty verdict against this defendant?
Now, my function here after having presented this matter to the Court and jury on behalf of the state is to sum up what I think is relevant. I can sum up in this case with a lot of convictions that this man is guilty. I think in getting this case before this jury the investigation that has gone on prior to our appearance in Court, when we go over the sum total of everything, I am convinced that this man is guilty and I feel that at the close of this case there is only one verdict that this jury can return and that verdict also will indicate the guilt of this defendant." (Italics added)
It is improper for a prosecutor to state in general or abstract terms his personal belief in the guilt of a defendant. Canon 15 of the Canons of Professional Ethics, R.R. 1:25. But a prosecutor's expression of belief in a defendant's guilt is not necessarily reversible error if he states that it is based solely on facts adduced at the trial. State v. Butler, 27 N.J. 560, 606 (1958); Annotation 50 A.L.R.2d 766, 775 n. 10 (1956); Cf. State v. Barker, 68 N.J.L. 19 (Sup. Ct. 1902). And a fortiori such expression of belief, when based on facts in evidence, does not constitute plain error. State v. Pisano, 33 N.J. Super. 559 (App. Div. 1955) certification denied 19 N.J. 385 (1955). Where, however, the prosecutor insinuates that his belief is based on facts not presented to the jury or that he is bringing to bear some expertise based on his experience or position, his expression of opinion may constitute reversible error, Aponte v. State, 30 N.J. 441 (1959); Annotation, supra, 50 A.L.R.2d, at p. 773 nn. 19, 20; or plain error, State v. Ferrell, 29 N.J. Super. 183 (App. Div. 1954); Annotation, supra, at p. 800 n. 4. The vice inherent in such insinuation is that it encourages the jury to base its decision on the undisclosed, superior knowledge of the prosecutor, who, in their eyes, represents the authority of the government and the people of the State. See Berger v. United States, 295 U.S. 78, 55 S.Ct. 629, 79 L.Ed. 1314 (1935); State v. Johnson, 31 N.J. 489, at p. 511 (1960). Additionally, the *312 defense is deprived of the opportunity to cross-examine what is in effect unsworn and probably inadmissible testimony. Note, 54 Colum. L. Rev. 946, 955 (1954).
In the above-quoted portion of the prosecutor's summation, he implied that as a result of his living with the case and the investigation performed prior to trial, he had knowledge of facts not before the jury which convinced him of the defendant's guilt. We have on numerous occasions expressed our strong disapproval of such improper excursions outside the evidence, see e.g. State v. Bogen, 13 N.J. 137 (1953); State v. Johnson, supra, but we do not believe that the prosecutor's remarks in the present case constitute grounds for reversal. An examination of the remarks in the context of the complete summation indicates that they could not have misled the jury. Following the challenged remarks, the prosecutor said:
"* * * he [defendant] is entitled to all the deliberations and interest and attention to this case that this jury can give it. He is also entitled to all the evidence that the State can adduce both in his behalf and also in behalf of the State. The State has attempted in this matter to prove his guilt and the State has produced every known bit of evidence they have at their command to show that this man is guilty as charged and I submit to you that the only verdict that could be rendered in this case is that Mr. Hipplewith is guilty of the murder of Mr. Callis."
Here, the prosecutor clearly announced that the State had produced all the evidence it had. It is therefore most unlikely that the jury believed the prosecutor's opinion was based on his unrevealed, superior knowledge of facts in the case. To warrant a reversal in this case, the alleged error must be of so plain and shocking a nature as to vitiate the absence of objection. In light of the prosecutor's assurance that the State had proffered all its available evidence, and the instruction of the court that the jury's decision was to be based "solely on the evidence presented," we cannot say the prosecutor's remarks were so egregious as to constitute plain error.
*313 (C).
Defendant also urges reversal on the ground that the prosecutor in his summation improperly insinuated that defense counsel had attempted to suppress material evidence. The prosecutor said:
"I think there was an attempt to cover up some pertinent information as to when and where this cigarette case was found."
The location of defendant's cigarette case immediately following the homicide was an issue at the trial. The defense relied in part on the alleged taking of the case by Callis to prove its defense of homicide to prevent an attempted robbery. Defendant at trial testified on his direct examination that he had the case when he entered the Rialto on May 12, that he did not have it when he was arrested following the homicide, and that the next time he saw it was on May 13 when it fell out of a pile of Callis' clothing at the police station. The State called a rebuttal witness, a police officer, who testified that the case was found immediately following the homicide in the vicinity of the theater seat defendant had occupied. Defendant in support of the proposition that the prosecutor's remarks were completely without foundation asserts in his brief:
"There is no indication on the record that defense counsel were even aware of the circumstances of its discovery until the State produced it and offered it as rebuttal evidence."
But on cross-examination of the State's witness, Ruff, the theater maintenance man, defense counsel elicited the fact that the cigarette case was found following the homicide on the floor of the theater. In view of defense counsel's knowledge of its location, defendant's testimony, which could be taken to imply that the case was taken by and in the possession of Callis, would understandably provoke the prosecutor to comment as he did. In his summation, the prosecutor *314 emphasized the fact that the case was found in the theater and not on Callis' body. His reference to "an attempt to cover up some pertinent information" underscored the State's contention that defendant's testimony was designed to induce the belief that the case was found in Callis' clothes when in fact it was not. We have held that "not every suspected deviation from perfection on the part of a prosecutor will justify a reversal of a conviction. Before such a result ensues, his infraction must be clear and unmistakable and must substantially prejudice the defendant's fundamental right to have the jury fairly evaluate the merits of his defense." State v. Bucanis, 26 N.J. 45, at p. 56 (1958). Moreover, we may infer from counsel's failure to object to the remark at the time it was made that he did not consider it, in the atmosphere of the trial, out of bounds. State v. Johnson, supra, 31 N.J., at p. 511. Any prejudice inherent in this remark could have been readily corrected had the defendant invoked the trial court's aid. See State v. Vaszorich, 13 N.J. 99, at p. 119 (1953). In any event, we cannot say that the challenged remarks, in the entire context of the trial, constituted plain error. See State v. Buffa, 31 N.J. 378 (1960).
(D).
The defendant next contends that plain error inhered in the prosecutor's invitation to the jury to speculate whether defendant would have killed Ruff or Rumpf if each had not answered to defendant's satisfaction when he asked, "Are you one of them?" The evidence showed that the defendant had just fatally wounded Callis; that he approached Ruff and Rumpf with a drawn knife pointed at Ruff; that he asked if they each were one of them; and that he appeared intent upon seeking the man he had just stabbed. In view of this evidence, we cannot say the prosecutor's remarks constituted plain error. See State v. Cioffe, 128 N.J.L. 342 (Sup. Ct. 1942) affirmed 130 N.J.L. 160 *315 (E. & A. 1943), where a similar comment by the prosecutor in similar circumstances was held not reversible.
(E).
Defendant also urges reversal on the ground that the prosecutor erroneously "instructed" the jury that a private person can never legally kill to prevent commission of a crime. These remarks, defendant argues, deprived him of his statutory defense that he killed one who was attempting to commit robbery. N.J.S.A. 2A:113-6. But it is clear that the prosecutor's remarks were based on the premise that the deceased attempted, if anything, to commit larceny. (N.J.S.A. 2A:113-6 does not extend the right to kill to cases of attempted larceny.) The here-challenged remarks were an exhortation to the jury to find that on the facts adduced deceased at worst attempted to perpetrate a larceny and that therefore the defendant had no right to kill. The prosecutor's remarks in the circumstances were a proper statement of the law. Additionally, the court instructed the jury that it was to be guided solely by instructions of the court as to the applicable rules of law. And the court correctly stated the law relative to justifiable homicide. Assuming the prosecutor had misstated the law, such an instruction would cure the error. State v. Continental Purchasing Co. Inc., 119 N.J.L. 257 (Sup. Ct. 1938) affirmed 121 N.J.L. 76 (E. & A. 1938). In any event, the remarks of the prosecutor, in the context of his entire summation and in light of the court's instruction, do not constitute error of so plain and prejudicial a nature as to warrant reversal in the absence of objection.
II.
Defendant's second general ground for reversal concerns alleged errors in the trial court's instructions to the jury. Again, defense counsel failed to object at the trial to the now-challenged instructions so that this court must find plain error to reverse.
*316 (A).
Defendant contends that the trial court committed plain error by charging the jury incorrectly on the law of self-defense. The court instructed as follows:
"Now, as the statute (N.J.S.A. 2A:113-6) stated under the law of our state a person who kills another in his own defense is guiltless and should be acquitted. It is the law of the state that no person is justified or excusable in taking the life of another unless the necessity for so doing is apparent as the only means to avoid his own destruction or some great injury and an accused may protect himself even to the extent of taking the life of another when such act is necessary or reasonably appears to be necessary in order to preserve his own life or to protect himself from serious bodily harm. However, the accused cannot make his judgment of the necessity of killing the deceased in order to defend himself the justification for his act. Whether the necessity for killing the deceased existed must be determined by you the jury from the situation of the accused at the time of his act.
If the injury apprehended by the accused could be otherwise avoided, the accused is bound to avoid the danger without resorting to violence and even if the circumstances were such as to require use of force to repel the assault upon him, he will be inexcusable if he carries on such a defense beyond the bounds of reasonable necessity.
It is your province and duty to determine whether such necessity for the taking of the life of Franklin Callis existed from the situation of the accused Hipplewith at the time of his act." (Italics added)
The defendant contends that in the italicized portions of its charge the trial court required the jury to find that actual necessity existed for the taking of Callis' life in order to acquit. In the defendant's view, the trial court thus foreclosed consideration by the jury of whether in the circumstances the defendant reasonably believed that it was necessary to kill.
A person may kill in self-defense when the act of killing is necessary or reasonably appears to be necessary in order to preserve his own life or to protect himself from serious bodily harm. State v. Bonofiglio, 67 N.J.L. 239 (E. & A. 1901). The right of self-defense does not depend *317 upon a showing of so-called "actual" necessity. It is sufficient that defendant show he reasonably believed it necessary to kill. State v. Mount, 73 N.J.L. 582 (E. & A. 1906); State v. Mellillo, 77 N.J.L. 505 (E. & A. 1908); State v. Lionetti, 93 N.J.L. 24 (Sup. Ct. 1919); see Wechsler and Michael, "A Rationale of The Law of Homicide," 37 Colum. L. Rev. 701, 736 (1937). Whether the act of killing was necessary or reasonably appeared to be necessary is to be determined by the jury, not the defendant, in light of the circumstances existing at the time of the homicide. Brown v. State, 62 N.J.L. 666 (E. & A. 1899) affirmed 175 U.S. 172, 20 S.Ct. 77, 44 L.Ed. 119 (1899).
In passing upon the propriety of a trial court's instruction, this court will examine the entire charge to see whether the jury was misinformed as to the controlling law. It is ordinarily impossible for the trial court to state all of the applicable law in one sentence. The test, therefore, is whether the charge in its entirety was ambiguous or misleading. Applying that test to the court's instruction in the present case, we find that the defendant was not prejudiced. On two separate occasions instructing on the existence and the extent of the right of self-defense the court told the jury that reasonable apprehension of necessity as well as actual necessity to kill is sufficient to excuse a homicide. Defendant asserts that in intervening portions of its charge the trial court confined the right of self-defense to instances of actual necessity. He cites the italicized parts of the above-quoted charge. In these parts of the charge the court was referring not to the circumstances under which the right of self-defense exists but to the fact that the subjective judgment of the defendant is not the test of justification for the act of killing. The court properly instructed the jury that it is their function and not the defendant's to determine whether there was justification for the homicide. Brown v. State, supra. In addition, the court referred in these parts of its charge to "the situation of the accused at the time of his act." The phrase "situation of the accused" *318 referred the jury to the court's preceding reference to what "reasonably appears to be necessary in order to preserve his own life." It would have perhaps been better had the court said: "whether the necessity existed or reasonably appeared to exist." In light, however, of the court's immediately preceding reference to the reasonable apprehension of the defendant, and the absence of any indication that the court intended to withdraw that part of the charge, we do not believe that the jury was misled.
Defendant cites State v. Mount, supra, and State v. Lionetti, supra, as cases wherein a conviction was reversed because the trial court omitted reference to reasonable apprehension of necessity in one part of its charge although it was included in another part. On appeal it was observed that the two parts of the instruction were inconsistent and there was no way of knowing by which the jury was guided. But in Mount and Lionetti the trial courts omitted the reference to reasonable apprehension of necessity when they were instructing on the existence of the right of self-defense, i.e., the circumstances under which the right could be properly invoked. As mentioned above, the trial court in the present case expressly included reasonable apprehension in instructing on the existence of the right.
It is also to be noted that the trial court in the present case delivered the precise instruction on self-defense which was requested by defense counsel. Moreover, had counsel objected to the instruction when delivered, any ambiguity could have been corrected at that time. Accordingly, we find that the court's charge on self-defense did not constitute plain error.
(B).
Defendant urges that the trial court committed plain error by instructing the jury that they were not to consider themselves responsible for the consequences of their verdict. In the course of its charge to the jury, the trial court said:
*319 "Now, ladies and gentlemen of the jury, you are charged with the most solemn duty that the law can impose upon you as citizens, the determination of the question of the extinction of human life by official decree. The responsibility that rests upon you is a grave one. You should let your verdict be in accord with the evidence. Remember that you are here as vindicators of the law, charged with the high responsibility of your position. Be mindful on the one hand of your obligation to this defendant and on the other hand of what is due to public justice.
You should let no fear of responsibility deter you from discharging your duties faithfully.
For the consequences that may follow your verdict neither you nor this Court is responsible.
When we have discharged our duties conscientiously and firmly, our responsibilities are at an end and we may leave the consequences to the law." (Italics added)
In certain circumstances, it is reversible error for a trial court to deliver an instruction which dilutes the jury's sense of responsibility. This court has reversed, for example, where the trial court directed attention to the fact that subsequent decision-makers in the criminal process would reappraise the jury's finding. State v. White, 27 N.J. 158 (1958); Aponte v. State, 30 N.J. 441 (1959); State v. Mount, 30 N.J. 195 (1959). The error of such an instruction lies in the encouragement of the jury to compensate for possible future clemency by imposing a harsher punishment than the evidence warrants, or to rely upon subsequent review to correct an erroneous finding as to guilt. There was no such danger in the instruction delivered by the trial court in the present case. That court did not alert the jury to the possibility of subsequent review but informed them that when they arrived at a verdict warranted by the evidence, the consequence is determined by law.
But in New Jersey the jury is directed by statute to determine appropriate punishment in first degree murder cases. If it does not expressly recommend life imprisonment, the sentence is death. N.J.S.A. 2A:113-4. To this extent, the jury is concerned with the consequences of its verdict. An instruction that the law is responsible therefor, as given in the present case, is erroneous because it tends to dilute the *320 jury's sense of responsibility in the exercise of its sentencing function. State v. Mount, supra. But for the defendant to show prejudice, the jury must have returned a verdict of murder in the first degree without recommendation of life imprisonment. In the present case the jury, finding the defendant guilty of first degree murder, imposed the lesser of the two possible sentences life imprisonment rather than death. Therefore, the instruction that the law was responsible for the consequences attendant upon the jury's verdict, though erroneous, could not have prejudiced the defendant, and hence is no ground for reversal.
III.
Defendant's final argument is that the allegedly erroneous remarks of the prosecutor and instructions of the trial court in the aggregate deprived defendant of a fair trial. After a careful examination of the record and all of the challenged remarks and instructions, and in light of the fact that none of the alleged errors impressed defense counsel as improper in the atmosphere of the trial, we are satisfied that defendant was not deprived of a full and fair hearing. We find no error in the judgment below and it is accordingly affirmed.
For affirmance Chief Justice WEINTRAUB, and Justices BURLING, JACOBS, FRANCIS, PROCTOR, HALL and SCHETTINO 7.
For reversal None. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550387/ | 223 Md. 440 (1960)
164 A.2d 882
BALTIMORE TRANSIT COMPANY
v.
TRUITT
[No. 49, September Term, 1960.]
Court of Appeals of Maryland.
Decided November 11, 1960.
The cause was argued before BRUNE, C.J., and HENDERSON, HAMMOND, PRESCOTT and HORNEY, JJ.
Patrick A. O'Doherty and George P. Bowie, for appellant.
Jacob Matz and Henry J. Frankel, with whom was Irvin S. Friedman on the brief, for appellee.
*442 HENDERSON, J., delivered the opinion of the Court.
This appeal is from a judgment in favor of the plaintiff-appellee in a personal injury case arising out of an accident in which the plaintiff's stalled automobile was struck in the rear by a streetcar. The jury's finding of negligence is not challenged on appeal. The main contention is that there was no legally sufficient evidence to establish a causal connection between the automobile accident, which occurred on September 4, 1957, and disc surgery upon the plaintiff's back on August 16, 1958. At that time the plaintiff was forty-four years old.
The plaintiff testified that when her automobile was struck she was "jostled about violently and my face struck the steering wheel, then a pain hit me in the back of my head and went clear down the entire length of my body * * *." She stepped out of her car, fainted and was taken to Franklin Square Hospital. Although her physical examination was negative, she told the examining doctor she was nervous and nauseated, and complained of a numb, aching feeling in her back. No x-rays were taken, and she went home. A week later she returned to work at the Chesapeake Restaurant, where she was employed as a waitress. But she testified that she had discomfort in her back, which she had never had prior to the automobile accident, and difficulty in performing her duties. This was corroborated by the testimony of a co-worker, who testified she "was having trouble getting down." On December 4, 1957, she went to see her family physician, Dr. Shochat. He testified she told him about the automobile accident, but his only positive finding was that she had swollen glands, which subsequently cleared up. He sent her to Dr. Roman for x-rays of the cervical spine, which proved to be negative.
On January 2, 1958, the plaintiff reported for work and went into the kitchen. When she was in the act of taking a tray from a shelf, she felt a severe pain in her lower back. She rested a few minutes but on attempting to resume her duties had a second seizure which rendered her unconscious. She was taken to the Maryland General Hospital in an ambulance and remained there fourteen days, twelve of which were in traction. Dr. Mitchell diagnosed her case as low back *443 strain, with possibility of an underlying disc at fifth lumbar vertebra. She was also examined by Dr. Mosberg. She told him she had no pain in her lower back prior to January 2nd. After discharge, she returned to part-time work, wearing a back brace, but complained of numbness and pain. On May 22, 1958, Dr. Shochat referred her to Dr. Thompson, a neurosurgeon, for consultation, and he examined her on June 3, 1958. X-ray pictures were taken by Dr. Roman. On August 7, 1958, she entered Lutheran Hospital, where on August 16, 1958, she was operated on by Dr. Thompson. The final diagnosis shown on the hospital records was "degenerated disc L5-S-1 and herniated disc L4-L5."
Dr. Thompson had been summoned to testify on behalf of the plaintiff at the trial, but it was learned that the witness was not available because he was operating. The plaintiff then proposed to offer the pre-trial deposition of Dr. Thompson taken by the appellant, in lieu of his "live" testimony. In a conference between the court and counsel it was agreed that counsel for the appellee might read the deposition to the jury, with one exception. That exception related to Dr. Thompson's answer to a hypothetical question propounded by counsel for the appellant, in which the witness stated: "* * * in summary, I would feel that if Mrs. Truitt sustained an injury to her back, which is well documented, and complained of low back symptoms prior to the episode on January 2nd, when she stooped over and felt a severe pain in the back and radiation down the left leg, then it would be a causal connection. If, however, the patient had no symptoms relating to the low back following her accident and had no low back symptom until she stooped over on January 2nd to pick up the tray, (I would be surprised, but) I would have to conclude that the patient's injury on September 4th had no causal connection with her low back derangement." Counsel agreed that the words in parentheses should be omitted. Yet when counsel for the appellee was reading the deposition, there were repeated objections by counsel for the appellant.
The appellant contends that the trial court abused its discretion in failing to require Dr. Thompson to testify in person *444 when a dispute arose between counsel as to the scope of the agreement regarding the use of Dr. Thompson's deposition. We find no abuse of discretion. The trial court stated that his recollection was clear that "we discussed this particular answer here at the Bench, and my understanding was that it was agreed that it was to be read to the jury from the deposition." The purport and effect of the oral agreement, made in the presence of the trial court, would seem to be a matter for the trial court to pass upon. We could hardly find that it was an abuse of discretion to place an interpretation upon the language employed in the context, contrary to that of counsel for the appellant, or to hold counsel to a bargain whereby opposing counsel dispensed with the calling of the witness in person and agreed to the deletion of a portion of his testimony deemed harmful to the appellant's case. It is not without significance that counsel for the appellant never asked that Dr. Thompson be called in person. We do not think that any of the answers were not responsive to the questions put.
In each case, the objections were aimed at eliminating references by the witness to the patient's history prior to June 3, 1958, from whatever source derived, and thus to destroy the basis for the witness' conclusion that there was in fact a causal connection between the condition diagnosed in June and verified by the operation in August, and the automobile accident in September of the previous year. Based on the history she gave him, Dr. Thompson expressed the opinion that she was thrown forward at the moment of impact and sustained a wrenching injury to the neck, to the mid-dorsal region of her back and to the lower lumbar region of the back. After the severe discomfort from the sprains of the neck and mid-back disappeared, the patient continued to complain of low-grade discomfort in the low back region. It was his theory that the accident produced tears in the supporting ligaments of the lumbar disc, the annulus fibrosis, which remained present until January 2nd, when she bent forward and protruded the nucleus pulposus through the tear, producing a severe leg pain for the first time. The pain was relieved by traction, but the symptoms persisted until relieved by surgery.
The appellant concedes that Dr. Thompson, as an attending *445 physician, was entitled to rely upon statements, pathologically germane, given to him by the patient. Cf. Langenfelder v. Thompson, 179 Md. 502, 508, Charlton Bros. Transp. Co. v. Garrettson, 188 Md. 85, 93, 94, and Bethlehem Steel Co. v. Jones, 222 Md. 54, 58. See also Adams v. Benson, 208 Md. 261, 266, and Twombley v. Fuller Brush Co., 221 Md. 476, 487. But the contention seems to be that the history on which the witness relied was so far contradicted by the plaintiff's testimony on the stand and in her pre-trial deposition, and by the absence of supporting evidence in the testimony of other witnesses, or in the hospital records, as to be incredible and unworthy of belief. We find no merit in the contention. The plaintiff definitely testified on the stand that after the accident, in which she experienced a sharp pain in her back, she had a dull aching pain, which grew worse when she returned to work. She had never had such a pain before. That she had discomfort in her back was confirmed by the testimony of a co-worker. It is quite true that the plaintiff did not complain of acute pain in the lower back when she was taken to the Franklin Square Hospital after the accident, as Dr. Thompson recognized. It is also true that she told Dr. Mosberg she had had no back pain prior to January 2, 1958. But there is an entry in the Maryland General Hospital records that she "had an accident while riding a Baltimore Transit bus last September. Alleges she hurt her back, but then she was able to walk and has been working as a waitress since then." The records of the Lutheran Hospital contain an entry that patient "had car accident in 9/2/57. From this time has back pains * * *." Viewing the evidence in a light most favorable to the plaintiff, we cannot find on the record that the inference of causal connection drawn by Dr. Thompson was wholly unsupported. It should hardly be necessary to observe that the weight of the evidence was for the jury to consider.
The appellant raises other points that may be dealt with briefly. Over objection, Dr. Shochat, as an attending physician, was allowed to express an opinion that the automobile accident was the cause of the patient's disability. But on cross examination he admitted that he based his opinion upon the opinions of Dr. Thompson and Dr. Roman. Counsel for the *446 appellant did not then move to strike his opinion, but did so in two "medical prayers" submitted at the close of the case. The trial court did not grant the prayers as offered, but told the jury to disregard the opinion. We think this was sufficient. We think the objection to Dr. Roman's testimony, as to the x-rays he took, is captious. Dr. Roman was called largely upon the insistence of counsel for the apppellant. Even if we assume that his testimony was irrelevant, it was clearly not harmful and the court's refusal to strike it at the close of the case could not amount to prejudicial and reversible error. The final point, as to inclusion in the court's charge of a reference to loss of future wage earning capacity, is without merit. There was testimony that the injury to the plaintiff was permanent, and also that she had difficulty in performing her work. Cf. Adams v. Benson, supra at pp. 271, 273.
Judgment affirmed, with costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550392/ | 63 N.J. Super. 148 (1960)
164 A.2d 192
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
FRANK EARL SCHREFFLER, JR., DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Submitted September 19, 1960.
Decided September 30, 1960.
*150 Before Judges GOLDMANN, FREUND and KILKENNY.
Mr. Thomas L. Smith, Salem County Prosecutor, on the brief for the State of New Jersey.
Mr. Frank Earl Schreffler, Jr., on the brief, pro se.
The opinion of the court was delivered by KILKENNY, J.A.D.
In September 1956 the defendant was indicted in Salem County for the crime of carnal abuse, N.J.S. 2A:138-1, and for the crime of assault with intent to commit carnal abuse, N.J.S. 2A:85-1. He first pleaded not guilty, but thereafter, on November 9, 1956, withdrew his not guilty plea and entered a plea of non vult to both indictments and placed himself upon the mercy of the court. He then had the assistance and advice of court-assigned counsel and fully understood the effect of his new plea, as the record below shows.
Thereupon the Salem County Court, proceeding under N.J.S. 2A:164-3, which applies to persons convicted of the offense of carnal abuse and other sex crimes specified therein, ordered the defendant committed to a diagnostic center for a complete physical and mental examination. This was done. Based upon the written report and recommendation of the diagnostic center, as required by N.J.S. 2A:164-5 and 6, but in the exercise of discretion as to the alternative measures to be pursued, the Salem County Court committed the defendant to the New Jersey State Hospital at Ancora on January 21, 1957, for treatment as a sex offender. In so doing no minimum or maximum term for *151 his commitment was specified by the court, all in accordance with N.J.S. 2A:164-6, which specifically provides, "Such order of commitment shall not specify a minimum period of detention, but in no event shall a person be confined or subject to parole supervision for a period of time greater than that provided by law for the crime of which such person was convicted."
On May 13, 1957 the defendant escaped from the hospital. He was apprehended shortly thereafter and charged with and convicted of another sex crime committed by him after his escape. The Camden County Court sentenced him for that new offense to State Prison for a term of not less than three nor more than seven years.
On July 31, 1957 the Commissioner of Institutions and Agencies, pursuant to the discretion vested in him by N.J.S. 2A:164-7, transferred the defendant to the New Jersey State Prison where he is presently confined.
In 1959 the defendant made a motion before the Salem County Court to have a minimum and maximum term fixed for his confinement resulting from the 1956 offenses, but that court on January 22, 1960 denied his motion. This appeal is from the judgment denying that motion.
The defendant labors under the misconception that he was not sentenced by the Salem County Court, but was sentenced by the hospital authorities for a term of 30 years. Actually, the defendant was not "sentenced" at all, but rather "committed" to an institution for treatment under the Sex Offender Act. Apparently he had made inquiry from the hospital authorities as to the possible duration of his confinement and was informed that it was for an indeterminate term with a maximum period of detention of 30 years. He misconstrues this information to mean that the hospital authorities had sentenced him for 30 years. In fact, he was being told only what the statute provides, namely, that an order of commitment in such cases shall not specify a minimum period of detention but in no event shall a person be confined for a period of time greater than that provided *152 by law for the crime of which he was convicted. The maximum time for which a person may be incarcerated in a case of the crime of carnal abuse is 30 years. N.J.S. 2A:138-1.
When a person has been convicted of the offense of carnal abuse, or the other sex crimes specified in N.J.S. 2A:164-3, whether he will be committed for treatment for an indeterminate period not to exceed the maximum confinement under the law for the crime, or sentenced to prison for a maximum and minimum term under N.J.S. 2A:164-17, depends upon the report of the clinical findings and the recommendations by the diagnostic center, which determine whether the defendant comes within the purview of the statute for treatment. The statute makes it the duty of the court, upon the recommendation of the diagnostic center and the findings required by N.J.S. 2A:164-5, to commit the defendant to a program of specialized treatment for his mental and physical aberrations. This was done in this case. No contention is made by the defendant that there was any deviation from the statute.
The distinction under the Sex Offender Act between a "sentence" under N.J.S. 2A:164-17, in which the maximum and minimum time must be fixed, and a "commitment" for treatment under N.J.S. 2A:164-6 for an indeterminate term, in which the maximum and minimum periods of confinement are not fixed, though the maximum is limited by the statute, was clearly pointed out in State v. Newton, 30 N.J. Super. 382 (App. Div.), affirmed 17 N.J. 271 (1954), which is comparable to the facts herein. There, it was held that commitment to an institution for treatment under the Sex Offender Act is an institutional confinement and not a sentence. Unlike a sentence to prison, such commitment does not require the court to fix a minimum and maximum term, notwithstanding the defendant's later transfer to State Prison. The transfer from the hospital to State Prison, pursuant to the discretion and authority vested in the Commissioner of Institutions and Agencies, *153 does not change the character of restraint from confinement for treatment to a sentence, but merely changes the locale of confinement and the supervisory agency in the stages of treatment. The time for treatment depends upon many factors not developed at the time of commitment. For that reason the Legislature in its wisdom has seen fit to cast the statute in its present form.
In Tully v. Tramburg, 57 N.J. Super. 377 (App. Div. 1959), this court again affirmed the statutory power of the Commissioner of Institutions and Agencies to transfer a person convicted under the Sex Offender Act from a hospital to State Prison.
The constitutionality of the act dealing with the treatment of sex offenders, N.J.S. 2A:164-3 et seq. was expressly upheld by our Supreme Court in State v. Wingler, 25 N.J. 161 (1957).
It thus appears that the motion before the Salem County Court was properly denied and its judgment is hereby affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550462/ | 5 F.2d 574 (1925)
OPPENHEIM, OBERNDORF & CO., Inc.,
v.
FEDERAL TRADE COMMISSION.
No. 2274.
Circuit Court of Appeals, Fourth Circuit.
April 14, 1925.
W. Calvin Chesnut and Charles Markell, both of Baltimore, Md. (S. Ralph Warnken and Haman, Cook, Chesnut & Markell, all of Baltimore, Md., on the brief), for petitioner.
Adrien F. Busick, Asst. Counsel for Federal Trade Commission, of Washington, D. C. (W. H. Fuller, Chief Counsel Federal Trade Commission, of Washington, D. C., and T. H. Baker, Jr., on the brief), for respondent.
Before WOODS, WADDILL, and ROSE, Circuit Judges.
WOODS, Circuit Judge.
The Federal Trade Commission, after a full hearing, found unfair the methods of interstate business of Oppenheim, Oberndorf & Co., and on the 19th of April, 1924, ordered that:
"Oppenheim, Oberndorf & Co., Inc., doing business under the trade-name and style of Sealpax Company, its officers, agents, servants and employees, do cease and desist from directly or indirectly carrying into effect by co-operative methods a system of resale prices in which respondent, its customers and agents, undertake to prevent others from obtaining the Sealpax products of respondent at less than the prices designated by it by:
"(1) The practice of reporting the names of jobbers and wholesalers who do not observe such resale prices.
"(2) Causing jobbers and wholesalers to be enrolled upon lists of undesirable purchasers who are not to be supplied with the Sealpax products of the company unless and until they have given satisfactory assurance of their purpose to maintain such designated prices in the future.
"(3) By employing its salesmen or agents to assist in any plan of reporting jobbers and wholesalers who do not observe such resale prices for said products.
"(4) By utilizing any other equivalent cooperative means of accomplishing the maintenance *575 of prices fixed by respondent for said products."
The following facts found by the Commission were clearly established by the evidence:
Oppenheim, Oberndorf & Co. are manufacturers of underwear. One of its products is called "Sealpax," which is sold exclusively to jobbers, wholesalers, and mail order houses. This branch of its business is conducted under the name of the Sealpax Company, Inc. It notifies its customers of the price at which Sealpax underwear shall be sold and undertakes, in the main successfully, to prevent sales at a less price. To accomplish this purpose, it uses these methods:
It selects its customers for their credit standing and their willingness to maintain the price fixed. It refuses to sell to dealers who persist in cutting the price. Through its salesmen it endeavors to discover customers who do not maintain the required price so as to cut them off or get them to restore the price. By correspondence, circulars, and through agents, it exhorts and persuades its purchasers not to sell at a less price; and in the same way gives notice that it will not sell to dealers who do not maintain the price. It endeavors by letters and through agents to induce customers who have been excluded for price cutting to give pledges and assurances that they will in future maintain the price as a condition to reinstatement, and it reinstates customers who give the assurance. By correspondence and through agents it has sought with considerable success the co-operation of its customers in maintaining prices. It has offered guaranty of prices and allowed goods to be returned as an inducement for the maintenance of the fixed price. It keeps a list of jobbers and wholesalers called "D S," meaning "Don't Sell," on which is placed the names of customers who have not maintained the price and are therefore not to be solicited or allowed to purchase until they give assurance that they will not in future cut the price.
We see no escape from holding that the Commission was required to respond to these facts by making the order above recited. The facts are substantially the same as in Federal Trade Commission v. Beech-Nut Packing Co., 257 U. S. 441, 42 S. Ct. 150, 66 L. Ed. 307, 19 A. L. R. 882, except in two particulars. In the case cited the effort to control prices extended to retailers while in this case it did not. This difference, of course, cannot affect the principle. In the Beech-Nut Case the packages were so marked under a key number system as to enable the Beech-Nut Company's agents to trace to the seller goods sold at less than the fixed price. That, however, was only one of the means of throttling competition, and its absence here does not affect the illegality of the other means to that end condemned by the Supreme Court. As this means was not used in the present case, it was, of course, not enjoined by the Commission. As to those illegal means condemned by the Supreme Court which were used to suppress competition, the Commission rightly adopted the precise language of the Supreme Court in making its order.
Counsel for petitioner contend the language of the order is too indefinite for its guidance. The Supreme Court thought otherwise, doubtless having in mind the impossibility of anticipating and mentioning every illegal variation of device for preventing competition.
The case has been elaborately argued, with the citation of many authorities. It seems to us, however, to be absolutely controlled by the Beech-Nut Case, and the order of the Commission must be approved and affirmed.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550488/ | 63 N.J. Super. 384 (1960)
164 A.2d 785
DOVER SHOPPING CENTER, INCORPORATED, A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
CUSHMAN'S SONS, INC., A CORPORATION OF THE STATE OF NEW YORK, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Argued October 10, 1960.
Decided October 17, 1960.
*386 Before Judges GOLDMANN, FREUND and KILKENNY.
Mr. David Young, 3rd, argued the cause for appellant (Messrs. Young & Sears, attorneys).
*387 Mr. Joseph A. Weisman argued the cause for respondent (Messrs. Hannoch, Weisman, Myers, Stern & Besser, attorneys; Mr. Albert G. Besser and Mr. Joseph S. Seidel, of counsel).
The opinion of the court was delivered by GOLDMANN, S.J.A.D.
Defendant appeals from a mandatory injunction of the Chancery Division, entered December 3, 1959, ordering it to reopen its retail bakery business at the store premises leased by it from plaintiff at No. 17 Bassett Highway, Dover, and to keep the store open for business during the hours and on the days required by paragraph Third of the lease, with a manager or salesperson in charge and a "Cushman's" sign on the outside of the premises. The court also dismissed defendant's counterclaim with prejudice and denied plaintiff's demand for money damages, the same having been withdrawn by plaintiff in open court. A stay of the injunction, granted by the Chancery Division on December 21, 1959, was vacated by this court on March 16, 1960.
On July 16, 1956 the parties entered into a written lease for one of a group of stores in plaintiff's shopping center in Dover which defendant undertook to operate as a retail bakery. The lease, a detailed and comprehensive instrument of some 29 pages, resulted from protracted negotiations between the parties during which defendant was represented by counsel. The printed form, as finally executed, contained numerous typewritten insertions and changes, obviously the result of those negotiations. Among its provisions was paragraph Third:
"Third: As one of the inducements for the making of this lease Tenant hereby agrees, beginning as soon after the commencement of the term as is reasonably possible and continuing during the full remaining term of this lease, to operate its business in the demised premises; to keep its store open daily for the regular conduct of its business therein during the same hours at least as are customarily employed by other similar stores in the neighborhood of the demised premises, and to keep and maintain the show window displays in *388 an attractive and dignified manner: PROVIDED, HOWEVER, that Tenant shall be under no obligation to keep said store open on Sundays or holidays, or on days when it is customary for other stores in Dover, New Jersey, to keep closed, or when it is recognized business practice to keep closed. Tenant hereby agrees to join with the other tenants in the shopping center in any endeavor to formulate a common plan of store hours and business days; and if Tenant and said other tenants shall arrange such common plan, then the store hours and business days of Tenant's store on the demised premises, in lieu of the store hours and business days hereinabove set forth in this Article, shall be those prescribed by said common plan during the continuance thereof. It is further agreed that no failure by Tenant to keep said store open for business by reason of the elements, fire, labor disturbances or other causes beyond the control of Tenant shall be deemed a breach by Tenant of the terms of this Article."
The lease provided for a minimum annual rental of $7,000 plus a shifting percentage of gross sales in excess of the minimum rent.
Defendant took possession and began business on September 25, 1957, and has continued to pay the minimum rental down to the present time. Operations were discontinued about April 4, 1959, when defendant posted a window sign indicating that the store was closed for alterations. Several telephone calls between plaintiff and defendant, and correspondence during April 1959, confirmed that the ostensible reason for defendant's shutdown was this remodeling. However, on May 1, 1959 defendant wrote plaintiff that it was permanently ceasing operations, indicating that it had found the enterprise unprofitable and had decided it would be less costly to pay the minimum rent than to resume operations.
Plaintiff subsequently instituted its action for a mandatory injunction directing defendant specifically to perform the covenants contained in paragraph Third of the lease. Defendant answered and by way of separate defenses contended, among other things, that (1) equity should not grant specific performance of a contract relating to personal services or requiring court supervision over a long period of time; (2) defendant had continued to pay its minimum rent down to date, but had not enjoyed sufficient business during its period of operation to April 1, 1959 so as to *389 be required to pay any additional rent over and above the minimum; (3) plaintiff had not suffered any substantial or irreparable injury and had an adequate remedy at law; (4) equity should not grant specific performance where the benefits to plaintiff from the store being open would be slight in comparison to the substantial injury sustained by defendant. Defendant also alleged that plaintiff was not entitled to the relief demanded because the lease was executed as a result of plaintiff's misrepresentations, upon which defendant relied in entering into the lease. These were spelled out in the counterclaim whereby defendant sought rescission of the lease because, it was alleged, plaintiff had falsely represented that the shopping center would be completed during 1957, a department store would be built and operating, all sidewalks would be completed immediately, a theatre would be installed and operating in 1957, and parking facilities for 2,000 cars would be constructed within a reasonable time.
The trial judge refused to permit parol evidence offered by defendant with respect to these representations, apparently on the ground that such evidence would contradict the express terms of paragraph Seventeenth of the lease, which provides:
"Seventeenth: Landlord has made no representations or promises with respect to the demised premises except as herein expressly set forth. This lease contains the entire agreement between the parties hereto; and any agreement hereafter made shall not operate to change, modify, terminate or discharge this lease in whole or in part unless such agreement is in writing and signed by the party sought to be charged therewith."
He also indicated that the representations on which defendant claimed it relied were nothing more than simple promises.
Defendant claims error because the representations were material, and it would not have executed the lease but for them. It argues that the parol evidence was permissible to prove fraud notwithstanding paragraph Seventeenth.
*390 There can be no question that parol evidence is admissible to establish that the execution of a contract was procured by fraud, notwithstanding a provision that no representations had been made except those set forth in the agreement. Guilder v. Boonton-Pine Brook-N.Y. Bus Co., 110 N.J.L. 103, 105-106 (E. & A. 1932); Tams v. Abrams, 120 N.J. Eq. 253, 258-259 (E. & A. 1936); 32 C.J.S., Evidence, § 979(a), p. 942 et seq. (1942). Fraud may always be shown by parol evidence, since no attempt is being made to alter, vary or contradict the integrated instrument, but only to show that it is not an unimpeachable document, i.e., that it is void or voidable. Harker v. McKissock, 12 N.J. 310, 323 (1953).
One of the theories advanced by plaintiff in support of the argument that fraud could not be shown by the proffered parol evidence is that it dealt with the subject matter of the lease itself the alleged fraudulent representations were directly and specifically contradictory to the express terms of the written instrument. Winoka Village, Inc. v. Tate, 16 N.J. Super. 330 (App. Div. 1951), is cited in support. However, plaintiff produces only partial evidence of direct contradiction between the terms of the lease and the alleged representations. The mere fact that both in some degree related to the physical layout or improvement of the shopping center is not sufficient to bar evidence of fraud. The Winoka holding is a narrow one and should be confined to its facts. Conceivably, one of the alleged representations the proposed 2,000-car parking lot was contradicted within the Winoka rationale, since paragraph Thirty-fifth (h) provides that "Landlord represents that the parking area will have accommodations for not less than one thousand vehicles and will have a paved surface." But the other representations do not appear to be expressly contradicted by the writing, and therefore should be admissible unless barred on another ground.
There is such other ground, and although the trial court did not clearly rest its exclusion of the proffered evidence *391 upon that basis, we may do so in affirming its result. The rejected parol evidence related to representations as to future events, and so was inadmissible.
Legal fraud consists of a material representation of a presently existing or past fact, made with knowledge of its falsity, with the intention that the other party rely on it, and he does so rely to his damage. In equitable fraud the second element (knowledge) is not necessary, but the other four are essential. A mere promise to do something in the future, subsequently unfulfilled, does not constitute actionable fraud. Anderson v. Modica, 4 N.J. 383, 391 (1950). It is a mere breach of contract for which an action for money damages may lie.
A promise to do something in the future, which the promisor never intended to keep when he made the promise, may satisfy the first element of fraud as a material misrepresentation of the promisor's state of mind at the time of the promise. Piechowski v. Matarese, 54 N.J. Super. 333, 345 (App. Div. 1959). The trial court gave defense counsel adequate opportunity to state fully his proffer of proof before rejecting it as violative of the parol evidence rule. Neither the proof proffered, nor indeed the pleadings, give any indication that there was a fraudulent misrepresentation of the promisor's state of mind at the time the representations were allegedly made. The proffer revealed nothing more than representations on plaintiff's part to do certain things in the future. Failure to keep such promises, even if made, would not, without more, constitute fraud. Accordingly, the parol evidence was properly excluded.
There is another reason why defendant cannot prevail. It is manifest that the proffered testimony was properly excluded and the counterclaim justifiably dismissed because of defendant's laches. Assuming the alleged representations were made, the evidence is uncontradicted that defendant regularly paid the minimum rent under the lease from October 1, 1957 through November 1959. It is also apparent *392 that defendant must have known by January 1958 that those representations would not be carried out, i.e., the shopping center completed by the date represented, namely, during 1957; a department store operating there; all sidewalks completed immediately; a theatre installed and operating in 1957, and parking facilities for 2,000 cars constructed within a reasonable time. Nevertheless, defendant elected to continue in possession and pay rent for some 24 months after its discovery of the alleged fraud. It did not close its store until April 1959, 16 months after it must have known of the alleged fraud which induced it to enter into the lease. This may be considered as the earliest possible date defendant showed any indication it did not consider the lease valid. But it did not affirmatively do so; when it wrote on May 1, 1959, the reason given for not reopening the store and choosing to pay the minimum rent was the unprofitable operation at the site.
When a party treats a contract as valid and subsisting, he has made an election which prevents him from later seeking its rescission. The power to elect between alternative and inconsistent choices may be destroyed by laches, as is the case when a party does not act promptly to avoid the contract after discovering the alleged fraud. 3 Williston on Contracts (rev. ed. 1936), § 683, p. 1970. There can be no question but that New Jersey follows this rule. Ajamian v. Schlanger, 20 N.J. Super. 246, 249 (App. Div. 1952), and authorities cited; Jones v. Gabrielan, 52 N.J. Super. 563, 576 (App. Div. 1958). (In Jones the rule is stated that delay in rescission of a contract is evidence of a waiver of the fraud and an election to treat the contract as valid. We note, however, that the rule is not strictly based upon waiver, but upon the doctrine of election. See Williston, above.)
Since it is clear from the proofs at the end of plaintiff's case that defendant was barred by laches from asserting fraud, and since defendant did not indicate in its offer of proof that it would show the contrary, the proffered *393 testimony was properly excluded and the defense and counterclaim held without merit as a matter of law.
Defendant next contends that plaintiff should have been denied relief since money damages would be adequate, and even if that were not so, a court of equity should not direct the performance of detailed provisions of a lease, such as here, because of the necessity of continued superintendence. In reply, plaintiff cites paragraph Ninth (3) of the lease, which provides that "In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Landlord shall have the right of injunction * * *." It argues that damages for the breach of a percentage lease arrangement are not readily measurable. Plaintiff also adduced proofs to show that the very nature of the shopping center as a cooperative enterprise, with each store's success dependent on the continued operation of the other stores, requires that defendant's bakery business be maintained in accordance with the lease for the benefit of all involved. Plaintiff further cites recent decisions showing a judicial tendency toward granting specific performance wherever feasible. It argues that the remedy is particularly feasible here because plaintiff has waived judicial superintendence and is willing to rely upon the defendant's self-interest in continuing to preserve its good reputation by conducting its business in a manner which would reflect credit upon its operations.
The mandatory injunction, as we have pointed out, does no more than require defendant to reopen and resume its retail bakery business, to display the name of "Cushman's" on the outside of the premises, to keep the store open as required by paragraph Third of the lease, and to maintain a manager or salesperson in charge.
Courts have recognized the uniqueness of a percentage lease and have generally implied therefrom an obligation on the part of the lessee to occupy the property and to use reasonable diligence in operating the business in a productive manner. Silverstein v. Keane, 19 N.J. 1, 12 (1955); *394 1 American Law of Property, § 3.66, p. 321 (1952). But the gravamen of the complaint here is not only the possible loss of additional income by way of a percentage of defendant's increased gross sales, but the difficulty in measuring the harm that would come from the withdrawal of one of the members of a semi-cooperative enterprise like a shopping center. Plaintiff's damages cannot therefore be accurately ascertained, and remedy by way of damages at law would be impractical and unsatisfactory. See 4 Pomeroy, Equity Jurisprudence (5th ed. 1941), §§ 1401-1403, p. 1033 et seq.
We turn to defendant's argument that relief should have been denied because of the necessity of continued superintendence on the part of the court. Equity will not ordinarily order specific performance where the duty to be enforced continues over a long period of time and is difficult of supervision. Pomeroy, above, § 1405, pp. 1048-1049. However, the modern tendency is to grant specific performance in the case of a clear breach, where the difficulties of enforcement are not great, particularly when compared with the inadequacy of damages at law. 5 Williston on Contracts (rev. ed. 1937), § 1423, p. 3977 et seq.; accord: 2 Restatement, Contracts, § 371, comment (a), p. 676 (1932); and see Mantell v. International Plastic Harmonica Corp., 141 N.J. Eq. 379 (E. & A. 1947); Zygmunt v. Avenue Realty Co., 108 N.J. Eq. 462 (Ch. 1931); Williams v. Lowe, 79 N.J. Eq. 173 (E. & A. 1911); Curtice Brothers' Co. v. Catts, 72 N.J. Eq. 831 (Ch. 1907). The duty here imposed is no more difficult of enforcement than that involved in Fleischer v. James Drug Stores, Inc., 1 N.J. 138 (1948), where specific performance was ordered of a continuing contract of indefinite duration for furtherance of a cooperative plan in purchases.
Price v. Herman, 81 N.Y.S.2d 361 (Sup. Ct. 1948), affirmed 275 App. Div. 675, 87 N.Y.S.2d 221 (App. Div. 1949), is distinguishable on its facts. There was no percentage lease or shopping center. Involved was a bakery *395 with ovens, where skill in the baking process was essential, and not a chain store retail outlet for the sale of its products.
The specific performance granted by the court was directed at certain covenants simple of performance and supervision. The judgment expressly provided that except as specifically set forth therein, the court would "make no direction with respect to the method of operating the defendant's business on the demised premises or to the quality of the products sold and services rendered by the defendant therein * * *."
Since the court was careful to limit its order, defendant's objection to it on the ground of required continued supervision is without persuasive force. The judgment as it stands is not so difficult of enforcement that it can be said the difficulties of supervision outweigh the importance of granting specific performance because of the inadequacy of the remedy of damages at law.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550500/ | 229 B.R. 456 (1999)
In re ARROW TRANSPORTATION CO. OF DELAWARE, Debtor-in-Possession.
State of Oregon, Department of Transportation, Appellant,
v.
Arrow Transportation Co. of Delaware, Appellee.
Bankruptcy No. 397-34556-PSH11, Civ. No. 98-1465-FR.
United States District Court, D. Oregon.
January 14, 1999.
Hardy Myers, Attorney General, Mary Lou Haas, Assistant Attorney General, Portland, Oregon, for appellant.
David W. Criswell, Ball Janik, LLP, Portland, Oregon, for debtor-in-possession/appellee.
*457 OPINION AND ORDER
FRYE, District Judge.
The matter before the court is the appeal by the State of Oregon, Department of Transportation, from the Memorandum Opinion of the United States Bankruptcy Court for the District of Oregon of August 6, 1998. The bankruptcy judge ruled that the Oregon Department of Transportation had a general unsecured claim because the obligation upon which the claim was based is a fee rather than a tax.
BACKGROUND
This case arose from an objection by the debtor, Arrow Transportation Co. of Delaware (debtor Arrow), to a proof of claim filed by the Oregon Department of Transportation (ODOT). The bankruptcy court upheld debtor Arrow's objection, ruling that the weight and mile tax assessments against commercial vehicles operating on the highways of the State of Oregon pursuant to the laws of the State of Oregon are not taxes and therefore are not entitled to priority of payment in bankruptcy.
FACTS
Debtor Arrow has operated as a motor carrier in the State of Oregon since 1931. Debtor Arrow has hauled bulk liquid chemicals on the highways of the State of Oregon pursuant to an operating authority issued by the predecessor to ODOT, the Oregon Public Utility Commission.
Pursuant to the laws of the State of Oregon, no for-fee or private carrier shall operate a motor vehicle for the transportation of persons or property on any public highway of the State of Oregon without being in compliance with Chapter 825 of the Oregon Revised Statutes. A carrier of persons or property for hire must possess a valid permit or certificate of authority from ODOT authorizing the proposed operation. ORS 825.100. The carrier must pay a fee of $300.00 to obtain a permit. ORS 825.180. A motor carrier operating in the State of Oregon must obtain identification plates or markers for each of its vehicles operated in connection with its permit or certificate of authority at a cost of $7.50 each. ORS 825.470(1)(a).
In addition to the imposition of fees for permits and identification plates, state law imposes a tax upon motor carriers. ORS 825.474 states, in part:
Motor carrier tax for use of highways. (1) In addition to other fees and taxes imposed by law upon carriers, there shall be assessed against and collected from every carrier a tax for the use of the highways, to apply to the cost of administration of this chapter and for the maintenance, operation, construction and reconstruction of public highways.
(2) The tax rate which shall apply to each motor vehicle shall be based upon the declared combined weight of the motor vehicle and in accordance with the weight group tax rates as shown in the tables set forth in ORS 825.476.
A motor carrier permit exempts the motor carrier from paying the 24 cents per gallon fuel tax at the point of purchase as required by state law of all persons who operate motor vehicles in the State of Oregon. ORS 319.530. Taken together, the fuel tax imposed pursuant to ORS 319.530 and the motor carrier tax imposed pursuant to ORS 825.474 require each vehicle traveling on the highways of the State of Oregon to pay a tax used to maintain and construct those highways.
As a motor carrier, debtor Arrow was required to file with ODOT monthly reports of the miles each of its vehicles had traveled in the State of Oregon and to pay a tax based upon the weight of each of the operating vehicles and the miles each had traveled on the highways of the State of Oregon pursuant to ORS 825.474.
On June 2, 1997, debtor Arrow filed a petition in bankruptcy. At the time the petition in bankruptcy was filed, debtor Arrow owed ODOT the sum of $75,326.38 for unpaid taxes for the two months immediately preceding the filing of the bankruptcy petition, and for penalties in the sum of $7,140.33. ODOT filed a proof of claim in the bankruptcy court contending that it had priority status for the unpaid taxes and accrued interest, *458 and had a general unsecured status for the penalties.
Debtor Arrow filed an objection to the claim of ODOT on the ground that the amounts owed to ODOT were not taxes but fees, and were therefore not entitled to priority of payment in the bankruptcy court.
In a Memorandum Opinion filed on August 6, 1998, 227 B.R. 183, the bankruptcy court concluded that "[t]he Department's highway use charges are not `taxes' [and] are not entitled to treatment under § 507(a)(8)(E) as a priority debt." Id. at 187. The bankruptcy court concluded that the highway use tax did not meet the "involuntary pecuniary burden" element of the term "tax" set forth in the seminal case of In re Lorber Indus. of Cal., Inc., 675 F.2d 1062, 1066 (9th Cir.1982).
CONTENTIONS OF ODOT
ODOT contends that the bankruptcy court erred in determining that the highway use tax in ORS 825.474 was a fee rather than a tax. ODOT contends that the involuntary test enunciated in Lorber and used by the bankruptcy court is not appropriate in excise tax cases. Even using the involuntary test of Lorber, ODOT contends that there is no alternative, practical or impractical, for an Oregon trucking company engaged in the hauling of bulk chemicals or other property to use other than the Oregon highways.
CONTENTIONS OF DEBTOR ARROW
Debtor Arrow contends that the bankruptcy court properly applied the Lorber test to determine that the highway use charge is a fee, and therefore not entitled to treatment as a priority tax in bankruptcy. Debtor Arrow contends that its business was not limited to the transportation of bulk liquid commodities. Debtor Arrow contends that it had the option of increasing its trucking business or decreasing its trucking business and focusing on other aspects of its business, such as washing truck tanks.
APPLICABLE LAW
11 U.S.C. § 507(a) states, in part:
(a) The following expenses and claims have priority in the following order:
. . . .
(E) an excise tax on
(i) a transaction occurring before the date of the filing of the petition for which a return, if required, is last due, under applicable law or under any extension, after three years before the date of the filing of the petition; or
(ii) if a return is not required, a transaction occurring during the three years immediately preceding the date of the filing of the petition;. . . .
11 U.S.C. § 507(a)(8)(E).
The United States Supreme Court has explained that taxes are "those pecuniary burdens laid upon individuals or their property for the purpose of defraying the expenses of government or undertakings authorized by it." City of New York v. Feiring, 313 U.S. 283, 285, 61 S. Ct. 1028, 85 L. Ed. 1333 (1941). An excise tax is a "tax imposed on the performance of an act, the engaging in an occupation, or the enjoyment of a privilege." Black's Law Dictionary, p. 506 (5th ed.1979).
In Lorber, supra, the Los Angeles County Sanitation District argued that sewer use fees assessed against a debtor prior to the petition in bankruptcy were a "tax." The circuit court defined the term "tax" for the purpose of determining priority status in bankruptcy explaining that:
[T]he elements which characterize an exaction of a "tax" . . . are as follows:
(a) An involuntary pecuniary burden, regardless of name, laid upon individuals or property;
(b) Imposed by, or under authority of the legislature;
(c) For public purposes, including the purposes of defraying expenses of government or undertakings authorized by it;
(d) Under the police or taxing powers of the state.
675 F.2d at 1066.
The debtor had argued that its sewer charges were not taxes because the debtor was not legally obligated to use the sewer system, and the bankruptcy court agreed that the debtor "was legally free not to use the system, and its voluntary use thus constituted *459 an implied contractual debt." Id. at 1065. The district court reversed on appeal, holding that the debtor's "use of the system was involuntary, because no practical alternatives were available." Id. The United States Court of Appeals for the Ninth Circuit reversed the district court:
In determining if [the debtor]'s use of the system was voluntary, and if it therefore consented to imposition of the fees, we are not free to consider the practical and economic factors which constrained [the debtor] to make the choices it did. The focus is not upon [the debtor]'s motivation, but on the inherent characteristics of the charges.
. . . .
. . . The imposition of these charges thus was triggered by [the debtor]'s decision to discharge into the system large amounts of industrial wastewater. Because the assessment resulted from [the debtor]'s acts, it falls within the non-tax fee classification. . . .
Id. at 1066-67.
In In re Camilli, 94 F.3d 1330 (9th Cir. 1996), the United States Court of Appeals for the Ninth Circuit concluded that the debtor's obligation to the industrial commission of the State of Arizona for workers' compensation benefits that the industrial commission paid to the debtor's employee was a nondischargeable excise tax. The debtor in Camilli failed to procure workers' compensation insurance as required by the laws of the State of Arizona, and was therefore required by the laws of the State of Arizona to repay monies paid to debtor's employee after an employee was injured at work and the employee was paid benefits by a statutorily-established Special Fund. The United States Court of Appeals explained:
In Lorber, the debtor owed the local sewer district charges for the debtor's use of the sewer system to discharge industrial waste. In holding that the obligation was contractual in nature rather than "involuntary," we stressed in Lorber that the obligation itself was not created by the statute authorizing imposition of the fees. Id. at 1067. Rather, the obligation was created by the debtor's voluntary act of using the system. See id. at 1067, n. 4.
Here, Camilli contends that her obligation is materially similar to that in Lorber, and the BAP majority agreed, holding that it was Camilli's "voluntary" decision not to purchase insurance that gave rise to this obligation. This holding is not, however, an accurate description of the legal effect of Camilli's failure to procure workers' compensation insurance in Arizona, even if that failure could be considered to be a "voluntary" act. The source of Camilli's obligation to repay the workers' compensation benefits in this case was not her failure to obtain insurance, but the statutorily-created obligation to reimburse the Special Fund once the Fund paid benefits to an uninsured employee. By contrast, in Lorber the event that triggered the charges was the voluntary use by the debtor of the sewer system. The obligation to repay the Fund in this case is thus a product of legislative fiat; at the time it arose, and the lien was established, it was wholly beyond the control of the debtor.
94 F.3d at 1333.
ANALYSIS
The highway use tax was designated a tax by the Oregon legislature in ORS 825.474. In Portland Van & Storage Co. v. Hoss. 139 Or. 434, 9 P.2d 122 (1932), the Oregon Supreme Court concluded that:
the business of transporting freight for compensation upon the state's highways may properly be made the subject of an occupation tax. A law requiring a license is primarily intended to regulate a particular calling or business, and not to raise revenue, while an occupation tax is primarily intended to raise revenue by that method of taxation. . . .
139 Or. at 443-44, 9 P.2d 122.
Whether a particular claim is entitled to priority treatment in a bankruptcy case is a federal question. New Jersey v. Anderson, 203 U.S. 483, 491, 27 S. Ct. 137, 51 L. Ed. 284 (1906). "[L]abels imposed by state law are not controlling" when determining what constitutes a "tax." Camilli, 94 F.3d at 1331. However, courts look to the *460 provisions of the state law giving rise to the claim in order to determine whether the obligation has the incidents of a tax. See Feiring, 313 U.S. at 285, 61 S. Ct. 1028.
Here, the bankruptcy court concluded that the highway use tax in ORS 825.474 does not meet the involuntary element of a tax set forth in Lorber. The bankruptcy court explained:
The Oregon motor carrier highway use charges covered by ORS 825.474-476 are comparable to the sewer charges in Lorber. They are only imposed on a carrier to the extent that it chooses to use the highway. It may choose not to use the highway and avoid the tax. Admittedly, it would be highly impractical, if not impossible, for a motor carrier to avoid using the highway and to stay in business. But the Lorber court unambiguously rejected the district court's reasoning, which reflected that logic, that "Lorber's use of the system was involuntary because no practical alternatives were available." Lorber at 1065.
Memorandum Opinion of August 6, 1998, 227 B.R. at 185-86.
This court concludes that the involuntariness test in Lorber cannot be the determining factor in deciding whether an excise tax qualifies for priority under 11 U.S.C. § 507(a)(8)(E). Since an excise tax is, by definition, based upon a transaction which is voluntarily incurred, the application of the involuntariness test to an excise tax would render section 507(a)(8)(E) without meaning. See, e.g., In re Park, 212 B.R. 430 (D.Mass. 1997).
In Lorber, the United States Court of Appeals for the Ninth Circuit explained that "[t]he focus is not upon [the debtor's] motivation, but on the inherent characteristics of the charges." 675 F.2d at 1066. In this case, the charges to debtor Arrow pursuant to ORS 825.474 are a part of the overall scheme for collecting fuel taxes in the State of Oregon. The Oregon weight and mile tax in ORS 825.474 and the fuel tax in ORS 319.530, taken together, place an involuntary burden upon all who elect to drive on the highways in the State of Oregon "to enable the further construction of highways and to provide for the operation, preservation and maintenance of highways already built." ORS 825.007(2)(i).
It is not possible for a motor carrier in the State of Oregon to avoid using the highways and paying the weight and mile tax under ORS 825.474. While debtor Arrow could choose not to be a motor carrier in the State of Oregon, once debtor Arrow chooses to act as a motor carrier in the State of Oregon, the obligation to contribute to the maintenance of the public highways is imposed by legislative fiat.
At the time the obligation of debtor Arrow to ODOT arose, it was wholly beyond the control of debtor Arrow. The legislative scheme includes remedies to collect the obligation which are not available to all creditors. ORS 825.504. The taxes collected are used for the public purpose of the maintenance, operation, construction and reconstruction of highways for use by all who travel the highways of the State of Oregon.
This court concludes that the obligation of debtor Arrow pursuant to ORS 825.474 meets the Lorber elements to qualify as a tax. The claim by ODOT for debts incurred pursuant to ORS 825.474 is entitled to priority treatment under 11 U.S.C. § 507(a)(8)(E).
CONCLUSION
The judgment of the United States Bankruptcy Court is reversed, and the case is remanded to the bankruptcy court for further proceedings consistent with this Opinion and Order.
IT IS SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550484/ | 164 A.2d 853 (1960)
Herbert G. FAIRFIELD et al.
v.
SACCO STONE & ASPHALT CO.
Ex. No. 8938.
Supreme Court of Rhode Island.
November 7, 1960.
*854 Higgins & Cavanagh, Joseph V. Cavanagh, Harold E. Adams, Jr., Providence, for plaintiffs.
Hinckley, Allen, Salisbury & Parsons, Matthew W. Goring, Providence, for garnishee Industrial Trust Company.
POWERS, Justice.
This is an action of assumpsit which was tried before a justice of the superior court sitting without a jury and resulted in a decision for the plaintiffs in the sum of $9,821.01. Thereafter the plaintiffs moved to charge the garnishee, Industrial Trust Company, now Industrial National Bank, and after a hearing thereon the trial justice granted such motion but charged said garnishee only in the sum of $25.97. The case is here on the plaintiffs' bill of exceptions to that decision.
The record discloses that defendant was the owner of an asphalt plant located in Cumberland, Rhode Island; that the plant and a stone crusher were mortgaged to the garnishee by separate instruments; that as a result of a fire on June 25, 1947 at the plant, five checks totaling $9,413.64 were drawn by several insurance companies in settlement of the loss; and that all checks were made payable to defendant and the above-named garnishee as mortgagee, as the latter's interest might appear, or in words of like effect.
The record further discloses that although the amount received in settlement was for the damage occurring to the plant, the stone crusher not having been damaged, nevertheless the mortgagee applied the proceeds from the checks in satisfaction of both mortgages. It did so by virtue of an alleged oral assignment by defendant. Although the questions of whether or not the assignment existed or was valid were argued and briefed in support of plaintiffs' exceptions to the decision of the trial justice, we do not deem it necessary to consider those questions in view of our conclusion.
The evidence reveals that plaintiffs are insurance agents or brokers to whom defendant corporation was indebted in the sum of $9,821.01; that the checks in question were delivered at 11:37 a.m. on September 18, 1947 by plaintiffs' counsel to the bank upon its demand as mortgagee; and that three minutes later the bank was served with the writ attaching the personal estate of defendant in its hands and possession as provided by general laws 1938, chapter 550.
It appears that the affidavit filed by the garnishee disclosed the sum of $25.97 as constituting all of the personal estate of defendant in its hands and possession at the time the writ was served. The $25.97 represented the aggregate balance of two accounts of defendant and was independent of *855 any interest defendant may have had in the checks. The garnishee, contending that defendant had no equity in the checks, did not refer to them in its affidavit. It relies principally on the rule set forth in Hanaford v. Hawkins, 18 R.I. 432, at page 435, 28 A. 605, at page 606, that "where one holds a promissory note, bank check, or chose in action, belonging to a defendant, he cannot be charged for the same on trustee process; because these are not money and may never be paid. But if a check or note be held and treated as cash, so that a debt is absolutely due from a trustee to a defendant on account thereof, whether the note or check be good or not, the garnishee should be charged. Hancock v. Colyer, 99 Mass. 187. This is a question of fact, and, so far as the facts are disclosed in the record, the refusal of the court to charge the garnishees upon this check was correct." It is our opinion that the position of the garnishee is well taken.
The plaintiffs argue that this court should take judicial notice of the fact that payment by check is a far more common experience in commerce than it was at the time the Hanaford case was decided. Even conceding this to be so, the reasoning of this court in the Hanaford case remains sound. The checks in the instant case were payable to defendant by the insurance companies which drew them, but actual payment might never be realized even though the likelihood of nonpayment could be demonstrated as being more remote in modern commerce than heretofore.
The plaintiffs further contend, however, that in E.E. Mason, Inc. v. Green, R.I., 153 A.2d 539, 541, which they point out is subsequent to the Hanaford case, the above-quoted rule has been materially affected. The plaintiffs fail to recognize that the Green case was "governed by the decision of this court in Lee v. Robinson, 15 R.I. 369, 5 A. 290." Not only was the Lee decision prior to the Hanaford decision, but it was rendered by four of the same justices concurring in Hanaford. A further distinction between the Green and Hanaford cases is to be found by comparing the situations of the respective garnishees. In the Green case, the garnishee was the drawer of the check and had treated delivery thereof as payment out of its hands of funds owing to the defendant. In the Hanaford case, the garnishees were holding checks which not only might never be paid but were not being treated as debts owing to the defendant.
The plaintiffs' exceptions are overruled, and the case is remitted to the superior court for entry of judgment on the decision. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551227/ | 908 A.2d 622 (2006)
2006 ME 116
RONALD P. SHERBERT
v.
U. CHARLES REMMEL II et al.
Docket: Cum-06-101.
Supreme Judicial Court of Maine.
Submitted On Briefs: July 18, 2006.
Decided: October 17, 2006.
Valeriano Diviacchi, Esq., Diviacchi Law Office, Boston, MA, Attorney for plaintiff.
Timothy H. Norton, Esq., Jennifer A. Archer, Esq., Kelly, Remmel & Zimmerman, Portland, ME, Attroneys for defendant.
Panel: SAUFLEY, C.J., and DANA, ALEXANDER, CALKINS, LEVY, and SILVER, JJ.
SAUFLEY, C.J.
[¶1] Ronald P. Sherbert appeals from the dismissal of his complaint against attorney U. Charles Remmel II and the law firm of Kelly, Remmel & Zimmerman, P.A., entered in the Superior Court (Cumberland County, Cole, J.). Because the court did not act on Sherbert's pending motion to amend the complaint prior to ruling on the motion to dismiss, we vacate the dismissal and remand to the Superior Court for action on Sherbert's motion to amend.
I. BACKGROUND
[¶2] Sherbert filed a complaint in Superior Court against Remmel and his law firm[1] on November 8, 2005, seeking damages for an allegedly fraudulent misrepresentation made by Remmel to the Portland Police Department. Sherbert alleges that Remmel's misrepresentation caused the police department to vacate a restraining order against a third person, Remmel's client. The client was then able to access and take Sherbert's property.
[¶3] On November 29, 2005, Remmel filed a motion to dismiss the complaint for failure to state a claim pursuant to M.R. Civ. P. 12(b)(6) and for failure to plead fraud with particularity pursuant to M.R. Civ. P. 9(b). Sherbert filed a written opposition to the motion on December 19, 2005, in which he stated he would amend his complaint. Hearing on the motion to dismiss was held on January 20, 2006. Two days before the hearing, Sherbert filed a motion to amend the complaint, along with an amended complaint.[2]
[¶4] Sherbert is self-represented, and neither his complaint nor his amended complaint are models of clarity. However, the gist of his complaints center around his allegation that Remmel knowingly made false statements to the police in order to obtain a rescission of the restraining order that kept Remmel's client from obtaining access to Sherbert's business, where Remmel's client had recently been employed. Sherbert's original complaint asserted that Remmel's actions constituted fraud, but it did not contain a claim of fraudulent interference with advantageous relations. His proposed amended complaint, however, did contain that claim.[3]
[¶5] After hearing arguments on January 20, 2006, the court issued an order dismissing Sherbert's original complaint on January 31, 2006. The court found that the specific fraud alleged in that complaint required proof that Sherbert himself had relied on Remmel's fraudulent misrepresentations to his detriment. Because the complaint alleged that the police department had been misled, not Sherbert, the court concluded that the complaint could not stand.[4] Accordingly, the court dismissed the complaint.
[¶6] The record contains no judicial notation or order regarding the amended complaint, nor does the record reflect a decision by the court to dismiss the original complaint with prejudice. Nonetheless, an entry on the docket sheet reads "Motion to Amend Pleading Moot on 1/31/2006" (emphasis added). That notation was entered on the docket on the same day as the entry of the order dismissing the original complaint. Sherbert filed a motion to reconsider the court's order of dismissal, which the court denied without hearing.
II. DISCUSSION
[¶7] The question presented on this record is whether the court erred in dismissing the complaint before ruling on the pending motion to amend that complaint. "Generally, a party is entitled to a ruling on a motion." Jones v. Suhre, 345 A.2d 515, 517-18 & n. 5 (Me. 1975) (declining to adopt a strict rule that unaddressed motions are denied as a matter of law). Leave to amend a complaint "shall be freely given when justice so requires." M.R. Civ. P. 15(a); see also Barkley v. Good Will Home Ass'n, 495 A.2d 1238, 1240 (Me. 1985).
[¶8] Although the court may deny a motion to amend if it is untimely filed or filed for delay, action on the motion to amend should occur before the court entertains a dispositive motion. Similarly, "[a] court does not abuse its discretion when it denies a motion for leave to amend when the moving party fails to show how it could cure the complaint. . . ." In re Petition of Sen, 1999 ME 83, ¶ 10, 730 A.2d 680, 683 (citing Potter, Prescott, Jamieson & Nelson, P.A. v. Campbell, 1998 ME 70, ¶ 10, 708 A.2d 283, 286-87). In other words, although denial may be appropriate for late, dilatory, or ineffective filings, a trial court should ordinarily rule on a motion to amend before acting on a motion that could be dispositive of the original complaint. See Jones, 345 A.2d at 518.
[¶9] In the matter before us, it appears that the court never addressed Sherbert's motion to amend, and never undertook a review of the contents of the amended complaint. We cannot determine on this record whether Sherbert's motion to amend was untimely, nor did the court make a finding that it was untimely, ineffective, or interposed for delay. Indeed, because the litigation is relatively new, the record contains no deadlines established by the court, and the motion to amend was filed less than three months after the filing of the complaint and before an answer had been filed by the defendants. See M.R. Civ. P. 15(a).
[¶10] Finally, although a docket entry indicates that the motion to amend was declared "moot," nothing in the record or other docket entries, and no written order or notation on the motion itself, reveals that the motion court disposed of the motion in such a manner. Given that the court would ordinarily act on a motion to amend a complaint before acting on a motion to dismiss, we cannot be confident that the docket declaration actually represents the action of the court. If the motion was, in fact, declared moot because the court intended to dismiss the original complaint with prejudice without acting on the motion to amend, the ruling was in error because the court should have acted on the motion to amend before entertaining the motion to dismiss. See Jones, 345 A.2d at 518.
The entry is:
Judgment of dismissal vacated. Remanded to the Superior Court for action on Sherbert's motion to amend.
NOTES
[1] For ease of reading, we will hereafter refer to the defendants collectively as "Remmel."
[2] Neither the docket entries nor the motion court file contains any indication as to when notice of the motion hearing was sent to Sherbert. Because he appeared at the hearing, it is assumed that he received notice, but the filing of his motion to amend cannot be judged against the timing of the notice of hearing.
[3] Along with other fraud-based torts, the amended complaint specifically alleged a cause of action for "tortious interference by fraud." In Maine, "`[i]nterference with an advantageous relationship requires the existence of a valid contract or prospective economic advantage, interference with that contract or advantage through fraud or intimidation, and damages proximately caused by the interference.'" Petit v. Key Bank of Me., 688 A.2d 427, 430 (Me. 1996) (quoting Barnes v. Zappia, 658 A.2d 1086, 1090 (Me. 1995)) (alteration in original). When tortious interference is committed through fraud, we have recognized that the plaintiff must establish the elements of fraud in the following manner:
A person is liable for fraud if the person (1) makes a false representation (2) of a material fact (3) with knowledge of its falsity or in reckless disregard of whether it is true or false (4) for the purpose of inducing another to act or to refrain from acting in reliance on it, and (5) the other person justifiably relies on the representation as true and acts upon it to the damage of the plaintiff.
Grover v. Minette-Mills, Inc., 638 A.2d 712, 716 (Me. 1994).
[4] The court also found that the complaint failed to allege specific circumstances constituting fraud as required by M.R. Civ. P. 9(b). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550568/ | 124 Pa. Commw. 9 (1989)
555 A.2d 279
Nancy M. Blackwell, Petitioner
v.
Commonwealth of Pennsylvania, Unemployment Compensation Board of Review, Respondent.
No. 223 C.D. 1988.
Commonwealth Court of Pennsylvania.
Submitted on briefs September 13, 1988.
March 2, 1989.
*10 Submitted on briefs September 13, 1988, to Judges DOYLE and McGINLEY, and Senior Judge KALISH, sitting as a panel of three.
*11 David B. Torrey, Thomson, Rhodes & Cowie, for petitioner.
No appearance for respondent Board.
Thomas M. Dailey, Goodwin, Procter & Hoar, and William D. Boswell, Boswell, Tintner & Piccola, for respondent, Wang Laboratories, Inc.
OPINION BY JUDGE DOYLE, March 2, 1989:
This is an appeal[1] by Nancy M. Blackwell (Claimant) from an order of the Unemployment Compensation Board of Review (Board) which affirmed a referee's determination and denied Claimant benefits pursuant to Section 402(b) of the Unemployment Compensation Law, (Law) Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §802(b) (voluntarily quitting work without necessitous and compelling reasons).
The Board, although it affirmed the referee's decision, made its own findings on appeal. It determined that Claimant had been employed by Wang Industries (Employer) as a systems consultant and that her last day of work was June 9, 1987. The Board further determined that Claimant had filed a complaint in October 1986 with the Equal Employment Opportunity Commission alleging discrimination. Subsequent thereto Claimant believed that she was subject to harassment regarding her job performance by certain management personnel. Claimant then voluntarily terminated her employment *12 because she believed that this harassment adversely affected her health. The Board further found that she was not specifically advised by her psychologist to resign and that she did not communicate to Employer any health problems prior to her resignation. Additionally, the Board specifically found that Claimant had not, in fact, been harassed at work and further stated that even if Claimant's evidence were deemed credible she would not be entitled to benefits because she had not informed Employer of her health problem prior to resigning. Accordingly, it denied benefits on the basis of Section 402(b) of the Law. Claimant then appealed to this Court.
On appeal here Claimant contends first that the Board capriciously disregarded competent evidence[2] in concluding that she did not have necessitous and compelling reasons for quitting and second, that the Board erred in concluding that Claimant had not effectively notified Employer of any health problems. Where, as here, the burdened party[3] was the only one to present evidence[4]*13 and that party did not prevail below, our scope of review is limited to determining whether the factfinder capriciously disregarded competent evidence and whether there has been a constitutional violation or an error of law. Russell v. Workmen's Compensation Appeal Board (Volkswagen of America), 121 Pa. Commw. 436, 550 A.2d 1364 (1988).
Claimant contends that the Board violated the dictates of Kirkwood v. Unemployment Compensation Board of Review, 106 Pa. Commw. 92, 525 A.2d 841 (1987), by not making sufficiently specific credibility determinations. We disagree. The Board specifically found that Claimant had not been harassed at work. It, thus, clearly rejected Claimant's evidence. Claimant, nonetheless, contends that such rejection was arbitrary and capricious because her testimony was unrebutted. A capricious disregard of the evidence has been defined as the disbelief of testimony which an individual of ordinary intelligence could not possibly challenge or entertain the slightest doubt as to its truth. Miceli v. Unemployment Compensation Board of Review, 93 Pa. Commw. 505, 512 n.2, 502 A.2d 297, 300 n.2 (1985). Despite Claimant's contention, it is clear that the Board can reject even uncontradicted evidence if it deems such evidence to be incredible. Stockdill v. Unemployment Compensation Board of Review, 28 Pa. Commw. 516, 368 A.2d 1341 (1977); cf. Treon v. Unemployment Compensation Board of Review, 499 Pa. 455, 453 A.2d 960 (1982) (Board cannot reject referee's findings based on *14 uncontradicted evidence without giving its reasons for doing so).
Our review of the record reveals that Claimant's testimony as to her medical problems was somewhat vague. For example, her only evidence of medical difficulties was her testimony of sleeping problems and a stomachache. Concededly, her psychologist gave more details, but as we will explain this fact does not alter our decision. As to her charge of harassment, Claimant complained principally that Employer called her customers to determine if they were satisfied with Claimant, switched some of Claimant's customer accounts and did not select her to participate in certain seminars. Certainly, these matters could be viewed as within the realm of managerial prerogative and Claimant did not present evidence that others who were similarly situated were not also subject to such actions. Accordingly, the Board could reasonably have had some doubt as to Claimant's interpretation of these events and we, therefore, conclude that it has not exhibited a capricious disregard of the evidence in rejecting her testimony.
As previously indicated, there may arguably be sufficient medical evidence to demonstrate necessitous and compelling reasons for a quit. Claimant, however, is still precluded from receiving benefits because she did not give the requisite notice.[5] The law is clear that a claimant *15 who desires to quit a job for health reasons must communicate her health problems to her employer so that the employer can attempt to accommodate the problem. Fox v. Unemployment Compensation Board of Review, 105 Pa. Commw. 7, 522 A.2d 713, petition for allowance of appeal denied, 517 Pa. 600, 535 A.2d 1058 (1987). Claimant, in support of her burden on the issue of notice, testified only that she did indicate to Employer's representative that she was "experiencing emotional problems" but when asked whether she explained that the problems were work-related she stated that she could not "recall the exact adjectives and verbiage [sic] used." N.T. 22.[6] As a matter of law this evidence is insufficient to meet her burden to provide notice. Thus, Claimant must be denied benefits.
Affirmed.
ORDER
NOW, March 2, 1989, the order of the Unemployment Compensation Board of Review in the above-captioned matter is hereby affirmed.
*16 Judge MacPHAIL did not participate in the decision in this case.
DISSENTING OPINION BY SENIOR JUDGE KALISH:
I respectfully dissent.
Petitioner testified that she was unable to sleep, had stomach problems and took medication for anxiety. She consulted a psychiatrist who told her that the circumstances surrounding her work were too stressful and that she should not continue to work in such a stressful environment. N. T. at 10-11. The employer presented no evidence to establish that the work did not adversely affect the petitioner's health, or that she had no other alternative but to terminate her employment.
Here, the Board erred in focusing only on petitioner's health, specifically, that petitioner's health was not severe enough to compel her to quit, and that it was not communicated to her employer. However, there is no requirement that petitioner's health must be affected in order to be a compelling and necessitous cause. "`Good cause' for voluntarily leaving one's employment (i.e. that cause which is necessitous and compelling) results from circumstances which produce pressure to terminate employment that is both real and substantial, and which would compel a reasonable person under the circumstances to act in the same manner." Taylor v. Unemployment Compensation Board of Review, 474 Pa. 351, 359, 378 A.2d 829, 832-33 (1977).
Since I feel that the Board's adjudication contained an error of law by using an improper standard, I would vacate and remand.
NOTES
[1] This case was reassigned to the opinion writer on January 24, 1989.
[2] Counsel has argued alternatively that there was not substantial evidence to support the Board's conclusion professing uncertainty with regard to the current state of the law on the subject of this Court's scope of review over appeals from administrative agencies under Section 704 of the Administrative Agency Law, 2 Pa. C. S. §704, because of seemingly conflicting Supreme Court opinions. Cf. Estate of McGovern v. State Employees' Retirement Board, 512 Pa. 377, 517 A.2d 523 (1986) with Odgers v. Unemployment Compensation Board of Review, 514 Pa. 378, 525 A.2d 359 (1987). We can appreciate the practicing bar's confusion in this regard and commend counsel for his thorough research on this issue. This Court has recently again attempted to clarify this area of the law. See Russell v. Workmen's Compensation Appeal Board (Volkswagen of America), 121 Pa. Commw. 436, 550 A.2d 1364 (1988).
[3] Claimant bore the burden of proving necessitous and compelling reasons for her voluntary quit. Quartz v. Unemployment Compensation Board of Review, 26 Pa. Commw. 611, 364 A.2d 961 (1976). Medical reasons can constitute necessitous and compelling ones. Fox v. Unemployment Compensation Board of Review, 105 Pa. Commw. 7, 522 A.2d 713 (1987), petition for allowance of appeal denied, 517 Pa. 600, 535 A.2d 1058 (1987).
[4] Employer presented evidence by telephone. Upon objection, however, this evidence was stricken because Claimant did not consent to Employer's testimony by telephone. See Knisley v. Unemployment Compensation Board of Review, 93 Pa. Commw. 519, 501 A.2d 1180 (1985).
[5] Because Claimant did not give notice it is unnecessary to concern ourselves with whether the Board failed to consider her doctor's testimony which it admittedly did not mention in its adjudication. Similarly, we need not attempt to divine whether the Board denied benefits because it observed that Claimant's doctor had not specifically advised Claimant to quit her job. Admittedly, such advice is not a necessary prerequisite to demonstrating necessitous and compelling reasons for a health quit. See e.g., Goettler Distributing, Inc. v. Unemployment Compensation Board of Review, 96 Pa. Commw. 632, 508 A.2d 630 (1986).
[6] Claimant also relies upon her resignation letter as evidence that she gave the proper notice. This letter states in pertinent part:
This memo is notification of my resignation from Wang Laboratories, Inc. I do not feel I can continue to function in my position (Systems Consultant) under the existing stressful environment. This includes all emotional pressures and high stress related situations created by Wang Management in regard to myself and my professionalism.
This letter is not only vague with respect to Claimant's medical condition, but any notice therein, since it was given at the same time as Claimant's resignation, came too late to permit Employer to accommodate Claimant. See Fox. The fact that the letter of resignation gave Employer two weeks notice does not alter our opinion in this regard inasmuch as the letter not only constituted an unconditional resignation, but was vague. Similarly, Claimant's doctor's note, dated subsequent to her resignation, is ineffective to establish proper notice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550591/ | 231 N.J. Super. 197 (1988)
555 A.2d 55
HALLIBURTON COMPANY, PLAINTIFF,
v.
SAM MOR AND JOSEPH OFECK, DEFENDANTS.
Superior Court of New Jersey, Law Division Bergen County.
Decided December 23, 1988.
*198 David P. Doyle for plaintiff (Pitney, Hardin, Kipp & Szuch, attorneys).
Gabriel Kaszovitz for defendant Joseph Ofeck.
SWEEN, J.S.C.
The issue in this case is whether a judgment debtor's individual retirement account (IRA) is exempt from a judgment creditor's levy of execution to satisfy a judgment.
In 1983 plaintiff obtained a judgment against defendants, jointly and severally, for $63,134.25. The judgment has been unpaid except for $500 obtained from a levy on a bank account of one of the defendants in 1983. Plaintiff has now levied execution on an "IRA Account" of defendant Joseph Ofeck and *199 when plaintiff made an application for an order directing the bank to pay the proceeds to the sheriff to be applied to the satisfaction of plaintiff's judgment, defendant opposed the application on the grounds that the "IRA Account" was exempt from levied execution by judgment creditors under the Federal Employee Retirement Income Security Act ("ERISA").
Generally, all property of a judgment debtor is subject to levy to satisfy a judgment under the provisions of N.J.S.A. 2A:17-15 et seq. except property reserved under N.J.S.A. 2A:17-19 and property specifically exempted by state or federal legislation. New Jersey has exempted certain governmental pensions from execution. N.J.S.A. 43:13-9; N.J.S.A. 43:18-12; N.J.S.A. 43:10-18.22, 18.71, 105; N.J.S.A. 43:16-7; N.J.S.A. 43:7-13; N.J.S.A. 43:10-57; N.J.S.A. 18A:66-116; N.J.S.A. 43:14-42; N.J.S.A. 43:19-17; N.J.S.A. 43:13-37.5; and 44. The federal government has exempted certain private pensions from execution under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C.A. § 1056(b)(1). However, neither New Jersey nor the federal government has enacted legislation which exempts all pensions or retirement benefits from execution.
Although defendant correctly asserts that ERISA exempts qualifying private pensions from execution except in family support situations such as in Ward v. Ward, 164 N.J. Super. 354 (Ch.Div. 1978) and the dicta in Northwest Airlines v. Roemer, 603 F. Supp. 7 (D.Minn. 1984) which stated, "[The] only exception to the general rule against garnishment appears to be where a debt is owed to an employee's spouse," defendant's argument presupposes that an "IRA" bank account is a qualified ERISA pension or retirement plan. Defendant relies upon the dicta in Mallory v. Mallory, 179 N.J. Super. 556 (Ch.Div. 1981) which provided:
The Congress, in establishing the IRA accounts as part of the comprehensive Employee Retirement Income Security Act (hereinafter ERISA), provided that there was to be no alienation or assignment of benefits, 29 U.S.C.A. § 1056(d)(1). [At 559.]
*200 After a careful reading of ERISA, the court respectfully disagrees with the court's finding in the Mallory case and concludes that individual retirement accounts (IRA) are not pension plans exempted from execution but are merely tax preferred savings accounts whose funds are available to the depositor upon payment of certain penalties.
IRA savings accounts do not meet the following criteria of ERISA-qualified pension or retirement plans:
1. "Pension Plan" is defined by "ERISA" as meaning
... any plan, fund or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program
(i) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond ... [29 U.S.C.A. § 1002(2)(A)]
IRA's are established by individuals, not employer or employee organizations, and do not result in a deferral of income by an employee for a period extending to the termination of his or her employment or beyond. They are accounts established by individuals by contract between the individual and a third party such as a bank with a term unrelated to the individual's employment or retirement.
2. ERISA-qualified pension and retirement plans are required to contain anti-alienation provisions, 29 U.S.C.A. § 1056(d), and make a distinction between an ERISA-qualified pension plan and an individual retirement account or annuity described in section 408 of the Internal Revenue Code. 29 U.S.C.A. § 1051(6).
3. Regulations adopted by the United States Department of Labor concerning ERISA state that the term "pension plan" for purpose of Title 1 of ERISA, "shall not include an individual retirement account described in Section 408(a) of the Code...." 29 C.F.R. 25:10.3-2(d). Bartlett Cooperative Ass'n. v. Patton, 239 Kan. 628, 722 P.2d 551 (1986), recognized the distinction when it said, "Federal law specifically requires that tax-qualified employee pensions, profit sharing and stock bonus plans contain anti-alienation clause ... [Internal Revenue Code ¶ 408] contains no similar anti-alienation provision." Id. 722 P.2d at 555.
In Sheehan v. Sheehan, 90 Misc.2d 673, 395 N.Y.S.2d 596 (Sup.Ct. 1977), the court held that a judgment creditor may attach a judgment debtor's Keogh plan. Keogh plans permitted self-employed individuals to defer a portion of their income until they reached 59 1/2 years of age and permitted earlier withdrawal of funds subject to an early withdrawal penalty *201 much like present-day IRA accounts, although Keogh plans are pension plans subject to anti-assignment and anti-alienation provisions of the Internal Revenue Code and ERISA. The court noted that funds deposited in a Keogh plan are, and remain, funds of the depositor, and no other person has an interest in the Keogh funds, and that Keogh funds are not beyond the reach of judgment creditors.
In Oliver v. Manufacturer's Hanover Trust Co., 3 Employee Benefit Cas. 1970 (N.Y. Sup. Ct. 1982), the court held that IRA assets were subject to levy to satisfy a judgment.
The court finds that defendant's IRA account is subject to levy of execution to satisfy plaintiff's judgment and directs the depository bank for plaintiff's IRA account to pay the proceeds of the account to the sheriff to be applied to the satisfaction of plaintiff's judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550751/ | 374 B.R. 362 (2006)
In the matter of Jeffrey DAVIS, Debtor.
Jeffrey Davis, Plaintiff,
v.
Matt Gay Chevrolet, Inc. and Linda Gay, Defendants.
Bankruptcy No. 06-60150, Adversary No. 06-6009.
United States Bankruptcy Court, S.D. Georgia, Statesboro Division.
November 1, 2006.
*363 H. Lehman Franklin, Jr., H. Lehman Franklin, PC, Statesboro, GA, for Plaintiff.
Evelyn S. Hubbard, Sylvania, GA, for Defendants.
MEMORANDUM AND ORDER ON THE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
LAMAR W. DAVIS, JR., Bankruptcy Judge.
The Plaintiff filed his Chapter 13 bankruptcy case on April 21, 2006. He instituted this adversary proceeding against the Defendants on May 19, 2006 seeking the turnover of a 2001 Chevrolet Silverado as well as damages stemming from an alleged violation of the automatic stay. The Plaintiff has now filed a motion for summary judgment. See Dckt. No. 15 (August 14, 2006). A hearing on this matter was held on September 21, 2006. After considering the evidence provided by the parties and the arguments presented, I make the following Findings of Fact and Conclusions of Law.
FINDINGS OF FACT
The Plaintiff went to Defendant Matt Gay Chevrolet ("MGC") in December 2004 to purchase a 2001 Chevrolet Silverado (the "vehicle"). See Dckt. No. 15, Ex. A (August 14, 2006)(affidavit of Plaintiff). He made a down payment of $500.00 in two installments to MGC. Id. Because the Plaintiff was unable to purchase insurance in his own name, he called a friend, Ruby Lee Young, to come and sign for the vehicle. Id. As a result, the vehicle is titled only in her name. Id.; see also Id., Ex. B (affidavit of Ruby Lee Young). MGC *364 served as both the seller and financier of the vehicle. The Plaintiff has submitted to the Court eighteen receipts that evidence payments made for the vehicle. Plaintiff made thirteen of them, and Ruby Lee Young made the other five but with funds provided by the Plaintiff. Id., Ex. A. In his affidavit, the Plaintiff asserts that employees at MGC knew that although the vehicle was titled in Ruby Lee Young's name, the Plaintiff was the individual driving the vehicle, making payments on it, and purchasing insurance for it. Id. MGC has not controverted this evidence.
On May 18, 2006, after the Plaintiff's Chapter 13 case had been filed, MGC took possession of the vehicle over Plaintiff's objection and after he informed MGC's agents that he had filed bankruptcy. Id., Exs. A and B. His attorney later called Defendant Linda Gay to advise her of the Plaintiff's pending bankruptcy case and request the return of the vehicle. This request was denied. Id., Ex. A. As a result, the Plaintiff filed the present adversary proceeding. An expedited hearing was held on, May 25, 2006, where the Plaintiff requested an interlocutory injunction requiring the return of the vehicle, which this Court denied. The Plaintiff, Ruby Lee Young, Defendant Linda Gay, and David Gay, the registered agent for and owner of MGC, all attended that hearing. See Dckt. No. 7 (May 25, 2006).
At the September 21, 2006 hearing, due to the Defendants' lack of a timely response to this adversary proceeding's complaint, the Plaintiff requested the entry of a default judgment, which this Court denied. The Court will now address the Plaintiff's motion for summary judgement on the issue of whether the Defendants violated the automatic stay.
STANDARD OF REVIEW
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. Proc. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). Rule 56 of the Federal Rules of Civil Procedure applies to motions for summary judgment in bankruptcy adversary proceedings. See Fed. R. Bankr.Proc. 7056. The party moving for summary judgement has the burden of demonstrating that no dispute exists as to any material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 156, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970). Once this burden is met, the nonmoving party must present specific facts that demonstrate that there is a genuine dispute over material facts. Finally, a court reviewing a motion for summary judgment must examine the evidence in a light most favorable to the nonmoving party, and all reasonable doubts and inferences should be resolved in the favor of the non-moving party.
The Defendants have not submitted any evidence to controvert the Plaintiff s evidence or a statement of material facts as to which they contend that there is no dispute. As a result, the Court will render its decision on the arguments and evidence now before it.
CONCLUSIONS OF LAW
At both the May 25, 2006 and the September 21, 2006 hearings, the Plaintiff acknowledged that all relevant documents pertaining to the vehicle were solely in the name of Ruby Lee Young. These documents include the certificate of title, insurance policy, registration, and retail installment contract. The Plaintiff asserts, however, that he alone drove the vehicle, paid its monthly payments, and brought it in to MGC for repairs. See *365 Dckt. No. 15, Ex. A (August 14, 2006). Furthermore, he claims that the employees of. MGC were aware of this arrangement between himself and Ruby Lee Young. See Id. Ruby Lee Young and the Plaintiff both testified as to these facts at the May 25, 2006 expedited hearing. The Defendants have not submitted any evidence or testimony that controverts the Plaintiff's characterization of the arrangement established between himself and Ruby Lee Young concerning the vehicle. A "possessory interest" has been defined to include the "present right to control property, including the right to exclude others, by a person who is not necessarily the owner." BLACK'S LAW DICTIONARY 1203 (8th ed.2004); see also McKechnie v. Berg, 2003 ND 136, 667 N.W.2d 628, 632-33 (2003)("A possessory interest is the right to possess property by virtue of an interest created in the property though it need not be accompanied by title.") (citations and quotations omitted). Under these facts, there is no genuine dispute that the Plaintiff had at the least a possessory interest in the vehicle.
Under 11 U.S.C. § 541,[1] the filing of a bankruptcy petition creates an estate comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). I have previously concluded that this provision of the Bankruptcy Code is sufficient to include property in which the debtor has a possessory interest. See Rahn v. Bank South, N.A. (In re Rahn), 1993 WL 13003874, *3 (Bankr.S.D.Ga.1993)(citing H.R. REP. No. 95-595, at 367-68 (1977) and S. REP. No. 95-989, at 82-83 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5963, 5787). Bankruptcy courts around the country have reached a similar conclusion. See, e.g., In re VanZant, 210 B.R. 1011, 1016 (Bankr.S.D.Ill.1997)("Under the Bankruptcy Code, a debtor has an `interest in property' even if the property is fully encumbered by liens and the debtor has only an equitable or possessory interest."); In re Continental Airlines, Inc., 134 B.R. 536, 541 (Bankr.D.Del.1991)("[Section 541(a)(1)] extends to property wherever located and by whomever held, and includes the Debtor's legal, equitable and possessory interests.") (citations and quotations omitted). Therefore, I conclude that the Plaintiff's possessory interest in the vehicle was part of his bankruptcy estate when he filed his Chapter 13 case.
As property of the estate, the vehicle was subject to Section 362, which stays any "act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. § 362(a)(3); Ramirez v. Fuselier (In re Ramirez), 183 B.R. 583, 587 (9th Cir. BAP 1995)("The automatic stay of Section 362 protects property of the estate in which the debtor has a legal, equitable or possessory interest."). In the present case, MGC repossessed the vehicle after the Plaintiff's Chapter 13 case had been filed and after receiving actual notice from the Plaintiff and his attorney that he claimed an interest in the vehicle. See Dckt. No. 15, Ex. B (August 14, 2006). At the September 21, 2006 hearing, David Gay informed the Court that the vehicle had been sold to a third party after the Court denied the Plaintiff's request for interlocutory relief at the May 25, 2006 hearing.[2] Therefore, I conclude that the Defendants willfully violated the protection afforded by Section 362 to the Plaintiff's possessory interest in the vehicle when they elected to repossess and sell it during the pendency of the Plaintiff's Chapter 13 *366 case. See 11 U.S.C. § 362(k); Bishop v. U.S. Bank/Firstar Bank, N.A. (In re Bishop), 296 B.R. 890, 894 (Bankr.S.D.Ga. 2003)("A stay violation is `willful' if a creditor has knowledge of the bankruptcy filing and deliberately acts in such a way that violates the stay.").
ORDER
Pursuant to the foregoing, IT IS THE ORDER OF THIS COURT that the Plaintiff's motion for summary judgment be GRANTED IN PART. I conclude that the Defendants are liable for violating the provisions of Section 362 of the Bankruptcy Code. As for the nature and amount of any damages that the Plaintiff may be entitled to as a result of the Defendants' actions, that issue will be tried at a date to be set by separate notice. At that hearing, the parties shall also address the merits of the Defendants' counterclaim against the Plaintiff.
NOTES
[1] Hereinafter, all Section references are to Title 11 of the United States Code.
[2] The fact that the Defendants had knowledge of the Plaintiff's bankruptcy case precludes the Defendants from the protection of Section 542(c), which permits a party "that has neither actual notice nor actual knowledge of the commencement of the case concerning the debtor" to transfer property of the estate in good faith to a third party. 11 U.S.C. § 542(c)(emphasis added). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550782/ | 382 Pa. Super. 468 (1989)
555 A.2d 1294
Patsy I. MAURER, Appellant,
v.
Raymond MAURER.
Supreme Court of Pennsylvania.
Argued December 6, 1988.
Filed January 30, 1989.
Petition for Allowance of Appeal Denied June 19, 1989.
*470 Bruce F. Bratton, Harrisburg, for appellant.
Jeffrey E. Piccola, Harrisburg, for appellee.
Before WIEAND, OLSZEWSKI and TAMILIA, JJ.
TAMILIA, Judge:
Appellant/mother and appellee/father are the parents of a 19 year old son, Troy, who graduated from high school in the spring of 1987. At that time, appellee was paying $75 per week for Troy's support and $15 per week for appellant's support. On June 24, 1987, appellee petitioned the court to terminate the support Order as to Troy, alleging he *471 was 18 years old, had graduated from high school and enlisted in the army. The support Order was modified by the domestic relations office which reduced appellee's support obligation to Troy to $50 per week. Both parties appealed to the domestic relations court which entered an Order on October 20, 1987 terminating Troy's support, finding him emancipated and capable of supporting himself. That portion of the Order granting appellee/mother support in the amount of $15 per week was unappealed.
The facts are not in dispute. Troy was scheduled for induction in the United States Army in June, 1987, but developed appendicitis and was released from his commitment. Prior to June, 1987, Troy was employed at a service garage and after the army released him, he enrolled in the Automotive Techniques and Management School (ATMS) at the National Education Center. The school provides a 15-month program of vocational training in automobiles and prepares students to set up their own small businesses. The cost of the program is $15,000 and Troy and appellant were approved for $4,700 in loans and grants.
The trial court found appellee has no duty to support Troy because he is not attending a college where he will obtain a bachelor's degree and also because Troy has the ability to support himself, as evidenced by his induction in the army and his employment at the service station. Appellant appeals from this Order claiming appellee is obligated to provide support for his son even though the school he is attending is not a four-year college.
The trial court relied on Brown v. Brown, 327 Pa.Super. 51, 474 A.2d 1168 (1984), in finding "college" meant undergraduate study leading to a bachelor's degree, therefore, Troy was not entitled to support from appellee for his training at the ATMS. In Brown, however, we were reviewing the question of whether a parent was obligated to support a child who already had an undergraduate degree and was attending law school. In our decision we stated children are entitled to support for "college" under certain circumstances and in distinguishing college from law school *472 or any other post-graduate school, we used the definition for college which other states have propounded, namely, "college" means undergraduate study leading to a bachelor's degree. Subsequent decisions reaffirmed this Court's intent to limit Brown to holding a child is not entitled to support for post-graduate education.
Brown does not limit the types of post-secondary education for which a parent may be compelled to provide support. Our cases do not stand for the proposition that a parent's obligation to provide education expenses is dependent on whether the child attends college or a commercial art school. Rather, the determination is to be made on the basis of whether the child possesses the aptitude and the desire to successfully complete the course of studies the school provides. (Citations omitted.)
Kopp v. Turley, 359 Pa.Super. 106, 108-09, 518 A.2d 588, 590 (1986).
Thus a parent may be responsible for helping a child financially through post-secondary schooling, whether it is college or vocational school, if the child has the ability and desire to successfully complete the course of studies. This is not an automatic obligation, however, as the parent from whom support is sought must have sufficient means to pay the support Order without undue hardship. Leonard v. Leonard, 353 Pa.Super. 604, 510 A.2d 827 (1986). In Leonard, we listed several factors the trial court must consider in determining a parent's ability to pay support for a child.
It is well established in evaluating a parent's support obligation the lower courts should consider the parent's income (or potential earning power if there is a disparity between that figure and actual income) and the full nature and extent of the parent's property interests and financial resources. The parent's stock holdings, and other investments, at their market value, are among the factors the lower court should consider. Quite naturally, the court should consider a parent's income, from whatever source; included in income should be monies received from the rental of real estate, but that "income" must *473 reflect actual available financial resources and not the oft time fictional financial picture which develops as the result of depreciation deductions taken against rental income as permitted by the federal income tax law. Otherwise put, "cash flow" ought to be considered and not federally taxed income. The court must also consider the parent's interest in jointly held assets, but it may not consider the entire value of joint property as the parent's.
Id., 353 Pa.Superior Ct. at 610, 510 A.2d at 830 (citations omitted).
The trial court did not reach the issue of appellee's ability to pay as, in addition to its erroneous reliance on Brown, supra, it found Troy has shown the ability to support himself. We cannot agree that a child should be denied support for post-secondary education because he showed enough initiative to obtain employment while in high school or prior to entering his chosen course of study; nor do we agree with appellee that he should not be ordered to contribute to the cost of Troy attending ATMS since Troy does not require further education to become employable. Under this reasoning, few children would have any claim on their parents for aid in furthering their advanced education in a time when jobs in fast food and other service areas go begging.
While it may be true further education is not "necessary" for a student who has a high school diploma, is employable and/or has worked prior to graduation, we have never held that a child should not be assisted by his parents financially to attend post-secondary school because the child could get a minimum wage job and be productive. This earning ability is a consideration as to the need of the child for parental assistance in pursuing advanced training, to the degree he can do both, but it does not eliminate parental support. A child should be encouraged to further his education and if he has the ability, aptitude and desire to attend and successfully complete a chosen program, his parents have a responsibility, within the limits of their respective incomes, to assist him.
*474 The family structure is the major unit of our society from which flows the culture, educational energy, direction and generational progression of our scholastic attainment. We are in serious competition with the rest of the world to maintain our leadership in educating our children. Because we have the highest divorce rate in the world and a serious problem of single parent families, which mitigate against children receiving the fullest measure of care and education, we stand to fall behind. Only through an enlightened legislative and judicial policy of assuring fairness and protection to the child victimized by family breakup, can we lessen the impact on the child and society of aborted educational pursuits.
A child in an intact family is usually encouraged by his parents to achieve the highest educational pursuits possible within family resources and usually with some sacrifice on the part of the parents. In a family racked by divorce, one parent, usually the mother, continues to support those aspirations, whereas the absent parent frequently seeks to shed those responsibilities even when sufficient means are available. This places the child of divorce in a doubly disadvantaged position in that he lacks the nurturing of an intact family and the loss of expectation for fulfillment of his intellectual and scholastic potential. Neither the child nor society can afford this.
In this case, the trial court buttressed his finding that the child was not entitled to support while seeking advanced training as he was emancipated. Emancipation, within the context of the law as it applies to minors, has only limited application in this or other cases involving support of children seeking advanced education from parents who have been separated or divorced.
In a limited way, this Court recently considered in an en banc review, the concept of emancipation as it applied to a minor who had become a mother, but then desired to return to college to complete her education. There, the child, Christine, graduated from high school in 1984, attended the University of Rochester during the fall of 1984, gave *475 birth to a child in the spring of 1985, attended Lehigh University in the fall of 1985, was employed during the winter, spring and summer of 1986, and attended Maine Institute of Art during the fall of 1986 and spring of 1987. She remained in the family home with the mother. Griffin v. Griffin, ___ Pa.Super. ___, 558 A.2d 75 filed (1989). The father argued the child was emancipated because she was twenty-one years of age and herself a mother of a child. The Court in Griffin was not inclined to find emancipation or adopt a distinction between a child who reached twenty-one and achieved motherhood from one who had not.
After careful analysis of the term and concept of emancipation, once the other requirements are met permitting a child to pursue advanced training, the criterion that is applicable in a support/educational situation is whether the child is dependent upon his parents for support or is independent of such needs. The Domestic Relations Code, 23 Pa.C.S. § 4323 Support of emancipated child, provides:
(a) Emancipated child. A court shall not order either or both parents to pay for the support of a child if the child is emancipated.
Emancipation is a question of fact to be determined by the circumstances presented in each case. For purposes of this case and support matters generally, dependency is the criterion and is less restrictive than the standards applied for purposes of receiving public assistance. See Public Assistance Manual, 55 Pa.Code § 145.62 Definitions, Emancipated minor. In that context, minors of 16 and over, not living with the parents or under the parents' control, or minors, married, whether or not living with the parents, are considered emancipated and, therefore, eligible for General Assistance. An unemancipated minor is eligible for Aid to Families of Dependent Children. Thus it is evident that the definition and concept as to emancipation in the context of children in need of public assistance is not relevant or applicable to those children who can be supported by their parents. In Public Welfare context, it becomes a procedural *476 and substantive means by which public aid is distributed as a state rather than federal responsibility.
Clark's work on Domestic Relations summarizes the law of emancipation and its various applications in English and American Common Law.
Emancipation, the legal process by which a child is released from the control and authority of his parent, was a Roman law institution. . . . [T]he earliest cases . . . arose out of the father's claim to the services and earnings of his son, a claim which he was normally entitled to assert at common law . . . if the father had failed or refused to support the child, courts were reluctant to let the father recover the child's earnings from an employer, since the father's right to his child's services was usually considered to be a correlative of the father's duty to support the child. Somewhat later the cases began characterizing the circumstances in which the father's claim to the child's earnings was rejected as constituting emancipation.
.....
[In modern times] [e]mancipation as a legal term is useful, but only as a means of describing a result already reached, not as an analytical tool. . . . A particular disability [of minority] should no longer exist whenever the child's circumstances have so changed that the reason for creating the disability no longer exists. This requires separate treatment for each sort of disability, . . . [by] reliance upon . . . the theory of partial emancipation. . . . Courts are beginning to adopt it in decisions which expressly hold that emancipation has occurred for some purposes but not for others. . . .
.....
The child is given the right to be supported by his parents because he is unable to support himself and because human progress requires that there be a relatively long period of education and training for the young, during which they cannot be productive citizens. If the child's situation is such that he no longer needs to be supported, *477 then his right to that support should no longer exist. We normally, though not always, find that this right ends at majority, but it could end earlier. Since the issue of the right to support arises in many ways, there are situations in which a child who would be considered "emancipated" for other purposes would not be entitled to support and others in which he would be so entitled.
H.H. Clark, Jr., The Law of Domestic Relations in the United States (2nd Edition 1987), pp. 323-326.
With this frame of reference and as applied to established case law in Pennsylvania, it becomes clear that emancipation may not arise by abandonment of the child by his father, or by the mere capacity of the child to get into the service or to become self-supporting. Granted, where a child has attained majority, has no disabilities and neither desires nor has the capability of attending a course of advanced training to reasonably prepare him for self-sufficiency, continued support is not in order. However, where as here the child has sincere and reasonable intentions for acquiring additional training, the law is abundantly clear that the parents have some obligations to provide assistance to him. For this purpose, he is not emancipated and the parents' obligation is a continuing one as outlined and delineated in the cases and discussion above. It is also true that a child may move in and out of emancipation and the mere fact he at one time qualified as an emancipated minor, does not foreclose the divestiture of emancipation when circumstances change.
For the above reasons, we hold that the trial court abused its discretion in finding that the child was emancipated and, therefore, no longer entitled to his father's assistance while he attended ATMS. It remains, however, to be determined the needs of the child and the ability of the father to pay, without there being an undue hardship on him.
We, therefore, vacate that portion of the Order of the trial court denying child support and remand for a hearing to evaluate appellee's support obligation for the child and for entry of an Order consistent with this Opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550775/ | 114 F.2d 796 (1940)
NATIONAL LABOR RELATIONS BOARD
v.
MATHIESON ALKALI WORKS, Inc.
No. 4626.
Circuit Court of Appeals, Fourth Circuit.
October 7, 1940.
*797 Gerhard P. Van Arkel, Atty., National Labor Relations Board, of Washington, D. C. (Charles Fahy, Gen. Counsel, Robert B. Watts, Associate Gen. Counsel, Laurence A. Knapp, Asst. Gen. Counsel, Bertram Edises, and Frederick M. Davenport, Jr., Attys., National Labor Relations Board, all of Washington, D. C., on the brief), for petitioner.
Wm. A. Stuart, of Abingdon, Va., for respondent.
Before PARKER, SOPER, and DOBIE, Circuit Judges.
PARKER, Circuit Judge.
This is a petition to enforce an order of the National Labor Relations Board. The respondent is the Mathieson Alkali Works of Saltville, Virginia, and the order disestablishes an association of its employees as a bargaining agency and directs that respondent cease and desist from interfering with the right of self organization on the part of its employees. The *798 principal question involved is whether respondent has dominated or interfered with the formation or administration of the association. Respondent contends that the Board's finding to that effect is not supported by substantial evidence; and a careful review of the evidence relied upon by the parties convinces us that this contention must be sustained.
There were approximately 950 employees of respondent, exclusive of supervisory employees, at its Saltville plant; and, following the decision of the National Labor Relations Board cases in the spring of 1937, certain of these employees became interested in forming an organization for the purpose of bargaining collectively with respondent. About the same time, an effort was made to organize a chapter of the United Mine Workers of America in their midst; but there is no evidence that this was begun before the effort to organize the association. Saltville was near communities which had had unfortunate experiences with strikes as a result of activities of the Committee for Industrial Organization; and the knowledge of these experiences, together with knowledge gleaned from newspaper accounts of sit-down strikes which had occurred in other sections of the country, furnished arguments to those who favored organizing an independent association of respondent's employees as an agency for collective bargaining to forestall the organization of an outside union, which it was thought might result in industrial strife and the interruption of employment. Such an association was organized through the efforts of one W. P. Thompson, a mechanic employed by respondent, and certain of his associates, none of whom held a position of supervisory character.
There is no evidence that respondent suggested the formation of the association or assisted in any way in its organization. On the contrary, the evidence is that, when respondent's manager heard rumors that organizational efforts were being talked among the men, he called in twenty-five or more of the thirty-four supervisory employees of higher rank, read the Wagner-Connery Labor Relations Act, 29 U.S.C.A. § 151 et seq., to them and cautioned them to take no part in the matter whatever and to remain strictly neutral as between any rival organizations. This occurred on August 20, 1937. Three days later Thompson and five of his associates called on the manager in his office, informed him that they were forming an association for the purpose of collective bargaining and asked his opinion with regard thereto. The manager stated that he was not permitted under the Wagner Act to advise them what they should or should not do, read to them sec. 7 of the Act, and told them that the choice of an organization rested with the employees. He further stated that for the employer to interfere with employees in the exercise of rights under the Act would constitute an unfair labor practice, and that the only request he had to make of them was not to let any organizational activities that they might decide upon interfere with the performance of their duties during regular working hours.
Prior to this conversation with the manager, many of the men had been reluctant to join the association which Thompson was engaged in organizing, through fear that respondent might be opposed to any organization whatever. After Thompson had received this assurance from the manager as to their rights, however, the signing up of employees for membership in the association proceeded rapidly; and, on September 27th, a meeting was held in the village school at which 100 or more employees were present and at which a committee was appointed to proceed with the work of organization and prepare a constitution and by laws. Another meeting was held on October 5th; and the constitution and by laws which had been prepared were adopted. On October 14th, the organization committee of the association called on the manager and asked that he recognize the association as a bargaining agency, as it had signed up over 700 men of whom 643 had paid their dues. The manager, however, refused at this time to recognize the association as a bargaining agency on the ground that no proper credentials of its authority were presented. On October 19th, the association held an election of members of its council, and on October 20th the council elected officers for the association. On October 22, a negotiating committee of the association held a conference with the management, at which both sides were represented by counsel, and recognition was again requested but was withheld because documentary proof of representation of a majority was not furnished. On October 25th, the committee presented to the management a verified petition for recognition to which was *799 attached a certified list of 643 paid up members. The association was thereupon recognized as the bargaining agency for the employees and has since functioned in that capacity.
Upon its recognition as a bargaining agent, the association presented eleven requests from the employees relating to wages, hours and conditions of employment; and agreements were reached as to a number of these, including a wage increase of five cents per hour and provision for a five day week of forty hours with time and a half for over time. In the following month, due to a falling off in business, respondent notified the association that it would be necessary to reduce wages, hours of work or the number of employees, and an agreement was reached that the work available be divided or staggered among the employees by allowing four days a week to each employee. The wage scale fixed by the prior agreement was retained. The record shows that the association has had regular monthly meetings of its council and has functioned in a number of matters relating to rights and grievances of the employees. No supervisory employee is a member of the association; and there is no evidence that the respondent has any control over it or any voice in its deliberations, or that respondent contributes in any way to its support or maintenance.
The Board's finding of domination and interference was based upon activities of four foremen of minor supervisory capacity, viz., Terry, Maiden, Holmes and Brown, in advocating the association or soliciting members for it; upon the fact that another foreman, Taylor, was found to have spied upon a union meeting; upon the fact that an assistant superintendent of one of the departments handed to a member of the association's organizing committee an envelope containing a copy of the constitution and by laws of an association in another of respondent's plants; upon the fact that respondent made no attempt to curb solicitation for membership in the association on company property during working hours and permitted an election of association officers to be held on the premises; upon the fact that the records of the association were kept in respondent's vault; and upon the finding that the association had failed to secure any real or lasting benefits for the employees. These matters must be considered in the light of attendant circumstances as disclosed by the record; and, when so considered, they fall far short of showing domination or interference with the association on the part of respondent.
The most serious of the facts to which the Board points is the activities of the foremen. We agree that the mere fact that respondent may have forbidden its supervisory employees to take part in the organizational activities of its employees is not sufficient to purge the association of employer domination, if such domination in fact existed; and we think, also, such domination may be inferred from activities of minor supervisory employees, such as foremen, if their activities were sufficiently wide spread or were of such a character as to form a reasonable basis for the conclusion that they proceeded from the anti-union policy of the employer and interfered with the right of self organization on the part of the employees. Consumers Power Co. v. N. L. R. B., 6 Cir., 113 F.2d 38, 44.
Sporadic activities on the part of foremen, however, not authorized by the employer and not resulting in interference with or domination of the right of the employees to organize and select bargaining representatives of their own choosing, should not be allowed to nullify a choice freely made by a majority of the employees acting on their own initiative. Humble Oil & Refining Co. v. N. L. R. B., 5 Cir., 113 F.2d 85. It would be absurd, for instance, to hold that, in a contest between the A.F.L. and the C.I.O., the union selected by the majority should be disqualified to act as bargaining representative merely because some foreman, without the authorization or approval of the employer, expressed his preference for or joined in soliciting members for it (National Labor Relations Board v. Sands Mfg. Co., 306 U.S. 332, 341, 342, 59 S. Ct. 508, 83 L. Ed. 682); and this would even more clearly be true if it also appeared that the activities of the foreman had not affected the result of the election. The same principle must be applied with respect to an independent association.
While the extent and effect of activities of foremen and others connected with the management should be carefully scrutinized in such cases, because experience has shown that organization of these independent associations is frequently resorted to by the employer as a means of defeating real collective bargaining, it must *800 nevertheless be remembered that independent associations, if free of employer domination, are recognized by the law as proper bargaining agencies and are entitled to recognition as such if they represent the free choice of a majority. National Labor Relations Board v. A. S. Abell Co., 4 Cir., 97 F.2d 951, 957; Link-Belt Co. v. N.L. R.B., 7 Cir., 110 F.2d 506, 510; National Labor Relations Board v. Swank Products Co., 3 Cir., 108 F.2d 872, 874.
Applying these principles, we find no support in the record for the finding that the association here was dominated by respondent or that the activities of the foremen interfered with the free expression of the employees or that they resulted in the association's acquiring majority representation. It is significant that of the 150 supervisory employees, only four, and these of the minor character of mere foremen, are alleged to have solicited members or to have encouraged membership in the association. As to these, none except Terry is shown to have secured any applications for membership, and the memberships secured by him were obtained after the meeting of September 27th, when more than a majority of the employees had already signed up. Terry is shown to have solicited 6 or 7 persons for membership, to have collected dues from 25 or 30 and to have had in his possession a petition upon which 70 or 75 had signed their names; but, if the entire 75 be disregarded, the association without them had a clear majority, as 789 employees had signed up for membership and 643 had paid their dues prior to the recognition of the association on October 25th.
Terry was a mere foreman of the crushing machine crew at the quarry, and only about a dozen men worked under him. He attended the September 27th meeting under the impression that he was eligible to membership in the association and was placed on the organization committee, evidently because he was the only man from the quarry at the meeting. Upon learning of his activities, his superior told him that he ought not have anything to do with the association and he desisted from further efforts in its behalf. It is perfectly clear that what he did could not have been any part of a scheme on the part of the management. It would be absurd to think that the manager, who was meticulously avoiding the appearance of evil and was cautioning his supervisory employees to have nothing to do with organizational efforts, would sanction the action of this foreman in participating in the organizational meeting and accepting a place on the organization committee; and it would be unjust to the other employees to deny representation to the association of their free and untrammelled choice merely because of his blundering efforts in their behalf.
Even less importance attaches to the activities of the other three foremen. All that Maiden did was to sign a membership petition with the statement that he did so because of fear of union activity and of being called out on a sympathetic strike. On being informed next day that he was ineligible for membership, he struck his name from the petition. There is no evidence that anyone was influenced by him to join the association, and there is uncontradicted evidence that he told employees working under him that union affiliation would have no effect on their jobs. Holmes allowed a petition for membership to lie on his desk for several days, and three witnesses testified that he asked them to join the association. All of this, however, was after the meeting of October 5th, when the association had already acquired a membership in excess of a majority. Brown is found by the Board to have told certain employees to sign applications for membership in the association; but there is nothing to indicate that anyone was influenced by what he said, and this also occurred after the October 5th meeting. Holmes and Brown denied that they had solicited members for the association or that they had made the statements attributed to them. We must, of course, accept the findings of the Board as to this; but, it is clear from the record that nothing that they did added anything to the association's membership or indicated any control or domination over it by respondent or the supervisory employees of respondent. As was well said by the Circuit Court of Appeals of the Fifth Circuit, speaking through Judge Sibley in the case of Humble Oil & Refining Co. v. N. L. R. B., 5 Cir., 113 F.2d 85, 92: "It would be strange indeed if a labor organization, freely organized by a large majority of the employees, is to be destroyed whenever some well wishing supervisor, contrary to his own duty and orders, says something in its favor. As we see it, the employees who freely formed these organizations have the right under the law to have them function. If *801 the employer trespasses through his representatives, he and they ought to be stopped, but a more serious and demoralizing trespass than here appears is necessary to show such domination or interference or support as will justify annihilation of such organizations."
See also National Labor Relations Board v. A. S. Abell Co., supra, 4 Cir., 97 F.2d 951, 956, 957; L. Greif & Bro. v. N. L. R. B., 4 Cir., 108 F.2d 551; Ballston Still-water K. Co. v. N. L. R. B., 2 Cir., 98 F.2d 758, 762; Cupples Co. v. N. L. R. B., 8 Cir. 106 F.2d 100, 115, 116.
The finding that foreman Taylor spied upon a meeting of the C. I. O. union is not supported by the evidence. Taylor denies that he was spying upon the union meeting and the conclusion to the contrary appears to be based on nothing but suspicion. The evidence is that he had stopped his automobile at a filling station opposite the place of meeting and had drunk a bottle of coca cola and purchased some gasoline. Some union members, coming out of the meeting, saw him in the car and testified that he was writing something in a book. They concluded that he was taking down their names. He admits being in the car at the time and place and says that he may have been writing in a memorandum book the mileage of his car, as it was his custom to do this when purchasing gasoline; but he denies that he was taking down names, and there is no evidence to justify the inference that he was doing so. There was, indeed, no occasion for him to be taking down the names of those attending the meeting, as the members of the union made no secret of their membership but openly solicited members in respondent's plant even during working hours. If there had been any desire on the part of respondent or its supervisory employees to spy on the meeting, they would hardly have placed a foreman opposite the meeting hall for this purpose. Certainly they would not have done so while meticulously attempting to preserve the appearance of neutrality and non-interference.
The fact that McCready, an assistant superintendent in one of the departments, handed to Shannon, one of the members of the committee to draw up the constitution and by laws, an envelope containing copy of the constitution and by laws of an association in another of respondent's plants, does not impress us as important. McCready says that he did not know what was in the envelope, and there is no evidence which would justify a contrary inference. The envelope was left on the desk in the "furnace room" office, where he worked, at a place where it was customary to leave mail for employees. Two other persons saw it there before he discovered it; and there is no evidence as to who placed it there. At the meeting of September 27th, the night before, it was remarked that employees who had come from the other plant of respondent had a copy of the constitution and by laws of the association there; and it is entirely possible that some such person left it at the desk for Shannon. If it was placed there by any supervisory employee of respondent, this was certainly done in such way as not to convey to Shannon any information as to its source; and it is not the mere fact that the constitution and by laws come from the employer that is objectionable, but the compulsion on the employees to adopt them when they are suggested by the employer. If the constitution and by laws here came from respondent, they came in such way that no such compulsion was present. There is no evidence, however, that they did come from respondent; and we think it extremely doubtful that they did. An attorney had already been employed to represent the organization committee; and if respondent had desired to get a copy of the constitution and by laws into his hands, it seems highly improbable that it would have resorted to any such crude method as this.
The fact that respondent made no attempt to curb solicitations for association membership on company property would be a damning circumstance, were it not for the fact that respondent's attitude towards the rival union was precisely the same. Ballston Stillwater K. Co. v. N. L. R. B., 2 Cir., 98 F.2d 758, 762. So far as we can see from any evidence called to our attention, the attitude of respondent was that of strict neutrality. Membership in the union, as well as membership in the association, was openly solicited on company property during working hours; and certain of the foremen, as well as certain other employees, seem to have been quite active in the union cause. The Board makes reference to the fact that respondent permitted the association to hold the election for members of its council on company property. At that time, however, the association already had a clear majority *802 of the employees; and this could not have influenced the obtaining of the majority. The case is entirely different from that presented where an election is held to choose organizations as bargaining representatives and where the fact that it is held on company property may prove an embarrassment to employees in the free expression of their choice. Here those who were conducting the election merely went to persons who were already members of the association and gave them opportunity to cast a secret ballot for members of the council. While it might have been better for the election to have been held at some other place, we cannot see that this circumstance is sufficient, either alone or in connection with other circumstances, to support the conclusion that the association is dominated by respondent.
The fact that the records of the association were kept in respondent's vault is utterly without significance when considered, as they must be, in the light of surrounding circumstances. These records were intrusted to Stephenson, the secretary of the association. He was an employee in the accounting department of respondent's office. He had a box in respondent's vault, to which he alone held the key, and in which he kept his private papers. The records of the association were kept by Stephenson in this box and were in respondent's vault only because the box was kept there. They were under the control of Stephenson, not under the control of respondent; and respondent's supervisory officers had no knowledge of how or where they were kept, until the fact was called to their attention by the Board's investigator, when their removal was at once ordered.
The Board's finding that the association has failed to secure any real or lasting benefits to the employees has particular reference to the fact that following the wage increase the association agreed to a reduction of hours. There is nothing in the record, however, to justify a finding that the association has not bargained with respondent in good faith, and the Board makes no such finding. In view of business conditions in the latter part of the year 1937, no unfavorable inference can be drawn from the fact that production was curtailed as a result of the recession of business or that a shortening of working hours resulted. To say that a shortening of working hours nullifies a wage increase does not impress us as sound reasoning. An employer who pays the same money for fewer hours work is certainly paying a greater unit price; and the employee who receives the same amount of money for fewer hours of work is unquestionably benefited. It may be that the association has not been as efficient a bargaining agent as an outside union would have been; but that is not the question before us or before the Board. The question is whether the evidence supports the conclusion that respondent dominates the association or was so connected with its organization that it is not a proper bargaining agency for the employees. We do not think that it does. National Labor Relations Board v. Sands Mfg. Co., 306 U.S. 332, 341, 342, 59 S. Ct. 508, 83 L. Ed. 682.
There is some evidence of sporadic and occasional expressions of anti-union sentiment on the part of a few foremen including one or two in addition to those heretofore mentioned, but, without reviewing this in detail, it is sufficient to say that it furnishes no proof of any unfair attitude on the part of respondent, and was not of a character to justify a cease and desist order on the ground that the expressions were attributable to respondent under the doctrine of respondent superior. If there were evidence that these foremen were speaking with the authority of respondent, or if their expressions of sentiment were so numerous or of such a character as to justify the inference that they were made with respondent's approval in furtherance of an anti-union policy, an order directing respondent to cease and desist from interfering with its employees in the exercise of the rights guaranteed by sec. 7 of the Act would be proper, even though it should not appear that anyone's affiliation had been changed thereby; for each employee has the right to be let alone in this respect by the employer and his representatives. Humble Oil & Refining Co. v. N. L. R. B., supra. But mere isolated expressions of minor supervisory employees, which appear to be nothing more than the utterance of individual views, not authorized by the employer and not of such a character or made under such circumstances as to justify the conclusion that they are an expression of his policy, will not ordinarily justify a finding against him. As was said in the case of National Labor Relations Board v. Whittier Mills Co., 5 Cir., 111 F.2d 474, 479: "Isolated *803 speeches like these made by underlings, though having some authority, in casual conversation with fellow employees, which are not authorized or encouraged or even known to the management, ought not to be too quickly imputed to the employer as his breaches of the law. When not made in the exercise of authority, but in personal conversation, they do not appear to be the sentiments of the employer nor his acts, and to make them such the circumstances ought to show some encouragement or ratification or such repetition as to justify the inference of a policy which they express."
Our decision in National Labor Relations Board v. A. S. Abell Co., 4 Cir., 97 F.2d 951, is not to the contrary. In that case one of the provisions of a cease and desist order was approved because of the anti-union activities and expressions of the superintendent of the press room of a newspaper. The superintendent was in charge of a branch of the employer's business and his expressions clearly constituted an interference with the right of self organization on the part of the men working under him. To like effect was our decision in Virginia Ferry Corp. v. N. L. R. B., 4 Cir., 101 F.2d 103, where we held the employer responsible, under the respondeat superior doctrine, for the anti-union activities and expressions of the master of a ferry boat. Neither of these cases is authority for holding that the employer is responsible for every chance expression of preference or hostility on the part of minor supervisory employees. In each case the question of the employer's responsibility for expressions of supervisory employees is to be determined by the facts of the case. If the supervisory employee is of such a position as to represent the employer in conducting a branch or department of the business, his expressions and activities with respect to organization would ordinarily constitute effective interference with the exercise of rights by employees and should be attributed to the employer, in application of the respondeat superior doctrine. Even if the supervisory position of the employee is of minor character, the employer may be held responsible for his conduct if the surrounding circumstances are such as reasonably to justify the inference that it is an expression of the employer's policy or is approved by the employer. National Labor Relations Board v. Swank Products, Inc., 3 Cir., 108 F.2d 872, 875. Where, however, the employee has only minor supervisory authority and the expression of views appears to be nothing more than an expression of ideas of his own, contrary to the neutral policy assumed by the employer, it cannot reasonably support a finding of violation of the Act on the part of the employer. See National Labor Relations Board v. Sands Mfg. Co., supra.
It will be observed that the circumstances upon which the Board relies in support of its findings are disconnected acts and expression on the part of minor supervisory employees, and do not fit into or tend to establish any plan of domination or interference on the part of respondent. Respondent was certainly outwardly assuming a position of neutrality and was forbidding its supervisory employees to interfere with the right of self organization on the part of the workers. It was advised from the beginning by able counsel. If it had sought to engage in secret interference, it certainly would not have resorted to the bungling acts on the part of the foremen which the evidence discloses. Instead of proving interference by the management in the organization of the employees, these acts tend rather to show that the management was keeping hands off; for, instead of being the shrewd interference to which management would resort if secretly interfering while outwardly professing neutrality, they are exactly the sort of thing that such a management would avoid. The circumstances relied on, therefore, do not fit into the only theory of the case which the Board can reasonably put forward.
For the reasons stated, the petition of the Board will be denied.
Petition denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550742/ | 114 F.2d 526 (1940)
NEW YORK LIFE INS. CO.
v.
CALHOUN.
No. 11492.
Circuit Court of Appeals, Eighth Circuit.
August 2, 1940.
Rehearing Denied August 22, 1940.
Writ of Certiorari Denied November 12, 1940.
*527 *528 Vincent L. Boisaubin, of St. Louis, Mo. (James C. Jones, Jr., of St. Louis, Mo., Louis H. Cooke, of New York City, and Jones, Hocker, Gladney & Grand, of St. Louis, Mo., on the brief), for appellant.
William R. Gentry, of St. Louis, Mo. (John W. Calhoun, of St. Louis, Mo., on the brief), for appellee.
Before GARDNER and WOODROUGH, Circuit Judges, and MOORE, District Judge.
Writ of Certiorari Denied November 12, 1940. See 61 S. Ct. 141, 85 L.Ed. ___.
MOORE, District Judge.
The appeal in this action at law is from a judgment of the District Court for the Eastern Division of the Eastern Judicial District of Missouri, based on the jury's verdict in appellee's favor and against appellant for the sum of $10,000 (the principal amount of the policy sued on) with interest thereon at 6 percent from December 4, 1935, to date of verdict, which interest amounted to $1,771.71; finding appellant guilty of vexatious delay in refusing to pay the loss and fixing appellee's damages at $750 and her attorney's fees at $3,225, making the total amount awarded appellee by said verdict the sum of $15,746.71.
The policy in question was issued under date of January 30, 1934, to William J. Calhoun. He gave his occupation as Vice-President of the Seidel Manufacturing Company; his age at his nearest birthday as 54, and named as his beneficiary his wife, Beulah C. Calhoun. The annual premium on the policy was $909.70.
The petition alleged the issuance of the policy for $10,000, the death of the insured on December 1, 1935, the performance of conditions; that the defendant vexatiously refused to pay, and asked for the face of the policy, interest and damages for vexatious refusal. The petition was filed in the State Circuit Court; the case was removed to the Federal Court, where the proceedings were stayed, by consent, pursuant to motion of defendant therefor, pending the outcome of a prior suit in equity between the same parties, in which the Insurance Company was plaintiff, and in which case the policy involved in the law action was sought to be cancelled, on the ground of misrepresentations in the application therefor. The lower court found the plaintiff Insurance Company was not entitled to have the policy cancelled for misrepresentations, and after appeal by the Insurance Company the lower court was affirmed. The appeal record in that case has been incorporated into the appeal record in this, the law case.
The mandate of this court in the equity case reached the lower court on August 3, 1938. On October 19, 1938, defendant in this action filed its answer.
The answer admitted the validity of the policy and the liability of the defendant for the full amount of $10,000 by reason of the decision of this court (in New York Life Ins. Co. v. Calhoun, 8 Cir., 97 F.2d 896, 897), determining the suit for cancellation against the company. The answer denied the refusal to pay was vexatious and without reasonable cause, and in this connection alleged that upon filing the proof of death of William J. Calhoun, which the defendant received on December 4, 1935, it at once investigated the cause of death and the truth or falsity of the statements made by him in his application for the policy; that on December 23, 1935, it received from the physician who attended Calhoun, and who made out the proofs of death and signed the death certificate, a definite statement that on November 2, 1933, the said Calhoun had had a gastric hemorrhage; that the application for the policy was dated January 24th and 25th, 1935; that further investigation disclosed that this hemorrhage was a result of a diseased condition of the blood vessels; and that the insured died from hemorrhages from the diseased blood vessels on December 1, 1935.
The answer alleged that from this and other information obtained it appeared to it that the insured had materially misrepresented the facts in his answers in the application for the policy, and upon advice of counsel defendant filed suit on January 9, 1936, to cancel said policy because of said misrepresentations.
The answer alleged that the deposition of the physician who attended insured and gave the defendant the information aforesaid, taken shortly after the filing of the equity suit, confirmed the facts above stated and fully established defendant's grounds for cancelling the policy.
*529 The answer then alleged that pending the trial and appeal in the equity suit the law action was stayed; that defendant fully believed, on advice of counsel, that under the facts and law the equity suit would be finally determined in its favor, resulting in a cancellation of the policy, and had no cause to believe it would be liable under the policy until the equity suit was decided adversely on July 18, 1938.
The answer alleged the investigation of facts coming to its knowledge concerning the question of misrepresentations, and of Calhoun's knowledge of his condition of health prior to his application, which investigation did not end until October 6, 1938. That upon the completion of this investigation, counsel for the defendant were of the opinion that the new and additional facts were insufficient to establish a defense of misrepresentation in view of the peculiar character of the opinion of the Court of Appeals in its decision in the equity suit; that counsel, therefore, and on the same day (October 6, 1938) offered to pay to the plaintiff, through her counsel, the full amount of the policy, together with interest thereon at six per cent per annum from the date of the receipt of proof of death (December 4, 1935) to the date of said offer (October 6, 1938) and the costs of court accrued to said date; that counsel for plaintiff refused said offer. The answer renewed the said offer and offered to tender into court the amount involved for the benefit of plaintiff.
The insured died on December 1, 1935. Proofs of death were furnished the Company on December 5, 1935. The proofs, signed by Dr. Seabold, disclosed that Dr. Seabold had treated insured for "pyloric erosion" in November, 1933, and that the immediate cause of death was "hemorrhage-varicose veins-esophagus".
In his application the insured stated that albumin or sugar had never been found in his urine; he had never raised or spat blood; had never consulted a physician or practitioner for or suffered any ailment or disease of the heart, blood vessels or lungs, the stomach or intestines, liver, kidneys or bladder; that he had not consulted a physician or practitioner or been examined or treated by anyone within the past five years. His application did disclose a heart abnormality and for this reason the Company issued the policy at an advanced premium, making the advance in premium because of Calhoun's heart condition.
The insured in his application having given permission to interview any physician who had treated him, the company sent an investigator to inquire. The investigator reported that the doctor had treated insured in March, 1932, for acute nephritis, which responded readily to treatment and had cleared up by May 3rd of that year. He further reported that "on November 2, 1933, insured had a gastric hemorrhage which was treated"; that the insured had stomach trouble in May of 1934, pyloric erosion, but that the condition cleared under treatment.
On November 30, 1935, the insured again had a gastric hemorrhage; the doctor thought it was a recurrence of the ulcer, and though the insured went to the hospital and had blood transfusions, he died from hemorrhage. The doctor stated that he did not think that an ulcer could cause such bleeding and ordered an autopsy, which revealed that an aneurism had developed and ruptured, causing death. The doctor stated that he found a perfectly normal stomach; stating that "there is no connection whatever between the stomach condition for which I treated the insured and the rupture which caused his death". The doctor also wrote to the company as follows:
"December 20, 1935
"New York Life Ins. Co.,
"818 Olive St.,
"St. Louis, Mo.
"Gentlemen:
"At the request of your representative, Mr. J. L. Glen, for more detailed information in the case of William J. Calhoun, I enclose the following data.
"I have been Mr. Calhoun's medical attendant for about ten years. During that period I treated him for numerous colds, and minor ailments. On March 15, 1932, he came to my office with an acute nephritis. The urine contained many red blood cells, few granular casts, and a large amount of albumin. This condition progressed favorably and he was discharged on May 3rd with normal urinary findings.
"On November 2, 1933, he had a moderately severe gastric hemorrhage. No x-ray examination was made at this time. This condition cleared readily and I did not see Mr. Calhoun until May of 1934 when he again complained of gastric discomfort. An x-ray examination at this time was made on April 30 by Dr. E. C. Ernst of St. Louis, who reported a pyloric mucous *530 erosion or ulcer. Under ulcer regime Mr. Calhoun made a rapid recovery and I did not see him again until November 29, 1935.
"On this date he had a severe gastric hemorrhage. This was followed by rapid hemorrhages during the following twenty-four hours. On the evening of November 30, following a severe hemorrhage at his home, I had him removed to St. Mary's Hospital where he was given an immediate blood transfusion. Another severe hemorrhage occurred about midnight, and another in the early morning hours of December 1. About 7 A. M. he was given a second blood transfusion. At noon on December 1 he had a very severe hemorrhage and expired.
"A partial autopsy, performed about two hours after death, revealed a perfectly normal gastric mucosa. The cardiac end of the esophagus was unusually patent admitting better than two fingers, and, about three inches above the cardiac end of the esophagus, a large group of varicose veins were disclosed. There was a moderate degree of hepatic cirrhosis. The hemorrhage undoubtedly originated from a rupture of one of these enlarged esophageal veins.
"Trusting that this will be the information you desire, I am,
"Very truly yours,
"J. A. Seabold."
The company decided to contest payment and turned over the file to its St. Louis attorneys.
On January 9, 1936, the attorneys filed suit in the U. S. District Court for the Eastern District of Missouri seeking cancellation of the policy on the ground of fraud, and for the reason that the incontestable period would run and terminate on January 29th, the day the answer to the petition was returnable. The original petition alleged that the insured was guilty of fraud in stating that he had not consulted a physician and that he had no disease of the stomach, intestines and kidneys. Early in February, Dr. Harris was asked to interview Dr. Seabold for the Company. He complied, and on February 21st wrote a report, which is here set out:
"February 21, 1936.
"Jones, Hocker, Gladney and Jones,
"705 Olive Str.,
"St. Louis, Mo.
"Gentlemen:
"At your request I interviewed Dr. E. C. Ernst, Dr. B. Portuondo and Dr. J. A. Seabold relative to their opinion as to the cause of death of William J. Calhoun.
"I examined the X-ray plates taken April 30, 1934, by Dr. Ernst and went over the history of the case with him. Mr. Calhoun was referred to Dr. Ernst by Dr. Seabold for the purpose of determining the cause of haemorrhages from the stomach, and from the X-ray plates and fluoroscopic examination Dr. Ernst made a probable diagnosis of gastric erosion or gastric ulcer.
"The plates show no evidence of thickening of the wall or contraction or adhesions and, in view of the post-mortem findings, Dr. Ernst is of the opinion that there was no gastric ulcer, but all the bleeding arose from a localized area of widely dilated veins in the oesophagus.
"Dr. Seabold's statement agrees with his letter dated December 30, 1935. He has known Mr. Calhoun for over ten years, during which period he has been the family physician. The first notation in his office records shows that Mr. Calhoun came to Dr. Seabold's office March 1st, 1932, complaining of having felt weak and tired for about ten days. Examination of the urine showed the presence of albumin, casts and red blood cells. His condition rapidly improved and on May 3rd there was no evidence of albumin, red blood cells or casts.
"He next saw him on November 2nd, 1933, because of a gastric haemorrhage, evidenced by nausea and vomiting of blood. There was no return of this bleeding until April, 1934, at which time he was sent to Dr. Ernst for consultation and X-ray diagnosis.
"In the meantime he went to see Dr. Seabold on January 23, 1934, for a general physical examination. Dr. Seabold at this visit found him free from any evidence of disease except for a moderate hypertrophy of the heart, attributed to his earlier strenuous exercise as a member of a rowing crew. (The policy was applied for the following day.)
"Dr. Seabold did not see him again until he was sent for because of another haemorrhage November 29, 1935. On the 30th he was taken to St. Mary's Hospital where he died, the result of uncontrollable haemorrhage.
"Dr. Portuondo's report of the autopsy agrees in the main with his present opinion, except that he admits his diagnosis of cirrhosis of the liver is without adequate foundation and was given in order to explain *531 the presence of dilated veins in the oesophagus.
"This plexus of dilated veins was localized, and described by Dr. Seabold as having the gross appearance of a group of coiled earthworms.
"I examined sections of the liver and oesophagus in Dr. Portuondo's office in the University. As to the liver, there is a small increase of connective tissue around some of the lobules, but there is not enough to have interfered in any way with the portal circulation. Dr. Portuondo shares this opinion.
"In the oesophagus there are large spaces filled with blood, and enclosed in a very thin wall. This very thin partition separates one space from another. The appearance is characteristic of the typical haemangioma cavernosum.
"This is a congenital anomaly of the blood vessels at this point. In all probability the condition progressed steadily during life.
"The absence at the autopsy of the slightest indication of an ulcer of the stomach, either fresh or healed, and the presence of this localized tumor of blood vessels must lead to the conclusion that all of previous haemorrhages, as well as the final one, were the result of a rupture of one of these dilated and thin walled vessels.
"In this opinion and conclusion Drs. Ernst, Seabold, Portuondo and I concur.
"Yours very truly,
"D. L. Harris, M.D."
On March 15th the Company took the deposition of Dr. Seabold. Dr. Seabold stated that the four times he treated the insured for nephritis, he had not told insured that he had nephritis, but only a secondary kidney irritation. Asked when he next saw the insured, the Doctor answered:
"On November 2nd, 1933."
"Q. What was his condition then? A. He had had a gastric hemorrhage; at any rate, he had vomited blood; that was ten p. m., November 2, 1933. I got a call to his home and found the man lying in bed with a pulse of ninety, blood pressure of 100/60; his color was good; he didn't show any evidence of the hemorrhage; I was rather reluctant to believe that he had had much hemorrhage.
"Q. You were there at that time while he was having the hemorrhage, or right afterwards? A. No, he had evidence of blood on towels and things in the bed with him.
"Q. Where did the blood seem to come from? A. He vomited it; that is all; it was from his stomach or somewhere in the vicinity of the stomach; it wasn't a thing that came from the lung. I could find no evidence of hemorrhage from the nose or throat, so the blood undoubtedly came from the intestinal tract.
"Q. When did you next see him? A. I saw him the following morning.
"Q. What did you do for him at that time? A. I put him quiet in bed with ice packs to his abdomen, gave him morphine and atropin and restricted everything by mouth, he got nothing, not even water, chips of ice only that night; the following morning I saw him and he had vomited several times through the night; the last two times there was no evidence of blood; blood pressure was 124/80, pulse of good volume, and he didn't appear particularly sick. That was the last time I had occasion to see him, none of these things impressed him very deeply; I didn't see the man again from November 3, 1933, until June 23, 1934. That was the last I saw of any bleeding. I told him at the time that the thing lacked the characteristics of ulcer; he didn't have the indigestion or pain; I was suspicious he might have some varicose veins in the stomach.
"Q. In November, 1933? A. Yes. I told him sometimes those hemorrhages come as a result of varicosities some place about the stomach. He vomited twice during the night after I saw him or he vomited several times, but the last two times there was no blood.
"Q. Did you discuss with Mr. Calhoun what might have been the cause of those hemorrhages? A. Oh, yes, he wanted to know what I thought it was. I told him the thing didn't present a true picture of an ulcer. The only other possibility would be a varicose vein in his stomach; we see those things rather frequently; people have hemorrhage from the stomach and our findings are negative. He apparently accepted it that way, because he didn't come to my office and didn't consult me again between November, 1933 and June, 1934.
"Q. January, 1934, wasn't it? A. Yes, January 23d; this looked like June.
"Q. What was his condition then? A. He then came in, he said he was rather *532 belated about it, but he thought he had better come in for a check up; I checked over him at that time and found him in excellent condition. His urine was entirely normal.
"Q. Did he give any special reason why he wanted you to go over him that day? A. No, as I got it, it was just that he wanted to know how he was getting along; it was in November he had had that hemorrhage, and he passed things up until January 23, 1934; when he came in to be checked over; his condition was excellent at that time; he had a blood pressure of 158/95; his urine was free of albumin and sugar, faintly acid, and microscopically negative. Mr. Calhoun had an athletic heart, which dated back to his youth; his heart was moderately enlarged; he had what is definitely known as `athletic heart', a hypertrophic condition of the heart muscle, due to strenuous athletic work in his youth."
In the deposition the doctor stated that insured did not take his indispositions seriously. "He got to feeling better; that is all there was to it; none of these things seemed to impress Mr. Calhoun, he had such a splendid physique and was ordinarily in such excellent shape, nothing put him down; he didn't have any neurasthenic tendencies that would force him to dwell on any of these things". Speaking of the cause of death, the aneurysmal varices, the varicose veins in the esophagus, the doctor said the condition was very unusual, "that sort of thing couldn't come suddenly; that is a thing that must have developed over a period of years; he didn't show any evidence of hemorrhage except in the last two years. How long it would take a thing like that to develop is purely a matter of guess work; the situation is so rare, we have no means of observing that; we can only do that by comparing it with varicose veins in other areas. People don't develop varicose veins in the legs until they get to forty or fifty.
"Q. Did these hemorrhages result from the vein condition you found in the esophagus? A. Oh yes.
"Q. All the hemorrhages he had the one in November? A. Oh, yes; I don't think the stomach condition had anything to do with that.
"Q. You think all the hemorrhages were the result of that? A. Yes; I don't think he ever had a hemorrhage from his stomach.
"Q. That vein condition must have developed before he had the hemorrhage? A. It was in the process of development, at any rate.
"Q. It gradually reached a stage of fullness in these veins, a plethoric condition of the blood, that eventually caused the breaking down of the walls of the veins, and that is what caused the hemorrhage; is that the way it worked out? A. Yes; every time the man would swallow food or nourishment, it would have to pass over these veins; this ulcerative thing could not have existed over a longer period than
"Q. Ordinarily when you have a hemorrhage from a duodenal ulcer the duodenum is down near the entrance from the stomach to the large intestine? A. Yes.
"Q. In a hemorrhage from a duodenal ulcer, you generally pass blood through the bowels and you see evidence of it in the stool? A. Yes, and you see the same thing in this.
"Q. Did you see evidence of that in his case? A. Yes, he had tarry stools. That is what made the diagnosis so difficult; you got the same picture you would get from a hemorrhage anywhere in the intestinal tract."
On cross-examination the doctor stated that this disease could not have been discovered except by putting a bronchoscope down there, and said he wouldn't want to be the man to do that.
The equity case was tried on an amended petition filed by the insurance company on March 26, 1936. The petition prayed for the cancellation and rescission of the policy in suit and that the beneficiary named in the policy be enjoined from bringing action thereon. The grounds for the relief sought were the alleged false and fraudulent answers of the insured to certain questions in the application which the company relied upon as true when it issued the policy.
The application by the terms of the policy was made a part of the contract. The petition alleged that the application contained false and untrue statements and representations, in that the insured in the application, to the questions "7E. Have you ever raised or spat blood? 8. Have you ever consulted a physician or practitioner for or suffered from any ailment or disease of * * * (b) the heart, blood vessels or lungs * * *?" answered each question "No".
*533 Upon the trial of the equity case the Company called Dr. Seabold as a witness. He gave the following testimony about the hemorrhage he had noted on November 2nd, 1933:
"I did not have occasion to treat him again from May 3, 1932, until November 2, 1933, when I was called to his home at ten o'clock that night. The history I got then was that he had done some vomiting. He described it as something that looked like coffee ground vomitus, and he was afraid that it might be something a hemorrhage of some kind. He was not particularly shocked; he was lying in bed perfectly comfortable. He had a pulse of 90, but he didn't show any evidence of shock, and there was nothing to indicate that he had had a serious hemorrhage.
"Q. Did he tell you he had a hemorrhage? A. He told me he had vomited this coffee ground material and I interrogated him rather closely about what he had eaten, whether he had taken anything into his stomach that might resemble blood, or certain vegetables that would give it that coffee ground appearance. I am not absolutely clear as to whether or not I saw the stuff he vomited. I had occasion to see him several times for this thing, and, if my recollection serves me correctly, I don't believe I saw what he vomited that first time, in November. But I made him stay in bed, put him on a liquid diet, and I gave him a hypodermic sedative. He showed no evidence whatever of any loss of blood. I mean, he was not shocked. He had a pulse of 90. One who has lost a noticeable amount of blood is apprehensive and fearful, but he showed no such symptoms. He was lying in bed laughing; as a matter of fact, I talked to him for about a half hour about everything in the world but his condition. As to whether or not this matter which he vomited came from the intestinal tract, or some other interior part of the body, it might come from anywhere from the mouth on down. Of course it came out through his mouth. He described the vomitus to me as coffee ground material. Blood that has been taken into the stomach and kept there for any length of time is changed into that sort of material by the gastric acids and digestive ferment, so that we are always suspicious of a coffee ground vomitus. Most often it does mean some loss of blood.
"I discussed with him the characteristics of this hemorrhage and an ulcer hemorrhage. I told him he had had no pain whatever; there was not a thing about him to suggest an ulcerating thing. You couldn't get a history of pain after taking food or when the stomach was empty. The whole thing was ephemeral. So, I told him that there were some varicose veins about his stomach or pharynx, or somewhere along the gastro-intestinal tract, that had broken loose, a thing that happens very frequently, and a thing which didn't have any significance.
"That was the night of November 2, 1933, at ten o'clock. I next saw him the following morning, and he complained that the hypodermic which I had given him the previous night had nauseated him. I discovered later that he could not tolerate morphine, as it made him violently sick. He had vomited several times during the night, but there was no blood in that vomitus. On November 3, 1933, the blood pressure was about normal. I had difficulty in persuading him to stay in bed, but I insisted upon his staying at home and following a rigid diet. I placed him on a bismuth preparation as a safeguard against any further bleeding, if there had been any."
The doctor described the cause of the insured's death substantially as in his deposition. This witness further testified:
"You took my deposition in the case which is now pending in the State Court, some time ago. You asked me with respect to this November 2d hemorrhage, what his condition was, and at that time I said: `He had had a gastric hemorrhage; at any rate, he had vomited blood; that was ten P. M., November 2d, 1933'. That agrees with my notation here. And you said to me during the taking of that deposition: `You were there at that time while he was having the hemorrhage, or right afterwards?' I said: `no, he had evidence of blood on towels and things in the bed with him.'"
"Unfortunately, I had made a visit I told you at that time that I had not seen Mr. Calhoun between that date and May, but I discovered afterwards that I had been to his home on another date, April 25. You will find in that deposition I told you that he had telephoned me that he had trouble I will explain why this uncertainty has come up. I told you that he had telephoned me that he had trouble and had had additional bleeding, and that I insisted that he should go immediately for an X-ray examination. I told you that on April 25, 1934, he had telephoned me. *534 Here is what happened: Frequently you will go out to see a patient and that notation is not made on the office card; that is what happened here. So, that brought up the question. I did see a hemorrhage at that time, in April, 1934. I had those two dates confused, so that I cannot honestly say that I saw any evidence of hemorrhage at that time in November. I recall now that it was in April that I actually saw blood, and then clamped right down on the thing and insisted on an X-ray examination. I am positive about having seen the blood in April.
"Q. But you do not definitely remember having seen any blood that you think he vomited in November? A. And the omission of that visit in April is what confused me in those two dates.
"Q. However, I asked you in this deposition, with respect to the November hemorrhage, where the blood came from, and you said he vomited it. A. It came from whatever it was he vomited it. Now, whether it was on November 3 that I saw the blood on the towels, or whether it was the April set-up, I say I saw this thing I followed this case over a year or more; I followed this thing from November, 1933, to December 1, 1935, and it is just a little bit difficult to keep those points absolutely clear, in all that time.
"Q. How long after you see the patient do you make your notes on your office record? A. I saw this man in November at 10:00 P. M. at night. This notation was made the following morning.
"My record does not say that I saw blood, but it shows that he had a gastric hemorrhage. That notation was made on the morning after I saw him, the morning of November 3, 1933.
"I would make that notation from calling on a patient and having him tell me that he vomited coffee-like material, which he thought looked like bloody material, and on that basis I would make that notation on my card. That was my opinion at that time, that he had some blood pass from the gastro-intestinal tract. A doctor's opinion may be absolutely based upon what someone tells him, as well as upon what he sees. I also made the notation, following that note, that there was no particular shock; the man had a pulse of 90, and that his blood pressure was all right. So, I left the way open for myself there for subsequent observation.
"A man can have a gastric hemorrhage without spitting blood. He could have a hemorrhage from the stomach that would pass through the intestinal tract. He would not necessarily have to vomit. It is the rule, however, that they do vomit.
"He told me that he had vomited this coffee ground tarry-like material, as I recall it. I asked him if he thought it was blood, and he said he was not sure about it. He said it was tarry-like, and that he was nauseated and sick at his stomach. I questioned him fully about what he had eaten, or evidence of pain, or anything else that would substantiate a diagnosis of gastric hemorrhage. But the only thing I could get out of the story was this coffee ground vomitus, without any shock symptoms of a hemorrhage to support it.
"He told me that he had vomited this coffee-like substance, and from what he told me, I put it down that it was my opinion that it was a gastric hemorrhage through the mouth. It might possibly have been something other than blood which caused that coffee ground material, such as berries, sometimes spinach, and sometimes a few things of that kind will cause the dark brown vomitus.
"If this varicose condition existed over a long period of time, and this condition that he had in November, 1933, is a little more than two years prior to the time he died, I would say yes, that Mr. Calhoun must have had some varicose condition in those veins at that time. Those varicosities were subject to being irritated by the swallowing of food, which is probably what caused them to break, or the pressure of thin walls eventually the walls become so thin from pressure that they break down.
"These X-rays which were taken on April 30, 1934, did not disclose this varicose condition. They could not show this. There is no way that these things could be discovered except by the introduction of the bronchoscope or the esophagoscope."
The doctor testified on cross-examination that the trouble insured had with a wrist pain of arthritic nature and with his kidneys had nothing to do with his death. He stated that the symptoms that usually occur with a hemorrhage had been absent on his November 2nd call, and that the coffee grounds substance in insured's vomit were what insured had observed and told him about. He stated he had seen blood on the towels in April, not November. The *535 doctors' records which showed a visit for hemorrhage then were held inadmissible.
Dr. Portuondo, who performed the autopsy, testified that the death was caused by the rupture of the varicose veins in the esophagus. It was his opinion that the varicose condition was incipiently present from insured's birth and that they were in a condition to rupture within ten years of his death. He thought they might have ruptured on November 2nd, and he could have had one then.
Dr. Harris agreed when questioned on the same matters; he testified further that there was no way that the insured could know of his condition. When Dr. Harris was asked about his interview with Dr. Seabold, the beneficiary objected on the ground that the insurance company sought to impeach its own witness: the insurance company claiming surprise, the beneficiary objected that the Company had not laid the foundation by asking leave to cross-examine and asking Dr. Seabold if he had made certain statements to Dr. Harris. This objection was sustained. Dr. Seabold was recalled and examined to cure the objections, and the deposition was received, as was subsequent testimony of Dr. Harris on the conversation he had had with Dr. Seabold.
The Company Medical Supervisor from New York testified by deposition that if the insured had revealed that he had had nephritis in the spring of 1932, the Company would not have issued the policy; that if it had known of a hemorrhage in November, in 1933, it would not have issued the policy. He testified that the heart condition alone was sufficient to make the insured a questionable risk.
A member of the Company's Classification Committee testified by deposition on the rating up of the loss, and a member of the Sub-Loss Committee testified by deposition about the decision to contest payment.
The beneficiary called two witnesses, each friends of the deceased. Each testified that the insured had been robust in health and each spoke of the insured's saying that he had been sick and vomited on November 2nd; one of them said there was suspicion of ptomaine, that no nephritis had been spoken of, only rheumatic pains. The insured's mother-in-law who lived with him and her daughter, the beneficiary, testified that on the evening of November 2nd the insured had eaten for dinner the menu that Dr. Seabold had testified might give the coffee grounds appearance: lobster, spinach, celery, black coffee. She said the vomitus "just looked like he was throwing up his supper". She had gone in to see about him and cleaned up. She saw no blood, but recalled that in April there had been some. Etta Carey, the colored maid of the Calhouns, said there had been no blood on towels or sheets in November; she judged by the laundry and sheets, as she was not present when the vomiting occurred. The beneficiary testified that they had had crab meat on toast, spinach and coffee to eat that night; that there was no blood then. She did see the blood in April.
On the trial of the Equity case the trial court found as a fact that the insured had not at any time prior to the making of the application for the policy in question vomited blood and that there was no evidence to show that at the time of his death the insured had any disease of the stomach, intestines, bladder or kidneys and that the deceased died on or about December 1, 1935, as the direct result of hemorrhage on that day and on the preceding day, caused by a rupture or ruptures of varicose veins in the lower part of the esophagus; the condition in the esophagus being known by the medical term "aneurysmal varices" and that while the "insured did in fact have an enlarged heart said condition was known to the plaintiff (insurance company) when said application was made and when said policy was issued and that on account thereof, a higher premium was charged for said policy than would otherwise have been charged" and "that said heart condition in no wise contributed to the death of the insured" and "from the evidence that the condition of the insured's esophagus from which the fatal hemorrhage resulted was of long standing, but that it was never known to the insured at any time nor was it known to or suspected by any physician who had examined or treated him."
The trial of this cause before Judge Davis and a jury consumed three days, the verdict being returned on November 18, 1938. The ruling of the Court on the motion of defendant for a directed verdict on the issues of penalties, damages and attorneys' fees was reserved. Judgment having been entered upon the verdict, defendant filed its motion to set aside the verdict and judgment and to enter judgment for defendant, or, in the alternative, to grant it *536 a new trial. This motion having been overruled, defendant prosecutes its appeal.
The issue presented by this appeal is the right to recover damages for vexatious refusal to pay the policy. The statute under which plaintiff seeks to recover is Section 5929, R.S.Mo.1929, Mo.St.Ann. § 5929, p. 4515. It reads: "Damages, when recoverable. In any action against any insurance company to recover the amount of any loss under a policy of fire, cyclone, lightning, life, health, accident, employers' liability, burglary, theft, embezzlement, fidelity, indemnity, marine or other insurance, if it appear from the evidence that such company has vexatiously refused to pay such loss, the court or jury may, in addition to the amount thereof and interest, allow the plaintiff damages not to exceed ten per cent on the amount of the loss and a reasonable attorney's fee; and the court shall enter judgment for the aggregate sum found in the verdict." The meaning, purpose and effect of the statute just quoted is to be determined by the interpretation placed thereon by the Supreme Court of Missouri.
In Non-Royalty Shoe Co. v. Phoenix Assurance Company, 277 Mo. 399, 210 S.W. 37, 42, the Supreme Court, speaking through Judge Faris, said:
"This is a penal indeed a highly penal statute, and so it ought to be strictly construed. No one ought to be allowed to profit by it, unless he brings himself strictly within the letter of its provisions. * * *
"We are convinced that a vexatious refusal to pay an insurance loss is not to be deduced from the mere fact that upon suit the verdict is adverse to the defendant. Patterson v. [American] Insurance Co., 174 Mo.App. [37] 44, 160 S.W. 59; Keller v. [Home Life] Insurance Co., 198 Mo. 440, 95 S.W. 903. If the fact of an adverse decision is to constitute the sole and decisive test, it would be fairly plain that this court was in error when it held the statute to be constitutional; for it is only upon the fundamental ground of a vexatious refusal to pay that the penalty inflicted by the statute can be upheld. The defendant is to be allowed to entertain an honest difference of opinion as to its liability, or as to the extent of such liability under the contract of insurance, and to litigate that difference; otherwise the provision of the statute is obviously so shot through with duress as to be invalid upon any view. It is from the very nature of the case, and from the protean form which the facts of the case assume, difficult, if not impossible, to frame any general rule for use in determining when a refusal to pay is vexatious and when it is not. Judge Trimble, of the Kansas City Court of Appeals, has announced a rule, which commends itself to us so far as it goes, and it goes as far as it is wise or safe to go in announcing a rule to govern cases wherein the facts are as variant as we find them in insurance cases upon this question. This rule reads thus:
"`And while affirmative proof is not required to show vexatious refusal, yet the penalty should not be inflicted unless the evidence and circumstances show that such refusal was willful and without reasonable cause as the facts appeared to a reasonable and prudent man before the trial; and merely because the judgment, after trial, is adverse to defendant's contention, is no reason for inflicting the penalty.' Patterson v. American Ins. Co., 174 Mo.App.loc. cit. 44, 160 S.W. 62.
"In the case at bar there was no refusal to pay after the time at which, by the terms of the policy, defendant became bound to pay. And while lapse of such time would not, of course, always be the true test, since the vexatious and recalcitrant attitude of the defendant might by the proof be shown to be such as that a delay to sue for the 60 days allowed would be futile, yet there is not in this case any showing of any such attitude. Young v. [Pennsylvania Fire] Insurance Co., 269 Mo. 1, 187 S.W. 856; Fay v. [Ætna Life] Insurance Co., 268 Mo. [373], loc. cit. 389, 187 S.W. 861. We are constrained to say that there was not in evidence any substantial facts upon which to base a finding of any penalty for vexatious refusal to pay the loss, and if upon a new trial none be offered, this issue ought not to be submitted to the jury."
In the case above cited (Non-Royalty Shoe Co. v. Phnix Assurance Company) it will be noted that the Supreme Court of Missouri, speaking through Judge Faris, announced the below mentioned principles in connection with the question of liability under this statute: (1) The refusal must be vexatious. (2) The defendant is to be allowed an honest difference of opinion as to its liability. (3) The defendant is to be allowed to litigate that difference. (4) (Unless the foregoing latitude of action be allowed to the defendant, the statute would be unconstitutional.) (5) No *537 penalty can be inflicted unless the evidence shows two things: First, that the refusal was willful and, secondly, that it was without reasonable cause; and these things must appear to a reasonable and prudent man before the trial. (6) The adverse outcome of a trial is no reason for inflicting the penalty. In Aufrichtig v. Columbia National Life Ins. Co., 298 Mo. 1, 249 S.W. 912, the Supreme Court added the following principle: (7) If the insurance company acts in good faith it may contest an issue of either fact or law without the danger of penalties. This further principle is announced in State ex rel. Continental Life Ins. Co. v. Allen, 303 Mo. 608, 262 S.W. 43. (8) The right to resist payment is, primarily, a question of law to be determined by the facts as they reasonably appeared before trial, and not as they may have been found by the jury. Later, the following principle was announced in State ex rel. Gott v. Fidelity & Deposit Co., 317 Mo. 1078, loc. cit. 1095, 298 S.W. 83: (9) Where the legal question involved is one about which lawyers might well differ, there can be no vexatious delay. See, also, Camdenton Consol. School Dist. No. 6 v. New York Casualty Co., 340 Mo. 1070, 104 S.W.2d 319.
We have examined the authorities cited by the appellant in support of its contention that the court committed error in the submission of the question of vexatious refusal to pay the sum due under the policy in this case. We have no fault to find with the principles laid down in such authorities. The facts in the cases cited are clearly distinguishable from the facts in the case now before the Court.
In Curtis v. Indemnity Co. of America, 327 Mo. 350, 37 S.W.2d 616, 628, the Supreme Court had before it a suit on a policy of fire insurance on an automobile which had been destroyed by fire. The insurance company's adjustor promised to pay the loss in full and that promise was renewed on various occasions but never fulfilled. The jury's verdict was in favor of plaintiff, including damages and attorneys' fees. The Supreme Court held that the evidence justified the finding that the defendant was guilty of vexatious refusal to pay the loss. In that case the court, after citing numerous authorities and quoting from the decision in Patterson v. American Insurance Co., 174 Mo.App. 37, 160 S.W. 59, said: "However, if the reasonable inference may be drawn from a general survey of all the facts and circumstances in the case that the defendant's refusal to pay the loss under the policy of insurance was without reasonable or probable cause or excuse, then the issue of defendant's vexatious refusal to pay the loss is properly submissible to a jury."
In Exchange Bank v. Turner, 321 Mo. 1104, 14 S.W.2d 425, 433, the Court said: "Complaint is made also on the ground that the facts did not warrant the assessment for vexatious delay under section 6337, R.S. Mo.1919. It is true, as appellants say, that insurance companies, acting in good faith, may contest either issues of fact or law without subjecting themselves to the penalties of the statute; and there are some issues of law in this case about which lawyers reasonably might differ. * * * But the mere presence of a real law question in the record will not of itself exculpate the defendant from a charge of willful obstruction if there is evidence that its attitude was vexatious and recalcitrant."
In Florea v. Iowa State Ins. Co., 225 Mo. App. 49, 32 S.W.2d 111, 115, the Court said: "We appreciate the fact that insurance companies, acting in good faith, may contest issues either of fact or of law without subjecting themselves to the penalty, but, even though there may be an issue of either character in the case about which lawyers might reasonably and honestly differ in their opinions, yet the attitude of the company in denying liability must not be vexatious and recalcitrant, else it may not be exculpated from the charge of willful obstruction."
In Coscarella v. Metropolitan Life Ins Co., 175 Mo.App. 130, 157 S.W. 873, 876, the Court said: "It is true there is no direct and positive evidence to the effect that the delay in payment was vexatious; but such evidence that is, positive and direct evidence is not required. The jury are authorized in cases of this character to infer and conclude that the delay was vexatious from a survey of all of the facts and circumstances in the case tending to reveal the conduct of the insurance company with respect to the matter."
In the case of Rush v. Metropolitan Life Insurance Co., Mo.App., 63 S.W.2d 453, 456, the St. Louis Court of Appeals had before it an action by an administrator of a holder of a life policy. The defense was misrepresentation as to the condition of the health at the time of making the application for the policy. The verdict, in *538 favor of plaintiff, included an allowance for attorneys' fees on account of vexatious refusal to pay. The court, in upholding the verdict, on the subject of vexatious delay, said: "Here the defendant knew from the outset that the proofs of death contained contradictions in and among themselves. It knew of the findings of its own medical examiner tending strongly to support the claimant's right to a recovery on the policy. It also should have known that the hospital and dispensary records, strongly relied upon by it for its defense, as well as the testimony of the attending physicians corroborative thereof, would be inadmissible in evidence, absent a waiver of privilege on the part of plaintiff which it had no right to anticipate."
In Porter v. Equitable Life Ins. Society, Mo.App., 71 S.W.2d 766, 779, the Kansas City Court of Appeals upheld the right of the plaintiff to recover attorneys' fees on account of vexatious refusal to pay. In that case the court said:
"It has also been held that, under circumstances where legal questions raised by a petition are such that lawyers may well differ honestly and reasonably concerning them, it is error to submit the question of vexatious delay. * * *
"But it has also been held that the mere presence of such issues in the case will not of itself exculpate the defendant from the charge of willful obstruction and delay if there is evidence that its attitude was, nevertheless, vexatious and recalcitrant. * * *
"In the case of Curtis v. Indemnity Company of America, 327 Mo. 350, 37 S.W.2d 616, loc. cit. 628, it was said: `However, if the reasonable inference may be drawn from a general survey of all the facts and circumstances in the case that the defendant's refusal to pay the loss under the policy of insurance was without reasonable or probable cause or excuse, then the issue of defendant's vexatious refusal to pay the loss is properly submissible to a jury.'
"There was not only evidence in the record from which it might appear that appellant, in good faith, asserted meritorious defenses, at least that questions were raised concerning which there was a place for honest difference of opinion; but there was also evidence tending to show that, notwithstanding the presence of such defenses and the good faith of appellant in asserting them, its action was nevertheless recalcitrant and obstructive, which made the issue as to vexatious delay a question for the jury and submissible.
"The records of the Loose-Wiles Company showed the premiums on the policy due from respondent had been paid to October, 1930; that respondent had been carried on the pay roll to January 1, 1930. Yet, appellant, regardless of such records, asserted that her employment had ceased November 2, 1929, and that her insurance had ceased and was not in force July 1, 1930. It was for the jury to say whether the assertion of such a defense, under the circumstances shown, was in good faith or without cause and excuse to obstruct and delay. There were other circumstances developed in evidence, not necessary here to particularize, justifying the submission of such question to the jury. The submission of such question to the jury was not erroneous. Appellant's complaint under this head is denied."
In White v. American Life & Accident Ins. Co., Mo.App., 90 S.W.2d 118, 120, a suit on a policy on the life of plaintiff's deceased husband, a verdict for the plaintiff included damages for vexatious refusal to pay. Discussing the insurance company's claim that such a finding was unwarranted by the evidence, the St. Louis Court of Appeals said:
"It is next argued that, for want of substantial evidence of vexatious refusal on defendant's part to have paid the claim, it was error for the court to have submitted such issue to the jury.
"The determination of this point must depend, of course, upon whether or not there may be said to have been such facts and circumstances in evidence as to have formed a legitimate basis for the belief that defendant's refusal to pay was willful and without reasonable cause as the case would have appeared to a reasonable man before the trial. * * *
"Though there is undoubtedly something to be said in support of defendant's viewpoint that under all the facts of the case it should have had the right to contest the issue of its liability under the policy without subjecting itself to the penalty of the statute (section 5929, R.S.1929, Mo.St.Ann. § 5929, p. 4515), yet it must be granted, we think, that the question of its right to have refused payment is, after all, a fairly debatable one, which is but another way of saying that the issue of vexatious refusal was one for the jury to determine along with the other issues in the case. It must *539 be borne in mind, just as we have already pointed out, that defendant did not have a word of direct and positive evidence to the effect that the insured was actually suffering from a duodenal ulcer at the date of the issuance of the policy, and defendant is furthermore to be charged with knowledge of what its own evidence subsequently disclosed, which was that, even though the insured had had the duodenal ulcer in November, 1930, it would still have been entirely possible for him to have been cured of it by October, 1931, when the policy was issued and delivered to him. So we repeat that, while in the minds of some people there might be thought to have been a legitimate basis in the case for defendant's denial of its liability, yet other minds equally reasonably might very well conclude that from the circumstances noted defendant could not reasonably have expected the return of a verdict in its favor upon the issue of a breach of the sound-health provision of the policy, and consequently the issue of vexatious refusal must be held to have been properly one for the jury to be called upon to decide."
See, also, Friedman v. State Mutual Life Ins. Co., Mo.App., 108 S.W.2d 156; Novosel v. Mid-West Life Ins. Co. of Mo., Mo.App., 276 S.W. 87; Groves v. Great Eastern Cas. Co., 212 Mo.App. 316, 246 S.W. 1002; Reed v. Prudential Ins. Co., 229 Mo.App. 90, 73 S.W.2d 1027. In the latter case the action of the jury in allowing damages and attorneys' fees was approved and the appellate court called attention to the fact that changing ground for refusal to pay after a suit had been filed was evidence of vexatious refusal to pay.
The question of vexatious delay was submitted to the jury. In submitting such issue the trial court, after making reference to the statute of Missouri heretofore set out, gave the following instructions:
1. "The question here is, Did this defendant vexatiously refuse to pay this loss? Now, the vexatious by a vexatious refusal to pay, we mean, Did the defendant, without reasonable grounds or excuse, litigate this policy and deny its liability thereon? And that is the peculiar question which is being submitted to you in this case on a life insurance policy and the question you will have to answer by your verdict is this: Did this defendant, without just cause or without excuse, and in bad faith, litigate this policy of life insurance? If you find from your consideration of this case that it did do that, that it litigated this life insurance policy and delayed payment of the proceeds of this policy without reasonable grounds, without just cause or excuse, and in bad faith if you find that, you ought to take the plaintiff's view of this case. On the other hand, if you determine that the defendant had reasonable grounds to question its liability upon this policy and that it did question it and did litigate it I say, if you take that view, you ought to decide this case for the defendant. I mean on the issue of damages and attorneys' fees, you ought to decide for the defendant, because that is the only issue in the case."
4. "And the Court further instructs you that, if from the facts and under the instructions of the Court you find that the defendant New York Life Insurance Company vexatiously refused to pay promptly the amount of said policy to the plaintiff, and that as a result thereof plaintiff has been hindered and delayed in the collection of said sum of ten thousand dollars and interest, without any reasonable grounds so to do, and that the defendant's refusal was not in good faith, then in addition to the principal sum of said policy, to-wit, ten thousand dollars, and interest thereon at the rate of six per cent per annum from the 4th day of December, 1935, to the date of your verdict, you may allow the plaintiff damages in a sum not to exceed ten per cent of the principal sum of said policy, and you may also allow her such a sum as you find from the evidence to be reasonable compensation for the services of attorneys employed by her in both of said lawsuits, insofar as the same were necessary wholly to protect her rights under said policy."
5. "By the term `vexatious refusal to pay' is meant refusal to pay the principal sum of said policy promptly, without reasonable grounds for belief on the part of the defendant that it was not legally liable to the plaintiff for the principal sum of said policy. If, in refusing to pay promptly, the defendant acted in good faith, and if it had reasonable grounds to believe that it was not liable under the terms of said policy, and reasonable grounds to believe that it might escape legal liability under said policy, then you should find that the refusal to pay was not vexatious, and, consequently, you should not allow the plaintiff any sum as damages, or any sum as attorneys' fees in this case. If, however, under the evidence and instructions of the Court, you find that the defendant, in view *540 of the established rules of law in the State of Missouri, with which it was presumed to be familiar when it refused to pay said policy, and in view of the facts which it had in its possession, and the facts which it could have discovered by a reasonable and fair investigation, did not have reasonable grounds to believe that it was not liable under the terms of said policy, then you may find that the defendant, in instituting and prosecuting said lawsuit, which it did institute, and in defending this case, did not act in good faith, and consequently, was guilty of vexatious refusal to pay the principal of said policy."
8. "As to whether or not the plaintiff is entitled to penalties for the refusal of the defendant to pay the policy, the Court instructs you that you may not assess such damages unless you find from the evidence that the refusal was vexatious; and in this connection, the Court instructs you that the mere refusal of defendant to pay, or an unsuccessful suit of the defendant to cancel the policy, is, in and of itself, no sufficient evidence of vexatiousness of the refusal. The statute of Missouri under which plaintiff seeks to recover damages for the vexatious refusal to pay is highly penal and should be strictly construed, and no one should be allowed to profit by it unless he brings himself strictly within the letter of its provisions; and so the Court instructs you that the defendant is to be allowed an honest difference of opinion as to its liability under the contract, and is to be allowed to litigate that difference. An insurance company that acts in good faith may contest either an issue of fact or an issue of law, without subjecting itself to penalties of the statute, and its refusal to pay is not vexatious in the sense in which that term is used in the statute, unless the refusal was willful and without reasonable cause as to the facts appearing to a reasonable and prudent man before the trial. With this explanation and test before you, the Court instructs you that, if you find from the evidence that before the trial of this case, the defendant had reasonable cause to believe, as the facts appeared to a reasonable and prudent man, that it was not liable under the policy, or that it honestly and in good faith believed it had a right to cancel the policy for what it honestly believed to be a misrepresentation of the insured in obtaining the policy, then it is not liable in this action for any penalties for its refusal to pay the policy."
9. "The burden of proof is upon the plaintiff to establish to your reasonable satisfaction, by the greater weight of the evidence, that the refusal of the defendant to pay the policy sued on herein was vexatious, as that term has been defined and explained to you in other instructions. The mere fact that the defendant refuses to pay the policy sued on herein is not of itself any evidence that the refusal of the defendant to pay said policy was vexatious; and before the plaintiff is entitled to recover ten per cent of the face of said policy as a penalty, or any sum as attorneys' fees, you must find that the defendant, prior to the trial of this case, had no reasonable grounds for refusing to pay said policy."
10. "The fact that the suit in Equity instituted by the defendant to cancel the policy sued on herein was decided in favor of the plaintiff, Beulah C. Calhoun, is not conclusive evidence that the refusal of the defendant to pay said policy was vexatious, and the jury cannot, simply because this suit was decided adversely to the defendant herein, in the District Court and in the Circuit Court of Appeals, allow the plaintiff the ten per cent penalty and attorneys' fees sued for in this case."
To restate the facts disclosed by the record in this cause on the question of vexatious delay would extend this opinion beyond all reasonable length and would serve no good purpose. Affirmative proof is not required to show vexatious refusal to pay. Under the principles announced by the Supreme Court of Missouri as heretofore set out, we are of the opinion that the action of the trial judge in submitting to the jury the issue of vexatious refusal to pay was proper, and this alleged ground of error is denied.
The ruling just announced makes it unnecessary to discuss the assignment that the Court committed error in denying the request of appellant for a directed verdict on the question of damages and attorneys' fees.
The defendant contends that the Court committed error in its refusal to give, on its behalf, instruction VI-A. In instruction VI-A, the defendant asked the Court to instruct the jury "that defendant had reasonable and justifiable grounds for taking an appeal from the decree of the District Court to the United States Circuit Court of Appeals in the equity suit instituted by defendant to cancel the policy sued *541 on herein, and that the jury cannot find that the defendant was guilty of vexatious delay in the payment of said policy because it took and prosecuted an appeal from the adverse decree of the District Court to the United States Circuit Court of Appeals in the equity suit brought by it to cancel the policy."
The subject of this instruction was covered by the Court in Instruction No. 10 above set out. Having held that the Court did not commit error in formally submitting to the jury the question of vexatious delay and the subject of defendant's refused instruction having been covered by the Court, it was not error to refuse the above requested instruction.
It is next contended by the defendant that the Court committed error in its refusal to give instruction IX requested by it. In Instruction IX the defendant requested the Court to instruct the jury that "even though you find from the evidence that the refusal to pay the policy in this action was `vexatious' as that term is defined and explained in another instruction, nevertheless the damages must not exceed 10 per cent of the amount of the policy and a reasonable attorney's fee for services rendered in connection with this law action alone, in an amount not to exceed $1,000."
Defendant contends that the refusal to give instruction IX was error for the reason that the plaintiff did not ask attorneys' fees for services rendered in the equity suit but only for services rendered in the law action, and the value of the services in question in connection with the law action did not exceed $1,000. The subject of this instruction was covered by the Court in instruction No. 4 set out above.
The defendant's proposed instruction sought to limit the attorneys' fees to the sum of $1,000, while the instruction of the Court authorized the jury, in the event they found vexatious delay, to allow plaintiff such sum as it found "from the evidence to be reasonable compensation for the services of attorneys employed by her in both of said lawsuits in so far as the same were necessary wholly to protect her rights under the policy."
It is next contended that the Court committed error in not granting a new trial on the ground that the verdict was excessive, in that it "included damages for attorneys' fees for services in the equity suit and should have been limited, even had there been vexatious refusal to pay, to attorney's fees for services rendered in the law case, to an amount not to exceed $1,000".
In support of this contention the defendant relies upon the allegations of the petition in this action which prays "for a reasonable attorneys' fee incurred in bringing this suit", which attorneys' fee plaintiff states is the sum of $4,000.
Mr. Wm. R. Gentry, Judge John W. Calhoun, Mr. S. Mayner Wallace and Judge Henry A. Hamilton testified as experts as to the value of legal services performed in this litigation. This question was propounded to Mr. Gentry:
"Q. Now Mr. Gentry, will you tell the Court what in your opinion is the value of the services performed in this litigation, how much they are reasonably worth?
"Mr. Jones: Just a minute, Defendant objects on the ground that there is no evidence in this case of any vexatious refusal on the part of the defendant to pay, and that it is, under those circumstances, not a proper case where any opinion could be expressed on the value of attorneys' fees.
"The Court: Overrule the objection.
"A. I cannot very well separate your services and mine in fixing the value of the services, and I prefer, if it is agreeable, to state my opinion as to the value of the services rendered by you and me, as well. In my opinion the value of all of those services is four thousand dollars. I think that is a fair, reasonable value for our services in the two cases, and I will, if it is agreeable, give you my ideas as to how that is divided as to the work in the different courts.
"Q. I will be glad to have you state that, Mr. Gentry. A. In my opinion, for those services rendered in the Equity suit up to and including the trial of the case, and the preparation of all the briefs before the decision of that case, a thousand dollars is a perfectly reasonable charge.
"For services rendered from the time when that case was decided on the 1st of July, 1937, on through the decision of that case by the United States Circuit Court of Appeals, in all the steps that were taken, which I have detailed here, as to services rendered by us after the decision of the District Court and on through the decision of the Court of Appeals, my opinion is that two thousand dollars is a fair allowance. There was a great deal more work in connection with that than there was in the work of the trial in the District *542 Court. That brings it up to three thousand dollars.
"And my opinion is that, for the preparation and trial of this case, one thousand dollars is a reasonable charge. That makes a total of four thousand dollars."
On cross-examination this question was propounded to the witness:
"Q. Mr. Gentry, if you were not allowed any attorney fees in this case, what do you think would be a reasonable charge on your part to Mrs. Calhoun for the services you have rendered? A. I think about the same amount Mr. Jones, in view of the length of time that was spent at it and work.
"Q. In other words, if you are not to recover attorney's fees in this case, would you make a charge of four thousand dollars to Mrs. Calhoun? A. I did not say I would do it. I think that would be a fair charge.
"Q. Well, you know that Mrs. Calhoun will get ten thousand dollars, plus several years' interest, don't you? A. I have every reason to believe she will. I think your company has given it, you have consented she may have it and I think she will get it.
"Q. All right. A. But I did not know that until very lately.
"Q. All right. I will assume that she gets her money, and I am asking you, if you do not get any attorneys' fees here from the Insurance Company, how much do you think you could justifiably charge her? A. I think I could justifiably charge four thousand dollars."
Judge Calhoun having been sworn, the following question was propounded to him:
"Q. Now Judge, taking into consideration all the facts brought out in your testimony and mine, as to the services rendered by us, considering them together, as if one lawyer had rendered all the services, what in your opinion is the fair, reasonable value of the services for attorneys, rendered by attorneys for the plaintiff in this case, both in connection with this case and the Equity case, in order to protect the rights of Mrs. Calhoun, the plaintiff herein?
"Mr. Jones: Just a minute. Defendant objects on the same ground as the objection previously made to Mr. Gentry's.
"The Court: The same ruling.
"A. Well I think we have asked for a very reasonable fee. I would estimate the services as being worth from $4200 to $5000.
"Q. And how do you arrive at your figures which you have stated? A. Well, I look upon this case as a contingent matter. That is, there would be no recovery for attorney fees unless we would succeed in this litigation, and I figure that the amount of recovery is ten thousand dollars on the policy, approximately seventeen hundred dollars interest, one thousand dollars damages, which would be $12,700, and certainly a third would be a very modest contingency fee, considering two cases. I think that ordinarily the courts would allow, where two cases were involved, a contingency fee of forty per cent, which would be five thousand dollars. A contingency fee of thirty-three and a third per cent would amount to about forty-two hundred dollars."
On cross-examination this question was propounded to witness:
"Q. Well, assume that there was no relationship between you and the insured in this case, and that you were employed by somebody, but you had no connection, no relation, and you did that work in that case on a similar policy for ten thousand dollars, how much would you charge in that case? A. Well, I think I would charge four thousand dollars."
"Mr. Wallace having been sworn, the following questions were propounded to him:
"Q. Now Mr. Wallace, assuming that all of these services were rendered as testified to by Judge Calhoun and me, in these two cases, the equity case and this present law case, what in your opinion, taking into consideration all the services and the amount involved, is the fair reasonable charge for fair attorneys' fees in these two cases?
"Mr. Boisaubin: If the Court please, we object to that question on the same ground that Mr. Jones stated with respect to the other question, similar question that was asked of the other witnesses.
"The Court: Overrule the objection.
"A. I think a third of the total recovery here is a fair and reasonable fee for the services that I understand have been rendered."
Judge Hamilton having been called by the plaintiff, testified as follows:
"Q. Now judge, taking into consideration the things that we testified, assuming our statements to be correct, what in your opinion, is a fair, reasonable charge to be made and allowed in this case to Mrs. Calhoun *543 for the services rendered by her attorneys in these two cases the equity case and this case?
"Mr. Boisaubin: If the Court please, we make the same objection to this question as we made in the previous ones.
"The Court: Yes.
"Mr. Boisaubin: For the same reasons.
"The Court: Overrule the objection.
"A. Why I think four thousand dollars, as you testified is a reasonable fee."
It will be observed that the only objection made by the defendant in the trial Court, when testimony as to legal services was offered, was based on the contention that there was "No evidence in this case of any vexatious refusal on the part of defendant to pay". There was no claim urged that plaintiff's pleadings were not broad enough to admit this evidence or that the evidence was irrelevant for any other reason than that set forth in the objection. The appellant is bound by the theory on which it presented its case in the trial court.
It is the general rule universally applied by appellate courts that courts of review will refuse to consider questions which have not been raised and tried in the trial court. The reasons for such ruling are numerous and varied. One is that in most instances any alleged error might have been corrected or the proper amendment made if an objection had been seasonably interposed, and that if a litigant were permitted to urge any point not going to the merits of the issue, it would give him an opportunity and an incentive to conceal errors during the trial in order that they might be used as grounds for reversal on review, in case the decision below was adverse.
In White v. Western Assurance Company, 52 Minn. 352, 54 N.W. 195, the Court said: "The cause evidently proceeded and was tried on the theory that, except for the matters alleged in the answer, the plaintiff could recover. It is a rule that generally this court will not decide a cause upon an issue of fact or law not presented to and passed on by the trial court; and that, where it is unquestionable that the party tried his cause upon one theory, either of the facts or the law, in the court below, he will not be permitted to shift his ground, so as to present an entirely different theory here. * * * The rule probably would not apply where the record shows conclusively that the party recovering is not entitled to recover; as where a complaint shows conclusively, so that it cannot be helped by proof or amendment, that there is no cause of action, or where it appears by evidence incapable of being rebutted or explained away that there is no cause of action, or that there is a defense. But to permit a party, upon an appeal, to shift his ground so as to present here a question of law, not raised in the trial court, in a case where, had it been presented there, the court might have obviated it by allowing amendments, and the introduction of further evidence might enable him to mislead the trial court and the opposite party, and so, really, to commit a fraud." See Spencer v. Black, 232 Mich. 675, 206 N.W. 493; Burroughs v. Donner, 282 Ill. 299, 118 N.E. 400; Robinson & Co. v. Belt, 187 U.S. 41, 23 S. Ct. 16, 47 L. Ed. 65; Illinois Cent. R. Co. v. Egan, 8 Cir., 203 F. 937, and 4 C.J. 701, 5 C.J.S., Appeal and Error, § 1503.
In many instances pleadings have been regarded as amended in the appellate courts to support the judgment notwithstanding an erroneous ruling against the defeated party where such a case appeared to be in the interest of substantial justice. Winston v. Terrace, 78 Wash. 146, 138 P. 673; Keller v. Webb, 126 Mass. 293.
In view of the rule announced and in furtherance of justice, we will regard the petition in this cause as having been amended in this Court to conform to the proof. "Let Justice prevail though the Heavens fall!"
It is urged by the appellant that the Court committed error in refusing to set aside the verdict and enter judgment for defendant on the issue of vexatious delay because "the evidence indisputably, and by documents, showed that the insured misrepresented in his application for insurance, material facts as to his prior condition of health; made false statements in said application and said misrepresentations were with respect to matters which contributed to or caused insured's death; because the evidence indisputably showed that the defendant had reasonable cause to believe that the insured was guilty of misrepresentations in obtaining the policy and that said misrepresentations were with respect to matters which contributed to insured's death; and because the evidence showed that the refusal to pay the policy was not vexatious, but was in good faith, *544 and that in the refusal to pay defendant had reasonable grounds to believe that there was no liability on the policy." The policy involved in this suit does not contain the sound health provision.
In the equity case of New York Life Ins. Co. v. Calhoun, 8 Cir., 97 F.2d 896, 897, this Court said:
"The application, which by the terms of the policy is a part of the contract, was made by the insured on January 24, and 25, 1934. The petition alleges that this application contained sundry false and untrue statements and representations. Most of such alleged untrue statements now appear to be immaterial under the law of Missouri, because they do not relate to matters which contributed to the death of the insured. Section 5732, R.S.Mo.1929; Mo. St.Ann. § 5732, p. 4373; Kern v. Supreme Council American Legion of Honor, 167 Mo. 471, 67 S.W. 252; Houston v. Metropolitan Life Ins. Co. [232 Mo.App. 195], 97 S.W.2d 856.
* * *
"The determining issue in this case is whether or not the insured's answers to the questions in the application were false. Appellant and appellee differ as to whether an innocent misrepresentation will, under the law of Missouri, avoid the policy. But it is not disputed that the representation upon which a suit for rescission is based must be false in fact. See Kirk v. Metropolitan Life Ins. Co., 336 Mo. [765] 768, 81 S.W.2d 333; Kern v. Supreme Council American Legion of Honor, 167 Mo. 471, 67 S.W. 252; De Valpine v. New York Life Ins. Co. (Mo.App.), 105 S.W.2d 977; Houston v. Metropolitan Ins. Co. [232 Mo. App. 195], 97 S.W.2d 856".
It has long been the rule in Missouri that misrepresentation means an intentional perversion of the truth for the purpose of inducing another in reliance upon it, to part with something of value; is intended to deceive another of his legal injury. State ex rel. v. Allen, 310 Mo. 378, 276 S.W. 877; Grand Lodge v. Massachusetts Bonding & Ins. Company, 324 Mo. 938, 25 S.W.2d 783; Summers v. Metropolitan Life Insurance Company, 90 Mo. App. 691. Contention denied.
The appellant also contends that the verdict was excessive inasmuch as it included interest from December 4, 1935, to the date of trial, November 18, 1938, instead of to October 19, 1938, when answer was filed admitting liability.
The answer of defendant filed in this cause on October 19, 1938, admitted liability and offered to pay the full amount of the policy of $10,000 with interest at 6% per annum from the date of the receipt of proof of death, December 4, 1935, to October 19, 1938. This offer of judgment by defendant was renewed on November 16, 1938. The offer did not include any statutory penalty. The offer was declined by plaintiff plaintiff having elected to submit the question of damages, interest, etc. to the jury. Plaintiff had the right to decline to accept the offer of judgment. The jury found in favor of the plaintiff and computed the interest to the date upon which its verdict was returned. Plaintiff having prevailed on the question of vexatious delay she was entitled to interest to date of the verdict, therefore the contention urged last above, should be denied.
The defendant contends that the Court committed error in its refusal to give, on its behalf, instruction IV. In instruction IV, defendant requested the Court to charge the jury that if it found from the evidence that on or about December 20, 1935, the defendant was advised and informed, in writing, by Dr. J. A. Seabold, the insured's attending physician, that the insured had had a gastric hemorrhage on or about November 2, 1933, and "if you find from the evidence that the defendant had reasonable grounds to believe that on November 2, 1933, the insured was afflicted with dilated or varicose veins of the esophagus, and that the gastric hemorrhage which it was informed and advised by Dr. Seabold that the insured had had on November 2, 1933, was due to rupture of the varicose or dilated veins of the insured's esophagus, then the Court instructs you that the refusal of the defendant to pay the policy sued on herein was in good faith", and that the verdict of the jury should be limited to the amount of the policy, with interest.
Dr. Seabold was the family physician of the insured. He was somewhat confused as to what occurred on various dates. When he gave testimony by deposition some months preceding the trial of the equity case, he testified that between November 2, 1933, and the date the deposition was given he had mislaid certain records which he did not have before him at that time. Between the date of the giving of the deposition and the date of trial of the equity case, the Doctor testified that he *545 had found the office records which had been misplaced and from those records his memory was refreshed and he testified at the trial that vomiting of blood by Calhoun did not occur on November 2, 1933, as stated by him in his deposition, but occurred for the first time on April 25, 1934, which later date was approximately three months after the date of the application in question.
The report of Dr. Seabold to the insurance company as well as his testimony by deposition in both the equity and law case was before the court and jury and has been referred to herein.
In addition, attention of counsel for appellant is respectfully called to the findings of fact filed by the trial court in the disposition of the Equity case. The finding of the District Court on this question was against the insurance company and such finding and decree was affirmed by the Court of Appeals. Having held that the action of the Court in submitting to the jury the question of vexatious delay was proper, we feel it unnecessary to further discuss this assignment of error. The action of the trial court in declining to instruct the jury as requested in instruction IV was proper.
The trial court had before it the record in the equity case between these parties. That court had an opportunity to observe the respective witnesses and their demeanor while testifying a privilege which is denied this Court.
The Court submitted the question of vexatious refusal to the jury. We have approved the action of that Court in this respect. The jury found the question of vexatious delay in favor of the plaintiff; in addition thereto, in a special interrogatory reading: "Did the defendant herein have reasonable grounds to believe, prior to trial of the equity suit brought by defendant to cancel said policy, that the insured had had a gastric hemorrhage on or about Nov. 2, 1933?" The answer thereto was in the negative.
A careful examination of the record in this cause including the rulings and instructions of the Court give monumental evidence that the appellant was accorded a most fair and impartial hearing by the Court nisi. That Court has placed its stamp of approval upon the findings and verdict of the jury. Finding no error we conclude that the judgment should be affirmed, and it is so ordered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550933/ | 27 F.2d 671 (1928)
COLTON
v.
NEW YORK & CUBA MAIL S. S. CO. et al.
Ex parte McCAULEY.
No. 312.
Circuit Court of Appeals, Second Circuit.
July 17, 1928.
*672 Rogers & Whitaker, of New York City (Horace L. Cheyney and William J. Dean, both of New York City, of counsel), for appellants.
Cook, Nathan & Lehman, of New York City (Edgar M. Souza and Louis M. Loeb, both of New York City, of counsel), for appellee.
Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
AUGUSTUS N. HAND, Circuit Judge.
The claimant purchased, subject to inspection, 3,627 bags of Irish potatoes, which had been shipped on the White Star steamship Regina, and received from his vendor a duly indorsed bill of lading issued by the agents of the New York & Cuba Mail Steamship Company (known as the Ward Line). This document, designated on its face as "New York & Cuba Mail Steamship Line Through Bill of Lading," read as follows:
"Received in apparent good condition from Cullen, Allen & Co., for shipment on board the steamship Regina, now lying in the port of Liverpool and bound for New York, three thousand six hundred and twenty-seven bags of merchandise, * * * to be delivered in like apparently good order and condition at the * * * port of New York * * * unto the New York & Cuba Mail Steamship Company as agents for the owners of the goods for the purpose of entry and of effecting the transshipment of the same by the usual methods of conveyance, at the sole risk of the owners of the goods, at the expense of the carriers, to one of the steamers of the New York & Cuba Mail Steamship Company, and to be conveyed by said steamer and delivered at the port of Havana unto order of Messrs. Wm. Gambel & Co. (New York), or to his or their assigns."
The contract also had stamped on it the clause: "Ship not accountable for damage by frost."
The potatoes reached New York in good order on March 28, 1923, and were discharged by the Regina on an open lighter furnished by the Ward Line on the afternoon of March 28th and during the succeeding night and early morning. The temperature was about 10° above zero and a northwest wind was blowing. Not only was an open lighter unfitted for transportation of such perishable cargo in extremely cold weather, but there seems to have been no sufficient attempt to protect the potatoes on the lighter by properly battened tarpaulins. The only evidence is that of McCauley's associate, Sullivan, who testified that "the tarpaulin cover was just thrown on top; the edges of it were flapping in the wind," and that of Quigley, McCauley's foreman, who said there were "no ropes on the tarpaulin tying it down; just a piece spread over the top; * * * it was not held at all; the wind was blowing it up and down." The testimony of the witness Cole was to the same effect.
The Ward Line had been warned by McCauley against using an open lighter for transshipment in such cold weather, and had said that the open lighter was the only one available, but agreed to cover the lighter with heavy tarpaulins and not to load during the night of the 28th of March. The shipment was exposed during the loading at night, and afterwards uncovered, except for an old piece of tarpulin, which partly covered the top and was flapping in the wind.
As an inevitable result of such neglect of care of the cargo a substantial portion of it *673 was badly frostbitten. McCauley examined it at the Ward Line pier and found the good potatoes could not be separated from the bad. The extent of the freezing could not then be determined, and governmental regulation did not permit Irish potatoes to be landed in this country. By the time they had reached Havana the whole shipment was more or less tainted by the potatoes that had been badly frozen. After the potatoes were loaded from the lighter upon the Ward Line steamer Orizaba, they were transported to Havana, where the whole shipment was sold at a loss, as compared with the sound value of $6,189.50. It was sufficiently proved that the claimant made every attempt promptly to dispose of the potatoes to various Havana dealers at a better price, but could get no one but the person to whom he sold to purchase the damaged goods.
The evidence and findings of the master completely dispose of the contention that there was sufficient care shown in the transshipping of the cargo, and also of the contention that there was a neglect on the part of McCauley in selling the potatoes in Havana without separating the worthless ones from the others. The claimant had the burden of proof but amply sustained it in every way. Therefore the only matters for serious consideration are two questions of law:
(1) Was the Ward Line acting as a common carrier in lightering the potatoes?
(2) Was the Ward Line liable for its negligence, whether acting as a common carrier or not?
The contention that the voyage was split up into three stages, and that the obligation of the Ward Line was satisfied by furnishing a proper lighter as agents for the purpose of transshipment, is contrary to the entire conception of a "through bill of lading." The Ward Line issued a through bill of lading, and after doing this proceeded to contract against its liability during transshipment. This it could not do (The Kensington, 183 U.S. 268, 22 S. Ct. 102, 46 L. Ed. 190; Santa Fé R. Co. v. Grant Bros., 228 U.S. 184, 33 S. Ct. 474, 57 L. Ed. 787), and for this reason alone the decree must be affirmed.
The defendants have attempted to distinguish Insurance Company of North America v. North German Lloyd Co. (D. C.) 106 F. 973, affirmed (C. C. A.) 110 F. 420, because there the carrier furnished an unseaworthy lighter, which capsized before the cargo was loaded on the ship. In that case there was a clause in the contract of carriage, "that the carrier shall have liberty to convey goods in lighters to and from the ship, and to discharge into lighters at the risk of the owner of the goods." But the court, in spite of that clause, held, following Bulkley v. Naumkeag Steam Cotton Co., 24 How. 386, 16 L. Ed. 599, that the lighter was simply a substitute for the ship, and the carrier was liable. The decision depended on a finding that the North German Lloyd was a common carrier throughout the service, and had not exercised due diligence to make the lighter seaworthy, so as to come within the exemptions of the Harter Act (46 USCA §§ 190-195). To the same effect is The Seaboard (D. C.) 119 F. 375, and The Ogeechee (D. C.) 248 F. 803. Here the carrier failed to take proper care of the cargo, either by providing a covered lighter, or by waiting until the severe cold abated, or by having sufficient tarpaulins and properly fastening them down. In none of these acts of negligence did McCauley acquiesce. He had to take what the Ward Line furnished, and he showed unusual diligence in giving warning against the dangers that imperiled the cargo.
In Smith v. Booth (C. C. A.) 122 F. 626, also referred to by the defendants, James E. Ward & Co. issued through bills of lading to shippers of a cargo of rice from Liverpool to Havana. By the terms of the bills of lading the rice was to be delivered by the Teutonic unto James E. Ward & Co. at New York, and by them to be forwarded by one of their steamers on the terms of the bills of lading of their company, at risk of shippers. This court held that the through bills of lading embraced obligations of James E. Ward & Co. in three capacities: (1) As initial carriers; (2) as intermediate carriers in making transshipment upon conditions not expressed, but implied from the nature of the undertaking; (3) as ultimate carriers upon conditions to be expressed in further bills of lading.
Ward & Co. employed a lighterage company to transship the rice at the port of New York, which negligently overloaded the cargo, so that it was lost. We there held Ward & Co. liable, without apparently deciding whether they were common carriers, or mere bailees of the cargo, on the ground that they neglected, through their agents, the lighterage company, to use ordinary care. In neither event was the clause "at risk of shippers" considered applicable, because it related only to bills of lading to be issued by the line that was to carry the cargo from New York to Havana, and when the loss occurred no such bills of lading had issued, nor were they to take effect until the rice was *674 delivered to the Havana steamer. The bill of lading in Smith v. Booth, supra, closely resembled the present one, but the freighter was held liable because, even if not a common carrier, he was guilty of negligence, and the clause exempting him from liability did not apply to the transshipment.
The Wildenfels (C. C. A.) 161 F. 864, relied on by the defendants, is not in point. The opinion indicates no employment of the lighter as a separate step in a through contract of carriage, and the lighter was not herself a common carrier. The Fri (C. C. A.) 154 F. 333, and The Maine (D. C.) 161 F. 401, and (C. C. A.) 170 F. 915, are to the same effect.
It was authoritatively decided in Bulkley v. Naumkeag Steam Cotton Co., 24 How. 386, 16 L. Ed. 599, that when the carriage begins from the lighter's point of departure the lighter is the substitute for the ship, and the liability arises as soon as the lighter receives the goods. We are unable to see how it can make a difference here that the lighter was the second step, instead of the first, in a through contract. Insurance Company of North America v. North German Lloyd, supra.
But, irrespective of whether the Ward Line was a common carrier, the defendants were properly held liable for their own negligence. The words, "at the sole risk of the owners of the goods," in a contract prepared by the Ward Line, which seeks to limit its liability, are to be strictly construed. Smith v. Booth (C. C. A.) 122 F. at p. 628. They do not in terms cover the negligence of the carrier, and were not held sufficient to avoid liability in Vitelli v. Cunard S. S. Co. (C. C. A.) 203 F. 697, and The Ogeechee (D. C.) 248 F. 803. Furthermore, as the master said, transshipment in an open lighter, with no adequate tarpaulins, was not "by the usual means" called for by the contract of affreightment.
The decree is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550929/ | 382 Pa. Super. 462 (1988)
555 A.2d 931
COMMONWEALTH of Pennsylvania
v.
Michael J. RUDINSKI, Appellant.
Supreme Court of Pennsylvania.
December 8, 1988.
Filed February 1, 1989.
Reargument Denied April 3, 1989.
Petition for Allowance of Appeal Denied September 7, 1989.
John P. Campana, Williamsport, for appellant.
*463 Robert W. Ferrell, Assistant District Attorney, Williamsport, for Com.
Before WIEAND, OLSZEWSKI and TAMILIA, JJ.
OLSZEWSKI, Judge:
Appellant, Michael J. Rudinski, appeals from a judgment of sentence imposing a fine of $15.00 for violation of a Williamsport city ordinance governing overtime parking and a $15.00 fine for violation of 75 Pa.C.S.A. § 3353(a)(3), parking in restricted areas. Appellant contends that: (1) the trial court erred in refusing to arrest judgment; and (2) the trial court violated appellant's constitutional right to due process. For reasons discussed below, we affirm the determination of the trial court.
On June 1, 1987, in the City of Williamsport, a parking ticket for parking in a restricted zone was issued to appellant's car. Subsequently, law enforcement authorities issued a second parking ticket to appellant's vehicle for overtime parking. When the tickets were not paid, appellant received citations pursuant to Pa.R.Crim.P. 95 which permits law enforcement officials to institute criminal proceedings by issuing a citation following non-payment of a parking ticket. A District Justice found appellant guilty of overtime parking, City Ordinance 521.02, and parking in restricted areas, 75 Pa.C.S.A. § 3353(a)(3). The case was subsequently heard de novo by the trial court, which found appellant guilty of all charges. This appeal follows denial of appellant's motions in arrest of judgment and for new trial.
Appellant claims that the trial court erred in denying his motion in arrest of judgment and denied his right to due process when the Commonwealth did not prove beyond a reasonable doubt the identity of the perpetrator. Appellant contends that because the trial court permitted the Commonwealth to rely upon the presumption that an owner of an automobile parked it, the burden of proof has been unconstitutionally shifted to appellant to establish that he did not park the car. Appellant asserts that the Commonwealth *464 was required to establish beyond a reasonable doubt: (1) the illegal parking of an automobile, and (2) the identity of the person parking the car; and cites Commonwealth v. Slaybaugh, 468 Pa. 618, 364 A.2d 687 (1976), in support of his argument that the presumption that the owner of a vehicle is responsible for parking violations is unconstitutional.
In Slaybaugh, our Supreme Court held that 75 P.S. § 1212 (repealed) was unconstitutional. The provision provided in pertinent part:
In any proceeding for a violation of the provisions of this act or any local ordinance, rule or regulation, the registration plate displayed on such vehicle or tractor shall be prima facie evidence that the owner of such vehicle was then operating the same. . . .
75 P.S. § 1212 (repealed). While we agree with the Supreme Court's holding in Slaybaugh, it has subsequently been applied exclusively to situations in which the presumption of ownership was used to convict a driver of a moving violation. See, e.g., Commonwealth v. Leaman, 255 Pa.Super. 481, 388 A.2d 330 (1978). In our opinion, the distinction between a moving violation and a parking violation is crucial to the resolution of the present matter.
Instantly, two parking tickets were issued to appellant's vehicle. The Commonwealth presented no evidence that appellant actually parked the vehicle himself. Appellant urges that the imposition of liability to the owner without proof that he illegally parked the car violates appellant's constitutional right to due process guaranteed under the United States Constitution. We disagree.
Preliminarily, we acknowledge that in criminal matters, the due process clause of the Fourteenth Amendment "protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged." In re Winship, 397 U.S. 358, 364, 90 S. Ct. 1068, 1073, 25 L. Ed. 2d 368, 375 (1970). In a series of United States Supreme Court cases, however, the high court carved out an exception to *465 the general criminal due process considerations in the area of public welfare offenses. In Morissette v. United States, 342 U.S. 246, 72 S. Ct. 240, 96 L. Ed. 288 (1952), the Supreme Court characterized these regulations as being:
. . . in the nature of neglect where the law requires care, or inaction where it imposes a duty. Many violations of such regulations result in no direct or immediate injury to person or property but merely create the danger or probability of it which the law seeks to minimize. . . . The accused, it he does not will the violation, usually is in a position to prevent it with no more care than society might reasonably exact from one who assumed his responsibilities.
Id. at 255-256, 72 S.Ct. at 246, 96 L.Ed. at 296-297. "Violations of traffic regulations fall squarely within a proper classification of public welfare offenses." Iowa City v. Nolan, 239 N.W.2d 102 (Iowa 1976), citing 33 Col.L.Rev. 55, 73, 77.
Because this is an issue of first impression for the appellate courts of this Commonwealth, we find other jurisdictions that have upheld the constitutionality of similar ordinances to be instructive in our disposition of this case. When upholding a Boston ordinance imposing liability for illegal parking on the car owner, the Supreme Court of Massachusetts provided:
As was pointed out in [Commonwealth v. Ober, 286 Mass. 25, 32, 189 N.E. 601, 603], "The inconvenience of keeping watch over parked vehicles to ascertain who in fact operates them would be impracticable, if not impossible, at a time when many vehicles are parked. . . . [T]he rules and regulations of the Boston Traffic Commission. . . were framed and intended to cover and make punishable any violation . . . by the owner of any vehicle registered in his name. . . ."
This doctrine is not impaired by Morissette v. United States, 342 U.S. 246, 72 S. Ct. 240, 96 L. Ed. 288, or Lambert v. People of State of California, 355 U.S. 225, 78 S. Ct. 240, 2 L. Ed. 2d 228, both of which recognize that *466 many public welfare crimes that require no intent are valid.
The defendant argues that where the penalty is not minor, absence of a scienter requirement may result in a deprivation of property without due process of law. . . . In the case at bar, the penalty of a fine not exceeding $20 is very definitely minor. . . . This is but another instance where the penalty is "relatively small, and conviction does no grave damage to an offender's reputation." Morissette v. United States, supra, 342 U.S. [at] 256, 72 S.Ct. [at] 246.
Commonwealth v. Minicost Car Rental, Inc., 354 Mass. 746, 242 N.E.2d 411 (1968).
Particularly helpful is the following excerpt from an opinion of the Supreme Court of Missouri:
The purpose of ordinances regulating parking is to permit the public streets to be used to their best advantage by the public. The maximum penalty is a relatively small fine and no potential incarceration. There is not public stigma attached to receiving a parking ticket and it has no effect upon one's driver's license or insurance cost. If the ticket is paid promptly, no court appearance is required. The movement of automobile traffic is a major problem in the cities of this state. Cars illegally parked contribute substantially to that problem and the enforcement of parking regulations is difficult and expensive. Most cars are driven by the owner, some member of the owner's family, or his employee or lessee and with the owner's consent. An ordinance imposing liability for the parking violation fine on the owner as well as the driver may very well result in fewer violations and thereby assist in the reduction of traffic problems.
City of Kansas City v. Hertz Corp., 499 S.W.2d 449, 453 (1973).
The parking prohibitions in the instant case are clearly within a permissible regulation in the interest of permitting the public to use public streets to their best advantage. Moreover, the penalty involved is minor and their is no *467 public stigma attached to receiving a parking ticket. We find that under the public welfare doctrine, it is clear that prima facie strict criminal responsibility may be imposed upon the registered owner of an illegally parked vehicle. Therefore, by proving (1) the existence of an illegally parked vehicle, (2) registered in the name of the defendant, the Commonwealth can make out a prima facie case for imposing responsibility for the violation upon the vehicle's owner. See Iowa City, supra. This standard, nonetheless, permits an owner to come forward with evidence that someone else was operating his vehicle in order to rebut the inference that the registered owner is responsible for a vehicle's operation. "In the area of public welfare offenses, such burden shifting is not constitutionally infirm." Id., citing U.S. v. Park, 421 U.S. 658, 95 S. Ct. 1903, 44 L. Ed. 2d 489 (1975). We emphasize that the result which appellant advocates would create utter chaos for our municipalities, law enforcement officials and in our court system and, therefore, as a practical matter, we refuse to impose a requirement of identifying the driver in parking violation cases.[1]
*468 The record in the present case indicates that the Commonwealth established that a vehicle registered to appellant was illegally parked on two occasions. Accordingly, based upon the foregoing, we affirm the judgment of sentence.
Judgment of sentence affirmed.
NOTES
[1] Moreover, we note that subsequent to Slaybaugh, supra, our legislature created 42 Pa.C.S.A. § 6143, which was "substantially a reenactment of [75 P.S. § 1212]." Official Source Note, 42 Pa.C.S.A. § 6143. The new rule was drafted in light of Slaybaugh and provided that:
In any action or proceeding for the recovery of a civil penalty for an infraction of the provisions of any law relating to the ownership or operation of any conveyance by air, land or water or any game or fish law or any local ordinance, rule or regulation relating thereto, the registration number displayed on a conveyance shall sustain any inference that the person to whom the registration number was officially assigned is the owner of the conveyance and was then operating the conveyance.
42 Pa.C.S.A. § 6143(a).
The Rule, therefore, creates an inference that the owner of a vehicle was operating the vehicle for purposes of imposing a civil penalty for infractions of laws or local ordinances relating to the operation of a vehicle. Instantly, a municipality issued parking tickets to appellant's vehicle. Our Rules of Criminal Procedure provide that:
Political subdivisions may use parking tickets to inform defendants of parking violations and to offer defendants an opportunity to avoid criminal proceedings by paying an amount specified on the ticket. When a political subdivision does use parking tickets and a ticket has been handed to a defendant or placed on a vehicle windshield, a criminal proceeding shall be instituted only if the defendant fails to respond as requested on the ticket. In that event, the criminal proceeding shall be instituted by a law enforcement officer filing a citation with the proper issuing authority.
Pa.R.Crim.P. 95(a). Important for our disposition, the Comment to Pa.R.Crim.P. 95 proclaims that a parking ticket "[i]s not a citation and does not constitute the instituting of a summary proceeding. . . ." Arguably, the resolution of the instant matter did not become criminal until appellant chose not to pay the parking tickets. Therefore, at the outset, the penalty sought fell within the parameters of 42 Pa.C.S.A. § 6143 and proof needed to establish the parking violations enjoyed the benefit of the inference created by the statute. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550932/ | 555 A.2d 339 (1989)
STATE
v.
Raymond LASSOR.
No. 87-417-C.A.
Supreme Court of Rhode Island.
March 9, 1989.
*340 James E. O'Neil, Atty. Gen. and Annie Goldberg, Asst. Atty. Gen., for plaintiff.
Robert B. Mann, Providence, for defendant.
OPINION
WEISBERGER, Justice.
This case comes before us on the defendant's appeal from his conviction of three counts of murder in the first degree, one count of attempted murder, and one count of first-degree sexual assault after trial by jury in the Superior Court. We affirm. The facts of the case insofar as pertinent to this appeal are as follows.
The defendant, Raymond Lassor, was charged in a single five-count indictment with the first-degree murders of Lori Carlucci, Wanda Adams, and Delores Neuser. He was also charged with first-degree sexual assault upon and attempted murder of Carrie-Ann Talbot. The circumstances prompting the indictment took place within a period of three months from June 1984 to September 1984. Three women were brutally murdered in the downtown area of the city of Providence. The three murders were committed within a radius of one-half mile from one another. Lori Carlucci was murdered on June 26, Wanda Sue Adams *341 was murdered on August 16, and Delores Neuser was murdered on August 30. Although the police suspected that the same person had committed all three crimes, no identifiable person came to their attention as the assailant.
On September 17, 1984, defendant and Talbot met at the Sabin Street bus station in downtown Providence. They had been previously acquainted. From the bus station they walked across the street to the Journal-Bulletin garage where they sat in a Journal-Bulletin truck and "smoked a joint". Their next stop was a liquor store, also located in downtown Providence, where defendant bought a six-pack of beer and a package of cigarettes. They then went to another liquor store to buy a bottle of peppermint Schnapps. Talbot bought something to eat at the McDonald's on Fountain Street before she and defendant proceeded by bus to Roger Williams Park in Providence. Both entered the park where they finally rested between the baseball field and the tennis courts. Both smoked another marijuana cigarette and consumed some beer. Talbot testified that she drank one beer and that defendant drank "a few". Sometime thereafter, defendant made several sexual advances toward Talbot, which were rejected, and as a result defendant flung Talbot to the ground and rendered her momentarily unconscious. When Talbot regained consciousness, she found defendant sitting on her chest, choking her with his hands, and again she fainted. Talbot testified that when she again regained consciousness, defendant kicked her in the forehead and knocked her out. When Talbot regained consciousness for the third time, she was alone. She testified that one of her pants legs was down, one boot was off, her underpants were gone, her shirt was pulled up, and her bra was around her neck. Talbot also testified that she felt a sharp pain in her abdomen. This pain was caused by a stick that had been inserted into her vagina. She removed the stick, and by stumbling and crawling, made her way to a main road.
Talbot was later treated at St. Joseph Hospital where it was discovered that she was bleeding internally as a result of the traumatic severance of a portion of her liver. In addition, small twigs, pebbles, and grass were found in her vagina.
The following day, September 18, 1984, the Providence police arrested defendant for first-degree sexual assault. At the time of arrest defendant was advised of his Miranda rights by Detective Steven Cross of the Providence police department and then was brought to the Providence police station. The defendant was taken to an interrogation room where he, Detective Cross, and Sergeant William Pedchenko remained throughout the afternoon and into the evening. When they were seated in the interviewing room, Detective Cross showed defendant a copy of the criminal warrant and the criminal complaint. Detective Cross then showed defendant a Miranda rights form on which defendant wrote his name. Then defendant read the portion of the form that stated, "having been informed I am a suspect in the crime of," and wrote in the blank space, "first-degree sexual assault". At the direction of Detective Cross defendant then read aloud the remaining portions of the form, which set forth the following statement:
"[V]oluntarily, without threats or promises on the part of the police, [I] make the following statement to members of the Providence police department after having been advised that:
1. I do not have to give a statement.
2. I have a right to remain silent.
3. Anything I say can and will be used against me in a court of law.
4. I have the right to the presence of an attorney prior to and during any questioning by the police.
5. I have a right to the presence of an attorney during a line-up or confrontation of witnesses, if any line-up or such confrontation takes place.
6. If I cannot afford an attorney, one will be appointed for me prior to any questioning if I so desire.
I further admit and agree that:
7. After having been informed of my constitutional rights, I do understand *342 these rights; and I agree to give a statement at this time.
8. I do not want an attorney called or appointed for me at this time."
After defendant read each line individually, Detective Cross asked him if he understood the meaning of each sentence. He answered in the affirmative and then initialed each line. Detective Cross testified that he specifically asked defendant if he wanted to speak to an attorney before being questioned or to make a phone call. Again defendant stated that he understood each of these rights and that he had nobody to whom he wished to talk. The defendant then proceeded to give the police a confession. He admitted the sexual assault upon Talbot but had no memory of inserting a stick into her vagina or kicking her in the face. The defendant also confessed that he had struck Talbot in the face with his hand a number of times and that he had grabbed her by the neck with both hands just prior to the sexual assault. The defendant's oral confession was typed by Detective Cross. At this time a break of about twenty minutes was taken for lunch. After lunch defendant continued with his statement, and Detective Cross periodically asked him if he wanted to take a break. The defendant insisted on continuing. When his statement was complete, defendant read and signed each page, making only two minor corrections. Detective Cross and Sergeant Pedchenko also signed all six pages. Lieutenant Paul LeBoeuf certified that defendant had sworn under oath to the truth of his statement. Once again a short break was taken.
Upon resuming, Detective Cross informed defendant that he was a suspect in the murder of Lori Carlucci and once again advised him of his rights. The admonitions were communicated to defendant by means of a procedure identical to that described above. The defendant read the form aloud and filled in any necessary information. The defendant, Detective Cross, and Sergeant Pedchenko signed the form.
Soon thereafter Sergeant Pedchenko showed defendant two photographs. One displayed the dead body of Carlucci at the scene where her body was found, and the second showed only the area where her body was found. Detective Cross testified that after defendant stared at the pictures for a moment, he was asked if he had killed Carlucci, to which defendant replied, "I killed all of them". Detective Cross then took defendant's statement regarding the Carlucci murder, using the same procedure utilized in the inquiry into the sexual assault and attempted murder of Talbot. The defendant then confessed to striking Carlucci a number of times, strangling her, dragging her out of the car, and pulling her pants off and underpants down. The defendant also confessed to inserting a plywood stick about two feet long into Carlucci's rectum which caused her to scream. He later qualified this statement by stating that it was "not a real scream but a moan".
After a fifteen minute break Detective Cross informed defendant of his Miranda rights before questioning him about the death of Wanda Adams. Again the same procedure regarding the Miranda admonitions and the confession-statement forms was followed by Detective Cross. Detective Cross described defendant at this stage in the interrogation as "calm, alert, cooperative". The defendant disclosed that he met Adams at a bus stop in downtown Providence near the train station. The defendant began a conversation with Adams, and they agreed to take a walk to an area near the train station to "smoke a joint". There they sat on top of a wall and dangled their feet over the side above the Providence River. After smoking the marijuana, defendant kissed Adams for about "twenty minutes" and then attempted, and failed at, several sexual advances. When Adams tried to leave, defendant grabbed her, managed to seize her in a headlock, and began to strangle her. At this point Adams was lying down, alive, but not moving. The defendant pulled her pants down and pulled her blouse and bra up to her neck. The defendant told police that at this point when he stood up to fix his shirt, Adams moved in some way that caused her to fall off the wall and into the water. She was later found dead. The medical examiner *343 testified that she had died of strangulation prior to immersion.
After a short break, Detective Cross presented defendant with another Miranda form. He then informed defendant that this next inquiry would relate to the Delores Neuser homicide. The defendant executed the form according to the identical procedure used in the preceding inquiries, and the same procedure was also followed in taking defendant's confession regarding Neuser. The defendant stated that he visited several bars in downtown Providence and had been drinking heavily from early afternoon until the bars closed on the night Neuser's body was found. Approximately an hour after the bars had closed defendant went to the top floor of The Parkade parking garage, located on Washington Street in Providence, to smoke a marijuana cigarette. The defendant was rolling the cigarette in the stairwell on the top floor when Neuser appeared and asked him what he was doing. The defendant did not reply, and Neuser told him that she was going downstairs to call the police. The defendant placed the cigarette in his pocket, grabbed Neuser from behind, and held her in a headlock for a couple of minutes with his right arm. The defendant stated that they both fell to the floor; then he hit her several times and choked her from the front with both hands. The defendant also stated that he had difficulty recollecting exactly what took place thereafter because he "had been drinking heavily" that night. He did recall that he walked downstairs and ultimately arrived at Orient Street in Pawtucket early in the morning. After the completion of this statement the interrogation was concluded, and defendant remained at the police station overnight.
The next morning, on September 19, 1984, Detectives Steven Cross, John McGehearty, and Sergeant William Pedchenko took defendant in a police cruiser to view and inspect each area where the victims had been found. Having waived his constitutional rights again, defendant directed the officers to each site. The police and defendant then returned to the station, where Detective Cross again informed defendant of his Miranda rights for the purpose of making follow-up inquiries regarding the killing of Carlucci. Detective Cross asked defendant if he had been drinking or had used any drugs on the night he killed Carlucci in the parking lot. The defendant answered that he had been sober, that he only had several beers that evening, and that he had not taken any drugs. This statement was taken in the same manner as were the previous statements.
In support of his appeal defendant raises eleven issues. We shall discuss these issues in the order of their significance to the opinion rather than in the order in which they are raised in defendant's brief. Further facts will be supplied as may be necessary in order to address the issues raised.
I
THE MOTION TO SUPPRESS THE CONFESSIONS
After hearing the evidence presented by both the state and defendant in respect to defendant's motion to suppress the confessions given to the Providence police, the trial justice determined that the state had proven by clear and convincing evidence (1) that defendant had been "adequately and effectively" informed of his constitutional rights as mandated by Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966), and its progeny, and (2) that defendant knowingly and intentionally waived his right to remain silent and his right to counsel, retained or appointed. He further found that defendant did so fully aware that anything he said could be used against him in court.
The defendant concedes that the police carefully advised him of his constitutional rights and that there was no element of coercion used in securing the four confessions that were introduced in evidence against him. He does, however, challenge his ability to understand the Miranda warnings and argues that he did not knowingly and intelligently waive his rights.
After examining the record and the transcript of testimony given in the suppression *344 hearing, we are of the opinion that Detective Cross and Sergeant Pedchenko were scrupulous in their admonitions and made every reasonable effort when discussing the Miranda rights and explaining the forms presented to defendant to make certain that he understood the document line by line as he read it aloud. Detective Cross also paraphrased statements on the form in everyday language, such as, "Do you understand, Ray, that you don't have to talk to me? You don't have to say anything?" and "Do you understand, Ray, that whatever you tell me I can go to court and tell the court what you told me?" and "Do you understand that you can have a lawyer here before you talk to me?"
The defendant stated to the police, as he went over the Miranda form line by line and was further instructed in everyday language, that he understood his rights and agreed to give a statement. He stated unequivocally that he did not want an attorney and did not wish to use the telephone.
We have scarcely encountered a more thorough and painstaking effort by police officers to inform a suspect of his constitutional rights to silence and counsel, and the consequences of waiving those rights than that disclosed by the evidence in this case.
The defendant does not challenge the quality of the admonitions or the lack of coercion by the police but relies solely upon his purportedly limited intelligence and inability to understand the Miranda warnings. In respect to defendant's ability to understand his rights and effectively waive them, the state presented four expert witnesses, all of whom testified that defendant had the capacity to understand, as well as to read, the specific description of his constitutional rights, particularly in light of the supplemental instructions given to him by the interrogating officers.
For example, Dr. Mary Wellman testified that she "felt with a reasonable degree of certainty that [defendant] was indeed able to comprehend the Miranda warning". Doctor Spencer DeVault came to the same conclusion, relying upon all the circumstances. Doctor Gerald Champagne testified that defendant was able to read and comprehend the Miranda admonitions. Doctor Joy E. Pitterman stated, "I feel that he does understand the content of [the Miranda] form and does understand the rights he waived". The defendant presented one witness, Dr. Stephen Imber, whose testimony was somewhat equivocal and whose ultimate conclusion was stated as follows:
"My opinion is that I believe Mr. Lassor would have had a limited understanding of his rights at that point in time. It's not absolutely possible to determine precisely how much he understood at that time. And I don't think anybody can make a definitive statement on that basis, but given his reading, his present reading levels, the results of testing that was conducted years ago, which is pretty consistent with my own findings, given his listening comprehension results, it would appear that his listening understanding would have been less than instructional level. That is, a frustration level, and perhaps some of the more abstract concepts involved might have, or probably would have been beyond comprehension or grasp at that time."
The testimony of the four experts presented by the state, considered in conjunction with the testimony presented by the police officers, leads us to believe that the trial justice committed no error in finding that defendant, who had been steadily employed, married, possessed a license to drive, and functioned normally in the community, was capable of understanding the Miranda admonitions and that he knowingly and freely waived his rights to remain silent and to be questioned in the presence of counsel. The fact that Dr. Imber's testimony questioned defendant's ability to understand did not detract significantly from the force of the testimony of the state's experts. The trial justice also took into account that defendant had been found competent to stand trial after examination by a state psychiatrist and passing the required tests for competency. The finding that defendant knowingly and voluntarily waived his rights without any "atmosphere *345 of coercion" is supported not only by clear and convincing evidence but as the trial justice suggested, also by evidence that "far exceeded [the state's] burden of proof." The motion to suppress was properly denied.
II
JOINDER OF CHARGES
The defendant unsuccessfully moved pretrial to sever counts under Rules 8 and 14 of the Superior Court Rules of Criminal Procedure. The trial court, in denying said motion, indicated the presence of a common scheme or plan among the charged offenses. The defendant renewed the motion several times throughout the trial, however, to no avail.
Rule 8(a) permits joinder of offenses in the same indictment if the offenses charged are "of the same or similar character". We are of the opinion that the offenses charged here were certainly of a similar character. Each offense involved the strangulation or attempted strangulation of the victim. Three of the offenses involved sexual assaults against the victim. Neuser was found nude from the waist down with her sweater pulled up over her breasts. Each offense had a strong overtone of erotic motivation, and all have in common the brutality of the killings or assaults themselves. It is of course true, that two of the victims were further savaged by the insertion of a stick in Talbot's vagina and one in Carlucci's rectum. In fact, an overall pattern of abhorrent sexual behavior, coupled with strangulation and head injuries, can be seen in each of the crimes set forth in this indictment. Consequently, the offenses were properly joined under Rule 8(a) as being "of the same or similar character". Moreover, Rule 8(a) goes on to provide that offenses may be joined when based "on two (2) or more acts or transactions connected together or constituting parts of a common scheme or plan". The trial justice in the case at bar found that these cases did disclose a common scheme or plan. They were also connected by virtue of a single interrogation in which defendant in substance confessed to the commission of all five criminal offenses. Thus, unquestionably, there was proper joinder pursuant to Rule 8(a).
This does not end our inquiry since even though offenses may be appropriately joined in a single indictment, defendant may move for severance of said counts for purposes of trial in the event that he is able to show such prejudice as might constitute a denial of his right to a fair trial, pursuant to Rule 14. State v. Whitman, 431 A.2d 1229 (R.I. 1981); State v. Sharbuno, 120 R.I. 714, 390 A.2d 915 (1978); State v. Patriarca, 112 R.I. 14, 308 A.2d 300 (1973).
The standard that has been consistently applied in reviewing a trial justice's decision declining to sever counts pursuant to Rule 14 has been that of abuse of discretion. As we stated in State v. Whitman:
"In the final analysis, the granting or denial of a motion for severance is not a matter of right but one within the sound discretion of the trial justice. * * * The term `discretion' connotes an action taken in the light of reason as applied to all of the facts and with a view to the rights of all parties to the action while having regard for what is right and equitable under all of the circumstances and the law." 431 A.2d at 1233.
In State v. Whitman we held that there was no abuse of discretion by the trial justice in declining to sever five counts that charged the defendant with the abominable and detestable crime against nature committed against five young men, all fifteen years of age or younger. We considered this severance in light of the doctrine first enunciated in State v. Colangelo, 55 R.I. 170, 179 A. 147 (1935), which held that evidence of other criminal acts would be excluded if offered simply to show a defendant's criminal propensity to commit the type of crime with which he is charged. Colangelo also recognized that evidence of other criminal acts would be admissible in order to show the defendant's guilty knowledge, intent, motive, design, plan, scheme, system, or the like. See also State v. Delahunt, 121 R.I. 565, 401 A.2d 1261 (1979); State v. Jalette, 119 R.I. 614, 382 A.2d 526 *346 (1978). In State v. Lemon, 497 A.2d 713, 720 (R.I. 1985), we noted that the Colangelo list of exceptions to admissibility of evidence of other crimes was not exhaustive and that proof of identity also constituted an exception to the similar crimes exclusion. McCormick On Evidence, § 190 at 557 (3d ed. Cleary 1984); see also 1 Wharton's Criminal Evidence, § 181 at 767 (14th ed. Torcia 1985).
In deciding the question of severance under Federal Rule 14 the court in United States v. Miller, 449 F.2d 974 (D.C. Cir.1970), has held that the joinder of charges relating to separate robberies of liquor stores in the District of Columbia was not improper since evidence in support of the various counts not only tended to show a common scheme or plan but also "went to the issue of identity." Id. at 981.
Similarly, in Johnson v. United States, 356 F.2d 680 (8th Cir.1966), the court declined to disturb a trial judge's decision not to sever a five-count indictment under the Mann Act for transportation of various women for purposes of prostitution. The court commented that the counts referred to the same type of offense, occurring over a relatively short period, and that the evidence associated with each count would of necessity overlap. Id. at 682. The court further observed that denial of severance is not grounds for reversal "unless clear prejudice and abuse of discretion is shown. It is not enough simply to show that joinder makes it more difficult to defend." Id.
In the case at bar the offenses all occurred over a relatively short period from June to September during the year 1984. The crimes were sufficiently similar so as to show as much of a common scheme or plan as we found to exist in State v. Whitman, supra, or State v. Sharbuno, supra. See also State v. Bernier, 491 A.2d 1000 (R.I. 1985) (sexual assault charges set forth in separate indictments were consolidated at trial).
In the instant case there would definitely have been an overlap in evidence regarding the taking of the confessions in relation to all five of these criminal charges. The confessions resulted from a single interrogation by the same police officers. It would have been difficult, if not impossible, to segregate the testimony regarding the taking of these confessions without creating confusion and unanswered questions in the minds of the jurors, if they heard a truncated version in respect to each offense, for the jurors must make the ultimate determination about voluntariness under Rhode Island law. Certainly the identity of this defendant was a common theme that would have to be determined in respect to each count of this indictment. As in United States v. Miller, supra, there would be not only a common scheme or plan but also the identity of defendant as an issue in each of the cases, making an overlap of evidence a necessity.
In respect to the possible confusion of the jurors by hearing all counts in a single trial, the evidence in this case was relatively simple and straightforward. The evidence in respect to each crime was also clearly separable and distinct and not likely to cause confusion or to be misunderstood with respect to the other crimes. United States v. Miller, 449 F.2d at 981. Moreover, the evidence in this case, in light of the confessions as well as the corroborating physical evidence, is nothing short of overwhelming. The likelihood that a different result would have been obtained in separate trials is remote and highly improbable.
The defendant further argues that had the counts been severed, he would have testified in respect to counts 3 and 4. He points out that as a result of the refusal to sever, he decided not to testify at all.
It is noteworthy that defendant did not point out to the trial justice or to us what his testimony would have been in respect to these counts whether he would have denied his guilt or what effect this testimony could have had upon the ultimate result in respect to the various charges. The effect of this undescribed testimony is left wholly to speculation. He also gave no specific reasons why he wished to refrain from testifying in regard to the other counts.
The defendant suggests that his decision not to testify may have deprived him of his *347 constitutional right to present a defense. It must be borne in mind that defendant's decision not to testify in respect to any of the charges was his own tactical decision and was certainly not reached by virtue of any prohibition or preclusion placed on him by the trial justice or the prosecution. This vague and indefinite assertion does not establish the kind of prejudice to which we and other courts have alluded when defining the type of prejudice necessary to establish an abuse of discretion on the part of the trial justice in refusing severance under Rule 14 of the Superior Court Rules of Criminal Procedure or its federal counterpart. See United States v. Park, 531 F.2d 754, 763 (5th Cir.1976), wherein the court observed:
"`[N]o need for a severance exists until the defendant makes a convincing showing both that he has important testimony to give concerning one count and strong need to refrain from testifying on the other. In making such a showing, it is essential that the defendant present enough information regarding the nature of the testimony he wishes to give on one count and his reason for not wishing to testify on the other to satisfy the court that the claim of prejudice is genuine and to enable it intelligently to weigh the considerations of "economy and expedition in judicial administration" against the defendant's interest in having a free choice with respect to testifying.'" (Emphasis added.)
We are of the opinion that the trial justice did not abuse his discretion in declining to grant defendant's motion to sever counts in this case.
III
DENIAL OF REQUEST FOR MISTRIAL
The defendant moved for a mistrial on three occasions during the course of the trial and once after the prosecution's closing arguments. These motions were denied. The defendant argues that these denials constituted reversible error.
A. The first motion was prompted by a reference by Detective Cross to "an incident in Westerly" in respect to which he had advised defendant of his Miranda rights and obtained an oral confession from him. No reference was made to the circumstances that underlay the "incident in Westerly".
The purpose of this testimony was to attempt to show that defendant understood the Miranda rights in respect to which he had been admonished concerning charges in Providence County that had been joined for trial in the case at bar. The defendant argued that any reference to "an incident in Westerly" would alert the jurors to the fact that he had committed another crime in addition to those crimes with which he was charged.
B. The second motion was based upon questions put to Michael E. Johnson, a Westerly police officer, concerning his prior giving of Miranda admonitions to defendant on April 12, 1980. This question was put to Officer Johnson in an attempt to show that defendant was familiar with the Miranda admonitions and would therefore probably be able to understand them. In the course of this interrogation, Officer Johnson stated, "I had several contacts with Mr. Lassor". At this juncture counsel for defendant moved to strike the comment and also moved for a mistrial. The trial justice gave a cautionary instruction but denied the motion.
C. Doctor Joy E. Pitterman was an expert witness presented by the state to establish defendant's ability to read and understand the admonitions contained in the Miranda form and also his ability to knowingly waive the rights contained therein. In the course of her testimony, the doctor testified that defendant said he had previously signed a Miranda form. Counsel for defendant moved for mistrial, claiming surprise at this testimony and arguing that it showed that defendant had had other contacts with the police. The trial justice denied the motion for mistrial.
We have stated that the decision concerning a declaration of a mistrial is within the sound discretion of the trial justice. State v. St. Amant, 536 A.2d 897 (R.I. 1988); State v. Fernandes, 526 A.2d 495 (R.I. *348 1987); State v. Collazo, 446 A.2d 1006 (R.I. 1982); State v. Anil, 417 A.2d 1367 (R.I. 1980). In the event that the trial justice denies such a motion, his determination will be given great weight and will not be disturbed on appeal unless it is clearly wrong. State v. Martellini, 533 A.2d 527, 529 (R.I. 1987); Collazo, 446 A.2d at 1010; State v. Pailin, 114 R.I. 725, 729, 339 A.2d 253, 255 (1975).
We have also said that the determination of whether a prosecutorial comment or question is inflammatory or ineradicably prejudicial cannot be decided by a fixed rule of law. State v. Brown, 522 A.2d 208 (R.I. 1987); State v. Peters, 82 R.I. 292, 107 A.2d 428 (1954). "The trial justice must evaluate the probable effect of the prosecutorial conduct on the outcome of the case by examining the remark or question in its factual context. * * * The test essentially is whether the prosecutorial comment or question so inflames the passions of the jury as to prevent their calm and dispassionate examination of the evidence." State v. Brown, 522 A.2d at 211; State v. Verdone, 114 R.I. 613, 337 A.2d 804 (1975); State v. Mancini, 108 R.I. 261, 274 A.2d 742 (1971).
Applying these guidelines to the three incidents upon which defendant based his motions for mistrial, we believe it is clear that the trial justice did not err in denying defendant's motions to pass the case. None of these references could be said to be so inflammatory as to prevent the calm and dispassionate examination of the evidence by the jurors.
The defendant cites State v. Sepe, 122 R.I. 560, 410 A.2d 127 (1980), and State v. Colangelo, 55 R.I. 170, 179 A. 147 (1935), as holding that it is improper to allow evidence of a crime other than the one charged in the indictment to show that a defendant is criminally disposed. It should be noted that both of these cases hold that the allusion to other crimes is improper when such evidence is irrelevant to the determination of an issue properly before the court. In the case at bar, defendant had raised the issue of his inability to understand Miranda admonitions. In respect to this issue, it became relevant to determine whether defendant had had prior contact with such admonitions. Expert testimony by Dr. Pitterman indicated that such prior contact would have a significant bearing upon defendant's ability to understand the contents of the waiver form. As we suggested in State v. Cline, 122 R.I. 297, 405 A.2d 1192 (1979), a defendant does not have a right to be insulated against relevant testimony, even though that relevant testimony may tend to show additional criminal activity (in that instance, the crime of escape).
We are of the opinion that the evidence introduced through Detective Cross, Officer Johnson of Westerly, and Dr. Pitterman was relevant to the determination of a significant issue in the case and was therefore not a basis for the declaration of a mistrial. The defendant's appeal on this issue cannot be sustained.
IV
CHALLENGE TO TESTIMONY OF DETECTIVE FERREIRA, SERGEANT PEDCHENKO, AND DR. PITTERMAN
The defendant argues that the trial justice committed reversible error in admitting what he describes as "hearsay" testimony submitted by Detective Alfred A. Ferreira and Sergeant William Pedchenko, who testified concerning the Miranda admonitions they had heard as given by Detective Cross prior to the waiver of rights made by defendant. In support of his argument defendant cites State v. Brash, 512 A.2d 1375 (R.I. 1986), wherein we held that inadmissible hearsay could not be used to bolster the testimony of a witness in a criminal case.
The short answer to this contention is that the testimony of Detective Ferreira and Sergeant Pedchenko did not constitute hearsay at all. The giving of Miranda admonitions is a verbal act. Testimony of a declarant who heard the Miranda admonitions is not introduced for the truth of the matter asserted but only to indicate that the words of admonition were given. These words have an independent legal effect *349 upon the voluntariness of a statement given by a defendant. They bear a similarity to contractual words upon which persons rely in a civil context. See McCormick on Evidence, § 249 at 732. A witness who heard a Miranda admonition given may testify to the words used as he might testify to any act of which he has made a firsthand observation. Consequently, State v. Brash is wholly inapplicable. There is no rule that precludes the admission of corroborative testimony from a witness who has observed an event relevant to an issue in the case.
The defendant also objects to the testimony of Dr. Pitterman, who was accompanied to the Adult Correctional Institutions by two detectives when she tested defendant's ability to read the Miranda form. Specifically defendant objects to Dr. Pitterman's testimony that she was told by the detectives that defendant had read the form to them "in a similar fashion" when he was arrested but "read a little bit more slowly" for her than he had for them. This testimony also did not constitute hearsay since it was introduced solely to show the effect of the form upon defendant and its relevance to the voluntariness of the subsequent statements. See McCormick on Evidence, § 249 at 733-34.
Consequently, the trial justice was correct in allowing these statements into evidence as nonhearsay.
V
INSTRUCTIONS IN REGARD TO MANSLAUGHTER
The defendant argues that the trial justice committed reversible error in failing to give instructions that would allow the jury to find the lesser included offense of voluntary manslaughter committed in the heat of passion on adequate provocation, or voluntary manslaughter based upon diminished capacity.
It is true that counsel for the defense requested an instruction in respect to diminished capacity (request No. 11). This request did not mention the crime of manslaughter. The trial justice did, in his instructions, speak of diminished capacity in accordance with this request. The trial justice did not relate the element of diminished capacity to the crime of manslaughter.
Nevertheless, upon completion of the trial justice's instructions, the sole objection raised by counsel for the defense was to the failure of the trial justice to give his requested instruction on voluntary manslaughter committed "in a sudden heat of passion * * * caused by adequate legal provocation" (request No. 10). Defense counsel did not object to the failure to give an instruction on voluntary manslaughter based upon diminished capacity owing to intoxication or any other cause.
It has long been the rule in this state that a party may not assign as error any portion of a charge or omission therefrom unless he specifically directs the trial justice's attention to the matter to which he objects, and gives the ground for his objection. He not only must, in accordance with Rule 30 of the Superior Court Rules of Criminal Procedure, object to the charge as given, but must also articulate the challenge in such a fashion that the court is made aware of the exact nature of the alleged error, be it of commission or omission. See, e.g., State v. Farlett, 490 A.2d 52, 56 (R.I. 1985); State v. Rodriquez, 465 A.2d 164, 170 (R.I. 1983); State v. Dionne, 442 A.2d 876, 885 (R.I. 1982). In the case at bar, defense counsel made no specific objection to the failure of the trial justice to instruct the jurors that they might find defendant guilty of voluntary manslaughter based upon diminished capacity. Consequently, defendant cannot now claim error on the part of the trial justice for having failed to give such an instruction.
Trial counsel, as indicated, did request an instruction on voluntary manslaughter committed "in a sudden heat of passion * * * caused by adequate legal provocation." The defendant now argues that this instruction should have been given with specific reference to the Carlucci murder since there was evidence from defendant's *350 statement that he had been provoked by his inability to achieve sexual consummation with the decedent, and his passion was therefore aroused. This argument is more astonishing than persuasive.
In State v. Winston, 105 R.I. 447, 452-53, 252 A.2d 354, 357 (1969), we outlined the historical development of the distinction between murder and manslaughter. We pointed out that in England voluntary manslaughter had evolved so as to require two elements:
A. The provocation must be so gross as to cause the ordinary reasonable man to lose his self-control and to use violence with fatal results.
B. The defendant must in fact have been deprived of his self-control under the stress of such provocation and must have committed the crime while so deprived.
To suggest that one who is attempting to commit a sexual assault upon a victim may be given the benefit of the defense of "adequate provocation" by reason of failure to consummate his illicit design is to propose a contradiction in terms. There was not one shred of evidence in this case that the victim had taken any action that constituted "adequate provocation". In attempting to fight off defendant, she was exercising, albeit unsuccessfully, her basic right of self-preservation. The defendant could not take advantage of her action to "convert his savagery into a lesser degree of homicide". Winston, 105 R.I. at 453, 252 A.2d at 358.
The trial justice did not err in declining defendant's proposed instruction in respect to voluntary manslaughter in the heat of passion and was not requested to instruct on the crime of manslaughter based on diminished capacity. We find no error in his instructing the jury as he did.
VI
JURY INSTRUCTIONS IN REGARD TO SEPARATE CHARGES
The defendant asserts error in the failure of the trial justice to give a requested instruction to the effect that each charge should be considered separately in respect to the principal charge and lesser included offenses.
An examination of the extensive instructions given by the trial justice discloses that he referred to each count of the indictment, defined the offenses set forth, and stated to the jury that each charge must be considered individually. The jury was also furnished with a verdict form upon which each count was set forth individually, along with possible lesser included offenses where applicable. The jurors were instructed to and did return separate verdicts on each count. Thus there seems little doubt that the court did in substance instruct the jury to consider each charge separately. Moreover, it is abundantly clear that the jurors did so.
It is the rule in this jurisdiction that when requested instructions are adequately covered by the trial justice's charge actually given to the jury, refusal to give the requested instruction is not error. State v. D'Alo, 435 A.2d 317 (R.I. 1981); State v. Sharbuno, 120 R.I. 714, 390 A.2d 915 (1978); State v. Casala, 113 R.I. 690, 325 A.2d 540 (1974).
Since we find in the case at bar that the trial justice adequately covered the subject matter contained in defendant's requested instruction, there is no error in his having refused to give the instruction in the form submitted by defendant.
VII
THE MOTION TO SEQUESTER
At the commencement of trial, defendant moved to sequester all witnesses. The court granted the request with the exception of two detectives, Steven Cross and John McGehearty, who were allowed to remain present at counsel table in order to assist the prosecutor in presentation of the case. The defendant moved as an alternative that these two detectives be required to testify first. The court declined to exclude the detectives from the courtroom and further declined to require that they testify as the state's first witnesses. The defendant asserts this denial of his requests as error.
*351 In State v. Mathias, 423 A.2d 484 (R.I. 1980), we considered this precise question and determined that the exclusion of witnesses from the courtroom during the taking of testimony at a trial is a matter vested in the sound discretion of the trial justice and that a decision in the exercise of that discretion will not be disturbed by this court "unless an abuse of that discretion clearly appears". Id. at 486; State v. Raposa, 100 R.I. 516, 517, 217 A.2d 469, 470 (1966); State v. Cyrulik, 100 R.I. 282, 284, 214 A.2d 382, 383-84 (1965).
In Mathias we applied the same standard in reviewing a trial justice's refusal to require that the police officer who was permitted to remain in the courtroom should testify first. We stated that the determination of the order of proof is within the discretion of the trial justice and that such discretion would not be lightly reviewed. 423 A.2d at 487. We also stated that it was unnecessary that the trial justice make a determination of the necessity of the assistance of the officer or officers who would be allowed to remain for the purpose of assisting the prosecution. Id. We saw no need to presume that the investigating officer or officers who assisted the prosecution are likely to modify their testimony in order to bring it into conformity with the testimony given by other witnesses. Id. at 488.
We believe that the principles enunciated in Mathias are dispositive of this issue. The trial justice committed no abuse of discretion in declining to exclude from the courtroom the two detectives assigned to assist state's counsel. We further find no abuse of discretion in not requiring the state to present these witnesses first.
VIII
STATE'S MOTION IN LIMINE
The defendant argues that his Sixth Amendment right of confrontation was violated by the trial justice's preclusion on the state's motion in limine of his intended cross-examination of the state's complaining witness, Carrie-Ann Talbot, in respect to her status as a runaway (she was then a juvenile) at the time of the commission of the alleged sexual assault upon her. On the ground of relevance, the trial justice forbade this cross-examination. The defendant cites the right of a defendant to cross-examine a witness for the purpose of establishing an interest, bias, or motive. Davis v. Alaska, 415 U.S. 308, 94 S. Ct. 1105, 39 L. Ed. 2d 347 (1974); State v. Anthony, 422 A.2d 921 (R.I. 1980). The short answer to this question is that the trial justice did not consider the status of the witness as a runaway as relevant to interest, bias, or motive. "Although an accused is guaranteed the right to effective cross-examination in all criminal matters, a trial justice must exercise discretion in determining the relevancy of proffered evidence and to protect a witness from questions that `harass, annoy, or humiliate'." State v. Burke, 522 A.2d 725, 732-33 (R.I. 1987); see also Davis, 415 U.S. at 320, 94 S.Ct. at 1112, 39 L.Ed.2d at 356; Anthony, 422 A.2d at 924. We discern no abuse of discretion in the trial justice's determination that the runaway status of the complaining witness had no relevance to interest, bias, or motive or any other legitimate issue in the case.
IX
THE CONSTITUTIONALITY OF THE RHODE ISLAND STATUTES THAT AUTHORIZE LIFE IMPRISONMENT WITHOUT PAROLE
The defendant challenges the constitutionality of the Rhode Island statutory structure that authorizes the imposition of the penalty of life imprisonment without parole on a number of grounds, some general and some specifically applicable to the procedures utilized in the instant case. These challenges require a general description and analysis of the statutes that authorize this particular punishment.
In 1984 G.L. 1956 (1981 Reenactment) § 11-23-2 was amended to read in pertinent part as follows:
"Every person guilty of murder in the first degree shall be imprisoned for life. Every person guilty of murder in the first degree (1) committed intentionally while such person was engaged in the *352 commission of another capital offense or other felony for which life imprisonment may be imposed; or (2) committed in a manner creating a great risk of death to more than one person by means of a weapon or device or substance which would normally be hazardous to the life of more than one person; or (3) committed at the direction of another person in return for money or any other thing of monetary value from that person; or (4) committed in a manner involving torture or an aggravated battery to the victim; or (5) committed against any member of the judiciary, law enforcement officer, corrections employee, or fireman arising from the lawful performance of his official duties; or (6) committed by a person who at the time of the murder was committed to confinement in the adult correctional institutions or the state reformatory for women upon conviction of a felony, shall be imprisoned for life and if ordered by the court pursuant to chapter 19.2 of title 12 such person shall not be eligible for parole from said imprisonment." (Emphasis added.) P.L. 1984, ch. 221, § 1.
During the same session of the General Assembly the Legislature enacted chapter 19.2 of title 12, which sets out the sentencing procedures which will be utilized in implementation of § 11-23-2. P.L. 1984, ch. 362, § 2. These sentencing procedures may be generally described as follows. In all cases in which eligibility for imposition of the penalty of life imprisonment without parole may be invoked by the prosecution, the Attorney General must recommend in writing to the court within twenty days of the date of arraignment that such sentence be imposed. Thereafter, in the event that the jury returns a verdict of guilty of murder in the first degree, the trial justice must instruct the same jury to consider whether it has been proven beyond a reasonable doubt that the murder committed by the defendant involves one of the six circumstances enumerated in § 11-23-2. "If after deliberation the jury finds that one or more of the enumerated circumstances was present, it shall state in writing, signed by the foreman of the jury, which such circumstance or circumstances it found beyond a reasonable doubt." Section 12-19.2-1.
Upon return of an affirmative verdict, identifying one or more of the six circumstances enumerated in § 11-23-2, the trial justice is required to conduct a presentencing hearing. At said hearing the court shall permit the Attorney General and counsel for the defense to present additional evidence relevant to a determination of the sentence to be imposed. Under the provisions of § 12-19.2-4 the trial justice must consider evidence regarding the nature and circumstances of the offense and the personal history, character, record, and propensities of the defendant, which are relevant to the sentencing determination. After hearing evidence and arguments regarding both aggravating and mitigating circumstances relating to the offense and the defendant, the court may in its discretion impose the sentence of life imprisonment without parole or a sentence of life imprisonment without such limitation. In either event the court must state on the record its reasons for imposing such sentence.
In all instances in which the trial justice imposes a sentence of life imprisonment without parole, the defendant has a right of appeal in respect to this sentence to this court, and this court has the obligation of exercising its own discretion in determining the appropriateness of such sentence. In effect this court must exercise its independent judgment after review of the transcript of the proceedings below and then either may ratify the imposition of the sentence of life imprisonment without parole or may reduce the sentence to life imprisonment. Section 12-19.2-5.
The defendant first challenges this statutory structure on the ground that the absence of a specific provision for allowing defense counsel to argue to the jury on the question of whether one or more aggravating circumstances exist violated his right to counsel under the Rhode Island and United States Constitutions. It is of primary significance in this case that counsel for the defense did not seek permission of the *353 court to argue to the jury prior to its deliberation on the existence or nonexistence of an aggravating circumstance. He did not raise this issue before the trial justice until long after the jury had returned its finding that there was an aggravating circumstance, namely, "first-degree murder committed in a manner involving aggravated battery to the victim as to counts number 1 and 3".
Count 1 charged defendant with the murder of Lori Carlucci, and count 3 charged defendant with the murder of Delores Neuser. We shall deal with the specific application of this finding later in this opinion.
We have decided in numerous cases that we shall not consider an issue raised for the first time on appeal. See, e.g., State v. D'Alo, 435 A.2d 317 (R.I. 1981); Majewski v. Porter, 121 R.I. 757, 403 A.2d 248 (1979). We have also said that claims of error "although briefed and argued at the appellate level, are deemed to have been waived if not effectively raised at trial". State v. Burke, 529 A.2d 621, 627 (R.I. 1987); State v. Rondeau, 480 A.2d 398 (R.I. 1984); State v. Byrnes, 433 A.2d 658 (R.I. 1981). Since defendant did not request an opportunity for argument at a time when the trial justice could have considered that request and implemented it, it was not effective for him to raise a challenge at a later point in the proceeding when such request was manifestly ineffective since by that time the jury had already completed its deliberation and had been excused.
Nothing in the statute forbids granting counsel an opportunity to argue to the jury prior to its deliberation on the existence or nonexistence of an aggravating circumstance. We should certainly construe the statute as permitting such argument to be made. Indeed, we hold that both defense counsel and counsel for the state must be given the right to argue to the jury at that stage of the proceeding, if they wish to do so. However, in the absence of such a request, we cannot fault the trial justice for having instructed the jury without argument by either counsel.
It should also be noted that under the provisions of § 12-19.2-4 both counsel for the prosecution and the defense have an opportunity to present evidence and argue to the trial justice concerning the "aggravating and mitigating factors relating to the offense" so that the trial justice in essence exercises independent judgment regarding whether an aggravating circumstance was properly found to have existed. Consequently, the jury's determination even of the existence of an aggravating circumstance is not final.
The defendant also challenges the constitutionality of § 11-23-2 in that it fails to provide a definition of the term "aggravated battery." He suggests that this failure violates due process in that the term is vague and would invite the trier of fact to make an arbitrary or capricious finding. For this proposition he cites Gregg v. Georgia, 428 U.S. 153, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976). We must disagree.
In evaluating the Rhode Island sentencing procedures in regard to imposition of the sentence of life imprisonment without parole, we must not equate this penalty with that of death, concerning which the Supreme Court of the United States has applied a unique analysis. Cases involving the death penalty are of limited usefulness in assessing the constitutionality of a sentence of a term of life imprisonment without parole. See Commonwealth v. Diatchenko, 387 Mass. 718, 443 N.E.2d 397 (1982). The unique quality of the death penalty has frequently been noted by the United States Supreme Court. In Lockett v. Ohio, 438 U.S. 586, 605, 98 S. Ct. 2954, 2965, 57 L. Ed. 2d 973, 990 (1978), the plurality described the death penalty as "profoundly different from all other penalties." Again in Lockett it was stated that the standards for evaluating the constitutionality of death-penalty provisions are much higher than the standard to be employed in evaluating other penalties. In Rummel v. Estelle, 445 U.S. 263, 272, 100 S. Ct. 1133, 1138, 63 L. Ed. 2d 382, 390 (1980), the Court observed that "[b]ecause a sentence of death differs in kind from any sentence of imprisonment, no matter how long, our decisions [in death-penalty cases] are of limited assistance in deciding the constitutionality of *354 [other punishments, including the life sentence imposed] on Rummel." (Emphasis added.)
Even though death-penalty decisions are of limited precedential effect, it is appropriate to note that even in such a context the term "aggravated battery" has never been determined by the United States Supreme Court to be facially unconstitutional for vagueness. Indeed, in Gregg v. Georgia, 428 U.S. 153, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976), the plurality specifically addressed a challenge to the seventh aggravating circumstance set forth in the Georgia death-penalty statute (inter alia, involving "an aggravated battery"). The Court observed: "It is, of course, arguable that any murder involves depravity of mind or an aggravated battery. But this language need not be construed in this way, and there is no reason to assume that the Supreme Court of Georgia will adopt such an open-ended construction." Id. at 201, 96 S.Ct. at 2938, 49 L.Ed.2d at 890. See also Godfrey v. Georgia, 446 U.S. 420, 100 S. Ct. 1759, 64 L. Ed. 2d 398 (1980), in which statutory language setting forth an aggravating circumstance as "outrageously vile, horrible or inhumane" was found vague in its application to a murder in the absence of "torture or aggravated battery". Consequently, the term "aggravated battery" has been recognized by the United States Supreme Court, as well as by the Supreme Court of Georgia, as indicating that it constitutes the malicious causing of bodily harm to another by depriving him of a member of his body or by rendering a member of his body useless or by seriously disfiguring his body or a member thereof. Godfrey, 446 U.S. at 431-32 n. 13, 100 S.Ct. at 1766 n. 13, 64 L.Ed.2d at 408 n. 13. The Supreme Court of the United States in Godfrey construed "aggravated battery" in pari material with "torture" as applied by the Georgia Supreme Court so as to require evidence of serious physical abuse of the victim before death. As a consequence, we are of the opinion that a term that has passed the intense scrutiny given in death-penalty cases should certainly not be considered unconstitutionally vague for the imposition of the sentence of life imprisonment without parole.
The defendant also has raised the question of his inability to have the jury consider mitigating circumstances. This claim is completely without merit because, unlike that in Georgia, the sentencing authority in this state is the trial justice, not the jury. The trial justice is directed by statute to consider mitigating circumstances as well as the aggravating circumstance or circumstances found by the jury and by the trial justice to have been proven beyond a reasonable doubt. The trial justice is in no way bound by the threshold determination of the jury. The jury's finding that an aggravating circumstance has been proven beyond a reasonable doubt merely triggers the inquiry by the trial justice into the suitability of the imposition of this penalty. There would be no point in asking the jury to consider mitigating circumstances when it has no authority to impose or withhold the sentence of life imprisonment without parole.
Every opportunity is given to counsel and to the defendant to argue to the court and to exercise the defendant's right of allocation. In the case at bar, defendant was offered the opportunity to make a statement to the court prior to sentencing, but he declined to do so. It is a well-settled principle of constitutional law that a statute duly enacted by the General Assembly is presumed to be constitutional. A party who challenges constitutionality must sustain the burden of proving the statute to be unconstitutional beyond a reasonable doubt. Cardi Corp. v. State, 524 A.2d 1092, 1097 (R.I. 1987); Santini v. Lyons, 448 A.2d 124, 126 (R.I. 1982); State v. Capone, 115 R.I. 426, 432-33, 347 A.2d 615, 619 (1975); In re Buxton, 111 R.I. 480, 483, 304 A.2d 350, 352 (1973). Our analysis of the statute clearly indicates that defendant has failed to sustain the burden of establishing unconstitutionality beyond a reasonable doubt. Therefore, his challenge on this ground must be rejected.
X
THE CHALLENGE TO THE IMPOSITION OF THE PENALTY IN THIS CASE
The defendant argues that it was inappropriate for the trial justice to impose the *355 two sentences of life imprisonment without parole in respect to counts 1 and 3 of the indictment. The defendant argues that although he is a person of limited abilities, he is young and can be rehabilitated, and therefore there is no need for the imposition of the additional sanction in this case. We must reject this argument. The defendant was found to be fully capable of responding to the criminal process after consideration of expert testimony on the issue of competency prior to trial. There is no question that the jury and the trial justice properly found that the circumstance of aggravated battery existed in respect to these two charges. In regard to the murders of Carlucci and Neuser, the record discloses shocking brutality in both cases.
The defendant beat Carlucci into unconsciousness, strangled her (fracturing both larynx and hyoid bone in multiple sites), and then forcefully inserted a plywood stick into her rectum with such force and so deeply that the medical examiner at first was led to believe that her clavicle had been fractured. In the defendant's own words in his statement to the police:
"Then I grabbed her by the neck with my both hands and strangled her but she was still alive and I dragged her out of the car and I laid her on the ground and she was unconscious. I hit her some more and then hit her with my fists some more. I don't know how many times I hit her. I then pulled her pants off and pulled her underwear down. I saw a thin plywood stick on the ground and I took the stick and I shoved it up her ass. She screamed when I shoved the stick up her ass. I got into my friend's car and left."
After the murder of Neuser, the "autopsy demonstrated injuries indicative of manual strangulation and severe injuries and fractures of the face and scalp resulting in extensive hemorrhage." There were also injuries of the lower abdomen resulting in bladder separation and laceration of the small bowel and mesentery with internal hemorrhage. She died "as a result of asphyxia due to strangulation and blunt force trauma [to] the face, * * * head and lower abdomen."
If there has ever been a case in which an aggravated battery was committed upon a victim with such savagery as to constitute serious physical abuse of the victim before death, it has certainly been proven beyond a reasonable doubt in this case in respect to Lori Carlucci and Delores Neuser.
In the exercise of our independent judgment and discretion, we affirm the sentence of life imprisonment without parole imposed upon this defendant in respect to counts 1 and 3 of the indictment.
XI
OTHER ISSUES
The defendant has raised a number of other issues involving evidentiary rulings by the trial justice in respect to both lay witnesses and expert witnesses. These rulings were based upon relevance or the foundation necessary to establish relevance. We have carefully examined the record of these rulings, the contexts in which they were made, and the arguments presented below, as well as those presented by the defendant and counsel for the state on appeal. We are of the opinion that all the rulings came well within the discretion granted to a trial justice under our prior cases.
For the reasons stated, the defendant's appeal is denied and dismissed. The judgments of conviction are affirmed, and the imposition of the sentence of life imprisonment without parole is affirmed. The papers in the case may be remanded to the Superior Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550972/ | 231 N.J. Super. 495 (1989)
555 A.2d 1149
W.W., PLAINTIFF-RESPONDENT,
v.
I.M., DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Argued December 14, 1988.
Decided March 10, 1989.
*498 Before Judges KING, ASHBEY and SKILLMAN.
Susan M. Scarola argued the cause for appellant (Lomurro, Davison, Eastman & Munoz, attorneys; Chen Kornreich, on the brief).
Edward S. Donini argued the cause for respondent (Donini and Donini, attorneys; Mr. Donini, on the brief).
The opinion of the court was delivered by ASHBEY, J.A.D.
In this contested custody case the judge granted plaintiff, father W.W. (Walter) and defendant mother I.M. (Isobel) joint custody of C.M. (Charles), but appointed Walter the primary residential parent. Isobel's motion for a stay of this order was denied. Isobel appeals.[1]
Charles was born on August 15, 1980, at a time when Walter was married to Carla,[2] to whom he had been married for some 20 years. Isobel ran a horse farm. Her occupation was breeding horses and giving riding lessons. She also cared for her recently bedridden mother who lived with her. From birth Charles lived with his mother and grandmother and beginning in July 1982 Walter had a court order for visitation. Ultimately the parties agreed to an order for custody in which Isobel had custody and Walter had visitation. It is a fair reading of the record that Walter had consistently participated in Charles' life from birth.
*499 When Charles was two years old, he was bitten by Isobel's dog, one that Walter asserted he had previously asked Isobel to give away because he was a danger to the child. According to Walter, Isobel told him she would protect the child from the dog, but two weeks later Charles was again bitten. He was hospitalized requiring surgery.
This incident led to Walter's 1983 complaint to the Division of Youth and Family Services (DYFS). He complained about the dog attacks and also about the condition of Isobel's home. According to testimony and the DYFS records a worker for DYFS persuaded Isobel who reluctantly agreed to get rid of the dog.
On August 10, 1986, Walter requested another investigation by DYFS. The next day Joyce Jacobs, a DYFS social worker, investigated Walter's then allegation of child neglect. In her testimony Jacobs described the condition of Isobel's house. She said that clothing and old food was everywhere. There were piles of medical bottles, dirty pots and dishes, dried dog feces in several of the rooms, on the floors and under the furniture. There was a decomposing dead rat on the front step and starving kittens. There were wires hanging in the kitchen and bare electrical wires in the hallway. The house was overrun with flies and fleas. Jacobs concluded that the house was an unsafe place for Charles to live. She persuaded Isobel to allow Charles to stay with Walter while Isobel cleaned the place. Charles stayed with his father for a couple of weeks and then was returned to his mother. DYFS supervision continued until January of 1987.
Walter saw more of Charles. On February 19, 1987, while Walter was giving Charles a bath, he saw extensive bruising on the child's buttocks. Walter contacted DYFS, and Isobel admitted that she had spanked Charles on his bare buttocks because he had not gotten ready for school on time. At that time Isobel *500 admitted she expected Charles to get himself ready for school each day with no help from her because she was too busy.[3]
Following these incidents DYFS filed a complaint for abuse and neglect and Charles lived with Walter from February 1987 until August 1987.[4] In addition to the incidents described, the DYFS complaint asserted that Isobel had attempted to have Walter and Jane killed and only failed because she could not raise the fee. There followed a series of DYFS related court orders for evaluations and counseling including the CPC evaluation at issue, and finally an order which directed Walter to file a complaint for custody if he intended to do so. Following Walter's May 1987 custody complaint, a Family Part judge ordered that the DYFS proceeding remain inactive pending the completion of Walter's custody case and ordered the Monmouth County Probation Department to conduct a full custody investigation.
Upon the filing of the Probation Department's report, many days of trial testimony followed: November 17 and December 16, 1987, January 7, March 7, March 28, and June 10, 1988 when the judge issued his ruling. Among the witnesses testifying for Walter were his wives, his parents and other relatives, acquaintances of Isobel, DYFS workers, the principal of Charles' school and Charles' teacher. The principal testified to the "noticeable improvement" in Charles when he lived with Walter. He said that there was a "dramatic change in the boy's demeanor, his attendance, including the tardiness and his work habits, and his general ability to get along with others." Walter's former wife testified that Charles was dirty and hungry when he came to visit over the six year period that she *501 saw him weekly. There was also testimony that Isobel had asked a friend to help her hire a hit-man to "do bodily harm" to Walter and Jane.
Dr. Jordan Pauker, the psychologist who had been counseling Isobel and Charles every other week since February 1987 under the DYFS order, testified that Isobel was becoming more aware of Charles's needs and was learning how to meet those needs. Dr. Pauker further testified that there was no noticeable behavioral change in Charles when he lived with his father and no reason to believe that Charles should be removed from his mother's home. Dr. Pauker gave no opinion as to Charles's best interest with respect to custody. Kathy D'Antonio, the DYFS social worker assigned to the case since July 1987, testified that since she had been involved, the housekeeping standards in Isobel's house had been acceptable.
In the middle of trial Isobel proffered the testimony of a child psychology expert who gave the opinion that it would be detrimental to Charles to remove him from her care. This proffer was prompted by the trial judge's admission of reports of the March 11, 1987 Children's Psychiatric Center (CPC) examination of Charles; the March 16, 1987 CPC testing of Isobel and the March 30, 1987 CPC testing of Walter which were court ordered in connection with the DYFS neglect and abuse complaint and which were part of the court's records. The judge also reviewed the Monmouth County Probation Department Report and the DYFS file.[5] On appeal she asserts that all of these rulings were error and that if admissible, the reports were improperly relied on by the judge.
There is controversy concerning the admissibility of hearsay in a custody trial, particularly hearsay which is not contained in *502 a court ordered report. See Ponzini v. Ponzini, 135 Misc.2d 468, 515 N.Y.S.2d 974 (Fam.Ct. 1987), detailing the law of sister states. See also In re Scarlett, 231 N.W.2d 8 (Iowa Sup.Ct. 1975); Gumphrey v. Gumphrey, 262 Minn. 515, 115 N.W.2d 353 (1962); De Boynton v. De Boynton, 137 Cal. App.2d 106, 289 P.2d 868 (1955).
We recognize that there was such inadmissible hearsay in this trial. John Cernak of the Monmouth County Prosecutor's office's, for instance, was permitted to testify that he was told about Isobel's purported effort to harm Walter and his wife. This was certainly inadmissible hearsay and that it was error to have admitted it.[6] Defendant's primary complaint, however, concerns the admission of the CPC reports to which the judge referred in his opinion.[7]
Generally, an exception to the hearsay rule is made for forensic reports in custody cases. See Annotation, "Right, in child custody proceedings, to cross-examine investigating officer whose report is used by court in its decision," 59 A.L.R.3d 1337, 1361 (1974), where it was said,
... In order to determine what is in the child's best interest, courts have often relaxed the seemingly inflexible procedural rules of traditional adversary proceeding. Thus it is said that the courts must try to give the parties litigant their fair trial in open court and at the same time try to do what is best for the child or children. [(footnotes omitted)]
We have a particular rule applicable to DYFS reports. R. 5:12-4(d) provides as follows:
The Division of Youth and Family Services shall be permitted to submit into evidence, pursuant to Evidence Rules 63(13) [business record exception] and *503 62(5) [definition of business], reports by staff personnel or professional consultants. Conclusions drawn from the facts stated therein shall be treated as prima facie evidence, subject to rebuttal.
N.J.S.A. 9:6-8.46 also states:
In any hearing [to determine child abuse or neglect]... any writing, record or photograph, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any condition, act, transaction, occurrence or event relating to a child in an abuse or neglect proceeding of any hospital or any other public or private institution or agency shall be admissible in evidence in proof of that condition, act, transaction, occurrence or event, if the judge finds that it was made in the regular course of the business of any hospital or any other public or private institution or agency, and that it was in the regular course of such business to make it, at the time of the condition, act, transaction, occurrence or event, or within a reasonable time thereafter, shall be prima facie evidence of the facts contained in such certification.
N.J.S.A. 9:6-8.10a also provides:
a. All records of child abuse reports made pursuant to section 3 of P.L. 1971, c. 437 (C. 9:6-8.10), all information obtained by the Division of Youth and Family Services in investigating such reports including reports received pursuant to section 20 of P.L. 1974, c. 119 (C. 9:6-8.40), and all reports of findings forwarded to the central registry pursuant to section 4 of P.L. 1971, c. 437 (C. 9:6-8.11) shall be kept confidential and may be disclosed only under the circumstances expressly authorized under subsection b. herein.
b. The division may release the records and reports referred to in subsection a., or parts thereof, to:
* * * * * * * *
(6) A court, upon its finding that access to such records may be necessary for determination of an issue before the court ...;
While defendant concedes the admissibility of testimony by DYFS workers with knowledge, defendant contends that these rules and statutes allowing for the admission of DYFS consultant reports do not apply in this case because the custody case was not a DYFS initiated proceeding and the evidence not proffered by DYFS.[8]
*504 A review of the record, however, demonstrates that the cases were procedurally intertwined. DYFS began contact with mother and child in 1982. Although that case was closed, and not reopened until August of 1986, DYFS maintained supervisory contact based upon the father's 1986 complaint until January of 1987. Based upon the February 1987 complaint and ensuing order, DYFS maintained supervision while the custody trial proceeded. Isobel agreed to its continued supervision until January of 1988. It was a DYFS order of May 4, 1987, (resulting from an April 10, 1987 hearing) which directed Walter to apply for custody. The resulting custody complaint contained the notation that it was to be served upon the DYFS worker. The August 28, 1987 DYFS order reflects that the June 5, 1985 DYFS hearing was consolidated with the return date of Walter's custody complaint. Defendant's two attorneys, her DYFS-related (and court-appointed attorney) and her attorney in the custody case, appeared at that consolidated hearing. The resulting DYFS order provided that DYFS continue to pay for the mother's therapy and set the custody-visitation schedule which governed the parties' actions until the trial of the custody proceeding was complete.[9]
The record is thus replete with evidence that the disposition of the DYFS abuse and neglect complaint was dependent upon the disposition of the custody complaint. We cannot conclude that evidence clearly admissible in a DYFS proceeding, was inadmissible because DYFS had temporarily relinquished its adversarial role and that its admission was reversible error requiring a new custody hearing.
Moreover, even if their reports were not admissible as part of the DYFS file under R. 5:12-4(d), the CPC experts were appointed *505 by the court. R. 5:3-3[10] also governs the admissibility of such reports.
Whenever the court, in its discretion, concludes that disposition of an issue will be assisted by expert opinion, and whether or not the parties propose to offer or have offered their own experts' opinions, the court may order any person under its jurisdiction to be examined by a physician, psychiatrist, psychologist or other health or mental health professional designated by it and may appoint an accountant or other appropriate expert to appraise the value of any property or to report and recommend as to any other issue. The court may also direct who shall pay the cost of such examination or appraisal. The court may also require a social investigation by a probation officer or other person at any time during the proceeding before it.
Significantly R. 5:3-3 requires no particular party to produce the expert at trial, nor the court. The comment following this rule notes that "a court-appointed expert is subject to cross-examination by the parties...." Pressler, Current N.J. Court Rules, Comment R. 5:3-3 (1987).[11]
The use of court-ordered expert reports in family matters is well accepted. The Uniform Marriage and Divorce Act (UMDA) § 404(b) provides:
The court may seek the advice of professional personnel, whether or not employed by the court on a regular basis. The advice given shall be in writing and made available by the court to counsel upon request. Counsel may examine as a witness any professional personnel consulted by the court. [9A U.L.A. 156, 600 (1987)].
UMDA § 405 also provides for a court ordered investigation which may include diagnosis by professional personnel. A report is to be made available, including texts of diagnostic reports and the names and addresses of persons consulted and any party to the proceeding may call the investigator and any person whom he has consulted for cross-examination. The principle behind the admissibility of such expert reports, particularly *506 those kept by the State agency entrusted with the duty of child care has long governed our law. In the case of In re Cope, 106 N.J. Super. 336, 343 (App.Div. 1969), we said that it was impossible to expect DYFS (then the Bureau of Children's Services) workers "to give live testimony on all matters within their personal knowledge." We ruled that it then became "necessary to allow certain evidence to be produced in a hearsay form while seeking to give full protection to the rights of the parent." We further said:
Reports of this type, prepared by the qualified personnel of a state agency charged with the responsibility for overseeing the welfare of the children in the State, supply a reasonably high degree of reliability as to the accuracy of the facts contained therein. The parent remains free to offer evidence contradicting any statements present in such reports and, of course, the trier of the facts may in his discretion call for live testimony on any point. [Id. at 344] [Emphasis added.]
With regard to the probation report, R. 5:8-4 requires:
The written report of an investigation made pursuant to this rule shall be filed with the court, shall be furnished to the parties, and shall thereafter be filed in the office of the Chief Probation Officer. The report shall be regarded as confidential, except as otherwise provided by rule or by court order. The report shall be received as direct evidence of the facts contained therein which are within the personal knowledge of the probation officer who made the investigation and report, subject to cross-examination of him.
Defendant claims that the Probation Department investigator's report also included inadmissible hearsay which was not within her personal knowledge. No such objection was made at trial.[12] Moreover, the officer's requirement for "personal knowledge" has been interpreted by this court to be related to a requirement that the hearsay result from the officer's personal investigation. See Salmon v. Salmon, 88 N.J. Super. 291, 308 (App.Div. 1965).
The essence of the rationale behind hearsay inadmissibility is the absence of an opportunity for cross-examination. 5 Wigmore, Evidence (Chadbourn rev. 1974), § 1362 at 3. It is *507 generally accepted that "the unhappy recipient of an adverse investigation ... may be unable to have the whole report thrown out on the basis of inadmissible hearsay ... [but has] the option of calling into court a quoted witness to contradict the report or to explain comments allegedly made to the investigator." Viken, "Hearsay and the Child: What Role Does a Youngster's Word Have in a Custody Battle?", 10 Fam.Advoc. 41, 41 (1987). Cf. Dranoff and Cohen, "Psychiatrists, Psychologists, and Social Workers: Getting the Most Out of Experts," 10 Fam.Advoc. 20, 23 (1987).[13]
Defendant fails to specify the benefit that cross-examination would have provided concerning any of these witnesses. During the custody trial defendant was represented by counsel who subpoenaed a DYFS worker on November 16, 1987. Counsel was given the opportunity to question that worker on December 16, 1987, and elected to proffer the worker as defendant's witness on March 7, 1988. Our review of the court record which was not proffered by the parties but which is contained in the DYFS file shows that the CPC reports were available to defendant's court-appointed counsel for the April 10, 1987 DYFS hearing.[14] Her attorney in this proceeding must have been aware of these reports in connection with the June 5, 1987 consolidated custody and DYFS hearing at which she appeared. At no time during the custody trial did counsel specify an inability to subpoena these forensic experts or request their production.[15] Nothing in the record suggests that any challenged author of the CPC reports was unavailable to testify when two DYFS workers did testify.
*508 Defendant concedes that on December 16, 1987, she was specifically offered the right to examine the CPC experts if she chose when she was advised that the court considered the DYFS consultant's reports admissible. At that time the court also agreed to review the entire DYFS record with defense counsel so that a decision concerning whether to call the current DYFS worker, Kathy D'Antonio, as a witness could be properly informed. The trial did not end until June 1988 so there was ample opportunity to call these witnesses. Yet, following review of all of the challenged material, defendant's counsel elected not to call the authors of the CPC reports, but instead proffered defendant's expert witness, Dr. Lewis. We reject defendant's assertion that it was the obligation of plaintiff, or of the court, to produce the authors for cross-examination without being requested. R. 5:3-3; R. 5:8-4. Whether these reports were improperly relied on as the sole basis for the custody adjudication is another issue which we will consider separately.
Defendant also claims that the admission of the DYFS psychological evaluation reports and the Monmouth County Probation Report was in violation of the "best evidence rule." The "best evidence rule," Evid.R. 70, provides that "[a]s tending to prove the content of a writing, no evidence other than the original writing itself is admissible...." The reports in question were part of the DYFS file which was admitted into evidence. When Walter moved the DYFS psychological reports into evidence the judge acknowledged that they were copies. The DYFS social worker identified the original file which was admitted into evidence. There is no basis for a "best evidence rule" argument.
Defendant also claims the trial judge erred in admitting the testimony of Joyce Jacobs and William Ulrich. Joyce Jacobs conducted the investigation of Isobel's home for DYFS. She testified to conditions she personally observed. William Ulrich, a DYFS employee who was admittedly a long time *509 friend of plaintiff, testified to conditions he observed, including the presence of a loaded shotgun in the middle of the living room floor and to Charles' physical condition on the day Isobel spanked him.[16]
Evid.R. 7 states that except as otherwise provided in the rules of evidence or other law of New Jersey, "every person is qualified to be a witness ... no person is disqualified to testify to any matter ... [and] all relevant evidence is admissible." While defendant asserted that these witnesses were testifying from stale observation, and, in the case of Ulrich, from biased observation, such assertions affect the weight, not the admissibility of their testimony, subject to Evid.R. 4.[17]
Defendant next challenges the admission of photographs of Isobel's home taken by Walter, asserting that in taking the photographs, Walter violated her Fourth Amendment guarantee against illegal searches and seizures because Walter was a police officer. This argument is meritless. Taking photographs for use in a personal custody dispute is not State action. Clearly Walter did not take the photographs in his capacity as a police officer but rather as a father. See State v. Sanders, 185 N.J. Super. 258 (App.Div. 1982).
Isobel's other contentions with regard to preferential treatment given Walter as a pro se litigant are also without merit. At the trial, in response to some of these objections, the judge explained:
I take in everything that's appropriate, that I think [is] appropriate, to decide a custody case.... [H]e's not getting any benefit by being a pro se. I think I've yelled at him more times than I've yelled at anyone else.
* * * * * * * *
*510 These evidence rulings are my standard evidence rulings when it comes to a custody case.... Everything's in the record and I'm not going to get reversed because I excluded documents. That's not because one of the litigants is pro se.
Defendant asserts that Walter presented DYFS worker D'Antonio as his witness but that when she took the stand Walter stated that he had no questions to ask. She asserts Walter then proceeded to state the probation report recommendation "out of the blue." Our review persuades us D'Antonio was called to testify by the judge in order to identify the DYFS records. Walter rested his case based on the probation department recommendation that he receive custody.[18]
Isobel also asserts that when Walter was a witness, the judge acted as his counsel. We do not find this assertion accurate. The judge properly ruled on the questions requiring an answer. Evid.R. 4. The questions were either hypothetical or highlighted facts otherwise in evidence, particularly that Walter was married to his first wife when he fathered Charles with Isobel and also when he fathered a child (which miscarried) with his present wife.
Defendant next asserts that the trial judge erred by not considering Charles's preference to live with his mother when he concluded that Charles was bonded to his mother but that he was also bonded to his father. Although Charles had "expressed a desire" to the judge to live with his mother, the judge did not foresee that Charles would have a problem living with his father, based upon "the past experience of the prior transfer of custody which developed into a very progressive and affirmative situation for [Charles's] betterment."[19] Charles *511 was seven years old at the time of the trial. Our review of the record indicates that the child had made conflicting statements concerning his preference. In 1987 he appears to have expressed a preference to live with his father. Defendant's child psychology expert acknowledged that he had been ambivalent in his preferences.
A trial judge is not bound by a young child's preference to live with one parent over the other. The judge is only required to give "due weight to the child's preference." The preference is a factor which the judge should consider along with all of the other relevant factors. Lavene v. Lavene, 148 N.J. Super. at 271-272. In Lavene, the court acknowledged that a child of eight and one-half years "clearly lack[s] the maturity and judgment to make a dispositive statement of custodial preference...." Id. at 271.
Finally defendant asserts that the trial judge's decision was against the weight of the evidence. The trial court's factual findings based upon matters of credibility should not be disturbed unless they result in a denial of justice. Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-484 (1974). While the court's findings were detailed pursuant to R. 1:7-4, defendant asserts that the factual findings were uncorrelated to the relevant legal conclusions. Curtis v. Finneran, 83 N.J. 563, 570 (1980). Thus, defendant claims that the extent to which the decision rested upon stale and insubstantial evidence as well as hearsay is not clear.
We agree that much of the evidence was hearsay, although admissible. Much of the evidence was stale. Plaintiff relied upon Isobel's 1982 initial refusal to give up her dog, her 1986 failure to take parental part in getting Charles ready for school, the 1986 unlivable and dangerous condition of her home, her 1987 physical abuse. There were expert reports without expert *512 testimony; testimony from experts who did not evaluate all concerned, and expert opinions based upon limited contact. The judge did not differentiate respecting the evidence upon which he relied.
The leading case on custody is Matter of Baby M., 109 N.J. 396 (1988), there the Court said,
"[u]nder the Parentage Act the claims of the natural father and the natural mother are entitled to equal weight, i.e., one is not preferred over the other solely because he or she is the father or the mother. N.J.S.A. 9:17-40. The applicable rule given these circumstances is clear: the child's best interests determine custody.
* * * * * * * *
... The question of custody in this case, as in practically all cases, assumes the fitness of both parents, and no serious contention is made in this case that either is unfit. The issue here is which life would be better for [the child].... [Matter of Baby M, 109 N.J. at 453-454 (footnote omitted) (emphasis in the original)].
What is important is the parental track record. Id. at 456. UMDA, § 402 defines the relevant factors respecting custody best interest as follows:
(1) the wishes of the child's parent or parents as to his custody;
(2) the wishes of the child as to his custodian;[20]
(3) the interaction and interrelationship of the child with his parent or parents, his siblings, and any other person who may significantly affect the child's best interest;
(4) the child's adjustment to his home, school, and community; and
(5) the mental and physical health of all individuals involved.
The court shall not consider conduct of a proposed custodian that does not affect his relationship to the child. [9A U.L.A. at 561].
Defendant relies on the fact that the only two experts who testified urged that she remain the primary custodial parent. We do not find that assertion entirely accurate. Dr. Pauker and Kathy D'Antonio both gave an opinion that defendant was not a danger to her child and that there was no reason for the State to intervene between defendant and her child. Neither *513 expressed a preference between parents equally entitled to custody. While the CPC evaluations recommended that plaintiff retain emergency custody, no one contended that the CPC evaluation of either parent should govern after defendant demonstrated "a greater emotional capacity to successfully meet her son's needs." Defendant's forensic expert did give an opinion that defendant should be the primary custodial parent. His opinion was based upon a very limited contact with the parties, which the Family Part Judge was free to consider in evaluating its worth.[21]
Disregarding the challenged evidence in support of the judge's determination, there was undisputed evidence that the child's behavior as demonstrated by his school performance, particularly his social adjustment, had been improved while the child lived with his father. The judge also found that placing the child's primary residence with plaintiff would ensure safety, structure and a stable home life, "conducive to appropriate peer relationships" giving him "opportunity to socialize with very significant persons in his life." We find this factual conclusion supported in the record of credible evidence.[22]
The court's June 22, 1988 oral opinion provided that the child was to be in Isobel's custody during the month of July of 1988, to be transferred in August to Walter. He was then to be with her three out of four weekends from Friday at 6 to Sunday at 6. Walter was to have him the fourth weekend, but during that week the child was to be with Isobel on Wednesday evening from 6 to 9. On July 22, 1988, during the argument on Isobel's motion for a stay of the order, it was asserted that on July 18, 1988, Dr. Pauker had recommended that defendant *514 have continued custody, and that a Dr. Katz had also made such a recommendation.[23] During that interchange it was asserted that the final order had restricted defendant's August visitation to 1/2 a day. Walter also asserted that Isobel had filed a retaliatory complaint that Jane was sexually and physically abusing the child. Isobel's counsel asserted that DYFS had asked the child about sexual abuse.
The judge denied the stay and refused the proffer, saying,
[t]his case has been going on since the summer of 1986 when the Division of Youth and Family Services became involved in the case. The disputed custody issues arose in May of 1987. An investigation by the Probation Department followed and a full contested trial with many witnesses and voluminous testimony and opinions was presented to the Court on 12/16/87, 3/7/88, 3/28/88 and June 10th, 1988.
It is understandable that the judge, anxious for finality, and concerned that child have a stable school life in September 1988, rejected these late submissions. Nonetheless despite the extensive record, these late proffers raise questions about the long term appropriateness of the order.
Several factors in this case exacerbated the difficult problems normally attendant upon litigated custody. We begin with the fact that plaintiff, a pro se policeman, was familiar with the prior DYFS proceedings over previous years, having instigated them. Rightly or wrongly, he assumed that the records of those proceedings along with the Probation Department report would dispose of the issue. Accordingly, he subpoenaed only fact witnesses and rested on the record. Defendant's counsel, on the other hand, had not been involved in these earlier DYFS matters. Moreover, defendant was obliged to change counsel for medical reasons. Although the record is clear that defendant's counsel was aware of the DYFS record at least as early as June of 1987, defendant's present counsel appeared to be *515 surprised by much of plaintiff's evidence. It is inferable that defendant's counsel realized the need for expert testimony late in the protracted litigation. Defendant's belated proffer of this expert, virtually without notice, created an atmosphere of discovery rule violation. Moreover, that expert had so little time with mother and child that a credibility gap in his opinion was evident.
In some measure the judge appears to have relied upon the CPC reports. The judge relied upon the fact that the therapist took no position between parents. The judge relied on school records, apparently as current as the winter term of 1988, but plaintiff's later proffer of the entire 1987-1988 record was rejected.
We are now in the middle of the 1988-1989 winter term. Charles has been in a new school for the first semester under Walter's custody. The judge relied upon Walter's family stability and Charles' increased access to Carla, Walter's former wife. Most important he considered it likely that Walter's family would increase Charles' ability to experience normal activity with other children in a home and neighborhood setting, something the record makes clear he had never known, and something which may have been related to his peer difficulties at school. As we have noted those findings were justified by the evidence. On the other hand, the evidence proffered by Walter also suggested that his demands for Charles' perfection, combined with Charles' loss of his mother and grandmother could possibly be detrimental to Charles' overall emotional growth.[24]
The record makes clear that whatever the judge's school-related reasons for the custody change, no thought was devoted in July 1988 to the out-of-school advantages to Charles from *516 day to day living at his mother's farm, given that the health risks had been alleviated and that Charles' mother was trying to work with the therapist to improve her parenting skills.[25] While we are satisfied, therefore, that the judge's findings concerning Charles' living arrangements for the school year 1988-1989 were supported in the record, the evidence did not warrant the finality which the order was given. We are obliged therefore to remand the matter for a new hearing at the end of the 1988-1989 school year. Prior to such a hearing, all parties are to be evaluated by one therapist, who must be available to give testimony. The Probation Department is to make an updated investigation and the investigator made available to testify. Charles' 1988-1989 school records are to be made available to the court subject to such necessary production of witnesses as the court in its discretion directs. At this hearing the parties may challenge the prior CPC reports if the court continues to regard them as relevant. Otherwise the parties are not to duplicate evidence previously presented and the court should limit the testimony in the best interest of the child.[26] This will be best accomplished by a pre-trial conference to narrow factual disputes.
The order for custody is affirmed for the 1988-1989 school year. The residential custody terms respecting each parent following July 15, 1989, are to be ordered as a result of a new hearing based upon current information. Such a hearing must be completed by July 15, 1989.
SKILLMAN, J.A.D., dissenting.
I am unable to agree with the part of the majority's opinion which concludes that "an exception to the hearsay rule is made *517 for forensic reports in custody cases" (at 502). Furthermore, I am convinced that psychological reports which the trial court erroneously admitted into evidence played a significant role in its decision awarding custody of Charles to Walter.[1] Therefore, I dissent from the majority's affirmance of the trial court's custody order insofar as it relates to the 1988-1989 school year.[2]
Charles was born out of wedlock on August 15, 1980 and remained in the sole custody of Isobel until he was six years old. In August 1986, Walter lodged a complaint of child neglect against Isobel with the Division of Youth and Family Services (DYFS). The agency's investigation disclosed that Isobel's home was in a dirty and disheveled condition. Consequently, DYFS persuaded Isobel to allow Charles to stay with his father while she cleaned her house. Charles stayed with his father for a few weeks before being returned to Isobel. In February 1987, Walter complained to DYFS that Isobel had abused Charles by a spanking which resulted in extensive bruising of the child's buttocks. DYFS subsequently filed a complaint against Isobel for abuse and neglect, which resulted in Charles being placed in Walter's custody. Charles remained with his father from February 1987 until August 1987, when he was returned to Isobel's custody under DYFS supervision. According to Kathleen D'Antonio, the DYFS caseworker assigned to the case at the time of trial, DYFS found Isobel's care *518 of Charles subsequent to August 1987 to be satisfactory and planned to close its file in August 1988.
Thus, as of the date of the trial court's decision, Charles, then nearly eight years old, had been in the custody of Isobel for all but six months of his life. Furthermore, the agency responsible for his removal from Isobel for those six months had concluded that there was no need to continue supervising Isobel's custody of Charles. Nevertheless, the trial court concluded, based substantially on written reports of experts prepared fifteen months earlier, that custody should be transferred to Walter. In my view, this decision rests on a foundation of inadmissible hearsay and should be reversed outright rather than simply denied permanent effect.
Isobel presented the testimony of two experts to support her claim that she should retain custody of Charles. The first of these experts, Dr. Jordan Pauker, a licensed psychologist, became involved with the parties by a referral from DYFS at the time Charles was removed from Isobel's home and placed in Walter's custody. Dr. Pauker concluded that there was "no evidence or reason to feel that [Charles] should be removed from his mother's home." However, Dr. Pauker declined to express an opinion as to whether it would be more beneficial for Charles to reside with his mother than with his father. The second expert presented by Isobel, Dr. Michael Lewis, a professor of pediatrics and psychiatry at the Robert Woods Johnson Medical School and Chief of the Institute for the Study of Child Development, interviewed Isobel and Charles and reviewed the psychological reports prepared in connection with the case. Dr. Lewis stated that he would "rate [Isobel] on a very high category of good parenting" based upon the "time and energy that she spends ... attending to the child's interest and needs, being concerned about the child's development, psychologically as well as mentally." Dr. Lewis also expressed the opinion that Charles' "primary attachment and bonding" was to Isobel and his grandmother, now deceased. Therefore, Dr. Lewis concluded that the removal of Charles from Isobel's custody would be *519 "disruptive" and "potentially quite harmful for [his] development."
Walter did not present any expert testimony to dispute the conclusions reached by Drs. Pauker and Lewis. In addition to lay testimony, mostly provided by Walter's friends and relatives, regarding the conditions in Isobel's home, her lifestyle, and her treatment of Charles, Walter relied exclusively upon written reports of the Children's Psychiatric Center (CPC) and the probation department to support his claim for custody of Charles. The CPC report states that Isobel has "a moderate level of pathology in her overall personality structure"; that her "markedly deflated sense of self-worth and her expectancy of failure and humiliation constrain all efforts on her part to function without support"; and that "she often acts in a petulant and passively aggressive manner, occasionally attacking others capriciously for their lack of support." The report also states:
While test data does not strongly indicate that the potential for recurrent abuse is likely, there are clinical elevations which point out [Isobel's] depressive affect, rigidity in child-rearing, anger and bitterness towards [Charles'] father, and a struggle to constrain feelings of hostility and resentment. These factors coupled with [Isobel's] inability to recognize when she has administered too harsh of punishment to her son does not rule out potential abuse.
On the other hand, the CPC's evaluation of Walter states that "[b]ased on the conclusions generated from test material there are no indications that [Walter] suffers with underlying personality disturbance or would potentially provide maltreatment towards [Charles]." The CPC also reported that Charles stated "he didn't want to go back to live with his mother" and that "[i]n contrast, [Charles] states he likes living with his dad and [his wife], and being very happy at this home."[3] Based on these evaluations, the CPC report recommended that Charles "remain in his father's custody, at least temporarily, until *520 [Isobel] demonstrates a greater emotional capacity to successfully meet her son's needs."
In overruling Isobel's objection to the admission of the CPC reports, the court stated:
I'm going to see every document and consider every document. It's going to come in one way or the other. If I'm going to err, I'm going to err in letting things in and not excluding them.
If I have to decide custody of a child, everything is coming in.
Moreover, the trial court placed significant reliance upon the CPC reports in awarding residential custody of Charles to Walter. In discussing Walter's fitness to serve as custodial parent, the court stated:
Starting with the CPC psychiatric evaluations, plaintiff is found essentially to be a well functioning individual with no major personality disturbances. There are simply no underlying personality disorders disclosed by the various tests that have been administered.
And in concluding that Isobel was less capable than Walter to serve as custodial parent, the court stated:
On the negative side, respecting the defendant's position, starting with the CPC psychological or psychiatric report, she is described as being at times in emotional turmoil, periods of despondency leading to occasional irrational thinking, [and] periods of bizarre behavior.
The psychological evaluations of the parties and the recommendations as to custody of their son contained in the CPC reports constituted hearsay; that is, statements "offered to prove the truth of the matter stated ... made other than by a witness while testifying at the hearing." Evid.R. 63. Therefore, the reports were inadmissible unless shown to fall within an exception to the rule against hearsay. Ibid.
Our courts have recognized that reports containing the observations and opinions of experts may be admitted into evidence under some circumstances pursuant to the business records exception to the rule against hearsay, Evid.R. 63(13). See, e.g., State v. Martorelli, 136 N.J. Super. 449, 453-456 (App.Div. 1975) (blood test report); State v. McGeary, 129 N.J. Super. 219, 224-227 (App.Div. 1974) (certification of operability of breathalyzer); Webber v. McCormick, 63 N.J. Super. 409, 416 (App.Div. 1960) (X-ray report). However, "not all diagnostic findings are *521 admissible" as business records. State v. Martorelli, supra, 136 N.J. Super. at 454; cf. Clowes v. Terminix International, Inc., 109 N.J. 575, 599 (1988) (diagnosis of alcoholism in hospital record constituted hearsay which was incompetent to support such a diagnosis). The essential test of admissibility is "the degree of complexity of the procedures utilized in formulating the conclusions expressed in the ... report." State v. Matulewicz, 101 N.J. 27, 30 (1985). In determining the degree of complexity of an evaluation in an expert's report, a court should consider among other things "the relative degrees of objectivity and subjectivity involved in the procedure" and "the routine quality of each analysis." Ibid.
The psychological evaluations contained in the CPC reports are not in any sense routine or objective but rather involve difficult and sensitive subjective judgments. The evaluations are based in large part on interviews with the parties and Charles and the examiners' evaluations of their responses. Moreover, even the psychological tests administered to the parties involve a substantial degree of subjectivity in the interpretation of results. Therefore, the "degree of complexity" of these psychological evaluations precludes the admissibility of the CPC reports as business records. Rather, if Walter wished to have the opinions of the experts who prepared these reports considered, he should have been required to present their testimony. This would have afforded Isobel the opportunity to cross-examine these experts regarding the conditions under which their interviews were conducted, the factual bases for their opinions and the evaluative process which led them to conclude that Walter should be awarded custody of Charles. In addition, since the CPC reports do not indicate the educational backgrounds or experience of the persons who prepared them, live testimony by these persons would have provided an opportunity to determine their professional qualifications and compare them with the qualifications of the experts called by Isobel.
*522 As I read the majority's opinion, it implicitly acknowledges that psychological reports containing the kind of observations and opinions found in the CPC reports ordinarily would not be admissible under the New Jersey Rules of Evidence. However, the majority concludes that because this is a child custody case which is indirectly related to a child abuse proceeding previously initiated by the DYFS, the rules of evidence are modified by court rules and statutory provisions governing child abuse proceedings.
I do not read any of the authorities cited by the majority to modify the rules of evidence governing the admissibility of hearsay in connection with child custody cases. First, I am unable to reconcile the majority's expansive interpretation of R. 5:12-4(d) and R. 5:3-3 with the Supreme Court's firmly stated reluctance to modify the rules of evidence without legislative and gubernatorial participation pursuant to the procedures set forth in the Evidence Act of 1960. See State v. D.R. 109 N.J. 348, 371-377 (1988); Busik v. Levine, 63 N.J. 351, 367-368 (1973), appeal dism. sub. nom. Levine v. Busik, 414 U.S. 1106, 94 S.Ct. 831, 38 L.Ed.2d 733 (1973); cf. Ramos v. Community Coach, 229 N.J. Super. 452, 457 (App.Div. 1989) ("It is unlikely that the Supreme Court has the authority to render inadmissible under its rule-making power evidence that would be admissible under the Rules of Evidence."). Evidence Rule 63 prohibits the admission into evidence of hearsay, subject to the exceptions set forth in Rules 63(1) through 63(32). The rules of evidence do not authorize the adoption by court rule of further exceptions to the rule against hearsay. Therefore, rules of court dealing with the admissibility of evidence should be construed, if at all possible, in a manner consistent with the rules of evidence.
Rule 5:12-4(d) provides in pertinent part that:
The Division of Youth and Family Services shall be permitted to submit into evidence, pursuant to Evidence Rules 63(13) and 62(5), reports by staff personnel or professional consultants. [Emphasis added].
*523 The CPC reports were submitted to the court by a party to a private custody dispute, not by DYFS. Therefore, R. 5:12-4(d) is inapplicable. Moreover, even if the CPC reports had been offered by DYFS, R. 5:12-4(d) would not authorize their admission. Reports of professional consultants may be admitted under this rule only "pursuant to Evidence Rules 63(13) and 62(5)." Since the CPC reports are not admissible as business records pursuant to Evid.R. 63(13), they also are inadmissible under R. 5:12-4(d).
The majority also relies upon R. 5:3-3, which provided as follows at the time of trial:[4]
Whenever the court, in its discretion, concludes that disposition of an issue will be assisted by expert opinion, and whether or not the parties propose to offer or have offered their own experts' opinions, the court may order any person under its jurisdiction to be examined by a physician, psychiatrist, psychologist or other health or mental health professional designated by it and may appoint an accountant or other appropriate expert to appraise the value of any property or to report and recommend as to any other issue. ... The court may also require a social investigation by a probation officer or other person at any time during the proceeding before it. [Emphasis added].
The majority apparently reads the part of this rule providing for the submission of reports by court appointed psychologists or other mental health professionals as authorization for the admission of such reports into evidence at trial. However, the CPC reports were prepared at the request of DYFS and thus do not constitute reports by court appointed experts.
Moreover, R. 5:3-3 does not deal with the admissibility of evidence. It only authorizes the submission of reports to the court. Such reports are submitted before trial and often play a part in settlement negotiations and other pretrial dispute resolution procedures. Furthermore, an authorization for the submission of expert reports is not inconsistent with a requirement that experts be called to testify at trial if a party wishes to rely upon their opinions. See Wayne Tp. v. Kosoff, 73 N.J. 8, 15 *524 (1977). Indeed, any expert who a party expects to call as a witness may be required to submit a report stating "the subject matter on which the expert is expected to testify, ... the substance of the facts and opinions to which the expert is expected to testify and a summary of the grounds for each opinion." R. 4:10-2(d)(1). Therefore, there is no reason to read R. 5:3-3 as authorization for the admission into evidence of reports prepared by court appointed experts in family actions without the opportunity for cross-examination.
In addition, the majority relies upon N.J.S.A. 9:6-8.10a(b)(6). This statute authorizes DYFS to release records and reports to a court "upon its finding that access to such records may be necessary for determination of an issue before the court." But like R. 5:3-3, N.J.S.A. 9:6-8.10a(b)(6) does not deal with the admissibility of evidence at a trial. Rather, it provides an exception to the general rule established by N.J.S.A. 9:6-8.10a of confidentiality of DYFS records and reports. Therefore, N.J.S.A. 9:6-8.10a(b)(6) provides no support for the majority's conclusion that the trial court properly admitted the CPC reports into evidence.
Finally, the majority relies upon N.J.S.A. 9:6-8.46a(3) which states in pertinent part:
In any hearing under this act ... any writing... made as a memorandum or record of any condition, act, transaction, occurrence or event relating to a child in an abuse or neglect proceeding of any hospital or any other public or private institution or agency shall be admissible in evidence in proof of that condition, act, transaction, occurrence or event if the judge finds that it was made in the regular course of the business of any hospital or any other public or private institution or agency, and that it was in the regular course of such business to make it, at the time of the condition, act, transaction, occurrence or event, or within a reasonable time thereafter, ... [Emphasis added].
This statutory provision is inapplicable because this private custody action was not brought under N.J.S.A. 9:6-8.8 et seq., which only governs child abuse and neglect actions brought by DYFS.
Furthermore, even if N.J.S.A. 9:6-8.46a(3) were applicable, the CPC reports would still be inadmissible. The thrust of *525 N.J.S.A. 9:6-8.46a(3) and Evid.R. 63(13) are substantially the same. Both the statute and the evidence rule provide for the admission into evidence of business entries made in the ordinary course of business. N.J.S.A. 9:6-8.46a(3) does not expressly condition the admissibility of a business entry upon the showing required by Evid.R. 63(13) that "the sources of information from which [the business entry] was made and the method and circumstances of its preparation were such as to justify its admission." However, N.J.S.A. 9:6-8.46a(3) conditions admissibility upon a showing that the business entry was "made in the regular course of the business" and that "it was in the regular course of such business" to make the "memorandum or record" sought to be admitted. I read this language to condition admissibility upon a showing that a business entry is the kind regularly and routinely made by a hospital or other institution. Such routineness provides the same assurance of reliability as required for admissibility under the final clause of Evid.R. 63(13). See In re Guardianship of Cope, 106 N.J. Super. 336, 343 (App.Div. 1969); see also R.K. v. Dept. of Human Services, 215 N.J. Super. 342, 348 (App.Div. 1987). However, the subjective evaluations of the parties and the appropriate custodial arrangement for Charles contained in the CPC reports do not have such routineness as to warrant their admissibility under N.J.S.A. 9:6-8.46a(3).
As we have observed on a prior occasion, "[t]here are obviously few judicial tasks which involve the application of greater sensitivity, delicacy and discretion than the adjudication of child custody disputes, which result in greater impact on the lives of those affected by the adjudication, and which require a higher degree of attention to the properly considered views of professionals in other disciplines." Fehnel v. Fehnel, 186 N.J. Super. 209, 215 (App.Div. 1982). Therefore, "the parties must be afforded every reasonable opportunity to introduce expert witnesses whose evaluation of the family situation may assist the judge in determining what is best for the children." Ibid. *526 However, the desirability of obtaining expert opinions in child custody cases does not mean that a party should be permitted to introduce such opinions by written reports, thereby depriving the other party of the opportunity for cross-examination and also depriving the court of the opportunity to evaluate the expert's credibility. To the contrary, the importance and sensitivity of child custody decisions, the significance of expert opinions in reaching such decisions and the inevitable elements of subjectivity in experts' recommendations as to custody, all underscore the need for strict adherence to the rules of evidence adopted to assure the fairness and reliability of the fact finding process at trial.[5]
Accordingly, I dissent from the part of the majority's opinion which affirms the trial court's order of custody insofar as it relates to the 1988-1989 school year. However, I concur in the part of the majority's opinion which remands the matter for a new hearing with respect to the residential custody of Charles after July 15, 1989. Moreover, in view of the potential negative effect upon Charles of any change in his schedule during the middle of a school year, I concur in the majority's decision that the existing custody arrangements should be continued until the hearing on remand is completed.
NOTES
[1] The names of the parties have been changed to protect the child's anonymity.
[2] This marriage was terminated by divorce in 1987. Walter then married Jane. Charles is the only child of either Walter or Isobel. Isobel has not married.
[3] According to the subsequent DYFS complaint, on February 11, 1987, Charles' school principal telephoned DYFS that Charles was often late and got angry in school. He said Charles had given another boy a kiss in school and had asked for a note to his mother to pay more attention to him.
[4] He then returned to Isobel's house under the supervision of DYFS.
[5] While defendant contends on appeal that she objected to the admissibility of the Probation Department report of its investigation, and at trial she did refer to the rule concerning the admissibility of such reports, R. 5:8-4, her objection was to the admissibility of the CPC reports, to which she later conceded R. 5:8-4 did not apply.
[6] The testimony was later confirmed by admissible evidence and the judge specifically noted that his determination would not be based on this hearsay. The error was, accordingly, harmless.
[7] Defendant also objected to the admissibility of a videotape of Cernak's interview with the child. Although the tape was admitted, we see no evidence that the judge was influenced by it. Our review of the record persuades us that its objectionable content duplicated admissible evidence. To the extent that its admission was error, that error was also, therefore, harmless.
[8] Although Isobel contended the CPC reports were not admissible, it is arguable that she waived any hearsay limitation. Isobel signed a release acknowledging that any agency could release information to DYFS and providing that "when children are in substitute care through DYFS, information regarding the child's placement is shared with the Family Court and the Child Placement Review Board."
[9] If there was a separate interim custody order, it is not a part of either the DYFS record or the record on appeal.
[10] Effective January 2, 1989, the relevant part of R. 5:3-3 was redesignated as R. 5:3-3(a). That part of the rule respecting economic experts is now in R. 5:3-3(b).
[11] See also Fed.R.Evid. 706(a) which provides,
... A witness so appointed [by the court] shall advise the parties of his findings, if any; his deposition may be taken by any party; and he may be called to testify by the court or any party. He shall be subject to cross-examination by each party, including a party calling him as a witness.
[12] A majority of the witnesses interviewed by the investigator actually testified.
[13] Family Advocate is a publication of the American Bar Association entitled, "A Practical Journal of the Family Law Section."
[14] The original record on appeal failed to contain the DYFS record, including the CPC reports. We requested it and have reviewed its contents, as well as the photographs in evidence.
[15] One of the CPC offices is within walking distance from the court house.
[16] The record is replete with evidence of Charles' exposure to firearms including an early incident when he swallowed bullets.
[17] Defendant's objection to Jacobs' testimony was based upon her assertion that Jacobs' name did not appear in the DYFS record.
[18] Defendant does not explain why D'Antonio was subpoenaed by her to appear on November 17 (DYFS file). She was not then questioned and cross-examined. Defendant later examined D'Antonio.
[19] We have no explanation of why no record was made of this interview. See R. 5:3-2 providing for a verbatim record of in camera proceedings and Lavene v. Lavene, 148 N.J. Super. 267, 272 n. 1 (App.Div. 1977), certif. den. 75 N.J. 28 (1977).
[20] Cases construing a requirement that the court consider the wishes of the child emphasize the age of the child as relevant. See UMDA § 402, 9A U.L.A. at 568-569.
[21] On the last day of trial, March 28, 1988, defendant's counsel did not seek updated psychological evaluations of the parties but merely asked the court to interview the child.
[22] In her testimony Isobel admitted many of the assertions Walter made and which recurred in the DYFS reports respecting Charles' contact with his peers, his inappropriate living arrangements, and her inappropriate conduct.
[23] Apparently Dr. Katz's report (not in the record) recommended custody in defendant with treatment and DYFS supervision.
[24] The record is replete with evidence that up until August of 1986, Charles' evening meals and his housekeeping environment had been the province of his grandmother, whose illness, culminating in her 1988 death during trial, was devasting to him, and accounted for much of Isobel's difficulties.
[25] In 1987, when Charles lived with Walter, but spent afternoons at Isobel's, the record indicated that his peer interaction did not suffer.
[26] We leave to the judge's discretion the extent of his interview with the child. From that interview, however, a record must be made.
[1] I have used the same fictitious names as the majority to refer to the parties and their child.
[2] Isobel also argues that the report of the Monmouth County Probation Department was inadmissible hearsay. However, Isobel waived whatever objection she might have had to the admission of this report by not raising the objection before the trial court. In re Petagno, 24 N.J. Misc. 279, 48 A.2d 909, 913 (Chan. 1946). Therefore, Isobel's arguments relating to the admissibility of the probation report are not discussed in this opinion. I would reject Isobel's other arguments substantially for the reasons expressed in the majority opinion.
[3] Significantly, every other expert who interviewed Charles reported that he expressed a preference to remain in his mother's custody. Charles also expressed this preference in an interview with the trial judge.
[4] As noted by the majority (at 505, n. 10), this rule was subsequently amended.
[5] Since the admissibility of the CPC reports must be determined under the New Jersey Rules of Evidence adopted pursuant to the procedures set forth in the Evidence Act of 1960, this appeal can be decided without consideration of decisions in other jurisdictions interpreting different evidence rules. However, I note that courts in other jurisdictions have generally refused to admit expert reports, including reports of court appointed experts, in child custody actions, unless the experts preparing the reports are called to testify. See, e.g., Denningham v. Denningham, 49 Md. App. 328, 431 A.2d 755 (1981); In re Swan, 173 Mont. 311, 567 P.2d 898 (1977); Ponzini v. Ponzini, 135 Misc.2d 468, 515 N.Y.S.2d 974 (Fam.Ct. 1987); Fuhrman v. Fuhrman, 254 N.W.2d 97 (N.D. 1977); Malone v. Malone, 591 P.2d 296 (Okla. 1979); Coble v. Coble, 323 Pa.Super. 445, 470 A.2d 1002 (1984). Contra Sabol v. Sabol, 624 P.2d 1378, 1381-1383 (Ha.Ct.App. 1981). See, generally, Annotation, Right, In Child Custody Proceedings, To Cross-Examine Investigating Officer Whose Report Is Used by Court In Its Decision, 59 A.L.R.3d 1337 (1974). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550891/ | 114 F.2d 288 (1940)
UNIVERSITY CITY, MO.,
v.
HOME FIRE & MARINE INS. CO.
SAME
v.
WESTERN FIRE INS. CO.
Nos. 11691, 11692.
Circuit Court of Appeals, Eighth Circuit.
August 23, 1940.
As Modified on Denial of Rehearing September 21, 1940.
*289 *290 *291 Marvin E. Boisseau, of St. Louis, Mo. (John W. Calhoun, of St. Louis, Mo., on the brief), for appellant.
Web A. Welker, of St. Louis, Mo. (Joseph H. Grand, James C. Jones, Jr., and Jones, Hocker, Gladney & Grand, all of St. Louis, Mo., on the brief), for appellees.
Before WOODROUGH and THOMAS, Circuit Judges, and BELL, District Judge.
THOMAS, Circuit Judge.
The plaintiff appeals from judgments for defendants entered in two suits upon fire insurance policies issued by the defendant companies. The issues were the same in both cases. By stipulation of the parties approved by the court it was agreed that the result in the suit against the Home Fire Insurance Company should abide the verdict in the trial of the case against The Western Fire Insurance Company. By a further stipulation both cases are presented here upon the same record. Accordingly, both appeals may properly be disposed of in one opinion.
The plaintiff's petition alleges that it is a municipal corporation organized under the laws of the state of Missouri; that on October 25, 1935, the defendant The Western Fire Insurance Company issued to plaintiff its policy of insurance whereby it agreed to insure plaintiff for a term of three years against all direct loss or damage by fire to a fireproof building owned by plaintiff, located on the north side of Delmar Boulevard, between Trinity Avenue on the west, and Oberlin (now known as Harvard) Avenue on the east, to an amount not exceeding $7,500; that on April 29, 1938, while the policy was in full force and effect, a fire occurred in the building insured by and described in the policy; that the building was damaged in an amount greatly in excess of the face of the policy; and that notwithstanding plaintiff's compliance with all the terms of the policy, the defendant has failed and refused to pay the amount of the policy and has denied that it is indebted to plaintiff in any amount whatsoever. A copy of the policy was attached to and made a part of the petition. The prayer is for judgment for the face amount of the policy, damages for vexatious refusal to pay, and for a reasonable attorney's fee.
The defendant's answer admits that it issued a fire insurance policy on "a fireproof building owned by plaintiff"; admits that Exhibit A, filed with plaintiff's petition, is a true and correct copy of the policy; admits that plaintiff notified it of a fire in a building owned by plaintiff; and admits that it has refused to pay plaintiff the amount of the policy. The defendant denies specifically that its policy insured plaintiff against all direct loss by fire to a fireproof building owned by plaintiff, located on the north side of Delmar Boulevard between Trinity Avenue on the west and Oberlin (now known as Harvard) Avenue on the east; denies that a fire occurred in the building insured by defendant; and denies that its refusal to pay is vexatious.
Pleading further the defendant alleges "That on or about the 29th day of April, 1938, a fire occurred in a building owned by plaintiff and situated on the west side of Oberlin Avenue, in the rear of the property mentioned and described in the policy of insurance issued by defendant to plaintiff and that said building was not covered by the aforementioned policy of insurance, and that defendant is not liable to plaintiff for and on account of any fire loss sustained by plaintiff on account of said fire in said building."
The policy attached to the petition provides for insurance
"On the fireproof building, located north side of Delmar Blvd. between Trinity & Oberlin Ave., known as 6801 Delmar Blvd., University City, Mo.
"This policy covers said building, including its attached platforms, including foundations, plumbing, electrical wiring and stationary heating, lighting, refrigerating and ventilating apparatus and fixtures, attached signs; stacks and awnings (covered under fire policies only), door and window screens, storm doors and windows; also all permanent fixtures, stationary scales, elevators and machinery therefor, all contained therein or thereon, and all while belonging to and constituting a part of said building."
The single issue raised by the pleadings is whether the fire occurred in the building *292 described in the policy. The facts relative to the physical characteristics and use of the property owned by the plaintiff were introduced in evidence by both parties and are not in dispute in any particular. They are as follows:
The plaintiff municipality owns a block of land containing about four acres lying north of Delmar Boulevard and west of Oberlin, now called Harvard, Avenue, in University City, Missouri. It is bounded on the west and north by Trinity Avenue, which runs in a curve, giving the block the shape of a half moon, or the segment of a circle.
The somewhat peculiar design of the structure on this block gives rise to the dispute between the parties. It was constructed as one unit in 1903 by a publishing concern. The south portion, or that part standing directly adjacent to Delmar Boulevard, is octagonal in shape and rises five stories above the basement. The north portion is rectangular in shape, about 100 feet wide by 250 feet long. It is three stories high at its southern end, and drops to two stories and then to one story at its northern end. These two parts of the structure are connected by a corridor about 12 feet wide and 50 feet long. A pipe tunnel from the boiler room at the extreme north end of the rectangular portion of the structure runs under the rectangular part and the corridor portion and opens into the basement under the octagonal portion. The latter section is on higher ground than the connecting corridor and rectangular section. The first floor of the corridor connects the basement of the octagonal portion with the first floor of the rectangular portion of the structure. An open walk-way overhead the corridor permits access between the first floor of the octagonal portion and the second floor of the rectangular part.
The entire structure is fireproof. It was erected at one time upon one continuous foundation. The outside walls are brick and ornamented terra cotta, are integral and present the same architectural design or barricade treatment throughout the entire unit. All parts of the structure receive heat from a stationary heating plant located in the one-story section at the north end of the rectangular portion. The stack or chimney rises above the boiler room at that end of the structure. At one time it also housed the dynamos used in operating the elevators in the building. The whole structure has always been known as 6801 Delmar Boulevard, and mail has always been addressed to all the occupants at that number.
The whole property was originally used by the publishing concern. The south portion was used for offices and editorial rooms and the north portion for machinery and the mechanical requirements of the printing business. When built, the only public entrances to the building opened into the octagonal section, one off the corner of Delmar and Harvard (Oberlin) and one off the corner of Delmar and Trinity. An employees' entrance opened off Harvard (Oberlin) Avenue into the pressroom and a driveway at the extreme north end was used by vehicles hauling paper and coal to the building.
The plaintiff purchased the premises in 1930 and made certain alterations in it to adapt it to the uses of the city. The first four floors of the octagonal section are used for offices by certain departments of the city government. The fifth floor is leased to a tenant. The city health and sanitary, police and fire departments are housed in the south end of the rectangular section adjacent to the octagonal section. The north end of the rectangular section is leased to and occupied by the Orcutt Storage Company. A platform for the use of the Orcutt Company has been added to this section from which a walk runs to Harvard (Oberlin) Avenue. The city has also constructed a double garage between the two sections of the structure which is connected to the Arcade passageway on the east side. Cement driveways have been constructed from Harvard Avenue to the garage and to the part occupied by the police and fire departments.
The fire resulting in the loss for which recovery is sought occurred on or about April 29, 1938, in that part of the rectangular portion occupied by the Orcutt Company. The defendants denied liability on the ground that their policies covered only the octagonal portion of the structure.
In seeking a reversal of the judgments entered upon the verdict of the jury the plaintiff relies mainly upon two contentions: (1) that the court erred in admitting in evidence certain exhibits, and (2) that he erred in refusing to instruct a verdict in plaintiff's favor. Other minor matters are argued in the briefs, but they are all resolved by a determination of these two leading contentions.
*293 1. Admission of exhibits. In order to bring into relief the questions arising in reference to the admission of exhibits, it is necessary to advert to the proceedings at the trial. The plaintiff attempted to show by the testimony of one Gantner, the insurance agent who procured the policies for the city, that he had been directed by the city council to obtain insurance on the structures as a unit and that he had so instructed the insurance brokerage firm with which he dealt and which issued the policies. His testimony was properly excluded on defendant's objection. Thereupon, the plaintiff having rested, the defendant offered in evidence exhibits 9, 10, 11, 12, 13, and 15, the nature of which will be explained later, and they were upon objection of counsel for plaintiff rejected. Both parties then rested, and because of illness of counsel the further trial of the case was adjourned for two days.
When the trial was resumed, upon application of counsel for defendant, the case was reopened, and the defendant renewed its offer of the above-numbered exhibits. They were objected to by counsel for plaintiff on the ground that "they purport to be policies of insurance in different companies than those the case is for; second, that they are expired before these policies were taken out, they are absolutely irrelevant and immaterial."
Thereupon the court, addressing counsel for the defendant, said: "Well, in connection with that, are you willing to withdraw your objection to plaintiff's testimony that was excluded on your objection, to the effect that you were requested to insure a group of buildings, the group of buildings of University City? If you are willing to withdraw your objection to that, I will overrule the objection to the introduction of these exhibits." To which counsel for defendant replied: "Yes, I will withdraw my objection." When it appeared that the plaintiff's witness Gantner was not present, counsel for defendant announced that he would concede that "he (the absent witness) will testify as to whatever they will state he will testify to."
Upon further objection to the offer of the exhibits by counsel for plaintiff on the additional grounds that the old policies were with the mortgagee and there was no showing that the city officials had ever seen them; that they were written by a different agency; and that it was not shown that the descriptions in the policies were ever brought to the attention of the city officials, the court said: "I think it is competent, in view of the evidence that the plaintiff has offered. It has offered evidence tending to show that the officers of the City always regarded the building as [at] 6801 as including the entire group of buildings, and the fact, if it is a fact, that theretofore the City had insured those buildings as separate buildings is, in some way, a response and in reply to the position taken by the plaintiff, and so, in view of the fact that the defendant has withdrawn its objection to certain evidence tendered by the plaintiff, we think that these two exhibits (12 and 13) are competent, and we overrule plaintiff's objection to them."
Exhibits 9, 10 and 11, are memoranda of expired policies of insurance taken from the files of an insurance broker, and, in so far as here material, are identical. They purport to insure separately and in different amounts, "the five story, fireproof building located on the No. Side of Delmar, bet. Harvard & Trinity, Block 4, Sub-div. 1, known & numbered as 6801 Delmar, University City, Missouri", and "the one, two and three story, fireproof buildings on rear of above described premises, together with fireproof tunnel or passage, connecting with front building." Exhibits 12 and 13 are memoranda from the files of the F. D. Hirschberg Company, another insurance agency. Exhibit 12 refers to a policy which purported to insure "the fireproof constructed building, situated North side of Delmar Avenue, between Oberlin and Trinity Avenues." Exhibit 13 refers to another policy purporting to insure "the fireproof constructed building, situated West side of Oberlin Avenue, in rear of City Hall Building". All of the policies referred to in these exhibits were issued in 1932 by companies not parties to this suit, and they expired in 1935. Exhibit 15 is a copy of a letter written in 1932 by the F. D. Hirschberg Agency to the mortgagee of the property owned by plaintiff informing the mortgagee of the expiration in 1932 of certain policies of insurance written by companies not parties to this suit. The policies are not in this record but are referred to in the letter as being "on the building, west side of Harvard in rear of Magazine Building" and "on the building, north side of Delmar Boulevard, between Harvard and Trinity Avenues."
These exhibits could have been admissible only for one or both of the following *294 reasons: (1) for the reason that they were relevant to the issue and would aid the court in construing the language of the policies, or (2) because the policies in suit are ambiguous as a matter of law making the exhibits competent as evidence of the intent of the parties.
It will be noted that no evidence was admitted to show whether the officers of the city regarded the structure as comprising one or more buildings; and expert testimony offered by the plaintiff to show that the structure constituted but one building was upon objection of counsel for defendant rejected. Obviously how the city officers regarded the building was entirely irrelevant to the question of the meaning of the written contract. Testimony to the effect that the entire unit had always been known as 6801 Delmar Boulevard and by no other number, and that mail had always been directed to all the occupants of the premises at that address, is a different matter.
It will be noted further that the policies in suit are not renewal policies. The defendant companies had no connection with the former insurance on the property. The policies were issued by different companies and through different agencies. So far as it appears in the record the defendants had no knowledge of the expired policies, and neither the defendants nor their agents had seen the old policies nor the exhibits at the time the policies sued on were issued. There is no evidence to support an inference that the defendants at the time the policies in suit were issued in any way relied upon any information disclosed by these exhibits; and there is no similarity between the description in the policies in suit and the descriptions in the exhibits to support the contention that the defendants understood that they were replacing insurance upon only one section of the structure, or that the policies were issued to replace other insurance at all.
Without a showing that the exhibits bear some relation to the contracts in suit they were clearly inadmissible. Generally, the rule is as follows: "Evidence of other agreements than the one involved in the particular issue is as a general rule inadmissible, unless the contract in suit was made with reference thereto, or forms a part thereof, or unless it forms a relevant part of the circumstances leading up to and surrounding such contract, or has been referred to to fix the terms of the contract in suit, or tends to show the presence or absence of a consideration, or that the contract in issue was not made. Neither is evidence of a similar contract previously made admissible to prove the terms of the contract in suit; and evidence of subsequent contracts with other parties is irrelevant. So, where the contract in question supersedes another, the original contract is properly excluded. * * * evidence as to the usual terms of contracts such as the one in issue is inadmissible in the absence of any showing that the parties contracted with reference to such terms. * * * Transactions with a third person are not admissible to prove the terms of a contract." 17 C.J.S., Contracts, §§ 592, 593, pages 1237, 1239; see, also, 13 C.J. 528.
None of the circumstances noted above have been shown to justify the admission of the expired policies and we have been unable to find any authority tending to uphold it. None is cited in defendants' brief. Such authority as we have been able to find holds to the contrary. Corporation of Roman Catholic Church v. Royal Ins. Co., 158 La. 601, 104 So. 383; Still v. Connecticut Fire Ins. Co., 185 Mo.App. 550, 172 S.W. 625, 627; Arlington Mfg. Co. v. Norwich Union Fire Ins. Co., 2 Cir., 107 F. 662, 665; Westinghouse Electric Co. v. Western Assur. Co. of Toronto, 42 La.Ann. 28, 7 So. 73, 74.
In Corporation of Roman Catholic Church v. Royal Ins. Co., supra, the court said [158 La. 601, 104 So. 384]: "The use of the words `day school' in the policy, and the fact that one of plaintiff's buildings was used exclusively for a day school, is the ground upon which defendant's contention rests as to the identity of the particular building insured. Defendant offered certain expired policies of insurance to show that, prior to the issuance of the policy sued upon, plaintiff had insured the day school but had not insured the convent. The offerings were excluded by the trial judge, and we think his ruling was correct. Each policy is an independent contract. What particular property may have been covered by an expired policy is not proof of the intention of the parties in the confection of a new policy, and it can be of no avail in interpreting the provisions of a subsequently issued and differently written contract."
Clearly, these exhibits were not relevant and should not have been admitted to aid the court in construing the policies.
*295 The defendants contend, however, that the error, if such, in admitting the exhibits was harmless. Rule 61 of the Rules of Civil Procedure for District Courts, 28 U.S.C.A. following section 723c, provides: "No error in either the admission or the exclusion of evidence * * * is ground for granting a new trial or for setting aside a verdict or for vacating, modifying, or otherwise disturbing a judgment or order, unless refusal to take such action appears to the court inconsistent with substantial justice." This rule is intended for the guidance of the district court, but it should be heeded by the appellate court to make it effective.
Section 391, Title 28 U.S.C.A., Judicial Code § 269, provides that "On the hearing of any appeal * * * in any case, civil or criminal, the court shall give judgment after an examination of the entire record before the court, without regard to technical errors, defects, or exceptions which do not affect the substantial rights of the parties." This section of the statute was included in the Act of February 26, 1919, 40 Stat. 1181. Speaking of the purpose of the statute, the Supreme Court said in Bruno v. United States, 308 U.S. 287, 294, 60 S. Ct. 198, 200, 84 L. Ed. 257, that "that Act was intended to prevent matters concerned with the mere etiquette of trials and with the formalities and minutiae of procedure from touching the merits of a verdict." Neither this statute nor Rule 61, supra, were intended to deprive a litigant of a substantial right in the trial of a case, civil or criminal. Whether or not a substantial right is invaded by the admission of irrelevant and incompetent evidence must depend upon the circumstances of each case. In this instance it so happened that the incompetent evidence was given great prominence upon the trial. It was given an emphasis before the jury altogether out of proportion to its merits. It was excluded when it was first offered and nearly two days later the case was reopened and its admission reconsidered. As the trial worked out the evidence was highly prejudicial.
It will be better economy of space in drafting this opinion to discuss the admissibility of the exhibits on the alleged ground that the description of the insured property in the policies is ambiguous in connection with the discussion of the ruling on the plaintiff's motion for an instructed verdict.
2. The motion to instruct a verdict for plaintiff. The plaintiff excepted to the refusal of the court to instruct a verdict in its favor on the ground that the language of the policy is capable of being so construed as to cover the property damaged by fire. The court submitted the case to the jury, instructing them that "If the language of the policy in question relating to the property which it attempts to insure is of an ambiguous or doubtful meaning, then the law requires such doubts, if any, to be resolved against the defendant, and further requires the policy in such event to be construed in favor of the plaintiff * * * and if * * * you find * * * that there is an ambiguity as to the property to which the policy applied, and if you find further that the policy is reasonably capable of being construed as describing the property damaged by the fire, then you must find in favor of the plaintiff on such issue, and this is true even though you may further find * * * that the defendant did not intend to insure such portion of plaintiff's property."
The plaintiff does not criticize the rule of law stated in the instruction. Its contentions are (a) that the construction of the policy was a question of law for the court and that the court erred in submitting the question of ambiguity to the jury and (b) that the policy is as a matter of law reasonably capable of being construed to cover the damaged property and that the court should have so held.
The law and the policy must be examined to determine the validity of these contentions. It is obvious that either the policy does adequately describe the entire structure including the portion damaged by fire or that the description of the insured property is ambiguous. Ambiguities in written instruments are of two kinds. They are either patent or latent. A patent ambiguity is one arising upon the face of the instrument without reference to the described object while a latent ambiguity is one developed by extrinsic evidence, where the particular words, in themselves clear, apply equally well to two different objects. Wolff Truck Frame Co. v. American Steel Foundries, 7 Cir., 195 F. 940, 944; Graham v. National Surety Co., 8 Cir., 244 F. 914; St. Paul Fire & Marine Ins. Co. v. Balfour, 9 Cir., 168 F. 212, 216. A latent ambiguity may be one in which the description of the property is clear upon the *296 face of the instrument, but it turns out that there is more than one estate to which the description applies; or it may be one where the property is imperfectly or in some respects erroneously described, so as not to refer with precision to any particular object. Patch v. White, 117 U.S. 210, 217, 6 S. Ct. 617, 29 L. Ed. 860; Queen Ins. Co. of America v. Meyer Milling Co., 8 Cir., 43 F.2d 885. If such an ambiguity develops, extrinsic evidence is admissible to show the real intent of the parties. Queen Ins. Co. of America v. Meyer Milling Co., supra.
Unless the extrinsic facts upon which the existence of a latent ambiguity is dependent are in dispute, the question of whether a contract is ambiguous is a matter of law for the court. Where the facts are not in dispute the application of the description of the property to the subject matter of the contract is the duty of the court. Hurin v. Electric Vacuum Cleaner Co., 6 Cir., 298 F. 76; East & West Ins. Co. of New Haven, Conn. v. Fidel, 10 Cir., 49 F.2d 35, 38; Cameron Mill & Elevator Co. v. Chas. F. Orthwein's Sons, 5 Cir., 120 F. 463; Arlington Mfg. Co. v. Norwich Union Fire Ins. Co., 2 Cir., 107 F. 662; Wright v. Ætna Life Ins. Co., 3 Cir., 10 F.2d 281, 46 A.L.R. 225; Gersten v. Western Assur. Co., 265 Mich. 122, 251 N.W. 310; Peony Park v. Security Ins. Co. of New Haven, Conn., Neb., 289 N.W. 848; see, also, Keyes Farm & Dairy Co. v. Prindle, 249 Mo. 600, 155 S.W. 391, 393; Cowell v. Employers' Indemnity Corp., 326 Mo. 1103, 34 S.W.2d 705; Ross v. St. Louis Dairy Co., 339 Mo. 982, 98 S.W.2d 717; Roach-Manigan Paving Co. v. Southwestern Surety Ins. Co., Mo.Sup., 238 S.W. 119; State ex rel. v. Allen, 305 Mo. 607, 267 S.W. 379. The court must determine whether the language of the contract aptly reads upon its subject matter or whether it is latently ambiguous. This question must first be determined by the court in order to determine the necessity for parole evidence of intent and the submission of the disputed issues of fact to the jury. Queen Ins. Co. of America v. Meyer Milling Co., supra. In determining the issue of ambiguity the court was entitled to consider only the terms of the policy in relation to the undisputed facts relative to the physical characteristics of the property which it was contended was within its scope. It was the court's problem to read the description in the policy, ignoring none of its terms, upon the subject matter of the insurance and to determine whether, when so read, the description with reasonable aptness designated the structure as a whole or whether, when so construed, it was doubtful whether the damaged property was included. In considering this problem the court was required to give the terms of the description their usual and ordinary meaning and to consider the undisputed physical facts relating to the design, construction and location of the property. Ries v. Dodson, 3 Cir., 46 F.2d 68; Hurin v. Electric Vacuum Cleaner Co., supra; F. W. Woolworth Co. v. Petersen, 10 Cir., 78 F.2d 47; Corbett v. Winston Elkhorn Coal Co., 6 Cir., 296 F. 577. When this is done, we do not think a latent ambiguity can be said to exist as a matter of law.
The description in the policy clearly reads upon the improvement as a unit when the language is given its usual and ordinary meaning. A "building" is defined as "a fabric or edifice, framed or constructed, designed to stand more or less permanently and covering a space of land for use as a dwelling, storehouse, a factory, shelter", etc. Webster's New International Dictionary; Great Eastern Casualty Co. v. Blackwelder, 21 Ga.App. 586, 94 S.E. 843. The term is not confined to structures of any particular size or shape. When it becomes material to determine whether or not one or more than one building is involved the question must depend, in so far as matters of interpretation are concerned, upon the physical characteristics of the structure. Here the evidence is undisputed that it was erected at one time, upon one continuous foundation, designed to present an identical style of architecture throughout, and that the whole improvement is fireproof and connected as an integral unit. It was treated as a unit in respect to servicing it with heat, light and water. So far as matters of use are concerned, practically the entire building was devoted to the purposes of the city government and used as a unit. The fact that the city did not require the use of the entire structure and leased a part of one section to the Orcutt Company can have no particular bearing under the issues in this case. The entire property was known as 6801 Delmar Boulevard. The description in the policy, therefore, aptly reads upon the property as a whole. When so read every word in the description is given coherence and force.
*297 On the other hand, if we attempt to apply the description to the octagonal part only, we are at once met by inconsistencies. The statement that "This policy covers said building, including its attached platforms, * * * plumbing * * * stationary heating, * * * stacks * * elevators and machinery therefor * * * all while belonging to and constituting a part of said building" has in no reasonable sense any application to the octagonal section considered as a separate building. The stationary heating plant, the stack, and the only platform connected to the structure are all a part of the rectangular section. The electric generators, once used to operate the elevators, are located in the rectangular part and are now used to operate a search light at the top of the octagonal section. The plumbing or water pipes come into the structure at the boiler room on the north end and extend to the various portions of the structure through the service tunnel underlying it. Upon the hypothesis that there are two buildings the language of the policy obviously applies to the rectangular "building" only. Further, the entire property and not solely the rectangular portion thereof is known as 6801 Delmar Boulevard. Thus it is only when the structure is considered as an architectural whole, and not as two separate buildings, that all the language of the policy has meaning and can be given effect; and when so considered the description is apt and clear.
In these circumstances it cannot be said that a latent ambiguity may be inferred from a consideration of the subject matter of the policy. The description contained therein does not apply equally well to two different objects. Further, an insurance company should not be permitted to claim ambiguity solely because of an irregularity of design or contour upon undisputed facts showing an integral structure described in the policy as a "building". The general rule is that an insurance contract on a "building" covers all the inseparable and constituent parts thereof. East & West Ins. Co. of New Haven, Conn. v. Fidel, 10 Cir., 49 F.2d 35, 39; Pettit v. State Ins. Co., 41 Minn. 299, 43 N.W. 378; Gross v. Milwaukee Mechanics Ins. Co., 92 Wis. 656, 66 N.W. 712; Still v. Connecticut Fire Ins. Co., 185 Mo.App. 550, 172 S.W. 625; Prussian Nat. Ins. Co. v. Terrell, 142 Ky. 732, 135 S.W. 416; General Accident, Fire & Life Assur. Corporation v. Cohen, 73 Colo. 459, 216 P. 522; Boak Fish Co. v. Manchester Fire Assur. Co., 84 Minn. 419, 87 N.W. 932; Nelson v. Traders' Ins. Co., 86 A.D. 66, 83 N.Y.S. 220, affirmed in 181 N.Y. 472, 74 N.E. 421.
In Pettit v. State Ins. Co., supra [41 Minn. 299, 43 N.W. 379], the policy read "Four thousand dollars on the following specified and located property, namely, grain * * * while contained in the frame, iron-clad, metal-roof [elevator] building occupied for the storage and handling of grain, and known as the `St. Anthony Elevator', situated in Auditor's Subdivision No. 21, Minneapolis, E. D., Minnesota." The facts disclosed that the property consisted of an engine house, elevator adjoining containing all the elevator machinery and having storage bins of a capacity of 500,000 bushels, and an addition or extension 300 feet distant known as "Annex A", with a capacity of 1,000,000 bushels. The main building and the Annex were connected by passageways. The separate portions of the structure were identical in construction and the entire property was known as "The St. Anthony Elevator" located on Auditor's Subdivision No. 21, Minneapolis, Minnesota. A fire having destroyed the main elevator and the Annex, the defendant insurance company contended that its risk was limited to the main elevator building. The court held that the Annex was included within the description of the policy, considering its language as descriptive of the character, construction, purpose and use of the building insured.
In Still v. Connecticut Fire Insurance Co., supra [185 Mo.App. 550, 172 S.W. 626], a persuasive authority in view of the fact that a Missouri contract is involved in the instant case, the court construed a policy insuring "the shingle-roof frame barn building situate on the same premises" as the insured's residence. A windstorm did little damage to the roof of the barn but blew down a silo attached to it. The defendant insurance company contended that the silo was a separate structure and did not constitute a part of the "barn building". The plaintiff insisted that the whole was one building, and the court so held. In commenting on the fact that the silo was built a year after the barn was erected, the court stated: "But this difference in time of erection would make no difference if the two were *298 so erected and joined together in such a way as to constitute in fact one building. Whether or not a structure added to a building is to be considered a part of the whole building depends upon a number of things. It would seem that if the addition was erected in such close proximity to the other structure as to be physically joined thereto, and is so arranged that the addition can only be used in connection with the main structure, and that the two are devoted to one general common purpose and are occupied and used by one owner, then they could be treated as one structure or building." After noting the uses to which the barn and silo were put the court said: "Where the subject of the insurance is described as a `building' the entire structure, though composed of several parts is included if the parts are so joined as to be used as one and devoted to the same common purpose."
It is evident that the rule stated above may lead to a more extended coverage than if matters relative only to the physical construction of the property are considered. In Gross et al. v. Milwaukee Mechanics Ins. Co., 92 Wis. 656, 66 N.W. 712, 713, the property, at the time the policy was issued, consisted of a one-story frame store building and a shed or lean-to so attached as to constitute one building. Thereafter the lean-to was moved back 20 feet and an addition was constructed on the main building extending to within three feet of the shed, to which it was connected by a platform. Doors between the two parts permitted the whole to be used in the grocery business as before. The defendant insurance company denied liability for a loss due to a fire in the shed, contending that its policy was limited to the store building. The Wisconsin Supreme Court, considering the use to which the property was put, held that the shed was within the terms of the policy insuring property "while contained in the one-story frame store building situated on the south side of Cranberry street in Centralia."
We do not understand the Missouri Court of Appeals, and other courts which have considered the use to which the property was put, to hold, however, that of necessity the separate parts of a structure must be used and devoted to the same common purpose in order to be considered one unit. In some circumstances use is among others a relevant and proper test to determine whether or not a structure is integral. But if the various portions of a structure are so physically connected in construction as to form one integral unit, the use to which the separate parts are put is necessarily immaterial. Fortesque v. Carroll, 76 N.J. Eq. 583, 75 A. 923, Ann.Cas.1912A, 79; Nelson v. Trader's Ins. Co., supra; Prussian Nat. Ins. Co. v. Terrell, supra; Robinson v. Pennsylvania Ins. Co., 87 Me. 399, 32 A. 996. Normally, the word "building" connotes matters of construction rather than matters relating to the use or mode of occupancy. Fortesque v. Carroll, supra. We think that the facts in the instant case show that the word is used in the policy in that sense. But if use is to be considered it may be noted that a large part of the entire structure is devoted to the use of the city government.
The reason for the rule that insurance on a "building" must be held to cover all the constituent parts thereof is aptly expressed in Prussian Nat. Ins. Co. v. Terrell, supra [142 Ky. 732, 135 S.W. 419], as follows: "It must be borne in mind that a description in a policy of the building insured is never accompanied, or intended to be accompanied, by the particularity of an architect's plans and specifications. The purpose of the description is simply to identify in a general way the building insured. Because the description fails specifically to include any particular portion of the building is no reason why that portion should be excluded from the operation of the policy. Any other rule would lead to endless confusion and all sorts of frivolous pleas and contentions. The courts would be called upon to say whether or not a bay window, a back porch, or a bathroom was included in the policy which simply described in a general way the building of which they were a part at the time the insurance was obtained. The result would be that, unless a man took the care to describe with particularity each and every portion of the building insured, he would never know what his rights were under his policy; while an insurance company would always have some plausible pretext upon which to resist payment of the policy."
After a careful study of the record we are of opinion that the court erred in admitting in evidence Exhibits 9, 10, 11, 12, 13 and 15; that the question of the construction of the policy was in the first instance a question of law for the court; and that in view of the undisputed facts *299 the policy is reasonably capable of being construed as describing the property damaged by the fire as a matter of law. The motion for an instructed verdict for the plaintiff should have been sustained. The result is that the judgments must be reversed. There remains as a result also, for determination by the district court, the issue with reference to attorney fees and alleged damages for vexatious delay.
The judgments appealed from are accordingly reversed, with instructions to grant a new trial in accordance with the law as announced herein.
WOODROUGH, Circuit Judge (dissenting).
City of University City is the owner of a plot of ground in the City known as Block 4, University Heights Subdivision, with the improvements thereon, consisting of an octagonal shaped five-story building connected at its rear or north side through a fifty-foot long passageway with a rectangular building which is three, two and one story in height in its several parts. There is also a one-story police garage on the lot. The octagonal building is on the north side of Delmar Avenue and has two main entrances on Delmar Avenue and is occupied as a City Hall with some office space rented to tenants. The other buildings open onto the west side of Harvard Avenue (formerly Oberlin Avenue) and are occupied by the City Police Department and jail, a partitioned-off space rented to a public warehouse company, and a police garage. A fire occurred in a part of the rectangular building which was rented by the City to Orcutt Moving and Storage Company for warehouse purposes, and the City brought this suit to recover on account of the loss upon a fire insurance policy issued to it by the defendant Western Fire Insurance Company. The company admitted that it had issued the policy sued on and that it was in force at the time of the fire, but asserted that it insured the octagonal building, where there was no fire, and denied that it insured the rectangular building where the fire was. The words and figures of description used in the policy to identify the property on which the insurance is written are: "On the fire-proof building, located North side of Delmar Blvd. between Trinity & Oberlin Ave., known as 6801 Delmar Blvd., University City, Mo."
The City claims that the octagonal building and the rectangular building constituted one integral structure or building, and that the part of the rectangular building that was burned was included within the description and identifying street number in the policy. The sole issue litigated below was whether both or only one of the improvements was described and insured by the policy. The court instructed the jury to take into consideration the language of the policy and the facts and circumstances in evidence, and if it appeared that the policy was capable of being construed by a person of ordinary prudence as applying to and covering the property where the fire occurred, their verdict should be for the plaintiff, even though it appeared from the evidence that the defendant did not intend to insure the portion of the property which was damaged by the fire. The jury's verdict was for the insurance company and the City has appealed from the judgment of dismissal entered on the verdict.
There is evidence in the record that this whole property of the City was subject to a mortgage owned by the Mercantile Commerce Bank and Trust Company, requiring that there should at all times be kept deposited with the bank $75,000 of insurance payable to the bank in case of loss, and in compliance with that requirement, the City's insurance policies were physically deposited in the hands of the bank and, including the policy in suit, they were payable in case of loss to the bank. The bank acquired the mortgage in 1932, and in January of that year there was $50,000 of tornado insurance on the improvements on the mortgaged property which was expiring. The bank notified the City in advance of the expiration and the City procured continuance of the protection by depositing with the bank three new policies, two for $15,000 and one for $20,000, to make up the $50,000 of insurance. In all of these policies the octagonal building was identified as the building on the north side of Delmar, numbered 6801 Delmar, the rectangular building was identified as the building "on the rear" of the building numbered 6801 Delmar, and the police garage was designated as the police garage. Another expiration date in the same year, 1932, was October 25, at which time $25,000 of fire insurance deposited with the bank would expire. On being notified by the bank, the City procured two new policies continuing fire insurance in the same amount, to be written and deposited with the bank by F. D. Hirschberg and Company, an old established insurance agency of St. Louis. Of these new policies, issued simultaneously, one was in the *300 amount of $15,000 and described the property insured as the building "situated North side of Delmar Avenue between Oberlin and Trinity Avenues, Block 4 Subdivision #1 University City", and the other policy, in the amount of $10,000, described the property insured as the building "situated West side of Oberlin Avenue in the rear of City Hall Building." Opposite the word "Occupancy" in the record of the first policy appeared "City Hall", and in the other policy record the notation as to occupancy was "Orcutt Whse" (Warehouse). Obviously the first description designated the octagonal building and the second designated the rectangular building to the rear where the fire occurred. The rate at which the octagonal building was insured was .866 per hundred dollars for three years, and the rate on the rectangular building was 2.783 per hundred dollars for the same period.
Up to the expiration date of these two policies on October 25, 1935, there was no possibility of uncertainty as to what improvements the respective policies deposited with the bank were intended to cover. The descriptions in the policies were not in conveyancers' language but were sufficient to inform the insured clearly that the improvements were insured as distinct and separate buildings, one building in the rear of the other building, and that each described structure was treated as a building to which certain insurance was related. Copy of a letter from the Hirschberg Agency to the bank is in evidence, listing and transmitting to the bank three policies "written for the account of the City of University City which expired on October 25" (1932). The letter is on one sheet and discloses at a glance that the building on the "north side of Delmar" was insured as one building in the amount of $15,000 and the building "in rear" was insured in the sum of $10,000 as a different building. Being a letter of transmittal of fire insurance policies that had expired long before the trial of this case, neither the old policies nor the original letter transmitting them were available at the trial, but there is no reason to question the record kept in the usual course of business in the Hirschberg Agency. It appears that as the policies were physically deposited with the bank their verbiage was unknown to the City officers. They testified at the trial that they had never seen any of them. A lady in the employ of the City who may have had more information was very sick and unable to testify.
October 25, 1935, was the expiration date of the two fire policies which had been written by Hirschberg and Company, and transmitted to the bank in 1932, one on the octagonal building for $15,000 and one on the building "in rear" for $10,000 and the bank duly notified the City concerning the expirations and requested deposit of renewal policies. The letter of the bank was not in evidence, but the City Board of Aldermen duly passed a resolution reciting that it was informed of the expiration of the two policies, and the Board directed that the "ten thousand dollar fire insurance policy" "be given to Frank L. Mackey", and "the fifteen thousand dollar fire insurance policy to Walter Gantner," and that "the above fire insurance policies * * * be allotted" as stated.
Frank L. Mackey and Walter Gantner were insurance solicitors or brokers, and the plain meaning of the Board's order was that one of the brokers should procure continuation of the insurance represented by the expiring $15,000 policy on the octagonal building, and the other should procure continuation of the insurance represented by the expiring $10,000 policy on the building "in rear". There was nothing in the order of the Board indicating that the Board wanted the brokers to increase the coverage of the insurance payable to the bank evidenced by the two policies that were expiring. The Board allotted or parcelled out the identical insurance it had to, and was, carrying under its mortgage contract, among the brokers who were seeking the business. When it "allotted" the $15,000 policy insuring one building to Mr. Gantner, it evidenced no intention that he should buy anything besides new insurance to continue the specified existing insurance. The bank to which the insurance was payable had not requested additional insurance upon the other building in which there was a public warehouse and which carried a much higher premium rate, and there is nothing in the record to indicate that any such increase of outlay for insurance payable to the bank was in contemplation by the Board. If such had been the intention, it is not credible that a policy would have been taken with the same old description long used to cover only the one building and not the other.[1]
*301 In pursuance of the order of the Board, Frank L. Mackey procured a new policy for $10,000 which is not shown in evidence, and Walter Gantner procured two new policies, identical in form, for $7500 each, one of which is the policy in suit. The lady in the employ of the insurance agency who used the typewriter to make out the policy sued on testified that Mr. Gantner told her what they wanted insured and that she prepared the policy as per his instructions. Her testimony contradicted the assertion of Mr. Gantner that the "City Hall group of buildings" was the property upon which he was to procure the insurance. She says she wrote the description of the same single building in the new policy which was insured by the expiring policy "as per his instructions."
The description of the property typewritten into the new policies was in substantially the same words of description that had been used in the expiring policy. That is, the old policy covered a "building, situated North side of Delmar Avenue, between Oberlin and Trinity Avenues, Block No. 4 Subdivision No. 1 University City, Missouri", and the policy issued on his instructions covered a "building located North Side of Delmar Blvd. between Trinity and Oberlin Ave. known as 6801 Delmar Blvd. University City, Mo." The premium rate for the three years' insurance appeared on the face of the new policy in large type, .867, and was the same rate within one-tenth of one cent as the rate of the expiring policy.
Practically the only difference between the description used in the expiring $15,000 policy which was allotted by the Board of Aldermen to Mr. Gantner and the new policies which he procured to continue the insurance, is that in the expiring policy there was no reference to the street number of the building insured and in the new policy the words "known as 6801 Delmar Blvd" were added to the description of the building insured. In this respect there was a reversion to the description of the octagonal building used in the tornado policies above referred to, wherein the octagonal building was given the Delmar street number 6801, and the building that was burned was described as being "in the rear". The evidence was conflicting whether a number was ever in fact physically upon the octagonal building, but it was shown that the number assignable to that building under the City regulations would be 6801 Delmar. There was also testimony for the City that the other City buildings in the rear of the octagonal building, which open onto Harvard Avenue, were sometimes referred to or known by the same number, and that mail was directed to occupants of the other buildings under that number. But no regulation was shown to justify giving a Delmar street number to the buildings that let out on Harvard Avenue.
The City introduced in evidence the check with which it paid for the policy in suit, which contained a notation that it was in payment of insurance on the "buildings" on its land. It proved that the octagonal building and the rectangular building, as well as the passageway between them, were all built at the same time as an integral and not segmented construction. That heat, light and power were brought into the octagonal building from the rectangular building through the passageway, and that both structures had been built originally to house the plant of a magazine publishing concern. The uses to which each part of each structure had been put, and the details of occupancy at the time of the issuance of the policy and at the time of the fire, were also shown by the City, and it was argued that in the light of the evidence the description in the policy could be found to cover the rectangular building which was burned. The argument was then pressed that under Missouri law (as generally) the policy should be construed liberally in favor of the assured and that when so construed it could be read to cover both the octagonal building and the rectangular building, and that the City was entitled to a verdict as a matter of law.
The Company concedes that a contract of insurance is ordinarily to be construed against the insurer in the event of any ambiguity therein, because the language of the policy is of its choosing, but contends that where there is dispute as to the identity of a person whose life is insured, or the identity of property which is insured, the rule may not be carried to unreasonable conclusions. East & West Ins. Co. v. Fidel, 10 Cir., 49 F.2d 35; Freed Realty Co. v. National Fire Ins. Co., 161 La. 102, 108 So. 228; Jefferson County Bank v. Insurance Company, 251 Ky. 502, 65 S.W.2d 474, 475; Peony Park v. Security Ins. Co., Neb., 289 N.W. 848. The octagonal five-story *302 building occupied mainly by the City as its City Hall is located on the north side of Delmar Boulevard and is known as 6801 Delmar Boulevard, and is therefore aptly described in the policy sued on. The buildings to the rear of it on the same block 4 which open onto the west side of Harvard Avenue could not be brought within the coverage of the policy except by a determination that the structures were altogether "a building" within the meaning of the word "building" in the policy. The word building is synonymous with structure or edifice. Undoubtedly circumstances may be presented where several structures have been so connected, combined or integrated that the aggregate may in common parlance come within the designation of a "building". But no rigid rule of law can be found to settle for all cases whether or not such integration of structures into one building has occurred.[2] In many cases the true intention of the parties who used the word "building" in their contract will remain a question of fact. I think the trial court committed no error prejudicial to this appellant when in this case it submitted the issue to the jury under the instruction that they should find for the City if it appeared on consideration of the language of the policy and the facts and circumstances in evidence that the policy was capable of being construed by a person of ordinary prudence as covering the property where the fire occurred. Queens Ins. Co. v. Meyer Milling Co., 8 Cir., 43 F.2d 885.
On the whole case, I think it is clear that the City did not pay the insurance company to insure the rectangular building where the fire occurred and had no intention of buying any insurance for the bank except continuation of the insurance then expiring; the Company had no thought or intention to insure the building opening on Harvard containing a warehouse, and the description in the policy, read in the light of the use long made of the same words in the City insurance contracts to designate the octagonal building and not the rectangular building all the circumstances taken together leave no doubt in my mind that the verdict of the jury was just and right. The rules about latent and patent ambiguities and the court's power to resolve an ambiguity as a matter of law, are all to further justice. I think the judgment here could and should be affirmed without doing any violence to them.
NOTES
[1] That prior insurance should be considered on the question of intention is assumed as elemental in Williams Mfg. Co. v. Insurance Company, 93 Vt. 161, 106 A. 657, cited in 26 C.J. 88, Sec. 84. I think it is.
[2] See Alterman v. Home Ins. Co., 195 A.D. 151, 186 N.Y.S. 462. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551003/ | 382 Pa. Super. 478 (1989)
555 A.2d 1299
Willa E. WHITE
v.
J. Nevin WHITE, Appellant.
Supreme Court of Pennsylvania.
Argued December 6, 1988.
Filed February 24, 1989.
Reargument Denied April 5, 1989.
*479 Albert Momjian, Philadelphia, for appellant.
Richard C. Snelbaker, Mechanicsburg, for appellee.
Before WIEAND, OLSZEWSKI and TAMILIA, JJ.
TAMILIA, Judge:
This is a timely appeal by defendant J. Nevin White of a Decree in divorce and Order incorporated therein providing for equitable distribution of the marital property, awarding appellee attorney's fees and costs, and denying appellee alimony. On appeal, appellant contests the trial court's distribution of marital property and award of attorney's fees.
The parties were married on November 23, 1946. During the course of their marriage they had two children, both of whom are emancipated adults. The parties separated on June 2, 1970 and have not resided together since that date. Appellee Willa E. White filed a complaint in divorce on December 24, 1981, alleging grounds for divorce pursuant to 23 P.S. § 201(d) of the Divorce Code, 23 P.S. § 101 et seq. Eleven hearings were held before a master during 1985 to resolve appellee's claims for equitable distribution, alimony pendente lite, alimony and counsel fees and costs. Timely exceptions to the master's report and recommendations were filed by both parties. After review of the exceptions, the trial court upheld the master's finding with the exception of the valuation of appellant's one-fourth interest in timberland located in Centre County, which the trial court concluded required an increase in the cash distributive award to appellee of $10,140 (Slip. Op., Hoffer, J., 4/6/88, p. 6). This appeal followed.
Appellee was born on March 26, 1926, making her 60 years old at the time of the master's report and 62 years old at the time of the appeal. The family unit remained intact *480 for the first 24 years of the marriage, with appellee working in appellant's lumber business without remuneration for the last 14 years prior to their separation in 1970, in addition to her being a homemaker. She has a high school education with little training and is suffering from a series of serious and chronic health problems which will prohibit any future gainful employment. Appellee has remained in the marital home since separation, receiving monthly spousal support by court Order in the amount of $2,100.
Appellant was born on October 25, 1925, making him 61 years old at the time of the master's report and 63 years old at the time of this appeal. Appellant is the sole stockholder and owner of J. Nevin White Lumber Company, Inc. (hereinafter "White Lumber"), and earns a salary of $53,000 per year, plus substantial fringe benefits. The trial court did not disturb the master's finding that the value of the company as of the date of the divorce was $2,735,000. Appellant also has a disputed interest in a Bermuda Corporation known as White Timber, Ltd., which was established and is controlled by a trust created by appellant's aunt in Bermuda in 1976. White Timber, Ltd., is a foreign income sales corporation or FISC, designed to defer or avoid United States income taxes for the sale of domestic lumber produced by appellant's lumber company in the international market.
The trial court made the following distribution of marital property after largely upholding the findings of the master:
APPELLEE
Description Value or Amount
Marital home $ 110,000.00
Household goods and furnishings 3,138.00
Joint securities 25,761.16
Individually owned life insurance policy 46,334.90
Bethel Isle, Florida lot 85,000.00
Veromer, Florida lot 52,000.00
Individual securities 13,862.38
Cash distributive award 1,662,990.00
_____________
Total $1,999,086.44
*481 APPELLANT
Timberland, Centre County $ 694,500.00
Timberland, Juniata County 60,000.00
Swiss francs 15,000.00
White Lumber capital stock 2,735,000.00
Joint bank account 3,728.34
Two cemetery lots 120.00
_____________
Total $3,508,348.34
In connection with the cash distributive award of $1,662,990, the trial court directed it be paid in equal quarterly installments over a ten-year period from the date of the divorce decree with interest at a rate of seven percent per year. This would make appellant's payments approximately $57,803 per quarter or $231,214 per year. As security for the cash award, the trial court directed appellant to have White Lumber issue a note payable to appellee for the full amount of $1,662,990 with appellant's personal and individual guarantee on the note. Additionally, appellant is to give appellee a first mortgage lien on appellant's timberland in Centre County and Juniata County, as well as pledge 50 per cent of the capital stock of White Lumber as security for the obligation. The trial court determined that because of the large equitable distribution award appellee was not entitled to alimony, 23 P.S. § 501(a)(1), but it did award appellee $24,000 in legal fees and expenses and $2,000 in court costs.
Appellant's first claim is that the trial court erred in determining the equitable distribution award by failing to consider that the amount of the cash distributive award to appellee will allegedly force appellant to liquidate his business and consequently cause White Lumber to incur adverse tax consequences. Appellant argues the inevitable deflation in value a liquidation sale produces, plus the brokerage costs of selling and adverse tax consequences such a sale would result in, will substantially and unjustly decrease appellant's share of the marital assets distributed without affecting appellee's share.
*482 In evaluating an equitable distribution scheme, our scope of review is limited. An appellate court will not reverse an Order determining equitable distribution absent an abuse of discretion by the trial court. Johnson v. Johnson, 365 Pa.Super. 409, 529 A.2d 1123 (1987); Campbell v. Campbell, 357 Pa.Super. 483, 516 A.2d 363 (1986); Bold v. Bold, 358 Pa.Super. 7, 516 A.2d 741 (1986).
Appellant repeatedly argues the master and trial court "ignored" and "overlooked" the alleged forced liquidation and tax consequences involved in a cash award to appellee, and appellant argues the trial court is "silent" as to liquidation or the manner in which appellant should pay appellee the yearly payments of the cash award (appellant's brief at 14-16, 18-20 and 23). Moreover, appellee relies on our holding in Morschhauser v. Morschhauser, 357 Pa.Super. 339, 516 A.2d 10 (1986), that a cash award to one spouse was not an abuse of discretion and was amply justified by the trial court's rationale under the circumstances despite an allegation the award would force a liquidation of the paying spouse's business holdings. Appellant argues that unlike the Morschhauser court, the present trial court failed to address the liquidation issue in its Opinion, leaving a fatal absence of any supporting rationale as to how the cash award could be paid by appellant. After review of the record, we agree.
The Pennsylvania Supreme Court recently addressed the tax consequences or liability in equitable distribution in Hovis v. Hovis, 518 Pa. 137, 141-44, 541 A.2d 1378, 1380-81 (1988), where the Court stated:
This case represents the classic quandary that confronts our trial courts regarding the issue of potential tax liability as it effects the equitable distribution of property. If a taxable event such as a sale or other transfer of property is required by the award of equitable distribution, or is certain to occur shortly thereafter, the tax liability of the parties can be reasonably ascertainable. However, where there is merely a likelihood or possibility *483 that a taxable event will occur, the court is left to speculate as to the tax consequences.
. . . .
In order to insure a "fair and just determination and settlement of property rights" we favor predictability over mere surmise in the valuation and distribution of marital property after divorce. Accordingly, we hold that potential tax liability may be considered in valuing marital assets only where a taxable event has occurred as a result of the divorce or equitable distribution of property or is certain to occur within a time frame such that the tax liability can be reasonably predicted.
(Footnote omitted.) The liquidation of White Lumber is a taxable event and with ten partial liquidations foreseeable to provide the funds for payment of the award, the calculation of tax consequences as to these liquidations, in whole or in part, can be readily predicted.
As stated before, appellee alleges this case is positively disposed of by the holding in Morschhauser, supra, while appellant would find it is distinguishable from the instant case. In Morschhauser, the trial court considered and appropriately dealt with that issue, which we recognized in rejecting the claim that liquidation of the business would be required and the husband would suffer adverse tax consequences. There, we said:
The final claim made by appellant is that the court erred in requiring an immediate payment of the entire equitable distribution award, in the amount of $127,641.25. He contends this will force him to liquidate his business holdings or suffer adverse tax consequences.
The court directly addressed this argument and determined appellant could produce part of the sum from his annual income, (gross income was found to be approximately $155,000.00) with the remainder obtained through a bank loan or by reaching some accomodation [sic] with appellee/wife. The court did not agree with appellant's *484 contention that the measures he claims are necessary are actually required to meet this obligation.
The court also upheld the immediate payment because the alimony award was based on the wife having a large amount of investment capital to produce income. If the payment of the distribution amount was spread out over time, appellant would be required to pay interest, the same as if he obtains a bank loan to pay appellee.
We find no abuse of discretion by the court in reaching this determination. The rationale provided by the court is sufficient to justify the action.
Id. 357 Pa.Super. at 346, 516 A.2d at 16.
The financial structure, business enterprise, distribution award, earnings and consequences of the award in the present case are radically different from those in Morschhauser. There, it was reasonably determined liquidation was not required to affect distribution. Here, it appears unavoidable and, therefore, presents a taxable event. This Court in Diamond v. Diamond, 360 Pa.Super. 101, 519 A.2d 1012 (1987), held the court must consider tax consequences on equitable distribution. Amendments to the Divorce Code, filed February 12, 1988, require the court to undertake such consideration. Section 401(d)(10), as amended, states the court shall consider:
The economic circumstances of each party, including Federal, State and local tax ramifications, at the time the division of property is to become effective.
(Emphasis added.) While appellee contends it may be inferred the trial court undertook this consideration, our review of the record does not support such a view or, if it was considered, the conclusions drawn from the facts were erroneous. There is nothing in the record which supports the court's findings or proposal by appellee that appellant, whose present gross earnings are $52,000 per year, can generate an additional $240,000 a year income by harvesting and selling timber already possessed by White Timber to meet the distribution schedule. Also despite the fact that the Bermuda trust is alleged to have yearly sales of *485 $2,000,000, again there is no evidence as to the amount of income this generates and as to how much appellant is legally able to take in income or profits, even assuming the trust was created for the purpose of putting assets and profits beyond the reach of the wife.
This appears to be a situation in which the marital property is in assets which lack liquidity of funds available for distribution. The court's solution to value the assets, apportion them between the parties and impose the burden on appellant through harder work, loans or sell offs over ten years, to produce the wife's share has failed to take into account this cannot be accomplished without a total or gradual liquidation or heavy loans, which are likely not to be available since the property is also liened with the wife's security for payment. With liquidation, because of the low-cost value of the acquisition of the marital property, tax consequences will be severe and entirely borne by the husband. Partial liquidation may seriously reduce the capacity of the business to continue to function, as it would appear that for a lumber business to function, it must continually seek out new timber assets to assure continued operation, rather than liquidate those assets to bring about a large short range cash flow.
We, therefore, find that failure to consider tax consequences in this case results in a severe imbalance in equitable distribution and such a distribution must be made with tax consequences in mind, or another form of distribution devised, whether it be in kind, notes, etc.
Next, appellant argues the trial court abused its discretion in assigning a constructive interest to appellant in the trust which established the Bermuda Corporation, White Timber, Ltd. Section 401(d)(8) of the Divorce Code, 23 P.S. § 401(d)(8), provides "[t]he value of property set apart to each party" is a valid consideration in equitable distribution. In discussing the appellant's interest in the trust in its review of the award, the trial court gave little weight to appellee's version of the interest held:
*486 Defendant's beneficial interest, while not capable of being quantified, was amply demonstrated in the record by extensive testimony concerning his numerous trips to Bermuda, some two hundred out-of-country telephone calls concerning the trust, and approximately $2,000,000 in sales to Bermuda by defendant's company. Defendant's obvious reluctance to be forthright about the Bermuda trust was also properly weighed by the Master in arriving at his decision.
(Slip Op. at 7.) Because of the inability to quantify the interest in a dollar amount, we find this was not an abuse of discretion. It goes without saying that we cannot permit a party to siphon off profits and assets which are part of a going concern, construed to be marital property, by passing them through a foreign trust.
Lastly, appellant claims the court abused its discretion in awarding appellee counsel fees of $24,000 plus $2,000 court costs in view of the disposition of the equitable distribution of the marital assets. In determining the propriety of an award of counsel fees an appellate court should employ an abuse of discretion standard. Vajda v. Vajda, 337 Pa.Super. 573, 487 A.2d 409 (1985); Semasek v. Semasek, 331 Pa.Super. 1, 479 A.2d 1047 (1984), reversed on other grounds, 509 Pa. 282, 502 A.2d 109 (1985). The fact that appellee received support and appellant controlled the business and its assets demonstrates the parties did not litigate this action on equal footing and, as found by the master, appellant employed uncooperative and delaying tactics throughout the proceedings before him. Fee awards are meant to equalize the parties' economic positions in conducting the divorce action. Hoover v. Hoover, 288 Pa.Super. 159, 431 A.2d 337 (1981). In Chaney v. Chaney, 343 Pa.Super. 77, 493 A.2d 1382 (1985), we found that even though one spouse received a disproportionate share of the marital property in an equitable distribution award this did not preclude an award of attorney's fees. However, in view of the fact this case must be remanded for further hearings and determinations as to the effect of tax consequences on *487 the distribution of the marital property, it is also appropriate to have a redetermination of counsel fees as reflecting the respective awards made to each party.
Accordingly, we affirm the determination of the value of the property subject to equitable distribution, the percentage of the marital property awarded to each part and the creation of a constructive interest in the Bermuda trust in the wife, but vacate the Order of distribution and the Order as to counsel fees and court costs and remand for a determination by the trial court of the effect of tax consequences in a final award of distribution.
Jurisdiction relinquished. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551002/ | 27 F.2d 462 (1928)
CROCKER FIRST NAT. BANK OF SAN FRANCISCO (substituted for CROCKER NAT. BANK OF SAN FRANCISCO),
v.
DE SOUSA et al.
No. 5456.
Circuit Court of Appeals, Ninth Circuit.
June 25, 1928.
Rehearing Denied August 20, 1928.
Morrison, Hohfeld, Foerster, Shuman & Clark and J. F. Shuman, all of San Francisco, Cal., for appellant and plaintiff in error.
T. T. C. Gregory and C. J. Goodell, both of San Francisco, Cal., and Frank V. Cornish, of Berkeley, Cal., for appellees and defendants in error.
Before RUDKIN, DIETRICH, and HUNT, Circuit Judges.
RUDKIN, Circuit Judge.
Early in May, 1920, De Sousa & Co., a copartnership, as vendors, entered into a contract with Hind, Rolph & Co., a copartnership, as purchasers, for the sale of 500 tons of sugar. On May 20, 1920, in compliance with the contract of sale, the purchasers procured from the Crocker National Bank of San Francisco a letter of credit in the sum of $208,000 in favor of the vendors, in which the bank agreed that it would accept upon presentation, and pay in 60 days, drafts not to exceed $208,000 against a shipment of 500 tons, net, white Java refined granulated sugar, 97/98° polarization, at 20½ cents per pound, gross shipped weight, c. i. f. San Francisco; shipment from Hongkong during May/June, 1920, accompanied by full sets of invoices, consular invoices, marine and war risk insurance certificates, surveyor's certificate of quality, weight certificate, and negotiable ocean bills of lading made out to order of shipper and indorsed in blank. Later, on May 29, 1920, the letter of credit was amended so as to cover 500 tons of sugar as follows: 150 tons granulated, 350 tons fine granulated. Early in July, 1920, drafts were presented to the bank for acceptance, accompanied by commercial invoice, consular invoices, marine and war risks insurance certificate, surveyor's certificates of quality, weight certificates, certificates of polarization, and bills of lading, but acceptance was refused on the ground that the documents accompanying the drafts were not in order. The present action was thereupon commenced by De Sousa & Co. against the Crocker First National Bank of San Francisco, as successor to the Crocker National Bank, to recover the amount of the drafts, less the net proceeds derived from the sale of the sugar. A judgment in favor of the plaintiff (23 F. [2d] 118) is now before us for review.
In the court below there was apparently some controversy between the parties as to the description of the sugar called for by the letter of credit in the light of the amendment of May 29, but it seems to be now conceded that the amendment made no change in the description of the smaller lot of 150 tons and simply added the word "fine" before the word "granulated" as to the larger lot of 350 tons, so that the description in the letter of credit as amended read: 150 tons white Java refined granulated sugar and 350 tons white Java refined fine granulated sugar.
In an early stage of the case the plaintiff in error likewise contended that it was under no legal obligation to accept or pay the drafts unless each and every of the documents accompanying them described the sugar word for word as the same was described *463 in the letter of credit as amended. But it seems to have receded from that extreme position, and now apparently concedes that it is perhaps sufficient if what it terms the essential documents so describe the sugar, and that the essential documents are the consular invoices, certificates of quality, and certificates of polarization. We think this latter view is the correct one, because it is hardly to be expected that ordinary insurance certificates, bills of lading, and certificates of weight will describe a commodity with greater particularity than is required by the nature of the documents and the purpose for which they are executed. And, without expressing any opinion as to the particular documents that must describe the commodity with precision, we will confine ourselves to the consular invoices and the certificates of quality, because in these the most complete description is found. The consular invoices described the smaller lot as "white Java granulated sugar No. 24," and the other lot as "white Java fine sugar No. 24," and the certificates of quality describe the two lots in the same words. It will thus be seen that the descriptive word "refined" is omitted from the description of the smaller lot, and the descriptive words "refined" and "granulated" from the description of the larger lot and that the figures "No. 24" are added to the description of both lots.
There was considerable discussion on the argument as to the rule of construction applicable to contracts of this kind. In Wells Fargo Nevada Nat. Bank of San Francisco v. Corn Exchange Nat. Bank (C. C. A.) 23 F.(2d) 1, the court said:
"Letters of credit in large numbers for vast sums are used in oversea commercial transactions by people whose laws, language, and customs are often different from those of the people where the letter is issued. The safety of the issuing bank, of the buyer for whose account it is issued, and of the seller who often expends much and risks much on the faith of the promise in the letter, require that the terms of the letter shall be sharply defined and strictly complied with in all respects."
We think this view is in harmony with the decisions of the Supreme Court. Thus, in Harrison v. Fortlage, 161 U. S. 57-63, 16 S. Ct. 488, 489 (40 L. Ed. 616), it is said:
"The court is not at liberty, either to disregard words used by the parties, descriptive of the subject-matter, or of any material incident, or to insert words which the parties have not made use of."
And in the recent case of Lamborn v. National Bank of Commerce, 48 S. Ct. 378, 72 L. Ed. ___, decided April 9, 1928, the same court said:
"The defendant is obviously not liable, unless there was a tender of sugar which met the requirements of the letter of credit as to amount and quality of the sugar, as to the time (Norrington v. Wright, 115 U.S. 188, 6 S. Ct. 12, 29 L. Ed. 366), and the place (Filley v. Pope, 115 U.S. 213, 6 S. Ct. 19, 29 L. Ed. 372) of shipment; and as to the manner of shipment and the ultimate destination."
See, also, Moss v. Old Colony Trust Co., 246 Mass. 139, 140 N.E. 803; G. Jaris Co. v. Banque D'Athenes et al., 246 Mass. 546, 141 N.E. 576; Banco Nacional Ultramarino v. First Nat'l Bank of Boston (D. C.) 289 F. 169-175; Lamborn v. Lake Shore Bank & Trust Co., 196 A.D. 504, 188 N. Y. S. 162, affirmed under same title in 231 N.Y. 616, 132 N.E. 911; Camp v. Corn Exchange Nat. Bank, 285 Pa. 337, 132 A. 189; Old Colony Trust Co. v. Lawyers' Title & Trust Co. (C. C. A.) 297 F. 152.
As thus construed, we think the documents accompanying the drafts were fatally defective. Thus, in National City Bank v. Seattle National Bank, 121 Wash. 476, 209 P. 705, 30 A. L. R. 347, the letter of credit called for "standard white granulated sugar" while the documents described the commodity as "granulated white sugar Java No. 24," and the court held that the variance was fatal. In Banco Nacional Ultramarino v. First Nat. Bank of Boston, supra, the letter of credit called for "Brazil white crystal sugar," but the sugar was described in some of the documents as "white crystal sugar," and again the variance was held fatal. In bank of Italy v. Merchants' Nat. Bank, 236 N.Y. 106, 140 N.E. 211, the Merchants' National Bank guaranteed the payment of the purchase price of two carloads of dried grapes upon presentation of the original bill of lading. The bill of lading described the commodity as raisins, and the court held there could be no recovery. In Lamborn v. Lake Shore Bank & Trust Co., supra, the letter of credit described "Java white granulated sugar," while the bill of lading described it as "Java white sugar," and the variance was held fatal. As already stated, this case was affirmed on appeal. See, also, International Banking Corporation v. Irving National Bank (D. C.) 274 F. 122; Brown v. Ambler, 66 Md. 391, 7 A. 903.
It is perhaps unnecessary to consider the significance of "No. 24," added to the description of each lot of sugar. The appellee *464 contends that these numerals refer to the Dutch standard, that No. 24 is one of 18 different shades, ranging from No. 8 to No. 25, that the numerals refer to the color of the sugar, and that the court must take judicial cognizance of their meaning, because the Dutch standard of colors was used by the government for many years prior to 1913 as the principal basis for computing duties on imported sugar. How far the judicial knowledge of the court should properly be extended we need not inquire, because private individuals are not chargeable with notice of laws long since repealed, which in no wise affect their rights, and we think it can safely be said that the significance of such figures when applied to sugar is not generally or commonly known. Such knowledge is confined largely to those engaged in the sugar trade, and it is at least questionable whether it extends to those engaged in the banking business. But if it be conceded that the bank was chargeable with knowledge of the Dutch standard, and that the figures have the significance now attributed to them, the question would still remain whether the sugar described in the letter of credit was in fact No. 24 Dutch standard.
It is agreed on all sides that the bank was a purchaser of documents, not of sugar, and that it had no concern with the contract of sale between the vendors and the purchasers, or with the performance of that contract. See cases above cited. For this reason the bank was not required to look beyond the accompanying documents, to ascertain whether the sugar complied with the contract of sale. If the accompanying documents satisfied the call of the letter of credit, it was the duty of the bank to accept and pay the drafts; but, if they did not, it was its right and duty to refuse acceptance or payment. The motives or the reasons which prompted the refusal are not involved in the case, and for that reason much of the testimony admitted at the trial and some of the arguments advanced in the briefs have no bearing upon the question at issue.
Again, the appellee contends that the appellant took the position at the outstart that each and every document must describe the sugar word for word and term for term as described in the letter of credit, that its position in that regard was untenable, and for that reason alone the appellee was entitled to judgment. No doubt, if a person refuses to perform a contract on a specific ground or for a specific reason, he will not generally be permitted to defend on another and different ground; but it has never been held, so far as we are advised, that a party is bound to make good every defense urged by him against a contract, or every reason assigned for nonperformance. In practice it is not uncommon to refuse performance on different grounds, some of which are untenable; but if the party maintains any one of the grounds, and that ground is legally sufficient, he is entitled to prevail. In view of the conclusion reached on the merits of the case, it becomes unnecessary to consider assignments of error based on the admission of testimony.
Upon full consideration of the record we are of opinion that the court below erred in denying the request to find for the defendant below, the appellant here, and for that error the judgment is reversed, and the cause is remanded for a new trial. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550993/ | 86 B.R. 59 (1988)
In re HOSPITALITY LTD. t/d/b/a Hospitality Inn, formerly t/a Sheraton Inn of St. Clairsville, Debtor.
In re WETZEL SPRING IMPROVEMENT CORPORATION, Debtor.
HOSPITALITY LTD. and Wetzel Spring Improvement Corporation, Movants,
v.
FIDELITY SAVINGS AND LOAN CO.; Belmont Federal Savings and Loan Association; North Akron Savings and Loan Company; Tri-State Asphalt Corporation; Belmont County National Bank; Equity Management Associates, Inc.; the RCA Service Company., a Division of RCA Corporation; and the Bank of Wheeling, Respondents.
Bankruptcy Nos. 87-1665, 87-1747, Motion No. 87-5896.
United States Bankruptcy Court, W.D. Pennsylvania.
May 3, 1988.
*60 F. Scott Gray, Sable, Makaroff & Libenson, Pittsburgh, Pa., for debtor.
William E. Kelleher, Jr., Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., for Sav. and Loan Group.
M. Bruce McCullough, Buchanon Ingersoll, Pittsburgh, Pa., for Concord Ltd.
Robert J. Samol, Tri-State Asphalt Corp., Wheeling, W.Va., for Tri-State.
MEMORANDUM OPINION
BERNARD MARKOVITZ, Bankruptcy Judge.
Presently before the Court is the Motion of Concord St. Clairsville Limited Partnership ("Concord Limited") for reimbursement of administrative expenses from secured assets, pursuant to 11 U.S.C. § 506(c). Alternatively, Concord Limited seeks nunc pro tunc appointment as a professional, pursuant to § 327, and approval and payment of fees and expenses as allowed under § 330 and 503. Objections to said requests have been raised by the debtor; the secured creditors (the "Savings and Loan" Group or the "S and L" Group); and Tri-State Asphalt Corporation ("Tri-State"), a general unsecured creditor and eventual purchaser of Debtor's assets. Additionally, the S and L Group has raised the question of Concord Limited's standing to pursue this action on behalf of Concord Hotels, Inc., and in place of the Trustee.
A hearing was held at which time testimony was taken. The parties have submitted briefs of the various legal issues presented. Based upon the evidence presented and this Court's further research, we find that Concord Limited does *61 not have standing to bring this action. Additionally, however, we note that if Concord Limited did have standing, its claim for administrative payment from the S and L Group's security would fail, as would its request for nunc pro tunc appointment.
FACTS
The Debtor (as consolidated) owned and operated a 118 room motel in St. Clairsville, Ohio. The S and L Group was owed in excess of $1.9 million, secured by the Debtor's real property. For a variety of reasons, including substantial new competition, the Debtor was having financial trouble. In September of 1986, the S and L Group instituted foreclosure proceedings.
Early in 1987, the Debtor began to negotiate a sale of its motel to Concord Limited for $1,730,000.00. Debtor advised the S and L Group of same and that they would receive $1,000,000.00 from said sale. The S and L Group advised Debtor that such a sum was unacceptable.[1]
In spite of the S and L repudiation, and in anticipation of the sale, Concord Limited and the Debtor agreed that a new management team would takeover the motel's operations. Concord Limited sought to have Concord Hotels, Inc. ("Concord Hotels") installed as manager immediately, with the understanding that Concord Hotels would continue to manage the property for Concord Limited after the sale was completed.
The Management Agreement was negotiated between the Debtor and Concord Hotels. Among the many and various rights and responsibilities negotiated, the Management Agreement clearly stated that Concord Hotels would retain all profits and sustain all losses resulting from its management of the motel. Debtor was to remain responsible for real estate taxes, personal property taxes, insurance premiums, and debt service on the outstanding mortgages. All other debts and liabilities incurred in the operation of the motel were to be borne by Concord Hotels; the operation was to include marketing, legal work, personnel, rental collections, purchasing, maintenance and repairs. The Debtor was not to advance any funds whatsoever. In addition, the Agreement states that if the profits were insufficient to maintain the motel at any time, Concord Hotels would supply the necessary working capital; the Agreement does not speak to the source of said funds.
The final paragraphs of this Agreement speak to the issue of bankruptcy. Specifically, the parties agreed that the Debtor would file bankruptcy, and that the Debtor would not seek rejection of the Management Agreement. There is no mention of administrative expense payment, nor appointment of professional persons. The S and L Group had no knowledge of the Management Agreement or of Concord Hotels until they were so advised by their appraiser, on or about June 23, 1987.[2]
The Management Agreement was executed on June 18, 1987. Debtor filed bankruptcy on June 25, 1987. Thereafter, on July 2, 1987, Debtor filed its Motion to Sell its Real and Personal Property Free and Clear of Liens, and to Assume the Management Agreement with Concord Hotels. The S and L Group filed an Objection to said Sale and a Motion for Relief from Stay or Adequate Protection. As of the bankruptcy filing date, Debtor owed the S and L Group in excess of $2 million.
The auction sale occurred on July 28, 1987, at which time Tri-State out bid Concord Hotels by submitting the winning bid of $1,755,000.00. The Court Order, pursuant to the request of the Debtor and Concord Hotels, allowed Concord Hotels to continue its management until August 10, 1987.
On October 19, 1987, Concord Limited filed a Motion for Reimbursement of Administrative Expenses. The hearing on this matter followed.
*62 I. STANDING
The S and L Group has challenged Concord Limited's standing to bring the instant motion, asserting that Concord Hotels, the property manager, is the real party in interest. Concord Limited cites In re McKeesport Steel Castings, Co., 799 F.2d 91 (3rd Cir.1986) for its contention that the rule barring individual creditors from acting in lieu of the Trustee is often disregarded when sufficient reason exists to permit same.
Standing generally requires an allegation of present or immediate injury in fact, a personal stake in the outcome, a causal connection between the injury and the challenged action, and a likelihood of redress by a favorable decision. Phillips Petroleum Company v. Shutts, 472 U.S. 797, 105 S. Ct. 2965, 86 L. Ed. 2d 628 (1985); Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 102 S. Ct. 752, 70 L. Ed. 2d 700 (1982); Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 99 S. Ct. 1601, 60 L. Ed. 2d 66 (1979); New Jersey Speech-Language-Hearing Association v. Prudential Insurance Co., 724 F.2d 383, (3rd Cir.1983); Cavileer v. City of Pittsburgh, 569 F. Supp. 208 (W.D.Pa. 1983), aff'd 727 F.2d 1099 (3rd Cir.1984).
Additionally, the Supreme Court has often stated that the Plaintiff must assert his own legal rights and cannot rest his claim on the legal rights of third parties. Phillips Petroleum Co., supra; Secretary of State of Maryland v. Joseph H. Munson, Co., 467 U.S. 947, 104 S. Ct. 2839, 81 L. Ed. 2d 786 (1984); Valley Forge, supra; Singleton v. Wulff, 428 U.S. 106, 96 S. Ct. 2868, 49 L. Ed. 2d 826 (1976); Warth v. Seldin, 422 U.S. 490, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1976).
In the case at bar, we have two separate entities: Concord Limited, a limited partnership; and Concord Hotels, a separate and distinct corporate entity. The management agreement was negotiated between the Debtor and Concord Hotels. Concord Hotels took responsibility for the Debtor's expenses, except taxes, insurance, and debt service, in return for Debtor's receipts. At the eleventh hour, Concord Limited asserts that under a submanagement agreement, Concord Hotels turned over all profits to Concord Limited in return for a percentage fee, and Concord Limited paid all debts and liabilities.
The receipt of such information at this late date can be seen as nothing more than self-serving verbage. Concord Limited and Concord Hotels obviously were formed separately and distinctly with a purpose in mind: to say otherwise now is not credible. Therefore, Concord Hotels is the real party in interest possessing standing to bring this action.
An exception to this hard and fast rule has emerged under the doctrine of jus tertii standing. Reliance upon jus tertii requires the relationship between the litigant and the injured party to be inextricably bound, making the litigant as effective a proponent as the real party. Furthermore, the real party must be unable to represent his own interest. Even where the parties are very closely related, the real party must assert his own right, unless a genuine obstacle prevents said assertion. Joseph H. Munson, Co., supra; Singleton v. Wulff, supra.
No showing has been made which would lead to a determination that Concord Hotels was or is unable to pursue its own interest. Therefore, even if Concord Limited and Concord Hotels are completely intertwined, any action must be brought by Concord Hotels, unless Concord Hotels is prevented by a genuine obstacle. None being asserted, this Court finds that Concord Limited does not have standing to bring this action.
Having made this decision, we further analyze the reasons that Movant's request would be denied even absent to standing issue.
II. SECTION 506(c)
Concord Limited has asserted a right to compensation for expenses incurred in preserving the bankruptcy estate. The estate is unable to support such compensation without relying upon funds allocated as security to the S and L Group. Said funds *63 are the remaining proceeds from the sale of Debtor's hotel, on which the S and L Group held security interests in the form of mortgages.
Generally, administrative expenses are not chargeable against a secured creditor's collateral. Matter of Trim-X, Inc., 695 F.2d 296 (7th Cir.1982); Matter of F/S Airlease II, Inc., 59 B.R. 769 (Bankr.W.D. Pa.1986), rev'd on other grounds, 844 F.2d 99 (3rd Cir.1988); In re Chicago Lutheran Hospital Association, 75 B.R. 854 (Bankr. N.D.Ill.1987); In re Fiberglass Industries, Inc., 74 B.R. 738 (Bankr.N.D.N.Y.1987); In re Birdsboro Casting Corporation, 69 B.R. 955 (Bankr.E.D.Pa.1987); In re T.P. Long Chemical Inc., 45 B.R. 278 (Bankr.N. D.Ohio 1985).
An exception to that policy has been statutorily created by 11 U.S.C. § 506(c) which states:
(c) The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.
In order to recover expenses under 506(c), the Movant must prove that the expenses were reasonable, necessary, and beneficial to the creditor. In re Cascade Hydraulics and Utility Service, Inc., 815 F.2d 546 (9th Cir.1987); Matter of Trim-X, supra; In re Settles, 75 B.R. 229 (Bankr.C. D.Ill.1987); In re J.P. Construction Co., 54 B.R. 895 (Bankr.W.D.Va.1985); In re AFCO Enterprises, Inc., 35 B.R. 512 (Bankr.D.Utah 1983). Movant must show that the expenses occurred primarily for the benefit of the creditor, and directly benefitted the creditor. Indirect, uncertain or speculative benefits cannot be recovered. Incidental benefits which accrue to the creditor are generally not recoverable. In re Cascade Hydraulics, supra; Matter of Trim-X, Inc., supra; In re Lindsey, 59 B.R. 168 (Bankr.C.D.Ill.1986); In re Wyckoff, 52 B.R. 164 (Bankr.W.D.Mich.1985). Additionally, we have joined several other courts in the position that the consent of the secured creditor is a controlling factor in determining whether recovery under 506(c) is appropriate. Matter of Trim-X, supra; Matter of F/S Airlease II, Inc., supra; In re Wyckoff, supra; In re Hotel Associates, Inc., 6 B.R. 108 (Bankr.E.D.Pa. 1980).
Preservation of the going concern value of a business can constitute a benefit to the secured creditor. In re McKeesport Steel Castings Co., supra; In re Annett Ford, Inc., 64 B.R. 946 (D.Neb.1986); In re AFCO Enterprises, Inc., supra. However, such a determination is factual and must be made on a case-by-case basis.
From the outset it was clear in this case that the entire operation was created and maintained for Concord Limited's benefit and only for Concord Limited's benefit. The management company put in place by Concord Limited was installed to make the transfer of ownership as smooth as possible. If Concord Limited had not been planning to purchase the hotel, Concord Hotels would never have become the management team.
Debtor was relieved of any responsibilities, debts and expenses which would inure to Concord Limited's benefit upon transfer of ownership, i.e. maintenance, advertising, personnel, and purchasing. Debtor retained responsibility for taxes, insurance and mortgage debt. Not surprisingly, the sale negotiated between the Debtor and Concord Limited provided for a bankruptcy sale, free and clear of all liens and encumbrances. Therefore, Concord Limited would never be responsible for any sums owing to taxing bodies or the S and L Group; those parties would be relegated to seeking funds from the sale proceeds. The sale was negotiated for $1,730,000.00, and the S and L Group was owed in excess of $1,900,000.00. When told of the sale, and the anticipated distribution of $1,000,000.00 in full satisfaction of said debt, the S and L Group refused to consent.
When the management agreement was negotiated, no consent from the S and L Group was either sought or obtained. In fact, the management group was in place for almost a week before the S and L Group became cognizant of their activities. *64 Even then, the S and L Group received notice only from their own appraiser.
Based upon these facts it is clear that the continued operation of the hotel by Concord Limited and/or Concord Hotels was not done primarily for the benefit of the S and L Group and did not provide them a direct benefit. Frankly, it does not appear that the S and L Group received any benefit, nor did they provide any consent for the process.
Even if Concord Limited argued that silence is equivalent to acquiescence, the argument would fail. Silence/acquiescence presumes notice or knowledge. As the S and L Group had no notice prior to June 23, 1987, they could not silently consent. The bankruptcy was filed two days later. One week later when the Debtor filed the motion to sell the hotel and assume the management contract, the S and L Group filed an objection. To read any of the S and L Group's actions as consent is ludicrous.
Concord Limited asserts that a benefit was provided by keeping the business as a going concern. McKeesport Steel Castings, Co., supra. In this case we disagree. Concord Limited's only concern in keeping the hotel open and operating was to purchase it. There was no anticipation by the Debtor or by Concord Limited that the continued operation of the hotel would bring any greater sum to the S and L Group than that already offered $1,000,000.00. The S and L Group was on the threshold of completing its foreclosure proceedings, would have owned the property outright, and could have operated the hotel and restaurant/lounge or sold same. Given the property valuation of over $1,500,000.00, it seems likely that the S and L Group would have salvaged for itself at least as much as, if not more than, that provided by Concord Limited.[3]
Additionally, the hotel was operational before Concord Limited came into the picture. Concord Limited paints a bleak picture of 25 rooms without air conditioning, insufficient changes of linen for all 118 rooms, and no restaurant facilities. St. Clairsville is not a high volume tourist area, like New York or Boston. It is a small community where the hotels and motels average only 50% occupancy. In order for this facility to be a going concern under the facts of this case, it was not necessary to have all 118 rooms ready for occupancy. If 25 of the rooms are without air conditioning, the hotel would need to fill 93 rooms before running into difficulty. Given the state of affairs of the various facilities in the area, the chances of such difficulty were less than remote. Similarly, if this hotel averages only 45% occupancy, it is not necessary to have a complete change of linen for all 118 rooms. While the hotel had no operative restaurant, it was within close proximity to a regional shopping mall and several restaurants. Being the lowest priced facility in a small town and easily accessible from a major interstate highway, make it attractive to overnight travellers. "Going concern" value, as discussed in McKeesport Steel Castings Co., supra, does not mean upgrading; it requires only maintaining.
This Court is also at a loss to determine the benefit received by the S and L Group as a result of travel costs and supervision of "capital improvements." These line items were incurred only for Concord Limited's benefit. These expenditures did not even incidentally benefit the S and L Group; and could not be compensable under any reading of 506(c).
It appears to this Court that Concord Limited never intended or anticipated submitting requests for reimbursement for any of these expenses; they did intend to reap the full benefit of same. It was only after they came away from the sale empty-handed that they sought recompense. Concord Limited took a calculated risk and lost. The secured creditor cannot be charged with the financing of a risk taken without their consent and, to the contrary, over their objection.
*65 III. NUNC PRO TUNC APPOINTMENT
As an alternative ground for recovery, Concord Limited seeks appointment as a professional nunc pro tunc to the filing of the bankruptcy. Bankruptcy Courts have the power to grant nunc pro tunc appointment of counsel and other professionals in limited cases where extraordinary circumstances are present. In re F/S Airlease II, Inc., 844 F.2d 99 (3rd Cir.1988); Matter of Arkansas Co., 798 F.2d 645 (3rd Cir.1986). In order to be appointed nunc pro tunc, the Court must determine that prior approval would have been appropriate under 327, and that the delay in seeking approval was due to hardship beyond the professional's control. In re F/S Airlease II, Inc., supra; Matter of Arkansas Co., supra. Pursuant to 327 of the Code, the Bankruptcy Court may grant retroactive approval only if it finds, after a hearing, that it would have granted prior approval. That determination requires proof that the applicant is "disinterested", does not possess an adverse interest, and performed services which were necessary under the circumstances. Matter of Arkansas Co., supra.
A party is "disinterested" if he has no material interest adverse to the estate or any class of creditors as a result of any direct or indirect relationship to, connection with or interest in the debtor. 11 U.S.C. 101(13). From a review of the previous discussions in this Opinion it is abundantly clear that Concord Limited is not a disinterested person. The relationship between Concord Limited and the Debtor commenced prepetition. Their connection, until the date of sale in this Court, was substantial; in fact, Concord Limited was thoroughly involved in the actual bankruptcy filing. Concord Limited's actions stayed the S and L Group's foreclosure proceeding and provided them with a distribution of less than 50%. It would be very difficult to find a non-insider who was any more interested than Concord Limited.
Based on this analysis, this Court would not have been able to approve Concord Limited's appointment, even if the request had been made in a timely fashion.
Assuming arguendo, we were to find that Concord Limited was disinterested, no nunc pro tunc approval could be granted. The law in this Circuit is very clear: the lack of prior approval must be the result of extraordinary circumstances hardship beyond the professional's control. In re F/S Airlease II, Inc., supra; Matter of Arkansas Co., supra.
In F/S Airlease, the Third Circuit denied such approval to a broker, stating as follows:
Simon is a sophisticated businessman who was represented by attorneys throughout the course of his dealings with Airlease. This is not a case in which a person, completely ignorant of the requirements of the Bankruptcy Code and without legal representation, justifiably relied on the superior expertise of another. See In re Freehold Music Center, Inc., 49 B.R. 293 (Bankr.D.N. J.1985). The evidence here suggests that Simon's attorney was familiar with the requirements of the Bankruptcy Code, including the requirements of section 327(a).
In the case at bar we are faced with a highly sophisticated group of businesspeople. At the hearing on this matter, witnesses for Concord Limited testified that they had been involved in the purchase of several other hotel facilities in other parts of the country.
Concord Limited was also represented by two law firms: Kohrman, Jackson & Krantz, and Buchanan Ingersoll, P.C. While this Court is not aware of the scope of the Kohrman firm's practice, we know that counsel from Buchanan Ingersoll hold themselves out as some of, if not the premier bankruptcy practitioners in this district. We are absolutely certain that if Concord Limited had ever intended to be appointed as a professional in this case, Buchanan Ingersoll would have attempted to secure such appointment.
Therefore, under the law as enunciated in this Circuit, a motion for nunc pro tunc appointment would of necessity be denied.
*66 CONCLUSION
This is a clear case of a gambler who wants to win all, but take no risks. Concord Limited wanted to buy this hotel and expected to make it a profitable entity. To that end, they invested substantial time and some money in the facility. Concord Limited knew that the Debtor would be filing bankruptcy and knew that a purchase through bankruptcy carried with it certain benefits (taking free and clear of liens and encumbrances), and certain risks (the Court may not approve the sale or the high bid may be made by another entity). Having lost the game, Concord Limited now wants the House to return the ante. Keeping in mind the caveat, "Do not risk what you cannot afford to lose," an appropriate Order will be issued.
ORDER OF COURT
AND NOW, this 3rd day of May, 1988, in accordance with the foregoing Memorandum Opinion of this same date it is hereby ORDERED, ADJUDGED, and DECREED that Concord Limited's Motion for Administrative Expense is DENIED.
NOTES
[1] While the S and L Group was advised of the pending sale, they did not know the name and financial strength of the purchaser until some time shortly before the bankruptcy filing.
[2] The S and L Group hired said appraiser in conjunction with the foreclosure proceedings discussed supra.
[3] This property valuation and subsequent references to vacancy rates and marketability were obtained from the property appraisal of William J. Lemmon, submitted under affidavit and filed in this case at Docket Number 25. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550997/ | 86 B.R. 833 (1988)
In re Irwin & Roberta STELWECK, Debtors.
In re Alfred & Agnes STELWECK, Debtors.
UNITED STATES of America, Plaintiff,
v.
Irwin STELWECK, Defendant.
UNITED STATES of America, Plaintiff,
v.
Alfred STELWECK, Defendant.
Bankruptcy Nos. 86-01403S, 86-01402S, Adv. Nos. 86-0487S, 86-0486S.
United States Bankruptcy Court, E.D. Pennsylvania.
May 26, 1988.
As Amended June 6, 1988.
*834 *835 Jerome J. Verlin, Philadelphia, Pa., for debtors/defendants.
Steven Usdin, Philadelphia, Pa., for trustee.
Catherine Votaw, Asst. U.S. Atty., Philadelphia, Pa., for plaintiff.
OPINION
DAVID A. SCHOLL, Bankruptcy Judge.
INTRODUCTION AND PROCEDURAL HISTORY
The instant consolidated adversarial proceedings present an interesting procedural issue regarding the role of bankruptcy courts in deciding dischargeability complaints, a novel substantive issue regarding interpretation of 11 U.S.C. § 523(a)(7), and a difficult and detailed factual analysis to resolve claims raised under 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(6). Procedurally, we decide that bankruptcy courts can determine whether unliquidated debts are dischargeable, but should only determine dischargeability rather than the amount of damages arising from the underlying debt. We hold that § 523(a)(7) does not embrace claims under the federal False Claims Act, 31 U.S.C. § 3729, et seq., because they are in the nature of compensation rather than punishment. Finally, we hold that the record does not support a finding that the debts are non-dischargeable under §§ 523(a)(2)(A) or 523(a)(6). Therefore, we render judgment in favor of the Defendants.
Irwin and Roberta Stelweck and Alfred and Agnes Stelweck filed their respective underlying Chapter 7 Petitions in this Court on March 24, 1986. The Plaintiff, the United States of America (hereinafter referred to as "the Plaintiff"), filed the instant adversarial proceedings against Irwin and Alfred Stelweck, who are brothers (hereinafter referred to as "the Defendants"), on May 80, 1986. The Defendants were officers in a company known as E & S Comfort Inc. (hereinafter referred to as "E & S"), which sold seat-lift chairs. The Plaintiff filed the present adversary proceedings against the Defendants alleging that the Defendants submitted fraudulent claims for reimbursement for their product to Medicare. The Plaintiff asks this Court to not only declare the obligations of the Defendants to the Plaintiff non-dischargeable, but to impose damages for the Defendants' alleged fraud, including penalties under the federal False Claims Act which total in excess of $10 million.
Disposition of these proceedings was delayed in earlier stages due to their entanglement with their four other related adversary proceedings: (1) An action by the Trustee in the Chapter 11 case of E & S (Bankr. No. 85-05474K) to recover certain claims against the Plaintiff herein (Adv. No. 86-0197K); (2) A counterclaim by the Plaintiff to recover for claims wrongly paid (Adv. No. 86-0431S); and (3) Actions by the Trustee against each of the Defendants herein (Adv. Nos. 86-1124K and 86-1050K). On April 13, 1988, we approved a complex Stipulation of Settlement of Adv. Nos. 86-0197K and 86-0431K, featuring the agreement of the Plaintiff to pay the E & S Trustee $1 million. The disposition of Adv. Nos. 86-1124K and 86-1050K shall be considered at a status conference presently scheduled for June 15, 1988.
Trial in these matters, which we broke loose from its entanglement with the other proceedings, was conducted on January 7 and 8, 1988. After completion of the Transcripts, the Plaintiff and the Defendants submitted proposed Findings of Fact, Conclusions of Law, and post-Trial Memoranda of Law on March 18, 1988, and April 6, 1988. Pursuant to Bankruptcy Rule 7052 and Federal Rule of Civil Procedure 52(a), we present our decision in the form of Findings of Fact, Conclusions of Law, and a Discussion.
FINDINGS OF FACT
1. E & S is a Pennsylvania corporation whose business was the sale of seat-lift chairs, i.e., chairs which mechanically elevate *836 a person from a sitting to a standing position and vice-versa.
2. E & S received reimbursement from Medicare for seat-lift chairs sold to Medicare recipients. The overwhelming majority of seat-lift chairs marketed by E & S were sold to Medicare recipients. As a result, E & S's main source of income was reimbursement from Medicare.
3. Prospective customers contacted E & S by phone to order their seat-lift chairs. Upon such a contact, E & S would send a Medicare Claim form (Form HCFA-1500A) (hereinafter referred to as "the claim form") to be completed by the prospective customer/Medicare recipient (hereinafter referred to as a "beneficiary"). About the same time, E & S sent a form letter to the beneficiary's physician requesting that the physician complete a Certificate of Medical Necessity form (hereinafter referred to as a "CMN"). Both forms were provided by Pennsylvania Blue Shield. These forms were subsequently returned to E & S by the beneficiaries. E & S would then make arrangements to deliver a chair to the beneficiaries prior to submitting a claim to Medicare for reimbursement.
4. The Medicare program is administered by the Health Care Financing Administration (hereinafter "HCFA"), an agency of the Plaintiff's Department of Health and Human Services (hereinafter "HHS"). HHS has contracted with Pennsylvania Blue Shield (hereinafter "Blue Shield") to process Part B Medicare claims, including seat-lift chairs.
5. Blue Shield required the submission of a completed claim form and CMN prior to approving Medicare reimbursement for a seat-lift chair.
6. Eileen Cohen (hereinafter "Cohen") was the President of E & S, and was employed full-time with the company from its inception in May, 1984, until January, 1986. Her job duties included reviewing claims prior to submission to Blue Shield to insure that the forms were properly completed; contacting physicians with questions regarding the CMN's; responding to calls or complaints from beneficiaries; dealing with personnel matters; and billings. In addition, Cohen also was involved with advertisement and shipping for the company.
7. The claim forms had to be signed by the physician or other supplier of medical services. By signing the claim form, such supplier certified that the services billed for "were medically indicated and necessary for the health of the patient." (Government Exhibit 1, at 1).
8. Each of the contested claim forms were signed by either one of the Defendants or Cohen as the supplier of medical services.
9. The CMN's included a space for the attending physician to indicate the patient's diagnosis. The Form provided that "SIGNATURE OF THE PHYSICIAN CERTIFIES THAT THE ABOVE REPRESENTS HIS JUDGMENT OF THE PATIENT'S NEED FOR THE EQUIPMENT." (Id. at 3).
10. There were three different sets of standards for determining whether a seat-lift chair qualified for Medicare reimbursement in effect during the time that the contested claims were submitted. These were the Medicare coverage issues Appendix for seat-lift chairs (hereinafter referred to as the "Medicare Appendix"); the Medicare Claims Payment Decision Logic Table for seat-lift chairs (hereinafter referred to as the "Logic Table"); and the Typical Diagnosis List for a seat-lift chair.
11. The Medicare Appendix is from the Medicare Carrier's Manual published by HCFA and provides in pertinent part that
[r]eimbursement may be made for the rental or purchase of a medically necessary seat lift when prescribed by a physician for a patient with severe arthritis of the hip or knee and patients with muscular dystrophy or other neuromuscular diseases when it has been determined the patient can benefit therapeutically from use of the device.
12. The Logic Table was utilized by Blue Shield claim processors processing claims for seat lift chairs. Rule 1 of the Logic Table provided that beneficiaries with the following conditions were entitled to reimbursement for a seat lift chair:
*837 Severe arthritis of the hip or knee, i.e.,
Rheumatoid arthritis
Osteoarthritis
Osteoporosis
Inflammatory polyarthritis
Degenerative Joint Disease (DJD)
Severe ankylosing spondylitis
Arthritis described as crippling, degenerative, or generalized
NOTE: With any of the conditions above, there must be hip and/or knee involvement.
Neuomuscular Diseases, i.e.,
Muscular dystrophy
Multiple Sclerosis
Landry's Ascending Paralysis
Polimoylitis [sic] involving both legs
Parkingson's [sic] Disease
Myasthenia gravis
Amyotrophic Lateral Sclerosis
Guillian-Barre Syndrome Infectious polyneuritis, acute ideopathic polyneuritis
Paralysis,paresis, paraplegic, hemiparesis, any diagnosis with paralysis, i.e., CVA (stroke) with paralysis; degeneration of spinal column with paralysis.
If the diagnosis on the CMN was not one contained in Rule 1 but related to a patient's hip or knee, then the claim had to be reviewed by a physician employed by Blue Shield before determining whether to deny or approve the claim under Rule 2. Pursuant to Rule 3, if the diagnosis was not contained in Rule 1 and did not relate to the patient's hip or knee, then the claim was denied by the claims examiner.
13. The Typical Diagnosis List simply lists diagnoses which typically will qualify for Medicare reimbursement. This list includes the following:
Advanced Parkinson's Disease
Cerebrovascular Accident with Apraxia
Muscule[sic] Atrophy
Polymyositis
Severe Arthritis of the Hips or Knees
Severe Osteoarthritis of the Hips or Knees
Severe Rheumatoid Arthritis of the Hips or Knees
14. When E & S first started business in 1984, Blue Shield provided the company with a set of claim forms and CMN's. At the request of Cohen, Blue Shield later provided E & S with the Typical Diagnosis List. E & S provided this list to physicians together with the CMN's to be completed. The list originally provided did not include the words "with hip & knee involvement" next to Severe Osteoarthritis of the Hips and Severe Osteoarthritis of the Knees. Blue Shield did not provide E & S with copies of either the Medicare Appendix or the Logic Table.
15. Many of the claims initially submitted by E & S were denied by Blue Shield because they did not meet any of the diagnoses listed on the Logic Table.
16. When Cohen had a question regarding a claim that was denied, she contacted Jill C. Shaffer (hereinafter referred to as "Shaffer"), who was a telephone customer service representative with Blue Shield. Cohen spoke to Shaffer approximately two or three times a week, at which times they discussed how to properly complete the forms and claims that had been denied.
17. According to Shaffer, when Cohen called with a question about a claim, she would pull copies of the claim form and certificate to discuss with Cohen. However, on cross-examination, Shaffer denied ever viewing E & S claim forms after they had been denied.
18. Shaffer advised Cohen that, in order for a claim to be approved for a beneficiary with arthritis, the diagnosis on the claim form must indicate that the arthritis was severe and that it affected the beneficiary's knees and/or hip.
19. If a claim form was not properly completed, Blue Shield would either return the form to the provider with directions to re-submit the claim form with any corrections necessary to process and approve a claim, or provide the supplier with written notice that the claim was denied.
20. Early in the company's operation, approximately two hundred (200) unprocessed claim forms were returned to E & S by Blue Shield with a note indicating that the diagoses had to specify that the patient's *838 arthritis involved the hips and/or knees.
21. It is clear that Cohen believed that in order for a claim involving a diagnosis of arthritis to be approved by Blue Shield, it had to include the "magic language" relating specifically to severe arthritis of the hip or knee with hip and/or knee involvement. It is not clear that Cohen was advised that this language was required on each claim form for customers with arthritis. It is possible that this was simply Cohen's understanding from her conversations with Shaffer. However, Cohen's testimony regarding her understanding of Blue Shield's requirements was credible and consistent with Shaffer's testimony in this regard.
22. Cohen added the typed language "with hip and knee involvement" on her copy of the Typical Diagnosis List after her conversations with Shaffer.
23. Shaffer testified that she had advised Cohen that there were two ways to "correct" a CMN. By the first method, the provider submitting the claim could contact the physician by telephone and obtain the additional information which could be added to the CMN. However, according to Shaffer, in order to properly add any additional information to a CMN, the provider had to (1) state that the addition was a correction; (2) state that the information was obtained via telephone call; and (3) return the CMN to the physician to re-date and initial the change. According to the second method, the provider could send the physician a new, blank CMN to be completed.
24. No written policy or manual sets forth the proper procedures to follow when "correcting" a CMN. Shaffer's directions to Cohen were never put in writing.
25. Cohen testified that she spoke to Shaffer frequently regarding the Medicare claims process and that Shaffer was generally helpful. According to Cohen, Shaffer advised her to obtain a stamp to use on the claim forms that read "add 99 months of Necessity To Pay in 1 Lump Sum" in order to receive reimbursement on E & S's claims in one lump sum. This stamp in fact appears on many of the claim forms admitted into evidence in this case.
26. According to Cohen, she was advised by Shaffer to add "hip and knee involvement" to claims involving arthritis in order to be paid. Also, according to Cohen, she was not advised that it had to be noted on the CMN that the addition or change was authorized by the physician.
27. Almost all of the disputed claims admitted into evidence in this case contained typing on the CMN. This typing was added by employees of E & S at the direction of either the Defendants or Cohen after the CMN was returned to the company by the attending physician.
28. E & S was never provided with written or oral notice that any individual or group of claims was denied or reimbursement withheld due to typing on the CMN's prior to November, 1985.
29. No employee of Blue Shield ever advised E & S that the claims were completed incorrectly either due to the additional typing or the lack of the physicians' initials. According to Shaffer, the claims department assumed that whatever was on the CMN was in fact authorized by the physician.
30. Shaffer appeared to the court to be a loyal employee who was reluctant to admit that either she or her employer made any mistakes in this process. This attitude appeared to color her memory and responses (i.e., her refusal to admit on cross-examination that she had in fact viewed claims from E & S which had been rejected). Cohen, on the other hand, while not appearing to be as familiar with Medicare requirements as Shaffer, appeared to be generally credible in her recitations. Cohen could recall the approximately number of claims initially returned to E & S for reprocessing and remembered directions given by Shaffer in other matters, i.e., the "99 months" stamp. For these reasons, we credit Cohen's testimony regarding her conversations with Shaffer. At a minimum, we find that Cohen testified truthfully regarding her understanding of Shaffer's directions, even though it may have been a misunderstanding.
*839 31. Cohen testified that she or one of the Defendants contacted the signatory physician for approval before making any additions to the diagnoses on the CMN's. When claim forms were received in the office, they were reviewed to determine if they were complete and if the diagnosis was one contained on the Typical Diagnosis List. If the diagnosis was not a qualifying diagnosis, the signatory physician would be contacted and asked for additional information regarding the customer's impairment.
32. The claim forms were placed in one of three piles depending on the outcome of the above conversation. Claim forms for customers not suffering from a qualifying impairment were placed in one pile. These forms were filed and were not submitted to Blue Shield for reimbursement. A second pile contained claim forms for customers suffering from some form of arthritis or degenerative bone disease which was both severe and involving either the knees or hips. This pile was given to the typists with directions to add the "magic language," i.e., "severe with hip and knee involvement." The third pile included claim forms for beneficiaries whose physicians indicated that they suffered from qualifying impairments in addition to those originally listed on the CMN. These forms were given to the typists with a piece of paper indicating the additional information to be typed onto the CMN.
33. There were three typists employed by E & S to process the claim forms prior to their submission to Blue Shield, Esther Tuner (hereinafter referred to as "Tuner"), Lori Johnston (hereinafter referred to as "Johnston"), and Janet Gomer. Tuner and Johnston testified in this matter.
34. Tuner testified that she was instructed that, when she received a claim form, she was to check the diagnosis on the physician's certificate to make sure that it matched a diagnosis on the Typical Diagnosis List. Tuner testified that if the diagnosis was not on the list, she was directed to type in "severe arthritis of hips and legs with hip and leg involvement." Tuner further testified that she processed one hundred (100) to one hundred and twenty-five (125) claims per day. On cross-examination, Tuner testified that she did not know if a physician had been contacted regarding the diagnosis before the form was given to her.
35. Johnston testified that she also would compare the diagnoses on the claim forms with those on the Typical Diagnosis List. If the diagnosis was arthritis, Johnston would type in "severe . . . with hip & knee involvement." On direct, Johnston testified that she did not receive notes on individual claim forms. However, on cross-examination, Johnston testified that she did not remember if she had received notes on the claim forms. Johnston also testified that she was advised that the particular language typed was required by Medicare to process the claims for reimbursement. If Johnston had a question about a diagnosis, she would return the form to the Defendants or Cohen, which she did frequently.
36. If a claim was denied by Blue Shield, the supplier could pursue an administrative appeal and would be afforded a hearing. At that hearing, the supplier would have an opportunity to submit additional evidence in support of its claim for reimbursement from Medicare, including supplemental information from the physician who completed the CMN.
37. All of the disputed claims at issue in the present adversarial proceedings were approved and paid by Blue Shield. As a result, there was no need for any party to to request or for Blue Shield to hold an administrative hearing with respect to these now contested Medicare claims.
38. All of the contested claims were accompanied by completed CMN's wherein the beneficiary's treating physician certified that, in his or her judgment, the seat-lift chair was necessary for the health of his or her patient. None of these CMN's were forged.
39. When processing a seat-lift chair Medicare claim, the Blue Shield claims processors would check to make sure that the claim was accompanied by a CMN signed by a physician and that the diagnosis matched one contained in the Logic Table *840 before approving the claim. In comparing diagnoses, the claims processors would consider the language typed by employees of E & S as well as the handwritten language of the physicians.
40. Any language added by E & S to the diagnoses was typed. Employees of E & S never attempted to imitate the physician's handwriting or to otherwise write the additional language so that it appeared to be written by the physician.
41. The claims processors at Blue Shield routinely processed and approved forms which contained both typing and handwriting on the diagnosis line. There was no evidence that any claims processor brought this situation to the attention of a supervisor prior to mid-August, 1985.
42. Lois K. VanOrden (hereinafter referred to as "VanOrden") is the manager of the Medicare Utilization Review Department at Blue Shield. She testified that, in or about mid-August 1985, all claims for Medicare reimbursement for seat lift chairs were subject to more intensive review. As part of this modified claims procedure, physicians were required to complete a detailed functional capacities questionnaire in addition to completing the CMN. HCFA had requested that Blue Shield take extra precautions in paying seat-lift claims because it appeared that suppliers were using standardized language on physician's certificates. Van Orden was not advised of the typing on the contested E & S claim forms until after mid-August, 1985.
43. In late November, Blue Shield received a directive from HHS advising it to suspend any future payments to E & S. According to this directive, HHS was conducting an investigation into the Medicare billings of E & S. On November 27, 1985, Van Orden sent E & S a letter advising it that reimbursement for all of its claims would be withheld thereafter. Neither letter mentioned the typing on the CMN's as as basis for this action. All reimbursement for claims submitted by E & S was withheld after November 27, 1985, and the monies owed to E & S were placed in an escrow account. The disputed claims at issue in the present matter were all paid by Medicare prior to the November, 1985, directive.
44. Between November, 1985, and January, 1986, Cohen and the Defendants spoke to and met with representatives of Blue Shield and Medicare several times to discuss the status of E & S's pending claims. During this period, E & S was not advised, either orally or in writing, that there was a problem regarding the typing on the CMN's.
45. As a result of the loss of Medicare reimbursement, E & S was unable to continue to meet its regular financial obligations and laid off all of its employees. On December 19, 1985, an involuntary bankruptcy petition was filed in this Court against E & S, and a Trustee was appointed on January 2, 1986.
46. The Trustee filed Adv. No. 86-0197S, referenced at page 3 supra, against HCFA and Blue Shield to compel turnover of the funds being held in escrow by Blue Shield for the claims submitted by E & S. HCFA filed an Answer and Counterclaim at Adv. No. 87-0431S, alleging that it was entitled to an offset against any funds which may be due E & S and seeking damages against E & S for alleged fraud on the part of the Debtor under the federal False Claims Act, 31 U.S.C. § 3729(a). The Stipulation of Settlement settling this dispute, referenced at page 3 supra, provides, inter alia, as follows: (1) E & S had approximately 3,300 claims pending before Blue Shield; (2) The Plaintiff shall pay the Trustee one million ($1,000,000.00) dollars in settlement of those claims; and (3) The alleged 789 claims previously submitted by E & S and paid by Blue Shield which are in issue in these proceedings are exempted therefrom.
47. Robert Taylor (hereinafter referred to as "Taylor") is a program analyst with HHS, Office of Inspector General. In late 1985, Taylor conducted an investigation into possible overutilization or abuse by E & S in providing seat-lift chairs to Medicare recipients. Taylor was called to testify on behalf of the Defendants.
48. Taylor testified that, in May, 1987, he prepared the results of a survey of *841 thirty (30) to thirty-five (35) of the approximately eight hundred (800) beneficiaries in issue who had purchased seat-lift chairs from E & S. As part of this survey, Taylor interviewed both the beneficiary and his or her physician. Taylor testified that, during the course of his investigation, he observed at least three beneficiaries engaged in activities such as climbing or sitting on stairs, which led Taylor to conclude that the person did not need a seat-lift chair. However, every doctor contacted indicated that he or she had prescribed the seat-lift chair, although one doctor indicated that he had done it simply as a favor to his patient. None of the doctors indicated that their signatures had been forged on the CMN's.
49. Included among the claims admitted as exhibits in this case were three questionnaires completed by Taylor in doing the survey. They indicate the following:
a. Hilda Levy The physician's questionnaire indicates a diagnosis of atrophy of the left leg, DJD [degenerative joint disease], spinal stenosis, and possible herniated disc. Her doctor indicated that she was unable to walk independently and that she would have to use a seat-lift chair indefinitely. The questionnaire completed by Taylor indicates that the information contained on the CMN was correct.
b. Mary Nahon The physician questionnaire contains a diagnosis of "CVA [cerebrovascular accident or stroke], DJD (Advanced); involved in auto accident and severely injured." While Nahon's physician failed to identify the location of Nahon's DJD, the patient questionnaire indicates "osteoarthritis of knees." The doctor indicated that patient's prognosis was "Poor-Dying" and that she would need a seat-lift chair indefinitely. Taylor's questionnaire indicates that the information contained on the CMN was correct.
c. Elizabeth Sharpe The beneficiary questionnaire indicates "medical problems, has arthritis but not crippling." The physician questionnaire indicates a diagnosis of "Diabetes/Arthritis-Some Stiffness-Arthritis Not Considered Severe." Taylor's questionnaire indicates that the CMN was not correct since Sharpe's "arthritis is not severe or crippling." However, on the CMN, Sharpe's doctor had written a diagnosis of "Arthritis of Hips & Knees" and a prognosis of "guarded." The additional typing on Sharpe's form states "with hip & knee involvement." It is significant to note that the additional typing on Sharpe's CMN does not indicate that the arthritis was severe. If in fact E & S routinely added "severe" and "with hip & knee involvement" to every form which indicated that the beneficiary had Arthritis, one would expect an addition of "severe" to Sharpe's form.
50. Charles Arthur Tress (hereinafter referred to as "Tress") is the Manager of the Medicare Fair Hearing office. At the request of Blue Shield, Tress reviewed 849 claims submitted by E & S which had been reimbursed to determine if they should have been paid based solely on the handwritten diagnosis on the CMN without considering any typewritten material on the form. In making these determinations, Tress used the Logic Table utilized by Blue Shield claims examiners. When acting in his normal capacity as a hearing officer, however, Tress bases his decisions on the Medicare statute and regulations and a Carrier's Manual published by HCFA. If a diagnosis was illegible or not sufficiently specific (i.e., as to the affected part of the patient's body), Tress determined that the claim should have been denied.
51. Tress testified that, of the 849 claims that he reviewed, only 59 should have been paid based only on the handwritten diagnosis. On cross-examination, he indicated that with additional information, some of the claims could have been approved.
52. Neither the total number of claims submitted by E & S to Blue Shield nor the number of such claims that included typing added to the CMN's were established with any degree of certainty. The government produced a list of 849 claims that were paid that had typing on the CMN's diagnosis. Cohen estimated that, as of November, 1985, E & S had 5,000 to 6,000 claims pending with Blue Shield which had been submitted some time after the company *842 began doing business in May, 1984. The Stipulation entered in Adv. No. 86-0197S refers to 3,300 pending claims.
53. We consider the testimony of Tuner that she processed 100 to 125 claims per day to be an overestimation. If in fact the three typists were processing 100 claims a day for the approximately eighteen months that E & S was operating at its full capacity, then E & S would have submitted a total of approximately 118,800 claims and would have delivered that many seat-lift chairs. We find this estimation to be incredible and unsupported by the record.
54. The Plaintiff submitted 789 of the disputed claim forms as evidence in this case.
55. All but two of the claims admitted into evidence were reduced copies of the original claim forms. Most of the copies admitted were of a poor quality. Many of the copies were light and/or blotchy. In addition, the physician's handwriting was illegible on at least 75 of the forms admitted into evidence.
56. According to the physicians' handwritten diagnoses on the CMN's, the majority of the disputed claims were for beneficiaries who suffered from some form of arthritis, including osteoarthritis, rheumatoid arthritis, gouty arthritis, or degenerative joint disease.
57. Approximately 70 claims admitted involve nonarthritis diagnoses involving the hips or knees.
58. Approximately 41 claims admitted involved diagnoses of CVA or stroke.
59. The majority of handwritten diagnoses did not indicate the level of severity of the impairment, i.e., severe, moderate, etc.
60. The majority of the CMN's involved elderly persons, many if not most of whom were over 70 years of age.
61. The majority of the prognoses on the CMN's were poor or guarded, for example:
Charles Cardile Arthritis of low back and hip joint; Prognosis poor
Jean Amendolari Rheumatoid Arthritis of knees, hips, hands; Prognosis guarded
62. The physicians' handwritten diagnosis generally did not specify the location of the arthritic or neuromuscular condition, for example:
Sister Mary Grace Varallo CVA [stroke], severe arthritis, Prognosis guarded
Margaret Barone Muscular Attrophy secondary to Poliomyelitis [typed: of lower extremities]
Lillian Berger Spondylosis, Osteoporosis, Osteoarthritis
Madeline Kamerling DJD
John Whittaker Pernicious Anemia and Osteoarthritis, severe; Prognosis poor
63. A number of handwritten diagnoses on the CMN's for the contested claims appear to match diagnoses in Rule 1 of the Logic Table, for example:
Ellen Franklin Degenerative Arthritis of both knees
Rose Greenbaum DJD of knees and hip
Gina Giampietro CVA with right sided paresis
Norma Hullings Hemiparesis
Mary John Severe Osteoarthritis of hips and knees
Rosemary Kelly Rheumatoid Arthritis of the legs
Mary Kowalski Osteoarthritis of knees, hips, spine
Rosaria LaRocca Spondylitis, Osteoarthritis knees and hips
Giovanni Vinacio Osteoarthritis of knees and low back; Prognosis guarded (age 92)
64. A number of handwritten diagnoses appear to qualify for consideration for Medicare funding under Rule 2. This rule relates to other (non-Rule 1) diagnoses which involve the hip or knee. Under this Rule, the claim would be reviewed by a doctor employed by Blue Shield to Determine eligibility for Medicare funding, for example:
Ruth Marshall Above knee amputation, left leg; hemiarthroplasty, medical compartment, right knee
*843 Anna Cerny Degenerative arthritis of spine/status post fractured hip (age 95)
Saverio Ciamarra S/P fracture right hip, COPD, contusion of spinal cord
Irwin Hollander Bi-lateral leg amputation
Virginia R. Payne Status post-total hip replacement L/degenerated R/hip
65. Many of the CMN's submitted contained multiple diagnoses.
66. A few CMN's were accompanied by prescriptions written by the physician on his or her prescription pad.
67. The typing on approximately 600 of the contested CMN's included the words "severe _______ of hips and knees with hip and knee involvement" or just "of hips or knees with hip and knee involvement."
68. Some of the CMN's contained typing not found on the Typical Diagnosis List, for example:
Rose Figliuolo COPD [chronic obstructive pulmonary disease], CVA [typed: with hemiparesis of lower extremities]
Charles Griffin Advanced Parkinsons Disease
Lawrence E. McCall Old CVA, DJD [with Apraxia, lower extremities, paralysis]
Zell E. Berry (illegible) . . . CVA June, 1983 [paralysis of right knee and hip]
Michael A. DeLaura Diabetes [amputee perifial [sic] vascular disease/severe osteoarthritis of hips w/hip involvement]
69. Approximately twenty CMN's contained only typed material with no handwritten diagnoses.
70. Some of the CMN's which contained typing on the diagnosis did not indicate that the arthritis was severe.
71. The Plaintiff called both Defendants to testify as upon cross-examination. Both Defendants invoked their Fifth Amendment privilege and refused to answer any of the questions asked by the Plaintiff's counsel, including questions regarding Defendants' role in causing the typing to be added to the disputed physicians' certificates; whether Defendants had contacted any doctors regarding their diagnosis; and whether the Defendants "knew [they] were submitting false claims for payment to Blue Shield."
72. The parties stipulated that the average reimbursement for each of the contested claims was $1,140.00.
73. The Defendants did not list the Plaintiff as a creditor on their Chapter 7 schedules.
74. The Plaintiff did not filed a Proof of Claim in either of the Defendants' bankruptcy cases.
CONCLUSIONS OF LAW
1. A bankruptcy court may determine dischargeability of a claim which is not liquidated but will generally not make the determinations necessary to liquidate the claim itself, since the dischargeability plaintiff is expressing a desire not to make a claim against the Debtor's estate.
2. The Plaintiff failed to establish all of the prerequisites necessary to successfully maintain an action under § 523(a)(2)(A). In particular, it failed to establish, by the requisite clear and convincing evidence standard, that the typed additions to the CMN's were false or that they were made by the Defendants with the purpose and intent of deceiving the Medicare Program.
3. Absent convincing independent evidence of these necessary elements of a cause under 11 U.S.C. § 523(a)(2)(A), the court will not impute these elements from the Defendants' invocation of their Fifth Amendment privilege to not testify.
4. The Defendants' debts to the Plaintiff were not established to be non-dischargeable under 11 U.S.C. § 523(a)(6) because of the Plaintiff's failure to prove that the Defendants intended to effect a willful and malicious conversion upon the Plaintiff.
5. The penalty provisions of the federal False Claims Act are not within the scope of 11 U.S.C. § 523(a)(7). Rather, a claim under the False Claims Act is non-dischargeable only under § 523(a)(2)(A) or § 523(a)(6), where the requirements of those Code sections have been met.
*844 6. The Plaintiff has not proven that the debts in issue are dischargeable under 11 U.S.C. §§ 523(a)(2)(A), (a)(6), or (a)(7), and therefore the Defendants are entitled to judgment in their favor.
DISCUSSION
I. A BANKRUPTCY COURT SHOULD RESOLVE A DISCHARGEABILITY COMPLAINT WHETHER THE UNDERLYING DEBT IS LIQUIDATED OR NOT, BUT IT SHOULD DECLINE TO ENTER A LIQUIDATED JUDGMENT ON A DISCHARGEABILITY COMPLAINT IN A CHAPTER 7 PROCEEDING
The parties apparently take radically different points of view on the role of the bankruptcy court when the issue of dischargeability is raised in reference to a debt which has not been liquidated pre-petition. In discussing the Plaintiff's § 523(a)(7) claim, Defendants argue that no such claim can be raised because there has been no imposition of any fine or penalty upon the Defendants prior to the institution or even the trial of this proceeding.
We disagree with the assertion that liquidation of a debt has any bearing on whether it is dischargeable or not. The role of the bankruptcy court is not to determine the extent of non-dischargeable debts, as we indicate below, but to determine whether debts are dischargeable. A contrary rule would support the monstrous result of protecting a debtor who does an act which would otherwise result in a non-dischargeable debt, but files a Chapter 7 case before the claimant can bring it to judgment, and is therefore rewarded with a Chapter 7 discharge of the debt. Therefore, we do not think that whether the Defendants here have been found liable for a penalty or a fine is at all decisive in determining the dischargeability of their alleged obligation to the Plaintiff under § 523(a)(7). Similarly, the fact that no judgment has been entered against the Defendants, either civilly or criminally, should have any impact on the Plaintiff's assertion that its debts are non-dischargeable under § 523(a)(2)(A) or § 523(a)(6).
On the other hand, the Plaintiff, citing only 28 U.S.C. § 157(b) as support therefor,[1] urges this Court to proceed to liquidate the Defendants' liability in this Court, and further enter judgments in the amount of such liability. However, the Plaintiff has cited no case in which the damages or penalties which a claimant seek to declare non-dischargeable were imposed by the bankruptcy court, as opposed to another state or federal court or administrative agency. We reject the Plaintiff's position, especially in a Chapter 7 liquidation where the alleged creditor has not even filed a Proof of Claim and is therefore obviously not seeking to share in the distribution of the bankruptcy estate.
We acknowledge that Section 17c(3) of the predecessor Bankruptcy Act provided that "if any debt is determined to be nondischargeable, [the court] shall determine the remaining issues, render judgment, and make all orders necessary for the enforcement thereof." However, without any apparent explanation in the legislative history, this provision was omitted from § 523 of the Bankruptcy Code. We are most reluctant to read such an omitted provision back into the Code.
Contrary to the position of the Plaintiff is the observation that a creditor pursuing a nondischargeability complaint is expressing a desire to pursue the debtor over and above what he could obtain from the debtor's estate in bankruptcy. Hence, the amount which the creditor is owed in a nondischargeable debt has no relevance to the debtor's estate in bankruptcy. It is therefore questionable whether such a claim is any way related to the debtor's bankruptcy proceeding.
*845 If the creditor wishes to make a claim against the debtor in a bankruptcy, his sole recourse is, generally, to the claims process. See In re New York City Shoes, Inc., Richard Royce Collections, Ltd. v. New York City Shoes, Inc., 84 B.R. 947, 959-60 (Bankr.E.D.Pa.1988); and In re International Endoscope Manufacturers, Inc., 79 B.R. 620, 621 (Bankr.E.D.Pa.1987). The bankruptcy court will, under § 157(b)(2)(B), determine the validity of contested claims against the estate. However, frequently, the absence of assets renders the determination of the validity of claims unnecessary. There is no logical reason why a bankruptcy court should extend its scarce resources to determine such unnecessary issues.
We note that, here, the Plaintiff has failed to so much as file a proof of claim in either of the Defendants' Chapter 7 cases. A proof of claim would have been filed if the Plaintiff desired to share in the distribution of the assets of the Defendants' respective bankruptcy estates. See 11 U.S.C. § 501; Bankr. Rule 3002(c); H.R.REP. NO. 95-595, 95th Cong., 1st Sess. 352 (1977); and S.REP. NO. 95-989, 95th Cong., 2nd Sess. 61 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787. By failing to file any proofs of claim, and pursuing these proceedings instead, the Plaintiff has expressed an option to seek to obtain payment from the Defendants after discharge in a non-bankruptcy forum rather than to collect anything from their estates in this forum. One of the primary concerns of this bankruptcy court is the expeditious administration and disposition of claims against debtors' estates. In a Chapter 7 case, this means the expeditious liquidation and distribution of the estate to creditors. We question the advisability of utilizing this court's scarce resources to fix liabilities that will not impact at all upon the Defendants' bankruptcy estate. We also note that the issues to be determined in a dischargeability proceeding will usually differ and are often less complex than those that will need to be decided in determining the underlying liability and assessing damages, often by a jury. No right to a jury trial exists in a dischargeability action. See, e.g., In re Merrill, 594 F.2d 1064 (5th Cir.1979); In re Swope, 466 F.2d 936 (7th Cir.1972); and In re Bailey, 75 B.R. 314, 316 (M.D.Tenn.1987).
The Plaintiff's contention that we should determine the amount of an allegedly dischargeable debt is particularly troubling in the context of its claims under § 523(a)(7). The Plaintiff asks this court to assess a civil penalty or fine in this case and then to find that such a penalty or fine is not dischargeable because it has been imposed within the meaning of § 523(a)(7). However, the Plaintiff fails to cite any case where the bankruptcy court imposed the penalty that was found to be non-dischargeable under § 523(a)(7). This is not surprising, because penalties and fines generally arise in criminal proceedings, which a bankruptcy court cannot hear. This is not to say that we could not determine whether a debt is nondischargeable under § 523(a)(7) prior to litigation in another tribunal, under the reasoning we applied in rejecting the Defendants' argument that the allegedly nondischargeable debt must be liquidated prior to the trial of the dischargeability proceeding. However, it means that we will let the determination of penalties and fines to other courts better equipped to deal with such matters. Rights to a jury trial are particularly likely to arise in criminal or quasi-criminal proceedings wherein penalties and fines may be imposed.
II. THE PLAINTIFF HAS FAILED TO ESTABLISH A CLAIM UNDER § 523(a)(2)(A) BY THE REQUISITE CLEAR AND CONVINCING EVIDENCE.
We begin this discussion by noting that exceptions to discharge will be strictly construed against the objecting creditor and in favor of the debtor in light of the strong policy of the Bankruptcy Code to provide the debtor a financial "fresh start." In re Fitzgerald, 73 B.R. 923, 926 (Bankr. E.D.Pa.1987); In re Woods, 66 B.R. 984, 988 (Bankr. E.D.Pa.1986); and 3 COLLIER, supra, ¶ 523.05A, at 523-16.
*846 The pertinent Code Section, 11 U.S.C. § 523(a)(2)(A) provides that a discharge of a debtor pursuant to Chapter 7 will not discharge any debt for money obtained by
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition . . .
The general purpose of this provision is to prevent a debtor from retaining property acquired by fraud. 3 COLLIER, supra, ¶ 523.08[1], at 523-39.
The Plaintiff concedes that, in order to prevail on the basis of an objection to dischargeability under § 523(a)(2)(A), it must establish all of the following elements by the demanding standard of "clear and convincing evidence:"
(1) that the debtor made the representation;
(2) that at the time he knew they were false;
(3) that he made them with the intention and purpose of deceiving the creditor;
(4) that the creditor relief on such representations; and
(5) that the creditor sustained the alleged loss and damages as a proximate result of the representations having been made.
Fitzgerald, supra, 73 B.R. at 926; Woods, supra, 66 B.R. at 988; In re Gelfand, 47 B.R. 876, 879 (Bankr. E.D.Pa.1985); and In re Colasante, 12 B.R. 635, 639 (Bankr. E.D.Pa.1981). Fraud under § 523(a)(2)(A) thus includes only those acts proven to involve moral turpitude or intentional wrong and does not apply to fraud implied in law which may occur in the absence of bad faith or immorality. In re Black, 787 F.2d 503, 505 (10th Cir.1986); In re Butler, Howkins v. Butler, 86 B.R. 829, 831-832 (Bankr. E.D.Pa.1988); and 3 COLLIER, supra, 523.08[5], at 523-50.
It would be helpful at the outset to indicate several issues that are not relevant to a determination of the dischargeability under § 523(a)(2)(A) in the present matter. It is not relevant that isolated beneficiaries who received Medicare reimbursement for seat-lift chairs may have been able, on occasion, to set and stand without such a chair, contrary to what Taylor's testimony seemed to imply. It is not relevant that certain physicians may have improvidently prescribed a seat-lift chair as a "favor" to their respective patients. The Defendants cannot be held responsible for any misrepresentations or errors in evaluations of particular beneficiaries' need for seat-lift chairs made by the beneficiaries or their physicians absent some showing of a conspiracy or agreement between the Defendants and the physician. No such showing was made in this case.
In addition, this case does not turn on whether any individual claim or group of claims was properly processed or paid. Failure to follow proper procedures absent proof of fraud will not preclude a discharge under § 523(a)(2)(A). The Plaintiff may not use the present proceeding to recoup improperly paid claims unless payment was obtained through use of some fraud or misrepresentation. Cf. Fitzgerald, supra, 73 B.R. at 923 (Social Security Administration's determination that recipient was overpaid benefits does not establish elements of § 523(a)(2)(A)).[2]
We believe that the Plaintiff has established that the Defendants made the representations at issue in this proceeding. While the typed additions to the CMN's diagnoses were actually made by the typists at E & S, these additions appear to have been made at the direction of the Defendants or Cohen. At a minimum, this typing was added with the knowledge and consent of the Defendants. Cohen testified that the Defendants themselves contacted some of the physicians regarding the "corrections" to be added to the diagnoses before they were added. This conclusion is further supported by consideration of the positions held by the Defendants in E & S *847 plus the fact that the Defendants themselves had signed a majority of the claim forms prior to submitting same to Blue Shield.
The Plaintiff has also established that the representations were material. Defendants suggest that there were no material misrepresentations made, since, with respect to each of the contested claims, the physician had prescribed a seat-lift chair and had certified by way of the CMN that such a chair was medically necessary for their patient.[3]
In fact, with respect to each of the disputed claims, the signatory physician did prescribe the chair and did certify that same was necessary for his or her patient. This conclusion is supported by the testimony of Taylor as well as from the CMN's themselves. Taylor testified that each of the physicians that he interviewed indicated that he or she had prescribed the seat-lift chair, although apparently a few indicated that they may have done so improvidently. There has been no suggestion or evidence indicating that the physicians' signatures on the CMN's were forgeries. Thus, it appears clear that, in the medical opinion of the signatory physicians, they each felt that his or her respective patients who obtained seat-lift chairs from E & S needed such devices as a result of his or her physical impairments.
However, more detailed eligibility guidelines for Medicare reimbursement are set forth in the Medicare Appendix. In addition, the Blue Shield claims processors used the Logic Table in determining initially if a claim should be approved, denied, or referred to a physician for further evaluation before approving or denying it. Both the Medicare Appendix and the Logic Table set forth eligibility criteria that was dependent upon the diagnosis of the the beneficiary's condition. As a result, any representation regarding the diagnosis of the beneficiary's impairments would be a material representation.
In addition, Plaintiff has established that Blue Shield relied upon the representations contained in the CMN's. The uncontroverted testimony of the Blue Shield representatives was that the claims processors considered both the handwritten and the typed language on the CMN's when determining whether to approve or deny claims.
Assuming that the Plaintiff had established the remaining elements of fraud under § 523(a)(2)(A), we believe that they have established that any damages sustained were the proximate result of the typed additions to the CMN's. Tress testified that, from his review of the claim forms, 849 claims would have been denied without consideration of the typed additions.[4] Tress' testimony, together with a review of the claims admitted into evidence and the Logic Table establish that many of the disputed claims would not have been paid without the typed additions. It has been stipulated that the government paid $1,140.00 for each disputed claim.
However, we find the Plaintiffs proof lacking with respect to the falsity of the typed additions and whether the representations contained in such additions were made by the Defendants with the purpose and intent of deceiving the Plaintiff.
The Plaintiff produced no direct evidence to establish that any of the typed additions to any of the CMN were in fact false.[5] It *848 called no beneficiary to testify that he or she did not have the diagnosis typed in on the CMN's. It called no physician to testify that his or her patient in fact did not suffer from severe arthritis of the knees or hips as was commonly indicated on the revised CMN's. Rather, it asks the court to infer that the typed additions are in fact false based upon purely circumstantial evidence. Thus, the Plaintiff apparently seeks such an inference based upon E & S's frequent use of standardized language on the CMN's together with the fact that the typed additions were not accompanied by the signatory physician's initials. The Plaintiff also suggests that Cohen's testimony that E & S contacted physicians for approval before the additions were typed was incredible in light of the number of claims that E & S processed.
The fact that E & S frequently used standardized language on the CMN's does not alone establish that the statements were in fact false, i.e., that the beneficiary did not suffer from some form of severe arthritis of the knees or hips. Even if the court were to assume the falsity of such statements, we cannot infer that such standardized language was being utilized with the intent and purpose of deceiving Medicare. The results of Taylor's survey, i.e., that the signatory physicians confirmed the "corrected" diagnoses, precludes such an inference.
It is clear that Cohen had concluded that a claim form must contain certain "magic language," i.e., "severe arthritis of the hip and/or knee with hip and/or knee involvement" or some variant thereof. However, it appears that Cohen was given this impression by Blue Shield. Indeed, this appeared to be the position of the witnesses from Blue Shield. Thus, Tress indicated in his report that claims involving generalized or degenerative arthritis should be denied where such claim failed to use the word "severe." See claim of Ellen Franklin, page 842 supra. Rule 1 of the Logic Table provides for approval of claims involving arthritis of the knee where the arthritis is described as crippling, degenerative, or generalized. In addition, Tress's report indicates that claims should be denied absent the magic "severe" language on the diagnosis line despite the fact that the signatory physician indicated a prognosis of guarded or poor. See claim of Jean Amendolari, page 842 supra.
The Defendants' position is further supported by Cohen's testimony regarding use of the "99 month" stamp. Shaffer advised Cohen to obtain a stamp to indicate that each seat-lift chair would be needed for 99 months so that E & S could be paid for each seat-lift chair in one lump sum. Such a stamp appears on a number of the claim forms admitted into evidence. The stamp was not accompanied by any doctor's initials. However, it is clear that such standardized language was utilized to comply with the expressed requirements of Blue Shield in one context, making it logical that it could be employed properly in another. We believe that use of standardized language on the "corrected" CMN's was motivated by a desire to comply with what was perceived to be the technical requirements of Blue Shield rather than a desire to circumvent those requirements.
The Plaintiff also relies upon the fact that the additions made were not accompanied by an indication that the change was made per telephone instructions and the physician's initials. According to Blue Shield's witnesses, it apparently was permissible to make corrections to the diagnosis on the CMN so long as these corrections were accompanied by the appropriate notation and the physician's initials. However, we credit Cohen's testimony that she was not advised of this alleged policy. It seems unlikely that Blue Shield would require a notation that a change was made via telephone instructions if the form then had to be returned to the physician for his signature. Moreover, this alleged "policy" does not appear to be contained in any manual or correspondence to E & S. Even if Shaffer had given these directions to Cohen, we *849 believe that Cohen misunderstood these directions rather than intentionally attempting to circumvent them. Such a misunderstanding is insufficient to establish fraudulent intent under § 523(a)(2)(A).
The Plaintiff argues that Cohen's testimony was incredible because she could not have possibly had time to contact all of the signatory physicians on the disputed CMN's. In so arguing, the Plaintiff relies primarily on the testimony of Tuner that the typists processed 100 to 125 claims per day. However, for the reasons set forth at pages 841-42 supra, we believe that Tuner's estimate was exaggerated. The Plaintiff admitted 789 contested claim forms into the record in the present matter. The Stipulation of Settlement in Adv. No. 87-0197S states that E & S had approximately 3,300 claims pending with Blue Shield. There has been no evidence presented to indicate how many of these pending claims contained typing. Cohen testified that the Defendants also contacted the physicians and that they were contacted only when there was a question regarding a CMN, which was not in every case. Assuming that Cohen or one of the Defendants contacted the physicians for each of the disputed paid and unpaid claims (789 + 3,300 = 4,089) during the approximately 19 months that E & S was actively in business, each principal would have placed between three to four calls a day. In light of this, we do not find Cohen's testimony to be incredible.
In addition, the Plaintiff has failed to present clear and convincing evidence that the Defendants made any alleged misrepresentations on the CMN's with the purpose and intent of deceiving the Medicare program. Cf. In re Woerner, 66 B.R. 964, 976 (Bankr.E.D.Pa.1986), aff'd, C.A. No. 86-7324 (E.D.Pa. April 27, 1987) (plaintiff law firm failed to produce evidence that debtor did not intend to pay for legal services rendered). We recognize that it may be difficult to present direct evidence of such fraudulent intent. Thus, the court may infer such fraudulent intent from the circumstances of a case. Nevertheless, the evidence presented must be convincing and the inference compelling. We decline to infer such fraudulent intent given the evidence presented in the present case.
We agree that the evidence presented by the Plaintiff indicates the existence of suspicious circumstances and raises some serious questions about whether E & S was following the proper procedures in processing their Medicare claims. However, in a dischargeability complaint under § 523(a)(2)(A), the plaintiff may not rest on suspicious circumstances alone. Cf. Matter of Haas, 29 B.R. 566 (Bankr.M.D.Fla. 1983) (showing of conduct which creates suspicion of fraud insufficient to render debt nondischargeable); and Matter of Peterson, 2 B.R. 402 (S.D.Ga.1980) (insufficient or nonexistent evidence does not sustain burden of proof in nondischargeability action). The evidence presented here raises more questions than it answers. We therefore conclude that, on the basis of the record presented here, the Plaintiff has failed to sustain its burden of presenting clear and convincing evidence of fraud.
Absent convincing independent evidence of fraud pursuant to 11 U.S.C. § 523(a)(2)(A), the court will not infer such fraud due to the Defendants' invocation of their Fifth Amendment privilege not to testify. We recognize that, in evaluating the facts in this case, we must consider negative inferences which may be drawn from the Defendants' invocation of the Fifth Amendment. In the criminal context, the Fifth Amendment "forbids either comment by the prosecution on the accused's silence or instructions by the court that such silence is evidence of guilt." Griffins v. California, 380 U.S. 609, 615, 85 S. Ct. 1229, 1233, 14 L. Ed. 2d 106 (1965). This privilege against self-incrimination applies to civil proceedings also, where the answers might tend to incriminate the witness in future criminal proceedings. Lefkowitz v. Turley, 414 U.S. 70, 77, 94 S. Ct. 316, 322, 38 L. Ed. 2d 274 (1973). In addition, a state may not coerce a witness to relinquish the Fifth Amendment privilege or penalize the exercise of that privilege. See Lefkowitz v. Cunningham, 431 U.S. 801, 806, 97 S. Ct. 2132, 2136, 53 L. Ed. 2d 1 *850 (1977) (court invalidated state statute which divested attorney of his political party office due to his refusal to waive his immunity before grand jury); Turley, supra (state may not cancel contracts with architects due to invocation of Fifth Amendment); and Gadner v. Broderick, 392 U.S. 273, 88 S. Ct. 1913, 20 L. Ed. 2d 1082 (1968) (police officer could not be discharged for refusal to answer grand jury questions on Fifth Amendment grounds). Furthermore, in assessing the coercive effect of such governmental action, the Court will take into account the probable economic impact of such action. Cunningham, supra, 431 U.S. at 806, 97 S.Ct. at 2136.
The Fifth Amendment, however, does not forbid drawing adverse inferences against parties in civil actions where they refuse to testify in response to probative evidence being offered against them. Baxter v. Palmigiano, 425 U.S. 308, 96 S. Ct. 1551, 47 L. Ed. 2d 810 (1976); RAD Services, Inc. v. Aetna Casualty & Surety Co., 808 F.2d 271 (3d Cir.1986). In Baxter, supra, the Supreme Court cites to 8 J. WIGMORE, WIGMORE ON EVIDENCE, ¶ 2272, at 439-42 (McNaughton rev. 1961), which states as follows:
The opinions in the cases on this point, as can be inferred from the illustrated citations below, are confused. . . . The inference seems to be allowed with least reluctance in cases where the party claiming privilege has an affirmative burden in the cause, where he has exclusive access to information which would, if favorable to him, dispute evidence adverse to him already before the tribunal, or where the inference is used only to buttress other evidence.
However, it is clear that "there must be sufficient independent evidence besides the mere invocation of the privilege upon which to base the negative inference." United States v. Local 560 of International Brotherhood of Teamsters, Etc., 780 F.2d 267, 292 n. 32 (3d Cir.1985), cert. denied, 476 U.S. 1140, 106 S. Ct. 2247, 90 L. Ed. 2d 693 (1987). See also National Acceptance Co. of America v. Bathalther, 705 F.2d 924, 929 (7th Cir.1983). The Bankruptcy Court for the Eastern District of Virginia has recently held that the court may not draw adverse inferences from an alleged debtor's invocation of the Fifth Amendment privilege to "fill in the gaps of the movant's case" on a motion for summary judgment and that such an inference "would abrogate a fundamental constitution right." In re Caucus Distributors, Inc., 83 B.R. 921, 926 (Bankr.E.D.Va.1988).
In order to prevail in its dischargeability complaint on the basis of § 523(a)(2)(A), the plaintiff must present clear and convincing evidence of the Defendants' fraud. The Plaintiff has failed to present such convincing evidence with respect to the falsity of the statements made and the intent to defraud. We decline to draw the adverse inferences from the Defendants' invocation of their Fifth Amendment rights to fill in the gaps in its case, as urged by the Plaintiff.
Absent substantial and compelling independent evidence of the required elements of fraud under § 523(a)(2)(A), it would be inappropriate to allow a plaintiff to establish such fraud simply by the fact that a defendant invoked the Fifth Amendment. If the court adopted such reasoning, we would be endangering the right of a debtor who invoked his or her Fifth Amendment privilege to a discharge in bankruptcy. We believe such a position would be both unwise and would unduly penalize a debtor for invocation of the Fifth Amendment privilege.
It must be borne in mind that a witness "may have a reasonable fear of prosecution and yet be innocent of any wrongdoing." Slochower v. Board of Higher Education, 350 U.S. 551, 557-58, 76 S. Ct. 637, 641, 100 L. Ed. 692 (1956). The privilege may be invoked whenever it is not possible to determine, from the question alone, that an answer would not incriminate or even furnish a "link in the chain of evidence needed to prosecute the claimant for a federal crime." Hoffman v. United States, 341 U.S. 479, 486, 71 S. Ct. 814, 818, 95 L. Ed. 1118 (1951). As a result, it is difficult to draw any meaningful inference from invocation of the privilege. *851 Lionti v. Lloyds Ins. Co., 709 F.2d 237, 245 (3d Cir.1983) (Stern, dis. op.). Moreover, if the Plaintiff wished the Defendants to answer its questions, it could have requested a grant of use immunity pursuant to 11 U.S.C. § 344.
Absent convincing independent evidence of fraud under § 523(a)(2)(A), we will decline to infer same simply from the Defendants' invocation of the Fifth Amendment.
III. THE PLAINTIFF HAS NOT ESTABLISHED A WILLFUL OR MALICIOUS INJURY UNDER § 523(a)(6).
Plaintiff also argues that the Defendants' alleged indebtedness to it is non-dischargeable under § 523(a)(6) as a debt for "willful and malicious injury by the debtor to another entity." This exception to discharge includes "willful and malicious" conversion. In re Lane, 76 B.R. 1016, 1023 (Bankr.E.D.Pa.1987). However, a debt based on a "technical" conversion which is due to a mistake or misunderstanding is dischargeable. 3 COLLIER, supra, ¶ 523.16[3], at 523-119, citing Davis v. Aetna Acceptance Co., 293 U.S. 328, 55 S. Ct. 151, 79 L. Ed. 393 (1934). Thus, a willful and malicious injury under § 523(a)(6) requires proof of intent to cause an injury. Lane, supra, 76 B.R. at 1023; and In re Gaebler, 83 B.R. 264, 267 (Bankr. E.D.Pa.1988).
The Plaintiff has failed to produce any direct evidence of the Defendants' intent to effect a willful or malicious conversion upon the Plaintiff, and, for the reasons previously discussed at pages 845-851 supra, we do not believe that the circumstances presented in the instant case are sufficiently compelling to infer such an intent absent direct proof.
IV. THE DEFENDANTS' ALLEGED DEBT IS NOT NON-DISCHARGEABLE UNDER THE PROVISIONS OF 11 U.S.C. § 523(a)(7)
The Plaintiff, as we indicated at the outset, also maintains that the Defendants presented false and fraudulent claims for payment in violation of the federal False Claims Act, 31 U.S.C. § 3729, et seq., entitling it to statutory damages under that Act. The False Claims Act authorizes imposition of "a civil penalty of not less than $5,000.00 and not more than $10,000.00, plus three times the amount of damages which the Government sustains" as a result of any violation of the Act. 31 U.S.C. § 3729(a). The Plaintiff maintains that such statutory penalties, as yet unassessed, should be assessed by us and then found nondischargeable by us as well. The Plaintiff's position in this matter presents us with the apparently novel issue of whether the bankruptcy court should assess penalties under the False Claims Act which would then, arguably, be non-dischargeable under the provisions of 11 U.S.C. § 523(a)(7).
This section of the Bankruptcy Code provides that no debt may be discharged in a Chapter 7 bankruptcy
to the extent such debt is for fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty.
Under the predecessor Bankruptcy Act, penalties payable to governmental units due to illegal activities were not discharged in bankruptcy since they were not "provable" under the Act. United States v. RePass, 688 F.2d 154 (2d Cir.1982); In re DiVincenzo, 1 B.R. 528 (Bankr.S.D.N.Y. 1979). Thus, the Act contained no specific provision relating to the dischargeability of such penalties. 3 COLLIER, supra, ¶ 523.17, at 523-124. As the Plaintiff points out, the concept of "provability" was eliminated under the current Bankruptcy Code. Section 523(a)(7) of the Code specifically excepts from discharge certain fines, forfeitures and penalties payable to a governmental unit. See Kelly v. Robinson, 479 U.S. 36, 107 S. Ct. 353, 361-63, 93 L. Ed. 2d 216 (1986).
Whether a penalty payable to the government is exempt from discharge turns on whether the penalty is imposed for compensatory reasons or to punish the wrongdoer. Only if the penalty is imposed for punishment of the wrongdoer is the debt arising from the penalty nondischargeable *852 under § 523(a)(7). See In re Corbly, 61 B.R. 851 (Bankr.D.S.D.1986) (civil contempt judgment dischargeable to extend imposed to compensate rather than to uphold the dignity of the court); and In re Tauscher, 7 B.R. 918 (Bankr.E.D.Wis. 1981) (civil penalty for child labor violations of Fair Labor Standards Act not dischargeable where legislative history reveals penalties not compensation for actual loss). Thus it has been held that parking fines are dischargeable to the extent that they relate to a pecuniary loss, i.e., compensation for monetary injury actually incurred. In re Caggiano, 34 B.R. 449, 450 (Bankr.D. Mass.1983). As stated by the court in In re Hite, 53 B.R. 21, 23 (Bankr.M.D.Tenn. 1985):
To make a determination under this section [523(a)(7)], the court must determine whether an assessment is penal or pecuniary in nature. . . . Courts analyzing this section have focused on the congressional intent of the statute authorizing the assessment and the economic impact on the parties.
Cf. In re Carracino, 53 B.R. 513 (Bankr.D. N.J.1985) (fines imposed for water pollution not dischargeable under § 523(a)(7), though debt owed to reimburse state for cleaning up river was dischargeable); In re Daugherty, 25 B.R. 158 (Bankr.E.D.Tenn.1982) (civil penalty for violation of state mining act not dischargeable under § 523(a)(7) where it was not compensatory for any actual pecuniary loss).
The objective of the False Claims Act is to "broadly protect the funds and property of the Government from fraudulent claims." Rainwater v. United States, 356 U.S. 590, 592, 78 S. Ct. 946, 948, 2 L. Ed. 2d 996 (1968). The Act, being remedial in nature, should not be narrowly construed. United States v. Neifert-White Co., 390 U.S. 228, 232-33, 88 S. Ct. 959, 961-62, 19 L. Ed. 2d 1061 (1968); and RePass, supra, 688 F.2d at 157. The Supreme Court, in United States v. Bornstein, 423 U.S. 303, 314, 96 S. Ct. 523, 530, 46 L. Ed. 2d 514 (1976), notes that
past decisions of this Court have reflected a clear understanding that Congress intended the double-damages provision to play an important role in compensating the United States in cases where it has been defrauded. "We think the chief purpose of the [Act's civil penalties] was to provide for restitution to the government of money taken from it by fraud, and that the device of double damages plus a specific sum was chosen to make sure that the government would be made completely whole." United States ex rel. Marcus v. Hess, 317 U.S., [537] at 551-552, 63 S.Ct. [379] at 387-388, 87 L.Ed. at 443 [(1943)]. For several different reasons, this make-whole purpose of the Act is best served by doubling the Government's damages before any compensatory payments are deducted.
The civil remedies provided by the Act do not lose their remedial quality simply because they provide compensation for more than the precise amount of actual damages. Marcus, supra, 317 U.S. at 549, 63 S.Ct. at 386-87. Earlier decisions construed the Act as penal in nature, requiring a specific intent to defraud the government to establish a violation. United States ex rel. Hughes v. Cook, 498 F. Supp. 784, 787 (S.D.Miss.1980) (requiring showing of personal knowledge of and personal participation in an attempt to cheat the government). See Note, The False Claims Act and the Proposed Program Fraud Civil Remedies Act, 73 KY. L.J. 967 (1984-85) (criticizes earlier decisions that construed the Act as penal as "now conflict[ing] with more modern needs for a remedial civil statute"). Moreover, the legislative history for False Claims Amendment Act enacted in 1986 states that
[a]s a civil remedy designed to make the Government whole for fraud losses, the civil False Claims Act currently provides that the Government need only prove that the defendant knowingly submitted a false claim. However, this standard has been construed by some courts to require that the Government prove the defendant had actual knowledge of fraud, and even to establish that the defendant had specific intent to submit the false claim, for example, United States v. Aerodex, Inc., 469 F.2d 1003 *853 (5th Cir.1972). The Committee believes this standard is inappropriate in a civil remedy and presently prohibits the filing of many civil actions to recover taxpayer funds lost to fraud.
The Committee's interest is not only to adopt a more uniform standard, but a more appropriate standard for remedial actions.
S.REP. No. 99-345, 1986 U.S. CODE CONG. & ADMIN. NEWS (99 Cong.) 5266, 5271-5272.[6] Thus, the better view is that the Act is remedial and compensatory in purpose, rather than penal. Cf. In re Wellham, 53 B.R. 195, 198 (Bankr.M.D.Tenn. 1985) (action for damages under the False Claims Act is not exempt from the automatic stay by 11 U.S.C. § 362(b)(4) applicable to actions to enforce a governmental unit's police or regulatory power since such an action is merely an action for damages).
In light of the compensatory nature of the False Claim Act, we believe that the civil remedies provided by the Act do not constitute a "fine, penalty, or forfeiture" under 11 U.S.C. § 523(a)(7). This conclusion is supported by the fact that the False Claim Act has criminal counterparts. 18 U.S.C. § 287 (false claims); and 18 U.S.C. § 1001 (false statements.)[7] Both of these criminal provisions provide for imposition of fines as well as incarceration.
Of course, any claims based on civil penalties imposed under the False Claims Act may, in certain instances, be excepted from discharge under the provisions of 11 U.S.C. § 523(a)(2)(A) (fraud) or § 523(a)(6) (willful injury to property). However, for the reasons discussed above at pages 845-51 supra, we find that the Plaintiff has failed, in the present case, to establish the requisite intent for either of these exceptions to discharge to apply here. We believe that this is the preferable view, and avoids the possibly anamolous result of allowing discharge of the underlying debt under § 523(a)(2)(A), but denying discharge of the trebling of such a debt under § 523(a)(7).
CONCLUSION
For the foregoing reasons we find that the Plaintiff has failed to establish cause for declaring its claims against the Defendants nondischargeable under either §§ 523(a)(2), 523(a)(6), or 523(a)(7). An appropriate Order will be entered.
NOTES
[1] The only possibly pertinent provisions of 28 U.S.C. § 157(b) would appear to be § 157(b)(2)(B), which relates to allowance or disallowance of claims, or § 157(b)(2)(I), which relates to determinations of dischargeability. However, the reference in § 157(b)(2)(B) is to claims "against the estate," which we do not believe includes claims which are alleged to be nondischargeable. The reference in § 157(b)(2)(I) is to only "determinations" of dischargeability, not determination of the amount of the nondischargeable debt.
[2] We note that Tress's testimony indicated that many of the claims submitted would not have been approved without consideration of the typed "corrections." His report, however, does not establish the existence of fraud in the submission or payment of these claims.
[3] In fact, the Medicare statute requires only that a physician certify that "in the case of medical and other health services [including durable medical equipment] . . . such services are and were medically required." 42 U.S.C. §§ 1395m(a)(2)(B), 1395x(s)(6).
[4] While we concur with Tress's testimony that many of the 849 claims would not have been paid, we question his conclusion that all of these claims would have been denied for a number of reasons. Many of the claims submitted did appear to match the eligibility criteria contained in the Logic Table. See pages 842-43 supra. In addition, it does not appear that Tress gave consideration to the beneficiary's prognosis in evaluating the severity of the beneficiary's impairment. See page 842 supra. In sum, it appeared that Tress was overly stringent in applying the eligibility criteria contained in the Logic Table, in all likelihood much more stringent than the claims processors themselves would have been.
[5] Tress's testimony goes only to the issue of whether the claims would have been paid initially without consideration of the typed "corrections." His report did not address the issues of either the falsity of the typed additions or whether the claims were properly paid, considering the additional typed information.
[6] The False Claims Amendment Act specifically provides that no proof of specific intent to defraud is required to establish a violation of the Act. 31 U.S.C. § 3729(b).
[7] The original False Claims Act contained three sections two imposing criminal liability and the other providing for statutory penalties. Act of Mar. 2, 1863, ch. 67, 12 Stat. 696-699, repealed by Act of Mar. 4, 1909, ch. 321, § 341, 35 Stat. 1153. The criminal provisions were repealed and reenacted as part of the Criminal Code. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551082/ | 27 F.2d 362 (1928)
In re GANNON.
No. 144.
District Court, E. D. Pennsylvania.
July 10, 1928.
Bernard L. Lemisch and Michael Serody, both of Philadelphia, Pa., for relator.
G. Plantou Middleton, of Philadelphia, Pa., for British consulate.
DICKINSON, District Judge.
In this cause we have had the benefit of a very well considered and helpful argument against the existence of the power to admit to bail, which has produced in us the feeling that we ought to be convinced, but are not. The prisoner is charged with the commission of a criminal offense in another country. He was here arrested, and is held awaiting a hearing to determine whether he should be extradited. The witnesses must be brought from a distance, so that some time must necessarily elapse before it can be known whether the prisoner is the proper subject of extradition proceedings. There is no time within which the hearing must be held short of two months. In the meantime is he to be held without bail? The offense charged is that known as the obtaining of money under false pretenses. This is a bailable offense under the laws of Pennsylvania, as it is under the laws of the country where the offense is charged to have been committed.
The question presented divides itself into two. (1) Has this court power to accept bail as an assurance of the presence of the prisoner at the hearing to be hereafter held? (2) If the power exists, should it be exercised?
We have so framed the questions because we are convinced that it has been authoritatively held for us that the prisoner has no legal right to demand his enlargement upon bail under the laws of the United States. The question of the power of the court to *363 admit to bail is one which arises out of the treaties between the United States and Great Britain and the acts of Congress passed in furtherance of the objects of the treaties. There is no need to examine into the specific provisions of the treaties or of the acts of Congress, because counsel are agreed upon their effect. The questions may thus be broadly faced.
It has been ruled, as before observed, that the right to bail given to those charged with crime is restricted to offenses against the United States, and that any corresponding right in extradition cases is purely statutory. The pertinent acts of Congress omit to expressly give the right and in consequence it does not exist as a right of the prisoner. Wright v. Henkel, 190 U.S. 40, 23 S. Ct. 781, 47 L. Ed. 948. An English case is, however, quoted as laying down the doctrine that a court has power to admit offenders to bail, and is not indebted for the possession of this power to any statute. Queen v. Spilsbury [1898] 2 Q. B. D. 615.
It has, however, been definitely held by the District Court for the District of Colorado that the power of a United States court to "allow" bail must rest upon a statute, and that the absence of a negative in the act is not enough, but the power must have been expressly conferred upon the courts by the statute, or otherwise they do not possess it. In re Carrier, 57 F. 578.
This case would be a sufficient guide to us, if we were able to find ourselves convinced by it. The reasoning is clear enough to lead to its stated objective that the statute expresses in effect the duty of the court to send the prisoner to be dealt with in the foreign jurisdiction, and not to substitute a bond for his appearance. That this follows the judgment of the court that he should be extradited we think must be admitted, but that it further follows that he must be denied bail pending his hearing is the proposition of the soundness of which we are unconvinced. We say this with diffidence and wholly because of compulsion inasmuch as it is said in Wright v. Henkel, supra, "that the same reasons" (for holding that the statute denies bail after the judgment of extradition) "would seem generally applicable to release pending examination."
We take this language to be directed to the question of the exercise of the power to admit to bail, not to its existence, because in Wright v. Henkel, the court expressed its unwillingness "to hold that the power" to admit to bail was wholly statutory. It is, of course, true that there is a like need to assure the presence of the prisoner at the hearing as there is to give effect to an order of extradition, because you cannot have one without the other. There is, however, a great difference in the accepted modes of enforcing his attendance. The difference is that between enforcing a defendant's presence at his trial and his submission to the punishment imposed by a sentence after conviction. We see no significance in the statutory provision for bail to answer for trial in removal cases from one district to another, and the absence of a like provision in extradition cases. It is true that a court would have no power (other than statutory) to hold a defendant for trial before another court, but it does not follow that it could not thus enforce his attendance at a hearing in the removal proceeding.
The "judicial power" is conferred by the Constitution upon the courts of the United States. The framers of the Constitution were familiar with common-law concepts and the words and phrases employed by common-law lawyers. The words chosen are "courts" and "judicial power." Whatever else may be said of the jurisdictional authority (in the power sense) of the judiciary, the meaning of the words and phrases used must be sought for in the literature of what we call the common law. Courts cannot function without the use of process, and any tribunal which has judicial powers can enforce attendance by holding the party to bail. There are different sorts of the kind, the general purpose of which is to assure the presence of the parties necessary to a judgment. These vary from a subpna to require the presence of a witness to bench warrants and attachments which operate not on his will but bring "his body."
A bail bond is process, and has no other function than to give assurance of attendance, so that there may be submission to the decrees of the court. In a case such as that before us, if the judgment reached is that the prisoner be extradited, the injunction of the statute must be followed; but if such judgment cannot be rendered, and the hearing must be held at a later date, then the court must enforce the attendance of the prisoner in some way, and we see no difference (again in the power sense) between one form of compulsion and another. The only difference is, as we have said, that one form acts upon his body; the other upon his will. It is true that a bond may not be effective but no more may a commitment. The prisoner may jump his bail, but so likewise he may escape from his jailers. The process should, of course, *364 be effective for its intended purpose, but to make it such goes to the exercise of the power of the court, not to the existence of the power. Substantial bail, we have no doubt, will serve its purpose.
Should the prisoner default, he will not only forfeit the penal sum of his bond, but will inflict upon himself a punishment many times heavier than any which would follow conviction for the offense with which he is charged, for he must thereafter elude the vigilance of the officers of each and both of two governments whose resources are practically unlimited. Against the small risk of default there is the injustice of imposing imprisonment in advance of a hearing which must be delayed for some time.
We feel constrained to admit the prisoner to bail pending a hearing and feel also that this course is in accordance with the teaching of the Wright Case. We are not unmindful that the United States is under a treaty obligation to send in proper cases fugitives from the justice of Canada, there for trial for any offenses committed against the laws of that country, and that Great Britain would do the same for us in like cases, and also that the courts are bound to do their part in meeting this obligation. Both countries are, however, alike in their regard for the liberty of every citizen or subject until the right to it is found after hearing to have been forfeited.
We owe to the industry displayed by counsel the duty of a careful reading of the other cases to which we have been referred, among which are In re Wright (C. C.) 123 F. 463; In re Mitchell (D. C.) 171 F. 289; In re Chow (C. C.) 25 F. 77; U. S. v. Yee Yet (D. C.) 192 F. 577. We have given them full consideration, without, however, a change in the views above expressed.
The conclusion reached is that the prisoner should be held for a further hearing, and that until this can be had he be enlarged upon entering bail, with surety, and condition approved by the court, in the sum of $10,000. An appropriate order in accordance with this opinion may be submitted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551069/ | 27 F.2d 101 (1928)
BUDER et al.
v.
FRANZ et al., and three other cases.
Nos. 7903, 7904, 7906, 7911.
Circuit Court of Appeals, Eighth Circuit.
May 16, 1928.
*102 Oscar E. Buder and G. A. Buder, Jr., both of St. Louis, Mo. (A. W. Wenger and E. E. Schowengerdt, both of St. Louis, Mo., on the brief), for Gustavus A. Buder and others.
S. Mayner Wallace, of St. Louis, Mo. (Allen McReynolds, of Carthage, Mo., on the brief), for Ehrhardt W. Franz.
T. M. Pierce, of St. Louis, Mo. (Samuel H. Liberman, of St. Louis, Mo., John B. Hollister, of Cincinnati, Ohio, and A. Holt Roudebush, of St. Louis, Mo., on the brief), for Mississippi Valley Trust Co.
Earl F. Nelson, of St. Louis, Mo. (Wilfley, Williams, McIntyre & Nelson, of St. Louis, Mo., on the brief), for Earl F. Nelson.
Before STONE and VAN VALKENBURGH, Circuit Judges, and PHILLIPS, District Judge.
STONE, Circuit Judge.
This litigation has been before this court three times once, on questions of jurisdiction and parties (11 F.[2d] 854); once, on questions of practice and procedure, involving the modification of the order of this court on the above appeal (11 F.[2d] 854, 858); once, on an ancillary bill to protect and preserve the jurisdiction of the trial court (15 F.[2d] 797). The first trial was upon the merits but, as the decree thereon was a dismissal of the bill for lack of necessary and indispensable parties, there was no determination of the merits. On that appeal [our No. 7019, 11 F.(2d) 854], counsel argued various points on the merits but, as this court thought that necessary and indispensable parties were lacking, it did not examine the merits except so far as to answer the questions as to parties and jurisdiction. On the return to the trial court, the bill was amended bringing in all interested *103 parties and the second trial and decree were upon the merits. Generally speaking, the result of that decree was to grant the relief sought in the bill and by the interveners. From that result, the main appeal herein is taken. There are cross-appeals on costs and concerning the bonds required to be given under the decree.
I. The Main Appeal.
These appellants argue their assignments under five headings. There is no material conflict in the evidence. The issues are as to the legal effect of the evidence. For an understanding of these issues an outline will be given of the material evidence with such further detailed statement, in connection with each issue, as may be necessary to develop the situation.
Prior to February 11, 1898, Ehrhardt D. Franz died testate in St. Louis, Mo., leaving an estate consisting (besides household goods and a small amount of cash) of (1) an undetermined interest in bonds, inventoried at $2,543.50; (2) bonds, inventoried at $24,750; (3) shares in various corporations, valued at $55,185; (4) notes, inventoried at $14,307.50; (5) insurance, inventoried at $1,000; (6) thirteen pieces of real estate. The residuary portion of his will was as follows:
"The rest, residue and remainder of my estate, whether real, personal or mixed property, I give, bequeath and devise unto my beloved wife Sophie Franz, for and during the period of her natural life.
"After the termination of the life estate of my wife, I give, bequeath and devise the remainder in equal shares, share and share alike, unto my children, Minna, Johanna, Ehrhardt, Ernest, Amanda, Gustav, Walter, Otto, Henrietta and Adelheide, and unto their heirs and assigns forever."
The estate was administered; the executrix discharged on March 10, 1900; and the residuary assets turned over to the wife (Sophie Franz) who was then 59 years old.
Among the assets of the estate turned over to Sophie Franz (in 1898) were 210 shares of the American Arithmometer Company. Thereafter, that company declared stock dividends of a like amount and, still later, the Burroughs Adding Machine Company acquired the assets and business of the Arithmometer Company and exchanged 4,200 of its shares for the above 420 shares in the Arithmometer Company. All of this took place by 1905.
January 30, 1909, Sophie Franz executed a trust agreement with G. A. Franz (one of the sons) and G. A. Buder (who had been counsel for the deceased, the estate, and later, of Mrs. Franz). This instrument conveyed from her to Franz and Buder, as trustees:
"All her right, title and interest of every kind and nature of, in and to the following described stocks, bonds, notes, mortgages, deeds of trust, obligations, securities, and assets now held, owned and controlled by her in her own right as her absolute property, or as life tenant under the last will and testament of E. D. Franz, deceased, to which reference is hereby made, or whether held, owned or controlled in either one or both of said capacities and more particularly described as follows, to wit: * * *
"3. Forty-two hundred (4200) shares of the capital stock of the Burroughs Adding Machine Company, evidenced by certificate No. ______, issued to Sophie Franz, said certificate including and embracing two hundred ten (210) shares of the capital stock of the American Arithmometer Company of St. Louis, Missouri, of the par value of one hundred dollars ($100.00), per share, inventoried as part of the estate of E. D. Franz, deceased; the said American Arithmometer Company having changed its name to Burroughs Adding Machine Company, and being now located in the city of Detroit, Michigan, reference being hereby made to the inventory of the estate of the said E. D. Franz, deceased. * * *
"7. Any and all other assets, securities, bonds, stocks, notes, mortgages, deeds of trust, collaterals, commercial paper, or other obligations received, acquired, held or owned by the undersigned, under and by virtue of the last will and testament of Ehrhardt D. Franz, deceased, dated August 9th, 1897, and duly filed and admitted to probate in the probate court of the city of St. Louis, Missouri, said court having jurisdiction of said estate, said will appearing of record in the recorder's office, of said city of St. Louis, Missouri, in Book No. 1441, page 443, to which said last will and testament reference is hereby made, and the same by such reference for all necessary purposes made part thereof."
The powers of the trustees were to collect and recover:
"All profits, and income, dividends, interest, earnings, and principal of the said stocks * * * or other assets, * * * and shall have and are hereby given and granted full power and authority, so far as is possible under the will and testament of said Ehrhardt D. Franz, deceased, to sell, *104 assign, exchange, transfer, convey, mortgage, pledge, incumber, or otherwise dispose of any or all of the said stocks, bonds, notes, obligations, mortgages, deeds of trust, collaterals, and securities, and the principal and proceeds thereof to them hereby transferred, assigned, conveyed and delivered, whenever in their judgment they deem it proper to do so, upon such terms, conditions, and provisions as they may deem best and for the best interests of the trust estate of the undersigned hereby created.
"In case of such conveyance, transfer, assignment, exchange, or other disposal of any of the assets, or any part of the assets, to them hereby conveyed, assigned, transferred, and delivered, they shall have and are hereby granted full power, right, and authority, and are hereby empowered, directed and authorized to invest and reinvest the proceeds of any such sale, transfer, or exchange, including principal, in such manner and in such form and securities as they may deem proper and for the best interests of said party of the first part and the trust estate hereby created."
Also they were empowered:
"To expend, disburse, retain, and pay out of said trust estate and funds, any and all assessments, charges and taxes, whether general or special, attorneys' fees, outlays, compensation, charges and costs of administration, necessary, incident or essential to and for the care, protection, preservation, administration, management and distribution of the assets hereby conveyed or hereafter acquired and are authorized and empowered to make, create, and pay all necessary debts, expenses and outlays for repairs, betterments, or improvements, which they may deem necessary or proper for the protection, preservation, improvement, sale or transfer of any and all real estate of which they may become owners as such trustees, whether acquired by foreclosure or otherwise, and are authorized and empowered to make any and all such other payments, outlays, and expenditures as they may deem necessary, expedient or proper for the protection of such real estate and the assets of such trust estate."
Certain disbursements to Mrs. Franz and to the children (or their heirs) were provided for as follows: $4,000 annually "shall" be paid to Mrs. Franz "providing the income, rents, earnings, and profits of the estate which they may hold and securities hereby conveyed, admit of such payments being made," with the power, in named emergencies, to "in their discretion increase said quarterly payment to her to such an amount, and for such time and upon such terms and conditions as they may deem best and proper"; after these payments to Mrs. Franz, the trustees "may pay" $625.00 quarterly to each of the ten children (or the heirs thereof) but:
"In the event the earnings, income, rents, receipts and profits received by said trustees are not sufficient to admit of such payment quarterly to each of the distributees above named and cannot be conveniently made, then the said trustees, after so making payment to said Sophie Franz, of one thousand dollars ($1,000.00) quarterly, or such other sum as they may deem necessary as aforesaid may pay to each of the said distributees such sum as they may deem proper, but in no event and under no circumstances shall the said payment encroach upon or impair the principal and assets of the trust estate hereby created."
The instrument provided, also, that semiannual statements of the condition of the trust estate should be made to Mrs. Franz and:
"If it appears from the statement of said trustees that there remains on hand any earnings, income, rents, receipts and profits from the said trust estate, which have not been drawn by or set aside, or paid out for account of said Sophie Franz, or to the distributees above mentioned or otherwise expended as herein provided, such sums shall be invested and become and remain as part principal of said trust estate hereby created."
The payments were to be made to Mrs. Franz during her life:
"And upon her death all these stocks, bonds, notes, collaterals, commercial paper, mortgages, deeds of trust, securities or other assets to them hereby conveyed or hereafter acquired or by them held, owned or controlled as such trustees, and any and all real estate by them acquired as such trustees, shall be held by them for account of the estate of said Sophie Franz, to be administered by the probate court of the city of St. Louis, Missouri, in accordance with the last will and testament of said Sophie Franz, and in accordance with the laws of the state of Missouri in such case made and provided."
The trustees were required to employ "Buder & Buder as their counsel and attorneys in the management and administration of said estate" and to appoint Oscar E. Buder (member of Buder & Buder) as the successor of either trustee. The certificates of stock in the Burroughs Company (and in two other companies 30 shares of the Germania Savings Institution and 50 shares of the Third National Bank of St. Louis, Mo.) were to remain *105 in a designated safety deposit box which could not be opened unless Mrs. Franz and both trustees were present she to have no power to remove any of such stock without "the consent and in the presence of both of said trustees." What was to be done with other securities or valuable papers is not designated although 300 shares in two other companies and 20 bonds ($1,000 each) are described therein. Also an irrevocable power of attorney given the trustees to vote the Burroughs, Germania and Third National stock at all stockholders' meetings and for all purposes nothing said as to the stock in other companies. There was no requirement that any bond be given by the trustees.
About sixty days after this trust deed was executed, Ehrhardt W. Franz (one of the sons) brought an action in the state court, at St. Louis, Missouri, attacking the validity of the trust agreement, seeking to have it set aside, a receiver appointed and for other relief. The decree therein sustained and construed the trust agreement and required the trustees to give a bond of $100,000 "for the use and benefit of any and all parties interested in said trust estate" and to charge the cost and expense thereof to the trust estate.
Thereafter, dissention arose between Ehrhardt W. Franz (one of the sons) and the trustees which resulted in this suit. The parties defendant were Mrs. Franz, the trustees, the six children then living and the heirs, guardians of heirs and administrators (or executors) of three children who had died after the father, Ehrhardt D. Franz. The amended bill sets forth that the trust estate, coming from the estate of the father, exceeds three million dollars in value and includes 31,500 non-par shares and 7,875 preferred shares in the Burroughs Adding Machine Company besides other stocks, bonds and securities; that the bond of $100,000 is "wholly inadequate in amount"; that the trustees refuse to give plaintiff "any information or account" concerning the "present nature, condition, extent and value of the various properties taken by them as aforesaid from the life tenant"; that the trustees are asserting and contending that "plaintiff no longer has or owns his said remainder interest in said properties." The prayer is for disclosure and accounting, for restraint in disposing of the Burroughs stock, for a bond to plaintiff to protect his remainder interest, for an adjudication of the vested interest of plaintiff, and for general relief.
The administrator of the estates of Ernest H. Franz and of Walter G. Franz (two deceased sons) and the guardians ad litem of several grandchildren (heirs of deceased children of Ehrhardt D. Franz) answered, praying substantially the same relief as sought in the amended bill.
Answers were filed by G. A. Buder (one of the trustees), jointly by Mrs. Franz and the trustees, G. A. Franz and G. A. Buder, by the other defendants jointly. In so far as the issues presented on this main appeal are involved, those answers were as follows: First, that the action was premature because the parties seeking relief have, until the death of Mrs. Franz, "no right to the possession or enjoyment of any remainder interest, if any he has, and no right to have the amount or value of such interest, if any, determined or ascertained." Second, denies the right of such parties to "demand any security." Third, denies any duty to furnish any information or account. Fourth, estoppel to assail trust agreement and bound thereby because of receipt of payments thereunder. Fifth, that the decree in the state court suit found that "any and all stock dividends were part of the earnings, usufruct, profits and income of said estate to which the life-tenant was entitled in her own right," which made the interest of the children res adjudicata. Sixth, estoppel because of agreements made January 7 and 30, 1920. Seventh, the parties seeking relief have "no interest, remainder or otherwise, under the will of * * * Ehrhardt D. Franz" because of certain advancements and payments in excess of the value of their shares in the estate of Ehrhardt D. Franz, deceased.
The decree herein determined that the increase of Burroughs stock (as well as certain other property) belonged to the corpus of the residuary estate of Ehrhardt D. Franz, deceased; that the plaintiff had a one-tenth vested right, as remainderman under the will (the complaining defendants having similar rights); that such remaindermen will be entitled to possession thereof upon the death of Mrs. Franz, the life tenant; that the trustees file, within 30 days, a complete statement, under oath, of the property coming to their hands and their administration thereof, and, thereafter, render semiannual statements to the parties here asking relief; that the trustees, within 30 days, give bond for $500,000 for the "joint and several" protection of the parties here asking relief, said bond to be additional to the existing bond for $100,000 and the cost thereof to be paid by or charged to such parties. Jurisdiction was expressly retained to order an accounting and for other necessary orders and decrees. *106 The costs of this proceeding to be paid by the trustees and charged "to the trust estate."
Issues on Main Appeal.
Appellants argue here five matters. One is a matter of procedure that this action is prematurely brought. Two are urged as a bar to recovery res adjudicata and estoppel. Two have to do with the merits of the action on the main facts the increase of Burroughs Company stock is income and, therefore, the property of the life tenant and the intent of the testator, Ehrhardt D. Franz.
Premature Action.
This contention is that while the life tenant survives, there can be no action to adjudicate title of the remaindermen or to protect the remainder estate. The present action does not involve nor seek to affect the enjoyment of possession or other rights of the life tenant. Its sole purpose is to protect from spoliation and loss property which is in possession of the life tenant, but alleged to belong to the estate coming to the remaindermen (with absolute right of possession upon death of the life tenant), and, as to which, the life tenant is entitled only to the income therefrom. Therefore, the legal issue is whether a remainderman is entitled to equitable relief to have protected property belonging to him in the rightful possession of the life tenant who is entitled to the income, for life, therefrom. As a necessary incident to such relief (if allowable), the remainderman must prove that he is such as to the property involved but this is not a proceeding where the only or main purpose is to have the title of the remainderman adjudicated it is a bona fide action to protect a remainder estate alleged to exist.
Appellants rely upon several state cases and the following cases in the Supreme Court or in inferior federal courts: Williams v. Hagood, 98 U.S. 72, 25 L. Ed. 51; Marye v. Parsons, 114 U.S. 325, 5 S. Ct. 932, 962, 29 L. Ed. 205; Singer Mfg. Co. v. Wright, 141 U.S. 696, 12 S. Ct. 103, 35 L. Ed. 906; United States v. Evans, 213 U.S. 297, 29 S. Ct. 507, 53 L. Ed. 803; Muskrat v. United States, 219 U.S. 346, 31 S. Ct. 250, 55 L. Ed. 246; Arnold v. Garth (C. C.) 106 F. 13; Pluche v. Jones (C. C. A.) 54 F. 860; Preston v. Smith (C. C.) 26 F. 884. The Williams and Marye Cases involved the validity of state statutes relating to securities issued by the state and in each the court said that no existing or threatening injury was alleged and, therefore, the issue presented was purely abstract and courts would act only upon legal rights actually in controversy. The Singer and Evans Cases were refused determination because the issues therein were purely moot. The Muskrat Case refused decision because the issue was not a justiciable controversy. The Arnold and Pluche Cases held merely that a statute of limitations did not begin to run against a remainderman until his right to possession accrued. The Preston Case (being a ruling on demurrer to a bill) held the action was "more like an effort to establish a doubtful title than a proceeding to protect from serious wrong a clear or adjudicated title" (page 889), and that "only upon an adjudicated or a clear title will a court of equity issue an injunction to restrain waste" by the life tenant. Thus, it appears that none of the above cases are applicable here nor are any statements in the opinions therein except those above quoted from Judge Brewer in the Preston Case. Those expressions clearly imply that, at least under certain circumstances, such right of action would exist during the life estate.
However, the matter is not in doubt. In Cross v. Del Valle, 1 Wall. 5, at page 15, 17 L. Ed. 515, the court said:
"A remainderman may have a decree to protect the estate from waste, and have it so secured by the trustee as to protect his estate in expectancy. The court will interfere under all needful circumstances to protect his rights, but such cases do not come within the category of mere declaratory decrees as to future rights."
Undoubtedly, the same rule prevails in the state courts. See 23 Rawle C. L. 579, where it is said:
"One who has a vested remainder in land has a right to protect the estate, so that he may receive the same when it ought to come to him by the terms of the limitation, and may maintain a proper action for any injury to the inheritance, committed or threatened, whether by the tenant in possession or by a stranger."
Also, at page 580, it is said:
"While a court of equity will not maintain a bill merely to declare future rights, it will interfere in all needful cases to protect the rights of remaindermen."
Again, at page 581, the right of the remainderman to require security bond and accounting (the relief here sought and accorded by the trial court) is stated as follows:
"Formerly it was the practice to exact from the tenant for life security that the property should be forthcoming on the happening of the contemplated event. This security *107 is still required in exceptional cases. But, before security for the forthcoming of the property at the termination of the life estate will be required, the remainderman must have reasonable grounds to apprehend the loss or removal of the property, or that his rights are in danger.
"139. Filing of Inventory. Unless the remainderman can show some necessity for exacting security, the only remedy which he now has is to require the tenant to make an inventory which shall show the property which he received, and to which the remainderman will become entitled upon the termination of the particular estate. And, though an inventory has been filed, the tenant, upon a proper showing of real danger, may be called on to account and be required to give bond.
"140. Seizure and Impounding of Property. The property may also be seized and impounded for the protection of the remainderman. Should the tenant attempt to sell, or in any other mode waste or misuse the property, so as to threaten its destruction, the court may impound it, that is, take it into the hands of the court, by its officer, and give the first taker the profits. The practice is to require security for the lawful use of the property during the life estate, and if this is not given, then pursue the mode of seizing upon the property."
Also in 21 C. J. at page 996, § 153, it is said:
"Since a remainderman has only an estate to vest in possession in futuro, he is entitled neither to actual nor to constructive possession of the property until the termination of the particular estate. He may however bring an action in equity during the lifetime of the life tenant to preserve the property, and, without taking actual possession to complete his title, he is entitled to all the remedies which may be necessary to protect and enforce his right at law."
Again, at page 1013, § 172, it is said:
"Where the property is in the hands of a trustee any breach of trust or improper conduct on the part of the trustee is a ground for equitable relief, and where a trust deed has been set aside under a decree fraudulently obtained, the remainderman may maintain a bill to have the property restored to the original trust. If the trustee is already under a valid and sufficient bond to protect the remainder interest, the remainderman is not entitled to any other relief; and the remainderman cannot, during the continuance of the life estate, sue on the trustee's bond to recover any part of the amount wasted, although he could proceed in equity to compel the trustee to bring the money into court to be invested. The remainderman may maintain a suit for the appointment of a new trustee and for an accounting."
Also at page 967, § 105, it is said:
"Right to Equitable Relief in General. A remainderman or reversioner unless barred by laches, is entitled to come into equity by a bill quia timet for the protection of his interest when the property in the hands of a life tenant is in danger of loss, deterioration or injury, or when the life tenant is claiming a right to the property adverse to that of the remainderman."
Also, at page 967, section 106 states that, under certain circumstances, injunction may be employed to protect the remainder estate; page 968, section 107, that accounting may be had; page 968, sections 108 and 109, that sequestration and a receiver are sometimes proper. The above statements in Ruling Case Law and in Corpus Juris are based upon abundant citations from various state courts to which may be added later citations as follows: Abbott v. Wagner, 108 Neb. 359, 188 N.W. 113, 121; Ivey v. Lewis, 133 Va. 122, 112 S.E. 712, 716; Newport v. Hatton, 195 Cal. 132, 231 P. 987, 994; Commercial Building Co. v. Parslow (Fla.) 112 So. 378, 381; Huey v. Brock, 207 Ala. 175, 92 So. 904, 905; Powe v. Payne, 208 Ala. 527, 94 So. 587; Colburn v. Burlingame, 190 Cal. 697, 214 P. 226, 27 A. L. R. 1374; Hodgman v. Cobb, 202 A.D. 259, 195 N. Y. S. 428; In re Niles, 122 Misc. Rep. 17, 202 N. Y. S. 475; Thomas' Adm'r v. Thomas, 220 Ky. 101, 294 S.W. 776. The last four cases deal with protecting bonds.
This record leaves no doubt that these trustees, the life tenant and several of the remaindermen are denying any right or interest of plaintiff to any property in the possession of the trustees and especially to the increases of stock in the Burroughs Company. Also, all of the property is in the form of securities which might be easily disposed of. These securities are concededly worth more than $4,000,000, yet the trustees are under a bond of only $100,000. Also, the trustees have always refused to give plaintiff any inventory or accounting and persistently deny his right to such. Also, the trust agreement provides that, on the death of Mrs. Franz (now more than 83 years old), all of the property "shall be held by them for account of the estate of said Sophie Franz, to be administered by the probate court of the city of St. Louis, Missouri, in accordance with the last will and testament of said *108 Sophie Franz, and in accordance with the laws of the State of Missouri in such case made and provided." If this quoted provision were followed, all of this property would be subject to various taxes, fees and costs (in course of such administration) which should not attach to any of such property belonging to the remaindermen because such would be deliverable direct to them by the trustees, upon termination of the life estate, and would not pass through the administration of the estate of Sophie Franz.
The above discussed law leaves no doubt that equity does afford, during the life tenancy, remedies for remaindermen to protect their estates and the above facts make it equally clear that a situation is here present justifying the use of such remedies at this time. Therefore, the suit was not prematurely brought.
Res Adjudicata.
Appellants contend that the decree (June 16, 1910) in the state court suit brought by plaintiff, shortly after the trust agreement was made, determined that "the stock dividends and other increases" in the property belonged to the life tenant and not to the remaindermen. The supporting argument takes two lines.
The first is that the fourth finding of that court was that Sophie Franz was entitled to all of such increases. That finding is as follows:
"4. The court doth further find that under and by virtue of the terms of the will of said Ehrhardt D. Franz, deceased, the defendant Sophie Franz, during her natural lifetime, became and was and is entitled to all of the usufruct and benefit of all of the property of said deceased and to all of the income, profits and earnings thereof, in her own right and absolutely."
Standing alone, this language is far from meaning that increases in the corpus of the estate, as distinguished from income therefrom, is the property of the life tenant. Nor do the words "profits and earnings," used in conjunction with "income," suggest such a meaning. The obvious meaning of the entire paragraph is that Sophie Franz is entitled to the revenue produced by the estate, in the nature of income. But even supposing the paragraph were ambiguous and, taken alone, might have either of the above meanings, yet the issues presented to the court and the entire decree leave no doubt.
The petition therein was an attack upon the trust agreement as being contrary to the rights of plaintiff under the will because it turned over to trustees property which would, at the end of the life estate, belong to the remaindermen and in which they had a present vested interest; also, that this property was being managed and wasted by the trustees without information or accounting to the remaindermen and without "being amenable to the plaintiff and the other remaindermen named in the said will by any bond or security whatever." It set forth that G. A. Buder (trustee) was denying that plaintiff had "any vested interest in the said property" and that plaintiff was the owner of "a one-tenth vested interest in the corpus of the aforesaid property." The prayer was for cancellation of the trust agreement and delivery of the property to a receiver; that the court construe the will and determine the rights and interests of the parties named therein and "whether their interests became contingent or vested at the death of the aforesaid testator"; and for general relief.
A joint and separate answer was filed by the trustees and other defendants (Mrs. Franz and other of her children). This answer alleged that Mrs. Franz owned absolutely considerable property which did not come from her husband's estate or which "had been acquired by her out of income which was hers." Further answering:
"These defendants say that at the time that she executed said instrument of January 30, 1909, defendant Sophie Franz was possessed in her own exclusive right as aforesaid of certain property and had a life estate and life interest in the property derived by her from the estate of her said deceased husband, and that the object and purpose of said instrument was to transfer to her son, the defendant G. A. Franz, and to defendant Buder, all such interest, right and title as she might and could properly and lawfully convey; that she intended to convey, and by said instrument did convey, to said two named defendants all of her said life estate, and no more, in the property so derived from her said deceased husband, and the absolute title to the property owned by her in her own exclusive right; that her object and purpose was to enable said two named defendants to distribute the income of all of said property, that in which she had but a life estate and that which belonged to her absolutely, between herself and her nine children, including the plaintiff, and her two grandchildren, the minor defendants herein. That in order to accomplish such purpose, she provided that $4,000 annually should be paid to her in quarterly installments and that $2,500 annually, in like installments, should be paid to each *109 of her said children and to the defendant Sherman H. Kleinschmidt for said grandchildren. That she expressly, however, provided that in making such distributions there should be no encroachment on or impairment of the principal assets thus conveyed to said two defendants. That she intended by said conveyance to provide, and she did provide, that on her death so much of said property as belonged to her absolutely and exclusively should be disposed of in accordance with her last will and testament and that so much of said property as was not hers exclusively and absolutely should be disposed of in accordance with the laws of Missouri in such case made and provided. * * *
"Defendants deny that said instrument attempts to dispose of any part of the estate of E. D. Franz, in contravention of his will, and deny that said defendant Buder has denied that the remaindermen have any interest in said property and has denied them or plaintiff any information to which they or he is entitled; also deny that said defendant Buder has declared that the remaindermen have no voice in the management, control or preservation of said property; but in that connection state that the said Buder has maintained, and these defendants also maintain, that the management and control and preservation of the property coming from the estate of said E. D. Franz is in defendant Sophie Franz or her grantees or assigns, during her lifetime, and that in any property acquired by her out of the income, the sole and exclusive management is in her and in her grantees or assigns, and that the remaindermen have no interest whatever in such last mentioned property.
"Further answering, these defendants say that defendant Sophie Franz had the power and the right to execute said instrument of January 30, 1909, as to the property in which she had a life estate, to the extent of her life interest, and had the right and the power to deliver said property to defendants Buder and Franz, to be held by them for and during the period and lifetime of the said Sophie Franz; and that as to property which belonged to said defendant Sophie absolutely and exclusively, she had the right to turn over and deliver the same to said defendants G. A. Franz and Buder without any limitation or restriction whatsoever.
"Further answering that part of the petition wherein plaintiff claims to have a vested interest in the property aforesaid, to the extent of at least $45,000, these defendants state that an undivided one-tenth interest in the estate left by said E. D. Franz, subject to the life estate of said defendant Sophie Franz, does not exceed the amount of $10,000; and that as a matter of fact, plaintiff has already received and accepted, by way of payments on account of his remainder interest, from defendant Sophie Franz, amounts exceeding in the aggregate $20,000.
"Further answering, these defendants say that none of the property whatsoever which was left by E. D. Franz, deceased, has been injured, wasted or destroyed; deny that there ever has been any threat on the part of defendant Buder or on the part of any defendant herein to injure, waste or destroy any part of said property whatsoever; deny that it is intended by said defendant Buder or by any of the defendants, to injure, waste or destroy any of said property whatsoever. On the contrary, these defendants aver that all of said property has been well and carefully preserved and is so invested and so managed that upon the death of defendant Sophie Franz and upon the termination of her life estate, any and all property in which plaintiff may then be interested will be forthcoming.
"Further answering, these defendants state that the defendants Sophie Franz, G. A. Franz and Gustavus A. Buder are each and all of them entirely solvent and fully able to respond to any right or claim which plaintiff herein may at any time be able to establish in the property left by the said E. D. Franz upon his decease."
The answer closed with:
"Wherefore these defendants say that plaintiff should not now be permitted to question the right of said defendant Sophie Franz to the possession of the property given her for life by the last will and testament of her said deceased husband."
In so far as the point now being discussed is concerned, the findings of the court were that the remaindermen had "a vested remainder" in the residuary property coming from the estate of Ehrhardt D. Franz; that Mrs. Franz was entitled to the income therefrom for life; that this property and other property, belonging absolutely to Mrs. Franz, was turned over to the trustees; that, as to the former, she conveyed to the trustees "only her life interest therein and no greater or other interest" but, as to the latter, she conveyed her entire title; that as to the estate property, the trustees had no power to dispose of any but her life interest; that, on her death, the estate property "should be divided between the plaintiff and the children named in the will of said Ehrhardt D. Franz * * * in accordance with the terms and *110 provisions of said will" and her absolute property "in accordance with her last will and testament, or if she should die intestate, then under the statutes of descents and distributions of the state of Missouri." The findings and decree were included in one order. The decree part followed the findings with a possible ambiguity as to a matter not pertinent to this point.
From the above it is clear that no issue was presented to the court as to whether the increase in Burroughs stock or from any other property belonged to Mrs. Franz nor as to what particular property the rights of the remaindermen attached. The issue was broader and more general. It was whether there was any property to which such rights attached and whether such rights were contingent or vested. The findings and decree determined this issue by holding that there was such property (without any particularization) and that the rights of the remaindermen were vested.
Appellants contend that the use of the words "usufruct," "benefit," "profits" and "earnings," used in the state court decree, carry a meaning which is larger than "income" and cover the exchange and increases of Burroughs stock. Even if the issues in that action could justify a determination by that court of the specific interests of the life tenant which they do not yet the above contended result does not necessarily follow and we think should not. This estate comprised considerable other property (both real and personal) beside corporate stock and the above quoted terms might reasonably be and we think were used to cover only the various kinds of income from such varied property. As to "usufruct," see 39 Cyc. 874, and citations; as to "benefit," see 7 C. J. 1135, and citations; as to "profits," see 32 Cyc. 585, and citations; as to "earnings," see 19 C. J. 853, and citations.
The second argument is that the amount of the bond ($100,000), required of the trustees by the court, is clear evidence that the court considered that amount to be the value of the remaindermen's estate and thus, indirectly at least, adjudged that the balance belonged to Mrs. Franz. The answer to this is that the court made no finding nor even hinted at the value of the remainder estate or of the entire estate turned over to the trustees and that the bond was not solely to protect the remainder interests but Mrs. Franz also, since it was required to be "for the use and benefit of any and all parties interested in said trust estate."
Therefore, we must conclude that there is no merit to this contention of res adjudicata.
Estoppel.
Appellants contend here that an instrument dated January 7, 1920, operates as an estoppel to all claims that there is any remainder interest (by virtue of the will of Ehrhardt D. Franz) in any property held by the trustees. To understand the place of this instrument and its effect, it is necessary briefly to state some related facts. Among the assets of the estate of Ehrhardt D. Franz, were 210 shares in the American Arithmometer Company. During the administration of that estate, a hundred per cent. stock dividend was declared. These 420 shares were delivered to Mrs. Franz (the life tenant). During 1905, the Burroughs Adding Machine Company was organized to succeed the Arithmometer Company, took over the assets of the latter and exchanged its stock for that of the Arithmometer Company on the basis of ten to one. When the trust agreement of 1909 became operative, these 4,200 shares in the Burroughs Company were turned over to the trustees by Mrs. Franz. During 1917, the Burroughs Company declared a stock dividend of 200 per cent., making a total of 12,600 shares held by the trustees. Early in the year 1920, the Burroughs Company issued to its stockholders certain "stock rights" whereby each existing share was entitled to subscribe for and purchase one-half of a share of new capital stock at par thus, the 12,600 shares had "rights" to purchase 6,300 new shares. At the time these "rights" were issued, the trust estate was not in position to make the purchase and apparently could not do so. These "rights" were valuable and estimated by the trustees and others interested in the trust property as being worth $75 per "right." The agreement of January 7, 1920 (relied upon for this estoppel), resulted from the above situation as to these "rights." It is (omitting signatures) as follows:
"This agreement, made and entered into this 7th day of January, 1920, by and between Sophie Franz of St. Louis, Missouri, temporarily sojourning at Santa Fé, New Mexico; Johanna F. Fiske, of Santa Fé, New Mexico; Ehrhardt W. Franz, of Webb City, Missouri; Ernest N. Franz, of Pasadena, California; Amanda F. Wheeler, of Denver, Colorado; Gustav A. Franz, of Clifton, Arizona; Walter G. Franz, of Cincinnati, Ohio; Otto B. Franz, of Los Angeles, California; Henrietta Holloway, of Chicago, *111 Illinois; Sherman H. Kleinschmidt and Helen Kleinschmidt, of the city of St. Louis, Missouri, parties of the first part; and G. A. Franz, of Clifton, Arizona, aforesaid, and G. A. Buder of the city of St. Louis, Missouri, trustees under a trust conveyance, dated January 30, 1909, parties of the second part, witnesseth:
"Whereas, under the terms of a certain trust conveyance of Sophie Franz to G. A. Franz and G. A. Buder, trustees, dated January 30, 1909, the parties of the first part and others are the beneficiaries of certain fixed quarterly distributions, as therein provided, to which trust conveyance reference is hereby made and the same by such reference made part thereof; and
"Whereas, under a certain supplemental agreement, dated December 26, 1913, the payments and distributions to said beneficiaries were increased, as in said supplemental agreement, provided, which supplemental agreement is by this reference made part hereof; and
"Whereas, it is the expressed wish and desire of said Sophie Franz to make an advancement in cash or securities to each of her said children and Sherman H. Kleinschmidt in behalf and for account of Helen and Eleanor Kleinschmidt, heirs of Minna F. Kleinschmidt, deceased, mentioned as beneficiaries under the said trust agreement, excepting her daughter, Adelaide Zimmerman, who, by reason of her marriage to Robert Zimmerman, a resident of Germany, is an alien enemy; and
"Whereas, there is no provision contained in said trust agreement whereby and whereunder any such advancement or distribution can be made to said children and beneficiaries, and the same can only be accomplished by consent and agreement among said parties; and
"Whereas, among the assets comprising said trust estate, created under the terms of said trust agreement, there are at this time twelve thousand six hundred (12,600) shares of the capital stock of the Burroughs Adding Machine Company, appearing in the name of Sophie Franz; and
"Whereas, the said trustees, as holders of said twelve thousand six hundred (12,600) shares of Burroughs Adding Machine Company stock, appearing in the name of Sophie Franz, will be entitled to certain rights to subscribe for new stock of the Burroughs Adding Machine Company to the extent of one-half share for each share of old stock, owned, being fifty per cent. of the present holdings of said trust estate, to wit, sixty-three hundred (6,300) shares at the price of one hundred ($100) dollars per share, par value therefor; and
"Whereas, the said trustees have no available cash or funds with which to subscribe for said sixty-three hundred (6,300) shares, being the sum of six hundred thirty thousand ($630,000) dollars to be paid as provided in the notice of the proposed increase of capital stock of said Burroughs Adding Machine Company, and
"Whereas, it is the wish and desire of said Sophie Franz that the trustees should distribute the rights to subscribe for such new stock among the distributees under said trust conveyance, excepting Adelaide Zimmerman, to the extent ten thousand eight hundred (10,800) rights or fifty-four hundred (5,400) shares, being twelve hundred (1,200) rights, entitling them respectively to purchase six hundred (600) shares of new stock; and
"Whereas, said distributees are anxious to receive and are respectively willing to accept the rights entitling them respectively to six hundred (600) shares of new stock as an advancement and partial distribution under the terms of said trust agreement and the supplemental agreement above referred to, and are willing to pay the subscription price of one hundred ($100) dollars per share therefor; and
"Whereas, the said trustees are willing to make such distribution and advancement, providing the said Sophie Franz and the said distributees and Sherman H. Kleinschmidt, in behalf of his daughter, Helen Kleinschmidt, and his minor daughter, Eleanor Kleinschmidt, will join in this agreement, consenting to such advancement and distribution and holding the said trustees harmless and indemnified of, from and against any and all liability by reason of having so made said partial distribution and advancement; and
"Whereas, the said Sophie Franz and the undersigned distributees are willing, jointly and severally, to hold the said trustees harmless and indemnify and protect them and each of them against any and all liability by reason of making such advancement and distribution; and
"Whereas, the said distributees are further willing to execute a noninterest-bearing receipt for such advancement and distribution, to be charged against their respective interests in said trust estate, the estate of Sophie Franz, or their respective interests, if any, in the estate of E. D. Franz (deceased); and
"Whereas, said Sophie Franz is anxious that said distribution be made even though *112 the consent of Adelaide Zimmerman and of Eleanor Kleinschmidt, a minor, cannot be obtained; and
"Whereas, to secure said distribution, she is willing that her estate shall be made liable and responsible in the event there be any liability on the part of said trustees, or either of them, because of making such distribution and advancement, without such consent, or for any other reason or reasons.
"Now, therefore, this agreement witnesseth:
"1. The said Sophie Franz, Johanna F. Fiske, Ehrhardt W. Franz, Ernest H. Franz, Amanda F. Wheeler, Gustav A. Franz, Walter G. Franz, Otto B. Franz, Henrietta Holloway, Sherman H. Kleinschmidt, and Helen Kleinschmidt, hereby jointly and severally bind ourselves and our and each of our respective heirs, executors, administrators and assigns, to protect and hold harmless and indemnified the said trustees, or either of them, of, from and against any and all liability of every kind and nature which they, or either of them, may assume or incur by reason of the making of a distribution or advancement of the rights entitling them respectively to subscribe to six hundred (600) shares of Burroughs stock, as hereinbefore mentioned.
"2. The said Sophie Franz agrees that in the event the said trustees, or either of them, incur any liability by reason of making such advancement or distribution, which shall not be fully protected, repaid and indemnified by herself and her children and distributees aforenamed, that then and in that event the said trustees, or either of them, may and shall be given a preferred claim and granted a priority and preference against the assets of her estate to the extent of any such claim or claims.
"3. The said distributees under said trust agreement and said Sherman H. Kleinschmidt hereby covenant and agree and bind themselves to execute proper receipts for such advancement or distribution of rights, entitling them respectively to six hundred shares of Burroughs stock as aforesaid, and stipulate and bind themselves that such receipts may and shall be used and will be accepted as a partial distribution of said trust estate, or the estate of said Sophie Franz, in the distribution of the same under her last will and testament, as provided for in said trust agreement.
"4. And the said Sophie Franz and the parties hereto hereby further covenant and agree that if, as soon as the inability of Adelaide Zimmerman to receive and accept an advancement is removed, that then and in that event and under such circumstances, the said trustees shall be, and hereby are, privileged to make a like distribution to said Adelaide Zimmerman, provided she paid said trustees the subscription price of one hundred ($100) dollars per share, or such amount as may have been paid on account of the subscription of said six hundred (600) shares by said trustees, it being understood that in the event of such distribution to said Adelaide Zimmerman, she shall likewise bind and obligate herself to the same extent in the protection of the said trustees against any and all liability on account of making such distribution and advancement to either one or all of said heirs and distributees.
"5. And the said Sherman H. Kleinschmidt, father of Helen Kleinschmidt and Eleanor Kleinschmidt, the latter a minor, hereby agrees to accept and receive the said advancement and distribution for account of his said two children and hereby stipulates and binds himself to obtain the consent and approval of said minor daughter in the making of such advancement or distribution as soon as she arrives at her majority. The said Helen Kleinschmidt hereby gives her consent and approval to such distribution and advancement by joining in the execution hereof.
"6. The said Sophie Franz and the distributees and parties hereby agree and bind themselves, jointly and severally, to protect, the said trustees, or either of them, of, from and against any and all claims or demands, of every kind and nature, which may be made against said trustees, or either of them, by any of the parties hereby or by any of the heirs or legal representatives of any of the parties hereto, by reason of the death of any one or more of said parties before the final distribution of said trust estate under the terms of the last will and testament of said Sophie Franz, or any claim or claims which may be made against them, or either of them, by said distributees or their respective heirs, or any of them, under the last will and testament of Ehrhardt D. Franz, deceased.
"7. And the parties hereto hereby further agree that the said trustees shall receive and may retain five per cent. of all such rights received from said Burroughs Adding Machine Company on account of any distribution made to the parties hereto as their compensation and commissions, the same as if final distribution or transfer of such part thereof had been made to the executor or legal representative of said Sophie Franz, in accordance with the terms of said trust conveyance or any other distribution which may *113 be affected by agreement under said trust agreement or the supplemental agreement above referred to."
The bare bones of this agreement are that these stock "rights" attached to stock "appearing in the name of Sophie Franz" which stock was subject to the trust agreement; that the trust agreement provided no method by which such "rights" could be taken therefromunder; that the trust estate lacked available funds to realize upon these "rights"; that the life tenant and all of the remaindermen wished distribution of such "rights" among the remaindermen in order that they might realize thereon; that some of such remaindermen were minors; that to secure this desired result and to protect the trustees in executing it, an agreement was advisable; that such distribution of the "rights" was authorized and such protecting indemnity contracted.
These "rights" were not income belonging to the life tenant but corpus belonging to the remaindermen. Miles v. Safe Deposit & Trust Co., 259 U.S. 247, 42 S. Ct. 483, 66 L. Ed. 923; Hite's Devisees v. Hite's Executor, 93 Ky. 257, 267, 20 S.W. 778, 19 L. R. A. 173, 40 Am. St. Rep. 189. The only interest therein, if any, of the life tenant was to the income from the stock purchased under those rights, if such purchase were by funds from the corpus of the trust. The life tenant nor the trustees had any right to appropriate these "rights" and make them the property of the life tenant through exercise of such "rights" with her own money. The only substantial thing acquired by the remaindermen through this contract was the protection of and realization upon their own property the "rights." For such a consideration we are asked to determine that they gave up all rights and claims to any other property in the trust estate. That is, for the immediate privilege of exercising the right to subscribe $100 per share for 6,300 new shares in the Burroughs Company they gave up all claim to 12,600 outstanding fully paid shares in that company and rights in other property as well. We must decline to travel such an uninviting course.
It is contended, also, that an agreement (dated January 30, 1920), by all the parties to the above agreement, made to the Burroughs Adding Machine Company to induce it to comply with the agreement of January 7, 1920, and to indemnify it for so doing, contains language upon which an estoppel should arise. The language relied upon is used for and in connection with Sophie Franz and not by these remaindermen. It is that "the said Sophie Franz, individually and for herself, her heirs and assigns, hereby agrees" that the rights and stock distributed under the agreement of January 7, 1920, "may be treated as a partial distribution of her estate under the terms of her last will and testament. * * *" In crushing contrast, is the undertaking of the remaindermen to waive all rights to such "rights" or resulting stock "whether acquired under the last will and testament of E. D. Franz, deceased, or in any other manner."
It is urged, also, as bearing on this contention that one of the trustees, G. A. Buder, testified that the payment to the trustees of 5 per cent. of the stock "rights," provided for in the agreement of January 7, 1920, "was done on the assumption that this was all property of Sophie Franz which was distributed * * * and not the property of E. D. Franz estate." We think the agreement of January 7, 1920, must govern and not the "assumption" as to its meaning and effect indulged by one of the parties seeking to establish the estoppel.
Increase of Burroughs Stock.
The Buroughs stock came in two ways. The first was by exchange of 4,200 shares of that stock for 420 shares in the Arithmometer Company. In 1905 the Burroughs Company was organized to succeed the Arithmometer Company and exchanged its shares for those of the latter. Obviously, this exchange made no change in the legal status of the shares in any respect here involved. It was a mere exchange or displacement. The 420 shares were clearly corpus coming from the estate of Ehrhardt D. Franz and anything for which they were exchanged would merely take the place of such shares. If there was an increase in value through the exchange, a fact not shown, it would not change the aspect that it was an increase in capital value and not of an income earned by capital.
The remainder and, by far, the greater amount of Burroughs stock came, after this exchange, in the form of stock dividends. That stock dividends are part of the corpus and not income therefrom or thereon is settled by authority which is binding upon us (McDonald v. Maxwell, 274 U.S. 91, 97, 47 S. Ct. 497, 71 L. Ed. 942; Gibbons v. Mahon, 136 U.S. 549, 10 S. Ct. 1057, 34 L. Ed. 525, and Brown v. Wisconsin Syndicate, 19 F. [2d] 198, this court) and the same rule prevails in Missouri (Hayes v. St. Louis Union Trust Co. [Mo. Sup.] 298 S.W. 91).
*114 Intent of the Testator.
While the legal rule as to stock dividends is as above, an owner of stock may make such disposition thereof, in his will, as he may see fit. "* * * The intention of the testator, so far as manifested by him must of course control; but when he has given no special direction upon the question as to what shall be considered principal and what income, he must be presumed to have had in view the lawful power of the corporation over the use and apportionment of its earnings, and to have intended that the determination of that question should depend upon the regular action of the corporation with regard to all its shares." Gibbons v. Mahon, 136 U.S. 549, 559, 10 S. Ct. 1057, 1058, 34 L. Ed. 525. The will of Ehrhardt D. Franz must be measured by the above quoted rule. In so far as pertinent to this question, that will is as follows:
"The rest, residue and remainder of my estate, whether real, personal or mixed property, I give, bequeath and devise unto my beloved wife Sophie Franz, for and during the period of her natural life.
"After the termination of the life estate of my wife, I give, bequeath and devise the remainder in equal shares, share and share alike, unto my children Minna, Johanna, Ehrhardt, Ernest, Amanda, Gustav, Walter, Otto, Henrietta and Adelheide, and unto their heirs and assigns forever."
These provisions create a plain life estate in Sophie D. Franz no more and no less. A life tenant is, in a sense, a trustee for the remaindermen (Bush Constr. Co. v. Withnell, 190 Mo. App. 33, 175 S.W. 260; 17 Rawle C. L. 626, and citations in note 10), with the right to possess and enjoy the use and income from the estate during life (17 Rawle C. L. 625, § 15) and a liability for waste to the corpus of the estate (Hill v. Ground, 114 Mo. App. 80, 89 S.W. 343; Tiffany, Real Property [2d Ed.] pp. 83, 949, et seq.; 17 Rawle C. L. 626).
Applying the rule above quoted from Gibbons v. Mahon, we must determine that this testator has "manifested" no intention and has "given no special direction upon the question as to what shall be considered principal and what income" and that, because he has not done so, "he must be presumed to have had in view the lawful power of the corporation over the use and apportionment of its earnings, and to have intended that the determination of that question should depend upon the regular action of the corporation with regard to all its shares." In short, all of this Burroughs stock here involved is corpus in which Sophie Franz has only a life estate.
No issue is presented here as to the right of Sophie Franz to create a trust to manage, during her lifetime, the estate coming from her husband under the will as well as any property belonging to her absolutely. With the termination of the trust by her death, her absolute property will pass to administration (testate or intestate). As her death will likewise terminate the life estate, the remaindermen will, thereupon, be entitled to receive direct from the trustees the property not belonging to Sophie Franz absolutely such property has no relation to her absolute property and no administration can be had upon it. Anderson v. Messinger (C. C. A. Sixth Circuit) 146 F. 929, 948, 949, 7 L. R. A. (N. S.) 1094.
II. Cross-Appeals.
The cross-appeals deal with the amount, character and expense of the security required from the trustees by paragraphs 7 and 9 of the decree and with the payment of costs. Italicizing the particular parts involved, those paragraphs are as follows:
"7. That defendants, Gustavus A. Buder and Gustav A. Franz, trustees, within thirty (30) days from the date of this decree, give bond, properly conditioned and in the sum of $500,000 to be approved by this court, for the protection and security of the said remainder interest, of plaintiff Ehrhardt W. Franz, of the said remainder interests of the estate of Walter G. Franz, deceased, and of Ernest H. Franz, deceased, and of the remainder interest of Eleanor Kleinschmidt, an infant, in and to said non-par value stock, any accretions thereto, said moneys described in paragraph 5 hereof, and any other property arising from and accruing out of such remainder interests, which may be in, or come into, the hands of said trustees, defendants. Said bonds to be both joint and several as to the parties and property thereby secured and protected and to be in addition to the existing bond provided for in and by the decree of the circuit court of the city of St. Louis, entered June 12, 1910. The cost of such bond to be paid for by the persons, estates and parties named and set out in this paragraph as obligees therein, or charged to and deducted ratably from any moneys in, or coming into, the hands of the trustees, payable to said obligees."
"9. That the costs in this cause be paid by the said Gustavus A. Buder and Gustav A. Franz, trustees, and the same may be charged by them to the trust estate."
*115 The contentions as to security are that there should be separate bonds to each of the cross-appellants; that the amount of the bond is too low and that any expense in procuring a bond or bonds should be borne by the trustees. Who shall pay the expense, if any, of procuring such bonds is a matter largely resting in the sound discretion of the chancellor. It is not usual in bonds demanded from a trustee to require the expense thereof to be borne by the trustee. Usually, such expense is placed upon the estate in trust as being a proper expenditure for the benefit of such estate. Here, the protection sought and that provided in the decree is not for the entire estate but solely for certain specified interests therein. Therefore, it seems more proper that such interests should bear this expense than to place part thereof upon the other interests which are not asking nor securing such protection. We approve the provision of the decree requiring any such expense to be paid from the interests protected by the particular bond.
The evidence is clear that the present and prospective value of the interests of the cross-appellants is considerably in excess of the bond amount ($500,000) named in the decree. Also, there seems no good reason why there should not be separate bonds for each interest represented by these cross-appellants that is, a bond to Ehrhardt W. Franz, one to the estate and heirs of Walter G. Franz, one to the estate and heirs of Ernest H. Franz and one to the minor, Eleanor Kleinschmidt. Therefore, to afford each of said four interests the opportunity to secure a separate bond, the decree will be modified as follows: That any of said four interests may, within thirty days after receipt of the mandate by the trial court, file therein a written request for such separate bond in such sum (not exceeding $500,000) as may be stated therein; that, within thirty days after such filing, a separate bond in such sum shall be filed by the trustees, to be approved in all respects by a judge of the trial court; as to all of such four interests not filing such request, a joint and several bond in the sum of $500,000, to be likewise approved.
As to costs: It is clear, from this record, that this entire controversy has been caused by the trustees. They have consistently and persistently refused to accord the cross-appellants the rights which were due them. They have gone further than this and have and do deny the existence of any and all rights and interest in the cross-appellants. Such course of conduct has compelled this litigation to establish those interests and to enforce and protect the resulting rights. The costs of this action up to the filing of the amended bill of complaint following the former appeal might properly be assessed against complainant and the then interveners because such costs were almost entirely incurred in connection with a mistaken theory of jurisdiction. However, if there has already been any assessment of such costs we leave such undisturbed. As to all costs accruing with and after the filing of such amended bill, we think they should be assessed against the trustees individually and the decree, in that respect, modified.
With the above modifications, as to security and as to costs, the decree of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551632/ | 315 B.R. 785 (2004)
In re Loveless BABIES, Jr., and Alma Bernice Babies, Debtors.
No. 03-82383.
United States Bankruptcy Court, N.D. Georgia, Atlanta Division.
September 30, 2004.
*788 J. Eugene Wilson, East Point, GA, American Bankruptcy Counselors, Law Offices of Donald M. Leibsker, Richard D. Grossman, The Law Group, Ltd., Chicago, IL, for Debtors.
MEMORANDUM OPINION
PAUL W. BONAPFEL, Bankruptcy Judge.
Loveless and Alma Babies (the "Debtors") retained two lawyers practicing bankruptcy law in Chicago, Illinois, with regard to the filing of their joint chapter 7 case in Atlanta. Debtors were referred to these lawyers by a credit counseling service that they contacted, one of many such entities that refer potential bankruptcy clients to the lawyers, often for compensation.
The two attorneys, Donald Leibsker (and his law firm, American Bankruptcy Counselors ("ABC")) and Richard D. Grossman (and his law firm, the Law Group, Ltd.) (collectively, the "Chicago Attorneys"), are licensed to practice in the State of Illinois and are admitted to the bar of the United States District Court for the Northern District of Illinois but are not members of the State Bar of Georgia or of the United States District Court for the Northern District of Georgia. After obtaining information from Debtors and preparing a draft of papers for the bankruptcy filing, the Chicago Attorneys arranged for Debtors to meet with Mr. J. Eugene Wilson, a member of the State Bar of Georgia and of this Court, who filed the case for the Debtors and appeared as their sole counsel of record.
In connection with proceedings not material here, the Court discovered that Debtors had paid a $1,000 fee for legal services in connection with this case that was shared by the Chicago Attorneys and Mr. Wilson. The Court sua sponte ordered that the lawyers appear at hearings to address the Court's concerns about whether they had adequately disclosed the particulars of their fee sharing agreement as required by Rule 2016 of the Federal Rules of Bankruptcy Procedure, whether the Chicago Attorneys had engaged in the unauthorized practice of law in this State and had practiced law in this Court without being admitted to its bar, whether their sharing of compensation was proper, and whether all or any part of their fee should be disgorged under 11 U.S.C. § 329.
*789 Under the facts of this case, the Court concludes that, unless the Chicago Attorneys are admitted to practice in this Court pro hac vice, they are engaging in the unauthorized practice of law in Georgia and the unauthorized practice of law in this Court such that they could not lawfully provide legal services to Debtors or share fees with local counsel. Because the Chicago Attorneys have evidenced a good faith intention to practice in compliance with applicable legal and professional standards and because they are qualified for pro hac vice admission, the Court will deem them admitted in this case. Consequently, no sanctions or further disciplinary proceedings are necessary, and the Court will not require disgorgement of the otherwise reasonable fee paid by Debtors who obtained an acceptable result in this case.
I. FACTS
The facts are not disputed. Faced with financial difficulties, Mr. Babies contacted a credit counseling service. The credit counseling service advised Mr. Babies that he should consider filing bankruptcy and referred him to ABC, Mr. Leibsker's firm. The Chicago Attorneys do not recall the particulars of the referral, but they admit that they pay a fee for at least half of their referrals. They often pay a fee to the referring entity whether or not the referred person calls or becomes a client.
Mr. Babies called ABC and received a form questionnaire to complete and return. The Chicago Attorneys represent that Debtors signed a standard "American Bankruptcy Counselors/Client Agreement" (the "Client Agreement") and returned the questionnaire. The Chicago Attorneys then prepared the petition, schedules, and statement of affairs, sent the papers to Mr. Wilson, and advised the Debtors to call Mr. Wilson. Mr. Wilson met with the Debtors, reviewed the bankruptcy papers, requested some revisions that the Chicago Attorneys made, and filed the revised petition and papers that the Debtors had signed.
The attorneys' disclosure statement filed pursuant to Rule 2016 disclosed that the $1,000 attorneys' fee was to be shared and that all of the attorneys had agreed that each "will remain responsible for completion of the legal work involved in this matter and responsible for the legal work of each." All three lawyers signed the Rule 2016 disclosure statement, but Debtors did not; the Chicago Attorneys contend this was an oversight and point out that the Client Agreement contemplated that, after ABC prepared the bankruptcy papers, Debtors would meet with a local lawyer to advise them as to local law, review the papers, file the case, attend the § 341 meeting, and represent them with regard to certain matters in the case.
Neither the Rule 2016 disclosure statement nor the Client Agreement reflects which lawyers get how much of the fee. The Rule 2016 disclosure statement shows that Mr. Grossman and his firm will share in the fee; the Client Agreement does not mention him, however, and neither document describes the services that he and his firm are to provide. Documents exchanged between Mr. Wilson and Mr. Leibsker show that Mr. Wilson got $250 and the Chicago Attorneys got $750. The record does not reflect how the Chicago Attorneys divided their $750. The division of fees takes place without regard to the amount of work that each of the three lawyers performs.
In one paragraph of the Rule 2016 disclosure statement, the three attorneys represent that they have agreed, in exchange for the $1,000 fee, to "render legal services for all aspects of the bankruptcy case." Another paragraph, however, states that the fee does not include "representation of *790 the debtor in adversary proceedings and other contested bankruptcy matters." In addition to the fact that these two paragraphs are inherently contradictory, the undertaking in the former paragraph to render legal services for "all aspects of the bankruptcy case" for the $1,000 fee conflicts with terms of the Client Agreement that expressly limit the scope of the representation by excluding services such as defense of any complaint to deny a discharge, prosecuting any complaint to determine dischargeability of a debt, converting a case from chapter 7 to 13 or from chapter 13 to 7, representation concerning any reaffirmation matters that are not resolved at the conclusion of the § 341 meeting, filing of motions to avoid liens, and amendments to add a creditor. These excluded services required an additional fee. The Chicago Attorneys candidly acknowledge that they did not discuss with Debtors the implications of limitation of scope of the representation.
Although not the focus of this Opinion, the Court notes that the foregoing facts give rise to several concerns relating to the limitation on the scope of services that the attorneys were obligated to provide. First, the attempted limitation of services as set forth in the Client Agreement is clearly not permissible in these circumstances under standards of professional conduct applicable in this and other courts. Among other things, the limitation is not permissible because the attorneys did not consult with Debtors about it and because it excluded legal services that are essential to the objectives of the representation. In re Egwim, 291 B.R. 559, 569-573 (Bankr.N.D.Ga.2003); see, e.g., In re Castorena, 270 B.R. 504, 523-30 (Bankr.D.Idaho 2001). The most glaring example is the exclusion of services concerning reaffirmation agreements not made by the time of conclusion of the § 341 meeting. In view of Debtors' stated intention to reaffirm two car loans and their residential mortgage and the fact that they could not reaffirm these debts without their attorney's review as required by 11 U.S.C. § 524(c)(3), the lawyers could not properly limit legal services with regard to these reaffirmations that clearly were a critical objective of the representation. Second, the limitation of services is not properly disclosed in accordance with Rule 2016. Third, it is arguable that a court could construe the disclosure statement against the attorneys who drafted it and hold that the attorneys were obligated to provide all services ir the bankruptcy case for $1,000 including even, for example, litigation of a discharge or dischargeability matter. Nothing would require the attorneys to agree to such an undertaking; the agreement could of course provide for additional fees for certain described services or for any services that are not described. Egwim, supra, at 573. Fortunately, such issues did not arise in this case because Debtors received their discharges as a matter of course and there were no complaints seeking a dischargeability determination.
II. REQUIREMENT OF PRO HAC VICE ADMISSION
The Chicago attorneys contend that they do not have to be admitted to the State Bar of Georgia or to the bar of this Court in order to provide legal services to the Debtors in connection with this case because they associated with local counsel who is so admitted. They also justify their activities on the theory that they are engaged in a fee-sharing arrangement with local counsel that is permissible for all of them under the professional standards applicable in their respective jurisdictions. The Court concludes that, under the circumstances of this case, the only way for the Chicago Attorneys to lawfully represent *791 Debtors in connection with this case and receive compensation for such services is to be admitted to the bar of this Court pro hac vice.
A. Unauthorized Practice of Law and Admission to the Court's Bar
A person must be a member of the State Bar of Georgia in order to lawfully provide legal services in Georgia. O.C.G.A. § 15-19-51(a)(4), (6); Rules and Regulations for the Organization and Government of the State Bar of Georgia, Rule 1-203. Rule 1-203 provides in pertinent part:
No person shall practice law in this State unless such person is an active member of the State Bar of Georgia in good standing; except as provided below:
(1) A person who is not a member of the State Bar of Georgia, but who is licensed to practice in a state or states other than Georgia, and is in good standing in all states in which such person is licensed, may be permitted to appear in the courts of this state in isolated cases in the discretion of the judge of such court.
In particular, persons practicing bankruptcy law in Georgia are subject to its rules of professional responsibility, In re Thomson, 266 Ga. 157, 464 S.E.2d 818 (1996); In re Bingley, 262 Ga. 31, 415 S.E.2d 901 (1992), and persons providing legal services with regard to bankruptcy matters without a license are engaged in the unauthorized practice of law. In re Martin, 40 B.R. 695 (Bankr.N.D.Ga.1984); Vaid v. State, 165 Ga.App. 823, 302 S.E.2d 631 (1983).
Georgia's exercise of authority in this regard is consistent with the general principle that the states may regulate and license the practice of law even if the legal services involve matters of federal law. See Maternally Yours, Inc. v. Your Maternity Shop, Inc., 234 F.2d 538, 541 n. 1 (2d Cir.1956); In re Peterson, 163 B.R. 665, 673-75 (Bankr.D.Conn.1994). To this general rule there is a limited exception: A person may provide services that a state validly characterizes as the practice of law without being admitted to the state's bar if the services relate to matters in a federal forum before which the person is authorized to practice. Sperry v. Florida ex rel. Florida Bar, 373 U.S. 379, 83 S. Ct. 1322, 10 L. Ed. 2d 428 (1963).
The majority and dissenting opinions in Rittenhouse v. Delta Home Improvement, Inc. (In re Desilets), 291 F.3d 925 (6th Cir.2002), illustrate two competing views as to the applicability of the foregoing exception to the bankruptcy practice of a lawyer admitted to the bar of a federal bankruptcy court located in a state in which the lawyer is not admitted to that state's bar. In Desilets, a lawyer licensed in Texas had been admitted to the bar of the United States District Court for the Western District of Michigan and established a practice limited to bankruptcy matters in federal court in Michigan without being admitted to the State Bar of Michigan. The Michigan bankruptcy and district courts ruled that the lawyer was engaged in the unauthorized practice of law, required him to return fees, and indefinitely suspended him from practice in the bankruptcy court. Id. at 927.
The Sixth Circuit reversed. Concluding that federal standards govern practice in federal courts and that state laws cannot limit practice in federal courts, the majority ruled that, because the lawyer had been duly admitted to practice in the bankruptcy court, he did not have to be admitted to the bar of the state in which the court sat in order to practice bankruptcy law there. Id. at 930-31. Disagreeing, the dissenting opinion concluded that the bankruptcy court and district court could properly interpret *792 their own rules to forbid routine practice in the bankruptcy courts in Michigan by a lawyer not licensed to practice in Michigan. Id. at 931.
The Court need not choose between these two views in order to determine the issues in this case. The premise of the majority view in Desilets is that state licensing requirements cannot restrict the practice of law concerning matters in a federal court in the state by a lawyer admitted to the bar of that federal court. Because the Chicago Attorneys are not members of the bar of this Court, there is no basis for excepting them from Georgia's requirements governing the practice of law even if Desilets makes an exception available.
The Chicago Attorneys contend, however, that Georgia's licensing requirements do not apply to their activities because local counsel, not they, signed and filed the petition and actually provided representation to Debtors in this Court. Their contention does not properly state the issue. A person providing legal services for a debtor filing a bankruptcy case in Georgia cannot avoid Georgia's requirements merely by associating an admitted lawyer. The retention of local counsel does not grant authority to the Chicago Attorneys to render legal services in bankruptcy cases to whatever Georgia residents they solicit through their referral program. More accurately stated, the issue is whether the activities of the Chicago Attorneys constitute the practice of law in Georgia.
The Chicago Attorneys did not come to Georgia in connection with their representation of Debtors in this case until they appeared in response to the Court's order. Nevertheless, the circumstances of this case demonstrate that they intended to, and did, provide legal services in this state.
The operation of the Chicago Attorneys' referral program shows plainly that they intended to provide legal services to residents of Georgia with regard to bankruptcy matters in Georgia on an "all comers" basis. Their referral program, through which they acquired Debtors as clients, targets financially distressed individuals in Georgia and other states; through it, the Chicago Attorneys hold themselves out as being ready, willing, and able to provide legal services to residents of such states, including Georgia, in connection with the filing of a bankruptcy petition in the client's state. They delivered their legal services to their clients in Georgia by way of telephone and the United States mail.
The subject of the representation was a bankruptcy case that obviously was to be filed in this state, and the representation of the clients necessarily involved issues of Georgia law that are inextricably intertwined with questions of federal bankruptcy law. (For example, issues of critical import to a consumer debtor find their answer in large part in Georgia law, including exemptions, O.C.G.A. § 44-13-100, residential foreclosure, automobile repossessions, and garnishments. The way that state law may dramatically affect the course of a bankruptcy case is aptly illustrated by the fact that a debtor in Georgia has the ability to require turnover of an automobile repossessed, but not sold, prior to the filing of a petition whereas a debtor in Alabama or Florida does not. Compare Motors Acceptance Corp. v. Rozier (In re Rozier), 376 F.3d 1323 (11th Cir.2004) (Georgia law) with Bell-Tel Fed. Credit Union v. Kalter (In re Kalter), 292 F.3d 1350 (11th Cir.2002) (F'.orida law) and Charles R. Hall Motors, Inc. v. Lewis (In re Lewis), 137 F.3d 1280 (11th Cir.1998) (Alabama law).) Any problems with the legal services in the case would clearly have consequences on the lives of Debtors in Georgia, the state of their residence, determined in the Georgia courts under *793 Georgia law, if not addressed by this Court.
If the Chicago Attorneys' representation of Debtors in this case is a single, isolated event, it is only because their referral program has not garnered any other clients so far. Their statement that they have provided legal services in bankruptcy matters for over 700 debtors in 47 states clearly demonstrates an intent to represent any Georgia debtors that their referral program solicits.
Everything about the representation involved Georgiaclients, forum, applicable law, eventual consequencesexcept the location of the Chicago Attorneys and the provision of the Client Agreement requiring arbitration of any disputes in Chicago. In an age of e-commerce and e-mail, the physical location of the attorneys and the metaphysical concept that because they remained in Chicago they rendered legal services there cannot control the actual substance of the representation: The Chicago Attorneys provided legal services in Georgia as fully as if they had hung a shingle across the street from the courthouse.
Because the activities of the Chicago Attorneys constitute the practice of law in Georgia, they are subject to its rules regulating the practice of law. Because they are not members of the State Bar of Georgia, the only way that they may legally provide legal services to Debtors in connection with their bankruptcy case is to be admitted to practice before this Court.
Admission to practice before this Court requires admission to the bar of the United States District Court for the Northern District Of Georgia. Bankruptcy Local Rule ("BLR") 2090-1. Unlike the rules of the Michigan district court in Desilets, the rules of the Northern District require membership in the State Bar of Georgia as a condition to being admitted to its bar. Civil Local Rule ("LR") 83.1(A). This requirement is clearly permissible. See Gallo v. U.S. Dist. Court for the Dist. of Arizona, 349 F.3d 1169 (9th Cir.2003), cert. denied, U.S. , 124 S. Ct. 2420, 158 L. Ed. 2d 982 (2004). Although the Chicago Attorneys do not meet this requirement, this Court has the discretion to permit lawyers admitted in other jurisdictions to practice pro hac vice. BLR 2090-2. The Chicago Attorneys must, therefore, seek and obtain pro hac vice admission to avoid the unauthorized practice of law in Georgia in connection with representation of clients with regard to a case to be filed in this Court.
The requirement that the Chicago Attorneys be admitted pro hac vice in connection with their representation of Debtors also arises, independently of the requirements of Georgia law just discussed, from the professional obligations of an attorney for a consumer debtor. An attorney providing legal services to a debtor with regard to a bankruptcy case must sign the petition as the debtor's lawyer, appear in the case as the debtor's counsel, attend the § 341 meeting, and represent the debtor in any matters that arise in the case. E.g., In re Egwim, 291 B.R. 559, 569-573 (Bankr.N.D.Ga.2003); Bone v. Judah (In re Josey), 195 B.R. 511 (Bankr. N.D.Ga.1996); see, e.g., In re Johnson, 291 B.R. 462 (Bankr.D.Minn.2003); In re Castorena, 270 B.R. 504, 523-30 (Bankr.D.Idaho 2001). Moreover, an attorney cannot prepare legal papers for a client to file pro se. See In re Mungo, 305 B.R. 762 (Bankr.D.S.C.2003).
If, as the Chicago Attorneys represent, they provided substantial legal representation enough to justify their receipt of three-fourths of the feethey cannot be strangers to their clients' case and must be considered to be co-counsel for Debtors. *794 In fact, they recognize this by referring to themselves as "participating co-counsel" in written communication with local counsel. (Undated Memorandum on American Bankruptcy Counselors Letterhead to ABC Panel Members from Don Leibsker, Legal Director, and Steve Blutza, Administrative Director [Docket No. 27]).
Indeed, the Chicago Attorneys are properly characterized as lead counsel. Representation of Debtors began with the Chicago Attorneys after they solicited and obtained Debtors as clients through their referral program. As the representation proceeded, the Chicago Attorneys collected the attorneys' fee to be shared, kept the lion's share of it, initially consulted with Debtors, prepared the initial drafts of the bankruptcy papers, chose local counsel on behalf of the Debtors and directed them to him, made revisions to the bankruptcy papers as requested by local counsel, and gave instructions to local counsel with regard to processing of paperwork and providing copies of same to them. In view of all of this, it is the Chicago Attorneys who represented themselves to Debtors as being capable of taking charge of their bankruptcy case to be filed in this Court and who thereby undertook primary responsibility for the representation.
The Chicago Attorneys steadfastly maintain that they provide effective legal representation to clients such as Debtors and others in similar situations in other states. The Court, for present purposes, accepts the Chicago Attorneys' characterization of the depth and quality of their services as being what they intended to, and did, provide. Notwithstanding the terms of the Client Agreement that attempt to assign to local counsel responsibility for substantially all of the critical functions that are at the heart of effective representation of a consumer debtor (including accuracy of bankruptcy papers, exemption counseling, attendance at the § 341 meeting, negotiations and approval of reiiffirmation agreements, and representation in court), therefore, the Court concludes that the Chicago Attorneys were ultimately responsible for directing and supervising the representation of Debtors in this case and for its outcome. Indeed, such a conclusion is necessary to support their fees as being reasonable. If the Chicago Attorneys' role and responsibilities were as limited as set forth in the Client Agreement such that local counsel had primary and ultimate responsibility for the representation, Debtors would not have needed the Chicago Attorneys to begin with, and it would make little sense to pay for legal services that are not necessary.
Because the Chicago Attorneys are in fact the principal lawyers ultimately responsible for representing Debtors, they must meet the standards of professional conduct that apply to an attorney of record for any consumer debtor. Consequently, they must, at a minimum, sign the petition they prepared and appear as counsel of record in the case Debtors filed on their advice. The only way that the Chicago Attorneys can lawfully meet these responsibilities is to be admitted pro hac vice; performing them without such admission constitutes practice in this Court without being admitted that would, of course, subject them to being found in contempt of court.
In summary, unless the Chicago Attorneys are admitted pro hac vice, they are engaged in the unauthorized practice of law in Georgia and are practicing law in this Court without being admitted.
On June 8, 2004, the Supreme Court of Georgia adopted amendments to the Georgia Rules of Professional Responsibility (the "Georgia Rules") relating to multijurisdictional practice. (Order of the Supreme Court of Georgia, June 8, 2004.) *795 Amended Georgia Rule 5.5(c) permits a non-Georgia lawyer to provide legal services in Georgia on a "temporary basis" on certain conditions, while amended Georgia Rule 5.5(b) prohibits establishing a "systematic and continuous presence" in the state, except as otherwise permitted by the Georgia Rules or other law. (The exception to the prohibition in amended Rule 5.5(b) on "systematic and continuous presence" appears to be limited to authorization under amended Rule 5.5(d)(1) and (2) for a non-Georgia lawyer to provide legal services in this state to the lawyer's employer or that are authorized by federal law or other Georgia law. See Comments 5 and 15 to Amended Rule 5.5 ("Except as provided in paragraphs d(1) and (d)(2), a [non-Georgia lawyer] who establishes an office or other systematic or continuous presence in this jurisdiction must become admitted to practice law generally in this jurisdiction.").) Comment 4 to Amended Rule 5.5 notes, "Presence may be systematic and continuous even if the [non-Georgia lawyer] is not physically present here."
Because the Chicago Attorneys did not invoke these new provisions and because the legal services rendered in this case predate their adoption, the Court has not considered their applicability here. Thus, although the Court questions whether the Chicago Attorneys could establish that their activities and the operation of their referral system that solicits clients in Georgia would amount merely to practice in Georgia on a "temporary basis" within the meaning of amended Rule 5.5(c) rather than a prohibited "systematic and continuous presence" prohibited by amended Rule 5.5(b), the Court does not decide this issue. Even if this issue is resolved in their favor, however, their responsibility as co-counsel would still require that they appear as attorney of record in the case and, as such, obtain pro hac vice admission.
B. Fee Sharing
The Chicago Attorneys also argue that their activities may be justified as a matter of fee-sharing that is permissible under the professional standards applicable to them in Illinois and to local counsel in Georgia. The Georgia Rules of Professional Conduct apply in the District Court and the Bankruptcy Court. L.R. 83.1(C); BLR 2091-1. Moreover, the agreement must be permissible under the Georgia Rules for local counsel to meet his professional responsibilities.
Georgia Rule 1.5(e) provides:
A division of a fee between lawyers who are not in the same firm may be made only if:
(1) the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation;
(2) the client is advised of the share that each lawyer is to receive and does not object to the participation of all the lawyers involved; and
(3) the total fee is reasonable.
Passing the question of whether the requirement of Georgia Rule 1.5(e)(1) that Debtors agree to the arrangement in writing has been met, the Court concludes that the fee-sharing arrangement here does not meet more fundamental and substantive requirements of the Rule in the absence of pro hac vice admission. (If Debtors had signed the Rule 2016 Disclosure Statement, the requirement of a writing would have been met, but they did not. The Chicago Attorneys contend that this was an oversight and that, in any event, Debtors signed the Client Agreement that contemplates sharing of the fee with local counsel.)
*796 Georgia Rule 1.5(e)(1) requires that all fee-sharing attorneys participating in the fee-sharing assume "joint responsibility" for the representation if the fee is not shared in proportion to the work performed. In this regard, the lawyers stated in their Rule 2016 disclosure statement, "Each [lawyer] will remain responsible for the completion of the legal work involved in this matter and responsible for the legal work of each." This would imply that the Chicago Attorneys and local counsel are jointly and severally responsible for representing Debtors. If the Chicago Attorneys are jointly responsible for representing the Debtors in this case, it is axiomatic that they must be admitted to the bar of this Court. They can scarcely assume responsibility for representation in the case if they cannot appear.
The Chicago Attorneys, however, argue that the requirement of "joint responsibility" means only that they must be financially responsible for the legal representation, citing Elane v. St. Bernard Hosp., 284 Ill.App.3d 865, 220 IlLDec. 3, 672 N.E.2d 820 (1996). In that case, the referring lawyer referred several personal injury matters to another lawyer shortly before becoming a judge, which precluded any further ability to handle the referred matters. The court permitted the judge to share in the fees under Rule 1.5(g) of the Illinois Rules of Professional Conduct, which governs fee-sharing where the primary service performed by one lawyer is the referral of the client to another lawyer. The court concluded that the judge's continued financial responsibility for the outcome of the litigation met the requirement of Illinois Rule 1.5(g)(2) that the referring lawyer assume "the same legal responsibility for the performance of the services in question as would a partner of the receiving lawyer." Id. at 870, 220 Ill. Dec. 3, 672 N.E.2d at 824.
The Elane analysis does not apply here. First, Georgia does not have a rule like the one construed in Elane. Even if Georgia had such a rule, it would not apply here because it is clear that the services provided by the Chicago Attorneys were far more than merely a referral. Indeed, if the primary service of the Chicago Attorneys was only referral to a Georgia lawyer, a fee of $750 for such service would not be reasonable under 11 U.S.C. § 329. The joint responsibility that the Chicago Attorneys had to assume in order to comply with Georgia Rule 1.5(e) is not limited to financial responsibility.
In any event, compliance with the fee sharing rules does not result in an exception to the rules governing the practice of law in Georgia and in this Court discussed above. Regardless of whether the Chicago Attorneys were required to assume responsibility for the representation that would mandate their admission to the bar of this Court, the fact is that they did assume that level of responsibility. As such, pro hac vice admission is required.
III. REMEDY
There are several consequences for the Chicago Attorneys if they are not admitted pro hac vice. First, without being able to lawfully provide services in connection with the case, they would not be entitled to compensation and would be required to disgorge the fee they received. Second, they would be engaged in the unauthorized practice of law in Georgia. Third, by proceeding to represent Debtors in connection with this case without being admitted, they would be in contempt of court for practicing law in this Court without being admitted to its bar.
The Chicago Attorneys have represented to the Court that they want to comply with the Court's: determination concerning the necessity of pro hac vice admission, that they proceeded in the good *797 faith belief that their activities were in accordance with applicable standards, that they received legal advice from counsel with expertise in professional and ethical matters that their conduct was proper, and that they desired to be admitted pro hac vice if the Court determined that it was necessary. At the hearing, the Court accepted these representations and determined that the Chicago Attorneys would be deemed to be admitted pro hac vice in view of their representations, their good standing as members of the State Bar of Illinois and their admission to the bar of the United States District Court for the Northern District of Illinois, and the fact that Debtors appear to have obtained adequate representation in this case. Because the Court deems the Chicago Attorneys to be admitted pro hac vice, the Chicago Attorneys have satisfied the Court's concerns with regard to unauthorized practice of law in the State of Georgia and in this Court, and there is no need for further disciplinary or other proceedings. The Court also concludes that there is no basis for the disgorgement of attorneys' fees in this case, it appearing that the fees charged are otherwise within the range of fees charged in comparable cases in this Court. In reaching these conclusions, the Court is expressly relying on the representation of the Chicago Attorneys that in the future they will not provide legal services or representation to a debtor with regard to any bankruptcy case to be filed in this district without being admitted as a member of the bar of the District Court or pro hac vice.
The decision that the Chicago Attorneys may properly be admitted in this case does not mean that they will be entitled to pro hac vice admission as a matter of course in any future case. The Local Rules permit pro hac vice admission in the discretion of the Court. The question of whether the Chicago Attorneys' activities in Georgia should preclude pro hac vice admission was not raised in this case, and, therefore, the Court makes no determination with regard to that issue, which remains open for consideration in future cases should the need arise.
IV. ADDENDUM
The Court adds this addendum to point out what this opinion does and does not address. It does address the situation of representation of an individual debtor in a consumer case by out of state counsel, unadmitted in the forum state or the forum court, whose only nexus with the forum is a referral by a nonlawyer service provider contacted by debtors residing in the forum state.
It does not address representation of a sophisticated, experienced, and knowledgeable client requiring legal services, possibly in multiple jurisdictions, relating to its business, or a client seeking bankruptcy representation in a matter of sufficient complexity, magnitude, or importance to justify selection of counsel with nationally or regionally recognized skills, experience, or reputation that may not be readily available in the forum state. It does not deal with representation of a debtor, trustee, examiner, or committee by special counsel employed to litigate in a court other than the bankruptcy court in which the case is pending.
Nor does the opinion establish the same rule for all circumstances involving collaboration between licensed in state counsel and unadmitted out of state counsel. It makes some sense for a lawyer admitted in her home state to lawfully provide legal services to a resident of the home state with regard to a matter in another state and to charge a fee for doing so, even if out of state counsel is associated to handle the matter. The Court does not have to agree with the arguably unfair result to *798 the client in Norris v. Kunes, 166 Ga.App. 686, 305 S.E.2d 426 (1983), for the Court to accept its holding to that effect. It may also make sense for a lawyer who represents a client in her home state to provide services relating to a matter in another state herself, without being admitted in the forum state, when she does not appear in proceedings in the other state. See Fought & Co. v. Steel Engineering & Erection, Inc., 87 Hawai'i 37, 951 P.2d 487 (1998); Estate of Condon, 65 Cal. App. 4th 1138, 76 Cal. Rptr. 2d 922 (Cal.Ct.App. 1st Dist.1988). And it may make sense for a lawyer in Georgia handling a bankruptcy matter in Georgia to obtain advice on bankruptcy law from an out of state lawyer, who does not thereby engage in the unauthorized practice of law in Georgia. See Cowen v. Calabrese, 230 Cal. App. 2d 870, 41 Cal. Rptr. 441 (Cal.Ct.App. 5th Dist. 1964). It may even make sense for a Georgia resident to desire to retain counsel from another state to represent the client in a matter in Georgia because of the lawyer's particular skills, experience, reputation, or an existing personal or professional relationship, when the lawyer will come to the state and handle it. In each of these circumstances, there is an original nexus between a client and a lawyer licensed to practice in the client's state or, in the last example, a lawyer who expects to come to the state and handle it. There are valid arguments that such arrangements should be permissible and that lawyers in such circumstances should be able to provide services a client requests without offending prohibitions on the unauthorized practice of law. But see Birbrower, Montalbano, Condon & Frank v. Superior Court, 17 Cal. 4th 119, 949 P.2d 1, 70 Cal. Rptr. 2d 304 (1998).
But it is an entirely different matter when a client in Georgia seeks legal services that are to be provided with regard to a matter in Georgia and out of state counsel does not intend to set foot in the state, to meet personally with the client, or to be admitted to the court in which the matter will necessarily be filed. The distinctions from the circumstances in the preceding paragraph are even more compelling in this case, where Debtors' retention of legal counsel did not arise out of a conscious choice of the Chicago Attorneys because of their particular skill, experience, reputation, or existing relationship, but because of a referral, very probably paid for by the Chicago Attorneys, from a nonlawyer. If an out of state lawyer's services in these circumstances are substantial enough to justify the client's retention of the lawyer, the lawyer must be authorized to practice law in the case that results.
V. CONCLUSION
For reasons set forth above, the Chicago Attorneys may not lawfully represent Debtors in connection with this case without being admitted to the bar of this Court pro hac vice. Because the Court will exercise its discretion in the circumstances of this case to deem the Chicago Attorneys to be so admitted and because the fee paid by Debtors is otherwise reasonable, the Court concludes that no disgorgement of fees is required and that no further disciplinary or other proceedings with regard to the representation are necessary. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550709/ | 114 N.J. 550 (1989)
555 A.2d 1112
GREGORY NIEMIERA, II, AN INFANT, BY HIS NATURAL GUARDIAN, JOY NIEMIERA, AND JOY NIEMIERA AND GREGORY N. NIEMIERA, INDIVIDUALLY, PLAINTIFFS-APPELLANTS,
v.
DR. ALAN SCHNEIDER, PRINCETON-NASSAU PEDIATRICS, P.A., AND WYETH LABORATORIES, DIVISION OF AMERICAN HOME PRODUCTS CORPORATION, DEFENDANTS-RESPONDENTS, AND PRINCETON MEDICAL CENTER, AND DENNIS DOODY, ADMINISTRATOR OF PRINCETON MEDICAL CENTER, DEFENDANTS.
The Supreme Court of New Jersey.
Argued October 24, 1988.
Decided April 13, 1989.
*551 Carl J. Valore argued the cause for appellants (Valore, McAllister, Westmoreland, Gould, Vesper & Schwartz, attorneys).
Thomas J. Alworth argued the cause for respondents Dr. Alan Schneider, et al. (Shanley & Fisher, attorneys).
Lauren E. Handler argued the cause for respondent Wyeth Laboratories, etc. (Porzio, Bromberg & Newman, attorneys; Lauren E. Handler and Anita Hotchkiss, on the brief).
The opinion of the Court was delivered by O'HERN, J.
*552 Gregory Niemiera, II is a seven-year-old child who suffered at age two months a disabling convulsive episode that left him brain damaged. Through his parents he alleges that the injuries resulted from an adverse reaction to a childhood vaccine. The central issue in his appeal is whether the "learned-intermediary" doctrine relieves the manufacturer of a childhood vaccine of the duty to warn patients directly of the vaccine's dangerous side effects. The vaccine here is DPT. Its tri-fold components protect against diphtheria, pertussis (whooping cough), and tetanus. The adverse reaction here is laid to the pertussis component of the vaccine.
The plaintiffs assert that the almost universal administration of the vaccine to infants equates with mass inoculation, an instance in which the pharmaceutical manufacturer should be held to owe an independent duty to warn patients of the danger of such adverse reactions. We disagree. The role of the physician with respect to DPT requires an exercise in medical judgment concerning when and under what circumstances the vaccine shall be administered. Hence we affirm the judgment below holding that the pharmaceutical manufacturer, Wyeth Laboratories, had no independent duty to warn of DPT's potentially catastrophic side effects.
To the extent that the pharmaceutical manufacturer is relieved of the duty to warn, the treating physician as the learned intermediary assumes a responsibility to warn the patient of the risks involved in taking the vaccine. We find that in this case, although the jury resolved all issues in the defendant-physician's favor concerning other aspects of professional treatment, the jury was not permitted to consider whether the patient was adequately informed of the risks of the vaccine. We are of course uncertain whether on that question the jury would have found in the defendant's favor as well, i.e., finding the warnings either adequate or, if inadequate, not a proximate cause of the infant's condition, but we are regrettably unable to *553 make that decision on the basis of this record. Hence that issue must be submitted to the jury.
I
As noted, the minor's condition is one of severe brain damage resulting from acute encephalopathy (a term identifying an illness with symptoms indicating an inflammation of the brain, but that on examination does not reveal any such inflammation) diagnosed within eight days of the inoculation with DPT. Gregory suffered convulsive seizures, which ravaged his central nervous system, and he will have impaired vision, be cerebrally palsied, and be mentally defective for the rest of his life. Plaintiff sued both Wyeth Laboratories, the manufacturer of DPT, and his physicians. (We shall refer to both Gregory and his parents as "plaintiff.")
Plaintiff contended that Wyeth Laboratories owed him an independent duty to warn that DPT had potentially devastating side effects among them, brain damage and death.[1] Plaintiff's mother, although she was a nurse, testified, as did her husband, that she knew of no such possible side effects of what she thought was a routine "well-baby" inoculation against childhood diseases. Before trial, Wyeth Laboratories succeeded in its pretrial motion to dismiss plaintiff's complaint for failure to warn on the basis of the "learned intermediary" doctrine. We shall discuss that aspect of the judgment in Part III of this opinion.
*554 At trial, plaintiff presented four bases of professional responsibility to be assessed against the physician: (1) failure to warn of the vaccine's side effects; (2) failure to heed the contraindications in the child's condition prior to administering the vaccine; (3) failure to treat when the early adverse symptoms were disclosed; and (4) failure to treat properly when the symptoms escalated.
The trial thus focused on many complex issues that are not before us for resolution. Even if the doctor were negligent, the jury had to consider the more fundamental underlying question of whether DPT was the cause of his resulting condition. There was surely enough evidence in the case for the jury to have found that an independent condition such as a urinary tract infection might have caused the convulsions and disorders that left Gregory permanently brain damaged. The jury did answer a special interrogatory finding that the physician had not been negligent.
II
The claim arises from a routine "well-baby" visit of Gregory Niemiera to his pediatrician on April 5, 1982. Gregory was then approximately ten weeks old. He was a nursing baby and thus ordinarily more immune to infectious diseases. On an earlier visit, February 17, 1982, he had presented a slight eye discharge. Plaintiff claims that on the April 5 visit Gregory still had the discharge from his eyes. Dr. Schneider, his pediatrician, examined the baby on April 5 and considered his medical history. In his opinion, it was safe to administer the DPT vaccine. Dr. Schneider testified that his usual routine was quickly to review personally "the fact that the baby was of the age to be given the immunization, [and] to review the usual side effects and precautions" before sending the child for a shot. Normally he would also advise the mother of typical post-shot reactions including irritability, redness and swelling at the area of the injection, and possibly a fever. Finally, he would tell the *555 mother that the baby could be given Tylenol to treat any fever or irritability. He could not recall whether he followed that procedure in this case. It was not disputed that subsequent to the inoculation, Mrs. Niemiera received from the administering nurse a printed paper describing these as possible post-shot reactions to the treatment. As was the doctor's custom, he left the actual administration to a nurse.
According to Mrs. Niemiera, on April 7, 1982, she called Dr. Schneider's office because Gregory was not nursing and was still running a low-grade fever. Although mild fever is a typical post-shot reaction, she was disturbed that he was still running a fever two days after the inoculation. Dr. Schneider was not in, but later that day Dr. Formalont, a partner of Dr. Schneider's, returned the call. By Mrs. Niemiera's account, Dr. Formalont advised her that she should not be concerned because Gregory was probably just suffering from a flu. The entire incident was disputed by Dr. Schneider who claimed that according to his office records Dr. Formalont was not working that day and therefore would not have returned the call.
Mrs. Niemiera also testified that she called Dr. Schneider's office again on April 9, 1982, because the baby's condition had worsened. Gregory was now vomiting, crying uncontrollably, and still did not want to eat. Dr. Schneider prescribed pedialyte, a medication to replace body fluids, and told Mrs. Niemiera to call again if Gregory had blood or mucus in his stool. This phone call was received by Dr. Schneider and noted in his office chart. Neither Dr. Schneider, Dr. Formalont, nor any other member of the Princeton-Nassau Pediatric Group examined Gregory on April 7 or April 9. According to plaintiffs, on Saturday, April 10, Gregory's condition was "a little bit better," and by Sunday morning, April 11, he was "pretty good." That day was Easter Sunday. Gregory was taken to church and to family dinner. It was Gregory's last day of normal childhood.
On the morning of Monday, April 12, 1988, Mr. and Mrs. Niemiera awoke to find Gregory lying on his stomach. His crib *556 was full of his waste. He was unresponsive, running a high fever, and suffering periodic seizures. At one point he stopped breathing. The Niemieras rushed Gregory to the Princeton Medical Center where he was seen by Dr. Schneider. Later he was transferred by ambulance to Children's Hospital of Philadelphia (CHOP) where he received "intensive and extensive" treatment. While at CHOP Gregory was diagnosed as having acute encephalopathy resulting in severe and permanent brain damage.
The exact cause of the convulsive illness was disputed. Early infusion of antibiotics, to prevent bacterial disorder, and the loss of early blood specimens make difficult an expert determination of cause. There was an infection in Gregory's bladder, but plaintiff's expert said that might have been a result, not a cause, of the child's bowel movements. At one time Dr. Schneider, the pediatrician, had rendered an opinion that the episode was caused by the vaccination.
Plaintiff's expert witness believed that Gregory's brain damage was caused by an adverse reaction to the DPT vaccine. He testified that it is normal for a child to receive the DPT vaccine several times in his early years, and that the symptoms of an adverse reaction to the initial inoculation may be different from an adverse reaction to subsequent inoculations. He claimed that the progress of the symptoms in this case, particularly the intermittent fever, were not inconsistent with a pertussis reaction to an initial DPT vaccination. He admitted, however, that ordinarily any severe adverse reaction, such as convulsions, occurs within seventy-two hours. Dr. Schneider and his expert contended that Gregory's symptoms were unrelated to the DPT shot, but were in fact caused by some independent medical illness, possibly the urinary tract infection.
Gregory's expert testified that good medical practice requires that a patient be informed of the symptoms that would indicate a potentially-catastrophic adverse reaction to the Pertussis vaccine. In his view, "it needed to be spelled out more clearly, *557 then one would have to say, this could cause a real problem in the brain and nervous system, and these are things you must watch." The "things you must watch" include severe and inconsolable crying, intermittent high fever, and loss of appetite. It should also include the fact that, at least with the initial DPT vaccination, symptoms of a bad reaction may disappear and reappear over several days, and that the presence of these symptoms should be immediately reported to a doctor. (The information sheet that Mrs. Niemiera received instructed her only to report any symptoms at the next visit to the doctor.) The onset of the disease is not irreversible, he said, and an informed patient, particularly one such as Joy Niemiera, might well have saved her child's life by heightening her reaction to the medical signals.
The defendant-physician moved to dismiss plaintiff's failure-to-warn claim at the close of all the evidence and before the case went to the jury. He relied on two theories for the dismissal. (We adopt for convenience the expressions "preshot" and "post-shot" used by defendant's attorney.) He argued that there was no causal connection between the pre-shot failure to warn and the resulting injuries because (1) the plaintiff's mother had not testified that she would have foregone the inoculation; and (2) New Jersey requires by statute that the shot be given. He also argued that any post-shot failure to warn was irrelevant in this case because Mrs. Niemiera actually called the doctor when she noticed the warning signs. The defendant further argued that any deviation from accepted medical standards was related only to negligent treatment by the doctor and not to any failure to warn. The trial court dismissed the failure-to-warn claims. We shall discuss its reasons in Part III of this opinion.
The jury returned a verdict of no cause for action against Gregory and his parents. It found no negligence on the part of the treating physician. On appeal, the Appellate Division affirmed the judgment in an unreported opinion. It ruled that the action against Wyeth for failure to warn was properly dismissed *558 because "the manufacturer or marketer of DPT vaccine has a duty only to warn prescribing physicians of the potential adverse effects." It also ruled that the trial court did not err in denying the motion to amend the complaint against Wyeth. Finally, it rejected plaintiff's failure to warn theory finding that (1) plaintiff conceded any pre-shot failure-to-warn theory by admitting "[i]t was not Plaintiff's contention that Joy Niemiera would have postponed or not subjected her child to the vaccine injection if she had been fully informed as to the risks," and (2) "the absence of additional post-vaccination warnings could not reasonably be found to have proximately caused Gregory's injuries."
We granted plaintiffs' petition for certification. 110 N.J. 200 (1988).
III
We recently have had occasion to consider the relationship between our principles of products liability law and pharmaceutical products. Feldman v. Lederle Laboratories, Inc., 97 N.J. 429 (1984). In Feldman, we refused to "hold as a matter of law and policy that all prescription drugs that are unsafe are unavoidably so." Id. at 447. We explained:
Drugs, like any other product[], may contain defects that could have been avoided by better manufacturing or design. Whether a drug is unavoidably unsafe should be decided on a case-by-case basis; we perceive no justification for giving all prescription drug manufacturers a blanket immunity from strict liability manufacturing and design defect claims under [Restatement (Second) Torts § 402A] comment k [(1965)].
Moreover, even if a prescription drug were unavoidably unsafe, the comment k immunity would not eliminate strict liability for failure to provide a proper warning. As Justice Pollock stated in O'Brien [v. Muskin Corp., 94 N.J. 169 (1983)], "[w]ith those products, the determination of liability may be achieved more appropriately through an evaluation of the adequacy of the warnings." 94 N.J. at 183. Thus, a manufacturer who knows or should know of the danger or side effects of a product is not relieved of its duty to warn. Rather, as the comment expressly states, it is only the unavoidably unsafe product "accompanied by proper * * * warning" that is not defective. [Ibid. (citation omitted).]
The question in this case is not the adequacy of Wyeth's warning. Rather, the question is whether the warning should *559 have been communicated directly to the patient. It is conceded that Wyeth informed physicians through material that accompanied its product of the possible side-effects, including irreversible brain damage or death, attendant to the administration of this vaccine.
In New Jersey, as elsewhere, we accept the proposition that a pharmaceutical manufacturer generally discharges its duty to warn the ultimate user of prescription drugs by supplying physicians with information about the drug's dangerous propensities. See, e.g., Bacardi v. Holzman, 182 N.J. Super. 422 (App.Div. 1981). This concept is known as the "learned intermediary rule because the physician acts as the intermediary between the manufacturer and the consumer. The phrase appears to have been coined in the case of Sterling Drug, Inc. v. Cornish, 370 F.2d 82, 85 (8th Cir.1966).
Plaintiff recognizes the general applicability of the doctrine but urges that we should carve out an exception such as was done in Davis v. Wyeth Laboratories, Inc., 399 F.2d 121 (9th Cir.1968). In that case the manufacturer of a polio vaccine was held to have an independent duty to warn the consumer because in such mass immunization clinics as attended the giving of polio vaccine there is no physician present to weigh the risks and benefits of the drug therapy for each patient. Id. at 131. See Reyes v. Wyeth Laboratories, Inc., 498 F.2d 1264 (5th Cir.), cert. denied, 419 U.S. 1096, 95 S.Ct. 687, 42 L.Ed.2d 688 (1974); see also Stephens v. G.D. Searle & Co., 602 F. Supp. 379 (E.D.Mich. 1985) (manufacturer of oral contraceptive has duty to warn consumers directly of risks and side effects); Samuels v. American Cyanamid Co., 130 Misc.2d 175, 495 N.Y.S.2d 1006 (Sup.Ct. 1985) (pharmaceutical company had duty to warn recipient of "travel" vaccines when company knew vaccines were ordinarily given without meaningful balancing of risks and benefits by informed intermediary).
We are satisfied that sufficient reasons exist with respect *560 to the DPT vaccine[2] to conclude that the "learned intermediary" doctrine should apply. Despite the presence of toxins, the pertussis vaccine has been very successful:
In the United States, DPT is administered to infants and young children via a series of inoculations and booster shots. This program has dramatically reduced the incidence of pertussis. In 1934, there were over 250,000 reported cases of pertussis in the United States, and 7500 deaths caused by the disease. By the 1980s, there were, at most, 3000 cases and 20 annual deaths. [Jones by Jones v. Lederle Laboratories, 695 F. Supp. 700, 702 (E.D.N.Y. 1988).]
Hence, although studies and cited reports have noted both temporary and permanent adverse reactions, the vaccine's utility is premised on the overall decline in infant mortality.[3] Plaintiff's *561 expert testified, however, that one in 100,000 children will suffer a severe adverse reaction. Defendant's expert conceded that DPT is the "most crude of the vaccines we currently use."
Unlike Salk Polio vaccine or swine flu vaccine, the antipertussis vaccine is administered in a doctor's office on a case-by-case basis. Although not required to administer the vaccine personally, the physician almost invariably sees the patient before the vaccination is given. Such was the case here. Thus we are satisfied that sufficient reasons exist to maintain the "learned intermediary" doctrine with respect to this extraordinarily valuable childhood vaccine.
Moreover, we take note of the fact that recent legislative initiatives at both state and national level have tended to agree with the conclusion that ordinarily a warning to the physician is the "only effective means by which a warning could help the patient." Davis v. Wyeth Laboratories, Inc., supra, 399 F.2d at 130. The National Childhood Vaccine Injury Act of 1986, 42 U.S.C. §§ 300aa-1 to -34, which became effective October 1, 1988, provides in part:
No vaccine manufacturer shall be liable in a civil action for damages arising from a vaccine-related injury or death associated with the administration of a vaccine after the effective date of this subpart solely due to the manufacturer's failure to provide direct warnings to the injured party (or the injured party's legal representative) of the potential dangers resulting from the administration of the vaccine manufactured by the manufacturer. [42 U.S.C. § 300aa-22(c).]
Section four of the New Jersey Products Liability Act of 1987, N.J.S.A. 2A:58C-1 to -7, suggests the same. The legislative statement that accompanied the bill states:
Section 4 provides that a manufacturer or seller is not liable in a warning-defect case if an adequate warning is given when the product has left the control of the manufacturer or seller or, in the case of dangers discovered after the product has left control, if an adequate warning is then given by the manufacturer or seller. The subsection contains a general definition of an adequate warning and a special definition for warnings that accompany prescription *562 drugs, since, in the case of prescription drugs, the warning is owed to the physician. The subsection establishes a presumption that a warning or instruction is adequate on drug or food products if the warning has been approved or prescribed by the Food and Drug Administration. [S. Judiciary Comm. Statement No. S. 2805, L. 1987, c. 197 (emphasis added).]
In addition, the Food and Drug Administration requires that special package inserts accompany only a certain limited group of prescription drugs whenever they are dispensed to a patient. See Pharmaceutical Mfrs. Ass'n v. Food & Drug Admin., 484 F. Supp. 1179 (D.Del.) (upholding FDA regulations requiring patient package inserts describing possible side effects to be provided whenever estrogen-containing prescription drugs are dispensed), affirmed, 634 F.2d 106 (3d Cir.1980). Within the legislative framework, we agree that the DPT manufacturer does not have an independent duty to warn the patient.
IV
Because "it is only the unavoidably unsafe product `accompanied by proper * * * warning' that is not defective," Feldman, supra, 97 N.J. at 447 (emphasis omitted) (quoting Restatement (Second) Torts § 402A comment k (1965)), it would be the bitterest irony if the learned intermediary were to be excused from performing the very act that makes the product safe, that is, giving proper warning of the danger or side effects of the product. The concept of proper warning by the learned intermediary will blend in this context with the concept of informed consent. Both are aspects of the patient autonomy that underlies our law of medical care. In re Conroy, 98 N.J. 321 (1985) (recognizing the right to decline having medical treatment initiated or continued). We recently had occasion to refine our understanding of the informed consent doctrine in Largey v. Rothman, 110 N.J. 204 (1988). We there clarified that under appropriate principles of New Jersey tort law, a physician must disclose to a patient all material information that a "prudent patient" might find significant for a determination whether to undergo the proposed therapy. Id. at 211-12. Such a standard is appropriately relevant in the case *563 of failure to warn with respect to the adverse consequences of pharmaceutical products. As counsel for Wyeth put it, "[t]he duty of the manufacturer of the vaccine is to warn the learned intermediary who passes it on to the patient through informed consent." We have emphasized that "[w]hen the strict liability defect consists of an improper * * * warning, reasonableness of the defendant's conduct is a factor in determining liability." Feldman, supra, 97 N.J. at 451 (citations omitted).
Some commentators have urged a stricter subjective standard of informed consent with respect to prescription drugs, that is, one related to the particular patient. See Tietz, Informed Consent in the Prescription Drug Context: The Special Case, 61 Wash.L.Rev. 367 (1986). More might be required in the case of a patient who the physician knows or should know has a particular sensitivity, but certainly the threshold of information that makes the product safe to market needs to be disclosed.
We are satisfied, however, that the "prudent patient" standard can be applied in this case. Paradoxically, in this case the subjective standard seems to have been used by way of defense in an attempt to convince the jury that even if most ordinary persons would not know of the risks associated with DPT vaccines, Mrs. Niemiera was aware of such risks. The defense's opening statement to the jury told them:
Do you know that in the emergency room where Nurse Niemiera worked they had a PDR [Physician's Desk Reference] that told you everything you needed to know, not only about the DPT, but you know, ladies and gentlemen, practically every other medication that's on the market in these United States. It was available to her.
Similarly, the first question the defense asked of each parent was "when did your wife graduate from nursing school?" and "when did you begin your nursing school training?". Joy Niemiera stated that, despite her training, she was not aware of the catastrophic consequences that can befall a DPT vaccine patient.
Nevertheless, under the objective prudent-patient theory the question is not what information a nurse would have needed to *564 assay the treatment, but what information a good mother would need to attend to the health of her child. In this regard the parent of the minor child is the one who must make the informed medical decisions.
Although the doctor did not recall either reading the pharmaceutical manufacturer's warnings that accompanied the product or the Physicians Desk Reference (PDR) entry on the vaccine, he testified on deposition that he was "generally aware" of their content. Both the manufacturer and PDR warnings detailed seven possible severe adverse side effects, including convulsions, collapse, inconsolable crying, and temperatures in excess of 105°. In addition to those potentially fatal side effects other more mild potential side effects were described.
In contrast, the warnings to Mrs. Niemiera, as recited on the information sheet given to her after the shot was administered, included only the less severe side effects: local redness or swelling, restlessness, and temperature between 100 and 102° F. Furthermore, the information sheet told Mrs. Niemiera only to treat those symptoms with aspirin, or similar substitute, and report any symptoms at the next visit.
As noted, in this case, on defendant's motion, the question of the physician's responsibility to warn was taken from the jury. Defendant broke his motion down into two aspects: "pre-shot" and "post-shot." Any claims of "pre-shot" deviation failed, he said, because Mrs. Niemiera never testified that she would have "opted not to take the shot," and because there are
State requirements which dictate the giving of a DPT shot. This doctor had no choice. So, even if he told Mrs. Niemiera, Mrs. Niemiera, this inoculation can cause brain damage, it can cause death, it can cause paralysis, but I have to give it anyway, she had no choice. So we don't have any cause and effect relationship between the alleged deviation and the giving of the shot.
Concerning the claims of "post-shot" deviation, defendant asserted that "there certainly wasn't any deviation in terms of advice to this lady, because she, in fact, called." Any deviation of the doctor would be in his response to the call.
*565 The trial court based its decision to dismiss on several theories.[4] In ruling on the motion, the trial court viewed the failure to furnish the "pre-shot" information as a "fifth red light," stating that in its view the plaintiff's first "red light" argument dealt with "lack of proper instructions given after the shot was given." Thus, the court ruled that as to the pre-shot warning,
[w]hat becomes more dispositive of that claim * * * is the fact that we have a mandatory law here in New Jersey that children, before they go to school, must subject themselves, and of course the parents must subject their children to these DPT shots before they can go to school. The testimony indicates that the proper timing of this is when the child is but two months old. * * * So, under those circumstances, the Court finds that the mother had no meaningful choice. And absent a meaningful choice, there can be no malpractice with regard to informed consent * * *.
It further ruled that any claim by plaintiff that she would have delayed the shot because of her child's infection would be subsumed in the jury's evaluation of the physician's negligence in giving the shot "when the conditions indicated it ought not to be given." With respect to the "post-shot" warnings, it ruled that "the fact that she did, indeed, call [the physician with respect to the child's reaction] robs that cause of action of any meaningfulness here." In sum, it ruled that there was no jury issue of informed consent because (1) the patient had no choice because DPT vaccination is compulsory in New Jersey, and (2) any failure to warn would otherwise be subsumed in the jury's evaluation of any neglect in treatment.
We are unable to agree that as a matter of law either theory disposes of the claim in its entirety. Under the "learned intermediary" doctrine, it is the physician's responsibility to pass on to the parties the information that enables the patient *566 to use the product safely. In this case, the question was not whether the patient would have foregone the treatment but rather whether the failure to warn the patient deprived her of the opportunity to avert the medical catastrophe that can occur in some cases. A patient warned of the drug's potential consequences and the increased susceptibility of patients in certain contraindicated circumstances might have delayed the shot[5] or responded to the symptoms more aggressively.
On the first point, we also note, as the court recognized, that the compulsory-vaccination requirement in New Jersey is only a preschool requirement and does not require inoculation in the early months of childhood. N.J.A.C. 8:57-4.10. We say this without in any way suggesting that it is improper medical practice to inoculate infant children. The overall data are abundantly in favor of early childhood vaccination. However, the fact that a procedure is mandated by state law does not mean that a mother should not know that her child may suffer permanent brain damage or death from the vaccination.
The second point, that "lack of proper instructions given after the shot" was taken would be subsumed in the question of negligent treatment, overlooks the fact that although the physician may indeed have responded well to the developing medical crisis, it may then have been too late to save the patient. The fault may have lain in the earlier failure to alert the mother to the possibility of catastrophic side effects. Recall that it is the adequacy of the warning that makes the product safe and that plaintiff had claimed in his opening that there were four "red lights" that the physician had crossed in administering patient care: (1) the failure to warn; (2) failure to heed warning signals of bad health that contraindicated the vaccination; (3) failure to *567 respond to the early onset of the reaction; and (4) the failure to treat it properly when alerted to the condition. It is the first issue that the plaintiff was prohibited from presenting to the jury.
We intend no judgment of the physician's conduct here. That is not for us to make. It is the factfinder's province. There were and will remain difficult issues of proximate cause in this case. But a "court is not concerned with the worth, nature or extent (beyond a scintilla) of the evidence, but only with its existence viewed most favorably to the party opposing the motion." Dolson v. Anastasia, 55 N.J. 2, 5-6 (1969), quoted in Malin v. Union Carbide Corp., 219 N.J. Super. 428, 436 (App. Div. 1987). Plaintiff need generally show only that the warning was inadequate and that "an adequate warning or instruction would have prevented the harm." Campos v. Firestone Tire & Rubber Co., 98 N.J. 198, 209 (1984) (quoting Keeton, Products Liability Inadequacy of Information, 48 Texas L.Rev. 398, 414 (1970)), quoted in Malin, supra, 219 N.J. Super. at 439.
"[W]hen there is evidence [in medical malpractice cases] that a defendant's negligent act or omission increased the risk of harm to one in the plaintiff's position and that harm was in fact sustained," the finder of fact is entitled to determine [on the basis of competent proof] "`whether or not that increased risk was a substantial factor in producing the harm.'" [Keir v. United States, 853 F.2d 398, 415-16 (6th Cir.1988) (quoting Evers v. Dollinger, 95 N.J. 399, 414-415 (1984) (quoting Hamil v. Bashline, 481 Pa. 256, 269, 392 A.2d 1280, 1286 (1978))).]
In this case there was slim but competent evidence that an adequate warning could have prevented the harm. Plaintiff's expert witness testified that the child's condition was not irreversible:
[I]n this case, [the problems] of several days later with extremely high fever, seizures and the anoxia or the lack of oxygen to the tissues, particularly the brain, this could have been avoided had it been picked up earlier, in my opinion.
Reasonable minds might have concluded, on the basis of this evidence, that insulating a prudent patient from knowledge that convulsive brain disorders were a potential side effect of DPT vaccine could, to a reasonable degree of medical probability, have substantially increased the risk of harm that eventually *568 befell the patient. Specifically, by not alerting the mother to the gravity of the consequences of her child's symptoms, the physician deprived the child of the opportunity for early intervention that could have saved him from that fate. If she had been adequately warned, she might have been more aggressive in seeking appropriate treatment.
Our decision is by no means a contraindication to the accepted medical practice of early and routine inoculation of infants against childhood disease. The data are overwhelmingly in favor of the procedure. Physicians can no more guarantee a safe passage through childhood than can medical science itself. With the benefit of appropriate warnings from pharmaceutical manufacturers, they will be in a position readily to alert their patients to the rare but possible effects of the medication.
DPT has an extraordinary potential for decreasing child-mortality rates and the National Childhood Vaccination Injury Act of 1986, 42 U.S.C. § 300aa-1 to -34, by providing a no fault remedy for some of the losses suffered by the one child in 100,000, may go a long way to eliminate the fitful dependency on tort litigation to provide human succor for the unfortunate few. But parents need to know the risks of the treatment and be prepared to use all the self-help they can to avert those consequences.
The judgment of the Appellate Division is reversed and the matter remanded to the Law Division to retry plaintiff's failure-to-warn claim.
For reversal and remandment Chief Justice WILENTZ and Justices CLIFFORD, HANDLER, POLLOCK, O'HERN, GARIBALDI and STEIN 7.
For affirmance None.
NOTES
[1] Plaintiff did not initially assert that DPT was unsafe because of design or manufacture. During the course of the trial he offered some proof that a safer vaccine was available, but did not contend that the vaccine was unfit for its intended use. Under Restatement (Second) of Torts § 402A comment k (1965) it is recognized that some products are unavoidably unsafe but may be rendered safe for use if adequate warnings are furnished. After the trial court dismissed the failure-to-warn claim against Wyeth, plaintiff sought leave to amend his complaint to assert that a safer alternative vaccine could have been marketed. The trial court refused to reopen the claim against Wyeth. The Appellate Division left that issue undisturbed as do we.
[2] For purposes of our discussion, we shall accept as generally correct the description of this product as set forth in the recent opinion of District Judge McLaughlin in Jones by Jones v. Lederle Laboratories, 695 F. Supp. 700 (E.D.N.Y. 1988). He notes that "[w]ell into the twentieth century, the disease of pertussis, commonly known as `whooping cough,' was responsible for thousands of deaths annually in the United States, mostly to infants." Id. at 701-702.
The first vaccine type was known as "whole-cell." In a whole-cell vaccine, entire dead pertussis cells are injected into the vaccine to induce immunity. Part, but not all, of the cell stimulates immune response. This part is known as the antigen. Other parts of the cell may contain neurotoxins, which do not induce immunity and may cause brain damage. * * * [T]he vaccine, as administered, stimulates immunity to pertussis, but at the fearsome risk of causing neurological damage. [Id. at 702.]
There are other types of vaccine, one being the so-called "split-cell" design which contains pertussis cells that have been "fragmented by a chemical process. Debris from some of the cell was discarded, although both antigens and toxins remained in the vaccine." Ibid. This product was marketed from 1960-76 by Eli Lilly under the trade name Tri-Solgen. Ibid. In 1982, another company attempted to relicense the product, but the FDA refused. Ibid. Another type of vaccine, known as "acellular," has been available in Japan since 1981 but never has been marketed in the United States. In that process "a protein component from the whole cell is purified in part and placed in the vaccine. The rest of the cell is discarded. Acellular vaccines also contain toxins." Ibid.
[3] The federal Food and Drug Administration (FDA) regulates vaccine manufacturers pursuant to the Public Health Service Act, as amended, 42 U.S.C. § 262, and the federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C. §§ 301 to 392. The regulations are quite detailed in their setting of standards for "safety," "effectiveness," and adequate labeling. Safety and effectiveness are determined in part based on a risk-to-benefit analysis. Furthermore, additional specific requirements must be met by any manufacturer of a pertussis vaccine. See 2 U.S.C. §§ 620.1-.6; see generally, Jones by Jones v. Lederle Laboratories, supra, 695 F. Supp. 700 (describing FDA requirements).
[4] Preliminarily, we note that the court did not find that plaintiff had to testify that she would have "refused" the shot. It did, however, find that (1) there was no expert testimony to establish the professional standard for such warnings, and (2) the post-shot warnings were factually reasonable. This trial occurred before our decision in Largey v. Rothman, supra, 110 N.J. 204, established that the standard of informed consent related to the patient's needs, not the physician's judgment. Before us defendant has not advanced these theories to sustain the ruling.
[5] Although on appeal plaintiff did not, as the Appellate Division noted, "conten[d] that Joy Niemiera would have postponed or not subjected her child to the vaccine injections if she had been fully informed as to the risks," plaintiff did assert that Joy Niemiera "may have postponed Gregory's immunization given the fact she claimed he was having an eye discharge." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550915/ | 124 Pa. Commonwealth Ct. 172 (1989)
555 A.2d 1362
Clifford B. Hill, Jr., Appellant
v.
Commonwealth of Pennsylvania, Bureau of Corrections, Appellee.
No. 164 C.D. 1988.
Commonwealth Court of Pennsylvania.
Argued December 15, 1988.
March 15, 1989.
Argued December 15, 1988, before Judges CRAIG and BARRY, and Senior Judge NARICK, sitting as a panel of three.
*173 Jerome J. Reitano, for appellant.
J. Matthew Wolfe, Deputy Attorney General, with him, LeRoy S. Zimmerman, Attorney General, for appellee.
OPINION BY JUDGE CRAIG, March 15, 1989:
Clifford B. Hill, Jr. appeals from an order of the Court of Common Pleas of Montgomery County that denied Hill's motion for a new trial on the grounds of inadequacy of damages after a jury rendered a verdict in his favor in his negligence suit against the Bureau of Corrections (bureau) for personal injuries.
The issue is whether the trial judge abused her discretion by denying Hill's motion, where the jury found the bureau to be 100% liable for his injuries but awarded only $1800 damages beyond payment of his medical bills, which totaled $5,844.
Most of the material facts of this case are not in dispute. On May 12, 1984, Hill, an inmate of the State Correctional Institution at Graterford, was trying out for a prison baseball team. The practice session was taking place on the athletic field on the prison grounds. The field also was used for playing football in the fall. When the field was set up for football, goal posts were installed in holes in the field containing metal sleeves. When the goal posts were not in place, the holes were covered by caps that screwed snugly onto the sleeves but were not otherwise locked or secured.
As Hill was running to catch a fly ball hit toward him in the outfield, his left foot became caught in a goal post hole from which the cover had been removed. Hill fell backward to the ground, fracturing his ankle in three places. After some of the other ballplayers carried Hill from the field, he was taken to Montgomery Hospital. There Dr. Bruce Menkowitz diagnosed Hill as suffering *174 from a trimalleolar fracture of the left ankle. The next day Dr. Menkowitz performed open reduction internal fixation surgery on Hill's ankle, which involved making two separate incisions and securing the fractures with five metal screws and one plate. The doctor then applied a cast that covered most of Hill's leg.
After five days in the hospital, Hill returned to the institution, walking on crutches. He was not able to return to his job in the prison tailor shop for three weeks. Approximately six weeks after the operation, Hill's cast was removed. He continued to walk with crutches for a period of one month after that. Hill continued to complain of pain in the ankle for over a year, and the institution provided him with medication for pain. He was admitted to Wilkes-Barre Hospital in September of 1985 for surgical removal of the metal hardware.
A panel of arbitrators heard this case on October 6, 1986. The arbitrators awarded Hill damages in the amount of $17,341.74. The bureau appealed from that decision to the Court of Common Pleas of Montgomery County. The case was tried before a jury on July 20 and 21, 1987. The jury found the defendant bureau to be 100% negligent. They awarded Hill damages in the amount of his medical expenses plus an additional $1800.
Hill filed a motion for a new trial on damages and a motion for additur. By order of December 30, 1987, the trial judge denied the motion for a new trial, and Hill has appealed from that order.
Likelihood of Compromise
One principle relating to review of a small damages award is that compromise verdicts are expected and allowed. Elza v. Chovan, 396 Pa. 112, 115, 152 A.2d 238, 240 (1959). A compromise verdict is one where "the jury, in doubt as to defendant's negligence or plaintiff's freedom from contributory negligence, brings in a verdict for *175 the plaintiff but in a smaller amount than it would have if these questions had been free from doubt." Phelps v. Britton, Inc., 412 Pa. 55, 60 n.3, 192 A.2d 689, 692 n.3 (1963). Logically, when this issue is raised, a reviewing court should consider it first, because if the small award probably was the result of a permissible compromise, then the award was not intended to be "adequate" in the sense of being reasonably related to the damages proved.[1]
Where, as here, a defendant resisting a motion for a new trial on the grounds of inadequacy argues that the small award may have resulted from compromise on the issue of liability, then the reviewing court must evaluate the likelihood of such a compromise. Courts routinely have done so. See, e.g., Hose v. Hake, 412 Pa. 10, 192 A.2d 339 (1963); McIntyre v. Clark, 314 Pa. Superior Ct. 552, 461 A.2d 295 (1983); Bortner v. Gladfelter, 302 Pa. *176 Superior Ct. 492, 448 A.2d 1386 (1982); Hevener v. Reilly, 266 Pa. Superior Ct. 386, 404 A.2d 1343 (1979).
Here, the likelihood of compromise is small. First, the bureau presented no evidence whatsoever tending to show any contributory negligence on Hill's part. Second, although the bureau argues that it "hotly" contested the issue of liability, the theory on which its defense was based was that unless the jury believed that a civilian or prisoner employee of the institution had removed the cover from the goal post hole, then the prison could not be charged with actual or constructive notice of the hazardous condition. However, there is a high degree of likelihood that the jury concluded that, regardless of who removed the cover, the prison had at least constructive notice of the dangerous state of the goal post hole, which was an artificial condition that the prison itself had installed in a piece of real estate that should be highly controlled, a prison yard.
Inadequacy of Damages
The Superior Court summarized the general principles involved in appellate review of a trial court's decision to grant or to deny a new trial on the grounds of inadequacy of damages in Bortner v. Gladfelter, 302 Pa. Superior Ct. 492, 496-97, 448 A.2d 1386, 1388-89 (1982):
Whether to grant a new trial because of inadequacy of the verdict is peculiarly within the competence of the trial court, and its discretion is considerable. Its action, therefore, will not be disturbed on appeal except where there has been a clear abuse of discretion. Wilson v. Nelson, 437 Pa. 254, 256, 258 A.2d 657, 658-659 (1969); Dougherty v. Sadsbury Township, 299 Pa. Super. 357, 360, 445 A.2d 793, 795 (1982); Mueller v. Brandon, 282 Pa. Super. 37, 41, 422 A.2d 664, 666 (1980); Palmer v. Brest, 254 Pa. Super. 532, *177 536, 386 A.2d 77, 79 (1978). However, the appellate courts do not abdicate their power of review and will reverse where a clear abuse of discretion appears. Hose v. Hake, 412 Pa. 10, 14, 192 A.2d 339, 341 (1963); Dougherty v. Sadsbury Township, supra.
`[T]o support the granting of a new trial for inadequacy, "the injustice of the verdict should stand forth like a beacon." So long as the verdict bears a reasonable resemblance to the damages proved, it is not the function of the court to substitute its judgment for that of the jury. Elza v. Chovan, 396 Pa. 112, 118, 152 A.2d 238, 240 (1959); Morris v. Peckyno, 202 Pa. Superior Ct. 490, 492, 198 A.2d 396, 397 (1964). In the latter case, [the Superior Court,] quoting 15 Am. Jur., Damages, §231, stated "`As a rule, a verdict in an action for a personal tort may be set aside as inadequate when, and only when, it is so inadequate as to indicate passion, prejudice, partiality, or corruption, or that the jury disregarded the instructions of the court, or in some instances, where there was a vital misapprehension or mistake on the part of the jury, or where it clearly appears from uncontradicted evidence that the amount of the verdict bears no reasonable relation to the loss suffered by the plaintiff, or, according to some of the cases, where, otherwise, there has been an evident failure of justice to the plaintiff, or where the award is so inadequate that it should not be permitted to stand. Generally, a verdict will not be disturbed merely on account of the smallness of the damages awarded or because the reviewing court would have awarded more.'"' Rutter v. Morris, 212 Pa. Super. 466, 469-470, 243 A.2d 140, 142 (1968). *178 This court expressed approval for the guidelines prescribed in Bortner as a means of evaluating the trial court's exercise of discretion in Riddle v. Anderson, 85 Pa. Commonwealth Ct. 271, 274-75, 481 A.2d 382, 384 (1984).
The above guidelines, although readily quoted, do not purport to be precise. The line between an award that is smaller than what the reviewing court would have granted, but still permissible, and an award that is so small that it amounts to a failure of justice to the plaintiff is not sharp.
In Mueller v. Brandon, 282 Pa. Superior Ct. 37, 422 A.2d 664 (1980), a woman injured in an automobile collision appealed from the trial court's denial of her motion for a new trial. In the accident she suffered a broken left ankle, a concussion and cut on her forehead, and a broken nose. The sole issue in dispute before the jury was the amount of damages for pain and suffering, and that portion of the jury's award came to $663.
The Superior Court quoted the standard for determining inadequacy from 15 Am. Jur., Damages, that would later appear in Bortner. The court then made the following cogent observation:
Since under our system of jurisprudence our courts in most cases have no way of knowing how or why a jury reached their verdict in a given case, the presence of passion, prejudice, partiality or corruption on the part of the jury, or whether they disregarded instructions, acted under misapprehension or mistake can only be a matter of surmise by a reviewing court. The test in the last analysis must simply be whether the award when scrutinized under the law and indisputable facts of the case at hand is so inadequate that it should not be permitted to stand. . . .
*179 In order to determine if the verdict is inadequate we must review the entire record to determine whether an injustice has occurred.
Mueller, 282 Pa. Superior Ct. at 40-41, 422 A.2d at 665.
The court acknowledged (1) that where a trial court refuses relief, a reviewing court is even more constrained than where the trial court grants relief; (2) that pain and suffering are elements of damage with no market value and so peculiarly for the common sense of the jury; and (3) that the award in question did not constitute a mere trivialization of the plaintiff's claim. Nevertheless, the Superior Court reversed the trial court and granted a new trial, noting that there was no contest as to the nature and extent of the injuries, which were objectively demonstrable, and that "[n]o jury is free to conclude that the presence of a nonwalking ankle cast for four weeks or undergoing nasal surgery do not necessarily involve substantial pain, suffering and inconvenience." Id. at 42, 422 A.2d at 666.
In the present case, Hill suffered a trimalleolar fracture of the ankle, an injury that involves a fracture of the lateral malleolus or bulbous portion at the end of the tibia bone, a fracture of the medial malleolus, the similar portion of the fibula, and a fracture of the posterior lip of the tibia. Notes of Testimony 95; R. 100. See also Marmor, Injuries of the Ankle, 2 Trauma no. 6, 1 (1961). That such a fracture would be intensely painful is self-evident. In addition, two witnesses to Hill's accident testified that he was in extreme pain at the time of his injury. N.T. 53, 63; R. 58, 68.
Beyond this evidence of pain at the time of the injury, Hill testified that he was in severe pain in the period following his first operation and that he continued to experience substantial pain in the area of the implants in his ankle for over a year. N.T. 23-24, 28-29; R. 28-29, *180 33-34. He supported the latter claim with documentary evidence of the prison's providing him with pain medication through that period. R. 136-43.
If the $1800 awarded Hill beyond the $5844 of his medical bills were credited entirely to pain and suffering, then the pain and suffering element would be approximately 30% of the special damages. No one disputes that such a ratio is far below what is customary in personal injury cases. A useful comparison may be made with Lininger v. Kromer, 238 Pa. Superior Ct. 259, 358 A.2d 89 (1976), where an en banc panel of the Superior Court upheld a trial court's grant of a new trial limited to the issue of damages, both on the grounds of excessiveness of certain awards for loss of future earnings and on the grounds of inadequacy of awards for pain and suffering. One plaintiff received $9,000 for pain and suffering and another received $4,000. The court said:
The curious components of the jury's awards are special damages and pain and suffering. Both John Lininger and Karen Kromer were given approximately 50% of special damages for pain and suffering. In view of the serious injuries suffered by these plaintiffs, the pain and suffering awards are too low.
Lininger, 238 Pa. Superior Ct. at 274, 358 A.2d at 96-97.[2]
However, the $1800 in this case does not apply only to pain and suffering. Hill also presented evidence relating to the continuing effects of his injury. He testified that he still occasionally experiences sharp pain in his ankle as well as numbness and that he cannot run at all without significant pain; therefore, he cannot play any strenuous *181 sports. N.T. 36, 40-41; R. 41, 45-46. In addition, Dr. Harvey Kleinberg, D.O., who examined Hill on July 30, 1986, and took an X-ray of the ankle and reviewed Hill's medical records, testified that the fracture had caused tendonitis and arthritis of the left foot and ankle. N.T. 96; R. 101. The doctor characterized this condition as being permanent. N.T. 97; R. 102. As Hill emphasizes in his brief, the bureau presented no evidence at all on the issue of damages, and its counsel did not even cross-examine Dr. Kleinberg.
Although a jury need not accept even uncontradicted testimony, Bronchak v. Rebmann, 263 Pa. Superior Ct. 136, 140, 397 A.2d 438, 440 (1979), there appears to be no basis in this case for a finding that Hill does not suffer some residual impairment of his ability to enjoy life's pleasures as a direct result of his injury. The trial judge expressly instructed the jury that they should compensate Hill for this distinct element of damages if they found the bureau liable. N.T. 117; R. 122. Therefore, the portion of the award intended to compensate for pain and suffering is actually less than $1800.[3]
Although a demonstration of prejudice on the jury's part is not a necessary condition to support a conclusion of inadequacy under Bortner and Riddle, our courts have not hesitated to infer the existence of prejudice where the facts of a particular case warranted such an inference. For example, in Vidmar v. Sigmund, 192 Pa. Superior Ct. 355, 162 A.2d 15 (1960), a mother brought an action in her own right and as guardian of her daughter for personal injuries inflicted upon them as a result of an assault *182 and battery by the child's father, since deceased. The mother suffered multiple contusions and abrasions of the face, head, body and extremities and a fractured face on the left side. At trial the court directed a verdict against the minor plaintiff on a theory of parental immunity later acknowledged to have been erroneous. The jury awarded the mother a very low amount. The Superior Court noted that the mother and father had maintained a "meretricious" relationship over a long period. In upholding the trial court's grant of a new trial to the mother, the Superior Court commented:
In view of the evidence the award of $285.57, the balance of her actual expenses, does seem to be grossly inadequate and as the appellees suggest, may possibly be explained by the jury's visiting their moral indignation at the sordid relationship between the parties, on the mother. It might, too, be noted that the direction of a verdict against the minor plaintiff may have had an effect.
Vidmar, 192 Pa. Superior Ct. at 361, 169 A.2d at 17.
In the present case, Hill contends that the only rational explanation for the jury's low award is the jury's prejudice against him as a convicted prisoner or as a black person or both. The existence of such a possibility cannot be ruled out in this case.
Under the guidelines set forth in Bortner v. Gladfelter and Riddle v. Anderson, as well as other precedents cited above, this court has the power to reverse a trial court's denial of a motion for a new trial where this court is convinced from uncontradicted testimony that the verdict "bears no reasonable relation to the loss suffered by the plaintiff" or there has been "an evident failure of justice to the plaintiff." In our considered judgment, we conclude that this is such a case.
*183 We emphasize that we do not establish any particular ratio of pain and suffering damages to special damages or any particular dollar figure as automatically constituting inadequacy. Each case must be examined in the light of its unique facts. As the cases discussed above demonstrate, however, an award for pain and suffering with respect to obviously serious injuries need not be zero or nominal or a trivialization of the plaintiff's injury in order to be inadequate.
Under the facts and circumstances of this case, given the uncontradicted evidence of the seriousness of Hill's injury and the lack of any claim of contributory negligence or likelihood of compromise, we are convinced that permitting this verdict to stand could not possibly have the effect of adequately compensating the plaintiff. Accordingly, the trial judge's denial of Hill's motion for a new trial must be classed as an abuse of discretion, and we must reverse the trial judge's order and remand with instructions to grant a new trial.
There remains only the question of the extent of the new trial on remand. A new trial may be granted solely on the issue of damages if (1) the issue of liability has been fairly determined and (2) the question of damages is readily separable from the issue of liability. Troncatti v. Smereczniak, 428 Pa. 7, 235 A.2d 345 (1967); McIntyre v. Clark, 314 Pa. Superior Ct. 552, 461 A.2d 295 (1983). As the discussion above indicates, we conclude that in this case the issue of liability has been fairly determined. Because there has been no hint of a claim of contributory negligence here, and the issue of liability is not otherwise entwined with that of damages, the question of damages is readily separable from the issue of liability. Therefore, the new trial should be limited to the issue of damages.
*184 ORDER
NOW, March 15, 1989, the order of the Court of Common Pleas of Montgomery County at No. 86-09947, dated February 6, 1988, is reversed. This case is remanded to the Court of Common Pleas with instructions to conduct a new trial in this matter limited to the issue of damages.
Jurisdiction relinquished.
Judge BARRY concurs in the result only.
NOTES
[1] Both sides in this case mistakenly have cited Dougherty v. Sadsbury Township, 299 Pa. Superior Ct. 357, 445 A.2d 793 (1982), for the proposition that a low verdict should not be disturbed where there is a conflict on the question of liability, because the jury could have compromised the liability issue with the amount of damages awarded. What the Superior Court actually said in Dougherty referred only to the propriety of a retrial limited to the issue of damages:
The Supreme Court has previously held that where a substantial conflict exists on the question of liability, such that a low verdict indicates that the jury probably has compromised the liability issue with the amount of damages awarded, it is an abuse of discretion for the trial court to award a new trial limited to the issue of damages. Gagliano v. Ditzler, 437 Pa. 230, 232, 263 A.2d 319, 320 (1970) . . . .
Dougherty, 299 Pa. Superior Ct. at 361, 445 A.2d at 795 (emphasis added).
In fact, the quoted language, and the Gagliano case cited there, stand for the opposite of the asserted proposition. A court may grant a new trial, even where a substantial conflict exists on the question of liability, but not, in such a case, limited to the issue of damages. See Stokan v. Turnbull, 480 Pa. 71, 77, 389 A.2d 90, 93 (1978).
[2] See generally Tables of Verdict Expectancy Values for Ankle Injuries, Release No. 226, Injury Valuation Reports in the Continuing Jury Verdict Research Project, Jury Verdict Research, Inc. (1979).
[3] Hill did not claim damages for loss of future earning capacity. He testified that he believed he would be able to return to his work as a window washer when he is released from prison, especially if he were able to get younger employees to do the high work, as others had done with him when he was young. N.T. 37; R. 42. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550715/ | 374 B.R. 720 (2007)
In re SECURITY AVIATION, INC., Debtor.
No. A06-00559-DMD.
United States Bankruptcy Court, D. Alaska.
August 27, 2007.
Richmond & Quinn, Cabot C. Christianson, Christianson & Spraker, Anchorage, AK, for Debtor.
MEMORANDUM ON DEBTOR'S OBJECTION TO CLAIM #12
DONALD MacDONALD, IV, Bankruptcy Judge.
On May 4, 2006, Security Aviation, Inc., and Regional Protective Services, LLC, *721 initiated a state court civil action against Air USA, Inc., and other defendants. The complaint contains several counts, including trespass, intentional interference with chattels, misrepresentation and breach of contract, and seeks damages well in excess of $5 million. Security Aviation's sole shareholder, Mark Avery, filed a chapter 7 petition on October 23, 2006. The chapter 7 case trustee assigned to Avery's bankruptcy case, Bill Barstow, placed Security Aviation into chapter 11 bankruptcy on December 21, 2006. Barstow substituted into the state court civil action as plaintiff in place of Security Aviation. He intends to liquidate Security Aviation's prepetition claims against Air USA and the other named defendants for' the benefit of the estate.
Air USA filed Proof of Claim No. 12 in this bankruptcy case. Its claim has two components: a general unsecured amount of $12,398,399.26, and an unsecured priority portion in an amount yet to be determined. This priority portion is for any Rule 82[1] attorney's fees and costs Air USA may be awarded in the state court litigation. Air USA characterizes this portion of its claim as one for "contingent unliquidated administrative expenses, currently in the form of an unsecured priority claim, in an amount to be determined upon resolution of the civil matter." The debtor filed an objection to the priority portion of Air USA's claim. The sole issue to be determined is whether a post-petition award of Rule 82 attorney fees and costs to Air USA in the state court action would have the status of an administrative expense under 11 U.S.C. § 503(b)(1).
Under controlling Ninth Circuit case law, I conclude that any costs or Rule 82 attorney's fees that may be awarded to Air USA in the state court litigation are not entitled to administrative expense status. Administrative expenses include "the actual and necessary costs and expenses of preserving the estate."[2] The claimant bears the burden of proving entitlement to an administrative expense claim,[3] and, must establish that the debt (1) arose from a post-petition transaction and (2) "directly and substantially benefitted the estate."[4]
An exception to this second requirement, that the expense benefit the estate, was recognized by the Supreme Court in Reading Co. v. Brown.[5] In that case, decided under the Bankruptcy Act, a chapter XI receiver was authorized to conduct the debtor's business, an eight story industrial structure in Philadelphia. During the pendency of the case, the building was destroyed by a fire which was attributed to the negligence of the receiver and a workman he had employed.[6] The Reading Company filed a priority claim for the damage it had suffered due to the fire. Other claimants filed similar claims. In all, claims totaling more than $3.5 million attributable to damages from the fire were filed. These claims were more than the debtor's total assets.[7]
The Court framed the issue as "whether the negligence of a receiver administering *722 an estate under a Chapter XI arrangement gives rise to an `actual and necessary' cost of operating the debtor's business."[8] The trustee argued that priority should only be given to expenses which were incurred to carry on the insolvent business. The Court disagreed, noting that the trustee had overlooked an important and decisive statutory objective: "fairness to all persons having claims against an insolvent."[9] Based upon this "fundamental fairness" doctrine, the Court felt that "actual and necessary costs" of preserving an estate should include "costs ordinarily incident to operation of a business, and not be limited to costs without which rehabilitation would be impossible."[10] The Court held that the damages resulting from the trustee's negligence in operating the debtor's business were "actual and necessary costs" of preserving the estate, entitled to priority over general unsecured creditors.[11]
The Reading exception, which the Ninth Circuit has described as a "venerable but limited exception,"[12] has been extended to claims arising from a trustee's or debtor-in-possession's negligence, as well as compensatory penalties for violations of injunctions or for cleanup of environmental hazards.[13] However, no Circuit Court decision has extended this exception to "cover debts incurred by a non-wrongful post-petition action to liquidate a chapter 7 bankruptcy estate."[14]
Two recent Ninth Circuit decisions have dealt with the issue of whether a post-petition award of attorney's fees to a creditor qualifies as an administrative expense under § 503(b)(1). In Abercrombie v. Hayden (In re Abercrombie),[15] Abercrombie obtained a judgment against Hayden Corporation in state court litigation involving a real estate contract. Hayden Corporation appealed. While the appeal was pending, Abercrombie filed a chapter 11 petition. The state appellate court subsequently reversed the lower court's judgment and awarded Hayden attorney's fees pursuant to a prevailing party provision in the real estate contract. Hayden contended its post-petition attorney's fees should be allowed as an administrative expense. The Ninth Circuit concluded that the fee award didn't qualify as an administrative expense because the claim didn't arise out of a post-petition transaction, stating:
"When third parties are induced to supply goods or services to the debtor-in-possession . . ., the purposes of [§ 503(b)] plainly require that their claims be afforded priority." Mammoth Mart, 536 F.2d at 954. The same principle does not apply, however, when the third party transacted with the debtor prepetition. "It is only when the debtor-in-possession's actions themselves that is, considered apart from any obligation of the debtor give rise to a legal liability that the claimant is entitled to a priority. . . ." Id. at 955.[16]
*723 In a more recent decision, Kadjevich v. Kadjevich (In re Kadjevich),[17] the Ninth Circuit held that fees which had been awarded postpetition to a creditor, based on a prepetition fraud claim, were not administrative expenses. The fees were awarded to the creditor as the prevailing party under a state fee shifting statute. In spite of the fact that the debtor's breach of a settlement of the state court fraud action occurred after his bankruptcy filing, the Ninth. Circuit held that the attorney fee award was encompassed within the creditor's prepetition claim and could not be treated as an administrative expense.[18]
In both Kadjevich and Abercrombie, the Ninth Circuit felt that the post-petition fee award to the creditor was based on a prepetition claim; neither the debtor's decision to continue litigation post-petition nor the debtor's post-petition breach of a settlement agreement transformed the fee award into a post-petition transaction.[19] In Kadjevich, the Ninth Circuit explained:
In the present case, the "source" of the award of attorney fees is the prepetition state-court fraud action that brought [the debtor] under the jurisdiction of the California courts and subjected him to the fee-shifting rule contained in California Code of Civil Procedure § 128.5. The state court's judgment in that case is unitary; all of it must be considered pre-petition under the reasoning of Abercrombie. For the purpose of establishing the priority of a claim for attorney fees, we see no principled basis to distinguish a pre-petition contract that provides for fees from a pre-petition tort claim that results in fees. By analogy to Abercrombie, the fact that [the debtor] did not engage in the particular misconduct that caused the fees to be awarded until after he filed his bankruptcy petition does not change the fundamentally pre-petition nature of the fraud action and of the total resulting judgment.
It is undisputed that [the creditor's] basic claim for fraud damages is a prepetition, nonpriority claim. Because [the creditor's] claim for attorney fees arises from the same pre-petition obligation as the damages . . . it should be afforded the same priority in federal bankruptcy proceedings as those other items.[20]
While the Ninth Circuit recognizes the "fundamental fairness" doctrine enunciated in Reading, it has disapproved of two lower court decisions from within this circuit that have granted administrative expense status to a creditor's post-petition fee award. One of these lower court decisions is In re Execuair Corp.[21] In Execuair, Whittaker Corporation had obtained a prepetition injunction which prohibited Execuair from selling certain aircraft parts. After Whittaker filed a contempt action against Execuair, alleging a violation of the injunction, Execuair filed a petition under chapter 11 and continued to defend against the contempt action. Whittaker prevailed, and the District Court awarded it attorney's fees under a provision of the Lanham Act, 15 U.S.C. § 1117.[22] The bankruptcy court noted that this provision of the Lanham Act, which permits a court in "exceptional cases" to award fees to a prevailing party, allows victims of infringement to be made *724 whole and also protects defendants against unfounded infringement suits.[23] Implicit in such a fee award is a finding that the prevailing party suffered an injury. Whitaker argued that the post-petition fee award should be treated as an administrative expense in the bankruptcy case. The bankruptcy court agreed, stating:
However, even if the District Court had not indicated the lack of meritorious defense, Reading cannot be interpreted on such a narrow basis. This court interprets Reading to hold that if the claim for attorneys' fees was incurred post-petition, because of a post-petition act by the debtor-in-possession or trustee which was intended to benefit the estate but which led to the injury of a third party, such attorneys' fees qualify as administrative expenses of the estate so long as the claimant can justify its right to attorneys' fees under law.[24]
In Irmas Family Trust v. Madden (In re Madden),[25] a litigant was awarded fees post-petition in a state court civil action for breach of contract. The fees were awarded under a prevailing party provision in the contract. The debtor-in-possession had continued to prosecute the state court action after the petition was filed. Relying on the "fundamental fairness" doctrine, the Bankruptcy Appellate Panel for the Ninth Circuit held that the post-petition attorney's fees could be treated as an administrative expense. The BAP reasoned:
To allow the debtor in possession to avoid liability for attorneys' fees by relegating them to the prepetition creditor pool can result in injustice to those who become engaged, voluntarily or involuntarily, in transactions with the bankruptcy estate, suffering loss or damage thereby. . . .
Qualification of a claim for administrative priority does not require that a post-petition claimant demonstrate a tangible benefit to the estate, but rather, a showing that as a result of the trustee's actions on behalf of the estate, the claim was incurred and became an element of the "actual, necessary costs and expenses of preserving the estate." Efforts to preserve the estate are not always successful, but the contingency of loss should not be borne by the trustee's adversary where the trustee is necessarily bound by statute or contract to compensate the party for costs of defense.[26]
The Ninth Circuit has disapproved of both Madden[27] and Execuair.[28] There is a third lower court decision, from this district, in which the bankruptcy court held that the fundamental fairness doctrine enunciated in Reading required a litigant's fees and costs, incurred in successfully defending against a chapter 7 trustee's § 544(b) avoidance actions, to be treated as an administrative expense.[29] In In re Good Taste, Inc., Judge Ross reviewed the Ninth Circuit authority on this issue and concluded that these cases sent a "mixed message."[30] But since Good Taste involved a suit initiated post-petition by the trustee, Judge Ross found the case to be distinguishable from the main holding in Kadjevich. He concluded that where attorney's fees were awarded in a trustee's unsuccessful post-petition § 544(b) action, brought to avoid a transfer for the benefit *725 of the estate, the fees of the prevailing litigant would be an administrative expense.
Air USA cites Madden and Good Taste in support of its claim for administrative expense. However, as noted above, the Ninth Circuit has expressly disapproved Madden, and Good Taste is factually distinguishable. The Ninth Circuit has intimated that there may be instances where a trustee's unsuccessful, continued prosecution of a prepetition claim may result in the successful litigant's fees being treated as an administrative expense. In Kadjevich, the Ninth Circuit stated that its holding was a narrow one, noting that it was not dealing with "a case in which a representative of the estate commenced litigation on behalf of the estate after the bankruptcy petition was filed, or one in which the representative obtained relief from the automatic stay to continue pre-petition litigation.[31] While the Ninth Circuit seems to suggest the results might be different in such circumstances, the two lower court decisions it cites as example deal with cases where the trustee's litigation was found to be meritless or frivolous.[32]
In Boeing N. American, Inc. v. Ybarra (In re Ybarra),[33] the Ninth Circuit recently held that a debtor who unsuccessfully continued to prosecute a state court civil action, post-petition and post-discharge, would be liable for the prevailing party's post-petition attorney's fees. This holding appears inconsistent with Abercrombie and Kadjevich because, in Ybarra, the postpetition fees weren't considered to be part of the prepetition claim. The Ninth Circuit explained that different policy considerations, distinct from those applied to determine whether post-petition fees fall into the administrative expense category, drive the discharge determination.[34] The court reiterated that "only claims arising from post-petition transactions can be granted [administrative] priority," and stated that the central question in determining whether the claim would qualify for such treatment was "whether the third party, should be paid at the expense of the debtor's existing unsecured creditors."[35] In the discharge context, the determining issue was whether the debtor should be released from prepetition debts.[36] In this context, a debtor could not use the "discharge shield" as a sword "to undertake risk-free litigation at other's expense" and, in instances where a debtor took "affirmative post-petition action to litigate a prepetition claim," the debtor's liability for post-petition attorneys fees would not be discharged.[37]
I agree with Judge Ross that the Ninth Circuit decisions send a mixed message. Particularly problematic is Kadjevich. On the one hand, the Ninth Circuit disapproves Execuair, where the bankruptcy court granted administrative priority to a post-petition fee award based on a federal statute which allows fees in extraordinary cases where a litigant has been injured.[38] On the other hand, the *726 Ninth Circuit suggests in Kadjevich, that a trustee's continued prosecution of a prepetition state court action might not fall within its "narrow ruling,"[39] so that a prevailing litigant's fees in those circumstances might be treated as an administrative expense. But the Ninth Circuit has also cited with approval the Jack/Wade Drilling and Hemingway Transport decisions from other circuits.[40] In both Jack/ Wade Drilling and Hemingway Transport, the circuit courts indicated that fees awarded to a litigant in successfully defending against the trustee's good faith, post-petition prosecution of a prepetition state court action are not administrative expenses under the "fundamental fairness" doctrine enunciated in Reading, unless the litigant has suffered some additional injury (other than the fact that fees were incurred). That appears to be the rule in the Ninth Circuit as well. Perhaps the best rationale for this determination is that, in light of the "American rule," where each party generally bears its own costs in litigation, it is not fundamentally unfair to treat such a litigant's post-petition attorney's fees as a general unsecured claim.[41] It seems the incurring of attorney's fees, by itself, may not be the type of injury that would fall within the "fundamental fairness" doctrine.
Air USA has not suggested that the debtor's continued prosecution of the state court action is frivolous or meritless. Absent such a determination from the state court, I find that under controlling Ninth Circuit law, any award of Rule 82 attorney's fees or costs to Air USA will be a general unsecured claim in this bankruptcy proceeding. An order will be entered accordingly.
NOTES
[1] Alaska Civil Rule 82 provides for an award of attorney's fees to the prevailing party in a state civil action.
[2] 11 U.S.C. § 503(b)(1)(A).
[3] Einstein/Noah Bagel Corp. v. Smith (In re BCE West, L.P.), 319 F.3d 1166, 1172 (9th Cir.2003), citing Microsoft Corp. v. DAK Indus. (In re DAK Indus.), 66 F.3d 1091, 1094 (9th Cir.1995).
[4] BCE West, L.P., 319 F.3d at 1172, citing Abercrombie v. Hayden Corp. (In re Abercrombie), 139 F.3d 755, 757 (9th Cir.1998).
[5] 391 U.S. 471, 88 S.Ct. 1759, 20 L.Ed.2d 751 (1968).
[6] Id. at 473-474, 88 S.Ct. 1759.
[7] Id.
[8] Id. at 476, 88 S.Ct. 1759.
[9] Reading, 391 U.S. at 477, 88 S.Ct. 1759.
[10] Id. at 483, 88 S.Ct. 1759.
[11] Id. at 485, 88 S.Ct. 1759.
[12] Abercrombie v. Hayden Corp. (In re Abercrombie), 139 F.3d 755, 758 (9th Cir.1998).
[13] 4 Collier on Bankruptcy ¶ 503.06[3][c] (15th ed. revised 2007).
[14] Total Minatome Corp. v. Jack/Wade Drilling, Inc. (In re Jack/Wade Drilling, Inc.), 258 F.3d 385, 388 (5th Cir.2001), cited with approval in Boeing N. Am., Inc. v. Ybarra (In re Ybarra), 424 F.3d 1018, 1026 (9th Cir.2005); see also Woburn Assoc. v. Kahn (In re Hemingway Transport, Inc.), 954 F.2d 1, 5-7, (1 st Cir.1992), cited with approval in Abercrombie, 139 F.3d at 759.
[15] 139 F.3d 755 (9th Cir.1998).
[16] Id. at 758.
[17] 220 F.3d 1016 (9th Cir.2000).
[18] Id. at 1020.
[19] Kadjevich, 220 F.3d at 1020; Abercrombie, 139 F.3d at 759.
[20] Kadjevich, 220 F.3d at 1020 (citations omitted).
[21] 125 B.R. 600 (Bankr.C.D.Cal.1991).
[22] Id. at 602.
[23] Id.
[24] Id. at 604.
[25] 185 B.R. 815 (9th Cir. BAP 1995).
[26] Madden, 185 B.R. at 819 (citations omitted).
[27] Abercrombie, 139 F.3d at 759:
[28] Kadjevich, 220 F.3d at 1021 n. 4.
[29] In re Good Taste, Inc., 317 B.R. 112 (Bankr.D.Alaska 2004).
[30] Id. at 112.
[31] Kadjevich, 220 F.3d at 1021, citing as example In re Met-L-Wood Corp., 115 B.R. 133 (N.D.Ill.1990), and In re E.A. Nord Co., 78 B.R. 289 (Bankr.W.D.Wash.1987).
[32] In Met-L-Wood Corp., 115 B.R. at 136, the trustee was found to have prosecuted meritless claims. In E.A. Nord Co., 78 B.R. at 292, the debtor engaged in frivolous litigation and the court noted that the fee award should be treated as an administrative expense "to discourage parties from wasting valuable time and causing needless expense."
[33] 424 F.3d 1018 (9th Cir.2005).
[34] Ybarra, 424 F.3d at 1025-26.
[35] Id. at 1026.
[36] Id.
[37] Id.
[38] Kadjevich, 220 F.3d at 1021 n. 4.
[39] Id. at 1021.
[40] Total Minatome Corp. v. Jack/Wade Drilling, Inc. (In re Jack/Wade Drilling, Inc.), 258 F.3d 385, 388 (5th Cir.2001), cited with approval in Boeing N. American, Inc. v. Ybarra (In re Ybarra), 424 F.3d 1018, 1026 (9th Cir. 2005); see also Woburn Assoc. v. Hemingway Transport, Inc. (In re Hemingway Transport, Inc.), 954 F.2d 1, 5-7 (1st Cir.1992), cited with approval in Abercrombie, 139 F.3d at 759.
[41] See, e.g., Jack/Wade Drilling, 258 F.3d at 390-91 n. 4. (noting that the existence of bad faith can except a lawsuit from the "American rule" that each party is to bear its own costs in litigation). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551008/ | 27 F.2d 16 (1928)
STACK et al.
v.
UNITED STATES.
No. 5433.
Circuit Court of Appeals, Ninth Circuit.
June 25, 1928.
Charles H. Miller, of Seattle, Wash., for plaintiffs in error.
Anthony Savage, U. S. Atty., and Jeffrey Heiman, Asst. U. S. Atty., both of Seattle, Wash.
Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges.
GILBERT, Circuit Judge.
The plaintiffs in error, hereinafter named the defendants, were convicted of violation of section 37 of the Penal Code (18 USCA § 88) in entering into a conspiracy to possess and sell intoxicating liquor and to maintain a common nuisance in violation of the National Prohibition Act (27 USCA).
It is assigned as error that the trial court refused to instruct the jury that they should not consider the testimony concerning the possession and sales of liquor, for the reason that the evidence did not connect the defendants with any unlawful agreement, combination, confederation, or conspiracy; also that the court denied the defendants' motion for a directed verdict of acquittal.
There was testimony that the defendant Marcell was the owner of the Venice Cafe and that Stack was his cashier and Galletti was his cook. There was testimony that the prohibition officer, Purvis, bought in the cafe two cups of moonshine, described as "coffee royal," from the defendant Marcell, and saw him put the money in the cash register and ring it up, and that in the following month the witness was in the cafe, standing *17 by the cash register, and saw the prohibition agents, Bell and Bywater, go into one of the booths behind green curtains and saw the waiter bring them two cups. Bell testified that, accompanied by Bywater, he went into the cafe and asked Stack for liquor, and that the latter caused the liquor to be brought by Galletti after they had been placed in a booth, and that the money for the drinks was paid to Stack, who placed the same in the cash register and rang it up. Bell testified further that on another occasion he bought a bottle of liquor from Stack in the presence of the other two defendants, and that the liquor was handed to Stack by one of the other defendants. The testimony tended to show that all of the defendants participated in the sale of intoxicating liquors in the Venice Cafe at different times during the months of February and March, 1927.
The defendants insist that there was no evidence of an agreement or conspiracy between them, either to sell intoxicating liquors, or to commit the acts which would constitute the maintenance of a nuisance. But it is well settled that no formal agreement is necessary to constitute an unlawful conspiracy. "In fact, the agreement is almost always a matter of inference, deduced from the acts of the persons accused, which are done in pursuance of an apparent criminal purpose." 5 R. C. L. 1065; 12 C. J. 632. A conspiracy may be and often is proven by the overt acts. Said the court in Fisher v. United States (C. C. A.) 2 F.(2d) 843, 846: "The fact that two men are found together breaking into a bank is indubitable proof that they had agreed to commit the burglary." It is sufficient if the evidence shows such a concerted action in the commission of an unlawful act, or other facts and circumstances from which the inference naturally arises that the unlawful overt act was in furtherance of a common design, intent and purpose of the alleged conspirators. Calcutt v. Gerig (C. C. A.) 271 F. 220, 27 A. L. R. 543; Davidson v. United States (C. C. A.) 274 F. 285; Keith v. United States (C. C. A.) 11 F.(2d) 933.
Circumstantial evidence is always admissible to prove conspiracy. Shook v. United States (C. C. A.) 10 F.(2d) 151. The defendants cite authorities to the proposition that in order to warrant conviction of conspiracy, the evidence must show something further than merely participating in the offense which is the object of the conspiracy, and we may concede that the proposition is sustainable as applied to cases in which the participation falls short of affirmatively and expressly aiding and abetting in the commission of the offense, or cases in which the participation is susceptible of a construction consistent with the innocence of the accused. But it cannot be said to apply to a case in which the evidence shows a deliberate and intentional course of action during a considerable period of time, in which all the persons accused of conspiracy are actuated by a common purpose and assist one another in carrying on a business in violation of the law. In Allen v. United States (C. C. A.) 4 F.(2d) 688, 691, it was said: "A conspiracy may be established by circumstantial evidence or by deduction from facts. The common design is the essence of the crime, and this may be made to appear when the parties steadily pursue the same object, whether acting separately or together, by common or different means, but ever leading to the same unlawful result."
We think that the evidence was sufficient to go to the jury on the charge of conspiracy as to the defendants Marcell and Stack. As to the defendant Galletti, we think it is too meager to justify belief beyond a reasonable doubt that he was a party to the unlawful enterprise. Accordingly, as to him the judgment is reversed, with directions to grant a new trial; as to the other two, it is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551107/ | 86 B.R. 1006 (1988)
In re Dale Lawrence SNIPES & Melba Darlene Snipes, Debtors.
Bankruptcy No. 88-00969-C-13.
United States Bankruptcy Court, W.D. Missouri, C.D.
June 20, 1988.
Gwendolyn Froeschner, Columbia, Mo., for debtors.
Rick Fink, Kansas City, Mo., Chapter 13 Trustee.
MEMORANDUM OPINION
FRANK W. KOGER, Bankruptcy Judge.
Debtors signed a note dated August 26, 1987 giving Kentucky Finance Company a purchase money security interest (pmsi) in a sofa sleeper and two chairs in consideration for a loan of $1,227.00. On October 8, 1987, Debtors obtained an additional loan from Kentucky Finance Company for $1,296.00. These two loans were combined on February 9, 1988, evidenced by a new note and secured by the sofa sleeper, the two chairs and other personal property of the Debtors. A financing statement was filed that same day.
Debtors filed bankruptcy under Chapter 7 of the Bankruptcy Code on March 3, 1988, and later converted to Chapter 13. A hearing was held on June 2, 1988, addressing Debtors' objection to the claim of Kentucky Finance Company that it has a pmsi in the sofa sleeper and the two chairs. At the hearing, the parties agreed to submit this matter to the Court on stipulation of the facts. Based upon that record, and for the reasons set forth in the Memorandum Opinion it is
ORDERED that the lien of Kentucky Finance Company on debtors' sofa sleeper and two chairs is nonpossessory, nonpurchase-money and is therefore subject to avoidance by debtors pursuant to 11 U.S.C. § 522(f).
*1007 ISSUE
Kentucky Finance Company does not dispute that their lien was nonpossessory. The question at issue here is whether the lien of Kentucky Finance Company is a purchase money lien in which case it could not be avoided by Debtors under the lien avoidance section of the Code.
LAW
Section 522(f)(2)(A) of the Bankruptcy Code permits a debtor to avoid a nonpossessory, nonpurchase-money security interest in household furnishings, household goods, or appliances which are primarily for the personal, family, or household use of the debtor or a dependent of the debtor to the extent that the lien impairs an exemption to which the debtor otherwise would be entitled.
The Bankruptcy Code does not define "purchase money security interest", therefore, we look to state law. See In re Manuel, 507 F.2d 990, 992 (5th Cir.1975). Missouri law defines same as: "A security interest is a `purchase money security interest' to the extent that it is (b) taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used". Mo.Ann.Stat. § 400.9-107 (Vernon 1988). A financing statement need not be filed to perfect a pmsi in consumer goods. Mo. Ann.Stat. § 400.9-302(1)(d) (Vernon 1988).
Courts appear to be divided on the issue of whether the character of a pmsi changes upon the consolidation of a purchase money security agreement and another agreement. Some courts have adopted the "transformation rule", that if an item of collateral secures not only its own purchase price but also that of other items, the security interest that existed before the "add on" procedures is transformed into nonpurchase money status. See Pristas v. Landaus of Plymouth, Inc., 742 F.2d 797, 800 (3rd Cir.1984); citing, In re Manuel, 507 F.2d 990 (5th Cir.1975); In re Norrell, 426 F.Supp. 485 (D.C.Ga.1977); In re Krulik, 6 B.R. 443 (Bkrtcy.M.D.Tenn.1980); In re Scott, 5 B.R. 37 (Bkrtcy.M.D.Pa.1980); In re Mulcahy, 3 B.R. 454 (Bkrtcy.S.D.Ind. 1980).
Other courts are of the opinion that security interests may possess dual statuses "and that the presence of a nonpurchase-money security interest does not destroy the purchase-money aspect". Pristas, at 800. This view derives its support from the Uniform Commercial Code § 9-107 which provides that a security interest is a pmsi "to the extent" it is taken or retained by the seller of the collateral to secure all or part of its price. "Thus, a purchase-money security interest in a quantity of goods can remain such `to the extent' it secures the price of that item, even though it may also secure the payment of other articles. See In re Breakiron, 32 B.R. 400 (Bkrtcy.W.D.Pa.1983); In re Moore, 33 B.R. 72 (Bkrtcy.D.Ore.1983); In re Gibson, 16 B.R. 257 (Bkrtcy.D.Kan.1981) . . ." Pristas, at 801.
THE DUAL APPROACH
The question in Pristas was whether a pmsi in consumer goods survived when the debt was consolidated with that incurred for subsequent purchases. The court held that the "add on" of both collateral and debt did not eliminate the purchase money character of the security interest in the original purchases. The court further held that where a debt secured by a purchase money security interest in consumer goods was consolidated with that incurred for subsequent purchases the allocation provisions of the state statute controlled, thus, the purchase money security interest in goods that also secured later payments to the extent the original items secure the unpaid part of their own price the pmsi is retained.
The Pristas court followed the dual status view and rejected the transformation rule because of the support of the language in the Uniform Commercial Code and because the dual status approach is consistent with the Code policy of approbation for purchase money security arrangements and simplifies repeat transactions between the same buyer and seller. The court stated, "[t]o apply the `dual-status' *1008 doctrine, it is necessary to determine the extent to which a particular item continues to secure its own price and the extent to which payment of other purchases is affected. If that allocation can be made, the purchase-money security interest survives and will not be avoided. The creditor's interest will be nullified under § 522(f)(2) only to the extent that it is nonpurchase-money security". Pristas, at 801.
THE TRANSFORMATION APPROACH
In In re Matthews, 724 F.2d 798 (9th Cir.1984), the issue before the court was whether the refinancing of a loan by issuing a new loan destroyed the purchase money nature of a security interest for purposes of 11 U.S.C. § 522(f). In this case the creditor decided to issue a new loan and pay off the old loan rather than to extend the payments on the old loan. The consideration for creditor's benefit in converting a delinquent loan into a current loan on its books was the sacrifice of its purchase money security interest, taking instead a security interest (non-purchase money) in the property to secure the new loan.
MISSOURI'S APPROACH
The Eastern District of Missouri Bankruptcy Court in In re Faughn, 69 B.R. 18 (Bkrtcy.E.D.Mo.1986), held that ". . . refinancing or consolidating loans by paying off the old loan and extending a new one extinguishes the purchase money character of the original loan because the proceeds of the new loan are not used to acquire rights in the collateral . . ." Faughn at 20. The Faughn court recognized the conflict in this area and decided to follow the Ninth Circuit in Matthews, which favored the transformation approach.
The Bankruptcy Court in In re Jackson, 9 UCC Rep.Serv. 1152 (Bkrtcy.W.D.Mo. 1971) stated that ". . . it does not necessarily follow that once a purchase money security interest always a purchase money security interest". Jackson, at 1156. The creditor's contention that it was a secured creditor failed because "its purchase money security interest in the consumer goods lost its identity as such when it attempt[ed] to claim the goods as security for the entire balance due and owing under the revolving charge agreement without further perfection by way of a filed financing statement . . ." Id. at 1156.
DISCUSSION
This Court believes a distinction can be made between the Matthews "transformation" approach and the Pristas "dual" approach. The question to be decided in Matthews was whether the pmsi survived the pay out of the original loan and applied to a completely new loan. In this event, the court found that the purchase money character of the original loan did not carry over to the new loan. The Court in that case, however, does not reach the debtors' alternate contention that collateral cannot secure more than its own value without destroying the purchase money security interest. In a footnote the Court stated it believed the weight of authority appears to be against the debtors on this point. See generally, McLaughlin, "`Add On' Clauses in Equipment Purchase Money Financing: Too Much Of A Good Thing," 49 Fordham L.Rev. 661 (1981). Matthews, at 800, n. 3. Similarly, Faughn based its decision on a payoff provision in a second contract to defeat the character of the purchase money agreement because then the second loan was not used by Debtors to acquire rights in the collateral and thus was not purchase money.
In Pristas, the question was somewhat different, however. The question in that case was whether a supplement to the original loan extinguished the purchase money character of the original loan. The court held that the purchase money character survived the add on provision as long as the character of the initial loans could be determined.
Similarly, the fact situations in In re Norrell, 426 F.Supp. 435 and In re Manuel, 507 F.2d 990 are unique in that the lender never had a valid pmsi to begin with because of the "add on" clause in the initial agreement giving the lender security in items other than those being purchased. *1009 In re Manuel involved an add-on clause in a security agreement under which the debtor never completely paid off his indebtedness before purchasing another item on credit and adding it to that indebtedness never gained title to anything until the entire debt was paid, and the creditor thus retained a security interest in all of the property so purchased to secure only the more recent purchases. The court held that because the security agreement purported to make collateral secure debt other than its own price, it was not a purchase money interest entitled to be perfected without filing. Id. at 993. "`Add-on' contracts do not fall into the category of a `purchase money security interest' for the simple reason that the items of collateral described in the contract stand as security not only for their own purchase price, but for the balance due on the purchase of other items . . ." (citation omitted) Scott, at 39. However, transformation cases state that "there is no reason to apply a different rule to security agreements executed as part of refinancing loans or consolidations of loans covering consumer goods". Mulcahy, at 457.
The court in In re Staley, 426 F.Supp. 437 (M.D.Ga.1977), agreed with the holding in Manuel that a security agreement which purported to make collateral secure debt other than its own price, it was not a pmsi entitled to be perfected without filing. The collateral must secure only debt representing its price. Staley did hold however, that a security agreement specifying a first-in-first-out method of applying payments retained the purchase money character of a security interest in a stereo.
ANALYSIS
Although this Court finds it easy to draw distinctions between this case and other cases which advocate the "transformation" approach because the combination of the two previous loans to Debtors did not provide for the payoff of Debtors' obligation on the purchase money agreement for an extension of new credit and because Kentucky Finance Company did initially have a valid pmsi in the sofa and chairs, it would appear that the law in this district would support an adoption of the "transformation" even in the circumstances before us. The general rule arising out of the transformation cases is that the consolidation of several existing obligations secured by pmsi's into a single obligation secured by all of the collateral transforms the pmsi's into nonpurchase money security interests. Creditors may always protect their secured position by extending or renewing their pmsi loan rather than rolling over totally unrelated debts into one new package. Furthermore, the "transformation rule" obviates the potential of an accounting problem. Had debtors paid one-half of the new balance after consolidation, what portion of same should be attributed to the pmsi balance and what portion to the non-purchase money balance?
Missouri has adopted the transformation approach in the case of Faughn and Jackson. Although, as discussed above, this Court believes Faughn and several other transformation approach cases are distinguishable from the case at hand, Jackson makes it clear that Missouri follows the transformation approach even in fact situations such as this one especially in light of the fact that the consolidated agreement appears to make the sofa and chairs security for the amount of both of the previous loans and does not provide for any separate allocation of payments. The agreement does not provide that the sofa and chairs are just security for the remaining balance due on the first note and thus the purchase money character of the security interest has changed in the new agreement. Kentucky Finance Company's pmsi became a nonpurchase money security interest upon the consolidation of the loans, and would be subject to lien avoidance pursuant to § 522(f).
The foregoing Memorandum Opinion constitutes Findings of Fact and Conclusions of Law as required by Rule 7052 Rules of Bankruptcy. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550720/ | 114 F.2d 355 (1940)
BLACK
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 9385.
Circuit Court of Appeals, Ninth Circuit.
July 27, 1940.
*356 *357 Robt. T. Jacob and Ashley Greene, both of Portland, Or., for petitioner.
Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, Edward H. Horton, and Carlton Fox, Sp. Assts. to Atty. Gen., for respondents.
Before GARRECHT, HANEY, and HEALY, Circuit Judges.
HEALY, Circuit Judge.
The case is here on petition to review an order of the Board of Tax Appeals assessing deficiencies in petitioner's income taxes for the years 1934 and 1935.
Petitioner was married in 1901. Thereafter until 1915 he lived with his wife in Pomeroy, Washington, at which time the couple removed to Oregon where they have since resided.
In 1910 petitioner and his brother each inherited from their father an undivided one quarter interest in 3,400 acres of farm land in Garfield County, Washington. In 1931 they acquired, by deed from their mother, an undivided one half interest in part of the land, and upon the mother's death in 1932 they inherited her remaining interest. In 1911 the brothers entered into an oral agreement of partnership and have since operated the tract under a partnership name. Profits and losses were shared equally between them, and each in alternate years managed the property.
The land was leased to tenants on shares. Upon the sale of the partnership's share of the crops the proceeds were deposited in bank in a partnership account. As the profits were divided, petitioner placed his share in a joint bank account kept by himself and wife.
Between 1898 and 1929 petitioner acquired other lands in Washington and Idaho which he managed alone.
In 1933 petitioner and his wife executed a written agreement by which they undertook to convert into community property all property of whatever nature then owned by them or thereafter to be acquired. The instrument was acknowledged and recorded in Garfield County, Washington.
In the tax year 1934 the partnership had a net income from the Washington property operated by it, half of which was distributed to petitioner. Petitioner also had net income from his other real estate in Washington and Idaho operated by him individually. Likewise in 1935 he had income from the same sources, plus income from "partnership land sold separately." For those years petitioner and his wife treated the income as community income and filed separate returns. The Commissioner assessed deficiencies, holding that the entire income was taxable as the separate property of the petitioner.
The Board upheld the Commissioner. It did not dispute the proposition that the agreement mentioned had the effect of converting petitioner's separate property into community property, but held that since the partnership interest was itself personalty, and hence not subject to Washington law, the agreement "was an attempt to import into Oregon [a non-community property state] as the law controlling the ownership of personal property in that state a kind of tenure not recognized there." Accordingly the 1933 agreement was held ineffective to stamp the income as community income.
In its opinion the Board took no note of those items of income derived from the land operated by petitioner individually or of the item received from the separate sale of a part of the land operated by the partnership.
1. The sufficiency of the 1933 agreement to effect the object of the parties is gauged by the laws of the situs of the land. "The effect of marriage upon an interest in land acquired by either or both of the spouses during coverture is determined by the law of the state where the land is." Restatement, Conflicts, § 283. See also, Beale, Conflict of Laws, Vol. 2, § 283.1, pp. 952-953; 11 Am.Jur. 182; Rush v. Landers, 107 La. 549, 32 So. 95, 57 L.R.A. 353. And in Volz v. Zang, 113 Wash. 378, 194 P. 409, it was held that an instrument identical in form with the one here involved effected a conversion of separate into community property. Compare United States v. Goodyear, 9 Cir., 99 F.2d 523. It follows that the 1933 instrument had like effect, and petitioner's wife thereafter had a vested community interest in the land and in the rents and proceeds therefrom.
The situation is not altered by the fact that the parties were domiciled in Oregon. The Washington laws control the status of property acquired there during coverture in the case of non-resident as *358 well as resident married persons.[1] Gratton v. Weber, C.C., 47 F. 852. See particularly discussion in Hammonds v. Commissioner, cited in the note.
In respect of the Idaho lands we think the same situation obtains.[2]
2. Under these circumstances, may income from the property be divided by petitioner and his wife and reported as community income?
While the problem depends upon the construction of the federal revenue acts and is thus not primarily one of the state law (Morgan v. Commissioner, 309 U.S. 78, 80, 60 S.Ct. 424, 84 L.Ed. 585; Burnet v. Harmel, 287 U.S. 103, 110, 53 S.Ct. 74, 77 L.Ed. 199), it is true, as a general proposition, that the federal income tax is imposed upon the owner of the income; and the right of husband and wife to file separate returns, each reporting half of the community income, is present if each owns the income he reports. Poe v. Seaborn, 282 U. S. 101, 51 S.Ct. 58, 75 L.Ed. 239; Goodell v. Koch, 282 U.S. 118, 51 S.Ct. 62, 75 L.Ed. 247; Hopkins v. Bacon, 282 U.S. 122, 51 S.Ct. 62, 75 L.Ed. 249; Bender v. Pfaff, 282 U.S. 127, 51 S.Ct. 64, 75 L.Ed. 252; United States v. Malcolm, 282 U.S. 792, 51 S.Ct. 184, 75 L.Ed. 714. Cf. Lang v. Commissioner, 304 U.S. 264, 58 S.Ct. 880, 82 L. Ed. 1331, 118 A.L.R. 319. The rule is based upon the interpretation of the phrase "net income of every individual," appearing in all revenue acts since 1919. Poe v. Seaborn, supra. "State law creates legal interests and rights. The federal revenue acts designate what interests or rights, so created, shall be taxed." Morgan v. Commissioner, supra [309 U.S. 78, 60 S.Ct. 426, 84 L.Ed. 585].
A consideration of the many cases bearing on this subject would serve merely to lengthen the opinion. This court has consistently upheld the proposition that where married persons, domiciled in a community property state, make an agreement, valid under the local law, whereby the future earnings of each shall not become community property, but shall remain the separate property of the recipient, such agreement will be recognized in applying the federal income tax law. Helvering v. Hickman, 9 Cir., 70 F.2d 985; Van Every v. Commissioner, 9 Cir., 108 F.2d 650; Sparkman v. Commissioner, 9 Cir., 112 F.2d 774.
The present case is distinguishable from Lucas v. Earl, 281 U.S. 111, 50 S.Ct. 241, 74 L.Ed. 731, since we are here dealing with an agreement between the spouses as it affected the status of the property from which the income was derived. The distinction between an agreement relating to future earnings, or other income, and one which affects the title to property which may later produce income, has been stated by this court in Anderson v. Commissioner, 9 Cir., 78 F.2d 636, 639. See also, Paul and Mertens, Law of Federal Income Taxation, 1939 Cum.Supp. § 53, 42, pp. 2609-2611; Magill, Taxable Income, Chap. 8, pp. 248-292; Bullis v. Comm'r, 32 B.T.A. 501. United States v. Goodyear, 9 Cir., 99 F.2d 523.
3. Since petitioner and his brother owned undivided interests in the realty, it was doubtless convenient for them to operate it as partners. But the partnership did not own the land. It is not thought that the agreement to convert into community property land theretofore separately owned was any less effective because of the existence of the partnership. And, under local law, the partnership arrangement did not of itself deprive the wife of her vested community interest, either in the land or in the income. Rucker v. Blair, 9 Cir., 32 F.2d 222.
While for certain purposes petitioner's interest in the partnership is to be regarded as personal property, we are unable to see any significance in the fact so far as concerns the disposition to be made of the case. The income from the community *359 land was personal property, certainly, but its status as community property is not altered by the circumstance that the spouses were domiciled in a non-community state. Compare Johnson v. Commissioner, 8 Cir., 88 F.2d 952; Id., 8 Cir., 105 F.2d 454; Hammonds v. Commissioner, supra, note 1.
Here the partnership filed the usual information returns, but it paid, and was required to pay, no tax. Individuals carrying on business in partnership are liable for income taxes in their individual capacity only. Sec. 181, Revenue Act of 1934, c. 277, 48 Stat. 680, 730, 26 U.S.C.A.Int.Rev. Acts, p. 728. Each partner, in computing his net income, is required by Sec. 182 of the act, 26 U.S.C.A.Int.Rev.Acts, p. 728, to report his distributive share of the net income of the partnership, whether distributed to him or not.
In view of the language of the statute, we are not disposed to interpret it as meaning that the entire amount of income distributable to a partner is taxable to him, even though half of it is owned by his wife. The better interpretation of the provisions referred to would seem to be that, in cases involving community income, the tax is imposed on the individual partner to the extent only of his ownership of the income. Compare Blair v. Commissioner, 300 U.S. 5, 12, 57 S.Ct. 330, 81 L.Ed. 465. This seems to be the Commissioner's construction, since Art. 182-1, Regulations 86, promulgated under the 1934 act direct that "if separate returns are made by the husband and wife domiciled in a community property state, and the husband only is a member of a partnership, that part of his distributive share of the partnership's net income which is community property should be reported by the husband and by the wife in equal proportions."
The view taken is not, we think, inconsistent with Burnet v. Leininger, 285 U.S. 136, 141, 53 S.Ct. 345, 76 L.Ed. 665. In that case there had been no transfer of the partnership assets but a mere assignment of part of the distributive share of the partner.
In Rucker v. Blair, supra, a case from this circuit, the taxpayer and another had entered into a partnership venture in Washington upon borrowed capital represented by notes signed by the partners for the firm. It was held that, under the laws of Washington, the taxpayer's distributive share of the partnership income was community property, returnable under the revenue act of 1926, one-half by the taxpayer and one-half by his wife. "There is," said the court, "no alchemy in the term `partnership' or in the relation it imports, and contributions of community funds to a joint or partnership enterprise are not ipso facto converted into separate property. We are concerned with the status of the property invested, not with the form in which it was held." [32 F.2d 224.]
The Commissioner claims that part, at least, of the partnership income was attributable to the personal services of the taxpayer as manager. Assuming that to be true, the portion of the income attributable to petitioner's services would necessarily be separate property, taxable to petitioner alone, since the status of earnings is controlled by the law of the domicile. Blumenthal v. Commissioner, 2 Cir., 60 F.2d 715, certiorari denied 287 U.S. 662, 53 S.Ct. 220, 77 L.Ed. 571; Paul and Mertens, Law of Federal Income Taxation, Vol. 2, pp. 61, 62. The same observation applies to the income from petitioner's lands not operated by the partnership. Naturally the taxpayer has the burden of proving, if he can, what portion of the income is attributable to the land itself. Johnson v. Commissioner, supra. Since the Board made no finding on this subject, the case must be remanded so that it may be ascertained to what extent, if any, the income represents personal earnings.
We think, despite procedural arguments of the Commissioner, that the Board was sufficiently apprised of the contention of the taxpayer relative to income from the land other than that operated by the partnership. The Board made separate findings as to these items. Any uncertainty with respect to this phase of the case may be clarified upon further hearing.
The order is reversed and the case remanded for further proceedings not inconsistent with this opinion.
HANEY, Circuit Judge (dissenting).
I think the majority misconceive the real point in this case. Dissertations on the law of community property are of little value here, if it is not applicable. The real issue here is: is the law of Washington, a community property state, applicable, or, is *360 the law of Oregon, a non-community property state, applicable?
The permission to divide the husband's income between the husband and wife in community property states, was probably one of the greatest discriminations against the people of 85% of the states in the union that has recently occurred. Estimates of the loss to the government vary from $9,000,000 to $60,000,000 annually. See Hearings before a Subcommittee of the Committee on Ways and Means, House Of Representatives, 73rd Cong., 2nd Sess., on H. R. 8396, pp. 2, 5, 11, 12, 48, 78. An annual loss of $10,000,000 for 20 years is two hundred millions of dollars. The indications are that the loss has been much greater. The people in the remaining 85% of the states have had to bear the brunt of such patent discrimination. If we are to uphold petitioner here, then there seems to be no reason why all people in non-community property states cannot take advantage of the precedent thus announced a catastrophe to government finances.
The basis for a tax on income has been uniformly stated in the various income tax acts as the "net income of every individual". (Italics supplied). It can be seen, therefore, that the question is whether the income is income "of" the husband, alone, or income "of" both the husband and wife as a community. Such question is determined differently according to whether ownership is determined by the law of a community property estate, or by the law of 85% of the states which have no community property system. It is apparent that the determination of the question is actually a determination of the question as to which of these two groups of rules should apply.
In United States v. Robbins, 269 U.S. 315, 327, 46 S.Ct. 148, 149, 70 L.Ed. 285, the guide was given as follows: "* * * Even if we * * * assume that the wife had an interest in the community income that Congress could tax if so minded, it does not follow that Congress could not tax the husband for the whole. * * *" Notwithstanding such clear implication, when the question as to the taxability of community income was presented to the Supreme Court, we find that the Commissioner had conceded away his case. The answer to the determining question was never made, and the necessity therefor was obviated by a concession, shown to have been made in Poe v. Seaborn, 282 U.S. 101, 110, 51 S.Ct. 58, 75 L.Ed. 239, as follows: "The Commissioner concedes that the answer to the question involved in the cause must be found in the provisions of the law of the State [of Washington a community property state]."
Based upon that concession, the Supreme Court held that the husband in his individual return need include only one-half of the community net income. See, also, Goodell v. Koch, 282 U.S. 118, 51 S.Ct. 62, 75 L.Ed. 247; Hopkins v. Bacon, 282 U.S. 122, 51 S. Ct. 62, 75 L.Ed. 249; Bender v. Pfaff, 282 U.S. 127, 51 S.Ct. 64, 75 L.Ed. 252; United States v. Malcolm, 282 U.S. 792, 51 S.Ct. 184, 75 L.Ed. 714. The Supreme Court did not decide that to determine the question as to whom community income was taxable, the law of the state of the residence of the taxpayer or of the situs of the income, must be applied. In fact, the question was not presented. Moreover, in each of the cases cited, the taxpayer was a resident of the community property state in which the income was derived. That fact is absent here.
It is apparent, therefore, that the primary question to be decided here, is what law is to be applied. On that question, the parties, only by inference, have presented an argument. Petitioner contends that the income must be considered community income because the instrument made by petitioner and his wife converted all the property from which the income was derived into community property, and because most of the property, other than that operated by the partnership, was purchased with community funds. We may assume, for the purposes of this decision, that if the law of Washington is applied, then petitioner's contention is correct.
The statute simply levies taxes on the "net income of every individual" and the "surtax net income of every individual". §§ 11, 12(a, b), Revenue Act of 1934, 26 U. S.C.A.Int.Rev.Acts, page 665. By § 181, partners are taxed "only in their individual capacity", so that the question to be decided is whether or not the income in question is the income "of" petitioner. As said, that question is to be decided by determining whether the law of Washington, a community property state, or the law of *361 Oregon, and other states, non-community property states, is to be applied.
The test for determining the applicable law is stated in Burnet v. Harmel, 287 U.S. 103, 110, 53 S.Ct. 74, 77, 77 L.Ed. 199, as follows: "Here we are concerned only with the meaning and application of a statute enacted by Congress, in the exercise of its plenary power under the Constitution, to tax income. The exertion of that power is not subject to state control. It is the will of Congress which controls, and the expression of its will in legislation, in the absence of language evidencing a different purpose, is to be interpreted so as to give a uniform application to a nation-wide scheme of taxation. * * * State law may control only when the federal taxing act, by express language or necessary implication, makes its own operation dependent upon state law. * * *" See, also, Biddle v. Commissioner, 302 U.S. 573, 578, 58 S.Ct. 379, 82 L.Ed. 431; Founders General Co. v. Hoey, 300 U.S. 268, 275, 57 S.Ct. 457, 81 L.Ed. 639; Thomas v. Perkins, 301 U.S. 655, 659, 57 S.Ct. 911, 81 L.Ed. 1324.
By the levy of a tax on the net income "of" every individual, it is clear that Congress did not expressly provide that ownership of net income was determinable by any particular law. That it did not do so by implication is made clear by the cases holding that ownership was not to be determined by the law of the residence of the taxpayer or the situs of the property. Weiss v. Weiner, 279 U.S. 333, 49 S.Ct. 337, 73 L.Ed. 720; Burnet v. Harmel, supra; Lyeth v. Hoey, 305 U.S. 188, 59 S.Ct. 155, 83 L.Ed. 119, 119 A.L.R. 410. Thus, there is no compelling reason for extending this patent discrimination against the great majority of citizens of the United States by application of the device known as the community property law.
Interpreting the word "of" so as to give "a uniform application to a nationwide scheme of taxation" requires a holding that ownership of the income in question is not to be determined by the law of Washington, no matter how that law may designate it. Applying the law of the great majority of the states, including Oregon, and looking to "a uniform application to a nationwide scheme of taxation", I think that the income in question was properly includable in petitioner's return.
NOTES
[1] Although a state may well deny to non-residents the incidents of its community property laws (Conner v. Elliot, 18 How. 591, 15 L.Ed. 497), it may also extend the community property system to non-residents, at least as to lands acquired by them within the state. Hammonds v. Comm'r, 10 Cir., 106 F.2d 420; Heidenheimer v. Loring, 6 Tex.Civ.App. 560, 26 S.W. 99; 23 Tex.Jur. 146; Jacobson v. Bunker Hill & S. Mining, etc., C., 3 Idaho, Hasb., 126, 28 P. 396; Williams v. Pope Mfg. Co., 52 La.Ann. 1417, 27 So. 851, 50 L.R.A. 816, 78 Am.St.Rep. 390.
[2] Jacobson v. Bunker Hill & S. Mining Co., 3 Idaho, Hasb., 126, 28 P. 396. Ch. 9, Title 31, Idaho Code, 1932; Douglas v. Douglas, 22 Idaho 336, 125 P. 796. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550735/ | 315 Md. 526 (1989)
555 A.2d 494
STATE OF MARYLAND
v.
MARVELUS ROMULUS.
No. 111, September Term, 1988.
Court of Appeals of Maryland.
March 30, 1989.
Gwynn X. Kinsey, Jr., Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., both on brief), Baltimore, for appellant.
Lawrence G. Bohlen, Cambridge, for appellee.
Argued before ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL, JJ., and CHARLES E. ORTH, Jr., Associate Judge of the Court of Appeals (retired), Specially Assigned.
CHARLES E. ORTH, Jr., Judge, Specially Assigned.
A police officer filed a statement of charges in the District Court of Maryland sitting in Dorchester County, Maryland, charging Marvelus Romulus with three violations of the drug laws. Inasmuch as one of the offenses charged was a felony which was not subject to the jurisdiction of the District Court, Maryland Code (1974, 1984 Repl.Vol.), § 4-301 and § 4-302(a) of the Courts and Judicial Proceedings Article, the case was transmitted to the Circuit Court for Dorchester County. As the District Court statement of charges did not constitute a "charging document" for purposes of the circuit court proceeding, Maryland Rule 4-201(c), a criminal information was prepared in the Office of the State's Attorney for Dorchester County and filed with the clerk of the circuit court. The document charged Romulus with the same crimes as those in the statement of charges.
The judge assigned to try the case was "a visiting judge from Worcester County." When the case was called for trial, the judge dropped a bombshell, at least as far as the defense was concerned. He informed the State's Attorney and the defense counsel that the day before he
discovered that the criminal information in a rather serious child abuse case was not signed by the State's Attorney as is required by law, but in fact was signed by the State's Attorney's secretary....
With this knowledge he checked the criminal information charging Romulus and determined that it, too, had been signed by the secretary. He returned to his chambers in Snow Hill and researched the law. He found it to be "very clear." He was convinced by the provisions of Md.Code (1957, 1987 Repl.Vol.), Art. 27, § 592, Md.Rule 4-202(b), and Md.Code (1957, 1987 Repl.Vol.), Art. 10, § 34 and § 40(j)(3),[1] that the State's Attorney's secretary "has absolutely no authority to sign any criminal information or any other pleadings whatsoever." As a matter of fact, the judge observed
it's very clearly a violation of judicial ethics to file any pleadings unless an attorney signs it, for the simple reason that, when a pleading is filed, it also certifies as to the truthfulness of it as far as the attorney knows and so on.
The judge reiterated: "Clearly without any doubt at all a secretary is not authorized to sign such a document." He explained his concern:
[The information] is an extremely important document. This is not anything that is just a mere technicality. This is a very serious document that brings a person into court and causes them to be arrested and causes them to face criminal charges.
The judge knew that the information before him had
not been signed by the State's Attorney because I can see it is not. It's the same signature that appeared yesterday on the other criminal investigations, with the initial after the signature.
He declared: "I don't believe this is a proper document, that's the bottom line of it." The judge suggested a way to remedy the defect:
Now, if defense counsel wants to, perhaps we can recess long enough for the State's Attorney to file an amended criminal information and go to trial.
"Short of that," the judge asserted, "I don't know how we can go to trial." He indicated that he would be glad to hear from either counsel. Defense counsel's response was a motion to dismiss the charges "based upon the information which the court has just revealed, which was unknown to defense counsel prior to today." For reasons he did not articulate, the State's Attorney, who was personally prosecuting the case, was not willing to accept the judge's solution to the problem. Instead he referred the judge to the opinion of the Court of Special Appeals in In re Valita T., 75 Md. App. 156, 540 A.2d 854 (1988), a juvenile case, which he claimed held that the State's Attorney's signature or facsimile thereof can appear on a charging document and stated that "when a plea is entered, the matter is cured." There was a pause in the proceedings while the judge read the case. He then read aloud the language on which the State's Attorney relied, "found on page 164 [540 A.2d 854]." It was a quote within a quote, citing 80 C.J.S. Signatures § 7 (1953):
"In the absence of a statute prescribing the method of affixing a signature, it may be affixed in many different ways. It may be written by hand, and, generally, in the absence of a statute otherwise providing, it may be printed, stamped, typewritten, engraved, photographed or cut from one instrument and attached to another."
"However," the judge concluded, "that doesn't authorize another person to sign for the State's Attorney." He "accordingly" granted defense counsel's motion to dismiss the charges.
The State's Attorney did not give up. He noted an appeal "on behalf of the State" to the Court of Special Appeals. On our own motion, before decision by that court, we ordered the issuance of a writ of certiorari. The State asks
1. Did Romulus waive whatever objection he may have had to the manner in which the information was signed?
2. Even if the information was improperly signed did the State's Attorney's subsequent actions render it an effective charging document.
The answer to each question is "no."
I
(1)
The State looks to the Maryland Rules to support its claim that Romulus waived whatever objection he may have had to the manner in which the information was signed. Under Rule 4-252(a)(2), in the circuit court, a motion raising "[a] defect in the charging document other than its failure to show jurisdiction in the court or its failure to charge an offense" is deemed a "mandatory motion." As such it shall be filed "within 30 days after the earlier of the appearance of counsel or the first appearance of the defendant before the court ... except when discovery discloses the basis for a motion, the motion may be filed within five days after the discovery is furnished." Rule 4-252(b). If the defect is not so raised, it is "waived unless the court, for good cause shown, orders otherwise." Rule 4-252(a). The State also relies on Rule 4-202(b) which includes the provision: "A plea to the merits waives any objection that the charging document is not signed." The State urges that since Romulus had entered a plea to the merits, he thereby waived any objection regarding the signing of the criminal information. The State asserts that under the plain language of the rules, Romulus is afforded no excuse for his lack of literal compliance with them. It declaims: "Romulus unquestionably waived his objection to the signing of the information." We are not persuaded by this sophistic argument.
The Court of Appeals from time to time shall adopt rules and regulations concerning the practice and procedure in and the administration of the appellate courts and in the other courts of this State, which shall have the force of law until rescinded, changed or modified by the Court of Appeals or otherwise by law.
Md. Const. Art. IV, § 18. See Hauver v. Dorsey, 228 Md. 499, 502, 180 A.2d 475 (1962). The canons and principles which we follow in construing statutes apply equally to an interpretation of our rules. Of course, we look to the words of a rule from which its meaning may appear to be plain. "But the plain-meaning [canon] is not rigid." Kaczorowski v. City of Baltimore, 309 Md. 505, 513, 525 A.2d 628 (1987). Our rules were not adopted merely to standardize procedures, but also to reflect good common sense. See Renshaw v. State, 25 Md. App. 270, 275, 333 A.2d 363, aff'd, 276 Md. 259, 347 A.2d 219 (1975). A construction which is illogical or unreasonable, or one which is inconsistent with common sense, is to be avoided. Kaczorowski, 309 Md. at 516, 525 A.2d 628. It is illogical, unreasonable, and inconsistent with common sense to apply the literal language of our rules to find that, in the circumstances here, Romulus waived any objection to the failure of the State's Attorney to sign the criminal information. The only indication that the handwritten signature "Hugh Carter Vinson" on the information, appearing over the typed "Hugh Carter Vinson, State's Attorney for Dorchester County, Maryland," was not the actual signature of the State's Attorney is a small letter "n" crammed against the end of the last name. The same signature appears on the "Certificate of Service" appended to the criminal information. We reproduce the signatures. On the criminal information:
Hugh Carter Vinson
State's Attorney for
Dorchester County, Maryland
On the certificate of service:
Hugh Carter Vinson
State's Attorney for
Dorchester County, Maryland
The little squiggle at the end of the signature could well be taken as a part of the personalized signature of the State's Attorney. Certainly it is not so outstanding as to flag that the information was actually signed by someone other than the State's Attorney. Furthermore, that same signature, purporting to be that of the State's Attorney, appeared in like manner on other documents in the case. For example, requests to issue subpoenas, the "State's Answer to Defendant's Motion for Discovery and Inspection," acknowledgments of the receipt of notices of the date of trial, the letter of transmittal of the charging document by the State's Attorney to the circuit court clerk, all bore the signature as it appeared in the criminal information.[2] There is no suggestion that defense counsel actually knew that the criminal information was not signed by the State's Attorney until the trial judge so informed him. And the trial judge found it out by being forewarned. He compared the signature on Romulus' information with that on the informations he learned had been signed by the secretary and found them to be the same. In the circumstances here, a person could reasonably be misled into believing that the State's Attorney had personally signed the document. In short, there was no good reason why defense counsel should have known that the State's Attorney had not signed the information until the trial judge disclosed it. Defense counsel then promptly moved to dismiss the charges. On the facts of this case, our rules are not to be construed as to divest the trial judge of discretion to permit a late challenge to the signature, when, as here, that challenge is made before trial. We hold that Romulus did not waive the alleged defect in the criminal information.
(2)
The State claims that in any event the actions of the State's Attorney rendered the information an "effective charging document." It urges that "the information was subsequently adopted, approved and ratified by the State's Attorney...." It first supports this claim by pointing to a docket entry. The docket under date of 14 December 1987 reads:
Criminal Information filed by the State's Attorney for Dorchester County....
This, however, falls far short of establishing that the State's Attorney personally filed the document, and thereby indicated his approval of it, even if that would suffice. We are confident that had the secretary or anyone else in the State's Attorney's Office tendered this document to the circuit court clerk for filing, the clerk would have accepted it and made the docket entry as he did. We cannot conceive that, in the normal course of events, the clerk would have insisted that the document be presented personally by the State's Attorney or if it were not that he would note on the docket who had brought it in to be filed. We do not believe that the docket entry alone is enough to show that the State's Attorney "adopted, approved and ratified" the criminal information.
The State's second support for the claim also looks to the docket entries which indicate that the State's Attorney or one of his assistants appeared in court on matters preliminary to the trial. Also, the State points out, the State's Attorney "personally called the case for trial and presented arguments why the information was valid and should not be dismissed." By this conduct, the State concludes, the information "was rendered a fully effective charging document by the State's Attorney's implicit acknowledgement, ratification and adoption of it before the trial court." We do not agree. The State refers us to Eastern Air Lines v. Phoenix, 239 Md. 195, 210 A.2d 515 (1965), which the State indicates stands for the proposition that the absence of a signature on a pleading or similar document "may be properly cured thereafter." In that case, a majority of the Court referred with approval to the case of Canadian Bank of Commerce v. Leale, 14 Cal. App. 307, 111 P. 759 (1910), "citing many supporting authorities." 239 Md. at 206, 210 A.2d 515. Leale involved a complaint seeking recovery on a promissory note which was filed one day before the end of the period of limitation. Neither the plaintiff nor its counsel had signed the complaint. An amended complaint bearing both signatures was filed fifteen days later. The Court held that the filing of the unsigned complaint commenced the action and tolled the statute, and the omission of the signatures was an irregularity which could be cured by an amendment which related back to the original filing. Id. The proper way to cure any defect in the information by reason of the failure of the State's Attorney to sign it, as Eastern Air Lines indicated and the trial judge here suggested, was for the State's Attorney to amend the complaint by signing it. See Md. Rule 4-204. Instead, the State's Attorney rejected this obvious solution and opted to stand fast on his belief that the information was not defective. The State now adopts a fallback position that even if the information were defective, his conduct cured the defect. We are not persuaded by the notion that the State's Attorney's willingness to proceed with the prosecution under the defective information accomplished this. We say again that the effective way to still the troubled waters was for the State's Attorney simply to follow the judge's suggestion and sign the information.
II
Our discussion thus far has been on the assumption, arguendo, that the criminal information was defective because it was improperly signed. The State, in its approach to the second question, suggests that, in fact, the information was not improperly signed, but, even if it were, the irregularity was not such as to render the document null and void. Therefore, the defect was susceptible of being cured. Romulus, on the other hand, claims that since the information was not signed as required by law, the document was null and void, and it may not be enlivened by any means.
The office of State's Attorney is a constitutional office. The Maryland Constitution Art. V, § 7 declares:
There shall be an Attorney for the State in each county and the City of Baltimore, to be styled "The State's Attorney"....[[3]]
See Murphy v. Yates, 276 Md. 475, 488, 348 A.2d 837 (1975). "A `State's Attorney' means a person authorized to prosecute an offense." Md.Rule 4-102(j). A State's Attorney must have been admitted to practice law in this State. Md. Const. Art. V, § 10. He "shall perform such duties ... as shall be prescribed by the General Assembly." Id. § 9. But there is little specificity in the enumeration of those duties.
In Maryland, the powers of the State's Attorneys are nowhere specifically enumerated and defined ... with the result that our State's Attorneys are vested with the broadest official discretion.
Murphy v. Yates, 276 Md. at 489, 348 A.2d 837 (citation omitted). Maryland Code (1957, 1987 Repl.Vol.), Art. 10, § 34, however, states:
The State's attorney for each county and the City of Baltimore shall, in such county or city, prosecute and defend, on the part of the State, all cases in which the State may be interested....
In the performance of that duty, Md.Rule 4-202(b), which as we have seen has the force of law, requires that a criminal information be signed by the State's Attorney, or if not signed by him, it must be signed by a person "authorized by law to do so." In Dorchester County, the State's Attorney's duly appointed assistants are authorized by law to sign informations inasmuch as they "shall present ... cases to the Dorchester County grand jury and perform such other acts and duties in relation to the grand jury, Circuit and District Court sitting in Dorchester County, as deemed necessary." Md.Code, Art. 10, § 40(j)(3).
Furthermore, Md.Rule 1-311(a) requires that
[e]very pleading ... of a party represented by an attorney shall be signed by at least one attorney who has been admitted to practice in this State....
See Attorney Griev. Comm'n v. Goldberg, 292 Md. 650, 657-658, 441 A.2d 338 (1982). Rule 1-202(r) makes a charging document as used in Title 4 of the Rules a pleading. A charging document under Title 4 embraces an information. Rule 4-102(a). Rule 1-311(b) spells out the effect of a signature on a pleading:
The signature of an attorney on a pleading ... constitutes a certification that the attorney has read the pleading ...; that to the best of the attorney's knowledge, information and belief there is good ground to support it; and that it is not interposed for improper purpose or delay.
We conclude that the Maryland Constitution, the relevant statutes, and the appropriate Maryland Rules, considered together, do not contemplate that the broad discretion which a State's Attorney enjoys goes so far as to enable him to permit his secretary to sign a criminal information, even in his name. Nowhere is authority to that effect expressed or implied. On the contrary, in the light of the limitation on the eligibility for the office of State's Attorney, the prescriptions as to who shall[4] sign the information, and the enunciation of the effect of the signature, we find it to be clear that a secretary is not a person authorized by law to sign the document. It follows that a criminal information must be signed by a State's Attorney as defined by Md.Rule 4-102(j). This is not to say, however, that a facsimile signature of one of those persons will not suffice.[5]
We hold that the criminal information here did not meet the requirements of the rule.
Although the information here was defective because of the failure of a person authorized by law to sign it, it was not thereby rendered null and void. The issue was resolved in Eastern Air Lines, 239 Md. 195, 210 A.2d 515. In that case a majority of this Court, following the weight of authority, applied the principle that
the absence of a signature to a pleading does not make it void or a nullity but only irregular.
Id. at 206, 210 A.2d 515. This view is supported by the sanctions imposed by Rule 1-311(c) for failure to sign a pleading as required. Paragraph (c), declaring that the pleading "may be stricken ...," furnishes clear indication that a pleading is not a nullity because of the lack of a proper signature (emphasis added). So, in Maryland, the omission of a required signature from a pleading is considered a mere irregularity or formal defect which can be remedied.
III
We deem it advisable to point out that a defendant is not entitled to relief under the Maryland Post Conviction Procedure Act, Md.Code, Art. 27, § 645A because of the failure of a person authorized by law to sign an information. There must be a point of finality in any criminal prosecution and with respect to an information defective for the reason here, we think that the fair point of finality is reached when the trial on the merits has been concluded. The defect in the information is not one of constitutional dimension. It does not fall within one of those "situations where the courts have required an `intelligent and knowing' standard [for a waiver]." Curtis v. State, 284 Md. 132, 148, 395 A.2d 464 (1978). Therefore, the "intelligent and knowing" waiver standard called for by § 645A(c) of the Post Conviction Act is not brought into play. Id. Judge Eldridge, writing for the Court in Curtis, found that
[i]t has repeatedly been recognized that the word "waiver" itself is ambiguous, susceptible to numerous meanings depending upon the particular context in which it is used.
Id., 284 Md. at 141, 395 A.2d 464. "Each case must be decided on the facts peculiar to it." Id., quoting United States v. Chichester, 312 F.2d 275, 281 (9th Cir.1963). The short of it is, that in the context of an information defective because of an improper signature, when judgment of conviction and sentence has been duly entered in a case without the issue being raised, the defendant is conclusively presumed to have waived the issue. Cf. 5 A.L.R.Fed. § 2(b) at 924-925.
JUDGMENT OF THE CIRCUIT COURT FOR DORCHESTER COUNTY AFFIRMED;
COSTS TO BE PAID BY DORCHESTER COUNTY.
ADKINS, Judge, concurring.
I agree with the result in this case and with virtually all the reasoning explaining that result. My only real quarrel with the majority is produced by its statement that a secretary may not sign the State's Attorney's name to a criminal information.
Of course, a secretary is not a person who is authorized by rule or by statute to sign his or her own name to a charging document. But if a facsimile signature of a person so authorized is sufficient, I do not see why it cannot be permissible for a secretary to sign the name of the authorized person as well.
Rule 4-202(b)'s requirement that an indictment or information "be signed by the State's Attorney of a county or by any other person authorized by law to do so" is not imposed merely to assure that a proper signature is appended to a piece of paper. The ink marks that constitute the signature are not what is important. Those ink marks are intended to be symbolic of something more fundamental. They certify that an authorized person has reviewed the document and has found it to be correct in form and substantiated by facts, or at least that the person is willing to assume responsibility for so representing. This fundamental purpose is reflected in Rule 1-311(b), which explains that a lawyer's signature on a pleading verifies that "the attorney has read the pleading ...; that to the best of the attorney's knowledge, information, and belief there is good ground to support it; and that it is not interposed for improper purpose or delay." As the majority notes, a charging document is a pleading, Rule 1-202(r), and thus is subject to Rule 1-311(b).
If a State's Attorney, deputy State's Attorney, or assistant State's Attorney has read a charging document and concludes that the requirements of Rule 1-311(b) have been met, the basic purposes of the rule its screening and accountability functions have been satisfied. Under these circumstances, I see no reason why the lawyer could not authorize his or her secretary to sign a charging document in the lawyer's name after ascertaining that the document is in proper form and that the charges are appropriate, based on the evidence in the case. Of course, the same effect would be produced if the lawyer, having reviewed the document in light of Rule 1-311(b), and having satisfied him or herself that its requirements were met, simply directed the secretary to affix the lawyer's name via a rubber stamp facsimile of the signature. In a situation such as this, the State's Attorney's signature, written by the secretary, is the functional equivalent of the State's Attorney's facsimile signature and in no way offends the policy of either Rule 1-311 or Rule 4-202(b).[1]
In In re Valita T., 75 Md. App. 156, 164, 540 A.2d 854, 858 (1988), the Court of Special Appeals held that a preprinted facsimile of the State's Attorney's signature did not violate the requirement of Rules 1-311 and 4-202(b) when the State's Attorney "approved and adopted the pre-printed signature as his own legitimate signature." There is no reason why that approval may not come before the signature is affixed, as the majority appears to recognize. See 80 C.J.S. Signatures § 6, at 1291 (1953) ("Generally, a signature may be made for a person by the hand of another, acting ... at his direction") [footnotes omitted].
Of course, when a charging document has been signed in the manner I have suggested, a question may arise as to whether the secretary was in fact authorized to sign the State's Attorney's name. I suppose a similar question might arise if the secretary affixed a facsimile signature of the State's Attorney. If that question should be raised, it would first be faced with the strong presumption, recognized by the majority, that public officers properly perform their duties. Schowgurow v. State, 240 Md. 121, 126, 213 A.2d 475, 479 (1965). Should that presumption be sufficiently rebutted, as it was in this case, the burden would then be upon the State to come forward with evidence to demonstrate the grant of authority to the secretary. Were the authority shown to the satisfaction of the court, the charging document would be sufficient; were it not shown, dismissal ordinarily would be required.[2]
It seems to me that this view of matters offends no policy of statute or of rule and produces a common sense and workable process that facilitates the proper handling of large numbers of documents that require authenticating signatures. I see no reason to restrict the signing requirement as narrowly as the majority has.
NOTES
[1] The trial judge did not mention the sections of Article 10 which he relied on but it appears that the above sections may be appropriate.
[2] Some pleadings over what was purported to be the signature of an assistant State's Attorney appeared to have been actually signed by the assistant State's Attorney.
[3] For a comprehensive history of the office of State's Attorney and a discussion of the duties of a State's Attorney, see Murphy v. Yates, 276 Md. 475, 480-496, 348 A.2d 837 (1975). See also, Babbitt v. State, 294 Md. 134, 137-140, 448 A.2d 930 (1982), which discusses the power of the court to appoint temporary officers when necessary for the conduct of a specific proceeding.
[4] See Md.Rule 1-201(a).
[5] A facsimile signature is one produced by mechanical means but recognized as valid by law for many transactions. Webster's Third International Dictionary of the English Language Unabridged 813 (1981).
[1] The authority to sign the State's Attorney's name or to affix a facsimile signature could be express as to a specific document or could be pursuant to general office practice e.g., a policy stating that all charging documents in the State's Attorney's out basket have been reviewed by that official and that a secretary may affix the official's signature (by facsimile or otherwise) to those documents.
[2] No evidence was presented in this case regarding the secretary's authority to sign the name of the State's Attorney. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550549/ | 229 B.R. 489 (1998)
In re Efrain FELIPE and Maria Felipe, Debtors.
Bankruptcy No. 98-24571-BKC-PGH.
United States Bankruptcy Court, S.D. Florida, Fort Lauderdale Division.
November 10, 1998.
Michael J. Brooks, North Miami, FL, for Debtors.
Patricia Ecker Gleason, Patricia E. Gleason, P.A., Hollywood, FL.
Michael Frank, North Miami, FL.
Robin R. Weiner, Fort Lauderdale, FL, Standing Chapter 13 Trustee.
MEMORANDUM DECISION AND ORDER DENYING CONFIRMATION OF DEBTORS' FIRST AMENDED CHAPTER 13 PLAN
PAUL G. HYMAN, Jr., Bankruptcy Judge.
THIS MATTER came before the Court on October 13, 1998, upon Mr. C's Auto Sales of Hollywood, L.C.'s ("Mr. C's") Objection to Confirmation of Efrain and Maria Felipe's *490 (the "Debtors") First Amended Chapter 13 Plan (the "Objection to Confirmation"). At the Confirmation Hearing on October 13, 1998, the Court instructed Mr. C's and Debtors to submit to the Court Memoranda of Law in Support of their respective positions on the Objection to Confirmation. After reviewing the Objection to Confirmation, Mr. C's Memorandum of Law and Affidavit of Dana Ross-Cohen in support thereof, and the Debtors' Memorandum of Law in Opposition to the Objection to Confirmation, the Court, being fully advised in the premises, hereby enters the following findings of fact and conclusions of law.
FINDINGS OF FACT
Mr. C's is a Florida limited liability corporation which sells used vehicles to "high risk" borrowers, typically, persons with poor credit history and/or borrowers who cannot obtain loans at conventional market rates. In order to determine the appropriate interest rate for a vehicle sale, Mr. C's evaluates the collateral, the loan-to-value ratio, the borrower's credit report, the borrower's payment history and the borrower's income.
On January 31, 1998, the Debtors executed a contract (the "Contract") for the purchase of a 1992 Ford Ranger Truck, VIN 1FTCR10A6NUC69671 (the "Truck"), from Mr. C's. The Debtors' credit report contained information that they were repeatedly late in paying their mortgage to Chase Manhattan Mortgage Corporation, repeatedly late in paying their Providian credit card, which was ultimately charged off, and were repeatedly late in making payments to Affiliated Financial.
Pursuant to the Contract, the Debtors were to pay the principal sum of $7,581.93 for the Truck. The terms of payment were $1,225.00 down and the balance of $6,382.13 was financed at 30.758% A.P.R. Forty-one payments in the amount of $195.00 were to be made every other week, with one final payment of $124.43, for a total sales price of $9,344.43. The sales price included the cost of the license plate and sales tax paid.
On June 30, 1998, Debtors filed a petition under Chapter 13 of the Bankruptcy Code. At the time of the filing, the Debtors were delinquent in their payments to Chase Manhattan Mortgage Corporation ("Chase") which has a first mortgage on the Debtors' homestead property, Mercury Finance which holds a security interest in the Debtors' 1994 Toyota Corolla, and Mr. C's which holds a security interest in the Truck. The Debtors in their First Amended Chapter 13 Plan propose to pay Mr. C's the principal sum of $5,000.00, at a rate of 8.00%, over a term of 58 months. In the Objection to Confirmation, Mr. C's claims that the proper interest rate should be based on Mr. C's current market rate of interest for similar loans in South Florida, which would be 29.6684%, payable $125.00 bi-weekly (or $250.00 per month) for a term of twenty-seven months.
Mr. C's and the Debtors stipulate and agree that the current value of the Truck is $5,000.00. The Parties also stipulate and agree that the average market interest rates charged by conventional lenders in South Florida for automobile loans range from 8.00% to 12.00% depending on the credit worthiness of the borrower. However, these same lenders do not lend money for the purchase of used vehicles more than five (5) years old. The Truck is more than five (5) years old, and therefore, the Debtors would not be able to qualify for conventional financing.
The sole issue before this Court is the determination of the appropriate interest rate for Mr. C's secured claim pursuant to 11 U.S.C. § 1325(a)(5)(B)(ii).
CONCLUSIONS OF LAW
This Court has jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L). As this is a case involving the Confirmation of a Chapter 13 plan and the valuation of a secured claim, the Court must look to 11 U.S.C. § 1325(a)(5)(B)(ii) for guidance. Section 1325(a)(5)(B)(ii) provides in pertinent part:
(a) Except as provided in subsection (b), the court shall confirm a plan if
(5) with respect to each allowed secured claim provided for by the plan
*491 (B)(ii) the value as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim[.]
Under Chapter 13, the secured creditor is not permitted to repossess and foreclose on its security interest. See In re Valenti, 105 F.3d 55, 58 (2d Cir.1997). The debtor instead has the option of either surrendering the property to the secured creditor or maintaining possession of the property. See id. If the debtor decides to maintain possession, the secured creditor retains its security interest and the debtor's reorganization plan must provide for payments to this secured creditor totaling no less than the present value of the secured creditor's allowed claim. See id. To insure payment of the present value as of the plan's effective date, Chapter 13 plan payments must incorporate an appropriate discount interest rate. See id. When, as in the instant case, the debtor attempts to have the Chapter 13 plan confirmed that provides for an interest rate that is lower than the interest rate in the original financing agreement, over the objection of the secured creditor, the plan is colloquially referred to as a "cramdown." See id.
There are no reported cases in the Eleventh Circuit or the Southern District of Florida that set the standard for determining the "current market rates" of interest for secured claims pursuant to 11 U.S.C. § 1325(a)(5)(B)(ii) in Chapter 13 cramdown situations. This Court therefore looks to the Eleventh Circuit's interpretation of similar provisions of the Bankruptcy Code. The present value language of 11 U.S.C. § 1325(a)(5)(B)(ii) is virtually identical to the present value language set forth in 11 U.S.C. § 1129(a)(9)(C).[1] In United States v. Southern States Motor Inns, Inc. (In the Matter of Southern States Motor Inns, Inc.), 709 F.2d 647, 652-653 (11th Cir.1983), cert. denied 465 U.S. 1022, 104 S.Ct. 1275, 79 L.Ed.2d 680 (1984), the Eleventh Circuit construed this latter provision in the context of a Chapter 11 reorganization case concerning the appropriate interest rate for deferred payments of delinquent federal taxes:
We believe Congress intended that creditors required to accept deferred payments pursuant to § 1129(a)(9)(C) should be placed in as good a position as they would have been had the present value of their claims been paid immediately. Consequently, we hold that the interest rate to be used in computing the present value of a claim pursuant to § 1129(a)(9)(C) should be the current market rate without any reduction for the `rehabilitation aspects' of the plan.
Southern States, 709 F.2d at 652-53. The Eleventh Circuit, citing 5 COLLIER ON BANKRUPTCY ¶ 1129.03, at 1129-65 (15th ed.1982), listed certain factors which should be considered when determining the market rate of interest:
The appropriate discount [interest] rate must be determined on the basis of the rate of interest which is reasonable in light of the risks involved. Thus, in determining the discount [interest] rate, the court must consider the prevailing market rate for a loan of a term equal to the payout period, with due consideration of the quality of the security and the risk of subsequent default.
Id. at 651. The court, in dicta, then endorsed the "coerced loan" approach as the method to determine the "current market *492 rate" of interest: "deferred payment of a claim under § 1129 is a coerced loan and the rate of return with respect to such loan must correspond to the rate which would be charged or obtained by the creditor making a loan to a third party with similar terms, duration, collateral and risk." Id. at 652 n. 7 (citing 15 COLLIER ON BANKRUPTCY ¶ 1129.03, at 1129-62, 63). The Court went on to state that when determining the "current market rate" of interest, "the debtor's ability to pay . . . is irrelevant when the question is whether the plan provides for payment of the present value of a creditor's claim as required by § 1129(a)(9)(C)." Id. at 653 n. 9. Furthermore, the Court noted that
in In re Benford, [14 B.R. 157, 161 (Bankr. W.D.Ky.1981)], a Chapter 13 case construing language identical to that found in § 1129(a)(9)(C) "[t]he statute reads `value as of the effective date of the plan'; it does not read `value, as of the effective date of the plan, but subject to reduction depending on the debtor's ability to pay.'"
Id. at 652. The Eleventh Circuit in Southern States therefore held that the "current market rate" of interest shall be determined by the "coerced loan" approach, whereby a court must look to interest rates charged by the creditor making a loan to a third party with similar terms, duration, collateral, and risk.
The "coerced loan" approach to determining the "current market rate" of interest represents the dominant view among the Circuits. See Green Tree Financial Servicing Corporation v. Smithwick (Matter of Smithwick), 121 F.3d 211 (5th Cir.1997), cert. denied ___ U.S. ___, 118 S.Ct. 1516, 140 L.Ed.2d 669 (1998); GMAC v. Jones, 999 F.2d 63 (3rd Cir.1993); United Carolina Bank v. Hall, 993 F.2d 1126, 1131 (4th Cir. 1993); Hardzog v. Federal Land Bank (In re Hardzog), 901 F.2d 858 (10th Cir.1990); Memphis Bank & Trust Co. v. Whitman, 692 F.2d 427, 431 (6th Cir.1982). In Hardzog, the Tenth Circuit adopted the "coerced loan" approach for determining the "current market rate" of interest in Chapter 12 cases, holding that "Bankruptcy Courts should use the current market rate of interest used for similar loans in the region." 901 F.2d at 860. The court explained that 11 U.S.C. § 1225(a)(5)(B)(ii) is predicated on the theory that the lender is making a new loan to the debtor. "It therefore follows that the most appropriate interest rate is the current market rate for similar loans made in the region at the time the new loan is made." Id. In two recent bankruptcy cases in the Tenth Circuit, In re Oglesby, 221 B.R. 515 (Bankr. D.Colo.1998) and In re Segura, 218 B.R. 166 (Bankr.N.D.Okl.1998), the courts extensively discuss and apply the "coerced loan" approach of Hardzog.
The facts in Oglesby are almost identical to the facts in the instant case. In Oglesby, the court consolidated two Chapter 13 cases wherein the debtors sought to "cramdown" the contract interest rates charged by secured creditors on automobile loans. The contract rates were 20.19% and 21.00% respectively. The debtors proposed to reduce the interest rate to 9.00% in their plans. The secured creditors filed objections to confirmation of the plans. The secured creditors in Oglesby, like Mr. C's in the instant case, routinely extended credit to high risk borrowers, or persons with poor credit histories, who could not qualify for conventional financing. The Oglesby Court adopted the "coerced loan" approach and held that
[t]he Tenth Circuit requires that the current market rate reflect the rates used in similar loans in the region. This Court will equate "similar" loan with a loan that the creditor regularly extends to other borrowers who are not in bankruptcy but who are otherwise similarly situated to the debtor. This Court believes that this will be best exemplified by the actual, average rate charged by a particular creditor on loans it has recently and routinely extended to similarly situated borrowers in comparable transactions in this region.
Id. at 524. The court ultimately found that the contract rates were equal to the average interest rates charged by these secured creditors over the past three to four months and used the contract rates of 20.19% and 21.00% respectively as the appropriate capitalization rates in the plans. See id.
Similarly, the court in Segura adopted the "coerced loan" approach in a similar chapter 13 cramdown case. See Segura, 218 B.R. at *493 175-76. In Segura, the lender, like Mr. C's in the instant case, made it a practice to finance used automobile purchases for "high risk" borrowers. See id. at 169. The lender objected to the debtor/borrower's chapter 13 plan because it provided for a discount rate that the lender did not believe would provide it with the present value of its allowed secured claim. The issue before the court in Segura, then, was what discount rate would insure that the lender receive the present value of its allowed secured claim. The court, after discussing at length other cases including Hardzog that addressed the chapter 13 cramdown interest rate issue, concluded that
the proper starting point for a cramdown interest rate is the "current market rate for similar loans made in the region at the time the new loan is made" where "similar loan" means a loan by the particular secured creditor to a borrower with a credit record similar to that of the debtor at the time the original loan was made, and "current market rate" is the rate at which the particular creditor charges for such "similar loans" in the region, as of the effective date of the plan.
Id. at 175-76. Furthermore, the Third Circuit in Jones, 999 F.2d 63, one of the cases discussed in Segura, also adopted the "coerced loan" approach and held that
because the effect of the instant cramdowns was to force GMAC to extend loans to appellees for the duration of the plans, we hold that the appropriate interest rate under § 1325(a)(5)(B)(ii) is the interest rate that GMAC would charge at the time of the effective date of the plans, for a loan of similar character, amount and duration.
Id. at 70. In an effort to eliminate further litigation over the issue of "current market rates" of interest, the Third Circuit in Jones proposed a rebuttable presumption approach to chapter 13 cramdown cases:
We conclude that it would be consistent with the statutory objective and would reduce litigation expenses if we imposed an additional rule of practice in this area. The contract rate of interest is, of course, the rate that the creditor voluntarily agreed to accept at an earlier date. While in some cases the passage of time will have seen a material increase or decrease in the lending rate of the creditor, the contract rate is the fair place to begin. In the absence of a stipulation regarding the creditor's current rate for a loan of similar character, amount and duration, we believe it would be appropriate for bankruptcy courts to accept a plan utilizing the contract rate if the creditor fails to come forward with persuasive evidence that its current interest rate is in excess of the contract rate. Conversely, utilizing the same rebuttable presumption approach, if a debtor proposes a plan with a rate less than the contract rate, it would be appropriate, in the absence of a stipulation, for a bankruptcy court to require the debtor to come forward with some evidence that the creditor's current rate is less than the contract rate.
Id. at 71-72; See also Smithwick, 121 F.3d 211 (adopting the rebuttable presumption approach of the Third Circuit).
The Fourth Circuit and the Sixth Circuit have also adopted the "coerced loan" approach in Chapter 13 cramdown situations. In Hall, 993 F.2d at 1131, the Fourth Circuit held that
we adopt a rule that looks to the secured creditor's lending market in determining what rate of interest best provides the secured creditor with its present value, taking into account not only the rates which it obtains from similar loans in the area but also its expenses in obtaining these loans, either by its own underwriting or in its purchases from dealers.
Moreover, the Sixth Circuit in Whitman, 692 F.2d at 431 decided that
[r]ather than tying the interest rate to an arbitrary ten percent rate, the Bankruptcy Court's solution, or some other arbitrary rate, we hold that in the absence of special circumstances bankruptcy courts should use the current market rate of interest used for similar loans in the region.
A competing approach to determining the "current market rate" of interest for allowed secured claims, pursuant to 11 U.S.C. § 1325(a)(5)(B)(ii), in Chapter 13 cramdown *494 cases is the "cost of funds" approach. Under this approach, the market rate of interest is based on the interest rate that lenders are charged to obtain their funds. The Second Circuit, in Valenti, 105 F.3d at 63, explained that
[c]ourts using this approach reason that the best way to place a creditor in the same economic position that it would have been in had the debtor surrendered the collateral immediately is to assume that the creditor would borrow the money representing the value of the allowed claim. Then, the creditor could make new loans to consumers at prevailing rates in the commercial market.
The Valenti Court went on to criticize the "coerced loan" approach suggesting that courts that adopt that approach
misapprehend the "present value" function of the interest rate. The objective of § 1325(a)(5)(B)(ii) is to put the creditor in the same economic position that it would have been in had it received the value of its allowed claim immediately. The purpose is not to put the creditor in the same position that it would have been in had it arranged a "new" loan. . . . [T]he value of a creditor's allowed Claim does not include any degree of profit. There is no reason, therefore, that the interest rate should account for profit.
Id. at 63-64 (emphasis in original). Despite its disapproval of the "coerced loan" approach, the Second Circuit in Valenti declined to adopt the competing "cost of funds" approach, finding that "courts using a `cost of funds' approach are likely to treat debtors inequitably. Chapter 13 debtors would be charged different interest rates depending upon how much their respective creditors have to pay for funds." Id. at 64. Instead, the Valenti Court held that
the market rate of interest under § 1325(a)(5)(B)(ii) should be fixed at the rate on a United States Treasury instrument with a maturity equivalent to the repayment schedule under the debtor's reorganization plan. This method of calculating interest is preferable to either the `cost of funds' approach or the `forced loan' approach because it is easy to apply, it is objective, and it will lead to uniform results. In addition, the treasury rate is responsive to market conditions.
Id. The court recognized that the interest rate should include a premium to reflect a creditor's risk in receiving deferred payments of the present value of the collateral under the reorganization plan. The actual risk premium, according to the court, however, may vary from one to three percent depending upon the "circumstances of the debtor, including prior credit history as well as the viability of the reorganization plan." Id. Finally, the Valenti court suggested that bankruptcy courts should conduct hearings limited solely to a determination of the risk premium. In the instant case, in the Memorandum in Opposition to Mr. C's Objection to Confirmation, the Debtors argue that this Court should adopt the Valenti Court's approach because it is objective and will lead to "uniform results." The Debtors go on to suggest that if the Court adopts the "coerced loan" approach, the Court will have to conduct an evidentiary hearing to determine the interest rate that Mr. C's would charge a similarly situated borrower attempting to obtain a similar loan in the same region. This Court, though, would have to conduct an evidentiary hearing regardless of which approach it adopts because the Valenti Court's approach calls for a determination of the appropriate risk premium. This Court does not find it problematic or over-burdensome to conduct an evidentiary hearing when there are factual issues to resolve.
In local Chapter 13 cramdown cases, debtors have typically proposed plans providing for interest rates between 8.00% and 12.00% because that range of interest rates is what conventional lenders of automobile loans currently charge on loans for vehicles less than five years old. In the instant case, however, Mr. C's loaned funds to the Debtors for a vehicle more than five years old, so the 8.00% to 12.00% range of interest rate is not applicable. Following the "coerced loan" approach, this Court holds that on the effective date of the plan, Mr. C's is entitled to a "current market rate" of interest calculated by determining what Mr. C's would charge third parties, with credit records similar to *495 those of the Debtors, but for filing bankruptcy, over the same term, for the purchase of the same vehicle, in the same region. The Debtors' ability to pay is irrelevant. Although in an affidavit provided to this Court, Dana Ross-Cohen, Vice President of Mr. C's, indicated that the current interest rate for borrowers in the same position as the Debtors, but for filing bankruptcy, would be 29.6684% payable $125.00 bi-weekly (or $250.00 per month) for a term of twenty-seven months, the Court finds that an evidentiary hearing is necessary to determine the "current market rate" of interest that the Debtors must pay to ensure that Mr. C's receives the present value of the allowed secured claim, pursuant to 11 U.S.C. § 1325(a)(5)(B)(ii).
This Court does not adopt the "rebuttable presumption" approach for determining "current market rates" of interest for "coerced loans" pursuant to 11 U.S.C. § 1325(a)(5)(B)(ii) as set forth by the Third Circuit in Jones. Rather, the Court finds it prudent to determine, through an evidentiary hearing, the "current market rate" of interest in a Chapter 13 cramdown situation on a case-by-case basis. The Tenth Circuit agreed, explaining that "the market rate should be easily susceptible of determination by means of a hearing where each party is given the opportunity to submit evidence concerning the current market rate of interest for similar loans in the region." Hardzog, 901 F.2d at 860 ("[C]ourts are well equipped to determine market rates[.]"). See also Memphis Bank, 692 F.2d at 431 ("Bankruptcy courts are generally familiar with the current conventional rates on various types of consumer loans. And where parties dispute the question, proof can easily be adduced.") Furthermore, the Court does not adopt the Second Circuit's approach in Valenti of fixing the interest rate on a United States Treasury instrument and conducting a hearing to determine the risk premium. Instead, this Court will follow the Eleventh Circuit's lead. Because the Eleventh Circuit in Southern States clearly endorses a "coerced loan" approach for Chapter 11 cases that is identical to the approach for Chapter 13 cases adopted by the Tenth Circuit in Hardzog and the bankruptcy courts in Oglesby and Segura, as well as a number of other Circuits, this Court adopts the "coerced loan" approach for determining the "current market rates" of interest for allowed secured claims in Chapter 13 cramdown cases. Therefore, an evidentiary hearing must be held to determine what Mr. C's would charge third parties, with credit records similar to those of the Debtors, but for filing bankruptcy, over the same term, for the purchase of the same vehicle, in the same region.
CONCLUSION
Based on the foregoing discussion and analysis, the Court concludes that the Eleventh Circuit's "coerced loan" approach is the proper method of determining the "current market rate" of interest, pursuant to 11 U.S.C. § 1325(a)(5)(B)(ii), in Chapter 13 cramdown cases. In order to determine the "current market rate" of interest in the instant case, the Court will hold an evidentiary hearing to ascertain what Mr. C's would charge third parties, with credit records similar to those of the Debtors, but for filing bankruptcy, over the same term, for the purchase of the same vehicle, in the same region. Accordingly, confirmation of the Debtors' First Amended Chapter 13 Plan is deferred pending the outcome of this evidentiary hearing.
ORDER
In accordance with the foregoing, and with the Court being fully advised in the premises, it is hereby ORDERED AND ADJUDGED that:
1. The Court adopts the "coerced loan" approach of determining the "current market rate" of interest in Chapter 13 cramdown cases, pursuant to 11 U.S.C. § 1325(a)(5)(B)(ii), such that the "current market rate" of interest is that which the instant lender would charge a similarly situated third party, with credit records similar to those of the instant debtor/borrower, but for filing bankruptcy, over the same term, for the purchase of the same goods, in the same region.
2. The Court will hold an evidentiary hearing to determine the "current market *496 rate" of interest that Mr. C's would charge similarly situated third parties, with credit records similar to those of the Debtors, but for filing bankruptcy, over the same term, for the purchase of the same vehicle, in the same region.
3. Confirmation of the Debtors' First Amended Chapter 13 Plan is deferred pending the outcome of this evidentiary hearing.
NOTES
[1] 11 U.S.C. § 1325(a)(5)(B)(ii) states in relevant part:
(a) Except as provided in subsection (b), the court shall confirm a plan if
(5) with respect to each allowed secured claim provided for by the plan
(B)(ii) the value as of the effective date of the plan, of property to be Distributed under the plan on account of such claim is not less than the allowed amount of such claim[.]
11 U.S.C. § 1129(a)(9)(C) is as follows:
(a) The court shall confirm a plan only if all of the following requirements are met:
(9) Except to the extent that the holder of a particular claim has agreed to a different treatment of such claim, the plan provides that (C) with respect to a claim of a kind specified in section 507(a)(8) of this title, the holder of such claim will receive on account of such claim deferred cash payments, over a period not exceeding six years after the date of assessment of such claim, of a value, as of the effective date of the plan, equal to the allowed amount of such claim. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550550/ | 5 F.2d 183 (1925)
KEETON
v.
JEFFERSON STANDARD LIFE INS. CO.
SAME
v.
EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES.
Nos. 2328, 2329.
Circuit Court of Appeals, Fourth Circuit.
April 14, 1925.
Frank T. Sutton, Jr., and M. J. Fulton, both of Richmond, Va. (John J. Wicker, Jr., and Fulton & Wicker, both of Richmond, Va., on the brief), for appellant.
Stuart G. Christian and Wyndham R. Meredith, both of Richmond, Va. (Brooks, Hines & Smith, of Greensboro, N. C., and Alexander & Green, of New York City, on the brief), for appellees.
Before WOODS, WADDILL, and ROSE, Circuit Judges.
WADDILL, Circuit Judge.
These bills in equity were respectively filed by the appellee, the Jefferson Standard Life Insurance *184 Company, hereinafter called the Jefferson Company, in the first-named cause, and by appellee, Equitable Life Assurance Society of the United States, hereinafter called the Equitable Society, in the last-named cause, to set aside, cancel, vacate, and annul four certain life policies issued by appellees, for $5,000 each, two being issued by each company, on the life of Joseph S. Keeton.
The causes were heard together by consent, as the assured was the same in all the contracts, and the policies were issued about the same time; that is to say, by the Jefferson Company on the 29th of April, and by the Equitable Society on the 22d of May, 1921. The first-named policies were delivered June 21, 1921, and the last on the 27th of June, 1921. The assured, Joseph S. Keeton, died on the 26th of August, 1921.
Shortly after his death, the bills in these causes were filed, appellees averring that after the death of the assured they learned of certain false statements and representations made in the applications for the policies, which invalidated the same. Each company tendered the return of the premiums paid, and in the case of the Equitable Society, one of the policies payable to a beneficiary other than the assured's wife, Jessie P. Keeton, was surrendered upon return of the premium, and is not involved in these suits, leaving the contest only on a single policy for $5,000 in the Equitable Society, and two for $5,000 each in the Jefferson Company.
In his application for a policy in the Jefferson Company, the assured answered the following questions bearing on his health, and made certain stipulations, as follows:
"(a) Have you been disabled or received medical attention within the past five years? No."
"(c) Have you ever suffered from any ailment or disease of the heart, lung, etc.? No."
"E. Have you ever had rheumatism, gout, etc.? No."
"H. Have you consulted a physician for any ailment or disease not included in your above answers? No."
"(d) What physician or physicians, if any, not named in the above, have you consulted or been treated by within the last five years, and for what illness or ailment (if none so state)? None."
"I hereby agree for myself, and for any person who may have or claim any interest in any contract which may be issued on this application, that:
"First, every statement and representation hereinabove contained is material and true."
Which was signed by J. S. Keeton.
"This policy and the application therefor (parts 1 and 2), copies of which are attached hereto, constitute the entire contract, and no statement shall avoid any payment under this policy, or be used in defense of any claim hereunder unless it is contained in one of these instruments."
"No agent or other person except the president, a vice president, the secretary or an assistant secretary of the company has power on behalf of the company to make, modify or discharge this, or any contract of insurance, to extend the time for paying a premium, to waive any lapse or forfeiture of any of the company's rights or requirements, or to bind the company by making any promise respecting any benefits hereunder, or by accepting any representation or information not contained in the written application for this policy."
In his applications for policies in the Equitable, the assured answered the following questions bearing on his health, and made certain representations as follows:
"6. State every physician or practitioner whom you have consulted or who have treated you during the past five years. None."
"C. Have you ever been treated for any disease or disturbance of the heart or blood vessels? No."
"8. Have you ever had gout, rheumatism, tuberculosis, or syphilis? No."
"F. Have you ever had any other illness or injury not mentioned above? No."
The application to the Equitable contained the following stipulation:
"All of the foregoing answers and all those made to the society's medical examiner which are contained in part 2 hereof are true and are offered to the society as an inducement to issue the policy for which application is hereby made."
At the end of the application is the following:
"I agree that the foregoing answers shall be part of my application which shall consist of parts one and two taken together, and that the foregoing answers shall also become part of any policy contract which may be issued on the strength thereof.
"Dated at Richmond, Virginia, on the 21st day of May, 1921.
"[Signed] J. S. Keeton.
"Witness: P. W. Howle, M. D."
Keeton's policy with the Equitable Society also contained the following:
"The Contract. This policy and the application *185 therefor, a copy of which is indorsed hereon, or attached hereto, constitute the entire contract between the parties. All statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties, etc."
Complainant in each of the causes charged that the assured procured the issuance of policies by making false statements, and concealing facts respecting material matters bearing upon his health, and medical treatment previously received by him, particularly that he had not theretofore been treated for rheumatism and heart trouble, and had never had or suffered from either of said ailments, and had had no occasion for five years preceding the dates of applications for the policies to have medical attention from any physician; all of which answers the bills charged were knowingly false and fraudulent, and affected matters of vital importance looking to the issuance of policies, and but for the making of which the policies would not have been issued.
Appellant, defendant in the District Court, answered denying generally all accusations of fraud in connection with the procuring of the insurance, and insisted that the deceased was insurable, and had not theretofore within five years preceding the dates of the policies, suffered from rheumatism or other disease that would have affected his insurability; nor had he been practiced upon within the period specified for any such ailments by a physician or physicians; and that the malady from which he died was one of short duration, the first symptoms of which appeared in the month of June, 1921.
Appellant further insisted that appellees were fully advised of the ailments with which the assured was afflicted, and that its agents and representatives knew thereof, and in the light of such knowledge made full investigation as to the health of the assured; and further averred that the answers to questions propounded to the assured were not in fact his answers, but those of insurers' representatives, who took down the same.
Issues were joined upon the pleadings, and the two causes heard together and submitted to the district judge. The testimony was all taken in open court under the new equity rules, and the District Court passed its decrees on the 17th of April, 1924, holding that said policies should be declared null and void and canceled, because procured by the assured's making false statements respecting material matters leading to their issue, which the testimony clearly established. From the decrees thus entered, these appeals were taken.
The merits of the cases, on appeal, turn so largely in our judgment upon what is the correct determination of the facts properly controlling, that we are relieved from much of the difficulty that might otherwise arise in passing upon the questions involved, by reason of the findings of fact of the learned district judge, who saw and heard the witnesses testify, and was thereby better enabled to give to their testimony the weight that properly belonged to the same. The following are excerpts from the opinion and finding of the district judge:
"The points of law, as I see them, are not really in serious doubt. I think the proper determination of the case depends upon a fair application of well-recognized principles of law to the facts. * * *
"The case, I think, presents only two questions: The question of whether or not the statements which are the basis of the suit, which were made in the answers in the examination of the applicant for the insurance, were untrue and, to that extent, false statements; and if they were, whether they were material and affected the making of the contract and the meeting of the minds of the parties. * * *
"It goes without saying that the very basis of the contract is the condition of the man's health. No insurance company could last, no insurance company could exist, unless there was a careful medical examination of the applicants for insurance. The rules which experience has taught are observed in the writing of the insurance, in the making of the contract. The undisputed evidence in this case is that the insured when he was examined by both doctors and asked the question whether or not he had consulted * * * a physician in the past five years, answered no. And when he was asked the other question whether or not he had suffered * * * certain designated diseases, including heart disease, syphilis, and rheumatism, he again replied no. The fact develops, by equally undisputed evidence, that he had consulted physicians, and not one physician, but, as stated time and time again in the argument, six physicians within a period of two years, prior to the time the application was made."
The district judge reviewed the testimony of the physicians at considerable length, bearing upon the character and extent of the assured's illness and treatment therefor, which showed, among other things, that for a period of six weeks in the summer of 1919, he was dangerously ill, under the constant *186 treatment of a physician for rheumatism, his temperature running from 103 to 104, and that from a year to a year and a half prior to making the applications for insurance, other doctors were invariably called in, in the absence of his regular physician, with a view of affording temporary relief; and considering the character of the symptoms, and whether the assured was suffering from rheumatic symptoms or not, the judge concluded:
"Whether they were real symptoms, or whether they were superficial symptoms, subjective or objective, I don't think it is material one way or the other, but from June in 1919 until possibly January in 1920, or within a year and two or three months of the time of this application, this insured had been constantly, or almost constantly, under the care of physicians, and, when he came to be examined by the examiner of the insurance company he concealed these facts entirely from both of those examiners, when he answered that question: `Have you consulted or been advised by a physician within five years? No.' Now, of course, the purpose and the only purpose subserved by the question and the answer was to furnish the insurance company with the information by which, through interrogation of the doctors who had been consulted by the applicant, they might determine the extent and character, duration and insurability or curability or what not of the man's illness. And, in this case, if there had been no more than that, that is to say the matter had rested at that point, it follows, it seems to me irresistibly that the company would have been deprived by reason of an incorrect and therefore an untrue statement of facts that could not have escaped the memory of the applicant, thereby deprived, I say, of a very material part of the information necessary to enable them to determine whether or not they shall make the contract with him."
These findings bind us in the action we should take, unless we are convinced, either that the judge's reasoning was not sound as to the law, or that the facts as found by him are clearly not supported by the testimony. As to many of the facts of importance, and as found by the district judge, there seems to be no real dispute, while as to others there is sharp conflict in the evidence, which, however, was solved in favor of appellees by a judge who had opportunity to determine the truthfulness of the statements of the several witnesses, heard them testify, and observed their demeanor, intelligence, and candor while upon the stand. We should be slow to depart from the well-recognized rule of following the findings of the trial court in the circumstances, and which is supported by the almost unanimous decisions of the federal courts. Adamson v. Gilliland, 242 U. S. 350, 37 S. Ct. 169, 61 L. Ed. 356; Mason v. United States, 260 U. S. 546, 556, 43 S. Ct. 200, 67 L. Ed. 396; Espenschied v. Baum, 115 F. 793, 53 C. C. A. 368; American, etc., v. Moorehead, 226 F. 202, 141 C. C. A. 129; Westerman v. Dispatch, etc., Co., 233 F. 609, 147 C. C. A. 417; United States Grass Creek O. & G. Co., 236 F. 481, 484, 149 C. C. A. 533; Stratton v. Buller (C. C. A.) 268 F. 825; McGovern v. McClintic-Marshall Co. (C. C. A.) 269 F. 916.
So far from not adhering to the usual rule in this case, it seems to us that the District Court was clearly right in what it did, and there was no other conclusion that could fairly have been reached, having regard to the testimony in the case and the law properly applicable thereto.
These were applications for the issuance of policies of insurance on the life of James S. Keeton. The policies contained a one-year noncontestable clause. Of course, before issuance of such policies, the condition of the health of the applicant was of prime importance, and where the policies became incontestable after a year, it was doubly so. Every consideration of right and justice would indicate that in such circumstances the utmost care should be observed in entering into a contract of insurance, and that only persons supposed to be in good health would be acceptable as risks. The applicant's history in respect to his health and medical treatment were most material, as bearing upon whether the insurance risk would be assumed; and at least the applicant should make full and frank explanation and answers to all inquiries throwing light upon his present and past state of health. Nothing could well be more important than the fact of previous sickness and past medical treatment, as to which the applicant was best able to furnish correct information; and anything that tended to mislead, or indicated a purpose to conceal the real truth, would serve to invalidate a policy if procured by such misleading and fraudulent conduct. In this case, the answers to the questions were of a character that the applicant could not have been mistaken about. They related directly to the state of his health regarding serious illness, and whether he had been treated at all by any physicians *187 during the period of five years previous to these inquiries, and he made positive and emphatic replies denying the existence of any sickness, or that he had received any medical treatment; all of which answers, being material and of vital importance to the transactions thus consummated, were entirely false, and deceived and misled the insurance companies into making the contracts of insurance now sought to be annulled. Authorities to sustain these views might be cited almost without number, but only a few will be given. Mutual Life Ins. Co. v. Hilton-Green, 241 U. S. 613, 622, 36 S. Ct. 676, 60 L. Ed. 1202; Hubbard v. Mutual Reserve Fund L. Ass'n, 100 F. 719, 726, 727, 40 C. C. A. 665; Talley v. Metrop. L. Ins. Co., 111 Va. 778, 69 S. E. 936; Mutual L. Ins. Co. v. Mullan, 107 Md. 457, 69 A. 385; Bryant v. Metropolitan L. Ins. Co., 147 N. C. 181, 60 S. E. 983; Schas v. Equitable L. Assur. Soc., 166 N. C. 55, 81 S. E. 1014; Caruthers v. Kansas Mut. L. Ins. Co. (C. C.) 108 F. 487, 491; Rigby v. Metropolitan L. Ins. Co., 240 Pa. 332, 87 A. 428; 4 Joyce on Insurance (2d Ed.) p. 3528; 25 Cyc. 816.
We have given much consideration to appellant's position that the answers, made by the assured to the several questions relied on to annul the policies, were written by representatives of the company, and not the assured, and that the latter should not be bound thereby; that the companies had knowledge as to the health of the assured, information in that respect given to their agents being imputed to them.
We have examined carefully the Virginia statutes, Code, § 4220, relied on in support of the proper interpretation to be placed upon contracts of insurance, as we have the many authorities, state and federal, cited by appellant. In the view we take, the authorities do not call for a conclusion different from the one we have arrived at, under the particular facts and circumstances of this case. There is nothing in the testimony to warrant the suggestion that answers, made by the assured to questions propounded to him by the medical examiners, were written other than as actually made by the applicant; and it is quite clear that within the provisions of the policy, the insurance solicitor or canvasser securing the same was without authority to issue policies or to make valid contracts for and binding on the company, and was not such a representative of the company as that knowledge imparted to him would be imputed to the company.
These positions respecting answers to questions made by the agent of the company, instead of the assured, and the imputation of knowledge on the part of the company because of information to its representative, are each predicated upon the transaction having been entered into in good faith, and that the same is otherwise free from the taint of fraud and imposition on the part of the assured; and when it once appears that such fraudulent conditions exist respecting material matters entering into the making of the contract, they become immaterial, and a contract so secured must fall. Mutual L. Ins. Co. v. Hilton-Green, 241 U. S. 613, 622, 36 S. Ct. 676, 60 L. Ed. 1202, supra; New York Life Ins. Co. v. Fletcher, 117 U. S. 519, 529, 533, 534, 6 S. Ct. 837, 29 L. Ed. 934; United States L. Ins. Co. v. Smith, 92 F. 503, 34 C. C. A. 506; Caruthers v. Kansas Mutual L. Ins. Co. (C. C.) 108 F. 487, 492, 494, supra; North American F. Ins. Co. v. Throop, 22 Mich. 146, 168, 7 Am. Rep. 638; Gallant v. Metropolitan Life Ins. Co., 167 Mass. 77, 44 N. E. 1073; Roe v. National Life Ins. Co., 137 Iowa, 696, 115 N. W. 500, 17 L. R. A. (N. S.) 1144; Sanders v. Cooper, 115 N. Y. 279, 22 N. E. 212, 5 L. R. A. 638, 12 Am. St. Rep. 801; Lorie v. Connecticut Mutual L. Ins. Co., 15 Fed. Cas. 891.
We are forced to the conclusion that the assured, in making the answers he did, in respect to his health and medical treatment he had received, fraudulently made false representations in regard to material matters, and concealed and withheld the real facts, which, if known, would have resulted in the applications being refused and the contracts of insurance not entered into.
Appellant insists in the seventh assignment of error that the court erred in allowing the witness Dr. Alfred Billings, assistant medical director for the Equitable Society, to testify as to whether the company would have issued the policy had the true facts in respect to the transaction been known. The ruling of the court complained of does not seem to us material, in the light of the conclusion we have reached.
The decrees of the District Court entered separately in the two cases will be affirmed, with costs.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550553/ | 5 F.2d 951 (1925)
KENNEBEC BOX CO., Inc.,
v.
O. S. RICHARDS CORPORATION.
UNITED STATES
v.
JOHNSTON.
No. 188.
Circuit Court of Appeals, Second Circuit.
March 16, 1925.
Ralph C. Greene, U. S. Atty., and William A. De Groot, Asst. U. S. Atty., both of Brooklyn, N. Y. (Nelson T. Hartson and Frank J. Ready, both of Washington, D. C., of counsel), for the United States.
Zalkin & Cohen, of New York City (S. Marshall Kronheimer and Emanuel Fichandler, both of New York City, of counsel), for respondent.
Before HOUGH, MANTON, and HAND, Circuit Judges.
HOUGH, Circuit Judge.
The record before us is an insufficient groundwork for some of the arguments at bar. It is impossible to argue therefrom that the United States has or ever had a lien upon any fund in respect of these taxes, or any of them, so that R. S. § 3186, as amended (Comp. St. § 5908), may apply. That statute declares that a tax shall be "a lien in favor of the United States from the time when the assessment list *952 was received by the collector," etc. There is no evidence whatever as to when any assessment list was received by anybody. We know nothing except that a demand for some unexplained kind of tax was made by the United States in March, 1923, and that further demands for income taxes were made later.
This estate is not in bankruptcy, but it is insolvent, and therefore R. S. § 3466 (Comp. St. § 6372), is the only available statute. That declares that "whenever any person indebted to the United States is insolvent * * * the debts due to the United States shall be first satisfied." Thus the sole question before us is whether debts of the insolvent secured by no lien shall be paid ahead of expenses created by the receivership, because such debts are for taxes due to the United States. So far as shown, this is the first attempt on the part of the United States to assert a claim for payment out of a fund ahead of the expenses incurred in the production thereof. There being no question of lien before us, we find no rights asserted under any form of execution, as by distress or the like. The United States comes into court and asserts in substance that, when the officers of the court have accumulated a fund insufficient to defray the expenses of its accumulation, the Treasury is entitled to take that fund and leave the court expenses unpaid.
For purposes of argument only it may be admitted that out of any fund available for paying the debts of an insolvent debtor United States taxes are to be paid first, and in full. But it is elementary that what is available to pay the debts of any debtor must be the property of that debtor. When these claims were presented, that property had all been consumed in the production of the present fund, which equitably belongs to the persons who made it, and they made it, not by giving credit to the insolvent Box Company, but by giving credit or rendering services to one or another of the various receivers herein. It may well be, as urged by the appellee, that the doctrine of United States v. Oklahoma, 261 U. S. 253, 43 S. Ct. 295, 67 L. Ed. 638, as followed and interpreted in Equitable, etc., Co. v. Connecticut, etc., Co. (C. C. A.) 290 F. 712, and Strain v. United States Fidelity, etc., Co. (C. C. A.) 292 F. 694, disposes of appellant's claim; but we prefer to put decision on the ground that, thoroughly admitting priority in the United States under the statute in any fund available for the payment of this insolvent's debts, there is and can be no claim in favor of even the most preferred of creditors until there is some fund available for the payment of all creditors of the insolvent.
There is no such fund; consequently the order below was right, and is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550605/ | 79 Md. App. 101 (1989)
555 A.2d 1070
GLORIA CRUTCHFIELD
v.
STATE OF MARYLAND.
No. 997, September Term, 1988.
Court of Special Appeals of Maryland.
April 3, 1989.
Certiorari Granted July 25, 1989.
Benjamin Lipsitz, Baltimore, for appellant.
Valerie J. Smith, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., Baltimore, and Thomas E. Hickman, State's Atty. for Carroll County, Westminster, on the brief), for appellee.
Argued before BISHOP, BLOOM and ROBERT M. BELL, JJ.
BLOOM, Judge.
Gloria Crutchfield appeals from an order of the Circuit Court for Garrett County denying her motion to dismiss, on double jeopardy grounds, an indictment charging her with murder and other offenses.
The indictment against appellant was originally filed in the Circuit Court for Carroll County. Appellant moved in that court for an order suppressing certain statements she had made to various police officers, asserting that those statements were made in response to custodial interrogations conducted before she was advised of her Miranda rights. After an evidentiary hearing, the suppression motion was denied, the hearing judge having concluded that appellant had either received a Miranda warning or was not in custody when she made each of the statements that were the subject of her motion.
At appellant's request, the case was removed to Garrett County for trial. After the trial had commenced but before any of the police officers testified, appellant renewed her motion to suppress, but the trial judge, relying on the decision of the motions hearing judge, denied the renewed suppression motion. The officers testified, and the substance of four oral statements made by appellant at the scene of the homicide were admitted in evidence. It was only after all four of those statements had been related to the jury that it became apparent to the trial judge that two of those statements extremely damaging to appellant because they were inconsistent with her other statements and her self-defense theory of defense had been made in response to interrogation while appellant was in custody and before she had been advised of her Miranda rights. The trial came to an abrupt halt, and the judge and counsel adjourned to the judge's chambers for a discussion as to how to deal with the problem.
No record was made of the proceedings in chambers, but we can deduce certain facts from what was put on the record later. The trial judge immediately expressed his belief that the damage done to appellant's case by the admission of highly prejudicial evidence that should have been excluded was irreparable. He suggested that defense counsel move for a mistrial. Counsel admittedly voiced no disagreement with the judge's assessment, but he refused to move for or consent to a mistrial, indicating that he fully intended to preserve appellant's right to move for a dismissal of the indictment if the court declared a mistrial without appellant's consent. Nevertheless, the trial judge, on his own motion, declared a mistrial. We do not know if any alternative to a mistrial was considered or discussed; we do know, from the trial judge's comments on the record, that appellant neither objected to nor consented to the court's sua sponte mistrial declaration.
Having already been put in jeopardy by the commencement of the aborted trial, appellant moved for dismissal of the indictment on the ground that to try her again would put her twice in jeopardy for the same offense. That motion was denied, and this appeal was promptly noted to raise a single issue:
Whether, having declared a mistrial, without appellant's consent, because statements made by appellant during custodial interrogation conducted without Miranda warnings had been admitted in evidence, the trial court erred in denying appellant's motion to dismiss on double jeopardy grounds.
We believe the trial court did err in denying the motion to dismiss the indictment. That error, of course, is what brings the matter to our attention. It was the earlier error, however, the declaration of a mistrial without the defendant's consent, that made it constitutionally impossible to retry her.
As Judge Moylan, writing for this Court in West v. State, 52 Md. App. 624, 451 A.2d 1228 (1982), pointed out, there are four distinct categories of double jeopardy presently recognized for purposes of federal constitutional law:
1. "Classic" former jeopardy, arising out of the common law pleas in bar of autrefois convict and autrefois acquit.
2. Simultaneous jeopardy, primarily involving issues of merger and multiple punishment.
3. Collateral estoppel.
4. The mistrial/retrial problem, which became firmly established as an aspect of double jeopardy constitutional law in Wade v. Hunter, 336 U.S. 684, 69 S.Ct. 834, 93 L.Ed. 974 (1949).
West, 52 Md. App. at 628, 451 A.2d 1228.
There are, in turn, two distinct subspecies of mistrial/retrial double jeopardy situations. One, which does not concern us here, is where the mistrial is declared at the request of the defendant. Ordinarily, a defendant's request for a mistrial is deemed to be a waiver of any double jeopardy claim, the only exception being if the defense request had been prompted by prosecutorial or judicial overreaching. West, 52 Md. App. at 631, 451 A.2d 1228.
The second subspecies, the variety that does concern us in this case, is where the mistrial has been declared by the judge sua sponte or at the request of the State without the defendant's explicit acquiescence. In those situations, retrial will not be barred if there was a manifest necessity for the mistrial; however, if the trial was needlessly aborted, retrial will be barred. West, 52 Md. App. at 630-31, 451 A.2d 1228, citing United States v. Perez, 22 U.S. (9 Wheat.) 579, 6 L.Ed. 165 (1824); Arizona v. Washington, 434 U.S. 497, 98 S.Ct. 824, 54 L.Ed.2d 717 (1978); and Illinois v. Somerville, 410 U.S. 458, 93 S.Ct. 1066, 35 L.Ed.2d 425 (1973).
The rule, which is easy to recite, is difficult to apply, because, as the Court of Appeals observed in Cornish v. State, 272 Md. 312, 322 A.2d 880 (1974), the Supreme Court has not attempted to enumerate those instances when manifest necessity exists. It obviously exists when a jury is unable to agree upon a verdict. United States v. Perez, supra; Logan v. United States, 144 U.S. 263, 12 S.Ct. 617, 36 L.Ed. 429 (1892).
But what other circumstances meet the test expressed by Mr. Justice Story in the Perez case, which is the authoritative starting point of the law on this subject?
We think, that in all cases of this nature, the law has invested Courts of justice with the authority to discharge a jury from giving any verdict, whenever, in their opinion, taking all the circumstances into consideration, there is a manifest necessity for the act, or the ends of public justice would otherwise be defeated. They are to exercise a sound discretion on the subject; and it is impossible to define all the circumstances, which would render it proper to interfere. To be sure, the power ought to be used with the greatest caution, under urgent circumstances, and for very plain and obvious causes; and in capital cases especially, Courts should be extremely careful with how they interfere with any of the chances of life, in favour of the prisoner.
Id. 22 U.S. at 580.
In Gori v. United States, 367 U.S. 364, 81 S.Ct. 1523, 6 L.Ed.2d 901 (1961), the Supreme Court, by a narrow (5 to 4) majority, upheld a denial of a motion to dismiss on a plea of former jeopardy where the first trial was terminated by the trial judge's declaration of a mistrial sua sponte, without the defendant's action and express consent. There it appeared that the trial judge had acted for the protection of the defendant. Although his conduct was characterized as "over-assiduous," "overzealous," and "too hasty," and his solicitude for the defendant as "overeager," the majority was "unwilling, where it clearly appears that a mistrial has been granted in the sole interest of the defendant, to hold that its necessary consequence is to bar all retrial." Id. at 369, 81 S.Ct. at 1527.
Ten years later, the Court retreated somewhat from Gori's emphasis on the motivation of the trial judge to protect the defendant rather than to help the prosecution. In United States v. Jorn, 400 U.S. 470, 91 S.Ct. 547, 27 L.Ed.2d 543 (1971), the Court emphasized the defendant's "valued right to have his trial completed by a particular tribunal." Id. at 484, 91 S.Ct. at 557.
If that right to go to a particular tribunal is valued, it is because, independent of the threat of bad-faith conduct by judge or prosecutor, the defendant has a significant interest in the decision whether or not to take the case from the jury when circumstances occur which might be thought to warrant a declaration of mistrial. Thus, where circumstances develop not attributable to prosecutorial or judicial overreaching, a motion by the defendant for mistrial is ordinarily assumed to remove any barrier to reprosecution, even if the defendant's motion is necessitated by prosecutorial or judicial error. In the absence of such a motion, the Perez doctrine of manifest necessity stands as a command to trial judges not to foreclose the defendant's option until a scrupulous exercise of judicial discretion leads to the conclusion that the ends of public justice would not be served by a continuation of the proceedings.
Jorn, 400 U.S. at 485, 91 S.Ct. at 557 (footnotes omitted).
The State relies on Cornish v. State, 272 Md. 312, 319, 322 A.2d 880 (1974), in which the Court of Appeals said:
A retrial is permitted where the trial judge's action in declaring a mistrial is necessary to protect the interest of the defendant, United States v. Jorn, supra, 400 U.S. at 483 [91 S.Ct. at 556], explaining and limiting the holding in Gori v. United States, supra; Whitfield v. Warden, 486 F.2d 1118, 1123 (4th Cir.1973). Retrial is allowed where the mistrial was caused by the occurrence of an error which could not be cured during the remainder of the trial, and which would necessitate a reversal on appeal, State of Illinois v. Somerville, supra [410 U.S. 458, 93 S.Ct. 1066, 35 L.Ed.2d 425 (1973)].
That quotation begs the question. What is necessary to protect the interest of the defendant? Not, as the Supreme Court had initially assumed in Gori, what the trial judge may think is necessary, but what is actually necessary to protect the defendant. True, a great deal of deference must be given the trial judge's determination; he is on the scene and therefore in a much better position than the appellate court to form a conclusion as to what is necessary. But we must not lose sight of the fact that the defendant is also on the scene, and great deference should be given his determination as to whether his own interests would be better served by aborting the trial or by submitting his fate to the jury that is already impaneled. We believe that, except in the most extraordinary circumstances, that decision should be left to the defendant, not the judge. As Judge Moylan, writing for this Court in Ball v. State, 57 Md. App. 338, 360, 470 A.2d 361 (1984), affirmed in part and reversed in part on other grounds sub nom. Wright v. State, 307 Md. 552, 515 A.2d 1157 (1986), expressed it:
When a mistrial is even contemplated for the benefit of a defendant, the defendant has the final choice of whether he wishes a mistrial or not. The very value protected by this subvariety of double jeopardy law is the right of a defendant "in keeping together a tribunal, once it is impaneled, until a verdict has been reached." West v. State, 52 Md. App. 624, 451 A.2d 1228 (1982). If a defendant chooses to stick it out to the sweet or bitter end, that is his choice. If the defendant desires a mistrial, he must manifest that desire by asking for it.
As to whether a mistrial is necessary to protect the interests of the defendant, therefore, we must let the defendant make that decision; it should not be made for him by the trial judge.
We turn now to the other mistrial/permissible retrial situation recognized by the Court of Appeals in Cornish: "Retrial is allowed where the mistrial was caused by the occurrence of an error which could not be cured during the remainder of the trial and which would necessitate a reversal [of a conviction] on appeal." That situation indeed would be an example of manifest necessity for a mistrial. There is nothing in the record of these proceedings, however, which places this case in that category. Somerville, which the Court of Appeals cited for that proposition in Cornish, was a case in which the trial judge discovered, after the jury was sworn but before any evidence was presented, that the indictment was defective for failing to charge a criminal offense. Under Illinois law, that defect (1) could not be cured, (2) could be raised at any time, and (3) would necessitate reversal of any conviction.
In the case sub judice, the error was the admission of evidence, prejudicial to the defendant, that should have been excluded. Was the error curable by striking out the evidence and instructing the jury to disregard it because it was unreliable evidence? Both the Court of Appeals and this Court have frequently held (usually at the State's urging) that there is a presumption that a jury can and will follow curative instructions when they are given. See Johnson v. State, 303 Md. 487, 516, 495 A.2d 1 (1985); Wilhelm v. State, 272 Md. 404, 423-24, 326 A.2d 707 (1974); Veney v. State, 251 Md. 182, 197, 246 A.2d 568 (1968); Esterline v. State, 105 Md. 629, 635, 66 A. 269 (1907); Pinder v. State, 70 Md. App. 218, 234, 520 A.2d 1101 (1987). In Worthen v. State, 42 Md. App. 20, 399 A.2d 272 (1979), there is reference to the fact that some of the finest legal minds have been the harshest critics of curative instructions, calling them "intrinsically ineffective" and referring to their penchant for purging prejudice as "unmitigated fiction." We expressly rejected such criticism, however. Id. at 34, 399 A.2d 272.
We are not holding that a curative instruction will always render harmless an error in the admission of evidence prejudicial to the accused. Certainly, it would be reversible error to admit into evidence an involuntary confession or, even worse, the confession of another person which inculpates the defendant with the expectation that a curative instruction will negate the harm. See, Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968). What we do hold is that the trial judge may not decide as a matter of law, over the defendant's objection or without his consent, that the harm is incurable. The defendant may believe that no substantial harm has been done; he may believe that a curative instruction would alleviate the harm; or he may believe that continuing the case before the jury already impanelled, if that jury is properly instructed, is a benefit that would outweigh any residual harm. If the defendant declines to move for a mistrial, choosing to continue the case before the impanelled jury, to which a curative instruction has been given, the error in admitting the evidence will not necessitate a reversal; it will be deemed to be either cured or waived.
In summary, this case is one in which the trial judge, upon concluding that damaging statements which had been admitted into evidence should have been excluded, took it upon himself to declare a mistrial sua sponte in order to protect the rights of a defendant who did not seek or consent to that protection. There being nothing in the record indicating a manifest, i.e., palpable, evident, obvious, clear, plain, or patent, necessity for the trial judge to have aborted the trial, a retrial of appellant is barred by the Double Jeopardy Clause of the Fifth Amendment, which is made applicable to proceedings in State courts by the Due Process Clause of the Fourteenth Amendment. Benton v. Maryland, 395 U.S. 784, 89 S.Ct. 2056, 23 L.Ed.2d 707 (1969). It was error to deny appellant's motion to dismiss the indictment.
JUDGMENT REVERSED.
COSTS TO BE PAID BY CARROLL COUNTY. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550610/ | 124 Pa. Commonwealth Ct. 59 (1989)
555 A.2d 288
The Peoples Natural Gas Company, Petitioner
v.
Pennsylvania Public Utility Commission, Respondent.
No. 1898 C. D. 1988.
Commonwealth Court of Pennsylvania.
Argued November 1, 1988.
March 7, 1989.
*60 Argued November 1, 1988, before President Judge CRUMLISH, JR., Judge McGINLEY, and Senior Judge NARICK, sitting as a panel of three.
Dennis J. Lewis, with him, Robert M. Lucas and Laura A. Meaden, Alder, Cohen & Grigsby, P.C., and William P. Boswell, for petitioner.
Patricia Krise Bilzi, Assistant Counsel, with her, Bohdan R. Pankiw, Deputy Chief Counsel and Daniel P. Delaney, Chief Counsel, for respondent.
Kenneth Zielonis, with him, Norman James Kennard, Tucker Arensberg, P.C., for Apollo Gas Company, intervenor.
Bernard A. Ryan, Jr., Dechert, Price & Rhoads, for Eljer Plumbingware Division, Household Manufacturing, Inc., intervenor.
*61 OPINION BY PRESIDENT JUDGE CRUMLISH, JR., March 7, 1989:
Peoples Natural Gas Company (Peoples) appeals a Pennsylvania Public Utility Commission (Commission) order granting Apollo Gas Company (Apollo) a temporary certificate of public convenience. We reverse.
This action arises from this Court's June 3, 1988 en banc Order and Opinion in Peoples Natural Gas Co. v. Pennsylvania Public Utility Commission, 116 Pa. Commonwealth Ct. 512, 542 A.2d 606 (1988) (COLINS, J., dissenting) (Peoples I). Although the factual and procedural history are detailed in that opinion, a brief review is necessary.
HISTORY
Peoples initially appealed a Commission order authorizing Apollo to serve Eljer Plumbingware's (Eljer) Ford City plant. This Court held that Apollo's acceptance of a certificate of public convenience on the condition that it "confine and restrict" service to three plants other than Eljer's, limited its service to the terms of that certificate. We held, therefore, that Apollo was unable to service the Eljer plant.
Approximately two weeks after our Order, Apollo applied for a temporary certificate of public convenience, seeking authorization to serve the Ford City "public." Eljer and Apollo then filed a joint petition for issuance of an interim emergency order, seeking immediate authority to serve the area, including Eljer's plant.
Four days after a hearing on the joint petition, Administrative Law Judge LOUIS COCHERES recommended that the commission deny the petition because neither Apollo nor Eljer proved the existence of an emergency or irreparable harm. The Commission, however, entered an opinion and order granting the joint petition and issuing *62 Apollo a temporary certificate of convenience. It is from this order that Peoples appeals.[1]
On appeal, Peoples contends that the commission erred in granting the temporary certificate, because Apollo and Eljer failed to prove an emergency; that a temporary certificate cannot be issued to a fixed utility; and that the Commission's order is in direct contravention of this Court's Order in Peoples I, thereby violating Peoples' due process rights. The Commission and intervenors counter that this appeal should be quashed as interlocutory.
APPEALABILITY
The Commission moves to quash the appeal, contending that its order is interlocutory and, therefore, not appealable. We disagree.
In Bollinger v. Obrecht et al., 122 Pa. Commonwealth Ct. 562, 552 A.2d 359 (1989), this Court examined the requisite criteria of appealability. An appeal will lie only from a final order unless otherwise permitted by statute or rule. Fried v. Fried, 509 Pa. 89, 501 A.2d 211 (1985); Pa. R.A.P. 341(a).[2] A final order is one that (1) ends the litigation or disposes of the entire case; (2) effectively puts a litigant "out of court"; or (3) precludes a party from presenting the merits of his or her claim to the tribunal. Nigro v. Nigro, 371 Pa. Superior Ct. 625, 538 A.2d 912 (1988).
*63 In Brinks, Inc. v. Pennsylvania Public Utility Commission, 68 Pa. Commonwealth Ct. 196, 448 A.2d 709 (1982) (Brinks I), the holder of an armored car service contract appealed the Commission's temporary authority grant to a rival carrier. This Court held that a temporary grant of authority must be regarded as a final and appealable order, because the practical effect of such an order would put protestants "out of court" without an opportunity to review. Id. at 200, 448 A.2d at 711.
Similarly in this case, Peoples, the protestant, is put "out of court" by the Commission's grant of a temporary certificate of public convenience for the life of that certificate. Accordingly, we deny the Commission's motion to quash.
MERITS
We turn to the merits, keeping in mind that our scope of review is limited to a determination of whether the Commission's findings of fact are supported by substantial evidence and whether the Commission committed an error of law or violated constitutional rights. Barasch v. Pennsylvania Public Utility Commission, 507 Pa. 561, 493 A.2d 653 (1985).
Peoples initially contends that Section 1103(d) of the Public Utility Code (Code), 66 Pa. C. S. §1103(d), permits the Commission to issue a temporary certificate only upon a showing of an emergency and pursuant to its own regulations and procedures. Peoples argues that the Commission's grant of a temporary certificate to Apollo deviated from its regulations and procedures and was, therefore, an administrative abuse of discretion. See Peoples I.
Section 1103(d) provides:
(d) Temporary authority. Except during the threat or existence of a labor dispute, the commission under such regulations as it shall prescribe *64 may, without hearing, in proper cases, consider and approve applications for certificates of public convenience, and in emergencies grant temporary certificates under this chapter, pending action on permanent certificates; but no applications shall be denied without right of hearing thereon being tendered to the applicant. (Emphasis added.)
This section clearly limits the Commission's authority to grant temporary certificates (1) during an "emergency," and (2) according to its regulations.
The Commission has promulgated regulations, at 52 Pa. Code §3.7, setting forth the criteria necessary to issue emergency orders. That section provides:
§3.7 Issuance of interim emergency orders.
(a) An administrative law judge or presiding officer may issue an interim emergency order upon finding that all of the following exist:
(1) The petitioner's right to relief is clear.
(2) The need for relief is immediate.
(3) The injury would be irreparable if relief is not granted.
(4) The relief requested is not injurious to the public interest. (Emphasis added.)
Here, the ALJ expressly found that no emergency existed. The Commission's reversal of the ALJ was based primarily on the testimony of Eljer's plant manager, who testified that if Eljer were not able to purchase gas from competing suppliers (Peoples and Apollo), a proposed plant expansion would be relocated to Eljer's Mississippi plant, thus resulting in a net loss of jobs and economic hardship in Ford City.
In Brinks, Inc. v. Pennsylvania Public Utility Commission, 76 Pa. Commonwealth Ct. 496, 464 A.2d 639 (1983) (Brinks II), this Court reversed the Commission's temporary grant of authority because the Commission failed to find the existence of an emergency. We held that *65 a finding that economic detriment would result if the temporary grant were not issued did not amount to an "emergency" as a matter of law. After a review of the record, we agree with the ALJ's determination that the record is devoid of evidence of an emergency. At best, adverse economic effects are speculative. Therefore, the Commission's order was not supported by substantial evidence.
The Commission, however, argues that the granting of a certificate of public convenience is a purely legislative function and wholly discretionary. Nonetheless, the Commission's action was based on the section authorizing temporary grants of authority in emergencies; its powers to grant temporary certificates must be limited to those situations and governed by those procedures prescribed by statute.
In concluding, we note that this Court's Order and Opinion in Peoples I clearly indicated that Apollo and Eljer were not legally entitled to contract for gas service due to the strict limitations of Apollo's certificate of public convenience. The Commission, with full knowledge that its prior order in Peoples I was an abuse of discretion and in contravention of the ALJ's determination that Apollo and Eljer failed to prove the existence of an emergency, nonetheless granted the temporary certificate. While the Commission may have been motivated by the laudable desire to facilitate manufacturing and commerce in the Commonwealth, we cannot conclude that an economic threat of the loss of a proposed plant expansion amounts to the clear, immediate and irreparable injury required by the Commission's own regulations. We agree with Peoples that Apollo attempted to circumvent this Court's previous Order. Accordingly, we reverse the Commission and vacate its grant of the temporary certificate of public convenience.
*66 ORDER
The corrected order of the Pennsylvania Public Utility Commission, No. A-00120450, entered July 15, 1988, is reversed. The temporary certificate of public convenience and the Interim Emergency Order granted therein are vacated.
NOTES
[1] As in Peoples I, Eljer and Apollo (intervenors) intervene on behalf of the Commission.
[2] Orders not considered as final may be nonetheless appealable under the collateral order doctrine. Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949); Bell v. Beneficial Consumer Discount Co., 465 Pa. 225, 348 A.2d 734 (1975). Having determined that the order is "final," we need not consider whether the order is an appealable interlocutory order. Bollinger. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551619/ | 315 B.R. 8 (2004)
In re Linda CARROW, Debtor.
No. 02-17838.
United States Bankruptcy Court, N.D. New York.
September 8, 2004.
*10 Darrell L. Bowen, Plattsburgh, NY, for Debtor.
Eggleston & Cramer, Ltd., Douglas J. Wolinsky, Chapter 7 Trustee, Burlington, VT, for Trus
Matthew Sgambettera, Clifton Park, NY, Robert Garrasi, Niskayuna, NY, Amicus for USR Group.
Ronald J. Kim, Saratoga Springs, NY, Amicus for Denise Dwyer.
Harris, Balzer & Conway, PLLC, Gregory G. Harris, Albany, NY, Amicus Chapter 7 Trustee.
Ehrlich, Hanft, Baird & Arcodia, Marc S. Ehrlich, Troy, NY, Amicus Chapter 7 Trustee.
Goldberg & Gottheim, Nathan M. Goldberg, Albany, NY, Amicus Chapter 7 Trustee.
MEMORANDUM-DECISION
ROBERT E. LITTLEFIELD, JR., Bankruptcy Judge.
Before the court is a motion filed by Linda L. Carrow (the "Debtor") to convert her bankruptcy case from chapter 7 to chapter 13 under the United States Bankruptcy Code (11 U.S.C. §§ 101-1330)[1] pursuant to § 706(a). The Chapter 7 Trustee, Douglas J. Wolinsky (the "Trustee"), has filed opposition to the motion.
JURISDICTION
This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), and the court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a), 157(b)(1), and 1334(b).
FACTS
The facts relevant to this motion are undisputed and are as follows. The Debtor filed a petition for chapter 7 bankruptcy relief on December 11, 2002 (the "Petition"). On Schedule A of the Petition, the Debtor lists three parcels of real property, to wit: her residence, owned jointly with *11 her daughter, located in Onchiota, New York (the "Residence"), and two unencumbered parcels of vacant land located in Saranac, New York (the "Land"). The Debtor lists a value of $27,500 for the Residence, but indicates that it is subject to a mortgage lien in the amount of $17,500. She lists the Land value as $13,800. On Schedule C, the Debtor claims a homestead exemption for the Residence, but does not claim any exemption for the Land. In Schedules I and J, the Debtor respectively lists net monthly income of $1,883.14 and total monthly expenses of $2,342.96.
On April 18, 2003, the Debtor received her discharge. The Trustee continued to administer the estate and on May 27, 2003, filed an application to employ a real estate broker, which was granted by written order on July 21, 2003. The next day, the Trustee filed a motion to sell the Land pursuant to § 363(b)(1). In response, on August 4, 2003, the Debtor filed an objection to the Trustee's sale motion and a separate motion to convert her case from chapter 7 to chapter 13. The Debtor's accompanying notice of motion scheduled a related hearing on the court's regular motion calendar on September 11, 2003. On September 8, 2003, the Trustee objected to the Debtor's conversion motion. The parties submitted memoranda of law and on January 8, 2004, after numerous hearings and conferences, the court indicated it would treat the motion as a submitted matter without the need for an evidentiary hearing. Because this was a case of first impression in this court, several amicus briefs and affirmations have also been submitted. Following the last amicus filing on May 14, 2004, the matter is now ripe for decision.
ARGUMENTS
The Debtor asserts that the language of § 706 is, "on its face, apparently clear and unambiguous," Debtor's Mem. at 2, yet the Debtor acknowledges that a number of courts have diminished, conditioned, or modified the right to convert. In recognition of the divergent case law on the issue, the Debtor labels the right to convert as "nearly absolute," Id. at 5, and suggests that even if the court were to consider the equities of the case, the circumstances mitigate in favor of permitting the Debtor to convert to chapter 13. The Debtor admits that she and her attorney chose chapter 7 relief with the expectation that the Trustee would abandon the Land on the ground that it would provide inconsequential value to the estate. The Debtor and her counsel based their expectation of abandonment on the Land's low market value and location in an area "subject to rigorous land use development and zoning scrutiny." Id. at 10. However, the Debtor denies that she entered the bankruptcy system in bad faith. As proof that she has declared bankruptcy with clean hands and that she does not seek to "leverage" her creditors, the Debtor asks the court to consider her willingness to relinquish all rights and entitlements of her chapter 7 discharge in exchange for the granting of her motion, thereby allowing her to retain the Land which she inherited. Additionally, the Debtor asserts that more money will go to creditors if she converts, and that she will be able to fund a chapter 13 plan because of an "oversight" in her income at the time of filing in the approximate amount of $1,000 per month, and a commitment from her adult son to help her fund such a plan. Lastly, the Debtor contends that the Trustee's motion should be denied on procedural grounds because the notice requirements of § 363(b)(1) may not have been complied with, since it appears that the purchase and sale contract was executed prior to the required statutory notice being given.
*12 The Trustee takes the position that § 706(a) gives the debtor a presumptive, but not absolute, right to convert from chapter 7 to chapter 13. He argues that his position is supported by the cases of In re Marcakis, 254 B.R. 77 (Bankr.E.D.N.Y. 2000) (debtor's request to convert denied), and In re Krishnaya, 263 B.R. 63 (Bankr. S.D.N.Y.2001) (debtor's request to convert granted).[2] The Trustee contends that the procedural requirement that a conversion be sought by motion suggests that the court play an active role. See Trustee's Opp'n at 3. Additionally, the Trustee argues that when a debtor seeks to convert a chapter 7 case to one under chapter 13, the court may use its discretionary powers under § 105 to prevent abuse of the bankruptcy process. In this case, the Trustee suggests that the court's use of § 105 is warranted because the Debtor received a discharge and there are no remaining debts to be paid through a chapter 13 plan, the Debtor has not proposed a plan, the Debtor has no apparent ability to fund a plan, and that she moved to convert for the sole purpose of preserving the Land, which is a non-exempt asset of the estate. In this regard, the Trustee asserts that the Debtor knew or should have known that when she filed her chapter 7 petition, the Land would become part of the bankruptcy estate and, therefore, be subject to liquidation. Finally, the Trustee makes the policy argument that to allow a conversion in this case would send the signal to future debtors to "hedge their bets." Id. at 7. It is the Trustee's belief that such "legal maneuvering" should not be permitted. Id.
ISSUES
The primary issue presented is whether a debtor has an absolute right to convert and, if not, what conditions may pose an impediment to conversion. Ancillary issues are the appropriate procedure to implement the conversion and what effect, if any, a chapter 7 discharge has on a proposed conversion.
DISCUSSION
The controversy in this case is generated by the express language of § 706(a), which states in pertinent part that "[t]he debtor may convert a case under this chapter to a case under chapter 11, 12, or 13 of this title at any time, if the case has not yet been converted under section 1112, 1208, or 1307 of this title." 11 U.S.C. § 706(a) (emphasis added).[3] This statutory language has been the subject of much debate, and courts are divided on the question of whether a debtor has an absolute right to convert from chapter 7 to chapter 13. See In re Krishnaya, 263 B.R. at 65 ("The authorities are considerably less than uniform as to whether the right to convert to chapter 13 is wholly absolute by statute.") Interestingly, three competing views have emerged.
First, one line of authority gives literal meaning to the statute and holds that the law is clear and unambiguous; therefore, there is no authority to deny conversion based on any factors other than those explicitly stated in § 706.[4]See, e.g., In re *13 Young, 237 F.3d 1168 (10th Cir.2001); In re Finney, 992 F.2d 43 (4th Cir.1993);[5]In re Martin, 880 F.2d 857 (5th Cir.1989);[6]In re Miller, 303 B.R. 471 (10th Cir. BAP 2003); Pequeno v. Schmidt, 307 B.R. 568 (S.D.Tex.2004); In re Widdicombe, 269 B.R. 803 (Bankr.W.D.Ark.2001); In re Rossen, Case No. 99-10383, slip. op. (Bankr.D.Vt. July 10, 2000); In re Kleber, 81 B.R. 726 (Bankr.N.D.Ga.1987); In re Easley, 72 B.R. 948 (Bankr.M.D.Tenn. 1987). This line of authority has been characterized as the majority view. In re Widdicombe, 269 B.R. at 806. But see In re Ponzini Til B.R. 399, 403 (Bankr. E.D.Ark.2002) (asserting that there is no longer a clear majority).
Second, one branch within the minority holds that the right to convert is absolute only in the absence of "extreme circumstances." See, e.g., In re Kuntz, 233 B.R. 580 (1st Cir. BAP 1999) (debtor's bad faith must be egregious to constitute extreme circumstances); In re Carter, 285 B.R. 61, 65 (Bankr.N.D.Ga.2002) ("While the Court need not define exactly the type of extreme circumstance that would lead it to deny a motion to convert, the Court would consider evidence that a debtor is seeking to avoid payment of debts, rather than to make an honest effort to repay them."); In re Krishnaya, 263 B.R. at 70 (without defining extreme circumstances, the court found that conversion from chapter 7 to chapter 13 for the purpose of avoiding dischargeability litigation fell below the threshold for denying conversion); In re Starkey, 179 B.R. 687 (Bankr.N.D.Okla. 1995); In re Spencer, 137 B.R. 506 (Bankr. N.D.Okla.1992).
Third, the other branch within the minority utilizes a broad "totality of the circumstances test," considering factors such as the possibility of abuse, prejudice to other parties or creditors, eligibility, and "all the circumstances generally" to decide whether "conversion is appropriate pursuant to the overall purpose and policy of the Bankruptcy Code." In re Marcakis, 254 B.R. at 82; see also In re Porter, 276 B.R. 32 (Bankr.D.Mass.2002); In re Pakuris, 262 B.R. 330 (Bankr.E.D.Pa.2001); In re Dews, 243 B.R. 337, 340 (Bankr.S.D.Ohio 1999) ("[C]ourts should make a preliminary inquiry as to the quality of any proposed chapter 13 plan, and whether it would meet confirmation requirements."); In re Sully, 223 B.R. 582, 585-86 (Bankr. M.D.Fla.1998) (focusing extensively on the debtor's ability, or lack thereof, to propose a feasible plan); In re Tardiff, 145 B.R. 357 (Bankr.D.Me.1992).[7]
*14 Having carefully considered the competing positions and for the reasons discussed infra, the court is convinced that the strict majority opinion reflects the correct interpretation of § 706(a).
I. THE RIGHT TO CONVERT
Section 706(a) must be read in conjunction with subsection (d), which provides:
(d) Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of this title unless the debtor may be a debtor under that chapter.
11 U.S.C. § 706(d). In determining whether § 706, as a whole, confers an absolute right of conversion upon the debtor, courts are guided by the following legislative history:
Subsection (a) of this section gives the debtor the one-time absolute right of conversion of a liquidation case to a reorganization or individual repayment plan case. If the case has already once been converted from chapter 11 or 13 to chapter 7, then the debtor does not have that right. The policy of the provision is that the debtor should always be given the opportunity to repay his debts, and a waiver of the right to convert a case is unenforceable.
....
Subsection (d) reinforces section 109 by prohibiting conversion to a chapter unless the debtor is eligible to be a debtor under that chapter.
S. REP. NO. 95-989, at 94 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5880 (emphasis added). Absolute is defined as "[f]ree from restriction; qualification, or condition." BLACK'S LAW DICTIONARY 7 (7thed.1999). Yet, we know from the limitations found in § 706(a) and (d), i.e., "if the case has not been converted" and "unless the debtor may be a debtor under such chapter," that the right to convert is not absolute. Thus, the term, as it appears in the legislative history, is misleading.
A statutory right that is absolute cannot have court-made exceptions. If that were the ease, it would not be an absolute right. Such an interpretation would be the statutory or judicial equivalent of being somewhat pregnant. One is either pregnant or not. A right is either absolute or it is not.
Pequeno v. Schmidt, 307 B.R. at 579.
This does not however mean that the court may look beyond the four corners of § 706 to answer a conversion request. The court must recognize the significance of Congress' grant to the debtor of a "right to convert" which cannot be waived. Right is defined as "[a] power, privilege or immunity secured to a person by law." BLACK'S LAW DICTIONARY at 1322. Rather than subject this right to a myriad of restrictions, Congress has conditioned it only upon (1) lack of a prior conversion and (2) eligibility. The intent of Congress is clear: that a debtor has the right to convert subject to these two qualifications.
Courts that have joined the minority have done so based upon an alternate statutory interpretation of § 706, court discretion invoked by the procedure necessary to implement a conversion, and/or use of the court's inherent authority pursuant to § 105. The minority has closely followed the seminal cases of Marcakis and Krishnaya.[8] Those courts that have adopted *15 Marcakis generally quote Judge Eisenberg for the following:
In the case now before the Court, the relevant statutory language has remained an important starting point for determining the scope of [§] 706(a).
....
... In looking to the actual verbs used in the statute, the Court agrees that, simply put, "shall" means "must," something mandatory, and "may" connotes the permissive, the possible; and when turning to section 706, reading all subsections as a context, as did the Starkey court, supra, and indeed as did the Barbieri court with section 1307, subsections (b) and (c) of section 706 speak of what a court "may" do concerning conversion.
....
The very first words of section 706(a) "The debtor may convert a case ..."is in the nature of the permissive.... Since a motion must be made and approved by the Court, then a court must consider in its decision to permit or deny the possibility of abuse; prejudice to other parties or creditors; the eligibility to be a Debtor under the converted section of the code; and all the circumstances generally. The statutory language clearly states that the Debtor may convert his case, but does not state that he or the Court "shall" honor his request.
The Court must determine if the conversion is appropriate pursuant to the overall purpose and policy of the Bankruptcy Code.
In re Marcakis, 254 B.R. at 80-82. While the court appreciates the minority courts' motivation to avoid damage to the bankruptcy system or creditors in each individual case, see Pequeno v. Schmidt, 307 B.R. at 578, the court respectfully disagrees with the assertions that it is statutorily permitted to consider factors other than prior conversion and eligibility, or that it has a right to exercise equitable discretion within the parameters of a § 706(a) motion.
First, characterizing the language of the statute as a "starting point," thereby implying that the court may look beyond both the statute itself and the legislative history, ignores the plain meaning rule which demands that the express words of the statute be given their proper effect. See In re Porras, 188 B.R. at 379. As Judge Clark so eloquently stated:
Any judge-made exception that operates to place a gloss on statutory language as implacable as that found in section 706(a) poses a significant danger of judicial legislation. The Code (like many other federal enactments) is full of examples of statutes which work less well in practice than Congress anticipated they would when the language was being developed by staffers and debated in committees. No doubt, the "one time right to convert" found in section 706(a) is one such statute, inviting as it does strategic maneuvering to avoid unpleasantness (or worse). It devolves to a court to make statutes fit in practice, which is why published judicial decisions are so important even in areas heavily fleshed out by statute or code. But courts exercising that authority must always be mindful of their limits. Under our system of government, the coordinate branches of government are expected to exercise a certain restraint, lest *16 they stray into another branch's bailiwick. For the courts, the greatest temptation is to "fix" statutes with judicial decisions having the force of law. It is a temptation which must be assiduously avoided, in deference to our structure of government. THE FEDERALIST, No. 51, (Wesleyan University Press, Jacob E. Cooke, editor, 1961), at p. 349.
Id. at 378-79. The Court of Appeals made clear in the case of In re Barbieri, 199 F.3d 616 (2d Cir.1999), that the court may not disregard the plain language of a statute and exercise discretion where none is afforded. Id. at 619, 621 (addressing the issue of an absolute right to dismiss a Chapter 13 petition pursuant to § 1307(b)).[9] There is nothing in § 706 or elsewhere in the Code that demands more of a converting chapter 7 debtor than that he meet the § 109(e) requirements. In re Miller, 303 B.R. at 476. If Congress wishes to invoke the equitable discretion of the court, it does so. See 11 U.S.C. § 1112(d)(3) (a requirement to convert from chapter 11 to chapter 12 is that it be equitable). Bankruptcy courts are not, for any reason, at liberty to redraft the statute. In re Barbieri, 199 F.3d at 621.
The court is perplexed by the Marcakis rationale equating the court's role under § 706(a) with that under § 706(b) and/or (c). Section 706(b) speaks to what the court "may" do by exercising its discretion in cases of involuntary conversion; Section 706(c) speaks to what the court "may not" doit may not convert a case under chapter 7 to one under chapter 12 or 13 unless the debtor requests such conversion. By contrast, subsection (a) speaks to what the debtor may do, which suggests that there can be no discretionary interference from the court. Cases of involuntary conversion under § 706(b) are treated as contested matters pursuant to Rule 9014, and the ultimate decision is left in the sound discretion of the court, based on what will most inure to the benefit of all parties in interest. S. REP. No. 95-989, at 94. This is far removed from a debtor exercising a statutory right to convert via the less stringent provisions of Federal Rule of Bankruptcy Procedure[10] 9013. As explained by Judge Brown in Rossen, "[§] 706(a) leaves conversion to the discretion of the debtor ... It may be contrasted with § 706(b) which leaves conversion under different circumstances to the discretion of the court." Rossen, slip. op. at 6 (emphasis added). Moreover, the specific words emphasized by the Marcakis court, at least as to chapters 12 and 13, have to be permissive, the alternative being some form of "the debtor shall convert" which connotes an involuntary conversion. That would violate both § 706(c), which specifically prohibits the court from converting a chapter 7 case to one under chapter 13 unless the debtor requests conversion, and the United States Constitution.[11] The use *17 of the word "may" in § 706(a) simply puts a one-time option of converting in the debtor's hands; the debtor may or may not choose to exercise the option.[12]
Second, the Marcakis court's procedural bootstrapping completely ignores that the court's jurisdiction emanates not from the Rules but from Title 28 of the United States Code. The Rules "shall not abridge, enlarge, or modify any substantive right." 28 U.S.C. § 2075. While motion practice is required to answer any questions of fact relating to the eligibility status of the debtor, the court cannot unilaterally expand or contract it's authority or responsibilities by virtue of a procedure that is designed to address specific issues of fact raised by § 706(a). "While we recognize that conversion can occur only upon a court order, we do not agree that such a requirement in the rules alone automatically invokes a court's discretion." In re Miller, 303 B.R. at 477. The procedure for conversion under § 706(a) is plainly set forth in Rule 1017(f)(2), which provides that voluntary conversion shall be treated on regular motion practice in accordance with Rule 9013.[13] "[R]ule 1017(f) is still an exercise of the rulemaking power and cannot deprive parties of statutory rights." In re Krishnaya, 263 B.R. at 65.
Finally, as contemplated by Congress and provided for in the Code, questions of bad faith, abuse of process, prejudice to creditors, and so forth, may be addressed within the confines of the newly minted chapter 13 case while preserving all rights, concerns, and potential objections. See, e.g., In re Young, 237 F.3d at 1174 (the provisions of § 1325 ensure that a chapter 13 plan arising out of a conversion from chapter 7 will be properly scrutinized by the bankruptcy court before the plan is confirmed, mitigating the danger of abuse); In re Oblinger, 288 B.R. 781, 786-87 (Bankr.N.D.Ohio 2003) (issues of good faith, best interests of creditors, best efforts of the debtor and feasibility "should be addressed in the context of a complete record developed in a confirmation hearing on a proposed Chapter 13 plan actually noticed to and evaluated by creditors and the Chapter 13 trustee, not in the context of a hearing on the propriety of conversion in the first instance" (citations omitted)); In re Porras, 188 B.R. at 379 (all parties have ample remedies to meet any abuse inflicted by conversion, including re-conversion or sanctions under Rule 9011(a)). The court disagrees with the minority positions not only because they grossly contort the Code, but also because they confuse confirmability with eligibility. The concerns of the minority will be addressed in due timepost-conversion, but pre-confirmation. Until the case has been converted and a plan has been filed,[14] bad *18 faith, treatment of creditors, "disposable income," feasibility, etc., are not ripe for adjudication.
Section 706(a) is silent on debtor motivation, but when Congress wants bad faith addressed, it so states. See 11 U.S.C. § 348(f)(2) ("If a debtor converts a case under chapter 13 of this title to a case under another chapter under this title in bad faith, the property in the converted case shall consist of the property of the estate as of the date of conversion."); § 1129(a)(3) (the court shall confirm a chapter 11 plan only if the plan has been proposed in good faith); § 1225(a)(3) (same with respect to a chapter 12 plan); § 1325(a)(3) (same with respect to a chapter 13 plan).
By crafting § 706(a) as it did, Congress did not leave the door open for abuse. While bad faith cannot prevent the debtor from converting from chapter 7 to chapter 13, once the conversion is done, bad faith would constitute grounds for an objection to confirmation pursuant to § 1325(a)(3) or cause for reconversion under § 1307(c).[15] While one might consider it frivolous to convert only to reconvert, such a procedure allows for compliance with both the Congressional mandate of § 706(a) and the court's duty to protect the bankruptcy process from abuse. Pequeno v. Schmidt, 307 B.R. at 580. Any request to reconvert is more properly determined by the court as part of the chapter 13 confirmation process. In re Little, 245 B.R. 351, 356 (Bankr.E.D.Mo.2000) (citation omitted). "[I]f this extra-procedural step needs to be eliminated, it needs to be done by Congressional amendment to the statute, not by judicial fiat." Pequeno v. Schmidt, 307 B.R. at 580 n. 98 (citation omitted). If necessary, the court may act sua sponte to preserve the integrity of the process.
Other than bad faith, unique circumstances may arise upon conversion that bring into question the appropriateness of the conversion and the need to balance the interests of the debtor against those of the creditors. As exemplified by In re Sully, 223 B.R. 582, conversion may place liquid assets in the debtor's hands. In that case, a personal injury action was settled for $40,000, and the debtor filed a conversion request to gain control of the settlement proceeds. The court denied conversion on the grounds of bad faith, infeasibility, and the likelihood that the funds would dissipate without disbursement to creditors. As discussed supra, questions of bad faith and feasibility must be answered in the chapter 13 process. Moreover, the issue of proceeds could be resolved in the confines of the conversion motion itself. The court could fashion an order restricting the use of funds pending a further order or, in the extreme, the court could order dual signatories on the account. While § 1306(b) provides that the debtor remains in possession of all property of the estate, the earliest it could revest in the debtor, pursuant to § 1327(b), is at confirmation. Thus, the court couldand it must, even in *19 a case such as Sully, follow the clear intent of § 706 while protecting all parties in interest pending the confirmation process.
The case of In re Pakuris, 262 B.R. 330, also presents a variation on the standard conversion situation. There, the chapter 7 trustee was administering a lawsuit that was not originally scheduled by the debtor. The trustee noticed a proposed settlement. In response, the debtor opposed the settlement and moved to convert. The court expressed concern that by returning control of the lawsuit to the debtor, the creditors would lose the benefit of the trustee's efforts and ultimately bear the risk of a poor effort by the debtor. Under a strict reading of § 706, this is also insufficient to prevent conversion, but this does not mean that procedural safeguards are lacking. Rather, the debtor would still have to meet the minimum amount negotiated by the trustee and convince the court that any plan had been proposed in good faith and was viable enough to confirm while relying on the debtor's efforts to shepherd the lawsuit. Furthermore, the question of who should bear the risk for a volatile asset, such as a lawsuit or publicly traded securities, is not an uncommon question in chapter 13 practice. The question may just as easily exist in an originally filed chapter 13 as in a converted chapter 7. In the former, it would be answered during the confirmation process, but not before. In an egregious case, the court could order a hearing on shortened notice to specifically address whether there is cause to reconvert the case and return control to the previously appointed trustee or, to ensure that all parties were on notice, direct that no assets be sold, settled, or transferred without further order of the court. If the case involved real property, the court could order the chapter 13 trustee to file a notice of the commencement of the debtor's bankruptcy case in the county clerk's office where the real property is located.
For all of the foregoing reasons, the court agrees that the strict interpretation of § 706(a) is the correct one. The debtor has an unfettered right to convert provided the debtor can meet the qualifications of § 706. As stated supra, the debtor's motion to convert may be denied only upon two grounds: (1) prior conversion or (2) ineligibility pursuant to § 109.
II. PROCEDURE NECESSARY TO EFFECTUATE CONVERSION
The conversion of a chapter 7 case to one under chapter 13 pursuant to § 706(a) is governed by Rules 1017(f)(2) and 9013. Rule 1017(f)(2) provides that conversion under § 706(a) "shall be on motion filed and served as required by Rule 9013." FED. R. BANKR. P. 1017(f)(2).[16] Rule 9013 provides:
A request for an order, except when an application is authorized by these rules, shall be by written motion, unless made during a hearing. The motion shall state with particularity the grounds therefor, and shall set forth the relief or order sought. Every written motion other than one which may be considered ex parte shall be served by the moving party on the trustee or debtor in possession and on those entities specified by these rules or, if service is not required or the entities to be served are not specified by these rules, the moving party shall serve the entities the court directs. *20 FED. R. Bankr. P. 9013. Thus, Rule 9013 provides four potential avenues to obtain an order of conversion: (1) application; (2) oral motion; (3) written motion offered ex parte; or (4) written motion served on those parties directed by the rules or specifically by the court.
There is at least one seemingly uniform conclusion among courts that have decided the issue sub judice: disputed questions of fact may exist with respect to the debtor's eligibility for chapter 13 pursuant to § 109. Keeping in mind standards of due process and the congressional mandate of § 706(d) that a case may not be converted unless the debtor is eligible for that chapter, the only appropriate procedure is a written motion served on the necessary parties. While the court may resolve the issue of prior conversion simply by examining the docket, the same is not true with respect to eligibility. But see 9 COLLIER ON BANKRUPTCY 11 1017.05[1][b] at 706-12 (15th ed. rev. 2003) ("Normally, the court can simply check the docket in the case to determine whether the debtor is entitled to the ... conversion sought in the motion."). The court docket would not answer questions of fact such as whether the (1) debtor has regular income within the meaning of § 101(30);[17] (2) schedules regarding debt structure are accurate as to amounts; or (3) any or all of the debts are contingent and/or unliquidated. To presume that the court or the clerk of court will peruse the information provided by the debtor, answer attendant questions of fact, and arbitrarily decide the fate of the petition without input from any party in interest is impractical at best and possibly violative of concepts of due process at worst. With inquiries such as these, the court generally looks to the case trustee, the United States Trustee and creditors to provide information and, if appropriate, objections to the debtor's eligibility status. They must therefore be given notice and the opportunity to appear and be heard. Accordingly, the court elects to direct the movant requesting a case be converted pursuant to § 706(a) provide at least 20 days notice of the hearing to the trustee and all creditors pursuant to Rule 2002(a)(4).
In the past, the court has signed ex parte applications to convert a case from chapter 7 to chapter 13; it will no longer do so. Although most requests to convert will probably be unopposed, the court will not assume that the clear directives of § 706 have been automatically met and/or complied with. The requirement of a motion will not prejudice the debtor because if there is no opposition, the matter will be routinely granted on a default basis pursuant to Local Rule 9013-4(b)(9). If time is of the essence, the debtor may request a reduction in time required to effectuate the motion pursuant to Rule 9006(c). In either event, if there are grounds to deny the conversion which were not apparent from a reading of the case history, an opportunity to be heard will help ensure that justice prevails. If the debtor affirmatively chooses to convert, then, pursuant to Rules 1017(f)(2), 9013, and 2004(a)(4), a hearing would be scheduled, if necessary, to allow an airing of any eligibility issues.
III. THE DISCHARGE ISSUE
Except as provided in § 523, a discharge under § 727(a) discharges a debtor from all debts that arose before the date of *21 the order for relief under chapter 7. 11 U.S.C. § 727(b). There is nothing in the Code prohibiting a debtor from converting a case from chapter 7 to chapter 13 once a discharge has been granted. Nevertheless, the topic of whether the issuance of a chapter 7 discharge affects the ability of a debtor to convert to a plan chapter has generated much case law and, at times, very little analysis.
Many courts have come to the conclusion that the prior issuance of a discharge is fatal, in and of itself, to a § 706 conversion. In re Marcakis, 254 B.R. at 82-83; see also In re Lesniak, 208 B.R. 902 (Bankr.N.D.Ill.1997); In re Schwartz, 178 B.R. 340, 345 (Bankr.E.D.N.Y.1995); In re Jeffrey, 176 B.R. 4 (Bankr.D.Mass.1994); In re Tardiff, 145 B.R. 357 (Bankr.D.Me. 1992). Courts prohibiting conversion after discharge assert that once a discharge has been issued there are no debts to be paid under a plan. Id.
The problem with this line of authority, with all due respect, is that the courts have reached a conclusion of law that is based more on citation to each other's decisions than on any critical analysis of the Code, the Rules, or existing case law. There is little or no discussion of the law, just the shared sentiment that it does not feel right that a chapter 7 debtor may convert to chapter 13 and, in effect, get two discharges for the price of one filing fee. This court respectfully disagrees with this line of cases. Instead, the court agrees with Judge Mitchell's rationale and conclusion in the case of In re Mosby, 244 B.R. 79 (Bankr.E.D.Va.2000), that there is no support in the Code or Rules for the argument that the issuance of a discharge bars conversion to chapter 13. Id. at 88; see also In re Oblinger 288 B.R. 781; In re Carter, 285 B.R. 61 (Bankr.N.D.Ga.2002).
A discharge operates as an injunction against the collection of a discharged debt "as a personal liability of the debtor." 11 U.S.C. § 524(a)(2). There is nothing in the Code to suggest that a discharge eliminates the creditors' claims against the bankruptcy estate. In re Mosby, 244 B.R. at 87. "Creditors with valid claims against the bankruptcy estate on the date the bankruptcy petition is filed do not lose them simply because the debtor is granted a discharge or the case is converted to another chapter." Id. Most often, in a chapter 7 case, the sequence of events is such that a debtor receives his or her discharge prior to the trustee making distributions to creditors. Id. Creditors do not lose their right to receive their pro rata share of the assets of the estate to be distributed because their debts were discharged.
It is also instructive to note that when Congress wishes to inject a prohibition against two discharges in one case, it expressly does so. Section 1112(d)(2) specifically disallows a conversion from chapter 11 to chapter 12 or 13 after the debtor has received a chapter 11 discharge. No such prohibition is found in § 706. It is generally presumed that Congress acts intentionally and purposely when it includes particular language in one section of a statute but omits it in another. BFP v. Resolution Trust Corp., 511 U.S. 531, 537, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994). The court is concerned, however, that when a chapter 7 case is converted postdischarge, creditors who have received notice of the discharge will be confused as to the status of their claims upon receipt of notice of the conversion to chapter 13. In an attempt to clarify the status of the debtor's discharged debts, the court will require language in an order converting a case from chapter 7 to chapter 13 that (1) the order shall be served upon all creditors and parties in interest, and (2) if the debtor's discharge has been issued extinguishing *22 personal liability, a claim may still be filed against the chapter 13 estate.
IV. THE FACTS OF THE CASE
In this case, there have been no assertions that the Debtor previously converted her case or that she is ineligible for chapter 13. Thus, the court finds there are no impediments to the Debtor converting her chapter 7 case to chapter 13.[18]
Whether the Debtor will be able to confirm a chapter 13 plan is left for another day. The court is troubled by the Debtor's apparent $1,000 oversight in her income and has concerns about the proposed monthly gift from a third party to help fund a plan. While these concerns may raise questions of good faith and feasibility relevant to a future confirmation hearing under § 1325(a)(3) and (a)(6), respectively, they are not yet ripe for judicial intervention.
The Trustee voices concern that the credibility of chapter 7 trustees will be tarnished if they advertise and negotiate sales with third parties that they may not be in a position to consummate should a debtor be permitted to convert his or her case prior to the sale. Any policy arguments, however, must be directed to the legislative branch of the government. "[Courts] may not arrogate to ourselves the legislative role. For when we do, we cross that line that assures appropriate separation of powers, and presume to ourselves a role ... entrusted to men and women [who are] answerable to the people for their actions." In re Porras, 188 B.R. at 379 n. 4. The court may only enforce legislation as it exists, whether it is "good or bad, far-sighted or improvident, useful or misguided." Id. In any event, a sale of an estate asset requires court approval unless it is in the ordinary course of business. 11 U.S.C. § 363. Because court approval is a contingency of a sale, a contract with a bankruptcy trustee is never absolute. There is always the chance that a trustee may not obtain approval for a sale or that another entity will offer a higher amount. Thus, any individual attempting to purchase an estate asset must do so with their eyes wide open, realizing that finality is achieved not with a contract but with a court order.
In this case, the Debtor filed her motion to convert in response to the Trustee's motion. The court approval contingency has not yet been satisfied.[19] Therefore, no prejudice occurs to the Trustee by virtue of the Debtor's conversion.
CONCLUSION
Based upon the foregoing, the within case is converted to one under chapter 13, and a chapter 13 Trustee shall be appointed.
The Debtor's counsel shall submit an order in conformance with this decision.
NOTES
[1] Unless otherwise indicated, all section references contained herein relate to the United States Bankruptcy Code tee.
[2] These cases are discussed in detail infra. See discussion infra at 14-17.
[3] Because § 706 expressly permits only an initial conversion from chapter 7 to a reorganization or repayment plan case, the question of what statutory authority, if any, would permit a previously converted case to reconvert must await another case on another day.
[4] As discussed infra, § 706(d) further limits the right to convert to debtors who are eligible for another chapter under § 109. At the time this case was filed, under § 109(e), only an individual with regular income that owed, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $290,525 and noncontingent, liquidated, secured debts of less than $871,550 would have been eligible for chapter 13 relief. For cases commenced on or after April 1, 2004, the amounts in effect are $307,675 and $922,975, respectively. 11 U.S.C. § 104(b) (providing for periodic adjustment of each dollar amount in Title 11 at 3-year intervals).
[5] The Finney court stated that "[CJongress intended § 706(a) to confer `the one time absolute' right to convert from liquidation to reorganization because `the debtor should always be given the opportunity to repay his debts.'" In re Finney, 992 F.2d at 44 (citation omitted). Yet, the court went on to state, "We express no opinion on what circumstance, if any, would justify invocation of § 105(a) to deny a § 706(a) motion outright." Id. at 45. This apparent contradiction has led to other courts' citation of the case for whichever respective position the citing court wishes to adopt.
[6] Like Finney, the Martin case also presents an enigma. The case is cited both for the proposition that the debtor has an absolute right to convert such that the court lacks discretion to block the conversion, and for its converse. The confusion emanates from footnote 2, which references cases that deny the right to convert only in extreme circumstances without editorializing about the appropriateness of that conclusion.
[7] While there seems to be some overlap between the two minority positions, since each considers a debtor's bad faith when determining whether to allow conversion, those courts within the extreme circumstances branch generally limit their investigations to the question of bad faith without delving into other equitable considerations or confirmation issues.
[8] The Krishnaya court relied heavily upon the authority of Marcakis, adding that "while the Court should have the power to protect its jurisdiction from abuse, it should regard the right to convert from chapter 7 to chapter 13 as presumptive, and should deny the right to convert only for lack of statutory qualification or extreme circumstances." In re Krishnaya, 263 B.R. at 69 (footnotes omitted).
[9] Barbieri cautions bankruptcy courts to use their equitable powers sparingly. "[T]he equitable powers emanating from § 105(a) ... are not a license for a court to disregard the clear language and meaning of the bankruptcy statutes and rules." In re Barbieri, 199 F.3d at 620-21 (citing Official Comm. of Equity Sec. Holders v. Mabey, 832 F.2d 299, 302 (4th Cir. 1987) (internal quotation marks omitted)); Accord In re lamo, 283 F.3d 392, 403 (1st Cir.2002) ("Section 105(a) does not provide bankruptcy courts with a roving writ, much less a free hand .... The authority bestowed thereunder may be invoked only if, and to the extent that, the equitable remedy dispensed by the court is necessary to preserve an identifiable right conferred elsewhere in the Bankruptcy Code.").
[10] Unless otherwise indicated, all further Rule references relate to the Federal Rules of Bankruptcy Procedure.
[11] The Thirteenth Amendment provides in relevant part: Section 1. Neither slavery nor involuntary servitude ... shall exist within the United States.
[12] The court notes that §§ 706(a), 1208(a) and 1307(a) are worded exactly the same except for the previously converted case language in § 706(a). It is beyond question that chapter 12 and 13 debtors may convert to chapter 7 at their whim since Rule 1017(f)(3) provides for only a notice of conversion that is effective without court order. Both §§ 1208(e) and 1307(f) have the same eligibility prerequisites found in § 706(d), but it is superfluous as to conversion from chapters 12 or 13 to chapter 7. Any debtor who is eligible for either chapter 12 or 13 would be eligible for chapter 7. Thus, there would be no limitation to prevent the conversion and no need for a hearing. The same would be true for a § 706(a) conversion except for the two qualifications noted supra.
[13] For a more detailed analysis of these Rules, see discussion infra Part II at 15-16.
[14] Nothing in the Code or Rules requires the filing of a plan with a motion to convert. Rather, Rule 3015 provides:
The debtor may file a chapter 13 plan with the petition. If a plan is not filed with the petition, it shall be filed within 15 days thereafter .... If a case is converted to chapter 13, a plan shall be filed within 15 days thereafter ....
FED. R. BANKR. P. 3015(b).
[15] Because the issue is not presently before the court, no opinion is given on whether the Trustee would have standing to seek an involuntary conversion after the case has been converted from chapter 7 to chapter 13. But see In re Verdi, 241 B.R. 851, 858 (Bankr. E.D.Pa.1999) (Formerly appointed chapter 7 trustee, as a "party in interest," may move for reconversion because "[t]he Trustee is an administrative claimant who need not file a proof of claim to have a claim against the Debtor's estate.").
[16] The 1987 Advisory Committee Note to Rule 1017(d), which the 1999 amendments redesignated as Bankruptcy Rule 1017(f), states that the subdivision was amended to clarify that conversion pursuant to the cited sections is not a contested matter under Rule 9014 and that "[n]o hearing is required on these motions unless the court directs."
[17] An "individual with regular income" is defined as an "individual whose income is sufficiently stable and regular to enable such individual to make payments under a plan under chapter 13 of this title, other than a stockbroker or a commodity broker." 11 U.S.C. § 101(30).
[18] Because the court finds no impediment to conversion from chapter 7 to chapter 13 postdischarge, it need not reach the issue of what authority, if any, exists to permit a debtor to set aside or vacate his or her discharge once issued.
[19] If the sale had previously been approved by the court, the Debtor would have needed to move for reconsideration pursuant to Rule 9023, or relief from the order pursuant to Rule 9024. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1550686/ | 114 F.2d 723 (1940)
HEINER, Former Collector of Internal Revenue,
v.
GWINNER.
GWINNER
v.
HEINER, Former Collector of Internal Revenue.
Nos. 7025, 7031.
Circuit Court of Appeals, Third Circuit.
September 9, 1940.
Writ of Certiorari Denied December 23, 1940.
*724 John A. McCann, W. A. Seifert, William Wallace Booth, and Thomas P. Johnson, all of Pittsburgh, Pa. (Reed, Smith, Shaw & McClay, of Pittsburgh, Pa., of counsel), for plaintiff.
George Mashank, U. S. Atty., and Elliott W. Finkel, Asst. U. S. Atty., both of Pittsburgh, Pa., Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and Michael H. Cardozo, IV, Sp. Assts. to the Atty. Gen., for defendant.
Before MARIS, JONES, and GOODRICH, Circuit Judges.
Writ of Certiorari Denied December 23, 1940. See 61 S.Ct. 396, 85 L.Ed. ___.
MARIS, Circuit Judge.
These cross-appeals are from a judgment of the District Court for the Western District of Pennsylvania, in a suit brought by the plaintiff to recover income tax alleged to have been overpaid by him for the year 1930. We shall consider first the defendant's appeal. The pertinent facts involved in it are as follows:
In 1930 Duquesne Steel Foundry Company, hereinafter called Duquesne, and two other corporations reorganized and transferred their assets to Continental Roll & Steel Foundry Company, hereinafter called Continental. The plaintiff owned 625 shares of Duquesne stock which he had acquired prior to March 1, 1913. On that date it had a fair market value of not less than $127.50 per share which was greater than its cost to the plaintiff. In accordance with the reorganization plan the plaintiff received for each share of his Duquesne stock $96.33 in cash. In addition certificates for preferred and common stock of Continental were issued in his name and delivered to an escrow agent. Endorsed upon these certificates was the legend that the stock could not be sold nor exchanged for a period of one year unless the restriction was terminated by mutual consent of all the parties. Later, but in the same year, the plaintiff was permitted to pledge the preferred stock for a bona fide indebtedness, but the restriction against sale or exchange remained in force.
The plaintiff made his income tax returns on the cash receipts and disbursements basis. In computing his income tax for 1930 he treated the Continental preferred stock as having a fair market value of $94 per share and the common stock as having a fair market value of $27.50 per share. Based upon these valuations he reported in his income tax return for 1930 a capital gain as a result of the exchange of his stock for cash and securities in the new corporation.[1]
Thereafter the plaintiff filed a claim for refund alleging that no gain resulted from the stock transaction for two reasons: first, that the Continental stock had no fair market value because of the restriction upon its free transfer, and, second, that the Continental stock was not income to him in 1930 for tax purposes, since it was delivered to the escrow agent and not *725 to him. The Commissioner denied the refund. The district court sustained the taxpayer's contention that the Continental stock had no market value because of the restrictive agreement.
Upon the defendant's appeal the plaintiff relies upon both grounds to sustain the judgment in his favor. In a suit to secure the refund of taxes previously paid the presumption is that the taxes were rightly collected upon assessments correctly made by the Commissioner. The burden is upon the taxpayer to prove all the facts necessary to establish the illegality of the collection. Niles Bement Pond Co. v. United States, 281 U.S. 357, 361, 50 S.Ct. 251, 74 L.Ed. 901. The assessment in the present case was based upon market values reported by the taxpayer in his return. The burden was upon him in the district court to show either that no market value in fact existed or that the values thus reported by him were excessive. He sought to sustain the former proposition by offering in evidence the restrictive agreement to which we have referred.
The courts have on several occasions allowed proof of the fair market value of stock despite the fact that there was a restriction upon its free transfer. Fesler v. Commissioner, 7 Cir., 38 F.2d 155, certiorari denied, 281 U.S. 755, 50 S.Ct. 409, 74 L.Ed. 1165; Newman v. Commissioner, 10 Cir., 40 F.2d 225, rehearing denied, 10 Cir., 41 F.2d 743, certiorari denied, 282 U.S. 858, 51 S.Ct. 33, 75 L.Ed. 760; Wright v. Commissioner, 4 Cir., 50 F.2d 727, certiorari denied, 284 U.S. 652, 52 S.Ct. 32, 76 L.Ed. 553. The restriction upon the sale or exchange of stock of course postpones the right of the owner of the stock to transfer title until the expiration of the period or its earlier termination and as a practical matter results in limiting the number of prospective purchasers to those who do not desire immediate delivery. In our opinion, however, it does not operate of and by itself to deprive the stock of a market value. If the assets and business of Continental appeared to prospective investors to be such as to make an investment in Continental lucrative there is no reason to believe that they would have been unwilling to pay some fair price for the stock, even though its delivery must necessarily have been postponed a year.
The plaintiff relies upon Helvering v. Tex-Penn Co., 300 U.S. 481, 57 S.Ct. 569, 81 L.Ed. 755; Propper v. Commissioner, 2 Cir., 89 F.2d 617, and Schuh Trading Co. v. Commissioner, 7 Cir., 95 F.2d 404, as decisive authority for the position he takes that a restriction upon the free sale of stock deprives it of a fair market value. In the Tex-Penn case, however, there was an element present which was deemed essential to the court's conclusion and which is lacking in the present case, namely, that the stock encumbered by the restriction was of a highly speculative character. In that case Mr. Justice Butler said (300 U.S. page 499, 57 S.Ct. page 577, 81 L.Ed. 755): "The court is also of opinion that the judgments must be affirmed upon the ground that in the peculiar circumstances of this case, the shares of Transcontinental stock, regard being had to their highly speculative quality and to the terms of a restrictive agreement making a sale thereof impossible, did not have a fair market value, capable of being ascertained with reasonable certainty, when they were acquired by the taxpayers."
There is no evidence in the present case that the Continental stock was speculative or hazardous in character. We do not think that the Tex-Penn case requires us to hold that a mere restriction against sale for one year, without more, as a matter of law deprives stock of all market value. The restriction in the Propper case was for five years and there were other facts present in that case which sufficiently distinguish it from this one. Insofar as the Schuh Trading Company case may be considered as authority for the plaintiff's position we find ourselves unable to follow it, for the reasons already stated.
To sustain his alternative claim the plaintiff offered opinion testimony which if competent tended to show that the market values were less than those reported in his return. Objections by the defendant to this testimony upon the ground that the witnesses were not qualified to express an opinion were sustained by the trial judge. We agree with the conclusion of the trial judge that the witnesses were not shown to be qualified. It necessarily follows that there was no competent evidence to sustain a finding of the reduced market value claimed in the alternative by the plaintiff.
*726 Our conclusion, therefore, is that the plaintiff failed to produce sufficient evidence to overcome the prima facie correctness of the assessment and that the district court erred in allowing recovery of the tax paid upon the gain resulting from the stock transaction.
This brings us to the contention that the value of the stock which was deposited in escrow subject to a restriction on sale was not income to the plaintiff in the year 1930 because it was not received by him in that year. The shares were issued in his name. Both the number of shares and the date upon which the plaintiff was entitled to receive physical possession of the certificates were fixed in 1930. He had the legal title and the equitable interest; it was only physical possession that was given the escrow agent. His title was in no respect conditional and could not be divested by any future occurrence. The stock became the absolute property of the plaintiff in 1930 and it is, therefore, in that year that he received income to the extent of the value of the stock. Bonham v. Commissioner, 8 Cir., 89 F.2d 725; Whitney Corporation v. Commissioner, 8 Cir., 105 F.2d 438.
The cases relied upon by the plaintiff do not compel a contrary conclusion. Upon their facts they are clearly distinguishable from the case before us. We think the plaintiff received the stock in 1930.
We now turn to the consideration of the plaintiff's appeal, which raises the sole question whether the failure to charge off a debt as worthless in 1930 deprives the taxpayer of the right to deduct the worthless debt in his income tax return for that year.
It appears upon this appeal that the plaintiff advanced $70,669.18 to a corporation in which he was a stockholder. In 1930 he issued execution upon a judgment against the corporation and obtained title at the sheriff's sale to property having a fair market value of $40,035.13. The sale left the corporation without assets. The plaintiff did not charge off his loss of $30,634.05 in 1930, however, and for that reason the district court refused to allow the deduction sought by him in his claim for refund.
Section 23 of the Revenue Act of 1928, 26 U.S.C.A. Int.Rev.Acts, page 357, by virtue of which the plaintiff claims to be entitled to the deduction provides:
"Sec. [§] 23. Deductions from Gross Income
"In computing net income there shall be allowed as deductions: * * *
"(j) Bad Debts. Debts ascertained to be worthless and charged off within the taxable year (or, in the discretion of the Commissioner, a reasonable addition to a reserve for bad debts); and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt to be charged off in part."
It is clear from this section and conceded by the plaintiff that to entitle him to the allowance in the case of a totally worthless debt he must charge off the debt during the same year for which the allowance is claimed. His argument is that the debt was only partially worthless and that accordingly no charge off was necessary or indeed possible. It seems that the courts are by no means in accord on the necessity for a charge off in the case of a partially worthless debt.[2] We deem it unnecessary to pass upon this question, however, for we are of the opinion that the debt involved in the present case was wholly worthless at the end of the taxable year. At that time the debt had been reduced by the payment derived through the sheriff's sale to $30,634.05, which amount the plaintiff concedes was wholly uncollectible. He likewise concedes that he did not charge the debt off in 1930. The district court was right in concluding that he was not entitled to the allowance.
The judgment of the district court is reversed and the cause is remanded, with directions to enter judgment for the defendant.
NOTES
[1] Sections 111 (a), (c), (d), 112 (a), (c) (1), and 113 (b) (1) (2) of the Revenue Act of 1928, 26 U.S.C.A.Int.Rev.Acts pages 376, 377, 378, 383, are the applicable sections for the determination of gain or loss resulting from the sale or other disposition of property.
[2] For cases holding that a charge off is not necessary see Commissioner v. Liberty Bank & Trust Co., 6 Cir., 59 F.2d 320; Chatham Phenix Nat. Bank & Trust Co. v. Helvering, 66 App.D.C. 330, 87 F.2d 547.
Contra: Santa Monica Mountain Park Co. v. United States, 9 Cir., 99 F.2d 450 certiorari dismissed, 306 U.S. 666, 59 S. Ct. 647, 83 L.Ed. 1062 and comment in United States v. Beckman, 3 Cir., 104 F.2d 260, 264, McMillan v. United States, Ct.Cl., 18 F.Supp. 853. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551631/ | 315 B.R. 399 (2004)
In re Verna Kay HERMAN, Debtor.
Verna Kay Herman, Plaintiff
v.
Gary Dean Jackson, Gloria A. Jackson, and Jackson Law Offices, P.C., Defendants.
Bankruptcy No. 02-64085. Adversary No. 03-6011.
United States Bankruptcy Court, E.D. Texas, Tyler Division.
March 31, 2004.
*400 Donald W. Cothern, Tyler, TX, for Plaintiff, Verna Kay Herman.
Gary D. Jackson, Jackson Law Offices, P.C., Lindale, TX, for Defendants, Gary Dean Jackson, Gloria A. Jackson & Jackson Law Offices, P.C.
MEMORANDUM OF DECISION
BILL G. PARKER, Chief Judge.
Now before the Court in the abovereferenced adversary proceeding is the Defendants' Second Motion for Summary Judgment (the "Defendants' Motion") filed by Gary Dean Jackson, Gloria A. Jackson, and the Jackson Law Offices, P.C. (collectively, "Defendants") on November 17, 2003. The Court, after reviewing the pleadings and considering the summary judgment evidence presented, finds that the Defendants' Motion should be granted and that judgment should be rendered for *401 the Defendants in this adversary proceeding.[1]
Factual Background
Prior to the current bankruptcy proceeding, the Defendants and the Debtor, Verna Kay Herman f/k/a Verna Kay Chappell ("Debtor"), were embroiled in state court litigation in the 3rd Judicial District Court of Anderson County, Texas, regarding the nonpayment of attorney's fees by the Debtor to Defendant Gary Jackson based upon his previous representation of the Debtor during a divorce proceeding. The Defendants were the plaintiffs in this state court proceeding, and the Debtor, along with Catherine Kennington and R.A. Moreau, were the defendants.[2] After a trial on the merits, the state court entered a judgment dated March 30, 1998, and subsequently issued an "Amended Judgment" on June 2, 1998.[3] This Amended Judgment provided as follows:
f. That Plaintiffs JACKSON LAW OFICES, P.C., GARY DEAN JACSON and GLORIA ANN JACKSON recover of and from Defendant VENA KAY CHAPPELL a net sum of Thirty-Eight Thousand Dollars ($38,000.00);
g. That Plaintiffs JACKSON LAW OFFICES, P.C., GARY DEAN JACKSON and GLORIA ANN JACKSON take nothing as against Defendants R.A. MOREAU and CATHERINE KENNINGTON;
h. That R.A. MOREAU and VERNA KAY CHAPPELL take nothing as against JACKSON LAW OFICES, P.C, GARY DEAN JACSON and GLORIA ANN JACSON;
i. Pre-judgment interest in the sum of Five Thousand Nine Hundred and Six dollars and Six Cents ($5,906.06) was awarded to Plaintiffs;
j. Post-judgment interest at the legal rate was awarded to Plaintiffs;
k. Costs were taxed to the party incurring same; and
l. All relief not awarded was denied.[4]
After the entry of the judgment, the Defendants prepared three identical abstracts of judgment. One abstract was filed in the deed records of Smith County, Texas, on July 9, 1998,[5] and the other two were filed on July 14, 1998, in the deed records of Anderson County, Texas, and Henderson County, Texas, respectively.[6] The abstracts of judgment properly identified the state court plaintiffs as the Jackson Law Offices, P.C, Gary Dean Jackson, and Gloria Ann Jackson. However, the only state court defendant identified in the abstracts of judgment was the Debtor under *402 the name "Verna Kay Chappell." R.A. Moreau and Catherine Kennington were not listed as defendants in either of the abstracts.
The case was subsequently appealed to the Texas Court of Appeals for the Twelfth District located in Tyler. Through its mandate entered on March 9, 2001, the Court of Appeals reversed and remanded the trial court's denial of the Jacksons' attorney's fees claim in their breach of contract action, modified the judgment "to award $5,000.00 to Gary Jackson and Gloria Jackson, against Verna Chappell, R.A. Moreau and Catherine Kennington, jointly and severally, for damages caused by their fraudulent transfers," ordered that the costs of court incurred in both the trial and appellate courts be assessed two-thirds against the Debtor and one-third against the Defendants, and otherwise affirmed, as modified, the trial court's judgment upon which the original abstracts were drawn.[7] This modified judgment, for the first time, imposed a joint and several judgment in favor of the current Defendants against R.A. Moreau and Catherine Kennington, as well as upon the Debtor.
On October 11, 2002, the state court plaintiffs (Defendants herein) filed a nonsuit as to the sole remaining issue of attorney's fees, thereby effectively concluding the state court litigation pending before the 3rd Judicial District Court of Anderson County.[8] On that same date, the Defendants prepared and filed their Amended Abstract of Judgment which included the names of the state court defendants R.A. Moreau and Catherine Kennington, as well as the $5,000.00 judgment entered against them. In addition, a Second Amended Abstract of Judgment was filed on November 6, 2002, also including the names of R.A. Moreau and Catherine Kennington. On November 12, 2002, the District Clerk of Anderson County, Texas, issued two identical writs of execution on this state court judgment.[9] Both writs were delivered to Dennis Taylor, Constable of Precinct No. 5 in Smith County, Texas, on that same date, directing him to satisfy the amount of $81,349.73 from the property of the Defendant-Debtor,[10] and to satisfy the amount of $7,646.50 from the property of either R.A. Moreau or the estate of Catherine Kennington.[11] R.A. Moreau thereafter satisfied the joint and several obligation owed by he, Catherine Kennington, and the Debtor by paying to the Defendants the sum of $7,646.50.
Constable Dennis Taylor served the other writ of execution on the Debtor on November 12, 2002, and thereby seized four tracts of real property to be sold in partial satisfaction of the indebtedness owed by the Debtor under the state court judgment. The public sale of the four tracts was set to occur on January 7, 2003. Prior to the sale date, however, the Debtor filed a voluntary Chapter 13 petition on December 3, 2002.[12] The Defendants responded *403 by filing a Motion for Relief from Stay on December 6, 2002, which the Court granted on February 12, 2003.[13] The lifting of the automatic stay allowed Constable Taylor to reconvene the public sale of the four tracts of land previously levied upon. On Tuesday, April 1, 2003, Constable Taylor sold the four tracts of land for the following amounts:
Tract One: $8,000.00
Tract Two: $11,600.00
Tract Three: $10,000.00
Tract Four: $400.00
Defendant Gary Dean Jackson was the high bidder for each of the four tracts. After reducing the amount of the judgment lien in favor of the Defendants by the amount of each purchase price, it is uncontested that there remains a judgment obligation owing from the Debtor to the Defendants in the amount of $47,799.44.
After the filing of her petition for relief under Chapter 13 of the Bankruptcy Code, the Debtor filed this adversary proceeding to determine the validity, priority, or extent of the lien allegedly held by the Defendants in her four tracts of land. In this adversary complaint, the Debtor argues that the July 1998 abstracts of judgment are invalid and do not satisfy the requirements imposed by § 52.001 § 52.043 of the Texas Property Code. Furthermore, the Debtor asserts that the Amended Abstract filed by the Defendants in October 2002, as well as the Second Amended Abstract filed in November 2002, fall within the ninety-day preference period and are therefore avoidable pursuant to 11 U.S.C. § 547.
The Defendants answered the Debtor's Complaint objecting to the relief sought therein, and subsequently filed their Second Motion for Summary Judgment, requesting the Court to find that the abstracts of judgment filed by the Defendants in July 1998 satisfy the requirements set forth in TEX. PROP.CODE ANN. § 52.001 § 52.043 (Vernon 1995), and that their original judgment liens are therefore valid. In addition, the Defendants assert that the validity of the July 1998 abstracts preclude the Debtor from succeeding on her preference cause of action because the 1998 abstracts were issued more than 90 days before the Debtor's December 3, 2002, bankruptcy petition. The Defendants' Motion also attempts to nullify one of the mandatory elements of the Debtor's § 547 preference action by asking the Court to find as a matter of law that the Debtor was not insolvent on the November 12, 2002, date upon which the Defendants abstracted their lien upon her interest in the four tracts of land, nor has she been insolvent at any time since that date including the April 1, 2003, date upon which the four tracts of land were sold to the Defendants via the public sale.[14] Finally, the Defendants ask the Court for an order nullifying the Notices of Lis Pendens filed by the Debtor against the four tracts purchased by the Defendants at the April 1, 2003, sale.
Discussion
The Defendants bring their Second Motion for Summary Judgment in this adversary proceeding pursuant to Federal Rule of Bankruptcy Procedure 7056. That rule *404 incorporates Federal Rule of Civil Procedure 56 which provides that summary judgment shall be rendered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c). "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S. Ct. 2548, 2555, 91 L. Ed. 2d 265 (1986). "The inquiry to be performed is the threshold inquiry of determining whether there is the need for a trialwhether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986).
The party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion, identifying those portions of the "pleadings, depositions, answers to interrogatories, and affidavits, if any," which it believes demonstrates the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. at 2553. "If a moving party fails to carry its initial burden of production, the non-moving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion." Hunter v. Caliber System, Inc., 220 F.3d 702, 726 (6th Cir.2000) (citing Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir.2000)). As more particularly described by Judge William Wayne Justice in Marshall Independent School Dist. v. U.S. Gypsum Co., 790 F. Supp. 1291 (E.D.Tex.1992):
Even where the non-moving party has the burden of persuasion on an issue, the summary judgment movant still has the initial burden of showing the absence of a genuine issue of material fact. It is not enough to move for summary judgment without supporting the motion in any way or with a conclusory assertion that the plaintiff has no evidence to prove its case. If there is literally no evidence in the record, the moving party may demonstrate this by reviewing for the court the admissions, interrogatories, and other exchanges between the parties that are in the record. If the moving party has not fully discharged this initial burden of production, its motion for summary judgment must be denied, and the court need not consider either any evidence submitted by the non-moving party or whether the moving party has met its ultimate burden of persuasion that summary judgment should be granted in its favor.
Id. at 1299-1300.
The manner in which this showing can be made depends upon which party will bear the burden of persuasion at trial. If, as in this case, the burden of persuasion at trial must be borne by the non-moving party, the party moving for summaryjudgment may satisfy the burden of production under Rule 56 by either submitting affirmative evidence that negates an essential element of the non-moving party's claim, or by demonstrating that the nonmoving party's evidence is insufficient to establish an essential element of the nonmoving party's claim. See 10A WRIGHT, MILLER, & KANE, FEDERAL PRACTICE AND PROCEDURE: CIVIL 3d § 2727 at pp. 471-172 (1998); see also Brewer v. Quaker State Oil Refining Corp., 72 F.3d 326, 329-30 (3d Cir.1995); Cannon v. Cherry Hill Toyota, *405 Inc., 161 F. Supp. 2d 362, 366 (D.N.J. 2001).
Once the motion is supported by a prima facie showing that the moving party is entitled to judgment as a matter of law, a party opposing the motion may not rest upon the mere allegations or denials in its pleadings, but rather must demonstrate in specific responsive pleadings the existence of specific facts constituting a genuine issue of material fact for which a trial is necessary. Anderson, 477 U.S. at 248-49, 106 S.Ct. at 2510 (citing FED.R.CIV.P. 56(e)). The substantive law will identify which facts are material. Id.
Thus, if a non-movant fails to set forth specific facts that present a triable issue, its claims should not survive summary judgment. Giles v. General Elec. Co., 245 F.3d 474, 494 (5th Cir.2001). As the Supreme Court has stated,
In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is "entitled to a judgment as a matter of law" because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.
Celotex, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 2552.
Thus, "in the absence of the necessary minimal showing by the plaintiff that the defendant may be liable under the claims alleged, the defendant should not be required to undergo the considerable expense of preparing for and participating in a trial." Robinson v. Cutchin, 140 F. Supp. 2d 488, 491 (D.Md.2001) (citing Catrett, 477 U.S. at 323-24, 106 S.Ct. at 2548 and Anderson, 477 U.S. at 256-57, 106 S.Ct. at 2505).
To determine whether summary judgment is appropriate, the record presented is reviewed in the light most favorable to the non-moving party. Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). However, if the evidence demonstrating the need for trial "is merely colorable or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-250, 106 S.Ct. at 2511. Thus, a non-movant must show more than a "mere disagreement" between the parties, Calpetco 1981 v. Marshall Exploration, Inc., 989 F.2d 1408, 1413 (5th Cir.1993), or that there is merely "some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586, 106 S.Ct. at 1356. However, "[t]he issue of material fact which must be present in order to entitle a party to proceed to trial is not required to be resolved conclusively in favor of the party asserting its existence; rather, all that is required is that sufficient evidence supporting the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." Anderson, 477 U.S. at 248-249, 106 S.Ct. at 2510. Accordingly, the process has been described by the Supreme Court as one which mandates the entry of summary judgment where the evidence is such that it would require a directed verdict for the moving party. "In essence,... the inquiry ... [is] whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so *406 one-sided that one party must prevail as a matter of law." Id. at 251-52, 106 S.Ct. at 2512; see also In re Hudsar Inc., 199 B.R. 266, 272 (Bankr.D.N.J.1996) ["The evidence which the non-moving party produces to show the existence of a genuine issue must be of sufficient quantum and quality to allow a rational and fair-minded fact finder to return a verdict in favor of the non-movant, bearing in mind the applicable standard of proof that would apply at a trial on the merits."] (citing Anderson, 477 U.S. at 249-51, 106 S.Ct. at 2511).
In this case, a review of the Defendants' Second Motion for Summary Judgment, as well as the Debtor's Response in Opposition thereto, reveals that at least as to the issue of the validity of the July 1998 abstracts of judgment, there is no factual dispute in need of resolution. Hence, the entry of summary judgment on this issue is appropriate. See, e.g., Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1326 (8th Cir. 1995); Thompson Everett, Inc. v. National Cable Advertising, L.P., 57 F.3d 1317,1323 (4th Cir.1995) ["A federal court may resolve the legal questions between the parties as a matter of law and enter judgment accordingly."].
Under Texas law, the mere rendition of a judgment does not automatically create a lien in favor of the prevailing party. Burton Lingo Co. v. Warren, 45 S.W.2d 750, 751-52 (Tex.Civ.App.-Eastland 1931, writ ref d). Rather, in order to acquire a judgment lien on real property owned by the judgment debtor, the judgment creditor must obtain an abstract of judgment complying with the statutory mechanisms provided under TEX. PROP. CODE ANN. § 52.001§ 52.043 (Vernon 1984 and Supp.2004). As set forth in TEX. PROP.CODE ANN. § 52.003 (Vernon 1995):
(a) An abstract of a judgment must show:
(1) the names of the plaintiff and defendant;
(2) the birthdate and driver's license number of the defendant, if available to the clerk or justice;
(3) the number of the suit in which the judgment was rendered;
(4) the defendant's address, or if the address is not shown in the suit, the nature of citation and the date and place of service of citation;
(5) the date on which the judgment was rendered;
(6) the amount for which the judgment was rendered and the balance due;
(7) the amount of the balance due, if any, for child support arrearage; and
(8) the rate of interest specified in the judgment.
(b) An abstract of judgment may show a mailing address for each plaintiff or judgment creditor.
In addition, TEX. PROP.CODE ANN. § 52.004 provides guidance on the recording and indexing of an abstract of judgment, stating that:
(a) The county clerk shall immediately record in the county real property records each properly authenticated abstract of judgment that is presented for recording. The clerk shall note in the records the date and hour an abstract of judgment is received.
(b) At the same time an abstract is recorded, the county clerk shall enter the abstract on the alphabetical index to the real property records, showing:
(1) the name of each plaintiff in the judgment;
(2) the name of each defendant in the judgment; and
(3) the volume and page or instrument number in the records in which the abstract is recorded.
*407 "It is well settled in Texas that it is the judgment creditor's responsibility to insure that the clerk abstracts the judgment properly. Moreover, since a judgment lien is statutorily created, substantial compliance with the statutory requirement is mandatory before a judgment creditor's lien will attach." Citicorp Real Estate, Inc. v. Banque Arabe Internationale D'lnvestissement, 747 S.W.2d 926, 928-30 (Tex. App.-Dallas 1988, writ denied) (citing Texas American Bank/Fort Worth, N.A. v. Southern Union Exploration Co., 714 S.W.2d 105, 107 (Tex.App.-Eastland 1986, writ ref d n.r.e.) and Sarny Holdings, Ltd. v. Letsos, 896 S.W.2d 274, 276 (Tex.App. Houston [1st Dist.] 1995, writ denied)).
The issue that must be decided in this dispute is whether an abstract of judgment that identifies only one judgment defendant is valid when the judgment issued in the action has been rendered solely against that singular defendant, even though the lawsuit was actually brought against three defendants, and the trial court entered a take-nothing judgment against the other two. In addition, even if such an abstract is initially valid, does a subsequent mandate issued by an appellate court arising from the appeal of the original judgment against only the one defendant render the earlier abstract invalid because the names of the two new "defendants-in-judgment" were not originally included?[15]
In support of her argument, the Debtor cites the Court to TEX. PROP.CODE § 52.003(a)(1), which states that an abstract of judgment must contain "the names of the plaintiff and defendant." Based upon this language, the Debtor asserts that the original abstract should have contained not only the name of the Debtor, but also the names of defendants R.A. Moreau and Catherine Kennington, notwithstanding the fact that a takenothing judgment was entered as to both of them. The Defendants, as the judgment plaintiffs, argue that, in order to be valid, the abstract is not required to include every defendant originally named in the lawsuit, but only those defendants against whom a judgment was rendered and for which a judgment can be properly abstracted. The Defendants cite to TEX. PROP.CODE § 52.004(b)(2), which states that the county clerk, when recording an abstract of judgment, shall enter the abstract on the alphabetical index to the real property records, showing "the name of each defendant in the judgment." (emphasis added). After reviewing the summary judgment evidence and the relevant jurisprudence, including the case law surrounding § 52.003 and its predecessor statute TEX.REV.CIV. STAT. ANN. art. 5447 and the purposes for such statutes, the Court concludes that the Defendants' position is correct.
Prior to the codification of the Texas Property Code (effective January 1, 1984),[16] the validity of an abstract of judgment *408 was governed by TEX.REV.CIV. STAT. ANN. art. 5447 and 5448.[17] Art. 5447 was the predecessor statute to the current § 52.003, and stated in pertinent part that the abstract must include "[t]he names of the plaintiff and of the defendant in such judgment" (Emphasis added).[18] Interpreting the plain language of this former statute, several cases held that for an abstract of judgment to be valid, it must contain the names of every defendant in the judgment. See, e.g., Womack v. Paris Grocer Co., 166 S.W.2d 366 (Tex.Civ. App.-Galveston 1942, writ refd); Shirey v. Trust Co. of Texas, 69 S.W.2d 835 (Tex. Civ.App.Texarkana 1934, writ refd) [finding an abstract of judgment invalid because it did not include in the abstract the name of each defendant in the judgment]; McGlothlin v. Coody, 59 S.W.2d 819 (Tex.Com.App.1933) [affirming a finding that an abstract of judgment that identified only one of the two defendants against whom a judgment had been entered was invalid and did not create a judgment lien on the property]. In fact, as stated by the court in Womack:
Article 5447 does not require that an abstract of judgment shall show the names of the parties to the suit or the names of the defendants in such suit. The only requirement of the statute in that respect is that it shall show the names of the plaintiff and of the defendant in such judgment.
166 S.W.2d at 368 (emphasis in original).
In Womack, one of the cases relied upon by the Defendants, Paris Grocer Co. ("Paris Grocer") filed suit against H.M. Womack, Sam Womack, and CL. Killingsworth, Receiver of the American National Bank of Paris, Texas ("Killingsworth"), seeking recovery of a money judgment against both Womack defendants and a foreclosure of a *409 chattel mortgage lien against all three defendants. 166 S.W.2d at 367. A judgment was subsequently entered in favor of Paris Grocer and against the two Womack defendants jointly and severally for the sum of $3,497.08, with interest. In addition, Killingsworth received a judgment in his favor on his cross-action against H.M. Womack for a money judgment and foreclosure. The judgment, however, also recited that at the time the case was called for trial, Paris Grocer had voluntarily dismissed its cause of action against all three defendants for foreclosure of its alleged mortgage. Id. Paris Grocer thereafter obtained an abstract of judgment, which was filed for record in Lamar County on February 2, 1932. Although this abstract properly identified both H.M. Womack and Sam Womack and was entered in the judgment index under both of their names, no mention was made of defendant Killingsworth either in the abstract or in the index records. Id. Despite the judgment obtained by Killingsworth against H.M. Womack on his cross-appeal, the court held as follows:
The judgment recites the dismissal of said suit as to all defendants, including C.L. Killingsworth, as such receiver, as to the foreclosure of said mortgage. When the receiver was thus dismissed he was no longer a party to the plaintiffs suit and that part of its cause of action was discontinued and dismissed and passed out of the case. C.L. Killingsworth was therefore not a party to the judgment thereafter rendered between the parties who continued through the litigation. It follows that, since he was not a party to said judgment, it was not necessary that he be shown as a party defendant in said abstract of judgment and that it was not necessary that his name be shown as a defendant in said judgment upon the alphabetical indexes of the abstract of judgment records.
Id. at 369 (emphasis added).
Accordingly, pursuant to the language of the former statute, TEX.REV.CIV. STAT. ANN. art. 5447(1), an abstract of judgment was only required to include the names of each party defendant against whom the plaintiff actually received a judgment. It did not require the names of every defendant named in the original lawsuit.
On January 1, 1984, however, the former statute was repealed and replaced with Tex. Prop.Code Ann. § 52.003. The present statute no longer requires that the abstract of judgment include "[t]he names of the plaintiff and of the defendant in such judgment; " rather, TEX. PROP.CODE ANN. § 52.003(a)(1) states that an abstract of judgment must show "the names of the plaintiff and defendant." Based upon the omission in the current statute of the modifying language "in such judgment," the Court must determine whether the requirements of TEX. PROP.CODE ANN. § 52.003(a)(1) are met when an abstract of judgment includes the names of all defendants against whom a judgment in favor of the plaintiff has been rendered, but omits the names of the defendants against whom the plaintiff received a take nothing judgment.
A fundamental rule of statutory construction is that a court should first ascertain the intent of the legislature in enacting the statute as expressed in its plain language. St. Luke's Episcopal Hosp. v. Agbor, 952 S.W.2d 503, 505 (Tex. 1997). However, "it is the courts' obligation to construe statutes to avoid absurd results, if alternative interpretations are available and consistent with the legislative purpose." In re Wright, 231 B.R. 597, 603 (Bankr.W.D.Tex.1999) (citing Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575, 102 S. Ct. 3245, 3252, 73 L. Ed. 2d 973 *410 (1982)); accord Olivares v. Nix Trust, 126 S.W.3d 242, 247 (Tex.App.San Antonio 2003, pet. denied) (citing City of Amarillo v. Martin, 971 S.W.2d 426, 428, n. 1 (Tex. 1998)) ["However, where an application of a statute's plain language leads to absurd results, courts do not enforce the statute under a literal interpretation."].
The plain language of the statute simply reads that "[a]n abstract of judgment must show the names of the plaintiff and defendant." TEX. PROP.CODE ANN. § 52.003(a)(1). Hence, the Debtor argues that the names of every defendant to the suit must be included in the abstract, even those defendants against whom a plaintiff does not receive any judgment. However, for the reasons set forth below, interpreting the statute in that manner would defy the purpose for which the entire abstracting process was created and would create confusion in the state's real property records as opposed to bringing clarity.
A review of the current statute and the accompanying case law fails to indicate that the omission of the language "in such judgment" from the language of TEX. PROP. CODE ANN. § 52.003(a)(1) was meant to effectuate any significant or material change in the historical requirements of an abstract of judgment. Moreover, there is nothing in the historical and statutory notes relating to TEX. PROP.CODE ANN. § 52.003 to suggest that this omission was intended to alter the requirement that an abstract must include only the names of those defendants against whom a plaintiff has obtained a judgment. In fact, in a 1989 case decided well after the enactment of the Texas Property Code, it was held that although the original petition sought relief against two defendants, the subsequent abstract needed only to include the name of the defendant against whom the plaintiff received judgment in order to be valid. Gensheimer v. Kneisley, 778 S.W.2d 138, 140 (Tex.App.Texarkana 1989, no writ) ["No requirement exists that an abstract show the names of the parties to the suit or the names of the defendants in the suit; the only requirement is that the defendants against whom a judgment was taken be listed."] (emphasis added). Hence, there is no support for the proposition that the 1984 enactment of the Texas Property Code effectuated a substantial change in the prior law requiring that only the "defendants in the judgment" be included in an abstract. See, e.g., Womack, 166 S.W.2d at 369; Shirey v. Trust Co. of Texas, 69 S.W.2d 835, 837 (Tex.Civ.App. Texarkana 1934, writ denied) [finding an abstract of judgment to be invalid in part because it did not include the names of certain defendants against whom the judgment "decreed a recovery by plaintiffs of all the cost of the case"]. In addition, if TEX. PROP.CODE ANN. § 52.003(a)(1) were to be interpreted as requiring that an abstract of judgment contain the names of each and every defendant in the lawsuit, even those defendants against whom no judgment was rendered, then no abstract could be rendered at all under TEX. PROP. CODE ANN. § 52.003 because the judgment plaintiff would be unable to specify "the amount for which the judgment was rendered and the balance due," as required by TEX. PROP.CODE ANN. § 52.003(a)(6).
Aside from the actual inability to comply with the statute, it is also widely recognized that the purpose of an abstract of judgment "is to create a lien against the debtor's property and to provide notice to subsequent purchasers of the existence of the judgment and the lien." Banque Arabe Internationale D'Investissement, 747 S.W.2d at 929; see also Olivares, 126 S.W.3d at 247; Hoffman, McBryde & Co. v. Heyland, 74 S.W.3d 906, 909 (Tex. App.Dallas 2002, pet. denied) ["The object of abstracting a judgment and recording *411 and indexing it is to put persons searching the real property records on notice that there are judgment liens against certain clearly identified property."]; Womack, 166 S.W.2d at 368-69. Requiring an abstract of judgment to include only those defendants against whom a judgment has been rendered (i.e., the defendants-in-judgment) supports this underlying purpose because it is only against the property of such defendants that a judgment lien may arise through the abstract process. It not only defies logic to require that an abstract of judgment include the names of defendants against whom the plaintiff received no judgment, but it actually defeats the clearly expressed purpose of the judgment lien recording statutes because such a rule would corrupt the index of abstracts with references to numerous parties against whom no judgment exists.
Requiring a plaintiff to abstract a judgment in the names of defendants against whom a take-nothing judgment has been entered would also create a cloud on the title to such defendants' property. See, e.g., In re Stroud Oil Properties, Inc., 110 S.W.3d 18, 26 (TexApp.Waco 2002, no pet. h.) ["Any deed, contract, judgment or other instrument not void on its face that purports to convey any interest in or make any charge upon the land of a true owner, the invalidity of which would require proof, is a cloud upon the legal title of the owner."] (citations omitted); Stewart v. American Indus. Linings, Inc., 640 S.W.2d 654, 656 (TexApp.El Paso 1982, writ refd n.r.e.) [removing as a cloud on the title of property certain abstract of judgment liens]. Thus, such action might actually subject the judgment plaintiff to a claim by such defendants for damages due to the unwarranted inclusion of the names of such innocent defendants in the abstract records.
Accordingly, for the reasons expressed, an abstract of judgment under TEX. PROP. CODE ANN. § 52.003 is not required to include the names of defendants against whom the plaintiff received a take-nothing judgment in order to be valid. To hold otherwise would frustrate the purpose of the statute, cause confusion among parties seeking to rely upon the accuracy of the judgment index, create unnecessary clouds on land titles of innocent defendants against whom no judgment exists, and subject judgment plaintiffs who seek to comply with the statute to potential liability for erroneously asserting the existence of a judgment against named parties when, in fact, no such judgment is in existence.
Applied in the context of the current case, the July 1998 abstracts of judgment filed by the Jackson Defendants were not required to include the names of RA. Moreau and Catherine Kennington. The July 1998 abstracts did properly name the Debtor as a defendant against whom a judgment had been rendered, thereby creating a judgment lien against the property owned or subsequently acquired by the Debtor in the selected counties. See TEX. PROP.CODE ANN. § 52.001. This judgment lien was not superseded by the Debtor as the defendant-in-judgment during the appeal of the Amended Judgment rendered by the 3rd Judicial District Court of Anderson County, Texas,[19] and therefore the judgment lien was valid and subsisting against the Debtor from the date of the abstract and remained valid and unaffected by the subsequent mandate entered on March 9, 2001.[20] The Plaintiff-Debtor has cited no authority upon which to invalidate the July 1998 abstracts of judgment due to *412 the subsequent action by the appellate court to reverse the decision of the trial court as to the two other defendants, to modify the judgment to include additional damages against all three defendants, to affirm the original judgment in all other respects as against the Debtor, and to remand the action for consideration of the imposition of further damages against all of the defendants. All of this subsequent action had no effect upon the validity of the original judgment against the Debtor. Such judgment was valid and subsisting from the date of its entry. Such judgment was never superseded by the Debtor and it formed a valid basis upon which a judgment lien properly arose against the Debtor's interest in real property. The subsequent abstracts containing the additional elements of damages assessed against the Debtor supplemented the scope of the original judgment lien. It did not supplant it. Consequently, the Court finds that the Defendants' Second Motion for Summary Judgment must be granted with regard to the validity of the July 1998 abstracts of judgment filed against the Plaintiff by the Jackson Defendants.[21]
As admitted by the Debtor in her Response to the Defendants' Second Motion For Summary Judgment, this ruling negates her preference cause of action and precludes her from "prevailing] on the merits in this case." It correspondingly moots the necessity of determining any issue regarding the alleged insolvency of the Debtor.[22] In fact, in light of this determination, there is no issue at all for which a trial is necessary in this adversary proceeding.
Having concluded that the Defendants' July 1998 abstracts of judgment were not invalidated due to the failure to include the names of the take-nothing defendants, the Notice of Lis Pendens filed by the Debtor in both Smith County, Texas, and Anderson County, Texas, are each groundless.[23] The Court will accordingly enter a judgment on the Plaintiff-Debtor's complaint in favor of the Jackson Defendants and order the cancellation of the two Notices of Lis Pendens filed by the Debtor.[24] An appropriate order and judgment will be entered which are consistent with this opinion.
NOTES
[1] This Court has jurisdiction to consider the complaint pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157(a). The Court has the authority to enter a final judgment in this adversary proceeding since it constitutes a core proceeding as contemplated by 28 U.S.C. § 157(b)(2)(A), (F), and (K).
[2] In addition, the Defendants were also counter/cross-defendants, and the Debtor and R.A. Moreau were counter/cross-plaintiffs.
[3] See Defendants' Motion, Ex. 1.
[4] Id.
[5] This abstract of judgment was filed as Document No. 98-R0026844 and recorded in Volume 4394, Pages 345-346, Deed Records of Smith County, Texas. See Defendants' Motion, Ex. 2.
[6] The abstract of judgment filed in Anderson County, Texas, was filed as Document No. 0097248 and recorded in Volume 1558, Pages 683-684, Deed Records of Anderson County, Texas. See Defendants' Motion, Ex. 3. Because the Debtor never owned or acquired any real property in Henderson County, the Henderson County abstract is not attached as an exhibit to this motion and merits no further discussion.
[7] See Defendants' Motion, Ex. 4.
[8] See Defendants' Motion, Ex. 5.
[9] See Defendants' Motion, Ex. 6 and 8.
[10] As admitted by the Defendants in their Motion for Summary Judgment, the $81,349.73 owed by the Debtor to the Defendants included the $5,000.00 joint and several obligation shared between the Debtor and the other two state court defendants. When R.A. Moreau satisfied his obligation by paying the $7,646.50 to the Defendants on November 13, 2002, the amount owed by the Debtor decreased as if she had actually paid this amount.
[11] One of the state court defendants, Catherine Kennington, was deceased at the time of the issuance of the writs of execution.
[12] Through the invocation of the automatic stay pursuant to 11 U.S.C. § 362, the sheriff was prevented from conducting the public sale scheduled for January 7, 2003.
[13] This relief was granted following an evidentiary hearing in which the Debtor failed to demonstrate in any way that the interests of the Defendants as secured parties were even being addressed, much less adequately protected.
[14] Actually, the Defendants ask the Court to find that the Debtor has not been insolvent at any time since March 30, 1998, the date that the 3rd Judicial District Court of Anderson County, Texas, entered its Amended Judgment.
[15] The Debtor also raises an issue regarding the failure of the October 2002 Amended Abstract of Judgment, as well as the November 2002 Second Amended Abstract of Judgment, to include the address for judgment defendant Catherine Kennington, as well as an assertion that these 2002 abstracts are avoidable as preferences. The Debtor admits that these issues only become relevant if the Court determines that the July 1998 abstracts were invalid for some reason. See Debtor's Response to Defendants' Second Motion For Summary Judgment, ¶ 1. Hence, based on the Court's ultimate ruling, no discussion is needed regarding the validity of the Amended Abstract or the Second Amended Abstract, nor does the Debtor's preference theory merit discussion.
[16] Alkas v. United Sav. Ass'n of Texas, Inc., 672 S.W.2d 852, 859 (Tex.App.Corpus Christi 1984, writ ref'd n.r.e.) [noting that TEX.REV.CIV. STAT. art. 5447, 5448, and 5449 (Vernon 1958) were repealed by the Texas Property Code, effective January 1, 1984].
[17] TEX.REV.CIV. STAT. ANN. art. 5448 was the predecessor statute to TEX. PROP CODE ANN. § 52.004. Article 5448, entitled "Recording judgments," in pertinent part provided:
Each county clerk shall keep a well bound book called the "judgment record," and he shall immediately file and therein record all properly authenticated abstracts of judgment when presented to him for record, noting therein the day and hour of such record. He shall at the same time enter it upon the alphabetical index to such judgment record, showing the name of each plaintiff and of each defendant in the judgment, and the number of the page of the book upon which the abstract is recorded. He shall leave a space at the foot of each such abstract for the entry of credits upon and satisfaction of such judgment, and shall enter the same when properly shown.
Reynolds v. Kessler, 669 S.W.2d 801, 803-04 (Tex.App.El Paso 1984, no writ).
[18] Article 5447, entitled "Abstract of Judgments," states as follows:
Each clerk of a court, when the person in whose favor a judgment was rendered, his agent, attorney or assignee, applies therefor, shall make out, certify under his hand and official seal, and deliver to such applicant upon the payment of the fee allowed by law, an abstract of such judgment showing;
(1) The names of the plaintiff and of the defendant in such judgment;
(2) The birthdate and driver's license number of the defendant, if available to the clerk of the court;
(3) The number of the suit in which the judgment was rendered;
(4) Defendant's address if shown in the suit in which judgment is rendered, and if not, the nature of citation and the date and place citation is served;
(5) The date when such judgment was rendered;
(6) The amount for which the judgment was rendered and balance due thereon; and
(7) The rate of interest specified in the judgment.
Each justice of the peace shall also make and deliver an abstract of any judgment rendered in his court in the manner herein provided, certified under his hand.
Fred Rizk Const. Co. v. Cousins Mortg. & Equity Investments, 627 S.W.2d 753, 754-55 (Tex. App.Houston [1st Dist.] 1982, writ ref'd n.r.e.).
[19] See TEX. PROP.CODE ANN. § 52.0011.
[20] See Defendants' Motion, Ex. 4.
[21] See Debtor's Response, ¶ 1.
[22] See id.
[23] The two Notice of Lis Pendens were filed by the Debtor against the four tracts of land sold to the Defendants at the April 1, 2003, public sale
[24] The Defendants also claimed an entitlement to an award of attorney's fees, but asserted no legal basis for such recovery. Accordingly, that request and all requests of the Plaintiff-Debtor will be denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551656/ | 315 B.R. 112 (2004)
In re Rose ENRIQUEZ, Debtor.
No. 03-51229-ASW.
United States Bankruptcy Court, N.D. California.
September 22, 2004.
*113 Lars T. Fuller, The Fuller Law Firm, San Jose, CA, for Debtor.
MEMORANDUM DECISION SUSTAIING OBJECTION TO CONFIRMTION BY COMERICA BANK, IN PART
ARTHUR S. WEISSBRODT, Bankruptcy Judge.
Before the Court is confirmation of the plan ("Plan") proposed by Rose Enriquez, the Debtor in this Chapter 13[1] case ("Debtor").
Comerica Bank ("Bank") asserts a claim against the Debtor and filed an objection to confirmation alleging that the Plan was not proposed in good faith and does not treat the Bank's claim in the manner required by law. At trial, the Bank raised for the first time an objection based on the Debtor's lack of eligibility for Chapter 13 relief due to debts exceeding the limits fixed by § 109(e)in closing argument, *114 counsel for the Debtor objected to those grounds being initially asserted at trial, but contended that the Debtor was not ineligible under the statute.[2]
The Debtor is represented by Lars T. Fuller, Esq. of The Fuller Law Firm. The Bank is represented by Barbara Cray, Esq. of Law Offices of Barbara Cray. The matter has been tried and submitted for decision.
This Memorandum Decision constitutes the Court's findings of fact and conclusions of law, pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure ("FRBP").
I.
FACTS
The facts are largely undisputed, although the parties disagree as to their interpretation.
The Debtor testified that she commenced a sole proprietorship business known as Omega Mailing Services ("Omega") in December 1995. Omega processed bulk mail for companies and its major customer was Marketing Response Systems, Inc. ("MRSI"). MRSI was a corporation wholly owned by Frank Brauch and his wife Joan (collectively, "Brauchs"), and the Debtor believed it to be "a very strong business and very well kept". The Brauchs decided to sell MRSI and the Debtor negotiated with them in August or September 1999 to buy the stock of the corporation for $580,000. At that time, the business had some equipment in the form of printers, computers, and desks, but the Debtor considered its primary assets to be "very good will, very strong work flow", and approximately $200,000 cash on hand.
On February 22, 2000, the Debtor and the Brauchs signed an agreement ("Sale Agreement") for the Debtor to buy the stock of MRSI, although the Debtor said the document was actually prepared in late 1999. The Sale Agreement calls for the $580,000 purchase price to be paid in the form of a $29,000 cash down payment, a bank loan of $493,000, and two $29,000 promissory notes carried by the Brauchs one unsecured note with monthly payments made over five years, and one note due in ten years without interim payments but secured by a certificate of deposit.
The Debtor testified that she submitted an application for the loan to the Bank in September 1999 and began discussing the transaction with bank personnel in October 1999first with Joe Baker ("Baker") and then with Marie Anderson ("Anderson").[3] According to the Debtor, she included an unsigned copy of the Sale Agreement in the "package" requested by the Bank, along with a handwritten financial statement that she prepared in September 1999. The information in the latter document was used by the Bank to prepare a typewritten version, which the Debtor signed in February 2000 ("Financial Statement"). The Financial Statement showed $35,000 cash on hand and the Debtor testified that those funds were in Omega's account in September 1999. However, they had been "used" by the beginning of 2000 because Omega "went into a transition" and "went through a very difficult time", eventually losing the lease of its business premises and having to operate *115 out of the Debtor's home. The Debtor had to borrow funds for the down payment from her brother in Mexico, which loan was repaid with cash of MRSI on March 22, 2000, immediately after escrow closed for the sale. The Debtor testified that her attorney and counsel for the Brauchs told Anderson that the Debtor no longer had the $35,000 cash shown on the Financial Statement, and said that she also "spoke with" both Baker and Anderson "about getting the money from Mexico". The Debtor testified that the Financial Statement reflected the conditions that existed in September 1999 when she prepared the handwritten version, rather than the actual state of affairs in February 2000 when she signed the typed version, although she acknowledged that she wrote "2/24/00" at the top of the typed form after the language "Personal Financial Statement As of'.
On December 6, 1999, the Bank issued a letter ("Commitment Letter") signed by Anderson, stating the terms and conditions under which the Bank would agree to lend money for the purchase of MRSI. The Debtor signed at the bottom of the Commitment Letter on December 9, 1999, following the sentence "I(we) have read and agree to the terms and conditions of the proposed credit facilities described in this letter". The terms set forth in the Commitment Letter call for, inter alia, 75% of the loan to be guaranteed by the Small Business Administration ("SBA"), a principal amount of $493,000 amortized over a ten year period, a variable interest rate and monthly payments of $6,862, collateral in the form of a senior security interest in the assets of MRSI and Omega, a down payment of at least $29,000, and "Seller financing in the amount of $58,000.00 to be on full standby (no payments) for the life of the SBA loan". The Debtor's signature appears twice, once labelled "Marketing Response Systems by Rose Enriquez, President", and once labelled "Rose Enriquez, as Guarantor"however, the body of the Commitment Letter identifies "Borrower" as MRSI and the Debtor, and states "n/a" in the space provided for the names of "Guarantors".
The Debtor testified that the "full standby" provision of the Commitment Letter (prohibiting payments to the Brauchs until the Bank loan had been repaid) must have been merely "a proposal" because it contradicted the Sale Agreement, a copy of which was in the Bank's possession at that time. The Sale Agreement provides that the Brauchs' ten year note is "fully subordinate" to the Bank loan and no payments are to be made on it "prior to maturity" without approval from the Bank, but the five year note is not made subject to such restrictionsas to that note, $616.17 is to be paid monthly and the maker "may at any time prepay the balance due on said note without penalty". Nevertheless, the Debtor also said that, when she signed the Commitment Letter on December 9, 1999, she did agree to its "full standby" provision concerning both notes.
The Debtor testified that, a week later, on December 16, 1999, she sent a memo to Anderson by means of facsimile transmission ("FAX"). The memo states that the Debtor had decided that the "best interest" of MRSI would be served by prepaying the Brauchs' ten year note within the next two years, if possible, rather than paying interest for the full term, and:
The SBA may have as the condition of the loan that Mr.Brauch's note be fully subordinate for the term however, I would be irresponsible in my role as fiduciary to the corporation by allowing the loan continue to its term.
The memo bears no address or FAX number and Debtor said that she had no FAX cover sheet or proof that it was sent, and "have not been able to find" a response *116 from the Bank. Debtor testified that she discussed the memo with Anderson by telephone on more than one occasion and was told that it would be "no problem" to prepay either of the Brauchs' notes. (As noted at footnote 3 above, Anderson did not testify). The ten year note was not prepaid, but it was secured by a certificate of deposit that Debtor caused to be purchased with MRSI's cash. The five year note was paid in full the month after escrow for the sale closed in March 2000, using MSRI's cash.
Joyce Wagoner ("Wagoner") testified that she is a Vice President of the Bank's Special Assets Group, with over eleven years' experience handling loans that develop "problems", most of them guaranteed by SBA. Wagoner explained that the Bank's policy was that a loan subject to SBA guarantee would not be made without first receiving and fully complying with SBA's written authorization ("Authorization"), which states the conditions under which SBA will guarantee the loan. In this case, the Authorization included a requirement that the Bank receive from the Brauchs a "standby agreement" for each of the two $29,000 notes, providing for the Brauchs to receive no payments on either note except $616.17 per month for the five year note, until the Bank loan had been paid in full. Wagoner testified that the Bank's file contained no documents concerning any change of the Authorization's terms, nor any notes of discussions about making any changes. She said that the Bank wanted SBA guarantees to be honored, so its policy was that it would not deviate from SBA requirements without prior written approval from SBA, and she was not aware of that ever having happened. Wagoner stated that it was at least a year after close of escrow that she learned from the Debtor about the five year note having been prepaid, and about the certificate of deposit securing the ten year note.
Wagoner testified that it was "unusual" for the Bank to make a loan for purchase of a business such as MRSI, which had little equipment but a large amount of cash. Wagoner said that the Bank relied on the cash being used to acquire certain equipment, noting that the Bank's "risk rating" report ("Risk Rating Report") for the proposed loan stated a "weakness" to be:
Loan is under-collateralized; however, there will be significant capital expenditures made which will add new equipment to our collateral base.
The Risk Rating Report (which appears to be an internal Bank document and is not signed by the Debtor) sets forth that the $200,000 cash on hand "is expected to be used" for six items of equipment and the cost of leasing new business premises. However, no such requirement that the Debtor buy any specific pieces of equipment is contained in the Note or in any other document signed by the Debtor. The Debtor testified that she did enter into the new lease, but bought only one of the pieces of equipment, an in-line tabber machine for $22,000; she also bought a delivery van for $5,000 that was not among the six items listed in the Risk Rating Report. The Debtor said that she had intended at first to purchase more equipment than she ultimately did buy, but decided to have two of the listed items (an inserter machine and an ink-jet system) leased by Omega rather than bought by MRSI, and not to acquire three of the listed items (a folder machine, forklift, and pallet racking) at all, because "at the time I felt it was necessary for me to keep some of the cash on hand to run the business in a more healthy way and that's what took place".
*117 The Debtor testified that, after escrow closed in March 2000, MRSI continued to employ the Brauchs for three months with monthly salaries totalling $10,700; the Debtor received no salary from MRSI during that period, though she did receive one from Omega. When the Brauchs left, the Debtor began receiving a salary from MRSI of $2,000 per month until 2001, when the amount increased to $3,000 per month, or $3,500 "probably a couple of times" if cash flow permittedin some months during late 2002 and early 2003, she received only $1,000. In addition to the Debtor, MRSI also employed Tim Holcomb with a monthly salary of $3,000.
The Debtor testified about payments that both MRSI and Omega made to her or for her benefit, other than salary. Between October 9, 2000 and July 2, 2003, MRSI issued twenty-one checks to the Debtor totaling $13,141.35the Debtor said that "many times" she would pay business expenses of both companies and receive reimbursement, and that was the reason for some (but not all) of these checks, although she could not provide details. Between April 25, 2003 and July 2, 2003, MRSI issued six checks to Omega totaling $14,988.47those payments were made after Omega had ceased doing business, but the Debtor said that MRSI continued to operate until June and was using some of Omega's equipment, so some of the funds were applied to equipment leases held by Omega (although she could not give details). On May 30, 2002, MSRI paid $2,800 in rent for the Debtor's home, where both MSRI and Omega were operating at that timethe Debtor said that the rent for those premises was sometimes paid by MRSI and sometimes by Omega; between December 30, 2000 and December 1, 2002, Omega issued nine checks totaling $25,020 to the lessor of those premises. Omega also paid the Debtor's dentist bills totaling $255.40 between December 31, 2000 and May 20, 2001, which she said was done "so I could record for tax purposes", though she would use her own account for such payments "if I had funds". After it had ceased doing business (and after commencement of the Debtor's Chapter 13 case), Omega issued nine checks between March 10, 2003 and June 1, 2003 totaling $3,612.46the Debtor said that $687.52 was for repairs to her personal vehicles that were used for business purposes, $1,688 was used for a dinette set because she had run out of personal checks, and the balance was for "tiny amounts" owed to vendors that she "did not want to list" in her bankruptcy schedules.
The Debtor testified that, after she acquired MRSI, its business "went up," with 2000 being a "very good year" and part of 2002 being "very strong". However, toward the end of 2002, MRSI lost one of its "main customers" representing 35% or 45% of annual sales and never recovered, "especially with the economy being in this state". Omega then stopped billing MRSI for services, so its own revenues were also affected. Omega ceased operations in 2003, prior to commencement of the Debtor's Chapter 13 case on February 26, 2003. However, the Debtor intended to continue MRSI's operations and did so using Omega's equipment until the end of May 2003. At that point, the ink jet system and inserter were repossessed and MRSI stopped doing business. The Debtor said that all remaining equipment of Omega and MRSI was put in storage and the keys were given to the Bank.
The schedules that the Debtor originally filed in her Chapter 13 case include stock in MRSI worth $10,000 and the Omega business worth zero, but no business equipment. Scheduled creditors include MRSI with a note for $217,371.47 and the Bank with an unsecured claim of $37,000 described as "Undersecured est. deficiency *118 on cross-collateralized loan"on May 13, 2003, the schedules were amended to show the amount of the Bank's unsecured claim as "Notice Only". An original and two amended plans were also filed, none of which include the Bank as a secured creditorthe most recent version provides for no dividend to general unsecured creditors after payment of a secured automobile loan and a secured tax claim, with all equipment of Omega being surrendered to the Bank. The Debtor testified that the scheduled value of her interest in MRSI was a "rough estimate" that she made without any expert advice. With respect to Omega being valued at zero, she said that Omega's assets did have value but she did not list a figure because she "knew that Omega and MRSI were responsible for the loan and the collateral was for operating the business so I was confused as to how I could do this and that's what took place"she did not schedule the equipment itself because "it was part of the [Bank's] collateral". According to the Debtor, the scheduled $217,371.47 debt to MRSI merely reflected an "allocation of money in the accounting system" that was made by an accountant "just for tax purposes", and neither the Debtor nor Omega actually received that amount from MRSIthe amount includes funds of MSRI that were used to make payments to the Bank, to repay the loan for the down payment, and to pay off the Brauchs' five year note. The Debtor stated that the Bank was not treated as a secured creditor with a lien on Omega's assets because she "intended to continue doing business as MRSI". As for the amount of the Bank's claim, the Debtor said that the originally scheduled amount of $37,000 was based on what she believed to be the total amount of default, and she intended to continue operating MRSI and pay the loan in full however, she did not consider herself to be directly obligated to the Bank once MRSI ceased operations and believed the loan to be owed by MRSI and Omega, with her role limited to being a "warrantor" who would not be liable unless MRSI failed to pay.
The Bank loan is represented by a promissory note ("Note") dated March 8, 2000. The Note states near the top of its first page that "Borrower" means MRSI and the Debtor. The sixth and final printed page states as follows:
12. BORROWER'S NAMES AND SIGNATURE(S):
By signing below, each individual or entity
becomes obligated under this Note as Borrower.
Marketing Response Systems, Inc.
_____________________________________________
Rose Enriquez
_____________________________________________
Marketing Response Systems, Inc.
By:
_____________________________________________
By:
_____________________________________________
x
_____________________________________________
Rose Enriquez
Wagoner testified that the first place where the two names appear on page 6 identifies the borrowers and does not call for a signature. However, the Debtor signed on the second line following her printed name, rather than where the individual borrower was supposed to sign, after the "x" on the last line labeled "Rose Enriquez". The Debtor also signed on the first line under the corporate name, after "By:", and wrote underneath that line "Rose A. Enriquez President". According to Wagoner, who was not involved in the transaction when the Note was signed, it was the Bank's intention that the borrowers be MRSI and the Debtor, with each liable for the loan. The Debtor testified that she signed the Note along with many other documents for close of escrow, without having time to read them all or compare them with each other. She said that her attorney was not present and had not *119 reviewed the documents, no one explained them to her, and she just signed where the Brauchs' attorney "was pointing me to sign"both the Debtor and Wagoner testified that no representative of the Bank was present, and Wagoner said that the Bank typically did not send a representative when a business escrow was used. Counsel for the Bank noted that the Debtor had stated in deposition testimony that she "understood that both [MRSI] and [the Debtor] had an obligation to repay" the Note, and agreed that she was required to repay itwhen asked whether she had "any dispute" that both owe the balance due under the Note, the Debtor replied "Disputes? I just don't have a way to repay the loan". At trial, the Debtor said that she "wasn't very clear on what I should respond there" because the documents were "very confusing", the deposition "went for such a long time, there were so many questions", and "now that I have taken a close look at the documents I see that they're confusing". Debtor acknowledged that, between January 10, 2001 and April 15, 2002, four checks totaling $7,574.24 were issued from Omega's account to the Bank.
The Debtor testified that the Bank loan was in default when she filed her Chapter 13 petition on February 26, 2003, and Wagoner testified that the last payment was received on November 8, 2001. The Bank's records show that the outstanding balance on January 1, 2002 was $462,295.47. The Bank has filed a proof of claim in the Debtor's Chapter 13 case for $479,657.93, asserting that it is secured to an unknown extent by collateral in the form of "business assets, machinery, and equipment"; there is no record of the Debtor having filed an objection to the claim. Wagoner testified that the total due as of January 12, 2004 was $482,148.64 after applying all payments and other receipts. The Bank's records show three credits totaling $37,742.59[4] that represent funds received from the Brauchs and liquidation of collateral. According to Wagoner, the Bank sued the Brauchs to recover the prepayments that they had accepted from the Debtor in violation of their standby agreements with the Bank, and settled that litigation. Wagoner was unaware of any collateral that had not been liquidated.
II.
ANALYSIS
The Bank's written objection to confirmation of the Debtor's Plan was based only on the Plan having been proposed in bad faith and failing to treat the Bank's claim in the manner required by law. At trial, the Bank raised for the first time the Debtor's lack of eligibility for Chapter 13 relief due to debts exceeding the limits fixed by § 109(e). In closing argument, counsel for the Debtor urged that the Bank should not be permitted to raise an objection to eligibility for the first time at trial, when it was not pled in the written objection to confirmationhowever, he also argued that the Debtor was not ineligible, based on the evidence at trial and the provisions of the statute.
A. Lateness
Rule 15(b) of the Federal Rules of Civil Procedure ("FRCP")[5] provides that pleadings may be amended to conform to the evidence: *120 Amendments to Conform to the Evidence. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice the party in maintaining the party's action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence.
The application of this rule is explained by In re Jodoin, 209 B.R. 132, 136 (9th Cir. BAP 1997):
Generally, a party cannot succeed on a cause of action not stated in the complaint. [Footnote omitted.] See generally Acequia, Inc. v. Clinton (In re Acequia, Inc.), 34 F.3d 800, 814 (9th Cir.1994) ... (quoting Self Directed Placement Corp. v. Control Data Corp., 908 F.2d 462, 466(9th Cir.1990) ("[T]he main purpose of the complaint is to provide notice of what the plaintiffs claim is and the grounds upon which the claims rest.... [The] plaintiff must at least set forth enough details so as to provide defendant and the court with a fair idea of the basis of the complaint and the legal grounds claimed for recovery."); Save Lake Washington v. Frank, 641 F.2d 1330, 1339 (9th Cir.1981)). However, FRCP 15(b) [footnote omitted] permits the parties to consent implicitly to amendments to the pleadings based on the actual trial. FRCP 15(b) is to be construed liberally. See 6A Charles Alan Wright, [Arthur R. Miller & Mary Kay Kane,] Federal Practice and Procedure § 1491 (2d ed.1990); 3 James Wm. Moore, et. al, Moore's Federal Practice 115.13[2] (1996).
In this case, counsel for the Debtor stated in closing argument that he objected to the Bank raising the eligibility issue for the first time at trial, but he did not object to evidence concerning that issue, and he addressed the merits in argument. Furthermore, FRCP 54(c)[6] provides (in pertinent part) that:
Except as to a party against whom a judgment is entered by default, every final judgment shall grant the relief to which the party is entitled, even if the party has not demanded such relief in the party's pleadings.
As the trial court pointed out in In re Jodoin, 196 B.R. 845, 851-852 (Bankr. E.D.Cal.1996):
The court is obliged to award the plaintiff the relief to which she is entitled under the evidence adduced at trial, so long as such relief is within the court's jurisdiction. Fed.R.Civ.P. 54(c); [footnote omitted] Fed.R.Bankr.P. 7054. It does not matter that the relief has not been requested. See, e.g., Z Channel Ltd. Partnership v. Home Box Office, Inc., 931 F.2d 1338 (9th Cir.1991).[1f] The key qualification is that the failure to have demanded the appropriate relief *121 must not have prejudiced the adversary in the defense of the matter. 10 Wright & Miller § 2664; 6 Moore It 54.62. In this context, prejudice refers to lack of opportunity to present additional evidence to meet the unpleaded issue. Hence, prejudice has been found where forewarning would have led to additional evidence that was not otherwise relevant to the issues that were expressly raised in the pleadings. Rivinius, Inc. v. Cross Mfg., Inc. (In re Rivinius, Inc.), 977 F.2d 1171, 1177 (7th Cir.1992). But prejudice has not been found to exist when the additional evidence would also have been relevant to the issues that were expressly raised. Rental Dev. Corp. v. Lavery, 304 F.2d 839, 842 (9th Cir.1962).
In this case, counsel for the Debtor expressed no prejudice and did not contend that he would present more or different evidence if he were given additional time. As discussed below, the facts concerning eligibility have been tried without a timely objection by the Debtor, the legal issues are a matter of black letter law, and there is no prejudice to the Debtor in ruling on that question now.
B. Merits
Pursuant to § 109(e) an individual is eligible to be a debtor under Chapter 13 only if she "owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than [$290,525] and noncontingent, liquidated, secured debts of less than [$871,550]".[7]
The Debtor contends that she does not owe a debt to the Bank because the loan was taken by MRSI and the Debtor acted only as a "warrantor". The Debtor pleads confusion about her role in the loan transaction, but the Bank argues that the documents she signed speak for themselves and are not ambiguous. It is true that the Debtor's signature on the Commitment Letter is labeled "as Guarantor", but the body of that document identifies the borrowers as both MRSI and the Debtor, and states that the capacity of guarantor is "n/a", ie., not applicable. Some three months later, the Debtor signed the Note, which identifies the borrowers twice (once at the top of the first page and again on the signature page) as being both MRSI and the Debtor, and which makes no reference to guarantors. The Debtor signed the Note twice, once on a line designating a representative of MRSI, and again on a line labeled only with her name and with no qualifying term such as "guarantor". The Debtor testified that she was represented by counsel but that her attorney was not present when the documents were signed and had not reviewed them, and the Debtor did not read everything that she signedshe does not complain that the Bank somehow misled or coerced her into signing under such circumstances. Furthermore, the Debtor caused Omega to make over $7,500 in loan payments to the Bank for a period exceeding one year, which arguably is inconsistent with a belief that only MRSI was liable for the loan. Finally, there is no evidence that the Debtor ever expressed confusion to the Bank, and she admitted at deposition that both she and MSRI were liable for the loan.
Even if the Debtor were not directly liable for the Bank loan, she characterizes herself as a "warrantor" who would be liable if MSRI were to default. Counsel for the Debtor contended in argument that, if the Debtor were merely a guarantor, the debt to the Bank would be a contingent one for purposes of § 109(e) *122 because the Debtor's liability had not yet arisen when the Chapter 13 case was commenced. But the Debtor testified that the Bank loan was in default when she filed her Chapter 13 petition on February 26, 2003, and the Bank's records show that no payment had been received since November 8, 2002, over three months pre-petition. Pursuant to In re Fostvedt, 823 F.2d 305, 306-307 (9th Cir.1987) ("Fostvedt"):
[T]he rule is clear that a contingent debt is "one which the debtor will be called upon to pay only upon the occurrence or happening of an extrinsic event which will trigger the liability of the debtor to the alleged creditor." Brockenbrough v. Commissioner, 61 B.R. 685, 686 (W.D.Va.1986), quoting In re All Media Properties, Inc., 5 B.R. 126, 133 (Bankr. S.D.Tex.1980), affd. per curiam, 646 F.2d 193 (5th Cir.1981).
According to the Debtor's own understanding of her role as "warrantor", the "extrinsic event which will trigger the liability of the debtor" was the default of MRSI, which Debtor concedes occurred pre-petition. Accordingly, on the date of bankruptcy, if Debtor had liability as a guarantor, such liability would be non-contingent for purposes of § 109(e). Therefore, whether Debtor was liable as a principal obligor or as a guarantor, she was liable for a non-contingent debt to the Bank.
The Debtor also argues that the debt to the Bank was unliquidated when the Chapter 13 case was commenced, because it was partially secured and the value of the collateral was not known. The Ninth Circuit has defined "liquidated" under § 109(e):
[WJhether a debt is liquidated "turns on whether it is subject to `ready determination and precision in computation of the amount due.'"
Fostvedt, at 306 (9th Cir.1987).
The definition of "ready determination" turns on the distinction between a simple hearing to determine the amount of a certain debt, and an extensive and contested evidentiary hearing in which substantial evidence may be necessary to establish amounts or liability.
In re Wenberg, 94 B.R. 631, 634 (9th Cir. BAP 1988), affd, 902 F.2d 768 (9th Cir. 1990). The Debtor did not dispute the amount of the debt itself at trial, nor has she objected to the claim filed by the Bank. The extent to which that debt was secured on the date of bankruptcy is the only issue that has been raised and the evidence does not suggest that determining the value of the collateral would require "an extensive and contested evidentiary hearing in which substantial evidence may be necessary". The collateral was personal property consisting primarily of a few pieces of used equipment, which could easily have been appraised. For purposes of § 109(e), the debt to the Bank is a liquidated one despite the fact that it was partially secured by collateral with a value that has not been precisely determined, because that value was and is capable of "ready determination".
As set forth above, the maximum debt permitted by § 109(e) is less than $290,525 in unsecured debt and less than $871,550 in secured debt. Pursuant to In re Scovis, 249 F.3d 975 (9th Cir.2001), a debt is secured for purposes of § 109(e) only to the extent of the value of the collateral, with any balance being treated as unsecured. The Bank's records showed the total amount owed on January 1, 2002 to be $462,295.47, with no reduction thereafter until November 2003; accordingly, the debt when the Chapter 13 case commenced on February 26, 2003 was at least $462,295.47. The evidence does not show what the value of the collateral was on that date, but there is some indication of its value later in the year, when the Bank *123 applied a total of $37,742.59 to the debt after having liquidated all collateral. That figure includes receipts from litigation with the Brauchs and there is no itemization of what portion is attributable to the collateral. Assuming for the sake of argument that the entire amount represented proceeds from sale of the collateral, if that amount were applied to reduce the debt of $462,295.47, the balance to be treated as an unsecured claim for purposes of § 109(e) would be $424,552.88. The collateral would have to be worth $171,771.48 in order to reduce the Bank's claim to one cent less than $290,525 and meet the unsecured debt limit of § 109(e),[8] which is not remotely supported by the evidencethe Debtor testified that MSRI had minimal equipment when she acquired it and spent only $27,000 to buy more, all of which was liquidated for something less than $38,000 nine months post-petition.
Accordingly, the Debtor owed noncontingent and liquidated unsecured debt on the date of bankruptcy totaling more than $290,525, and is therefore ineligible for relief under Chapter 13.
CONCLUSION
For the reasons set forth above, the Bank's objection to confirmation of the Debtor's Plan is sustained to the extent that it alleges ineligibility, and is moot with respect to all other grounds raised.
Counsel for the Bank shall submit a form of order so providing, after review by counsel for the Debtor as to form.
NOTES
[1] Unless otherwise noted, all statutory references are to Title 11, United States Code ("Bankruptcy Code"), as applicable to cases commenced on February 26, 2003.
[2] Devin Derham-Burk, the Chapter 13 trustee, has also filed an objection to confirmation, on the grounds that unsecured debt exceeds the maximum amount permitted by § 109(e). That objection was not tried with the Bank's objection, and remains pending.
[3] Neither Baker nor Anderson testified. The Bank's attorney said that Anderson had left the Bank's employ and moved to another state, where she could not be located.
[4] The credits were applied on November 14, 2003, December 12, 2003, and December 18, 2003 in the respective amounts of $1,500, $16,000, and $20,242.59
[5] FRCP 15(b) has been incorporated by FRBP 7015, which in turn is made applicable to contested matterssuch as objections to plan confirmationby FRBP 9014(c).
[6] FRCP 54(c) has been incorporated by FRBP 7054, which in turn is made applicable to contested matterssuch as objections to plan confirmationby FRBP 9014(c).
[7] Pursuant to § 104(b)(1), the amounts are periodically adjusted. The amounts set forth above apply to cases commenced between April 1, 2001 and March 30, 2004.
[8] The Debtor's amended schedules list other unsecured claims totaling $42,815.25, which would have to be included in the eligibility calculation unless they were contingent and/or unliquidated. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1301930/ | 159 Ga. App. 600 (1981)
284 S.E.2d 103
MORRIS
v.
THE STATE.
62177.
Court of Appeals of Georgia.
Decided September 18, 1981.
*602 Robert A. Kunz, Michael R. Hauptman, for appellant.
William A. Foster III, District Attorney, Frank C. Winn, Barbara V. Tinsley, Assistant District Attorneys, for appellee.
SHULMAN, Presiding Judge.
On July 9, 1980, appellant was being transported from the Douglas County jail to a doctor's office. When appellant was searched prior to being transported, he attempted to put his right hand into his pocket. The guards found in that pocket a broken pen, a .22 bullet, and a rubber band. The pen and bullet were put together in a manner commonly known as a "zip gun." Appellant was placed in an isolation cell where his bedding subsequently caught fire.
During the trial, a police sergeant testified that, in his opinion, the device found on the appellant's person was capable of detonating and projecting a .22 slug. The trial judge included in his instruction to the jury a charge concerning the testimony of expert witnesses. Appellant was convicted of possession of a firearm by a convicted felon, attempted escape, and criminal trespass.
Appellant raises two enumerations of error. He contends that it was error for the trial court to charge the jury, over appellant's objection, as to expert witnesses and expert testimony. Appellant also contends that the trial court erred in denying his motion for a directed verdict on the charge of attempted escape.
1. In appellant's first enumeration of error, counsel urges that the police sergeant did not qualify as an expert witness and that the *601 court's charge concerning expert testimony caused the jury to give more weight to his testimony than it warranted.
For many years, the law concerning this issue has been solid and consistent. "Generally, nothing more is required to qualify an expert than that he has been educated in a particular trade or profession. This special knowledge may be derived from experience as well as study. [Cits.]" Martin v. Newton, 129 Ga. App. 735, 736 (201 SE2d 31). See also Redd v. State, 240 Ga. 753 (2) (243 SE2d 16).
The sergeant testified that he had been exposed to firearms since early childhood and had gained further knowledge through his police training. His knowledge concerning the pressure required to detonate a .22 bullet had been obtained from studying various magazines and books. The sergeant qualified as an expert under the language of Martin, supra.
"Whether or not a witness is allowed to testify as an expert is a question for the sound discretion of the trial court and such discretion, unless abused, will not be disturbed." Hogan v. Olivera, 141 Ga. App. 399, 401 (233 SE2d 428). See also Redd v. State, supra. Upon objection to the charge, the trial judge ruled that the police officer qualified as an expert witness. We find no abuse of discretion by the trial court. Therefore, appellant's first enumeration of error is without merit.
2. Appellant's second enumeration of error concerns his conviction of attempted escape. "A person commits criminal attempt when, with intent to commit a specific crime, he performs any act which constitutes a substantial step toward the commission of that crime." Code Ann. § 26-1001.
Appellant contends that the mere fact he had a weapon in jail was not a substantial step toward the commission of the crime of attempted escape. However, the evidence goes somewhat further. The appellant knew that he was about to be transported out of the prison. Also, he did make a move toward the pocket where the "zip gun" was afterward found.
It is not error to refuse to grant a directed verdict for acquittal where there is any evidence to support the conviction. Bethay v. State, 235 Ga. 371 (219 SE2d 743). Although admittedly not conclusive, this evidence is enough to survive a motion for directed verdict. It should be up to the jury to decide the substantiality of the step taken by the appellant, and the jury in the case at bar has done just that.
Judgment affirmed. Birdsong and Sognier, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551088/ | 908 A.2d 790 (2006)
APPEAL OF WHITE MOUNTAIN REGIONAL SCHOOL DISTRICT (New Hampshire Public Employee Labor Relations Board)
No. 2005-490
Supreme Court of New Hampshire.
Argued: May 17, 2006
Opinion Issued: August 29, 2006
Soule, Leslie, Kidder, Sayward & Loughman, of Salem (Michael S. Elwell and Jill A. Desrochers on the brief, and Mr. Elwell orally), for the appellant.
James F. Allmendinger, of Concord, staff attorney, NEA-New Hampshire, by brief and orally, for the appellee, White Mountain Regional Education Association, NEA-New Hampshire.
HICKS, J.
The appellant, White Mountain Regional School District (district), appeals a ruling of the New Hampshire Public Employee Labor Relations Board (PELRB) that it committed an unfair labor practice under RSA 273-A:5 (1999). The PELRB ruled that the district breached its collective bargaining agreement with the appellee, White Mountain Regional Education Association (association), when it issued letters of renewal with reservations to several of its teachers and required them to develop improvement plans for the upcoming school year. We affirm.
The record supports the following facts. The association is the exclusive representative of teachers employed by the district. The association and the district were parties to a collective bargaining agreement (CBA) in effect from July 1, 2002, to June 30, 2004. In April 2004, several tenured teachers employed by the district were given letters of renewal with reservations by the superintendent of schools. These letters informed the teachers that they were renominated for employment for the upcoming school year, but with reservations about their performance. The letters further stated that the teachers were required to prepare improvement plans before the end of the 2003-2004 school year.
The association filed an unfair labor practice complaint with the PELRB, alleging that the district unilaterally changed the procedures outlined in the CBA concerning teacher evaluation and performance reviews. The association relied upon article XVI of the CBA, entitled "Employee Evaluation," which details the procedures for evaluating teacher performance and providing feedback. It provides that tenured teachers are to be observed at least once per year, with discretion to the administration to conduct additional visits. A written evaluation must be prepared and placed in the teacher's file as a result of the observation, and a copy must be provided to the teacher.
The district maintained that its actions were consistent with the terms of the CBA, the past policies of the district, and RSA 189:14-a, III (Supp. 2005), which requires, among other things, notice to teachers that "unsatisfactory performance may lead to nonrenomination." The PELRB disagreed, ruling that the district breached the parties' CBA by using new procedures to communicate teacher deficiencies. It ordered the district to remove all evidence of the letters and improvement plans from the teachers' files. The district redacted certain portions of the teachers' files in accordance with the PELRB order and filed this appeal.
On appeal, the district argues that: (1) the PELRB's decision is contrary to RSA 189:14-a; (2) the CBA impliedly permits it to issue such letters and to require improvement plans; and (3) its actions constituted "managerial policy within the exclusive prerogative of the public employer" under RSA 273-A:1, XI (Supp. 2005).
Our review standard is governed by RSA 541:13 (1997). The PELRB's findings of fact are deemed prima facie lawful and reasonable, and its decision will be set aside only for errors of law or if it is shown to be unjust or unreasonable by a clear preponderance of the evidence. Appeal of State of N.H., 138 N.H. 716, 719 (1994).
Following submission of the briefs but prior to oral argument, the association moved to dismiss this case as moot due to the expiration of the old agreement. Specifically, the association asserted that the case is moot because the teachers affected by the actions of the district were renewed and are under a new CBA that specifically addresses improvement plans. The new CBA, however, does not resolve whether the letters of renewal with reservations and improvement plans must remain redacted from the teachers' files. Accordingly, we deny the appellee's motion and address the merits of the appeal.
The district first argues that the PELRB's decision is contrary to RSA 189:14-a, III (Supp. 2005) because this statute obligated the district to issue renewals with reservations in order to provide notice to the teachers that they may not be renewed. We disagree.
RSA 189:14-a, III became effective on August 29, 2003, and provides that:
In cases of nonrenomination because of unsatisfactory performance, the superintendent of the local school district shall demonstrate, at the school board hearing, by a preponderance of the evidence, that the teacher had received written notice that the teacher's unsatisfactory performance may lead to nonrenomination, that the teacher had a reasonable opportunity to correct such unsatisfactory performance, and that the teacher had failed to correct such unsatisfactory performance.
RSA 189:14-a. The district asserts that this statute applied to the CBA on August 29, 2003, and therefore the district was required to take the action it did in order to comply with the terms of the statute in anticipation of the eventual nonrenomination of the teachers. The association counters that the provisions of this statute do not apply because of RSA 273-A:4 (Supp. 2005), which addresses arbitration and other binding resolution provisions under grievance procedures adopted under a collective bargaining agreement.
RSA 273-A:4 provides that:
Every agreement negotiated under the terms of this chapter shall be reduced to writing and shall contain workable grievance procedures. No grievance resulting from the failure of a teacher to be renewed pursuant to RSA 189:14-a shall be subject to arbitration or any other binding resolution, except as provided by RSA 189:14-a and RSA 189:14-b. Any such provision in force as of the effective date of this section shall be null and void upon the expiration date of that collective bargaining agreement.
RSA 273-A:4. The "effective date of this section" was August 29, 2003. See Laws 2003, 204:5. The association asserts that the last sentence of this statute precluded application of RSA 189:14-a until the CBA expired on June 30, 2004.
While RSA 189:14-a is not directly applicable to this case because the teachers were all renominated, we recognize the district's concern that were the teachers not renominated for the following school year, the renewals with reservations policy would be evaluated to determine if it complied with the requirements of the statute. However, we hold that the notice provisions of RSA 189:14-a did not apply to the parties' CBA, which was already in existence at the time the notice provisions became effective. This dispute arose in April 2004, while the 2002-2004 CBA was in effect. An amendment to an existing law that affects existing contract rights is presumed to operate prospectively unless the language of the amendment or surrounding circumstances express a contrary legislative intent. Hayes v. LeBlanc, 114 N.H. 141, 144 (1974). We find no such language or circumstances here indicating that RSA 189:14-a was intended to affect existing contract rights. Indeed, the companion amendment to RSA 273-A:4 demonstrates the legislature's intent not to affect existing contract rights the amendment specifically provides that its prohibition of arbitration or other binding resolutions does not apply to existing CBAs prior to their expiration dates. Therefore, we conclude that the language in RSA 189:14-a regarding procedures for notifying teachers of unsatisfactory performance did not apply to the district until the expiration of the CBA in June 2004. Accordingly, the district was under no obligation to comply with its provisions.
Next, the district argues that the PELRB's decision was contrary to the parties' CBA because letters of renewal with reservations and improvement plans are impliedly permitted by its provisions. Article XVI of the CBA requires tenured teachers to be observed at least once per year, allows multiple observations at the administration's discretion and requires a written evaluation document to be prepared within ten days following such observations. The district contends that because this provision does not expressly preclude "the use of improvement plans and notices of reservations," it is free to utilize such measures. The PELRB disagreed, ruling that: "[W]e do not see a negotiated right flowing to the District to unilaterally abandon the multiple observation device and instead issuing a conditional renewal and, in addition, adding the requirement of participation in an undefined improvement plan that is not allowed under the terms of the CBA." We agree with the PELRB.
The terms of the CBA are clear regarding the procedures to be used when evaluating teachers and communicating teacher deficiencies. When the district issued letters of renewal with reservations and required improvement plans, it failed to follow the procedures of the CBA, which already provided procedures for teacher recommendations and improvement.
Once parties to a CBA have chosen to bargain over matters not otherwise prohibited from negotiation, the parties must abide by the agreement entered into during the term of the CBA. Appeal of Pittsfield School Dist., 144 N.H. 536, 540 (1999). In Pittsfield, we held that the Pittsfield School District was bound to follow the ten procedures laid out in the CBA regarding teacher evaluations and could not unilaterally adopt and enforce a new plan. Id. We reach the same conclusion here because the record supports the PELRB's finding that the terms of the CBA did not reserve to the district the right to implement different procedures for addressing teacher performance and evaluations. By doing so, the district failed to follow the express provisions of the CBA.
Similarly, the savings clause of the CBA cannot be used by the district to support its actions. The savings clause provides that school board policies in use as of the effective date of the CBA are applicable so long as the policies are not restricted by provisions of the CBA. The record supports the PELRB's ruling that the savings clause does not apply because the CBA provides for the procedures to be followed when addressing teacher evaluations and performance reviews. Letters of renewal with reservations issued directly by the Superintendent without any warning or feedback from the teachers are contrary to the evaluation and recommendation procedures identified in the CBA. Accordingly, we reject the district's argument that its conduct can be justified by past policies.
Finally, the district asserts that the letters of renewal with reservations and required improvement plans fall within the managerial policy exception defined in RSA 273-A:1, XI, thereby permitting the district to unilaterally implement these procedures without negotiation. The association counters that teacher evaluation procedures affect the terms and conditions of employment, which is a mandatory subject of bargaining.
RSA 273-A:1, XI exempts managerial policy from mandatory negotiation. The statute provides:
"Terms and conditions of employment" means wages, hours and other conditions of employment other than managerial policy within the exclusive prerogative of the public employer, or confided exclusively to the public employer by statute or regulations adopted pursuant to statute. The phrase "managerial policy within the exclusive prerogative of the public employer" shall be construed to include but shall not be limited to the functions, programs and methods of the public employer, including the use of technology, the public employer's organizational structure, and the selection, direction and number of its personnel, so as to continue public control of governmental functions.
RSA 273-A:1, XI. In Appeal of State of N.H., we clarified the managerial policy exception and established a three-part test to determine whether negotiation of a proposal is mandatory, permissible or prohibited. Appeal of State of N.H., 138 N.H. at 722. In order for a proposal to be a prohibited subject of bargaining, and therefore fall under the managerial policy exception, the subject matter of the proposal must be reserved to the exclusive managerial authority of the public employer by the constitution, or by statute or statutorily adopted regulation. Id.
The PELRB ruled, without discussion, that the conduct of the district does not fall under the managerial policy exception. We agree. RSA 273-A:1, XI does not expressly except from bargaining teacher evaluation and performance review procedures. See Pittsfield, 144 N.H. at 539-40. The renewals with reservations and required improvement plans do not involve procedures for hiring teachers or the standards by which teacher improvement will be assessed and therefore do not affect matters of managerial policy. Id. at 540. Accordingly, we reject the district's argument that its actions are within the "exclusive prerogative of the public employer" affecting the "selection" and "direction" of its personnel. RSA 273-A:1, XI.
The district further argues that even if its actions are not considered managerial policy, the procedures at issue are not mandatory subjects of bargaining and that since the CBA is silent on the matter, the district is permitted to implement them. The association counters that the procedures involve "terms and conditions of employment" which are mandatory subjects of bargaining that cannot be unilaterally implemented without negotiation. Appeal of State of N.H., 138 N.H. at 722.
On the record before us, we decline to decide whether the procedures at issue in this case are "terms and conditions of employment." As we stated above, the CBA expressly provides for teacher evaluation and performance review procedures. By utilizing new procedures in this area, the district breached the specific provisions of the CBA. Because the procedures at issue are not prohibited subjects of bargaining under the managerial policy exception, and the parties chose to negotiate in this area, they are bound by the terms of the CBA. Pittsfield, 144 N.H. at 540. Thus, the PELRB correctly applied applicable precedent. See id.; see also Appeal of State of N.H., 138 N.H. at 722.
Accordingly, we uphold the PELRB's ruling that the district breached the parties' CBA and that the April 2004 letters of renewal with reservations and improvement plans must be removed from the teachers' files.
Affirmed.
BRODERICK, C.J., and DALIANIS and GALWAY, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3070546/ | 11TH COURT OF APPEALS
EASTLAND, TEXAS
JUDGMENT
Daniel Vasquez Dominguez, * From the 104th District
Court of Taylor County,
Trial Court No. 13674-B.
Vs. No. 11-12-00349-CR * February 27, 2015
The State of Texas, * Memorandum Opinion by Bailey, J.
(Panel consists of: Wright, C.J.,
Willson, J., and Bailey, J.)
This court has inspected the record in this cause and concludes that there is
no error in the judgment below. Therefore, in accordance with this court’s
opinion, the judgment of the trial court is in all things affirmed. | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1551129/ | 908 A.2d 132 (2006)
KESTER OBOMIGHIE
v.
STATE OF MARYLAND.
No. 1672, September Term, 2005.
Court of Special Appeals of Maryland.
Filed: September 22, 2006.
Salmon, Adkins, Meredith, JJ.
Opinion by MEREDITH, J.
Kester Obomighie appeals the dismissal by the Circuit Court for Baltimore County of his petition for post conviction relief. Obomighie was convicted of second degree assault and was sentenced to 18 months of imprisonment, all suspended in favor of 18 months of supervised probation. He did not file his petition for post conviction relief until the 18 month probationary period had only one week remaining. Because Obomighie's probation had ended by the time his post conviction petition came before the circuit court for a hearing, the court concluded it had no jurisdiction to grant the petition.
The issue raised in this appeal is whether the circuit court retains jurisdiction to grant post conviction relief in a case when the petition was filed while the petitioner was on probation, but the hearing on the petition took place after the probationary period had ended. We agree with the circuit court that, once Obomighie's term of probation ended, it no longer had jurisdiction under Maryland's Uniform Postconviction Procedure Act to grant relief. The circuit court therefore properly dismissed the case.
Procedural Background
Following a bench trial, Obomighie was convicted of second degree assault. On June 6, 2003, he was sentenced to 18 months of imprisonment, all of which was suspended in favor of 18 months of supervised probation. On November 29, 2004, Obomighie filed a petition seeking post conviction relief, alleging ineffective assistance of trial counsel. Obomighie's probation ended on December 6, 2004, seven days after the petition was filed and before the court acted on the petition. The circuit court conducted a hearing on August 9, 2005, and, on August 11, 2005, entered an order dismissing the case for want of jurisdiction because Obomighie was no longer on probation. Obomighie timely appealed to this Court.
Analysis
This case turns on the interpretation of the Uniform Postconviction Procedure Act ("UPPA"), Maryland Code (2001), Criminal Procedure Article, §§ 7-101 et seq., and the Maryland rules implementing the UPPA. The interpretation of a statute is a question of law, which we review de novo. Collins v. State, 383 Md. 684, 688 (2004). In Collins, the Court of Appeals summarized the relevant rules of statutory construction, noting that we generally apply the plain language rule to unambiguous statutes:
The cardinal rule of statutory construction is to ascertain and effectuate the intent of the Legislature. See Melton v. State, 379 Md. 471, 476, 842 A.2d 743, 746 (2004). We begin with the plain language of the statutes. As we have frequently stated, if the statutory language is unambiguous when construed according to its ordinary and everyday meaning, then we give effect to the statute as written. Id. at 477, 842 A.2d at 746.
Id. at 688-89.
UPPA § 7-101 defines the scope of post conviction relief in Maryland. It reads:
This title applies to a person convicted in any court in the State who is:
(1) confined under sentence of death or imprisonment; or
(2) on parole or probation.
On its face, this language excludes Obomighie from the scope of post conviction relief. UPPA § 7-101 uses the present tense when it states that "[t]his title applies to a person . . . who is . . . on parole or probation." (Emphasis added). The statute does not refer to any time period when the condition of being on probation must be satisfied, but in no way implies that a person who files a petition while on probation will remain within the scope of the title after the probationary period ends. See Ruby v. State, 353 Md. 100, 106 n. 3 (1999)("The [UPPA] does not provide a remedy, for example, when the defendant is not incarcerated or subject to parole or probation."); Fairbanks v. State, 331 Md. 482, 492 n. 3 (1993)("Post-conviction and habeas corpus remedies are available only if the defendant is in custody or subject to conditions of parole or probation."; Randall Book Corp. v. State, 316 Md. 315, 321 (1989)(The UPPA "applies only to persons who are `either incarcerated under sentence of death or imprisonment or on parole or probation.'").
The statement in UPPA § 7-101 that the title "applies" to convicted persons who are either (1) confined, or (2) on parole or probation, is equivalent, under the doctrine of expressio unius, to saying that people who do not meet either of those requirements are ineligible for post conviction relief because they are outside the scope of the statute. See Comptroller v. Blanton, 390 Md. 528, 537 (2006)("Maryland has long accepted the doctrine of expressio (or inclusio) unius est exclusio alterius, or the expression of one thing is the exclusion of the other.").
We recognize that UPPA § 7-102 states that "a convicted person may begin a proceeding under this title in the circuit court for the county in which the conviction took place at any time. . . ." (Emphasis added.) But the apparent conflict between UPPA § 7-101 (which limits the scope of the title, and the jurisdiction of the circuit court, to persons imprisoned or on parole or probation) and UPPA § 7-102 (which, on its face, permits initiating a proceeding under the UPPA "at any time") was resolved by the Court of Appeals in McMannis v. State, 311 Md. 534 (1988).[1] The Court held in McMannis that the custody requirement circumscribes the period during which post conviction relief may be granted notwithstanding the right to initiate a proceeding seeking such relief "at any time." The Court stated:
The purpose of [the "at any time" language in § 7-102] is to permit the filing of a petition at any time, even while a direct appeal is pending, or long after the time for a direct appeal has passed, provided the custody requirement of [§ 7-101] is also met.
Id. at 540.[2]McMannis makes it clear that petitions may be "filed at any time," but only by persons within the scope of UPPA § 7-101, that is to say, only by persons who are either confined, or on parole or probation.
Even though Obomighie was on probation, and therefore within the scope of UPPA § 7-101 at the time he filed his petition, we nevertheless conclude that his right to seek relief under UPPA expired simultaneously with the termination of his probation. We reach this conclusion because the Court of Appeals held in McMannis, supra, 311 Md. at 541, that the requirement in UPPA § 7-101 that the petitioner be in custody is jurisdictional in nature. Obomighie, like McMannis, fell outside of the scope of UPPA § 7-101 on December 6, 2004, when his probation ended, thereby terminating the circuit court's jurisdiction over his petition. UPPA § 7-101.[3]
Notwithstanding the plain language of UPPA § 7-101 and the construction the Court of Appeals gave similar language in McMannis, Obomighie contends that UPPA § 7-101 must be read in conjunction with Maryland Rule 4-402, which prescribes the contents of a petition for post conviction relief. Obomighie argues that because Rule 4-402 does not require such petitions to state the date a term of incarceration or probation expires, Rule 4-402 therefore implies that a court continues to have jurisdiction over a properly filed petition for post conviction relief, even if the term of incarceration or probation ends before the court acts upon the petition.
Although a rule of procedure adopted by the Court of Appeals might take precedence over an earlier enacted procedural statute when the two are in conflict, James v. Butler, 378 Md. 683, 692 (2003), we conclude that UPPA § 7-101 and Rule 4-402 are not in conflict. Rule 4-402 does no more than state the minimum requirements for a petition seeking post conviction relief, and does not purport to create or expand upon the petitioner's substantive rights to relief under UPPA.
Obomighie makes two additional arguments as to why the circuit court should have continuing jurisdiction to grant post conviction relief if the petitioner is within the scope of § 7-101 at the time the petition is filed. We shall address each briefly.
First, Obomighie points out that the date the hearing on his petition was scheduled was beyond his control, and he contends that his obligation to invoke the jurisdiction of the court was fully satisfied when he timely filed his petition. While he is correct that the scheduling of the hearing was beyond his control, his decision to file his petition 98.7 percent of the way through his probationary period virtually guaranteed that a hearing would not be scheduled in time to ensure that he remained eligible for relief under UPPA § 7-101.[4]
Second, Obomighie contends that the principles regarding survival of an appeal, set forth by the Court of Appeals in Surland v. State, 392 Md. 17 (2006), require that this Court reverse the circuit court. We disagree. Surland dealt with the issue of whether a direct appeal of a conviction survives the death of the person convicted of the crime. Although the Court of Appeals held that an appeal of right could proceed after an appellant's death under certain circumstances, id. at 36, the holding in Surland offers no support for Obomighie's position.
The Court of Appeals specifically limited its analysis in Surland to appeals of right. At the very beginning of the opinion, Judge Wilner stated for the Court:
The law throughout the country seems clear, and by now mostly undisputed, that, if the defendant's conviction has already been affirmed on direct appeal and the death [of the convicted person] occurs while the case is pending further discretionary review by a higher court, such as on certiorari, the proper course is to dismiss the discretionary appellate proceeding and leave the existing judgment, as affirmed, intact. The Supreme Court has adopted that view, and so have we.
Id. at 19.
In our view, the above quoted passage makes Surland inapplicable to Obomighie because Obomighie had the opportunity for a direct appeal of right but, after noting the appeal, dismissed it. As a consequence, the judgment of conviction remained intact. The petition for post conviction relief, as a collateral attack on the conviction, is more analogous to a discretionary appeal than to a direct appeal as a matter of right. Because the possibility of survival of an appeal, as recognized in Surland, would not apply to a discretionary appeal, Surland does not alter our conclusion that a court is without jurisdiction to grant a petition for post conviction relief after such point in time when the petitioner is no longer incarcerated, on parole, or on probation within the scope of UPPA § 7-101.[5]
THE JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE COUNTY IS AFFIRMED.
COSTS TO BE PAID BY APPELLANT.
NOTES
[1] McMannis addressed Maryland Code (1957, 1982 Repl. Vol., 1987 Cum. Supp.), Article 27, § 645A, the predecessor to the current version of the UPPA that was adopted by the General Assembly in 2001. The UPPA was first adopted in Maryland in 1958. Edward A. Tomlinson, Post-Conviction Relief in Maryland: Past, Present and Future, 45 Md. L. Rev. 927, 932 (1986). Initially, only imprisoned persons were within its scope, but the statute was amended in 1965 to include people on parole or probation as well as those imprisoned. Id. at n. 18. The language of current UPPA § 7-101, which defines the scope of the UPPA, "was derived without substantive change from former Art. 27, § 645A(a)(1)" in 2001. Revisor's Note to UPPA § 7-101.
[2] In McMannis, the Court referred to the predecessor of UPPA § 7-101(1) and (2) collectively "[f]or convenience . . . as the `custody' requirement of our [post conviction] statute." 311 Md. at 539. Consequently, even though McMannis had been incarcerated, we see no indication the Court of Appeals would adopt a contrary interpretation with respect to the availability of post conviction relief for persons whose "custody" was the result of being on parole or probation.
[3] Earlier cases had utilized a mootness analysis to deny post conviction relief to persons who had completed their sentences. See, e.g., Tucker v. Warden, 240 Md. 738 (1966)("It appearing to the Court that the petitioner is no longer `incarcerated under sentence of . . . imprisonment' (Acts of 1965, Chapter 442), and, as a consequence thereof, his application for leave to appeal has been rendered moot . . ."); Noble v. Warden, 221 Md. 581 (1959)(holding that an application for post conviction relief became moot when the prisoner was released from custody); Jett v. Director, 4 Md. App. 506, 507 (1968)(holding that a petition for post conviction relief became moot when the petitioner was "no longer `incarcerated under sentence of death or imprisonment or on parole or probation'"). The Court of Appeals recognized, however, in McMannis, 311 Md. at 539, that collateral consequences, such as an enhanced prison term for a subsequent conviction, might render a claim of mootness inapplicable. Consequently, the holding in McMannis was grounded squarely upon a lack of statutory jurisdiction.
[4] Under Maryland Rule 4-404, the State's Attorney was not required to file a response to the petition until 15 days after receiving notice of the filing of the petition. Therefore, the earliest date that a response would have been required to be filed would have been December 13, 2004, a week after Obomighie's probationary period ended.
[5] The fact that Obomighie does not qualify for relief under UPPA does not necessarily leave him without any remedy. In McMannis, 311 Md. at 544, the Court of Appeals left the door open for McMannis to collaterally attack his conviction in the jurisdiction that was subsequently relying upon the judgment, stating: "When a challenge to the validity of a foreign predicate conviction is lodged, we believe it is the jurisdiction utilizing that foreign conviction for enhancement of sentence which should bear the responsibility of resolving that controversy." Additionally, some convicted persons who are no longer in custody may qualify for relief through a writ of error coram nobis. See Skok v. State, 361 Md. 52 (2000). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551123/ | 908 A.2d 99 (2006)
JEANINE AGNES THOMAS and LUANN SUDBROOK
v.
DEPARTMENT OF LABOR, LICENSING, AND REGULATION and BOARD OF EDUCATION OF BALTIMORE COUNTY
No. 1475, September Term, 2005.
Court of Special Appeals of Maryland.
Filed: September 21, 2006.
Kenney, Adkins, Krauser, JJ.
Opinion by KENNEY, J.
The Board of Appeals of the Department of Labor, Licensing, and Regulation denied the separate claims of Jeanine Thomas and Luanne Sudbrook (collectively, "appellants"), for unemployment benefits, concluding that appellants were ineligible under Maryland Code (1991, 1999 Repl. Vol.), § 8-909 of the Labor and Employment Article ("L.E."). The Circuit Court for Baltimore County consolidated appellants' petitions for judicial review, and affirmed the denial of benefits. Appellants present two questions for our review, which we have slightly reworded as follows:
I. Are school bus drivers employed by a county board of education, who have worked for the first of two consecutive academic years or terms and who have a reasonable assurance of performing such work in the forthcoming academic year or term, employed by an "educational institution," thereby rendering them ineligible for benefits for unemployment occurring between the successive academic years or terms under L.E. § 8-909?
II. Does L.E. § 8-909 violate the Equal Protection Clause of the Fourteenth Amendment and Article 24 of the Maryland Declaration of Rights by unlawfully discriminating between those school bus drivers employed by the Maryland public school system and those drivers servicing public schools but employed by private contractors?
For the following reasons, we answer "yes" to the first question and "no" to the second. Therefore, we shall affirm the judgment of the circuit court.
FACTUAL AND PROCEDURAL HISTORY
Labor and Employment § 8-909 governs unemployment benefits payable to employees of governmental, charitable, educational, and religious organizations and provides, in pertinent part:
(a) In general. Subject to the provisions of this section, benefits based on service in covered employment under §§ 8-208(a) and 8-212(c) of this title shall be payable in the same amount, on the same terms, and subject to the same conditions as benefits payable on the basis of other service in covered employment.
* * *
(c) Same Services performed in other capacities. (1) With respect to services performed for an educational institution in any capacity other than instructional, research, or principal administrative, benefits may not be paid on the basis of the services for any week of unemployment that begins during a period between 2 successive academic years or terms.
(2) This subsection applies to any individual who: (i) performs the services described in this subsection in the first of 2 academic years or terms; and
(ii) has a reasonable assurance that the individual will perform the services in the second of the 2 successive academic years or terms.
(3) Before July 1 of each year, each educational institution shall provide the Department with the name and Social Security number of each individual who has a reasonable assurance of performing covered employment described under this subsection in the next academic year.
(4) If an individual whose name and Social Security number are required to be submitted to the Department under paragraph
(3) of this subsection is not given an opportunity to perform the services for the educational institution for the next successive year or term, the individual shall be eligible for benefits retroactively if the individual:
(i) files a timely claim for each week;
(ii) was denied benefits solely under this subsection; and
(iii) is otherwise eligible for benefits. (d) Same Vacations and holidays.(1) With respect to services described in subsections
(b) and (c) of this section, an individual may not be eligible for benefits based on the services for any week that begins during an established and customary vacation period or holiday recess.
(2) This subsection applies to any individual who:
(i) performs the services in the period immediately before the vacation period or holiday recess; and
(ii) has a reasonable assurance that the individual will perform the services in the period immediately following the vacation period or holiday recess.
(e) Educational service agencies. (1) In this subsection, "educational service agency" means a governmental entity that is established and operated exclusively to provide educational service to one or more educational institutions.
(2) If any service described in subsection (b) and (c) of this section is performed by an individual in an educational institution while in the employ of an educational service agency, the individual is subject to subsections (b), (c), and subsection (d) of this section and benefits may not be paid if not allowed under subsection (b), (c), or (d) of this section.
(f) Services on behalf of educational institutions. If any service described in subsection (a) of this section is provided by an individual to or on behalf of an educational institution, the individual is subject to subsections (b), (c), and (d) of this section and benefits may not be paid if not allowed under subsections (b), (c), and (d) of this section.
"Educational institution" is defined as "an institution that offers participants, students, or trainees an organized course of study or training that is academic, technical, trade-oriented, or preparatory for gainful employment in a recognized occupation" and includes "an institution of higher education." L.E. § 8-101(n). Both Thomas and Sudbrook were employed as school bus drivers by the Baltimore County Board of Education ("the Board") for the 2003-04 academic year, essentially on a ten-month basis. At the end of the academic year, Thomas and Sudbrook were each mailed a letter regarding their continued employment with the Board and requesting their route preferences for the next academic term. Appellants both responded to that letter, indicating their desire to return to work the following term and to retain their same respective routes as the prior academic year.
A. Jeanine Thomas
Thomas's last day of work was June 17, 2004, the last day of the regular academic term. On July 25, 2004, she filed a claim for unemployment insurance benefits with the Department of Labor, Licensing, and Regulation ("the Department"), claiming that she was temporarily laid-off from work for ten weeks or less. Her claim was denied by a Claims Specialist from the Department on August 16, 2004, because, as an employee of an educational institution under L.E. § 8-909(c) and having obtained a reasonable assurance of performing covered employment in the next academic term, she was ineligible for benefits. Thomas appealed to a Hearing Examiner, and a hearing on her claim was held on September 15, 2004. The Hearing Examiner denied Thomas's claim, finding her ineligible under L.E. § 8-909(c). When Thomas appealed the Hearing Examiner's decision to the Board of Appeals of the Department, the Board of Appeals adopted the Hearing Examiner's findings and recommendations. Afterwards, Thomas petitioned for judicial review in the Circuit Court for Baltimore County.
B. Luann Sudbrook.
Following the conclusion of the 2003-2004 regular academic year, the Board afforded Sudbrook work as a private contractor during the summer of 2004. Her final day of employment was July 30, 2004, and, on August 11, 2004, she filed a claim for unemployment benefits. A Department Claims specialist determined that L.E. § 8-909(c) applied to Sudbrook's claim and denied her benefits. In a hearing before the Hearing Examiner, Sudbrook argued that L.E. § 8-909(c) unfairly discriminated against her because school bus drivers employed by private contractors were eligible for benefits during the break between academic terms, while those drivers employed by the Board were not. Unpersuaded, the Hearing Examiner denied Sudbrook's claim on September 19, 2004. When the Board of Appeals adopted the findings and conclusions of the Hearing Examiner, Sudbrook petitioned the Circuit Court for Baltimore County for judicial review. Her case was consolidated with Thomas's petition.
C. Proceedings in the Circuit Court.
Following a hearing, the circuit court affirmed the decision of the Board of Appeals. It found that both Thomas and Sudbrook were ineligible for benefits under L.E. § 8-909(c). This timely appeal followed.
STANDARD OF REVIEW
The standard of judicial review of a decision of the Board of Appeals is governed by L.E. § 8-512(d), which provides:
(d) Scope of Review. In a judicial proceeding under this section, findings of fact of the Board of Appeals are conclusive and the jurisdiction of the court is confined to questions of law if:
(1) the findings of fact are supported by evidence that is competent, material, and substantial in view of the entire record; and
(2) there is no fraud.
"Under this statute, the reviewing court shall determine only: '(1) the legality of the decision and (2) whether there was substantial evidence from the record as a whole to support the decision.'" Department of Labor, Licensing, & Regulation v. Hider, 349 Md. 71, 77-78, 706 A.2d 1073 (1998) (quoting Baltimore Lutheran High Sch. Ass'n v. Employment Sec. Admin., 302 Md. 649, 662, 490 A.2d 701 (1985)). We "'may not reject a decision of the Board supported by substantial evidence unless that decision is wrong as a matter of law.'" Hernandez v. Dep't of Labor, Licensing, & Regulation, 122 Md. App. 19, 23, 711 A.2d 243 (1998) (quoting Hider, 349 Md. at 78)). "The test for determining whether the Board's findings of fact are supported by substantial evidence is whether reasoning minds could reach the same conclusion from the facts relied upon by the Board." Hider, 349 Md. at 78 (citing Baltimore Lutheran, 302 Md. at 661-662).
DISCUSSION
I.
Appellants concede that they performed services for the Board for at least one academic term immediately prior to the period for which they seek unemployment benefits and that they had obtained a reasonable assurance of performing such services in the second of the two successive academic terms. But, according to appellants, L.E. § 8-909(c) does not render them ineligible for unemployment benefits because they are not employed by an "educational institution" as defined by L.E. § 8-101(n). Appellants, who are employed by the Board, argue that "a school board, as opposed to an individual school, is not itself an educational institution. Rather it is an organization through which educational institutions, i.e., individual schools, are regulated." Therefore, appellants "did not `render services for an educational institution' and are not barred from receiving benefits under the plain meaning of [L.E.] § 8-909(c)."
The Department and the Board argue that the plain language of the statute and the purported purpose of the disqualification provisions clearly indicate that the Board is an "educational institution." And, because appellants had a reasonable assurance of continued employment, L.E. § 8-909(c) rendered them ineligible for unemployment benefits.
The Court of Appeals "has stated many times `that the cardinal rule of statutory construction is to ascertain and effectuate legislative intention.'" State v. Green, 367 Md. 61, 81, 785 A.2d 1275 (2001) (quoting Mayor of Baltimore v. Chase, 360 Md. 121, 128, 756 A.2d 987 (2000)). When we interpret a statute, our starting point is always the text of the statute. Adamson v. Corr. Med. Servs., Inc., 359 Md. 238, 251, 753 A.2d 501 (2000). "[I]f the plain meaning of the statutory language is clear and unambiguous, and consistent with both the broad purposes of the legislation, and the specific purpose of the provision being interpreted, our inquiry is at an end." Breitenbach v. N.B. Handy Co., 366 Md. 467, 473, 784 A.2d 569 (2001). The plain meaning rule is "elastic, rather than cast in stone[,]" and if "persuasive evidence exists outside the plain text of the statute, we do not turn a blind eye to it." Adamson, 359 Md. at 251 (citing Kaczorowski v. Mayor of Baltimore, 309 Md. 505, 513-14, 525 A.2d 628 (1987)).
"[I]n determining a statute's meaning, courts may consider the context in which a statute appears, including related statutes and legislative history." Ridge Heating, Air Conditioning & Plumbing v. Brennan, 366 Md. 336, 350-51, 783 A.2d 691 (2001). We often look to the legislative history, an agency's interpretation of the statute, and other sources for a more complete understanding of what the General Assembly intended when it enacted particular legislation. See Harris v. State, 331 Md. 137, 146, 626 A.2d 946 (1993). "We may also consider the particular problem or problems the legislature was addressing, and the objective it sought to attain." Sinai Hosp. of Baltimore, Inc. v. Dep't of Employment and Training, 309 Md. 28, 40, 522 A.2d 382 (1987). "This enables us to put the statute in controversy in its proper context and thereby avoid unreasonable or illogical results that defy common sense." Adamson, 359 Md. at 252.
"In the context of unemployment insurance law, because of its remedial nature, its provisions are liberally construed in favor of eligibility for benefits." Department of Econ. & Employment Dev. v. Taylor, 108 Md. App. 250, 268, 671 A.2d 523 (1996) (citing Siani Hosp., 309 Md. at 40). Accordingly, "provisions that disqualify claimants from receiving benefits are construed narrowly." Id.
Initially, we recognize that, in order to qualify for federal funding for this State's unemployment insurance program and for private employer's in Maryland to be eligible for federal tax credits for unemployment contributions, Maryland's unemployment compensation laws must comply with the standards set forth in the Federal Unemployment Tax Act of 1954 ("FUTA"), codified at 26 U.S.C. §§ 3301-3311 (1997). Through the 1970 amendments to FUTA, for the first time states were required to pay unemployment compensation to otherwise eligible employees of institutions of higher learning. See generally S. Rep. No. 91-752 (1970), reprinted in 1970 U.S.C.C.A.N. 3606. Under the 1970 amendments, however, "faculty, research, and administrative employees of institutions of higher education were not considered unemployed during the summer vacation if they had a contract to resume work after the summer vacation." Id. at 3609, 3617-18. The ineligibility provision sought to exclude those employees "who can plan for temporary unemployment and thus do not truly suffer from economic insecurity." Maribeth Wilt-Seibert, Unemployment Compensation for Employees of Educational Institutions: How State Courts Have Created Variations on Federally Mandated Statutory Language, 29 U. Mich. J.L. Reform 585, 588 (1996) (citing Hayes v. Pennsylvania, 442 A.2d 1232, 1233 (Pa. 1982)).
In 1976, FUTA was again amended to render professional employees of elementary and secondary educational institutions ineligible for unemployment benefits for unemployment occurring between academic terms, where such employees had a reasonable assurance of returning to work in the successive academic term. Unemployment Compensation Amendments of 1976, Pub. L. No. 94-556 § 115, 90 Stat. 2667 (1976). As the United States Court of Appeals for the Seventh Circuit explained in Chicago Teachers Union v. Johnson, 639 F.2d 353 (7th Cir. 1980):
The period excluded under 26 U.S.C. § 3304, Part A, s 203(b) was intended to be that period characteristic to the educational profession and within the expectation of the teachers. The legislative history surrounding this section shows that it intended for all professional educational workers to be treated the same during the summer break:
"In the absence of this prohibition, a number of states have indicated that they find no provision in their laws by which they can deny emergency assistance to professional educational workers who are only temporarily unemployed during this period. Payment of such emergency assistance to workers who have contracts for the succeeding school term would be contrary to the treatment of their counterparts in institutions of higher education, who are covered under regular unemployment insurance. In Public Law 91-373, Congress mandated that college and university teachers, researchers, and administrators with contracts for both terms be denied benefits with respect to the periods between terms."
Id. at 357 (quoting S. Rep. No. 94-208, 94th Cong. 1st Sess. 5-6, reprinted in (1975) U.S. Code Cong. & Admin. News 377, 382).
In addition, states were permitted to deny "benefits based on services performed for educational institutions to nonprofessional school employees during periods between academic years or terms if there [wa]s a reasonable assurance that the individual w[ould] be employed by the educational institution in the forthcoming academic year." H.R. Conf. Rep. 94-1745 (reprinted in 1976 U.S.C.C.A.N. 6032, 6035-36). See also Patricia C. Kussmann, Right to Unemployment Compensation or Social Security Benefits of Teacher or Other School Employee, 33 A.L.R. 5th 643 § 2(a) (1995). FUTA was amended in 1977 to permit states to extend the ineligibility provisions applicable to nonprofessional school employees to vacation periods. Emergency Unemployment Compensation Extension Act of 1977, Pub. L. No. 95-19, § 302, 91 Stat. 39, 44 (1977).
The ineligibility provision applicable to professional and nonprofessional school employees was also extended to apply to employees of "educational service agencies." Id. The Senate Report concerning the 1977 amendments stated, in relevant part:
Public Law 94-566 required States to cover virtually all State and local government employees under their unemployment compensation programs. Because of the special work patterns of school employees, this legislation required that benefits not be paid during regular vacation periods to teachers who have a reasonable expectation of reemployment at the end of the vacation. Nonprofessional school employees could, at State option, be excluded from benefits during vacation periods on the same basis.
As the statute was drawn, however, these exclusions apply only to individuals who are actually employed by educational institutions. In a number of States there are separate State agencies set up to provide specialized services to many schools. For example, such agencies may provide driver education and audiovisual services to all schools in the State and employees of these agencies may travel from school to school providing these services. Since such employees are in every respect the equivalent of school personnel and follow the same work and vacation patterns, it seems appropriate to apply the same benefit exclusions during vacation periods to these employees as are applied to persons who are directly employed by schools.
The committee bill would extend to such individuals the provisions under which professional employees must be denied benefits during vacation periods (and nonprofessional employees may be denied such benefits) where there is reasonable expectation of reemployment at the end of the vacation.
S. Rep. 95-456, at 6 (1977) (reprinted in 1977 U.S.C.C.A.N. 3579, 3583-84).
Finally, in 1983, Congress required that states deny benefits to all employees of educational institutions and educational service agencies, including nonprofessional employees and those serving in capacities other than instructional, research, or principally administrative for periods between academic terms or years, or during customary vacation periods, where such employees had a reasonable expectation of continued employment. Social Security Amendments of 1983, Pub. L. No. 98-21, § 521, 97 Stat. 65, 147-48 (1983). As currently codified, FUTA provides, in pertinent part:
(a) Requirements. The Secretary of Labor shall approve any State law submitted to him, within 30 days of such submission, which he finds provides that
(6)(A) compensation is payable on the basis of service to which section 3309(a)(1) applies, in the same amount, on the same terms, and subject to the same conditions as compensation payable on the basis of other service subject to such law; except that
(i) with respect to services in an instructional, research, or principal administrative capacity for an educational institution to which section 3309(a)(1) applies, compensation shall not be payable based on such services for any week commencing during the period between two successive academic years or terms (or, when an agreement provides instead for a similar period between two regular but not successive terms, during such period) to any individual if such individual performs such services in the first of such academic years (or terms) and if there is a contract or reasonable assurance that such individual will perform services in any such capacity for any educational institution in the second of such academic years or terms,
(ii) with respect to services in any other capacity for an educational institution to which section 3309(a)(1) applies
(I) compensation payable on the basis of such services may be denied to any individual for any week which commences during a period between 2 successive academic years or terms if such individual performs such services in the first of such academic years or terms and there is a reasonable assurance that such individual will perform such services in the second of such academic years or terms, except that
(II) if compensation is denied to any individual for any week under subclause (I) and such individual was not offered an opportunity to perform such services for the educational institution for the second of such academic years or terms, such individual shall be entitled to a retroactive payment of the compensation for each week for which the individual filed a timely claim for compensation and for which compensation was denied solely by reason of subclause (I),
(iii) with respect to any services described in clause (i) or (ii), compensation payable on the basis of such services shall be denied to any individual for any week which commences during an established and customary vacation period or holiday recess if such individual performs such services in the period immediately before such vacation period or holiday recess, and there is a reasonable assurance that such individual will perform such services in the period immediately following such vacation period or holiday recess,
(iv) with respect to any services described in clause (i) or (ii), compensation payable on the basis of services in any such capacity shall be denied as specified in clauses (i), (ii), and (iii) to any individual who performed such services in an educational institution while in the employ of an educational service agency, and for this purpose the term "educational service agency" means a governmental agency or governmental entity which is established and operated exclusively for the purpose of providing such services to one or more educational institutions,
(v) with respect to services to which section 3309(a)(1) applies, if such services are provided to or on behalf of an educational institution, compensation may be denied under the same circumstances as described in clauses (i) through (iv), and
(vi) with respect to services described in clause (ii), clauses (iii) and (iv) shall be applied by substituting "may be denied" for "shall be denied", and
(B) payments (in lieu of contributions) with respect to service to which section 3309(a)(2) applies may be made into the State unemployment fund on the basis set forth in section 3309(a)(2)[.]
26 U.S.C. § 3304(a)(6).
The legislative intent is clear from the plain language and statutory scheme as well as the legislative history; the General Assembly sought to deny unemployment benefits to school employees during scheduled and anticipated holidays, vacations, and breaks between academic terms when the employee has a reasonable assurance of continued employment. The unemployment insurance law was created to "prevent the spread of involuntary unemployment and to lighten its burden, which often falls with crushing force on the unemployed worker and the family of the unemployed worker." L.E. § 8-102(b)(2). In the case of employees such as appellants, who are essentially employed on a ten-month basis, the period of unemployment between academic terms is expected and permits the employee to plan for periods in which he or she will not receive a paycheck. As one court has explained, "[t]he rationale for this limitation is that school employees can plan for those periods of unemployment and thus are not experiencing the suffering from unanticipated layoffs that the employment-security law was intended to alleviate." Baker v. Dep't of Employment and Training Bd. of Review, 637 A.2d 630, 363 (R.I. 1994). See also University of Toledo v. Heiny, 507 N.E.2d 1130, 1133 (Ohio 1987) (stating that the provisions of that state's unemployment compensation legislation, which allowed benefits to unemployed nonprofessional employees of educational institutions "whose employment prospects for the ensuing academic year are doubtful," "was not enacted to 'subsidize the vacation periods of those who know well in advance that they may be laid off for certain specified periods'") (quoting Davis v. Pennsylvania, 394 A.2d 1320, 1321 (Pa. 1978)).
The disqualification provisions of L.E. § 8-909 relating to employees of "educational institutions" and "educational service agencies" are in conformity with FUTA, and presumably were adopted by the General Assembly in order to become eligible for federal funding and tax benefits. See L.E. § 8-103(a) ("To the extent necessary to ensure that the United States Secretary of Labor certifies this title under § 3304 of the Internal Revenue Code and unless this title clearly indicates an intent to the contrary, this title shall be construed in a manner consistent with the relevant provisions of the Internal Revenue Code, the Federal Security Act, the Federal-State Extended Unemployment Compensation Act of 1970, and the Federal Trade Act of 1974.").
Labor and Employment § 8-101(n) defines "educational institution" as "an institution that offers participants, students, or trainees an organized course of study or training that is academic, technical, trade-oriented, or preparatory for gainful employment in a recognized occupation," and includes "an institution of higher education." In contrast, L.E. § 8-909(e) defines "educational service agency" as "a governmental entity that is established and operated exclusively to provide educational services to one or more educational institutions." Maryland Code (2003), § 3-103 of the Education Article ("Educ.") establishes a county board of education for each county of this State and for Baltimore City. Under Educ. §§ 4-101-111, each board of education is responsible for controlling "educational matters that affect that count[y]," establishing public schools, hiring school personnel, including principals and teachers, setting employees' salaries, and creating curriculum guides and courses of study. County boards are also responsible for arranging for transportation of students to and from consolidated schools. Educ. § 4-120. In other words, individual public schools are an extension of the respective board, not separate educational institutions.
Courts in other jurisdictions have similarly concluded that bus drivers employed by local school districts were employed by "educational institutions," within the definition of that jurisdiction's unemployment compensation law, such that they were ineligible for benefits between academic terms when they had a reasonable assurance of continued employment for the next academic year or term. See, e.g., Becotte v. Gwinn Schools, 481 N.W.2d 728 (Mich. Ct. App. 1991); La Mountain v. Westport Central School District, 414 N.E.2d 672 (N.Y. 1980); North Penn School District v. Unemployment Compensation Bd., 662 A.2d 1161 (Pa. Commw. Ct. 1995). See also Valot v. Southeast Local School District Bd. of Educ., 107 F.3d 1220, 1224 (6th Cir. 1997) (recognizing that a change in school district procedure, whereby all substitute employees of the school district, including substitute bus drivers, were given a reasonable assurance of continued employment for the following school year rendered "those employees ineligible for unemployment compensation under [an] Ohio law," which is in substantial conformity with L.E. § 8-909). Clearly, L.E. § 8-909 was intended by the General Assembly to institute the requirements of FUTA and deny eligibility to all those educational workers employed by educational institutions, including public school boards, who have been employed for at least one year and who had a reasonable assurance of continued employment for the next successive academic term. Therefore, the Board of Appeals did not err in concluding that appellants were ineligible for benefits under L.E. § 8-909(c).[1]
II.
Appellants next contend that L.E. § 8-909(c) violates the Due Process Clause of the Fourteenth Amendment and the Maryland Declaration of Rights because it discriminates between those school bus drivers employed by county boards of education and those employed by private contractors. According to appellants, under Attorney General of Maryland v. Waldron, 289 Md. 683, 426 A.2d 929 (1981), and the cases cited therein, our analysis of their equal protection claims involves an intermediate scrutiny or "heightened scrutiny" review, and that no explanation has been offered by the Board to justify the disparate treatment of privately and publicly employed school bus drivers. Appellants also argue that L.E. § 8-909(c) is not rationally related to any legitimate government interest.
Initially, we must consider the standard of review applicable to appellants' equal protection claims. As the Court of Appeals explained in Waldron, absent a statute that impinges upon a fundamental right or provides for disparate treatment based upon a suspect classification, where strict scrutiny applies, courts generally employ rational basis review. 289 Md. at 706. A suspect classification includes classifications based on race, ancestry, and national origin. Id. Fundamental rights are those rights or interests secured "explicitly or implicitly" by the federal constitution, and include the right to vote, the right to interstate travel, the right of equal access to a criminal appeal, and the right to procreate. The receipt of unemployment benefits is not a fundamental right secured by the federal constitution and bus drivers employed by educational institutions are not a suspect classification.
Appellants also correctly note that courts employ "intermediate scrutiny" to analyze equal protection where the statute involves "sensitive classifications," such as classifications based on gender and, probably, legitimacy, or where the statute implicates "'important personal interests or work[s] a 'significant interference with liberty or a denial of a benefit vital to the individual.'" Waldron, 289 Md. at 711 (quoting Lawrence H. Tribe, American Constitutional Law § 16-3, 996 (1978)). Under intermediate scrutiny or heightened review, "to be sustained the classification `must serve important government objectives and must be substantially related to achievement of those objectives.'" Murphy v. Edmonds, 325 Md. 342, 358, 601 A.2d 102 (1992) (quoting Craig v. Boren, 429 U.S. 190, 197, 975 S. Ct. 451, 50 L. Ed. 2d 397 (1976)).
In this case, there is no "sensitive classification," and we are not persuaded that appellants' claims to unemployment benefits necessitate an invocation of heightened scrutiny. Accordingly, we apply the rational basis standard, under which "a statutory classification is struck down, in the oft-expressed words of the Supreme Court, only if the means chosen by the legislative body are 'wholly irrelevant to the achievement of the State's objective.'" Waldron, 289 Md. at 707 (quoting McGowan v. Maryland, 366 U.S. 420, 425, 81 S. Ct. 1101, 6 L. Ed. 2d 393 (1961)). See Watkins v. Cantrell, 736 F.2d 933, 945 (4th Cir. 1984) ("Where a state's unemployment insurance compensation statute neither involves a discernable fundamental interest nor affects any protected class with particularity, the relatively relaxed `rational basis' standard should be applied in determining whether the statute violates the Equal Protection Clause.") (citing Ohio Bureau of Employment Servs. V. Hodory, 431 U.S. 471, 97 S. Ct. 1898, 52 L. Ed. 2d. 513 (1977)). See also, Zambrano v. Reinhart, 291 F.3d 964 (7th Cir. 2002)(applying rational basis review in considering a petitioner's claim that a Wisconsin statute, which disqualified certain seasonal workers employed in processing fruits and vegetables from unemployment benefits, was violative of the Equal Protection clause).
As noted above, L.E. § 8-909 was enacted to exclude those individuals employed by educational institutions and with a reasonable assurance of continued employment from eligibility for unemployment benefits during regularly scheduled periods of unemployment. Congress had concluded that, because those employed by educational institutions know of scheduled breaks in employment they should be prepared for the breaks that regularly occur in their chosen employment and should prepare for them. The statute is rationally related to achieving its objective. The General Assembly presumably enacted L.E. § 8-909 to comply with the federal mandate, designed to prevent the subsidization of vacation periods for school employees. See L.E. § 8-130(a) ("To the extent necessary to ensure that the United States Secretary of Labor certifies this title under § 3304 of the Internal Revenue Code and unless this title clearly indicates an intent to the contrary, this title shall be construed in a manner consistent with the relevant provisions of the Internal Revenue Code, the Federal Social Security Act, the Federal-State Extended Unemployment Compensation Act of 1970, and the Federal Trade Act of 1974.").
Courts in other jurisdictions have also concluded that state unemployment compensation laws do not violate equal protection because they render nonprofessional employees of educational institutions ineligible for benefits between academic terms where the employee has a reasonable assurance of employment for the next academic term, while granting benefits to employees engaged in the same vocation, but not employed by, or rendering services exclusively for, educational institutions. Herrera v. Industrial Comm'n, 593 P.2d 329 (Colo. 1979) (applying rational basis to a Denver Public Schools food service worker's claim that a Colorado statute, which disqualified nonprofessional employees of educational institutions from unemployment benefits between academic terms, deprived her of equal protection and concluding that the function of the 1976 amendments to FUTA "was not to unreasonably distinguish [nonprofessional] school employees from other seasonally employed workers, but to combine them with another class to whom they are the most similarly situated: professional school employees who can reasonably expect to be rehired at the onset of the next school year"); Larkin v. Appeal Bd. of Empl. Security Comm'n, 280 N.W.2d 483 (Mich. Ct. App. 1979) (applying rational basis to an equal protection claim brought by school hall monitor and holding that a Michigan statute making nonprofessional school employees ineligible for unemployment benefits was rationally related to legitimate state interest of safeguarding "the stability of school district unemployment funds"). See also Imel v. Dep't of Employment, 580 P.2d 70 (Idaho 1978) (rejecting teacher's claim that she was denied equal protection under an Idaho statute making teachers ineligible for benefits between academic terms and concluding that Congress "did not consider teachers as those facing [an] economic crunch"); Riddel v. Dep't of Employment Sec., 436 A.2d 1086 (Vt. 1981) (concluding that a teacher's aide was not denied equal protection under a Vermont statute rendering employees working in an instructional capacity for an educational institution ineligible for benefits between academic terms where she had a reasonable assurance of continued employment for the next academic term). Although privately employed bus drivers may not be subject to the exclusion provisions of L.E. § 8-909, any perceived inequitable treatment of privately employed and publicly employed school bus drivers is a matter for the legislature to address.
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE COUNTY AFFIRMED; COSTS TO BE PAID BY APPELLANTS.
NOTES
[1] Neither party raised the application of L.E. § 8-909 (e), which renders employees of "educational service agencies" ineligible for benefits for the period between academic terms or for vacation periods where they have performed "educational services" "in an educational institution" for the first of two consecutive academic terms and given a reasonable assurance of continued employment for the next academic term. Because we conclude that the county boards of education satisfy the L.E. § 8-101(n) definition of "education institution," we need not consider whether they might alternatively satisfy the L.E. § 8-909 (e)(1) definition of "educational service agency." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551164/ | 908 A.2d 344 (2006)
2006 Pa. Super. 257
JAMES MEE, Appellant
v.
SAFECO INSURANCE COMPANY OF AMERICA, Appellee
No. 2006 EDA 2005.
Superior Court of Pennsylvania.
Filed: September 14, 2006.
BEFORE: HUDOCK and PANELLA, JJ. and McEWEN, P.J.E.
OPINION BY HUDOCK, J.:
¶ 1 In this class action suit for breach of contract and bad faith, James Mee (Mee) appeals from the order granting summary judgment to Safeco Insurance Company of America (Safeco). Finding that the trial court misapplied this Court's holding in Gilderman v. State Farm Insurance Company, 649 A.2d 941 (Pa. Super. 1994), we reverse and remand for further proceedings.
¶ 2 Mee purchased a homeowner's insurance policy from Safeco covering his home at 4540 Garland Road, Bensalem, PA 19020, with an effective date of August 29, 2001, to August 29, 2002. The policy provided replacement cost coverage, but also allowed for the possibility of loss settlement based on actual cash value. The policy defines actual cash value as follows: "When the damage to property is economically repairable, actual cash value means the cost of repairing the damage, less reasonable deduction for wear and tear, deterioration and obsolescence." Policy Definitions, page 20, at ¶ 1(a).
¶ 3 On May 20, 2002, Mee suffered direct physical loss to his home as the result of an overflowing toilet. Mee reported the loss to Safeco the same day. On May 23, 2002, Safeco sent a general contractor, First General/Lewis Builders, Inc. (Lewis Builders), to inspect the damage to Mee's home and to provide Safeco with a repair and replacement cost estimate. Lewis Builders submitted an estimate to Safeco of $3,892.38. This estimate did not include a line-item cost for a general contractor's overhead and profit (O&P). Safeco also hired John Dwyer of ComSearch (Comsearch) to conduct an adjuster summary of Lewis Builders' estimate. ComSearch concluded that the cost of repair to Mee's home was $3,368.83, a difference of $523.55 from Lewis Builders' estimate.[1] Meanwhile, Mee hired a public adjuster, John Hansen, to inspect the damage and to provide a repair and replacement cost estimate. Using his own estimate, John Hansen submitted a proof of loss form to Safeco on behalf of Mee in the amount of $7,112.09. The major difference between John Hansen's estimate and ComSearch's estimate was the cost of replacing the hardwood floor in Mee's family room.
¶ 4 On July 22, 2002, Safeco issued a check in the amount of $2,284.15 to Mee and his wife and John Hansen. This amount purportedly represented the cost of repairs, less Mee's $500.00 deductible and twenty percent for O&P.[2] Mee accepted the check as "partial settlement" of his claim. Then, in a letter from John Hansen to Safeco dated December 11, 2002, Mee presented a claim for twenty percent O&P based on the repair and replacement cost estimates. Safeco sent a letter on December 17, 2002, offering Mee O&P with regard to the unresolved flooring issue only and requesting that Mee provide the name of the general contractor who would be doing the repairs, as indication that Mee would incur an O&P expense. Mee did not respond to Safeco's request.
¶ 5 On May 19, 2003, Mee filed suit against Safeco alleging breach of contract, insurance bad faith under 42 Pa.C.S.A. section 8371, and violation of the Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. sections 201-1-201-9.3. As noted, Mee brought this suit as a class action on his own behalf and as the representative of a class of similarly situated homeowners in Pennsylvania. Safeco's preliminary objection to the UTPCPL claim was sustained on December 18, 2002. Following discovery, Safeco filed a motion for summary judgment on December 1, 2004, to which Mee responded on December 29, 2004. Then, on February 14, 2005, Safeco filed a joint motion for summary judgment along with several other defendants in separate, related cases. The trial court granted summary judgment to Safeco on June 15, 2005. This appeal followed.
¶ 6 Mee asks us to review the following questions:
1. Did the trial Court commit error when it granted summary judgment in favor of the defendant insurance company, even though the record contained expert custom and usage evidence that whenever more than one trade is reasonably required to make repairs, a general contractor's services (with the contractor's overhead and profit) are reasonably required?
2. Does Safeco's' [sic] homeowners insurance policy, together with relevant custom and usage, require that Safeco automatically and unconditionally pay, to a property damage claimant, general contractor's overhead and profit whenever more than one construction trade is reasonably required to make the repairs or restoration?
Mee's Brief at 4. These questions challenge the trial court's grant of summary judgment based on its finding that Safeco was not required to pay O&P to Mee because he did not use a general contractor to repair the damage to his home.
Our scope of review of an order granting summary judgment is plenary. We apply the same standard as the trial court, reviewing all the evidence of record to determine whether there exists a genuine issue of material fact. We view the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Only where there is no genuine issue as to any material fact and it is clear that the moving party is entitled to a judgment as a matter of law will summary judgment be entered. All doubts as to the existence of a genuine issue of a material fact must be resolved against the moving party.
Motions for summary judgment necessarily and directly implicate the plaintiff's proof of the elements of her cause of action. Summary judgment is proper "if, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury." Pa.R.C.P. 1035.2. In other words, "whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense, which could be established by additional discovery or expert report and the moving party is entitled to judgment as a matter of law," summary judgment is appropriate. Id. Thus, a record that supports summary judgment either (1) shows the material facts are undisputed or (2) contains insufficient evidence of facts to make out a prima facie cause of action or defense.
Upon appellate review, we are not bound by the trial court's conclusions of law, but may reach our own conclusions. The appellate [c]ourt will disturb the trial court's order only upon an error of law or an abuse of discretion.
Judicial discretion requires action in conformity with law on facts and circumstances before the trial court after hearing and consideration. Consequently, the court abuses its discretion if, in resolving the issue for decision, it misapplies the law or exercises its discretion in a manner lacking reason. Similarly, the trial court abuses its discretion if it does not follow legal procedure.
Where the discretion exercised by the trial court is challenged on appeal, the party bringing the challenge bears a heavy burden.
It is not sufficient to persuade the appellate court that it might have reached a different conclusion if . . . charged with the duty imposed on the court below; it is necessary to go further and show an abuse of the discretionary power. An abuse of discretion is not merely an error of judgment, but if in reaching a conclusion the law is overridden or misapplied, or the judgment exercised is manifestly unreasonable, or the result of partiality, prejudice, bias or ill-will, as shown by the evidence or the record, discretion is abused. Chenot v. A.P. Green Services, Inc., 895 A.2d 55, 60-62 (Pa. Super. 2006) (internal quotations and most internal citations omitted). ¶ 7 At the heart of the present dispute is conflicting interpretations of this Court's decision in Gilderman v. State Farm Ins. Co., 649 A.2d 941 (Pa. Super. 1994). According to Mee, Gilderman stands for the proposition that, in any claim where more than one trade is required to perform the repairs, it is "reasonably likely" that the services of a general contractor will be required and, accordingly, the insurance company must include O&P as part of its actual cash value payment, even if the insured makes the repairs himself, hires a handyman instead of a team of subcontractors, or chooses not to make the repairs at all. Mee's Brief at 15, n. 8, and 17. Safeco, on the other hand, interprets Gilderman as imposing a requirement that an insurer look at the facts of each case in making its determination of whether the use of a contractor is reasonably likely. Because Mee did not hire a general contractor but did the work himself, Safeco argues, use of a general contractor was not reasonably likely, and, therefore, Mee was not entitled to O&P. Safeco's Brief at 8. The trial court agreed with Safeco, finding that Mee did not hire a general contractor; therefore, "[t]he use of a general contractor was never `reasonably likely' because no general contractor was needed." Opinion, 11/28/05, at 4. Both these interpretations miss the mark. Consequently, because the trial court misapplied our decision in Gilderman, it committed an error of law.
¶ 8 The Honorable John Hester stated the issue in Gilderman as "whether an insurer, which has agreed to pay repair or replacement costs less depreciation in advance of actual repair or replacement of a covered loss, may automatically withhold both depreciation and a flat twenty percent representing contractor overhead and profit from its advance payment." Gilderman, 649 A.2d at 942. Tailoring the Gilderman issue to fit the case at hand, the question becomes whether an insurer, which has agreed to pay actual cash value in advance of the repair and replacement of a covered loss, is required to include twenty percent for O&P in its advance payment where no general contractor was used because the homeowner made the repairs himself. The answer to that question depends on whether use of a general contractor was reasonably likely. Whether use of a general contractor was reasonably likely is a question of fact for the jury.
¶ 9 Like the case at hand, Gilderman involved a replacement cost coverage insurance policy. Therein, the homeowner instituted a class action alleging that, since January 1, 1991, State Farm always deducted twenty percent from the top of its repair or replacement estimates for purposes of computing the actual cash value of a loss. Gilderman, 649 A.2d at 944. The homeowner argued "that contractor overhead and profit must always be included in repair or replacement cost estimates [because repair or replacement costs necessarily include contractor overhead and profit]. State Farm counter[ed] that contractor overhead and profit never has to be included in repair or replacement cost estimates since contractors are not always used to repair or replace damaged property." Id. at 944.
¶ 10 Before addressing the parties' arguments, Judge Hester made an initial observation: "Repair and replacement costs logically and necessarily include any costs that an insured reasonably would be expected to incur in repairing or replacing the covered loss." Gilderman, 649 A.2d at 945 (emphasis supplied). Turning to the homeowners' claim that repair or replacement costs estimates "necessarily" include twenty percent for a general contractor's overhead and profit, Judge Hester opined:
We believe that there clearly are certain types of property damage claims which will not require the services of a general contractor. An example is where the loss involves only a damaged pipe, and a plumber alone normally would be called to perform all necessary repairs. In this respect, we therefore agree with State Farm's position that there are some types of covered losses where the services of a general contractor normally would not be utilized. Thus, in some cases, contractor expenses would not have to be included in repair or replacement cost estimates.
Indeed, [Gildermans] implicitly concede that general contractors are not always needed, noting that "it is generally accepted in the building trade that if more than three trade categories of subcontractors are involved in the repairs, the owner is entitled to the services of a general contractor to obtain bids, hire the subcontractors and coordinate/supervise the work."
On the other hand, however, there are types of property damage where a homeowner would use the services of a general contractor. There are many instances where the insured reasonably would be expected to call a contractor, especially where there is extensive damage to a home [emphasis supplied] requiring the use of more than one trade specialist. Thus, State Farm may not make repair or replacement estimates and then deduct twenty percent representing contractor's fees when those expenses reasonably are expected to be incurred.
Id. Based on this reasoning, Judge Hester rejected the homeowners' argument that O&P must always be included in repair and replacement cost estimates.
¶ 11 Judge Hester then addressed State Farm's reasons for always deducting O&P from its advance payments:
State Farm defends its actions first by observing that a contractor's costs are contingent and may never be incurred. State Farm posits that it is unfair for an insured to receive advance payment for such expenses. We make two observations in regard to this argument. First, contractor expenses may well be contingent; however, the same can be said of all repair or replacement costs. For example, the insured may be a plumber, repair a covered loss himself, and incur no labor costs. The insured may be able to obtain goods at wholesale, used, or free and never incur the retail cost of parts. All repair and replacement costs are, in theory, "contingent" prior to being incurred.
Second, and more importantly, the issue is not whether a given cost is contingent. The issue is what State Farm agreed to pay to its insureds prior to actual repair or replacement. It agreed to pay "actual cash value," which means "repair or replacement cost less depreciation." Thus, the real inquiry is what is included in "repair and replacement costs." We hold that repair or replacement costs include any cost that an insured is reasonably likely to incur in repairing or replacing a covered loss. In some instances, this will include use of a general contractor and his twenty percent overhead and profit.
Gilderman, 649 A.2d at 945.
¶ 12 Like State Farm, Safeco complains that, because Mee did not use a general contractor, he did not incur an O&P expense; therefore, paying him O&P would result in a windfall. The trial court expressed the same concern. Opinion, 11/28/05, at 4 ("The purpose of insurance is to cover a loss, not to create financial windfalls . . ."). Judge Hester addressed this issue:
State Farm offers a second rationale for its practice [of never including O&P], arguing that an insured would receive a windfall if permitted to recover a repair or replacement cost which may never be incurred. In this respect, we note that insureds under these policies have paid an additional premium for replacement cost coverage so that the insured can afford to repair or replace a loss at current market value and essentially keep the value of his property the same. . . . It can hardly be said that an insured reaps a windfall by obtaining payment of actual cash value determined in a fair and reasonable manner when that is precisely what the insurer has agreed to pay under its policy in advance of actual repair or replacement.
Gilderman, 649 A.2d at 946. According to Judge Hester, no windfall occurs where the insured receives benefits for which he has paid and to which he is entitled, even if repair or replacement costs are not incurred. Id.
¶ 13 In Gilderman, Judge Hester did not adopt a bright line rule for determining when an insurer should pay O&P based on the number of trades required to make repairs. Rather, Judge Hester established an objective standard by which an insurer may determine on a case-by-case basis whether to pay O&P, i.e., payment of O&P is required where use of a general contractor would reasonably be likely. Judge Hester suggested certain factors to be considered in reviewing the insurer's decision regarding payment of O&P, i.e., the extent of the property damage, the number of trades required to repair the damage, and expert evidence of building industry standards regarding the correlation between use of a general contractor and the number of trades required to repair damage. Gilderman, 649 A.2d at 945.
¶ 14 From Gilderman, we take the following legal principles: (1) actual cash value includes repair and replacement costs;[3] (2) repair and replacement costs include O&P where use of a general contractor would be reasonably likely; (3) because a homeowner pays higher premiums for repair and replacement coverage, he is entitled to O&P where use of a general contractor would be reasonably likely, even if no contractor is used or no repairs are made; (4) expert testimony about industry standards may be used to answer whether use of a general contractor is reasonably likely; and (5) whether use of a general contractor is reasonably likely depends on the nature and extent of the damage and the number of trades needed to make repairs. This last principle necessarily requires consideration of the degree of coordination or supervision of trades required to make the repairs. ¶ 15 Herein, the record establishes the following: (1) Mee paid premiums for a full value repair and replacement policy; (2) Mee suffered a covered loss; (3) Safeco agreed to pay Mee the actual cash value for repairs and replacement; (4) multiple trades would be needed to repair the damage to Mee's bathroom, stairwells, family room, and foyer, e.g., plumbing, flooring, drywall, carpentry, painting, and electrical; and (5) Mee presented expert opinions as to when use of a general contractor is reasonably likely. ¶ 16 Applying the Gilderman principles to this case, Mee is entitled to the benefit for which he contracted with Safeco, i.e., O&P, if he can establish that use of a general contractor would be reasonably likely; the fact that Mee chose to or was required to make the repairs himself does not necessarily preclude him from recovering O&P. Viewing the evidence in the light most favorable to Mee as the non-moving party, we conclude that a genuine issue of material fact exists as to whether use of a general contractor would be reasonably likely under the facts of this case. We further conclude that a genuine issue of material fact exists as to whether Safeco acted in bad faith by not paying O&P on Mee's claim. Because resolution of these questions is for a jury, the entry of summary judgment in favor of Safeco was improper. Thus, we remand for further proceedings.
¶ 17 Order reversed and case remanded for further proceedings. Jurisdiction relinquished.
NOTES
[1] The significance of the $523.55 difference, which ComSearch designates "Adjusted Amount," is not clear from a review of Lewis Builders' and ComSearch's estimates. However, a handwritten notation on a copy of the cover letter accompanying Safeco's payment to Mee et al., dated July 22, 2002, suggests that this amount represents a deduction for O&P.
[2] Given our inability to reconcile the amount paid by Safeco to Mee ($2,284.15) with either Comsearch's or Lewis Builders' estimates, less O&P and a $500.00 deductible, we are troubled by the possibility that Safeco withheld O&P which, Safeco admits, was not included in the original defense estimates, thereby further reducing the insurance proceeds paid to Mee.
[3] We are aware of this Court's recent decision in Kane v. State Farm Fire and Cas. Co., 841 A.2d 1038 (Pa. Super. 2003) (involving State Farm's practice of deducting depreciation from insureds' settlements for partial loss claims), which rejects the definition of actual cash value originally stated in Canulli v. Allstate Ins. Co., 462 A.2d 286 (Pa. Super. 1983), and relied upon in Gilderman as non-binding dictum. Kane, 841 A.2d at 1046. Our use of "actual cash value" in the present case neither contradicts the definition set forth in Kane nor undermines our interpretation of or reliance on Gilderman. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551169/ | 908 A.2d 900 (2006)
2006 Pa. Super. 247
TRACEY McCANDLESS, ADMINISTRATOR OF THE ESTATE OF DANIEL JOHN DIAMOND, JR AND DANIEL DIAMOND, SR, ADMINISTRATOR OF THE ESTATE OF DANIEL JOHN DIAMOND, JR AND TRACEY MCCANDLESS AND DANIEL DIAMOND, SR IN THEIR OWN RIGHT
v.
WAYNE EDWARDS AND GREGORY EDWARDS AND GIRARD MEDICAL CENTER AND NORTH PHILADELPHIA HEALTH SYSTEM
APPEAL OF TRACEY MCCANDLESS, ADMINISTRATOR OF THE ESTATE OF DANIEL JOHN DIAMOND, JR
No 3324 EDA 2005
Superior Court of Pennsylvania
Filed: September 7, 2006
BEFORE: MUSMANNO, KLEIN and TAMILIA, JJ
OPINION BY TAMILIA, J
¶ 1 Tracy McCandless and Daniel Diamond Sr, appeal both as individuals and in their capacity as co-executors of the estate of Daniel Diamond, Jr, from the January 26, 2006, judgment entered following the trial court's denial of post-trial motions seeking a new trial or judgment notwithstanding the verdict.
¶ 2 The underlying facts in this case are not in dispute. Appellee Girard Medical Center, a subsidiary of the North Philadelphia Health System ("NPHS"), prescribed Wayne Edwards methadone as part of a pain management program. Wayne's nephew, Gregory Edwards, stole the methadone from Wayne's residence and sold it to Daniel Diamond, Jr. ("decedent"). On April 30, 2001, decedent ingested a pharmaceutical cocktail that included the methadone and lapsed into aspiration pneumonia, resulting in his death.
¶ 3 On June 12, 2002, appellants filed a complaint alleging, inter alia, Girard Medical and NPHS were negligent in oversupplying Wayne Edwards with methadone in violation of applicable federal regulations. Record, No. 8. After months of procedural maneuvering by the parties, the trial court entered a default judgment against Gregory Edwards for failing to answer the complaint on June 6, 2003. Record, No. 27. Subsequently, the trial court also entered default judgment against Wayne Edwards for failing to answer on June 23, 2003. Record, No. 30.
¶ 4 A jury trial commenced on October 18, 2004 and at the close of appellees' case, both parties moved for a directed verdict. N.T., 10/20/04, at 52, 55. The trial court granted Girard and NPHS's motion by Order of October 22, 2004. Record, No. 64. Shortly thereafter appellants filed their post-trial motions. Record, No. 65. The case then proceeded to the jury for an assessment of damages against Wayne and Gregory Edwards. The jury determined Wayne was sixty percent responsible for decedent's death and Gregory was forty percent responsible. Thereafter, appellants perfected a timely appeal to this Court.
¶ 5 Appellants raise the following issues for our review
I. Whether the Plaintiffs were entitled to a New Trial because the trial judge improperly directed a verdict on behalf of North Philadelphia Health Systems and Girard Medical Center based on his conclusion that they owed no duty to the decedent, Daniel Diamond, Jr.
II. Whether the lower court improperly allowed in evidence from the defendants' expert that was based upon double hearsay contained in a police report.
III. Whether the lower court should have granted the Plaintiff a judgment notwithstanding the verdict.
Appellants' brief at 4.
¶ 6 As to the first two issues raised, our standard of review is as follows:
When assessing the trial court's denial of a motion for new trial, we apply a deferential standard of review. The decision whether to grant or deny a new trial is one that lies within the discretion of the trial court. We will not overturn such a decision unless the trial court grossly abused its discretion or committed an error of law that controlled the outcome of the case.
B & L Asphalt Indus. v. Fusco, 753 A.2d 264, 267 (Pa.Super. 2000) (internal citations and quotations marks omitted).
¶ 7 In directing a verdict in favor Girard Medical and NPHS, the trial court came to a number of conclusions. First, the court relied on the framework outlined in F.D.P. ex. rel. S.M.P. v. Ferrara, 804 A.2d 1221 (Pa.Super. 2002), in concluding Girard and NPHS did not owe a duty of care to the decedent. Trial Court Opinion, Jelin J., 1/13/06, at 3-5. Second, the court found Girard Medical's internal regulations did not, in of themselves, create a duty of care in favor of the decedent as a matter of law. Id. at 4. Furthermore, the trial court concluded federal regulations governing clinical distribution of controlled substances did not impose a duty upon Girard Medical and NPSH in favor of the decedent as a matter of law but, rather, created a duty flowing from Girard Medical and NPHS to Wayne Edwards as patient. Id. at 5.
¶ 8 In reviewing a trial court's decision to direct a verdict in favor of a defendant, we must view the evidence in the light most favorable to the plaintiff in order to determine whether plaintiff failed to prove his case as a matter of law. Riley v. Warren Mfg., 688 A.2d 221, 224 (Pa.Super. 1997) (citation omitted). If a jury reasonably could have concluded, on the basis of the evidence and all reasonable inferences therefrom, that the defendant was liable, then the directed verdict must be reversed. Our review over questions of law is, as always, plenary. Id.
¶ 9 To establish a cause of action sounding in negligence, a party must demonstrate they were owed a duty of care by the defendant, the defendant breached this duty, and this breach resulted in injury and actual loss. Brisbine v. Outside In Sch. of Experiential Educ., Inc., 799 A.2d 89, 93 (Pa.Super. 2002), citing Brezenski v. World Truck Transp., 755 A.2d 36, 40 (Pa.Super. 2000).
¶ 10 At trial, appellants' argument was premised on the theory that Girard Medical and NPHS owed a general duty of care to the public at large.[1] In addressing this theory, the trial court pointed to the following rule of law used to determine whether this alleged duty was legally cognizable:
The following factors, which are derived from the above principles, are to be applied in determining the existence of a duty: (1) the relationship between the parties; (2) the social utility of the actor's conduct; (3) the nature of the risk imposed and foreseeability of the harm incurred; (4) the consequences of imposing a duty upon the actor; (5) the overall public interest in the proposed solution.
Trial Court Opinion, Jelin, J., 1/13/06, at 3, citing Ferrara, supra at 1231 (Pa.Super. 2002) (internal citations and quotation marks omitted).
¶ 11 In determining whether to create a duty of care, the most important factor to consider is social policy. Ferrara, supra at 1231. It is a question of law as to whether a duty of care exists. Brisbine, supra at 95.
¶ 12 In applying the Ferrara factors, the trial court pointed out that no relationship existed between Girard Medical, NPHS and the decedent. It noted that Girard Medical's services provided great social utility by rehabilitating heroin addicts and further opined that it was highly unforeseeable a person would steal methadone from a patient and then sell it to a third party, who would turn around and lethally overdose. The court also emphasized that imposing a duty in this instance would effectively prevent methadone clinics from disbursing take-home medication to patients. Finally, the trial court pointed out the public interest would not be served by preventing incapacitated heroin addicts from taking medication at home. Trial Court Opinion at 4.
¶ 13 Appellants attack this analysis by arguing Ferrara is factually inapposite to the matter sub judice and, hence, other cases should be deemed to be factually controlling.[2] Appellants' argument is flawed because the trial court did not draw a correlation between the facts in Ferrara and the facts at hand but, rather, relied on the legal principles set forth in Ferrara. After careful review of the trial court's analysis, we conclude it did not err as a matter of law in determining Girard Medical and NPHS did not owe a duty of care to the decedent.
¶ 14 Appellants also aver Girard Medical's internal regulations created a duty of care running to the decedent. In doing so, appellants point out that Girard Medical and NPHS itself recognized it had a duty to the public at large.
¶ 15 Appellants' argument in this regard misses the mark. Although Girard Medical and NPHS took steps to regulate the dissemination of methadone in accordance with federal guidelines and general principles of social responsibility, this in no way means a duty of care was created de facto as a matter of tort law in the Commonwealth. See Ferraro, supra at 1231.
¶ 16 Appellants' final argument with respect to the first issue raised is that various provisions in federal law create a duty of care in this instance as a matter of law. In attempting to bolster this argument, appellants point to a number of federal provisions. Initially, their reliance on 21 U.S.C. 823, Registration requirements, is wholly misplaced because its only purpose is to provide guidelines for the Attorney General to consider when deciding whether to register a party as a manufacturer or distributor of a controlled substance. As such, it has no bearing on the issue of whether a duty of care exists. Appellants next point to 42 U.S.C. 257, which was repealed in October 2000 and, therefore, has no import whatsoever. Appellants also point to "66 F.R. 4090," which does not exist.[3] Finally, appellants point to sections 8.4, 8.2, and 8.12(j)(4)(i) of "that Act" (a phrase which seemingly refers to the non-existent 66 F.R. 4090) for the proposition that "[Programs or Practitioners engaged in opioid treatment of individuals] must maintain current procedures adequate to identify the theft or diversion of take-home medication." Appellants' brief at 26. Appellants, however, fail to point to any authority providing that this requirement can be enforced through private causes of action sounding in negligence in state court.
¶ 17 Turning to the second issue raised, appellants argue the trial court erred in admitting testimony from an expert witness who noted decedent was a user of the narcotic oxycotin. Appellants allege the expert witness extrapolated this evidence from a statement taken from an eyewitness to decedent's death and contained in a police report and, as such, the expert witness' testimony in this regard constitutes inadmissible double hearsay.
¶ 18 Appellants' argument is easily dismissed. As appellees point out, the trial court entered a directed verdict in their favor after finding they did not owe decedent a duty of care as a matter of law. Consequently, the double hearsay issue is moot as a consequence of our determination that the trial court's finding was appropriate.
¶ 19 Turning to the final issue raised, appellants aver: "The testimony was so overwhelming in favor of the claim presented, that a judgment notwithstanding the verdict should be entered." This averment constitutes the entirety of the argument with respect to this issue. Appellants' brief at 39.
¶ 20 Appellants' failure to support this bald averment by pointing to any relevant facts or pointing to any legal support constitutes waiver of the issue. Commonwealth v. Luktisch, 680 A.2d 877, 879 (Pa.Super. 1996), citing Pa.R.A.P. 2119, Argument (other citations omitted).
¶ 21 Judgment affirmed.
NOTES
[1] As a general matter, there is no duty to control the acts of a third party unless a defendant stands in a "special relationship" with either the third party whose conduct needs to be controlled or the intended victim of such conduct. Brisbine v. Outside In Sch. of Experiential Educ., Inc., 799 A.2d 89, 93 (Pa.Super. 2002), citing Brezenski v. World Truck Transp., 755 A.2d 36, 40 (Pa.Super. 2000), accord Restatement of Torts (Second), Title A, Duty to Control Conduct of Third Persons §315, General Principle. In Pennsylvania, "special relationships" are only those described in sections 316-319 in the Restatement of Torts (Second). Id. These special relationships include a parent's duty to control a child (§316), a master's duty to control a servant (§317), a landowner's duty to control a licensee (§318), and the duty of those in charge of individuals with dangerous propensities to control these individuals (§319). Id.
[2] Appellants support their argument by forwarding two lists of cases in their brief followed by a factual summary and commentary on all cases included in these lists. Appellants' brief at 26-36. Appellants' argument reads like a cut-and-paste law review article and does little to bolster their position.
[3] The Code of Federal Regulations only contains fifty titles. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551175/ | 86 B.R. 768 (1988)
In re DENBY STORES, INC., Debtor.
Robert M. FISHER, as Trustee of Denby Stores, Inc., Plaintiff,
v.
The OUTLET COMPANY, United Department Stores, Inc., et al., Defendants.
Bankruptcy No. 82 B 10154 (TLB), Adv. No. 86-5148A.
United States Bankruptcy Court, S.D. New York.
May 5, 1988.
As Corrected May 16, 1988.
*769 *770 *771 Bertram Goldstein, New York City, Special Counsel to Trustee.
Latham & Watkins by Robert J. Rosenberg, David G. Smith, New York City, for The Outlet Co.
DECISION AND ORDER ON MOTIONS FOR PARTIAL SUMMARY JUDGMENT
TINA L. BROZMAN, Bankruptcy Judge.
Robert M. Fisher, chapter 7 trustee (Trustee) of Denby Stores, Inc. (Denby), requests partial summary judgment on his eighth cause of action in this adversary proceeding and on his objection to the proofs of claim filed by The Outlet Company (Outlet).
I.
On January 25, 1982, Denby filed a petition for relief under chapter 11 of the Bankruptcy Code (the Code). The reorganization was not successful; on June 28, 1983 the case was converted to chapter 7. The Trustee was soon after appointed.
The instant dispute has its genesis in two leases, one of which related to property in Colonie, New York (the Colonie Lease). R.I. Associates (Associates), the lessor, in a sale and leaseback arrangement entered into in May, 1980, granted Denby the use of the premises from September 29, 1980 through January 31, 2006 at a yearly rental of $282,000. To facilitate the arrangement, Outlet, Denby's corporate parent, guaranteed payment to Associates of all sums owed by Denby under the Colonie Lease (the Guaranty). The Guaranty further provided that Outlet's obligation would not be impaired or released other than by complete performance of the obligations by Denby and, specifically, would not be affected by Denby's bankruptcy. Additionally the Guaranty provided that Associates could demand payment of Outlet at any time without prior demand on or pursuit of Denby.
By letter dated July 29, 1982, Denby surrendered the leased premises to Associates. Although the Trustee contends that all rent and then use and occupation payments were made through January 31, 1982, Outlet disputes this assertion, contending that none of the required payments was made at any time subsequent to closing. The parties are agreed that no use or occupancy was paid after January 31, 1982.
In September, 1982, Bankers Life Company (Bankers Life), as assignee of Associates, sued Outlet for breach of its obligations under the Guaranty, seeking $6,768,000 in damages (the Bankers Life Action). The Bankers Life Action was resolved in March 1984 when Outlet paid *772 Bankers Life $3,178,473.52 in return for releases from Bankers Life and Associates.
The second lease was for premises in Hadley, Massachusetts (the Hadley Lease). The lessor was the Pyramid Company of Hadley (Pyramid). The term of the Hadley Lease was to have been June 15, 1979 through June 30, 1994 at a base monthly rental of $13,920.53 plus additional charges for taxes and maintenance.
Outlet's involvement with the Hadley Lease was somewhat different than with the Colonie Lease. In September 1980, Outlet agreed to sell Denby to United Department Stores, Inc. (UDS). According to Outlet, the existence of the Colonie Lease was important to UDS and an inducement to the closing of the sale. Not so the Hadley Lease. Prior to the closing Outlet informed Pyramid that UDS would not assume the Hadley Lease. Pyramid promptly sued Denby and Outlet (the Pyramid Action) alleging that Outlet induced or caused Denby to repudiate its lease and that Outlet tortiously interfered with Pyramid's contractual relationship with Denby. As a result of the commencement of the Pyramid Action, Outlet and UDS restructured their agreement. Denby retained the Hadley Lease; the purchase price for Denby was reduced by $1.2 million; and Outlet executed a note in favor of Denby in the same amount, $1.2 million (the Note). On November 15, 1980, the sale closed.
Two years later, in November, 1982, Pyramid moved this court to compel Denby to assume or reject the Hadley Lease and to fix the value of Denby's use and occupation for the post petition period. On December 22, 1982, the court approved a stipulation deeming the Hadley Lease rejected and fixing Pyramid's administrative claim at $65,000. Outlet settled the claims against it in the Pyramid Action by payment of $5,000 to Pyramid on February 7, 1984. A further stipulation, approved by this court in January, 1986, settled Pyramid's administrative claim against Denby at 38% and eliminated Pyramid's unsecured claim.
Anticipating that it would be called upon to make payments to Pyramid and Bankers Life, Outlet in January, 1984, filed two proofs of claim against Denby's estate, an unliquidated administration claim (# 575) "in the nature of indemnity or subrogation" for any post-petition use and occupancy that it might be called upon to pay in connection with its Guaranty and an unliquidated unsecured claim (# 576) "in the nature of indemnity or subrogation" concerning any amounts it might be called upon to pay for (i) a breach or rejection of the Colonie Lease and (ii) any loss suffered as a result of the Pyramid Action. After paying Pyramid and Bankers Life as detailed above, Outlet filed in December 1985 two amended proofs of claim to fix the amount of the indebtedness and clarify the section of the Code pursuant to which it seeks relief. Claim # 651 amends # 575. Although filed in Outlet's name, it provides that Outlet is subrogated to Bankers Life and seeks pursuant to section 509(a) $141,000 paid for post-petition use and occupancy. Claim # 652 amends # 576. It, too, is filed in Outlet's name and provides that Outlet is subrogated to Bankers Life and Pyramid. The claim seeks pursuant to section 509(a) $3,178,473.52 for Outlet's payment to Bankers Life and $5,000 for Outlet's payment to Pyramid.
On February 28, 1986 the Trustee sued Outlet and a number of other defendants. His complaint was later amended. His eighth claim for relief seeks recovery of the entire $1.2 million plus interest due to Denby from Outlet pursuant to the Note. Outlet's answer contains several affirmative defenses including Outlet's entitlement to (a) $3,183,473.52 based on the theory of recoupment and (b) recovery of the amounts it paid with respect to the Hadley and Colonie Leases based on the theories of setoff, indemnity, subrogation, guarantee, contract and the common law. The Trustee has moved for partial summary judgment on his eighth claim and on Outlet's affirmative defenses pursuant to Fed.R. Civ.P. 56 and Fed.R.Bankr.P. (Rule) 7056 as well as on Outlet's proofs of claim.
II.
Summary judgment is appropriate only when the moving party has met his *773 burden of proving that there are no unresolved factual disputes that relate to an issue which is material to the outcome of the litigation.[1]Corselli v. Coughlin, 842 F.2d 23, 25 (2d Cir.1988). All ambiguities must be resolved and all reasonable inferences must be drawn in favor of the party against whom summary judgment is sought. Schiess-Froriep Corp. v. S.S. Finnsailor, 574 F.2d 123, 126 (2d Cir.1978); Knight v. U.S. Fire Insurance Co., 804 F.2d 9, 10-11 (2d Cir.1986), cert. denied, ___ U.S. ___, 107 S. Ct. 1570, 94 L. Ed. 2d 762 (1987). The court's function is not to resolve disputed issues of fact, but rather only to determine whether there is a genuine issue of fact to be tried. Eastman Machine Co., Inc. v. United States, 841 F.2d 469 (2d Cir.1988) citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2509-11, 91 L. Ed. 2d 202 (1986); Knight v. U.S. Fire Ins. Co., 804 F.2d at 11.
A. Objection to Claims
The Trustee contends that claim # 576 is a direct claim against the Denby estate which must be disallowed as a matter of law pursuant to section 502(e)(1)(C)[2] because Outlet later filed a claim for subrogation pursuant to section 509 of the Code. The argument that claim # 576 must be deemed to be an unallowable direct claim under section 502 flows from two facts, that the claim was not filed in the name of the creditor and that it was filed prior to the bar date, not 30 days after expiration of the time for the creditor to file its claim. The court disagrees with the Trustee's analysis.
Outlet filed claim # 576 in its own name prior to the bar date. The claim described in detail the facts giving rise to Outlet's then contingent claim against Denby and described the nature of Outlet's rights against Denby, specifically "indemnity or subrogation." Outlet did not state the section of the Code under which it could recover from Denby, and in fact the language it used could have applied either to sections 502 or 509. Later, after the bar date had passed and the liability had been fixed, Outlet amended claim # 576 to liquidate the amount of its claim and to assert the specific section of the Code under which it could recover from Denby. The court concludes that Outlet asserted a timely claim for subrogation, not that Outlet filed a timely direct claim which must be disallowed under section 502(e)(1)(C) by virtue of Outlet's having later filed an untimely claim for subrogation.[3]
The first sentence of Rule 3005(a) indicates that an entity liable with the debtor or may file a claim if the creditor has not filed one pursuant to Rule 3002 or 3003(c), and that the debtor's claim should be filed within 30 days after the expiration of the applicable time set for filing claims. The thrust of the rule is salutary; it is meant to ameliorate the harsh effect on a codebtor where a creditor decides to forego participation in the debtor's estate in favor of simply pursuing the solvent codebtor. See 3 L. King, Collier on Bankruptcy, ¶ 509.02 at 509-5 (15th ed. 1988). Although the rule *774 could arguably be read, as the Trustee suggests, to preclude a codebtor from filing a claim before a bar date, the court finds no reason for refusing to recognize the codebtor's claim once the bar date has passed and the creditor has not filed a claim. Accord 8 L. King, Collier on Bankruptcy ¶ 3005.03 at 3005-4 (15th ed. 1988) ("there is no reason why a claim filed before the bar date by a codebtor should not be recognized once the bar date is passed.") In fact, this seems the most logical reading when considering the last sentence of Rule 3005(a) which contemplates that the codebtor and the creditor may both have claims filed at the same time. If the codebtor's claim filed prior to the bar date were never to be recognized, there would be no reason to provide for the order of priority.
Moreover, it would be an absurd elevation of form over substance not to recognize a codebtor's claim solely because it was filed too early, when in fact it was filed prior to the expiration of the bar date. Particularly where the creditor did not file a proof of claim, the claim of the codebtor filed prior to the bar date should be allowed. Since neither Associates nor its assignee, Bankers Life, filed a proof of claim, so much of Outlet's claim # 576 as related to the Colonie Lease should escape dismissal on the grounds that it was prematurely filed.
Unlike Associates and Bankers Life, Pyramid filed both administrative and general unsecured proofs of claim. Outlet has not disputed that Pyramid had an administrative claim which was fixed at $65,000 and later settled at 38%, nor that the unsecured claim was eliminated based on an agreement between Pyramid and Denby. Ordinarily, where the creditor filed a timely proof of claim, it should supersede the earlier filed claim by the codebtor asserted by virtue of the codebtor's subrogation to the creditor. And, indeed, Rule 3005 so provides. But where the creditor settles with the debtor, accepting less than the full distribution to which it might be adjudged entitled, and additionally receives payment on the debtor's liability to it from the codebtor, the codebtor's earlier filed subrogation claim should not be disallowed merely because the creditor had filed a proof of claim. Thus Outlet should not be prohibited from asserting Pyramid's claim to the extent of the payment which Outlet made in partial satisfaction of Denby's liability.[4] Partial summary judgment therefore cannot be granted on the basis that Outlet's claim was superseded.
Rule 3005 requires an entity which seeks subrogation to file a claim in the creditor's name, if known. But if the creditor is unknown, the rule permits filing in the entity's own name. While it may have been bad form for Outlet not to file in Pyramid's name, Denby was on notice by the plain language in claim # 576 that Outlet sought subrogation. There can be no valid claim of surprise or prejudice. As the Trustee himself acknowledges, the defect is a technical one which is curable by an amendment. Athens Stove Works v. Fleming (In re Boggs-Rice Co.), 4 F. Supp. 431 (W.D.Va.1933), rev'd on other grounds, 66 F.2d 855 (4th Cir.1933); 3 L. King, Collier on Bankruptcy ¶ 57.21 at 371 (14th ed. 1977). Further, principles of equity dictate "that substance will not give way to form [and] that technical considerations will not prevent substantial justice from being done." Pepper v. Litton, 308 U.S. 295, 305, 60 S. Ct. 238, 244, 84 L. Ed. 281 (1939).
The Trustee continues his argument by attacking the timeliness of the amended claim # 652. He contends that claim # 652 cannot amend claim # 576 because it asserts a different and distinct claim. Thus he concludes that the amended claim must be disallowed because a claim for subrogation must be filed within the time frame set forth in Rule 3005(a) (that is within 30 days after the expiration of the last day fixed for filing claims). The Trustee's focus is misplaced. The real issue is whether Outlet could properly amend its proof of claim. It is well established that an "amendment *775 to a claim is freely allowed where the purpose is to cure a defect in the claim as originally filed, to describe the claim with greater particularity or to plead a new theory of recovery on the facts set forth in the original claim." United States v. International Horizons, Inc. (In re International Horizons), 751 F.2d 1213, 1216 (11th Cir. 1985), citing, Szatkowski v. Meade Tool & Die Co. (In re Meade Tool & Die Co.), 164 F.2d 228, 230 (6th Cir.1947); In re G.L. Miller & Co., 45 F.2d 115 (2d Cir.1930); see also In re W.T. Grant Co., 53 B.R. 417, 420 (Bankr.S.D.N.Y.1985). The original proof of claim set forth in detail the factual basis for Outlet's claim. The amended claim did precisely what is permitted; it liquidated the amount sought by Outlet and clarified the statutory authority for the claim.
Alternatively, the Trustee urges that the payments to Bankers Life for which reimbursement is sought were made by Outlet as a volunteer for the purpose of settling a lawsuit, and not pursuant to its liability under the Guaranty. His conclusion is predicated entirely on the following language contained in both releases: "Associates [or Bankers Life Company] understands that this settlement is in compromise of doubtful and disputed claims and it is not to be construed as an admission of liability on the part of the persons, firms or corporations hereby released, by each of whom liability is expressly denied." Further, the Trustee argues that the $141,000 of use and occupation for which Outlet asserts an administration claim is a claim arising against the debtor-in-possession for use of the premises post-petition and was not a contractual claim arising under the lease. Finally, the Trustee alleges that Outlet failed to make a showing that any monies were in fact due from Denby to Pyramid for a breach and concludes that this payment, too, was made for the sole purpose of settling a lawsuit, rather than to satisfy any liability of Denby to Pyramid. The Trustee therefore urges that he is entitled, as a matter of law, to disallowance of Outlet's claims.
Dealing first with the payment to Bankers Life, Outlet responds that the language in the releases was included to prevent any unforeseen or foreseen collateral use of the settlement agreements by third parties, and should not be relied upon for a finding that its payment was not on account of a liability to Associates or Bankers Life. In addition, Outlet urges that the obligation for post-petition rent was contemplated and incorporated into the Guaranty. Outlet was responsible for any lease payments irrespective of Denby's bankruptcy and, thus, all monies flowing from Outlet to Bankers Life were paid in connection with Outlet's obligation under the Guaranty. Outlet argues that there is a clear factual dispute as to whether the payments were made pursuant to the Guaranty, precluding summary judgment.
Outlet's claims were filed based upon rights in the nature of subrogation pursuant to section 509(a).[5] The doctrine of subrogation enables one who pays the debt of another to stand in the shoes of the latter party and assert whatever rights that party held. Pearlman v. Reliance Ins. Co., 371 U.S. 132, 137, 83 S. Ct. 232, 235, 9 L. Ed. 2d 190 (1962). It applies where a party pays a debt or discharges an obligation for some type of liability rather than voluntarily, see Miller v. Concord-Liberty Savings & Loan Assoc. (In re Miller), 72 B.R. 352, 353 (Bankr.W.D.Pa.1987); In re Bugos, 760 F.2d 731 (7th Cir.1984) and for which another is primarily liable. Rubenstein v. Ball Bros., Inc. (In re New England Fish Co.), 749 F.2d 1277, 1282 (9th Cir.1984). Moreover, a party cannot assert subrogation for paying his own debt. In re Glade Springs, Inc., 47 B.R. 780 (Bankr. E.D.Tenn.1985), aff'd 826 F.2d 440 (6th Cir. 1987); Ridge v. Smothers (In re Smothers), 60 B.R. 733 (Bankr.W.D.Ky.1986).
That Outlet was secondarily liable pursuant to the Guaranty is certain. The import *776 of the releases is not, however, so clear. Outlet is not a signatory to either of the releases and thus is not bound by the characterization used by the releasors. Equally important, the language of the releases merely indicates that the settlement is not to be "construed" as an admission of liability. The documents are not free from ambiguity. Where the documents on which a motion for summary judgment are predicated are ambiguous, a factual issue is presented which may not be summarily resolved, even if both parties move for summary judgment. Bank of America National Trust & Savings Association v. Gillaizeau, 766 F.2d 709 (2d Cir.1985). It would be inappropriate to hold that as a matter of law Outlet's payment of $3,178,473.52 to settle the lawsuit was not a payment under Outlet's Guaranty, for that would require the court to draw inferences from the documents which are adverse to the party against whom summary judgment is sought and would constitute an impermissible exercise in fact finding. See 48th Street Steakhouse, Inc. v. Rockefeller Group, Inc., (In re 48th Street Steakhouse), 835 F.2d 427, 430 (2d Cir.1987), petition for cert. denied, ___ U.S. ___, 108 S. Ct. 1596, 99 L. Ed. 2d 910 (1988).
Turning to the remainder of Outlet's pre-petition claim, the facts underlying the $5,000 payment to Pyramid are sketchy. The Trustee's argument that the payment by Outlet was for Outlet's primary liability for its tortious interference is undercut by the fact that the Pyramid Lease was apparently not breached by Denby at the time of the sale of Denby to UDS. This tends to suggest that Outlet settled the Pyramid Action during the bankruptcy case because of some perceived liability of Denby for which Outlet was secondarily liable.[6] Accordingly, although the Trustee may well prove correct at a trial of the matter, summary judgment is not appropriate.
The Court rejects the theory that the $141,000 paid to the Colonie landlord for Denby's post-petition use and occupancy was not encompassed by the Guaranty and is not recoverable by Outlet. Pursuant to case law under the Bankruptcy Reform Act of 1978 (prior to the 1984 amendment), even though the statute did not specifically so provide, lessors were entitled to the reasonable value of the leased property pending a decision to assume or reject a lease. In re Wheeling-Pittsburgh Steel Corp., 54 B.R. 385, 391 (Bankr.W.D.Pa. 1985); In re Sweetwater, 40 B.R. 733, 745 (Bankr.D.Utah 1984), aff'd, 57 B.R. 743 (D.Utah 1985), 2 L. King, Collier on Bankruptcy ¶ 365.03[2], at 365-24 to 365-25 (15th ed. 1982). Thus, Denby was responsible for making post-petition payments prior to its assumption or rejection of the Colonie Lease. Because Outlet made these payments, it may seek to assert the landlord's claim for the $141,000. Thus, the Trustee's motion for summary judgment on the objection to claim # 575, as amended by claim # 651, must be denied.
B. Setoff
The Trustee asks the court to rule that, as a matter of law, Outlet's claims, if allowable, may not be offset against Outlet's debt to Denby pursuant to section 553 of the Code.[7]
Setoff is only available where there exists a mutuality of obligation between *777 the debtor and creditor. This requires that both obligations be held by the same parties, in the same right or capacity, and arise from pre-petition obligations. In re Mastroeni, 57 B.R. 191 (Bankr.S.D.N.Y. 1986); In re O.P.M. Leasing Services, Inc., 68 B.R. 979, 986 (Bankr.S.D.N.Y.1987). The debt and the claim need not arise from the same transaction, nor must they be of the same character. See Elsinore Shore Associates v. First Fidelity Bank, N.A. (In re Elsinore Shore Associates) 67 B.R. 926, 936 (Bankr.D.N.J.1986); Braniff Airways, Inc. v. Exxon Co., U.S.A., 814 F.2d 1030, 1035 (5th Cir.1987).
The Trustee contests Outlet's ability to set off its claims on a variety of theories discussed below. First, the Trustee urges that Outlet has come to this court with "unclean" hands by having failed to mention the Note in its proofs of claim and having allegedly misstated the facts concerning payments under the Colonie Lease. Good faith is a peculiarly factual inquiry rarely susceptible to summary determination. Outlet argues that its silence about the Note was justified because of its belief that there was a failure of consideration which precluded any supposition of liability against it on the Note. The issue is factual and the facts are disputed. Similarly disputed is whether Denby fulfilled any of its obligations under the Colonie Lease. As such, it is inappropriate to determine that as a matter of law the doctrine of setoff is unavailable because Outlet has unclean hands. See Eastman Machine Co., 841 F.2d at 473.
The Trustee next argues that Outlet waived its right to setoff by stating in the proofs of claim that they were not subject to any right of setoff or counterclaim and by failing to assert its right of setoff in them. He relies on the case of In re Butler, 61 B.R. 790 (Bankr.S.D.Fla.1986) which states a general rule that a creditor will be deemed to have waived his right of setoff if he files a proof of claim in bankruptcy without asserting the right. Id. at 791, citing 3 L. King, Collier on Bankruptcy 553.07 n. 1 (15th ed. 1985). The Trustee, however, acknowledges that there are exceptions to the general rule, specifically, where the failure to assert the right was due to a good faith mistake of fact and did not prejudice the debtor. In re Sound Emporium, Inc., 48 B.R. 1 (Bankr.W.D. Tex.1984), aff'd, 70 B.R. 22 (W.D.Tex.1987). In Sound Emporium, the creditor filed its proof of claim within the statutory period and asserted that no offsets were available. Later it learned that funds it held were available for setoff, and it amended its proof of claim to reflect a setoff. The court held that the creditor made a good faith mistake and the debtor did not detrimentally rely on the original proof of claim.
It is certainly possible that the good faith exception is available to Outlet inasmuch as it claims to have had no liability on the Note available to be set off. Determination of that issue must await trial.[8]
In an argument which distorts the ordinary principles of bankruptcy law, the Trustee urges that setoff is unavailable because Outlet's claim against Denby respecting the Colonie Lease arose post-petition when the monies were paid pursuant to the agreement of settlement rather than prior to bankruptcy when the Guaranty was executed, thereby destroying mutuality. The Trustee's argument ignores the fundamental precept that the filing of a bankruptcy petition effects a cleavage, with the condition of the estate being assessed as of the filing date. Everett v. *778 Judson, 228 U.S. 474, 479, 33 S. Ct. 568, 569-570, 57 L. Ed. 927 (1913); see also Andrews v. Partridge, 228 U.S. 479, 33 S. Ct. 570, 57 L. Ed. 929 (1913). When the guarantor pays the creditor's claim, he succeeds to it by way of subrogation. The landlord's claim for damages from the rejection of the lease is deemed a pre-petition claim by virtue of section 502(g), 11 U.S.C. § 502(g). Thus, the guarantor's claim must likewise be considered pre-petition.[9]
The Trustee's argument rests on two decisions, Cooper-Jarrett, Inc. v. Central Transport, Inc., 726 F.2d 93 (3d Cir.1984) and Stonitsch v. Waller (In re Waller), 28 B.R. 850 (Bankr.W.D.Mo.1983). The Cooper-Jarrett case is inapposite. Subsequent to the debtor's bankruptcy, he and a creditor negotiated and entered into a settlement agreement to resolve a lawsuit that had been commenced pre-petition. The creditor sought to set off its obligation pursuant to the settlement agreement with a pre-petition debt owed by the debtor to it. The court held that the settlement agreement was a post-petition obligation because it extinguished the legal rights the creditor sought to enforce through the litigation. Here, Outlet seeks to set off the pre-petition claim of the landlord to which it succeeded by subrogation. Moreover, it does not appear that Outlet's settlement with Bankers Life and Associates constituted a novation with the debtor, as was the case in Cooper-Jarrett. Denby's liability to Bankers Life and Associates was not compromised.[10] In other words, the liability was not one which sprung into existence only subsequent to bankruptcy.
The Trustee's reliance on Waller is misplaced for two reasons. First, the landlord in that case, who had not been paid in full by the guarantor, filed a proof of claim. The Waller court explained that its decision was predicated upon the possibility of a double recovery against the estate if the guarantor were permitted to set off the debt. Since the landlord here did not file a proof of claim, no such possibility exists. Second, as the Collier treatise notes, the Waller court based its decision in part on the finding of an agreement between the parties that, upon dissolution of the partnership, the debtor would receive its share of the partnership assets without regard to any other accounts between the partners. See 4 L. King, Collier on Bankruptcy, ¶ 553.04 at 553-26 n. 44 (15th ed. 1988).
The decision in In re Flanagan Brothers, Inc., 47 B.R. 299 (Bankr.D.N.J.1985) supports the notion that there are mutual debts such that Outlet may assert by way of setoff the landlord's claim to which Outlet is subrogated. See also 4 L. King, Collier on Bankruptcy, ¶ 553.11 at 533-51 (15th ed. 1988) ("[w]here the situation involves payment by a surety subsequent to the principal's bankruptcy, the allowance of the surety's claim is subject to special rules, but a similar result [allowing a setoff] could be reached if the claim on the obligation has been paid and the surety therefore has an allowed claim arising from payment." Footnotes omitted.); Moorefield v. Perlman (In re Monex Corp.), 43 B.R. 879 (Bankr.S.D.Fla.1984); Traders Bank v. Stonitsch (In re Isis Foods, Inc.), 24 B.R. 75 (Bankr.W.D.Mo.1982); Elsinore Shore Associates, 67 B.R. 926. In Flanagan, a general contractor who was a surety was permitted upon payment to set off its entire debt to the debtor/subcontractor against the claim of a materialman who supplied goods to the debtor. The court reasoned that the surety would in effect have to pay the materialman's claim twice if the setoff were not permitted and the debtor would gain a windfall; the surety would have to pay the materialman directly and, if the setoff were not allowed, would also have to pay the debtor all sums owed to it, including the monies which the debtor *779 was liable to pay to the materialman. Similarly, if Outlet were permitted no setoff, it would have paid the landlord and would also have to pay Denby's Trustee the full indebtedness on the Note, without reduction for the amount paid to the landlord. Since the Colonie landlord filed no claim and is owed no money, Denby's Trustee would reap a windfall. The court concludes that Outlet's claim under the Guaranty arose pre-petition. Accordingly, Outlet is not precluded from setting off its pre-petition claim with its pre-petition liability on the basis that mutuality is lacking.
The Trustee also contends that Outlet is precluded from asserting any setoff because section 553(a)(1) excludes "the claim of [a] creditor against the debtor [if the claim] is disallowed other than under section 502(b)(3) of this title [11]." The Trustee urges that Outlet's claim is disallowed under section 502(e)(1)(C) because it is a section 502 claim and Outlet also asserted a claim under section 509. This has already been disposed of above by the determination that Outlet did not assert a section 502 claim.
Another argument posited by the Trustee is that Outlet is precluded from invoking the doctrine of setoff by reason of section 553(a)(2) which excludes a claim that "was transferred, by an entity other than the debtor, to such creditor- (A) after the commencement of the case . . ." The Trustee asserts that when Outlet paid the claim to Bankers Life, it received a "transfer" of the claim. The Trustee recognizes that at least one bankruptcy court does not agree with his analysis of section 553(a)(2), Flanagan Brothers Inc., 47 B.R. 299, but submits that the Flanagan court rewrote the provisions of subsection 553(a)(2).
What the court did in Flanagan was to construe section 553(a)(2) so as to implement congressional intention. The purpose of the statute was to prohibit trafficking in claims against the debtor in order to effect setoff (which would provide a windfall to both parties to the transfer at the expense of the estate). To apply subsection (a)(2) to prevent the guarantor or surety from setting off its claim would effectively require the guarantor or surety to pay twice, once when he is called upon to pay the creditor, and once when he is called upon to pay the debtor. This could not have been what Congress intended where the claim was acquired by the guarantor under a contract entered into more than 90 days prior to the bankruptcy. Accord 4 L. King, Collier on Bankruptcy, ¶ 553.08[2] at 553-41 (15th ed. 1988).[11]
Assuming that the payments to Pyramid and Bankers Life are determined to have been based on a liability of Outlet, and were not payments by a volunteer, the extent of the setoff available to Outlet must be ascertained. Outlet has paid a total of $3,042,473.55.[12] It seeks to set off this amount against the indebtedness due on the $1.2 million Note. Because Outlet asserts that it is subrogated to Bankers Life's and Pyramid's claims pursuant to section 509 of the Code, its claim is subordinated to those of Associates and Pyramid until they are paid in full, either through payments under Title 11 or otherwise. See section 509(c). Further, had Associates or Pyramid pressed claims against Denby, the amount each could recover would be limited by section 502(b)(6).[13]
*780 The Trustee asserts that Outlet should not be permitted to set off an amount greater than the dividend which the prime creditor would receive from the estate.[14] He relies on Hippodrome Bldg. Co. v. Irving Trust Co., 91 F.2d 753 (2d Cir.1937), cert. denied, 302 U.S. 748, 58 S. Ct. 265, 82 L. Ed. 578 (1937) and its progeny, including In re Schulte Retail Stores Corp., 105 F.2d 986 (2d Cir.1939); Fisher v. Lee Bros. Value World, Inc., 486 F.2d 1037 (9th Cir.1973); and In re Mammoth Mart, Inc., 1 Bankr.Ct.Dec. 1177 (Bankr.D.Mass. 1975). None of these cases considers whether a surety can set off a claim in an amount greater than the dividend which the prime creditor would receive. They focus, instead, on the statutory limitation of a landlord to recover from the estate under section 502(b)(6). Outlet, on the other hand, points to several cases which have permitted setoff where the surety's claim would be subordinate to the claim of other creditors, and the subordinated claim would not itself share in the dividends of the estate. See Rochelle v. United States, 521 F.2d 844 (5th Cir.1975), cert. denied, 426 U.S. 948, 96 S. Ct. 3168, 49 L. Ed. 2d 1185 (1976); Hayden v. Standard Accident Ins. Co., 316 F.2d 598 (9th Cir.1963); In re Sound Emporium, Inc., 48 B.R. 1; Flanagan Bros., Inc., 47 B.R. at 302. The reasoning behind the two earlier cases was that section 68 of the former Bankruptcy Act which governed setoff permitted the doctrine to be used for mutual claims, except in certain specific instances, which specific instances did not include when the claim was subordinated. In the absence of such an exception, the courts declined to impose one.
The Flanagan court was directed to a New Jersey case which addressed the same issue on distinguishable facts. After reviewing the pertinent language in the New Jersey opinion, the Flanagan court found that it "evinces the court's belief that setoff would be allowed to the full extent of the [surety's] debt rather than limited by the size of the dividend the materialmen would have received. In fact, the very term `setoff,' . . . denotes a netting of mutual debts." 47 B.R. at 302, citing 4 L. King, Collier on Bankruptcy ¶ 553 (15th ed. 1984).
Although neither the Trustee nor Outlet raised this matter with the court, the facts of this case seemingly do not demand that the court determine whether a surety's or guarantor's claim subordinated to the claim of the debtor's creditor is available for offset. For here, the pre-petition claims are no longer subordinate. Although Pyramid did file a pre-petition claim, it later waived that claim as part of its settlement with the Trustee. Neither Bankers Life nor Associates ever filed any claims, having been paid by Outlet, as guarantor, more than 100% of the maximum claim which could have been allowed.[15] Thus there remains no liability of the estate to either landlord.
But even if the claims remained subordinated to the claims of the landlords, the court concludes that Outlet would be entitled to assert a right of setoff. A setoff is, in effect, a congressionally and judicially sanctioned preference. Section 553, with certain exceptions, permits setoff where it is available under non-bankruptcy law. See H.R.Rep. No. 595, 95th Cong., 1st Sess. 185 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787; 4 L. King, Collier on Bankruptcy, ¶ 553.02 at 553-9 (15th ed. 1988). Since Congress explicitly set forth the exceptions to the right to set off mutual debts, the court would be remiss in engrafting *781 onto the statute a new exception for the subordinated claim of a guarantor or surety in the absence of some policy in non-bankruptcy law which would require that result.[16]
Having said all of that, the court must, however, reject Outlet's contention that it is entitled to set off the full amount of its payment regardless of the amount of Denby's liability to the landlords. The argument is facile, although momentarily plausible if one looks only to section 509(a), which subrogates the guarantor to the extent of his payment to the creditor. Outlet's right of setoff must be limited to the allowable claims of the landlords to which it is subrogated.
Subrogation is an equitable doctrine which enables a surety who pays the debt of another to assert the rights of the person he paid. Pearlman v. Reliance Ins. Co., 371 U.S. at 137, 83 S.Ct. at 235. He cannot assert any greater rights than the creditor in whose shoes he stands. Western Casualty and Surety Co. v. Brooks (In re Bruns Coal Co.), 362 F.2d 486, 491 (4th Cir.1966); Guinee v. Board of Supervisors (In re James R. Corbitt Co.), 62 B.R. 1017, 1022 (Bankr.E.D.Va.1986). "[T]he rights [and] claims . . . to which [the surety] succeeds are taken subject to the limitations, burdens, and disqualifications incident to them in the hands of the party to whom he is subrogated . . ." 73 Am Jur.2d, Subrogation, § 106 (1974).
If the landlord had an indebtedness to the estate which the Trustee were seeking to recover, pursuant to section 553(a)(1) the maximum amount of the setoff to which the landlord would be entitled would be its allowed claim, that is, its damages as limited by section 502(b)(6). Outlet, since it is subrogated to the claims of the landlords, can be entitled to no greater setoff. In other words, the guarantor's setoff is limited to the lesser amount of his payment or the creditor's allowed claim.[17]
C. Recoupment
Recoupment is a common law doctrine which arose as an equitable rule of joinder to avoid the necessity of bringing separate actions for two claims. It permits a defendant to defend against the plaintiff by asserting a countervailing claim that arose out of the "same transaction." See 3 J. Moore, Moore's Federal Practice ¶ 13.02 at 1313 (2 ed. 1985); 20 Am.Jur.2d, Counterclaim, Recoupment & Setoff, §§ 16-18 (1965). Instead of relating to mutual obligations arising from different transactions, recoupment is essentially a defense to the debtor's claim against the creditor. In re Monongahela Rye Liquors, 141 F.2d 864, 869 (3d Cir.1944). The doctrine has been employed in bankruptcy cases. See id.; In re Yonkers Hamilton Sanitarium Inc., 22 B.R. 427 (Bankr.S.D.N.Y.1982), aff'd, 34 B.R. 385 (S.D.N.Y.1983). The major consideration is whether the claims arise from the same transaction.
Outlet contends that it may invoke the doctrine of recoupment as an affirmative defense to the eighth cause of action, explaining that "the Note, executed in reduction of the purchase price of the overall transaction, and the payment by [it] stemming from breaches of the Colonie Lease obligations starting immediately on the date of the transfer, constitute elements of *782 the same transaction." Outlet Memorandum of Law in Opposition at 7.
The Trustee asserts that the Note, executed in consideration of performance on the Hadley Lease and the Guaranty executed in connection with the Colonie Lease and the UDS sale can in no way be construed as arising from a single transaction.
The term "same transaction" is not defined. Courts have permitted recoupment where but a single contract is involved. Generally, the cases have concerned an overpayment made to the debtor which the creditor sought to utilize to avoid its post-petition liability. See Waldschmidt v. CBS, Inc., 14 B.R. 309 (M.D.Tenn.1981) (recording company made advance royalties to the debtor and was permitted to recoup the advances from post-petition royalties); Yonkers Hamilton Sanitarium, 22 B.R. 427 (government overpaid Medicare allowances to debtor hospital and recouped from post-petition allowances due debtor); Ashland v. Petroleum Co. v. Appel (In re B. & L. Oil Co.), 782 F.2d 155 (10th Cir.1986) (buyer of crude oil overpaid debtor for pre-petition purchases and recouped that amount by post-petition purchases). Recoupment in executory contract cases is permitted to prevent a debtor from assuming the favorable aspects of a contract and rejecting the unfavorable burdens or obligations of the same contract. Yonkers Hamilton Sanitarium, 22 B.R. at 435, citing In re Shoppers Paradise, Inc., 8 B.R. 271 (Bankr.S.D.N.Y.1980). As explained in B. & L. Oil, recoupment should be allowed where to disallow it would result in unjust enrichment because the creditor did not consciously make a loan, extend credit or make payments required by a contract but paid the debtor by mistake. 782 F.2d at 159.
Two cases in which recoupment was denied are helpful to resolution of the parties' dispute. In Steinberg v. Illinois Department of Mental Health and Development Disabilities (In re Klingberg Schools), 68 B.R. 173 (N.D.Ill.1986), aff'd, 837 F.2d 763 (7th Cir.1988) (per curiam), a state agency contracted with the debtor to pay a per diem rate in return for the debtor's providing services to third parties. The federal government also began to provide funding to the debtor. When the state agency learned of the federal funding, it unilaterally reduced the per diem rate, effective retroactively, so that it had substantially overpaid the debtor. It sought to recoup these monies from post-petition amounts it owed the debtor. The court found the doctrine of recoupment unavailable because the state agency in fact sought to recoup payments made by a third party, the federal government. The court explained that "recoupment is a defense to assert that the claimant did not perform its part of the bargain and is not entitled to recover from defendant . . ." Id. at 180.
In Westinghouse Electric Corp. v. Fidelity and Deposit Co., 63 B.R. 18 (E.D.Pa. 1986) the creditor, a furniture supplier, entered into a contract with the debtor. Pursuant to the contract, the debtor would sell the property, bill its customers, and then pay the creditor after deducting the debtor's commission. When the debtor was behind in its payments to the creditor, the arrangement was restructured such that the creditor would bill the clients and pay the debtor its commission. Under this new arrangement, the creditor sought to recoup the unpaid bills by sending the debtor a smaller percentage commission. The court found that this was not a typical recoupment case because there had been no advance monies paid which the creditor sought to recoup. Moreover, "the reciprocal obligations of the parties clearly arose from different transactions. `The fact that the same parties are involved, and that a similar subject matter gave rise to both claims . . . does not mean that the two arose from the `same transaction'". Id. at 21, citing Lee v. Schweiker, 739 F.2d 870, 875 (3d Cir.1984).
Outlet's effort to push and tug its payment to Bankers Life on the Colonie Lease into the same transaction as Outlet's indebtedness to Denby on the Note is wholly unavailing. Outlet's payment to Bankers Life arose out of the Guaranty executed in May 1980. Its indebtedness to Denby on the Note, dated November 20, 1980, arose out of Outlet's restructuring of its proposed *783 sale of Denby to UDS to provide that UDS would assume the Pyramid Lease. The umbrella of the UDS sale is not available to encompass the different obligations which Outlet incurred to different entities. Drawing all reasonable inferences in favor of Outlet, the court cannot conclude that the Guaranty of the Colonie Lease and the execution of the Note constituted a single transaction with Denby.[18] Indeed, Denby was not a party to a contractual arrangement with Outlet but a corporation being sold by Outlet.
The facts are not like the cases in which recoupment has been allowed. There was no overpayment to Denby, mistaken or intentional. Denby had no contract with Outlet, only an obligation from Outlet. Outlet's contracts were with UDS, Associates and Pyramid.
There is a somewhat closer relationship between the Note given to Denby in consideration of UDS' assumption of the Pyramid Lease and a payment made by Outlet to Pyramid. But since the facts concerning the payment to Pyramid are so undeveloped the court cannot determine if recoupment would be available.
In conclusion, although recoupment of the money paid to Bankers Life is not available to Outlet, setoff may be, to the extent discussed above. The factual development of the Pyramid payment is insufficient to permit any conclusion with respect to Outlet's ability to utilize that payment as a defense. The Trustee has not shown that he is entitled to summary judgment on the Note or on his objections to Outlet's claims against the estate and his motion is therefore denied.
IT IS SO ORDERED.
NOTES
[1] The Trustee has steadfastly maintained that Outlet bears the burden respecting its proofs of claim. He misperceives the nature of his own motion. Although Outlet bears the burden of persuasion at trial once the Trustee has rebutted its prima facie case, California State Board of Equalization v. Official Committee of Unsecured Creditors (In re Fidelity Holding Company, Ltd.), 837 F.2d 696, 697, (5th Cir.1988), the Trustee has moved for summary judgment on his objection to the proofs of claim. To prevail on that motion the Trustee bears the same burden as he does with respect to his motion for summary judgment on his eighth claim for relief.
[2] Section 502(e)(1)(C) provides that the claim for reimbursement or contribution of a codebtor must be disallowed to the extent that the codebtor asserts a right of subrogation to the right of the creditor under section 509 of the Code.
[3] The Trustee would have the court hold that if the amended claim were untimely, asserting a new claim for subrogation and having been filed more than 30 days after the bar date, the amended claim must nevertheless be considered valid for purposes of disallowing the timely filed direct claim. That is a highly questionable result, but need not be considered here in light of the conclusion that claim # 576 was a timely filed subrogation claim.
[4] This does not mean that Outlet's claim may be allowed in an amount greater than the allowed claim of the creditor.
[5] Section 509(a) reads "Except as provided in subsection (b) or (c) of this section, an entity that is liable with the debtor on, or that has secured, a claim of a creditor against the debtor, and that pays such claim, is subrogated to the rights of such creditor to the extent of such payment."
[6] The proof of claim states that Outlet was a guarantor of the Hadley Lease but Outlet's answer to the Trustee's complaint, although it mentions the Guaranty of the Colonie Lease, makes no mention of a guaranty of the Hadley Lease.
[7] Section 553 of the Code provides that Title 11 does not impair "any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case." Certain claims are nevertheless excluded from the application of this doctrine including (i) claims that are disallowed other than under section 502(b)(3); (ii) claims that were transferred to the creditor by an entity other than the debtor, after the commencement of the case or after 90 days before the commencement of the case, while the debtor was insolvent (which insolvency is presumed) or (iii) claims for debts that were incurred after 90 days before the commencement of the case, while the debtor was insolvent (which insolvency is presumed) for the purpose of obtaining a right of setoff. See section 553(a).
[8] It should be noted that a creditor seeking to exercise setoff is not required to file a proof of claim. As discussed in In re Sutton Investments, Inc., 53 B.R. 226, 230 (Bankr.W.D.La.1985) section 553 does not contain a requirement that a creditor seeking to exercise a setoff must first file a proof of claim but merely provides that setoff will not be permitted if the claim is disallowed. If the debtor or trustee wants to attack a claim, either may file a proof of claim on behalf of the creditor who has not itself timely filed by virtue of section 501(c). See Gold Kist, Inc. v. Henderson (In re Henderson) 24 B.R. 630, 632 (Bankr.M.D.Ga.1982) (creditor who had not filed a proof of claim could assert setoff as affirmative defense, but could not use setoff claim to obtain affirmative recovery.) Accordingly, even it Outlet failed to timely file a proof of claim asserting its right of setoff, it could assert the right as an affirmative defense.
[9] A claim for reimbursement should also be deemed pre-petition notwithstanding that the payment was made subsequent to bankruptcy, because at the time of the filing of the case, the guarantor had a contingent claim (subject to disallowance pursuant to section 502(e)(1)(B) if not fixed).
[10] This discussion has been confined to payment on the Colonie Lease because the parties so confined it and because, as noted above, the facts underlying the payment of Pyramid are apparently disputed and, in any event, undeveloped.
[11] The Trustee would also have this court read a section 553(b) standard into this section and deny setoff because Outlet improved its position within 90 days prior to the petition. As Congress elected not to incorporate such a provision in section 553(a)(2) [which clearly it knew how to do and did in section 553(b)], this court refuses to impose one.
[12] The sum of $141,000 paid for use and occupation is not included. This is a post-petition obligation which is not available for setoff because of lack of mutuality. See Elliott v. Leounes (In re William J. Brittingham, Inc.), 39 B.R. 575, 578 (Bankr.D.Del.1984).
[13] Section 502(b)(6) of the Code provides that "the claim of a lessor for damages resulting from the termination of a lease of real property [is limited to]
(A) the rent reserved by such lease, without acceleration, for the greater of one year, or 15 percent, not to exceed three years, of the remaining term of such lease, following the earlier of
(i) the date of the filing of the petition; and
(ii) the date on which such lessor repossessed, or the lessee surrendered, the leased property; plus
(B) any unpaid rent due under such lease, without acceleration, on the earlier of such dates.
[14] The Trustee also asserts that a surety cannot be subrogated to rights of the obligee where the indebtedness has not been satisfied in full. We find no such limitation in section 509. As stated in 3 L. King Collier on Bankruptcy ¶ 509.02 at page 509-6 (15th ed. 1988), "A partial discharge of the principal debt by the codebtor is clearly covered by section 509(a)." The court notes, however, that by virtue of section 553(c) Outlet's claim is subordinate to the primary creditor's claim until such claim is paid in full.
[15] The yearly rent reserved was $282,000. Under 11 U.S.C. § 502(b)(6), the maximum allowable claim for breach of the lease was three years multiplied by the yearly rent reserved, or $846,000.
[16] This is not to say that the court today holds that a claim subordinated to the claims of all unsecured creditors may always be used to diminish or eliminate the subordinated creditor's liability to the debtor. See Marta Group, Inc. v. Perlstein's Inc. (In re Marta Group, Inc.), 47 B.R. 220 (Bankr.E.D.Pa.1985); F.D.I.C v. Bank of America National Trust and Savings Assoc., 701 F.2d 831 (9th Cir.), cert. denied 464 U.S. 935, 104 S. Ct. 343, 78 L. Ed. 2d 310 (1983).
[17] Without close analysis, the language quoted from Flanagan at page 780 of this decision might seem to be at odds with the limitation today placed on Outlet's maximum claim for setoff. For in Flanagan the court said that the surety's setoff would be allowed to the full extent of the surety's debt. 47 Bankr. at 302. But in Flanagan, there was no limitation, as here, on the allowability of the claims to which the surety succeeded. The issue there presented was whether the surety's setoff was limited not to the allowed claim of the materialman but to the dividend which the materialman would have received. The court concluded, quite properly, that the dividend did not define the setoff to which the surety was entitled.
[18] Perhaps if Outlet were engaged in suit with UDS Outlet might be able to show that the various documents which it executed appurtenant to the sale constituted but a single transaction with UDS. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551161/ | 908 A.2d 196 (2006)
MARK LEWIS and DENNIS WINSLOW; SAUNDRA HEATH and CLARITA ALICIA TOBY; CRAIG HUTCHISON and CHRIS LODEWYKS; MAUREEN KILIAN and CINDY MENEGHIN; SARAH and SUYIN LAEL; MARILYN MANEELY and DIANE MARINI; and KAREN and MARCYE NICHOLSON-MCFADDEN, Plaintiffs-Appellants,
v.
GWENDOLYN L. HARRIS, in her official capacity as Commissioner of the New Jersey Department of Human Services; CLIFTON R. LACY, in his official capacity as the Commissioner of the New Jersey Department of Health and Senior Services; and JOSEPH KOMOSINSKI, in his official capacity as Acting State Registrar of Vital Statistics of the New Jersey State Department of Health and Senior Services, Defendants-Respondents.
A-68 September Term 2005
Supreme Court of New Jersey
Argued February 15, 2006
Decided October 25, 2006
JUSTICES LaVECCHIA, WALLACE, and RIVERA-SOTO join in JUSTICE ALBIN's opinion. CHIEF JUSTICE PORITZ filed a separate concurring and dissenting opinion in which JUSTICES LONG and ZAZZALI join.
David S. Buckel, a member of the New York bar, argued the cause for appellants (Gibbons, Del Deo, Dolan, Griffinger & Vecchione, attorneys; Mr. Buckel, Susan L. Sommer, a member of the New York bar, Lawrence S. Lustberg and Megan Lewis, on the briefs).
Patrick DeAlmeida, Assistant Attorney General argued the cause for respondents (Anne Milgram, Acting Attorney General of New Jersey, attorney; Mr. DeAlmeida and Mary Beth Wood, on the briefs).
David R. Oakley submitted a brief on behalf of amicus curiae Alliance for Marriage, Inc. (Anderl & Oakley, attorneys).
Edward L. Barocas, Legal Director, submitted a brief on behalf of amici curiae American Civil Liberties Union of New Jersey, American-Arab Anti-Discrimination Committee, Asian American Legal Defense and Education Fund, Hispanic Bar Association of New Jersey, and The National Organization for Women of New Jersey.
Howard M. Nashel submitted a brief on behalf of amici curiae American Psychological Association and New Jersey Psychological Association (Nashel, Kates, Nussman, Rapone & Ellis, attorneys).
Franklyn C. Steinberg, III, submitted a brief on behalf of amicus curiae The Anscombe Society at Princeton University.
Douglas S. Eakeley submitted a brief on behalf of amicus curiae City of Asbury Park (Lowenstein Sandler, attorneys).
Kevin H. Marino and John A. Boyle submitted a brief on behalf of amici curiae Asian Equality, Equality Federation, People for the American Way Foundation and Vermont Freedom to Marry Task Force (Marino & Associates, attorneys; Paul A. Saso, of counsel).
Mark L. Hopkins submitted a brief on behalf of amicus curiae Clergy of New Jersey.
Richard F. Collier, Jr., submitted a brief on behalf of amicus curiae Family Leader Foundation (Collier & Basil, attorneys).
Dennis M. Caufield submitted a brief on behalf of amicus curiae Family Research Council.
Leslie A. Farber and Thomas H. Prol submitted a brief on behalf of amici curiae Garden State Equality Education Fund, Inc. and Garden State Equality, LLC, a Continuing Political Committee (Leslie A. Farber, attorneys; Mr. Prol, of counsel).
Alan E. Kraus submitted a brief on behalf of amici curiae Human Rights Campaign, Human Rights Campaign Foundation, Children of Lesbians and Gays Everywhere (COLAGE), Family Pride Coalition, Freedom to Marry, Gay & Lesbian Advocates & Defenders (GLAD), National Center for Lesbian Rights, National Gay and Lesbian Task Force, New Jersey Lesbian and Gay Coalition (NJLGC), and Parents, Families and Friends of Lesbians and Gays (PFLAG) (Latham & Watkins, attorneys).
Kevin Costello submitted a brief on behalf of amicus curiae Legal Momentum (Levow & Costello, attorneys).
Cliona A. Levy submitted a brief on behalf of amicus curiae Madeline Marzano-Lesnevich (Sonnenschein Nath & Rosenthal, attorneys).
Demetrios K. Stratis submitted a brief on behalf of amici curiae Monmouth Rubber & Plastics, Corp. and John M. Bonforte, Sr., (Demetrios K. Stratis, attorneys; Mr. Stratis and Vincent P. McCarthy, on the brief).
Stephen M. Orlofsky and Jordana Cooper submitted a brief on behalf of amici curiae National Association of Social Workers and National Association of Social Workers New Jersey Chapter (Blank Rome, attorneys).
Steven G. Sanders submitted a brief on behalf of amicus curiae National Black Justice Coalition (Arseneault, Fassett & Mariano, attorneys).
Robert R. Fuggi, Jr., submitted a brief on behalf of amicus curiae National Legal Foundation (Fuggi & Fuggi, attorneys).
Michael Behrens submitted a brief on behalf of amici curiae The New Jersey Coalition to Preserve and Protect Marriage, The New Jersey Family Policy Council and The New Jersey Catholic Conference (Messina & Laffey, attorneys).
Debra E. Guston and Trayton M. Davis, a member of the New York bar, submitted a brief on behalf of amici curiae New Jersey Religious Leaders and National and Regional Religious Organizations in Support of Marriage (Guston & Guston, attorneys).
Stuart A. Hoberman, President, submitted a brief on behalf of amicus curiae New Jersey State Bar Association (Mr. Hoberman, attorney; Felice T. Londa, Andrew J. DeMaio, Gail Oxfeld Kanef, Robert A Knee, Scott A. Laterra and Thomas J. Snyder, on the brief).
R. William Potter submitted a brief on behalf of amici curiae Princeton Justice Project and Undergraduate Student Government of Princeton University (Potter and Dickson, attorneys; Mr. Potter and Linda A. Colligan, on the brief).
Michael P. Laffey submitted a brief on behalf of amicus curiae Professors of Psychology and Psychiatry.
Adam N. Saravay submitted a brief on behalf of amicus curiae Professors of the History of Marriage, Families, and the Law (McCarter & English, attorneys; Mr. Saravay and Sydney E. Dickey, on the brief).
Donald D. Campbell submitted a letter in lieu of brief on behalf of amici curiae United Families International and United Families-New Jersey (Campbell & Campbell, attorneys).
Ralph Charles Coti submitted a brief on behalf of amici curiae James Q. Wilson, Douglas Allen, Ph.D., David Blankenhorn, Lloyd R. Cohen, J.D., Ph.D., John Coverdale, J.D., Nicholas Eberstadt, Ph.D., Robert P. George, J.D., Harold James, Ph.D., Leon R. Kass, M.D., Ph.D., Douglas W. Kmiec and Katherine Shaw Spaht (Coti & Segrue, attorneys).
JUSTICE ALBIN delivered the opinion of the Court.
The statutory and decisional laws of this State protect individuals from discrimination based on sexual orientation. When those individuals are gays and lesbians who follow the inclination of their sexual orientation and enter into a committed relationship with someone of the same sex, our laws treat them, as couples, differently than heterosexual couples. As committed same-sex partners, they are not permitted to marry or to enjoy the multitude of social and financial benefits and privileges conferred on opposite-sex married couples.
In this case, we must decide whether persons of the same sex have a fundamental right to marry that is encompassed within the concept of liberty guaranteed by Article I, Paragraph 1 of the New Jersey Constitution. Alternatively, we must decide whether Article I, Paragraph 1's equal protection guarantee requires that committed same-sex couples be given on equal terms the legal benefits and privileges awarded to married heterosexual couples and, if so, whether that guarantee also requires that the title of marriage, as opposed to some other term, define the committed same-sex legal relationship.
Only rights that are deeply rooted in the traditions, history, and conscience of the people are deemed to be fundamental. Although we cannot find that a fundamental right to same-sex marriage exists in this State, the unequal dispensation of rights and benefits to committed same-sex partners can no longer be tolerated under our State Constitution. With this State's legislative and judicial commitment to eradicating sexual orientation discrimination as our backdrop, we now hold that denying rights and benefits to committed same-sex couples that are statutorily given to their heterosexual counterparts violates the equal protection guarantee of Article I, Paragraph 1. To comply with this constitutional mandate, the Legislature must either amend the marriage statutes to include same-sex couples or create a parallel statutory structure, which will provide for, on equal terms, the rights and benefits enjoyed and burdens and obligations borne by married couples. We will not presume that a separate statutory scheme, which uses a title other than marriage, contravenes equal protection principles, so long as the rights and benefits of civil marriage are made equally available to same-sex couples. The name to be given to the statutory scheme that provides full rights and benefits to same-sex couples, whether marriage or some other term, is a matter left to the democratic process.
I.
A.
Plaintiffs are seven same-sex couples who claim that New Jersey's laws, which restrict civil marriage to the union of a man and a woman, violate the liberty and equal protection guarantees of the New Jersey Constitution. Each plaintiff has been in a "permanent committed relationship" for more than ten years and each seeks to marry his or her partner and to enjoy the legal, financial, and social benefits that are afforded by marriage. When the seven couples applied for marriage licenses in the municipalities in which they live, the appropriate licensing officials told them that the law did not permit same-sex couples to marry. Plaintiffs then filed a complaint in the Superior Court, Law Division, challenging the constitutionality of the State's marriage statutes.
In terms of the value they place on family, career, and community service, plaintiffs lead lives that are remarkably similar to those of opposite-sex couples.[1] Alicia Toby and Saundra Heath, who reside in Newark, have lived together for seventeen years and have children and grandchildren. Alicia is an ordained minister in a church where her pastoral duties include coordinating her church's HIV prevention program. Saundra works as a dispatcher for Federal Express.
Mark Lewis and Dennis Winslow reside in Union City and have been together for fourteen years. They both are pastors in the Episcopal Church. In their ministerial capacities, they have officiated at numerous weddings and signed marriage certificates, though their own relationship cannot be similarly sanctified under New Jersey law. When Dennis's father was suffering from a serious long-term illness, Mark helped care for him in their home as would a devoted son-in-law.
Diane Marini and Marilyn Maneely were committed partners for fourteen years until Marilyn's death in 2005.[2] The couple lived in Haddonfield, where Diane helped raise, as though they were her own, Marilyn's five children from an earlier marriage. Diane's mother considered Marilyn her daughter-in-law and Marilyn's children her grandchildren. The daily routine of their lives mirrored those of "other suburban married couples [their] age." Marilyn was a registered nurse. Diane is a businesswoman who serves on the planning board in Haddonfield, where she is otherwise active in community affairs.
Karen and Marcye Nicholson-McFadden have been committed partners for seventeen years, living together for most of that time in Aberdeen. There, they are raising two young children conceived through artificial insemination, Karen having given birth to their daughter and Marcye to their son. They own an executive search firm where Marcye works full-time and Karen at night and on weekends. Karen otherwise devotes herself to daytime parenting responsibilities. Both are generally active in their community, with Karen serving on the township zoning board.
Suyin and Sarah Lael have resided together in Franklin Park for most of the sixteen years of their familial partnership. Suyin is employed as an administrator for a non-profit corporation, and Sarah is a speech therapist. They live with their nine-year-old adopted daughter and two other children who they are in the process of adopting. They legally changed their surname and that of their daughter to reflect their status as one family. Like many other couples, Suyin and Sarah share holidays with their extended families.
Cindy Meneghin and Maureen Kilian first met in high school and have been in a committed relationship for thirty-two years. They have lived together for twenty-three years in Butler where they are raising a fourteen-year-old son and a twelve-year-old daughter. Through artificial insemination, Cindy conceived their son and Maureen their daughter. Cindy is a director of web services at Montclair State University, and Maureen is a church administrator. They are deeply involved in their children's education, attending after-school activities and PTA meetings. They also play active roles in their church, serving with their children in the soup kitchen to help the needy.
Chris Lodewyks and Craig Hutchison have been in a committed relationship with each other since their college days thirty-five years ago. They have lived together in Pompton Lakes for the last twenty-three years. Craig works in Summit, where he is an investment asset manager and president of the Summit Downtown Association. He also serves as the vice-chairman of the board of trustees of a YMCA camp for children. Chris, who is retired, helps Craig's elderly mother with daily chores, such as getting to the eye doctor.
The seeming ordinariness of plaintiffs' lives is belied by the social indignities and economic difficulties that they daily face due to the inferior legal standing of their relationships compared to that of married couples. Without the benefits of marriage, some plaintiffs have had to endure the expensive and time-consuming process of cross-adopting each other's children and effectuating legal surname changes. Other plaintiffs have had to contend with economic disadvantages, such as paying excessive health insurance premiums because employers did not have to provide coverage to domestic partners, not having a right to "family leave" time, and suffering adverse inheritance tax consequences.
When some plaintiffs have been hospitalized, medical facilities have denied privileges to their partners customarily extended to family members. For example, when Cindy Meneghin contracted meningitis, the hospital's medical staff at first ignored her pleas to allow her partner Maureen to accompany her to the emergency room. After Marcye Nicholson-McFadden gave birth to a son, a hospital nurse challenged the right of her partner Karen to be present in the newborn nursery to view their child. When Diane Marini received treatment for breast cancer, medical staff withheld information from her partner Marilyn "that would never be withheld from a spouse or even a more distant relative." Finally, plaintiffs recount the indignities, embarrassment, and anguish that they as well as their children have suffered in attempting to explain their family status.[3]
B.
In a complaint filed in the Superior Court, plaintiffs sought both a declaration that the laws denying same-sex marriage violated the liberty and equal protection guarantees of Article I, Paragraph 1 of the New Jersey Constitution and injunctive relief compelling defendants to grant them marriage licenses.[4] The defendants named in the complaint are Gwendolyn L. Harris, the then Commissioner of the New Jersey Department of Human Services responsible for implementing the State's marriage statutes; Clifton R. Lacy, the then Commissioner of the New Jersey Department of Health and Senior Services responsible for the operation of the State Registrar of Vital Statistics; and Joseph Komosinski, the then Acting State Registrar of Vital Statistics of the Department of Health and Senior Services responsible for supervising local registration of marriage records.[5] The departments run by those officials have oversight duties relating to the issuance of marriage licenses.
The complaint detailed a number of statutory benefits and privileges available to opposite-sex couples through New Jersey's civil marriage laws but denied to committed same-sex couples. Additionally, in their affidavits, plaintiffs asserted that the laws prohibiting same-sex couples to marry caused harm to their dignity and social standing, and inflicted psychic injuries on them, their children, and their extended families.
The State moved to dismiss the complaint for failure to state a claim upon which relief could be granted, see R. 4:6-2(e), and later both parties moved for summary judgment, see R. 4:46-2(c). The trial court entered summary judgment in favor of the State and dismissed the complaint.
In an unpublished opinion, the trial court first concluded that marriage is restricted to the union of a man and a woman under New Jersey law. The court maintained that the notion of "same-sex marriage was so foreign" to the legislators who in 1912 passed the marriage statute that "a ban [on same-sex marriage] hardly needed mention." The court next rejected plaintiffs' argument that same-sex couples possess a fundamental right to marriage protected by the State Constitution, finding that such a right was not so rooted in the collective conscience and traditions of the people of this State as to be deemed fundamental. Last, the court held that the marriage laws did not violate the State Constitution's equal protection guarantee. The court determined that "limiting marriage to mixed-gender couples is a valid and reasonable exercise of government authority" and that the rights of gays and lesbians could "be protected in ways other than alteration of the traditional understanding of marriage." Plaintiffs were attempting "not to lift a barrier to marriage," according to the court, but rather "to change its very essence." To accomplish that end, the court suggested that plaintiffs would have to seek relief from the Legislature, which at the time was considering the passage of a domestic partnership act.
C.
A divided three-judge panel of the Appellate Division affirmed. Lewis v. Harris, 378 N.J. Super. 168, 194 (App. Div. 2005). Writing for the majority, Judge Skillman determined that New Jersey's marriage statutes do not contravene the substantive due process and equal protection guarantees of Article I, Paragraph 1 of the State Constitution. Id. at 188-89. In analyzing the substantive due process claim, Judge Skillman concluded that "[m]arriage between members of the same sex is clearly not a fundamental right." Id. at 183 (internal quotation marks omitted). He reached that conclusion because he could find no support for such a proposition in the text of the State Constitution, this State's history and traditions, or contemporary social standards. Id. at 183-84. He noted that "[o]ur leading religions view marriage as a union of men and women recognized by God" and that "our society considers marriage between a man and woman to play a vital role in propagating the species and in providing the ideal environment for raising children." Id. at 185.[6]
In rebuffing plaintiffs' equal protection claim, Judge Skillman looked to the balancing test that governs such claims a consideration of "`the nature of the affected right, the extent to which the governmental restriction intrudes upon it, and the public need for the restriction.'" Id. at 189 (quoting Greenberg v. Kimmelman, 99 N.J. 552, 567 (1985)). Starting with the premise that there is no fundamental right to same-sex marriage, Judge Skillman reasoned that plaintiffs could not demonstrate the existence of an "affected" or "claimed" right. Id. at 189-90 (internal quotation marks omitted). From that viewpoint, the State was not required to show that a public need for limiting marriage to opposite-sex couples outweighed a non-existent affected right to same-sex marriage. Id. at 190.
Judge Skillman chronicled the legislative progress made by same-sex couples through such enactments as the Domestic Partnership Act and expressed his view of the constricted role of judges in setting social policy: "A constitution is not simply an empty receptacle into which judges may pour their own conceptions of evolving social mores." Id. at 176-79. In the absence of a constitutional mandate, he concluded that only the Legislature could authorize marriage between members of the same sex. Id. at 194. Judge Skillman, however, emphasized that same-sex couples "may assert claims that the due process and equal protection guarantees of [the State Constitution] entitle them to additional legal benefits provided by marriage." Ibid.
In a separate opinion, Judge Parrillo fully concurred with Judge Skillman's reasoning, but added his view of the twofold nature of the relief sought by plaintiffs "the right to marry and the rights of marriage." Id. at 194-95 (Parrillo, J., concurring). Judge Parrillo observed that the right to marry necessarily includes significant "economic, legal and regulatory benefits," the so-called rights of marriage. Id. at 195. With regard to those "publicly-conferred tangible [and] intangible benefits" incident to marriage that are denied to same-sex couples, Judge Parrillo asserted plaintiffs are free to challenge "on an ad-hoc basis" any "particular statutory exclusion resulting in disparate or unfair treatment." Ibid. He concluded, however, that courts had no constitutional authority to alter "a core feature of marriage," namely "its binary, opposite-sex nature." Id. at 199-200. He maintained that "[p]rocreative heterosexual intercourse is and has been historically through all times and cultures an important feature of that privileged status, and that characteristic is a fundamental, originating reason why the State privileges marriage." Id. at 197. He submitted that it was the Legislature's role "to weigh the societal costs against the societal benefits flowing from a profound change in the public meaning of marriage." Id. at 200.
In dissenting, Judge Collester concluded that the substantive due process and equal protection guarantees of Article I, Paragraph 1 obligate the State to afford same-sex couples the right to marry on terms equal to those afforded to opposite-sex couples. Id. at 218-20 (Collester, J., dissenting). He charted the evolving nature of the institution of marriage and of the rights and protections afforded to same-sex couples, and reasoned that outdated conceptions of marriage "cannot justify contemporary violations of constitutional guarantees." Id. at 206-10. He described the majority's argument as circular: Plaintiffs have no constitutional right to marry because this State's laws by definition do not permit same-sex couples to marry. Id. at 204. That paradigm, Judge Collester believed, unfairly insulated the State's marriage laws from plaintiffs' constitutional claims and denied "plaintiffs the right to enter into lawful marriage in this State with the person of their choice." Id. at 204, 211. Judge Collester dismissed the notion that "procreation or the ability to procreate is central to marriage" today and pointed out that four plaintiffs in this case gave birth to children after artificial insemination. Id. at 211-12. He further asserted that if marriage indeed is "the optimal environment for child rearing," then denying plaintiffs the right to marry their committed partners is fundamentally unfair to their children. Id. at 212-13 (internal quotation marks omitted). Because the current marriage laws prohibit "a central life choice to some and not others based on sexual orientation" and because he could find no rational basis for limiting the right of marriage to opposite-sex couples, Judge Collester determined that the State had deprived plaintiffs of their right to substantive due process and equal protection of the laws. Id. at 216-20.
We review this case as of right based on the dissent in the Appellate Division. See R. 2:2-1(a)(2). We granted the motions of a number of individuals and organizations to participate as amici curiae.
II.
This appeal comes before us from a grant of summary judgment in favor of the State. See R. 4:46-2(c). As this case raises no factual disputes, we address solely questions of law, and thus are not bound to defer to the legal conclusions of the lower courts. See Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 372 (1999) (stating that "matters of law are subject to a de novo review").
Plaintiffs contend that the State's laws barring members of the same sex from marrying their chosen partners violate the New Jersey Constitution. They make no claim that those laws contravene the Federal Constitution. Plaintiffs present a twofold argument. They first assert that same-sex couples have a fundamental right to marry that is protected by the liberty guarantee of Article I, Paragraph 1 of the State Constitution. They next assert that denying same-sex couples the right to marriage afforded to opposite-sex couples violates the equal protection guarantee of that constitutional provision.
In defending the constitutionality of its marriage laws, the State submits that same-sex marriage has no historical roots in the traditions or collective conscience of the people of New Jersey to give it the ranking of a fundamental right, and that limiting marriage to opposite-sex couples is a rational exercise of social policy by the Legislature. The State concedes that state law and policy do not support the argument that limiting marriage to heterosexual couples is necessary for either procreative purposes or providing the optimal environment for raising children.[7] Indeed, the State not only recognizes the right of gay and lesbian parents to raise their own children, but also places foster children in same-sex parent homes through the Division of Youth and Family Services.
The State rests its case on age-old traditions, beliefs, and laws, which have defined the essential nature of marriage to be the union of a man and a woman. The long-held historical view of marriage, according to the State, provides a sufficient basis to uphold the constitutionality of the marriage statutes. Any change to the bedrock principle that limits marriage to persons of the opposite sex, the State argues, must come from the democratic process.
The legal battle in this case has been waged over one overarching issue the right to marry. A civil marriage license entitles those wedded to a vast array of economic and social benefits and privileges the rights of marriage. Plaintiffs have pursued the singular goal of obtaining the right to marry, knowing that, if successful, the rights of marriage automatically follow. We do not have to take that all-or-nothing approach. We perceive plaintiffs' equal protection claim to have two components: whether committed same-sex couples have a constitutional right to the benefits and privileges afforded to married heterosexual couples, and, if so, whether they have the constitutional right to have their "permanent committed relationship" recognized by the name of marriage. After we address plaintiffs' fundamental right argument, we will examine those equal protection issues in turn.
III.
Plaintiffs contend that the right to marry a person of the same sex is a fundamental right secured by the liberty guarantee of Article I, Paragraph 1 of the New Jersey Constitution. Plaintiffs maintain that the liberty interest at stake is "the right of every adult to choose whom to marry without intervention of government." Plaintiffs do not profess a desire to overthrow all state regulation of marriage, such as the prohibition on polygamy and restrictions based on consanguinity and age.[8] They therefore accept some limitations on "the exercise of personal choice in marriage." They do claim, however, that the State cannot regulate marriage by defining it as the union between a man and a woman without offending our State Constitution. In assessing their liberty claim, we must determine whether the right of a person to marry someone of the same sex is so deeply rooted in the traditions and collective conscience of our people that it must be deemed fundamental under Article I, Paragraph 1. We thus begin with the text of Article I, Paragraph 1, which provides:
All persons are by nature free and independent, and have certain natural and unalienable rights, among which are those of enjoying and defending life and liberty, of acquiring, possessing, and protecting property, and of pursuing and obtaining safety and happiness.
[N.J. Const. art. I, ¶ 1.]
The origins of Article I, Paragraph 1 date back to New Jersey's 1844 Constitution.[9] That first paragraph of our Constitution is, in part, "a `general recognition of those absolute rights of the citizen which were a part of the common law.'" King v. S. Jersey Nat'l Bank, 66 N.J. 161, 178 (1974) (quoting Ransom v. Black, 54 N.J.L. 446, 448 (Sup. Ct. 1892), aff'd per curiam, 65 N.J.L. 688 (E. & A. 1893)). In attempting to discern those substantive rights that are fundamental under Article I, Paragraph 1, we have adopted the general standard followed by the United States Supreme Court in construing the Due Process Clause of the Fourteenth Amendment of the Federal Constitution. We "look to `the traditions and [collective] conscience of our people to determine whether a principle is so rooted [there] . . . as to be ranked as fundamental.'" Ibid. (internal quotation marks omitted) (alterations in original) (quoting Griswold v. Connecticut, 381 U.S. 479, 493, 85 S. Ct. 1678, 1686, 14 L. Ed. 2d 510, 520 (1965) (Goldberg, J., concurring)); see also Watkins v. Nelson, 163 N.J. 235, 245 (2000); Doe v. Poritz, 142 N.J. 1, 120 (1995); State v. Parker, 124 N.J. 628, 648 (1991), cert. denied, 503 U.S. 939, 112 S. Ct. 1483, 117 L. Ed. 2d 625 (1992).
Under Article I, Paragraph 1, as under the Fourteenth Amendment's substantive due process analysis, determining whether a fundamental right exists involves a two-step inquiry. First, the asserted fundamental liberty interest must be clearly identified. See Washington v. Glucksberg, 521 U.S. 702, 721, 117 S. Ct. 2258, 2268, 138 L. Ed. 2d 772, 788 (1997). Second, that liberty interest must be objectively and deeply rooted in the traditions, history, and conscience of the people of this State. See King, supra, 66 N.J. at 178; see also Glucksberg, supra, 521 U.S. at 720-21, 117 S. Ct. at 2268, 138 L. Ed. 2d at 787-88 (stating that liberty interest must be "objectively, deeply rooted in this Nation's history and tradition" and "implicit in the concept of ordered liberty" (internal quotation marks omitted)).
How the right is defined may dictate whether it is deemed fundamental. One such example is Glucksberg, supra, a case involving a challenge to Washington's law prohibiting and criminalizing assisted suicide. 521 U.S. at 705-06, 117 S. Ct. at 2261, 138 L. Ed. 2d at 779. In that case, the Supreme Court stated that the liberty interest at issue was not the "`liberty to choose how to die,'" but rather the "right to commit suicide with another's assistance." Id. at 722-24, 117 S. Ct. at 2269, 138 L. Ed. 2d at 789-90. Having framed the issue that way, the Court concluded that the right to assisted suicide was not deeply rooted in the nation's history and traditions and therefore not a fundamental liberty interest under substantive due process. Id. at 723, 728, 117 S. Ct. at 2269, 2271, 138 L. Ed. 2d at 789, 792.
The right to marriage is recognized as fundamental by both our Federal and State Constitutions. See, e.g., Zablocki v. Redhail, 434 U.S. 374, 383-84, 98 S. Ct. 673, 679-80, 54 L. Ed. 2d 618, 628-29 (1978); J.B. v. M.B., 170 N.J. 9, 23-24 (2001). That broadly stated right, however, is "subject to reasonable state regulation." Greenberg, supra, 99 N.J. at 572. Although the fundamental right to marriage extends even to those imprisoned, Turner v. Safley, 482 U.S. 78, 95-96, 107 S. Ct. 2254, 2265, 96 L. Ed. 2d 64, 83 (1987), and those in noncompliance with their child support obligations, Zablocki, supra, 434 U.S. at 387-91, 98 S. Ct. at 681-83, 54 L. Ed. 2d at 631-33, it does not extend to polygamous, incestuous, and adolescent marriages, N.J.S.A. 2C:24-1; N.J.S.A. 37:1-1, -6. In this case, the liberty interest at stake is not some undifferentiated, abstract right to marriage, but rather the right of people of the same sex to marry. Thus, we are concerned only with the question of whether the right to same-sex marriage is deeply rooted in this State's history and its people's collective conscience.[10]
In answering that question, we are not bound by the nation's experience or the precedents of other states, although they may provide guideposts and persuasive authority. See Doe v. Poritz, supra, 142 N.J. at 119-20 (stating that although practice "followed by a large number of states is not conclusive[,] . . . it is plainly worth considering in determining whether the practice offends some principle of justice so rooted in the traditions and conscience of our people as to be ranked as fundamental" (internal quotation marks omitted)). Our starting point is the State's marriage laws.
Plaintiffs do not dispute that New Jersey's civil marriage statutes, N.J.S.A. 37:1-1 to 37:2-41, which were first enacted in 1912, limit marriage to heterosexual couples. That limitation is clear from the use of gender-specific language in the text of various statutes. See, e.g., N.J.S.A. 37:1-1 (describing prohibited marriages in terms of opposite-sex relatives); N.J.S.A. 37:2-10 (providing that "husband" is not liable for debts of "wife" incurred before or after marriage); N.J.S.A. 37:2-18.1 (providing release rights of curtesy and dower for "husband" and "wife"). More recently, in passing the Domestic Partnership Act to ameliorate some of the economic and social disparities between committed same-sex couples and married heterosexual couples, the Legislature explicitly acknowledged that same-sex couples cannot marry. See N.J.S.A. 26:8A-2(e).
Three decades ago, Justice (then Judge) Handler wrote that "[d]espite winds of change," there was almost a universal recognition that "a lawful marriage requires the performance of a ceremonial marriage of two persons of the opposite sex, a male and a female." M.T. v. J.T., 140 N.J. Super. 77, 83-84 (App. Div.), certif. denied, 71 N.J. 345 (1976). With the exception of Massachusetts, every state's law, explicitly or implicitly, defines marriage to mean the union of a man and a woman.[11]
Although today there is a nationwide public debate raging over whether same-sex marriage should be authorized under the laws or constitutions of the various states, the framers of the 1947 New Jersey Constitution, much less the drafters of our marriage statutes, could not have imagined that the liberty right protected by Article I, Paragraph 1 embraced the right of a person to marry someone of his or her own sex. See, e.g., Baker v. Nelson, 191 N.W.2d 185, 186 (Minn. 1971) ("The institution of marriage as a union of man and woman . . . is as old as the book of Genesis."), appeal dismissed, 409 U.S. 810, 93 S. Ct. 37, 34 L. Ed. 2d 65 (1972); Nancy F. Cott, Public Vows: A History of Marriage and the Nation 2-3 (2000) (describing particular model of marriage "deeply implanted" in United States history to be "lifelong, faithful monogamy, formed by the mutual consent of a man and a woman"); see also 1 U.S.C.A. § 7 (defining under Federal Defense of Marriage Act "the word `marriage' [to] mean[] only a legal union between one man and one woman as husband and wife").
Times and attitudes have changed, and there has been a developing understanding that discrimination against gays and lesbians is no longer acceptable in this State, as is evidenced by various laws and judicial decisions prohibiting differential treatment based on sexual orientation. See, e.g., N.J.S.A. 10:5-4 (prohibiting discrimination on basis of sexual orientation); N.J.S.A. 26:8A-1 to -13 (affording various rights to same-sex couples under Domestic Partnership Act); In re Adoption of a Child by J.M.G., 267 N.J. Super. 622, 623, 625 (Ch. Div. 1993) (determining that lesbian partner was entitled to adopt biological child of partner). See generally Joshua Kaplan, Unmasking the Federal Marriage Amendment: The Status of Sexuality, 6 Geo. J. Gender & L. 105, 123-24 (2005) (noting that "1969 is widely recognized as the beginning of the gay rights movement," which is considered "relatively new to the national agenda"). On the federal level, moreover, the United States Supreme Court has struck down laws that have unconstitutionally targeted gays and lesbians for disparate treatment.
In Romer v. Evans, Colorado passed an amendment to its constitution that prohibited all legislative, executive, or judicial action designed to afford homosexuals protection from discrimination based on sexual orientation. 517 U.S. 620, 623-24, 116 S. Ct. 1620, 1623, 134 L. Ed. 2d 855, 860-61 (1996). The Supreme Court declared that Colorado's constitutional provision violated the Fourteenth Amendment's Equal Protection Clause because it "impos[ed] a broad and undifferentiated disability on a single named group" and appeared to be motivated by an "animus toward" gays and lesbians. Id. at 632, 116 S. Ct. at 1627, 1628, 134 L. Ed. 2d at 865-66. The Court concluded that a state could not make "a class of persons a stranger to its laws." Id. at 635, 116 S. Ct. at 1629, 134 L. Ed. 2d at 868.
More recently, in Lawrence v. Texas, the Court invalidated on Fourteenth Amendment due process grounds Texas's sodomy statute, which made it a crime for homosexuals "to engage in certain intimate sexual conduct." 539 U.S. 558, 562, 578, 123 S. Ct. 2472, 2475, 2484, 156 L. Ed. 2d 508, 515, 525-26 (2003). The Court held that the "liberty" protected by the Due Process Clause prevented Texas from controlling the destiny of homosexuals "by making their private sexual conduct a crime." Id. at 578, 123 S. Ct. at 2484, 156 L. Ed. 2d at 525. The Lawrence Court, however, pointedly noted that the case did "not involve whether the government must give formal recognition to any relationship that homosexual persons seek to enter." Ibid. In a concurring opinion, Justice O'Connor concluded that the Texas law, as applied to the private, consensual conduct of homosexuals, violated the Equal Protection Clause, but strongly suggested that a state's legitimate interest in "preserving the traditional institution of marriage" would allow for distinguishing between heterosexuals and homosexuals without offending equal protection principles. Id. at 585, 123 S. Ct. at 2487-88, 156 L. Ed. 2d at 530 (O'Connor, J., concurring).
Plaintiffs rely on the Romer and Lawrence cases to argue that they have a fundamental right to marry under the New Jersey Constitution, not that they have such a right under the Federal Constitution. Although those recent cases openly advance the civil rights of gays and lesbians, they fall far short of establishing a right to same-sex marriage deeply rooted in the traditions, history, and conscience of the people of this State.
Plaintiffs also rely on Loving v. Virginia, 388 U.S. 1, 87 S. Ct. 1817, 18 L. Ed. 2d 1010 (1967), to support their claim that the right to same-sex marriage is fundamental. In Loving, the United States Supreme Court held that Virginia's antimiscegenation statutes, which prohibited and criminalized interracial marriages, violated the Equal Protection and Due Process Clauses of the Fourteenth Amendment. Id. at 2, 87 S. Ct. at 1818, 18 L. Ed. 2d at 1012. Although the Court reaffirmed the fundamental right of marriage, the heart of the case was invidious discrimination based on race, the very evil that motivated passage of the Fourteenth Amendment. Id. at 10-12, 87 S. Ct. at 1823-24, 18 L. Ed. 2d at 1017-18. The Court stated that "[t]he clear and central purpose of the Fourteenth Amendment was to eliminate all official state sources of invidious racial discrimination in the States." Id. at 10, 87 S. Ct. at 1823, 18 L. Ed. 2d at 1017. For that reason, the Court concluded that "restricting the freedom to marry solely because of racial classifications violates the central meaning of the Equal Protection Clause." Id. at 12, 87 S. Ct. at 1823, 18 L. Ed. 2d at 1018. From the fact-specific background of that case, which dealt with intolerable racial distinctions that patently violated the Fourteenth Amendment, we cannot find support for plaintiffs claim that there is a fundamental right to same-sex marriage under our State Constitution. We add that all of the United States Supreme Court cases cited by plaintiffs, Loving, Turner, and Zablocki, involved heterosexual couples seeking access to the right to marriage and did not implicate directly the primary question to be answered in this case.
Within the concept of liberty protected by Article I, Paragraph 1 of the New Jersey Constitution are core rights of such overriding value that we consider them to be fundamental. Determining whether a particular claimed right is fundamental is a task that requires both caution and foresight. When engaging in a substantive due process analysis under the Fourteenth Amendment, the United States Supreme Court has instructed that it must "exercise the utmost care" before finding new rights, which place important social issues beyond public debate, "lest the liberty protected by the Due Process Clause be subtly transformed into the policy preferences of the Members of [the] Court." Glucksberg, supra, 521 U.S. at 720, 117 S. Ct. at 2267-68, 138 L. Ed. 2d at 787 (internal quotation marks omitted). In searching for the meaning of "liberty" under Article I, Paragraph 1, we must resist the temptation of seeing in the majesty of that word only a mirror image of our own strongly felt opinions and beliefs. Under the guise of newly found rights, we must be careful not to impose our personal value system on eight-and-one-half million people, thus bypassing the democratic process as the primary means of effecting social change in this State. That being said, this Court will never abandon its responsibility to protect the fundamental rights of all of our citizens, even the most alienated and disfavored, no matter how strong the winds of popular opinion may blow.
Despite the rich diversity of this State, the tolerance and goodness of its people, and the many recent advances made by gays and lesbians toward achieving social acceptance and equality under the law, we cannot find that a right to same-sex marriage is so deeply rooted in the traditions, history, and conscience of the people of this State that it ranks as a fundamental right. When looking for the source of our rights under the New Jersey Constitution, we need not look beyond our borders. Nevertheless, we do take note that no jurisdiction, not even Massachusetts, has declared that there is a fundamental right to same-sex marriage under the federal or its own constitution.[12]
Having decided that there is no fundamental right to same-sex marriage does not end our inquiry. See WHS Realty Co. v. Town of Morristown, 323 N.J. Super. 553, 562-63 (App. Div.) (recognizing that although provision of municipal service is not fundamental right, inequitable provision of that service is subject to equal protection analysis), certif. denied, 162 N.J. 489 (1999). We now must examine whether those laws that deny to committed same-sex couples both the right to and the rights of marriage afforded to heterosexual couples offend the equal protection principles of our State Constitution.
IV.
Article I, Paragraph 1 of the New Jersey Constitution sets forth the first principles of our governmental charter that every person possesses the "unalienable rights" to enjoy life, liberty, and property, and to pursue happiness. Although our State Constitution nowhere expressly states that every person shall be entitled to the equal protection of the laws, we have construed the expansive language of Article I, Paragraph 1 to embrace that fundamental guarantee. Sojourner A. v. N.J. Dep't of Human Servs., 177 N.J. 318, 332 (2003); Greenberg, supra, 99 N.J. at 568. Quite simply, that first paragraph to our State Constitution "protect[s] against injustice and against the unequal treatment of those who should be treated alike." Greenberg, supra, 99 N.J. at 568.
Plaintiffs claim that the State's marriage laws have relegated them to "second-class citizenship" by denying them the "tangible and intangible" benefits available to heterosexual couples through marriage. Depriving same-sex partners access to civil marriage and its benefits, plaintiffs contend, violates Article I, Paragraph 1's equal protection guarantee. We must determine whether the State's marriage laws permissibly distinguish between same-sex and heterosexual couples.
When a statute is challenged on the ground that it does not apply evenhandedly to similarly situated people, our equal protection jurisprudence requires that the legislation, in distinguishing between two classes of people, bear a substantial relationship to a legitimate governmental purpose. Caviglia v. Royal Tours of Am., 178 N.J. 460, 472-73 (2004); Barone v. Dep't of Human Servs., 107 N.J. 355, 368 (1987). The test that we have applied to such equal protection claims involves the weighing of three factors: the nature of the right at stake, the extent to which the challenged statutory scheme restricts that right, and the public need for the statutory restriction. Greenberg, supra, 99 N.J. at 567; Robinson v. Cahill, 62 N.J. 473, 491-92, cert. denied, 414 U.S. 976, 94 S. Ct. 292, 38 L. Ed. 2d 219 (1973). The test is a flexible one, measuring the importance of the right against the need for the governmental restriction.[13] See Sojourner A., supra, 177 N.J. at 333. Under that approach, each claim is examined "on a continuum that reflects the nature of the burdened right and the importance of the governmental restriction." Ibid. Accordingly, "the more personal the right, the greater the public need must be to justify governmental interference with the exercise of that right." George Harms Constr. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 29 (1994); see also Taxpayers Ass'n of Weymouth Twp. v. Weymouth Twp., 80 N.J. 6, 43 (1976), cert. denied, 430 U.S. 977, 97 S. Ct. 1672, 52 L. Ed. 2d 373 (1977). Unless the public need justifies statutorily limiting the exercise of a claimed right, the State's action is deemed arbitrary. See Robinson, supra, 62 N.J. at 491-92.
A.
In conducting this equal protection analysis, we discern two distinct issues. The first is whether committed same-sex couples have the right to the statutory benefits and privileges conferred on heterosexual married couples. Next, assuming a right to equal benefits and privileges, the issue is whether committed same-sex partners have a constitutional right to define their relationship by the name of marriage, the word that historically has characterized the union of a man and a woman. In addressing plaintiffs' claimed interest in equality of treatment, we begin with a retrospective look at the evolving expansion of rights to gays and lesbians in this State.
Today, in New Jersey, it is just as unlawful to discriminate against individuals on the basis of sexual orientation as it is to discriminate against them on the basis of race, national origin, age, or sex. See N.J.S.A. 10:5-4. Over the last three decades, through judicial decisions and comprehensive legislative enactments, this State, step by step, has protected gay and lesbian individuals from discrimination on account of their sexual orientation.
In 1974, a New Jersey court held that the parental visitation rights of a divorced homosexual father could not be denied or restricted based on his sexual orientation. In re J.S. & C., 129 N.J. Super. 486, 489 (Ch. Div. 1974), aff'd per curiam, 142 N.J. Super. 499 (App. Div. 1976). Five years later, the Appellate Division stated that the custodial rights of a mother could not be denied or impaired because she was a lesbian. M.P. v. S.P., 169 N.J. Super. 425, 427 (App. Div. 1979). This State was one of the first in the nation to judicially recognize the right of an individual to adopt a same-sex partner's biological child.[14] J.M.G., supra, 267 N.J. Super. at 625, 626, 631 (recognizing "importance of the emotional benefit of formal recognition of the relationship between [the non-biological mother] and the child" and that there is not one correct family paradigm for creating "supportive, loving environment" for children); see also In re Adoption of Two Children by H.N.R., 285 N.J. Super. 1, 3 (App. Div. 1995) (finding that "best interests" of children supported adoption by same-sex partner of biological mother). Additionally, this Court has acknowledged that a woman can be the "psychological parent" of children born to her former same-sex partner during their committed relationship, entitling the woman to visitation with the children. V.C. v. M.J.B., 163 N.J. 200, 206-07, 230, cert. denied, 531 U.S. 926, 121 S. Ct. 302, 148 L. Ed. 2d 243 (2000); see also id. at 232 (Long, J., concurring) (noting that no one "particular model of family life" has monopoly on "`family values'" and that "[t]hose qualities of family life on which society places a premium . . . are unrelated to the particular form a family takes"). Recently, our Appellate Division held that under New Jersey's change of name statute an individual could assume the surname of a same-sex partner. In re Application for Change of Name by Bacharach, 344 N.J. Super. 126, 130-31, 136 (App. Div. 2001).
Perhaps more significantly, New Jersey's Legislature has been at the forefront of combating sexual orientation discrimination and advancing equality of treatment toward gays and lesbians. In 1992, through an amendment to the Law Against Discrimination (LAD), L. 1991, c. 519, New Jersey became the fifth state[15] in the nation to prohibit discrimination on the basis of "affectional or sexual orientation."[16] See N.J.S.A. 10:5-4. In making sexual orientation a protected category, the Legislature committed New Jersey to the goal of eradicating discrimination against gays and lesbians. See also Fuchilla v. Layman, 109 N.J. 319, 334 ("[T]he overarching goal of the [LAD] is nothing less than the eradication of the cancer of discrimination." (internal quotation marks omitted)), cert. denied, 488 U.S. 826, 109 S. Ct. 75, 102 L. Ed. 2d 51 (1988). In 2004, the Legislature added "domestic partnership status" to the categories protected by the LAD. L. 2003, c. 246.
The LAD guarantees that gays and lesbians, as well as same-sex domestic partners, will not be subject to discrimination in pursuing employment opportunities, gaining access to public accommodations, obtaining housing and real property, seeking credit and loans from financial institutions, and engaging in business transactions. N.J.S.A. 10:5-12. The LAD declares that access to those opportunities and basic needs of modern life is a civil right. N.J.S.A. 10:5-4.
Additionally, discrimination on the basis of sexual orientation is outlawed in various other statutes. For example, the Legislature has made it a bias crime for a person to commit certain offenses with the purpose to intimidate an individual on account of sexual orientation, N.J.S.A. 2C:16-1(a)(1), and has provided a civil cause of action against the offender, N.J.S.A. 2A:53A-21. It is a crime for a public official to deny a person any "right, privilege, power or immunity" on the basis of sexual orientation. N.J.S.A. 2C:30-6(a). It is also unlawful to discriminate against gays and lesbians under the Local Public Contracts Law and the Public Schools Contracts Law. N.J.S.A. 40A:11-13; N.J.S.A. 18A:18A-15. The Legislature, moreover, formed the New Jersey Human Relations Council to promote educational programs aimed at reducing bias and bias-related acts, identifying sexual orientation as a protected category, N.J.S.A. 52:9DD-8, and required school districts to adopt anti-bullying and anti-intimidation policies to protect, among others, gays and lesbians, N.J.S.A. 18A:37-14, -15(a).
In 2004, the Legislature passed the Domestic Partnership Act, L. 2003, c. 246, making available to committed same-sex couples "certain rights and benefits that are accorded to married couples under the laws of New Jersey."[17] N.J.S.A. 26:8A-2(d). With same-sex partners in mind, the Legislature declared that "[t]here are a significant number of individuals in this State who choose to live together in important personal, emotional and economic committed relationships," N.J.S.A. 26:8A-2(a), and that those "mutually supportive relationships should be formally recognized by statute," N.J.S.A. 26:8A-2(c). The Legislature also acknowledged that such relationships "assist the State by their establishment of a private network of support for the financial, physical and emotional health of their participants." N.J.S.A. 26:8A-2(b).
For those same-sex couples who enter into a domestic partnership, the Act provides a limited number of rights and benefits possessed by married couples, including "statutory protection against various forms of discrimination against domestic partners; certain visitation and decision-making rights in a health care setting; certain tax-related benefits; and, in some cases, health and pension benefits that are provided in the same manner as for spouses." N.J.S.A. 26:8A-2(c). Later amendments to other statutes have provided domestic partners with additional rights pertaining to funeral arrangements and disposition of the remains of a deceased partner, L. 2005, c. 331, inheritance privileges when the deceased partner dies without a will, L. 2005, c. 331, and guardianship rights in the event of a partner's incapacitation, L. 2005, c. 304.
In passing the Act, the Legislature expressed its clear understanding of the human dimension that propelled it to provide relief to same-sex couples. It emphasized that the need for committed same-sex partners "to have access to these rights and benefits is paramount in view of their essential relationship to any reasonable conception of basic human dignity and autonomy, and the extent to which they will play an integral role in enabling these persons to enjoy their familial relationships as domestic partners." N.J.S.A. 26:8A-2(d).
Aside from federal decisions such as Romer, supra, and Lawrence, supra, this State's decisional law and sweeping legislative enactments, which protect gays and lesbians from sexual orientation discrimination in all its virulent forms, provide committed same-sex couples with a strong interest in equality of treatment relative to comparable heterosexual couples.
B.
We next examine the extent to which New Jersey's laws continue to restrict committed same-sex couples from enjoying the full benefits and privileges available through marriage. Although under the Domestic Partnership Act same-sex couples are provided with a number of important rights, they still are denied many benefits and privileges accorded to their similarly situated heterosexual counterparts. Thus, the Act has failed to bridge the inequality gap between committed same-sex couples and married opposite-sex couples. Among the rights afforded to married couples but denied to committed same-sex couples are the right to
(1) a surname change without petitioning the court, see Bacharach, supra, 344 N.J. Super. at 135-36;
(2) ownership of property as tenants by the entirety, N.J.S.A. 46:3-17.2, which would allow for both automatic transfer of ownership on death, N.J.S.A. 46:3-17.5, and protection against severance and alienation, N.J.S.A. 46:3-17.4;
(3) survivor benefits under New Jersey's Workers' Compensation Act, N.J.S.A. 34:15-13;
(4) back wages owed to a deceased spouse, N.J.S.A. 34:11-4.5;
(5) compensation available to spouses, children, and other relatives of homicide victims under the Criminal Injuries Compensation Act, N.J.S.A. 52:4B-10(c), -2;
(6) free tuition at any public institution of higher education for surviving spouses and children of certain members of the New Jersey National Guard, N.J.S.A. 18A:62-25;
(7) tuition assistance for higher education for spouses and children of volunteer firefighters and first-aid responders, N.J.S.A. 18A:71-78.1;
(8) tax deductions for spousal medical expenses, N.J.S.A. 54A:3-3(a);
(9) an exemption from the realty transfer fee for transfers between spouses, N.J.S.A. 46:15-10(j), -6.1; and
(10) the testimonial privilege given to the spouse of an accused in a criminal action, N.J.S.A. 2A:84A-17(2).
In addition, same-sex couples certified as domestic partners receive fewer workplace protections than married couples. For example, an employer is not required to provide health insurance coverage for an employee's domestic partner. N.J.S.A. 34:11A-20(b). Because the New Jersey Family Leave Act does not include domestic partners within the definition of family member, N.J.S.A. 34:11B-3(j), gay and lesbian employees are not entitled to statutory leave for the purpose of caring for an ill domestic partner, see N.J.S.A. 34:11B-4(a). The disparity of rights and remedies also extends to the laws governing wills. For instance, a bequest in a will by one domestic partner to another is not automatically revoked after termination of the partnership, as it would be for a divorced couple, N.J.S.A. 3B:3-14. For that reason, the failure to revise a will prior to death may result in an estranged domestic partner receiving a bequest that a divorced spouse would not. There is also no statutory provision permitting the payment of an allowance for the support and maintenance of a surviving domestic partner when a will contest is pending. See N.J.S.A. 3B:3-30 (stating that support and maintenance may be paid out of decedent's estate to surviving spouse pending will contest).
The Domestic Partnership Act, notably, does not provide to committed same-sex couples the family law protections available to married couples. The Act provides no comparable presumption of dual parentage to the non-biological parent of a child born to a domestic partner, N.J.S.A. 9:17-43, -44.[18] As a result, domestic partners must rely on costly and time-consuming second-parent adoption procedures.[19] The Act also is silent on critical issues relating to custody, visitation, and partner and child support in the event a domestic partnership terminates. See, e.g., N.J.S.A. 9:2-4 (providing custody rights to divorced spouses).[20] For example, the Act does not place any support obligation on the non-biological partner-parent who does not adopt a child born during a committed relationship. Additionally, there is no statutory mechanism for post-relationship support of a domestic partner. See N.J.S.A. 2A:34-23 (providing for spousal support following filing of matrimonial complaint). Contrary to the law that applies to divorcing spouses, see N.J.S.A. 2A:34-23, -23.1, the Act states that a court shall not be required to equitably distribute property acquired by one or both partners during the domestic partnership on termination of the partnership. N.J.S.A. 26:8A-10(a)(3).
Significantly, the economic and financial inequities that are borne by same-sex domestic partners are borne by their children too. With fewer financial benefits and protections available, those children are disadvantaged in a way that children in married households are not. Children have the same universal needs and wants, whether they are raised in a same-sex or opposite-sex family, yet under the current system they are treated differently.
Last, even though they are provided fewer benefits and rights, same-sex couples are subject to more stringent requirements to enter into a domestic partnership than opposite-sex couples entering into marriage. The Act requires that those seeking a domestic partnership share "a common residence;" prove that they have assumed joint responsibility "for each other's common welfare as evidenced by joint financial arrangements or joint ownership of real or personal property;" "agree to be jointly responsible for each other's basic living expenses during the domestic partnership;" and show that they "have chosen to share each other's lives in a committed relationship of mutual caring." N.J.S.A. 26:8A-4(b)(1), (2), (6). Opposite-sex couples do not have to clear those hurdles to obtain a marriage license. See N.J.S.A. 37:1-1 to -12.3.
Thus, under our current laws, committed same-sex couples and their children are not afforded the benefits and protections available to similar heterosexual households.
C.
We now must assess the public need for denying the full benefits and privileges that flow from marriage to committed same-sex partners. At this point, we do not consider whether committed same-sex couples should be allowed to marry, but only whether those couples are entitled to the same rights and benefits afforded to married heterosexual couples. Cast in that light, the issue is not about the transformation of the traditional definition of marriage, but about the unequal dispensation of benefits and privileges to one of two similarly situated classes of people. We therefore must determine whether there is a public need to deny committed same-sex partners the benefits and privileges available to heterosexual couples.
The State does not argue that limiting marriage to the union of a man and a woman is needed to encourage procreation or to create the optimal living environment for children. Other than sustaining the traditional definition of marriage, which is not implicated in this discussion, the State has not articulated any legitimate public need for depriving same-sex couples of the host of benefits and privileges catalogued in Section IV.B. Perhaps that is because the public policy of this State is to eliminate sexual orientation discrimination and support legally sanctioned domestic partnerships. The Legislature has designated sexual orientation, along with race, national origin, and sex, as a protected category in the Law Against Discrimination. N.J.S.A. 10:5-4, -12. Access to employment, housing, credit, and business opportunities is a civil right possessed by gays and lesbians. See ibid. Unequal treatment on account of sexual orientation is forbidden by a number of statutes in addition to the Law Against Discrimination.
The Legislature has recognized that the "rights and benefits" provided in the Domestic Partnership Act are directly related "to any reasonable conception of basic human dignity and autonomy." N.J.S.A. 26:8A-2(d). It is difficult to understand how withholding the remaining "rights and benefits" from committed same-sex couples is compatible with a "reasonable conception of basic human dignity and autonomy." There is no rational basis for, on the one hand, giving gays and lesbians full civil rights in their status as individuals, and, on the other, giving them an incomplete set of rights when they follow the inclination of their sexual orientation and enter into committed same-sex relationships.
Disparate treatment of committed same-sex couples, moreover, directly disadvantages their children. We fail to see any legitimate governmental purpose in disallowing the child of a deceased same-sex parent survivor benefits under the Workers' Compensation Act or Criminal Injuries Compensation Act when children of married parents would be entitled to such benefits. Nor do we see the governmental purpose in not affording the child of a same-sex parent, who is a volunteer firefighter or first-aid responder, tuition assistance when the children of married parents receive such assistance. There is something distinctly unfair about the State recognizing the right of same-sex couples to raise natural and adopted children and placing foster children with those couples, and yet denying those children the financial and social benefits and privileges available to children in heterosexual households. Five of the seven plaintiff couples are raising or have raised children. There is no rational basis for visiting on those children a flawed and unfair scheme directed at their parents. To the extent that families are strengthened by encouraging monogamous relationships, whether heterosexual or homosexual, we cannot discern any public need that would justify the legal disabilities that now afflict same-sex domestic partnerships.
There are more than 16,000 same-sex couples living in committed relationships in towns and cities across this State. Ruth Padawer, Gay Couples, At Long Last, Feel Acknowledged, The Rec., Aug. 15, 2001, at 104. Gays and lesbians work in every profession, business, and trade. They are educators, architects, police officers, fire officials, doctors, lawyers, electricians, and construction workers. They serve on township boards, in civic organizations, and in church groups that minister to the needy. They are mothers and fathers. They are our neighbors, our co-workers, and our friends. In light of the policies reflected in the statutory and decisional laws of this State, we cannot find a legitimate public need for an unequal legal scheme of benefits and privileges that disadvantages committed same-sex couples.
D.
In arguing to uphold the system of disparate treatment that disfavors same-sex couples, the State offers as a justification the interest in uniformity with other states' laws. Unlike other states, however, New Jersey forbids sexual orientation discrimination, and not only allows same-sex couples to adopt children, but also places foster children in their households. Unlike New Jersey, other states have expressed open hostility toward legally recognizing committed same-sex relationships.[21] See Symposium, State Marriage Amendments: Developments, Precedents, and Significance, 7 Fla. Coastal L. Rev. 403, 403 (2005) (noting that "[s]ince November 1998, nineteen states have passed state marriage amendments . . . defining marriage as the union of a man and a woman" and "[v]oters in thirteen states ratified [those amendments] in the summer and fall of 2004 alone and by overwhelming margins").
Today, only Connecticut and Vermont, through civil union, and Massachusetts, through marriage, extend to committed same-sex couples the full rights and benefits offered to married heterosexual couples. See Conn. Gen. Stat. §§ 46b-38aa to -38pp; Vt. Stat. Ann. tit. 15, §§ 1201-1207; Goodridge v. Dep't of Pub. Health, 798 N.E.2d 941, 969 (Mass. 2003). A few jurisdictions, such as New Jersey, offer some but not all of those rights under domestic partnership schemes.[22]
The high courts of Vermont and Massachusetts have found that the denial of the full benefits and protections of marriage to committed same-sex couples violated their respective state constitutions.[23] In Baker v. State, the Vermont Supreme Court held that same-sex couples are entitled "to obtain the same benefits and protections afforded by Vermont law to married opposite-sex couples" under the Common Benefits Clause of the Vermont Constitution, "its counterpart [to] the Equal Protection Clause of the Fourteenth Amendment." 744 A.2d 864, 870, 886 (Vt. 1999). To remedy the constitutional violation, the Vermont Supreme Court referred the matter to the state legislature. Id. at 886. Afterwards, the Vermont Legislature enacted the nation's first civil union law. See Vt. Stat. Ann. tit. 15, §§ 1201-1207; see also Mark Strasser, Equal Protection at the Crossroads: On Baker, Common Benefits, and Facial Neutrality, 42 Ariz. L. Rev. 935, 936 n. 8 (2000).
In Goodridge, supra, the Supreme Judicial Court of Massachusetts declared that Massachusetts, consistent with its own constitution, could not "deny the protections, benefits, and obligations conferred by civil marriage to two individuals of the same sex who wish to marry." 798 N.E.2d at 948. Finding that the State's ban on same-sex marriage did "not meet the rational basis test for either due process or equal protection" under the Massachusetts Constitution, the high court redefined civil marriage to allow two persons of the same sex to marry. Id. at 961, 969. Massachusetts is the only state in the nation to legally recognize same-sex marriage.[24] In contrast to Vermont and Massachusetts, Connecticut did not act pursuant to a court decree when it passed a civil union statute.
Vermont, Massachusetts, and Connecticut represent a distinct minority view. Nevertheless, our current laws concerning same-sex couples are more in line with the legal constructs in those states than the majority of other states. In protecting the rights of citizens of this State, we have never slavishly followed the popular trends in other jurisdictions, particularly when the majority approach is incompatible with the unique interests, values, customs, and concerns of our people. See New State Ice Co. v. Liebmann, 285 U.S. 262, 311, 52 S. Ct. 371, 386-87, 76 L. Ed. 747, 771 (1932) (Brandeis, J., dissenting) ("It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country."). Equality of treatment is a dominant theme of our laws and a central guarantee of our State Constitution, and fitting for a State with so diverse a population. The New Jersey Constitution not only stands apart from other state constitutions, but also "may be a source of `individual liberties more expansive than those conferred by the Federal Constitution.'" State v. Novembrino, 105 N.J. 95, 144-45 (1987) (quoting Pruneyard Shopping Ctr. v. Robins, 447 U.S. 74, 81, 100 S. Ct. 2035, 2040, 64 L. Ed. 2d 741, 752 (1980)). Indeed, we have not hesitated to find that our State Constitution provides our citizens with greater rights to privacy, free speech, and equal protection than those available under the United States Constitution. See, e.g., State v. McAllister, 184 N.J. 17, 26, 32-33 (2005) (concluding that New Jersey Constitution recognizes interest in privacy of bank records, unlike Federal Constitution); N.J. Coal. Against War in the Middle East v. J.M.B. Realty Corp., 138 N.J. 326, 332, 349, 374 (1994) (holding that free speech protection of New Jersey Constitution requires, subject to reasonable restrictions, privately-owned shopping centers to permit speech on political and societal issues on premises, unlike First Amendment of Federal Constitution), cert. denied, 516 U.S. 812, 116 S. Ct. 62, 133 L. Ed. 2d 25 (1995); Right to Choose v. Byrne, 91 N.J. 287, 298, 310 (1982) (holding that restriction of Medicaid funding to those abortions that are "necessary to save the life of the mother" violates equal protection guarantee of New Jersey Constitution although same restriction does not violate United States Constitution).
Article I, Paragraph 1 protects not just the rights of the majority, but also the rights of the disfavored and the disadvantaged; they too are promised a fair opportunity "of pursuing and obtaining safety and happiness." N.J. Const. art. I, ¶ 1. Ultimately, we have the responsibility of ensuring that every New Jersey citizen receives the full protection of our State Constitution. In light of plaintiffs' strong interest in rights and benefits comparable to those of married couples, the State has failed to show a public need for disparate treatment. We conclude that denying to committed same-sex couples the financial and social benefits and privileges given to their married heterosexual counterparts bears no substantial relationship to a legitimate governmental purpose. We now hold that under the equal protection guarantee of Article I, Paragraph 1 of the New Jersey Constitution, committed same-sex couples must be afforded on equal terms the same rights and benefits enjoyed by married opposite-sex couples.
V.
The equal protection requirement of Article I, Paragraph 1 leaves the Legislature with two apparent options. The Legislature could simply amend the marriage statutes to include same-sex couples, or it could create a separate statutory structure, such as a civil union, as Connecticut and Vermont have done. See Conn. Gen. Stat. §§ 46b-38aa to -38pp; Vt. Stat. Ann. tit. 15, §§ 1201-1207.
Plaintiffs argue that even equal social and financial benefits would not make them whole unless they are allowed to call their committed relationships by the name of marriage. They maintain that a parallel legal structure, called by a name other than marriage, which provides the social and financial benefits they have sought, would be a separate-but-equal classification that offends Article I, Paragraph 1. From plaintiffs' standpoint, the title of marriage is an intangible right, without which they are consigned to second-class citizenship. Plaintiffs seek not just legal standing, but also social acceptance, which in their view is the last step toward true equality. Conversely, the State asserts that it has a substantial interest in preserving the historically and almost universally accepted definition of marriage as the union of a man and a woman. For the State, if the age-old definition of marriage is to be discarded, such change must come from the crucible of the democratic process. The State submits that plaintiffs seek by judicial decree "a fundamental change in the meaning of marriage itself," when "the power to define marriage rests with the Legislature, the branch of government best equipped to express the judgment of the people on controversial social questions."
Raised here is the perplexing question "what's in a name?" and is a name itself of constitutional magnitude after the State is required to provide full statutory rights and benefits to same-sex couples? We are mindful that in the cultural clash over same-sex marriage, the word marriage itself independent of the rights and benefits of marriage has an evocative and important meaning to both parties. Under our equal protection jurisprudence, however, plaintiffs' claimed right to the name of marriage is surely not the same now that equal rights and benefits must be conferred on committed same-sex couples.
We do not know how the Legislature will proceed to remedy the equal protection disparities that currently exist in our statutory scheme. The Legislature is free to break from the historical traditions that have limited the definition of marriage to heterosexual couples or to frame a civil union style structure, as Vermont and Connecticut have done. Whatever path the Legislature takes, our starting point must be to presume the constitutionality of legislation. Caviglia, supra, 178 N.J. at 477 ("A legislative enactment is presumed to be constitutional and the burden is on those challenging the legislation to show that it lacks a rational basis."). We will give, as we must, deference to any legislative enactment unless it is unmistakably shown to run afoul of the Constitution. Hamilton Amusement Ctr. v. Verniero, 156 N.J. 254, 285 (1998) (stating that presumption of statute's validity "can be rebutted only upon a showing that the statute's repugnancy to the Constitution is clear beyond a reasonable doubt" (internal quotation marks omitted)), cert. denied, 527 U.S. 1021, 119 S. Ct. 2365, 144 L. Ed. 2d 770 (1999). Because this State has no experience with a civil union construct that provides equal rights and benefits to same-sex couples, we will not speculate that identical schemes called by different names would create a distinction that would offend Article I, Paragraph 1. We will not presume that a difference in name alone is of constitutional magnitude.
"A legislature must have substantial latitude to establish classifications," and therefore determining "what is `different' and what is `the same'" ordinarily is a matter of legislative discretion. Plyler v. Doe, 457 U.S. 202, 216, 102 S. Ct. 2382, 2394, 72 L. Ed. 2d 786, 798-99 (1982); see also Greenberg, supra, 99 N.J. at 577 ("Proper classification for equal protection purposes is not a precise science. . . . As long as the classifications do not discriminate arbitrarily between persons who are similarly situated, the matter is one of legislative prerogative.").[25] If the Legislature creates a separate statutory structure for same-sex couples by a name other than marriage, it probably will state its purpose and reasons for enacting such legislation. To be clear, it is not our role to suggest whether the Legislature should either amend the marriage statutes to include same-sex couples or enact a civil union scheme. Our role here is limited to constitutional adjudication, and therefore we must steer clear of the swift and treacherous currents of social policy when we have no constitutional compass with which to navigate.
Despite the extraordinary remedy crafted in this opinion extending equal rights to same-sex couples, our dissenting colleagues are willing to part ways from traditional principles of judicial restraint to reach a constitutional issue that is not before us. Before the Legislature has been given the opportunity to act, the dissenters are willing to substitute their judicial definition of marriage for the statutory definition, for the definition that has reigned for centuries, for the definition that is accepted in forty-nine states and in the vast majority of countries in the world. Although we do not know whether the Legislature will choose the option of a civil union statute, the dissenters presume in advance that our legislators cannot give any reason to justify retaining the definition of marriage solely for opposite sex couples. A proper respect for a coordinate branch of government counsels that we defer until it has spoken. Unlike our colleagues who are prepared immediately to overthrow the long established definition of marriage, we believe that our democratically elected representatives should be given a chance to address the issue under the constitutional mandate set forth in this opinion.
We cannot escape the reality that the shared societal meaning of marriage passed down through the common law into our statutory law has always been the union of a man and a woman. To alter that meaning would render a profound change in the public consciousness of a social institution of ancient origin. When such change is not compelled by a constitutional imperative, it must come about through civil dialogue and reasoned discourse, and the considered judgment of the people in whom we place ultimate trust in our republican form of government. Whether an issue with such far-reaching social implications as how to define marriage falls within the judicial or the democratic realm, to many, is debatable. Some may think that this Court should settle the matter, insulating it from public discussion and the political process. Nevertheless, a court must discern not only the limits of its own authority, but also when to exercise forbearance, recognizing that the legitimacy of its decisions rests on reason, not power. We will not short-circuit the democratic process from running its course.
New language is developing to describe new social and familial relationships, and in time will find its place in our common vocabulary. Through a better understanding of those new relationships and acceptance forged in the democratic process, rather than by judicial fiat, the proper labels will take hold. However the Legislature may act, same-sex couples will be free to call their relationships by the name they choose and to sanctify their relationships in religious ceremonies in houses of worship. See Bacharach, supra, 344 N.J. Super. at 135 (noting that state laws and policies are not offended if same-sex couples choose to "exchange rings, proclaim devotion in a public or private ceremony, [or] call their relationship a marriage"); Lynn D. Wardle, Is Marriage Obsolete?, 10 Mich. J. Gender & L. 189, 191-92 ("What is deemed a `marriage' for purposes of law may not be exactly the same as what is deemed marriage for other purposes and in other settings [such as] religious doctrines. . . . ").
The institution of marriage reflects society's changing social mores and values. In the last two centuries, that institution has undergone a great transformation, much of it through legislative action. The Legislature broke the grip of the dead hand of the past and repealed the common law decisions that denied a married woman a legal identity separate from that of her husband.[26] Through the passage of statutory laws, the Legislature gave women the freedom to own property, to contract, to incur debt, and to sue.[27] The Legislature has played a major role, along with the courts, in ushering marriage into the modern era. See, e.g., Reva B. Siegal, Symposium, The Modernization of Marital Status Law: Adjudicating Wives' Rights to Earnings 1860-1930, 82 Geo. L.J. 2127, 2148-49 (1994) (discussing courts' role in reformulation of married women's rights).
Our decision today significantly advances the civil rights of gays and lesbians. We have decided that our State Constitution guarantees that every statutory right and benefit conferred to heterosexual couples through civil marriage must be made available to committed same-sex couples. Now the Legislature must determine whether to alter the long accepted definition of marriage. The great engine for social change in this country has always been the democratic process. Although courts can ensure equal treatment, they cannot guarantee social acceptance, which must come through the evolving ethos of a maturing society. Plaintiffs' quest does not end here. Their next appeal must be to their fellow citizens whose voices are heard through their popularly elected representatives.
VI.
To comply with the equal protection guarantee of Article I, Paragraph 1 of the New Jersey Constitution, the State must provide to committed same-sex couples, on equal terms, the full rights and benefits enjoyed by heterosexual married couples. The State can fulfill that constitutional requirement in one of two ways. It can either amend the marriage statutes to include same-sex couples or enact a parallel statutory structure by another name, in which same-sex couples would not only enjoy the rights and benefits, but also bear the burdens and obligations of civil marriage. If the State proceeds with a parallel scheme, it cannot make entry into a same-sex civil union any more difficult than it is for heterosexual couples to enter the state of marriage.[28] It may, however, regulate that scheme similarly to marriage and, for instance, restrict civil unions based on age and consanguinity and prohibit polygamous relationships.
The constitutional relief that we give to plaintiffs cannot be effectuated immediately or by this Court alone. The implementation of this constitutional mandate will require the cooperation of the Legislature. To bring the State into compliance with Article I, Paragraph 1 so that plaintiffs can exercise their full constitutional rights, the Legislature must either amend the marriage statutes or enact an appropriate statutory structure within 180 days of the date of this decision.
For the reasons explained, we affirm in part and modify in part the judgment of the Appellate Division.
JUSTICES LaVECCHIA, WALLACE, and RIVERA-SOTO join in JUSTICE ALBIN's opinion. CHIEF JUSTICE PORITZ filed a separate opinion concurring in part and dissenting in part in which JUSTICES LONG and ZAZZALI join.
CHIEF JUSTICE PORITZ, concurring and dissenting.
I concur with the determination of the majority that "denying the rights and benefits to committed same-sex couples that are statutorily given to their heterosexual counterparts violates the equal protection guarantee of Article I, Paragraph 1[,]" of the New Jersey Constitution.[1] Ante at ___ (slip op. at 6). I can find no principled basis, however, on which to distinguish those rights and benefits from the right to the title of marriage, and therefore dissent from the majority's opinion insofar as it declines to recognize that right among all of the other rights and benefits that will be available to same-sex couples in the future.
I dissent also from the majority's conclusion that there is no fundamental due process right to same-sex marriage "encompassed within the concept of liberty guaranteed by Article I, Paragraph 1." Ante at ___ (slip op. at 5-6). The majority acknowledges, as it must, that there is a universally accepted fundamental right to marriage "deeply rooted" in the "traditions, history, and conscience of the people." Ante at ___ (slip op. at 6). Yet, by asking whether there is a right to same-sex marriage, the Court avoids the more difficult questions of personal dignity and autonomy raised by this case. Under the majority opinion, it appears that persons who exercise their individual liberty interest to choose same-sex partners can be denied the fundamental right to participate in a state-sanctioned civil marriage. I would hold that plaintiffs' due process rights are violated when the State so burdens their liberty interests.
I.
The majority has provided the procedural and factual context for the issues the Court decides today. I will not repeat that information except as it is directly relevant to the analytical framework that supports this dissent. In that vein, then, some initial observations are appropriate.
Plaintiffs have not sought relief in the form provided by the Court they have asked, simply, to be married. To be sure, they have claimed the specific rights and benefits that are available to all married couples, and in support of their claim, they have explained in some detail how the withholding of those benefits has measurably affected them and their children. As the majority points out, same-sex couples have been forced to cross-adopt their partners' children, have paid higher health insurance premiums than those paid by heterosexual married couples, and have been denied family leave-time even though, like heterosexual couples, they have children who need care. Ante at ___ (slip op. at 11). Further, those burdens represent only a few of the many imposed on same-sex couples because of their status, because they are unable to be civilly married. The majority addresses those specific concerns in its opinion.
But there is another dimension to the relief plaintiffs' seek. In their presentation to the Court, they speak of the deep and symbolic significance to them of the institution of marriage. They ask to participate, not simply in the tangible benefits that civil marriage provides although certainly those benefits are of enormous importance but in the intangible benefits that flow from being civilly married. Chief Justice Marshall, writing for the Massachusetts Supreme Judicial Court, has conveyed some sense of what that means:
Marriage also bestows enormous private and social advantages on those who choose to marry. Civil marriage is at once a deeply personal commitment to another human being and a highly public celebration of the ideals of mutuality, companionship, intimacy, fidelity, and family. "It is an association that promotes a way of life, not causes; a harmony in living, not political faiths; a bilateral loyalty, not commercial or social projects." Griswold v. Connecticut, 381 U.S. 479, 486, 85 S. Ct. 1678, 14 L. Ed. 2d 510 (1965). Because it fulfils yearnings for security, safe haven, and connection that express our common humanity, civil marriage is an esteemed institution, and the decision whether and whom to marry is among life's momentous acts of self-definition.
[Goodridge v. Dep't. of Pub. Health, 798 N.E.2d 941, 954-55 (Mass. 2003).]
Plaintiffs are no less eloquent. They have presented their sense of the meaning of marriage in affidavits submitted to the Court:
In our relationship, Saundra and I have the same level of love and commitment as our married friends. But being able to proudly say that we are married is important to us. Marriage is the ultimate expression of love, commitment, and honor that you can give to another human being.
* * * *
Alicia and I live our life together as if it were a marriage. I am proud that Alicia and I have the courage and the values to take on the responsibility to love and cherish and provide for each other. When I am asked about my relationship, I want my words to match my life, so I want to say I am married and know that my relationship with Alicia is immediately understood, and after that nothing more needs be explained.
* * * *
I've seen that there is a significant respect that comes with the declaration "[w]e're married." Society endows the institution of marriage with not only a host of rights and responsibilities, but with a significant respect for the relationship of the married couple. When you say that you are married, others know immediately that you have taken steps to create something special. . . . The word "married" gives you automatic membership in a vast club of people whose values are clarified by their choice of marriage. With a marriage, everyone can instantly relate to you and your relationship. They don't have to wonder what kind of relationship it is or how to refer to it or how much to respect it.
* * * *
My parents long to talk about their three married children, all with spouses, because they are proud and happy that we are all in committed relationships. They want to be able to use the common language of marriage to describe each of their children's lives. Instead they have to use a different language, which discounts and cheapens their family as well as mine[, because I have a same-sex partner and cannot be married].
By those individual and personal statements, plaintiffs express a deep yearning for inclusion, for participation, for the right to marry in the deepest sense of that word. When we say that the Legislature cannot deny the tangible benefits of marriage to same-sex couples, but then suggest that "a separate statutory scheme, which uses a title other than marriage," is presumptively constitutional, ante at ___ (slip op. at 7), we demean plaintiffs' claim. What we "name" things matters, language matters.
In her book Making all the Difference: Inclusion, Exclusion, and American Law, Martha Minnow discusses "labels" and the way they are used:
Human beings use labels to describe and sort their perceptions of the world. The particular labels often chosen in American culture can carry social and moral consequences while burying the choices and responsibility for those consequences.
. . . .
Language and labels play a special role in the perpetuation of prejudice about differences.
[Martha Minnow, Making all the Difference: Inclusion, Exclusion, and American Law 4, 6 (1990).]
We must not underestimate the power of language. Labels set people apart as surely as physical separation on a bus or in school facilities. Labels are used to perpetuate prejudice about differences that, in this case, are embedded in the law. By excluding same-sex couples from civil marriage, the State declares that it is legitimate to differentiate between their commitments and the commitments of heterosexual couples. Ultimately, the message is that what same-sex couples have is not as important or as significant as "real" marriage, that such lesser relationships cannot have the name of marriage.[2]
II.
A.
Beginning with Robinson v. Cahill, this Court has repeatedly rejected a "mechanical" framework for due process and equal protection analyses under Article I, Paragraph 1 of our State Constitution. 62 N.J. 473, 491-92 (1973). See Right to Choose v. Byrne, 91 N.J. 287, 308-09 (1982); Greenberg v. Kimmelman 99 N.J. 552, 567-68 (1985); Planned Parenthood v. Farmer, 165 N.J. 609, 629-30 (2000); Sojourner A. v. N.J. Dept. of Human Serv., 177 N.J. 318, 332-33 (2003). Chief Justice Weintraub described the process by which the courts should conduct an Article I review:
[A] court must weigh the nature of the restraint or the denial against the apparent public justification, and decide whether the State action is arbitrary. In that process, if the circumstances sensibly so require, the court may call upon the State to demonstrate the existence of a sufficient public need for the restraint or the denial.
[Robinson, supra, 62 N.J. at 492 (citation omitted).]
Later, the Court "reaffirmed that approach [because] it provided a . . . flexible analytical framework for the evaluation of equal protection and due process claims." Sojourner A., supra, 177 N.J. at 333. There, we restated the nature of the weighing process:
In keeping with Chief Justice Weintraub's direction, we "consider the nature of the affected right, the extent to which the governmental restriction intrudes upon it, and the public need for the restriction." [In so doing] we are able to examine each claim on a continuum that reflects the nature of the burdened right and the importance of the governmental restriction.
[Ibid. (quoting Planned Parenthood, supra, 165 N.J. at 630).]
The majority begins its discussion, as it should, with the first prong of the test, the nature of the affected right. Ante at ___ (slip op. at 37). The inquiry is grounded in substantive due process concerns that include whether the affected right is so basic to the liberty interests found in Article I, Paragraph 1, that it is "fundamental."[3] When we ask the question whether there is a fundamental right to same-sex marriage "rooted in the traditions, and collective conscience of our people," ante at ___ (slip op. at 22), we suggest the answer, and it is "no".[4] That is because the liberty interest has been framed "so narrowly as to make inevitable the conclusion that the claimed right could not be fundamental because historically it has been denied to those who now seek to exercise it." Hernandez v. Robles, Nos. 86-89, 2006 N.Y. LEXIS 1836, at *56-57, 2006 N.Y. slip op. 5239, at *14 (Kaye, C.J., dissenting from majority decision upholding law limiting marriage to heterosexual couples). When we ask, however, whether there is a fundamental right to marriage rooted in the traditions, history and conscience of our people, there is universal agreement that the answer is "yes." See Loving v. Virginia, 388 U.S. 1, 87 S. Ct. 1817, 18 L. Ed. 2d 1010 (1967); Turner v. Safley; 482 U.S. 78, 107 S. Ct. 2254, 96 L. Ed. 2d 64 (1987); Zablocki v. Redhail, 434 U.S. 374, 98 S. Ct. 673, 54 L. Ed. 2d 618 (1977); see also J.B. v. M.B., 170 N.J. 9, 23-24 (2001) (noting that the right to marry is a fundamental right protected by both the federal and state constitutions); In re Baby M., 109 N.J. 396, 447 (1988) (same); Greenberg v. Kimmelman, 99 N.J. 552, 571 (1985) (same). What same-sex couples seek is admission to that most valuable institution, what they seek is the liberty to choose, as a matter of personal autonomy, to commit to another person, a same-sex person, in a civil marriage. Of course there is no history or tradition including same-sex couples; if there were, there would have been no need to bring this case to the courts. As Judge Collester points out in his dissent below, "[t]he argument is circular: plaintiffs cannot marry because by definition they cannot marry." Lewis v. Harris, 378 N.J. Super. 168, 204 (App. Div. 2005) (Collester, J., dissenting); see Hernandez v. Robles, Nos. 86-89, 2006 N.Y. LEXIS 1836 at *63-64, 2006 N.Y. slip op. 5239, at *23-24 (Kaye, C.J., dissenting) ("It is no answer that same-sex couples can be excluded from marriage because `marriage,' by definition, does not include them. In the end, `an argument that marriage is heterosexual because it `just is' amounts to circular reasoning.'" (quoting Halpern v. Attorney Gen. of Can., 65 O.R.3d 161, 181 (2003))).
I also agree with Judge Collester that Loving should have put to rest the notion that fundamental rights can be found only in the historical traditions and conscience of the people. See id. at 205. Had the United States Supreme Court followed the traditions of the people of Virginia, the Court would have sustained the law that barred marriage between members of racial minorities and caucasians. The Court nevertheless found that the Lovings, an interracial couple, could not be deprived of "the freedom to marry [that] has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men." Loving, supra, 388 U.S. at 12, 87 S. Ct. at 1824, 18 L. Ed. at 1018. Most telling, the Court did not frame the issue as a right to interracial marriage but, simply, as a right to marry sought by individuals who had traditionally been denied that right. Loving teaches that the fundamental right to marry no more can be limited to same-race couples than it can be limited to those who choose a committed relationship with persons of the opposite sex. By imposing that limitation on same-sex couples, the majority denies them access to one of our most cherished institutions simply because they are homosexuals.
Lawrence v. Texas, 539 U.S. 558, 123 S. Ct. 2472, 156 L. Ed. 2d 508 (2003), in overruling Bowers v. Hardwick, 478 U.S. 186, 106 S. Ct. 2841, 92 L. Ed. 2d 140 (1986), made a different but equally powerful point. In Bowers, the Court had sustained a Georgia statute that made sodomy a crime. 478 U.S. at 189, 106 S. Ct. at 2843, 93 L. Ed. 2d at 145. When it rejected the Bowers holding seventeen years later, the Court stated bluntly that "Bowers was not correct when it was decided, and it is not correct today." Lawrence, supra, 539 U.S. at 578, 123 S. Ct. at 2484, 156 L. Ed. 2d at 525. Justice Kennedy explained further that "times can blind us to certain truths and later generations can see that laws once thought necessary and proper in fact serve only to oppress. As the Constitution endures, persons in every generation can invoke its principles in their own search for greater freedom." Id. at 579, 123 S. Ct. at 2484, 156 L. Ed. 2d at 526.
We are told that when the Justices who decided Brown v. Board of Education, 347 U.S. 483, 74 S. Ct. 686, 98 L. Ed. 873 (1954), finally rejected legal segregation in public schools, they were deeply conflicted over the issue. Michael J. Klarman, Brown and Lawrence (and Goodridge), 104 Mich. L. Rev. 431, 433 (2005). "The sources of constitutional interpretation to which they ordinarily looked for guidance text, original understanding, precedent, and custom indicated that school segregation was permissible. By contrast, most of the Justices privately condemned segregation, which Justice Hugo Black called `Hitler's creed.' Their quandary was how to reconcile their legal and moral views." Ibid. (footnote omitted). Today, it is difficult to believe that "Brown was a hard case for the Justices." Ibid.
Without analysis, our Court turns to history and tradition and finds that marriage has never been available to same-sex couples. That may be so but the Court has not asked whether the limitation in our marriage laws, "once thought necessary and proper in fact serve[s] only to oppress." I would hold that plaintiffs have a liberty interest in civil marriage that cannot be withheld by the State. Framed differently, the right that is burdened under the first prong of the Court's equal protection/due process test is a right of constitutional dimension.
B.
Although the majority rejects the argument I find compelling, it does grant a form of relief to plaintiffs on equal protection grounds, finding a source for plaintiffs' interest outside of the Constitution. Ante at ___ (slip op. at 43, 58-59). Having previously separated the right to the tangible "benefits and privileges" of marriage from the right to the "name of marriage," and having dismissed the right to the name of marriage for same-sex couples because it is not part of our history or traditions, the majority finds the right to the tangible benefits of marriage in enactments and decisions of the legislative, executive, and judicial branches protecting gays and lesbians from discrimination, allowing adoption by same-sex partners, and conferring some of the benefits of marriage on domestic partners. Ante at ___ (slip op. at 28-29, 37-43, 49).
The enactments and decisions relied on by the majority as a source of same-sex couples' interest in equality of treatment are belied by the very law at issue in this case that confines the right to marry to heterosexual couples. Moreover, as the majority painstakingly demonstrates, the Domestic Partnership Act, N.J.S.A. 26:8A-1 to -13, does not provide many of the tangible benefits that accrue automatically when heterosexual couples marry. Ante at ___ (slip op. at 43-48). New Jersey's statutes reflect both abhorrence of sexual orientation discrimination and a desire to prevent same-sex couples from having access to one of society's most cherished institutions, the institution of marriage. Plaintiffs' interests arise out of constitutional principles that are integral to the liberty of a free people and not out of the legislative provisions described by the majority. In any case, it is clear that civil marriage and all of the benefits it represents is absolutely denied same-sex couples, and, therefore, that same-sex couples' fundamental rights are not simply burdened but are denied altogether (the second prong of the Court's test).
Finally, the majority turns to the third prong whether there is a public need to deprive same-sex couples of the tangible benefits and privileges available to heterosexual couples. Ante at ___ (slip op. at 48). Because the State has argued only that historically marriage has been limited to opposite-sex couples, and because the majority has accepted the State's position and declined to find that same-sex couples have a liberty interest in the choice to marry, the majority is able to conclude that no interest has been advanced by the State to support denying the rights and benefits of marriage to same-sex couples. Ante at ___ (slip op. at 48-49, 51). Without any state interest to justify the denial of tangible benefits, the Court finds that the Legislature must provide those benefits to same-sex couples. Ante at ____ (slip op. at 48-51). I certainly agree with that conclusion but would take a different route to get there.
Although the State has not made the argument, I note that the Appellate Division, and various amici curiae, have claimed the "promotion of procreation and creating the optimal environment for raising children as justifications for the limitation of marriage to members of the opposite sex." Lewis, supra, 378 N.J. Super. at 185 n. 2. That claim retains little viability today. Recent social science studies inform us that "same-sex couples increasingly form the core of families in which children are conceived, born, and raised." Gregory N. Herek, Legal Recognition of Same-Sex Relationships in the United States: A Social Science Perspective, 61 Am. Psychol. 607, 611 (2006). It is not surprising, given that data, that the State does not advance a "promotion of procreation" position to support limiting marriage to heterosexuals. Further, "[e]mpirical studies comparing children raised by sexual minority parents with those raised by otherwise comparable heterosexual parents have not found reliable disparities in mental health or social adjustment," id. at 613, suggesting that the "optimal environment" position is equally weak. Without such arguments, the State is left with the "but that is the way it has always been" circular reasoning discussed supra at ___ (slip op. at 11-12).
C.
Perhaps the political branches will right the wrong presented in this case by amending the marriage statutes to recognize fully the fundamental right of same-sex couples to marry. That possibility does not relieve this Court of its responsibility to decide constitutional questions, no matter how difficult. Deference to the Legislature is a cardinal principle of our law except in those cases requiring the Court to claim for the people the values found in our Constitution. Alexander Hamilton, in his essay, Judges as Guardians of the Constitution, The Federalist No. 78, (Benjamin Fletcher Wright ed., 1961) spoke of the role of the courts and of judicial independence. He argued that "the courts of justice are . . . the bulwarks of a limited Constitution against legislative encroachments" because he believed that the judicial branch was the only branch capable of opposing "oppressions [by the elected branches] of the minor party in the community." Id. at 494. Our role is to stand as a bulwark of a constitution that limits the power of government to oppress minorities.
The question of access to civil marriage by same-sex couples "is not a matter of social policy but of constitutional interpretation." Opinions of the Justices to the Senate, 802 N.E.2d 565, 569 (Mass. 2004). It is a question for this Court to decide.
III.
In his essay Three Questions for America, Professor Ronald Dworkin talks about the alternative of recognizing "a special `civil union' status" that is not "marriage but nevertheless provides many of the legal and material benefits of marriage." N.Y. Rev. Books, Sept. 21, 2006 at 24, 30. He explains:
Such a step reduces the discrimination, but falls far short of eliminating it. The institution of marriage is unique: it is a distinct mode of association and commitment with long traditions of historical, social, and personal meaning. It means something slightly different to each couple, no doubt. For some it is primarily a union that sanctifies sex, for others a social status, for still others a confirmation of the most profound possible commitment. But each of these meanings depends on associations that have been attached to the institution by centuries of experience. We can no more now create an alternate mode of commitment carrying a parallel intensity of meaning than we can now create a substitute for poetry or for love. The status of marriage is therefore a social resource of irreplaceable value to those to whom it is offered: it enables two people together to create value in their lives that they could not create if that institution had never existed. We know that people of the same sex often love one another with the same passion as people of different sexes do and that they want as much as heterosexuals to have the benefits and experience of the married state. If we allow a heterosexual couple access to that wonderful resource but deny it to a homosexual couple, we make it possible for one pair but not the other to realize what they both believe to be an important value in their lives.
[Ibid.]
On this day, the majority parses plaintiffs' rights to hold that plaintiffs must have access to the tangible benefits of state-sanctioned heterosexual marriage. I would extend the Court's mandate to require that same-sex couples have access to the "status" of marriage and all that the status of marriage entails.
Justices Long and Zazzali join in this opinion.
NOTES
[1] The following sketches of plaintiffs' lives come from affidavits submitted to the trial court in 2003 and from factual assertions in the complaint. We assume that their familial relationships remain unchanged.
[2] As a result of Marilyn's passing, Diane, who remains a party to this action, seeks only declaratory relief.
[3] While plaintiffs' appeal was pending before the Appellate Division, the Legislature enacted the Domestic Partnership Act, L. 2003, c. 246, affording certain rights and benefits to same-sex couples who enter into domestic partnerships. With the passage of the Act and subsequent amendments, some of the inequities plaintiffs listed in their complaint and affidavits have been remedied. See discussion infra Part IV.A-B. For example, under the Domestic Partnership Act, same-sex domestic partners now have certain hospital visitation and medical decision-making rights. N.J.S.A. 26:8A-2(c).
[4] The initial complaint in this case was filed on June 26, 2002. That complaint was replaced by the "amended complaint" now before us. All references in this opinion are to the amended complaint.
[5] Each defendant was sued in his or her official capacity and therefore stands as an alter ego of the State. For the sake of simplicity, we refer to defendants as "the State."
[6] It should be noted that the "Attorney General disclaim[ed] reliance upon promotion of procreation and creating the optimal environment for raising children as justifications for the limitation of marriage to members of the opposite sex." Id. at 185 n. 2.
[7] Unlike the Appellate Division, we will not rely on policy justifications disavowed by the State, even though vigorously advanced by amici curiae.
[8] Plaintiffs concede that the State can insist on the binary nature of marriage, limiting marriage to one per person at any given time. As Judge Skillman pointed out, polygamists undoubtedly would insist that the essential nature of marriage is the coupling of people of the opposite sex while defending multiple marriages on religious principles. Lewis, supra, 378 N.J. Super. at 187-88.
[9] The text of Article I, Paragraph 1 of the 1947 New Jersey Constitution largely parallels the language of the 1844 Constitution. Compare N.J. Const. art. I, ¶ 1, with N.J. Const. of 1844 art. I, ¶ 1.
[10] The dissent posits that we have defined the right too narrowly and that the fundamental right to marry involves nothing less than "the liberty to choose, as a matter of personal autonomy." Post at ___ (slip op. at 11). That expansively stated formulation, however, would eviscerate any logic behind the State's authority to forbid incestuous and polygamous marriages. For example, under the dissent's approach, the State would have no legitimate interest in preventing a sister and brother or father and daughter (assuming child bearing is not involved) from exercising their "personal autonomy" and "liberty to choose" to marry.
[11] Alaska Const. art. I, § 25; Ark. Const. amend. 83, § 1; Ga. Const. art. I, § IV, ¶ I; Haw. Const. art. I, § 23; Kan. Const. art. XV, § 16; Ky. Const. § 233a; La. Const. art. XII, § 15; Mich. Const. art. I, § 25; Miss. Const. art. 14, § 263A; Mo. Const. art. I, § 33; Mont. Const. art. XIII, § 7; Neb. Const. art. I, § 29; Nev. Const. art. I, § 21; N.D. Const. art. XI, § 28; Ohio Const. art. XV, § 11; Okla. Const. art. II, § 35; Or. Const. art. XV, § 5a; Tex. Const. art. I, § 32; Utah Const. art. I, § 29; Ala. Code § 30-1-19; Ariz. Rev. Stat. § 25-101; Cal. Fam. Code § 308.5; Colo. Rev. Stat. § 14-2-104; Conn. Gen. Stat. § 45a-727a; Del. Code Ann. tit. 13, § 101; Fla. Stat. § 741.212; Idaho Code Ann. § 32-201; 750 Ill. Comp. Stat. 5/201, 5/212; Ind. Code § 31-11-1-1; Iowa Code § 595.2; Me. Rev. Stat. Ann. tit. 19-A, §§ 650, 701; Md. Code Ann., Fam. Law § 2-201; Minn. Stat. §§ 517.01, 517.03; N.H. Rev. Stat. Ann. §§ 457:1, 457:2; N.J.S.A. 37:1-1, -3; N.M. Stat. § 40-1-18; N.Y. Dom. Rel. Law §§ 12, 50; N.C. Gen. Stat. §§ 51-1, 51-1.2; 23 Pa. Cons. Stat. §§ 1102, 1704; R.I. Gen. Laws §§ 15-1-1, 15-1-2, 15-2-1; S.C. Code Ann. § 20-1-15; S.D. Codified Laws § 25-1-1; Tenn. Code Ann. § 36-3-113; Vt. Stat. Ann. tit. 15, § 8; Va. Code Ann. §§ 20-45.2, 20-45.3; Wash. Rev. Code § 26.04.020(1)(c); W. Va. Code § 48-2-104(c); Wis. Stat. §§ 765.001(2), 765.01; Wyo. Stat. Ann. § 20-1-101.
[12] See Dean v. District of Columbia, 653 A.2d 307, 331 (D.C. 1995); Standhardt v. Superior Court of Ariz., 77 P.3d 451, 459-60 (Ariz. Ct. App. 2003); Baehr v. Lewin, 852 P.2d 44, 57 (Haw. 1993); Morrison v. Sadler, 821 N.E.2d 15, 34 (Ind. Ct. App. 2005); Baker, supra, 191 N.W.2d at 186; Hernandez v. Robles, Nos. 86-89, 2006 N.Y. LEXIS 1836, at *14-15 (N.Y. July 6, 2006) (plurality opinion); Andersen v. State, 2006 Wash. LEXIS 598, at *38-43, *68 (Wash. July 26, 2006) (plurality opinion); see also Goodridge v. Dep't of Pub. Health, 798 N.E.2d 941, 961 (Mass. 2003) (stating that it was not necessary to reach fundamental right issue in light of finding that no rational basis existed for denying same-sex couples right to marry under state constitution).
[13] Our state equal protection analysis differs from the more rigid, three-tiered federal equal protection methodology. When a statute is challenged under the Fourteenth Amendment's Equal Protection Clause, one of three tiers of review applies strict scrutiny, intermediate scrutiny, or rational basis depending on whether a fundamental right, protected class, or some other protected interest is in question. Clark v. Jeter, 486 U.S. 456, 461, 108 S. Ct. 1910, 1914, 100 L. Ed. 2d 465, 471 (1988). All classifications must at a minimum survive rational basis review, the lowest tier. Ibid.
[14] Unlike New Jersey, a number of states prohibit adoption by same-sex couples. See Kari E. Hong, Parens Patriarchy: Adoption, Eugenics, and Same-Sex Couples, 40 Cal. W.L. Rev. 1, 2-3 (2003) (detailing states that have enacted measures to restrict adoption by same-sex couples).
[15] At the time of New Jersey's amendment, only four other states, Wisconsin, Massachusetts, Connecticut, and Hawaii, had adopted similar anti-discrimination provisions. See L. 1981, c. 112 (codified at Wis. Stat. §§ 111.31 to 111.39 (1982)); St. 1989, c. 516 (codified at Mass. Gen. Laws ch. 151B, §§ 1 to 10 (1989)); Public Act No. 91-58 (codified at Conn. Gen. Stat. §§ 46a-81a to -81r (1991)); L. 1991, c. 2 (codified at Haw. Rev. Stat. §§ 378-1 to -6 (1991)); L. 1991, c. 519 (codified at N.J.S.A. 10:5-1 to -42 (1992)).
[16] "Affectional or sexual orientation" is defined to mean "male or female heterosexuality, homosexuality or bisexuality by inclination, practice, identity or expression, having a history thereof or being perceived, presumed or identified by others as having such an orientation." N.J.S.A. 10:5-5(hh).
[17] The rights and benefits provided by the Domestic Partnership Act extend to two classes of people persons who "are of the same sex and therefore unable to enter into a marriage with each other that is recognized by New Jersey law" and persons "who are each 62 years of age or older and not of the same sex." N.J.S.A. 26:8A-4(b)(5).
[18] Every statutory provision applicable to opposite-sex couples might not be symmetrically applicable to same-sex couples. The presumption of parentage would apply differently for same-sex partners inasmuch as both partners could not be the biological parents of the child. It appears that the presumption in such circumstances would be that the non-biological partner consented to the other partner either conceiving or giving birth to a child.
[19] But see In re Parentage of Child of Robinson, 383 N.J.Super. 165, 176 (Ch. Div. 2005) (declaring that same-sex partner was entitled to statutory presumption of parenthood afforded to husbands).
[20] To obtain custody or visitation rights, the non-biological parent must petition the courts to be recognized as a psychological parent. See V.C., supra, 163 N.J. at 206, 230 (declaring former lesbian partner of biological mother of twins "psychological parent," and awarding regular visitation).
[21] A number of states declare that they will not recognize domestic relationships other than the union of a man and a woman, and specifically prohibit any marriage, civil union, domestic partnership, or other state sanctioned arrangement between persons of the same sex. See, e.g., Ga. Const. art. I, § IV, ¶ I(b); Kan. Const. art. XV, § 16(b); Ky. Const. § 233a; La. Const. art. XII, § 15; Mich. Const. art. I, § 25; Neb. Const. art. I, § 29; N.D. Const. art. XI, § 28; Ohio Const. art. XV, § 11; Utah Const. art. I, § 29; Alaska Stat. § 25.05.013; Okla. Stat. tit. 51, § 255(A)(2); Tex. Fam. Code Ann. § 6.204(b); Va. Code Ann. § 20-45.3.
[22] See Cal. Fam. Code §§ 297-299.6; Haw. Rev. Stat. §§ 572C-1 to -7; Me. Rev. Stat. Ann. tit. 22, § 2710; N.J.S.A. 26:8A-1 to -13; D.C. Code §§ 32-701 to -710.
[23] The Hawaii Supreme Court was the first state high court to rule that sexual orientation discrimination possibly violated the equal protection rights of same-sex couples under a state constitution. See Encyclopedia of Everyday Law, Gay Couples, http://law.enotes.com/everyday-law-encyclopedia/gay-couples (last visited Oct. 10, 2006). In Baehr, supra, the Hawaii Supreme Court concluded that the marriage statute "discriminates based on sex against the applicant couples in the exercise of the civil right of marriage, thereby implicating the equal protection clause of article I, section 5 of the Hawaii Constitution" and remanded for an evidentiary hearing on whether there was a compelling government interest furthered by the sex-based classification. 852 P.2d at 57, 59. After the remand but before the Hawaii Supreme Court had a chance to address the constitutionality of the statute, Hawaii passed a constitutional amendment stating that "[t]he legislature shall have the power to reserve marriage to opposite-sex couples." Haw. Const. art. I, § 23. The Hawaii Legislature enacted a statute conferring certain rights and benefits on same-sex couples through a reciprocal beneficiary relationship. Haw. Rev. Stat. §§ 572C-1 to -7.
[24] After rendering its decision, the Massachusetts Supreme Judicial Court issued an opinion advising the state legislature that a proposed bill prohibiting same-sex couples from entering into marriage but allowing them to form civil unions would violate the equal protection and due process requirements of the Massachusetts Constitution and Declaration of Rights. Opinions of the Justices to the Senate, 802 N.E.2d 565, 566, 572 (Mass. 2004). The court later upheld the validity of an initiative petition, which if successful would amend the Massachusetts Constitution to define "'marriage only as the union of one man and one woman.'" Schulman v. Attorney General, 850 N.E.2d 505, 506-07 (Mass. 2006).
[25] We note that what we have done and whatever the Legislature may do will not alter federal law, which only confers marriage rights and privileges to opposite-sex married couples. See 1 U.S.C.A. § 7 (defining marriage, under Federal Defense of Marriage Act, as "legal union between one man and one woman").
[26] See Newman v. Chase, 70 N.J. 254, 260 n. 4 (1976) (noting that prior to Married Women's Property Act of 1852 "the then prevailing rule" entitled husband "to the possession and enjoyment of his wife's real estate during their joint lives"); Nancy F. Cott, Public Vows: A History of Marriage and the Nation 12 (2000) (explaining that marriage resulted in husband becoming "the one full citizen in the household"); Hendrick Hartog, Man and Wife in America: A History 99 (2000) (stating that "merger" of wife's identity led to wife's loss of control over property and over her contractual capacity).
[27] See, e.g., L. 1906, c. 248 (May 17, 1906) (affording married women right to sue); L. 1852, c. 171 (Mar. 25, 1852) (providing married women property rights).
[28] We note, for example, that the Domestic Partnership Act requires, as a condition to the establishment of a domestic partnership, that the partners have "a common residence" and be "otherwise jointly responsible for each other's common welfare." N.J.S.A. 26:8A-4(b)(1). Such a condition is not placed on heterosexual couples who marry and thus could not be imposed on same-sex couples who enter into a civil union.
[1] Article I, Paragraph 1, states:
All persons are by nature free and independent, and have certain natural and unalienable rights, among which are those of enjoying and defending life and liberty, of acquiring, possessing, and protecting property, and of pursuing and obtaining safety and happiness.
[N.J. Const. art. I, ¶ 1.]
This language constitutes our State equivalent of the Due Process and Equal Protection Clauses of the Federal Constitution.
[2] Professor Michael Wald, in Same-Sex Couple Marriage: A Family Policy Perspective similarly states that "if a State passed a civil union statute for same-sex couples that paralleled marriage, it would be sending a message that these unions were in some way second class units unworthy of the term `marriage'[,] . . . that these are less important family relationships." 9 Va. J. Soc. Pol'y. & L. 291, 338 (2001).
[3] Professor Laurence Tribe has described in metaphoric terms, the relationship between due process and equal protection analyses. Lawrence v. Texas: The "Fundamental Right" That Dare Not Speak Its Name, 117 Harv. L. Rev. 1893, 1897-98. His understanding is especially apt in respect of New Jersey's test. He finds in judges "conclusions" a "narrative in which due process and equal protection, far from having separate missions and entailing different inquiries, are profoundly interlocked in a legal double helix . . . [representing] a single, unfolding tale of equal liberty and increasingly universal dignity." Ibid. This case is a paradigm for the interlocking concepts that support both the due process and the equal protection inquiry.
[4] The majority understands that "[h]ow the right is defined may dictate whether it is deemed fundamental." Ante at ___ (slip op. at 24). By claiming that the broad right to marriage is "undifferentiated" and "abstract," and by focusing on the narrow question of the right to same-sex marriage, the Court thereby removes the right from the traditional concept of marriage. Ante at ___ (slip op. at 24-25). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551443/ | 6 F.2d 841 (1925)
GEORGE D. HARTER BANK OF CANTON, OHIO,
v.
INGLIS (and four other cases).
Nos. 4295-4299.
Circuit Court of Appeals, Sixth Circuit.
July 3, 1925.
*842 C. M. Horn, of Cleveland, Ohio, and Homer E. Black, of Canton, Ohio (Herbruck, Black, McCuskey & Ruff, of Canton, Ohio, and Dustin, McKeehan, Merrick, Arter & Stewart, of Cleveland, Ohio, on the brief), for appellant.
Luther Day, of Cleveland, Ohio (Day & Day, of Cleveland, Ohio, and Rufus S. Day, of Washington, D. C., on the brief), for receiver.
Wendell Lilly, of Columbus, Ohio (Lemuel D. Lilly, of Columbus, Ohio, and Tolles, Hogsett, Ginn & Morley and J. C. Little, all of Cleveland, Ohio, on the brief), for appellees who were intervening claimants in the court below.
Before DENISON, DONAHUE, and MOORMAN, Circuit Judges.
MOORMAN, Circuit Judge (after stating the facts as above).
In the first four cases there is presented primarily the question of the jurisdiction of the District Court to determine the controversy between the bank and the intervening claimants. Each of the claimants was a resident of the state of Ohio, the bank was a state institution, and no one of the claims was for as much as $3,000. The jurisdictional question was not raised in the lower court. The fund was drawn into court by petition of the receiver, and the intervening claimants filed their respective petitions claiming a part of it. The bank, without demurring to the jurisdiction, responded to their claims as well as to that of the receiver.
Whether the District Court in a summary proceeding could draw to its jurisdiction the controversy between the receiver and the bank is not argued. By failing to object to the form of the proceeding the bank waived any question as to the right of the court so to proceed. The final adjudication that the receiver had no interest in the fund did not affect the jurisdiction that had theretofore rightfully attached. City Railway Co. v. Citizens' Street Railroad Co., 166 U.S. 557, 17 S. Ct. 653, 41 L. Ed. 1114; Mullen v. Torrance, 9 Wheat. 537, 6 L. Ed. 154. As between the receiver and the bank, the ancillary jurisdiction was complete under the powers of the court to administer the estate. Wilson v. Power & Light Co. (D. C.) 300 F. 185, and authorities cited. A complement of that was the authority to determine the rights of all claimants to the fund. The case is not like Fulton National Bank v. Hoosier, 45 S. Ct. 261, 69 L. Ed. ___, reported in advance sheets April 1, 1925, page 261. In that case the proceeding was not initiated by the receiver but by Hoosier, who brought the bank into court, seeking to compel the receivers to litigate with it "for his sole interest and without possibility of benefit to the estate." The proceeding as thus initiated was in no sense ancillary to any right claimed by the receivers or to the power of the court to administer the estate.
There is no controversy as to the facts. It was stipulated that the bank had *843 neither actual nor constructive knowledge of any latent equities in favor of the interveners. The bank claims the right of set-off on the ground that its relation with the Geiger-Jones Company was that of debtor and creditor. Ordinarily a bank may set off a deposit against a debt due it from the depositor. Where insolvency has intervened, equity has extended the right to an unmatured note, upon the theory that in good conscience one ought not to be required to pay a debt to his creditor if he cannot ultimately compel the creditor to pay a debt due him. Laclede Bank v. Schuler, 120 U.S. 506, 7 S. Ct. 644, 30 L. Ed. 704. In neither case, however, is the right absolute or paramount to the superior equities of other claimants. In Bank of Metropolis v. New England Bank, 1 How. 234, 11 L. Ed. 115, 6 How. 212, 12 L. Ed. 409, the Supreme Court held that, unless the creditor bank had extended credit on the faith of an account current between it and another bank, and thus acquired equities not arising from the mere relationship of debtor and creditor, it could not apply the proceeds of notes received by it for collection and apparently belonging to the debtor bank to a debt presently due and defeat the claims of the equitable owners. Cited with approval in Wilson v. Smith, 3 How. 763, 11 L. Ed. 820, and United States v. State Nat. Bank, 96 U.S. 30, 24 L. Ed. 647.
These decisions are said to have been overruled in Central National Bank v. Connecticut Mutual Life Insurance Co., 104 U.S. 54, 26 L. Ed. 693; Union Stock Yards Bank v. Gillespie, 137 U.S. 417, 11 S. Ct. 118, 34 L. Ed. 724, and United States v. Butterworth, 45 S. Ct. 388, 69 L. Ed. ___, March 2, 1925. In each of those cases the bank had actual or constructive notice that the money deposited with it, and absorbed in part satisfaction of the depositor's debt, belonged to some one other than the depositor, and it was held that the equitable owner could follow the fund into the hands of the bank and recover it. In the Mutual Life Insurance Co. Case the court said: "Evidently the bank has no better right than Dillon, unless it can obtain it through its banker's lien. Ordinarily that attaches in favor of the bank upon the securities and moneys of the customer deposited in the usual course of business, for advances which are supposed to be made upon their credit. It attaches to such securities and funds, not only against the depositor, but against the unknown equities of all others in interest, unless modified or waived by some agreement, express or implied, or by conduct inconsistent with its assertion. But it cannot be permitted to prevail against the equity of the beneficial owner, of which the bank has notice, either actual or constructive."
It will be observed that in speaking of the banker's lien that prevails against "unknown equities" the court refers to it as attaching to securities and money deposited in the usual course of business "for advances which are supposed to be made upon their credit." That is not this case. In none of the Supreme Court decisions relied on by the bank did the question arise as to the applicable law in the absence of notice, or as to the rights of the bank as between it and the equitable owner where the credit was not extended on the faith of the deposit. We cannot hold that the denial of the right of set-off as against the real owner, where the bank had notice of his equity, is the equivalent of holding that, in the absence of notice, the right is absolute, for, as pointed out in the case just referred to, although the balance due on a depositing account is only a debt, "the question is always open to whom in equity does it beneficially belong."
The loan to the Geiger-Jones Company was not made upon the credit of its deposit. The bank applied the deposit to a debt that was not due. Its rights were purely equitable, and were subject to superior equities in favor of the beneficial owners. The claims of the interveners were for funds impressed with a trust in their favor. Those funds had been transferred to the Geiger-Jones Company and deposited by it with the bank. The bank had not granted or extended credit or in any respect changed its position because of the deposit. The equitable rights of the interveners were in our opinion superior to the right of set-off in the bank.
The controversy between the bank and the receiver presents the question as to whether collateral deposited by a debtor with a bank to secure the payment of a debt "or any other liability or liabilities of ours to said company, due or to become due, or that may be hereafter contracted" may, after the existing debt is paid, be applied to the payment of a pre-existing obligation to another bank which has absorbed the bank with which the collateral was deposited. Counsel for the bank rely on Mulert v. National Bank of Tarentum, 210 F. 857, 127 Cow. C. A. 419; Richardson v. Winnisimmet, 189 Mass. 25, 75 N.E. 97; Oleon v. Rosenbloom, 247 Pa. 250, 93 A. 473, L. R. A. 1915F, 968, 1 Ann. Cas. 1916B, 233. None *844 of them is in point. They deal with contracts of pledge subjecting the collateral, not merely to debts due the original pledgee, but to all debts and liabilities due any holder of the note, and authorizing any such holder to sell the collateral and apply the proceeds in payment of any debt then due or to become due, or that might thereafter be contracted in favor of any holder of the note. The contract of pledge in the instant case limited the subjection of the collateral to debts due or to become due or that thereafter might be contracted in favor of the original pledgee. The liability to which the Harter Bank is attempting to subject the collateral is not and was never due the City National Bank to which the pledge by its terms was limited. The taking over of that bank did not effect an extension of the pledge to an account which the Harter Bank had prior to that time. Gillett v. Bank of America, 160 N.Y. 549, 55 N.E. 292.
The judgments in all cases are affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857970/ | Christian Care2
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-024-CV
TEXAS DEPARTMENT OF HUMAN SERVICES, ET AL.,
APPELLANTS
vs.
CHRISTIAN CARE CENTERS, INC.,
APPELLEE
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
NO. 482,108, HONORABLE WILL WILSON, JUDGE PRESIDING
Plaintiff below, Christian Care Centers, Inc. ("Christian Care"), brought a
declaratory judgment action against Texas Department of Human Services (TDHS) and Ron
Lindsay, Commissioner, (collectively "Appellants"). Christian Care sought to declare a portion
of a TDHS administrative rule void in order to recover $124,033.85 in reimbursement payments
for services it had provided to Medicaid recipients. The district court granted Christian Care's
motion for summary judgment declaring that TDHS had exceeded its statutory authority in
enacting the rule which allowed it to withhold the Medicaid payments in question. On appeal,
Appellants contend that the trial court erred in granting summary judgment. We will affirm the
district court.
THE CONTROVERSY
The Medicaid Program
The Texas Legislature has designated TDHS to administer the Texas program of
medical assistance to financially needy persons. Tex. Hum. Res. Code Ann. § 32.021 (1990).
That program, commonly known as "Medicaid," (1) requires cooperation between TDHS and the
federal government to ensure that Texas qualifies for federal matching funds. Title 42 of the
United States Code establishes the program whereby matching funds are provided to states as a
percentage of state expenditures for health care to the needy. 42 U.S.C. §§ 1396-1396s (1988 &
Supp. I. 1989). The Secretary of the United States Department of Health and Human Services
administers this program through rules codified in title 42 of the Code of Federal Regulations.
42 C.F.R. §§ 430-456 (1991). Those federal rules set requirements for matching funds but do
not attempt to assign functions directly to any particular state administrative agency. That process
is left to state lawmakers.
The Texas Legislature gave TDHS statutory authority to provide Medicaid services
directly or through contracts with private providers. TDHS also has authority to prescribe rules
governing the Medicaid program, including "reasonable rules and standards governing the
determination of fees, charges, and rates for medical assistance payments." Tex. Hum. Res. Code
Ann. §§ 22.002, 32.001-.040, 32.028 (1990 & Supp. 1992) (the state Medical Assistance statute).
Under this authority, TDHS has adopted extensive rules governing its Medicaid program which
are codified at title 40 of the Texas Administrative Code. TDHS also issues policy statements
which are viewed as rules under the Administrative Procedures and Texas Register Act (APTRA).
See Tex. Rev. Civ. Stat. Ann. art. 6252-13a (Supp. 1992). One type of policy statement, entitled
Standards for Participation, is used to amend provider contracts. Standards for Participation
mirror formal rules and carry the same numerical designation.
Under its statutory authority, TDHS promulgates standardized contracts which all
providers of Medicaid services are required to sign. These contracts require nursing homes to
accept and acknowledge all changes in the Standards for Participation as amendments to their
contracts in order to remain providers. One such Standard and the rule it reflects, TDHS Rule
16.7103, form the focus of this lawsuit.
The Challenged Rule
Rule 16.7103 establishes a program of "Utilization Review" to ensure that the State
of Texas is paying only for nursing home services that Medicaid recipients truly need. (2) Federal
Medicaid guidelines require some type of Utilization Review program to maintain eligibility for
matching funds. 42 U.S.C. § 1396a(a)(30) (1988 & Supp. I. 1989). States have the option of
either crafting a review program similar to Medicare's review program, or creating their own
program, which must be more stringent than the Federal requirements, and applying for a
"superior waiver." 42 C.F.R. §§ 456.505-.507 (1991). Texas chose to craft its own program
and, in 1977, received its "superior waiver" for the program which is now set out in Rule
16.7103.
Part of this review program is "continued stay review," a mechanism whereby the
medical condition of a Medicaid recipient in a nursing home is regularly evaluated to determine
if the "level of care" (3) administered by the nursing home continues to be appropriate to the
Medicaid recipient's needs. As stated in Rule 16.7103(d)(3), "continued stay reviews are the
responsibility of the long-term care unit," a unit of the Texas Department of Health. Tex. Dep't
of Hum. Servs., 12 Tex. Reg. 4010 (1987) (40 Tex. Admin. Code § 16.7103(d)(3), since
repealed). TDHS has an agreement with the Department of Health whereby health nurses and
other health-care professionals perform review and inspection of nursing homes under the
Medicaid program. Tex. Dep't of Hum. Servs. 7 Tex. Reg. 2278 (1982) (40 Tex. Admin. Code
§ 16.7101, since repealed).
However, in rule changes made since the original waiver was obtained, TDHS and
the Department of Health have shifted at least part of their responsibility to nursing homes. A
1987 amendment to Rule 16.7103 requires that nursing home facilities submit level of care
assessment forms to the Health Department at specified intervals. Tex. Dep't of Hum. Servs.,
12 Tex. Reg. 4010 (1987) (40 Tex. Admin. Code § 16.7103(d)(3) and (4)(A), since repealed).
This rule change was also issued as a Standard for Participation. Pursuant to the contracts,
providers had to accept this Standard as an amendment to their contracts in order to continue
participating in the program. It is the enforcement of this change to Rule 16.7103 in the
Utilization Review process that creates the controversy in this case.
The system promulgated by TDHS provides that if the nursing home fails to submit
its forms in a timely fashion, the Department of Health does not initiate its review. Absent a
review, the patient's "level of care" pursuant to the Rule "cease[s] to exist" and TDHS does not
pay for the care provided during the period of time that the "level of care" assessment forms are
not on file. (4) The designation that a patient's "level of care" has "ceased to exist" avoids the due-process notice procedures otherwise required when finding a patient is no longer medically
eligible for benefits.
Christian Care Centers, Inc.
Christian Care entered into two standard contracts with TDHS: a 1980 contract for
an intermediate care facility and a 1973 contract for a skilled nursing facility. Due to
administrative confusion at the nursing home, lasting several months during 1988 and 1989,
Christian Care's employees failed to send in "level of care" assessment forms for thirty-seven
Medicaid recipients. The nursing home did not realize the error until payments from the State
ceased several months later. (5) When Christian Care became aware of the problem, it sent in new
forms and Medicaid payments resumed from the date those forms were processed. However,
pursuant to the Rule in question, TDHS refused to pay for the care provided during the interim
period when the forms were not current. There is no dispute on this appeal that the thirty-seven
Medicaid recipients at the Christian Care facility received reasonable and necessary nursing care
at all times. Nor is there any question as to the eligibility of these patients for Medicaid, based
on financial or medical need. However, TDHS takes the position that under its Rule, which states
that without current forms the "level of care ceases to exist," Christian Care has permanently lost
the Medicaid payments for these patients during the hiatus. (6)
In the district court, Christian Care filed a motion for summary judgment alleging
that the enforcement of Rule 16.7103 by permanently withholding Medicaid reimbursement
payments for services provided to admittedly eligible Medicaid recipients exceeded the statutory
authority granted to TDHS. Appellants responded that the promulgation and enforcement of the
Rule was within its statutory authority. Further, they alleged that the Rule was incorporated into
the written contracts existing between TDHS and Christian Care and, therefore, should be
enforced by the court as written. The district court held that TDHS exceeded its statutory
authority in enacting this penalty provision of Rule 16.7103 and applying it to effectuate the
forfeiture of Medicaid payments due Christian Care. On appeal, Appellants contend, in a single
point of error, that the district court erred in granting Christian Care's Motion for Summary
Judgment.
DISCUSSION AND HOLDING
An agency like TDHS "is a creature of the Legislature and has only such powers
as are expressly granted to it by statute, together with those necessarily implied from the authority
conferred or duties imposed." Railroad Comm'n v. Atchison, T. & S.F. R.R., 609 S.W.2d 641,
643 (Tex. Civ. App. 1980, writ ref'd n.r.e.). TDHS is expressly granted authority to withhold
Medicaid payments permanently only in cases of contract cancellation or fraud. See Tex. Hum.
Res. Code Ann. §§ 32.034, 32.039 (1990). Christian Care argues that since TDHS has not been
given the express authority to enforce Rule 16.7103 by permanently withholding payments, the
agency's action is unlawful. Christian Care urges this Court to adopt a system whereby TDHS
could enforce the Rule in question only by canceling the contract with the nursing home provider.
However, it is obvious from the statutory language that sections 32.034 and 32.039, dealing with
contract cancellation and fraud, are not intended as the exclusive enforcement tools for the
Medicaid program, and we decline to read the statutory authority of TDHS so narrowly.
Lack of express authority for a particular act of an agency does not mean the
agency has no authority for that act. An agency may have implied authority to take an action or
promulgate a rule even though such authority might not be expressly enumerated in its enabling
statute. Indeed, under a general grant of authority, an agency has all the implied authority
reasonably necessary to accomplish a delegated purpose. Sexton v. Mount Olivet Cemetery Ass'n,
720 S.W.2d 129, 137 (Tex. App. 1986, writ ref'd n.r.e.) (and cases cited therein). The
legislature expressly gave TDHS full rulemaking authority as necessary for the administration of
the Medicaid program. Tex. Hum. Res. Code. Ann. § 32.021 (1990). (7) A means of enforcing
the administrative rules can be implied from the grant to promulgate rules. Sexton, 720 S.W.2d
at 137; see also First Fed. Sav. & Loan Ass'n v. Vandygriff, 639 S.W.2d 492, 499 (Tex. App.
1982, writ dism'd). In the instant case, we conclude that the authority given TDHS to promulgate
rules for utilization review includes the implied authority to enforce such rules.
However, statutory authority, both express and implied, is limited to what is
necessary and reasonable. See Bullock v. Hewlett-Packard Co., 628 S.W.2d 754, 756 (Tex.
1982). Although we hold that implied authority would permit TDHS to temporarily withhold
Medicaid payments until a nursing home facility complied with the rules, we conclude that such
authority does not extend to the permanent withholding of payments for services that were actually
rendered to qualified Medicaid patients. Although administrative rules are presumed valid, they
may be found void if adopted without statutory authority. Hollywood Calling v. Public Util.
Comm'n, 805 S.W.2d 618, 620 (Tex. App. 1991, no writ); see also Brown v. Humble Oil & Ref.
Co., 87 S.W.2d 1069 (Tex. 1935). There appears to be no reasonable basis to support the
confiscation or forfeiture that results from the Rule at issue in this case, either to enforce other
TDHS rules or carry out the purposes of the program.
Appellants argue that permanently withholding payments for services rendered
while current "level of care" forms were not on file is necessary to prevent the loss of federal
matching funds. A careful reading of the federal statutes governing Medicaid does not support
this contention. At the time TDHS promulgated these penalty provisions, the only element of
Utilization Review which elicited a mandatory decrease of federal funds was failure to have an
annual evaluation of each case by a professional review team. 42 U.S.C. § 1396b(g)(1) (1988). (8)
As Christian Care correctly points out, the cases TDHS cites in their supplemental brief are
narrowly based on language which was subsequently deleted from the statute. See Indiana Dep't
of Public Welfare v. Bowen, 686 F. Supp. 692, 695 (S.D. Ind. 1987); Colorado Dep't of Social
Servs. v. Department of Health and Human Servs., 558 F. Supp. 337, 354 (D. Colo. 1983)
(amounts of federal matching funds reduced due to the failure of states to meet the statutory
requirements of their Utilization Review programs). The courts in those cases lamented the overly
harsh penalty provision but felt constrained to follow it until Congress acted to amend it. Bowen,
686 F. Supp. at 695. In view of the change in the Medicaid statute, this Court finds no federal
basis for the permanent withholding provision. (9)
Further, TDHS has constructed the enforcement of Rule 16.7103 around the fiction
that the patient's "level of care," i.e., the patient's medical need, "ceases to exist." Relying on
this fiction to deny reimbursement likewise exceeds the statutory authority of TDHS. TDHS is
required to pay for qualified services made to eligible patients or give notice before finding
patients ineligible, so that disqualified patients may exercise their due-process right to appeal
eligibility decisions. See Tex. Hum. Res. Code Ann. § 32.035 (1990); 42 U.S.C. § 1396a(a)(3)
and (10) (1988 & Supp. I. 1989); 42 C.F.R. § 431.200-.250 (1991); see also Goldberg, 397 U.S.
254. By providing that a "Level of Care ceases to exist," rather than declaring a patient medically
ineligible, TDHS seeks to avoid these due-process notice and appeal requirements. We find that
use of this grammatical fiction circumvents the primary intent of the Medicaid statute; to provide
continuous payment for necessary services to eligible individuals. Implied authority is not
authority to depart from the intent of the statute. Sexton, 720 S.W.2d at 137; see also Texas Bd.
of Dental Examiners v. Prichard, 446 S.W.2d 905, 909 (Tex. Civ. App. 1969, writ ref'd n.r.e.).
One of the key determinants of whether a rule is within an agency's implied
authority is whether the rule harmonizes with the purpose of the agency's governing statute, in
all of its provisions. See Gerst v. Oak Cliff Sav. & Loan Ass'n, 432 S.W.2d 702, 706 (Tex. 1968);
see also State Bd. of Ins. v. Deffebach, 631 S.W.2d 794, 798 (Tex. App. 1982, writ ref'd n.r.e.);
Jeffco, Inc. v. Lewis, 520 S.W.2d 915, 921 (Tex. Civ. App. 1975, writ ref'd n.r.e.). It would
be inconsistent with the overall purposes of the Medical Assistance statute, i.e. providing quality
nursing services to Medicaid qualified patients, to give TDHS the authority to withhold funds
permanently, merely for failure to file updated records timely.
TDHS alternatively urges that summary judgment was inappropriate in this case
because of genuine and material fact issues regarding the enforcement of the written contracts
between TDHS and Christian Care. 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).
Movant has the burden of demonstrating that no genuine issue of material fact exists. Id.
We believe the district court correctly concluded that if Rule 16.7103(d)(4)(G) and
(8), as enforced to permanently withhold funds from Christian Care, is invalid, then the
incorporation of the Rule into the written contracts is likewise unenforceable. The invalidity of
the Rule is a question of law for the court, therefore, it creates no genuine and material fact issue
to be presented to a factfinder. See Texas State Bd. of Examiners in Optometry v. Carp, 388
S.W.2d 409, 414-15 (Tex. 1965). In this case, once the Rule is declared void, the issue of the
contract is resolved as a matter of law and there is no ambiguity to present to a fact finder. See
Capitol Rod & Gun Club v. Lower Colorado River Auth., 622 S.W.2d 887, 894 (Tex. App. 1981,
writ ref'd n.r.e.).
Permanent withholding of reimbursement during the lapse in filing "level of care"
forms with TDHS is not reasonable in light of the circumstances present here and is inconsistent
with the purposes of the federal Medicaid and state Medical Assistance statutes. Therefore, we
hold that the district court properly concluded that the Rule as applied to Christian Care was
invalid. We therefore overrule Appellant's single point of error and affirm the summary judgment
of the district court.
Mack Kidd, Justice
[Before Chief Justice Carroll, Justices Aboussie and Kidd]
Affirmed
Filed: March 4, 1992
[Publish]
1. 1 This is a separate and distinct program from Medicare and it is necessary to distinguish
between the rules for the separate programs.
2. 2 Tex. Dep't of Hum. Servs., 7 Tex. Reg. 2278 (1982) (40 Tex. Admin. Code § 16.7103),
amended by 8 Tex. Reg. 3418 (1983), amended by 9 Tex. Reg. 1985 (1984) (adopting 8 Tex.
Reg. 4479 (1983) (proposed rule)), amended by 10 Tex. Reg. 339 (1985) (adopting 9 Tex.
Reg. 5376 (1984) (proposed rule)), amended by 11 Tex. Reg. 2104 (1986), amended by 11
Tex. Reg. 4853 (1986), amended by 12 Tex. Reg. 4010 (1987), amended by 13 Tex. Reg.
3586 (1988) (adopting 13 Tex. Reg. 771 (proposed rule)), repealed by 15 Tex. Reg. 6749
(1990).
3. 3 Level of Care (LOC) is defined as the required degree of medical care or nursing care for
a recipient in a nursing home. Tex. Dep't of Hum. Servs., 13 Tex. Reg. 3587 (1988),
adopting 13 Tex. Reg. 766 (1988) (proposed rule) (40 Tex. Admin. Code § 16.1101, since
repealed).
4. 4 The portions of the Rule 16.7103 relevant to this case are:
(4)(E) if an LOC [Level Of Care] form is not received by the day
after the expiration date of the current LOC, the current LOC
ceases to exist. To reinstate an expired LOC, facility staff must
submit an updated LOC assessment to the TDH/LTCU. The date
of receipt of these LOC forms is the new effective date of the
LOC;
****
(4)(G) DHS does not pay for the period of time between the LOC
expiration date and the new effective date of the level of care,
and recoups any inadvertent payments made to ICF or SNF
facilities. If a lapse in payment is because of a facility error,
restrictions apply as provided in § 16.3807 of this title (relating
to Limitations on Provider Charges to Patients).
Tex. Dep't of Hum. Servs., 13 Tex. Reg. 3588 (1988), adopting 13 Tex. Reg. 772 (1988)
(proposed rule) (40 Tex. Admin. Code § 16.7103(d)(4)(E), (G), since repealed) and
(8) The Texas Department of Human Services (DHS) does not
make vendor payment when a level of care expires. A provider
is not entitled to payment for services between the expiration date
and the new effective date of a recipient's level of care. Vendor
payment made by DHS for that period is subject to recoupment.
Tex. Dep't of Hum. Servs., 12 Tex. Reg. 4010 (1987) (40 Tex. Admin. Code §
16.7103(d)(8), since repealed). This Court notes that the penalty provisions of this Rule have
been amended during the pendency of this suit so that they are no longer permanent.
However, these changes do not impact our decision.
5. 5 A time lag occurs between the date services are rendered and the date payment is sent to
providers. Therefore, it takes several months for nursing homes to realize that they are no
longer receiving payments due to their failure to update level of care forms. No other notice
exists for the failure to timely update these forms.
6. 6 This refusal to pay is especially harsh because the nursing home has no other source of
reimbursement. Providers are forbidden by federal and state law from charging the patients
directly because the patients to whom services were rendered were at all times Medicaid
eligible. Tex. Dep't of Hum. Servs., 12 Tex. Reg. 70 (1987) adopting, 11 Tex. Reg. 3925
(1986) (proposed rule) (40 Tex. Admin. Code § 16.3807, since repealed).
7. 7 TDHS also cites to Tex. Hum. Res. Code Ann. §§ 32.024(c) and 32.026(a), (c) (1990),
as authority to promulgate Rule 16.7103. However, those sections deal with the relationship
between the agency and aid recipients, not providers. Further, once a patient is qualified and
begins receiving aid under the program, the agency's authority to terminate services to patients
is circumscribed by the United States Constitution. See Goldberg v. Kelly, 397 U.S. 254
(1970).
8. 8 This version of the statute includes the amendments made in 1984 decreasing the scope of
the mandatory penalty provisions. Spending Reduction Act of 1984, Pub. L. No. 98-369,
§ 2363(a)(2)(C), (a)(4), 98 Stat. 494, 1106 (1984).
9. 9 Section 1396b(g)(1) also makes reference to a medical review program as set out in 42
U.S.C. § 1396a(a)(26) through (31) (1988 & Supp. I. 1989). These subsections in turn refer
states to requirements in 42 U.S.C. §§ 1396r(b)-(d), (f)(7), (e), (g), and (h)(2)(B) and (D)
(1988 & Supp. I. 1989) and Social Security Amendments of 1967, Pub. L. 90-248, § 236(b),
81 Stat. 821, 908, amended by Social Security Amendments of 1972, Pub. L. 92-603, §§
268(b), 269, 274(b), 86 Stat. 1329, 1451-52, amended by Act approved Dec. 31, 1973, Pub.
L. 93-233, § 18(y)(3), 87 Stat. 947, 973 (42 U.S.C. § 1396g, since repealed). None of these
sections places upon states or facilities a requirement similar to the Level of Care Forms, or
requires a decrease in federal matching funds as a mandatory penalty if such forms or the
review initiated by them is delayed, or if services provided during that delay are reimbursed
once the need for
those services has finally been documented. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2857996/ | Pruitt v. Franklin Federal
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-196-CV
SUZANNE PRUITT,
APPELLANT
vs.
FRANKLIN FEDERAL BANCORP,
APPELLEE
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 147TH JUDICIAL DISTRICT
NO. 485,168, HONORABLE HUME COFER, JUDGE PRESIDING
Franklin Federal Bancorp, appellee, sued Suzanne Pruitt, appellant, for deficiency
balances remaining on two promissory notes after foreclosure on deeds of trust securing payment
of the notes. The trial court granted summary judgment for Franklin Federal for principal,
interest, and attorney's fees. Pruitt appeals, contending, among other arguments, that the
summary judgment evidence regarding the amount of interest that had accrued was insufficient.
We will reverse and remand.
THE SUMMARY JUDGMENT EVIDENCE
In 1983 Pruitt borrowed $119,200 from Lockhart Savings & Loan Association and
signed two "adjustable rate" promissory notes, one dated December 8, 1983, in the amount of
$62,400 and one dated December 15, 1983, in the amount of $56,800. Through a series of events
not relevant to this appeal, the two notes were eventually transferred to Franklin Federal. Pruitt
defaulted on the notes, whereupon on May 2, 1989, Franklin Federal accelerated the maturity
dates of the notes and foreclosed on the properties securing the indebtedness. For purposes of this
appeal, the relevant terms of the two notes, those pertaining to interest, are identical:
2. INTEREST
Interest will be charged on that part of principal which has not been
paid, beginning on the date I receive principal and continuing until the full amount
of principal has been paid.
Beginning on the date I receive principal, I will pay interest at a
yearly rate of 13.25%. The interest rate I will pay will change in accordance with
Section 4 of this Note.
The interest rate required by this Section, Section 4, and Section 5
of this Note is the rate I will pay both before and after any default described in
Section 9(B) of this Note.
* * *
4. INTEREST RATE AND MONTHLY PAYMENT CHANGES
(A) Change Dates
The interest rate I will pay may change on January 1, 1987, and on that day of the
month every thirty-six (36) months thereafter. Each date on which my interest rate
could change is called a "Change Date."
(B) The Index
Beginning with the first Change Date, my interest rate will be based
on an "Index." The Index is the weekly average yield on United States Treasury
securities adjusted to a constant maturity of three (3) years, as made available by
the Federal Reserve Board. The most recent Index figure available as of 45 days
before each Change Date is called the "Current Index."
If the index is no longer available, the Note Holder will choose a
new index which is based upon comparable information. The Note Holder will
give me notice of its choice.
(C) Calculation of Changes
Before each Change Date, the Note Holder will calculate my new
interest rate by adding 1.575 percentage points to the Current Index. The sum will
be my new interest rate.
The Note Holder will then determine the amount of the monthly
payment that would be sufficient to repay in full the principal I am expected to owe
on the Change Date in substantially equal payments by the maturity date at my new
interest rate. The result of this calculation will be the new amount of my monthly
payment.
(D) Effective Date of Changes
My new rate will become effective on each Change Date. I will pay
the amount of my new monthly payment beginning on the first monthly payment
date after the Change Date until the amount of my monthly payment changes again.
(Emphasis added.)
The summary judgment evidence consisted of: (1) an affidavit of Dianna Gordon,
an officer of Franklin Federal, to which copies of the relevant notes were attached; and (2) an
affidavit of Franklin Federal's attorney, which related only to attorney's fees. The only portion
of Gordon's affidavit that addressed the amount of interest that had accrued on the notes was the
following sentence: "In accordance with the terms of the Notes, interest has accrued and
continues to accrue on the matured amount at the rate as set out therein."
STANDARD OF REVIEW
The standards for reviewing a summary judgment are well established:
1. The movant for summary judgment has the burden of showing that there
is no genuine issue of material fact and that it is entitled to judgment as a
matter of law.
2. In deciding whether there is a disputed material fact issue precluding
summary judgment, evidence favorable to the non-movant will be taken as
true.
3. Every reasonable inference must be indulged in favor of the non-movant
and any doubts resolved in its favor.
Nixon v. Mr. Property Mgt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).
DISCUSSION
In her third point of error, Pruitt asserts that Franklin Federal did not satisfy its
burden of showing that there are no genuine issues of material fact regarding the amount of
interest to which Franklin Federal is entitled. We agree.
Section 2 of the notes expressly states that the interest rate will change in
accordance with the provisions of Section 4. Section 4 provides that on January 1, 1987, and
every three years thereafter the interest rate will change to the "current index" plus 1.575 percent.
The "current index" is based on the current yield of United States Treasury securities. The
summary judgment evidence contains no information whatsoever from which to calculate what the
current index was on January 1, 1987, or what the interest rate on the notes was after that date.
Nor does Dianne Gordon's affidavit contain any conclusory statements about how much interest
had accrued by a particular date or what the per diem accrual of interest was. In short, there is
absolutely nothing in the summary judgment evidence by which the trial court could determine
how much interest Franklin Federal was entitled to recover.
Franklin Federal cites several cases for the proposition that the nonmovant has the
burden to controvert the movant's summary judgment evidence with his own evidence in order
to raise a fact issue. The nonmovant has no such burden, however, unless and until the movant
has met its summary judgment burden of establishing that there are no genuine issues of material
fact and that it is entitled to judgment as a matter of law. City of Houston v. Clear Creek Basin
Auth., 589 S.W.2d 671, 678 (Tex. 1979). In this instance, Pruitt did not have any burden to
contradict Franklin Federal's motion or present evidence to "raise a fact issue," because Franklin
Federal did not present sufficient evidence to warrant summary judgment in the first instance.
We sustain Pruitt's third point of error.
In light of our foregoing holding, we need not address Pruitt's other points of error
or Franklin Federal's cross-point.
The judgment of the trial court is reversed and the cause is remanded to that court
for further proceedings.
J. Woodfin Jones, Justice
[Before Justices Jones, Kidd and B. A. Smith]
Reversed and Remanded
Filed: February 19, 1992
[Publish] | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1551205/ | 908 A.2d 506 (2006)
280 Conn. 361
STATE OF CONNECTICUTv.
RUSSELL KIRBY
(SC 17531)
Supreme Court of Connecticut.
Argued January 5, 2006
Officially released October 17, 2006
Sullivan, C.J., and Borden, Norcott, Palmer and Zarella, Js.[*]
Jeremiah Donovan, for the appellant (defendant).
Kevin T. Kane, state's attorney, for the appellee (state).
Opinion
NORCOTT, J.
This appeal requires us to consider whether various hearsay statements made by the deceased complainant to a police dispatcher, a responding police officer, and an emergency medical technician were "testimonial" and, therefore, inadmissible as violative of the confrontation clause of the sixth amendment to the United States constitution[1] as explained by Crawford v. Washington, 541 U.S. 36, 124 S. Ct. 1354, 158 L. Ed. 2d 177 (2004). The defendant, Russell Kirby, appeals[2] from the judgment of conviction, rendered after a jury trial, of one count of kidnapping in the second degree in violation of General Statutes § 53a-94,[3] and one count of assault in the third degree in violation of General Statutes § 53a-61.[4] In addition to raising the Crawford and associated evidentiary issues, specifically whether the deceased complainant's statements to the police officer and dispatcher were "spontaneous utterances," the defendant also contends that the trial court improperly denied his motions: (1) to suppress statements that he had made to the police at his residence and at the police station; and (2) for judgment of acquittal based on the trial court's failure to order the state to move for the grant of immunity for a witness pursuant to General Statutes § 54-47a. Guided by the United States Supreme Court's recent decision in Davis v. Washington, U.S. , 126 S. Ct. 2266, 165 L. Ed. 2d 224 (2006), we reverse the judgment of the trial court and remand the case for a new trial.
The record reveals the following facts and procedural history. On the evening of May 2, 2002, Leslie Buck (complainant), a fifty-nine year old second grade teacher, attended a meeting of Alpha Delta Kappa, an honorary sorority for teachers. After the meeting ended at approximately 8:15 p.m., the complainant left the meeting and drove home, intending to stop first at her mother's house to drop off some dessert from the meeting. Later that evening, at approximately 10:45 p.m., Charles Buck, the complainant's husband, called Judy Barber, a close friend of the complainant who also had attended the sorority meeting, and asked about the complainant's whereabouts. Barber did not know where the complainant was at that time.
Buck previously had called the Stonington police at approximately 10:30 p.m., to report the complainant missing.[5] Timothy Thornton, a Stonington police officer, responded to Buck's home and took a report from him. After Thornton spoke to Buck, as well as to Barber, he drove to the nearby A & P supermarket on the chance that the complainant might have stopped there on her way home. While Thornton was at the A & P, the complainant returned home; Buck notified the police of her return via telephone at 11:07 p.m. The complainant then interjected in Buck's conversation with Allyson Gomes, the police dispatcher, and told Gomes that the defendant had surprised her when she arrived home, and then assaulted and abducted her before she was able to escape.[6] Gomes then dispatched Thornton back to Buck's residence, where he interviewed the complainant, whom he found near hysterical and disheveled, but coherent.[7] Thornton then called for medical assistance at that time. After Thornton interviewed the complainant, she was assessed and transported to a hospital by Jeremy Knapp, a volunteer emergency medical technician, and his ambulance crew.[8]
The complainant's statements during her interview with Thornton and telephone call to Gomes, introduced into evidence through Thornton's testimony and the tape recording of the telephone call, develop in greater detail the altercation between the complainant and the defendant as follows. When the complainant arrived home from the meeting, she heard someone call her name. When she turned toward the voice, an individual that she had identified as the defendant struck her on the head and neck with a black object that made a humming noise. She then scuffled with the defendant, who tied her up. The complainant was able to extricate herself at first, but the defendant chased and tackled her again, tying her up more securely the second time. The defendant then put the complainant in her car, a Buick Park Avenue, and threw a bag into the backseat before driving away with her to his residence.
Subsequently, while the defendant and the complainant drove around in her car, he pulled over to the side of the road and untied her. The defendant then pulled over again on Interstate 95 in Mystic because he thought he had hit something after hearing a thumping noise. After the defendant exited the car to check the source of the noise, the complainant, whose hands previously had been untied, was able to use a spare key in her pocket to start the car and drive off, leaving the defendant on the side of the highway. The complainant then drove the car to her home, at which point Buck called the police to tell them that she had returned.
Once the complainant had been transported to the hospital, Thornton and several other police officers, including Sergeant Keith Beebe, met to discuss the case. They subsequently decided to go to the defendant's home to discuss the case with him. When the police arrived at the defendant's home in Ledyard at 4:30 a.m. on May 3, 2002, they knocked on his door. The defendant declined their requests to step outside, but invited the police officers into the house. While in the house, the officers noticed, on the kitchen counter, a key ring that was readily identifiable as belonging to the complainant because she previously had described its emblems and accessories to the officers; they seized those keys. In response to Beebe's question about whether the defendant knew why the police were there, the defendant first said yes, and when asked about whether it was about the complainant, he said yes again. The defendant then admitted to the officers that he had tied up the complainant as part of kidnapping her for money, and asked whether he would be coming with the officers. The defendant was then taken into custody.
Subsequently, David Knowles, a detective sergeant with the Stonington police department, searched the complainant's automobile. He found a duffel bag belonging to the defendant in the backseat containing a .45 caliber handgun and a magazine with seven live rounds, two stun guns, one of which was functional, two plastic bottles of liquid, which turned out to be a chopped olive martini, a hickory log, several ropes, two pairs of men's eyeglasses, and one pair of women's eyeglasses that a local optician subsequently identified as belonging to the complainant. The bag also contained several bandannas and white cotton gloves that were similar to other bandannas and gloves that the police had found on a dresser in the defendant's residence.[9]
Early in the morning of May 3, 2002, the complainant called Barber, and told her what had happened to her. The complainant then went and worked a full day at school. That evening, after Thornton had stopped by the complainant's home to check on her, the complainant died as a result of a fall down a flight of stairs at her home.
Thereafter, the state charged the defendant with one count of kidnapping in the second degree in violation of § 53a-94, two counts of burglary in the first degree in violation of General Statutes § 53a-101 (a) (1) and (2), and one count of assault in the third degree in violation of § 53a-61. The defendant then moved in limine to exclude the complainant's statements to Thornton, Gomes and Knapp as inadmissible hearsay that also would violate the defendant's confrontation clause rights. The defendant also moved to suppress statements that he made to the police after his arrest, as well as the keys that the police had seized from his residence. The trial court denied these motions in two extensive oral decisions. The case was then tried to the jury, and the trial court rendered judgment of conviction in accordance with the verdict of guilty on the kidnapping and assault charges. After denying the defendant's motions for a judgment of acquittal and a new trial, the trial court sentenced the defendant to a total effective sentence of twenty-one years imprisonment, three of which are nonsuspendable.[10] This appeal followed.
I
WHETHER THE COMPLAINANT'S STATEMENTS TO GOMES, THORNTON AND KNAPP WERE PROPERLY ADMITTED INTO EVIDENCE
The primary issue in this appeal is whether the trial court properly admitted into evidence the complainant's statements to Gomes, the police dispatcher who received the telephone call, Thornton, the police officer who initially responded to the call and interviewed the complainant, and Knapp, the emergency medical technician who treated and transported her. The trial court denied the defendant's motions in limine to preclude the admission of those statements, rejecting his claims that the statements: (1) were not "spontaneous utterances" admissible under § 8-3 (2) of the Connecticut Code of Evidence; and (2) were "testimonial" and, therefore, inadmissible under Crawford v. Washington, supra, 541 U.S. 36. We note at the outset that it is undisputed that the defendant properly preserved all of these issues for appellate review when he filed relevant motions in limine, objected again at trial, and reiterated his objection in his motion for a new trial. We begin with the defendant's evidentiary claims.[11]
A
Whether the Complainant's Statements to Gomes and Thornton Were Spontaneous Utterances
The defendant first claims that the trial court improperly admitted the statements to Thornton and Gomes as spontaneous utterances under § 8-3 (2) of the Connecticut Code of Evidence. Specifically, the defendant notes that the complainant made her statements to Thornton and Gomes two and one-half to three hours after she initially had arrived home from the sorority meeting to find the defendant in her garage, and contends that lapse of time and the fact that the complainant was able to drive home created an opportunity for fabrication that rendered these statements inadmissible as spontaneous utterances. The state argues in response that the trial court did not abuse its discretion in determining that the statements were admissible because less than thirty minutes had passed since she had escaped from the defendant, and that both the telephone call tape recording and the witnesses' testimony demonstrated that those statements were made while she was still extremely emotional and fearful. We agree with the state.
"An out-of-court statement offered to prove the truth of the matter asserted is hearsay and is generally inadmissible unless an exception to the general rule applies." (Internal quotation marks omitted.) State v. Wargo, 255 Conn. 113, 127, 763 A.2d 1 (2000). Section 8-3 of the Connecticut Code of Evidence provides that certain statements are "not excluded by the hearsay rule, even though the declarant is available as a witness. . . ." A "spontaneous utterance" is defined as "[a] statement relating to a startling event or condition made while the declarant was under the stress of excitement caused by the event or condition." Conn. Code Evid. § 8-3 (2). Furthermore, the commentary to § 8-3 (2) provides: "The hearsay exception for spontaneous utterances is well established. . . . Although Section 8-3 (2) states the exception in terms different from that of the case law on which the exception is based . . . the rule assumes incorporation of the case law principles underlying the exception.
"The event or condition must be sufficiently startling, so `as to produce nervous excitement in the declarant and render [the declarant's] utterances spontaneous and unreflective.' " (Citations omitted.)
"The excited utterance exception is well established. Hearsay statements, otherwise inadmissible, may be admitted into evidence to prove the truth of the matter asserted therein when (1) the declaration follows a startling occurrence, (2) the declaration refers to that occurrence, (3) the declarant observed the occurrence, and (4) the declaration is made under circumstances that negate the opportunity for deliberation and fabrication by the declarant. . . .
"The requirement that a spontaneous utterance be made under such circumstances as to [negate] the opportunity for deliberation and fabrication by the declarant . . . does not preclude the admission of statements made after a startling occurrence as long as the statement is made under the stress of that occurrence. . . . While [a] short time between the incident and the statement is important, it is not dispositive. . . .
"Whether an utterance is spontaneous and made under circumstances that would preclude contrivance and misrepresentation is a preliminary question of fact to be decided by the trial judge. . . . The trial court has broad discretion in making that factual determination, which will not be disturbed on appeal absent an unreasonable exercise of discretion. . . . Furthermore, although the time period between the occurrence and the utterance is important, it is not dispositive."[12] (Citations omitted; emphasis added; internal quotation marks omitted.) State v. Kelly, 256 Conn. 23, 41-42, 770 A.2d 908 (2001); id., 41 (sexual assault victim's statement made to sister while victim was hysterical and in fetal position, fifteen minutes after arriving home from altercation, properly admitted as spontaneous utterance).
Thus, we follow the rule embraced by the "majority of the jurisdictions that have addressed the issue of the effect of the time interval between the startling occurrence and the making of the spontaneous utterance," and conclude that there is no identifiable discrete time interval within which an utterance becomes spontaneous; "[e]ach case must be decided on its particular circumstances." State v. Stange, 212 Conn. 612, 618, 563 A.2d 681 (1989); id., 618-20 (collecting cases reflecting acceptable time lapses ranging from fifteen minutes to six and one-half hours and upholding victim's statement made fifteen to thirty minutes after shooting as victim was witnessed in "agitated and painful state"); see also State v. Arluk, 75 Conn. App. 181, 188-90, 815 A.2d 694 (2003) (thirty minutes not excessive time between family fight and child blurting out to police officer that he saw "daddy hit his mommy" when child was still under stress of having witnessed that altercation [internal quotation marks omitted]); cf. State v. Gregory C., 94 Conn. App. 759, 771-72, 893 A.2d 912 (2006) (Statements of the victim made to a police officer were not spontaneous utterances when "more than fifteen hours had passed between the time of the alleged sexual assault and the victim's statement to [an investigating police officer]. Further, the victim discussed her alleged assault at length with [her friend] prior to giving her statement. The victim thus had considerable time and opportunity to collect her thoughts and reflect on what had occurred the night before."); State v. McNair, 54 Conn. App. 807, 813, 738 A.2d 689 (noting that when "significant time lapse was allowed" for spontaneous utterance, "the declarant had undergone drastic personal trauma and remained in a severe emotional state from the time of the event until the time of the statement"), cert. denied, 251 Conn. 913, 739 A.2d 1249 (1999). Moreover, that a statement is made in response to a question does not preclude its admission as a spontaneous utterance. See State v. Stange, supra, 619.
We conclude that the trial court did not abuse its broad discretion in determining that the complainant's statements to Thornton and Gomes were admissible as spontaneous utterances pursuant to § 8-3 (2) of the Connecticut Code of Evidence. As the Appellate Court has recognized, "the application of the exception entails a uniquely fact-bound inquiry. The overarching consideration is whether the declarant made the statement before he or she had the opportunity to undertake a reasoned reflection of the event described therein." State v. Westberry, 68 Conn. App. 622, 628, 792 A.2d 154, cert. denied, 260 Conn. 923, 797 A.2d 519 (2002). In the present case, it is undisputed that the complainant's statements followed a startling occurrence, namely, her altercation with the defendant, and that the complainant both observed and referred to that occurrence. With respect to the fourth element, as the defendant himself states, "[t]here can be no doubt that the trial court found correctly that [the complainant] sounded highly emotional when she spoke with [Gomes], [Thornton] and [Knapp]."[13] Moreover, all of the statements at issue were made within one-half hour of the complainant having arrived home from her multihour altercation with the defendant, which our cases indicate is not an excessive time lapse for purposes of avoiding contrivance or fabrication by an alleged victim. See, e.g., State v. Stange, supra, 212 Conn. 618-20; cf. State v. McNair, supra, 54 Conn. App. 813 (Trial court improperly admitted a statement made after a one-half hour time lapse when the declarant "was not the actual or intended victim, or even a close bystander. The witness viewed the incident from the safety of her apartment. The thirty minute intervening period gave the witness ample time to collect her thoughts before making the statements at issue." [Internal quotation marks omitted.]). There also is no evidence that the complainant had the opportunity to speak to anyone else prior to making the statements, which would indicate the opportunity to reflect or contrive a story. See State v. Gregory C., supra, 94 Conn. App. 771-72. "The conclusion that evidence is admissible under a hearsay exception does not preclude the possibility, in a criminal trial, that the same evidence will be inadmissible under the confrontation clause of the sixth amendment. The confrontation clause limits the state's use of hearsay evidence against a criminal defendant at trial." State v. Smith, 275 Conn. 205, 232, 881 A.2d 160 (2005). Accordingly, we now turn to the constitutional issues presented by this case concerning the admissibility of the complainant's statements.
B
Crawford Issues with Respect to Gomes and Thornton
The defendant next claims that the trial court improperly admitted into evidence the complainant's statements made via telephone to Gomes and on the scene to Thornton. The defendant claims specifically that these statements are inadmissible under the United States Supreme Court's recent decision in Davis v. Washington, supra, 126 S. Ct. 2266, which provides greater explication of the application of that court's decision in Crawford v. Washington, supra, 541 U.S. 36, in these contexts.[14]
We first note the standard of review applicable to the trial court's determination of whether a statement is testimonial and, therefore, subject to the admissibility restrictions of Crawford. Because this is a question of constitutional law, we agree with the parties that the trial court's determination is subject to plenary review. Cf. State v. Merriam, 264 Conn. 617, 640-41 n. 27, 826 A.2d 1021 (2003) (following plurality opinion in Lilly v. Virginia, 527 U.S. 116, 119 S. Ct. 1887, 144 L. Ed. 2d 117 [1999], and "conduct[ing] an independent review of the circumstances surrounding the victim's statements in determining whether those statements possess the particularized guarantees of trustworthiness that are necessary to satisfy the requirements of the confrontation clause"); see also Wall v. State, 184 S.W.3d 730, 742-43 (Tex. Crim. App. 2006) ("Although we defer to a trial court's determination of historical facts and credibility, we review a constitutional legal ruling, i.e. whether a statement is testimonial or non-testimonial, de novo. This is particularly so because the legal ruling of whether a statement is testimonial under Crawford is determined by the standard of an objectively reasonable declarant standing in the shoes of the actual declarant. On that question trial judges are no better equipped than are appellate judges, and the ruling itself does not depend upon demeanor, credibility, or other criteria peculiar to personal observation.").
"Traditionally, for purposes of the confrontation clause, all hearsay statements were admissible [under Ohio v. Roberts, 448 U.S. 56, 66, 100 S. Ct. 2531, 65 L. Ed. 2d 597 (1980)] if (1) the declarant was unavailable to testify, and (2) the statement bore adequate indicia of reliability. . . . [In Crawford v. Washington, supra, 541 U.S. 68], the United States Supreme Court overruled Roberts to the extent that it applied to testimonial hearsay statements. . . . In Crawford, the court concluded that the reliability standard set forth in the second prong of the Roberts test is too amorphous to prevent adequately the improper admission of core testimonial statements that the [c]onfrontation [c]lause plainly meant to exclude. . . . The court held, therefore, that such testimonial hearsay statements may be admitted as evidence against an accused at a criminal trial only when (1) the declarant is unavailable to testify, and (2) the defendant has had a prior opportunity to cross-examine the declarant. . . .
"In so concluding, the court drew a distinction between testimonial hearsay statements and those deemed nontestimonial. Where nontestimonial hearsay is at issue, it is wholly consistent with the [f]ramers' design to afford the [s]tates flexibility in their development of hearsay lawas does Roberts, and as would an approach that exempted such statements from [c]onfrontation [c]lause scrutiny altogether. . . . In other words, nontestimonial hearsay statements may still be admitted as evidence against an accused in a criminal trial if it satisfies both prongs of the Roberts test, irrespective of whether the defendant has had a prior opportunity to cross-examine the declarant.
"Although the court declined to define the terms testimonial and nontestimonial, it considered three formulations of th[e] core class of testimonial statements. . . . The first formulation consists of ex parte in-court testimony or its functional equivalentthat is, material such as affidavits, custodial examinations, prior testimony that the defendant was unable to cross-examine, or similar pretrial statements that declarants would reasonably expect to be used prosecutorially. . . . The second formulation consists of extrajudicial statements . . . contained in formalized testimonial materials, such as affidavits, depositions, prior testimony, or confessions. . . . Finally, the third formulation consists of statements that were made under circumstances which would lead an objective witness reasonably to believe that the statement would be available for use at a later trial. . . . The court did not adopt any one particular formulation, noting that, [t]hese formulations all share a common nucleus and then define the [c]lause's coverage at various levels of abstraction around it. Regardless of the precise articulation, some statements qualify under any definitionfor example, ex parte testimony at a preliminary hearing. . . . Similarly, [s]tatements taken by police officers in the course of interrogations are also testimonial under even a narrow standard. . . . Therefore, [w]hatever else the term [testimonial] covers, it applies at a minimum to prior testimony at a preliminary hearing, before a grand jury, or at a former trial; and to police interrogations. These are the modern practices with closest kinship to the abuses at which the [c]onfrontation [c]lause was directed." (Citations omitted; internal quotation marks omitted.) State v. Rivera, 268 Conn. 351, 362-64, 844 A.2d 191 (2004).
The Supreme Court recently considered the applicability of Crawford to more informal statements made to police dispatchers in the context of 911 calls, and to police officers on the scene of a crime. In Davis v. Washington, supra, 126 S. Ct. 2266, the court articulated the following test for determining whether such statements are testimonial and, therefore, inadmissible under Crawford in the absence of a prior opportunity for cross-examination by the defendant: "Statements are nontestimonial when made in the course of police interrogation under circumstances objectively indicating that the primary purpose of the interrogation is to enable police assistance to meet an ongoing emergency. They are testimonial when the circumstances objectively indicate that there is no such ongoing emergency, and that the primary purpose of the interrogation is to establish or prove past events potentially relevant to later criminal prosecution." Id., 2273-74.
The court then applied this test to the facts of the two cases before it.[15] The court first assumed that 911 operators are agents of the police, and concluded that the recording of the 911 call in that case was not testimonial hearsay because the declarant, a domestic violence victim calling to report that her former boyfriend was at her house beating her, "was speaking about events as they were actually happening, rather than `describ[ing] past events. . . .' Moreover, any reasonable listener would recognize that [the caller] . . . was facing an ongoing emergency. Although one might call 911 to provide a narrative report of a crime absent any imminent danger, [the victim's] call was plainly a call for help against bona fide physical threat. Third, the nature of what was asked and answered . . . objectively, was such that the elicited statements were necessary to be able to resolve the present emergency, rather than simply to learn . . . what had happened in the past. This is true even of the operator's effort to establish the identity of the assailant, so that the dispatched officers might know whether they would be encountering a violent felon." (Citation omitted; emphasis in original.) Id., 2276. Ultimately, the Supreme Court concluded that, "the circumstances of the [caller's] interrogation objectively indicate its primary purpose was to enable police assistance to meet an ongoing emergency." (Emphasis added.) Id., 2277. The court did, however, note that a call for help could evolve into testimonial statements once the purpose of the emergency call has been achieved, such as after the emergency has been averted by, for example, the departure of the perpetrator from the scene. It left to trial courts, through in limine procedure, to "redact or exclude the portions of any statement that have become testimonial. . . ." Id.
With respect to the on-scene statements by a domestic violence victim to a police officer, the Supreme Court concluded that the statements before it were testimonial, despite the fact that they were not the formal police station interviews with Miranda warnings initially contemplated in Crawford. Id., 2278. The court used its "primary purpose" test to hold that these statements were testimonial because it "is entirely clear from the circumstances that the interrogation was part of an investigation into possibly criminal past conduct. . . . There was no emergency in progress; the interrogating officer testified that he had heard no arguments or crashing and saw no one throw or break anything. . . ." (Citation omitted.) Id. The court noted that the officer's questioning was directed not at seeking "to determine . . . `what is happening,' but rather `what happened.' Objectively viewed, the primary, if not indeed the sole, purpose of the interrogation was to investigate a possible crimewhich is, of course, precisely what the officer should have done."[16] Id. The court did, however, state that it is not impossible that "questions at the scene will yield nontestimonial answers," as officers might need to make initial inquiries to assess the danger level of the situation. Id., 2279. The court also emphasized that, "in cases like this one, where [the victim's] statements were neither a cry for help nor the provision of information enabling officers immediately to end a threatening situation, the fact that they were given at an alleged crime scene and were `initial inquiries' is immaterial." Id.
1
Applying the Davis test to the facts of the present case, we first conclude that the complainant's statements by telephone to Gomes were testimonial and, therefore, inadmissible under Crawford. A review of Gomes' conversation with the complainant makes clear that the "primary purpose" of the call was to investigate and apprehend a suspect from a prior crime, rather than to solve an ongoing emergency or crime in progress at the time of the call.[17] The defendant properly points out that the call at issue was made after the emergency had been averted and the complainant no longer was under any threat from the defendant because she already had escaped and had left him stranded on the side of the road. Thus, although the complainant might have needed emergency medical assistance at the time she made the call, the bulk of her conversation with Gomes nevertheless consisted of her account of a crime that had happened to her in the recent past, rather than one that was happening to her at the time of the call. This renders the call, viewed as a whole,[18] distinct from the telephone call that was held nontestimonial in Davis, in which the declarant, a domestic violence victim calling to report that her former boyfriend was at her house beating her, "was speaking about events as they were actually happening, rather than `describ[ing] past events. . . .' " (Citation omitted; emphasis in original.) Id., 2276. Put differently, at the time of her telephone conversation with Gomes, the complainant in the present case was not under a "bona fide physical threat" at the hands of the defendant. Id. Her call was made for the purpose of reporting a past criminal act, rather than to avert a presently occurring one. This renders the telephone call recording testimonial and, therefore, inadmissible under Crawford in the absence of an opportunity for prior cross-examination by the defendant. Cf. United States v. Thomas, 453 F.3d 838, 844 (7th Cir. 2006) (applying Davis and concluding that 911 call was nontestimonial when anonymous caller reported there had just been shooting and shooter had immediately fled scene); Jackson v. State, 931 So. 2d 1062, 1063 (Fla. App. 2006) (applying Davis and concluding that 911 tape was nontestimonial when victim "described events as they were actually happening"); Cook v. State, Court of Appeals, Docket No. 01-05-00107-CR, 2006 Tex. App. LEXIS 6431, *6-7 (Tex. App. July 20, 2006) (immediate call to 911 to report intoxicated motorist who had just thrown beer bottle at caller's vehicle and gestured obscenely at him was nontestimonial because it reported "potential crime in progress"). We, therefore, conclude that the trial court improperly admitted the recording of the call into evidence.[19]
2
We conclude similarly as to the complainant's statements to Thornton at her home, which also were testimonial and, therefore, inadmissible under Crawford because the defendant lacked a prior opportunity for cross-examination. The facts and circumstances of this case indicate that, as in Davis, the officer's questioning was directed not at seeking "to determine . . . `what is happening,' but rather `what happened.' Objectively viewed, the primary, if not indeed the sole, purpose of the interrogation was to investigate a possible crime which is, of course, precisely what the officer should have done." Davis v. Washington, supra, 126 S. Ct. 2278. In the present case, just as in Davis, any emergency with respect to the complainant had ceased because the alleged crimes no longer were in progress and she was rendered protected by Thornton's presence at her home, which constituted part of the alleged crime scene in this case. Id., 2279. In this respect, we find instructive State v. Mechling, W. Va. , 633 S.E.2d 311, 323 (2006), a recent case in which the West Virginia Supreme Court of Appeals applied Davis and concluded that a trial court had improperly permitted sheriffs' deputies to testify about statements by a domestic violence victim because "[i]t is clear from the circumstances that the deputies' interrogation of [the victim] was part of an investigation into possibly criminal past conduct." In so holding, the court emphasized that the perpetrator had departed the scene and there "was no emergency in progress when [they] arrived. . . ." Id.; cf. State v. Reardon, Court of Appeals, Docket No. CR-2005-1177, 2006 Ohio App. LEXIS 3960, *7-8 (Ohio App. August 4, 2006) (statements to police officers responding to home invasion nontestimonial and concerned "ongoing emergency" when suspects were still fleeing scene upon officers' arrival). In the present case, Thornton's presence and the fact that the defendant, the alleged perpetrator, was located some distance away, rendered the primary purpose of Thornton's interaction with the complainant investigatory, and her answers to his questions testimonial statements. Accordingly, the trial court improperly permitted Thornton to testify about the complainant's statements to him.[20]
Moreover, the state does not argue in its primary or supplemental briefs that the admission of the statements to Gomes or Thornton, in violation of the defendant's confrontation clause rights, constituted harmless error beyond a reasonable doubt. Accordingly, we must reverse the judgment of the trial court and remand the case for a new trial. This case does, however, present us with a variety of issues that are likely to arise again on remand. We turn to them now, beginning with the defendant's third Crawford claim.
C
Crawford Issues with Respect to Statements Made to Knapp
The defendant does not contest the admissibility of the complainant's statements to Knapp under the medical treatment exception to the hearsay rule, specifically § 8-3 (5) of the Connecticut Code of Evidence,[21] but asks us to conclude that the trial court should have excluded the portions of Knapp's testimony repeating the complainant's statements that she had been " `kidnapped,' " which he considers accusatory and, therefore, testimonial under Crawford. The defendant also argues that the complainant's statement to Knapp was testimonial because of the involvement of the police at the scene. The state argues in response that these statements were not testimonial because they were part of Knapp's immediate response to and medical assessment of the complainant at the scene. We agree with the state.
We begin with a review of Knapp's testimony before the trial court at the motions hearing and before the jury. At the motions hearing, Knapp testified about the complainant's "distraught" and "shak[en]" appearance and about her visible injuries and complaints, including chest and stomach pain, swollen wrists from having her hands tied, and numerous abrasions and lacerations. Knapp and his partner photographed her injuries, and those photographs were admitted at trial. In accordance with his usual medical assessment procedure, Knapp questioned her about the source of her injuries. The complainant told Knapp that she had been "thrown down" and "taken for several hours," but said nothing else other than that she had been to the kidnapper's home before she broke free. Knapp then testified about the first aid and transportation process to Lawrence and Memorial Hospital in New London. The complainant did not tell Knapp who had abducted her, or about the use of a stun gun. At the house, Thornton listened to Knapp's questioning, but did not himself participate in that questioning. Knapp testified consistently at trial. See footnote 8 of this opinion.
We note at the outset that, as with Gomes and Thornton, our review of the trial court's determination as to the testimonial nature of the complainant's statements to Knapp is plenary. See part I B of this opinion. The defendant's claim with respect to the complainant's statements to Knapp implicates the third formulation of testimonial statements under Crawford, namely, "statements that were made under circumstances which would lead an objective witness reasonably to believe that the statement would be available for use at a later trial. . . ." (Internal quotation marks omitted.) Crawford v. Washington, supra, 541 U.S. 52. Most courts considering statements made for medical treatment, in cases that generally have arisen in the assessment and treatment of sexual assault victims, have concluded that, "if an interview is done strictly for medical purposes, and not in anticipation of criminal proceedings, the statement would be considered nontestimonial. . . . [I]f a statement is made as part of an investigation by government officials the statement is generally considered testimonial." (Citations omitted.) State v. Blue, 717 N.W.2d 558, 563 (N.D. 2006); id., 564 (videotaped interview of child sex abuse victim by forensic examiner, taken one week after alleged assault, was testimonial when directed and witnessed by police detective); see also People v. Vigil, 127 P.3d 916, 926 (Colo. 2006) (With no police officer present, an objective witness in a child's position would not see the statements as testimonial because that "child would reasonably be interested in feeling better and would intend his statements to describe the source of his pain and his symptoms. In addition, an objectively reasonable seven-year-old child would expect that a doctor would use his statements to make him feel better and to formulate a medical diagnosis. He would not foresee the statements being used in a later trial."); In re T.T., 351 Ill. App. 3d 976, 992, 815 N.E.2d 789 (2004) (The child victim's statements to a pediatrician "describing the cause of symptoms or pain or the general character of the assault were not testimonial in nature. . . . However, [the victim's] statement identifying [the] respondent as the perpetrator was testimonial. . . ." [Citation omitted.]); Commonwealth v. DeOliveira, 447 Mass. 56, 64, 849 N.E.2d 218 (2006) (child victim's statements "cannot persuasively be said to have been made in response to police interrogation" when police were present at hospital, but not for examination, and they had not "instructed the doctor on the manner in which his examination should proceed"); Foley v. State, 914 So. 2d 677, 685 (Miss. 2005) (child victim's statements to physicians not testimonial because they "were made as a part of neutral medical evaluations" and medical professionals did not contact and were not being used by police); State v. Moses, 129 Wash. App. 718, 730, 119 P.3d 906 (2005) (Domestic violence victim's explanation to an emergency room physician of how her jaw was injured was not testimonial because the "purpose of [the physician's] examination was for medical diagnosis and treatment of [the victim's] significant injuries. [The physician] had no role in the investigation of the assault and he was not working on behalf of or in conjunction with the police or governmental officials to develop testimony for the prosecution."), review denied, 157 Wash. 2d 1006, 136 P.3d 759 (2006).
The key to the inquiry is whether the examination and questioning were for a "diagnostic purpose" and whether the "statement was the by-product of substantive medical activity." In re T.T., supra, 351 Ill. App. 3d 992; id., 993 (pediatrician's "primary investment in cooperating with law enforcement agencies was in facilitating the least traumatic method of diagnosis and treatment for the alleged victim, rather than a specific interest in enforcing sexual abuse laws"). Also significant to whether the statement is testimonial is whether "such statements . . . accuse or identify the perpetrator of the assault." Id.; but see Wallace v. State, 836 N.E.2d 985, 996 (Ind. App. 2005) (dying victim's statements to emergency medical technician and emergency room nurse identifying defendant as shooter not testimonial because record contained no indication that inquiries were "taken in significant part for purposes of preserving it for potential future use in legal proceedings, i.e., with an eye toward trial" [internal quotation marks omitted]).
We conclude that the complainant's statements to Knapp were not testimonial under Crawford, and, therefore, properly were admitted under the "firmly rooted" medical treatment hearsay exception, which satisfied the applicable rule of Ohio v. Roberts, supra, 448 U.S. 66. The statements did not identify the defendant as the assailant, and the complainant's statements about her kidnapping and assaults were relevant to Knapp's determination of the origin of her injuries. They were, therefore, germane to describing the complainant's need for "medical treatment," and were not "testimonial." Moreover, Knapp's questioning of the complainant was secondary to the more detailed interview and statements taken by Thornton at the scene, which we have concluded were testimonial under Crawford. See part I B 2 of this opinion. Accordingly, the trial court properly admitted into evidence Knapp's testimony about the complainant's statements to him.
II
THE DEFENDANT'S MOTIONS TO SUPPRESS
A
Whether Questioning at the Defendant's Residence Constituted a Custodial Interrogation Requiring Miranda Warnings
The defendant next claims that the trial court improperly denied his motion to suppress certain statements that he had made to the police at his residence, which he claims were made without benefit of Miranda warnings.[22] The defendant argues that the trial court improperly concluded that he was not the subject of a custodial interrogation at the time, and that Miranda warnings were, therefore, not required.
In its oral decision, following a suppression hearing, the trial court found that the defendant's statements were not the product of custodial interrogation because he had consented to the police entry of his home and the statements themselves were voluntary. The trial court credited the police officers' testimony that they had gone to the defendant's home only to get his side of the story as part of their investigation, they did not draw their weapons, he invited the officers into his home, and the defendant cooperatively and calmly told them that he had tied up the complainant and kidnapped her for money. The trial court further credited Beebe's testimony that the defendant had stated words to the effect of, "I guess I'm going with you," after relating his story of what had happened. The trial court concluded that the defendant was not in custody until he acknowledged that he was going with the officers and was handcuffed, both of which occurred after he told the police what had happened. The trial court further found that the defendant's statements at his residence were voluntary because there was no show of force and the defendant's will had not been "overborne in any way. . . ."
"Two threshold conditions must be satisfied in order to invoke the warnings constitutionally required by Miranda: (1) the defendant must have been in custody; and (2) the defendant must have been subjected to police interrogation. . . . [A]lthough the circumstances of each case must certainly influence a determination of whether a suspect is in custody for purposes of receiving Miranda protection, the ultimate inquiry is simply whether there is a formal arrest or restraint on freedom of movement of the degree associated with a formal arrest. . . . A person is in custody only if, in view of all the surrounding circumstances, a reasonable person would have believed [that] he was not free to leave. . . . Further, the United States Supreme Court has adopted an objective, reasonable person test for determining whether a defendant is in custody. . . . Thus, in determining whether Miranda rights are required, the only relevant inquiry is whether a reasonable person in the defendant's position would believe that he or she was in police custody of the degree associated with a formal arrest. . . .
"The defendant bears the burden of proving that he was in custody for Miranda purposes. . . . Two discrete inquiries are essential to determine custody: first, what were the circumstances surrounding the interrogation; and second, given those circumstances, would a reasonable person have felt he or she was not at liberty to terminate the interrogation and leave. . . . The first inquiry is factual, and we will not overturn the trial court's determination of the historical circumstances surrounding the defendant's interrogation unless it is clearly erroneous. . . . The second inquiry, however, calls for application of the controlling legal standard to the historical facts. . . . The ultimate determination of whether a defendant was subjected to a custodial interrogation, therefore, presents a mixed question of law and fact, over which our review is de novo." (Citations omitted; internal quotation marks omitted.) State v. Turner, 267 Conn. 414, 434-35, 838 A.2d 947, cert. denied, 543 U.S. 809, 125 S. Ct. 36, 160 L. Ed. 2d 12 (2004).
In the present case, the defendant does not attack the trial court's underlying factual findings, and our review of the record indicates that they are supported by the testimony of the various police officers, including Beebe and Thornton. Rather, the defendant contends that a reasonable person would not have felt free to leave because five police officers arrived at his house in separate vehicles at approximately 4:30 a.m., and that opening his door and inviting the officers inside was only "bowing to superior force" because his choice was interrogation in the dark outside, or interrogation inside the lighted house. He also notes that the officers did not tell him that he was free to leave or to ask them to leave.
We conclude that the trial court properly determined that the defendant did not carry his burden of proving that he was in custody at the time he made his initial statement to the police. We find instructive our decision in State v. Johnson, 241 Conn. 702, 719-20, 699 A.2d 57 (1997), in which we concluded that the interview of a suspect in the kitchen of his father's house was not custodial. In Johnson, detectives investigating the murder of a state trooper during the course of a burglary went to the home of the suspect's father, where the vehicle considered the getaway car had supposedly been parked at the time of the shooting. Id., 716. Two detectives and a uniformed police officer went to the house and saw the carthey then saw the defendant, the suspect's brother, approach the house in his car, slow down as if to turn, but continue past the driveway. Id. "Suspecting that the defendant might know something about [his brother's] involvement in the burglary and shooting, [one detective] and the uniformed police officer entered the unmarked police car and drove after the defendant. They had driven approximately 100 yards when the defendant turned his car around and returned to the house. The police followed him into the driveway.
"The detectives asked the defendant if he would be willing to speak to them inside the house. The defendant agreed. The detectives also asked the defendant's father for permission to speak with his son in his house. He also agreed. The two detectives and the defendant sat at the kitchen table while the defendant's father and the uniformed police officer stayed outside. [One detective] told the defendant that the defendant knew why the detectives were there and that the defendant had a story to tell. [The other detective] then produced a copy of the composite drawing. The defendant stated that he did not know how to begin, and [the first detective] suggested that the defendant use a `once upon a time' method. The defendant then told the detectives about the burglary and the shooting of [a state trooper]. At some point during the defendant's recounting of events, his father entered the kitchen to get a portable telephone and left. The detective then asked the defendant to repeat the story with more detail, and the defendant did so." Id., 716-17.
This court concluded that the interrogation was not custodial, noting that, "[t]he interview took place in the familiar surroundings of his father's kitchen. There was no evidence that the defendant was ever handcuffed or otherwise restrained at the time of the statements, nor did the officers use or threaten the use of force, or display their weapons. The court expressly found that the police had been neutral and reserved. The defendant had access to a telephone. The defendant's father entered the kitchen during this period. The defendant never expressed a desire to leave, stop talking, or speak with his father. Under these circumstances, we cannot conclude that the defendant has met his burden of proving custodial interrogation." Id., 720.
In the present case, evidence at the suppression hearing indicated that the police went to the house to speak to the defendant and get his side of what Beebe called a "fairly bizarre" story, and found the defendant to be calm and cooperative with them. He declined their request to step outside, but invited the police into his house. He told the police that he knew why they were there, and answered affirmatively in response to their question that it was about the complainant. The encounter lasted only ten or fifteen minutes. The officers' guns remained holstered, and the defendant was not handcuffed until after his arrest following his admission of involvement in the kidnapping, even at which point he was permitted to go get his shoes. Accordingly, we conclude that the defendant's statement was not the product of custodial interrogation.
B
Whether Admission of the Defendant's Statement at the Police Station Violated Miranda and Doyle
The defendant next asks for suppression of a comment that he made to Officer Bryan Schneider after his arrest at the police station, claiming that: (1) the statement was unwarned and in response to custodial interrogation in violation of Miranda; and (2) admission of the statement violated Doyle v. Ohio, 426 U.S. 610, 96 S. Ct. 2240, 49 L. Ed. 2d 91 (1976), because it resulted in using the invocation of silence against the defendant.
The record reveals the following additional relevant facts. After he was arrested, Schneider drove the defendant to Stonington police headquarters where he took the defendant into the booking area and removed his handcuffs. Schneider testified that he informed the defendant that he was looking to take a voluntary statement from him, and brought the "necessary paperwork," including a Miranda consent form, and the defendant into an interview room. Schneider and the defendant sat down, and Schneider explained the process, including the notice of rights form, to the defendant. Schneider testified that the officers read the warnings out loud to the defendant, and asked him to initial next to each warning after the defendant indicated that he understood the warnings. When asked whether he understood the warnings, the defendant was silent and did not respond to Schneider. When asked again whether he understood the warnings, the defendant then told Schneider that he was not interested in filling out paperwork because "[h]e stated that he knew what he had done was wrong, that we had what we wanted and that he wasn't gonna go around and around with paperwork. He just wanted to get it over with." Beebe then entered the room, explained the form to the defendant again, and the defendant just bowed his head and closed his eyes. The officers then stopped any questioning altogether. They did not question the defendant at all about the specifics of the events of that night, and attempted only to explain the warnings to him. The trial court concluded that admission of these statements did not violate Miranda because they were not the product of an interrogation, and did not violate Doyle because they were statements and not silence or the invocation of the right thereto.[23] Schneider subsequently testified to this effect at trial.
1
The defendant claims that Schneider's questioning of the defendant as to whether he understood his rights constituted "custodial interrogation" requiring the reading of his Miranda rights because those inquiries constituted "express questioning" that also were " `reasonably likely to elicit an incriminating response from the suspect.' " We disagree. In Rhode Island v. Innis, 446 U.S. 291, 300-302, 100 S. Ct. 1682, 64 L. Ed. 2d 297 (1980), the United States Supreme Court concluded that, "the Miranda safeguards come into play whenever a person in custody is subjected to either express questioning or its functional equivalent. That is to say, the term `interrogation' under Miranda refers not only to express questioning, but also to any words or actions on the part of the police (other than those normally attendant to arrest and custody) that the police should know are reasonably likely to elicit an incriminating response from the suspect. The latter portion of this definition focuses primarily upon the perceptions of the suspect, rather than the intent of the police. This focus reflects the fact that the Miranda safeguards were designed to vest a suspect in custody with an added measure of protection against coercive police practices, without regard to objective proof of the underlying intent of the police. A practice that the police should know is reasonably likely to evoke an incriminating response from a suspect thus amounts to interrogation. But, since the police surely cannot be held accountable for the unforeseeable results of their words or actions, the definition of interrogation can extend only to words or actions on the part of police officers that they should have known were reasonably likely to elicit an incriminating response." (Emphasis added.)
Questions about whether a suspect understands his or her rights do not, without more, constitute " `interrogation' " as that term was defined in Rhode Island v. Innis, supra, 446 U.S. 301-302, but rather are considered "words or actions" that are "normally attendant to arrest and custody. . . ." See Shields v. State, 269 Ga. 177, 179, 496 S.E.2d 719 (1998) (trial court properly denied motion to suppress defendant's statement following question about whether he understood his rights, which was "a routine and appropriate inquiry and we cannot conclude that it constituted interrogation" [internal quotation marks omitted]); State v. Lescard, 128 N.H. 495, 496-97, 517 A.2d 1158 (1986) (questioning about whether defendant understood his rights under implied consent statute "was in no way calculated to produce an incriminating response"); Commonwealth v. Lark, 505 Pa. 126, 133, 477 A.2d 857 (1984) ("fact that the police read appellant his rights and questioned him concerning his understanding of those rights did not violate his apparent wish to remain silent" because those actions were "normally attendant to arrest and custody"); accord State v. Dobson, 221 Conn. 128, 133, 602 A.2d 977 (1992) (serving arrest warrant on suspect in custody "is a procedural formality not tantamount to an initiation of interrogation"); State v. Evans, 203 Conn. 212, 225-27, 523 A.2d 1306 (1987) (discussing Innis and concluding with respect to "routine booking questions," that "not every express question posed in a custodial setting is equivalent to interrogation" when "routine, noninvestigatory questions were unrelated to the crime and were objectively neutral . . . [and] there is nothing in the record to suggest an improper motive on the part of the . . . police" [internal quotation marks omitted]). We, therefore, reject the defendant's claim that Schneider's attempt to ensure that he understood his rights constituted impermissible custodial interrogation.
2
The defendant also claims that the state's introduction of Schneider's testimony constituted use of the defendant's invocation of his right to silence against him in violation of Doyle v. Ohio, supra, 426 U.S. 610, wherein "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. Cabral, 275 Conn. 514, 523, 881 A.2d 247, cert. denied, U.S. , 126 S. Ct. 773, 163 L. Ed. 2d 600 (2005). "[I]t also is fundamentally unfair, and, therefore, a deprivation of due process, for the state to use evidence of a defendant's post-Miranda silence as affirmative proof at trial." (Internal quotation marks omitted.) Id., 524, citing State v. Plourde, 208 Conn. 455, 468, 545 A.2d 1071 (1988), cert. denied, 488 U.S. 1034, 109 S. Ct. 847, 102 L. Ed. 2d 979 (1989). Under Doyle, "silence . . . does not mean only muteness; it includes the statement of a desire to remain silent, as well as of a desire to remain silent until an attorney has been consulted." (Internal quotation marks omitted.) State v. Cabral, supra, 524.
We conclude that the defendant has failed to establish a Doyle violation in the present case. With respect to the defendant's statement, specifically, that "he knew what he had done was wrong" and that he did not want to deal with "paperwork," this statement as testified to by Schneider was neither itself silence nor the invocation of the right to silence. Accordingly, "[t]he Doyle decision . . . is not applicable to the facts of this case. The crucial distinction is that, here, the defendant did not remain silent after he was arrested and advised of his rights. After being given Miranda warnings, the defendant clearly chose to [forgo] his right to remain silent." State v. Talton, 197 Conn. 280, 295, 497 A.2d 35 (1985); id. (defendant cannot use selective silence to tell police only exculpatory parts of story); see also State v. Joly, 219 Conn. 234, 256-57, 593 A.2d 96 (1991) ("[t]he factual predicate of a claimed Doyle violation is the use by the state of a defendant's postarrest and postMiranda silence either for impeachment or as affirmative proof of his guilt," and concluding that "the state offered [a police officer's] testimony for the permissible purpose of presenting the defendant's statements, not his refusals to speak, as evidence of his guilt"). Moreover, to the extent that any silence by the defendant after he made that statement was implicated in the present case, it is not a Doyle violation because "we have permitted the state some leeway in adducing evidence of the defendant's assertion of that right for purposes of demonstrating the investigative effort made by the police and the sequence of events as they unfolded . . . as long as the evidence is not offered to impeach the testimony of the defendant in any way." (Citation omitted; internal quotation marks omitted.) State v. Cabral, supra, 275 Conn. 525. Inasmuch as the defendant has not demonstrated any reliance by the state on his poststatement silence, such as its use in cross-examination or summations, we conclude that there is no Doyle violation in this case.
III
WHETHER THE TRIAL COURT SHOULD HAVE ORDERED THE STATE TO GRANT IMMUNITY TO BUCK OR GRANTED THE DEFENDANT'S MOTION FOR JUDGMENT OF ACQUITTAL
The defendant next claims that the trial court should have ordered the state to grant immunity, pursuant to § 54-47a,[24] to Buck, who invoked his privilege against self-incrimination pursuant to the fifth amendment to the United States constitution; see footnote 5 of this opinion; or have granted the defendant's motions for judgment of acquittal or a new trial.
"As a threshold matter, we must first determine the applicable standard of review that governs our examination of the defendant's claims. The issue of whether a defendant's rights to due process and compulsory process require that a defense witness be granted immunity is a question of law and, thus, is subject to de novo review. . . .
"[A] defendant has a right under the compulsory process and due process clauses to present [his] version of the facts as well as the prosecution's to the jury so [that] it may decide where the truth lies. . . . The compulsory process clause of the sixth amendment generally affords an accused the right to call witnesses whose testimony is material and favorable to his defense. . . .
"We begin our analysis with the statutory provision concerning prosecutorial immunity for witnesses. [Section] 54-47a authorizes the prosecution to grant immunity to state witnesses under certain circumstances. We explicitly have held that § 54-47a confers no such authority upon the courts with regard to defense witnesses. . . . Indeed, this court has held repeatedly that there is no authority, statutory or otherwise, enabling a trial court to grant immunity to defense witnesses. . . . We have no occasion to revisit those holdings today.
"We recognize that other courts have held that under certain compelling circumstances the rights to due process and compulsory process under the federal constitution require the granting of immunity to a defense witness. The federal Circuit Courts of Appeals have developed two theories pursuant to which the due process and compulsory process clauses entitle defense witnesses to a grant of immunity. They are the effective defense theory, and the prosecutorial misconduct theory. . . . Because such circumstances are not presented in this case, however, we need not decide whether either theory is a correct application of the due process or compulsory process clause.
"Under the effective defense theory . . . the trial court has the authority to grant immunity to a defense witness when it is found that a potential defense witness can offer testimony which is clearly exculpatory and essential to the defense case and when the government has no strong interest in withholding . . . immunity. . . . The Third Circuit [Court of Appeals] has held explicitly that under the effective defense theory [i]mmunity will be denied if the proffered testimony is found to be ambiguous [or] not clearly exculpatory. . . ." (Citations omitted; internal quotation marks omitted.) State v. Holmes, 257 Conn. 248, 252-55, 777 A.2d 627 (2001), cert. denied, 535 U.S. 939, 122 S. Ct. 1321, 152 L. Ed. 2d 229 (2002).
The prosecutorial misconduct theory of immunity "is based on the notion that the due process clause [constrains] the prosecutor to a certain extent in [its] decision to grant or not to grant immunity. . . . Under this theory, however, the constraint imposed by the due process clause is operative only when the prosecution engages in certain types of misconduct," which include forcing the witness to invoke the fifth amendment or engaging in discriminatory grants of immunity to gain a tactical advantage, and the testimony must be material, exculpatory and not cumulative, and the defendant must have no other source to get the evidence. (Citations omitted; internal quotation marks omitted.) Id., 256-57.
The present case again provides us with no occasion to reach either of these immunity theories. The defendant has not pointed to anything that Buck might testify to as "clearly exculpatory," and cites as "misconduct" only the state's use of hearsay testimony of an unavailable complainant who may have had some prior animosity against the defendant, an act that has some confrontation clause implications, but does not rise to the level of prosecutorial gamesmanship or misconduct. Thus, we again leave to another day consideration of either theory of immunity under the due process clause.
The judgment is reversed and the case is remanded for a new trial.
In this opinion the other justices concurred.
NOTES
[*] The listing of justices reflects their seniority status on this court as of the date of oral argument.
[1] "The sixth amendment to the United States constitution provides in relevant part: `In all criminal prosecutions, the accused shall enjoy the right . . . to be confronted with the witnesses against him. . . .' The confrontation clause of the sixth amendment is made applicable to the states through the due process clause of the fourteenth amendment." State v. Sandoval, 263 Conn. 524, 532 n. 17, 821 A.2d 247 (2003).
[2] The defendant 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.
[3] General Statutes § 53a-94 provides: "(a) A person is guilty of kidnapping in the second degree when he abducts another person.
"(b) Kidnapping in the second degree is a class B felony for which three years of the sentence imposed may not be suspended or reduced by the court."
[4] General Statutes § 53a-61 provides: "(a) A person is guilty of assault in the third degree when: (1) With intent to cause physical injury to another person, he causes such injury to such person or to a third person; or (2) he recklessly causes serious physical injury to another person; or (3) with criminal negligence, he causes physical injury to another person by means of a deadly weapon, a dangerous instrument or an electronic defense weapon.
"(b) Assault in the third degree is a class A misdemeanor and any person found guilty under subdivision (3) of subsection (a) of this section shall be sentenced to a term of imprisonment of one year which may not be suspended or reduced."
[5] Buck was called to testify at trial, but invoked his fifth amendment privilege against self-incrimination in response to every question asked during both the pretrial hearings and the trial itself, outside the presence of the jury. See part III of this opinion.
[6] We note the following transcript of the tape recording of the conversation between Gomes, Buck and the complainant. The call was received by the Stonington police at 23:07:52 on Thursday, May 2, 2002, and provided as follows:
"[The Complainant]: (Screaming in the background.)
"[Gomes]: Stonington Police Dispatcher Gomes.
"[Buck]: Hello?
"[Gomes]: Stonington Police Department.
"[Buck]: Yeah, Charlie Buck, my wife just came home, she said she was kidnapped!
"[The Complainant]: By [the defendant]! Oh my God!
"[Gomes]: Any description?
"[Buck]: Oh Sweetheart.
"[The Complainant]: Look at me!
"[Buck]: Oh!
"[Gomes]: Is she injured?
"[The Complainant]: He's so sick!
"[Buck]: Hello?
"[Gomes]: Sir?
"[Buck]: Yeah, Thornton was just here.
"[The Complainant]: Oooooh!
"[Buck]: My wife is . . . sweetheart I'm talking.
"[Gomes]: Sir?
"[Buck]: There here get Thornton back here will ya please?
"[Gomes]: The officer there?
"[Buck]: Yeah.
"[Buck]: Ohhhhh . . . oh sweetie.
"[Buck]: Are you . . . there?
"[The Complainant]: I've been bound up!
"[Buck]: Oh god!
"[The Complainant]: I told you I never liked him!
"[Buck]: Nu-huh.
"[Buck]: Hello?
"[Gomes]: Sir, calm down a moment.
"[Buck]: Oh my wife is up here, she's a mess here.
"[Gomes]: Any description of the people who did this?
"[Buck]: She knows who it is she said. She's getting on the phone.
"[The Complainant]: Hello, I just, I came home and this person, a friend of my husband's was in the garage, I think he had a stun gun, he grabbed me by the neck, he kept pulling me, he pushed me down, then he finally, he tied my hands & feet when he took me to his house on where is it? . . . Lantern Hill?
"[Buck]: Yup.
"[Gomes]: Okay, what is his name?
"[The Complainant]: He punched me in the stomach, and I tried to pull away and finally we've been driving around in the car and he just stopped on [Interstate] 95 and he had the keys with him, he has our house keys!
"[Buck]: Oh God!
"[Gomes]: Okay, maam? Maam?
"[The Complainant]: Yes.
"[Gomes]: Listen to me, what was his name please?
"[The Complainant]: [The defendant]. He's about [sixty-five] years old, he stopped on [Interstate] 95 in between Mystic.
"[Gomes]: In your car?
"[The Complainant]: In my car.
"[Gomes]: And he has your car?
"[The Complainant]: He, no, I have the car.
"[Gomes]: Okay.
"[The Complainant]: He untied me. I have an extra key in my pocketbook. I, during the night I got it out and had it in my hand, when he got out of the car to check something, I just shut the door, shoved that in and drove like crazy home here.
"[Buck]: Ohhhhhh.
"[Gomes]: Okay, stay on the phone.
"[The Complainant]: What?
"[Gomes]: Go ahead, Tack 3.
"[The Complainant]: I don't know what they're saying to me?
"[Gomes]: Do you need an ambulance there?
"[The Complainant]: No.
"[Gomes]: Okay.
"[The Complainant]: I don't think so, but I got bad chest pains.
"[Buck]: Oh sweetheart.
"[The Complainant]: What?
"[Gomes]: Talking with officer in the car, the suspect that abducted her is [the defendant], says he's on [Interstate] 95 right now.
"[The Complainant]: And he's on [Interstate] 95 at least he was, in between Allyn Street near the Mystic exit.
"[Gomes]: Talking to officer, near the Mystic exit. She's home, has her vehicle, but he has a set of spare keys with him.
"[The Complainant]: Got mom's keys.
"[Buck]: Ohhhh. I don't know what is the problem he was just here and took all the information. I showed him a picture of her.
"[Gomes]: He's on Mason's Island right now.
"[Buck]: Okay.
"[The Complainant]: I think my thumb's broken.
"[Gomes]: He should be there any minute.
"[Buck]: Okay, oh no.
"[Gomes]: What is [the defendant's] address on Lantern Hill, do you know?
"[The Complainant]: I don't know.
"[Buck]: I don't know.
"[Gomes]: You don't know?
"[Buck]: No. . . .
"[Gomes]: What was he wearing?
"[The Complainant]: What?
"[Gomes]: What was he wearing, maam?
"[The Complainant]: He had on I think corduroy pants and a plaid shirt and he has on a toupee. He had on brown shoes.
"[Gomes]: He had white . . .?
"[The Complainant]: He's got a lot of his stuff in the back of my car. I don't even know what it is.
"[Gomes]: Roger, the officer is there right now.
"[The Complainant]: Okay.
"[Buck]: Alright.
"[Gomes]: Okay.
"[Buck]: Yup.
"[Gomes]: Wait til he makes contact with you.
"[The Complainant]: What?
"[Gomes]: Let me know when he's there.
"[The Complainant]: What time did you get home?
"[Buck]: Oh, about five after ten, I called, called Anna right away and she didn't see you then I called Judy, then Judy said you left about quarter past eight. Oh, oh, you poor thing, your hand is cut oh God, oh God!
"[The Complainant]: Alright, goodbye. (Hangs up.)"
[7] Thornton testified that the complainant appeared as if she had been in a scuffle because her hair was in disarray, her stockings were ripped and she had black marks under her eyes.
[8] Knapp testified that he interviewed the complainant about what had happened in connection with his medical assessment of her. The complainant appeared shaking and upset to him, and also told him that she had been kidnapped and tied up for several hours. Knapp assessed the complainant as having injuries to her hands and shoulder, and she complained of chest and abdominal pain as well.
[9] The defendant testified at trial that he supplemented his Electric Boat pension by working in numerous handyman and mechanic positions. He became very friendly with Buck when he began to do work for Buck's electrical contracting business, and subsequently worked for Buck as a mechanic for his antique cars. In that capacity, he had free access to the garage at Buck's home and the tools kept therein.
The defendant also testified that, on May 2, 2002, which was a rainy night, he was having mechanical difficulties starting his pickup truck, and went to Buck's house to borrow truck parts and tools from the garage. He testified that the complainant arrived home and found him in the garage, and then, because she was angry at him because Buck had paid him with joint funds, attacked him with her pocketbook and large key ring. He then wrestled her and used the stun gun on her in self-defense. He then tied up the complainant and put her in her car in order to go find Buck, who was out at a bar, to settle the issue; he placed his bag in the car. The defendant testified that he did not call the police because he did not want to embarrass his friend's wife. The defendant then testified that he drove the complainant back to his house in Ledyard to get more truck parts, where he unbound her when she calmed down. They then headed back to Stonington on Interstate 95, at which point he pulled over to check the thumping noise and the complainant escaped using her spare key.
The defendant then testified that he had a reason for each of the items in the duffel bag. He testified that he had altercations with vicious Rottweilers at a different job, and he intended to use the martini to drug them and the gun to protect himself if necessary. The log and ropes were intended for leverage for lifting heavy items at that site. The stun gun was going to be used to start his pickup truck, which had electrical problems. Finally, the gloves were intended to alleviate symptoms of the defendant's carpal tunnel syndrome.
[10] The trial court sentenced the defendant to twenty years imprisonment, three of which are nonsuspendable, on the kidnapping count. With respect to the assault charge, the trial court imposed a sentence of one year imprisonment, consecutive to the kidnapping sentence.
[11] We note that the defendant does not contest, on evidentiary grounds, the admission of the complainant's statements to Knapp pursuant to the medical treatment exception to the hearsay rule. See Conn. Code Evid. § 8-3 (5).
[12] This represents an evolution from the "traditional" approach formerly followed by his court, under which there was "a very narrow time frame within which a spontaneous utterance could arise. Rock[hill] v. White Line Bus Co., 109 Conn. 706, 710, 145 A. 504 (1929) (three minutes too long); Perry v. Haritos, [100 Conn. 476, 483, 124 A. 44 (1924)] (utterance permitted where made in such close proximity to accident as to be almost part of and contemporaneous with it). The presence or absence of a very brief time frame between the event and the spontaneous utterance was `decisive.' " State v. McNair, 54 Conn. App. 807, 812, 738 A.2d 689, cert. denied, 251 Conn. 913, 739 A.2d 1249 (1999).
[13] The defendant contends that the statements were inadmissible under the spontaneous utterance exception because the complainant's time driving with the defendant and then driving home after leaving him on the side of the road left her ample time to "reflect upon what she should say in order to explain her own actions, get [the defendant] into serious trouble, and rid her husband of his companionship. . . ." The defendant further argues that "[e]motion . . . is no indicia of trustworthiness," and adds that "the distorting power of shock, fear and excitement cannot be underestimated." These arguments go, however, to the weight afforded to the complainant's statements, and does not necessarily serve to undermine the trial court's determination as to their admissibility.
[14] The present case was briefed and argued prior to the June 19, 2006 release of the United States Supreme Court decision in Davis v. Washington, supra, 126 S. Ct. 2266. On June 22, 2006, to afford the parties the opportunity to address the import of Davis, we ordered them to file simultaneous supplemental briefs addressing the question of whether the trial court properly admitted into evidence the complainant's statements to Gomes and Thornton, in light of the United States Supreme Court's recent decision in Davis.
[15] Davis is a consolidated opinion resolving two cases to which the Supreme Court granted certiorari, specifically, Hammon v. Indiana, 829 N.E.2d 444 (Ind.) (addressing on-scene statements to police officers), cert. granted, U.S. , 126 S. Ct. 552, 163 L. Ed. 2d 459 (2005), and State v. Davis, 154 Wash. 2d 291, 111 P.3d 844 (involving statements to 911 operators), cert. granted, U.S. , 126 S. Ct. 552, 163 L. Ed. 2d 459 (2005).
[16] We note that the United States Supreme Court emphasized that, "[p]olice investigations themselves are, of course, in no way impugned by [its] characterization of their fruits as testimonial. Investigations of past crimes prevent future harms and lead to necessary arrests. While prosecutors may hope that inculpatory `nontestimonial' evidence is gathered, this is essentially beyond police control. Their saying that an emergency exists cannot make it be so. The [c]onfrontation [c]lause in no way governs police conduct, because it is the trial use of, not the investigatory collection of, ex parte testimonial statements which offends that provision. But neither can police conduct govern the [c]onfrontation [c]lause; testimonial statements are what they are." (Emphasis altered.) Davis v. Washington, supra, 126 S. Ct. 2279 n. 6.
[17] The state contends that it is irrelevant to our inquiry that the call was made to a regular telephone number rather than to 911. We agree with this proposition in the limited context of this case because the telephone was dialed not by the complainant, but by Buck.
[18] We recognize that some isolated portions of the telephone call, specifically when the complainant described to Gomes the injuries and chest pains that affected her at the time of the conversation, are not testimonial in nature and, therefore, would not by themselves be barred under Crawford. We conclude, however, that the telephone recording remains inadmissible in its entirety because the recording is so heavily dominated by testimonial statements that redacting them in accordance with the procedure directed in Davis v. Washington, supra, 126 S. Ct. 2277, would leave the nontestimonial portions of the conversation without any meaningful context.
[19] The state contends that the complainant's conversation with Gomes "objectively indicate[d] that the purpose of . . . Gomes' interrogation was to gain information to assess the ongoing event in order to provide appropriate assistance." We disagree with the state's broad portrayal of the circumstances of the call, and its description of the facts of this case as "constitut[ing] an ongoing public safety emergency and a possible medical emergency. . . ." Even if we were to accept the state's contention that the complainant was hysterical and in need of medical assistance, those portions of the call explaining what had happened to her at the hands of the defendant did not point to an ongoing emergency, but rather to an explanation of past events. Put differently, accepting the state's arguments on this point would render meaningless the distinction drawn by the United States Supreme Court, as they would render virtually any telephone report of a past violent crime in which a suspect was still at large, no matter the timing of the call, into the report of a "public safety emergency."
[20] Our conclusion that the complainant's statements to the police officer are inadmissible under Crawford and Davis is not inconsistent with our recent decision in State v. Greene, 274 Conn. 134, 874 A.2d 750 (2005), cert. denied, U.S. , 126 S. Ct. 2981, L. Ed. 2d (2006), a case decided prior to Davis that was our first opportunity to consider the admissibility under Crawford of hearsay statements made to a police officer who had responded to the scene of a crime. In Greene, we concluded that, "where a victim contacts a police officer immediately following a criminal incident to report a possible injury and the officer receives information or asks questions to ensure that the victim receives proper medical attention and that the crime scene is properly secured, the victim's statements are not testimonial in nature because they can be `seen as part of the criminal incident itself, rather than as part of the prosecution that follows.' " Id., 172. In so concluding, we followed the majority of sister state cases decided prior to Davis addressing on-scene statements to police officers, and determined that, under Crawford, two police officers properly could testify concerning the assault victim's statements to them about the circumstances of his shooting and his injury, which had occurred immediately following a shooting spree through a neighborhood in which the defendant had participated. Id., 165, 173.
We conclude that Greene is distinguishable from both the present case and Davis, and, therefore, remains good law in light of the Supreme Court's recent decision. The statements in Greene were near contemporaneous with a shooting spree on the street, in which numerous perpetrators were still at large, and the safety of the citizens in the vicinity was still immediately at issue. At that point, it reasonably and objectively could be said that the police officers' "primary purpose" in their questioning was to secure the scene and ascertain what had happened. Indeed, as the Supreme Court noted in Davis, it explicitly "[did] not hold . . . that no questions at the scene will yield nontestimonial answers. We have already observed of domestic disputes that `[o]fficers called to investigate . . . need to know whom they are dealing with in order to assess the situation, the threat to their own safety, and possible danger to the potential victim.' . . . Such exigencies may often mean that `initial inquiries' produce nontestimonial statements." (Citation omitted; emphasis in original.) Davis v. Washington, supra, 126 S. Ct. 2279.
[21] Section 8-3 (5) of the Connecticut Code of Evidence provides: "A statement made for purposes of obtaining medical treatment or advice pertaining thereto and describing medical history, or past or present symptoms, pain, or sensations, or the inception or general character of the cause or external source thereof, insofar as reasonably pertinent to the medical treatment or advice."
[22] Miranda v. Arizona, 384 U.S. 436, 444, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966) ("[p]rior to any questioning, the person must be warned that he has a right to remain silent, that any statement he does make may be used as evidence against him, and that he has a right to the presence of an attorney, either retained or appointed").
[23] The trial court also rejected these arguments in conjunction with the defendant's motion for a new trial.
[24] General Statutes § 54-47a provides: "(a) Whenever in the judgment of the Chief State's Attorney, a state's attorney or the deputy chief state's attorney, the testimony of any witness or the production of books, papers or other evidence of any witness (1) in any criminal proceeding involving narcotics, arson, bribery, gambling, election law violations, felonious crimes of violence, any violation which is an offense under the provisions of title 22a, corruption in the executive, legislative or judicial branch of state government or in the government of any political subdivision of the state, fraud by a vendor of goods or services in the medical assistance program under Title XIX of the Social Security Act amendments of 1965, as amended, any violation of chapter 949c, or any other class A, B or C felony or unclassified felony punishable by a term of imprisonment in excess of five years for which the Chief State's Attorney or state's attorney demonstrates that he has no other means of obtaining sufficient information as to whether a crime has been committed or the identity of the person or persons who may have committed a crime, before a court or grand jury of this state or (2) in any investigation conducted by an investigatory grand jury as provided in sections 54-47b to 54-47g, inclusive, is necessary to the public interest, the Chief State's Attorney, the state's attorney, or the deputy chief state's attorney, may, with notice to the witness, after the witness has claimed his privilege against self-incrimination, make application to the court for an order directing the witness to testify or produce evidence subject to the provisions of this section.
"(b) Upon the issuance of the order such witness shall not be excused from testifying or from producing books, papers or other evidence in such case or proceeding on the ground that the testimony or evidence required of him may tend to incriminate him or subject him to a penalty or forfeiture. No such witness may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing concerning which he is compelled to testify or produce evidence, and no testimony or evidence so compelled, and no evidence discovered as a result of or otherwise derived from testimony or evidence so compelled, may be used as evidence against him in any proceeding, except that no witness shall be immune from prosecution for perjury or contempt committed while giving such testimony or producing such evidence. Whenever evidence is objected to as inadmissible because it was discovered as a result of or otherwise derived from compelled testimony or evidence, the burden shall be upon the person offering the challenged evidence to establish a source independent of the compelled testimony or evidence." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551235/ | 908 A.2d 1200 (2006)
Stephen J. ACKERMAN, Jr., Appellant,
v.
GENEVIEVE ACKERMAN FAMILY TRUST, et al., Appellees.
No. 05-CV-652.
District of Columbia Court of Appeals.
Argued September 6, 2006.
Decided October 12, 2006.
John T. Szymkowicz, with whom J.P. Szymkowicz, Washington, DC, was on the brief, for appellant.
*1201 George B. Huckabay, Bethesda, MD, for appellees.
Before REID and FISHER, Associate Judges, and SCHWELB, Senior Judge.
FISHER, Associate Judge:
Appellant Stephen J. Ackerman, Jr., lost his lawsuit to reform a trust created by his mother. Enforcing a "no contest" provision of the trust, the trial court then declared that appellant had lost any and all interests he may have had under the trust and his mother's will. Appellant challenges the latter ruling, but we affirm.
I.
In May 2002 Genevieve Ackerman created a revocable trust (the Genevieve Ackerman Family Trust). Her husband, now deceased, created a similar trust, and the Ackermans placed most of their assets in those trusts. The couple's primary purpose was to pay for their health, comfort, and support in their remaining years. A secondary purpose was to provide support for their son, Stephen J. Ackerman, Jr., the appellant. Appellant and his sister, Mary Frances Abbott, were to share the assets remaining after the death of their parents.
Most of the trust provisions are unimportant to this appeal. We mention, however, that Frank Abbott, the Ackermans' son-in-law, was named trustee. Mary Frances Abbott was nominated to be the successor trustee if her husband was unable to serve. Most importantly for this litigation, Article XII of the Trust contained the following provision:
In the event that a beneficiary of any of the trust assets contests the validity of any provision of the Settlor's Will, any trusts which the Settlor or the Settlor's spouse have created, or any transfers to this trust or the trust for the Settlor's spouse, such beneficiary shall lose all of his or her right to any and all interests he or she may have from the Settlor's Will and any trusts which the Settlor or the Settlor's spouse have created. The person who has "contested" shall be deemed to have predeceased me.
Among the assets transferred to the trust were one-half tenant in common interests in three dwellings: (1) the home in the District of Columbia where the Ackermans lived; (2) a home in the District where appellant lived; and (3) a condominium at Sea Colony in Bethany Beach, Delaware. Those properties and other assets were described in Exhibit A, which was attached to the trust agreement "and made a part hereof." This controversy centers on the Delaware condominium, which appellant had hoped to inherit out-right.[1]
In August 2003 Stephen J. Ackerman, Jr., filed a complaint which sought an accounting of the trust assets, income, liabilities, and distributions; removal and replacement of the trustee and successor trustee; and reformation of the trust. Appellant maintained that the condominium at Bethany Beach had been placed in the trust in defiance of his mother's wishes. Named as defendants were the current appelleesthe trust, Frank M. Abbott (the trustee), and Mary Frances Abbott. In addition to answering the complaint, appellees asserted a counterclaim for a declaratory judgment
determining whether the Plaintiff/Counter-Defendant, Stephen J. Ackerman, Jr., has forfeited any rights that he may have had as a beneficiary of Genevieve Ackerman's Last Will and Testament *1202 and/or the Genevieve Ackerman Family Trust and otherwise determining the rights and obligations of the parties to this lawsuit with reference to Article XII ("Contesting This Trust") of the attached Revocable Trust Agreement.
On May 9 and 10, 2005, Judge Weisberg conducted a bench trial, hearing the testimony of Mrs. Ackerman[2] and other witnesses. At the end of the trial the court delivered a detailed oral ruling, which included the following findings of fact. "There was no mistake at all based on the evidence in putting the Sea Colony property into the trust." "Mr. Ackerman's testimony that somehow his sister or Mr. Abbott or Mr. Coroneos [the attorney who drafted the trust instrument] or somebody had slipped it in at the last minute, was not credible to say the least, and there is absolutely no basis to reform the trust or to conclude that it was not intended to be part of the trust in the first place." The court therefore denied the relief requested in appellant's complaint.
Turning to the counterclaim, the court reviewed the law in the District of Columbia and concluded that "no contest" clauses "are perfectly valid and enforceable." Noting local caselaw holding that there is no exception to enforcement of a "no contest" clause even when litigation is brought in good faith and with probable cause, the court commented that "surely there is no exception to [enforcement] where the challenge to the instrument is as without merit as this one has been." Judge Weisberg entered judgment for appellees on both the complaint and their counterclaim, declaring
that Article XII of the Trust is a legally valid and enforceable provision, that Article XII is unambiguous as written and reflects the intent of the Settlor, that Plaintiff, as a beneficiary of the Trust, has, by this action, contested the validity of Trust provisions and of transfers to the Trust, and that by doing so he has "lost all of his . . . right to any and all interests he . . . may have from the Settlor's Will and any trusts which the Settlor or the Settlor's spouse have created."
II.
Different jurisdictions take different positions on whether and when a "no contest" or in terrorem clause in a will or a trust will be enforced. See generally Annotation, Validity and Enforceability of Provision of Will or Trust Instrument for Forfeiture or Reduction of Share of Contesting Beneficiary, 23 A.L.R.4th 369 (1983). However, it is well-established in the District of Columbia that such clauses are valid and enforceable.
The leading case in this jurisdiction is Barry v. American Security & Trust Co., 77 U.S.App. D.C. 351, 135 F.2d 470 (1943), which held that "the court below was unquestionably correct in holding that the interest of Barry under the will was forfeited by his filing of the caveat." Id. at 352, 135 F.2d at 471. The court deemed it settled in the District of Columbia "that a provision avoiding a disposition of property for action of the beneficiary in contesting *1203 the will is valid and will be enforced notwithstanding good faith and probable cause in making the contest." Id. at 353, 135 F.2d at 472. Acknowledging the existence of contrary arguments, the court observed that "[t]he view that the wishes of the testator should be disregarded with respect to the disposition of his property in the interest of greater freedom of litigation does not impress us as resting on a sound or logical basis." Id. at 354, 135 F.2d at 473. Emphasizing the frivolous nature of the litigation, the court observed that "even if the rule avoiding forfeiture where contest is based on probable cause were recognized here, it would not avail appellant [Barry], since there was no probable cause shown for the contest." Id.
Some commentators thought that the sentence last quoted expressed a narrow holding in Barry, leaving uncertain the views of this jurisdiction about will contests conducted in good faith and with probable cause. However, any uncertainty was resolved several years later when the United States Court of Appeals held that a "forfeiture provision contained in [a] will [is] valid and the filing of [a] caveat [a contest of the will] work[s] a forfeiture of the interest of the devisee filing it, irrespective of the question of good faith or probable cause for the litigation." Sullivan v. Bond, 91 U.S.App. D.C. 99, 198 F.2d 529 (1952) (citation omitted).[3] Although no-contest clauses "appear most frequently in wills, there appears to be no reason to apply a different test in determining the validity of such a clause in a living trust instrument. . . ." BOGERT, THE LAW OF TRUSTS AND TRUSTEES § 181 at 94 (rev. 2d ed. 1979 and 2005 Supp.).[4]
This court has not discussed the issue, but Barry and Sullivan are binding upon us. See M.A.P. v. Ryan, 285 A.2d 310, 312 (D.C.1971) (decisions of the D.C. Circuit prior to February 1, 1971, are binding upon a division of this court). Moreover, we recognized the vitality of the forfeiture doctrine in In re Estate of Delaney, 819 A.2d 968, 996 (D.C.2003), noting the trial court's holding that Valentine's attempted contest of the will stripped her of her status as a legatee by operation of the no-contest clause in the will. Id. & n. 22. See also In re Estate of Himmelfarb, 345 A.2d 477, 480 & n. 8 (D.C.1975) (settlement agreement provided that beneficiary who withdrew her caveat contesting the will would receive her bequest notwithstanding the will's in terrorem clause).
Appellant notes that the validity of in terrorem clauses in the District of Columbia has not been addressed by an appellate court in many years and contends that we "should, based upon modern decisions of other state supreme courts, hold that [appellant] did not violate the in terrorem provision in the Genevieve Ackerman Family Trust by filing his Complaint." Appellant's brief focused more directly on the validity of such clauses, but his counsel spent much of his time at oral argument asserting that filing and trying appellant's *1204 complaint did not constitute a violation of the "no contest" provision included in this trust.
The first step in answering that question is to look at the language of Article XII, which is quoted in full above. It specifically applies to "a beneficiary of any of the trust assets" who "contests the validity of . . . any transfers to this trust. . . ." The complaint filed by appellant did exactly that. It alleged that "[p]rior to May 24, 2002, Genevieve Ackerman explicitly instructed the attorney for the Trust that her condominium unit located in the Sea Colony complex on Bethany Beach, Delaware should be inherited outright by Stephen J. Ackerman, Jr. upon her death." Nevertheless, "the Sea Colony condominium was inadvertently placed via deed in the Trust rather than kept in Genevieve Ackerman's name." Using much stronger language, the complaint then asserted that "the placement of the deed to the Sea Colony Condominium property in the Trust was in defiance of Genevieve Ackerman's wishes." For relief, it requested, among other things, that the court "reform the Trust to reflect the true Settlor's true purposes in establishing the Trust. . . ." It seems clear to us that "reforming" the trust to reflect the settlor's purposes (as alleged by appellant) would have required returning the property to Mrs. Ackerman. Appellant plainly was contesting the validity of the transfer of the Sea Colony condominium to the trust.
The rule we are bound to apply might have unfair consequences in some situations,[5] but, on the whole, we do not believe that this is one of them. The trier of fact concluded that there was no factual basis for the complaint. "There was no mistake at all based on the evidence in putting the Sea Colony property into the trust." "[T]here is absolutely no basis to reform the trust or to conclude that it was not intended to be part of the trust in the first place." Indeed, the "no contest" provision was added to the trust with the hope of forestalling this very litigation over the condominium.
III.
The "no contest" provision in the trust is valid and enforceable, and appellant's lawsuit to "reform" the trust clearly violated it. The judgment of the Superior Court is hereby
Affirmed.
NOTES
[1] This was not a unilateral hope on appellant's part. Before her death his aunt, who then owned the property jointly with Mrs. Ackerman, had voiced her intention to leave it to appellant. Before she created the trust, his mother had stated the same intention.
[2] Mrs. Ackerman clearly was upset by this litigation between her children, and she testified, among other things, that the "no contest" provision was "inhuman" because her son would be "considered as dead" if he "disapprove[d] of [the trust]." The trial court viewed this testimony as "an emotional reaction" to the "lawyers' language" in Article XII. "[I]t suggests . . . that her son [would] have predeceased her and that of course is not something she can accept easily." Nevertheless, having heard all the testimony, the court concluded that Article XII "is unambiguous, intended by the settlor at the time, and, therefore, enforceable according to its terms." This finding regarding the settlor's intent certainly is not clearly erroneous.
[3] The Uniform Probate Code provides that a no-contest clause "is unenforceable if probable cause exists for instituting proceedings." UPC § 3-905. The District of Columbia has not adopted this provision. Endorsing the same rule, phrased differently, the RESTATEMENT provides that such a clause "is enforceable unless probable cause existed for instituting the proceeding." RESTATEMENT (THIRD) OF PROPERTY, § 8.5 (2003).
[4] The rule endorsed in the RESTATEMENT (THIRD) OF PROPERTY differs somewhat from our common law. See note 3, supra. Nevertheless, the RESTATEMENT recognizes that "[w]ith the increase in the use of revocable inter vivos trusts as will substitutes, no-contest clauses restraining challenges of particular provisions in those trusts serve the same purpose as do such clauses in wills, and the same test applies to determine the validity of those clauses in the two comparable situations." Id. at § 8.5 (comment i).
[5] Appellees rest their argument squarely upon the efforts of Mr. Ackerman, Jr., to reverse the transfer of the Sea Colony condominium. We do not consider whether there might be an exception to the general rule if a beneficiary, in good faith and with probable cause, sought to remove a trustee who apparently was embezzling assets. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551238/ | 908 A.2d 556 (2006)
98 Conn. App. 93
STATE OF CONNECTICUTv.
JAMES J. FARR.
(AC 26050)
Appellate Court of Connecticut.
Argued April 25, 2006.
Officially released October 17, 2006.
Bishop, Harper and McDonald, Js.
Mary H. Trainer, special public defender, for the appellant (defendant).
Bruce R. Lockwood, assistant state's attorney, with whom, on the brief, were James E. Thomas, state's attorney, and David L. Zagaja, assistant state's attorney, for the appellee (state).
Opinion
MCDONALD, J.
The defendant, James J. Farr, appeals from the judgment of conviction, rendered after a jury trial, of robbery in the first degree in violation of General Statutes § 53a-134 (a) (4) and interfering with an officer in violation of General Statutes § 53a-167a. The defendant claims that (1) he was subjected to an illegal search and seizure and that any resulting evidence should have been suppressed, (2) there was insufficient evidence to support his conviction of robbery in the first degree and (3) the prosecutor engaged in misconduct that deprived him of a fair trial. We affirm the judgment of the trial court.
The jury reasonably could have found the following facts. On March 1, 2003, the victim, Kim Campbell, a registered nurse, arrived at Riverside Health Care Center at 745 Main Street in East Hartford at approximately 6:50 p.m. for her nursing assignment. As the victim parked and exited her car, a man jumped out at her over a snowbank, stuck what appeared to be a gun in her face and demanded her purse. When the victim stated that she did not have a purse, the man demanded her money. The victim took her wallet from under the driver's seat of her car and handed it to the man, who then fled with the wallet. The victim's wallet contained her motor vehicle operator's license, one or two credit cards, telephone cards and a handful of silver coins.
After the man fled, the victim called 911 with her cellular telephone and reported the incident. Kwanza Clayton, an officer with the East Hartford police department, arrived within five minutes, and the victim told him that a white man, about five feet, ten inches in height, wearing dark clothing and a mask had robbed her and fled, running in a northbound direction. Clayton then broadcast the information to fellow officers over the police radio. Robert Pronovost, a sergeant with the East Hartford police department, responded within one minute, reporting that he had seen a white male matching the description about 5000 feet, less than one mile, from Riverside Health Care Center, running in an open field in an easterly direction toward the Walgreens store on Main Street in East Hartford.
Pronovost stopped the man, who later was identified as the defendant, in the parking lot of the Walgreens and performed a Terry search for weapons. See Terry v. Ohio, 392 U.S. 1, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968). Pronovost saw that the defendant was wearing a white sweatshirt and, during the search, noticed that he had dark gloves in his back pocket. Pronovost perceived that although the weather that night was very cold and clear, the defendant's heart was racing and he was perspiring profusely. In the front pocket of the defendant's sweatshirt, Pronovost found a purple telephone card and $4.55 in silver coins. The defendant was detained and placed in custody.
The police took the defendant back to the victim at Riverside Health Care Center. The victim was able to recognize the defendant's eyes and noticed that he had the same size and build as the man who had taken her wallet, but was not able positively to identify the defendant as the perpetrator. The defendant identified himself as "David LaForest" and provided a birth date of December 5, 1964. The police later discovered that the defendant was James Farr with a birth date of September 24, 1964. At trial, the victim described the perpetrator as a white male who was wearing a dark ski mask and gloves and dressed in dark clothing with something like "a white lining" or "the collar of his coat" or "white clothing underneath" that was revealed around his neck area. The victim could see that he was a white man by the color of the skin underneath his eyes, which was exposed by the eyeholes cut out of the ski mask.
At the scene, when questioned about where he had been, the defendant answered that he had been to visit his mother at 886 Main Street and his friend, Donald Tilson, at 44 Connecticut Boulevard in East Hartford. An officer then went to 886 Main Street and knocked on the door but received no answer. When confronted with this information, the defendant stated that he had gone to the address, rang the doorbell and there had been no answer. Shortly thereafter, Pronovost received a call from another officer that something of interest had been found in a garbage can next to a rooming house at 42-44 Connecticut Boulevard, which was about fifty to seventy-five yards from where Pronovost first saw the defendant. Under the lid at the top of the garbage can was a black jacket and a black sweatshirt, and about seven feet away on the ground was a black ski mask. No firearm was ever recovered.[1] The recovered items were taken to the scene where the victim identified them as having been worn by the perpetrator. She also recognized the purple telephone card as belonging to her. As to the silver coins found on the defendant, the victim did not know the exact amount of the coins that she had had in her wallet but did know that it had been a handful of silver coins.
On April 22, 2003, Clayton executed a search warrant for DNA samples from the defendant. The black ski mask was submitted for DNA testing, and a swabbing from the inside of the ski mask demonstrated that the defendant was included as a contributor to the DNA profile from the mask. A swabbing from the outside of the ski mask demonstrated that the defendant could not be eliminated as a contributor to the DNA material on the mask.
In a letter dated September 22, 2003, and addressed to Judge Solomon, who had appointed the defendant's public defender, the defendant offered his version of the events that took place on March 1, 2003. At trial, the letter was offered into evidence by the state and read to the jury. In the letter, the defendant denied having committed the robbery. He said that drizzling rain had been falling as he jogged toward Walgreens. He admitted that the clothes recovered by the police were his, but he claimed that he had given them to a homeless friend named Kevin Luzey. He also claimed in the letter that the purple telephone card and silver coins that the police had found on him had been given to him by Luzey.
After the trial, the jury returned a verdict of guilty. The defendant was sentenced to a total effective term of seven years incarceration followed by five years of special parole. This appeal followed. Additional facts will be set forth as needed.
I
The defendant claims that he was subjected to an illegal search and seizure and that any resulting evidence should have been suppressed. On appeal, he argues that the police lacked a reasonable and articulable suspicion to detain him and that they subjected him to an improper Terry search.[2] He therefore maintains that the telephone card, coins and gloves seized as a result of the illegal search should have been suppressed as "fruits of the poisonous tree."[3] We decline to review this claim because the defendant has not satisfied the first prong of State v. Golding, 213 Conn. 233, 23940, 567 A.2d 823 (1989).
The defendant concedes that his claim was not preserved properly and argues that he is entitled to review under Golding. In Golding, our Supreme Court set forth the conditions under which a defendant can prevail on an unpreserved constitutional claim. Id. A defendant can prevail 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." Id. "The first two [prongs of Golding] involve a determination of whether the claim is reviewable; the second two . . . involve a determination of whether the defendant may prevail." State v. George B., 258 Conn. 779, 784, 785 A.2d 573 (2001).
In Golding, our Supreme Court stated that "[t]he defendant bears the responsibility for providing a record that is adequate for review of his claim of constitutional error. If the facts revealed by the record are insufficient, unclear or ambiguous as to whether a constitutional violation has occurred, we will not attempt to supplement or reconstruct the record, or to make factual determinations, in order to decide the defendant's claim." State v. Golding, supra, 213 Conn. 240.
The defendant did not file a motion to suppress, no suppression hearing was held and the court had no opportunity to make any factual or legal findings as to this issue. The defendant, however, relying on State v. Torres, 230 Conn. 372, 37980, 645 A.2d 529 (1994), argues that the record at hand is adequate for Golding purposes, even if the court never found any facts or reached a conclusion of law, because the record contains the factual predicates for making such a determination. "Under the Golding doctrine, a conclusion of law can properly be made by an appellate court, even if the trial court was never asked to make, and never made, such a determination, so long as the factual record is adequate to provide the basis for such a conclusion." Id., 379. The question of whether a reasonable and articulable suspicion arises from an underlying set of facts is a legal conclusion. Id. "Accordingly, if there is in the appellate record a sufficient underlying set of facts upon which an appellate court can answer the question of whether a reasonable and articulable suspicion existed, the first prong of Golding is satisfied." Id., 37980. In this case, therefore, the question is the existence of such a record. Here, the defendant directs us to the testimony of Clayton and Pronovost as providing the set of facts that will allow us to make our determination.
The defendant argues that the record is sufficient to reveal that the police lacked a reasonable and articulable suspicion at the time he was stopped. We set forth the applicable legal principles. "Under the fourth amendment to the United States Constitution and article first, §§ 7 and 9, of our state constitution, a police officer is permitted in appropriate circumstances and in an appropriate manner to detain an individual for investigative purposes if the officer believes, based on a reasonable and articulable suspicion that the individual is engaged in criminal activity, even if there is no probable cause to make an arrest." (Internal quotation marks omitted.) State v. Straub, 90 Conn. App. 147, 15051, 877 A.2d 866, cert. denied, 275 Conn. 927, 883 A.2d 1252 (2005). "Reasonable and articulable suspicion is an objective standard that focuses not on the actual state of mind of the police officer, but on whether a reasonable person, having the information available to and known by the police, would have had that level of suspicion. . . . In ascertaining whether reasonable suspicion existed for the patdown search, the totality of the circumstancesthe whole picturemust be taken into account." (Internal quotation marks omitted.) State v. Starks, 94 Conn. App. 325, 33031, 892 A.2d 959, cert. denied, 278 Conn. 918, 901 A.2d 44 (2006). "The trial court must consider whether, in light of the totality of the circumstances, the police had a particularized and objective basis for suspecting that person of criminal activity. . . . The trial court's conclusions must stand unless they are legally and logically inconsistent with the facts found." (Citation omitted.) State v. Pettway, 39 Conn. App. 63, 71, 664 A.2d 1125, cert. denied, 235 Conn. 921, 665 A.2d 908 (1995).
An examination of the record leads us to conclude that it is inadequate for review. We do not know if all of the facts surrounding Pronovost's detention of the defendant were brought to light during the trial. We do not know how many other people were in the vicinity of the crime scene or what other people were nearby when the defendant was first observed. See State v. Daniels, 248 Conn. 64, 8081, 726 A.2d 520 (1999). Neither party questioned Pronovost specifically as to the totality of the circumstances under which he first observed the defendant. As our Supreme Court observed in State v. Tatum, 219 Conn. 721, 727 n. 11, 595 A.2d 322 (1991), we have "no way of divining what evidence the state might have presented to rebut the defendant's claim. . . ." We thus conclude that the factual background necessary for disposition of this claim is deficient.
The defendant also argues that the police subjected him to an improper Terry search. Specifically, he contends that Pronovost's search of the defendant in the Walgreens parking lot exceeded the limits of the plain feel doctrine.
"In Minnesota v. Dickerson [508 U.S. 366, 113 S. Ct. 2130, 124 L. Ed. 2d 334 (1993)], the United States Supreme Court established the plain feel exception to the warrant requirement, as a matter of federal constitutional law. Under Dickerson, a police officer acting without a warrant may seize contraband that the officer detected through the sense of touch during a lawful patdown search. . . . Specifically, the United States Supreme Court held that, [i]f a police officer lawfully pats down a suspect's outer clothing and feels an object whose contour or mass makes its identity immediately apparent, there has been no invasion of the suspect's privacy beyond that already authorized by the officer's search for weapons; if the object is contraband, its warrantless seizure would be justified by the same practical considerations that inhere in the plain-view context." (Emphasis in original; internal quotation marks omitted.) State v. Gregory, 74 Conn. App. 248, 26263, 812 A.2d 102 (2002), cert. denied, 262 Conn. 948, 817 A.2d 108 (2003).
Our review of the record discloses that the facts concerning the patdown are not sufficiently developed to consider this issue. Pronovost's testimony reveals only that he performed a patdown and found gloves in the defendant's back pocket, and a telephone card and $4.55 in change in the defendant's front sweatshirt pocket. There is nothing to indicate, as the defendant now asserts, that Pronovost continued to search the defendant even after determining that there were no weapons or that he did not feel suspicious items on the defendant during the patdown.
In light of the foregoing, we conclude that this claim was not developed sufficiently in the trial court for this court to review the circumstances surrounding the search and seizure of the defendant and whether any resulting evidence should have been suppressed. Consequently, the defendant's claim fails to satisfy the first prong of the Golding analysis, and we therefore decline to afford it review.
II
The defendant next claims that there was insufficient evidence to support his conviction of robbery in the first degree. In support of his claim, the defendant argues that the victim's testimony never positively identified him as the person who robbed her and that the clothing, telephone card and coins recovered near the scene of the crime could not reliably be connected to him. He therefore contends that "[a] reasonable jury could not have concluded that the victim identified the defendant beyond a reasonable doubt." We are not persuaded.
"In reviewing a sufficiency [of the evidence] claim, we apply a two part test. First, we construe the evidence in the light most favorable to sustaining the verdict. Second, we determine whether upon the facts so construed and the inferences reasonably drawn therefrom the jury reasonably could have concluded that the cumulative force of the evidence established guilt beyond a reasonable doubt. . . . This court cannot substitute its own judgment for that of the jury if there is sufficient evidence to support the jury's verdict. . . . In conducting our review, we are mindful that the finding of facts, the gauging of witness credibility and the choosing among competing inferences are functions within the exclusive province of the jury, and, therefore, we must afford those determinations great deference." (Citation omitted; internal quotation marks omitted.) State v. James P., 96 Conn. App. 93, 9798, 899 A.2d 649 (2006).
On the basis of our review of the record, we conclude that even though the victim was not able positively to identify the defendant, there was sufficient circumstantial evidence to support the jury's finding that he was the person who robbed the victim. "Where . . . the identification of the defendant is derived from circumstantial evidence, it is, nonetheless, the cumulative impact of a multitude of factors that must be examined to determine whether the identification of the defendant has been satisfactorily established by circumstantial evidence. . . . In criminal cases, including the most serious ones, the fact that an accused was the person who committed the criminal act may be proved by circumstantial evidence." (Internal quotation marks omitted.) State v. Barlow, 70 Conn. App. 232, 238, 797 A.2d 605, cert. denied, 261 Conn. 929, 806 A.2d 1067 (2002).
Minutes after the victim was robbed, the defendant was found by the police less than one mile from the scene of the crime, running and perspiring profusely. The weather was cold, and he did not wear outer clothing. At trial, the victim described the perpetrator as wearing dark clothing with something white underneath, a dark ski mask and gloves. When the defendant was detained, he was wearing a white sweatshirt and carried dark gloves in his pocket. A black jacket, black sweatshirt and black ski mask were found near a house that the defendant admitted to having visited that evening. When the defendant was brought to the victim for identification, she was able to recognize his eyes and noticed that he had the same size and build as the man who had taken her wallet. She also recognized the black clothing and black ski mask found by the police as having been the items of clothing worn by the perpetrator. Additionally, the victim recognized as belonging to her the purple telephone card found on the defendant. Although she did not know the exact amount of the change that she had had in her wallet, she did know that she had been carrying a handful of silver change. The defendant was found with $4.55 in silver change in the front pocket of his sweatshirt. The inside of the ski mask contained a DNA profile that included the defendant as a contributor, and the defendant could not be excluded as a contributor to the DNA material on the outside of the mask. In the defendant's letter to Judge Solomon, he stated that he had given his jacket and other clothing to Kevin Luzey that night and later received the victim's telephone card and some change from Luzey.
Reviewing the evidence in the light most favorable to sustaining the verdict, we conclude that sufficient evidence existed to convict the defendant of robbery in the first degree in violation of § 53a-134 (a) (4). The defendant's claim, therefore, fails.
III
The defendant asserts that the prosecutor engaged in misconduct during closing and rebuttal arguments that deprived him of a fair trial. Specifically, the defendant argues that the prosecutor's comments inappropriately appealed to the jury's emotions and improperly alluded to facts not in evidence. On the basis of our review of the record, we do not agree that misconduct occurred.
The defendant failed to object to the alleged instances of misconduct at trial and, thus, his claims are unpreserved.[4] We will, however, review his claims following the analytic approach set forth by our Supreme Court in State v. Stevenson, 269 Conn. 563, 57273, 849 A.2d 626 (2004). In Stevenson, the court held that "following a determination that prosecutorial misconduct has occurred, regardless of whether it was objected to, an appellate court must apply the . . . factors [set forth in State v. Williams, 204 Conn. 523, 540, 529 A.2d 653 (1987)] to the entire trial." State v. Stevenson, supra, 575. Before we review the challenged remarks, we set forth our standard of review.
"Prosecutorial misconduct claims invoke a two step analysis. First, the reviewing court must determine whether the challenged conduct did, in fact, constitute misconduct. Second, if misconduct occurred, the reviewing court must then determine if the defendant has demonstrated substantial prejudice. . . . In order to demonstrate this, the defendant must establish that the trial as a whole was fundamentally unfair and that the misconduct so infected the trial with unfairness as to make the conviction a denial of due process." (Citation omitted; internal quotation marks omitted.) State v. Pedro S., 87 Conn. App. 183, 187, 865 A.2d 1177, cert. denied, 273 Conn. 924, 871 A.2d 1033 (2005).
Because the claimed prosecutorial misconduct occurred during closing arguments, we advance the following legal principles. "[P]rosecutorial misconduct of a constitutional magnitude can occur in the course of closing arguments. . . . In determining whether such misconduct has occurred, the reviewing court must give due deference to the fact that [c]ounsel must be allowed a generous latitude in argument, as the limits of legitimate argument and fair comment cannot be determined precisely by rule and line, and something must be allowed for the zeal of counsel in the heat of argument. . . . Thus, as the state's advocate, a prosecutor may argue the state's case forcefully, [provided the argument is] fair and based upon the facts in evidence and the reasonable inferences to be drawn therefrom." (Internal quotation marks omitted.) State v. Boyd, 89 Conn. App. 1, 2930, 872 A.2d 477, cert. denied, 275 Conn. 921, 883 A.2d 1247 (2005).
A
The defendant argues that the prosecutor's comments during closing and rebutttal arguments inappropriately appealed to the jury's emotions.
In closing argument, the prosecutor commented to the jury: "Does it make sense that someone like this defendant, and I'm not asking you to speculate that he's like anything or not like anything, but he did retrieve clothing, gave it to Kevin Luzey, stayed with just a sweatshirt on; in fact, gave him a nylon jacket, but he finds it important to explain in the letter . . . that it was drizzling out. The drizzle, which actually contradicts the stipulation [entered into by the parties] relative to the weather conditions, is an explanation for his shirt being wet, rather than [his having been] sweating profusely because he just ran after committing a robbery, and he was sweating and his heart was beating. . . . I ask you to consider what type of a person he is or how generous he is in that he would leave himself with just a sweatshirt, give this clothing to a person named Kevin Luzey and be exposed to the elements, the rain?" Later, in rebuttal argument, the prosecutor commented: "I'm not going to go through it, but what strikes me is the similarities between an episode of [the television program] M*A*S*H I saw where I think Hawkeye and Trapper set Frank Burns up, and they set him up with some false information and he bit and that's just it; he bit."
The defendant argues that by these comments, the prosecutor characterized the defendant as "a meanspirited, selfish, inconsiderate person" in the first instance and "a fool and a buffoon who is not caring, generous or kind" in the second instance.
"It is well settled that [a] prosecutor may not appeal to the emotions, passions and prejudices of the jurors. . . . When the prosecutor appeals to emotions, he invites the jury to decide the case, not according to a rational appraisal of the evidence, but on the basis of powerful and irrelevant factors which are likely to skew that appraisal. . . . Therefore, a prosecutor may argue the state's case forcefully, [but] such argument must be fair and based upon the facts in evidence and the reasonable inferences to be drawn therefrom. . . . Nor should a prosecutor express his opinion, directly or indirectly, as to the guilt of the defendant. . . . Such expressions of personal opinion are a form of unsworn and unchecked testimony, and are particularly difficult for the jury to ignore because of the prosecutor's special position. . . . Nevertheless, [w]hen making closing arguments to the jury . . . [c]ounsel must be allowed a generous latitude in argument, as the limits of legitimate argument and fair comment cannot be determined precisely by rule and line, and something must be allowed for the zeal of counsel in the heat of argument." (Citation omitted; internal quotation marks omitted.) State v. Little, 88 Conn. App. 708, 71718, 870 A.2d 1170, cert. denied, 274 Conn. 916, 879 A.2d 895 (2005).
The prosecutor's first comment did not characterize the defendant as "a mean-spirited, selfish, inconsiderate person," as the defendant contends. The prosecutor set forth the evidence and asked the jury to weigh that evidence and to use common sense to determine the likelihood of the defendant's version of events. "Remarks that are nothing more than a permissible appeal to the jurors' common sense do not constitute prosecutorial misconduct." State v. Lindo, 75 Conn. App. 408, 416, 816 A.2d 641, cert. denied, 263 Conn. 917, 821 A.2d 771 (2003). There is also no rule that precludes a prosecutor from challenging the defendant's account. See State v. Pedro S., 87 Conn. App. 183, 199, 865 A.2d 1177, cert. denied, 273 Conn. 924, 871 A.2d 1033 (2005).
As to the prosecutor's comment during rebuttal argument noting similarities to an episode of a television show, it did not represent the defendant as "a fool and a buffoon who is not caring, generous or kind." It was a rhetorical device that was clarified when the prosecutor quickly made it clear that he was discussing the letter written by the defendant. The prosecutor went on to point out inconsistencies between some of the evidence and what was represented in the letter. "[T]he occasional use of rhetorical devices is simply fair argument." (Internal quotation marks omitted.) State v. Thompson, 266 Conn. 440, 464, 832 A.2d 626 (2003) (noting that rhetorical device of incorporating literary theme into closing argument not improper). It also is "not improper for the prosecutor to comment upon the evidence presented at trial and to argue the inferences that the jurors might draw therefrom. . . ." (Internal quotation marks omitted.) State v. Martinez, 95 Conn. App. 162, 184, 896 A.2d 109, cert. denied, 279 Conn. 902, 279 A.2d 902 (2006).
B
The defendant next argues that several of the prosecutor's comments during closing and rebutttal arguments constituted improper comment on facts not in evidence. We examine the alleged instances of misconduct in the context in which they were presented.
In closing argument, the prosecutor made the following statements:[5] "[The victim] indicated that someone came up to her as she exited her car. . . . She turned over her wallet . . . to that person. . . . [The victim] was able to identify that person by his clothing. . . . Within the garbage can [was] found . . . a black jacket. . . . This black jacket [was] identified by [the victim] as being the jacket worn by the person who demanded money of her. . . . Put all those things together. Put the location where he was detained from where the robbery occurred; the time frame; the items he had on him, positively identified by the victim . . . as being taken from her wallet. . . . Is that enough to convict him beyond a reasonable doubt? Is there any reasonable doubt as to his innocence? As to his guilt? There isn't. But the defendant, unfortunately, takes another step. . . . He wrote a letter. . . . [I]n writing the letter [the defendant] understands the evidence, or at least has a belief as to what's being offered against him. He has read the police reports. He references the police reports. He makes specific mention in the letter about the police reports. . . . He has full knowledge, or at least apparent knowledge, as to what witnesses are saying and what people will say if they're brought into court. . . . He ran like the dickens. He was in that area of [44] Connecticut Boulevard. He stripped the clothing off, the clothing that could identify him, threw it in that area, quickly took what he thought could be of value, left the credit card in the wallet, threw it, and it was recovered at that location by the police. That's what happened." (Emphasis added.)
It is well established "that a prosecutor, in fulfilling his duties, must confine himself to the evidence in the record. . . . Statements as to facts that have not been proven amount to unsworn testimony, which is not the subject of proper closing argument. . . . A prosecutor may invite the jury to draw reasonable inferences from the evidence; however, he or she may not invite sheer speculation unconnected to evidence. . . . Moreover, when a prosecutor suggests a fact not in evidence, there is a risk that the jury may conclude that he or she has independent knowledge of facts that could not be presented to the jury." (Internal quotation marks omitted.) State v. Skakel, 276 Conn. 633, 746, 888 A.2d 985 (2006).
Our careful review of the record reveals that the prosecutor's remarks were nothing more than fair comment on the evidence and did not constitute misconduct. "[I]t is not improper for the prosecutor to comment upon the evidence presented at trial and to argue the inferences that the jurors might draw therefrom. . . ." (Internal quotation marks omitted.) State v. Martinez, supra, 95 Conn. App. 184.
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[1] The wallet was recovered on March 21, 2003, several weeks after the robbery, when a business at 42 Connecticut Boulevard found it and turned it over to the police. The wallet contained a motor vehicle operator's license and a credit card, both of which bore the victim's name.
[2] "When conducting a patdown search of a suspect, the officer is limited to an investigatory search for weapons in order to ensure his or her own safety and the safety of others nearby." (Internal quotation marks omitted.) State v. Starks, 94 Conn. App. 325, 330, 892 A.2d 959, cert. denied, 278 Conn. 918, 901 A.2d 44 (2006); see also Terry v. Ohio, supra, 392 U.S. 29.
[3] "Under the exclusionary rule, evidence must be suppressed if it is found to be the fruit of prior police illegality." (Internal quotation marks omitted.) In re Nicholas R., 92 Conn. App. 316, 321 n. 4, 884 A.2d 1059 (2005).
[4] The defendant asserts that he preserved his claims by objecting at trial, but the portion of the trial transcript he identifies relates to comments made by the prosecutor that are not the subject of this appeal.
[5] The alleged improper statements are italicized. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551411/ | 6 F.2d 237 (1925)
LUBETICH et al.
v.
POLLOCK, Supervisor of Fisheries, et al.
No. 246E.
District Court, W. D. Washington, S. D.
June 13, 1925.
Van C. Griffin, of Seattle, Wash., for complainants.
John H. Dunbar, Atty. Gen., E. W. Anderson, Asst. Atty. Gen., and John I. O'Phelan, Pros. Atty., of Raymond, Wash., for defendants.
*238 Before GILBERT, Circuit Judge, and CUSHMAN and WEBSTER, District Judges.
WEBSTER, District Judge.
The complaint in this action attacks the constitutionality of section 4, chapter 90, Laws 1923, of the state of Washington, which, as construed by state authorities, prohibits aliens from engaging in commercial fishing in the waters of this state, either in their individual capacity or as employees on fishing vessels owned and operated by citizens of the state. It further assails the constitutionality of certain orders and regulations promulgated by the state fisheries board, pursuant to the authority vested in it by the Legislature, effecting commercial fishing in that portion of the Columbia river and the Pacific Ocean over which the state of Washington has jurisdiction, and also in Grays and Willapa Harbors. The relief prayed is that the defendants be enjoined from enforcing the statute and regulations in question over the waters above mentioned as against the complainants Hroncich, a subject of the government of Italy, lawfully admitted into the United States, and Lubetich, a citizen of the United States and of the state of Washington, engaged in the business of operating a purseseine fishing boat, and in that capacity being the employer of Hroncich, a fisherman.
It is contended that the statute involved prohibiting an alien from being employed on a fishing vessel is a violation of section 12, article 1, of the Constitution of the state of Washington, and also of the Fourteenth Amendment to the Constitution of the United States. The claim is also made that the statute is in contravention of the provisions of the treaty between the United States and the kingdom of Italy. In addition it is asserted that certain orders and regulations of the Fisheries Board are unreasonable, arbitrary and capricious, and therefore in violation of the same constitutional provisions; and finally, that complainants, unless the injunctive relief prayed for be granted, will be arrested and prosecuted in the courts of Pacific County, which have no jurisdiction over offenses committed on the Pacific Ocean within the three-mile limit, thereby depriving them of due process of law. The case was argued to three judges, pursuant to section 266 of the Judicial Code (Comp. St. § 1243), and submitted on the motion of complainants for a temporary injunction and the motion of the defendants to dismiss the bill.
Section 4, chapter 90, Laws 1923, reads:
"It shall be unlawful for any person to fish or take for sale or profit any salmon or other food or shellfish in any of the rivers or waters of this state or over which it has concurrent jurisdiction in civil and criminal cases, unless such person prior to January 1, 1924, be a citizen of the United States or has declared his intention to become such and is and has been, for twelve months immediately prior to the time he engages in such business, a resident of this state or an adjoining state, and from and after January 1, 1924, unless such person be a citizen of the United States and is and has been for twelve months immediately prior to the time he engages in such business an actual resident of this state or an adjoining state; but this section shall not apply to Indians, and nothing in this act shall be construed to prohibit fishing or the taking of fish with a hook and line. The word `fishing' as used in this act shall be deemed and construed to mean the catching or taking of food fish with any appliance, gear or trap, floating or fixed, whatsoever."
It cannot be doubted that the clause of the Fourteenth Amendment guaranteeing equal protection of the laws is of universal application to all persons within the territorial jurisdiction involved, and includes within its protection aliens, without regard to race, color, or nationality. The first question for decision, therefore, is: Does the statute under review amount to a denial of such equal protection? The whole question of the ownership of fish and game and the nature of the title thereto is exhaustively considered by the Supreme Court in the case of Geer v. Connecticut, 161 U. S. 519, 16 S. Ct. 600, 40 L. Ed. 793. In that case the court had under consideration a statute of Connecticut which made it unlawful to kill any woodcock, ruffled grouse, or quail for the purpose of conveying the same beyond the limits of the state. Both the civil and common law authorities were elaborately reviewed, and in the course of the opinion Mr. Justice White declared that from the earliest traditions the right to reduce animals feræ naturæ to possession has been subject to the control of the law giving power; that the wild game within a state belongs to the people in their collective sovereign capacity; that it is not the subject of private ownership except insofar as the people may choose to make it so, and they may, if they see fit, absolutely prohibit the taking of it or the traffic or commerce in it. The following excerpt from *239 the case of Magner v. People, 97 Ill. 320, was quoted with approval:
"The ownership being in the people of the state, the repository of the sovereign authority, and no individual having any property rights to be affected, it necessarily results that the Legislature, as the representative of the people of the state, may withhold or grant to individuals the right to hunt and kill game, or qualify or restrict, as in the opinion of its members will best subserve the public welfare. Stated in other language, to hunt and kill game is a boon or privilege, granted, either expressly or impliedly, by the sovereign authority not a right inherent in each individual; and, consequently, nothing is taken away from the individual when he is denied the privilege, at stated seasons, of hunting and killing game. It is, perhaps, accurate to say that the ownership of the sovereign authority is in trust for all the people of the state, and hence by implication it is the duty of the Legislature to enact such laws as will best preserve the subject of the trust and secure its beneficial use in the future to the people of the state. But in any view, the question of individual enjoyment is one of public policy and not of private right."
The statute was upheld, and in the opinion this language is found:
"The sole consequence of the provision forbidding the transportation of game, killed within the state, beyond the state, is to confine the use of such game to those who own it, the people of that state. The proposition that the state may not forbid carrying it beyond her limits involves, therefore, the contention that a state can not allow its own people the enjoyment of the benefits of the property belonging to them in common, without at the same time permitting the citizens of other states to participate in that which they do not own."
In the more recent case of Lacoste v. Department of Conservation, 263 U. S. 545, 44 S. Ct. 186, 68 L. Ed. 437, it is said:
"The wild animals within its borders are, so far as capable of ownership, owned by the state in its sovereign capacity for the common benefit of all of its people. Because of such ownership, and in the exercise of its police power the state may regulate and control the taking, subsequent use, and property rights that may be acquired therein."
In McCready v. Virginia, 94 U. S. 391, 24 L. Ed. 248, there was involved a statute of the state of Virginia which prohibited any person not a citizen of that state from taking oysters or shellfish in certain tide waters. In sustaining the statute against the charge that it violated the Fourteenth Amendment, the court, Mr. Chief Justice Waite writing, said:
"The principle has long been settled in this court that each state owns the beds of all tidewaters within its jurisdiction, unless they have been granted away. * * * In like manner, the states own the tide waters themselves, and the fish in them, so far as they are capable of ownership while running. For this purpose the State represents its people, and the ownership is that of the people in their united sovereignty. * * * The title thus held is subject to the paramount right of navigation, the regulation of which, in respect to foreign and interstate commerce, has been granted to the United States. There has been, however, no such grant of power over the fisheries. These remain under the exclusive control of the state, which has consequently the right, in its discretion, to appropriate its tidewaters and their beds to be used by its people as a common for taking and cultivating fish, so far as it may be done without obstructing navigation. Such an appropriation is, in effect, nothing more than a regulation of the use by the people of their common property. The right which the people of the state thus acquire comes not from their citizenship alone, but from their citizenship and property combined. It is, in fact, a property right, and not a mere privilege or immunity of citizenship."
Later on in the opinion this language is used:
"And as all concede that a State may grant to one of its citizens the exclusive use of a part of the common property, the conclusion would seem to follow, that it might by appropriate legislation confine the use of the whole to its own people alone."
Patsone v. Pennsylvania, 232 U. S. 138, 34 S. Ct. 281, 58 L. Ed. 539, dealt with a statute of Pennsylvania which made it unlawful for any unnaturalized, foreign-born resident to kill any wild bird or animal, except in defense of person or property, and to that end made it unlawful for such foreign-born person to own or be possessed of a shotgun or rifle. The constitutionality of the statute was challenged as being a violation of the Fourteenth Amendment. In upholding the law the court said: "It is to be remembered that the subject of this whole discussion is wild game, which the State may preserve for its own citizens if it pleases. Geer v. Connecticut, 161 U. S. 519, 529."
In the case of McMillan v. Sims (Wash.) 231 P. 943, recently decided by the Supreme *240 Court of this state, this language is employed: "Let us at the outset be reminded that in the regulation of and restrictions upon the taking of the fish from the waters of the state, the state is but dealing with its own property over which its control is as absolute as any other owner has over his property. In State v. Tice, 69 Wash. 403, 125 P. 168, 41 L. R. A. (N. S.) 469, we said: `The decisions of the courts in this country, so far as they have come to our notice, are all in unison in holding that there is no private right in the citizen to take fish or game, except as such right is either expressly or inferentially given by the state.'"
In the light of the foregoing authorities it seems unescapable that the state owns the food fish in the waters over which it has jurisdiction, the same as any other proprietor owns property, and that aliens and nonresidents of the state may be constitutionally denied the right to take fish within its borders. The power to make such disposition of the fish arises out of and is incidental to the ownership of the property.
Is the statute in question open to the charge that it denies Hroncich the right to engage in a lawful occupation, trade, or business, and denies Lubetich the right to contract with whomsoever he pleases, and hence is in conflict with the Fourteenth Amendment? The cases of Heim v. McCall, 239 U. S. 175, 36 S. Ct. 78, 60 L. Ed. 206, Ann. Cas. 1917B, 287, and Crane v. New York, 239 U. S. 195, 36 S. Ct. 85, 60 L. Ed. 218, deal with the constitutionality of statutes forbidding contractors on public works from employing aliens. These statutes were held not to be in violation of the Fourteenth Amendment. In the matter of developing their public works, municipalities are dealing with their own property, and in consequence may prescribe such conditions as they see fit. "The principle that justifies these discriminations is that the common property of the state belongs to the people of the state, and hence that, in any distribution of that property, the citizen may be preferred." People v. Crane, 214 N. Y. 154, 108 N. E. 427. See, also, Atkin v. Kansas, 191 U. S. 207, 24 S. Ct. 124, 48 L. Ed. 148.
Obviously it is a denial of the equal protection of the laws when a lawmaking body, regulating, not its own property, but private business, undertakes to deny to aliens the right to engage in lawful trade or labor; but it is difficult to comprehend how there can be any such violation when the Government, in its capacity of owner and proprietor of property, refuses to allow an alien the right to share therein on equal terms with those for whom the property involved is held in sovereign trust. In such circumstances aliens are denied participation in the property, for the simple reason that they do not own it, either in whole or in part, and in consequence have no right to share its enjoyment. We are not considering a case involving the proper exercise of police power, but a case wherein the state of Washington is making disposition of its own property. The case of Alsos v. Kendall, 227 P. 286, recently considered by the Supreme Court of Oregon, is "on all fours" with the case in hand. In that case it was held:
"The rights of the state in the fish and in the waters from which the fish are to be taken are superior to plaintiff's right to choose fishing for salmon in those waters for an occupation. Such an occupation is not open to an alien against the legislative will of the state, since it involves the appropriation of property belonging to the state in its sovereign capacity. The state, in prohibiting aliens from engaging in the taking of salmon fish, is dealing with the common property of the people of the state; in prohibiting citizens of other states and unnaturalized foreign-born residents from fishing in the public waters of the state the state is, in fact, dealing with a property right of the state, and not with a mere privilege or immunity of a citizen of another state, nor does it amount to a denial to an alien within the state of the equal protection of its laws. Under the police power of the state the Legislature may prescribe any terms or conditions reasonably necessary for the preservation of the fish, but in the enactment of this law the Legislature was not legislating under its police powers, but under its reserved powers as the owner of the property which was the subject of the legislation, and which was to be affected thereby. As such owner it was authorized to prescribe any terms or conditions upon which the property of the state might be converted into private ownership. In legislating to that end it was dealing with its own property, and it had all of the rights and powers of an individual owner subject only to the duties which it owed to its own citizens."
The court concluded that the fact that the Oregon statute prohibited the plaintiff from accepting employment from one lawfully engaged in fishing, and thereby prevented him from earning a livelihood in that particular occupation, did not in the circumstances render the statute unconstitutional. The reasoning of this case commends itself to our judgment *241 as altogether sound. See, also, Curry v. Moran, 76 Fla. 373, 79 So. 637. Haavik v. Alaska Packers' Association, 263 U. S. 510, 44 S. Ct. 177, 68 L. Ed. 414.
We conclude that the statute under review is not unconstitutional, as violative of the Fourteenth Amendment, so far as Hroncich, the subject of Italy, is concerned; and if he is lawfully denied the right to engage in fishing, palpably Lubetich is not deprived of any constitutional protection by being denied the right to enter into a contract for the performance of labor which would be in violation of the laws of Washington. Let it not be forgotten that the right of Lubetich, a citizen of Washington, to take fish from the waters of that state, is subject to the conditions imposed by the state Legislature, and his freedom of contract cannot be asserted to the point where it infringes upon the right of the state to deal with its own property.
Does the statute violate the provisions of the treaty with Italy? The language of the treaty of 1871 upon which reliance is placed by Hroncich, the alien complainant, provides: "The citizens of each of the high contracting parties shall have liberty to travel in the states and territories of the other, to carry on trade, wholesale and retail, to hire and occupy houses and warehouses, to employ agents of their choice, and generally to do anything incident to or necessary for trade, upon the same terms as the natives of the country, submitting themselves to the laws there established. The citizens of each of the high contracting parties shall receive, in the states and territories of the other, the most constant protection and security for their persons and property, and shall enjoy in this respect the same rights and privileges as are or shall be granted to the natives, on their submitting themselves to the conditions imposed upon the natives." 17 Stat. 846.
There were modifications of these provisions in the Treaty of 1913, as follows: "It is agreed between the high contracting parties that the first paragraph of article III of the Treaty of Commerce and Navigation of February 26, 1871, between the United States and Italy, shall be replaced by the following provision: The citizens of each of the high contracting parties shall receive in the states and territories of the other the most constant security and protection for their persons and property and for their rights, including that form of protection granted by any state or national law which establishes a civil responsibility for injuries or for death caused by negligence or fault and gives to relatives or heirs of the injured party a right of action, which right shall not be restricted on account of the nationality of said relatives or heirs; and shall enjoy in this respect the same rights and privileges as are or shall be granted to nationals, provided that they submit themselves to the conditions imposed on the latter." 38 Stat. 1670.
The Supreme Court, in Patsone v. Pennsylvania, supra, held that the action of the Legislature of the state of Pennsylvania prohibiting the killing of game by aliens did not violate this treaty. After saying that the whole discussion had to do with wild game, Mr. Justice Holmes said: "We see nothing in the treaty that purports or attempts to cut off the exercise of their powers over the matter by the states to the full extent."
This treaty was again invoked in Heim v. McCall, supra, but again the contention based upon it was rejected, the court saying: "Construing the provision of 1871 the Circuit Court of Appeals decided that it `does not limit the power of the state, as a proprietor, to control the construction of its own works and the distribution of its own moneys.' The conclusion is inevitable, we think, from the principles we have announced. We need not follow counsel in dissertation upon the treaty making power or the obligations of treaties when made. The present case is concerned with construction, not power; and we have precedents to guide construction. The treaty with Italy was considered in Patsone v. Pennsylvania, 232 U. S. 138, 145, and a convention with Switzerland (as in the present case) which was supposed to become a part of it. It was held that a law of Pennsylvania making it unlawful for unnaturalized foreign-born residents to kill game, and to that end making the possession of shotguns and rifles unlawful, did not violate the treaty. Adopting the declaration of the court below, it was said `that the equality of rights that the treaty assures is equality only in respect of protection and security for persons and property.' And the ruling was given point by a citation of the power of the state over its wild game which might be preserved for its own citizens. In other words, the ruling was given point by the special power of the state over the subject-matter, a power which exists in the case at bar, as we have seen." See, also, People v. Crane, supra. Leong Mow v. Board of Commrs. (C. C.) 185 F. 223.
The foregoing authorities seem conclusive of the treaty question presented and resolve the point adversely to the contention of complainant Hroncich.
*242 The regulations of the fisheries board which are under attack are too lengthy to be set forth in full. It will perhaps be sufficient to say that the unreasonableness and arbitrariness complained of consist in the prohibiting of the taking of fish from the Pacific Ocean and rivers and harbors adjacent thereto by means of a purse seine, while permitting fish to be taken therefrom with set nets, pound nets, gill nets, and drag seines; it being alleged in the complaint that purse seines are the least destructive of any of the recognized types of net fishing gear. It seems too plain to justify lengthy discussion that this contention presents a legislative, not a judicial, question. It was so ruled by this court in Katick v. Dibble, No. 154E of the files of this court, a case heard before Judges Gilbert, Cushman, and Neterer (no written opinion). The bill in that case presented precisely the same question now urged upon us. The court refused to hear evidence tending to impeach the regulations of the fisheries board and dismissed the bill upon the ground that the matter was one of legislative policy; the board having acted within the scope of its delegated powers. It is well sustained in the authorities that the legislative determination of such questions is conclusive upon the courts, unless it manifestly appears that the regulations imposed cannot have any relation to the accomplishment of the purpose in view. Jacobson v. Mass., 197 U. S. 11, 25 S. Ct. 358, 49 L. Ed. 643, 3 Ann. Cas. 765; Powell v. Pennsylvania, 127 U. S. 678, 8 S. Ct. 992, 32 L. Ed. 253; Louisville & Nashville R. R. Co. v. Garrett, 231 U. S. 298, 34 S. Ct. 48, 58 L. Ed. 229. McMillan v. Sims, supra.
In the case last cited, the Supreme Court of this state said: "By what agency may the state act and speak in the making of such regulations and restrictions as it desires to put into force with reference to the taking of fish from its waters? Of course, it may do so through direct action of its Legislature directly and specifically prescribing rules and territorial limits within which fish may and may not be taken. It is elementary law that, when such regulations and restrictions are directly so prescribed by the Legislature, the courts have no concern with the reasonableness and wisdom of such regulations and restrictions; and, since the Legislature may delegate to some other state agency, in this case to the state fisheries board, the determination of territorial limits within which fish may or may not be taken (Cawsey v. Brickey, supra), we think the action of such agency, within the scope of its legislative prescribed power, is equally beyond judicial control or interference. This, it seems to us, must be true, especially in view of the fact that the state is thereby but creating and empowering an agency for the disposition of its own property."
With respect to the jurisdiction of the superior court of the state of Washington for Pacific county, it is alleged that the western boundary of the state of Washington is one marine league west of the seacoast, while the western boundary of Pacific county is at the seacoast. Hence, it is insisted, there is a strip of water three miles in width and extending the length of Pacific county which is within the state of Washington, but not within Pacific county, or any other county of the state. In consequence of this situation it is asserted that the courts of Pacific county have no jurisdiction over this three-mile strip. Palpably this contention presents no federal question within the competency of this court to determine. The jurisdiction of the courts of Washington as to territory within the authority and control of the state of Washington is a matter within the exclusive cognizance of the judicial tribunals of that state.
A number of situations are suggested in the brief of counsel for complainants, and were referred to in oral argument, raising questions concerning the constitutionality of section 4 under certain supposed conditions; but, since neither of the complainants comes within any of the hypothetical categories assumed, they cannot be heard to make the questions, and this court is without power to consider them in this case.
From the foregoing views, it follows that the bill must be dismissed.
Decree accordingly. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551417/ | 86 B.R. 721 (1988)
In re Narin IMPRASERT and Nipapan Imprasert, Debtors.
Bankruptcy No. 88-572-BKC-8P7.
United States Bankruptcy Court, M.D. Florida, Tampa Division.
June 7, 1988.
Carolyn McMullen, Tampa, Fla., for debtors.
Charles Weissing, Tampa, Fla., Trustee.
ORDER ON TRUSTEE'S OBJECTION TO CLAIM OF EXEMPTIONS
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 7 liquidation case, and the matter under consideration is a challenge by the Trustee Charles L. Weissing (Trustee) to the homestead exemption claim of Narin and Nipapan Imprasert (Debtors). It is the contention of the Trustee that the residential home located at 1909 Colleen Street, Sarasota, Florida, does not meet the requirements of the homestead exemption as set forth in Fla. Const. Article X, Section 4 and, therefore, is subject to administration by the Trustee for the benefit of the general estate.
The facts germane and relevant to the issue raised by the Trustee as established at the final evidentiary hearing are as follows:
On June 13, 1980, the Debtors purchased a home located at 1909 Colleen Street, Sarasota, Florida, from Mr. and Mrs. Kohler (Trustee's Exhibit 1). The Debtors resided on this property together with their children until May of 1987. It appears that in October of 1985, Narin Imprasert acquired certain commercial property located in Tampa, Florida, from Frank K. Houston, Jr., who, it appears, retained a mortgage on the commercial property. It further appears that the Debtors established and operated a restaurant on the commercial premises until they encountered financial difficulties and became involved in extensive litigation with Houston, who apparently instituted a foreclosure action in which the Debtor asserted a counterclaim.
On April 29, 1987, the Debtors acquired residential property located at 3810 W. Wallace Avenue in Tampa, Florida (Trustee's Exhibit 3), from James B. Askew. The Debtors actually resided on the property on February 3, 1988, the date the Debtors filed their Voluntary Petition for Relief under Chapter 7, and enrolled their children *722 in the Hillsborough County Schools. One Mr. Vacharachai Thirawatananond, a friend from whom the Debtors had borrowed $10-15,000.00 to commence their business, resided with the Debtors on the Wallace Avenue property until October 19, 1987. It appears, and the record on this point is clear that the Wallace property was subsequently conveyed to Mr. Thirawatananond in part repayment of the monies borrowed by the Debtors from Mr. Thirawatananond.
It is without dispute that during the same time, the property owned by the Debtors in Sarasota was rented for a one-year term commencing on May 1, 1987, and ending on April 30, 1988. There is no evidence in this record, however, that the property was placed on the market for sale nor that there was an understanding or agreement with the tenant that the tenant had an option to purchase the property. It further appears that the tenant occupying the Sarasota property defaulted, and on February 19, 1988, the Debtors caused a Notice of Eviction to be issued by the Sheriff of Sarasota County on the tenant, Henry Beaver. It further appears that on March 10, 1988, the Debtors obtained from the County Court of Sarasota a Writ of Possession and after having regained possession, moved back to the property and currently live in the property with their family (Debtors' Exhibit 4).
These are basically the facts which, according to the Trustee, warrant the conclusion that the Debtors have abandoned their former residence located in Sarasota and, therefore, on the date of the commencement of the case, the Sarasota residence could not qualify for the homestead exemption. In opposing the Trustee's claim, the Debtors contend that they never intended to abandon the Sarasota property as their permanent residence; that their presence in Tampa was temporary and necessitated only because of the protracted litigation with the landlord of the commercial property which required the presence of the Debtor constantly; that the Debtors never intended to make the Wallace Avenue property their residence and that this intent is evidenced by the fact that as soon as the litigation with the landlord was concluded by entry of a final judgment of foreclosure on October 7, 1987, the Debtors did, in fact, return to Sarasota where they have resided ever since.
Art. X, § 4 of the Florida Constitution, which governs the resolution of this matter, provides in pertinent part as follows:
4. Homestead exemptions
(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by the head of a family:
(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner's consent by reason of subsequent inclusion in a municipality; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or his family
. . .
There is no question that the Florida homestead is liberally construed in favor of the party claiming the exemption and that the exemption's purpose is to protect and foster the family home. See In the Matter of Hersch, 23 B.R. 42 (BKR M.D.Fla.1982); Hospital Affiliates of Florida, Inc. v. McElroy, 393 So.2d 25 (1981). Thus, the burden is on the objecting party to make a strong showing that the claimant is not entitled to the claimed exemption. In the Matter of Hersch, supra. It is also clear that in the event the family home is abandoned, it loses its exempt status. In re McCarthy, 13 B.R. 389 (BKR M.D.Fla. 1981); M.O. Logue Sod Service, Inc. v. Logue, 422 So.2d 71 (1982). Abandonment, however, may only be proved by a strong showing of the Debtor's intent not to return *723 to the residence, and mere absence due to health, financial, or family reasons generally does not constitute an abandonment. Monson v. First National Bank of Bradenton, 497 F.2d 135 (5th Cir.1974).
In the instant case, this Court is satisfied that the Debtors left their Sarasota home for financial reasons only and possessed an actual intent to return to the Sarasota residence and live there as their permanent place of residence once the litigation in Tampa concluded. The Debtors' retention of ownership of the Sarasota property further evidences this intent. Therefore, it appears clear that the Debtors cannot be deemed to have abandoned the Sarasota home, and the Objection to Claim of Exemption should be overruled.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Objection to Claim of Exemption be, and the same is hereby, overruled. It is further
ORDERED, ADJUDGED AND DECREED that the Debtors are hereby entitled to claim as exempt the property located at 1909 Colleen Street, Sarasota, Florida. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/480554/ | 807 F.2d 318
Falicha ADAMS, An Infant by her Parent and Natural Guardian,Paula ADAMS, Plaintiff-Appellant,v.UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,Defendant-Appellee.
No. 272, 86-6146.
United States Court of Appeals,Second Circuit.
Submitted Nov. 5, 1986.Decided Dec. 17, 1986.
Mackenzie, Smith, Lewis, Michell & Hughes, Syracuse, N.Y., for plaintiff-appellant.
Frederick J. Scullin, Jr., U.S. Atty. for the N.D. of N.Y., Syracuse, N.Y. (Craig A. Benedict, Asst. U.S. Atty., Syracuse, N.Y., of counsel), for defendant-appellee.
Before LUMBARD, OAKES and KEARSE, Circuit Judges.
KEARSE, Circuit Judge:
1
Plaintiff Paula Adams ("Adams"), suing in her own right and on behalf of her daughter Falicha Adams ("Falicha"), appeals from a final judgment entered in the United States District Court for the Northern District of New York, Howard G. Munson, Chief Judge, summarily dismissing her claims against defendant United States Department of Housing and Urban Development ("HUD" or the "government"), brought under the Federal Tort Claims Act, 28 U.S.C. Secs. 1346(b), 2671-2680 (1982) ("FTCA"), to recover damages totaling $4,400,000 allegedly resulting from an accident to Falicha in their home, housing owned by HUD. The district court granted the government's motion for summary judgment on the ground that plaintiff had failed to comply with certain jurisdictional prerequisites to suit under the FTCA because Adams had failed to file an administrative claim with HUD on her own behalf and because Falicha's administrative claim failed to specify the precise amount of her claim. See 28 U.S.C. Sec. 2675. On appeal, Adams argues that the dismissal was improper because, in the circumstances, the government had adequate notice of her claim and of the amount of Falicha's claim. We reject these contentions and affirm (1) the dismissal of Adams's claim in its entirety, and (2) the dismissal of Falicha's claim to the extent that it demands more than $1,000.
I. BACKGROUND
2
According to the complaint, in March 1984, Adams and Falicha resided in Syracuse, New York, in an apartment complex owned by HUD. On March 31, 1984, a kitchen cabinet in their apartment fell from the wall and hit Falicha. She was taken to a local hospital where she was treated and released on the same day.
3
On May 17, 1985, Thomas F. Quinlan, an attorney, wrote a letter "Re: Falicha Adams " ("Quinlan letter") to HUD official Joseph Soto, requesting compensation for Falicha's injuries resulting from the accident. This letter, accompanied by a narration of the circumstances surrounding the accident, a medical report, and three invoices, stated in pertinent part as follows:
4
As a result of this incident, medical expenses were incurred which are in excess of $1,000.00. We enclose copies of bills from [two medical doctors and a radiologist] which total $893.31....
5
If you had public liability coverage at the time this accident occurred, it is requested that you refer the enclosed documents to the appropriate insurance carrier. We would like to negotiate a settlement of this matter and avoid the necessity of litigation, if possible.
6
Quinlan was subsequently contacted by one of the government's insurance carriers who offered $2,000 in settlement of the claim. Quinlan demanded $7,500, and no settlement was reached.
7
In February 1986, Adams commenced the present action, alleging that the fall of the kitchen cabinet was the result of the government's negligence and had caused pain and suffering and permanent physical injuries to Falicha and the loss of Falicha's services to Adams. The complaint sought $4,000,000 in damages for Falicha plus $400,000 for Adams in her own right. HUD filed an answer and moved for summary judgment dismissing the complaint for lack of subject matter jurisdiction. HUD conceded that the Quinlan letter constituted an administrative claim on behalf of Falicha, but it argued that Adams had failed to file any administrative claim on her own behalf as required by Sec. 2675(a), and that Falicha's claim was not sufficiently definite in amount.
8
After hearing oral argument, the district court agreed and granted HUD's motion. Judgment was entered dismissing the complaint, and this appeal followed.
II. DISCUSSION
9
FTCA Sec. 2675 provides, in pertinent part, that
10
(a) An action shall not be instituted upon a claim against the United States for money damages for ... personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, unless the claimant shall have first presented the claim to the appropriate Federal agency
11
....
12
(b) Action under this section shall not be instituted for any sum in excess of the amount of the claim presented to the federal agency....
13
Adams argues principally (1) that she should be deemed to have filed a claim within the meaning of Sec. 2675(a) because HUD was aware of her close relationship to Falicha, who had filed a claim, and (2) that the failure of Falicha's administrative claim to request a sum certain should not be fatal under Sec. 2675 since her claim was adequate to inform the government of the underlying circumstances and enable it to attempt to negotiate a settlement. We disagree with both contentions, although we conclude that the dismissal of the claim on behalf of Falicha should be vacated because her administrative claim should be viewed as requesting the sum of $1,000.
A. The Dismissal of Adams's Claim
14
Adams filed no administrative claim of her own with HUD, and her claim in the present action was properly dismissed because Sec. 2675(a) prohibits suit against the United States "unless the claimant shall have first presented the claim to the appropriate Federal agency." She seeks to avoid this prohibition by arguing that her name should be read into the administrative claim filed on behalf of her daughter and that the government should be estopped from asserting the administrative filing requirement against her because it knew or should have known that she might have a claim arising out of her daughter's accident. Neither contention has merit.
15
In support of the contention that Adams's name should be read into Falicha's administrative claim, Adams relies on House v. Mine Safety Appliances Co., 573 F.2d 609, 615-16 (9th Cir.), cert. denied sub nom. Silver Dollar Mining Co. v. PVO International, Inc., 439 U.S. 862, 99 S.Ct. 182, 58 L.Ed.2d 171 (1978), overruled on other grounds, Warren v. United States Department of the Interior, 724 F.2d 776, 780 (9th Cir.1984). Her reliance is misplaced. In House, the plaintiffs had in fact filed their own administrative claim. The House court merely held that this administrative claim would not be ruled inadequate solely by reason of the fact that some of the required information was incorporated by reference from the administrative claims filed with the agency by other persons who also claimed damages as a result of the same occurrence. See 573 F.2d at 615. This holding does not help Adams, who, on her own behalf, filed nothing.
16
Adams's contention that the district court should have held the government estopped from asserting the filing requirement against her borders on the frivolous. She did not allege any act of misconduct on the part of any government official, and the government was under no obligation to advise her to comply with Sec. 2675 if she wished eventually to bring suit, see Dancy v. United States, 229 Ct.Cl. 300, 668 F.2d 1224, 1228 (1982) (even if government has actual or constructive notice of a possible claim, it has no duty to solicit an administrative claim to ensure that the jurisdictional prerequisite to suit is properly laid). Thus, a finding of estoppel would have been improper. See Schweiker v. Hansen, 450 U.S. 785, 788, 101 S.Ct. 1468, 1470, 67 L.Ed.2d 685, reh'g denied, 451 U.S. 1032, 101 S.Ct. 3023, 69 L.Ed.2d 401 (1981); Chu v. Schweiker, 690 F.2d 330, 334 (2d Cir.1982); United States v. RePass, 688 F.2d 154, 158 (2d Cir.1982).
17
We conclude that Adams's claim for damages for the loss of Falicha's services was properly dismissed.
B. The Dismissal of Falicha's Claim
18
We and other circuits have held, on various grounds, that the administrative filing prerequisites in Sec. 2675 encompass a requirement that the request for damages in any administrative claim state a sum certain. See Keene Corp. v. United States, 700 F.2d 836, 841-42 (2d Cir.), cert. denied, 464 U.S. 864, 104 S.Ct. 195, 78 L.Ed.2d 171 (1983); Erxleben v. United States, 668 F.2d 268, 271 & n. 3 (7th Cir.1981) (per curiam); Adams v. United States, 615 F.2d 284, 291-92 n. 15 (5th Cir.), clarified on reh'g, 622 F.2d 197 (5th Cir.1980) (per curiam); Caton v. United States, 495 F.2d 635, 638 (9th Cir.1974). The requirement that the claim state a specific dollar sum, like other requirements imposed in a Sec. 2675, is jurisdictional and cannot be waived. See Keene Corp. v. United States, 700 F.2d at 841; Hohri v. United States, 782 F.2d 227, 245 (D.C.Cir.1986).
19
We reject Adams's contention that Falicha's administrative claim for an amount "in excess of $1,000.00" met the sum certain requirement with respect to a suit for $4,000,000 merely because it informed the government of the circumstances underlying the claim and enabled the government to attempt to negotiate a settlement. First, acceptance of this proposition would in effect nullify the prohibition in Sec. 2675(b) against any suit for an amount in excess of that stated in the administrative claim, for there is no theoretical upper limit on an amount that is described only as being "in excess of" a stated dollar figure. Further, one purpose of the specificity requirement is to give the government adequate notice of the extent of the claimant's demands. A claim mentioning the sum of $1,000 does not give notice that the claimant actually contends he suffered damages in the amount of $4,000,000. Thus, we find no merit in Adams's argument that Falicha's administrative claim was sufficient to permit the present suit for $4,000,000 to proceed.
20
Nonetheless, we are not persuaded that Falicha's claim should have been dismissed in its entirety. While a claimant's failure to state any dollar amount in his administrative claim would give the government no notice of the extent of his claim and would, under Sec. 2675(b), deprive the court of jurisdiction to consider his subsequent suit, we do not believe an otherwise adequate request for a specific dollar amount should be deemed fatally uncertain by reason of the claimant's mere inclusion of the words "in excess of." Such a request gives the government adequate notice to the extent of the stated dollar amount. Since a principal purpose of the FTCA is to promote fairness in the settlement of tort claims asserted against the United States, see Johnson ex rel. Johnson v. United States, 788 F.2d 845, 848-49 (2d Cir.1986); Erxleben v. United States, 668 F.2d at 273, we think it more appropriate, where the plaintiff's administrative claim is otherwise adequate, to treat the qualifying words "in excess of" simply as surplusage, leaving the specific amount stated as the claim. See, e.g., Martinez v. United States, 728 F.2d 694, 697 (5th Cir.1984) (administrative claim for damages "in excess of $100,000" stated a claim for $100,000); Erxleben v. United States, 668 F.2d at 270, 272-73 (administrative claim alleging damages of "$149.42 presently" stated a claim in that amount).
21
In the present case, the Quinlan letter requested damages "in excess of $1,000.00." This should be deemed sufficiently definite to the extent of $1,000.
22
Our decision in Keene Corp. v. United States, in which we declined to disregard qualifying language in order to hold an administrative claim sufficient, is not to the contrary. In Keene we considered the sufficiency of the plaintiff's administrative claim against the United States for expenses incurred by the plaintiff in connection with more than 14,000 asbestos-related lawsuits filed against it; with respect to approximately 1,000 of these lawsuits, the administrative claim had requested damages "in the sum of $1,088,135 and in an additional amount yet to be ascertained." We held that the amount stated, as qualified by the demand for "an additional amount yet to be ascertained," was too indefinite to satisfy the sum certain requirement of Sec. 2675. We declined to disregard the qualifying language and to deem the claim one for $1,088,135 only because the Keene claim had an additional defect: it failed to inform the United States of its potential exposure on each of the 1,000 underlying suits. See 700 F.2d at 842.
23
The reason for declining to disregard the qualifying language in Keene does not exist here, for the government has not called to our attention any respect in which Falicha's administrative claim was defective other than in its use of the "in excess of" phrase to qualify the stated $1,000 amount. We conclude that that phrase should be disregarded and that the present suit may proceed on her behalf to the extent of a demand for $1,000.
CONCLUSION
24
The judgment of the district court is affirmed insofar as it dismissed Adams's claim and is vacated in so far as it dismissed Falicha's claim. The matter is remanded to the district court for further proceedings not inconsistent with this opinion. No costs. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1551427/ | 86 B.R. 871 (1988)
In re David S. WILSON, Debtor.
DOMINION BANK, N.A., Plaintiff,
v.
David S. WILSON, Defendant.
No. 7-85-01377, Adv. No. 7-86-0004, Civ. A. 87-0445(R).
United States District Court, W.D. Virginia, Roanoke Division.
April 28, 1988.
*872 James F. Douthat, Phillip D. Payne, IV, Woods, Rogers & Hazlegrove, Roanoke, Va., for plaintiff.
John G. Douglass, Richmond, Va., Charles L. Williams, Roanoke, Va., for defendant.
MEMORANDUM OPINION
TURK, Chief Judge.
This matter is before the court on appeal from the United States Bankruptcy Court. The plaintiff, Dominion Bank, N.A. (hereinafter "Dominion") appeals the decision of the bankruptcy court holding that Dominion's security agreement with the debtor/defendant David S. Wilson (hereinafter "Wilson") did not give Dominion a security interest in a real estate option contract which Wilson exercised prior to signing the security agreement.
The facts are not in dispute. In August, 1978, Wilson entered into a contract with L.B. Holyfield (hereinafter "Holyfield"), which gave Wilson an option to purchase real property in Franklin County (hereinafter the "Holyfield property"). In September, 1979, Wilson sought to exercise the option. When Holyfield refused to comply, the dispute was taken to the Circuit Court of the City of Roanoke. That court's decision was reversed by the Virginia Supreme Court's decision in Wilson v. Holyfield, 227 Va. 184, 313 S.E.2d 396 (1984). The Supreme Court held that the financing terms provided in the option were neither so ambiguous nor indefinite as to render the contract a nullity. The case was remanded to the Circuit Court to further construe the agreement. That court has not rendered any further judgment.
Between March 1983 and March 1985, Wilson borrowed real estate development loans from Dominion, which were secured with deeds of trust on the property. On March 5, 1985, Dominion acquired a security interest in certain personal property of Wilson, including "accounts receivable, inventory, and contract rights used or held by Wilson in his trade or business. . . ." Record of Appeal at 25. In November 1985, Wilson filed for protection under the Bankruptcy Act, 11 U.S.C. §§ 1101-1174 (1982).
In litigation before the bankruptcy court, the issue arose as to whether the term "contract rights," as used in the March 5 security agreement, gave Dominion a security interest in any interest Wilson may have in the Holyfield property. Judge Krumm ruled that Dominion's security interest does not attach to Wilson's disputed interest in the Holyfield property. It is from that opinion that Dominion appeals.
This court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158 (1982).
There are two issues before the court. First, is a vendee's interest in a disputed real estate purchase contract an interest in real or personal property? The answer hinges on whether the doctrine of equitable conversion applies to Wilson's interest as it relates to Dominion. This court holds that Wilson's interest is personal property.
Having determined that Wilson's interest is one in personal property, the second issue is whether the term "contract rights," *873 as used in Dominion's security agreement, includes Wilson's interest in the Holyfield property. This court reverses the decision of the bankruptcy court, and holds that the security agreement does give Dominion a security interest in Wilson's interest in the Holyfield property.
I. The Nature of Wilson's Interest
Whether Wilson's property interest in the Holyfield property, as it relates to Dominion, is real or personal is determined by the applicability of the doctrine of equitable conversion.
Judge Bostetter clearly described the doctrine in In re Community Investments Assoc. I, 14 B.R. 211, 214 (Bankr.E.D.Va. 1981) where he stated that
"`[t]he doctrine of [equitable] conversion is based on the principal that equity regards things directed or agreed to be done, as having been actually performed where nothing has intervened which ought to prevent a performance.' . . . The real purpose of this theory `is to give effect to the manifest intent of a . . . vendor and to treat that as done which . . . by previous contract with another both have mutually bound themselves to do.'" Id. (citations omitted).
Applying equitable conversion to a real estate transaction, the ownership interest changes when the contract is signed. Upon signing, the purchaser holds the purchase money in trust for the seller. The seller holds the legal title of the land in trust for the purchaser. Each party receives an equitable interest in the property legally held by the other. 77 Am.Jur.2d § 317, 478-79 (1975).
In examining the case at bar, this court must determine whether, through the doctrine of equitable conversion, Wilson's interest in the Holyfield property was transformed into a real property interest which would be beyond the reach of Dominion's security agreement.[1] Equitable conversion is a doctrine used primarily to construe ownership interests between the parties participating in the transfer of real property.[2] The court concludes that it would be inappropriate to apply the doctrine to the detriment of a third party not involved in the real estate transfer.[3]
The Supreme Court of Virginia discussed the doctrine of equitable conversion in Miller v. Kemp, 157 Va. 178, 160 S.E. 203 (1931). In that case, a land company had conveyed several parcels of land to Gresham and Paschall in 1909. Gresham and Paschall purchased the property together, but different lots were individually titled to either Paschall or Gresham. Gresham purchased lots 1, 2, and 3, and Paschall purchased lot 13.
Gresham sold his property in 1918 to Miller, who entered into a contract to sell the property to Kemp in 1929. The issue before the court was whether Miller could convey title free and clear, because a series of judgments totalling $250,000 had been docketed against Paschall between 1921 and 1926. Even though Paschall had never possessed the legal title to any of the lots which had been owned by Gresham, the trial court held that Paschall had an equitable interest in the property by virtue of the fact that he and Gresham had paid for the property together. The trial court held that since Paschall had never released his equitable interest in the land, the judgment liens entered years later attached to that property and prevented Miller from conveying a title free and clear of defects. 160 S.E. at 206-07.
The Supreme Court reversed the trial court's decision. In considering the reach of a judgment lien,[4] the court considered *874 whether any equitable interest Paschall may have in Gresham's land could be attached by the judgment lien.
The court stated the general equitable conversion principle, and added that as it is "an equitable doctrine [it] cannot be invoked as conclusively determining all legal rights and liens of others." Id. The court concluded that the "fundamental error" of the trial court was in holding that all legal rights and interests attached to the equitable rights created by the original contract. Id.
Clearly, the Virginia Supreme Court has indicated that the doctrine of equitable conversion does not, in every instance, determine the rights and interests of parties other than the vendor and vendee. As an instrument of equity, the doctrine is only to be applied when required by justice.
Other courts have similarly limited the application of the doctrine. In Heider v. Dietz, 234 Or. 105, 380 P.2d 619, the Supreme Court of Oregon discussed the applicability of the equitable conversion doctrine in a case involving the rights of a third party creditor with a judgment lien on the vendor's property. In Heider, purchasers under a land sale contract sued for strict foreclosure after a judgment lien had been docketed against the vendor. The vendor counterclaimed and sued for specific performance. Vendor's argument was that since she had contracted to sell the property before the judgment was docketed, she had no real property interest to which the judgment lien could attach. She argued that through equitable conversion she had been divested of her real property interest, leaving her with only the legal title, which she was free to convey. Id. 380 P.2d at 624.
The court disagreed with the vendor's argument. It considered several different circumstances where the equitable conversion doctrine is applied. It noted that in risk of loss cases, where there is an unambiguous contract and specific performance would be available, the majority of states do apply equitable conversion. However, equitable conversion is not usually applied if, for some reason such as ambiguity, specific performance is not available. This is also true for risk of loss cases and cases involving devolution of title on the death of one of the contracting parties. Id. 380 P.2d at 623.
The court, citing Dean Pound, concluded that "equitable conversion is not a condition of property for all purposes, but is only a name given to a situation resulting from the application of equitable doctrines to special states of facts." Id. 380 P.2d at 623, citing Pound, The Progress of the Law, 1918-1919, 33 Harv.L.Rev. 813, 831 (1920) (other citations omitted).
The court concluded that the reasons for applying equitable conversion in most risk of loss and devolution cases are not present when considering the rights of third party creditors who have judgment liens on real property. It declined to apply the doctrine, and ruled that the purchaser was justified in withholding further payments until the vendor could demonstrate she held a good title. Equitable conversion did not protect the vendor from the judgment-creditor.
Dominion has cited a similar case to the court that, although distinguishable, is nevertheless instructive. In Leake v. Finance One Mortgage, Inc., 57 B.R. 438 (Bankr.W.D.Va.1985), the issue arose as to the effect of a judgment lien docketed after the parties had entered into a contract of sale, (which they had not recorded) and before the closing of the sale agreement. The trustee in bankruptcy argued that the vendor had relinquished all interest in real property as of the date of the contract of sale, and there was nothing to which the judgment lien could attach. The court noted that the argument was "unassailable" as it affected the nature of the interests "between [the parties]," id. at 440, indicating that the argument is not "unassailable" with regard to other parties.[5]
*875 This court agrees with the reasoning of the previously cited cases, and the Virginia Supreme Court's direction in Miller v. Kemp. Equitable conversion is not to be blindly applied to any situation involving the sale of real estate. As an instrument of equity it is to be applied only when, in light of all the circumstances, justice so demands. Such is not the case before the court. While equitable conversion may be applicable between Wilson and Holyfield, it is irrelevant in the dispute between Wilson and Dominion. As to Dominion, Wilson's interest in the Holyfield property is one in personal property.[6]
II. "Contract Rights"
The court must next determine whether Wilson's interest was included in the security agreement taken by Dominion.
Wilson argues that the term "contract rights," which was used by Dominion in attempting to acquire a security interest in certain of Wilson's personal property, is not appropriate to obtain a security interest in any interest Wilson has in the Holyfield property. Wilson contends that the term "contract right" is a term of art under the code which refers only to a "right to payment under a contract not yet earned by performance and not evidenced by an instrument or chattel paper." Appellee's brief at 16, quoting Va.Code Ann. § 8.9-106 (amended 1973).
Dominion counters that the term should be given its common, literal meaning, and points to the fact that Wilson himself used the term when describing his interest in the Holyfield property in documents filed with the bankruptcy court. Appellant's brief at 4-6. Dominion also argues that under the notice filing system provided for by the Uniform Commercial Code, as adopted by Virginia,[7] Wilson was on notice as to the extent of Dominion's security interest. The court finds Dominion's contentions persuasive.
Wilson relies on a superceded code provision for the strength of his argument.[8] He asserts that the term "contract right" persists as a "right of payment," and that the 1973 amendments "merged the concept of `contract rights' into the broader category of `accounts.'" Appellee's brief at 16-17, (citations omitted). Accordingly, the term "contract right" refers only to rights to receive payment, not rights to receive real estate.
Wilson's argument that "contract rights" is now a subset of "account"[9] and cannot be used to describe items other than those which fall within the definition of account is untenable. While it is true that the 1973 amendments abolished the prior distinction between "account" and "contract right" which was dependent on whether or not the right to payment had previously been earned,[10] the amendments did not further *876 restrict the meaning of "contract rights."[11] Although "contract right" can be synonymous with "account," it is not necessarily so.[12] The amendments removing the term from the code, although definitional, should not be considered meaningless.[13] The court should not give "contract right" the same narrow meaning it had when it was specifically defined in the statute.
The code itself uses the term in a way that is inconsistent with the narrow definition urged by Wilson. The official comment to § 8.9-106, states that the term "general intangibles" includes "miscellaneous types of contractual rights and other personal property which are used or may become customarily used as commercial security." Id. (emphasis added). Clearly the code contemplates "contract right" to encompass more than just a right to payment.[14]
"Account" and "general intangible" are both defined in § 8.9-106, and hence are mutually exclusive. In re Shiflett, 40 B.R. 493, 494 (Bankr.W.D.Va.1984). "Contract right" is a term that was both absorbed into the definition of "account," and is used to define "general intangible." It is impossible for the term to have a single meaning and be incorporated in both mutually exclusive categories. Accordingly, the court rejects the narrow definition urged by Wilson, and will give the term its common meaning.
The court also concludes that Wilson was on notice as to the extent of Dominion's security interest.
Va.Code Ann. § 8.9-110 provides that "any description of personal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described." Id. The official comment further provides that "[t]he test of sufficiency . . . is that the description . . . make possible the identification of the thing described." Va.Code Ann. § 8.9-110, official comment. The comment further admonishes that courts "should refuse to follow the holdings . . . that descriptions are insufficient unless they are of the most exact and detailed nature." Id.
The question for this court is whether "contract rights" as used in the security agreement taken by Dominion is sufficient to "make possible the identification of the thing described." The court concludes that it is. Wilson himself used the term to describe his interest in the Holyfield property at least five times in various documents filed with the bankruptcy court. Appellant's brief at 4-6. Clearly, he cannot now claim that the term does not adequately describe his interest.[15]
III. Conclusion
The court has determined that, as to Dominion, Wilson's interest in the Holyfield property is personal property, and therefore could be included in the security agreement. The court also concludes that *877 the term "contract rights," when given its ordinary meaning, as is appropriate in this case, encompasses Wilson's interest in the Holyfield property. Thus, the court finds that Dominion's security interest reaches Wilson's interest in the Holyfield property.
This court hereby reverses the decision of the bankruptcy court, and holds that the 1985 security agreement granting Dominion a security interest in some of Wilson's personal property, does give Dominion a security interest in whatever interest Wilson has in the Holyfield property. An appropriate order will accompany this opinion.
NOTES
[1] Va.Code Ann. § 8.9-104(j) (1987 Supp.) provides that "[t]his title does not apply . . . to the creation or transfer of an interest in or lien on real estate."
[2] Heider v. Dietz, 234 Or. 105, 380 P.2d 619 (1963).
[3] The court need not consider Dominion's alternative argument that the real estate contract is so ambiguous as to prevent the doctrine from operating between the contracting parties.
[4] "It reaches every interest of the judgment debtor in land which the record of the title shows that he had, either before or after the judgment was docketed, even though he has in fact transferred his interest to an innocent purchaser before the judgment was docketed, unless the record itself shows such previous transfer by deed duly recorded." 160 S.E. at 206.
[5] The court decided the case on the basis of Va.Code Ann. § 55-96 (1982) which provides that contracts for sale are void as to lien creditors, and ruled that the judgment-creditor should be paid from the proceeds of the sale. See also Security Bank v. Chiapuzio, 304 Or. 438, 747 P.2d 335, 337 n. 1 (1987) (court refused to apply equitable conversion to alter the "claims of third parties not in privity with the contracting parties." (citation omitted)); First Security Bank of Idaho v. Rogers, 91 Idaho 654, 429 P.2d 386, 389 (1967) (A judgment lien docketed against the vendor after vendor has contracted to sell the land extends to the vendor's interest in the land.); Noyes v. Estate of Cohen, 123 N.J.Super. 471, 303 A.2d 605 (Ch.Div.1973) (Equitable conversion does not restrict creditor's claim to vendor's interest in the purchase money.)
[6] It follows, then, that Wilson's interest is not necessarily excluded from the 1985 security agreement by virtue of Va. Code Ann. § 8.9-104(j) supra n. 1.
[7] "This section adopts [a] system of `notice filing'. . . . What is required to be filed is . . . a simple notice which. . . . indicates merely that the secured party who has filed may have a security interest in the collateral described." Va. Code Ann. § 8.9-402, Official Comment, (Supp.1987). See also In re Varney Wood Products, Inc., 458 F.2d 435, 437 (4th Cir.1972) ("`notice filing' . . . contemplates further inquiry in order to determine whether a given asset is covered by a security agreement.")
[8] § 8.9-106 (amended 1973) supra p. 875.
[9] § 8.9-106 (Supp.1987) "`Account' means any right to payment for goods sold or leased, or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance."
[10] In re Himlie Properties, Inc., 36 B.R. 32, 34 (Bankr.W.D.Wash.1983) "[T]he term `contract right' was eliminated as unnecessary and indistinguishable from the term `account'." Id.
[11] "[T]he . . . amendments . . . have been deemed `functional, definitional, but not substantive' and merely `declarative of the code as it existed before. . . .'" Id. citing Dynair Electronics, Inc. v. Video Cable, Inc., 55 Cal.App.3d 11, 127 Cal.Rptr. 268, 273 (1976) and Official Reasons for 1972 Change, Uniform Laws Annotated, Uniform Commercial Code, § 9-106 at 180 (West 1981).
[12] In re Kelly, 21 B.R. 495, 496-97 (Bankr.W.D. Va.1982), "Contract rights include rights to payment of money to be earned by some future performance." Id. (emphasis added).
[13] Southern Ry. Co. v. United States Cas. Co., 136 Va. 475, 483, 118 S.E. 266, 269 (1923). "An amendment to a statute should always be construed to mean something, rather than nothing." Id.
[14] See also In re D.J. Maltese, Inc., 42 B.R. 589, 592 (Bankr.E.D.Mich.1984) (A contract for sale of realty was not an "account," but was a "general intangible." The court noted the use of "contract right" in the comment defining "general intangible.")
[15] The court is aware of Wilson's argument that § 8.9-402 requires a financing statement which describes a security interest in crops or timber to specifically describe the real estate involved, and that by analogy, a security interest in the ownership of that land should be no less specific. The court notes first that, as to Dominion, Wilson's interest is not real property, and second, this case does not involve any question of notice to third parties since the dispute is only between the parties who signed the security agreement. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/480555/ | 807 F.2d 322
105 Lab.Cas. P 12,118
UNITED STATES of America, Appellant,v.Stephen TRAITZ, Jr.UNITED STATES of America, Appellant,v.Mark "Buddy" OSBORN.UNITED STATES of America, Appellant,v.Robert MEDINA.
Nos. 86-1676, 86-1677, and 86-1678.
United States Court of Appeals,Third Circuit.
Argued Nov. 20, 1986.Decided Dec. 1, 1986.
Henry L. Doner, Saul Doner, Saul Doner & Associates, Philadelphia, Pa., for appellee Robert Medina.
Steven A. Morley (argued), Morley & Farber, Philadelphia, Pa., for appellee, Mark "Buddy" Osborn.
Edward S.G. Dennis, Jr., U.S. Atty., Walter S. Batty, Jr., Richard L. Scheff (argued), Ronald K. Noble (argued), Asst. U.S. Attys., U.S. Atty's Office, Philadelphia, Pa., for appellant.
Ronald F. Kidd (argued), Michael M. Mustokoff, Teresa N. Cavenagh, Duane, Morris & Heckscher, Philadelphia, Pa., for appellees, Stephen Traitz, Jr. and Robert Medina.
Before SEITZ, HIGGINBOTHAM and SLOVITER, Circuit Judges.
OPINION OF THE COURT
SLOVITER, Circuit Judge.
1
The government appeals from orders of the district court releasing from custody defendants Stephen Traitz, Jr., Mark Osborn, and Robert Medina on certain conditions of release imposed by the court. The government contends that the release conditions are unsatisfactory and that no condition or combination of conditions will reasonably assure the safety of any other person or the community. We heard this appeal on an expedited basis.
2
Defendants Traitz, Osborn and Medina are among 19 defendants charged in a 61 count indictment with numerous offenses. All three defendants are charged with participation in the affairs of the Roofers Union through a pattern of racketeering and with conspiracy in violation of 18 U.S.C. Sec. 1962 and collection of credit by extortionate means in violation of 18 U.S.C. Sec. 894. Traitz and Medina are charged with mail fraud in violation of 18 U.S.C. Sec. 1341. Traitz is charged as well with solicitation and acceptance of kickbacks to influence operation of an employee benefit plan, in violation of 18 U.S.C. Sec. 1954; embezzlement of funds from an employee welfare benefit plan in violation of 18 U.S.C. Sec. 664; bribery of a federal official in violation of 18 U.S.C. Sec. 201; interstate travel in aid of racketeering in violation of 18 U.S.C. Sec. 1952; and embezzlement of union funds in violation of 29 U.S.C. Sec. 501(c). Osborn and Medina are also charged with interference with commerce by extortion in violation of 18 U.S.C. Sec. 1951.
3
The government sought detention of the three defendants before trial pursuant to 18 U.S.C. Sec. 3142. Following a consolidated detention hearing, a United States magistrate found that the defendants are charged, inter alia, with crimes of violence; that there is probable cause to find that each of the defendants is guilty of the crimes charged; that the evidence against Traitz, Medina and Osborn is substantial and incriminating; that tape recordings contain evidence that Traitz counselled and encouraged violence against roofing contractors and that Medina and Osborn actually committed intimidation and violence; that the tapes disclose repeated patterns of lawlessness and attempted obstruction of justice by intimidation; and that there is clear and convincing evidence that no condition or set of conditions will insure the safety of the community and the witnesses and protection of the witnesses in this case if these defendants were released.
4
Following an appeal to the district court, a hearing was held on November 3, 1986. The district court reversed the Magistrate's detention order and, in an order dated November 4, 1986, 646 F.Supp. 1086, directed that the defendants be released before trial under various conditions. These conditions require that each defendant post monetary bail in the amount of 10% of $400,000 for Traitz and $100,000 for the other two; that each post the title to his home, and in the case of Traitz title as well to other real and personal property, to assure each defendant's appearance and to satisfy the remainder of his bail in the event he breaches any conditions set by the court; that defendants cease and desist all union activity directly or indirectly; that defendants remain at their respective homes subject to house arrest and report by telephone daily to the pretrial services officer; that defendants cease contact with all but family members, attorney and friends having no relation to the allegations in this case; that defendants surrender all firearms; and that defendants comply with any other conditions the court imposes. In addition, the court directed that Traitz agree to a 24 hour phone monitoring of his house phones, to wear a beeper device to disclose his whereabouts if requested by the government, and to surrender his passport.
5
The cases in which pretrial detention is authorized under the Bail Reform Act of 1984 are specified in 18 U.S.C. Sec. 3142(f). See S.Rep. No. 225, 98th Cong., 2d Sess. 20, reprinted in 1984 U.S. Code Cong. & Admin. News 3182, 3203. Here, the government alleges that the defendants have been charged with crimes of violence within 18 U.S.C. Sec. 3142(f)(1)(A); that there is a serious risk that Traitz will obstruct and attempt to obstruct justice or intimidate witnesses, within the scope of 18 U.S.C. Sec. 3142(f)(2)(B); and that Medina's prior offenses fall within 18 U.S.C. Sec. 3142(f)(1)(D). Defendants do not appear to contest that this is the type of case in which pretrial detention could be ordered, and instead have challenged the government's contention that such detention is appropriate here.
6
Under the statute, pretrial detention can be ordered only when a judicial officer finds, after a hearing, "that no condition or combination of conditions will reasonably assure the appearance of the person as required and the safety of any other person and the community." 18 U.S.C. Sec. 3142(e). The statute requires that in determining whether there are conditions of release that will reasonably assure such appearance and safety, the judicial officer shall take into account the available information concerning (1) the nature and seriousness of the offense charged; (2) the weight of the evidence against the person; (3) the history and characteristics of the person; and (4) the nature and seriousness of the danger to any person and the community that would be posed by the person's release. See United States v. Coleman, 777 F.2d 888, 892 (3d Cir.1985). See also 18 U.S.C. Sec. 3142(g). In this case, the government does not contend that the defendants will flee. Thus, the focus is on the safety of the community.
7
In evaluating the nature and circumstances of the offense charged and the weight of the evidence, the district court found, inter alia, that the government has demonstrated "that the three defendants under detention use the [R]oofers' [U]nion to squeeze money out of roofing contractors by violence and intimidation," and that "[t]he tape recorded conversations demonstrate that the Roofers' Union has conducted its affairs through a pattern of violence." Although the court stated that it was not prejudging the claims of the defense that the violence was used to achieve legitimate union objectives, it stated that the factual underpinnings of such a claim "on the present record appear weak."
8
With respect to the government's contention that these defendants would obstruct justice and intimidate witnesses, the court found that the evidence "demonstrates a clear intention to 'fix' state court judges" but that there was only a weak showing of intimidation or threats to witnesses, which arose out of a motor vehicle accident involving Medina that was unrelated to the union activities.
9
In considering the history and characteristics of the defendants, the court noted that Traitz and Osborn had never been convicted of any crime, and that Medina had twice been convicted of armed bank robbery.1
10
Finally, in considering the nature and seriousness of the danger to any person or the community that would be posed by the defendants' release, the district court concluded that the removal of the defendants from union activities combined with the other conditions in its orders provide reasonable assurance that the pattern of violence against roofing contractors and others will cease, and provide reasonable assurances of the safety of witnesses and others. The court reminded the government that it can and indeed "should move to revoke defendants' bail" if the circumstances change.2
11
On appeal from the district court's decision to detain a defendant before trial and to release a defendant, the court of appeals has an obligation to make an independent determination on the application of the government for detention, although the reasons given by the trial judge are entitled to respectful consideration. United States v. Coleman, 777 F.2d at 891. In effect, the district court ruled that the conditions of release that it imposed adequately protect the community and any persons therein from any danger posed by these defendants. Exercising our independent determination, we conclude that the district court's order should be affirmed.
12
In enacting the Bail Reform Act of 1984, Congress substantially altered the preceding practice under which assurance of the defendant's presence at trial was the only factor to be considered in detention determinations before trial. See S.Rep. No. 225, 98th Cong., 2d Sess. 5, reprinted in 1984 U.S.Code Cong. & Admin.News at 3187. However, while enlarging the circumstances and basis for pretrial detention,3 Congress also made clear that such detention was for only a "limited group" of offenders to whom pretrial detention was applicable, i.e. the "small but identifiable group of particularly dangerous defendants as to whom neither the imposition of stringent release conditions nor the prospect of revocation of release can reasonably assure the safety of the community or other persons." Id. at 6-7, reprinted in 1984 U.S.Code Cong. & Admin.News at 3189.
13
In the statute, Congress indicated those cases for which pretrial detention is particularly appropriate by providing for a presumption of dangerousness in certain situations. See 18 U.S.C. Sec. 3142(e). In other cases, release on conditions remains the norm and the government must prove, by clear and convincing evidence, that no condition or combination will assure the safety of the community. 18 U.S.C. Sec. 3142(f).
14
Here, the government concedes that it does not have the benefit of the statutory presumption of dangerousness. Compare United States v. Perry, 788 F.2d 100, 108 (3d Cir.1986). It argues, however, that the conditions are inadequate and contends that imposing house arrest is unprecedented and unsupported by the statute. We note, however, that one of the conditions expressly specified in the statute is that the defendant "abide by specified restrictions on his personal associations, place of abode, or travel," 18 U.S.C. Sec. 3142(c)(2)(D), and therefore conclude that house arrest is a statutorily permissible condition.
15
Each case, of course, is sui generis, and must be decided on the basis of the particular record adduced. Although the government refers us to earlier cases decided by this court and others, we believe that there are significant differentiating factors. In United States v. Delker, 757 F.2d 1390, 1400 (3d Cir.1985), there was substantial testimony that Delker had already threatened potential witnesses several times. In United States v. Coleman, 777 F.2d at 892-93, Coleman, who had a history of 7 criminal convictions including distribution of heroin, was charged with participating in a conspiracy resulting in the death of a government witness and the evidence was sufficient to convince 6 jurors at his first trial of his guilt beyond a reasonable doubt. In United States v. Colombo, 777 F.2d 96, 97 (2d Cir.1985), the indictment charged that Colombo operated a criminal enterprise which committed crimes such as murder, robbery, narcotics violations, arson, extortion, threats, assaults, illegal gambling, bribery, interstate theft, transportation of stolen goods, and mail/wire fraud.
16
We do not minimize the seriousness of the charges of widespread illegal activities against these defendants, nor the strength of the government's evidence presented by it in support of its application for detention. However, the focus of the Bail Reform Act is on whether the conditions or combination of conditions will reasonably assure the safety of the community. The government has produced no evidence of a threat to any witness in connection with the crimes charged in the indictment, and its evidence as to threats in the unrelated incident arising out of Medina's automobile accident was "weak." While "house arrest" may not, in and of itself always provide the requisite assurance, we are satisfied that, after according respectful consideration to the reasons given by the trial judge, and based on the record produced by the government, the district court did not err in determining that house arrest combined with the other conditions of release, including in particular the requirement that defendants cease all connection with the Roofers' Union through which and on whose behalf many of the crimes of violence were allegedly committed, would provide the reasonable assurance required by the statute of the safety of the community during the period before the trial is concluded.
17
For the foregoing reasons, we will affirm the orders of the district court. The mandate will issue forthwith.
18
A. LEON HIGGINBOTHAM, Jr., Circuit Judge, dissenting in part.
19
The Bail Reform Act of 1984 has brought extensive changes to the pretrial bail process in certain noncapital criminal cases. It has, as the majority notes, "substantially altered the preceding practice under which assurance of the defendant's presence at trial was the only factor to be considered in detention determination before trial." Maj. at 325.
20
The Court of Appeals for the Second Circuit, in an opinion written by Judge Kearse, has concluded--quite persuasively, in my view--that the authorization of pretrial detention, see 18 U.S.C. Sec. 3142(e) (Supp.III 1985), is "repugnant to the concept of substantive due process [that] ... prohibits the total deprivation of liberty simply as a means of preventing future crimes."1 United States v. Salerno, 794 F.2d 64, 71-72 (2d Cir.), cert. granted, --- U.S. ----, 107 S.Ct. 397, 93 L.Ed.2d 351 (1986). In this Circuit, however, we are bound by our prior decisions rejecting constitutional attacks on the Bail Reform Act. See United States v. Perry, 788 F.2d 100 (3d Cir.1986); United States v. Accetturo, 783 F.2d 382 (3d Cir.1986); United States v. Delker, 757 F.2d 1390 (3d Cir.1985). At least until the Supreme Court reaches a decision in the Salerno case, our task is to put aside our individual reservations about the Act's validity and apply its precise terms to defendants like Messrs. Traitz, Medina and Osborne.
21
In both Salerno and the instant case, the government's theory has been that "the defendants would if released carry on 'business as usual' notwithstanding any release conditions, and that business as usual involves threats and crimes of violence." 794 F.2d at 71. The record in this case establishes clearly that, particularly for Mr. Traitz and Mr. Medina,2 their "business as usual" involves threats and crimes of violence. Their alleged conduct has been so egregious, so truly bereft of moral values and so disrespectful of the law that it defies my imagination to conceive that, for example, confining Traitz to his suburban estate will change his long term practices of abuse, threats and violence whenever he finds them to be tactically advantageous. If there are anywhere persons whose "release ... will endanger the safety of any other person or the community," 18 U.S.C. Sec. 3142(b) (Supp.III 1985), Traitz and Medina fit perfectly that Congressional description.3 They personify that "small but identifiable group of particularly dangerous defendants as to whom neither the imposition of stringent release conditions nor the prospect of revocation of release can reasonably assure the safety of the community or other persons." S.Rep. No. 225, 98th Cong.. 2d Sess. 6-7, reprinted in 1984 U.S.Code Cong. & Admin.News at 3189; Maj. at 325.
22
I concede that these appeals involve, in many respects, close judgment calls. Judges Sloviter and Katz have, in their characteristic fashion, written thoughtful opinions. Nevertheless, I believe that releasing Traitz and Medina eviscerates the intent of Congress. The majority stresses that United States v. Delker, 757 F.2d 1390 (3d Cir.1985), where we affirmed a pretrial detention order, was different because "there was substantial testimony that Delker had already threatened potential witnesses several times." Maj. at 326. I do not believe that the only persons who are subject to pretrial detention are those bestial individuals who have in fact killed others or who have in the most unequivocal language threatened to terrorize those who have been officially designated as "witnesses" in pending federal court cases. As I interpret the Bail Reform Act, Congress swept much more widely when, in authorizing the pretrial detention of "dangerous" individuals, it sought to protect "the safety of any other person and the community," 18 U.S.C. Sec. 3142(f) (Supp.III 1985), from defendants who have, as in this case, been indicted for crimes of violence. While Sec. 3142(f)(2) makes reference to threatening a prospective witness or juror, that conduct is not a synonym or the equivalent of the statutory language that is concerned to insure the safety of "other person(s) in the community." The statute's concern thus encompasses a broad variety of persons in addition to prospective witnesses. On the more general level of danger to the community, there are several remarkable similarities here to a prior case under the Act, where our Court noted that:
23
[o]ur independent analysis finds clear and convincing evidence that Delker[, the defendant,] poses a danger to the community within the meaning of the Bail Reform Act of 1984. He is charged with several serious offenses; the indictment alleges that he was part of a group that dominated a union local through the systematic use of force, violence, vandalism, and physical and economic intimidation. The Hobbs Act count results from Delker's alleged beating of and the use of a death threat in an attempt to extort money from a painting contractor. The Act provides for consideration of the nature and seriousness of the offense charged with specific emphasis upon crimes of violence. See S.Rep. No. 225, 98th Cong., 1st Sess. at 23, reprinted in 1984 U.S.Code Cong. & Ad.News at 26 (Supp.9A). This first factor thus supports the district court's detention decision.
24
Next, despite appellant's protestation that he is not a "career offender," the record reveals that Delker has two Pennsylvania convictions for assault and battery in 1961, and a Pennsylvania conviction for robbery by assault and force in 1964. He also has a 1975 arrest for assault and resisting arrest, which was subsequently reduced to disorderly conduct at the time of a guilty plea. In 1977, Delker was arrested on criminal mischief charges. The Act specifically provides for consideration of prior arrests in the release decision. S.Rep. No. 225, 98th Cong., 1st Sess. at 23 n. 66, reprinted in 1984 U.S.Code Cong. & Ad.News at 26 n. 66 (Supp.9A), and the legislative history of the Act records Congress' belief that there is a "significant correlation" between prior criminal history and pretrial rearrest. Id. at n. 68.
25
Delker, 757 F.2d at 1400. Certainly Mr. Delker's criminal record was not as malevolent as is Medina's, and, except for direct personal threats to prospective witnesses, Traitz could pass as Delker's identical twin as to his conduct in the union.4
26
In their brief, counsel for Mr. Traitz complain about some of the conditions that he has had to tolerate in prison. See Brief of Appellee at 31. They assert that the government's fears that the conditions of release will not insure the safety of the community are "groundless" because "Mr. Traitz's movements have been restricted to horseback rides around his three acre farm." Id. at 26. Given the existence of the Bail Reform Act and the preventive detention it authorizes, however, Traitz's counsel's argument fundamentally misperceives the parity of our law. As Justice Harlan wrote ninety years ago, "in the eyes of the law, there is in this country no superior, dominant, ruling class of citizens. There is no caste here. Our Constitution ... neither knows nor tolerates classes among citizens. In respect of civil rights, all citizens are equal before the law." Plessy v. Ferguson, 163 U.S. 537, 559, 16 S.Ct. 1138, 1146, 41 L.Ed. 256 (1896) (Harlan, J., dissenting) (emphasis added).
27
Under our Constitution and the Bail Reform Act, Mr. Traitz deserves no special class treatment. He is no more entitled to liberty because he is an equestrian devotee who desires to retreat from prison to his Montgomery County farm, than would be an "underprivileged" poor defendant, who had been involved in similar systematic violent conduct but resides in a public housing project notorious for drug trafficking and other criminal activities. It is my hunch that, under the statute as it is now being applied, the latter defendant would not be freed, and, in my view, neither should Mr. Traitz nor Mr. Medina. For these reasons, I respectfully dissent.
Appendix
28
The district court made the following factual findings:
29
The government has demonstrated that the three defendants under detention used the roofers' union to squeeze money out of roofing contractors by violence and intimidation. The tape recorded conversations demonstrate that the Roofers Union has conducted its affairs through a pattern of violence. On October 30, 1985, Stephen Traitz, Jr., Robert Medina, and another defendant discussed an individual who worked for Peerless Roofing. When Medina advised Traitz that the individual had not followed certain instructions, Traitz instructed Medina to have the individual beaten. Traitz advised Medina not to get involved personally in the beating. Traitz instructed Medina to get a "good gang" together and "give it to 'em good." Traitz instructed Medina that a "good punch in the mouth will do him a world of good."
30
United States v. Traitz, 646 F.Supp. 1086, 1088 (E.D.Pa.1986).
31
* * *
32
* * *
33
Traitz stated, "The first time I see him at one of them functions, I'll get Joey or Schoenberger to beat the fuckin' balls off him. Like I did with the two metal men, like I did with the ironworker, like I did with the bricklayer. That's how I do it. They're scared to fuckin' death of me because that's how the fuckin' operate." Other conversations are proffered to indicate that on October 17, 1985, Stephen Traitz, Jr. told another defendant to summon a roofer to the union offices for a union infraction and to let defendant Joseph Traitz "give him a smack." On October 23, 1985, Traitz gave permission to a defendant to assault a roofer over a personal matter, according to another proffer in the government's Memorandum. Finally, on November 7, 1985, the government's Memorandum proffers that Traitz told another defendant what he (Traitz) tells other business agents to tell contractors to establish superiority. Specifically, Traitz stated, "If you fuck me, I'll beat you the fuck-up. Don't mess with me ... I'll beat you up."
34
Stephen Traitz, Jr. does not perform the acts of violence personally. Rather, this task falls on one or more of his subordinates. The recorded conversation of October 10, 1985 is replete with evidence of this; it also suggests some connection between the union and a reputed organized crime employee.
35
In an October 3, 1985, tape recording, a contractor who tried to leave a confrontation at the union offices was forced to sit down for further intimidation. On November 21, 1985, another contractor was at the union offices for a confrontation. In that instance, Robert Medina was intercepted yelling "smack him in the mouth. Smack him again ... smack him again." This was followed by slapping noises. The tape recording established that Mark Osborne was the individual who actually assaulted the contractor. Similarly, there is a tape recording from a November 26, 1985 assault of a roofer. In that confrontation, Mark Osborne slapped a roofer in the union offices for working on weekends. In yet another instance on September 26, 1985, Robert Medina and others confronted a contractor and accused him of underreporting the number of hours worked. In this confrontation, Robert Medina screamed and yelled at the contractor. At one point, the contractor is slapped on the side of the head by another defendant. At the end of this confrontation directed by Robert Medina, another defendant told the contractor, "You're lucky you're getting away with just a slap in the head; next time it won't be as easy."
36
Id. at 1088-1089 (original ellipses).
1
The district court also stated that Medina was convicted of assault and related charges in state court in 1986 for which he received probation, but we cannot confirm that conviction on the basis of the limited record before us
2
We note that the district court stayed its orders pending determination of an appeal, scrupulously following this court's suggestion in United States v. Coleman, 777 F.2d at 891, that a reasonable time be allotted following the district court's order to permit us to review the appeal papers
3
The Supreme Court has granted certiorari on some questions relating to the constitutionality of pretrial detention in United States v. Salerno, 794 F.2d 64 (2d Cir.), cert. granted, --- U.S. ---, 107 S.Ct. 397, 93 L.Ed.2d 351 (1986). No constitutional issue is raised before us
1
I "recognize that pretrial detention may be validly imposed when substantial evidence indicates that a defendant, if released, would [tamper with or intimidate witnesses or jurors, or would flee and not appear for trial]." United States v. Salerno, 794 F.2d 64, 71 (2d Cir.1986). The constitutional problem with the Bail Reform Act is that it goes so much further, authorizing "[p]retrial detention to prevent future crimes against society at large." Id. at 73
2
As to appellee Mr. Osborne, I do not dissent from the majority's affirmation of the district court order. Although the record alleges that Osborne has personally committed a number of acts of violence, his role in the alleged crimes of the Roofer's Union appears to have been limited to that of a soldier taking orders. Unlike appellees Traitz and Medina, Osborne is not alleged to have been a decisionmaker or even to have given orders that any crimes be committed. He also, unlike Medina, has no criminal record. I am thus persuaded that the safety of the community and the well-being of prospective witnesses in this case will be insured by the bail conditions that Judge Katz imposed on Osborne
3
I have included in an appendix portions of the trial court's findings which confirm my view. In fact, as I read the trial judge's opinion, it understates the magnitude of violence that is Traitz's and Medina's "stock in trade."
4
Counsel for Traitz misperceive the intent of the statute when they stress the following:
When cross-examined, it was established that although the taped incidents sounded truly horrible, there was no evidence that any of the alleged victims had ever been hospitalized or even received medical treatment.
Brief of Appellee at 7. Dangerousness to the community does not require a trail of broken bones, hospitalized bodies, or corpses. As Judge Adams noted in Delker, "[t]he legislative history ... specifies that the concept of a defendant's dangerousness as used in the Act is to 'be given a broader construction than merely danger of harm involving physical violence.' " Delker, 757 F.2d at 1393 (quoting S.Rep. No. 225, 98th Cong., 1st Sess. 12-13, reprinted in 1984 U.S.Code Cong. & Admin.News 1, 15 (Supp.9A)). | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1551393/ | 908 A.2d 933 (2006)
Anthony William Oliviero, Dennis Underwood, and Katherine White, Petitioners
v.
Michael B. Diven, Pedro A. Cortes, and the Allegheny County Board of Elections, Respondents
No. 380 M.D. 2006.
Commonwealth Court of Pennsylvania.
Heard: August 3, 2006.
Order Filed: October 26, 2006.
Filed: August 10, 2006.
BEFORE: HONORABLE JAMES R. KELLEY, Senior Judge.
ORDER
AND NOW, this 26th day of October, 2006, it is ordered that the Opinion filed on August 10, 2006, shall be designated OPINION rather than MEMORANDUM OPINION, and that it shall be reported.
OPINION BY SENIOR JUDGE KELLEY.
On August 3, 2006, this Court heard arguments on a Motion for Preliminary Injunction filed by Anthony William Oliverio, Dennis Underwood, and Katherine White (Petitioners) and a Motion to Quash Subpoenas filed by Debora Romaniello and Daniel Romaniello (collectively, Romaniellos). By order dated August 4, 2006, this Court denied the Petitioners' Motion for Preliminary Injunction and granted the Romaniellos' Motion to Quash Subpoenas. This opinion now follows.
The Petitioners are residents, registered Republicans and qualified electors of the 22nd Legislative District, Allegheny County. With this motion, the Petitioners seek to enjoin the Secretary of the Commonwealth and the Allegheny County Board of Elections from certifying Michael Diven (Diven) as a candidate for the Office of Representative in the General Assembly from the 22nd Legislative District in the November 2006 general election.
Prior to this action, the Petitioners filed with this Court a petition to set aside the nomination petition of Diven seeking nomination as the Republican candidate for the Office of Representative in the General Assembly from the 22nd Legislative District in the May 2006 primary election at docket number 176 M.D. 2006. Therein, the Petitioners alleged that Diven's nomination petition should be set aside on the basis that signatures contained in his petition were obtained fraudulently. A hearing on the petition to set aside was set for March 29, 2006.
On March 28, 2006, Diven filed a petition to withdraw his nomination petition at docket number 207 M.D. 2006. Diven's petition to withdraw was granted. By order of this Court dated March 28, 2006, the Secretary of the Commonwealth was directed not to certify the name of Michael Diven as a Republican candidate in the May 16, 2006 primary election as a candidate for the Office of Representative in General Assembly from the 22nd Legislative District. Consequently, the March 29, 2006 hearing at docket number 176 M.D. 2006 was cancelled and the case was dismissed as moot.
Thereafter, Diven launched a write-in campaign. As stipulated to by the parties, at the primary election held on May 16, 2006, Diven won the Republican nomination for the Office of Representative in the General Assembly from the 22nd Legislative District by receiving 680 write-in votes.
The Petitioners then filed a Petition for Review with this Court followed by the instant Motion for Preliminary Injunction, docketed at 380 M.D. 2006. The Petitioners allege that if Diven is certified as the Republican candidate, the Petitioners will suffer irreparable harm because Diven's certification will be contrary to this Court's order of March 28, 2006, Republican voters of the 22nd Legislative District will be disenfranchised, the anti-fraud provisions of the Pennsylvania Election Code[1] will be nullified, and Diven and his staff will be allowed to unjustly benefit from their unlawful acts. The Petitioners allege that there is no adequate remedy at law and that preliminary injunction is reasonably suited to abate Diven's unlawful acts.
Both the Secretary of the Commonwealth and Diven timely responded to the motion. The Secretary and Diven both assert that the Petitioners have failed to establish the requisite elements for injunctive relief. Additionally, Diven contends that the Petitioners lack standing to contest certification of the May 16, 2006 primary election. This Court shall first address the issue of standing.
STANDING
Diven asserts that the Petitioners do not have standing having failed to establish a substantial interest in the claim sought to be litigated that surpasses the common interest of all citizens in procuring obedience to the law. Diven further asserts that the Petitioners have not established a direct and immediate connection between the interest they seek to protect and the alleged harm.
The "purpose of the requirement of standing is to protect against improper plaintiffs." Application of Biester v. Thornburgh, 487 Pa. 438, 442-43, 409 A.2d 848, 851 (1979). In order to meet this requirement, a plaintiff must allege and prove an interest in the outcome of the suit which surpasses "the common interest of all citizens in procuring obedience to the law." Id. (quoting William Penn Parking Garage v. City of Pittsburgh, 464 Pa. 168, 346 A.2d 269 (1975)). To surpass the common interest of all citizens, the interest must be substantial, direct, and immediate. Id. Additionally, where a citizen challenges an action that would otherwise go unchallenged in the courts, standing may be found. Consumer Party of Pennsylvania v. Commonwealth, 510 Pa. 158, 507 A.2d 323 (1986). This legal precept is often applied where plaintiffs assert standing on the basis that they are taxpayers and, thus, have an interest in public fiscal expenditures. Id.
Here, there is no dispute that the Petitioners, as registered Republicans and qualified electors of the 22nd Legislative District, had standing to challenge the nomination petition of Diven. The question is whether they continue to have standing to challenge the Secretary's certification of Diven as the Republican nominee for the office of Representative in the General Assembly from the 22nd Legislative District in the general election. The Petitioners argue that Diven would not be the nominee if their objection to the nomination petition had been heard by this Court. The Petitioners argue that because Diven withdrew his nomination petition and the hearing was cancelled, they were never granted their day in court and are uniquely aggrieved in this regard. The Petitioners further assert that the order issued in the case docketed at 207 M.D. 2006 prevents the Secretary from certifying Diven as the Republican nominee.
By virtue of the Petitioners' involvement in the prior proceeding and the fact that their present claims are directly and uniquely related to the prior proceeding, which were never heard due to Diven's withdrawal, this Court finds that the Petitioners have established an interest in the outcome of this suit which surpasses "the common interest of all citizens in procuring obedience to the law." The Petitioners seek to protect the integrity of the election process and the interests of the Republican Party by ensuring that the nominee of their party is qualified for office.[2] In this case of first impression, this Court finds that the Petitioners have standing to challenge the Secretary's certification of Diven.
PRELIMINARY INJUNCTION
Having determined that the Petitioners have standing to proceed, the Court shall next address whether the Petitioners have established entitlement to preliminary injunction. A preliminary injunction is intended to preserve the status quo and prevent imminent and irreparable harm that might occur before the merits of the case can be heard and determined. Soja v. Factoryville Sportsmen Club, 522 A.2d 1129 (Pa. Super. 1987). It is considered an extraordinary remedy and may only be granted if the plaintiff has established a clear right to the relief sought. T.W. Phillips Gas and Oil Co. v. Peoples Natural Gas Co., 492 A.2d 776 (Pa. Cmwlth. 1985). A court may grant a preliminary injunction only where the moving party establishes the following elements: (1) the relief is necessary to prevent irreparable harm to the movant; (2) the injunction would restore the parties to the status quo as it existed before the alleged wrongful act; (3) greater injury would result from a refusal to grant the injunction than from granting the injunction; and (4) the movant's right to relief is clear. Id., 492 A.2d at 780. To establish a clear right to relief, the moving party must be able to show that he has a reasonable likelihood of success on the merits. Id. Our Supreme Court has illustrated the "clear right" requirement as follows:
Where the threat of immediate and irreparable harm to the petitioning party is evident, that the injunction does no more than restore the status quo and the greater injury would result by refusing the requested injunction than granting it, an injunction may properly be granted where substantial legal questions must be resolved to determine the rights of the respective parties.
Fischer v. Department of Public Welfare, 497 Pa. 267, 271, 439 A.2d 1172, 1174 (1982).
Clear Right to Relief
The Petitioners assert that Diven's certification will be contrary to this Court's order of March 28, 2006. The order clearly provides:
The Secretary of the Commonwealth is directed NOT to certify the name of MICHAEL DIVEN as a republican candidate in the May 16, 2006 primary election as a candidate for the office of Pennsylvania General Assembly from the 22nd Legislative District.
(Emphasis in original). The Secretary fully complied with this directive and did not certify Diven's name as a Republican candidate in the primary election. The order relates only to the primary election. Contrary to the Petitioners' assertions, the order does not preclude the Secretary from certifying Diven as the duly-elected Republican nominee in the general election.
The Petitioners further assert that this Court should enjoin the Secretary from certifying Diven pursuant to Sections 951(b), 909 and 977 of the Pennsylvania Election Code, 25 P.S. §§ 2911(b), 2869 and 2937. However, these sections do not apply to the instant case. Section 951 pertains to nominations by political bodies.[3] Diven was not nominated by a political body, but won the nomination of the Republican Party in the primary election by garnering the most votes. Likewise, Sections 909 and 977 are inapplicable as both refer to the pre-primary election process prescribed for gaining a place on the primary election ballot through the nomination petition process. Having withdrawn his nomination petition, Diven chose not to participate in the process that would have enabled him to have his name printed on the primary election ballot as a Republican candidate for office.
The Petitioners further assert that Diven's untimely withdrawal of his nomination petition violated the Election Code. The time period within which one can withdraw his or her name as a candidate from a primary election is set by statute. Section 914 of the Election Code, 25 P.S. §2874, provides:
Any of the candidates for nomination or election at any primary may withdraw his name as a candidate by a request in writing, signed by him and acknowledged before an officer empowered to administer oaths, and filed in the office in which his nomination petition was filed. Such withdrawals, to be effective, must be received in the office of the Secretary of the Commonwealth not later than 5 o'clock P.M. on the fifteenth day next succeeding the last day for filing nomination petitions in said office, and in the office of any county board of elections, not later than the ordinary closing hour of said office on the fifteenth day next succeeding the last day for filing nomination petitions in said office. No name so withdrawn shall be printed on the ballot or ballot labels. already received and filed, and thereby reinstate his nomination petition.
However, once this statutory time period expires, a candidate for nomination can still withdraw his or her name as a candidate. Section 978.4 of the Election Code, 25 P.S. §2938.4;[4] In re Petition of Dietterick, 583 A.2d 1258 (Pa. Cmwlth. 1990). After this statutory time period has lapsed, Section 978.4 of the Election Code provides that a candidate for nomination can petition the court of common pleas, or the Commonwealth Court, when a court of common pleas is without jurisdiction, to withdraw. The court shall order the withdrawal of said candidate's name for nomination or election, except upon a showing of special circumstances. Id.
Herein, as the primary ballots had not yet been printed and no special circumstances were shown, this Court granted Diven's petition to withdraw his nomination petition. The Petitioners correctly state that a nomination petition once withdrawn cannot be refiled or reinstated, but that did not occur here. Diven's name remained off the ballot. In full compliance with this Court's order, the Secretary of the Commonwealth did not certify Diven's name as a Republican candidate for the primary election.
The Petitioners further contend that Diven's withdrawal should preclude him from continuing to participate in the election cycle. In support of this contention, the Petitioners rely upon Lachina v. Berks County Board of Elections, 887 A.2d 326 (Pa. Cmwlth.), aff'd, 584 Pa. 493, 884 A.2d 867 (2005). However, the Petitioners' reliance on Lachina is misplaced.
In Lachina, the prospective candidate filed Democratic and Republican nomination petitions seeking the primary nomination of both parties for the office of Magisterial District Judge. Due to defects in both nomination petitions, the nomination petitions were struck and the candidate's name did not appear on the primary ballot as a candidate for either party. Lachina. Thereafter, the candidate attempted to refile nomination papers as a candidate of a political body. Id. This Court held that since the candidate had not voluntarily withdrawn from the primary process, but instead was stricken from the ballot due to defects in her nomination petitions, she was precluded from subsequently filing nomination papers as the candidate of a political body. Id., 887 A.2d at 329. We opined that Section 976 of the Code, 25 P.S. 2936,[5] requires the Secretary to reject the nomination paper of any candidate who has filed a petition for, or who has actually participated in, that primary election in which he seeks a ballot position. Id.
Lachina and "sore loser" provisions of the Election Code stand for the proposition that once a candidate's name has been stricken from the primary ballot or the candidate loses his party's nomination in the primary, the candidate is then precluded from filing nomination papers for the general election. Id. They are not applicable here as Diven's name was not "stricken" from the ballot and Diven did not "lose" the primary. Rather, Diven withdrew his nomination petition and voluntarily chose not to participate in the primary process. In doing so, Diven's voluntary withdrawal "undid" ab initio his nomination petition. Once Diven withdrew his nomination petition, his name did not appear on the ballot as a candidate for the Republican Party in the primary election. fact that Diven's name did not appear on the ballot, the Republican electorate for the 22nd Legislative District wrote-in Diven's name on the ballot. Having received the majority of the votes cast, Diven has rightfully earned the Republican Party's nomination for the Office of Representative in the General Assembly from the 22nd Legislative District and is now entitled to have his name appear on the general election ballot as the Republican Party's nominee.
The Petitioners assert that since Diven withdrew his nomination petition, they have been denied their day in court and have no adequate remedy at law to redress the harm and injury that will be caused by Diven's alleged violations of the Election Code. Assuming arguendo that the Petitioners' allegations of fraud and other violations of the Election Code are true, the Election Code provides an adequate remedy after a finding of guilt in a proper forum. Section 1851 of the Election Code, 25 P.S. §3551, provides "Any person who shall, while a candidate for office, be guilty of bribery, fraud or willful violation of any provision of this act, shall be forever disqualified from holding said office or any other office of trust or profit in this Commonwealth."
The Petitioners have begun the process that could lead to Diven's disqualification from office if elected by filing a complaint with the Department of Law of Allegheny County and, according to the parties, an investigation is currently underway.[6] As of this date, Diven has not been charged with fraud, let alone been found guilty of fraud, and therefore the Petitioners' instant action in equity is premature.
Additionally, the Petitioners' allegations of fraud and violations of the Election Code relate only to Diven's nomination petition. Their objections ended when Diven withdrew his nomination petition and are irrelevant to the certification of a candidate for the general election. The Petitioners do not allege fraud or violations of the Election Code in connection with the primary election. the Petitioners assert that Diven did not receive the majority of votes in the May 16, 2006 Republican primary. Diven succeeded in winning the nomination because Republican voters of the 22nd Legislative District wrote-in Diven's name on the ballot as permitted by Section 1112-A of the Election Code, 25 P.S. §3031.12(b)(2).[7] Consequently, Diven is the duly-elected nominee for the Office of Representative in the General Assembly from the 22nd Legislative District.
In Butcher v. Trimarchi, 28 Pa. D. & C.2d 537 (1962), the plaintiffs filed a motion for injunctive relief seeking to have statutes pertaining to senatorial and representative districts declared unconstitutional. The Court of Common Pleas of Dauphin County, sitting as the Commonwealth Court, opined that relief sought would result in stopping the election machinery, and would deny the electorate the right to vote for those persons who were duly nominated in the primary election. Butcher. The court further posited, "it would be improper to invalidate a primary election when that machinery has been lawfully and faithfully complied with." Id., 28 Pa. D. & C.2d at 542. Where the people nominated their candidates in accordance with the requirements of the Election Code, an injunction preventing the electorate from exercising its will would be of "very questionable validity." Id. The Court held that "to negate the will of the electorate by judicial fiat" and effectuating "any course of action in the time that is allowed between now and the November election would be fraught with difficulty and undue haste." Id.
Applying the same rationale in Butcher to the instant proceeding, it would be improper to invalidate a primary election when that machinery has been lawfully and faithfully complied with. The Petitioners have asserted no viable legal basis to invalidate the choice made by the Republican voters of the 22nd Legislative District. For these reasons, this Court concludes that the Petitioners have failed to establish any clear right to the injunctive relief requested.
Immediate and Irreparable Harm
Additionally, the Petitioners have not shown danger of suffering immediate and irreparable harm if the preliminary injunction is denied. The harm the Petitioners seek to prevent is the disenfranchisement of the electorate and nullification of the Election Code by allowing a candidate who has allegedly engaged in fraudulent activity from obtaining public office. The alleged fraud was in connection with the nomination petition process a process that Diven withdrew himself from not the primary election itself, wherein the electorate chose Diven as their candidate by valid write-in votes. As addressed above, the Petitioners' allegations of fraud are currently under investigation. Those charges are proceeding in the appropriate investigatory bodies. The candidate himself has not been so charged and there are presently no reasons why Diven's name should not appear on the ballot for general election.
Greater Injury
The Petitioners have also not established that greater injury would result from granting the preliminary injunction than would result from denying it. In fact, this Court finds that the harm would be greater if the injunction were granted. The Commonwealth of Pennsylvania has a significant interest in protecting the electoral process, especially when it functions lawfully. Butcher. Diven was nominated in the May 16, 2006 primary election by the Republican electorate for the 22nd Legislative District in Allegheny County through valid write-in votes cast for him. Granting the Petitioners' injunctive relief and invalidating the primary results would harm the electoral process, invalidate the will of the electorate and, as a result, greatly harm public interest.
Status Quo
Finally, the Petitioners have not established that a preliminary injunction will restore the status quo. The Petitioners are in effect requesting this Court to return them to a status quo that would undo the lawful results of the May 16, 2006 primary election and invalidate the electorate's choice for the Republican nominee for the office. Such is not an acceptable result.
For the foregoing reasons, the Petitioners' Motion for Injunctive Relief was denied.
SUBPOENAS
With regard to the Motion to Quash, the Romaniellos assert that they did not receive sufficient notice to appear at the hearing. The hearing in this matter was originally set for August 2, 2006 by order of Court dated July 13, 2006 and was continued to August 3, 2006 by order dated July 24, 2006. The Petitioners had adequate time to serve timely subpoenas. However, the Petitioners did not personally serve Daniel Romaniello until August 1, 2006 at approximately 8:30 p.m. Debora Romaniello was not personally served; a subpoena was left at her place of employment on Friday, July 28, 2006.[8] Debora Romaniello alleges that she did not become aware of the subpoena until August 1. The Romaniellos, who reside in Pittsburgh, Pennsylvania, assert that one day's notice to appear in Harrisburg, Pennsylvania is "insufficient, unreasonable and oppressive." At the hearing, the Petitioners did not provide adequate justification for the short notice. This Court agrees such short notice was insufficient and unreasonable. Thus, the Motion to Quash was granted.
NOTES
[1] Act of June 3, 1937, P.L. 1333, as amended, 25 P.S. §§ 2600-3591.
[2] Additionally, the Court notes that if Petitioners were to ultimately prevail in this matter, a vacancy in the Republican Party nomination would exist. Pursuant to Section 979 of the Election Code, 25 P.S. §2939, "[a]ny vacancy happening or existing after the date of the primary in any party nomination, by reason of the death or withdrawal of any candidate after nomination, . . . may be filled by a substituted nomination made by such committee as is authorized by the rules of the party to make nominations in the event of vacancies on the party ticket." Petitioners, as registered, Republican electors in the 22nd Legislative District, have a direct and immediate interest in ensuring that a true and lawful Republican nominee appears on the general election ballot.
[3] The Election Code distinguishes between political parties and political bodies. Section 801 of the Election Code, 25 P.S. §2831; Packrall v. Quail, 411 Pa. 555, 192 A.2d 704 (1963). A political group which receives more than a certain number of votes at the preceding general or municipal election is deemed a political party and permitted to select its candidates by the primary election method. Id. A prospective candidate places his name on the primary ballot by filing a nomination petition. Id. Any other political group is deemed a "political body" and must select its candidates by the more difficult process of filing nomination papers. Id.
[4] Added by the Act of July 11, 1980, P.L. 591.
[5] Section 976 provides that no nomination paper shall be accepted "if the candidate named therein has filed a nomination petition for any public office for the ensuing primary, or has been nominated for any such office by nomination papers previously filed."
[6] Diven's chief of staff, Debora Romaniello, was arrested on July 28, 2006 and charged with fraud in connection with Diven's nomination petition.
[7] Added by the Act of July 11, 1980, P.L. 600. This section provides:
At primary elections, the voter shall vote for the candidates of his choice for nomination, . . . or he may so mark the write-in position provided on the ballot for the particular office and, in the space provided therefor on the ballot and/or ballot envelope, write the identification of the office in question and the name of any person not already printed on the ballot for that office, and such mark and written insertion shall count as a vote for that person for such office.
25 P.S. §3031.12(b)(2).
[8] This was the date of Ms. Romaniello's arrest. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551432/ | 6 F.2d 350 (1925)
ROSSINI
v.
UNITED STATES.
No. 6688.
Circuit Court of Appeals, Eighth Circuit.
June 3, 1925.
*351 George G. Chapin, of St. Paul, Minn., for plaintiff in error.
George A. Heisey, Asst. U. S. Atty., of Minneapolis, Minn. (Lafayette French, Jr., U. S. Atty., of St. Paul, Minn., on the brief), for the United States.
Before STONE and LEWIS, Circuit Judges, and SCOTT, District Judge.
STONE, Circuit Judge.
From a conviction on an information in three counts, charging respectively possession of intoxicating liquor, sale of intoxicating liquor and maintaining a liquor nuisance, this writ is sued out.
The plaintiff in error presents here three main contentions: First, this offense, being punishable by imprisonment in the penitentiary, was an infamous crime, which could be preferred only in an indictment (Const. U. S. Amend. 5); second, that certain evidence relating to the nuisance count should have been excluded; and, third, that certain evidence secured under alleged unlawful search and seizure should have been excluded.
I. While a very ingenious argument is presented by counsel for the plaintiff in error, his entire contention is met and conclusively answered by the case of Brede v. Powers, 263 U. S. 4, 44 S. Ct. 8, 68 L. Ed. 132. The conviction in the Brede Case (as upon the third count here) was for violation of section 21 of the National Prohibition Act (Comp. St. Ann. Supp. 1923, § 10138½jj). At the same time that it determined the Brede Case, the Supreme Court had before it the case of Wyman v. United States, 263 U. S. 14, 44 S. Ct. 10, 68 L. Ed. 136, which was a conviction for violation of section 29 of the same act (Comp. St. Ann. Supp. 1923, § 10138½p) for the sale of intoxicants (the same charge covered by count 2 of the case at bar). These two cases were considered together and virtually determined in the opinion in the Brede Case. Both the Brede and Wyman Cases were instances of prosecutions upon informations where the persons had sued out writs of habeas corpus, based upon the contention that such offense could be presented only by indictment. While those cases had in mind the imposition of imprisonment at hard labor, yet the reasoning of the court covers the matter of imprisonment in a penitentiary as well and obviously is equally applicable thereto. The statement in the Brede Case which determines the case now at bar and settles this contention is found on page 12 (44 S. Ct. 9) and is as follows:
"The statute provides that, for the offense here charged, the offender shall be fined not more than $1,000 or imprisoned not exceeding one year, or both. Section 21. Where the charge is selling, as in the Wyman Case, post, 14 [44 Sup. Ct. 10], the punishment, for the first offense, is a fine not more than $1,000, and imprisonment not exceeding six months. National Prohibition Act, § 29, 41 Stat. 316. The statute excludes the imposition of hard labor or imprisonment in a penitentiary. Under the contention of appellant both would be imposed."
See, also, Brown v. United States, 260 F. 752, 171 C. C. A. 490 (9th C. C. A.); Hunter v. United States, 272 F. 235 (4th C. C. A.); Yaffee v. United States, 276 F. 497 (6th C. C. A.).
Plaintiff in error places much reliance upon Stevens v. Biddle, 298 F. 209, decided by this court. That case is distinguishable because the offenses involved in those indictments were felonies.
In this connection, it is contended that the sentences here imposed of six months on the second count and one year on the third count, to run consecutively, amount to one sentence for more than a year and therefore justify imprisonment in a penitentiary which *352 would make the punishment "infamous" and therefore require presentment by indictment. The above quotation from the Brede Case clearly and definitely settles the status of prosecutions under this statute and forecloses the contention just outlined. Again, separate counts in the same indictment or information charge separate and distinct offenses, require separate and distinct action by the court in adjudging sentence or acquittal.
II. The second matter relied upon here is the admission of evidence of a sale at this place on August 6, 1923. The third count charges a nuisance as of September 26, 1923. The objection to the above evidence was upon the grounds (a) that it comes within the rule prohibiting proof of distinct offenses not charged in the information; (b) that it was so remote in time from the date alleged in the nuisance count that it could constitute no part of the nuisance there charged; and (c) that no sufficient notice was given by the information by which any such evidence could have been anticipated on the trial. There was evidence introduced proving an unlawful sale at this place on August 25, 1923, and the unlawful possession at that place on September 26, 1923. There was conclusive evidence of no change in the ownership or character of business at this place between the 5th of August and the 26th of September. Evidence of sales at this place would support the charge of maintaining a nuisance, so that this character of evidence would be entirely pertinent to the nuisance charge if it be not so far removed in time as to have no logical or natural connection with the existence of such nuisance on or about the dates specifically charged. We think this evidence sufficiently near in point of time. The evidence is entirely proper and directly supports the charge of maintaining such a nuisance at or about the time alleged here.
Irrespective of the nuisance charge, the evidence was admissible as showing guilty knowledge and intent on the part of accused. This becomes pertinent because of the claim made by Rossini, who admitted the presence of liquor on the premises, that no liquor was ever kept for sale or sold there with his knowledge.
III. Prior to the filing of the information, prohibition officers secured a warrant to search the premises of the accused. These premises consisted of a two-story building whereof the ground floor was used as a pool hall, bowling alley and soft drink establishment connected by a dumb-waiter with the upper floor which was used as the residence of the accused, his wife and his employee. Two of the prohibition officers, before the date the warrant was served, had purchased intoxicants in the soft drink parlor which were sent down from the floor above on the dumb-waiter after being ordered by them. With the thought that the intoxicants were located on the second floor and might be destroyed if any warning of the search should be given, the officers divided into two parties, one going into the ground floor room with a copy of the search warrant and the other going up a back outside stairway leading up to the second floor, with the original warrant. They endeavored to make the approach of the two parties simultaneous. While the copy of the search warrant was being served on the first floor, the other party, having encountered a locked door and no answer to their repeated summons to open, kicked in the door on the second floor. Rossini, who was down stairs where the warrant borne by the officers who entered from the front was served, promptly went up stairs. Up to the time he met the searchers on the second floor, they had found only one bottle of liquor. The searching officers talked with him there and he denied having any other liquor. Further search, in his presence, revealed a hidden compartment under the kitchen floor in which were six or eight bottles of whisky. Further search of the premises revealed several bottles of beer. At the trial of the case, when the government offered to prove what had been found by the officers, counsel for plaintiff in error was permitted to develop the above facts concerning the service of the warrant, and thereupon, for the first time, objected to the introduction of such evidence. This objection was overruled. The above action of the court in permitting the introduction of this testimony is the matter involved in this point.
This point must be ruled against plaintiff in error for four reasons: First, he has not complied with rule 11 of this court by quoting "the full substance of the evidence admitted." The assignments (9 to 12, inclusive) relied upon to present this matter are most general statements, except assignment 11, which covers the admission of three physical exhibits. Except as to this assignment 11, there is no proper assignment under the above rule.
The second reason why no error was committed in the admission of this evidence is that the accused waived his right to object to this evidence on the ground of the method in which it was obtained because he made no effort to do so before there was an *353 offer, in the course of the trial, of this testimony. An objection of this character must be made seasonably. It is not made seasonably when, as here, accused knows, in advance of the trial, of the existence of the evidence and the way in which it has been procured and makes no move to prevent its use as evidence until it is offered in the course of the trial. There is no good reason why the accused should not be compelled to present the exclusion of such evidence before it is sought to be introduced where he has such knowledge concerning it. He is thus given ample opportunity to protect his rights if he wishes to do so. On the other hand, to permit him to wait until the court is in the course of taking the evidence would often afford him an opportunity to lay a trap which would prevent the government from producing other testimony of the offense or sufficient testimony concerning the character and sufficiency of the search and seizure. Again, if this matter were seasonably presented before the trial and sustained by the court, the expense and delay of a useless trial would often be accomplished. This matter has been directly so decided by this court in Winkle v. United States, 291 F. 493, and such position is strongly supported by expressions of the Supreme Court in Gouled v. United States, 255 U. S. 298, 305, 41 S. Ct. 261, 65 L. Ed. 647; Weeks v. United States, 232 U. S. 383, 398, 34 S. Ct. 341, 58 L. Ed. 652, L. R. A. 1915B, 834, Ann. Cas. 1915C, 1177. Also see Amos v. United States, 255 U. S. 313, 41 S. Ct. 266, 65 L. Ed. 654; MacDaniel v. United States, 294 F. 769, 772 (6th C. C. A.).
The third reason is that there was other evidence which conclusively established the presence of intoxicants. Rossini testified, without objection, that he had the liquor, but that it was for his own use. One bottle, he said, was alcohol for body rubbing purposes and that the beer was "near beer," or was bought by him for "near beer," and he had no knowledge that it was intoxicating or contained an illegal excess of alcohol. As this plaintiff in error voluntarily admitted all that the officers found under the search warrant, he could not have been substantially injured by the admission of such evidence. Without substantial prejudice therefrom, he cannot urge reversal therefor.
The fourth reason is that all except one bottle of the liquor was searched for and found after this plaintiff in error had knowledge of the warrant; was conducted in his presence and was, therefore, fully protected by the warrant. Surely reversal cannot follow even if this one bottle should have been excluded (which we do not decide).
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551309/ | 908 A.2d 424 (2006)
2006 VT 71
Town of Lunenburg, et al.
v.
Supervisor and Board of Governors of the Unorganized Towns and Gores of Essex County
No. 2005-165, DECEMBER TERM, 2005
Supreme Court of Vermont
July 24, 2006
ENTRY ORDER
In the above-entitled cause, the Clerk will enter:
¶ 1. Plaintiffs, several of the thirteen organized towns in Essex County, sued the supervisor and Board of Governors of the six unorganized towns and gores of Essex County (UTGs), seeking a declaratory judgment on the disposition of a substantial sum of money in a UTG savings account. On appeal, defendants challenge the superior court's order requiring them to distribute the bulk of the funds to the organized towns of Essex County. The trial court held that defendants' view that the statutes that set up the funding mechanism for the UTGs allowed the supervisor to retain the funds indefinitely conflicted with the plain language of the statutes. Accordingly, the court ordered distribution of the funds to the thirteen organized towns of Essex County. We affirm the judgment of the trial court.
¶ 2. The six UTGs are Averill, Avery's Gore, Ferdinand, Lewis, Warner's Grant, and Warren's Gore. Largely uninhabited, they occupy a contiguous area in Essex County of approximately 103,000 acres and were home to twenty-four registered voters and three schoolchildren in 2000.
¶ 3. The State controlled the UTGs' finances prior to January 1, 1969. In 1968, the Legislature created the position of supervisor of the UTGs and shifted control of the UTGs' finances to the supervisor. 1967, No. 331 (Adj. Sess.), §§ 1 & 3 (eff. Jan. 1, 1969). Under the new financial system created by Act 331, an annual tax was assessed "upon the grand list of all unorganized towns and gores in Essex county" at a rate of three dollars. 32 V.S.A. § 4981.[1] The supervisor was directed to meet the UTGs' expenses, including the salary of and the reasonable expenses incurred by the supervisor, from the § 4981 tax revenues. Id. § 4982. Finally, the Legislature required the supervisor to close the UTGs' books each year by distributing any revenue left after expenses to the organized towns of Essex County, as follows:
During the month of July each year, upon adequate provision being made for the expenses of all unorganized towns and gores in Essex county, any surplus revenue assessed under section 4981 and received during the preceding calendar year shall be distributed by the supervisor for the unorganized towns and gores of Essex county to each organized town and city within that county in equal amounts up to and including $300.00 for each organized town and city. Any surplus revenue then remaining shall be distributed to each organized town and city in Essex county in the proportion which the population of that town or city bears to the population of all the organized towns and cities of the county, as shown in the most recent United States census.
32 V.S.A. § 4983. Whether and how to apply this provision to the disputed savings account is the crux of this case.
¶ 4. The trial court found the following relevant facts. The savings account at issue first appeared in the UTGs' books in 1971, which reflected a $450 interest payment into the account, resulting in a total balance of $40,450. The original supervisor would later tell his successor that the account was "for emergencies." While the account witnessed some activity early on, it has been entirely dormant since 1975, at which time its balance was about $52,000. The account continued to accrue interest, however, and, as of October 25, 2000, the balance had increased to $174,021.24.
¶ 5. An audit in 2000 confirmed the existence of the savings account, and plaintiffs sued for a declaration of rights with respect to the funds in the account as of May 18, 2000, the effective date of the changes in §§ 4981-4982 and repeal of § 4983. 1999, No. 139 (Adj. Sess.), § 5. The parties filed cross-motions for summary judgment. The trial court denied defendants' motion and granted plaintiffs' motion in part. After resolving issues relating to surplus revenue for fiscal year 1999 and interest rates, the court entered judgment on April 4, 2005, ordering the UTGs to pay each of the thirteen organized towns its pro-rata share of the savings account principal and interest, a sum from a checking account plus interest, and prejudgment interest. Defendants appealed, principally asserting: (1) the trial court misconstrued § 4983 and failed to accord proper deference to the supervisor by treating the money in the savings account as revenue eligible for distribution to the organized towns; (2) the statute of limitations barred plaintiffs' claim to any money that was in the savings account more than six years before the suit was commenced; (3) the trial court lacked jurisdiction to award money to organized towns other than plaintiffs; and (4) the repeal of § 4983 obviated any requirement for distribution after May 18, 2000.[2] We reject each argument and affirm.
¶ 6. We review summary judgment orders de novo and apply the same standard as the trial court. Hardwick Recycling & Salvage, Inc. v. Acadia Ins. Co., 2004 VT 124, ¶ 14, 177 Vt. 421, 869 A.2d 82. Summary judgment is proper when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. V.R.C.P. 56(c)(3). Where, as here, no genuine issues of material fact remain, "[w]e conduct a plenary, nondeferential review of the questions of law raised by the motion." Hardwick Recycling & Salvage, Inc., 2004 VT 124, ¶ 14.
¶ 7. Defendant's first argument turns principally on whether the court correctly viewed the savings account as "surplus revenue" under § 4983. When interpreting a statute, our primary goal is to give effect to the Legislature's intent. Town of Killington v. State, 172 Vt. 182, 188, 776 A.2d 395, 400 (2001). To determine legislative intent, "we look to the words of the statute itself, the legislative history and circumstances surrounding its enactment, and the legislative policy it was designed to implement." Perry v. Vt. Med. Practice Bd., 169 Vt. 399, 406, 737 A.2d 900, 905 (1999). The plain language of a statute, if unambiguous and not harmful to the legislative scheme, is sufficient evidence of legislative intent. In re Weeks, 167 Vt. 551, 554, 712 A.2d 907, 909 (1998).
¶ 8. The trial court concluded that the plain language of § 4983 demonstrated the Legislature's intent to create "a fiscal system in which the receipts and expenses for each year would be netted out at the close of each year, and any surplus of revenues over expenses would be paid over to the organized towns . . . no later than July of the ensuing year." We agree. A fair reading of § 4983 indicates that, after making "adequate provision" for expenses, the supervisor must distribute any remaining funds to the organized towns.
¶ 9. Defendants' reading of § 4983 would undermine this purpose. See In re Jewell, 169 Vt. 604, 606, 737 A.2d 897, 900 (1999) (mem.) (reasoning that a statute should not be construed in way that is at odds with its underlying purpose). They read § 4983 as excluding all funds in the savings account other than the preceding calendar year's interest from the statute's definition of surplus revenue. That interpretation, however, has caused the supervisors to avoid their statutory obligation to disburse surplus funds simply by holding onto the funds in the savings account year after year. Thus, we reject defendants' interpretation because we presume the Legislature did not intend such a result. See Will v. Mill Condo. Owners' Ass'n, 2004 VT 22, ¶ 15, 176 Vt. 380, 848 A.2d 336 (recognizing that we presume the Legislature does not intend interpretation of statute "that would lead to absurd or irrational consequences" (quotations omitted)).
¶ 10. The "adequate provision" language of § 4983 does not permit the supervisor to maintain an ever-growing reserve fund for an indefinite duration. As the trial court observed,
the Legislature contemplated that seven months was more than enough time for all bills for the preceding calendar year to have filtered in to the supervisor, and to have actually been paid, but if not then perhaps some estimated amount could be set aside to cover any such later arriving bills or invoices.
Just because a taxing authority may provide for future expenses does not "warrant unnecessary accumulation in the treasury for the remote future or for contingencies which may never occur." 15 E. McQuillin, The Law of Municipal Corporations § 39:2, at 5 (3d ed. 2005); see also In re County Collector of Cook County, 774 N.E.2d 832, 848 (Ill. App. Ct. 2002) (recognizing that a municipality "cannot unnecessarily accumulate monies in the public treasury"). This is especially true here in light of the Legislature's decision to require the supervisor to close the UTG books each year and distribute excess funds to the organized towns. The disputed funds in this case could not have been the "adequate provision" for future the statute contemplated because the supervisors never used them to pay UTG expenses and instead left them untouched in the savings account for three decades. Finally, nothing in the record suggests the amount of money in the account bears any relation to a reasonable estimate of late-arriving bills or invoices.
¶ 11. We also reject defendants' argument that we should defer to the supervisors' contemporaneous construction of § 4983 as allowing them to retain the funds in the savings account indefinitely. "[T]he contemporaneous construction of a statute by the executive officers of a government, whose duty it is to execute it, is entitled to great weight, and should not be disregarded nor overturned, except for cogent reasons, and unless it is clear that such construction is erroneous." In re National Guard, 71 Vt. 493, 499, 45 A. 1051, 1053 (1899). The supervisors' thirty-year practice of holding the funds in the savings account directly conflicts with the plain language and purpose of § 4983 because it precluded both the use of the disputed funds for UTG expenses and the disbursement of the funds to the organized towns-the only permissible outcomes for UTG revenue enumerated in § 4983. Instead, their construction allowed the funds to sit, untouched, in the savings account, presumably indefinitely. This is just the sort of "purely aberrational . . . result" against which this Court has warned. Town of Killington v. Dep't of Taxes, 2003 VT 88, ¶ 6, 176 Vt. 70, 838 A.2d 91. In addition, determining the meaning of "surplus revenue" under § 4983 is a legal task for which the supervisors have no special expertise. See In re Lyon, 2005 VT 63, ¶ 15, 178 Vt. 232, 882 A.2d 1143 (recognizing an administrative agency's discretion in making findings and conclusions of fact but declining to defer to an agency's conclusions of law in areas outside the agency's expertise). Thus, we need not defer to them in matters of statutory construction.
¶ 12. Next, this action is not, as defendants assert, time-barred, because the supervisors continuously violated § 4983 ever since the initial failure to disburse the money in the savings account to the organized towns. In concrete terms, in July 1972, the year after the savings account first appeared in the UTGs' books, each supervisor was bound by § 4983 to include that money as in the statutorily mandated reckoning of expenses against revenue and distribution to the organized towns. The passage of time did not relieve the supervisors of that duty, and the interest accumulating in the account each year became subject to distribution under § 4983 in July of the following year. Thus, at the time of this lawsuit, the supervisor was statutorily required to run the entire contents of the savings account through the § 4983 calculations and make distributions to the organized towns accordingly. Therefore, because the § 4983 violation as to all the money in the account continued right up to the time of this action, plaintiffs' claim is not time-barred. See Howard Jarvis Taxpayers Ass'n v. City of La Habra, 23 P.3d 601, 609 (Cal. 2001) (holding that city's continued imposition and collection of a tax without voter approval was a continuous violation, and therefore limitations period began anew with each collection and did not bar claims for declaratory and mandamus relief).
¶ 13. Next, we hold that the trial court correctly awarded the funds on a pro-rata basis to all of the organized towns in Essex County, despite the fact that some of those towns were not parties to the case. Section 4983 directs the supervisor, when a surplus exists after netting out the year's expenses, to pay "equal amounts up to and including $300.00 for each organized town and city," and to distribute any remaining surplus "to each organized town and city" in proportion to the population of each. 13 V.S.A. § 4983 (emphasis added). Thus, to award the disputed funds to any group other than each of the organized towns and cities in Essex County would violate the express instructions of the Legislature.
¶ 14. Finally, the supervisor was required to make a distribution in 2000 notwithstanding the fact that § 4983 was repealed that year. 1999, No. 139 (Adj. Sess.), § 3 (eff. May 18, 2000). The UTGs urge that Act 139's limitation "to grand lists for April 1, 2000 or after," id. § 5, does not apply to the repeal of § 4983, so that the supervisor's authority to make § 4983 disbursements ended on May 18, 2000, the effective date of Act 139. To support their contention, the UTGs cite historical notes following §§ 4981 and 4982, which each state that "the amendment to this section by section 1 of [Act 139] shall apply to grand lists for April 1, 2000 or after." 32 V.S.A. §§ 4981-4982 hist. (Cum. Supp. 2005). These historical notes, however, do not elucidate the effect of Act 139 on § 4983. Indeed, because Act 139 applies only to grand lists for April 1, 2000, or after, the provisions of § 4983 remained operative for grand lists before April 1, 2000, and the supervisor still had to conduct the § 4983 calculations for the 1999 calendar year.
Affirmed.
BY THE COURT:
_________________________________________
Paul L. Reiber, Chief Justice
_________________________________________
Denise R. Johnson, Associate Justice
_________________________________________
Marilyn S. Skoglund, Associate Justice
_________________________________________
Brian L. Burgess, Associate Justice
__________________________________________
Ernest W. Gibson III (Ret.), Associate
Justice, Specially Assigned
NOTES
[1] Unless otherwise stated, citations throughout the text to 32 V.S.A. §§ 4981-4983 are to the versions in effect before May 18, 2000. In 2000, the Legislature revamped the UTGs' financial structure, amending §§ 4981 and 4982 and repealing § 4983. 1999, No. 139 (Adj. Sess.), §§ 1-3. The act became effective on May 18, 2000, its date of passage, and applied "to grand lists for April 1, 2000 or after." Id. § 5.
[2] Defendants proffered two additional claims: (1) the "unusual quantity of obvious errors" in the trial court's decision "cast significant doubt" on its conclusions; and (2) the UTGs' railroad tax revenues were not, as the trial court found, payments in lieu of taxes from the State for railroad tracks that it owned. On the first point, defendants list numerous statements in the trial court's decision that they claim are incorrect. To the extent that these points relate to the legal challenges advanced by defendants, they are subsumed by our resolution of those challenges. To the extent they do not, they are not adequately briefed legal arguments. See Wilkins v. Lamoille County Mental Health Svcs., 2005 VT 121, ¶ 15, 16 Vt. L. Wk. 329, 889 A.2d 245 (noting that points insufficiently briefed or argued do not warrant consideration on appeal). As to the railroad tax issue, assuming the trial court's discussion was incorrect, defendants fail to explain how that entitles them to relief. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551252/ | 86 B.R. 877 (1988)
In re Jack D. SHOWALTER, Debtor.
John Z. ROWE, Mary J. Rowe, Plaintiffs,
v.
Jack D. SHOWALTER, Defendant.
Bankruptcy No. 7-87-00469, Adv. No. 7-87-0200.
United States Bankruptcy Court, W.D. Virginia, Roanoke Division.
May 27, 1988.
*878 Jeffrey A. Crackel, Covington, Va., for plaintiffs.
Evans B. Jessee, Roanoke, Va., for defendant.
MEMORANDUM OPINION
ROSS W. KRUMM, Bankruptcy Judge.
This case is before the court on the complaint filed by John Z. Rowe and Mary J. Rowe, pursuant to 11 U.S.C. § 523(a)(2), to have this court declare the debt owed the Rowes by Jack D. Showalter, non-dischargeable. Based upon the allegations made in the complaint, this court construes the complaint as one under § 523(a)(2)(A). The trial of this matter commenced on December 3, 1987. At the close of plaintiffs' evidence, counsel for the defendant requested the court to enter summary judgment in favor of the defendant. The appropriate motion at this stage of the proceedings is a motion for involuntary dismissal pursuant to Federal Rule of Civil Procedure 41(b). Rule 41(b) permits this court to determine the facts of the case and either render judgment against the plaintiff or decline to render any judgment until the close of all evidence. Fed.R.Civ.P. 41(b). In the proceedings at hand, counsel for the defendant indicated that the defendant would stand on his motion and that no further evidence would be introduced. Therefore, this court will render judgment based on the evidence presented.
Findings of Fact
John and Mary Rowe became acquainted with the defendant, Jack D. Showalter, and the defendant's wife, Mary Showalter, through their mutual interests in the railroad business. John Rowe first came in contact with Jack Showalter's name through a railroad magazine. Because Mrs. Rowe operated a post card business in Florida, John Rowe contacted Mr. Showalter regarding the production of post cards bearing a photograph of the railroad owned and operated by Jack D. Showalter, the Alleghany Central. This contact resulted in an agreement for the Rowes to produce post cards bearing the picture of the Showalters' railroad for use in various railroad gift shops across the country. In addition to the business relationship, a personal relationship developed and the Rowes and the Showalters became friends. The Rowes came to Virginia on railroad business and called on the Showalters, both socially and professionally.
In August of 1976, the Rowes received a letter from Mary Showalter requesting that the Rowes lend the Showalters the sum of $5,000.00. The letter stated that the Showalters were in financial trouble. The Rowes loaned the Showalters the sum of $3,000.00. In February of 1978, the Showalters again contacted the Rowes and requested a loan of an additional $5,000.00. The Showalters offered collateral for the *879 loan and represented that Mr. Showalter, a builder, had some houses to finish which would provide a source of repayment. The Rowes made the $5,000.00 loan. In August of 1978, the Showalters again approached the Rowes for a $10,000.00 loan representing that the money was needed to keep Mr. Showalter from going to prison. On August 28, 1978, there was a wire transfer in the amount of $10,000.00 from the Rowes to the Showalters.
Sometime prior to Christmas in 1978, the Rowes agreed to have Jack Showalter build a house for them in the Clifton Forge area. It was understood that the house would be completed by March 1, 1979. During these late 1978 discussions, the Rowes advanced $10,000.00 toward construction of the home. This advance was in the form of a check post-dated to January 2, 1979. The Showalters represented to the Rowes, at that time, that they would apply the $18,000.00 previously loaned, in addition to the check dated January 2, 1979, toward the cost of building the home.
The Rowes remained in Florida until February of 1979. During that time, they received reports from Mr. Showalter that construction was progressing and, in one instance, there was a specific representation that the roof was on the house. In late February, 1979, the Rowes moved to Covington, Virginia, anticipating, based on the representations of the Showalters, that their home would be completed by March 1, 1979. The Rowes arrived in Covington to find that no work had been done on their home at all. In fact, all the Rowes saw was two horses grazing in the field where the house was supposed to be erected. Upon inquiry, Mr. Showalter made the excuse that it was too wet to dig the foundation. The Rowes proceeded to move themselves and their possessions into a railroad car owned by the Showalters and continued to reside there for six weeks.
The Showalters also represented to the plaintiffs that the reason their home had not been completed was because Jack Showalter was currently involved in a construction project for a client by the name of Simanis. Showalter represented that additional cash would be needed in order to finish the Simanis job but that as soon as that job was completed Showalter would get the cash back and have sufficient capital to commence construction on the Rowes' home. Showalter explained to the Rowes that his supplier, Bailey Lumber Co., cut off his supply of lumber for the Simanis project and that without additional funds he would not be able to purchase the fixtures he needed to obtain a draw. Based on those representations, the Rowes made the following loans to Showalter: March 1979 $3,000.00; April 3, 1979 $5,000.00; April 9, 1979 $3,000.00; April 18, 1979 $10,000.00 (this was comprised of two separate transfers of $4,000.00 and $6,000.00 on the same day); and on April 27, 1979 $3,000.00. The April 27, 1979 transfer was induced by the representation of Jack Showalter that a truckload of supplies was enroute from Roanoke, Virginia, that those supplies were to be used in the construction of the Rowes' home, and that unless Jack Showalter had $3,000.00 in cash the truck would not be unloaded. The Rowes transferred the $3,000.00, however the truck never arrived in Covington.
The Rowes indicated to the Showalters that the April 27, 1979 transfer would be their final payment. Showalter responded by indicating that he would not finish the project without any further payments. Although the home was never finished in accordance with the specifications originally agreed upon, the Rowes were able to move into the premises and they received a deed to the property. Throughout all of the construction problems, the Rowes continued to honor their agreement with the Showalters to work on the Showalters' railroad and gift shop.
Finally the Rowes sued Showalter for their losses and judgment was entered on May 21, 1980, in the Circuit Court of Alleghany County for $44,500.00, plus costs and interest. It is that amount that the plaintiffs seek to have this court declare non-dischargeable under 11 U.S.C. § 523(a)(2).
*880 Law
The Rowes bring this action under 11 U.S.C. § 523(a)(2)(A). In order for this court to declare a debt non-dischargeable under § 523(a)(2)(A), the Rowes must demonstrate that the debtor obtained money, property or services by false pretenses, false representation, or actual fraud. In re Criswell, 52 B.R. 184, 196 (Bankr.E.D.Va. 1985). The elements comprising false representation are: (1) the debtor made a representation; (2) the debtor knew the representation was false at the time it was made; (3) the debtor intended to deceive the creditor at the time the debtor received the money; (4) the creditor relied on the representation; and (5) the creditor sustained a loss as a result of that reliance. Id.
Although the court in Criswell required the plaintiff to prove each element by clear and convincing evidence the Fourth Circuit has since issued its opinion in Combs v. Richardson, 838 F.2d 112 (4th Cir.1988), holding that the proper burden of proof in a § 523(a)(6) proceeding is a preponderance of the evidence. The Combs decision states:
Congress had reasons for enacting the exceptions to discharge in bankruptcy embodied in § 523. While bankruptcy proceedings are intended to afford debtors a `fresh start,' the provision at issue here expresses Congress' determination that debts incurred as the result of a debtor's willful and malicious injury of another are of a type that bankruptcy ought not to forgive. The balance of these competing policies does not require a heightened standard of proof of the § 523 exception, but does require that the bankruptcy court carefully determine that the prerequisites for collateral estoppel have been fully satisfied. Although lower courts are divided on the question of the appropriate standard of proof, compare In re Shepherd, 56 B.R. 218, 221 (W.D.Va.1985); In re Boren, 47 B.R. 293, 295 n. 8 (Bankr.W.D.Ky.1985); In re Baiata, 12 B.R. 813, 817 (Bankr.E. D.N.Y.1981) (applying preponderance of evidence standard) with In re Peoni, 67 B.R. 288, 290 (Bankr.S.D.Ind.1986); Matter of Wintrow, 57 B.R. 695, 703 (Bankr. S.D.Ohio 1986); In re Capparelli, 33 B.R. 360, 366 (Bankr.S.D.N.Y.1983) (applying clear and convincing evidence standard), we hold that the policies of the Bankruptcy Code are best effectuated by requiring that creditors prove by a preponderance of the evidence the willfulness and maliciousness of the debtors' acts under § 523(a)(6) and by waiting for Congress, not the courts, to signal a departure from this standard.
Combs, p. 116.
This court finds that the Combs decision is an expression by the Fourth Circuit that a preponderance of the evidence standard applies to all of the separate subparagraphs of § 523. Further, this standard was used in the Western District of Virginia prior to Combs. See, In re Shepherd, 56 B.R. 218, 221 (W.D.Va.1985). Thus, the standard of proof to be applied in this case will be a preponderance of the evidence.
The first element under § 523(a)(2)(A) requires a showing that Showalter actually made a representation. The Rowes attach significance to different representations for the various transfers. Regarding the first three transfers, the representations the Rowes have proved are (1) that the Showalters represented that they were in financial trouble, (2) that Showalter promised to repay the loans and (3) that Showalter promised to provide certain collateral to the Rowes. Any other representations regarding the first three transfers of money (totaling $18,000.00), were made after the money was transferred and therefore, do not apply.
One of the statements made prior to the transfer fails to rise to the level of a representation. To satisfy the representation element of § 523(a)(2), the Rowes must demonstrate that the representation was one of existing fact and not merely an opinion, expectation or declaration of intention. Criswell at 197. A mere promise to repay, and nothing more, does not rise to the level of a representation under § 523(a)(2). Regarding the remaining two statements, the Rowes failed to demonstrate *881 that Showalter knew they were false. As to the statement of financial trouble, no evidence was offered to show that the Showalters were not in such trouble. With respect to the offer of collateral, it was provided and then released by the Rowes.
The Rowes offered evidence of two representations for six of the remaining seven transfers. First, Mr. Rowe testified that Showalter represented to him that Bailey Lumber Company had cut off his supply of lumber and that Showalter needed money to buy fixtures to get a draw. The second representation, which is actually a sub-part of the first, is that a draw could not be obtained until Showalter received the materials. This court finds that these representations are representations of existing fact and are sufficient to satisfy the representation element of a case under § 523(a)(2). However, the Rowes have offered no evidence to prove that Showalter knew that these statements were false when made or that they were made with intent to deceive. Thus, the Rowes cannot prevail on six of the remaining transfers.
The final transfer, on April 27, 1979, was preceded by Showalter's representation that a truckload of supplies, for use in the construction of the Rowe home, was enroute from Roanoke, Virginia, and that unless Showalter could produce $3,000.00 cash the truck would not be unloaded. This court finds that the Rowes have introduced sufficient evidence regarding the falsity of the statements, Showalter's knowledge of falsity at the time the statements were made, and Showalter's intent to deceive the Rowes.
Given the long history of the transactions between the parties and the endless string of Mr. Showalter's failure or inability to keep his word, the court feels it necessary to evaluate the reliance factor as it applies to the last cash advance in this case. There is no requirement under 11 U.S.C. § 523(a)(2)(A) that a creditor "reasonably" rely on a debtors representation in order to have a debt declared non-dischargeable. In a recent decision, the Eighth Circuit held that the creditor need only prove that he relied on a debtor's fraudulent representations in order to have the debt declared non-dischargeable. In re Ophaug, 827 F.2d 340, 343 (8th Cir.1987). The Ophaug decision is grounded on the plain meaning of the statutory language of § 523(a)(2)(A) which has no "reliance" language as compared to § 523(a)(2)(B) which contains the wording "reasonably relied." The Ophaug court reasons that had Congress intended "reasonable reliance" in § 523(a)(2)(A), it would have included language to make that clear. The opinion also sets forth rationale for Congress' distinguishing the provisions of § 523(a)(2)(A) and § 523(a)(2)(B). Id., at 343.
On the other hand, there are numerous decisions requiring plaintiffs to demonstrate, in varying degrees, reasonable reliance on the debtors representations. E.g., In re Kimzey, 761 F.2d 421, 423 (7th Cir.1985).
Another line of cases deciding the "reasonable" reliance issue takes the position that only reliance must be proved and that discharge will not be denied where a creditor's claimed reliance is so unreasonable as not to be actual reliance at all. One such case stands for the proposition that the reliance requirement should not be a rigorous one. In re Phillips, 804 F.2d 930, 933 (6th Cir.1986). Finally, in a § 523(a)(2)(B) context, the Seventh Circuit in In re Garman, 643 F.2d 1252 (7th Cir.1980), held that, "[T]he creditor need establish only its reliance in fact, although its claims to reliance cannot be so unreasonable as to defeat a finding of reliance in fact." Garman, 643 F.2d at 1258.
The court has considered the numerous opinions that attempt to either define reliance or determine whether the creditor must prove "reasonable reliance" in § 523(a)(2)(A) litigation. The cases which involve a non-commercial or "friendship" type transaction are limited in number. Ophaug is a friendship type transaction which involved one loan. In the non-commercial context or friendship type transaction, this court finds the Ophaug reasoning persuasive and holds that the creditor need establish only reliance.
The court finds that the Rowes have produced evidence sufficient to prove reliance *882 on the representation of Showalter that a truck with their building supplies was coming from Roanoke and would not unload except that the sum of $3,000.00 was available to pay the driver. Therefore, all the elements of § 523(a)(2)(A) have been proved with respect to the last $3,000.00 cash advance and that portion of the debt will be non-dischargeable.
An appropriate order will be entered implementing this memorandum opinion.
ORDER
For the reasons stated in the memorandum opinion attached hereto and made a part hereof, it is
ORDERED:
That the plaintiffs' complaint to deny the defendant discharge is hereby DENIED with the exception of the last $3,000.00 cash advance which is non-dischargeable.
Copies of the order are to be mailed Jeffrey A. Crackel, Esquire, 275 W. Main Street, Covington, Virginia, 24426, counsel for the plaintiffs; and to Evans B. Jessee, Esquire, 404 Shenandoah Building, Roanoke, Virginia, 24011, counsel for the defendant. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551321/ | 142 F.2d 232 (1944)
UNITED STATES
v.
BRANSEN et al.
No. 10528.
Circuit Court of Appeals, Ninth Circuit.
April 6, 1944.
*233 Norman M. Littell, Asst. Atty. Gen., Frank P. Keenan, Sp. Asst. to Atty Gen., Vernon L. Wilkinson and S. Billingsley Hill, Attys., Dept. of Justice, both of Washington, D. C., for appellant.
No appearances were entered for appellees.
Before WILBUR and GARRECHT, Circuit Judges, and McCORMICK, District Judge.
GARRECHT, Circuit Judge.
This is an action in condemnation. In the final judgment the trial court fixed the value of a certain described parcel of the land included in the condemnation proceedings at $151 and apportioned this sum to the appellees according to their interest as determined by the court. Appellant contends that King County alone was entitled to $1 for its interest which was a never used easement for a street over the described premises, and that the other appellees should have received nothing for their interest in the reversion. This contention is waged in this Court with earnestness and ability and with a zeal which, if exercised with due timeliness in the trial court, might possibly have saved the expense of time and costs of presenting this appeal, which probably far exceeds the value of the amount involved.
None of the appellees have appeared. The expense would have been greater than the award.
The following are the facts as disclosed by the record:
On May 11, 1942, the Government instituted this proceeding to acquire 15.87 acres of land in King County, Washington, in order to provide housing for persons engaged in national defense activities. A declaration of taking was filed and estimated compensation in the sum of $6,201 was deposited with the District Court.
In the declaration of taking the land was divided, according to ownership, into ten parcels, and a map showing these ten parcels was incorporated in the declaration as Schedule "B." Parcel 10, containing 0.56 acre, comprised "all of N.E. 75th Street lying between the east line of 110th Avenue N. E. and the west line of 112th Avenue. N.E." King County, a municipal corporation, held an easement over parcel 10 for street purposes but no street or road had been constructed up to the time of the taking herein. Parcel 10 was abutted on the north by parcels 1 and 4 and on the south by parcel 2. The owners of parcels 1, 2 and 4 had, by virtue of their ownership of their respective parcels, reversionary interests in parcel 10 in the proportion which their respective parcels abutted on that 0.56 acre.
In Schedule "A", attached to the declaration of taking, the Government estimated the following sums, respectively, as just compensation for parcels 1, 2 and 4: $900, $2100, and $400.
On November 18, 1942, a hearing was had upon the taking of parcel 4, and after the proof had been submitted the court found that $400 was just compensation for taking said parcel 4 which was particularly described by metes and bounds which did not include any part of parcel 10.
Again, on November 23, 1942, a hearing was had upon the taking of parcel 2 and after proof had been submitted the court found that $2,100 was just compensation for taking said parcel 2, which was particularly described by metes and bounds which did not include any part of parcel 10.
Likewise, on February 1, 1943, a hearing was had as to parcel 1, the value of which had been estimated in Schedule "A" at $900, which sum had been paid into the registry of the court at the time the order of taking was entered. At the hearing the court was advised that as to this parcel the owners had entered into an agreement, which had been accepted by the Federal Public Housing Authority, whereby the Government agreed to pay $1,200 for said parcel 1. The court considered evidence and awarded compensation for the taking of parcel 1 in the sum of $1,200. This parcel was also specifically described by metes and bounds which did not include any part of parcel 10.
On January 20, 1943, further proceedings took place upon the question of just compensation for the taking of parcels 1, 2, 4, and 10. None of the respondents were present and the petitioner moved for a default. Whereupon the court considered the pleadings, the declaration of taking on file, the statement of counsel for petitioner, and the testimony of petitioner's witness, an appraiser by profession, who testified *234 that the easement rights of King County in parcel 10 were worth only a nominal sum of $1 but that the fair cash market value of the fee simple title of the land in parcel 10 would be worth the sum of $150.
Thereafter, on April 5, 1943, pursuant to special notice issued to the owners of abutting parcels 1, 2 and 4, a further hearing was had and further evidence introduced. Isabella Jones Coleman, one of the respondents, testified the fair cash market value of the land in parcel 10 was $200 and that this sum should be divided into three parts and distributed to the adjoining property owners. No further evidence was introduced.
On April 12, 1943, the court made the following findings:
"That the added valuation of Parcel 2, by reason of the reversionary right of the owners of Parcel 2 in Parcel 10, as of May 11, 1942, the date of the filing of the declaration of taking herein, is the sum of Seventy-five Dollars ($75.00), and that the full fair and just compensation to be paid for Parcel 2 is Two Thousand One Hundred Seventy-five Dollars ($2175.00) instead of the sum of $2100.00 previously adjudged and ordered paid herein; that the added valuation of Parcel 1, by reason of the reversionary right of the owners of Parcel 1 in Parcel 10 as of May 11, 1942, the date of the filing of the declaration of taking herein, is the sum of Thirty-seven and 50/100 Dollars ($37.50), and that the full, fair and just compensation to be paid for Parcel 1 is the sum of One Thousand Two Hundred Thirty-seven and 50/100 Dollars ($1237.50) instead of the sum of $1200.00 heretofore adjudged and ordered paid herein; that the added valuation of Parcel 4, by reason of the reversionary right of the owners of Parcel 4 in Parcel 10 as of May 11, 1942, the date of the filing of the declaration of taking herein, is the sum of Thirty-seven and 50/100 Dollars ($37.50), and that the full, fair and just compensation to be paid for Parcel 4 is the sum of Four Hundred Thirty-seven and 50/100 Dollars ($437.50) instead of $400.00 heretofore adjudged and ordered paid herein.
"That upon the filing of the declaration of taking herein the full, fair and just compensation for Parcel 10 was the sum of One Hundred Fifty-one Dollars ($151.00); that the full, fair and just compensation for the easement rights of King County to build a road over said Parcel is the sum of One Dollar ($1.00) which is included in said sum of $151.00 of which $150.00 should be paid to the above named abutting property owners respectively in the respective amounts stated."
Judgment was entered in accordance with said findings.
On April 19, 1943, the appellant filed a motion for a new trial, principally on the ground of newly discovered evidence. The other grounds are without support in the record. As to the disposition of the motion the statement of facts recites: "The petitioner filed its motion for a new trial and the same came duly on for hearing before and was submitted to the Court on May 4, 1943, and the same was denied by the Court because the Court was of the opinion that petitioner should have, if it desired, offered the option agreements (the absence of which from the evidence was the principal basis for the motion for new trial) in evidence before the trial, continued from time to time, was finally completed and that petitioner's discovery and bringing to the attention of the Court of said option agreements was not timely, to which ruling the petitioner excepted and its exception was allowed."
The attorney for appellant, in the affidavit in support of his motion for a new trial, alleges that this newly discovered evidence consisted of certain offers of sale, copies of which are attached to the affidavit, wherein the owners of parcels 1, 2 and 4 offered to sell their land for an amount stated. These are dated in March, April and May of 1942 and presumably were in the possession of appellant ever since. Affiant alleges that he had no knowledge of these offers and makes a number of excuses for not discovering them prior to trial, which are not convincing.
To correctly dispose of this appeal it is necessary to keep in mind that this was a proceeding in condemnation and not an action to enforce any agreement of sale.
It is not without significance that during the several hearings relating to these various tracts condemned by the Government these offers of sale were never introduced in evidence. Moreover, the proceedings at the different hearings indicate that the court was making the award upon its own judgment on the independent evidence submitted, most of which was furnished by appellant. The offers or options were not pleaded in the petition nor attached thereto *235 as exhibits and were brought to the attention of the court only after judgment. Unquestionably, the court, as was its obligation, made the awards upon its own judgment of values based upon the pleadings and evidence submitted at the respective hearings. Further, the action of the court on the motion for new trial indicates clearly that this so-called newly discovered evidence would not effect a change of judgment.
The appellant cites the case of Danforth v. United States, 308 U.S. 271, 60 S.Ct. 231, 84 L.Ed. 240, as authority for the proposition that where the parties have entered into a valid agreement or contract fixing compensation in a specified amount the court has no discretion in a condemnation case but to enter judgment in that amount. Not only is that case distinguishable on its factual situation from the case at bar, but in the Danforth case the agreement was pleaded and reliance placed thereon, while in this case the Government did not refer to the offers of sale in the pleadings or at the trial of the case although these offers were in its possession during all the times the various hearings were taking place. It now seeks to introduce them as newly discovered evidence. Furthermore, while the agreements may have established the compensation for parcels 1, 2 and 4, which are specifically described by metes and bounds by reference, they in no way include any part of parcel 10 which is not referred to at all, and it is not clear that the prices fixed in those agreements were intended to include just compensation for the reversionary interests in parcel 10.
It is well settled that when a parcel of land is taken by eminent domain, every person having an estate or interest at law or in equity in the land taken is entitled to share in the award. The term "owner" in statutes relating to the exercise of eminent domain includes any person having a lawful interest in the property to be condemned. In the case at bar the abutting owners had a reversionary interest in parcel 10 and the court below found that there was no reasonable prospect that parcel 10 ever would be opened and improved as a street. A reversion is an actual estate in praesenti and is vested in the sense of a present fixed right of enjoyment in futuro. The court was not bound to accept the estimates of either party but was called on to exercise its best judgment as to value on the basis of all the facts in evidence. The lower court did exercise such judgment and acted within its power in fixing the just compensation for these vested rights.
It is also well settled that motions for new trial are addressed to the sound discretion of the court, and orders denying them are not reviewable on appeal in the absence of clear abuse of discretion. Fairmount Glass Works v. Club Fork Coal Co., 287 U.S. 474, 482, 53 S.Ct. 252, 77 L.Ed. 439; United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 247, 248, 60 S.Ct. 811, 84 L.Ed. 1129. Alleged newly discovered evidence which would not materially change the result and which is in large part not newly discovered at all is not ground for a new trial. This court has so held in the case of Wulfsohn v. Russo-Asiatic Bank, 9 Cir., 11 F.2d 715, and also as to an analogous situation in the recent case of United States v. Pacific Fruit & Produce Co., 9 Cir., 138 F.2d 367.
"Newly discovered evidence" within Civil Procedure Rule 59, 28 U.S.C.A. following section 723c, refers to evidence of facts existing at time of trial, of which aggrieved party was excusably ignorant. Campbell v. American Foreign S. S. Corporation, 2 Cir., 116 F.2d 926, certiorari denied 1941, 313 U.S. 573, 61 S.Ct. 959, 85 L. Ed. 1530. All of these alleged offers of sale apparently had been in the possession of appellant for about a year before the trial and, if pertinent, by the exercise of reasonable diligence could have been presented at the trial. Applicant is required to rebut the presumption that there has been a lack of diligence. 39 Am.Jur. § 156, p. 163. Subsequent discovery of the importance of evidence which was in the possession of applicant for new trial, at the time of the trial, does not entitle him to a new trial upon the ground of newly discovered evidence. 39 Am.Jur. § 159, p. 166. The application for a new trial will be denied where it appears that the degree of activity or diligence which led to the discovery of the evidence after the trial would have produced it had it been exercised prior thereto. 39 Am.Jur. § 161, p. 168.
Furthermore, appellant in its brief asserts that "If the judgment of the District Court is allowed to stand, the United States will be able to sue on these offers of sale to recover the amounts by which the present judgment for Parcel 10 exceeds the contract prices." We refrain from expressing any *236 opinion upon this point. However, if appellant is correct, allowing the judgment to stand will result in no particular injury to appellant and the question of whether the holders of parcels 1, 2 and 4 intended by the alleged offers of sale to include any interest in parcel 10 can be adjudicated by the court in a direct proceeding for that purpose. The court did not abuse its discretion in denying the motion for a new trial.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551322/ | 908 A.2d 1126 (2006)
98 Conn.App. 271
Frederick PROVENCHER
v.
TOWN OF ENFIELD.
No. 26819.
Appellate Court of Connecticut.
Argued May 26, 2006.
Decided October 31, 2006.
*1127 Stephen F. McEleney, Hartford, for the appellant (plaintiff).
Gabriel J. Jiran, with whom, on the brief, was Saranne P. Murray, Hartford, for the appellee (defendant).
FLYNN, C.J., and McLACHLAN and WEST, Js.
WEST, J.
The plaintiff, Frederick Provencher, appeals from the summary judgment rendered by the trial court in favor of the defendant, the town of Enfield (town). On appeal, the plaintiff claims that the court improperly concluded that General Statutes § 22-331(a)[1] does not confer a private cause of action affording declaratory relief. We reverse the judgment of the trial court.
The plaintiff is the town's animal control officer and also a sworn member of its police department. He was hired as assistant animal control officer on August 10, 1968, and promoted to his present position on April 13, 1969. At the time of his promotion, the plaintiff sought to participate in the department's retirement system, but the town police chief blocked his participation. The plaintiff joined the town police union in 1975. After filing a grievance with the union in 1977, he was permitted to participate in the retirement system, but chose not to begin participating until November 12, 1980. The plaintiff contacted the police chief, mayor and certain members of the town council in 1994 and 1995 in an attempt to receive retirement credit for the period from April 13, 1969, through November 11, 1980, but was unable to resolve the issue.
On February 4, 2004, the plaintiff filed a three count complaint against the town, seeking a declaratory judgment, a writ of mandamus and equitable relief. After the case had been scheduled for trial, the town requested permission to file a motion for summary judgment pursuant to Practice Book § 17-44.[2] The town's request was granted on March 31, 2005. *1128 The case then proceeded to trial on May 11 and 12, 2005. Thereafter, on July 20, 2005, the court granted the town's motion for summary judgment,[3] concluding that § 22-331(a) does not confer a private cause of action affording declaratory relief and that the plaintiff's action was barred by the six year contract statute of limitations pursuant to General Statutes § 52-576(a). This appeal followed.
We first set forth the standard of review. "Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party. . . . The party moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore, entitled to judgment as a matter of law. . . . The test is whether the party moving for summary judgment would be entitled to a directed verdict on the same facts. . . . Our review of the trial court's decision to grant the defendant's motion for summary judgment is plenary." (Citations omitted; internal quotation marks omitted.) Leisure Resort Technology, Inc. v. Trading Cove Associates, 277 Conn. 21, 30-31, 889 A.2d 785 (2006).
We next examine § 22-331(a). That statute does not provide for an express private cause of action to enforce the provision that a full-time municipal animal control officer "appointed as a member of the police department shall be fully eligible to participate in the retirement system of such department." General Statutes § 22-331(a). The issue, therefore, is whether a private remedy is implied. "In determining whether a private remedy is implicit in a statute not expressly providing one, several factors are relevant. First, is the plaintiff one of the class for whose . . . benefit the statute was enacted . . .? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? . . . Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff?" (Internal quotation marks omitted.) Napoletano v. CIGNA Healthcare of Connecticut, Inc., 238 Conn. 216, 249, 680 A.2d 127 (1996), cert. denied, 520 U.S. 1103, 117 S.Ct. 1106, 137 L.Ed.2d 308 (1997).[4]
*1129 The parties agree, as do we, that the plaintiff is a member of the class benefited by § 22-331(a) and that there is no indication of legislative intent to create or to deny a private remedy. We therefore examine the underlying purposes of the legislative scheme. Section 22-331(a) appears in title 22, chapter 435 of the General Statutes. The purpose of chapter 435 is to regulate dogs, other companion animals, kennels and pet shops. In furtherance of that purpose, § 22-331(a) provides for the appointment of a municipal animal control officer and underscores the importance of that position by permitting the officer to become a member of the police department even if the officer lacks "requirements as to age, sex, physical condition, education and training applicable to other members of the police department. . . ." General Statutes § 22-331(a). Section 22-331(a) further strengthens the permitted status of a municipal animal control officer as a member of the police department by providing that the officer "shall be fully eligible to participate in the retirement system of such department." General Statutes § 22-331(a). The underlying purposes of the legislative scheme indicate that the control of dogs and other companion animals is of such significance that a municipal animal control officer may have the status of a member of the police department, and, if so, is to be granted full eligibility in the department's retirement system. We therefore conclude that it is consistent with the underlying purposes of the legislative scheme to imply a remedy for the plaintiff under § 22-331(a).
Two other considerations weigh in favor of our analysis of § 22-331(a). First, there is no indication that the legislature intended to limit the enforcement of that statute. The town points out that General Statutes § 22-328(a) provides in relevant part that "[t]he commissioner [of agriculture] is authorized to enforce the provisions of [title 22, chapter 435]. . . ." The town therefore argues that enforcement of the plaintiff's right to eligibility for retirement benefits is allocated exclusively to the commissioner of agriculture. We disagree. Section 22-331(a) makes the appointment of a full-time municipal animal control officer "subject to the provisions of . . . chapter 113. . . ." Title 7, chapter 113 of the General Statutes concerns municipal employees and also is known as the Municipal Employees' Retirement Act, General Statutes § 7-425 et seq. The commissioner of agriculture is not authorized to enforce the provisions of that act. Furthermore, it is the plaintiff's responsibility to ensure that he receives the retirement benefits for which he is eligible.
Second, public policy weighs in favor of our conclusion that § 22-331(a) confers a private cause of action affording declaratory relief. In the absence of a private remedy, the plaintiff would have no opportunity to challenge the town's denial of his right to participate in the retirement system from 1969 to 1977.[5] A private *1130 cause of action enables the plaintiff to protect his statutory right to eligibility for retirement benefits and also promotes compliance with § 22-331(a). See Skakel v. Benedict, 54 Conn.App. 663, 687, 738 A.2d 170 (1999).
Having concluded that the court's rendering of summary judgment in favor of the town must be reversed, we next consider the nature of the proceedings on remand. The town points out that the court held a full trial before rendering summary judgment. Consequently, the town argues that the case should be remanded for a judgment on the plaintiff's claims. The plaintiff argues that the case should be remanded for a new trial. Although the plaintiff's argument does not serve the interest of judicial efficiency, we nonetheless agree that a new trial is necessary in the interest of justice. We reach that conclusion because of the manner in which the rendering of summary judgment in this case could be perceived. Summary judgment "is an attempt to dispose of cases involving sham or frivolous issues. . . ." (Internal quotation marks omitted.) Ocwen Federal Bank, FSB v. Charles, 95 Conn.App. 315, 331, 898 A.2d 197, cert. denied, 279 Conn. 909, 902 A.2d 1069 (2006). We stress that we have found nothing in the record to show that the court adopted the extremely negative view that the words "sham" and "frivolous" indicate, but in order to avoid even the possible suggestion that the court might have viewed the plaintiff's action in such negative terms when it rendered summary judgment after having conducted a full trial, the plaintiff should receive a new trial before a different judge.
The judgment is reversed and the case is remanded for a new trial.
In this opinion the other judges concurred.
NOTES
[1] General Statutes § 22-331(a) provides: "In each municipality of the state having a population of more than twenty-five thousand which has adopted the provisions of chapter 113, or otherwise provided for a merit system for its employees, the chief of police, or such other appointing authority as the charter may designate, shall, appoint a full-time municipal animal control officer and such assistants as are deemed necessary, subject to the provisions of said chapter 113 or other merit system, to administer and enforce the laws relating to dogs or other domestic animals. Any person so appointed may be or become a member of the police department and for such purpose the legislative body of such municipality may waive any requirements as to age, sex, physical condition, education and training applicable to other members of the police department. Any person so appointed as a member of the police department shall be fully eligible to participate in the retirement system of such department."
[2] Practice Book § 17-44 provides in relevant part that "any party may move for a summary judgment at any time, except that the party must obtain the judicial authority's permission to file a motion for summary judgment after the case has been assigned for trial. . . ."
[3] Our rules of practice permit the trial court to rule on a motion for summary judgment after trial. Practice Book § 17-44 provides in relevant part that "[t]he pendency of a motion for summary judgment shall delay trial only at the discretion of the trial judge." We are nonetheless mindful that "[t]he summary judgment procedure is designed to eliminate the delay and expense incident to a trial where there is no real issue to be tried. . . . It is an attempt to dispose of cases involving sham or frivolous issues in a manner which is speedier and less expensive for all concerned than a full-dress trial. . . . One of the goals advanced by the summary judgment process is judicial efficiency." (Citation omitted; internal quotation marks omitted.) Ocwen Federal Bank, FSB v. Charles, 95 Conn.App. 315, 331, 898 A.2d 197, cert. denied, 279 Conn. 909, 902 A.2d 1069 (2006). Even though our rules of practice countenance a ruling on a motion for summary judgment after trial, such a ruling does not serve the goal of judicial efficiency.
[4] "[T]he Napoletano test essentially applies our well established process of statutory interpretation, under which we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case, including the question of whether the language actually does apply. In seeking to determine that meaning, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter." (Internal quotation marks omitted.) Asylum Hill Problem Solving Revitalization Assn. v. King, 277 Conn. 238, 247 n. 10, 890 A.2d 522 (2006).
[5] The record does not reveal whether the plaintiff could have used the police union grievance procedure to seek redress for the denial of his right to participate in the retirement system from 1969 to 1977. In its memorandum of decision on the town's motion for summary judgment, the court noted that the parties had produced insufficient evidence from which to conclude that the plaintiff had failed to exhaust any administrative remedies that were available to him. The town contends that the plaintiff should have filed a complaint with the commissioner of agriculture pursuant to General Statutes § 22-328(a), but we disagree. As we have explained, General Statutes § 22-331(a) makes the appointment of a full-time municipal animal control officer subject to the Municipal Employees' Retirement Act, General Statutes § 7-425 et seq., and the commissioner of agriculture is not authorized to enforce the provisions of that act. The six year contract statute of limitations pursuant to General Statutes § 52-576(a) does not apply to a private cause of action under § 22-331(a). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551262/ | 908 A.2d 1 (2006)
98 Conn. App. 1
RINO GNESI COMPANY, INC.v.
SEBASTIAN SBRIGLIO ET AL.
(AC 25476)
Appellate Court of Connecticut.
Argued April 18, 2006.
Officially released October 10, 2006.
Schaller, Gruendel and Hennessy, Js.
David S. Hoopes, with whom was Elizabeth A. Cipriano, for the appellant (plaintiff).
John C. Lewis III, for the appellees (defendants).
Opinion
GRUENDEL, J.
The plaintiff, Rino Gnesi Company, Inc., appeals from the judgment of the trial court dismissing its action against the defendants, Sebastian Sbriglio and Angela Sbriglio, and denying its subsequent motion for reconsideration. The action arises from a promissory note, executed by the defendants in favor of the plaintiff, secured by a mortgage. Following a default in payment of the mortgage loan, the plaintiff brought a two count complaint seeking a foreclosure on the mortgage and a money judgment on the promissory note. The court subsequently dismissed the action, determining that it lacked subject matter jurisdiction to hear the complaint on the basis of mootness. On appeal, the plaintiff claims that the court, in granting the defendants' motion to dismiss, improperly determined that (1) its initial interlocutory ruling, which stated that the plaintiff could proceed on the foreclosure count only, was a final judgment from which the plaintiff failed to appeal or file a motion to reconsider, and (2) the promissory note had been discharged in bankruptcy, thus precluding the plaintiff from proceeding to a hearing in damages in rem to perfect its attachment lien. We agree with the plaintiff and, accordingly, reverse the judgment of the trial court.
The following facts and procedural history are relevant to the resolution of the plaintiff's appeal. In August, 2000, the plaintiff brought an action against the defendants seeking to foreclose a mortgage on certain real estate owned by the defendants on Wethersfield Avenue in Hartford. In October, 2001, the plaintiff filed an amended complaint, adding a second count seeking damages under the promissory note. In connection with the amended complaint, the plaintiff obtained an ex parte prejudgment attachment lien against a second property owned by the defendants, which was located on Cowles Street in Hartford.[1] The defendants then filed a motion to dissolve the attachment lien, which the court denied.
On January 22, 2002, the court granted the plaintiff's motion for summary judgment as to liability on both counts of the complaint. Subsequently, on July 12, 2002, the defendants filed a chapter 7 bankruptcy petition with the United States Bankruptcy Court for the District of Connecticut. On October 15, 2002, the defendants received a discharge in bankruptcy, relieving them from any and all personal liability under the note or on any deficiency. On November 27, 2002, the plaintiff claimed the foreclosure action to the hearing in damages list, seeking to enforce its attachment lien, which had been obtained before the defendants' July bankruptcy filing. The plaintiff noted that it sought to enforce the attachment lien in rem only and did not seek to enforce a money judgment against the defendants.
On February 11, 2003, the defendants filed a motion to remove the case from the hearing in damages list. The plaintiff filed an objection to the motion, which, on March 18, 2003, the court sustained, noting that the plaintiff could proceed on the foreclosure count only. In making this ruling, the court found: "Note has been discharged (2nd Count)." The court also scheduled the case for a hearing in damages on April 14, 2003. On April 14, 2003, however, the defendants filed a motion to dismiss, claiming that the case was moot because the Wethersfield Avenue property had been foreclosed through a judgment of strict foreclosure in a separate action[2] brought by the holder of a tax lien on the property. That judgment, the defendants argued, extinguished both the defendants' and the plaintiff's legal rights with respect to the Wethersfield Avenue property.
On November 5, 2003, the court granted the defendants' motion to dismiss the case on the ground that the remaining foreclosure count of the complaint had been rendered moot by the judgment of foreclosure on the Wethersfield Avenue property. On November 13, 2003, the plaintiff filed a motion for reconsideration of the court's decision, acknowledging that the count seeking to foreclose on the Wethersfield Avenue property was moot, but claiming that the second count, on the note, was still viable. The plaintiff argued that it was attempting to proceed to a hearing in damages only for the limited purpose of enforcing its attachment lien on the Cowles Street property in rem by reducing it to a judgment.[3]
On May 6, 2004, the trial court filed a memorandum of decision in which it denied the motion for reconsideration. The court noted in its decision that its March 18, 2003 order was, in effect, a final judgment as to the second count of the complaint seeking damages under the note. On May 25, 2004, the plaintiff filed this appeal.[4]
The plaintiff claims on appeal that the court improperly sustained the defendants' motion to dismiss the complaint. First, it argues that the court improperly determined that its March 18, 2003 order, which sustained the objection to the defendants' motion to remove the case from the hearing in damages list, was a final judgment. As such, the plaintiff claims that it was not obligated to appeal from the order and that the court's subsequent refusal to reconsider its November 5, 2003 decision dismissing the case was improper. Second, the plaintiff argues that the court improperly determined that the note had been discharged in bankruptcy. Because it obtained an attachment lien on a second property before the defendants filed a petition in bankruptcy, the plaintiff argues that it was entitled to proceed in rem to a hearing in damages to perfect the attachment lien. We agree with the plaintiff on both claims.
We set forth our standard of review. "The standard of review of a [challenge to a court's granting of a] motion to dismiss is . . . well established. In ruling upon whether a complaint survives a motion to dismiss, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader. . . . A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Lawton v. Weiner, 91 Conn. App. 698, 705, 882 A.2d 151 (2005).
I
We first consider whether the court's denial of the motion to remove the case from the hearing in damages list constitutes an appealable final judgment. "As a general rule, an interlocutory ruling may not be appealed pending the final disposition of a case." Chadha v. Charlotte Hungerford Hospital, 272 Conn. 776, 784, 865 A.2d 1163 (2005). The denial of a motion to remove a case from a hearing in damages list ordinarily is an interlocutory ruling and, accordingly, is not a final judgment for purposes of appeal. The question before us, however, is whether the form or the content of the trial court's March 18, 2003 order removes it from the general rule.
The following additional facts are relevant to the plaintiff's claim. The court's March 18, 2003 order sustaining the plaintiff's objection to the motion to remove the case from the hearing in damages list contained the following statement: "Plaintiff may proceed on foreclosure count only. Note has been discharged (2nd Count). Case continued to 4/14/03." Subsequent to this order, the court dismissed the plaintiff's complaint on the ground that the remaining foreclosure count of the complaint had been rendered moot.
In its May 6, 2004 memorandum of decision denying the plaintiff's motion for reconsideration, the court noted that its March 18, 2003 order was, in effect, a ruling dismissing the second count of the complaint in which the plaintiff sought damages under the note. The court further stated that (1) if the plaintiff disagreed with the ruling, it should have filed a motion to reconsider or an appeal and (2) the court did not have the power to reconsider its March 18, 2003 order because the plaintiff failed to file a motion to open that "judgment" within four months, as required under Practice Book § 17-4 (a).
"A judgment that disposes of only a part of a complaint is not a final judgment. . . . Our rules of practice, however, set forth certain circumstances under which a party may appeal from a judgment disposing of less than all of the counts of a complaint. Thus, a party may appeal if the partial judgment disposes of all causes of action against a particular party or parties; see Practice Book § 61-3;[5] or if the trial court makes a written determination regarding the significance of the issues resolved by the judgment and the chief justice or chief judge of the court having appellate jurisdiction concurs. See Practice Book § 61-4 (a)."[6] (Internal quotation marks omitted.) Kelly v. New Haven, 275 Conn. 580, 594, 881 A.2d 978 (2005). Neither of these exceptions applies to this case.
First, the court's March 18, 2003 order did not dispose of all causes of action against the defendants. The order specifically stated that the "[p]laintiff may proceed on foreclosure count only." Although the court subsequently determined that the foreclosure count was moot, this claim was still outstanding at the time of the March 18, 2003 order. Furthermore, having secured an attachment lien against the defendant's second property, the plaintiff still maintained an action in rem on the note.[7] Second, neither the trial court nor this court made any written determination pursuant to Practice Book § 61-4 (a) regarding the significance of the issues presented in this case. The court's March 18, 2003 order, therefore, does not meet either standard and is not a final judgment according to our rules of practice.
This conclusion, however, does not end our inquiry as to whether the March 18, 2003 order was a final judgment. "An otherwise interlocutory order is appealable in two circumstances: (1) where the order or action terminates a separate and distinct proceeding, or (2) where the order or action so concludes the rights of the parties that further proceedings cannot affect them." State v. Curcio, 191 Conn. 27, 31, 463 A.2d 566 (1983). In the present case, neither prong of the Curcio test is satisfied.
Under the first prong, the court's March 18, 2003 order stating that the plaintiff could proceed only on the foreclosure count, and not on the count seeking damages on the note, did not terminate a separate and distinct proceeding. On the contrary, both counts were steps along the road to a final judgment on the entire complaint. See State v. Parker, 194 Conn. 650, 653, 485 A.2d 139 (1984). The defendants argue that the court's order satisfies the first prong of Curcio because the order "terminated the action on the note, and the action on the note is, pursuant to Connecticut foreclosure laws, a separate and distinct cause of action from the foreclosure." While we agree that foreclosing on a mortgage and pursuing the amount due on a promissory note are separate and distinct causes of action,[8] we do not agree that they necessarily are separate and distinct proceedings. Rather, "[t]he mortgagee may . . . pursue [an action to foreclose and action on a note] simultaneously in one consolidated foreclosure suit." (Internal quotation marks omitted.) Federal Deposit Ins. Corp. v. Voll, 38 Conn. App. 198, 206, 660 A.2d 358, cert. denied, 235 Conn. 903, 665 A.2d 901 (1995). We consider the plaintiff's amended complaint, which included both a count to foreclose on the mortgage and a count to collect damages on the note, to fall under one proceeding that was not terminated by the court's March 18, 2003 order.
Under the second prong of Curcio, the court's March 18, 2003 order did not so conclude the parties' rights such that further proceedings could not affect them. "In applying this prong of the Curcio test, our focus is on whether appellate review is necessary [in order] to prevent the irreparable loss of a cognizable legal right. . . . An essential predicate to the applicability of this prong is the identification of jeopardy to [either] a statutory or constitutional right that the interlocutory appeal seeks to vindicate." (Citation omitted; internal quotation marks omitted.) Gorelick v. Montanaro, 94 Conn. App. 14, 33, 811 A.2d 1272 (2006). Here, in light of our determination that the court improperly dismissed the plaintiff's complaint, the parties will have the appellate opportunity to challenge all of the court's subsequent findings of fact and conclusions of law. "That course to appellate review is consistent with the well established policy behind the final judgment rule, which is to avoid piecemeal appeals." Id. We therefore observe no risk of loss of any cognizable right should either party pursue appellate review following final adjudication.
For the foregoing reasons, we conclude that the court's March 18, 2003 order is not a final judgment. The court, therefore, improperly determined that the plaintiff was required to file an appeal of, or a motion to reconsider, such order.
II
We next address whether the court improperly determined that the promissory note had been discharged in bankruptcy, thus preventing the plaintiff from proceeding to a hearing in damages. The plaintiff argues that because it obtained an attachment lien of a second property before the defendants' bankruptcy petition was filed, it was entitled to proceed in rem to a hearing in damages to perfect the lien. We agree with the plaintiff.
On February 10, 2003, the defendants filed a motion to remove the case from the hearing in damages list on the ground that they had obtained a discharge in bankruptcy on October 15, 2002. As a result, the defendants claim, any debts between the two parties, including debts owed by the defendants to the plaintiff on the mortgage and promissory note, were discharged. The plaintiff filed an objection to that motion on the ground that the attachment lien it had filed on November 9, 2001, had survived the bankruptcy discharge, and, therefore, it was entitled to proceed to a hearing in damages in rem for the limited purpose of obtaining judgment to perfect its attachment lien. Although the trial court sustained the plaintiff's objection, it noted that the plaintiff could proceed on the foreclosure count only because it believed the debt on the note had been discharged in bankruptcy.
On April 14, 2003, however, the defendants filed a motion to dismiss, claiming that the case was moot because the Wethersfield Avenue property had been foreclosed through a judgment of strict foreclosure in a separate action brought by the holder of a tax lien on the property. We agree that the judgment in that separate action extinguished the legal rights of both the plaintiff and the defendants with respect to the Wethersfield Avenue property, but we do not agree that it caused the present case to become moot. Rather, the plaintiff continued to have a viable claim after the foreclosure of the Wethersfield Avenue property by virtue of its attachment on the Cowles Street property pursuant to the note.
"In Connecticut, a prejudgment attachment [lien] is a provisional remedy afforded to a claimant to secure satisfaction of a judgment in the future. . . . A majority of cases has held that the Bankruptcy Code and its legislative history plainly establish that valid liens that have not been disallowed or avoided survive the bankruptcy discharge of the underlying debt. . . . A long line of cases . . . allows a creditor with a loan secured by a lien on assets of the debtor who becomes bankrupt before the loan is repaid to ignore the bankruptcy proceeding and look to the lien for the satisfaction of the debt. . . . A valid judicial lien is not affected by a discharge in bankruptcy. [T]he discharge in bankruptcy does not extinguish the underlying debt. It only prevents [the] debtor from being personally liable for the discharged debt and forecloses collection of any deficiency judgment, thereby limiting the claimant to enforce its collection efforts in in rem actions against property subject to a valid, prebankruptcy lien guaranteeing payment of the debt." (Citations omitted; internal quotation marks omitted.) Shawmut Bank v. Brooks Development Corp., 46 Conn. App. 399, 410-11, 699 A.2d 283 (1997).
In this case, the defendants did not file their bankruptcy petition until July 12, 2002, at which time the plaintiff had already obtained an attachment lien against the defendants' second property. Although the plaintiff no longer could pursue a personal claim against the defendants for the balance of the debt owed, it nonetheless could pursue its claim to perfect the attachment lien. Furthermore, the fact that the plaintiff sought to perfect its attachment lien after, as opposed to before, the filing of the defendants' bankruptcy petition does not affect its right to secure satisfaction of the debt. "[I]f the lien attaches prior to the period within which the bankruptcy trustee can avoid it as a preference, it need not be perfected in order to survive a discharge in bankruptcy of the underlying indebtedness." (Internal quotation marks omitted.) Id., 413.
Ultimately, the bankruptcy petition and the discharge in bankruptcy of the defendants' individual debts should not have had any effect on the power of the court to render judgment in this case. Therefore, although the plaintiff's foreclosure action was moot because its mortgage had been extinguished by a senior encumbrance, its action on the note was viable at all times.[9] Accordingly, the court improperly granted the defendants' motion to dismiss on the ground of mootness.
The judgment is reversed and the case is remanded for further proceedings in accordance with this opinion.
In this opinion the other judges concurred.
NOTES
[1] The original note contained a standard commercial waiver by which the defendants consented to the attachment of other property.
[2] Both the plaintiff and the defendants were parties to the tax foreclosure.
[3] On June 30, 2000, prior to the defendants' bankruptcy petition, the defendants transferred title to the Cowles Street property to their daughter. On August 12, 2003, subsequent to the plaintiff's attachment of the same property, the defendants filed a motion to avoid the attachment, claiming that it impaired their homestead exemption. On March 1, 2004, the United States Bankruptcy Court for the District of Connecticut denied the defendants' motion. The court determined that the debtors, having transferred title to the Cowles Street property to their daughter, retained no ownership interest in the property on the date of their bankruptcy petition. The debtors, therefore, were not entitled to a homestead exemption in order to avoid the fixing of the plaintiff's attachment on the property. On the contrary, the court found that title to the property on the date of the defendants' bankruptcy was in the daughter, subject to the plaintiff's attachment. See In re Sbriglio, 306 B.R. 445, 448 (Bankr. D. Conn. 2004).
[4] Thereafter, on July 2, 2004, the plaintiff filed a motion for articulation of the court's orders granting the motion to dismiss and denying the motion for reconsideration. The court denied the motion for articulation on July 29, 2004, and on August 12, 2004, the plaintiff filed a motion for review of the court's denial, which this court granted. On December 27, 2004, the court filed its articulation in which it explained why the plaintiff could not proceed to a hearing in damages to reduce its attachment lien to a judgment. For further discussion on the court's articulation, see footnote 9.
[5] Practice Book § 61-3 provides in relevant part: "A judgment disposing of only a part of a complaint, counterclaim, or cross complaint is a final judgment if that judgment disposes of all causes of action in that complaint, counterclaim, or cross complaint brought by or against a particular party or parties. . . ."
[6] Practice Book § 61-4 (a) provides in relevant part: "When the trial court renders a judgment to which this section applies, such judgment shall not ordinarily constitute an appealable final judgment. Such a judgment shall be considered an appealable final judgment only if the trial court makes a written determination that the issues resolved by the judgment are of such significance to the determination of the outcome of the case that the delay incident to the appeal would be justified, and the chief justice or chief judge of the court having appellate jurisdiction concurs. . . ."
[7] See our discussion in part II of the plaintiff's second claim, which is that the court improperly determined that the note had been discharged in bankruptcy.
[8] "It is well established that a mortgagee has two separate and distinct causes of action against a defaulting mortgagor. A mortgagee may pursue an action at law for the amount due on the promissory note, or it may pursue its remedy in equity and foreclose on the mortgage." (Internal quotation marks omitted.) Federal Deposit Ins. Corp. v. Voll, 38 Conn. App. 198, 206, 660 A.2d 358, cert. denied, 235 Conn. 903, 665 A.2d 901 (1995).
[9] We also note that the court based its March 18, 2003 order dismissing the plaintiff's claim on the promissory note under the misinformed belief that the plaintiff had not obtained a prejudgment attachment lien. In its December 27, 2004 articulation ordered by this court, the trial court noted that, in making its determination on the defendant's second count on the note in the March 18, 2003 order, it "investigated the status of [the note] in the Bankruptcy Court and was advised that the note was designated as unsecured and discharged." In the same articulation, however, the court stated that "this court determined that the information it had previously received as to the unsecured nature of the note was, in fact, incorrect and that the lien filed by the plaintiff was viable." The court, therefore, improperly determined that the plaintiff's attachment lien could not be enforced in rem. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551268/ | 142 F.2d 869 (1944)
MECCA TEMPLE OF ANCIENT ARABIC ORDER OF NOBLES OF MYSTIC SHRINE
v.
DARROCK.
No. 330.
Circuit Court of Appeals, Second Circuit.
June 1, 1944.
*870 Alexander C. Dick, of New York City (Ben B. Lifflander, of New York City, on the brief), for appellant.
David Haar, of New York City, for appellee.
Before SWAN, AUGUSTUS N. HAND, and CLARK, Circuit Judges.
CLARK, Circuit Judge.
The debtor, Mecca Temple of the Ancient Arabic Order of the Nobles of the Mystic Shrine, is an insolvent membership corporation of some 2,800 members, organized under the laws of the State of New York and having an executive office in New York City. Its assets include an interest in two pieces of real estate, the income from which in 1942 totalled $1,363, two cemetery plots, and bank deposits amounting to $9,597.74. Its annual income from dues is approximately $50,000, and it has small miscellaneous receipts of about $2,500, while its yearly disbursements run to some $10,000 for secretaries, plus around $2,000 for the publishing of a quarterly magazine and $2,500 for rent. The unsecured liability of the organization approximates in principal and interest $1,200,000, as the result of the issuance in 1922, at five per cent interest, of a series of bearer bonds, in principal amount of $763,000, in order to finance the erection of a new temple, later lost by foreclosure. No interest has been paid for ten years on these bonds, nor have any payments been made towards the principal amounts. The bonds, issued in denominations of $100, $500, and $1,000, were originally sold exclusively to members of the debtor and to other fraternal organizations to which Mecca Temple members also belonged, except for the sum of $20,200 principal amount to the architects of the proposed edifice. Through inheritance, assignment, and sale, however, the bonds have so changed hands that present holders are 1,834 in number, scattered throughout the country, and not necessarily all members of the debtor. Appellant is owner of $1,200 of bonds and is in no way connected with the Mecca Temple.
On July 20, 1943, the debtor filed its petition and schedules for arrangement of unsecured indebtedness pursuant to § 322 of Chapter XI of the Bankruptcy Act, 11 U. S.C.A. § 722, in the District Court. By the submitted plan of arrangement the debtor proposed to pay each bondholder ten per cent of the principal amount of his outstanding bonds in installments of one per cent per year for ten years without interest. The court referred the matter to a referee, who sua sponte issued an order that the debtor and the Securities and Exchange Commission show cause on July 29, 1943, why the petition should not be dismissed. After hearings on that and several subsequent days, at which the Commission appeared informally and appellant as intervening creditor pressed for dismissal, the referee finally dismissed the petition, being of the opinion that fair and equitable relief for the creditors of the debtor could be obtained only by a proceeding for a reorganization under Chapter X of the Bankruptcy Act, 11 U.S. C.A. § 501 et seq. The debtor petitioned for review of this order, and the District Court reversed it and reinstated the petition, writing an opinion in which it questioned the authority of the referee to dismiss sua sponte and held the debtor, in any event, to be a different type of corporation from that considered in Securities and Exchange Commission v. United States Realty & Improvement Co., 310 U.S. 434, 60 S. Ct. 1044, 84 L. Ed. 1093, and therefore not barred from relief under Chapter XI. From this judgment, appellant presses the present appeal, which presents us with the two questions whether the referee had power to dismiss the petition on his own motion, and whether the petition was correctly dismissed on the merits.
First, a referee in bankruptcy clearly has the power sua sponte to dismiss a petition for an arrangement under Chapter XI and relegate the debtor to reorganization proceedings under Chapter X. The district judge read Securities and Exchange Commission v. United States Realty & Improvement Co., supra, to permit the application of § 146 of the Bankruptcy Act dealing with want of "good faith" in the filing of a petition for reorganization, to be passed upon by "the judge" under § 141 to apply to a proceeding under Chapter XI, and thus to support *871 the inference that action must be by the judge. But what the Supreme Court actually decided was that a bankruptcy court, as a court of equity and in the exercise of its equity powers, could determine under Chapter XI the adequacy of the relief afforded by that Chapter, in the same manner as it can in reorganization proceedings under the specific permission of § 146. 310 U.S. at pages 455, 456, 60 S.Ct. at page 1053, 84 L. Ed. 1293. Hence the "bankruptcy court," rather than the "judge," has this equitable power; and since the Bankruptcy Act, § 1(9), 11 U.S.C.A. § 1(9), includes the referee within the meaning of the term "bankruptcy court," the referee had the power to dismiss here.
On the merits the answer is not as clear cut, but we are of the opinion that the referee acted properly in dismissing the petition in favor of a proceeding under Chapter X. And since the Supreme Court in the United States Realty case, supra, has made an exhaustive comparison and analysis of the respective purposes of, and merits of proceedings under, the two chapters, there is little which can be added to the criteria set forth there. Of course, there still is no well-defined answer in the borderline cases to the question as to whether a particular type corporation should be permitted to proceed under Chapter XI; but especially persuasive here is the nature of the debtor's financial structure, which is such that if a reorganization under Chapter X is not required, the interests of an objecting creditor like appellant are not likely to be adequately protected. We have seen that the annual income of the debtor is well in excess of $50,000, while disbursements total less than $15,000 (a sum which appellant urges could easily be substantially reduced); and yet there is no explanation of the use to which the balance of the receipts is being put. Some explanation is surely due the creditors before they should be obliged to accept 10 cents on the dollar for their principal and nothing at all for their long overdue interest. Should the plan of arrangement proposed in the petition be confirmed, the debtor would be able to liquidate its indebtedness for $7,630 per year for ten years a result palpably unjust to the unsecured creditors of a corporation whose income appears to exceed its authorized expenditures by nearly $40,000 yearly. These facts by themselves suggest that the plan merits condemnation under Bankruptcy Act, § 366(2), which states that the court shall confirm an arrangement only if it is convinced that "it is for the best interests of the creditors."
The debtor explains the low amount and rate of payment proposed in the plan by the argument that the greater number of the creditors are members of Mecca Temple who are willing to surrender their claims voluntarily for little or no recompense. But it does not appear how many bondholders are of such mind, and the total number of bondholders and the wide area over which they are spread make it unlikely that there is, as yet at least, any definite accord in the matter. Indeed, it is more probable that many do not even know of the pendency of these proceedings, and that many who have been informed suffer from a grave lack of accurate information as to the true state of affairs. For this situation a petition under Chapter X is again the only fair solution. As the Court stated in the United States Realty case: "The basic assumption of Chapter X and other acts administered by the Commission is that the investing public dissociated from control or active participation in the management, needs impartial and expert administrative assistance in the ascertainment of facts, in the detection of fraud, and in the understanding of complex financial problems." 310 U.S. at pages 448, 449, 60 S.Ct. at page 1050, 84 L. Ed. 1093, note 6, citing the various statutes.
The debtor contests this suggestion by alleging that the bonds in question here were virtually a private issue and that there is no "public interest" to be protected. However valid that argument might conceivably have been in 1922, it is patently ridiculous now. The bonds are bearer bonds and have passed from hand to hand for twenty-two years; there are existing over 1,800 bondholders (as compared to only 900 in the United States Realty case), and these are scattered throughout the country. In this connection, the $20,200 in bonds originally issued to the firm of architects of the original building may also be recalled. Surely it cannot be said in the light of such facts that there is no public interest in the bonds. There is an obvious and direct divergence in interest between the nonmember creditors, who desire only repayment, and the member creditors, who are necessarily anxious also to free their fraternal organization finally from the load of debt it has been carrying.
*872 Yet another reason for reversing the holding below may be found in Bankruptcy Act, § 366(3), which provides that a plan shall not be confirmed unless "it is fair and equitable." As pointed out in the United States Realty case, 310 U.S. at page 452, 60 S.Ct. at page 1051, 84 L. Ed. 1093, an arrangement is not "fair and equitable" which does not conform to the rule of Northern Pac. R. Co. v. Boyd, 228 U.S. 482, 33 S. Ct. 554, 57 L. Ed. 931, as applied in Case v. Los Angeles Lumber Products Co., 308 U.S. 106, 60 S. Ct. 1, 84 L. Ed. 110. These decisions establish the principle that "in any plan of corporate reorganization unsecured creditors are entitled to priority over stockholders to the full extent of their debts and that any scaling down of the claims of creditors without some fair compensating advantage to them which is prior to the rights of stockholders is inadmissible." Thus here the rights of the members, who by § 106(12) of the Bankruptcy Act are assimilated to stockholders, in the assets of the debtor perhaps should be curtailed to compensate the losses to the bondholders, in order that the arrangement be "fair and equitable." It is possible, too, that the creditor rights held by members should be subordinated to the rights of other creditors. Pepper v. Litton, 308 U.S. 295, 60 S. Ct. 238, 84 L. Ed. 281; 8 Collier on Bankruptcy, 14th Ed. 1941, 1179. But these are matters beyond the scope of an arrangement, and hence the debtor should be left to avail itself of the remedies afforded by Chapter X. The judgment below should be reversed for reinstatement of the order of the referee. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551282/ | 908 A.2d 1182 (2006)
Oscar S. MAYERS, Appellant,
v.
Sheila T. MAYERS, Appellee.
Nos. 01-FM-795, 03-FM-1361.
District of Columbia Court of Appeals.
Submitted April 18, 2005.
Decided October 12, 2006.
*1184 Oscar S. Mayers, pro se.
Sheila T. Mayers, pro se.
Before RUIZ and REID, Associate Judges, and NEBEKER, Senior Judge.
REID, Associate Judge:
Appellant Oscar S. Mayers appeals from two orders of the trial court entered in a domestic relations case filed by appellee, Sheila T. Mayers, in the Superior Court of the District of Columbia seeking a decree of divorce and other relief.[1] The first trial court order, dated May 11, 2001, granted Ms. Mayers an absolute divorce, and resolved custody, child support, and other issues relating to the divorce. The second order, dated November 19, 2003, mainly denied Mr. Mayers' motion to terminate child support and found him in civil contempt for "willful failure to pay $12,250 in child support." Mr. Mayers makes two main arguments on appeal: (1) the trial court erred in failing to conclude that the delay in receiving the February 1, 2001 transcript of a hearing adversely affected his substantial rights; and (2) the trial judge, the Honorable Robert E. Morin, erred in refusing to recuse himself from the case due to alleged bias, and therefore all orders entered by him are void. Discerning no error, we affirm the trial court's judgment granting an absolute divorce and its order denying the motion to terminate child support.
FACTUAL SUMMARY
The record shows that after reconciling following their 1991 divorce, Mr. and Ms. Mayers, both attorneys, married for the second time on July 17, 1994. On March 12, 1999, Ms. Mayers filed for divorce from Mr. Mayers. She was given pendente lite custody of Elizabeth and Gabriel Mayers, and Mr. Mayers was given pendente lite custody of Carolene Mayers and Robert Mayers.[2] Mr. Mayers was ordered to pay child support bi-weekly to Ms. Mayers for the children in her care.
After the temporary child custody decisions were made, the parties filed various motions in the years 1999 and 2000. One of those motions, filed by Ms. Mayers, was an October 2000, emergency supplemental motion to modify child support as well as the custody designation for Carolene Mayers, and for an award of alimony pendente lite. The motion indicated that Ms. Mayers' income had decreased. Mr. Mayers lodged an opposition to the motion. At a February 1, 2001 hearing on the motion, Mr. Mayers indicated that he was paying $500 bi-weekly in child support. Judge Morin increased Mr. Mayers' child support payments to $1,000 bi-weekly, retroactive to October 23, 2000, pending trial and decision on Ms. Mayers' action for divorce and related relief.
*1185 Prior to the scheduled trial on Ms. Mayers' action, Mr. Mayers filed a motion on March 8, 2001, to disqualify Judge Morin from the case, based on the judge's statements during the February 1, 2001 hearing; Mr. Mayers believed that the judge's statements revealed prejudice. In his motion, Mr. Mayers requested that Judge Morin's previous orders be vacated due to his consideration of personal knowledge outside the record, specifically that Ms. Mayers was not selected for the list of attorneys eligible to handle Criminal Justice Act ("CJA") cases. Mr. Mayers alleged that during the February 1, 2001 hearing, the trial court had taken "judicial notice that [Ms. Mayers] did nothing voluntarily to cause the los[s] of her CJA eligibility, and thus rejected [Mr. Mayers'] argument that the los[s] of CJA status was a result of [Ms. Mayers'] affiliation with her client and CJA investigator, Stanley Harris,[3] to whom she deliberately authorized CJA payments at the same time she received CJA payments to represent him as a client." Mr. Mayers also alleged that the trial judge violated Canon 3(C)(1)(a) of the American Bar Association's ("ABA") Code of Judicial Conduct.[4] On March 14, 2001, Ms. Mayers filed an opposition to Mr. Mayers' motion for recusal and to vacate child support order. Judge Morin refused to recuse himself, and trial commenced on March 19, 2001.
On May 11, 2001, the trial court docketed "findings of facts and conclusions of law and final judgment" awarding (1) Ms. Mayers an absolute divorce from Mr. Mayers; (2) both parties joint legal custody of both Elizabeth and Gabriel with primary physical custody awarded to Ms. Mayers; (3) child support from Mr. Mayers in the amount of $1,195 bi-weekly ($500 of which was ordered to be given directly to Elizabeth Mayers or the college she is attending); (4) to Mr. and Ms. Mayers each, a 50% interest in a piece of property located in Herndon, Virginia, which was ordered to be sold; and (5) to Mr. and Ms. Mayers each, a 50% interest in a timeshare property in Williamsburg, Virginia. In addition, the trial court disposed of issues related to Mr. Mayers' pension and thrift savings plan. Ms. Mayers' request for alimony was denied, but she was awarded $17,750.00 in attorney's fees.
Mr. Mayers filed notice of appeal on June 6, 2001. Subsequently, on April 16, 2002, he moved "for leave to prepare a statement of proceedings [for February 1, 2001,] in lieu of a reporter's transcript." On May 17, 2002, this court entered an order granting his motion. On June 4, 2002, Mr. Mayers submitted a proposed statement of the February 1, 2001 proceedings to the trial court. However, the statement was disapproved by Judge Morin on June 13, 2002. In response, Mr. Mayers filed a motion to reconsider the court's notice of disapproval. As a basis for his motion, he argued that he had ordered the transcript, and that the court reporter's office indicated that it could not produce it. In an order dated September 23, 2002, the trial judge stated that appellant was "correct in his statement that the court was not aware that the Court of *1186 Appeals had directed him to prepare a statement of proceedings because of the unavailability of a transcript due to technical difficulties," and that he had received correspondence from Elizabeth Mayers advising that Mr. Mayers had not made the required child support payments ordered in her behalf. The trial court set a hearing date on these matters.
On November 14, 2002, Mr. Mayers submitted a memorandum of law, citing Cross v. District of Columbia, 292 A.2d 794 (D.C. 1972), and Cole v. United States, 478 A.2d 277 (D.C.1984), contending that the trial judge should set aside the judgment and order a new trial because there was no transcript for the February 1, 2001 hearing. Thereafter, he filed a motion to dismiss or vacate on December 9, 2002. The trial judge, in his January 27, 2003 order, stated in response to appellant's motion, "[t]he court has ordered the production of the earlier proceedings for its review to determine whether any portion of the earlier proceedings can be discerned." On May 19, 2003, Mr. Mayers filed a motion to vacate the trial judge's "findings of facts and conclusions [of] law entered May 11, 2001, an order vacating its order of February 1, 2001, and order for a new trial pursuant to the holdings of [Cross and Cole]."
On October 16, 2003, the trial judge issued an order to show cause relating to Mr. Mayers' failure to pay child support. A hearing was held on November 17, 2003. On November 19, 2003, the trial judge issued an order finding that Mr. Mayers was "in [civil] contempt of [the] court's order due to his willful failure to pay $12,250 in child support to his daughter Elizabeth. . . ." With respect to Mr. Mayers' "assertion that the trial judge made comments during a pendente lite hearing that formed a basis for a subsequent motion for recusal," Judge Morin stated that "although the Office of Court Reporters initially informed the parties and the court that equipment malfunction prevented transcription of the proceedings [of February 1, 2001], it later discovered that the hearing was recorded." In the November 19, 2003 order, the court found "that Mr. Mayers' testimony in regards to the alleged statements made by the court was false. The transcript of the February 1st hearing comports with the court's memory of the hearing." The court concluded that "Mr. Mayers' testimony to the contrary constitutes an intentional misrepresentation by him in order to inject fabricated issues into the proceedings and is part of his pattern of making false statements and giving false testimony." The court found Mr. Mayers in contempt, ordered the United States Marshal to take him into custody, and committed him to the D.C. Jail "for a period of 90 days or until such earlier time as he shall purge himself of his contempt by paying . . . the sum of $12,250, or until further order of the court." The trial court stayed its order pending a hearing scheduled for January 6, 2004. Mr. Mayers filed an appeal on December 3, 2003.
ANALYSIS
The February 1, 2001 Transcript Issue
Mr. Mayers argues that the February 1, 2001 transcript is unreliable for appellate review due to numerous "inaudibles," and partial transcription. He also maintains that he was prejudiced by the two-year delay in the production of the transcript, and that the trial court should have vacated its 2001 and 2003 orders, and granted him a new trial. Ms. Mayers contends that the trial court did not abuse its discretion because of the delay in production of the transcript and properly denied Mr. Mayers' motion for a new trial.
This court defers to the trial court's findings of fact unless they are *1187 plainly wrong, and reviews legal issues de novo. See D.C.Code § 17-305 (2001). Matters of discretion are reviewed for an abuse of discretion. See Johnson v. United States, 398 A.2d 354, 362 (D.C.1979).
Mr. Mayers relies on Cross, supra, and Cole, supra, in support of his contention that a new trial should be granted due to the errors in the transcript. In Cross, unlike this case, there was no transcript of the testimony taken during the trial and the parties submitted conflicting versions of a "Statement of Proceedings and Evidence." The trial judge had no independent recollection of the proceeding and thus was unable to reconcile the conflicting versions. Cross, supra, 292 A.2d at 794. We held that the trial court should have vacated the judgment when it could not resolve the parties' conflicting statements about the proceeding, and hence, we remanded the case for a new trial. Id. at 795. Mr. Mayers asserts that in the present case, as in Cross, supra, there are two conflicting versions of what the court saidhis version and that of the trial court. He faults the trial court for relying on its version of the proceedings, and denying the accuracy of his version. He insists that the "incomplete" transcript of February 1, 2001 does not resolve the conflict, and therefore, asks this court to set aside the trial court's orders and judgments pursuant to Cross, supra. But Cross simply does not support Mr. Mayers' argument. Here, unlike Cross, the critical part of the February 1, 2001 transcript pertaining to Ms. Mayers' appointment to the CJA list of eligible attorneys, and comments made by the trial judge during the February 1st hearingwas transcribed and made available to both Mr. Mayers and the trial judge.
Nor is Cole controlling in this case. To the contrary, Cole is inapplicable not only because the tape of the proceedings was found and transcribed, but also since the transcript (albeit with recognition that some parts were "inaudible"), as the trial court found, does not support Mr. Mayers' version of what happened during the February 1, 2001 hearing. In Cole, we declared that "in cases where there is an incomplete transcript and appellant claims that a specific trial court error merits reversal, this court will not consider the substance of the appellant's representations about the alleged error, unless the transcript supports those representations. . . ." 478 A.2d at 284. The transcript simply does not substantiate Mr. Mayers' allegations.
The transcript of the February 1, 2001 proceedings establishes that Mr. Mayers was wrong in his assertions regarding the statements of the trial judge. Despite the fact that the transcript has many "inaudible" insertions, most of the statements of the trial judge, and the witnesses were clearly transcribed. Significantly, the pertinent parts of Ms. Mayers' testimony and the statements made by the trial judge are clear. During her testimony, Ms. Mayers stated that she was no longer on the CJA panel and no one had given her an explanation as to why she was left off the list. When counsel for Ms. Mayers attempted to explore the reasons why Ms. Mayers no longer was on the CJA panel, Mr. Mayers' counsel objected on grounds of speculation. The trial judge then said:
I said it is speculation. You all can't talk over each other. It is speculation. [Ms. Mayers] says she doesn't know why she didn't [make the CJA Panel]. I can take judicial notice counsel that the Court issued a report as to how people got on the panel and didn't get on the panel. That was a public document and the reasons given. I also indicate that no attorney was told why they did or did not get on the panel.
In response to an inaudible question Ms. Mayers testified:
*1188 To my knowledge, I didn't know that the Court was aware that Mr. Harris was working for me and nobody has yet to say anything to me about it. I rememberwhat I do remember is in 1998, I got aeither a letter or a call from Judge Burgess who was the Presiding Judge, the Chief of the Criminal Division. He indicated to me that he received some kind of anonymous note or letter indicating that somebody who works for me has a criminal record.
We had a discussion about that. He said, you know, I'm not telling you what to do, but it would seem to me that he wouldn't be respected in light of hishis prior criminal record. That wasthat was the sole discussion that I had with anybody regarding Mr. Harris working for me or not. And this was Judge Burgess, Chief Presiding Judge of the Criminal Division. He told me, he said, I'm not telling you what to do one way or the other. That's what he said to me. If he had said something else or additional to me, then that would have been helpful.
When another inaudible question was posed, counsel for Mr. Mayers objected and the trial court asserted:
[I'll] put on the record and the parties should know, I was one of the judges on the CJA selection panel, one of the twelve judges, and I signed-off on the report. So we ruled on each and every name whether they should make the list or not. So I was part of that deliberation and I'm prepared to represent that that had nothing to do with whether or not Ms. Mayers made the list. There was no discussion about that. I mean, that's all I can represent to you. You can accept that or not.
As shown above, the February 1, 2001 transcript provided to this court reflects that the trial judge did not make the statements alleged by Mr. Mayers regarding the committee's review of Ms. Mayers' application to be a CJA attorney. Although Mr. Harris' name came up during Ms. Mayers' testimony, nothing in the record, including the trial judge's statements, shows that Ms. Mayers was kept off the CJA Panel because of her CJA payments to her investigator, Mr. Harris, or her CJA representation of him. In sum, we cannot say that the transcript of the February 1, 2001 hearing is unreliable for appellate review.
Mr. Mayers also maintains that the trial judge violated D.C.App. R. 10(d)(2),[5]*1189 which he insists is "clear and unambiguous," by making him wait approximately sixteen (16) months to complete the record for appeal. He asserts that, "[t]he trial court stated it delayed or was reluctant in ruling on any of the appellant's motions or holding any hearing to re-create the record because it knew at one point a tape of the February 1st hearing existed." In his order of November 19, 2003, the trial judge noted:
Because the court knew at one point a tape of the February 1st hearing existed, the court was reluctant to hold a hearing concerning alternative ways to re-create the record. Eventually, the Office of Court Reporters discovered a tape of the hearing.
As reflected in the transcript of the hearing of March 19, 2001, when Mr. Mayers raised for the first time an allegation that the court made certain remarks at the February 1 hearing, the court listened to the tape of the earlier hearing to ensure that the allegations made by Mr. Mayers were not true.
On March 19, 2001, prior to the commencement of trial, the judge considered some preliminary matters, including Ms. Mayers' motion for sanctions due to Mr. Mayers' failure to produce certain documents, and Mr. Mayers' motion to disqualify Judge Morin, based upon statements made at the February 1, 2001 hearing. At that time, it became clear that the tape of the February 1, 2001 proceeding existed. As the trial judge asserted:
Let me put on the record . . . my memory of what happened. And just to let you know that I ordered up FTR, our digital tape recording system allows us to reinstate and listen in chambers [to] what happened. And I thought your motion did not accurately state what had occurred at that hearing. So I just wanted to be sure and I had the recording reinstated so that I was able to listen to it in chambers and explain to you from my memory of what occurred and why I made the statements I did.
Thus, as of March 19, 2001, Mr. Mayers knew that a tape of the proceedings existed, that the trial court had listened to it, and placed on the record a summary of statements regarding Mr. Harris. Once the Office of Court Reporters found the tape of the February 1, 2001 proceeding, it prepared a transcript of the tape and, according to the trial court's November 19, 2003 order, "[t]he transcript of the hearing was provided to Mr. Mayers for his review."
The gravamen of Mr. Mayers' argument is that the trial court should have approved his reconstructed statement of the February 1, 2001 hearing within ten days, and by failing to do so the trial court prejudiced his appeal. But, we have said "that the trial court has the `ultimate responsibility to bring about an adequate record for review.'" McCoy v. United States, 781 A.2d 765, 771 (D.C.2001) (quoting Cole, supra, 478 A.2d at 284). In that regard, "if the trial court is not satisfied that the [proposed reconstructed] statement is accurate or as complete as possible, the court should take appropriate measures to modify it." Cole, 478 A.2d at 284; see also McCoy, supra, 781 A.2d at 772 (trial court must be satisfied that the proposed reconstructed statement "reflects *1190 an accurate reconstruction prepared by the best means available"). Here, since the trial judge had listened to the tape of the February 1st hearing, he knew that Mr. Mayers' proposed reconstructed statement was inaccurate, and consequently properly refused to approve it. Instead, the judge took the appropriate step of trying to track down the tape ("the best means available" to determine what was said at the hearing), which he knew existed, so that a transcript could be provided. Even though the tape contained "inaudibles," we conclude that a transcript of that tape suffices because "a fair review on appeal has not been frustrated[.]" McCoy, 781 A.2d at 771 (quoting Cole, 478 A.2d at 282 (internal quotation marks omitted)).
Furthermore, contrary to Mr. Mayers' argument, we do not read former Super. Ct. Civ. R. 10(d)(2) as requiring the trial court in this case to approve Mr. Mayers' proposed reconstructed statement within ten days after it was submitted to the court, even though the rule provided that: "Within ten days [after [t]he statement has been submitted], the trial judge shall either settle and approve the statement or notify the parties that it is disapproved, stating the reasons for its disapproval."[6] Under the circumstances presented here, where Mr. Mayers was made aware that the trial court would not approve his proposed reconstructed statement within six weeks of its filing, we do not believe that Mr. Mayers' was adversely impacted by the alleged 16-month delay in obtaining the transcript of the February 1, 2001 proceeding.
The Recusal Issue
Mr. Mayers claims that Judge Morin was biased against him and should have recused himself because of personal knowledge he gained from being one of the judges on the panel of judges who decided which attorneys were eligible to be on the CJA list, and Ms. Mayers was under consideration for that panel. He argues that there is an appearance of bias "on the part of any judge who [as here] was on a panel which decided that a particular lawyer would lose his/her status to earn a living under the Criminal Justice Act and is now in a position to significantly improve his/her financial condition through his presiding over the ousted lawyer's divorce and child support case."
In support of his claim, Mr. Mayers cites Super. Ct. Civ. R. 63-I(a) which states, "[w]henever a party to any proceeding makes and files a sufficient affidavit that the judge before whom the matter is to be heard has a personal bias or prejudice either against the party or in favor of any adverse party, such judge shall proceed no further therein, but another judge shall be assigned, in accordance with Rule 40-I(b), to hear such a proceeding." He also cites Lynn v. Lynn, 617 A.2d 963 (D.C.1992), where the trial court based "some of its findings . . . upon evidence not properly before the court. . . ." Id. at 971.
"Public confidence in a fair and impartial judiciary is essential to our criminal justice system. In order to preserve the integrity of the judiciary, and to ensure that justice is carried out in each individual case, judges must adhere to high standards of conduct." York v. United States, 785 A.2d 651, 655 (D.C.2001). "Thus even if there is no bias in fact, an appearance of bias or prejudice requires recusal if it is sufficient to raise a question in the mind of `the average citizen' about a judge's impartiality." Id. "[T]he bias or prejudice must be personal in nature and *1191 have its source `beyond the four corners of the courtroom.'" Anderson v. United States, 754 A.2d 920, 925 (D.C.2000) (quoting Gregory v. United States, 393 A.2d 132, 142 (D.C.1978) (citations omitted)).
Super. Ct. Civ. R. 63-I(a) requires "a sufficient affidavit" showing the alleged personal bias or prejudice on the part of the judge. "When the affidavit is `sufficient' under the rule, a judge must recuse himself or herself from the case." York, supra, 785 A.2d at 654 (citing Rule 63-I(a)); In re Evans, 411 A.2d 984, 994 (D.C.1980)). "[B]ecause the disqualification of a trial judge may disrupt and delay the judicial process, affidavits of bias are strictly scrutinized for form, timeliness and sufficiency." Id. "[T]o be disqualifying, the alleged bias and prejudice must stem from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case." In re Bell, 373 A.2d 232, 233 (D.C.1977) (citation and internal quotation marks omitted). Super. Ct. Civ. R. 63-I(b) requires that the affidavit specified in Rule 63-I(a) "be accompanied by a certificate of counsel of record stating that it is made in good faith. The affidavit must be filed at least 24 hours prior to the time set for hearing of such matter unless good cause is shown for the failure to file by such time." Mr. Mayers maintains that he filed his affidavit on March 10, 2001, but that for some reason it is missing from the official record. A supplemental record on appeal contains a non-notarized copy of his affidavit.
There are at least two problems with Mr. Mayers' argument. First, his motion "was procedurally deficient." York, supra, 785 A.2d at 653; see also Kreuzer v. George Washington Univ., 896 A.2d 238, 249 (D.C.2006) ("the motion was unaccompanied by an affidavit or certificate of good faith"). "[P]rocedural deficiencies are, in and of themselves, sufficient reason for a trial judge to deny a recusal motion." York, supra, 785 A.2d at 654 (citations omitted). As Ms. Mayers notes, no certificate of counsel was filed indicating that appellant's affidavit, which was not submitted simultaneously with his motion for recusal, was made in good faith. Moreover, Mr. Mayers did not file his affidavit (assuming that it was properly notarized and filed) until March 19, 2001, more than 5 weeks after he knew of the alleged reason for recusal (the trial judge's comments on February 1, 2001), and only approximately one week before trial. The affidavit also was lodged after Mr. Mayers' motion to continue trial had been denied, and the trial court had ordered him "to produce the documents requested" by Ms. Mayers as part of her discovery efforts. Thus, the timing of his motion is suspect and may not meet the requirement of timeliness.[7] "[A]ffidavits of bias are strictly scrutinized for . . . timeliness. . . ." York, supra, 785 A.2d at 654. As the trial court stated during preliminary matters on the day of trial, March 19, 2001:
[T]his [recusal] motion comes fairly late . . . after a series of motions that goes back a while that I needed to rule on, without objection from either side. And then once the ruling was made, the motion was filed. It has a certain appearance. Why wasn't this motion filed . . . prior to me filing a decision on other matters?
A judge has an obligation not to recuse himself when it is not required. Kreuzer, supra, 896 A.2d at 249-50.[8]*1192 Therefore, Judge Morin properly scrutinized Mr. Mayers' recusal motion for timeliness by examining it within the context of other pre-trial events.
Not only was Mr. Mayers' motion procedurally deficient and the timing of it suspect, but his affidavit was not "sufficient" to show "personal bias or prejudice" on the part of the judge, under Rule 63-I(a). We "strictly scrutinize[]" the affidavit "for . . . sufficiency." York, supra, 785 A.2d at 654. After recounting what he thought he heard Judge Morin state during the February 1, 2001 hearing ("I heard Judge Morin say something to the effect. . . ."), Mr. Mayers' affidavit states that the judge's personal bias or prejudice is traceable to his membership on the CJA Panel committee:
The Judge further mentioned that the reasons why Ms. Mayers was not selected could be found on a document with her name and the reasons listed along side of it. Judge Morin then stated that Mrs. Mayers' los[s] of CJA case appointment eligibility was involuntary, then proceeded to increase the child support award based on her los[s] of CJA income. I had no knowledge of what occurred during the discussions of the panel of judges deciding CJA attorney appointment eligibility since it was not a public proceeding.
Judge Morin's findings were based on facts not in evidence produced at the hearing. Furthermore the findings that her los[s] of CJA income was through no fault of her own is not supported by the record.
"[A]ppellant must provide some factual basis for the motion." York, supra, 785 A.2d at 654 n. 6. In ruling on Mr. Mayers' recusal motion, Judge Morin stated:
I'm inclined to deny the motion to recuse for the reasons stated. I indicated I made those statements so that, as I indicated, I had to make the final decision concerning who was on the rolls and who was not on the roll. It was an advisory committee to the Chief Judge. You know I don't know what his reasons were other than what he stated in his addendum to the list. I don't believe I cut off any evidence concerning this matter. As indicated in the opinion, I made my decision based on the evidence before me and did not base the decision on any prior knowledge.
. . . .
I think I made essentially two statements concerning this matter. Number 1, I had no previous communication on the matter. Number 2, neither the committee nor the Chief Judge indicated the reasons for an appointment of an attorney . . . to the list. And, number 3, I think in my written order, I indicated that the Court's finding, based on the evidence, was that her removal from the panel was not voluntary . . . in the sense that she did apply to become a member of the panel and did not voluntarily remove herself from it. I meant nothing more than the statement itself. . . .
[T]he affidavit is incorrect, is factually incorrect as to what I stated at the last hearing. I don't have any outside information. And I represented that to the parties. Based on that, I'll deny the motion [to recuse].
Our review of the record convinces us that Mr. Mayers' affidavit did not have a *1193 sufficient factual basis to demonstrate personal bias or prejudice on the part of the trial judge, or that he based his decision in the Mayers' case on personal knowledge or observations. Judge Morin's May 11, 2001 "findings of facts and conclusions of law and final judgment" reveal that he based his child support award on such factors as "Ms. Mayers' increased income and potential income," the fact that Elizabeth Mayers "will soon be leaving for college" (Mr. Mayers was ordered to pay "$500.00 bi-weekly either directly to Elizabeth or her college)," the Child Support Guidelines pertaining to "the appropriate level of support of a non-custodial parent," and the cost of Gabriel Mayers' private school (Mr. Mayers was ordered to pay "$695.00 bi-weekly" to Ms. Mayers for child support of Gabriel).[9] The order included two pertinent footnotes. Footnote 32 stated in part: "Attribution of $40,000 annual income to Ms. Mayers was an estimate of her annualized income, because since being dropped from the Criminal Justice Act Appointment Panel, her income has been sporadic." However, footnote 33 stated that "Ms. Mayers' future prospects for earnings potential have apparently considerably brightened," based on CJA payments, appointments in juvenile cases, temporary legal work, and "her expectation . . . that she will receive full-time employment in the near future." Clearly the court's order reflected neither personal bias nor prejudice against Mr. Mayers. Nor can we say that Judge Morin's child support award was based on the type of extrajudicial personal knowledge on which the trial judge relied in Lynn, supra, to conclude "that the appellant could not qualify for a loan of $110,000 in spite of a statement from a lending institution that he so qualified." 617 A.2d at 971. In short, Judge Morin did not rest his child support award on "personal knowledge of disputed evidentiary facts concerning [the Mayers' divorce, custody and child support] proceeding." DISTRICT OF COLUMBIA CODE OF JUDICIAL CONDUCT, Canon 3(E)(1)(a).[10] Indeed, in revealing his role relating to the internal judicial CJA panel, Judge Morin acted in accordance with the commentary to Canon 3(E)(1): "A judge should disclose on the record information that the judge believes the parties or their lawyers might consider relevant to the question of disqualification, even if the judge believes there is no real basis for disqualification."
In sum, we are satisfied, even assuming Mr. Mayers' recusal motion was not procedurally deficient, that the trial judge did not err in refusing to recuse himself from this case. The trial judge did not base his decision on extra-judicial knowledge, nor was there an appearance *1194 of, or actual bias. See Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 108 S. Ct. 2194, 100 L. Ed. 2d 855 (1988); see also Liteky v. United States, 510 U.S. 540, 555, 114 S. Ct. 1147, 127 L. Ed. 2d 474 (1994) ("[O]pinions formed by the judge on the basis of facts introduced or events occurring in the course of the current proceedings, or of prior proceedings, do not constitute bias for a bias or partiality motion unless they display a deep-seated favoritism or antagonism that would make fair judgment impossible."). "[T]o be disqualifying, the alleged bias and prejudice `must stem from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case.'" In re Bell, supra, 373 A.2d at 233 (quoting United States v. Grinnell Corp., 384 U.S. 563, 583, 86 S. Ct. 1698, 16 L. Ed. 2d 778 (1966)). Any trial judge involved with this case would have known that appellee lost her eligibility to obtain CJA appointments. This knowledge, gained within the walls of the court, by itself is not enough to require a judge to recuse himself: "[A] judge may have personal experience with particular parties who have appeared before [him] in previous cases, or [he] may have learned about underlying events by presiding over related trials. Yet such prior knowledge does not, by itself, generally raise questions about the fairness of a judge." Clifford v. United States, 329 U.S.App. D.C. 1, 5-6, 136 F.3d 144, 148-49 (1998) (citing Liteky v. United States, 510 U.S. 540, 550-51, 114 S. Ct. 1147, 127 L. Ed. 2d 474 (1994)). On this record, we are confident that Judge Morin's "impartiality [could not] reasonably be questioned." DISTRICT OF COLUMBIA CODE OF JUDICIAL CONDUCT, Canon 3(E)(1); Kreuzer, supra, 896 A.2d at 249. Furthermore, we are satisfied that any "opinions formed by [Judge Morin] . . . [did not] display a deep-seated favoritism or antagonism that would make fair judgment impossible," Liteky, supra, 510 U.S. at 555.
Accordingly, for the foregoing reasons, we affirm the trial court's judgment granting an absolute divorce and its order denying the motion to terminate child support.[11]
So ordered.
NOTES
[1] Mr. Mayers did not appear for oral argument. Ms. Mayers did not file a brief, but she appeared for oral argument. She claimed she had received no notices about the appeal in the year 2004. She filed a "motion to dismiss appeal, supplement the record, and remand for further proceedings," which we have granted to the extent that she has been permitted to file a responsive brief. The case was submitted, without oral argument.
[2] Robert Mayers died on July 17, 2000, of a self-inflicted gunshot wound.
[3] The trial judge referred to Mr. Harris as "James Harris."
[4] Judges of the District of Columbia Courts are governed by the CODE OF JUDICIAL CONDUCT FOR THE DISTRICT OF COLUMBIA COURTS. The comparable provision to the ABA's Canon 3(C)(1)(a) is Canon 3(E)(1)(a) which provides:
(1) A judge shall disqualify himself or herself in a proceeding in which the judge's impartiality might reasonably be questioned, including but not limited to instances where:
(a) the judge has a personal bias or prejudice concerning a party or a party's lawyer, or personal knowledge of disputed evidentiary facts concerning the proceeding[.]
[5] D.C.App. R. 10(d)(2) (1999) previously provided:
The statement and each objection or proposed amendment shall be submitted by the Clerk of the Superior Court to the trial judge. Within ten days thereafter, the trial judge shall either settle and approve the statement or notify the parties that it is disapproved, stating the reasons for its disapproval. A statement approved by a trial judge shall be filed promptly and shall be included by the Clerk of the Superior Court in the record on appeal. A trial judge who disapproves a statement of proceedings and evidence may authorize the appellant to submit a revised statement. The appellant, if so authorized, shall submit a revised statement for the judge's approval within ten days, or in lieu thereof shall order a transcript from the court reporter. If the trial judge does not authorize the appellant to submit a revised statement, or if the appellant submits a revised statement and it is disapproved by the trial judge, the appellant shall forthwith order a transcript from the court reporter.
In 2004, however, this court revised its rules to conform, wherever feasible, to the Federal Rules of Appellate Procedure. D.C.App. R. 10(d) (2006) now specifies:
Agreed Statement as the Record on Appeal. In place of the record on appeal as defined in Rule 10(a), the parties may prepare, sign, and submit to the trial judge a statement of the case showing how the issues presented by the appeal arose and were decided in the Superior Court. The statement must set forth only those facts averred and proved or sought to be proved that are essential to the court's resolution of the issues. If the statement is accurate, ittogether with any additions that the trial judge may consider necessary to a full presentation of the issues on appealmust be approved by the trial judge and must then be certified to this court as the record on appeal. A copy of the agreed statement may be filed in place of the appendix required by Rule 30.
[6] At any rate, we do not interpret former D.C.App. R. 10(d)(2) either as jurisdictional, or as an inflexible claim-processing rule. Nor have we found any case in which we declared the ten-day requirement in the former version of the rule to be either. See Kontrick v. Ryan, 540 U.S. 443, 454-55, 124 S. Ct. 906, 157 L. Ed. 2d 867 (2004).
[7] Counsel for Mr. Mayers attributed the timing of the filing to the time needed "to research the issue," and to "a number of . . . hotly contested issues" in the case.
[8] In Kreuzer, supra, a case in which GWU was a party, the court held "the trial judge did not err in declining to recuse himself sua sponte on being assigned the case after he had taught a seminar at GWU's law school for which he had been paid." Id. at 249. This court held that "the judge's association with GWU, all but ended by the time the suit was filed and with only a conjectural possibility of being renewed, raised no appearance of bias or prejudice `sufficient to permit the average citizen reasonably to question [the] judge's impartiality.'" Id. (quoting Scott v. United States, 559 A.2d 745, 749 (D.C.1989)).
[9] Notably, the order that Mr. Mayers pay a total of $1,195 bi-weekly in child support ($500 bi-weekly to Elizabeth or her college and $695 bi-weekly to Ms. Mayers for Gabriel) was only $195 higher than the $1,000 bi-weekly payment ordered at the February 1, 2001 hearing. And, based on the information presented to the trial court prior to the February 1, 2001, hearing, the increase in Mr. Mayers' bi-weekly child support payments, at that time, from $500 bi-weekly to $1,000 bi-weekly was not arbitrary; rather, it was reasonable.
[10] In Scott, supra, note 8, 559 A.2d at 748 (D.C.1989), we said: "Canon 3(C)(1) of the [ABA] Code of Judicial Conduct provides in relevant part: `A judge should disqualify himself in a proceeding in which his impartiality might reasonably be questioned.'" (emphasis in original) (quoting the ABA CODE OF JUDICIAL CONDUCT Canon 3(C)(1)). According to Scott, the necessity of recusal is evaluated by "an objective standard," which "is required in the interests of ensuring justice in the individual case and maintaining public confidence in the integrity of the judicial process which depends on a belief in the impersonality of judicial decision making." Id. at 749 (quoting United States v. Nobel, 696 F.2d 231, 235 (3d Cir.1982), cert denied, 462 U.S. 1118, 103 S. Ct. 3086, 77 L. Ed. 2d 1348 (1983)) (internal quotation marks omitted).
[11] Mr. Mayers also challenges the trial court's findings concerning their Herndon, Virginia marital home, but we see no reason to disturb those factual findings where Mr. Mayers relies only on the parties' "initial pleadings" in the case. In its May 11, 2001 "Findings of Fact and Conclusions of Law and Final Judgement," the trial court noted that "[t]he parties purchased the [Herndon] property in January 31, 1995 with marital proceeds," and stated that: "The parties do not dispute that the Herndon property, Mr. Mayers' pension and thrift savings plan and the timeshare are marital property," only "how, if at all, the property should be distributed." Mr. Mayers also maintains that the trial court erred with respect to its "award of interest in the property [located in Virginia] and ordering a sale without follow[ing] the applicable law in Virginia. . . ." However, properly read, the court's order of May 11, 2001 "`determine[d]' and `adjudicated[d]' the couple's rights to [the Herndon] property." McGean v. McGean, 339 A.2d 384, 386 n. 1 (D.C.1975) (citing Argent v. Argent, 130 U.S.App. D.C. 46, 396 F.2d 695 (1968)); see also Quarles v. Quarles, 353 A.2d 285, 287-88 (1976) ("Although the . . . decree was ineffective to accomplish a transfer of title to the appellee by its own force since both properties were located outside the District of Columbia, it was effective as a determination of property rights as between the parties.") (footnote and citation omitted). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551290/ | 142 F.2d 340 (1944)
UNITED STATES
v.
PEPPER BROS.
No. 8602.
Circuit Court of Appeals, Third Circuit.
Argued April 18, 1944.
Decided May 3, 1944.
*341 Stewart Lynch, of Wilmington, Del. (Tom C. Clark, Asst. Atty. Gen., Walker Smith, Sp. Asst. to the Atty. Gen., and Thomas I. Emerson, Deputy Administrator for Enforcement, and Samuel Mermin and Harry L. Shniderman, Attys., Office of Price Administration, all of Washington, D. C., on the brief), for appellant.
Alfred C. McKenzie, Brooklyn, N. Y. (Milton E. Sahn, of New York City, on the brief), for appellee.
Before MARIS, GOODRICH, and McLAUGHLIN, Circuit Judges.
MARIS, Circuit Judge.
This is an appeal by the United States from an order of the District Court for the District of Delaware granting the defendant's motion to quash the fifth and sixth counts of a criminal information which charged the defendant with violation of Revised Maximum Price Regulation 269 issued under Section 2 of the Emergency Price Control Act of 1942, 50 U.S.C.A. Appendix, § 902.
Revised Maximum Price Regulation 269 (7 F.R. 10708) fixed maximum prices for poultry and prohibited any person from selling or delivering and any person in the course of trade from buying or receiving poultry at prices higher than the maximum prices thus fixed. By Amendment No. 6 effective March 20, 1943, (8 F.R. 3316), the Regulation was modified by the adoption for pricing purposes for both dressed and live poultry of tentative standards for classes and grades promulgated by the Department of Agriculture. As amended the Regulation prescribed maximum prices for the different classes and weights of Grade A live poultry and established a basis for determining maximum prices for Grade B and Grade C. Section 4(a) of the Act, 50 U.S.C.A. Appendix, § 904(a), makes it unlawful for any person to sell or deliver or in the course of trade or business to buy or receive any commodity in violation of any regulation under Section 2, and Section 205(b) makes the willful violation of Section 4(a), 50 U.S.C.A. Appendix, §§ 902, *342 925(b) and 904(a), a misdemeanor punishable by fine or imprisonment or both.
The fifth and sixth counts of the information in the present case charged the defendant with purchasing on or about July 28, 1943 from one John Isaac a total of 15,641 pounds of live broilers, fryers and light roasters, 80% thereof being of Grade B and 20% thereof being of Grade C, at prices in excess of the maximum prices permitted by Revised Maximum Price Regulation 269 to be paid for poultry items of those classes and grades.
The district court quashed these counts of the information upon the ground that subsection (j) of Section 2 of the Act, as added by Section 5(a) of the Joint Resolution of July 16, 1943, 57 Stat. 566, repealed the provisions of Maximum Price Regulation 269 for standards and grades of poultry and maximum prices based thereon. 53 F. Supp. 163. Preliminarily we note that if this construction of the Act had been the sole ground for the court's action the present appeal would, under the Criminal Appeals Act, 18 U.S.C.A. § 682, have had to have been taken directly to the Supreme Court. However, in a supplemental opinion denying the Government's motion for reargument the court stated that its action was also based upon the independent ground that the counts were defective for failure to set out sufficient averments. 53 F. Supp. 166. In view of the existence of these grounds for the court's action apart from its construction of the statute the appeal was properly taken to this court. United States v. Wayne Pump Co., 1942, 317 U.S. 200, 63 S. Ct. 191, 87 L. Ed. 184. Under the circumstances we have authority to review the district court's construction of the statute as well as its ruling as to the insufficiency of the information. United States v. Swift & Co., 1943, 318 U.S. 442, 63 S. Ct. 684, 87 L. Ed. 889.
We accordingly turn to the consideration of the questions raised by the appeal. The principal question is whether the provisions of the Regulation for maximum prices by grades which the defendant is charged with having violated had been repealed by Congressional action subsequent to their adoption and were, therefore, not in force at the time of the purchases in question. The defendant relies upon subsection (j), known as the Taft amendment, which was added to Section 2 of the Emergency Price Control Act by the Joint Resolution of July 16, 1943, 57 Stat. 566, and which provides:
"(j) Nothing in this Act shall be construed (1) as authorizing the elimination or any restriction of the use of trade and brand names; (2) as authorizing the Administrator to require the grade labeling of any commodity; (3) as authorizing the Administrator to standardize any commodity, unless the Administrator shall determine, with respect to such standardization, that no practicable alternative exists for securing effective price control with respect to such commodity; or (4) as authorizing any order of the Administrator fixing maximum prices for different kinds, classes, or types of a commodity which are described in terms of specifications or standards, unless such specifications or standards were, prior to such order, in general use in the trade or industry affected, or have previously been promulgated and their use lawfully required by another Government agency."
The defendant's contention is that the enactment of subsection (j) repealed and rendered void those provisions of the Regulation which imposed standardization and maximum prices of poultry by grades and that consequently there was no ban upon the defendant's purchase on July 28, 1943 of poultry at prices higher than those maximum prices. The Government denies that subsection (j) operated as such a repealer and asserts that the question whether it rendered void the provisions in controversy involves the continued validity of the Regulation, a question which the district court had no power to consider, since jurisdiction to determine the validity of price regulations is conferred exclusively upon the Emergency Court of Appeals and the Supreme Court, and is expressly withdrawn from all other courts, federal, state or territorial, by Section 204(d) of the Emergency Price Control Act, 50 U.S.C.A. Appendix, § 924(d).
In granting the motion to quash the two counts the district court in its original opinion held that the provisions of the Regulation upon which the counts were based had been repealed by subsection (j). The court stated that in so holding it did not consider that it was passing upon the validity of the Regulation. If the effect of the enactment of subsection (j) was to repeal outright all standardization and *343 grade pricing provisions contained in regulations in force at the date of its enactment the action of the district court was right and must be sustained. For to hold that a piece of legislation, whether a statute or a regulation, has been repealed by a subsequent Act of Congress is not to pass upon its validity but merely upon its continued existence.
Did subsection (j) repeal these provisions of the Regulation? Certainly the subsection does not in express terms purport to repeal any provisions of existing regulations or orders of the Administrator which were valid when they were issued. Moreover repeal by implication will not be assumed "unless no other reasonable construction can be applied." United States v. Jackson, 1938, 302 U.S. 628, 631, 58 S. Ct. 390, 392, 82 L. Ed. 488. Furthermore such a construction of the subsection would fly in the face of the clear intention of the Emergency Price Control Act to provide continuity of price control. See Yakus v. United States, 64 S. Ct. 660. Nothing in the legislative history of subsection (j) supports the view that it was intended to operate as a repealer. The subsection uses the language "Nothing in this Act shall be construed * * * as authorizing * * *" provisions of the character described except under stipulated circumstances. Substantially the same language was used in the original Act in Section 302(c), 50 U.S. C.A. Appendix, § 942(c). It is there directed toward restricting the authority of the Price Administrator to incorporate certain provisions in regulations promulgated by him. We think that a similar construction should be placed upon the same phraseology when used in subsection (j). United States v. Cooper Corp., 1941, 312 U.S. 600, 606, 607, 61 S. Ct. 742, 85 L. Ed. 1071; Lewellyn v. Harbison, 3 Cir., 1929, 31 F.2d 740, certiorari denied 280 U.S. 560, 50 S. Ct. 18, 74 L. Ed. 615. We conclude that subsection (j) did not repeal any of the provisions of Maximum Price Regulation 269.
Under the terms of subsection (j) provisions for standards and grades are not to be included in a regulation unless certain basic facts are present. They must be necessary for securing effective price control or they must have previously been in general use or required by another Government agency. The subsection thus does grant power to the Administrator to issue regulations incorporating standardization and grading provisions in those situations in which the supporting facts described in the subsection exist. Assuming, without deciding, that the subsection was intended to apply to a regulation validly issued before its enactment to the extent of invalidating standardization and grading provisions if the basic facts stipulated by the subsection are not present, it will be seen that a question as to the continued validity of the regulation is presented which can only be determined upon consideration of the underlying facts. The question thus presented is clearly a question of the validity of the regulation, the exclusive jurisdiction to determine which is given to the Emergency Court of Appeals and the Supreme Court by Section 204(d) of the Act and which was, therefore, not within the legal competence of the district court to consider. Yakus v. United States, 64 S. Ct. 660.
The question whether a regulation is invalid under subsection (j) is similar in nature to many other questions of validity which may arise under the Act. Thus the question may arise as to whether a regulation operates "to compel changes in the business practices, cost practices or methods, or means or aids to distribution, established in any industry, except to prevent circumvention or evasion of any regulation," in violation of the express prohibition of Section 2(h). Likewise the question may arise as to whether a regulation is invalid because it regulates "compensation paid by an employer to any of his employees," or "rates charged by any common carrier or other public utility," or "rates charged by any person engaged in the business of selling or underwriting insurance," or "rates charged by any person engaged in the business of operating or publishing a newspaper, periodical, or magazine, or operating a radio-broadcasting station, a motion-picture or other theater enterprise, or outdoor advertising facilities," or "rates charged for any professional services," in violation of Section 302(c) of the Act which declares that "nothing in this Act shall be construed to authorize the regulation of" such rates. But such questions are clearly within the jurisdiction of the Emergency Court of Appeals. See Davies Warehouse Co. v. Bowles, 321 U.S. 144, 64 S. Ct. 474.
There remains for us to consider the question whether the district court *344 erred in holding the information defective as a pleading. The defendant had, and may well still have,[1] the right to attack the validity of the Regulation in the light of the mandate of subsection (j) by protest to the Administrator under Section 203(a) and complaint to the Emergency Court of Appeals under Section 204(a), 50 U.S.C.A. Appendix, §§ 923(a), 924(a). The district court, however, must accept the Regulation as valid unless and until it is set aside by the Emergency Court of Appeals or by the Supreme Court upon review. Consequently the information did not have to set out the basic facts which support the validity of the Regulation and which might have to be shown in defense of the validity of the Regulation if it should be challenged in the proper forum. Moreover it is clear that even if the question of the existence of these supporting facts were open as a defense in the district court the Government was not required to anticipate or negative the defense by averring their existence in the information. Evans v. United States, 1894, 153 U.S. 584, 590, 14 S. Ct. 934, 38 L. Ed. 830. Consequently in holding that the information was defective for its failure to aver these basic facts the district court erred.
The order of the district court is reversed and the cause is remanded with directions to reinstate the fifth and sixth counts of the information.
NOTES
[1] See R. E. Schanzer, Inc. v. Bowles, Em.App.1944, 141 F.2d 262. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551292/ | 142 F.2d 82 (1944)
SCHILLING et al.
v.
SCHWITZER-CUMMINS CO.
No. 8412.
United States Court of Appeals District of Columbia.
Decided March 31, 1944.
Mr. Arthur Raisch, of Detroit, Mich., member of the bar of the Supreme Court of the State of Michigan, pro hac vice, by special leave of Court, with whom Messrs. Stuart C. Barnes, of Detroit, Mich., and John G. Sbarbaro, of Washington, D. C., were on the brief, for appellants.
Mr. Ralph G. Lockwood, of Washington, D. C., with whom Mr. Dwight B. Galt, of Washington, D. C., was on the brief, for appellee.
Before GRONER, Chief Justice, MILLER and EDGERTON, Associate Justices.
MILLER, Associate Justice.
This appeal arises out of a Section 4915 proceeding in the District Court which, in turn, followed an interference proceeding in the Patent Office. Invention is conceded; the improvement being an automatic seal, a self-contained assembly which can be handled and put in place as a unit, intended primarily for water pumps used on automobiles. Both the Patent Office and the District Court decided in favor of appellee. Specifically, the court found: "5. The invention in issue relates to a fluid seal generally used to seal the water pump shaft in water cooled motors, including a self-contained non-exploding sealing unit, *83 as set forth and particularly described and claimed in plaintiff's application, claims 19 to 22, inclusive. 6. The defendant-patentee, Schwitzer-Cummins Company, has established possession of the invention in issue, as having been invented by its assignor, Kurt A. Beier, on or before November 6, 1935, and its disclosure to plaintiffs by the drawing in evidence as Defendant's Exhibit N and the letter of transmittal thereof to the plaintiffs dated November 6, 1935. 7. The earliest date that plaintiffs have established as their being in possession of the invention in issue and as the invention of Robert Schilling, is November 26, 1935. 8. Plaintiffs have failed to establish that they first disclosed the invention in issue to defendant, Schwitzer-Cummins Company, or its assignor, Kurt A. Beier, the first disclosure of one of said parties to the other being established as the disclosure of defendant, Schwitzer-Cummins Company, to plaintiffs by its letter dated November 6, 1935, transmitting the drawing, Defendant's Exhibit N. 9. Plaintiffs' successful tests of the seals produced by defendant, Schwitzer-Cummins Company, according to the said Defendant's Exhibit N, constituted a reduction to practice inuring to the benefit of said defendant's assignor Beier. 10. The plaintiff-applicant Schilling was not the true, original and first inventor or discoverer of the fluid seal as defined by his said claims here in issue, having failed to establish his invention thereof as being prior to that of the said defendant's assignor Beier."
In its preliminary memorandum opinion the trial court found the facts to be "substantially as claimed by the defendant * * *" and directed counsel to draft findings. Appellants contend this is not a commendable procedure; that the findings subsequently made are entitled to no weight; and, consequently, that the case should be considered by this court, on the evidence, de novo. Assuming the correctness of the premise, the conclusion does not follow. In such a situation as that of the present case, if adequate findings had not been made, the proper procedure would be to remand the case to the trial court and direct that new findings be made.[1] It is not the function of an appellate court to assume the powers of the trial court; which it would do, necessarily, if it tried, de novo, such a case as the present.[2]
However, the premise assumed by appellants is incorrect. Whatever may be the most commendable method of preparing findings whether by a judge alone, or with the assistance of his court reporter, his law clerk and his secretary, or from a draft submitted by counsel may well depend upon the case, the judge, and facilities available to him.[3] If inadequate findings result from improper reliance upon drafts prepared by counsel or from any other cause it is the result and not the source that is objectionable.[4] It is no more appropriate to tell a trial judge he must refrain from using or requiring the assistance of able counsel,[5] in preparing his findings, *84 than it would be to tell an appellate judge he must write his opinions without the aid of briefs and oral argument. What the law requires in this respect is that the findings as made, shall be those of the trial judge himself.[6] The ultimate test as to the adequacy of findings will always be whether they are sufficiently comprehensive and pertinent to the issues to provide a basis for decision,[7] and whether they are supported by the evidence.[8] To the extent that they are, in addition, concisely stated, nonargumentative in form, free from conclusions of law[9] and from the redundancy so frequently found in pleadings, they will be more useful to all concerned.[10] While counsel may be disappointed that findings do not discuss propositions sincerely contended for, that, alone, does not make them inadequate or suggest that such propositions were not understood by the court. A decision, as between two contestants, necessarily rejects contentions made by one or the other. The Bar other than counsel who participate in each particular case complains, only too frequently, of the length of decisions in appellate courts, which results from judicial efforts to reflect consideration of contentions made by both parties. Certainly, we should not require or encourage trial judges, in preparing findings, to assert the negative of each rejected contention as well as the affirmative of those which they find to be correct.
Specifically, appellants say the trial judge disregarded certain evidence upon which they placed great reliance. On the contrary, the judge stated in his memorandum opinion: "The court concludes that the testimony of the plaintiff's witness, Charles Lewis, and Plaintiff's Exhibits Nos. 43, 47 and 51 should not be admitted in evidence because they were readily available to the plaintiff (General Motors Corporation) and were either suppressed or withheld from the Interference Proceedings in the Patent Office, but even if allowed in evidence the Judgment of the court would still be for the defendant, Schwitzer-Cummins Company." (Italics supplied) The language used by Mr. Justice Rutledge, speaking for this court, in the Boucher Inventions case,[11] is applicable in the present case: "The practice, under Section 4915 as well as within the Patent Office itself, contemplates a full disclosure to that office, so far as is reasonably possible, particularly in relation to models, exhibits, drawings, etc. While the 4915 suit is de novo and permits introduction of evidence not presented to the Patent Office, it does not contemplate *85 the suppression or the withholding of evidence so readily available and of such importance as was Exhibit AR or oversight of such glaring proportions. We have added these views, * * * though not strictly necessary for decision of the cause, to avoid by admonition, if possible, the necessity for making decision on such a ground in another case, in which the consequences might be more serious." One who assumes the difficult burden placed upon a plaintiff in a Section 4915 proceeding,[12] does not aid his cause by giving ground for the impression that he deliberately failed to make a full disclosure in the Patent Office. The same result flows from Judge Woolley's opinion in the Barrett case,[13] upon which appellants rely: "Specifically our decision is that the plaintiffs in this action under section 4915, R.S., are estopped to offer evidence which was wholly within their possession and control at the interference proceeding and which they withheld from that proceeding * * *." (Italics supplied) While the 1927 amendment to Section 4915, R.S. contemplated a de novo trial in the District Court and made the record in the Patent Office proceeding available, along with other evidence, for that purpose,[14] it was not intended to encourage the practice of suppressing evidence before the administrative agency, for whatever purpose.[15] On this appeal, appellants did not deny that the disputed evidence was wholly within their possession and control at the interference proceeding, and was withheld from that proceeding. Whether or not withholding evidence may constitute suppression will depend upon the circumstances of the particular case. But, in any event, after a careful examination of the record including the disputed evidence we have concluded there was ample support for the findings and judgment of the trial court; hence, there is no reason to interfere with its determination.[16]
Affirmed.
NOTES
[1] Rainey v. Rainey, 76 U.S.App.D.C. 341, 131 F.2d 349; National Savings & Trust Co. v. Shutack, ___ U.S.App.D.C. ___, 139 F.2d 371; Fogle v. General Credit, Inc., 71 App.D.C. 338, 110 F.2d 128; Boss v. Hardee, 68 App.D.C. 75, 93 F.2d 234. See Matton Oil Transfer Corp. v. The Dynamic, 2 Cir., 123 F.2d 999; Graham v. Bayne, 18 How. 60, 15 L. Ed. 265.
[2] See 28 U.S.C.A. § 225(a): "The circuit courts of appeal shall have appellate jurisdiction to review by appeal * * *." D.C.Code (1940) tit. 17; id. at § 11-208.
[3] Matton Oil Transfer Corp. v. The Dynamic, 2 Cir., 123 F.2d 999, 1001: "Of course, we do not mean to imply that a trial court is not privileged to seek such aid of counsel, both as to the facts and the law, as it thinks desirable prior to and as a step in decision; or to limit or restrict in any way the procedure for amending or otherwise correcting findings set forth in F.R.C.P. 52(b) [28 U.S.C.A. following section 723c]. Nor do we wish to preclude the trial court from preparing an opinion, for that can be most illuminating and helpful to an appellate court." See Chesnut, Analysis of Proposed New Federal Rules of Civil Procedure, 22 A. B.A.J. 533, 541.
[4] Epstein v. Goldstein, 2 Cir., 107 F.2d 755; Process Engineers, Inc. v. Container Corp. of America, 7 Cir., 70 F.2d 487, 489.
[5] Societe Suisse Pour Valeurs de Metaux v. Cummings, 69 App.D.C. 154, 157, 99 F.2d 387, 390: "In cases requiring findings of fact it is the better practice to insist that counsel for the prevailing party submit to the court and to the adverse party proposed findings. Thereafter a time should be set at which objections and proposed modifications, eliminations, or additions may be submitted and then, if necessary, a hearing had and the findings settled."
[6] Fed.Rules Civ.Proc., Rule 52(a). See Mayo v. Lakeland Highlands Canning Co., 309 U.S. 310, 316, 60 S. Ct. 517, 84 L. Ed. 774; Interstate Circuit, Inc. v. United States, 304 U.S. 55, 56, 58 S. Ct. 768, 82 L. Ed. 1146; Hazeltine Corp. v. General Motors Corp., 3 Cir., 131 F.2d 34, 37.
[7] Klimkiewicz v. Westminster Deposit & Trust Co., 74 App.D.C. 333, 334, 122 F.2d 957, 958, and cases there collected. See Heitmeyer v. Federal Communications Comm., 68 App.D.C. 180, 185, 188, 95 F.2d 91, 96, 99; Saginaw Broadcasting Co. v. Federal Communications Comm., 68 App.D.C. 282, 288-289, 96 F.2d 554, 560-561, certiorari denied, Gross v. Saginaw Broadcasting Co., 305 U.S. 613, 59 S. Ct. 72, 83 L. Ed. 391, and authorities cited.
[8] Nichols v. Gaston, 72 App.D.C. 186, 112 F.2d 220. See State of Florida v. United States, 282 U.S. 194, 212-215, 51 S. Ct. 119, 75 L. Ed. 291; Heitmeyer v. Federal Communications Comm., 68 App. D.C. 180, 189, 95 F.2d 91, 100.
[9] Societe Suisse Pour Valeurs de Metaux v. Cummings, 69 App.D.C. 154, 157, 99 F.2d 387, 390: "* * * it would have been better if the findings had not been interwoven with conclusions of law and interspersed with expressions of the court's opinion on the merits; but by disregarding the extraneous matter there is enough left to enable us to determine the issues which the case presents." Heitmeyer v. Federal Communications Comm., 68 App.D.C. 180, 185, 95 F.2d 91, 96.
[10] Klimkiewicz v. Westminster Deposit & Trust Co., 74 App.D.C. 333, 334, 122 F.2d 957, 958; Petterson Lighterage & Towing Corp. v. New York Central R. Co., 2 Cir., 126 F.2d 992, 996; McGee v. Nee, 8 Cir., 113 F.2d 543, 546: "The findings should be `a clear and concise statement of the ultimate facts, and not a statement, report, or recapitulation of evidence from which such facts may be found or inferred.' Anglo-American L. M. & A. Co. v. Lombard, 8 Cir., 132 F. 721, 734; Becker v. Evens & Howard Sewer Pipe Co., [8 Cir., 70 F.2d 596, 598] * * *."
[11] Boucher Inventions, Ltd. v. Sola Electric Co., 76 U.S.App.D.C. 160, 162, 131 F.2d 225, 227, certiorari denied, 318 U.S. 770, 63 S. Ct. 762, 87 L. Ed. 1140.
[12] Morgan v. Daniels, 153 U.S. 120, 125, 14 S. Ct. 772, 38 L. Ed. 657; Cleveland Trust Co. v. Berry, 6 Cir., 99 F.2d 517, 522.
[13] Barrett Co. v. Koppers Co., 3 Cir., 22 F.2d 395, 397. See also, Greene v. Beidler, 2 Cir., 58 F.2d 207.
[14] Act of March 2, 1927, e. 273, § 11, 44 Stat. 1336-1337, 35 U.S.C.A. § 63.
[15] See Abbott v. Coe, 71 App.D.C. 195, 197, 109 F.2d 449, 451.
[16] Abbott v. Coe, 71 App.D.C. 195, 197, 198, 109 F.2d 449, 451, 452; Morrison v. Coe, 75 U.S.App.D.C. 219, 220, 127 F.2d 737, 738; Daniels v. Coe, 73 App.D.C. 54, 58, 116 F.2d 941, 945. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551297/ | 142 F.2d 883 (1944)
In re POTTS.
POTTS
v.
POTTS.
No. 9700.
Circuit Court of Appeals, Sixth Circuit.
June 6, 1944.
*884 *885 J. A. Edge, of Lexington, Ky., for appellant.
A. B. Thomason, of Lexington, Ky., for appellee.
Before SIMONS, HAMILTON, and MARTIN, Circuit Judges.
HAMILTON, Circuit Judge.
The debtor, Mary Potts, and Herbert H. Potts, appellee, were married in 1899 and lived together as husband and wife until 1935. On March 28, 1935, in a judgment divorcing them in the Fayette Circuit Court at Lexington, Kentucky, it was decreed that each party restore to the other any property not disposed of at the commencement of the action which either party may have obtained either directly or indirectly from or through the other during marriage, and on account of the marriage relationship.
On January 1, 1937, Herbert H. Potts recovered in the Fayette Circuit Court a judgment for $5,439.19 against the debtor, Mary Potts, being the value of the property which the court decreed the debtor had acquired from her husband during their married life and which had not been disposed of by her at the commencement of the divorce action.
The debtor commenced these proceedings under Chapter XI, sec. 322 of the Bankruptcy Act, 11 U.S.C.A. 722, for the primary purpose of obtaining relief from the foregoing judgment which was included in her schedule. She listed as her assets an unliquidated claim of $22,000 against Herbert H. Potts and also improved real estate located in Lexington, *886 Kentucky, valued in the schedule at $8,000. The debtor's arrangement proposition was to collect the debt owed her by her former husband and apply it on the principal of her indebtedness and to pay the balance, if any, at the rate of $55 per month, the latter sum to be realized from the rental of the real estate owned by her.
On November 4, 1941, Herbert H. Potts filed an execution claim which he asserted was secured by a lien on the real estate which the debtor had scheduled. On November 24, 1941, debtor demurred to the claim, moved to expunge it and without waiving her demurrer or motion, set up a counterclaim and set-off aggregating $80,256 which she claimed was allowable under sec. 68 of the Bankruptcy Act, 11 U.S. C.A. § 108. The claimant, Herbert H. Potts, appeared and resisted the counterclaim.
On May 5, 1942, the Referee disallowed the set-off and counterclaim on the ground that the items therein stated were matters included in the original action in the state court in which claimant obtained his judgment. The Referee also overruled the demurrer and motion to expunge and allowed claimant's claim in full as secured, the security being an execution lien on the property described in the debtor's schedule.
The debtor reviewed the Referee's order and the court, on December 21, 1942, set the order aside on the ground that the debtor's proceeding related solely to relief from unsecured debts and that the lien claim was in no way affected by the proceedings. In re Potts, D. C., 47 F. Supp. 990. The debtor on March 22, 1943, filed an amended petition and sought relief under both Chapters XI and XII of the Bankruptcy Act, 11 U.S.C.A. §§ 701 et seq., 801 et seq. She stated in her amended petition that the real estate owned by her had a fair market value in excess of $10,000 and that her former husband, Herbert H. Potts, had obtained an execution lien on the property by reason of a judgment he had theretofore obtained against her in the Fayette Circuit Court and that on December 14, 1942, Herbert H. Potts had instituted an equitable action in the Fayette Circuit Court seeking to foreclose the lien. The debtor further stated that she had filed an answer and counterclaim to said action, the counterclaim consisting of the same items she had set out in her set-off and counterclaim in these proceedings and an additional sum for alimony.
The debtor prayed that the claimant, Herbert H. Potts, be enjoined from the further prosecution of his action in the state court and that if this could not be done, that the present proceeding be stayed until her counterclaim in the state court was adjudicated.
On June 11, 1943, Herbert H. Potts, claimant, filed an application for the appointment of a trustee to take charge of the real estate owned by the debtor in which he stated that the debtor had permitted tax liens to accumulate against the property and that she was collecting rents therefrom without accounting to creditors. The debtor filed a response and stated that she had not wilfully or intentionally failed or refused to pay all taxes due on the property as they matured but she did not deny owing them.
On June 29, 1943, the Referee, pursuant to the provisions of Chapter XII, sec. 432 of the Bankruptcy Act, 11 U.S.C.A. § 832, appointed a trustee with authority to take charge of debtor's property, with the power to collect rents. On July 6, 1943, the debtor filed a petition to review this order.
On April 12, 1943, the debtor, pursuant to the provisions of section 426 of Chapter XII of the Bankruptcy Act, 11 U.S.C.A. § 826, executed a bond in the penal sum of $1,000, which was approved by the trustee, to indemnify the estate against any subsequent loss in the event of an entry of an order of adjudication. On July 26, 1943, the claimant, Herbert H. Potts, secured a judgment against the debtor in the Fayette Circuit Court for $5,439.19 with 6% interest thereon from January 1, 1937, in which judgment the court decreed a sale of all of the real estate of the debtor in satisfaction thereof. The judgment in the state court also dismissed the debtor's counterclaim. On August 13, 1943, the claimant, Herbert H. Potts, filed a new proof of claim in these proceedings based on the judgment of July 26, 1943. On August 20, 1943, the debtor filed a response to the new proof of claim and also plead in defense a counterclaim which contained the items disallowed in the state court judgment.
On August 2, 1943, the Referee issued a notice to creditors of a meeting to be held on August 13, 1943, for the purpose of accepting or rejecting the debtor's proposed arrangement and in the notice he advised the creditors the petition would be dismissed *887 or the debtor adjudicated a bankrupt if the proposed arrangement was rejected. The debtor objected and insisted that the meeting be postponed until the claim of Herbert H. Potts was finally adjudicated and filed a petition to review the Referee's order.
On August 13, 1943, the Referee allowed the new claim of Herbert H. Potts and decreed to the claimant a superior lien on all of the real estate scheduled by the debtor and the debtor filed petition for review. On August 20, 1943, the Referee overruled the debtor's motion to strike Herbert H. Potts' claim and dismissed the debtor's counterclaim on the ground that the counterclaim was barred by the judgment in the state court and further found that the debtor was indebted on unsecured claims in the amount of $1,250, and on secured claims in the amount of $5,439.19 with interest thereon from January 1, 1937, until paid and also $453.50 for costs due the Circuit Clerk of Fayette County, Kentucky.
The Referee further found that the debtor had made no provision for the payment of costs and the expenses of administration and further had made no provision in her proposed arrangement for the payment of secured creditors and that it appeared that the debtor's secured creditors would not accept any arrangement proposed by her. The Referee concluded that the arrangement proposed by the debtor was unfair, lacked equity and therefore was not for the best interest of the creditors. The Referee dismissed the proceedings in so far as an arrangement was sought, and adjudged the debtor a bankrupt and directed that any further action in the proceedings be pursuant to the provisions of bankruptcy. The debtor filed petition for review of this order.
On September 25, 1943, the district court denied the debtor's petitions to review the Referee's orders of August 2, 1943, August 13, 1943, and August 20, 1943, and approved each of them and directed that the estate be administered in ordinary bankruptcy. From the court's order this appeal is prosecuted.
Appellant insists first, that the Bankruptcy Court lacked jurisdiction to adjudicate the debtor's counterclaim and set-off against the judgment creditor, and second, if the court had jurisdiction that the debtor was not estopped by the judgments of the state court.
Chapters I to VII of the Bankruptcy Act, consisting of sections 1-72, 11 U.S.C. A. §§ 1-112, dealing with ordinary bankruptcy proceedings, are made applicable specifically to proceedings under Chapters XI and XII where not inconsistent with or in conflict with the provisions of those Chapters, 11 U.S.C.A. §§ 702 and 802. Therefore, the right of the debtor to set-off or counterclaim against her judgment creditor is determinable under section 68 of the Bankruptcy Act, 11 U.S.C.A. § 108.
This section provides that in all cases of mutual debts or mutual credits between the estate of a bankrupt and a creditor, the account shall be stated and one debt shall be set off against the other and the balance only allowed or paid. It is settled law that parties interested in the estate may set off in reduction or extinguishment of the allowance of a provable claim, any debt or counterclaim which passes to the trustee and which the bankrupt or any of his creditors might have asserted against the claimant. The section is not self-executing and its benefit is to be had only on action of the Bankruptcy Court properly invoked. The statute does not enlarge the general doctrine of set-off or counterclaim. It only becomes operative when the case is brought within the general principles of set-off. The debt sought to be set off must ordinarily be a mutual one and must be of the same nature as the creditor's claim, and where the set-off of a debtor is sought in arrangement proceedings, the debtor must observe and comply with all conditions governing perfection of his rights to recover from a claimant in an ordinary proceeding. Cumberland Glass Mfg. Co. v. DeWitt, 237 U.S. 447, 455, 456, 35 S. Ct. 636, 640, 59 L. Ed. 1042.
The debtor's set-off, accepting the allegations of her pleading as true, was allowable under section 68, but the burden rested on her to establish the amount thereof.
The determination as to whether a right of set-off exists under section 68 lies within the discretionary control of the district court to be exercised in accord with the general principles of equity. The court has the "primary duty of determining for itself whether there are `mutual debts or credits' that should be set off one against the other." Cumberland Glass Co. v. DeWitt, supra; In re Rosenbaum Grain Corp., 7 Cir., 103 F.2d 656; In re Cuyahoga Finance Co., 6 Cir., 136 F.2d 18.
*888 Jurisdiction may be conferred on the Bankruptcy Court by a claimant's consent. Where a set-off is plead to a claim and the claimant answers to the merits without objection, the court has jurisdiction. Fairbanks Steam Shovel Co. v. Wills, Tr., 240 U.S. 642, 649, 36 S. Ct. 466, 60 L. Ed. 841; Page v. Arkansas Gas Corporation, 286 U.S. 269, 272, 52 S. Ct. 507, 76 L. Ed. 1096; Schumacher v. Beeler, 293 U.S. 367, 377, 55 S. Ct. 230, 79 L. Ed. 433.
The parties here consented to the jurisdiction of the court. The debtor filed her set-off and the claimant defended the set-off on the ground that it was res judicata.
The claimant also moved for appointment of a trustee and asserted a lien on the property which was in the possession of the court under the debtor's petition. Under such circumstances, there can be no question of jurisdiction. The claimant has raised no such issue and from the very nature of the proceeding, the debtor cannot.
Claimant Potts' plea of res judicata is predicated on three judgments of the state court: (1) that in the divorce action the court adjudged, on March 28, 1935, that the respective parties should restore to each other any property not disposed of at the beginning of the action, which either obtained from the other during the marriage relationship; (2) the judgment for $5,439.19 of January 1, 1937; (3) the judgment of July 26, 1943.
In the divorce action neither party made any claim against the other for debts owed or property acquired from each other during the marriage relationship. In the second action, plaintiff claimed that during the marriage relationship defendant had acquired from him an undivided one-half interest in certain real estate in Fayette County, Kentucky, and that she also had in her possession twenty dairy cows and one bull which they jointly owned and that after the divorce the defendant had disposed of both the land and cattle and had appropriated the proceeds of the sale to her own use. Defendant's answer was a general denial. In the third action plaintiff sought to foreclose the execution lien he had theretofore acquired on the improved city real estate. Defendant answered, filed counterclaim and set-off containing the same items as are plead against the claim in the present action. She also plead in bar the pendency of the present proceedings and an order which the Referee had entered herein restraining the plaintiff, Herbert H. Potts, from further prosecuting his action in the state court. In the state court judgment, defendant's counterclaim was dismissed and the plea in bar denied.
The debtor filed her amended petition under Chapter XII and it was approved by the court March 22, 1943. Section 428 of Chapter XII, Title 11 U.S.C.A. § 828, provides that a petition filed under the chapter "shall operate as a stay of any act or proceeding to enforce any lien upon the real property or chattel real of a debtor." The automatic stay provided under the statute operates to postpone all proceedings in all other courts to enforce any lien on real estate until otherwise ordered by the bankruptcy court upon hearing and after notice to the debtor and all other parties in interest. Under the express provisions of the statute, the action of the claimant, Herbert H. Potts, in the state court to enforce the lien was automatically stayed after March 22, 1943, and as the judgment was entered in that case on July 26, 1943, it has no efficacy in these proceedings.
Upon filing a petition under Chapter XII, all of the property of the debtor is brought within the jurisdiction of the Bankruptcy Court which jurisdiction is paramount and exclusive and thereafter no action taken in any other court can affect the proceedings in the Bankruptcy Court. Since the judgment of the state court of July 26, 1943, is the sole foundation for claimant Potts' second claim, the judgment being void, the claim is void and, likewise, the whole decree of the state court. Taylor v. Sternberg, 293 U.S. 470, 473, 55 S. Ct. 260, 79 L. Ed. 599; Kalb v. Feuerstein, 308 U.S. 433, 443, 60 S. Ct. 343, 84 L. Ed. 370.
In considering the issue of res judicata, the question is confined solely to the effect of the divorce decree and the subsequent proceedings for the recovery of the property or its value which the plaintiff claimed defendant had acquired during the marriage relationship.
The doctrine of res judicata may be applied to a claim in another court where the action in the latter involves the same subject matter determined in the former action. The cause of action or matter litigated must have been a bar to a second action in the forum where the first was decided. Therefore, the determination *889 of the issue of res judicata here must be decided by the laws of the Commonwealth of Kentucky and whatever matter was adjudicated in the actions in the state court must be given full faith and credit in these proceedings.
Section 96 of the Civil Code of Practice of the Commonwealth of Kentucky, Carroll's Kentucky Codes, Baldwin's Revision 1938, defines a counterclaim as a cause of action in favor of defendant against a plaintiff which arises out of the contract or transaction stated in the petition as the foundation of the plaintiff's claim or which is connected with the subject of the action. A set-off is defined as a cause of action arising upon a contract judgment or award in favor of a defendant against a plaintiff and confines relief by set-off to actions upon contracts, judgments or awards. In applying the Code provisions, the Kentucky courts have laid down the rule that the judgment of a court having jurisdiction of the subject matter and of the parties is final and conclusive, not only as to matters actually litigated and decided therein, but also as to all matters necessarily involved in the litigation and which might have been litigated. However, in applying this rule, the court has said that whenever recoupment, set-off or counterclaim is sought, the party entitled to any of these remedies, may interpose either of them as a defense, or he may bring a new cross-action and it is optional with the defendant which course he will adopt.
A pure defense must be presented or it is lost. A counterclaim or set-off may be withheld for a separate action. Jefferson, Noyes & Brown v. Western Nat. Bank, 144 Ky. 62, 138 S.W. 308; Carroll v. Fullerton, 215 Ky. 558, 559, 286 S.W. 847.
It is sometimes difficult to draw the line between a judgment which will operate as a bar to an action for a specified claim, and one which leaves the claim outstanding with the right of a subsequent action. The rule is established that in order to render a judgment conclusive, it must appear by the record of the prior suit that the particular matter sought to be included was necessarily tried or determined, that is that the judgment could not have been rendered without deciding that matter. The prior action operates as an estoppel only as to those matters in issue or points controverted upon the determination of which the judgment was rendered. Phillips et al. v. Big Sandy Co., 149 Ky. 555, 149 S.W. 957.
The Kentucky decisions on the concept of res judicata may be summed up in a simple statement that a matter once decided is finally decided and that the rule is founded on public policy as conducive to peace, repose and morality without producing injustices. In order to determine what matter has been decided in the preceding action, the entire record therein is to be considered. The inquiry is not limited to the judgment, but extends to the pleadings, the verdict or findings of the court. The scope and meaning of the judgment may be determined in the light of all the matters the court was required to consider in arriving at the judgment excluding matters collaterally or inferentially decided.
Plaintiff's action in the state court on which his execution claim was based was for restoration of property defendant had obtained from him during the marriage relationship and to account therefor for its value. Defendant plead no counterclaim or set-offs but in answers to interrogatories attached to the petition which she was required to answer (Carroll's Kentucky Codes, Civ.Code Prac., Baldwin's Revision 1938, sections 140 and 141) stated that the deed made by the plaintiff to her was not obtained by virtue of the marriage relationship but that it was made in contemplation of their immediate separation and in settlement of plaintiff's liability to her by reason of the use of her property and the income therefrom appropriated by him during their married life and also the proceeds of the sale of her property which plaintiff had appropriated to his own use and also for debts of plaintiff which she had paid at his request.
In construing section 425 of the Kentucky Civil Code of Practice (Carroll's Kentucky Codes, Baldwin's Revision 1938) the Court of Appeals of Kentucky has decided that title put in the name of husband or wife by one or the other for a valuable consideration or in settlement of debts between them cannot be recovered. Brandenburg v. Brandenburg, 252 Ky. 338, 67 S.W.2d 27. The court has also decided that when it appears that money or property has been received by the husband or wife from or through the other, the presumption arises it was obtained by reason of marriage and the burden rests on the opposite party to overcome the presumption. *890 Pope v. Pope, 148 Ky. 30, 146 S.W. 410.
In the execution case, defendant conceded that her husband had made the deed during marriage; therefore, the burden shifted to her to show that she paid a consideration for the property and she undertook to establish consideration by showing she had forgiven plaintiff the very items, excluding alimony, which she claims as a set-off in the present proceedings.
If a matter available as a counterclaim is unsuccessfully relied upon as a defense, it cannot afterwards be asserted as a counterclaim or as an independent cause of action in a subsequent suit between the same parties. Jefferson, Noyes & Brown v. Western Nat. Bank, supra.
Here is the state of the case. The debtor now relies upon precisely the same matter to defeat the collection of the judgment as she depended upon in the original action to prevent its rendition. Such a position is untenable. The bar of a former action operates as an estoppel when the point relied on collaterally to attack a judgment was essentially decided in the action where the judgment was obtained. Graves v. Allen, Trustee, 208 Ky. 764, 271 S.W. 1077.
The fact that the debtor here, defendant in the former action, interposed in that action only part of her claim, does not change the rule. The principle applies that a party may not use an indivisible claim in part in one action and then use it later in another. Pilcher v. Ligon, 91 Ky. 228, 15 S.W. 513; Commonwealth v. Bacon, 126 Ky. 30, 102 S.W. 839; Johnson v. Dry Creek Oil & Gas Co., 283 Ky. 340, 141 S.W.2d 263.
There is no identity of cause of action between the debtor's claim for alimony which she here asserts as a set-off, with her defense in the action in which the plaintiff obtained his judgment. This part of the claim was not the subject matter of the former litigation and the basis for alimony rests upon a different state of facts. If her alimony set-off is barred, it must be based on the divorce judgment. So far as the record shows, none of the matters litigated in the divorce action related directly to the question of alimony. The judgment did provide for restoration of property.
Subject to one exception, the rule prevails in Kentucky that where a decree of absolute divorce has been entered without reservation of the right thereafter to make an allowance for alimony, the decree is final and absolute and the wife cannot be allowed alimony in any subsequent action. Campbell v. Campbell, 115 Ky. 656, 74 S.W. 670; Logsdon v. Logsdon, 204 Ky. 104, 263 S.W. 728. The exception to the rule is found in Hanks v. Hanks, 282 Ky. 236, 138 S.W.2d 362. In that case the court stated that a wife was not precluded by a divorce decree from setting up a counterclaim based on alimony in an action by the husband to recover property acquired by the wife from him during the marriage relationship if the divorce decree did not contain an order of restoration. In the case at bar, the divorce decree ordered restoration; therefore, the case falls under the general rule and the debtor's claim to alimony is barred in the present action.
The Referee in the order of August 20, 1943, adjudged the debtor a bankrupt on the ground that her proposed arrangement had been accepted by common creditors only holding claims of $1,250 and that the debtor's arrangement made no provision for the payment of the secured judgment claim of Herbert H. Potts in the sum of $5,439.19 with interest thereon at the rate of six percent from January 1, 1937, until paid, and the secured claim of George E. DeLong in the sum of $453.50 and further that her secured creditors had refused to accept the arrangement. The debtor attacks the order of adjudication on the ground that conditions prerequisite for such an adjudication did not exist.
As we have heretofore pointed out, the judgment lien claims of Potts and DeLong were void because of the automatic stay under the Bankruptcy Act, but under the laws of the Commonwealth of Kentucky, Potts had an execution lien on the property more than four months old at the time of the commencement of these proceedings. Hood v. Pope, 233 Ky. 749, 26 S.W.2d 1043; Ky. Revised Statutes, sec. 426.120. Therefore, the Referee's order is supported by the execution lien regardless of the void judgment. A petition for relief under either Chapter XI or XII is a petition proposing an arrangement by a debtor, and is not a proceeding for adjudication as a bankrupt. An arrangement has no binding force until confirmed by the court. Chapter XII, sec. 481, U.S.C.A. Title 11, § 881, provides in substance that if an arrangement is withdrawn or abandoned prior to acceptance *891 and no other arrangement is pending or accepted at the meeting of creditors, or within the time fixed by the court or if confirmation of the arrangement is refused, where the petition is filed under section 422, the court shall enter an order upon hearing after notice to the debtor, the creditors and such other parties as the court may direct, either adjudging the debtor a bankrupt or dismissing the proceeding, whichever in the opinion of the court may be in the interest of the creditors. The present proceedings come within the statute. The debtor's proposal was not accepted by the secured creditor and her arrangement made no provision for the novation of his claim except by set-off. The Referee, as we have heretofore pointed out, correctly rejected the set-off and from this it follows that the debtor's arrangement would fail unless provision was made for the creditor holding the execution.
The jurisdiction to adjudicate or dismiss is vested in the court but by the express terms of the statute, the court includes the Referee as well as the Judge. Bankruptcy Act, sec. 1(9), 11 U.S.C.A. § 1(9). The statute empowers the court either to adjudicate or dismiss. The alternative to be adopted must be in the interest of the creditors. The interest of the debtor is ignored.
If the financial affairs of the debtor are such that the administration of his estate in bankruptcy will prevent attachments, preferences, dissipation of assets or other acts injurious to the interests of creditors, adjudication should be decreed. However, if the interest of creditors will be in no way served by adjudication, the proceedings should be dismissed. Section 457 of the Act, 11 U.S.C.A. § 857, provides that where not inconsistent with the Arrangement Chapter, the rights, duties and liabilities of creditors with respect to the property of the debtor shall be the same as if a voluntary petition for adjudication in bankruptcy had been filed and a decree of adjudication had been entered at the time the petition under either Chapter XI or XII was filed.
The execution creditor had a prior lien on the real estate but both the title and possession of the property were in the debtor at the time the present proceedings were filed and the title to the property passed to the trustee by operation of law as of the date the proceedings were instituted.
The Referee made no finding as to the value of the real estate. Whether the debtor has an equity in the property cannot be determined on this record. It may be that the real estate, if administered in bankruptcy, may sell for more than the lien indebtedness, in which event the debtor's unsecured creditors, after payment of the costs of administration, might realize a distribution on their claims. If it should develop that the property has no value for unsecured creditors or that it would be unprofitable to administer it in bankruptcy, an order of abandonment would be proper, but we in no way pass on this question. In our opinion, the evidence supports the Referee's order of adjudication.
The debtor also insists that the order of the Referee appointing a trustee was erroneous. We find no error in this respect. Chapter XII, sec. 432, 11 U.S.C.A. § 832, provides that the court may, upon the application of any person in interest, appoint a trustee for the property of the debtor. The bankruptcy court has a broad discretion to appoint a trustee at any time in the course of the proceedings. There was no abuse of discretion here.
The order of the Referee of August 20, 1943, approving the proof of claim of Herbert H. Potts as a judgment creditor is set aside and the proof of claim stricken from the record.
The order of the district court affirming the Referee is in all other respects affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551363/ | 142 F.2d 237 (1944)
ROYAL INDEMNITY CO.
v.
PUERTO RICO CEMENT CORPORATION.
No. 3946.
Circuit Court of Appeals, First Circuit.
April 5, 1944.
Asa S. Allen and Ralph H. Willard, and Willard, Allen & Mulkern, all of Boston, Mass., for appellant.
L. E. Dubon, Dubon & Ochoteco, Otero Suro & Otero Suro, and Mariano H. Ramirez Bages, all of San Juan, P. R., for appellee.
David L. Kreeger, Sp. Asst. to Atty. Gen. (Francis M. Shea, Asst. Atty. Gen., Philip F. Herrick, U. S. Atty., of San Juan, P. R., and Mrs. Dick Cutter Smiley *238 and Ward E. Boote, Chief Counsel, United States Employees' Compensation Commission, both of Washington, D. C., on the brief), for the United States as amicus curiae.
Before MAHONEY and WOODBURY, Circuit Judges, and PETERS, District Judge.
PETERS, District Judge.
This is an appeal from the judgment of the United States District Court in Puerto Rico dismissing the complaint on the ground that it sets forth no right to relief.
The complaint alleges that the plaintiff, appellant, was the insurance carrier for a contractor employer doing construction work for the United States in February, 1942, on land occupied and used by the Government for military purposes in Puerto Rico; that an employee, in the course of his employment, was injured through the negligence of the defendant, appellee, owner of an adjoining stone quarry, for which injuries the employee was awarded compensation under the Longshoremen's and Harbor Workers' Compensation Act, approved March 4, 1927, 44 Stat. 1424, 33 U.S.C.A. §§ 901-950, which compensation was paid by the plaintiff insurance carrier who brought the action to recover for the alleged negligence of the defendant, having been subrogated to the rights of the injured workman under the provisions of the Act.
The court held that the plaintiff had shown no cause of action because of the wording of Section 3(a) of the Longshoremen's Act, which provides that:
"Compensation shall be payable under this Act in respect of disability or death of an employee, but only if the disability or death results from an injury occurring upon the navigable waters of the United States (including any dry dock) and if recovery for the disability or death through workmen's compensation proceedings may not validly be provided by State law."
The court considered the effect of the Defense Bases Act of August 16, 1941, 55 Stat. 622, c. 357, 42 U.S.C.A. §§ 1651-1654, which provides, in § 1:
"That except as herein modified, the provisions of the Act entitled `Longshoremen's and Harbor Workers' Compensation Act,' approved March 4, 1927, * * * as amended, and as the same may be amended hereafter, shall apply in respect to the injury or death of any employee engaged in any employment at any military, air, or naval base acquired after January 1, 1940, by the United States from any foreign government or any lands occupied or used by the United States for military or naval purposes in any Territory or possession outside the continental United States * * * irrespective of the place where the injury or death occurs."
But the court was of the opinion that, in spite of the wording of the Defense Bases Act, the "state law" clause in § 3 of the Longshoremen's Act prevented the operation of the latter act in Puerto Rico where there was a local compensation law.
In thus construing the statutes we think the District Court was in error.
In the Longshoremen's Act, Congress set up a complete system of workmen's compensation with appropriate machinery for its operation and made it effective in a federal field which the states could not reach, and which the Supreme Court had held that Congress could not permit them to reach. Knickerbocker Ice Co. v. Stewart, 253 U.S. 149, 40 S. Ct. 438, 64 L. Ed. 834, 11 A.L.R. 1145.
In describing the field in which the law should be operative, which was the purpose of the paragraph the language of § 3(a), called the "Coverage" section, had to harmonize with three important decisions of the Supreme Court which preceded passage of the Longshoremen's Act; viz, Southern Pac. Co. v. Jensen, 244 U.S. 205, 37 S. Ct. 524, 61 L. Ed. 1086, L.R.A. 1918C, 451, Ann.Cas.1917E, 900; Knickerbocker Ice Co. v. Stewart, supra; and State of Washington v. W. C. Dawson & Co., 264 U.S. 219, 44 S. Ct. 302, 68 L. Ed. 646.
The clause permitting recovery only where compensation "may not validly be provided by state law" is not an independent condition, but a limitation upon the previous clause referring to navigable waters, necessary in view of the above decisions, and because not all injuries upon navigable waters are exclusively within federal jurisdiction. Grant, Smith-Porter Ship Co. v. Rohde, 257 U.S. 469, 42 S. Ct. 157, 66 L. Ed. 321, 25 A.L.R. 1008; Miller's Indemnity Underwriters v. Boudreaux Braud, 270 U.S. 59, 46 S. Ct. 194, 70 L. Ed. 470; Alaska Packers' Ass'n v. *239 Industrial Accident Commission, 276 U.S. 467, 48 S. Ct. 346, 72 L. Ed. 656.
Both clauses must be read together and, taken together, they describe and limit the maritime field in which the Act was first made operative, automatically adjusting what the Supreme Court has referred to as the somewhat "shadowy limits" of that field to any situation.
In speaking of the Longshoremen's Act and the Jensen, Stewart and Dawson cases above referred to, the Supreme Court, in Parker v. Motor Boat Sales Co., 314 U.S. 244, 249, 62 S. Ct. 221, 225, 86 L. Ed. 1184, recently said:
"There can be no doubt that the purpose of the Act was to provide for federal compensation in the area which the specific decisions referred to placed beyond the reach of the states. The proviso permitting recovery only where compensation `may not validly be provided by State law' cannot be read in a manner that would defeat this purpose. * * *
"The main impetus for the Longshoremen's and Harbor Workers' Compensation Act was the need to correct a gap made plain by the decisions of this Court. We believe that there is only one interpretation of the proviso in Section 3(a) which would accord with the aim of Congress; the field in which a state may not validly provide for compensation must be taken, for the purposes of the Act, as the same field which the Jensen line of decision excluded from state compensation laws."
The reports of the Senate and House Committees show that, by the language of the section, including the clause referring to state law, it was intended to provide federal compensation in the maritime field up to the line where local compensation would not be excluded by the existence of federal admiralty jurisdiction. Sen.Rep. No. 973, 69th Cong. 1st Session; House Rep. No. 1767, 69th Cong. 2nd Session.
It follows that when Congress, in the Defense Bases Act, by appropriate and unequivocal language, enlarged the scope of the Longshoremen's Act by making its provisions applicable to land outside the United States occupied and used by the Government for military purposes, the "Coverage" language in § 3(a) was inapplicable and became inoperative.
Moreover, when the Longshoremen's Act is extended to cover injuries on land within a territory or possession of the United States, no line has to be drawn between federal and local jurisdiction. The federal power is paramount; Congress can authorize or refuse to authorize local authority to compensate for local injuries and the clause or proviso referring to local compensation that may not be validly provided for by state (local) law has no applicable meaning.
Any other construction would contravene the purpose of Congress in the passage of the Defense Bases law and defeat its object which was to provide a system of workmen's compensation both uniform and adequate in all the far-flung places occupied and to be occupied by the United States for military purposes. The history of the Defense Bases Act clearly shows the intention of Congress to extend the provisions of the Longshoremen's Act to defense bases without regard to local compensation laws. It was stated in House Report No. 1070, 77th Congress, First Session, that the purpose of the bill was to provide substantially the same relief to outlying territories, including and mentioning Puerto Rico, as the existing law affords employees in the United States, and to assist contractors employing labor at such bases to obtain compensation insurance at reasonable rates.
The District Courts in Hawaii and Alaska have held that the Defense Bases Act made the Longshoremen's Act available, irrespective of the existence of an otherwise applicable local compensation law. Aetna Casualty and Surety Company v. Schmitz, Civil Action No. 478, in the Territory of Hawaii. Handy v. C. F. Lytle Co.,[1] No. 4691, U. S. District Court for Alaska.
The judgment of the District Court in reversed, and the case remanded to that court for further proceedings not inconsistent with this opinion; the appellant recovers costs of appeal.
NOTES
[1] No opinion for publication. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1551291/ | 908 A.2d 960 (2006)
Daniel McElheney, Petitioner
v.
Workers' Compensation Appeal Board (Kvaerner Philadelphia Shipyard), Respondent
No. 806 C.D. 2006.
Commonwealth Court of Pennsylvania.
Submitted: August 18, 2006.
Filed: September 27, 2006.
BEFORE: PELLEGRINI, Judge; FRIEDMAN, Judge; McCLOSKEY, Senior Judge.
OPINION BY JUDGE PELLEGRINI.
The single question presented by this appeal is whether the Pennsylvania Workers' Compensation Act (Act)[1] applies to an injury incurred by a claimant working on a ship in dry dock even though that injury also falls within the coverage of the Longshore and Harbor Workers' Compensation Act (LHWCA), 33 U.S.C. §§901-950 (2000).
Daniel McElheney (Claimant) worked at the Philadelphia Navy Yard employed by Kvaerner Philadelphia Ship Yard (Employer) as a pipe fitter welder. While working on a ship in dry dock, Claimant tripped and fell, injuring his right knee, right shoulder and right foot. Claimant was initially paid benefits under the LHWCA from February 1, 2003, until June 11, 2004,[2] when those benefits ended.[3]
Because his work-related injuries which were previously compensated under the LHWCA purportedly still prevented him from returning to work, Claimant filed a Claim Petition seeking Pennsylvania workers' compensation. Employer denied all of the allegations and also contested whether Pennsylvania workers' compensation benefits were even available because his injury occurred while repairing a ship in dry dock making the LHWCA his sole source of benefits. Because it was a threshold issue, the parties agreed that the Workers' Compensation Judge (WCJ) would decide whether Claimant was entitled to compensation under the Pennsylvania Workers' Compensation Act. In Pennsylvania, whether a maritime worker, who is not a seaman, has access to the state workers' compensation system is determined by whether a claimant's job duties are sufficiently land-based or those job duties are not primarily maritime in nature. (See discussion, infra).
Before the WCJ, Claimant contended that his job was land-based because the ship was not on navigable waters as it was not afloat, but in dry dock when the injury occurred, entitling him to access to the Pennsylvania workers' compensation system. Employer argued that Claimant's work was not land-based because working on a ship in dry dock was a traditional maritime activity occurring on "navigable waters," making the LHWCA the exclusive remedy for his work-related injuries. Agreeing with Employer's reasoning and relying on our Supreme Court's decision in Wellsville Terminals Company v. Workmen's Compensation Appeal Board (Zacharias), 534 Pa. 333, 632 A.2d 1305 (1993), the WCJ found that Claimant's exclusive remedy was under the LHWCA because he was working on a ship in dry dock which was a traditional maritime activity precluding access to Pennsylvania workers' compensation benefits. Claimant appealed to the Board, which affirmed, and this appeal followed.[4]
Relying on the United States Supreme Court's decision Sun Ship, Inc. v. Pennsylvania, 447 U.S. 715 (1980), Claimant argues that he is entitled to benefits under both the Act and the LHWCA where his injuries were land-based. While he was working on a ship, he contends that it was land-based because it was sitting in dry dock and not afloat or over water. Employer contends that under Wellsville, our Supreme Court determined that Claimant's work was not land-based and his work was a traditional maritime activity making the LHWCA his sole remedy. To better understand those cases, a brief history of the LHWCA and when it preempts state workers' compensation laws is necessary.
In 1917, at a time where there was no federal legislation providing for compensation of injured workers, the United States Supreme in Southern Pacific Co. v. Jensen, 244 U.S. 205 (1917), created a line at the water's edge beyond which states were barred by the admiralty clause of the United States Constitution from applying their workers' compensation schemes to maritime workers. It reasoned that in the national interest of promoting uniformity in the national maritime law, all injuries to maritime workers occurring seaward of the water's edge were required to be addressed only under federal law. Although Jensen has never been explicitly overruled, its holding over the years has been narrowed considerably.
One of those cases that narrowed Jensen and allowed injured maritime employees to be eligible for state workers' compensation benefits was Western Fuel Co. v. Garcia, 257 U.S. 233 (1921). In that case, the United States Supreme Court held that it was constitutionally permissible to apply state workers' compensation laws to employees even where the employment in issue was "maritime" if the employment was "local" in character. In such cases, it was reasoned that application of state law would not imperil the uniformity of the national maritime law. Western Fuel Co., 257 U.S. at 242; see also Grant Smith-Porter Ship Co. v. Rohde, 257 U.S. 469 (1922) (holding that a proceeding in admiralty would not lie to recover damages for an injury on Oregon's navigable waters because the employee was restricted to a remedy under Oregon's workers' compensation law). If employment could not be described as "maritime but local," however, no compensation was available to injured maritime workers under the state compensation systems.
Congress twice attempted to deal with this decision by legislation expressly allowing state compensation programs to apply to maritime activities, but the Court struck down both statutes as unconstitutional interferences with the harmony and uniformity of maritime law. See Knickerbocker Ice Co. v. Stewart, 253 U.S. 149 (1920); see also Washington v. W.C. Dawson & Co., 264 U.S. 219 (1924). Congress then enacted the LHWCA in 1927,[5] extending some level of protection to maritime workers by providing compensation for injuries occurring upon the navigable waters of the United States. The LHWCA provided compensation coverage to maritime workers injured on navigable waters "if recovery . . . through workmen's compensation proceedings may not validly be provided by State law." 33 U.S.C. §903(a) (1927). Passage of the LHWCA did not serve, however, to erase confusion whether the employment was "maritime but local" that determined whether the federal law applied or claimants had to seek access to the state workers' compensation system.
In 1942, in Davis v. Department of Labor and Industries of Washington, 317 U.S. 249 (1942), the United States Supreme Court examined whether a state workers' compensation program applied to workers who were injured in navigable waters, but who were performing duties that were not traditionally maritime. In that case, a structural steelworker drowned in a river while dismantling an abandoned drawbridge. The deceased's duty was to examine the steel after it was lowered to a barge, and, when necessary, to cut the pieces to proper lengths. The deceased had helped to cut some steel from the bridge, and at the time of the accident, was working on the barge that was being loaded with the steel. If his employment were deemed "maritime but local" his remedy would have been through the state workers' compensation program and remedies would not have been available under the LHWCA. His dependents sought compensation under the state workers' compensation act and the Supreme Court in Davis held that it would apply. As explained in Calbeck v. Travelers Insurance Co., 370 U.S. 114, 128 (1962), Davis, "was not predicated on the ground that the employment was `maritime but local,' and so outside the coverage of the Longshoremen's Act. Rather the Court viewed the case as in a `twilight zone' where the applicability of state law was `extremely difficult' to determine, and resolved the doubt, of course, in favor of the constitutionality of the application of state law. At the same time, the Court indicated that compensation might also have been sought under the Longshoremen's Act and that an award under that Act in the very same circumstances would have been supportable . . ." After Davis there was a "twilight zone" in which there was concurrent jurisdiction between the state workers' compensation system and the LHWCA. With its decision in Calbeck however, the Supreme Court removed that "twilight zone" when it held that the LHWCA was applicable to all injuries on navigable waters, regardless of whether they were "maritime but local" and irrespective of whether state compensation schemes could also constitutionally apply. Id. at 126-127. Calbeck established that the LHWCA would apply to all injuries on navigable waters and that a state workers' compensation system would also apply if the job was "maritime but local." Id. at 126. It was clear, though, that the LHWCA did not cover injuries when they happened to occur on land, even to workers in such traditional maritime occupations such as longshoremen.
Before 1972 then, a worker who sustained a maritime-related injury would be entitled to seek compensation from the following sources: If the injury occurred on navigable waters and the employment was not "local" in nature, Jensen controlled and the LHWCA was the exclusive source of compensation. "Maritime but local" injuries "upon the navigable waters of the United States," 33 U.S.C. §903(a) (1970), could be compensated under both the LHWCA and state workers' compensation. Davis. Injuries suffered beyond navigable waters albeit within the range of federal admiralty jurisdictionwere remediable only under state law. Nacirema Operating Co. v. Johnson, 396 U.S. 212, 220-221 (1969).
In 1972, Congress amended the LHWCA to extend the list of activities eligible for compensation under the LHWCA to include those activities that were land-based, but at the "waters edge."[6]Sun Shipbuilding and Dry Dock Co. v. Workmen's Compensation Appeal Board, 398 A.2d 1111, 1114 (Pa. Cmwlth. 1979). Addressing the 1972 Amendments, the United States Supreme Court, in Sun Ship, Inc. v. Pennsylvania, 447 U.S. 715, 720 (1980), the case relied on by Claimant, held that only federal jurisdiction was extended by the 1972 amendments to the LHWCA to land-based maritime injuries that are also covered under state workers' compensation systems. Because the 1972 amendments supplemented, rather than supplanted, state workers' compensation law, concurrent federal and state jurisdiction exists for land-based injuries sustained by shipyard workers. The Supreme Court reasoned that this was consistent with the thrust of the 1972 amendments to "upgrade the benefits" for maritime workers and that concurrent jurisdiction for state and federal compensation laws was in no way inconsistent with this policy. Id. at 723-724. Because the 1972 amendments supplemented not supplanted state workers' compensation schemes, to obtain state worker's compensation benefits, it was not necessary for land-based maritime employees to establish that the work was "maritime but local," but only that they were injured.
In summary, after the 1972 amendments and Sun Ship, a maritime worker could seek compensation for injuries as follows:
Injuries on navigable waters to maritime employees whose employment was not "local" in nature are covered exclusively under the LHWCA.
"Maritime but local" injuries on navigable waters, could be compensated either under the LHWCA or through the state workers' compensation system.[7]
Injuries to maritime workers occurring on land could be compensated either under the LHWCA or through the state workers' compensation system.
With regard to whether an injury on navigable waters was "maritime but local," thereby giving workers access to the state workers' compensation system, Pennsylvania and some other states[8] focused on the nature of the work in making that determination.[9] If the work was traditional maritime work and was not land-based, state workers' compensation benefits were not available. In Wellsville, supra, a welder was injured on navigable waters in the course of his employment with a company that repaired barges floating on a river. His work was held not to be "maritime but local" because it was traditional maritime work. The Pennsylvania Supreme Court recognized that Jensen had been narrowed, but held that "maritime employees who are performing traditionally maritime functions and are injured over navigable waters, under Jensen, are constitutionally barred from recovering under any state workmen's compensation law." Wellsville, 534 Pa. at 337, 632 A.2d at 1307. In our Supreme Court's view, Sun Ship's recognition of concurrent jurisdiction over land-based injuries within the LHWCA "applied only to that part of the LHWCA which had been extended onto land by the `land-based' amendments." Id. at 337, 632 A.2d at 1307-08. Our Supreme Court's adherence to the strict locality principle is evident from the following passage: "The Jensen doctrine, which protects a uniform maritime law and does not deal with land-based activities, was completely unaffected by the Sun Ship decision. Under Jensen, an injury over navigable waters still falls within the exclusive jurisdiction of the LHWCA." Id. at 338, 632 A.2d at 1308. Because the barge upon which the claimant was injured was floating in the river, the claimant's repair activities were on navigable waters and injuries were incurred performing a traditional maritime activity, his work was held not to be "maritime but local"; thus, Pennsylvania workers' compensation benefits were not available because the claimant had engaged in traditional maritime work thereby making the LHWCA his sole source of compensation. If a claimant sustains an injury while engaged in a traditional maritime activity on navigable waters, the LHWCA has exclusive jurisdiction over that claim. If Wellsville applied, Claimant in this case would not meet the "maritime but local" test and would be ineligible for Pennsylvania workers' compensation benefits.
Claimant contends that since he was injured while working on a ship sitting in a dry dock that was not afloat or over water, his injury was land-based, thereby making him eligible for Pennsylvania workers' compensation benefits. The question then becomes whether the nature of the dry dock makes any difference.
There appear to be three different types of dry docks recognized by Section 3(a) of the LHWCA: "(1) A floating dry dock, as its name makes clear, floats on the water, the vessel resting on the bottom of the dry dock after the water has been removed. (2) A graven dry dock is dug into the land. The vessel floats in but rests on land once the water has been pumped out. (3) Finally there is the marine railway, on which the vessel is drawn out of the water, instead of the water being drawn away from the vessel. A ship is no more and no less on land when it rests in a graven dry dock than when it rests on a marine railway." Avondale Marine Ways, Inc. v. Henderson, 346 U.S. 366, 367, (1953) (Burton, J., concurring). Wellsville holds that a worker employed in a maritime capacity on a floating dry dock is precluded under Jensen from receiving state workers' compensation. With regard to a marine railway dry dock, the United States Supreme Court in Calbeck, in discussing Avondale Marine Ways, commented that a worker injured on a marine railway dry dock was eligible for state workers' compensation because the ship was located on land stating:
The issue in Avondale Marine Ways v. Henderson, 346 U.S. 366, 74 S. Ct. 100, 98 L. Ed. 77, was whether compensation was available under the Longshoremen's Act for the death of an employee killed while engaged in the repair of a vessel which was then physically located on land, but on a marine railway. Since a marine railway was considered to be a `dry dock,' the injury satisfied [section] 3(a)'s requirement that it occur 'upon . . . navigable waters,' defined in [section] 3 as 'including any dry dock.' At the same time, since the injury did, in a physical sense, occur on land, there is little doubt that a state compensation act could validly have been applied to it. See State Industrial Commission of State of New York v. Nordenholt Corp., 259 U.S. 263, 42 S. Ct. 473, 66 L. Ed. 933.
Calbeck, 370 U.S. at 129; see also Lisenby v. Texas Employers' Insurance Association, 487 S.W.2d 366 (Tex. Civ. App. 1972).
While no case can be found that addresses whether a claimant injured while repairing a ship in a graven dry dock is precluded from seeking state workers' compensation benefits, Calbeck teaches us that what matters in making a determination is that if "the injury did, in a physical sense, occur on land," then Jensen would not preclude jurisdiction of the state workers' compensation system. Because we agree with Justice Burton's comments in Avondale Marine Ways that: "[a] ship is no more and no less on land when it rests in a graven dry dock than when it rests on a marine railway," an injury that occurs in a graven dry dock while the ship is not afloat is "in a physical sense" on land. Because Claimant was injured in a graven dry dock while the ship was not afloat, Claimant has access to both LHWCA and Pennsylvania workers' compensation benefits.
Accordingly, we reverse the decision of the WCJ and the Board finding that the Act does not apply and remand for a determination as to whether Claimant is entitled to benefits.
ORDER
AND NOW, this 27th day of September , 2006, the order of the Workers' Compensation Appeal Board, dated March 30, 2006, at No. A05-1193, is reversed and the matter is remanded for a determination as to whether Petitioner is entitled to benefits under the provisions of the Pennsylvania Workers' Compensation Act, Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§1-1041.4; 2501-2626.
Jurisdiction relinquished.
NOTES
[1] Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§1-1041.4; 2501-2626.
[2] The parties submitted the following documentation as joint exhibits which were relevant to the Claimant's receipt of benefits under the LHWCA: U.S. Department of Labor Payment of Compensation Without Award Form (2/26/03);Notice of Controversion of Right to Compensation Form (3/17/03); Notice of Final Payment or Suspension of Compensation Payment Form (1/28/04); Notice of Conversion of Right to Compensation Form (1/28/04); Notice of Final Payment or Suspension of Compensation Payments (6/11/04); November 29, 2004 letter from Ms. Earline Wiseman (Wiseman), Claims Examiner, U.S. Department of Labor addressed to Claimant; and December 7, 2004 reply letter from Claimant's counsel addressed to the U.S. Department of Labor.
[3] The November 29, 2004 letter from U.S. Department of Labor Claims Examiner Wiseman stated that Claimant's LHWCA benefits were stopped by Employer's insurance carrier because: "You sustained a permanent partial disability equivalent to 20% of the right foot, have reached maximum medical improvement and have the ability to return to work." In response, Claimant's counsel sent the December 7, 2004 letter disagreeing with Wiseman's partial disability of 20% of the right foot. The letter also noted that Claimant had suffered knee and shoulder injuries, which had prevented him from returning to his pre-injury employment and that was the reason why he filed a Pennsylvania workers' compensation claim.
[4] Our scope of review of the Board's order is limited to determining whether an error of law was committed, whether necessary findings of fact are supported by substantial evidence, or whether constitutional rights were violated. Nevin Trucking v. Workmen's Compensation Appeal Board (Murdock), 667 A.2d 262 (Pa. Cmwlth. 1995).
[5] The 1927 version of Section 3(a) of the LHWCA reads as follows:
(a) Compensation shall be payable under this chapter in respect of disability or death of an employee, but only if the disability or death results from an injury occurring upon the navigable waters of the United States (including any dry dock) and if recovery for the disability or death through workmen's compensation proceedings may not validly be provided by State law. No compensation shall be payable in respect of the disability or death of
(1) A master or member of a crew of any vessel, nor any person engaged by the master to load or unload or repair any small vessel under eighteen tons net; or
(2) An officer or employee of the United States or any agency thereof or of any State or foreign government, or of any political subdivision thereof.
[6] The 1972 version of Section 3(a) of the LHWCA stated as follows: Compensation shall be payable under this chapter in respect of disability or death . . . if the disability or death results from an injury occurring upon the navigable waters of the United States (including any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other adjoining area customarily used by an employer in loading, unloading, repairing, dismantling, or building a vessel).
[7] There is no possibility of double recovery because benefits under either scheme were credited against each other.
[8] See Wells v. Industrial Commission, 660 N.E.2d 229 (Ill. App. Ct. 1995); see also Indiana & Michigan Electric Co. v. Workers' Compensation Commissioner, 403 S.E.2d 416 (W. Va. 1991).
[9] Other states in determining if the work is "maritime but local" focus on the relationship and contacts that the employer and employee have to the state in which the injury occurs. In Norfolk Shipbuilding & Drydock Corp. v. Duke, 420 S.E.2d 528 (Va. Ct. App. 1992), an employee was injured on navigable waters in the course of his employment with a shipbuilder. The employment was held to be "maritime but local" because both the injured employee and the corporate employer were Virginia citizens, the work was performed in Virginia waters and resulted from a local employment contract, and the employer-employee relationship was a proper subject of state interest and control. See also Beverly v. Action Marine Services, Inc., 433 So. 2d 139 (La. 1983); Allsouth Stevedoring Co. v. Wilson, 469 S.E.2d 348 (Ga. Ct. App. 1996). | 01-03-2023 | 10-30-2013 |
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