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https://www.courtlistener.com/api/rest/v3/opinions/1542304/ | 122 F.2d 469 (1941)
THE AAKRE.
WATERMAN et al.
v.
THE AAKRE et al.
No. 344.
Circuit Court of Appeals, Second Circuit.
July 28, 1941.
Writ of Certiorari Denied December 8, 1941.
*470 D. Roger Englar, of New York City (Bigham, Englar, Jones & Houston, W. J. Nunnally, Jr., and F. Herbert Prem, all of New York City, on the brief), for libellants-claimants-appellants.
John W. Griffin, of New York City (Haight, Griffin, Deming & Gardner, Wharton Poor, and James McKown, Jr., all of New York City, on the brief), for Rederi A/S Henneseid.
John L. Galey, of New York City (Burlingham, Veeder, Clark & Hupper and Burton H. White, all of New York City, on the brief), for Lamport & Holt Line, Ltd.
*471 George C. Sprague, of New York City (Crawford & Sprague and H. C. Archibald, all of New York City, on the brief), for Continental Grain Co.
Before SWAN, CLARK, and FRANK, Circuit Judges.
Writ of Certiorari Denied December 8, 1941. See ___ U.S. ___, 62 S.Ct. 360, 86 L.Ed. ___.
CLARK, Circuit Judge.
This proceeding arose out of the stranding of the Aakre, a Norwegian motor vessel of 4,138 tons gross and 2,336 tons net, on Cheney Island near Grand Manan Island in the Bay of Fundy on the morning of October 29, 1937. Much of the cargo of potatoes then on board was jettisoned, and most of the remainder was lost through delay and rehandling.
The cargo was carried under bills incorporating the Canadian Water Carriage of Goods Act, 1936, which in all material respects is identical with our own Carriage of Goods by Sea Act, 46 U.S.C.A. §§ 1300-1315. By Art. IV, sub. 1, of the Schedule of Rules of the Canadian Act, "Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manned, equipped and supplied"; and by sub. 2, "Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (a) act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship: * * * (c) perils, danger, and accidents of the sea or other navigable waters."
The trial court found that the stranding was not caused by unseaworthiness, but by an error in navigation. It consequently rendered a decree exonerating ship and carriers from liability, and dismissing the cargo owners' libel. From this decree the latter appeals.
The Aakre sailed from St. John at 9:00 P. M., October 28, 1937, intending to traverse the Bay and leave it by way of the gap between Old Proprietor Shoal and Northwest Ledge. The distance from St. John to the gap is about 50 miles, and the width of the gap about 15 miles. The vessel first made good from St. John a course about 211° true, which, if continued, would have carried her just east of Old Proprietor Shoal and safely out of the Bay. When she had proceeded on this course about 26 miles through the water an estimated 30 miles over the ground a leak developed from a latent defect in a "telescope pipe," and the engines were stopped at 11:45 P. M. to permit repairs. The court found, by tracing her course back from the point of stranding, that her drift between 11:45 P. M. and 2:50 A. M., when the engines were again started, was about four miles almost due west, placing her where a new course more southerly than the old would be necessary to pass to the east of Old Proprietor Shoal. Instead, she steered further to the west. From 2:50 A. M. until 4:00 A. M., she ran 221° true, toward the mass of shoals and islands behind Old Proprietor. At 4:00 A. M., she shifted her course still further west to 252° true; and at 4:20 A. M., she ran aground on Cheney Island, about 44 miles from St. John.
The strange courses steered from 2:50 until 4:00 A. M., and from 4:00 until 4:20 A. M., are explained by the captain's complete misunderstanding of his position. His dead reckoning until the engines were stopped at 11:45 P. M. was at least roughly accurate, although it probably did not allow for the effects of favorable currents on his speed over the ground. At about 1:45 A. M., however, the third officer saw to the east what he believed to be Prim Point Light, which was actually invisible from the position of the ship at the time, and from anywhere except well to the east of her dead-reckoned midnight position. Surprised at this, the captain called on the second officer for a radio bearing, which the latter took from St. John at 2:25 A. M., found to be 216.5° true, but erroneously transcribed on the chart as about 195° true from St. John. By this error the apparent position of the vessel was shown to be far east of its actual position, and the third officer's mistaken report of having sighted Prim Point Light was confirmed. Hence the captain believed that he was east, instead of west, of his original course, and set the new 2:50 A. M. course accordingly.
A second radio bearing from St. John taken at 3:41 A. M. showed the vessel at 218.5° true; but another error was made, and this bearing was transcribed onto the chart as about 197° true from St. John. Both errors were of 21°, the amount of *472 local variation,[1] and may have been made by marking the chart with reference to the inner or magnetic, rather than the outer or true, rose. When the second St. John bearing was crossed immediately by a correct bearing from Yarmouth, Nova Scotia, the captain was led to believe that he was still to the east of his course and then dangerously near Northwest Ledge. Meaning to avoid this, he veered more sharply westward at 4:00 A. M. and directly onto Cheney Island.
It is entirely futile for appellants to question that such apparently simple mistakes of navigation could have been made. The three stated radio bearings were certainly taken, and the ship's course was certainly laid as described. No other explanation of that course, except the complete uselessness of the compasses, can be imagined. Appellants do not suggest this, or any alternative explanation. The compasses were shown to be accurate and reliable, the court found that they were, and appellants have not even made out a serious case to the contrary.
The two charges of unseaworthiness which appellants make against the Aakre are that it used an inaccurate chart of the Bay, and that it lacked proper compass records.
The gist of the first of these charges is that the Aakre was using an old chart which showed the Fairway Buoy outside St. John Harbor to be 2½ miles south by east of its position at that time, and that by taking the buoy as a point of departure she steered a course somewhat west of what she intended.
The vessel had aboard, however, another chart and a catalogue of lights and buoys by which the error might have been corrected, and the captain was personally aware of the error. Under such circumstances, a failure to make the necessary routine correction was possibly bad navigation, but was certainly not a deficiency in the vessel's equipment. United States Steel Products Co. v. American & Foreign Ins. Co., 2 Cir., 82 F.2d 752; cf. The W. W. Bruce, 2 Cir., 94 F.2d 834, certiorari denied, Pacific-Atlantic Steamship Co. v. Weyerhaeuser Timber Co., 304 U.S. 567, 58 S.Ct. 950, 82 L.Ed. 1533. Although the first mate originally was misled by the erroneous chart, the captain noticed the error and corrected it before midnight. Moreover, navigation after the period of drifting was from a new point of departure, and completely detached from navigation before that period. Even if the course reckoned from the erroneous chart had gone uncorrected, it could never have thrown the vessel more than a negligible distance to the west of its reckoned course, for the east-west difference in the actual and indicated position of the buoy was very slight. Consequently, unseaworthiness with respect to the chart, if it had existed, could not have contributed to the accident.
The second charge of unseaworthiness was directed at the alleged deficiency in the compass book of entries on compass deviations.[2] The vessel carried deviation records in three different forms: (1) The compass card, kept on the bridge, showing the deviations at each compass interval of ten degrees, as found by a government adjuster at Sandefjord, Norway, on March 9, 1936; (2) the compass book, also kept on the bridge, showing 103 deviation entries made since the Sandefjord adjustment, and also catalogued under compass intervals; (3) the logbooks, showing many more entries, but not catalogued except in the chronological order in which they were taken. Appellants argue that logbook entries are practically useless because not easily accessible, and that good practice requires daily observations and regular entries in the compass book, at least of all observations showing as much as one degree's difference from the last recorded observation in the same sector. With this, all the expert witnesses and the court itself seemed to agree; and it is evident that the compass book lacked a record of some observations which it would have had if the practice had been strictly observed.
The court found, however, that adequate observations had been made, and, from the logbook entries, that the deviation in the south-west quadrant had never been greater than three degrees. Of this maximum deviation *473 the navigator was apprised by an entry in the compass book September 30, 1937, showing a plus three-degree deviation on a course S 50° W; and if the navigator failed to make proper allowance for it the night of the accident, his error could not be attributed to lack of information. Since the compass book carried the particular entry necessary for this occasion, even a fairly general deficiency in the records could not have been material to the stranding. Furthermore, it is a sufficient answer to this charge, as to the former, that no possible error in the ship's course before the period of drifting could have affected her navigation afterwards, and that three degrees' difference in her course after 2:45 A. M. would not have saved her from the effects of the captain's misconception of his position.
Since we recognize that the compass book did not contain all the entries which good seamanship required, nothing is added to the argument by the proof of a Norwegian statute enjoining regular entries in the compass book. The materiality of its violation is disproved in exactly the same fashion, and as we have just stated.
Appellants' chief argument, however, is not that a deficiency of the compass records (necessarily entailing a violation of Norwegian law) was directly responsible for the catastrophic navigation of the Aakre. Arguendo, at least, they assume that the careless transcription of the St. John radio bearings was directly to blame. But, they contend, the positions at which those bearings put the ship were so far removed from her actual and dead-reckoned position that they could have been accepted unquestioningly only by one who lacked faith in his dead reckoning, and therefore in his compass data.
This argument puts directly into issue the captain's state of mind his belief in the accuracy of the compass and the sufficiency of the compass data, as well as the fact of the accuracy of the one and the sufficiency of the other. The captain himself testified that the Aakre's compass was the best he had ever used, and that the compass data were "sufficient for safe navigation"; and the trial court accepted this testimony not only as true in fact, but also as a true statement of what the captain had always believed. This is a complete answer unless other facts are shown which make the captain's faith absolutely incredible.
The captain explained that he thought his apparent change in position at 2:25 A. M. was owing to currents, on which the vessel had been adrift almost three hours. Actually, his drift was a little south of west, while his supposed drift was a little east of south a difference in direction of about 90°. The Aakre had aboard information on the direction of currents in the Bay, but the captain did not examine it. He knew the Bay had a reputation for changeable and uncertain currents. His course from 4:00 to 4:20 A. M. conclusively demonstrates that he believed he had run since 2:50 A. M. almost 10 knots faster than the engine speed, although the current was actually not more than 2 knots, and at that time in the opposite direction. If he made any attempt at all to reconcile his supposed 2:50 and 4:00 A. M. positions, he must have thought the Bay currents entirely unpredictable in force and direction; or possibly he knew nothing about them.[3] This is perhaps very bad navigation, but is no reflection at all on the quality of the ship's equipment.
On the contrary, it has already been stated that the compass was shown to be highly accurate, and the compass book was shown to conform to ordinary requirements, at least in respect of the south-west quadrant. In other quadrants it was not radically deficient. Appellants recite at great length a list taken from the Aakre's logbook of discrepancies between dead-reckoned and observed positions on previous voyages as evidence of inaccurate navigation. Most such discrepancies are no greater than are reasonably to be explained by the incalculable effects of tide, currents, and wind. To some extent they might be attributable to poor steering or inaccurate observation. But the greatest *474 discrepancies shown are all largely along the line of the ship's course, not transverse to it, and to that extent not relevant to the performance or reading of the compass. Appellants' reference to two previous occasions on which the Aakre stranded can have little probative effect without more particular evidence of the causes. It affirmatively appears that on at least one of these occasions the Aakre was navigating in narrow Norwegian coastal waters, through strong currents, in a snow storm and a hurricane. Such circumstances as those would certainly support no inference of unseaworthiness.
Much argument has been devoted to the rule in The Pennsylvania, 19 Wall. 125, 86 U.S. 125, 22 L.Ed. 148, which declares it to be incumbent upon a vessel shown to have been guilty of violating a statutory rule of navigation to prove that the violation could not have contributed to the ensuing collision. Appellants contend that it is applicable to strandings as well as to collisions, The Denali, 9 Cir., 105 F.2d 413, on rehearing 9 Cir., 112 F.2d 952, certiorari denied, Alaska Steamship Co. v. Pacific Coast Coal Co., 311 U.S. 687, 61 S.Ct. 65, 85 L.Ed. ___, and, being a rule of evidence, to proceedings under foreign as well as under domestic law. See Richelieu & Ontario Nav. Co. v. Boston Marine Ins. Co., 136 U.S. 408, 422, 423, 10 S.Ct. 934, 34 L. Ed. 398. Finally, the burden cast upon the vessel is said to be something more than a burden of disproving a causal relationship.
The problems, in so far as they need affect this case, are easily settled. If The Pennsylvania rule prescribes anything more than a shift in the burden of proof with regard to the causal relation of default to injury if it is an absolute penalty for default it is much more than a rule of evidence or procedure. It then requires the establishment of facts not otherwise a part of the cause of action, and clearly affects the substantive rights of the parties. In that event, it is not applicable to a cause triable under foreign law. On the other hand, if it does no more than shift the burden of proof, the vessel has met that burden in this case by credible evidence on every point at issue.
Indeed, however The Pennsylvania rule was originally stated, the history of its application shows that it has done no more than shift the burden of proof with regard to causality. That was all that was necessary to the decision of The Pennsylvania case itself, to the Richelieu case, supra, and to The Martello, 153 U.S. 64, 74, 14 S.Ct. 723, 38 L.Ed. 637, and Lie v. San Francisco & P. S. S. Co., 243 U.S. 291, 298, 37 S.Ct. 270, 61 L.Ed. 726. It seems to have been disregarded altogether in White Oak Transportation Co. v. Boston, Cape Cod & New York Canal Co., 258 U.S. 341, 344, 42 S.Ct. 338, 66 L.Ed. 649, and was assumed to have done no more than shift the burden in Henry DuBois Sons Co. v. A/S Ivarans Rederi, 2 Cir., 116 F.2d 492, certiorari denied The Ariosa v. A/S Ivarans Rederi, 61 S.Ct. 942, 85 L.Ed. ___.[4] Still, if it were applied in the strongest sense conceivable, requiring the defaulting vessel to show that the inference of non sequitur was not only the most probable, but even the only possible, inference from the facts in evidence, appellants still could not succeed; for every point at issue in the case, including the captain's faith in his compass, was established by direct testimony.
The questions involved in this proceeding were questions of fact which the court below resolved in an opinion which demonstrates the care and consideration which he gave to the matter. D.C.S. D.N.Y., 31 F.Supp. 8-23. In view of this, criticisms made of it that he was confused as to the navigator of the ship, because he did not always distinguish between the master and the second mate, seem rather captious. His material findings are clear and definite. We have recently emphasized that admiralty findings should be accepted on appeal unless clearly erroneous. United States Gypsum Co. v. Conners Marine Co., 2 Cir., 119 F.2d 689; Johnson v. Andrus, 2 Cir., 119 F.2d 287; McAllister Bros. v. Pennsylvania R. Co., 2 Cir., 118 F.2d 45. Here they seem quite the most natural and rational under the circumstances; indeed, cargo's real complaint is with the policy of Canada and ourselves as to the merchant marine, which accords the water carrier *475 full protection against the negligent navigation of its own servants. Robinson on Admiralty, 1939, 495-503.
The owner of the vessel cross-assigns error in the limitation of its recovery of costs in the proceeding for exoneration to one docket fee, although there were twenty-six different claimants therein. Since each of the twenty-six claimants, if successful, might have charged a docket fee against this petitioner, we think it only fair that he be allowed to charge the same number against them. The Salvore, 1931 A.M.C. 1526; cf. The Horaisan Maru, 1935 A.M.C. 982.
The decree granting the ship and each of the carriers exoneration from liability and dismissing the libel is affirmed. The order as to costs is modified to allow the petitioner a docket fee from each of the claimants.
FRANK, Circuit Judge (dissenting).
My dissent is based largely upon a difference of understanding as to the meaning of the rule laid down in The Pennsylvania, 19 Wall. 125, 136, 22 L.Ed. 148: In that, and succeeding cases, the Supreme Court has held that the federal courts, when sitting in admiralty, must regard the violation of a statute designed to prevent accidents as a peculiarly serious transgression. In The Pennsylvania, the Court said: "But when, as in this case, a ship at the time of a collision is in actual violation of a statutory rule intended to prevent collisions, it is no more than a reasonable presumption that the fault, if not the sole cause, was at least a contributory cause of the disaster. In such a case the burden rests upon the ship of showing not merely that her fault might not have been one of the causes, or that it probably was not, but that it could not have been";[5] the Court also uses the locution "in no degree occasioned by that failure". In The Martello, 153 U.S. 64, 75, 14 S.Ct. 723, 727, 38 L.Ed. 637, citing The Pennsylvania, the phrasing of the rule is that the offending ship has the burden of proving that the statutory violation "could not by any possibility have contributed * * *."[6] The Pennsylvania rule is applicable to a stranding; see Richelieu & Ontario Navigation Co. v. Boston Insurance Co., 136 U.S. 408, 10 S.Ct. 934, 34 L.Ed. 398.
I think that the majority opinion and the District Court have not sufficiently observed that, once a violation of a statute has been shown, then, under The Pennsylvania rule, the usual doctrine of so-called "proximate cause"[7] becomes inapplicable. Speaking generally, under the "proximate cause" rule, a plaintiff, to recover, must show more than a factual causal relationship; he must show both (1) that the defendant's act or omission was factually (i. e., when regarded "scientifically") in the chain of causation leading to the plaintiff's damage; and also (on grounds of legal policy established by the courts) that (2) the plaintiff's damage was the reasonably forseeable ("probable") consequence of the defendant's act or omission.[8] It is for that reason that liability is usually excluded if there intervenes, between defendant's act or omission and the plaintiff's damage, some act or event not reasonably forseeable. In cases where the proximate cause rule applies, it is, then, not at all sufficient, in order to shift the burden of proof, that the plaintiff show that the defendant's act or omission could "by any possibility have contributed" to the plaintiff's damage. Thus in Chicago, B. & Q. R. Co. v. Gelvin, 8 Cir., 238 F. 14, 23, L.R.A.1917C, 983, a proximate cause case, the Court said: "To impose such a standard of care as requires, in the ordinary affairs of life, precaution on the part of individuals against all the possibilities which may occur, is establishing a degree of responsibility quite beyond any legal limitations which have been declared". But that is precisely the standard which is imposed, in admiralty, where it is proved that there has been a statutory violation followed by a subsequent stranding; the burden of proof is then on the ship of "disproving a causal relationship,"[9] i. e., *476 of showing that the violation "could not by any possibility have contributed" to the stranding; see The Pennsylvania, supra; The Martello, supra. The "proximate cause" rule is, in such a case, inapplicable.
The rule of The Pennsylvania, the lex fori, is, I think, applicable to this stranding, although it occurred in non-American waters. For, since (as the majority says) it is not a rule of absolute liability, I regard it as one of procedure, not of substantive law. Those cases are not relevant in which the burden of proof is an element of the plaintiff's cause of action; here the presumption only arises if cargo first proves that a statute was violated by the ship. We obtain some illumination from Sibbach v. Wilson & Co., 312 U.S. 1, 11-14, 61 S.Ct. 422, 85 L.Ed. 479; there the court held that the words "substantive rights" as used in the Act of June 19, 1934, 28 U.S.C.A. §§ 723b, 723c, did not mean "important" or "substantial" rights.[10] There is an additional consideration: It is elementary that the doctrines of conflict of laws are part of the domestic law; that, accordingly, when courts, in accordance with their domestic conflict of laws doctrines, borrow and apply a rule of another jurisdiction, in the very act of doing so, they are, in truth, applying their own domestic law; that any country may refuse to apply any doctrine of so-called conflict of laws, and will refuse to do so when it involves the application of a foreign rule of law at variance with domestic policy. It may well be that the burden of proof rule of The Pennsylvania involves an important issue of policy of that kind, and that, therefore, that rule should not be abandoned, when suit is brought in our courts, in favor of a different rule of law of the foreign country which, quite by chance, happened to be the place where the casualty occurred. Cargo has a slim chance at best, for it must rely exclusively on the testimony of the ship's officers and crew as to what preceded the casualty; and admiralty courts have often recognized that such witnesses almost invariably will testify on behalf of their ship. See cases collected in Moore, Facts (1908) Sections 8, 501, 523, 1021, 1110; Cf. Coxe Admiralty Law, 8 Col.L.Rev. 172, 181 (1908). Moreover, it is salutary that our courts should do what they can to see to it that legislation like the Norwegian statute is obeyed.
If The Pennsylvania rule is applicable, the question then arises whether there was a violation of the Norwegian statute. On that subject the trial court made no satisfactory finding. The record shows that many striking deviations were recorded solely in the log book and not in the compass book; in such circumstances, it would seem that the records were not readily accessible when a course was being charted by compass; consequently, it was highly likely they would not then be used. As the Norwegian statute specifically required such recordings in the accessible compass book, it would appear that both the purpose and the letter of the statute were substantially violated.
The District Court, to be sure, found that deviations were "checked by daily observations, many of which were recorded in the compass book". [31 F.Supp. 15.] But the Court did not find a very different matter that all of the significant deviations were entered in the compass book. We are left to assume that they were not. True, the Court also found that "the fact that all the observations were not recorded in one book would not necessarily render the vessel unseaworthy". But that is not a finding of fact. It is a conclusion of law, involving interpretation of the Norwegian statute; moreover, it tells us nothing of the Court's belief as to the effect of the statute where significant observations were not noted in the compass book. It follows that the District Judge made no finding of fact which leads to the conclusion that the Norwegian *477 statute was not violated. Having great respect for Judge Woolsey's abilities as an admiralty judge, I would remand the case to him for definite findings on that subject.
Of course, to do so would be nugatory if it were clear from the record that, even if the statute were violated, cargo could not recover, under The Pennsylvania rule. But here again, we lack a definite finding of fact. The question is whether those violations could "by any possibility have contributed" to the stranding. Cargo contends that they could. It argues that such violations caused the compass deviations to be inaccessible; that that inaccessibility led to gross inaccuracies in previous chartings by compass; that this, in turn, in all likelihood meant that the master had no confidence in his chartings; that, on the voyage in question, that lack of confidence very probably induced him to ignore the charted course and to rely on a radio bearing, as mistakenly recorded by the second mate, which showed an erroneous position strikingly at variance with the position according to the course charted by compass; and that that reliance on that error of the second mate caused the stranding.
That contention is highly plausible. There is no doubt that the record contains much evidence that, on prior voyages, the course charted by compass had been strikingly inaccurate; evidence was offered by the ship to explain these facts, but the District Judge made no finding, one way or another, with respect to them.[11] Had he done so, I should be strongly inclined to follow his findings; I would now remand for that purpose. But, until and unless the District Court, on a remand, makes such a finding, the evidence on behalf of cargo is sufficiently strong so that we should assume that, on the previous voyages, the courses as charted by compass were frequently substantially erroneous. Such substantial errors could easily be due to the violation of the statute; for the important deviations, if recorded merely in the log book and thus not readily accessible when the course was being charted by compass may well have resulted in a failure to make adequate corrections when the course was thus charted. And such facts would justify an inference that, because the master knew of the statutory violations (i. e., the failure to record significant deviations in the compass book) he had little or no confidence in his chartings by compass and, therefore, relied primarily upon other devices in navigating. The facts that deviation in the southwest quadrant had never been greater than three degrees and that one such deviation was entered in the compass book would not militate against a general lack of faith in the compass; there was no more reason for the master, merely because of the correct entry of one of many deviations of similar magnitude, to trust more in the readings in this one quadrant than in those of any other, as to several of which there were seemingly important unrecorded or unavailable deviations. He knew that there had been violations of the statute (i. e., failures to record many significant deviations in the compass book) and there is nothing to indicate that he knew that, if all the significant deviations in this quadrant had been there recorded, they would not have shown a deviation greater than was shown in that single recording.
A finding that he lacked faith in his compass would justify cargo's contention, which, more in detail, is as follows: On the voyage in question, the course was laid out by compass on the chart. Subsequently, in order to repair the engines, the ship was permitted to drift for about three hours. At that time, the second mate was directed to obtain a radio bearing. This he did; but he recorded it inaccurately. As a result, the position shown, according to his mistaken recording, was many miles from the ship's actual position. The captain seemingly knew that the drift of the ship during the preceding two and one-half hours was to the west; although there is some testimony on his part to the effect that he was not aware of that fact, his charting of the position is a fact, occurring at the time, which more eloquently attests his belief that the drift had been westward. Even if the master had been only an amateur navigator, yet, looking at the course as originally charted by compass, and knowing that the drift was westward, he would have been shocked at the position shown according to the second mate's recording of the radio bearing provided the master believed that the course originally charted by compass was reliable. *478 Had he been thus shocked, he would have called for an explanation of the radio bearing as recorded. The result would have been that the second mate's error would have been detected and the stranding would not have occurred. The violation of the statute is thus in the factual causal chain; and it could "possibly have contributed" to the stranding.
The cogency of this reasoning depends on whether or not the master knew of the westward drift. The evidence, though indecisive, tends to indicate that he did. The point P on the chart is the 1:45 position as fixed by the supposed sighting of Prim Point Light and by the first radio bearing.[12] The point Q is the position computed under the master's direction at 2:50, when the engines were started. The computation shows a southerly and westerly drift.[13]That computation is fatally inconsistent with the apparent southeasterly drift from the charted midnight position to the 1:45 position.[14] I find it inconceivable that the master could have thought the currents were so utterly erratic that the ship would drift southeasterly between midnight and 1:45 a.m., a distance almost five times as far as it would drift, in a southwesterly direction, between 1:45 a.m. and 2:50 a.m. It is not difficult to believe that the line drawn between his midnight and 1:45 a. m. positions was a mere formal act of the master to connect (1) a position he never seriously thought he was at, with (2) one which he erroneously thought correct; and that, since he did not take the line seriously, he was not aroused by the fact that it went opposite to the current, and so did not bother to check the accuracy of the second mate's plotting of the radio bearing.
My colleagues suggest, as showing that the master thought the currents entirely unpredictable, that he was not surprised at his charted course from 2:50 to 4:00. As to that, however, the court below made no finding. The only reason which one could conjecture for thinking that the master was not surprised is that, instead of rechecking his course, he immediately steered westward. But the evidence shows that at 3:51 a cross bearing was obtained from Yarmouth, which showed him to be close to the Northwest Ledge. According to the trial court: "He was in a fog. Therefore, to escape what he believed to be immediately impending danger he changed his course sharply at 4 a.m. * * *" The fact that, finding himself in such apparent danger, he did not take the time to recheck his course, would hardly prove that he thought the currents utterly erratic. Even if he was surprised, he might well have thought it would be better to avoid the apparent immediate danger and recheck later. Furthermore, there was more reason for surprise at 2 o'clock than at 4, when his mistaken course had apparently been corroborated by at least two additional radio bearings.
I said it was "inconceivable" that he should have thought the currents were so erratic, but I suppose it was not impossible. For, although in replotting the course Judge Woolsey had no hesitation about using the current tables, which showed a west southwesterly direction, the master did testify that "we drifted about three hours without any kind of log or anything else to prove which way the ship would drift". This general testimony, and similar statements, must, however, be regarded as qualified by his testimony that he did know the direction of the current:
Q. And did you have a chart which showed the direction of the tide, the set of it? A. Oh, yes, the usual chart.
Q. You knew the general set of the tide? A. Oh, yes.
The Canadian Government's Table of Currents in the Bay of Fundy, which is in the record, says flatly: "* * * a change *479 in position of even a few miles may make a marked difference in [the current's] character. This difference is chiefly in the strength and in the time of slack water, and not so much in direction". No doubt the current was uncertain, but in the whole record there is no unqualified testimony that the master did not know the general direction,[15] which is all he would have to know to be suspicious of the 1:45 a.m. fix, if he thought the midnight position, shown on the chart, was accurate. Since, however, there are contradictions in the record, I would remand for findings as to (1) the master's knowledge that his drift would be westward, and (2) the possibility that, if he had believed in his midnight position as plotted by dead reckoning, he would have been so astonished by the apparent southeasterly drift between then and 1:45, as to check on the radio bearing.
It is true that Judge Woolsey stated that the stranding was entirely due to the error of the second mate in erroneously laying out the radio bearing. He supports that "finding" which is, after all, but a lump sum conclusion and not at all adequately detailed by another "finding" to this effect: He divides the ship's movements into three different segments, the first being before her engines stopped, the second being the period of drifting, and the third what happened after the drifting was over; and he concludes that what occurred in the first segment had nothing whatsoever to do with what occurred in the third, because, he says, the second the period of drifting created a disjunction between the first and the third. This smacks of "proximate cause" reasoning as to the insulating effect of unforseeable intervening events; such reasoning, as we have seen, has no pertinence when The Pennsylvania rule applies. Moreover, Judge Woolsey, when making this particular "finding" as to such disjunction, paid attention neither to the master's knowledge of the westward drift, nor to the effect of the inadequate recording of compass deviations; the judge was, at that point, concentrating his entire attention on another and distinct contention advanced by cargo, which we all agree, is without weight, i. e., that the Norwegian statute was violated because of the use of an erroneous chart.
It is suggested that the line of reasoning employed by cargo to show that the violation of the Norwegian statute could by any possibility have contributed to the stranding, is highly tenuous because it involves the captain's "state of mind". That seems to imply that, in applying the standard of The Pennsylvania case, there must be excluded from consideration, as a link in the factual causal chain, normal mental operations, i. e., that such a factual causal chain is to be regarded as broken when one of its links is a normal, mental factor. I cannot agree. Even under the so-called proximate cause rule, there is no such doctrine. If the usual "state of mind" of a non-neurotic horse does not break the causal chain,[16] why should that of a man? Surely the courts have shown no such snobbishness about the functioning of the mind of an ordinary man. In The Pennsylvania itself, the Court took into account such a factor when it asked: "How can it be proved that if a foghorn had been blown those on board the steamer would not have heard it in season * * * to check their speed or change their course * * *?" In a sense, this requires the psychological assumption that the navigator of a vessel, on hearing a fog horn, will react as a normal person. There are many cases in the books to support the conclusion that mental factors are not taboo when the courts are passing on questions of causation. See, e. g., Wagner v. International Ry. Co., 232 N.Y. 176, 133 N. E. 437, 19 A.L.R. 1, where Cardozo, J., said: "Danger invites rescue. * * * The law does not ignore these reactions of the mind in tracing conduct to its consequences. It recognizes them as normal". And here we must consider how, "by any possibility" the mind of the master, assuming it to be normal, would have operated.
*480 In the case as tried below, cargo went into a multiplicity of theories, with the consequence that the record is very large. Judge Woolsey in his findings was obliged to consider all those many theories; it may be that for that reason and because the narrower issues now preserved were not as clearly presented to him as they were to us he did not go into them in detail; that serves to explain, and justifies a reference to, his mistake in imputing all the navigation to the second mate. At any rate, Judge Woolsey, having concluded on the basis of his inadequate finding of fact that, as a matter of law, the Norwegian statute was not violated because of failure properly to record compass deviations, very probably did not feel it necessary to and certainly he did not make any adequate findings of fact negating the possibility that the statute, if thus violated, could have contributed to the stranding.
In a case of this kind, where the issues are far narrower when they reach this Court than they were below, we should hesitate to reverse when the trial judge has not made findings covering elements in the case which are important as we regard the case. Consequently, if my view of the applicable law were to be followed here, I should, for the reasons indicated, go no further than to remand the case for further findings on the questions noted in the foregoing.
As to the issue of costs, I concur with the majority opinion.
NOTES
[1] "Variation" is the difference in degrees between the direction of the true pole and the magnetic pole: It is comparatively fixed for any one locality, but is not the same in different localities.
[2] "Deviation" is the difference in degrees between the direction of the magnetic pole and the compass needle. As parts of a ship will influence a magnetic needle, its susceptibility must be ascertained and recorded for every course which the ship might make. Deviation may also be affected by repairs, age of the vessel, and cargo.
[3] That he did not know the currents or try to determine their nature is borne out by his explanation of why he allowed on his chart for a slight drift between 2:25 and 2:50 A. M. in a south-by-west direction. He said that he "just assumed it." It is true that his assumption of a south-by-west current is inconsistent with the belief that he drifted from his dead-reckoned midnight position to his supposed 2:25 A. M. position on a south-by-east current. But on the trial there was no attempt to elicit a rationalization, of which he may have had several; and the matter, therefore, stood on his quite erroneous assumption.
[4] We have regularly considered a violation of navigation rules from the standpoint of cause in collision cases, and not as a rule of absolute liability. See, among recent cases, Construction Aggregates Co. v. Long Island R. Co., 2 Cir., 105 F.2d 1009; The Richard J. Barnes, 2 Cir., 111 F.2d 294, 296; The Cornelius Vanderbilt (The Watuppa), 2 Cir., 120 F.2d 766; The Sanday, 2 Cir., 122 F.2d 325.
[5] Italics added.
[6] Italics added.
[7] Cf. the remarks of Judge Learned Hand as to that phrase: "Nothing would indeed be gained by addition to the volume of comment upon that phrase, particularly as nobody has ever been able to extract any practical guidance from it". Cusson v. Canadian Pacific Ry. Co., 2 Cir., 115 F.2d 430, 432.
[8] Under that rule, when applicable, proof that a defendant has violated a statute is not enough to establish a plaintiff's cause of action; the plaintiff must show that the statutory violation was (1) in the factual causal chain leading to the injury, and also (2) that the injury was a reasonably forseeable consequence of the violation.
[9] I quote these words from the majority opinion. Of course, under The Pennsylvania rule, there is no more than such a burden; the proof of violation does not create an irrebuttable presumption. The majority opinion errs, I think, in intimating that anyone has urged that the rule creates "an absolute penalty for default". Cargo argues only that "under well-settled precedents such violation must be held a participating cause of the disaster, unless the contrary is shown", Henry DuBois Sons Co. v. A/S Ivarans Rederi, 2 Cir., 116 F.2d 492, 493.
[10] Too much weight should not be given to cases arising under Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, because there the dominant purpose is to avoid a situation in which "the accident of diversity of citizenship would constantly disturb equal administration of justice in coordinate state and federal courts sitting side by side". Klaxon Company v. Stentor Electric Manufacturing Company, Inc., June 2, 1941, 61 S.Ct. 1020, 1021, 85 L. Ed. 1477.
[11] For that reason, I do not believe the majority is justified in saying that previous discrepancies were "not relevant" to the performance or reading of the compass.
[12] Respondent interprets point P as being a 2:30 fix, correlating the Prim Point Light observation with the first radio bearing, and this is perhaps a possible explanation of the testimony. Assuming this interpretation is correct, it does not, of course, affect my conclusion that, in plotting line P-Q to reflect drift, the master unequivocally showed that he knew the drift was southwesterly.
[13] There is the additional fact, which corroborates my impression that the officers knew the drift was westward, that when the third mate, upon sighting the Prim Point Light, found that the ship had apparently drifted eastward, he was so surprised that he called the master on deck. If, as is argued, there was no way of telling where the ship would drift, why was there surprise at the apparent eastward drift?
[14] The majority opinion suggests that the master may have had some "rationalization" of this conflict, but he offered none.
[15] I do not regard the master's ignorance as being established by such statements as the following, of which there are several in the record:
"* * * the Bay of Fundy, as we all know, has very strong tides going. Without seeing anything nobody can say sure where the ship stands."
Q. When you were called again just before two o'clock and you were told about this Prim Point Light bearing did you try to figure out then what the current had been doing to you? A. No.
Q. You figured you were at a certain spot and that is where the current took you? A. Yes.
[16] City of Winona v. Botzet, 8 Cir., 169 F. 321, 23 L.R.A.,N.S., 204. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1494173/ | 963 S.W.2d 403 (1998)
Wendell Patrick BRYAN, Guardian of the Estate of Denise Bryan, and Wendell Patrick Bryan, Appellants,
v.
The MISSOURI STATE HIGHWAY PATROL and J.P. Lysaught, Respondents.
No. WD 53841.
Missouri Court of Appeals, Western District.
January 20, 1998.
Motion for Rehearing and/or Transfer to Denied March 3, 1998.
Application to Transfer Denied April 21, 1998.
*405 Steven G. Schumaier, St. Louis, for appellants.
Jeremiah W. (Jay) Nixon, Atty. Gen., Theodore A. Bruce, Asst. Atty. Gen., Jefferson City, for respondents.
Before ELLIS, P.J., and HOWARD and RIEDERER, JJ.
Motion for Rehearing and/or Transfer to Supreme Court Denied March 3, 1998.
HOWARD, Judge.
This is an appeal from the trial court's order granting summary judgment to Respondents J.P. Lysaught and the Missouri State Highway Patrol. Appellant Wendell Patrick Bryan contends the trial court erred in granting summary judgment to Respondents because 1) Mr. Lysaught failed to meet his burden to prove that no material facts are in dispute; 2) the doctrine of official immunity does not apply in this case because Mr. Lysaught's acts were ministerial, rather than discretionary; 3) the grant of summary judgment to the Highway Patrol was not pursuant to a motion and Appellant did not have an opportunity to brief the issue.
Facts
On December 4, 1990, Denise Bryan was driving from Columbia, Missouri, to her home in Marshall. Ms. Bryan was employed as a travel agent at Summit Travel in Columbia at the time. At approximately 7:13 p.m., Ms. Bryan collided with a cow in the northbound lane of Highway 65, approximately two miles south of Marshall. She was then hit in the rear by a vehicle operated by James Chitwood. Ms. Bryan suffered severe and permanent injuries as a result of this accident.
Wendell Patrick Bryan, Ms. Bryan's husband, was named guardian of Ms. Bryan's estate and initiated a lawsuit against Franklin Pogue, James Chitwood, the Saline County Sheriff's Department, Highway Trooper J.P. Lysaught, and others in relation to this accident. Mr. Bryan also filed a loss of consortium claim. The Missouri Highway Patrol and Trooper Lysaught are the only remaining defendants in this action.
On December 4, 1990, at approximately 6:40 p.m., 33 minutes prior to Ms. Bryan's accident, Mr. Lysaught was advised by Troop A radio dispatch that an accident had occurred on Highway 65, involving Garret and Phoebe Jones and a cow. Mr. Lysaught arrived at the scene of the initial accident by 6:45 p.m. Based on his interview with the Joneses and inspection of the automobile, Mr. Lysaught determined that the initial accident was caused by a "short horned red" cow belonging to Franklin Pogue. Mr. Lysaught alleges that he searched for the cow in the vicinity of the accident, but he could not find the cow. He alleges that he remained on and "worked" the accident for 30 minutes and did not see the cow. He testified that he drove up and down Highway 65 in search of the cow, and then left the scene and transported the Joneses to a Concordia High School basketball game.
Upon arriving in Concordia, Mr. Lysaught was advised by Troop A radio dispatch that another accident had occurred on Highway 65. This accident occurred a few hundred feet away from the location of the Joneses' accident. According to the police report, the second accident occurred at 7:13 p.m. and involved Denise Bryan, a "red short horned" cow, and another automobile. The police report indicates that Mr. Lysaught arrived at the scene of Ms. Bryan's accident at 7:34 p.m. According to the police report, nine cows were wandering loose in the immediate vicinity of Ms. Bryan's accident. Eight of the cows were owned by Franklin Pogue.
On September 9, 1996, Mr. Lysaught filed a motion for summary judgment. On December 18, 1996, Wendell Bryan filed a memorandum in opposition to Mr. Lysaught's motion for summary judgment. On January 16, 1997, the trial court entered summary judgment in favor of Mr. Lysaught. The court stated that "Lysaught complied with the provisions of § 270.010, RSMo, and did not violate his duty under that statute because he looked for any cattle running at large and tried to determine if any cattle were at large." The court then determined that Mr. Lysaught was entitled to official immunity because the duty imposed by § 270.010 was "discretionary." The court also found that *406 the Missouri Highway Patrol is an agency of the State and protected by sovereign immunity. The court granted summary judgment to Mr. Lysaught and the Highway Patrol, although the Highway Patrol did not file a motion for summary judgment. This appeal followed.
Standard of Review
Appellate review of the propriety of summary judgment is de novo. Williams v. City of Independence, 931 S.W.2d 894, 895 (Mo.App. W.D.1996). The record is viewed in the light most favorable to the party against whom summary judgment was entered, and that party is afforded all reasonable inferences that may be drawn from the evidence. Id. Summary judgment will be affirmed on appeal if the reviewing court determines that no genuine issues of material fact exist and the movant has a right to judgment as a matter of law. Id.
Point I
Appellant's first point on appeal is that the trial court erred in granting Mr. Lysaught's motion for summary judgment because Mr. Lysaught failed to meet his burden to prove that no material facts are in dispute. Appellant contends that the trial court's order invades the province of the jury because 1) whether Mr. Lysaught properly discharged his duties as mandated by § 270.010 RSMo 1994 is a question of fact; 2) Mr. Lysaught's credibility and veracity of his version of the events are issues to be determined by a jury because the fact that his affidavit in support of his summary judgment motion differs from his deposition testimony brings his credibility and veracity into question.
Negligence is ordinarily a question for the jury and always is when the evidence on the issue is conflicting or where, the facts being undisputed, different minds might reasonably draw different conclusions from them. Rickman v. Sauerwein, 470 S.W.2d 487, 489 (Mo.1971); Wilkerson v. Mid-America Cardiology, 908 S.W.2d 691, 695 (Mo. App. W.D.1995). Unique among the elements of negligence is duty because the existence of a duty is a question of law. Strickland v. Taco Bell Corp., 849 S.W.2d 127, 131 (Mo.App. E.D.1993). The existence of a statutory duty on Mr. Lysaught's part is not in dispute in this case. The issue in dispute is whether he breached his duty. This is a question of fact. We find that there is a genuine issue in dispute concerning the adequacy of Mr. Lysaught's efforts to locate and restrain the cow in compliance with his statutory duty. Appellant has questioned the veracity of Mr. Lysaught's testimony about his efforts to search for the cow, specifically questioning the possibility that Mr. Lysaught could have made the efforts to search for the cow that he claims to have made in the time frame he claims to have made them. Different minds might reasonably draw different conclusions on the adequacy of Mr. Lysaught's search. Because the question of whether Mr. Lysaught failed or refused to discharge his duty under § 270.010 is a question of fact for the jury, summary judgment was not appropriate in this case.
Point II
Appellant's second point on appeal is that the trial court erred in finding that Mr. Lysaught was entitled to protection based on the official immunity doctrine because Mr. Lysaught was performing a ministerial act described by the stock law, and thus was not protected under the doctrine.
The common law doctrine of official immunity shields officials from liability for injuries arising out of their discretionary acts or omissions, but an official may be held liable for injuries arising out of ministerial acts. Charron v. Thompson, 939 S.W.2d 885, 886 (Mo. banc 1996), cert. denied, ___ U.S. ___, 118 S. Ct. 96, 139 L. Ed. 2d 52 (1997). Whether a function is discretionary or ministerial is a case by case determination. Id. Relevant factors include "the nature of the official's duties, the extent to which the acts involve policymaking or the exercise of professional expertise and judgment, and the likely consequences of withholding immunity." Warren v. State, 939 S.W.2d 950, 953 (Mo.App. W.D.1997) (quoting Kanagawa v. State By and Through Freeman, 685 S.W.2d 831, 836 (Mo. banc 1985)). A discretionary act requires "the exercise of reason in the *407 adaption of means to an end, and discretion in determining how or whether an act should be done or a course pursued." Id. (quoting Rustici v. Weidemeyer, 673 S.W.2d 762, 769 (Mo. banc 1984)). "Discretionary acts" should not be defined narrowly because such an interpretation would frustrate the purpose of official immunity. Warren, 939 S.W.2d at 953; Costello v. City of Ellisville, 921 S.W.2d 134, 136 (Mo.App. E.D.1996).
A ministerial function is one that a public officer is required to perform upon a given state of facts, in a prescribed manner, in obedience to the mandate of legal authority, without regard to the officer's own judgment or opinion concerning the propriety of the act to be performed. Charron, 939 S.W.2d at 885 (emphasis added). A ministerial function is the antithesis of a function that is left to be performed in a manner the acting official believes to be "appropriate" or "suitable." Warren, 939 S.W.2d at 954.
We first decide whether the act of restraining a cow under § 270.010 is a discretionary or ministerial act. Section 270.010 provides, in relevant part:
It shall be unlawful for the owner of any animal or animals of the species of horse, mule, ass, cattle, swine, sheep or goat, in this state, to permit the same to run at large outside the enclosure of the owner of such stock, and if any of the species of domestic animal aforesaid be found running at large, outside the enclosure of the owner, it shall be lawful for any person, and it is hereby made the duty of the sheriff or other officer having police powers, on his own view, or when notified by any other person that any of such stock is so running at large, to restrain the same forthwith.... Any failure or refusal on the part of such officer to discharge the duties required of him by this section shall render him liable on his bond to any person damaged by such failure or refusal, which damages may be sued for and recovered in any court of competent jurisdiction.
We find that the officer's duty to restrain a cow under § 270.010 is a discretionary act because the means to achieve the end is within the officer's discretion. The nature of the act of restraining a cow that is not within an officer's view requires the officer to use his judgment to determine where and how long to look for the cow, taking into account his other responsibilities. As Respondents point out, it is not reasonable to interpret this statute as a strict liability statute, requiring an officer to search for a cow indefinitely every time he is informed a cow is loose, neglecting his other duties, and making him liable for his failure to restrain a cow running at large regardless of the diligence of his search for the animal.
However, while we find that an officer's duty under § 270.010 involves a discretionary act, we also find that the legislature partially abrogated the common law doctrine of official immunity for the purpose of an officer's liability under § 270.010. The plain language of the statute indicates that a person damaged under this statute may sue an officer on his bond for his failure or refusal to discharge his duty under the statute. By implication, an officer cannot be held liable as to any amount of damages in excess of his bond.
We again note that whether Mr. Lysaught failed or refused to discharge his duty in this case is a question of fact. If the jury finds that Mr. Lysaught failed or refused to discharge his duty, he will only be liable to the extent of his bond.
Point III
Appellant's third point on appeal is that the trial court's order granting summary judgment for the Missouri Highway Patrol is erroneous because the issue was not before the court pursuant to a motion, and Appellant was not given the opportunity to brief the issue.
The Missouri State Highway Patrol is protected by sovereign immunity. Conrod v. Missouri State Highway Patrol, 810 S.W.2d 614, 617 (Mo.App. S.D.1991). This case does not involve an instance where sovereign immunity would be waived under § 537.600. Therefore, the Highway Patrol does appear to be protected from suit in this case as a matter of law. However, since no motion for summary judgment was ever filed or briefed in the trial court, the matter is *408 reversed and returned for further proceedings on this issue.
The judgment of the trial court is reversed and remanded for further proceedings.
All concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917494/ | 835 So.2d 990 (2002)
SouthTRUST BANK
v.
Melody FORD and Eddie Ford.
1010124.
Supreme Court of Alabama.
May 17, 2002.
*991 A. Joe Peddy and Clair Maloney Gammill of Smith, Spires & Peddy, P.C., Birmingham, for appellant.
Chuck Hunter, Birmingham, for appellees.
STUART, Justice.
SouthTrust Bank ("SouthTrust") is a defendant in an action pending in the Jefferson Circuit Court. It appeals from the trial court's denial of its motion to compel arbitration. We affirm in part, reverse in part, and remand with instructions.
Facts
Melody Ford and Eddie Ford are husband and wife. Upon the death of Melody's father, Edwin Edwards, Melody was appointed the administratrix of his estate. At the time of Edwards's death, he maintained at least one checking account with SouthTrust. Before his death, Edwards and SouthTrust were involved in a dispute regarding SouthTrust's payment of an allegedly *992 forged check drawn on Edwards's account.[1]
Edwards's checking account with South-Trust was governed by a "deposit agreement." That deposit agreement incorporated by reference SouthTrust's "Rules and Regulations Governing Deposit Accounts" and all amendments thereto. Those rules and regulations contained the following arbitration provision:
"ARBITRATION OF DISPUTES. You and we agree that the transactions in your account, involve `commerce' under the Federal Arbitration Act (`FAA'). ANY CONTROVERSY OR CLAIM BETWEEN YOU AND US, OR BETWEEN YOU AND ANY OF OUR OFFICERS, EMPLOYEES, AGENTS OR AFFILIATED ENTITIES, THAT ARISES OUT OF OR IS RELATED TO YOUR ACCOUNT, OR ANY AGREEMENT RELATED TO YOUR ACCOUNT, OR ANY SERVICE RELATED TO YOUR ACCOUNT OR ANY SUCH SERVICE, WHETHER BASED ON CONTRACT OR IN TORT OR ANY OTHER LEGAL THEORY, INCLUDING CLAIMS OF FRAUD, SUPPRESSION, MISREPRESENTATION AND FRAUD IN THE INDUCEMENT (COLLECTIVELY, ANY `CLAIM'), WILL BE SETTLED BY BINDING ARBITRATION UNDER THE FAA. EACH PARTY WAIVES ALL RIGHTS TO TRIAL IN ANY DISPUTE RELATED TO THESE RULES OR TO ANY RELATED SERVICE.... This agreement to arbitrate disputes will survive the closing of your account and the termination of your deposit agreement with us."
The Fords instituted this action against SouthTrust, alleging that SouthTrust: (1) negligently cashed a forged item drawn on Edwards's account; (2) intentionally inflicted emotional distress by causing Edwards's estate to be depleted and "having to vainly attempt to have [SouthTrust] reimburse the Monies and having to deal with Uncaring and Rude personnel of [SouthTrust]"; and (3) intentionally misrepresented and suppressed material facts concerning the passing and forgery of the check.
SouthTrust filed a motion to dismiss or, in the alternative, to stay the proceedings and compel arbitration. In support of that motion, SouthTrust submitted the affidavit of Heather Thornburgh, who is employed by SouthTrust as a vice president.
The Fords opposed SouthTrust's motion to compel arbitration. They asserted that the language of the deposit agreement and the language of the arbitration agreement itself pertained only to a dispute between Edwards and SouthTrust and that neither the deposit agreement nor the arbitration agreement addressed claims asserted by the administratrix of Edwards's estate.
The trial court denied SouthTrust's motion to compel arbitration, finding that the "substantial-effect-on-interstate-commerce" requirement had been satisfied but that the arbitration agreement did not apply to claims asserted by the depositor's agents, assigns, or representatives. SouthTrust appeals from the trial court's denial of its motion to compel arbitration.
Standard of Review
In American General Finance, Inc. v. Morton, 812 So.2d 282, 284 (Ala. *993 2001), Justice Harwood, writing the main opinion, set forth the standard of review on an appeal from the trial court's denial of a motion to compel arbitration:
"This Court reviews the denial of a motion to compel arbitration de novo. Green Tree Fin. Corp. v. Vintson, 753 So.2d 497, 502 (Ala.1999); Patrick Home Ctr., Inc. v. Karr, 730 So.2d 1171, 1172 (Ala.1999). The party seeking to compel arbitration has the initial burden of proving the existence of a contract calling for arbitration and proving that the contract evidences a transaction substantially affecting interstate commerce. TranSouth Fin. Corp. v. Bell, 739 So.2d 1110, 1114 (Ala.1999); Sisters of the Visitation v. Cochran, 775 So.2d 759 (Ala. 2000). `[A]fter a motion to compel arbitration has been made and supported, the burden is on the nonmovant to present evidence that the supposed arbitration agreement is not valid or does not apply to the dispute in question.' Jim Burke Auto., Inc. v. Beavers, 674 So.2d 1260, 1265 n. 1 (opinion on application for rehearing) (Ala.1995)."
Here, SouthTrust bears the initial burden of proving the existence of a contract calling for arbitration and proving that the contract evidences a transaction substantially affecting interstate commerce.
If SouthTrust met this burden of proof, then the burden of persuasion shifted to the Fords as the parties opposing the motion to compel arbitration. Once that burden has shifted, we consider whether the Fords have established that the arbitration agreement is inapplicable or whether they have a valid defense to the enforcement of that agreement.
Has SouthTrust Met its Burden of Proof?
The parties do not dispute that Edwards's checking account was governed by SouthTrust's deposit agreement, or that the deposit agreement included the arbitration agreement. Thus, SouthTrust established the existence of a contract calling for arbitration.
SouthTrust also presented evidence concerning the effect of its banking activities on interstate commerce; the trial court held that SouthTrust had proved that the transaction had a substantial effect on interstate commerce. On appeal, the Fords do not challenge SouthTrust's assertion or the trial court's finding that the transaction at issue in this case had a substantial effect on interstate commerce. Thus, the burden of persuasion shifted to the Fords to oppose SouthTrust's properly supported motion to compel arbitration.
The Fords' Defenses to the Arbitration Provision
The Fords oppose arbitration because, they allege, SouthTrust's deposit agreement governs only a transaction between SouthTrust and Edwards and does not include Edwards's estate. They further assert that the language of the arbitration agreement itself does not encompass the claims asserted by a depositor's agents, assigns, or representatives but limits the application of the agreement solely to disputes between Edwards and SouthTrust.
We recognize that an administratrix of a decedent's estate stands in the shoes of the decedent. See Conseco Fin. Corp. v. Sharman, 828 So.2d 890 (Ala. 2001). We also recognize that the "[p]owers [of an executor], in collecting the debts constituting the assets of the estate, are just as broad as those of the deceased." Webb v. Sprott, 144 So. 569, 571, 225 Ala. 600, 603 (1932). For the same reason the powers of an executor or an administrator encompass all of those formerly held by the decedent, those powers must likewise be restricted in the same manner and to the same extent as the powers of the decedent *994 would have been. Thus, where an executor or administrator asserts a claim on behalf of the estate, he or she must also abide by the terms of any valid agreement, including an arbitration agreement, entered into by the decedent.
We agree that the arbitration agreement at issue in this case is limited to disputes arising between Edwards and SouthTrust. If Edwards were alive and asserting against SouthTrust a claim to recover the value of the purportedly forged check, he would be bound to arbitrate. Because Melody serves as the administratrix of Edwards's estate, she stands in his shoes. We conclude that Melody's claim to recover the value of the improperly paid check is subject to arbitration because she is asserting that claim in her role as the administratrix of Edwards's estate.
Additionally, Edwards agreed to arbitrate any dispute with SouthTrust "that arises out of or is related to [his] account, or any agreement related to [his] account, ... whether based on contract or in tort." Thus, to the extent that Melody's tort claims of intentional infliction of emotional distress and fraud are based upon an injury sustained by Edwards before his death, those claims would be subject to the agreement to arbitrate. This Court, however, expresses no opinion as to whether any such claims survived Edwards's death. See § 6-5-462, Ala.Code 1975 ("In all proceedings not of an equitable nature, all claims upon which an action has been filed and all claims upon which no action has been filed on a contract, express or implied, and all personal claims upon which an action has been filed, except for injuries to the reputation, survive in favor of and against personal representatives; and all personal claims upon which no action has been filed survive against the personal representative of a deceased tortfeasor.").
However, this Court has noted: "`"[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit."'" Modern Woodmen of America v. McElroy, 815 So.2d 520, 526 (Ala.2001), quoting AT & T Techs., Inc. v. Communications Workers of America, 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), quoting in turn United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960). Although this Court has recognized certain situations in which an agreement to arbitrate may extend to nonsignatories, see, e.g., Oakwood Mobile Homes, Inc. v. Godsey, 824 So.2d 713 (Ala.2001) (discussing third-party beneficiaries and the doctrine of intertwining), those limited exceptions are not applicable in this case.
First, Melody has not agreed to arbitrate her claims against SouthTrust. Additionally, if Melody is asserting a tort claim based upon an injury she suffered directly, she is not seeking the benefits of the Edwards-SouthTrust deposit agreement. Thus, she is not a third-party beneficiary of that contract. See, e.g., Tom Williams Motors, Inc. v. Thompson, 726 So.2d 607 (Ala.1998) (the father was not a third-party beneficiary of the contract containing an arbitration provision; he was not a signatory to the contract, his claims were independent of the contract, and he was not seeking to recover benefits due under that contract).
The only possible basis for compelling Melody to arbitrate any personal claims she might have against SouthTrust would be under the doctrine of "intertwining." The doctrine of intertwining is applicable where arbitrable and nonarbitrable claims are so closely related that the party to a controversy subject to arbitration is *995 equitably estopped from denying the arbitrability of the related claim. See, e.g., Ex parte Tony's Towing, Inc., 825 So.2d 96 (Ala.2002); Oakwood Mobile Homes, Inc. v. Godsey, supra; Cook's Pest Control, Inc. v. Boykin, 807 So.2d 524 (Ala.2001).
However, the doctrine of equitable estoppel is not applicable where the arbitration agreement is specifically limited to the parties that have executed the agreement. Monsanto Co. v. Benton Farm, 813 So.2d 867 (Ala.2001). The arbitration provision at issue in this case encompasses only disputes that arose between Edwards and SouthTrust.
Moreover, the doctrine of estoppel is applicable only to estop a signatory from avoiding arbitration. See Ex parte Tony's Towing, Inc., supra (noting that a nonsignatory cannot be estopped from avoiding arbitration and recognizing that the equitable principle of intertwining is applicable only where a signatory to the arbitration agreement seeks to frustrate a nonsignatory from obtaining arbitration). Because arbitration is strictly a matter of contract, this Court has no authority, even under the doctrine of equitable estoppel, to compel parties to arbitrate if they have not agreed to do so. Because Melody has never agreed to submit her personal claims against SouthTrust to arbitration, the doctrine of intertwining is not applicable to any claims asserted by her on her own behalf.
We are unable to determine from the record the factual allegations underlying Melody's claims of intentional infliction of emotional distress and fraud. Accordingly, the trial court is instructed to conduct further proceedings as necessary to determine which, if any, of Melody's tort claims are asserted on behalf of Edwards's estate and which, if any, are asserted on her own behalf. The trial court is instructed to then determine, consistent with this opinion, which of those claims are subject to arbitration.
We now address Eddie's claims.[2] Like Melody, Eddie is not a signatory to the arbitration agreement. He is not a third-party beneficiary under the Edwards-SouthTrust deposit agreement, and the arbitration agreement incorporated in that contract is specifically limited to disputes arising between Edwards and SouthTrust. For these reasons, the reasoning we applied to Melody's claims is equally applicable to the claims asserted by Eddie.
Nothing in the record suggests that Eddie is asserting his claims in any capacity other than an individual one. Because Eddie is not a signatory to the arbitration agreement and because he has not agreed to arbitrate his claims against SouthTrust, his claims are not subject to the arbitration agreement. Again, we express no opinion as to the viability of any of the claims asserted in the complaint.
Conclusion
SouthTrust has properly supported its motion to compel arbitration of the claims asserted on behalf of Edwards's estate. Any claim asserted by Melody on behalf of Edwards's estate is subject to the agreement to arbitrate. However, any claim asserted on behalf of Melody or Eddie personally is not subject to arbitration. We affirm the trial court's order of August 26, 2001, insofar as it pertains to any claim asserted by Melody or Eddie in their personal capacity; we reverse the trial court's order insofar as it pertains to any claims asserted by Melody in her role as the administratrix of Edwards's estate; and we remand this case to the trial court for *996 further proceedings consistent with this opinion.
AFFIRMED IN PART; REVERSED IN PART; REMANDED WITH INSTRUCTIONS.
HOUSTON, SEE, LYONS, BROWN, JOHNSTONE, HARWOOD, and WOODALL, JJ., concur.
MOORE, C.J., concurs in the result in part and dissents in part.
MOORE, Chief Justice (concurring in the result in part and dissenting in part).
I concur in affirming the trial court's order denying arbitration as to the claims asserted by Melody and Eddie Ford in their individual capacities; however, I dissent from the reversal of the trial court's denial of arbitration as to the claims asserted by Melody Ford in her role as administratrix.
NOTES
[1] Eddie is not named as the administrator of Edwards's estate, and the record is devoid of any basis upon which Eddie could proceed to recover the value of the purportedly forged check on behalf of Edwards's estate. We also find nothing in the record to suggest that Eddie would have a personal cause of action to recover the value of the purportedly forged check.
[2] See note 1. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917496/ | 993 A.2d 595 (2010)
Baker N. EVERTON, Appellant,
v.
DISTRICT OF COLUMBIA, Appellee.
No. 07-CT-1350.
District of Columbia Court of Appeals.
Submitted April 6, 2010.
Decided April 22, 2010.
Daniel K. Dorsey, Washington, DC, was on the brief, for appellant.
Peter J. Nickles, Attorney General for the District of Columbia, Todd S. Kim, Solicitor General, Rosalyn Calbert Groce, Deputy Attorney General, and Janice Y. Sheppard, Assistant Attorney General, were on the brief for appellee.
Before RUIZ, Associate Judge, and FERREN and SCHWELB, Senior Judges.
RUIZ, Associate Judge:
Baker N. Everton appeals his conviction for operating a vehicle under the influence of alcohol (commonly referred to as *596 "DUI"), in violation of D.C.Code § 50-2201.05 (2001), which appellant claims does not apply to his riding a bicycle while concededly intoxicated. Although the applicable provision of the Traffic Act that incorporates the DUI statute has been in place since the 1920s, this appeal presents an issue of first impression. We conclude that the DUI statute applies to bicycles and affirm the trial court's judgment.
I. Statement of Facts
On January 12, 2007, at approximately 7:45 p.m., appellant Everton was "yelling and screaming" on the sidewalk at the intersection of Georgia Avenue and Otis Place, N.W., in Washington D.C. Officers Matthew Mahl and Brandon Stagon, members of the Metropolitan Police Department, were on patrol in that area when they heard a loud "commotion" and turned to see appellant standing next to his bicycle.
After approaching appellant, Officer Mahl noticed that appellant had a very strong odor of alcohol on his breath, his eyes were bloodshot and watery, and he was unsteady on his feet, as he "wobbled" and "sway[ed]." In short, Mahl believed that appellant was very intoxicated. Similarly, Officer Stagon observed that appellant's speech was slurred and very loud and that appellant could "hardly stand." The officers asked appellant to quiet down and move on, and told him not to ride his bicycle because he was so intoxicated. Appellant, however, proceeded to ride his bicycle. Officer Mahl repeated his warning not to ride the bicycle, but appellant rode away. As he crossed Otis Place, appellant almost hit a small child who was in the crosswalk. Appellant then lost control of the bicycle and fell on the ground. Officers Mahl and Stagon arrested appellant for violating D.C.Code § 50-2201.05.
Officer Mahl did not administer any of the standard field sobriety tests on the scene out of safety concerns given appellant's level of intoxication and the fear that he could harm himself. Once in the police station, however, Mahl performed the horizontal gaze and nystagmus test and found six clues of impairment evidencing a high level of intoxication.
II. Is a bicycle a "vehicle" under the DUI statute?
On appeal, Everton claims that D.C.Code § 50-2201.05, part of the Traffic Act of 1925, which criminalizes operating a "vehicle" under the influence of alcohol, does not apply to him because although he was concededly intoxicated, the bicycle he was riding was not a "vehicle" as defined by the statute.[1] We conclude otherwise.
Whether a bicycle is considered a "vehicle" under D.C.Code § 50-2201.05 is a question of statutory interpretation, which we review de novo. See Banks v. United States, 955 A.2d 709, 711 (D.C. 2008). "[T]he words of a statute should be construed according to their ordinary sense and with the meaning commonly attributed to them." Thompson v. District of Columbia, 863 A.2d 814, 817-18 (D.C. 2004) (quoting Peoples Drug Stores, Inc. v. District of Columbia, 470 A.2d 751, 753 (D.C.1983) (en banc)). "Courts must presume that a legislature says in a statute what it means and means in a statute what it says there." Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992).
*597 Here, the plain meaning of the Traffic Act does not support Everton's contention that a bicycle is not a "vehicle" for purposes of the DUI statute.[2] D.C.Code § 50-2201.05, provides, in relevant part, that "[n]o person shall operate or be in physical control of any vehicle in the District. . . [w]hile under the influence of intoxicating liquor or any drug or any combination thereof." D.C.Code §§ 50-2201.05(b)(1)(A)(i), -2201.05(b)(1)(A)(i)(II) (emphasis added). The Traffic Act defines "vehicle" as "any appliance moved over a highway on wheels or traction tread, including street cars, draft animals, and beasts of burden." Id. at § 50-2201.02(9) (emphasis added). Under the Act's clear and unambiguous language defining "vehicle," a bicycle is a "vehicle," as it is an "appliance" consisting of a metal frame mounted on two "wheels" that can move over a "highway."[3] An interpretation of the Traffic Act's definition of "vehicle" as including bicycles comports with the ordinary dictionary definition that a bicycle is a vehicle.[4]
The history of the Traffic Act also supports this interpretation. Relying on a 1926 amendment to the Traffic Act of 1925, which adopted the definition of "vehicle" that remains unchanged to this day, this court's predecessor rejected the notion that the Act "related entirely to motor vehicle traffic" and explained that the amendment was "designed to remove any possible doubt as to its all-encompassing character." District of Columbia v. Wheeler, 57 App. D.C. 106, 106, 17 F.2d 953, 953, (1927) (discussing Act of July 3, 1926, ch. 739, 44 Stat. 812 (1926), § 1 (currently codified at D.C.Code § 50-2201.02(9) (2001))); see also id. at 108, 17 F.2d at 955 (noting that the 1926 amendment "greatly enlarge[d] the common meaning of the word `vehicle'") (Barber, Acting Associate Judge, dissenting).
It is also apparent that the legislature distinguished between the definition of "vehicle" and the narrower category of "motor vehicle." Compare D.C.Code § 50-2201.02(9) (defining "vehicle") with D.C.Code § 50-2201.02(1) (2001) (defining "motor vehicle" as "[a]ll vehicles propelled by internal-combustion engines, electricity, or steam. The term `motor vehicle' shall not include traction engines, road rollers, vehicles propelled only upon rails or tracks, personal mobility devices, . . . or a battery-operated wheelchair when operated by a person with a disability.").
Furthermore, a comprehensive interpretation of the term "vehicle" is consistent with the intent of the Traffic Act to regulate traffic for the protection of public *598 safety. See, e.g., Cass v. District of Columbia, 829 A.2d 480, 485 (D.C.2003) (holding that "the suspension of driving privileges for violations of the [Traffic] Act by underage persons who possess or consume alcohol" has as "its primary objective. . . traffic safety"); Persham v. United States, 70 App. D.C. 116, 117, 104 F.2d 249, 250 (1939) (holding that under the Traffic Act the District had the power to regulate traffic on public thoroughfares and prosecute and punish for violations). Operating a bicycle while intoxicated poses a serious threat to the safety of pedestrians and other vehicles as it increases the risk of vehicular accidents. We must look no further than the facts of this case, where appellant almost ran over a child who was walking over a crosswalk and fell off his bicycle in a heavily transited city street.
Appellant maintains, however, that if the term "vehicle" is interpreted to include bicycles, a literal application of the DUI statute prohibiting an intoxicated person from "operat[ing] or be[ing] in physical control of any vehicle in the District," D.C.Code § 50-2201.05(b)(1)(A)(i), would lead to an absurd result. According to appellant, "if an intoxicated individual walks or is holding onto the bicycle, as a pedestrian, then the intoxicated individual is still violating the statute." We do not need to decide that question in this case. Everton was not a pedestrian as he was neither walking next to his bicycle nor holding onto it. Rather, he was riding the bicycle across a public street and thus undoubtedly was "operat[ing]" the bicycle as a vehicle.[5] Therefore, he has no standing to challenge the statute based on a hypothetical application to a different situation. See Leiss v. United States, 364 A.2d 803, 807 (D.C.1976) ("It is a well-settled principle that one to whose conduct a statute clearly applies is not entitled to attack it on the ground that its language might be less likely to give fair warning in some other situation not before the court."), cert. denied 430 U.S. 970, 97 S.Ct. 1654, 52 L.Ed.2d 362 (1977).
Giving effect to the clear statutory language of the Traffic Act, and consistently with its purpose, we conclude that a bicycle is a "vehicle" for purposes of the DUI statute of the District of Columbia.[6] Therefore, the trial court did not err in finding Everton guilty of operating a vehicle under the influence of alcohol, in violation of D.C.Code § 50-2201.05.
For the foregoing reasons, the judgment of the trial court is hereby affirmed.
So ordered.
NOTES
[1] At trial, appellant took the stand and denied that he was intoxicated. Based on the officers' testimony, the trial judge found that he was. Appellant does not challenge that finding on appeal and concedes that the only issue presented for decision is the legal interpretation of the statute concerning coverage of bicycles.
[2] Appellant refers to a number of statutes and cases from other jurisdictions in an effort to persuade us that a bicycle is not a "vehicle" for purposes of the DUI statute. Those cases are inapposite, however, as they interpret differently-worded statutes. For example, some of the statutes cited by appellant make their intent to exclude bicycles quite clear by providing that devices "moved by human power" do not come within the statutes' purview. See, e.g., Clingenpeel v. Mun. Court for Antelope Judicial Dist., 108 Cal.App.3d 394, 399, 166 Cal.Rptr. 573 (1980); People v. Schaefer, 274 Ill.App.3d 450, 210 Ill.Dec. 968, 654 N.E.2d 267, 268 (1995).
[3] For purposes of the Traffic Act, "a public sidewalk is part of the public highway." Houston v. District of Columbia, 149 A.2d 790, 792 (D.C. 1959) (noting that a public sidewalk, although not designed or intended for vehicular traffic, is considered part of the public highway).
[4] The American Heritage Dictionary of the English Language defines "bicycle" as a "vehicle consisting of a light frame mounted on two wire-spoked wheels one behind the other and having a seat, handlebars for steering, brakes, and two pedals or a small motor by which it is driven." AMERICAN HERITAGE DICTIONARY 183 (3d ed.1992).
[5] We have held that to be in "physical control" of a vehicle, a person must be capable of putting the vehicle into movement or preventing its movement. See Houston, 149 A.2d at 792 ("As long as one were physically or bodily able to assert dominion, in the sense of movement, then he has as much control over an object as he would if he were actually driving the vehicle.") (quoting State v. Ruona, 133 Mont. 243, 321 P.2d 615, 618 (1958)); see also Taylor v. United States, 662 A.2d 1368, 1371 (D.C.1995) (person in parked car, with lights and engine running, apparently asleep behind the steering wheel, had "physical control" of the vehicle for purposes of DUI statute).
[6] We, therefore, have no need to resort to the rule of lenity to resolve any ambiguity. See Sullivan v. United States, 990 A.2d 477, 483 n. 9 (D.C.2010); Albernaz v. United States, 450 U.S. 333, 343, 101 S.Ct. 1137, 67 L.Ed.2d 275 (1981). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1570873/ | 29 So. 3d 303 (2010)
SHEFFIELD
v.
STATE.
No. 2D08-4638.
District Court of Appeal of Florida, Second District.
February 19, 2010.
Decision Without Published Opinion Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1570925/ | 277 S.W.2d 776 (1954)
INTERNATIONAL ASSOCIATION OF MACHINISTS et al., Appellants,
v.
M. E. SANDSBERRY, Jr. et al., and Gulf, Colorado & Santa Fe Railway Company et al., Appellees.
No. 6437.
Court of Civil Appeals of Texas, Amarillo.
November 15, 1954.
Rehearing Denied December 13, 1954.
*778 Schoene & Kramer, Washington, D. C., Mulholland, Robie & Hickey, Toledo, Ohio, Mullinax & Wells, Dallas, Tex., for appellants.
Simpson, Clayton & Fullingim, Amarillo, for M. E. Sandsberry, Jr., and others.
J. C. Gibson, R. S. Outlaw, Wm. J. Milroy, C. G. Niebank, Jr., Chicago, Illinois, A. J. Folley, Amarillo, Preston Shirley, Galveston, for Gulf, Colorado and Santa Fe R. Co., and others for appellees.
MARTIN, Justice.
This cause of action involves the constitutionality of Title 45 U.S.C. § 152, Eleventh, 45 U.S.C.A. § 152, subd. 11. The provisions of the Act essential to a determination of this appeal are as follows:
"Eleventh. Notwithstanding any other provisions of this chapter, or of any other statute or law of the United States, or Territory thereof, or of any State, any carrier or carriers as defined in this chapter and a labor organization or labor organizations duly designated and authorized to represent employees in accordance with the requirements of this chapter shall be permitted
"(a) to make agreements, requiring, as a condition of continued employment, that within sixty days following the beginning of such employment, or the effective date of such agreements, whichever is the later, all employees shall become members of the labor organization representing their craft or class: * * *
"(d) Any provisions in paragraphs Fourth and Fifth of this section in conflict herewith are to the extent of such conflict amended."
Subsections Fourth and Fifth provide in essence that "No carrier, its officers, or agents shall require any person seeking employment to sign any contract or agreement promising to join or not to join a labor organization; * * *."
It is readily apparent that if Section 152, Eleventh is unconstitutional, it does not effect a repeal or amendment of said subsections Fourth and Fifth. Therefore, such subsections of the Act prohibiting a carrier from requiring its employees to sign any contract or agreement promising to join or not to join a labor organization would be in full force and effect. It would necessarily follow that an injunction would issue to prevent the appellants from violating the rights assured to non-union employees by such Act of Congress. It would also necessarily follow that if Section 152, Eleventh is a valid exercise of the commerce power within the limits of the Constitution, that such an injunction should not issue. These considerations define the issue on appeal. Counsel for appellants repeatedly refers to the issue in this cause as one involving "union security". Only a casual survey of the acts of Congress and of the pertinent decisions of the Supreme Court of the United States on this issue should wholly dispel any fear entertained by appellants' attorney as to loss of "union security". The ultimate issue in this cause of action is whether the unions under the provisions of Section 152, Eleventh, by collective bargaining, may require the execution of a closed shop contract between the unions and the Santa Fe which contract will require the discharge of all non-union employees who do not join and remain members of the union.
It is apparent from the record, as found by the jury, that the unions following the enactment of Section 152, Eleventh, unless restrained by injunction, were about to resort to economic force upon the Santa Fe *779 for the purpose of compelling it to sign a union shop agreement. Such a contract would require Gulf, Colorado & Santa Fe Railway Company and the other appellee railroads, hereinafter referred to as Santa Fe, to discharge all non-union employees who did not join and remain members of a union. The appellees in this cause, other than the Santa Fe, are twelve employees of the Santa Fe who, acting for themselves and on behalf of all other employees similarly situated, brought a suit in the trial court to restrain the Santa Fe and the sixteen non-operating railway unions from entering into such closed shop agreement. They also sought to restrain the Unions from striking or using other economic force to compel the Santa Fe to enter into such contract. These twelve non-union employees of the Santa Fe will be referred to herein as plaintiffs. Although named as a defendant in the suit, the Santa Fe joined the plaintiffs in seeking relief against the defendant Unions, appellants in the cause and designated herein as the Unions.
The case was tried before a jury and all findings of fact by the jury, other than the answers to Special Issues Nos. 7 (a) and 12(c), are supported by sufficient evidence in the record. Under the jury's finding in answer to Issue No. 7 that a union shop agreement would not substantially interfere with the Santa Fe's procuring of desirable new employees, it necessarily follows as to Issue No. 7(a) that the Santa Fe would not, in reasonable probability, suffer irreparable injury by the signing of the union shop agreement which fact is contrary to the jury finding that the Santa Fe would suffer irreparable injury by the signing of the agreement. There is no evidence of probative force that a strike would result in irreparable injury to the public as found under Issue No. 12(c). The jury findings support appellees' contention as to facts proven in the trial of the cause. However, the fact findings of the jury are not controlling in the cause as the appeal is determined by the application of established principles of law.
After the return of the jury verdict in the cause, the trial court ruled upon the issues briefly outlined above and entered a declaratory judgment that Section 152, Eleventh, was unconstitutional and void because the same violated the First, Fifth, Ninth, Tenth and Thirteenth Amendments to the Constitution of the United States. The trial court also ruled that the above Congressional Act had no substantial relationship to interstate commerce under the provisions of Clause 3, Section 8, of Article 1 of the Constitution of the United States. Following such action, the trial court found that the issue in the cause was governed by Article 5207a, Vernon's Texas Civil Statutes, generally known as the Texas "Right-To-Work" statute. The court issued a very comprehensive permanent injunction against the Unions which in essence restrained them from entering into a closed shop agreement with the Santa Fe and from striking or using other action to enforce the execution of such an agreement. The Unions appealed from this judgment of the trial court. Appellees' brief is presented on behalf of the Santa Fe and the Plaintiffs.
This appeal may be resolved by a correct application of the principles of law governing the rulings of the trial court as outlined above. This will also effect a final ruling on the various issues raised under appellants' points of error and appellees' counter-points.
Appellant Unions' Point 1-A asserts that the trial court erred in ruling that Section 152, Eleventh, was an invalid exercise of the commerce power. Section 152, Eleventh, is a valid exercise of the commerce power as established by numerous decisions of the Supreme Court of the United States. Texas & New Orleans Railroad Co. v. Brotherhood of Railway & Steamship Clerks, 281 U.S. 548, headnotes 11, 12 and 13, 50 S.Ct. 427, 74 L.Ed. 1034; Virginian Railway Company v. System Federation No. 40, Railway Employees Department of the American Federation of Labor, etc., 300 U.S. 515, headnotes 8, 9 and 10, 57 S.Ct. 592, 81 L.Ed. 789; Brotherhood *780 of Railroad Shop Crafts of America, Rock Island System, Grand Lodge No. 3 v. Lowden, 10 Cir., 86 F.2d 458, 108 A.L.R. 1128; U. S. v. Carolene Products Company, 304 U.S. 144, headnotes 1, 2, 3, 4 and 5, 58 S.Ct. 778, 82 L.Ed. 1234.
Appellant Unions by Point 1-B and C assert that the trial court erred in ruling that Section 152, Eleventh, was void in that it violated the First, Fifth, Ninth and Tenth Amendments to the Federal Constitution. The controlling principle as to this issue is presented in appellees' brief, "It is well settled that the first ten Amendments to the Constitution are a check only on the activity of Congress and are not limitations on purely private action. Corrigan v. Buckley, 1926, 271 U.S. 323, 330, 46 S.Ct. 521, 70 L.Ed. 969. * * * In this case, therefore, decision of the constitutional questions raised under the First, Fifth, Ninth and Tenth Amendments requires, as a condition precedent, that `governmental action' be found." The issue as to "governmental action" is best expressed by the further statement found in appellees' brief; "The condition is satisfied by a showing that private parties have been aided `in some way' by `government's thumb on the scales'". The record has been examined with care as to the issue of governmental action as defined above. This Court can only rule on the expressions of Congress as incorporated in its various legislative acts and the Court is bound by the rulings of the Supreme Court of the United States interpretating such acts of Congress. An examination of the Congressional Act here in issue in the light of many rulings by the Supreme Court of the United States precludes a finding that governmental action was taken on behalf of the unions by congressional enactment of Section 152, Eleventh. Section 152, Eleventh, is not in the contravention of the First, Fifth, Ninth and Tenth Amendments to the Constitution. Otten v. Baltimore & O. R. Co., 2 Cir., 205 F.2d 58; Corrigan v. Buckley, 271 U.S. 323, 46 S.Ct. 521, 70 L.Ed. 969; Grovey v. Townsend, 295 U.S. 45, 55 S.Ct. 622, 79 L.Ed. 1292; American Communications Association. C.I.O. v. Douds (United Steel-workers of America v. National Labor Relations Board), 339 U.S. 382, at page 402, 70 S.Ct. 674, 94 L.Ed. 925; National Federation of Railway Workers v. National Mediation Board, 71 App.D.C. 266, 110 F.2d 529, Syl. 17-19; Courant v. International Photographers of Motion Picture Industry Local 659, 9 Cir., 176 F.2d 1000, syl. 2; Virginian Railway Company v. System Federation No. 40 etc., supra; American Federation of Labor v. American Sash & Door Co., 335 U.S. 538, 550, 69 S.Ct. 258, 93 L.Ed. 222.
Section 152, Eleventh, does not contravene the proscription against involuntary servitude as set forth in the Thirteenth Amendment to the Constitution of the United States. As pointed out hereinabove, no governmental action is involved as to the execution of a closed shop contract between the unions and the Santa Fe. Under the Congressional Act, as revealed by its language, it is permissive for the Santa Fe and the Unions to execute a closed shop contract. (Emphasis added.) The ultimate execution of the contract as to a closed shop is thus left subject to collective bargaining between the Unions and the Santa Fe. On the issue as to a closed shop, it must be observed that prior to the enactment of Article 5207a, Vernon's Texas Civil Statutes, supra, it was expressly decreed by the courts of Texas that an employer and union contract as to a closed shop was not void as against public policy. It does not appear that such decisions have been ruled invalid as contrary to the Thirteenth Amendment of the Federal Constitution. Underwood v. Texas & P. R. Co., Tex.Civ.App., 178 S.W. 38; Harper v. Local Union No. 520, International Brother-hood of Electrical Workers, Tex.Civ.App., 48 S.W.2d 1033; San Angelo v. Amalgamated Meat Cutters & Butchers Workmen of North America, Local 103, Tex.Civ. App., 139 S.W.2d 843.
The rulings hereinabove made bring in issue a further principle of law governing this cause of action. Section 152, Eleventh, permits the making of a closed shop agreement "Notwithstanding *781 any other provisions of this chapter, or of any other statute or law of the United States, or Territory thereof, or of any State, * * *". As Section 152, Eleventh is a valid exercise of the commerce power in regulating labor relations between the Unions and the Santa Fe operating in interstate commerce, the amendment is valid and controlling in this field and supersedes any state legislation in the same field and contrary thereto, to-wit: Article 5207a, Section 1, supra and Art. 7428-1, Vernon's Texas Civil Statutes. New York Central Railroad Company v. Winfield, 244 U.S. 147, 37 S.Ct. 546, 61 L.Ed. 1045; Wichita Falls & Southern R. Co. v. Lodge No. 1476, International Ass'n of Machinists, Tex.Civ. App., 266 S.W.2d 265, Syl. 6 (error refused-no reversible error); Brotherhood of Railroad Trainmen v. Owens, 165 S.W.2d 128; Truck Drivers, Chauffeurs, Warehousemen & Helpers, Local 941 v. Whitfield Transportation, Inc., Tex., 273 S.W.2d 857.
One other issue must be discussed as the same is essential to a correct disposition of the appeal. It is a recognized principle and appellees concede in their brief that "Union leaders have argued and the courts have quite properly held that it is a `fundamental' right of man to organize and bargain collectively with their employer a right which exists separately and apart from legislation." (Citing authorities.) Therefore, since collective bargaining is not only a fundamental right but is one also permitted by congressional enactment Section 152, Eleventh, the Unions and Santa Fe may not be enjoined from the exercise of such valid and legal right of collective bargaining. Nor can the Unions be enjoined from striking to procure their asserted rights which are subject to collective bargaining. This is an established principle of law under the theory of collective bargaining even though, as found by the jury in answer to Issue 12(b), such a strike would result in irreparable injury to Santa Fe. If the right of collective bargaining be conceded, which right is established beyond controversy and is conceded by appellees, it follows logically that the essential moving force behind effective bargaining is the ever present and imminent threat of irreparable injury to one of the bargaining parties. To enjoin collective bargaining under the theory that it threatens irreparable injury to one or more of the parties concerned is to wholly the destroy the right of collective bargaining. Harper v. Local Union No. 520, International Brotherhood of Electrical Workers, supra, Syl. 5 and 6; Cline v. Insurance Exchange of Houston, Tex.Civ.App., 154 S.W.2d 491, Syl. 4-12; affirmed 140 Tex. 175, 166 S.W.2d 677.
Under the principles discussed hereinabove, appellants' Point 1, Sections A, B, C and D, and Points 3, 7 and 8 must be sustained. Appellants' Points 2-A and B, 4, 5 and 6 are overruled as such issues become immaterial under the above rulings.
The judgment of the trial court is reversed and judgment is rendered for appellants. The injunction granted by the trial court is dissolved. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1570966/ | 277 S.W.2d 106 (1955)
Homer Sylvester ARNOLD, Appellant,
v.
The STATE of Texas, Appellee.
No. 27543.
Court of Criminal Appeals of Texas.
April 13, 1955.
Lawrence Arnim, Henry J. Lamb, Houston, for appellant.
Dan Walton, Dist. Atty., Eugene Brady, Jr., Asst. Dist. Atty., Houston, Leon Douglas, State's Atty., Austin, for the State.
DICE, Commissioner.
Upon a trial before the court, a jury being waived, appellant was found guilty and assessed the minimum punishment for the misdemeanor offense of driving a motor vehicle upon a public highway while intoxicated.
The State's witness, Robert L. Smith, testified that he first saw appellant "when he sideswiped a car in front of me"; then saw him hit the left rear bumper of a standing car, and come toward the witness, causing him to drive on to a railroad track.
Smith further testified that he followed appellant's car, "tooting my horn, trying to get everybody to look up and get out of his way", and appellant's car, with the left front tire flat "jumped the left curb" "sideswiped another car" "kept pulling to the left" "he caught a door handle" on the suspenders of a man working in the street "chased another car on the curb" hit the curb where a child was playing in the street, and stopped the car in front of his home "when he got out of his car, he fell down. He was barefooted."
Smith also testified that he called the officers and, after their arrival, saw appellant come out of his house and start toward his car, then go back in the house; that he observed appellant when he again walked out the door and talked to him and "he was very slurry." He didn't know. His actions were very funny he staggered was barefooted and in old clothes "he tried to hold on to a tree, and kept feeling for it and missing it." Also he heard this conversation between appellant and the officer: "The officer said, `this boy saved you from hitting a child; you ought to thank you. You hit a car.' He said, `I didn't even know it.' He admitted, `I have been drinking, and am sorry. If I have done anything, I will pay for it.'"
Smith testified that he had seen many people who were intoxicated, that he smelled alcohol on appellant's breath, and based upon his experience and his observation of appellant, he expressed the opinion that he was intoxicated.
Appellant complains of the testimony of the officers who arrested him in his home, and who expressed the opinion that he was intoxicated. He also complains of the testimony relating to the result of an analysis of a blood specimen taken from appellant with his written consent, which showed an alcohol content of .29 per cent, the complaint being that the vial in which the blood was placed when taken was not offered in *107 evidence or identified as that which was opened by the chemist and toxicologist.
The trial being before the court and the testimony of the witness Smith being sufficient to sustain the conviction, we need not determine whether the arrest was legal or whether the blood tested was sufficiently identified.
When a cause is tried before the court and there is nothing to show that the judgment was based upon the inadmissible evidence (such as by findings or conclusions of fact or law) it will be presumed that the trial judge disregarded incompetent evidence admitted at the trial and the judgment will not be reversed on appeal on the ground of the admission of incompetent evidence if sufficient proper evidence was admitted to sustain the judgment. Authorities to this effect in civil cases are collated under Texas Digest, Trial.
The rule is applicable in criminal cases. Johnson v. State, 149 Tex.Cr.R. 245, 193 S.W.2d 528; Slaughter v. State, 154 Tex. Cr.R. 460, 231 S.W.2d 657; Conn v. State, 143 Tex.Cr.R. 367, 158 S.W.2d 503.
The judgment is affirmed.
Opinion approved by the Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917546/ | 835 So.2d 958 (2003)
Morris BROOKS, Appellant,
v.
STATE of Mississippi, Appellee.
No. 2000-KA-02135-COA.
Court of Appeals of Mississippi.
January 28, 2003.
*959 Carrie A. Jourdan, Columbus, attorney for appellant.
Office of the Attorney General by Deirdre McCrory, attorney for appellee.
Before McMILLIN, C.J., IRVING and MYERS, JJ.
McMILLIN, C.J., for the Court.
¶ 1. Morris Brooks has appealed his conviction of kidnaping returned by a jury in the Circuit Court of Oktibbeha County. He raises three issues on appeal as follows: (a) that the trial court erred in permitting Brooks to represent himself at trial; (b) that Brooks received ineffective assistance of counsel during the preliminary proceedings leading up to trial and while appointed counsel was serving in an advisory capacity during the trial; and (c) that the trial court erred in not setting aside the guilty verdict after it was discovered that a juror was personally acquainted with Brooks but failed to disclose that fact during voir dire.
¶ 2. We find none of these issues to have merit. For that reason, we affirm the judgment of the trial court.
I.
Facts
¶ 3. In view of the issues presented in this appeal, a detailed recitation of the facts of the underlying crime does not appear necessary. The State offered proof that Brooks had approached Thomas Davison at a convenience store in Starkville and forced Davison against his will at knife-point into a vehicle driven by Brooks' fiancee, Rosana Landwer. Brooks subsequently caused Landwer to drive away from the store. Davison's continued presence in the car as it drove away was claimed by the State to be caused by violence to his person or threats of such violence carried out by Brooks.
¶ 4. Police officers responding to a call stopped the vehicle shortly after the car left the convenience store. Davison, Landwer and Brooks were all still occupying the car. Law enforcement officers subsequently searched the vehicle and recovered a knife from the passenger compartment.
II.
First Issue: Brooks' Decision to Represent Himself
¶ 5. On the day trial was scheduled to begin, Brooks formally moved that his defense attorney be dismissed and that Brooks be allowed to represent himself. There followed on the record a lengthy exchange between the trial court and Brooks regarding the advisability and the potential consequences of such a decision. Repeatedly, the trial court cautioned Brooks that the court considered this an unwise move on his (Brooks') part. Each time, Brooks acknowledged the trial court's advice but assured the court that he felt able to effectively represent himself and was prepared to assume that responsibility with full knowledge of the pitfalls associated with doing so as outlined by the court.
¶ 6. During the course of this exchange, Brooks represented to the court that he had obtained a bachelor's degree from Illinois State University and had taken a series of correspondence courses relating to the law while formerly imprisoned on another conviction "through a Harvard Law correspondence course...."
¶ 7. Ultimately, the trial court permitted Brooks to represent himself but required court-appointed counsel to continue to attend the remainder of the trial to act in an *960 advisory capacity to Brooks should Brooks request such assistance.
¶ 8. In this appeal, Brooks is once again represented by an attorney, though not the same one who served him during the trial. Brooks, through his new counsel, now asserts that the trial court committed reversible error in acceding to Brooks' persistent demand to represent himself. Brooks suggests that it should have been apparent to the trial court that he was not mentally competent to make an informed decision of that nature. In fact, Brooks now says that he may have lacked the requisite mental competency to be subjected to a trial, much less to act as his own attorney.
¶ 9. The foundation for this assertion is that "[a] couple of simple inquiries" would have revealed that Brooks was not, in fact, a college graduate nor did Harvard Law School have a program to offer law-related courses to prison inmates. Brooks suggests that these false representations demonstrated that he was at least arguably "delusional," and should have prompted the trial court to undertake a sua sponte inquiry into the matter of his competency to stand trial, citing Conner v. State, 632 So.2d 1239, 1248 (Miss.1993) (overruled by Weatherspoon v. State, 732 So.2d 158 (Miss.1999)).
¶ 10. A defendant desiring to represent himself at trial has a constitutional right to do so. Faretta v. California, 422 U.S. 806, 819, 95 S.Ct. 2525, 45 L.Ed.2d 562 (1975). Nevertheless, in view of the evident difficulties associated with such a decision, the Mississippi Supreme Court has fashioned a procedure to both fully acquaint the defendant with the relevant considerations that ought to influence his decision and to satisfy the court that the defendant has "knowingly and voluntarily" elected to represent himself. URCCC 8.05. Once the court is satisfied that such a decision has been made, the authority of the court to deny the defendant's wish no longer exists. Taylor v. State, 812 So.2d 1056 (¶¶ 17-18) (Miss.Ct.App.2001).
¶ 11. The same issue raised by Brooks in this case was before our Court in the Taylor case, since Taylor asserted that his behavior at trial was proof in itself of his mental incompetency to make an informed decision to represent himself. Id. at (¶ 19). Reviewing the exchange between the trial court and Brooks in light of the considerations raised in Taylor, this Court concludes that there was not enough indication of mental incompetency on the part of Brooks to warrant a sua sponte inquiry into that question. His answers to the court's inquiries were intelligent and appropriate. He appears from the record to have been alert and focused on the issues being discussed, and certainly he seemed to have been insistent in asserting his desire to represent himself. The claims regarding his educational background could as easily be construed as a calculated effort to persuade the trial court to grant his request through a conscious inflation of his "resume" as the delusional ranting of a mentally incompetent person.
¶ 12. The trial court, observing the demeanor of the defendant first-hand, is best suited to make those sort of subjective judgment calls. Conner v. State, 632 So.2d at 1248. There is the additional problem that this Court, in its deliberations, is confined to consideration of matters appearing in the record. Colenburg v. State, 735 So.2d 1099(¶ 6) (Miss.Ct.App.1999) (citing Saucier v. State, 328 So.2d 355, 357 (Miss. 1976)). There is nothing in the record to demonstrate the falsity of Brooks' claims regarding his attainments in college or his alleged efforts to educate himself in the field of law-related matters through correspondence courses. We are, in that circumstance, reluctant to make a factual determination *961 as to exactly what a fuller inquiry into Brooks' claims would have revealed.
¶ 13. While Brooks' claims in this regard might have been troubling had it appeared that the trial court put substantial weight on them in reaching a decision, our review of the record leaves us satisfied that the trial court did not do so in determining that Brooks had made an informed decision on the question. Instead, the record seems to show that the court's decision was based on a more general determination that Brooks had the intelligence to understand and assess the problems associated with self-representation and, thus, had made an informed decision to undertake the task. Under the limited standard of review available to this Court in such matters, we do not find enough contrary information in the record to convince us that the trial court abused its discretion in so finding.
III.
Second Issue: Ineffective Assistance of Counsel Claim
¶ 14. Having elected to represent himself, Brooks cannot now claim that his court-appointed attorney, retained in the proceeding by order of the circuit court solely to act in an advisory capacity to Brooks, was so deficient in that capacity that Brooks was denied his constitutional right to effective representation. Gardner v. State, 792 So.2d 1000 (¶ 21) (Miss.Ct. App.2001).
IV.
Third Issue: New Trial Motion
¶ 15. Brooks filed a motion for new trial alleging juror misconduct based on a claim that Jerry Austin, one of the jurors at the trial, had failed to reveal during voir dire that he was personally acquainted with the defendant Brooks. In the course of an inquiry based on Brooks' assertion, Austin admitted to being personally acquainted with Brooks and indicated that they had become familiar with each other approximately five years earlier when they both visited at the residence of Ezell Jefferson. He did not explain why he failed to reveal this information during the course of voir dire, even though there was a direct inquiry made as to whether any potential juror was personally acquainted with Brooks.
¶ 16. Brooks, for his part, testified at the new trial hearing that he had never known Austin's last name and, thus, did not realize this was the same individual he had previously known when the name appeared on the prospective jurors list. He also testified that Austin had gained a fairly substantial amount of weight in the intervening years since he had last seen him and that, as a result, he did not recognize him in the courtroom during the course of the trial. According to Brooks, he was only able to make the connection as he mentally rehashed the trial in his cell after the jury's guilty verdict.
¶ 17. The trial court, in denying Brooks' motion, made findings of fact that, in effect, concluded that Brooks was being untruthful in denying that he did not recognize Austin as a former acquaintance, taking note of the uncontradicted testimony that Austin and Brooks had been acquaintances for a number of years and that Brooks was often within six feet of Austin during the proceedings. The court took the view that Brooks had, in fact, counted on Austin as being friendly to the defense and purposely elected to leave him on the jury rather than making a timely claim that Austin had not been satisfactorily forthcoming during voir dire.
*962 ¶ 18. The court reasoned that it would be improper to permit Brooks to pursue a course of silence in hope that Austin would vote to acquit and yet be able to obtain a mistrial if that hope did not pan out. The court took judicial notice of the prosecution's well-established practice in the county of striking jurors having an acquaintance with the defendant and concluded that, had Brooks raised the issue of Austin's failure to properly respond at the proper time, there was essentially no doubt that he would have been struck from the jury panel.
¶ 19. In matters relating to new trial motions, the trial court's decisions are reviewed on an abuse of discretion standard. Goff v. State, 778 So.2d 779 (¶ 18) (Miss.Ct.App.2000). Further, as to issues of credibility of testimony offered in support of the motion, the trial court sits as finder of fact and the court's findings on appeal are entitled to deference since the court observes the witnesses first-hand and is better positioned to assess matters of credibility. Murphy v. Murphy, 631 So.2d 812, 815 (Miss.1994).
¶ 20. We do not find that the trial court abused its discretion in disbelieving Brooks' facially incredible version of why he was untimely in raising the issue of his prior relationship with juror Austin or in declining to grant a mistrial based solely on the fact that Austin was permitted to serve as a juror when Brooks himself failed to raise the issue before jury selection was concluded.
¶ 21. THE JUDGMENT OF THE CIRCUIT COURT OF OKTIBBEHA COUNTY OF CONVICTION OF KIDNAPING AND SENTENCE OF THIRTY YEARS IN THE CUSTODY OF THE MISSISSIPPI DEPARTMENT OF CORRECTIONS, WITHOUT THE POSSIBILITY OF SUSPENSION, REDUCTION, PAROLE OR PROBATION, IS AFFIRMED. ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE APPELLANT.
KING AND SOUTHWICK, P.JJ., BRIDGES, THOMAS, LEE, IRVING, MYERS, CHANDLER AND GRIFFIS, JJ., CONCUR. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917504/ | 835 So.2d 131 (2002)
Cheryl BURGOON, individually and as administratrix of the estate of J.B. Beasley, deceased
v.
ALABAMA STATE DEPARTMENT OF HUMAN RESOURCES et al.
1010345.
Supreme Court of Alabama.
May 17, 2002.
*132 Michael Guy Holton, Pike Road, for appellant.
J. Coleman Campbell and Sharon E. Ficquette, asst. attys. gen., Department of Human Resources; Stephen T. Etheredge, Dothan; and Jere C. Segrest and Kevin Walding of Hardwick, Hause & Segrest, Dothan, for appellees.
WOODALL, Justice.
Cheryl Burgoon, individually and as administratrix of the estate of her daughter, J.B. Beasley, deceased, appeals from a judgment dismissing her complaint against, among others, the Alabama State Department of Human Resources and the Houston County Department of Human Resources (hereinafter referred to collectively as "DHR"). We affirm in part, reverse in part, and remand.
According to the undisputed facts, 17-year-old J.B. Beasley was murdered. Her body was discovered locked in the trunk of her automobile; she had suffered a gunshot wound to the head. At the time of the murder, Beasley was in the legal custody of the Houston County Department of Human Resources.
On July 31, 2001, Burgoon commenced a wrongful-death action in the Houston Circuit Court against DHR and certain individuals, among whom were employees of DHR. The complaint alleged, among other things, that certain individuals had failed to supervise Beasley. It averred that "none of the Defendants can account for J.B. Beasley's whereabouts on the night of her death," and that the homicide occurred "[a]s a direct and proximate result of [the] failure to ... supervise." The complaint included claims for damages against DHR and against its employees in their individual and official capacities.
On August 8, 2001, one of the individual defendants moved to disqualify Burgoon's attorney, on the ground that the attorney would become a material witness in the case. On August 27, 2001, the trial court entered on the case-action-summary sheet an order scheduling a hearing on October 2, 2001, for "[a]ll pending motions." Subsequently, the defendants filed motions for dismissal. In particular, the individual defendants filed motions to dismiss pursuant to Ala. R. Civ. P. 12(b)(6) on August 30, 2001, and August 31, 2001. On September 5, 2001, DHR and one of its employees filed a joint "Motion to Dismiss Pursuant to [Ala]. R. Civ. P. 12, or in the Alternative, Motion for Summary Judgment Pursuant to [Ala]. R. Civ. P. 56." Accompanying the latter motion was the employee's affidavit. On September 21, 2001, that is, 11 days before the scheduled hearing, the trial court entered the following order on the case-action-summary sheet: "Motions to dismiss as to all defendants are hereby granted." From that judgment, Burgoon appealed.
Burgoon contends that the trial court erred in granting the defendants' motions to dismiss without a hearing. She relies on Ala. R. Civ. P. 78, which states, in pertinent part:
"To expedite further its business, unless there is a request for oral hearing, the court may enter an order denying a motion to dismiss without oral hearing. Unless the court orders otherwise, an order granting a motion to dismiss shall be deemed to permit an automatic right of amendment of the pleading to which the motion is directed within ten (10) days from service of the order."
(Emphasis added.) Particularly instructive are the "Committee Comments on 1973 Adoption" to Rule 78, which state, in part:
"It is to be noted that the last sentence of the rule prohibits the granting *133 of a Motion Seeking Final Judgment such as a Motion for Summary Judgment without giving the parties an opportunity to be heard orally.
"... In the event the court has any inclination toward the granting of the motion to dismiss, a hearing will continue to be required."
(Emphasis added.)
It is clear that the requirements of Rule 78 differ, depending on whether the trial court contemplates granting, as opposed to denying, a motion for a final judgment. Under the plain language of the rule and the comments to the rule, a trial court may not grant a motion to dismiss without a hearing, although, in some circumstances, it may deny such a motion. Cf. Van Knight v. Smoker, 778 So.2d 801, 805 (Ala. 2000) (except in "certain limited circumstances," Rule 56(c), Ala. R. Civ. P., entitles the parties to a hearing on a summary-judgment motion).
There is one notable exception to this rule. Under Alabama caselaw, a "circuit court is without jurisdiction to entertain a suit against the State because of [Ala. Const.1901, § 14]." Aland v. Graham, 287 Ala. 226, 229, 250 So.2d 677, 678 (1971). "Therefore, it appears that a trial court or an appellate court should, at any stage of the proceedings, dismiss a suit when it becomes convinced that it is a suit against the State and contrary to Sec. 14 of the Constitution." 287 Ala. at 229, 250 So.2d at 678 (emphasis added).
A suit against a State agency, or against State agents in their official capacities, is a suit against the State. Ex parte Mobile County Dep't of Human Res., 815 So.2d 527 (Ala.2001); Ex parte Alabama Dep't of Forensic Sciences, 709 So.2d 455 (Ala.1997); Ex parte Franklin County Dep't of Human Res., 674 So.2d 1277, 1279 (Ala.1996); Alabama State Docks v. Saxon, 631 So.2d 943, 946 (Ala.1994). State agents enjoy absolute immunity from suit in their official capacities. "[A] county department of human resources is considered to be a State agency for purposes of asserting the defense of sovereign immunity." Ex parte Franklin County Dep't of Human Res., 674 So.2d at 1279. A trial court must dismiss an action against a State agency or against a State agent acting in an official capacity at the earliest opportunity. The trial court did not err in dismissing the claims against DHR and against its employees in their official capacities, because facially these claims were claims against the State.
The DHR employees in their individual capacities, however, enjoy only qualified immunity from suit. Ex parte Tuscaloosa County, 796 So.2d 1100, 1106 (Ala.2000). The law of qualified immunity was succinctly restated in Ex parte Cranman, 792 So.2d 392, 405-06 (Ala.2000), adopted by a majority of this Court in Ex parte Butts, 775 So.2d 173 (Ala.2000). The claims against the individuals in their individual capacities are not subject to the "notable exception" to Rule 78, because such claims are not claims against the State.
The trial court erred, therefore, in granting the motions to dismiss the claims against all individual defendants in their individual capacities without conducting a hearing. To the extent the judgment dismissed the claims against the individuals in their individual capacities, that judgment is reversed, and the cause is remanded for further proceedings consistent with this opinion. To the extent it dismissed the claims against DHR and against the individual defendants in their official capacities, the judgment is affirmed.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
*134 HOUSTON, SEE, LYONS, BROWN, JOHNSTONE, HARWOOD, and STUART, JJ., concur.
MOORE, C.J., concurs in part and dissents in part.
MOORE, Chief Justice (concurring in part and dissenting in part).
I concur in reversing the trial court's order insofar as it dismissed the claims against the DHR employees in their individual capacities; however, I dissent from that part of the majority opinion affirming the trial court's order dismissing the claims against DHR and its employees in their official capacities without a hearing. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2475784/ | 772 F.Supp.2d 129 (2011)
The ARMENIAN ASSEMBLY OF AMERICA, INC., et al., Plaintiffs/Counter-Defendants,
v.
Gerard L. CAFESJIAN, et al., Defendants/Counter-Plaintiffs.
Civil Action Nos. 07-1259, 08-255, 08-1254 (CKK).
United States District Court, District of Columbia.
May 9, 2011.
*132 Richard I. Chaifetz, Chaifetz & Coyle, P.C., Columbia, MD, for Plaintiffs/Counter-Defendants.
Ashley Compton, John B. Williams, William G. Laxton, Jr., Jones Day, Washington, DC, Sarah E. Bushnell, Timothy D. Kelly, Kelly & Berens, PA, Minneapolis, MN, Kathleen Howard Meredith, Stephan Y. Brennan, Iliff & Meredith, P.C., Pasadena, MD, for Defendants/Counter-Plaintiffs.
MEMORANDUM OPINION
COLLEEN KOLLAR-KOTELLY, District Judge.
The above-captioned consolidated actions involve a series of claims and counterclaims relating to the parties' attempts to create a museum and memorial in Washington, D.C. devoted to the Armenian Genocide.[1] Following a twelve-day bench *133 trial in November 2010, the Court issued a Memorandum Opinion setting forth its findings of fact and conclusions of law on January 26, 2011. See [193][2] Mem. Op. (Jan. 26, 2011). The Court found that none of the parties' substantive claims were meritorious and dismissed all of the claims save one, holding that Defendants Gerard L. Cafesjian ("Cafesjian") and John J. Waters ("Waters") were entitled to indemnification from the Armenian Genocide Museum and Memorial, Inc. ("AGM & M") for legal expenses incurred in defending claims asserted against them in their capacities as former officers of AGM & M. The Court also upheld the validity of a reversion clause in a Grant Agreement executed between Defendants Cafesjian and the Cafesjian Family Foundation, Inc. ("CFF") and Plaintiff Armenian Assembly of America, Inc. (the "Assembly"), ruling that CFF and Cafesjian may exercise their rights under that clause effective December 31, 2010. The Court asked the parties to submit additional briefing regarding two issues left unresolved by the Court's prior Memorandum Opinion: (1) whether CFF should be required to reimburse AGM & M for part of the value of properties that shall be transferred to CFF under the terms of the Grant Agreement; and (2) the amount of legal expenses for which Cafesjian and Waters are entitled to be indemnified. The parties have now completed the additional briefing on these issues as ordered by the Court, and these issues are ripe for the Court's resolution. This Memorandum Opinion contains the Court's final findings of fact and conclusions of law with respect to these issues. The parties have also filed a series of papers with the Court regarding the terms on which the properties must be transferred to CFF. The Court shall address these filings in the context of addressing the reimbursement issue.
Pending also before the Court are several additional motions filed by Defendants Cafesjian, Waters, and CFF (collectively, "Defendants"). First, Defendants have filed a [198] Petition for Involuntary Dissolution asking the Court to initiate procedures to involuntarily dissolve AGM & M under D.C. law. Second, Defendants have filed a[221] Motion Requesting Attorneys' Fees for Vexatious Litigation. Third, Defendants have filed a[214] Request for Order to Show Cause as to Why Plaintiffs Should Not Be Held In Contempt for allegedly violating one of this Court's orders. The Assembly and AGM & M (collectively, "Plaintiffs") have filed oppositions to each of these motions, and Defendants have filed replies. In addition, Plaintiffs' former counsel, K & L Gates LLP, has intervened and filed a brief opposing Defendants' motion for attorneys' fees for vexatious litigation. Accordingly, these motions are all ripe for resolution.
For the reasons explained below, the Court finds that the Grant Agreement does not impose any obligation on CFF to reimburse AGM & M for the excess value of the properties over the amount of the funds originally donated. Therefore, the Court shall enter final judgment on this issue and order AGM & M to transfer the properties to CFF without further delay. With respect to the amount of legal fees and expenses subject to the indemnification clause covering Cafesjian and Waters, the Court shall refer this issue to a magistrate judge for a report and recommendation. The Court shall deny-in-part Defendants' motion requesting attorneys' fees for vexatious litigation because Defendants *134 have mostly failed to demonstrate that Plaintiffs or their counsel acted recklessly or in bad faith; however, the Court shall hold in abeyance Defendants' motion with respect to Plaintiffs' untimely production of documents on the eve of trial. The Court shall decline to exercise supplemental jurisdiction over Defendants' petition for involuntary dissolution of AGM & M, as this is a new claim asserted after trial that is best left to be adjudicated by the Superior Court of the District of Columbia. Finally, the Court shall deny Defendants' request for a show cause order because Defendants have not shown that Plaintiffs violated one of this Court's orders.
I. BACKGROUND
The Court set out its factual findings thoroughly in its Memorandum Opinion issued on January 26, 2011, and the Court assumes familiarity with that opinion and incorporates it here. See Armenian Assembly of Am., Inc. v. Cafesjian, 772 F.Supp.2d 20, 2011 WL 229354 (D.D.C. Jan. 26, 2011). The Court shall summarize the facts previously found by the Court to the extent they are relevant to the issues remaining to be decided.
A. Initial Interest in an Armenian Genocide Museum and the Acquisition of the National Bank of Washington Building
In the late 1990s, Cafesjian and several individuals involved with the Assembly joined forces in an effort to create a museum devoted to memorializing the Armenian Genocide. On or about April 1, 1996, Hirair Hovnanian ("Hovnanian"), one of the Assembly's founders, made a pledge of about $1.6 million to establish the Armenian National Institute ("ANI") for the study, research, and affirmation of the Armenian Genocide. Dr. Rouben Adalian ("Adalian"), a historical researcher, was hired to become the director of ANI. Inspired by Hovnanian's pledge, Anoush Mathevosian ("Mathevosian") decided in 1996 to pledge $3 million to be used for the purpose of constructing a permanent museum in Washington, D.C. dedicated to the victims and survivors of the Armenian Genocide. In 1996, the Assembly began to explore properties in Washington, D.C. that would be suitable for a museum. Around this same time, Cafesjian was independently planning to build a memorial to the Armenian Genocide. Through his trusted associate Waters, Cafesjian contacted the Assembly and expressed an interest in potentially associating his planned memorial with the Assembly's museum project. Because Cafesjian had not been involved in the Assembly, he invited Hovnanian, Adalian, and Robert Aram Kaloosdian ("Kaloosdian"), another of the Assembly's founders, to meet with him and discuss the museum project and the Assembly's advocacy efforts. Cafesjian officially joined the Assembly as a trustee in August 1998. At that point in time, Cafesjian and Waters continued to search separately for a location for a memorial.
In or about late 1999, the Assembly identified the National Bank of Washington, located at 619 14th Street, NW, Washington, D.C., as a possible site for the museum. Although it was much larger than the properties they had been looking at to date, everyone involved in the search was impressed by the National Bank of Washington building (the "Bank Building"). The Bank Building has a prime locationjust blocks from the White Houseand its exterior and part of the interior have been designated as historic landmarks in the D.C. Inventory of Historic Sites and the National Register of Historic Places. The property on which the Bank Building is located also includes a vacant back lot which would allow for the construction of an annex. Cafesjian was *135 very interested in the Bank Building, and he dispatched Waters to do due diligence on the property. Because there was another interested buyer, Cafesjian directed Waters to work quickly to arrange the purchase. Cafesjian agreed to donate $3.5 million to the Assembly to create a consolidated location at which the genocide museum, the genocide memorial, and offices for ANI could be located. Anoush Mathevosian agreed to increase her pledge to $3.5 million to acquire the property.
The Assembly closed on the Bank Building on February 16, 2000, purchasing the building for $7.25 million. The funds for the purchase were comprised of a $3.5 million pledge from Mathevosian, a $2.5 million grant from CFF, and a $1 million grant from Cafesjian's Vanguard Charitable Endowment ProgramCafesjian Family Foundation Charitable Trust. Because Mathevosian could not access funds in sufficient time to wire them to the Assembly prior to the closing, CFF provided the Assembly with a $4 million interest-free bridge loan to cover Mathevosian's pledge and to complete the transaction. On March 8, 2000, after the Assembly had received Mathevosian's pledged donation, the Assembly repaid CFF $3.5 million by wire transfer. On March 17, 2000, the Assembly executed a promissory note produced by and for the benefit of CFF for the remaining $500,000.
After the closing, on February 28, 2000, Anoush Mathevosian wrote a letter to the Assembly restating the purpose of her pledge. The letter stated that the purpose of her gift was to foster the development of an Armenian Genocide museum with educational exhibits, and Mathevosian expressed her desire that the Bank Building be used solely for the Assembly, ANI, the museum, and the memorial. She wrote:
To be certain that future generations remain true to the intent of our donations, it should be clear that no changes will be made to the purpose and usage of the Museum; that no mortgages are taken against the property and that the Museum's perpetuation is not jeopardized as such or encumbered in any way; and that there will be no subsequent changes to the name of the museum.
PX-110. At her deposition, Mathevosian explained that she wanted to ensure that they paid for the property in full so that it would not be mortgaged or sold in the future. Mathevosian asked that these understandings be incorporated into the permanent records of the organization. However, there is no evidence that Mathevosian's expressed desires were ever formally incorporated by the Assembly into a binding obligation. Mathevosian testified that Hovnanian agreed to her conditions, but she did not recall whether he had done so orally or in writing. John Waters testified that he did not see Mathevosian's letter until several years later, in late 2003. In any case, Mathevosian did not ask for a reversionary interest in her donation, and therefore she does not have one.
The parties agreed that as a condition of Cafesjian's donation of funds for the purchase of the Bank Building, the Assembly was required to include a memorial named after Cafesjian as part of the project. On March 30, 2000, the Assembly sent Cafesjian a letter confirming his donations and its obligation to build a memorial. The Assembly agreed to cooperate with the design firm or artist chosen by CFF to complete the memorial. The anticipated completion date for the project was March 2002, and CFF agreed to make contributions to the Assembly to finance the memorial. Because of the size of the Bank Building (34,000 sq. ft) and the property on which it sits, it was contemplated that the Assembly and ANI would move out of *136 their existing offices when their lease expired in March 2002 and occupy space on the new site. Accordingly, it was agreed that the development of suitable office space on the property would be a priority. Ross Vartian, then-Executive Director for the Assembly, testified at trial that in retrospect, they were naïve to think that the museum, the memorial, and offices for the Assembly and ANI could all be housed within the Bank Building.
B. Acquisition of the Properties Adjacent to the Bank Building
Once the Bank Building was acquired by the Assembly, Cafesjian began to acquire properties adjacent to the Bank Building. Ultimately, Cafesjian decided to donate the properties to the Assembly for the purpose of expanding the footprint of the museum project.
Cafesjian acquired four parcels adjacent to the Bank Building: (1) 1342 G Street, NW; (2) 1340 G Street, NW; (3) 1338 G Street, NW; and (4) 1334-36 G Street, NW (collectively, the "Adjacent Properties"). Each of the properties was acquired in an arms-length transaction by one of Cafesjian's entities, TomKat Limited Partnership ("TomKat"). TomKat executed an agreement to purchase 1338 G Street for $1.2 million on March 10, 2000 and closed on May 15, 2000. TomKat purchased 1342 G Street for $1.2 million on March 16, 2000 and closed on September 30, 2000. On October 24, 2000, TomKat entered into an Installment Purchase and Sale Agreement to purchase 1340 G Street for a total of $3 million. Under the installment agreement, payments of $150,000 were due each year for a period of ten years, with a final balloon payment of $1.5 million due in March 2011.[3] The final adjacent property, 1334-46 G Street, NW, also known as the "Families U.S.A." building, was acquired later by TomKat, which purchased the building from a third-party seller for $6.5 million in September 2003.
C. Initial Efforts to Develop the Museum and Memorial
A planning committee was formed to handle the task of developing the Bank Building into a museum and memorial. The planning committee operated largely by consensus, and there were about a dozen different individuals who became involved to varying degrees in the planning for the project. Although the committee held several meetings in the spring of 2000 to discuss development plans and fundraising, there was no dedicated staff to shepherd the project along, and the lack of a central decision maker slowed the pace of progress considerably. In 2001, Ross Vartian took on the position of planning director for the project, but the committee was unable to agree on critical decisions such as how to go about hiring professionals to work on the building and how to raise funds to cover the costs of construction and operation. The biggest obstacle was disagreement over the size and scope of the project, including uncertainty over how Cafesjian's acquisition of the Adjacent Properties would affect the development of the museum.
It was around late summer 2001 when Cafesjian agreed to donate the Adjacent Properties to be used for the genocide museum project. No official proposal was made to the Assembly until October 15, 2001, when Cafesjian wrote a letter to Hovnanian outlining the terms of a proposed grant of the three properties that had been acquired. This letter was the *137 first in a series of draft grant agreements that would ultimately be exchanged between Cafesjian and the Assembly. The letter proposed that Cafesjian and/or CFF donate $5.8 million to the Assembly to purchase the properties from TomKat. The proposed grant agreement would require the Assembly to use the properties solely as part of the genocide museum project, subject to plans approved by the Assembly's planning committee. The letter also proposed that if the Assembly failed to develop the property according to those plans, CFF would be entitled to a return of either the grant funds or the properties. Cafesjian expressed his frustration with the lack of progress that had been made, and he explained at trial that he wanted to make certain that the museum was built during his lifetime.
Cafesjian's proposal was generally well received at the Assembly, although the Assembly never responded in writing to Cafesjian's letter. However, there was no meaningful progress throughout the rest of 2001. In 2002, the parties continued to discuss various development proposals and there was some progress. In March 2002, the Assembly determined that an independent entity should be created to develop and operate the museum project. CFF and the Assembly also agreed to combine their conditions with prior gifting commitments, which the newly-formed independent entity would be obliged to honor. CFF and the Assembly agreed to jointly design and approve the governing documents for the new entity, which would become known as the Armenian Genocide Museum & Memorial, Inc. ("AGM & M"). It was agreed that AGM & M would be incorporated as a 501(c)(3) organization as soon as it was possible to do so responsibly and sustainably. The parties also decided that the Assembly offices would not be housed within any portion of the museum complex, in part to keep the museum independent from any advocacy organization and in part because it was thought that there would not be adequate space in the complex for the Assembly. To ensure that the Assembly would get sufficient credit for launching the museum (and to combat the perception that the Assembly was abandoning the project), Cafesjian and Hovnanian agreed to channel their contributions through the Assembly.
In August 2002, the planning committee met and discussed a revised draft grant agreement letter from CFF. Like the previous draft grant agreement sent in October 2001, it contained a reversion clause stating that if the three adjacent properties were not developed in accordance with a plan approved by the AGM & M (with the necessary approval of CFF), CFF would be entitled to a return of either those adjacent properties or the funds used to purchase them. There was some discussion at the meeting that such an open-ended reversion clause would not be appropriate.
The museum project was facing significant cash flow problems over the course of 2002, and Cafesjian had agreed to advance funds necessary for work to be completed in that year. In October 2002, the museum planning committee convened a meeting in New York and engaged in an extensive discussion about the finances for the project. Hovnanian expressed his concern that they would be unable to raise enough money to fund a project with a $100 million budget, and he raised the possibility of phasing in the project, with later expansion tied to better economic circumstances. Others also expressed concerns about the operating deficit. Waters told the committee that Cafesjian was optimistic that the funds could be raised from the community and that, if necessary, Cafesjian was prepared to donate $50-75 million to ensure that the project was completed. According *138 to one draft summary of the meeting, "[a]ll felt that G. Cafesjian's commitment, characterized as a `safety net,' alleviated the fiscal concerns." DX-67 at 2. The planning committee members did reach some agreements about how best to move forward, but the committee remained focused on consensus-based decision-making.
On January 22, 2003, CFF sent a revised draft grant letter to the Assembly for review. As with the previous drafts, the letter contained a reversion clause, but this time it contained a triggering date: if the three donated adjacent properties were not developed according to plans approved by AGM & M by December 31, 2008, then those properties (or the cash used to acquire them) would revert to CFF. The letter also provided that a new $500,000 promissory note would be issued to CFF by the Assembly to replace the previous one, and that the obligation may be transferred to AGM & M. The letter proposed that decisions of the AGM & M Board of Trustees be decided by an 80% affirmative vote. This draft letter was discussed at a meeting in Delray, Florida, where Hovnanian, Vartian, Kaloosdian, and Adalian were present. The Assembly Board of Trustees held another annual meeting in Boca Raton on March 1, 2003. By the time of this meeting, everyone agreed that AGM & M should be launched as an independent entity with a budget of around $100 million and a new building constructed on the Bank Building and the three adjacent properties to be donated by Cafesjian. It was also agreed that ANI would retain its status as an independent 501(c)(3) organization, but that it would become a subsidiary of the new museum entity.
D. Final Negotiation of the Grant Agreements and the Creation of AGM&M
It took seven months following the March 2003 meeting to finalize the agreements and governing documents that would create AGM & M. One reason for the delay was the acquisition of the fourth adjacent property, the Families U.S.A. building. Through TomKat, Cafesjian entered into a purchase agreement to buy the property for $6.5 million on September 22, 2003. The closing date was scheduled for October 30, 2003.
The draft grant agreement from Cafesjian continued to be discussed and negotiated. Because Cafesjian had agreed to channel his donations to AGM & M through the Assembly, it was decided that Cafesjian would enter a grant agreement with the Assembly (hereinafter, the "Grant Agreement"), and the Assembly would transfer all of the museum-related assets and obligations to AGM & M in a separate agreement, to be known as the "Transfer Agreement." The law firm of Caplin & Drysdale was hired to draft the Transfer Agreement as well as the organic documents for AGM & M, including the Articles of Incorporation, the By-Laws, and a Unanimous Written Consent agreement signed by all of the initial trustees of AGM &M.
The record shows that the language in the Grant Agreement was reviewed by most of the major figures involved in AGM & M during the months leading up to its execution on November 1, 2003. On October 13, 2003, Waters emailed an updated draft of the Grant Agreement, which included the donation of the Families U.S.A. building, for review. The revised draft also included a new trigger date of December 31, 2010 for the reversion clause; it was felt that seven years was a reasonable timeline for the completion of the project. The reversion clause was also expanded to cover the Bank Building in addition to the four Adjacent Properties. Because the *139 Families U.S.A. building transaction was scheduled to close on October 30, Waters urged everyone to act expeditiously so that title to the building could be transferred directly to AGM & M, eliminating the need to transfer the property from TomKat to AGM & M and saving hundreds of thousands of dollars in transfer and recordation fees. On October 28, 2003, a conference call was held with, inter alia, Hovnanian, Cafesjian, Kaloosdian, Waters, and Vartian to discuss the four key documents: the Grant Agreement, the Articles of Incorporation for AGM & M, the AGM & M By-Laws, and the Unanimous Written Consent agreement. During this meeting, Kaloosdian suggested that the language in the reversion clause in the Grant Agreement be clarified so as to avoid ambiguity about when the right of reversion might be triggered. The final language of these documents was approved shortly after this conference call.
The Court noted in its prior Memorandum Opinion that several individuals involved in these discussions, including Kaloosdian and Hovnanian, had a convenient lack of memory with respect to what transpired. Therefore, the Court relied heavily on documents that were submitted as exhibits to determine the events in question. The Court also noted that it appeared as if these individuals did not take the time to fully understand the terms and conditions of the agreements. Any claim that these individuals had certain intentions with regard to these documents is disingenuous and belied by the language of the documents themselves.
The Articles of Incorporation for AGM & M were signed on October 29, 2003, and AGM & M officially became incorporated as a nonprofit corporation in the District of Columbia. The Articles of Incorporation and the By-Laws for AGM & M were ratified and adopted, respectively, pursuant to the Unanimous Written Consent agreement, which was executed on October 30, 2003. The Grant Agreement and Transfer Agreement were signed on November 1, 2003 during an Assembly gala in Palm Desert, California. Because the content of these documents is critically important to disputed issues in this litigation, the Court shall review each of these documents in some detail.
1. The Grant Agreement
The Grant Agreement was signed by Cafesjian on behalf of himself and CFF and by Hovnanian and Peter Vosbikian on behalf of the Assembly. See DX-2 (hereinafter, "Grant Agreement").[4] The eleven-page document sets forth the terms and conditions of the grants made by Cafesjian and CFF to the Assembly for the museum project and obligates the Assembly to comply with those terms and conditions.
Pursuant to the Grant Agreement, Cafesjian and/or CFF (jointly defined as the "Grantor") agreed to donate $10.3 million for the purchase of the Adjacent Properties from TomKat and any related transaction costs. In addition, Cafesjian and/or CFF agreed to make the annual $150,000 payments under the installment agreement for 1340 G Street and the final balloon payment of $1.5 million due in March 2011. See Grant Agreement §§ 2(D)-(E). The amounts paid under the Grant Agreement were calculated based on the purchase price paid by TomKat for the Adjacent Properties, plus the holding costs paid by TomKat pending transfer minus any rents earned during this period, plus the legal costs associated with the transfer.
*140 For purposes of this litigation, the most critical feature of the Grant Agreement is the reversion clause. Under § 3.1 of the Grant Agreement, the "Grant Property" defined as the Bank Building and the Adjacent Properties"may only be used as part of the AGM & M,[[5]] subject to plans for the AGM & M approved by the Board of Trustees of the American Genocide Museum & Memorial, Inc. (the `Plans'). . . ." Grant Agreement § 3.1(A). The next section reads as follows:
If the Grant Property is not developed prior to December 31, 2010 in accordance with the Plans, or if the Grant Property is not developed in substantial compliance with the Plans including with respect to the deadlines for completion of the construction, renovation, installation and other phases detailed in the Plans, then:
(i) in the event any portion of the Grants has not been funded, this Agreement terminates;
(ii) to the degree any portion of the Grants has been funded, at the Grantor's sole discretion, the Assembly shall return to the Grantor the Grant funds or transfer to the Grantor the Grant Property.
Id. § 3.1(B). The phrase "Grant funds" as referenced in the reversion clause includes both the initial grant of $4 million that was used to acquire the Bank Building as well as the $12.85 million pledged to acquire the Adjacent Properties. Cafesjian testified that the purpose of the reversion clause was to provide an incentive to complete the museum expeditiously, so that it might be built before Cafesjian died. Waters testified that the reversion clause was most likely his idea; he explained that CFF often inserted reversion clauses into its grant agreements. Section 3.3 of the Grant Agreement requires the Assembly to use the "Grant funds only for purposes described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended." Id. § 3.3.
The Grant Agreement provides that the Assembly shall make available a space for a memorial to be named the "Gerard L. Cafesjian Memorial" or another name approved by CFF, which shall be operated and maintained in perpetuity by the Assembly at its own cost. Grant Agreement § 3.2. The Grant Agreement also provides that neither CFF nor Cafesjian have any obligation to provide additional funding to the Assembly or to AGM & M. Id. § 3.8. The Grant Agreement also contains a breach clause:
(A) If the Assembly fails to use the Grants solely for the purposes set out in this Agreement or if the Assembly fails to satisfy any of the conditions of this Agreement, Grantor is released from any remaining obligation under this Agreement to provide funds or property to the Assembly.
(B) If the Assembly uses any portion of the Grants either for a purpose other than those set out in this Agreement or for a purpose other than those described in Section 501(c)(3) of the [Internal Revenue] Code, as amended, the Assembly shall repay the portion of the Grants so spent to Grantor, plus interest.
(C) The remedies set out in this Section 3.9 are in addition to any other remedies that may be available to the Grantor at law or equity.
Grant Agreement § 3.9.
The Grant Agreement also required the Assembly to enter into a Transfer Agreement *141 with AGM & M to transfer all of its interest in all cash, pledges, property, and other assets being held by the Assembly for the museum project. Id. § 5.3(A). The Transfer Agreement would obligate AGM & M to honor all existing donor requirements at the time of transfer and to assume all obligations in the Grant Agreement relating to the Memorial. Id. § 5.3(B)-(C). The Grant Agreement also provided that the Assembly would assign its right to appoint the Trustees of the Armenian National Institute to AGM & M. Id. § 5.5.
2. The Transfer Agreement
The Transfer Agreement was executed on November 1, 2003 by the Assembly and the newly-incorporated AGM & M. See PX-114 (hereinafter, the "Transfer Agreement"). The Transfer Agreement requires the Assembly to contribute to AGM & M "all of its rights, title and interest in and to all cash, pledges, real property, tangible property, intangible property, and other assets contributed to the [Assembly] and/or held by the [Assembly] for the development, renovation, and construction of the AGM & M." Id. § 1.1. The approximate aggregate value of the grant was listed as $27.8 million, including $7.25 million in property, over $19 million in pledges, and approximately $670,000 in cash and other assets. Id. § 1.1(C).
Pursuant to § 1.2 of the Transfer Agreement, "AGM & M, Inc. must honor all of the [Assembly]'s donor requirements existing at time of transfer, or in the alternative, obtain donor consent to the transfer and any modification of donor terms." Transfer Agreement § 1.2(A). The agreement also explicitly requires AGM & M to comply with the obligation to construct a memorial as set out in the Grant Agreement. Id. § 1.2(B). The Transfer Agreement also requires AGM & M to use the funds and property transferred "solely to develop, construct and operate" the Armenian Genocide Museum & Memorial. Id. § 1.3. The agreement also contains an arbitration clause. See Transfer Agreement § 5.3. However, as the Court noted in its prior Memorandum Opinion, none of the parties is presently seeking to enforce that arbitration clause.
3. The AGM & M Articles of Incorporation
The Articles of Incorporation for AGM & M were executed on October 29, 2003. See PX121. The Articles provide that AGM & M is a nonprofit corporation organized for charitable purposes within the meaning of § 501(c)(3) of the Internal Revenue Code. Id., Art. IV(A). The purpose of the corporation is defined as, inter alia, "to own, operate, and maintain a permanent museum and memorial to the victims and survivors of the Armenian Genocide." Id. The Articles provide that AGM & M has no members and that the board of directors for the corporation shall be referred to as the Board of Trustees. See id., Arts. V-VI. The manner of election or appointment to the Board of Trustees is to be set forth in the By-Laws of the corporation. Id., Art. VI. The Board of Trustees must have at least three trustees at all times, and the initial trustees are defined to be Gerard L. Cafesjian, Hirair Hovnanian, Anoush Mathevosian, and Robert Kaloosdian. Id., Art. IX. The Articles also provide that "[n]o part of the net earnings of the Corporation shall inure to the benefit of or be distributed to any trustee, employee or other individual, partnership, estate, trust or corporation having a personal or private interest in the Corporation." Id., Art. IV(C).
4. The AGM & M By-Laws
The By-Laws of AGM & M set out rules that govern the operation of the Board of Trustees. See PX-122 (hereinafter, "By-Laws"). The By-Laws provide that the *142 term of office of each of the initial trustees (i.e., Cafesjian, Mathevosian, Hovnanian, and Kaloosdian) "shall be perpetual." By-Laws § 2.4. Each donor that elected an initial trustee (CFF, Mathevosian, Hovnanian, and the Assembly) is entitled to appoint a successor trustee in the event that the initial trustee is unable to serve for any reason. Id. Additional trustees may be elected to the Board of Trustees by making a contribution of $5 million to AGM & M, provided that the Board of Trustees has accepted the contribution by an 80% affirmative vote and the donor has appointed a successor. Id. § 2.5. Each donor (including initial donors) is entitled to one vote on the Board of Trustees for each $5 million contributed. Id. §§ 2.4-2.5.
The By-Laws prohibit AGM & M from engaging in any activities or conduct that would not be permitted to a corporation exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. See By-Laws § 3.3. Similarly, the By-Laws provide that "[n]o part of the net earnings shall inure to the benefit of, or be distributable to, the Trustees, officers or others except that the Trustees shall be authorized and empowered, if they so elect, to pay to Trustees, officers or others reasonable compensation for service rendered and to make payments and distribution in furtherance of the purposes set forth in these By-Laws." Id.
Pursuant to § 4.1 of the By-Laws,
Unless otherwise prohibited by law or sections 4.3 and 4.4 of these By-Laws, the Corporation shall indemnify any Trustee or officer of the Corporation, any former Trustee or officer of the Corporation, or any person who may have served at its request as a trustee, director or officer of another corporation or entity, whether for profit or not for profit, and may, by resolution of the Board of Trustees, indemnify any employee or agent of the Corporation against any and all expenses and liabilities actually and necessarily incurred by him or her or imposed on him or her in connection with any claim, action, suit or proceeding (whether actual or threatened, civil, criminal, administrative or investigative, including appeals) in which he or she is or may be made a party by reason of having been such Trustee, officer, person, employee or agent, subject to the limitation, however, that there shall be no indemnification in relation to matters as to which he or she shall be adjudged in such claim, action, suit or proceeding to be guilty of a criminal offense or liable to the Corporation for damages arising out of his or her own negligence or misconduct in the performance of a duty to the Corporation.
The By-Laws provide that indemnification shall include, but not be limited to, counsel fees and other costs. Section 4.3 of the By-Laws provides that if AGM & M is ever deemed a private foundation within the meaning of Section 509 of the Internal Revenue Code, no indemnification shall be paid if such payment would constitute an act of self-dealing or a taxable expenditure as defined in Sections 4941(d) or 4945(d) of the Internal Revenue Code, respectively. Id. § 4.3.
5. The Unanimous Written Consent Agreement
On October 30, 2003, each of the four initial trustees of AGM & M signed a document titled Unanimous Written Consent in Lieu of the Organization Meeting of the Board of Trustees of AGM & M. See DX-1 (hereinafter, "UWC"). By unanimous written consent, the Board of Trustees adopted a series of resolutions. First, the actions of the incorporators were ratified and the By-Laws were approved. Second, the initial donors (and their appointed *143 trustees) were recognized to be CFF (Cafesjian), Hirair Hovnanian (himself), Anoush Mathevosian (herself), and the Assembly (Kaloosdian). Cafesjian was appointed Chairman and President, Hovnanian was appointed Vice Chairman, and John Waters was appointed Secretary and Treasurer.
Through the Unanimous Written Consent agreement, the AGM & M Board of Trustees authorized the officers to pay all of the organizational expenses of the corporation. The actions of the Chairman (Cafesjian) and the Secretary/Treasurer (Waters) in negotiating the purchase of the Adjacent Properties were ratified and approved, and the Secretary/Treasurer was authorized "to enter into and execute any and all documents necessary to effect the purchase" of the Adjacent Properties and "to take such other action as deemed necessary or desired to effect such transactions." UWC at 3. The AGM & M Board also approved and ratified the negotiation of grant agreements with donors and the Assembly, and the Secretary/Treasurer was authorized to negotiate further grant agreements with donors. The Board also accepted from the Assembly its power to appoint trustees for the Armenian National Institute.
E. Efforts to Develop An Armenian Genocide Museum Through AGM & M
The facts surrounding what happened after AGM & M was formally created were thoroughly discussed in the Court's prior Memorandum Opinion and need not be repeated herein. The AGM & M Board of Trustees was unable to reach consensus on the proper size and scope of the project, and tensions between Cafesjian and Hovnanian increased over a series of disagreements about the museum project and other policies of the Assembly. By 2006, relations between the parties had completely broken down, prompting Cafesjian to propose that AGM & M be dissolved. Cafesjian ultimately resigned from the AGM & M Board of Trustees, designating Waters as his successor. After Cafesjian sued the Assembly for payment on the promissory note, the other AGM & M Trustees voted to exclude Waters from participation on all matters relating to the museum project. This resulted in a series of lawsuits filed by the parties fighting for control of AGM & M and alleging mismanagement of the corporation. The three other AGM & M trustees attempted to move forward with the project without Waters's involvement, but they were unable to raise the funds necessary to implement a development plan. Accordingly, the museum was not developed by December 31, 2010, thus triggering the reversion clause in the Grant Agreement.
II. DISCUSSION
A. Findings of Fact and Conclusions of Law Regarding CFF's Obligation to Reimburse AGM & M for the Value of Properties that Revert Under the Grant Agreement
The Court ruled in its prior Memorandum Opinion that the reversion clause in the Grant Agreement was valid and enforceable and that CFF and Cafesjian may exercise their rights under that clause effective December 31, 2010. Cafesjian informed the Court that only CFF will exercise its rights under the reversion clause and that CFF will elect to have the properties transferred in lieu of the grant funds. The Court indicated, however, that Plaintiffs had raised questions about whether returning the properties to CFF violates the rulestated in the AGM & M By-Laws and Articles of Incorporation that no part of AGM & M's net earnings shall inure to the benefit of any trustee. *144 The Court asked the parties to address in further briefing whether it would be inequitable to enforce the reversion clause without requiring CFF to reimburse AGM & M for any potential increased value over the amount of funds originally donated by CFF or Cafesjian, and to address whether it was the original intent of the contracting parties that the reversion would be a nonprofit transaction. Through supplemental briefing, the parties have clarified their positions on these issues.
Plaintiffs argue that the reversion clause in the Grant Agreement, when read in context with the other provisions of the Grant Agreement and the terms of the AGM & M By-Laws and Articles of Incorporation, should be construed as requiring that CFF not realize a profit from the reversion. Plaintiffs contend that CFF will profit from the reversion because the value of the properties being transferred exceeds the value of the donation that CFF and Cafesjian made as part of the Grant Agreement. Furthermore, Plaintiffs argue that a reversion without some form of reimbursement would violate federal tax laws applicable to nonprofit organizations under § 501(c)(3) of the Internal Revenue Code. Defendants, by contrast, claim that the language in the Grant Agreement is unambiguous and places no restrictions on the right of CFF to elect a reversion of the properties rather than the grant funds. They also dispute Plaintiffs' claim that the reversion runs afoul of the tax laws. The Court shall address these arguments below.
1. The Grant Agreement
Ultimately, the issue before the Court is a straightforward question of contract interpretation: does the Grant Agreement require CFF to reimburse AGM & M for the extent to which the value of the properties to be transferred exceeds the value of the grant funds donated to acquire them?
The District of Columbia adheres to an "objective" law of contracts, meaning that "the written language embodying the terms of an agreement will govern the rights and liabilities of the parties [regardless] of the intent of the parties at the time they entered into the contract, unless the written language is not susceptible of a clear and definite undertaking, or unless there is fraud, duress, or mutual mistake." Dyer v. Bilaal, 983 A.2d 349, 354-55 (D.C. 2009) (citation omitted; brackets in original). "If the court finds that the contract has more than one reasonable interpretation and therefore is ambiguous, then the courtafter admitting probative extrinsic evidencemust determine what a reasonable person in the position of the parties would have thought the disputed language meant." Tillery v. D.C. Contract Appeals Bd., 912 A.2d 1169, 1176 (D.C.2006) (quoting In re Bailey, 883 A.2d 106, 118 (D.C. 2005)). "Ambiguity exists only if the court determines that the proper interpretation of the contract cannot be derived from the contractual language exclusively, and requires consideration of evidence outside the contract itself." Steele Foundations, Inc. v. Clark Constr. Grp., Inc., 937 A.2d 148, 153 (D.C.2007). "[C]ontracts are not rendered ambiguous by the mere fact that the parties do not agree upon their proper construction." Id. In determining whether a contract is ambiguous, courts examine the document on its face and give the language its plain meaning. Tillery, 912 A.2d at 1176.
The first step in interpreting a contract is to determine "what a reasonable person in the position of the parties would have thought the disputed language meant." Steele Foundations, 937 A.2d at 154 (quoting Dodek v. CF 16 Corp., 537 A.2d 1086, 1092 (D.C.1988)). "The meaning *145 must be ascertained in light of all the circumstances surrounding the parties at the time the contract was made," and "[t]he writing must be interpreted as a whole, giving a reasonable, lawful, and effective meaning to all its terms." 1010 Potomac Assocs. v. Grocery Mfrs. of Am., Inc., 485 A.2d 199, 205 (D.C.1984) (internal citations omitted).
The language in the Grant Agreement is unambiguous: if the conditions triggering the reversion are met, "at the Grantor's sole discretion, the Assembly shall return to the Grantor the Grant funds or transfer to the Grantor the Grant Property." It is clear from this language that the Grantor (CFF and Cafesjian) may choose between a return of the funds donated and a transfer of the properties. There is no language in the reversion clause or anywhere else in the Grant Agreement that restricts the Grantor's right to receive the Grant Property. The Court presumes that if the parties had intended to place any restrictions of the Grantor's right to elect a transfer of the Grant Property, they would have memorialized that intent in the Grant Agreement itself, particularly in light of the fact that the Grant Agreement contains an integration clause. See Luther Williams, Jr., Inc. v. Johnson, 229 A.2d 163, 165 (D.C. 1967) ("[I]t has always been presumed that a written contract is the final repository of the agreement of the parties.... [A]n integration clause merely strengthens this presumption.") (internal citation omitted).
Plaintiffs argue that the two options in the reversion clause, "when read together and with the balance of the Grant Agreement, signify that the exercise of the reversion would be a nonprofit transaction." See Pls.' Br. Regarding Reimbursement at 3. However, that is not a natural construction of the plain language of the Grant Agreement. All parties knew at the time they entered into the agreement that the value of the Grant Property, which included the Bank Building and the Adjacent Properties, would be potentially much greater than the value of the Grant funds, which covered the purchase of the Adjacent Properties and only about half the cost of the Bank Building (the other half being covered by Anoush Mathevosian). Therefore, even at the outset, the Grantor's choice was not between two options that were equal in value. It is implausible that the parties would have intended the options to be equal seven years later on the reversion date of December 31, 2010, for this would effectively eliminate the Grantor's right to elect the most valuable remedy.
It is even more inconceivable that the parties would have intended for the transfer of the Grant Property to be a nonprofit transaction without specifying any provisions for determining the value of the Grant Property at the time of transfer. Valuing property in the absence of an arms-length market transaction is inherently uncertain, and the record at trial indicated that there were widely varying appraisals of the properties depending on whether they would be used to build a museum or sold to a commercial developer, with no definite valuation. See Trial Tr. (11/16 PM) at 85-87; DX-513N. Any valuation offered by the parties at this time would be speculative. Since the Court has determined that there are no "strings" attached to CFF's use of the properties once transferred, how would the Court decide what method of valuation was appropriate to ensure that CFF did not realize a profit? Such uncertainty over how to implement a "nonprofit" transfer is a significant reason to assume that this was not what the parties intended.
Plaintiffs argue that their interpretation of the options as equal in value is *146 supported by the limiting phrase in the reversion clause: "to the degree any portion of the Grants has been funded...." They argue that this phrase must be read as limiting the Grantor's right of reversion to the extent that the Grants have actually been funded, and they argue that Defendants' construction "would allow the grantors to take back the entire grant properties even if they had not fulfilled their payment obligations under the pledge." Pl.'s Br. Regarding Reimbursement at 7. But Plaintiffs overlook the fact that under the Grant Agreement, the Grant funds had to be used to purchase the Grant Property, meaning that if Cafesjian and CFF had not fulfilled their pledges, AGM & M would never have acquired all of the properties that now must be transferred. Therefore, there was never any risk that Cafesjian and CFF would receive a windfall, for example, by paying for the acquisition of only one of the Adjacent Properties and then receiving all four of them under the reversion clause. Ultimately, the Court is not persuaded that the phrase "to the degree any portion of the Grants has been funded" places any restriction on the Grantor's right to elect a transfer of the Grant Property, particularly where the record demonstrates that Cafesjian and CFF have fulfilled their obligations under the Grant Agreement.[6]
Plaintiffs also argue that the requirement in § 3.3 of the Grant Agreement that the Grant funds be used "only for purposes described in Section 501(c)(3) of the Internal Revenue Code" supports their position. By its own terms, this provision acts as a limitation only on the use of the Grant funds; it says nothing about transferring the Grant Property. Even assuming that § 3.3 applied to the transfer of the Grant Property, the general language in § 3.3 cannot be fairly read to implicitly restrict the more specific language contained in the reversion clause. Therefore, the Court finds that § 3.3 does not impose any reimbursement requirement on the transfer of the Grant Property.
Plaintiffs complain that without a reimbursement requirement, CFF will be allowed to retain the benefit of the appreciated value of the properties, Anoush Mathevosian's $3.5 million donation, and more than seven years of carrying costs, taxes, and insurance that were paid for the properties, with the result being that AGM & M is stripped of nearly all its assets. Plaintiffs argue that the parties could not have intended such an inequitable result. But this was a foreseeable consequence at the time the parties entered into the agreement. The reversion clause in the Grant Agreement was intended to create a meaningful incentive for the parties to substantially complete the museum project by December 31, 2010. Since the parties failed to reach that milestone, Plaintiffs must live with the consequences of their bargained-for agreement. The Court cannot reform the plain terms of the Grant Agreement simply because Plaintiffs belatedly realized how dire those consequences would be.
2. The AGM & M By-Laws and Articles of Incorporation
Plaintiffs argue that the Court should look beyond the four corners of the *147 Grant Agreement to the AGM & M By-Laws and Articles of Incorporation in determining the meaning of the reversion clause. However, the Court has no occasion to search beyond the text of the Grant Agreement because the terms of the reversion clause are clear and unambiguous. See 1010 Potomac Assocs., 485 A.2d at 205 ("Extrinsic evidence of the parties' subjective intent may be resorted to only if the document is ambiguous."). Although the Court may consider these documents as part of the circumstances surrounding the formation of the Grant Agreement, see id., the execution of these documents does not alter the Court's interpretation of the Grant Agreement. Plaintiffs contend that the adoption of the AGM & M Articles of Incorporation and By-Laws around the same time as the Grant Agreement and Transfer Agreement demonstrates that the parties intended for the private inurement restrictions contained in the By-Laws and the Articles to apply to the Grant Agreement. Again, however, the specific and direct language in the reversion clause is the best evidence of the parties' intent. The Court is not persuaded that the parties would have intended to restrict the Grantor's reversion rights through more general language contained in entirely separate documents. See Washington Automotive Co. v. 1828 L Street Assocs., 906 A.2d 869, 880 (D.C. 2006) ("[It is] a familiar principle of contract interpretation[] that `specific terms and exact terms are given greater weight than general language.'") (quoting Restatement (Second) of Contracts § 203(c) (1981)). The lack of any explicit restriction on the transfer in the Grant Agreement strongly suggests that the parties did not intend to subject the transfer to any private inurement regulations.
Plaintiffs argue that the Court should not construe the reversion clause in a manner that could result in adverse tax consequences for AGM & M, suggesting that the parties would not have intended such a result. However, there is no reason to assume that the parties expected AGM & M to survive if the reversion clause was exercised; to the contrary, it is reasonable to assume that the parties expected the reversion of either the Grant funds or the Grant Property to be the death knell for the organization. The parties in this litigation created AGM & M for the express purpose of creating a museum and memorial devoted to the Armenian Genocide on the site of the Bank Building and the Adjacent Properties. Without those properties, it is unclear how AGM & M could be expected to fulfill its mission and survive as an organization. Therefore, the Court is not persuaded that the parties intended to spare AGM & M from any adverse tax consequences that might result from the transfer of the Grant Property.
Plaintiffs claim that construing the reversion clause as requiring no reimbursement for appreciated value would create "a vehicle for tax fraud" because it would allow wealthy donors to put cash into a charity for the acquisition of real estate, wait for the value of that real estate to increase over time, and then seek the return of the appreciated real estate pursuant to some unmet condition, thereby gaining the appreciated property without any consequence. See Pls.' Br. Regarding Reimbursement at 7. It is unclear why Plaintiffs believe there would be no tax consequences to the donor in this hypothetical, and Plaintiffs cite no authority to explain their theory of this "vehicle for tax fraud." In any event, the collection and recovery of federal taxes is the sole responsibility of the United States government; Plaintiffs cannot compel Defendants to comply with the tax code through this litigation. See 26 U.S.C. § 7401 ("No civil *148 action for the collection or recovery of taxes, or of any fine, penalty, or forfeiture, shall be commenced unless the Secretary [of the Treasury] authorizes or sanctions the proceedings and the Attorney General or his delegate directs that the action be commenced."). Furthermore, the Court has no power to change the terms of the Grant Agreement merely because enforcing the reversion clause can be expected to have adverse tax consequences for the parties.
3. Tax Regulations Prohibiting Private Benefit
Plaintiffs have presented the Court with a rather complicated set of arguments as to why they believe that allowing CFF to profit from the transfer of the Grant Property will violate federal tax laws pertaining to tax-exempt organizations. As the Court has explained, these arguments are essentially irrelevant because the Grant Agreement clearly and unambiguously requires AGM & M to transfer the properties without regard to the tax consequences of the transfer. In any event, the Court is not persuaded that the transfer of the properties to CFF violates the tax laws as Plaintiffs claim.
Plaintiffs' central argument is that by transferring the Grant Property to CFF, AGM & M will be violating regulations that require § 501(c)(3) organizations to be operated exclusively for tax-exempt purposes. Pursuant to 26 C.F.R. § 1.501(c)(3)-1(c)(2), "[a]n organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals." A private shareholder or individual is defined as a person having a personal and private interest in the activities of the organization. 26 C.F.R. § 1.501(a)-1(c). The purpose of the inurement provision is "to prevent the siphoning of charitable receipts to insiders of the charity." United Cancer Council, Inc. v. Comm'r, 165 F.3d 1173, 1176 (7th Cir.1999); see also I.R.S. Priv. Ltr. Rul. 201047033 (Nov. 3, 2010) ("Inurement is any transfer of charitable assets to the organization's insiders for which the organization does not receive adequate consideration. Inurement can take many forms.").
Defendants argue that there can be no violation of the inurement provision because the property is being transferred to CFF, another 501(c)(3) organization which is neither a shareholder of AGM & M nor a private individual. Because CFF itself must operate exclusively for tax-exempt purposes, Defendants argue that there will be no "private" benefit from the transfer of property that would frustrate the purposes of § 501(c)(3). Plaintiffs do not directly respond to this argument in their briefing, and they have cited no cases in which it was determined that a 501(c)(3) organization was a private shareholder or individual for purposes of the inurement provision. In fact, Plaintiffs' counsel essentially conceded the point during a Status Hearing on February 24, 2011, noting that "by designating the actual acquiring entity as CFF, that ... avoids some of the limitations in the private inurement law." 2/24/11 Hr'g Tr. at 16. Accordingly, the Court is not persuaded that the transfer of the properties to CFF will violate the prohibition on private inurement as stated in the federal tax laws and incorporated into the By-Laws and Articles of Incorporation of AGM & M.[7]
*149 Moreover, based on a review of the substance of the transaction as a whole, the Court is not persuaded that the transfer of the property under the Grant Agreement qualifies as private inurement. Contrary to Plaintiffs' characterization, this is not a case where a wealthy donor gave money to an organization to buy property and then the corporation gave the property back to the donor after it had substantially appreciated. This is a case where a donor made a conditional gift of funds to be used for a specific purpose, and after AGM & M was unable to fulfill the required conditions, it was compelled to allow the donor to recover the properties acquired with the gifted funds. Defendants rely heavily on Underwood v. United States, 461 F.Supp. 1382 (N.D.Tex.1978), which also involved the return of a conditional gift. In Underwood, the plaintiff had agreed to donate $1 million to the Southern Methodist University School of Law through a charitable foundation with the understanding that all of his donations would be deductible for federal income tax purposes. See id. at 1384. After the IRS disallowed some of Underwood's deductions to the charitable foundation, Underwood reached an agreement with the foundation to return his donations so that he could give the money directly to the law school. Id. at 1385. The IRS determined that the return of funds from the foundation amounted to self-dealing in violation of 26 U.S.C. § 4941, which imposes a tax on any act of self-dealing between a private foundation and any "disqualified person" such as a substantial contributor to the foundation. See 26 U.S.C. §§ 4941, 4946(a)(1).[8] However, the Underwood court held that the return of funds by the foundation was not an act of self-dealing because it was simply the return of a conditional gift. 461 F.Supp. at 1389.
Underwood is distinguishable from this case, primarily because the donor in that case received an exact refund of the amount he had donated. By contrast, CFF is going to receive properties that were purchased for $3.5 million more than CFF and Cafesjian donated to acquire them (the amount of Mathevosian's contribution) and that may or may not have appreciated in value since then. Therefore, it could be argued that CFF will "profit" from the transfer of the properties. However, pecuniary gain does not automatically equate to inurement; the question is whether the profit is reasonable in light of the benefits to AGM & M. Cf. Church By Mail, Inc. v. Comm'r, 765 F.2d 1387, 1392-93 (9th Cir.1985) (noting that payment of excessive salaries to employees may constitute inurement to the benefit of a private person). The circumstances surrounding the Grant Agreement and the formation of AGM & M demonstrate that the reversion clause was an essential part of the bargain that enabled AGM & M to obtain the funds necessary to acquire the properties. Cafesjian and CFF were unwilling to donate additional millions of dollars to the genocide museum and memorial project unless they could be reasonably assured that the project would be substantially completed in a timely manner. Therefore, they demanded a reversion clause that would enable them to get control of the properties in case AGM *150 & M was unsuccessful. This was not a sham transaction for AGM & M to shelter assets for Cafesjian and CFF; it was an agreement that gave AGM & M a financial incentive to be successful with the money donated by Cafesjian and CFF. The Court has already found that Cafesjian and the CFF-designated trustees of AGM & M acted in good faith to try to develop the genocide museum and memorial before the reversion date of December 31, 2010. In that regard, it is unfair and without support to characterize the Grant Agreement as an act of self-dealing or to state that AGM & M was operating for the private benefit of Cafesjian or CFF.[9]
4. Implementing the Transfer
For all of the aforementioned reasons, the Court finds that the Grant Agreement clearly and unambiguously requires AGM & M to transfer the Grant Property to CFF without regard to any tax consequences that flow therefrom. To date, AGM & M has failed to transfer the Grant Property, citing concerns about the tax consequences of the transfer and demanding that several restrictions be placed on the transfer.[10] Now that the Court has addressed Plaintiffs' arguments relating to the tax consequences of the transfer, there should be no reason for further delaying the transfer of the properties. Defendants have asked the Court to order the trustees of AGM & M to sign certain documents prepared by Defendants to complete the transfer. The Court declines at this time to order the trustees to sign the specific documents drafted by Defendants' counsel. Instead, the Court shall order the AGM & M trustees to transfer the property to CFF in accordance with D.C. law by no later than May 23, 2011.
B. Findings of Fact and Conclusions of Law Regarding AGM & M's Indemnification of Cafesjian and Waters
The Court ruled in its prior Memorandum Opinion that Defendants Cafesjian and Waters were entitled to indemnification under § 4.1 of the AGM & M By-Laws for expenses actually and necessarily incurred by them in defense of claims brought against them by Plaintiffs. The indemnification requirement extends only to claims that arose out of Cafesjian's or Waters's duties as officers or directors of AGM & M, which are asserted in Count One of the Consolidated Complaint. Expenses relating to the Assembly's claims against Cafesjian and Waters for breach of fiduciary duty or misappropriation of trade secrets are not covered by the indemnification clause in the AGM & M By-Laws. The Court previously indicated that it would determine the amount of indemnification in post-trial proceedings. Cafesjian and Waters have submitted a brief with supporting documentation that sets forth the amount of their expenses. Plaintiffs have filed an opposition contesting the reasonableness and validity of those expenses, *151 and Defendants have filed a reply. Plaintiffs raise a series of objections to Defendants' request for indemnification, and the Court shall address each below.
"[O]nce a contractual entitlement to attorney's fees has been ascertained, the determination of a reasonable fee award is for the trial court in light of the relevant circumstances." Ideal Electronic Sec. Co. v. Int'l Fid. Ins. Co., 129 F.3d 143, 150 (D.C.Cir.1997). "[T]he reasonableness of an attorney's fees award is within the sound discretion of the trial court and is reviewed only for abuse of discretion." Id. The Court has discretion to determine the nature and amount of proof necessary to determine reasonableness and may fix the amount of the fee without hearing any evidence at all. FDIC v. Bender, 127 F.3d 58, 64 (D.C.Cir.1997).
1. Self-Dealing
Although they did not raise this argument before the Court issued its Memorandum Opinion, Plaintiffs now contend that indemnification is not required under the By-Laws because AGM & M has been deemed a private foundation within the meaning of § 509 of the Internal Revenue Code and the payment of legal expenses to Cafesjian and Waters would amount to an act of self-dealing under § 4941(d) of the Internal Revenue Code. See By-Laws § 4.3 ("[I]f at any time the Corporation is deemed to be a private foundation within the meaning of Section 509 of the Code then, during such time, no payment shall be made under this Article if such payment would constitute an act of self-dealing or a taxable expenditure, as defined in Section 4941(d) or Section 4945(d), respectively, of the Code."). Defendants dispute whether AGM & M has been "deemed to be a private foundation," since there is no evidence that the IRS has yet made such a determination. Plaintiffs have submitted financial documents to the Court under seal purportedly showing that AGM & M lost its status as a public charity in fiscal year 2010, when its public support fraction dropped below the level required to maintain public charity status. See [217] Pls.' Status Report to the Court at 3-5. However, there is no evidence before the Court indicating that the IRS has made any determination that AGM & M qualifies as a private foundation. Section 4.3 provides that indemnification shall not be paid "during such time" that "the Corporation is deemed to be private foundation," suggesting that until a determination is made by the IRS, indemnification must be paid.
Even assuming that AGM & M is deemed a private foundation, however, Treasury regulations provide that indemnification of former officers does not amount to an act of self-dealing for purposes of § 4941(d). Pursuant to 26 C.F.R. § 53.4941(d)-2(f)(3),
section 4941(d)(1) shall not apply to the indemnification by a private foundation of a foundation manager, with respect to the manager's defense in any civil judicial or civil administrative proceeding arising out of the manager's performance of services (or failure to perform services) on behalf of the foundation, against all expenses (other than taxes, including taxes imposed by chapter 42, penalties, or expenses of correction) including attorneys' fees, judgments and settlement expenditures if
(A) Such expenses are reasonably incurred by the manager in connection with such proceeding; and
(B) The manager has not acted willfully and without reasonable cause with respect to the act or failure to act which led to such proceeding or to liability for tax under chapter 42.
*152 Therefore, the By-Laws provision precluding payment of indemnification where it constitutes self-dealing does not preclude the Court from ordering AGM & M to pay Cafesjian and Waters for the reasonable expenses they incurred in defending their claims.
2. Arbitration
Plaintiffs next argue that the Court should reject Defendants' request for indemnification because the legal expenses associated with this litigation could have been avoided had Cafesjian and Waters agreed to arbitrate this dispute. Plaintiffs had filed a demand for arbitration with the American Arbitration Association on September 13, 2007 relating to the first lawsuit filed by Cafesjian and CFF against the Assembly in Minnesota. On October 10, 2007, Cafesjian and Waters, inter alia, filed a lawsuit in Minnesota to enjoin the arbitration. The parties ultimately stipulated to the dismissal of that lawsuit in September 2007. Therefore, Plaintiffs have long since abandoned any attempt to compel arbitration of the issues contested in these actions, and there is nothing in the arbitration provisions of the AGM & M By-Laws that requires Cafesjian and Waters to agree to arbitration. Most significantly, the indemnification provision in the AGM & M By-Laws does not require Cafesjian or Waters to submit to arbitration. Accordingly, there is no basis for concluding that Cafesjian's and Waters's legal expenses are unreasonable or unnecessary based on their decision to litigate in federal court. The Court also notes that Plaintiffs did not include this argument in their proposed conclusions of law or otherwise present this argument to the Court during the trial; this is an independent reason for rejecting Plaintiffs' argument.
3. Expenses Incurred by CFF
Plaintiffs next claim that CFF has paid the legal expenses for this litigation on behalf of Cafesjian and Waters, and since CFF is not subject to indemnification under the AGM & M By-Laws, they claim that no indemnification is owed. In response to Plaintiffs' claim, Defendants state that they have removed any expenses paid by CFF from their request for indemnification, leaving only expenses paid by Cafesjian.[11] Defendants have produced a declaration with supporting documentation demonstrating that Cafesjian personally paid for the legal expenses that were not covered by CFF. See Defs.' Reply in Support of Br. Quantifying Attorneys' Fees for Indemnification, Ex. E (Suppl. Decl. of William G. Laxton, Jr.). Accordingly, the Court shall consider only these expenses that were incurred by Cafesjian in determining the amount of indemnification required under the AGM & M By-Laws.
4. Identification of Expenses Subject to Indemnification
Because the scope of indemnification under the AGM & M By-Laws is limited to the expenses incurred by Cafesjian and Waters in defending the claims asserted against them as former officers and trustees of AGM & M, Defendants must identify which expenses are related to these claims and separate any expenses that they incurred asserting counterclaims against Plaintiffs or defending against separate claims asserted by the Assembly. In order to accomplish this task, Defendants have identified three categories of expenses: (1) those that are clearly related to the defense of claims asserted against *153 Waters and Cafesjian in their capacities as fiduciaries of AGM & M; (2) those that are clearly related to other claims asserted in the litigation; and (3) those expenses that cannot easily be separated between these two categories of claims ("blended expenses"). Defendants seek indemnity for the amount of expenses in the first category and 67% of the blended expenses, based on Defendants' estimate of the proportion of those expenses that can be fairly attributed to the defense of claims that are subject to indemnification. Plaintiffs do not take issue with Defendants' decisions about which expenses belong in each category. However, Plaintiffs argue that none of the blended expenses should be awarded because they cannot clearly be linked to the claims that must be indemnified. Alternatively, Plaintiffs argue that Defendants' proposed percentage is too high and should be greatly reduced to 19%.
The parties have cited only a few cases to support their arguments regarding the proper allocation of attorneys' fees, all of which involve application of a fee-shifting statute rather than a contractual indemnification clause. In Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), the Supreme Court addressed how fees should be awarded to a prevailing party where the party prevailed on only some of the claims asserted in the litigation. The Court noted that in such cases, "[m]uch of counsel's time will be devoted generally to the litigation as a whole, making it difficult to divide the hours expended on a claim-by-claim basis," and therefore courts "should focus on the significance of the overall relief obtained by the plaintiff in relation to the hours reasonably expended on the litigation." 461 U.S. at 435, 103 S.Ct. 1933; accord Thomas v. Nat'l Football League Players Ass'n, 273 F.3d 1124, 1128-29 (D.C.Cir.2001). The most analogous case cited by the parties is Alpo Petfoods, Inc. v. Ralston Purina Co., No. Civ. A. 86-2728, 1991 WL 1292963 (D.D.C. Dec. 4, 1991), in which the court awarded attorneys' fees that were limited to the costs of prosecuting successful aspects of the prevailing party's case-in-chief. See id. at *12-13. In that case, the party seeking an award undertook a three-step methodology to calculate the time attributable to its successful counterclaim: first, it excluded time clearly unrelated to the successful claim; then, it segregated the remaining legal fees into various subject matter categories based on the nature of the relationship to the successful claim; and finally it estimated the percentage of time in each category that could fairly be attributed to a successful result. Id. at *12. The court accepted this methodology as a valid means of proving the amount of fees that should be awarded. Id.
These cases are somewhat in tension with the D.C. Court of Appeals's decision in Safeway Stores, Inc. v. Chamberlain Protective Services, Inc., 451 A.2d 66 (D.C. 1982). In that case, the court affirmed the denial of attorneys' fees and expenses to a party where the court determined that it was impossible to allocate the fees and expenses among three claims, only one of which was subject to indemnity. Id. at 72-73. However, in that case, the party's right to indemnification was based on the limited exception to the American Rule that allows a party wrongfully involved in litigation with a third party to recover the expenses of such litigation from the wrongdoer. See id. at 68-69. It is therefore unclear whether Safeway Stores controls beyond its core holding that "an indemnitee may be denied recovery of attorney's fees from his codefendant indemnitor where the fees incurred in establishing his right to indemnity are considered inseparable from those incurred in defending the alleged negligence." Id. at 73.
*154 The Court finds that it is unnecessary to resolve this issue at this time because Defendants may be able to break down many of their "blended" expenses in a manner that more clearly identifies whether the costs incurred or the work performed were actually related to the claims subject to indemnification. Moreover, beyond criticizing Defendants' approach to calculating a percentage for the blended expenses, Plaintiffs also contend that many of the expenses claimed by Defendants are unreasonable. Plaintiffs complain that Defendants' legal bills are bloated by excessive time devoted to ordinary tasks, appearances by multiple attorneys where only one was necessary, and other unnecessary expenses. In order to expedite resolution of these disputes over the necessity of particular expenses, the Court shall refer this issue to a magistrate judge for a report and recommendation pursuant to Federal Rule of Civil Procedure 72(b) and Local Civil Rule 72.3(a). The magistrate judge may review Defendants' categorization of "blended" expenses and determine whether there is a more appropriate methodology for separating which expenses should be indemnified and which should not. The magistrate judge may also review Plaintiffs' objections to particular expenses and make decisions about which expenses were "actually and necessarily incurred" within the meaning of the indemnification provision of the AGM & M By-Laws. Upon review of the magistrate judge's report and recommendation, the Court shall determine, if necessary, whether Defendants' proposed blended expenses approach is appropriate and what percentage should be applied to those expenses.
C. Defendants' Motion for Attorneys' Fees for Vexatious Litigation
Apart from their claim for indemnification, Defendants have filed a[221] Motion Requesting Attorneys' Fees for Vexatious Litigation. Defendants argue that the Court should award attorneys' fees under its inherent authority to sanction parties for vexatious conduct or, alternatively, under 28 U.S.C. § 1927, which provides that "[a]ny attorney or other person ... who so multiplies the proceedings in any case unreasonably and vexatiously may be required to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." Defendants contend that they should be awarded attorneys' fees based on: (1) Plaintiffs' pursuit of a claim for equitable disgorgement of Cafesjian's investments in Armenia that was ultimately withdrawn before trial; (2) Plaintiffs' refusal to disclose its theories of damages during discovery; (3) Plaintiffs' use of allegedly obstructive tactics during discovery; (4) Plaintiffs' filing unnecessary motions in the course of the litigation; and (5) Plaintiffs' failure to produce a substantial number of documents until the eve of trial. Plaintiffs have filed an opposition to Defendants' motion, and Plaintiffs' trial counsel, K & L Gates LLP, have intervened for the purpose of filing an opposition to Defendants' motion. Defendants have responded to both of these oppositions, and the motion is now ripe for adjudication.
Although the American Rule generally provides that each party must bears its own legal costs, the federal courts have inherent power to assess attorneys' fees when a party has "acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Chambers v. NASCO, Inc., 501 U.S. 32, 45-46, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) (quoting Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258-59, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975)). "As old as the judiciary itself, the inherent power enables courts to protect their institutional integrity and to guard *155 against abuses of the judicial process with contempt citations, fines, awards of attorneys' fees, and such other orders and sanctions as they find necessary." Shepherd v. Am. Broad. Cos., 62 F.3d 1469, 1472 (D.C.Cir.1995). To support a sanction under this inherent authority, "the court must make a finding by clear and convincing evidence that [the [sanctioned party] committed sanctionable misconduct that is tantamount to bad faith." Ali v. Tolbert, 636 F.3d 622, 627 (D.C.Cir.2011).
The Court may also award attorneys' fees based on vexatious conduct pursuant to 28 U.S.C. § 1927. The purpose of § 1927 is to allow the Court "to assess attorney's fees against an attorney who frustrates the progress of judicial proceedings." United States v. Wallace, 964 F.2d 1214, 1218 (D.C.Cir.1992). Before imposing sanctions on an attorney, the Court must evaluate whether the attorney's conduct was "at least reckless[.]" Id. at 1217. Recklessness is a "high threshold... and in general requires deliberate action in the face of a known risk, the likelihood or impact of which the actor inexcusably ignores." Id. at 1219-20. "The power to assess costs on the attorney involved is a power which the courts should exercise only in instances of serious and studied disregard for the orderly process of justice." Id. at 1220 (quotation marks and citations omitted). "[U]nintended, inadvertent, and negligent acts will not support an imposition of sanctions under section 1927." Id. at 1219 (quoting Cruz v. Savage, 896 F.2d 626, 631 (1st Cir.1990)).
The Court notes at the outset that the majority of Defendants' requests for fees relate to disputes that arose in the course of discovery over what evidence should be produced in relation to particular claims asserted by Plaintiffs. The Federal Rules of Civil Procedure provide a mechanism for awarding expenses to parties who incur expenses as a result of unnecessary discovery, and that is the preferred approach for awarding expenses as a result of misconduct during discovery. See Fed.R.Civ.P. 26(c)(3) & 37(a)(5). Defendants did not seek expenses during the course of discovery, and Defendants do not rely on the Federal Rules in asking the Court to award fees for vexatious litigation.
1. Plaintiffs' Pursuit of a Claim for Disgorgement of Cafesjian's Investments
Defendants argue that they should be awarded the fees they incurred in defending a claim asserted by the Assembly for disgorgement of Cafesjian's business interests based on his failure to disclose those interests to the Assembly under its conflicts of interest policy. The Assembly did not explicitly assert such a claim in its original complaint in Civil Action No. 08-255. However, the Assembly did pursue discovery based on a disgorgement theory of damages in connection with its claims for breach of fiduciary duty and violation of the conflicts of interest policy. Defendants refused to respond to the Assembly's requests for discovery on relevancy grounds, and the Court denied the Assembly's motion to compel this discovery. The Assembly ultimately dropped this claim prior to trial. Defendants complain that they were forced to investigate the Assembly's disgorgement theory and devote resources to defeating it during the course of the litigation. Defendants essentially argue that the disgorgement claim was frivolous and that Plaintiffs were asserting it for the improper purpose of harassing Cafesjian with improper discovery requests.
Although the legal basis for the Assembly's disgorgement claim has never been clear to the Court and the claim was ultimately dropped as lacking merit, the *156 Court is not persuaded that Plaintiffs' pursuit of that theory demonstrates recklessness or bad faith. It is often the case that the contours of a party's claims evolve throughout the discovery process, particularly with respect to damages and remedies. The fact that Plaintiffs propounded overbroad discovery requests related to this claim does not warrant imposition of sanctions for vexatious litigation, even though it may have been sufficient to justify an award of expenses under Rule 26(c) if Defendants had moved for a protective order. See Fed.R.Civ.P. 26(c)(3) & 37(a)(5) (providing that expenses may be awarded if a motion for protective order is granted). The fact that Defendants did not move for discovery sanctions suggests that Plaintiffs' efforts to pursue their disgorgement claim were not more vexatious than their pursuit of other claims that were ultimately found to be meritless. In fact, the record shows that Plaintiffs' attempts to litigate a disgorgement claim were limited to identifying disgorgement as a potential remedy in their answers to interrogatories, requesting discovery relating to Cafesjian's business interests (which the Court denied), and asserting this argument during the deposition of Edele Hovnanian. While Defendants complain that they were forced to conduct legal research to determine the viability of Plaintiffs' theory, that is part of the ordinary costs of civil litigation. Accordingly, the Court declines to exercise its discretion to award legal expenses to Defendants based on Plaintiffs' attempts to pursue a disgorgement claim.
2. Plaintiffs' Failure to Disclose Theories of Damages During Discovery
Defendants contend that they should be awarded expenses as a result of Plaintiffs' failure to disclose various theories of damages during discovery. The Court previously granted Defendants' motion to strike any theories of damages that were not sufficiently disclosed during discovery. See Pretrial Conference Mem. Op. & Order (Oct. 22, 2010), 746 F.Supp.2d 55, 65-73. However, Defendants ask for the additional sanction of attorneys' fees, arguing that Plaintiffs vexatiously avoided their obligations to disclose their theories of damages. Defendants rely on the fact that Plaintiffs failed to provide a computation of their damages at the outset of discovery as required by Rule 26(a)(1)(A)(iii), instructed Dr. Rouben Adalian not to answer questions relating to damages during his deposition, and provided incomplete or vague responses to Defendants' interrogatories about damages. Defendants also rely on the fact that Plaintiffs' Rule 30(b)(6) witness, Van Krikorian, was unable to answer questions relating to the calculation of damages during his deposition. Krikorian testified during that deposition that Plaintiffs would produce an expert witness to address the subject of damages, but Plaintiffs never designated any expert witnesses.
It is clear from the record that Plaintiffs were less than forthcoming about their theories of damages during discovery, and that is the basis upon which the Court granted Defendants' motion to strike those claims. However, the Court is not persuaded that Plaintiffs' conduct amounts to recklessness or bad faith sufficient to justify a sanction under § 1927 or the Court's inherent authority. The record indicates that Plaintiffs did supplement their disclosures with estimates of their damages, and it appears that they may have had a good faith basis for asserting those claims at the time. Ultimately, Plaintiffs were unable to come up with evidence in support of those claims, and therefore they were unable to give satisfactory responses to Defendants' discovery demands. The Court is not convinced that Plaintiffs were acting vexatiously *157 by asserting their damages claims during discovery and then being caught without evidence to support them. Therefore, the Court finds that its pretrial sanction precluding Plaintiffs from proceeding based on undisclosed damages was sufficient, and it declines to award attorneys' fees based on this conduct.
3. Plaintiffs' Alleged Gamesmanship During Discovery
Defendants next argue that they should be awarded fees as a result of what they call "unnecessary discovery and obstructive tactics" by Plaintiffs relating to two depositions taken during discovery. First, Defendants complain about the fact that Plaintiffs' counsel instructed Adalian not to answer questions about damages during his deposition, since this was not a proper instruction. See Fed.R.Civ.P. 30(c)(2) ("A person may instruct a deponent not to answer only when necessary to preserve a privilege, to enforce a limitation ordered by the court, or to present a motion under Rule 30(d)(3).") Second, Defendants complain about the fact that two days prior to Anoush Mathevosian's scheduled deposition, Plaintiffs filed an emergency motion for a protective order to proceed with the deposition by written questions in lieu of an oral examination pursuant to Rule 31. Although Plaintiffs based their motion on Mathevosian's poor health, Defendants argue that it was made for purely strategic reasons because Plaintiffs needed additional time to prepare Mathevosian to testify regarding the May 7, 2007 meeting of the AGM & M Board of Trustees.
With respect to deposition of Adalian, the Court granted Defendants' motion to compel his testimony on the subject of damages. See [59] Order (May 7, 2009). Plaintiffs' counsel had instructed Adalian not to answer questions about damages because a Rule 30(b)(6) witness was being designated for that purpose. During a telephone conference on the record with the Court, Plaintiffs' counsel agreed that this was an inappropriate basis upon which to instruct Adalian not to answer questions. Accordingly, the Court ordered that Dr. Adalian's deposition be continued so that Defendants could ask him questions relating to damages. Defendants did not request any sanctions at the time, and the Court did not award any sanctions.
With respect to the deposition of Mathevosian, the Court denied Plaintiffs' emergency motion to proceed upon written questions rather than by oral examination. See [64] Order (June 23, 2009). The Court held that Defendants had established that it was important to depose her and that Plaintiffs had not substantiated their claims that she was too ill to be deposed. Defendants ultimately deposed Mathevosian at her home, and the videotape of that deposition was presented to the Court as part of the record at trial. It is apparent from that video that she was in poor health, and given the limited scope of the questioning from Defendants during that deposition, it was reasonable for Plaintiffs to ask the Court to limit the method of questioning.
Defendants have seized upon these two incidents during discovery as evidence of Plaintiffs' vexatiousness. However, the Court is not persuaded that Plaintiffs' counsel acted recklessly or in bad faith in taking these actions. Accordingly, the Court declines to award a sanction of attorneys' fees based on this conduct.
4. Unnecessary Motions Practice
Defendants next argue that they should be awarded expenses because Plaintiffs filed several unnecessary "motions" during the course of the litigation. First, Defendants complain about a request for entry of default that was filed 35 days after Defendants failed to file an *158 answer to Plaintiffs' Second Amended Complaint in Civil Action No. 07-1259. The Court denied Plaintiffs' request for entry of default, agreeing with Defendants that default was inappropriate in light of their participation in the lawsuit and the related actions pending before the Court. Defendants argue that Plaintiffs filed their request only for the purpose of delay and harassment, but they concede that Plaintiffs' action was allowed by Rule 55. The Court declines to sanction Plaintiffs for taking an action that is explicitly authorized by the Federal Rules of Civil Procedure.
Defendants next complain about Plaintiffs' reference to Rule 11 in a footnote of their reply brief in support of summary judgment. See [79] Pls.' Reply Mem. at 5 n. 5. In that footnote, Plaintiffs suggested that Defendants had improperly cited Delaware case law and secondary sources in support of their breach of fiduciary duty claims. With leave of the Court, Defendants filed a surreply to respond to Plaintiffs' suggestion. See [82] Defs.' Surreply. The Court agrees with Defendants that the reference to Rule 11 was unnecessary, but Defendants also did not need to file a surreply to respond to Plaintiffs' footnote.[12] The Court shall not sanction Plaintiffs for asserting a legal argument that Defendants' cited sources are not controlling authority.
Finally, Defendants complain about a motion filed by Plaintiffs on the eve of trial asking Defendants to certify that they had complied with certain discovery obligations. See [152] Pls.' Mot. for Order Requiring Defs.' Confirmation of Compliance with Discovery Obligations. Plaintiffs were seeking confirmation that Defendants had searched all of Cafesjian's email addresses for discoverable information in light of new evidence of additional email accounts that surfaced before trial. Defendants argue that Plaintiffs' motion was unnecessary and vexatious because the parties were engaged in discussion about producing any outstanding materials before trial. The Court ultimately denied the motion without prejudice after the parties appeared to have resolved the dispute through negotiation. While Plaintiffs should have been able to resolve their disagreement with Defendants before filing a motion with the Court, the Court does not find that Plaintiffs' motion was vexatious. The parties had legitimate disputes about last-minute discovery obligations, and Plaintiffs' decision to file a motion with the Court was not clearly inappropriate. Therefore, the Court shall not sanction Plaintiffs based on this conduct.
5. Production of Documents on the Eve of Trial
Defendants' final request for attorneys' fees is based on the fact that Plaintiffs produced a large number of documents some 12,000 pages of emailsless than two weeks before the start of the trial. Plaintiffs' late production is troubling because these emailsmany of which were ultimately used by Defendants as important exhibits at trialshould have been produced prior to the close of discovery pursuant to the Court's scheduling order and prior rulings relating to the consolidated discovery in these actions. By producing these documents on the eve of trial, Plaintiffs forced Defendants to spend a significant amount of time and resources *159 reviewing these materials instead of preparing their witnesses, rehearsing their arguments, and otherwise preparing for a lengthy bench trial. Ultimately, it is unclear what impact Plaintiffs' late production had on Defendants' ability to prepare for trial. Defendants did not ask for a continuance based on Plaintiffs' late production, but it was not in Defendants' interest to delay the trial, so the Court cannot assume that Defendants were not prejudiced by the untimely disclosures.
Based on the damning contents of many of the documents, Defendants speculate that Plaintiffs acted in bad faith and abused the discovery process by waiting until before trial to produce them. Plaintiffs indicated to the Court that a computer problem had inadvertently caused these documents to be omitted from its prior production of documents during discovery. See [170] Pls.' Resp. to Defs.' Mot. to Amend the Joint Pretrial Stmt. at 2. Plaintiffs' former counsel has presented the Court with a declaration indicating that he was unaware until October 2010 that additional emails existed that had not been produced. See Decl. of Arnold E. Rosenfeld ¶ 11. While the Court is willing to accept the declaration of Plaintiffs' former counsel as an officer of the Court that documents were not deliberately withheld until the eve of trial by legal counsel, it is unclear whether Plaintiffs acted recklessly or otherwise breached their obligation to timely supplement their discovery responses. Therefore, the Court shall require Plaintiffs to provide the Court with a more specific explanation as to why they did not produce these documents during discovery. The Court may order payment of reasonable expenses caused by Plaintiffs' untimely production pursuant to Rule 26(c)(1) if the Court is not satisfied with Plaintiffs' response. The Court shall hold in abeyance Defendants' motion for attorneys' fees with respect to the untimely production of these documents.
D. Defendants' Petition for Involuntarily Dissolution
On February 16, 2011, Defendants filed a [198] Petition for Involuntary Dissolution asking this Court to begin the involuntarily dissolution of AGM & M pursuant to the procedures in the District of Columbia Nonprofit Corporation Act, D.C.Code §§ 29-301.01 to 301.114. Pursuant to D.C.Code § 29-301.55, the Act provides in pertinent part:
The court shall have full power to liquidate the assets and affairs of a corporation:
(1) In any action by a member or director when it is made to appear:
(A) That the directors are deadlocked in the management of the corporate affairs and that irreparable injury to the corporation is being suffered or is threatened by reason thereof, and either that the members are unable to break the deadlock or there are no members having voting rights;
(B) That the acts of the directors or those in control of the corporation are illegal, oppressive, or fraudulent;
(C) That the corporate assets are being misapplied or wasted; or
(D) That the corporation is unable to carry out its purposes[.]
D.C.Code § 29-301.55(a). The Nonprofit Corporation Act sets out specific procedures for liquidation proceedings. See id. §§ 29-301.55 to 301.60.
As the Court explained in a Memorandum Opinion and Order issued on February 17, 2011, following passage of the District of Columbia Court Reform and Criminal Procedure Act, Pub. L. No. 91-358, 84 Stat. 473 (1970), all powers over nonprofit corporation liquidation are vested *160 in the Superior Court of the District of Columbia. See [202] Mem. Op. & Order at 5-6. The Court suggested, however, that it might be appropriate to exercise supplemental jurisdiction over Defendants' petition for involuntary dissolution, and the Court asked the parties to submit briefing on this issue. Defendants filed a response to the Court's order addressing the issue of jurisdiction, and Plaintiffs have filed an opposition to Defendants' petition, to which Defendants filed a reply. Therefore, the issue is ripe for the Court's resolution.
The supplemental jurisdiction statute, 28 U.S.C. § 1367, provides that "the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within [the courts'] original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367(a). However, the statute provides that a court may decline to exercise supplemental jurisdiction where (1) the claim raises a novel or complex issue of state law; (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction; (3) the court has dismissed all claims over which it has original jurisdiction; or (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction. Id. § 1367(c).
Many federal courts have recognized that claims for corporate dissolution involve special state interests that may be disrupted or frustrated by the exercise of federal jurisdiction, and the existence of state procedures for dissolution may require federal courts to abstain from exercising jurisdiction. See, e.g., Pennsylvania v. Williams, 294 U.S. 176, 185, 55 S.Ct. 380, 79 L.Ed. 841 (1935) ("It has long been accepted practice for the federal courts to relinquish their jurisdiction in favor of the state courts, where its exercise would involve control of or interference with the internal affairs of a domestic corporation of the state."); Caudill v. Eubanks Farms, Inc., 301 F.3d 658, 661-65 (6th Cir.2002) (affirming district court's abstention from jurisdiction over corporate dissolution claim under Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943)); Friedman v. Revenue Mgmt. of N.Y., Inc., 38 F.3d 668, 671 (2d Cir.1994) (recognizing that the comprehensive regulation of corporate governance and existence by the state may warrant abstention under Burford); In re English Seafood (USA) Inc., 743 F.Supp. 281, 288-89 (D.Del.1990) ("We find that abstention is required in this case. The state of Delaware has a strong interest in the formation and termination of corporations under its laws and in the uniform development and application of the statutory scheme that the state legislature and courts have created to regulate those corporations."); see also Kermanshah v. Kermanshah, 580 F.Supp.2d 247, 271 (S.D.N.Y.2008) (citing cases). Although there is some question whether similar principles should apply to the District of Columbia, see Silverman v. Barry, 727 F.2d 1121, 1123 n. 4 (D.C.Cir. 1984), there is some basis for considering the Superior Court's expertise in resolving these local issues, see Handy v. Shaw, Bransford, Veilleux & Roth, 325 F.3d 346, 351-52 (D.C.Cir.2003). Accordingly, the Court is reluctant to assert jurisdiction over a matter that is nearly always handled exclusively by the local courts of the District of Columbia.
Defendants argue that the Court should exercise supplemental jurisdiction over the petition because the Court has already invested a substantial amount of time in this litigation and is familiar with the problems facing AGM & M. However, while the Court may be familiar with some *161 of the facts that are relevant to Defendants' petition, Defendants did not assert this claim for relief in their Streamlined Counterclaims or any of their pretrial briefs, and this claim was not litigated by the parties at trial.[13] Resolution of Defendants' petition would require additional findings of fact by the Court following "a hearing had upon such notice as the court may direct to be given to all parties to the proceedings and to any other parties in interest designated by the court."[14] D.C.Code § 29-301.56(b). Such proceedings would likely occur after the Court has finally disposed of the parties' original claims, which is an additional reason to decline the exercise of supplemental jurisdiction. See 28 U.S.C. § 1367(c)(3). It is one thing to have the Court exercise supplemental jurisdiction over a claim in the interest of judicial economy; it is another thing entirely to seek to extend the Court's jurisdiction by adding a completely new claim after the trial has been held.
For the foregoing reasons, the Court declines to exercise supplemental jurisdiction over Defendants' [198] Petition for Involuntary Dissolution. Defendants should seek appropriate relief from the Superior Court for the District of Columbia.
E. Defendants' Motion for Order to Show Cause as to Why Plaintiffs Should Not Be Held in Contempt
On March 21, 2011, Defendants filed a[214] Request for Order to Show Cause as to Why Plaintiffs Should Not Be Held in Contempt. Defendants contend that Plaintiffs have violated one of this Court's orders by relocating certain materials maintained by the Armenian National Institute ("ANI") off the premises of the Families U.S.A. building. Plaintiffs do not dispute that ANI has moved its materials out of the Families U.S.A. building, but they contend that they should not be held in contempt because ANI is a separate legal entity that is not a party to this litigation and the Court did not expressly order it to keep its belongings in the Families U.S.A. building. The Court agrees with Plaintiffs that there is no basis for finding them in contempt.
Following the completion of closing arguments at trial, the Court asked the parties if they would agree not to take any actions with respect to the properties pending the Court's ruling. Because the reversion date of December 31, 2010 was approaching soon after trial, the Court wanted assurances that the parties would not attempt to enforce the Grant Agreement or change the status quo while the Court was in the process of deciding the case. Plaintiffs agreed that they would wait until the Court's ruling before taking action. Defendants also agreed that they would not take any actions with respect to the buildings, but they raised a concern about "the ANI situation," referring to the materials being stored in the Families U.S.A. building and the staff working *162 there. See Trial Tr. (11/29) at 168. In response, the Court stated:
I would hope that while we await my decisions that nothing happens to them or they get moved or anything else. I'd prefer not to enter an order because I'm sureunless you can reach an agreement about what both sides need to do. If you can reach some stipulation or some sort of consent order, I'd be happy to sign something until I make a decision.
Id. at 168-69. Defendants complained about the lack of an enforcement mechanism and asked for a right of inspection. See id. at 170-71. The Court then inquired as to whether there was inventory of the materials kept by ANI, and Plaintiffs' counsel informed the Court (after conferring with Dr. Rouben Adalian, who was present in the courtroom), that there was not a precise inventory. Id. at 171. Plaintiffs' counsel told the Court that nothing had happened to the materials for a long time since the litigation began, and Plaintiffs agreed that nothing should happen to them pending the Court's decision. The Court then told the parties several times that they should try to reach an agreement about this issue before asking the Court to enter an order:
Let me make the suggestion, in order to enter some sort of order you either have to agree to it or you need to file something in terms of what my authority would be. ANI, technically, is not a party, although they are under you, it's under the umbrella of [AGM & M], I'd have to take a look at that more carefully. So, I'm just saying that this is not something I would do off the top of my head. If you can reach some agreement that just simply says nothing gets moved by anybody that relates to this until I make this decision, that would be helpful. Once I make a decision, I will bring you back to have some discussion further.
. . .
[I]f you can agree to something, that would be most helpful. Just leave everybody with nobody moving or doing anything, that would be helpful. If you can't do that and you still feel strongly, then file something and then I'll take a look at it. I prefer not to put my resources into that. But why don't you have a discussion about it.
. . .
As I said, I would prefer that you have discussion about it, see if you can resolve something. If you want me to sign something, fine. Reach a stipulation, however you want to do it. If you can't, then you need to file something. I'm not going to do it today without your filing something in writing.
. . .
[W]hat I'm asking is nobody move anything. I mean, in other words, we've beenyou've been on pause while we've been waiting for this for at leastat least for a couple of years at the end [of the] year. So, don't change anything. I mean, you can accept new donations, but don't move the property or make changes to the thing. To the extent that you want to put somethingstipulate that nobodyeither side is going to do anything, then that would be helpful. But I'll do this as fast as I can. But if you're not satisfied, then file something in writing and I'll litigate it. But I would suggest that you talk and see whether you can do it on a more amicable basis.
Id. at 171-75. The parties did not present any stipulation or agreement to the Court for ratification, nor did the parties file any motions asking the Court to enter an Order.
*163 Defendants argue that the removal of the ANI materials from the Families U.S.A. building, which apparently occurred after the Court issued its Memorandum Opinion on January 26, 2011, violated the Court's oral admonition that "nobody move anything." However, as should have been clear from the context, the Court's statement was not intended to constitute a binding order on ANI.[15] Even if the Court had intended to impose a binding obligation, ANI's actions would not justify a finding of contempt. The record presented by Plaintiffs demonstrates that ANI waited until after the Court issued its January 26, 2011 Memorandum Opinion before moving its materials to an offsite storage facility, where they remain under the supervision of Dr. Adalian. See Decl. of Dr. Rouben Adalian ¶¶ 3-6, 11, 14. Therefore, there is no basis to conclude that ANI's assets have been wasted.
For these reasons, the Court finds that there is no basis for holding Plaintiffs in contempt, and the Court shall deny Defendants' request for a show cause order.
III. CONCLUSION
For the foregoing reasons, the Court finds that the Grant Agreement clearly and unambiguously requires AGM & M to transfer the Bank Building and the Adjacent Properties to CFF without any reimbursement requirement and without regard to any tax consequences that might result from the transfer. Therefore, the Court shall order AGM & M to effect the transfer of the properties without further delay in compliance with D.C. law. The Court reaffirms its ruling that Cafesjian and Waters are entitled to indemnification from AGM & M for their attorneys' fees in defending the claims asserted against them for breaching their fiduciary duty to AGM & M, but the Court shall refer this issue to a magistrate judge for a report and recommendation. The magistrate judge shall review the expenses submitted by Defendants and make recommendations as to which of the claimed expenses should be subject to indemnification; the Court shall review the magistrate judge's report and recommendation and make a final ruling as to the amount of the indemnification. The Court shall also deny-in-part Defendants' [221] Motion Requesting Attorneys' Fees for Vexatious Litigation because Defendants have mostly failed to demonstrate that Plaintiffs or their counsel acted recklessly or in bad faith. However, the Court shall hold in abeyance Defendants' motion with respect to Plaintiffs' untimely production of documents on the eve of trial and require Plaintiffs to more clearly explain why they did not produce these documents during discovery.
The Court shall decline to exercise supplemental jurisdiction over Defendants' [198] Petition for Involuntary Dissolution of AGM & M, as this is a new claim asserted after trial that is best left to be adjudicated by the Superior Court of the District of Columbia.
Finally, the Court shall deny Defendants' [214] Request for Order to Show Cause as to Why Plaintiffs Should Not Be Held In Contempt because Defendants have not shown that Plaintiffs violated one of this Court's orders.
Because the Court has now finally disposed of all the parties' claims except for determining the amount of indemnification, the Court shall direct entry of final judgment pursuant to Rule 54(b) as to all claims except for Defendants' claim for *164 legal fees and expenses under the indemnification provision of the AGM & M By-Laws (Count VII of their Streamlined Counterclaims). An appropriate Order accompanies this Memorandum Opinion.
NOTES
[1] As the Court has previously noted, the use of the term "genocide" to describe the atrocities that befell the Armenians between 1915 and 1923 is not without controversy. The Court employs the term used as by the parties, and the Court expresses no opinion on the propriety of that label.
[2] All docket numbers refer to Civil Action No. 08-255.
[3] In a Status Report filed on May 5, 2011, Defendants indicated that all payments had been made under the installment agreement and that title had been transferred to CFF.
[4] A duplicate copy of this exhibit with some handwriting on the second page was admitted as PX-112.
[5] As used in this context, "AGM & M" refers to the museum project, not the corporate entity.
[6] The record at trial indicated that the Assembly, acting on behalf of AGM & M, refused to cash CFF's check for its annual payment of $150,000 for the 1340 G Street property in 2007. The Court found that although the payment was made a few days late, there was no reason that the Assembly could not have cashed the check and credited CFF with the payment. Accordingly, the Court finds that CFF and Cafesjian satisfied their obligation to make the annual payment in 2007, and there was no other evidence at trial suggesting that CFF and Cafesjian did not perform their funding obligations under the Grant Agreement.
[7] Plaintiffs suggested during the February 24, 2011 Status Hearing that because the Grant Agreement defines the "Grantor" as Cafesjian and CFF, there must be a private benefit to Cafesjian. However, Cafesjian has relinquished his right to receive the property in favor of CFF, and Plaintiffs have not demonstrated how Cafesjian will benefit from the transfer.
[8] Plaintiffs argue that AGM & M is now a private foundation and therefore may be subject to this tax if it transfers the Grant Property to CFF. As explained below, the Court does not believe that the transfer can be characterized as an act of self-dealing within the meaning of § 4941. Furthermore, Plaintiffs assume without discussion that CFF falls within the definition of "disqualified person" under the statute, but this is not clear.
[9] Plaintiffs erroneously claim that Cafesjian was entitled to four votes on the AGM & M Board of Trustees by virtue of his pledge of more than $15 million. See Pls.' Reimbursement Br. at 14. At most, Cafesjian would have been entitled to three votes under the AGM & M By-Laws. However, because of the 80% vote requirement, Cafesjian would have had veto power over the Board's decisions even if he were only recognized as having one vote. In any event, the Court has already rejected Plaintiffs' argument that Cafesjian acted in bad faith through his management of AGM & M.
[10] Among the conditions that the AGM & M trustees seek to impose is an agreement that CFF will forfeit the Grant Property to the Assembly if a permanent museum and memorial devoted to the Armenian Genocide is not constructed within five years. See [212] Pls.' Status Report at 4.
[11] Waters testified at trial that he had not paid for any legal expenses. See Trial Tr. (11/15 AM) at 36-37.
[12] Plaintiffs did not file a motion for sanctions under Rule 11, and the Court did not construe Plaintiffs' footnote as requesting that sanctions be imposed. In any event, it was obvious to the Court that Defendants' citation of persuasive authority was not sanctionable conduct.
[13] By contrast, the plaintiffs in Miller v. Up In Smoke, Inc., 738 F.Supp.2d 878 (N.D.Ind. 2010), upon which Defendants rely, pled their alternative claim for judicial dissolution in the complaint. See id. at 866.
[14] The Court notes that none of the present trustees of AGM & M were parties to this litigation during the trial. Hirair Hovnanian was dismissed as a party at the summary judgment stage. Anoush Mathevosian and Van Krikorian have never been parties, although Van Krikorian attended the trial as the corporate representative of the Assembly. According to Defendants, the CFF-designated trustee of AGM & M is now John Williams, Defendants' trial counsel. It is unclear whether Mr. Williams could continue to represent Defendants through any dissolution proceedings in light of his present status as a trustee.
[15] This Court has never determined that ANI is a party to this litigation or that AGM & M or the Assembly has control over ANI. The record at trial indicated only that the AGM & M Board of Trustees had the right to appoint the Board of Governors of ANI. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917545/ | 835 So. 2d 533 (2002)
Sharon Cortez DRURY (Vicknair)
v.
Steve DRURY.
No. 2001 CA 0877.
Court of Appeal of Louisiana, First Circuit.
August 21, 2002.
*534 Mary E. Heck Barrios, Denham Springs, for Plaintiff-Appellant Sharon Cortez Drury Vicknair.
*535 Brenda Braud, John Braud, Independence, for Defendant-Appellant Steven R. Drury.
Before: FOIL and PETTIGREW, JJ., and KLINE[1], J., Pro Tem.
PETTIGREW, J.
This is an action for divorce, child custody, and support. Both parties have appealed and object to the district court's award of child support. Sharon Cortez Drury has also appealed the district court's decision to assess her with court costs and attorney fees. For the reasons set forth below, we vacate in part, affirm in part, reverse in part, and remand.
FACTS
Petitioner Sharon Cortez Drury ("Ms.Drury") and defendant Steve Drury ("Mr.Drury") were married on September 4, 1982, in Tangipahoa Parish, Louisiana, where they established a matrimonial domicile. According to the facts set forth in the Petition For Divorce filed by Ms. Drury on August 14, 1996, "[t]wo children were born of this marriage, namely, Steven Drury, age nine and Shane Drury, age eight."
The divorce petition further alleged that the parties separated on August 6, 1996, and that Ms. Drury desired a divorce pursuant to La. Civ.Code art. 102. As part of her petition, Ms. Drury sought to be designated as the domiciliary parent of the minor children pursuant to a plan of joint custody and an award of child support. Ms. Drury also sought issuance of temporary orders and injunctive relief prohibiting Mr. Drury from harassing her or alienating or encumbering the community property.
Mr. Drury filed an answer to the divorce petition in the form of a general denial, and through a reconventional demand, sought an immediate divorce based upon "numerous acts of adultery" alleged to have been committed by Ms. Drury. Mr. Drury further sought to be designated as the domiciliary parent of the minor children pursuant to a plan of joint custody.
The record reflects that in a hearing held on October 10, 1996, the parties entered into various stipulations that were incorporated into a Joint Custody Agreement and plan of implementation. This plan designated the parent in actual physical custody of the minor children as the domiciliary parent pending further orders of the court. The plan also set forth a visitation schedule for major holidays and granted each parent two weeks of summer visitation with the children. A formal judgment was also prepared that granted four days of alternating visitation to each party. Both the agreement and the judgment were signed by the parties and their respective attorneys. The trial judge signed both documents on the same date.[2]
On December 16, 1996, Mr. Drury, appearing in proper person, filed a Rule For Contempt along with a Motion and Order for temporary physical custody of the minor children. These matters were inexplicably transferred from Division "D" to Division "E" of the district court, and a hearing on Mr. Drury's motion was scheduled. Said matters were later resolved, *536 and the scheduled hearing was removed from the court's docket.
On March 19, 1997, Mr. Drury filed an Amended Reconventional Demand For Divorce seeking termination of the marriage alleging that the parties had lived separate and apart for a period in excess of six months. The parties were then divorced on June 16, 1997.
Ms. Drury subsequently filed a Petition For Custody And Contempt on September 10, 1997, alleging that her ex-husband had denied her request for two weeks of summer visitation with the children. Ms. Drury further alleged that the existing custody plan, providing for four days of alternating visitation, had not proved to be workable and was not in the best interest of the minor children. Accordingly, Ms. Drury reasserted her request to be designated the domiciliary parent of the minor children pursuant to a "standard joint custody plan." Ms. Drury further sought an award of reasonable child support as set forth in the child support guidelines. Mr. Drury responded with a denial of his ex-wife's allegations and asserted his own request for designation as the domiciliary parent pursuant to a plan of joint custody. Mr. Drury also sought an award of reasonable child support as set forth in the guidelines.
A hearing on these issues was subsequently conducted on October 14, 1997. A transcript of the hearing, contained in the record, disclosed no evidence or argument regarding child support by either party. The sole issue presented at the October 14, 1997 hearing concerned which parent should be awarded domiciliary custody of the minor children. In a judgment signed October 17, 1997, the district court denied Ms. Drury's rule for contempt and granted custody of the minor children jointly to the parties. The district court further designated Mr. Drury as the children's domiciliary parent with alternating weekends of visitation to Ms. Drury. Neither party appealed from this judgment.
Eight months later, on June 16, 1998, Ms. Drury filed a "Rule For New Trial Specify Visitation And Joint Custody Plan." Mr. Drury responded with a motion to continue the hearing on Ms. Drury's rule and his own rule requesting that Ms. Drury show cause why child support should not be fixed. A hearing was later held on August 24, 1998. At the hearing, the district court took the custody issue under advisement and suggested the parties exchange income information and, "come up with a guideline amount" for child support. The district court subsequently issued Reasons For Judgment on October 28, 1998, denying Ms. Drury's rule for a new trial on the grounds that its previous judgment of October 17, 1997, was "just and equitable and in accordance with law." No judgment was submitted in connection with the August 24, 1998 hearing.
On March 3, 1999, pleadings were filed by both parties. Mr. Drury filed a motion to set his earlier Rule For Child Support for hearing; however, the order attached to Mr. Drury's was inscribed "Moot" and filed unsigned. Ms. Drury filed a Rule to Show Cause seeking a change in custody based upon material changes in circumstances. Inexplicably, the district court prepared an order noting that since all previous rules in the matter had been disposed of, Ms. Drury's rule should be reallotted in accordance with local court rules. This matter was then transferred from Division "E" back to Division "D" by random reallotment on March 11, 1999.
On March 31, 1999, after the matter had been reallotted, the judge of Division "E" (from whose docket this case had recently been transferred) issued, sua sponte, Amended Reasons For Judgment reaffirming *537 the correctness of her previous October 17, 1997 judgment, but directing that child support be set in accordance with the applicable child support guidelines. Again, no judgment had ever been prepared in connection with the hearing of August 24, 1998.
Over the ensuing twelve months, Mr. Drury filed motions and sought a supervisory writ from this court[3] and ultimately, writs of certiorari, prohibition and mandamus from the Louisiana Supreme Court[4] in an unsuccessful effort to have this matter transferred back to Division "E" from Division "D."
During the pendency of Mr. Drury's writ applications, Ms. Drury filed an Application For Relief Under The Domestic Violence Relief Act, For Protective Order, Change of Custody and Other Ancillary Relief in Division "D" of the district court. Following a hearing on May 31, 2000, the parties entered into a Stipulated Judgment that addressed issues related to custody and visitation. The terms of the judgment ultimately signed on February 12, 2001, provided in pertinent part,
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that neither parent shall have any obligation to pay child support to the other, commencing February, 2000. Nothing contained herein shall be construed as a waiver of the rights of either party to enforce any support obligation which may be determined to have existed prior to February, 2000;
Between the date of the hearing and the signing of the Stipulated Judgment in Division "D," the judge of Division "E" signed a judgment on November 30, 2000, covering the earlier hearing held on August 24, 1998. Said judgment ordered Ms. Drury to pay to Mr. Drury "monthly child support in accordance with the applicable child support guidelines, retroactive to June 25, 1998." The judgment further cast Ms. Drury with all costs of said proceedings and all attorney fees incurred by Mr. Drury.
From the judgment of November 30, 2000, Mr. Drury has taken a devolutive appeal. Ms. Drury has taken a separate suspensive appeal.
ISSUES SET FORTH ON APPEAL
On appeal, Mr. Drury asserts that the district court erred:
1. [W]hen it attempted to award child support in the absence of an evidentiary hearing or factual stipulations by the parties.
2. [W]hen it issued a judgment that authorized child support but did not specify an amount as such a judgment is unenforceable.
3. [I]n not awarding child support retroactive to the date of filing in the absence of evidence establishing good cause for not making the retroactive award.
In connection with her appeal of the instant matter, Ms. Drury presents the following issues for consideration by this court:
1. The judgment signed by the [district] court on October 17, 1997, denied [Mr. Drury's] claim for support, and is a final judgment.
2. The judgment signed by the [district] court on November 30, 2000, fixing child support "in accordance with the child support Guidelines" violated the due process requirements of law.
*538 3. The [district] court erred as a matter of law in awarding [Mr. Drury] attorney fees for prosecution of a child support rule and in defense of a rule for new trial.
4. The [district] court erred in assessing all cost of this proceeding against [Ms. Drury], and this Honorable Court should reapportion those costs in the [district] court between the parties, as well as assess costs on appeal against [Mr. Drury].
5. On remand, the [district] court should consider all support of any kind provided by [Ms. Drury] to or on behalf of the minor children as a credit against any amount of child support which may be fixed, and should consider that good cause exists for fixing the retroactivity date of such a judgment later than the date for judicial demand.
DISCUSSION
The Louisiana Constitution of 1974 provides that the appellate jurisdiction of the courts of appeal extends to both law and facts. La. Const. art. V, § 10(B). A court of appeal may not overturn a judgment of a trial court absent an error of law or a factual finding that is manifestly erroneous or clearly wrong. See Stobart v. State, Department of Transportation and Development, 617 So. 2d 880, 882, n. 2 (La.1993). If the trial court's findings are reasonable in light of the record reviewed in its entirety, the court of appeal may not reverse, even if convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Sistler v. Liberty Mutual Insurance Company, 558 So. 2d 1106, 1112 (La.1990).
Child Support Award
In the instant case, both parties take issue with the district court's judgment of November 30, 2000, that ordered Ms. Drury to pay to Mr. Drury "monthly child support in accordance with the applicable child support guidelines, retroactive to June 25, 1998." This court, in Percle v. Noll, 93-1272, pp. 8-9 (La.App. 1 Cir. 3/11/94), 634 So. 2d 498, 502-503, stated:
Fathers and mothers by the very act of marrying, contract together the obligation of supporting, maintaining and educating their children. La. C.C. Art. 227. Generally the custodial parent has the right to seek child support from the non-custodial parent for financial assistance in the maintenance of the children. Barkemeyer v. Barkemeyer, 598 So. 2d 550 (La.App. 4th Cir.1992)[]. The guidelines for determination of child support shall apply to "any proceeding to establish or modify child support filed after October 1, 1989". La.R.S. 9:315.1 et seq. Fuge v. Uiterwyk, 613 So. 2d 717 (La.App. 4th Cir.1993) [writ den. 619 So. 2d 574 (La.1993)]. Use of the guidelines gives rise to the presumption that an award of child support is proper. La.R.S. 9:315.1.
The judgment at issue was signed by the district court on November 30, 2000, following a hearing more than two years earlier. The transcript of the August 24, 1998 hearing reflects that counsel for Mr. Drury volunteered to exchange income information and prepare an order for the court setting forth child support in accordance with the guidelines. This was evidently never done. The judgment rendered two years later merely directs Ms. Drury to pay an unspecified sum as monthly child support to Mr. Drury in accordance with the applicable child support guidelines. The record is entirely devoid of any of the supporting documentation required by La. R.S. 9:315.2.
A judgment must be certain and not based on any contingency. Crefasi v. Crefasi, 628 So. 2d 1274, 1276 (La.App. 3 *539 Cir.1993). Documentation is essential to the setting of child support, even in the context of an interim or temporary order. Ventura v. Rubio, XXXX-XXXX, p. 8 (La.App. 4 Cir. 3/16/01), 785 So. 2d 880, 888. Louisiana Revised Statute 9:315.2A is clear in its mandate of essential documentation. That statute provides, in pertinent part, as follows:
Each party shall provide to the court a verified income statement showing gross income and adjusted gross income, together with documentation of current and past earnings. Spouses of the parties shall also provide any relevant information with regard to the source of payments of household expenses upon request of the court or the opposing party, provided such request is filed in a reasonable time prior to the hearing. Failure to timely file the request shall not be grounds for a continuance. Suitable documentation of current earnings shall include but not be limited to pay stubs, employer statements, or receipts and expenses if self-employed. The documentation shall include a copy of the party's most recent federal tax return. A copy of the statement and documentation shall be provided to the other party. [Underscoring added]
Inherent in the process of calculating child support is the principle of equity that requires the court to examine the financial status of both parties. Therefore, the child support statutes must be applied in pari materia. State of Louisiana in the Interest of Wade Joseph, Sr., 97-0780, p. 5 (La.App. 4 Cir. 12/23/97), 705 So. 2d 776, 779. In the instant case, both parties failed to submit verified statements as to their respective incomes, documentation of current and past earnings, copies of their most recent tax returns, as well as other evidence mandated by La. R.S. 9:315.2. Without the introduction of the appropriate documentation, the district court could not properly apply the guidelines of La. R.S. 9:315, et seq. and establish child support in accordance with law. For the same reasons, neither can this court.
Accordingly, we remand this matter to the district court for the submission of the required documentary evidence and the proper calculation of the parties' respective child support obligations.
Retroactive Effect of Judgment Awarding Child Support
Also at issue in this case is the retroactive effect of the November 30, 2000 judgment that attempted to award child support. The parties apparently do not dispute that pursuant to the terms of the Stipulated Judgment previously rendered on May 31, 2000, "neither parent shall have any obligation to pay child support to the other, commencing February, 2000." Thus, at issue is the obligation to pay child support prior to February 2000.
In his brief to this court, Mr. Drury cites and relies upon La. R.S. 9:315.21A, which provides in pertinent part:
A. Except for good cause shown, a judgment awarding, modifying, or revoking an interim child support allowance shall be retroactive to the date of judicial demand ....
The district court's award of child support was made retroactive to June 25, 1998; however, Mr. Drury complains that he has been judicially requesting child support since he filed his original rule for child support on September 18, 1997.
A review of the transcript of the October 14, 1997 hearing held on Mr. Drury's rule reveals that no evidence was presented by Mr. Drury in support of his request for child support. As a result, the judgment rendered on October 14, 1997, and signed *540 on October 17, 1997, was silent as to Mr. Drury's request for child support.
Ms. Drury argues that it has long been established that a final judgment that fails to award relief requested by a party effectively denies that relief. In support of this argument, Ms. Drury cites Rills v. Southern Bell Telephone Co., 305 So. 2d 596, 597 (La.App. 1 Cir.1974), for its proposition that "[o]ur law is well settled that where a decree is silent on an issue, such silence is to be construed as a rejection of the demands of a litigant." Ms. Drury asserts that the judgment signed on October 17, 1997, became final on November 27, 1997, when the delays for filing motions for a new trial and appeal had expired.
The record reflects that Mr. Drury filed a rule to show cause seeking to fix child support on June 25, 1998. Ms. Drury points out that while a hearing was later held on August 24, 1998, the hearing transcript reflects the district court suggested that the parties exchange income information and "come up with a guideline amount." Subsequently issued Reasons For Judgment and Amended Reasons For Judgment were silent as to the issue of child support. The judgment rendered by the court more than two years later awarded child support retroactive to June 25, 1998.
Upon review, we agree and affirm the district court's determination that Mr. Drury is not entitled to child support prior to June 25, 1998.
Award of Attorney Fees
Mr. Drury also requested an award of attorney fees and court costs in connection with his rule to show cause seeking child support filed on June 25, 1998. The judgment signed by the district court on November 30, 2000, cast Ms. Drury with all costs of said proceedings and all attorney fees incurred by Mr. Drury.
Louisiana Revised Statute 9:375A provides, in pertinent part, that "[w]hen the court renders judgment in an action to make executory past-due payments under a ... child support award ... it shall, except for good cause shown, award attorney's fees and costs to the prevailing party."
Pursuant to our reading of the statute, La. R.S. 9:375A applies when a party arbitrarily or capriciously refuses to pay an existing support obligation. In the instant case, the district court did not make an award of child support until two years after the hearing. The district court then failed to order a specific amount of child support to be paid. Thus, the district court erred in awarding attorney fees absent proof of an existing support obligation and a party's subsequent arbitrary refusal to comply. Accordingly, the district court's award of attorney fees and costs is reversed.
CONCLUSION
For the foregoing reasons, the judgment of the district court establishing an unspecified amount as child support for the period from June 25, 1998 through January 2000 is vacated, and the matter is remanded to the district court for recalculation of child support in accordance with the guidelines. We affirm the district court's determination that Mr. Drury is not entitled to child support prior to June 25, 1998. Additionally, we reverse the district court's award of attorney fees and court costs to Mr. Drury. Costs of this appeal are assessed equally against plaintiff, Sharon Cortez Drury Vicknair, and defendant, Steven R. Drury.
VACATED IN PART; AFFIRMED IN PART; REVERSED IN PART; REMANDED.
NOTES
[1] Judge William F. Kline, Jr., retired, is serving as judge pro tempore by special appointment of the Louisiana Supreme Court.
[2] It appears that Mr. Drury's former attorney prepared both documents. At a subsequent hearing held in Division "E" on October 14, 1997, the district court ruled that the provisions of the judgment controlled and that the two weeks of summer visitation specified in the Joint Custody Agreement were null and void.
[3] See Vicknair v. Drury, 99-CW-2526 (La.App. 1 Cir. 4/20/2000).
[4] See Vicknair v. Drury, 2000-CC-1248 (La.5/3/2000), 760 So. 2d 1185. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917801/ | 272 So. 2d 382 (1972)
Milton Greer HARELSON et al., Plaintiffs-Appellees,
v.
PARISH OF EAST BATON ROUGE, Defendant-Appellant.
No. 9115.
Court of Appeal of Louisiana, First Circuit.
December 26, 1972.
Rehearing Denied January 31, 1973.
*383 Charles E. Pilcher, Asst. Parish Atty., and Joseph Keogh, City Parish Atty., Baton Rouge, for defendant-appellant.
Cordell H. Haymon, Baton Rouge, for plaintiffs-appellees.
Before SARTAIN, BLANCHE and EVERETT, JJ.
SARTAIN, Judge.
This litigation is for damages growing out of an alleged breach of contract. On September 18, 1964, a contract was executed wherein the plaintiffs granted a drainage servitude to the defendant for the purpose of widening Claycut Bayou, a major drainage artery in the Parish of East Baton Rouge. It was agreed that the spoil from its excavation would be spread for a distance of 250 feet on each side of the bank of the channel. The spoil was to be spread so as to slope downward and away from the bank of the new channel. Further, it was agreed that all debris would be burned and that drains would be provided through the spoil so as to eliminate ponding of water. The reason for requiring that the spoil be sloped away from the bank of the new channel was to prevent water from flowing over the channel bank from the outside thereby causing the banks to erode. Metal pipes "tin whistles" were to be placed in strategic locations to permit the flow of water from the balance of plaintiffs' property through the pipes and into the channel.
Plaintiffs instituted this action on October 7, 1966, first to compel the completion of the project in accordance with the plans but later amended to seek damages in lieu of specific performance.
The trial judge, though no oral or written reasons were assigned, obviously concluded that the defendant had, in fact, breached the contract and awarded plaintiffs damages to the extent of $1,357.50, itemized as follows: $1,087.50 for fencing, $200.00 for the burning of brush piles, and $70.00 for loss of use of seventy acres for one year at $1.00 per acre. The defendant was also cast for all costs of court.
Defendant has appealed contending that the awards of $200.00 for the burning of the brush piles and $70.00 for the loss of use of seventy acres for one year are not supported by the evidence and the judgment rendered herein should be reduced accordingly.
Plaintiffs answered the appeal urging that the trial judge erred in failing to award plaintiffs damages for loss of use of the land for seven years plus the failure of the trial judge to grant them recovery for the amount that it would take to properly slope the channel banks. We *384 are of the opinion that the trial judge erred in casting the Parish of East Baton Rouge for all costs of court, in failing to award plaintiffs damages for the loss of use of their land for a period of seven years, and in failing to award plaintiffs monetary damages to the extent that it would take to perform the work in accordance with the original agreement.
The record in this case clearly reflects that for a period of seven years plaintiffs were in almost constant contact with the defendant in an effort to have the work properly executed. The evidence is also abundantly clear that the defendant in fact failed to comply with the terms of the contract and that the items of damages sought by the plaintiffs in their answer to this appeal are reasonable, fully supported by the record, and should be granted.
The digging of the canal was under the supervision of the Louisiana State Department of Public Works. However, the clearing of land, spreading of the soil, replacement of fences, etc., was the responsibility and under the supervision of the Department of Public Works for the Parish of East Baton Rouge.
The defendant offered three expert witnesses, engineers out of the Department of Public Works for the Parish, who testified that according to the best of their recollection, the spreading of the spoil was done in accordance with the terms of the contract. However, each acknowledged that the photographs presented by the plaintiffs in support of their assertion that the work was not properly performed clearly show that the dirt from the excavation of the canal was spread in such a manner so as to slope towards rather than away from the banks of the canal. Several reasons were advanced as to how this result occurred. Regardless of the reasons so advanced the unalterable fact remains that the spoil from the channel was not graded in the manner required and that the land immediately parallel to the new channel actually slopes toward the channel itself. The "tin whistles" originally placed on plaintiffs' land to permit the drainage of water into the canal were admittedly defective in design and instead of permitting the orderly flow of water into the canal these drainage pipes were washed out and it was necessary to replace them with pipes of proper design. This work was not completed until November 16, 1970, notwithstanding the fact that a year previous the need for their replacement was apparent. The record further reflects that additional work was required in September of 1969. The fences removed in the earlier construction in 1965 were never replaced. Thus, as plaintiffs assert, this particular project has been the center of much controversy from the date of its commencement in 1964 up to and including the time of the trial in July of 1971. Even the brush piles created during the corrective work performed in November of 1969 were not burned as provided for in the contract. This is one of the items which defendant contends is excessive.
With respect to the regrading of the channel bank to the condition in which it should have been delivered to the plaintiffs, plaintiffs' expert witness estimated that the cost to do so would be $7,100.00. This estimate is not contradicted by the defendant. As a matter of fact it is corroborated by one aspect of its own case. Originally, the working plans presented to the contractor did not reflect that the spoil should be spread in the manner called for in the written contract. It was necessary for the defendant to enter into a Change Order and have the contractor respread the spoil. One of defendant's witnesses estimated that the cost resulting from this Change Order was approximately $7,000.00. Unfortunately, even with the respreading of the spoil on this occasion, the work still proved defective.
The last item of damages claimed by the plaintiffs is for the loss of use of *385 their land for a period of seven years. As mentioned above, the trial judge awarded only $70.00 calculated at $1.00 per acre for the loss of seventy acres. The spoil bank in question is the rear 28 acres of a larger 70 acre tract. Evidence was introduced that reasonable rental of pasture land is $1.00 per acre per year. We do not believe that it is reasonable for defendant to now claim that plaintiffs have failed to properly use the balance of their property when said defendant has protracted in its disruption of plaintiffs' use of their land for this period of time. The pictures placed in evidence clearly reflect that at the outset plaintiffs' lands were not properly graded so as to permit bushhogging, etc. Further, the washing away of the original drains prevented its use, and it is questionable to us whether a fence could have been maintained under these circumstances had the plaintiffs attempted to erect one themselves. Throughout these past seven years the use of plaintiffs' lands for pasture purposes has been denied them unless they would have expended the sums now sought for curative measures. This would be an unreasonable burden to place upon the plaintiffs. We would be prone to reduce the damages for the loss of use of their land had it not taken the defendant a period of five years to even conclude what corrective measures it took in replacing the tin whistles and regrading the land immediately surrounding these drains.
The measure of damages for the breach of an obligation is the sum that will put the plaintiff in the same position as if the obligation had been fulfilled. C.C. Art. 2769. Womack v. Sternberg, 247 La. 566, 172 So. 2d 683 (1965); and Slack v. Standard Chevrolet Corporation, 197 So. 200, 2nd La.App. 1940.
We concur with the defendant that it was improper for the trial judge to assess all costs of court against the defendant, a political subdivision of the State. In controversies such as the one at hand, a political subdivision is liable only for the stenographer's cost for taking testimony. R.S. 13:4521.
Accordingly, for the above reasons the judgment of the District Court is amended and as amended shall be as follows: Judgment in favor of the plaintiffs in the following amounts: $1,087.50 for fencing, $200.00 for the burning of brush piles, $490.00 for the loss of use of the property, and $7,100.00 as damages to the property itself, together with legal interest thereon from the date of judicial demand, until paid. Further, the defendant is cast for all such costs as are permitted by law.
Amended and affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1570887/ | 29 So. 3d 305 (2010)
VELAZQUEZ
v.
STATE.
No. 2D09-2970.
District Court of Appeal of Florida, Second District.
February 5, 2010.
Decision Without Published Opinion Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917551/ | 835 So. 2d 2 (2002)
Russell T. GREEN, Plaintiff-Appellant,
v.
STATE FARM GENERAL INSURANCE COMPANY, Defendant-Appellee.
No. 35,775-CA.
Court of Appeal of Louisiana, Second Circuit.
April 23, 2002.
*3 James M. Johnson, Minden, Counsel for Appellant.
Kitchens, Benton, Kitchens & Warren, Graydon K. Kitchens, III, Minden, Counsel for Appellee.
Before WILLIAMS, CARAWAY and DREW, JJ.
DREW, J.
The sole issue is whether the trial court erred in granting defendants' motion for summary judgment. Russell Green, plaintiff, urged the trial court's action was inappropriate and premature, in light of his intention to hire an expert to examine the allegedly defective ladder from which Green fell and his assertion that discovery had not been cut off. The judgment is affirmed.
Green, and the defendant, Dennis C. McMullen, Jr., were co-owners of real estate and a gas powered pressure washer which broke down occasionally. On November 27, 1997, Green was using the washer to clean a house owned solely by McMullen. While alone on the property cleaning the house, Green used a five foot aluminum ladder owned by McMullen. After using the ladder approximately 45 minutes, Green fell and was injured. McMullen and his insurer, State Farm Fire and Casualty Company[1], stated that Green fell from the ladder. Green asserted that the ladder collapsed and he was badly injured.
In his petition filed November 23, 1998, Green alleged that he was standing on the third rung of the ladder when it collapsed with the ladder legs bending inward. Green's petition stated that he sustained a dislocated right elbow and a fractured right wrist which required hospitalization, surgery and physical therapy. Suing McMullen and his insurer, State Farm, Green asserted that McMullen was strictly liable to him for permitting him to use a defective ladder which he knew, or should have known was defective. Green also urged that McMullen was negligent by leaving Green alone operating the power *4 washer while standing on a ladder which he knew or should have known was defective. Both McMullen and State Farm filed answers which denied liability.
On April 22, 1999, the parties filed a joint motion for continuance of a May 17, 1999 trial date because discovery was incomplete and the plaintiff intended to take video depositions of medical doctors for trial which had not been able to be scheduled. The matter was continued without date.
On October 11, 1999, the trial judge signed a pretrial order. The parties set out their respective contentions and represented to the court that no motions were pending before the court. The defense position was that the accident was caused by the plaintiffs negligence in wrapping the hose of the power washer around the legs of the ladder, that the ladder was not defective and that McMullen had no knowledge nor should he have, that the ladder was defective.
The pre-trial order set out the contested issues: (1) Are the defendants solidarily liable for plaintiffs injuries and was the ladder defective and did defendant know (or should he have known) about the defect?; (2) Was plaintiff guilty of any negligence which would reduce his recovery under comparative fault?; and (3) quantum.
Both plaintiff and defendant represented in the pre-trial order that there were no contested legal issues. The parties supplied lists of their exhibits and witnesses. The defendants listed Ron McKinley, P.E. as their expert to inspect and give testimony about the condition of the aluminum ladder along with an economic expert to be selected. The plaintiffs witness list stated experts were to be selected to inspect and give testimony about the condition of the ladder and to provide testimony on economic issues. Both sides stated they had no requests for amendments to the pleadings and that neither party was aware of any additional matters to assist in the disposition of the action which they estimated would take two and one half days to try.
The next filing in the record came eighteen and one-half months later on May 1, 2001. The defendants, McMullen and State Farm, filed a motion for summary judgment based upon La. C.C. art. 2317.1 which requires that a defendant knew or should have known of the existence of the defect which caused the damages. The defendants asserted that the ladder was not defective, but that even if there was a defect, plaintiff could not satisfy his burden of proof because he had no evidence that McMullen knew or should have known of a defect in the ladder.
In support of the motion for summary judgment, defendants filed the affidavit of Ron McKinley, a licensed professional engineer. After examining the ladder, McKinley stated: the ladder legs had an outward taper that prevented downward pressure from causing an inward collapse; the damage to the ladder could not have occurred from a downward load such as a person standing on the ladder; the fracture points were new and brittle and caused by sudden over-stressing of the metal; that force was applied to the outside of the ladder leg surfaces; the damage to the ladder and the fall was not caused by a structural failure in the ladder, but were more probably than not caused by Green's loss of balance; and the damage to the ladder and to Green was caused when Green fell onto the ladder legs.
In his opposition to the Motion for Summary Judgment, Green stated that he planned to employ an expert engineer, that the case was not set for trial and that *5 discovery had not been foreclosed. Therefore, it was premature and improper to grant the Motion for Summary Judgment which was improperly based upon defendant's expert witness. Green urged that what McMullen knew or should have known about the condition of the ladder should be decided on the circumstantial evidence presented at trial. Green filed no affidavits or anything else to buttress the argument in his opposition.
On June 5, 2001, the trial judge granted the motion for summary judgment and dismissed plaintiffs action at his cost. On August 3, 2001 Green filed this appeal.
DISCUSSION
In Independent Fire Ins. Co. v. Sunbeam Corp., 99-2181 (La.2/29/00), 755 So. 2d 226, the supreme court explained that review of a grant or denial of a motion for summary judgment is de novo. A motion for summary judgment will be granted 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 material fact, and that the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966(B). The article was amended in 1996 to provide that summary judgment procedure is designed to secure the just, speedy, and inexpensive determination of every action. La. C.C.P. art. 966(A)(2). A 1997 amendment of the article specifically altered the burden of proof in summary judgment proceedings to provide that the burden of proof remains with the movant. Thereafter, if the adverse party fails to produce factual support sufficient to establish that he will be able to satisfy his evidentiary burden of proof at trial, there is no genuine issue of material fact. La. C.C.P. art. 966(C)(2). This amendment levels the playing field between the parties in two ways: first, the supporting documentation submitted by the parties is scrutinized equally, and second, the presumption in favor of trial on the merits is removed. Independent Fire Ins. Co. v. Sunbeam Corp, supra.
La. C.C.P. art. 966(C)(2) establishes that while the burden of proof remains with the movant, if the movant will not bear the burden of proof at trial, the movant does not have to negate all essential elements of the adverse party's claim, action, or defense, but must point out to the court that there is an absence of factual support for one or more elements essential to the adverse party's claim. Then, if the adverse party fails to produce factual support sufficient to establish that he will be able to satisfy his evidentiary burden of proof at trial, there is no genuine issue of material fact. Hagood v. Brakefield, 35570 (La. App.2d Cir.1/23/02), 805 So. 2d 1230.
A motion for summary judgment may be made at any time. La. C.C.P. art. 966(A). After adequate discovery or after a case is set for trial, a motion for summary judgment which shows that there is no genuine issue of material fact and that the movant is entitled to summary judgment as a matter of law shall be granted. La. C.C.P. art. 966(C). Eason v. Finch, 32157 (La.App.2d Cir.8/18/99), 738 So. 2d 1205, writ denied, 99-2767 (La.12/10/99), 751 So. 2d 861.
Green contended that the trial court prematurely and incorrectly granted the summary judgment because discovery had not been foreclosed and because no trial date had been set. In Eason v. Finch, supra, the plaintiff complained on appeal that the trial court should not have granted summary judgment because discovery was not complete. In affirming the summary judgment, the court noted that parties may move for summary judgment and the court may consider the motion before the parties have completed discovery. The *6 fact that discovery is incomplete does not procedurally bar the defendant from seeking a summary judgment. The trial court has the discretion to issue a summary judgment or order more discovery. While parties must have a fair opportunity to conduct discovery and present their claim, there is no absolute right to delay action on a motion for summary judgment until discovery is complete. In Eason, supra, the defendant filed an opposition which was supported by excerpts from depositions and answers to interrogatories. This court noted that the suit had been filed in October 1997 and defendant sought a summary judgment in September of 1998. The trial court granted the summary judgment in October of 1998. Concluding, in essence, that plaintiff had received a fair opportunity to conduct discovery and present her claim, this court found that the trial court did not abuse its discretion in granting the summary judgment instead of ordering more discovery.
This court also affirmed the summary judgment granted in Berzas v. OXY USA, Inc., 29835 (La.App.2d Cir.9/24/97), 699 So. 2d 1149. Apartment residents sued a number of defendants in 1991 to recover for their damages allegedly caused by toxic and hazardous wastes deposited in the ground including the site of their apartments. OXY conducted discovery and plaintiffs conducted no discovery. After discovery deadline and trial date were set, plaintiffs sought to continue the trial until government agencies completed their testing. OXY relied in part on plaintiffs' failure to designate experts for claims that could not be proven absent expert testimony. The plaintiffs responded that they could not get experts until the EPA, DEQ and the La. Office of Public Health identified the toxins at the site. The court observed that once a motion for summary judgment has been properly supported, the failure of the nonmoving party to produce evidence of a material factual dispute mandates the granting of the motion for summary judgment. OXY pointed out that in the five years the suit had been pending, plaintiffs had not conducted discovery. To oppose the summary judgment, plaintiffs supplied an affidavit from a government official that testing was incomplete. In granting the summary judgment, the court noted that plaintiffs had failed to show they were exposed to chemicals, that they had suffered any injury and that OXY was responsible for any alleged exposure. The court also pointed out that plaintiffs had ample time for discovery and made no efforts to factually support any element of their claim against OXY.
In Barron v. Webb, 29707 (La.App.2d Cir.8/20/97), 698 So. 2d 727, writ denied, 97-2357 (La.11/26/97), 703 So. 2d 651, this court also affirmed a summary judgment which plaintiffs contended was granted prior to adequate discovery. The suit was filed in January of 1996 and the Motion for Summary Judgment was filed in August of 1997. Plaintiffs opposed the motion with an affidavit from their attorney stating one witness scheduled for deposition could not be found and the defendant-homeowners had not been deposed. This court observed that once a Motion for Summary Judgment is made and supported, the burden shifts to the opposing parties. This court found that there was no absolute right to delay an action until discovery is cut off and that plaintiffs had been given a fair opportunity to present their claim and filed only a conclusory affidavit instead of seeking to have discovery set. After concluding that the defense Motion for Summary Judgment had been properly supported and there was no material issue of genuine fact, this court affirmed the summary judgment.
The case has been pending over three years and a pre-trial order was *7 signed in October 1999 which set out plaintiffs intent to retain experts on the condition of the ladder and economic issues, yet no action was taken. Plaintiff's response to the motion for summary judgment was to state again his intention to retain experts. The plaintiff in this case certainly had a fair opportunity to conduct discovery and to present his claim.
Before a summary judgment can be granted, the movant must establish that there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966(C)(1). In Hagood v. Brakefield, supra, the court discussed liability for damage caused by defective things. La. C.C. 2317 and 2317.1 state:
We are responsible, not only for the damage occasioned by our own act, but for that which is caused by the act of persons for whom we are answerable, or of the things which we have in our custody. This, however, is to be understood with the following modifications.
The owner or custodian of a thing is answerable for damage occasioned by its ruin, vice, or defect, only upon a showing that he knew or, in the exercise of reasonable care, should have known of the ruin, vice, or defect which caused the damage, that the damage could have been prevented by the exercise of reasonable care, and that he failed to exercise such reasonable care....
Enacted in 1996, La. C.C. art. 2317.1, effectively negated the concept of "strict liability" for defective things and prescribed a negligence standard based on the owner or custodian's knowledge or constructive knowledge of a defect. However, the article 2317.1 requirement of constructive knowledge imposed a reasonable duty to discover apparent defects in things under the defendant's garde. Hagood supra. Hagood was injured when he fell and was cut by the chain saw he was using. The parties conceded the owner of the saw had no actual knowledge that the chain saw continued to run after the trigger was released. Hagood opposed the owner's motion for summary judgment with affidavits from two witnesses of the defect in the saw and from an expert who stated the saw was unreasonably dangerous. Although the parties conceded the owner had no actual knowledge of the defect, this court reversed a summary judgment in favor of the owner after finding that Hagood had opposed the motion with enough to raise a genuine issue of material fact as to the owner's constructive knowledge.
In this matter, one of Green's complaints on appeal is that the trial court improperly considered the affidavit of defendant's expert witness. The supreme court concluded that affidavits of experts may be considered for purposes of a motion for summary judgment.[2]Independent Fire Ins. Co. v. Sunbeam Corp., 99-2257 (La.2/29/00), 755 So. 2d 226.
Supporting defendants' motion for summary judgment was their affidavit from an expert engineer who, after setting out his scientific credentials, reported his examination of all portions of the ladder including the broken portion. The expert stated that the ladder was in good condition and that Green's fall was not caused by structural failure of the ladder, but by his losing his balance and falling on the ladder legs. Concerning the owners' constructive or actual knowledge of an alleged defect, defendants presented an excerpt from Green's deposition at which he responded, "I don't know that. Huh-uh," to whether Green had any reason to think that all that *8 McMullen knew that the ladder was defective or would fall. In the memorandum in support of the summary judgment and in response to Green's allegation that McMullen negligently caused his fall by leaving the premises instead of staying and holding the ladder, the defendants noted that Green had stated that McMullen left over an hour before the accident and that Green worked unassisted.
The defendants established there was no genuine issue of material fact as to McMullen's negligence or actual and/or constructive knowledge of a defect. Instead of opposing the summary judgment with his own expert and lay testimony, Green simply indicated he would hire an expert and stated discovery was not complete and the matter did not have a trial date.
Summary judgment may be sought at any time. Plaintiff had a fair opportunity to conduct discovery and present this claim and had no absolute right to delay action on the motion for summary judgment until discovery was complete. Once the defendants presented the properly supported motion for summary judgment showing no genuine of issue of material fact, the burden shifted to Green to present evidence that genuine issues of material fact exist. Instead, Green simply sought to delay the long pending matter by repeating again his intention to hire a scientific expert.
DECREE
The trial court did not err in granting the defense motion for summary judgment and dismissing Green's action with prejudice. Costs are assessed to Russell T. Green, plaintiff.
AFFIRMED.
NOTES
[1] Green's petition named as defendant "State Farm General Insurance Company." In its answers on its own behalf and on behalf of McMullen, State Farm Fire and Casualty Company pointed out that Green had incorrectly stated the company's name.
[2] That decision contains a specific and extensive discussion concerning the consideration of experts' affidavits on motions for summary judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917570/ | 835 So. 2d 1181 (2002)
Salvatore J. ALTIERI, Appellant,
v.
STATE of Florida, Appellee.
No. 4D01-925.
District Court of Appeal of Florida, Fourth District.
December 26, 2002.
*1182 Carey Haughwout, Public Defender, and Gary Caldwell, Assistant Public Defender, West Palm Beach, for appellant.
Richard E. Doran, Attorney General, Tallahassee, Laura Fisher Zibara and Marrett W. Hanna, Assistant Attorneys General, West Palm Beach, for appellee.
DELL, JOHN W., Senior Judge.
Salvatore Altieri appeals his conviction and sentence for aggravated assault with a deadly weapon. We affirm his conviction. We reverse the trial court's imposition of a twenty year mandatory minimum sentence for discharging a firearm during the offense. We remand for re-sentencing.
On July 26, 1999, the victims were traveling north on 1-95 when the driver of a white taxicab, later identified as appellant, fired two or three shots at their car. The driver of the victim's car testified that he sped into a rest area to escape from appellant. He lost control of the car and crashed into a tree. The occupants of the car and appellant called the police and both claimed to be the victim of an incident occurring on 1-95. Appellant testified that the victims were the aggressors and that the shots he fired were fired into the air as warning shots. The jury found appellant guilty of aggravated assault with a deadly weapon and also found that he discharged the firearm during the offense. The trial court sentenced appellant to a mandatory minimum term of twenty years imprisonment for the aggravated assault based on the discharge of the firearm, pursuant to 775.087(2)(a)(2), Florida Statutes (1999).
Appellant contends that the trial court erred when it imposed a twenty year mandatory minimum sentence because the information did not charge that during the commission of the aggravated assault, he discharged a firearm. Appellant also contends that the trial court should have granted a new trial based on the prosecutor's improper comments during closing argument and that the trial court erred when it refused to give a jury instruction on justifiable use of non-deadly force.
We agree with appellant that the trial court erred when it imposed a mandatory minimum twenty year sentence. The state alleged in the information that on:
July 26, 1999 Salvatore J. Altieri did intentionally and unlawfully threaten[ed] by word or act to do violence to the person of Jose Desravines, having the apparent ability to do so, and did an act which created a well-founded fear in Jose Desravines that such violence was about to take place, and in the process thereof used a deadly weapon, to-wit: a firearm, in violation of Florida Statute 784.021(1)(a).
(Emphasis added.) The jury found appellant "Guilty of Aggravated Assault with a Deadly Weapon, as charged in the Information." The jury also found that the deadly weapon was a firearm when they responded "yes" to the question, "If you find the Defendant Guilty of Aggravated Assault with a Deadly Weapon and you find that the Deadly Weapon was a firearm, did the Defendant Discharge the Firearm?" The trial court sentenced appellant pursuant to section 775.087(2)(a)(2), Florida Statutes (1999), which provides:
*1183 Any person who is convicted of a felony or an attempt to commit a felony listed in sub-subparagraphs (a)1.a.-q., regardless of whether the use of a weapon is an element of the felony, and during the course of the commission of the felony such person discharged a `firearm' or `destructive device' ... shall be sentenced to a minimum term of imprisonment of 20 years.
§ 775.087(2)(a)(2), Fla. Stat. (1999). Aggravated assault is one of the enumerated felonies included in § 775.087(2)(a)(1)(f), Florida Statutes (1999).
Appellant cites Bryant v. State, 744 So. 2d 1225 (Fla. 4th DCA 1999), in support of his argument that his twenty year mandatory minimum sentence must be reversed. In Bryant, the information charged the defendant with attempted first-degree murder in count I and for shooting into an occupied building in count II. In count I, attempted first-degree murder, the information "did not allege that the offense was committed with a firearm." Id. at 1226. The defendant was found guilty of the lesser-included charge of attempted second-degree murder (count I) and of shooting into an occupied building (count II). By special verdict, the jury found that the defendant used a firearm in the commission of the attempted second-degree murder. He was sentenced on each count to a mandatory minimum sentence of three years pursuant to section 775.087(2), Florida Statutes (1997).
This court held in Bryant that the imposition of a three year mandatory minimum sentence for his conviction of attempted second-degree murder constituted fundamental error and reversed and remanded the case for re-sentencing:
We have held that `[i]n order for a three year mandatory minimum to apply on a conviction pursuant to section 775.087(2), the state must allege in the information and prove at trial that the defendant possessed a `firearm' or `destructive device' during the commission of the crime.' No such firearm allegation or reference to section 775.087(2) was made in the information to put appellant on notice that he was being charged in Count I [attempted first-degree murder] `with the use of a firearm' and faced potential imposition of a three-year mandatory minimum sentence.
Id. at 1226 (citations omitted). In Bryant, the court also stated:
Although Count II charged appellant with shooting into an occupied building, the state cannot use allegations of use of a firearm in another count of the information to support imposition of the mandatory minimum term on Count I.
Id.
Here, the information contained an allegation that appellant "used a deadly weapon, to wit: a firearm" but it did not contain an allegation that appellant discharged a firearm or destructive device. We are not persuaded by the state's argument that the allegation that "in the process thereof used a deadly weapon, to wit: a firearm," was sufficient to place appellant on notice that he was being charged with discharging a firearm during the course of the aggravated assault. The term "used" a firearm does not necessarily mean that a person "discharged" a firearm because a person may use a firearm without discharging it. Section 775.087(2)(a)(2) applies when a person discharges the firearm or destructive device.
The absence of any allegation in the information that appellant "discharged" a firearm during the aggravated assault deprived him of notice that he was subject to a mandatory minimum of twenty years. The jury's finding that he discharged a firearm during the course of the aggravated assault did not cure the defect in the information. We, therefore, reverse *1184 the mandatory minimum twenty year sentence imposed by the trial court for the discharge of a firearm. See Bryant, 744 So.2d at 1225; see also Gibbs v. State, 623 So. 2d 551, 555 (Fla. 4th DCA 1993).
Because we must remand this case for re-sentencing, we will discuss appellant's argument that because the information does not contain an express allegation that he "actually possessed" a firearm during the commission of the aggravated battery, the trial court cannot impose a three-year mandatory minimum sentence for possession of a firearm. Section 775.087(2)(a)(1), Florida Statutes (1999), provides in part "that a person who is convicted for aggravated assault ... shall be sentenced to a minimum term of imprisonment of three years if such person possessed a `firearm' or `destructive device' during the commission of the offense." Here, the information charged that "in the process thereof [the aggravated assault] [appellant] used a deadly weapon, to wit: a firearm." Appellant argues that Bryant requires that the state "must allege in the information and prove at trial that the defendant possessed a `firearm' or `destructive device' during the commission of the crime."
Neither party has cited a case that addresses the specific question of whether an information that contains an allegation that a person "used" a firearm during the commission of an aggravated assault is sufficient to support the imposition of a three-year mandatory minimum sentence as provided in 775.087(2)(a)(1). This court noted in Bryant, that State v. Overfelt, 457 So. 2d 1385 (Fla.1984), and its progeny "addressed the requirement that a jury specifically find that the defendant committed the crime while using a firearm, either by finding the defendant guilty of a crime which involved a firearm or by a special verdict form indicating use of a firearm. They did not answer the question of whether there needed to be an allegation in the charging document that the defendant possessed a firearm during the commission of the crime." Id. at 1226-27.
In Bryant and Gibbs, neither information contained any allegation as to whether the subject offense was committed with a firearm. In both cases, this court held that "[i]n order for a three year mandatory minimum to apply on a conviction pursuant to section 775.087(2), the state must allege in the information and prove at trial that the defendant possessed a `firearm' or `destructive device' during the commission of the crime. See Peck v. State, 425 So. 2d 664, 665 (Fla. 2d DCA 1983)." Gibbs, 623 So.2d at 555. We conclude that the imposition of a three year mandatory minimum sentence in this case is consistent with Bryant and Gibbs because the information contains an allegation that the appellant "used a deadly weapon, to wit: a firearm," during the commission of the aggravated assault. We find support for this conclusion in Bryant because this Court stated "... [n]o such firearm allegation or reference to section 775.087(2) was made in the information to put appellant on notice that he was being charged in Count I `with use of a firearm' and faced potential imposition of a three year mandatory minimum sentence." (Emphasis added.) Bryant, 744 So.2d at 1226. It is also apparent from several of the cases that have considered the application of the three year mandatory minimum sentence for possession of a firearm during an enumerated offense that "possession of a firearm" and "use of a firearm" have been used in the same context. See Overfelt, 457 So.2d at 1385; Bryant, 744 So.2d at 1225; Gibbs, 623 So.2d at 551; Mesa v. State, 632 So. 2d 1094 (Fla. 3d DCA 1994).
In Bass v. State, 739 So. 2d 1243 (Fla. 5th DCA 1999), the Fifth District affirmed the imposition of a three year mandatory *1185 minimum sentence for aggravated assault. The court stated:
However, the jury verdict found defendant guilty of aggravated assault `as charged in the information.' The information, in each count, charged defendant with committing the crime `with a firearm, `a deadly weapon. For imposition of the mandatory minimum sentence, it was sufficient the verdict referred to the information where the information contained a charge of a crime committed with the use of a firearm. State v. Hargrove, 694 So. 2d 729, 731 (Fla.1997). There was no error here.
Id. at 1246. (Emphasis added.)
Here, as in Bass, the information charged that appellant used a firearm during the commission of the aggravated assault and the jury found him guilty of aggravated assault with a deadly weapon. For the reasons discussed, we hold that the state's allegation that appellant "used a deadly weapon, to wit: a firearm" was sufficient to place him on notice that he was subject to a three year mandatory minimum sentence for possession of a firearm, pursuant to section 775.087(2)(a)(1).
Next, we hold that the prosecutor's comments during closing argument did not constitute reversible error. We have considered the comments raised by appellant in light of the evidence adduced at trial and in the context of the prosecutor's entire argument and hold that the comments did not reach the level of prejudice that would require a new trial. See Ryan v. State, 457 So. 2d 1084 (Fla. 4th DCA 1984). We also hold that the trial court did not abuse its discretion when it failed to give an instruction on justifiable use of non-deadly force. See Miller v. State, 613 So. 2d 530, 531 (Fla. 3d DCA 1993).[1]
Accordingly, we affirm appellant's conviction. We reverse the trial court's imposition of a twenty year mandatory minimum sentence for discharging a firearm and we remand this cause to the trial court to re-sentence appellant as provided in section 775.087(2)(a)(1), Florida Statutes (1999).
AFFIRMED IN PART; REVERSED IN PART AND REMANDED.
KLEIN and SHAHOOD, JJ., concur.
NOTES
[1] We have addressed the issues concerning prosecutorial misconduct and the trial court's failure to give an instruction on justifiable use of non-deadly force, notwithstanding the appellant's conditional abandonment of these issues. Appellant states in his brief that "appellant asks that, if this court concludes that it was error to sentence him to a twenty year mandatory minimum because the state did not allege that he discharged a firearm, it affirm his conviction." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917809/ | 135 N.W.2d 134 (1965)
178 Neb. 733
Application of Vincent SKINNER for a writ of habeas corpus.
Vincent SKINNER, Appellee,
v.
Lester JENSEN, Sheriff of Sheridan County, Nebraska, Appellant.
No. 35896.
Supreme Court of Nebraska.
May 14, 1965.
*135 Michael V. Smith, E. A. Anderson, Gordon, for appellant.
Fisher & Fisher, Chadron, for appellee.
Heard before WHITE, C. J., and CARTER, SPENCER, BOSLAUGH, BROWER, SMITH and McCOWN, JJ.
BOSLAUGH, Justice.
A complaint was filed in the county court of Sheridan County, Nebraska, charging the relator, Vincent Skinner, with manslaughter in the death of Sophie Plenty Wounds. A preliminary hearing was held and the relator ordered committed to the county jail until discharged according to law or until bail in the amount of $5,000 was furnished.
The relator then commenced this action to obtain a writ of habeas corpus upon the ground that his imprisonment was unlawful because the evidence produced at the preliminary hearing was not sufficient to sustain the order of the county court. The trial court found that the detention of the relator was unlawful and ordered that he be discharged from custody. The respondent, who is the sheriff of Sheridan County, Nebraska, has appealed from that order.
A transcript of the evidence introduced at the preliminary hearing was attached to and made a part of the petition. This evidence tends to show that Sophie Plenty Wounds appeared to be in good health on April 14, 1964; that she spent the night of April 14, 1964, at the relator's house in *136 Gordon, Nebraska, on his bed; that the relator and Sophie Plenty Wounds were in the relator's house from about 7 p. m. on April 14, 1964, until about 8 a. m. on April 15, 1964; that on the morning of April 15, 1964, Sophie Plenty Wounds was found lying on the floor at the side of the bed in the relator's house; that she was unconscious and had no clothes on; that she had severe bruises upon her arms, legs, and mouth; that the right side of her face was blue and swollen and her right eye was closed; that the bruise mark on her face extended over to the side of her head near the temple; that she was carried to an automobile and taken to the Pine Ridge Hospital; that she did not recover consciousness; and that on April 22, 1964, she was transferred to the Rapid City Hospital. Over the objection of the relator, a certified copy of a "Death Register" or death certificate was received in evidence. The certificate recited that Sophie Plenty Wounds died at Rapid City, South Dakota, on April 23, 1964, as a result of head injuries.
The purpose of a preliminary hearing is to ascertain whether there is evidence which justifies holding an accused for trial. Before an accused can be held to answer a charge upon information, he is entitled to a preliminary examination and there must be proof and a judicial determination that the offense has been committed and that there is probable cause to believe that the accused committed the offense. Carson v. State, 80 Neb. 619, 114 N.W. 938; Cotner v. Solomon, 163 Neb. 619, 80 N.W.2d 587.
A preliminary hearing is not a prosecution or trial. Evidence which will justify a finding by a committing magistrate that probable cause exists for the detention of a defendant need not be sufficient to sustain a verdict of guilty or show guilt beyond a reasonable doubt. State ex rel. Pribyl v. Frank, 165 Neb. 239, 85 N.W.2d 328.
In a habeas corpus proceeding instituted for the purpose of testing the sufficiency of the evidence produced at a preliminary hearing, the court will not weigh the evidence but will only inquire as to the existence of evidence to sustain the charge. Neudeck v. Buettow, 166 Neb. 649, 90 N.W.2d 254. Where the testimony shows that an offense has been committed and there is testimony tending to show that the accused committed the offense, the court, on a writ of habeas corpus, will not discharge the accused.
The relator in this case was charged with manslaughter. Manslaughter is the unlawful killing of another, either upon a sudden quarrel, or unintentionally, while in the commission of some unlawful act. Section 28-403, R.R.S.1943. It may consist of the unintentional killing of a person, without malice, resulting from an unlawful assault and battery that in itself is not of a character or intended to cause death. Fisher v. State, 154 Neb. 166, 47 N.W.2d 349.
In this case the relator was charged with causing the death of Sophie Plenty Wounds from injuries resulting from an unlawful assault and battery upon her. The evidence is sufficient to sustain a finding that an assault and battery was committed upon Sophie Plenty Wounds and that there is probable cause to believe that the relator is guilty of that offense. There is no evidence as to the death or cause of death of Sophie Plenty Wounds other than the certified copy of the South Dakota death register.
The rule in this state is that a death certificate is not competent evidence of the cause of death in a controversy where the cause of death is a material issue. Vanderheiden v. State, 156 Neb. 735, 57 N.W.2d 761. The basis of the rule lies in the fact that death certificates are made ex parte, without a hearing and without the right of cross-examination.
*137 Except for the death certificate, there was no evidence to establish the death or cause of death of Sophie Plenty Wounds. Thus, the evidence was not sufficient to sustain a finding that manslaughter has been committed and that the relator should be held for trial on that offense.
The preliminary hearing which has been held is not a bar to the filing of a new complaint and a hearing upon the new complaint. See, Fugate v. Ronin, 167 Neb. 70, 91 N.W.2d 240; Neudeck v. Buettow, supra; State ex rel. Flippin v. Sievers, 102 Neb. 611, 168 N.W. 99; Michaelson v. Beemer, 72 Neb. 761, 101 N.W. 1007; Van Buren v. State, 65 Neb. 223, 91 N.W. 201. If the State has additional evidence which it may wish to present, a new complaint may be filed.
The judgment of the district court is affirmed.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917814/ | 1 Mich. App. 271 (1965)
135 N.W.2d 565
SHAW
v.
WIEGARTZ.
Docket No. 214.
Michigan Court of Appeals.
Decided June 21, 1965.
*273 Evans & Shipper (R.L. Shipper, of counsel), for plaintiffs.
John K. Irwin, Jr., for defendants.
FITZGERALD, J.
No single human act has been so tortured by the law as the simple deed of going onto the property of another and being injured. Courts, in their efforts to refrain from imposing undue burdens on injured parties or landowners, have set up categories and categories-within-categories to designate the "status" of the injured and the "knowledge" of the landowner.
The tangled skein created by the law can only be unravelled by close inspection and this saga is no exception to this precept.
Plaintiff Eve M. Shaw is an aunt of defendant Dorothy Wiegartz. The husbands of each party, though named in the suit, figure little in the statement of events. Plaintiff suffered a fall down a basement stairs in defendants' home on August 24, 1963. Trial, on June 9, 1964, without a jury, resulted in a no cause of action on the ground of lack of knowledge of the hazardous stairs on the part of defendant. Plaintiff brings this appeal.
From time to time, previous to the accident, plaintiffs had lived with defendants in Royal Oak, contributing part of the food but paying no rent. Defendants purchased a new home at Walled Lake during the summer of 1963 and were scheduled to move on August 24th. Sometime around August 22d, the parties had a conversation relative to the cleaning-up *274 and moving process. Plaintiff claims defendant asked her to come out and help her. Defendant claims that Mrs. Shaw volunteered for duty. At any rate, there was no discussion regarding compensation for Mrs. Shaw's services.
On August 24th, Mrs. Shaw went to the premises for the first time with two other ladies and arrived some 15 minutes before defendant. The prior owners had moved out the day before. While getting ready to go to work, Mrs. Shaw walked to a darkened area in a normal manner and speed, thinking it was a hall (she asked specifically, "What is this, a hall?") and fell down the basement stairs, breaking bones in both ankles.
Meanwhile, Dorothy Wiegartz, who had arrived on the scene, was talking on the telephone and had no chance to answer plaintiff Shaw's question. Neither had she told Mrs. Shaw of the nature of the stairs, described in testimony as the "well-type," being an opening cut out of the floor. There was no door as such, and the opening was mostly concealed by the outside door to the kitchen when that door was open. The walls were a continuation of the kitchen walls, the floor was a continuation of the kitchen floor. There was a light switch and a light in the stairwell, but at the time of the fall, the light was not on. There was no handrail. The ceiling was a continuation of the kitchen ceiling and the wall paint of the stairwell and the kitchen were the same.
The defendant had been on the premises three times before the day of the accident: one trip she had not been in the house; one trip she had not gone to the basement; her other trip included a visit to the basement in the company of the prior owners and while it was lighted. She testified she saw nothing unusual or hazardous at that time.
Thus, the relationships of the parties and the treacherous conditions bring us directly to the issues: *275 What was the legal status of Mrs. Shaw, and what duty of care was owed her, and did defendant have sufficient knowledge of a hazardous condition to be charged with a legal duty to warn of the stairs?
A trespasser Mrs. Shaw was not, and we can reject that she was a business invitee on the premises since it was neither urged by counsel nor carried out by proofs. About the best that can be said for her is that she was a licensee, as befits the conflicting testimony as to whether she was asked to help in the cleaning or whether she volunteered her services.
Authorities have universally agreed that the "licensee" is not entitled to the same degree of wariness for his safety on the premises of another as the "business invitee." If the family relationship is close, as is the case here, the most common term applied to such a visitor is a "gratuitous licensee" and this is borne out by the American Law Institute's Restatement of Torts, § 331.
But what of the visitor who confers a benefit on the host during the course of the visit? It is well stated in 25 ALR2d 598, 607 that minor services performed by the guest for the host during the course of the visit will not be sufficient to interrupt his status as a guest. The weight of authority for the duty owed licensees is likewise set out in 25 ALR2d 598, 602 where it states that:
"The host's only duty is not to injure, by active or affirmative negligence, a guest whose presence is known, not to set a trap or pitfall for the guest, to warn against or remove defects which the landlord knows are likely to cause harm to the guest, and which he has reason to believe the guest is not likely to discover for himself." (Emphasis supplied.)
*276 The court in its opinion found that the stairs in question were hazardous, but further stated that it could not find "that defendant had actual knowledge of a hazardous condition requiring warning or other action on her part."
Plaintiff urges a long succession of Michigan cases, beginning with Samuelson v. Cleveland Iron Mining Company (1882), 49 Mich. 164, and ending with Kroll v. Katz (1965), 374 Mich. 364. But the majority of these cases deal with business invitees and, while helpful, are not controlling.
Such cases, however, stand for the proposition that it is for the trier of fact to determine whether or not the possessor of land knew of the danger or ought to have known about the danger. The court in the instant case found that defendant did not have such knowledge nor could such knowledge be imputed to her.
The recent case of Miller v. Miller (1964), 373 Mich. 519, is perhaps more factually in point in that a family relationship was also involved. Here, plaintiff had gone to her son's home for a social visit and to deliver clothing for his children. Finding the screen door stuck, she was advised by defendant to give it a kick which she did, thereupon hurtling out the door and down the steps. The Court cited with approval Restatement of Torts, § 342, p 524, "defendant's duty to plaintiff required they exercise reasonable care to disclose to her dangerous defects which were known to them and were likely to be undiscovered by plaintiff." (Emphasis supplied.)
We agree with the trial judge that we cannot impute superior knowledge to the defendant in the instant case. Her testimony reveals that the stairs were not hazardous in her estimation:
*277 "Q. Did you have knowledge of this stairway before the accident?
"A. Well, what do you mean by knowledge? Did I know it was there?
"Q. Yes.
"A. I realized it was there, but I didn't realize it was a hazard."
What then is the duty owed to gratuitous licensees? Certainly protection from active wrongdoing, traps, gross negligence, and willful injury to name but a few. But unsuspected or undiscovered hazards? We think not. To place the duty of knowing every potential danger upon the owner of property where he has had no reasonable opportunity to fully inspect his premises is to place upon him an intolerable burden.
Protection from known hazards, yes. An ironclad guarantee of safety against all hazards, no.
Plaintiff put in her proofs fully and completely and, indeed, was allowed to reopen over objection for the purpose of submitting the question of defendant's knowledge of the condition that the court found dangerous. The proofs raised fact questions which were determined by a judge, acting without a jury. The Supreme Court of this State has frequently restated the rule that in a nonjury law case, the findings of fact by the trial judge will not be reversed unless contrary to the clear preponderance of the evidence.
A concise statement of this rule will be found in Mallory v. Pitcairn (1943), 307 Mich. 40, 47:
"The trial court saw and heard the witnesses and, as trier of the facts, was best able to judge the credibility of, and the weight to be accorded, their testimony. We have repeatedly said that in cases tried without a jury the trial judge may give such *278 weight to the testimony as in his opinion it is entitled to, and that in such cases we do not reverse unless the evidence clearly preponderates in the opposite direction."
This rule was reiterated as late as 1965 in Kevreson v. Michigan Consolidated Gas Company, 374 Mich. 465.
After a review of the record, we cannot accord Mrs. Shaw any greater status than the trial court gave her, nor can we impose any greater duty upon the Wiegartzes than did that court.
Accordingly, the judgment of no cause of action is affirmed. Cost to appellees.
QUINN, P.J., and T.G. KAVANAGH, J., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/733263/ | 104 F.3d 654
36 Fed.R.Serv.3d 1391, Bankr. L. Rep. P 77,254
In the Matter of Edward RICHMAN; Ilene Richman, Debtors.Edward RICHMAN; Ilene Richman, Plaintiffs-Appellants,v.FIRST WOMAN'S BANK, Defendant-Appellee.
No. 96-1052.
United States Court of Appeals,Fourth Circuit.
Argued Sept. 26, 1996.Decided Jan. 15, 1997.
1
ARGUED: Roger Charles Simmons, Gordon & Simmons, Frederick, MD, for Appellants. Morris Kletzkin, Friedlander, Misler, Friedlander, Sloan & Herz, Washington, DC, for Appellee. ON BRIEF: Brenda D. Thew, Gordon & Simmons, Frederick, MD; Richard H. Gins, Gins & Seeber, P.C., Washington, DC, for Appellants. Jerome Ostrov, Friedlander, Misler, Friedlander, Sloan & Herz, Washington, DC, for Appellee.
2
Before WILKINSON, Chief Judge, LUTTIG, Circuit Judge, and SMITH, United States District Judge for the Eastern District of Virginia, sitting by designation.
3
Affirmed by published opinion. Judge SMITH wrote the opinion, in which Chief Judge WILKINSON and Judge LUTTIG joined.
OPINION
REBECCA BEACH SMITH, District Judge:
4
This case involves a bankruptcy dispute in which the Appellants, two Chapter 7 debtors, claim the bankruptcy court erred in finding that the Appellee, their primary creditor, held a valid lien over the proceeds of their brokerage account. As this is a procedurally complex case, a wide variety of issues were presented to the court. The dispositive inquiry, however, concerns whether the district court correctly ruled that the Appellants failed to intervene properly in the bankruptcy court adversary proceeding, and hence lack standing to prosecute this appeal. Because we agree that the Appellants cannot satisfy the requirements for intervention as of right, we affirm the district court's ruling.
I.
5
This present action arose out of a loan dispute in which Edward and Ilene Richman, the Appellants, allegedly consented to the placing of a lien on their brokerage account with Shearson Lehman Brothers, Inc. ("Shearson Account") in favor of the First Woman's Bank ("FWB"), the Appellee. The long and detailed procedural history of the case is summarized as follows.
6
The dispute first reached the court system when FWB instituted a collection action in the Circuit Court of Montgomery County, Maryland ("state court action"), on January 28, 1992. The state court tentatively accepted FWB's arguments that the Richmans were dissipating the Shearson Account and granted the bank's request for an attachment before judgment. The Richmans filed a Voluntary Petition under Chapter 11 of the Bankruptcy Code on May 29, 1992, and the state court action was stayed. On September 3, 1992, FWB filed an adversary proceeding in bankruptcy court, which raised essentially the same issues the bank had raised in the state court action, and sought a declaration from the bankruptcy court that the Richmans' debt was nondischargeable. On April 22, 1993, Bankruptcy Judge Derby, orally ruling on the Richmans' motion for summary judgment, declined to address certain fraud claims raised by the Richmans, instead deferring to the state court the question of whether the lien on the Shearson Account had been procured through fraudulent inducement. Judge Derby's written order on this matter was entered April 25, 1993.
7
The Richmans filed a Turnover Action on April 23, 1993, seeking release of the proceeds of the Shearson Account. The Richmans subsequently filed another motion for summary judgment in June, 1993, on the grounds that Judge Derby's order of April 22, 1993, found no fraud on their part to support an attachment before judgment. FWB then cross-moved for summary judgment, alleging, inter alia, that it had a consensual lien on the Shearson Account. On February 23, 1994, Judge Derby ruled on the cross-motions for summary judgment, and again deferred to the state court action and abstained from ruling on the Richmans' allegation of fraudulent inducement.
8
At a hearing on August 15, 1994, the Richmans' Chapter 11 proceeding was converted to Chapter 7. On April 21, 1995, Judge Keir of the bankruptcy court issued a ruling on the Turnover Action ("Lien Order"). In the Lien Order, Judge Keir, who did not expressly make any findings regarding the fraudulent inducement issue, nevertheless granted FWB's motion for summary judgment, thus implicitly ruling that FWB had acquired a consensual lien on the Shearson Account. On May 4, 1995, the Richmans filed a Motion for Reconsideration of Lien Order, which the bankruptcy court treated as a post-judgment motion under Federal Bankruptcy Rule 9024. Judge Keir denied the Richmans' motion on July 21, 1995, holding, inter alia, that the Richmans (as well as the law firm of Gordon & Simmons, the only other movant) lacked standing to seek reconsideration, primarily because after the conversion from a Chapter 11 to a Chapter 7 proceeding, the Trustee was "the substituted plaintiff entitled to prosecute this turnover action...." ("Reconsideration Opinion").
9
On July 31, 1995, the Richmans then moved to intervene as a matter of right for the purposes of appealing the Lien Order, but in an October 31, 1995 order, the district court, sitting as an appellate court over the bankruptcy proceeding, rejected the Richmans' Motion to Intervene. On November 30, 1995, the district court ruled on the issue of whether the bankruptcy court had abused its discretion in refusing to grant the Richmans' Motion for Reconsideration of the Lien Order, finding that it had not.
II.
10
The threshold question on appeal is whether the Richmans satisfy the requirements for intervention, and thus whether they may participate as a matter of right in the Turnover Action to challenge the Lien Order and for purposes of appeal to the district court and to this court. This question involves issues of both law and fact. We review the lower court's legal conclusions de novo, and reverse its findings of fact only if clearly erroneous. E.g., In re Varat Enterprises, Inc., 81 F.3d 1310, 1314 (4th Cir.1996); In re Stanley, 66 F.3d 664, 667 (4th Cir.1995).
11
Courts consistently have noted a public policy interest in reducing the number of ancillary suits that can be brought in the bankruptcy context so as to advance the swift and efficient administration of the bankrupt's estate. This goal is achieved primarily by narrowly defining who has standing in a bankruptcy proceeding. See, e.g., In re Schultz Mfg. Fabricating Co., 956 F.2d 686, 689-90 (7th Cir.1992) (observing that, because the Chapter 7 debtor lacked standing, the court could not review the merits of the bankruptcy court's orders); Hancock Bank v. Jefferson, 73 B.R. 183, 185 (S.D.Miss.1986) (noting that the court has no jurisdiction to hear a claim if the litigant lacks standing to prosecute the appeal). As a general matter, in a Chapter 7 proceeding, the trustee alone has standing to raise issues before the bankruptcy court and to prosecute appeals. A trustee is the representative of the bankrupt's estate and has the capacity to sue or be sued. 11 U.S.C. § 323; In re Eisen, 31 F.3d 1447, 1451 n. 2 (9th Cir.1994). Once appointed, the trustee becomes the estate's "proper party in interest, and the only party with standing to appeal the bankruptcy court's order." Eisen, 31 F.3d at 1451 n. 2 (quoting Hancock, 73 B.R. at 185); see also Stanley v. Sherwin-Williams Co., 156 B.R. 25, 26 (W.D.Va.1993) (preventing a Chapter 7 debtor from litigating a cause of action which belonged to the estate on the grounds that the debtor "lacks standing because the cause of action is [no longer] his to assert").1
12
In certain instances, courts relax the general rule that only the Chapter 7 trustee has standing before the bankruptcy court and grant standing to certain other interested parties. Courts should be chary about granting such dispensations, however, as lax rules which liberally allow parties with some interest in the bankruptcy proceeding, such as a Chapter 7 debtor, to contest a proposed course of action, or to appeal an adverse decision, are too likely to generate "protracted litigation" that ultimately serves the interests of neither the debtor's estate nor the creditors. See In re Thompson, 965 F.2d 1136, 1145-46 (1st Cir.1992). Stricter rules, on the other hand, have the salutary effects of advancing the estate's "timely administration," In re Bowman, 181 B.R. 836, 844 (Bankr.D.Md.1995), and shielding the courts from "the needless multiplication of lawsuits." In re Wells, 575 F.2d 329, 331 (1st Cir.1978); see McGuirl v. White, 86 F.3d 1232, 1235 (D.C.Cir.1996) (discussing the need to avoid "overwhelm[ing] bankruptcy courts with claims by the many parties indirectly affected by bankruptcy court orders").
13
The Richmans argue that they have standing to contest the bank ruptcy court's actions because they qualify as "parties in interest."2 The debtors seem to have concluded that the mere fact of being a party in interest would grant them an automatic right to intervene, and hence participate as a matter of right, in the adversary proceeding. Even if the Richmans are correct in arguing that they are "parties in interest," that status does not guarantee that they have a right to intervene, either in the Turnover Action or for the purposes of appeal.3 Rather, while a "party in interest" may have standing to intervene, the party with the interest must still separately satisfy the requirements for intervention in order to participate in an adversary proceeding. Although this court has not directly addressed the issue of whether a "party in interest" has an automatic right to intervene, other circuits have debated the similar question of whether a "party in interest," as that term is used in 11 U.S.C. § 1109(b), must still formally intervene to participate in an adversary proceeding.4 In Fuel Oil Supply and Terminaling v. Gulf Oil Corp., 762 F.2d 1283 (5th Cir.1985), the Fifth Circuit rejected the argument that a Chapter 11 creditors' committee, which qualified as a "party in interest" under section 1109(b), thereby gained an absolute right to intervene in an adversary proceeding to set aside a preferential transfer. Id. at 1284; see In re Charter Co., 876 F.2d 866, 871 (11th Cir.1989) (paraphrasing Fuel Oil 's holding). Instead, the court in Fuel Oil determined that a "party in interest" must still satisfy the intervention requirements of Bankruptcy Rule 7024 and Rule 24(a)(2) of the Federal Rules of Civil Procedure. 762 F.2d at 1287. The court explained that this tougher standard was necessary as a means to protect the bankruptcy court from being overwhelmed by a flood of "automatic parties." Id. By adopting this more restrictive approach to intervention, the court permitted the bankruptcy court "to control the proceeding by restricting intervention to those persons whose interests in the outcome of the proceeding are not already adequately represented by existing parties." Id.
14
We find the logic of Fuel Oil persuasive, and believe that its Chapter 11 analysis is clearly analogous and applicable to the same issue in this Chapter 7 proceeding. A Chapter 7 liquidation certainly has the same need for efficiency and the orderly administration of the bankrupt's estate as a Chapter 11 proceeding. Therefore, we conclude that the Fuel Oil approach, in which "applications to raise any issue and be heard are governed by" the intervention requirements of the federal rules, Charter Co., 876 F.2d at 871, should apply with equal force in the setting of the Richmans' Chapter 7 adversary proceeding.
15
Thus, whether the Richmans might otherwise be found to possess "party in interest" standing, they do not have the right to participate in the Turnover Action or appeal the Lien Order, if they have not intervened properly pursuant to Bankruptcy Rule 7024 and Federal Rule of Civil Procedure 24(a)(2). Moreover, a would-be intervenor bears the burden of demonstrating to the court a right to intervene. In re Kaiser Steel Corp., 998 F.2d 783, 790 (10th Cir.1993).
III.
16
In this case, the Richmans made no attempt to intervene until after the bankruptcy court denied their Motion for Reconsideration of the Lien Order. In its July 21, 1995 Reconsideration Opinion, the bankruptcy court noted that it could not "entertain the debtors' request for post-judgment relief." Despite the Richmans' interest in the outcome, "[s]uch interest alone is insufficient. Apparently, the debtors chose not to seek the status of parties in the action, having failed to file any motion for ... intervention." In an attempt to rectify this shortcoming, the Richmans then filed a motion to intervene as a matter of right for the purposes of appeal to the district court pursuant to Federal Rule of Civil Procedure 24 and Bankruptcy Rule 7024. In their intervention motion, filed on July 31, 1995, the Richmans contended that they had a right to intervene because they stood to recover the potential surplus in the estate following satisfaction of claims.
17
We now consider whether the Richmans can make out a case for intervention as of right. A showing of intervention as of right affords the intervenor with appellate standing, and is thus vitally important. "While 'one who is not an original party to a lawsuit may of course become a party by intervention ... one who is not a party ... has no right to appeal.' " Thompson, 965 F.2d at 1141 (quoting Karcher v. May, 484 U.S. 72, 77, 108 S.Ct. 388, 391-93, 98 L.Ed.2d 327 (1987)). Because we find that they cannot make out a case for intervention as of right, the Richmans are not parties to the underlying action below, and hence had no automatic right to participate in the adversary proceeding or appeal the Lien Order.5 The Richmans fail to satisfy the intervention requirements of Bankruptcy Rule 7024, which directs that the right to intervene in the bankruptcy context is governed by Rule 24 of the Federal Rules of Civil Procedure.6 See Kaiser Steel, 998 F.2d at 790; Thompson, 965 F.2d at 1141. An intervenor in this context under Rule 24(a)(2) must then satisfy four requirements.7 First, the intervenor must submit a timely motion to intervene in the adversary proceeding. Second, he must demonstrate a "direct and substantial interest" in the property or transaction. Third, he has to prove that the interest would be impaired if intervention was not allowed. Finally, he must establish that the interest is inadequately represented by existing parties. Fed.R.Civ.P. 24(a)(2); Kaiser Steel, 998 F.2d at 790; Thompson, 965 F.2d at 1142; Merritt Commercial Sav. & Loan, Inc. v. Guinee, 766 F.2d 850, 853 (4th Cir.1985). In this case, the Richmans clearly run afoul of requirements one and four.
18
As a preliminary matter, the Richmans failed to submit a timely motion to intervene in the bankruptcy proceeding, namely the Turn over Action.8 In order to prove that the party sought to intervene in the bankruptcy court, the intervenor must prove some formal attempt to intervene. "Mere participation" in a hearing before the bankruptcy court "does not constitute de facto intervention." Thompson, 965 F.2d at 1141-42 (fact that appellants were given an opportunity to be heard in the bankruptcy court does not provide basis for intervention to appeal). As a courtesy, the bankruptcy court allowed the Richmans to appear before it and present arguments during the Turnover Action. However, this informal participation does not satisfy the need for formal intervention. In its July 21, 1995 Reconsideration Opinion, the bankruptcy court specifically noted the Richmans' failure to file any motion to intervene. The Richmans only belatedly attempted to correct their earlier lapse by moving to intervene as a matter of right for the purposes of appeal on July 31, 1995. This late filing, however, is insufficient for intervention purposes.9
19
The Richmans also fail to satisfy the requirements for intervention because of their inability to establish that whatever interest they may have possessed in the Shearson Account was inadequately represented by the bankruptcy trustee. The court in Thompson noted that, not only does the burden of demonstrating inadequate representation rest on the putative intervenor, but that the burden "is at its most onerous" where an existing party is under a legal obligation to represent the would-be intervenor's interest. Thompson, 965 F.2d at 1142. In such a situation, there must be a "compelling showing of inadequate representation." Id. (emphasis in original) (quoting 9 Lawrence D. King, Collier on Bankruptcy p 7024.05 (15th ed.1991)).
20
In this case, the Richmans pin their hopes on the fact that a surplus in the Chapter 7 estate might accrue, if they were awarded the proceeds of the Shearson Account. This surplus, they argue, is the interest which warrants their intervention. However, the Richmans fail to make any showing whatsoever that this interest was inadequately represented by the Chapter 7 trustee. In its October 31, 1996 order, the district court found as a fact that the trustee did provide adequate representation in the Turnover Action. The Richmans submitted no evidence to the contrary, and thus have offered no justification for disturbing this factual finding. As a result, they are unable to meet their burden of demonstrating inadequate representation by an existing party to the action, namely the trustee for the Richmans' Chapter 7 bankruptcy proceeding.
21
We conclude that the Richmans do not satisfy the requirements for intervention as of right. Accordingly, the district court acted appropriately in denying their motion. For the reasons stated above, the district court's opinion is
22
AFFIRMED.
1
As the bankruptcy court correctly concluded in the Reconsideration Opinion,
[p]rior to conversion, the debtors were debtors-in-possession and held the powers of a trustee including powers under 11 U.S.C. § 542 for turnover of property of the estate. 11 U.S.C. § 1107. Upon conversion to Chapter 7 and the appointment of the trustee, the debtors lost their rights to prosecute this action. The trustee became the sole representative of the estate, 11 U.S.C. § 323(a), and succeeded to those causes of action which were property of the estate, including the turnover action for the Shearson account. One of the trustee's enumerated duties is to collect and reduce to money the property of the estate for which the trustee serves.
J.A. 506.
2
The "party in interest" test asks whether the debtor should be allowed to contest a proposed course of action before the bankruptcy court itself. This inquiry grants standing to certain persons who are "parties in interest." This terminology derives from section 502 of the bankruptcy code, which provides that claims against an estate are allowed unless a "party in interest" objects. 11 U.S.C. § 502(a); see, e.g., Caserta v. Tobin 175 B.R. 773, 774 (S.D.Fla.1994). This court in Willemain v. Kivitz, 764 F.2d 1019 (4th Cir.1985), relying on "party in interest" cases, held that a Chapter 7 debtor lacked standing to challenge the commercial reasonableness of a trustee's proposed sale of the estate's primary asset because the debtor failed to show that an alternative sale of the property would create any surplus for the estate. See McGuirl, 86 F.3d at 1234; In re F.A. Dellastatious, Inc., 121 B.R. 487, 490 (Bankr.E.D.Va.1990) (two cases discussing Willemain 's "party in interest" standing analysis). The holding in Willemain thereby extends section 502 "party in interest" analysis to other contexts, namely the Chapter 7 arena. Id
In the case at bar, the Richmans note that their estate may have a surplus, if the proceeds of the Shearson account are awarded to them, and argue that because of this surplus they are "parties in interest."
3
Because we ultimately find that the Richmans do not satisfy the requirements for intervention, we need not determine whether they are "parties in interest."
4
Section 1109 of Chapter 11 provides in pertinent part:
[a] party in interest, including the debtor, the trustee, a creditors' committee, an equity security holders' committee, a creditor, and equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a case under this chapter.
11 U.S.C. § 1109(b).
5
By order of October 31, 1995, the district court denied the Richmans' motion to intervene to appeal the Lien Order for a variety of reasons, one of the grounds being that it had not been filed in a timely manner under Bankruptcy Rule 8002, which requires that motions to appeal must be filed "within 10 days of the date on the entry of the judgment, order, or decree appealed from." Fed.Bankr.R. 8002(a)
On May 4, 1995, the Richmans filed a timely Motion to Reconsider the Lien Order of April 21, 1995, under Bankruptcy Rule 9024. The bankruptcy court issued its ruling on this Motion to Reconsider on July 21, 1995. The Richmans then moved to intervene for purposes of appealing the Lien Order on July 31, 1995. Given the circumstances, it appears that the debtors' intervention motion for purposes of appeal was timely under Bankruptcy Rule 8002, because their Motion to Reconsider stayed the ten-day time period to appeal the Lien Order until July 21, 1995, when the order denying their Motion to Reconsider was filed.
6
Bankruptcy Rule 7024, Intervention, states that "Rule 24 F.R.Civ.P. applies in adversary proceedings." Fed.R.Bankr.P. 7024
7
To intervene of right, Rule 24 provides in pertinent part:
Upon timely application anyone shall be permitted to intervene in an action: ... when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.
Fed.R.Civ.P. 24(a)(2) (emphasis added). The other sections of Rule 24 are inapplicable in this Chapter 7 bankruptcy context, namely no "statute of the United States confers an unconditional right to intervene," Fed.R.Civ.P. 24(a)(1), or a "conditional right to intervene," Fed.R.Civ.P. 24(b)(1). Permissive intervention under Rule 24(b)(2) is not an issue, as the Richmans moved to intervene of right. More importantly, by the very nature of a Chapter 7 proceeding, the Trustee has taken over the applicant's "claim or defense" in "the main action" for purposes of section 24(b)(2) permissive intervention, thereby leaving the applicant to intervene of right under section 24(a)(2) on the basis that the applicant's interest is not adequately represented by the Trustee.
8
This timeliness inquiry is distinct from the issue of whether the Richmans' motion to intervene for purposes of appealing the Lien Order was timely pursuant to the ten-day rule of Bankruptcy Rule 8002. See supra note 5
9
See supra notes 5 and 8 | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/733331/ | 104 F.3d 1127
97 Cal. Daily Op. Serv. 8, 97 Daily Journal D.A.R. 41Manuel Augusto SANTAMARIA-AMES, aka: Manuel A.Santamaria-Ames, Petitioner-Appellant,v.IMMIGRATION AND NATURALIZATION SERVICE, District Director,Respondent-Appellee.
No. 95-55805.
United States Court of Appeals,Ninth Circuit.
Argued and Submitted Nov. 5, 1996.Decided Dec. 31, 1996.
John Stephen Glaser and William B. Bennett, Manulkin, Glaser & Bennett, Fountain Valley, California, for Petitioner-Appellant.
Jeffrey J. Bernstein and Karen A. Herrling, United States Department of Justice, Washington, DC, for Respondent-Appellee.
Appeal from the United States District Court for the Central District of California, Manuel L. Real, District Judge, Presiding. D.C. No. Api-mhf-utj.
Before: BROWNING, THOMPSON, and THOMAS, Circuit Judges.
THOMAS, Circuit Judge:
1
This case presents the question of how past criminal behavior should be considered in naturalization proceedings involving noncitizen veterans qualifying for special treatment under 8 U.S.C. § 1440.
I.
2
Congress chose to reward noncitizens who had honorably served in the armed forces of the United States during certain wartime hostilities by relaxing preconditions for their naturalization. For these veterans, Congress eliminated the residency requirement, but provided that the applicant "shall comply in all other respects with the requirements of this subchapter...." 8 U.S.C. § 1440(b) (1996).1 Normally, a naturalization candidate must reside continuously in the United States for five years immediately preceding the application and show he or she "has been and still is a person of good moral character" during that period. 8 U.S.C. § 1427(a)(3) (1996).2
3
Because Congress did not specify the time period during which a qualifying noncitizen veteran should demonstrate good moral character, the Immigration and Naturalization Service ("INS") promulgated a regulation providing that a section 1440 applicant:
4
Has been, for at least one year prior to filing the application for naturalization, and continues to be, of good moral character, attached to the principles of the Constitution of the United States, and favorably disposed toward the good order and happiness of the United States.
5
8 C.F.R. § 329.2(d) (1996).
II.
6
Against this general legal backdrop, we consider the facts of this case. Petitioner Manual Augusto Santamaria-Ames is a native and citizen of Peru. He entered the United States at age nine in 1966, as a permanent resident alien. His father, mother, and four sisters all live in the United States. Santamaria-Ames is married to a United States citizen, with whom he has one child.
7
In 1974, Santamaria-Ames entered into active service in the army during the Vietnam War. His army career was not successful. He received three Article 15 violations and was counseled on fifteen occasions for disciplinary violations while on active duty. As a result, Santamaria-Ames was recommended for an early separation from the army due to unsuitability. After eight months and twenty-seven days of service, he was discharged from active service under honorable conditions.
8
Upon return to civilian life, Santamaria-Ames entered a life of crime. From his discharge through 1989, he had twenty arrests, five felony convictions and twelve misdemeanor convictions. He was convicted of battery, assault with a deadly weapon, burglary, possession of a controlled substance, being under the influence of a controlled substance, and felony hit and run.
9
Santamaria-Ames engaged in criminal activity even after deportation proceedings had been instituted against him. In 1980, he was arrested and convicted of burglary and felony burglary. As a result, the INS issued an Order to Show Cause in 1981 finding Santamaria-Ames to be deportable under 8 U.S.C. § 1251(a)(4). After being placed in deportation proceedings, he applied for a waiver of deportability pursuant to section 212(c) of the Immigration and Nationality Act, 8 U.S.C. § 1182(c). While such proceeding was pending before the Immigration Judge, Santamaria-Ames was convicted for possession of heroin and for felony hit and run. After the Immigration Judge denied his section 212(c) request for a waiver of deportability in 1986, Santamaria-Ames appealed to the Bureau of Immigration Appeals ("BIA"). While the appeal was pending, he was convicted of four misdemeanor vehicle code violations and for possession of a controlled substance. There is no record of Santamaria-Ames committing a crime since April 1989.
10
In February 1992, the BIA denied his appeal, holding that his "equities though outstanding d[id] not overcome his repeated convictions to warrant a grant of 212(c) relief." On appeal, we held the BIA did not abuse its discretion in denying section 212(c) relief.
11
In June 1992, Santamaria-Ames filed a Motion to Reopen and and Motion for Reconsideration of section 212(c) relief with the BIA. He contended that new facts made reopening necessary, including his claim that he was eligible for naturalization as a Vietnam veteran pursuant to 8 U.S.C. § 1440. The BIA denied the motion, holding that the deportation proceedings did not preclude Santamaria-Ames from pursuing naturalization and that there was no new evidence presented which would alter the previous BIA decision. The BIA's denial of the Motion to Reopen is the subject of a companion appeal, No. 95-70365.
12
Santamaria-Ames filed an application for naturalization on May 11, 1992. On January 19, 1993, the INS conducted an interview and examination of Santamaria-Ames. On January 9, 1995, he filed a motion for naturalization with the district court pursuant to 8 U.S.C. § 1447(b) because the INS had not yet issued a decision on Santamaria-Ames's application. The INS filed its Response to Petitioner's Motion for Naturalization on May 1, 1995, arguing that in light of his extensive criminal record Santamaria-Ames did not establish that for one year prior to filing his application he was, and continues to be, a person of good moral character as required by 8 C.F.R. § 329.2(d). The district judge denied the naturalization motion without a hearing on May 8, 1995, "for the reasons stated in District Counsel's Response to Petitioner's Motion for Naturalization." From this decision, Santamaria-Ames appeals.
III.
13
The first question we must consider is whether, as Santamaria-Ames claims, the INS is precluded from examining character issues predating the section 329.2(d) one-year period.
14
Where the plain meaning of a statute is unambiguous, that meaning is controlling unless it is at odds with the drafters' intent. Almero v. INS, 18 F.3d 757, 760 (9th Cir.1994). Similarly, the plain meaning of language in a regulation governs unless that meaning would lead to absurd results. Reno v. National Transp. Safety Board, 45 F.3d 1375, 1379 (9th Cir.1995).
15
Both the plain meaning of 8 U.S.C. §§ 1440 and 1427, as well as 8 C.F.R. § 329.2(d), indicate that conduct prior to the one-year regulatory period may be examined. Because servicemen and servicewomen are not exempt from section 1427's good moral character requirements, 8 U.S.C. § 1427(e) applies to determinations of good moral character under section 1440. See 8 U.S.C. § 1440(b).
16
Section 1427(e) provides that in determining good moral character, the INS "may take into consideration as a basis for such determination the applicant's conduct and acts at any time prior to that period." When applied to section 1440, "that period" refers to the one-year regulatory period. Thus, the INS and the district court may consider conduct prior to the one-year regulatory period in determining whether an otherwise qualifying veteran has established the requisite good moral character to merit naturalization.
17
This conclusion is confirmed by INS regulations. Section 329.2 states that to be eligible for naturalization under section 1440, an applicant must comply "with all other requirements for naturalization as provided in part 316 of this chapter" with certain exceptions. 8 C.F.R. § 329.2(e). Those exceptions do not exempt the applicant from the requirements relating to good moral character in part 316. Specifically, part 316 states:
18
[T]he Service shall evaluate claims of good moral character on a case-by-case basis taking into account the elements enumerated in this section and the standards of the average citizen in the community of residence. The Service is not limited to reviewing the applicant's conduct during the five years immediately preceding the filing of the application, but may take into consideration, as a basis for its determination, the applicant's conduct and acts at any time prior to that period, if the conduct of the applicant during the statutory period does not reflect that there has been reform of character from an earlier period or if the earlier conduct and acts appear relevant to a determination of the applicant's present moral character.
19
8 C.F.R. § 316.10(a)(2) (emphasis added). The regulatory period of one year for veterans must be substituted for the term "five years" in this regulation, but otherwise section 316.10 applies to section 1440.3
20
Accordingly, we hold that conduct predating the regulatory period established in 8 C.F.R. § 329.2(d) may be considered by the INS or the district court in determining naturalization eligibility under 8 U.S.C. § 1440.
IV.
21
We must next decide, as the INS argues, whether the INS and the district court may rely solely on pre-regulatory period conduct as the basis for denying naturalization. This is a question of first impression concerning section 1440 applications.4 The only time we have considered an analogous question was in Yuen Jung v. Barber, 184 F.2d 491 (9th Cir.1950).
22
In Yuen, the petitioner applied for naturalization under (a) 8 U.S.C. § 724a (the predecessor to 8 U.S.C. § 1439 which permitted naturalization of persons who have served honorably in the military for periods of three years or more and who establish good moral character during such service), and (b) 8 U.S.C. § 724a (the predecessor to 8 U.S.C. § 1440, which at that time required that only present good moral character had to be established).5 The district court denied the petition, stating that petitioner "has failed to establish that he has been a person of good moral character." Id. at 492. The petitioner argued that under section 724 he need only establish his record of honorable service in the army to show good moral character during his period of service, while the government argued that his past misconduct alone was enough to reject his petition. Judge Pope differed with both:
23
We think the language of Sec. 724 ... compels a conclusion that it was the intent of Congress to test the applicant's fitness solely by his moral character, (and other required attitudes) during the period of continuous military service mentioned in the Act [three years]. We think so, because we believe a like rule must obtain in the ordinary naturalization proceeding where the five year period is significant. To hold otherwise would sanction a denial of citizenship where the applicant's misconduct, and evident bad moral character, was many years in the past, and where a former bad record has been followed by many years of exemplary conduct with every evidence of reformation and subsequent good moral character. Such a conclusion would require a holding that Congress had enacted a legislative doctrine of predestination and eternal damnation. All modern legislation dealing with crime and punishment proceeds upon the theory that aside from capital cases, no man is beyond redemption. We think a like principle underlies these provisions for naturalization.This does not mean that the court may not inquire into the petitioner's character in prior periods. For such evidence is circumstantially relevant as bearing upon petitioner's character during the five year period, or in a case like this, during the period of military service. But the ultimate fact to be determined, and the only material one, is his moral character within the specified period.
24
Id. at 495 (emphasis added).
25
Similarly, Judge Pope noted that under section 724a, the relevant inquiry was whether the petitioner has established present good moral character, but evidence of past misconduct was relevant to such inquiry. Id. at 496. Accordingly, Yuen reversed the district court's holding that petitioner "has failed to establish that he has been a person of good moral character" because the holding did not address his present moral character. The case was remanded for a hearing on that issue.
26
In accordance with Yuen, we hold that under 8 U.S.C. § 1440 and 8 C.F.R. § 329.2(d) the pertinent inquiry is whether the petitioner is presently of good moral character and has demonstrated good moral character from the year preceding the filing of his application to the present. Criminal conduct and other behavior prior to the one-year period may be examined. Whether the petitioner can establish that he has reformed and rehabilitated from this prior conduct is germane to the determination of whether he has established good moral character from the beginning of the one-year period to the present. Id.; see also Ralich v. United States, 185 F.2d 784, 787-788 (8th Cir.1950). If the petitioner demonstrates "exemplary conduct with every evidence of reformation and subsequent good moral character" from the beginning of the one-year regulatory period to the present, then his application cannot be denied based solely on his prior criminal record, although it is highly relevant to the ultimate determination. See Yuen, 184 F.2d at 495.6 This rule is consistent with the legislative history of 8 U.S.C. § 1440, which indicates that relief from some of the burdensome naturalization requirements has been provided as a reward for aliens who served honorably in wartime hostilities. Mason v. Brooks, 862 F.2d 190, 193 (9th Cir.1988); S.Rep. No. 90-1292, 90th Cong., 2nd Sess. (1968).7
27
In this case, the district court erred by holding pre-regulatory period conduct preclusive to naturalization without affording Santamaria-Ames the chance to present evidence as to whether during the regulatory period he was, and continues to be "of good moral character, attached to the principles of the Constitution of the United States and favorably disposed toward the good order and happiness of the United States." 8 C.F.R. § 329.2(d). Given Santamaria-Ames's past criminal record and broken promises of rehabilitation, he faces a formidable task in sustaining his burden of proof. However, he cannot be denied that opportunity.
28
Thus, we conclude the district court erred by denying Santamaria-Ames the opportunity to demonstrate his eligibility for naturalization under section 1440.8 Consistent with Yuen, we hold that the case must be remanded to the district court to determine whether Santamaria-Ames was, during the one-year regulatory period, and continues to be, a person of good moral character, attached to the principles of the Constitution, and well disposed to the good order and happiness of the United States. See Yuen, 184 F.2d at 497. Both the United States and Santamaria-Ames should be allowed to furnish further evidence. Id.
VI.
29
Citing INS delay, INS statements in collateral proceedings and alleged misrepresentations to the district court, Santamaria-Ames urges that the INS be estopped from asserting he is not of good moral character. Mere file processing delay alone is insufficient to estop the government. INS v. Miranda, 459 U.S. 14, 18-19, 103 S.Ct. 281, 283, 74 L.Ed.2d 12 (1982). Estoppel is appropriate only when the government has committed "affirmative misconduct." Jaa v. United States INS, 779 F.2d 569, 572 (9th Cir.1986). In order to be estopped by a collateral judgment, the issue in contention must have been actually litigated and critical to the judgment. Town of North Bonneville v. Callaway, 10 F.3d 1505, 1508 (9th Cir.1993). Application of these principles, coupled with an absence of proof of affirmative governmental misconduct and detrimental reliance in the record, are fatal to Santamaria-Ames's theory.
VII.
30
The judgment of the district court is vacated and this matter is remanded.
1
Specifically, section 1440 states in relevant part:
(a) Requirements. Any person who, while an alien or a noncitizen national of the United States, has served honorably in an active-duty status in the military, air or naval forces of the United States during [certain designated periods of conflict such as World War I, World War II and Vietnam, and others designated by Executive Order] ..., and who, if separated from such service, was separated under honorable conditions, may be naturalized as provided in this section if (1) at the time of enlistment or induction such person shall have been in the United States, the Canal Zone, American Samoa or Swains Island, whether or not he has been lawfully admitted to the United States for permanent residence, or (2) at any time subsequent to enlistment or induction such person shall have been lawfully admitted to the United States for permanent residence....
(b) Exceptions. A person filing an application under subsection (a) of this section shall comply in all other respects with the requirements of this subchapter, except that
(1) he may be naturalized regardless of age, and notwithstanding the provisions of section 318 [8 U.S.C. § 1429] as they relate to deportability and the provisions of section 331 [8 U.S.C. § 1429]; ...
(2) no period of residence or specified period of physical presence within the United States or any State or district of the Service in the United States shall be required; and
(3) service in the military, air or naval forces of the United States shall be proved by a duly authenticated certification from the executive department under which the applicant service or is serving....
8 U.S.C. § 1440 (emphasis added).
2
8 U.S.C. § 1427 provides in relevant part:
(a) Residence. No person, except as otherwise provided in this subchapter, shall be naturalized unless such applicant (1) immediately preceding the date of filing his application for naturalization has resided continuously, after being lawfully admitted for permanent residence, within the United States for at least five years ... and (3) during all the period referred to in this subsection has been and still is a person of good moral character, attached to the principles of the Constitution of the United States, and well disposed to the good order and happiness of the United States.
(e) Determination. In determining whether the applicant has sustained the burden of establishing good moral character and the other qualifications for citizenship specified in subsection (a) of this section, the Attorney General shall not be limited to the applicant's conduct during the five years preceding the filing of the application, but may take into consideration as a basis for such determination the applicant's conduct and acts at any time prior to that period.
8 U.S.C. § 1427 (emphasis added).
3
Santamaria-Ames also argues that the INS violates its own Interpretations by examining pre-regulatory period conduct. Santamaria-Ames cites an INS Interpretation stating that, "When no specific period of residence is required, but the petitioner is required to establish good moral character, consideration must be given to his conduct and utterances during a reasonable period of time immediately preceding the filing of the petition for naturalization and during the period between the date of filing and the final hearing." 9 Gordon & Mailman, Immigration Law and Procedure 257 (quoting INS INTERP 329.1(6)). Santamaria-Ames argues under such Interpretation, evidence of Santamaria-Ames's criminal conduct over his entire lifetime may not be considered. He fails to note that the INS Interpretation goes on to say, "In determining whether the petitioner has met the burden of establishing good moral character, the inquiry into these matters shall extend to the petitioner's entire lifetime." Id. Thus, INS Interpretations contemplate consideration of events outside the regulatory period
4
Before and after the enactment of 8 C.F.R. § 329.2(d) and the current versions of 8 U.S.C. §§ 1427, 1440, the courts were divided on whether naturalization may be denied solely on the basis of crimes committed prior to the statutory period. See, e.g., Marcantonio v. United States, 185 F.2d 934, 937 (4th Cir.1950) (under predecessor to 8 U.S.C. § 1427, naturalization cannot be denied solely based on crimes prior to statutory period); Molsen v. Young, 182 F.2d 480, 483 (5th Cir.1950) (under predecessor to 8 U.S.C. § 1427, statutory period is the minimum period in which good moral character must be demonstrated because the statutory period is "at least" five years), vacated on other grounds, 340 U.S. 880, 71 S.Ct. 195, 95 L.Ed. 639 (1950); Tan v. INS, 931 F.Supp. 725, 729-732 (D.Haw.1996) (under 8 C.F.R. § 329.2(d) and 8 U.S.C. § 1440, courts cannot use events outside the one-year regulatory period in denying a naturalization application); Suey Chin, 173 F.Supp. 510, 512 (S.D.N.Y.1959) (petitioner's conduct prior to statutory period may not be sole basis for denial of naturalization under 8 U.S.C. § 1440)
5
As discussed above, the current statute, 8 U.S.C. § 1440, and regulation, 8 C.F.R. § 329.2(d), require that a petitioner establish good moral character from the year preceding the filing of his application to the present
6
This position is consistent with INS Interpretations, which state that "Congress undoubtedly intended to make provision for the reformation and eventual naturalization of persons who were guilty of past misconduct" and, "[T]he Service considered proper an inquiry into antecedent events for the purpose of evaluating misconduct or explaining other facts that had occurred within the crucial period in order to determine whether an actual reformation had taken place, and whether the applicant, in fact, had been a person of good moral character throughout the requisite period." 9 Gordon & Mailman, Immigration Law and Procedure 131-32 (quoting INS Interpretation 316.1(2))
7
The INS correctly argues that an agency's construction of its own regulations is entitled to substantial deference. See Lyng v. Payne, 476 U.S. 926, 939, 106 S.Ct. 2333, 2341, 90 L.Ed.2d 921 (1986). However, deference is not afforded if the administrative construction is clearly contrary to the plain and sensible meaning of the regulation. Borregard v. National Transp. Safety Board, 46 F.3d 944, 946 (9th Cir.1995). Further, the INS interpretation of a statute is subject to de novo review. Tang v. Reno, 77 F.3d 1194, 1196 (9th Cir.1996). The INS argues here that a finding of lack of good moral character under 8 C.F.R. § 329.2(d) may be based solely on criminal acts and broken promises of rehabilitation that occurred prior to the regulatory period. However, given the plain meaning of the statutes and regulations at issue, the holding of Yuen, the legislative history, and the INS INTERP described in footnote 5, supra, we do not adopt the INS' construction in this case. See Almero, 18 F.3d at 760
8
Even though the district court erred by adopting the INS's arguments that conduct prior to the regulatory period may be the sole basis for finding lack of good moral character, we may affirm the district court's denial of Santamaria-Ames's naturalization application on any basis supported in the record. Mason, 862 F.2d at 193. If the record conclusively demonstrated that, under the standards set forth above, Santamaria-Ames had not established good moral character at present and during the year preceding the filing of his naturalization application (i.e. from May 11, 1991 to the present), then we could affirm the district court. However, in absence of any record at all on the issue, we cannot | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1570960/ | 722 N.W.2d 268 (2006)
Michael ALLARD, Plaintiff-Appellee,
v.
STATE FARM INSURANCE COMPANY, Defendant-Appellant.
Michael Allard, Plaintiff-Appellant,
v.
State Farm Insurance Company, Defendant-Appellee.
Docket Nos. 257702, 260435.
Court of Appeals of Michigan.
Submitted April 4, 2006, at Detroit.
Decided April 18, 2006.
Approved for Publication June 15, 2006, at 9:05 a.m.
Released for Publication October 2, 2006.
*270 Cummings, McClorey, Davis & Acho, P.L.C. (by Robert L. Blamer and Gail P. Massad), Livonia, for the plaintiff.
Moblo & Fleming, P.C. (by Cheryl L. Ronk), Livonia, for the defendant.
Before: WHITE, P.J., WHITBECK, C.J., and DAVIS, J.
*269 PER CURIAM.
In these consolidated appeals, defendant State Farm Insurance Company appeals as of right the trial court's order denying its motion for case evaluation sanctions under MCR 2.403 in Docket No. 257702. In Docket No. 260435, plaintiff Michael Allard appeals by leave granted[1] the trial court's denial of his motion for a new trial or judgment notwithstanding the verdict (JNOV) under MCR 2.611(A)(1)(e), arguing that the jury's verdict was inconsistent and against the great weight of the evidence. We affirm the trial court's order denying Allard's motion for a new trial or JNOV. However, we reverse the trial court's order denying State Farm's motion for case evaluation sanctions and remand to allow the trial court to determine the proper amount of those sanctions. On remand, the trial court shall also amend its previous award of costs under MCR 2.625 to exclude those costs associated with attending the case evaluation hearing.
*271 I. Basic Facts And Procedural History
In this case, Allard filed a claim with State Farm, his no-fault insurance carrier, for first-party personal injury protection (PIP) benefits. Allard asserted that he injured his lower back while fueling his vehicle on October 21, 2001. Because State Farm failed to make full payments on Allard's claim for benefits within 30 days,[2] Allard filed the current action in the Wayne Circuit Court. Allard alleged that he was entitled to the claimed benefits and to attorney fees pursuant to MCL 500.3148. Although State Farm did not formally deny Allard's claim for benefits until two months before trial, it continually asserted that his injuries were caused by a preexistent degenerative condition at the L5-S1 vertebrae rather than by the October 21, 2001, incident. This case proceeded to case evaluation pursuant to MCR 2.403. The panel found in Allard's favor and valued his claims at $55,000. Both parties rejected this award, and the case proceeded to trial. At the conclusion of the trial, the trial court entered a judgment of no cause of action in State Farm's favor, consistent with the jury's verdict entered by a special verdict form.
II. Case Evaluation Sanctions
A. Standard Of Review
We review de novo the interpretation and application of a court rule.[3] We also review de novo the trial court's decision whether to grant or deny case evaluation sanctions under MCR 2.403.[4]
B. MCR 2.403(O)(1)
MCR 2.403(O)(1) provides:
If a party has rejected an evaluation and the action proceeds to verdict, that party must pay the opposing party's actual costs unless the verdict is more favorable to the rejecting party than the case evaluation. However, if the opposing party has also rejected the evaluation, a party is entitled to costs only if the verdict is more favorable to that party than the case evaluation. [Emphasis added.]
C. The Trial Court's Decision
The jury's verdict was clearly less favorable to Allard and more favorable to State Farm, which also rejected the award. However, the trial court denied State Farm's motion for "good cause." The trial court agreed with Allard's argument that, had both parties accepted the case evaluation award, Allard could have been precluded by MCR 2.403(M)(1)[5] and the Michigan Supreme Court's opinion in CAM Constr. v. Lake Edgewood Condo Ass'n from raising additional claims for future accrued PIP benefits.[6] The concern of waiver of the future accrued PIP benefits was significant in this case given that Allard underwent additional surgery after the case evaluation and was subsequently permanently disabled from his work as a self-employed electrician.
*272 D. Applying The Rule
The purpose of case evaluation sanctions is to shift the financial burden of trial onto "the party who demands a trial by rejecting a proposed [case evaluation] award."[7] The decision to award case evaluation sanctions is determined as a matter of law; it is not a discretionary matter.[8] The use of the word "must" indicates that the imposition of these sanctions is mandatory.[9] In Great Lakes Gas Transmission Ltd Partnership v. Markel, this Court found that there are only three narrow exceptions to the mandatory imposition of case evaluation sanctions.[10] Under the first exception, the trial court may decline to award costs in a case involving equitable relief, when the verdict (considering both equitable and monetary relief) is more favorable to the rejecting party than the evaluated award.[11] The second exception applies only to dramshop actions.[12] Finally, the trial court "may, in the interest of justice, refuse to award costs" when the judgment is "entered as a result of a ruling on a motion after the party rejected the [case] evaluation" under MCR 2.403(O)(2)(c).[13] This case does not fall within any of the exceptions provided in the plain language of the court rule; thus, the trial court was required to impose case evaluation sanctions in State Farm's favor.
Moreover, we do not agree that Allard would have been precluded under CAM Constr. from filing future claims for PIP benefits if both parties had accepted the case evaluation. In CAM Constr., the plaintiff filed a four-count complaint against the defendantthree counts related to nonpayment for services rendered and one count for breach of contract.[14] The trial court granted the defendant's motion for summary disposition of the breach of contract claim on the ground that the parties had never entered into a written agreement. The remaining three counts proceeded to case evaluation.[15] Both parties ultimately accepted the case evaluation award, and the defendant requested that the trial court enter an order dismissing the entire action pursuant to MCR 2.403(M)(1).[16] The plaintiff argued that it reserved the right to appeal the trial court's grant of summary disposition.[17] The Michigan Supreme Court held that, under the plain language of the court rule, the acceptance of the case evaluation award means that all claims in the action are dismissed.[18]
*273 Here, however, Allard's potential future claims to PIP benefits could not have proceeded to case evaluation and, therefore, could not be excepted in the first instance. Pursuant to MCL 500.3110(4), "[p]ersonal protection insurance benefits payable for accidental bodily injury accrue not when the injury occurs but as the allowable expense, work loss or survivors' loss is incurred." Under MCL 500.3107(1), an insurer is not liable to pay allowable expenses until they are incurred. "To `incur' means `[t]o become liable or subject to, [especially] because of one's own actions.'"[19] Until the expense is incurred, the insured's entitlement to benefits does not accrue and the insurer's liability to pay the claim does not attach.[20] Had both parties here accepted the case evaluation, State Farm would have been deemed liable to pay $55,000 of PIP benefits, which had accrued up to the time of the case evaluation. As Allard's subsequent work loss and other allowable expenses accrued, he could file additional claims with State Farm.[21]
E. "Actual Costs"
Because the trial court improperly denied State Farm's motion for case evaluation sanctions under the mandatory language of the court rule, we must remand to allow the trial court to consider State Farm's "actual costs" of proceeding to trial. "Actual costs" are defined under the court rule as follows:
(a) those costs taxable in any civil action, and
(b) a reasonable attorney fee based on a reasonable hourly or daily rate as determined by the trial judge for services necessitated by the rejection of the case evaluation.
For purposes of determining taxable costs under this subrule and under MCR 2.625, the party entitled to recover actual costs under this rule shall be considered the prevailing party.[22]
"Those costs taxable in any civil action" are enumerated in MCL 600.2405:
(1) Any of the fees of officers, witnesses, or other persons mentioned in this chapter or in chapter 25, unless a contrary intention is stated.
(2) Matters specially made taxable elsewhere in the statutes or rules.
(3) The legal fees for any newspaper publication required by law.
(4) The reasonable expense of printing any required brief and appendix in the supreme court, including any brief on motion for leave to appeal.
(5) The reasonable costs of any bond required by law, including any stay of proceeding or appeal bond.
(6) Any attorney fees authorized by statute or by court rule.
We disagree with Allard's contention that the costs and fees associated with proceeding to trial were "necessitated by" State Farm's rejection of the case evaluation award and refusal to settle this case, rather than by his rejection of the award. In Haliw v. Sterling Hts, the Michigan Supreme Court clarified that, under MCR 2.403(O), there must be "a causal nexus between rejection and incurred expenses" to justify the award of case evaluation *274 sanctions.[23] The Court rejected prior case law construing the phrase "`necessitated by the rejection'" to be merely a "temporal demarcation."[24] "[A] causal nexus plainly exists between rejection and trial fees and costs."[25]
This Court has repeatedly rejected the argument that the required causal nexus is destroyed when the defendant fails to offer to settle the case and rejects the case evaluation award. In Ayre v. Outlaw Decoys, Inc, four coplaintiffs filed a wrongful death and negligence action against two defendants, including Attwood Corporation, on behalf of their decedents' estates following a fatal boating accident.[26] Following a case evaluation hearing, the panel determined that Attwood was 30 percent at fault for the plaintiffs' losses. Three of the coplaintiffs accepted this award, but the appealing plaintiff rejected it.[27] Attwood also rejected the case evaluation award, and the plaintiff's claims against that defendant proceeded to trial.[28] The jury ultimately entered a verdict of no cause of action in Attwood's favor.[29] The trial court subsequently granted Attwood's motion for case evaluation sanctions against this plaintiff alone as a rejecting party who fared worse at trial.[30] On appeal, this Court rejected the plaintiff's argument that the trial was "necessitated by" Attwood's rejection of the case evaluation award with respect to all four plaintiffs, rather than by this plaintiff's rejection.[31] This plaintiff's rejection "did cause [Attwood] to incur attorney fees defending against [the] plaintiff's case" regardless of the fact that Attwood also rejected the award.[32] Similarly, in this case, Allard's rejection of the case evaluation award necessitated trial, even though State Farm never offered to settle.
F. Specific Items As Taxable Costs
Allard also challenges the trial court's award of specific items as taxable costs to State Farm. Unlike the award of case evaluation sanctions, the award of taxable costs to the prevailing party is within the trial court's discretion. Under MCR 2.625(A)(1), "[c]osts will be allowed to the prevailing party in an action, unless prohibited by statute or by these rules or unless the court directs otherwise, for reasons stated in writing and filed in the action."[33] Although the trial court initially rejected State Farm's motion for taxable costs, it later granted the motion on reconsideration. Arguably, the trial court could have denied State Farm's motion for costs under MCR 2.625 on the basis of its concern for the potential waiver of a PIP claimant's future claims for recovery. However, as noted in MCR 2.403(O)(6), taxable costs are completely subsumed by the mandatory award of "actual costs" as case evaluation sanctions. Accordingly, Allard's challenge to specific itemized costs *275 will apply equally to the award of case evaluation sanctions on remand.
G. Paralegal And Clerical Fees
Allard contends that State Farm improperly sought to tax paralegal and clerical fees, which should have been included in its attorney's overhead. In Joerger v. Gordon Food Service, Inc,[34] this Court found that paralegal fees are neither part of taxable costs under MCL 600.2405 nor recompensable as part of an attorney's fees under MCR 2.403(O)(6). Paralegal fees are not enumerated in the list of taxable costs in the statute. Although this Court noted that a paralegal performing duties traditionally conducted by an attorney should be a separate allowable expense,[35] this Court found that it was bound to find that fees generated by the work of paralegals are already included in the attorney's cost of doing business.
Clearly, attorney fees are not meant to compensate only work performed personally by members of the bar. Rather, the term must refer to a reasonable fee for the work product of an attorney that necessarily includes support staff. The rule allowing an award of attorney fees has traditionally anticipated the allowance of a fee sufficient to cover the office overhead of an attorney together with a reasonable profit. The inclusion of factor 5, the expenses incurred, reflects the traditional understanding that attorney fees should be sufficient to recoup at least a portion of overhead costs. Johnston v. Detroit Hoist & Crane Co., 142 Mich.App. 597, 601, 370 N.W.2d 1 (1985); Detroit Bank & Trust Co. v. Coopes, 93 Mich.App. 459, 468, 287 N.W.2d 266 (1979). Fixed overhead costs include such items as employee wages, rent, equipment rental, and so forth. Id. Thus, until a statute or a court rule specifies otherwise, the attorney fees must take into account the work not only of attorneys, but also of secretaries, messengers, paralegals, and others whose labor contributes to the work product for which an attorney bills a client, and it must also take account of other expenses and profit. We therefore must rule, albeit reluctantly, that the reasonable "attorney fees" should already include the work of paralegals, as well as that of attorneys and other factors underlying the fee. Accordingly, we remand in order for the trial court to reduce the award of attorney fees by the amount attributable to the independent paralegal billings.[36]
Clerical tasks would, similarly, be considered part of an attorney's overhead under this reasoning.
We agree with Allard that State Farm was not entitled to the costs and fees associated with attending case evaluation. The court rule specifically provides recovery only for the actual costs associated with trial. Accordingly, on remand, the trial court should adjust State Farm's award of actual costs to exclude the challenged amounts. However, we do not agree that the trial court improperly awarded State Farm costs associated with paralegal or clerical work. Allard contends that State Farm billed a reduced rate for the work of a paralegal. However, the bill of costs clearly indicates that this individual was an attorney who billed at a lower rate. Moreover, Allard challenges several "clerical" tasks, but these *276 were billed directly by the attorney in this case. Accordingly, we find that the trial court did not abuse its discretion in including those costs in its award.
III. New Trial Or JNOV
A. Standard Of Review
Allard challenges the trial court's denial of its motion for new trial or JNOV. Allard contended that the jury's verdict was inconsistent and against the great weight of the evidence under MCR 2.611(A)(1)(e). The jury determined that Allard had suffered an accidental bodily injury, but that his injury did not arise from the maintenance of a motor vehicle as a motor vehicle.[37] Allard contends that this verdict was inconsistent with the evidence, given that State Farm's claims adjuster admitted that the fueling of a vehicle is "maintenance" as contemplated by the statute. Allard also contends that, if the jury found that his injuries were not caused by the incident on October 21, 2001, it should have found that his injuries arose out of the ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle, but that no allowable expenses had accrued. Basically, Allard is challenging the jury's interpretation of the jury verdict form.
We review for an abuse of discretion a trial court's denial of a motion for new trial.[38] When a party challenges a jury's verdict as against the great weight of the evidence, this Court must give substantial deference to the judgment of the trier of fact. If there is any competent evidence to support the jury's verdict, we must defer our judgment regarding the credibility of the witnesses.[39] The Michigan Supreme Court has repeatedly held that the jury's verdict must be upheld, "even if it is arguably inconsistent, `[i]f there is an interpretation of the evidence that provides a logical explanation for the findings of the jury.'"[40] "`[E]very attempt must be made to harmonize a jury's verdicts. Only where verdicts are so logically and legally inconsistent that they cannot be reconciled will they be set aside.'"[41]
B. The Special Verdict Form
In Question No. 1 on the special verdict form, the jury found that Allard had suffered an accidental bodily injury. However, that question did not ask when the injury occurred or what caused it. Given that State Farm conceded that Allard had suffered a debilitating injury to his back, the jury had grounds to find that he had suffered an accidental injury at some point in time. In Question No. 2, however, the jury found that Allard's accidental bodily injury did not "arise out of the ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle [on] October 21, 2001." Although Allard argues on appeal that State Farm's claims adjuster admitted that fueling a vehicle is "maintenance" as contemplated by the statute, he conceded during the January 16, 2004, hearing that the adjuster did not admit that his accidental bodily injury arose out of that incident. While Allard and the trial court both believed that Question No. 3 was the proper *277 causation question, the trial court correctly determined that the jury found a lack of causation in Question No. 2. We note that Allard did not challenge the verdict when the jury returned it.
C. The Evidence
The parties presented significant conflicting evidence regarding the cause of Allard's injuries following the October 21, 2001, incident. Allard presented the testimony of his treating physician that the incident on October 21, 2001, "aggravated" his preexistent back condition and necessitated further surgeries. State Farm presented the contradictory evidence of its independent medical examiner that Allard's later fusion surgeries were inevitable given the condition of his back and that the instability was likely increased by the first surgery. From that evidence, the jury declined to find that Allard's injuries stemmed from the use of a motor vehicle. It is the sole province of the jury to determine the weight of the evidence and credibility of the witnesses. We may not interfere with that judgment.[42]
Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.
NOTES
[1] Allard v. State Farm Ins Co, unpublished order of the Court of Appeals, entered June 20, 2005 (Docket No. 260435).
[2] MCL 500.3142(2).
[3] Haliw v. Sterling Hts., 471 Mich. 700, 704, 691 N.W.2d 753 (2005).
[4] Elia v. Hazen, 242 Mich.App. 374, 376-377, 619 N.W.2d 1 (2000).
[5] MCR 2.403(M)(1) provides:
If all the parties accept the panel's evaluation, judgment will be entered in accordance with the evaluation, unless the amount of the award is paid within 28 days after notification of the acceptances, in which case the court shall dismiss the action with prejudice. The judgment or dismissal shall be deemed to dispose of all claims in the action and includes all fees, costs, and interest to the date it is entered. [Emphasis added.]
[6] CAM Constr. v. Lake Edgewood Condo. Ass'n, 465 Mich. 549, 640 N.W.2d 256 (2002).
[7] Bennett v. Weitz, 220 Mich.App. 295, 301, 559 N.W.2d 354 (1996); see also Ayre v. Outlaw Decoys, Inc., 256 Mich.App. 517, 529, 664 N.W.2d 263 (2003).
[8] Great Lakes Gas Transmission Ltd. Partnership v. Markel, 226 Mich.App. 127, 129, 573 N.W.2d 61 (1997).
[9] Id. at 130, 573 N.W.2d 61; see also Elia, supra at 379, 619 N.W.2d 1 ("Given that the parties rejected the mediation evaluation and the jury verdict is more than ten percent above the mediated value, plaintiffs are, as a matter of law, entitled to mediation sanctions in the amount of their `actual costs.'").
[10] Great Lakes Gas Transmission Ltd Partnership, supra at 130, 573 N.W.2d 61.
[11] Id., citing MCR 2.403(O)(5).
[12] Id., citing MCR 2.403(O)(9).
[13] Id., citing MCR 2.403(O)(11).
[14] CAM Constr., supra at 550-551, 640 N.W.2d 256.
[15] Id. at 551, 640 N.W.2d 256.
[16] Id. at 551-552, 640 N.W.2d 256.
[17] Id. at 552, 640 N.W.2d 256.
[18] Id. at 554-555, 640 N.W.2d 256.
[19] Proudfoot v. State Farm Mut. Ins. Co., 469 Mich. 476, 484, 673 N.W.2d 739 (2003).
[20] Id.; Nasser v. Auto Club Ins. Ass'n, 435 Mich. 33, 52 n. 7, 457 N.W.2d 637 (1990).
[21] See Proudfoot, supra at 484, 673 N.W.2d 739 (in which the plaintiff was required to take actions to become liable for the cost of home modifications necessitated by her injury in order to incur an allowable expense for which the defendant could be liable).
[22] MCR 2.403(O)(6) (emphasis added).
[23] Haliw, supra at 711 n. 8, 691 N.W.2d 753.
[24] Id., citing Michigan Basic Prop. Ins. Ass'n v. Hackert Furniture Distributing Co., Inc., 194 Mich.App. 230, 235, 486 N.W.2d 68 (1992).
[25] Id.
[26] Ayre, supra at 519, 664 N.W.2d 263.
[27] Id.
[28] Id.
[29] Id.
[30] Id. at 520, 664 N.W.2d 263.
[31] Id. at 521, 664 N.W.2d 263.
[32] Id. at 526, 664 N.W.2d 263; see also Bennett, supra (in which this Court also upheld the imposition of case evaluation sanctions where both parties had rejected the case evaluation award).
[33] Emphasis added.
[34] Joerger v. Gordon Food Service, Inc., 224 Mich.App. 167, 180-182, 568 N.W.2d 365 (1997).
[35] Id. at 183, 568 N.W.2d 365.
[36] Id. at 181-182, 568 N.W.2d 365 (emphasis in original).
[37] MCL 500.3105(1).
[38] Kelly v. Builders Square, Inc., 465 Mich. 29, 34, 632 N.W.2d 912 (2001).
[39] Ellsworth v. Hotel Corp. of America, 236 Mich.App. 185, 194, 600 N.W.2d 129 (1999).
[40] Bean v. Directions Unlimited, Inc., 462 Mich. 24, 31, 609 N.W.2d 567 (2000), quoting Granger v. Fruehauf Corp., 429 Mich. 1, 7, 412 N.W.2d 199 (1987); Lagalo v. The Allied Corp., 457 Mich. 278, 282, 577 N.W.2d 462 (1998).
[41] Lagalo, supra at 282, 577 N.W.2d 462, quoting Granger, supra at 9, 412 N.W.2d 199.
[42] Ellsworth, supra at 194, 600 N.W.2d 129. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1570970/ | 29 So.3d 291 (2010)
HARPER
v.
UNITED SERVICES AUTO. ASS'N.
No. SC10-220.
Supreme Court of Florida.
February 5, 2010.
Decision Without Published Opinion Review dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/457913/ | 772 F.2d 482
19 Fed. R. Evid. Serv. 222
UNITED STATES of America, Plaintiff-Appellee,v.Carlo Scott BAGLEY, Defendant-Appellant.
No. 84-3063.
United States Court of Appeals,Ninth Circuit.
Argued and Submitted Jan. 14, 1985.Decided July 9, 1985.Amended Sept. 26, 1985.
William W. Youngman, Asst. U.S. Atty., Portland, Or., for plaintiff-appellee.
Steven Wax, Asst. Federal Public Defender, Portland, Or., for defendant-appellant.
Appeal from the United States District Court for the District of Oregon.
Before GOODWIN, SKOPIL and WIGGINS, Circuit Judges.
AMENDED OPINION
WIGGINS, Circuit Judge:
1
Appellant Carlo Scott Bagley was convicted after a jury trial of bank robbery, in violation of 18 U.S.C. Sec. 2113(a). He appeals his conviction and urges reversal on the basis of several alleged errors in the pretrial proceedings and in the trial itself. We reject his contentions and affirm his conviction.
FACTS
2
On October 31, 1983, at approximately 12:45 p.m., the Peninsula Branch of the First Interstate Bank of Oregon was robbed by a lone black male who was wearing a cap, reddish-pink sunglasses, and a dark jacket. The robber obtained $500 in cash from a teller which included five twenty dollar ($20) bait bills.
3
The bank manager observed the robbery and followed the robber out of the bank. Although she lost sight of the robber momentarily, she heard a car start and watched it turn east on Willamette Boulevard. The car she observed was a large, gold colored American made automobile. She believed it was the getaway car.
4
The teller and manager promptly reported the robbery to the police and provided a description of the robber and the getaway car. This information was transmitted over the police radio to patrol cars in the vicinity. The transmission was received by Officers Stolley and Frater who were driving separate cars in the area, as well as by FBI agents who were investigating prior bank robberies.
5
A few minutes after the robbery, Officer Stolley observed a car matching the description of the getaway car. Officer Stolley followed the car for approximately half a mile and then pulled up alongside the suspected getaway car. He observed that the only occupant was the driver, a black male who resembled the description given of the bank robber. At this time the two cars were on Greeley Street.
6
At about the same time, Officer Frater was driving in the opposite direction on Greeley Street and he observed a large gold, Buick automobile being followed by Officer Stolley. As he drove by the Buick, Officer Frater saw the driver.
7
After both police cars had passed the Buick, the driver immediately parked the car on Greeley Street and departed on foot between two houses. Officers Stolley and Frater promptly returned to the scene of the parked Buick. Being uncertain of the involvement of the driver in the recent bank robbery, the officers decided not to pursue him.
8
The Buick was lawfully parked on Greeley Street. The car was locked and no key was in the ignition. A registration check made at the scene revealed that the Buick was registered to Marjorie and Anthony Akers.
9
The bank manager was brought to the scene of the parked Buick. She identified it as the getaway car. Visible on the front seat of the Buick were sunglasses similar to those worn by the robber and a pair of gloves.
10
After the manager had identified the Buick as the getaway car, Police Officer Ault made a forced entry into the car. Officer Ault intended to remove the sunglasses and gloves. Once inside the car, however, Officer Ault decided to leave these items in place. He conducted no further search of the car. Sometime after 1:15 p.m., Officer Ault ordered the car towed to a storage lot. The car was removed from Greeley Street by 1:30 p.m.
11
While the above described activities were taking place, the FBI was also investigating the bank robbery. FBI agents focused their attention upon Bagley because he was a suspect in two earlier robberies. A team of FBI agents went immediately to the Bagley residence and began surveillance. The Bagley residence was approximately two miles from the site of the parked Buick. FBI Agent Snow went first to the Bagley residence and then to the location of the parked Buick. He took with him two photographic arrays.
12
The FBI agents at the Bagley residence observed Bagley arrive between 1:15 p.m. and 1:20 p.m. as a passenger in a car driven by Chris Pennington. The agents watched Bagley enter his house.
13
In the meantime Agent Snow had arrived at the site of the parked Buick. Agent Snow displayed the photographic arrays to the bank manager and to Officers Stolley and Frater. The bank manager identified Bagley as the robber. The officers selected Bagley's picture as the driver of the Buick.
14
The agents at the Bagley residence saw Bagley exit the house at approximately 1:30 p.m. As Bagley was about to enter a car driven by Pennington, the agents detained Bagley and questioned him. The agents then proceeded to handcuff him and transport him to the bank in their car.
15
At the bank, the teller was asked if she recognized Bagley. She indicated, with some hesitation, that she thought Bagley was the bank robber.
16
Three days later, the Buick was searched at the police storage lot pursuant to a search warrant. The search uncovered a pair of reddish-pink sunglasses, a pair of gloves, several documents with Bagley's fingerprints, and $500 in cash, including the five twenty dollar ($20) bait bills.
I.
ALLEGED PRETRIAL ERRORS
17
1. Denial of motion in limine to preclude impeachment of Bagley with prior bank robbery convictions.
18
Prior to trial, Bagley filed a motion in limine seeking to bar the prosecution from impeaching his credibility by introducing evidence of his prior convictions.1 Bagley had previously been convicted of four felonies, two for robbery and two for forgery. The district court denied his motion and Bagley did not testify at trial. On appeal, he concedes the admissibility of his forgery convictions, but he challenges the district court's ruling regarding his prior robbery convictions.
19
In United States v. Cook, 608 F.2d 1175 (9th Cir.1979) (en banc), cert. denied, 444 U.S. 1034, 100 S.Ct. 706, 62 L.Ed.2d 670 (1980), we held that a defendant may preserve the right to challenge a district court's ruling refusing to prohibit impeachment by the introduction of prior convictions even if the defendant does not testify. Id. at 1183-86. In order to preserve this issue for appellate review a defendant must "establish on the record that [he or she] will in fact take the stand and testify if the challenged prior convictions are excluded and sufficiently outline the nature of his or her testimony." Id. at 1186. Following this procedure Bagley properly preserved his right to appellate review of the district court's ruling on his motion under Fed.R.Evid. 609(a)(1). Bagley offered to testify that he purchased the getaway car but sold it prior to the robbery. He would also deny any involvement in the robbery and explain his whereabouts at the time of the robbery.
20
Shortly before oral argument of this appeal, the United States Supreme Court decided Luce v. United States, --- U.S. ----, 105 S.Ct. 460, 83 L.Ed.2d 443 (1984). In Luce, the Supreme Court held that in order to preserve the claim of improper impeachment with a prior felony conviction, the defendant must testify at trial. In so holding, the Court rejected the procedure adopted by us in Cook and applicable at the time of Bagley's trial.
21
Were we to apply Luce retroactively, Bagley's claim of error based on the district court denial of his motion in limine would fail because Bagley did not testify at trial. We find it unnecessary to determine whether Luce should be given retroactive application in this case. Bagley's claim of error under Rule 609 must fail because he has not demonstrated that a substantial right was prejudiced.
22
As is clear from its text, Fed.R.Evid. 609(a)(1) requires a weighing of the probative value of a prior conviction against the prejudicial effect to the defendant of that evidence. The prosecution bears the burden of establishing that the probative value of admitting a prior conviction outweighs its prejudicial effect. United States v. Hendershot, 614 F.2d 648, 653 (9th Cir.1980). Factors a district court should consider in reaching the appropriate balance are: (1) the impeachment value of the prior crime; (2) the temporal relationship between the conviction and the subsequent history of the defendant; (3) the similarity between the prior offense and the offense charged; (4) the importance of the defendant's testimony; and (5) the centrality of the credibility issue. United States v. Cook, 608 F.2d at 1185, n. 8.
23
We review a district court's ruling on a motion under Rule 609(a)(1) for abuse of discretion. See United States v. Mehrmanesh, 682 F.2d 1303, 1309 (9th Cir.1982). But, even if we conclude that the district court's ruling is erroneous, reversal is required only if a defendant demonstrates that a substantial right has been prejudiced. See United States v. Portillo, 699 F.2d 461, 464-65 (9th Cir.1982). A careful review of the record before us compels the conclusion that the district court abused its discretion in finding that the government met its burden of demonstrating that the probative value of Bagley's prior robbery convictions outweighed their prejudicial effect.
24
The purpose of impeachment is to challenge the credibility of a witness. See Gordon v. United States, 383 F.2d 936, 940 (D.C.Cir.1967), cert. denied, 390 U.S. 1029, 88 S.Ct. 1421, 20 L.Ed.2d 287 (1968). Proper impeachment is not, in itself, evidence of guilt or innocence; it merely casts a doubt on other evidence going directly to those issues which the trier of fact should consider. Consistent with this purpose, prior felony convictions which do not in themselves implicate the veracity of a witness may have little impact on credibility. For example, the question of the truth or falsity of a witness's statement generally is not advanced in any material way by a showing of his prior conviction of the crime of burglary or theft, unless issues of credibility are otherwise directly involved. See United States v. Glenn, 667 F.2d 1269, 1272-73 (9th Cir.1982)
25
In Cook, we upheld a district court's ruling which would have allowed into evidence the defendant's prior robbery convictions at his trial for bank robbery because the district court had reason to believe that the defendant would take the stand and misrepresent his character to the jury. 608 F.2d at 1187. In those circumstances, we held that the defendant's prior criminal record would "give the jury a more comprehensive view of the trustworthiness of the defendant as a witness." Id. at 1187. See also United States v. Mehrmanesh, 682 F.2d at 1309 (in prosecution for drug offense court upheld ruling allowing introduction of prior narcotics conviction because defendant intended to take the stand and deny any involvement in narcotics trafficking).
26
In the case before us, however, the record is devoid of any evidence that Bagley intended to misrepresent his character or to testify falsely as to his prior criminal record. Thus, the impeachment value of Bagley's prior robbery convictions was quite low yet its prejudicial impact would be overwhelming.
27
To allow evidence of a prior conviction of the very crime for which a defendant is on trial may be devastating in its potential impact on a jury. As we recognized in United States v. Field, 625 F.2d 862, 872 (9th Cir.1980), where, as here, the prior conviction is sufficiently similar to the crime charged, there is a substantial risk that all exculpatory evidence will be overwhelmed by a jury's fixation on the human tendency to draw a conclusion which is impermissible in law: because he did it before, he must have done it again. Such a risk was clearly present in this case.
28
Moreover, the government's need for the robbery convictions for impeachment purposes was nil. Most certainly, the government would have impeached Bagley's credibility by the introduction of his two forgery convictions. Thus, the only purpose served by the robbery convictions would be to plant in the minds of the jury the spectre that Bagley did it before and he did it again.
29
In these circumstances, we are convinced that the district court abused its discretion in denying Bagley's motion in limine. Nonetheless, because Bagley has failed to demonstrate that a substantial right has been prejudiced, we hold that the error was harmless. See United States v. Portillo, 699 F.2d at 464-65.
30
To meet his burden that a substantial right was affected by the district court's erroneous ruling, Bagley must establish (1) that he would have testified but for the adverse ruling; (2) the substance of his testimony; and (3) that his testimony would more probably than not have altered the jury verdict. See id.
31
Thus, although Bagley has met the first two prongs of this test, he has failed to convince us that his wholly uncorroborated testimony would more probably than not have altered the jury verdict.
32
Bagley's proffered testimony was that he sold the car prior to the robbery and was jogging when the robbery occurred. However, at trial, Bagley did not introduce any evidence to corroborate his alibi. Bagley did not call the registered owners of the Buick as defense witnesses nor did he introduce any other evidence to substantiate his claim that he sold the car prior to the robbery. Bagley also failed to call the person who drove him to his home shortly after the robbery to bolster his alibi.
33
Furthermore had Bagley taken the stand, even in the absence of the two prior robbery convictions, his testimony would have properly been impeached by two recent prior forgery convictions. In addition, his wholly uncorroborated alibi testimony would have been tested against the weight of the identification testimony of four prosecution witnesses and the evidence seized from the Buick.
34
When viewing such glaring weaknesses in Bagley's proffered alibi testimony, coupled with his impeachment by the introduction of his two prior forgery convictions, and the weight of the identification testimony offered against him, it is highly unlikely that the jury would have found Bagley credible. Cf. United States v. Glenn, 667 F.2d at 1273-74. In light of this overwhelming evidence of guilt, we are convinced that the district court's erroneous ruling on Bagley's Rule 609 motion was more probably than not harmless.2
II.
MOTION TO SUPPRESS
35
1. Denial of motion to suppress.
36
Sunglasses, gloves, stolen money, and Bagley's fingerprints were found upon a search of the Buick conducted pursuant to a warrant three days after the automobile was impounded in a police storage lot. Bagley does not contest the sufficiency of the affidavit in support of the search warrant, rather he contends that an unconstitutional seizure of the automobile occurred when it was towed because the seizure was effectuated without a warrant and in the absence of exigent circumstances.3 Accordingly, Bagley asserts that the unconstitutional seizure tainted the subsequent search and therefore the district court should have suppressed the evidence found in the automobile.
37
We review the question of the lawfulness of the automobile seizure as a mixed question of law and fact to which a de novo standard of review applies. See United States v. McConney, 728 F.2d 1195, 1202-04 (9th Cir.) (en banc), cert. denied, --- U.S. ----, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984).
38
Before turning to the merits of Bagley's fourth amendment claim, we first address the government's contention that Bagley does not have a legitimate expectation of privacy in the automobile. This contention, raised for the first time on appeal, stems from Bagley's proffered alibi defense.
39
In his offer of proof in support of his motion in limine and through defense counsel at opening argument, Bagley asserted that he sold the automobile prior to the robbery and was not in possession of it on the day of the robbery. In light of these assertions, the government now argues that Bagley has no legitimate expectation of privacy in the automobile. At trial, however, the government asserted, and convinced the jury, that Bagley was the driver of the automobile on the day of the robbery. We reject the government's argument that Bagley's trial strategy vitiates his expectation of privacy in the automobile.
40
There exists respectable authority to support a determination that the government has waived its right to challenge Bagley's expectation of privacy for the first time on appeal. See Steagald v. United States, 451 U.S. 204, 209-11, 101 S.Ct. 1642, 1646-47, 68 L.Ed.2d 38 (1981). We may also conclude that the government may not argue the facts both ways in order to defeat an expectation of privacy. See United States v. Isaacs, 708 F.2d 1365, 1367-68 (9th Cir.1984). However, we prefer to decide the expectation of privacy issue before us upon a defendant's right to raise constitutional errors on appeal which are consistent with the jury's factual determinations during the trial. See United States v. Ross, 655 F.2d 1159, 1165-66 (D.C.Cir.1981) (en banc), rev'd on other grounds, 456 U.S. 798, 102 S.Ct. 2157, 72 L.Ed.2d 572 (1982).
41
In this case, the government's claim that Bagley lacked a legitimate expectation of privacy is based upon Bagley's offer of proof. A mere offer of proof by the defendant that he is not the owner or possessor of a car does not establish the fact of ownership or possession. Here, the jury implicitly found that Bagley was in possession of the getaway car on the day of the robbery. Thus, we hold that Bagley has a legitimate expectation of privacy in the car. We, therefore, turn to the merits of Bagley's challenge to the seizure of the automobile.
42
The lawfulness of the automobile seizure was extensively briefed below and made the subject of a well-considered order by the district court. The district court concluded that our holding in United States v. Spetz, 721 F.2d 1457 (9th Cir.1983), governed the seizure issue present in this case. The district court correctly interpreted Spetz, id. at 1470-72, to require probable cause to believe the automobile contains contraband or evidence of a crime, and a stop of an automobile in transit or exigent circumstances which make it impracticable to secure a warrant, to justify the warrantless seizure of an vehicle under the automobile exception.
43
Upon examination of the evidence, the district court found the police had probable cause to believe that the automobile contained evidence of the bank robbery. The district court further concluded that the functional equivalent of an "in transit" stop occurred because Officer Stolley was tailing the automobile when Bagley parked it. As an alternative to its "in transit" holding, the district court found that exigent circumstances justified the warrantless seizure of the automobile because the police had reason to believe that Bagley or the registered owner's might remove the car before a warrant could be secured.
44
Bagley challenges the district court's conclusions that the functional equivalent of an "in transit" vehicle stop occurred and that exigent circumstances justified the seizure.
45
We begin our analysis of the issue by acknowledging that towing the automobile to the police lot constituted a seizure within the meaning of the fourth amendment. See Cardwell v. Lewis, 417 U.S. 583, 592-96, 94 S.Ct. 2464, 2470-72, 41 L.Ed.2d 325 (1973) (plurality). A search or a seizure effectuated without a warrant issued upon a probable cause is "per se unreasonable under the fourth amendment--subject only to a few specifically established and well delineated exceptions." Katz v. United States, 389 U.S. 347, 357, 88 S.Ct. 507, 514, 19 L.Ed.2d 576 (1967). See also United States v. Place, 462 U.S. 696, 701, 103 S.Ct. 2637, 2641, 77 L.Ed.2d 110 (1983); Coolidge v. New Hampshire, 403 U.S. 443, 454-55, 91 S.Ct. 2022, 2031-32, 29 L.Ed.2d 564 (1971) (plurality). One such exception is the "automobile exception" first articulated by the Supreme Court in Carroll v. United States, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543 (1925).
46
Since its decision in Carroll, id., the Supreme Court has addressed the parameters of the automobile exception in numerous cases, including Cardwell v. Lewis, 417 U.S. 583, 94 S.Ct. 2464, 41 L.Ed.2d 325, which involved review of a state prisoner's habeas corpus petition. In Cardwell, a majority of the Court upheld the warrantless seizure of an automobile lawfully parked in a public place. Id. The plurality upheld the warrantless seizure on the grounds that the police had probable cause to believe that the car was evidence of a crime and that prompt action was necessary because members of the defendant's family might remove the car. Id. at 592-96, 94 S.Ct. at 2470-72. The concurrence found it unnecessary to reach the merits of the defendant's fourth amendment claim on the ground that the defendant had a full and fair opportunity to litigate the issue in the state courts. Id. at 596, 94 S.Ct. at 2472. (Powell, J., concurring).
47
In United States v. Spetz, we declined to extract from the plurality's holding in Cardwell any general rule with regard to the applicability of the automobile exception to searches or seizures of cars lawfully parked in a public place. 721 F.2d at 1472. We expressly stated that before abandoning the rule set forth in United States v. Connolly, 479 F.2d 930, 935 (9th Cir.), cert. dismissed, 414 U.S. 897, 94 S.Ct. 248, 38 L.Ed.2d 139 (1973), wherein we required a showing of both probable cause and exigent circumstances for a warrantless search and seizure of an automobile parked on a public street to be deemed lawful, "we would require a far clearer directive from the Supreme Court." United States v. Spetz, 721 F.2d at 1472. We now have that directive.
48
Emphasizing the inherent mobility of vehicles and the reduced expectation of privacy accorded to them, the Supreme Court recently upheld the warrantless search of a lawfully parked, but fully mobile motor home under the automobile exception. California v. Carney, --- U.S. ----, 105 S.Ct. 2066, 2068-71, 85 L.Ed.2d 406 (1985). In California v. Carney, the Court makes clear that under the automobile exception, probable cause alone suffices to justify a warrantless search of a vehicle lawfully parked in a public place, as long as the scope of the search is reasonable. Id. Specifically, the Court stated, "the pervasive schemes of regulation, which necessarily lead to reduced expectations of privacy, and the exigencies attendant to ready mobility justify searches [of vehicles] without prior recourse to the authority of a magistrate so long as the overriding standard of probable cause is met." Id. at 2070.
49
It follows from the Court's opinion in California v. Carney, that if the existence of probable cause alone justifies the warrantless search of a vehicle parked in a public place, certainly a warrantless seizure of such a vehicle, based only on probable cause, also falls within the automobile exception. In light of the Court's holding in California v. Carney, we must abandon our interpretation of the automobile exception set forth in United States v. Spetz, 721 F.2d at 1472, and United States v. Connolly, 479 F.2d at 934-35. We now hold that the existence of probable cause alone justifies a warrantless search or seizure of a vehicle lawfully parked in a public place. In the present case, we need only concern ourselves with the propriety of a warrantless seizure of an automobile parked on a public street.
50
Here, the police officers undoubtedly had probable cause to associate the Buick with criminal activity. Within minutes after the robbery, an eyewitness to the crime identified the car as the getaway vehicle. Sunglasses similar to those worn by the robber were visible on the front seat of the car. In these circumstances, the seizure of the Buick comported with the fourth amendment.
51
Even if we apply the rule set forth in United States v. Spetz, 721 F.2d at 1472, to this case, we are convinced that, along with probable cause, exigencies also existed which necessitated prompt removal of the automobile from the public street.
52
Contrary to Bagley's assertion, the police officers clearly had more than a generalized fear that someone might attempt to move the Buick. The registered owners, Bagley's friend, or Bagley himself might have attempted to move the automobile.4 See United States v. Connolly, 479 F.2d at 935. In these circumstances, the exigent circumstances prong of the automobile exception rule set forth in United States v. Spetz was satisfied. See id. 721 F.2d at 1472.
53
Finally, even if we were to find the seizure of the automobile unlawful, suppression of the items seized from the car would be inappropriate. The items were secured during a search conducted pursuant to a warrant. Towing the automobile to the police storage lot for safekeeping in no way contributed to the subsequent search. The search warrant was based on information wholly independent of the automobile seizure. The exclusionary rule is therefore inapplicable to the items secured from the automobile. See Segura v. United States, --- U.S. ----, 104 S.Ct. 3380, 3386-89, 82 L.Ed.2d 599 (1984).
54
In these circumstances, we are satisfied that the district court properly denied Bagley's motion to suppress the evidence secured from the automobile.
III.
ALLEGED ERRORS AT TRIAL
55
1. Identification Testimony.
56
At trial, the district court allowed into evidence the identification testimony of the bank teller, the bank manager, and Officer Frater. Bagley contends that this amounted to denial of due process of law because their identification testimony was the product of impermissibly suggestive pretrial identification procedures. Specifically, Bagley challenges the one-on-one show-up at the bank and the photographic display at the scene of the parked Buick. He claims that these procedures were impermissibly suggestive and thus tainted both the out-of-court and in-court identifications of the teller, the manager, and Officer Frater.5
57
Our review of the constitutionality of the pretrial identification procedures is de novo. United States v. Love, 746 F.2d 477, 478 (9th Cir.1984). Suggestive pretrial identification procedures may be so impermissibly suggestive as to taint subsequent in-court identifications and thereby deny a defendant due process of law. United States v. Love, 746 F.2d at 478. To determine whether a challenged identification procedure is so impermissibly suggestive as to give rise to a substantial likelihood of mistaken identification, we must examine the totality of the surrounding circumstances. See Simmons v. United States, 390 U.S. 377, 384, 88 S.Ct. 967, 971, 19 L.Ed.2d 1247 (1968) (photographic array); Stovall v. Denno, 388 U.S. 293, 301-02, 87 S.Ct. 1967, 1972, 18 L.Ed.2d 1199 (1967) (one-on-one confrontation); United States v. Love, 746 F.2d at 478-79 (photographic array); United States v. Kessler, 692 F.2d 584, 585 (9th Cir.1982) (one-on-one confrontation).
58
If we find that a challenged procedure is not impermissibly suggestive, our inquiry into the due process claim ends. See United States v. Davenport, 753 F.2d 1460, 1463 and n. 2 (9th Cir.1985); United States v. Love, 746 F.2d at 478. Should we find a pretrial procedure impermissibly suggestive, automatic exclusion of identification testimony is not required. See Manson v. Brathwaite, 432 U.S. 98, 113-14, 97 S.Ct. 2243, 2252-53, 53 L.Ed.2d 140 (1977); Neil v. Biggers, 409 U.S. 188, 198-99, 93 S.Ct. 375, 381-82, 34 L.Ed.2d 401 (1972). If under the totality of the circumstances the identification is sufficiently reliable, identification testimony may properly be allowed into evidence even if the identification was made pursuant to an unnecessarily suggestive procedure. See id.
59
To determine whether the identification was sufficiently reliable to warrant admission, we weigh the indicia of reliability against the "corrupting effect of the suggestive identification procedure itself." Manson v. Brathwaite, 432 U.S. at 114, 97 S.Ct. at 2253. Several factors which should be considered in evaluating the reliability of both in-court and out-of-court identifications are: (1) the opportunity of the witness to view the criminal at the time of the crime; (2) the witness' degree of attention; (3) the accuracy of the witness' prior description of the criminal; (4) the level of certainty demonstrated by the witness at the confrontation; and (5) the length of time between the crime and the confrontation. Neil v. Biggers, 409 U.S. at 199-200, 93 S.Ct. at 382. United States v. Field, 625 F.2d at 866-67. With these principles in mind, we turn first to Bagley's challenge to the identification testimony of the bank teller.
60
Within an hour and a half of the robbery, Bagley was taken into custody. FBI agents promptly transported Bagley to the bank for the teller to observe. The teller saw Bagley seated in a police car, handcuffed and surrounded by law enforcement officials. After getting a full view of Bagley and hearing his voice, the teller stated that she believed Bagley was the robber. Nothing in the record even hints at any verbal encouragement by the officers to identify Bagley as the robber.
61
In United States v. Kessler, 692 F.2d at 584, in circumstances quite similar to those present in this case, we held that a show-up at the bank shortly after the commission of a robbery, although suggestive, was a legitimate procedure. Id. at 585-87. In light of our decision in Kessler, id, we hold that the identification procedure employed here was proper.
62
Having concluded that the one-on-one show-up was a legitimate identification procedure, we need not reach the question whether the teller's identification was reliable under the test enunciated in Biggers. See United States v. Davenport, 753 F.2d at 1463 and n. 2; United States v. Love, 746 F.2d at 478. In the circumstances of this case, the district court properly admitted the teller's identification testimony.
63
We turn next to Bagley's challenge to the identification testimony of the bank manager and Officer Frater on the ground that the photographic display at the scene of the parked get-away car was impermissibly suggestive. Bagley's challenge to this procedure is twofold. He claims that both the content of the display and the method of displaying the photographs to the bank manager and Officer Frater were impermissibly suggestive. We first examine Bagley's challenge to the content of the photographic displays.
64
Photographic procedures which emphasize the focus upon a single individual increase the danger of misidentification. Simmons v. United States, 390 U.S. at 382-83, 88 S.Ct. at 970. United States v. Hanigan, 681 F.2d 1127, 1133 (9th Cir.1982), cert. denied, 459 U.S. 1203, 103 S.Ct. 1189, 75 L.Ed.2d 435 (1983). The repeated showing of the picture of an individual, for example, reinforces the image of the photograph in the mind of the viewer. Simmons v. United States, 390 U.S. at 383, 88 S.Ct. at 970. Thus, we have held that "[c]onvictions based on in-court identifications following a pre-trial identification by photograph will be set aside where the photographic identification procedure was so impermissibly suggestive as to give use to a substantial likelihood of misidentification." United States v. Barrett, 703 F.2d 1076, 1084 (9th Cir.1983).
65
The photographic display challenged by Bagley consisted of two groups. One group was comprised of six mug shots of black males. Bagley's mug shot was included in this set. Bagley does not contend that the mug shots in this group were suggestive in any way, rather he contends that the suggestiveness arises because his picture was repeated in the second group of photographs. The second group consisted of two surveillance photographs taken during two previous bank robberies. FBI Agent Snow believed that one of the bank surveillance photographs was a picture of Bagley.
66
Bagley's contention that the photographic display was unduly suggestive because only his picture was common to both sets of pictures places him in a rather awkward position. If Bagley insists that he is the person in one of the bank surveillance photographs, he is tacitly admitting his involvement in that robbery. We pass this interesting point however, because we have examined both sets of photographs and conclude that the content of photographic display was not impermissibly suggestive. See United States v. Barrett, 703 F.2d at 1085 (court independently examined photographic spread to evaluate suggestiveness); United States v. Portillo, 633 F.2d 1313, 1324 (9th Cir.1980) cert. denied, 450 U.S. 1043, 101 S.Ct. 1763, 68 L.Ed.2d 241 (1981) (same); United States v. Collins, 559 F.2d 561, 563 (9th Cir.), cert. denied, 434 U.S. 907, 98 S.Ct. 309, 54 L.Ed.2d 195 (1977) (same).
67
Bagley also claims that the method of showing the photographs was impermissibly suggestive because of the sequence in which the pictures were handed to the bank manager and the joint viewing of the pictures by the bank manager and Officer Frater.
68
In light of our determination that the content of the photographic display was not suggestive, we conclude that the sequence in which the pictures were shown to the bank manager, without further indicia of suggestiveness, did not render the procedure suggestive in any way. Here, the record is devoid of any evidence that either Agent Snow or Officer Frater directed the bank manager's attention to any particular photograph. Accordingly, the sequence in which the pictures were shown to the bank manager did not constitute an impermissible procedure. Because the bank manager's identification testimony was not the product of any impermissibly suggestive procedure, the district court properly allowed it into evidence.
69
Finally, Bagley asserts that the photographic display was impermissibly suggestive because Officer Frater looked over the bank manager's shoulder as she was viewing the pictures and saw her select Bagley's mug shot. Bagley claims that this procedure impermissibly influenced Officer Frater and thus his identification testimony should have been excluded.
70
A joint confrontation is a disapproved identification procedure. See United States v. Fields, 625 F.2d at 870; United States v. Wilson, 435 F.2d 403, 405 (D.C.Cir.1970). Clearly, the better procedure is to keep witnesses apart when they view photographic spreads. United States v. Wilson, 435 F.2d at 405.
71
Even if we assume that the joint viewing in this case was unnecessarily suggestive, we are convinced that the district court properly concluded that Officer Frater's testimony was sufficiently reliable to warrant its admission at trial, regardless of whether we apply a de novo or clearly erroneous standard of review to the district court's determination of reliability. See United States v. Jarrad, 754 F.2d 1451, 1455 and n. 2 (9th Cir.1985) (suggesting, without deciding, that reliability of pretrial identification is subject to de novo review on appeal). Here, the indicia of reliability present clearly outweigh any corrupting influences of the pretrial identification procedure.
72
Officer Frater is an experienced law enforcement official. His attention was keen as it focused on suspected criminal activity. As he drove by Bagley, Officer Frater had an unobstructed view of Bagley's face from a short distance. At the photographic display, Officer Frater promptly identified Bagley as the driver of the Buick. At trial, Officer Frater testified that his identification of Bagley was independent of the bank manager's selection.
73
In summary, we reject Bagley's due process claim. The district court properly admitted into evidence the identification testimony of the teller, bank manager, and Officer Frater. The weight to be accorded their respective testimony was for the jury to decide. See United States v. Davenport, 753 F.2d at 1463; United States v. Kessler, 692 F.2d at 587.
74
2. Alleged Prosecutorial Misconduct.
75
During closing argument the prosecutor made various comments which Bagley contends deprived him of a fair trial. Contrary to Bagley's assertions, the challenged comments were proper.
76
In reply to defense counsel's argument that the government had not proved its cases, the prosecutor stated:
77
The government has not proved its case. You don't know if the car was stolen. You don't know if the car was borrowed. You don't know if the car was sold. You don't--don't you suppose, if anything, if any of those things had, in fact, happened, where would that evidence be, wouldn't it be presented to you--
78
Bagley argues that this statement by the prosecutor violated his fifth amendment rights because it was an impermissible comment on his failure to testify. See Griffin v. California, 380 U.S. 609, 85 S.Ct. 1229, 14 L.Ed.2d 106 (1965).
79
A prosecutor may properly reply to the arguments made by defense counsel, so long as the comment is not manifestly intended to call attention to the defendant's failure to testify, and is not of such a character that the jury would naturally and necessarily take it to be a comment on the failure to testify. United States v. Soulard, 730 F.2d 1292 (9th Cir.1984). "A prosecutor may [also] comment upon a defendant's failure to present exculpatory evidence, so long as it is not phrased to call attention to defendant's own failure to testify." Id. (Citing United States v. Passaro, 624 F.2d 938, 944 (9th Cir.1980), cert. denied, 449 U.S. 1113, 101 S.Ct. 925, 66 L.Ed.2d 842 (1981) ). Viewed under this standard, we do not believe the prosecutor's comments amounted to error at all.
80
During his closing argument, defense counsel stated:
81
What the government has to prove, that Mr. Bagley was the person using the car on that day. And you don't know what happened with that car. You don't know if it was stolen by someone to use in a bank robbery as you see on TV. You don't know if he sold it. You don't know if he loaned it out. You don't know.
82
When viewed in context, it is clear that the prosecutor's rebuttal comments were a fair reply to the defense's contention that the government had not ruled out other possible users of the Buick. The prosecutor clearly did not refer to the defendant's failure to testify, nor, under the circumstances of his comment, can we find that the jury would naturally and necessarily have taken this isolated remark as a comment upon the defendant's failure to testify.
83
Finally, Bagley takes exception to comments made by prosecutor referring to a "conspiracy to get Bagley." Bagley concedes that these comments do not implicate his fifth amendment rights, nonetheless, he contends that these comments were so improper and unduly prejudicial, that a reversal for a new trial is required. Again, the prosecutor's comments must be viewed in context.
84
During his closing argument, defense counsel sharply challenged the identification of his client by prosecution witnesses. He repeatedly asserted that the identification was constructed and was merely an identification "game" to get Bagley.
85
In his response, the prosecutor addressed this argument and attempted to dispell any notion that there was an attempt "to get" Bagley. The prosecutor referred to this "game" as an alleged "conspiracy to get Bagley."
86
A prosecutor's closing arguments must rise to the level of plain error to mandate a reversal for a new trial. United States v. Falsia, 724 F.2d 1339, 1342 (9th Cir.1983). On the record before us, we find no such error. Both counsel were zealous in their respective roles. As we view the exchange between counsel, defense counsel opened the door to argument and the prosecutor properly entered. See id.
87
Affirmed.
1
Bagley renewed his motion to bar the introduction of his prior robbery convictions for impeachment purposes at the conclusion of the prosecution's case. The district court again denied the motion
2
We recognize that in Luce, the Supreme Court stated that "[an] appellate court [cannot] logically term 'harmless' an error that presumptively kept the defendant from testifying." 105 S.Ct. at 464. For the above stated reasons, we are convinced that in this case we may logically conclude that the error was harmless
3
In the district court proceedings, Bagley challenged the lawfulness of Officer Ault's entry into the Buick. Bagley does not renew this claim on appeal and thus we deem it waived
4
The record clearly reflects that the Buick was ordered towed before Bagley was taken into custody. Although the Bagley residence was under surveillance from the front of the house, Bagley could have exited through the rear door or windows
5
Prior to trial, Bagley moved to suppress all identification testimony. After an extensive hearing, the district court denied the motion. On appeal, Bagley concedes that the identification testimony of Officer Stolley was not tainted by the challenged procedures and thus was properly admitted into evidence | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1573617/ | RONALD L. CHAPMAN
v.
KATHERINE CARNEY, U.S. AGENCIES AND STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY DOCKET NUMBER 477,400, DIVISION J (25)
ROSA MAE CLARK CHAPMAN
v.
KATHERINE CARNEY, U.S. AGENCIES & STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY DOCKET NUMBER 477,401, DIVISION J (25)
No. 2009 CA 0216, Consolidated with No. 2009 CA 0217.
Court of Appeals of Louisiana, First Circuit.
August 31, 2009.
Not Designated for Publication
RONALD L. CHAPMAN, Sr., ROSA MAE CHAPMAN, In Proper Person-Plaintiffs/Appellants Ronald L. Chapman, Sr. & Rosa Mae Clark Chapman.
ALLEN J. MYLES, Attorney for Plaintiff/Appellant Ronald L. Chapman, Sr.
KAREN WIEDEMANN, Attorney for Intervenor-Appellee Weidemann & Weidemann.
BRET T. WALSH, Attorney for Defendants-Appellees Katherine Carney & U.S. Agencies Insurance Company.
GLEN SCOTT LOVE, Attorney for Defendant-Appellee State Farm Mutual Automobile Insurance Company (Ronald L. Chapman).
DARRELL J. LOUP, Attorney for Defendant-Appellee State Farm Mutual Automobile Insurance Company (Rosa Mae Clark Chapman).
Before: PETTIGREW, McDONALD, HUGHES, JJ.
McDONALD, J.
This matter arises from consolidated lawsuits with a long and tortured history. The basis for the lawsuits is an automobile accident that occurred on December 1, 1999, in which Rosa Chapman was driving and her husband, Ronald, was a passenger. In October 2000, separate lawsuits were filed against the driver of the other vehicle, {Catherine Carney, on behalf of Rosa Mae Clark Chapman and Ronald L. Chapman. These suits were eventually consolidated by order of the court signed by the judge accepting the consolidated cases on April 5, 2001.
Depositions of the persons involved in the accident, an investigating police officer, and witnesses were scheduled in early March 2001. Neither Rosa nor Ronald Chapman attended. Depositions of Rosa and Ronald Chapman were rescheduled on three occasions, totaling six depositions noticed between January and June 2001, none of which were attended by the plaintiffs. In November 2002, Ronald Chapman's original counsel moved to be withdrawn as attorney of record, advising the court that the law firm had been fired without cause.[1] In November 2002, an attorney enrolled as counsel of record for both Chapmans and subsequently withdrew in January 2003. In July 2003, Charles Rea enrolled as counsel for Rosa Chapman.
In August 2003, counsel for Ronald Chapman filed a first supplemental and amending petition naming Rosa Chapman as a defendant. The trial court subsequently sustained an objection raising the exception of prescription, which was reversed by a panel of this court,[2] and Ronald Chapman was allowed to maintain his action against the insurer of Rosa Chapman. A case management schedule, dated March 5, 2004, indicates discovery cutoff was set for August 6, 2004, and the pretrial order was due September 11, 2004.
In May 2006, Charles Rea submitted a motion to withdraw to the court that alleged that after investigating the accident, the Chapmans were advised that the independent eye witness to the accident indicated that Rosa Chapman caused the accident and that they should either drop Mrs. Chapman's claim or find another attorney. Stating, "[S]ince there is nothing that this office has done or can do to prosecute a claim on behalf of Mrs. Chapman," Rea moved to be relieved of any further responsibility for representing her, and be allowed to withdraw as counsel of record.
On October 30, 2006, a hearing was held on motions to set the matter for trial and to bifurcate the trial. The hearing was attended by Allen Myles on behalf of Ronald Chapman; Charles Rea did not attend. The trial court bifurcated the trial, gave Rosa Chapman 60 days to seek counsel, and ordered that the motion to set trial would be reset for early 2007, at which time all counsel of record would receive notice.
The record indicates that a status conference was held on February 27, 2007, attended by Charles Rea, as counsel for Rosa Chapman, at which time a trial was set for August 16, 2007. Allen Myles also attended, representing Ronald Chapman. Although the record does not confirm this, it is alleged in the joint appellee brief that Mrs. Chapman wrote to the judge on May 6, 2006, pleading to have Rea stay on as counsel of record. Further, it is alleged that Rea again submitted a motion to withdraw at the February conference, which the judge denied. A minute entry for the August trial date states that the matter came before the court for a civil bench trial, that none of the parties appeared, that the court was not notified of any disposition, and therefore the matter was dismissed.
According to briefs of both parties, a mediation conference was held on August 8, 2007. Charles Rea attended representing Rosa Chapman, and Allen Myles represented Ronald Chapman. The claims of all parties were settled at the conference. On February 6, 2008, counsel for all parties submitted a joint motion to dismiss with prejudice. The same day Ronald and Rosa Chapman filed a motion for a hearing not to dismiss with prejudice, which was denied. The trial court ordered the matter dismissed with prejudice on February 7, 2008. A motion for a new trial was filed, and denied on February 11, 2008. The minute entry indicates the motion for a new trial and order for the hearing was denied, and a copy of the denial order was mailed to all counsel of record. The Chapman brief alleges that Ronald Chapman called the clerk of court for East Baton Rouge and asked how to file an appeal and was told to write a motion for appeal. Ronald and Rosa Chapman filed a motion for appeal on October 27, 2008.
The Chapmans' appeal asserts that the court erred in granting the motion to dismiss; erred in allowing Charles Rea to sign representing Rosa Chapman; erred in denying plaintiffs' motion not to dismiss; erred in denying plaintiffs' motion for new trial; erred "in safe guarding plaintiffs legal rights;" and erred in sanctioning the biased August 8, 2007 mediation hearing.
The appellants argue that the Chapmans' appeal, filed over eight months after the denial of the motion for new trial, was untimely. On initial review, we agreed. Louisiana Code of Civil Procedure article 2087, as applicable here, provides that an appeal which does not suspend the effect or the execution of an appealable order or judgment may be taken within sixty days of the date of the mailing of the notice of the court's refusal to grant a timely application for a new trial or judgment notwithstanding the verdict. The notice of the denial of the motion for new trial filed by the Chapmans was mailed to all counsel on February 12, 2008. Sixty days from that date, the right to file an appeal was extinguished. October 27, 2008 is clearly well beyond the time that the law allows for a timely appeal. However, the record only evidences notice being mailed to counsel. The motion for a new trial at issue here was filed pro se by the Chapmans. It is apparent that the Chapmans were aware of the denial of the motion. When questioned at oral argument why they had waited so long after the denial of the motion to file an appeal, the response was that no one had advised them that they only had sixty days to file the appeal. However, the record does not provide evidence that the notice that started the sixty-day period had been mailed to the Chapmans, and in the interest of justice, we will consider the appeal as timely.
It is the Chapmans' position that Charles Rea "fired" them, and that he no longer represented them after May 9, 2006. On May 9, 2006, Judge Don Johnson signed the motion to withdraw submitted by Charles Rea. It is unclear when the parties became aware of this. It seems that the trial court was made aware of it at least by the October 30, 2006 hearing on the motions referenced previously. At that time, Judge Calloway, the judge to whom these lawsuits were assigned, gave Rosa Chapman sixty days to seek counsel.
Chapman asserts that irreparable legal and economic harm resulted from the trial court not "enforcing the order signed by Judge Don Johnson on May 9, 2006 for Mr. Rea." We recognize that the Chapmans are not attorneys and have considered the appeal based on the merits of the substance of their complaint, making allowances for their lack of technical and procedural expertise. It is their position that once Charles Rea "fired" them, he could no longer represent them. However, once enrolled as counsel, an attorney may not be relieved of responsibility to the party he undertook to represent, or to the court, without permission of the court. A trial court has inherent power to take whatever reasonable actions are necessary to maintain control of its docket. Wallace v. PFG, 04-1080 (La. App. 1st Cir. 5/6/05), 916 So.2d 175, 178.
The lawsuits that form the basis for this action were filed in October 2000. In August 2006, a joint motion to set the matter for trial was filed. Trial courts are under a duty to schedule their trial work and dispose of same expeditiously to alleviate the continuous problem of crowded dockets. At Your Service Enterprises, Inc. v. Swope, 07-1620 (La. App. 4th Cir. 1/14/09), 4 So.3d 138, 146 n.16. Although Judge Calloway had not relieved Charles Rea of his responsibility in this matter, he allowed Rosa Chapman sixty days to seek counsel, requiring all parties, who are also entitled to fairness and justice from the court, to hold the matter in abeyance for that time.
When the matter was next addressed by the trial court, at the February 27, 2007, status conference when the trial date was set, Charles Rea attended as counsel for Rosa Chapman. It has been suggested that he re-urged his motion to withdraw and that Judge Calloway denied it. Regardless, the fact remains that on February 27, 2007, when he attended the status conference and signed the case management schedule on behalf of Rosa Chapman, Charles Rea was Rosa Chapman's counsel of record. Apparently, Mrs. Chapman had not retained other counsel within the time allowed by the court for her to do so. The trial judge is afforded wide discretion in the maintenance of his docket and any decision pertaining thereto will not be overturned absent a showing of breach of that discretion. Dufrene v. Doctor's Hosp. of Jefferson, Inc., 02-654 (La. App. 5th Cir. 12/11/02), 836 So.2d 309, 311. We find no error in the trial court's refusal to allow Charles Rea to withdraw as counsel.
The Chapmans allege error by the trial court in granting the appellants' motion to dismiss and denying their motion "not to dismiss." It seems that the Chapmans were aware that the motion to dismiss had been or was being filed. Their pleading, therefore, should have been an opposition to the filed motion. We consider whether it was error for the trial court to grant the motion to dismiss filed by all counsel representing all parties in this matter.
The trial court had been assigned this matter in October 2000. In the course of seven years, numerous issues had been addressed and adjudicated by the trial court. This is not a matter that had languished with no action being taken, in which it could be argued that the trial court was not familiar with the parties or the issues. In fact, the trial court had orally dismissed the matter in August 2007, when no action was taken on the trial date; however, no written judgment of dismissal was signed.
At the time the motion to dismiss was filed in February 2008, all counsel representing all parties represented to the court that the matter had been settled. There is no doubt that the Chapmans were aware that Charles Rea attended the mediation/settlement conference on August 8, 2007, representing Rosa Chapman; Ronald Chapman was there. The Chapmans also complain to us and have filed a complaint with the Office of Disciplinary Council against Charles Rea regarding the fees charged. This is not a matter that we have the authority to adjudicate. However, it causes us to question exactly when and why Rosa Chapman decided to seek to have Charles Rea removed as counsel.
The pleadings filed by the Chapmans, the motion not to dismiss and the motion for a new trial, presented the issues raised here to the trial judge. He denied both motions filed by the Chapmans. In order to do so, he made factual findings that are subject to review under the clearly wrong/manifest error standard. The two-part test for the appellate review of a factual finding is: 1) whether there is a reasonable factual basis in the record for the finding of the trial court, and 2) whether the record further establishes that the finding is not manifestly erroneous. Pierce v. State, Office of Legislative Auditor, 07-0230 (La. App. 1st Cir. 2/8/08), 984 So.2d 61, 67. Thus, if there is no reasonable factual basis in the record for the trial court's finding, no additional inquiry is necessary. However, if a reasonable factual basis exists, an appellate court may set aside a trial court's factual finding only if, after reviewing the record in its entirety, it determines the trial court's finding was clearly wrong. Id. With regard to questions of law, the appellate review is simply a review of whether the trial court was legally correct or legally incorrect. Id.
After careful review of the entire record in this matter, we find no reversible error by the trial court. Therefore, the judgment of dismissal ordered by the trial court on February 7, 2008, and the denial of the motions of February 6, 2008, and February 11, 2008, are affirmed. Costs are assessed to Ronald and Rosa Chapman.
AFFIRMED.
NOTES
[1] A member of the law firm also represented Rosa Chapman. Although no motion to withdraw as attorney for Rosa was found in the record, it appears that counsel for both parties was replaced.
[2] Chapman v. Carney, XXXX-XXXX (La. App. 1st Cir. 5/6/05), unpublished, writ denied, XXXX-XXXX (La. 1/27/06), 922 So.2d 551. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/497991/ | 833 F.2d 1352
9 Fed.R.Serv.3d 979, 24 Fed. R. Evid. Serv. 242
Anthony P. LOCRICCHIO, Plaintiff-Appellee/Cross-Appellant,v.LEGAL SERVICES CORP., et al., Defendants-Appellants/Cross-Appellees.
Nos. 86-2042, 86-2066.
United States Court of Appeals,Ninth Circuit.
Argued and Submitted July 17, 1987.Decided Dec. 9, 1987.
Jeremiah J. Kenney, Pamela Hobbs, Kitch, Saurbier, Drutchas, Wagner & Kenney, P.C., Detroit, Mich., for plaintiff-appellee/cross-appellant.
Lawrence R. White, Las Cruces, N.M., for defendants-appellants/cross-appellees.
Appeal from the United States District Court for the District of Hawaii.
Before KOELSCH, SNEED and TANG, Circuit Judges.
SNEED, Circuit Judge:
1
Anthony P. Locricchio sued the Legal Services Corporation (LSC) and certain of its employees, alleging interference with contract, defamation, interference with prospective contract, and intentional infliction of emotional distress. A jury awarded Locricchio $537,500. The district court granted judgment notwithstanding the verdict (JNOV) as to interference with prospective contract and accordingly reduced the award to $337,500. The district court also awarded Locricchio post-judgment interest. The litigants appeal and cross-appeal from virtually every aspect of the final judgment. We affirm in all respects.I.
FACTS AND PROCEEDINGS BELOW
2
From July 1, 1974 until September 23, 1978, Locricchio was the Executive Director of the Legal Aid Society of Hawaii (LASH). At the time he was terminated, Locricchio had an employment contract that ran until July 1, 1980 and could be terminated only for cause. LASH is a Hawaii non-profit corporation organized to provide legal counsel to the indigent. It receives 5% of its funds from private contributions, 45% from the Hawaii State Legislature, and 50% from LSC. LSC is a District of Columbia non-profit corporation. Jurisdiction is based on diversity.
3
This dispute has its origin in disagreements that arose between Locricchio and LASH staff in January 1978. It appeared that some LASH employees and perhaps Locricchio were misappropriating funds. Locricchio criticized LASH attorneys for their small caseloads. Fifty attorneys and staff employees of LASH signed a petition asking Locricchio to resign. Locricchio fired five attorneys. The Board of Directors of LASH placed Locricchio on administrative leave with full pay and benefits.
4
The Board organized hearings to review the charges against Locricchio. Meanwhile, LSC undertook its own investigation. It hired the accounting firm of Price Waterhouse to investigate charges of financial wrongdoing. Price Waterhouse prepared a report that, among other things, described the charges against Locricchio without saying whether they were true or false.
5
The Board's hearings began on March 21, 1978. A former Hawaii Supreme Court justice was the hearing officer. Locricchio and his lawyer stopped attending the hearings before the staff presented all of its charges against Locricchio. Shortly thereafter, a car struck and injured the hearing officer. The hearings were postponed while he recuperated. They resumed on August 14, but Locricchio did not attend. His lawyer moved for a continuance, which was denied. The hearing ended without Locricchio's having presented his case.1
6
Before the hearings ended, Charles Jones, then director of LSC's Office of Field Services, sent a telegram dated July 19 to the Board of LASH. The telegram described the history of financial mismanagement at LASH and referred to the Price Waterhouse report. It demanded that Locricchio and others be removed as a condition of further funding.
7
On September 5, the hearing officer issued his findings of fact. They described the relationship between Locricchio and his staff as "irretrievably broken" and criticized Locricchio for poor management and fiscal abuses. On September 23, the Board voted unanimously to terminate Locricchio's employment contract.
8
Locricchio filed this lawsuit against LSC on August 6, 1980. Its progress was languid. Not until April 12, 1983 did Locricchio file interrogatories and a request for documents. LSC for its part did not answer the interrogatories despite repeated requests. The district court imposed sanctions limiting LSC's discovery. E.R. at 55-56. LSC moved for summary judgment on August 8, 1985. The court denied the motion on November 15. After trial, the jury awarded Locricchio $537,500: $87,500 for interference with contract, $200,000 for interference with prospective contract, $150,000 for defamation, and $100,000 in punitive damages. The court granted JNOV with respect to the interference with prospective contract claim, approved the rest of the award, and granted Locricchio post-judgment interest. LSC appealed, and Locricchio cross-appealed, from those aspects of the judgment adverse to each. We affirm in all respects.
II.
PARTIAL GRANT AND PARTIAL DENIAL OF JNOV
A. Standard of Review
9
LSC challenges the trial court's denial of its motion for JNOV as to the defamation and interference with contract claims.2 Locricchio, in turn, objects to the trial court's grant of LSC's motion for JNOV on his interference with prospective advantage claim. We determine the propriety of a JNOV under the same standard as that employed by the district court: whether the evidence, viewed in the light most favorable to the non-moving party, permits only one reasonable conclusion with respect to the verdict. Peterson v. Kennedy, 771 F.2d 1244, 1252 (9th Cir.1985), cert. denied, 475 U.S. 1122, 106 S.Ct. 1642, 90 L.Ed.2d 187 (1986). In reviewing the grant or denial of a motion for JNOV, we do not account for witness credibility, weigh evidence, or reach a different result simply because we feel it is more reasonable. Rinker v. County of Napa, 820 F.2d 295, 297 (9th Cir.1987).
10
B. LSC Challenge: Denial of JNOV with Respect to Interference with Contract Claim
11
LSC maintains that its conduct was justified and privileged. Its governing regulations do not support this. LSC is charged with attempting to achieve compliance with the Legal Services Corporation Act first "through informal consultation with the recipient [LASH]." 45 C.F.R. Sec. 1618.5(a) (1986). When LSC determines that a recipient has failed to comply with the Act to such an extent that it warrants a suspension of funding, LSC must serve a written preliminary determination of funding suspension upon the recipient with notice that the recipient can request an informal meeting to dispute the proposed suspension. 45 C.F.R. Sec. 1623.4 (1986). The July 19 telegram ordered LASH to fire Locricchio or risk losing LSC funding. This command was not an attempt at informal consultation, nor was it a preliminary determination of funding suspension. It was an ultimatum. We agree with the jury that LSC acted beyond the scope of its governing regulations in demanding Locricchio's discharge.
12
LSC insists that Locricchio must prove that a majority of the LASH board members were influenced by LSC in their decision to fire Locricchio. It relies on Hawaii's rule that an agency's decision is not vitiated by the vote of a member having an improper interest if the qualified majority of votes would have reached the same result. Waikiki Resort Hotel, Inc. v. City & County of Honolulu, 63 Haw. 222, 248-49, 624 P.2d 1353, 1371-72 (1981). However, this rule pertains to statutory disqualification, which is not an issue in this case. The rule is no authority for second-guessing the jury's determination that LSC influenced the LASH board's decision.
13
Finally, LSC objects to Simon Rosenthal's testimony that LSC did not follow proper procedures in demanding that Locricchio be fired. The grounds for LSC's objection to the Rosenthal testimony are unclear from its brief. Nevertheless, the trial court did not abuse its discretion by permitting Rosenthal to testify about LSC procedures. See Taylor v. Burlington N.R.R., 787 F.2d 1309, 1315-16 (9th Cir.1986). Rosenthal was testifying from his years of experience with LSC. Reporter's Transcript (R.T.), vol. 10, at 57-68. The jury could appropriately weigh his testimony. Therefore, we affirm the trial court's denial of JNOV on this claim.
14
C. LSC Challenge: Denial of JNOV with Respect to Defamation Claim
15
LSC also contends it was surprised by much of the defamation testimony because it did not conform to the pretrial statement. We will not reverse a trial court's decision to admit evidence absent an abuse of discretion and some showing of prejudice. Kisor v. Johns-Manville Corp., 783 F.2d 1337, 1340 (9th Cir.1986). LSC did not suggest, far less show, how it was prejudiced.
16
LSC doubts whether a reasonable jury could find actual malice on the part of LSC employees who defamed Locricchio. Actual malice may be inferred. Beamer v. Nishiki, 66 Haw. 572, 586-87, 670 P.2d 1264, 1275 (1983). Our review of the trial record convinces us that there is ample evidence to support such an inference in this case.
17
D. Locricchio Challenge: Grant of JNOV on the Interference with Prospective Advantage Claim
18
The trial court granted JNOV on the prospective advantage claim at the behest of LSC because Locricchio failed to show that LSC acted with the necessary intent to interfere with any specific prospective economic relationship. E.R. at 884. We agree. Even viewing the evidence and reasonable inferences drawn therefrom in the light most favorable to Locricchio, he did not sustain his burden of proving the necessary elements of tortious interference with prospective advantage.
19
The elements are: (1) the existence of an economic relationship between the plaintiff and a third party that has the probability of ripening into a future economic benefit to the plaintiff; (2) knowledge by the defendant of the existence of the relationship; (3) intentional acts by the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages proximately caused by the defendant's acts. Buckaloo v. Johnson, 14 Cal.3d 815, 827, 122 Cal.Rptr. 745, 752, 537 P.2d 865, 872 (1975).
20
There are no cases to guide us in determining the extent of proof necessary to prevail on this claim under Hawaii law. The general trend of Hawaiian courts is to look to California law in the absence of Hawaiian authority. In re Pago Pago Aircrash, 525 F.Supp. 1007, 1021 (C.D.Cal.1981). In our past decisions based on California law we have held that there must be "a 'colorable economic relationship' between the plaintiff and a third party with 'the potential to develop into a full contractual relationship.' " Aydin Corp. v. Loral Corp., 718 F.2d 897, 904 (9th Cir.1983) (quoting Buckaloo v. Johnson, 14 Cal.3d 815, 828-29, 122 Cal.Rptr. 745, 753, 537 P.2d 865, 873 (1975)). The prospective economic relationship need not take the form of an offer, but there must be specific facts proving the possibility of future association. Id.
21
This level of specificity was not met in the evidence Locricchio adduced at trial. Locricchio presented testimony that LSC told employers in the legal services community that their funding would be imperiled if they hired Locricchio. However, he failed to show any specific potential relationship with these employers that would have inured to his economic benefit but for LSC's wrongful interference. Danette Layford testified that Locricchio was ousted from some affiliation with a local legal services board because of LSC's threats to withdraw its funding. R.T., vol. 12, at 49-50. Nonetheless, Locricchio did not show how this operated to his economic detriment. Simon Rosenthal testified that the National Legal Aid and Defender's Association briefly considered Locricchio for a position but then declined to consider him further due to his alleged improprieties while at LASH. R.T., vol. 10, at 120-22. However, Locricchio offered no evidence to prove that LSC was aware of this potential relationship or acted to impede it. While Locricchio amply showed that LSC's action in firing him hindered his ability to obtain gainful employment elsewhere, he failed to prove that this inability was a direct result of LSC's wrongful interference with his employment endeavors.
22
Locricchio cites several California cases for the proposition that the specific prospective economic relationship requirement be interpreted broadly. See Blatty v. New York Times Co., 175 Cal.App.3d 571, 184 Cal.App.3d 1144, 221 Cal.Rptr. 236 (1985), rev'd on other grounds, 42 Cal.3d 1033, 232 Cal.Rptr. 542, 728 P.2d 1177 (1986) (relationship between author and prospective purchasers of listed bestsellers suffices); Gold v. Los Angeles Democratic League, 49 Cal.App.3d 365, 122 Cal.Rptr. 732 (1975) (relationship between candidate and voters who might vote for him suffices); Greenberg v. Hollywood Turf Club, 7 Cal.App.3d 968, 86 Cal.Rptr. 885 (1970) (relationship between employee and prospective employers in a partially monopolized business suffices). These cases involved the sufficiency of complaints, not the sufficiency of proof. More importantly, each of these cases involved a specific economic advantage which was denied to the plaintiff by the defendant's wrongful action. All that Locricchio has shown is that he was not able to obtain any job because of his bad reputation which was fostered by LSC's wrongful action.
23
Locricchio's damages in this claim are more accurately redressed under his defamation action. On that claim he was compensated for the damage to his reputation caused by LSC. To the extent that LSC acted egregiously in making general threats to withdraw funding from legal services operations that employed Locricchio, the jury's punitive damages award of $100,000 is compensation.
24
The trial court noted that Locricchio had not proven that LSC acted with the necessary motive required for a finding of tortious interference. R.T., vol. 18, at 55. We have held that tortious interference requires a state of mind or motive more culpable than mere intent. DeVoto v. Pacific Fidelity Life Ins., 618 F.2d 1340, 1347 (9th Cir.), cert. denied, 449 U.S. 869, 101 S.Ct. 206, 66 L.Ed.2d 89 (1980). Since we hold now that Locricchio failed to show any specific potential relationship with which LSC interfered, there is no need to approach the more difficult issue of assessing LSC's motive. We affirm the trial court's grant of JNOV on the interference with prospective advantage claim.
III.
DENIAL OF LSC'S MOTION FOR SUMMARY JUDGMENT
25
LSC asks this court to review the district court's denial of its motion for summary judgment. Immediately we confront the issue whether a denial of a motion for summary judgment is appealable following a jury verdict adverse to the mover. It is clear that a denial alone may not be immediately appealed under 28 U.S.C. Sec. 1292(a)(1). Switzerland Cheese Ass'n, Inc. v. E. Horne's Mkt., Inc., 385 U.S. 23, 25, 87 S.Ct. 193, 195, 17 L.Ed.2d 23 (1966). Also, the majority rule appears to be that the denial is not properly reviewable on an appeal from the final judgment entered after trial.3 This position was recently adopted by the Federal Circuit in Glaros v. H.H. Robertson Co., 797 F.2d 1564 (Fed.Cir.1986), cert. dismissed, --- U.S. ----, 107 S.Ct. 1262, 94 L.Ed.2d 194 (1987). The Glaros court reasoned that "[b]ecause the denial decided nothing but a need for trial and trial has occurred, the general and better view is against review of summary judgment denials on appeal from a final judgment entered after trial." Id. at 1573 n. 14. We agree.
26
To be sure, the party moving for summary judgment suffers an injustice if his motion is improperly denied. This is true even if the jury decides in his favor. The injustice arguably is greater when the verdict goes against him. However, we believe it would be even more unjust to deprive a party of a jury verdict after the evidence was fully presented, on the basis of an appellate court's review of whether the pleadings and affidavits at the time of the summary judgment motion demonstrated the need for a trial. After considerable research, we have found no case in which a jury verdict was overturned because summary judgment had been improperly denied. We hold, therefore, that the denial of a motion for summary judgment is not reviewable on an appeal from a final judgment entered after a full trial on the merits.4
IV.
DENIAL OF MOTION FOR NEW TRIAL
27
LSC challenges the trial court's denial of its motion for new trial which we review for an abuse of discretion. Robins v. Harum, 773 F.2d 1004, 1006 (9th Cir.1985). LSC moved for a new trial first, on the ground that Locricchio introduced testimony that did not conform to his pre-trial statement. The testimony was relevant to the issues raised in the pleadings, so the trial court was within its discretion in admitting it. Besides, LSC did not demonstrate prejudice.5
28
Second, LSC contests the evidentiary basis for the jury's award. We will not set aside the jury verdict unless, viewing the evidence in the light most favorable to that verdict, we can say that the court in denying the motion for a new trial abused its discretion. Hard v. Burlington N.R.R., 812 F.2d 482, 486 (9th Cir.1987). We find the jury verdict supported by sufficient evidence.6
V.
EXCLUSION OF EVIDENCE
29
Locricchio objects to the trial court's decision to exclude evidence tending to show that LSC publicized the fact that his minor daughter had been a rape victim. We review a decision to exclude evidence under Fed.R.Evid. 403 for a clear abuse of discretion. Coursen v. A.H. Robins Co., 764 F.2d 1329, 1333 (9th Cir.1985). Locricchio contends that this ruling prejudiced him with respect to his claim for intentional infliction of emotional distress, on which he did not recover. The trial court noted LSC's alleged conduct had little to do with the original premise of the lawsuit. E.R. at 13. It excluded the evidence on the grounds that it would confuse the issues and unfairly prejudice LSC. Fed.R.Evid. 403. We find that the trial court exercised its discretion soundly in excluding this inflammatory evidence.
VI.
30
DENIAL OF PREJUDGMENT INTEREST AND ATTORNEYS' FEES
A. Prejudgment Interest
31
Hawaii law gives the trial court discretion to designate the date for commencement of interest. Haw.Rev.Stat. Sec. 636-16 (1985). Therefore, we will reverse only for an abuse of discretion. See Columbia Brick Works, Inc. v. Royal Ins. Co. of Am., 768 F.2d 1066, 1068 (1985). In its denial of prejudgment interest, the trial court noted that it was Locricchio's dilatoriness that accounted for much of the delay in rendering judgment. Locricchio countered with a request for interest commencing April 12, 1983--the date he filed his first interrogatories. It was within the discretion of the trial court to reject this compromise and to award interest commencing on the date of judgment.
B. Attorneys' Fees
32
Hawaii follows the traditional American rule that attorneys' fees are not recoverable. Rosa v. Johnston, 3 Haw.App. 420, 430, 651 P.2d 1228, 1236 (1982). Locricchio argues that the court ought nevertheless to have awarded attorneys' fees because LSC acted in bad faith. See Hall v. Cole, 412 U.S. 1, 5, 93 S.Ct. 1943, 1946, 36 L.Ed.2d 702 (1973). We review for clear error the trial court's finding that LSC's conduct did not meet the bad faith standard. Beaudry Motor Co. v. Abko Properties, Inc., 780 F.2d 751, 756 (9th Cir.), cert. denied, --- U.S. ----, 107 S.Ct. 100, 93 L.Ed.2d 51 (1986).
33
The trial court's finding that LSC did not act in bad faith is based on a review of the five-year history of this litigation. We find the court's holdings and rulings in this regard highly persuasive. Therefore, we affirm the trial court's denial of prejudgment interest and attorneys' fees.
34
AFFIRMED.
1
The parties disagree about why Locricchio did not participate more fully in the hearings. Locricchio and his lawyer originally walked out after declaring that the hearings were a sham. Excerpt of Record (E.R.) at 200-04. However, Locricchio might have wished not to jeopardize the suit that he had brought against LASH in state court by revealing his case at the hearings. Locricchio left for Europe with his family on July 8, while the hearing officer recuperated. Locricchio received notice that the hearings would resume on August 14. He did not appear. Locricchio says that Charles Jones, an officer of LSC, summoned him to a meeting in Washington, D.C. on August 14 and assured him that the hearings would not proceed. E.R. at 30. The hearing officer believed that LASH had not authorized him to grant Locricchio a continuance
2
LSC also challenges the trial court's denial of directed verdict on these claims. An appeal does not lie from a denial of a motion for directed verdict. May v. Watt, 822 F.2d 896, 899 n. 1 (9th Cir.1987). In any event, our analysis of the denial of JNOV disposes of LSC's claim that a directed verdict was improperly denied. See Peterson v. Kennedy, 771 F.2d 1244, 1256 (9th Cir.1985), cert. denied, 475 U.S. 1122, 106 S.Ct. 1642, 90 L.Ed.2d 187 (1986) (substantive analysis for directed verdict and JNOV are the same)
3
See Annotation, Reviewability of Federal Court's Denial of Motion for Summary Judgment, 17 L.Ed.2d 886, 893-94 (1967); Annotation, Reviewability of Order Denying Motion for Summary Judgment, 15 A.L.R.3d 899, 922-25 (1967). But see 10 C. Wright, A. Miller, & M. Kane, Federal Practice & Procedure Sec. 2715 n. 25 (1983). There is one Ninth Circuit case that seems to condone the propriety of reviewing a summary judgment denial. See Hilton v. Mumaw, 522 F.2d 588, 603 (9th Cir.1975). However, in Hilton judgment was entered on a directed verdict, and thus the spectre of overturning a jury verdict based on an improper denial of summary judgment was not presented. Moreover, the panel failed to specifically address the reviewability question. Hilton, therefore, has no application to the facts of this case
4
In any event, were we to consider this point on the merits, we would have no difficulty concluding that the district court's denial of LSC's motion for summary judgment was proper
5
In its denial of the motion for new trial, the trial court noted that LSC could not show real prejudice from the alleged "surprise" evidence because the person who made the defamatory statements did not unqualifiedly deny making them. Hence, any continuance or rebuttal witnesses that LSC may have mustered to counter this testimony could never overcome the fact that the speaker did not deny making the defamatory statements. R.T., vol. 18, at 58-59
6
LSC also argues that it should be able to offset certain payments made by LASH to Locricchio to settle a state court action arising out of Locricchio's interference with contract action against LASH. However, it appears from the record that the settlement between LASH and Locricchio involved several claims and that the settlement amount was not broken down into a specific dollar figure given on each underlying claim. Therefore, we are not in a position to evaluate the merits of this offset issue. The only authority cited by LSC is Restatement (Second) of Torts Sec. 774A, which states that damages paid by a third party on an interference with contract claim will reduce the total damages actually recoverable in a later judgment for the plaintiff on that claim. The other pertinent provisions of Restatement Sec. 774A state, however, that damages are recoverable in excess of mere compensation for the breach of contract and can go to consequential losses and emotional distress. Restatement (Second) of Torts Sec. 774A(1) (1977); see also Duff v. Engelberg, 237 Cal.App.2d 505, 47 Cal.Rptr. 114 (1965) (plaintiff sued seller who had unlawfully rescinded contract for sale of real property and received specific performance; plaintiff then sued neighbors who had induced seller to breach and recovered monetary damages). Here, we are convinced that Locricchio did not make a windfall in double-recovery by our refusal to consider an offset | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1917963/ | 101 B.R. 961 (1988)
In re Donald Joseph GUY, Debtor.
Gene A. LEEB, Ronald J. George, Maureen McClinchy Wagner & Robert W. Bales, Plaintiffs,
v.
Donald Joseph GUY, Defendant.
Bankruptcy No. 85-60236, Adv. No. 85-6050.
United States Bankruptcy Court, N.D. Indiana, Hammond Division, at Gary/Lafayette.
April 28, 1988.
*962 *963 *964 *965 *966 *967 R. Cordell Funk, Hammond, Ind., for plaintiff.
Charles Enslen, Highland, Ind., for defendant.
MEMORANDUM OPINION AND ORDER
KENT LINDQUIST, Chief Judge.
I
Statement of Proceedings
The Plaintiffs filed their nondischargeability complaint versus the Defendant, Donald Joseph Guy (hereinafter: "Debtor") under the above-captioned adversary proceeding number on June 14, 1985 alleging that a certain indebtedness to them by the Debtor is nondischargeable pursuant to 11 U.S.C. § 523(a)(2), (4) and (6).
The basis for the Plaintiffs' assertion of nondischargeability is a certain judgment entered in favor of the Plaintiffs versus the Defendant in the United States District Court for the Northern District of Indiana, Hammond Division on November 19, 1984, under Cause No. 80-220 in the sum of $46,106.87. This action was fully tried on the merits. The damages awarded in said judgment were broken down as follows: 1) $20,369.39 for the remaining principal amount due on contracts sued upon; 2) $17,737.48 in prejudgment interest for a total of $38,106.87 in compensatory damages; and, 3) $8,000.00 in punitive damages. A copy of said judgment is attached to Plaintiffs' complaint as Exhibit "A" and a copy of the court order on which said judgment is based is attached as Exhibit "B". The Debtor filed answer on June 24, 1985, and admitted rhetorical paragraph one of the Plaintiffs' complaint that said judgment had been entered (Exhibit "A") and the first sentence of rhetorical paragraph two relating to the entry of the *968 findings and order concerning said judgment (Exhibit "B").
The District Court specifically found in its judgment of November 20, 1984, that the Plaintiffs had established by clear and convincing evidence the existence of tortious misconduct and thus formed the basis for the award of $8,000.00 in punitive damages.
The Court's Order of November 19, 1984 upon which said judgment was rendered, made the following findings of fact:
Findings of Fact
The parties stipulated to the following findings of fact:
1) On June 1, 1978, the parties entered into a written agreement wherein the four plaintiffs were individual investors, and the defendant was a security analyst who was given almost unlimited authority to invest funds supplied by plaintiffs.
2) Each plaintiff signed a separate written contract with the defendant entitled "Sussex Vampire Fund Agreement of Limited Partnership". The purpose of the partnership was the buying and selling of commodity futures contracts.
3) The four written contracts, all of which were identical, established the rules the plaintiff-investors and the defendant-investor would follow in this venture. The defendant, Donald J. Guy, drafted the contract and had used similar contracts in similar ventures in the past.
4) Initially, Leeb, et al., gave Guy $60,000.00 for one hundred twenty (120) shares in the limited partnership, equalling $500.00 per share. Guy was to invest this amount in the futures market, until the fund dropped below $30,000.00 at which time the unused funds were to be returned.
5) Plaintiffs made the following investments:
(a) Leeb $25,000 50 shares 06-01-78
(b) George $25,000 50 shares 06-01-78
(c) McClinchy $25,000 10 shares 06-01-78
(d) Bales $ 5,000 10 shares 05-11-78
(e) McClinchy $ 5,800 10 shares 10-01-78
6) On October 1, 1978, Guy induced Maureen McClinchy to invest an additional $5,800.00 for ten (10) shares. McClinchy was led to believe the shares were worth $580.00 per share at that time based upon representations from Guy, when in fact the shares were worth only $254.00. These additional monies increased the initial investments of Leeb, et al., to $65,800.00.
7) The agreement entered into between Leeb, et al., and Guy, required the following:
a. Each month the General Partner will issue a report to the Limited Partners of the "net asset value" of each limited partnership unit as of the end of the month. (Paragraph 6.2 of the contract).
b. The General Partner shall deliver to each Limited Partner within (sixty) 60 days after December 31 of each year a statement of receipts and expenses together with a statement showing the profits and losses of fund for federal income tax purposes. (Article IV of the contract).
c. Upon dissolution and failure to reconstitute, accounting shall be made of the financial affairs of the Partnership. Thereupon, the General Partner . . . shall act as liquidating Trustee and immediately proceed to wind up and terminate the business and affairs of the Partnership. (Paragraph 5.2 of the contract).
d. Upon the reduction from the initial value of $500.00 per share to $250.00 per share (Net Asset Value), the Partnership shall immediately be dissolved. (Paragraph 5.1 of the contract).
e. A Limited Partner shall be entitled to return of his contribution upon dissolution of the partnership. (Paragraph 3.4 of the contract).
8) Guy was designated the General Partner, and made only one written report to Leeb, et al. The report was issued July 3, 1978.
9) Guy made misleading oral reports to the plaintiffs, upon which they relied to their detriment.
10) Guy failed to timely transmit tax information, as required pursuant to contract.
*969 11) When the value of the fund dropped below the one-half mark on December 26, 1978, instead of liquidating the fund pursuant to agreed upon contract terms, Guy knowingly reinvested the monies without authority from Leeb, et al., and without attempting to advise Leeb, et al. of his intent to reinvest. Guy knew the value of each share was below $250.00 at the time of reinvestment.
12) On February 7, 1979, Guy liquidated the fund and realized approximately $111.00 per share, or a total of $13,630.61. Guy did not inform Leeb, et al., of the liquidation.
13) At the inception of the venture, each share was worth $500.00, and pursuant to contract, Guy was required to liquidate when the value per share fell to $250.00.
14) On April 8, 1979, pursuant to a letter, Gene A. Leeb and Ronald J. George demanded to examine the partnership records.
15) On July 13, 1979, pursuant to letter, Guy was informed that Leeb, et al., retained counsel to represent them. At that time Leeb, et al., demanded an opportunity to inspect the books, requested a statement of receipts and expenses, and demanded that Guy submit to binding arbitration to determine the amount of money due.
16) On August 23, 1979, Guy was advised, pursuant to letter, that Leeb, et al., elected to rescind their purchase of units in the limited partnership and to demand an immediate refund of the entire purchase price.
17) Guy withheld the funds realized, despite repeated demands, in a separate, non-interest bearing account until March 16, 1981, when he delivered to Leeb, et al., the sum of $12,130.61.
18) On March 25, 1979, Guy delivered to Leeb, et al., a notice that the partnership was in the process of being closed out and that final audit and report on final position, plus a check, would be forthcoming.
19) Thereafter, Guy refused to return the monies realized unless Leeb, et al., would agree to sign a release. This withholding of funds was an attempt to force settlement. When this attempt failed, Guy delivered $12,130.61 to Leeb, et al., on March 16, 1981.
20) Guy converted a portion of the $13,620.61 realized upon liquidation, in that he utilized $1,500.00 of those funds to pay an attorney to defend the action initiated by Leeb, et al. against him. This use of partnership funds was in violation of the terms of the agreement entered June 1, 1978, between Leeb, et al., and Guy. [Article II Sections 2.1 and 2.2].
21) Guy also converted the following monies from the fund in that he received money from the checking account of the Sussex Vampire Fund without authority and for his own personal use:
(a) $1,000.00 on 6-07-78
(b) $133.78 on 7-01-78
(c) $1,200.00 on 8-27-78
22) Guy also converted to his own benefit $4,000.00 on October 20, 1978, from the Sussex Vampire Fund. Specifically, he withdrew that money from the Sussex Vampire fund and Paid it to another fund to which none of the plaintiffs contributed nor from which they would gain any benefit.
23) Guy withdrew a total of $7,883.78 from the Sussex Vampire Fund between June of 1978 and October of 1978 without the consent of Leeb, et al., contrary to the partnership agreement and for his own personal benefit.
24) Pursuant to contract, Leeb, et al. were entitled to $32,500.00 on December 26, 1978. That figure was reached in multiplying the number of shares (130) by their net worth on that date ($250.00). On February 7, 1979, the fund was liquidated and approximately $111.00 per share was realized, totaling $13,630.61. On March 16, 1981, $12,130.61 was delivered to Leeb, et al. leaving $20,369.39 due.
25) Leeb, et al. lost 12 percent interest on funds they did not receive.
The District Court in its "Memorandum" following the above finding of facts noted that the parties had stipulated that the *970 $32,500.00 was due the Plaintiffs by the Debtor on or about January 1, 1979, that a demand for payment was made, and that on or about March 1, 1981, the Debtor paid $12,130.61 to the Plaintiffs on or about March 1, 1981.
The initial question addressed by the District Court was whether the Plaintiffs were entitled to pre-judgment interest pursuant to Indiana law on the principal sum due. The Court held that pre-judgment interest at the rate of 12% per annum was recoverable pursuant to Indiana Code 24-4.6-1-101 on the grounds that the parties had so stipulated to that rate and the damages were clearly "ascertainable" by the Court relying on relevant Indiana case law as set out therein. (pp. 5-9 of the Court's order of November 19, 1984; Exhibit "B" to Plaintiffs' complaint).
The District Court next addressed the issue of whether the Plaintiffs' request that the Court assess punitive damages should be allowed (pp. 9-14 of the Court's order of November 19, 1984; Exhibit "B" to Plaintiffs' complaint).
The Court discussed in detail that in proper circumstances, Indiana case law allows punitive damages to be awarded in breach of contract cases. The Court held as follows:
It is, . . . clear under Indiana law that in the proper circumstances punitive damages may be awarded on a tort theory in a breach of contract case. Photovest Corp. v. Fotomat Corp., 606 F.2d 704 (7th Cir.1979). The law which governs the award of punitive damages in contract actions was definitely set out by the Indiana Supreme Court in Vernon Fire & Casualty Ins. Co. v. Sharp, [264 Ind. 599] 349 N.E.2d 173 (Ind.1976). Therein the court recognized an exception to the general rule that punitive damages are not recoverable in contract actions. The Court restricted this exception to those instances in which the evidence: (1) independently establishes the elements of a common law tort, or (2) shows that a serious wrong, tortious in nature, has been committed in an instance in which the public interest would be served by the deterrent effect punitive damages would have upon the future conduct of the wrongdoer and parties similarly situated. Id. 349 N.E.2d at 180.
However, courts have long recognized that a good faith dispute as to what a contract requires will never supply the grounds for punitive damages. First Federal Savings and Loan Assoc. of Indianapolis v. Mudgett, 397 N.E.2d 1002 (Ind.App.1979). In discussing the differences between those contract actions in which punitive damages are appropriate and those in which they are not, the Court in First Federal stated:
. . . the legitimate exercise of the "right to disagree" may directly result in intentional infliction of temporal damage; but that the infliction of such damage is generally regarded as privileged, Vernon, supra. Courts must be careful not to discourage honest litigation by allowing punitive damages against a party who is merely exercising his right to adjudicate an honest dispute even if he is found to be in error and even if his litigation injures the other party. 8 Ind.Law Review 668, supra. In Vernon, supra, we also stressed that a promisor's motive for breaching his contract is generally irrelevant and that even a breach indicating substandard business conduct does not entitle the promisee to mulct the promisor in punitive damages.
On the other hand, as Judges Buchanan and Garrard have emphasized, punitive damages are appropriate where there is evidence of an independent tort of a `reprehensible' nature, where the record indicates a state of mind evidencing bad faith, or where the actor's conduct has a quality that characterizes it as `reprehensible' as where there is evidence of a consciousness of an intended or probable effect calculated to unlawfully injure the personal safety or property rights of others. Hibschman Pontiac, supra; Vernon, supra. Such conduct is not privileged. Id. at 1008.
Case law thus supports the award of punitive damages in certain breach of *971 contract cases, if the evidence sustains findings of elements of fraud, malice, gross negligence or oppression mingled with the breaches. Travelers [Indemnity Company v. Armstrong], 442 N.E.2d 349 [(Ind., 1982)]. The Court in Travelers addressed prior case law in which the award of punitive damages was deemed appropriate. Id. at 359. In addressing those cases the court said:
We find no fault with the end result in these cases, but it becomes apparent, from them, that the advent of punitive damages in contract cases, absent evidence of an attendant full blown tort of a nature which would permit punitive damages in and of itself, has given rise to a need for the adoption of an evidentiary standard not heretofore required, lest the public policy favoring such awards be subverted. Id. at 360.
The Indiana Supreme Court's recent opinion in Travelers changed Indiana law so that punitive damages must be proven by the stricter evidentiary requirement of clear and convincing evidence. Id. Therein the court stated:
[P]unitive damages should not be allowable upon evidence that is merely consistent with the hypothesis of malice, fraud, gross negligence or oppressiveness. Rather some evidence should be required that is inconsistent with the hypothesis that the tortious conduct was the result of a mistake of law, or fact, honest error of judgment, over-zealousness, mere negligence or other such noniniquitous human failing . . .
. . . a requirement of proof by clear and convincing evidence furthers the public interest when punitive damages are sought.
The propriety of the clear and convincing evidence standard is particularly evident in contract cases, because the breach itself for whatever reason, will almost invariably be regarded by the complaining party as oppressive, if not outright fraudulent.
The public interest cannot be served by any policy that deters resort to the courts for the determination of bona fide commercial disputes. Id. at 362-63.
Thus the standard to be utilized by the court in a tortious breach of contract case where there is a request for punitive damages is well established, yet the Appellate Courts are in apparent disagreement as to what type of misconduct will support an award of punitive damages.
There is no disagreement that when the evidence independently establishes the elements of a common law tort, punitive damages are appropriate. The facts indicate the presence of both fraud and conversion by Guy. Fraud is defined as:
"The intentional deception, relied upon by another which induces him to part with property or surrender a legal right. . . . "
Guy v. Schuldt, 138 N.E.2d 891, 895 (Ind.1956).
Thus the following elements must be established before the independent tort of fraud is found to exist: (1) Material misrepresentation of past or existing fact; (2) falsity of representation upon which the actor of a fraud is predicated; (3) alleged misrepresentation was known to be false or made recklessly; (4) reliance, such reliance being reasonable and not predicated upon matters of subjective future intent or probability; and (5) damages. Tutwiler v. Snodgrass, 428 N.E.2d 1291 (Ind.App.1981). Clearly, a fraud was committed against Maureen McClinchy in that Guy misrepresented the worth of stock sold to her. Furthermore, the parties stipulated to the fact that Guy made "misleading oral reports, upon which the plaintiffs relied to their detriment."
Alternatively, had the parties not stipulated as to the existence of fraudulent misrepresentations, case law supports the view that an independent tort need not always be established. Vernon Fire and Casualty Ins. Co., supra. Thus, "when a serious wrong, tortious in nature, has been committed but the wrong does not conveniently fit the confines of *972 a pre-determined tort," Vernon, supra at 180, punitive damages are justified, if the public interest will be served by the deterrent effect. Id. Conduct "tortious in nature" has been interpreted to mean that evidence of "fraud, malice, gross negligence or oppression" mingle with the controversy. Vernon, supra.
Though it is clear that actionable fraud is not required in order to award punitive damages in a contract action, the appellate courts in Indiana are apparently in disagreement as to what exactly is required. In Miller Pipeline Corporation [v. Broeker], 460 N.E.2d 177 (Ind.App. 2 Dist.1984), the court reversed an award of punitive damages holding that conduct for which punitive damages may be awarded must demonstrate malice or an equivalent state of mind and that a heedless disregard of the consequences, absent an oppression or malicious state of mind, was insufficient to justify such an award. This was re-affirmed by the court on a petition for re-hearing, Miller Pipeline Corp. v. Broeker, 464 N.E.2d 12 (Ind.App. 2nd Dist.1984) despite the ruling by the Fourth District in Orkin Exterminating Co. Inc. v. [Traina] Tiana, 461 N.E.2d 693 (Ind.App. 4th Dist. 1984), issued in the interim. In Orkin, the court held that willful or wanton misconduct alone will support an award of punitive damages. Thus, the court in Orkin contemplates that the conduct necessary for an award of punitive damages is considerably less than the malice standard enunciated in Miller Pipeline.
It is clear that the conduct of the defendant, Guy in this case, falls within the scope of misconduct found by other courts in the past sufficient to justify an award of punitive damages. This is not a "good faith" contract dispute, as was addressed by the court in Mudgett, supra. The tortious conduct involved economic duress, as recognized in Vernon, supra, and Jones v. Alviani, supra, and was also calculated to attempt to delay performance and ultimately escape full liability through forced settlement. The relationship between the parties is fiduciary in nature, thus creating a higher duty of care owed to plaintiffs by defendant. This can be distinguished from the mortgagor-mortgagee relationship discussed by the court in Prudential Ins. Co. [v. Executive Estates, Inc.], [174 Ind.App. 674,] 369 N.E.2d [1117] at 1126 [(1977)], wherein the court denied an award of punitive damages. Finally, the case at bar is a particularly appropriate instance where the public interest is served by the punishment that is inflicted on the wrongdoer. The test set forth in Travelers is also met in that the evidence is inconsistent with the hypothesis that the tortious conduct was the result of "a mistake of law or fact, honest error of judgment, over-zealousness, mere negligence or other such noniniquitous human failing." Id. at 442. Thus, the requirements set forth in Vernon, supra, are met, and the only remaining issue is the amount of punitive damages appropriate in this case.
In its conclusions of law in its Order of November 19, 1984, the Court held as to the relevant portions thereof as follows:
2. Plaintiffs have established the alleged violation of fraudulent breach of contract and willful withholding of funds by Defendant in violation of Indiana tort law and contracted law.
* * * * * *
4. Plaintiffs have established by clear and convincing evidence the existence of tortious misconduct and are entitled to punitive damages in the amount of $8,000.00.
(P. 15 of the Court's Order of November 19, 1984; Exhibit "B" to Plaintiff's complaint) (Emphasis added).
The stipulation of facts filed by the parties in the District Court on November 10, 1981, refers to four separate written contracts that each of the Plaintiffs and the Debtor entered into, entitled "Sussex Vampire Fund Agreement Limited Partnership." The purpose of the partnership was the buying and selling of commodity futures contracts. The four contracts, all of which were identical, established the rules *973 that the Plaintiff investors and the Debtor-investor would follow in the venture. The Debtor had drafted the contract and used similar contracts in similar ventures on four or five other occasions. The four contracts are referred to in the stipulation of facts between the parties filed November 10, 1981 with the District Court as Exhibits 1-4 (See p. 1 of Exhibit "C" to Plaintiffs' Motion for Summary Judgment). The contracts were not in fact attached to Exhibit "C", and by Court Order of January 28, 1987, the Court ordered the Plaintiff to file the same. On February 11, 1987, the Plaintiffs filed their response to the January 28, 1987 order and filed Exhibit "1" to Exhibit "C" and the signature pages to Exhibits "2", "3" and "4" to Exhibit "C".
On November 27, 1985, the Plaintiffs filed their Motion for Summary Judgment pursuant to Fed.R.Civ.P. 56 on the grounds that there is no genuine issue of material fact and that the Plaintiffs are entitled to a judgment as a matter of law that the debt arising from Order and Judgment entered in the district Court is nondischargeable in the Debtor's bankruptcy pursuant to 11 U.S.C. § 523(a)(2), (4) and (6). The Plaintiffs noted in their motion that no oral evidence or trial was necessitated by the District Court in that the parties stipulated to certain facts (Exhibit "C" to Plaintiffs' Motion), and that the Debtor never responded to certain requests for admissions which are deemed admitted pursuant to Fed.R.Civ.P. 36 (Exhibits "D", "E", "F" and "G" to Plaintiffs' motion). Nevertheless this case was submitted on the merits. However, even though the District Court judgment was not a default judgment it does not have res judicata (claims preclusion) effect in a nondischargeability adversary proceeding in this Court. Brown v. Felsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979); In re Rudd, (Estate of David Schubert Deceased, and David Schubert v. Rudd, 104 B.R. 8, 10-22 (Bankr.N.D.Ind.1987).
However, the Supreme Court in Brown v. Felsen, in ruling that res judicata did not preclude the bankruptcy court from going behind a prior state court judgment to determine if a debt is nondischargeable stated in a footnote that collateral estoppel should be applied if the state court's factual findings were based on standards identical to those used by the bankruptcy court in its dischargeability determination. The court stated:
This case concerns res judicata only, and not the narrower principle of collateral estoppel. Whereas res judicata forecloses all that which might have been litigated previously, collateral estoppel treats as final only those questions actually and necessarily decided in a prior suit. [citations omitted] If, in the course of adjudicating a state-law question, a state court should determine factual issues using standards identical to those of § 17, then collateral estoppel, in the absence of countervailing statutory policy, would bar litigation of those issues in bankruptcy court.
Brown, 442 U.S. at 139 n. 10, 99 S.Ct. at 2213 n. 10.
A majority of the courts have adhered to the foregoing analysis by the Supreme Court and applied collateral estoppel when the state law standards as those required to prove nondischargeability of debt under the Bankruptcy Code. See Spilman v. Harley, 656 F.2d 224, 227 (6th Cir.1981); Matter of Merrill, 594 F.2d 1064, 1067 (5th Cir.1979); Matter of Ross, 602 F.2d 604, 607-08 (3d Cir.1979); In re Shepherd, 56 B.R. 218, 219 (W.D.Va.1985); In re Bishop, 55 B.R. 687, 688-89 (Bankr.W.D.Ky.1985); In re Perrin, 55 B.R. 401, 402 (Bankr.D.N. D.1985); In re D'Annolfo, 54 B.R. 887, 888-89 (Bankr.D.Mass.1985).
This Court has also held when a case is actually litigated on the merits, although the prior judgment cannot be given res judicata or claim preclusions effect, if all of the four elements of collateral estoppel or issue preclusions are present, and the non-bankruptcy court applies the same clear and convincing standard of proof, which the Bankruptcy Court must apply in the context of a nondischargeability proceeding, the findings of fact by that Court *974 can have collateral estoppel application in any subsequent nondischargeability proceeding. See In re Tomsic, (Gellenbeck v. Tomsic, 104 B.R. 22, 29-40 (Bankr.N.D.Ind. 1987).
The Seventh Circuit in the recent case of Klingman v. Levinson, 831 F.2d 1292, 1295 (7th Cir.1987), held that where a state court determines factual questions using the same standards as the bankruptcy court would use, collateral estoppel should be applied to promote judicial economy by encouraging the parties to present their strongest arguments, and thus if the requirements for applying collateral estoppel have been satisfied, then the doctrine should apply to bar relitigation of an issue determined by a state court.
As noted by the Klingman Court, the four requirements for collateral estoppel are 1) the issue sought to be precluded must be the same issue as that involved in the prior action, 2) the issue must have been actually litigated, 3) the determination of the issue must have been essential to the final judgment, and 4) the party against whom estoppel is invoked must be fully represented in the prior action. Klingman v. Levinson, 831 F.2d at 1295, supra. A Federal Court must apply the same issue preclusive effect to state court judgments, which would be given in courts of the state from which they emerged and can give neither less nor more preclusive effect than would those state courts. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 105 S.Ct. 1327, 84 L.Ed.2d 274, rehg. den. 471 U.S. 1062, 105 S.Ct. 2127, 85 L.Ed.2d 491, on remand 628 F.Supp. 918; Kirk v. Board of Educ. of Bremen Community High School, Dist. No. 228, Cook County, Illinois, 811 F.2d 347 (7th Cir.1987); Cook County v. Mid-Con Corp., 773 F.2d 892 (7th Cir.1985) (applying state preclusion law as to effect of state court judgment based on federal statute).
However, because the prior litigation here was brought in a federal court, the federal rule of collateral estoppel or issue preclusion would apply rather than the state standards of collateral estoppel or claim preclusion. Fireman's Fund Ins. Co. v. International Market Place, 773 F.2d 1068 (9th Cir.1985); Freeman v. Lester Coggins Trucking, Inc., 771 F.2d 860 (5th Cir.1985). Cf. In the Matter of Energy Cooperative, 814 F.2d 1226, 1230-31 (7th Cir.1987) (applying the federal rule of res judicata or claim preclusion where prior litigation was brought in federal court, Citing, Car Carriers, Inc. v. Ford Motor Co., 789 F.2d 589, 593, whereby the Court applied the "operative facts" or "same transaction" test to define "cause of action" and holding that "once a transaction has caused injury, all claims arising from that transaction must be brought in one suit or lost.")
The Court would note that the standard of proof to be applied in a nondischargeability proceeding under §§ 523(a)(2)(A), (4) and (6), is that of clear and convincing evidence, rather than by a preponderance of the evidence. In re Kimzey, 761 F.2d 421, 423-24 (7th Cir.1985) (§ 523(a)(2)(A)), In re Peoni, 67 B.R. 288, 291 (Bankr.S.D.Ind.1986) (§ 523(a)(6)), citing, In re Kaufmann, 57 B.R. 644 (Bankr. E.D.Wis.1986) (§ 523(a)(2)(A)) and § 523(a)(6), and Matter of Wintrow, 57 B.R. 695 (Bankr.S.D.Ohio 1986), and In re Egan, 52 B.R. 501 (Bankr.D.Minn.1985) (§ 523(a)(6)); In re Sutton, 39 B.R. 390 (Bankr.M.D.Tenn.1984) (§ 523(a)(4)); In re Graziano, 35 B.R. 589, 593 (Bankr.E.D.N. Y.1983) (§ 523(a)(4)).
The Supreme Court in the case of Anderson, et. al. v. Liberty Lobby, Inc. and Willis A. Carto, 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) held that in determining whether a factual dispute exists on a motion for summary judgment, the court must be guided by the substantive evidentiary standards of the case that are applicable at trial, and thus in ruling on a motion for summary judgment the Supreme Court held that the court must apply the clear and convincing standard in a case where the actual malice rule applied, and this was thus the standard of proof for such a claim.
*975 Thus, the court must apply the clear and convincing standard of proof in this adversary proceeding in testing the sufficiency of the Plaintiff's motion for summary judgment.
Inasmuch as the District Court clearly applied the clear and convincing standard of proof in awarding punitive damages to the Plaintiffs, pursuant to Indiana law, i.e. by applying the case of Travelers Indemnity Co. v. Armstrong, 442 N.E.2d 349, 362-63 (Ind.Sup.Ct.1982), the findings of fact by the District Court are entitled to collateral estoppel or issue preclusion affect in this adversary proceeding if the other elements of the test are met.
The Court must next address the question of the extent of the identity of the issues that were tried by the District Court and those being tried in this adversary proceeding.
The Plaintiffs have prayed that the indebtedness to them by the Debtor arising out of the District Court judgment be held nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), (4) and (6) which provide as follows:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt
* * * * * *
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition;
* * * * * *
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
* * * * * *
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;
The Court must thus review the necessary elements to be proven by the Plaintiffs to prevail under §§ 523(a)(2)(A), (4) and (6) in order to determine whether the prior District Court judgment should be afforded collateral estoppel or issue preclusion effect in the case at bar.
The statutory elements that need to be proven under § 523(a)(2), (4) and (6) and the federal case law construing the same will often not be the same as is necessary to assess liability in the state court or in a federal court based on state law based on the same set of facts. For instance, while a debtor may be liable in damages for a mere technical conversion in the state court, § 523(a)(6) expressly requires that such a conversion be both "willful and malicious" in order for a debt to be held nondischargeable. Compare, Noble v. Moistner, 180 Ind.App. 414, 388 N.E.2d 620, 621 (4th Dist.1979), where conversion is defined as the "appropriation of property of another to the party's own use and benefit, or in its destruction, or in exercising dominion over it, in exclusion and defiance of the rights of the owner or lawful possessor, or in withholding it from his possession, under a claim and title inconsistent with the owner's."
The application of this state law definition is clearly not sufficient in a nondischargeability proceeding under § 523(a)(6) in which the claimant must show conjunctively that the actions of the debtor were "willful and malicious". Thus a mere technical conversion may be dischargeable in bankruptcy, where it is not shown the same was willful and malicious. See, e.g., Matter of Conner, 59 B.R. 594, 596 (Bankr.W. D.Mo.1986). See also, 3 Collier on Bankruptcy, para 523.16 (pp 511-514) (L. King 15th Ed.), where it discusses the fact that the 1978 Code overruled many previous Act cases holding various degrees of recklessness as being willful and malicious and that a deliberate and intentional act is necessary.
The same can be said of a state fraud action. In Indiana, the claimant can prevail if he can prove that the fraud is either actual or constructive. Under Indiana law "constructive fraud" is fraud that arises by operation of law from conduct, *976 which if sanctioned by law, would secure an unconscionable advantage. Whiteco Properties, Inc. v. Thielbar, 467 N.E.2d 433 (Ind.App. 3rd Dist.1984); See also, Abdulrahim v. Gene B. Glick Co., Inc., 612 F.Supp. 256 (D.C.Ind.1985); Crook v. Shearson Loeb Rhoades, Inc., 591 F.Supp. 40 (D.C.Ind.1983).
This is to be compared with the clear legislative intent of the provisions of § 523(a)(2)(A). The relevant legislative statements thereto are as follows:
[t]hus, under section 523(a)(2)(A) a creditor must prove that the debt was obtained by false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insiders financial condition. Subparagraph (A) is intended to codify current case law, e.g. Neal v. Clark, 95 U.S. 704 [24 L.Ed. 586] (1887) [(1877)], which interprets "fraud" to mean actual or positive fraud rather than fraud implied in law. Subparagraph (A) is mutually exclusive from subparagraph (B). Subparagraph (B) pertains to the so-called false financial statement. . . .
124 Cong.Rec. H11095-96 (Daily Ed. Sept. 28, 1978); S17412 (Daily Ed. Oct. 6, 1978). Reprinted in 4 Norton Bankruptcy Law and Practice, Annotated Legislative History, § 523, page 397 (Callaghan and Company, 1983).
The Courts have consistently held in construing § 523(a)(2)(A) that there must be proof of positive fraud and this involves showing that the acts which constitute fraud involved moral turpitude or an intentional wrong; and fraud implied in law which does not require a showing of bad faith or immorality is insufficient. See e.g., In re Gilman, 31 B.R. 927, 929 (Bankr.S.D. Fla.1983); In re Slutzky, 22 B.R. 270, 271 (Bankr.E.d.Mich.1982); In re Montbleau, 13 B.R. 47, 48 (Bankr.D.Mass.1981); In re Byrd, 9 B.R. 357, 359 (Bankr.D.C.1981); In re McAdams, 11 B.R. 153, 155 (Bankr.D.Vt. 1980).
Thus, from the mere fact that a fraud, conversion, or breach of fiduciary duty case is fully tried on its merits and judgment entered based on state law, it does not follow that the Court's findings of fact in such a case (assuming that Court used the clear and convincing evidence standard discussed above) would have the effect of collateral estoppel or issue preclusion in a subsequent nondischargeability proceeding in the Bankruptcy Court as for example, the evidence might show, that although the court found fraud the finding of fraud may have really been a finding of constructive fraud or fraud implied-in-law as opposed to actual or positive fraud or that the finding of conversion was really based on a technical conversion or gross negligence which would be dischargeable in the bankruptcy proceeding.
The Court will now review the elements of each section of 523 relied upon by the Plaintiff.
11 U.S.C. § 523(a)(2)(A)
The Seventh Circuit in Matter of Pappas, 661 F.2d 82 (7th Cir.1981), a case interpreting the predecessor to 11 U.S.C. § 523(a)(2) (11 U.S.C. § 35(a)(2)), held the bankruptcy court had exclusive jurisdiction to determine the meaning of false pretenses and false representations without having to look at Indiana state law. There have been only slight changes between 11 U.S.C. § 35(a)(2) and the present 11 U.S.C. § 523(a)(2) and thus the foregoing principle as to applicable law in a fraud case set out in Pappas remains a correct statement of the law under the 1978 Code. See Birmingham Trust National Bank v. Case, 755 F.2d 1474, (11th Cir.1985), where it was held that because of negligible differences, case law under the Act serves as a useful guide under the 1978 Code.
The cases construing the 1978 Code are consistent with the Act case of Pappas, and hold that the question of whether a debt is dischargeable is one of federal law. In re Marini, 28 B.R. 262, 264 (Bankr.E.D. N.Y.1983); In re Tapp, 16 B.R. 315, 318 (Bankr.D.Alaska 1981); In re Sadwin, 15 B.R. 884, 886 (D.Ct.M.D.Fla.1981); In re Liberati, 11 B.R. 54 (Bankr.E.D.Penn. 1981).
The basic elements of the Plaintiff's claim which must be proved by clear and *977 convincing evidence pursuant to 11 U.S.C. § 523(a)(2)(A) are as follows:
1. That the debtor obtained the money (property or services) through representations which the debtor either knew to be false or made with such reckless disregard for the truth as constitutes a willful misrepresentation;
2. That the debtor possessed scienter, i.e. an intent to deceive; and
3. That the creditor relied on the false representation and the reliance was reasonable.
In re Kimzey, 761 F.2d 421, 423 supra.
In construing the scienter element under the Bankruptcy Act's counterpart to § 523(a)(2)(A) (§ 17(a)(2)), the Seventh Circuit in the case of Carini v. Matera, 592 F.2d 378 (7th Cir.1979) held that for a debt to be nondischargeable the bankrupt must have obtained the money or property through representations known to be false or made with reckless disregard for the truth amounting to willful misrepresentations, citing In re Houtman, 568 F.2d 651, 655-56 (9th Cir.1978). The Houtman court cited the Supreme Court opinion of Morimura Arai & Company v. Taback, 279 U.S. 24, 49 S.Ct. 212, 73 L.Ed. 586 (1929) for its decision. In Morimura, the court held that "reckless indifference to the actual facts, without examining the available source of knowledge which lay at hand, and with no reasonable ground to believe that it was in fact correct" was sufficient to establish the knowledge element under a provision of the Bankruptcy Act, then in existence which completely barred a discharge of all debts if the bankrupt had made a materially false statement in order to obtain property or credit. Id. 279 U.S. at 33, 49 S.Ct. at 215. The Houtman court went on to add that the close statutory relationship between the concept of that act and § 17(a)(2) suggests that a similar definition of knowledge would be appropriate.
Also, as to the scienter element, an intent to deceive may logically be inferred from a false representation which the debtor knows or should know will induce another to make a loan (or otherwise part with property or services). In re Kimzey, 761 F.2d 424, supra. Also, because direct proof of reliance is difficult, actual reliance may be proven by circumstantial evidence of reliance. In re Kreps, 700 F.2d 372, 375, supra. The actual reliance must be reasonable. The Seventh Circuit has held that the reliance test is not meant to "second guess a creditor's decisions to make a loan or set loan policy for a creditor". Matter of Garman, 625 F.2d 755, 759 (7th Cir.1980), cert. denied sub nom. Garman v. Northern Trust Co., 450 U.S. 910, 101 S.Ct. 1347, 67 L.Ed.2d 333 (1981). In addition, the Court is not empowered to "undertake a subjective evaluation and judgment of a creditor's lending policies and practices". Id. at 759.
It is important to note the legislative history to 11 U.S.C. § 523(a)(2)(A). The relevant portion of the Senate Report is as follows:
Paragraph (2) provides that as under Bankruptcy Act section 17a(2), a debt for obtaining money, property, services, or a refinancing extension or renewal of credit by false pretenses, a false representation, or actual fraud, or by use of a statement in writing respecting the debtor's financial condition that is materially false, on which the creditor reasonably relied, and which the debtor made or published with intent to deceive, is excepted from discharge. This provision is modified only slightly from current section 17a(2). First, "actual fraud" is added as a ground for exception from discharge.
Senate Report No. 95-595, 95th Cong., 2nd Sess. 78-79 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5864. reprinted in 4 Norton Bankruptcy Law and Practice, Annotated Legislative History, § 523, page 396 (Callaghan and Company, 1983).
The relevant legislative statements are as follows:
[t]hus, under section 523(a)(2)(A) a creditor must prove that the debt was obtained by false pretenses, a false representation, or actual fraud, other than a *978 statement respecting the debtor's or an insiders financial condition. Subparagraph (A) is intended to codify current case law e.g., Neal v. Clark, 95 U.S. 704 (1887), which interprets "fraud" to mean actual or positive fraud rather than fraud implied in law. Subparagraph (A) is mutually exclusive from subparagraph (B). Subparagraph (B) pertains to the so-called false financial statement. . . . 124 Cong.Rec. H11095-96 (Daily Ed. Sept. 28, 1978); S17412 (Daily Ed. Oct. 6, 1978). Reprinted in 4 Norton Bankruptcy Law and Practice, Annotated Legislative History, § 523, page 397 (Callaghan and Company, 1983).
Thus, there must be proof of positive fraud and this involves showing that the acts which constitute fraud involved moral turpitude or an intentional wrong; and fraud implied in law which does not require a showing of bad faith or immorality is sufficient. In re Gilman, 31 B.R. 927, 929 supra; In re Slutzky, 22 B.R. 270, 271 supra: In re Montbleau, 13 B.R. 47, 48 supra; In re Byrd, 9 B.R. 357, 359 supra; In re McAdams, 11 B.R. 153, 155 supra. Therefore, a mere breach of contract by the debtor without more, does not imply existence of actual fraud for purposes of the exception to discharge under § 523(a)(2)(A). In re Emery, 52 B.R. 68, 70 (Bankr.E.D.Pa.1985). Accordingly, a mere promise to be executed in the future is not sufficient to make a debt non-dischargeable, even though there is no excuse for the subsequent breach. In re Barker, 14 B.R. 852, 567 (Bankr.E.D.Tenn.1981). See also, 3 Collier on Bankruptcy, para. 523.08, p. 523-47 (L. King 15th Ed.). That is, subsequent conduct contrary to a former representation does not necessarily render the original representation to be false. In re Boese, 8 B.R. 660, 662 (Bankr. D.N.Dak.1981). However, if a debtor enters into a contract intending not to comply with its terms and later defaults under that contract, such contract may provide a basis for exceptions to discharge on the grounds of fraud if the other remaining elements are satisfied, In re Taylor, 49 B.R. 849, 851 (Bankr.E.D.Pa.1985); In re Fenninger, 49 B.R. 307, 310 (Bankr.E.D.Pa.1985).
"Actual" fraud precluding discharge consists of any deceit, artifice, trick or design, involving the direct and active operations of the mind used to circumvent or cheat another; something said, done or omitted with the design of perpetrating what is known to be a cheat or deception. In re Davis, 11 B.R. 156, 158 (Bankr.D.Vt. 1980). However, fraud may consist of silence, concealment or intentional non-disclosure of a material fact, as well as affirmative misrepresentation of a material fact. In re Slutzky, 22 B.R. 270, 272 supra; In re Frye, 48 B.R. 422, 426 (Bankr.M.D.Ala. 1985); In re Samford, 39 B.R. 423, 427 (Bankr.M.D.Tenn.1984); Matter of Weinstein, 31 B.R. 804, 809 (Bankr.E.D.N.Y. 1983).
A "false pretense" involves implied misrepresentation or conduct intended to create and foster a false impression, as distinguished from a "false representation" which is an express misrepresentation. Matter of Weinstein, 31 B.R. at 809, supra.
This finding of fact as to the Defendants' fraudulent intention or scienter will obviously have to be determined by circumstantial evidence in most cases as direct evidence of the Defendants' state of mind at the time of the transaction is seldom expressly indicated. Although this is certainly a difficult task, it is no greater a task than any other cause of action that includes intent or state of mind as a necessary element, and the existence of fraud may be inferred if the totality of the circumstances present a picture of deceptive conduct by the debtor which indicates he intended to deceive or cheat the creditor. In re Fenninger, 49 B.R. 307, 310, supra; In re Taylor, 49 B.R. 849, 851, supra. The Court may logically infer an intent not to pay from the relevant facts surrounding each particular case. See In re Kimzey, 761 F.2d 421, 424, supra. And a person's intent, his state of mind, has been long recognized as capable of ascertainment and a statement of present intention is deemed a statement of a material existing fact sufficient to support a fraud action. In re *979 Pannell, 27 B.R. 298, 302 (Bankr.E.D.N.Y. 1983). While as a general proposition the alleged fraud must exist at the inception of the debt, and statements or actions which were neither false nor fraudulent when made will not be made so by the happening of subsequent events, a promisor's subsequent conduct may reflect his state of mind at the time he made the promise and thus be considered in determining whether he possessed the requisite fraudulent intent. In re Kelsey, 9 B.R. 154, 157 (Bankr.W.D.Ky.1981). Nevertheless, false representations or false statements encompass statements that falsely purport to depict current or past facts and do not relate to future action. In re Todd, 34 B.R. 633, 635 (Bankr.W.D.Ky.1983).
To except a debt for property, services or credit from discharge, the property, services or credit must have actually been obtained by the debtor from the creditor as a direct result of the fraud. Expressed another way, a creditor must have given present consideration based on the false pretense, false representation or actual fraud. Thus, for example, a debt which is otherwise dischargeable does not be come nondischargeable on the grounds of fraud because the debtor attempted to pay a check that was subsequently dishonored where the creditor sustains no loss by reason of the issuance of the check. In re Preston, 47 B.R. 354, 357 (Bankr.E.D.Va. 1983). See also, 3 Collier on Bankruptcy, para. 523.08(1), p. 523-39 (L. King 15th Ed.1986).
In reviewing the findings of fact and conclusions of law made by the District Court, the Court applied the elements of common law fraud as applicable in the state of Indiana and as set out in the case of Tutwiler v. Snodgrass, 428 N.E.2d 1291 (Ind.App.1981). The Tutwiler case sets out the elements necessary to prove actual or positive fraud necessary to prevail pursuant to § 523(a)(2)(A) rather than the elements of constructive fraud or fraud implied in law which would not suffice. That is, the elements set out in Tutwiler in essence track those discussed by the Seventh Circuit in In re Kimzey, 761 F.2d 423, supra.
The district Court clearly held that the Plaintiff had proved fraud by clear and convincing evidence as to at least the Plaintiff McClinchy Wagner in that the debtor misrepresented the worth of the stock sold to her. As to whether the Debtor's conduct constituted fraud within the purview of § 523(a)(2)(A) as to the remaining Plaintiffs is not so clear. The parties did stipulate that the Debtor made "misleading oral reports to the Plaintiffs, upon which they relied to their detriment." It is not clear at all from the record whether these misleading oral reports were indeed material and done with the necessary scienter as to the other Plaintiffs, which were reasonably relied upon to constitute fraud pursuant to § 523(a)(2)(A).
11 U.S.C. § 523(a)(6)
The legislative history to this provision must be carefully scrutinized regarding this provision. The House Report is as follows:
Paragraph (6) excepts debts for willful injury by the debtor to another person or to the property of another person. Under this paragraph, "willful" means deliberate or intentional. To the extent that Tinker v. Colwell, 193 U.S. 473 (1902) [24 S.Ct. 505, 48 L.Ed. 754, 11 Am.Bankr.Rep. 568], held that a looser standard is intended, and to the extent that other cases have relied on Tinker to apply a "reckless disregard" standard, they are overruled.
H.R.Rep. 95-595, 95th Cong., 1st Sess. 365 (1977), U.S.Code Cong. & Admin.News 1978, pp. 6320-6321; Reprinted in 4 Norton Bankruptcy Law and Practice, Legislative History, § 523, p. 404 (Callaghan & Co. 1983).
The legislative statements to this section add the following comment:
Section 523(a)(6) adopts the position taken in the House bill and rejects the alternative suggested in the Senate amendment. The phrase "willful and malicious injury" covers a willful and malicious conversion.
*980 124 Cong.Rec., H11096 (Daily Ed. Sept. 28, 1978); S17412 (Daily Ed. Oct. 6, 1978); Reprinted in 4 Norton Bankruptcy Law and Practice, Legislative History, § 523, p. 404-405 (Callaghan & Co. 1983).
The legislative history of the Bankruptcy Code thus reflects that Congress clearly intended a standard of intentional and deliberate conduct and not merely a willful disregard or reckless conduct.
The Supreme Court in Tinker v. Colwell, 193 U.S. 473, 24 S.Ct. 505, 48 L.Ed. 754 (1904), provided a definition of "malicious injury". Tinker involved a state court action against a bankrupt for damages arising from criminal conversation with the plaintiff's wife. At issue was whether the bankrupt's acts were willful and malicious injury to the plaintiff's property rights and thus nondischargeable under § 17(a)(2) of the Bankruptcy Act of 1898.[1]
The Supreme Court in Tinker for the purposes of Section 17(a)(2) concluded:
[W]e think a willful disregard of what one knows to be his duty, an act which is against good morals and wrongful in and of itself, and which necessarily causes injury and is done intentionally, may be said to be done willfully and maliciously, so as to come within the exception.
Id. 193 U.S. at 487, 24 S.Ct. at 509, 48 L.Ed. 754.
Collier on Bankruptcy has made a helpful analysis of § 523(a)(6) as follows:
In order to fall within the exception of section 523(a)(6), the injury to an entity or property must have been willful and malicious. An injury to an entity or property may be a malicious injury within this provision if it was wrongful and without just cause or excessive, even in the absence of personal hatred, spite or ill-will. The word "willful" means "deliberate or intentional," a deliberate and intentional act which necessarily leads to injury. Therefore, a wrongful act done intentionally, which necessarily produces harm and is without just cause or excuse, may constitute a willful and malicious injury. It has been said that this category of liabilities excepted from discharge "contemplates something more restricted than malice in the broader sense," and covers all cases in which the facts of intent and malice are judicially ascertained, irrespective of the character of the allegations made by the parties. Injuries within the meaning of the exception are not confined to physical damage or destruction; but an injury to intangible personal or property rights is sufficient. Thus the conversion of another's property without his knowledge or consent, done intentionally and without justification and excuse, to the other's injury, is willful and malicious injury within the meaning of the exception. On the other hand; a technical conversion may very well lack any element of willfulness or maliciousness necessary to except the liability from discharge.
A claim or judgment based merely upon negligence does not necessarily constitute a willful and malicious injury within the exception even if the negligence is alleged to be reckless and wanton. Under this paragraph, "willful" means deliberate or intentional. Cases decided under section 17a(2) of the former Bankruptcy Act, such as Tinker v. Colwell holding that a looser standard is intended, and to the extent that other cases have relied on Tinker to apply a "reckless disregard" standard, they are overruled. In Greenfield v. Tuccillo, [129 F.2d 854 (2nd Cir.1942)] the Second Circuit Court of Appeals said, citing Tinker:
"The question is whether the liability to Greenfield was for `willful and malicious' injuries. Such injuries have been defined by the Supreme Court as arising from an act involving a `willful disregard of what one know to be his duty, an act which is against good morals and wrongful in and of itself, and which necessarily causes injury and is done intentionally.' Tinker v. Colwell, 193 U.S. 473, 487, [24 S.Ct. 505, 509,] 11 AM.B.R. 568. See McIntyre v. *981 Kavanaugh, 242 U.S. 138, [37 S.Ct. 38, 61 L.Ed.2d 205,] 38 AM.B.R. 165; Brown v. Garey, 28 AM.B.R. (N.S.) 270, 267 N.Y. 167, 169 [196 N.E. 12, 14]. . . . "
It is clear from both the House and Senate Reports that the standard of "reckless disregard" as expressed in Greenfield will no longer be applicable, and the many cases holding various degrees of recklessness to constitute willfulness and maliciousness will no longer be controlling in construing section 523(a)(6) of the Code.
3 Collier on Bankruptcy, para. 523.16 (pp. 511-14) (L. King 15th Ed.) (Footnotes omitted) (Emphasis added).
The formulation and application of a precise definition of "willful and malicious" to be applied generally has been a difficult one for the courts.
The definition of "willful" has given the courts the least problem, and most Courts have followed the legislative history and have held that "willful" means a deliberate or intentional act. See In re Adams, 761 F.2d 1422, 1426 (9th Cir.1985); In re Clark, 50 B.R. 122, 126 (Bankr.D.N.Dak.1985); In re Nuckols, 47 B.R. 731, 734 (Bankr.E.D. Va.1985); In re Langer, 12 B.R. 957, 959 (Bankr.D.N.Dak.1981).
Thus "willful and malicious" does not mean reckless disregard or mere negligence. In re Compos, 768 F.2d 1155, 1157 (10th Cir.1985); In re Louis, 49 B.R. 135, 137 (Bankr.E.D.Wis.1985); In re Nuckols, 47 B.R. 731, 734, supra; Matter of Vereen, 43 B.R. 489, 491 (Bankr.M.D. Fla.1984). Even gross negligence is not sufficient. In re Louis, 49 B.R. 135, 137 (Bankr.E.D.Wis.1985). An increase in the degree of gross negligence only increases the possibility of resulting injury, it does not make the injury willful. In re Morgan, 22 B.R. 38, 39 (Bankr.D.Neb.1982).
However, as pointed out by the court in the recent case of In re Cecchini, 780 F.2d 1440, 1442 (9th Cir.1986), the courts are split over the interpretation of the phrase "willful and malicious" even though the act must be found to be intentional. The word "malicious" is less susceptible to precise definition and has always been a difficult concept for the courts to apply. That is, as Cecchini points out, some courts have found this phrase requires an intentional act which results in injury, see e.g., In re DeRosa, 20 B.R. 307, 313 (Bankr.S.D.N.Y.1982); In re Fussell, 15 B.R. 1016, 1022 (Bankr.W.D.Va.1981); In re McGiboney, 8 B.R. 987, 989 (Bankr. N.D.Ala.1981), while other courts have found that phrase requires an act with the intent to cause injury. See e.g., In re Graham, 7 B.R. 5 (Bankr.D.Nev.1980); In re Finnie, 10 B.R. 262, 264 (Bankr.D.Mass. 1981); In re Hinkle, 9 B.R. 283, 286 (Bankr.D.Mass.1981).
The plaintiff in Cecchini urged that the looser standard of "willful and malicious" refers to an intentional act which causes injury. Under this construction the creditor would not be required to prove that the debtor acted with intent to injure. The Cecchini court noted that the plaintiff's construction was in accord with other circuits that recently addressed the matter. Cecchini, 780 F.2d at 1442, citing In re Franklin, 726 F.2d 606, 610 (10th Cir. 1984); In re Held, 734 F.2d 628, 629-30 (11th Cir.1984); Matter of Quezada, 718 F.2d 121, 123 (5th Cir.1983); Seven Elves Inc. v. Eskenazi, 704 F.2d 241, 245 (5th Cir.1983). See also, In re Adams, 761 F.2d 1422, 1427, supra. There the court rejected the appellant's contention that the requirements of willfulness and malice could only be satisfied by a showing that he specifically intended to injure the appellee.
Accordingly, Cecchini holds that when a wrongful act, such as conversion is done intentionally, necessarily produces harm, and is without just cause or excuse, it is "willful and malicious" even absent proof of specific intent to injure.
Thus, one line of cases is that malice may exist by implication or constructively because the debtor's actions indicate he knew that his actions would result in injury but acted in disregard of that knowledge. See e.g., United Bank of Southgate v. Nelson, 35 B.R. 766, 768 (N.D.Ill.1983); In re Clark, 50 B.R. 122, 126, supra; In re *982 Lindberg, 49 B.R. 228, 230 (Bankr.D.Mass. 1985); In re Frye, 48 B.R. 422, 427 (Bankr. M.D.Ala.1985); In re Wolfington, 47 B.R. 225, 226 (E.D.Pa.1985).
The other line of cases hold that malice cannot exist constructively or by implication, but must be evidenced by specific intent to injure a person or his property. See e.g., In the Matter of Ireland, 49 B.R. 269, 271 (Bankr.W.D.Mo.1985); In re Gallaudet, III, 46 B.R. 918, 925 (Bankr.D.Vt. 1985); In re Major, 44 B.R. 636, 639 (Bankr.W.D.Mo.1984).
The court in United Bank of Southgate v. Nelson, 35 B.R. 766, 769, supra, noted in finding that "malicious" only requires a finding of implied or constructive malice and that Congress, in overruling Tinker, meant to only modify Tinker's definition of "willful" and to retain the definition of "malicious" as developed by that decision. This Court also notes the specific intent requirement has been sharply criticized for placing an almost insurmountable burden on the creditor. This is particularly true in the area of conversion as most conversions of property are made to reduce financial strain and reduce expenses rather than to injure the creditor's interest specifically. See Comment, Accidental "Willful and Malicious Injury": The Intoxicated Driver and Section 523(a)(6), 1 Bank.Dev.J. 135, 141 (1984).
This Court adopts the reasoning of Cecchini and United Bank of Southgate, and holds "willful" and "malicious" to be an intentional or deliberate wrongful act, done without excuse or just cause, which produces or results in harm or injury and that the wrongdoer need not have a specific intent to cause the resulting harm or injury to the person and property of the plaintiff. It is the intent to do the act which is the operative legal event and not the intent to do the harm. In re Nuckols, 47 B.R. 731, 735, supra.
Thus, the phrase "willful and malicious" under 11 U.S.C. § 523(a)(6) does not connote or require personal hatred, ill-will, spite or special malice. In re Salai, 50 B.R. 11, 12 (Bankr.Fla.1985); In re Dever, 49 B.R. 329, 332 (Bankr.Ky.1984); In re Friedenberg, 12 B.R. 901, 905 (Bankr.S.D. N.Y.1981). However, mere failure to perform and contractual obligations, standing alone, does not make a debt non-dischargeable under 11 U.S.C. § 523(a)(6); In re Salett, 53 B.R. 925, 930 (Bankr.D.Mass. 1985); In re Schaeffer, 30 B.R. 301, 303 (Bankr.S.D.Ohio 1983).
The District Court made express findings of fact based upon the clear and convincing evidence standard of proof that the Debtor converted the following partnership funds:
1. $1,500.00 was wrongfully used by the Debtor to defend the suit by the Plaintiffs. (Findings of Fact no. 20).
2. $2,333.78 was wrongfully converted by the Debtor for his own personal use. (Findings of Fact no. 21).
3. $4,000.00 was wrongfully converted by the Debtor by having monies paid to another fund in which the Plaintiffs had no interest. (Findings of Fact no. 22).
4. $7,833.78 was withdrawn from the partnership account and used by the Debtor for his own personal benefit. (Findings of Fact no. 23).
The foregoing totals $15,667.56.
These sums were clearly converted by the Debtor to his own use. The District Court expressly found that the Debtor's liability did not arise out of a "good faith" contract dispute as discussed by the Court in First Federal Savings and Loan Association of Indianapolis v. Mudgett, 397 N.E.2d 1002 (Ind.App.1979), but that the Debtor's conduct involved economic duress as recognized in Vernon Fire and Casualty Ins. Co. v. Sharp, 264 Ind. 599, 349 N.E.2d 173 (1976).
Although duress alone does not also necessarily constitute conversion under § 523(a)(6), the District Court expressly held that the test set forth in Travelers had been met in that the evidence was inconsistent with the hypothesis that the tortious conduct was the result a "mistake of law or fact, honest error of judgment, over zealousness, mere negligence or other noniniquitous human failing. Id. at 442. In addition, the findings of fact 20 through 23 *983 expressly find wrongful conversion or use by the Debtor. Thus, the Debtor is collaterally estopped by the findings of the District Court that the Debtor wrongfully converted $15,667.56 in partnership funds to his own use in violation of § 523(a)(6).
11 U.S.C. § 523(a)(4)
It has been consistently held that the scope of the concept "fiduciary" under this exception to discharge provision is a question of federal law. See Matter of Rausch, 49 B.R. 562 (Bankr.D.N.J.1985); In re Schultz, 46 B.R. 880 (Bankr.D.Nev.1985); In re Adkisson, 26 B.R. 879 (Bankr.E.D. Tenn.1983); Matter of Angell, 610 F.2d 1335 (5th Cir.1980); In re Paley, 8 B.R. 466, (Bankr.E.D.N.Y.1981).
However, state law is important in determining when a trust relationship exists. That is, in determining whether a requisite trust exists, the Court should consult state law although the issue ultimately remains a federal question. In re Niven, 32 B.R. 354 (Bankr.W.D.Okla.1983); In re Ballard, 26 B.R. 981 (Bankr.D.Conn.1983); Matter of Murphy, 9 B.R. 167 (Bankr.Va.1981); In re Schultz, 46 B.R. 880, (Bankr.D.Nev. 1985).
The broad, general definition of fiduciary, involving confidence, trust and good faith, is inapplicable in a dischargeability context, thus excluding ordinary commercial relationships from the reach of the section of the Bankruptcy Code excepting from discharge certain debts incurred in a fiduciary capacity. In re Schultz, 46 B.R. 880, supra.
It has been repeatedly held that a debtor is not a fiduciary within the meaning of 11 U.S.C. § 523(a)(4) in the absence of any evidence that an express or technical trust existed between the debtor and the creditor. In re Ballard, 26 B.R. 981, supra; In re Lowther, 32 B.R. 638 (Bankr.W.D.Okla. 1983); In re Baiata, 12 B.R. 813 (Bankr.E. D.N.Y.1981).
However, when a state statute imposes trust-like obligations on parties engaging in certain kinds of contracts the contracting parties may be trustees for purposes of 11 U.S.C. § 523(a)(4). See In re Bacher, 47 B.R. 825 (Bankr.E.D.Pa. 1985); In re Gagliano, 44 B.R. 259 (Bankr. N.D.Ill.1984).
Based on the foregoing requirements it has also been consistently held that constructive trusts, or those implied by law, that created duties ex maleficio, are not the types of fiduciary relationships that fall under 11 U.S.C. § 523(a)(4). See In re Talcott, 29 B.R. 874 (Bankr.D.Ka.1983); In re Ayers, 25 B.R. 762 (Bankr.M.D.Tenn.1982); In re Barwick, 24 B.R. 703 (Bankr.E.D.Va. 1982); In re Ridgway, 24 B.R. 780 (Bankr. D.Kan.1982); Matter of Wise, 6 B.R. 867 (Bankr.M.D.Fla.1980).
What the foregoing cases are saying is that since an express or technical trust is required the fiduciary relationship must be shown to have existed prior to the creation of the debt in controversy. Matter of Thomas, 21 B.R. 553 (Bankr.E.D. Wis.1982), aff'd. 34 B.R. 103; In re Gagliano, 44 B.R. 259, supra. That is, the Plaintiff must show the Debtor was a trustee before the wrong occurred, without any reference to the wrong and be independent of it. Matter of Wise, 6 B.R. 867, supra; In re Marshall, 24 B.R. 105 (Bankr.W.D.Mo.1982).
Absent statutory definition or special considerations, ordinary commercial relationships such as principal and agent do not fall within the meaning of fiduciary under the Bankruptcy Code, In re Ridgway, 24 B.r. 780, 785, supra; In re Paley, 8 B.R. 466, supra. This is also true of one who holds the status of a bailee, without more. In re Holman, 42 B.R. 848 (Bankr. E.D.Mo.1984); Matter of Adams, 24 B.R. 252 (Bankr.W.D.Mo.1982).
Even the fact that a commercial agreement contains the word "trust" does not make the agreement a trust agreement nor create a fiduciary relationship for nondischargeability purposes, but it is the substance and character of the debt relationship and not its form that determines whether fiduciary relationship exists. See In re Gallaudet, 46 B.R. 918 (Bankr.D.Vt. *984 1985); In re Talcott, 29 B.R. 874 (Bankr.D. Kan.1983); In re Paley, 8 B.R. 466, supra.
Thus, mere contract jargon is not determinative of the existence of a fiduciary relationship and the determinative causes are whether there was an effective duty to segregate funds, an insistence on segregation of funds, formality of relationship and requirement of an accounting. Matter of Storms, 28 B.R. 761 (Bankr.E.D. N.C.1983).
A review of the following cases all consistently indicate that an ordinary commercial agreement, although it may contain certain elements of trust and confidence, is not sufficient standing alone to establish an express or technical trust.
For example, it was held in In re Snellgrove, 15 B.R. 149 (Bankr.S.D.Fla.1981), that where debtors who were president and general contractor, diverted funds from a certain construction project to other construction projects they were not acting in a fiduciary capacity.
And a floor plan financing arrangement between a dealer and a creditor does not normally give rise to a trust relationship as to preclude discharge. In re Talcott, 29 B.R. 874 (Bankr.D.Kan.1983); Accord: In re Gallaudet, 46 B.R. 918 (Bankr.D.Vt. 1985); In re Hickey, 41 B.R. 601 (Bankr.S. D.Fla.1984); In re Clifton, 32 B.R. 666 (Bankr.D.N.M.1983); Matter of Chambers, 23 B.R. 206 (Bankr.Wis.1982); In re Miles, 5 B.R. 458 (Bankr.E.D.Va.1980).
A debtor who managed creditor's property was merely a typical agency relationship where there was no express technical trust agreement between debtor and creditor. In re Ridgway, 24 B.R. 780 (Bankr.D.Kan. 1982).
An agreement between Airline Ticket Associations and debtors who conducted a travel service and who did not turn over proceeds of sale per agreement between the parties did not create a fiduciary relationship when agreement appeared to be no more than ordinary commercial contract and the agreement did not require debtors to segregate funds. In re Paley, 8 B.R. 466, supra. See also, In re Chick, 53 B.R. 697 (Bankr.D.Ore.1985), where although the agreement had boiler-plate language evidencing a trust agreement, there was no specific requirement to segregate funds no fiduciary relationship was established.
An insurance agent's indebtedness for premiums did not create a fiduciary capacity, embezzlement or fraud when though the agency contract provided premiums were to be held in trust, the agent was not required to segregate the funds in a separate bank account and periodically account for premium collections. Matter of Storms, 28 B.R. 761, supra.
The mere fact a contractor-debtor told creditor he would pay an unpaid supplier did not create a fiduciary relationship but a mere debtor-creditor relationship. In re Boese, 8 B.R. 660 (Bankr.D.S.Dak.1981).
Thus, the Debtor's liability as a fiduciary under § 523(a)(4) will be determined by an analysis of the Sussex Vampire Fund Agreement of Limited Partnership and the rights and duties of the parties arising out of the contractual, statutory and common law relationships established between the Debtor, as a general partner and the Plaintiffs as limited partners.
The Plaintiff's in their Memorandum in Support of their Motion for Summary Judgment filed April 24, 1986 at p. 6 assert that they are relying primarily on 11 U.S.C. § 523(a)(4).
In support of their position the Plaintiffs cite the case of In re Niven, 32 B.R. 354, supra, where the Court stated:
"Defalcation" has been defined as "the failure of one who has received monies in trust to pay it over as he ought. It is a broader word than fraud, embezzlement or misappropriation, and covers cases where there was no fraud, embezzlement, or willful misappropriation on the part of the bankrupt." In re Herbst, 22 F.Supp. 353, 354 (S.D.N.Y.1937). In affirming the ruling of the district court, Judge Learned Hand, in Central Hanover Bank and Trust Co. v. Herbst, 93 F.2d 510 (2nd Cir.1937), noted that, although colloquially, the word "defalcation" ordinarily implies some moral dereliction, *985 in a bankruptcy context it may include innocent default, including all fiduciaries, who for any reason were short in their accounts. "[W]hen a fiduciary takes money upon a conditional authority which may be revoked and knows at the time that it may, he is guilty of `defalcation' though it may not be a `fraud', or an `embezzlement', or perhaps not even a `misappropriation'." Id. at 512.
The case of John P. Maguire and Co. v. Herzog, 421 F.2d 419 (5th Cir.1970) is somewhat analogous to the case at bar. Herzog was decided under § 17a(4) of the Bankruptcy Act which created an exception to discharge for debts created by the debtor's fraud, embezzlement, misappropriation or defalcation while acting as an officer or in any fiduciary capacity. The Court in Herzog resolved the matter by a determination that the debtor committed a misappropriation while an officer. Paragraph 4 of § 523(a) of the Bankruptcy Code omits the word "officer". "But the omission is without significance because an officer who misappropriates funds of a corporation is acting in a fiduciary capacity, and despite deletion of the word `officer', the debt would be nondischargeable." 3 Collier on Bankruptcy, para. 523.14 n. 1 at 523-94 (15th ed.1979) (citation omitted). As we have already noted, a "defalcation" is much broader a term than "misappropriation" and therefore Herzog may be utilized in supplying a standard for committing a "defalcation". The Court in Herzog found that a corporate officer's application of proceeds, derived from the sale of goods acquired under a floorplan arrangement, prior to the bankruptcy of the corporation, which were to be held by the corporation for the creditor and then remitted on a periodic basis, and were instead applied to the debts of other creditors, constituted a debt created by "misappropriation" so as to bar its discharge when the officer was personally adjudged a bankrupt.
Accordingly, it is our opinion that Debtors committed a "defalcation".
A finding of "defalcation" does not, however, end the matter for in order to effect a complete resolution, we must address the second prong of our inquiry, namely, whether the defalcation was committed while acting in a "fiduciary capacity".
"Fiduciary capacity" as used in § 523, supra, has been held to connote the idea of trust or confidence, which relationship arises whenever one's property is placed in the custody of another. In re Romero, 535 F.2d 618 (10th Cir.1976). Furthermore, the fiduciary relationship must be shown to exist prior to the creation of the debt in controversy. Davis v. Aetna Acceptance Co., 293 U.S. 328, 55 S.Ct. 151, 79 L.Ed. 393 (1934); In re Romero, supra.
The fiduciary relationship referred to in § 523(a)(4) has been held to be limited to express and technical trusts. Davis v. Aetna Acceptance Co., supra; In re Romero, supra; In re Cairone, 12 B.R. 60 (Bkrtcy.D.R.I.1981). Further, it has been held the trust may not be one arising or implied from a contract. In re Romero, supra. Cf. Davis v. Aetna, supra; In re Paley, 8 B.R. 466 (Bkrtcy. E.D.N.Y.1981) (it is not enough that the trust relationship spring from the act from which the debt arose). The fact that a commercial agreement contains the word "trust", however, does not make the agreement a trust agreement. Davis v. Aetna Acceptance Co., supra; In re Paley, supra. "in the absence of a true fiduciary or trust relationship, a plaintiff may not circumvent the effect of a bankruptcy discharge by adding `trust language' to an ordinary commercial agreement." In re Paley, supra, at 469.
The question of who is a fiduciary for purposes of § 523(a)(4) is one of federal law. Matter of Angelle, 610 F.2d 1335 (5th Cir.1980). However, state law plays an important role in determining whether a specific case involves an express trust. Matter of Angelle, supra; In re Cairone, supra. [12 B.R. 60 (Bkrtcy.D.R.I. 1981)]. Cf. Jaffke v. Dunham, 352 U.S. 280, 77 S.Ct. 307, 1 L.Ed.2d 314 (1957) (determination of whether trust established *986 in bankruptcy proceeding under § 70(a)(4), 11 U.S.C. § 110(a)(4), is one of state Law).
Id. at 355-357.
The Court's attention is also directed to the case of In re McCraney, 63 B.R. 64 (Bankr.N.D.Ala.1986), where the Court in discussing the law to be applied in determining nondischargeability under § 523(a)(4) stated as follows:
All questions of dischargeability of debts in bankruptcy proceedings are federal law questions. Brown v. Fclsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979). Less clear is whether federal law or state law determines the underlying issues of a dischargeability issue under Section 523(a)(4).
The Supreme Court appeared to answer this question in Davis v. Aetna Acceptance Co., 293 U.S. 328, 55 S.Ct. 151, 79 L.Ed. 393 (1934), by applying federal law. Some Courts of Appeals circumvent Davis and apply state law directly, but the majority of them apply Davis in connection with a non-Davis federal standards analysis of state law.
The Eleventh Circuit sides with the majority. Matter of Cross, 666 F.2d 873 (5th Cir.1982) (Unit B). Cross relies on Matter of Angelle, 610 F.2d 1335 (5th Cir.1980), which explains why both state and federal law should be consulted. "We think it essential to clarify the precise role of state law. . . . To begin with, the scope of the concept fiduciary under Section 17(a)(4) is a question of federal law." Id. 1341. "On the other hand, state law takes on importance in determining when a trust exists." Id. "We also believe that state law may play importance in determining whether a specific case involves an express trust." Id. Footnote omitted.
Under Davis v. Aetna and its progeny, a fiduciary relationship exists for purposes of the Bankruptcy Code if there is a technical trust, not one which the law implies from a contract, Chapman v. Forsyth, 2 How. 189, 195[, 11 L.Ed. 236] (1844); and it must have existed prior to the act creating the debt and without reference to that act. Upshur v. Briscoe, 138 U.S. 365, 378, 11 S.Ct. 313, 317-18, 34 L.Ed. 931 (1890); and Davis v. Aetna, 293 U.S. 328, 333, 55 S.Ct. 151, 153-54, 79 L.Ed. 393 (1934).
Under Cross and the majority procedure, where state statutes impose fiduciary trusts, additional factors are considered. Does the statute require the individual to maintain a segregated account? See Matter of Angelle, 610 F.2d 1335, 1340 (5th Cir.1980); Matter of Cross, 666 F.2d 873, 881 (5th Cir.1982) (Unit B); Matter of Banister, 737 F.2d 225, 229 (2nd Cir.1984), cert. denied, [469] U.S. [1035], 105 S.Ct. 509, 83 L.Ed.2d 400 (1984); In re Katzen, 47 B.R. 738 (Bkrtcy.D.Mass.1985). Does the statue create the basic elements of a trust? Is a res defined? Are fiduciary duties spelled out? In re Pedrazzini, 644 F.2d 756, 759 (9th Cir.1981); and In re Lipke, 54 B.R. 704 (Bkrtcy.W.D.Wis. 1985).
Id. at 65-66 (Footnotes omitted).
The Seventh Circuit in the case of Matter of Thomas, 729 F.2d 502, applied federal standards to a Wisconsin statute without applying Davis v. Aetna Acceptance Co., 293 U.S. 328, 55 S.Ct. 151, supra.
The Plaintiff's assert that in looking to Indiana law under § 523(a)(4), the Uniform Partnership Act as adopted by the State of Indiana makes any partner accountable as a fiduciary citing, I.C. XX-X-X-XX. However, the partnership in question is not a general partnership but a limited partnership and thus, I.C. 23-4-2-1 et seq. controls in the first instance.
Indiana Code 23-4-2-9 provides that a general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of a partnership without limited partners, except that, among other things, that without the written consent or ratification of the specific act by all limited partners, a general partner has no authority to possess partnership property, or assign their rights in specific partnership property for other than a partnership purpose. Id. at subsection (d).
*987 Since a general partner of a limited partnership is subject to all the restrictions and liabilities of a partner that is not limited in nature by virtue of I.C. 23-4-2-9. I.C. XX-X-X-XX(1) is applicable to an Indiana limited partnership and the general partner is thus a trustee of some type, either technical or ex maleficio after a wrong has been committed.
This section which is captioned "Partner accountable as a fiduciary", is identical to Section 21 of the Uniform Partnership Act, and provides as follows:
Sec. 21(1) Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property. (Emphasis added).
Indiana Code 23-4-1-20 places a duty on a partner to render on demand true and full information of all things affecting the partnership. Indiana Code 23-4-1-22 grants to any partner the right to a formal account as to partnership affairs. Indiana Code 23-4-2-10 gives the limited partner the same rights on a general partner to have on demand true and full information affecting the partnership, a formal account of partnership affairs, a right to a share of the profits, and the return of his contribution under certain circumstances.
In addition, pursuant to I.C. XX-X-X-XX in any case not provided for by the Indiana Limited Partnership Act, the rules of law, and equity, including, without limiting the generality thereof, statutory law, common law, and the law merchant shall govern. The Uniform Partnership Act was adopted by the state of Indiana in 1949, and thus any common law decisions as to the fiduciary nature of a partnership are still applicable pursuant to I.C. XX-X-X-XX.
As discussed in 59A Am Jr.2d § 1333, Partnership it is clear as a general proposition that a general partner in a limited partnership is a fiduciary. There it is stated as follows:
Partners owe one another a duty of the utmost good faith, fairness, and loyalty. Their relationship is one of mutual trust and confidence and the law imposes upon them the highest standard of integrity and good faith in their dealings with each other. Thus general partners owe a fiduciary duty to limited partners, as a matter of law, especially since they have complete authority to deal with the partnership business. The sole general partner of a limited partnership owes to limited partners an even greater duty than that normally imposed on partners, especially when he holds a majority interest.
It has been said that the general partner, acting in complete control, stands in the same fiduciary capacity to the limited partners as a trustee stands to the beneficiaries of a trust, and that when breach of fiduciary duty is alleged the case is decided under the law of trusts. It has also been said that there is no basis for distinguishing the fiduciary relationship of corporate director and shareholder from that of general partner and limited partner. The principle is the same those in control of the business must deal fairly with the interest of other investors. (Footnotes omitted).
As to the general partners' standard of conduct as a fiduciary it is stated at 59A Am.Jr.2d § 1335 Partnerships, as follows:
While a strict fiduciary standard is not the only measure which has been applied to the conduct of a general partner vis a vis his limited partners, it is the one most frequently encountered, and quite a few courts have applied to general partners in a limited partnership Cardozo's statement that "not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior." When the question is one of the general partner's fiduciary duty, concepts of reasonableness and good faith have no application, so that, for instance, a sale by the partnership to the general partner or to a corporation owned by the general partner and her husband is unlawful, and whether it is in the best interest of the partnership is immaterial. The severity of a breach of fiduciary duty will not be *988 examined; the only question is whether there has been a breach at all. (Footnotes omitted).
In support of their position that the Defendant is a fiduciary for the purposes of 11 U.S.C. § 523(a)(4), the Plaintiff's in their brief cite In re Kraus, 37 B.R. 126 (Bankr. E.D.Mich.1984). The Court in Kraus after finding a partnership existed pursuant to Michigan law looked to M.C.L.A. § 449.21 which is identical to I.C. XX-X-X-XX(1). The Kraus court concluded that the Uniform Partnership Act established an express trust for which each partner acts as a trustee, that the trust is created before the act creating the debt and without any reference to the debt. The Kraus court thus concluded that M.C.L.A. § 449.21 satisfied the test laid down in In re Johnson, 691 F.2d 249 (6th Cir.1982) (an act case interpreting former 11 U.S.C. § 35(a)(4)), which held as follows:
The term "fiduciary" applies only to express or technical trusts, which are imposed on transactions by operation of law as a matter of equity. Moreover, the requisite trust relationship must exist prior to the act creating the debt and without reference to it. State statutes which impose a trust ex-maleficio are not within the scope of section 17(a)(4) since such trusts only arise upon an act of misappropriation.
Id. at 251-52 (Citations omitted).
The same result was reached in In re Owens, 54 B.R. 162 (Bankr.D.S.C.1984), in which the Court held that the Debtor, a general partner of a limited partnership, was obligated to the limited partners, and committed a defalcation while acting in a fiduciary capacity, citing, In re Kraus, 37 B.R. 126, supra; In re Harris, 458 F.Supp. 238 (D.Ore.1976, aff'd. 587 F.2d 451 (9th Cir.1978)). And in the recent case of In re Dino, 82 B.R. 184 (Bankr.D.R.I.1988), the Court concluded a partner is a fiduciary pursuant to § 523(a)(4), citing, In re Owens, supra, without discussion. Compare, In re Taylor, 58 B.R. 849 (Bankr.E.D.Va. 1986), and In re Holman, 42 B.R. 848 (Bankr.E.D.Mo.1984).
In In re Taylor, the Court concluded that the existence of a partnership does not per se create a fiduciary relationship within the meaning of 11 U.S.C. § 523(a)(4). 58 B.R. at 854. The Taylor Court found the reasoning in Holman to be persuasive. In Holman, the Court construed Section 358.210 R.S.Mo. which is identical to I.C. XX-X-X-XX(1), and expressly rejected the conclusion of the Court in Kraus. In so doing the Taylor Court stated as follows:
The Michigan bankruptcy court in reaching this above-quoted conclusion, overlooks the old United States Supreme Court case of Chapman v. Forsyth, 2 How. 202, 43 U.S. 202, 11 L.Ed. 236 (1844). In that case, the Supreme Court first clarified the meaning of the term "fiduciary" as used in a bankruptcy statute similar to section 523(a)(4):
The second point is, whether a factor, who retains the money of his principal, is a fiduciary debtor within the act. If the act embrace such a debt, it will be difficult to limit its application. It must include all debts arising from agencies; and indeed all cases where the law implies an obligation from the trust reposed in the debtor. Such a construction would have left but few debts on which the law could operate. In almost all the commercial transactions of the country, confidence is reposed in the punctuality and integrity of the debtor, and a violation of these is, in a commercial sense, a disregard of a trust. But this is not the relation spoken of in the first section of the act. The cases enumerated, "the defalcation of a public officer," "executor," "administrator," "guardian," or "trustee," are not cases of implied but special trusts, and the "other fiduciary capacity" mentioned, must mean the same class of trusts. The act speaks of technical trusts, and not those which the law implies from the contract. A factor is not, therefore, within the act. This view is strengthened and, indeed, made conclusive by the provision of the fourth section, which declares that no "merchant, banker, factor, broker, underwriter, or marine insurer," shall *989 be entitled to a discharge, "who has not kept proper books of accounts." In answer to the second question, then, we say, that a factor who owes his principal money received on the sale of his goods, is not a fiduciary debtor within the meaning of the act.
Chapman v. Forsyth, supra 2 How. at p. 207.
This interpretation was later approved by the Supreme Court in Davis v. Aetna Acceptance Co., 293 U.S. 328, 55 S.Ct. 151, 79 L.Ed. 393 (1934). Clearly then, the term "fiduciary" as used in 11 U.S.C. 523(a)(4) is limited to the class of fiduciaries including trustees of specific written declarations of trust, guardians, administrators, executors, or public officers and, absent special considerations, does not extend to the more general class of fiduciaries such as agents, bailees, brokers, factors, and partners. Thus, the alleged indebtedness at issue in this case is not a debt for fraud or defalcation while acting in a fiduciary capacity.
In re Taylor, 58 B.R. at 851.
The Court in In re Hurbace, 61 B.R. 563 (Bankr.W.D.Tex.1986) construed Tex.Rev. Civ.Stat.Ann. Art. 6132b, § 21 (Vernon 1970), which is identical to I.C. XX-X-X-XX(1), and stated as follows:
[t]he phrase "hold as trustee" does not establish a technical or express trust. Under the Texas statute, the trust arises only when the partner derives profits without the consent of the other partners. Therefore, the statute would fall within the ambit of a trust ex maleficio specifically excluded from the purview of nondischargeable debts under § 523(a)(4). See Davis v. Aetna, supra. The Source and Comments following the Texas statute reaffirm the nonapplicability of the state law to 11 U.S.C. § 523(a)(4):
. . . The reference to "trustee" authorizes a court to impose a constructive trust where appropriate to implement the Section (Emphasis added).
Plaintiff would urge that a recent Ninth Circuit decision, Ragsdale v. Haller, 780 F.2d 794 (9th Cir.1986), supports a finding by this Court that the judgment debt owed by Debtor is nondischargeable. The Circuit panel in Ragsdale, interpreting § 21 of the Uniform Partnership Act (which is identical to the Texas statute) to be the sort of trust ex maleficio not included within the purview of § 523(a)(4). However, the Circuit concluded that California courts had raised the duties of partners beyond those required by the literal wording of the Uniform Partnership Act. The Circuit concluded that the California courts had made all partner trustees over the assets of the partnership.
Partners are trustees for each other, and in all proceedings connected with the conduct of the partnership every partner is bound to act in the highest good faith to his co-partner and may not obtain any advantage over him in the partnership affairs by the slightest misrepresentation, concealment, threat or adverse pressure of any kind.
Id. at 796 citing Leff v. Gunter, 33 Cal.3d 508, 514, 189 Cal.Rptr. 377, 658 P.2d 740 (1983) [quoting Page v. Page, 55 Cal.2d 192, 197, 10 Cal.Rptr. 643, 359 P.2d 41 (1961)].
Texas courts have not, to date, extended the partnership relationship beyond the frame of reference used in § 21 of the Uniform Partnership Act. Generally, the relationship is a broad fiduciary duty based upon trust, confidence, and good faith far too broad from the narrow construction of fiduciary required by the Supreme Court cases previously cited. It is only when viewing the position of managing partners do Texas courts venture to impose the type of fiduciary duty described in Ragsdale. See e.g., Huffington v. Upchurch 532 S.W.2d 576 (Tex.1976) (managing partner of partnership enterprise owed copartners one of the highest fiduciary duties recognized in law); Crenshaw v. Swenson, 611 S.W.2d 886 (Tex.Civ.App. Austin 1980, writ ref'd n.r.e.) (managing partner in general partnership owes copartners highest fiduciary duty recognized in law); Johnson v. Buck, 540 S.W.2d 393 (Tex.Civ. *990 App. Corpus Christi 1976, writ. ref'd n.r.e.).
This Court concludes that in the present case dealing not with a managing partner vis-à-vis general partners but with equal copartners; the scope of fiduciary duty described in Ragsdale is not applicable.
Id. at 566.
A similar result to that of the Hurbace court was reached in In re Napoli, 82 B.R. 378 (Bankr.E.D.Pa.1988) wherein the court relied on In re Taylor, and In re Holman, supra, and held that the Uniform Partnership Act enacted as New Jersey, N.J.S.A. 42:1-1 et. seq. did not create the type of technical or express trust required to find the fiduciary relationship necessary as a prerequisite to the determination of nondischargeability under § 523(a)(4). The Napoli court recognized Ragsdale and based on the analysis of Haller (erroneously referred to as Lindley v. General Election), 780 F.2d 797 (9th Cir.1986), cert. denied 476 U.S. 1186, 106 S.Ct. 2926, 91 L.Ed.2d 554 (1986), that although the Uniform Partnership Act creates a sort of trust ex maleficio not within the purview of § 523(a)(4), the common law of a state can raise the duties of a partner beyond the literal reading of the Uniform Partnership Act. The Napoli court concluded that the New Jersey Common Law did not create a general fiduciary relationship for partners for all purposes simply by virtue of the partnership relationship.
The Court's research revealed little Indiana Common Law as to the status and duties of a general partner to his limited partners in terms of a fiduciary relationship.
However, the Comments of the Indiana Supreme Court in the case of Hannah, et. al. v. McLaughlin, et. al, 158 Ind. 242, 63 N.E. 475 (1902) are somewhat enlightening. There Hannah, et. al. and one McLaughlin entered into a partnership for the purposes of acting as an agent for one Fleming in finding a purchaser for one Fleming. Fleming paid McLaughlin the commission which he wrongfully converted to his own use and that of his wife. The Court held Hannah stated a cause of action versus McLaughlin, et. al. for an accounting and to recovery of the misappropriated partnership funds and stated:
The demurrers admit that the appellee Charles W. McLaughlin has, without the consent of his copartners, applied the partnership funds to the payment of his individual debt, in the discharge of a mortgage lien on real estate conveyed to his wife with notice of the fraud. As between themselves, the appellee Charles W. McLaughlin must be regarded as a trustee of the firm for the partnership funds collected and held by him. Where a trustee has in fact converted trust funds to his own use, or has, without authority, invested them in property into which they can be distinctly traced, the cestui que trust has the right to follow the same into the new investment; and where trust funds are invested in the hands of third persons, having knowledge of their character, they still remain impressed with the obligation of the trust in the hands of the holders, and are subject to be reclaimed and restored to the trust fund. Pearce v. Dill, 149 Ind. 136, 48 N.E. 788; State v. Foster, 5 Wyo. 199, 38 Pac. 926, 29 L.R.A. 226, 63 Am.St.Rep. 47; Warren v. Bank, 157 N.Y. 259, 51 N.E. 2036, 43 L.R.A. 256, 68 Am.St.Rep. 777; Bank v. Brightwell, 148 Mo. 358, 49 S.W. 994, 71 Am.St.Rep. 608, 614, note.
Id. at 63 N.E. 476 (Emphasis added).
Thus, it appears clear to the court that the Supreme Court has treated a general partner as a common law fiduciary with the same duties and standards of conduct as a cestui que trust. That is, the relationship of an express trust is established at the outset of the partnership agreement and is not merely an arrangement that can ripen into a constructive trust or a trust implied in law ex maleficio.
When there are no reported Indiana decisions on the issue in controversy, or the Court is faced with state law issue that is unsettled, the Federal Court must look to all available data and adopt a rule which it believes the Indiana Supreme Court would *991 adopt. Heinhold v. Bishop Motor Exp., Inc., 660 F.Supp. 382 (N.D.Ind.1983); Neofes v. Robertshaw Controls Co., 409 F.Supp. 1376 (S.D.Ind.1976). In making such a decision without an discernible doctrinal trend, the Court may reasonably assume that the state court will follow the rule that appears best to effectuate the policies that underlie the rule, Bowen v. U.S., 570 F.2d 1311 (7th Cir.1978).
However, it must be remembered that whether the debtor's obligation is nondischargeable pursuant to 11 U.S.C. § 523(a)(4) remains a federal question and this court need only look to state law for guidance on the issue of whether the debtor is a fiduciary or there has been a defalcation.
In looking to case law in other jurisdictions, it has been held that general partners owe a fiduciary duty to limited partners. Homestake Mining Co. v. Mid Continent Exploration Co, 282 F.2d 787, 799 (10th Cir.1960); In Re Longhorn Secur. Litigation, 573 F.Supp. 255, 271 (W.D. Okla.1983); later proceeding 573 F.Supp. 274, later proceeding, 573 F.Supp. 278; Iowa Center Associates v. Watson, 456 F.Supp. 1108 (N.D.Ill.1978); Gundelach v. Gollehon, 42 Colo.App. 437, 598 P.2d 521, 523 (1979); Application of Grotzinger, 81 App.Div.2d 268, 440 N.Y.S.2d 189 (1981).
It has also been held that the general partner, acting in complete control stands in the same fiduciary capacity to the limited partnership as a trustee stands to the beneficiaries of a trust. Riviera Congress Associates v. Yassky, 18 N.Y.2d 540, 277 N.Y.S.2d 386, 223 N.E.2d 876 (1966); Watson v. Limited Partners of WCKT, Ltd., 570 S.W.2d 179, 182 (Tex.Civ.App.1978).
When the breach of fiduciary duty is alleged it has been held that the case is decided under the law of trusts. Crenshaw v. Swenson, 611 S.W.2d 886, 890 (Tex.App.1980).
The Court thus concludes although there is sparse Indiana case law on the point, that as to at least a limited partnership in Indiana, the duties of a general partner to his limited partners rises to a level that is considerably higher than the mere garden-variety type of commercial relationship such as creditor-debtor, principal-agent, bailor-bailee, client-broker, insurer-insured, and the like, and that there is established at the very outset of the partnership relationship an express fiduciary duty which is something more than a relationship wherein a constructive or implied trust is imposed ex maleficio after the wrong is committed and the debt incurred.
This Court agrees with the conclusion reached by the courts in In re Kraus, 37 B.R. 126, supra, and In re Owens, 54 B.R. 162, supra, that Indiana Code 23-4-1-21(1) establishes a fiduciary relationship at the outset of the agreement that falls within the federal definition of a fiduciary under § 523(a)(4). However, even assuming arguendo that this statutory provision did not establish such a relationship, it must be remembered that pursuant to I.C. XX-X-X-XX in any case not provided for by the Indiana Limited Partnership Act, the Indiana Rules of Law and Equity, including the Indiana Common Law shall govern. Thus, the Indiana Common Law case of Hannah et al v. McLaughlin, 63 N.E. 475, supra, is still a valid precedent for the proposition that a general partner is a fiduciary vis á vis his general partners. This conclusion is thus also in accord with the conclusion of the court in Ragsdale v. Haller, 780 F.2d 794 (9th Cir.1986).
The final issue under § 523(a)(4) is whether there was a "defalcation" by the Debtor.
Once a fiduciary relationship is established "Defalcation" means something broader than "embezzlement" and in fact can be broader than "misappropriation". See Discussion Generally, 3 Collier on Bankruptcy, para. 523.14(b) (P. 523-105), supra.
It has thus been held that Defalcation precluding discharge includes the failure of a fiduciary to account for money he received in a fiduciary capacity, and it is irrelevant if the default by the fiduciary is innocent and the loss is due to negligence or ignorance. Bellity v. Wolfington, 48 B.R. 920, 923 (Bankr.E.D.Pa.1985); In re *992 Hickey, 41 B.R. 601, 603 (Bankr.E.D.Fla. 1984). This section thus covers cases where there is no fraud, embezzlement or willful misappropriation on the part of the debtor. In re Niven, 32 B.R. 354 supra. It is thus not necessary to prove an intentional wrong by the debtor once the technical or express trust is established. In re Gonzales, 22 B.R. 58 (BAP Cal.1982). Accordingly, using a trust fund for any purposes other than the purpose for which the trust fund was created is a nondischargeable defalcation. In re Matheson, 10 B.R. 652 (Bankr.Ala.1981).
Inasmuch as the debtor is a fiduciary, liability for defalcation is established under § 523(a)(4) when a proper accounting and payment of trust funds has not been made to the beneficiaries for any reason even though an embezzlement theft, or fraud has not technically occurred or been established.
Accordingly, the court finds that the Debtor is collaterally estopped from re-litigating those issues tried by the District Court, and that there is no genuine issue of material fact pursuant to Fed.R. Civ.P. 56 and that as a matter of law the Plaintiff is entitled to a summary judgment that the District Court judgment is nondischargeable pursuant to § 523(a)(2), (4) and (6) as discussed above.
The final issue is the extent to which the judgment is nondischargeable.
Clearly, the principal balance of $20,369.39, the pre-judgment interest of $17,737.48 for a total of $38, 106.87 in compensatory damages plus any interest and costs due on the judgment itself are not dischargeable.
However, there is a split of authority as to whether the $8,000.00 in punitive damages is nondischargeable. The District Court award of $8,000.00 was based on the fact that the public interest would be served by inflicting this degree of punishment on the Debtor. The method of calculating the amount of the punitive damages was not discussed by the District Court.
It is noted that at 11 U.S.C. § 523(a)(2), (4) and (6) a debtor is not discharged "from any debt" that is found to be nondischargeable under that section.
"Debt" is defined at 11 U.S.C. § 101(11) as "liability on a claim".
"Claim" is defined in its relevant part at 11 U.S.C. § 101(4)(A) as "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secure or unsecured."
The Ninth Circuit in the case of In re Adams, 761 F.2d 1422, 1427-1428 (9th Cir. 1985), held that both compensatory and punitive damages are subject to findings of nondischargeability citing, Coen v. Zick, 458 F.2d 326 (9th Cir.1972), (construing section 523(a)(6) involving willful and malicious conduct). No prior state court judgment had been entered in the Adams case. See also, In re Willis, 2 B.R. 566 (Bankr.M. D.Ga.1980); In re Carey, 7 B.C.D. 6 (Bankr.S.D. Ohio 1980); In re Cummings, 3 B.C.D. 908 (Bankr.W.D.Mo.1977).
The court in Birmingham Trust Nat. Bank v. Case, 755 F.2d 1474, 1477 (11th Cir.1985) analyzed the concept of "debt" as defined at 11 U.S.C. § 101(11) and "claim" as defined at 11 U.S.C. § 101(4). Although the case did not involve the issue of the collateral estoppel effect of a prior state court judgment and punitive damages, the court held that a "debt" based on the plain language of the statute is an all or nothing proposition, and that the purpose of creating fraud exceptions to discharge was to discourage fraudulent conduct and to ensure that relief intended for honest debtors did not inure to the benefit of dishonest ones. The court also noted that one of the purposes of the fraud exception to discharge is to punish the debtor for engaging in fraudulent conduct.
The Court in In re James T. Wilson, 72 B.R. 956 (Bankr.M.D.Fla.1987) was a case based on securities fraud. The court gave collateral estoppel effect to the default judgment but denied that portion as to the statutory treble damages. There the Court stated:
Section 523(a)(2)(A) excepts from discharge only those monies actually obtained *993 by fraud. . . . The judgment as trebled cannot be excepted from discharge in its entirety because N.C.Gen. Stat. § 75-16 is an attempt by the North Carolina legislature to punish persons who engage in unfair and deceptive acts and practices affecting commerce. This exercise of police power by the North Carolina legislature is contrary to the purpose of bankruptcy and fraud exception to discharge and cannot be enforced under these circumstances. See, Birmingham Nat. Bank. v. Case, 755 F.2d 1474, 1477 (11th Cir.1985) (Footnote omitted).
Id. at 960.
The Court in In re Record Co., Inc., 8 B.R. 57 (Bankr.S.D.Ind.1980), dismissing a § 523(a)(2) counter complaint for $100,000.00 in punitive damages (there being no prior state court judgment), without further discussion or citation of any authority, stated as follows:
It is a well-established principle of bankruptcy that damages granted on nondischargeability complaints for obtaining money by false pretenses are limited to funds actually obtained by the representation. Consequential damages are not included, nor are punitive damages.
Id. at 60.
The Court in Matter of Cheatham, 44 B.R. 4 (Bankr.N.D.Ala.1984), gave collateral estoppel effect to a prior state court judgment, but held that the punitive damages awarded therein were dischargeable. The court noted as follows:
This Court cannot, in equitable good conscience, punish the innocent unsecured creditors by virtue of a substantial depletion of the estate for a wrong committed by the debtor. As noted in In re Ryan, 15 B.R. 514, 520 (Bkrtcy.Md.1981), "[t]he intent of Congress was that unsecured creditors should be protected from `the debtor's wrongdoing.'" (citing H.R. Rep. No. 95-595, 1st Sess. 382 (1977), U.S. Code Cong. & Admin.News 1978 p. 5787). The maximum actual pecuniary loss suffered by the plaintiff as a result of the false pretenses is the amount paid for the automobile $900.00. Even if the car sold by the defendant had been absolutely worthless, the plaintiff would be adequately compensated by a damage award of $900.00. Before the Bankruptcy Code went into effect, there was a great deal of confusion and conflicting judicial interpretations of the dischargeability of punitive damages assessed against the debtor in prior proceedings. See [In re] Beard, supra, [5 B.C.D. 680] at 682, 683; contra, U.S. v. RePass, 688 F.2d 154, 157 (2d Cir.1982). Such uncertainty was principally due to the "provable debt" concept contained in Section 17 and Section 63 of the Bankruptcy Act. However, the Bankruptcy Code no longer refers to the provable and non-provable distinctions. The "provability" of a debt no longer has any bearing on whether or not the debt is dischargeable. See 3 Collier on Bankruptcy, Section 523.02 (15th ed. 1983). Thus, based on the maximum amount of actual loss suffered by the plaintiff and in the interest of fairness to the unsecured creditors, the Court concludes that the plaintiff is entitled to judgment in the amount of $900.00 and said amount is to be nondischargeable pursuant to 11 U.S.C. Section 523(a)(2)(A). The balance of the state court jury award is due to be allowed as an unsecured claim and is therefore dischargeable.
Id. at pp. 8-9.
See also, In Matter of Church, 69 B.R. 425 (Bankr.N.D.Tex.1987), In re Brown, 66 B.R. 13, 16 (Bankr.D.Utah, 1986), In the Matter of Suter, 59 B.R. 944 (Bankr.N.D. Ill.1986), and In re Beard, 5 B.C.D. 680 (Bankr.M.D.Tenn.1979) (an Act case holding that punitive damages were a penalty and not provable), where the Courts specifically held that punitive damages awarded in a prior state court judgment are not nondischargeable in bankruptcy where a prior state court judgment was given collateral estoppel effect.
In Church, the court gave collateral estoppel effect to a state court jury verdict, in which multiple damages were awarded to the creditor under a state deceptive practice *994 act in addition to actual pecuniary loss. The state court also entered judgment for punitive fees and attorney's fees. The bankruptcy court noted that Texas law did not permit attorney's fees to be awarded as actual damages in a suit for fraud but that there were two potentially independent grounds for the award of attorney's fees case law permitting attorney's fees when punitive damages are awarded and the Texas Deceptive Trade Practices Act. The court held that the attorney's fees awarded based on the fact the judgment also awarded punitive damages could not be held nondischargeable, but that the attorney's fees could be nondischargeable based on the statute. The court cited In re Suter, 59 B.R. 944 supra, with approval as well as In re Brown, 66 B.R. 13, 16 (Bankr.D.Utah 1986).
In In re Church, the court stated as follows:
The Debtor was also adjudged separately liable for an additional $25,000.00 punitive damages; duplicating the punitive damages awarded against Contemporary Homes and making the total judgment against the Debtor $112,672.34.
Since the court has determined that summary judgment is appropriate as to the Section 523(a)(2)(A) claim of the Plaintiffs, it follows that the debt attributable to the "actual fraud" of the debtor should similarly be accorded summary treatment. The difficulty arises from the conflicting case law and the ambiguity of the statute. Section 523(a)(2) excepts from discharge any debt "for money, . . . to the extent obtained by (A) . . . actual fraud,. . . ." (emphasis supplied).
The Plaintiffs argue that the entire judgment debt must be found to be nondischargeable. They cite Birmingham Trust National Bank v. Case, 755 F.2d 1474 (11th Cir.1985), in support of this proposition. In that opinion the Court of Appeals held that, when a debt is declared non-dischargeable on the basis of a false representation in a financial statement, the entire debt is non-dischargeable and there is no off-set, so to speak, for the value of property returnable to the creditor even though it may be the same property so obtained. Moreover, it has been held that a bankruptcy court may not find certain portions of a debt to be non-dischargeable and certain portions discharged. In re McCall, 59 B.R. 3 (Bankr.W.D.La.1986). It is noteworthy that in Birmingham Trust the statutory language quoted by the Eleventh Circuit omitted the phrase "to the extent obtained by". Unfortunately, the guidance of legislative history is lacking as to this statutory riddle. The leading treatise on bankruptcy indicates that the Birmingham Trust decision is not in complete accord with the 1984 amendments to the Code and that the phrase "to the extent obtained by" is limiting language. 3 Collier on Bankruptcy, para. 523.08 (1986).
It may be conceded that the statutory language is ambiguous and, though seemingly simple, difficult to apply to the actual case. In a recent opinion by Bankruptcy Judge Ginsberg, Matter of Suter, 59 B.R. 944 (Bankr.N.D.Ill.1986), it was held that the effect of the emphasized language of the statute quoted above was to preclude finding punitive damages such as were awarded by the state court against the Debtor here to be nondischargeable. It must be said that the punitive damages award of $50,000.00 against the Debtor cannot be considered to be within the language of Section 523(a)(2)(A). In re Brown, 66 B.R. 13, 16 (Bankr.D. Utah 1986). The same reasoning applies to the award of damages for emotional distress since this does not represent "money, property, or services, or . . . credit . . . obtained by . . . actual fraud". Thus, an additional $5,000.00 must be eliminated from the nondischargeable debt determined today. See In re Romero, 535 F.2d 618 (10th Cir.1976). Likewise, the award of multiple damages under the Texas Deceptive Trade Practices Act cannot be included. Each of these components of the damages awarded under the state court judgment represents damages for something *995 other than actual pecuniary loss suffered by the Plaintiffs.
After having given careful consideration to the import of the statutory language, this court is of the view that the phrase "to the extent obtained by" requires that an actual pecuniary loss to the creditor result from the fraudulent conduct of the debtor that gave rise to the debt. This excludes from the nondischargeable debt under Section 523(a)(2)(A) those portions of the judgment debt that are in the nature of a penalty having no relation to the actual pecuniary loss resulting from the debtor's fraud.
Id. at 434-435.
In Matter of Suter, prior to the debtor's bankruptcy, the District Court had entered a judgment versus the debtor on the merits based on four counts, one count was based on RICO (18 U.S.C. § 1962(c)), and one count was for fraud as set forth in § 523(a)(2). The District Court trebled the civil damages pursuant to 18 U.S.C. § 1964(c). The bankruptcy court held the trebled damages dischargeable and stated as follows:
Section 523(a)(2)(A) excepts from discharge "any debt . . . for money . . . to the extent obtained by . . . actual fraud." (emphasis added). The district court judgment here clearly is a debt for money under the Bankruptcy Code. However, § 523(a)(2)(A) precludes the dischargeability of a debt for money only to the extent the money was obtained by actual fraud. In this case, the debtor defrauded McCullough in the amount of $14,045.51. Because of the debtor's fraud, McCullough had to expend $7,141.14 in attorneys' fees in an attempt to recover his actual damages. The treble damages awarded by the District Court under RICO are punitive in nature and in no way alter the extent of the damages for money obtained by actual fraud. The trebling of McCullough's damages did not increase the amount of money which the debtor obtained from McCullough by actual fraud. That amount was and continues to be $14,045.51. It is possible to argue that the attorneys' fees incurred by the debtor in obtaining the prebankruptcy judgment also represent a debt for money obtained by the debtor's actual fraud, although that analysis is admittedly strained at best. Thus, arguably $21,186.65 plus interest at the legal rate is the amount of the debt for money to the extent obtained by the debtor's fraud. It is not possible under any rational reading of the English language that two thirds of the trebling of McCullough's actual damages in any way represents a "debt for money . . . to the extent obtained by . . . actual fraud."
The result reached by this Court also accords with other provisions of the Bankruptcy Code, particularly § 523(a)(7). Section 523(a)(7) provides for the nondischargeability of a debt owed to a governmental unit for a fine, penalty, or forfeiture that is not compensation for any actual damages. In § 523(a)(7), Congress created a specific exception to discharge for noncompensatory damages. However, Congress clearly determined to not allow nongovernmental entities to seek the nondischargeability of punitive damages under § 523(a)(7). The language of §§ 523(a)(2)(A) and 523(a)(7) when read in harmony compel the conclusion that Congress intended noncompensatory damages to be excepted from discharge only where they are owed to a governmental entity pursuant to § 523(a)(7). No other result can be gleaned from interpreting the plain language of those sections.
Finally it must be remembered that § 523(a)(2)(A) is a provision conflicting with the fresh start philosophy of the Bankruptcy Code. Therefore, it should be read no more broadly than required to implement the policy underlying § 523(a)(2)(A), i.e. the policy against debtors avoiding fraud-based debts in bankruptcy. See In re Prestridge, 45 B.R. 681, 684 (Bankr.W.D.Tenn.1985); In re Lipscomb, 41 B.R. 112, 116 (Bankr.E.D. Va.1984). If McCullough collects $14,045.51 plus interest and attorneys' fees from the debtor, he will be made whole. *996 If he collects $56,935.62, he will, in effect, receive a windfall in the amount of $35,748.97. The Bankruptcy Code intends the former result. It does not intend the latter. Section 523(a)(7) recognizes that debtors are to be punished by governmental units in (and after) bankruptcy cases, not by creditors. The motion to reconsider is denied.
Id. at pp. 946-47.
Are punitive damages awarded in a prior judgment which could have collateral estoppel effect to a private party in the nature of a fine or in the nature of punitive damages? It is clear that a fine, penalty or forfeiture payable to or for the benefit of a governmental unit is not dischargeable under § 523(a)(7). However, the judgment in question clearly provides that the punitive damages are awarded to the plaintiffs rather than to or for the benefit of a governmental unit. Matter of Suter, 59 B.R. 944 supra. They are not in the nature of a fine, penalty or forfeiture payable to or for the benefit of a governmental unit, and are thus not nondischargeable on that basis. Since they are treated as civil punitive damages payable to the plaintiff, are they nondischargeable in a dischargeability proceeding under § 523(a)(2), (4) or (6)?
It has been held that statutorily authorized punitive damage awards are nondischargeable. In re Maxwell, 51 B.R. 244 (Bankr.S.D.Ind.1983). See also, In re Adams, supra. In Maxwell, the award of punitive damages by the state court in a summary judgment was held to be nondischargeable, since they were awarded pursuant to state law which rendered the actual debt nondischargeable. The court gave collateral estoppel effect to the prior state court judgment. Accordingly, unless it is clear that the state court determination of punitive damages was based on the exact same standard as used under the Bankruptcy Code, then the previous state court judgment has no effect on this Court's determination of the dischargeability of the punitive damage award. Maxwell involved a state court judgment concerning the debtor's "willful and malicious" conduct. The court in Maxwell gave a collateral estoppel effect to a prior state court determinations as to the debtor's conduct. In Maxwell, the prior state court judgment was a summary judgment which awarded "punitive" damages based on I.C. XX-X-XX-X and I.C. XX-XX-X-X for criminal conversion. The court, through Judge Bayt, noted that Indiana law allows punitive damages "whenever the elements of fraud, malice, gross negligence or aggression mingle in the controversy", citing, Gorman v. Sof-t Mate, Inc., 513 F.Supp. 1028, 1037 (N.D. Ind.1981), or "where the defendant is . . . guilty of . . . willful and wanton misconduct", citing, Baker v. American States Insurance Co., 428 N.E.2d 1342, 1351 (Ind. App.1981). Judge Bayt did not discuss his holding in In re Record Co., supra, but that case is distinguishable from Maxwell, in that in In re Record Co., supra, there was no prior state court judgment which could be given collateral estoppel effect.
The court concludes that when a pre-petition judgment results from the case being actually tried on the merits, in which punitive damages were awarded in the judgment and the judgment is entitled to collateral estoppel effect, the claimant is entitled to punitive damages in a nondischargeability proceeding, when they have been proven up by competent, clear and convincing evidence in the prior trial.
The "fresh start" policy of the Bankruptcy Code should have no application to a debtor who has committed a nondischargeable act that is so grievous that after a full trial on the merits, and after that court, with a full opportunity to observe the witnesses, awarded punitive damages based on clear and convincing evidence. The very purpose of § 523 is in fact to penalize the less than honest debtor for his misdeeds and thus the allowance of punitive damages is not inconsistent with the purposes of the Code in such an instance.
The prior court has adjudicated a fully liquidated "debt", prepetition, by entry of the judgment and once it has been accorded collateral estoppel effect by the Bankruptcy Court, the prevailing creditor should not be penalized by a reduction in the amount awarded for any portion that was punitive *997 in nature. Those punitive damages flow from the primary debt just as do attorney fees and interest, and should not be simply excised from the judgment because this court might feel those damages are too harsh. The entire judgment should either be given collateral estoppel effect, or it should not be given such effect. If the Debtor thought the District Court was erroneous, he should have exercised his appeal rights from that forum.
This court should not, in giving collateral estoppel effect to a prior judgment, also attempt to seize the role of a super-appellate court and second-guess the prior court after it has made thorough and complete findings of fact and conclusions of law.
Therefore, this Court hold that the punitive damages awarded by the District Court are also nondischargeable.
The Court thus having reviewed the complaint and answer filed herein and the Plaintiffs' motion for summary judgment together with the supporting memoranda and all of the papers and documents filed in support of the motions, and having taken in to consideration all admitted facts, the Court finds that no triable issue of material fact exists pursuant to Fed.R.Civ.P. 56 in that the entire District Court judgment is to be accorded collateral estoppel effect, and that the Plaintiffs are entitled to a summary judgment as a matter of law. It is therefore
ORDERED, ADJUDGED, AND DECREED that a Summary Judgment be entered in favor of the Plaintiffs and against the Defendant-Debtor.
NOTES
[1] See 11 U.S.C. § 35(a)(2), repealed 1978. Section 17(a)(2) is the predecessor provision under the Bankruptcy Act of 1898 to § 523(a)(6) of the Code. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1570998/ | 29 So. 3d 1142 (2009)
Frederick A. SMITH, Appellant,
v.
AMS STAFF LEASING and Aspen Administrators, Appellees.
No. 2D08-2206.
District Court of Appeal of Florida, Second District.
November 13, 2009.
Rehearing Denied March 17, 2010.
*1143 Alex Lancaster of Lancaster & Eure, P.A., Sarasota, for Appellant.
D. Robert Swanson of William E. Gregory, P.A., Longwood, for Appellees.
PER CURIAM.
Affirmed.
KELLY and VILLANTI, JJ., Concur.
CASANUEVA, C.J., Concurs specially.
CASANUEVA, Chief Judge, Specially concurring.
Frederick Smith appeals the order denying his petition for rule nisi, seeking to enforce a workers' compensation order. Within the petition Mr. Smith also sought attorney's fees. Our review is de novo. Sanders v. City of Orlando, 997 So. 2d 1089 (Fla.2008).
Facts
The meager record indicates that on September 5, 2007, the parties entered into a mediation agreement that required AMS Staff Leasing and Aspen Administrators (combined, the Employer) to provide Mr. Smith with certain benefits, including the services of a pain management physician. On October 9, 2007, a Judge of Compensation Claims ordered the parties to comply with the mediation agreement.
Mr. Smith subsequently filed a petition for rule nisi in the circuit court pursuant to section 440.24, Florida Statutes (2007). He sought compliance with the prior compensation order, claiming that the Employer had not yet provided the pain management services. He also sought costs, interest penalties, and attorney's fees as provided by chapter 440. The circuit court held a hearing on November 9, 2007, and granted the petition. The employer sought rehearing, asserting that through understandable confusion its attorney did not appear on November 9. The circuit court granted the motion for rehearing and scheduled a new rule nisi show cause hearing for April 9, 2008.
On November 30, 2007, the Employer filed a response to Mr. Smith's petition for rule nisi. The Employer stated that despite its continuing good faith attempts it had not yet been able to locate and procure the required pain management specialist. The Employer claimed that it had kept Mr. Smith informed while it persisted in its attempts to comply with the compensation order. The circuit court held the second hearing on April 9, 2008, and denied the petition without any written factual findings. The circuit court made no specific mention of Mr. Smith's request for attorney's fees and costs.
Analysis
Mr. Smith claims the trial court erred in denying his petition for rule nisi and request for attorney's fees and costs because it relied upon the Employer's justification defense. The record does not contain a copy of the transcript from the April 9, 2008, hearing, and Mr. Smith states that none exists. The only documentation within the record that suggests each party's posture is their pleadings. Without the transcript, this court cannot determine whether the parties presented evidence at the hearing and what that evidence was. More importantly, this court cannot determine the basis for the circuit court's order. The record is simply insufficient to support Mr. Smith's argument.
Moreover, I concur with the majority in affirming the denial of the petition for rule nisi on the merits as well, assuming the parties presented evidence to the circuit court which coincides with their pleadings. Section 440.24(1) states:
In case of default by the employer or carrier in the payment of compensation due under any compensation order of a judge of compensation claims or other *1144 failure by the employer or carrier to comply with such order within 10 days after the order becomes final, any circuit court of this state within the jurisdiction of which the employer or carrier resides or transacts business shall, upon application by the department or any beneficiary under such order, have jurisdiction to issue a rule nisi directing such employer or carrier to show cause why a writ of execution, or such other process as may be necessary to enforce the terms of such order, shall not be issued, and, unless such cause is shown, the court shall have jurisdiction to issue a writ of execution or such other process or final order as may be necessary to enforce the terms of such order of the judge of compensation claims.
In its brief, the Employer claimed to have started providing pain management services to Mr. Smith on December 10, 2007. This is long after the compensation court rendered its order but months before the circuit court held the second hearing on Mr. Smith's petition. Because the Employer was in compliance by the date of the hearing, there was no need for "a writ of execution or such other process or final order" because none was "necessary to enforce the terms of such order of the judge of compensation claims." Id. Consequently, the circuit court correctly declined to enter an enforcement order if such were the facts before it.
However, I do not think this resolution answers Mr. Smith's request for attorney's fees and costs. Under section 440.34(3) and (3)(d), costs and attorney's fees shall be taxed and awarded to the claimant if he "successfully prevails in proceedings filed under [section] 440.24." The plain language of this statute suggests that Mr. Smith, who did not technically "prevail" because he did not successfully obtain relief from the circuit court, would not be entitled to such awards.
Such reasoning could permit an employer in similar circumstances to willfully ignore a compensation claim order until the claimant brought a petition for rule nisi in the circuit court or immediately prior to the hearing on the petition. Once that employer complied the petition would be moot, and the employer would arguably escape responsibility for costs and fees.
This scenario would be contrary to the legislative intent manifested in the statutory framework of workers' compensation. Section 440.015 states: "It is the intent of the Legislature that the Workers' Compensation Law be interpreted so as to assure the quick and efficient delivery of disability and medical benefits to an injured worker and to facilitate the worker's return to gainful reemployment at a reasonable cost to the employer." An employer would suffer no negative consequences for delaying compliance with a compensation order until the last possible moment, even though the claimant's petition for rule nisiand the associated costs and fees he incurredmay have been the direct cause of the employer's compliance.
Generally, these circumstances should require an evidentiary hearing on costs and fees to establish whether the responding party sought to and complied with the compensation order. It may well be that, despite ongoing efforts, a physician was impossible to retain. Good-faith efforts should preclude an award of fees and costs. Conversely, where no efforts were undertaken, it is my view that an award of costs and attorney's fees would be appropriate. Each case would require the circuit court to conduct a fact-intensive analysis and make specific findings of fact to support its order and facilitate appellate review. However, because the record in this case does not indicate what occurred *1145 or did not occurin the proceedings below, I concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1570992/ | 29 So. 3d 915 (2009)
Diane E. JOHNSON
v.
Jodi HALAGAN, as personal representative of the estate of Clarence L. Johnson, deceased.
2080130.
Court of Civil Appeals of Alabama.
August 28, 2009.
J.E. Sawyer, Jr., Enterprise, for appellant.
Thomas F. Kelly, Jr., Clayton, for appellee.
MOORE, Judge.
Diane E. Johnson ("the wife") appeals from an order entered by the Barbour Circuit Court in a divorce action between her and Clarence L. Johnson ("the husband").
Procedural History
On December 9, 2005, the husband filed a complaint seeking a divorce from the wife and an equitable division of the parties' jointly owned real and personal property. On January 13, 2006, the wife filed an answer to the husband's complaint; she also sought an award of periodic alimony.
*916 On February 6, 2006, the wife filed a "motion for pendente lite hearing," requesting that, pending a final hearing, she be awarded a monthly amount for spousal support. Following a hearing on February 22, 2006, at which counsel for both parties informed the court that they had reached an agreement pertaining to the pendente lite issues and placed the terms of the agreement on the record, the trial court, on February 27, 2006, entered a pendente lite order that, among other things, ordered the husband to pay to the wife $700 per month in spousal support and ordered the husband to pay insurance on the vehicle being driven by the wife and on the marital residence.
On November 7, 2006, the wife filed a motion asking that the trial court find the husband in contempt for his failure to pay to the wife the monthly spousal support as ordered, issue a restraining order preventing the husband from entering upon the premises of the marital residence, and increase the husband's monthly spousal-support obligation. Following a hearing on March 13, 2007, at which ore tenus evidence was received, the trial court entered an order on April 20, 2007, that, among other things, (1) ordered that the marital residence be listed with a realtor and sold; (2) ordered the husband to pay all copays for doctor visits and prescription drugs, to keep medical insurance in effect, and to pay all outstanding medical bills pertaining to the parties; (3) ordered the husband to pay spousal support in the amount of $800 per month; (4) ordered the husband to return the lawnmower, "weed eater," and other items needed for maintenance of the yard and to assist with the upkeep of the yard until such time as the marital residence was sold; (5) ordered the parties to maintain the status quo as to all certificates of deposit, bonds, and personal property and ordered the parties not to dispose of, disperse, and/or dissolve any of the personal and real property of the parties; and (6) reserved final disposition of the marital assets, moneys, certificates of deposit, bonds, proceeds from the sale of the marital residence, alimony, and any other matters until such time as the marital residence was sold.
Both parties filed additional contempt motions, and orders were entered by the trial court on those motions. Thereafter, on June 30, 2008, the trial court entered an order "after hearing extensive oral testimony during trial" that, among other things, (1) divorced the parties; (2) ordered that the marital residence located in Clio, Alabama, be sold and that a hearing "be set for division of the proceeds from [that] sale, as well as, [for] division of Certificates of Deposit" (emphasis added); (3) divided certain of the parties' personal property; (4) ordered each party to be responsible for his or her own debts; (5) awarded each party his or her individual checking accounts and the funds therein; (6) declined to award the wife periodic alimony; and (7) declined to award either party any form of property settlement from the other party. On July 30, 2008, the wife filed a "motion for reconsideration or in the alternative motion for new trial"; that motion was denied by the trial court on August 22, 2008. On September 29, 2008, the wife filed a notice of appeal to this court.
Subsequent to the filing of the wife's notice of appeal, the trial court, on September 30, 2008, purported to enter the following order: "The court having been notified of an appeal being taken by the [wife] it is hereby ordered, adjudged and decreed that all proceedings are stayed pending appeal." Thereafter, on October 7, 2008, the trial court purported to enter the following order:
*917 "The Court having received correspondence from the [wife] through her attorney... that she does not intend to file an appeal bond hereby lifts and vacates the stay previously entered. The closing shall proceed and all funds and proceeds due either party shall be interplead[ed] into court for equitable distribution...."
On October 20, 2008, the trial court then purported to enter the following order: "The Court hereby sets this case for a hearing on distribution of marital assets for October 30, 2008 at 10:00 a.m. at the Barbour County Courthouse, Clayton Division." The hearing set for October 30, 2008, was continued by the trial court and, it appears from the record, was eventually held on December 10, 2008. On December 10, 2008, the trial court purported to render the following order: "That any and all rights of [the wife] to be designated a beneficiary under the Joint and Survivor Annuity plan of payment elected by [the husband] from Ohio Police & Fire Pension Fund be hereby cancelled and of no further force and effect." That purported order was not put into the State Judicial Information System ("SJIS") and, thus, was not entered by the trial court, see Rule 58(c), Ala. R. Civ. P. There is, however, a December 10, 2008, entry in SJIS, which states: "Testimony taken and judge to rule and do order." Thereafter, the trial court, on January 13, 2009, purported to enter an order disposing of the remaining marital assets of the parties.
On March 2, 2009, counsel for the husband filed a "suggestion of death" in the trial court, indicating that the husband had died on February 21, 2009. On March 10, 2009, counsel for the husband filed a suggestion of death with this court. On April 13, 2009, counsel for the husband filed a motion to substitute Jodi Halagan, as personal representative of the husband's estate, as the appellee in this case. That motion was granted by this court that same day.'"
Analysis
Because "`"jurisdictional matters are of such magnitude that we take notice of them at any time and do so even ex mero motu,"'" Horton v. Horton, 822 So. 2d 431, 433 (Ala.Civ.App.2001) (quoting Wallace v. Tee Jays Mfg. Co., 689 So. 2d 210, 211 (Ala.Civ.App.1997), quoting in turn Nunn v. Baker, 518 So. 2d 711, 712 (Ala.1987)), we must first consider whether we have jurisdiction over this appeal.
"[J]urisdiction of a case can be in only one court at a time," Foster v. Greer & Sons, Inc., 446 So. 2d 605, 608 (Ala.1984), and, "`[o]nce an appeal is taken, the trial court loses jurisdiction to act except in matters entirely collateral to the appeal.'" Horton, 822 So.2d at 434 (quoting Ward v. Ullery, 412 So. 2d 796, 797 (Ala.Civ.App. 1982)). Thus, in the present case, the filing of the wife's notice of appeal on September 29, 2008, divested the trial court of jurisdiction to act in the parties' divorce action, which encompassed the division of all the parties' real and personal property, until that appeal was resolved. "An order entered by a trial court without jurisdiction is a nullity." J.B. v. A.B., 888 So. 2d 528, 532 (Ala.Civ.App.2004). Accordingly, all orders entered by the trial court after September 29, 2008, "`except [orders entered] in matters entirely collateral to the appeal,'" are nullities. Horton, 822 So.2d at 434.
Having determined that the orders entered by the trial court after September 29, 2008, are nullities, we must now determine whether the trial court's June 30, 2008, order is a final judgment that will support an appeal.
"`... The question whether a judgment is final is a jurisdictional question, *918 and the reviewing court, on a determination that the judgment is not final, has a duty to dismiss the case. See Jim Walter Homes, Inc. v. Holman, 373 So. 2d 869, 871 (Ala.Civ. App.1979).'
"Hubbard v. Hubbard, 935 So. 2d 1191, 1192 (Ala.Civ.App.2006). See also § 12-22-2, Ala.Code 1975.
"This court has previously stated:
"`"`It is a well established rule that, with limited exceptions, an appeal will lie only from a final judgment which determines the issues before the court and ascertains and declares the rights of the parties involved.'" Owens v. Owens, 739 So. 2d 511, 513 (Ala.Civ. App.1999), quoting Taylor v. Taylor, 398 So. 2d 267, 269 (Ala.1981). This court has stated:
"`"A final judgment is one that completely adjudicates all matters in controversy between all the parties.
"`"An order that does not dispose of all claims or determine the rights and liabilities of all the parties to an action is not a final judgment. In such an instance, an appeal may be had `only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment.' See Rule 54(b), Ala. R. Civ. P.'"
"Adams v. NaphCare, Inc., 869 So. 2d 1179, 1181 (Ala.Civ.App.2003) (quoting Eubanks v. McCollum, 828 So. 2d 935, 937 (Ala.Civ.App.2002))."
Blankenship v. Blankenship, 963 So. 2d 112, 114 (Ala.Civ.App.2007). Additionally, this court, in Grubbs v. Grubbs, 729 So. 2d 346, 347-48 (Ala.Civ.App.1998), held that a divorce judgment that "made no final distribution of all the parties property" was not a final judgment. See also McGill v. McGill, 888 So. 2d 502, 504 (Ala.Civ.App. 2004).
In the present case, the trial court did not finally dispose of all the marital assets of the parties in its June 30, 2008, order; instead, the trial court ordered that the marital residence be sold and further ordered that a hearing "be set for division of the proceeds from [that] sale, as well as, [for] division of [the] Certificates of Deposit." That order was a nonfinal judgment because it did not "`"completely adjudicate[] all matters in controversy between... the parties."'" Blankenship, 963 So.2d at 114. Additionally, the trial court did not certify its June 30, 2008, order as final pursuant to Rule 54(b), Ala. R. Civ. P. See id. Accordingly, the trial court's June 30, 2008, order is not a final judgment, and we must dismiss the appeal.
APPEAL DISMISSED.
THOMPSON, P.J., and PITTMAN, BRYAN, and THOMAS, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1570995/ | 29 So. 3d 840 (2009)
Phyllis MINTER, Appellant,
v.
John C. MINTER, Appellee.
No. 2008-CA-01114-COA.
Court of Appeals of Mississippi.
October 13, 2009.
Rehearing Denied December 15, 2009.
Certiorari Denied March 11, 2010.
*841 Leonard Brown Melvin, Hattiesburg, attorney for appellant.
Alexander Ignatiev, attorney for appellee.
*842 Before MYERS, P.J., IRVING, and BARNES, JJ.
BARNES, J., for the court.
¶ 1. John Minter filed a petition in the Lamar County Chancery Court seeking modification of the primary physical custody of his minor son, John Clayborn Minter ("Clay"), from his former wife, Phyllis Minter, to him. The chancery court issued an agreed order, whereby temporary physical custody of Clay was transferred to John, with Phyllis receiving standard visitation. After a hearing on the matter, custody was modified, with John receiving permanent physical custody of Clay. Finding no reversible error, we affirm.
STATEMENT OF FACTS AND PROCEDURAL HISTORY
¶ 2. Phyllis and John married in February 1998. One child, Clay, was born of the marriage in July 1999. The Chancery Court of Lamar County granted a judgment of divorce based on irreconcilable differences in August 2000. The parties agreed to share legal custody of Clay, with Phyllis having primary physical custody and John having standard visitation, which consisted of every other week from Thursday through Sunday. The court also ordered John to pay $200 per month in child support.
¶ 3. After the divorce, Phyllis was living in Opelousas, Louisiana, at her father's house, and John was living in Hattiesburg, Mississippi. Once Clay began pre-kindergarten, John testified that he would pick Clay up every other Friday and return him to Phyllis on Sunday. There were no problems with the custody arrangement until May 2005, when John petitioned the chancery court for modification of custody, mainly because Clay had to repeat kindergarten due to thirty-five absences in one year while under Phyllis's custody. John also claimed Phyllis failed to provide Clay with suitable, stable living quarters; she used drugs; cohabited with men to whom she was not married; and did not cooperate with John about transporting the child between Mississippi and Louisiana for visitation.
¶ 4. In August 2005, the chancery court entered a temporary order, whereby the parties were ordered to submit to hair follicle and urinalysis drug tests.[1] Also, the court appointed Dr. John Galloway, a licensed marriage and family counselor and social worker, to evaluate Clay's health and well-being and make a recommendation to the court concerning Clay's custody. In January 2006, temporary physical custody of Clay was transferred to John through an agreed order. Clay has remained in John's custody since that time, with Phyllis maintaining standard visitation rights.
¶ 5. The chancery court held hearings in June and October 2007. Testimony showed both parties had lived in numerous locations and had held several jobs since the divorce. At the time of the divorce, Phyllis was living in Hattiesburg, but she later moved to Louisiana and stayed at her father's house in Opelousas for approximately one year. She then moved to an apartment in Lafayette, Louisiana for eight months. Because her father was dying of cancer, Phyllis moved back to his house to care for him. During this time, Phyllis gave birth to her second child, Jacob, in December 2002. Phyllis had the child out of wedlock; she had dated the father of the child for six months. Phyllis *843 testified Jacob's father has no active participation in his son's life.
¶ 6. Phyllis continued to live with her father for approximately two years until he died; then she, Clay, and Jacob moved in with her brother, who had a larger mobile home nearby, for approximately one year. Next, she moved in with her sister in Geismar, Louisiana for eight months, while she waited for an apartment in Baton Rouge to become available. Five people were staying in a three-bedroom residence: Clay and Jacob had one bedroom; Phyllis her own bedroom; and Phyllis's sister and aunt slept in one room. Once the apartment became available, Phyllis moved to Baton Rouge for one year. Phyllis's latest residence was a two-bedroom mobile home in Prairieville, Louisiana. She resides in one bedroom, with Jacob and Clay (when she has custody) sharing another bedroom. She has several relatives who live nearby.
¶ 7. As for employment, at the time of the divorce, Phyllis was working for H & R Block and for an attorney in Hattiesburg. She had also worked at a Cracker Barrel restaurant at some point since the divorce. She then worked at a seafood company, followed by Teche Electric in Lafayette for one year, where she was laid off. At this time she also became pregnant with Jacob; so, she did not work until she had him. Next, she worked at a T-shirt printing company for a few months until she moved to Baton Rouge, where she worked for a church daycare for about five months, and then another daycare for a year. At the time of the final judgment, Phyllis had worked at Tonya's Kids, another daycare, in Gonzalez, Louisiana, for more than two consecutive years.
¶ 8. John, too, has lived in various locations. At the time of the divorce, John was living in Hattiesburg. One month later, he moved to another location in Hattiesburg for fourteen months; then he lived with and assisted his grandmother for approximately three years. John moved to another address for approximately a year and one half, until he bought his current house in Petal, Mississippi, which is a three-bedroom home with a fenced-in backyard. He noted that he has only lived in two places since receiving custody of Clay.
¶ 9. Additionally, John has held numerous jobs since the divorce. At the time of the divorce, John worked for Deviney Construction for three months. To make more money, he left this job to work on a construction site in Baton Rouge. He worked at this job until the project was completedapproximately eight weeks. During this time, John still maintained a residence in Hattiesburg. In 2002, John collected unemployment. He then returned to Hattiesburg and worked for various contractors as a painter. At the time of the hearing, he was self-employed, and for the past three years, he has operated a paint-contracting company. He employs three to four individuals and has flexible hours.
¶ 10. Regarding Clay's education, he attended numerous schools while in Phyllis's custody. Clay started out in pre-kindergarten at a public school in Opelousas. Phyllis claimed that she was happy with the school, but John did not want Clay in public school; so they moved Clay to kindergarten at New Hope Christian Academy. John refutes this and claims Phyllis was the one who had complained about the public school. John paid the tuition at New Hope.
¶ 11. Testimony conflicted regarding the explanation of Clay's thirty-five unexcused absences at the private school. John blamed Phyllis, and Phyllis blamed John. Phyllis and her sister claimed the absences were due to John's picking Clay *844 up every other Thursday morning pursuant to the visitation schedule in the chancellor's final judgment, which was entered before Clay started school, instead of waiting until Friday afternoon when school was over. John and his mother testified, however, that once Clay was in kindergarten, John did not pick Clay up until school let out on Friday, and that John caused Clay to miss only one day of school. Phyllis admitted she never objected to or sought to have the visitation schedule changed, because John would verbally and physically threaten her if she disobeyed him. Phyllis also stated that the teachers at New Hope were of poor quality; they were not certified and were just hired "off the streets." John claims that they both knew the teachers at the private school were not certified, and he agreed to the change in schools to make Phyllis happy.
¶ 12. After New Hope and while still in Phyllis's custody, Clay attended Grand Prairie Elementary from August 2005 to October 2005. Records indicate he missed four days of school. Clay then attended Dutchtown Primary from October 2005 to December 2005, apparently because of Phyllis's moving. John was then granted temporary custody in January 2006, and Clay attended Thames Elementary, where he was on the honor roll and was promoted to first grade. Then, John moved to Petal where Clay attended Petal Elementary and was, at the time of the hearing, making good grades and had no absences.
¶ 13. Also testifying at the hearing was Dr. Galloway, who has a Ph.D. in sociology. After voir-dire examination, Phyllis's counsel objected to Dr. Galloway's acceptance as an expert in the fields of counseling, sociology, and social work, but the chancellor overruled the objection. Dr. Galloway wrote an initial two-page report to the court in October 2005, after having met with John twice and Phyllis once; the report was entered into evidence at the June 2007 hearing. In it, Dr. Galloway explained that Phyllis came across as having had a "very difficult life." He opined that Clay should be receiving better attention from Phyllis. As time passed, John and Clay were doing more activities together, with Clay's becoming closer to his father. Dr. Galloway found no evidence of abuse or drug use on John's part, as Phyllis had complained. By the time of the June 2007 hearing, Dr. Galloway had met with John five times (three of which Clay was present) and Phyllis once. He opined that Phyllis, through her affect, demeanor, presentation, and history, "demonstrated an inability to take care of herself, projects blame onto other people and prefers to rely on other people to handle things for her." He concluded she was not a fit parent at that time.
¶ 14. Regarding his meetings with Clay, Dr. Galloway found him reluctant to talk at first, but eventually Clay became more outgoing and expressed a desire to be around his father. Dr. Galloway determined that John was a good role model for Clay, who enjoyed life with his father.
¶ 15. Additionally, for the first time at the hearing, Phyllis accused Dr. Galloway of being independently hired by John before being appointed by the court. John's counsel denied this accusation; however, Phyllis's counsel contended that Dr. Galloway had actually had a meeting with John in January 2005, seven months before he was appointed by the court. Dr. Galloway's handwritten notes, which were admitted into evidence, did indicate a meeting in January 2005, but Dr. Galloway was unsure whether he first met with John in January 2005 or 2006; he explained that his notes might have had a scrivener's error regarding the year. It was undisputed that John was responsible for paying all of Dr. Galloway's fees for the evaluation *845 pursuant to the court order, since Phyllis had limited funds.
¶ 16. The chancellor noted that Phyllis's counsel did not object prior to trial through a motion in limine to exclude Dr. Galloway as an expert witness. The chancellor also explained that, having observed Dr. Galloway for several years testifying in court, he was always objective and fair in his opinion regarding the best interest of the child. Therefore, the chancellor did not find any bias present, even if John may have met independently with Dr. Galloway one time.
¶ 17. Phyllis tendered Eliot Levin as an expert witness in the field of clinical social work and custody evaluation at the October 2007 hearing. Phyllis hired Levin to assist her and Clay in what Phyllis perceived as Clay's emotional difficulties related to the custody and visitation situation. Phyllis also asked Levin to review Dr. Galloway's two-page report. Levin testified that after meeting with Phyllis for approximately four hours and with Clay for approximately one hour, he determined that Dr. Galloway's custody report was "garbage." Levin claimed Dr. Galloway did not interview "peripheral resources" or Phyllis and Clay sufficiently. Additionally, he found Dr. Galloway's report was too general. Levin claims Clay's stuttering is treatable, but his condition is worsening due to the stress of the custody arrangement. Levin made his opinion under the presumption that both Phyllis and John were good parents; however, he never met with John and did not review Dr. Galloway's trial testimony. Levin opined that Phyllis was a passive person for voluntarily signing the temporary order granting John custody; Levine contended that Phyllis was "bullied" into signing the temporary order by her attorney at that time.
¶ 18. John entered calendars into evidence showing the numerous dates he kept Clay before the child started school when Phyllis still had primary custody.[2] John described his relationship with Clay as "real close," with Clay being his number one priority. For the year and one half since John has had custody, he typically drives Clay to school, picks him up from school, helps with Clay's homework, accompanies him to extracurricular activities after school (including karate, soccer, swimming lessons, and baseball) and generally provides a highly structured environment. John claims to have many family members near his residence. John also arranged for Clay to receive speech therapy from the Petal Public Schools twice per week. John admitted that the program may not have been as effective as possible, and he pledged to enroll Clay in a more specialized local speech-therapy program.
¶ 19. Phyllis testified that Clay's speech difficulties had worsened since John received temporary custody of Clay. She had obtained placement for Clay in a speech-therapy program at Louisiana State University, approximately one hour from her home, if she got custody. Phyllis also admitted that her drivers' license had been suspended since 2001 due to an unpaid traffic ticket. She claimed she "thought it was taken care of," and presumably took care of it the week of the June 2007 hearing. Phyllis also admitted to pleading guilty and paying restitution on a bad check. Since the divorce, Phyllis said that she has not had any live-in relationships or extended stays with unrelated men. She stated Clay and Jacob's relationship is "very close." When she had custody of *846 Clay, he engaged in T-ball, baseball camp, and Bible camp. Phyllis acknowledged she had been relying on food stamps for several years for her and Jacob in order to make ends meet. She admitted agreeing to grant John temporary custody of Clay in December 2005, but she claims her attorney at the time misinformed her on the law.
¶ 20. Clay's first-grade teacher in Petal testified that Clay was doing very well in school under his father's custody and that John appears to be involved and interested in Clay's education. She stated Clay is one of the top students in his class, consistently completes all of his homework, and has been tested for the school's gifted program. He also received an award from his teacher for "most cooperative" student.
¶ 21. Phyllis's supervisor at her current employer, Tonya's Child Care, testified that Phyllis has great rapport with the approximately eight children, who are between the ages of one year and sixteen months, under her care. The supervisor described Phyllis as being "one of our best employees." The supervisor also testified she would be concerned with the quality of parenting if a child had to repeat kindergarten because of thirty-five unexcused absences. At the time of the hearing, Phyllis worked from 7:00 a.m. until 6:00 p.m., five days a week, but her supervisor stated she could change her hours from 7:00 a.m. until 4:30 p.m. Phyllis further added that if granted custody, Clay could attend her daycare's before-and-after-school programs.
¶ 22. Phyllis's sister, Gloria Deville, testified that she and their brother, Chad Deville, live within five miles of Phyllis. Gloria maintained that once Clay started kindergarten, John kept the court-ordered visitation, picking Clay up on Thursday nights. Therefore, Clay was missing kindergarten on Thursday, Friday, and sometimes Monday; however, she was not certain this happened every time. For Phyllis's visitation period, Gloria usually picked Clay up from John's custody on Fridays because of Phyllis's work hours.
¶ 23. John's mother, Connie Chisholm, testified about John's family and support network in the Hattiesburg area. She stated that John picked Clay up from Phyllis on Thursdays until Clay began kindergarten; then, John voluntarily limited his visitation to commence alternate Fridays, not Thursdays, so Clay would not miss school. Chisholm, who is the owner and director of a child-care center, stated she would keep Clay whenever John was working.
¶ 24. On May 29, 2008, the chancery court entered a final judgment, granting John permanent physical custody of Clay. Phyllis now timely appeals, raising the following issues: (1) the chancellor erred in applying the Riley test for custody modification; (2) the chancellor erred in performing an Albright analysis as there was no material change in circumstances adverse to Clay; (3) the chancellor erred in finding the majority of the Albright factors favored John, not Phyllis; and (4) the chancery court erred in considering the expert testimony of Dr. Galloway.
STANDARD OF REVIEW
¶ 25. Our standard of review for child custody cases is very limited. Johnson v. Gray, 859 So. 2d 1006, 1012(¶ 31) (Miss.2003). In order for this Court to reverse, the chancellor must be "manifestly wrong, clearly erroneous, or apply an erroneous legal standard." Id. (citing Mabus v. Mabus, 847 So. 2d 815, 818(¶ 8) (Miss.2003)). The chancellor's findings of fact may not be set aside or disturbed on appeal if they are supported by substantial, credible evidence. Id. (citing Marascalco *847 v. Marascalco, 445 So. 2d 1380, 1382 (Miss.1984)).
ANALYSIS
1. Material Change in Circumstances
¶ 26. The law on custody modification is well established. "[A] non-custodial party must prove [that]: (1) there has been a substantial change in circumstances affecting the child; (2) the change adversely affects the [child's] welfare; and (3) a change in custody is in the best interest of the child." Johnson, 859 So.2d at 1013(¶ 33) (citing Bredemeier v. Jackson, 689 So. 2d 770, 775 (Miss.1997)). The totality of the circumstances must be considered in determining whether there was a material change in circumstances. Mabus, 847 So.2d at 818(¶ 8) (citing Bredemeier, 689 So.2d at 775). Furthermore, it is well settled that the polestar consideration in any child custody matter is the best interest and welfare of the child. Id. (citing Albright v. Albright, 437 So. 2d 1003, 1005 (Miss.1983)).
¶ 27. In his final judgment modifying custody, the chancellor cited Riley v. Doerner, 677 So. 2d 740, 744 (Miss.1996), where custody was modified based on an improvement in the noncustodial parent's living condition. Riley acknowledged that "a change in circumstances of the non-custodial parent does not, by itself, merit a modification of custody." Id. (citing Duran v. Weaver, 495 So. 2d 1355, 1357 (Miss. 1986)). However, the Riley court went on to hold that, while not abandoning the material-change-in-circumstances standard, "when the environment provided by the custodial parent is found to be adverse to the child's best interest, and that the circumstances of the non-custodial parent have changed such that he or she is able to provide an environment more suitable than that of the custodial parent," custody may be modified. Id.
¶ 28. Phyllis argues that the chancellor erred in applying Riley to find custody could be modified. Phyllis explains that Riley holds it still must first be shown that there is a material change in circumstances and that the custodial parent's environment is adverse to the child's best interest. She contends there are no such facts in the case at bar justifying such a finding. Thus, she concludes the custody modification was inappropriate.
¶ 29. First, we note that the chancellor did not rely on the test in Riley alone; in his opinion, he initially cited the traditional three-part test for modificationa material change has occurred which is adverse to the child, where a change is in the child's best interest. See Johnson, 859 So.2d at 1013(¶ 33). He properly noted that in determining whether a material change in circumstances had occurred, the relocation of a parent, in and of itself, is insufficient. See Giannaris v. Giannaris, 960 So. 2d 462, 468(¶ 11) (Miss.2007). The chancellor then cited to Riley, but he did not provide any analysis as to how the facts of this case applied to Riley's holding. Therefore, we disagree with Phyllis's contention that the chancellor improperly based his decision entirely on Riley.
¶ 30. Second, we agree with Phyllis that the alternative Riley test is not applicable in this case. In Riley, the supreme court affirmed a chancellor's decision to transfer custody of a minor child from the mother to the father, even though the chancellor found the father had not met the traditional test for modification. Id. at 745. Testimony showed: the mother had moved several times; the child had attended several different schools due to the moves; the child had failed first grade; the mother was sporadically employed; her income was supplemented by food stamps and other government assistance; and she had *848 lived with men prior to and subsequent to her current live-in boyfriend, who admitted he occasionally smoked marijuana. Id. at 742. The chancellor in Riley reasoned that although he believed it was in the best interest of the child to live with her father due to the negative "totality of circumstances" surrounding the mother, he could not transfer custody because there had been no material change in circumstances since the original judgment and no measurable adverse affect on the child. However, the chancellor conditioned his ruling on both parents passing regular drug tests, and when the mother ultimately tested positive for marijuana use, the chancellor then transferred custody to the father. Id. The supreme court found it within the chancellor's discretion to do so as the mother's home had been the site of illegal drug use and other behavior adverse to the child's welfare, and that the father's circumstances had improved since the original decree. Id. at 745. The supreme court stressed "a chancellor is never obliged to ignore a child's best interest in weighing custody change"; instead, the chancellor should consider it "above all else . . . . `we never depart from our polestar consideration: the best interest and welfare of the child.'" Id. at 744 (quoting Ash v. Ash, 622 So. 2d 1264, 1266 (Miss. 1993)).
¶ 31. The situation in Riley is factually distinguishable from the instant case.[3] While there are some similarities, such as Phyllis's frequent moves and Clay's attendance at numerous schools, her frequent job changes, Clay's failing kindergarten, and Phyllis's reliance on food stamps, there was no frequent and ongoing cohabitation with men or drug use here. Phyllis testified that she had not cohabited with men since the divorce, even after giving birth to a child out of wedlock, and there was no evidence of drug use by her or any individual living with her. Most importantly, however, we find that, unlike Riley, custody was modified based on the traditional test of custody modification.
¶ 32. Regarding the first prong of the traditional test, "[t]he burden of proof is on the movant to show by a preponderance of the evidence that a material change in circumstances has occurred in the custodial home." Johnson, 859 So.2d at 1014(¶ 37) (quoting Mabus, 847 So.2d at 818(¶ 8)). Professor Deborah H. Bell, in her treatise on family law, notes that "[e]vents which would not, alone, be a sufficient material change may in combination provide a basis for modifying custody." Deborah H. Bell, Bell on Mississippi Family Law § 5.11(5) (Supp.2008); see also Duke v. Elmore, 956 So. 2d 244, 248(¶ 8) (Miss.Ct.App.2006) (cohabitation with a convicted felon for ten months in the presence of the child before marrying him, the *849 mother's sporadic employment, and her changing residences four times in two years since the divorce all constituted a material change); Hill v. Hill, 942 So. 2d 207, 210-11(¶ 16) (Miss.Ct.App.2006) (in the totality of the circumstances, cohabitation with numerous men, inconsistent living situations, and "risk-taking" behavior were found to constitute sufficient material change in circumstances). As to the second prong, the material change must adversely affect the child. Johnson, 859 So.2d at 1013(¶ 33) (citing Bredemeier, 689 So.2d at 775). Again, custody may be modified when there is a combination of adverse circumstances. Bell on Mississippi Family Law § 5.11(5)(a) (2005); see also Brown v. White, 875 So. 2d 1116, 1119(¶ 9) (Miss.Ct.App.2004) (adverse material changes included the custodial parent's moving frequently, mother's relationships with different men, the child's failing first grade after having attended numerous schools, and the custodial parent's job schedule interfering with the child's care); Fletcher v. Shaw, 800 So. 2d 1212, 1217(¶ 13) (Miss.Ct.App.2001) (custody modified under the traditional test because of material adverse changes of the custodial parent's frequent moving, unemployment, leaving the child with friends for long periods of time, and having two children out of wedlock).
¶ 33. In the instant case, the chancellor found a material change in circumstances adverse to the child based on the following facts. While modification cannot be based on relocation alone, Phyllis had relocated several times. Additionally, Phyllis relies on others for support, including her parents and brother, and she was, at the time of the hearing, relying on welfare in the form of food stamps for herself and her other son. The chancellor also noted Phyllis had a suspended driver's license since 2001, and it was only cured after the hearing in June 2007.
¶ 34. The chancellor also acknowledged the parents' living conditions at the time of the hearing: Phyllis resided in a two-bedroom, one-bathroom mobile home with her living in one bedroom, and Jacob and Clay living in the other; while John resided alone in his own three-bedroom home in Petal, where Clay had resided since approximately six months after John received temporary custody of Clay in January 2006. As far as employment, the chancellor found both parents were currently gainfully employed: Phyllis had worked at the same daycare for over two years, although she still relied on food stamps; and John had been self-employed as a painting contractor for three years. Finally, the chancellor noted that Clay had been enrolled in Petal Elementary since under John's custody in January 2006, was doing well academically, and participated in many extracurricular activities, including soccer and karate. John promised to obtain more aggressive therapy for Clay's speech problems and enroll him in a specialized speech-therapy program.
¶ 35. The chancellor also took into account Dr. Galloway's opinion, which concluded that Clay would be better off remaining in John's custody. Notably, the chancellor cited Dr. Galloway's comments that: Phyllis was insufficiently self-reliant to provide proper care for Clay; he observed her blaming others for the difficulties in her life; and she had an inability to make plans for the future. Further, Clay and John were bonding well as father and son.
¶ 36. While this case does not show the severe adverse material changes in circumstances found in some child custody modification cases, we find the chancellor's determinations were proper. We are mindful of our standard of review: "[o]n *850 appeal, we are limited to searching for an abuse of that discretion; otherwise, our duty is to affirm the chancellor." Carter v. Carter, 735 So. 2d 1109, 1114(¶ 18) (Miss. Ct.App.1999) (citing Murphy v. Murphy, 631 So. 2d 812, 815 (Miss.1994)). We cannot reweigh the evidence, but if we find substantial evidence to support the chancellor's findings, we must affirm. Id. Further, any resolution of factual disputes is always a matter entrusted to the sound discretion of the chancellor. Id. at (¶ 19) (citing Murphy, 631 So.2d at 815). Because he was present in the courtroom, the chancellor was best equipped to listen to the witnesses, observe their demeanor, and determine their credibility. Id.
¶ 37. In examining the record, we note of particular significance Clay's academic struggles while in the custody of his mother, which improved once custody was transferred to John. Although the chancellor did not make an on-the-record determination of whose fault the thirty-five absences from kindergarten were related to, Clay was in the custody of Phyllis when this occurred, and there was conflicting evidence of blame. Additionally, school records show Clay was not ready for kindergarten, regardless of the reason, as Clay performed very poorly on his "reading readiness" test. While there was no baseline of comparison for Clay's academic ability, as he was not in school prior to the initial award of custody, his academic improvement once in the custody of his father is noteworthy. Additionally, we note Phyllis's numerous moves caused Clay to attend two different schools in the fall of 2005 before John was granted temporary custody.[4] Considering the totality of the circumstances, we cannot say the chancellor erred in finding a material change in circumstances adverse to the child's best interest.
2. Application of the Albright Factors
¶ 38. After finding a material change in circumstances adverse to the child, the chancellor made a thorough analysis of the factors found in Albright in order to determine whether a change in custody was in the best interest of the child. See Albright, 437 So.2d at 1005. The chancellor found that Clay's age, health and sex; the parents' employments, parenting skills, physical and mental health, age, and moral fitness; and the emotional ties between the parents and the child were all neutral. Therefore, these factors did not weigh in favor of either John or Phyllis.
¶ 39. The chancellor found the remaining Albright factors all weighed in favor of John. Regarding continuity of care, during the time Phyllis had primary physical custody of Clay since the divorce, John had significant visitation. The chancellor noted John's documentation that he had Clay a total of 501 days from 2001, the first year of divorce, until 2003, when Clay entered kindergarten. Clay has been in the temporary *851 custody of his father since January 2006, or over two years as of the entry of the chancellor's judgment on modification. Although the chancellor acknowledged that both parents expressed a willingness to care for Clay, John was deemed more capable of providing that care, as Phyllis relied on family and friends and was, at the time of the hearing, on food stamps. Also, the chancellor noted that John had been self-employed for three years and now owns a home. Clay's home, school, and community record weighed in favor of John; since living with John, Clay was doing well in school and was involved in many extracurricular activities. The chancellor was primarily concerned with the stability issues in Phyllis's life. He stated that while Phyllis had "made an effort to stabilize her life, and home environment, this seems to have been a long, drawn out process." During the time she had primary custody of Clay, Phyllis moved to five different residences in four different towns; further, she had been "constantly living with and utilizing the assistance of relatives." The chancellor noted John had only resided in and around Hattiesburg since the divorce, except for a brief period of time he worked in Louisiana; the chancellor found that John provided a regular, highly structured schedule for Clay while in his custody. The chancellor concluded that it was in Clay's best interest for permanent physical care and custody to be awarded to John.
¶ 40. We acknowledge that the chancellor had a difficult decision to make, as the evidence showed both parents appear to be "good" parents and have a strong bond with Clay. However, the chancellor's findings were supported by substantial evidence and based on the best interest of the child. Accordingly, we cannot conclude that the chancellor erred in modifying custody.
3. Dr. Galloway's Testimony
¶ 41. Phyllis argues that the chancellor erred in admitting the expert testimony of Dr. Galloway at the modification hearing. She notes his observations that she was an unfit parent were made after a single thirty-minute visit; Dr. Galloway did not visit her home or interview her friends, relatives, or employers. She further criticizes him for allegedly basing his opinion on the fact she receives food stamps. Finally, Phyllis contends that Dr. Galloway's testimony was not reliable, as John had employed him in January 2005, and had paid him "a considerable amount of money."
¶ 42. The standard of review for the admission or exclusion of evidence is an abuse of discretion. Miss. Transp. Comm'n v. McLemore, 863 So. 2d 31, 34(¶ 4) (Miss.2003) (citing Haggerty v. Foster, 838 So. 2d 948, 958(¶ 25) (Miss.2002)). Further, the admission of expert testimony is within the sound discretion of the trial judge; therefore, the trial judge's decision will stand "unless we conclude that the discretion was arbitrary and clearly erroneous, amounting to an abuse of discretion." Id. (quoting Puckett v. State, 737 So. 2d 322, 342(¶ 57) (Miss.1999)).
¶ 43. Rule 702 of the Mississippi Rules of Evidence governs the admissibility of expert testimony. It provides:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness *852 has applied the principles and methods reliably to the facts of the case.
M.R.E. 702. The trial court must first determine if the expert's testimony is relevant; that is, does the testimony assist the trier of fact. McLemore, 863 So.2d at 38(¶ 16) (citing Mathis v. Exxon Corp., 302 F.3d 448, 460 (5th Cir.2002)). Then, the trial court must determine if the proffered testimony is reliable. Giannaris, 960 So.2d at 470(¶ 14) (citing Pipitone v. Biomatrix, Inc., 288 F.3d 239, 244 (5th Cir. 2002)). "[T]he trial court has `considerable leeway in deciding in a particular case how to go about determining whether particular expert testimony is reliable.'" McLemore, 863 So.2d at 37(¶ 13) (quoting Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999)). Factors the trial court may consider pertaining to reliability include:
whether the theory or technique can be and has been tested; whether it has been subjected to peer review and publication; whether, in respect to a particular technique, there is a high known or potential rate of error; whether there are standards controlling the techniques of operation; and whether the theory or technique enjoys general acceptance within a relevant scientific community.
Id. (citing Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 592-94, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993)).
¶ 44. First, we note John did not address this issue in his brief.[5] Regardless, we find Phyllis's contentions are without merit. John tendered Dr. Galloway as an expert in counseling, sociology, and social work. After voir-dire examination, Phyllis's objection to Dr. Galloway's admission as an expert was overruled. In voir dire, Dr. Galloway testified that he was a professional counselor and social worker. He holds licenses in Louisiana in marriage and family counseling and vocational rehabilitation and counseling. He admitted he was not a licensed professional counselor as he did not think it was necessary because of the licenses he already holds. He has bachelors' degrees in psychology and sociology, a master's degree in social work, and a Ph.D. in sociology. His past work includes private practice in psychiatric settings (both inpatient and outpatient), teaching, and more recently doing custody and mediation work in the court system. Having been accepted as an expert in Mississippi and Louisiana, he stated that he had testified at forty cases in one year. He testified that no court had ever rejected him as an expert. He stated that the methods he utilized were appropriate to the information he was provided by the court. He utilized interviewing techniques and behavioral diagnostic procedures to come to an opinion. Dr. Galloway had also recently attended three seminars with specific training in custody evaluations.
¶ 45. We find Dr. Galloway's testimony was both relevant and reliable. A qualified third-party's evaluation of the situation is useful to the fact-finder. Custody evaluation experts are often called to testify in modification matters, and Phyllis hired her own expert, Levin, for the same purpose. Dr. Galloway's credentials show he has the skill, experience, and education to assist the trier of fact in this determination. The interviews were an appropriate, reliable method of gathering this information, and the chancellor was aware of Dr. Galloway's limited time with Phyllis, which was in part due to Phyllis's transience.
¶ 46. Dr. Galloway made his custody recommendation in October 2005 after having met with John twice and Phyllis *853 once. All of these visits were in his office. Dr. Galloway explained in his October 2005 letter that he attempted to visit Phyllis at home, but she was temporarily moving to Baton Rouge at the time. By the June 2007 hearing, where Dr. Galloway opined she was "unfit," Dr. Galloway had met with John three more times. Clay was present for three of the meetings. Dr. Galloway made no mention of Phyllis being on food stamps in his written report, and he expressly denied blaming her "unfitness" solely on receiving this assistance. Moreover, while the chancellor considered Dr. Galloway's opinion, there is no indication that the chancellor agreed with his determination that Phyllis was an "unfit" parent. However, the chancellor did agree with Dr. Galloway's determination that Phyllis was too reliant on others for support and lacked stability.
¶ 47. Additionally, we find no merit to Phyllis's contention that Dr. Galloway was biased toward John because he was hired by John individually before the court appointed him. From the record, it is unclear if Dr. Galloway met with John in January 2005 or January 2006. The court appointed Dr. Galloway on August 15, 2005. John maintains he did not hire Dr. Galloway independently. Dr. Galloway testified his notes were unclear on the matter. It was undisputed that Dr. Galloway was paid by John pursuant to the court order, as Phyllis had limited funds. At the June 2007 hearing, the chancellor found that he had observed Dr. Galloway as an expert witness for several years and found him always to have the best interest of the child in mind, and he was never biased toward a specific parent. Further, Phyllis had not filed a motion in limine to exclude Dr. Galloway's testimony before trial; the first time she raised the issue was at the hearing. Accordingly, we find the chancellor did not abuse his discretion in admitting Dr. Galloway's testimony regarding Clay's custody.
CONCLUSION
¶ 48. We find that the chancellor applied the correct legal standard, and his decision to modify custody from Phyllis to John is based upon substantial, credible evidence. Accordingly, we affirm.
¶ 49. THE JUDGMENT OF THE CHANCERY COURT OF LAMAR COUNTY IS AFFIRMED. ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE APPELLANT.
KING, C.J., LEE AND MYERS, P.JJ., IRVING, ISHEE, ROBERTS AND MAXWELL, JJ., CONCUR. GRIFFIS, J., CONCURS IN PART AND IN THE RESULT. CARLTON, J., CONCURS IN RESULT ONLY.
NOTES
[1] John's drug tests were negative. Phyllis's urinalysis drug test came back negative. She submitted to a hair follicle drug test in November 2005, but due to an error by the testing company, the lab would not release the results.
[2] John had Clay for 149 days in 2001; 196 days in 2002; and 156 days in 2003, for a total of 501 days.
[3] In Carter v. Carter, 735 So. 2d 1109 (Miss.Ct. App.1999), this Court affirmed the application of the Riley test over the traditional test for custody modification. In Carter, there was no material change in circumstance because the stay-at-home mother's neglect of her two children had been continual since the original custody decree. Id. at 1113(¶ 11). In Hoggatt v. Hoggatt, 796 So. 2d 273 (Miss.Ct.App. 2001), it was unclear whether the chancellor based his decision on Riley or the traditional test, but this Court upheld the modification while questioning whether there was indeed a material change in circumstances. As in Carter, evidence in Hoggatt showed a pattern of neglect by the mother, and the chancellor found that the child's current situation with his mother was detrimental to his physical and emotional health, while the father had improved his living situation since the time of the original decree. Id. at 275(¶ 7). This Court stated it favored a narrow application of Riley, where the existing custody arrangement is detrimental to the child and the noncustodial parent demonstrates a living environment that is beneficial to the child and which was not present at the time of the original custody determination. Id. at (¶ 9).
[4] We note several cases that found academic struggles, in the totality of the circumstances, to be a material change in circumstances adverse to the child's best interest. See Powell v. Powell, 976 So. 2d 358, 362(¶ 17) (Miss.Ct. App.2008) (denial of custody modification reversed for reconsideration of whether there was a material change in circumstances where one minor child was two years behind in school, other child had speech impediment, and evidence was present of their difficulties adjusting to constant change in their educational environments); Brown, 875 So.2d at 1119(¶ 9) (modification based on a material change in circumstances adversely affecting the child, including child doing poorly academically and failing the first grade); Cooper v. Ingram, 814 So. 2d 166, 168(¶ 3) (Miss.Ct. App.2002) (custody modification upheld based on chancellor's finding that for a child with learning disability, the child's academic struggles without timely intervention by the custodial parent constituted an adverse material change in circumstances).
[5] However, we note that Phyllis did not include this issue in her "statement of the issues" section of her brief, but only in her argument section. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1572639/ | 971 S.W.2d 645 (1998)
Juan Luis CARDENAS, Appellant,
v.
The STATE of Texas, Appellee.
No. 05-96-00493-CR.
Court of Appeals of Texas, Dallas.
April 24, 1998.
*647 Lawrence B. Mitchell, John H. Hagler, Dallas, for Appellant.
Sue Korioth, Assistant District Attorney, Karen R. Wise, Assistant District Attorney, for State.
Before CHAPMAN, MORRIS and WRIGHT, JJ.
OPINION
MORRIS, Justice.
After a trial by jury, Juan Luis Cardenas appeals his conviction and life sentence for the murder of David DeLeon. He contends the evidence is legally and factually insufficient to prove he was the person who committed the murder. He also contends the trial court erroneously admitted out-of-court statements of a witness who died before trial. Finally, he claims he was denied effective assistance of counsel. We affirm the trial court's judgment.
BACKGROUND
David DeLeon, the 14-year-old murder victim, attended a classmate's fifteenth birthday party with his older brother and some *648 friends. Appellant attended the same party with his girlfriend and a friend named Joey Cordova. At the party, one of David's friends, Angel Nunez, got into a fist fight with Joey Cordova on the front lawn. The evidence indicates that another guest, Alex Morales, fired a gun in the direction of the scuffle to break it up. The fight broke up, and Angel joined his friends, who were getting into a pickup truck to leave the party. As the truck pulled away, two men came out of the house and started shooting at the truck. David, who was in the bed of the truck, died from a gunshot wound to the head. A firearms examiner testified David was killed by a .25-caliber bullet fired from a semi-automatic weapon.
The victim's brother, Steve DeLeon, testified that he was in the cab of the pickup when his brother was shot. He identified the two gunmen as appellant and Alex Morales. He said appellant wore a "Sox" baseball jersey and carried a small, square gun, not a revolver, and was standing closer to the truck than Alex. Both appellant and David were in Steve's line of vision at the moment David was hit. Steve had no doubt appellant was the gunman who shot his brother. He said there was "no way" he could have mistaken appellant for Alex because appellant was bigger and had facial hair.
Angel Nunez also testified. He said that, after his fist fight with Joey Cordova broke up, he saw appellant come out of the house. Anticipating that shooting would start again, he ducked his head down. He did not see who shot David.
Another witness, the party hostess, testified that appellant, Alex Morales, and Joey Cordova followed the victim's group as they left the party. Joey got into a fight with Angel, but it broke up and things appeared to calm down. When the gunfire started, she was near the front door behind Alex. She said appellant was closer to the truck. She could not see anything in appellant's hands before the shooting started. But once firing began, she said, some men tried to wrestle Alex's gun from him. She could still hear gunfire after Alex was wrestled to the ground. She testified Alex used a revolver.
Four defense witnesses, who were friends and acquaintances of appellant, testified that Alex Morales and Ezekiel Martinez, not appellant, were the two men who came out of the house with guns. They said that appellant looked like Alex, and that Alex, not appellant, stood near the truck and fired. They also testified appellant wore a "Pittsburgh" jersey not a "Sox" jersey.
Appellant denied any involvement in the shooting. Nonetheless, he testified that he ran away after the shooting started and left his girlfriend at the party. He said he ran to a nearby convenience store where Ezekiel and Alex caught up with him. The police later arrived there and arrested appellant. Appellant was arrested because he matched a suspect's description broadcast over the police radio. In the book-in photograph that was admitted into evidence, it appears appellant is wearing a "Pittsburgh" jersey rather than a "Sox" jersey.
The arresting officer testified he also took appellant for a handwashing test to determine if he had recently fired a weapon. The test proved inconclusive. A police detective later explained that, unlike revolvers, automatic weapons frequently do not leave gunpowder residue. The detective also testified that appellant, after his arrest, told police he had borrowed a .25-caliber automatic weapon that evening. The detective further stated, contrary to the four defense witnesses, that Alex and appellant did not look alike.
DISCUSSION
In his first point of error, appellant challenges the legal sufficiency of the evidence to prove he was the gunman who shot David DeLeon. The standard of review for a legal insufficiency claim is well established. See Jackson v. Virginia, 443 U.S. 307, 318-19, 99 S. Ct. 2781, 2788-89, 61 L. Ed. 2d 560 (1979); Narvaiz v. State, 840 S.W.2d 415, 423 (Tex.Crim.App.), cert. denied, 507 U.S. 975, 113 S. Ct. 1422, 122 L. Ed. 2d 791 (1993). Because appellant challenges the sufficiency of the evidence to prove identity, we examine the evidence in the light most favorable to the verdict and determine whether any rational trier of fact could have found beyond a *649 reasonable doubt that he was the person who shot the victim.
We first note that Steve DeLeon testified he witnessed the offense from a unique position of visibility under lighted conditions. He positively identified appellant as the person who shot his brother. The victim was killed by a .25-caliber bullet fired from an automatic weapon, and appellant admitted to police that he borrowed a .25-caliber automatic weapon that night. This evidence is legally sufficient to support the conviction. We overrule appellant's first point of error.
In his second point of error, appellant challenges the factual sufficiency of the evidence. The standard of review in analyzing a claim of factual insufficiency is clearly established. Scott v. State, 934 S.W.2d 396, 398-99 (Tex.App.Dallas 1996, no pet.). We simply review the evidence in support of and contrary to the jury's finding that appellant was the shooter to determine whether the verdict is so contrary to the great weight of the evidence as to be clearly wrong and unjust.
We begin our review with observing that all the witnesses agree Alex Morales was one of the shooters; they only disagree with respect to where he was standing and who was with him. Two State's witnesses and one defense witness placed appellant on the front lawn at the time Alex was shooting. The party's hostess testified that the gunfire continued after Alex was wrestled to the ground by party guests. Two witnesses testified Alex used a revolver, while appellant admitted borrowing an automatic weapon that matched the characteristics of the murder weapon. Although appellant denied any involvement in the shooting, he also admitted he left his girlfriend at the party and fled the scene of the shooting. Such evidence of flight shows consciousness of guilt. See Bigby v. State, 892 S.W.2d 864, 884 (Tex.Crim. App.1994), cert. denied, 515 U.S. 1162, 115 S. Ct. 2617, 132 L. Ed. 2d 860 (1995). Finally, Steve DeLeon positively identified appellant as the shooter who killed his brother.
On the other hand, the fact that Steve may have been mistaken that appellant wore a baseball jersey with "Sox" on it instead of "Pittsburgh" goes to the weight and credibility of his testimony. See Earls v. State, 707 S.W.2d 82, 85 (Tex.Crim.App.1986). Additionally, appellant's four friends testified that this is a case of mistaken identity and that Alex, not appellant, was the shooter near the truck who killed David. Also, appellant's handwashing test for gunpowder residue was inconclusive.
Controverting the defense theory that Alex Morales was the murderer, the lead detective testified that appellant did not look like Alex. He also explained the absence of gunpowder residue on appellant's hands. Further, the defense theory that the State's witnesses mistook Alex, the shooter nearest the truck according to the defense witnesses, for appellant necessarily implies that the State's witnesses also mistook Ezekiel Martinez, the gunman closer to the house, as Alex. There is no testimony to support this defense theory with respect to whether Ezekiel Martinez looks like Alex.
Even in a factual insufficiency review, matters of credibility and what weight to give contradictory testimonial evidence are exclusively within the purview of the jury. See Cain v. State, 958 S.W.2d 404, 408-09 (Tex.Crim.App.1997); Scott, 934 S.W.2d at 399. If reasonable minds could differ about conclusions to be drawn from the evidence, we may not reverse the verdict for factual insufficiency. Scott, 934 S.W.2d at 399. We have carefully examined the record, and we cannot conclude the evidence produced by the State to discharge its burden of proof with respect to identity is so uncertain, inconsistent, improbable, or unbelievable that it would be clearly unjust to allow the verdict to stand. We also cannot conclude the jury's finding that appellant committed this offense is against the great weight of the evidence. We overrule appellant's second point of error.
In his third point of error, appellant argues that the trial court erroneously permitted a police detective to testify about a written statement given by Alex Morales, who died in an unrelated incident before trial. The detective stated on cross-examination that certain witnesses implicated Alex in the *650 shooting. The following exchange then occurred between defense counsel and the detective:
Q. Did you not follow up on your information that Alex Morales was involved in this killing?
A. Yes, sir, I interviewed Alex Morales.
Q. Even though witnesses told you he [Alex] was shooting, you didn't see it necessary to file charges on him?
A. No, sir.
On redirect examination, the prosecutor asked the detective what he uncovered during his interview of Alex. Defense counsel objected "to anything Alex Morales may have told him." The prosecutor argued that defense counsel "opened the door," and the trial court overruled the objection.
The detective went on to testify that Alex admitted in a written statement he had a .22 caliber revolver at the party and that he (Alex) shot in the air to break up the fight between Angel and Joey. The prosecutor then asked what Alex said about appellant's involvement. The detective testified that Alex indicated appellant fired a .25-caliber automatic weapon towards the pickup truck and later bragged about shooting the victim.
Appellant maintains the content of Alex's written statement was inadmissible hearsay. The State initially responds that appellant's objection was insufficient to preserve the error raised on appeal. To preserve a complaint for appellate review, a party must have presented to the trial court a timely request, objection or motion, stating the specific grounds for the ruling he desired the court to make if the specific grounds were not apparent from the context. Tex. R.App. P. 52(a).[1] We agree appellant's objection to "anything Alex Morales may have told him" is imprecise; however, the hearsay ground was apparent to both the court and the prosecutor. Appellant's complaint is not waived.
Hearsay is a statement, other than one made by the declarant while testifying at trial, offered in evidence to prove the truth of the matter asserted. Tex.R.Crim. Evid. 801(d). An out-of-court statement is offered to prove the truth of the matter asserted if it is relevant only to the extent the factfinder believes it to be true and accurate. See Bell v. State, 877 S.W.2d 21, 24 (Tex.App.Dallas 1994, pet. ref'd). If the statement's probative value does not hinge on its truthfulness, then it is not offered to show the truth of the matter asserted and is not hearsay. See id. The State argues that Alex's out-of-court statements were not hearsay because they were not offered to prove the truth of the matter asserted but to show why the detective did not arrest Alex.
The State's argument holds true only with respect to the out-of-court statements about Alex's own involvement in the shooting. Defense counsel attacked the detective's integrity by implying he had made an unreasonable or irresponsible decision not to arrest Alex. Alex's statement to the detective that he had no involvement in the murder but only shot in the air to break up the fight between Angel and Joey makes less probable defense counsel's implication that the detective was unreasonable or irresponsible in his decision not to arrest Alex. Further, the probative value of Alex's statement does not hinge on its truthfulness. That is, the jury could disbelieve at the time of trial Alex's statement that he only shot up in the air to break up a fight, but find that the detective believed Alex and, thus, made a reasonable decision not to arrest him. Consequently, the probative value of the statement to show why the detective did not arrest Alex did not hinge on the jury believing the statement; it hinged on the detective believing it. Accordingly, it is not hearsay.
We arrive at a different conclusion, however, with respect to Alex's statements *651 about appellant's involvement in the crime. Although one bullet killed David DeLeon, the evidence clearly shows two different gunmen shot at the time David was murdered. Alex's statement to police that appellant fired the fatal bullet did not exclude Alex's possible liability or arrest as a party to the murder. Accordingly, Alex's out-of-court statements identifying appellant as the person who fired the bullet that killed the victim are nonprobative with respect to why the detective did not arrest Alex when Alex possibly could have been arrested as a party to the murder. As such, they are hearsay.
The State argues that appellant opened the door to this hearsay. But "opening the door" or "inviting" testimony that would otherwise pertain to inadmissible subject matter does not mean that such testimony is necessarily invited into evidence in any form, including hearsay. Kipp v. State, 876 S.W.2d 330, 337 (Tex.Crim.App.1994) (plurality opinion). In other words, a conclusion that appellant opened the door to the subject of why the detective did not arrest Alex does not suspend the hearsay rules. The State does not assert the applicability of any other hearsay exception. We conclude the trial court improperly overruled appellant's hearsay objection to Alex's out-of-court statements about appellant's involvement in this offense.
Our conclusion that error occurred does not end the inquiry, however. If an appellate record reveals error, we reverse the judgment unless we determine beyond a reasonable doubt that the error made no contribution to the conviction or punishment. Tex.R.App. P. 81(b)(2).[2] The guidelines for making a harmless error analysis are well established. See Harris v. State, 790 S.W.2d 568, 587-88 (Tex.Crim.App.1989). The determinant is not whether the evidence is sufficient to convict without the inadmissible hearsay, but whether there is a reasonable possibility that the erroneously admitted evidence contributed to the jury's verdict. Jones v. State, 833 S.W.2d 118, 127 (Tex. Crim.App.1992), cert. denied, 507 U.S. 921, 113 S. Ct. 1285, 122 L. Ed. 2d 678 (1993). The error is harmful if there is a reasonable possibility the evidence, either alone or in context, moved the jury from a state of nonpersuasion to one of persuasion beyond a reasonable doubt. Id.
After carefully reviewing the evidence, we conclude there is no reasonable possibility that Alex's two out-of-court statements relating to appellant's involvement moved the jury from a state of nonpersuasion to one of persuasion beyond a reasonable doubt. We realize that the prosecutor emphasized during closing argument Alex's statement that appellant bragged about shooting the victim. Nonetheless, we conclude for several reasons that the admission of both hearsay statements was harmless.
First, the information that appellant possessed a .25-caliber automatic weapon on the night of the murder was admitted without objection through the testimony of the detective. Any error in admitting that same information through Alex's hearsay statement was therefore harmless. See Anderson v. State, 717 S.W.2d 622, 627 (Tex.Crim.App. 1986). Second, the prosecutor did not seek to admit the hearsay until he believed, though erroneously, that appellant "opened the door." Thus, the State was not intentionally attempting to taint the trial process by offering Alex's statements. Third, the statements were made during a police interview by a gunman who was a suspect and potential codefendant in this case. We do not perceive the jury would place significant weight on a statement made by one suspect who attempts to implicate another in the crime. Fourth, the evidence of guilt, nearly all of which the jury heard before the hearsay was admitted, weighs heavily against a finding of harm. Appellant admitted he was at the party at the time of the shooting. He admitted he had borrowed a weapon that matched the characteristics of the murder weapon. He, Alex, and Joey followed the victim's group as they left the party. Appellant fled the party after the shooting, leaving *652 his girlfriend behind, and met up with the very people he claims are the shooters Alex and Ezekiel. Also, Steve DeLeon was in a unique position to view this offense and unequivocally identified appellant as the murderer. As the victim's older brother who did not know appellant before the offense, he had considerable motivation to be certain in his identification of his brother's killer. We note also that all four of appellant's friends who testified that this was a case of misidentification had never before told their story to investigative or prosecutorial authorities, although they had the opportunity to do so. Fifth, it is unlikely that this type of error will be repeated by the State with impunity because the trial court, in overruling appellant's objection, was the source of the error, and the circumstances of a potential codefendant dying before trial are somewhat rare.
Moreover, we conclude appellant's life sentence was not a reaction to the out-of-court statements, but an understandable response to the unprovoked, violent, and random killing of a fourteen year-old youth. We also note that during the punishment phase of trial, appellant put two witnesses on the stand who testified that appellant worked as a youth counselor and tutor providing "guidance" to boys and girls. These witnesses testified they would accept appellant back to work with children if the jury granted him probation. In light of this testimony, the life sentence could also be attributable to the jury's concern that appellant, a convicted murderer, would upon his release resume involvement with children the same age as his victim.
Based on the record before us, we cannot conclude the statement, one of several made by a suspect during police interrogation, moved the jury from a state of nonpersuasion to one of persuasion beyond a reasonable doubt. We conclude beyond a reasonable doubt that the hearsay testimony, either alone or in context, made no contribution to appellant's conviction or punishment. We overrule appellant's third point of error.
Appellant next complains his trial counsel rendered ineffective assistance of counsel. When challenging counsel's effectiveness at the guilt stage, it is appellant's burden to show by a preponderance of the evidence that (1) trial counsel's performance was deficient in that it fell below the prevailing professional norms, and (2) the deficiency "prejudiced" appellant; that is, but for the deficiency, there is a reasonable probability that the result of the proceeding would have been different. See Rosales v. State, 841 S.W.2d 368, 375 (Tex.Crim.App.1992), cert. denied, 510 U.S. 949, 114 S. Ct. 393, 126 L. Ed. 2d 341 (1993) (citing Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984)). We indulge a strong presumption that counsel was reasonably effective, and strategic choices made after reasonable investigation are almost unchallengeable. Ex parte Zepeda, 819 S.W.2d 874, 876 (Tex.Crim.App.1991).
Appellant claims that, in the event we conclude trial counsel opened the door for the admission of the hearsay statements complained of in his third point of error, trial counsel's questioning fell below professional norms. We have concluded trial counsel did not open the door for the admission of hearsay statements. As we stated previously, "opening the door" to a subject matter generally does not suspend hearsay rules, and the trial court improperly overruled in part defense counsel's hearsay objection. To the extent counsel's questioning opened the door to the non-hearsay testimony with respect to why the detective did not arrest Alex, such questioning was part of counsel's trial strategy to make a case of mistaken identification and in no way harmed appellant.
Finally, appellant contends counsel rendered ineffective assistance in failing to make a reasonable effort to exclude evidence that appellant told police he borrowed a .25-caliber automatic weapon on the night of the offense. Defense counsel did lodge an objection that the proper predicate had not been laid for the admission of appellant's oral statements. The parties then held a discussion off the record. The record resumes with the prosecutor's questioning and another objection to improper predicate, which the trial court overruled. Nonetheless, appellant complains defense counsel rendered ineffective assistance because he did not insist on a hearing to determine the admissibility of his *653 statement under article 38.22 of the code of criminal procedure. Tex.Code Crim. Proc. Ann. art. 38.22 (Vernon 1979 & Supp. Pamph. 1998).
To show counsel was ineffective for failing to lodge an objection, appellant must show the trial court would have erred in overruling such objection. Vaughn v. State, 931 S.W.2d 564, 566 (Tex.Crim.App. 1996). The record is completely void of any information about the circumstances under which appellant's police statement was given. Any evidence was apparently received by the trial court off the record. Appellant cannot show on this record, and does not argue, that the trial court would have erred in overruling such an objection had one been made. Accordingly, we overrule appellant's fourth point of error.
We affirm the trial court's judgment.
NOTES
[1] The new rules of appellate procedure went into effect on September 1, 1997. The Texas Court of Criminal Appeals, in adopting the new appellate rules, expressly ordered that the new rules will govern all proceedings pending on September 1, 1997 "except to the extent that in the opinion of the court their application in a particular proceeding then pending would not be feasible or would work injustice, in which case the former procedure may be followed." We apply the old rule in this case, concluding it might work injustice to require appellant to preserve error under a rule that did not exist at the time of trial. See Tex.R.App. P. 33.1.
[2] We apply former Texas Rule of Appellate Procedure 81(b)(2), the rule in effect at the time of appellant's trial, rather than new rule 44.2. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571010/ | 562 F. Supp. 488 (1983)
UNITED STATES of America, Plaintiff,
v.
Charles BECKHAM, Defendant.
Crim. No. 83CR60070DT.
United States District Court, E.D. Michigan, S.D.
May 4, 1983.
Leonard R. Gilman, U.S. Atty., Detroit, Mich., for plaintiff.
Deborah J. Gaskin, Detroit, Mich., for Beckham.
Thomas O'Brien, Ann Arbor, Mich., for Bowers.
Richard E. Zuckerman, Troy, Mich., for Ferrantino.
Neil Fink, Detroit, Mich., for Cusenza.
David Dumouchel, Detroit, Mich., for Valentini.
MEMORANDUM OPINION
DeMASCIO, District Judge.
On February 3, 1983, a grand jury returned a fourteen count indictment against *489 Charles Beckham, Darralyn C. Bowers, Michael Ferrantino, Sam Cusenza and Joseph Valentini. Two of the counts charged defendants with conducting the affairs of several corporations through a pattern of racketeering activity in violation of 18 U.S.C. §§ 1962(c), (d) and 1963(a)(1), (2). Because of the possibility of forfeiture of defendants' properties pursuant to 18 U.S.C. §§ 1963(a)(1) and (2), the government filed a motion, on February 4, 1983, for a restraining order and/or establishment of a performance bond. The purpose of the motion was to assure the government that defendants would not dispose of their interests in various sludge-related corporations during the course of the criminal proceedings. The government relies on 18 U.S.C. § 1963(b), which gives the court power to enter such a restraining order.
In response to the government's motion, defendants argued that no restraints could be placed on the disposition and handling of their properties without the court first conducting an evidentiary hearing. At the hearing, defendants contended that the applicable standard was that enunciated by the Ninth Circuit when it outlined the conditions that must be met before a court can issue a restraining order during criminal proceedings based on RICO violations. United States v. Spilotro, 680 F.2d 612 (9th Cir.1982); see United States v. Crozier, 674 F.2d 1293 (9th Cir.1982); United States v. Long, 654 F.2d 911 (3d Cir.1981) (standards under the Continuing Criminal Enterprise statute). In Spilotro, the court held that:
The government's burden in obtaining a restraining order in a RICO prosecution is similar to that in a continuing criminal prosecution:
Before a Court can issue such a restraining order .... the government must demonstrate that it is likely to convince a jury, beyond a reasonable doubt of two things: one, that the defendant is guilty of violating the Continuing Criminal Enterprise statute and two, that the ... properties at issue are subject to forfeiture under the provisions of [the statute]. [Citations]. In addition, these determinations must be made on the basis of a full hearing; the government cannot rely on indictments alone. United States v. Long, 654 F.2d at 915.
United States v. Spilotro, 680 F.2d at 618 [emphasis added]. The Ninth Circuit has, therefore, determined that a court prior to the issuing of any restraining order in connection with a RICO prosecution must first determine whether a jury is likely to find defendants guilty beyond a reasonable doubt. This court cannot apply such a standard.
On February 16, 1983, a hearing on the government's motion was conducted. At the conclusion of the hearing, the parties engaged in informal negotiations, and subsequently stipulated to the entering of a restraining order which this court signed, because it believed that the proper standard for the restraining of properties pending a trial based on RICO violations had been met. Because of the stipulation, there was no need to conduct an evidentiary hearing on the matter.
As we have already indicated, we cannot adopt the standard outlined in Spilotro, supra. We find it difficult to apply with any degree of precision. There is simply no way we can glean whether it is probable that the government can convince a jury beyond a reasonable doubt that the defendants have violated the criminal RICO statute. A trial judge cannot place himself/herself in the position of a jury. In passing upon a motion for judgment of acquittal in a criminal case, a court is not asked to put itself in the place of a jury. The standard that is applied is one that is capable of application. In passing upon a motion for judgment of acquittal,
the trial judge must view the evidence and reasonable inferences to be drawn therefrom most favorable to the government. If he concludes that a reasonable mind may determine guilt beyond a reasonable doubt the case must go to the jury
United States v. Gaines, 353 F.2d 276, 278 (6th Cir.1965) (emphasis added); Fed.R. Cr.P. 29(a).
*490 This well-established rule for deciding a motion for judgment of acquittal shows that even in the actual criminal trial, a trial judge cannot substitute his/her judgment for that of the jury. A judge is not asked to determine whether a reasonable jury would determine guilt beyond a reasonable doubt, but whether a reasonable mind could find such a level of guilt. It would be even more inappropriate for a judge, in deciding upon a motion for a restraining order, to utilize the standard outlined in Spilotro. Not only is a judge incapable of evaluating what is likely to convince a jury, but such a standard requires a court to conduct a minitrial on a defendant's guilt. Such a standard is extremely cumbersome and likely to taint a later jury trial, especially in a case as highly publicized as this one. It is important to emphasize that by issuing a restraining order, a trial judge is not ordering the forfeiture of the property; forfeiture occurs only upon a conviction. We are not minimizing the impact of a restraining order on a defendant's property interest. It is clear that before the issuance of such an order, that procedural due process must be afforded a defendant. See Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556 (1972).
We believe that in an evidentiary hearing the government must prove by clear and convincing evidence that the property which it is seeking to restrain was involved in a RICO violation; that the property at issue would be subject to forfeiture under the provisions of the statute; and that the government has reasonable grounds to believe that defendant is likely to make the property inaccessible to the government prior to the conclusion of the trial. This test focuses on the property, not the defendant. We realize that the ultimate forfeiture is a punishment against the person, not the property. Nevertheless, in applying a rule at this stage of the proceedings, we are only concerned that the property remain available to the government in the event a jury does convict the defendants. Again, we note that a restraining order does curtail the property interest of a defendant. That is why the government must prove at an evidentiary hearing by clear and convincing evidence that the property it is trying to restrain was involved in a RICO violation. In many cases, a defendant's activities will be used as evidence at the hearing. One often cannot isolate the property and the actions of a defendant. Yet the standard does not require a judge to conduct a mini "jury" trial on the issue of defendant's guilt. An example of how this test would be applied can be shown in the setting of an offense involving a drug ring. If the government wanted to seize a ship during the course of the criminal proceedings, it would need to prove by clear and convincing evidence that drugs had been loaded onto the ship and had been taken off of the ship. The government would not have to prove the conduct of the defendant, rather it would have to show the role of the property in the alleged offense.
In adopting this test, we are attempting to reconcile conflicting interests. On the one hand, we are faced with the interests of defendants, who, for example, as in this case are trying to continue the operation of ongoing businesses. On the other hand, we have the interest of the government in assuring that the forfeiture provisions of the RICO statute maintain some vitality. The importance of both these interests cannot be minimized. The court, therefore, has adopted this test in deference to the concerns of all the parties in this criminal proceeding. Accordingly, we find that the stipulated restraining orders meet this standard and, therefore, will be entered.
IT IS SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571015/ | 277 S.W.2d 548 (1955)
Hallie Gail LODAHL, Appellant,
v.
Russell PAPENBERG, Respondent.
No. 44462.
Supreme Court of Missouri, Division No. 1.
April 11, 1955.
*549 J. Grant Frye, Cape Girardeau, for appellant.
Frank W. Jenny, James A. Cole, Union, for respondent.
VAN OSDOL, Commissioner.
In this action, instituted in the Circuit Court of Franklin County, Hallie Gail Lodahl, plaintiff, formerly the wife of Russell Papenberg, defendant, seeks the recovery of $8,700 for expenditures by her for the support of Marilyn Gay Papenberg, the minor daughter of the parties, plaintiff and defendant, who were divorced in 1943, which expenditures were allegedly made by plaintiff from and after December 21, 1945. The trial court acting on defendant's motion dismissed plaintiff's petition and she has appealed from the judgment of dismissal.
The decree of divorce was rendered by the Circuit Court of the City of St. Louis, March 11, 1943, and other and subsequent orders were entered by that court modifying the decree, which modifying orders were entered August 6, 1943, December 21, 1945, and December 6, 1946.
Plaintiff in her petition stated the substance of the original decree and of subsequently entered modifying orders, and alleged that on December 21, 1945, the decree was modified "releasing defendant from the payments of any support and maintenance for the said Marilyn Gay" and the other two minor children. Plaintiff further alleged that since December 21, 1945, defendant has not "in any wise contributed to the necessaries of life acquired for" the child Marilyn Gay; and that plaintiff has "furnished food, clothing, shelter, medical attention, entertainment, *550 education, and all other necessaries of life for said Marilyn Gay and defendant has refused to pay any of such or reimburse plaintiff for it."
Defendant in his motion to dismiss stated as grounds therefor that the Circuit Court of Franklin County did not have jurisdiction of the subject matter of the instant claim; that the Circuit Court of the City of St. Louis, in which the decree of divorce was granted, had and has jurisdiction of the instant action; and that the claim in this action stated "has been asserted by the action" for divorce in the court in which the divorce was granted. By this we understand defendant meant the matter of defendant's liability for the support and maintenance of the child Marilyn Gay had been adjudicated by the Circuit Court of the City of St. Louis. The motion also stated the substance of the divorce decree and the subsequent modifying orders.
The trial court heard evidence introduced by defendant in support of defendant's motion to dismiss. The evidence so introduced consisted of certified copies of the divorce decree and the several modifying orders which decree and orders were in substance as follows,
By a decree of March 11, 1943, rendered in the Circuit Court of the City of St. Louis, plaintiff was granted a divorce and the care, custody and control of Russell Joseph, seven years old, Raymond Albert, four years old, and Marilyn Gay, three years old, the minor children of the parties. In the decree it was further ordered that plaintiff should have and recover of defendant "as and for the support and maintenance of each of said minor children the sum of $8 per week, until the further order of the Court, * * *."
August 6, 1943, pursuant to a stipulation of the parties on that day filed and approved by the court, the divorce decree was modified so that from the date thereof the plaintiff should "have and recover of the defendant, as and for the support and maintenance of the three minor children, * * * the sum of $62 per month, until said defendant is discharged from the Armed Services of the United States or until the further order of the Court, in lien of the original award of $8 per week, for each child, * * *."
December 21, 1945, the decree of divorce as modified on August 6, 1943, was further modified, so that from the date thereof "the defendant shall be released of the payment of $62 per month for the support and maintenance of minor children Russell, Raymond and Marilyn, and that from this day forthwith said payments shall cease and determine, until the further order of the Court." And it was further ordered that "in all other respects the original decree of divorce and as subsequently modified, remain in full force and effect, * * *."
December 6, 1946, the court heard and considered a motion, filed by plaintiff, to modify the decree and overruled the same; and the court heard and considered defendant's motion to modify the decree, and ordered that the motion be sustained, "and doth further order that the decree of divorce rendered herein on the 11th day of March, 1943, * * * and as modified on the 6th day of August, 1943, * * * and as further modified on December 21st, 1945, * * * be further modified, so that from the date hereof the defendant shall have the care, custody and control of Russell Joseph and Raymond Albert, only, until the further order of the Court." And it was further ordered by the court "that in all other respects the original decree of divorce and as subsequently modified, remain in full force and effect, * * *."
It is provided by statute that, when a divorce is adjudged, the court shall make such order touching the care, custody and maintenance of a child, as, from the circumstances of the parties and the nature of the case, is reasonable. Section 452.070 RSMo 1949, V.A.M.S.
A father has the primary common-law duty and obligation to support his minor children, regardless of whether *551 there is in force a valid order of court requiring him to do so. The order contemplated by the statute, Section 452.070, supra, is a determination of the father's liability for the support of the minor child and the order and judgment are in effect a substitution for the father's common-law liability which would otherwise exist. Robinson v. Robinson, 268 Mo. 703, 186 S.W. 1032; Gardine v. Cottey, 360 Mo. 681, 230 S.W.2d 731, 18 A.L.R. 2d 1100. In the Gardine case it was said the apparent purpose of the statute is to provide a mode of procedure for obtaining maintenance of the child and for determining in advance the extent of the common-law obligation of the father, as well as to provide the means of enforcing the obligation. The simplified statutory procedure (enacted in the public welfare and looking to the security of the child during infancy) is designed to obviate the expense and delay of independent actions. Robinson v. Robinson, supra.
Often courts, in granting a divorce, do not (and sometimes cannot, because of want of jurisdiction) make an order providing for the support of a minor child, and in cases wherein the custody of the child has been awarded to the wife, but no provision was made for the child's support and the wife supports the child, two remedies are available to the divorced wife. One remedy is a proceeding in the divorce case, by motion or otherwise, to obtain an order providing for future support; and the other is by independent common-law action to recover for expenses already incurred. Kelly v. Kelly, 329 Mo. 992, 47 S.W.2d 762, 767, 81 A.L.R. 875. In seeking to invoke the latter remedyan independent action to recover for expenses already incurred, the wife may resort to any court of original general jurisdiction affording appropriate venue. But, as said in the Kelly case, "The two remedies are coterminous rather than concurrent, and the one begins where the other ends. It is not a choice between remedies but a use of the remedy suitable to the facts."
It is the majority rule, and the settled law of this state that where a divorce is granted to the parents of a minor child and the custody of the child is awarded to the mother, with no provision made in the decree for the child's support, the duty and obligation of the father to support remains as at common law; and the former wife and mother may maintain an independent common-law action for necessary expenditures made by her for the child's support. Kelly v. Kelly, supra; Mayes v. Mayes, 342 Mo. 401, 116 S.W.2d 1; Marley v. Marley, 356 Mo. 870, 204 S.W.2d 261; Broemmer v. Broemmer, Mo.App., 219 S.W.2d 300; Swenson v. Swenson, Mo.App., 227 S.W.2d 103, 20 A.L.R. 2d 1409; Luntsford v. Luntsford, D.C., 117 F. Supp. 8; cases collated in the Annotations 15 A.L.R. 569, and 81 A.L.R. 887; 27 C.J.S., Divorce,§ 319c, p. 1199.
What was the legal effect of the divorce decree and subsequent orders, particularly with respect to the support and maintenance of Marilyn Gay?
Now, if the original provision in the decree awarding support and maintenance in the sum of $8 per week governs and measures defendant's liability since December 21, 1945, plaintiff may not maintain the instant independent action. (The petition in the instant case prayed for no relief with respect to, and we are not herein concerned with the support of the other two minor children, and we may assume defendant is fulfilling his common-law obligation by supporting these two children, the custody of whom was awarded to him by the order of December 6, 1946.)
The determination of the legal effect of the decree and modifying orders is, of course, a legal question and in determining their legal effect we shall examine the decree (and modifying orders) as a whole. State ex rel. Anderson Motor Service Co. v. Public Service Commission, 348 Mo. 613, 154 S.W.2d 777, Id., 234 Mo.App. 470, 134 S.W.2d 1069; 49 C.J.S., Judgments, § 436, p. 862.
The divorce decree originally made provision for the care, custody and support of the three minor children of the parties, and the modifying order of August 6, 1943, *552 changed but continued the provision for the support of the children by granting a stated allowance until defendant was discharged from military service. These provisions of the decree and the order of August 6, 1943, signify the court's original cognizance of the infancy of the children and of the court's statutory duty to make an order touching their care, custody and maintenance. The modifying order of December 21, 1945 (providing that defendant should be released of the payments of the allowance as granted August 6, 1943, and that such payments should cease and determine [and the subsequently entered modifying order of December 6, 1946]) was silent as to the future support of the children in the sense that it did not therein expressly provide for future maintenance, nor did it expressly provide that the order in the original decree was to be the further admeasurement of defendant's commonlaw obligation in the then circumstances of the parties. But it seems that by the order of August 6, 1943, a provisional, temporary or interim admeasurement of $62 per month was set in "until said defendant is discharged from the Armed Services" or until the further order of the court. This substitutional measure of defendant's obligation was no doubt called for because of the circumstance that defendant was entering military service. It was "in lieu of" the original award of $8 per week for each child as provided in the original decree. We believe the court intended to do no more than approve the parents' stipulation for the "time while defendant was in military service." Now, in the order of December 21, 1945, it was ordered that defendant should be released of the payment of $62 per month and that such payment should cease and determine, but it was further ordered that in all other respects the original decree of divorce and as subsequently modified should remain in full force and effect.
Having read the decree and subsequent orders and having considered them in combination and together or as a whole, we believe they manifest by every reasonable intentment that the Circuit Court of the City of St. Louis again recognized and in effect continued the allowance for the support of the children as made in the original decree. This interpretation, which seems to us to be the correct one, is in harmony with the objects and purposes of the litigation, and with the court's duty to enter orders making provision for the care, custody and maintenance of the minor children in such litigation.
The order and judgment of dismissal should be affirmed.
It is so ordered.
LOZIER and COIL, CC., concur.
PER CURIAM.
The foregoing opinion by VAN OSDOL, C., is adopted as the opinion of the court.
All of the Judges concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/310745/ | 477 F.2d 812
73-1 USTC P 9411
Nannie Carr HARRIS, Incompetent, and Robert A. Eubanks,Guardian, Appellee,v.COMMISSIONER OF INTERNAL REVENUE, Appellant.
No. 72-1343.
United States Court of Appeals,Fourth Circuit.
Argued Oct. 5, 1972.Decided May 4, 1973.
William L. Goldman, Atty., Tax Div., Dept. of Justice (Scott P. Crampton, Asst. Atty. Gen., Mayer Rothwacks and William A. Friedlander, Attys., Tax Div., Dept. of Justice, on brief), for appellant.
James H. Johnson, III, Chapel Hill, N. C. (Haywood, Denny & Miller, Chapel Hill, N. C., on brief), for appellee.
Before BOREMAN, Senior Circuit Judge, and WINTER and RUSSELL, Circuit Judges.
BOREMAN, Senior Circuit Judge:
1
This is an appeal by the Commissioner of Internal Revenue from a decision of the United States Tax Court, 56 T.C. 1165.
2
In the spring of 1962, Robert A. Eubanks, the duly qualified guardian of taxpayer, Nannie Carr Harris, an incompetent, negotiated with one Robert I. Lipton for the sale of certain improved real estate owned by taxpayer in Chapel Hill, North Carolina. On May 18, 1962, Eubanks, as such guardian, and Lipton executed a contract providing for the sale of the property, subject to the required approval of the Superior Court of Orange County, North Carolina.1 One Thousand Dollars was to be paid upon securing the necessary judicial approval and the balance on or before August 1, 1962.
3
Pursuant to the contract and the pertinent North Carolina statutes, Eubanks filed a petition with the Clerk of the Superior Court of Orange County on May 21, 1962, seeking authority to sell the property for $156,500, alleging as grounds therefor the low net income from the property, the insufficiency of the income to provide the support needed by taxpayer and to satisfy certain debts owed by her. On the same day, the Superior Court ordered (1) that Eubanks offer the property to Lipton for $156,500, (2) that Eubanks file a report of the offer, and (3) that the sale be confirmed after ten days if no objections or upset bids were filed. Also on May 21, 1962, Eubanks made the offer and filed the report as ordered, and Lipton made the $1,000 down payment called for in the contract. The petition, court order and report filed May 21 did not deal with the disposition of sale proceeds.
4
It appears that sometime between May 21, 1962, and June 1, 1962, during the 10-day period before the sale could be confirmed, Eubanks was advised that a reduction in income tax could be effected if the purchase price were payable in installments. On June 1, 1962, he filed a supplemental petition, seeking approval of an arrangement whereby Lipton would pay $46,500 upon delivery of the deed and would deposit the balance of $110,000 with First Federal Savings and Loan Association of Durham, North Carolina, as escrow agent, with instructions to the agent to pay $27,500 plus interest to the guardian on January 2 of each of the following four years. In addition to this supplemental petition, Eubanks' attorney sent a letter to the Clerk in which he approximated the tax savings if the receipts from the sale of the property were reported over a period of five years. By order2 entered June 1, 1962, the Superior Court confirmed and approved the sale and authorized the plan of payment as requested in the supplemental petition.
5
Subsequently, the closing date of the contemplated transaction was extended and Lipton assigned all his rights in the property to W. J. Darnell, George S. Goodyear, and George F. Lattimore, Jr. (hereinafter referred to as the assignees). The property was ultimately deeded to the assignees on or about August 31, 1963, pursuant to an order3 entered by the Superior Court on August 23, 1963.
6
Under the agreement between Eubanks and the assignees, payment of the purchase price was to be substantially as set forth in the confirmation order of June 1, 1962, with only the payment dates changed to reflect the passage of time. Ultimately, the sum of $6,000 was paid during or before 1963, the sum of $40,500 was paid on or about January 17, 1964, and, also on January 17, 1964, the sum of $110,000 was paid to First Federal Savings and Loan Association of Durham pursuant to an escrow agreement4 of that date.
7
In her tax return for 1964, taxpayer included in her taxable income $40,500, representing that portion of the sale price actually received by her on January 17, 1964.5 The Commissioner determined a deficiency of $30,757.32, ruling that (1) the $110,000 paid to First Federal Savings and Loan Association, as escrow agent, and (2) $4,070.04 interest credited to the escrow account in 1964, were constructively received by taxpayer in 1964. The Tax Court recognized the established rule that where payment is made by the purchaser to a third party at the seller's behest the seller has constructively received the payment for tax purposes but held that the rule did not apply here because the $110,000 was paid to First Federal Savings and Loan Association at the direction of the Superior Court rather than by direction of taxpayer or her guardian. The Tax Court determined a deficiency of only $226.67.6 We reverse as to the $110,000 deposited in the escrow account. The Commissioner does not appeal the Tax Court's holding as to the interest credited to the escrow account during 1964.
8
Section 451(a) of the Internal Revenue Code of 1954, 26 U.S.C., provides:
9
The amount of any item of gross income shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under the method of accounting used in computing taxable income, such amount is to be properly accounted for as of a different period.
10
Treasury Regulations Section 1.4512(a), 26 C.F.R., sets forth the general rule with respect to constructive receipt of income:
11
Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given.
12
It is clear that if taxpayer had not been incompetent and had made the same escrow agreement acting for herself, or if the escrow arrangement had been entered into solely by Eubanks acting on behalf of taxpayer as her guardian without the supervision of the local court, the $110,000 payment to the escrow agent would be treated as constructively received by her in 1964. Williams v. United States, 219 F.2d 523 (5 Cir. 1955); Rhodes v. United States, 243 F. Supp. 894 (W.D. S.C.1965); Pozzi v. Commissioner, 49 T.C. 119 (1967). Lipton had signed on May 18, 1962, a contract of sale calling for payment in cash on or before the date set for closing the transaction. Further, on January 17, 1964, Lipton's assignees, the ultimate purchasers, were ready, willing and able to pay the entire remainder of the purchase price, $150,500, and in fact did irrevocably part with the full amount thereof on that date. Sale proceeds, or other income, are constructively received when available without restriction at the taxpayer's command; the fact that the taxpayer has arranged to have the sale proceeds paid to a third party and that the third party is, with taxpayer's agreement, not legally obligated to pay them to taxpayer until a later date, is immaterial. See Griffiths v. Commissioner, 308 U.S. 355, 60 S. Ct. 277, 84 L. Ed. 319 (1939); Hicks v. United States, 314 F.2d 180 (4 Cir. 1963). The sole question presented, therefore, is whether this rule is inapplicable for the reason that, where the property of an incompetent is being sold, the terms of the sale and the disposition of the sale proceeds must be approved by the local court under North Carolina law.
13
In his brief filed with the Tax Court, the Commissioner argued as follows:
14
Respondent's [Commissioner's] position is that the entire consideration was constructively received in 1964 since it was within the power and control of the petitioner to have received the funds at that time.
15
******
16
* * *
17
It is the respondent's position that the circumstances of this case are such that, when the purchase price was paid into the escrow account for the benefit of the petitioner, there was constructive receipt of the full amount. When negotiations were completed and the contract entered into on May 18, 1962, it was the intention of both parties that the sale would be a cash transaction. On that date petitioner was ready, willing and able to close the transaction for a cash payment of $156,500. On the day the sale was approved by the Court, petitioner became equitably entitled to the full purchase price. This contractual right was an asset which he could sell or otherwise transfer. It was within petitioner's power and control to receive the purchase in cash, but instead he elected to have it delivered to the bank under an escrow agreement.
18
The Tax Court noted that implicit in this argument is the assumption that taxpayer at one time had an enforceable right to receive the total sale proceeds in cash but that she then decided to voluntarily put herself under some legal disability with respect to payment, i. e., the escrow arrangement. The Court reviewed the applicable North Carolina statutory and case law and determined that, in North Carolina, when a guardian of an incompetent sells real property under order of the court, the guardian is merely an "agent" of the court, and the sale is not consummated until it is confirmed by the resident judge, which confirmation represents the consent of the court to the sale. Pike v. Wachovia Bank and Trust Company, 274 N.C. 1, 161 S.E.2d 453 (1968). The Tax Court then concluded that Eubanks was merely acting for the Superior Court of Orange County in contracting for the sale of taxpayer's property and that the May 18, 1962, contract of sale created no rights in any of the parties unless and until the sale was confirmed by the resident judge. Since the confirmation was contained in the order of June 1, 1962, which order also authorized and directed the use of the escrow arrangement, the court held that Eubanks, on behalf of taxpayer, never had the power to receive the full purchase price in 1964, and thus did not constructively receive that amount in 1964.
19
We find no error in the Tax Court's analysis of the respective powers of Eubanks, as guardian, and the Superior Court of Orange County. We agree that, under North Carolina law, Eubanks could not enter a binding agreement for the sale of taxpayer's real property without the confirmation of the resident judge. The error of the Tax Court was in regarding the state court's role in the proceedings as representing an interest adverse to, or independent of, the interests of the incompetent taxpayer, and in regarding the state court's order to place the funds in escrow as a denial to the taxpayer and her guardian of dominion over the payment. North Carolina Gen. Stat. Sec. 33-31,7 which requires judicial supervision of the sale of an incompetent's property, actually supplements the guardianship protection afforded the incompetent. The resident judge must ensure that any sale is made "on such terms as may be most advantageous to the interest of the ward."
20
In City Bank Co. v. McGowan, 323 U.S. 594, 65 S. Ct. 496, 89 L. Ed. 483 (1945), the Supreme Court rejected the distinction between the acts of an incompetent and those of a court acting in her behalf. The question there was whether a transfer of the decedent's property, made pursuant to court order because the decedent was incompetent, was in contemplation of the decedent's death, which fact would make the property includible in the decedent's estate for federal estate tax purposes. The Court stated, 323 U.S. at 598-599, 65 S. Ct. at 498:
21
The issue is a narrow one. Literally Mrs. Vail neither made the transfers nor did she have any motive with respect to them. But a court stood in her place and unquestionably had the function of effectuating a transfer of her property and of determining what motive or purpose would have actuated her had she been competent to act. It seems to us that it is sticking in the bark to say that, in the circumstances, the transfers are not within the section because Congress did not add a phrase to the effect that where a court made the transfer, acting in lieu of the incompetent owner, such a transfer should be governed by the statute.
22
We hold, therefore, that where, as in New York, the court is to substitute itself as nearly as may be for the incompetent, and to act upon the same motives and considerations as would have moved her, the transfer is, in legal effect, her act and the motive is hers.
23
The act of the Superior Court of Orange County in directing, upon the request of Eubanks, that the $110,000 be placed in escrow was "in legal effect" the act of the taxpayer. We hold that the escrow deposit was constructively received, for income tax purposes, in 1964.
1
N.C.Gen.Stat. Sec. 33-31 (1966 Repl.Vol.):
Special proceedings to sell; judge's approval required.-On application of the guardian . . . by petition, verified upon oath, to the superior court, showing that the interest of the ward would be materially promoted by the sale . . . of any part of his estate, real or personal, . . . a decree may thereupon be made that a sale . . . be had by such person, in such way and on such terms as may be most advantageous to the interest of the ward; all petitions filed under the authority of this section wherein an order is sought for the sale . . . of the ward's real estate . . . shall be filed in the superior court of the county in which all or any part of the real estate is situated; . . . no . . . conveyance of the title [shall be] made, unless confirmed and directed by the judge, and the proceeds of the sale . . . shall be exclusively applied and secured to such purposes and on such trusts as the judge shall specify. . . .
In the case of a private sale, such as the one here, the sale may be confirmed if no upset bids are submitted within ten days after the report of sale is filed. N.C.Gen. Stat. Sec. 1-339.37 (1969 Repl.Vol.).
2
The Superior Court summarized the proceedings, and concluded:
This cause again coming on to be heard and being heard and it appearing to the court that under a prior order entered in this matter Robert A. Eubanks, guardian of Nannie Carr Harris, incompetent, reported to the court that he had an offer for the property described in the pleadings from Robert I. Lipton, Trustee, through Foushee-Olsen Realty Company for $156,500.00, of which sum $6,500.00 is due and payable to Foushee-Olsen Realty Company as commissions; the said report has remained on file in this office for more than ten days as required by law; no objections or upset bids have been filed and Robert A. Eubanks, guardian for Nannie Carr Harris, incompetent, has filed a supplementary petition in which he prays that he be permitted to accept a down payment of $46,500.00 and that the remainder of the purchase price be deposited by Robert I. Lipton, Trustee, or his assigns with First Federal Savings and Loan Association of Durham, N. C., as escrow agent, with irrevocable authorization to the escrow agent to pay to Robert A. Eubanks, guardian of Nannie Carr Harris, incompetent, on the 2nd day of January 1963, the sum of $27,500.00, plus accumulated interest and on the 2nd day of January, 1964, 1965, and 1966, each, the sum of $27,500.00 plus accumulated interest so that the taxable income from the sale of this property can be reported by the guardian on an installment sale basis and over a period of five years; and it appearing to the court that it would be to the best interest of the estate of Nannie Carr Harris, incompetent, that this method of payment for the said property would be advantageous to the estate and should be approved by the court.
NOW, THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED, that the sale of the property described in the pleadings by Robert A. Eubanks, guardian of Nannie Carr Harris, incompetent, to Robert I. Lipton, Trustee, or his assigns, for the full sum of $156,500.00 be and the same is hereby in all respects confirmed and fully approved.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED, that the said Robert A. Eubanks, guardian of Nannie Carr Harris, incompetent, be and he is hereby authorized and permitted to accept the sum of $46,500.00 in cash and Robert I. Lipton, Trustee, or his assigns, is authorized to deposit with First Federal Savings and Loan Association of Durham, N. C., as escrow agent, under an irrevocable escrow agreement the remaining sum of $110,000.00 which escrow agreement shall authorize First Federal Savings and Loan Association of Durham, N. C., as escrow agent, to pay to Robert A. Eubanks, guardian of Nannie Carr Harris, incompetent, on the 2nd day of January, 1963, from the said funds $27,500.00 plus accumulated interest and on the 2nd day of January of the years 1964, 1965, and 1966, each, the sum of $27,500.00 plus accumulated interest to each date until transfer of the said funds to Robert A. Eubanks, guardian of Nannie Carr Harris, incompetent, has been completed, or to the duly qualified representative of Nannie Carr Harris should she die before the escrow agreement terminates.
IT IS FURTHER ORDERED AND DECREED, that Robert A. Eubanks, guardian of Nannie Carr Harris, incompetent, shall and he is hereby authorized, empowered and directed to execute and deliver to Robert I. Lipton, Trustee, or his assigns, a good and sufficient deed in fee simple, with taxes, insurance and rents adjusted as of the date of the closing of this matter and upon payment of $46,500.00 and delivery to him of a copy of the above mentioned escrow agreement between Robert I. Lipton, Trustee, or his assigns, and First Federal Savings and Loan Association of Durham, N. C., relative to the balance of $110,000.00.
3
In a second supplemental petition to the Superior Court filed on August 23, 1963, Eubanks reported that: (1) he had been unable to complete the sale of the property to Lipton; (2) Lipton had assigned his rights in the matter to Goodyear, Lattimore and Darnell; (3) the assignees had arranged through Goodyear Mortgage Corporation to finance the purchase of the property and the erection of a multiple unit motel and business building on the property for $850,000; and (4) the assignees would authorize one Lee W. Settle, Trustee in the deed of trust securing the indebtedness to Goodyear Mortgage Corporation, and the Goodyear Mortgage Corporation, to pay the first funds disbursed by the mortgagee in payment of the purchase price in the amount of $46,500, and that the Goodyear Mortgage Corporation would deposit the balance of $110,000 under the escrow agreement earlier contemplated
The Superior Court's Order of August 23, 1963, provided in pertinent part:
ORDERED, ADJUDGED AND DECREED that Robert A. Eubanks, Guardian of Nannie Carr Harris, incompetent be and he is hereby authorized, empowered and directed to execute a fee simple deed to the property described in the pleadings to George S. Goodyear, George F. Lattimore, Jr. and W. J. Darnell and is further authorized, empowered and directed to enter into a contract with the said parties, their spouses, and Lee W. Settle, Trustee, and Goodyear Mortgage Corporation to the effect that the first monies disbursed by Goodyear Mortgage Corporation on the . . . [demand] note of $850,000.00 [executed by the assignees payable to the Goodyear Mortgage Corporation] shall be paid to Robert A. Eubanks, guardian of Nannie Carr Harris, incompetent, and on or before December 15, 1963 and he may provide in that contract for the payment of $46,500.00 on or before the said date and for the payment of the remainder through an escrow agreement over a period of four (4) years as set out in an order of this Court dated June 1, 1962, and he is further authorized and directed to see that his deed to George S. Goodyear, George F. Lattimore, Jr. and W. J. Darnell, the deed of trust securing an indebtedness to Goodyear Mortgage Corporation, and an agreement relative to payments are filed for registration simultaneously in the Office of the Reister of Deeds of Orange County and to see that there are no intervening liens against the said property.
4
The escrow agreement between Lee W. Settle, Trustee, and the First Federal Savings and Loan Association, provided in part:
Whereas, the order of the Clerk of the Superior Court of Orange County and approval by the Resident Judge of the Fifteenth Judicial District of the Superior Courts of North Carolina, authorized and permitted the party of the first part [Settle] to deposit the balance of the purchase price and in the sum of $110,000.00 with the party of the second part, as Escrow Agent, and under the following irrevocable terms and conditions, . . . .
5
Taxpayer reported the receipt of $5,000 of the proceeds of the sale on her 1963 individual income tax return and made an election to report the sale on the installment basis. On her 1964 return, she reported the receipt of $40,500 as a longterm capital gain installment on the 1963 installment sale. The issue here is whether the amount of the 1964 installment was understated and whether the amount deposited in escrow should have been included in the 1964 tax return
6
This deficiency of $226.67 was apparently due to the fact that taxpayer originally claimed $10,000 as the basis of the property sold, the Commissioner used a basis of $1,000 in determining the deficiency, and the parties ultimately stipulated a basis of $6,000
7
See footnote 1 | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1917580/ | 835 So. 2d 234 (2000)
Antonio BONNER
v.
STATE.
CR-99-0615.
Court of Criminal Appeals of Alabama.
August 25, 2000.
Opinion on Return to Remand on Grant of Rehearing September 28, 2001.
*235 Blanchard L. McLeod, Jr., Selma, for appellant.
Bill Pryor, atty. gen., and J. Thomas Leverette, asst. atty. gen., for appellee.
FRY, Judge.
The appellant, Antonio Bonner, was convicted of four counts of the unlawful distribution of a controlled substance, a violation of § 13A-12-211, Ala.Code 1975. For each conviction, he was sentenced as a habitual felony offender to life imprisonment, with the sentences to run concurrently.[1] In an unpublished memorandum *236 issued today, we affirmed Bonner's convictions. See Bonner v. State (No. CR-99-0615), 814 So. 2d 1013 (Ala.Crim.App.2000) (table). In this opinion we address only Bonner's sentencing.
Our review of the record indicates that the trial court did not impose the fines required by the Alabama Demand Reduction Assessment Act. The Alabama Demand Reduction Assessment Act, § 13A-12-281, Ala.Code 1975, mandates an additional fine of $1,000 for first-time offenders and $2,000 for second-time and subsequent offenders for each conviction under § 13A-12-211, Ala.Code 1975.
Although the trial court's sentencing order indicates that the trial court assessed a $1,000 fine, the record does not indicate whether that fine was assessed pursuant to the Alabama Demand Reduction Assessment Act or for some other purpose. Therefore, we remand this case for the trial court to clarify whether the $1,000 fine was assessed pursuant to the Alabama Demand Reduction Assessment Act or was assessed for some other purpose.
Furthermore, the record indicates that the trial court failed to impose the appropriate additional fines in accordance with the Alabama Demand Reduction Assessment Act. As discussed above, because the offense charged in Count I was Bonner's first drug offense, the trial court should have assessed a $1,000 fine in accordance with the Alabama Demand Reduction Assessment Act. Additionally, because the offenses charged in for Counts II, III, and IV were for subsequent drug offenses, Bonner should have been fined $1,000 for each additional conviction. See May v. State, 729 So. 2d 362, 363 n. 2 (Ala.Crim.App.1998) (noting that, because the State did not prove any prior offenses, $1,000 for each count is the appropriate fine).
Furthermore, the record indicates that the trial court did not apply the enhancement provisions of § 13A-12-250 and § 13A-12-270, Ala.Code 1975, when it sentenced Bonner.
In Gamble v. State, 699 So. 2d 978 (Ala. Crim.App.1997), this Court stated:
"Section 13A-12-250 provides a penalty of 5 years' incarceration in addition to any other penalties when the unlawful sale occurred within 3 miles of a school. Section 13A-12-270 provides a penalty of 5 years' incarceration in addition to any other penalties when the unlawful sale occurred within 3 miles of a public housing project. Application of both sections is mandatory. Cunny v. State, 629 So. 2d 693 (Ala.Cr.App.1993)."
699 So.2d at 980. See Wild v. State, 761 So. 2d 261 (Ala.Crim.App.1999) ("testimony from an officer who is familiar with the location of the sale is sufficient to establish that the sale occurred within three miles of a school").
Testimony indicated that three of the transactions occurred within or in front of a house on 1508 Mabry Street in Selma. During sentencing, Eddie Cook, a probation officer, testified that he was familiar with the neighborhood where the transactions occurred, and that 1508 Mabry Street is located within three miles of both an elementary school and a housing project. The State's evidence indicates that the first, third, and fourth transactions occurred within three miles of a school and housing project. Thus, the trial court should have enhanced Bonner's sentences *237 for the first, third, and fourth transactions by an additional 10 years' imprisonment.[2]
Therefore, we remand this case so that the trial court may impose the appropriate fines mandated by the Demand Reduction Assessment Act, see May v. State, supra, Smith v. State, 715 So. 2d 904 (Ala.Crim.App.1997); Palmer v. State, 745 So. 2d 920 (Ala.Crim.App.1999); Laster v. State, 747 So. 2d 359 (Ala.Crim.App. 1999). On remand, the trial court shall apply the enhancement provisions of § 13A-12-250 and § 13A-12-270 to each of Bonner's convictions for distribution of a controlled substance.[3] See Gamble v. State, supra. The trial court shall take all necessary action to see that the circuit clerk makes due return to this court at the earliest possible time and within 56 days of the release of this opinion.
AFFIRMED BY MEMORANDUM IN PART AS TO CONVICTIONS; REMANDED WITH DIRECTIONS IN PART AS TO SENTENCING.[*]
LONG, P.J., and McMILLAN, COBB, and BASCHAB, JJ., concur.
On Application For Rehearing
PER CURIAM.
The unpublished memorandum released on December 15, 2000, is hereby withdrawn, and the following opinion is substituted therefor.
The appellant, Antonio Bonner, was convicted of four counts of the unlawful distribution of a controlled substance, violations of § 13A-12-211, Ala.Code 1975. Bonner was sentenced as a habitual offender to life imprisonment on each count; those sentences were to be served concurrently. On August 25, 2000, we affirmed Bonner's convictions and remanded the case for imposition of the enhancement provisions contained in § 13A-12-250 and § 13A-12-270, Ala.Code 1975. See Bonner v. State, 835 So. 2d 234 (Ala.Crim.App. 2000). We further directed the trial court to assess the Demand Reduction Assessment fines on each conviction. See § 13A-12-281, Ala.Code 1975.
When we remanded this case, the United States Supreme Court had recently released its decision in Apprendi v. New Jersey, 530 U.S. 466, 120 S. Ct. 2348, 147 L. Ed. 2d 435 (2000). In that case, the Supreme Court held that any fact that increases a sentence above the statutory range must be submitted to a jury and proven beyond a reasonable doubt.
On August 31, 2001, this Court first addressed the effect of Apprendi on the enhancement provisions of § 13A-12-250 and § 13A-12-270. See Poole v. State, [Ms. CR-99-1200, August 31, 2001] ___ So.2d ___ (Ala.Crim.App.2001). In Poole, we held that Apprendi applies to § 13A-12-250 and § 13A-12-270, and the failure *238 to submit such an enhancement to the jury will invalidate a sentence if a proper objection is made. After Bonner was resentenced he objected to the newly enhanced sentences based on the holding in Apprendi. For the reasons stated in Apprendi and Poole, Bonner's sentences are due to be set aside. The trial court is directed to resentence Bonner without applying § 13A-12-250 and § 13A-12-270. Due return should be filed in this Court no later than 45 days from the date of this opinion.
APPLICATION GRANTED; UNPUBLISHED MEMORANDUM OF DECEMBER 15, 2000, WITHDRAWN; OPINION SUBSTITUTED; REMANDED WITH DIRECTIONS.[*]
McMILLAN, P.J., and COBB and BASCHAB, JJ., concur.
NOTES
[1] Bonner was sentenced as a habitual felony offender because he had three prior felony convictions. The record indicates that the three prior convictions were not for drug-related offenses.
[2] The record indicates that the second transaction occurred while "driving around on Sixth Street." (R. 147.) Testimony at the sentencing hearing does not indicate that the location of this sale was within three miles of a school or a housing project; therefore, no sentencing enhancements should apply to the second transaction.
[3] We note that, "[w]hile the enhancement statutes require that different enhancements for a single offense be served consecutively, the consecutive-service provisions of the enhancement statutes do not apply to convictions based on separate offenses." Ex parte Garner, 781 So. 2d 253, 255-56 (Ala.2000). "It is within the trial court's discretion to allow sentences imposed for separate offenses to run concurrently when §§ 13A-12-250 and 13A-12-270 apply." Ex parte Garner, supra.
[*] Note from the reporter of decisions: This case will also appear on a table of decisions without opinions.
[*] Note from the reporter of decisions: On November 30, 2001, on return to second remand, the Court of Criminal Appeals affirmed, without opinion. On January 11, 2002, that court denied rehearing, without opinion. On May 17, 2002, the Supreme Court denied certiorari review, without opinion (1010817). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917559/ | 178 B.R. 533 (1995)
In re Larry C. GREEN and Betty Jo Green, Debtors.
Bankruptcy No. 94-02077-BKC-3P7.
United States Bankruptcy Court, M.D. Florida, Jacksonville Division.
February 27, 1995.
*534 Lansing J. Roy, Jacksonville, FL, for debtors.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
GEORGE L. PROCTOR, Bankruptcy Judge.
This case is before the Court upon the objection to debtors'[1] claim of exemption filed by the trustee. The Court held a hearing on November 9, 1994, and upon the facts stipulated by the parties and post hearing briefs, the Court enters these findings of fact and conclusions of law.
Findings of Fact
The parties are in agreement as to the following facts.[2]
1. On or before January 10, 1990, Larry Green sustained an on-the-job injury while working as an employee for Parker Pontiac in Havlock, North Carolina.
2. Larry Green received 167 weeks of temporary total disability from August 8, 1990, through October 20, 1993.
3. Larry Green through his attorney in the state of North Carolina negotiated a compromise settlement referred to as a "clincher" in the amount of $112,500.00 in the latter part of 1993. The total amount of compensation paid including the "clincher" was $133,036.88 with total medical paid of $101,033.72 for total compensation and medical paid of $234,070.60. Attached hereto as Exhibit # 1 is a report of compensation and medical paid dated December 6, 1993 and confirming the aforestated.[3]
4. Attached hereto as Exhibit # 2 is an Agreement of Final Settlement and Release entered into by the parties on September 3, 1993. Larry Green's portion of the "clincher" settlement was placed in Certificate of Deposit # 5533 dated May 13, 1994 in the amount of $81,071.85. (See attached exhibit # 3)
a. Attached hereto as composite Exhibit # 4 are bank statements from Community State Bank Of Starke beginning in November of 1993 through April 11, 1994 showing that an initial opening deposit $84,000.00 on November 19, 1994.
6. The Debtor filed a petition for relief under title 7, Chapter 11 on May 7, 1994.[4]
7. On Schedule B2 the Debtor showed the Certificate of Deposit in the amount of $81,071.85.
8. On Schedule C the Debtor claimed the Certificate of Deposit as exempt Under Fla. Stat. 222.201(1), 11 U.S.C. 522(d)(10)(C) and *535 under N.C.G.S. Sec. 97-21 in the amount of $81,071.85. On July 21, 1994 Alexander G. Smith filed an objection to claim of exemptions concerning the Certificate of Deposit. (exhibit # 5)
9. By permission of the Court, the parties through their respective attorneys are submitting Memoranda of Law on the exemption claimed and the Trustee's objection to the exemption.
Conclusions of Law
The filing of a bankruptcy case creates an estate which consists of all property of the debtor. 11 U.S.C. § 541. A debtor may exempt certain property from the estate pursuant to § 522. Section 522(b) provides for two exemption schemes, either those exemptions provided in § 522(d) or those exemptions provided by state and local law and other federal law. 11 U.S.C. § 522(b). Florida has "opted out" of the federal exemptions provided in § 522(d) and only allows debtors to choose state and non-bankruptcy exemptions. Fla.Stat. ch. 222.20.
Applicable State Law
Debtor argues that his worker's compensation settlement is exempt property because § 522(b) of the bankruptcy code does not require application of the Florida law of exemptions. Rather, it requires application of "applicable" state law which in this case is North Carolina law because the injury occurred in North Carolina and all benefits were paid pursuant to North Carolina's worker's compensation act.
The answer to the question of which state law applies is found in 11 U.S.C. § 522(b)(2) which states in pertinent part:
(b) Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate the property listed in either paragraph (1) or, in the alternative, paragraph (2) of this subsection. . . .
(1) property that is specified under subsection (d) of this section, unless the State law that is applicable to the debtor under paragraph (2)(A) of this subsection specifically does not so authorize; or, in the alternative
(2)(A) any property that is exempt under Federal law, other than subsection (d) of this section, or State or local law that is applicable on the date of the filing of the petition at the place in which the debtor's domicile has been located for the 180 days immediately preceding the date of the filing of the petition, or for a longer portion of such 180-day period than in any other place;
The statute is clear; the exemptions available to a debtor in a state that has "opted out" of the federal bankruptcy exemptions provided in subsection (d) of § 522 are those provided by the law of his domicile. In re Dixson, 153 B.R. 594 (Bankr.M.D.Fla.1993); In re Pizzi, 153 B.R. 357 (Bankr.S.D.Fla. 1993); In re Wellberg, 12 B.R. 48 (Bankr. E.D.Va.1981); In re Volk, 26 B.R. 457 (Bankr.D.S.D.1983). The debtor has the burden of establishing entitlement to exemptions claimed. In re Estridge, 7 B.R. 873, 874 (Bankr.M.D.Fla.1980).
No evidence of debtor's residency or debtor's intent to return to North Carolina or to stay permanently in Florida was presented. The sole evidence presented regarding residency or domicile is the inferences which may be drawn from the fact that debtors deposited $84,000.00 of the worker's compensation settlement into a bank account in Florida in November, 1993, and that those funds were then used to purchase a certificate of deposit from a Florida bank in May, 1994. Because debtors have the burden of proving entitlement to the exemptions claimed and have failed to establish that their domicile is North Carolina, their claim to exempt status for the settlement funds pursuant to N.C.G.S. 97.21 is unsupported. The trustee's objection to this ground for exemption is sustained. If the settlement proceeds are to be exempt debtors must establish that the funds are exempt under Florida law.
Exemption under Florida Statute 222.201(1)
Debtors argue in that alternative that even if the exemption is not allowed under North Carolina law, debtors are entitled to exempt the funds in the certificate pursuant *536 to Fla.Stat. ch. 222.201. Section 222.201 provides:
(1) Notwithstanding s. 222.20, an individual debtor under the federal Bankruptcy Reform Act of 1978 may exempt, in addition to any other exemptions allowed under state law, any property listed in subsection (d)(10) of s. 522 of that act.
Florida Stat. ch. 222.20 provides:
In accordance with the provision of s. 522(b) of the Bankruptcy Code of 1978 (11 U.S.C. s. 522(b)), residents of this state shall not be entitled to the federal exemptions provided in s. 522(d). Nothing herein shall affect the exemptions given to residents of this state by the State Constitution and the Florida Statutes.
The trustee argues that the Florida legislature cannot "selectively opt back in" to the federal exemptions contained in § 522(d) after "opting out" in Fla.Stat. 222.20 because § 522(b) only allows the complete adoption or rejection of the exemptions contained in § 522(d).
By providing that Florida debtors may exempt the property enumerated in § 522(d)(10) the Florida legislature is not violating § 522(b), but effectuates the purposes of the code and § 522. Congress intended that the states participate in determining what the fresh start would entail, and to that end provided that states could provide exemptions which are appropriate to each locale. In re Schlein, 8 F.3d 745, 752 (11th Cir.1993); In re Treadwell, 699 F.2d 1050 (11th Cir.1983) (citing legislative history that indicates debtor must chose between 522(d) exemptions and state and non-bankruptcy exemptions). Thus, Congress has relied upon state law to assist in implementation of the code. Id.
Florida Statute 222.201(1) is consistent with this scheme because a Florida debtor is not allowed both the bankruptcy exemptions and the state and federal non-bankruptcy exemptions, rather only those items enumerated in § (d)(10) are allowed by the state and become state exemptions by virtue of being incorporated into state law. In re Rosenquist, 122 B.R. 775 (Bankr.M.D.Fla.1990) rev'd on other grounds In re Schlein, 8 F.3d 745 (11th Cir.1993); In re Bryan, 106 B.R. 749, (Bankr.S.D.Fla.1989), rev'd on other grounds In re Schlein, 8 F.3d 745 (11th Cir.1993) (argument that only choice available to state legislature was complete opting out or opting in is without merit).[5] Thus, if debtor's worker's compensation settlement fits within the meaning of § 522(d)(10)(C) then debtors may claim it as exempt pursuant to Fla.Stat. 222.201(1).
The trustee argues that even if § 522(d)(10)(C) exemptions are available under Fla.Stat. 222.201(1) the settlement does not fall within § 522(d)(10)(C) because the funds are not traceable to the settlement. The trustee contends that the difference in the $84,000.00 deposited in the bank account, and the $112,500.00 settlement is unexplained, thus the proceeds are untraceable. The trustee also argues that the funds which were used to purchase the certificate of deposit no longer relate to debtor's "right to receive a disability benefit" because interest has been added to the settlement and funds have been withdrawn from the account.
The parties stipulated that debtor's portion of the settlement was used to purchase CD # 5533 on May 14, 1994, thus that portion of the trustee's argument concerning traceability of funds into the bank account is moot.
This Court has previously recognized the general rule that depositing exempt funds into a bank account does not divest those funds of their exempt status. In re Benedict, 88 B.R. 390 (Bankr.M.D.Fla.1988) citing 31 Am.Jur.2d, Exemptions § 224. In addition, lump sum awards may be exempt. In re Fraley, 148 B.R. 635 (Bankr.M.D.Fla. 1992); In re Donaghy, 11 B.R. 677 (Bankr. S.D.N.Y.1981); In re Frazier, 116 B.R. 675 (Bankr.W.D.Wis.1990).
Although the settlement proceeds retained their exempt status while they were on deposit at the bank, debtors subsequently purchased a certificate of deposit with the settlement *537 funds and the accrued interest. Thus, if the settlement proceeds are exempt the exemption must continue notwithstanding the purchase of the certificate. Case law supports both the continuation of the exemption and the loss of the exemption. In re Albrecht, 89 B.R. 859 (Bankr.D.Mont.1988) (FELA settlement from disability completely exempt in bankruptcy as disability benefit even though a portion of the funds were used as down payment on house); In re Cesare, 170 B.R. 37 (Bankr.D.Conn.1994) (once proceeds of employee benefit plan are distributed they are no longer exempt and IRA purchased with proceeds not exempt); In re Bonzey, 153 B.R. 105 (Bankr.D.R.I.1990) (pursuant to Rhode Island law even though the personal property was traceable exemption lost); See also, 31 A.L.R. 3d 532, 546 and cases cited therein.
The interest paid while the funds were on deposit in the Florida bank is unrelated to debtor's right to receive a disability benefit and it is not exempt. However, the amount of interest is known and commingling the non-exempt interest with the exempt settlement proceeds does not effect the exempt status of the settlement proceeds. Because the funds used to purchase the certificate are traceable to the settlement proceeds which represent debtor's right to receive a disability benefit the Court holds that the certificate of deposit is exempt.
The policies of providing future wages to an injured workman or his family to keep them from becoming destitute which this Court relied upon in Fraley, and the requirement that exemptions be liberally construed add additional support the conclusion that the settlement proceeds are exempt. 148 B.R. 635, 637, citing Kennedy v. Estate of Beasley, 318 So. 2d 496, 498 (Fla. 2d DCA 1975), cert. denied, 333 So. 2d 463 (Fla.1976); In re Cain, 91 B.R. 182 (Bankr.N.D.Ga.1988) (legislative history and intent of worker's compensation statute supports exemption under § 522(d)(10)(C)); In re Dixson, 153 B.R. 594, 599, citing Killian v. Lawson, 387 So. 2d 960, 962 (Fla.1980).
Conclusion
Pursuant to § 522(b) debtor is entitled to the exemptions provided by Florida law because debtor failed to establish North Carolina was his domicile for the 180 days which preceded this case.
The exemption provided in Fla.Stat. 222.201(1) is not preempted by § 522(b) and debtor may exempt his right to receive a disability benefit. The settlement proceeds from debtor's worker's compensation settlement which were deposited into a bank account and then used to purchase a certificate of deposit continue to represent debtor's right to receive a disability benefit and are exempt pursuant to § 522.
The Court will enter a separate order consistent with these findings of fact and conclusions of law.
ORDER SUSTAINING IN PART AND OVERRULING IN PART TRUSTEE'S OBJECTION TO DEBTORS' CLAIM OF EXEMPTION
Upon findings of fact and conclusions of law separately entered, it is
ORDERED:
1. Trustee's objection to debtors' claim of exemption pursuant to N.C.G.S. 97-21 is sustained.
2. Trustee's objection to debtors' claim of exemption pursuant to Fla.Stat. 222.201(1) is overruled.
NOTES
[1] Hereinafter, debtor will refer only to debtor, Larry C. Green because the worker's compensation award was made to him individually.
[2] The stipulation of the parties is reproduced verbatim without correction for errors in style or sentence structure.
[3] Exhibits are not included in these findings of fact and conclusions of law.
[4] Debtor filed his chapter 7 petition on May 7, 1994.
[5] In addition to addressing the question of Florida's opting back into the federal exemptions, these cases held that ERISA preempted the Florida exemption for state pensions plans. The Eleventh Circuit reversed that holding in In re Schlein, 8 F.3d 745. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917562/ | 178 B.R. 112 (1995)
In the Matter of EMBRACE SYSTEMS CORPORATION, d/b/a Embrace Technology Systems, Inc., Debtor.
Bankruptcy No. 94-84766.
United States Bankruptcy Court, W.D. Michigan.
February 16, 1995.
*113 *114 Thomas E. O'Brien, Chicago, IL, and Michael W. Donovan, Grand Rapids, MI, for Embrace Systems Corp.
Patrick R. Sughroue, Grand Rapids, MI, for Eco-Fibre Corp.
Michael L. Gesas, Chicago, IL, and James D. Stone, Macatawa, MI, for Herbert R. Eldean.
Harold E. Nelson, Grand Rapids, MI, for certain so-called Bridge Loan Investors.
Dan E. Bylenga, Jr., Grand Rapids, MI, for Price Waterhouse.
James Triant, Grand Rapids, MI, for Creditors' Committee.
Ronald L. Rose, Detroit, MI, and Douglas L. Lutz, Grand Rapids, MI, for Guardian Fiberglass, Inc.
OPINION REGARDING DEBTOR'S AMENDED MOTION FOR LEAVE TO ASSUME AMENDED EXECUTORY CONTRACT
JAMES D. GREGG, Bankruptcy Judge.
I. ISSUES
In this chapter 11 case, should the court, pursuant to 11 U.S.C. § 363(b)(1),[1] approve a transfer of certain technology to an asserted insider buyer without the approval of a chapter 11 plan? Given the facts and circumstances, should the court order the appointment of a chapter 11 trustee?
II. JURISDICTION
Embrace Systems Corporation, "Debtor", filed an Amended Motion With Respect To Motion For Leave To Assume Amended Executory Contract And Motion For Alternative Relief on February 1, 1995, "Amended Motion". In its Amended Motion, the Debtor *115 seeks to transfer certain technology, customers, and marketing information, to Eco-Fibre Corporation, "Eco", pursuant to a postpetition Amended Exclusive Worldwide License Agreement, the "Amended License Agreement", outside the ordinary course of the Debtor's business. Although all other parties have either consented to the requested relief, or withdrawn their prior objections, Guardian Fiberglass, Inc., "Guardian", has objected to the relief on various grounds. A trial of this contested matter took place on February 6, 7, 8 and 10, 1995, in the bankruptcy courtroom in Grand Rapids, Michigan.
This court has jurisdiction over this contested matter pursuant to 28 U.S.C. § 1334. In accordance with 28 U.S.C. § 157(b)(2)(A), (M) and (N), this matter is a core proceeding. This court has the authority to enter a final order in this contested matter under 28 U.S.C. § 157(b)(1). This opinion constitutes the court's findings of fact and conclusions of law. FED.R.BANKR.P. 7052.[2]
III. FACTS
This matter principally revolves around the continuing attempts of two persons, Curtis Appel, president of the Debtor, "Appel", and David Sanborn, an engineer consultant to the Debtor and president of Apptech, collectively referred to as "Sanborn", to own and control certain technology and business opportunities. They hope to eventually profit from the commercial manufacture of meltblown fibers, fabrics and webs. Very simplistically stated, the technological process involves converting feedstocks (in whole or in part composed of recycled plastic materials) into plastic fiber, by using heat and chemicals and then forcing those materials through an extruder. This meltblown fiber is then processed, per a customer's specifications, into a fabric or web of proper size and density. Potential commercial uses include thermal and acoustical insulation for the appliance and automotive industries. If commercially feasible, these plastic meltblown products eventually will compete with fiberglass as an insulating material. One of the asserted positive attributes of these meltblown products is that they are environmentally friendly because they use recycled materials as raw product and the technological process does not damage water or air quality.
Appel holds a J.D. degree and was previously a practicing attorney for three years. He has also worked in the chemical industry in sales, manufacturing, and recycling of products.
Appel became a director of the Debtor in March, 1993. He became its chief executive officer, "CEO", sometime during the third quarter of 1993. In the last quarter of 1993, the Debtor raised more than $6,500,000 in funds for its capital requirements.
During February, 1994, Appel was terminated as the Debtor's CEO. One week later, he was re-hired as president of the Debtor. At the end of February, 1994, Appel took over the day-to-day operations of the Debtor and he still remains its president.
Appel is also the president of Regenex, Inc., a company that currently is not operating. The Debtor is the largest shareholder of Regenex and, in 1993, held in excess of thirty percent of its stock. Appel owned, and now owns, approximately eight percent of the Regenex stock. During the second half of 1993, nearly all efforts of Regenex were related to developing or improving feedstocks for the Debtor. Although Regenex owed a debt to the Debtor, the Debtor's schedules do not disclose the debt because the Debtor previously wrote off that indebtedness.
Appel, in addition to being on the Debtor's Board of Directors, is a shareholder of the Debtor. Susan & Co., Ltd. holds 50,000 shares of common stock as Appel's nominee. *116 Although the Debtor bought stock from shareholders in late 1993 or early 1994 from the substantial capital it raised, the court is unable to now find whether the Debtor purchased any of Appel's stock and, if so, the amount purchased.
Sanborn is the one hundred percent owner of Apptech, an Illinois corporation. Sanborn provides consulting services through Apptech. Sanborn is also the owner of at least 5,000 shares of the Debtor's stock.[3] Although the court lacks details, Sanborn previously consulted with Regenex.
In March, 1994, Appel discovered that the Debtor could produce meltblown fabrics only on the so-called Davis-Standard production equipment, "Davis-Standard Line". The Debtor's production crew was able to only sporadically produce between 30 and 60 pounds per hour of meltblown fabrics that were suitable for thermal and acoustical insulating use. The Debtor was not then able to operate any of the HPM extruders and related production equipment, that the Debtor had engineered, purchased and installed during 1993, the "HPM Line".
In March, 1994, Appel caused the Debtor to engage the services of Dr. Gerald Najour of Visionquest Management Services as a consultant. During March and April 1994, Dr. Najour worked with the Debtor's staff and was able to increase production of meltblown fabrics on the Davis-Standard Line to rates up to 120 pounds per hour.
In March 1994, Appel also approached Sanborn regarding providing consulting engineering services to the Debtor. Even though Sanborn lacked any melt-blowing experience, Appel stated that would not be a problem because Sanborn would work under the guidance of Dr. Najour. In April 1994, Appel engaged Sanborn, through Apptech, to provide consulting services. Sanborn's task was to develop and implement operating parameters for the HPM Line that were consonant with what Dr. Najour had accomplished while working with the Debtor's staff on the Davis-Standard Line.
During the initial development period, Sanborn became aware that certain equipment in the HPM Line necessary to produce meltblown fabric (and handle the meltblown fabric "downstream") required redesign or reengineering to remedy production problems. Appel requested that Sanborn redesign and reengineer the necessary changes to the equipment. Sanborn agreed to attempt to do so.
No written contract existed with regard to Sanborn's consulting activities or compensation. However, pursuant to the testimony, the Debtor was obligated to pay Sanborn $2,000 per week for consulting services, plus reimbursement for expenses. Sometime in June of 1994, the Debtor lacked money to continue to pay Sanborn.[4] Appel and Sanborn then assertedly entered into an oral agreement whereby Sanborn would continue to work on redesigning and reengineering the HPM Line equipment. The Debtor would only pay Sanborn's expenses. Any future technology developed by Sanborn would be owned solely by Apptech. Sanborn would then "work with the Debtor" to utilize any new technology and use the Debtor's production line to create a successful meltblown fiber business. No written corroboration exists for the asserted oral technology agreement between Appel and Sanborn. Nothing in the record exists to support any approval or ratification of such an agreement by the Debtor's directors.
By mid-July, 1994, Sanborn believed he would be successful in modifying the HPM Line. Prior to and after this time, Sanborn worked on development of the meltdown fiber process at the Debtor's plant, using the Debtor's equipment, and with the assistance of the Debtor's employees. Within six weeks of entering into the asserted oral technology agreement, Sanborn was able to use a three and one-half inch HPM extruder to produce *117 approximately 600 pounds per hour of melt-blown fibers. Appel told Sanborn that this output made the process commercially feasible.
After the changes to the HPM Line had been developed, Appel and Sanborn discussed the formation of Eco. Sanborn testified that the purpose of incorporating Eco was to continue technology development without going through the Debtor, and to keep Apptech separate from the Debtor.
Apptech then transferred all of its technology to Eco. Sanborn testified that Appel prepared the technology transfer agreement from Apptech to Eco.[5] In general terms, the agreement provides that Eco now owns all meltblown fiber technology rights that Sanborn, through Apptech, previously held. Sanborn is now the president of Eco. Edward Salazar, another former consultant of the Debtor respecting feedstock problems, is the other officer of Eco. Sanborn and Salazar own 100,000 shares and 50,000 shares of Eco stock, respectively.
The other stockholders of Eco are Dr. Jan Arnett and Jerome Bauman. Arnett previously loaned the Debtor $105,000 and owns 40,000 shares of the Debtor's common stock. See Debtor's schedules; FED.R.EVID. 201. Bauman previously loaned the Debtor $115,000 and is not listed as owning any of the Debtor's stock. See Debtor's schedules; FED.R.EVID. 201. Although Arnett and Bauman have invested cash in Eco, Sanborn does not know the amounts they invested. Indeed, although there are only four shareholders in Eco, Sanborn does not even know whether Bauman is a man or a woman. Based upon the circumstances, the court finds that Appel recruited Arnett and Bauman as Eco investors.
Sanborn and Salazar have not invested any money in Eco. They received their shares of stock in return for Apptech's asserted technology contribution and Salazar's promise to provide services to Eco in the future. Eco has never had a formal shareholders' meeting. Although Sanborn testified that board meetings have taken place, Eco has no corporate minutebook.
Appel is a "consultant" to Eco. Appel is assisting Eco to arrange short-term financing, to develop a business plan, and to attempt to secure long-term financing to comply with the terms of the proposed Amended License Agreement. Prepetition, during September and October 1994, Appel directed Eco to pay $150,000 to the Debtor in accordance with the prior proposed license agreement. Approximately $100,000 went directly to the Debtor. Approximately $50,000 was disbursed by Eco to creditors or other entities at the direction of the Debtor.
Appel is not now a shareholder, officer, or director of Eco. However, Eco desires to continue to retain Appel's services as a consultant, assuming the Amended License Agreement is approved and long-term financing of Eco is completed as is necessary for Eco's needs. In addition, Sanborn testified that Appel is, or shall be, consulting with Eco on administrative, financial, marketing, and sales matters. At this time, Appel is not paid by Eco. Only his expenses are reimbursed. Sanborn testified that Appel might receive compensation from Eco, depending upon Appel's success in future Eco fundraising activities. It was testified that no promises have been made to Appel regarding any compensation amount, and Sanborn stated this is a "fluid situation".
Based upon the totality of the testimony and the exhibits, the court finds that Appel will receive some compensation if he ultimately obtains funding for Eco to carry out the terms of the proposed Amended License Agreement. Thus, Appel has an interest in Eco and is not a disinterested person. Cf. § 101(14)(A) and (E); § 101(10) and (5). Indeed, the court finds that Appel testified more for Eco's interests than for the Debtor's interests. The court also received a very strong impression that Appel either was not cognizant of or may have ignored his fiduciary obligations to the Debtor.
The initial License Agreement between the Debtor and Eco was negotiated by Appel and Sanborn and drafted by Appel. Eventually, the Debtor's Board of Directors ratified that License Agreement. This ratification occurred *118 at the same board meeting at which the Debtor's directors authorized the Debtor to file for chapter 11 relief.
From September, 1994 to shortly before the hearing on this contested matter, the Debtor, through Appel, attempted to sell its technology. Appel testified that he communicated or negotiated with various entities, including: The Bethlehem Corporation, Bethlehem, Pennsylvania; Universal Process Equipment, Inc., Roosevelt, New Jersey; PET Processors, Painesville, Ohio; and Louisiana Chemical, Baton Rouge, Louisiana. See also Amended Motion, paragraph 12. Appel testified that he was involved in an effort to sell the Debtor's and Eco's combined technology. He stated he advised prospective purchasers that the two entities' technology was involved.
Appel contacted possible interested buyers, based upon names given to him by one of the shareholders and pursuant to discussions with brokers. The court finds that Appel acted as an agent for both Eco and the Debtor to attempt to sell their asserted joint technology package. During cross-examination, Appel testified that he did not contact any fiberglass manufacturers because their large investment in that industry gave them a "vested interest" in maintaining fiberglass as the major product for thermal and acoustical insulation.[6]
The Amended License Agreement, which is the subject of this contested matter, was first brought before the court as an exhibit at the hearing. It has not been approved by the Debtor's board of directors. Appel testified that if the court approves the transfer of technology, the Debtor's board will then ratify the agreement.
The proposed Amended License Agreement now provides that the Debtor will transfer certain "Fiber Technology", "Customers", and "Marketing Information" to Eco. The "Fiber Technology" to be transferred includes all of the Debtor's technology, including work performed by Sanborn prior to June 1, 1994 only. Because the "Fiber Technology" is also defined to include "all additions, improvements, enhancements, future know how, processes and technology developed from any of the forgoing know how, processes and technologies" [relating to the Debtor], and because of apparent ambiguities in the agreement, the court asked counsel for the Debtor and Eco to clarify the intent of the agreement. Specifically, the parties were asked whether the Amended License Agreement contemplates that any claim or cause of action for post June 1, 1994 technology, which may be held by the Debtor against Eco (through Sanborn or Apptech), would be waived. At first, counsel for the Debtor answered "no," and counsel for Eco answered "yes". After a recess, both parties agreed that the Amended License Agreement should be interpreted to constitute a waiver of any cause of action held by the Debtor to the technology now asserted to be owned by Eco.
In Paragraph 3.1 of the Amended Licensing Agreement, Eco is required to pay the Debtor $50,000 "as a final pre-licensing fee". Paragraph 3.3 of the agreement requires Eco to obtain capital in a maximum amount of $1 million, on or before May 1, 1995.
The court finds that Eco now has no money in its bank account.[7] The only source anticipated for the $50,000 pre-licensing fee is from potential Eco investors. Further, the court finds that Eco now has no firm commitments for capital contributions from any potential investors. The court finds that it is extremely unlikely that Eco will be able to obtain capital in the amount of $1 million, on or before May 1, 1995.
In addition to the $50,000 payment, Eco agrees to pay the Debtor royalties for use of the Fiber Technology, Customers, and Marketing Information to be transferred. Eco will be obligated to pay the greater of 2 percent of its net sales or 14 percent of pretax *119 net profits to the Debtor within 30 days after the close of each quarter.
Appel and Sanborn testified that Eco expects to commence production within 6 months after the initial $1 million in capital is received, and Eco expects that full production shall be underway within an additional six months thereafter. To accomplish this goal, Appel testified that Eco will obtain, from unknown or undisclosed funders, $2,000,000 to $2,500,000 in new capital during the first year. Although equipment might be leased during the first year, Eco will likely purchase $3,800,000 in equipment within the first two years.
Eco, using projections prepared mostly by Appel, projects that it will earn $28,000,000 in pre-tax profits during its first four years of existence. See Debtor's Exhibit 1. After carefully reviewing the exhibit, and considering the evidence in its totality, the court finds that Appel's/Eco's projections are not "pie-in-the-sky" or "chicken-in-every pot" projections, but rather filet mignon-cooking-on-everybody's-gold-plated-barbeque grill projections. The court finds that the projections have absolutely no current basis in fact. They are not corroborated in any material respect by any evidentiary source. They are made up, based solely upon Appel's belief. The court finds that these projections must be accorded no evidentiary weight whatsoever.
At this time, Eco and the Debtor have the same address. Eco now has a negative net worth. There is no money available in Eco's checking account. Eco currently conducts no business whatsoever, except its attempt to enter into the proposed Amended License Agreement. The only purchase order that Eco has is one from Mackinaw Sales & Engineering Co., (Objecting Creditor's Exh. B), which expires on October 31, 1995 and which, the court finds, will be impossible for Eco to complete. Eco has not now obtained any approvals of meltblown fiber fabric from the appliance or automotive industries. As previously stated, Eco now has no written funding commitments to adequately capitalize its business.
After the Debtor filed its case on October 21, 1994, the Debtor had no money and could not pay any administrative expenses. Without objection, the Debtor obtained court approval to borrow funds to pay administrative expenses, including its commercial lease obligations. To date, the court is not certain whether the Debtor has borrowed money, although testimony was given that postpetition lease payments have not been made.
Campau Leasing & Development Company, "Landlord", obtained a consent relief from stay, unless the Debtor paid certain rent and lease-related obligations, totaling $19,333.34, on or before February 3, 1995. The Debtor, apparently without sufficient funds, failed to timely pay the Landlord. On February 9, 1995, during the hearing on this contested matter, the Landlord filed an "Affidavit Of Default", which documented that the Debtor's commercial lease had been deemed rejected and the automatic stay of proceedings had been modified to permit the Landlord to undertake appropriate remedies, including eviction of the Debtor from its leased premises. FED.R.EVID. 201. The Debtor has argued that one major reason to approve the Amended License Agreement is so it may receive the $50,000 payment from Eco, which may be used, in part, to pay the Debtor's delinquent lease obligations.
Guardian first became involved with the Debtor after the filing of the Debtor's chapter 11 case. On or about January 20, 1995, Crown Lift Trucks Inc. assigned a claim to Guardian. A Proof of Claim was filed by Guardian on January 23, 1995, in the amount of $1,161.89. Claims Docket # 37; FED. R.EVID. 201. No objection to the claim of Guardian has thus far been filed by any party in interest. Therefore, the claim is currently "deemed allowed" under § 502(a) of the Bankruptcy Code.
On January 23, 1995, Guardian made an offer to purchase certain of the Debtor's assets. It sent a letter and a proposed Asset Purchase Agreement to the Debtor, the Creditors' Committee, and all other parties, through counsel, who had previously appeared in connection with the Debtor's motion to transfer assets. See Debtor's Exh. 3. The offer contained many contingencies because Guardian had insufficient information *120 from the Debtor at the time that the offer was submitted. First, and most importantly, Guardian did not, and still does not, adequately know what technology is asserted to be owned by the Debtor and what technology is asserted to be owned by Eco. Guardian offered to buy all the meltblown fiber technology. Second, Guardian wanted to observe a demonstration run of the HPM Line meltblown process. It would then determine whether to resubmit a modified offer, inasmuch as its original Asset Purchase Agreement offer expired on February 1, 1995.
The Debtor and Eco initially consented to show Guardian a test run of the technology. Because neither the Debtor nor Eco had any money to conduct the demonstration, Guardian was requested to give, and gave, $3,000 to fund the demonstration expenses.
The Debtor and Eco subsequently cancelled the demonstration, shortly before it was scheduled to occur, because (1) Guardian raised an issue in its objection as to whether Eco owned the meltblown fiber technology and (2) a potential unidentified funder of Eco objected. Per Appel's testimony, the potential funder asserted that Guardian might steal technological secrets from the Debtor or Eco, even though Sanborn did not believe that this was possible and demonstrations had been previously conducted for other potential buyers.
Sanborn testified that Appel was against showing Guardian the process and that the Debtor's counsel was disappointed there would be no demonstration, because it would be unwise to cancel it. Appel testified that he was not certain that trade secrets could be discovered by Guardian viewing the demonstration and also admitted that Sanborn stated that technological secrets could not be obtained by watching a demonstration. In subsequent testimony, Sanborn backtracked on his original testimony and then stated he didn't recall the reasons for cancelling the Guardian demonstration. To further confuse matters, Appel later testified that he wanted the demonstration to go forward.
The court believes Sanborn's initial testimony and finds Appel decided to cancel the Guardian demonstration. Partially as a result of this action, Guardian has been denied the opportunity to determine whether to submit another bid for the assets the Debtor seeks to transfer.
IV. DISCUSSION
A. Guardian's Standing.
The threshold question this court must address is whether Guardian has standing to object to the Debtor's Amended Motion to assume the alleged executory contract with Eco. (In Part IV.B. of this opinion, the court addresses the question of whether the "contract" with Eco does indeed fall within the parameters of § 365.) Guardian's standing is at issue because it was not a creditor in the Debtor's bankruptcy case as of the filing of the Debtor's petition under chapter 11. On January 20, 1995, Crown Lift Trucks, Inc. assigned its claim in the aggregate amount of $1,161.89 to Guardian. On January 23, 1995, Guardian filed its proof of claim for that amount with the bankruptcy court. Claims Docket # 37.
In answering this question, the court turns to the Bankruptcy Code for guidance. Section 1109(b) of the Code provides that "[a] party in interest, including . . . a creditor, . . ., may raise and may appear and be heard on any issue in a case under this chapter." 11 U.S.C. § 1109(b). Thus, the Code contemplates that a creditor is a party in interest for purposes of raising issues and objections in a bankruptcy case. The Code does not distinguish between creditors existing at the time of a bankruptcy case filing and those that attain creditor status postpetition.
In addition, Bankruptcy Rule 3001(e) specifically contemplates the purchase of creditor claims. The Advisory Committee Notes to the 1991 Amendments state as follows:
Subdivision (e) [of B.R. 3001] is amended to limit the court's role to the adjudication of disputes regarding transfers of claims. . . . This rule is not intended either to encourage or discourage postpetition transfers of claims or to affect any remedies otherwise available under nonbankruptcy law to a transferor or transferee such as for misrepresentation in connection with the transfer of a claim. *121 Advisory Committee Notes to 1991 Amendments (emphasis added). Denying standing to purchasers of claims, however, would effectively discourage postpetition transfers of claims, in contravention of the intended purpose of Bankruptcy Rule 3001. In addition, no other Bankruptcy Rule provides or implies that the postpetition purchaser of a claim lacks standing to participate in the bankruptcy case in which it has purchased a claim.
The case law also supports this court's determination that Guardian, as the purchaser of a claim in the Debtor's bankruptcy case, has standing to object to the Debtor's Amended Motion. In In re Rook Broadcasting of Idaho, Inc., 154 B.R. 970 (Bankr.D.Idaho 1993), the court held that the purchaser of a claim postpetition had standing to propose a plan of reorganization as a "party in interest" under § 1121(c). The court in In re First Humanics Corp., 124 B.R. 87 (Bankr.W.D.Mo.1991) reached a similar conclusion, holding that the timing of a creditor's acquisition of a claim (prepetition vs. postpetition) did not affect its status as a party in interest for purposes of proposing a plan of reorganization under § 1121. Id. at 91. Bankruptcy courts, however, have denied standing to parties that are not creditors, but are interested only in purchasing a debtor's assets. See e.g., In re Crescent Manufacturing Co., 122 B.R. 979, 981 (Bankr.N.D.Ohio 1990) ("Scarborough is not a creditor of this estate; it is an interested purchaser of Debtor's assets or business. . . . Because Scarborough represents only a perspective [sic] purchaser, the court, as opined at the hearing, finds that it is without standing to object to the instant motions.").
This court recognizes that Guardian wears two hats in this proceeding: as a creditor and as an interested purchaser. It is not Guardian's status as the purchaser of an existing claim that concerns this court; it is Guardian's status as a competitor and an interested purchaser of the Debtor's assets that raises the specter of improper motive. Nonetheless, Guardian's mere status as an interested purchaser does not negate its rights as a creditor to object to the Debtor's Amended Motion. The court will not second-guess Guardian's motives. Rather, the Debtor must show, by a preponderance of the evidence, that Guardian has objected in bad faith to the Debtor's Amended Motion.
The Bankruptcy Code does not define "good faith." A creditor acting in its own self-interest does not necessitate a finding of bad faith. Cf. Insinger Machine Co. v. Federal Support Co. (In re Federal Support Co.), 859 F.2d 17 (4th Cir.1988) (a creditor that votes against the debtor's plan of reorganization because the creditor views the plan as contrary to its self-interest does not act in bad faith). Therefore, as an unsecured creditor, Guardian may properly object to the Debtor's Amended Motion if Guardian believes that the Debtor's sale proposal provides no real prospect of eventual payment to the unsecured creditors.
In an arguably analogous situation in chapter 11, when a creditor votes to reject a plan, "bad faith" may be shown when the creditor seeks to coerce payment of more than its fair share from the estate, or exhibits an improper ulterior motive such as malice, strikes, blackmail, or purposely seeking to destroy the debtor to advance a competing business. Id. at 19. If any such circumstance was present in this contested matter, the court would likely find Guardian had acted in bad faith.
But there are no facts in the existing record to support a finding of bad faith on the part of Guardian. The Debtor has not alleged any impropriety with regard to Guardian's purchase of Crown Lift's claim. While Debtor's counsel has vaguely alluded to Guardian's purchase of standing in this contested matter, the Debtor has put forth no facts which show that Guardian's motivation in objecting is suspect, e.g., to destroy the Debtor's ability to reorganize. Moreover, this court would be reluctant to find that Guardian has acted with an improper motive without giving Guardian at least some chance to summarily address such allegations, with some advance notice, however limited. Cf. § 1126(e) (after notice and hearing, court may designate an entity whose acceptance or rejection of chapter 11 plan was not in good faith).
*122 The court determines that Guardian has standing to object to the Debtor's Amended Motion. No facts exist in the record to impugn Guardian's motivation in objecting to the Debtor's Amended Motion. Moreover, this court would require some form of advance notice to Guardian prior to making such a factual determination, unless the prohibited motivation was clear in the record itself. Because no such facts exist in the record, the court need not reach the issue of whether a finding of bad faith would destroy Guardian's standing to object or merely negate the validity of its objection to the Debtor's Amended Motion.
B. Standards to Grant or Deny the Amended Motion.
1. Does § 365 or § 363 Govern?
The Debtor originally filed a Motion For Leave to Assume Executory Contract on November 21, 1994. The Debtor sought to assume, pursuant to § 365, the Exclusive Worldwide License Agreement, dated September 1, 1994, and signed by Appel, president of the Debtor, and Sanborn, president of Eco. The original License Agreement essentially contemplated a sale of the Debtor's entire business. It included not only an exclusive license of the Fiber Technology, but also a transfer of all machines and equipment owned, leased, or used by the Debtor. After the Debtor received numerous objections to its original assumption motion, the Debtor filed the Amended Motion. Pursuant to this Amended Motion, the Debtor sought to assume, pursuant to § 365, the Amended Exclusive Worldwide License Agreement with Eco.
The Amended License is not some minor modification of an existing executory contract between the Debtor and Eco; it is an entirely new agreement. The Debtor has made the following significant modifications to the terms of the original License Agreement: (1) the Amended License does not provide for a transfer of any hard assets of the Debtor; (2) the Amended License provides for different royalty payment percentages; and (3) the indemnification provisions were deleted from the Amended License Agreement.
The problem is that this Amended License Agreement does not fall within the scope of § 365 because it is not an executory contract. There is no indication, in fact, that the parties have any contractual relationship at this point. The document proffered by the parties as the Amended License Agreement has not been signed by any representative of either the Debtor or of Eco. It is not dated. It has not been approved by the Debtor's Board of Directors. The testimony suggests that the parties are seeking the court's advance approval to enter into the agreement; once the court gives its imprimatur to the Amended License Agreement, then the parties (presumably) will sign the document and present it to their respective boards.
Section 365 of the Code involves assumption of executory contracts. By definition, an assumption means that a contract already exists. Section 365 does not govern the standards by which a debtor may enter into new contracts postpetition; rather, it sets forth requirements for a debtor to either assume or reject a contract that was already in existence prepetition and has not yet expired. Therefore, regardless of the title of the Debtor's motion, or the form of the request, § 365 does not govern the standards applicable to this contested matter.
If § 365 does not apply, then which provisions of the Bankruptcy Code govern? The court turns to § 363 of the Code which relates to use, sale, or lease of property. The initial question is whether the Debtor's Amended License Agreement, which provides for a 50-year license of the Debtor's Fiber Technology, constitutes a sale under § 363. In making this determination, the court examines the record in this contested matter. For the following reasons, the court concludes that the 50-year license to Eco essentially amounts to a sale of the Debtor's Fiber Technology.
First, at the Assumption Motion hearing, the Debtor indicated that after the court approved its Amended License Agreement, the Debtor planned to conduct an auction sale of all of its hard assets. The combination of the Fiber Technology license with the sale of the hard assets amounts to a liquidation of the Debtor's business. Second, the *123 Amended License Agreement has a term of 50 years, but does not explicitly provide that the Fiber Technology reverts to the Debtor in the year 2044. Third, the Amended License Agreement, if approved, would give Eco the right to sell the Package, which consists of the Fiber Technology, Customers and Marketing Information. The court wonders how Eco could sell that which it only holds a mere license to exploit. Fourth, the Amended License Agreement, if approved, would transfer all rights to the Fiber Technology to Eco; the Debtor would retain no rights to use or license the technology, at least until the year 2044. Cf. Ernest Bainbridge Lipscomb III, 5 WALKER ON PATENTS § 19:12 at 366 (3d ed. 1986) ("A transfer constitutes a sale when there is a grant of all substantial rights of value in the patent."). Finally, the court must look not to the terminology used by the parties, but to the substance of the transaction. Cf. id. (citing Bell Intercontinental Corp. v. United States, 381 F.2d 1004, 1011, 180 Ct. Cl. 1071 (1967)) ("Whether a transfer constitutes a sale or license is determined by the substance of the transaction. . . . The question does not depend upon the labels or the terminology used in the agreement."). The combination of the Debtor's intent to liquidate its business, the length of the proposed license, and the scope of the rights conveyed under that license mandates a conclusion that the Amended License Agreement proffered by the Debtor constitutes a sale of the Debtor's Fiber Technology.[8]
2. General Considerations Regarding Sales Under § 363.
A large measure of discretion is available to a bankruptcy court in determining whether a private sale should be approved. In re Blue Coal Corp., 168 B.R. 553, 564 (Bankr.M.D.Pa.1994). The court should exercise its discretion based upon the facts and circumstances of the proposed sale.
A sale of assets is appropriate if all provisions of § 363 are followed, the bid is fair, and the sale is in the best interests of the estate and its creditors. In re Charlesbank Laundry Co., 37 B.R. 20, 22 (Bankr. D.Mass.1983). In this matter, Eco's offer now appears to be unfair and the sale is not in the estate's best interests. Also, in circumstances such as this, where the sale has been arranged by Appel, the Debtor's president who has an interest in Eco, as the prospective buyer, the sale should not be approved. See In re WHET, Inc., 12 B.R. 743, 751 (Bankr.D.Mass.1981). (court states that circumstances under which a proposed sale of substantially all of a debtor's assets would be inappropriate include a case "where the sale has been arranged by the debtor who is to have an interest in the purchasing entity."); accord In re Ancor Exploration Co., 30 B.R. 802, 807-08 (N.D.Okla.1983).
"When a debtor desires to sell an asset, its main responsibility, and the primary concern of the bankruptcy court, is the maximization of the value of the asset sold." In re Integrated Resources, Inc., 135 B.R. 746, 750 (Bankr.S.D.N.Y.1992), (citation omitted) aff'd, 147 B.R. 650 (S.D.N.Y.1992). In general, a debtor must demonstrate that the proposed purchase price is the highest and best offer. Id. In this matter, for reasons stated in the factual findings, the Debtor has not met its burden. There has been no showing that the marketing of the assets has been diligent or sufficient.
If there is any degree of fraud, unfairness, or mistake, the bankruptcy court should assess the impact of these factors on the sale at issue when the offer is compared to the court's finding of valuation of the assets to be sold. In re Blue Coal Corp., 168 B.R. at 565. In this case, the court has made no, and is unable to make a, finding as to valuation. There has been no appraisal or other sufficient valuation evidence presented. Appel has testified it is a "waste of time" to place a value on the property because there is "no objective ascertainable standard to utilize based upon the uniqueness of the technology" and, further, because the Debtor lacks money to pay for an appraisal.
*124 The chapter 11 Debtor has a fiduciary duty to the estate. As the Debtor's president, Appel has a duty to make inquiry as to the value of property sought to be transferred; he must do at least as much as he would if the sale were in his own interest in the Debtor's capacity. See Matter of Chapin, 2 B.R. 373, 375 (Bankr.S.D.N.Y.1980) (trustee, as fiduciary for the estate, has a duty to inquire as to property's real value, at least to the same extent he would if the property were his own). The record does not permit any finding that Appel has met this fiduciary obligation.
Given the Debtor's and Eco's position that Eco already owns some of the meltblown Fiber Technology, which is an asserted fact this court believes is problematic, and given the cancellation of a demonstration of the HPM Line to a competing bidder, i.e., Guardian, the court finds that unfairness exists. Indeed, considering the questionable circumstances surrounding this proposed transfer of technology and all of the interconnections between the Debtor (through Appel) and the purchaser Eco, the court even sniffs a possibility that silent fraud exists.[9]
While the court does not believe the testimony and projections about Eco's prospective financial and manufacturing capabilities and, thus, chooses to disregard it, the court does not consider the evidence to be a sufficient basis for now finding fraud. See Bose Corp. v. Consumers Union, 466 U.S. 485, 512-13, 104 S. Ct. 1949, 1966, 80 L. Ed. 2d 502 (1984) (citation omitted) ("When the testimony of a witness is not believed, the trier of fact may disregard it. Normally the discredited testimony is not considered a sufficient basis for drawing a contrary conclusion."); accord Duddy v. Kitchen & Bath Distribs. (In re H.J. Scheirich Co.), 982 F.2d 945 (6th Cir.1993).
Even when a bankruptcy court finds unfairness or bad faith, it retains "discretion to approve the sale should the estate be so desperate for a buyer that a rejection of the offer would be devastating to creditors." Blue Coal Corp., 168 B.R. at 569. Although the Creditors' Committee supports the proposed sale, and its counsel characterizes the sale as an "option" being granted to Eco, no such compelling desperation now exists. First, Eco has no present ability to pay the $50,000 downstroke required by the Amended License Agreement. Second, the court has found Eco's future business projections, and its ability to adequately capitalize itself, to manufacture product, and to generate profits, to be illusory, and perhaps verging on being fictitious. If the Amended License Agreement is not approved, creditors will lose nothing. To the contrary, if the assets are later sold to someone who has a demonstrable ability to pay, the estate will receive something.
3. Special Considerations Regarding Chapter 11 Sales.
An issue exists under what circumstances a bankruptcy court may authorize a sale of all, or a major portion of, a chapter 11 debtor's assets outside a plan of reorganization. In this circuit, "a bankruptcy court can authorize a sale of all a chapter 11 debtor's assets under § 363(b)(1) when a sound business purpose dictates such action." Stephens Indus., Inc. v. McClung, 789 F.2d 386, 390 (6th Cir.1986). In this contested matter, the Stephens case is applicable and supplements the general considerations relating to approval of sales outside the ordinary course.[10]See Discussion Part IV.B.2. supra.
*125 In Stephens, the Sixth Circuit explicitly adopted the reasoning of Committee of Equity Security Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063 (2nd Cir. 1983). In Lionel, the relevant factors were listed as (1) "the proportionate value of the asset to the estate as a whole", (2) "the amount of elapsed time since the filing", (3) "the likelihood that a plan of reorganization will be proposed and confirmed in the near future", (4) "the effect of the proposed disposition on future plans of reorganization", (5) "the proceeds to be obtained from the disposition vis-a-vis any appraisals of the property", (6) "which of the alternatives of use, sale or lease the proposal envisions", and (7) "most importantly perhaps, whether the asset is increasing or decreasing in value." Lionel, 722 F.2d at 1071. These factors are not exclusive and are intended to provide guidance to a bankruptcy court. Id. at 1071. Neither Lionel nor Stephens require that each of the above factors must always be considered. Also, to the extent any factors are utilized, there is no necessity that those factors considered must be given equal weight to determine the outcome. When a chapter 11 sale is requested, in each instance, the unique facts and circumstances must be considered and weighed rather than applying some concrete predetermined formula.
Has the Debtor shown sufficient business justification for approval of the proposed Amended License Agreement? The answer is "no".
The assets subject of the sale represent the great bulk, if not all, of the Debtor's possibly unencumbered assets. This is not an instance when a single vehicle or some unnecessary minor asset is sought to be sold.
This case was filed on October 21, 1994, and it is now slightly less than four months old. On a chapter 11 timeline, the case is reasonably young and there remains time for the Debtor, or another entity, to propose a plan, assuming one is possible. There exists sufficient time to adequately disclose material facts with regard to any future proposed sale, either outside or inside a chapter 11 plan. Lionel, 772 F.2d at 1070 (the key to chapter 11 reorganization is proper disclosure). Although it is now uncertain whether any plan ultimately may be confirmed, the court finds the current proposed sale will not advance the goal of effective reorganization.
Counsel for the Debtor and the Creditors' Committee assert that a plan can be proposed based upon Eco's future royalty payments to the estate. The court disagrees because those payments are phantomlike and not based upon persuasive or supported projections.[11] A future plan remains possible if another prospective buyer is found who may make another offer, a new funder is willing to invest in and take over the Debtor's operations, or possible causes of action are ultimately resolved to generate assets for distribution.
With regard to what normally is the most important factor, i.e., whether the asset is increasing or decreasing in value, reference to the record is warranted. Appel testified that the Fiber Technology was decreasing in value. He also opined that as time progressed, some other company would step in and fill the Debtor's shoes if the Amended License Agreement were not promptly approved *126 by the court and the Fiber Technology not conveyed to Eco.
The court finds this testimony problematic. First, neither the Debtor nor Appel provided the court with any valuation of the asset package to be sold pursuant to the Amended License Agreement. With regard to the value of the Fiber Technology, Appel testified that he did not seek an appraisal of this significant corporate asset because, in part, it was too unique to value. Yet Appel and the Debtor now expect this court to conclude, on absolutely no factual basis, that this asset is declining in value. How does the Debtor expect this court to conclude that an asset is declining in value when no initial value and no current value of the asset in question is presented to the court?
Second, the court finds unpersuasive Appel's testimony that some other company will eventually step in and develop a similar form of technology. That may well be true, but it certainly does not necessitate an immediate sale of this important asset of the Debtor. The development of this technology did not occur overnight. The Debtor did not identify any competitors on the brink of developing the Fiber Technology. The court concludes that the Debtor has failed to demonstrate, by a preponderance of the evidence, that the asset package (in particular, the Fiber Technology) is depreciating in value, thereby necessitating an immediate sale under § 363(b)(1).
The court also finds the sale is not commercially reasonable. It is collusive and not in good faith, for the reasons discussed elsewhere in this opinion. The only circumstance in which the court might even consider this proposed sale would be in connection with a plan, with complete disclosure of all material terms, and an affirmative vote by all classes of creditors. If creditors were desperate enough to take the risk, and the proposed plan otherwise complied with all confirmation requirements, the sale would be approved as part of the plan. See § 1123(b)(4) (permissive sale under plan); and § 1123(b)(3)(A) (settlement of possible claim by Debtor against Eco for post-June 1, 1994 technology). However, this sale does not pass muster under Stephens and Lionel, and cannot be approved.
4. Lack of Good Faith.
It has been held "that when a bankruptcy court authorizes a sale of assets pursuant to Section 363(b)(1), it is required to make a finding with respect to the `good faith' of the purchaser." In re Abbotts Dairies Of Pennsylvania, Inc., 788 F.2d 143, 149-50 (3rd Cir.1986). In the analogous situation of a § 364 borrowing order, the Sixth Circuit has cited Abbotts Dairies approvingly. New York Life Ins. Co. v. Revco, D.S., Inc. (In re Revco D.S., Inc.), 901 F.2d 1359, 1366 (6th Cir.1990) (holding that "an implicit finding of `good faith' in a § 364(e) context is insufficient, and that `good faith' under that section should not be presumed").
The requirement that a purchaser act in good faith . . . speaks to the integrity of his conduct in the course of the sale proceedings. Typically, the misconduct that would destroy a purchaser's good faith status at a judicial sale involves fraud, collusion between the purchaser and other bidders or the trustee, or an attempt to take grossly unfair advantage of other bidders.
In re Abbotts Dairies, 788 F.2d at 147, quoting In re Rock Indus. Mach. Corp., 572 F.2d 1195, 1198 (7th Cir.1978).
In this contested matter, the facts and circumstances mandate a finding that there exists collusion between the Debtor[12], through Appel, and Eco as prospective purchaser, through Sanborn and/or Appel. There also exists evidence of an attempt to take unfair advantage of other prospective bidders. Lastly, there exists some evidence of material nondisclosure and perhaps silent fraud. (See discussion in Part IV.B.2. supra.)
Based upon the totality of the record, the proposed sale by the Debtor to Eco smacks of a "sweetheart deal" or, as argued during closing by Guardian's counsel, the "deal is fixed". A number of facts abundantly support such a conclusion.
*127 The proposed sale is not an auction sale which permits competitive bidding. Basically, the Debtor seeks approval of the Amended License Agreement on a "take it or leave it" basis. However, even assuming that an auction sale occurred, as was requested by the Debtor as a form of alternative relief, under the facts, no meaningful competitive bidding is possible. Pursuant to the alleged June, 1994, oral technology agreement, Appel seemingly "gave away" the Debtor's claim to a valuable technology asset without a written agreement and without approval of the Debtor's board of directors. Appel now projects (even though the court does not believe those projections) that the combined technology of the Debtor and Eco will result in net pre-tax profits totaling in excess of $28,000,000 within four years after approval of the Amended License Agreement.[13] Why would Appel, on behalf of the Debtor, be willing to sacrifice such valuable technology in exchange for Sanborn's services, which were valued at $2,000 per week plus expenses? Why did Appel not retain a non-exclusive license for the post-June 1, 1994 technology on behalf of the Debtor? It is also incredible to the court that material terms of this asserted agreement were not documented in writing, especially given that Appel is an attorney.
Appel, president of the Debtor, discussed and agreed with Sanborn to form Eco. Sanborn testified that he did not incorporate Eco and he was uncertain as to who actually accomplished the incorporation. If not Appel, who else? The court does not believe that the incorporation was carried out by Salazar, Arnett, or Bauman. No testimony exists that any of those persons were actively involved in Eco. The only reasonable finding is that Appel prepared, or caused someone to prepare, the Eco incorporation documents.
Apptech, Sanborn's consulting company, transferred its alleged ownership of the post-June 1, 1994, technology to Eco. According to the testimony, who prepared this document? Appel did.
The original License Agreement was supposedly drawn up on or about September 1, 1994. Who was involved in this agreement? Appel was. That agreement was not ratified by the Debtor's board of directors until shortly before filing of the Debtor's chapter 11 case. Indeed, the original License Agreement was ratified at the same meeting that the board authorized the chapter 11 filing. Why was there a delay in ratifying that proposed agreement? Given the fact that the Debtor asserted at the hearing, through Appel, that the Amended License Agreement is crucial to the Debtor's "survival", the delay is inexplicable.
Appel, kindly stated, has played a very questionable role in Eco's affairs. Because Sanborn testified that he did not recruit the other shareholders, i.e., Arnett and Bauman, the court concludes that Appel did. Appel also caused Eco to make the so-called pre-license payment of $150,000 to the Debtor. Where did these funds come from? Given Sanborn's testimony that he is not well-versed in Eco's financial affairs, the only logical finding is that Appel raised these funds.
Sanborn originally testified, and the court accepts the testimony to be true, that Appel eventually would be paid by Eco for his "consulting" services, based upon the amount of funds that Appel might raise for Eco. Even though the testimony was that no compensation had been agreed to and no promises made, the court believes it is reasonable to find that Appel has a vested interest in Eco's survival and success. The court disbelieves Appel's self-serving testimony that he is working solely (or even predominately) for the Debtor's creditors and shareholders. At a minimum, Appel has an important contingent financial interest in Eco.
Eco is an Illinois corporation that appears to run its very limited business, if any, out of the Debtor's Grand Haven plant. Based upon the schedules, and some statements before this court, the Debtor and Eco have the same address. Although Sanborn testified that Eco has no office at the Grand Haven plant, he also testified that he has answered the telephone at that plant by identifying *128 Eco's name. Although Eco asserts it owns the post-June 1, 1994 fiber technology, as a result of an agreement with, or license from, Apptech, it is consequential that the technology was developed using the Debtor's HPM Line equipment, at the Debtor's plant in Grand Haven, with assistance from the Debtor's employees.
These facts lead to a compelling conclusion that collusion exists between the Debtor and Eco, by and through Appel and perhaps Sanborn, to obtain approval of a sale of the Debtor's technology and future business opportunities. If the sale is approved, Eco will own the Debtor's most valuable asset, free and clear of claims of the Debtor's creditors and shareholders, in exchange for $50,000 and a chimerical promise to pay future royalties.[14]
In addition, the evidence demonstrates that the Debtor and Eco have been unfair to other prospective bidders, most particularly Guardian. The demonstration of the meltblown fiber production process was cancelled by Appel, or the cancellation was caused by Appel, after consultation with one of Eco's possible funders, without reasonable justification. By viewing any demonstration of the HPM Line process, Guardian would not be able to "steal" any of Eco's (or for that matter the Debtor's) secrets. Although Guardian may not have been able to bid as a practical matter, based upon Appel's and Eco's assertion as to ownership of the meltblown fiber technology, cancellation of the demonstration created yet another impediment to Guardian's ability to analyze whether it should make a competing bid.
The court makes an explicit finding that Eco, as a prospective purchaser, lacks good faith. The court also makes an explicit finding that the Debtor, by Appel's actions and omissions, lacks good faith. See also IV.B.2. supra.
C. Should the Court Order, Sua Sponte, the Appointment of a Chapter 11 Trustee?
A bankruptcy court may sua sponte raise the issue of whether a chapter 11 trustee should be appointed. Matter of Mother Hubbard, Inc., 152 B.R. 189, 197 (Bankr.W.D.Mich.1993). This issue may be raised when "persuasive evidence comes to the court's attention on the record which may lead to a conclusion that cause exists or an abuse of process is occurring." Id.
In this contested matter, after notice and three and one-half days of hearing, the court has found that Appel, the Debtor's president, has engaged in activities that are detrimental to the estate and its creditors. Postpetition, Appel has sought approval of the Amended License Agreement with Eco when he is serving as Eco's consultant, is not disinterested, and holds an interest adverse to the estate. Given the total record, the court strongly perceives that Appel is much more concerned about Eco's future (and its attempt to capture the meltblown fiber technology) than any possible success of the Debtor's chapter 11 case. The court has found that the Debtor, through Appel, acted unfairly, and lacks good faith, in pursuing the private sale to Eco.
Also very important, from the court's perspective, is the possible existence of a cause of action regarding the ownership of the post-June 1, 1994 technology, which is claimed by Eco pursuant to the oral agreement assertedly entered into by Appel and Sanborn.[15] Although no valuation of this technology has been made, the court believes *129 that this asset may be very important to whomever may own it. Until this issue is resolved by litigation, or court-approved settlement after full disclosure, it will be very difficult, if not impossible, for the Debtor to sell its uncontested technology to any other entity. Further, until this issue is resolved, any party's ability to propose a chapter 11 plan is, at best, dubious. The court finds that given his testimony and interest in Eco, Appel is not the person to investigate and determine whether litigation is warranted or the possibility of a reasonable settlement exists. He is not currently the person to propose a plan. To the extent the Debtor may have any business operations, he is not the person who should operate the Debtor.
The chapter 11 process is premised upon full disclosure to parties in interest. Cf. § 1125. Such disclosure requires revelation of all material facts both the good and the bad. Corporate debtors take actions and make decisions through individual persons. Appel, who is concerned with Eco's future and the maintenance of the technology thus far developed for its benefit, holds an adverse interest to the Debtor's estate. He should not be permitted to continue to exercise the Debtor's fiduciary obligations. Compelling cause exists pursuant to the court's findings herein to forthwith remove Appel as the Debtor's individual decision-maker.
Given the present record, it appears to the court that the Debtor now has no other employees to comply with its duties and obligations. Further delay in this case is not in the interests of the creditors and equity security holders and will be prejudicial. An independent examination of the Debtor's assets, liabilities, potential causes of action,[16] ability or inability to sell assets, and any potential to propose a plan of reorganization must proceed expeditiously. An independent disinterested person must now be appointed.
Based upon its findings of fact herein, after a full hearing on the record, the court holds an appointment of a chapter 11 trustee is both necessary and proper, both for "cause" and to serve the "interest of creditors". § 1104(a)(1) and (2); § 105.[17]
V. CONCLUSION
Under the facts in this contested matter, the Debtor's Amended Motion to Approve the Amended License Agreement constitutes a sale rather than a requested assumption of an executory contract. Approval of the sale is denied, inter alia, because of unfairness and lack of good faith.[18] Appointment of a chapter 11 trustee, sua sponte, is now mandated pursuant to the court's findings of fact.
NOTES
[1] Unless otherwise noted, all future statutory references are to title 11 of the United States Code, sometimes referred to as the "Bankruptcy Code" or "Code".
[2] Because of the importance of this decision, and the constraints on the court's time, on February 14, 1995, four days after the hearing concluded, the court issued an oral bench opinion. At that time, the court stated it would release its written opinion in publishable form as soon as was possible.
The findings and conclusions stated by the court in its oral opinion are consonant with this written opinion in all material respects. The findings of fact are based upon the testimony of the witnesses (including their written declarations), the exhibits which were admitted and, only when necessary and stated, judicial notice of background information contained in the court's file. FED.R.EVID. 201.
[3] The court is unable to determine, based upon conflicting evidence, whether Sanborn holds 5,000 or 7,500 shares of the Debtor's stock. For purposes of this opinion, the number of shares is immaterial.
[4] Appel testified that the Debtor was insolvent at the time he became president in late February, 1994. The court finds, for purposes of this hearing, that the Debtor remained insolvent for all relevant time periods.
[5] This technology transfer agreement was not admitted into evidence as an exhibit.
[6] On the other hand, Appel testified that one reason to deny Guardian the opportunity to see the technology demonstration was that Guardian might try to steal the technology. See discussion infra.
[7] The only money available to Eco is $3,000, which was advanced by Guardian to fund the expenses of a demonstration of the HPM Line technology. Because the demonstration was cancelled, Sanborn testified that this money would be returned to Guardian.
[8] Although not dispositive, this court notes that counsel for the Debtor and Eco each stated, after questioning by the court, that the Amended License Agreement amounted to a sale of the Debtor's Fiber Technology.
[9] Fraud may occur by suppression of facts as well as by positive false assertions because such a suppression may suggest a falsehood. There must be a legal or equitable duty to disclose in order for suppression of information to constitute silent fraud. Sumitomo Trust & Banking Co., Ltd. v. Holly's, Inc. (Matter of Holly's, Inc.), 140 B.R. 643, 694 (Bankr.W.D.Mich.1992), citing and quoting United States Fidelity & Guar. Co. v. Black, 412 Mich. 99, 125, 313 N.W.2d 77, 88 (1981). The Debtor and Appel have a duty to disclose information to this estate. Whether this was adequately done remains an issue.
[10] The court finds the Debtor has three major categories of assets: (1) the "soft" assets, including the Fiber Technology, subject of this proposed sale to Eco; (2) the "hard" assets, i.e., predominately the Davis-Standard Line and the HPM Line equipment; and (3) the Debtor's California operations, known as the CRM subsidiary.
With regard to CRM, the court now lacks meaningful information. However, the record shows that the Debtor's interest is disputed and the Debtor may recover little, if anything, from this asset.
Based upon statements by counsel and some testimony, the court finds that the total value of the hard assets is approximately $600,000 to $625,000 and the aggregate claim secured thereby, i.e., by Eldean and the so-called Bridge Loan Investors, is in excess of $1,200,000. It appears the two secured creditors are under water pursuant to 506(a) and the estate will receive little, if any, proceeds from a possible sale of the equipment.
The court therefore finds, for purposes of this contested matter, that the only known significant (and possibly unencumbered) assets are the Fiber Technology, Customers, and Marketing Information which are subject of the proposed sale. Therefore, the Stephens case must be considered.
[11] However, if a plan were filed and, after approval of an adequate disclosure statement, all classes of creditors approved the plan without objection, the court would likely confirm the plan under § 1129(a). In such an instance, the creditors would determine whether to take the risk that royalties might never be received as projected. The problem is, in an instance like this, when a sale is sought outside the chapter 11 plan process, creditors (and for that matter shareholders) receive insufficient disclosure and are not entitled to vote to assume the risk of nonperformance or possible default. The decision must, therefore, be shouldered by the court.
[12] The chapter 11 Debtor is a debtor-in-possession and exercises the powers and must perform all duties, with some specified exceptions not applicable here, of a trustee. § 1107(a).
[13] The court notes that Appel's projections are also premised upon adequate capitalization to acquire equipment, labor, and other necessities to commercially produce the meltblown fibers, fabrics and webs.
[14] Under the Amended License Agreement, what would prevent Eco from selling or licensing the technology to yet another entity? If Eco does not operate, or sell product, or make any profit, what royalties would be owed? Because paragraph 6 of the Amended License Agreement states "In order for Eco to maintain exclusive rights to exploit the Package, Eco shall not be required to generate any specific minimum sales proceeds from the exploitation of the Fiber Technology", Eco would have a very strong argument that it is not required to pay any royalties to the Debtor's estate, if and when the asset package is subsequently transferred.
[15] During the hearing, upon questioning by the court, counsel for both the Debtor and Eco indicated that it was the parties' intent in the Amended License Agreement to transfer any interest the Debtor may have in the post-June 1, 1994 technology. This is tantamount to a hidden settlement, without disclosure to creditors, and is violative of the Bankruptcy Code and Bankruptcy Rules. FED.R.BANKR.P. 9019.
[16] An investigation, and perhaps litigation, of the ownership of the post-June 1, 1994 technology is an important issue. During closing argument, Guardian's counsel stated it may be willing to finance the litigation on behalf of the estate based upon certain conditions stated on the record.
[17] To the extent that any plan may be proposed, other entities may now do so. Appointment of a chapter 11 trustee terminates a debtor's exclusive period to file a plan. § 1121(c)(1).
[18] The Debtor's alternative request for an auction sale is also denied, without prejudice to the soon-to-be-designated trustee to seek such relief. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917563/ | 835 So. 2d 1091 (2002)
FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Petitioner,
v.
S.A.P., Respondent.
No. SC00-105.
Supreme Court of Florida.
November 27, 2002.
Rehearing Denied January 8, 2003.
*1093 Richard E. Doran, Attorney General, and Charlie McCoy, Assistant Attorney General, Tallahassee, FL, for Petitioner.
Jay C. Howell of Anderson & Howell, Jacksonville, FL, for Respondent.
Thomas E. Warner, Solicitor General, and T. Kent Wetherell, II, Deputy Solicitor General, Tallahassee, FL, for the State of Florida, Amicus Curiae.
SHAW, J.
We have for review S.A.P. v. State Department of Health & Rehabilitative Services, 704 So. 2d 583 (Fla. 1st DCA 1997), wherein the district court certified the following question in an unpublished order:
Can the doctrine of fraudulent concealment apply to toll the statute of limitations in a negligence action?
We have jurisdiction. See art. V, § 3(b)(4), Fla. Const. We answer as explained herein.
I. FACTS
The facts concerning S.A.P.'s 1995 negligence claim against Florida Department of Health and Rehabilitative Services ("HRS" or the "department") are set forth in the district court decision under review, which provides in relevant part:
S.A.P. appeals a final order which dismissed with prejudice her second amended complaint against appellee, State of Florida Department of Health and Rehabilitative Services (HRS), based on the application of the statute of limitations, section 768.28(12), Florida Statutes (1993). This section provides, with certain exceptions not applicable here, that a claim against the state must be brought within four years after such claim accrues....
. . . .
S.A.P.'s complaint alleges that in 1979, when she was a four year-old child in foster care supervised by HRS, she was subjected to physical injury, including burns, beatings, and malnourishment, due to the negligent failure of HRS to supervise and monitor her foster care placement and to remove her from the care parent. Paragraph 13 of her complaint alleges:
The department, during the plaintiff's minority, actively concealed the facts concerning the negligence that is the basis of this complaint. Any records concerning the negligence complained of were, by Florida Statute and by the active efforts of the defendant, concealed from the public and those involved in the care of the plaintiff. *1094 The defendant department obstructed the law enforcement investigation of the abuse of the plaintiff and her sister in 1979....
. . . .
We conclude that, based on the allegations of the complaint, S.A.P. has sufficiently stated both a cause of action for negligence and the equitable principle of fraudulent concealment.
S.A.P., 704 So.2d at 584-85.
The court held that the four-year limitation in section 768.28(12), Florida Statutes (1993),[1] was "tolled" by HRS's conduct and ordered S.A.P.'s complaint reinstated:
S.A.P. argues, and we agree, that because her complaint sufficiently alleged factual bases for tolling the statute [of limitations], it cannot be said that the defense of the statute of limitations affirmatively appears on the face of the complaint. Accordingly, it was error to dismiss her complaint with prejudice and we reverse.
S.A.P., 704 So.2d at 584. The district court certified the above question.
S.A.P. contends that, in light of HRS's allegedly fraudulent acts and its "active concealment" of those acts, the doctrine of equitable estoppel should bar the department from asserting a statute of limitations defense. "HRS should be barred by equitable estoppel from asserting the defense of the statute of limitations. This prohibition on the ability of HRS to articulate the defense is consistent with this Court's reliance upon the principle that our courts will not protect defendants who are directly responsible for delays of filing because of their own willful acts." We agree.
Because this case is before us on the trial court's dismissal of S.A.P.'s second amended complaint, we must take all the factual allegations in her complaint as true and construe all reasonable inferences from those facts in her favor.[2] Our standard of review is de novo.[3] Several significant dates appear on the face of her complaint: S.A.P.'s abuse was first officially observed in 1979; HRS's internal investigation report documenting the abuse was released on December 21, 1992; S.A.P. reached the age of majority on August 8, 1994; and the present action was filed in January 1995.
II. THE CONSTITUTIONAL AND STATUTORY SCHEMES
The doctrine of sovereign immunity, which provides that a sovereign cannot be sued without its own permission, has been a fundamental tenet of Anglo-American jurisprudence for centuries and is based on the principle that "the King can do no wrong."[4] The doctrine was a part of the English common law when the State of Florida was founded and has been adopted and codified by the Florida Legislature.[5]
Article X, section 13, Florida Constitution, however, provides that the Legislature can abrogate the State's sovereign immunity:
*1095 SECTION 13. Suits against the state.Provision may be made by general law for bringing suit against the state as to all liabilities now existing or hereafter originating.
Art. X, § 13, Fla. Const. Pursuant to this provision, the Legislature enacted section 768.28, Florida Statutes (1973), which at the time the present action was filed in 1995 provided as follows:
768.28 Waiver of sovereign immunity in tort actions; recovery limits; limitation on attorney fees; statute of limitations; exclusions.
(1) In accordance with s. 13, Art. X, State Constitution, the state, for itself and for its agencies or subdivisions, hereby waives sovereign immunity for liability for torts, but only to the extent specified in this act. Actions at law against the state or of any of its agencies or subdivisions to recover damages in tort for money damages against the state or its agencies or subdivisions for injury or loss of property, personal injury, or death caused by the negligent or wrongful act or omission of any employee of the agency or subdivision while acting within the scope of his office or employment under circumstances in which the state or such agency or subdivision, if a private person, would be liable to the claimant, in accordance with the general laws of this state, may be prosecuted subject to the limitations specified in this act.
§ 768.28, Fla. Stat. (1995) (emphasis added).
One of the key limitations specified in the act is spelled out in section 768.28(13) in the form of a four-year restriction placed on the filing of all tort claims under section 768.28:
(13) Every claim against the state or one of its agencies or subdivisions for damages for a negligent or wrongful act or omission pursuant to this section shall be forever barred unless the civil action is commenced by filing a complaint in the court of appropriate jurisdiction within 4 years after such claim accrues; except that an action for contribution must be commenced within the limitations provided in s. 768.31(4), and an action for damages arising from medical malpractice must be commenced within the limitations for such an action in s. 95.11(4).
§ 768.28(13), Fla. Stat. (1995) (emphasis added). The Court has held that this restriction constitutes a statute of limitations, not a statute of repose.[6]
III. MAJOR LEAGUE BASEBALL v. MORSANI
This Court in Major League Baseball v. Morsani, 790 So. 2d 1071 (Fla.2001), addressed the question of whether the tolling proscription in section 95.051 applies to equitable estoppel.[7] There, Major League Baseball alleged that Morsani's tort claim was barred by the statute of limitations *1096 and that Morsani could not assert the doctrine of equitable estoppel because the doctrine was excluded by section 95.051. This Court disagreed, concluded that the doctrines of tolling and equitable estoppel "are as different as apples and oranges," and held that the tolling proscription in section 95.051 is inapplicable to equitable estoppel. In reaching this decision, the Court examined the principles underlying the statutes of limitation and equitable estoppel.
A. Statutes of Limitation
Statutes of limitation, which impose a strict time limit on the filing of legal actions, were nonexistent at common law and instead are a creature of modern statutory law:
At common law, there were no fixed time limits for filing lawsuits. Rather, fixed limitations on actions are predicated on public policy and are a product of modern legislative, rather than judicial, processes. A prime purpose underlying statutes of limitation is to protect defendants from unfair surprise and stale claims:
"As a statute of [limitations], they afford parties needed protection against the necessity of defending claims which, because of their antiquity, would place the defendant at a grave disadvantage. In such cases how resolutely unfair it would be to award one who has willfully or carelessly slept on his legal rights an opportunity to enforce an unfresh claim against a party who is left to shield himself from liability with nothing more than tattered or faded memories, misplaced or discarded records, and missing or deceased witnesses. Indeed, in such circumstances, the quest for truth might elude even the wisest court."
Nardone v. Reynolds, 333 So. 2d 25, 36 (Fla.1976) (quoting Wilkinson v. Harrington, 104 R.I. 224, 243 A.2d 745, 752 (1968)).
Major League Baseball v. Morsani, 790 So. 2d 1071, 1074-75 (Fla.2001) (footnotes omitted). Time limitations on legal actions in Florida ordinarily are governed by the statutes of limitation set forth in chapter 95,[8] but as noted above, time limitations on chapter 768 actions are controlled by section 768.28(13).
B. Equitable Estoppel
The preclusive effect of the statutes of limitation can be deflected by various legal theories, including the doctrine of equitable estoppel. The Court described the contours of this doctrine:
The doctrine of equitable estoppel has been a fundamental tenet of Anglo-American jurisprudence for centuries:
"Estoppe," says Lord Coke, "cometh of the French word estoupe, from whence the English word stopped; and it is called an estoppel or conclusion, because a man's own act or acceptance stoppeth or closeth up his mouth to allege or plead [otherwise]."
Lancelot Feilding Everest, Everest and Strode's Law of Estoppel 1 (3d ed.1923). The doctrine, which was part of the English common law when the State of Florida was founded, was adopted and codified by the Florida Legislature in 1829.
Equitable estoppel is based on principles of fair play and essential justice and arises when one party lulls another party into a disadvantageous legal position:
"Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which perhaps have otherwise existed, *1097 either of property or of contract, or of remedy, as against another person, who has in good faith relied upon such conduct and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of property, or of contract or of remedy."
The doctrine of estoppel is applicable in all cases where one, by word, act or conduct, willfully caused another to believe in the existence of a certain state of things, and thereby induces him to act on this belief injuriously to himself, or to alter his own previous condition to his injury.
State ex rel. Watson v. Gray, 48 So. 2d 84, 87-88 (Fla.1950) (quoting 3 Pomeroy's Equity Jurisprudence § 804 (5th ed.1941)).
Major League Baseball, 790 So.2d at 1076 (footnote omitted).
Equitable estoppel differs from other legal theories that may operate upon the statutes of limitation in that equitable estoppel presupposes an act of wrongdoingsuch as fraud and concealmentthat prejudices a party's case:
Equitable estoppel presupposes a legal shortcoming in a party's case that is directly attributable to the opposing party's misconduct. The doctrine bars the wrongdoer from asserting that shortcoming and profiting from his or her own misconduct. Equitable estoppel thus functions as a shield, not a sword, and operates against the wrongdoer, not the victim. This Court has applied the doctrine for more than a century and a half.
Major League Baseball, 790 So.2d at 1077.
IV. EQUITABLE ESTOPPEL vs. SECTION 768.28(13)
It is well settled in Florida and other jurisdictions that the statutes of limitation can be deflected by the doctrine of equitable estoppel.[9] This proposition is supported by vast precedent from this Court,[10] Florida district courts of appeal,[11]*1098 and federal courts.[12] HRS asserts that, despite this precedent, the statute of limitations in section 768.28(13) is somehow different from all other statutes of limitation in that it applies only to suits filed against the State as opposed to private persons. We find this claim disingenuous in light of the plain language of section 768.28(1), which provides that the State consents to be sued "in accordance with the general laws of this state" for any tort in which "a private person would be liable to the claimant." This consent, we conclude, evinces an unequivocal intent on the part of the State to abide by the traditional lawsincluding the equitable canons governing tort actions in any claim filed under section 768.28.
This conclusion is borne out by several considerations. First, equitable estoppel is a basic tenet of the common law[13] and any statute enacted in derogation of the common lawsuch as a statute of limitationsmust expressly so provide:
[A]s noted above, equitable estoppel is a deeply rooted, centuries old tenet of the common law. On the other hand, fixed time limitations for filing suit, i.e., statutes of limitation, were unknown at common law and are a creature of modern statute. This Court has held that a statute enacted in derogation of the common law must be strictly construed and that, even where the Legislature acts in a particular area, the common law remains in effect in that area unless the statute specifically says otherwise:
The presumption is that no change in the common law is intended unless the statute is explicit and clear in that regard. Unless a statute unequivocally states that it changes the common law, or is so repugnant to the common law that the two cannot coexist, the statute will not be held to have changed the common law.
Thornber v. City of Fort Walton Beach, 568 So. 2d 914, 918 (Fla.1990).
Major League Baseball, 790 So.2d at 1077-78 (footnote omitted). In the present case, not only does the plain language of section 768.28(13) not expressly change the common law doctrine of equitable estoppel, it does not mention or allude to that doctrine.
And second, the basic purposes served by the statute of limitations and the doctrine of equitable estoppel are in harmony.
[T]he fundamental purposes served by the statute of limitations and the doctrine *1099 of equitable estoppel are congruent. As noted above, a main purpose of the statute of limitations is to protect defendants from unfair surprise and stale claims. A prime purpose of the doctrine of equitable estoppel, on the other hand, is to prevent a party from profiting from his or her wrongdoing. Logic dictates that a defendant cannot be taken by surprise by the late filing of a suit when the defendant's own actions are responsible for the tardiness of the filing.
Major League Baseball, 790 So.2d at 1078 (footnote omitted). In the present case, section 768.28(13) and the doctrine of equitable estoppel work hand in hand to achieve a common goalthe preservation of a viable and fair legal system.
V. S.A.P.'s COMPLAINT
S.A.P. alleged in her complaint that the department was negligent in the following ways: in failing to adequately supervise and monitor the placement of S.A.P.; in failing to adequately supervise the activities of its caseworker, Ms. Dassie; in failing to remove S.A.P. from the home of C.C. when the department knew or should have known that S.A.P. and her sister were being abused by C.C.; and in falsifying and altering records of her foster care in C.C.'s home and in allowing those records to remain in her official file. S.A.P. also alleged that the department "actively concealed the facts concerning the negligence that is the basis of this complaint" and "obstructed the law enforcement investigation of the abuse of the plaintiff and her sister."
S.A.P. stated several specific claims in paragraph 13 of her second amended complaint:
(13) The department, during the plaintiff's minority, actively concealed the facts concerning the negligence that is the basis for this complaint. Any records concerning the negligence complained of were, by Florida Statute and by the active efforts of the defendant concealed from the public and those involved in the care of the plaintiff. The department obstructed the law enforcement investigation of the abuse of the plaintiff and her sister in 1979. In the report of the internal investigation conducted by the Defendant and released on December 21, 1992, it was first revealed that law enforcement officials alleged that employees of the defendant obstructed the criminal investigation of the 1979 abuse and neglect of the plaintiff. The department's own internal investigation, reported on December 21, 1992, also revealed for the first time that the case worker charged with the duty to supervise the placement of the plaintiff and her sister falsified records so that it appeared that the case worker had conducted monthly supervision visits with the plaintiff and her sister. The records reveal that the foster home was frequently visited and that S.A.P. and her sister were doing fine. Had any interested adult examined these records prior to December 21, 1992, they would have been misled into believing that the department had reasonably, appropriately, and lawfully discharged its supervision duties. The negligence of the Department was concealed by these falsified records.
In paragraph of 17 of her complaint, S.A.P. explained that she had no active memory of the abuse until she became a young adult:
(17) Throughout the course of her childhood, the plaintiff had little or no actual memory of the incidents which serve as the subject of this complaint. She was only three and barely four years old at the time of the incidents which serve as the basis for this claim. In addition, the trauma and abuse which she endured caused her to lose any active *1100 memory of the incidents in question. Her loss of memory is confirmed by her treating counselor who, in treatment with the plaintiff from 1992 to 1993 (when the plaintiff was 17 years of age), verified that the plaintiff, at that time, had no active memory of these incidents. Of course, the plaintiff had no memory or knowledge whatsoever concerning the negligence that forms the basis of this complaint and the failure of the department to properly supervise her at age three and four.
Additionally, S.A.P. alleged other acts of wrongdoing by the department, including a claim that "[t]he records of the facts underlying this cause of action ... had been altered."
VI. CONCLUSION
If we, as we must, take the factual allegations in S.A.P.'s second amended complaint as true and construe all reasonable inferences therefrom in her favor, we conclude that the doctrine of equitable estoppel bars HRS from asserting that the complaint was untimely filed. Section 768.28(13) is a conventional statute of limitations, nothing more; it is not a statute of repose that forecloses all forms of equitable relief. The law of this State does not bestow upon the department a special boon to betray the children in its charge, to flagrantly flout the law, to conceal its misdeeds, and then to invoke section 768.28(13) as a shield for its actions.
S.A.P.'s complaint alleged serious acts of sustained, long-term child abuse that the department negligently overlooked in contravention of its supervisory responsibility:
On or about October 20, 1979, the Clay County Sheriff's Office responded to reports from neighbors that they had heard the cries of young children and screaming emanating from a residence. They found S.A.P. and her younger sister, J.M.P., bruised over their entire bodies, burned, beaten, choked, malnourished, and suffering from other injuries at a residence in Orange Park, Florida. At the time of the discovery of the children, S.A.P., then age 4, weighed 22 pounds and was "very emaciated" according to medical records. The children were not residing at the proper foster home location.
The complaint further alleged that, after the abuse was uncovered by police, HRS then "obstructed" the police investigation, "falsified" reports, "altered" records, and otherwise "actively concealed" the abuse. To allow the department to do as alleged i.e., to negligently supervise and monitor S.A.P.'s placement, to conceal the resulting abuse for years, and then to invoke the statute of limitations to escape liability would violate the basic principles underlying chapter 768 and make a mockery of section 768.28(13).
Notably, we do not pass on the factual development of this issue at trial; our review is limited solely to the allegations contained in the complaint. We do not address the question of whether any other considerations may operate to restrict the use of equitable estoppel in this case; nor do we comment on the merits of the underlying cause of action. We answer the certified question narrowly as explained herein, approve the ruling of the district court to the extent it is consistent with this decision, and remand for proceedings consistent with this opinion.
It is so ordered.
ANSTEAD, C.J., and PARIENTE and QUINCE, JJ., concur.
LEWIS, J., concurs specially with an opinion, in which ANSTEAD, C.J., and PARIENTE, J., concur.
*1101 WELLS, J., dissents with an opinion, in which HARDING, Senior Justice, concurs.
HARDING, Senior Justice, dissents with an opinion, in which WELLS, J., concurs.
LEWIS, J., specially concurring.
I concur in the entirety of the majority opinion in the instant case. I write separately, however, to expand upon several concepts of Florida law that become operative under the circumstances we consider today. In my view, the dissenting opinions approach the analysis of sovereign immunity and its relationship with the doctrine of equitable estoppel from a far different perspective. This perspective does not, in my opinion, afford room for consideration or accommodation of several important decisions and concepts applicable here. While I agree with some concepts expressed by the dissenting view, equitable concepts have a life here, as previously recognized by this Court.
As noted by the majority, the sovereign's immunity from civil suit is an age-old common law rule, adopted as the law in this state by inclusion of the principle in the Florida Constitution. See art. X, § 13, Fla. Const. Within the Constitution, however, is a provision which allows the Legislature to abrogate the immunity. See id. As detailed in the majority opinion, the Legislature has chosen to waive sovereign immunity and accept tort liability to the same degree "a private person would be liable." § 768.28, Fla. Stat. (1995). In my view, this statute is extraordinarily clear, and it is important to note that it specifically directsunless explicitly excluded by the language of the statutethat the state is liable in tort as if it were a private party. The fundamental principle here is that the Legislature has in fact waived immunity and today we are not faced with creating or extending immunity. On the contrary, we must carry out our constitutional responsibility to interpret and apply the statutes which have already done so.[14] This is a difference of perspective in approaching resolution of the problem we confront.
Like sovereign immunity, equitable estoppel is also a seasoned common law doctrine. Based upon principles of fair play and essential justice, this doctrine may be applied as a shield against otherwise viable defenses. Most assuredly, equitable estoppel is an age-old doctrine which has been the law in Florida since 1829, and has been applied by this Court for more than a century. See majority op., supra, at 1096-97; Major League Baseball v. Morsani, 790 So. 2d 1071, 1076 (Fla.2001). It is triggered when one party "lulls another party into a disadvantageous legal position," particularly when standing in a fiduciary capacity to the complaining party. Morsani, 790 So.2d at 1076. Based upon the principle that one standing in a fiduciary position must disclose all relevant information to the party depending upon him or her, equitable estoppel simply nullifies the effectiveness of an otherwise valid defense because equity deems that result repugnant to justice. Thus, where a party in such position owes another a duty, fails to fulfill that duty, and also does not disclose the breach to his or her charge, the fiduciary is estopped from asserting that the injured party's action is barred by a statute *1102 of limitations. While equitable concepts may have some limitations when arms-length transactions with total strangers are involved, such principles are more expansive when special relationships are presented.
In Florida, it is well settled that a time limitation provision "does not trump the doctrine of equitable estoppel." Morsani, 790 So.2d at 1078. In Morsani, this Court stated that it
has recognized equitable estoppel as a bar to a statute of limitations defense both prior to the passage of the tolling provision in section 95.051 and after passage... Florida's district courts have approved equitable estoppel as a bar to the statute of limitations and federal courts have ruled similarly....
Id. (footnotes omitted). The rationale of the relationship between equitable estoppel and a time-limiting statute is that a defendant cannot be taken by surprise by the late filing of an action when the defendant's own conduct is responsible for the tardiness of the filing. See id.; Baptist Hospital of Miami, Inc. v. Carter, 658 So. 2d 560, 563 (Fla. 3d DCA 1995); Alachua County v. Cheshire, 603 So. 2d 1334, 1337 (Fla. 1st DCA 1992).
While I agree to a very limited extent with some of the basic elements discussed in the dissent, I have difficulty accepting the expression and discussion of other ideas in such rigid, absolute terms, which are contrary to what I find to be the persuasive authority. I suggest that while the waiver of sovereign immunity is to be strictly construed, the implementing statute must also be considered and applied in light of the manifest purpose to be achieved by the legislation. See Tampa-Hillsborough County Expressway Auth. v. K.E. Morris Alignment Serv., Inc., 444 So. 2d 926, 929 (Fla.1983). Sovereign immunity flows from public policy considerations that are centered upon protection of the public treasury from inflated depletions and, secondly, principles relating to the administration of government functions in an orderly fashion. Our legislature has determined and declared the public policy of this state in favor of permitting injured citizens to recover damages over the sovereign interest of possessing absolute immunity. The rigidity of the dissenting view does not accommodate this notion, because it expresses the issue from the perspective that this decision is creating the waiver, while I view this decision as interpreting application of the waiver of immunity already existing.
I also conclude that the dissents' absolutist view, in which Florida's statutory waiver of sovereign immunity would require unwavering compliance in isolation and a vacuum without exception, is contrary to at least Rabinowitz v. Town of Bay Harbor Islands, 178 So. 2d 9 (Fla. 1965), in which this Court has previously addressed precisely equitable concepts in the face of strict compliance arguments with regard to statutorily required "notice" in connection with claims against a governmental entity, concluding:
The sum of the holdings in recent years has been that when responsible agents or officials of a city have actual knowledge of the occurrence which causes injury and they pursue an investigation which reveals substantially the same information that the required notice would provide, and they thereafter follow a course of action which would reasonably lead a claimant to conclude that formal notice would be unnecessary, then the filing of such notice may be said to be waived. If the claimant, as a result of such municipal conduct, in good faith fails to act, or acts thereon to his disadvantage, then an estoppel against the requirement of notice may be said to arise.
*1103 Id. at 12-13 (emphasis supplied). Clearly, where a government, or a subdivision thereof, acts in a fashion which fulfills the general requirements of equitable estoppel, the equitable defense is available to claimants against the governmental entity.[15] This Court has, most assuredly, specifically held that the doctrine of equitable estoppel is available as a shield to defeat a defense based on strict compliance with statutory provisions related to the manner in which claims may be prosecuted against a governmental entity. See, e.g., Rabinowitz, 178 So. 2d 9.
Application of well-established and recognized equitable principles existing in the common law when circumstances such as those presented here exist merely operates to implement the stated public policy of this State, not create a waiver, and does not adversely impact the limitations upon the amount of damages that may be recovered, which is now, with a legislatively created waiver, the focal point of the sovereign's primary concern. See Commercial Carrier Corp. v. Indian River County, 371 So. 2d 1010, 1019 (Fla.1979) (recognizing that in organized society, basic governmental policy decisions must be unhampered by the threat of depletion of the public treasury through tort liability); Circuit Court of Twelfth Judicial Circuit v. Dep't of Natural Res., 339 So. 2d 1113, 1116 (Fla.1976) (deeming protection of the state treasury the primary concern expressed in decisions applying the sovereign immunity doctrine); see also Trianon Park Condo. Ass'n, Inc. v. City of Hialeah, 468 So. 2d 912 (Fla.1985).
Additionally, I must also respectfully disagree with an analysis and conclusion that we may only look to the Legislature for guidance here.[16] While the statutes waiving the state's sovereign immunity and limiting the time allowed for filing actions are clearly within the purview of the legislative body and must be strictly construed by courts, common law doctrines such as equitable estoppel, fraudulent concealment, and others remain in effect and fully operative unless the statute specifically states otherwise. See State v. Ashley, 701 So. 2d 338, 341 (Fla. 1997) ("Unless a statute unequivocally states that it changes the common law, or is so repugnant to the common law that the two cannot coexist, *1104 the statute will not be held to have changed the common law.") (citing Thornber v. City of Fort Walton Beach, 568 So. 2d 914 (Fla.1990)). The immunity-waiving statute, the statute of limitations, and the doctrines of equitable estoppel, fraudulent concealment, and other equitable concepts all work in concert here. The dissenting opinion of Justice Wells correctly states a fundamental principle: the "sovereign cannot be sued in tort except to the extent it waives by statutory law its common law sovereign immunity." Dissenting op. at 1106. Because, however, section 768.28 specifies that the State waives its immunity "under circumstances in which the state or such agency or subdivision, if a private person, would be liable to the claimant, in accordance with the general laws of this state," nothing prevents those injured and having matters concealed as occurred here from employing the standard equitable principles available to all litigants in actions filed against the state. There is not one word in the statute which provides to the contrary. This Court is not creating a waiver; the Legislature has already done so. We are discussing time limitations-not the creation of a "waiver."
Additionally, since neither section 768.28 nor section 95.11 of the Florida Statutes abrogates these equitable doctrines, I conclude they certainly remain viable and applicable in Florida and in the instant case. Unless and until the Legislature expressly revokes the application of equitable principles, they are and should be available as viable shields against the assertion that a statute of limitations precludes a party from pursuing a cause of action under circumstances such as those alleged here, which are certainly repugnant to any sense of justice or decency. In my view, the application of the waiver of sovereign immunity on behalf of the State, as urged by the dissents, does not require this Court to ignore fundamental equitable principles available to every litigant in Florida. The dissents' exclusive attention in this case is to the broad concept of the creation of a waiver of immunity generally, when the attention should focus on a recognition that immunity has unquestionably been waived, but the State is simply attempting to rely upon an internal limitation such as a notice limitation which we have already held to be subject to equitable considerations.
Finally, I cannot find North American Co. v. Green, 120 So. 2d 603 (Fla.1960), State Department of Revenue v. Anderson, 403 So. 2d 397 (Fla.1981), and Greenhut Construction Co. v. Henry A. Knott Inc., 247 So. 2d 517 (Fla. 1st DCA 1971), relating to the principle that "equitable estoppel can effectively be applied against the state only in rare and exceptional circumstances," applicable here. My reading of these cases reveals that all are distinguishable and totally inapposite to the action and facts presently before this Court.
While each of these opinions certainly contains a discussion of the doctrine of equitable estoppel, as well as language which declares that the State may be estopped only in rare situations, the holdings of these cases must be considered in the context of the facts before each court. Upon examination of the three decisions, I conclude that none of them address circumstances even remotely similar to the facts presented in the instant cause of action, nor are they controlling here. While they address the applicability of the doctrine of estoppel in general terms, I read these cases to resolve only the scenario in which a private party attempts to bind the state to a certain position or representation made by a state actor at a time preceding a particular dispute.
In North American, the appellant contended that the Comptroller of Florida was "estopped to collect the subject tax because of his earlier administrative decision *1105 to rely upon an opinion of the Attorney General to the effect that the tax was not collectible." 120 So. 2d at 610. Likewise, in Anderson, the respondents attempted to hold the state to its previous "long-standing practice of allowing late registration as a dealer to relate back to the time of a sale in order to demonstrate an exemption." 403 So. 2d at 400. Finally, in Greenhut Construction, the court dismissed the appellant's attempt to estop the Florida Department of General Services from asserting its disqualification as a bidder for a state construction contract based upon "the understanding the latter received from the chief of the bureau of construction." 247 So. 2d at 523. In my view, because these cases address only arms-length transactions, as opposed to the factual situation in which the State has assumed a position of full responsibility for the well-being of a child through state action, the expansive language contained in these opinions which deals with estoppel does not apply to the instant case. I find no Florida authority which rejects or prohibits application of equitable concepts as a shield under circumstances which involve the State assuming a special protective relationship toward a child which has placed the State alone in an authoritative position to protect a child. I believe that equitable estoppel has been applied by this Court in an analogous situation in Rabinowitz (which involved a tort action) to preclude a governmental entity from relying on an internal limitation (notice) within a statutory framework of permitting actions against a governmental entity.
I submit that the cases which affirmatively attempt to use the doctrine of estoppel to bind the State to past policy articulations or remarksa different scenario than that now before this Courtare not controlling. Here, S.A.P. does not attempt to affirmatively bind the State to prior representations; she simply seeks to use equitable estoppel as a shield to prevent HRS from profiting from its alleged breach of duty and concomitant concealment of evidence. Because the facts of the instant case and the decisions cited in opposition to this result vary so significantly, in my view it is clear that they have no bearing whatsoever on the instant action. The facts which would support application of equitable concepts have already been set forth on the face of the complaint, and nothing new is being injected into this proceeding.
With the Legislature having so clearly waived sovereign immunity and established that the state "shall be liable for tort claims in the same manner and to the same extent as a private individual under like circumstances," and the state having affirmatively assumed a special relationship to protect this child, application of equitable estoppel to avoid the defense of time limitations is not only proper here, I submit that it is the classic case in which such principle finds the very reason for its existence.
ANSTEAD, C.J., and PARIENTE, J., concur.
WELLS, J., dissenting.
I dissent.
First, the majority opinion does not answer the question that the district court certified to this Court. That question is:
CAN THE DOCTRINE OF FRAUDULENT CONCEALMENT APPLY TO TOLL THE STATUTE OF LIMITATIONS IN A NEGLIGENCE ACTION?
S.A.P. v. Dep't of Health & Rehabilitative Servs., No. 95-00252-CA at 2 (Fla. 1st DCA order filed Dec. 15, 1999). Second, the majority's opinion does not decide any of the issues which were decided by the district court. The district court held that: (1) fraudulent concealment tolled the statute *1106 of limitations as to a claim against a State agency brought under section 768.28, Florida Statutes (1993); (2) this action should be allowed to proceed because of the allegations that during S.A.P.'s minority "there was no one acting on her behalf, no friend or guardian, who could have filed suit on her behalf; and (3) section 95.051(1)(h), Florida Statutes (1993), is not applicable to S.A.P.'s case. S.A.P. v. State Dep't of Health & Rehabilitative Servs., 704 So. 2d 583, 585-87 (Fla. 1st DCA 1997).
If the majority were to answer the certified question and decide the issues that were decided by the district court, contrary to the majority's conclusion, the result would have to be adverse to S.A.P. A plain application of the applicable statutes, this Court's precedent, and the doctrine of sovereign immunity dictate that the question certified be answered NO and that the district court's decision be quashed.
In direct answer to the question, which is whether fraudulent concealment tolls the statute of limitations in a negligence action, the answer is dictated by the following statute:
No disability or other reason shall toll the running of any statute of limitations except those specified in this section, s. 95.091, the Florida Probate Code, or the Florida Guardianship Law.
§ 95.051(2), Fla. Stat (1993) (emphasis added). This statute is expressly very broad, applying to "any statute of limitations." Id. Because fraudulent concealment is not one of the exceptions listed in section 95.051(2), this provision alone requires that the certified question be answered in the negative. This Court's precedent is that courts will not write exceptions into statutes when the Legislature has not. See Federal Ins. Co. v. Southwest Florida Ret. Ctr., Inc., 707 So. 2d 1119, 1121 (Fla.1998).
The fact that this negligence action was brought against a State agency provides an additional basis as to why the certified question has to be answered NO, and the district court's decision should be quashed. The Florida Constitution states in article X, section 13:
Suits against the state.Provision may be made by general law for bringing suit against the state as to all liabilities now existing or hereafter originating.
Section 768.28(1), Florida Statutes (1993), implemented this constitutional provision, stating in its first sentence:
In accordance with s. 13, Art. X, State Constitution, the state, for itself and for its agencies or subdivisions, hereby waives sovereign immunity for liability for torts, but only to the extent specified in this act.
(Emphasis added.) Section 768.28(12)[17] expressly specified:
Every claim against the state or one of its agencies or subdivisions for damages for a negligent or wrongful act or omission pursuant to this section shall be forever barred unless the civil action is commenced by filing a complaint in the court of appropriate jurisdiction within 4 years after such claim accrues....
(Emphasis added.) The history of our common law, clearly predating Florida becoming a state,[18] is that the State as a sovereign cannot be sued in tort except to the extent it waives by statutory law its common law sovereign immunity. This Court has repeatedly made this clear. Obviously, *1107 the statutes quoted above represent this statutory waiver. In State ex rel. Florida Dry Cleaning & Laundry Board v. Atkinson, 136 Fla. 528, 188 So. 834, 838 (1938), this Court held:
[N]o suit may be maintained against [a state instrumentality] ... except by consent of the State, which consent may only be effectuated by legislative Act. Such consent can be extended to operate no further than the limitation, if any, which may be prescribed by the legislature in its grant of consent. With the wisdom or policy of a legislative Act limiting the scope of the State's consent to be sued, the courts have no voice.
(Emphasis added.) Moreover, this Court has made equally clear that statutes waiving sovereign immunity are to be strictly construed. In Spangler v. Florida State Turnpike Authority, 106 So. 2d 421 (Fla. 1958), a case preceding section 768.28, this Court set out the principle applicable to the earlier constitutional provision pertaining to sovereign immunity. Writing for the Court, Justice Thornal said:
Article III, Section 22, Florida Constitution, F.S.A., authorizes the Legislature to provide by general law for the bringing of a suit against the State. This, of course, applies in equal measure to all state agencies. Inasmuch as immunity of the state and its agencies is an aspect of sovereignty, the courts have consistently held that statutes purporting to waive the sovereign immunity must be clear and unequivocal. Waiver will not be reached as a product of inference or implication. The so-called `waiver of immunity statutes' are to be strictly construed. This is so for the obvious reason that the immunity of the sovereign is a part of the public policy of the state. It is enforced as a protection of the public against profligate encroachments on the public treasury.
Id. at 424 (emphasis added).
Our adherence to strict application of the waiver of sovereign immunity on behalf of the State is in accord with the federal courts' adherence to strict construction in respect to the waiver of sovereign immunity under the Federal Tort Claims Act (FTCA).[19] In Allgeier v. United States, 909 F.2d 869, 873 (6th Cir. 1990), the court stated:
[S]uch considerations are insufficient to override our duty to construe strictly any waiver by the United States of its sovereign immunity. See United States v. Kubrick, 444 U.S. 111, 117-18, 100 S. Ct. 352, 62 L. Ed. 2d 259 (1979) ("we should not take it upon ourselves to extend the waiver beyond that which Congress intended"). On the basis of this well-established principle, courts have declined to extend the limited waiver period for tort claims in [28 U.S.C.] section 2401(b) in interpreting the language of that statute, see, e.g., Kubrick; Vernell [ex rel. Vernell v. U.S. Postal Service], 819 F.2d [108] at 111-12 [2nd Cir.1975], and also in interpreting [Federal Rule of Civil Procedure] 15(c).
In Mann v. United States, 399 F.2d 672, 673 (9th Cir. 1968), the court said:
The Federal Tort Claims Act provides, in part, as follows: "A tort claim against the United States shall be forever barred unless action is begun within two years after such claim accrues...." 28 U.S.C. § 2401(b). Institution of suit within the two-year period is a jurisdictional requirement. Powers v. United States, 390 F.2d 602 (9th Cir.1968); Humphreys v. United States, 272 F.2d 411, 412 (9th Cir.1959). The time limitation *1108 is not tolled during a claimant's minority. Brown v. United States, 353 F.2d 578 (9th Cir.1965); Pittman v. United States, 341 F.2d 739 (9th Cir.), cert. denied, 382 U.S. 941, 86 S. Ct. 394, 15 L. Ed. 2d 351 (1965).
Mann argues that the Government may be prevented from taking advantage of this defense in "a proper case." He points to Osbourne v. United States, 164 F.2d 767 (2d Cir.1947), wherein the Government was not allowed the limitations defense because the plaintiff, a seaman proceeding under the Jones Act, had been denied access to the courts by reason of his imprisonment by the enemy during time of war. Specifically, Mann relies upon his status as an Indian, alleging that he was a ward of the Government and, as such, was "entitled to the care and protection due from a guardian to his ward."
Assuming, arguendo, the validity of the Osbourne decision, which was clearly limited to the wartime situation, we are nevertheless convinced that Congress has left no room for an exception to be made in the present case. Although exceptions to the applicability of the limitations period might occasionally be desirable, we are not free to enlarge that consent to be sued which the Government, through Congress, has undertaken so carefully to limit. See United States v. Sherwood, 312 U.S. 584, 586, 61 S. Ct. 767, 85 L. Ed. 1058 (1941). The limitations period established by Congress "must be strictly observed and exceptions thereto are not to be implied." Soriano v. United States, 352 U.S. 270, 276, 77 S. Ct. 269, 1 L. Ed. 2d 306 (1957).
(Emphasis added.)
Following these teachings in respect to both the Florida and the federal waivers of sovereign immunity leads to the inescapable conclusion that the section 768.28(12) limitation of four years to pursue a claim is not, as the majority labels it, a "conventional" statute of limitations. This limitations period is the extent of time that the Florida Legislature has determined that sovereign immunity is waived. The plain, unequivocal language that "every claim" must be filed within four years of accrual leaves no room for construction or deflection by the courts. § 768.28(12), Fla. Stat. (emphasis added). To hold that this limitation on the waiver of immunity may be tolled or deflected by equitable estoppel fails to account for the fact that this limitations period is an integral part of the waiver of sovereign immunity and ignores this plain, unequivocal statute. Moreover, this holding writes out of section 768.28(1) the additional mandate that sovereign immunity is waived "only to the extent specified in this act."
I do not agree that the time limitation provision in section 768.28(13), Florida Statutes, is in any way affected by the statement in section 768.28(5), which states, "The state and its agencies and subdivisions shall be liable for tort claims in the same manner and to the same extent as a private individual under like circumstances." Rather, subdivision (5) is intended to make clear the types of actions which may be brought against the State. But every such action must be within the requirement of subdivision (13) because that provision says "every claim" is otherwise barred. The waiver of sovereign immunity is solely a prerogative of the legislative branch of government. Because this waiver is solely a prerogative of the legislative branch and not the judicial branch, I believe the Court is without authority to exercise judicial equity powers to extend the waiver of sovereign immunity beyond that which the Legislature has expressly granted.
Even if equitable estoppel was a doctrine which could be used to extend the *1109 Legislature's waiver of sovereign immunity, that doctrine has no bearing here. Morsani is totally distinguishable on its facts in that it applied equitable estoppel to circumstances where the defendant made inducements to the plaintiff to forbear the bringing of the action that was later claimed by the defendant to be barred. That is the appropriate context for applying the doctrine of equitable estoppel. I do agree with the majority's statement that the doctrines of tolling and equitable estoppel "are as different as apples and oranges." Majority op. at 1096. In fact, the district court decided this case on the basis of tolling and did not refer to the doctrine of equitable estoppel, nor does the certified question refer to equitable tolling.
I note additionally that the law of Florida generally has been that equitable estoppel can effectively be applied against the State only in rare and exceptional circumstances. See North Am. Co. v. Green, 120 So. 2d 603, 610 (Fla.1959) ("The instances are rare indeed when the doctrine of equitable estoppel can effectively be applied against state action."); see also State Dep't of Revenue v. Anderson, 403 So. 2d 397, 400 (Fla.1981). I know of no decision out of this Court involving a tort claim that has applied equitable estoppel against the State. The rare and exceptional circumstances in which equitable estoppel has been allowed are instances in which the State has made affirmative representations relied upon by parties in contractual or taxation situations. Equitable estoppel can never be used against the State when the claimant alleges unauthorized acts by State officers, as was alleged in the instant case. The First District Court of Appeal clearly stated these principles in Greenhut Construction Co. v. Henry A. Knott, Inc., 247 So. 2d 517, 524 (Fla. 1st DCA 1971):
The law of this state generally recognizes the proposition that although the sovereign may under certain circumstances be estopped, such circumstances must be exceptional and must include some positive act on the part of some officer of the state upon which the aggrieved party had a right to rely and did rely to its detriment. Under no circumstances may the state be estopped by the unauthorized acts or representations of its officers.
(Emphasis added.)
Because I conclude that S.A.P. cannot overcome the four-year limitation in section 768.28(12), on either the basis of tolling or equitable estoppel, I move on to the second holding of the district court below: that S.A.P.'s action can proceed despite the four-year limitation because of her allegations that no one was acting on her behalf during her minority. See S.A.P., 704 So.2d at 585. Again, the district court's decision on this issue must be quashed because it is in conflict with sections 95.051(2) and 768.28(12) and the long-standing precedent of this Court. First, section 95.051(2) specifically prohibits tolling for any statute of limitations except as specified, and the allegations here do not come within the specified exceptions. Second, even if the first reason was not itself dispositive, what I have previously stated concerning the waiver of sovereign immunity also applies to this issue. The Legislature did not waive sovereign immunity for longer than four years even under the alleged circumstances involving S.A.P.
Third, this Court held in Slaughter v. Tyler, 126 Fla. 515, 171 So. 320 (1936), overruled in part on other grounds, Manning v. Serrano, 97 So. 2d 688 (Fla. 1957), that "[t]here is no statute in force in this state suspending the statute of limitations on personal actions in account of the minority of the claimant and none has existed since 1872." Id. at 323. The district court correctly recognized in its third holding that no such statute was passed until 1993, *1110 and therefore section 95.051(1)(h) has no applicability to S.A.P.'s case. See S.A.P., 704 So.2d at 587. Finally, in Department of Transportation v. Soldovere, 519 So. 2d 616, 617 (Fla.1988), this Court held:
A cause of action for the negligence of another occurs at the time the injury is first inflicted. See Seaboard Air Line Railroad Co. v. Ford, 92 So. 2d 160 (Fla. 1956) 35 Fla. Jur.2d Limitations and Laches § 48 (1982). This rule applies whether the cause of action is against a private party or the state.
(Emphasis added.) The operative complaint in this case alleges that S.A.P.'s injuries were known "on or about October 20, 1979." The express language of section 768.28(12) states unequivocally: "Every claim against the state ... shall be forever barred unless the civil action is commenced ... within four years after such claim accrues." (Emphasis added.) Thus, despite S.A.P.'s allegations that no one was acting on her behalf during her minority, this claim is barred because by the allegations of the complaint the cause of action accrued in October 20,1979.
S.A.P. presents a sympathetic circumstance, particularly in light of present news reports concerning the State's agency caring for children. However, since the waiver of sovereign immunity is a power conferred by Florida's Constitution upon the legislative branch, it is my belief that it is the Legislature which must act if claims arising so long ago are to be compensated by this State. S.A.P. does have the alternative of seeking a claims bill before the Legislature. See, e.g., Gamble v. Wells, 450 So. 2d 850, 852 (Fla. 1984). It should be the Legislature, as the constitutional guardian of the State treasury, which makes the decision on a claim that accrued after the period of time that the Legislature empowered Florida courts to decide claims against the State by its waiver of sovereign immunity.
HARDING, Senior Justice, concurs.
HARDING, Senior Justice, dissenting.
I concur with Justice Wells' dissent. The majority does not answer the question that the district court certified to this court. Moreover, I would not extend the waiver of sovereign immunity beyond that which the Legislature has expressly granted.
In addition, the respondent never raised the equitable estoppel argument below and, in effect, is impermissibly raising a new argument, in the nature of an affirmative defense, for the first time before this court on appeal.[20]See Fla. R. Civ. P. 1.100(a) (stating when an answer contains an affirmative defense, the opposing party "shall" file a reply containing any avoidance of the defense); Fla. R. Civ. P. 1.110(d) (requiring affirmative defenses, including "estoppel" to be pled). All defenses not raised by motion or responsive pleading are waived and, therefore, respondent's equitable estoppel claim has not been properly preserved. See Fla. R. Civ. P. 1.140(h) (stating all defenses not raised by motion or responsive pleading are waived).[21]
Furthermore, neither the trial court nor the district court has ever ruled upon the equitable estoppel issue and, therefore, this Court is also without jurisdiction to answer the question raised by the majority. In this case, the district court certified the following question:
*1111 CAN THE DOCTRINE OF FRAUDULENT CONCEALMENT APPLY TO TOLL THE STATUTE OF LIMITATIONS IN A NEGLIGENCE ACTION?
Without expressly rewording the certified question, however, this Court reframes the issue from pertaining specifically to "fraudulent concealment" to that pertaining specifically to equitable estoppelan issue never raised in any of the pleadings, nor ever addressed by either the trial or the district court.
This is a court of limited jurisdiction. In Pirelli Armstrong Tire Corp. v. Jensen, 777 So. 2d 973 (Fla.2001), we explained that our jurisdiction in certified question cases was limited to "any decision of a district court of appeal that passes upon a question certified by it to be of great public importance." Id. at 974 (quoting art. V, § 3(b)(4), Fla. Const.) (emphasis added). Because neither the trial court nor the district court has ever passed upon the question of whether application of the doctrine of equitable estoppel extends the waiver of sovereign immunity beyond that which the Legislature has expressly granted, I would find that, under the reasoning expressed by this Court in Jensen, this Court is without jurisdiction to answer the question raised and addressed by the majority.
NOTES
[1] Section 768.28(12) subsequently was renumbered section 768.28(13). See § 768.28(13), Fla. Stat. (1995).
[2] See, e.g., Ralph v. City of Daytona Beach, 471 So. 2d 1, 2 (Fla.1983) ("For the purposes of a motion to dismiss ... allegations of the complaint are assumed to be true and all reasonable inferences arising therefrom are allowed in favor of the plaintiff.").
[3] See, e.g., Execu-Tech Bus. Sys., Inc. v. New Oji Paper Co., 752 So. 2d 582, 583 (Fla.2000) ("A trial court's ruling on a motion to dismiss based on a question of law is subject to de novo review.").
[4] See Glassman v. Glassman, 309 N.Y. 436, 131 N.E.2d 721 (1956).
[5] See generally § 2.01, Fla. Stat. (1995).
[6] See Public Health Trust v. Menendez, 584 So. 2d 567, 569 (Fla. 1991) ("The fact that [section 768.28(13)] provides a statute of limitation but not a statute of repose thus means that no repose period was intended."); Beard v. Hambrick, 396 So. 2d 708, 712 (Fla. 1981) (holding that "the four-year statute of limitations" contained in current section 768.28(13) applies to all section 768.28 actions); see generally Kush v. Lloyd, 616 So. 2d 415, 418 (Fla. 1992) ("A statute of limitation begins to run upon the accrual of a cause of action.... On the other hand, a statute of repose, which is usually longer in length, runs from the date of a discrete act on the part of the defendant without regard to when the cause of action accrued.")
[7] Section 95.051 sets forth an exclusive list of conditions that can "toll" the running of the statute of limitations; the section states that no other condition can toll the statute of limitations. The list does not mention equitable estoppel. See § 95.051, Fla. Stat. (1995).
[8] See § 95.11, Fla. Stat. (1995).
[9] See Major League Baseball, 790 So.2d at 1078.
[10] See, e.g., Barnett Bank of Palm Beach County v. Estate of Read, 493 So. 2d 447, 449 (Fla. 1986) ("[J]ustice requires us to hold that section 733.702 is a statute of limitations. Valid grounds, such as estoppel or fraud, may exist that would and should excuse untimely claims."); Rabinowitz v. Town of Bay Harbor Islands, 178 So. 2d 9, 13 (Fla.1965)" ("If the claimant, as a result of such municipal conduct, in good faith fails to act, or acts thereon to his disadvantage, then an estoppel against the requirement of the notice may be said to arise.").
[11] See, e.g., Baptist Hosp. of Miami, Inc. v. Carter, 658 So. 2d 560, 563 (Fla. 3rd DCA 1995) ("It is well settled ... as a general rule... that fraud or misrepresentation which misleads a claimant into a justified failure to assert his rights bars reliance on a statute of limitations."); Alachua County v. Cheshire, 603 So. 2d 1334, 1337 (Fla. 1st DCA 1992) ("A party will be estopped from asserting the statute of limitations defense to an admittedly untimely action where his conduct has induced another into forbearing suit within the applicable limitations period."); Jaszay v. H.B. Corp., 598 So. 2d 112, 113 (Fla. 4th DCA 1992) ("The appellee is estopped from asserting the limitations defense because it stipulated to a sixty-day extension of the pre-suit screening period...."); Glantzis v. State Auto. Mut. Ins. Co., 573 So. 2d 1049, 1050 (Fla. 4th DCA 1991) ("[W]e believe the evidence is such that the doctrine of equitable estoppel applies preventing State Auto from resorting to the statute of limitations as a defense."); Olenek v. Bennett, 537 So. 2d 160, 161 (Fla. 5th DCA 1989) ("Fairness and equity dictate that the estate is estopped from raising the statute [of limitations] as a defense."); Martin v. Monroe County, 518 So. 2d 934, 935 (Fla. 3rd DCA 1987) ("We hold that when the [department] acknowledges that within the statute of limitations, an accident report of a claim was filed ... it is thereafter estopped after the expiration of the statute of limitations to deny receipt of the claim."); City of Brooksville v. Hernando County, 424 So. 2d 846, 848 (Fla. 5th DCA 1982) ("While continuing negotiations regarding settlement do not `toll' the running of a statute of limitation, such negotiations, if infected with an element of deception, may create an estoppel. This is true even subsequent to the 1975 enactment of subsection (2) of section 95.051 which states that `no disability or other reason shall toll the running of any statute of limitations except those specified in this section.' " (footnote and citation omitted)); Cape Cave Corp. v. Lowe, 411 So. 2d 887, 889 (Fla. 2nd DCA 1982) ("[A] defendant may by its actions become estopped from claiming the benefit of a statute of limitations."); Salcedo v. Asociacion Cubana, Inc., 368 So. 2d 1337, 1339 (Fla. 3rd DCA 1979) ("There can be no doubt that one may in fact be estopped from claiming the benefit of the statute of limitations."); J.A. Cantor Assoc. v. Brenner, 363 So. 2d 204, 205 (Fla. 3rd DCA 1978) ("Concerning the statute of limitations, the record shows evidence which, if believed by the jury, would support a jury finding that ... the appellant made fraudulent representations... so that the appellee was misled....").
[12] See, e.g., Cange v. Stotler & Co., 913 F.2d 1204, 1209 (7th Cir.1990); Cook v. Deltona Corp., 753 F.2d 1552, 1562-63 (11th Cir. 1985); Darms v. McCulloch Oil Corp., 720 F.2d 490, 494 (8th Cir. 1983); Aldrich v. McCulloch Properties, Inc., 627 F.2d 1036, 1043 n. 7 (10th Cir.1980).
[13] See generally Soud v. Hike, 56 So. 2d 462, 466 (Fla. 1952) ("By judicial construction [the common law] also includes the substantive principles of equity as well as those of law.").
[14] The Florida courts have been called upon many times to interpret the scope and applicability of the state's waiver of sovereign immunity. See, e.g., Beard v. Hambrick, 396 So. 2d 708 (Fla. 1981); Hill v. Dep't of Corrections, 513 So. 2d 129 (Fla. 1987); Triannon Park Condo. Ass'n, Inc. v. City of Hialeah, 468 So. 2d 912 (Fla. 1985); McClelland v. Cool, 547 So. 2d 975, 976 (Fla. 2d DCA 1989). Today, this Court continues this fulfillment of its constitutional duties by analyzing the interaction between the statutory waiver of immunity and the doctrine of equitable estoppel.
[15] The United States Supreme Court has deemed the doctrine of equitable estoppel applicable to the federal government on a number of occasions, provided that the government engaged in affirmative misconduct. See Heckler v. Cmty. Health Servs. of Crawford County, 467 U.S. 51, 60-61, 104 S. Ct. 2218, 81 L. Ed. 2d 42 (1984); United States v. Pennsylvania Indus. Chem. Corp., 411 U.S. 655, 670-75, 93 S. Ct. 1804, 36 L. Ed. 2d 567 (1973); Moser v. United States, 341 U.S. 41, 71 S. Ct. 553, 95 L. Ed. 729 (1951); see also Tefel v. Reno, 180 F.3d 1286, 1302-03 (11th Cir. 1999); Clark v. United States, 68 F. Supp. 2d 1333, 1350-51 (N.D.Ga.1999). Additionally, various states have applied the doctrine of equitable estoppel to prevent governmental entities from asserting time bar or lack of notice as affirmative defenses. See, e.g., Pritchard v. State, 163 Ariz. 427, 788 P.2d 1178, 1183 (1990); Ortega v. Pajaro Valley Unified School Dist., 64 Cal. App. 4th 1023, 75 Cal. Rptr. 2d 777, 789 (1998); Woodard v. City of Lincoln, 256 Neb. 61, 588 N.W.2d 831, 836 (1999) ("We find no reason to place the tort claims acts outside the reach of the doctrine of equitable estoppel."); Brown v. City of New-York, 264 A.D.2d 493, 694 N.Y.S.2d 461, 462 (1999) (equitably estopping the City from asserting the limitations period due to misconduct); Mercer v. State, 48 Wash.App. 496, 739 P.2d 703, 706 (1987).
[16] In my view, Spangler v. Florida State Turnpike Authority, 106 So. 2d 421 (Fla. 1958), is not applicable to the issues addressed by this Court today. While this decision certainly details long-standing principles with regard to the proper construction of statutes waiving the sovereign immunity of government entities, this case only addresses the situation in which "the State Legislature has not waived [an agency's sovereign] immunity" at all. Id. at 423.
[17] This subdivision was subsequently renumbered to be section 768.28(13). See § 768.28(13), Fla. Stat. (1995).
[18] The Florida Legislature's adoption of the common law as it existed prior to Florida's statehood is codified in section 2.01, Florida Statutes (1993).
[19] See 28 U.S.C. §§ 2671-2680 (2000) (establishing legal mechanism for compensating persons injured by negligent or wrongful acts of federal employees committed within scope of their employment).
[20] The first time the equitable estoppel issue was raised is in the respondent's answer brief to this Court.
[21] Petitioner's argument that the respondent's claim is barred under the doctrine of sovereign immunity, though not addressed in the lower court's decision, was properly raised in petitioner's second amended motion to dismiss the respondent's amended complaint. See Record on Appeal at 127. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917817/ | 135 N.W.2d 639 (1965)
Dolores ANDERSEN, Appellant,
v.
NATIONAL PRESTO INDUSTRIES, INC. and Gold Bond Stamp Company of Iowa, Appellees.
No. 51703.
Supreme Court of Iowa.
June 8, 1965.
George E. Wright, of Patterson & Lorentzen, Des Moines, for appellant.
H. R. (Randy) Duncan, Jr., of Duncan, Jones, Riley & Davis, Des Moines, for appellees.
*640 THOMPSON, Justice:
This appeal concerns the question of the jurisdiction of state courts over foreign corporations not licensed to do business in the state, and having no registered agent or agents therein. The plaintiff's petition as amended alleged that the defendant National Presto Industries, Inc., is a foreign corporation with its principal place of business at Eau Claire, Wisconsin; that it manufactured a coffeemaker, and marketed it; that the plaintiff obtained one of these devices from a dealer in Des Moines, Polk County, Iowa; that it was so defectively devised and manufactured that the plaintiff was injured while using it. The other defendant, Gold Bond Stamp Company of Iowa, is not involved in this appeal, the action having been dismissed as to it.
It is not disputed that the defendant is a foreign corporation and that it had no registered agent in Iowa upon whom process might be served. In attempting to obtain jurisdiction the plaintiff followed section 617.3, code of 1962, I.C.A., as amended by chapter 325 of the Acts of the 60th General Assembly. So far as pertinent, this section now reads: "If a foreign corporation makes a contract with a resident of Iowa to be performed in whole or in part by either party in Iowa, or if such foreign corporation commits a tort in whole or in part in Iowa against a resident of Iowa, such acts shall be deemed to be doing business in Iowa by such foreign corporation for the purpose of service of process or original notice on such foreign corporation under this Act, and, if the corporation does not have a registered agent or agents in the State of Iowa, shall be deemed to constitute the appointment of the secretary of state of the state of Iowa * * *."
No contention is made that the plaintiff did not follow the provisions of the code in serving notice upon the secretary of state. The trial court upheld a special appearance filed by the defendant questioning its jurisdiction, and determined that the defendant is not amenable to suit in Iowa. The plaintiff, thus being left without remedy so far as her action in Iowa is concerned, appeals.
I. The defendant in its written brief states that the sole question involved "is whether the defendant committed a tort, in whole or in part, in the State of Iowa." It would somewhat simplify our discussion if we should take the defendant at its word; but the argument does in fact discuss two points: first, whether a tort was committed in Iowa, and second, whether the commission of one tort, if a tort was in fact committed here, is in itself a sufficient "minimum contact" with the state to justify the manner of obtaining jurisdiction provided by section 617.3 as it now reads. The questions involved may be stated thus: Was a tort committed by the defendant, in whole or in part, within the State of Iowa, within the meaning of section 617.3; and whether, if the first question is answered in the affirmative, the statute violates fair concepts of due process of law.
II. We address ourselves first to the question whether a tort was in fact committed by the defendant in Iowa. It is its contention that the tort is the affirmative act of negligence itself, and that a resulting injury, if one occurs, is not a part of the tortious act. Few authorities have had the temerity to attempt an all-inclusive definition of the word "tort" which would be applicable in all cases. It is often said that a tort is a breach of a duty owed to another; from which the implication is possible that the injury and damage are not part of the tort itself. Other authorities include the injury as an essential part of the tort. It must be kept in mind that we are here dealing with the intent of the legislature in enacting the statute as it presently appears; in particular, what it intended to, and did, say when it used the words "in whole or in part". It must be recognized that the lawmakers had in mind that a tort might be committed in part only in Iowa; that some elements might be found outside the state. This lends some weight to the plaintiff's position, although it is not conclusive.
*641 On the substantial question whether jurisdictional statutes such as our section 617.3 apply to and include torts in which the only part occurring in the state is the resulting injury the authorities are divided. Both plaintiff and defendant are able to cite cases from other jurisdictions which support their positions. For the plaintiff, there are Atkins v. Jones & Laughlin Steel Corp., 258 Minn. 571, 104 N.W.2d 888, followed in Ehlers v. United States Heating & Cooling Mfg. Corp., 267 Minn. 56, 124 N.W.2d 824; Gray v. American Radiator & Standard Sanitary Corp., 22 Ill. 2d 432, 176 N.E.2d 761; and Smyth v. Twin State Improvement Corp., 116 Vt. 569, 80 A.2d 664, 25 A.L.R. 2d 1193. The latter case is distinguishable on its facts because it appears that the tortious acts in addition to the injury, occurred in Vermont. The case is chiefly valuable for its discussion.
In support of its position the defendant cites Rufo v. Bastian-Blessing Company, 405 Pa. 12, 173 A.2d 123; Mann v. Equitable Gas Company, D.C., 209 F. Supp. 571; and the English case of George Monro v. American Cyanamide and Chemical Corporation, 1 K.B. 432.
The Minnesota and Vermont statutes are, for all substantial purposes, identical with our section 617.3, supra. The Illinois statute, instead of using the word "tort" says "tortious act". The Illinois Supreme Court said: "Titan (a defendant) seeks to avoid this result by arguing that instead of using the word `tort,' the legislature employed the term `tortious act'; and that the latter refers only to the act or conduct, separate and apart from any consequences thereof. We cannot accept the argument. To be tortious an act must cause injury. The concept of injury is an inseparable part of the phrase." It appears that the defendant, conceding arguendo that the word "tort" includes the injury, attempted to distinguish the words `tortious act' actually used; but the Illinois Court held that even these words necessarily included the injury, as used in the Illinois statute providing for means of obtaining jurisdiction over foreign corporation not licensed or having agents in the state.
The Pennsylvania statute under which Rufo was decided was based on "negligent acts or omissions". Whether this is in effect so much different from "a tort in whole or in part", as the Iowa law is worded, that a fair distinction should be drawn we shall not attempt to say. Even accepting the argument that the Pennsylvania, and West Virginia Federal District Court holdings, and the English authority cited are directly in point, we still must conclude that the Minnesota and Illinois cases cited above are better reasoned and more in line with the modern trend.
Other authorities support this view. Restatement, Conflict of Laws, section 377, says: "The place of wrong is in the state where the last event necessary to make an actor liable for an alleged tort takes place." The significance of this rule is pointed up in Price v. State Highway Commission, 62 Wyo. 385, 167 P.2d 309, 312, in this language: "Generally speaking and without undertaking in the least an all inclusive definition, a tort has a meaning somewhat similar to wrong and is an unlawful act injurious to another independent of contract." It is held in Jones v. Matson, 4 Wash.2d 659, 104 P.2d 591, 596, 597, 134 A. L.R. 708: "The elements of a tort are a wrong committed and damage resulting therefrom (Cooley on Torts, 3d Ed., p. 3)." In Hornaday v. Hornaday, 95 Cal. App. 2d 384, 213 P.2d 91, it was held that a conspiracy in itself, without resulting harm, did not constitute an actionable tort.
We must assume that the legislature, in wording section 617.3 as it has now done, had in mind an actionable tort, rather than an act which by itself, without resulting injury, would not give a basis for recovery. It is also of considerable importance that the statute says "in whole or in part". It is not a strained or illogical conclusion that the legislature had in mind *642 the exact situation here present, where the negligence occurred in another state, but the injury was inflicted in Iowa. In this situation, adopting what we think is the proper definition of a tort as related to the remedy contemplated by the statute, we think the tort was committed "in part" in Iowa.
Some attention must be given to our own case of Hill v. Electronics Corporation of America, 253 Iowa 581, 589, 113 N.W.2d 313, 318. This case is much relied upon by the defendant, and was apparently thought significant by the trial court. There is specific language therein which we quote: "Plaintiff suggests these defendants committed a tort in whole or in part in Iowa against a resident thereof and, under this chapter, by such acts were doing business here for the purpose of service of original notice. It is doubtful at best if the alleged tort was committed in whole or in part in Iowa although the injury occurred here. Rufo v. Bastian-Blessing Co., supra, 405 Pa. 12, 173 A.2d 123, 128-129, and citations. However, we need not decide the point." The actual holding in the case was that section 617.3 was not retroactive, and since the injury occurred before the enactment of the pertinent amendment to the section it did not govern.
It is evident that the language quoted was no more than obiter dictum. It is clearly so stated. Since the decision of the point was not necessary or in any way involved in the case then under review, no extended consideration was given to it. There has now been a further significant trend toward the liberalization of the laws pertaining to obtaining jurisdiction over foreign corporations, and we think our decision in the case at bar represents the more logical interpretation of our statute in the light of present day conditions. Modern means of transportation and communication have greatly altered conditions since the decision in Pennoyer v. Neff, 95 U.S. 714, 24 L. Ed. 565, and the power of a state to assert its jurisdiction over non-residents has been greatly expanded. It is an example of the capacity of the law to grow and change with changing conditions. It was well said in Smyth v. Twin State Improvement Corporation, supra: "Extension of the jurisdiction of courts may be expected to continue in the wake of scientific and economic developments. Facility of travel has largely effaced state lines." Loc. cit. 80 A.2d 668.
It is true, as Justice Larson said in Iowa-Illinois Gas & Electric Company v. City of Fort Dodge, 248 Iowa 1201, 1225, 85 N.W.2d 28, 41, that "No court should be concerned with whether it is `modern' but with whether it is right." It is equally true that change is not always progress; it is possible, often easier, to go backward instead of forward. But we think the reasons set out above justify our approval of the modern trend toward extension of the jurisdiction of the courts over non-residents.
III. Was there sufficient minimum contact between the defendant and the state of Iowa, and its residents, to justify the application of section 617.3 within the limitations of due process? Only one tort is shown by the pleadings to have been committed here; but this does not entirely answer the question. It is clear that under section 617.3 the commission of one tort in whole or in part in Iowa is sufficient to give jurisdiction. Again, this does not necessarily determine whether the statute in all cases requires sufficient minimum contact to afford due process. International Shoe Company v. State of Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95, is the leading case upholding the authority of a state to secure jurisdiction over one not served with process within its borders. However, it leaves several questions unanswered, one of them being what contact is sufficient. We quote this language: "It is evident that the criteria by which we mark the boundary line between those activities which justify the subjection of a corporation to suit, and those which do not, cannot be simply mechanical or quantitative. The test is not merely, as has sometimes been suggested, whether the activity, *643 which the corporation has seen fit to procure through its agents in another state, is a little more or a little less." In Gray v. American Radiator & Standard Sanitary Corporation, supra, the Illinois Supreme Court was faced with a situation identical with the one found here. Only one actual contact was shown; but the Illinois court said: "We do not think, however, that doing a given volume of business is the only way in which a nonresident can form the required connection with this State. Since the International Shoe case was decided the requirements for jurisdiction have been further relaxed, so that at the present time it is sufficient if the act or transaction itself has a substantial connection with the State of the forum." Loc. cit. 176 N.E.2d 764. In further discussion of the point the same court said: "In the case at bar defendant does not claim that the present use of its product in Illinois is an isolated instance. While the record does not disclose the volume of Titan's business * * * it is a reasonable inference that its commercial transactions, like those of other manufacturers, result in substantial use and consumption in this State."
In Ehlers v. United States Heating & Cooling Manufacturing Corporation, supra, which likewise involved only one use of the product in the state of claimed jurisdiction, the Minnesota Supreme Court reached the same conclusion by substantially the same rationalization. It said: "We feel justified, in view of the record, in concluding that the product here involved was manufactured by appellant corporation for use by the general public. It is not contended that the area of foreseeable use of the product was so limited as to exclude the State of Minnesota. The affidavit filed in support of the motions to dismiss did not negate the reasonable inference that the `Fireball' boiler is a mass-production unit intended for nationwide use." Loc. cit. 124 N.W.2d 827.
So in the case at bar. It is charged that the defendant marketed the coffee-maker; and its affidavit in support of its special appearance in no way counters the inference that its product was designed for general sale and use not only in its home state of Wisconsin, but generally. It would by flying in the face of reality if we did not admit knowledge that manufactured products are ordinarily designed for commercial sale in whatever markets may be found for them, without regard to state lines. They are placed in the stream of commerce; and when they reach a foreign state they have the protection of its laws. It is not unfair to say they should assume the burdens as well as the benefits. Products liability has become an important part of the law of negligence; and the producer of such products who sends them into another state may properly be held to respond for such injuries as they may cause, granted a sufficient showing of negligence and a method of notification adequate to bring to him a timely notice of the suit.
The defendant, and some of the authorities, place some emphasis upon the inconvenience caused to a non-resident defendant by being compelled to defend a suit in another state. We have pointed out above the greatly expanded means of communication and travel now available, both as to convenience and time. It also appears that the argument is one which is equally cogent in support of the plaintiff's position. If it is inconvenient and expensive to the defendant to go to another state to defend, it is equally so for the plaintiff to prosecute. There is much justice in a holding which places the burden of inconvenience and expense upon the tort feasor which puts its defective product upon the market in another state and so injures an innocent user, rather than upon the injured party. Convenience or the lack thereof is not in any event a good test for determining jurisdiction; but so far as it has any weight here, the argument is at least as available to the plaintiff as to the defendant.
IV. The defendant urges that section 617.3 provides an extraordinary method *644 of obtaining jurisdiction, and there must be clear and complete compliance with it. This is true; but we are not pointed to any deviation from the exact procedures required by the statute, and the defendant does not claim they were not literally followed. Its contention is based upon the two points stated in Division I above. These have been answered.
The ruling and judgment of the trial court is reversed, and the cause remanded for further proceedings in conformity with this opinion.
All Justices concur except LARSON, J., who dissents.
LARSON, Justice:
I respectfully dissent. In Division III of the majority opinion it is stated: "It is clear that under section 617.3 the commission of one tort in whole or in part in Iowa is sufficient to give jurisdiction," and the majority admit this fact does not determine whether the statute in all cases requires sufficient minimum contact to afford due process, citing International Shoe Company v. State of Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95, as the leading case holding such jurisdiction can be so secured.
As I read the Gray v. American Radiator & Standard Sanitary Corporation case, 22 Ill. 2d 432, 176 N.E.2d 761, which the majority says is identical with the one here, one isolated instance was not considered sufficient. Impliedly, at least, there was a volume of Titan business being transacted in Illinois. Here the inference, if it is an inference, is that a trading stamp concern offered the article as a premium, and the defendant did not solicit or transact direct business in Iowa. In other words, the contact came by way of a second or third transfer, and the holding is that no matter how an article comes into a foreign state the foreign state can secure jurisdiction of the manufacturer, by service on the Secretary of State, so as to satisfy due process. I am unable to go that far, and would hold plaintiff must allege and prove a substantial use and consumption in this state before such service would be valid. The necessary and basic premise for such jurisdiction, that defendant by act or conduct invokes the benefits and protection of the laws of the forum as clearly set forth in Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 2 L. Ed. 2d 1283, 1298, does not appear here. Therefore, I believe the trial court was right and would affirm. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1572714/ | 323 F.Supp. 1397 (1971)
UNITED STATES of America, Plaintiff,
v.
WHITE CONSOLIDATED INDUSTRIES, INC.
and
White Motor Corporation, Defendants.
No. C71-91.
United States District Court, N. D. Ohio, E. D.
February 24, 1971.
William LeFaiver, David F. Hils, Gerald Rubin, John A. Weedon, Carl Stein-house, Justice Dept., Cleveland, Ohio, for plaintiff.
George Meisel, Cleveland, Ohio, John H. Schafer, III, Washington, D. C., Rufus Day, Jr., Ward Smith, George Brown, Cleveland, Ohio, for defendants.
MEMORANDUM OPINION AND ORDER
BATTISTI, Chief Judge.
White Motor Corporation (Motor) is an Ohio corporation, and White Consolidated Industries, Inc. (Consolidated), is a Delaware corporation, but based in Cleveland, Ohio. The two were originally one firm, but for most of this century have had separate identities. In recent years both firms have expanded greatly in size and scope: since 1953 Motor has acquired eight firms with assets of $231,000,000, while since 1960 Consolidated has made twenty nine acquisitions totaling $420,000,000. The effect of these several transactions has been to create two large firms, each of which although well diversifiedearns nearly half its revenues from non-electrical machinery sales.
This action was brought by the Government under Section 15 of the Clayton Act, 15 U.S.C. § 25, to prevent the proposed merger of the defendant corporations. The Government charges that, if allowed to stand, the merger will violate Section 7 of that Act, 15 U.S.C. § 18, substantially lessening competition in several lines of commerce within the non-electrical machinery field. In view of this, the Government has moved for a preliminary injunction to halt the merger pending a trial on the merits after an opportunity for full discovery.
*1398 This case is not so much a contest between the United States Department of Justice and the two defendant companies as a skirmish in a broader battle over the direction American economic life will take in the coming years. At the center of this struggle is the concept of the conglomerate corporationnot a particularly new development, but one which lately has gained great momentum. One reason for its recent popularity is the attempt of companies to expand through acquisition of other firms, while avoiding the antitrust problems of vertical or horizontal mergers. The resulting corporations have had none of the earmarks of the traditional trust situation, but they have presented new problems of their own. Although the market shares of the several component firms within their individual markets remain unchanged in conglomerate mergers, their capital resources become pooledconcentrated into ever fewer hands. Economic concentration is economic power, and the Government is concerned that this trend, if left unchecked, will pose new hazards to the already much-battered competitive system in the United States.
The specific evil the Government is attacking here is reciprocal dealingthe use by a firm of its strength in one segment of the market to improve its position in another. Unlike recent cases in steel and other industries, the issue here is not overt reciprocity, but rather what the Government terms "reciprocity effect." This, simply, is an alleged tendency for prospective suppliers of a firm to direct their purchases to that firm in order to maintain its goodwill. The larger the firm, presumably, the greater its leverage in the market-place and the greater the danger to competition from this "reciprocity effect."
The entire concept of "reciprocity effect" is rather a new one and one whose very novelty has made the courts generally chary of accepting it. There is dicta by Judge Rosenberg in United States v. Ingersoll-Rand Co., 218 F.Supp. 530 (W.D.Pa., 1963) that the "judicious use" of the defendant's steel purchasing power could be used as a lever to aid sales by its subsidiaries to the steel industry. The Court there goes on to note that:
"Moreover, the mere existence of this purchasing power might make its conscious employment toward this end unnecessary; the possession of the power is frequently sufficient, as sophisticated businessmen are quick to see the advantages in securing the goodwill of the possessor." Id. at 552.
On appeal, this language was quoted with approval by the Third Circuit Court of Appeals, 320 F.2d 509, 524 (1963), but in general the theory has failed to gain acceptance outside that circuit. In Allis-Chalmers Mfg. Co. v. White Consolidated Industries, Inc., 414 F.2d 506 (C.C.A. 3, 1969), cert. den. 396 U.S. 1009, 90 S.Ct. 567, 24 L.Ed.2d 501, that same court reversed the District Court's refusal to grant a preliminary injunction, and based its decision largely on the probability of an anti-competitive "reciprocal effect." The majority there found that Allis-Chalmers' annual steel mill products purchases of $44,000,000 added to White's $42,000,000 would give a competitive advantage to Blaw-Knox, a White subsidiary, in its sales of rolling mill equipment to the steel industry.
"An acquisition which creates a market structure conducive to reciprocal dealing presents the acquiring company with an advantage over competitors, an advantage which by its very nature is anticompetitive." 414 F.2d at 518.
Although this Court is not bound by decisions of the Court of Appeals for the Third Circuit, the logic of its opinion in the Allis-Chalmers case seems both inescapable and quite compelling. The result of a merger between the defendant corporations would be no less than a superconglomerate, whose impact upon the market can hardly be gauged. The undesirable effects of such a merger are totally unrelated to the motives of the parties; rather, their mere size in the market will operate as a lever which in turn will lesson competition. Unquestionably, other firms will hesitate to compete too zealously with one division *1399 out of fear of antagonizing the entire firm and losing it as a customer for other goods. In particular, the combined steel purchases of White Consolidated and White Motors will aid Blaw-Knox in its sales of rolling-mill equipment to the steel industry. Since White Motor is a smaller purchaser of steel than Allis-Chalmers, the effect here will not be so drastic as in the earlier casebut the same forces can be seen operating here as in that case.
The defendants attempt to minimize the anti-competitive impact of their proposed merger by speaking of the so-called "profit-center" system under which they claim White Consolidated operates. Each division, they argue, is responsible only for its own internal profitability. As a result, the Court is told, no division will practice or encourage reciprocal dealing in favor of another, since this would harm its internal situation. The evidence and testimony presented to this Court, however, indicates a much firmer and more centralized control than the defendants would have us believe; and it would appear that it is the overall corporate profits, not divisional ones, which are of paramount importance to White Consolidated's central office.
This "profit-center" concept is also used to argue against the charge of vertical anti-competitive effects. Without finding it necessary to go into the extent of these effects at this time, it is noted parenthetically that it would seem patently beyond reason for a wholly-owned subsidiary of White Consolidated to go with any regularity to an outside firm to purchase goods available as well from White Consolidated itself or another of its subsidiaries. If nothing else, the requirements of regular reports from each division to the central office of major purchases surely would act as a rein to keep such purchases by and large within the family. In support of this, it appears that, since entering into the agreement to merge, White Consolidated has been pursuing an intensified sales program at White Motors, with the clear purpose of taking full advantage of the impending merger between the two firms. Such a policy is not, of course, anti-competitive in itself, but it does serve to indicate the inevitable impact the merger will have.
The defendant companies have stated, in testimony and in oral argument, that should a preliminary injunction issue postponing their merger, their attempted merger will be abandoned. It is quite clear that mergerslike marriages are not arranged in a vacuum, and that to postpone consummation for an extended time may erode the conditions which gave rise to their union in the first place. Despite this fact though, and without impugning the high professionalism and standing of counsel, the Court will not be intimidated or pressured by such suggestions regarding the gravity of the situation and the resultant impact this decision will have upon the future of this or other corporate mergers. It should be noted in this regard that the alternative would be to permit the two firms to join, under the illusion of a court order to maintain themselves "separate and apart" pending final adjudication. However, in that situation as well, the status quo could not be maintained over the several months or years involved. There is no way this or any court can hold the national economy static, no way it can prevent the economic necessity of the defendants to react to new conditions once their merger has been consummated. Already, personnel changes have been made and policy decisions implemented at White Motors whose impact cannot be doubted and whose effects cannot be reversed. (Affidavits of J. M. Fairbanks, J. J. O'Connor, and William L. Peterson, Transcript pp. 13-17 and 20-23). The defendants argue that under an appropriate "hold separate and apart" order, divestiture would be relatively simple should a permanent injunction issue after a full trial, and that to grant such an order would constitute sound policy. Quite to the contrary, however, it would only further bad policy and its implementation might present, ultimately, horrendous complexity. It would seem, *1400 then, that in balancing possible harm to the defendants against probable antitrust violations, there is no question that national interests must take precedence.
The Government has raised, in addition to reciprocity and vertical antitrust violations, questions of possible horizontal effects from this merger in conjunction with the earlier acquisition by White Consolidated of Allis-Chalmers. In view of the foregoing discussion, however, and of the recent court-ordered divestiture of Allis-Chalmers, this issue now is moot and need not be dealt with further.
Similarly, to the Government's contention that the size and structure of these two firms may have anti-competitive effects transcending any single product market, the Court notes that there is no reason for it to enter so novel and uncharted a territory at this juncture. Rather, it is sufficient to note that in this case there are specific and identifiable lines of commerce, particularly sales of rolling-mill equipment, in which this merger would have the effect of lessening competition in the national market. The broader question of aggregate effects can best be raised in the context of a full trial.
It is the opinion of this Court that the Government has shown in pleadings, testimony, and oral argument both a probability of success at trial and the necessity that until that time the merger between the defendants be prevented; accordingly, a preliminary injunction is granted.
The defendants, White Motor Corporation and White Consolidated Industries, Inc., and their officers, directors, employees, agents, and all other persons acting in their behalf, shall not take any action in furtherance of or pursuant to the Agreement and Supplemental Agreement of Merger dated October 6, 1970, or any similar existing or future agreement, pending full discovery and final determination of the merits of the complaint of the Government.
It is so ordered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1811828/ | 616 F.Supp. 569 (1985)
SOCIETY OF PROFESSIONAL JOURNALISTS, a Utah non-profit corporation, KUTV, Inc., KSL Radio and Television, KTVX T.V., KUED, KALL, the Kearns-Tribune Corporation, Deseret News Publishing Company, the Ogden Standard Examiner, the Logan Herald Journal, Associated Press, United Press International, and National Broadcasting Company, Plaintiffs,
v.
The SECRETARY OF LABOR, Defendant.
EMERY MINING CORPORATION, a Utah corporation, Plaintiff,
v.
The UNITED STATES SECRETARY OF LABOR, Defendant.
Civ. Nos. C-85-0070W, C-85-0166W.
United States District Court, D. Utah, C.D.
August 21, 1985.
*570 Samuel O. Gaufin, David L. Deisley, Patrick A. Shea, Salt Lake City, Utah, for Society of Professional Journalists.
James B. Lee, Raymond S. Etcheverry, Salt Lake City, Utah, for Emery Min. Corp.
Joseph W. Anderson, Asst. U.S. Atty., Salt Lake City, Utah, Timothy M. Biddle, Washington, D.C., for Secretary of Labor.
Arthur F. Sandack, Salt Lake City, Utah, Michael H. Holland, Earl R. Pfeffer, United Mine Workers of America, Washington, D.C., for United Mine Workers.
MEMORANDUM DECISION AND ORDER
WINDER, District Judge.
This matter is before the court on the defendant Secretary's motion for summary judgment. The motion was orally argued on May 9, 1985. The plaintiffs (other than Emery Mining Co.)[1] were represented by Patrick A. Shea and David L. Deisley. The defendant Secretary was represented by Joseph W. Anderson and Alan Yamamoto. The matter was taken under advisement, and the court has since carefully reviewed the memoranda submitted by counsel and various authorities that bear on the issue involved in the motion. Being now fully advised, the court renders the following decision.
Background
On December 19, 1984, a fire broke out in the Wilberg Mine, a coal mine near Price, Utah. The fire killed 27 miners. On December 31, the Mine Safety and Health Administration (MSHA) launched an investigation into the cause of the fire. As part of the investigation, MSHA decided to conduct formal hearings and asked several people to give sworn testimony to be taken down verbatim by a court reporter. MSHA invited several groups to send non-testifying representatives to the hearings, but closed the hearings to the press and the public. The hearings began on January 21, 1985.
When the plaintiffs, who are various news-reporting organizations, discovered that they were being excluded from the hearings, they brought this action. They demanded access to the formal hearings then being conducted by MSHA personnel in Price, Utah. The plaintiffs asked for a temporary restraining order to prevent MSHA from conducting the formal hearings *571 behind closed doors. They asked that MSHA be enjoined from continuing the hearings unless a pool reporter was allowed to be present. On January 25, 1985, after a brief hearing, this court issued the requested temporary restraining order. A pool reporter presented himself at the hearings in Price and requested admittance. The MSHA personnel conducting the hearing thereupon recessed the hearings pending the preliminary injunction hearing this court had scheduled.
The preliminary injunction hearing was held on February 1, 1985. In addition to the plaintiffs and the defendant Secretary, the United Mine Workers of America (UMWA) were represented at the hearing. The UMWA moved to intervene in the proceedings, and that motion was later granted. Following the preliminary injunction hearing, this court took the matter under advisement.
On February 8, this court issued a preliminary injunction which differed from the temporary restraining order. Under the terms of the preliminary injunction, the hearings could be closed if the participants were limited to representatives of MSHA, the Utah Industrial Commission, and the UMWA. If anyone besides representatives of these groups, the witness, and the court reporter were allowed to be present, the hearing would have to be open to the press and the public.
The operator of the Wilberg Mine, Emery Mining Co., was dissatisfied at being excluded from the hearings and brought a separate action against the Secretary of Labor. On February 14, 1985, this court consolidated Emery Mining's case with this case and modified the preliminary injunction to allow Emery Mining to be among those who could participate in the closed hearings. The hearings were resumed with personnel from MSHA, the Utah State Industrial Commission, the UMWA, and Emery Mining all present and participating. The press and the public were excluded. The hearing were completed several months ago.[2]
The present motion for summary judgment is centered on one issue: whether the Constitution or federal law requires that the formal fact-finding hearings conducted by MSHA be open to the press and public. The defendant Secretary argues that summary judgment must be granted in his favor. He claims that he is not obligated by either federal statute or the United States Constitution to allow the press or the public to attend hearings conducted by MSHA.
The plaintiffs, in response, claim that the constitutional guarantees of free speech and freedom of the press require this type of hearing to be open to the press and the public. They also claim that hearings of the type conducted by MSHA in Price must be public under 30 U.S.C. § 813(b). This court holds that there is a constitutionally protected right of access to formal administrative proceedings of this type. Therefore, the summary judgment motion is denied.
Statutory Requirements
The plaintiffs argue strenuously that there is a statutory requirement under 30 U.S.C. § 813(b) that any formal hearings conducted by MSHA to investigate coal mine accident must be public. However, the language of § 813(b) does not support the plaintiffs' argument. It is permissive language, not mandatory.
The pertinent part of § 813(b) states that the Secretary may conduct public hearings.
For the purpose of making any investigation of any accident or other occurrence relating to health or safety in a coal or other mine, the Secretary may, after notice, hold public hearings, and may sign and issue subpoenas for the attendance and testimony of witnesses and the production of relevant papers, books, and documents, and administer oaths. *572 30 U.S.C. § 813(b). The statute does not require the Secretary to hold in public any and all hearings conducted for the purpose of investigating a mine disaster. It simply empowers him to conduct public hearings. Therefore, the plaintiffs cannot claim a right of access under § 813(b).
The plaintiffs also argue that § 813(b) suggests that Congress intended all investigatory hearings into mine accidents to be conducted formally and in public. While it is unclear whether that was Congress's intent or not, it is clear that that intent is not embodied in the statutory language. The Secretary is not required to hold all mine accident investigation hearings as public hearings under § 813(b).
Constitutional Right of Access
The United States Constitution does not expressly require either Congress or the Executive to hold any of their meetings in public. There is also no common-law right to attend meetings of government bodies. See Note, Open Meeting Statutes: The Press Fights for the "Right to Know," 75 Harv.L.Rev. 1199, 1203 (1962). Indeed, the tradition in England was to hold legislative debate in secret and to prohibit publication of legislative proceedings. See id.; Watkins, Open Meetings Under the Arkansas Freedom of Information Act, 38 Ark.L.Rev. 268, 271 (1984). This tradition was exported to colonial America. See Watkins, supra, at 271.
The tradition of closed legislative proceedings resulted in both the Continental Congress and the Constitutional Convention conducting their proceedings in secret. See id. It is not surprising, therefore, that the Framers of the Constitution did not include an express provision in the Constitution that required Congress to deliberate in public. Even though not constitutionally required, it was not long before both the House and Senate began to hold their sessions in public on a regular basis. Id. The Senate has done so since 1794, and the House since the War of 1812. Id. The increasingly important committee sessions, however, have been routinely open to the public only since the mid-1970's. Id.
Although Congress is not expressly required to hold open meetings by the United States Constitution, thirty-four of the states do have express constitutional requirements that their state legislature meet in public. See Note, supra, at 1203. In the other states, the legislative sessions are open by custom. Id. None of the states, however, require by an express constitutional provision that any meetings or proceedings other than legislative sessions be open to the public.
Although the executive branches of the various state governments and the federal government are not expressly required by constitutional provision to open their proceedings, they are required to hold some of their meetings in public by law. All fifty states, the District of Columbia, and the federal government have some form of a "government in the sunshine" act. See Watkins, supra, at 268. These acts have never been held to be constitutionally required, however, and derive from vigorous lobbying of legislative bodies by the news media rather than any action in the courts. See Watkins, supra, at 272.
Although legislatures have generally been more active in promoting a right of access than the courts, the courts have been active in finding a constitutional right of access in one area. The area is that of judicial proceedings. The sixth amendment gives only the defendant the right to a public trial; it does not give anyone other than a criminal defendant standing to assert the right. See U.S. Const. amend. VI. However, the Supreme Court has found that the press and public have a right of access to criminal trials even where the defendant expressly waives his right to a public trial and desires the proceedings to be closed. Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 100 S.Ct. 2814, 65 L.Ed.2d 973 (1980). This right of access is based on the first amendment freedoms. See id. This right is not absolute, since the press and public can be excluded if the court finds a compelling reason why the *573 proceedings must be closed. But the right exists.
The right of access to judicial proceedings has been extended beyond criminal trials. Some courts have found a right of access to civil trials. See, e.g., Publicker Indus. v. Cohen, 733 F.2d 1059, 1071 (3d Cir.1984). The press have a first amendment right of access to presidential press conferences. Cable News Network v. American Broadcasting Cos., 518 F.Supp. 1238 (N.D.Ga.1981). This court is asked by the plaintiffs in this case to extend the right of access to formal administrative fact-finding hearings. This court does so.
Freedom of the Press
The plaintiffs ask this court to find a right of access in the freedom of the press guarantee of the first amendment. They claim that they are constitutionally entitled to access even though the public might not be. They claim that the right to publish information is expressly given the press in the first amendment, and argue that the right of access to information is a necessary part of publishing that information. This court agrees that there is a right of access in this case. This court finds, however, that the right of access is based on the penumbra of the first amendment guarantees, not solely on the freedom of the press guarantee.
There are weighty practical problems in finding that members of the press have a greater right of access than the general public. One difficulty is in determining whether a person desiring access is indeed a member of the press or is simply a member of the general public.[3] For example, is a person who claims to be a free-lance reporter, but has never had any of his work published, a member of the press or not? The distinction between press people and the general public is too vague and indistinct to base a constitutional right upon.
Another difficulty in finding that the press has greater rights than the public is that the policies behind allowing a right of access may not be served if the right is limited. If members of the general public cannot attend a hearing, then the only information they can receive will have been filtered through the press. Although one might expect that the press would report fully on all matters of public interest, that is frequently not the case. See Pechter v. Lyons, 441 F.Supp. 115 (S.D.N.Y.1977). A press right of access is often an inadequate substitute for a right of access for all interested members of the public. Allowing the press to decide what the public will hear is subject to the same abuse, and perhaps to a greater degree, as the government itself deciding what the public and press will hear. See Houchins v. KQED, Inc., 438 U.S. 1, 14, 98 S.Ct. 2588, 2596, 57 L.Ed.2d 553 (1978).
In addition to the practical problems in finding a right of access solely for members of the press, there are problems with precedent as well. The Supreme Court has ruled out a right of access based on the freedom of the press guarantee standing alone. See Pell v. Procunier, 417 U.S. 817, 834, 94 S.Ct. 2800, 2810, 41 L.Ed.2d 495 (1974). See also Houchins v. KQED, Inc., 438 U.S. 1, 98 S.Ct. 2588, 57 L.Ed.2d 553 (1978).[4] This court will follow the Supreme Court, as it must, and not base the right of access solely on the freedom of the press guarantee of the first amendment.
First Amendment Right of Access to Judicial Proceedings
The Supreme Court, in a plurality decision, found a right of access to criminal *574 trials in the penumbra of the first amendment guarantees of freedom of the press, freedom of speech, and freedom of assembly. Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 100 S.Ct. 2814, 65 L.Ed.2d 973 (1980). The Richmond Newspapers case was a clear departure from the earlier Supreme Court ruling in Pell v. Procunier, 417 U.S. 817, 94 S.Ct. 2800, 41 L.Ed.2d 495 (1974). A majority of the Court reached basically the same result in Globe Newspaper Co. v. Superior Court, 457 U.S. 596, 102 S.Ct. 2613, 73 L.Ed.2d 248 (1982), which made the Richmond Newspapers analysis the analysis of the Court.
In Globe Newspaper, the Court identified two features of the criminal justice system that explain why a right of access to criminal trials is afforded first amendment protection. See 457 U.S. at 605, 102 S.Ct. at 2619. First, criminal trials have historically been open to the press and public. See id.; Richmond Newspapers, 448 U.S. at 569, 100 S.Ct. at 2823. Second, the right of access to criminal trials plays a significant role in the proper functioning of the judicial process. See Globe Newspaper, 457 U.S. at 606, 102 S.Ct. at 2619; Richmond Newspapers, 448 U.S. at 569, 100 S.Ct. at 2823.
Thus far, the right of access has been limited to criminal trials in Supreme Court cases. The Supreme Court has, however, extended the right beyond just the trial itself to include jury voir dire in criminal cases. Press Enterprise Co. v. Superior Court, 464 U.S. 501, 104 S.Ct. 819, 78 L.Ed.2d 629 (1984). In doing so, the Court used the Richmond Newspapers analysis. The Court looked to the historical tradition in England and colonial America, and found that jury voir dire has historically been performed in public. See id., 104 S.Ct. at 822-23. The Court then looked to the significance of the role a right of access plays in the jury voir dire process, and found that it plays a crucial role. See id., 104 S.Ct. at 823-24. Consequently, the Court held that a right of access, or presumption of openness, applies to the jury voir dire proceedings in a criminal proceeding.
While the Supreme Court has extended Richmond Newspapers beyond just the criminal trial itself, it has not overruled the direct holding of Gannett Co. v. DePasquale, 443 U.S. 368, 99 S.Ct. 2898, 61 L.Ed.2d 608 (1979). In Gannett, the court held that there is no first amendment right of access to a pretrial suppression hearing in a criminal case. The Court in Richmond Newspapers was careful not to overrule Gannett. In fact, the Court mentioned Gannett in passing, thus seeming to indicate that Gannett is still good law, in the recent case of Waller v. Georgia, 467 U.S. 39, 104 S.Ct. 2210, 2214-15, 81 L.Ed.2d 31 (1984). However, the stage has certainly been set for the overruling of Gannett, and its precedential value is in question. See In re Herald Co., 734 F.2d 93 (2d Cir.1984) (reaching a result contrary to Gannett). Given the appropriate case, Gannett may well be overruled by the Supreme Court.
Indeed, the analysis used by the Court in Richmond Newspapers and Globe Newspaper supports finding a right of access in civil trials as well as criminal trials. See id. Both historical tradition and the procedural importance of openness weigh as heavily in favor of open civil trials as open criminal trials. See Gannett, 443 U.S. at 386 n. 15, 99 S.Ct. at 2908 n. 15; Richmond Newspapers, 448 U.S. at 599, 100 S.Ct. at 2839 (Stewart, J., concurring). The Second, Third, and Sixth Circuits have all followed the Richmond Newspapers analysis in holding that civil trials must be open. See Westmoreland v. Columbia Broadcasting System, 752 F.2d 16, 23 (2d Cir.1984); Publicker Indus. v. Cohen, 733 F.2d 1059, 1071 (3d Cir.1984); Brown & Williamson Tobacco Corp. v. FTC, 710 F.2d 1165, 1178-79 (6th Cir.1983), cert. denied, ___ U.S. ___, 104 S.Ct. 1595, 80 L.Ed.2d 127 (1984).
First Amendment Right of Access to Presidential Press Conferences
One court has found that members of the press have a first amendment right to attend presidential press conferences. Cable News Network v. American Broadcasting *575 Cos., 518 F.Supp. 1238 (N.D.Ga.1981). The Cable News court did not carefully track the analysis of the Supreme Court in Richmond Newspapers. It only briefly mentioned that there has been a historical practice of allowing pool coverage of presidential news conferences "going back through several past Administrations." See 518 F.Supp. at 1244-45. The court was no more extensive in its analysis of the value of a right of access to presidential news conferences. See 518 F.Supp. at 1245. Nevertheless, the Cable News court was unequivocal in finding a right of access to events such as presidential news conferences.
The Cable News court's holding is succintly stated in one quoted paragraph.
Having carefully reviewed the few cases relevant to this issue, this Court finds that the rights guaranteed and protected by the First Amendment include a right of access to news or information concerning the operations and activities of government. This right is held by both the general public and the press, with the press acting as a representative or agent of the public as well as on its own behalf. Without such a right, the goals and purposes of the First Amendment would be meaningless. However, such a right of access is qualified, rather than absolute, and is subject to limiting considerations such as confidentiality, security, orderly process, spatial limitation, and doubtless many others.
518 F.Supp. at 1244. The court's rather broad statement that the right applies to "news or information concerning the operations and activities of government" will undoubtedly be limited in subsequent cases. But the clear import of Cable News is that at least one court has unmistakably found a right of access to non-judicial proceedings using the Richmond Newspapers analysis.
First Amendment Right of Access to Administrative Proceedings
This court is convinced that a right of access is necessary to the type of hearing MSHA conducted in this case. Even though it is unclear whether a majority of the Supreme Court would find such a right in this case, nose-count analysis is not always helpful. It is difficult, if not impossible, to predict how each member of the Supreme Court would rule on this new issue. Therefore, this court must merely try to follow the analysis adopted by the Supreme Court in similar cases and examine the same policy considerations the Supreme Court would examine. Following that course, this court holds that a right of access exists in this case.
Historical Tradition
There is little historical tradition to examine to determine whether administrative hearings of the type MSHA conducted have generally been open to the public. There does not appear to be a lengthy tradition of even holding administrative fact-finding hearings, since they are of fairly recent origin. However, as discussed above, it is clear that congressional sessions have been open since the early history of our country. Moreover, civil trials, which are analogous to administrative fact-finding proceedings, have historically been open to the public. It seems, therefore, that to the extent that there is a tradition of holding this type of hearing, there is a tradition that the hearings have been open to the public. See Fitzgerald v. Hampton, 467 F.2d 755, 764 (D.C.Cir.1972) ("in administrative hearings, the rule of the `open' forum is prevailing"). See also 3 K. Davis, Administrative Law Treatise § 14:13 (1980); Pechter v. Lyons, 441 F.Supp. 115 (S.D.N.Y.1977); FCC v. Schreiber, 381 U.S. 279, 292-94, 85 S.Ct. 1459, 1468-70, 14 L.Ed.2d 383 (1965).
The Secretary argues that there is not a tradition of openness in this type of hearing because MSHA has almost always closed its hearings to the public. However, that is not a very good indicator of whether there is a tradition of openness for two reasons. First, MSHA has not held a large number of this type of hearing. It is necessary to examine the broad spectrum of administrative hearings, rather than narrow *576 instances, in order to perceive a tradition. See Globe Newspaper Co. v. Superior Court, 457 U.S. 596, 605 n. 13, 102 S.Ct. 2613, 2619 n. 13, 73 L.Ed.2d 248 (1982). Second, MSHA alone controls whether these hearings are open or not. The fact that MSHA has chosen over the past few years to close its hearings is not a significant indicator of whether there is an enduring and vital tradition of public entree to administrative hearings.
Procedural Importance of Openness
Openness is crucially important to the type of hearings MSHA conducted. A mine disaster that takes twenty-seven lives creates shock and sorrow in the mining community. Even though the disaster may have been the fault of no one, the emotional impact in the community is just as though a murder had taken place. An investigation into the causes of the disaster can create an emotional catharsis that soothes the community sorrow. If someone is responsible, people become aware of that. If no one is at fault, people can become reassured of that. Access to the proceedings, where feasible, ensures that people realize that justice is being done.
Moreover, openness ensures that MSHA properly does its job. Although Congress can conduct oversight hearings, they occur too long after the MSHA hearings to accomplish the purposes gained by openness.[5] Congressional oversight hearings can prevent future mistakes, but they can do little to correct past ones. In contrast, openness at the hearings can allow mistakes to be cured at once.
The natural tendency of governmental officials is to hold their meetings in secret. See Note, Open Meeting Statutes, The Press Fights for the Right to Know, 75 Harv.L.Rev. 1199, 1202-03 & n. 21 (1962). They can thereby avoid criticism and proceed informally and less carefully. They do not have to worry before they proceed with the task that a careless remark may be splashed across the next day's headlines. But it is exactly that type of public awareness and opportunity to criticize that is the very foundation of our democracy.
Openness safeguards our democratic institutions. Secrecy breeds mistrust and abuse. As Justice Brandeis stated in words often quoted,
Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.
L. Brandeis, Other People's Money 62 (1933). A right to open proceedings is necessary to prevent any governmental body from abusing the power it is given.
The federal government, particularly the executive branch, produces a vast amount of information. If the government is given the unfettered discretion to decide what information to make available to the press and the public, it has the power to distort the information and hide the truth. The first amendment guarantees of free speech and free press protect our right to freely criticize the government without fear of censorship by the government. But censorship in speaking and publishing is not the only form of censorship that must be prevented. The process of filtering information selectively releasing some information while withholding other information can be effectively used to prevent criticism and hide mistakes. The first amendment guarantees apply to both forms of censorship.
Without a first amendment right of access to some governmental information, our system of government by the people will not work. As James Madison noted,
A popular Government, without popular information, or the means of acquiring it, *577 is but a Prologue to a Farce or a Tragedy; or, perhaps both. Knowledge will forever govern ignorance: And a people who mean to be their own Governors, must arm themselves with the power which knowledge gives.
9 Writings of James Madison 103 (G. Hunt ed. 1910). See also Houchins v. KQED, Inc., 438 U.S. 1, 30-35, 98 S.Ct. 2588, 2604-07, 57 L.Ed.2d 553 (1978) (Stevens, J., dissenting) (quoting and discussing Madison's comment).
The Constitution is not, however, a Freedom of Information Act. See Houchins, 438 U.S. at 14, 98 S.Ct. at 2596. There are limits to the right of access. It is doubtful that the right of access would extend to informal interviews or internal agency deliberations. A right of access is not a license to force disclosure of confidential information or to invade the decisionmaking processes of governmental officials. In this case, this court decides only that the press and public have a first amendment right of access to formal administrative fact-finding hearings.
Many times, it is not necessary to enshrine rights in the Constitution. The democratic process itself ensures that many rights are protected even without embodying them in the Constitution. If a majority of the people cherish a particular right, that right will be respected and protected by representative legislatures. The right will become law.
Openness is essential, however, to the proper functioning of democratic processes. Majoritarian pressures are not felt if the majority of the people are unaware or misled about information crucial to their decisions. The cloak of secrecy can be used to hide abuses or disguise mistakes until it is too late to prevent damage from being done. Openness acts as both a preventative and a curative of such abuses.
A right of access is more a procedural right than a substantive right. It is particularly important that procedural rights be embodied in the Constitution. Majoritarian pressures are often sufficient to ensure that substantive rights are protected by law even though they are not based in the Constitution. Procedural rights are less susceptible to protection by majoritarian pressures. Unless the procedure functions properly, a right will not arise. Therefore, a right of access must be constitutionally protected as a procedural right.
Transcripts of Hearings Cannot Substitute for Openness
The government argues that openness is not essential to the fact-finding process because MSHA has agreed to make a transcript of the hearings available to interested persons as soon as possible. In fact, the plaintiffs did receive transcripts of the hearings at issue here. The government argues that the transcripts are the procedural equivalent of open hearings. By providing a transcript rather than opening the hearings, the government argues, MSHA is able to proceed as it desires in its hearings while still providing the public with the information it desires.
There are, however, several reasons why a transcript cannot replace the right to an open hearing. The most important reason is that MSHA is not obligated to provide a transcript unless a constitutional right requiring disclosure exists. The fact that MSHA provided a transcript this time does not bind it to produce a transcript the next time such hearings are held. The question of whether a right of access exists, therefore, is not answered by simply noting that a transcript was provided in this case.
Moreover, a transcript is not an adequate substitute for an open hearing. Preparation of a transcript requires time. By the time the transcript is ready, the information it contains is stale. In a hearing such as this one, the participants in the hearing can release their own version of the hearing, filtered according to their viewpoint, before the transcript is ready. See, e.g., Plaintiffs' Memorandum Of Points and Authorities in Opposition to Defendant's Motions for a Protective Order and for Summary Judgment, exh. A (containing an excerpt from the United Mine Worker's Journal which gives the UMWA's view of *578 the accident). The press and public are denied access to unfiltered information while it is still fresh. A stale transcript is not an adequate substitute for access to the hearings themselves.
Transcripts are also inadequate because they are incomplete. A transcript can be edited to remove sensitive information without leaving a trace, or embarrassing material, as in the Watergate Tapes, may be "accidentally" deleted. No such opportunity exists in open hearings. Even if there is no purposeful tampering with the transcript, the full flavor of the hearing cannot be sensed from the sterile sheets of a transcript. Emotions, gestures, facial expressions, and pregnant pauses do not appear on the reported transcript. See Affidavit of Richard L. Finlinson. Much of what makes good news is lost in the difference between a one-dimensional transcript and an opportunity to see and hear testimony as it unfolds.
The Hearings Are Not Equivalent to Grand Jury Proceedings
The government contends that a right of access is inappropriate because the MSHA hearings must be kept secret just as grand jury proceedings are generally kept secret. But the analogy between MSHA hearings and grand jury proceedings is inapt. Several grounds support secret grand jury proceedings.[6] None apply to the MSHA hearings. The contrast between the two is particularly evidenced by the fact that the secrecy rule regarding grand juries applies to transcripts of the proceedings as well as attendance at the proceedings, while MSHA was willing to provide transcripts in lieu of allowing attendance at its hearings. The MSHA fact-finding hearings are simply not analogous to grand jury deliberations.
Conclusion
This court holds, in short, that the press and public have a constitutional right of access to the MSHA hearings. Although this court is aware of the possible broad implications of this holding, that consideration should not deter recognition of this important right. Other courts in other cases can determine how far the right should extend. This court's holding is limited to the hearings conducted by MSHA in Price, Utah, that are the basis of this case.
Moreover, to say that there is a right of access to this type of hearing does not mean that all hearings of this type must be open. It means, instead, that the Secretary himself does not have the unfettered right to decide whether the hearings conducted by him are public or not. That decision is for the impartial judiciary.
Because a right of access exists, the government's motion for summary judgment is denied. Even though a right of access exists, however, that right is not absolute. Governmental interests in confidentiality, security, or orderly process may weigh heavily enough to limit the right of access, or even outweigh it. But a governmental interest must be weighty indeed to be protected when a constitutional right is on the other side of the scales.
The Secretary has advanced several governmental interests which he believes justify his decision to close the hearings. The governmental interests advanced by the Secretary are not frivolous. It is true that MSHA personnel can more easily conduct *579 MSHA hearings without the press and public having access to the hearings. It is true that the press does not always report information accurately or fairly. See Sheppard v. Maxwell, 384 U.S. 333, 86 S.Ct. 1507, 16 L.Ed.2d 600 (1966) (setting forth a litany of press abuses in sensationalizing the Sheppard murder trial). It is true that access to the hearings may spawn unfounded rumors and distorted information. It is true that access to the hearings may, in some cases, hinder the search for truth rather than aid it. Nevertheless, the hearings must be open.
We have agreed as a society to pay the price of holding governmental proceedings in the open in order to preserve our freedom. We have chosen to preserve and encourage free discussion about, and criticism of, our government in order to continually refine our government. In our democracy, the people control the government. A shift from the people controlling the government to the government controlling the people is a shift from democracy to totalitarianism. Administrative difficulties such as those advanced by the Secretary are a small price to pay to entrench the procedural safeguards that keep our society from creeping even slightly closer to totalitarianism. Such difficulties pale in the light of the constitutional rights of free speech and a free press.
It is unclear what further proceedings are necessary in this case. While the Secretary has not yet suggested any counterbalancing governmental interest to overcome the constitutional right this court has found, he has not yet been squarely presented with the opportunity to do so. The Secretary shall have that opportunity if he has anything further he wishes to present.
It is doubtful that there are any governmental interests compelling enough to warrant complete closure of the MSHA hearings. However, limitations on the right of access appear to be essential. The plaintiffs proposed that one pool reporter be allowed to attend the hearings and that one camera be placed in the hearing room so that a video and audio feed could be available to the press and so that the press and the public could watch and hear the live proceedings in a nearby room. Although that arrangement appears to be equitable, this court will delay a final ruling on this issue until both sides have had an opportunity to fully present their evidence and arguments.
Either side may, if it desires, submit further argument and evidence on the issue of whether there is a governmental interest sufficiently weighty to close the MSHA hearings or limit access to them. If necessary, an evidentiary hearing on that issue will be held. Clearly, discovery concerning that issue is necessary, and the Secretary's motion for a protective order must therefore be denied.
Accordingly,
IT IS HEREBY ORDERED that the Secretary's motion for summary judgment and motion for a protective order are both denied.
This order will suffice as the court's action on these motions. No further order need be prepared by counsel.
NOTES
[1] Plaintiff Emery Mining Co. is not involved in this motion.
[2] The Secretary has not raised the issue of mootness, presumably because the situation is "capable of repetition, yet evading review," and thus excepted from the mootness doctrine. See Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 31 S.Ct. 279, 55 L.Ed. 310 (1911).
[3] The difficulty of identifying members of the press has been made more difficult by the expansion of methods of reporting the news. The term "press" can refer to the traditional media such as newspaper, magazine, television, and radio news reporters, as well as the non-traditional press such as writers of non-fiction books or articles and the creators of documentary films.
[4] Although Houchins was merely a plurality opinion, it seems clear that most, if not all, of the current members of the Court agree that the press has no constitutional right of access superior to that of the general public. See Houchins, 438 U.S. at 13-14, 98 S.Ct. at 2596 (opinion of Burger, C.J., joined by White and Rehnquist, JJ.); id. at 19, 98 S.Ct. at 2599 (Stevens, J., dissenting, joined by Brennan and Powell, JJ.).
[5] As Jeremy Bentham noted, no other check on power can substitute for openness.
Without publicity, all other checks are insufficient: in comparison of publicity, all other checks are of small account. Recordation, appeal, whatever other institutions might present themselves in the character of checks, would be found to operate rather as cloaks than checks; as cloaks in reality, as checks only in appearance.
1 J. Bentham, Rationale of Judicial Evidence 524 (1827), quoted in Richmond Newspapers v. Virginia, 448 U.S. 555, 569, 100 S.Ct. 2814, 2823, 65 L.Ed.2d 973 (1980).
[6] Some of the most important grounds for maintaining secrecy in grand jury proceedings include:
(1) To prevent the escape of those whose indictment may be contemplated; (2) to insure the utmost freedom to the grand jury in its deliberations, and to prevent persons subject to indictment or their friends from importuning the grand jurors; (3) to prevent subornation of perjury or tampering with the witnesses who may testify before grand jury and later appear at the trial of those indicted by it; (4) to encourage free and untrammeled disclosures by persons who have information with respect to the commission of crimes; (5) to protect innocent accused who is exonerated from disclosure of the fact that he has been under investigation, and from the expense of standing trial where there was no probability of guilt.
Houchins v. KQED, Inc., 438 U.S. 1, 35 n. 26, 98 S.Ct. 2588, 2607 n. 26, 57 L.Ed.2d 553 (1978) (Stevens, J., dissenting). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/733364/ | 104 F.3d 1344
Robert J. CONNER, Petitioner,v.OFFICE OF PERSONNEL MANAGEMENT, Respondent.
No. 96-3110.
United States Court of Appeals,Federal Circuit.
Jan. 21, 1997.
Sheldon I. Cohen, Sheldon I. Cohen and Associates, Arlington, VA, argued, for petitioner.
Lesleyanne Koch Kessler, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, argued, for respondent. With her on the brief were Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, and Jeanne E. Davidson, Assistant Director.
Before RICH, CLEVENGER, and SCHALL, Circuit Judges.
CLEVENGER, Circuit Judge.
1
In this federal retirement benefits case, Robert J. Conner petitions for review of the December 12, 1995, final order of the Merit Systems Protection Board (Board), Docket No. DC0831950389-I-1, sustaining the decision of the Office of Personnel Management (OPM) which held that Conner could not make a service credit redeposit under the Civil Service Retirement System (CSRS) because he was covered by the Federal Employees' Retirement System (FERS). We hold that the controlling statute, 5 U.S.C. § 8402(b), is not ambiguous, and that its clear language excludes Conner from FERS, notwithstanding a contrary regulation. We therefore reverse the Board's ruling.
2
* Conner began working as a Senate page at age fourteen on January 26, 1949, and continued, with a two-year absence to serve in the Army, through March 15, 1964. During that period, he accumulated approximately twelve years of total Senate service and was eligible to have retirement contributions deducted from his salary under CSRS. He did not, however, choose to have any contributions deducted from his paychecks. Conner started working for the Senate again on March 9, 1988. A few months later, he sought to pay the CSRS retirement contributions he had failed to make decades earlier. Since Conner's earlier employment, however, Congress had enacted FERS, 5 U.S.C. § 8401 et. seq. (1994), largely to supplant CSRS for new government employees.
3
OPM denied Conner's request to make contributions under CSRS because it found he was ineligible for exclusion from FERS pursuant to 5 U.S.C. § 8402(b) (1994), and thus was unable to enter CSRS. Conner resubmitted his application, which OPM again rejected. After Conner submitted a request for reconsideration, OPM published a notice of proposed rulemaking and issued final regulations regarding the relevant statute on December 14, 1994, to take effect on January 13, 1995. See 5 C.F.R. § 842.104 (1996). Under those regulations, OPM issued its final reconsideration decision on February 3, 1995, again rejecting Conner's application.
4
Conner filed an appeal to the Board from OPM's reconsideration decision. The Administrative Judge (AJ) issued his initial decision on July 3, 1995, affirming OPM's decision to deny Conner's request, stating: "I find that OPM's determination that [Conner] was not excluded from FERS under 5 U.S.C. § 8402(b) was correct, and that he was automatically covered by FERS upon his reemployment in 1988." Because the AJ found OPM's determination to be in accord with section 8402, he did not consider OPM's regulations. The Board denied Conner's petition for review, and the initial decision became final.
II
5
This case questions whether Conner is covered by FERS or CSRS. The question is answered by statutory interpretation, a matter of law which we review de novo. See Martin v. Secretary of Health & Human Servs., 62 F.3d 1403, 1405 (Fed.Cir.1995). In construing a statute that is administered by an agency, we must first ascertain whether Congress has spoken directly to the question at issue. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984). If Congress has expressed its meaning on the precise question using clear statutory language, we must give that intention effect as the controlling law. Id. at 843 n. 9, 104 S.Ct. at 2782 n. 9; Rosete v. Office of Personnel Management, 48 F.3d 514, 517 (Fed.Cir.1995). If the statute fails to resolve the matter or is ambiguous on the question, however, we must decide whether the agency has adopted a permissible construction of the statute. Chevron, 467 U.S. at 843, 104 S.Ct. at 2782.
6
The controlling statute in this case, 5 U.S.C. § 8402, defines FERS coverage by exclusion, and states in relevant part:
7
Federal Employees' Retirement System; exclusions
8
(a) The provisions of this chapter comprise the Federal Employees' Retirement System [FERS].
9
(b) The provisions of this chapter shall not apply with respect to--
10
(1)....
11
(2)(A) any employee or Member who has separated from the service after--
12
(i) having been subject to [CSRS], or subchapter I of chapter 8 of the Foreign Service Act of 1980 [FSA]; and
13
(ii) having completed at least 5 years of civilian service creditable under [CSRS], or at least 5 years of civilian service creditable under [FSA] (determined without regard to any deposit or redeposit requirement under either such subchapter, or any requirement that the individual become subject to either such subchapter after performing the service involved); or
14
(B) any employee having at least 5 years of civilian service performed before January 1, 1987, creditable under [CSRS] (determined without regard to any deposit or redeposit requirement under such subchapter, any requirement that the individual become subject to such subchapter after performing the service involved, or any requirement that the individual give notice in writing to the official by whom such individual is paid of such individual's desire to become subject to such subchapter);
15
except to the extent provided for under subsection (d) of this section or title III of [FERS] pursuant to an election under such title to become subject to this chapter.1
16
If Conner falls under one of the enumerated categories in subsections (b)(2)(A) or (b)(2)(B), he may opt out of FERS and seek coverage under CSRS. If he does not match one of the categories, he is forced to use FERS if he wants to contribute to a retirement plan, and may not make a deposit under CSRS.
17
The interpretation of section 8402 depends initially on the meaning to be given the phrase "subject to." The government asserts that "subject to" in section 8402 is synonymous with "covered by," and thus refers to whether the employee has paid any money into the CSRS. The government, citing other sections of the Civil Service Retirement Act (CSRA), notes that "subject to" is a term of art used by Congress when referring to a coverage requirement. The AJ reached the same conclusion by looking only at section 8402, and noting the section's reference to an individual's "desire to become subject to [CSRS]." We agree. The final portion of subsection (b)(2)(B) speaks of an individual giving notice "to the official by whom such individual is paid of such individual's desire to become subject to such subchapter." By stating that such notice is to be given to the person who provides paychecks, and who thus would be required to deduct retirement contributions if the employee chose to pay into a retirement plan, this provision indicates that "subject to" means to pay money into the retirement plan. In addition, language identical to that in subsection (b)(2)(B) quoted above has also appeared in previous versions of the CSRA, under which Conner served during his earlier Senate employment. See 5 U.S.C. § 8331(1)(C), (D) (1994). In Rosete v. Office of Personnel Management, 48 F.3d 514, 516 (Fed.Cir.1995), we noted that service "subject to" CSRS under section 8331 is the same as "covered service," i.e., service for which an employee must deposit part of his or her pay into the Civil Service Retirement and Disability Fund. Thus, to be "subject to" CSRS, an employee must have contributed some amount of money to the fund.
18
Based on this interpretation of "subject to," the government admits that each subsection is unambiguous if read alone. Subsection (b)(2)(A) covers employees who have been reemployed after having been separated from the service, who have completed five years of creditable service, and who have paid some amount of money into CSRS before separation. Subsection (b)(2)(B) covers employees who have completed five years of creditable service before January 1, 1987, whether or not they have paid anything into CSRS, and whether they have worked continuously for the government or have been separated from service.
19
The government argues, however, that when read together, the two subsections are ambiguous because they overlap. The government has, therefore, adopted a regulation that interprets subsection (b)(2)(A) to apply to employees rehired after December 31, 1986, after a break in service, and subsection (b)(2)(B) to apply to employees who have not had a break in service ending after December 31, 1986. In addition, under the government's interpretation of the statute, to be excluded under either subsection, the employee must have had at least five years of civilian service creditable under CSRS. See 5 C.F.R. § 842.104 (1996). For employees hired after a break in service ((b)(2)(A)), the creditable service must have occurred before the last separation from the service, and a part of the service must have been covered by CSRS, i.e., the employee must have paid something into CSRS. § 842.104(c). For employees with no break in service ((b)(2)(B)), there is no time requirement for the service, and the service need not have been covered by (i.e., "subject to") CSRS. § 842.104(d). Conner had a break in service, but he never paid into CSRS during his earlier service; therefore, the government argues under OPM's regulation, he cannot be excluded from FERS and thus may not make a redeposit to CSRS.
20
We hold that section 8402 is not ambiguous and should be read according to its clear language; thus, under Chevron, we need not consider OPM's regulation. The fact that subsections (b)(2)(A) and (b)(2)(B) can both exclude a particular employee from FERS does not demand a conclusion that the statute is ambiguous. It is true that there is some overlap between the two subsections, i.e., both cover an employee who accumulated five years of creditable service before January 1, 1987, who has been subject to CSRS, and who has been separated from the service. This is not a situation, however, where the overlap is so significant as to render either subsection superfluous. Here, each subsection also has its own distinct area of coverage. Only subsection (b)(2)(A) covers employees who did not accumulate their five years of creditable service before January 1, 1987. In contrast, only subsection (b)(2)(B) covers employees who have not been subject to CSRS or have not been separated from service.
21
Furthermore, this is not a situation in which the two subsections are opposed to each other. Rather, they both point toward exclusion from FERS. An employee who falls under both subsections is not pushed one way by (b)(2)(A) and the other way by (b)(2)(B). He knows precisely his situation--he is doubly excluded from FERS. Under such circumstances, the limited overlap between the two subsections does not by itself make the statute ambiguous. See Natural Resources Defense Council v. Reilly, 983 F.2d 259, 272 (D.C.Cir.1993) (noting in one instance that the overlap between two statutory sections "demonstrates not an ambiguity in the statute, but congressional prudence in providing for foreseeable administrative delays"); United States v. Pimental, 979 F.2d 282, 285 (2d Cir.1992) (noting that limited overlap between two statutory subsections does not justify departing from the unambiguous statutory language by reading into one subsection limitations not included by Congress).
22
When read according to its clear language, section 8402 requires employees to have a tie or anchor to CSRS. Subsection (b)(2)(A) requires employees who have returned to government service after an absence to have had five years of creditable service and to have staked a claim in the system by paying some amount of money into CSRS. Employees who have not staked a claim by paying into CSRS, in contrast, must have accumulated their five years of creditable time before January 1, 1987, to be excluded from FERS under subsection (b)(2)(B).
23
Conner has such a tie to CSRS. Under the clear language of the statute, Conner may choose to be excluded from FERS under subsection (b)(2)(B). It is undisputed that he has more than five years of creditable service that was performed before January 1, 1987. Subsection (b)(2)(B) does not contain any additional requirements. Because Conner meets all requirements for exclusion from FERS under subsection (b)(2)(B) as correctly interpreted, the decision of the Board is
24
REVERSED.
1
Subsection (d) provides an exception for certain individuals under the FSA. Title III covers elections to be subject to FERS made by individuals who were reemployed by the government and who are subject to CSRS. Neither provision is relevant to the interpretation issue at bar | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/733367/ | 104 F.3d 1371
323 U.S.App.D.C. 23, 46 Fed. R. Evid. Serv. 294,Prod.Liab.Rep. (CCH) P 14,859
Donald RAYNOR, Sr., et al., Appellantsv.MERRELL PHARMACEUTICALS INC., Appellee.
No. 95-7241.
United States Court of Appeals,District of Columbia Circuit.
Argued Dec. 3, 1996.Decided Jan. 21, 1997.
[323 U.S.App.D.C. 24] Appeal from the United States District Court for the District of Columbia (No. 83-cv03506).
Kenneth J. Chesebro, argued the cause for appellant. With him on the brief was Barry J. Nace, Washington, DC.
Walter A. Smith, Jr., Washington, DC, argued the cause for appellee. With him on the brief was Stephen G. Vaskovz.
Before: SILBERMAN, WILLIAMS and GINSBURG, Circuit Judges.
Opinion for the Court filed by Circuit Judge WILLIAMS.
STEPHEN F. WILLIAMS, Circuit Judge:
1
This appeal arises out of a personal injury claim filed by Donald Raynor, Jr. and his parents against Merrell Pharmaceuticals, Inc., alleging that Merrell's anti-nausea drug, [323 U.S.App.D.C. 25] Bendectin, caused Raynor's birth defects. After a jury awarded $300,000 in compensatory damages, Merrell filed motions for judgment notwithstanding the verdict ("JNOV") and for a new trial. The district judge granted the former based upon our decision inRichardson v. Richardson-Merrell, Inc., 857 F.2d 823 (D.C.Cir.1988). On the first appeal of the judge's ruling, this court remanded to the district court for further consideration in light of the Supreme Court's opinion in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). Griffin v. Richardson-Merrell, Inc., No. 93-7109, 1993 WL 483935 (D.C.Cir. Nov.12, 1993) (per curiam). After analyzing the admissibility of plaintiffs' evidence using the Daubert factors, the district court confirmed its original judgment.
Rule 50
2
Plaintiffs argue that JNOV under Federal Rule of Civil Procedure 50 (currently titled a "Judgment as a Matter of Law") is an improper remedy for evidentiary errors at trial. Rather, according to plaintiffs, the only appropriate remedy for errors in the admission of evidence is a motion for a new trial under Rule 59(a). On plaintiffs' view JNOV is reserved for cases where the evidence presented was of insufficient weight to raise an issue for the jury.
3
Although plaintiffs concede that they failed to raise this issue before the district court, they argue that our decision in Richardson, 857 F.2d at 823, made raising it futile. If this were the case, plaintiffs might conceivably benefit from the "supervening-decision doctrine," which allows us to consider issues not raised at trial where "the law was so well-settled at the time of trial that any attempt to challenge it would have appeared pointless," but where the law had changed in the appellant's favor between trial court's decision and appeal. United States v. Washington, 12 F.3d 1128, 1138-39 (D.C.Cir.1994).
4
We assume arguendo that two post-Richardson circuit court decisions adopting the view that evidence may not be excluded on a JNOV motion, Douglass v. Eaton Corp., 956 F.2d 1339, 1343-44 (6th Cir.1992); Jackson v. Pleasant Grove Health Care Center, 980 F.2d 692, 695-96 (11th Cir.1993), could be "supervening decisions" of sufficient magnitude to trigger the doctrine of that name.1 But even with that assumption, Richardson fails to establish the sort of circuit rule required by Washington, i.e., one that would render "pointless" an objection to resting JNOV on an exclusion of evidence previously admitted. In fact, the Richardson court simply did not address the issue.
5
To be sure, the Richardson court upheld the grant of a JNOV motion in a case factually similar to this one, and the opinion, although it discusses the evidence's sufficiency, clearly rests on its inadmissibility. Richardson, 857 F.2d at 825 n. 9. As plaintiffs acknowledge, however, the issue of whether JNOV can be granted to redress errors of admissibility "was neither briefed ... nor discussed, in Richardson." Rep. Br. at 3, quoting Appellants' Memorandum in Opposition to Motion for Summary Affirmance. Although the Richardson court upheld the JNOV motion, it neither considered, nor had implicitly to resolve, the question of whether such a motion was appropriate for admissibility errors. It therefore provides no holding on this question, and cannot justify plaintiffs' failure to object at trial. Thus they have waived their Rule 50 argument.
6
Of course, if Richardson did create binding law establishing the propriety of JNOV for admissibility errors, this panel would be bound by that precedent, despite the two intervening circuit court decisions that back plaintiffs' position. Moreover, the rule rejecting [323 U.S.App.D.C. 26] resolution of an evidentiary issue on a motion for JNOV rests on imputed reliance; if the evidence had been excluded in the course of trial, the offering party might have offered a substitute. See Jackson, 980 F.2d at 696. Plaintiffs' failure to object strongly suggests the absence of any such reliance.
Daubert
7
Plaintiffs argue that the district court inappropriately deemed their expert testimony inadmissible. We review the district court's judgment for abuse of discretion. Joy v. Bell Helicopter Textron, Inc., 999 F.2d 549, 567 (D.C.Cir.1993) (district court has broad discretion regarding the admission or exclusion of expert testimony under Rule 702); see also Lust v. Merrell Dow Pharmaceuticals, Inc., 89 F.3d 594, 596-97 (9th Cir.1996) (abuse of discretion review applies to F.R.E. 702 ruling); Rosen v. Ciba-Geigy Corp., 78 F.3d 316, 318 (7th Cir.1996) (same).
8
In Richardson this court held that similar evidence was inadmissible:
9
These three types of studies then--chemical, in vitro, and in vivo--cannot furnish a sufficient foundation for a conclusion that Bendectin caused the birth defects at issue in this case. Studies of this kind, singly or in combination, are not capable of proving causation in human beings in the face of the overwhelming body of contradictory epidemiological evidence.
10
857 F.2d at 830. Richardson was decided under Federal Rule of Evidence 703, which provides an exception to the hearsay rule for the facts and data underlying expert testimony:
11
If of a type reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject, the facts or data need not be admissible in evidence.
12
In reliance on Richardson, the district court initially found plaintiffs' evidence inadmissible under Rule 703. If we were to consider this case under Rule 703, nothing would compel us to deviate from our holding in Richardson. Plaintiffs make much of Ambrosini v. Labarraque, 966 F.2d 1464, 1468 (D.C.Cir.1992) ("Ambrosini I"), in which we distinguished Richardson in part on the ground that the expert in that case had conceded that the data was not the type upon which an expert would reasonably rely. See also Ambrosini v. Labarraque, 101 F.3d 129, 138 (D.C.Cir.1996) (citing expert's concession as one distinguishing factor) ("Ambrosini II"). But the more critical distinction in Ambrosini was that whereas Bendectin had "been extensively studied and a wealth of published epidemiological data ha[d] been amassed, none of which has concluded that the drug is teratogenic," id. at 138 (quoting Richardson), the drug in question in Ambrosini, Depo-Provera, had not been the subject of such a wealth of studies. Plaintiffs ask us to distinguish Richardson and apply the two Ambrosini cases, pointing to the assertions of their expert (Dr. Thoman) that, contrary to the scientists whose work this court found dispositive in Richardson, see 857 F.2d at 831 (noting that no published work found statistically significant association between Bendectin and birth defects), it was reasonable to form an opinion as to causation without data statistically significant at the 95% confidence level. But nothing in the Ambrosini cases suggests that one expert's conclusory assertion of some lower threshold of statistical significance could undercut the force of the Bendectin studies found controlling in Richardson. See In re Paoli Railroad Yd. PCB Litigation, 35 F.3d 717, 748 (3d Cir.1994) (judge must make independent inquiry regarding reasonableness of reliance).
13
Plaintiffs argue, however, that our Rule 703 holding has no force in light of the Supreme Court's decision in Daubert. While Daubert creates no obvious bar to applying Rule 703 as we have done in the past, it leaves obscure the relation between that rule and the rule at issue in Daubert, Rule 702, which states that an expert may testify if the "scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue." The Daubert Court found Rule 702 the "primary locus" of the district court's obligation to screen scientific evidence presented by expert testimony, 509 U.S. at 589, 113 S.Ct. at 2794-95, but also instructed the judge to "be mindful of other applicable rules" such as Rule 703, id. at 595, 113 S.Ct. at 2797. Courts have begun to explore the [323 U.S.App.D.C. 27] relationship betweenRules 702 and 703 following Daubert. See, e.g., In re Paoli, 35 F.3d at 748 (holding that Rule 703 is the equivalent to Rule 702's reliability requirement). We need not do so, however, because we find that plaintiffs' evidence is inadmissible under Rule 702.
14
The Court in Daubert directed federal courts first to determine whether the proffered expert's evidence is "scientific knowledge," which it said required consideration of the following: (1) whether the theory or technique can be (or has been) tested; (2) whether the theory or technique has been subject to peer review and publication; (3) the known or potential rate of error of the methodology; and (4) the general acceptance of the methodology. 509 U.S. at 593-95, 113 S.Ct. at 2796-98. In addition, the court must conclude that the expert testimony will "assist the trier of fact to understand or determine a fact in issue." Id. at 592, 113 S.Ct. at 2796.
15
Plaintiffs contend that the district court erroneously applied the principles of Daubert by focusing on the conclusions of their experts rather than on the methodology. They are correct that the Supreme Court stated that the inquiry should "focus ... solely on principles and methodology, not on the conclusions that they generate." Id. at 595, 113 S.Ct. at 2797. The line is not all that clear, as propositions may be formulated as conclusions or methodologies with comparatively minor linguistic adjustment. Here, however, the primary question can properly be formulated as whether it is methodologically sound to draw an inference that a drug causes human birth defects from chemical structure, in vivo animal studies, and in vitro studies, when epidemiological evidence is to the contrary. The secondary question is whether one expert's "differential diagnosis," which apparently seeks to determine cause by process of elimination, is methodologically sound in this context.
16
None of the plaintiffs' experts had published their conclusions regarding Bendectin, nor had their work been subject to peer review (factor # 2). See Daubert v. Merrell Dow Pharmaceuticals, Inc., 43 F.3d 1311, 1317 (9th Cir.1995) (noting that this factor may be particularly important where conclusions have been drawn solely for purpose of litigation: "a scientist's normal workplace is the lab or the field, not the courtroom or the lawyer's office"); cf. Ambrosini II, 101 F.3d at 139 (noting concern about risk of "gun for hire" testimony).
17
The experts' methodology also suffers from "testing" problems (factor # 1). The only way to test whether data from non-human studies can be extrapolated to humans would be to conduct human experiments or to use epidemiological data. In fact, the experts' conclusions have been tested by the latter method and have been found wanting. We do not believe that when the Daubert opinion directed courts to consider whether the "theory or technique ... can be (and has been) tested," 509 U.S. at 593, 113 S.Ct. at 2796, it meant that a "theory or technique" that has been contradicted is on that account more likely to qualify as "scientific knowledge." Rather the reverse.
18
Similarly, where sound epidemiological studies produce opposite results from nonepidemiological ones, the rate of error of the latter is likely to be quite high (factor # 3). Of course epidemiological evidence does not always trump the nonepidemiological. Here, however, plaintiffs make no serious argument that the epidemiological sample sizes have been too small to detect the relationship between Bendectin and birth defects, a relationship that has been studied for hundreds of thousands of subjects.
19
In addition to the in vivo, in vitro, and chemical data, plaintiffs put forth an expert, Dr. Thoman, who conducted a methodology called "differential diagnosis," an approach presumably designed to eliminate other possible causes of Raynor's birth defect. Based upon this analysis, Dr. Thoman points to Bendectin as the cause. He relied upon family history, parental background, genetic history, physical examination, pregnancy history, and toxicology. Nonetheless, Dr. Thoman provided "no tested or testable theory to explain how, from this limited information, he was able to eliminate all other potential [323 U.S.App.D.C. 28] causes of birth defects."2 Daubert, 43 F.3d at 1319. Although we found testimony ruling out alternative causes admissible in Ambrosini II, 101 F.3d at 139-40, that testimony on specific causation had legitimacy only as follow-up to admissible evidence that the drug in question could in general cause birth defects. That first step, establishing a link between Bendectin and human birth defects (general causation), is missing here. In addition, while the Ambrosini expert evidently was able to show the implausibility of all but a few other possible causes, see id. at 140, Dr. Thoman, whose methodology remains obscure, failed to offer any comprehensive understanding of the etiology of birth defects.
20
Nor can plaintiffs' methodology be said to enjoy "general acceptance" (factor # 4). Here, we reiterate our holding in Richardson: "Studies of this kind, singly or in combination, are not capable of proving causation in human beings in the face of the overwhelming body of contradictory epidemiological evidence." 857 F.2d at 830; see also Ealy v. Richardson-Merrell, Inc., 897 F.2d 1159, 1161-63 (D.C.Cir.1990); cf. Ambrosini II, 101 F.3d at 138 (distinguishing Richardson based on lack of overwhelming body of contradictory epidemiological evidence). Plaintiffs have provided no convincing argument that the medical profession disagrees. Thus we find that the district court correctly applied the Daubert test.
21
Finally, we note that even if the expert testimony were admissible under Daubert, it is unlikely that a jury could reasonably find it sufficient to show causation. The question of sufficiency would be a substantive rule under Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and therefore governed by District of Columbia law.3 Our past Bendectin decisions have not classified plaintiffs' evidence similar to that presented here as insufficient as a matter of law, having noted the District of Columbia's decision in Oxendine v. Merrell Dow Pharmaceuticals, Inc., 506 A.2d 1100 (D.C.1986) ("Oxendine I"), which reinstated a jury verdict on the ground that the totality of evidence was enough for the jury to find a causal link between Bendectin and birth defects. See Richardson, 857 F.2d at 825 n. 9; Ealy, 897 F.2d at 1163. In Ealy, however, we said that Oxendine I was not likely to be "directly exportable" to cases taking into account the additional epidemiological evidence available since that decision. Id. We believe this conclusion even more true today than in 1990 when we originally suggested it. On the most recent remand in the Oxendine litigation, Oxendine v. Merrell Dow Pharmaceuticals Inc., No. 82-1245, 1996 WL 680992 (D.C. Super. Oct. 24, 1996), the trial court (although ultimately holding for defendants on admissibility rather than sufficiency grounds) provided an 82-page survey of Bendectin research, and concluded that Merrell had "established, by clear and convincing evidence, that post-1983 evidence makes it clear that Bendectin is not a human teratogen and that 'all responsible scientific thought' agrees with this conclusion." Id. at * 33. In addition, in Bendectin cases after Oxendine I several circuits have held that, as a matter of law, plaintiffs' expert testimony was insufficient to prove causation. See, e.g., Brock v. Merrell Dow Pharmaceuticals, Inc., 874 F.2d 307, 311-15 (5th Cir.1989) (lack of epidemiological proof fatal, particularly where only other evidence is animal studies); Lynch v. Merrell-Nat'l Labs., 830 F.2d 1190, 1195-97 (1st Cir.1987) (analysis of chemical structure and effect on animals incapable of proving causation in human beings in the absence of any confirmatory epidemiological data); but see DeLuca v. Merrell Dow Pharmaceuticals, Inc., 911 F.2d 941 (3rd Cir.1990) (reversing summary judgment in favor of [323 U.S.App.D.C. 29] pharmaceutical company and remanding for analysis of evidence by district court under Rule 702 without commenting on the sufficiency of that evidence).
22
Because the district court was within its discretion in finding the plaintiffs' expert evidence inadmissible under Rule 702, the judgment is
23
Affirmed.
1
Plaintiffs attempt to have their cake and eat it too. On the one hand, they claim that the novelty of decisions limiting the district court's use of the JNOV justifies their failure to object. On the other, in their attempt to convince us to adopt the rule barring the use of JNOV for admissibility errors, they claim that the restrictive rule belongs to "[a] virtually unbroken string of federal appellate court decisions" since 1940
We note that in order for a decision to qualify as supervening it must be decided after plaintiff's chance to raise the issue in the district court. In fact the district court granted the motion for a JNOV on April 13, 1993, well after both Douglass and Jackson, the later of which was decided January 4, 1993.
2
Of course, an expert testifying simply that Bendectin was more likely than not the cause of the birth defects would not have to completely "eliminate" every other possibility, no matter how small. Dr. Thoman's purported elimination of alternative explanations was, however, exceedingly vague, amounting to little more than a reference to "family history," examination of the child, "any laboratory tests," and "genetic studies." App. 47
3
Plaintiffs argue that the appropriate substantive law is that of the District of Columbia, a premise that appears undisputed by defendants, at least so far as the record before us demonstrates. See Raynor v. Richardson-Merrell, Inc., No. 83-3506, 1993 WL 484200, * 3 n.3 (D.D.C.1993). Thus, we proceed on this assumption | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1572679/ | 323 F. Supp. 617 (1971)
Herma BARNES, Plaintiff,
v.
LERNER SHOPS OF TEXAS, INC., Defendant.
Civ. A. No. 68-H-735.
United States District Court, S. D. Texas, Houston Division.
March 8, 1971.
*618 James R. Watson, Jr., Dixie, Wolf & Hall, Houston, Tex., for plaintiff.
James M. Neel, Richard R. Brann, Baker & Botts, Houston, Tex., for defendant.
MEMORANDUM OPINION
BUE, District Judge.
This case was tried to the Court. Plaintiff, a Negro, instigated this action for reinstatement, back pay, and injunctive relief pursuant to the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e-2(a), 3(a), 5(e)-(g). The amended complaint alleges that defendant, Lerner Shops of Texas: (1) discharged the plaintiff solely because of her race and because she opposed defendant's unlawful employment practices; (2) discriminated against her during her employment with respect to the conditions of employment; and (3) discriminated against all of defendant's Negro employees with respect to their compensation, terms and conditions of employment, and opportunities for promotions.
Defendant contends that plaintiff was discharged for reasons other than her race and that it has not otherwise discriminated against its Negro employees.
Lerner Shops of Texas, Inc., is a subsidiary of Lerner, Inc., which has its main offices in New York City and operates retail stores throughout the United States. In the Houston area defendant had four stores in operation at all times material to this lawsuit. Each store's managerial staff included a store manager, two or three sales department managers, a credit manager and a display manager.
The plaintiff was initially employed by Lerner stores in March of 1952 as a "wrapper" in its Dayton, Ohio store. Shortly thereafter, she resigned that position, but was reemployed as a "presser" in August of 1952 at the Downtown store in Houston, Texas. She again resigned in May of 1953, but was once more reemployed two weeks later. It is not clear whether she worked for Lerner stores the remainder of 1953 and in 1954. However, it is clear that she was employed from November, 1954 to August, 1955, as a maid in the Downtown store's display department. In March of 1963 she was employed for approximately three weeks as a maid in Houston's Northline store. Finally, in August of 1965 she was employed as display manager at the Northline store. On May 13, 1966, plaintiff left a note for the store manager before departing on her scheduled vacation. Although subject to various interpretations, that note indicated that plaintiff was dissatisfied with her job, that she felt she was receiving less pay than other managers, that she was probably going to work for another retail firm during her vacation, and, finally, that she felt other managers had received an employment privilege that she had not.[1] The *619 note makes no charge or reference to race or racial discrimination. The store manager, although unsure at first as to the note's proper interpretation, responded by sending a note to plaintiff accepting her resignation. He then placed an advertisement in a local newspaper, and, shortly thereafter, hired a white retired Lerner's employee, a Mrs. Stephens, as a replacement. The defendant concedes that these events are tantamount to a formal discharge of plaintiff.
After her discharge, plaintiff on July 16, 1966, filed a charge with the Equal Employment Opportunity Commission (EEOC) alleging racial discrimination on the basis that (1) she was paid less than white display managers; and (2) that she was discharged solely because defendant desired to replace her with a person of the white race. After an investigation the EEOC concluded that there was no disparity in wages and that she was not replaced for discriminatory reasons. However, upon a request for reconsideration based upon new evidence presented by the plaintiff, the EEOC reversed its earlier position and ruled that reasonable cause did exist to believe that defendant had violated the Civil Rights Act of 1964. That new evidence included plaintiff's allegations that (1) other display managers worked 5 days and were paid for 6 days work;[2] (2) she was unjustifiably harassed by her fellow employees and by a store detective when the 6 days pay for 5 days worked privilege was discontinued after she also attempted to participate in its benefits; (3) her note to the store manager could not be interpreted as a resignation; (4) a Negro was given the display manager's job following her departure only after defendant learned of the charge filed before the EEOC; and (5) plaintiff had also been unlawfully discharged from defendant's store in 1963. After conciliative efforts failed, plaintiff filed this action.
The defendant contends that the only issues before the Court are (1) whether plaintiff was unlawfully discharged by defendant; and (2) whether defendant discriminated against her by paying her a salary that was less than that of the white display managers. Those were the only allegations presented in the plaintiff's initial charge to the EEOC. The plaintiff contends that, although not expressly made a class action under Rule 23 of the Federal Rules of Civil Procedure, this Court should grant relief to all Negro employees of the defendant. This position under certain circumstances finds legal support in the language of Jenkins v. United Gas Corporation, 400 F.2d 28, 33 (5th Cir. 1968), wherein it is stated that "[w]hether in name or not, the suit is perforce a sort of class action for fellow employees similarly situated." Further support comes from Oatis v. Crown Zellerbach Corporation, 398 F.2d 496 (5th Cir. 1968), wherein a class action was held to be permissible, although only one of its members had presented his grievance to the EEOC.
More analogous to this situation, however, is Sanchez v. Standard Brands, Inc., 431 F.2d 455 (5th Cir. 1970). In the Sanchez decision the permissible scope of a complaint was stated to be limited "to the scope of the EEOC investigation which can reasonably be expected *620 to grow out of the charge of discrimination." 431 F.2d at 466. It is this Court's conclusion that the above standard requires a reasonable relevancy between the EEOC investigation and the scope of the civil action. Here, the scope must be limited to issues of whether plaintiff was discriminatorily discharged and whether plaintiff or other Negro employees received less pay than white employees for comparable work. Of course, defendant's other forms of unlawful discrimination could be relevant to this cause, since defendant's "pattern of action" is material to a determination of whether specific unlawful employment procedures were practiced. See Blue Bell Boots, Inc. v. Equal Employment Opportunity Commission, 418 F.2d 355 (6th Cir. 1969).
After hearing all of the evidence, it is obvious to this Court that the basic issues for decision are factual and not legal. As a result, the burden of proof is an important determinant. The defendant contends that plaintiff must prove by a preponderance of the evidence that a violation of the Act occurred. On the other hand, plaintiff contends that its burden is a lesser one. It is this Court's opinion that the defendant's position is the more persuasive and that it is supported by substantial authority. See Dewey v. Reynolds Metals Co., 429 F.2d 324, 328 (6th Cir. 1970). See, e. g., United States v. Jacksonville Terminal Co., 316 F. Supp. 567, 615-616 (M.D.Fla. 1970); Green v. McDonnell-Douglas Corp., 318 F. Supp. 846, 850 (E.D.Mo. 1970). See generally, McBeth v. Board of Education, 300 F. Supp. 1270, 1275 (E.D.Ark.1969). The preponderance of the evidence test is therefore applied in this case, although as a practical matter the decision of the Court would be precisely the same if a lesser test had been applied.
Prior to the Court's assessment of the various contentions relating to discrimination presented by the parties, it must be recognized that there are numerous factual areas in this cause in which the evidence is in sharp conflict, thereby obligating the Court to assess credibility of the witnesses in order to determine what version of an incident is more believable. This the Court has done by carefully reviewing the various claims leveled by the parties.
At the trial the plaintiff relied heavily, in demonstrating discrimination, upon the incident wherein she allegedly signed in on the employee time sheet on her day off so as to qualify for an extra day's pay, as the other managers allegedly did. When the privilege was thereafter discontinued as to all managers, her professed efforts to achieve equal treatment created animosity towards her, and resulting harassment, on the part of the white employees. Apparently, the plaintiff is contending that the store manager discontinued this so-called privilege, rather than permit a member of a minority race to participate in its benefits. However, contrary to the plaintiff's contention, the evidence clearly reflects that as a consequence of the Easter selling season the sales managers had worked approximately 16 to 24 overtime hours. Their employment contracts provided that they were to receive half time for all overtime hours worked.[3] They preferred to take time off, rather than to receive this small rate of overtime pay. The store manager, at their request, permitted these sales managers to adopt a practice whereby they received an hour off with pay for every hour they had worked overtime during a "rush" season. As a result, these sales managers signed in on the time sheet and were paid for 6 days work during a period of 2 or 3 weeks after Easter, but actually worked only 5 days per week. The practice *621 was terminated when the time off owed by the store to these employees under this arrangement expired. Plaintiff's display work during "rush" periods, on the other hand, did not fluctuate to the same extent as that of the sales managers. As a result, she was rarely called upon to work overtime. Therefore, the alleged privilege of which the plaintiff complains never applied to her.
As to the harassment generated by plaintiff's attempt to take advantage of the above stated employment privilege, primary reliance is placed upon two incidents, one involving a store detective and the other a sales manager. However, the testimony preponderates in favor of the fact that the alleged harassment of the plaintiff in both incidents is unfounded. More importantly, these incidents occurred prior to her professed attempt to receive the benefits of the "signing-in" privilege extended to the sales managers.[4]
Plaintiff also presented evidence that she was paid less than Mrs. Stephens, the white display manager who replaced her. Although Mrs. Stephens did receive a higher salary, she had 15 years of prior experience as opposed to plaintiff's 5 years. Mrs. Stephens was also experienced in the sales operations of the store and contracted to serve as relief sales manager in addition to her normal display work. However, because of her age, she could not adequately do the job. She was therefore replaced by Mrs. Johnson, a Negro. Although Mrs. Johnson was paid less than Mrs. Stephens, it was again on the basis of experience, as she had essentially no experience as a display manager.[5] Additionally, it should be noted that the testimony showed that the display managers in all of defendant's Houston area stores are of the Negro race and that two of them received a higher wage rate than Mrs. Stephens.[6]
Evidence was also presented by the plaintiff to show that she was discharged in 1963 for racial reasons. However, the defendant introduced documentary evidence as well as testimony at the trial to show that plaintiff was hired only temporarily, as a maid, in 1963 in order to facilitate the readying of the Northline store for its initial opening.[7]
The plaintiff presented unpersuasive evidence that defendant's stores have a policy of discrimination or that any Negroes have applied for managerial positions and have been turned away because of racial reasons. The testimony of plaintiff's witnesses was to the effect that they were not aware of many Negro persons holding supervisory positions in the Lerner organization. The defendant, on the other hand, presented credible testimony that there is no such policy of exclusion, and, more importantly, that there are several members of the minority *622 races holding sales managerial positions.[8]
The defendant presented substantial evidence and testimony that (1) the store manager had received a letter from a "charge" customer which set out an incident in which plaintiff had screamed at her for physically inspecting merchandise being prepared for display; (2) the store manager was forced to have other employees remove merchandise out of the display window at the request of customers when the plaintiff refused to do so; (3) the plaintiff had been reprimanded several times for laxity in commencing her display duties and because of her poor attitude in carrying out those duties; (4) plaintiff was constantly getting into arguments with her fellow employees and creating undesirable scenes as a result thereof;[9] (5) plaintiff refused to take orders or cooperate with the sales manager; and (6) plaintiff was discharged from another retail store in 1968 because she could not get along with her fellow employees and because she created a dramatic scene in front of customers.
In weighing the evidence in this matter, it is important to note that an employer may discharge an employee for any reason except discrimination or because of practices made unlawful under Title VII. The testimony and evidence before the Court fails to establish by its greater weight, or preponderance, that plaintiff was discharged for racial prejudice. It is apparent from the record that defendant's reasons for discharging plaintiff were motivated solely and simply by the plaintiff's inability to get along with her fellow employees and because of the lax attitude which she demonstrated in carrying out her duties. The burden of proving reasons apart from these was on the plaintiff. This she failed to do. The evidence offered by the plaintiff, particularly her own lack of candor and contradictory testimony, reveals that she misconstrued routine store procedures and her random conflicts with fellow employees and, as a result, formulated the alleged discrimination without justifiable facts in support thereof. This is not a case that turns on the issue of race; instead, it turns on the personalities of people and their ability to work together. As a result, the plaintiff's evidence in this case falls far short of its aim.
The Court finds and concludes by the evidence before it that:
(a) Plaintiff has not shown that defendant was motivated by racial prejudice in contradiction of 42 U.S.C. § 2000e-2(a) or 3(a), the Civil Rights Act of 1964;
(b) Defendant's discharge of plaintiff and refusal to reemploy her were based on plaintiff's unsatisfactory conduct as an employee which justified the discharge;
(c) Plaintiff has not shown that she was discriminated against by her salary or privileges of employment;
(d) Plaintiff has not shown that other Negro employees were discriminated against by their salary or privileges of employment;
(e) Plaintiff has not shown that defendant maintained a policy or practice of excluding persons of the minority races from managerial positions.
The foregoing constitutes the Court's Findings of Fact and Conclusions of Law. This is and constitutes a Final Judgment herein.
The Clerk will notify counsel.
NOTES
[1] May 13, 1966
Mr. Deese,
Dear Sir,
You have been a wonderful boss, and I am going on vacation. I tried to please you, to be sure that every window was in very good shape.
Now, this note, is a "food for thought."
1. I am your hardest working Manager, ask any one in Northline, for I have some offers.
2. Some people do display because they like it, I do, other for the pay.
3. Sir, Lerners, is too poor a firm, to pay a living salary.
I have been here 10 months, I haven't had a day off with pay, others have, I am your seller, Windows sell, I have to do my best.
Sir, I have a nice offer, and I want to make it plain, the vacation will be spent, working for this firm, for I can't really believe their offer, I may or may not.
I am not quitting, I owe you, on my charge account, I shall return, and Sir, I slaved to open this store, why couldn't I be reinstated?
I know other who have, so it's not new.
I know both of your Display Managers salary, or what I have been told, look at their work and if you think I don't have it, sorry, others do, (smile).
Mr. Deese, I have been told your other managers salary here, yes, 6 day, of standing around, while I slave in those hot windows to sell for them.
By the way, what stopped there off day with pay, mine never was?
I say again, I shall return, I want $100.00 5 days remember, I am also a presser, a wonderful salelady, I have the experience. If your answer is No don't fire me. (smile) Sincerely
Barnes
[2] This clearly is a misstatement. Plaintiff undoubtedly was referring to the sales managers of the Northline store and not "other display managers."
[3] Their employment contracts provided for compensation on the basis of a variable workweek or coefficient table wage plan. As a result, they received a stated salary per week for all hours worked. However, for all hours worked in excess of forty per week they received an additional half time their regular hourly rate. See Stipulation H, Pretrial Order (January 4, 1971).
[4] Compare the totality of plaintiff's proof that was offered to establish that she was harassed or discharged because she opposed a discriminatory employment practice with that presented in Pettway v. American Cast Iron Pipe Co., 411 F.2d 998 (5th Cir. 1969).
[5] Plaintiff received a salary of $60 a week for a 40 hour week. She also received time and one-half of her regular wage rate for all hours worked in excess of 40 hours. Mrs. Stephens contracted to work a 48 hour week for which she received $75.81. She received one-half time of her regular rate for all overtime hours worked. Mrs. Johnson, received a salary of $56 a week for a 40 hour week. She received time and one-half her regular wage rate for all hours worked in excess of 40 hours.
[6] Ruth Cox, at the Gulfgate store, received $70 per week for 40 hours, with time and one-half her regular wage rate for all overtime work; P. Guillory, at the Pasadena store, received $56 per week with time and one-half her regular wage rate for all overtime work; E. Hemphill, at the Downtown store, received $79.30 per week on a 48 hour contract basis.
[7] The employment application submitted by plaintiff when she applied for the display manager position in 1965 reflects that the reason she had left Lerners in 1963 was because she had been hired temporarily "to help out during the opening" of the Northline store.
[8] Compare the nature and scope of plaintiff's evidence to establish discrimination by statistical implication with the detailed employment statistics presented in Parham v. Southwestern Bell Telephone Co., 433 F.2d 421 (8th Cir. 1970).
[9] After one such incident the store manager gave plaintiff a book entitled "How to Win Friends and Influence People" and requested that she read it to help solve her compatibility problems. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1572700/ | 323 F. Supp. 853 (1971)
In the Matter of MID STATE WOOD PRODUCTS COMPANY, Bankrupt.
No. 69 B 184.
United States District Court, N. D. Illinois, W. D.
February 19, 1971.
*854 Kenneth F. Ritz, Alford R. Penniman, Williams, McCarthy, Kinley & Rudy, Rockford, Ill., for the bankrupt.
MEMORANDUM AND ORDER
CAMPBELL, Senior District Judge.
This matter comes before the Court on petitions filed by Daniel D. Doyle, Trustee of the Bankrupt Estate, ("Trustee"), Breece Plywood, Inc., ("Breece") and National Acceptance Company of America, ("NAC") to review an order entered by the Referee in Bankruptcy establishing the order of priority to an account or accounts receivable owed to the Bankrupt in which each of the petitioners claimed an interest.
The facts are stated in the briefs submitted by the parties and the Referee's Certificate As To The Record, which includes 35 enumerated documents, including the Bankrupt's petition and schedules and the pleadings. The Bankrupt was engaged in the manufacture of wooden cabinets in the city of Rockford, Illinois. Among the Bankrupt's customers was Ampex Corporation to which it had sold and delivered a quantity of cabinets for which Ampex was indebted at the date of bankruptcy in an amount claimed to be the sum of $47,265.22.
The Referee's order provides:
That from the proceeds realized from Ampex Corporation there shall be paid to the following parties the stated amounts in the order of priority listed:
1. To BREECE PLYWOOD, INC., the sum of $14,265.05 prior to the two parties hereinafter named.
2. To NATIONAL ACCEPTANCE COMPANY OF AMERICA, the sum of $13,745.65 prior to the Trustee hereinafter named.
*855 3. To DANIEL D. DOYLE, Trustee the sum of $19,254.52.
All three parties have petitioned for review of the order.
A stipulation between Breece, the Trustee and NAC as to certain of the facts was filed on July 30, 1969. The Referee made certain findings which are dated September 15, 1969. Petitions for rehearing were filed by all three parties and on June 19, 1970 the Referee entered his Findings on Reconsideration.
In essence, the respective positions taken by the three claimants are as follows:
BREECE
In December, 1966 the Bankrupt entered into a security agreement with Breece to secure payment for plywood to be sold and delivered by Breece to the Bankrupt which would use it in the construction of cabinets for sale to the Bankrupt's customers. In October, 1968 the Bankrupt owed Breece $49,555.99 for plywood delivered up to that time. A new procedure was thereupon adopted whereby the Bankrupt upon receiving an order from its customer Ampex would immediately assign a portion of the order to Breece. Breece would then ship the plywood to the Bankrupt to construct the cabinets ordered by Ampex and the Bankrupt would notify Ampex to make payment at Breece's bank in New Albany (Union National Bank of New Albany, Indiana). The bank would deduct the amount assigned to Breece and forward the balance to the Bankrupt.
At the date of bankruptcy Ampex owed the Bankrupt $47,265.22 on nine orders for cabinets which the Bankrupt had constructed from plywood furnished by Breece. Breece filed an application to reclaim the nine accounts receivable, but the Referee held that Breece was entitled only to $14,265.05 and that the remaining $33,000.17 was an asset of the Bankrupt Estate, subject only to the lien of NAC (hereinafter discussed). Breece requests that it be found to have a first lien on the assets (accounts receivable) to the extent of its claim in the amount of $40,179.55.
NAC
NAC made a series of loans to the Bankrupt pursuant to security agreements beginning in June, 1963. NAC would advance money to the Bankrupt and in return would take "a security interest in all of the Bankrupt's present and after-acquired equipment, inventory, general intangibles and proceeds of the foregoing (as these terms are defined in the Uniform Commercial Code of Illinois)." (Application of NAC filed March 11, 1969.)
The Referee found that $13,745.65 still remains unpaid to NAC and that it is entitled to said sum from the proceeds realized from Ampex Corporation after payment of the first lien of Breece but prior to any payment therefrom to the Trustee. NAC requests that a hearing be held before the Referee to determine the amount of reasonable attorneys' fees and other costs and expenses which should be added to the $14,265.05.
THE TRUSTEE
The Trustee argues that Breece has waived its lien rights and is not entitled to any payment out of the proceeds of the Ampex accounts. He also contends that the validity of the liens claimed by NAC and the amount allowed to it were not correctly determined and that NAC is entitled at most to a lien in the amount of $915.20.
As is clear from the facts and theories of the parties recited above, the primary issue presented for review is that of the relative priorities of Breece, NAC and the Trustee to the Ampex account. The parties do not dispute that, as of the date of bankruptcy, Breece had a valid claim against the Bankrupt in the sum of $40,179.55 for plywood which it sold to the Bankrupt which in turn used it to fabricate the cabinets which it sold to Ampex. The Security Agreement entered into between Breece and the Bankrupt on December 6, 1966 covered, *856 among other things, present and after acquired inventory and accounts, and a financing statement was filed on December 13, 1966.
On November 2, 1968, Breece sent to NAC a written notice that it would be acquiring a purchase money security interest in the plywood and cabinets of the Bankrupt.
It appears from the record and is apparently not disputed by the parties that NAC was first in point of time to file a financing statement covering present and after acquired inventory and proceeds of the Bankrupt.[1]
Nevertheless, the parties, by their respective petitions and briefs, appear to agree that even though NAC was apparently the first to file, that fact is not determinative of the relative priorities as between NAC and Breece. Both NAC and the Trustee concede that until such time as the bankrupt executed its assignment to Breece of future accounts on November 7, 1969, Breece had a prior right in the Bankrupt's proceeds from its inventory by reason of its purchase money security interest in the inventory pursuant to § 9-312(3) UCC.
NAC and the Trustee contend, however, that Breece relinquished its purchase money priority portion with respect to at least a portion of its claim when it agreed to a new procedure for payment under the procedures adopted pursuant to the Assignment of Future Accounts for repayment of its advances.
Their theory is that by taking a specific assignment of certain Ampex accounts pursuant to the assignment of future accounts, Breece abdicated its priorities which it had as a purchase money lender under its pre-existing perfection of its security interest in these accounts. As stated above, this position was adopted by the referee in his order of June 25, 1970.
Upon review I find no basis in law to support this finding. The Assignment of Future Accounts document executed by the bankrupt for the benefit of Breece expressly reserves to Breece whatever rights and priorities which previously accrued to Breece under its previous perfection. The assignment expressly states that it is designed to supplement rather than supplant the earlier Security Agreement and filing. The manifest purpose of the Supplemental Assignment was to enhance Breece's policing procedure over those accounts specifically assigned to it and to implement its mode of collection by providing for notice of the assignment to the account debtor and by designating a collecting bank to receive and disburse payment. The mere fact that a secured party chooses to police a portion of the proceeds in which he is perfected without similarly policing the balance should not jeopardize his priority position with regards to such balance. A contrary result would serve only to resurrect on an arbitrary basis an unwelcome spector of the rule in Benedict v. Ratner, 268 U.S. 353, 45 S. Ct. 566, 69 L. Ed. 991 (1925) which the Uniform Commercial Code has effectively sought to modify.
Section 9-205 of the Code explicitly provides that the security interest is not invalidated or fraudulent as against competing creditors where the secured party allows the debtor to retain complete control over the disposition of collateral including proceeds. The Official Code Comment upon this section delineates the intent of the drafters to repeal the rule of Benedict v. Ratner insofar as *857 it imposed the burden upon accounts receivable or inventory financiers to police proceeds or risk the invalidation of their security interest.
The authorities cited by NAC and the Trustee in support of that portion of the Referee's order limiting the priority of Breece only to a percentage of the specific accounts assigned to Breece are not applicable to the facts of this case. In re Forney, 299 F.2d 503 (7th Cir. 1962); Clovis National Bank v. Thomas, 77 N.M. 554, 425 P.2d 726 (1967); and First National Bank and Trust Co. of Oklahoma City v. Stock Yards Loan Co., 65 F.2d 226 (8th Cir. 1933).
In re Forney was decided in 1962 and did not purport to look to the Uniform Commercial Code. If its holding were applied after adoption of the Uniform Commercial Code, then its effect would be to deny an inventory financier a right to proceeds of sales since such sale would be in the ordinary and usual course of business and with consent whether expressed or implied.
Section 9-306(2) of the Code expressly reserves the right to proceeds notwithstanding authorization to sell the primary collateral. Whether the sale was authorized is made determinative only of the secured party's right to follow the collateral after sale affecting his priorities as against the purchaser but in no manner affects his interest in the retained proceeds as against competing creditors. This construction of the statutory provision is emphasized in the Official Code Comment upon that provision. See UCC, Official Code Comment § 9-306(2) at par. 2.
The Stock Yards Loan Company case is less in point since that case dealt only with the interest of a secured party in the collateral which was actually sold. The right of the secured party to the proceeds which the debtor received in exchange of the sale was not even questioned. The same is true of the Clovis case.
As previously discussed, the Uniform Commercial Code is explicit in preserving the priority of the secured party to the proceeds notwithstanding his consent to the sale of the primary collateral and further notwithstanding his consent to the debtor's unrestricted use and disposition of these proceeds so long as they remain identifiable. See UCC §§ 9-306, 9-205 and the Official Code Comments upon these sections.
Authorization to sell collateral at best affects the secured party's rights against the subsequent purchaser but not as against the creditor.
Accordingly I find and conclude that the order of the Referee restricting the priority of Breece's secured claim to $14,265.05 is clearly erroneous. If the priority position of Breece is recognized, it must be given effect to its entire claim.
However, there does appear to be a substantial question concerning the priority of Breece over NAC in the Ampex accounts since that priority is predicated wholly upon the status of Breece as a purchase money lender. Although not raised by the parties hereto, the law is not at all clear as to whether the priority of a purchase money lender as against a competing inventory financier extends to proceeds of the goods to which the purchase money security interest applies. See 2 Gilmore, Security Interests in Personal Property § 29.5. This issue may be considered on remand.
I should further observe that this question is being presently considered by the review committee for Article 9 of the Uniform Commercial Code. Under their present draft of the proposed revisions of Article 9, the relative priorities of the secured seller as against competing inventory or accounts receivable financiers would be determined by Section 9-312(5) of the Code on the basis of who was first to file. The effect of Section 9-312(3) and (4) dealing with the special priority of the purchase money lender would thus be restricted to the *858 primary collateral alone. See Permanent Editorial Board for Uniform Commercial Code, Review Committee for Article 9 of the Uniform Commercial Code, Preliminary Draft No. 2, Feb. 1, 1970 at pp. 30-32. Of course, this draft of the proposed revisions has not yet been adopted nor would it necessarily have binding retroactive effect.
If it should be determined that the purchase money priority of Breece extends to proceeds, then Breece is clearly entitled to recover the full amount of its indebtedness in the sum of $40,179.55 from the Ampex account as against NAC and the Trustee. However, if it should be determined that the purchase money priority of Breece does not extend to proceeds, Breece's rights against the Trustee would nevertheless remain paramount for the full extent of its claim against the Bankrupt since it would, in any event, have a perfected security interest as to that entire amount which, therefore, establishes its priority over the trustee. UCC §§ 9-301, 9-108 and 9-306. See also, In re Grain Merchants of Indiana, 408 F.2d 209 (7th Cir. 1969). The determination of its status as a purchase money secured party would only affect its relative priority over NAC, its competing secured creditor, who apparently was the first to file against this collateral. The adjudication of the relative priorities as between Breece and NAC will determine who as between these two will be the first to satisfy its debt out of the Ampex fund. The second in priority will, in any event, be fully entitled to all of the remaining surplus.
As to the remaining issues presented by the Petitions of NAC and the Trustee, particularly, NAC's claim for attorneys' fees and the Trustee's claim that the amount of NAC's lien was not correctly determined by the Referee, I find that the Findings and Conclusions of the Referee are supported by the evidence and the authorities and are not clearly erroneous.
This cause is hereby remanded for proceedings consistent with this memorandum and order.
NOTES
[1] The underlying Security Agreement between NAC and the bankrupt, however, does not appear to grant a security interest in proceeds, but does grant a security interest in the accounts of the debtor as well as his inventory. However, between the Security Agreement which covers the Ampex account as primary collateral, and the financing statement, which covers the Ampex account as a proceed of inventory, the requirements for perfection under the Uniform Commercial Code §§ 9-203, 204, 303, 402 have been met, notwithstanding the failure of the Security Agreement to provide for proceeds of inventory and the failure of the financing statement to provide for accounts. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571043/ | 277 S.W.2d 521 (1955)
George W. SMITH, Appellant,
v.
Robert A. SIERCKS, Respondent.
No. 44475.
Supreme Court of Missouri, Division No. 1.
April 11, 1955.
*522 Don G. Stubbs, James L. Williams, Stubbs, McKenzie, Williams, Merrick & Gibson, Kansas City, Vance Julian, Clinton, for appellant.
Kelso Journey, Clinton, for respondent.
HOLLINGS WORTH, Judge.
On the 29th day of August, 1953, plaintiff, George W. Smith, while operating his automobile northward on State Highway 13 near Clinton, Missouri, overtook and passed a northbound automobile operated by defendant, Robert A. Siercks, and thereupon collided with a southbound automobile operated by one Mary Lou Murphy, whereby plaintiff sustained personal injuries and damage to his automobile. By this action, he sought to recover damages in the sum of $25,400 from both defendant Siercks and Mary Lou Murphy. The petition alleged that as he undertook to drive around and pass the Siercks automobile, Siercks negligently and deliberately increased the speed of his automobile and swerved it to the left, thereby denying plaintiff the right of way and delaying plaintiff's passage and prompt return to the right side of the highway; that Mary Lou Murphy, at the same time, saw plaintiff in a position of imminent peril of collision with her oncoming automobile and negligently failed to slow her speed or swerve to her right and avoid a collision of plaintiff's automobile with hers; and that the negligence of each of the defendants was a proximate cause of the collision.
Defendant Siercks is a minor. Prior to the trial, his mother, Carmyle Siercks, was duly appointed his guardian ad litem and thereafter, as such, answered and defended the suit. Plaintiff effected a settlement for the sum of $2,000 with Mary Lou Murphy and dismissed the action as to her when the case was called for trial. At the close of all the evidence, the trial court directed a verdict in favor of instant defendant and upon return thereof accordingly entered judgment, from which plaintiff appealed.
The theory of the trial court in directing a verdict for defendant, as he declared in an oral statement to the jury, was that " * * * the plaintiff himself, his own testimony has shown to the mind of the court * * * that there was no negligence on the part of the defendant Siercks which caused the plaintiff Smith to collide with the Murphy car. In other words, he testified that he had successfully passed the Siercks car. Regardless of the fact whether or not the Siercks car had speeded up, it makes no difference, he had already gotten past it according to his own testimony, had gotten into his own lane of traffic and was struck by the Murphy car, which may have made, if Miss Murphy had been left in the case, * * * a submissible case against her of being negligent for having run into him."
The collision occurred south of the city limits of Clinton. At that point Highway 13 extends north and south and is downgrade to the south. It is paved with "blacktop" macadam, 20 feet, 9 inches, in width. The collision occurred at 11:15 p.m. The weather was warm and clear, the pavement dry.
Wayne Allman, State Highway Patrolman for the past seven and one-half years, testified in behalf of plaintiff: He is stationed at Clinton and arrived at the scene of the collision at 11:35 p.m. He came upon plaintiff's car first. It was in the ditch on the east side of the highway. South thereof he came upon the Murphy and Siercks cars. They were locked together, head-on, in the east traffic lane. There had been two collisions. First, the *523 Murphy car, headed south, and the plaintiff's car, headed north, had sideswiped each other; and, second, the Murphy car had continued on southward for a distance of 159 feet from the point of its collision with plaintiff's car and there had collided head-on with defendant's car. There was glass and debris at the points of both collisions. There was a freshly "dug-out" spot, a "gouged-out" spot, in the blacktop portion of the highway, evidencing, the witness said, the point of collision of plaintiff's car and the Murphy car. The dug-out spot was 4 to 6 inches to the west of the center line of the pavement. There was debris at the dug-out spot "in the vicinity of the center" of the highway, but "more in the west lane". At the point of the collision between the Murphy and defendant Siercks cars, the witness found a skid mark leading from the right rear wheel of defendant's car back southwestwardly a distance of 15 feet to the exact center line of the highway at an angle of 45 degrees, showing, the witness said, that the defendant's car was on the "wrong" (west) side of the highway "before [defendant] started braking down". It was the type of a mark that "would have been laid down by the motorist applying his brakes and sliding his wheels to come to a stop". Plaintiff had been taken to the hospital before the patrolman arrived. The patrolman talked with defendant at the scene of the collision. Defendant there made a statement to him that "he (Smith) had just passed me (defendant) and was in the middle of the road when he hit the other (Murphy) car."
Plaintiff testified: On the night of the collision he drove from Deepwater toward Clinton at a speed of 40 to 50 miles per hour. He heard the patrolman (Allman) testify and his testimony "placed the accident about where it occurred". As he came up to the defendant's car, it was not going fast, 30 to 35 miles an hour, and was upon its right side of the highway. Plaintiff attempted to pass defendant's car. When he was even with defendant's car or a half car length in front of it, defendant "speeded up on me", "equal to my speed (of 40 to 50 miles per hour) or faster". Both cars stayed relatively abreast for a matter of seconds. There was no car in sight when plaintiff attempted to pass defendant, but plaintiff got a glimpse of car lights in the air "coming out of the city limits". These lights (from the Murphy car) were a quarter of a mile away when he first saw them. Plaintiff then "lagged back to get behind the (defendant's) car", and guessed that defendant saw the reflection of lights about the time he did, as he (defendant) lagged back too. Plaintiff speeded up and went arount defendant and came into collision with the Murphy car, which, as it approached the point of collision, was weaving back and forth across the center line of the highway. Plaintiff sustained severe injuries, was in great pain, and was immediately taken to a hospital by a motorist that had been following his car. He did not see the gouged-out spot on the pavement that night and did not return to the scene of the collision until 14 weeks thereafter.
Plaintiff further testified:
"Q. Where did that collision occur with reference to the center of the highway? A. Well, according to the Highway Patrol and everything it was right in, right close to the center of the highway.
"Q. You are telling the jury that you had succeeded in getting all the way back to your side of the road, or partly back? A. Yes.
"Q. Well, what's your best judgment of it? Just tell them what you best judgment is. A. Well, the best I could tell, at night, I was to my side of the road.
"Q. It was at night? A. Night.
"Q. Do you remember if there was a white line there indicating the center of the road at that time, George? A. At that time I believe it was just checks down the highway; it wasn't marked like it is now, I know."
On cross-examination, plaintiff was interrogated vigorously and at great length as to the position of his car upon the highway *524 when it came into collision with the Murphy car. Space will not permit a detailed statement of his answers to these many questions. Several times he answered unqualifiedly that he had completely passed defendant's car and had returned to his side of the highway before the collision. Again he would state that to the best of his judgment he had returned to his side. He admitted that during testimony then recently given by him in the case of Murphy v. Siercks, arising out of the instant collisions, he had several times stated he had returned to his side before the collision occurred. On redirect examination, he undertook to explain these conflicting answers by stating, in effect, that due to the darkness of the night and his preoccupation with the act of passing defendant's car, he was not certain of his position; that he had believed he had fully returned to his side of the highway before the collision until Mr. Allman, the highway patrolman, exhibited certain pictures to him which showed the gouged-out spot on the highway to be west of the center line; and that these pictures had convinced him he had been mistaken in his conclusion that he had gotten back to his side before the collision occurred.
Mary Lou Murphy testified: She drove south out of Clinton at 25 to 30 miles per hour and first saw plaintiff's car when it began to pass defendant's car. At that time both cars "seemed to speed up and slow down and speed up and slow down". She slowed her car to a speed of 20 to 30 miles per hour. Plaintiff's car came ahead with a burst of speed and sideswiped her car. Her car was at that time on the west side of the highway. On cross-examination, she said plaintiff's car was "on the wrong (west) side of the highway" when it collided with her car.
Defendant's version of the collision between plaintiff's car and the Murphy car was that he was driving northward to the scene of the collisions at 35 to 40 miles per hour in the right lane of traffic, from which lane he did not at any time depart; that he saw the headlights of plaintiff's car as it approached from his rear; that plaintiff, travelling at 50 to 55 miles per hour pulled out in the left lane and passed his car, and "something seemed to force him out, or he just didn't get back in the center of his lane, he just straddled the center line of the highway and sideswiped Murphy"; that he saw the lights of the oncoming Murphy car as it came "around the curve"; that it was also close to the center of the highway and did not swerve out to avoid the collision; and that he never saw it swerving from one side of the highway to the other.
It was on the basis of plaintiff's testimony as to the position of his automobile on the highway at the time of the collision that the trial court found he had admitted himself out of court. Plaintiff insists that the circumstances under which the collision occurred, in and of themselves, show that the testimony of plaintiff as to the position of his car upon the highway at the time of the collision could be nothing more than a mere estimate and is not binding upon him as a matter of law; and, further, that, in any event, the point of the collision upon the highway is unimportant. Plaintiff's argument runs in this wise: "Again taking the evidence most favorable to the plaintiff, it will be recalled that Siercks was not only racing plaintiff but apparently was crowding him. Accordingly to the highway patrolman, Siercks was over in the west lane when he applied his brakes to head for the ditch. If Siercks was in the west lane, appellant who was attempting to pass him on the left had to be on the shoulder, or almost there. Thus the two cars would have completely blocked the paved portion of the highway and would have explained Miss Murphy's actions, as testified to by the plaintiff: `The Murphy car was weaving back and forth across the highway.' Faced with this emergency situation, Miss Murphy had little choice as to which way to turn. As it happened the impact occurred practically in the middle of the highway. * * * But for the negligent actions of Siercks appellant would have had ample opportunity to pass him and to get back to appellant's side of the road. The causal link between Siercks' negligence and the appellant's injuries is apparent. There was *525 nothing Miss Murphy could do when presented with a blocked highway and two oncoming cars." Defendant says that the several unequivocal declarations of plaintiff that he had returned to his side of the road before the collision "completely exonerated defendant of any imputation of negligence, and cast the sole responsibility of the accident upon the driver of the Murphy automobile, and * * * had the force and effect of a judicial admission so as to preclude a recovery against defendant * * * as a matter of law."
The courts of this State frequently have been called upon to consider the effect of testimony of a party such as was given by plaintiff in this case and to determine whether it amounts to a judicial admission binding upon the party, thereby depriving him of the benefit of the favorable testimony of his other witnesses. The law has been tersely stated by Bour, C., in the case of Burris v. Kansas City Public Service Co., Mo.App., 226 S.W.2d 743, 747, 748[1-4]: "But a party's testimony on the stand as a witness may be of such a nature as to have the effect of a judicial admission which not only relieves the opponent from adducing evidence, but precludes the party himself from disputing it, either by his own testimony or by other witnesses. Wigmore, Evidence, Sec. 2495a (3d Ed.). Thus, if a party in full possession of his mental faculties testifies unequivocally and understandingly to a material fact peculiarly within his own personal knowledge, which negatives his right of action or defense, he is precluded from relying upon any testimony to the contrary, unless he gives some reasonable explanation of his previous statement as having been the result of mistake, oversight, lapse of memory or misunderstanding. In the absence of such an explanation, the party may not have the benefit of any testimony which is contrary to his own testimony, whether given by himself, Steele v. Kansas City Southern R. Co., 265 Mo. 97, 175 S.W. 177, by his adversary's witnesses, Elkin v. St. Louis Public Service Co., 335 Mo. 951, 958, 74 S.W.2d 600, or by his own witnesses. Mollman v. St. Louis Public Service Co., Mo.App., 192 S.W.2d 618, 621, and cases cited. Where, however, the testimony of a party is not a positive statement of fact within his own knowledge, but is a mere estimate or opinion, it does not have the effect of a judicial admission. This is especially so as to the circumstances of an accident or similar event, because in such a case the party's testimony is subject to inexactness of observation and memory. See Kanopka v. Kanopka, 113 Conn. 30, 154 A. 144, 80 A.L.R. 619, a leading case. Thus a party is not conclusively bound by his mere estimate of time, speed or distance, or the position of an automobile or train at the time of an accident. His testimony in regard to such matters does not preclude him from relying upon the more favorable testimony of other witnesses in the case, unless the testimony of the other witnesses is inconsistent with his theory of the case or contrary to physical facts. Dennis v. Wood, 357 Mo. 886, 211 S.W.2d 470, 471; State ex rel. Thompson v. Shain, 351 Mo. 530, 173 S.W.2d 406; Goggin v. Schoening, Mo.App., 199 S.W.2d 87, 92; Golden v. Onerem, Mo.App., 123 S.W.2d 617, 169 A.L.R. 798, 819."
In the instant case there was strong and convincing testimony that the collision occurred upon or west of the center line of the highway. The measurements and observations made by the highway patrolman support this view. Miss Murphy so testified and defendant expressly admitted that plaintiff "didn't get back to the center of his lane, he just straddled the center line of the highway and sideswiped Murphy". Now, it is true that plaintiff stated in positive terms several times that he had returned to and was in his own proper lane when the collision occurred, but we think it is also evident that despite his positiveness and the factual phraseology of such statements, yet he was, of necessity, stating an impression or conclusion, which in view of the circumstances under which it was formed, was subject to a wide margin of error, and that the jury reasonably could so find. He was faced with immediate peril of a head-on collision in the night time on a blacktop highway; he was speeding up *526 in an effort to avoid the peril; obviously, his immediate attention would be directed to the object imperiling him, the Murphy car. Immediately following the collision, he was taken away from the scene. Considering all of the facts and circumstances in evidence, we have concluded that plaintiff's testimony did not amount to a judicial admission as to the position of his car upon the highway when it collided with the Murphy car; and that the jury could consider his explanation of the inconsistencies in his testimony in weighing its value and in connection with all of the evidence in determining the facts and defendant's negligence and its causal connection, if any, with the collision and plaintiff's resultant injuries.
A collision such as is here shown could be caused by the negligence of either one of the three motorists involved therein or by the concurring negligence of any two or all of them. We think it cannot be gainsaid that, considered in the light most favorable to plaintiff, the evidence sufficiently tended to show negligence on the part of defendant in speeding up his automobile when he saw plaintiff in the act of passing him. And especially is this true when he admitted he saw at about the same time as did plaintiff the lights of the oncoming car. Under such circumstances, the jury could reasonably find that, in the exercise of the highest degree of care, defendant knew or should have known that by interfering with plaintiff's passage and thereby increasing the distance required of plaintiff to pass around him he was placing plaintiff's car in the immediate path of the Murphy car and peril of collision with it.
We do not understand defendant to contend otherwise. What we do understand from defendant's brief and argument is that plaintiff reached a place of safety and there was no causal connection between defendant's aforesaid negligence and the collision of plaintiff's car with the Murphy car. In view of our holding that plaintiff was not bound by his testimony as to the position of his car at the time of the collision and that the jury could consider the favorable testimony of his other witnesses, we think that contention goes out of the case. This, for the reason that the jury could reasonably find from the testimony of those witnesses that defendant's negligent act of delaying plaintiff's passage around him had made it impossible for plaintiff to return to the right side of the highway to a position of safety and avoid the collision.
But, moreover, and more to the point: If the effect of defendant's negligence actively and continuously operated to bring about the collision by preventing plaintiff from returning to the right side of the highway, then the mere fact that Miss Murphy simultaneously operated her car in such a manner as to also become a substantial factor in causing the collision does not relieve defendant of liability, irrespective of her negligence. Restatement, Torts, Vol. 2, § 439, p. 1184; Gray v. Kurn, 345 Mo. 1027, 137 S.W.2d 558, 566[9]; Louisville & N. R. Co. v. Beatrice Foods Co., Mo.App., 250 S.W.2d 825, 828 [3-5]. And, further, even if plaintiff's car, after passing defendant's car, had reached the right side of the highway and was in a position of safety but for negligence of Mrs. Murphy in swerving or "weaving" her car to the left, yet that fact would not make her act a superseding cause if the jury should further find that defendant reasonably should have foreseen that his negligence might cause Miss Murphy to swerve to her left. Restatement, Torts, Vol. 2, § 447(a) and (b), p. 1196; Champieux v. Miller, Mo., 255 S.W.2d 794, 797[3].
We are of the opinion the jury could reasonably find that the effect of defendant's negligence, if he was negligent, was still actively and continuously in operation at the time of the collision so as to constitute a direct and causal connection between his negligence and the collision, regardless of the position of plaintiff's car upon the highway.
The judgment is reversed and the cause remanded.
All concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917579/ | 178 B.R. 299 (1995)
In re Mitchell B. ROBBINS, Debtor.
Abdellah BENJELLOUN, Plaintiff,
v.
Mitchell B. ROBBINS, Defendant.
Bankruptcy No. 90-40181-JFQ. Adv. No. 90-4241.
United States Bankruptcy Court, D. Massachusetts.
January 9, 1995.
*300 William F. Macauley, Craig and Macauley, Boston, MA, for Mitchell B. Robbins.
Kevin C. McGee, Seder & Chandler, Worcester, MA, for Abdellah Benjelloun.
OPINION
JAMES F. QUEENAN, Jr., Chief Judge.
Abdellah Benjelloun (the "Plaintiff") seeks a declaration that the $325,000 indebtedness allegedly owed him by Mitchell Robbins (the "Debtor") is nondischargeable under section 523(a)(2) of the Bankruptcy Code, which concerns debt obtained by use of a false financial statement. The Debtor moves for summary judgment. The Plaintiff also moves for summary judgment on all aspects of the case except the issue of the Debtor's fraudulent intent. Both motions are supported by affidavits incorporating deposition testimony. I have taken the matter under advisement after a hearing on the motions.
The factual background is undisputed. In June of 1988, the Debtor, through a trust, purchased for $2,330,000 a so-called "strip mall" known as Warner Shops Plaza, located at 284-286 Winthrop Street, Taunton, Massachusetts. The purchase was financed by a bank mortgage of $2,100,000 which the Debtor guaranteed. On December 28, 1988, the Plaintiff and the Debtor formed a limited partnership under an agreement of that date entitled "Certificate of Limited Partnership and Warner Shops Limited Partnership Agreement." The partnership then purchased the property for $2,425,000 through payment of $325,000 in cash and assumption of the trust's obligation on the mortgage of approximately $2,100,000. The Debtor continued to remain sole guarantor of the debt. The Plaintiff became the sole limited partner, having paid $325,000 for his interest represented by 100 partnership units. The Debtor and Robbins Management Co., Inc., a company wholly owned by the Debtor, became the general partners, with the Debtor receiving 95 partnerships units and the Debtor's corporation receiving 5 partnership units.
Until the Plaintiff's $325,000 investment had been paid back to him, he was to receive the first $32,500 of annual cash flow, with any excess to be allocated 50% to the Plaintiff and 50% to the general partners. Following its provisions on annual cash flow, the partnership agreement contains these additional sections concerning return of the Plaintiff's $325,000 capital contribution:
Section 7.6 Sale, Refinancing and Terminating Transactions. Net cash, proceeds of Sale, Refinancing and Terminating Transactions shall be distributed as follows;
a) First to the Limited Partner(s) as a class, until they have received a return of their total Capital Contribution;
*301 b) Second to the General Partners as a class until they have received a return of their total Capital Contribution;
c) Then any remaining net cash proceeds shall be distributed, 50% to the General partners as a class and 50% to the Limited Partner(s) as a class.
Section 7.7 General Partner Terminating Capital Requirement. The General Partner shall make a capital contribution upon termination of the Partnership equal to the amount required, after giving effect to section 7.6(a) above, so that the Limited Partner(s), receive as a class, a return of their capital contribution.
The Plaintiff has received no return of capital. The partnership having been dissolved pursuant to the Debtor's confirmed plan of reorganization, the Plaintiff now seeks to have declared nondischargeable the Debtor's obligation to return the Plaintiff's $325,000 capital contribution pursuant to these provisions of the partnership agreement.
During the parties' negotiations in December of 1988, the Debtor furnished the Plaintiff with a personal financial statement dated July 31, 1988. This was done because of the Plaintiff's concern that the Debtor have the financial resources to support his obligation under section 7.7 of the partnership agreement. The financial statement, which runs to 26 pages, shows assets valued at $51,649,388.00 and liabilities of $23,982,520.00, with a net worth of $27,666,868.00. The defendant's extensive real estate investments are valued on the financial statement at $37,524,131.
The Plaintiff's complaint, as unartfully amended by a pleading entitled in part "Expanded Allegations", contains two counts. In Count I, the Plaintiff alleges that the $325,000 debt is nondischargeable under section 523(a)(2)(B) of the Code, which applies to debts for money obtained by the use of a materially false and intentionally fraudulent written statement with respect to the debtor's financial condition. In Count II, the Plaintiff relies in part upon a different writing furnished him by the Debtor that relates only to Warner Shops Plaza, which is entitled "Summary of Proposed Investment." The Plaintiff alleges that in this writing the Debtor fraudulently misrepresented the value and net worth of Warner Shops Plaza. He refers to this writing as a "Financial Statement." In his "Expanded Allegations," the Plaintiff adds to Count II allegations that the Debtor and his employees represented that Warner Shops Plaza had "good tenants," whereas four of the nine tenants were behind in their rent and one of these had been told by the Debtor to vacate the premises. Count II nevertheless still refers only to section 523(a)(2)(B) pertaining to false written statements concerning a debtor's financial condition.
I. EXISTENCE OF "DEBT" OWED BY DEBTOR TO PLAINTIFF
Section 523(a)(2)(B), whose provisions are fully quoted later, operates to prevent the discharge of an individual debtor from the type of "debt" described therein. The Debtor contends the statute has no application here because the only debt arguably owed the Plaintiff under the partnership agreement is owed by the partnership and not by the Debtor.
The obligations of the Debtor and his corporation under the partnership agreement are expressly made their joint and several obligations by section 12.15 of the agreement. Upon termination of the agreement, which has occurred, under section 7.7 the Debtor obligated himself to make a capital contribution "equal to the amount required, after giving affect to section 7.6(a) above, so that [the Plaintiff] receive[s] . . . a return of all [his] Capital Contribution." I agree with the Debtor that this language, when read with the preceding section 7.6(a), requires him to pay $325,000 to the partnership. But that payment was obviously to be earmarked for the Plaintiff and was to pass quickly through the partnership to him. The obligation is therefore owed, in substance, to the Plaintiff.
The Debtor's obligation is somewhat similar to that owed to a third party beneficiary under a contract to which the beneficiary is not a party. Massachusetts recognizes the right of either a creditor or donee beneficiary to enforce a contract. See Rae v. Air-Speed, Inc., 386 Mass. 187, 435 *302 N.E.2d 628 (1982); Choate, Hall & Stewart v. SCA Services, Inc., 378 Mass. 535, 392 N.E.2d 1045 (1979); see also Restatement of Contracts (Second) §§ 302, 304 (1981). Massachusetts law controls here; it is the place of contracting, the location of the property, the residency of the Debtor and the jurisdiction in which the partnership obtained its legal existence. Id. Here the Plaintiff was a party to the contract as well as the one who was in substance the beneficiary of the Debtor's obligation. Surely the Massachusetts courts would give the Plaintiff a cause of action against the Debtor.
The Debtor's obligation is a debt notwithstanding its relationship to capital. As an obligation to return capital, it creates a "debt" which is merely a "right to payment." See 11 U.S.C. §§ 101(5), (12) (1988).
II. DEBTOR'S FINANCIAL STATEMENT (COUNT I)
Section 523(a)(2)(B) provides:
(a) A discharge under 727, 1141, 1228(a), 1228(b) or 1328(b) of this title does not discharge an individual debtor from any debt
. . . . .
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by
. . . . .
(B) use of a statement in writing
(i) that is materially false;
(ii) respecting the debtor's or an insider's financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive;
11 U.S.C. § 523(a)(2)(B) (1988).
A. Reasonable Reliance
The statute requires, first, that there be actual reliance upon the financial statement, and, second, that the reliance be reasonable. Marx v. Reeds (In re Reeds), 145 B.R. 703, 707 (Bankr.N.D.Okla.1992). The Debtor contends there was neither actual nor reasonable reliance by the Plaintiff because the Plaintiff read only two pages of the twenty-six page financial statement. But the two pages which the Plaintiff read were the pages that summarized the Debtor's financial condition and showed a net worth of $27,666,868. That net worth is what the Plaintiff relied upon. It was not unreasonable for him to forego leafing through the minutia contained in the numerous other pages. Moreover, the Plaintiff's attorney and accountant both looked at these more detailed pages and communicated to him any further knowledge they obtained.
The affidavits supporting the Plaintiff's motion indicate the Plaintiff's concern that the Debtor had the financial strength to back up his obligation to return the Plaintiff's capital investment. The affidavits, in summary, make out a case of actual and reasonable reliance.
B. Material Falsity
The July 31, 1988 financial statement showed assets having a total value of $51,649,388 and contained the following subcategories with supporting exhibits:
Cash and other current Assets $ 5,160,257
Individual condominium units 9,808,400
Land 17,340,000
Apartment Complexes 6,729,145
Shopping Centers 3,646,586
Cash Deposits & other assets 8,965,000
___________
Total Assets $51,649,388
The Plaintiff asserts that the financial statement was materially false for a number of reasons. First, the Plaintiff points to a note to the financial statement which reads: "Market values for real estate have been determined by both independent appraisals and comparison of each respective real estate holding to recent sales of similar real estate located near each real estate holding." The Plaintiff's lawyer professes by affidavit to have read and relied upon this statement. The Plaintiff contends it is false because the Debtor admits that many of the values represent his own estimate of value. For example, the $6,729,145 value of the apartment complexes is based upon the Debtor's own estimate of what the aggregate sales price would be if he converted the complexes to condominiums *303 and sales were made of individual condominium units. In July of 1988 he had no present plans to convert any apartment complex to a condominium. As another example, he valued his numerous individual condominium units at a total value of $9,808,400 based also on his own estimate of value. In some instances, however, values on the financial statement were based upon independent appraisals. Perhaps ironically, one instance of this is Warner Shops Plaza, which had been independently appraised at $2,500,000.
Second, the Plaintiff asserts the financial statement was materially false because the Debtor's opinion of values appearing therein went far beyond "mere puffery." The Plaintiff attacks the comparable sales figures used by the Debtor in support of his values, asserting the properties which were the subject of these sales were totally different. The Plaintiff is especially critical of the Debtor for having valued apartment complexes at the aggregate of the value of the apartments if the properties were converted to condominiums and sales were made of individual condominium units. The Plaintiff attacks the raw land values totaling $17,340,000. The Debtor computed these values based upon the aggregate of lot values when development was completed. The Plaintiff also criticizes the Debtor for having valued a New Hampshire shopping mall by capitalizing its potential income stream rather than its present rental incomes.
At the core of Plaintiff's attack on the July 31, 1988 financial statement is the difference between its net worth of $27,666,868 and the $4,062,398.33 negative net worth shown on the Debtor's bankruptcy schedules filed in connection with his chapter 11 filing of February 14, 1990. Some, but not all, of this difference is caused by property being valued at significantly lower amounts. Often the lower values were arrived at through use of a different appraisal technique. For example, apartment complexes were valued through capitalization of income rather than by totaling the market values of individual units assuming a conversion to condominiums.
None of this make the financial statements materially false. I agree with the Plaintiff that the note to the financial statement stating that values had been determined by "both" independent appraisals and comparative sales prices is a statement that each property had been independently appraised. If the note was intended to mean only some properties had been independently appraised, the word "either" instead of "both" should have been used. But under the statute, the truth or falsity of a financial statement depends upon its description of the Debtor's "financial condition," not on how that financial condition was determined. Valuations were for the most part based upon the Debtor's opinion. Those values must therefore be tested by the standard applicable to a debtor's opinion of values appearing on a financial statement.
An opinion of asset valuation in a financial statement falls outside section 523(a)(2)(B), despite the opinion's inaccuracy, so long as there is a foundation for the opinion. Bombardier Credit, Inc., v. Calvo (In re Calvo), 111 B.R. 1003 (Bankr.M.D.Fla.1990). The court in Calvo explained,
[T]he valuation of assets on a loan application is the declarant's subjective opinion, and there is generally no basis to infer fraud if the valuation turns out to be incorrect. However, when the valuation is so completely without foundation, one can only conclude that the valuation was beyond mere puffery, and instead was stated for the primary purpose of inducing the lender to lend money to the applicant.
Id., 111 B.R. at 1006. See also Fields v. Nemovitz (In re Nemovitz), 142 B.R. 472 (Bankr.M.D.Fla.1992); Fifth Third Bank of Toledo v. Frugh (In re Frugh), 133 B.R. 870 (Bankr.N.D.Ohio 1991); Chase Manhattan Fin. Serv., Inc. v. Warmack (In re Warmack), 88 B.R. 399 (Bankr.M.D.Fla.1988). Cf. Oppenheimer v. Reder (In re Reder), 60 B.R. 529 (Bankr.D.Minn.1986) (financial statement materially false where it incorrectly stated value of automobile without any discussion of lack of foundation).
In the present case, the Debtor had a foundation for his opinion of values with respect to apartment complexes. That foundation was an assumed conversion of the complexes into condominiums. With respect to *304 raw land, the foundation consisted of anticipated development activities on the properties. In the 1980's condominium conversions were common and developments were proceeding apace. With respect to the New Hampshire shopping center, it was the center's potential rental stream. One might criticize these opinions as an unconservative approach to valuation. That criticism, however, is legitimate only for cross examination of an expert so opining, and I have seen many such cross examinations. It falls far short of establishing fraud.
The Debtor's valuations must be considered in the context of the state of the Massachusetts economy in mid-1988. It is common knowledge that Massachusetts real estate values tumbled dramatically during the 1988-1992 period. As the result of excessive construction of both residential and commercial properties, by July 31, 1988 the supply of all types of real estate far exceeded the demand for their purchase. Yet that fact had not then sunk into the public consciousness. A comparison between a valuation opinion of July 31, 1988 and one as of the bankruptcy filing of February 14, 1990 (and made several months later) simply demonstrates this sharp market decline. It certainly does not establish the rendering of a fraudulent opinion, either alone or in conjunction with the rest of the Plaintiff's proffered evidence.
A financial statement will not be held materially false due to subsequent events which make the statement inaccurate at some later time. Public Employees Retirement Sys. v. Gadus (In re Gadus), 145 B.R. 235, 237 (Bankr.N.D.Ohio 1992); ITT Commercial Finance Corp. v. Walz, 115 B.R. 353, 357 (Bankr.N.D.Fla.1990) (statement not materially false when difference in values listed on the financial statement and petition two years later was due to different methods of valuation and dissipation of assets); Federal Deposit Ins. Corp. v. Cerar (In re Cerar), 84 B.R. 524, 532 (Bankr.C.D.Ill.1988), aff'd on different grounds, 97 B.R. 447 (C.D.Ill.1989) (financial statement not materially false when substantial difference in values listed on statement given 29 months later was due to the variety of events which could have occurred in this amount of time); First Hardin Nat'l Bank & Trust v. Rosel (In re Rosel), 63 B.R. 603, 606 (Bankr.W.D.Ky.1986) (financial statement not materially false when statement of income was future projection that did not materialize). Cf. First Alabama Bank v. Bagwell (In re Bagwell), 125 B.R. 306, 309 (Bankr.N.D.Ala.1991) (financial statement materially false when another financial statement given six months later showed decline in value of real estate at 54% and personalty at 87% despite debtor's explanation that both sales of assets and a general decrease in value had occurred in the interim).
In sum, an opinion of value on a financial statement may be materially false if it is so completely without foundation that one can only conclude the valuation went beyond mere puffery. That is not the situation here.
III. ALLEGATIONS OF COUNT II
Count II, as initially framed, relied solely upon a document entitled "Summary of Proposed Investment" which the Debtor prepared and delivered to the Plaintiff in December of 1988. This contained information on only Warner Shops Plaza. The document valued the real estate at $2,500,000. The Plaintiff alleges the property was actually worth $1,800,000, the amount shown on the Debtor's bankruptcy schedules. Count II describes the document as a "Financial Statement" and requests relief under section 523(a)(2)(B) pertaining to false financial statements.
Count II fails because the document entitled "Summary of Proposed Investment" does not come within the scope of section 523(a)(2)(B). It is not, in the words of the statute, a "statement in writing . . . respecting the debtor's . . . financial condition." It relates only to a particular property. Moreover, for the reasons set forth in the discussion of Count I, the document was not materially false. Indeed, the valuation contained in it was based upon an independent appraisal.
In his amendment to the complaint, the Plaintiff expands Count II to contain *305 allegations the Debtor through his employees falsely represented that the tenants of Warner Shops Plaza were "good tenants," whereas four of the nine tenants were behind in their rent and one of these had been notified by the Debtor to vacate. Here Count II goes further afield of section 523(a)(2)(B), even though it purports to be still based upon that subsection. Apparently recognizing this, the Plaintiff in his cross-motion for summary judgment cites section 523(a)(2)(A). This subsection applies to debts for money obtained by "false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition." 11 U.S.C. § 523(a)(2)(A) (1988).
The allegations in the amended complaint of false representation concerning "good tenants" may fall within the coverage of subsection (A). The difficulty is they come too late. For a debt to be nondischargeable under either subsection (A) or (B), a complaint to establish its nondischargeability must be filed with this court no later than sixty days following the first date set for the meeting of creditors held pursuant to section 341(a). 11 U.S.C. § 523(c)(1) (1988); Fed.R.Bankr.P. 4007(c). The Plaintiff did not amend his complaint until long after this sixty-day period had expired. Amendment of a complaint to assert a new cause of action is the equivalent, for statute of limitation purposes, to the filing of a new complaint on that cause of action. See O'Loughlin v. National R.R. Passenger Corp., 928 F.2d 24 (1st Cir.1991).
I permitted no such late filing. These so-called "Expanded Allegations" were filed in response to my direction at a pretrial that the Plaintiff make more specific allegations as to the falsity of the July 31, 1988 financial statement. I had no intention of permitting a new count based upon subsection (A). Moreover, any motion requesting permission to file a complaint beyond the sixty-day period must be filed within the sixty-day period. Fed.R.Bankr.P. 4007(c). That did not occur.
IV. CONCLUSION
Summary judgment is to be granted if the pleadings and other documents on file, including any affidavits, show 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.Bankr.P. 7056. Summary judgment is properly entered against the party who bears the burden of proof at trial if that party fails to make a showing sufficient to establish the existence of an element essential to that party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106, 2548, 2552, 91 L. Ed. 2d 265 (1986). In the instant case, the Plaintiff has failed to make a showing that the financial statement in question was materially false. His attempt to establish fraud unrelated to the financial statement came too late. Therefore, summary judgment is to be granted in favor of the Debtor.
A separate judgment has been entered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571114/ | 29 So.3d 1093 (2010)
Alwin C. TUMBLIN, Appellant,
v.
STATE of Florida, Appellee.
No. SC07-2111.
Supreme Court of Florida.
February 25, 2010.
*1095 Carey Haughwout, Public Defender, and Paul E. Petillo, Assistant Public Defender, Fifteenth Judicial Circuit, West Palm Beach, FL, for Appellant.
Bill McCollum, Attorney General, Tallahassee, FL, Lisa-Marie Lerner and Leslie Campbell, Assistant Attorneys General, West Palm Beach, FL, for Appellee.
PER CURIAM.
Alwin C. Tumblin appeals from a judgment of conviction of first-degree murder and a sentence of death, as well as a conviction for robbery with a firearm. We have jurisdiction. See art. V, § 3(b)(1), Fla. Const. For the reasons set forth below, we reverse the convictions, vacate the sentence of death, and remand for a new trial. We conclude that reversible error occurred in the guilt phase of the trial, which affected both the guilt phase and the penalty phase, when a police officer gave his opinion of the truthfulness of a key State witness.
FACTS AND PROCEDURAL HISTORY
Overview
This case involves the May 24, 2004, murder of Jimmy Johns, the owner of Jimmy's Auto Clinic in Fort Pierce, Florida. Forensic Pathologist and District Medical Examiner Dr. Roger Mittleman testified that Jimmy Johns died as a result of a bullet that entered the left side of his head, traveled through his brain, and lodged in the right rear portion of his brain. Gun powder stippling on the left side of Johns' head indicated a close but not contact gun shot.
On the day of the murder, Elizabeth Hobson, who worked at the Auto Zone store across from Jimmy's Auto Clinic, heard a gunshot as she was leaving for lunch. She saw Johns lying on the floor of his shop, and then she saw a short, stocky black "kid" running from the shop with a white towel in his hand. A minute or so later, she saw another black man come out of the shop and leave in a yellow car that looked like a retired taxicab. Another witness, Susan Ooley, also saw a yellow taxicab-like car parked near the auto shop at the time of the murder. She saw someone running from the shop but did not see anything in his hand. Employees of the shop returned from lunch a little after 1 p.m. and found Johns' body.
Alwin C. Tumblin, age twenty-five at the time, was ultimately indicted and convicted for the murder as well as the armed robbery of Johns. During the investigation, Tumblin's friend, Anthony Mayes, was also considered to be a suspect. When finally located by Sheriff's Department Lieutenant Dennis Smith, Mayes was handcuffed and taken into custody. He immediately said he wanted to talk, but only to Lieutenant Smith, who had previously spoken with his grandmother. Mayes was taken to the Fort Pierce police station where he *1096 was advised of his Miranda[1] rights. He was informally interviewed by Lieutenant Smith before giving a taped interview to Detective Joe Coleman and State Attorney Investigator Jeff Hamrick.[2] Mayes' statements to police implicated Tumblin as the planner of the crimes and as the person who shot Jimmy Johns. No DNA evidence linked Tumblin directly to the murder. The only eyewitness who testified that Tumblin shot Johns was Mayes, who entered a plea to second-degree murder and agreed to testify at trial in exchange for a maximum sentence of twenty years. We discuss the evidence in detail because an error occurred in the guilt phase, during Lieutenant Smith's testimony concerning the statements made by Mayes, which deprived Tumblin of a fair trial.
Trial Testimony
Jimmy Johns was the owner and operator of Jimmy's Auto Clinic. On the morning of May 24, 2004, Tumblin, his girlfriend Theresa York, and his friend Anthony Mayes, were at the home of Tumblin's sister, Rhonda Tumblin. At the time, Tumblin and York were both staying in Rhonda's home and sleeping in her bedroom. Mayes testified that Tumblin began "boosting" him up that morning, or attempting to persuade him to participate in a robbery and that Tumblin said he would pay Mayes $300 to act as a lookout. Mayes testified that he heard Tumblin tell York to call Wal-Mart about some bullets and that Tumblin and York then left for a short time. Mayes testified that Tumblin and York later returned to Rhonda's home and, sometime around noon on May 24, Tumblin and Mayes left in York's yellow Grand Marquis automobile, which looked like a retired taxicab. Mayes testified that Tumblin took a gun from the waistband of his pants and placed it under the seat of the car, and that Tumblin commented during the ride that "he was gonna kill everybody that exists as if whoever is in there."[3] According to Mayes, they proceeded to Jimmy's Auto Clinic with Tumblin driving and Mayes in the passenger seat, a trip that took about twenty to twenty-five minutes. On arrival, Tumblin parked the car in front and walked into the auto shop. Mayes testified that he followed Tumblin into the shop where they waited outside the shop office while Johns completed a telephone call.
Mayes testified that when Johns approached them, Tumblin first asked him about a car part but then asked, "Where is it at?" When Johns indicated that he did not understand, Tumblin asked, "Where is the money at?" Mayes testified that after Johns gave Tumblin money and a money clip from his pocket, Tumblin pulled the gun from the back of his pants waistband and held it to Johns' head. Mayes reported that Tumblin asked Johns, "What you think about this?" According to Mayes, Tumblin then pulled the trigger, killing Johns, who was sixty-seven years old. Mayes said that as he started to run away, he saw Tumblin go toward Johns' office, where it was later discovered that envelopes with checks to pay the shop's bills were missing.
When Tumblin returned to his sister's house, Jean Nicole Ruth, a friend of Mayes, heard Tumblin say, "The cracker *1097 dead and Head [Mayes' nickname] ran." Jean Nicole Ruth also testified that when Tumblin returned, she saw him with some papers and envelopes. She said York and Rhonda opened the envelopes and Rhonda took them outside, along with a pan. Although she did not see it, she concluded that Rhonda burned them in the backyard. No envelopes, checks or burnt remains were ever recovered. Later, Rhonda Tumblin borrowed Jean Nicole Ruth's yellow Buick to go to Rhonda's aunt's house. On the way, Rhonda was hailed down by Tumblin, who was on foot next to the road, and by York, who was standing across the street. Rhonda picked up Tumblin and York in the Buick and they drove to Tumblin's aunt's house. In the meantime, based on reports from witnesses at the scene, the police were looking for a yellow car that looked like a retired taxicab. When Tumblin, his sister, and York arrived at the aunt's house, they found no one home but, while there, were approached by the police, who inquired about the names of the driver and passengers. Tumblin's sister was then allowed to drive away with Tumblin and York, but about ten minutes later, when they drove into an Amoco station, the car was surrounded by police, who took them to the police station. This second stop was the result of a police helicopter spotting another yellow car, the car that resembled a taxicab, parked behind Rhonda Tumblin's house. Tumblin's sister testified that as they were driving to the gas station, they saw the helicopter and Tumblin said, "The cracker must be dead."
When the police went to Rhonda's house to investigate, Officer Kathleen Murphy saw a black woman flee the home through a window. The woman was later identified as Jean Nicole Ruth. A search warrant was obtained to search the house, and the search revealed a .32 caliber revolver under some clothes on a chair in the room where Tumblin and York had been sleeping. Four Remington-Peters bullets were found under a pillow on a bed. Evidence at trial showed that at 9:53 a.m. on May 24, 2004, a person with a birth date of November 11, 1981, bought Remington-Peters ammunition at the Fort Pierce Wal-Mart. Theresa York's birth date, according to her driver's license, is November 11, 1981.
Fort Pierce police officer Hall Soloman found an expended pistol cartridge lying outside the auto repair bay door at the crime scene and found an unfired Remington-Peters bullet inside the doorway of the bay. Mark Chapman, firearms expert with the Indian River Crime Laboratory, testified that the bullet removed from Johns' brain and the cartridge casing found at the scene were fired from the same .32 caliber revolver found in the search of Tumblin's sister's home.[4]
The Verdict and Sentence
On a special verdict form, the jury found Tumblin guilty of both premeditated and felony murder. The jury also found him guilty of robbery with a firearm. The case proceeded to the penalty phase on June 25, 2007, after which the jury unanimously recommended a sentence of death. In the sentencing order entered on September 25, 2007, the court found the following aggravators: (1) Tumblin had prior convictions for felonies involving the use or threat of violence (great weight); (2) the murder was committed while the defendant was engaged in commission, attempt to commit, or flight after commission of a robbery, merged with the aggravator that *1098 the murder was committed for pecuniary gain (great weight); and (3) the murder was committed in a cold, calculated, and premeditated manner without pretense of moral or legal justification (CCP) (great weight). The trial court found no statutory mitigation but did find nonstatutory mitigation as follows: (1) poor family life Tumblin grew up in a dysfunctional family characterized by abuse and neglect (impoverished abusive environment) (some weight); (2) poor mental statebelow-average intelligence, behavioral disorders, antisocial impulsive conduct, adolescent brain injury, and suicidal behavior (little weight); (3) Tumblin loves his mother and sister and his children, and they love him in return (little weight); and (4) Tumblin was well-behaved during trial and the penalty hearing (very little weight). We turn now to the guilt phase issues raised by Tumblin.
ISSUES ON APPEAL
Tumblin raises three guilt phase issues in this appeal.[5] We discuss two of these issues in detailthe admission of Anthony Mayes' prior consistent statement through the testimony of Lieutenant Smith and Smith's testimony that essentially vouched for Mayes' truthfulness. While we reverse based on the second issue, we also discuss the first issue because both arose out of Smith's testimony relating to Anthony Mayes. We do not reach the third guilt phase issue because it is not an issue that is likely to reoccur in the retrial of this case.[6] First, however, pursuant to *1099 our mandatory duty, we must examine the sufficiency of the evidence.
Sufficiency of the Evidence
Before remanding for a new trial, we must analyze the sufficiency of the evidence because if there was insufficient evidence on which to convict Tumblin of this murder, it is our obligation to reverse the convictions with directions to grant judgments of acquittal. See McDuffie v. State, 970 So.2d 312, 329 (Fla.2007). Although Tumblin does not challenge the sufficiency of the evidence in this case, we have a mandatory obligation to review the sufficiency of the evidence in every case in which a sentence of death has been imposed, even if the issue is not raised on appeal. See Jones v. State, 963 So.2d 180, 184 (Fla.2007).
The evidence, the most incriminating of which was presented through the testimony of Anthony Mayes, was sufficient for the jury to find that he and Tumblin went to Jimmy's Auto Clinic to perpetrate a robbery and that, once there, Tumblin demanded and received money from Johns. According to Mayes, Tumblin took a handgun with him in the car and that on the way to the auto shop, Tumblin announced that he planned to kill anyone there who either "existed" or "resisted" Mayes was not sure which word was used. Mayes also testified that after Tumblin was given money by Johns, who did not resist, Tumblin put a gun close to Johns' head and pulled the trigger. The medical examiner testified that Johns died from a single gunshot to his left temple and that gunpowder stippling around the entry wound showed the shot to have been fired from very close range. Thus, sufficient competent, substantial evidence supports the jury's verdict and the judgment of conviction for first-degree murder. We turn now to examination of the testimony of Lieutenant Smith, which we conclude contained error that deprived Tumblin of a fair trial and which necessitates our reversal for a new trial.
The Testimony of Lieutenant Smith
Tumblin contends that the trial court abused its discretion in denying his motion for mistrial made during Lieutenant Dennis Smith's testimony when Smith testified that he told Detective Coleman he thought that Mayes would tell him the truth. As explained below, we agree that a mistrial should have been granted. Tumblin also contends that the trial court abused its discretion in allowing Lieutenant Smith to tell the jury about Mayes' prior statement that was consistent with his trial testimony. Although we do not find merit in this claim, we discuss it in some detail because the content and chronology of the testimony of Mayes and Smith are important to our discussion of this issue.
Mayes testified first and told the jury that Tumblin had convinced him to participate in the robbery and that once at Jimmy's Auto Clinic, Tumblin robbed Johns and without provocation shot him in the head at close range. Later during that same day of trial, Lieutenant Smith, an officer with the St. Lucie County Sheriff's Department, testified that he arrested Anthony Mayes on July 9, 2004. Mayes was anxious to talk to Smith about the crimes and, even though Smith urged Mayes to wait for the other officers in charge of the investigation, Mayes did recount details of the crime first to Smith. Over objection, *1100 the trial court allowed Smith to tell the jury what Mayes told him about the robbery and murder prior to Mayes giving a formal recorded statement on the day he was arrested. Smith testified as follows:
Q. [prosecutor]: Lieutenant, go ahead, what did Mr. Mayes tell you?
A. [Smith]: He told me about being at a house, I believe, on 14th Street earlier in the day, the day of the homicide with the subject he referred to as Man. He told me that Man washe used the term "boosting." I understood that to mean encouraging, persuading him to go do a robbery with Man. That Man and his girlfriend went to Wal-Mart to get a box of ammunition, that they called there first. That Man promised him $300 from the proceeds of the robbery. That he told him thatthat Man told him that if the victim bucked, meaning if he resists or bucked up, that he was gonna cap him.
Q. Go ahead.
A. And that they went to do the robbery. That he saw Man shoot the victim in the head, told us approximately how far away he was when that occurred.
Q. How far away who was?
A. Mayes. How far awayhe told us approximately how far away Mayes was and how far away from the victim Man was when he fired the shot.
Q. How close did he say Man was to the victim when he shot him?
A. As I recall, hehevery close. I think he may have even stuck the gun to his head.
This prior statement was consistent with the trial testimony Mayes had given earlier that day.
"Generally, prior consistent statements are inadmissible to corroborate or bolster a witness's trial testimony" because they are usually hearsay, but a prior consistent statement may be admitted as nonhearsay if certain conditions are met. Taylor v. State, 855 So.2d 1, 22-23 (Fla. 2003). The trial court found that Mayes' prior consistent statement in this case was admissible under section 90.801(2)(b), Florida Statutes (2008). Section 90.801(2)(b), Florida Statutes, provides that prior statements that are "[c]onsistent with the declarant's testimony and are offered to rebut an express or implied charge against the declarant of improper influence, motive, or recent fabrication" are not inadmissible hearsay if the declarant testifies at trial and is subject to cross-examination concerning the statement. § 90.801(2)(b), Fla. Stat. (2008).
In reviewing the trial court's decision to admit Mayes' prior consistent statement in this case, our standard of review is abuse of discretion. See Hudson v. State, 992 So.2d 96, 107 (Fla.2008) (stating that the standard of review of a trial court's decision to admit evidence is abuse of discretion), cert. denied, ___ U.S. ___, 129 S.Ct. 1360, 173 L.Ed.2d 621 (2009). We conclude that under the circumstances in this case, the trial court did not abuse its discretion when it allowed Smith to testify about Mayes' prior statement, which was consistent with Mayes' trial testimony. Defense counsel's earlier cross-examination of Mayes first suggested that Mayes' taped statement was only a regurgitation of what Smith had prompted him to say. Other portions of the cross-examination suggested that Mayes was testifying falsely against Tumblin in order to preserve a favorable plea agreement he reached with the State sometime after he gave his initial statements. Defense counsel cross-examined Mayes about the details of his plea agreement and implied that Mayes testified at trial as he did against Tumblin in order to preserve his *1101 favorable plea deal and twenty-year sentence.
The cross-examination of Mayes impliedly charged that Mayes testified as he did at trial due to improper influence and that his trial testimony was a recent fabrication intended to preserve his plea deal. Both of these grounds are a basis for admission of prior consistent statements under section 90.801(2)(b), Florida Statutes. Thus, the admission of Mayes' prior consistent statement was not an abuse of discretion. See Chamberlain v. State, 881 So.2d 1087 (Fla.2004) (holding prior consistent statement admissible where it was made after the codefendant was arrested but before plea negotiations with the State because defense counsel implied witness was testifying against the defendant to protect a favorable plea deal and sentence); Rodriguez v. State, 609 So.2d 493, 500 (Fla.1992) (holding prior consistent statements admissible because "[d]efense counsel's references to plea agreements with the state during cross-examination [of the witness] were sufficient to create an inference of improper motive to fabricate"); Jackson v. State, 599 So.2d 103, 107 (Fla.1992) (holding that a prior consistent statement was admissible to rebut the inference that the codefendant had a motive to fabricate in light of agreement to testify against Jackson). Although we find that the trial court did not abuse its discretion in allowing Lieutenant Smith to testify about Mayes' prior consistent statement, that testimony plays a part in our separate determination that other testimony given by Smith, for which Tumblin sought a mistrial, requires a new trial.
During Lieutenant Smith's direct examination testimony, immediately after Smith recounted Mayes' prior consistent statement to the jury, the following colloquy occurred:
Q. [prosecutor to Lt. Smith] Did you then recount that or summarize that statement that he gave you to Detective Coleman and Investigator Hamrick when they returned?
A. [Lt. Smith] Yes.
Q. Did you when you recounted this when you recounted his version, did you add anything or suggest anything he should say in the future?
A. Only no, nothing in particular that he should say. I did assure Detective Coleman in front of Mayes that I felt like Mayes would would tell him the truth.
(Emphasis added.) Tumblin's counsel objected to this comment on Mayes' veracity, and the trial court struck the comment. The trial court agreed with Tumblin that Smith "was vouching to another officer that he felt like [Mayes] was going to tell him the truth."
"[A]llowing one witness to offer a personal view on the credibility of a fellow witness is an invasion of the province of the jury to determine a witness's credibility." Seibert v. State, 923 So.2d 460, 472 (Fla.2006) (quoting Knowles v. State, 632 So.2d 62, 65-66 (Fla.1993)). "It is clearly error for one witness to testify as to the credibility of another witness." Acosta v. State, 798 So.2d 809, 810 (Fla. 4th DCA 2001). Moreover, "[i]t is especially harmful for a police witness to give his opinion of a witnesses' [sic] credibility because of the great weight afforded an officer's testimony." Seibert, 923 So.2d at 472 (quoting Page v. State, 733 So.2d 1079, 1081 (Fla. 4th DCA 1999)); see also Acosta, 798 So.2d at 810. "Police officers, by virtue of their positions, rightfully bring with their testimony an air of authority and legitimacy. A jury is inclined to give great weight to their opinions. ..." Bowles v. State, 381 So.2d 326, 328 (Fla. 5th DCA 1980); see also Lee v. State, 873 So.2d 582, *1102 583 (Fla. 3d DCA 2004) (holding police officer's comment that witness was credible and positive in her pretrial lineup identification was error requiring new trial); Olsen v. State, 778 So.2d 422, 423 (Fla. 5th DCA 2001) ("[I]t is considered especially harmful for a police officer to give his or her opinion of a witness' credibility because of the great weight afforded an officer's testimony."); cf. Perez v. State, 595 So.2d 1096, 1097 (Fla. 3d DCA 1992) (stating that improper admission of police officer's testimony to bolster the credibility of a witness cannot be deemed harmless).
The case of Acosta v. State is illustrative of the similar problem we face in this case. In Acosta, the district court reversed the conviction for uttering a forged instrument and grand theft because of a statement by a police officer witness that bolstered the credibility of a key state's witness, Sarah Riley, who had been involved with Acosta in the crimes. 798 So.2d at 809. When the officer was asked why a handwriting sample was not taken from Riley, he responded, "Up until that point, everything Sarah Riley told me appeared to be truthful." Id. Acosta's motion for mistrial was denied but the court gave a curative instruction to the jury to disregard the comment. Id. The Fourth District held that it is clear error for one witness to offer his personal view on the credibility of a fellow witness, especially where the witness offering the view is a police officer, because of the great weight accorded an officer's testimony. Id. at 810. In reversing, the district court held:
Riley was the key witness for the state, and the state's case hinged primarily on her credibility. She was an admitted participant in the crime, but was not charged. She testified that she had not, but that the appellant had forged the check. The state's handwriting expert could only corroborate her testimony to the extent he believed it was "probable" that it was appellant's handwriting. He found significant similarities between the signature on the check and appellant's handwriting, and dissimilarities which could not be accounted for. This expert has various classifications which he uses to explain the strength of his opinion, and this classification was third from the strongest.
Because Riley's testimony was crucial and the defense's main emphasis was on her lack of credibility, we cannot agree with the State that the error was harmless or that it was cured by the instruction. We therefore reverse and remand for a new trial.
Id. Similarly, in the instant case, the trial court sustained the objection, struck the comment, and later gave a curative instruction.[7] Even so, as we explain below, we conclude that the curative measures did not erase the taint of the testimony and, as a result, the trial court abused its discretion in denying Tumblin's motion for mistrial. "The giving of a curative instruction will often obviate the necessity of a mistrial. However, there are some instances in which the prejudice is so great that it is impossible `to unring the bell.'" Graham v. State, 479 So.2d 824, 825-26 (Fla. 2d DCA 1985) (citation omitted).
*1103 "[T]his Court reviews a trial court's ruling on a motion for mistrial under an abuse of discretion standard." Salazar v. State, 991 So.2d 364, 371 (Fla. 2008), cert. denied, ___ U.S. ___, 129 S.Ct. 1347, 173 L.Ed.2d 614 (2009); see also Perez v. State, 919 So.2d 347, 363 (Fla.2005); Floyd v. State, 913 So.2d 564, 576 (Fla.2005). The motion should be granted "only when it is necessary to ensure that the defendant receives a fair trial." Salazar, 991 So.2d at 372 (quoting Cole v. State, 701 So.2d 845, 853 (Fla. 1997)). In the present case, as the trial court noted:
Other than Anthony Mayes, is there any evidence that Alwin Tumblin shot Jimmy Johns? The answer is no, it's all circumstantial and nobody puts him on the scene, nobody sees what happened, nobody saw him with a gun that day, nobody said he drove over there that day. Everything that places him at the scene and committing that murder comes from Anthony Mayes.
The trial court also questioned whether the State could prove premeditation without Mayes' testimony. Smith's testimony concerning Mayes' truthfulness occurred after the jury heard Mayes' version of events, which also matched Mayes' prior consistent statement related by Smith to the jury. Because Mayes gave the same version of events to Lieutenant Smith informally that he testified to at trial, Smith's vouching for his truthfulness could be reasonably inferred by the jury to extend to Mayes' veracity at trial. Under these circumstances and the facts of this case, in which Mayes gave the only eyewitness testimony that Tumblin committed the murder and did so in a premeditated manner, we conclude that the trial court abused its discretion in denying the motion for mistrial.
We also find that Mayes' critical eyewitness testimony in the guilt phase was an essential component of the evidence of aggravation relied upon by the State and the court in the penalty phase. The trial court found that the murder was committed in a cold, calculated, and premeditated manner (CCP) based in large part on Mayes' testimony that Tumblin took a gun from the waistband of his pants and coldly aimed it at Johns, asking, "What you think about this?" This evidence came solely from Mayes. The trial court also relied on Mayes' testimony that Tumblin convinced him to commit the robbery and be a lookout. Again, this fact came only from Mayes. In finding CCP, the trial court also relied on Mayes' testimony that on the way to Jimmy's Auto Clinic, Tumblin told Mayes he would kill everybody "that exists" there. The trial court noted evidence from Mayes that he did not know where the robbery would occur and Tumblin had chosen the target business in advance. The trial court also cited testimony that came only from Mayes that Johns did not resist in any way before being shot.
The heavy reliance by the trial court on testimony given by Mayes in establishing CCP is summed up in the following excerpt from the sentencing order:
In the days, hours and minutes preceding this robbery and murder, the Defendant procured a firearm, obtained ammunition, secured an accomplice (Anthony Mayes), stayed at his sister's house in Fort Pierce the night before, drove to Jimmy's Auto Clinic with Anthony Mayes proclaiming that he would commit murder in the process, found Jimmy Johns alone at Jimmy's Auto Clinic, robbed him without incident and then shot him in the head, execution-style. It is noteworthy that neither the Defendant nor Anthony Mayes attempted to disguise their identities. Further, *1104 the Defendant chose to drive to and flee from the murder scene in an emphatically distinct, yellow taxicab-looking car. Also, the Defendant engaged the victim in a conversation about a car part before asking Mr. Johns where the money is. In this otherwise well-planned and orchestrated "robbery" the Defendant took no precautions to prevent or minimize his identification by any would-be victim. To be sure, he had no intentions of leaving any survivors as further evidenced by his statement to Anthony Mayes before the robbery and murder [that he would kill anyone who exists there].
Thus, it can be seen that Anthony Mayes' testimonyand his credibility before the jury and the courtwas instrumental in the jury finding Tumblin guilty of first-degree premeditated and felony murder and in the trial court finding that the murder was cold, calculated, and premeditated. Because Lieutenant Smith improperly volunteered testimony that essentially vouched for Mayes' credibility in a manner that tied his credibility both to the version of events Mayes gave to officers prior to trial and to the same version of events he gave the jury during trial, we conclude that Tumblin did not receive a fair trial. Although the trial court correctly recognized the error, struck the testimony, and later gave a curative instruction, these corrective measures could not erase the inescapable impression upon the jury that Lieutenant Smith believed the version of events testified to by Mayes was truthful.
Under the facts and circumstances present in this case, we find that Smith's testimony that he believed Mayes would tell the truth deprived Tumblin of a fair trial. We are thus constrained to reverse and remand for a new trial. This reversal and remand for a new trial obviates the need for us to reach any of the penalty phase claims or the issue of proportionality in this case.
CONCLUSION
Accordingly, for the reasons explained above, we reverse Tumblin's convictions and sentences, and we remand for a new trial.
It is so ordered.
QUINCE, C.J., and PARIENTE, LEWIS, LABARGA, and PERRY, JJ., concur.
CANADY, J., dissents with an opinion, in which POLSTON, J., concurs.
CANADY, J., dissenting.
I disagree with the majority's conclusion that the trial court's denial of Tumblin's motion for mistrial constituted an abuse of discretion. I would affirm Tumblin's convictions and sentences because I conclude that there is no basis for reversal.
Under the abuse of discretion standard that governs our review of the trial court's denial of the mistrial motion, "the trial court's ruling should be sustained unless no reasonable person would take the view adopted by the trial court." Overton v. State, 801 So.2d 877, 896 (Fla.2001). A trial court should grant a motion for mistrial "only when the error committed was so prejudicial as to vitiate the entire trial." Cobb v. State, 376 So.2d 230, 232 (Fla. 1979). That is, declaring a mistrial is appropriate only when doing so "is necessary to ensure that the defendant receives a fair trial." Cole v. State, 701 So.2d 845, 853 (Fla.1997). "In this State the rule has been long established and continuously adhered to that the power to declare a mistrial and discharge the jury should be exercised with great care and caution and should be done only in cases of absolute necessity." Salvatore v. State, 366 So.2d 745, 750 (Fla.1978); see also England v. *1105 State, 940 So.2d 389, 402 (Fla.2006); Pagan v. State, 830 So.2d 792, 814 (Fla.2002); Thomas v. State, 748 So.2d 970, 980 (Fla. 1999).
Given this rule, which governed the trial court's consideration of the motion for mistrial, it is unwarranted to conclude that "no reasonable person would take the view adopted by the trial court" in denying the motion. Overton, 801 So.2d at 896.
I acknowledge that this Court has recognized that allowing "a police witness to give his opinion of a witness['s] credibility" is "especially harmful." Seibert v. State, 923 So.2d 460, 472 (Fla.2006) (quoting Page v. State, 733 So.2d 1079, 1081 (Fla. 4th DCA 1999)). The special concern associated with such improper testimony does not, however, justify a categorical rule that such errors are remediable only by declaring a mistrial. The error should instead be assessed within the context of the trial to determine whether corrective action short of a mistrial is sufficient to avoid a prejudicial impact that vitiates the entire trial. As with other errors, such improper testimony justifies a mistrial "only in cases of absolute necessity." Salvatore, 366 So.2d at 750.
Here, the context supports the conclusion that a reasonable trial judge could decide that striking the improper testimony and giving a curative instruction would be adequate "to ensure that the defendant receive[d] a fair trial". Cole, 701 So.2d at 853. The single reference to Mayes' credibility was indirect and apparently uncalculated. We have previously held that where an improper reference "was isolated and appear[ed] to have been inadvertent," "[t]he trial court was well within its discretion to determine that the statement did not prevent [the defendant] from having a fair trial." Merck v. State, 664 So.2d 939, 941 (Fla.1995).
Although Mayes' testimony clearly was a significant part of the State's case against Tumblin, it is unjustified to conclude that "the state's case hinged primarily on [Mayes'] credibility." Acosta v. State, 798 So.2d 809, 810 (Fla.App.2001) (emphasis added). Substantial evidence other than Mayes' testimony was presented to show not only that Tumblin was involved in the robbery and murder but also that Tumblinrather than Mayes shot the victim. Jean Nicole Ruth testified that Tumblin made statements shortly after the crimes occurred implicating himself in the shooting. Tumblin's sister Rhonda gave testimony establishing that Tumblin owned and possessed the murder weapon prior to the crimes. The evidence at trial also established that shortly after the crimes, the murder weapon was found in Tumblin's bedroom in Rhonda's house, a location to which Tumblinand not Mayeshad returned after the murder. Accordingly, even if Acosta was correctly decided, the instant case is distinguishable.
The trial court did not abuse its discretion in determining that Tumblin was not entitled to a mistrial. The convictions and sentences should be affirmed.
POLSTON, J., concurs.
NOTES
[1] Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966).
[2] Lieutenant Smith was with the Sheriff's Department but was working with the Fort Pierce Police Department in a violent crimes unit.
[3] Mayes explained that Tumblin said he would kill anyone who "existed" or "resisted" in the shopMayes could not recall which term was used. Mayes told Lieutenant Smith that Tumblin said he would kill anyone who "bucked."
[4] Although the murder weapon was a revolver, which normally retains the spent cartridges in the chambers, the evidence showed that the cylinder of this revolver was faulty and would fall open if not manually held closed.
[5] The guilt phase issues raised by Tumblin are: (1) whether the trial court erred in letting Lieutenant Smith, a senior police officer, testify to Anthony Mayes' prior consistent statement; (2) whether the trial court abused its discretion in denying Tumblin's motion for mistrial when Lieutenant Smith testified that he told another officer that Anthony Mayes would tell him the truth; and (3) whether the trial court reversibly erred in failing to conduct a proper hearing pursuant to Richardson v. State, 246 So.2d 771 (Fla.1971), after the State failed to disclose that Jean Nicole Ruth had recently been shot in an unrelated incident and was taking hydrocodone medication at the time of her testimony.
The penalty phase issues raised in this appeal, but not reached in this opinion are: (1) whether the court erred in instructing the jury and in finding that the homicide was committed in a cold, calculated, and premeditated manner; (2) whether the court failed to properly find and evaluate mental mitigation; (3) whether the death penalty is disproportionate; (4) whether the court erred in allowing Tumblin to choose the penalty phase witnesses; (5) whether the court properly evaluated admissible hearsay evidence in the penalty phase; (6) whether the court erred in overruling Tumblin's objection to victim impact evidence that Johns' wife suffered a stroke; (7) whether the court erred in allowing aggravation evidence of prior felonies that were not violent felonies; and (8) whether the court erred in denying Tumblin's special verdict form and instructions for aggravators.
[6] During the testimony of Jean Nicole Ruth, it was disclosed before the jury that she had recently been shot in an incident unrelated to the case and was taking hydrocodone medication at the time of her testimony. Although we do not discuss the third guilt phase claim, we remind trial judges that in conducting a Richardson inquiry after a discovery violation has occurred, the court should make express findings concerning whether the discovery violation (1) was willful or inadvertent; (2) was substantial or trivial; and (3) had a prejudicial effect on the aggrieved party's trial preparation. Richardson, 246 So.2d at 775. We also remind prosecutors and defense attorneys that any fact that can reasonably be found to bear on a witness's ability or competency to testify clearly is relevant and subject to discovery. See, e.g., Edwards v. State, 548 So.2d 656, 658 (Fla. 1989) (evidence of drug use for the purpose of impeachment is admissible if it can be shown that the witness is using drugs at or about the time of the testimony itself or it is expressly shown by other relevant evidence that prior drug use affects the witness's ability to observe, remember, and recount); § 90.608(4), Fla. Stat. (2009) (any party may attack the credibility of a witness by "[s]howing a defect of capacity, ability, or opportunity in the witness to observe, remember, or recount the matters about which the witness testified").
[7] The trial court took the motion for mistrial under advisement over the weekend and, after considering additional research and argument of counsel, denied the motion on the following Monday. Consequently, the curative instruction was given several days after Lieutenant Smith's actual testimony and made no specific reference to Smith's testimony. It simply advised the jury, "You are hereby instructed that the believability or credibility of all witnesses testifying in this case is within the exclusive province of the jury. Please disregard any suggestion to the contrary." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571140/ | 29 So.3d 290 (2010)
ARMSTRONG
v.
STATE.
No. SC09-1160.
Supreme Court of Florida.
February 10, 2010.
Decision Without Published Opinion Remanded. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917592/ | 178 B.R. 631 (1994)
In re SODEN-MARDANE EXCAVATING, INC., Debtor.
Bankruptcy No. 5-90-01294.
United States Bankruptcy Court, M.D. Pennsylvania, Wilkes-Barre Division.
September 26, 1994.
*632 Paul Sotak, Scranton, PA, for debtor.
Stephen Bresset, Honesdale, PA, for Honesdale Nat. Bank.
Joseph Gorman, Trustee in Bankruptcy, Tunkhannock, PA.
John Doran, Wilkes-Barre, PA, for Trustee.
OPINION AND ORDER
JOHN J. THOMAS, Bankruptcy Judge.
Before the court for consideration is an Objection of Joseph Gorman, Esquire, Trustee in Bankruptcy, (hereinafter "Trustee"), to claim number 18 filed on or about March 11, 1992 by Honesdale National Bank, (hereinafter "Bank"), in the approximate amount of Two Hundred Forty-Five Thousand Dollars ($245,000.00). The Trustee is currently holding the settlement proceeds of litigation initiated during the course of the administration of this estate by the Trustee against an account debtor. The Bank, through its proof of claim, claims that it has a security interest in the proceeds of that litigation. For the reasons provided herein, this court sustains the objection of the Trustee but only to the extent we find that the Bank does not have a secured interest in the proceeds of the litigation.
The parties, at the time of hearing on the instant objection, indicated to the court that it could render its decision based upon the documents filed of record in support and in opposition to the objection to the proof of claim in conjunction with the briefs filed by the respective parties. At the time of the hearing, the Bank indicated that the issue for resolution by the court was whether or not a financing statement attached to the proof of claim could act also as a security agreement thereby giving the Bank a security interest in the proceeds of the litigation. The Trustee, however, couched the issue as whether or not the financing statement could alter the terms of a security agreement which is also attached to the proof of claim.
Attached to the Bank's proof of claim, which indicates that it has an unsecured claim for approximately Twelve Thousand Dollars ($12,000.00) and a secured claim for Two Hundred Forty-Five Thousand Dollars ($245,000.00), is what was termed a current account status, which figures reflect principal of One Thousand Four Hundred Forty-Three and 74/100 Dollars ($1,443.74); interest of Twenty-One Thousand Two Hundred Forty-Five and 92/100 Dollars ($21,245.92); and costs and fees of Twenty-Five Thousand Five Hundred Seventy-One and 95/100 Dollars ($25,571.95), for a total of Forty-Eight Thousand Two Hundred Sixty-One and 61/100 Dollars ($48,261.61). The face of the proof of claim provides no indication as to the meaning of this document and the brief in opposition to the objection likewise sheds no light on the meaning of this document.
*633 Also attached is a financing statement dated July 22, 1988 indicating that the Debtor is Soden-Mardane Excavating, Inc. and that the secured party is the Honesdale National Bank. The document appears to be signed by the vice president of the Honesdale National Bank as well as both the president and the secretary of Soden-Mardane Excavating, Inc. The financing statement indicates that it covers the following types (or items) of property: "all personal property set forth in Exhibit "A" which is attached hereto and all equipment, machinery, tools, fixtures and accounts receivable of debtor . . .". Also attached to the proof of claim is a document titled Security Agreement dated July 22, 1988 by and between the Honesdale National Bank and Soden-Mardane Excavating, Inc. This document is likewise signed by officers of both the Debtor and the Bank. Without setting forth the security agreement language in its entirety, the court draws attention to the following language in the security agreement:
"AND WHEREAS, the debtor desires to enter into this agreement for the purpose of creating a security interest in favor of the creditor in the goods and chattels described in the schedule hereto attached, marked "Schedule A" and made a part hereof;"
Attached as Exhibit "A" to the security agreement is a multi-page list which contains a description of various equipment together with an appraised value for each piece of equipment. It should be noted that the security agreement no where mentions nor references the accounts receivable of the Debtor. It is on the basis of the language contained in the financing statement and the security agreement upon which both parties based their presentation of the issue for resolution in this case.
Both parties cite the Third Circuit case of Matter of Bollinger Corp., 614 F.2d 924 (3rd Cir.1980) in support of their position. In that case, the court took the position that there does not need to be a signed security agreement in order for the granting of a security interest. The court wrote the following concerning that issue:
"We think Pennsylvania courts would accept the logic behind the First and Ninth Circuit rule and reject the American Card rule imposing the requirement of a formal grant of a security interest before a security agreement may exist. When the parties have neglected to sign a separate security agreement, it would appear that the better and more practical view is to look at the transaction as a whole in order to determine if there is a writing, or writings, signed by the debtor describing the collateral which demonstrates an intent to create a security interest in the collateral." Id. at page 928.
Based upon the Bollinger reasoning and other cases cited by the Bank which relied on Bollinger, the Bank argues that a security agreement or a financing statement "may be used interchangeably to create a security interest". See Memorandum of Law of Honesdale National Bank, filed June 9, 1994, at page 2. This court has previously cited the reasoning of the circuit court in Bollinger to find that a security agreement existed in certain property based upon a review of a transaction with documents purported to be other than a security agreement. See In re William Hance, Bankruptcy No. X-XX-XXXXX, slip op., ___ B.R. ___ [1993 WL 773381] (M.D.Pa. March 18, 1993).
Unlike the Bollinger and Hance cases cited supra. and those other cases cited in the Bank's brief, the instant case does present both a financing statement and a security agreement. What is the impact of these two documents? We note that in order to create a perfected security interest in the collateral, there must be first a security agreement giving the creditor an interest in the collateral and then a financing statement signed by both parties and filed of public record. See Matter of Bollinger Corp., supra at page 926. The formal requirements of financing statements are contained in 13 Pa.C.S.A. § 9402 and the Trustee in this case does not question whether or not the formal requirements as prescribed by that section have been met by the Bank. The comment, however, to that subsection of the Uniform Commercial Code provides, inter alia, that "this section adopts the system of `notice filing' which *634 proves successful under the Uniform Trust Receipts Act. . . . The notice itself indicates merely that the secured party who has filed may have a security interest in the collateral described. [Emphasis added.] Further inquiry from the parties concerned will be necessary to disclose the complete state of affairs. Section 9-208 provides a statutory procedure under which the secured party, at the debtor's request, may be required to make disclosure. . . ."
What would a creditor learn from further inquiry after a review of the financing statement in question? The parties submitted to this court for review an extremely detailed security agreement which lists a lengthy compilation of specific descriptions of equipment with appraised values attached as Schedule A to the security agreement. Recall that this security agreement did not mention accounts receivable and, in fact, in several places referenced that there was a security interest in goods and chattels described on Schedule A of the security agreement.
The Trustee has drawn our attention to the case of In re Jackson, 93 B.R. 421 (Bkrtcy.W.D.Pa.1988), which case concerns whether or not a security agreement extended to a liquor license based upon an "after-acquired property" clause in a security agreement. The court, at page 424, wrote the following:
"We have recently joined other Courts in holding that `. . . collateral types listed in a financing statement may restrict the security interest created . . .'; however, `. . . said classifications cannot have the effect of enlarging the security interest.' In re Guterl Special Steel Corp., 91 B.R. 721 (Bankr.W.D.Pa.1988). See also, Mitchell v. Shepherd Mall State Bank, 324 F. Supp. 1029 (W.D.Okla.1971), aff'd 458 F.2d 700, 10 U.C.C.Rep.Serv. 737 (10th Cir.1972); In re Platt, 257 F. Supp. 478, 3 U.C.C.Rep.Serv. 275 (E.D.Pa.1966); In re Marta Cooperative, Inc., 74 Misc. 2d 612, 344 N.Y.S.2d 676, 12 U.C.C.Rep.Serv. 955 (Nassau Cty 1973)." In re Jackson, supra at page 424.
We find this reasoning compelling, especially in this case, when the financing statement gives, in essence, false notice as to the extent of the security agreement.
The financing statement in question does meet the basic Section 9-203(1)(b) requirements of a writing signed by the debtor describing the collateral. As the Bollinger court, supra, indicates, the "financing statement provides only an inferential basis for concluding that the parties intended a security agreement." See Matter of Bollinger, supra at page 928. While Bollinger and Hance, supra, both found that the parties intended to create a security interest by a reading of a financing statement and other supporting documents, the court cannot make that leap of faith as requested by the Bank in this case.
For all the foregoing reasons, the court will sustain the objection filed by the Trustee but only to the extent that the Bank does not have a secured interest in the proceeds of the litigation currently held by the Trustee. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917596/ | 178 B.R. 222 (1995)
In re CONSOLIDATED PIONEER MORTGAGE, a.k.a., Pioneer Liquidating Corporation, a.k.a., Pioneer Mortgage Corporation, Debtor.
Burk N. ASHFORD, and Theresa T. Ashford, Appellants,
v.
CONSOLIDATED PIONEER MORTGAGE, and Pioneer Liquidating Corporation, Appellees.
BAP No. SC-94-1452-RHJ. Bankruptcy No. 91-00214-M11.
United States Bankruptcy Appellate Panel of the Ninth Circuit.
Argued and Submitted January 18, 1995.
Decided February 27, 1995.
*223 Burk N. Ashford and Theresa T. Ashford, appellants in pro. per.
Roy L. Carlson, Cardiff by the Sea, CA, for appellees.
Before RUSSELL, JONES and HAGAN, Bankruptcy Judges.
OPINION
RUSSELL, Bankruptcy Judge:
The appellants filed a proof of claim based on § 365(j).[1] The reorganized debtor/appellee filed an objection to the appellants' claim alleging, inter alia, that no amount was owed to the appellants. After several hearings, the bankruptcy court disallowed the claim in full. We AFFIRM.
I. FACTS
On June 6, 1992, the appellants, Burk N. and Theresa T. Ashford ("Ashfords") filed a proof of claim based upon damages arising under § 365(j).[2] The Ashfords assert that the damages arose when the debtor, Consolidated Pioneer Mortgage Entities ("Pioneer")[3] rejected a purported executory contract which gave the Ashfords the right to purchase real property from Pioneer.
On October 8, 1993, the appellee/reorganized debtor, Pioneer Liquidating Corporation ("PLC"), the successor in interest to Pioneer, filed an objection to the Ashfords' claim. PLC based its objection chiefly on the ground that there was no executory contract and therefore no claim.
1. Real Property Lease and Contract to Purchase Real Property
In August 1988, the Ashfords offered to purchase real property located at 29200 Miller *224 Road, Valley Center, California ("real property") from Naimco, Inc. ("Naimco"), a subsidiary of Pioneer. At first, the Ashfords requested a twelve month lease on the real property at a monthly rental rate of $1,250. In lieu of rental payments until November 1988, the Ashfords offered to prepare the real property for habitation.
The president of Naimco was Gary F. Naiman ("Naiman"), who approved the lease and agreed to convert the lease to a sales contract at the end of a one year term upon a $20,000 cash down payment. There was no evidence offered by the Ashfords that they ever made the $20,000 down payment. The purchase price for the real property was set at $275,000.
In November 1988, a purported contract for the sale of the real property was drafted by Naimco. PLC contends that this contract was never executed. The Ashfords base their claim on this contract.
One year later, the Ashfords requested a six month extension of the real property lease until May 1, 1990.
On January 9, 1991, Naimco and five other affiliated debtor-entities of Pioneer filed a voluntary chapter 11 petition. On May 29, 1991, the first lienholder on the real property, Wesley D. Waters ("Waters") filed a motion for relief from the automatic stay in order to foreclose on the real property.
2. Rejection of the Ashfords' Executory Contract
On October 28, 1991, the bankruptcy court granted Pioneer's motion to reject the Ashfords' purported executory sales contract. The bankruptcy court carefully concluded that it was not making a ruling on whether or not the sales contract had actually existed between the Ashfords and Naimco. However, if the executory contract existed, it was deemed rejected.
On March 26, 1992, the bankruptcy court granted Waters' motion for relief from the automatic stay.
3. The Ashfords' Proof of Claim
On June 5, 1992, the Ashfords filed a proof of claim (Claim No. 7685/4208) ("claim"). The Ashfords classified their claim as a secured lien pursuant to § 365(j), in the amount of $49,794.33.
On June 19, 1992, the bankruptcy court confirmed the joint plan proposed by Pioneer and the Official Creditors' Committee. Pursuant to the plan, the appellee PLC was created as the reorganized debtor. One of its duties was to examine all proofs of claim and raise objections to certain claims.
On July 16, 1992, Waters completed his foreclosure on the real property, leaving the Ashfords with no security for their alleged claim. On September 8, 1993, the bankruptcy court held an ex parte hearing to consider the Ashfords' request to be listed as a secured creditor. The bankruptcy court ruled that since the underlying real property had been foreclosed upon, the Ashfords' proof of claim would be classified as unsecured. The bankruptcy court further allowed PLC thirty days to review the claim and file any objection. The Ashfords did not appeal this ruling.
4. PLC's Objection to the Ashfords' Claim
On October 8, 1993, PLC filed its objection to the Ashfords' proof of claim. The grounds for the objection were: (1) that there was insufficient supporting documentation attached to the claim; and (2) that the amount of the claim represented the amount the Ashfords owed for rent of the real property from Naimco and not the alleged sales price.
On October 15, 1993, the Ashfords filed their opposition to the objection and requested a hearing. A hearing was held on November 15, 1993. On December 9, 1993 the bankruptcy court held another hearing on the issue. After the second hearing, the bankruptcy court took the matter under submission.
On December 29, 1993, the bankruptcy court entered its notice of intended decision to disallow the Ashfords' claim in full based upon its finding that the Ashfords failed to present adequate evidence that a contract for the sale of the real property existed. On January 14, 1994, a final order was entered which disallowed the Ashfords' claim in full.
*225 On January 24, 1994, the Ashfords filed a motion for reconsideration, arguing that they were not given an opportunity to address the issues of proof to support their claim. On March 11, 1994, the bankruptcy court denied the Ashfords' motion for reconsideration. An order denying the motion was entered on April 4, 1994. The Ashfords timely filed their notice of appeal.
II. ISSUES
A. Whether PLC's objection to the Ashfords' proof of claim was timely filed.
B. Whether the bankruptcy court's denial of the Ashfords' claim in full was clearly erroneous.
C. Whether the bankruptcy court abused its discretion in denying the Ashfords' motion for reconsideration.
III. STANDARD OF REVIEW
The BAP reviews questions of statutory interpretation de novo. In re Pikush, 157 B.R. 155, 156 (9th Cir. BAP 1993), aff'd, 27 F.3d 386 (9th Cir.1994).
Whether there was compliance with Rule 3007 is a question of fact reviewed under the clearly erroneous standard. In re Cleanmaster Indus., Inc., 106 B.R. 628, 631 (9th Cir. BAP 1989). Similarly, compliance with Rule 3001 is also a question of fact reviewed for clear error.
A bankruptcy court's denial of a motion for reconsideration of an allowance or disallowance of a claim under § 502(j) and Rule 3008 is reviewed for an abuse of discretion. In re Int'l Yacht & Tennis, Inc., 922 F.2d 659, 662 (11th Cir.1991); Cleanmaster, 106 B.R. at 630.
IV. DISCUSSION
A. Timeliness of PLC's Objection to the Ashford's Proof of Claim
Section 502(a) provides that any proof of claim "is deemed allowed, unless a party in interest . . . objects." Whitney v. Dresser, 200 U.S. 532, 534-35, 26 S. Ct. 316, 317, 50 L. Ed. 584 (1906) (stating proof of claim is sufficient to establish prima facie proof of a valid debt for purposes of distribution of estate assets). Unlike a proof of claim, which must be filed before the bar date, an objection to a proof of claim may be filed at any time. In re Thompson, 965 F.2d 1136, 1147 (1st Cir.1992); In re Kolstad, 928 F.2d 171, 174 (5th Cir.), cert. denied, 502 U.S. 958, 112 S. Ct. 419, 116 L. Ed. 2d 439 (1991).
The procedure for filing objections to the allowance of claims is established in part by Rule 3007. Rule 3007 provides that an objection shall be in writing and filed with the bankruptcy court, and a copy of the objection with notice of a hearing shall be mailed to the claimant at least 30 days prior to the hearing.
The Ashfords, relying on Local Rule 3007-4 of the United States Bankruptcy Court for the Southern District of California ("Local Rule"), argue in their opening brief that PLC was "prohibited from objecting to a Claim after 30 days['] from [the] filing of the Claim. . . ."
Local Rule 3007-4(b) provides that "[t]he party objecting to a claim shall give no less than thirty (30) days['] notice of the objection to the claimant, . . ., in a format prescribed by Local Form CSD 2015. . . ." Local Form CSD 2015 is a form titled "Objection to Claim and Notice Thereof."
PLC responds, correctly, that Local Rule 3007-4(b) requires thirty days' notice of the objection to the claimant and does not require thirty days to file an objection, as the Ashfords argue.
PLC's objection to the Ashfords' claim was filed on October 8, 1993. The Ashfords filed their opposition to the objection and request for a hearing on October 15, 1993. The bankruptcy court did not schedule the hearing until November 15, 1993. Because more than thirty days had elapsed since the filing of PLC's objection, the Ashfords were afforded the 30 days' notice required by Local Rule 3007-4(b).
B. Disallowance of the Ashfords' Claim
A proof of claim filed in bankruptcy is prima facie valid under § 502(a). Rule 3001(c) requires a creditor to attach a writing to its proof of claim if the creditor bases its *226 claim on a writing. Similarly, Rule 3001(d) requires a creditor to accompany a proof of claim with evidence that the creditor perfected a security interest if it claims a security interest in property of the debtor. Rule 3001(f) provides that "[a] proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim."
Upon the filing of an objection, the objecting party "must produce evidence tending to defeat the claim that is of a probative force equal to that of the creditor's proof of claim." In re Simmons, 765 F.2d 547, 552 (5th Cir. 1985).
The Third Circuit Court of Appeals, in explaining the applicable burdens of proof, aptly stated:
The burden of proof for claims brought in the bankruptcy court under 11 U.S.C.A. § 502(a) rests on different parties at different times. Initially, the claimant must allege facts sufficient to support the claim. If the averments in his filed claim meet this standard of sufficiency, it is "prima facie" valid. In other words, a claim that alleges facts sufficient to support a legal liability to the claimant satisfies the claimant's initial obligation to go forward. The burden of going forward then shifts to the objector to produce evidence sufficient to negate the prima facie validity of the filed claim. It is often said that the objector must produce evidence equal in force to the prima facie case. In practice, the objector must produce evidence which, if believed, would refute at least one of the allegations that is essential to the claim's legal sufficiency. If the objector produces sufficient evidence to negate one or more of the sworn facts in the proof of claim, the burden reverts to the claimant to prove the validity of the claim by a preponderance of the evidence. The burden of persuasion is always on the claimant.
In re Allegheny International, Inc., 954 F.2d 167, 173-74 (3d Cir.1992) (citations omitted); In re Holm, 931 F.2d 620, 623 (9th Cir.1991); In re Pugh, 157 B.R. 898, 901 (9th Cir. BAP 1993) (holding claimant bears ultimate burden of persuasion as to validity and amount of the claim by a preponderance of the evidence). See generally Barry Russell, Bankruptcy Evidence Manual, §§ 301.13, 301.47 (West 1994-95 ed.).
The proof of claim filed by the Ashfords contained several documents, including: (1) a notice of election to terminate a rejected executory contract; (2) a notice of a claim of lien pursuant to § 365(j); (3) miscellaneous receipts and canceled checks; and (4) a notice of lien.
1. Claim Based on a Writing Rule 3001(c)
As previously stated, Rule 3001(c) provides that "[w]hen a claim, or an interest in property of the debtor securing the claim, is based on a writing, the original or a duplicate shall be filed with the proof of claim. If the writing has been lost or destroyed, a statement of the circumstances of the loss or destruction shall be filed with the claim."
It is generally held that failure to attach writings to a proof of claim does not require a bankruptcy court to disallow a claim on that basis alone. Rather, the claim is not entitled to be considered as prima facie evidence of the claim's validity. In re Stoecker, 143 B.R. 879, 883 (N.D.Ill.1992); Whitney, 200 U.S. at 534, 26 S. Ct. at 317 (holding failure to file writing does not raise presumption against the existence of the writing); In re Petrich, 43 F.2d 435, 437 (S.D.Cal.1930); In re Lindell Drop Forge Co., 111 B.R. 137, 142-43 (Bankr.W.D.Mich. 1990) (holding where claim did not comply with Rule 3001(c) it was not entitled to be considered as prima facie evidentiary proof).
"The purpose of the rule [Rule 3001(c)] is to allow a creditor who attaches documents to his proof of claim to then refrain from presenting any other evidence because the documents establish sufficient evidence to sustain the claim." Stoecker, 143 B.R. at 883.
The Ashfords' claim revolves around the rejection of the purported sales contract creating the lien under § 365(j). As such, the purported contract should have been filed with the proof of claim.
The Ashfords in their reply brief claim that they "are able to prove the contract was entered into, but that is not necessary as the *227 contract was rejected. . . ." We disagree. Since the Ashfords have failed to comply with Rule 3001(c), the claim cannot constitute prima facie evidence of validity under Rule 3001(f).
2. Evidence of Perfection of Security Interest Rule 3001(d)
Rule 3001(d) provides that "[i]f a security interest in property of the debtor is claimed, the proof of claim shall be accompanied by evidence that the security interest has been perfected."
The Ashfords have claimed that they have a security interest in the real property. The Ashfords further argue that the bankruptcy court impermissibly classified the claim as unsecured. As proof of their secured status, the Ashfords attached a notice of lien to their proof of claim.
The proof of claim does not establish proof of a sales contract or that the Ashfords made payments towards the purchase of real property, rather than rent. In addition, the notice of lien attached to the proof of claim lacked both a bankruptcy court file stamp and/or a stamp indicating whether the interest had been perfected under state law (i.e., recordation).
Since the Ashfords have also failed to comply with Rule 3001(d), the claim cannot also constitute prima facie evidence of validity.
3. Validity of Claim
Since the claim lacks prima facie evidence of validity, the Ashfords are required to allege facts sufficient to support their claim. The Ashfords have not alleged sufficient facts to prove the existence of a secured claim. In fact, based on the record before this panel, it is clear that the Ashfords were merely tenants with a month to month lease and not secured creditors.
The bankruptcy court correctly concluded that the Ashfords failed to present adequate evidence that a sales contract existed, that their payments were for the purchase of property, or that they had a security interest in the property. Thus, the decision of the bankruptcy court to disallow the Ashfords' claim in full was not clearly erroneous.
C. Reconsideration of Disallowance of Claim
Section 502(j) provides in pertinent part, that, "[a] claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case."
Rule 3008 states that "[a] party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate. The court after a hearing on notice shall enter an appropriate order."
Several courts have looked to Fed.R.Civ.P. 60(b) for the standards for reconsideration of claims and the definition of "cause" under § 502(j).[4]In re Colley, 814 F.2d 1008, 1010, reh'g denied, 818 F.2d 443 (5th Cir.), cert. denied, 484 U.S. 898, 108 S. Ct. 234, 98 L. Ed. 2d 193 (1987); In re W.F. Hurley, Inc., 612 F.2d 392, 396 n. 4 (8th Cir.1980); Cleanmaster, 106 B.R. at 630; In re Resources Reclamation Corp. of America, 34 B.R. 771, 773 (9th Cir. BAP 1983).
The Fifth Circuit Court of Appeals has held that where a Rule 3008 motion is filed within the ten day period to appeal, the applicable standards for reconsideration and definition of "cause" under § 502(j) must be found in Rule 59(a).[5]In re Aguilar, 861 F.2d 873, 874 (5th Cir.1988).
Fed.R.Civ.P. 59(a)(2) provides that the court may open the judgment, take additional testimony, amend or make new findings of fact and conclusions of law, and direct the entry of a new judgment for any of the reasons for which rehearings have been granted in suits in equity.
Here, the Ashfords argued that they did not have an opportunity to address the issue of whether they tendered the $20,000 down payment to convert the lease to a sales contract, and further raised objection to PLC being allowed to file an objection to the Ashfords' claim. The Ashfords concluded in *228 their motion for reconsideration that "new evidence and testimony has come to light to confirm the fraud inflicted upon the Court in this matter."
The evidence supplied by the Ashfords consisted of miscellaneous letters dated from June 8, 1989 to September 14, 1989 from the Ashfords to Naiman and/or Pioneer, and copies of canceled checks. As this evidence was available at the time of the hearing, it cannot be said to be new.
At the December 9, 1993 hearing on PLC's objection, the bankruptcy court specifically inquired whether the Ashfords had presented all the evidence in support of their claim:
THE COURT: . . . Is there any need for an evidentiary hearing? Should I just read what I have in front of me and make a decision on the claim?
MR. ASHFORD: Yes, your Honor. . . . The issue should be the amount of the Ashfords' claim.
THE COURT: I take it you're satisfied with the record, that everything you want me to consider on your behalf is here?
MR. ASHFORD: Yes, your Honor.
Even though the evidence was available at the time of the hearing, the bankruptcy court held a hearing on the Ashfords' motion for reconsideration on March 11, 1994. We find no abuse of discretion by the bankruptcy court in denying the Ashfords' motion for reconsideration when the evidence was not "newly discovered," the Ashfords failed to prove sufficient "cause," and they were given an opportunity at a prior hearing to submit any relevant evidence.
In addition, the Ashfords' main argument appears to be that the court order, rejecting their alleged executory contract, established the fact that they had a valid executory contract. This argument is without merit. The order rejecting the contract clearly reserved the issue of whether there was an executory contract to reject.
V. CONCLUSION
PLC's objection to the Ashfords' proof of claim was timely filed. The bankruptcy court did not commit clear error by disallowing the Ashfords' claim in full based on their failure to establish that there was an executory contract. The bankruptcy court also did not abuse its discretion in denying the Ashfords' motion for reconsideration. Accordingly, we AFFIRM.
NOTES
[1] Unless otherwise indicated, all Chapter, Section and Rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330 and to the Federal Rules of Bankruptcy Procedure, Rules XXXX-XXXX.
[2] Section 365(j) provides in relevant part:
A purchaser that treats an executory contract as terminated . . . or a party whose executory contract to purchase real property from the debtor is rejected and under which such party is not in possession, has a lien on the interest of the debtor in such property for the recovery of any portion of the purchase price that such purchaser or party has paid.
[3] Consolidated Pioneer Mortgage Entities is actually several chapter 11 cases which were administratively consolidated. These entities are Naiman Financial Corp.; Naimpro, Inc.; Naimco, Inc.; Naimco-Clairemont, Inc. dba Pioneer Mortgage; Alvarado Investment Co.; and Frontier Service Corp.
[4] Fed.R.Civ.P. 60(b) is made applicable to bankruptcy proceedings through Rule 9024.
[5] Fed.R.Civ.P. 59(a) is made applicable to bankruptcy proceedings through Rule 9023. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917561/ | 835 So. 2d 785 (2002)
Gordean Adella WINGFIELD, Individually and as Guardian and Conservator of the Estate of Her Major Son, Kenny Clark
v.
STATE of Louisiana Through the DEPARTMENT OF TRANSPORTATION AND DEVELOPMENT, Wilson Trailer Company, Inc. and National Union Fire Insurance Company of Pittsburgh, PA.
Jackie Murray, Sharon Ray Rovner, Ivy J. Wills as Legal Guardian and Attorney for Joseph Edward Wingfield and Joseph Edward Wingfield
v.
State of Louisiana, Through the Department of Transportation and Development and Wilson Trailer Company, Inc.
No. 2001 CA 2668, 2001 CA 2669.
Court of Appeal of Louisiana, First Circuit.
November 8, 2002.
Rehearing Denied December 31, 2002.
*792 J.E. Cullens, Jr., Charles R. Moore, Baton Rouge, Counsel for Plaintiffs-Appellees Gordean Adella Wingfield, et al.
Richard G. Creed, Jr., Baton Rouge, Robert E. Kleinpeter, Baton Rouge, Stacey Moak, Douglas M. Chapoton, Baton Rouge, Isaac H. Ryan, Robert E. Kerrigan, New Orleans, David F. Bienvenu, Nathan L. Schrantz, New Orleans, Counsel for Plaintiffs-Appellees Jackie Murray, et al. Counsel for Defendant-Appellant State of Louisiana Through the Department of Transportation and Development. Counsel for Defendant-Appellant National Union Fire Insurance Company of Pittsburgh, PA.
Before: FITZSIMMONS, GAIDRY and JAMES[1], JJ.
FITZSIMMONS, J.
On August 6, 1994, Mr. Kenneth Clark and his step-father, Mr. Jack Ray Wingfield, both commercial truck drivers, were hauling a load of cattle from Florida to Arizona via Interstate Highway 10, westbound. A fatal accident occurred when the driver of the double decked tractor-trailer, Mr. Clark, entered a sharply curving ramp on the interstate, just before the Mississippi River Bridge in Baton Rouge, Louisiana. At the time of the accident, approximately 5:50 a.m., Mr. Wingfield was asleep in the sleeper compartment of the tractor cab.
The tractor-trailer rolled over the ramp railing and landed on the highway below. *793 Mr. Wingfield subsequently died of the massive injuries he sustained. Mr. Clark also suffered serious injuries, including an injury to his brain that left him totally disabled and unable to care for himself.
Mr. Wingfield's wife, individually and as guardian for her son, Mr. Clark, filed suit on June 22, 1995. Mrs. Wingfield alleged that defendants, State of Louisiana, through the Department of Transportation and Development (DOTD), and its insurer, National Union Fire Insurance Co.,[2] were liable for all the damages sustained. She alleged that the DOTD knew that the interstate, at the site of the accident, was unreasonably dangerous because of defective design and inadequate warning signs. On July 21, 1995, plaintiffs, Jackie Murray, Sharon Ray Rovner, Ivy J. Wills as guardian for Joseph Edward Wingfield, and Joseph Edward Wingfield, filed a separate petition for damages based on essentially the same allegations. Jackie, Sharon, and Joseph are children of the deceased Mr. Jack Wingfield. Their mother, Ivy Wills, is the former spouse of the decedent. The two suits were consolidated.
After a jury trial, the jury found defendants, DOTD and its insurer, liable and attributed to them 54% of the fault. Mr. Clark, the driver, was found to be 46% at fault. The jury awarded damages totaling almost fourteen million dollars. A judgment implementing the jury's verdict was signed on May 25, 2001. The judgment assessed 66 percent of the taxable costs to defendants, and also imposed on DOTD 100% of the fault for the survival and wrongful death actions arising from Jack Wingfield's injuries and death.
Subsequently, plaintiffs filed a rule to tax costs, a post-trial motion for a new trial, and, in the alternative, a motion to have repealed Louisiana Revised Statutes 13:5114 declared unconstitutional. Defendants filed a motion for judgment notwithstanding the verdict (JNOV), and in the alternative, a motion for new trial. By judgment dated August 3, 2001, the various motions were decided, and the May 2001 judgment was amended where necessary and adopted. The trial court granted the JNOV, and reduced the Wingfield survival action award from $800,000.00 to $500,000.00. The trial court excluded from a reversionary trust, previously ordered by the trial court, the jury's award of future economic losses, but affirmed the inclusion in the trust of Mr. Clark's award for future medical expenses. The rule to tax costs, which asked for the trial court to give a specific amount of the plaintiffs' expenses to be paid by defendants, was taken under advisement, but is not at issue here. All other motions were denied.
Defendants appealed. Plaintiffs answered the appeal.
FEDERAL PREEMPTION
Before trial, defendants filed a motion for summary judgment on the issue of federal preemption of Louisiana tort law. Defendants alleged that the highway in question had been designed, built, and signed as a joint state and federal project, but with the mandated approval of the federal government and with 90 percent of the funding provided by the federal government. Based on their claim of preemption, defendants argued that plaintiffs could not seek damages based on alleged defects in a highway designed, constructed, and signed under federal requirements. The thrust of the argument seems to be that federal approval equates to the *794 absence of any negligence or liability for the state. Initially, plaintiffs pointed out that the applicable federal law, the Federal Aid Highway Act (FAHA), 23 U.S.C. § 101, et seq., did not contain any express preemption clause. They also argued that federal funds are linked to the state's compliance with the FAHA, but the FAHA does not provide any remedy to a victim of negligence. Finally, plaintiffs asserted that Louisiana tort law does not conflict with or frustrate the purpose or goal of the FAHA. Thus, the federal standards and rules are not meant to preempt by implication or by operation all of Louisiana tort law. After a hearing, the trial court denied the motion. Defendants assigned error to that ruling.
Federal preemption of an area of law may be either express or implied. Haydel v. Hercules Transport, Inc., 94-1246, p. 6 (La.App. 1 Cir. 4/7/95), 654 So. 2d 418, 423, writs denied, 95-1172 (La.6/23/95), 656 So. 2d 1019. Particularly in an area of law traditionally occupied by the state, the party claiming preemption must show an express preemptive clause in the federal law. Alternatively, the party must overcome an assumption of state sovereignty and prove "a clear and manifest purpose" by Congress to supersede state law. Rice v. Santa Fe Elevator Corporation, 331 U.S. 218, 230, 67 S. Ct. 1146, 1152, 91 L. Ed. 1447 (1947); see Haydel, 94-1246 at p. 6, 654 So. 2d at 424. In a similar vein, the court may find preemption when "compliance with both federal and state regulations is a physical impossibility," or when the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress ...." Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 141-43, 83 S. Ct. 1210, 1217, 10 L. Ed. 2d 248 (1963), quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404, 85 L. Ed. 581 (1941); Haydel, 94-1246 at pp. 6-7, 654 So. 2d at 424. If Congress's intention is ambiguous, there is a general presumption against preemption. See Florida Lime & Avocado Growers, Inc., 373 U.S. at 146-47, 83 S. Ct. at 1219.
Defendants reference no express preemption clause in the FAHA. Compare Duncan v. Kansas City Southern Railway Co., XXXX-XXXX, p. 7 (La.10/30/00), 773 So. 2d 670, 678, cert. denied, 532 U.S. 992, 121 S. Ct. 1651, 149 L. Ed. 2d 508 (2001) (The federal act contained an express preemption provision.). On the contrary, the FAHA contains the following: "appropriation of Federal funds ... under this chapter shall in no way infringe on the sovereign rights of the States to determine which projects shall be federally financed. The provisions of this chapter provide for a federally assisted State program." 23 U.S.C. § 145(a) (Emphasis added.).
Tort law falls within the traditional power of this state to protect its citizens. Louisiana tort law is designed to place the burden of repair on those that caused the damage or on those persons who had custody of damage-causing property. La. C.C. art. 2315 & 2317. The object of the FAHA is to promote, through federal funding, the construction of federal aid highways. See 23 U.S.C. § 101, et seq.; State of Vermont v. Goldschmidt, 638 F.2d 482, 483 (2nd Cir.1980). The FAHA does provide standards, but the issue here is not whether the highway met the minimum standards necessary for federal funding. See 23 U.S.C. § 109 (standards). The issue is whether the highway was an unreasonably dangerous one; defective by inadequate warnings and in design. The FAHA standards do not attempt to supersede the prohibition in our state law against negligent acts of design, construction, or signage or imposition of strict liability. Nothing in the FAHA provided an *795 alternative to our tort law or required the state to build an unreasonably dangerous and defective highway. Thus, based on our thorough review of the record, we see no error in the trial court's denial of the summary judgment on the issue of preemption. The defendants failed to prove a manifest intention by Congress to replace Louisiana tort law with the FAHA, or prove that our tort law stands as an obstacle to the federal standards of design, construction, or signage.
VALIDITY OF MEXICAN MARRIAGE
Defendants assigned error to the trial court's denial of their peremptory exception raising the objection of no right of action against the claims asserted by Mrs. Gordean Wingfield, the alleged spouse of the deceased, Mr. Jack Wingfield. Defendants asserted that the Wingfield marriage was not valid; thus, she was not the right party to assert the survival and wrongful death actions. See La. C.C. arts. 2315.1A(1) & 2315.2A(1).
Louisiana recognizes marriages that are valid under the law of the state (1) where contracted or (2) where the spouses were first domiciled. La. C.C. art. 3520. After a thorough review of Mrs. Wingfield's testimony concerning her marriage, her documentary evidence, and applicable California law (first marital domicile), we cannot say that the trial court erred in denying DOTD's exception of no right of action. See Freeman S.S. Co. v. Pillsbury, 172 F.2d 321, 323-24 (9th Cir.1949); McMurren v. McMurren, 143 Cal. App. 2d 804, 299 P.2d 888 (1956).
EVIDENCE OF MARIJUANA USE
During the proceedings below, plaintiffs filed a motion to exclude the expert testimony of defendants' experts on the issue of the alleged use of marijuana by the driver of the truck, Mr. Clark, and filed a motion for partial summary judgment on DOTD's "Affirmative Defense of Comparative Negligence for Driving Under the Influence of Marijuana."[3] On December 21, 2000, a hearing was held to resolve various issues raised concerning the admissibility of the marijuana evidence and plaintiffs' motion for summary judgment. At the hearing, exhibits and testimony were presented.
At the end of the December hearing, the trial judge candidly admitted that the disagreements among the experts on the issue of use and impairment, and its effect on driving, should be resolved by the jury. Additionally, the trial judge noted that most relevant evidence was prejudicial to one side or the other, but that generally the evidence on the impairment issue should go to the jury. However, the judge then made several credibility determinations concerning the various opinions of the experts. Based on the credibility determinations, the judge found that there was not sufficient evidence to arrive at the conclusion of impairment at the time of the accident. These factual findings and the court's conclusion served as the basis for the trial judge's grant of the motion to exclude defendants' experts' testimony regarding marijuana and grant of the partial summary judgment dismissing the defendants' affirmative defense of Mr. Clark's negligence in driving under the influence of marijuana. The excluded evidence from both sides was proffered.
On appeal, defendants assigned error to the exclusion of the evidence of the alleged marijuana use. They argue that the exclusion of the evidence tainted the jury verdict and requires a de novo review.
*796 To be admissible, evidence must be relevant and not unduly prejudicial. La. C.E. arts. 104 & 401-403. "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise." La. C.E. art. 702. Additionally, our supreme court has adopted federal jurisprudential guidelines, provided in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993), to aid in interpreting article 702 and ensure that scientific and technical expert testimony meets minimal standards of reliability and relevance. See State v. Foret, 628 So. 2d 1116, 1123 (La.1993).
The Daubert/Foret guidelines require that expert opinions be grounded in approved methods and procedures of science, rather than just subjective belief or unsupported speculation. The trial court must also ensure that the scientific "evidence admitted is not only relevant, but reliable." Daubert, 509 U.S. at 589, 113 S.Ct at 2795; see La. C.E. 104 & 401-403. Before the expert opinion can be admitted, the trial court must make "a preliminary assessment" that "the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue." Daubert, 509 U.S. at 592-93, 113 S. Ct. at 2796; Vardaman v. Baker Center, Inc., 96-2611, p. 6 n. 6 (La.App. 1 Cir. 3/13/98), 711 So. 2d 727, 731 n. 6. The court must also determine whether the "probative value" of the expert testimony or opinion would be "substantially outweighed by the danger of" confusion or an undue prejudicial effect on the fact finder. La. C.E. art. 403; see Foret, 628 So.2d at 1127; Fussell v. Roadrunner Towing and Recovery, Inc., 99-0194, p. 3 (La.App. 1 Cir. 3/31/00), 765 So. 2d 373, 376, writ denied, XXXX-XXXX (La.6/23/00), 765 So. 2d 1042; State v. Brooks, 98-1151, p. 19 (La.App. 1 Cir. 4/15/99), 734 So. 2d 1232, 1242, writ denied, 99-1462 (La.11/12/99), 749 So. 2d 651. To fulfill the trial court's gatekeeper function for proposed expert evidence, various factors may be considered by the trial judge: (1) whether the technique has been subjected to peer review or publication, (2) the "known or potential rate of error," (3) a "reliability assessment," in which the "degree of acceptance" within a scientific community may be determined and reviewed, and (4) the "testability" of the technique. Daubert, 509 U.S. at 593-94, 113 S. Ct. at 2796-2797. However, the approach is a flexible one, and the list of factors is neither exclusive nor mandatory. Daubert, 509 U.S. at 593-95, 113 S. Ct. at 2796-2797. The admission of evidence, expert or otherwise, is subject to the trial court's discretion. Fussell, 99-0194 at p. 3, 765 So. 2d at 375; see State v. Catanese, 368 So. 2d 975, 983 (La.1979).
After a review using the Daubert/Foret guidelines, and considering relevancy and possible prejudice, we agree with the judge's initial remarks that the majority of the evidence should have been presented to the jury. A legal error occurred when the trial judge based his ruling not on the evidentiary articles and jurisprudence governing admissibility, but on his own credibility decisions and choice of expert opinions. The legal error of the use of the wrong standard led to an abuse of the trial court's discretion in admissibility rulings.
Although the mere mention of marijuana may carry some prejudice, the presence of a controlled substance in a driver's system may certainly be relevant "as long as it could be reliably determined" that the *797 driver used the drug within a period of time that could probably "impair one's ability to drive." Ruiz-Troche v. Pepsi Cola of Puerto Rico Bottling Company, 161 F.3d 77, 83 (1st Cir.1998). With the presentation of evidence from both sides, the possibility of baseless prejudice engendered by a general bias against marijuana smokers would be addressed. The specific scientific knowledge imparted by the experts would be more probative than prejudicial. See La. C.E. art. 403.
The tests available to determine levels of marijuana in one's system and its effects on driving are far from settled areas of science. It was not defendants' burden to present evidence with an absolute degree of certainty, and not the trial judge's function to determine which theory was the best supported. See Ruiz-Troche, 161 F.3d at 85. The Daubert/Foret guidelines require "only that the proponent of the evidence show that the expert's conclusion has been arrived at in a scientifically sound and methodologically reliable fashion." Id.
In this case, defendants' experts offered evidence of three different immunoassay or Emit tests and a separate gas chromatography and mass spectrometry (GC/MS) test. All of these tests showed that the driver's urine was positive for marijuana. Although a certain procedure for confirmation is preferred, the same positive result from the Emit tests and the GC/MS test could have been reasonably viewed as a confirmation of the positive finding, which provided the necessary reliability for admission. For the next step in their analysis, defendants' experts used the findings from the Emit tests as proof that the driver's urine had a level at, or greater than, 100 nanograms per milliliter of carboxy THC (metabolite of marijuana). While formulating his opinion, a defense expert consulted the lab that reported the level at, or greater than, 100 nanograms about a possible ambiguity in the testing procedures. The lab answered the concerns and affirmed the result. From eyewitness testimony of the driver's past use, the driver could be reasonably classified as an occasional user of marijuana. With that classification and reported test level, and drawing from accepted, published studies, the defendants' experts concluded that, on average, marijuana use would have occurred within 24 hours. After consulting published studies showing that cognitive skills could be affected by marijuana use within 24 hours, defendants' experts then analogized driving decisions to some of the studied cognitive skills. Defendants also pointed to a study showing how flight skills were affected by marijuana use, and analogized flight skills to driving skills. Finally, considering alleged facts related to the accident, such as speeding, failure to brake, or failure to slow properly, defendants' experts opined that impairment of the driver from marijuana use was probable and could have contributed to the cause of the accident.
Plaintiffs' experts testified that blood tests were more reliable for quantifying the actual level of marijuana in a human's system and judging impairment. In the opinion of plaintiffs' experts, impairment could not be inferred or found from a urine test alone. Additionally, plaintiffs attacked the procedures employed by the various labs reporting the Emit and GC/MS test results, the limitations of urine testing, the defendants' interpretation of reported scientific studies, and the conclusions drawn from the test results and the experts' analyses. As an example of the limitations of urine tests, any attempted quantification should be adjusted to account for variations in the strength of marijuana, the user's history of usage, and height and weight of the user. These attacks may have rebutted and even overwhelmed defendants' allegations of actual *798 impairment, but did not establish that all of the opinions of defendants' experts were based on unacceptable scientific studies, or establish that the majority of their opinions were scientifically unreliable. Additionally, isolated testimony may have inferred that defendants' experts concluded impairment based only on the urine levels. However, a consideration of all of the testimony showed that other factors were relied on as well. In fact, one of the plaintiffs' experts used an essentially similar analytical process to determine impairment. Though one of plaintiffs' experts preferred to use allegedly more reliable blood tests, she deduced impairment from test results and a similar combination of factors as those considered by defendants' experts. For example, the blood test results, predictive models for estimation of use times, and studies on the effects of marijuana during the determined time frames were used to find impairment. Additionally, the plaintiffs' expert agreed that, even with a urine test, if "you know something about the individual's history..., if you know that they are infrequent or occasional users, there is a detection time when it is reasonable that individual used the drug." The record also revealed that one of plaintiffs' experts' criticism was that the defendants' experts' conclusions did not reach the level of reliability required for the reporting of scientific laboratory and study results. However, it appears from the depositions that the requisite scientific level is higher than the indicia of reliability required for expert testimony and opinion at trial.
Therefore, with the one exception discussed below, the trial court erred in granting the motion to exclude and motion for partial summary judgment. On summary judgment, the trial judge may not make credibility determinations. See La. C.C.P. art. 966; Independent Fire Ins. Co. v. Sunbeam Corp., 99-2181, 99-2257, pp. 16-17 (La.2/29/2000), 755 So. 2d 226, 236. Similarly, the inquiry under a Daubert/Foret review on summary judgment is based on undisputed material facts and "focus[es] ... solely on principles and methodology, not on the conclusions that they generate." Daubert, 509 U.S. at 595, 113 S. Ct. at 2797; see Independent Fire Ins. Co., 99-2181, 99-2257 at pp. 17, 755 So. 2d at 236 (Emphasis added.). "If a party submits expert opinion evidence in opposition to a motion for summary judgment that would be admissible under Daubert/Foret and the other applicable evidentiary rules, and is sufficient to allow a reasonable juror to conclude that the expert's opinion on a material fact more likely than not is true, the trial judge should deny the motion and let the issue be decided at trial." Independent Fire Ins. Co., 99-2181, 99-2257 at p. 17, 755 So. 2d at 236.
The obvious exception to our finding of admissibility is the defendants' expert's attempted calculation of a specific quantity of marijuana in the driver's system based on data from the qualitative GC/MS test data. In this case, the GC/MS test was done only as a qualitative test; a test done to confirm the presence of a controlled substance. It was never intended to serve as a quantitative test to determine a specific amount of material present in the tested sample. The plaintiffs' experts attacked various shortcomings in the collection, measurement, and testing of the urine sample used in the GC/MS test. The importance of these breaks in procedure are magnified when past data from a qualitative source is used to quantify. Although some scientific basis for the actual formula used for calculation was submitted, the trial court could have found that the data from the GC/MS was not gathered using the necessary procedural safeguards for quantitative testing. As a result, *799 the data used for the calculation lacked the requisite indicia of reliability. Without a minimal level of reliability, the subsequently calculated quantification from the GC/MS data would have been more prejudicial than probative and fails to meet the requirements of Daubert/Foret. In summary, we find that the trial judge could have reasonably excluded the defendants' attempted quantification, but committed legal error in excluding the other probative, admissible evidence in the form of defendants' experts' opinions on the issue of marijuana use and impairment. A trial judge may not decide what expert evidence the jury should hear based on its own credibility determinations and resulting resolution of the disagreements between the experts. Independent Fire Ins. Co., 99-2181, 99-2257 at pp. 16-17, 755 So. 2d at 236.
The exclusion of admissible evidence may interdict a fair verdict. Thus, we must consider the effect of the erroneous exclusion of evidence on the jury verdict.
The resolution of legal cases may involve questions of fact and questions of law. Factual determinations are the sole province of the trier of fact, whether it be judge or jury. To preserve the right to a fair trial, the function of the entity that views the witnesses and hears the testimony first hand must be safeguarded. When the process of credibility determinations and fact finding operates correctly, the factual findings are reviewed by this court using the standard of manifest or clear error. Stobart v. State, Department of Transportation and Development, 617 So. 2d 880, 882-83 (La.1993). In other words, based on a presentation of admissible evidence, the jury may have made a factual finding different from one that would have been reached by this court, but the difference does not rise to a clearly erroneous finding upon the record. Thus, this court will not reverse based on those findings. Rosell v. ESCO, 549 So. 2d 840, 844 (La.1989). However, if a trial judge commits legal error by denying the jury relevant, admissible evidence, the fact finding process is interdicted, and thus, the verdict may be "tainted." McLean v. Hunter, 495 So. 2d 1298, 1304 (La.1986). "A legal error occurs when a trial court applies incorrect legal principles of law and such errors are prejudicial." Evans v. Lungrin, 97-0541, 97-0577, pp. 6-7 (La.2/6/98), 708 So. 2d 731, 735. For these reasons, evidence should not be withheld from the jury, unless it clearly meets the legal requirements of exclusion.
If the exclusion of evidence tainted a jury verdict, this court steps into the shoes of the factfinder and conducts a de novo review of all the admissible evidence to ensure a fair trial and a fair judgment that implements the jury's verdict. McLean, 495 So.2d at 1304. However, a de novo review should not be undertaken for every evidentiary exclusion error. Unnecessary or added steps of review not only usurp the jury's function, but are a clear waste of judicial economy. Therefore, a de novo review should be limited to consequential errors; that is, the error prejudiced or tainted the verdict rendered. See Evans, 97-0541, pp. 6-7, 708 So. 2d at 735. In a few cases, this court believes that a preliminary de novo review can be limited to a determination of the impact of excluded evidence on the overall verdict. If it is clear from the initial limited de novo review that the excluded evidence could not have permissibly changed the final verdict (and thus did not taint the verdict), the jury's verdict should not be vacated and reviewed de novo. In the absence of a tainted verdict, the verdict is subject only to a manifest error review. See Ruiz-Troche, 161 F.3d at 87. Such is the case before us on the *800 issue of the excluded evidence concerning the driver's alleged use of marijuana, and its possible consequences.
Although we find that the majority of the proffered evidence was admissible, it is clear from our review of this record that the defendants failed in their burden to prove driver impairment at the time of the accident. Certainly, they failed to prove that any alleged impairment caused this particular accident. Indeed, if the jury had made a finding of impairment based on the expert evidence on the impairment issue, it would have been manifest, clear error. The plaintiffs' attacks on the lab procedures, the limits of the available test results, and on the analogies drawn and relied on by the defendants' experts, were more than sufficient to defeat the defendants' allegations of impairment and causation. Thus, in this case, the inclusion of the rejected evidence could not have permissibly changed the jury's verdict. In the absence of a tainted verdict, a de novo review of the record to determine "which party should prevail by a preponderance of the evidence" is not required. McLean, 495 So.2d at 1304. For these reasons, the portion of the jury verdict on allocation of fault will be reviewed using the manifest, clear error standard.
JURY INSTRUCTIONS
Defendants assigned error to the trial court's failure (1) to give a jury charge on the statutory presumption provided by Louisiana Revised Statutes 32:235E, and (2) to further instruct the jury on the definition of the word "unreasonable." Based on these errors, they request a de novo review. Plaintiffs assert that defendants did not request a charge on the statute or object to the court's failure to further define "unreasonable." Also, plaintiffs argue that the statutory presumption was rebutted, and the trial court fully informed the jury on the concept of unreasonable risks during the initial instructions. Therefore, the trial court properly exercised its discretion and no reversible error occurred. In its reply brief, DOTD noted the pages in the record where its objections to both errors appear.
Louisiana Revised Statutes 32:235E, provides, in pertinent part, that DOTD's compliance with the "traffic control devices manual shall be prima facie evidence of discharge ... of its obligations to the motoring public." At best, the prima facie evidence of compliance establishes a rebuttable presumption. See La. C.E. arts. 308 & 304.
The trial court instructs the jury on the law to be applied to the facts of the case. La. C.C.P. art. 1792. Whether to give an instruction is within the discretion of the court, and will not be disturbed absent an abuse of that discretion. Baxter v. Sonat Offshore Drilling, Inc., 98-1054, p. 6 (La.App. 1 Cir. 5/14/99), 734 So. 2d 901, 906. If requested by the jury after it retires, the trial court "may give" further instruction. La. C.C.P. art. 1796A & B. On appeal, the adequacy of jury instructions must be determined in the light of the jury instructions as a whole. The discovery of an error in the instructions does not by itself justify a de novo review. The appellate court must measure the gravity or degree of error, while considering the instructions as a whole and the circumstances of the case. Lincecum v. Missouri Pacific Railroad Company, 452 So. 2d 1182, 1190 (La.App. 1 Cir.), writ denied, 458 So. 2d 476 (La.1984). A verdict should not be set aside unless the error in the instructions misled the jury to such an extent as to prevent it from doing justice. Baxter, 98-1054 at p. 6, 734 So. 2d at 906.
*801 After a thorough review of the record, we find that the trial court erred in failing to give the requested jury instruction on the presumption offered by Louisiana Revised Statutes 32:235E. If the evidence supported a finding that the highway department standards, or MUTCD, were followed, DOTD was entitled to the presumption. Without knowledge of the presumption, the jury could not have known to apply it if the standards were found to have been met.
However, the measure of the error, in light of the circumstances of this record, does not require setting aside the jury's verdict and a de novo review of the evidence on the issue of whether the highway presented an unreasonable risk of harm. The record contains disagreements between the various experts over (1) whether the MUTCD minimum standards on signage were met; and (2) whether the minimum warnings were sufficient, under the peculiar facts concerning this area of I-10. From the evidence before the jury, reasonable persons could have concluded that the MUTCD standards were not met, and that, if met, the traffic device standards were not sufficient under the particular circumstances here. Thus, no prejudicial error or injustice occurred, and we see no reversible error. Even assuming for the sake of argument a de novo review was required, the result would be the same. Based on the circumstances here, an earlier, functional warning was required.
On the request for an additional explanation of the meaning of "unreasonable," we cannot say that the trial court abused its discretion. Initially, the court instructed the jury on the various applicable precepts, including an instruction on what factors may be used to determine unreasonableness. During deliberations, the jury requested an additional definition of "unreasonable." The minute entry for February 20, 2001 states that the trial court "conferred with counsel for both sides, and there was no agreement as to the definition; therefore, none was given by the court." Based on the information provided in the initial jury instructions, and the inability of the parties to agree on an additional explanation or definition, we see no abuse of the trial court's discretion.
OBJECTIONS TO WITNESS TESTIMONY AND EVIDENCE
Gillen Testimony
On the day of the accident, Mr. Michael Gillen was a Baton Rouge police officer charged with investigating the accident. During his testimony, DOTD objected and argued that Mr. Gillen was giving expert opinion testimony without having been qualified as an expert. On appeal, defendants assigned error to the trial court's failure to exclude the opinion testimony. Defendants also argued that Mr. Gillen, who worked for plaintiffs' attorneys after leaving the police department, should not have been allowed to testify on the basis of prejudice.
Louisiana Code of Evidence article 701 allows a lay witness to provide opinion testimony if (1) "[r]ationally based on the perception of the witness; and (2)[h]elpful to a clear understanding of his testimony or the determination of a fact in issue." Thus, Mr. Gillen, though not an accident reconstruction expert, could give opinion testimony based on his training, investigation, perception of the scene, and observation of physical evidence. See Whetstone v. Dixon, 616 So. 2d 764, 768 (La.App. 1 Cir.1993), writ denied, 623 So. 2d 1333 (La. 1993) (rehearing granted on other grounds) (State trooper was allowed to testify on point of impact for accident.). Whether article 701 was violated or Mr. *802 Gillen was unduly prejudiced in favor of the plaintiffs was a determination within the discretion of the trial court. See State v. Catanese, 368 So.2d at 983; Belle Pass Terminal, Inc. v. Jolin, Inc., 92-1544, 92-1545, p. 11 (La.App. 1 Cir. 3/11/94), 634 So. 2d 466, 476-77, writ denied, 94-0906 (La.6/17/94), 638 So. 2d 1094.
The majority of Mr. Gillen's testimony related pertinent facts about the accident scene. For the most part, the portion of the testimony that could be seen as hybrid or opinion testimony met the requirements of Code of Evidence article 701. Where Mr. Gillen may have strayed into opinion beyond those codal parameters, his testimony was redundant to the testimony of plaintiffs' qualified experts. As to the claim of prejudice, the fact of prior work relationships alone is not sufficient to support a claim of collusion or unduly prejudiced testimony. Attorneys and investigators often work together on projects and in opposition on others. More importantly, defendants' questioning informed the jury of Mr. Gillen's work connections to plaintiffs' attorneys and that Mr. Gillen was no longer a police officer. For these reasons, we see no basis for reversible error.
Bronstad Testimony
Before trial, defendants filed a motion in limine to exclude the opinion of plaintiffs' expert, Mr. Maurice Bronstad, on the structural character of the site of the accident. At trial, the court accepted Mr. Bronstad as an expert for plaintiffs in the area of highway safety engineering. Mr. Bronstad testified that the accident occurred on "a ramp like structure" that is actually a continuation of I-10 as opposed to defendants' characterization of a ramp approach to I-10.
In briefs to this court, defendants highlighted the record page where the testimony appears and argue that the trial court erred in denying the motion in limine. Specifically, defendants assert that Mr. Bronstad had no factual basis for his opinion and that the testimony did not meet the Daubert/Foret standards for reliability.
Based on our thorough review of the record, we see no abuse of the discretion afforded the trial court. See State v. Catanese, 368 So.2d at 983. The attack on the testimony is based on an opposing description or characterization given by defendants' expert, rather than on a proven lack of scientific support or reliability.
Defendants also cited a specific portion of the trial transcript and assigned error to the trial court's failure to disallow Mr. Bronstad's irrelevant "hearsay" testimony concerning six prior accidents on the same roadway. Mr. Bronstad testified that, in preparation for trial, he reviewed six prior accident reports. Mr. Bronstad opined that the site of the accident was prone to tractor-trailer load shift problems and rollover. However, no hearsay or relevancy objection to the testimony appears of record at the pages placed at issue by defendants. During Mr. Bronstad's testimony, the trial court refused to let photographs and reports of the accidents into evidence. Instead, the exhibits were proffered by plaintiffs. Subsequent to Mr. Bronstad's testimony, defendants discussed the same six accidents with their expert, Mr. Neil Rowan.
In response to an appellee brief arguing the lack of an objection to the testimony at issue, DOTD replied that admissibility was argued during pre-trial motions. However, the only specific citation to a record page or exhibit is to an earlier general trial objection to any discussion of the six accidents. No basis for the general objection was given, no objection to the pre-trial *803 ruling was cited, and no reference to the pre-trial ruling was provided.
Evidentiary admissibility rulings are well within the discretion of the trial court. See State v. Catanese, 368 So.2d at 983; Belle Pass Terminal, Inc., 92-1544, 92-1545 at p. 11, 634 So. 2d at 476-77. In the absence of a contemporaneous objection made with the grounds thereof, this court may refuse to consider the assigned error. See La. C.C.P. art. 1635; Bienvenu v. Dudley, 95-0547, p. 8 (La.App. 1 Cir. 10/3/96), 682 So. 2d 281, 286, writs denied, 96-2661, 96-2673 (La.12/13/96), 692 So. 2d 1069, 1070. This court may also refuse to consider an argument made without specific reference to the record volume and page containing the basis for the argument. Uniform Rules-Courts of Appeal, Rule 2-12.4.
Based on our thorough review of the record, including the failure to document sufficiently the specific grounds and ruling, and the defendants' own offered testimony on the same accidents, we see no basis for a grant of defendants' request for de novo review or reversible error. The complained of testimony was not contemporaneously objected to by defendants at the cited record page, the prior general objection did not state the grounds for the objection, no objection was cited to any pre-trial ruling on this matter, and the record as a whole does not support a finding that Mr. Bronstad's testimony caused a prejudicial or reversible error. A reasonable jury could have found that the character of the accident site was prone to load shift and rollover problems based on testimony and evidence surrounding the one accident at issue.
Rebuttal Testimony
On rebuttal during the trial, plaintiffs offered Mr. Gillen and another expert, Mr. James Raymond Lock, an expert in accident reconstruction and highway design. Defendants assigned error to the trial court's failure to disallow the rebuttal testimony by plaintiffs' experts. Essentially, defendants argue that the testimony was redundant of their prior testimony and not valid rebuttal testimony.
Plaintiffs are entitled to rebut the evidence and testimony offered by defendants. La. C.C.P. art. 1632(3). Evidentiary admissibility rulings are well within the discretion of the trial court. State v. Catanese, 368 So.2d at 983; Belle Pass Terminal, Inc., 92-1544, 92-1545 at p. 11, 634 So. 2d at 476-77.
Plaintiffs' experts' rebuttal testimony was generally in the same areas of their initial testimony, but was not unduly repetitious or prejudicial. The thrust of their testimony was to rebut the evidence and opinions offered by defendants, particularly defendants' accident reconstructionist. In great part, the rebuttal testimony centered on defendants' expert's opinion on what physical evidence, found at the scene, actually related to the accident in question; a point on which the two sides disagreed. Thus, we see no abuse of discretion by the trial court.
Tickets
Defendants assigned error to the trial court's exclusion of two traffic tickets that defendants offered as evidence. Allegedly, the tickets were issued to Mr. Clark, the driver of the truck involved in the accident. The tickets were not introduced, but were proffered. Although DOTD cites in its brief to a page in the record where the trial court ruled on admissibility, the record does not contain a specific ruling excluding the tickets.
The relevancy of evidence and the effect of prejudice from the offered evidence *804 are governed by Louisiana Code of Evidence articles 401-403. These evidentiary admissibility rulings are well within the discretion of the trial court. State v. Catanese, 368 So.2d at 983; Belle Pass Terminal, Inc., 92-1544, 92-1545 at p. 11, 634 So. 2d at 476-77. Assuming the trial court specifically ruled and excluded the tickets, our review of the record and the proffered tickets supports a ruling based on insufficient relevancy or a finding that the tickets were more prejudicial than probative. Certainly, we see no abuse of the trial court's discretion. One ticket appears to be a speeding ticket; the other is not. Neither ticket has a discernable date, nor can the essential facts of the speeding ticket be gleaned from what is a poor copy at best.
DEFECT AND ALLOCATION OF FAULT
Both sides offered testimony and evidence on the plaintiffs' allegations of an unreasonably dangerous roadway, defective by inadequate warnings and in design. Both sides presented contradictory reconstructions of how the accident occurred and its cause. In its verdict, the jury specifically found "a defect existed in I-10 that created an unreasonable risk of harm," the DOTD had notice of the defect, and that DOTD and the driver of the truck were at fault. The jury allocated 54% of the fault to DOTD and 46% to Mr. Clark.
Mrs. Wingfield, the co-plaintiffs in her suit, and defendants assigned error to the jury's allocation of fault. Defendants also assigned error to the jury's finding that DOTD was liable.
Whether a highway is unreasonably dangerous is a finding of fact reviewable under the standard of manifest error. That is, the trier of fact's findings may be set aside only if found to be clearly or manifestly wrong. See Snearl v. Mercer, XXXX-XXXX, XXXX-XXXX, p. 10 (La.App. 1 Cir. 2/16/01), 780 So. 2d 563, 573, writs denied, XXXX-XXXX, XXXX-XXXX (La.6/22/01), 794 So. 2d 800, 801. Allocation of fault is a factual finding within the discretion of the trier of fact. It also is reviewed under the manifest error standard. Snearl, XXXX-XXXX, XXXX-XXXX at p. 25, 780 So. 2d at 582.
From the verdict, we do not know on what basis, whether design, signage, or both, the jury found that a defect existed. However, based on a thorough review of this record, the jury could have reasonably found as follows: (1) that a sharp lefthand curving continuation of I-10W, which necessitated an unusual 20 MPH drop in speed on an interstate, coupled with a seemingly straight flow for motorists exiting onto I-110, created a hazardous driving condition; (2) that the sharpness of the curve and drop in speed would be particularly hazardous for a driver of a loaded, top heavy, double-decker cattle trailer, who was unfamiliar with the I-10W/I-110 split in Baton Rouge; (3) that prior to the actual split and entrance onto the curve, the driver's attention had been engaged by signs directing the need for choice of lanes based on destination; (4) that some signs were dirty or filmy and that an electronic warning sign placed in advance of the curve was not working on the day of the accident; (5) that the first warning of a sharp curve and significant drop in speed came at the entrance to the curving ramp; (6) that these conditions created a defect that caused an unreasonable risk of harm on the day of the accident, (7) that DOTD had notice of the defect; and (8) that DOTD was negligent in not placing an earlier, static, permanent sharp curve and speed reduction warning in advance of the split and ramp entrance. The jury could also have found that an experienced commercial cattle truck driver should have been alerted and slowed further, *805 or appropriately responded to the unusual hazard sooner than he did; decisions that may have ameliorated the severe consequences. Thus, from our review of this particular record, we cannot say that the jury's verdict on liability was manifestly or clearly wrong. Additionally, if sitting as the fact finder, we may have allocated the fault differently, but we see no abuse of the jury's great discretion in its assessment of fault.
REALLOCATION OF FAULT BY TRIAL COURT
In the judgment dated May 2001, which was later amended and adopted by the appealed judgment of August 2001, the trial court re-allocated Mr. Clark's 46 percent of the fault to DOTD. The reallocation applied only to the Wingfield survival and wrongful death causes of actions and awards. The trial court's decision was based on the status of Mr. Wingfield and Mr. Clark as co-employees, who cannot sue each other for recovery based in tort. See La. R.S. 23:1032. The trial court, based on the inability of co-employees to sue each other, found that defendants, as solidary obligors with Mr. Clark, were liable for the full 100 percent of the Wingfield survival and wrongful death claims. Defendants object to the reallocation.
At the time of the accident in 1994, Louisiana Civil Code article 2324B provided, in pertinent part, as follows: "liability for damages caused by two or more persons shall be solidary only to the extent necessary for the person suffering injury, death, or loss to recover fifty percent of his recoverable damages ...." Additionally, the article provided that:
Except ... as otherwise provided by law, ... the liability for damages caused by two or more persons shall be a joint, divisible obligation, and a joint tortfeasor shall not be solidarily liable with any other person for damages attributable to the fault of such other person, including the person suffering injury, death, or loss, regardless of such other person's... degree of fault, or immunity by statute or otherwise.
La. C.C. art. 2324B.
The issue here is the applicability, to named joint tortfeasors Mr. Clark and DOTD, of the statutory cap for solidary liability provided by article 2324. However, in spite of the wording of the statute, this court has held that the presence in the suit of a co-employee joint tortfeasor, named or unnamed, brings the issue of any cap under the holding of Cavalier v. Cain's Hydrostatic Testing, Inc., 94-1496 (La.6/30/95), 657 So. 2d 975 (superseded by 1996 statute). Snearl, XXXX-XXXX, XXXX-XXXX at pp. 28-31, 780 So. 2d at 584-86. In Cavalier, the Louisiana Supreme Court held that Civil Code article 2324B did not apply to the quantification of statutorily immune non-party employers.[4] Focusing on Cavalier's interpretation of article 2324B in light of Louisiana Revised Statutes 23:1032 immunity, the Snearl court *806 found that Cavalier's jurisprudential exemption from the statutory cap of 50 percent must be extended to a named joint tortfeasor co-employee, as well as non-party employers. Without the protection of the statutory cap, all the fault attributable to a co-employee may be reallocated to the non-immune tortfeasor. Snearl, XXXX-XXXX, XXXX-XXXX at p. 31, 780 So. 2d at 586.
In this case, Mr. Clark and Mr. Wingfield were co-employees.[5] Thus, Mr. Wingfield's estate and heirs may not sue Mr. Clark because of the statutory immunity granted to co-employees by Louisiana Revised Statutes 23:1032. Based on their immunity status, and the inapplicability of the article 2324B cap as found by Snearl, DOTD may not take advantage of the 50 percent statutory cap for solidary obligors. Without the protection of article 2324B, the full amount of Mr. Clark's fault may be reallocated to DOTD. See Snearl, XXXX-XXXX, XXXX-XXXX at p. 31, 780 So. 2d at 586. With the reallocation of Mr. Clark's 46 percent, DOTD becomes responsible for 100 percent of the fault and of the award for the survival and wrongful death claims. Therefore, the reallocation of fault as set by the trial court is affirmed.
DAMAGES
Plaintiffs and defendants assigned error to one or more components of the award of damages. Specifically, defendants assert that the jury awards of $5,000,000.00 for Mr. Clark's general damages, $500,000.00 for Mrs. Gordean Wingfield's loss of consortium claim, and $1,000,000.00 to Mrs. Gordean Wingfield for the wrongful death of her husband, are excessive under Louisiana law. In their answer to the appeal, plaintiffs argue that the trial judge erred in granting defendants' motion for judgment notwithstanding the verdict (JNOV). The trial court reduced the award to Mr. Wingfield's wife and children for his Civil Code article 2315.1 survival action from $800,000.00 to $500,000.00.
The trier of fact has discretion in the assessment of damages. La. C.C. art. 2324.1. On appeal, consideration of the jury's determination of damages is limited to a review for manifest error or abuse of discretion. In determining the amount of damages, the discretion vested in the trier of fact is "great." Youn v. Maritime Overseas Corp., 623 So. 2d 1257, 1261 (La.1993), cert. denied, Maritime Overseas Corp. v. Youn, 510 U.S. 1114, 114 S. Ct. 1059, 127 L. Ed. 2d 379 (1994). The reviewing court must evaluate the particular injuries and their effects on the particular injured persons. Reck v. Stevens, 373 So. 2d 498, 501 (La.1979). Only after a determination of an abuse of discretion or manifest error is a resort to prior awards appropriate, and then only for the purpose of determining the highest or lowest point that is reasonably within that discretion. Youn, 623 So.2d at 1260. If the trier of fact awarded excessive damages, the reviewing court can "disturb the award ... only to the extent of ... lowering it ... to the highest ... point which is reasonably within the discretion afforded that court." Coco v. Winston Industries, Inc., 341 So. 2d 332, 335 (La.1976).
Mr. Clark was not conscious at the scene, and never regained consciousness. However, the doctors at the hospital gave *807 him pain medication in response to signs that he was experiencing pain. As a result of the accident, Mr. Clark suffered a closed head injury, fractured ribs, numerous abrasions, trauma to the right forearm, a partially detached ear, collapsed lungs, liver laceration, and a fracture of the femur. From conflicting testimony, the jury could have reasonably found that Mr. Clark may live for another 25-30 years, and was in a permanent minimally responsive state, rather than a truly vegetative unresponsive state.
The jury awarded Mr. Clark $1,500,000.00 for past and future bodily injury and physical pain and suffering, $500,000.00 for permanent disability and disfigurement, $1,500,000.00 for past and future enjoyment of life, and $1,500,000.00 for past and future mental anguish and distress.
General damages by their nature are not susceptible of exact quantification. Duncan v. Kansas City Southern Railway Co., XXXX-XXXX, p. 13 (La.10/30/00), 773 So. 2d 670, 682. And although the jury's discretion is great, on this particular record, we find (1) that the awards for bodily injury and for disability and disfigurement are somewhat duplicative, and (2) that the jury erred by awarding an excessive amount for past and future physical pain and suffering and past and future mental anguish and distress. The awards may have been sustainable for a catastrophically injured victim generally, or a victim fully aware of the drastic changes permanently affecting his life. However, the magnitude of the injuries suffered does not determine the awareness. The level of physical and mental suffering, for a minimally aware victim, is not the same for a fully cognizant victim. Having found that these awards are excessive, we reviewed the jurisprudence for guidance in setting the highest reasonable award based on the circumstances here. See Coco, 341 So.2d at 335. From our review of the record, in light of similar awards for serious injuries, we find the highest reasonable award for the combined categories of bodily injury, physical suffering, and mental suffering is $1,000,000.00, rather than the $3,000,000.00 awarded by the jury. Chamberlain v. State, Department of Transportation and Development, 91-1942R, p. 3 (La.App. 1 Cir. 3/11/94), 633 So. 2d 871, 873 (an older case with award of $600,000.00 for past and future physical and mental suffering); compare with Snearl, XXXX-XXXX, XXXX-XXXX at pp. 3 & 35-36, 780 So. 2d at 569 & 589 (an award of $2,000,000.00 for past and future physical and mental suffering to a fully aware victim with catastrophic injuries) and Brown v. Glaxo, Inc. 99-1531, p. 11 (La.App. 1 Cir. 11/15/00), 790 So. 2d 35, 43, writs denied, XXXX-XXXX, XXXX-XXXX (La.2/09/01), 785 So. 2d 827, 832 (Plaintiff in vegetative state received no award for physical and mental pain and suffering.). Therefore, we reduce the award for the combined categories of bodily injury and physical and mental suffering to $1,000,000.00. Thereby, the total general damages award is reduced from $5,000,000.00 to $3,000,000.00.
Mr. and Mrs. Wingfield had been married about 27 years at the time of his death; her third marriage and his second. Mr. Wingfield spent a lot of time on the road as a truck driver, but, by all accounts, they had a loving and close relationship. When he died, Mr. Wingfield was 60 years old. He had a worklife expectancy of 2.39 years. Based on her wrongful death claim under Louisiana Civil Code article 2315.2, Mrs. Wingfield was awarded $1,000,000.00 for the death of her husband and $70,000.00 for loss of support. The medical and funeral expenses were awarded separately.
*808 Wrongful death claims do "not arise until the victim dies and it compensates" the claimants for their own injuries suffered after the death of the victim. Taylor v. Giddens, 618 So. 2d 834, 840 (La. 1993). The elements of the award for wrongful death include loss of love, affection, companionship, support, and funeral expenses. Gibson v. State, Department of Transportation and Development, 95-1418, 95-1419, p. 14 (La.App. 1 Cir. 4/4/96), 674 So. 2d 996, 1006, writs denied, 96-1862, 96-1895, 96-1902 (La.10/25/96), 681 So. 2d 373, 374.
Funeral expenses were separately awarded and not challenged. To the extent that the loss of support element of the total wrongful death award was challenged, $70,000.00 is well within the discretion of the jury. From our review of the different expert opinions on the issue, we see no abuse.
As to the award of $1,000,000.00 for the other elements of the wrongful death claim, the award is excessive under the facts of this record. It is possible that the jury may have been affected by the severity of Mr. Wingfield's injuries and tragic death before his wife and family arrived to comfort him. Such injuries and suffering are elements of the survival action. See La. C.C. art. 2315.2; Taylor, 618 So.2d at 840. If the jury considered such elements, it erred. However, regardless of the actual reasons for the unusually high death award, the jury abused its discretion by awarding $1,000,000.00. Considering all the relevant factors, the closeness of the relationship, Mr. Wingfield's age, his time away from home, and the length of the marriage, in light of prior valid awards under similar circumstances, $500,000.00 is the highest reasonable award possible at the time of trial. See Gibson, 95-1418, 95-1419 at pp. 14-15, 674 So. 2d at 1006 (Close relationship and difficulty of wife in recovering from the death of her spouse was considered in award of $350,000.00.); Rick v. State, Department of Transportation and Development, 93-1776, 93-1784 pp. 13-14 (La.1/14/94), 630 So. 2d 1271, 1277 (Supreme court considered the fact that couple worked together everyday in family business as grounds for reinstating trier of fact's award of $400,000.00.); Faucheaux v. Terrebonne Parish Consolidated Government, 625 So. 2d 683, 685 (La.App. 1 Cir.1993) (Loving relationship and 27 year marriage were factors considered in affirming award of $300,000.00.)
Therefore, we affirm the loss of support component, but reduce the death award to $500,000.00, for a total wrongful death award of $570,000.00. We amend the judgment accordingly.
Generally, loss of consortium claims by parents are calculated based on loss of love and affection, loss of companionship, loss of material services and financial support, and loss of aid and assistance. Snearl, XXXX-XXXX, XXXX-XXXX at p. 40, 780 So. 2d at 591-92. Certainly Mrs. Wingfield had a loving relationship with her son, and due to his permanent status of minimal responsiveness, she lost the former level of companionship that they enjoyed. However, Mr. Clark had not lived with his mother for several years, and they had not enjoyed a long-term, daily relationship; nor did Mr. Clark provide significant assistance, material services, or financial support to his mother. For these reasons, we find that an award of $500,000.00 was excessive. The highest possible award for loss of consortium under the facts here is $200,000.00. See Snearl, XXXX-XXXX, XXXX-XXXX at pp. 40-42, 780 So. 2d at 591-93 ( and cases cited therein). Therefore, the judgment must be amended to reflect the reduction from $500,000.00 to $200,000.00 *809 for Mrs. Wingfield's loss of consortium claim.
The standard of review for a JNOV on appeal is a two-part inquiry. In reviewing a JNOV, the appellate court must first determine if the trial court erred in granting the JNOV. This is done by the reviewing court using the same criteria used by the trial judge to decide whether to grant the motion. Joseph v. Broussard Rice Mill, Inc., XXXX-XXXX, p. 5 (La.10/30/00), 772 So. 2d 94, 99. In other words, considering all the evidence in the light most favorable to the party opposing the motion for JNOV, do the facts and inferences point so strongly and overwhelmingly in favor of the moving party that reasonable persons could not reach different conclusions? Smith v. Davill Petroleum Company, Inc., 97-1596, p. 4 (La. App. 1 Cir. 12/09/98), 744 So. 2d 23, 27. "If the answer to that question is in the affirmative, then the trial judge was correct in granting the motion. If, however, reasonable persons in the exercise of impartial judgment might reach a different conclusion, then it was error to grant the motion and the jury verdict should be reinstated." Joseph, 00-0628 at p. 5, 772 So. 2d at 99. If we determine that the trial court correctly applied its standard of review as to the jury verdict, the appellate court reviews the JNOV using the manifest error standard of review. Smith v. Davill Petroleum Co., Inc., 97-1596 at pp. 4-5, 744 So. 2d at 27.
On plaintiffs' claim that the JNOV was granted in error, we agree. Severity and duration of the pain and suffering are valid considerations in assessing pain and suffering. Fleniken v. Entergy Corporation, XXXX-XXXX, XXXX-XXXX, p. 29 (La.App. 1 Cir. 2/16/01), 780 So. 2d 1175, 1194, writs denied, XXXX-XXXX, XXXX-XXXX, XXXX-XXXX (La.6/15/01), 793 So. 2d 1250, 1253, 1254. From the dynamics of this accident, Mr. Wingfield suffered one complete amputation and one crushed leg, with partial amputation. He suffered severe chest injuries and other serious injuries such as several fractured ribs and massive bleeding throughout his body, including the brain and kidneys. He was conscious at the scene, where, amidst an horrific sight of truck and cattle parts and sound of injured cattle thrashing, he lay on the highway awaiting transport. Several times, Mr. Wingfield asked about Mr. Clark's condition. The movement from the ground to the ambulance was extremely painful. At the hospital, Mr. Wingfield survived for approximately three hours. He was conscious for much of the time from the accident until his death. He repeatedly expressed concern about Mr. Clark, who was his stepson, and asked for his wife. Unfortunately, his wife and family were not able to reach the hospital and provide comfort before Mr. Wingfield succumbed to his injuries. Dr. Alfredo Suarez, who performed the autopsy, testified that the injuries were some of the most severe he had seen in his career, and he opined that Mr. Wingfield suffered "quite a bit" of pain.
Considering all the evidence in the light most favorable to the plaintiffs, the facts and inferences do not point so strongly and overwhelmingly in favor of defendants that reasonable persons could not have reached different conclusions on the amount of damages. Based on the traumatic accident, the particularly egregious injuries, the level of pain and suffering, and the time of survival for this particular victim, the jury awarded $800,000.00 for Mr. Wingfield's survival action for pain and suffering. Although the amount awarded in 2001 by the jury may have been at the highest end of a reasonable range, we cannot say that reasonable persons, under the specific facts of this case, could not have *810 reached such a conclusion. See Strawder v. Zapata Haynie Corporation, 94-453, 94-454, pp. 3-5 (La.App. 3 Cir. 11/02/94), 649 So. 2d 554, 558-59 (An award of $500,000.00 for pain and suffering, experienced after an explosion for a period of thirty minutes until death, was held not excessive.); Randall v. Chevron U.S.A., Inc., 13 F.3d 888, 892 & 901-02 (5th Cir. 1994), modified on other grounds, 22 F.3d 568 (5th Cir.1994), cert. dismissed sub nom., Sea Savage, Inc. v. Chevron U.S.A., Inc., 512 U.S. 1265, 115 S. Ct. 5, 129 L. Ed. 2d 906 (1994), and cert. denied sub nom., 513 U.S. 994, 115 S. Ct. 498, 130 L. Ed. 2d 408 (1994) (Award of $500,000.00 was given by circuit court for pain and suffering for accident in which mechanic fell overboard and clung to barnacle infested oil platform leg for twenty-five minutes before drowning.). Thus, we find that the trial court erred in granting the JNOV. For these reasons, we reverse the grant of the JNOV, and reinstate the jury verdict of $800,000.00.
REVERSIONARY MEDICAL TRUST FOR FUTURE MEDICAL EXPENSES
Mrs. Wingfield, and the co-plaintiffs in her suit (Wingfield plaintiffs), assigned error to the trial court's creation of a reversionary trust for the jury's award of $4,000,000.00 to Mr. Clark for his future medical expenses. The Wingfield plaintiffs argue that Louisiana Revised Statutes 13:5106 B (enacted after the date of the accident and filing of the suit) effected a substantive change in the amount of damages awarded, and thus could not be applied retroactively[6] to this case. Secondly, Louisiana Revised Statutes 13:5114B(4) (in effect at the time of the accident and the filing of the suit)[7] abrogated Mr. Clark's and his heirs' vested right in Mr. Clark's award for future medical expenses. Therefore, Louisiana Revised Statutes 13:5114B(4) was unconstitutional. Alternatively, if the statute was not unconstitutional, the statute applied only to judge trials and not to the jury award at issue here.
Both statutes provide for the creation of a reversionary trust for future medical expenses. Upon the death of the injured person, any funds remaining would revert to the public entity that established the trust. La. R.S. 13:5106B(3)(b); 5114B(4) (pre-1996 version). Another section of Louisiana Revised Statutes 13:5114 provided that the trial court could select a structured payment plan for future economic damages awarded by the judge to an injured person. La. R.S. 13:5114D(1)(a). However, the provisions for the structured payment plan are different from those governing the reversionary trust.[8] Unlike the reversionary clause triggered by the death of the injured person, the structured payment "plan shall not operate to relieve the public entity from liability for the future payments unless *811 and until all future payments have been made." La. R.S. 13:5114D(1)(b). Even assuming the reference to judge-made awards applied to reversionary trusts, it is clear from the statutory scheme in effect at the time that the word "judge" referred to the trier of fact, and was not meant to provide a specific exemption to jury awards. At the time of the passage of section 5114, Louisiana Revised Statute 13:5105 provided that suits against the state could only be tried by a judge. The goal of the legislation was to protect the public fisc by providing for structured payment plans. Its intent was not to differentiate between awards made by a jury and those granted by a judge. La. R.S. 13:5114A.
Although we do not believe that section 5106B(3) effects a substantive change, section 5106B(3) provides for reversionary trusts only in suits against political subdivisions of the state. La. R.S. 13:5106B(3)(a) & (b). In a suit against the state or a state agency, the future medical benefits must be paid from the Future Medical Care Fund. La. R.S. 13:5106B(3)(c). In written reasons, the trial court referenced both statutes, but may have incorrectly cited to section 5106 for the creation of a reversionary trust. For use by the state in the form of DOTD, section 5114 provided the discretionary authority for the trial court's creation of a reversionary trust.
In written reasons filed in the record, the trial court opined that the trust does not limit the amount of damages due the victim, Mr. Clark, because, when the trust terminates, the victim's need for medical expenses no longer exists. We agree. As applied to this victim-plaintiff, the creation of a reversionary trust does not derogate a substantive or vested right in actual damages suffered or incurred by the victim. The state's liability for tort damages is not waived; the state is still liable for all of the victim's medical expenses. Neither does a reversionary trust for medical benefits set a ceiling on damages. All medical expenses will be paid, and thus, the actual damages incurred will not be reduced. For these reasons, the creation of a reversionary trust does not effect a substantive change. Based on the same analysis, section 5114B(4), as applied here, would not be an unconstitutional limitation of the state's liability that was prohibited at the time of this pre-1996 accident and suit. See Chamberlain v. State, Department of Transportation and Development, 624 So. 2d 874 (La.1993) (superseded by 1995 Constitutional Amendment).
A plaintiff must prove the need for future medical benefits or expenses. Duncan, XXXX-XXXX at p. 17, 773 So. 2d at 685. However, because the award must be made at the time of the trial, but before the services and payments are actually needed or incurred, the trier of fact must make an award based on speculation, including the life expectancy of the victim. To allow such an award to be deemed a property right, regardless of the amount of medical expenses or "damages" actually incurred in the future, would be an abuse of the very system that allows speculative awards in an effort to help an injured victim. The goal of the reversionary trust is not to limit actual damages, meaning the expenses incurred or owed. The creation of the trust does not deprive the victim of medical treatment or care. The trust only terminates after the need for medical care and treatment ends. After death, no new expenses can be incurred; thus, no damages are due or owed to the victim.[9]
*812 The medical trust operates to the benefit of the victim and ensures that the necessary funds for care and treatment remain available during the time of need, the life of the victim. The trust provides protection to the victim for what is arguably the single most important item of damages for Mr. Clark. For example, the victim's family may feel that their investment plans for the award are prudent and will ensure future needs, but if a mistake is made, the payment for future medical services may be endangered or lost completely. Additionally, the trust does not substantively affect or reduce any rights of the families. The families have no vested right in damages that never come into being. After the death of the victim, no new "damages" for medical care or treatment expenses can be incurred. Certainly the victim's estate is responsible for the victim's debts, the due and payable medical expenses incurred. However, once those debts are paid, no new expenses or "damages" due the victim can arise. After death, the funds in the trust, which had only the potential of becoming damages due the victim, do not become part of the estate. Instead, those funds revert to the state. To find otherwise, would be akin to holding that from the estate's obligation to pay credit card debts, flows the heirs' rights to inherit the unused personal credit line from the same card.[10]
While protecting the victim's benefits, the trust also ensures the integrity and stability of public finances by preventing the use of public funds in payment of potential state liabilities that never accrue. If damages in the form of medical expenses are not and cannot be incurred by the intended recipient, the use of state funds can no longer be approved. For these reasons, we see no error in the trial court's creation of a reversionary trust for the future medical expenses. Thus, we affirm the creation of the trust in favor of Mr. Clark.
COSTS
In the judgment of May 25, 2001, the trial court assessed 66% of the taxable costs to DOTD. Plaintiffs argue that only Mr. Clark was found to have been at fault. Thus, the other plaintiffs are free of fault and should not have to share in the payment of any costs of court. The "court may render judgment for costs, or any part thereof, against any party, as it may consider equitable." La. C.C.P. art.1920. From our review of this particular record, we see no abuse of the trial court's discretion in its division of the costs between the parties. The trial court is in a much better position to decide how the costs in such a complex and actively contested case should be apportioned.
For the foregoing reasons, the JNOV is reversed, and the jury's award of $800,000.00 for the Wingfield survival action is reinstated. The $500,000.00 loss of consortium award to Mrs. Wingfield is reduced to $200,000.00; the total Wingfield wrongful death award is reduced from *813 $1,070,000.00 to $570,000.00; and the award of general damages to Mr. Clark is reduced from $5,000,000.00 to $3,000,000.00. As amended, the remainder of the judgment is affirmed.
The plaintiffs in both consolidated cases shared issues and worked jointly on the appeal and their answers to the appeal. Thus, the costs of the appeal for both cases, $36,649.15, are assessed as one-half to plaintiffs and one-half to defendants-appellants.
REVERSED IN PART, AMENDED, AND AS AMENDED, AFFIRMED IN PART.
GAIDRY, J., agrees and assigns additional reasons.
GAIDRY, J., agrees and assigns additional reasons.
I join in all of the well-reasoned conclusions reached by the majority herein, with the following additional reasons.
My review of the trial court's oral reasons for judgment does not reveal any basis for a conclusion that the court made a credibility determination in granting the motion in limine to exclude the testimony of the defense experts on the marijuana test results. Although not articulated in as precise a fashion as they could have been, the trial court's reasons address the considerations of scientific validity under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993), and its progeny, and the practical interplay of La. C.E. arts. 403 and 702 in the exercise of the trial court's sound discretion. The trial court obviously concluded that although the opinion testimony offered and the scientific methodology upon which it was based met the threshold criteria required for admission, its substantive content simply was not sufficiently probative on the issue of contributory negligence to outweigh the very real danger of unfair prejudice under art. 403. The evidence before the trial court on the issue supports the conclusion that the trial court did not abuse its discretion as gatekeeper in granting the motions related to that evidence and its related defense. Accordingly, it is unnecessary for us to reach the issue of whether any claimed error in that regard prejudiced the verdict and to undertake a preliminary or limited de novo review. The ultimate result reached on that assignment of error, however, is correct.
NOTES
[1] The Honorable A. Clayton James, Judge, retired, is serving as judge pro tempore by special appointment of the Louisiana Supreme Court.
[2] Other parties were cited as defendants, but on appeal, we have only named the defendant-appellants.
[3] Other matters argued at the hearing, and decided by a judgment dated January 10, 2001, are not listed as they are not at issue in this appeal.
[4] The Louisiana Supreme Court, in Cavalier v. Cain's Hydrostatic Testing, Inc., 94-1496, pp. 9-11 (La.6/23/95), 657 So. 2d 975, 982 & n. 8, acknowledged the protection of a statutory cap offered to all named joint tortfeasors by Louisiana Civil Code article 2324B, but was troubled by the inequitable result of the quantification of an unjoined employer's fault. The court explained that, upon quantification of the absent employer's fault, the employee-victim would suffer a reduction in the percentage of fault recoverable and a reduction from the priority of the employer's statutory lien on the recoverable proceeds. After review of the language of the codal article, the supreme court held that the pre-1996 version of article 2324B did not require quantification of the fault of a non-party employer. If employer fault could not be quantified, the third party tortfeasor had no protection under the statutory cap. See Cavalier, 94-1496 at pp. 12-14, 657 So. 2d at 983-84.
[5] Mr. Clark and Mr. Wingfield's status as co-employees was recognized by this court in Wingfield v. State, Department of Transportation and Development, 97-1567, 97-1568, pp. 6-7 (La.App. 1 Cir. 6/29/98), 716 So. 2d 164, 166-167, writ denied, 98-2068 (La.11/06/98), 728 So. 2d 395. Unfortunately for DOTD, it was denied the right to seek contribution from Mr. Clark in that case, based on La. C.C. art. 2323, and denied the protection of art. 2324 in this case.
[6] See La. C.C. art. 6; La. R.S. 1:2. In the absence of the express intent of retroactivity required by Louisiana Revised Statutes 1:2, the reviewing court must then classify the statutory provision in question as substantive, procedural, or interpretive. Procedural and interpretive laws that do not create new rights or duties, or change existing ones, may be applied retroactively. Genusa v. Dominique, 97-0047, pp. 8-11 (La.App. 1 Cir. 2/20/98), 708 So. 2d 784, 790-91.
[7] The version of Louisiana Revised Statutes 13:5114 at issue here is the statute in effect before its repeal by Acts 1996, 1st Ex.Sess., No. 63. The current version of section 5114 does not provide for reversionary trusts.
[8] Similarly, we are not convinced by the argument that the creation of reversionary trusts is limited by a cap provided for settlements or compromises governed by section 5114 C(1) & (2).
[9] Obviously, expenses incurred before death may be billed after death. Those bills would be payable, as would bills for services reasonably and necessarily contracted for on a monthly or longer time basis, when reimbursement is not customarily paid after the death of the victim. It is the need by the victim at the time the services or treatment are incurred or contracted for that changes speculative, potential damages into actual expenses and therefore recoverable damages.
[10] Arguably, the obligation imposed on a tortfeasor to pay medical expenses is in general an obligation owed only to the victim; a personal obligation, and not heritable. The payment for medical services and "performance [of medical services] is for the exclusive benefit of the recipient of such services." 1 Saul Litvinoff, Obligations § 4.13, at 62, in 5 Louisiana Civil Law Treatise (2001); see La. C.C. arts. 1765-66. However, that reasoning is unnecessary here. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917566/ | 178 B.R. 501 (1995)
In re Jay H. PRATHER, dba Woodcraft Design, dba Woodtech, Debtor.
Michael J. TARIO, Plaintiff,
v.
Jay H. PRATHER, dba Woodcraft Design, dba Woodtech, Defendant.
Bankruptcy No. 93-09771. Adv. No. A94-02272.
United States Bankruptcy Court, W.D. Washington, at Seattle.
February 24, 1995.
Ruth Spalter, Tario & Associates, Everett, WA, for plaintiff.
Richard C. Kimberly, Bellingham, WA, for debtor/defendant.
MEMORANDUM OPINION
SAMUEL J. STEINER, Bankruptcy Judge.
FACTS
On May 15, 1991, the plaintiff, an attorney, sued the debtor in the Superior Court of the State of Washington for Whatcom County. The complaint alleged theft, conversion, fraud, and misrepresentation and sought damages in the sum of $30,000. On May 29, 1991, a stipulated judgment was entered. Aside from the caption, which stated in part "STIPULATED JUDGMENT FOR FRAUD," and the signature of the judge, the judgment which was endorsed for entry by the plaintiff and the attorney for the debtor, reads as follows:
This matter having come on regularly before the above-entitled Court upon the agreement of the parties as evidenced by their signatures below, and the Court having reviewed the records and files of the above entitled matter, and being otherwise first fully advised in the premises herein, it is hereby
ORDERED, ADJUDGED AND DECREED that plaintiff Michael John Tario have and recover of and from the defendant, Jay Prather, individually, d/b/a Woodcraft Design and Woodtech, thirty thousand ($30,000.00) dollars as damages against the defendant on causes of action for fraud.
On December 9, 1993, the debtor filed a Chapter 7 case, which was followed by this adversary proceeding, wherein the plaintiff *502 contends that the judgment is not dischargeable in bankruptcy.
DISCUSSION
The specific issue before the Court is whether a stipulated judgment for fraud entered in state court prior to filing operates as collateral estoppel in an action for nondischargeability under section 523(a)(2) of the Bankruptcy Code.
Generally, a bankruptcy court may give collateral estoppel effect to those elements of a claim that are identical to the elements required for discharge and which were "actually litigated and determined in the prior action." Grogan v. Garner, 498 U.S. 279, 284 n. 11, 111 S. Ct. 654, 658 n. 11, 112 L. Ed. 2d 755 (1991). Nevertheless the doctrine should "be applied with great care since bankruptcy courts are vested with the exclusive jurisdiction to determine the nondischargeability of debts." In re Mason, 175 B.R. 299 (Bankr.W.D.Mo.1994), quoting In re Olson, 170 B.R. 161, 165 (Bankr.D.N.D.1994). In this case, the debtor maintains that an issue resolved by stipulation does not satisfy the "actually litigated" requirement of the collateral estoppel doctrine.
Pursuant to the full faith and credit doctrine, codified in 28 U.S.C. § 1738, federal courts must look to state law to determine the preclusive effect of a prior state court judgment. Kremer v. Chemical Construction Corp., 456 U.S. 461, 102 S. Ct. 1883, 72 L. Ed. 2d 262 (1982); In re Stowell, 113 B.R. 322 (Bankr.W.D.Tex.1990). Washington law is consistent with the view expressed in the Restatement (Second) of Judgments § 27 comment e (1982), which states that an issue is not actually litigated if it is the subject of a stipulation between the parties, unless the parties have manifested an intention to be bound. The reason is that "the parties could settle for myriad reasons not related to the resolution of the issues they are litigating." Marquardt v. Federal Old Line Ins. Co., 33 Wash.App. 685, 658 P.2d 20 (1983); Dunning v. Pacerelli, 63 Wash.App. 232, 818 P.2d 34 (1991). See also 15 L. Orland & K. Tegland, Wash. Prac., Trial Practice Civil § 368, at 38 (Fourth Edition).
Further, as a matter of policy, "If preclusive effect were given to issues not litigated, the result might serve to discourage compromise, to decrease the likelihood that the issues in an action would be narrowed by stipulation, and thus to intensify litigation." Restatement, Supra. Even where the circumstances are such that preclusion may seem appropriate, the Restatement authors conclude that "the policy considerations . . . weigh strongly in favor of nonpreclusion, and it is in the interest of predictability and simplicity for such a result to obtain uniformly." Id.
Notwithstanding the general rule, a rare exception may be made where the parties have manifested an intention to be bound. Shapiro, Annotation, Consent Judgment as Res Judicata, 91 A.L.R. 3d 1170, 1189. This Court declines to apply this exception in the dischargeability context, primarily because to do so would undermine the jurisdiction of the bankruptcy court and provide creditors with an opportunity to overreach. In this case, where the plaintiff is an attorney, it may have been his intention to bind the debtor to a nondischargeable judgment. It is difficult to think of a situation in which the debtor would agree to such a determination absent the fear of some other, overriding consequence, which in this case may have been criminal prosecution.
Another reason cited by the defendant for not precluding litigation of the fraud issue is that determination of that issue was not necessary to the state court judgment. This conclusion finds support in Yakima Cement Prods. Co. v. Great American Ins. Co., 14 Wash.App. 557, 544 P.2d 763 (1975), in which the Court held that stipulated findings of fact and conclusions of law entered in a prior action were not binding and would not be given preclusive effect, for the reason that FRCP 52 does not require the entry of findings in an action that has been settled. Nor does the corresponding State rule. CR 52, Washington State Superior Court Civil Rules. Therefore the same conclusion applies in this case, that is the stipulated finding of fraud in the state court action was not necessary to the entry of a confessed judgment.
*503 CONCLUSION
The stipulated judgment for fraud entered in the state court suit does not operate as collateral estoppel in this dischargeability action. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917571/ | 178 B.R. 340 (1995)
In re Joel SCHWARTZ, Debtor.
Bankruptcy No. 893-84417-20.
United States Bankruptcy Court, E.D. New York, at Westbury.
March 2, 1995.
*341 Schlachter & Mauro, Reynold A. Mauro, Commack, NY, for debtor.
Flower & Medalie, Jeffrey Herzberg, Bay Shore, NY, for Chapter 7 Trustee.
Zavatsky & Mendelsohn, Allan B. Mendelsohn, Chapter 7 Trustee, Syosset, NY.
MEMORANDUM DECISION AND ORDER
ROBERT JOHN HALL, Bankruptcy Judge.
This matter comes before the Court upon a Notice of Motion, dated April 14, 1994, by Joel Schwartz ("Debtor") to convert his chapter 7 petition ("Petition") to one under chapter 13, or, in the alternative, to have the chapter 7 bankruptcy withdrawn. The chapter 7 trustee, Allan B. Mendelsohn, Esq. ("Trustee"), filed an Affirmation in Opposition to the motion. Debtor filed an Affidavit in reply to Trustee's Opposition.
Argument in support of and in opposition to the motion was heard on June 7, 1994 at which time the Court reserved decision and directed the parties to supply the Court with the transcript from the argument and also the transcript of the Debtor's 341 meeting of creditors ("341 Meeting").[1] The transcript from the June 7, 1994 hearing was supplied to the Court on February 9, 1995.
The Debtor's request for conversion or dismissal of the within Petition comes on the heels of the 341 Meeting wherein the Trustee alluded to the fact that a sale of the Debtor's real estate was imminent. Real estate holdings that at first were not to be found within *342 the confines of the Petition. A review of the Debtor's chapter 7 Petition, filed on August 5, 1993, a Petition that the Debtor signs:
under penalty of perjury that the information provided in this petition is true and correct, . . .
indicates approximately $214,000.00 in liabilities, $3,800.00 in assets, no income and approximately $2,900.00 in expenses. The Debtor listed no real property in Schedule A, claimed a homestead exemption pursuant to "11 U.S.C. 522(d)" and listed one secured creditor in the amount of $138,482.56. "Marine Midland Mtg. Corp." holds a "mortgage on home."
The Debtor's address on his Petition is 12 Sunhill Road, Nesconset, New York 11767.
Debtor's employer in Schedule I is Onset International Corp., with an address of 12 Sunhill Road, Nesconset, New York 11767. Debtor's marital status is listed as "separated." Monthly income for Debtor is "none." There is no entry under spouse.
At the initial 341 Meeting the Debtor was advised by the Trustee that numerous errors existed in the Petition as filed. The 341 Meeting was adjourned and the Debtor contemplated rectifying the "numerous errors." At the adjourned 341 Meeting, it became apparent to the Debtor, as per the Trustee, that real estate owned by the Debtor would have to be sold. In the interests of retaining any equity that might exist, the Debtor indicated that he would exercise his option and either convert or dismiss his Petition.
With no applications or motions before the Court to the contrary, on December 14, 1993, the Debtor received his chapter 7 discharge in the usual course of business. Unfortunately Debtor and Debtor's counsel believed that their expression to the Trustee of an intent to do something would allow the proceedings to remain status quo.
FIFTH: That in the intrum [sic] a discharge of Debtor was received and the receipt of the discharge came as a total surprise to the Debtor as the Debtor was under the impression that the matter was not going forward until such time as that the Debtor filed the amended Petition (Exhibit C) and said amended petition was never filed.
(Affidavit of Joel Schwartz, sworn to March 28, 1994, ¶ Fifth.)
The amended Petition that was to be proffered at the next 341 Meeting is attached to Debtor's moving papers as Exhibit "B". Interestingly, Schedule A now had an entry:
Description and Location of Property
12 Sunhill Road
Nesconset, New York
Nature of Debtor's Interest and Property
title holder.
Current Market Value
$200,000.00 (approx.)
The amount of the secured claim did not change $138,482.56.[2]
The Trustee's opposition is two-fold. The amended Petition that was offered to him accurately listed the Debtor's real estate holdings and set forth sufficient non-exempt equity that could be distributed to creditors. The fact that the Trustee would liquidate the Debtor's real estate holdings to pay off creditors is not cause within the meaning of 11 U.S.C. section 707 for the debtor to request dismissal. Additionally, the Trustee questioned how this Debtor would be able to offer a feasible plan under chapter 13. Schedule I reflects no income earning capacity. Debtor's testimony at the adjourned 341 Meeting confirmed that.
Debtor's rebuttal to his non-eligibility for chapter 13 is that he "will be able to demonstrate that he has commenced employment efforts,. . . ." (Reply Affidavit of Reynold A. Mauro, Esq., sworn to on April 29, 1994, ¶ Fourth.) Bolstering his previous statement, at oral argument on June 7, 1994, Debtor's counsel stated that the conversion to a chapter 13 would be successful as Debtor's *343 wife was employed and Debtor was prospectively employed as a sales agent as of July 1994. Although she is not a debtor before the Court and is believed to be separated from the debtor, she is "helping paying the bills." (Transcript, June 7, 1994, p. 8.)
The Debtor's Reply Affidavit indicates that the Debtor, upon learning that his interest in real estate improperly valued and/or not accurately disclosed, was to be liquidated by the Trustee, chose not to file the amended Petition.
Debtor's counsel approaches the allegation of fraud in not listing all assets with a non-convincing air of naivete and casual indifference.
MR. MAURO: . . . With regard to the original petition, what happened was and I have to take the fault of this I had a paralegal do it, it stated "homestead exemption." There was no attempt to hide it from the Trustee. We met with the Trustee and sat down with the Trustee. There wasn't an interrogation. He asked if there was real estate and we said "yes." It states $2,000 value, not $200,000. There was no attempt to defraud the Court. This was at the initial meeting. To turn that into some kind of accusation of fraud, I think, is absolutely absurd. If there was an inquiry and he denied the existence of it under oath and the assets were destroyed and uncovered on an independent investigation, then that accusation would be appropriate. There was no such thing.
THE COURT: Did you read the petition? Did you know if the Debtor owned a house. [sic]
MR. MAURO: I signed both petitions. I assume that I midread [sic] the $200 as 2,000 or something like that. I, quite frankly, did not look closely. That is why we amended; the amendment wasn't filed when we considered all the ramifications.
(Transcript, June 7, 1994, p. 7).
DISCUSSION
Section 706(a) of the Bankruptcy Code gives the chapter 7 debtor the unequivocal right to convert to chapter 13 without a hearing. It provides in pertinent part:
(a) The 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 been converted under section 1112, 1208, or 1307 of this title. Any waiver of the right to convert a case under this subsection is unenforceable.
11 U.S.C. § 706(a).
The Bankruptcy Code does not give a chapter 7 debtor an absolute right to dismiss the petition without a hearing.
(a) The court may dismiss a case under this chapter only after notice and a hearing and only for cause, including
(1) unreasonable delay by the debtor that is prejudicial to creditors; . . .
11 U.S.C. § 707(a).
With respect to Debtor's request for dismissal of his chapter 7 Petition, this Court submits that the request is not made in good faith. Pursuant to section 707(a) "cause" must be demonstrated.
This Court has looked at the following factors present in this case to help it determine if cause exists:
1. the Debtor's repeated failure to file the "amended petition";
2. the motivation for the Debtor's request to dismiss protecting his real estate interests; and
3. the timing of the motion after the 341 Meeting where he learned that improperly valued assets would be utilized to pay Debtor's creditors.
The Court has not been presented with a scintilla of evidence that would justify dismissal. Rather, this Debtor has requested dismissal as a remedy for the ills in his Petition. That part of the motion is denied.
The Fifth Circuit in In re Martin, 87 B.R. 20 (E.D.La.1988) aff'd 880 F.2d 857, 860 (5th Cir.1989) has held that the debtor has an absolute right to convert and the bankruptcy court's denial of "the conversion was improper." The ruling in Martin was one of pure statutory interpretation as the court left for another day the issue of what happens to the discharge and what effect the motion would have if granted after the discharge. *344 Id. There appears to be an ability for this court to exercise its discretion.
In deciding whether or not to allow the Debtor to exercise his right to convert, courts have considered whether the chapter 7 debtor received his discharge, whether the debtor has requested that it be revoked and what effect a revocation of discharge would have on the creditor body. In re Safley, 132 B.R. 397 (Bankr.E.D.Ark.1991); In re Jones, 111 B.R. 674 (Bankr.E.D.Tenn.1990).
In those instances where a debtor's "absolute right" to convert has been exercised post-discharge, courts have looked beyond the absolute right to see what motivated the request. Those requests that were prompted for purposes of exploiting the system have been denied or conditioned. In re Jeffrey, 176 B.R. 4, 5 (Bankr.D.Mass.1994) (responding to the trustee's motion to reopen to liquidate a newly discovered asset, debtors requested conversion to chapter 13 was denied and the court found that to do otherwise would be to "tolerate a gross abuse of Chapter 7."); In re Kilker, 155 B.R. 201, 205 (Bankr.W.D.Ark.1993) (motion to convert denied on grounds that debts and expenses were inaccurately listed and information in petition was manipulated to conform with debtor's personal goals); In re Tardiff, 137 B.R. 83 (Bankr.D.Me.1992), vacated, remanded, 146 B.R. 499 (D.Me.1992), aff'd on remand, 145 B.R. 357, 362 (Bankr.D.Me.1992) (on remand, motion to convert post-discharge denied where motivation was to avoid paying tort creditor); In re Spencer, 137 B.R. 506, 516 (Bankr.N.D.Okla.1992) (court granted debtor's request to convert but conditioned it as "debtor's bad faith, abuse of jurisdiction and process, estoppel, and the like are not finally determined by this Order, but are merely continued for more opportune determination as the Ch. 13 case progresses;. . . ."); In re Safley, 132 B.R. 397, 400 (Bankr.E.D.Ark.1991) (motion to convert denied where Court found that request was meaningless in light of chapter 7 discharge and debtor's inability to fund a chapter 13 plan); In re Sieg, 120 B.R. 533, 537 (Bankr. D.N.D.1990) (debtor's request to convert post-discharge was denied and proposal of chapter 13 plan was found to be in bad faith).
Judge Stair when confronted with the issue of conversion to chapter 13 post-chapter 7 discharge denied the debtor's request. In re Jones, 111 B.R. 674 (Bankr.E.D.Tenn. 1990). The debtors in Jones did ask the court for conversion and a revocation of their discharge.[3] A reaffirmed creditor objected. Additionally the question of the debtors maintaining their employment was taken into consideration as Mrs. Jones anticipated a layoff and would not be able to contribute to the funding of the chapter 13 plan as proposed. In denying the motion, the court opined:
. . . the provisions of § 706(a) allowing a Chapter 7 debtor to convert to Chapter 13 "at any time" must be limited to those situations where the debtor's Chapter 7 discharge has not been granted or has been revoked upon motion of the debtor under the criteria set forth above. Once the Chapter 7 discharge has been granted the debtor's personal liability is extinguished, thus rendering conversion to Chapter 13 meaningless except as to those creditors holding nondischargeable claims. Further, to hold that a debtor has the right to convert to Chapter 13 notwithstanding the grant of a Chapter 7 discharge would have the potential of allowing a debtor to receive a discharge in the same case under two mutually exclusive chapters of the Bankruptcy Code.
Jones, 111 B.R. at 680.
In 1991, Judge Scott encountered a factual scenario on par with the case at bar. In re Safley, 132 B.R. 397 (Bankr.E.D.Ark.1991). The debtor in Safley filed a chapter 7 and received her discharge. Subsequently the chapter 7 trustee learned that debtor's assets were not properly disclosed. Debtor's "claimed as exempt" assets were noticed for sale. In response, debtor requested conversion to chapter 13. The trustee objected on the ground that debtor's request was prompted by the impending liquidation. Taking into consideration the fact that Ms. *345 Safley's income equalled her expenses which would impact negatively on her ability to pay pursuant to a plan, the motion was denied.
The Court must presume the debtor in this case wishes to retain her discharge because she does not seek to set it aside and has pre-empted a creditor's attempt to revoke it with this Motion to Convert. In that case the evidence reveals there are no debts remaining for which she is liable. Her request to convert is meaningless. . . . Thus, even if the debtor could get over the eligibility and/or necessity hurdles outlined above she has no income to fund a plan. The entire procedure in this case is an exercise in futility.
Safley, 132 B.R. at 400.
With respect to this Debtor's request for conversion to chapter 13, the debtor has not filed amended schedules that would reflect either an increase in income commensurate with the expenses as listed or vice versa. A proposed chapter 13 plan was not offered. There has not been a demonstration of a good-faith motive prompting the within request. There is nothing to reorganize. The only secured creditor has had the automatic stay vacated and is presumably proceeding with a foreclosure sale. The unsecured debts have been discharged. American Express Travel Related Services Company, Inc. did file a timely non-dischargeability action. That adversary proceeding has been resolved and a stipulation of settlement was approved by this Court by Order dated December 19, 1994.
This Court could overlook a typographical error and an innocent miscalculation if such existed and be in the position of having to allow this Debtor the opportunity to exercise his absolute right. What the Court cannot overlook is this Debtor's intentional unwillingness to file the amended Petition so that the Trustee and the Court can have all the facts before it.
The Debtor was aware at the October 14, 1993 341 Meeting that substantial inaccuracies plagued his Petition. On October 28, 1993 a possible amended Petition was given to the Trustee:
ALLAN B. MENDELSOHN, ESQ.: Let the record show that they [sic] are no creditors present. Mr., um, Schwartz, there has been handed to me today, although I just got it and I understand that it has been filed with the Court, an amendment to your petition. Now you indicate now that the property you own at 12 Sun Hill Road, its current market value is approximately $200,000.00. Is that correct?
(October 28, 1993 Transcript).
The Debtor having sighed in relief, later believed it was all straightened out.
MR. MAURO: . . . Actually, we didn't file the amended petition. When we returned to the second meeting with the creditors with the amended petition, we reviewed the petition regarding the real estate; the Trustee indicated to us there was sufficient equity in the asset. We didn't file the amended petition for the specific purpose of seeking leave to file Chapter 13, and even in anticipation of dismissal of a petition. This motion reiterates those facts.
I do have an amended petition with me today, but it was never filed with the Court.
(June 7, 1994 Transcript, page 4).
For reasons that escape this Court, Debtor and his counsel are unwilling to part with this amended Petition. An amended Petition that might have corrected the Debtor's errors and omissions. An amended Petition that would have erased the ambiguities before the Court and accurately reflected the Debtor's eligibility to be a debtor under chapter 13 and an ability to successfully complete a chapter 13 wage earner plan.
Having considered the Debtor's continued failure to file the amended schedules and Petition and the Debtor's inability to successfully convert, and the Court not being convinced that a conditional conversion would benefit the Debtor or the estate, this Court denies the Debtor's motion in its entirety.
SO ORDERED.
NOTES
[1] The 341 Meeting transcript of October 12, 1993 was transcribed by R & R Reporting. A copy of the transcript from the adjourned 341 Meeting on October 28, 1993 was transcribed by and provided from the law firm of Flower & Medalie, attorneys for the Trustee. No objection to the form has been interposed and the Court accepts the transcript. Debtor's counsel by letter dated July 28, 1994 did suggest that substantial "off the record colloquy" took place that had been omitted from the transcript. The Court need not respond to the omission of colloquy.
[2] By Notice of Presentment of Order Vacating Automatic Stay, dated June 24, 1994, Marine Midland Mortgage Corporation requested this Court to vacate the automatic stay pursuant to section 362(a) so that a foreclosure action could be commenced. The Court received no opposition and an Order was entered September 8, 1994.
[3] The motion before this Court seeks definitive relief through conversion or dismissal. However, paragraph eighth does request, ". . . this court grant him leave to withdraw the within chapter 7 proceeding and to nullify the discharge of Debtor previously issued herein." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917574/ | 178 B.R. 205 (1995)
In re Anthony Stanley VITALIANO, Debtor.
Anthony Stanley VITALIANO, Appellant,
v.
STATE OF CALIFORNIA, FRANCHISE TAX BOARD, Appellee.
BAP No. EC-94-1543-JRC. Bankruptcy No. 91-22404-B-7.
United States Bankruptcy Appellate Panel of the Ninth Circuit.
Argued and Submitted November 16, 1994.
Decided January 9, 1995.
*206 Pamela C. Jackson, Vacaville, CA, for appellant.
Robert D. Milam, Sacramento, CA, for appellee.
Before: JONES, RUSSELL, and CARLSON,[1] Bankruptcy Judges.
OPINION
JONES, Bankruptcy Judge:
The debtor appeals an order finding a tax debt to be nondischargeable pursuant to § 11 U.S.C. 523(a)(1)(A).
I. FACTS
In December, 1989, the Internal Revenue Service (IRS) audited Appellant Anthony Vitaliano's tax returns for the years 1983 through 1987, assessing a deficiency for each year. Rather than suffer the expense of fighting the IRS, Vitaliano agreed to sign a Notice of Deficiency Waiver and pay the additional taxes. He signed the waiver on June 12, 1990.
Under California law, a taxpayer must notify the California Franchise Tax Board ("Board") of any corrections made by the IRS within 90 days after the IRS' determination becomes final.[2] Cal.Rev. & Tax.Code § 18451 (West 1994). If the Board receives notice from the taxpayer within 90 days, it only has 6 months in which to assess a state tax deficiency based upon those changes. Id. § 18586. If the Board does not receive notice from the taxpayer within the 90 days, it has 4 years in which to assess a deficiency. Id. § 18586.2.
In the June 12, 1990 letter to the IRS in which Vitaliano returned the waiver forms, Vitaliano asked the IRS to notify the Board of the changes. On September 4, 1990, within the 90-day period, the Board received a Revenue Agent's Report (RAR) from the IRS, stating that it had made changes in Appellant's tax returns and had assessed deficiencies. This report was arguably the result of Vitaliano's request, because the IRS had already sent an RAR to the Board on April 12, 1990.
*207 Because Vitaliano did not hear from the Board, Vitaliano's attorney sent it a letter on November 5, 1990, after the 90-day period had expired, advising them of the changes. Vitaliano filed a Chapter 7 bankruptcy petition on April 1, 1991. On May 27, 1992, the Board sent Vitaliano proposed deficiency assessments for each of the tax years 1983 through 1987.
The bankruptcy court held that the September 4, 1990, submission of the RAR by the IRS did not comply with the notice requirements of California Revenue and Taxation Code ("California Tax Code") § 18451. The court based its ruling on the fact that an RAR does not purport to be a final disposition of a tax deficiency noticeit merely states that the IRS is taking the position that the taxpayer's return is incorrect. Since Vitaliano's own letter was mailed after the 90-day notice period had expired, the Board had four years to assess the deficiencies. Therefore the May 27, 1992 assessments were valid as 11 U.S.C. § 507(a)(7)(A)(iii) priority claims and nondischargeable under 11 U.S.C. § 523(a)(1)(A).
II. ISSUES
1. Did the lower court err in holding that the RAR received by the Board from the IRS on September 4, 1990 was not notice from the taxpayer as required by California Tax Code § 18451?
2. Did the bankruptcy court err in according the tax deficiency priority status under 11 U.S.C. § 507(a)(7)(A)(iii) and therefore holding it nondischargeable under 11 U.S.C. § 523(a)(1)(A)?
III. STANDARD OF REVIEW
The facts in this case are not in dispute. What is in dispute is the bankruptcy court's interpretation of the California Tax Code and its application of two provisions of the Bankruptcy Code. We review issues of law de novo. In re Commercial Western Finance Corp., 761 F.2d 1329, 1333 (9th Cir.1985).
IV. DISCUSSION
A. Reporting Requirements of California Tax Code § 18451
Section 18451 of the California Tax Code requires a taxpayer to report changes or corrections in his federal tax return to the Board. The report must be sent by "the taxpayer" and must either concede the accuracy of the IRS changes, or state how the IRS changes are erroneous. Cal.Rev. & Tax. Code § 18451 (West 1994). In addition, any report filed under § 18451 must meet the reporting requirements of California Code of Regulations § 18586, which requires the debtor to mail the original or a copy of "the final determination" of the IRS assessment to the Board. Cal.Code Regs. tit. 18, § 18586 (1994).
The debtor argued that the RAR sent by the IRS satisfied the reporting requirements of the statute. After an initial hearing and supplemental briefing, the court ruled that:
"At first blush, it might not appear to be important as to whom notifies the [Board] of the changes in taxpayers' federal income taxes, so the debtor's argument . . . seems plausible. Upon careful review . . . this argument collapses. As shown by the testimony of Jeanne Houston, the [Board] receives the RARs in large batches, with no attempt to distinguish any particular RAR. . . . [T]here was no evidence whatsoever that the September 4 mailing was an IRS response to the letter of June 12. Even if this court could accept the proposition that the receipt by the [Board] on September 4, 1990 of another copy of the RAR it had previously received on April 12 of that year somehow constituted notice of the IRS' `final determination,' it was not a report from the debtor and it most assuredly did not constitute a concession by the debtor of `the accuracy of such determination' by the IRS. Applying the `plain meaning' statutory interpretation doctrine to the facts of this case can only lead to the conclusion that the debtor simply failed to comply with the notice requirements of R & TC § 18451."
Appellant's Excerpts of Record on Appeal at 130-31.
The debtor argues that receipt of an RAR should be sufficient to comply with the notice requirement of § 18451 because the Board's *208 own policy requires RARs to be processed within 24 days. However, as indicated above, the IRS sends the RARs to the Board pursuant to an agreementnot as fulfillment of § 18451. In addition, the plain language of § 18451 and Regulation 18586 clearly indicate that receipt of the RARs is not the notice to which the Board is entitled.
It seems clear that the mere receipt of an RAR, even at the debtor's request, does not satisfy the reporting requirements of § 18451, since it is not notice of the "final determination" of the tax deficiency.
B. Priority Status and Nondischargeability of the Tax Deficiency
11 U.S.C. § 507(a)(7)(A)(iii) provides:
(a) The following expenses have priority in the following order:
* * * * * *
(7) Seventh, allowed unsecured claims of governmental units, only to the extent that such claims are for
(A) a tax on or measured by income or gross receipts
* * * * * *
(iii) other than a tax specified in section 523(a)(1)(B) or 523(a)(1)(C) of this title, not assessed before, but assessable, under applicable law or by agreement, after, the commencement of this case . . .
The trial court ruled that since the taxes were properly assessable (and did not come within the definition of 11 U.S.C. § 523(a)(1)(B) or (C)), they were allowed priority claims under 11 U.S.C. § 507(a)(7)(A), and were therefore nondischargeable under 11 U.S.C. § 523(a)(1)(A).[3] This ruling is a correct reading of the plain language of the applicable bankruptcy provisions.
The debtor argues that even if the taxes were properly assessed, they are nonetheless dischargeable. The debtor apparently misreads the Bankruptcy Code, arguing that in order for a tax debt to qualify as a priority claim pursuant to 11 U.S.C. § 507(a)(7), it must satisfy 11 U.S.C. § 507(a)(7)(A)(i), (ii), and (iii). However, the bankruptcy code clearly contemplates that a tax debt must fit into only one of those three subsections in order to obtain priority status. See Matter of Longley, 66 B.R. 237, 241 (Bankr.N.D.Ohio 1986) (agreeing with cases that hold that "the failure of a tax to fit within Section 507(a)(7)(A)(i) does not render Section 507(a)(7)(A)(ii) and (iii) inapplicable.").
The debtor also cites In re Doss, 42 B.R. 749 (Bankr.E.D.Ark.1984). In Doss, the debtor had filed late returns for several tax years, then filed bankruptcy more than two years after having filed these late returns. The court held that because the returns were not excepted from discharge under 11 U.S.C. § 523(a)(1)(B)(ii) (because they were filed late and filed more than 2 years prior to bankruptcy), they were dischargeable, notwithstanding the application of 11 U.S.C. § 507(a)(7)(A)(iii).
There are two problems with applying Doss to the instant appeal. First, the case involves a very dubious reading of the Bankruptcy Code. Although Doss has been widely cited by debtors seeking discharge of tax debts, every court which has considered it has either distinguished it or criticized it. See In re Crist, 85 B.R. 807, 812 (Bankr. N.D.Iowa 1988); In re Torrente, 75 B.R. 193, 195 (Bankr.S.D.Fla.1987); see also In re Etheridge, 91 B.R. 842 (Bankr.C.D.Ill.1988) (declining to discuss the propriety of Doss since it was distinguishable).
Second, even if we thought the Doss court's interpretation had merit, Doss involved late-filed returns, a factually different situation from the instant appeal. Here, the returns were filed on time, do not come within 11 U.S.C. § 523(a)(1)(B) or (C), and thus properly come within 11 U.S.C. § 507(a)(7)(A)(iii). See, e.g., Longley, 66 B.R. at 241; In re Treister, 52 B.R. 735, 738 n. 6 (Bankr.S.D.N.Y.1985) (cases which both distinguish Doss in a factual situation similar to the instant appeal).
*209 The majority interpretation of the interaction between these two provisions is consistent with the policy behind the tax priority and nondischargeability provisions.
[I]t becomes clear that the legislative intent is to treat tax claims arising from late-filed or fraudulent returns as nondischargeable, but general unsecured claims, and to treat tax claims arising from current returns, or recently assessed or assessable tax returns, as nondischargeable, but unsecured claims with priority treatment. In balancing the interests of the general creditors, the debtor and the tax collector, the treatment of tax claims was designed to give "governmental units a priority claim on assets of the debtor's estate for certain taxes which have not grown so `stale' as to constitute an unjustifiable burden on general unsecured creditors (who may have extended new credit to the debtor since the tax liability arose)."
In re Edwards, 74 B.R. 661, 665 (Bankr. N.D.Ohio 1987) (quoting Committee on Finance, S.Rep. No. 1106, 95th Cong., 2d Sess. 5 (1978)).
V. CONCLUSION
The court correctly held that the information supplied by the IRS was inadequate to satisfy California Tax Code § 18451. Therefore, the California Franchise Tax Board had 4 years in which to assess any deficiencies against the debtor. Since the tax deficiencies were assessed after the bankruptcy petition was filed, but before the end of the 4-year assessment period, the tax claims were priority claims under 11 U.S.C. § 507(a)(7)(A)(iii) and are therefore nondischargeable pursuant to 11 U.S.C. § 523(a)(1)(A). The decision of the bankruptcy court is AFFIRMED.
NOTES
[1] Hon. Thomas E. Carlson, Bankruptcy Judge for the Northern District of California, sitting by designation.
[2] Although the parties disagree on what date this assessment became "final" for purposes of beginning the 90-day California notice period, the earliest date was June 14, 1990, and the latest date was July 30, 1990. Since the IRS' notification of the tax deficiency was received within 90 days of June 14, and Appellant's own notice was mailed more than 90 days after July 30, the actual date of finality is not at issue.
[3] 11 U.S.C. § 523(a)(1)(A) states that a discharge under Chapter 7 does not discharge tax debts "of the kind . . . specified in section . . . 507(a)(7)." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542482/ | 410 B.R. 157 (2008)
In re Howard D. BALENSWEIG, Debtor.
Keith N. Costa, as Chapter 11 Trustee for the Estate of Howard D. Balensweig, Plaintiff,
v.
Kitrell & Kitrell, P.C., Gary A. Kitrell, Esq., Richard J. Kitrell, Esq., and Agnes Neiger, Esq., Defendants.
Bankruptcy No. 04-13299 (BRL). Adversary No. 07-03246 (BRL).
United States Bankruptcy Court, S.D. New York.
April 10, 2008.
*158 Irve J. Goldman, Keith N. Costa, Pullman & Comley, LLC, White Plains, NY, for Plaintiff.
Rachel S. Blumenfeld, Law Offices of Rachel S. Blumenfeld, Brooklyn, NY, for Defendants.
Agnes Neiger, New York, NY, pro se.
MEMORANDUM DECISION AND ORDER GRANTING DEFENDANTS' MOTION FOR ORDER DISMISSING PLAINTIFF'S COMPLAINT
BURTON R. LIFLAND, Bankruptcy Judge.
Before the Court is the motion ("Motion to Dismiss") of Kitrell & Kitrell, P.C., Gary A. Kitrell, Esq., and Richard J. Kitrell, Esq. (collectively, the "Defendants") seeking to dismiss the complaint ("Complaint") filed in the above-captioned adversary proceeding ("Adversary Proceeding") by Keith N. Costa, as chapter 11 trustee ("Trustee") for the estate of Howard D. Balensweig ("Debtor"). The Defendants assert, inter alia, that the Complaint fails to state a claim upon which relief can be granted and that the Court lacks jurisdiction to hear the causes of action asserted. The Trustee opposes the Motion to Dismiss claiming that the Court has subjectmatter jurisdiction over a cause of action for malpractice, which the Trustee asserts has been sufficiently pled in the Complaint. For the reasons set forth below and at oral argument, the Court finds that it lacks jurisdiction to hear this matter and, accordingly, the Motion to Dismiss is granted.
*159 BACKGROUND
I. Events Preceding the Debtor's Bankruptcy
The Adversary Proceeding and Complaint arise in connection with the dubious circumstances surrounding the drafting of a last will and testament and, depending on whom you believe, the purported existence of an attorney-client relationship between the Debtor and the Defendants.
The individual named defendants are lawyers associated with the law firm of Kitrell & Kitrell, P.C. The Trustee alleges that on or about June 17, 2003, the Debtor, a retired octogenarian physician, entered into an attorney-client relationship with the Defendants to prepare a variety of legal documents including, inter alia, the drafting of (i) a last will and testament for the Debtor together with supporting affidavits (collectively, the "Will") and (ii) an affidavit and judgment by confession ("Confession of Judgment") in the amount of $2,566,057.00 executed in favor of Dr. Roger E. Mosesson. While the facts and circumstances surrounding the nature of the Debtor's and Dr. Mosesson's relationship are highly disputed, it has been asserted that the two shared an interest in African art and that, among other things, Dr. Mosesson (a) wrote checks and gave cash to the Debtor over the course of nine years, which had not been repaid; (b) sold several pieces of African art to the Debtor for which he never received payment, and (c) loaned money to, and paid some debts on behalf of, the Debtor with the expectation of repayment.
The Trustee alleges that in exchange for a one-time payment of $500.00, the Defendants drafted the Will, which disinherited the Debtor's wife, sister and his sister's children and left the Debtor's entire estate to Dr. Mosesson, who was the Debtor's then single largest creditor. The Trustee further alleges that on June 18, 2003, Dr. Mosesson filed a special proceeding against the Debtor in the Supreme Court of the State of New York for the entry of the Confession of Judgment titled Roger E. Mosesson v. Howard D. Balensweig (Index No. 03111141) ("State Court Action"). The Confession of Judgment was subsequently entered by the clerk of the Supreme Court on that same date.
Although the Defendants vehemently dispute these allegations, according to the Trustee the Defendants simultaneously represented both the Debtor and Dr. Mosesson when they prepared and executed the Will and Confession of Judgment and negligently advised the Debtor to sign the Confession of Judgment when he had numerous defenses. This dual representation would eventually form the bases of the causes of action set forth in the Complaint.
Thereafter, on April 30, 2004, the Supreme Court, Justice Solomon, issued a decision and order vacating the Confession of Judgment on the motion of Joseph P. Carroll, Ltd. ("JPC"), one of the Debtor's creditors, for failing to provide adequate detail regarding the Confession of Judgment's underlying debts.[1]
With the Confession of Judgment vacated (and the Will revoked by the Debtor), Dr. Mosesson commenced this bankruptcy proceeding on or about May 31, 2004 *160 through the filing of an involuntary petition for relief under chapter 7 of title 11 of the United States Code ("Bankruptcy Code"). By order dated July 29, 2004, the case was converted to a case under chapter 11 of the Bankruptcy Code. Thereafter, the Trustee was appointed by order of the Court dated October 6, 2004.
II. The Mosesson Settlements and the Bankruptcy Proceeding
On or about August 23, 2004, Dr. Mosesson filed proof of claim no. 14 ("Mosesson Claim") in the Debtor's bankruptcy proceeding for the unsecured amount of $2,549,996.00. Thereafter, after an extensive investigation into Dr. Mosesson's largely unsubstantiated claim, on November 30, 2005, the Trustee and Dr. Mosesson entered into a stipulation settling the Mosesson Claim ("Trustee-Mosesson Settlement"). Under the terms of the Trustee-Mosesson Settlement, in exchange for a mutual agreement to terminate all pending litigation between the parties, Dr. Mosesson agreed to have his claim subordinated to all other allowed claims and further agreed, with certain caveats, to waive and release any right to receive future distributions from the Debtor's estate, which permitted the holders of all allowed claims (except Dr. Mosesson) to be paid in full. In return, the Trustee agreed that any balance of funds remaining in the Debtor's estate following a one hundred percent (100%) distribution to creditors and a distribution to the holders of administrative claims would be abandoned and interplead into the Bankruptcy Court, naming the Debtor and Dr. Mosesson as interested parties for purposes of determining their respective rights to those funds. The Trustee-Mosesson Settlement was approved by order of the Court dated January 10, 2006.
On February 9, 2007, the Trustee filed a motion ("February 9 Motion") seeking to implement the terms of the previously approved Trustee-Mosesson Settlement, make a one hundred (100%) percent distribution to the holders of allowed unsecured priority and non-priority claims, and to make a pro rata distribution to administrative professionals. As stated by the Trustee, "[t]he only parties affected by this Motion are the Trustee and the professionals, all of whom have agreed to accept a pro rata payment of their fees from the Surplus. ..." February 9 Motion, at ¶ 7. The February 9 Motion further acknowledged that the sole remaining asset of the Debtor's estate left to be administered was the legal malpractice claim presently at issue against the Defendants. The February 9 Motion stated that in the event the Trustee was successful in prosecuting that action "any proceeds remaining after paying the Trustee's professionals would then become available for distribution pursuant to the Stipulation. ... Any estate professionals who may in the future seek to increase their pro rata payment from such future proceeds must first make proper application to this Court, on notice to all parties in interest." Id. at ¶ 11. The February 9 Motion was granted by order of the Court dated March 8, 2007.
On March 21, 2007, the Trustee commenced an adversary proceeding against the Debtor and Dr. Mosesson to implement the interpleader in accordance with the terms of the Trustee-Mosesson Settlement. After a substantial amount of litigation, including the filing of cross-claims and counterclaims by both the Debtor and Dr. Mosesson, the Debtor and Dr. Mosesson agreed to settle their respective claims to the remaining funds of the estate ("Debtor-Mosesson Settlement"). Under the terms of the Debtor-Mosesson Settlement, in exchange for mutual releases, Dr. Mosesson received a cash payment of *161 $350,000, while the Debtor received the remaining balance of the funds in the amount of $150,000. The Debtor-Mosesson Settlement was approved by order of the Court dated August 20, 2007.
III. The Adversary Proceeding and the Complaint
On or about December 31, 2007, the Trustee filed the Complaint asserting claims against the Defendants for, inter alia, negligence, breach of duty of care and breach of contract based on allegations that the Defendants were "negligent in their rendering of professional services" to the Debtor. Among other things, the Trustee alleges that the Defendants failed and/or neglected to advise the Debtor to "retain counsel separate from Dr. Mosesson," "failed to inform, notify and/or advise Dr. Balensweig of certain legal issues which would have avoided all of the claims and damages alleged in the instant Action," and "failed to advise Dr. Balensweig to refuse to sign a Confession of Judgment in the amount of $2,566,057.00 because he had numerous defenses to claim." Complaint, at ¶ 34.
On February 11, 2008, the Defendants filed the Motion to Dismiss stating that the Trustee was improperly asserting malpractice claims that should be dismissed because (a) the Trustee was precluded under the doctrines of res judicata and collateral estoppel from asserting claims that were at issue in the State Court Action; (b) the Trustee released any claims the Debtor's estate had against the Defendants under the terms of the Trustee-Mosesson Settlement as well as the Debtor-Mosesson Settlement; and (c) prepetition malpractice and contract claims constituted "non-core" proceedings for which the Court lacked subject-matter jurisdiction. See Motion to Dismiss, at p. 2.
The Trustee objects to the Motion to Dismiss claiming that (a) the causes of action asserted in the Complaint were not barred by res judicata or claim preclusion because the State Court Action was not a decision on the merits and the Defendants could not establish that they were in privity with Dr. Mosesson; (b) the Defendants were not released under the terms of either the Trustee-Mosesson Settlement or the Debtor-Mosesson Settlement; and (c) the Court had subject-matter jurisdiction over the Adversary Proceeding as the matter was a "core" proceeding, or at a minimum, fell within the Court's "related to" jurisdiction. See Chapter 11 Trustee's Memorandum in Opposition to Defendants' Motion to Dismiss the Complaint ("Response"), at pp. 10-22.
DISCUSSION
At the heart of this matter is whether this Adversary Proceeding constitutes a "core" or "non-core" proceeding. Section 157(b) of title 28 of the United States Code sets forth the categories of proceedings arising under the Bankruptcy Code that Bankruptcy judges have jurisdiction to hear. 28 U.S.C. § 157(b). Section 157(b) distinguishes between "core proceedings" which bankruptcy courts may "hear and determine" and for which bankruptcy judges "may enter appropriate orders and judgments," and "non-core" proceedings that are "otherwise related to" a bankruptcy case where bankruptcy judges may only issue "proposed findings of fact and conclusions of law" to the District Court absent the consent of the parties. 28 U.S.C. § 157(b), (c); see generally Official Comm. of Unsecured Creditors of FMI Forwarding Co. v. Union Transp. Corp. (In re FMI Forwarding Co.), No. 00-B-41815 (CB), 2004 WL 1348956, *3 (S.D.N.Y. June 16, 2004); Wechsler v. Squadron, Ellenoff, Plesent & Sheinfeld LLP, 201 B.R. 635, 639 (S.D.N.Y.1996). *162 Section 157(b) sets forth a non-exhaustive list of categories of "core" proceedings, which includes, inter alia, "matters concerning the administration of the estate." 28 U.S.C. § 157(b)(2). In general, however, a core proceeding must "invoke a substantive right" created by federal bankruptcy law that would not exist outside of a bankruptcy case. MBNA America Bank, N.A. v. Hill, 436 F.3d 104, 108-09 (2d Cir.2006) ("Claims that clearly invoke substantive rights created by federal bankruptcy law necessarily arise under Title 11 and are deemed core proceedings."); In re FMI Forwarding Co., 2004 WL 1348956, at *4 (same). In contrast, "non-core" proceedings "involve disputes over rights that... have little or no relation to the Bankruptcy Code, do not arise under federal bankruptcy law and would exist in the absence of a bankruptcy case." Official Comm. of Unsecured Creditors v. Amlicke (In re VWE Group, Inc.), 359 B.R. 441 (S.D.N.Y.2007) (quotations omitted); see also Wechsler, 201 B.R. at 639 ("A core proceeding must invoke a substantive right provided by title 11. On the other hand, non-core proceedings `involve disputes over rights that ... have little or no relation to the Bankruptcy Code, do not arise under federal bankruptcy law and would exist in the absence of a bankruptcy case.").
Regardless of whether claims are fashioned as malpractice, breach of contract, or breach of fiduciary duty, courts in this Circuit have "consistently found professional malpractice claims arising out of pre-petition misconduct to be non-core." In re VWE Group, Inc., 359 B.R. at 448; In re FMI Forwarding Co., 2004 WL 1348956, at *4 (professional malpractice claim alleging accounting firm negligently completed valuation of Debtor's assets held to be "non-core proceeding"); Esteva v. Nash, No. 01-13341(AJG), 2004 WL 5327181, *3 (Bankr.S.D.N.Y. Nov.24, 2004) ("[M]alpractice action is clearly a non-core proceeding."); Wechsler, 201 B.R. at 639-40 (chapter 11 trustee's malpractice, breach of fiduciary duty and breach of contract claims against law firm based on prepetition conduct was "non-core" proceeding); In re Green, 200 B.R. 296, 298-99 (S.D.N.Y.1996) (debtor's third-party claims for malpractice, breach of fiduciary duty and breach of contract against law firm that provided legal advice for pre-petition real estate transaction at issue in adversary proceeding were "non-core").
In this instance, the allegations set forth by the Trustee in the Complaint wholly involve events that preceded the Debtor's bankruptcy filing. The disputed Will was prepared, drafted, executed and revoked by mid-June 2003 and the Confession of Judgment was similarly drafted, executed and later vacated by April 2004. In contrast, the Debtor's bankruptcy proceeding was not commenced until May 31, 2004. The Trustee has not argued the claims asserted in the Complaint require the adjudication of issues or rights peculiar to bankruptcy law, rather, by the Trustee's own admission in the Trustee-Mosesson Settlement "[t]his bankruptcy case can be viewed essentially as a two party dispute between Mosesson and the Debtor, which dispute is based entirely on pre-petition events and largely on non-bankruptcy law." See Trustee-Mosesson Settlement, at p. 5.
The Trustee's sole basis for claiming that the instant action is a "core" proceeding is that the possibility of recovery of funds in the Adversary Proceeding may affect distributions to administrative and priority claim holders. However, permitting such a broad interpretation in this instance, where the allegations involve solely a pre-petition controversy and the Defendants have not filed a proof of claim, *163 would create an exception that "would swallow the rule." See Enron Power Marketing, Inc. v. Santa Clara (In re Enron Power Marketing, Inc.), No. 014-Civ-7964, 2003 WL 68036 (S.D.N.Y. Jan.8, 2003); Orion Pictures, Corp. v. Showtime Networks, Inc. (In re Orion Pictures, Corp.), 4 F.3d 1095, 1102 (2d Cir.1993) (pre-petition contract action brought by debtor against a party that had not filed a proof of claim against the bankruptcy estate was "non-core" proceeding that "may not be finally adjudicated by a non-Article III judge.") (internal citations omitted). While the Trustee goes to great lengths to distinguish the present case from previous decisions in this Circuit by stressing that those decisions generally decided motions to withdraw the reference rather than motions to dismiss, the Court is not persuaded. The case law in this Circuit is clear a prepetition cause of action for malpractice is not a "core" proceeding.
Likewise, as the Defendants have neither filed a proof of claim nor consented to have this Court adjudicate this matter, the Court may not hear this action as a "non-core" proceeding. See Johns-Manville Corp. v. Chubb Indemnity Ins. Co. (In re Johns-Manville Corp.), 517 F.3d 52, 63-64 (2d Cir.2008) (bankruptcy court could not extend "related to" jurisdiction where claimholders had not filed claims against the debtor and actions would have no effect on the bankruptcy estate); 176-60 Union Turnpike, Inc. v. Howard Beach Fitness Ctr., Inc., 209 B.R. 307, 313-14 (S.D.N.Y.1997) (prepetition negligence action originally brought by debtor almost two years before it filed its petition in bankruptcy, where defendant had not filed a proof of claim or counterclaims against the bankruptcy estate, was not "related to" within the meaning of Sections 157(a) and (b)).
The Trustee contends that the outcome of this proceeding may have a significant upside to improve distributions to administrative and priority claimholders and the February 9 Motion provided that any proceeds that the Trustee might receive through his pursuit of this Adversary Proceeding would become available for distribution after paying the Trustee's professionals. However, it is not clear to the Court how any party aside from the Trustee or his administrative professionals might possibly benefit from the prosecution of this action. Indeed, it appears that the main incentive for the Trustee to bring this action is to recover some portion of fees, including fees for bring this Adversary Proceedings. The holders of all allowed claims save for Dr. Mosesson have already been paid in full in accordance with the Court's March 8, 2008 order and the Trustee, the Debtor and Dr. Mosesson have all exchanged mutual walk-away releases with Dr. Mosesson (with certain limited exceptions) specifically waiving any right to receive future distributions from the Debtor's estate. As all other creditors have either been paid in full or waived their right to future distributions and the Defendants have not filed a proof of claim, it seems clear as stated above that the Trustee and his administrative professionals (who previously agreed to receive a pro rata distribution for their fees in the February 9 Motion) are the only parties who might benefit from the continued pursuit of this action. Extending "related to" jurisdiction would not be proper in this instance as no possibility exists for the outcome of this Adversary Proceeding to have any negative or detrimental impact on the Debtor's estate. See, e.g., 176-60 Union Turnpike, Inc., 209 B.R. at 313-14 (declining to extend "related to" jurisdiction where there "could be no conceivable detriment to the administration of the bankruptcy estate in a case where no claim has *164 been asserted `against' the bankruptcy estate in the bankruptcy court.").
Therefore, as the outcome of the Adversary Proceeding will only have a "speculative, indirect or incidental" effect on the Debtor's estate the matter is not "related to" the bankruptcy estate and the Court lacks jurisdiction. See id., 209 B.R. at 313-14 (Although `bankruptcy jurisdiction [is] to be construed as broadly as possible within the constitutional constraints of Marathon,' this Court finds that any controversy having `only [a] speculative, indirect or incidental effect on the estate' is not `related to' the bankruptcy action within the meaning of Sections 157(a) and (c)) (internal citations omitted); Turner v. Ermiger (In re Turner), 724 F.2d 338, 341 (2d Cir.1983) ("Congress must have intended to put some limit on the scope of `related to' jurisdiction.").
Accordingly, as this matter is neither a "core" nor a "non-core" proceeding, the Court need not decide the other issues raised by the Defendants in the Motion to Dismiss.
CONCLUSION
For the reasons set above and at oral argument, the Complaint is dismissed and the Motion to Dismiss is granted.
IT IS SO ORDERED.
NOTES
[1] While both the Debtor and JPC simultaneously moved to vacate the Confession of Judgment only JPC's motion to vacate was granted. Interestingly, the Debtor's motion, which was premised on his accusation that the Confession of Judgment was procured by fraud, was denied because the State Supreme Court held that (i) a separate plenary action was required, and (ii) the Debtor had failed to show that the Confession of Judgment was invalid or improperly filed. See Decision and Order Granting Motion to Vacate dated April 30, 2004, Roger E. Mosesson v. Howard D. Balensweig (Index No. 0311141), at pp. 5-9. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542485/ | 410 B.R. 845 (2008)
In re Douglas Robert McELROY, Kathy Ann McElroy, Debtors.
No. 08-01740F.
United States Bankruptcy Court, N.D. Iowa, Western Division.
December 3, 2008.
Michael L. Jankins, Des Moines, IA, for Debtors.
MEMORANDUM DECISION: PLAN CONFIRMATION
WILLIAM L. EDMONDS, Bankruptcy Judge.
Debtors Douglas and Kathy McElroy seek confirmation of their chapter 13 plan. They filed their petition and plan on August 18, 2008. Citizens Automobile Finance, Inc. objected to the treatment of its secured claim; Carol F. Dunbar, the standing trustee, filed a Conditional Report of No Objection to the plan. Hearing was held November 20, 2008 in Fort Dodge. Michael L. Jankins appeared for *846 McElroys; Carol F. Dunbar appeared on her own behalf.
Initially, McElroys proposed to "cram down" the secured claim of Citizens Automobile Finance, Inc. by paying it $6,050.00 as the value of the collateral, a 2001 Hyundai Santa Fe automobile. No interest was proposed for payment of the value over the term of the plan. After Citizens objected, McElroys modified the plan to pay Citizens $9,712.00 at 7 per cent per annum (doc. 22). This modified treatment conforms to Citizens's objection.
The trustee's objection stated that she would have no objection to the modified plan if the debtors orally modified it to add a "disposable income provision" (doc. 24).
McElroys' modified plan proposes to pay to the trustee:
$ 150.00 per month for 33 months
491.00 per month for 2 months
662.00 per month for 16 months
990.00 per month for 1 month
1,283.00 per month for 8 months
for a total of $27,778.00. In addition the McElroys propose to pay to the trustee "any tax refunds to which they become entitled during the term of the Plan within ten days of receipt by the Debtor(s)." Plan, ¶ 1 (doc. 2).
Thus, the only objection lodged against the proposed plan is pursuant to 11 U.S.C. § 1325(b)(1)(B), which states:
If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan ... (B) the plan provides that all of the debtor's projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.
11 U.S.C. § 1325(b)(1)(B).
McElroys are above median income debtors; however, their monthly disposable income under 11 U.S.C. § 1325(b)(2) is negative $716.70. Their applicable commitment period is five years. 11 U.S.C. § 1325(b)(4). They calculated their disposable income at filing as $149.82 by subtracting their average monthly expenses as shown on schedule J from their average monthly income as shown on schedule I. The monthly payments increase at intervals as the debtors pay off each of four loans from 401(k) plans.
At the confirmation hearing, McElroys' attorney stated that debtors would agree to payment of additional disposable income during the term of the plan, as demanded by the trustee, if necessary to obtain confirmation, but that he did not believe such agreement was required by the provisions of chapter 13 of the Bankruptcy Code.
Dunbar does not point to any particular type of income which would increase McElroys' disposable income over the 60 months. She contends that debtors are obligated to submit any income they receive in addition to wages and tax refunds during the term of the plan.
In this district, a promise to pay tax refunds to the trustee has been determined as necessary because most wage earning debtors anticipate annual tax refunds. If tax refunds are obtained by intentional over-withholding, one court has described them as "virtual savings accounts." In re Rhein, 73 B.R. 285, 288 (Bankr.E.D.Mich.1987). Because most debtors anticipate receiving annual tax refunds, parties have agreed that tax refunds received during some or all of the years of the plan will be submitted to the trustee.
*847 It seems that as a result of expectations regarding tax refunds, debtors are normally not precise in describing what part of their projected disposable income is expected in the form of tax refunds. Moreover, the trustee (almost always it is the trustee's objection to plans that triggers the § 1325(b)(1)(B) requirement for confirmation) does not force debtors to be more precise in filling out the "Employee's Withholding Allowance Certificate" (Department of the Treasury, IRS form W-4 or the Iowa form W4). If a chapter 13 debtor regularly receives tax refunds, it is expected that they are part of projected disposable income, and this, I believe, is a fair and correct result.
But I disagree with the contention that "projected disposable income" is whatever disposable income debtors actually receive during the applicable chapter 13 plan period. Section 1325(b)(1)(B) requires only that debtor provide for payment of all projected disposable income as calculated at the time of confirmation, not that debtor will provide all actual disposable income. Anderson v. Satterlee (In re Anderson), 21 F.3d 355, 358 (9th Cir.1994); see also Commercial Credit Corp. v. Killough (Matter of Killough), 900 F.2d 61, 65 (5th Cir.1990) (affirming bankruptcy court's determination that "potential for [debtor] to work overtime in the future was not definite enough" to include in projected income). There is support in our circuit for the proposition that future income which is too speculative is not included in projected income. Education Assistance Corp. v. Zellner, 827 F.2d 1222, 1226 (8th Cir.1987); see also In re Schyma, 68 B.R. 52, 63 (Bankr.D.Minn.1985) (prospect of dividends "not so certain" as to consider them regular or disposable income).
It seems to me that "projected disposable income" in a chapter 13 case should not include items of income which are not anticipated or which are purely speculative. The trustee has not pointed to any forms of such income during the term of McElroys' plan. Indeed, debtors' attorney says he discussed with them whether there were any future sources of income, and there are none. I find no evidence of any anticipated income of debtors which they have failed to include in their projection.
I conclude that it is not necessary, in order to satisfy the requirement of § 1325(b)(1)(B), for debtors to promise to submit all actual disposable income during the term of the plan. I conclude that McElroys' plan meets the requirements of § 1325(b)(1)(B) as proposed, and it meets the requirements set out in 11 U.S.C. § 1325(a)(1)-(9). They are applying all of their projected disposable income to make payments to unsecured creditors.
IT IS ORDERED that the chapter 13 plan proposed by Douglas and Kathy McElroy on August 18, 2008 and modified on October 3, 2008 is confirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542458/ | 410 B.R. 101 (2009)
In re SUNDALE, LTD., Debtor.
No. 07-21016-BKC-LMI.
United States Bankruptcy Court, S.D. Florida.
June 3, 2009.
*102 Daniel N. Gonzalez, James C. Moon, Peter D. Russin, Richard S. Lubliner, Miami, FL, for Debtor.
ORDER ON OCEAN BANK'S ENTITLEMENT TO DEFAULT INTEREST IN RESPECT OF ITS CLAIM[1]
LAUREL M. ISICOFF, Bankruptcy Judge.
This matter came before me on request of Ocean Bank for temporary allowance of its claim for voting and estimation purposes (DE #895) and the objection of the Debtor, Sundale, ltd. ("Sundale" or "Debtor") to the motion (DE #1241). In making this decision I have also reviewed the memoranda of law (DE #986 and #1141) filed by Ocean Bank as well as the memorandum of law (DE #1103) filed by the Debtor, Sundale.[2]
Ocean Bank claims it is entitled to default interest from as early as May 22, 2007, the date that KRH Ltd., the co-guarantor of the Ocean Bank Loan, filed bankruptcy. Sundale argues that Ocean Bank is not entitled to default interest at all.
I have already held that, for purposes of estimation, default interest, to the extent that Ocean Bank is entitled to charge default interest, shall run from December 10, 2007, the date Ocean Bank sent Sundale the notice of default. The issue before me is whether Ocean Bank should be entitled to charge default interest at all. I have previously advised the parties that my ruling on this legal issue will apply not only for purposes of the estimation motion, but also to the objection to the Ocean Bank claim that has been filed by Sundale.[3]
*103 Sundale argues that Ocean Bank is not entitled default interest at all because
a. Ocean Bank's claim of default rate of interest[4] is an unenforceable penalty under Florida law and therefore not allowable under 11 U.S.C. § 506(b); and
b. Even if I should find the default interest rate reasonable (which, as I will get to, is not the issue), I should nonetheless not enforce the default interest based on a balancing of the equities of the case under federal law.
For the reasons set forth in this Order, I find that Ocean Bank's claim of default interest is enforceable under Florida law and therefore enforceable under section 11 U.S.C. § 506(b). Moreover, equitable considerations do not, under Florida law, and cannot, under federal law, modify Ocean Bank's entitlement to default interest on its claim.
In U.S. v. Ron Pair Enterprises, Inc., 489 U.S. 235, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989), the United States Supreme Court first reviewed section 506(b). In that case, the issue was the enforceability of post-petition interest charges for a non-consensual, oversecured claim. In ruling that non-consensual interest on such a claim was allowed, the Supreme Court held that "[r]ecovery of post-petition interest [under section 506] is unqualified," as opposed to allowance of fees costs and charges, which must be reasonable and allowed pursuant to agreement. 489 U.S. at 241, 109 S. Ct. 1026. The Supreme Court expressly held that when Congress enacted section 506(b) it implicitly, although not explicitly, repudiated the balancing of equities analysis espoused by the Supreme Court in Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 67 S. Ct. 237, 91 L. Ed. 162 (1946). U.S. v. Ron Pair Enter., Inc., 489 U.S. at 248, 109 S. Ct. 1026.
The Eleventh Circuit has repeatedly echoed the Supreme Court's holding in cases dealing with section 506(b). In Equitable Life Assurance Society v. Sublett, 895 F.2d 1381 (11th Cir.1990), the Eleventh Circuit considered the bankruptcy court's disallowance of certain interest requested by a lender arising out of a promissory note secured by real property. In reversing the bankruptcy court decision and the district court's affirmance of that decision, the court noted that the bankruptcy court's decision, based on the equitable balancing of the Vanston Bondholders case, was "fatally flawed." The court based its holding on the Supreme Court ruling in Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 108 S. Ct. 963, 99 L. Ed. 2d 169 (1988), in which the Supreme Court specifically held that a bankruptcy court may only exercise its equitable rights consistent with the provisions of the Bankruptcy Code. Since section 506(b) specifically allows oversecured creditors interest on account of their claims, the court held that, to the extent Vanston directed a different result, Vanston had been superseded. The Eleventh Circuit also noted that, even were Vanston to have continuing viability, "Vanston recognized the principle long established under pre-Code bankruptcy lawsthat claims for post-petition interest should be allowed in full where the debtor's estate ultimately proves to be solvent...." 895 F.2d at 1386. In the Sublett case there was no issue that the lender was oversecured and the estate was solvent. The case was remanded to the *104 bankruptcy court solely for determination of whether the interest sought was actually allowed under the applicable loan documents, an issue that had not been directly addressed in the lower court opinion.
While there appears to be some confusing reference in Sublett, in dicta, to reasonableness, any such confusion was resolved by the Eleventh Circuit in Orix Credit Alliance, Inc. v. Delta Resources, Inc., 54 F.3d 722 (11th Cir.1995) and Welzel v. Advocate Realty Investments, LLC, 275 F.3d 1308 (11th Cir.2001). In Delta Resources, the court considered whether an oversecured creditor is entitled to payment of post-petition interest as adequate protection payments in order to preserve the value of its equity cushion. Although answering that question in the negative, the Eleventh Circuit did note, citing Ron Pair and Sublett, that "it seems beyond preadventure that a creditor's right to recover postpetition interest on its oversecured claim pursuant to 11 U.S.C. § 506(b) is virtually `unqualified.'" 54 F.3d at 727. In Welzel, the court considered the reasonableness qualifier in section 506(b) as it applies to attorney fees. First, the Eleventh Circuit noted that the amount and validity of claims is determined through reference to state law. Second, the Eleventh Circuit wrote:
Congress has shown that when it wants to exempt a particular set of items from the reasonableness standard, it does so explicitly. With regard to interest payments on oversecured claims, § 506(b) conspicuously leaves out the adjective "reasonable," in contrast to the explicit reference to "reasonable fees, costs or charges." This indicates that Congress, by using "reasonable" with respect to one set of items but not another, acted purposefully in deciding whether to include or exclude the reasonableness standard.
275 F.3d at 1314. Thus, the court held that, in determining the allowability of attorney fees, the court had to consider the allowability of the claim under state law, and then further whether the claim met the reasonableness standard for purposes of allowance under section 506(b). Conversely, in considering the allowability of interest under section 506(b) (that is, the secured status of the interest claim) the inquiry is limited to state law. I would also note that Congress amended section 506(b) in 2005 to add an additional modifier ("or State Statute") to charges other than interest, but did not change the unqualified allowance of interest notwithstanding the case law on this issue. Had Congress wanted to change the statute to qualify the allowance of interest under section 506(b) it could have done so in 2005.
There is no dispute that the allowance of a claim, in the absence of a specific Bankruptcy Code provision to the contrary, as noted by the Eleventh Circuit in Welzel, is governed by state law. As stated by the Supreme Court time and again:
Creditors' entitlements in bankruptcy arise in the first instance from the underlying substantive law creating the debtor's obligation, subject to any qualifying or contrary provisions of the Bankruptcy Code ... The "basic federal rule" in bankruptcy is that state law governs the substance of claims.
Raleigh v. Ill. Dep't of Revenue, 530 U.S. 15, 19, 120 S. Ct. 1951, 147 L. Ed. 2d 13 (2000) (citing Butner v. U.S., 440 U.S. 48, 99 S. Ct. 914, 59 L. Ed. 2d 136 (1979)). See also Travelers Cas. & Sur. Co. of Am. v. Pacific Gas & Elec. Co., 549 U.S. 443, 451, 127 S. Ct. 1199, 167 L. Ed. 2d 178 (2007) ("[W]hen the Bankruptcy Code uses the word `claim'which the Code itself defines as a `right to payment,' 11 U.S.C. § 101(5)(A)it is usually referring to a *105 right to payment recognized under state law.")
While the Debtor is correct that there are several cases under Florida law regarding the unenforceability of unreasonable fees and charges improperly disguised as penalties, there are no such Florida cases with respect to a lender's entitlement to default interest. Nor are there any Florida cases equating default interest with fees and charges under agreements such that it would be appropriate to analogize the treatment. Indeed, the Debtor concedes this in its memorandum. The cases that are cited by the Debtor do not inform the issue before me because, in each instance, either the case was based on a state law, other than that of Florida, that limited a lender's entitlement to default interest, see, e.g., In re Timberline Prop. Dev., Inc., 136 B.R. 382 (Bankr.D.N.J. 1992), or the case relied on the balancing of equities approach of Vanston Bondholders, see, e.g. In re DWS Inv., Inc., 121 B.R. 845 (Bankr.C.D.Cal.1990), which approach, as I have already discussed, the Supreme Court has specifically held is no longer appropriate with respect to an oversecured creditor's entitlement to interest.
Florida law expressly recognizes a lender's right to charge default interest if the underlying loan documents so provide. See, e.g. Smiley v. Manufactured Hous. Assoc. III, 679 So. 2d 1229 (Fla. 2d DCA 1996); THFN Realty Co. v. Kirkman/Conroy Ltd., 546 So. 2d 1158 (Fla. 5th DCA 1989); Haddock v. Marlin, 458 So. 2d 848 (Fla. 5th DCA 1984); Bratcher v. Wronkowski, 417 So. 2d 1132 (Fla. 5th DCA 1982); Conn. Mut. Life Ins. Co. v. Fisher, 165 So. 2d 182 (Fla. 3d DCA 1964). Moreover, a trial court may not alter that contractual right based on equitable considerations even though mortgage foreclosures in Florida are equitable proceedings. In reversing a trial court's denial of a lender's claim of default interest based on the trial court's finding that the lender acted unreasonably because the lender would not give the borrower a partial release of mortgage (and therefore the borrower stopped making mortgage payments, hence "causing" the default), the Second District Court of Appeal wrote:
We recognize that mortgage foreclosure is an equitable remedy. However, in determining whether to grant equitable relief, the trial court cannot look solely to the result but must apply rules which confer some degree of predictability on the decision-making process. [David v. Sun Fed. Sav. & Loan Ass'n, 461 So. 2d 93, 95 (Fla.1984).] Only under certain clearly defined circumstances, none of which are present in this case, may a court of equity refuse to foreclose a mortgage. Furthermore, in determining whether to grant the equitable relief of foreclosure, the trial court is not at liberty to modify terms of the note and mortgage that are unambiguous and undisputed. In this case, the note provided for an original interest rate of 8.5 percent per annum and a default rate not to exceed 18 percent per annum that would apply "if default be made in the payment of any of the sums or interest mentioned herein or in said mortgage or in the performance of any of the agreements contained herein or in said mortgage." Given the facts of this case, we hold that, even if the [lender] had breached the independent covenant pertaining to partial releases, the trial court was without authority to modify the terms of the note and mortgage by failing to give effect to the default rate provision.
Smiley v. Manufactured Hous. Assoc. III, 679 So.2d at 1232 (internal citations omitted).
*106 In sum, Ocean Bank's contractual right to default interest is enforceable under Florida law, and, because Ocean Bank's state law right is not modified by any Bankruptcy Code provision, and since this Court may not use its equitable powers to alter Ocean Bank's state law contract right either under Florida law or federal law, Ocean Bank is entitled to default interest on account of its claim. Moreover, even if Vanston had continuing viability, despite direct contrary rulings by the United States Supreme Court and the Eleventh Circuit, the Debtor has repeatedly claimed that all creditors will be paid in full, and, therefore, under Vanston's equity standard Ocean Bank would nonetheless be entitled to its default interest.
As I ruled previously, for purposes of estimation only, default interest shall run from December 10, 2007. For purposes of final claim allowance, default interest shall run from such date as I determine based on the evidence presented at the trial on the Ocean Bank claim objection. However, nothing in this ruling is intended to or shall limit the Debtor's right to bring its counterclaim against Ocean Bank.
Because of this ruling I find there is no need to have an evidentiary hearing on the "purpose" of the default interest or to consider what are Ocean Bank's actual costs or losses with respect to the allowability of default interest. These facts are not relevant because Florida law views contractual default interest differently than it does other charges that courts may scrutinize to determine whether such charges are penal in nature. Equity cannot alter those rights.
NOTES
[1] This Order reduces to writing (and adds some formality) to my oral ruling of March 25, 2009.
[2] A detailed factual background of this case is available in In re Sundale, Ltd., 400 B.R. 890 (Bankr.S.D.Fla.2009) (the "Trustee Order"). Capitalized terms not defined in this Order will have the meaning set forth in the Trustee Order.
[3] FACE has asked that this ruling also apply to its claim for default interest. Since the law does not change, this ruling will apply to the pending objection to FACE's claim as well.
[4] The Debtor also argues that Ocean Bank's claim of late charges and late fees are equally unenforceable, but Ocean Bank has stated it is not seeking late charges or late fees, so there is no need to address this argument. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1494264/ | 571 F. Supp. 108 (1983)
Fred V. PEAY, Jr., Individually and d/b/a Chip Peay Music
v.
Larry W. MORTON and Ann Morton, Individually and d/b/a Accredit Music; Russ Allison and David Hall.
No. 82-3242.
United States District Court, M.D. Tennessee, Nashville Division.
July 27, 1983.
*109 Michael Milom and Malcolm L. Mimms, Jr., Nashville, Tenn., for plaintiff.
Scott Siman, Nashville, Tenn., for David Hall.
W. Robert Thompson and Craig Hayes, Nashville, Tenn., for Mortons.
MEMORANDUM
JOHN T. NIXON, District Judge.
Plaintiff brings this cause of action requesting, alternatively, a permanent injunction and damages for copyright infringement under the Copyright Act, 17 U.S.C. §§ 101, et seq., or a declaratory judgment pursuant to 28 U.S.C. § 2201 that plaintiff is the sole owner of the copyright in the musical composition at issue in this case. Pending is defendants' motion to dismiss or for summary judgment based on their contention that this Court lacks subject matter jurisdiction and that the plaintiff failed to join an indispensable party. Because this *110 Court has determined that subject matter jurisdiction is indeed lacking, this action must be dismissed.
Summary judgment is an inappropriate vehicle for raising questions concerning a court's jurisdiction or a defect in parties. See Boudloche v. Conoco Oil Corp., 615 F.2d 687, 688-689 (5th Cir.1980); Wright, Miller & Kane, 10 Federal Practice & Procedure: Civil 2d § 2713 at 611-12 (1983). Therefore, to the extent defendant's motion challenges jurisdiction, the Court will treat it as a motion to dismiss under Fed.R.Civ.P. 12(b)(1). In passing on such motions, however, the district courts may consider affidavits and other competent documentary evidence, and resolve disputed jurisdictional fact issues, particularly where the case is not to be tried to a jury. Berardinelli v. Castle & Cooke, Inc., 587 F.2d 37, 39 (9th Cir.1978); Rosemound Sand & Gravel Co. v. Lambert Sand & Gravel Co., 469 F.2d 416, 418 (5th Cir.1972); Gallogly v. Bakery & Confectionery Wkrs. Int. Union, 180 F. Supp. 778, 781 (D.R.I.1960). This Court may therefore consider not only the pleadings but make any necessary findings based upon the affidavits and transcripts of depositions presented by the parties to decide the jurisdictional question.
The events that form the basis of this action date back to October 1979, when Carl Chambers, a songwriter, composed a musical composition called "Close Enough to Perfect" ("Close Enough"). The Amended Complaint alleges that on May 19, 1981, the plaintiff, Fred V. Peay, Jr., acquired this composition from Chambers pursuant to a "Single Song Publishing Contract" and by an Assignment of Copyright executed on the same date. Plaintiff alleges that he took this transfer of copyright in good faith on the basis of a binding promise to pay royalties to Chambers and without notice of any prior transfer. The plaintiff registered his claim to copyright in the composition on July 9, 1981 and recorded the Assignment of Copyright with the Register of Copyrights on August 14, 1981. On September 15, 1981, the plaintiff filed a "Publisher Clearance Form" for the song with Broadcast Music, Inc. (BMI), a performing rights society.
On the preceding day, September 14, 1981, the plaintiff had a discussion with the defendant, Larry Morton (Morton), who with defendant Ann Morton is doing business as the defendant corporation, Accredit Music, concerning the matter that seems to be the crux of the controversy: Morton indicated to Peay that Accredit Music owned four of Carl Chambers' songs, including "Close Enough"; Peay responded that Chip Peay Music owned the exclusive rights to "Close Enough" and fourteen other Chambers songs. Complaint, Exhibit 5.
Count I of the Amended Complaint alleges that the Mortons and the remaining two defendants, Russ Allison and David Hall, entered into an agreement in contravention of the plaintiff's exclusive rights in the copyright to "Close Enough" by representing themselves to be the sole and exclusive owners of all such rights and by "pitching"[1] the song to Harold Shedd, co-producer of the popular country music artists known as Alabama. The complaint alleges that the defendants thereby authorized Shedd and RCA Records to record a performance of "Close Enough" by Alabama in deliberate infringement of plaintiff's rights. Although the complaint contains no averment as to precisely when these events took place, it expressly states that the date of the infringement was after September 15, 1981. Amended Complaint, ¶ 12. Plaintiff further alleges that at the end of February 1982 RCA Records released Alabama's "Mountain Music" album, which included "Close Enough", and designated the defendant Accredit Music as publisher and owner of the song. On the basis of these alleged facts, plaintiff seeks a permanent injunction restraining the defendants from exploiting the composition, and any damages resulting from the alleged infringement.
*111 In Count II, plaintiff asserts that the foregoing allegations evidence an actual controversy concerning the proper ownership of the composition and therefore urges that this Court enter a declaratory judgment to resolve the ownership dispute.
The complaint reveals that there is no diversity of citizenship. To determine whether federal jurisdiction is present under 28 U.S.C. § 1338 the Court has considered the following in addition to the allegations of the complaint.
Defendant Morton claims that in February 1980, two years prior to the release of the "Mountain Music" album, he and Chambers entered into an oral agreement to co-produce "Close Enough" and three other Chambers songs and to use the finished performances to "shop for a deal". Morton Affidavit. Morton claims that Chambers agreed to assign to Accredit Music all rights in the copyrights to the songs if Morton would pay for production and promotion of the musical tracks for the songs. It is undisputed that over the course of the following year, Morton incurred expenses in the production and promotion of the four songs, one of which was commercially released, by agreement with Chambers, on Morton's record label to radio stations nationwide. Morton Affidavit and Schedule B thereto. It is further uncontroverted that on January 22, 1981 Chambers sought to obtain performance rights from BMI and that in executing the requisite application, Chambers listed three songs, including "Close Enough", as published by Accredit Music. Morton Affidavit, Schedule B. Morton claims that he understood that Chambers had thereby made a written acknowledgement of their oral agreement that Accredit Music would be the publisher and copyright owner of "Close Enough". He thereafter sent Chambers songwriter contracts and a recording contract for the songs, but Chambers never executed them.
As regards the "pitching" of "Close Enough" to Alabama's co-producer, Shedd, it appears that pursuant to an oral agreement between the defendants (Morton Deposition at 96), defendant Russ Allison had indeed provided Shedd with a copy of the "demo tape" in February of 1981 and indicated that Accredit Music and Raindance Music, a company formed by defendants Allison and Hall, were the publishers. Morton Deposition at 96; Hall Deposition at 16, 21. The defendants apparently heard nothing from Shedd until August of 1981, when Hall learned that Alabama had already "cut the song". Hall Deposition at 20-21; Morton Affidavit.
Morton claims that in the Fall of 1981, he learned that Chambers had signed songwriter agreements with Chip Peay. He then suspended all plans for promotion of the compositions, and has not been reimbursed by Chambers for the expenses he had already incurred. Morton Affidavit. It is undisputed that Morton never executed any mechanical license on behalf of Accredit Music for "Close Enough", and he claims that he never authorized any license for manufacture and sale of any performance of the song by Alabama. Morton Affidavit.
It is in any event clear that Alabama and RCA Records never obtained the licenses required under the copyright laws before producing and releasing their recording of "Close Enough".
Somewhat ironically, however, it appears that during the spring and summer of 1981, the plaintiff independently sought to interest Alabama in producing a recording of "Close Enough", and indeed, upon initially hearing that Alabama had produced a recording, believed that he had obtained it himself. Peay Deposition at 30. He testified at his deposition that in March or April of 1981, before the Single Song Publishers Contract between Peay and Chambers was executed, he himself had pitched "Close Enough" to Dale Morris, Alabama's manager. Peay Deposition at 24-27. Peay further testified that he had been contacted by Morris in July of 1981 and was led to believe that, although the song had not yet been recorded, if he would offer Alabama a percentage of copyright ownership in the song, Alabama would include the song on its "Mountain Music" album and guarantee release of a single recording of "Close *112 Enough" in addition. Peay Deposition at 37. Peay soon thereafter sent Morris a letter confirming that he understood that they had reached an agreement whereby "Close Enough" would be released on the "Mountain Music" album and as an "A-side single", and Alabama would receive fifty percent of the copyright ownership in the song. Peay Deposition at 38. It was apparently not until Peay later learned that RCA Records would be releasing the album listing Accredit Music as publisher that he learned of the defendants' involvement in pitching the song. Peay Deposition at 30.
On January 26, 1982, plaintiff's attorney wrote to RCA Records advising it that contrary to the label credits on the soon-to-be released Alabama album, Chip Peay Music was sole owner of the copyright in "Close Enough" and that he understood no mechanical license had ever been issued for the song. Morton Affidavit, Collective Exhibit 2, at 27. The letter states, in addition, that Peay and Alabama's personal manager had reached an agreement whereby "the song would be included on the next album and that if released as an A-side single, Mr. Peay would split publishing with Alabama's publishing company. Apparently, Messrs. Hall and Allison had pitched the song to Harold Shedd, a producer on the album, and he denoted them as publisher when he submitted label copy". Morton Affidavit, Collective Exhibit 2, at 27.
In April of 1982, after the album was released, RCA Records sought synchronization and mechanical licenses for "Close Enough", apparently leaving it to plaintiff's and defendants' counsel to determine how the publisher should be identified. Morton Affidavit, Collective Exhibit 2, at 23-25. BMI thereafter decided to withhold payment of publisher royalties earned by "Close Enough" pending the outcome of this litigation. Id. at 21-22. Finally, the parties stipulated that monies generated by users of "Close Enough" would be held in escrow until further agreement or order.
The prerequisite for federal jurisdiction is that this suit arises under the copyright law. 28 U.S.C. § 1338. "A suit arises under the law that creates the cause of action". American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 36 S. Ct. 585, 586, 60 L. Ed. 987 (1916) (Holmes, J.). As the courts have repeatedly observed, however, the foregoing Holmes "creation test" is "more useful for inclusion than for the exclusion [of cases]" for which it was intended. Smart v. First Federal S & L Ass'n of Detroit, 500 F. Supp. 1147, 1153 (E.D.Mich.1980) (quoting T.B. Harms v. Eliscu, 339 F.2d 823, 827 (2d Cir.1964), cert. denied, 381 U.S. 915, 85 S. Ct. 1534, 14 L. Ed. 2d 435 (1965)). In this "murky" area of the law, the Court must look to the "essence of the plaintiff's claim". Keith v. Scruggs, 507 F. Supp. 968, 970 (S.D.N.Y. 1981). The oft-cited test formulated by Judge Friendly in T.B. Harms, 339 F.2d at 828 (emphasis supplied), is that
an action "arises under" the Copyright Act if and only if the complaint is for a remedy expressly granted by the Act, e.g., a suit for infringement ...., or asserts a claim requiring construction of the Act, ..., or, at the very least and perhaps more doubtfully, presents a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim. The general interest that copyrights, like all other forms of property, should be enjoyed by their true owner is not enough to meet this last test.
Simply because an action is predicated on rights derived from the Copyright Act does not mean that the action is one for copyright infringement, or one "arising under" the Copyright Act. 28 U.S.C. § 1338(a); Nimmer on Copyright, § 12.01[A]. Jurisdiction lies with the state courts in an action to enforce contractual rights or to establish title to a work in statutory copyright. Nimmer, supra, § 12.01[A]. Further, state jurisdiction is present even when disposition of such an action will require determination of questions of copyright law. Id. at 12-3, 12-4 (citing state cases). See T.B. Harms Co., 339 F.2d at 828; Elan Associates, Ltd. v. Quackenbush Music Ltd., 339 F. Supp. 461 (S.D.N.Y.1972). *113 Indeed even a well-pleaded "infringement claim will not invoke federal jurisdiction when the claim is merely incidental to a primary dispute over copyright ownership under state law." RX Data Corp. v. Dept. of Social Services, 684 F.2d 192, 196 (2d Cir.1982) (emphasis added); Simon & Flynn, Inc. v. Time, Inc., 513 F.2d 832 (2d Cir.1975) (per curiam); Stepdesign, Inc. v. Research Media, Inc., 442 F. Supp. 32 (S.D. N.Y.1977); Luckett v. Delpark, Inc., 270 U.S. 496, 502-03, 46 S. Ct. 397, 399, 70 L. Ed. 703 (1926) (patent law).
The jurisdictional question is most troublesome in a case, such as this, "of a hybrid nature" in which the plaintiff's claims are infringement of his rights under the copyright laws, "but in which at least a preliminary question arises unrelated to the copyright laws". Muse v. Mellin, 212 F. Supp. 315, 316 (S.D.N.Y.1962), aff'd per curiam, 339 F.2d 888 (2d Cir.1964) (citing T.B. Harms). In Muse v. Mellin, the plaintiff asserted a claim of ownership of the renewal right in a popular song based on an assignment executed by one of the authors of the song in 1931 to the plaintiff's predecessor in interest and on a "confirmatory" agreement of 1957. Defendants, however, claimed the same one-third interest in the renewal right under an agreement executed by the same author in 1951. The defendant performing rights society, ASCAP, was acting as stake holder of income earned by the song pending the court's determination of ownership. Plaintiffs claimed that their rights were infringed when ASCAP licensed the public performance of the song without their consent and, as in the instant case, they sought to obtain a declaratory judgment as to ownership, an injunction against defendants from infringing plaintiffs' rights in the renewal copyrights, and damages for infringement.
Finding that the "principal issue in this case is title", the Muse Court held:
This is simply a declaratory judgment action between one assignee against another assignee of the same one-third interest to determine the ownership of the elusive one-third interest.... The allegation of infringement in this case must be construed as an allegation that the plaintiff, after his title to the copyright has been established, will seek relief from infringement. The primary and controlling purpose of the complaint is to secure an interpretation of the various assignments of the one-third interest. Of such suits the federal courts lack jurisdiction.
212 F.Supp. at 318 (emphasis added; citations omitted).
Similarly, in Elan Associates, Ltd. v. Quackenbush Music, Ltd., 339 F.Supp. at 462, both the plaintiff and defendant claimed that they owned the copyright in seven songs composed by Carly Simon. Although the action was "cast in terms of infringement," the Court held that it lacked subject matter jurisdiction because the "principal and controlling issue" was who owned the copyrights. Id. See also Simon & Flynn, Inc. v. Time, Inc., 513 F.2d at 833-834; Rotardier v. Entertainment Company Music Group, 518 F. Supp. 919 (S.D.N. Y.1981); Keith v. Scruggs, 507 F.Supp. at 971.
These cases do not, of course, stand for the proposition that the federal courts are without jurisdiction to decide threshold questions concerning ownership in a copyright infringement action. Indeed, in any such action, ownership of a valid copyright and copying by the defendant are the two elements plaintiff necessarily must establish. Topolos v. Caldewey, 698 F.2d 991, 994 (9th Cir.1983); Warner Bros, Inc. v. ABC, Inc., 654 F.2d 204, 207 (2d Cir.1981). However, federal jurisdiction may not be invoked "where the primary and controlling purpose of the complaint is to secure an interpretation of conflicting assignments" and "the only infringement alleged is prospective under a declaratory relief count" or is incidental to a claim of ownership, for example, through a reversion of rights by reason of the defendant's breach of contract; in such cases "the determination of state or federal jurisdiction may often turn on the ephemeral issue of plaintiff's `primary and controlling' purpose." Nimmer, *114 supra, § 12.01[A] at 12-8, 12-8.1 (footnotes omitted).
Such is the case here. The complaint clearly presents as a central, if not the controlling, issue a dispute as to who owns the copyright in the song, "Close Enough". There is, for jurisdictional purposes, substantial evidence of conflicting assignments of the rights and interest in the song on the part of its composer. Certainly, a paramount purpose of the complaint, as plaintiff concedes, is to secure an interpretation of these conflicting assignments so as to establish the plaintiff as the proper owner of the copyright.
As to an allegation of infringement, the jurisdictional facts supporting such a claim are far from substantial or clear. The parties have argued over the question of whether the act of "pitching" a song constitutes a sufficiently public performance as to fall within the class of exclusive rights of the copyright owner under 17 U.S.C. § 106. This Court doubts whether the act of "pitching", without more, amounts to an infringement.[2] It is unnecessary to resolve the issue, however, because the amended complaint unequivocally states that the alleged infringement took place after September 15, 1981, and it is uncontroverted that the song was pitched to Alabama's producer in the Spring of 1981. Amended Complaint ¶ 12; Hall Deposition at 20-21; Morton Affidavit. The complaint therefore can only be construed to allege as the sole act of infringement the allegation that, representing themselves as owners of all rights in the song, "defendants authorized Shedd and RCA to record a performance of the composition by the group Alabama and to manufacture and release throughout the world records and tapes embodying the performance". Amended Complaint ¶¶ 15-17 (emphasis added). Even here, however, the undisputed facts as to the period during which the defendants made such representations and allegedly authorized the record production appear to be in conflict with the complaint's averment that the infringement occurred after September 15, 1981.
There are additional and more disturbing problems with this allegation of infringement. It has troubled this Court from the outset that the plaintiff has brought no infringement claim against third persons who figure centrally in this dispute, such as Alabama, Harold Shedd, Dale Morris, and RCA Records, even though they apparently made no effort to determine the true copyright owner or secure the proper licenses prior to their use of the composition. However, from the agreement reached, according to plaintiff's own deposition testimony and the letter of his counsel to RCA Records, between the plaintiff and Alabama's manager, it is evident that the plaintiff actually consented to the release of the album upon which he now bases his infringement claim against the defendants. If the unauthorized act itself on the part of the recording artists and their producers were noninfringing by reason of the plaintiff's consent to the use of the composition, it is difficult to see how those who in some way aided the primary actors could be found to have committed an infringement. See Nimmer, supra, § 8.05[C] (applying similar reasoning to the problem of home recording exemption). Further, it has been held that a complaint alleging that "the defendant has `represented and asserted' that it has the right to use and authorize the use of the plaintiff's song ... without an accompanying act or threatened act to implement the asserted right is not sufficient to state a charge of threatened infringement of the plaintiff's copyright." Southern Music Publishing Co. v. C & C Films, Inc., 171 F. Supp. 832, 833 (S.D.N.Y. 1959) (emphasis added). Again, it appears that Alabama, its producers and RCA, not the defendants, implemented the asserted right and that the plaintiff, moreover, consented to release of the album they produced. One may well wonder what communications *115 took place between Alabama's producer, Shedd, and manager, Morris, regarding who should be designated publisher on the "Mountain Music" album. In any event, this Court finds it hard to perceive, for jurisdictional purposes, evidence of infringement by the defendants. See T.B. Harms, 339 F.2d at 825.
Construing the complaint liberally and as a whole, this Court cannot view the primary and controlling purpose of this action as the adjudication of a claimed copyright infringement. In Rotardier v. Entertainment Company Music Group, 518 F. Supp. 919 (S.D.N.Y.1981), the author of a musical composition claimed that the defendant music companies had infringed upon his exclusive ownership in the copyright by commercially exploiting the song after the copyright had, by virtue of the defendants' alleged breach of contract, reverted to the author. Stating that a "finding of copyright infringement would be incidental to the main purpose of this suit," 518 F. Supp. at 921 (emphasis supplied), the Court dismissed for lack of jurisdiction:
Essentially, the claim in the instant case is to establish valid title to a copyright by attempting to show noncompliance with a contract. The mere fact that a controversy involves a copyright does not give rise to federal jurisdiction. Nor can plaintiff invoke federal jurisdiction by casting the claim in terms of copyright infringement.
Id. Of course, if the plaintiff in Rotardier ultimately proved its claim of ownership through automatic reversion it might follow that the alleged subsequent commercial exploitation by the defendants could amount to an infringement. For jurisdictional purposes, the infringement claim was nevertheless incidental to the dispute of title. Because of this primary and controlling purpose, the suit remained subject to state jurisdiction. Accord Stepdesign, Inc. v. Research Media, Inc., 442 F.Supp. at 33-34 ("any finding of infringement would be clearly incidental to the main purpose of plaintiff's suit which ... seeks a declaratory judgment" establishing reversion of rights to plaintiff).
Like the claims of infringing commercial exploitation in Rotardier, Stepdesign, Muse and Elan, the determination of the rather dubious infringement claim in the instant case would incidentally and automatically follow, assuming arguendo that any such claim is in fact properly stated,[3] upon decision of the ownership question. That decision is not merely the threshold to a controlling question of infringement. Rather, the determination of ownership is, clearly, the principal purpose of the instant complaint.
In an attempt to distinguish Muse v. Mellin and the cases holding that the federal courts lack jurisdiction over actions that primarily seek the adjudication of conflicting assignments of copyrights, the plaintiff argues that the T.B. Harms test offers another basis for jurisdiction. Plaintiff argues that even if, like Muse, this case is viewed as primarily an ownership dispute, the Court nevertheless has jurisdiction because "the complaint ... asserts a claim requiring construction of the Act." T.B. Harms, 339 F.2d at 828. The plaintiff argues that resolution of the instant dispute will involve the construction of two provisions of the Copyright Act, Section 204, which requires a written memorandum of transfer of copyright ownership, and Section 205(e), establishing priority between conflicting transfers. Plaintiff asserts that these provisions must be construed because, in response to the complaint, the defendants claim that they "have exercised ownership rights in and to this song based upon an alleged oral assignment of copyright from the composer and a subsequent `memorandum' signed by him." Plaintiff's Brief in Opposition at 5.
*116 Plaintiff's argument fatally ignores the long-established axiom that there can be no "arising under" jurisdiction unless the federal question is presented plainly on the face of his well-pleaded complaint. The Supreme Court
has repeatedly held that in order for a claim to arise "under the Constitution, laws, or treaties of the United States," "a right or immunity created by the Constitution or laws of the United States must be an element and an essential one, of the plaintiff's cause of action." Gully v. First National Bank, 299 U.S. 109, 112 [57 S. Ct. 96, 97, 81 L. Ed. 70] (1936). The federal questions "must be disclosed upon the face of the complaint, unaided by the answer." Moreover, "the complaint itself will not avail as a basis for jurisdiction in so far as it goes beyond a statement of the plaintiff's cause of action and anticipates or replies to a probable defense." Gully, supra, at 113 [57 S.Ct. at 98].
Phillips Petroleum Co. v. Texaco, Inc., 415 U.S. 125, 127-128, 94 S. Ct. 1002, 1003-1004, 39 L. Ed. 2d 209 (1974) (citations omitted) (emphasis added).
The case Judge Friendly had in mind in formulating his test for jurisdiction based on construction of the Act was De Sylva v. Ballentine, 351 U.S. 570, 76 S. Ct. 974, 100 L. Ed. 1415 (1956), in which the complaint presented, on its face, a claim that the illegitimate child of the author shared in the right of renewal of copyright under a particular section of the statute. See T.B. Harms, 339 F.2d at 827-828. Similarly, the Court in Hill & Range Songs, Inc. v. Fred Rose Music, Inc., 58 F.R.D. 185, 187-188 (S.D.N.Y.1972), citing De Sylva, held that it had jurisdiction because a "primary issue" raised in the complaint was whether the assignee of the renewal copyrights was a "widow" within the meaning of the Copyright Act. As for Rossiter v. Vogel, 134 F.2d 908 (2d Cir.1943), relied upon by the plaintiff, the Court in T.B. Harms, raised doubts as to whether the assumption of jurisdiction in that case is entitled to much weight for purposes of "arising under" jurisdiction since the complaint disclosed diverse citizenship. 339 F.2d at 828.
In any event, it is clear that construction of the Act in the instant case would become necessary only by reason of the defenses raised to the plaintiff's claim of ownership. The plaintiff's claimed basis for jurisdiction, that the Act must be construed to resolve the defendants' claim regarding their allegedly prior written memorandum of transfer, remains defensive in nature. In Keith v. Scruggs, 507 F.Supp. at 970, the Court held that no federal question sufficient for jurisdiction appeared on the face of the complaint; the complaint sought, rather, to establish title. As in the instant case, the plaintiff attempted to distinguish the cases holding that such actions do not "arise under" the copyright laws
by listing various issues in his brief that may require construction of the copyright laws. However, although plaintiff lists these potential issues in his brief, he does not allege the facts underlying them in his complaint as required by Phillips Petroleum Co. v. Texaco, Inc. ... That questions of copyright law may arise does not ipso facto create federal jurisdiction. Moreover, to the extent that these issues anticipate possible defenses (such as the fact that Scruggs claims Keith was paid for his contribution, and was, therefore, a worker for hire [within the meaning of the Act]), they cannot be relied upon to establish a federal question.
507 F. Supp. 970 (citations omitted). Clearly, in the instant case, even if the complaint itself set forth the underlying facts regarding the defendants' claimed prior transfer from Chambers, the potential issues thus raised would, as in Keith, merely be anticipatory of defenses.
This Court must conclude that the "essence of the plaintiff's claim" is a declaratory judgment action to establish title to a work in statutory copyright. Keith v. Scruggs, 507 F.Supp. at 970. Over such suits jurisdiction lies with the state courts. Muse v. Mellin, 212 F.Supp. at 318; Nimmer, supra, § 12.01[A], at 12-3, 12-4. The mere fact that, in the course of this litigation, the federal copyright laws may of *117 necessity be interpreted or applied does not suffice for federal question jurisdiction. Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 29 S. Ct. 42, 53 L. Ed. 126 (1908); Dorn v. Dorn's Transp., Inc., 562 F. Supp. 822, 825 (S.D.N.Y.1983).
To sanction suits for declaratory relief as within the jurisdiction of the District Courts merely because ... artful pleading anticipates a defense of federal law would contravene the whole trend of jurisdictional legislation by Congress, disregard the effective functioning of the federal judicial system and distort the limited procedural purpose of the Declaratory Judgment Act.
Home Federal S & L Ass'n v. Ins. Dept. of Iowa, 571 F.2d 423, 426 (8th Cir.1978). See also Smart v. First Federal S & L Ass'n of Detroit, 500 F.Supp. at 1152 (Congress expressly declined to expand federal jurisdiction to allow action whenever a "substantial defense" arising under the Constitution, laws or treaties of the United States was asserted). The appropriate state courts, to whom "Congress left a considerable residue of power" to "pass on `copyright questions'", including "questions arising in contract and title disputes," Cresci v. Music Publishers Holding Corp., 210 F.Supp. at 260 (quoting Harrington v. Mure, 186 F. Supp. 655, 658 (S.D.N.Y.1960)), are competent and have the power to pass upon any questions that may arise in resolving this litigation. See Nimmer, supra, § 12.01[A] at 12-3.
For the foregoing reasons, the defendants' motion to dismiss the amended complaint for want of subject matter jurisdiction is granted without prejudice to the plaintiff's right to maintain an action in the appropriate forum. Because federal jurisdiction is lacking, this Court does not reach the defendants' motion to dismiss for failure to join an indispensable party. An appropriate ORDER will be entered.
NOTES
[1] A common term in the record industry, "pitching" is the act of playing a song for recording artists or record producers and manufacturers in order to interest them in performing and producing the work.
[2] Moreover, the plaintiff's admission that he himself pitched "Close Enough" to Alabama's manager prior to execution by the composer of the agreements transferring ownership of the copyright in the song does little to strengthen his position that the similar act of defendants was in and of itself an infringement. Peay Deposition at 24-27.
[3] The Court notes that the instant case may represent an instance where it is difficult to ascertain whether the complaint should be dismissed for want of subject matter jurisdiction or failure to state a claim upon which the federal court can grant relief. See T.B. Harms, 339 F.2d at 828-829; Cresci v. Music Publishers Holding Co., 210 F. Supp. 253, 256 n. 2 (S.D.N.Y.1962). That problem, however, has no effect upon the disposition in this case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/263974/ | 330 F.2d 545
Harold A. GADSDEN et al., Appellant,v.Harry M. FRIPP, Supervisor of Colleton County, SouthCarolina (Successor to the late J. H. Hayden, formerColleton County Supervisor) and/or Harry M. Fripp'sSuccessors in Office as Supervisor of Colleton County andColleton County of The State of South Carolina, Walterboro,South Carolina, Appellees.
No. 9021.
United States Court of Appeals Fourth Circuit.
Argued Nov. 13, 1963.Decided April 13, 1964.
Harold A. Gadsden, pro se (Samuel S. Mitchell, Raleigh, N.C., on brief), for appellant.
Thomas M. Howell, Jr., Walterboro, S.C., for appellees.
Before HAYNSWORTH and BOREMAN, Circuit Judges, and BARKSDALE, District judge.
HAYNSWORTH, Circuit Judge:
1
The plaintiff in this diversity action sought the recovery of expense to which he had been put as a result of an abandoned attempt to condemn real estate he owned in South Carolina, a cause of action for which there is specific statutory provision. Additionally, he alleged a continuing trespass upon his land by the defendants, officials of Colleton County, South Carolina.
2
The plaintiff filed a motion for summary judgment respecting his claim for recovery of expenses and damages arising out of the condemnation proceeding, and, at the same time, indicated that he wanted to bring in additional parties defendant, apparently as to the cause of action founded upon the claimed continuing trespass. The defendants filed a motion for leave to amend to set up the Statute of Limitations as a bar to recovery of the expenses and damages arising out of the abandoned condemnation proceeding. These two motions came on to be heard together.
3
At the hearing, the District Judge had the plaintiff sworn as a witness and, on the basis of the testimony of the witness, decided that the plaintiff was due $1,756.50 on account of expenses incurred by him in the condemnation proceeding. The expense claim was in a much larger amount, but the Court ordered entry of a final judgment in favor of the plaintiff in the amount of $1,756.50, together with the taxable costs in this action. The District Judge did not specifically rule upon the defendants' contention that recovery of any such expenses was barred by the Statute of Limitations, nor did he specifically rule upon the plaintiff's claim for damages arising out of the alleged continuing trespass.
4
It is elementary, of course, that, on a motion for summary judgment, the only inquiry is to the existence of an issue of triable fact. If there is no such issue, summary judgment may be awarded, but, if the Court, at the hearing on the motion for summary judgment, is of the opinion that there are disputed issues of fact, the usual procedure is to deny the motion for summary judgment and thereafter to determine the factual issues at a plenary trial. If it appears on the motion for summary judgment that there is no triable issue with respect to a portion of the claim while there are triable issues with respect to the remainder, the Court, in its discretion, may enter a partial summary judgment, but it is not authorized to foreclose a trial of the remaining triable issues.
5
The only possible justification, therefore, for the Court's undertaking to dispose of the whole case on the basis of a disallowance of the plaintiff's claim to the extent to which it was disputed, or to the extent to which it was not clearly and definitely proved at the hearing on the motion for summary judgment, would be the enlightened consent of the parties. There is in the record some indication of such consent by the plaintiff speaking through an attorney. It was stated by the attorney that the plaintiff wished the judge to determine the matter, but we cannot find in the record such an unequivocal statement of an informed consent as to warrant the Court's order purporting to dispose of all issues at the conclusion of the hearing on the motion for summary judgment.
6
The plaintiff has had a succession of attorneys. He represents in this Court that the attorney who accompanied him to the hearing on the motion for summary judgment had been engaged, principally, to meet the Statute of Limitations defense and was prepared only to represent the plaintiff in the argument of that issue. Neither he nor the plaintiff was prepared for a full trial of all disputed issues of fact and, clearly, they had no notice that such a trial would be held when the hearing opened. There had been no effort to have witnesses present and none were offered, but the plaintiff testified after having been required, or requested, by the Court to do so.
7
Under these circumstances, the plaintiff's lawyer's statement that he wanted the Judge to determine all matters is certainly equivocal. We are not convinced that it was intended to include authorization for the Judge's entry of a final judgment on those issues which the Judge, after the hearing, might conclude were triable issues of fact and which normally would require a complete trial. It is most unlikely that the plaintiff would have knowingly consented to such a submission of the whole case when he went without supporting witnesses and prepared only to submit his motion for summary judgment as to issues which he contended were undisputed. Under these circumstances, we think that the order entered at the conclusion of the hearing on the motion for summary judgment purporting to dispose of the entire case on the merits was unwarranted.
8
In this Court, the defendants have moved to dismiss the appeal because of the plaintiff's acceptance of a check for $1,756.50, the amount of the judgment entered in his favor by the Court. Such a check was promptly issued after entry of the judgment. It was payable jointly to the plaintiff and to two attorneys. The check was endorsed by the three payees, and, in due course, was paid. Here, the plaintiff represents that he endorsed the check at the insistence of the two attorneys, one of whom appeared with him at the hearing on the motion for summary judgment, and the other of whom had earlier represented him. He did so, he says, without intending to foreclose his right of appeal, and, thereafter, he took a timely appeal to this Court which brought the case here.
9
A payment of a judgment is not necessarily a bar to appeal.1 When a payment of a judgment is made and accepted under such circumstances as to indicate an intention to finally compromise and settle a disputed claim, an appeal may be foreclosed, but, under such circumstances, it is the mutual manifestation of an intention to bring the litigation to a definite conclusion upon a basis acceptable to all parties which bars a subsequent appeal, not the bare fact of payment of the judgment.
10
If an appeal is taken by a defendant after he has paid a judgment, he runs the risk of being unable to obtain restitution if he prevails on appeal. If, on the other hand, an appeal is taken by a plaintiff who has received the payment, he runs the risk of having to make restitution in the event the proceedings are reopened as a result of his appeal. In this instance, the District Court, in its discretion, may condition the reopening of the entire case upon the plaintiff's repayment of the amount he received from the defendants or the giving of reasonable security for its repayment. Such a requirement need not be imposed if it is plain that, in any event, the plaintiff will ultimately prevail at least to the extent of the judgment he has obtained. Particularly in light of the limitations question, however, we cannot say, on the present record, that the plaintiff will certainly be entitled to a judgment in his favor in at least that amount. Accordingly, what, if any, restitution, or security for restitution, is required of the plaintiff as a condition to further proceedings in the District Court is left to the determination, in its discretion, of the District Court.
11
The judgment below is reversed and the case remanded for further proceedings not inconsistent with this opinion.
12
Reversed.
1
Woodson v. Chamberlain, 4 Cir., 317 F.2d 245 | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/2584723/ | 233 P.3d 827 (2010)
235 Or. App. 572
IN RE N.E.
STATE
v.
N.E.
A139909.
Court of Appeals of Oregon.
June 9, 2010.
Affirmed without opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1001929/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
LEE POLK,
Plaintiff-Appellant,
v. No. 99-2204
CROWN AUTO, INCORPORATED,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Virginia, at Danville.
Norman K. Moon, District Judge.
(CA-98-54-4)
Argued: June 9, 2000
Decided: June 28, 2000
Before LUTTIG and KING, Circuit Judges, and
Richard L. WILLIAMS, Senior United States District Judge
for the Eastern District of Virginia, sitting by designation.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Thomas Dean Domonoske, Chapel Hill, North Carolina,
for Appellant. James A.L. Daniel, DANIEL, VAUGHAN, MEDLEY
& SMITHERMAN, P.C., Danville, Virginia, for Appellee. ON
BRIEF: Elmer R. Woodard, Danville, Virginia, for Appellant. Robert
J. Smitherman, Elizabeth B. Carroll, DANIEL, VAUGHAN, MED-
LEY & SMITHERMAN, P.C., Danville, Virginia, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
On February 9, 1998, Lee Polk purchased a truck from Crown
Auto. On March 10, 1998, he voluntarily returned it. Polk sued
Crown Auto for various violations of the Truth-in-Lending Act
("TILA") and of Virginia law arising out of the sale of the truck.
Crown Auto filed a counterclaim for breach of contract. The district
court granted summary judgment to Crown Auto on Polk's claims and
judgment to Crown Auto on the breach of contract claim. Polk now
appeals the summary judgment on his claims. For the reasons below,
we affirm.
I.
Polk argues that Crown Auto violated TILA, Virginia usury law,
and the Virginia Consumer Protection Act ("VCPA") when it sold the
truck to him. We address each claim below.
A.
Polk argues that the district court erred when it rejected his claim
that, under TILA, Crown Auto should have disclosed an $85.00 pro-
cessing fee as a "finance charge." See 15 U.S.C. § 1638(a)(3) (requir-
ing a seller to disclose "finance charges"). However, we conclude that
the district court did not err in finding that Polk did not present evi-
dence sufficient to refute Crown Auto's claim that the $85.00 pro-
cessing fee was generally charged in "comparable cash transactions,"
see 15 U.S.C. § 1605(a) ("The finance charge does not include
charges of a type payable in a comparable cash transaction."). There-
fore, the $85.00 processing fee was not a "finance charge" under
TILA, and Crown Auto was not required to disclose it as such. See
Alston v. Crown Auto, Inc., No. 99-1944, at *4-*5 (4th Cir. June 26,
2000).
2
Polk also argues that Crown Auto violated TILA when it failed to
make credit disclosures in writing, in a form that he could keep before
consummation of the sale. See 12 C.F.R.§ 226.17; see also Chrisom
Polk v. Crown Auto, Inc., No. 99-2539 (4th Cir. June 26, 2000). How-
ever, because this claim was not properly raised in the district court
or properly appealed to this court, we will not review it.1
B.
Polk also argues that the district court erred when it granted sum-
mary judgment to Crown Auto on his claim that the loan for the truck
was usurious. Polk claims that Crown Auto charged him undisclosed,
and thus usurious, interest because it did not pay the $26.50 allotted
for title and registration fees to the Department of Motor Vehicles.
See also Alston v. Crown Auto, Inc., No. 99-1944, *5-*6 (4th Cir.
2000) (Alston claiming that an excessive late fee constituted undis-
closed interest, thereby making the loan usurious under Virginia law).
That is, according to Polk, Crown Auto was permitted to use the
$26.50 only for title and registration fees, and when it did not, its
retention of the money constituted additional undisclosed interest.
The district court held that the loan was not usurious because the
$26.50 was properly disclosed in the contract, Crown Auto was no
longer obligated to pay the title and registration fee after Polk
returned the vehicle, and that Crown Auto merely needed to refund
the $26.50. We agree.
Crown Auto did initiate the registration process, but because Polk
returned the truck before Crown Auto was required by law to then
register the truck in Polk's name, Crown Auto did not complete the
registration process and did not pay the $26.50 to the Department of
Motor Vehicles. Thus, it was only through Polk's action, returning the
_________________________________________________________________
1 Several claims Polk now raises on appeal were not raised in his origi-
nal complaint. They were raised only in his amended complaint, after the
district court had denied his motion to amend his original complaint.
Polk appealed only the district court's order addressing the original com-
plaint, and did not appeal the district court's order denying his motion to
amend. Therefore, those claims raised only in Polk's amended complaint
are not properly before this court.
3
truck, that Crown Auto stopped the registration process. Polk does not
claim that the $26.50 fee was an improper charge at the time the con-
tract was made, and the parties have stipulated that Crown Auto
reduced the amount of its judgment award by $26.50 to reimburse
Polk for the unused fee, see Appellant's Br. at 8. Therefore, we can-
not conclude that the district court erred in holding that the $26.50
was not usurious undisclosed interest at the time the contract was made.2
C.
Polk argues that the district court also erred when it granted sum-
mary judgment to Crown Auto on his claim that Crown Auto violated
the VCPA. Polk claims that Crown Auto violated section 59.1-
200(13) of the VCPA when it charged him an unlawfully excessive
ten-percent fee for late payments. See also Alston v. Crown Auto, Inc.,
No. 99-1944, *8-*10 (4th Cir. 2000) (discussing Alston's identical
argument that an unlawful late fee violated Va. Code§ 59.1-200(13)).
It is undisputed that Polk never made a late payment and therefore
never paid the excessive ten-percent late fee that he argues constitutes
the violation of the VCPA.
The district court rejected Polk's claim because Polk did not "suf-
fer[ ] loss as the result of a violation" of the VCPA, as is required to
initiate an action for damages. Va. Code § 59.1-204(A) ("Any person
who suffers loss as the result of a violation of this chapter shall be
entitled to initiate an action to recover actual damages . . . ."). We
conclude that, because Polk alleges no loss as a result of the violation,
the district court did not err when it granted summary judgment to
Crown Auto on this claim.
Polk also argues that Crown Auto violated a separate provision of
the VCPA when it failed to properly disclose to him that the vehicle
was being sold "as is," without a warranty. See Va. Code § 46.2-
_________________________________________________________________
2 Because we conclude that the district court properly rejected Polk's
usury claim, we also reject Polk's claim on appeal that the judgment to
Crown Auto could not include usurious interest.
4
1529.1(B). However, we decline to review this claim because it was
not properly raised in the district court or properly appealed to this court.3
For the reasons stated herein, we affirm the judgment of the district
court.
AFFIRMED
_________________________________________________________________
3 Polk also argues that he had the right to cancel the sale under section
46.2-1529.1(C), but this claim was also not properly raised in the district
court.
5 | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3034457/ | FILED
NOT FOR PUBLICATION MAR 04 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 09-50053
Plaintiff - Appellee, D.C. No. 3:07-CR-03267-JLS-1
v.
MEMORANDUM *
GUADENCIO CAYETANO-CAMACHO,
Defendant - Appellant.
Appeal from the United States District Court
for the Southern District of California
Janis L. Sammartino, District Judge, Presiding
Submitted February 16, 2010 **
Before: FERNANDEZ, GOULD and M. SMITH, Circuit Judges.
Guadencio Cayetano-Camacho appeals from the 51-month sentence imposed
following his guilty-plea conviction for being a deported alien found in the United
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
HL/Inventory
States, in violation of 8 U.S.C. § 1326. We have jurisdiction pursuant to 28 U.S.C.
§ 1291. We affirm.
Cayetano-Camacho contends the district court erred by applying a “crime of
violence” sentencing enhancement, pursuant to U.S.S.G. § 2L1.2(b)(1)(A)(ii),
because his prior conviction for lewd and lascivious acts on a minor under 14, in
violation of California Penal Code § 288(a), does not constitute sexual abuse of a
minor. This contention is foreclosed by United States v. Medina-Villa, 567 F.3d
507, 509 (9th Cir. 2009).
AFFIRMED.
HL/Inventory | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1571082/ | 29 So. 3d 1124 (2010)
ASSANTE
v.
WINDSOR PLACE BERKSHIRE LAKES.
Nos. 2D08-6283, 2D08-6388.
District Court of Appeal of Florida, Second District.
March 9, 2010.
Decision Without Published Opinion Dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917634/ | 178 B.R. 40 (1994)
Hal M. HIRSCH, as Trustee of the Consolidated Estate of Colonial Realty Company, Jonathan Googel and Benjamin Sisti, Debtors,
v.
ARTHUR ANDERSEN & CO., Sorokin, Sorokin, Gross Hyde & Williams, P.C., Tarlow, Levy & Droney, P.C. and Weinstein, Schwartz & Pinkus.
No. 3:93-CV-1207 (JAC).
United States District Court, D. Connecticut.
June 10, 1994.
*41 Hal M. Hirsch, Howard P. Magaliff, Gainsburg & Hirsch, Purchase, NY, Jerome M. Congress, Melvyn I. Weiss, Milberg, Weiss, Bershad, Hynes & Lerach, New York City, for plaintiff.
John F. Conway, Shaun S. Sullivan, William H. Prout, Jr., Robert Tilewick, Thomas L. Casagrande, Wiggin & Dana, New Haven, CT, for defendant Arthur Andersen & Co.
Neil W. Silberblatt, Jones, Hirsch, Connors & Bull, New York City, Peter Pericles Orphanos, Serchuk & Zelermyer, White Plains, NY, Stephen R. Steinberg, Steven A. Coploff, Serchuk & Zelermyer, Stamford, CT, for defendant Tarlow, Levy & Droney, P.C.
Robert T. Gill, Vincent Amoroso, Parker, Coulter, Daley & White, Boston, MA, for defendant Sorokin, Sorokin, Gross, Hyde & Williams, P.C.
Andrew S. Turret, Bai, Pollock & Dunnigan, Bridgeport, CT, for defendant Weinstein, Schwartz & Pinkus.
RULING ON MOTIONS TO DISMISS
JOSÉ A. CABRANES, Chief Judge:
This litigation arises out of the sale of limited partnership interests in various real estate properties by Colonial Realty Company ("Colonial") and its general partners, Jonathan Googel, Benjamin Sisti, and Frank Shuch (collectively, "the debtors"), during the 1980's. In this action, the trustee for the consolidated estate of Colonial, Googel and Sisti has asserted claims against the law firms and accounting firms that allegedly participated with the debtors in the so-called Colonial "Ponzi" scheme. Pending before the court are the defendants' motions to dismiss the trustee's complaint for lack of standing pursuant to Fed.R. 12(b)(1).
*42 BACKGROUND
On September 14, 1990, involuntary bankruptcy proceedings were commenced against Colonial and its general partners in United States Bankruptcy Court for the District of Connecticut. By order of the Bankruptcy Court, the cases were converted pursuant to Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 701 et seq., and were consolidated. The plaintiff is the trustee of the consolidated estate.
This action was originally filed in the Bankruptcy Court on April 5, 1993, and was transferred to this court on June 14, 1993. The defendants are two law firms and two accounting firms that allegedly provided professional services to and on behalf of the debtors in connection with the offer and sale of the limited partnership interests. The complaint, as amended on June 25, 1993, asserts 465 causes of actions, sounding in breach of contract, negligence, breach of fiduciary duty, negligent misrepresentation, fraud, and RICO. The defendants have moved to dismiss the complaint in its entirety for lack of standing pursuant to Fed.R.Civ.P. 12(b)(1).
DISCUSSION
It is well settled that standing "cannot be `inferred argumentatively from averments in the pleadings,' . . . but rather `must affirmatively appear in the record.'" FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231, 110 S. Ct. 596, 607, 107 L. Ed. 2d 603 (1990) (quotations and citations omitted); Thompson v. County of Franklin, 15 F.3d 245, 249 (2d Cir.1994). Accordingly, the burden is on the plaintiff "`clearly to alleged facts demonstrating that he is a proper party to invoke judicial resolution of the dispute.'" Id. (quoting Warth v. Seldin, 422 U.S. 490, 518, 95 S. Ct. 2197, 2215, 45 L. Ed. 2d 343 (1975)).
In deciding a motion to dismiss for lack of standing, the court "must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party." Warth, 422 U.S. at 501, 95 S. Ct. at 2206 (citations omitted); Thompson, 15 F.3d at 249. It is within the court's power, however, "to allow or to require the plaintiff to supply, by amendment to the complaint or by affidavits, further particularized allegations of fact deemed supportive of plaintiff's standing." Id.[1] If, after considering all the relevant materials, it appears to the court that the plaintiff lacks standing, the complaint must be dismissed. Id.
The question presented is whether the trustee has standing to assert claims under section 541 of the Bankruptcy Code against the defendants.[2] The defendants argue that the trustee lacks standing because the claims he asserts on behalf of the estate really belong to Colonial's creditors, and because any claims the debtors might assert are barred by virtue of their participation in the fraudulent scheme. The trustee responds that the claims belong to the debtors themselves and are not barred by their involvement in the fraudulent scheme because the defendants controlled the actions of the debtors, and because these actions were separate and distinct from the wrongful acts of the defendants.
Under section 541 of the Bankruptcy Code,[3] the trustee "stands in the shoes of the [debtor] and has standing to bring suit that the [debtor] could have instituted had it not *43 petitioned for bankruptcy." Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114, 118 (2d Cir.1991) (citing Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416, 429, 92 S. Ct. 1678, 1685, 32 L. Ed. 2d 195 (1972), and Cissell v. American Home Assur. Co., 521 F.2d 790, 792 (6th Cir.1975), cert. denied, 423 U.S. 1074, 96 S. Ct. 857, 47 L. Ed. 2d 83 (1976)). The motions in the instant cases raise the question of when, consonant with this principle, a trustee may sue a third party. It is well settled that a trustee "has no standing generally to sue third parties on behalf of the estate's creditors" because the debtor itself could not have asserted any such claim. Id. (citation omitted). A trustee has standing to sue third parties only if the debtor itself was damaged by the conduct of the third parties. Id.
Thus, the critical question in the instant case is whether the trustee has alleged that the defendants caused damage to the debtorsor, put another way, whether the debtors themselves could have prevailed against the defendants on any legal theory presented in the complaint. See Wagoner, 944 F.2d at 119. Ordinarily, this would involve a determination not only that the causes of action in the complaint belong to the debtors but also that they would survive a motion to dismiss. Id. In the instant case, the court need not concern itself with the latter determination inasmuch as it granted the defendants' motion to split the consideration of standing from the legal sufficiency of the claims presented. See Transcript of Hearing on November 8, 1993 (oral ruling granting defendants' request to file successive motions under Fed.R.Civ.P. 12(b)(1) and 12(b)(6) to enable court to resolve threshold question of standing). Therefore, the court will only address the standing issue at this time.
In the standing context, the concept of damage to the debtors is a difficult one to understand, and one that has been applied inconsistently by the courts. One principle is certain, however, as a matter of law and common sense: mere "allegations of misconduct and damage to the debtor . . . are insufficient to give the trustee standing to sue third parties on behalf of creditors." In re D.H. Overmyer Telecasting Co., 56 B.R. 657, 660 (Bankr.N.D.Ohio 1986); Feltman v. Prudential Bache Securities, 122 B.R. 466, 475 (S.D.Fla.1990). Thus, the trustee must do more than simply allege damage to the debtors; the facts alleged in the complaint must support this allegation. If the facts of the complaint suggest that the claims actually belong to the creditors, a blanket allegation of damage to the debtors will not confer standing on the trustee.
In the instant case, the facts alleged in the complaint do not support the trustee's allegation of damage to the debtors. The bulk of the complaint alleges that the defendants, with the participation of the debtors, engaged in a scheme to enhance the financial appearance of the debtors at a time when the debtors were actually insolvent in order to induce third parties (the "creditors") to lend money, provide services, and sell supplies on credit to the debtors. Clearly, the creditors would have claims against the defendants and indeed against the debtors as well on the basis of these allegations. Recognizing that he cannot assert claims against the defendants on behalf of the creditors, the trustee alleges damage to the debtors, to the extent of the unpaid obligations of the debtors to the creditors. Yet, the trustee has not alleged any distinct way in which the debtors were injured by the asserted wrongdoing of the defendants. Rather, the trustee alleges that the debtors suffered injuries identical to those of the creditors. Under these circumstances, it is the individual creditors, rather than the trustee, who may seek recovery from the defendants. Accordingly, the trustee lacks standing to assert these claims.[4]
*44 The same is true of the claims against Arthur Andersen & Company ("Arthur Andersen") arising from Arthur Andersen's alleged failure to properly perform "due diligence" with respect to a portfolio of properties from the Travelers Insurance Company. The trustee alleges that Arthur Andersen's failure to properly perform due diligence led to the purchase of allegedly unworthy properties. While the investors were clearly injured by the purchase of these properties, the trustee has alleged no distinct way in which the debtors were damaged. Under the circumstances presented, and in light of the fact that the investors have already asserted independent actions against the defendants for their participation in the Colonial scheme, the trustee lacks standing to assert his claims against Arthur Andersen.
It bears noting that the trustee's claims are not analogous to the claim of "churning" for which our Court of Appeals recognized standing in Wagoner. See 944 F.2d at 119. Churning is a practice through which a broker obtains excessive commissions by needlessly turning over a client's account. Thus, the damage to the debtor resulting from churning is distinct from any damage resulting to the creditors from other instances of fraud in which the broker participates. In the instant case, the trustee alleges that the injury to the debtors was coextensive with the injury to the creditors. Thus, the trustee has done no more than cast the debtors as the collection agents for the creditors.
In sum, it appears from the complaint that the only ones injured by the defendants' conduct, if any, were the creditors. The trustee cannot circumvent the standing requirement simply by imputing this injury to the debtors. To allow the trustee to do so would prevent the creditors from asserting individual actions on their own behalf, at least temporarily. See St. Paul Fire and Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688, 701 (2d Cir.1989) ("if the claims are property of the debtor, they must be abandoned by the trustee before they can be asserted by any individual creditors"); Bankers Trust v. Rhoades, 859 F.2d 1096, 1107 (2d Cir.1988) (when a creditor and bankrupt share claims arising from the same transaction, creditor must await disposition of trustee's claim before bringing action), cert. denied, 490 U.S. 1007, 109 S. Ct. 1642, 1643, 104 L. Ed. 2d 158 (1989).
Moreover, if the trustee recovered on behalf of the debtors, the proceeds would be distributed among the creditors which would raise the prospect that the proceeds would be distributed inequitably. It bears recalling that the trustee represents the very parties who are alleged to have participated in defrauding the creditors. The Supreme Court has viewed this prospect of conflict of interest as strongly militating against trustee standing. See Caplin v. Marine Midland Grace Trust Co. of New York, 406 U.S. 416, 431-32, 92 S. Ct. 1678, 1686-87, 32 L. Ed. 2d 195 (1972).
For the reasons stated above, the trustee lacks standing to bring the instant action.[5] Accordingly, the defendants' motions to dismiss for lack of standing must be granted.
CONCLUSION
Based on the full record, and for the reasons stated above, it is hereby ORDERED that:
1. Motion of Defendant Levy & Droney, P.C. to Dismiss the Amended Complaint in this Adversary Proceeding (filed Aug. 16, 1993) (doc # 16) is GRANTED;
2. Arthur Andersen & Co.'s Motion to Dismiss Plaintiff's Amended Complaint Pursuant to Fed.R.Civ.P. 12(b)(1) (filed Nov. 18, 1993) (doc # 30) is GRANTED;
3. Sorokin, Sorokin, Gross, Hyde & Williams, P.C.'s Motion to Dismiss Plaintiff's Amended Complaint Pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure *45 (filed Nov. 26, 1993) (doc # 32) is GRANTED;
4. Weinstein, Schwartz & Pinkus' Motion to Dismiss Plaintiff's Amended Complaint Pursuant to Fed.R.Civ.P. 12(b)(1) (filed Nov. 26, 1993) (doc # 33) is GRANTED.
It is so ordered.
NOTES
[1] In the instant case, the trustee has already had an opportunity to amend the complaint. See Amended Complaint (filed June 25, 1993).
[2] In the complaint, the trustee also premised his standing on section 544 of the Bankruptcy Code. However, the trustee has decided not to oppose the defendants' motions to dismiss section 544 as a basis for jurisdiction. See Trustee's Memorandum of Law in Opposition to Defendants' Motion to Dismiss Plaintiff's Amended Complaint for Lack of Standing (filed Dec. 29, 1993) at 4 n. 3 ("Memorandum of Law in Opposition"). Accordingly, the defendants' motions to dismiss for lack of standing based on section 544 may be granted absent timely objection or response of any kind.
[3] Section 541 provides in relevant part:
(a) The commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all of the following property, wherever located and by whomever held:
(1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.
[4] The trustee has requested an opportunity to take discovery and provide additional factual information in the event the court deems the amended complaint insufficient to support standing. See, e.g., Trustee's Memorandum of Law in Opposition at 18-19; Trustee's Surreply Memorandum of Law in Opposition to Defendants' Motions to Dismiss Plaintiff's Amended Complaint for Lack of Standing (filed Feb. 14, 1994) at 4. However, the type of supplemental allegations contemplated by the trustee would not rehabilitate his claims; the damage alleged would still accrue to the creditors and not to the debtors. Accordingly, the trustee's requests to supplement the amended complaint are denied.
[5] The court need not consider any of the other grounds offered by the defendants in support of dismissal, including the doctrines of in pari delicto and unclean hands. In addition, the court need not reach the question of whether the wrongdoing of Googel and Sisti may be attributed to Colonial for the purposes of denying standing, inasmuch as standing is denied as to Colonial for the reasons stated above. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571098/ | 277 S.W.2d 377 (1955)
R. Earl BLAND
v.
Mrs. M.V. SMITH.
Supreme Court of Tennessee.
March 11, 1955.
*378 A. A. Aspero and W. C. Rodgers, Memphis, for plaintiff in error.
Hanover, Hanover & Hanover, Memphis, for defendant in error.
PREWITT, Justice.
The Circuit Judge sustained the demurrer to the declaration dismissing the suit and this appeal resulted.
There are two questions presented, first whether the one year Statute of Limitations applies and two, if it does whether the present suit was filed within the one year period.
This is a suit brought by Doctor Bland, a colored physician in the City of Memphis, against Mrs. M.V. Smith, a practicing attorney of the Memphis Bar.
*379 The defendant, Mrs. Smith, contends that this suit is in reality one of malpractice. The declaration demands damages in the sum of $50,000.
The plaintiff below, Bland, alleged that he employed Mrs. Smith on March 15, 1950, to represent him and defend the suit for divorce which had been filed against him; that he paid her $1,000, as an attorney fee to represent him in this litigation.
The plaintiff's declaration contains many allegations with reference to negligence, failures, and refusals on the part of Mrs. Smith to perform her services; that she neglected to conduct the trial in a proper manner, and that she neglected to place witnesses on the stand in his behalf, and various other acts of misconduct in the trial of the divorce suit.
The plaintiff's declaration and amendment thereto contains only this statement with reference to his damages. This is as follows: "to his great damage, injury and detriment, not only the loss of his properties but to his great annoyance, aggravation, embarrassment, humiliation and injury to his physical well-being, particularly his health, on the account of which he suffered no end of pain and mental anguish."
The statute of limitations in suits "for personal injuries" provides that the action must be brought "within one year after cause of action accrued." Section 8595. Williams' Tennessee Code Anno.
To determine whether or not a suit is for personal injuries or contract a Court must look to the plaintiff's declaration to determine the real purpose of the law suit. Citing Bodne v. Austin, 156 Tenn. 353, 2 S.W.2d 100, 62 A.L.R. 1410; 34 Am. Jur., Limitations of Actions, Sec. 103, Tort Arising Out of Contract; State v. Head, 194 Tenn. 576, 253 S.W.2d 756; Ehlen v. Burrows, 51 Cal. App. 2d 141, 124 P.2d 82.
In determining the real purpose or the gravamen of the action the Court must look to the basis for which damages are sought. 15 Am. Jur., Damages, Section 273.
It is the contention of the plaintiff that this is an action for breach of contract and that the six year statute of limitations, Code, § 8600, applies. This six-year statute of limitations is only applied in cases where the whole basis of recovery is sought on contract and no element of personal injuries is involved. Bruce v. Baxter, 75 Tenn. 477; Bodne v. Austin, 156 Tenn. 353, 2 S.W.2d 100.
The Court must look to the plaintiff's declaration to determine whether or not he is suing on the implied contract as exists between attorney and client, or whether or not he is suing for injuries to the person. The question of whether or not the action is one ex contractu or ex delicto is not determinative of the question. The question is whether or not the plaintiff is suing for injuries to the person.
A careful reading of the declaration and the amendment thereto will show that the plaintiff has sued for both compensatory and punitive damages.
It is a general rule in Tennessee that punitive damages are only allowable in cases involving torts where the action involves fraud, malice, oppression, or gross negligence. These damages are not generally allowed in cases founded on a breach of contract.
The principal allegation in the declaration as to damages is the statement regarding the defendant's conduct that in all of the matters complained of the result was "to his great damage, injury, and detriment" wherein he suffered no end of pain and mental anguish as a result of the misconduct of the defendant.
In Bodne v. Austin, supra, it appears that there was a suit for breach of a dentist's contract to extract plaintiff's teeth and make her a new set. It was alleged that he negligently failed to extract all of her teeth and one broke in her jaw with the result that "she suffered pain, loss of time, and was put to a great expense." The defendant interposed the plea of the one-year *380 Statute of Limitations and the plaintiff relied upon the six-year Statute of Limitations. In this case the Court said:
"(1) It is assumed in much of the discussion that the decision turns upon whether the action is in contract or ex delicto, grounded on the wrong. However, this court is of opinion that this is not determinative; that, conceding that in given malpractice cases there may be two independent causes of action, (1) breach of a contract, and (2) negligence constituting a tort, and conceding further, as quite generally held, that the right of election ordinarily exists as between these two causes of action, nevertheless, the effect of the Tennessee statutes is to limit the bringing of a suit to one year, whenever the action is one to recover damages for injuries to the person. In this view and construction of our statutes the question as to whether the ground or cause of the action is ex contractu or ex delicto, treated as vital in much of the discussion in the authorities, becomes nondeterminative here. The pertinent inquiry becomes, in each case as presented, whether or not, on the facts alleged, the defendant has inflicted injuries to the person, on account of which recovery is sought."
On the basis of this reasoning the Court held that the Statute of Limitations of one year should apply. The Court in the Bodne case, supra, discussed the early case of Bruce v. Baxter, and had this to say:
"While in Bruce v. Baxter, supra, the court held the six-year statute applicable in an action against an attorney, it was found and held that the liability in that case grew out of a breach of his contract to make certain collections. There was no element of injury to the person involved, and such injury as the plaintiff suffered to his property was clearly an incident and outgrowth of the breach of this contract."
We are also of the opinion that the plaintiff in the present case is relying on injuries inflicted upon his person.
The Bodne case, supra, has been followed in this State and is relied upon in the case of State v. Head, 194 Tenn. 576, 253 S.W.2d 756. This was a suit against a sheriff and the surety on his bond for personal injuries to a prisoner The court cited the Bodne case and reached the conclusion that the one-year Statute of Limitations applied. In the main, other jurisdictions in the modern cases followed this line of reasoning. See Ehlen v. Burrows, supra, malpractice against physicians; Wilson v. Stever, 202 Iowa 1396, 212 N.W. 142, breach of promise; Coates v. Milner Hotels, Inc., 311 Mich. 233, 18 N.W.2d 389, suit for an assault in a hotel by a stranger founded on breach of contract to protect.
It will be found that the weight of authority to be in Tennessee and elsewhere that regardless of whether the suit is based on tort or contract the Court must look to the plaintiff's declaration to see whether or not he is suing for damages arising out of a contract, or for damages arising out of a tort that is personal injury.
In the case now under consideration in reading the declaration and the damages alleged to have been suffered, we come to the conclusion that the plaintiff based his entire action not only on tort to begin with, but injuries to his person. We are therefore of the opinion that the Statute of Limitations of one year applies.
The second question is that assuming that one year Statute of Limitations applies when did the cause of action accrue?
The plaintiff's declaration was filed on December 9, 1953. The plaintiff has based his whole cause of action on the alleged negligent handling of his divorce suit in Chancery Court by the defendant. The declaration alleged that the final decree in this matter was entered on June 18, 1952, which was considerably more than one year before the filing of this declaration. It is argued that to take this cause out of the one-year Statute of Limitations is the allegation that on December 10, 1952, he paid the defendant an additional fee. This allegation might be determinative if this *381 were a suit in contract. However, this is not important in a suit for personal injuries since the cause of action accrued from the date of plaintiff's injuries. See Albert v. Sherman, 167 Tenn. 133, 67 S.W.2d 140.
We are therefore of the opinion that the plaintiff's cause of action had accrued upon date of the entry of the final decree in the Chancery Court of Shelby County, Tennessee, in the divorce suit and that his cause of action accrued more than one year before the filing of the declaration in this cause and is barred by Section 8595 of Williams' Tennessee Code Anno.
It results that we find no error in the judgment of the lower court and it is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/685656/ | 43 F.3d 1211
UNITED STATES of America, Plaintiff-Appellee,v.Julius Randolph JOHNSON, Defendant-Appellant.
No. 94-2244.
United States Court of Appeals,Eighth Circuit.
Submitted Oct. 11, 1994.Decided Jan. 3, 1995.
Robert D. Richman, Minneapolis, MN, argued, for appellant.
Joseph T. Walbran, Minneapolis, MN, argued (Don W. Bakke, Legal Intern, on the brief), for appellee.
Before WOLLMAN, Circuit Judge, HEANEY, Senior Circuit Judge, and HANSEN, Circuit Judge.
HANSEN, Circuit Judge.
1
Julius Randolph Johnson appeals the sentence imposed upon him after he pleaded guilty to possession with intent to distribute cocaine base and using and carrying a firearm during a drug trafficking offense. On appeal, Johnson contends that the district court erred by assigning one point to his criminal history score based on a prior Minnesota state misdemeanor conviction for which he received a straight stay of imposition of sentence without an accompanying term of probation. We reverse and remand for resentencing.I. BACKGROUND
2
On October 20, 1993, a federal grand jury charged Julius Randolph Johnson in a two-count indictment with possession of cocaine base with intent to distribute in violation of 21 U.S.C. Sec. 841 (Count I) and with using and carrying a firearm during the commission of a drug trafficking crime in violation of 18 U.S.C. Sec. 924(c) (Count II). Johnson pled guilty to both counts pursuant to a plea agreement.
3
The presentence report (PSR) calculated Johnson's total offense level on Count I to be 31 and his criminal history score to be 4, placing him in criminal history category III with a resulting sentencing range of 135 to 168 months of imprisonment. The PSR assigned one point to Johnson's criminal history score for a 1992 Minnesota state misdemeanor conviction for obstructing the legal process. As punishment for this misdemeanor conviction, Johnson received a stay of imposition of sentence for one year, see Minn.Stat.Ann. Sec. 609.135(1) (West Supp.1994), on the condition that he refrain from committing the same or similar offenses, after which time the case would be dismissed if no further offenses had been committed. The case was dismissed one year after the sentence was stayed because Johnson had not committed any further offenses.
4
At his federal sentencing hearing in the present case, Johnson objected to the addition of this one point to his criminal history score. The district court rejected Johnson's arguments, adopted the recommendations set forth in the PSR, and sentenced Johnson at the bottom of the identified Guidelines range to 135 months of imprisonment on Count I and imposed the mandatory 60-month consecutive sentence on Count II. Johnson appeals.
II. DISCUSSION
5
The sole issue in this appeal is whether the district court erred in assigning the one criminal history point to Johnson's criminal history score on Count I under the United States Sentencing Commission Guidelines Manual Secs. 4A1.1(c) and 4A1.2(c)(1) (Nov. 1993) for his prior Minnesota state misdemeanor conviction for obstructing the legal process. Johnson contends that this prior conviction should not be used to calculate his criminal history score because: (1) due to the nature of a stay of imposition of sentence, he never actually received a sentence for this conviction; or alternatively (2) assuming this one-year period is considered to be a sentence in itself, such a sentence does not fall within the meaning of "probation" as that term is found in U.S.S.G. Sec. 4A1.2(c)(1). We review factual determinations made by the district court under the clearly erroneous standard while the application of a Guidelines provision to the facts of the case presents an issue of law which we review de novo. United States v. Frieberger, 28 F.3d 916, 918 (8th Cir.1994).
6
As a threshold matter, the government observes that even if Johnson's criminal history category is determined to be II rather than III, his sentence of 135 months of imprisonment falls within the lower of the two applicable Guidelines ranges.1 The government argues that the sentencing court deliberately chose a sentence that fell within both ranges and indicated at sentencing that the same sentence would be imposed if Johnson's arguments concerning his criminal history score later prevailed and he was placed in category II. Therefore, the government contends that under our prior case law, Johnson's sentence is unreviewable.
7
We have previously emphasized that a sentence which falls within two arguable Guidelines ranges is unreviewable only under circumstances where "it is clear that the sentencing court would have imposed the same sentence regardless of whether the appellant's argument for a lower guideline range ultimately prevailed." United States v. Simpkins, 953 F.2d 443, 446 (8th Cir.1992); see also United States v. Kloor, 961 F.2d 1393, 1394 (8th Cir.1992). After thoroughly reviewing the record, we believe that it is far from clear that the district court would impose the same sentence in this case if Johnson's criminal history category was determined to be II. The district court acknowledged that Johnson's sentence fell within an area of overlap between the two arguably applicable Guidelines ranges, but it expressly declined the government's invitation to state on the record that it would impose the same sentence if Johnson's arguments concerning his criminal history category later prevailed.2 Thus, Johnson's sentence is reviewable, and we proceed to the merits of his arguments.
8
U.S.S.G. Sec. 4A1.2(c)(1) provides that certain enumerated prior misdemeanor offenses are to be calculated in a defendant's criminal history score if "the sentence [imposed for the offense] was a term of probation of at least one year." U.S.S.G. Sec. 4A1.2(c)(1). Johnson concedes that his conviction for obstructing the legal process is within the meaning of U.S.S.G. Sec. 4A1.2(c)(1). See U.S.S.G. Sec. 4A1.2(c)(1) ("[h]indering or failure to obey a police officer" countable). Johnson also concedes that the term of the stay of imposition of sentence was one year in duration. Therefore, we need only determine if the stay of imposition of sentence was: (1) a "sentence" within the meaning of U.S.S.G. Sec. 4A1.2(c)(1) and if so, (2) whether such sentence falls within the meaning of "probation" in that Guidelines provision.
9
Johnson first argues that he did not receive a "sentence" within the meaning of U.S.S.G. Sec. 4A1.2(c)(1) for his prior misdemeanor conviction because the state sentencing judge did not impose a fine, imprisonment, or a combination thereof pursuant to Minn.Stat.Ann. Sec. 609.125 (West Supp.1994), the governing Minnesota statute for misdemeanor sentences.3 Rather, the sentencing judge chose to stay imposition of sentence entirely, a procedure authorized by Minn.Stat.Ann. Sec. 609.135(1). Johnson reasons that because the state court refrained from imposing a sentence upon him for a period of one year and then dismissed the case, the effect was as if no sentence was imposed at all. Thus, U.S.S.G. Sec. 4A1.2(c)(1), which by its terms expressly requires a "sentence" in order to apply, is inapposite in this case.
10
We reject this reasoning. U.S.S.G. Sec. 4A1.2(a) defines what is a prior sentence for criminal history purposes. Section 4A1.2(a)(3) clearly states that "[a] conviction for which the imposition or execution of sentence was totally suspended or stayed shall be counted as a prior sentence under Sec. 4A1.1(c)." Section 4A1.1(c) would assess one point for a sentence for which imposition of sentence was stayed. Hence, Johnson's argument that his stayed sentence is not a "prior sentence" under the Sentencing Guidelines is answered by the Guidelines themselves. The real issue is not whether Johnson's prior stayed sentence is a "prior sentence," but rather whether or not it is a "countable" sentence under the Guidelines. See Application Note 3 to U.S.S.G. Sec. 4A1.1 ("Sentences for certain specified non-felony offenses are counted only if they meet certain requirements. See Sec. 4A1.2(c)(1).") As noted above, Johnson's prior sentence is countable only if his sentence was one of "probation" for at least one year. Accordingly, we proceed to analyze whether the disposition of Johnson's case falls within the meaning of "probation" under U.S.S.G. Sec. 4A1.2(c)(1).
11
Johnson contends that where imposition of sentence is stayed, without an accompanying term of probation, such disposition does not constitute a sentence of probation under U.S.S.G. Sec. 4A1.2(c)(1). He observes that under Minnesota law, the trial court had the discretion to sentence him to formal or informal probation as a condition of staying imposition of his sentence, but chose to do neither and thus his sentence falls short of "a term of probation" under U.S.S.G. Sec. 4A1.2(c)(1). We agree.
12
Under Minnesota law, with certain exceptions not relevant here, a sentencing court:
13
may stay imposition or execution of sentence and (a) may order intermediate sanctions without placing the defendant on probation or (b) may place the defendant on probation with or without supervision and on the terms the court prescribes, including intermediate sanctions when practicable.
14
Minn.Stat.Ann. Sec. 609.135(1). The plain language of the statute, through use of the term "may," allows, but does not require, a sentencing court to impose a term of probation along with staying imposition of sentence. See State v. Dyer, 438 N.W.2d 716, 720 (Minn.Ct.App.1989) (sentencing court "may" order term of probation as condition for staying imposition of sentence). We note that when a sentencing court merely stays imposition of sentence without ordering an accompanying term of probation of any kind, the resultant sentence, a sort of judicial limbo, is necessarily more lenient than a disposition in which a term of probation is ordered to accompany the stay of imposition of sentence.
15
To interpret probation under U.S.S.G. Sec. 4A1.2(c)(1) as encompassing a circumstance in which the sentencing court had the discretion to impose a term of probation but declined to do so, would depart from the plain language of Sec. 4A1.2(c)(1), which explicitly requires "a term of probation." Johnson was required to avoid further similar offenses as a condition of a stay of imposition of sentence, but this does not elevate the disposition to a de facto term of probation given the fact that the sentencing court did not impose this requirement as "a term of probation." See Minn.Stat.Ann. Sec. 609.135(1) (sentencing court may impose probation "on the terms court prescribes"). On the basis of this unique Minnesota sentencing scheme, which grants a sentencing judge the discretion to impose a term of supervised or unsupervised probation as a condition of a stay of imposition of sentence, we hold that a straight stay of imposition of sentence without an accompanying term of probation of any kind is not a sentence of probation under U.S.S.G. Sec. 4A1.2(c)(1).
16
The government argues that the stay of imposition of sentence Johnson received is similar to a sentence of conditional discharge under Illinois law which the Seventh Circuit has held to fall within the ambit of probation under U.S.S.G. Sec. 4A1.2(c)(1). See United States v. Caputo, 978 F.2d 972, 977 (7th Cir.1992); see also United States v. Scott, 19 F.3d 1238, 1246 (7th Cir.), cert. denied, --- U.S. ----, 115 S. Ct. 163, 130 L. Ed. 2d 101 (1994). In Caputo, the defendant was sentenced to a term of conditional discharge instead of formal probation for an Illinois misdemeanor conviction. 978 F.2d at 976. The court observed that the only distinction between sentences of formal probation and "conditional discharge" under Illinois law is that in the former the defendant is monitored by a probation officer, while in the latter no such supervision is provided. Id. at 976-77. The court also noted that a sentence of conditional discharge was created under Illinois law "as a way of coping with the shortage of probation officers." Id. at 976-77. In holding that a conditional discharge constitutes probation under U.S.S.G. Sec. 4A1.2(c)(1), the court stated that a "conditional discharge" is "probation without the probation officer and that is a distinction without a difference so far as the purposes of the guideline[s] [are] concerned." Id. at 977. We recently adopted this reasoning in United States v. Lloyd, 43 F.3d 1183, 1187-88 (8th Cir.1994).
17
These cases are readily distinguishable from the present case because under Illinois law no discernible difference exists concerning the nature and degree of punishment between sentences of conditional discharge and formal probation. An Illinois defendant sentenced to a term of conditional discharge is subject to the same restrictions as a defendant sentenced to formal probation; the only difference lies in that the conditionally discharged defendant is not formally monitored by a probation officer. Under Minnesota law, a stay of imposition of sentence may be imposed either with or without a term of probation. A stay of imposition of sentence with an attendant term of either supervised or unsupervised probation is certainly a more exacting penalty than a like sentence without a term of probation due to the additional probationary restrictions. Johnson received the latter--he was not sentenced to probation of any kind.
18
We conclude that the district court erred in assessing one point to Johnson's criminal history score for his prior misdemeanor offense of interference with the legal process. Therefore, we reverse and remand this case for resentencing without including the Minnesota misdemeanor conviction in the calculation of Johnson's criminal history score.
1
If the disputed point were subtracted from Johnson's criminal history score, reducing it to 3, he would be placed in criminal history category II and subject to a sentencing range of 121-151 months of imprisonment
2
The following excerpts from the sentencing hearing illustrate this point:
MR. WALBRAN [Prosecutor]: ... I urge the Court to find that whatever sentence you impose would have been what you would have imposed for this defendant because of what he did--regardless of this one point controversy.
THE COURT: The Court will note here that, if the Court had found that the criminal history category was Roman Numeral II, that would have led the Court to believe that the proper calculation with a total offense level, would be that the defendant could receive from 121 to 151 months [of] imprisonment, five years of supervised release, a fine of fifteen thousand to four million dollars plus costs of imprisonment or supervision, and a one hundred dollar special assessment.
Although I am not going to make a particular finding that the Court would have sentenced Mr. Johnson to the same sentence, it is very obvious from the sentence that I am about to announce that it falls within the guidelines under both a finding of criminal history category III or criminal history category II.
(Sent. Tr. at 19, 27-28) (emphasis added).
3
This provision is entitled "Sentence for misdemeanor or gross misdemeanor" and states in pertinent part:
Upon conviction of a misdemeanor or gross misdemeanor the court, if sentence is imposed, may, to the extent authorized by law, sentence the defendant:
(1) to imprisonment for a definite term; or
(2) to payment of a fine, or to imprisonment for a specified term if the fine is not paid; or
(3) to both imprisonment for a definite term and payment of a fine....
Minn.Stat.Ann. Sec. 609.125. | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/2584747/ | 187 P.3d 270 (2008)
163 Wash.2d 1039
STATE
v.
HEDDRICK.
No. 80841-4.
Supreme Court of Washington, Department II.
June 4, 2008.
Disposition of petition for review. Granted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2584864/ | 187 P.3d 231 (2008)
220 Or. App. 457
CITY OF MADRAS
v.
JENSEN.
Court of Appeals of Oregon.
June 11, 2008.
Affirmed without opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/457552/ | 770 F.2d 1276
10 Soc.Sec.Rep.Ser. 424, Unempl.Ins.Rep. CCH 16,297James OWENS, Plaintiff-Appellant,v.Margaret HECKLER, Secretary of Health and Human Services,Defendant-Appellee.
No. 84-3693
Summary Calendar.
United States Court of Appeals,Fifth Circuit.
July 29, 1985.
William Byrne Jr., New Orleans, La., for plaintiff-appellant.
John P. Volz, U.S. Atty., Nancy A. Nungesser, Asst. U.S. Atty., New Orleans, La., for defendant-appellee.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before CLARK, Chief Judge, GARWOOD, and HILL, Circuit Judges.
CLARK, Chief Judge:
1
James Owens appeals from a judgment denying his claim for period of disability and social security disability benefits as provided under 42 U.S.C. Sec. 416(i) and Sec. 423. On appeal, Owens complains the record lacks substantial evidence to support the determination that he is not disabled within the meaning of the Social Security Act. After a careful review of the entire record, we find substantial evidence to support the administrative determination that Owens is capable of pursuing gainful activity, and therefore, is not disabled. The decision appealed from is affirmed.
2
* Owens was fifty-four years old at the time his alleged disability prevented further employment. He has completed a third grade education, but has successfully tested at the level of a ninth grade education. His past work history includes various unskilled and semi-skilled jobs, often involving bending, stooping and lifting. He has also worked driving a private mail truck, soldering wires, inspecting pipe threads and cleaning cans with a chemical solution, jobs which entail less strenuous physical labor. Owens first injured his back in 1970, but returned to work in 1973. He has been unable to work since August 1975 when he injured his back a second time lifting a heavy pipe.
3
Owens filed this claim for disability insurance benefits on February 21, 1979, alleging a back injury, a heart condition and high blood pressure. Owens further asserts he suffers constant severe pain in his lower back, shortness of breath and fatigue. Owens asserts these ailments and accompanying pain have caused him to be disabled and unable to work since August 14, 1975.
II.
4
Owens' claim has been the subject of lengthy administrative proceedings. Owens was granted a hearing before an administrative law judge (ALJ) at which he was present and represented by counsel. In addition to medical records and doctors' opinions, the evidence before the ALJ included testimony by Owens and a vocational expert. The ALJ found Owens had the capacity for "light" work activity as defined by social security regulations1 and could perform the less physical work he had done previously which corresponded to this definition. Therefore, he was not disabled as defined by the Social Security Act and not entitled to benefits. The Appeals Council approved the decision by the ALJ, making it the final decision of the Secretary of Health and Human Services (Secretary).
5
After exhausting his administrative remedies, Owens sought judicial review. A United States magistrate remanded the case to the Secretary for the limited purpose of reconciling the testimony of the vocational expert which was incompatible with the decision to deny disability, yet was not mentioned in the ALJ's decision. The Secretary remanded the case to the ALJ for further explanation as directed by the magistrate. The ALJ provided additional explanation and again issued a recommended decision denying Owens' claims for social security benefits. The Appeals Council adopted this recommendation, and Owens again sought judicial review of the Secretary's final decision. The district court approved the findings and recommendations of the magistrate and entered summary judgment in favor of the Secretary, dismissing Owens' claim for social security benefits. Thus, Owens has exhausted his administrative remedies and is properly before this court on appeal of a final judgment.
III.
6
Under the applicable standard of review, the Secretary's findings are conclusive if supported by substantial evidence. 42 U.S.C. Sec. 405(g); see Jones v. Heckler, 702 F.2d 616, 620 (5th Cir.1983). The narrow issue before this court, then, is whether substantial evidence supports the Secretary's decision that Owens is not disabled within the meaning of the Social Security Act. Substantial evidence is more than a scintilla, less than a preponderance, and is such relevant evidence as a reasonable mind might accept as adequate to support the conclusion. Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971). The elements of proof to be weighed in determining whether substantial evidence exists include: 1) objective medical facts; 2) diagnoses and opinions of treating and examining physicians; 3) claimant's subjective evidence of pain; 4) claimant's educational background, age and work history. See DePaepe v. Richardson, 464 F.2d 92, 94 (5th Cir.1972). Upon reviewing the record, we are satisfied the ALJ considered all of these factors, and that her findings and conclusions are supported by substantial evidence to show Owens is not disabled under the Act, but is capable of performing light gainful activity.
IV.
7
Owens raises four issues before this court: A) the ALJ's decision that Owens was not disabled is not supported by substantial evidence; B) despite objective medical evidence that substantiated his pain, the ALJ failed to consider severe lower back pain as a serious impairment of Owens' working capacity; C) instead of considering the cumulative effect of his impairments, the ALJ evaluated each impairment individually to conclude Owens was not disabled by any one impairment; D) the ALJ ignored the vocational expert's testimony as irrelevant to her consideration.
8
Initially, we note Owens' earnings record indicates he last met the special earnings requirement of the Act on December 31, 1977. 42 U.S.C. Sec. 416(i)(3) and Sec. 423(c)(1). Thus, to be eligible for disability benefits, Owens must show he became disabled on or before December 31, 1977, the date his insured status expired. See Demandre v. Califano, 591 F.2d 1088, 1090 (5th Cir.), cert. denied, 444 U.S. 952, 100 S.Ct. 428, 62 L.Ed.2d 323 (1979). Any impairment which had its onset or became disabling after the special earnings test was last met cannot serve as the basis for a finding of disability. Id.
A.
9
An examination of the record firmly supports the ALJ's determination that Owens failed to prove a medically determinable disability within the meaning of the Act. Disability is defined as the "inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which ... has lasted or can be expected to last for a continuous period of not less than 12 months." 42 U.S.C. Sec. 416(i)(1)(A) and Sec. 423(d)(1)(A). To succeed on a claim for disability benefits, Owens must show an impairment so severe as to incapacitate him from performing any substantial gainful activity. Jones v. Heckler, 702 F.2d 616, 620 (5th Cir.1983). Thus, while Owens undoubtedly suffers some impairment due to back pain and other ailments, some impairment does not prove disability. Consequently, there was substantial evidence to show Owens' impairments would permit him to perform work requiring light exertion.
10
Medical reports and opinions of examining doctors prior to December 31, 1977,2 indicate Owens suffers from a degenerative spine disease, inconsistently controlled hypertension, and a heart condition known as ventricular hypertrophy. In addition, Owens claimed to be short of breath, easily fatigued, and stricken by constant, and at times severe, back pain. The following objective medical evidence supports the ALJ's conclusion that these impairments do not prevent Owens from performing any gainful activity.
11
In March 1976, Dr. L.G. Clanton examined Owens and reported only slight limitation of back motion, normal reflexes and no motor or sensory deficits. Examination by Dr. Kenneth E. Vogel, also in March 1976, revealed a mild degree of limitation of motion in the back with mild muscle spasm, but no motor or sensory deficits. In May 1976, Owens was examined by Dr. James T. Williams. Dr. Williams found no significant decrease in back movement, no sensory deficit, no muscle spasm, but mild degenerative changes in the lower back. In Dr. Williams' opinion, there was no orthopedic reason Owens could not return to his former type of employment. In August 1977, x-rays showed normal heart and lungs, but confirmed a mild degenerative disease of the spine. All motor and joint motion were normal, except for continued limitation in back movement. Owens also suffered from high blood pressure. In October 1977, Owens was diagnosed as having hypertensive cardiovascular disease. His blood pressure remains high, but is fairly well controlled by medication.
12
This objective medical evidence substantially supports the ALJ's conclusion that Owens failed to prove that prior to December 31, 1977 he suffered a severe orthopedic or cardiovascular condition which would preclude all substantial gainful activity for a period of twelve continuous months.
B.
13
The ALJ found Owens' subjective complaints of pain unsubstantiated by objective medical findings, and therefore, not credible. Owens argues pain alone, unsupported by objective evidence, can be a disabling condition, Dorsey v. Heckler, 702 F.2d 597, 603 (5th Cir.1983), if linked to a medically determinable impairment. Benson v. Schweiker, 652 F.2d 406, 408-09 (5th Cir.1981). Owens argues he has established such a link. He attributes his severe lower back pain to the medically substantiated back injury and degenerative arthritic condition of his spine. He claims a long history of hypertension, exacerbated by strenuous activity, accounts for his precordialgia. Owens claims the ALJ must consider subjective evidence of pain, Scharlow v. Schweiker, 655 F.2d 645, 648 (5th Cir.1981), especially when corroborated by objectively demonstrable and uncontroverted physical impairments. Failure to consider subjective evidence of pain is reversible error. Id. By not doing so, the Secretary acted arbitrarily.
14
The proper standard for evaluating pain is now provided by statute which reads in pertinent part:
15
An individual's statement as to pain or other symptoms shall not alone be conclusive evidence of disability ... there must be medical signs and findings ... which could reasonably be expected to produce the pain or other symptoms alleged.... Objective medical evidence of pain or other symptoms established by medically acceptable clinical or laboratory techniques ... must be considered in reaching a conclusion as to whether the individual is under a disability.
16
Social Security Disability Benefits Reform Act of 1984, Pub.L. No. 98-460 Sec. 3 (enacted Oct. 9, 1984), reprinted in 42 U.S.C.A. Sec. 423(d)(5)(A) (West Supp.1985).
17
The ALJ's decision fully comported with this statutorily dictated standard. The record indicates the ALJ duly considered Owens' subjective complaints of pain:
18
The claimant alleges that his conditions cause severe pain and functional limitation. The objective medical findings in the record are normally considered not of such severity as to produce severe, incapacitating pain. Moreover, during the period of time in question, the claimant did not take medications which would indicate he suffered severe incapacitating pain. The objective record does not document signs or symptoms of severe, incapacitating pain which persisted over a period of twelve continuous months.... [T]he preponderance of the evidence shows that from August 14, 1975 through December 31, 1977, the claimant suffered at most mild to moderate pain and limitation of normal bodily function. Allegations of constant or frequent severe pain for a period of twelve continuous months are not credible.
19
This passage indicates the ALJ acknowledged Owens suffered physical impairment that could be painful. However, she found the severity of the pain alleged was not reasonably consistent with the objective medical evidence on record. In her opinion, the medical evidence did not "show the existence of a medical impairment ... which could reasonably be expected to produce the pain or other symptoms alleged...." The ALJ did not credit Owens' testimony concerning constant and severe pain because objective medical support was lacking to show his pain was more severe than normal, and the degree of pain normally associated with Owens' impairments was not of the type likely to cause total disability.
20
The mere existence of pain is not an automatic ground for obtaining disability benefits. Jones v. Heckler, 702 F.2d at 621 n. 4. Subjective evidence will not take precedence over conflicting medical evidence. Id. Owens failed to meet his burden. He did not offer additional corroborating proof of his alleged debilitating pain, despite ample opportunity to supplement the record at the close of the hearing. Substantial evidence supports this conclusion.
C.
21
Owens next asserts the ALJ failed to consider the cumulative effect of his impairments, choosing instead to evaluate each disorder individually. We agree that an individual's combined impairments can prohibit substantial gainful activity. See Dillon v. Celebrezze, 345 F.2d 753, 757 (4th Cir.1965). However, we do not find the ALJ "so fragmentized [Owens'] several ailments ... that [s]he failed properly to evaluate their effect in combination upon this claimant." Id. In finding No. 4, the ALJ states specifically that "claimant's impairments, taken singly or in combination, do not meet or equal an impairment as defined in the Listing of Impairments, Appendix 1, Subpart P of Regulation 404." 20 C.F.R. Sec. 404, Appendix 1 (1985) (emphasis supplied).
22
Our review of the record reveals this is not simply a rote statement; substantial evidence supports the ALJ's conclusion. Owens testified he could stand 15-20 minutes at a time, sit for one hour, walk about one mile, and drive an automobile short distances. His daily activities were limited, but included attending church, doing light yard work, going to the grocery store and caring for his personal needs. He believed he could carry 10 pounds, but not without pain; he had never tried to lift 20 pounds. The ALJ's finding that Owens was not disabled, but able to perform light work as defined by 20 C.F.R. Sec. 404.1567,3 is consistent with Owens' recitation of his functional capabilities. The ALJ's conclusion is reasonable and supported by substantial evidence.
D.
23
Owens also complains that the ALJ arbitrarily ignored the testimony of the government's vocational expert. Owens' claim was originally remanded by the magistrate for the limited purpose of explaining why the decision was incompatible with the expert's opinion.
24
On remand, the ALJ explained the expert's opinion was irrelevant because it was based on a hypothetical question composed of assumptions4 subsequently found unsupported by medical evidence. The hypothetical assumed the existence of Owens' complaints--significant limitation in back movement and moderate pain and discomfort which increased upon exertion. However, on remand the ALJ explained her ultimate findings did not substantiate these subjective complaints of pain and allegations of functional limitation. The ALJ found that Owens "has suffered at most mild to moderate pain and limitation of normal bodily function." Because she found objective medical evidence did not coincide with the hypothetical assumptions posed to the vocational expert, the ALJ reasoned the expert's opinion was immaterial. In light of this explanation, and acknowledging that the findings as to pain and limitation are supported by substantial evidence, we find rejection of the expert testimony reasonable.
25
In the ALJ's opinion, as affirmed by the Secretary and district court, Owens retained the residual functional capacity to perform light work. Furthermore, because Owens had performed light work in the past, he retained the ability to perform his past relevant work. Based upon the record as a whole, including testimony and medical evidence offered at the hearing, we are convinced there was substantial evidence to support these findings and the conclusion that Owens was not disabled within the meaning of the Social Security Act. The judgment appealed from is
26
AFFIRMED.
1
Light work is defined as follows:
(b) Light work. Light work involves lifting no more than 20 pounds at a time with frequent lifting or carrying of objects weighing up to 10 pounds. Even though the weight lifted may be very little, a job is in this category when it requires a good deal of walking or standing, or when it involves sitting most of the time with some pushing and pulling of arm or leg controls. To be considered capable of performing a full or wide range of light work, you must have the ability to do substantially all of these activities....
20
C.F.R. Sec. 404.1567 (1985)
2
The record reflects a significant amount of medical evidence from January 1970 to August 1971 pertaining to Owens' first back injury. This evidence was carefully considered by the ALJ in her recommended decision. However, Owens returned to work some time in 1973. Thus, we find this early medical evidence immaterial to our review of Owens' claimed disability since August 1975
3
See supra note 1
4
The ALJ posed the following hypothetical question:
... let us assume that the claimant has back and heart problems and experiences shortness of breath on exertion and has constant moderate back pain, becoming worse on exertion, and has significant limitation in motion of his back ... and he's not able to lift or carry more than 10 pounds or engage in prolonged walking or standing or such strenuous activities as repeated bending or stooping. Considering the claimant's age, education and work experience, is there any type of work in the New Orleans area or in the national economy in which the claimant would be able to engage?
The vocational expert replied:
I don't think so because of the significant back pain. That, of course, would impair his concentration on any job. The heart trouble, shortness of breath also would impair a person's ability to maintain a full 8-hour a day job. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1917790/ | 135 N.W.2d 868 (1965)
178 Neb. 838
Anna GORMAN, Appellant,
v.
WORLD PUBLISHING CO., Appellee.
No. 35899.
Supreme Court of Nebraska.
June 25, 1965.
*869 Martin A. Cannon, Omaha, for appellant.
Cassem, Tierney, Adams & Henatsch, Charles F. Gotch, Omaha, for appellee.
Heard before WHITE, C. J., CARTER, BOSLAUGH, BROWER, SMITH, and McCOWN, JJ., and WESTERMARK, District Judge.
McCOWN, Justice.
This is a negligence action brought by a business invitee against the owners of a building for injuries suffered in a fall near the entrance. The jury returned a verdict for the defendant and the plaintiff has appealed.
On March 30, 1961, at 1:30 p. m., on a sunny day, the plaintiff, a woman 66 years of age, came by automobile to the Doctors' Building in Omaha, Nebraska, to consult her physician, a tenant in the building. The defendant owned and maintained the building as an office building for physicians and others connected with the healing arts. Access to the defendant's building was provided by an entrance approximately 30 feet wide, with two revolving doors in the center and a regular door on either side. A driveway came up from the street and extended across the entryway, and provided access for all traffic, wheeled or afoot. A roof or marquee extended over the driveway for the width of the entrance. The inside lobby floor was of terrazzo and extended about 18 inches outside the doors where it ended against an aluminum strip that joined the concrete driveway, which served for both pedestrian and auto traffic. At the junction of these two surfaces, and 18 inches outside the doors, there was a difference in level. The driveway was one-half inch lower than the terrazzo. The ridge or seam was square because of the aluminum edge on the terrazzo surface. The terrazzo was a light tan in color, smooth and polished in texture, and the driveway was concrete.
The plaintiff got out of the car driven by her husband at a point in front of the entrance, walked around on the driveway behind the car, and approached the doors. Her toe hit something which she identified as the joining where the terrazzo joined the concrete. It threw her forward into the door and she sustained severe personal injuries.
There is no question but that the plaintiff was an invitee. The defendant had a legal duty to exercise ordinary care to keep the premises reasonably safe for the use of the invitee. The defendant is not an insurer of the safety of invitees. The liability of the defendant is for its own negligence. Jeffries v. Safeway Stores, Inc., 176 Neb. 347, 125 N.W.2d 914; Sipprell *870 v. Merner Motors, 164 Neb. 447, 82 N.W.2d 648.
The mere fact that an invitee falls at the entrance of a building where a difference in levels is present does not raise any presumption of negligence on the part of the owner and the doctrine of res ipsa loquitur does not apply. Thompson v. Young Men's Christian Ass'n, 122 Neb. 843, 241 N.W. 565; Sipprell v. Merner Motors, supra.
In such cases negligence and the duty to use care does not exist in the abstract, but must be measured against a particular set of facts and circumstances. The mere fact that there is a slight difference between levels in different parts of a building or on the premises outside the building which the public is invited to enter, does not in itself constitute negligence. See Kelley v. Luke, 140 Neb. 283, 299 N.W. 593. Our cases have previously drawn a distinction between conditions existing inside and outside the inviter's place of business. We have held that the duty as to maintenance of floor conditions is higher inside the inviter's place of business for the reason that the invitees are examining merchandise and that the inviter invites a condition in which their attention is diverted to the inspection of merchandise and the other ordinary incidents of the inviter's business. Crawford v. Soennichsen, 175 Neb. 87, 120 N.W.2d 578. These differences do not affect the legal duty to exercise ordinary care, but recognize that all the facts of location and surrounding circumstances enter into the determination of what is reasonable in a particular case.
At this point, we revert to a more detailed examination of the facts as to the particular difference in levels which is the sole basis for the claim of negligence against the defendant. The plaintiff and her witnesses testified as to the appearance of the seam between the terrazzo and the concrete, and two photographs were introduced in evidence, one showing the seam or joinder from the front, the direction from which the plaintiff approached, and the other laterally. The plaintiff testified that she had been in and out of the building many times; that she had noticed the line where the terrazzo and concrete met many times; that she had seen the ridge or seam many times before; but that she did not know of the difference in levels. Her husband and son both testified that they could see the seam or ridge, but could not tell the difference in levels looking down at it, except upon close examination. They identified the seam or ridge by marking or identifying it on the photographs.
It has been stated by many courts and on many occasions that it is a matter of common knowledge that a change of level at the entrances or exits of buildings is to be expected, and that sidewalk and entrance elevations to most places, private and public, are quite without uniformity. See, Sullivan v. Chicago & Northwestern Ry. Co., 128 Neb. 92, 258 N.W. 38; Cates v. Evans (Mo.App.), 142 S.W.2d 654; Dominguez v. Southwestern Greyhound Lines, 49 N.M. 13, 155 P.2d 138; Hoyt v. Woodbury, 200 Mass. 343, 86 N.E. 772, 22 L.R.A., N.S., 730.
Jones v. Great Atlantic & Pacific Tea Co., 256 A.D. 896, 9 N.Y.S.2d 81, involved a fall on a sidewalk near the entrance to the defendant's store. The opinion does not state the exact difference in levels on which the plaintiff fell. The court affirmed the dismissal of plaintiff's complaint and stated: "The difference in elevation between the sidewalk and the concrete slab forming the entrance to defendants' store was so slight that a reasonably prudent person would not have anticipated that it would be the cause of an accident such as happened in this case." That case cites several cases involving minor differences in elevation, varying from 3/8 to ¾ of an inch, both inside and outside of buildings, in all of which the petitions were dismissed.
It is the plaintiff's contention that the difference in level was so slight as to be *871 unnoticeable and, therefore, that it constituted a trap. A careful examination of the cases cited and relied upon by the plaintiff in her able brief does not reveal a case directly in point upon its facts. Here there is simply no evidence that this was an unusual change in elevation; nor one at a place not to be expected; nor a situation in which the danger is accentuated by either too much light in the wrong place or too little where it could have afforded protection. It cannot be said to present a hidden or concealed danger for any person using it in broad daylight, where it extended uniformly and continuously for 30 feet across the entire entrance, with variations in color and texture of surfaces at the junction, and where there is no evidence of unusual distraction. See Holmes v. State of New York, 5 Misc. 2d 838, 161 N.Y.S.2d 913.
The rule is, of course, well established that it is not negligence to maintain, under appropriate circumstances, different levels in approaches to places of business. The plaintiff had visited this building many times before and must have been, and concededly was, familiar with the entrance and particular approach used, which we cannot' say was unusual nor that it presented a trap for business patrons. From the particular facts here, it must be said as a matter of law that the defendant's motion for directed verdict should have been sustained.
In view of this determination, the plaintiff's assignments of error relating to evidence as to the repairable nature of the defect charged and assignments of error relative to instructions become immaterial and it is, therefore, unnecessary to consider them.
For the reasons stated, the judgment is affirmed.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1645121/ | 994 So. 2d 541 (2008)
Samuel E. RUSSELL, et al.
v.
SHELTER MUTUAL INSURANCE COMPANY, et al.
No. 2008-CC-1898.
Supreme Court of Louisiana.
October 31, 2008.
*542 Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2460436/ | 469 S.W.2d 662 (1971)
STATE of Missouri, Plaintiff-Respondent,
v.
Harvey Glenn WARREN, Defendant-Appellant.
No. 9098.
Springfield Court of Appeals, Missouri.
July 8, 1971.
Zane H. White, Rolla, for plaintiff-respondent.
Jay V. White, Rolla, for defendant-appellant.
TITUS, Presiding Judge.
A jury in the Circuit Court of Phelps County returned a verdict on February 25, 1970, finding defendant guilty of the first offense misdemeanor of operating a motor vehicle while in an intoxicated condition and assessed "his punishment at $250.00 fine and 60 days in jail." § 564.440(1).[1]*663 Subsequent to developments detailed anon, sentence and judgment were rendered according to the verdict on November 4, 1970, and defendant appealed.
Defendant did not receive nor did he apply for an extension of time to file his motion for new trial. Therefore, it was required that the motion "be filed before judgment and within ten days after the return of the verdict." Crim. Rule 27.20(a); State v. Cantrell, Mo., 403 S.W.2d 647, 649(1). On March 3, 1970 (verdict plus six days), defendant filed a "Motion for New Trial." Fourteen days after the verdict (March 11, 1970) defendant filed an "Amended Motion for New Trial" and on July 6, 1970 (117 days after the "amended" motion was filed), he filed a "Motion to Set Aside Order Overruling Defendant's [Amended] Motion for New Trial." The trial court did not rule any of these motions.
Although the March 3 motion was timely, it was "deemed denied for all purposes" by operation of law when it was "not passed on within ninety days" after it was filed or on June 1, 1970. Crim. Rule 27.20(b); State v. Grant, Mo., 380 S.W.2d 799, 803(5). Defendant has not enounced in his appeal brief any of the alleged trial court errors complained of in the motion. Consequently, nothing contained in the March 3 motion is for determination here as we will not consider any "allegations of error asserted in the motion for new trial which are not briefed" because such unbriefed averments are "deemed waived or abandoned." Crim. Rule 28.02; State v. Lay, Mo., 427 S.W.2d 394, 403(12).
Defendant's brief contains the lone "point" that the trial court "erred in failing to give [him] a hearing and permit [him] to present evidence in support of allegation No. 1 of his amended motion for new trial, and failed to rule on said * * * amended motion for new trial, and [his] motion to set aside order overruling defendant's [amended] motion for new trial."[2] Allegation "No. 1" of the "amended motion" consists of a first-time assertion that a new trial was warranted because one of the jurors did not reveal on voir dire examination his prejudice against the defendant resulting from a complaint the juror had once lodged with the police charging defendant "with disturbance of the peace and disorderly conduct while intoxicated." However, "allegation No. 1" does not state when defendant or his counsel first learned of the juror's alleged misconduct. When the claim of a juror's misconduct is confined to the motion for new trial, then an averment that knowledge of this character first came after submission of the case to the jury is required if the motion is to be effective, for if the misconduct of the juror was known prior to submission and was not then called to the court's attention, the objection comes too late when made for the first time in the motion for a new trial. State v. McVey, Mo., 66 S.W.2d 857, 859(7-9); State v. Robbins, Mo.App., 455 S.W.2d 24, 27-28(11).
Civil Rules 83.05(a) (3) and (e) are made applicable to criminal cases by Crim. Rule 28.18 (State v. Conner, Mo., 391 S.W.2d 335, 337-338), and the "point" in defendant's brief does neither honor to the rules nor preserves anything for review because it does not state "wherein and why" the trial court's actions or inactions were wrong. Evans v. State, Mo., 465 S.W.2d 500, 502(1); Chambers v. Kansas City, Mo., 446 S.W.2d 833, 841(14). But irrespective of the content deficiencies of defendant's "point" and the "amended" motion for new trial, the simple fact is that the "amended" motion was filed fourteen days after verdict or four days out of time. The provisions of Crim. Rule 27.20(a) relating to the time for filing the *664 new trial motion are mandatory [State v. Tucker, Mo., 451 S.W.2d 91, 92(1)], and albeit the subject of late filing may not be raised, we are bound to consider the matter sua sponte since neither the parties nor the court can waive the requirements of the rule. State v. Rapp, Mo., 412 S.W.2d 120, 122(2). Not having been filed within the time required by Crim. Rule 27.20(a), defendant's "amended" motion for a new trial was a nullity and preserved nothing for consideration by this court. State v. Mucie, Mo., 448 S.W.2d 879, 890(16), cert. den., 398 U.S. 938, 90 S. Ct. 1842, 26 L. Ed. 2d 271; State v. White, Mo., 439 S.W.2d 752, 753(1); State v. Crow, Mo., 388 S.W.2d 817, 819(1, 2), cert. den., 383 U.S. 914, 86 S. Ct. 901, 15 L. Ed. 2d 668; State v. Small, Mo., 344 S.W.2d 49, 54(4). Also, because the "amended" motion was a nullity, the trial court was not obliged to rule it or give defendant a hearing on it. The judgment is affirmed.
STONE and HOGAN, JJ., concur.
NOTES
[1] Statutory references are to RSMo 1969, V.A.M.S.; references to rules are to Missouri Supreme Court Rules of Criminal and Civil Procedure, V.A.M.R.
[2] Since the trial court did not make an order overruling the "amended" motion for new trial, it would be most difficult to convict the court of error for failing to set aside an order it never made. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2584727/ | 233 P.3d 888 (2010)
168 Wash.2d 1036-43
STATE
v.
T.J.C.
No. 84146-2.
Supreme Court of Washington, Department I.
June 1, 2010.
Disposition of Petition for Review Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917560/ | 178 B.R. 518 (1995)
In re Danny Lee MYERS and Pava Lynn Myers, Debtors.
Bankruptcy No. BK-94-17105.
United States Bankruptcy Court, W.D. Oklahoma.
March 7, 1995.
Leslie Martha Forbes, Oklahoma City, OK, for debtors.
W. Brent Kelley, Oklahoma City, OK, for MidFirst Bank, SSB.
Letha Sweeney, Oklahoma City, OK, for Chapter 13 Trustee.
Ann Spears, Chapter 13 Trustee, Oklahoma City, OK.
ORDER ON OBJECTION TO CONFIRMATION OF CHAPTER 13 PLAN
PAUL B. LINDSEY, Chief Judge.
In a case such as this, filed under Chapter 13 of the Bankruptcy Code,[1] the provisions of § 1325(a) govern whether the court may confirm the debtor's Chapter 13 plan. Section 1325(a)(5) deals with allowed secured claims provided for in the plan. Its requirements are met if the holder of the claim accepts the plan [§ 1325(a)(5)(A)] or the debtor surrenders the property securing the claim to the holder [§ 1325(a)(5)(C)].
If, however, the debtor proposes to retain the property which secures the claim, and the holder of the claim does not accept the plan, the plan must comply with § 1325(a)(5)(B). In order to do so, the plan must provide that the holder of the claim retain the lien securing the claim, and that "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."
The property to be distributed under the plan on account of a secured claim will almost always be a stream of cash payments. To insure that § 1325(a)(5)(B) is complied with, the allowed amount of the secured claim is paid in installments which include an appropriate market rate of interest. Viewed from the opposite perspective, the total of the installments, when discounted to the present, will at least equal the allowed amount of the secured claim.
*519 The amount of a secured claim is determined under § 506(a), which, in material part, is as follows:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property . . . and is an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest.
As all courts which have addressed the issue of the amount of a creditor's secured claim have recognized, "value" is not defined in the Code or in the Bankruptcy Rules. Neither does the legislative history of § 506(a) provide any significant guidance.
"Value" does not necessarily contemplate forced sale or liquidation value of the collateral; nor does it always imply a full going concern value. Courts will have to determine value on a case by case basis, taking into account the facts of each case and the competing interests in the case.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 356, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 6312.
While courts will have to determine value on a case-by-case basis, the subsection makes it clear that valuation is to be determined in light of the purpose of the valuation and the proposed disposition or use of the subject property.
S.Rep. No. 989, 95th Cong., 1st Sess. 68, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5854.
In a Chapter 13 case, the value of a creditor's secured claim must be determined by the court most frequently with regard to one or more vehicles which the debtors wish to retain.[2] The most common sources of evidence and argument of such value are the compilations by the National Automobile Dealers Association (NADA).[3] These compilations take the form of "books," small pamphlets published monthly or quarterly on a regional basis, listing, for each model year, virtually every make and model of vehicle with the then current average trade-in, loan and retail values for each. The NADA books also contain information with regard to the appropriate increase or decrease in value which should be applied due to the presence or absence of specified optional equipment, unusually low or high mileage, and other variable factors.
In Chapter 13 cases, general unsecured claims are paid, if at all, after all administrative, secured and priority unsecured claims, at or near the end of the term of the plan, which will be not less than 36 and not more than 60 months in length.[4] Not surprisingly, debtors and secured creditors often disagree upon the value which should be assigned to the secured claim of the creditor in a vehicle. For obvious reasons, debtors favor the trade-in or wholesale value, and creditors favor the retail value.
*520 Bankruptcy courts have dealt with these conflicts over the years, and the numerous reported decisions appear to favor a published wholesale value as the appropriate measure.[5]
The first court of appeals decision which specifically addressed the issue was General Motors Acceptance Corporation v. Mitchell (In re Mitchell), 954 F.2d 557 (9th Cir.1992), cert. denied, ___ U.S. ___, 113 S. Ct. 303, 121 L. Ed. 2d 226 (1992).
In Mitchell, the issue was the value of an automobile purchased by debtors some fifteen months prior to bankruptcy. The parties' experts testified as expectedplaintiff's in favor of the retail value and debtors' in favor of wholesale value found in the "book."[6] The difference between the two was some $3,400.
The bankruptcy court found retail to be the appropriate value. On appeal by debtors, the Bankruptcy Appellate Panel (BAP) opted for wholesale value. Plaintiff appealed to the court of appeals.
After reviewing the discussion and compilation of cases contained in Collier on Bankruptcy,[7] the Mitchell majority concludes that wholesale price best approximates the value sought to be ascertained, the amount that the creditor would obtain if permitted to make a reasonable disposition of the collateral.[8]Mitchell, 954 F.2d at 560. The Mitchell court notes that this result was obtained in what it describes as the leading bankruptcy decision in the circuit, In re Malody, 102 B.R. 745 (9th Cir. BAP 1989).
The Mitchell court next addresses the plaintiff's reliance upon the second sentence of § 506(a), which requires that the determination of value be made "in light of the proposed disposition or use of such property." Plaintiff urges that in view of the debtors' intention to continue to use the vehicle, its value must be based upon the replacement cost of the vehicle to them. The court states that this argument ignores the clause of § 506(a) which defines the value of the secured claim as the value, not merely of the debtor's interest in the collateral, but of the creditor's interest in the debtor's interest in the collateral. The court cites and quotes from Queenan, Standards for Valuation of Security Interests in Chapter 11, 92 Com. L.J. 19, 30 (1987), in this connection.
The dissent in Mitchell adopts the plaintiff's argument, that because the vehicle is to be retained, wholesale value is irrelevant and the cost to debtors of a replacement vehicle is therefore the appropriate value.
In In re Balbus, 933 F.2d 246 (4th Cir. 1991), decided some six months prior to Mitchell, the court was called upon to decide whether hypothetical costs of sale should be deducted from the unadjusted fair market value in determining the value of the creditor's secured claim. The property involved was real property which debtor proposed to retain and use. The parties had agreed upon the unadjusted fair market value of the property. The issue was crucial, since the reduction of the amount of the secured claim by deduction of such costs would have had the effect of raising the amount of debtor's unsecured claims above $100,000, which was then the upper limit for such claims in order to be eligible for Chapter 13 relief.[9]
The majority in Balbus, decided as was Mitchell by a divided panel, determined that such costs should not be deducted in instances in which the debtor proposed to retain and use the collateral, opining that to hold otherwise would virtually write out of the statute the second sentence of § 506(a). The dissent would have followed Malody, the Ninth Circuit BAP decision which would be relied upon six months later by the majority in Mitchell.
*521 In Matter of Rash, 31 F.3d 325 (5th Cir. 1994), a case involving a commercial truck originally purchased for more than $70,000, the court states that: "If the debtor retains the property as a part of a reorganization, the proper measurement of the estate's interest in the property is the `going concern' value of the collateral to the debtor's reorganization." Rash, 31 F.3d at 329. The court equates "going concern" value with replacement cost, and cites the dissenting opinion in Mitchell in support of the statement. After considerable dictum, which appears to be largely addressed to justification of the result reached and to policy considerations, the court concludes as follows:
Thus, retail value is the proper measurement for purposes of
determining an undersecured creditor's allowed amount of a secured claim under § 506(a). Both wholesale valuation and techniques that average wholesale and retail values, see, e.g., In re Carlan, 157 B.R. 324 (Bankr.S.D.Tex.1993), undercompensate the secured creditor and provide an invalid windfall to the debtor.
Rash, 31 F.3d at 331.
While the Rash court is unequivocal in the language of, and in support of, its holding, it is noted that the property involved in that case was a commercial vehicle used, and proposed to be retained for use, in debtor's trade or business. This court believes that if the vehicle in Mitchell had been such a purely commercial vehicle, the same result might well have been reached, without the strident, inflexible and arguably unnecessary language found in Rash.[10] The Mitchell court made the following statement:
In holding that the wholesale value should apply as a general rule in valuing vehicles, we do not suggest that the contemplated use by the debtor in Chapter 13 or Chapter 11 proceedings should never affect the valuation of the creditor's interest. Collier suggests that the so-called "going concern" or "replacement cost to the debtor" is appropriate where the collateral is being used as part of a going concern and the prospects for successful reorganization are good. See [3] Collier [on Bankruptcy 506.04 at] 506-28 to 506-29. In his article on this subject, Judge Queenan offers an even narrower application of debtor's use as a factor in valuation of the secured claim. He suggests that debtor's use should affect valuation where the use is "particularly beneficial," as for example when the collateral is being used in the debtor's hands in a more profitable way than it would in others' hands, or where the use is "particularly detrimental" to its value, as for example when the debtor is using the collateral 24 hours a day and causing rapid depreciation. Queenan, [Standards for Valuation of Security Interests in Chapter 11, 92 Com.L.J. 19] at 37.
Mitchell, 954 F.2d at 560.
The Rash court cites Mitchell for its adoption of the "foreclosure approach," but then asserts that the later case of Lomas Mortgage USA v. Wiese, 980 F.2d 1279 (9th Cir. 1992), vacated on other grounds, ___ U.S. ___, 113 S. Ct. 2925, 124 L. Ed. 2d 676 (1993), suggests that the Mitchell decision "contradicts the language of § 506(a) and illogically `allow[s] the debtor to keep the home but value[s] the secured portion based upon a hypothetical sale of the residence.'"[11]
Wiese involved, inter alia, certain real property being retained by Chapter 13 debtors, and was decided almost a full year after Mitchell. In the portion of the opinion in which it determines that the value of the property should not include mortgage insurance pursuant to an agreement between the creditor and a third party, the Wiese court, quoting from In re Fisher, 136 B.R. 819, 827 (D.Alaska 1992), states that "Mitchell is consistent with our holding because it did not *522 involve insurance or `any type of recourse agreement that would guarantee the creditor more than market value.'"
In a later section of the Wiese opinion, dealing with the debtors' cross-appeal, the court follows Balbus, holding that selling costs should not be deducted when determining the value of the creditor's secured claim. The court added that "it is contradictory to allow the debtor to keep the home but value the secured portion based upon a hypothetical sale of the residence." Wiese, 980 F.2d at 1286. In this section of the opinion, the Wiese court makes no mention whatever of Mitchell, and asserts that "this circuit has not addressed the question." Wiese, 980 F.2d at 1285.
Obviously the questions addressed by Mitchell and Wiese are not identical. They do appear to be opposite sides of the same coin, however, and it is difficult to reconcile the two cases, the only substantive difference apparently being that Mitchell dealt with personal property and Wiese dealt with real property. It is also difficult to see how Mitchell could be seen to be consistent with Wiese, even as to the mortgage insurance issue, when that issue was not present in Mitchell.
In In re Carlan, supra, 157 B.R. 324, cited in Rash, the court adopts, as the starting point in valuation, the average of the "book" wholesale and retail values. It disagrees with Mitchell for its failure to give effect to the second sentence of § 506(a), and with cases mandating the use of retail value, because "purchasers rarely pay retail or `sticker price' for a car." Carlan, 157 B.R. at 325, 326. The former objection, it seems to this court, is offered without supporting analysis, and the latter does not give effect to the fact that the NADA "book" refers to average values, and certainly does not imply or warrant the inference that the values supplied have any relationship whatever to values of vehicles being sold for the first time.
The same result, adoption of the average of the "book" wholesale and retail values, was obtained earlier in In re Stauffer, 141 B.R. 612 (Bankr.N.D.Ohio 1992). The analysis which led to the result, however, contains considerably more substance.
The court in Stauffer notes that the estate's interest in the vehicle is benefitted by the right to retain and to continue to use the vehicle. Conversely, it notes that the creditor is denied the right to realize the value of the vehicle immediately, that it is required to assume the risk that, even with interest, the vehicle may depreciate at a greater rate than the secured claim of the creditor is reduced, and that if the debtor fails to complete the plan, the creditor may receive the collateral and be unable to realize from it an amount equal to the then unpaid balance of the secured claim.
The Stauffer court then makes the following statement in support of its conclusion that the secured claim in a vehicle should be valued at the average of NADA wholesale and retail values on the petition date:
To use NADA wholesale value alone ignores the creditor's risks under a Chapter 13 plan. To use NADA retail valuation would compel the debtor to pay an amount far in excess of what the creditor would receive at repossession with immediate sale. The most equitable approach in such a situation would seem to this court to be to average the two figures, as was done in In re Thayer, 98 B.R. 748 (Bankr.W.D.Va. 1989). . . .
The Stauffer court specifically recognizes that other factors could warrant further adjustment in value, and states that any party may request an evidentiary hearing if it believes a higher or lower value is appropriate in the circumstances.
This court has for more than two years applied the rule announced in Stauffer to cases involving personal vehicles proposed to be retained by Chapter 13 debtors. Recently, counsel for a creditor in a Chapter 13 case, although recognizing the court's policy in this regard, requested that the court either revisit the policy or provide what would amount to special dispensation to his client. This request was based upon the assertion that the creditor, a large local credit union, was specially situated, and therefore entitled to valuation equivalent to the "book" average retail value. Its special position was said to be due to its "captive" market in the form of *523 a large membership, its maintenance of a retail sales lot for repossessed vehicles, its retention of a full-time, salaried salesman, and its provision of 100% financing on all vehicles sold, regardless of age.[12] The court took the issue raised under advisement, but before an order was entered, the case was converted to a case under Chapter 7, thus rendering the issue moot.
While the issue previously submitted was under advisement, counsel for debtors and the secured creditor in this case announced at a hearing on confirmation of debtors' Chapter 13 plan that they were willing to be bound by the court's decision in the previous case, and requested a continuance to permit the court to complete its consideration of the issue. The creditor had interposed an objection to confirmation based upon the valuation of a personal vehicle purchased by debtors and financed by the creditor some four months prior to bankruptcy. The issue therefore is ready for decision in connection with this case.
This court is of the view that the importance of the second sentence of § 506(a) in the context of valuations of personal automobiles sought to be retained in Chapter 13 cases has been overemphasized by the courts which have addressed this issue. The only reason for a § 506(a) valuation of a personal automobile in a Chapter 13 case is to establish the amount of the creditor's secured claim in order to permit debtor to retain and use the property and provide for the secured claim in the Chapter 13 plan in accordance with § 1325(a)(5)(B). Otherwise, the debtor would simply surrender the property to the creditor, § 1325(a)(5)(C) would be satisfied, and any impediment to confirmation of the debtor's Chapter 13 plan created by the creditor's secured claim would be removed.
A debtor in a Chapter 7 liquidation case is permitted by § 722 to redeem property from a lien securing a dischargeable debt, by paying the holder of the lien the amount of the allowed secured claim that is secured by the lien. Such redemption may be accomplished by paying to the creditor, in a lump sum, the lesser of the balance of the obligation to the creditor or the amount of the allowed secured claim.
Just as the Congress has given the right to a debtor in liquidation to redeem property from the lien of a secured claim, it has given a debtor in Chapter 13 the right to pay a secured claim, and obtain a release of the lien securing it, over time, out of post-petition earnings and property. In doing so, the Congress has provided protection for the creditor, in the form of the requirement that the amount to be paid to the creditor over time have a current value of not less than would be received in an immediate liquidation.
In either instance, the creditor is entitled to, and should therefore receive, no more than the value of the collateral.[13] Those courts which have sought to provide creditors with substantial additional protection, in the form of providing valuation of the collateral at retail, as do Green and Rash, and by analogy, Balbus, are in effect engaging in judicial legislation and imposing their view of appropriate bankruptcy policy upon litigants within their jurisdiction. That function, in this court's view, belongs solely to the Congress, and should be left to it.
This court believes that the courts which have adopted retail value as the value of the secured claim, based upon the fact that debtors propose to retain and use the vehicle, have failed to consider the fact that it is the creditor's interest in the estate's interest in the vehicle which is being valued, not the *524 estate's, or the debtors' interest alone, and that under no reasonable scenario could the creditor be expected to realize from the vehicle its full retail value, even if granted immediate possession of it. It also appears that those courts are bent upon punishing debtors for doing what the Code specifically authorizes them to doretain the property and pay to the creditor over time an amount, discounted to the present, equal to the amount which the creditor would realize if permitted to liquidate the property immediately.
This court adopted the Stauffer compromise position in the belief that it provided courts with the flexibility required in order to give meaning, to the extent possible, to both the first and second sentences of § 506(a). Even though it may be argued that that position provides creditors with somewhat more than they could be expected to realize from an immediate liquidation of the collateral, this court is of the view that it represents a compromise which in a vast majority of cases will provide an equitable result.
Upon reconsideration of the issue, and upon review of the authorities referred to herein, this court reaffirms its adoption of the Stauffer rule: That the starting point for valuation of personal vehicles in Chapter 13 cases hereafter should be the average of the wholesale, or trade-in, and the retail values contained in the most current available NADA, or other equally reliable "book" providing such information for such vehicles.
Any party may request a hearing in order to put forward evidence with respect to any fact or variable, not addressed and provided for in the "book," with regard to the particular vehicle, which, if proven, could justify either an increase to or a reduction from the starting point.
The parties in this case have indicated that they will be able to do the appropriate arithmetic and address the resulting impact on debtors' proposed Chapter 13 plan upon receipt of this court's ruling. The issue of confirmation, therefore, will be addressed at the hearing rescheduled for March 14, 1995.[14]
IT IS SO ORDERED.
NOTES
[1] References herein to statutory provisions by section number only will be to provisions of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq., unless the context requires otherwise.
[2] Prior to June 1993, the issue was frequently raised in this court with regard to the value of debtors' homestead under the rule of In re Hart, 923 F.2d 1410 (10th Cir.1991), which permitted the bifurcation of the creditor's claim into secured and unsecured components. Hart, however, was overruled by Nobelman v. American Savings Bank, ___ U.S. ___, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993), which held that § 1322(b)(2) prohibits such bifurcation where the claim of the creditor is secured solely by a security interest in real property that is the debtors' principal residence.
[3] While such compilations are made and published by others as well, those of the NADA are primarily relied upon in this district.
[4] While some courts will not confirm a Chapter 13 plan which proposes to pay nothing, or a very small percentage, to holders of general unsecured claims, this court is of the view that nothing in the Code prohibits the confirmation of so-called "zero-percent" plans, and that such plans can not be found to have been filed in bad faith, without more, so long as the term of the plan does not extend beyond 36 months. Debtors proposing such plans extending beyond 36 months, however, will find it increasingly difficult to establish the "cause" required by § 1322(d) for confirmation of such plans as the proposed term increases.
[5] See 3 Collier on Bankruptcy ¶ 506.04, at 506-36 (1995).
[6] In Mitchell, the "book" employed was the Kelley Blue Book, presumably the approximate equivalent of the NADA "book" generally employed in this district.
[7] See Note 5, supra.
[8] Mitchell was decided by a split panel of the court of appeals.
[9] See § 109(e). Effective as to cases filed on or after October 22, 1994, the eligibility limit for unsecured claims was increased by the Bankruptcy Reform Act of 1994 from $100,000 to $250,000.
[10] See In re Green, 151 B.R. 501 (Bankr.D.Minn. 1993) for a compilation of decisions in a case in which retail value is found to be appropriate in determining the amount of the secured claim secured by a non-commercial family vehicle.
[11] One of the holdings in Wiese was to reaffirm Hougland v. Lomas & Nettleton Co. (In re Hougland), 886 F.2d 1182 (9th Cir.1989). The decision of the Supreme Court in Nobelman v. American Savings Bank, ___ U.S. ___, 113 S. Ct. 2106, 124 L. Ed. 2d 228, overruling Hougland, necessitated the vacation of Wiese. See Note 2, supra.
[12] Although evidence on such issues was not taken, it is not at all clear whether the creditor gave consideration to the fact that each of its supposed advantages bore attendant costs.
[13] See United Savings Ass'n v. Timbers of Inwood Forest Associates, 484 U.S. 365, 372, 108 S. Ct. 626, 631, 98 L. Ed. 2d 740 (1988). ("In subsection (a) of [§ 506] the creditor's `interest in property' obviously means his security interest without taking account of his right to immediate possession of the collateral on default. . . . The phrase `value of such creditor's interest' in § 506(a) means `the value of the collateral.'") This language, admittedly dictum in Timbers, has been quoted, and relied upon as being supportive of, virtually every decision published on this issue, including the majority and dissent in both Mitchell and Balbus.
[14] Counsel for debtors in Chapter 13 cases should disabuse themselves of any thought that this ruling will in any way diminish the disfavor in which this court holds debtors who purchase automobiles in anticipation of bankruptcy, or with knowledge that they can not afford them, the obligations on which subsequently contribute to their seeking relief under the Bankruptcy Code, and then propose plans involving retention of the vehicle, the "cram down" on the creditor of a value substantially below the amount owed to that creditor, and a minimal payment to unsecured creditors. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571260/ | 29 So. 3d 303 (2010)
SANCHEZ
v.
STATE.
No. 2D09-4357.
District Court of Appeal of Florida, Second District.
February 17, 2010.
Decision Without Published Opinion Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1576519/ | 35 So. 3d 639 (2008)
Ex parte State of Alabama.
(In re Thomas Walter WARREN, Jr.
v.
STATE of Alabama).
1051434.
Supreme Court of Alabama.
March 28, 2008.
Troy King, atty. gen., and Kevin C. Newsom, deputy atty. gen., and Audrey Jordan, asst. atty. gen., for petitioner.
Erskine R. Mathis, Birmingham, for respondent.
PARKER, Justice.
Thomas Walter Warren, Jr., was convicted, following a jury trial, of first-degree robbery and first-degree burglary. He appealed, and the Court of Criminal Appeals reversed his convictions and remanded the case for a new trial on the basis that the trial court erred in refusing to instruct the jury on the lesser-included offense of third-degree robbery. Warren v. State, [Ms. CR-04-2100, April 28, 2006] 35 So. 3d 633 (Ala.Crim.App.2006). We granted the State's petition for certiorari review to determine whether the Court of Criminal Appeals' decision conflicts with its decisions in Saffold v. State, 951 So. 2d 777, 780 (Ala.Crim.App.2006), and Welch v. State, 630 So. 2d 145, 146-47 (Ala.Crim.App.1993). We conclude that its decision in this case does conflict with Saffold and Welch, and we reverse the judgment of the Court of Criminal Appeals.
I. Background
Alma Knox testified that on June 10, 2004, she was in her residence watching an Atlanta Braves baseball game on television. Her 14-year-old grandson was mowing the lawn. The front door of the residence was locked; however, the back door had been left unlocked so that her grandson could come back in. While mowing the lawn, her grandson saw a man *640 later determined to be Warren walk from the boat shed located on the property to the residence. Knox's grandson was not concerned because he assumed that Knox knew the man.
Knox testified that she looked up to find Warren standing a few feet away from where she was sitting. Warren then demanded that Knox give him the keys to her automobile and threatened to kill her if she did not comply. Knox said that she responded, "You're kidding me." She then testified that Warren raised a large boat anchor he was holding in his right hand. Again, he demanded the keys to the automobile and threatened to kill Knox. Frightened that Warren would hit her with the anchor, Knox got out of her chair and gave Warren the spare keys to her automobile.
Knox then followed Warren into the kitchen, where he demanded money. Knox told Warren that she was widowed and that she did not have any money. According to Knox, while holding the anchor in his hand, Warren took some food, a lighter, and some cigarettes from the kitchen. Before leaving, Warren told Knox that if she telephoned the police, he would return in less than an hour to kill her. He then left in Knox's 1991 dark blue automobile which had a 150-foot garden hose in the trunk.
Warren's testimony was quite different. He testified at trial that on June 9, 2004, he had been riding in an automobile with another individual who dropped him off near Knox's residence. He testified that he slept in the woods that evening, and the next day, assuming that no one was home, he decided to enter Knox's residence and take the keys to the automobile that was parked outside. When he entered the residence, Warren said, he heard the television. He stopped in the kitchen to take some food and saw Knox sitting in her recliner watching television. He says that he approached Knox and asked if he could have the keys to her automobile. Warren testified that he did not have a weapon and that he did not threaten Knox in any way. According to Warren, he told Knox that he was not there to hurt her and that he only wanted the keys to her automobile.
Warren testified that Knox got up from her recliner and walked past him to retrieve a set of keys. She handed him the keys, and he left in the automobile. Warren testified that he told Knox that she could retrieve her automobile later that day from the parking lot of the Winn-Dixie grocery store. Warren later wrecked the car as he tried to elude a police vehicle that was pursuing him.. He stated that he had traded the garden hose for $10 worth of crack cocaine.
The jury found Warren guilty of first-degree robbery and first-degree burglary. The Court of Criminal Appeals reversed Warren's conviction, stating that because there was some evidence to support Warren's claim that he was guilty of only the lesser-included offense of third-degree robbery, the refusal of his requested jury instruction on the lesser-included offense constitutes reversible error. Judge Baschab dissented, with an opinion. We granted the State's petition for the writ of certiorari to determine whether the Court of Criminal Appeals' decision conflicts with its prior cases or with the cases of this Court.
II. Analysis
This Court reviews legal issues, such as this one, de novo. In Clark v. State, 896 So. 2d 584, 641 (Ala.Crim.App. 2000), the Court of Criminal Appeals addressed when it is appropriate to give a jury a charge on a lesser-included offense:
"`A person accused of the greater offense has a right to have the court *641 charge on lesser included offenses when there is a reasonable theory from the evidence supporting those lesser included offenses.' MacEwan v. State, 701 So. 2d 66, 69 (Ala.Crim.App.1997). An accused has the right to have the jury charged on `"any material hypothesis which the evidence in his favor tends to establish."' Ex parte Stork, 475 So. 2d 623, 624 (Ala.1985). `[E]very accused is entitled to have charges given, which would not be misleading, which correctly state the law of his case, and which are supported by any evidence, however[] weak, insufficient, or doubtful in credibility,' Ex parte Chavers, 361 So. 2d 1106, 1107 (Ala.1978), `even if the evidence supporting the charge is offered by the State.' Ex parte Myers, 699 So. 2d 1285, 1290-91 (Ala.1997), cert. denied, 522 U.S. 1054, 118 S. Ct. 706, 139 L. Ed. 2d 648 (1998). However, `[t]he court shall not charge the jury with respect to an included offense unless there is a rational basis for a verdict convicting the defendant of the included offense.' § 13A-1-9(b), Ala.Code 1975. `The basis of a charge on a lesser-included offense must be derived from the evidence presented at trial and cannot be based on speculation or conjecture.' Broadnax v. State, 825 So. 2d 134, 200 (Ala. Crim.App.2000), aff'd, 825 So. 2d 233 (Ala.2001), cert. denied, 536 U.S. 964, 122 S. Ct. 2675, 153 L. Ed. 2d 847 (2002). `"A court may properly refuse to charge on a lesser included offense only when (1) it is clear to the judicial mind that there is no evidence tending to bring the offense within the definition of the lesser offense, or (2) the requested charge would have a tendency to mislead or confuse the jury."' Williams v. State, 675 So. 2d 537, 540-41 (Ala.Crim.App. 1996), quoting Anderson v. State, 507 So. 2d 580, 582 (Ala.Crim.App.1987)."
Robbery in the first degree is defined in § 13A-8-41, Ala.Code 1975, as follows:
"(a) A person commits the crime of robbery in the first degree if he violates Section 13A-8-43 and he:
"(1) Is armed with a deadly weapon or dangerous instrument ...."
Robbery in the third degree is defined in § 13A-8-43, Ala.Code 1975, as follows:
"(a) A person commits the crime of robbery in the third degree if in the course of committing a theft he:
"(1) Uses force against the person of the owner or any person present with intent to overcome his physical resistance or physical power of resistance; or
"(2) Threatens the imminent use of force against the person of the owner or any person present with intent to compel acquiescence to the taking of or escaping with the property."
The definitions contained in § 13A-8-1, Ala.Code 1975, are applicable to §§ 13A-8-41 and 13A-8-43, the statutes defining the offenses of robbery in the first degree and robbery in the third degree, respectively. Those definitions were applied in Saffold v. State, supra, a case the State contends conflicts with the decision of the Court of Criminal Appeals here:
"Section 13A-8-1(13), Ala.Code 1975, which is applicable to § 13A-8-43, see § 13A-8-40(a), Ala.Code 1975, defines `threat' in part as `[a] menace, however communicated, to ... [c]ause physical harm to the person threatened or to any other person.' `Menace' is defined in the Compact Oxford English Dictionary 1062 (2d ed.1994) in part as `[a] declaration or indication of hostile intention, or of a probable evil or catastrophe'; Merriam-Webster's Collegiate Dictionary 774 (11th ed.2003) defines `menace' in *642 part as `a show of intention to inflict harm.'"
Saffold v. State, 951 So.2d at 780 (emphasis omitted).
In Welch v. State, supra, a case which the State also contends conflicts with the Court of Criminal Appeals' holding here, the Court of Criminal Appeals stated:
"`A person commits the crime of robbery in the third degree if in the course of committing a theft he: (1) Uses force against the person of the owner ... with intent to overcome his physical resistance or physical power of resistance; or (2) Threatens the imminent use of force against the person of the owner ... with intent to compel acquiescence to the taking of or escaping with the property.' Ala.Code 1975, § 13A-8-43(a). At the time of the taking, the victim had realized that the appellant did not have a gun, although he had previously told her that he did. We note, however, that `the State does not have to prove that the defendant actually had a gun in order to sustain a conviction of first degree robbery.' Kent v. State, 504 So. 2d 373, 376 (Ala.Cr.App.1987) (emphasis added); Miller v. State, 431 So. 2d 586, 592 (Ala. Cr.App.1983). In this case, the only reasonable conclusion is that `the words and actions of the appellant caused the victim to part unwillingly with [her] property because of fear of injury to [her] person by the appellant.' Watson v. State, 389 So. 2d 961, 965 (Ala.Cr.App. 1980), overruled on other grounds, Steeley v. City of Gadsden, 533 So. 2d 671 (Ala.Cr.App.1988). This evidence was clearly sufficient to support the conviction for third degree robbery."
630 So.2d at 146-47.
The per curiam opinion of the Court of Criminal Appeals states:
"In the instant case, the jury heard evidence that arguably supported the lesser-included offense of third-degree robbery. Warren testified at trial that he did not threaten Knox. He also testified that he was not armed with a boat anchor. This evidence went toward rebutting the presumption that Warren was armed and created a question of fact for the jury as to whether he should be convicted of first-degree robbery or the lesser-included offense of third-degree robbery."
35 So.3d at 636-37 (emphasis added).
In Ex parte Hannah, 527 So. 2d 675, 677 (Ala.1988), this Court stated:
"As [Chavers v. State, 361 So. 2d 1106 (Ala.1978),] holds, a court may properly refuse to charge on lesser included offenses when it is clear to the judicial mind `that there is no evidence tending to bring the offense within the definition of the lesser offense.'"
In Ex parte Hannah, this Court found that the defendant presented evidence at trial denying that a robbery of any kind had occurred and that in order for the jury to reach the conclusion that the lesser offense of robbery in the second degree had occurred, it would have had to presume that witnesses for both the petitioner and for the prosecution were lying. 527 So.2d at 677.
"It logically follows, we think, that where the evidence permits no reasonable conclusion other than that defendant is guilty of robbery in the first degree as expressly charged or not guilty of any offense whatever, charges as to robbery in the second or robbery in the third degree should not be given. The trial court was correct in limiting its oral charge accordingly."
Richburg v. State, 416 So. 2d 1079, 1082 (Ala.Crim.App.1982).
If Warren's entire testimony was to be believed, then he would not be guilty of *643 any kind of robbery because he neither had a weapon nor made a threat. The only way the jury could convict Warren of third-degree robbery was if the jury believed that both Knox and Warren had lied and then cobble together various elements of their contrasting testimony to reach a compromise verdict. In other words, a conviction for third-degree robbery would require the jury to believe the victim's testimony that Warren threatened her and disbelieve his testimony that he did not threaten her, and to disbelieve her testimony that he had an anchor and believe his testimony that he did not. This very closely resembles the scenario in Ex parte Hannah.
An instruction on third-degree robbery was not required under the facts here. The trial court did not err when it failed to instruct the jury on the lesser-included offense of robbery in the third degree.
III. Conclusion
We, therefore, reverse the judgment of the Court of Criminal Appeals on the ground that an instruction on third-degree robbery as a lesser offense included within the offense of first-degree robbery was not required, and we remand this case to that court for proceedings consistent this opinion.
REVERSED AND REMANDED.[*]
SEE, LYONS, WOODALL, STUART, SMITH, BOLIN, and MURDOCK, JJ., concur.
COBB, C.J., recuses herself.
NOTES
[*] Note from the reporter of decisions: On August 22, 2008, on remand from the Alabama Supreme Court, the Court of Criminal Appeals affirmed, without opinion. On September 12, 2008, that court denied rehearing, without opinion. On December 19, 2008, the Supreme Court denied certiorari review, without opinion (1071707). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917613/ | 749 N.W.2d 182 (2008)
2008 WI 45
Kevin SUMMERS and Amy Summers, Plaintiffs-Appellants,
v.
TOUCHPOINT HEALTH PLAN, INC., Defendant-Respondent-Petitioner.
No. 2005AP2643.
Supreme Court of Wisconsin.
Argued September 12, 2007.
Decided May 28, 2008.
*184 For the defendant-respondent-petitioner there were briefs by Robert J. Dreps, James D. Peterson, Bryan J. Cahill, and Godfrey & Kahn, S.C., Madison, and oral argument by Robert J. Dreps.
For the plaintiffs-appellants there was a brief by Stephen E. Meili, University of Wisconsin Law School, Madison; James W. Gardner and Lawton & Cates, S.C., Madison, and oral argument by Stephen E. Meili.
¶ 1 N. PATRICK CROOKS, J.
This is a review of a published decision of the court of appeals,[1] reversing in part *185 and remanding for further proceedings a judgment of the Circuit Court for Outagamie County, Judge Dee R. Dyer, presiding.
¶ 2 Petitioner, Touchpoint Health Plan, Inc. (Touchpoint), seeks review of a published decision of the court of appeals, which reversed the circuit court's grant of summary judgment in favor of Touchpoint. The court of appeals remanded the case to the circuit court with an instruction to order the reinstatement of benefits as of the date that the benefits were terminated. The circuit court had upheld Touchpoint in its decision to terminate the health insurance benefits of Parker Summers (Parker), the minor son of Kevin and Amy Summers (the Summers), in regard to Parker's treatments for anaplastic ependymoma. This case involves this court's authority under 29 U.S.C. § 1132(a)(1)(B)-(e)(1) (2000)[2] to review claims arising from an Employee Retirement Income Security Act (ERISA) governed plan for the recovery of benefits due under such a plan, the enforcement of rights under the terms of such a plan, or the clarification of rights to future benefits under such a plan. See Evans v. W.E.A. Ins. Trust, 122 Wis. 2d 1, 5, 361 N.W.2d 630 (1985). The case also involves 29 U.S.C. § 1133 and 29 C.F.R. § 2560-503-1 (2002)[3].
¶ 3 There are two principal issues upon review: 1) Whether the termination decision itself, which denied the resubmitted request for benefits under an ERISA-governed plan, as well as the termination letter, were both arbitrary and capricious when, as here, the termination letter[4] allegedly did not adequately set forth the reasons for the termination?; and 2) If so, what is the appropriate remedy?
¶ 4 We affirm the decision of the court of appeals. We hold that the termination decision itself was arbitrary and capricious because Touchpoint's interpretations of the plan were inconsistent. We also are satisfied that Touchpoint's decision was arbitrary and capricious because Touchpoint's termination of benefits decision was made despite the external review agency's finding that the requested treatment met the standard of care and was medically necessary, and despite the external review agency recommending approval for the treatment. We further hold that the second termination letter of December 12, 2002, was arbitrary and capricious, because it did not provide a sufficient and adequate explanation of the reasons for Touchpoint's termination of benefits. As a result, the Summers were not provided with the opportunity for a full and fair review of the termination, which is required by 29 U.S.C. § 1133 and 29 C.F.R. § 2560-503-1.
¶ 5 Lastly, we hold that, given the inconsistent interpretations of the plan by Touchpoint, as well as the ambiguous policy provisions concerning participation in a clinical trial, the appropriate remedy for the termination of benefits in this case is *186 the reinstatement of benefits forward from the date that the benefits were terminated.
I
¶ 6 Kevin Summers was employed by and received health benefits for his family through Kimberly Clark Corporation (Kimberly Clark). Kimberly Clark had contracted with Touchpoint, a health care maintenance organization, to administer its health benefits plan. This case involves the question of whether benefits for high-dose chemotherapy with stem-cell rescue were due under the provisions of that health benefits plan.
¶ 7 In October 2002 the Summers' son, Parker, was diagnosed as having a cancerous brain tumor known as an anaplastic ependymoma, which is a rare form of childhood cancer. Parker's doctor referred him to the University of Wisconsin Hospital for surgery to remove his tumor, which Touchpoint approved. Touchpoint paid for the surgery and follow-up care.
¶ 8 After the surgery, Parker's surgeon referred him to a pediatric oncologist, Dr. Diane Puccetti (Dr. Puccetti), for ongoing cancer treatment. Such follow-up treatment was necessary after surgery to prevent the progression of his disease and, therefore, to increase his chances of surviving. Dr. Puccetti weighed three treatment options for Parker: observation, chemotherapy with radiation, and high-dose chemotherapy with stem-cell rescue. After weighing all three options, Dr. Puccetti decided that high-dose chemotherapy with stem-cell rescue would be Parker's best option, because it had a higher cure rate than conventional chemotherapy. As a result, Dr. Puccetti sought to have Parker enrolled in a clinical trial that included this specialized chemotherapy, which a doctor at the New York University Medical School was conducting.
¶ 9 The Summers sought coverage from Touchpoint for the ongoing cancer treatment that was recommended. Touchpoint terminated coverage for such cancer treatment, because of the exclusion of experimental and investigational procedures in Kimberly Clark's plan with Touchpoint. Specifically, the plan excluded any "service, supply, drug, device, treatment, or procedure" that Touchpoint's medical director determined was "the subject of an on-going Phase I or II clinical trial" or was "furnished in connection with medical or other research to determine its maximum tolerated dose, its toxicity, its safety, or its efficacy. . . ."
¶ 10 After the recommended cancer treatment was terminated,[5] the Summers took Parker to see Dr. Kelly Maloney at the Children's Hospital of Wisconsin. Dr. Maloney recommended chemotherapy and radiation as a course of treatment, which the Summers rejected because of the risks to a young child associated with radiation.
¶ 11 On November 20, 2002, the Summers requested that Touchpoint submit its termination of benefits to an independent review organization for an expedited review under the terms of Kimberly Clark's plan. On November 25, 2002, while determining that the recommended cancer treatment was within the standard of care and medically necessary, the independent review organization upheld Touchpoint's termination of benefits because it concluded *187 that, "[b]ased on the policy language submitted, the proposed therapy meets the criteria of experimental."
¶ 12 Touchpoint's external review agency, despite upholding Touchpoint's termination of benefits, stated, "Although the proposed treatment would fall under the policy language as experimental/investigational, I would recommend approving the proposed therapy as it would be one of the standard approaches for three-year-old children with this disorder. . . . There is no alternative with superior or proven results and is therefore, medically necessary." Furthermore, the review agency stated, "All patients with this disorder are standardly enrolled in clinical trials and all mature trials are phase II. . . . [T]he standard of care for patients with this disorder is to enroll patients into the best phase II trials available that are building on the success of previous phase II trials. That is the case for this patient."
¶ 13 After learning about the results of the independent review, Dr. Puccetti suggested removing Parker from the clinical trial, but giving him the same cancer treatment. Dr. Puccetti submitted another request for the treatment's coverage that noted the treatment would now not be a part of any clinical trial. Once again, Touchpoint terminated coverage, and it issued a letter on December 12, 2002, that noted the decision. It is that letter which has become a focal point of this case.
¶ 14 Notwithstanding Touchpoint's termination of coverage, Dr. Puccetti administered the treatment to Parker. The Summers then sued Touchpoint in Outagamie County Circuit Court to attempt to gain coverage for the treatment. The circuit court granted Touchpoint's summary judgment motion, after determining that the plan unambiguously excluded coverage for any treatments that were the subject of Phase II clinical trials, and that Touchpoint's termination was reasonable, because it was not in dispute that the treatment administered was the subject of such a Phase II clinical trial. The court of appeals reversed the circuit court's decision. It held that the December 12, 2002 termination letter was arbitrary and capricious, thus violating 29 U.S.C. § 1133, and the applicable regulations promulgated under that statute's authority. As a result, the court of appeals remanded the case back to the circuit court with instructions to reinstate benefits retroactively. Touchpoint petitioned this court for a review of that decision.
II
¶ 15 We begin with a discussion of our standards of review. We review a circuit court's grant or denial of summary judgment independently of either the circuit court or the court of appeals, applying the same methodology, but benefiting from their analyses. AKG Real Estate, LLC v. Kosterman, 2006 WI 106, ¶ 14, 296 Wis. 2d 1, 717 N.W.2d 835. Summary judgment is appropriate if there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law. Wis. Stat. § 802.08(2). Summary judgment materials, including pleadings, depositions, answers to interrogatories, and admissions on file are viewed in the light most favorable to the nonmoving party. Rainbow Country Rentals v. Ameritech Publ'g, 2005 WI 153, ¶ 13, 286 Wis. 2d 170, 706 N.W.2d 95. In this case, the material facts are not in dispute, which leaves only questions of law that we review de novo. 1325 N. Van Buren, LLC v. T-3 Group, Ltd., 2006 WI 94, ¶ 22, 293 Wis. 2d 410, 716 N.W.2d 822.
¶ 16 The motion for summary judgment in this case also presents a question of law on how we review the termination of benefits under an ERISA-governed *188 plan. In cases involving the termination of benefits under an ERISA-governed plan, courts apply one of two standards of review. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989). The default standard of review for the termination of benefits is de novo. Id. Under the de novo standard, no deference is given to the plan administrator's or fiduciary's termination of benefits. Id. at 113-15, 109 S. Ct. 948. However, if the plan reserves discretion to the plan administrator or fiduciary, the termination of benefits is reviewed under a discretionary standard. Id. at 115, 109 S. Ct. 948. Under the discretionary standard, the termination of benefits will not be reversed unless it was arbitrary and capricious. Id. at 113-15, 109 S. Ct. 948. Courts review the policy's language on a case by case basis to determine which standard of review applies to the termination of benefits in the particular case. Id.
¶ 17 The language of the policy in question here supports the application of the discretionary standard. A benefit plan may confer such discretion even in the absence of any express language to that effect. Vander Pas v. UNUM Life Ins. Co., 7 F. Supp. 2d 1011, 1014 (E.D.Wis. 1998), citing Sisters of the Third Order of St. Francis v. SwedishAmerican Group Health Benefit Trust, 901 F.2d 1369, 1371 (7th Cir.1990). In this case, however, Touchpoint's plan expressly conferred such discretion. The policy states, "Touchpoint Health Plan has the power and authority to administer, interpret and apply this Policy. Touchpoint Health Plan will decide all questions arising in connection with the Policy, and may issue any necessary rule and regulations for the purpose of administering the Policy." The policy grants Touchpoint's medical director the discretion to terminate coverage if treatments are experimental or investigational. The plan also gives Touchpoint's medical director the authority and discretion to interpret the plan's language and its coverage. Because the plan conferred discretion, the appropriate issue in this case is whether Touchpoint's termination of benefits was arbitrary and capricious. Firestone Tire & Rubber Co., 489 U.S. at 113-15, 109 S. Ct. 948; see also Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 688 (7th Cir.1992) (holding the administrator had discretion, and, therefore, the discretionary standard of review was the appropriate one to utilize, based on nearly identical language to Touchpoint's plan, when the Grainger plan stated the administrator "`shall determine all questions arising in the administration, interpretation and operation of the Plan'" (citation omitted)). However, review under even "the deferential arbitrary and capricious standard is not a rubber stamp and deference need not be abject." Hackett v. Xerox Corp. Long-Term Disability Income Plan, 315 F.3d 771, 774 (7th Cir.2003) (citation omitted). As a result, even under this deferential review, the United States Court of Appeals for the Seventh Circuit stated that "we will not uphold a termination when there is an absence of reasoning in the record to support it." Id. at 774-75.
III
¶ 18 Before addressing the termination decision itself, we examine whether the failure to extend benefits under an ERISA-governed plan[6] was arbitrary and capricious here, where the termination letter allegedly does not adequately set forth the reasons for the termination. At issue here is the second termination letter of December 12, 2002. That letter, in pertinent *189 part, stated: "The request was reviewed and it was determined this is an exclusion of coverage as stated in your Certificate of Coverage. . . . For additional information, refer to your Certificate of Coverage under RESTRICTIONS, LIMITATIONS, AND EXCLUSIONS FOR COVERED SERVICES."
¶ 19 On review, Touchpoint claims that its second termination letter substantially complied with 29 U.S.C. § 1133. Touchpoint argues that the communication was sufficient to inform the Summers of the basis for the termination of coverage. It also argues that, evaluating all the communications with the Summers, there was enough for a meaningful review by them.
¶ 20 The Summers argue that the second termination letter was arbitrary and capricious. They claim that letter failed to provide them with a clear and precise understanding of the termination decision, in violation of ERISA's requirements. As a result, they assert that the letter was arbitrary and capricious, because it did not provide them with an adequate reason for the termination of benefits. The Summers argue that, because the second termination letter did not adequately state why coverage was terminated, and merely described the procedures that the Summers could use to challenge the termination, the Summers were not provided with the opportunity for a full and fair review of the termination, which is required by 29 U.S.C. § 1133 and 29 C.F.R. § 2560-503-1.
¶ 21 We are satisfied that the Summers are correct that the second termination letter of December 12, 2002, was arbitrary and capricious, because it did not provide a sufficient explanation of the reasons for Touchpoint's termination of benefits. As a result, the Summers were not provided with the opportunity for a full and fair review of the termination, which is required by 29 U.S.C. § 1133 and 29 C.F.R. § 2560-503-1. The second letter violates the relevant statutes and regulations.
¶ 22 For a letter communicating an adverse benefits decision to satisfy ERISA's requirements, so that it is not arbitrary and capricious, it must provide adequate reasoning to explain the decision, so the beneficiary will have a "clear and precise understanding" of the decision. Hackett, 315 F.3d at 775. Bare conclusions are not a sufficient rationale, and "the regulations require that the denial letter itself contain specific reasons." Halpin, 962 F.2d at 693.
¶ 23 Compliance with 29 U.S.C. § 1133 requires two elements. First, every ERISA-governed employee benefits plan must "provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant. . . ." 29 U.S.C. § 1133(1) (emphasis added). Second, every ERISA-governed employee benefits plan also must "afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim." 29 U.S.C. § 1133(2).
¶ 24 Furthermore, the relevant Code of Federal Regulations section requires that a notification of an adverse benefits determination must contain the "specific reason or reasons for the adverse determination;" a "[r]eference to the specific plan provisions on which the determination is based;" a "description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under section 502(a) of the Act following an adverse benefit determination on review;" and, for a group health *190 plan with an experimental treatment exclusion or limit upon which an adverse benefits determination was based, "either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of charge upon request." 29 C.F.R. § 2560-503-1(g)(1) (emphasis added). A termination letter lacking the minimal requirements codified in the statutes and regulations is arbitrary and capricious. Dade v. Sherwin-Williams Co., 128 F.3d 1135, 1141 (7th Cir.1997); see also Vander Pas, 7 F.Supp.2d at 1018.
¶ 25 The second termination letter was deficient in numerous regards. The letter did not meet the requirement of including a specific reason for the termination, as required by 29 U.S.C. § 1133(1) and 29 C.F.R. § 2560-503-1(g)(1), but merely made reference to an exclusion of coverage. It did not include the required "[r]eference to the specific plan provisions on which the determination [was] based[,]" because it only referenced a broad, nonspecific segment of the policy (the Certificate of Coverage). 29 C.F.R. § 2560-503-1(g)(1)(ii). Also, because the adverse benefit determination apparently was based on an experimental treatment exclusion, the second letter was deficient given that it did not contain, as required, "either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of charge upon request." 29 C.F.R. § 2560-503-1(g)(1)(v)(B). Applying the relevant statutes and regulations, Touchpoint's second termination letter was arbitrary and capricious.
¶ 26 Case law also supports this conclusion. The Seventh Circuit recently dealt with a case based on similar factual underpinnings in the context of an ERISA-governed employer-sponsored disability benefits plan. Schneider v. Sentry Group Long Term Disability Plan, 422 F.3d 621 (7th Cir.2005). Sentry terminated Schneider's long term disability benefits using a letter that merely referenced, but did not provide any details from, an independent medical exam report. The letter merely stated that the report held that Schneider had recovered and could return to work. Id. at 624. The letter stated, "As a result of this information, no further benefits are due." Id. The court noted that ERISA required that such notification to the claimant must provide the specific reasons behind the termination of benefits. Id. at 627. While acknowledging that previous case law had held that substantial compliance with the statutes and regulations was sufficient, the letter "was indefensible as a matter of statute, regulation and case law." Id. at 628 (citing Halpin, 962 F.2d at 690). The court noted that the letter failed to set forth the specific reasons why benefits were terminated and that it "did not identify the specific plan provision on which the denial was based. . . ." Schneider, 422 F.3d at 628. As a result, the court held that Schneider did not have "`a sufficiently clear understanding of the administrator's position to permit effective review.'" Id. (citing Halpin, 962 F.2d at 690). The court determined Schneider was entitled to summary judgment on her claim that the letter violated ERISA and ordered the reinstatement of Schneider's benefits as of the date that the benefits were terminated. Schneider, 422 F.3d at 629-30.
¶ 27 In another case, a letter sent to a claimant informing him of the termination of his long term disability benefits was arbitrary and capricious when its reasoning only stated, "`Continued Disability not clinically supported.'" Hackett, 315 F.3d at *191 773. When the claimant appealed, the appeal's termination only contained the exact same explanation. Id. The court held that the "absence of reasoning in the record to support [the decision]" did not provide the needed grounds to uphold the plan's decision to terminate benefits, even under the deferential arbitrary and capricious standard of review. Id. at 774-75. The reasons for the termination must be clear and specific. Id. at 774. As in this case before us, the specificity of the letter was the main issue, and that letter was inadequate, because it lacked the details behind the termination and contained only statements of the termination decision. The court concluded that the termination of Hackett's benefits was inappropriate, because benefits cannot be terminated as "the result of arbitrary and capricious procedures. . . ." Id. at 776.
¶ 28 In another case, an employer violated 29 U.S.C. § 1133 by failing to give a claimant adequate notice of the reasons for the termination of his benefits using a letter similar to the one in this case. Schleibaum v. Kmart Corp., 153 F.3d 496, 497 (7th Cir.1998). Kmart's benefit administrator had informed Schleibaum that, after reviewing all the medical evidence, the administrator had found that Schleibaum was not permanently and totally disabled. Id. at 498. As a result, Kmart informed Schleibaum that the company would not continue to pay for his life insurance policy's premiums. Id. Kmart's "conclusory letter did not explain any specific reason for the finding that Mr. Schleibaum was not disabled. . . ." Id.
¶ 29 Touchpoint's attorney conceded at oral argument that the December 12, 2002 letter did not literally comply with ERISA's requirements. Indeed, as he admitted, one need only compare the first termination letter with the second termination letter to see that the second letter lacked the required details about the reasons why Touchpoint denied the Summers' second claim. However, he argued that the letters must be read together. Where this argument fails is on the fact that the Summers did not merely resubmit their first request. The Summers requested coverage using a different rationale. This change in the claim's rationale is significant. Given that the Summers submitted the second claim using a different rationale, reading the two termination letters together is not sufficient to meet the required specificity. The second termination letter must stand on its own.[7]
¶ 30 The Summers based their changed rationale on their interpretation of the plan's experimental exclusion as not excluding coverage for a treatment received by a patient who is not enrolled in a Phase II clinical trial, regardless of whether such treatment is "subject to" a Phase II clinical trial. The exclusion in the Touchpoint plan for treatments that are "the subject of an on-going Phase I or II clinical trial" is ambiguous, because of the uncertainty over what triggers the exclusion for an individual who is not in a Phase I or II clinical trial, but who is receiving a treatment that is the subject of such a trial. For example, it is unclear whether it is the treatment itself that is the subject of a Phase II trial, even if the claimant is not participating in the Phase II trial, or *192 whether it is the claimant's receiving the treatment as a participant in the Phase II trial that triggers the exclusion. A term in an ERISA-governed benefits plan "is ambiguous if there is `genuine (meaning, substantial) uncertainty, not resolvable by other means' in interpreting the term." Casey v. Uddeholm Corp., 32 F.3d 1094, 1096 (7th Cir.1994), citing Harnischfeger Corp. v. Harbor Ins. Co., 927 F.2d 974, 976 (7th Cir.1991). Touchpoint's experimental exclusion certainly seems to be genuinely uncertain and, as a result, ambiguous.
¶ 31 We agree with the federal courts that have held that "`ambiguous terms in an insurance contract will be construed in favor of the insured.'" Pitcher v. Principal Mut. Life Ins. Co., 93 F.3d 407, 411 (7th Cir.1996) (citations omitted). Here, it appears appropriate to resolve the ambiguous experimental exclusion against Touchpoint, its drafter, and in favor of the Summers. Given that its experimental exclusion was ambiguous, Touchpoint's failure to address the Summers' interpretation of the exclusion made the second termination letter arbitrary and capricious.[8]
¶ 32 When the Summers submitted their second application for the ongoing cancer treatment that was recommended, they proceeded under the belief that the reason Touchpoint refused their first request for such treatment was because Parker was participating in a Phase II clinical trial. Touchpoint's second termination letter does not acknowledge the Summers' changed reasoning that, because Parker was no longer participating in the clinical trial, Parker's treatments should be covered as part of his continuing course of treatment. Instead, Touchpoint simply repeated its decision to terminate coverage without giving any specific details for its decision. By only repeating its termination conclusion, and by failing to address or to respond to the Summers' changed rationale for coverage in its second termination letter, Touchpoint failed to communicate fully the specific reasons for its termination. Touchpoint erred in not addressing the Summers' policy interpretation, and should have provided the statutorily-required detailed rationale for its termination on the new grounds, regardless of the detail that the first letter had contained. The second letter simply does not provide the Summers with the required clear and precise understanding of why their second coverage request was denied, in light of their reasonable assumption about coverage for the treatment. Consequently, Touchpoint's second termination letter was arbitrary and capricious.
¶ 33 We also find Touchpoint's decision in terminating benefits to be arbitrary and capricious. At various relevant times, Touchpoint was inconsistent in its position on what it would cover under the terms of the plan. This court has held that the absence of evidence that an administrator has consistently maintained an *193 interpretation of the terms of its own plan "suggests arbitrary action on the part of the trustees[,]" and that the "Trust's interpretation of the terms of its plan . . . [was] arbitrary and capricious." Evans, 122 Wis.2d at 19, 361 N.W.2d 630. Indeed, we held that "the burden is [on] the trustees to produce [such evidence]." Id.
¶ 34 Touchpoint has not consistently maintained its interpretation of its own plan, which suggests arbitrary action. In this case, the record reflects that Touchpoint's attorney, speaking for the plan's administrator in an attempt to justify the administrator's actions, conceded in the circuit court that "[t]here is also no dispute . . . that [the Summers] were told by Touchpoint that observation would be covered and radiation/chemotherapy treatment would be covered post surgery." Touchpoint now claims in its briefs to this court that this statement was merely a "simple mistake" by Touchpoint's attorney. In his deposition, Dr. Ronald Harms, Touchpoint's Medical Director stated that Touchpoint would have covered radiation plus chemotherapy, if requested, but later in his deposition, he stated that Touchpoint "would have covered anything that was not in a clinical trial," even though it appears undisputed that the radiation treatment protocol was part of a Phase II clinical trial.
¶ 35 As a result, Touchpoint maintained an arbitrary and capricious reading of its own experimental exclusion[9] by apparently agreeing to cover some treatments that were subject to Phase II clinical trials, while not agreeing to cover other treatments that were subject to such clinical trials. Touchpoint's varying arguments on the treatments in question at various stages of this proceeding demonstrate the arbitrary and capricious nature of its interpretation of the experimental exclusion.
¶ 36 Another reason why we are satisfied that Touchpoint's decision was arbitrary and capricious remains the fact that Touchpoint's external review agency, while upholding Touchpoint's termination of benefits decision, actually recommended the approval of the requested treatment finding that the treatment was the standard of care and also was medically necessary. It is important to note, again, that Touchpoint's external review agency stated the proposed therapy (high-dose chemotherapy with stem-cell rescue) "would be one of the standard approaches for three-year-old children with this disorder. . . . There is no alternative with superior or proven results and is therefore, medically necessary. . . . [T]he standard of care for patients with this disorder is to enroll patients into the best phase II trials available that are building on the success of previous phase II trials." The review agency concluded as follows: "This is the best available therapy and there is no standard therapy that can be substituted."
¶ 37 For example, when a health benefits plan refused to pay benefits for gastric bypass surgery as being "not medically necessary," this court upheld the decision of the circuit court reinstating coverage, because the plan's decision was arbitrary and capricious. Evans, 122 Wis.2d at 4, 361 N.W.2d 630. This court found that the decision was arbitrary and capricious, because it was made based on internal plan administrative procedures for claims personnel, which "were not incorporated into the plan as benefit plan amendments." Id. at 7, 361 N.W.2d 630. These guidelines *194 "constituted an unauthorized alteration of the plan." Id. at 11, 361 N.W.2d 630. The plan administrators improperly had evaluated the claims "under the guideline standards that were not a part of the contracted-for plan. . . ." Id. at 12, 361 N.W.2d 630. Such an approach is analytically similar to the unwritten and changing interpretations of its own policy's experimental exclusion that Touchpoint exhibited in this case.
¶ 38 Furthermore, in Evans, the claims personnel were held to have acted in an arbitrary and capricious manner because, despite the plan's continued position that the treatment was not medically necessary for obesity alone without secondary illnesses as a result of the obesity, the plan's doctor had "recognized that obesity was an illness and that the surgery might well have been appropriate for the treatment of that illness." Id. at 10, 361 N.W.2d 630. Similarly, here, Touchpoint terminated Parker's coverage despite its admission that the requested treatment was "the standard of care" for children with anaplastic ependymoma.
¶ 39 Finally, as in the case before us, this court in Evans found the refusal to pay benefits to be arbitrary and capricious because the trustees of the plan "failed to present evidence that their interpretation of the terms of the plan was consistently maintained." Id. at 18, 361 N.W.2d 630. As we noted, the absence of such evidence "suggests arbitrary action on the part of the trustees." Id. at 19, 361 N.W.2d 630 (footnote omitted). In a similar manner, Touchpoint failed to present evidence of a consistent interpretation of its experimental exclusion. Accordingly, while we hold that the termination decision was embodied in an arbitrary and capricious termination letter, we also hold that the termination decision itself was arbitrary and capricious. Id. at 16-19, 361 N.W.2d 630.
¶ 40 The Summers' attorney claimed at oral argument that the Touchpoint plan was an illusory contract, and Touchpoint's attorney argued in response that the Summers' illusory contract argument was preempted by ERISA. We need not address this contention because we have decided the case on other grounds. However, we note that it appears that a strong argument could be made favoring preemption of the Summers' illusory contract claim under ERISA. See generally Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S. Ct. 478, 112 L. Ed. 2d 474 (1990).
IV
¶ 41 As a result of our holdings that the second termination letter, as well as the termination decision itself, were arbitrary and capricious, we now address the issue of what the appropriate remedy is for those arbitrary and capricious termination actions. We note that our discussion of the ambiguous policy provisions concerning participation in a clinical trial relates to the remedy issue as well.
¶ 42 On review, Touchpoint claims that ERISA prohibits an award of extracontractual benefits, so a court may not order as a remedy for arbitrary and capricious termination actions any coverage for an experimental medical treatment that is unambiguously excluded under the plan. Touchpoint further argues that remedies for improper claim processing are limited to those remedies in 29 U.S.C. § 1132(a).[10]*195 Touchpoint contends that the court of appeals erred by awarding a remedy that was not due under the plan, by giving substantive relief for a procedural deficiency, and by considering this a termination of benefits case, rather than an initial denial of benefits case.
¶ 43 On review, the Summers claim that, because Touchpoint terminated ongoing and previously afforded benefits, and because Touchpoint acted in an arbitrary and capricious fashion in failing to address the Summers' reasonable interpretation of the plan, they are entitled to the reinstatement of benefits forward from the date that the benefits were terminated. The Summers argue that this is a termination of benefits case, not an initial denial of benefits case, because the treatments in question began with the removal of the tumor and continued with some follow-up care.[11] They assert that the mere fact that Parker had reached a point where there was more than one possible treatment does not mean that medically necessary follow-up care was not an ongoing course of treatment. The Summers state that the surgery was premised on the idea that, once the tumor was removed, Parker would receive ongoing treatment by a specialist.
¶ 44 We hold that the appropriate remedy for Touchpoint's arbitrary and capricious termination actions is the reinstatement of benefits forward from the date that the benefits were terminated. We hold that this is a termination of benefits case, because surgery had occurred and some follow-up care already had commenced, which had been paid for by Touchpoint. We are, therefore, satisfied that the appropriate remedy is a return to the status quo prior to the arbitrary and capricious termination actions. In this case, that remedy encompasses Touchpoint paying Parker's health care providers for the services they have given to Parker forward from the date that the benefits were terminated.[12]
¶ 45 In cases of arbitrary and capricious denials of coverage, there are two remedies. See Hackett, 315 F.3d at 774-75. When the beneficiary has not yet undergone the treatments, the appropriate remedy is for the beneficiary to be provided with a benefits application process that is not arbitrary and capricious, which may or may not result in coverage for the treatments. Id. at 776. When the beneficiary has undergone the treatments and then coverage is terminated, the appropriate *196 remedy is for the beneficiary to receive the "retroactive reinstatement of benefits. . . ." Id. at 777.
¶ 46 In Hackett, a claimant was receiving long term disability benefits, because his serious psychiatric condition prevented him from performing any type of work. Id. at 773. After an employer-paid doctor examined Hackett, and after that doctor reviewed the previous findings of the other doctors, the employer-paid doctor found that "Hackett suffered from a personality disorder but found [that] Hackett [was] able to return to work without restriction." Id. at 773. As a result of this employer-paid doctor's opinion, the employer terminated Hackett's long term disability benefits. Id. The reason the employer gave for the termination of Hackett's benefits merely stated, "Continued Disability not clinically supported." Id. When Hackett appealed the decision to terminate his benefits, the plan's reviewer gave Hackett only the exact same response. Id. Hackett sued, and the United States Court of Appeals for the Seventh Circuit retroactively reinstated Hackett's benefits, even under the deferential arbitrary and capricious review standard, because there was an absence of appropriate reasoning in the record to support the termination of Hackett's benefits. Id. at 774-75. As in the case before us, the court held that the reasons for the termination of benefits were not appropriately articulated, so as to allow for a meaningful review. Id. at 775. The court held the termination was arbitrary and capricious as a result, and that the appropriate remedy for such an arbitrary and capricious termination of ongoing benefits was the "retroactive reinstatement" of Hackett's benefits. Id. at 777. As the court stated, "Remedying the defective procedures requires a reinstatement of benefits." Id. at 776. The court went on to note that plans may not terminate benefits as a result of arbitrary and capricious procedures. Id.
¶ 47 We agree with the remedy that this court provided in a very similar case. In Evans, we held that the appropriate remedy for the arbitrary and capricious denial of benefits under a health benefits plan was the restoration of payment to the health care providers involved. Evans, 122 Wis.2d at 4, 361 N.W.2d 630.
¶ 48 In a case similar to the case before us, where the plan administrator failed to communicate specific reasons for its termination of continuing benefits to the claimant, thus depriving him of the opportunity for a full and fair review of his benefits termination, the United States Court of Appeals for the Seventh Circuit upheld the district court's order of reinstatement of the claimant's benefits. Halpin, 962 F.2d at 698. The Seventh Circuit held that, in the absence of an appropriate termination letter and review process, the plan administrator "cannot be permitted to terminate benefits previously awarded." Id.
¶ 49 As noted previously, we hold that this is a termination of benefits case because surgery had occurred and some follow-up care had commenced, which had been paid for by Touchpoint. Benefits were terminated when the Summers proceeded with Dr. Puccetti's recommended treatment for Parker. Here, the Summers requested coverage for a treatment that is part of the standard treatment protocol for anaplastic ependymoma and that was determined upon independent review to be medically necessary. The treatment protocol begins with the tumor's removal and continues with follow-up treatment, whether observation, and/or radiation or chemotherapy. Accordingly, Parker's chemotherapy with stem-cell rescue was a continuation of his treatment for anaplastic ependymoma. We agree with the Summers that the chemotherapy with stem-cell *197 transplant was an ongoing treatment that was medically necessary to prevent the progression of Parker's disease and to improve his chances of survival. Given the ambiguous policy provisions concerning participation in a clinical trial, it was a reasonable expectation of the insureds, the Summers, that the follow-up treatments to the surgery were a continuing course of treatment that would be covered. As a result, because Touchpoint arbitrarily and capriciously terminated ongoing benefits, the appropriate remedy is the reinstatement of benefits forward from the date that the benefits were terminated.
¶ 50 In Hackett, where the termination letter was held to be arbitrary and capricious because it contained no rationale for the decision and only stated that the claimant's continued disability was "not clinically supported," the court held that the appropriate remedy for the termination of continuing benefits, following an arbitrary and capricious letter, was the retroactive reinstatement of benefits. Hackett, 315 F.3d at 776-77.[13] However, as the Hackett court noted, "nothing in this opinion should be read as expressing an opinion that . . . benefits should not [or could not] be terminated in the future." Id. at 777.
¶ 51 We hold that the appropriate remedy here is to remand this case to the circuit court with an instruction for that court to order the reinstatement of Parker's benefits forward from the date that the benefits were terminated.
V
¶ 52 We affirm the decision of the court of appeals. We hold that the termination decision itself was arbitrary and capricious because Touchpoint's interpretations of the plan were inconsistent. We also are satisfied that Touchpoint's decision was arbitrary and capricious because Touchpoint's termination of benefits decision was made despite the external review agency's finding that the requested treatment met the standard of care and was medically necessary, and despite the external review agency recommending approval for the treatment. We further hold that the second termination letter of December 12, 2002, was arbitrary and capricious, because it did not provide a sufficient and adequate explanation of the reasons for Touchpoint's termination of benefits. As a result, the Summers were not provided with the opportunity for a full and fair review of the termination, which is required by 29 U.S.C. § 1133 and 29 C.F.R. § 2560-503-1.
¶ 53 Lastly, we hold that, given the inconsistent interpretations of the plan by Touchpoint, as well as the ambiguous policy provisions concerning participation in a clinical trial, the appropriate remedy for the termination of benefits in this case is the reinstatement of benefits forward from the date that the benefits were terminated.
¶ 54 The decision of the court of appeals is affirmed, and the case is remanded to the circuit court for proceedings consistent with our decision.
Affirmed and remanded to the circuit court.
¶ 55 SHIRLEY S. ABRAHAMSON, C.J., and DAVID T. PROSSER, J., did not participate.
*198 ¶ 56 PATIENCE DRAKE ROGGENSACK, J. (dissenting).
Decisions of the United States Supreme Court on questions of federal law bind this court. State v. Ward, 2000 WI 3, ¶ 39, 231 Wis. 2d 723, 604 N.W.2d 517 (concluding that the decisions of the United States Supreme Court are controlling precedent on questions of federal law). However, the majority opinion contravenes Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989) and Egelhoff v. Egelhoff, 532 U.S. 141, 121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001), binding precedent of the United States Supreme Court, in its interpretation and application of the Employment Retirement Income Security Act (ERISA)[1] to the healthcare policy at issue here. Because the majority opinion disregards binding precedent, I respectfully dissent.
¶ 57 The majority opinion does not adhere to federal law in at least three respects. First, Touchpoint Health Plan, Inc. (Touchpoint) has the power to interpret the terms of the policy and to decide whether a treatment is a covered service under the policy. Notwithstanding the express allocation of power to the plan administrator by the policy, the majority opinion construes the healthcare policy itself.[2] Second, although the majority opinion recognizes that it may not reverse the plan administrator's decision unless it is arbitrary and capricious, it disregards controlling federal precedent in regard to when a decision is arbitrary and capricious.[3] Third, the majority opinion concludes that the second notice of denial of Kevin and Amy Summers' (the Summers) claim was insufficient,[4] and then it characterizes the decision of the plan administrator as a "termination" of benefits, rather than acknowledging that benefits were "denied."[5] It does so in order to have insurance coverage as a remedy for its conclusion that Touchpoint provided insufficient notice to the Summers.[6]
¶ 58 I conclude that, because Touchpoint has the power to interpret and apply the policy, we are required to uphold the plan administrator's interpretation and application of the policy if it is reasonable. Firestone, 489 U.S. at 111, 109 S. Ct. 948. Touchpoint decided that the treatment for which benefits were sought is defined as an "experimental" treatment in the policy and that "experimental" treatments are excluded from coverage under the policy. This is a reasonable interpretation of the policy; and therefore, it is not arbitrary and capricious. I also conclude that the notice of denial of claim substantially complied with the notice requirements of 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503-1(g). Accordingly, I would reverse the court of appeals and remand the case to the circuit court to dismiss the Summers' complaint on the merits.
I. BACKGROUND
¶ 59 This case arises in the course of the Summers' request for payment of the expenses incurred for certain treatment their son, Parker, received. Parker suffered from an anaplastic ependymoma, a malignant brain tumor. The tumor was surgically removed, with more than $80,000 in healthcare benefits being paid for Parker's care. Subsequent to the surgery, the Summers chose to have Parker receive *199 high-dose chemotherapy with stem-cell rescue. The Summers' claim for payment for this specialized chemotherapy is before this court on review.
¶ 60 The following statements, which are dispositive of the questions presented herein, are not disputed: (1) The Summers' healthcare policy is governed by federal ERISA law. (2) Under the healthcare policy at issue, "prior authorization" is required for healthcare services before they are rendered, unless they are emergency services. (3) "Prior authorization" is defined in the policy as "approval granted by Touchpoint Health Plan's Medical Director for anticipated services prior to those services being rendered." (4) Subsequent to Parker's surgery, the Summers sought "prior authorization" from Touchpoint for the treatment of high-dose chemotherapy with stem-cell rescue. (5) The policy grants Touchpoint the "power and authority" to interpret it. (6) Touchpoint's Medical Director reviewed the Summers' "prior authorization" request for Parker's treatment, and on November 19, 2002, he denied the request because he concluded that the treatment was "experimental," as "experimental" is defined in the policy. (7) Touchpoint's Medical Director explained that the treatment was "experimental" because the treatment was the subject of an ongoing Phase I or II clinical trial. (8) He also explained that under the policy, "experimental" treatments are not covered services. (9) He related that the Summers had a right to appeal his decision, that assistance in proceeding on an appeal was available and that the Summers had a right to an "external review" of his decision. (10) The Summers chose to pursue an external review, which was provided by the Medical Review Institute of America, Inc. (11) The Medical Review Institute decided "to uphold the prior adverse decisions." That external review decision explained:
Based on the policy language submitted, the proposed therapy meets the criteria of experimental. Therefore, the previous denials would be upheld.
(12) After the denial of benefits was upheld by the Medical Review Institute and after Parker received the treatment, the Summers re-submitted their request for coverage for the same specialized chemotherapy treatment for Parker. (13) On December 12, 2002, the Touchpoint Health Plan Medical Director again denied coverage, stating that the specialized chemotherapy treatment was designated under the insurance policy as "an exclusion of coverage" because that treatment was defined as "experimental" under the policy due to its being part of an ongoing Phase II clinical trial.
¶ 61 As all parties agree, the policy grants Touchpoint "the power and authority to administer, interpret and apply" it. It also grants Touchpoint's Medical Director the specific power to determine whether a particular treatment for which coverage is sought is "experimental." The Policy states in relevant part:
EXPERIMENTAL/INVESTIGATIONAL means any service, supply, drug, device, treatment, or procedure that Touchpoint Health Plan's Medical Director determines:
. . . .
3. Is the subject of an on-going Phase I or II clinical trial, or furnished in connection with medical or other research to determine its maximum tolerated dose, its toxicity, its safety, or its efficacy[.]
There is no dispute by the Summers, or by the majority opinion, that the treatment at issue is the subject of an ongoing Phase I or II clinical trial.
¶ 62 The policy also defines "exclusion":
*200 EXCLUSION means any service or supply listed in the section of this Certificate entitled Restrictions, Limitations and Exclusions. Such services or supplies listed as Exclusions are not covered by Touchpoint Health Plan, regardless of their Medical Necessity or their approval or prescription by a physician or other provider. (Emphasis added.)[7]
Under the policy's exclusions from coverage, the policy states:
THE FOLLOWING SERVICES ARE NOT COVERED BY TOUCHPOINT HEALTH PLAN:
. . . .
Experimental/Investigational
1. Services, supplies, drugs, devices, treatments, or procedures that Touchpoint Health Plan determines to be Experimental or Investigational. (Emphasis in original.)
There is no dispute that Touchpoint interpreted these policy provisions in reaching its decision to deny the Summers' request for prior authorization for high-dose chemotherapy with stem-cell rescue, as well as for payment for this treatment after Parker received it. Therefore, the outcome of this case turns on the application of federal law to Touchpoint's interpretation and application of the policy.
II. DISCUSSION
A. Standard of Review
¶ 63 This case is before us to review the appeal of a decision granting summary judgment to Touchpoint. We review the decision on a motion for summary judgment independently, applying the same methodology as the circuit court. City of Janesville v. CC Midwest, Inc., 2007 WI 93, ¶ 13, 302 Wis. 2d 599, 734 N.W.2d 428 (citing AKG Real Estate, LLC v. Kosterman, 2006 WI 106, ¶ 14, 296 Wis. 2d 1, 717 N.W.2d 835).
¶ 64 The decision that began this lawsuit under 29 U.S.C. § 1132(a)(1)(B) was the denial of healthcare insurance coverage to the Summers for the treatment Parker received, based on Touchpoint's interpretation and application of an ERISA-regulated policy. When an ERISA healthcare policy gives the administrator the power to interpret and apply the policy, we review the administrator's decisions under the arbitrary and capricious standard. Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 688 (7th Cir.1992) (citing Firestone, 489 U.S. at 111, 109 S. Ct. 948). A decision is arbitrary and capricious only if it is not reasonable. Firestone, 489 U.S. at 111, 109 S. Ct. 948. Under the arbitrary and capricious standard of review, "[w]here a plan administrator has offered a reasonable interpretation of disputed provisions, [a court] may not replace it with an interpretation of [its] own." Booth v. Wal-Mart Stores, Inc., 201 F.3d 335, 344 (4th Cir.2000).
B. Touchpoint's Decision
1. General ERISA principles
¶ 65 A major objective of ERISA is "to establish a uniform administrative scheme, *201 which provides a set of standard procedures to guide processing of claims and disbursement of benefits." Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 9, 107 S. Ct. 2211, 96 L. Ed. 2d 1 (1987). In furtherance of that goal, the United States Supreme Court has concluded that ERISA-governed plans must state the basis for the payment of benefits and that the administrator must administer the plan in accord with the plan's terms, and not on any other basis. Egelhoff, 532 U.S. at 147, 121 S. Ct. 1322.
ERISA[] commands that a plan shall "specify the basis on which payments are made to and from the plan," § 1102(b)(4), and that the fiduciary shall administer the plan "in accordance with the documents and instruments governing the plan," § 1104(a)(1)(D). . . .
Id. (citation omitted). Therefore, we must examine Touchpoint's explanation for denying benefits in light of the terms of the policy, because Touchpoint was obligated to conform its decisions in regard to payment, or the denial thereof, to the healthcare policy. Id.
2. Policy interpretation
¶ 66 Touchpoint interpreted the policy to determine whether Parker's treatment was a covered service under the policy. It denied coverage based on three factors: (1) the treatment is the subject of an ongoing Phase I or II clinical trial; (2) the policy defines such treatment as "experimental" treatment; and (3) experimental treatment is not a covered service within the terms of the policy.
¶ 67 It has never been disputed that high-dose chemotherapy with stem-cell rescue is the subject of an ongoing Phase I or II clinical trial. Therefore, the only dispute for our review is whether Touchpoint's decision that the treatment is "experimental," as that term is used in the policy, is reasonable. Firestone, 489 U.S. at 111, 109 S. Ct. 948.
¶ 68 The majority opinion asserts that the Summers based their second request for coverage on a different theory. The majority opinion acknowledges that the treatment, itself, which Parker received, was the subject of an ongoing Phase II clinical trial.[8] However, the majority opinion asserts that as of the second request for coverage, Parker was not enrolled, personally, in a Phase I or II clinical trial when he received the treatment that is the subject of an ongoing clinical trial.[9] Based on this difference, the majority opinion contends that the definition of "experimental" is ambiguous. It asserts:
it is unclear whether it is the treatment itself that is the subject of a Phase II trial, even if the claimant is not participating in the Phase II trial, or whether it is the claimant's receiving the treatment as a participant in the Phase II trial that triggers the exclusion.[10]
The majority opinion then construes the ambiguity that it has created against the insurer.[11] The majority opinion cites Pitcher v. Principal Mutual Life Insurance Co., 93 F.3d 407 (7th Cir.1996), and Casey v. Uddeholm Corp., 32 F.3d 1094 (7th Cir.1994), as support for its conclusion.[12]
¶ 69 The majority opinion's conclusion is contrary to controlling precedent. The dispositive question is not whether the policy is ambiguous, as the majority opinion *202 implies; but rather, whether Touchpoint's interpretation of the policy is reasonable. Firestone, 489 U.S. at 111, 109 S. Ct. 948. It is undisputed that Touchpoint has the power to interpret the terms in the policy. When the plan administrator has the power to interpret the policy, a court cannot overturn a plan administrator's interpretation of a policy term unless that interpretation is not reasonable. Id.; Dade v. Sherwin-Williams Co., 128 F.3d 1135, 1139 (7th Cir.1997); Halpin, 962 F.2d at 688. Accordingly, when a plan administrator has the power to interpret the policy, courts are not permitted to substitute their interpretations of the policy terms for that of the administrator. Booth, 201 F.3d at 344; Nelson v. Unum Life Ins. Co. of Am., 421 F. Supp. 2d 558, 566-67 (E.D.N.Y.2006).
¶ 70 Furthermore, the majority opinion's reliance on Pitcher and Casey is misplaced because in neither Pitcher nor Casey did the court conclude that the plan administrator had the power to interpret the plan. In Pitcher, the court said if the plan were ambiguous, it would rely on the rule of contra proferentum for its decision.[13]Pitcher, 93 F.3d at 418. However, the court concluded there was no ambiguity. Id. In Casey, the court began its analysis by pointing out that "[t]he benefit plan does not grant discretion to the administrator to construe uncertain terms." Casey, 32 F.3d at 1096.
¶ 71 The differing powers of a plan administrator are critical to an ERISA analysis because when the plan administrator does not have the power to interpret the policy, the review of its interpretation is de novo.[14]Firestone, 489 U.S. at 115, 109 S. Ct. 948. Under a de novo standard of review, decisions of the administrator are given no deference and courts may resolve *203 ambiguities in favor of the insured. Katzenberg v. First Fortis Life Ins. Co., 500 F. Supp. 2d 177, 193-94 (E.D.N.Y.2007).
¶ 72 Furthermore, the rule of contra proferentum that was mentioned in Pitcher provides that when one party drafted the document, any ambiguities in the document are resolved against the drafter. Nelson, 421 F.Supp.2d at 572. However, when the administrator has the power to interpret the policy, the rule of contra proferentum is inapplicable because that grant of power to the administrator permits the administrator, not the court, to interpret any ambiguous policy terms. Halpin, 962 F.2d at 688; Nelson, 421 F.Supp.2d at 572.
¶ 73 Having established that we must apply the arbitrary and capricious standard to Touchpoint's decision denying benefits, I shall apply that standard. Touchpoint interpreted the following facts and the words in the policy to come to its conclusion that the treatment that Parker received was "experimental" as that term is defined in the policy. First, there is no dispute that the treatment is the subject of an ongoing Phase II clinical trial. Second, the policy defines "experimental" as:
EXPERIMENTAL/INVESTIGATIONAL means any service, supply, drug, device, treatment, or procedure that Touchpoint Health Plan's Medical Director determines:
. . . .
3. Is the subject of an on-going Phase I or II clinical trial, or furnished in connection with medical or other research to determine its maximum tolerated dose, its toxicity, its safety, or its efficacy[.]
¶ 74 The policy defines the term, "experimental," in relation to a "service, supply, drug, device, treatment, or procedure." It does not limit the definition by adding that the person seeking benefits must also be receiving such "service, supply, drug, device, treatment, or procedure" as a participant in a Phase I or II clinical trial. However, the majority opinion implies that such a limitation is a possible interpretation of the definition of "experimental."[15]
¶ 75 Touchpoint's interpretation of the policy relied on the plain language of the policy which expressly defines "experimental." The external review, conducted by the Medical Review Institute, also concluded that the treatment sought met the policy's definition of "experimental." I see nothing in the words defining "experimental" that creates an ambiguity. However, even if the policy terms could be interpreted as the majority opinion suggests, that possibility does not cause Touchpoint's interpretation to be "unreasonable." And, it is only unreasonable interpretations that are arbitrary and capricious. Firestone, 489 U.S. at 111, 109 S. Ct. 948; Johnson v. Dist. 2 Marine Eng'rs Beneficial Ass'n-Associated Mar. Officers, Med. Plan, 857 F.2d 514, 516 (9th Cir.1988); Cook v. Pension Plan for Salaried Employees of Cyclops Corp., 801 F.2d 865, 871 (6th Cir. 1986).
¶ 76 The majority opinion also asserts that Touchpoint's decision was arbitrary and capricious because "Touchpoint was inconsistent in its position on what it would cover under the terms of the plan."[16] However, the "inconsistent" "position" that the majority opinion identifies is not an inconsistent application of the policy by the plan administrator to similarly situated applicants for benefits, which is required before a decision may be held to be arbitrary and capricious. Vann v. Nat'l *204 Rural Elec. Coop. Assoc. Ret. & Sec. Program, 978 F. Supp. 1025, 1043 (M.D.Ala. 1997).
¶ 77 As with many terms that have developed in ERISA litigation, an "inconsistent application" is a term of art that has a particularized meaning. To determine whether a plan administrator has rendered an arbitrary decision through "inconsistent application" of a policy, courts investigate "whether the challenged interpretation [of the policy] has been uniformly applied in similar situations." DeAngelis v. Warner Lambert Co., 641 F. Supp. 467, 470 (S.D.N.Y.1986) (citing Denton v. First Nat'l Bank, 765 F.2d 1295, 1304 (5th Cir. 1985); Anderson v. Ciba-Geigy Corp., 759 F.2d 1518, 1522 (11th Cir.1985); Molyneux v. Arthur Guinness & Sons, P.L.C., 616 F. Supp. 240, 246 (S.D.N.Y.1985)).
¶ 78 The majority opinion does not identify the plan administrator's application of the Touchpoint policy to any other person, let alone to one who is similarly situated. Instead, the majority opinion attempts to recast both the statement by Touchpoint's attorney about how he would interpret the policy and deposition testimony of Dr. Ronald Harms, Touchpoint's Medical Director, about the differing types of chemotherapy that may or may not come within the policy as inconsistencies that indicate the denial of benefits to the Summers was an arbitrary decision.[17] However, the majority opinion's assertion that "Touchpoint maintained an arbitrary and capricious reading of its own experimental exclusion"[18] is insufficient, as a matter of law, to support the assertion that Touchpoint's denial of benefits to the Summers was arbitrary and capricious.
¶ 79 To prevail on the theory of inconsistent policy application, the Summers were required to present some evidence that the plan administrator granted benefits to other persons similarly situated to them. See DeAngelis, 641 F.Supp. at 470. The record and the majority opinion are silent in regard to any such applicant for, or award of, benefits.
¶ 80 In sum, under federal precedent, we must affirm Touchpoint's interpretation of the policy provisions that led to its decision to deny benefits for the high-dose chemotherapy with stem-cell rescue because Touchpoint's interpretation of the policy is reasonable.
3. Notice of denial
¶ 81 On November 19, 2002, Touchpoint denied benefits for Parker's treatment with high-dose chemotherapy and stem-cell rescue because it was not a covered service under the policy. Touchpoint's notice of denial provided in part:
Touchpoint Health Plan received a request on Parker's behalf from Dr. Diane Puccetti to consider coverage for Phase II Study of Two Alternative Intensive Induction Chemotherapy Regimens Followed by Consolidation With Myeloablative Chemotherapy and Autologous Stem Cell Rescue. The request was reviewed and it was determined that this is EXPERIMENTAL and an exclusion of coverage as stated in your CERTIFICATE OF COVERAGE.
Touchpoint denied coverage for the treatment for which the Summers sought both prior and subsequent approval. Touchpoint's decision was not a termination of benefits.
¶ 82 When there is a termination of benefits, a court may reinstate benefits pending a full review by the plan administrator of the termination decision. Halpin, 962 *205 F.2d at 697. When there is a denial of benefits and the administrator's notification of the reasons for its decision is deficient, the remedy is to remand the matter to the administrator for another review of the request for payment. Quinn v. Blue Cross & Blue Shield Ass'n, 161 F.3d 472, 477-78 (7th Cir.1998); Halpin, 962 F.2d at 689 (citing Wolfe v. J.C. Penney Co., 710 F.2d 388, 392 (7th Cir.1983)).
¶ 83 Notice of denial of benefits is required under 29 U.S.C. § 1133, which provides:
In accordance with regulations of the Secretary, every employee benefit plan shall
(1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and
(2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.
Federal regulations promulgated by the Secretary that relate to notice provide in relevant part:
The notification shall set forth, in a manner calculated to be understood by the claimant
(i) The specific reason or reasons for the adverse determination;
(ii) Reference to the specific plan provisions on which the determination is based;
. . . .
(iv) A description of the plan's review procedures and the time limits applicable to such procedures[.]
29 C.F.R. § 2560.503-1(g)(1).
¶ 84 "Substantial compliance [with the applicable regulations] is sufficient" to fulfill Touchpoint's notification obligation under ERISA. Schneider v. Sentry Group Long Term Disability Plan, 422 F.3d 621, 627 (7th Cir.2005) (quoting Halpin, 962 F.2d at 690). Substantial compliance is sufficient and technical compliance is unnecessary because the purpose of 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503-1(g) is to afford the beneficiary an explanation sufficiently adequate to enable him to mount an effective appeal, if he seeks review of the denial of benefits. Id. at 627-28. All that is required is a "sufficient explanation to enable" the claimant "to formulate his further challenge to the denial." Gallo v. Amoco Corp., 102 F.3d 918, 923 (7th Cir.1996).
¶ 85 Therefore, the question we must ask in regard to the notice of denial that Touchpoint provided to the Summers is: Were the Summers "supplied with a statement of reasons that, under the circumstances of the case, permitted a sufficiently clear understanding of the administrator's position to permit effective review." Schneider, 422 F.3d at 628.[19]
*206 ¶ 86 The Summers sought prior authorization for the treatment of high-dose chemotherapy with stem-cell rescue that was denied for the first time on November 19, 2002. Touchpoint explained that the treatment for which the Summers sought prior authorization "falls into a Phase II clinical trial"; "experimental" is defined in the policy as including treatments subject to an ongoing Phase I or II clinical trial; and experimental treatments are excluded from coverage. The November 19 letter cited the pages of the Certificate of Coverage containing the exclusions from coverage and the definition for "experimental." It explained the appeals procedure, as well as the Summers' opportunity for an external review.
¶ 87 The Summers chose an external review. On November 25, 2002, the Medical Review Institute, the external review body, also concluded that the treatment was not covered under the policy because it was experimental. The Summers re-submitted their claim to Touchpoint for the same treatment after Parker had received it. On December 12, 2002, Touchpoint again denied the claim because it was a request for "cycle two of the Phase II clinical trial for treatment of anaplastic ependymoma." Therefore, between November 19, 2002 and December 12, 2002, the Summers received three notices that their claim for high-dose chemotherapy with stem-cell rescue was not a covered service under their policy because it was defined as "experimental" by the policy.
¶ 88 All three notices must be read together when determining whether Touchpoint substantially complied with its notice obligations under federal law because the notices applied to the same treatment and all were received within one month's time.
¶ 89 Furthermore, the Summers have never asserted that they did not understand Touchpoint's reason for denying their claim for coverage. The complaint they filed to commence this action demonstrates that they understood why their claim was denied. The complaint asserts that the requested treatment is the subject of a Phase II study at New York University Medical Center. Complaint, ¶ 9. The Summers understood that their claim was denied because the treatment fell within a Phase II clinical trial and was therefore experimental and excluded under the terms of the policy. Complaint, ¶ 11. Accordingly, I must conclude that the purpose of 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503-1(g) was fulfilled.
¶ 90 The basis for the Summers' claim seems to be that because their pediatric oncologist recommended high-dose chemotherapy with stem-cell rescue as the best of the available treatments for Parker, that treatment should be covered by their policy. Complaint, ¶ 10. However, a faithful application of the law to the healthcare policy does not permit the conferral of benefits for that reason. Rather, the terms of the policy must be followed. Egelhoff, 532 U.S. at 147, 121 S. Ct. 1322. Because the Summers have a sufficiently clear understanding of Touchpoint's reason for the denial of benefits to permit an effective review, I conclude that Touchpoint substantially complied with the notice requirements under federal law.
¶ 91 Notwithstanding the evidence of the Summers' understanding of the reason Touchpoint denied coverage, the majority *207 opinion concludes that Touchpoint's notice was insufficient.[20] It then seeks a way to base payment for Parker's treatment on that perceived deficiency.[21] It relies heavily on Evans v. W.E.A. Insurance Trust, 122 Wis. 2d 1, 361 N.W.2d 630 (1985).
¶ 92 Evans involved the application of "guidelines" that a claims manager created to evaluate claims for benefits for gastric bypass surgery. Id. at 7, 361 N.W.2d 630. The claim for benefits was denied based on the guidelines. Id. at 12-13, 361 N.W.2d 630. We concluded that the denial of benefits was arbitrary and capricious because the guidelines "impose[d] a standard for payment of benefits that is not required by the basic plan, but rather is imposed by an administrative gloss." Id. at 15-16, 361 N.W.2d 630. Evans has no application to the case at hand because Touchpoint interpreted the words of the policy, not "guidelines" that were inconsistent with the policy, as the claims manager did in Evans.
¶ 93 The majority opinion agrees that Touchpoint has the power to interpret the policy.[22] However, after citing appropriate federal case law that supports this conclusion, the majority opinion recasts the policy as a termination of benefits: "The policy grants Touchpoint's medical director the discretion to terminate coverage if treatments are experimental or investigational."[23] The majority opinion recasts the power Touchpoint was granted under the policy as the power to "terminate" coverage so that later it can assert, "the appropriate issue in this case is whether Touchpoint's termination of benefits was arbitrary and capricious."[24]
¶ 94 Touchpoint did not "terminate" payments for high-dose chemotherapy and stem-cell rescue. No payments have ever been made. Instead, Touchpoint denied payment for high-dose chemotherapy and stem-cell rescue because that treatment was not a covered service under the policy. The Summers' complaint clearly shows that they understood their claim was denied:
Defendant sent a letter to plaintiffs denying coverage for Parker's participation in Dr. Findlay's study as proposed by Dr. Puccetti on the grounds that "the request [fell] into a Phase II clinical trial," and was therefore "experimental" and excluded under the terms and provisions of the policy's Certificate of Coverage.
Complaint, ¶ 11 (emphasis added).
¶ 95 Under federal law, Touchpoint is prohibited from paying for services unless the services are covered under the policy. Egelhoff, 532 U.S. at 147, 121 S. Ct. 1322. The policy does not permit payment for treatments that are the subject of a Phase I or II clinical trial. There is no dispute that the treatment Parker received is the subject of a Phase I or II clinical trial. Therefore, Touchpoint could not "terminate" what it could not have awarded in the first instance. Id. Stated otherwise, Touchpoint is not free to pay for any service that is requested by a participant or ordered by a physician. It has the power to pay for only those services that are covered by the policy. Id.
¶ 96 In my view, the majority opinion recasts Touchpoint's denial of benefits into a "termination" of benefits because it chose to order payment for the treatment that Parker received. Stated otherwise, if the majority opinion acknowledged that *208 Touchpoint's decision was a denial of benefits, it would have to explain how a treatment that is indisputably the subject of a Phase I or II clinical trial is a covered service, before payment for that treatment could be ordered.[25]
III. CONCLUSION
¶ 97 I conclude that, because Touchpoint has the power to interpret and apply the policy, we are required to uphold the plan administrator's interpretation and application of the policy if it is reasonable. Firestone, 489 U.S. at 111, 109 S. Ct. 948. Touchpoint decided that the treatment for which benefits were sought is defined as an "experimental" treatment in the policy and that "experimental" treatments are excluded from coverage under the policy. This is a reasonable interpretation of the policy; and therefore, it is not arbitrary and capricious. I also conclude that the notice of denial of claim substantially complied with the notice requirements of 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503-1(g).
¶ 98 Accordingly, I would reverse the court of appeals and remand the case to the circuit court to dismiss the Summers' complaint on the merits. Therefore, I respectfully dissent from the majority opinion.
¶ 99 I am authorized to state that Justice ANNETTE KINGSLAND ZIEGLER joins this dissent.
NOTES
[1] Summers v. Touchpoint Health Plan, Inc., 2006 WI App 217, 296 Wis. 2d 566, 723 N.W.2d 784.
[2] All references to the United States Code are to the 2000 version, as updated to the relevant dates of October to December 2002, unless otherwise noted.
[3] All references to the Code of Federal Regulations are to the 2002 version, as updated to the relevant dates of October to December 2002, unless otherwise noted.
[4] While the case law often uses the terminology "denial letter" regardless of whether the letter was in an initial denial of benefits case or in a termination of benefits case, we will use the terminology "termination letter" given that we hold this was a termination of benefits case, not an initial denial of benefits case.
[5] The dissent takes issue with our determination that what occurred here was a "`termination' of benefits, rather than acknowledging that benefits were `denied.'" Dissent, ¶ 57. Make no mistake, when Parker's parents and his doctor were informed that what was recommended for the ongoing cancer treatment would not be allowed, that was a termination of the benefits for the follow-up treatment. Benefits had been previously provided for the cancer surgery and for follow-up care thereafter. Such benefits were then terminated.
[6] Neither party has disputed that the plan in question is an ERISA-governed plan.
[7] This case is distinguishable from Dade v. Sherwin-Williams Co., 128 F.3d 1135, 1141-42 (7th Cir.1997), because, in Dade, the plaintiff never submitted his claim using a different rationale, so the series of letters in Dade all responded to the plaintiff's consistent rationale. Id. As a result, it was not inappropriate for the Dade court to read the letters together, unlike this case where the letters must stand on their own given the changed rationale that the Summers presented.
[8] As one law review article aptly noted, insurance companies' "wide discretion" in deciding "whether a medical technology should be considered `experimental,' and, accordingly, denied coverage, can result in great disparity in the policies of insurers, with coverage decisions influenced not just by the medical data and clinical judgments, but also by factors such as lawsuits and public relations concerns." Natalie Regoli, Insurance Roulette: The Experimental Treatment Exclusion & Desperate Patients, 22 Quinnipiac L.Rev. 697, 700 (2004) (footnote omitted). As a result, the court system plays "an important role in regulating insurance contract terms because statutory regulation is often ineffective." Id. As in this case, "[t]he conflict between the standardized nature of an insurance contract and the attempt to incorporate provisions for unknown or changing therapies often leads to situations where the scope of coverage is in dispute." Id. at 701.
[9] The dissent wishes us to uphold the plan administrator's interpretations and applications of the plan as reasonable. Dissent, ¶ 58. That is impossible here, since the interpretations and applications were inconsistent, and, thus, they were arbitrary and capricious. Such arbitrary and capricious actions are not reasonable.
[10] It is noted, however, that the available remedies under 29 U.S.C. § 1132(a) appear to be expansive and to include the recovery of benefits due to a participant or a beneficiary under the terms of the plan, enforcement of the rights of a participant or a beneficiary under the terms of the plan, or a clarification of his or her rights to future benefits pursuant to the terms of the plan. See 29 U.S.C. § 1132(a)(1)(B). Clearly, the ambiguous policy provisions discussed herein relate to the benefits due under the terms of the plan at issue here.
[11] A letter from Dr. Puccetti suggests that Touchpoint paid for follow-up care on November 15, 2002, which included a "metastatic evaluation including a MRI of the total spine and a diagnostic lumbar puncture." Furthermore, an earlier letter from Dr. Puccetti indicates that Touchpoint paid for a postoperative CAT scan.
[12] We note that Wolfe v. J.C. Penney Co., 710 F.2d 388 (7th Cir.1983), even if it were still good law, is distinguishable in many regards from the case before us. In Wolfe, a former employee applied for, but was denied, long term disability benefits from his former employer. Id. at 389. The employee never received the benefits he applied for, and, as a result, his case was an initial denial of benefits case and not a termination of benefits case. Accordingly, the Wolfe court's remand to the fiduciary, for a review of the information that the employee had presented in the federal trial court for the first time, so that the fiduciary could make a proper initial benefits determination is not applicable to a termination of benefits case. Id. at 394. We further note that the holding in Wolfe was abrogated by the United States Supreme Court in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989), where the Court established the analytical framework that was discussed in this decision's standard of review section.
[13] While we recognize that Hackett dealt with the termination of long term disability benefits and not health care benefits, the Hackett decision rested on the interpretation and application of the very same federal statutes and regulations as in this case, and, as noted previously, also dealt with the required contents of a termination letter under an ERISA-governed benefits plan. Hackett v. Xerox Corp. Long-Term Disability Income Plan, 315 F.3d 771, 772 (7th Cir.2003).
[1] 29 U.S.C. § 1001 et seq.
[2] Majority op., ¶¶ 29-30.
[3] Id., ¶¶ 16, 21, 33-39.
[4] Id., ¶ 25.
[5] Id., ¶ 48.
[6] Id., ¶ 49.
[7] The majority opinion asserts that Parker's treatment was medically necessary because it falls within the standard of care for his illness and because Parker's physician ordered it. Therefore, it should be covered. Majority op., ¶ 4. While describing Parker's treatment as medically necessary engenders sympathy for the majority opinion's result, that result cannot be reached under the terms of the policy. The terms of the policy that define "exclusion" explicitly state that the standard of care and a physician's order cannot be considered by the administrator when determining whether the treatment is excluded from coverage under the policy. Therefore, the majority opinion contravenes the following primary rule of ERISA-governed plans where claims for benefits are made: the plan shall be administered in accordance with the terms of the plan documents. Egelhoff v. Egelhoff, 532 U.S. 141, 147, 121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001).
[8] Majority op., ¶¶ 9, 14.
[9] Id., ¶ 30.
[10] Id.
[11] Id. at ¶ 31.
[12] Id. at ¶¶ 30-31.
[13] I note that in the United States Court of Appeals for the Seventh Circuit, from which circuit Pitcher v. Principal Mutual Life Insurance Co., 93 F.3d 407 (7th Cir.1996) arises, when the administrator has the power to interpret the plan, the court defers to the administrator's decision, rather than interpreting the policy. Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 688 (7th Cir.1992). Although the court made no express statement of the power of the administrator in Pitcher, the administrator could not have had the power to interpret the policy. If it had had that power, the court would have reviewed the administrator's decision to determine whether it was reasonable. See Halpin, 962 F.2d at 688.
[14] The framework for the analysis of a claim made under 29 U.S.C. § 1132(a)(1)(B) of ERISA is somewhat like a chemistry flow chart. For instance, if the first question in the analysis presents choices "A" and "B" as potential answers and "A" is the answer to the first question, that answer leads to choices "C" and "D" as potential answers to the second question. If choice "B" is the answer to the first question, that answer leads to choices "E" and "F" as potential answers to the second question.
Once a court has answered "A" to the first question, it is precluded from selecting either choice "E" or "F" as an answer to the second question because answering "B" to the first question is the necessary predicate for the use of choices "E" or "F."
When we apply the ERISA framework for analysis to the circumstances presented by the Summers' claim, the first question is: Does the policy give the plan administrator the power to interpret the policy? Choice "A" is yes and choice "B" is no. The majority opinion correctly selects "A" (the plan administrator has the power to interpret the policy). Majority op., ¶ 17. Selecting choice "A" results in a standard of review that requires a court to affirm Touchpoint's interpretation of the policy, if it is reasonable. It is only when choice "B" is selected as the answer to the first question (i.e., the plan administrator does not have the power to interpret the policy) that a court may review the plan administrator's decision de novo and in that process interpret the policy itself. The majority opinion errs because it interprets the policy itself, when that choice is not available to it in an ERISA analysis, because the plan administrator has the power to interpret the policy.
[15] Id., ¶ 30.
[16] Id., ¶ 33.
[17] Id., ¶¶ 34-35.
[18] Id., ¶ 35.
[19] The majority opinion cites Schneider v. Sentry Group Long Term Disability Plan, 422 F.3d 621 (7th Cir.2005), as support for an award of benefits. Majority op., ¶ 26. The majority's reliance on Schneider is misplaced for at least two reasons: First, the plan administrator in Schneider gave no reason for its "conclusion that [Schneider] was no longer disabled[; therefore,] she could hardly seek review of that conclusion." Schneider, 422 F.3d at 628. By contrast, Touchpoint explained that because the treatment was the subject of an ongoing Phase I or II clinical trial, it met the definition of "experimental" under the policy, and experimental treatments are not covered. Second, Schneider involved the termination of benefits. When an ERISA procedural decision is erroneously made, courts reinstate the status quo. Hackett v. Xerox Corp. Long-Term Disability Income Plan, 315 F.3d 771, 776 (7th Cir.2003). The status quo for erroneous termination is to reinstate benefits. Id. By contrast, if benefits were denied due to a procedural error, the correct procedure is to "remand[] to the administrator for a new hearing." Schneider, 422 F.3d at 629 citing Wolfe v. J.C. Penney Co., 710 F.2d 388, 393-94 (7th Cir.1983). The Summers were denied benefits.
[20] Majority op., ¶ 25.
[21] Id., ¶¶ 43-48.
[22] Id., ¶ 17.
[23] Id. (emphasis added).
[24] Id.
[25] Id. at ¶¶ 42-43. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4515681/ | NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 12 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
KENNARD LEE DAVIS, No. 18-56399
Petitioner-Appellant, D.C. No. 2:06-cv-04744-JVS-JEM
v.
MEMORANDUM*
MATTHEW ATCHLEY, Acting Warden,
Respondent-Appellee.
Appeal from the United States District Court
for the Central District of California
John E. McDermott, Magistrate Judge, Presiding
Submitted March 3, 2020**
Before: MURGUIA, CHRISTEN, and BADE, Circuit Judges.
Kennard Lee Davis appeals from the magistrate judge’s order denying the
motion to withdraw filed by Davis’s counsel. We conclude that we lack
jurisdiction over this appeal and remand to the district court.
As an initial matter, we agree with the parties that the magistrate judge had
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
authority under 28 U.S.C. § 636(b)(1)(A) to hear and determine counsel’s motion
to withdraw. See Mitchell v. Valenzuela, 791 F.3d 1166, 1168 (9th Cir. 2015)
(magistrate judge has authority to determine nondispositive matters). The record
shows, however, that the parties did not consent to the magistrate judge’s
jurisdiction under 28 U.S.C. § 636(c)(1). Absent this consent, Davis first had to
seek review by the district judge for clear or legal error before appealing the order
to this court. See 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); Simpson v. Lear
Astronics Corp., 77 F.3d 1170, 1174 (9th Cir. 1996) (Rule 72(a) requires a
magistrate judge’s nondispositive order to be reviewed by the district judge to be
appealable); In re San Vicente Med. Partners Ltd., 865 F.2d 1128, 1131 (9th Cir.
1989) (order) (absent consent, magistrate judge order not final or appealable to the
circuit court).
We lack jurisdiction over this appeal and therefore, we remand this matter to
the district court for further action.
REMANDED.
2 18-56399 | 01-03-2023 | 03-12-2020 |
https://www.courtlistener.com/api/rest/v3/opinions/1543120/ | 46 S.W.3d 427 (2001)
Mitchell Grove COLE, Appellant,
v.
The STATE of Texas, State.
Nos. 2-99-043-CR, 2-99-044-CR.
Court of Appeals of Texas, Fort Worth.
April 27, 2001.
*429 Law Offices of Michael Logan Ware; Michael Logan Ware, Fort Worth, Attorney for Appellant.
Tim Curry, Dist. Attorney, Charles M. Mallin, Chief of Appellate Section; Sylvia Mandel, Greg Pipes, Susan Hargis, Ass't Dist. Attorneys, Fort Worth, Attorneys for Appellee.
Panel A: CAYCE, C.J.; DAY and DAUPHINOT, JJ.
OPINION
DAUPHINOT, Justice.
Appellant Mitchell Grove Cole was charged in two separate indictments with the offense of aggravated assault on a public servant. The cases were consolidated for trial, and a jury convicted Appellant on both indictments and assessed his punishment at ten years' confinement in each case, the sentences to run concurrently.
On appeal, Appellant brings four points challenging the legal sufficiency of the evidence and the propriety of the court's charge. Finding no reversible error, we affirm.
FACTUAL BACKGROUND
On April 29, 1996, Officers Gilliland and Vanover of the DFW Airport Department of Public Safety observed a vehicle making unsafe lane changes. The officers pulled over the vehicle, and the driver, later identified as Appellant, told Gilliland that he did not have his driver's license with him. Appellant then falsely identified himself to the officer. When Gilliland told Appellant that there might be a warrant for his arrest and that Appellant would not be *430 able to leave until the officers found out who he was, Appellant ran back to his vehicle and jumped in the driver's seat. Gilliland followed Appellant and jumped into the car, reaching over the steering wheel to grab the keys out of the ignition. Gilliland testified that he was seated on the floorboard of the driver's side with his feet hanging out when the vehicle began to move. Gilliland stated that he could feel his feet dragging along the pavement. The officer held onto the steering column until he was eventually shoved from the car. Gilliland testified that he struck the pavement with the back of his head, and that he landed on his gun, which bruised his hip.
Officer Vanover testified that he jumped into the driver's side of Appellant's vehicle behind Officer Gilliland, pushed him forward, and attempted to spray Appellant with pepper spray. Vanover stated that he was inside the vehicle when it began moving, and that he could feel his feet dragging. "Once we started moving and he was fighting with us, the next thing that I know, I am looking at the sky and we are tumbling down the road." Vanover testified that his left arm was scraped, that he had gravel embedded in his palm, and that his hand swelled as a result of the trauma of being pushed out of the vehicle.
A civilian witness, Dale Johnson, testified that he saw two police officers leaning inside a vehicle, when the vehicle suddenly accelerated. While he could not be sure, Johnson believed that the officers were being dragged by the vehicle. He stated that the car traveled approximately fifteen to twenty feet before the officers tumbled down the road.
After a lengthy pursuit, Appellant was eventually apprehended when his car struck a pole.
The indictments alleged that Appellant intentionally or knowingly caused bodily injury to officers Vanover and Gilliland by "dragging" their bodies with his car.
SUFFICIENCY OF THE EVIDENCE
In his first two points, Appellant argues that the evidence is legally insufficient to sustain his conviction. Specifically, Appellant contends that because both officers testified their injuries resulted from landing on the pavement after being pushed out of the vehicle, the evidence is legally insufficient to show Appellant intentionally or knowingly caused bodily injury to Vanover and Gilliland by dragging their bodies with his automobile, as alleged in the indictments.
STANDARD OF REVIEWLEGAL SUFFICIENCY
In reviewing the legal sufficiency of the evidence to support a conviction, we view all the evidence in the light most favorable to the verdict.[1] The critical inquiry is whether, after so viewing the evidence, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.[2] This standard gives full play to the responsibility of the trier of fact to resolve conflicts in the testimony, to weigh the evidence, and to draw reasonable inferences from basic facts to ultimate facts.[3] Our duty is not to reweigh the evidence from reading a cold *431 record but to act as a due process safeguard ensuring only the rationality of the fact finder.[4] The verdict may not be overturned unless it is irrational or unsupported by proof beyond a reasonable doubt.[5]
In determining the legal sufficiency of the evidence to show Appellant's intent, and faced with a record that supports conflicting inferences, we "must presumeeven if it does not affirmatively appear in the recordthat the trier of fact resolved any such conflict in favor of the prosecution, and must defer to that resolution."[6]
DISCUSSION
A person acts intentionally, or with intent, with respect to a result of his conduct when it is his conscious objective or desire to cause the result.[7] A person acts knowingly, or with knowledge, with respect to a result of his conduct when he is aware that his conduct is reasonably certain to cause the result.[8]
In Sneed v. State, police officers pulled over the defendant for a traffic violation.[9] After deciding to make an arrest, the officers approached the vehicle and instructed the defendant to turn off the ignition and exit the vehicle.[10] As the officers reached into the vehicle to grab the keys out of the ignition, the defendant suddenly accelerated, dragging the officers alongside the vehicle.[11] In that case, the court held that the evidence was sufficient for a rational jury to conclude that Sneed knew with reasonable certainty that accelerating the vehicle while the officers were leaning inside would cause bodily injury to the officers.[12] The court noted that the evidence revealed that Sneed was aware that the officers had extended their bodies partially inside the vehicle before he sped off.[13]
Similarly, we conclude that Appellant was aware Vanover and Gilliland were partially inside his automobile when he chose to drive off at a high rate of speed. Consequently, the evidence was sufficient for a rational jury to find that Appellant knew that speeding off with the two officers hanging out of his vehicle and later attempting to shove them from the vehicle was reasonably certain to cause bodily injury to Gilliland and Vanover. Accordingly, while there is no evidence that it was Appellant's intention to cause bodily injury to the officers by dragging them with his vehicle, we conclude that the evidence is legally sufficient to support the jury's finding that he did so knowingly.
Appellant also argues that there is no evidence that the officers' injuries were caused by dragging; rather, he contends that the injuries occurred when Vanover and Gilliland hit the pavement, that is, when the dragging stopped. Appellant is correct that neither officer testified that the dragging of their feet caused any injury. Nevertheless, "a person is criminally responsible if the result would not have occurred but for his conduct, operating either alone or concurrently with another *432 cause."[14] Here, Vanover and Gilliland would not have been injured but for Appellant's actions in dragging them with his automobile. Additionally, the jury could reasonably infer from the evidence that Appellant's purpose in speeding off and shoving the officers from the vehicle was to rid himself of their presence. Accordingly, under the evidence before it, a rational jury could conclude that the officers' hitting the pavement was an inseparable part of the dragging event. We overrule Appellant's first and second points.
CHARGE ERROR
EXTRANEOUS OFFENSES
In his third point, Appellant argues that the trial court erred in denying his requested limiting instruction on extraneous offenses. The trial court did, however, include a limiting instruction in its charge to the jury. The complaint on appeal, therefore, is that the trial court did not include a "proper" limiting instruction in the jury charge.
The record is somewhat confusing on this point. After the trial judge began reading the charge, he excused the jury and allowed Appellant to present an additional challenge to the charge. Apparently, although Appellant had previously requested a limiting instruction on extraneous offenses, he was unaware that such an instruction had been included in the court's charge. That instruction limited the jury's consideration of evidence that Appellant had prior outstanding warrants for his arrest at the time of the alleged offense. Appellant then lodged an objection to the limiting instruction that the court had included, and which had already been read to the jury, on the grounds that it failed to refer to a videotape of a news broadcast viewed by the jury, wherein Appellant states that he has successfully run from law enforcement officers in the past. The court denied Appellant's request and finished reading the charge.
Rule 105(a) of the rules of evidence requires that, upon request, a trial court must immediately give a limiting instruction regarding evidence that is admitted for a limited purpose.[15] The requirement is also satisfied if the trial court gives the limiting instruction to the jury in the charge.[16] A party opposing the evidence has the burden of objecting and requesting the limiting instruction at the introduction of the evidence.[17] Once evidence is received without a proper limiting instruction, it becomes part of the general evidence in the case and may be used as proof to the full extent of its rational persuasive power.[18] Here, the record reveals that at the time the videotape was admitted into evidence, Appellant did not object and request that the trial court give the jury a limiting instruction; rather, Appellant's request came after the trial court had begun reading the charge to the jury. As such, his request was untimely and preserved nothing for review.[19] Consequently, *433 we overrule Appellant's third point.
CULPABLE MENTAL STATES
In his fourth point, Appellant argues that the trial court erred in failing to limit the definitions of "intentionally" and "knowingly" in its charge to the jury because aggravated assault on a public servant is a result-oriented offense.[20]
The trial court instructed the jury as follows:
A person acts intentionally, or with intent, with respect to the nature of his conduct or to a result of his conduct when it is his conscious objective or desire to engage in the conduct or cause the result.
A person acts knowingly, or with knowledge, with respect to the nature of his conduct or to circumstances surrounding his conduct when he is aware of the nature of his conduct or that the circumstances exist. A person acts knowingly, or with knowledge, with respect to a result of his conduct when he is aware that his conduct is reasonably certain to cause the result. [Emphasis added]
Where a defendant is charged with a "result of conduct" offense, the trial court errs in not limiting the definitions of the culpable mental states to the result of the defendant's conduct.[21] Appellant concedes that he did not object at trial to the allegedly erroneous definitions in the court's charge. Accordingly, we must decide whether the trial court erred and if so, whether "egregious harm" has occurred.[22]
In making this determination, "the actual degree of harm must be assayed in light of the entire jury charge, the state of the evidence, including the contested issues and weight of probative evidence, the argument of counsel and any other relevant information revealed by the record of the trial as a whole."[23] The purpose of this review is to illuminate the actual, not just theoretical, harm to the accused.[24] Egregious harm is a difficult standard to prove and must be determined on a case-by-case basis.[25]
Appellant argues that the erroneous definitions contained in the court's charge "severely compromised Appellant's basic defenselack of intent to cause bodily injury." Appellant points to portions of his written statement, wherein he states that he "just wanted to get home and I didn't really want to hurt anyone," as evidence that he lacked the intent to cause bodily injury to the officers. We agree with Appellant that the trial court's failure to limit the definition of "intentionally" to the result of conduct would compromise an argument that Appellant lacked the intent to cause the result, as opposed to the intent to engage in the conduct.[26] Appellant does not argue, however, that the failure to limit the definition of "knowingly" *434 in the court's charge compromised a defense that he did not act knowingly with respect to the result of his conduct. Where different theories of the offense are submitted to the jury in the disjunctive, a general verdict is sufficient if the evidence supports at least one of the theories submitted.[27]
Furthermore, we note that aggravated assault on a public servant is an offense that bears two separate, culpable mental states. The first is that the actor intentionally, knowingly, or recklessly causes bodily injury to another.[28] The second is that the actor knows that the object of his assault is a public servant lawfully discharging an official duty.[29] The trial court was, therefore, correct in instructing the jury on the entire statutory definition of "knowingly." In order to commit the offense of aggravated assault on a public servant, a person must act knowingly with respect to the circumstances surrounding his conduct, as well as knowingly with regard to the result of his conduct.[30]
Accordingly, under the facts of this case, we conclude that although the trial court erred in failing to appropriately limit the definition of "intentionally" in its charge to the jury, such error does not rise to the level of egregious harm. We overrule Appellant's fourth point.
CONCLUSION
Having overruled all of Appellant's points on appeal, we affirm the judgment of the trial court.
NOTES
[1] Cardenas v. State, 30 S.W.3d 384, 389-90 (Tex.Crim.App.2000); Narvaiz v. State, 840 S.W.2d 415, 423 (Tex.Crim.App.1992), cert. denied, 507 U.S. 975, 113 S. Ct. 1422, 122 L. Ed. 2d 791 (1993).
[2] McDuff v. State, 939 S.W.2d 607, 614 (Tex. Crim.App.), cert. denied, 522 U.S. 844, 118 S. Ct. 125, 139 L. Ed. 2d 75 (1997).
[3] Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 2789, 61 L. Ed. 2d 560 (1979).
[4] Williams v. State, 937 S.W.2d 479, 483 (Tex. Crim.App.1996).
[5] Matson v. State, 819 S.W.2d 839, 846 (Tex. Crim.App.1991).
[6] Id. at 846.
[7] Tex. Penal Code Ann. § 6.03(a) (Vernon 1994).
[8] Id. § 6.03(b).
[9] 803 S.W.2d 833, 834 (Tex.App.-Dallas 1991, pet. ref'd).
[10] Id.
[11] Id.
[12] Id. at 837.
[13] Id.
[14] Tex. Penal Code Ann. § 6.04(a) (Vernon 1994).
[15] Tex.R. Evid. 105(a).
[16] See Thompson v. State, 752 S.W.2d 12, 14 (Tex.App.-Dallas 1988, pet. dism'd).
[17] Tex.R. Evid. 105(a); Wesbrook v. State, 29 S.W.3d 103, 114 n. 8 (Tex.Crim.App.2000), cert. denied, ___ U.S. ___, 121 S. Ct. 1407, 149 L. Ed. 2d 349 (2001).
[18] Garcia v. State, 887 S.W.2d 862, 878 (Tex. Crim.App.1994), cert. denied, 514 U.S. 1021, 115 S. Ct. 1368, 131 L. Ed. 2d 223 (1995).
[19] Wesbrook, 29 S.W.3d at 114, n. 8.
[20] See Peterson v. State, 836 S.W.2d 760, 764-65 (Tex.App.-El Paso 1992, pet. ref'd); Sneed, 803 S.W.2d at 835-36.
[21] Cook v. State, 884 S.W.2d 485, 491-92 (Tex.Crim.App.1994).
[22] Almanza v. State, 686 S.W.2d 157, 171 (Tex.Crim.App.1985) (op. on reh'g); see Tex. Code Crim. Proc. Ann. art. 36.19; Hutch v. State, 922 S.W.2d 166, 171 (Tex.Crim.App.1996).
[23] Almanza, 686 S.W.2d at 171; see generally Hutch, 922 S.W.2d at 172-74.
[24] Almanza, 686 S.W.2d at 174.
[25] Hutch, 922 S.W.2d at 171.
[26] See Peterson, 836 S.W.2d at 764-65; Sneed, 803 S.W.2d at 835-36.
[27] Fuller v. State, 827 S.W.2d 919, 931 (Tex. Crim.App.1992); Kitchens v. State, 823 S.W.2d 256, 257-58 (Tex.Crim.App.1991).
[28] Tex. Penal Code Ann. § 22.02(a) (Vernon 1994).
[29] Id. § 22.02(b)(2).
[30] See id. § 6.03(b). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917700/ | 178 B.R. 471 (1995)
In re Roger Clinton HAINES, Debtor.
Roger Clinton HAINES, Plaintiff,
v.
REGINA C. DIXON TRUST, et al., Defendants.
Bankruptcy No. 94-61085-S-11. Adv. No. 94-6060-11.
United States Bankruptcy Court, W.D. Missouri.
February 28, 1995.
*472 Thomas L. Williams, Joplin, MO, for plaintiff.
Theodore C. Salveter, III, Springfield, MO, for defendants.
MEMORANDUM OPINION AND ORDER
KAREN M. SEE, Bankruptcy Judge.
Debtor in possession Roger Clinton Haines filed this adversary action seeking to avoid the pre-bankruptcy termination of a lease as a fraudulent transfer under 11 U.S.C. § 548(a)(2). Debtor and the defendant, the Regina C. Dixon Trust, filed cross-motions for summary judgment. Debtor in possession seeks summary judgment on the issue of whether the termination of the lease by the Dixon Trust prior to bankruptcy is a fraudulent transfer under § 548(a)(2). The Dixon *473 Trust filed a motion for summary judgment, arguing that the lease was not a fraudulent transfer, that the lease cannot be assumed under § 365(c)(3), and requesting relief from the automatic stay so the Dixon Trust can proceed with enforcement of its state court judgment.
The court has jurisdiction over this matter and finds that it is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (G), (H) and (O). After review of the cross-motions, briefs, arguments, statements of counsel and evidence submitted in support of the motions, the court finds that summary judgment should be entered in favor of defendants and against plaintiff, the debtor in possession. The court finds that § 365(c)(3) prohibits a debtor in possession from assuming a lease which was validly terminated before the bankruptcy proceeding was filed, that under the circumstances in this case a non-collusively terminated lease should not be avoided as a fraudulent transfer, and that the automatic stay should be terminated to permit defendant to enforce its state court judgment for possession of the premises.
I. FACTS
The facts are undisputed. On November 6, 1991, debtor and two other parties entered into a ground lease with the Dixon Trust, so they could build and operate a restaurant called the Mendez Mining Company in Branson, Missouri. The ground lease provided that upon expiration of the lease, whether at the end of the term or after default, improvements would become the property of the Dixon Trust. Debtor built a restaurant on the property and began operation. Debtor subsequently failed to pay rent and permitted mechanics liens to be filed on the property.
On December 17, 1993, counsel for the Dixon Trust informed debtor by letter that he was in default on the lease. Debtor was given 30 days to cure the default. On January 5, 1994, counsel for the Dixon Trust again wrote debtor to inform him that rent for that month had not been paid. On February 9, 1994, the Dixon Trust terminated the lease because debtor did not pay the rent, did not have the property insured, allowed liens to be filed on the property, and subleased part of the property. All of these events or omissions were defaults under the lease.
Subsequently, the Dixon Trust filed an action in state court for possession of the premises and for damages. On October 5, 1994, the state court entered a judgment which confirmed that the lease was terminated on February 9, 1994, awarded possession of the premises to the Dixon Trust, and awarded damages of $67,895.94, which included back rent and payment for the mechanics liens. Under the terms of the lease and the judgment, the termination had the effect of a forfeiture of all improvements in favor of the Dixon Trust. There was no appeal from the state court judgment and it became final and unappealable before this Chapter 11 bankruptcy proceeding was filed on December 2, 1994.
Debtor does not allege actual fraud, but only that the termination is constructively fraudulent under § 548(a)(2). If the termination is avoided as a fraudulent transfer, debtor hopes to assume the terminated lease and sublease or assign it to another restaurateur. Debtor's counsel stated that debtor is negotiating with parties but does not have an agreement with any party for assignment or subleasing. Counsel also said that as part of a plan to assign to another party, debtor would pay the damages awarded by the state court from the proceeds of the assignment.
II. LEGAL DISCUSSION
Debtor argues that the lease termination was a fraudulent transfer under the constructive fraud provisions of 11 U.S.C. § 548(a)(2), which provides:
(a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily
* * * * * *
(2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
*474 (B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation.
Debtor cited a line of cases which holds that termination of a lease prior to filing of a bankruptcy case can be avoided pursuant to § 548. See In re Edward Harvey Co., 68 B.R. 851, 858 (Bankr.D.Mass.1987) (settlement agreement terminating lease was fraudulent transfer); In re Queen City Grain, Inc., 51 B.R. 722 (Bankr.D.Ohio 1985) (lease termination was fraudulent transfer); In re Fashion World, Inc., 44 B.R. 754, 756 (Bankr.D.Mass.1984) (agreement granting landlord option to terminate lease on 30 days notice was fraudulent transfer).
Defendant argues that 11 U.S.C. § 365(c)(3) prohibits debtor from assuming the lease and therefore, it would be futile to find that the lease was a fraudulent transfer. The court finds that § 365 is dispositive, and therefore, discusses it first.
A. Lease Assumption Under § 365(c)(3)
Title 11 U.S.C. § 365(c)(3) prohibits assumption of a lease of nonresidential real property that has been terminated prior to the filing of the petition. The statute provides:
(c) The trustee may not assume or assign any executory contract or unexpired lease of the debtor, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties, if
* * * * * *
(3) such lease is of nonresidential real property and has been terminated under applicable nonbankruptcy law prior to the order for relief. . . .
The bankruptcy case was filed December 2, 1994. Ten months earlier, on February 9, 1994, the lease was terminated under Missouri law. The termination was confirmed in the state court judgment entered October 5, 1994, which granted possession of the premises to defendant. Pursuant to § 365(c)(3) the lease cannot be assumed. "If the contract or lease has expired by its own terms or has been terminated prior to the commencement of the bankruptcy case, then there is nothing left for the [debtor] to assume or [reject]." In re Huffman, 171 B.R. 649, 653 (Bankr.W.D.Mo.1994).
Plaintiff cited In re Edward Harvey Co., 68 B.R. 851 (Bankr.D.Mass.1987), which is at odds with the simple logic in Huffman. Harvey found the lease was not terminated for purposes of § 365(c)(3) because the trustee still had the power to file an action to avoid termination as a fraudulent transfer. Harvey stated, "[S]ection 365(c)(3) is simply not applicable where, as here, the lease was terminated in a constructively fraudulent manner. Clearly, the lease in question cannot be said to be finally and irredeemably terminated because this Court has the power to permit the Trustee to avoid the transfer and to order the reinstatement of the lease." Id. at 859.
This court declines to follow Harvey, which does not address the consequences of giving § 548(a) precedence over § 365(c)(3). To follow Harvey would require the court to ignore clear statutory language and congressional intent for treatment of terminated nonresidential leases as expressed in § 365(c)(3). "[I]t is a commonplace of statutory construction that the specific governs the general. . . ." Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384, 112 S.Ct. 2031, 2037 [9], 119 L.Ed.2d 157 (1992). Section 365(c)(3), dealing expressly with nonresidential leases terminated prior to the bankruptcy filing, is a more specific section of the Bankruptcy Code than the provisions of § 548(a) for avoidance of fraudulent transfers generally. Thus, principles of statutory construction require that meaning and effect be given to § 365(c)(3), which must be applied instead of § 548(a) to the extent the two statutes are inconsistent.
To apply § 548 in the manner of Harvey would frustrate the specific congressional intent expressed in § 365(c)(3). It is a "settled rule that a statute must, if possible, be construed in such fashion that every word has some operative effect." United States v. Nordic Village Inc., 503 U.S. 30, 36, 112 S.Ct. 1011, 1015[6], 117 L.Ed.2d 181 (1992). If this court applied the Harvey rationale, it would render § 365(c)(3) inoperable. No *475 pre-bankruptcy termination of a lease would be final until the limitations period expired for filing of fraudulent transfer actions. Section 548 would be used by trustees and debtors in possession to avoid the result intended by § 365(c)(3). Section 365(c)(3) must take precedence over § 548(a). Therefore, there is nothing for the debtor to assume because the lease was terminated on February 9, 1994, 10 months before the debtor in possession filed his Chapter 11 bankruptcy petition.[1]
B. Lease Termination as Fraudulent Transfer under § 548(a)(2)
1. Policy Considerations
The avoidance of non-collusive prepetition lease terminations as fraudulent transfers presents significant policy considerations. Strict application of cases such as Harvey and In re Queen City Grain, Inc., 51 B.R. 722 (Bankr.S.D.Ohio 1985), would make it impossible to settle rights in real property. Under the ruling in Harvey, landlords cannot rely on a state court judgment for termination of the lease and possession of the premises, but must wait until the statute of limitations on fraudulent transfer actions has passed. As one authority concluded, "[t]he Harvey [decision] . . . will introduce a significant degree of uncertainty into the termination of leases and the transfer, mortgaging, and insurance of property that has been the subject of a lease termination." Robert E. Goodman, Jr., Avoidance of Lease Terminations as Fraudulent Transfers, 43 Bus. Law. 807, 832 (May 1988) ("Lease Terminations").
Concern with the uncertainty that Harvey -type decisions would have on commerce was a factor in In re Metro Water and Coffee Servs., Inc., 157 B.R. 742, 745-47 (Bankr. W.D.N.Y.1993), which stated:
It cannot go unsaid that the commercial ramifications of reading § 548 too literally so as to allow it to be used to avoid a prepetition, ordinary course of commercial business, non-collusive termination of an executory contract in accordance with its terms when the debtor has materially defaulted under the contract would be devastating.
Metro Water stated that it is "important to step back from the application of the literal provisions of Section 548(a) of the Bankruptcy Code . . . to the facts alleged in the Complaint to take a broad and realistic view of the case at hand." Id. at 746. Metro Water held that, although the termination of a concession agreement with a baseball team was technically a transfer under the broad definition in § 101(58)[54], the termination was not avoidable as a fraudulent transfer because of policy concerns.
Finally, In re Jermoo's, Inc., 38 B.R. 197, 203-04 (Bankr.W.D.Wis.1984) stated:
Since it is reasonable to assume that a great many executory contracts were terminated against insolvent debtors prior to bankruptcy filings, the nearly total silence of the courts strongly suggests a continuing practical construction of the fraudulent transfer statute by the bench and bar which excludes from the statute rightful terminations of operating agreements.
See also Metro Water, 157 B.R. at 746 n. 6. Therefore, the court will not find a "rightful non-collusive termination by reason of a debtor's material defaults to be a fraudulent transfer." Id.
*476 2. Requirement of a Transfer
The elements of a constructively fraudulent transfer are: 1) a transfer of the debtor's interest in property; 2) made within one year before the petition was filed; 3) if the debtor received less than reasonably equivalent value; and 4) the debtor was insolvent. Although the Dixon Trust admitted elements two and four, it was prepared to argue that Debtor's valuation of the improvements was incorrect. The court need not reach the issue of valuation because the lease termination was not a transfer.
The first requirement of § 548(a)(2) is that there be a transfer of the debtor's interest in property. In re Robinson, 169 B.R. 171 (Bankr.N.D.Ill.1994), held that a Chapter 13 debtor could not assume a lease that had been terminated prepetition under Illinois law. The debtor argued that the automatic stay should remain in effect while the debtor litigated whether the lease termination was a fraudulent transfer. Robinson held "[the fraudulent transfer] argument must fail because, when Robinson's lease terminated, her interest in the property terminated as well. Thus, because no property interest belonging to Robinson was transferred, she has failed to prove the first element." Id. at 177[9].
Several cases have found that lease terminations can be fraudulent transfers. In re Edward Harvey Co., 68 B.R. 851, 858 (Bankr.D.Mass.1987) (settlement agreement terminating a lease was a transfer); In re Fashion World, Inc., 44 B.R. 754, 756 (Bankr.D.Mass.1984) (agreement granting landlord an option to terminate lease on 30 days notice was a transfer under § 548); In re Queen City Grain, Inc., 51 B.R. 722 (Bankr.S.D.Ohio 1985) (lease termination between two related corporations). See also In re Pinto, 89 B.R. 486 (Bankr.E.D.Pa.1988); In re Indri, 126 B.R. 443 (Bankr.D.N.J.1991).
"Transfer" is defined in the Bankruptcy Code as "every mode direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property. . . ." 11 U.S.C. § 101(58)[54]. In Queen City, 51 B.R. at 725-26, which involved termination of a lease between related corporations, the party opposing the characterization of a termination as a transfer argued that "termination of an interest in leasehold property by reason of default is outside the Bankruptcy Code definition of transfer (at 11 U.S.C. § 101[(58)][54])." The court held that "[t]here is just no getting away from the fact that upon the termination of [the debtor's] lease, there was a `parting with . . . an interest in property,' for after the termination of the lease [the debtor] no longer had an interest in the Kellogg Avenue grain elevator facility." Id. (citing In re Ferris, 415 F.Supp. 33 (Bankr.D.Okla.1976) (Bankruptcy Act case)).
Both Queen City and Harvey can be distinguished factually from the present case. In Harvey, the termination was pursuant to a settlement agreement entered into by debtor and the landlord. In Queen City, the landlord and debtor were related corporations. Thus, in both cases there was a certain amount of cooperation or collusion which may have affected the courts' perspectives and which does not exist in the present case. Here, it is undisputed that pursuant to the terms of the contract between the parties the Dixon Trust terminated the lease 10 months before the bankruptcy case was filed and also obtained a state court judgment for possession and damages which was final and unappealable before the bankruptcy case was filed.
In an analogous situation involving an executory contract, In re Jermoo's Inc., 38 B.R. 197 (Bankr.W.D.Wis.1984), refused to follow Ferris and held that a franchisor's termination of a franchise agreement did not constitute a transfer under § 548(a)(2) because § 365 is the exclusive statute dealing with executory contracts. Jermoo's, Id. at 204, reasoned that:
It would be anomalous, to say the least, to expect that the drafters of a generally thrifty codification of bankruptcy law would devote a substantial section of the Code to the subject of the assumption or rejection of executory contracts and unexpired leases, while at the same time allowing a portion of that subject to spill over into the section governing fraudulent transfers and obligations. There is no indication *477 in § 365, § 548, or the legislative history of the Code, that the drafters had such an unlikely intention.
Furthermore, Jermoo's found that the termination of the contract was not a transfer, but a transformation of rights:
When property, real, tangible, or intangible, is transferred, the property itself is not transformed by the exchange. The termination of the right to perform on an executory contract, according to the terms of that contract, differs from a transfer of property in this sense: the rights terminated, unlike property, are transformed. At the option of the terminating party, the rights may simply disappear, or as with other kinds of property, may be dispersed, reconveyed or retained.
Id.; but see Lease Terminations, 43 Bus. Law. at 814 (transfer/transformation distinction is abstract considering the Bankruptcy Code's broad definition of "transfer").
In re Coast Cities Truck Sales, Inc., 147 B.R. 674 (Bankr.D.N.J.1992), aff'd, 5 F.3d 1488 (3d Cir.1993), held that the termination of a dealership agreement was not a transfer so as to be attacked under § 548(a)(2). Coast Cities stated that the debtor "possessed no rights as a matter of law which it could relinquish since the contract between Navistar and the debtor had expired by its own terms." Id. at 678. Coast Cities cited In re Wey, 854 F.2d 196, 199 (7th Cir.1988): "Possession of expired rights is the equivalent of the possession of no rights. When a termination is pursuant to the terms of a contract, there is no transfer." Id. In the present case the right to lease the premises was transformed into no right at all when the lease was terminated pursuant to the terms of the contract between the parties. See In re Robinson, 169 B.R. 171, 177[9] (Bankr.N.D.Ill.1994).
As Coast Cities, 147 B.R. at 678, stated, finding that an executory contract termination is a transfer for purposes of § 548 "would render virtually every validly terminated executory contract revivable by a debtor by simply initiating bankruptcy proceedings. Such a result is not only unwarranted, but is contrary to the intent of the drafters of the code." According to the article Lease Terminations, an argument implied, but not expressly stated, by Jermoo's was that "the Bankruptcy Code generally upholds the pre-bankruptcy termination of contracts and leases without threat of later attack. In fact, bankruptcy courts generally disclaim the power to override the pre-petition termination of an executory contract or lease." 43 Bus.Law. at 816 (citing Moody v. Amoco Oil Co., 734 F.2d 1200 (7th Cir.1984), cert. denied, 469 U.S. 982, 105 S.Ct. 386, 83 L.Ed.2d 321 (1984) (cannot revive agreement terminated before bankruptcy if termination otherwise effective)).
The court will follow the reasoning in Jermoo's and Coast Cities and find that a lease termination pursuant to the terms of the contract between the parties, prior to the bankruptcy filing, is not a transfer.
III. CONCLUSION
The court holds that § 365(c)(3), the specific statute relating to leases terminated before bankruptcy, should be given effect over the inconsistent provisions of § 548(a)(2), the more general statute. Therefore, even if the lease termination were a transfer for purposes of § 548(a)(2), which the court does not find, debtor cannot assume the lease because it is prohibited by § 365(c)(3). Therefore, the cross-motions for summary judgment must be ruled in favor of defendant, the Dixon Trust, and against plaintiff, the debtor in possession. Accordingly, it is
ORDERED, ADJUDGED and DECREED as follows:
1. The motion of plaintiff and debtor in possession Roger Clinton Haines for summary judgment is denied and the cross-motion of defendant and creditor the Regina C. Dixon Trust is granted.
2. Judgment is entered against plaintiff Roger Clinton Haines and in favor of defendants on the plaintiff's complaint and it is declared that the termination of the ground lease prior to the filing of plaintiff's Chapter 11 proceeding is not an avoidable fraudulent transfer.
*478 3. The automatic stay is terminated so defendants may enforce the state court judgment for possession of the premises.
4. Costs shall be assessed against plaintiff and debtor in possession Roger Clinton Haines.
NOTES
[1] Even if the court held the lease termination was avoidable under § 548 and the lease was assumable despite § 365(c)(3), debtor would not prevail in this action. Under § 365(b)(1), before debtor can assume the lease he must demonstrate that he has the ability to cure defaults, provide adequate assurance that he will compensate defendant for pecuniary losses resulting from the default and termination, and provide adequate assurance of future performance. Debtor cannot meet the requirements of § 365(b)(1). Debtor plans to pay any damages and cure defaults from proceeds to be received from an assignment after the proposed assumption. However, at the moment there are only negotiations with prospective tenants and no agreement for assignment or subleasing. There is no evidence that debtor could pay the damages of $67,895.94, cure other defaults such as the lack of insurance coverage, and provide adequate assurance that he will perform in the future. Thus, debtor cannot meet the conditions precedent to assumption. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917713/ | 178 B.R. 279 (1995)
Jeffrey W. WARREN and Bush, Ross, Gardner, Warren & Rudy, P.A., Appellants,
v.
CALANIA CORPORATION, Appellee.
No. 94-1516-CIV-T-17E.
United States District Court, M.D. Florida, Tampa Division.
January 31, 1995.
*280 Harold B. Staggs, Bush, Ross, Gardner, Warren & Rudy, P.A., Tampa, FL, for appellants.
Mark David Hildreth, Abel, Band, Russell, Collier, Pitchford & Gordon, Chartered, James D. Gibson, Norton, Moran, Hammersley, Dunlap, Gurley & Lopez, P.A., Sarasota, FL, for appellee.
ORDER
KOVACHEVICH, District Judge.
This cause is before the Court on appeal from the "Order Granting Appellee's Motion to Remand to the Twelfth Judicial Circuit for Sarasota County," entered on August 8, 1994 by Chief Bankruptcy Judge Alexander L. Paskay. Jurisdiction over appeals from the final judgments, orders and decrees of the Bankruptcy Court is vested in the Federal District courts. 28 U.S.C. § 158(a).
The issue presented for this Court's review is whether the Bankruptcy Court erred in remanding, based on lack of subject matter jurisdiction, an action previously removed to the Bankruptcy Court. The action alleges attorney misconduct during Chapter 11 bankruptcy proceedings. The reorganization plan and the order confirming the plan reserved jurisdiction postconfirmation.
STANDARD OF APPELLATE REVIEW
The District Court is bound by the findings of fact made by the Bankruptcy Court unless it determines them clearly erroneous. The burden is on the appellant to show that the Bankruptcy Court's finding is clearly erroneous. Federal Rules of Bankruptcy Procedure, Rule 8013; In re Downtown Properties, Ltd., 794 F.2d 647 (11th Cir.1986). Appellant is entitled to an independent, de novo review of all conclusions of law and the legal significance accorded to the facts. In re Owen, 86 B.R. 691 (M.D.Fla. 1988).
FACTS
On February 16, 1993, Calania Corporation (hereafter "Calania") filed a voluntary petition for relief under Title II, United States Code, in the United States Bankruptcy Court for the Middle District of Florida. Jeffrey W. Warren of the law firm of Bush, Ross, Gardner, Warren & Rudy, P.A. acted as counsel for the Official Committee of Unsecured Creditors in the Reorganization.
On or about January 26, 1994, Calania filed a Modified Second Amended Plan of Reorganization. This Reorganization Plan was confirmed by the Bankruptcy Court on March 18, 1994, nunc pro tunc to March 7, 1994. The court retained jurisdiction in the proceedings "until the consummation of the Plan and the entry of a final decree pursuant to Bankruptcy Rule 3022. . . ." (See Amended Plan of Reorganization, Article IX.)
On June 2, 1994, in the Circuit Court of the Twelfth Judicial Circuit in and for Sarasota *281 County, Florida, Calania commenced an action against Appellants. In its Complaint to the Twelfth Circuit, Calania alleges that appellants violated the Rules of Professional Conduct. Allegedly, appellees breached their fiduciary duties to Calania by failing to negotiate a reorganization plan in good faith and in a timely manner, thereby needlessly increasing attorneys fees.
On June 27, 1994, the action was removed, by appellants, to the Bankruptcy Court pursuant to initiation of procedures, required by 28 U.S.C. 1452 and Rule 9027, Bankruptcy Rules of Procedure. However, on July 7, 1994, Calania sought to remand the action to Circuit Court on grounds that the Bankruptcy Court lacked subject matter jurisdiction.
Because the action was commenced postconfirmation of the reorganization plan, the Bankruptcy Court concluded that it lacked subject matter jurisdiction. Debtor's remand motion was granted after a hearing on July 21, 1994. Appellants appeal this remand order.
DISCUSSION
The bankruptcy court may retain jurisdiction by specific reservation in the Chapter 11 plan of reorganization. A.R.E. Mfg. Co. v. United States (In re A.R.E. Mfg. Co.), 138 B.R. 996, 999 (Bankr.M.D.Fla.1992). However, in this instance, the Bankruptcy Court held that it lacked jurisdiction because the "Retention of Jurisdiction" clause in the Reorganization Plan (Article 9.0) was insufficient to establish it. The attorney misconduct proceeding did not relate to the case and the proceeding could be brought in a forum other than the Bankruptcy Court. (Transcript, pp. 26-28).
The term "relate to the case" refers to all matters "arising in" or "arising under" a Title 11 case. Matter of Wood, 825 F.2d 90, 93 (5th Cir.1987). For a proceeding to "arise under" Title 11, it must be, by its very nature, the kind of proceeding that could only arise in the context of a bankruptcy case. Id. at 97. Appellants unsuccessfully argue that the current proceeding "arises in" a Title 11 case because the attorney represented the Official Unsecured Creditors Committee in the reorganization. Thus, the debtor's attorney misconduct action could only arise in the context of a bankruptcy case. Therefore, appellant's conclude the proceeding is core.
However, this proceeding does not meet the test of a "core" proceeding outlined in Matter of Wood, supra. This proceeding could not conceivably affect administration of the bankruptcy plan. This is an independent action. The fact that potential proceeds from the action may be distributed by the court if an award is received is not enough. If an award is received, provisions exist in the reorganization plan for distributing assets under the retained jurisdiction of the court. Thus, it is not necessary to involve the court in the initial attorney misconduct proceedings.
An action against an attorney for breach of fiduciary duty can exist outside the bankruptcy context. See, e.g., Gutter v. Wunker, 631 So.2d 1117 (Fla. 4th DCA 1994). Situations illustrating the types of matters that must fall under the exclusive jurisdiction of the bankruptcy court are outlined in Matter of Wood, 825 F.2d 90, 97 (5th Cir.1987). These matters include allowance and disallowance of claims, discharges, confirmation of plans, and orders to obtain credit. If the proceeding in question does not significantly affect consummation of the reorganization plan, jurisdiction over the proceeding is not granted merely by a reservation of jurisdiction paragraph in the plan. See In re Tri-L Corp., 65 B.R. 774, 778 (D.Utah 1986). The outcome of the proceeding must conceivably have an effect on the estate being administered in bankruptcy Id. A court may retain jurisdiction to guarantee compliance with the reorganization plan, but, the court "may not keep the corporation in `perpetual tutelage' by. . . . assuming jurisdiction over controversies between the reorganized corporation and third parties." Claybrook Drilling Co. v. Divanco, 336 F.2d 697, 700-01 (10th Cir. 1964).
Appellants reliance on In re TGX Corp., 168 B.R. 122 (W.D.La.1994) is misguided. In TGX, the court retained jurisdiction because the proceeding in question was specifically disclosed in the Plan. The bankruptcy court retained subject matter jurisdiction over *282 postconfirmation litigation alleging preconfirmation breaches of fiduciary duty. The court reasoned that the outcome of the litigation could have an effect on the estate's ability to meet its obligations to creditors under the confirmed plan. The plan was confirmed with full knowledge of the existence of litigation alleging attorney misconduct.
The instant case is distinguishable because the attorney misconduct proceeding was initiated well after confirmation of the Plan. The plan was confirmed without notice or knowledge of the later attorney misconduct action. Thus, it is unnecessary for the bankruptcy court to exercise jurisdiction.
Confirmation of a reorganization plan effectively dissolves the bankruptcy estate. In re Greenley Energy Holdings, 110 B.R. 173, 180 (E.D.Pa.1990). "The bankruptcy court is restricted to exercising postconfirmation jurisdiction over those matters directly relevant to the management of the former estate . . ." In re Haws, 158 B.R. 965, 970. Since the instant proceeding was filed after confirmation of the reorganization plan, the plan was confirmed without evidence of the contemplation of, or reliance on, this proceeding. Following the reasoning in Haws, the Bankruptcy Court was correct in determining that it had no jurisdiction. As stated in Haws, "a bankruptcy court does not remain forever involved in the postconfirmation affairs of its reorganized debtors." Id. at 971.
After confirmation of a Chapter 11 case, the Court has jurisdiction over an adversary proceeding that will in some way significantly affect consummation of the confirmed plan. Id. at 970. Appellee argues that any recovery by the Reorganized Debtor will inure to its benefit and will not be distributed to creditors through any Plan provision. Section 8.3 of the Plan permits a debtor to avoid transfers or obligations and file claims or commence actions to recover claims or assets. Appellee argues that the instant proceeding is not an avoidance or a claim as contemplated under Section 8.3 because Article 1.11 of the Plan defines a "claim" as a claim of a creditor that is set forth in the reorganization plan itself. However, despite the language of section 8.3, Section 7.5 of the plan, "Surplus Funds", clearly states that "in the event that the Reorganized Debtor has surplus cash available at the end of any fiscal year. . . . such surplus cash shall be paid over to the Plan Payment Escrow Account to be distributed pursuant to the Plan." Thus, any damages received from an award in an attorney misconduct action could potentially be applied to satisfy the reorganized debtor's creditors, as is well argued by the appellant. However, appellee correctly asserts the language of Section 8.3, stating that the "mere potential" of recovery is insufficient to create jurisdiction. See, e.g., In re Transamerica Natural Gas Corp., 127 B.R. 800 (S.D.Tex. 1991) (stating that the mere potential of a claim increase or decrease of the pool of funds available, without more, is insufficient to create bankruptcy jurisdiction.) In the event that Reorganized Debtor should receive a damage award in state court, or additional monies from any other source, a mechanism is already in place to properly distribute the funds under the supervision of the bankruptcy court. Thus, the bankruptcy court need not retain jurisdiction over the misconduct claim in order to have the power to distribute any potential proceeds resulting from the action.
CONCLUSION
This Court has carefully reviewed the order of Judge Paskay, and the briefs of both parties. Under the quoted standard of review, the Court finds that the findings of fact of the Bankruptcy Court are not clearly erroneous. The Bankruptcy Court's conclusions of law are sound. Accordingly, it is
ORDERED that the Order of the Bankruptcy Court be affirmed and the Clerk of the Court be directed to enter judgment for the appellee.
DONE AND ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917797/ | 27 Wis. 2d 552 (1965)
CMELAK, Respondent,
v.
INDUSTRIAL COMMISSION and others, Appellants.
Supreme Court of Wisconsin.
April 27, 1965.
June 1, 1965.
*554 For the appellant Industrial Commission the cause was argued by Gordon Samuelsen, assistant attorney general, with whom on the brief was Bronson C. La Follette, attorney general.
For the appellants Curtis Development Company and Liberty Mutual Insurance Company there was a brief by Wickham, Borgelt, Skogstad & Powell, attorneys, and Clayton R. Hahn of counsel, all of Milwaukee, and oral argument by Mr. Hahn.
For the respondent there was a brief and oral argument by Ralph J. Podell of Milwaukee.
*555 HEFFERNAN, J.
The questions on this appeal arise out of the statutory requirements[3] that must be fulfilled to establish eligibility for workmen's compensation. In this case we are particularly concerned with the requirements that the employee at the time of the accident "is performing service growing out of and incidental to his employment" and that the "accident . . . arises out of his employment."
The first requisite, that the employee must be performing service growing out of and incidental to his employment, by statutory definition includes every employee "going to and from his employment in the ordinary and usual way, while on the premises of his employer." Since a company-owned parking lot has been held to be part of the premises (American Motors Corp. v. Industrial Comm. (1962), 18 Wis. (2d) 246, 118 N. W. (2d) 181), the issue is whether Mrs. Cmelak was going to work "in the ordinary and usual way." The hearing officer concluded that the "applicant was not going to or coming from work in the usual and customary manner [sic]." The commission affirmed this finding.
"Going to and from his employment in the ordinary and usual way" has been held to exclude an employee who caught a ride on the railroad cars that were leaving his place of employment when his usual and ordinary way was to walk *556 home.[4] In the instant fact situation, however, Mrs. Cmelak drove her car to work. This was her ordinary and usual way of going to her employment. The test, according to the statute, is not whether the accident and injury were ordinary and usual. The trial court adopted the following interpretation, in which we concur, of the statutory terms:
"The words `in the ordinary and usual way' clearly refer to the mode and route of the transportation or ambulation, . . ."
The second essential element necessary for recovery under the Workmen's Compensation Act is that the accident causing injury must arise out of the employment. See sec. 102.03 (1) (e), Stats. This phrase does not mean that the employment must be the moving force which produces the accident, although this court has stated that this portion of the statute has something to do with a causal connection between the injury and the employment.[5]
The Cutler-Hammer Case has made it clear, however, that the employment does not have to proximately cause the accident or injury, but it is required that the obligation or circumstances of employment have placed the worker at the particular place where the injury occurs. It is also required that the force be one not personal to the employee.[6] This does not mean that no action or effort of the employee may not have concurred in or have caused the injury, rather it means that the occurrence cannot be of a solely idiopathic nature. For example, in Cutler-Hammer, liability was found *557 when the employee fell on a stairway and was injured. The court there followed the findings of the examiner that a pre-existing knee injury had not caused the leg to give out and the fall. Here there is no evidence of any idiopathic defect. It is perfectly clear that the injury was sustained as the result of the coworkers suddenly releasing the car and allowing the weight to be borne by Mrs. Cmelak alone.
We have no difficulty in holding that this accident arose out of the employment since Mrs. Cmelak was in the parking lot as a circumstance of her employment, when she was injured through the agency of a third person (though she may have been negligent or participated in the conduct leading to the injury).
In the Cutler-Hammer Case this court concluded that the claimant was eligible under the "positional-risk" doctrine, when he fell on a stairway that he used to punch the time clock at the end of the day's work. Here the claimant was in the same situation by virtue of the fact that her employment occasioned her being in the parking lot at the time the injury occurred.
Both the appellants maintain that the commission made a finding of fact and that the reviewing courts are bound by this finding if there is any credible evidence to support the finding. The commission also urges that the court invoke the rule that the findings of the commission are conclusive where it is possible to draw different inferences from undisputed facts.
With these well-accepted rules we have no quarrel, but they are not applicable here. It is equally axiomatic that when but one inference can be drawn from a set of facts that the conclusion is one of law and not of fact. Horvath v. Industrial Comm. (1965), 26 Wis. (2d) 253, 131 N. W. (2d) 876. Here it is undisputed that the claimant was going to work by precisely the same mode of transportation, following the same route, and arriving at the same destination *558 as she had done during the whole course of her employment. We can only conclude as a matter of law that she was "going to her employment in the ordinary and usual way."
We conclude that the commission applied erroneous law to these undisputed facts. Under these circumstances the courts are not bound by a conclusion of the Industrial Commission.
The commission on the undisputed facts concluded, "It is recognized and established that negligence is not a bar to recovery, but claimant herein created the hazard which caused her injury." It was on this principle of law that the commission concluded that the accident did not arise out of the employment.
In a well-reasoned opinion the learned trial judge correctly stated that this expressed an improper application of law to the undisputed facts. As we have stated above, the fact that the claimant participated in the conduct that caused the injury does not render her ineligible for compensation, if she in other respects meets the statutory qualifications. We conclude that she has done so and affirm the judgment of the trial court.
By the Court.Judgment affirmed.
NOTES
[3] Sec. 102.03, Stats. "CONDITIONS OF LIABILITY. (1) Liability under this chapter shall exist against an employer only where the following conditions concur: . . .
"(c) 1. Where, at the time of the injury, the employe is performing service growing out of and incidental to his employment. Every employe going to and from his employment in the ordinary and usual way, while on the premises of his employer, . . . shall be deemed to be performing service growing out of and incidental to his employment; . . .
"(e) Where the accident or disease causing injury arises out of his employment."
[4] Foster-Latimer Lumber Co. v. Industrial Comm. (1918), 167 Wis. 337, 167 N.W. 453.
[5] See Cutler-Hammer, Inc., v. Industrial Comm. (1958), 5 Wis. (2d) 247, 252, 92 N. W. (2d) 824. Cf. 1 Larson, Law of Workmen's Compensation, p. 42, sec. 6.10, in which he differentiates between these by stating that "arising out of" refers to causal origin, and "course of employment" relates to the time, place, and circumstances of the accident in relation to the employment.
[6] Compare Larson, ibid. p. 48, sec. 7.00. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3076042/ | IN THE
TENTH COURT OF APPEALS
No. 10-13-00236-CV
VARIAN MEDICAL SYSTEMS, INC.,
Appellant
v.
JANICE KENOYER AND ELEKTA, INC.,
Appellees
From the 40th District Court
Ellis County, Texas
Trial Court No. 85321
MEMORANDUM OPINION
Appellant, Varian Medical Systems, Inc., and appellees, Elekta, Inc. and Janice
Kenoyer, have filed a joint motion to dismiss this appeal. See TEX. R. APP. P. 42.1(a)(2).
Dismissal of this appeal would not prevent a party from seeking relief to which it
would otherwise be entitled. The motion is granted, and the appeal is dismissed.
Further, pursuant to their joint motion, the parties will bear their own costs.
AL SCOGGINS
Justice
Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Motion granted; appeal dismissed
Opinion delivered and filed August 8, 2013
[CV06]
Varian Medical Systems, Inc. v. Kenoyer Page 2 | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/4199426/ | 300 Multiple Choices
Multiple Choices
The document name you requested (/attorneys/assets/opinions/appellate/unpublished/a3069-14.pdf) could not be found on this server.
However, we found documents with names similar to the one you requested.Available documents:
/attorneys/assets/opinions/appellate/unpublished/a3269-14.pdf (mistyped character)
/attorneys/assets/opinions/appellate/unpublished/a4069-14.pdf (mistyped character)
IBM_HTTP_Server at www.judiciary.state.nj.us Port 443 | 01-03-2023 | 08-28-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/2460492/ | 16 F. Supp. 2d 762 (1998)
BLUE MARLIN CONSTRUCTION CO., INC.
v.
GENERAL STAR INDEMNITY CO.
No. CIV.A. G-98-47.
United States District Court, S.D. Texas, Galveston Division.
August 18, 1998.
Christopher David Bertini, Mills Shirley Eckel and Bassett, Galveston, TX, for Plaintiff.
Beth D. Bradley, Thompson Coe Cousins & Irons, Dallas, TX, Ellen Lewis Van Meir, Thompson Coe Cousins and Irons, Dallas, TX, for Defendant.
*763 ORDER GRANTING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
KENT, District Judge.
Plaintiff brings this case seeking a declaration of Defendant's duties and obligations pursuant to an insurance contract entered into by both parties. Plaintiff also alleges breach of contract, breach of the common-law duty of good faith and fair dealing pursuant to Aranda v. Ins. Co. of North America, 748 S.W.2d 210 (Tex.1988), violation of the Texas Insurance Code, TEX. INS. CODE ANN. art. 21.21, and violation of the Texas Deceptive Trade Practices Act ("DTPA"), TEX. BUS. COMM. CODE ANN. § 17.46 et seq. Now before the Court are Motions for Partial Summary Judgment from both Plaintiff and Defendant. For the reasons that follow, Defendant's Motion for Partial Summary Judgment is GRANTED, and Plaintiff's Motion for Partial Summary Judgment is DENIED. Furthermore, the remainder of Plaintiff's claims are DISMISSED WITHOUT PREJUDICE.
I. FACTUAL SUMMARY
The facts of this case are not disputed. On July 28, 1996, Plaintiff was employed by Applied Industrial Materials Corporation ("AIMCORP"), providing certain equipment, labor, and expertise in the marine contracting and pile driving field. Pursuant to instructions from AIMCORP, Plaintiff's personnel were required to move a vibro hammer, a heavy piece of pile driving equipment leased by AIMCORP from a third party. The vibro hammer consists of two component parts: the hammer that actually physically does the pile driving, and the power pack. The component parts of the vibro hammer are connected by a series of hoses and wires which are bundled together. After moving the hammer component with a crane owned by Plaintiff, Plaintiff personnel repositioned the crane to pick up the power pack and hoses, which remained attached to the hammer. Unfortunately, while lifting the power pack, Plaintiff's crane buckled and the power pack fell on top of the hammer, damaging both component parts of the vibro hammer. No other equipment was damaged.
The cost to repair the damaged vibro hammer totaled $70,510.12. Initially, AIMCORP's insurance carrier, CIGNA, assumed the majority of the costs for the repair, except for the $10,000 deductible and one month lost lease time which was paid by Plaintiff. CIGNA later notified Plaintiff of its demand that Plaintiff reimburse CIGNA for the total amount paid to repair the vibro hammer. AIMCORP then filed suit against Plaintiff in Galveston County state court to recover those monies paid by AIMCORP's insurance carrier. That suit remains pending. After being sued, Plaintiff sought indemnity from Defendant pursuant to their insurance agreement. After Defendant investigated the claim, it determined that Plaintiff's claim for indemnity was not covered by the policy, because that policy excludes damage to tangible personal property in the "care, custody or control" of the insured and excludes damage to property "loaned to the insured." Defendant therefore rejected Plaintiff's claim. Thereafter, Plaintiff filed suit in this Court seeking a declaratory judgment that it is entitled to coverage; Plaintiff also alleges breach of contract, violations of the Texas Insurance Code, and violations of the DTPA.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2552-53, 91 L. Ed. 2d 265 (1986). When a motion for summary judgment is made, the nonmoving party must set forth specific facts showing that there is a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). Issues of material fact are "genuine" only if they require resolution by a trier of fact. See id. 477 U.S. at 248, 106 S. Ct. at 2510. The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for *764 summary judgment. Only disputes over facts that might affect the outcome of the lawsuit under governing law will preclude the entry of summary judgment. See id. 477 U.S. at 247-48, 106 S. Ct. at 2510. If the evidence is such that a reasonable fact-finder could find in favor of the nonmoving party, summary judgment should not be granted. See id.; see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986); Dixon v. State Farm Fire & Casualty Co., 799 F. Supp. 691, 693 (S.D.Tex.1992)(noting that summary judgment is inappropriate if the evidence could lead to different factual findings and conclusions). Determining credibility, weighing evidence, and drawing reasonable inferences are left to the trier of fact. See Anderson, 477 U.S. at 255, 106 S. Ct. at 2513.
Procedurally, the party moving for summary judgment bears the initial burden of "informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrates the absence of a genuine issue of material fact." Celotex Corp., 477 U.S. at 323, 106 S. Ct. at 2553; see also FED. R. CIV. P. 56(c). The burden then shifts to the nonmoving party to establish the existence of a genuine issue for trial. See Matsushita, 475 U.S. at 585-87, 106 S. Ct. at 1355-56; Wise v. E.I. DuPont de Nemours & Co., 58 F.3d 193, 195 (5th Cir.1995). The Court must accept the evidence of the nonmoving party and draw all justifiable inferences in favor of that party. See Matsushita, 475 U.S. at 585-87, 106 S. Ct. at 1355-56. However, to meet its burden, the nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts," but instead, must "come forward with `specific facts showing that there is a genuine issue for trial.'" Id. at 586-87, 106 S. Ct. at 1355-56 (quoting FED. R. CIV. P. 56(e)).
III. ANALYSIS
The issue before the Court is ripe for summary resolution. Neither party disputes that the vibro hammer is tangible personal property that suffered "property damage" as that term is defined in the pertinent policy. Thus, the issue before the Court is whether the policy exclusions found in the insurance contract apply to the undisputed facts of this case. The Court initially looks to the language of the policy. It provides:
1. Insuring Agreement
We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.
. . . . .
2. Exclusions.
This insurance does not apply to:
. . . . .
j. "property damage" to:
. . . . .
(3) property loaned to you;
(4) property in the care, custody or control of the insured;
Texas law construes insurance policies pursuant to the same rules of interpretation as are contracts generally. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex.1994). Contract interpretation is the means by which the Court determines the intent of the parties, which is primarily derived by examining the words used in the contract and the subject matter to which they relate. See State Farm Mutual Auto. Ins. Co. v. Pan American Ins. Co., 437 S.W.2d 542, 544 (Tex.1969). The language used by the parties to a contract should be accorded its plain grammatical meaning, unless it definitely appears the intention of the parties would thereby be defeated. See Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 529 (Tex.1987); Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex.1985). If the contract is worded so that it can be given a certain and definite meaning or interpretation, it is not ambiguous, and the Court will construe the contract as a matter of law. See Coker v. Coker, 650 S.W.2d 391, 393 *765 (Tex.1983). The Court finds no ambiguities in the relevant language of the policy at issue here.
Plaintiff argues that the care, custody or control exclusion precludes insurance coverage only in cases in which the insured had total and exclusive control over the damaged property. According to Plaintiff, because prior to the accident Plaintiff's personnel were specifically directed to move the vibro hammer, because AIMCORP's personnel participated in some capacity in helping move the hammer, and because AIMCORP actually told Plaintiff's personnel where to move the hammer, Plaintiff did not have the requisite total control over the vibro hammer and the policy exclusion does not apply. In support of its argument, Plaintiff primarily relies upon three cases: SnyderGeneral Corp. v. Century Indem., Co., 113 F.3d 536 (5th Cir. 1997); National Standard Ins. Co. v. Wilson Indus., Inc., 556 S.W.2d 838 (Tex.App. Houston [14th Dist.] 1997, no writ); and Home Indem. Co. v. Fuller, 427 S.W.2d 97, 102 (Tex.Civ.App. Austin 1968, writ ref'd n.r.e.). As this Court reads these cases, they offer little support for Plaintiff's contention.
In SnyderGeneral, the insured sought, but was denied, coverage to recompense the cleanup of groundwater contamination. In denying the claim, the insurer contended that the care, custody or control exclusion applied, because the insured had spilled the contaminate while using the groundwater in its operations. See SnyderGeneral, 113 F.3d at 538. The court disagreed, holding that because the insurer could not show that the insured had total control of the groundwater that is, because the insured was only extracting and using as much of the groundwater as was necessary for operations at the time of the groundwater contamination the insurer could not deny coverage based on that policy exclusion. See id. 113 F.3d at 539. The case at bar is clearly different. Here, Plaintiff seeks repair monies for tangible personalty which Plaintiff's personnel were going to use and were therefore attempting to move. Unlike the situation in SnyderGeneral, this is not a case where the damage was inflicted as a result of property in Plaintiff's control.[1] Instead, here, the damage was inflicted upon the very property in Plaintiff's control. Regardless of who directed Plaintiff's personnel to do so, it is clear that at the time it was damaged, the vibro hammer was in the care, custody, or control of Plaintiff.
Wilson too is inapposite. In Wilson, the insured was sued after the vessel it had chartered sunk. See Wilson, 556 S.W.2d at 838. In granting a directed verdict against the insurer, who had contended that the care, custody or control exclusion applied, the court noted that the charter agreement specifically stated that the owner of the vessel, and not the insured, was to maintain custody and control of the vessel. The court noted further that the insured used the vessel as a platform to perform its duties, but the vessel itself remained in the control of the captain of the vessel. See id. 556 S.W.2d at 839. Again, the situation extant in the Wilson case differs from that here. Although Plaintiff was clearly given instructions regarding what work needed to be completed, and although, to an extent, Plaintiff's personnel were told how to complete the work, it was personnel employed by Plaintiff who were actually moving the vibro hammer when it was damaged.
Finally, in Fuller, the insured was working on the engine of a boat when it exploded. See Fuller, 427 S.W.2d at 99-100. Holding against the insurer, the Fuller court found that, although the insured had secured the boat to the dock, had filled it with gasoline, had charged the battery, and had attempted to repair the motor at the time of the explosion, the insured did not actually have the right to exercise control over the boat. The court observed that the owner, who was present at the dock at the time of the explosion, had himself launched the boat and his small son remained aboard the boat at the time of the explosion. Thus, the policy exclusion was inapplicable. Again, the facts of this case differ materially from those before the court in Fuller. Here, unlike the insured in Fuller, who was simply working on the boat's motor when the explosion occurred, Plaintiff *766 in this case was actually moving the entire piece of equipment damaged and intended to use the vibro hammer to perform its contractual duties.
Instead of those cases cited by Plaintiff, this Court finds the holding in Goswick v. Employers' Casualty Co., 440 S.W.2d 287 (Tex.1969), particularly instructive in the resolution of the present Motions. In Goswick, the insured was in the oil well servicing business and was hired to change an underground pump. It was necessary for the insured to remove rods and tubing from the well and, during that process, an explosion caused the tubing to drop to the bottom of the hole thus causing extensive damage to the well. See id. 440 S.W.2d at 289. The insurer denied coverage of the well on the basis of the "care, custody or control" exclusion. After stating the general rule that property under the "control" of the insured is limited to the particular object of the insured's work, usually personalty, and to other property which he totally and physically manipulates, the Goswick court determined that the insured had complete physical control over the rods and tubing, but did not have direct control over the well. The Goswick court further observed that not only was the damaged property under the immediate supervision of the insured, it was also a necessary element of the work involved. See id. However, because the damaged well was merely incidental to the insured's specific task, it was not within the policy exclusion and unlike the rods and tubing, was therefore covered by the policy.
In this Court's view, contrary to Plaintiff's contention, the fact that Plaintiff's personnel were acting pursuant to AIMCORP's instructions did not prevent Plaintiff from exercising care, custody or control over the vibro hammer.[2] As in Goswick, here Plaintiff, like any employee or independent contractor, was performing tasks pursuant to instructions when the accident occurred. Here, Plaintiff had immediate supervision of the vibro hammer, and it was a necessary element of Plaintiff's work. Plaintiff fully admits that it owned the crane, that its personnel were operating the crane, and that it intended to use the hammer to accomplish its contractual tasks. Plaintiff further concedes that it was employed by AIMCORP, and therefore was contractually bound to perform pile driving and other similar work for AIMCORP. Thus, contrary to Plaintiff's assertion, by definition, every task Plaintiff performed at the jobsite was at AIMCORP's request, either directly or indirectly; whether AIMCORP told Plaintiff's employees to do the work is therefore of no moment to this analysis. The Court understands that its holding today could be interpreted to mean that any piece of equipment used by an insured at the jobsite is excluded from damage coverage.[3] The Court, however, finds such an interpretation to be consistent with the terms of the policy at issue. On the other hand, if the Court accepts Plaintiff's argument, the policy exclusion at issue would never apply, because as AIMCORP'S employee, Plaintiff was constantly taking instructions regarding particular work to be done, and could never be said to be in complete and total control of anything. Such interpretation was clearly not the intention of these parties when entering the contract at issue.
Although a very close question, the Court concludes that based on the plain language of the contractual provision at issue, the vibro hammer was in the care, custody or control of Plaintiff at the time it was damaged. Therefore, according to the parties' contract, compensation for its damage is not covered by the relevant policy. Consequently, Defendants' Motion for Partial Summary Judgment is GRANTED and Plaintiff's Motion for Partial Summary Judgment is DENIED. Having resolved the main claim regarding the issue of coverage, the Court declines to exercise supplemental jurisdiction over the remaining claims in this case; thus, Plaintiff's remaining claims are hereby DIS- *767 MISSED WITH PREJUDICE. The parties are ORDERED to bear their own taxable costs and expenses incurred herein to date. The parties are also ORDERED to file no further pleadings on these issues in this Court, including motions to reconsider or the like, unless justified by a compelling showing of new evidence not available at the time of the instant submissions. Instead, the parties are instructed to seek any further relief to which they feel themselves entitled in the United States Court of Appeals for the Fifth Circuit, as may be appropriate in due course.
IT IS SO ORDERED
FINAL JUDGMENT
For the reasons set forth in the Court's Order Granting Partial Summary Judgment in favor of Defendant issued this day, all of Plaintiff's claims are hereby DISMISSED WITHOUT PREJUDICE. The parties are ORDERED to bear their own taxable costs and expenses incurred herein to date. The parties are also ORDERED to file no further pleadings on these issues in this Court, including motions to reconsider or the like, unless justified by a compelling showing of new evidence not available at the time of the instant submissions. Instead, the parties are instructed to seek any further relief to which they feel themselves entitled in the United States Court of Appeals for the Fifth Circuit, as may be appropriate in due course.
THIS IS A FINAL JUDGMENT.
NOTES
[1] This Court agrees with the holding in SnyderGeneral. In a groundwater contamination case, it is highly doubtful that the insured could ever be found to be in "control" of the groundwater.
[2] Indeed, Plaintiff's use of the vibro hammer created an implied bailment. See Berlow v. Sheraton Dallas Corp., 629 S.W.2d 818, 821. Because of the bailment, it is clear that AIMCORP had every right to expect Plaintiff to return the vibro hammer in its original condition. This Court also relies upon the holding of Hartford Casualty Co. v. Cruse, 938 F.2d 601, 604 (5th Cir.1991).
[3] Of course, the Court's holding today is limited to the facts at issue here. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571232/ | Sherry Mercer, Petitioner-Appellant,
v.
Pamida, Fidelity & Guaranty Insurance Underwriters and State of Wisconsin Labor & Industry Review Commission, Respondents-Respondents.
No. 2005AP2133.
Court of Appeals of Wisconsin, District III.
August 10, 2006.
Before Lundsten, P.J., Dykman and Higginbotham, JJ.
¶1 PER CURIAM.
Sherry Mercer appeals the circuit court's order affirming a decision of the Labor and Industry Review Commission. Mercer argues that the Commission's decision is not supported by credible evidence. We affirm.
¶2 We review the record to determine whether there is credible evidence to support the Commission's determination. Vande Zande v. DILHR, 70 Wis. 2d 1086, 1097, 236 N.W.2d 255 (1975). If such evidence exists, we must uphold the Commission's decision. Id. at 1095, 1097. We do not weigh the evidence that supports the Commission's decision against the evidence opposed to the Commission's decision. Id. at 1097. The Commission is the primary fact finder, not its hearing examiners. Burton v. DILHR, 43 Wis. 2d 218, 222, 168 N.W.2d 196, 170 N.W.2d 695 (1969).
In evaluating a situation in which the commission reverses the recommendation of its examiner or examiners, it is to be kept in mind that the primary fact-finder is the agency, not the hearing officer. The dominant power to make findings of fact is in the agency heads, not in its hearing officers. One writer has termed this recognition of the ' ... substantive difference between the power to recommend and the power to decide.'
Id.
¶3 The result in this case is driven by our standard of review. The Commission credited the testimony of Dr. Paul Cederberg that Mercer had no disability to her back attributable to the leg injury Mercer sustained while unloading a truck at work on July 1, 1998. Dr. Cederberg concluded that Mercer's disability was attributable to a degenerative condition unrelated to work. He based his decision on the fact that Mercer had a history of back problems and did not first complain about back pain after her work accident until well after it occurred. Dr. Cederberg's opinion is supported by the medical record,[1] which shows that, after her July 1 accident, Mercer visited the doctor on July 8, July 22, August 5, August 20, and September 8, complaining of pain in her leg and ankle, but not her back.[2] Mercer first complained to the doctor about back pain on December 4, five months after her leg injury. Because the Commission found Dr. Cederberg's opinion to be most credible, and his conclusion in turn is solidly based on evidence found in the medical record, we conclude there is credible evidence to support the Commission's conclusion that Mercer's damages were not a result of her injury at work.[3]
¶4 Mercer suggests that the hearing examiner's findings, which were reversed by the Commission, are well supported in the evidence and should have been affirmed. Where, as here, the Commission has reversed the recommendation of its hearing examiner, it is well established that the Commission's findings prevail because it is the primary finder of fact. Burton, 43 Wis. 2d at 222.
By the Court. Order affirmed.
NOTES
[1] We note here that in this and other cases in which we must review LIRC records, we have found searches of the record extremely difficult due to a lack of pagination and indexes in conjunction with the large number of documents contained within any given LIRC record. Although there is no rule requiring LIRC to include such pagination and indexes with their records, it would substantially assist in the review of LIRC cases if the voluminous documents LIRC transmits for inclusion in appellate records were organized similarly to the appellate record itself. Just as the clerk of courts is required by statute to "identify by number each paper, and prepare a list of the number papers [i.e., a record index]," WIS. STAT. § 809.15(2), for the sake of efficiency, accuracy and consistency, LIRC would do a great service to appellate review if it followed this model in preparing its own record.
Further, regardless of whether LIRC complies with our request, we expect the parties to include citations to the LIRC record that, so far as possible, directs our attention to specific pages. For example, parties could specify the name of the document, its date, whether it is an attachment to another document, and how many pages in from the start of the document is the specific page or pages to be referred to. Parties could also provide copies of the pertinent documents in their appendices. If the latter option is exercised, parties should still direct our attention, to the extent possible, to the specific location in the record where the document can be found.
[2] On September 8, Mercer drew a "pain diagram" that shows pain at the front and side of her right hip in addition to her leg and ankle.
[3] Mercer argues that "[t]here is ample evidence to support that Ms. Mercer's low back pain was the result of the July 1, 1998 accident." This is the wrong standard of review. We "must search the record to locate credible evidence which supports [the Commission's] determination, rather than weighing the medical evidence opposed thereto." Vande Zande v. DILHR, 70 Wis. 2d 1086, 1097, 236 N.W.2d 255 (1975). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917672/ | 178 B.R. 645 (1995)
In re NUTRI/SYSTEM OF FLORIDA ASSOCIATES.
ANSEL PROPERTIES, INC., et al.
v.
NUTRI/SYSTEM OF FLORIDA ASSOCIATES, et al.
In re NUTRI/SYSTEM, INC.
MB LIMITED PARTNERSHIP, et al.
v.
NUTRI/SYSTEM, INC., et al.
Civ. A. Nos. 94-4830, 94-4859. Bankruptcy Nos. 93-14121(DAS), 93-12725(DAS). Adv. Nos. 93-0942, 93-0941.
United States District Court, E.D. Pennsylvania.
February 16, 1995.
*646 *647 Andrew Bershad, Alan C. Gershenson, Blank, Rome, Comisky & McCauley, Philadelphia, PA, for Ansel Properties, Inc., Rreef Mid America East-IV, Inc. in Civ.A. No. 94-4830.
Robert A. Hendricks, Grand Rapids, MI, for Official Creditor Committee in Civ.A. Nos. 94-4830 and 94-4859.
Bruce S. Sperling, Eugene J. Frett, Chicago, IL, for Heico Acquisition Co., Inc., Heico Cosmetics, Inc., NSI Debt, Inc. in Civ.A. Nos. 94-4830 and 94-4859.
Lee A. Rosengard, Stradley, Ronon, Stevens & Young, Philadelphia, PA, for NSI Acquisition Ltd. Partnership in Civ.A. Nos. 94-4830 and 94-4859.
Margaret S. Woodruff, Schnader, Harrison, Segal & Lewis, Philadelphia, PA, Eugene J. Frett, Chicago, IL, for Nutri/System of Florida Associates in Civ.A. No. 94-4830.
Bruce S. Sperling, Eugene J. Frett, Chicago, IL, for Nutri/System, Inc., in Civ.A. No. 94-4859.
Andrew Bershad, Alan C. Gershenson, Howard T. Glassman, Blank, Rome, Comisky & McCauley, Philadelphia, PA, for Donald M. Smith, Virginia L. VanMaanen, Allied Amboy Co., Washington Mut. Sav. Bank, Ansel Properties, Inc., Angelo S. Mallozzi, Westmont Enterprises, Rreef Mid America/East-V Rosedale Square, Inc., The Clinton Employment Center Associates, L.P., Harlington Realty Corp., The J.S. Co., Foothill & La Crescenta Associates, Morse Road Co., MB Ltd. Partnership in Civ.A. No. 94-4859.
Nicholas J. Le Pore, II, Margaret S. Woodruff, Schnader, Harrison, Segal & Lewis, Philadelphia, PA, for Nutri/System, Inc. in Civ.A. No. 94-4859.
Frederic J. Baker, U.S. Trustees Office, U.S. Dept. of Justice, Philadelphia, PA, pro se.
MEMORANDUM AND FINAL JUDGMENT
HUTTON, District Judge.
I. BACKGROUND
This is an appeal from the Bankruptcy Court's final judgment entered in favor of the Appellees on July 8, 1994. In re Nutri/System, Inc., 169 B.R. 854 (Bankr.E.D.Pa. 1994). The appellants are former landlords of debtors Nutri/System, Inc. (N/S) and Nutri/System of Florida Associates (N/SF). On December 22, 1993, the appellants, who had leases with N/S and N/SF, filed two class actions, one against N/S and the other against N/SF. Named as defendants in the two class actions were the debtors and several entities ("Heisley Defendants") controlled by Michael Heisley ("Heisley") which were all involved in the acquisition of the debtors' *648 assets.[1] The two class actions were consolidated for trial.
The appellants filed the class actions in order to attempt to recoup lost post-petition administrative rents from the appellees. The appellants proffered three theories of recovery. First, the appellants claimed that the appellees' secured claims should have been equitably subordinated to the appellants' claims pursuant to 11 U.S.C. § 510(c). Second, the appellants claimed that the debtors' corporate veil should be pierced. Third, the appellants claimed that they were entitled to a surcharge on the appellees' collateral in an amount equal to their claims pursuant to 11 U.S.C. 506(c). The Bankruptcy Court found that the appellants had failed to produce sufficient evidence to support a claim under any of the proffered theories of recovery.
The two actions were originally assigned to separate district judges on appeal. Subsequently, however, the actions were assigned to this Court. Considering the virtually identical nature of the two actions and the consolidation below, they will be consolidated for the purpose of appeal.
The factual findings made by the Bankruptcy Court are not in dispute and are as follows:
N/S operated and franchised weight loss centers which administered weight loss programs and sold diet foods. In 1991, N/S ran into financial difficulties, and began a search for investors to either provide capital or purchase N/S. To facilitate the search, N/S hired a broker in 1992. In January, 1992, the broker was subsequently replaced by Arthur Anderson & Co. ("Arthur Anderson"), a national accounting firm. Brian Haveson ("Haveson"), an Arthur Anderson employee, who later became an employee of one of the Heico Defendants conducted the search for potential investors. Haveson introduced N/S to a number of potential investors, including Heisley.
At the time Haveson started introducing possible investors to N/S, a consortium of banks (the "Bank Group") held $40,000,000 in senior secured debt of N/S. None of the possible investors located by Haveson came close to offering the amount of the Bank Group's senior secured debt. The proposals ranged from $10,000,000 to $21,000,000. The high offer, however, was not considered to be a serious offer by N/S. Heisley's offer was approximately $12,500,000.
In March, 1993, Heisley and his employees began performing a "due diligence" inspection of N/S. Arthur Anderson considered Heisley's offer to be superior to all others and advised N/S to accept it. Negotiations then ensued between Heisley and N/S.
On April 27, 1993, however, before these negotiations could proceed, the Bank Group, concerned that N/S was going to declare bankruptcy, seized N/S's accounts (the "Bank Sweep"). N/S's management, and even Heisley, attempted to convince the Bank Group to release the seized funds. The Bank Group refused and as a consequence, N/S was forced to shut down its operations. N/S instructed all the stores it owned ("Company Stores") to close down the next day, and N/S employees were instructed not to report to work. N/S also ceased shipping food products to its stores. In an attempt to restart food distribution a group of franchisees (the "Franchisees"), filed an involuntary Chapter 7 Bankruptcy against N/S on May 4, 1993.
On May 6, 1994, an expedited hearing was held on a motion of the Franchisees to appoint an interim trustee. At that hearing, all the interested parties, the Bank Group, the Franchisees, and the shareholders and management of N/S, were in favor of allowing HAC to step in and manage N/S, instead of a trustee. In addition, Heisley represented to the Court that he was still interested in purchasing N/S's assets, and was opposed to the appointment of a trustee. At the end of the hearing, the Bankruptcy Court entered an order stating that unless the Bankruptcy Court was notified by 12:00 p.m. on May 7, 1993 that HAC had acquired effective control of N/S, the Court would appoint an interim trustee. The Court did not receive notice by *649 12:00 p.m. on May 7, 1993, and thus an interim trustee was appointed.[2]
A few days later, the Franchisees who had originally filed the motion for appointment of the trustee, filed an emergency motion to vacate the appointment of the trustee. A hearing was held on May 10, 1993. At the hearing, it was established that HAC was in control of the N/S and that all interested parties, including the Franchisees, the Bank Group, and the former management and shareholders of N/S, but not the trustee, were in favor of removing the trustee and placing Heisley in control. On May 12, 1993, the Bankruptcy Court vacated the appointment of the trustee.
At the same time the trustee was removed, the Board of Directors of N/S voluntarily resigned and were replaced by Heisley and two of his employees. The new board elected Heisley chairman and chief executive officer of N/S. N/S then brought back certain key employees, who had left N/S after the bank sweep, to run the day to day operations of N/S. Joel Rosen, one of the key employees brought back and N/S's general counsel, suggested that N/S hire the firm of Schnader, Harrison, Segal and Lewis ("Schnader") as bankruptcy counsel. Because of concern that administrative claimants such as the debtors' outside professionals would not get paid for their services because of the size of N/S's secured debt, Heico, Inc., an entity controlled by Heisley and not a party to this action, guaranteed Schnader's fees. Subsequently, the Bankruptcy Court approved of Schnader's appointment.
During May, 1993, Heico continued its negotiations with the Bank Group regarding the purchase of N/S's assets. In early May, 1993, the parties drew up an unsigned term sheet under which Heico would purchase the assets of N/S from the Bank Group for $14,000,000. The Term Sheet outlined that in order for the transaction to go forward, the Bank Group would have to secure relief from the automatic stay to foreclose on its collateral (N/S's assets) and then the Bank Group was to sell the foreclosed-upon assets to Heico in an extrajudicial foreclosure sale. The term sheet also recited that the Bank Group would consent to the conversion of N/S's bankruptcy to Chapter 11 and to a cash collateral agreement under which cash would be provided to N/S to facilitate distribution and sale of food to Franchisees. The agreement between the Bank Group and HAC was not formalized until an agreement was executed on August 30, 1993.
On June 3, 1993, the Franchisees, with the consent of N/S and the Bank Group, filed an amended involuntary petition seeking to convert the bankruptcy proceeding to Chapter 11. The Franchisees were willing to accommodate the debtors in the conversion of the case because arrangements had been made to start food distribution. Indeed, HFA had, at its own expense, began to distribute food to the Franchisees. The Bankruptcy Court converted the case to Chapter 11 on June 4, 1993.
On June 11, 1993, N/S filed an application requesting authority to use the cash collateral it was to receive from the Bank Group pursuant to the cash collateral arrangement with the Bank Group. After an expedited hearing on June 16, 1993, the Court issued an interim order which was later extended by subsequent interim orders through November, 1993, approving the use of the Bank Group's cash collateral for restarting the distribution of food and to allow N/S to reopen a few Company Stores. In addition, the interim order required N/S to waive all claims under 11 U.S.C. § 506(c).
Also at this point, N/S requested that the Bank Group allow it to use funds received pursuant to the cash collateral agreement to pay rent to the appellants. The Bank Group, however, refused and only authorized the payment of two-months of future rent on five reopened "test" stores.
On July 21, 1993, the Bank Group filed a motion for relief from the automatic stay in the N/S case. The motion, if granted, would have allowed the Bank Group to foreclose on N/S's assets pursuant to its loan agreements and applicable state law. A hearing was scheduled on the Bank Group's motion, but *650 the hearing was continued and no hearing was ever held on the Bank Group's Motion because on September 9, 1992, N/S filed a motion ("Sale Motion") requesting that the Bankruptcy Court approve bidding and other procedures for the sale of virtually all of its assets, pursuant to 11 U.S.C. § 363(b). The sale motion was opposed by the Franchisees and the Counsel for the Creditors Committee because these parties wanted to entertain overtures from two prospective purchasers other than the Heico Defendants. To accommodate the objectors, the Bankruptcy Court continued a hearing scheduled for September 15, 1993 on the Sale Motion until September 22, 1993, and then to October 6, 1993.
Up until and after October 6, 1993, no consensus was reached as to whom the most appropriate purchaser of N/S. The Franchisees, at this time, favored the proposal of Regal Acquisition Co. ("Regal") to that of the Heico Defendants' proposal. In light of the dispute as to the most appropriate buyer, N/S withdrew the Sale Motion. Thus, only the Bank Group's motion for relief from the automatic stay remained before the Court. At the close of the hearing on October 6, 1993, the Bankruptcy Court issued an order requiring the stay to remain in effect until November 3, 1993 at which time the Bankruptcy Court would determine whether a viable plan of reorganization had been filed by any interested party. Regal filed a plan of reorganization on October 29, 1993. On November 3, 1993, however, the Franchisees announced that they were now in favor of Heico's offer. Regal then withdrew its plan. Accordingly, the Bankruptcy Court granted the Bank Group relief from the automatic stay.
On November 24, 1993, N/S filed another motion pursuant to 11 U.S.C. § 363(b) seeking to establish bidding and other procedures to sell its assets to the Heico Defendants. On December 1, 1993, NSI and the Bank Group entered into a final agreement under which the Bank Group would sell NSI its Senior secured debt in N/S and N/SF for $14,000,000. Despite the various agreements and support of most interested parties for the sale, the Bankruptcy Court denied N/S's motion finding that § 363(b) was an inappropriate mechanism for the sale because N/S did not intend to reorganize. A hearing was then scheduled for December 15, 1993, at which N/S was to inform the Court of its intentions of how it was now going to proceed with its case.
On December 15, 1993, the Court was informed that N/S intended to allow the Bank Group to foreclose on its assets, and then transfer the assets to the Heico Defendants. Also, on December 15, 1993, NSI filed a motion to dismiss the N/SF case or, in the alternative, obtain relief from the automatic stay in the N/SF case. A hearing on this motion was held on December 23, 1993 and relief was granted from the stay in the N/SF case.
On December 28, 1993, a public foreclosure sale of N/S and NS/F's assets was held. The assets of both debtors was purchased by NSI. The next day, NSI transferred the assets to NSLIP, which subsequently changed its name to Nutri/System L.P. N/S and N/SF were left as empty corporate shells after these transactions.
On January 20, 1994, N/S refiled its motion to dismiss its bankruptcy case. The next day, N/SF filed a motion to dismiss its bankruptcy case. A hearing on the dismissal motions was held on February 22, 1994 at which time only the defendants in the present case objected to dismissal. At the conclusion of the hearing, the Bankruptcy Court issued an order stating that it would not dismiss the bankruptcy proceeding until the instant case was dismissed, settled or otherwise disposed of. On July 8, 1994, after entering judgment against the appellee, the Bankruptcy Court finally dismissed the bankruptcy proceedings in the N/S and N/SF cases.
During the course of the Bankruptcy proceeding many landlords filed motions for relief from the stay in order to compel N/S to assume or reject leases or pay administrative rent. On July 1, 1993, N/S, faced with 11 U.S.C. § 365(d)(4)'s requirement that a debtor assume or reject nonresidential leases within 60 days, filed a motion to reject certain leases. The motion was granted on July 28, 1994. On August 3, 1993, N/S filed a motion seeking to extend the 60-day period *651 in which it might assume or reject the remaining leases. Many landlords filed objections to this motion. By Order dated September 14, 1993, the Bankruptcy Court permitted N/S to reject the leases of every landlord who objected to the August 3 motion. The Order also extended the time that N/S could assume or reject the remaining leases. Pursuant to the Order, out of the 283 stores open when the Bank Sweep occurred, 251 leases were deemed rejected.
Most of the properties associated with the rejected leases contained property of little value. Nonetheless these properties had to be emptied out by N/S in order to turn the properties over to the respective landlords. Accordingly, N/S filed a motion on July 27, 1993 seeking permission to liquidate the personalty remaining at the closed stores. The liquidation process would be financed from the proceeds of the sale of the personalty. On August 3, 1993, the Bankruptcy Court approved the motion. Soon, thereafter, N/S hired Arthur Rea, a former N/S executive, to carry out the liquidation of the personalty. Rea began the liquidation process which lasted through February, 1994. However, most of the Company Stores were vacated by September 1, 1993.
With respect to the overall proceedings in the N/S and NS/F Bankruptcies the Bankruptcy Court found:
[T]he Landlords case is simply this: (1) Heisley, through entities he controls, took control of the Debtors with the intent to operate them in bankruptcy until such time as he could purchase their assets; and (2) along the way, the Landlords were harmed by not being paid their administrative rent. . . . Although Heisley's self-interest may, at first glance, give pause to one not familiar with the Debtors' cases, it must be remembered that this very self-interest, which was fully disclosed at all times during the bankruptcies, is what made his involvement in the management of the Debtors so attractive to the Franchisees, the Bank Group, and other creditor entities, including, after a change of counsel, the Creditors' Committee, as well as the Debtors' original directors, officers, and shareholders, and almost every other interested party who took an active role in these bankruptcy cases.
Because Heisley was interested in preserving the Debtors, their operations, and their assets for eventual purchase, he was the only party willing to actually invest in the Debtors during the critical early portion of the Debtors' bankruptcies. The parties in interest, realizing that Heisley's involvement in the bankruptcy cases would inure to their benefit, rallied around him and urged this court to allow him to mange the Debtors at the commencement of the Case, as opposed to the Trustee. Thus, this is not a case of an existing insider who, dressed in the lamb's clothing of selfless motivation for the benefit of the firm, seeks, in actuality, to steal corporate opportunities or engage in self-dealing. Rather, we have an interested suitor (a white knight, if you will) agreeing to operate the Debtors post petition in an attempt to preserve, and possibly enhance, the value of their assets. . . .
Reviewed in toto, Heisley's and the Heico Defendants' management of the Debtors has been aboveboard. . . . All corporate formalities have been maintained. There is no evidence the Debtors have not complied with the administrative requirements of the Bankruptcy Code. Nor is their [sic] any evidence that the Debtors, the Heico Defendants, or Heisley himself have surreptitiously taken any action which would have otherwise required bankruptcy court review and approval after notice and hearing. Every step of the way, the Debtors, the Heico Defendants, and, for that matter, all other parties implicated by the Landlords' allegations, have sought and secured court approval before taking almost every action involving the Debtors, the Landlords' leases, or the senior secured claims. And, at each one of these junctures, it has always been made clear to this court what interest, if any, Heisley had in the proposed action or the events to follow the proposed action.
After scrutinizing those aspects of the bankruptcies which impacted upon the Landlords, their leases, and their administrative rent claims, we likewise find nothing *652 sinister. Although the Debtors possibly could have addressed their lease situations more quickly than they did, there is no evidence that the Landlords and their leases were tied up intentionally so that the Debtors or the Heico Defendants could derive some benefit at the Landlords' expense. There was no evidence presented which would suggest that the maintenance of the Company Stores was critical to the N/S distribution network or improved the Debtors' going concern value, except perhaps in the State of New York. . . . Indeed, the Bank Group and Heisley thought that the Company Stores were for the most part a liability to the value of the Debtors' assets. Nor were the contents of these Company Stores of great value to any party. We were impressed by the testimony of Rea that he vacated the Company Stores as quickly as possible given the difficult logistics of the task and the limited funds available to complete it. We would generally describe the Debtors actions vis-a-vis the Landlords by stating only that the complexity of the bankruptcies, the lack of surplus capital, and the large number and wide geographic distribution of the Company Stores resulted in a slower rate of vacancy than the Landlords, quite understandably, would have liked. Finally, with regard to the reopening of the Company Stores, the Lease Extension motions, and the liquidation of the personal property located at Company Stores, we heard uncontroverted testimony that neither Heisley nor his entities were involved in these decisions. Rather, these decisions were apparently made by N/S's President, Mark A. Miller, a former vice president and longtime employee of the N/S who was hired by Heisley (or possibly the Trustee before him) to manage the day-to-day operations of N/S. Although Heisley, as CEO and chairman of the board, had the last word on all corporate decisions, the origin of these particular decisions suggests that they were made as part of the ordinary management process, and not as part of a scheme masterminded by Heisley and carried out by the Debtors, acting in the capacity of straw men.
Nutri/Systems, 169 B.R. at 863-65.
II. DISCUSSION[3]
A. Standard Of Review
A district court's review of questions of law in a bankruptcy appeal is plenary. Meridian Bank v. Alten, 958 F.2d 1226 (3d Cir.1992). Review of findings of fact will not be set aside unless they are found to be clearly erroneous. Bankr.R. 8013; Meridian, 958 F.2d at 1229. As to mixed questions of law and fact the district court must break down the question and apply the appropriate standard to each component. Id. A finding is clearly erroneous "when although there is evidence to support it, the reviewing court on the entire evidence is left with definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer, 470 U.S. 564, 574, 105 S. Ct. 1504, 1511, 84 L. Ed. 2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 68 S. Ct. 525, 92 L. Ed. 746 (1948)). If the district *653 court determines that the findings of fact of the bankruptcy court are not clearly erroneous, the district court must determine whether the factual findings are legally sufficient to support the bankruptcy court's conclusions of law. Universal Minerals v. C.A. Hughes & Co., 669 F.2d 98 (3d Cir.1981).
B. Piercing The Corporate Veil
The appellants claim that the Bankruptcy Court erred in finding that the corporate veil of the Heico Defendants should not be pierced because the appellants failed to prove that the Heico Defendants dominated the debtors so that the debtors had no independent corporate existence of their own and that the appellees were utilizing the debtors to commit a fraud or an injustice.[4]
It is axiomatic that under the doctrine of limited liability a corporation is a legal entity separate and distinct from its owners and thus, only the corporation, not the owners, are liable for the corporation's debts. Based on this legal fiction "large undertakings are rested, vast enterprises are launched, and huge sums of capital attracted." Anderson v. Abbott, 321 U.S. 349, 362, 64 S. Ct. 531, 538, 88 L. Ed. 793 (1944). The legal fiction of a separate existence, or, as commonly referred to the corporate veil may, however, be pierced under Pennsylvania law when "the corporation was an artifice and sham to execute illegitimate purpose and an abuse of the corporate fiction and immunity that it carries." Kaplan v. First Options of Chicago, 19 F.3d 1503, 1521 (3d Cir.1994) (quoting Wheeling-Pittsburgh Steel Corp. v. Intersteel, Inc., 758 F. Supp. 1054, 1058 (W.D.Pa. 1990)).
In order for the corporate veil to be pierced, a plaintiff must first make a threshold showing of control of the corporation that the plaintiff seeks to pierce, which is more than mere majority or complete stock control, but is complete domination, not only of finances but of policy and business practice in respect to the transaction attacked, so that the corporate entity at the time of the transaction had no separate mind, will or existence of its own. See Craig v. Lake Asbestos of Quebec, Ltd., 843 F.2d 145, 150 (3d Cir.1988); see also Culbreth v. Amosa (Pty), Ltd., 898 F.2d 13, 15 (3d Cir.1990) (finding that the control necessary to fulfill first factor is "a showing that the controlled corporation acted robot or puppet like in mechanical response to the controllers tugs on its strings or pressure on its buttons"). Second, the plaintiff must show that injustice, fraud, illegality, or defeat of public policy would result if the court does not pierce the corporate veil. See Kaplan v. First Options of Chicago, 19 F.3d 1503, 1521 (3d Cir.1994); see also Carpenters Health & Welfare Fund v. Kenneth R. Ambrose, Inc., 727 F.2d 279, 284 (3d Cir.1983) (stating that the alter ego concept is a "tool of equity [that] is appropriately utilized `when the court must prevent fraud, illegality or injustice, or when recognition of the corporate entity would defeat public policy or shield someone from public liability for a crime'" (internal citations omitted)). Third, a plaintiff must show that the defendant's inequitable use of the corporation was the proximate cause of the injury complained *654 of. See Realco Services, Inc. v. Holt, 513 F. Supp. 435 (E.D.Pa.1980).
Factors to be considered when deciding whether to pierce the corporate veil include:
(1) gross undercapitalization;
(2) failure to observe corporate formalities;
(3) non-payment of dividends;
(4) insolvency of the debtor corporation;
(5) siphoning of funds of the corporation by the dominant shareholder;
(6) non-functioning of other officers or directors;
(7) absence of corporate records; and
(8) the fact that the corporation is merely a facade for the operations of the dominant stockholder or stockholders.
United States v. Pisani, 646 F.2d 83, 88 (3d Cir.1981). Many of the factors enumerated above (i.e undercapitalization, non-payment of dividends, and insolvency of the debtor), as the Bankruptcy Court correctly pointed out, do not apply when the alleged controlled corporation is in bankruptcy. Indeed, when the inequitable use of control is alleged to occur in bankruptcy, a plaintiff must also overcome the burden of explaining how the Bankruptcy Court and other interested third parties, which may include secured and unsecured creditors, a creditors' committee or a trustee, either condoned or did not detect the inequitable conduct.
In this case, the appellants first argue in support of the first factor of the test outlined above that the Heisley Defendants "so completely dominated and controlled the Debtors that the Debtors had no separate will or existence." (Appellants Brief at 40).
In addressing this claim, the Bankruptcy Court utilized the same legal standard as articulated above. Thus, since the factual findings of the Bankruptcy Court are not in dispute, in order for this Court to find that the Bankruptcy Court erred it must find that the factual findings are not legally sufficient to sustain the Bankruptcy Court's conclusion of law. Universal Minerals, 669 F.2d at 102.
The factual findings regarding the degree of the Heisley Defendants' control of the debtors were:
We have been presented with no evidence that the corporate formalities were dispensed with once Heisley took control of the Debtors. . . . The Landlords have introduced no evidence that the Heico Defendants were siphoning off funds of the Debtors, nor did they rebut the Debtors' testimony that Heisley actually invested in the Debtors post-petition. Nor are we convinced that the Debtors other directors or and officers were puppets while Heisley called the shots. Indeed, as noted [supra], it was the officers and long time employees of N/S who ran the day to day operations of the Debtors and made many decisions that the Landlords now complain. There was no evidence presented that the Debtors corporate records were missing or incomplete. Finally, it is quite clear that the Debtors are not `mere facades,' but rather, an international chain of weight loss centers which fell upon hard times.
Nutri/Systems, 169 B.R. at 870. As discussed above, in addition to finding that key employees ran the day to day operations and made many of the decisions that are now in dispute, the Bankruptcy Court made numerous findings that other entities wielded control over the debtors, namely the Bankruptcy Court itself, the Franchisees, and the Bank Group. Indeed, it was the Bank Group, not the Heisley Defendants, that refused to release funds for the payment of the administrative rent claims of the appellants. Moreover, the Heico Defendants' purchase of the debtors was not a certainty until after the Franchisees decided to reject Regal's proposal and support the Heisley Defendants on November 3, 1993.[5] Had the Heisley Defendants *655 been in complete control of the debtors would they not have made sure that their proposal to purchase control of the debtors would have been approved? These facts clearly establish that although the debtors might appear as marionettes, like many debtors in Bankruptcy, the strings which were controlling their movements were being tugged and pulled in diverse directions by diverse constituencies, all of whose tugs were directed towards benefiting their particular interests. Thus, the Bankruptcy Court's finding that Heisley Defendants did not completely dominate the debtors to the point where the debtors had no separate mind, will or existence of their own was supported by the evidence. Craig, 843 F.2d at 150.[6]
Assuming, arguendo, as the Bankruptcy Court did, that the Heisley Defendants completely controlled the debtors, the evidence did not support a finding that they did so to perpetrate injustice, fraud, illegality, or a violation of public policy. Kaplan, 19 F.3d at 1521. The appellants' sole contention of illegitimate conduct by the Heisley Defendants was that they caused a violation of 11 U.S.C. § 365(d)(3) and § 365(d)(4).[7] Pursuant to these sections, the trustee has 60 days from the order of relief to decide whether to assume or reject leases on nonresidential real property. See 11 U.S.C. § 365(d)(4). If the trustee does not act within the 60-day window the lease is deemed rejected as a matter of law. Id. During the 60-day period, the trustee must perform all obligations under the leases of the debtor. 11 U.S.C. § 365(d)(3). Where, as here, an estate does not have enough assets to pay its administrative claims, however, a lessor's administrative rent claim does not receive super priority status and receive payment ahead of secured debt. See In re Orient River Investments, Inc., 112 B.R. 126, 134 (Bankr.E.D.Pa.1990); In re Dieckhaus Stationers of King of Prussia, Inc., 73 B.R. 969, 973 (Bankr.E.D.Pa. 1987).
The appellants' claim that the Heisley Defendants caused a violation of these sections by forcing the debtor to fail to make current rent payments pursuant to § 365(d)(3) and fail to turn over the leased premises immediately after rejection pursuant to § 365(d)(4). It is undisputed that these sections were violated during the bankruptcy proceeding, at least to some of the appellants' leases. However, whether the appellees were responsible for these violations and, in turn, whether such a violation is the kind of inequitable conduct which would justify a court's piercing the corporate veil as a matter of law are in dispute.
The first question can, as the Bankruptcy Court did, only be answered in the negative. The nonpayment of the administrative rent was not a result of the appellees' domination of the debtors or some nefarious plot to injure the appellants, but rather a result of the impossible. The Bank Group held $40,000,000 in secured debt, which all parties *656 agree was not going to be paid in full.[8] In fact, in the end, the Bank Group only received $14,000,000 of its claim. There are no allegations that the appellees were in any way responsible for the Bank Group's large claim. Thus, the appellees were not responsible for the failure of payment of the administrative rent claims, but rather nonpayment was the result of the priority of the debtors' debt and the Bank Group's specifically refusing to allow payments of the administrative rent.
The Bankruptcy Court found that to the extent there was a violation of § 365(d)(4) because the debtors did not immediately surrender upon rejection, it did not rise to the level of inequity to justify piercing the corporate veil. The Bankruptcy Court found that "the Debtors, through Rea, made every reasonable effort under the circumstances to visit, empty, and surrender the many Company stores located throughout the United States to the Landlords as soon as practicable." Nutri/System, 169 B.R. at 867. To the extent that the appellees might have been responsible for an unintentional violation of § 365(d)(4), such violation was de minimis and did not rise to the level of inequitable conduct which would justify piercing the corporate veil.
It is an unfortunate incident of the bankruptcy process that certain claims may not be paid when an estate's creditors are undersecured. See In re Orient River Investments, Inc., 112 B.R. 126, 134 (Bankr. E.D.Pa.1990) ("[A] Landlord will not be allowed immediate payment of rentals due under a lease in effect during the period between the bankruptcy filing and assumption or rejection unless it establishes that there is a likelihood that the debtor will pay all administrative claims."). In the event that the estate is undersecured, it is not the secured creditor's responsibility to pay administrative rent claims. In re Sports Information Data Base, Inc., 64 B.R. 824, 828 (Bankr.S.D.N.Y. 1986) ("In the unfortunate event that the estate lacks unencumbered funds to pay the landlord's administrative rent claim, it does not follow that the secured creditor bears the expense."). The finding of Sports Information applies a fortiori to the instant case because the appellees were not the secured creditors during the period the administrative rent was not paid. Accordingly, the Bankruptcy Court's finding that the appellees were not responsible for violation of sections 365(d)(3) and (4) or any injuries flowing therefrom that rise to the level of inequitable conduct to justify piercing the corporate veil was correct.[9]
C. Equitable Subordination
The Supreme Court has recognized that "[i]n the exercise of its equitable jurisdiction the bankruptcy court has the power to sift the circumstances surrounding any claim to see that injustice and unfairness is not done in the administration of the bankrupt estate." Pepper v. Litton, 308 U.S. 295, 307-08, 60 S. Ct. 238, 246, 84 L. Ed. 281 (1939); see also Burden v. U.S., 917 F.2d 115, 117 (3d Cir. 1990). Section 510(c) of the Bankruptcy Code essentially codified the doctrine of equitable subordination enunciated in Pepper and the numerous case which subsequently reiterated and refined the doctrine. See In re *657 CTS Truss, Inc., 868 F.2d 146, 148 (5th Cir. 1989) (finding that intent of 11 U.S.C. § 510(c) "was to incorporate the doctrines that had been well-developed in the courts for several decades preceding the enactment of the Bankruptcy Code"); In re M. Paolella & Sons, Inc., 161 B.R. 107, 117 (E.D.Pa.1993) (same). Nevertheless, "equitable subordination is an unusual remedy which should only be applied in limited circumstances." In re Fabricators, Inc., 926 F.2d 1458, 1464 (5th Cir.1991); see also Paolella & Sons, 161 B.R. at 117 ("[E]quitable Subordination is an extraordinary departure from the `usual principle of equality of distribution and preference for secured creditors.'") (citations omitted).
Section 510(c) states in relevant part:
Notwithstanding subsections (a) and (b) of this section, after notice and a hearing, the court may
(1) under principle of equitable subordination, subordinate for purposes of distribution all or part of an allowed claim to all or part of another allowed claim or part of an allowed interest to all or part of another allowed interest; or
(2) order that any lien securing such a subordinated claim be transferee to the estate.
11 U.S.C. 510(c).
Although Congress did not define equitable subordination or create a test for its application in Section 510(c), the test most courts have applied is the three part test enunciated in In re Mobile Steel Co., 563 F.2d 692, 700 (5th Cir.1977). See, e.g., Paolella & Sons, 161 B.R. at 117 and cases cited therein; Lawrence P. King, 3 Collier on Bankruptcy ¶ 510.05 (15th ed. 1988). The Mobile Steel test requires that before a court may equitably subordinate a claim the movant must establish that:
(1) The claimant must have engaged in some type of inequitable conduct.
(2) The misconduct must have resulted in injury to the creditors of the bankrupt or conferred an unfair advantage on the claimant.
(3) Equitable subordination of the claim must not be inconsistent with the Bankruptcy Act.
Mobile Steel, 563 F.2d at 700.
The burden of proof required to prove equitable subordination is less demanding when the respondent is an insider. The difference in burdens was astutely described by the Eleventh Circuit as:
The Burden and sufficiency of proof required are not uniform in all cases. Where the claimant is an insider or a fiduciary, the trustee bears the burden of presenting material evidence of unfair conduct. Once the trustee meets his burden, the claimant then must prove the fairness of his transactions with the debtor or his claim will be equitably subordinated. If the claimant is not an insider or fiduciary, the trustee must prove more egregious conduct such as fraud, spoilation, or overreaching and prove it with particularity.
In re N & D Properties, Inc., 799 F.2d 726, 731 (11th Cir.1986). Insider status alone, however, is insufficient to warrant subordination. In re Fabricators, Inc., 926 F.2d 1458, 1467 (5th Cir.1991).
The question of whether a claimant is an insider is a question of fact which will only be reversed if clearly erroneous. Fabricators, Inc., 926 F.2d at 1466; Paolella & Sons, 161 B.R. at 118. Section 11 U.S.C. § 101(31) defines insider to include:
(B) if the debtor is a corporation
(i) director of the debtor;
(ii) officer of the debtor;
(iii) person in control of the debtor;
(iv) partnership in which the partner is a general partner.
(v) general partner of the debtor; or
(vi) relative of a general partner, director, officer, or person in control of the debtor.
Id. The term "person" includes a corporation. 11 U.S.C. § 101(41).
The Bankruptcy Court found that Heisley was an insider. This finding is clearly correct considering that Heisley was the chairman of the board and chief executive officer of N/S during the period of the inequitable *658 conduct of which the appellants are complaining. Based on this finding the Bankruptcy Court went on to "assume, for purposes of our discussion, that we can collapse the Defendants and Heisley into a single entity which is, indeed, an insider of both entities." Nutri/System, 169 B.R. at 866. Although the Court doubts the efficacy of collapsing the appellees into one entity, it will do so for purposes of this discussion because, notwithstanding the stricter scrutiny applied to insiders, the Bankruptcy Court's finding that the appellants failed to prove inequitable conduct was correct.
Although there is no precise definition of inequitable conduct under the first part of the Mobile Steel test, courts have identified three general categories of misconduct which may constitute inequitable conduct: (1) fraud, illegality, or breach of fiduciary duties; (2) undercapitalization; and (3) claimant's use of the debtor as a mere instrumentality or alter ego.
The conduct that the appellants complain of all occurred post-petition. The appellants have not cited one case, nor has the Court's research located any, that applied equitable subordination to post-petition conduct. The appellees translate the lack of case law into meaning that the section should not apply to post-petition conduct. However, the language of § 510(c) in no way indicates that it does not apply to post-petition conduct. Accordingly, this Court will not write such a limitation into the statute, for that is the duty of Congress. The Court does acknowledge that all the protections and parties which come into play once a debtor enters bankruptcy i.e. the bankruptcy court, secured and unsecured creditors, a trustee make the occurrence of equitable subordination based on post-petition conduct unlikely.
The appellants' claim of inequitable conduct under § 510(c) mirrors the claims they made in arguing that the Court should pierce the corporate veil. As found above, the appellants failed to present evidence that the appellees were controlling the debtors in an attempt to engineer a nefarious scheme to avoid having to pay administrative rent. See supra at 654-56.
Without any evidence of a scheme which might rise to the level of misconduct necessary for an insider under the first prong of the Mobile Steel test, the appellants fall back on their argument that the violations of 11 U.S.C. §§ 356(d)(3) and (4) were caused by the appellees and were inequitable conduct that falls within the ambit of the first prong of the Mobile Steel test. The Court need not repeat the reasons why the appellees cannot be found liable for a violation of § 365(d)(3), for they are fully explained at pages 655-56 supra. In addition, as in the context of the alter ego discussion above, the Court finds that to the extent the appellees were responsible for an unintentional, de minimis violation of § 365(d)(4), such an unintentional violation does not rise to the level of inequitable conduct warranting subordination. Accordingly, the Bankruptcy Court did not err when it found that equitable subordination was not appropriate in this case.
D. 11 U.S.C. 506(c)
11 U.S.C. § 506(c) states:
The Trustee may recover from property securing an allowed secured claim all reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.
Although the statute states that only a trustee may recover under this section, it is well-settled in the Third Circuit that a creditor or an administrative claimant may bring a claim under 506(c). See In re McKeesport Steel Castings Co., 799 F.2d 91 (3d Cir.1986).
In order to recover under § 506(c) a claimant must demonstrate that: (1) the expenditures or services were necessary to the preservation or disposal of the property; (2) the amount of the expenditure was reasonable; and (3) the expenditures provided a direct benefit to the secured creditors. See In re C.S. Associates, 29 F.3d 903, 906 (3d Cir.1994); In re Orfa Corp. of America, 170 B.R. 257 (E.D.Pa.1994). "Whether expenses are reasonable, necessary, and have benefitted the secured party are factual issues that rest with the sound discretion of the trial *659 judge." Orfa Corp., 170 B.R. at 271. The burden of proof is on the claimant. Id.
The above-enumerated test may be fulfilled if the claimant can prove that the secured creditor consented to the expenditures that the claimant is seeking to recover. Id. at 272; see also In re Birdsboro Casting Corp., 69 B.R. 955 (Bankr.E.D.Pa.1987); Lawrence P. King, 3 Collier On Bankruptcy (15th ed. 1993 ¶ 506.06 at XXX-XX-XX. The claimant must show that such consent was clear and unequivocal and was specifically directed at the expenditures that the claimant is seeking to recover. See In re Combined Crofts Corp., 54 B.R. 294, 299 (Bankr. W.D.Wisc.1985). In rare instances, a secured creditor's consent may be implied from its actions. In re Flagstaff Foodservice Corp., 739 F.2d 73 (2d Cir.1984); In re Bob Grissett Golf Shoppes, Inc., 50 B.R. 598 (Bankr.E.D.Va.1985). But, implied consent "is not to be lightly inferred." Flagstaff, 739 F.2d at 77. This consent-based test is commonly referred to as the "subjective" test, while the three-part test enunciated in the preceding paragraph is commonly referred to as the "objective" test.
The appellants' last claim is that the Bankruptcy Court erred in not finding that the appellants were entitled to a surcharge on the collateral for the Bank Group's secured debt pursuant to § 506(c). The appellants have confined their argument under § 506(c) to the subjective tests.[10] Once again, this claim is based on the notion that the appellees controlled the debtors and the Bank Group's senior secured debt. The Bankruptcy Court explained this claim aptly as "[a]lthough, the Landlords acknowledge that the Heico Defendants did not control the Bank Group, they assert that the Heico Defendants controlled the Bank Group's senior secured claim. Thus they contend that the `true' claimant(s) (the Heico Defendants) under that claim consented to the Landlord services which would benefit what the Heico Defendants knew would become their collateral, when they caused the debtors (1) to not reject the Landlords' leases during the initial 60-day breathing spell of § 365(d)(4); and (2) to file the lease extension motions." The Bankruptcy Court found the appellees' theory of recovery to be too tenuous to support a finding of implied consent. This Court agrees.
In order to avoid repetitiveness, all that must be said is that consent cannot be found in this case in the absence of a finding that the appellees controlled the debtors and the Bank Group's senior secured debt. Because the Court has found that the Bankruptcy Court did not err in finding that such control was not proven, the Bankruptcy Court's finding that appellants failed to prove implied consent must be, and is, affirmed.
NOTES
[1] In addition to the debtors, the other named defendants (now appellees) are: Heico Acquisition Co., Inc. ("HAC"), Heico Cosmetics, Inc. formerly Heico Food Acquisition, Inc., ("HFA"), NSI Debt, Inc. ("NSI"), and NSI Acquisition Limited Partnership ("NSLIP").
[2] On May 7, 1993 at sometime after noon, the Court did receive notice that HAC had obtained control of N/S. However, the Order became effective because the noon deadline was not met.
[3] As in the Bankruptcy Court proceedings, the appellants here fail to differentiate between the liability of the myriad of defendants. Indeed, the appellants filed the exact same brief in the N/S and N/SF appeals. Because of the Court's ultimate finding that the Bankruptcy Court did not err, the Court will treat all the appellants as one entity. Like the Bankruptcy Court, this Court will not attempt to infiltrate the miasma of distinguishing between the liability and actions of the various entities, a distinction which should have been made by the appellants in the court below. The Bankruptcy Court explained the efficacy of treating the appellees as one entity:
The Landlords [Appellants] do not name Heisley as a Defendant, and lump the Debtors and the Heico Defendants together as if there was only one defendant and one bankruptcy case. The Defendants assert that the Landlords' failure to differentiate between the Heico Defendants and the two bankruptcy cases, inter alia, prevents us from granting them relief. This argument is not without merit. . . . [I]f we recognize the individuality of each of the Heico Defendant, it is clear that all of them could not be liable on every count of both the Complaints. On the other hand, the Landlords argue that Heisley controlled all off the Defendants. Therefore, they argue, by implication, that the actions of any one can be imputed to the group as a collapsed single entity. Because we enter judgment in favor of the Defendants on all three counts, we need not attempt to wade through this quagmire.
Nutri/Systems, 169 B.R. at 863 n. 3.
[4] The appellants distinguish between the alter ego theory and the instrumentality rule as theories justifying the piercing of the corporate veil. However, courts have generally utilized these terms interchangeably to denote the same equitable principle: in certain extraordinary situations equity may require a court to disregard a corporation's separate existence in order to impose liability on the person or entity that is dominating the corporation and using the corporation for illegitimate purposes. See, e.g., Taylor v. Standard Gas & Electric Co., 306 U.S. 307, 59 S. Ct. 543, 83 L. Ed. 669 (1939) (finding that the instrumentality rule "is not, properly speaking, a rule, but a convenient way of designating the application, in particular circumstances, of the broader equitable principle that the doctrine of corporate entity, recognized generally and for most purposes, will not be regarded when so to do would work fraud or injustice"); United States v. Jon-T Chemicals, Inc., 768 F.2d 686 (5th Cir.1985) (describing that the corporation that is being controlled may be described as an "alter ego," "agent," or "instrumentality" of the person or entity in control); Berkowitz v. Allied Stores of Penn-Ohio, Inc., 541 F. Supp. 1209, 1215 (E.D.Pa.1982) (finding no substantive difference between the instrumentality rule and the alter ego doctrine). Thus, for the purpose of this appeal the Court will rely on the overarching equitable principle described above, but for reasons of uniformity and clarity will refer to it as the alter ego doctrine as the Court below did and the parties to this appeal do.
[5] The Bankruptcy Court described the uncertainty of the Heisley Defendants obtaining control as:
Nor was the outcome of Heisley's acquisition of the Debtors' assets at any time prior to November 3, 1993. Regal appeared at numerous hearings and vigorously and, for a time, successfully wooed the support of many of the Franchisees, whose preferences of an ultimate purchaser were significant to the outcome of the disposition of the Debtors' assets. Heisley did, of course, outlast Regal and was able to consummate the deal which he hoped he had made with the Bank Group. But this result was, prior to November 3, 1993, far from inevitable.
Nutri/Systems, 169 B.R. at 871.
[6] Essentially, this finding eviscerates the appellants' remaining claims because they are premised on the assumption that the appellees dominated the debtors. However, in light of the various remaining legal theories and the slight nuances in the Bankruptcy Court's findings under the different theories, the Court will proceed to review the remaining claims.
[7] These sections provide in relevant part:
(3) The Trustee shall timely perform all obligations of the debtor, except those specified in section 365(b)(2), arising from and after the order for relief under any unexpired lease of nonresidential real property real property, until the such lease is assumed or rejected, notwithstanding section 503(b)(1) of this title. The court may extend, for cause, the time for performance of any such obligation that arises within the 60 days after the date of the order of relief, but the time for performance shall not be extended beyond such 60 day period. . . . (4) Notwithstanding paragraphs (1) and (2), in any case under any chapter of this title, if the trustee does not assume or reject an unexpired lease of nonresidential real property under which the debtor the debtor is the lessee within 60 days after the date of the order for relief, or within such additional time as the court, for cause, within such 60-day period fixes, then such lease is deemed rejected, and the trustee shall immediately surrender such nonresidential real property to the lessor.
11 U.S.C. §§ 365(d)(3) & (4).
[8] The appellants claim that somehow the Heisley Defendants controlled the Bank Group's $40,000,000 secured claim during the period that the majority of the rent the appellants are claiming accrued. The Bankruptcy Court found this claim to be unsupported. The appellants' purchase of the secured debt cannot be said to be a certainty until after Regal's bid was rejected on November 3, 1993.
[9] The Bankruptcy Court went on to hold that violations of section 365(d)(3) and (4) do not stand alone, rise to the level of inequitable conduct to justify piercing the corporate veil in the case at bar. Although the above findings that the appellants were not responsible for the violations makes reaching this issue unnecessary for disposition of this appeal, in the interest of clarity and thoroughness, the Court finds that the Bankruptcy Court's holding on this issue was correct. C.f. In re Streamlight, Inc., 108 B.R. 505 (Bankr. E.D.Pa.1989) (finding that violation of the Bulk Transfer Law did not justify piercing the corporate veil).; Orient River, 112 B.R. at 134 (finding that the Bankruptcy Code, especially § 365, provides landlords with adequate remedies for nonpayment of administrative rent and thus, extra code remedies are not warranted.); Dieckhaus Stationers, 73 B.R. at 974 (finding that given the Bankruptcy Code protections afforded lessors "it is inappropriate to judicially fashion any additional remedies").
[10] To the extent that the argument presented in section VI(A)(3) of the appellants' brief represents an attempt to recover under the "objective" test, the Bankruptcy Court's finding that the Appellants' failure to present even a scintilla of evidence regarding the benefit allegedly imparted upon the Appellees' bars recovery under the "objective" test is found not to be clearly erroneous. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571235/ | 29 So. 3d 432 (2010)
Stephanie R. GASKINS, Petitioner,
v.
Charles Edward CANTY, Jr. and Christopher Gaskins, Respondents.
No. 2D09-5172.
District Court of Appeal of Florida, Second District.
March 10, 2010.
Celene H. Humphries of Brannock & Humphries, Tampa, and Scott T. Johni of Law Office of Scott Johni, P.A., Tampa, for Petitioner.
Lorraine A. Valenti of Valenti & Associates, P.A., Tampa, for Respondents.
*433 NORTHCUTT, Judge.
Stephanie Gaskins, the plaintiff in the action below, has petitioned for a writ of certiorari quashing a circuit court order that requires her to attend a compulsory vocational rehabilitation examination.[1] The order provides that the examination may be recorded by use of an unattended videotape or audiotape machine, but it prohibits the presence of any third persons, such as a videographer or Gaskins's attorney. We grant the petition and quash the order compelling the examination with limitations.
Christopher Canty, a defendant in the action, sought to have Gaskins examined pursuant to Florida Rule of Civil Procedure 1.360. Gaskins responded that she would appear for the examination accompanied by her counsel or a videographer. Canty then filed a motion to compel the examination with limitations and attached the affidavit of his proposed examiner, who asserted that: (1) the examination involved timed testing that could not be interrupted by the changing of videotapes; (2) the presence of a videographer could negatively affect the examination; and (3) "numerous psychological literature with empirical studies and analyses" show that observation may affect an event. The circuit court held a hearing on the motion, but no additional evidence concerning the proposed limitations was presented. After the hearing, the court entered the order under review.
Florida courts follow the liberal view when determining whether attorneys and other third persons may attend examinations. U.S. Sec. Ins. Co. v. Cimino, 754 So. 2d 697, 700-01 (Fla.2000). Thus, parties in civil suits are generally entitled to have attorneys, videographers, or court reporters attend when they are compelled to submit to examinations. Maraman v. State, 980 So. 2d 1096, 1098 (Fla. 2d DCA 2008); Broyles v. Reilly, 695 So. 2d 832, 833 (Fla. 2d DCA 1997). The party opposing a third person's presence at an examination has the burden to establish case-specific reasons why such attendance would disrupt it. If that burden is met, the party must then show that no other examiner in the area would conduct an examination with a third party present. Freeman v. Latherow, 722 So. 2d 885, 886 (Fla. 2d DCA 1998); Broyles, 695 So.2d at 834.
Canty met neither of his burdens. While the affidavit was somewhat case specific, it discussed a "rehabilitation examination." The parties agreed at the hearing to a "life plan" examination because Mrs. Gaskins had dropped her claim for future lost wages. The proposed examiner was not present at the hearing and thus did not provide any evidence concerning the specifics of a "life plan" examination or why the presence of a third person would disrupt such an examination. And even if Canty had met this burden, he presented no evidence at all concerning the second prong, i.e., that no other examiner would conduct the examination with the third person present.
Accordingly, we grant Gaskins's petition and quash the circuit court's order. If Canty continues to perceive a need for a limited examination he may file an appropriate motion and present additional evidence in an attempt to satisfy the burdens discussed in this opinion.
Petition granted; order quashed.
SILBERMAN and MORRIS, JJ., Concur.
NOTES
[1] At the hearing, the scope of the examination was narrowed to a "life plan" examination. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571270/ | 29 So. 3d 375 (2010)
MERCURY INSURANCE COMPANY OF FLORIDA, Appellant,
v.
CHARLIE'S TREE SERVICE, INC., Scott Rosen, as Personal Representative of the Estate of Elias Caballero, Valentin Bautista-Bautista, Minerva Bautista Aleman, his wife, Juan Victorino Cordoso, and Big Lake Roofing Enterprises, Inc., Appellees.
No. 4D09-3192.
District Court of Appeal of Florida, Fourth District.
February 24, 2010.
Rehearing Denied April 1, 2010.
*376 Elizabeth K. Russo of Russo Appellate Firm, P.A., Miami, and Butler, Pappas, Weihmuller, Katz, Craig, LLP, Tallahassee, for appellant.
Keith E. Hope of The Hope Law Firm, P.A., Gulfport, for appellee Scott Rosen, as Personal Representative of the Estate of Elias Caballero.
Susan W. Fox of Fox & Loquasto, P.A., Tampa, and Brent L. Probinsky, P.A., Sarasota, for appellees, Valentin Bautista-Bautista and Minerva Bautista Aleman, his wife.
GROSS, C.J.
Because a policy exclusion applies, we reverse a final declaratory judgment finding that insurance coverage exists for a lawsuit arising out of an automobile accident.
Valentin Bautista-Bautista and Elias Caballero were employees of Charlie's Tree Service, Inc. While both were on the job, Caballero was driving a company truck in which Bautista was a passenger. The truck was in an accident that killed Caballero and injured Bautista.
Bautista settled with Charlie's for worker's compensation benefits and sued Caballero's estate. Mercury Insurance Company of Florida had issued a commercial auto policy where Charlie's was the named insured. Mercury filed a declaratory judgment action to establish that exclusions in the policy precluded coverage for Bautista's claim against Caballero's estate. Both parties moved for summary judgment. The circuit court granted summary judgment in favor of Bautista, ruling that there was coverage under the Mercury policy for Bautista's claims against Caballero's estate.
The facts of this case fall under at least one exclusion in the policy, so the court should have granted judgment in favor of Mercury.
The policy provides that coverage and Mercury's duty to defend "does not apply to"
6. Bodily injury to an employee of an insured . . . arising out of or within the course of employment, except with respect to a domestic employee if benefits are neither paid nor required to be provided under any Workers' Compensation, disability benefits or other similar *377 law. This exclusion applies whether the insured may be liable as an employer or in any other capacity and to any obligation to share damages with or repay someone else who must pay damages because of the injury.
There is no dispute (1) that Charlie's is "an insured" within the meaning of the exclusion, (2) that Bautista was an employee of Charlie's, and (3) that Bautista's injuries arose out of or within the course of his employment with Charlie's.
We reject Bautista's argument that "an insured" must refer only to Caballero, because Caballero is the only "insured"[1] he has sued. The exclusion is not confined to the parameters of a particular lawsuit, but is directed at the facts of the accident for which coverage is sought. There is no getting around the fact that Charlie's is "an insured" under the policy. We agree with the observations of the second district that exclusions such as this one
are inserted in business policies for the benefit of the employer. An employer is required to protect its employees pursuant to the Workers' Compensation Statute.. . . The employer then protects the general public by purchasing a liability insurance policy. Because employees are already protected by workers' compensation, the insurance policy bought to protect the general public generally specifically excludes coverage for injuries covered by workers' compensation. The insurance policy premium would necessarily be higher were this not so.
Aetna Fire Underwriters Ins. Co. v. Williams, 422 So. 2d 7, 9 (Fla. 2d DCA 1982). See also Webb v. Am. Fire & Cas. Co., 148 Fla. 714, 5 So. 2d 252 (1941); 8 Couch on Insurance § 115:26 (3d ed. 2008).
We reverse the final summary declaratory judgment and remand for the entry of a judgment in favor of Mercury establishing that there is no coverage under the policy for Bautista's lawsuit against Caballero's estate.
WARNER and LEVINE, JJ., concur.
NOTES
[1] A policy definition of "insured" includes "[a]ny additional driver listed" on the policy "but only while driving" an insured auto. Caballero was a listed driver driving an insured auto. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917626/ | 835 So.2d 67 (2003)
PILGRIM REST MISSIONARY BAPTIST CHURCH By And Through its BOARD OF DEACONS
v.
G.W. WALLACE, Elijah Cooper, Lewis Williams, Bobby Wallace and Leonard Wilson.
No. 2002-CA-00070-SCT.
Supreme Court of Mississippi.
January 23, 2003.
*68 Doug Douglas Wade, Jackson, Attorney for Appellant.
Ramel Lemar Cotton, Jackson, Attorney for Appellees.
Before PITTMAN, C.J., WALLER and CARLSON, JJ.
WALLER, J., for the Court.
¶ 1. This appeal concerns the consolidation of two actions in Hinds County Chancery Court in which the chancellor ordered a determination of voting members of a church and an election to decide whether to terminate the services of its pastor. We affirm.
*69 FACTS AND PROCEDURAL HISTORY
¶ 2. This case arose as a result of the efforts of members of the Pilgrim Rest Missionary Baptist Church in Terry, Mississippi, to remove Reverend W.R. Griffin as pastor because of disputes over the business practices of the Church. Church members held two meetings at which they voted to remove Griffin. Deacon Sylvester Crisler and Reverend Griffin sought injunctive relief in chancery court as Pilgrim Rest Missionary Baptist Church By and Through Its Board of Deacons (the Board of Deacons) to enjoin Deacon G.W. Wallace and Trustees Elijah Cooper, Lewis Williams, Bobby Wallace, and Leonard Wilson (the Board of Trustees) from doing any act relating to the business affairs of the Church which is against the Church's by-laws.
¶ 3. The Board of Trustees responded with a complaint, also on behalf of the Church, seeking a declaration that the Church membership had the right to relieve Reverend Griffin and a motion for a temporary restraining order to prevent the Board of Deacons and Griffin from spending any Church funds as well as to require them to provide an accounting and reimburse the Church for funds spent.[1] They also answered the initial complaint arguing that the Deacons had not been authorized by the membership to bring the action and that, pursuant to the by-laws, neither the pastor nor deacons were authorized to pursue a legal action on behalf of the Church. Specifically, the Board of Trustees alleged that Deacon Crisler and Reverend Griffin on their own and without authorization closed the Church's bank account and moved the funds to an undisclosed location and hired counsel to represent the Church. The chancellor granted the Trustees a preliminary injunction freezing the Church's funds and appointed Drs. Obadiah Myles and Jay T. Smith consulting experts to complete an accounting of all funds deposited and to reconcile Church finances.
¶ 4. The Hinds County Chancery Court consolidated the two actions. After a hearing, the chancellor ordered a list of qualified voters to be compiled and a formal election for the members to decide if Reverend Griffin would remain as pastor. The chancellor's Final Judgment states in pertinent part:
III.
The Court being reluctant to become involved in church affairs and church business, and to that extent this Court will limit its ruling to the following provisions in terms of its findings.
IV.
The Court references the document that has been marked as Exhibit 1, the Official Christian Handbook According to the Teachings of the Holy Bible for the Pilgrim Rest Missionary Baptist Church of Terry, Mississippi, which in other words has been referred to as the By-Laws.
V.
The Court finds that based upon the testimony of all witnesses and particularly the spiritual leader of the church, Reverend Griffin, very few of these By-Laws have been followed, and even those alleged to have been attempted to be followed actually did not purport to actually reflect the By-Laws. As an example of the fact that only the By-Laws have been referenced in this Court's opinion when it fits or matches the benefit of someone who is trying to enforce the By-Laws on the other [sic].
*70 This Court finds that these By-Laws do not give Reverend Griffin or Deacon Crisler the right to go out and pay an attorney before bringing it to the body of the church over $4,000 in fees before the Church has had an opportunity to vote or determine whether or not that that is the will of the body of the church.
VI.
The Court finds in regard to other instances where the By-Laws have not been followed as they relate to the pastor under charge that it agrees with the respondents that the procedure was not followed verbatim; and the Court finds that it is not sure if it could have been followed because it's so much ambiguity and so much unclearness, or lack of clarity in regard to these By-Laws that this Court is not sure even if one attempted to follow it verbatim that they could follow it.
VII.
The Court finds for the reasons stated that the issue of the By-Laws in terms of who followed the By-Laws and who didn't follow the By-Laws is really not one that the Court can concern itself with at this juncture because there are insufficient By-Laws to determine whether either one of the parties should be held accountable for not following the By-Laws.
* * *
IX.
The Court finds that it is the responsibility of the Court to put a procedure in place to enable the membership to determine who is to be its pastor.[2]
¶ 5. The ambiguity about which the chancellor was chiefly concerned was that contained in the provisions dealing with charging a pastor. The by-laws state that "[a]ll accusations against the Pastor shall be in writing signed by the accuser(s) and submitted to chairman of the Deacon Board." Article VII, subdivision E.2. Furthermore, "The Deacon Board shall give a written notice to the accused Pastor, signed by the chairman and the Secretary of the Deacon Board [Deacon Crisler] before they confer with him." Article VII, subdivision E.3. When asked how the attempts at his ouster failed to comply with the by-laws, Reverend Griffin testified that the two accusers were inactive members of the church and that there was no investigation as required by Art. VII, subdivision E.5. Also, the initial meeting where members voted to remove him was improper because it was not held on church property, and it was not set by the Board of Deacons and presided over by the pastor. Since the attempted ouster did not comply with the by-laws totally, Reverend Griffin simply ignored the letter announcing his removal.
¶ 6. The result of the election was 54-0 in favor of removing Reverend Griffin. Aggrieved, the Board of Deacons and Griffin *71 appeal and assert various constitutional and procedural errors.
STANDARD OF REVIEW
¶ 7. We will not interfere with or disturb a chancellor's findings of fact unless those findings are manifestly wrong, clearly erroneous, or an erroneous legal standard was applied. United States Fid. & Guar. Co. v. Estate of Francis ex rel. Francis, 825 So.2d 38, 43 (Miss.2002); Miller v. Pannell, 815 So.2d 1117, 1119 (Miss.2002).
DISCUSSION
I. WHETHER THE CHANCELLOR VIOLATED CONSTITUTIONAL PROVISIONS REQUIRING THE SEPARATION OF CHURCH AND STATE.
¶ 8. The Board of Deacons and Griffin argue that the chancellor's judgment violated the First and Fourteenth Amendments to the United States Constitution in that a civil court became involved in a ecclesiastical dispute. Their only supporting authority is the Court of Appeals decision in Mallette v. Church of God International, 789 So.2d 120 (Miss.Ct.App. 2001). In Mallette, a pastor sued the Church of God International and others for defamation after his ministerial license was revoked. 789 So.2d at 121. The trial court entered summary judgment in favor of the Church holding that the ecclesiastical abstention doctrine barred such a civil suit. Id. The Court of Appeals reversed and remanded with instructions to determine if the pastor's claim was in fact barred by the ecclesiastical abstention doctrine, and the trial court again granted summary judgment. Id. On a second appeal, the Court of Appeals affirmed and stated
the United States Supreme Court held that in accordance with the doctrine of ecclesiastical abstention, "civil courts shall not disturb the decisions of the highest ecclesiastical tribunal within a church of hierarchical polity, but must accept such decisions as binding on them...." This abstention includes church-related questions of discipline, faith, rule, custom, or law.
Id. at 124 (quoting Serbian E. Orthodox Diocese v. Milivojevich, 426 U.S. 696, 709, 96 S.Ct. 2372, 49 L.Ed.2d 151 (1976)).
¶ 9. The Church of God International in Mallette and the Serbian Eastern Orthodox Church in Milivojevich are quite different than the Pilgrim Rest Missionary Baptist Church in the instant case. Both of those aforementioned churches are hierarchical in that they are subject to a general or higher church authority.[3] Baptist churches, on the other hand, are congregational in that "[e]ach church is a distinct organization, independent of others." Allen v. Roby, 109 Miss. 107, 67 So. 899, 900 (1915). Such an arrangement bears on the extent of a civil court's jurisdiction over disputes within the church or among its members.
¶ 10. This case presents an interesting situation in that it questions not the propriety or justification for dismissing a pastor but whether the court had the authority to order an election in the first place. The Ohio Court of Appeals addresses this dilemma in Tibbs v. Kendrick, 93 Ohio App.3d 35, 637 N.E.2d 397 (1994). Collecting authorities from many states, the court summarized the extent of a trial court's jurisdiction: "If the church is congregational, a civil court retains jurisdiction to *72 determine whether the decision concerning `who shall preach from the pulpit' was made by the proper church authority. The court's jurisdiction is limited to purely secular issues, and the court must not be involved in ecclesiastical issues." 637 N.E.2d at 402 (citations omitted).
¶ 11. It clear in this case that the chancellor merely established a procedure whereby the members of Pilgrim Rest could vote on whether they wanted to retain Reverend Griffin as their pastor. She did so in the absence of clear by-laws and a higher church authority. We are keenly aware, as was the chancellor in her order, of a civil court's extreme reluctance to meddle in the ecclesiastical affairs of a church and impotence to rule on matters pertaining thereto. See Stegall v. Newsom, 326 So.2d 803, 807 (Miss.1976); Conic v. Cobbins, 208 Miss. 203, 216, 44 So.2d 52, 55 (1950). However, we cannot say that the chancellor overstepped her bounds of jurisdiction in ordering an election when doing so was secular in purpose and sanctioned by other jurisdictions. See McKinney v. Twenty-Fifth Ave. Baptist Church, Inc., 514 So.2d 837 (Ala.1987) (finding no abuse of discretion in ordering members of competing church factions to compile a list of church members eligible to vote in an election); Beulah Missionary Baptist Church v. Spann, 132 Mich.App. 118, 346 N.W.2d 911, 914 (1984) (holding that the trial court "properly ordered the parties to compile a list of eligible voters not only to assure a fair election, but also to assure that any eligibility questions be resolved before the election was held."). The chancellor did not rule on whether Reverend Griffin was entitled to be pastor. See Blue v. Jones, 230 So.2d 569 (Miss.1970) (finding question of who were proper trustees, pastor and deacon of congregational church to be ecclesiastical that must be decided by congregation); Grantham v. Humphries, 185 Miss. 496, 188 So. 313 (1939) (holding that "church authorities and such tribunals as they may set up for themselves are supreme in such matters. Their decision is final as to who shall be the pastor and other officers. Such disputes are ecclesiastical in their nature and the courts have no control over them."). The problem with applying Blue and Grantham is that they assume the church has a viable means of passing on such questions. It is clear that Pilgrim Rest did not.[4]
¶ 12. The Supreme Court of South Carolina recognized the dilemma courts face when confronted with discord within a congregational church:
It is not for this court to determine who shall or shall not be members of the Mount Zion Baptist Church. It is not for this court, to dictate procedure for the church to follow. It is the function of this court, however, in these circumstances, to assure that the church itself has spoken. If it has, this court inquires no further. If it has not, this court may restore the status quo to enable the church to act.
We note that this case deals with a congregational church. The situation is substantially different when a hierarchical church is involved. In that situation any judicial relief, if appropriate, would ordinarily await final determination by the highest hierarchical tribunal having jurisdiction over ecclesiastical matters.
Bowen v. Green, 275 S.C. 431, 272 S.E.2d 433, 435-36 (1980) (emphasis added).[5]
*73 ¶ 13. The chancellor's resolution also complies with Mississippi's Nonprofit Corporations Law. Pilgrim Rest is a "religious society" under the Nonprofit, Nonshare Corporations and Religious Societies Law. Miss.Code Ann. § 79-11-31 (2001). It is also a "religious corporation"[6] under the Mississippi Nonprofit Corporation Act. Miss.Code Ann. § 79-11-127(cc). In the event a corporation is unable to conduct a meeting and vote, directors, officers, delegates or members can seek assistance in chancery court pursuant to Miss.Code Ann. § 79-11-131 which states in pertinent part:
(1) If for any reason it is impractical or impossible for any corporation to call or conduct a meeting of its members, delegates or directors, or otherwise obtain their consent, in the manner prescribed by its articles, bylaws or Sections 79-11-101 et seq., then upon petition of a director, officer, delegate, member or the Attorney General, the chancery court of the county where the corporation's principal office ... is located may order that such meeting be called or that a written ballot or other form of obtaining the vote of members, delegates or directors be authorized in such a manner as the court finds fair and adequate under the circumstances.
(2) The court shall, in an order issued pursuant to this section, provide for a method of notice reasonably designed to give actual notice to all persons who would be entitled to notice of a meeting held pursuant to the articles, by-laws and Sections 79-11-101 et seq., whether or not the method results in actual notice to all such persons or conforms to the notice requirements that would otherwise apply. In a proceeding under this section the court may determine who the members or directors are.
(emphasis added). Miss.Code Ann. § 79-11-401, dealing with applicability of the Nonprofit Corporation Act to religious corporations, does not except Miss.Code Ann. § 79-11-131.
¶ 14. We recognize the chancellor's awareness of the "religious thicket"[7] in which she was entangled. There is absolutely no indication of her imposing an ecclesiastical dictate on the congregation of Pilgrim Rest. On the contrary, she merely sought to establish a procedure in which the majority of the Church could be *74 heard thereby preserving the peace. We hold that the chancellor was not hamstrung to resolve by secular and statutorily-justifiable means a dispute which could likely lead to a breach of peace.
II. WHETHER THE CHANCELLOR VIOLATED MISS. R. CIV. P. 62(a).
¶ 15. The Board of Deacons contends the chancellor violated Miss. R. Civ. P. 62(a) because she held a hearing to enforce her final judgment less than ten days after its entry. Their entire argument consists of a partial quote of Rule 62(a). The Board of Trustees responds that these consolidated actions sought injunctive relief and were, therefore, not stayed under Rule 62(a). Rule 62(a) provides:
Except as stated herein or as otherwise provided by statute or by order of the court for good cause shown, no execution shall be issued upon a judgment nor shall proceedings be taken for its enforcement until the expiration of ten days after the later of its entry or the disposition of a motion for new trial. Unless otherwise ordered by the court, an interlocutory or final judgment in an action for an injunction or in a receivership action shall not be stayed during the period after its entry and until an appeal is taken or during the pendency of an appeal. The provisions of subdivision (c) of this rule govern the suspending, modifying, restoring, or granting of an injunction during the pendency of an appeal.
(emphasis added).
¶ 16. For whatever reason, the Board of Deacons never quoted the italicized portion of Rule 62(a) in its brief. It clear, however, that Rule 62(a) excepts injunctions from the automatic stay. See Miss. R. Civ. P. 62 cmt.; 11 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2902 (2d ed.2002). This assignment of error is without merit.
III. WHETHER THE CHANCELLOR VIOLATED MISS. R. CIV. P. 52(a).
¶ 17. The Board of Deacons next argues that the "Final Judgment entered by the trial court in this cause on January 8, 2002, does not contain anything resembling the required finding of fact or conclusion of law. It is a somewhat rambling statement from the bench...." They cite no authority for the proposition that the chancellor's order was in some way in violation of Miss. R. Civ. P. 52(a).
¶ 18. Rule 52(a) states that in bench trials, "the court may, and shall upon the request of any party to the suit or when required by these rules, find the facts specially and state separately its conclusions of law thereon and judgment shall be entered accordingly." The seminal case on this point is Tricon Metals & Servs., Inc. v. Topp, 516 So.2d 236, 239 (Miss.1987), in which we held where "a case is hotly contested and the facts greatly in dispute and where there is complexity involved therein, failure to make any findings of ultimate fact and conclusions of law will generally be regarded as an abuse of discretion." While it is true the chancellor failed to cite any legal authority, this case is not terribly complex from a factual standpoint, and the facts as stated in her five-page Final Judgment adequately state her findings of fact and aptly explain what she did. See 9 James Wm. Moore et al., Moore's Federal Practice § 52.02[1], at 52-12 (3d ed.1997) (main purposes of Rule 52 are "to provide the appellate court with an adequate record for review[ ] and to guarantee that the trial court carefully reviews the evidence"). The Final Judgment provided us with an adequate record to review and established *75 that the chancellor reviewed the evidence. This assignment of error is without merit.
IV. WHETHER THE CHANCELLOR VIOLATED MISS. R. CIV. P. 54(c).
¶ 19. The fourth assignment of error presented by the Board of Deacons is that the chancellor violated Miss. R. Civ. P. 54(c) by granting relief for which no party prayed. Neither party cites any authority whatsoever in support of their respective arguments. That aside, it is axiomatic that the relief need not be limited in kind or amount by the demand but may include relief not requested in the complaint. See Miss. R. Civ. P. 54 cmt.; Turner v. Terry, 799 So.2d 25, 39 (Miss. 2001); Tuck v. Blackmon, 798 So.2d 402, 410 (Miss.2001).
¶ 20. It is unclear why the Board of Deacons would assign such an error. They filed their complaint alleging that there was in the by-laws a specific method for removing a pastor and that the Board of Trustees and members were in violation of those by-laws. All the chancellor did was prescribe a method of election, since it was clear the congregation's intentions could not be carried out under the by-laws. This assignment of error is without merit.
V. WHETHER THE FINAL JUDGMENT ENTERED WAS VAGUE, AMBIGUOUS, OR UNCERTAIN.
¶ 21. The final assignment of error is that the Final Judgment was vague, ambiguous, and unclear because it did not set forth a procedure to validate the election. The Board of Deacons' entire argument consists solely of a block-quote from a non-binding treatise stating in effect that a decree should be reasonably certain and fairly precise. They provide no examples of vagueness, ambiguity, or lack of clarity in the Final Judgment.
¶ 22. With regard to the regulation of the election, the Final Judgment clearly stated:
The Court orders Dr. Myles and Dr. Smith to regulate an election to be held January 19, 2002, from 2:00 P.M. until 4:00 P.M. at the Pilgrim Rest Missionary Baptist Church, Terry, MS[,] for the purpose of determining what the members of the church want to do. The Court finds that a ballot should be prepared. It is Ordered that if Dr. Myles and Dr. Smith do not accept to conduct the stated election, there shall be someone independent of the church present at the date, time and place stated to set a procedure in place for conduct of this election.
¶ 23. Also, with regard to the eligible voting membership, the chancellor ordered that those eligible to vote would be those members over twelve years of age who live in the Terry area and regularly attend services, regardless of the amount or lack of tithing. Clearly, the chancellor was certain and quite clear in the regulation of the election. Accordingly, this assignment of error is without merit.
CONCLUSION
¶ 24. The chancellor did not err in ordering the compiling of a voting list and an election on whether to terminate Reverend Griffin as pastor. We also find the procedural issues raised by the Board of Deacons to be without merit. Therefore, the judgment of the Hinds County Chancery Court is affirmed.
¶ 25. AFFIRMED.
PITTMAN, C.J., McRAE AND SMITH, P.JJ., COBB, DIAZ, EASLEY, CARLSON AND GRAVES, JJ., CONCUR.
NOTES
[1] Deacon D.W. Wallace's name was also removed from the Church's checking account.
[2] An example of the ambiguity within the by-laws is the provision concerning who is vested with responsibility to hold Church property. The by-laws state in Article XI, subdivision D.1. that it is the duty of the trustees "[t]o hold the Church's property in trust, to care for the Church's property and to keep oversight of Church property." Article XI, subdivision A also states, "Trustees shall be held responsible for the business affairs of the Church." Reverend Griffin testified that by custom the trustees were vested with responsibility over the Church's real property and that the Board of Deacons had control over the bank account and financial affairs of the Church. The trustees counter that the Board of Deacons had no authority to hire an attorney or pursue a legal action on behalf of the Church.
[3] Perhaps the best known example of a hierarchical church is the Roman Catholic Church.
[4] Police had to be called to the church on several occasions to keep the peace.
[5] Academic commentary has expressed concern over the distinction between hierarchical and congregational churches in the context of pastor terminations:
[I]t is difficult to see any difference between a civil court deciding whether a minister was properly defrocked in a hierarchical church, and a court adjudicating that same issue when it arises in a congregational setting. In each case, the court is defining criteria which the church, hierarchical or congregational, must employ in selecting its spiritual leaders, a doctrinal matter of purely ecclesiastical concern. Absent any principled distinction, the courts should defer jurisdiction whenever a question of doctrinal interpretation arises in a dispute concerning church discipline, organization, or government, regardless of whether the church is hierarchical or congregational.
David J. Young & Steven W. Tigges, Into the Religious ThicketConstitutional Limits on Civil Court Jurisdiction Over Ecclesiastical Disputes, 47 Ohio St. L.J. 475, 493 (1986). While we certainly agree with the authors that such a distinction between a hierarchical and congregational church need not be always drawn, the problem with such an analysis in the instant case is that it presumes a congregation has terminated its pastor in an orderly fashion following clear and established church law.
[6] The Act defines a "religious corporation" as "a corporation organized and operating primarily or exclusively for religious purposes." Miss.Code Ann. § 79-11-127(cc).
[7] See Serbian E. Orthodox Diocese v. Milivojevich, 426 U.S. 696, 719, 96 S.Ct. 2372, 49 L.Ed.2d 151 (1976). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542604/ | 60 F.2d 245 (1932)
HARTER
v.
AMERICAN EAGLE FIRE INS. CO.
No. 5967.
Circuit Court of Appeals, Sixth Circuit.
June 27, 1932.
John H. McNeal, of Cleveland, Ohio, for appellant.
R. M. Edmonds, of Columbus, Ohio (Mooney, Bibbee & Edmonds, of Columbus, Ohio, on the brief), for appellee.
Before MOORMAN, HICKENLOOPER, and SIMONS, Circuit Judges.
SIMONS, Circuit Judge.
The plaintiff below looked for escaping gas with a lighted match. The inevitable explosion and resulting fire which followed completely destroyed his house and his household goods, injured him, and caused him substantial loss of earnings. At the time of the explosion and fire, the plaintiff's house was insured against fire in the sum of $5,000 by a policy issued by the defendant insurance company, appellee. The plaintiff notified Mr. Hook, a local agent of the company, of the fire, and claims to have been told by Hook that there was nothing for him to do or sign; that his claim would be paid in the sum of $5,000, but that he should first settle with the East Ohio Gas Company, that company being responsible for the escaping gas which caused the explosion; that, by first doing so, he would obtain a better settlement from the gas company; that he could then come back and his money would be paid to him. The plaintiff subsequently presented to the gas company a claim for all of the damages suffered, including damages to his house and household goods, his personal injuries, and loss of *246 salary, and the gas company paid him the sum of $32,000, taking a full release of all liability, which release is set forth in the margin.[1] After the settlement the plaintiff commenced suit on his fire insurance policy against the defendant in the state court, and, after removal to and trial in the federal court, where judgment on directed verdict was entered against him, brought this appeal.
The policy sued upon contained the usual subrogation clause, providing that, in case fire is caused by the act or neglect of any person or corporation, the company should, upon payment of the loss, be subrogated to the extent of any payment made by it to all right of recovery by the insured for the resulting loss. It also contained the further provision that no officer, agent, or other representative of the company, should have the power to waive any provision or condition of the policy except such as by the terms of the policy might be the subject of agreement indorsed thereon or added thereto, and as to such provisions or conditions no agent should have the power, or be deemed or held to have waived such provisions or conditions unless the waiver be written upon or attached to the policy.
Defense to the suit was based upon payment of the loss suffered by the party primarily liable, and upon destruction of defendant's right to subrogation by the plaintiff's execution of the release to the gas company for all damages growing out of the explosion. In answer the plaintiff contends that there was no settlement of the fire loss with the gas company, that defendant's agent waived the subrogation clause, and that in any event the defendant is estopped by the representations of its agent from denying liability on the policy.
The defendant possessed the right to subrogation to the extent of its liability on the policy not only under its contract, but upon equitable principles. Phnix Insurance Company v. Erie & W. Transportation Company, 117 U. S. 312, 6 S. Ct. 750, 29 L. Ed. 873; Farmers' Bank v. Hayes, 58 F. (2d) 34, decided by this court April 15, 1932. It is also settled that a release given by the insured to a tort-feasor who is primarily liable for the injury destroys the insurance company's right of subrogation, and is a bar to recovery on the policy. Phnix Insurance Company v. Erie & W. Transportation Company, supra; Chicago, etc., Railroad Company v. Pullman Car Company, 139 U. S. 79, 11 S. Ct. 490, 35 L. Ed. 97; Packham v. German Fire Insurance Company, 91 Md. 515, 46 A. 1066, 50 L. R. A. 828, 80 Am. St. Rep. 461; Sims v. Mutual Fire Insurance Company, 101 Wis. 586, 77 N. W. 908; Maryland Motor Car Insurance Company v. Haggard (Tex. Civ. App.) 168 S. W. 1011; Auto Owners' Protective Exchange v. Edwards, 82 Ind. App. 558, 136 N. E. 577; Smith & Son v. Phnix Insurance Company, 181 Mo. App. 455, 168 S. W. 831; Highlands v. Cumberland V. F. M. Insurance Company, 203 Pa. 134, 52 A. 130; Ætna Casualty & Surety *247 Co. v. Phnix National Bank, 285 U. S. 209, 52 S. Ct. 329, 76 L. Ed. 709. This seems to rest upon the principle that the insured is not entitled to double compensation for the same loss. Auto Owners' Protective Exchange v. Edwards, supra; Phnix Insurance Company v. Transportation Co., supra; Sims v. Mutual Fire Insurance Company, supra. Even if the insurance company had first paid, and if the amount collected from the gas company had exceeded the net loss, the excess amount representing such loss would be held by the insured in trust for the insurance company. Phnix Insurance Company v. Erie & W. Transportation Company, supra.
Some of the cases go so far as to hold that, even where some item of damage is especially excepted or reserved in the release, the right to recovery is nevertheless extinguished, because release from liability for a tort extinguishes all claims of damages growing out of it. Packham v. German Fire Insurance Company, supra; Sims v. Mutual Fire Insurance Company, supra; Maryland Motor Car Insurance Co. v. Haggard, supra. It is unnecessary for us to decide the question ruled upon in the last-cited case, because it is clear from the terms of the release and upon the whole record that no item of damage was excepted by the plaintiff in his release to the gas company.
There remain the questions of waiver and estoppel, and in respect to them the extent of the authority posessed by Hook to bind the company. Hook was the vice president of the Daily & Hook Company, a local insurance agency which wrote the policy to Harter. For a short time the Daily & Hook Company represented the defendant, and were authorized to consent to assignments, transfers, and indorsements at the time the loss occurred; they were also agents for other insurance companies. Their agency was not unlimited, and the record is silent as to any authority possessed by them to bind the defendant other than as above stated. They could not waive the subrogation clause at all, and certainly not by representations which were not in writing indorsed on or attached to the policy. Hartford Fire Insurance Company v. Nance, 12 F.(2d) 575 (C. C. A. 6); Home Insurance Office v. Scott, 46 F.(2d) 10 (C. C. A. 6); Sun Ins. Office v. Scott, 284 U. S. 177, 52 S. Ct. 72, 76 L. Ed. 229. For the same reason we think the defendant not estopped from denying liability by Hook's alleged representations.
Plaintiff relies upon section 9586 of Ohio General Code, which makes the person who solicits or takes an application for insurance the agent of the company, anything in the application or the policy to the contrary notwithstanding. The Supreme Court of the United States recently reviewed the Ohio cases interpreting this statute. Sun Insurance Office v. Scott, supra.[2] The Ohio courts do not interpret the statute as defining the scope of the agency created by it, but leave it to be defined by applicable principles of common law. When the policy limits its scope, the written contract must control. The burden was upon the plaintiff in the instant case to show the extent of Hook's authority. There is nothing in the record to show that he had anything to do with adjustments of loss, nothing upon which to predicate any authority on his part to waive the subrogation clause, and neither waiver nor estoppel is based upon acts or representations of any other agent or officer of the company.
The judgment below is affirmed.
NOTES
[1] to East Ohio Gas Company
In consideration of the payment to us by The East Ohio Gas Company of the sum of Thirty-two thousand and no/100 Dollars ($32,000.00), being in full settlement and satisfaction of all claims, actions or causes of actions, known or unknown for compensation or otherwise, which we now have, or may in the future have against said Company on account of any and all personal injuries to us, damages to house, furniture, household goods, clothing and any other (D391) property belonging to us, loss or expense resulting or to result from an explosion which occurred on or about January 17th, 1929, in our residence located on Greenwood Place, S. W.; Canton, Ohio, causing total loss of said house and contents and injuring us, and in consideration of such payment, we do for ourselves, our heirs, executors, administrators and assigns, release and forever discharge said The East Ohio Gas Company, its successors and assigns, of and from all claims and demands whatsoever, and in particular, such as have arisen or may in any manner grow out of said explosion.
As a part of this release, it is understood and agreed by the parties hereto, that of the total amount of this settlement, the sum of One Thousand Eight Hundred Ninety-four and 33/100 Dollars ($1,894.33) shall be paid to The Citizens Building & Loan Company, Canton, Ohio, to cover amount of mortgage and interest held by it on our property located on Greenwood Place, S. W., Canton, Ohio.
In witness whereof, we have hereunto set our hands at Canton, Ohio, this 5th day of April, 1929.
[Signed] Clayton C. Harter
[Signed] Sylvia G. Harter
Witnesses:
[Signed] W. D. R. Evans,
[Signed] L. C. Flath.
The Citizens Building & Loan Company, holder of mortgage on property owned by Mr. and Mrs. C. C. Harter, located on Greenwood Place, S. W., Canton, Ohio, in consideration of the amount of mortgage held by it, plus interest thereon to be paid to this Company, hereby consents to the above contract of settlement insofar as loss of the house is concerned, and in consideration of the same, does for itself, its successors or assigns, hereby release and forever discharge said The East Ohio Gas Company, its agents, employees, successors and assigns, from all liability for all claims and demands whatsoever, either at law or in equity, which it now has as a result of and arising from said explosion, occurring January 17th, 1929, as above set forth, or which may in any manner grow out of or arise therefrom.
Witness our hands at Canton, Ohio, this 6th day of April, 1929.
The Citizens Building & Loan Company,
[Signed] Geo. W. H. Higgins.
Witnesses:
[Signed] W. D. R. Evans,
[Signed] Hayes R. Putnam.
[Stamp] Audited.
[2] See, also, Bergholm v. Peoria Life Ins. Co., 284 U. S. 489, 52 S. Ct. 230, 76 L.Ed. 416, and Newsom v. New York Life Insurance Co. (C. C. A. 6) 60 F. (2d) 241, decided at this session. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1002270/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
KEVIN TAYLOR,
Plaintiff-Appellant,
v.
LIEUTENANT BRIGHT; OFFICER LILLY;
No. 00-6676
OFFICER CLARK; OFFICER HUDSON;
OFFICER BROGGS; OFFICER MURPHY,
Associated Warden, individually
and in their official capacities,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Alexander Williams, Jr., District Judge.
(CA-00-701-AW)
Submitted: July 20, 2000
Decided: August 14, 2000
Before WILLIAMS, WILKINS, and MICHAEL, Circuit Judges.
_________________________________________________________________
Vacated and remanded by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
Kevin Taylor, Appellant Pro Se.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Kevin Taylor appeals from the district court's order dismissing his
Bivens1 claim with prejudice and dismissing without prejudice his
Federal Tort Claims Act ("FTCA") claim, 28 U.S.C.A. § 1346(b)
(West Supp. 2000). The district court concluded that Taylor had an
adequate post-deprivation remedy such that a Bivens action would not
lie, and that he failed to exhaust his administrative remedies and
therefore the court lacked jurisdiction over the FTCA claim. Because
we find that Taylor sufficiently alleged exhaustion of administrative
remedies and that it is not clear that Bivens relief is not available, we
vacate and remand for further proceedings.
Taylor, a federal inmate, alleged that correctional officers refused
to return to him his gold chain and a pair of tennis shoes. In his com-
plaint, he alleged that the property was lost, stolen, or destroyed. He
sought compensatory and punitive damages and "any relief deemed
appropriate."
In dismissing the FTCA claim, the district court determined that it
lacked jurisdiction over the claim because Taylor failed to submit
documentary proof that he exhausted his administrative remedies. In
his complaint, Taylor alleged, under penalty of perjury, that he pre-
sented his tort claim to the Mid-Atlantic Regional Office of the
Bureau of Prisons on February 9, 1999. He further alleged that as of
the date of the complaint, March 1, 2000, he had received no
response.
While exhaustion of administrative remedies is a jurisdictional pre-
requisite to the district court's jurisdiction, see Plyler v. United States,
_________________________________________________________________
1 Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics,
403 U.S. 388 (1971).
2
900 F.2d 41, 42 (4th Cir. 1990), the exhaustion requirement is met if
the claimant has "first presented the claim to the appropriate Federal
agency and his claim shall have been finally denied by the agency in
writing." 28 U.S.C. § 2675(a) (1994). Notably, "[t]he failure of an
agency to make final disposition of a claim within six months after
it is filed shall, at the option of the claimant any time thereafter, be
deemed a final denial of the claim for purposes of this section." Id.
Because Taylor's complaint alleged that he filed his tort claim in Feb-
ruary 1999, and received no response as of March 2000, we conclude
that Taylor had sufficiently demonstrated exhaustion of administra-
tive remedies. The district court's dismissal of the FTCA claim, there-
fore, was improper.
The negligent deprivation of property through the acts of a state or
federal employee does not constitute a deprivation of due process. See
Daniels v. Williams, 474 U.S. 327, 333-34 (1986). In addition, even
the intentional deprivation of property through the random and unau-
thorized acts of a state or federal employee does not constitute a
deprivation of due process, if "a meaningful postdeprivation remedy
for the loss is available." Hudson v. Palmer , 468 U.S. 517, 533
(1984). The district court summarily determined that Taylor had an
adequate post-deprivation remedy and therefore dismissed Taylor's
Bivens claim. Taylor might have an adequate post-deprivation remedy
under the FTCA if it is his contention that Defendants acted outside
their authority in stealing his property. See CHoPP Computer Corp.
v. United States, 5 F.3d 1344, 1347 (9th Cir. 1993) (holding that
claim for conversion was not beyond scope of FTCA); see also Balti-
more & Ohio R.R. v. Equitable Bank, N.A., 550 A.2d 407, 410 (Md.
Ct. Spec. App. 1988) (articulating elements of conversion under
Maryland law).
We have previously indicated, however, that the availability of
relief under the FTCA does not automatically foreclose a Bivens
action. See Dunbar Corp. v. Lindsey, 905 F.2d 754, 762 (4th Cir.
1990) (relying upon Carlson v. Green, 446 U.S. 14, 19-23 (1980)).
Under the FTCA, Taylor could only recover monetary damages. To
the extent that Taylor's complaint could be read as a request for
injunctive relief in the form of the return of his property, the FTCA
would not be an adequate remedy. Moreover, Taylor sought punitive
damages, which are available in a Bivens action, but are not available
3
under the FTCA. We find that the district court's conclusion as to the
adequacy of Taylor's post-deprivation remedies was premature.
Finally, we note that the in forma pauperis statute requires that a
prisoner who brings a civil action or an appeal must pay the full filing
fee. See 28 U.S.C.A. § 1915(b)(1) (West 2000). Therefore, the district
court's decision to "not require [Taylor] to provide the fee or indi-
gency application" was incorrect. On remand, the district court should
resolve the fee issue prior to consideration of the merits of Taylor's
claims.2 See United States v. Jones, ___ F.3d ___, 2000 WL 709090
(4th Cir. May 31, 2000) (NO. 99-6398).
In conclusion, we vacate the district court's order and remand to
the district court for resolution of the fee issue, for further proceed-
ings on the FTCA claim, and for a determination of whether Taylor
alleged an intentional deprivation of his property, and if so, whether,
in fact, Taylor had an adequate post-deprivation remedy such that a
Bivens action would not lie. We dispense with oral argument because
the facts and legal contentions are adequately presented in the materi-
als before the court and argument would not aid the decisional pro-
cess.
VACATED AND REMANDED
_________________________________________________________________
2 Taylor filed an application to proceed in forma pauperis after the dis-
trict court's order was entered. The district court denied this motion as
moot. In light of our disposition of this appeal, the motion is reinstated.
4 | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1002297/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 00-4193
CHAD WINFRED WILLIS,
Defendant-Appellant.
Appeal from the United States District Court
for the Middle District of North Carolina, at Durham.
Frank W. Bullock, Jr., District Judge.
(CR-99-262)
Submitted: August 24, 2000
Decided: August 31, 2000
Before MICHAEL and MOTZ, Circuit Judges, and
HAMILTON, Senior Circuit Judge.
_________________________________________________________________
Affirmed in part and dismissed in part by unpublished per curiam
opinion.
_________________________________________________________________
COUNSEL
Louis C. Allen III, Federal Public Defender, William S. Trivette,
Assistant Federal Public Defender, Greensboro, North Carolina, for
Appellant. Walter C. Holton, Jr., United States Attorney, Lisa B.
Boggs, Assistant United States Attorney, Greensboro, North Carolina,
for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Chad Winfred Willis pleaded guilty to one count of possession of
a firearm by a convicted felon, in violation of 18 U.S.C.A.
§ 922(g)(1) (West 2000), and was sentenced to 96 months in prison.
Willis noted a timely appeal. His attorney has filed a brief pursuant
to Anders v. California, 386 U.S. 738, 744 (1967), stating that there
are no meritorious issues for appeal. Nonetheless, counsel argues that
the sentence was too severe. Willis was advised of his right to file a
pro se supplemental brief, but he did not file such a brief. Because we
find the assignment of error to lack merit and discern no other error
in the record, we affirm Willis' conviction and sentence.
The presentence report reflects that Willis' base offense level was
24. See U.S. Sentencing Guidelines Manual§ 2K2.1(a)(2) (1998).
Willis received a three-level adjustment for acceptance of responsibil-
ity. See USSG § 3E1.1(a), (b). His resulting offense level was 21.
With a criminal history category of VI, Willis' guideline range was
77-96 months. The Government moved for an upward departure,
arguing that Willis' extensive criminal history in the North Carolina
state courts warranted such a departure. The district court denied the
motion but sentenced Willis to the maximum term of imprisonment
within his guideline range.
On appeal, counsel contends that the 96-month sentence is too
severe. Counsel points out that this is Willis' first federal conviction,
and, despite his multiple state convictions, Willis has never served a
significant length of time for those offenses. Additionally, Willis is a
dialysis patient, admits that he has a drug problem that he needs to
control, and wants to pursue his education and obtain certain skills.
We have held that a defendant may not seek "review of a sentenc-
ing court's discretion in setting a sentence anywhere within a properly
2
calculated sentencing range." United States v. Porter, 909 F.2d 789,
794-95 (4th Cir. 1990). The record in this case reflects that Willis'
guideline range was appropriately calculated. His 96-month sentence
exceeded neither the guideline range nor the maximum penalty to
which he was statutorily subject. See 18 U.S.C.A. § 924(a)(2) (West
2000).
As required by Anders, we have independently reviewed the entire
record and all pertinent documents in this case. We have considered
all possible issues presented by the record and conclude that there are
no non-frivolous grounds for this appeal. We deny counsel's motion
to withdraw at this time. Pursuant to the plan adopted by the Fourth
Circuit Judicial Council in implementation of the Criminal Justice Act
of 1964, 18 U.S.C. § 3006A (1994), this court requires counsel to
inform his client, in writing, of his right to petition the Supreme Court
for further review. If requested by the client to do so, counsel should
prepare a timely petition for a writ of certiorari, unless counsel
believes that such a petition would be frivolous. In that case, counsel
may move in this court to withdraw from representation. Counsel's
motion must state that a copy thereof was served on the client.
We affirm Willis' conviction and sentence, dismissing that part of
the appeal challenging the length of the sentence as unduly severe.
We dispense with oral argument because the facts and legal conten-
tions are adequately presented in the materials before the court and
argument would not aid the decisional process.
AFFIRMED IN PART; DISMISSED IN PART
3 | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571304/ | 29 So.3d 1132 (2010)
DESANTUS
v.
STATE.
No. 4D08-598.
District Court of Appeal of Florida, Fourth District.
April 6, 2010.
Decision Without Published Opinion Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1572734/ | 323 F.Supp. 1107 (1971)
INTERNATIONAL EQUITY CORPORATION
v.
PEPPER AND TANNER, INC.
Civ. A. No. 70-3239.
United States District Court, E. D. Pennsylvania.
February 8, 1971.
*1108 Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., for plaintiff.
J. M. Demcisak, Philadelphia, Pa., for defendant.
MEMORANDUM
TROUTMAN, District Judge.
This action or proceeding was removed to this Court from the Court of Common Pleas of Montgomery County on November 23, 1970, when Pepper and Tanner, Inc., hereinafter referred to as "defendant" filed in this Court a "petition for removal" pursuant to the provisions of 28 U.S.C. § 1441 et seq., alleging diversity of citizenship and an amount in controversy in excess of $10,000.00, both of which are admitted by International Equity Corporation, hereinafter referred to as "plaintiff".
On December 28, 1970, plaintiff filed a motion to "remand" the action to the State Court, contending that the petition for removal was not filed within thirty days as required by 28 U.S.C. § 1446(b).[1]
On August 12, 1968, the defendant signed a judgment note payable to the plaintiff in the sum of $192,118.83, payable in four installments on December 31, 1968, and June 30, 1969, 1970 and 1971. On July 21, 1970, plaintiff, through its counsel, forwarded to the defendant letter of demand advising that the sum of $64,039.61, together with interest, was due and payable on said note "on or before June 30, 1970". The receipt of said letter is not denied. The defendant was further advised that unless payment of the amount due was made "within fifteen days" "all remaining installments payable under the note will become immediately due and payable with interest thereon to date of payment". The defendant's attention was also called "to the fact that under the terms of the note judgment may be entered against you by confession in any court of record in Pennsylvania or elsewhere". The defendant was further advised that counsel was instructed "to take such legal action as may be necessary to effect collection of the entire balance of the note" including accelerated payments, together with interest, costs and attorney's fees. On August 21, 1970, a complaint was filed by the plaintiff in the Court of Common Pleas of Montgomery County and judgment was confessed in the total sum of $119,134.51. On August 26, 1970, the plaintiff, through its counsel, forwarded to the defendant written notice, the receipt *1109 of which is not denied, which read as follows:
"Gentlemen: This is to advise that judgment has been entered against you in the amount of $119,134.51 in the above captioned matter for failure to comply with the terms of your installment note with International Equity Corporation."
On October 16, 1970, a writ of execution issued on said judgment which was served upon the defendant on October 19, 1970. On November 17, 1970, the defendant filed, in the Court of Common Pleas of Montgomery County, a petition to strike or open said judgment. On November 19, 1970, the defendant filed, in the Court of Common Pleas of Montgomery County, petition to set aside the execution and filed therewith an appropriate bond. On November 23, 1970, the defendant filed, in this Court, petition for removal of the action to this Court. On December 28, 1970, the plaintiff filed in this Court motion to remand the action to the State Court for failure to have complied with the provisions of 28 U.S.C. § 1446(b).
Said statute provides that the petition for the removal of a civil action to the Federal Courts shall be filed within thirty days after the "receipt" by the defendant "through service or otherwise" of a copy of the initial pleading. Where, as here, the initial pleading, the complaint, need not be served, it then provides that the petition for removal shall be filed "within thirty days after the service of summons upon the defendant". To cover a situation where removability can be determined only after the filing of amended pleadings or other papers, the statute provides that the petition for removal may be filed within thirty days "after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable". Thus, from a reading of § 1446(b) in its entirety, it becomes evident that a petition for removal must be filed by the defendant within thirty days after the receipt by the defendant of a pleading, a summons, a motion, order or other paper "from which it may first be ascertained that the case is one which is or has become removable". Regrettably, the Federal statute cannot be so drafted and phrased as to precisely fit the situation existing in each state and by the same token the State statutes and rules cannot be so drafted and phrased as to precisely fit the Federal statute. However, from a reading of § 1446(b), in its entirety, it becomes evident that it was the intent of Congress to obtain the earliest possible removal of the action to the Federal Court after receipt, by the defendant, of notice of the State proceeding, the nature of it, the issues involved and the parties involved so that, with this information, the defendant can determine the removability of the action. Given the opportunity to thus determine that it is removable, the defendant is then obliged to file his petition for removal within thirty days. Legal "service" is not required. The statute reads, "Service or otherwise". It need not be a pleading. The statute refers to an amended pleading, a "motion", "order" or "other paper". It is sufficient that the pleading, amended pleading, motion, order or other paper be sufficient that the defendant can, from it, ascertain "that the case is one which is or has become removable."
Pennsylvania Rule 2951, 12 P.S. Appendix, relating to confession of judgment provides for the confession of judgment, under certain circumstances, without the filing of a complaint. It further provides for the entry of a confession of judgment by the filing of a complaint which was done in this case on August 21, 1970. Pennsylvania Rule 2958 provides for the giving of written notice of the entry of judgment and the date, the court, the term and number and the amount of the judgment. Said rule provides that said notice "shall" be mailed to the defendant by the plaintiff *1110 "within twenty (20) days after the entry of judgment". Said rule further provides that within the same twenty-day period a writ of execution may issue and a levy or attachment made. However, it provides that "no sale may be had pursuant to such writ until twenty days after the notice has been mailed (to the defendant) and the affidavit of mailing has been filed". The defendant contends that the notice in question is nothing more than a condition precedent to the sale. It is obviously more than that. The rule provides that the notice must be given within twenty days "after the entry of judgment". That the plaintiff may never, in fact, issue execution, levy, attach or attempt to sell, does not in the least affect his obligation to give the notice in question to the defendant within twenty days after the entry of judgment. Moreover, the contents of said notice, as required by the rule, is precisely the information contemplated by 28 U.S.C. § 1446(b), i. e., information from which it may be ascertained that the case is one which is "removable" to the Federal Court. Therefore, we cannot agree with the defendant's contention that the notice required is nothing more than a condition precedent to the execution and sale. It is more than that. It gives the defendant the opportunity to appear, immediately following the receipt of the notice, and to take whatever action he may desire in defense of his rights. If the plaintiff has not yet executed, it may well precede the execution. It gives to the defendant, within twenty days after the entry of the judgment, notice of all information essential to the protection of his rights. It incidentally gives him information sufficient upon which to base a decision as to the removability of the action to the Federal Courts in compliance with 28 U.S.C. § 1446(b). That the defendant is given no right to appear, answer the complaint and present a defense prior to the entry of judgment or even prior to the execution on the judgment is not pertinent to the question of removal. This is the result of the terms and provisions of the judgment note executed voluntarily by the defendant for commercial, economic and/or other reasons best known to him. Likewise, that the remedy is "powerful and drastic" is again the result of the defendant's voluntary execution of the judgment note and is likewise not pertinent to the question of removal.
The defendant contends that the use of the word "summons" in 28 U.S.C. § 1446(b) is significant in that it contemplates the issuance of some type of "original process" served upon the defendant before he can be required to file a petition for removal to the Federal Courts. There is nothing in the language of the statute and nothing in the history pertaining to its amendment to support such contention. The use of the word "summons" was apparently the result of an effort on the part of Congress to meet the specific practices prevailing in certain states "such as Kentucky" (see page 4 of defendant's brief). It does not suggest "original process". As a matter of fact, the clear language of the entire section (1446(b)) indicates that the notice to the defendant may be by way of a "pleading", a "summons", a "motion", an "order", or "other paper", "from which it may first be ascertained that the case is one which is * * * removable." Moreover, it need not be by "service". It may be by "service or otherwise".
Neither does the language of the statute suggest that defendant must be given information such as that contained on a "summons" used in Pennsylvania practice. The Pennsylvania summons notifies the defendant that an action has been commenced against him which he is "required to defend". But § 1446(b) requires no notice to the defendant that he is "required to defend" the action. It merely requires that he be given a "pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable". So we can find nothing in the Federal Act which requires that the defendant's obligation *1111 to remove, if he so desires, awaits service upon him of "original process". That the Federal Act does not so provide is understandable in that many State procedures, like the procedure in the instant case, do not provide for the service of original process upon the defendant. Were the Federal statute to be so construed it might well exclude completely the removability of certain actions, depending entirely upon the State procedures involved. The statute does not contemplate such an unjust result. Removability cannot be dependent upon the technicalities of procedures or the usage of specific verbiage.
The defendant criticizes the Pennsylvania procedures incident to confession of judgment. We are not here concerned with the equities of those procedures, or the lack thereof, and neither are we concerned with the constitutionality thereof. We are concerned only with the thirty-day limitation contained in § 1446(b). In contending that "this court should not liberally construe the State confession procedure", (page 6 of defendant's brief) and in contending that "equity" should be applied, the defendant completely overlooks the fact that the thirty-day requirement for the filing of a removal petition is mandatory. We have no discretion. Putterman v. Daveler, D.C., 169 F.Supp. 125 (1958); Green v. Zuck, D.C., 133 F. Supp. 436 (1955); Maybruck v. Haim, D.C., 290 F.Supp. 721 (1962); Wisseman v. LaChance, D.C., 209 F.Supp. 807 (1962); Sunbeam Corp. v. Brazin, D.C., 138 F.Supp. 723 (1956); Pottstown Daily News Publishing Co. v. Pottstown Broadcasting Co., 247 F.Supp. 578, 583-584 (E.D.Pa.1965); Adams v. Western Steel Buildings Inc., 296 F.Supp. 759, 761 (D.Colo.1969); 1A Moore, Federal Practice, 1345 (1965).
Therefore, we feel compelled to remand the action to the State Court and grant the plaintiff's motion to remand for failure, on the part of the defendant, to have filed its petition for removal within thirty days after receipt of letter of notice from the plaintiff. However, we need not base our conclusion solely upon such grounds. On October 19, 1970, writ of execution was served upon the defendant. Appearing thereon was information as to the court, number and term, the date of judgment, etc. Petition for removal was not filed within thirty days thereafter, so that, even if the receipt of the written notice from the plaintiff had not started the running of the thirty-day period prescribed by 1446(b) certainly the service upon the defendant of the writ of execution would have accomplished such result. In either event, the petition for removal was not filed within the thirty-day period prescribed by 28 U.S.C. § 1446(b).
For the reasons stated we shall remand the action to the State Court and grant the plaintiff's motion to remand.
NOTES
[1] 28 U.S.C. § 1446(b) provides, inter alia:
"(b) The petition for removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading had then been filed in court and is not required to be served on the defendant, whichever period is shorter.
If the case stated by the initial pleading is not removable, a petition for removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571265/ | 589 S.W.2d 529 (1979)
Virginia Harbour TOLER et al., Appellants,
v.
Frank A. HARBOUR, Appellee.
No. 9011.
Court of Civil Appeals of Texas, Amarillo.
October 24, 1979.
Rehearing Denied November 21, 1979.
Manning Holland, Amarillo, for appellants.
Garland D. Sell & Associates, Garland D. Sell and Patrick A. Pirtle, Amarillo, for appellee.
REYNOLDS, Chief Justice.
Granting plaintiff's motion, the trial court summarily decreed that a will, which states plaintiff shall "have and hold a life-estate only" in realty and "at his death his heirs take the fee simple title," vested, by operation of the rule in Shelley's case, the fee simple title in plaintiff. The non-moving defendants did not present to the court any issue which would avoid plaintiff's entitlement to the summary judgment established by the proof. Affirmed.
Plaintiff Frank A. Harbour instituted this action to secure a declaratory judgment construing the last will and testament of W. A. Harbour, deceased. Specifically, Frank sought a judgment declaring that the fourth article of the decedent's will vested in him the fee simple title to the East 167 acres of Section 1114, Block 43, H&TC Ry. Co. Survey, Ochiltree County, Texas.
*530 The will of W. A. Harbour was executed 3 November 1945 and admitted to probate on 13 May 1963. The will, which gave to his wife, Mattie Harbour, "a life-estate in all of my real estate," also provided:
Third: Upon the passing from this life of the said Mattie Harbour, it is my will and I so direct that my son, John K. Harbour take the fee simple title to the North 240 acres of the West 480 acres of Section 1114, Block 43, H.&T.C.R.R.Co. in Ochiltree county, Texas; and that my daughter, Anna Marie Harbour Smith take the fee simple title to the South 240 acres of the said West 480 acres of said Section 1114, Block 43, H.&T.C.R.R.Co., in Ochiltree county, Texas.
Fourth: It is my will, and I so direct that my son, Frank A. Harbour, shall, at the passing of my wife Mattie Harbour, have and hold a life-estate only in and to the East part of said Section 1114, Block 43, H.&.T.C.R.R.Co., in Ochiltree county, Texas, being all of the residue of said section not herein bequeathed to John K. Harbour and Anna Marie Harbour Smith, above, and containing 167 acres, more or less. Said East part being where I now reside; at his death his heirs take the fee simple title in and to said tract of land.
As defendants to his action, Frank named Virginia Harbour Toler, Harold Leon Harbour, Joy Harbour Sibrel and Patsy Harbour Anglinwho are his children and who, he alleged, would be the apparent takers of fee simple title to the property passing under the fourth article but for the operation of the rule in Shelley's caseand the First National Bank of Perryton, Texas, receiver. The bank had been appointed receiver of the 167-acre tract for mineral development pursuant to Tex.Rev.Civ.Stat.Ann. art. 2320c (Vernon 1971) in Cause No. 4827 pending on the docket of the trial court.
Frank's children filed an original answer consisting of allegations which have no pertinence to the matters submitted on this appeal.[1] The bank answered that it had received certain monies in its capacity as receiver and prayed that if Frank should prevail, the judgment should specifically provide for the payment of income tax, if any, receiver's fees and the expenses out of the funds, with the balance, if any, payable to Frank.
After all defendants answered and the children responded to Frank's interrogatories and requests for admissions of fact, Frank moved for summary judgment. Attaching a certified copy of W. A. Harbour's probated will to his motion, Frank alleged, in essence, that the operation of the rule in Shelley's case on the language of the will entitled him to summary judgment as a matter of law, the answer of the defendants having failed to state a defense to defeat the summary judgment.
In response to the summary judgment motion, the children filed an answer, attaching affidavits. The answer consisted of allegations that: first, there is a genuine issue of material fact as to the intention of testator W. A. Harbour, particularly in using the word "heirs;" and, second, the entire will itself clearly sets forth the testator's intent that Frank was to have only a life estate and, at Frank's death, his heirs, by which the testator meant Frank's children, were to take the fee simple title. The thrust of the affidavits was that the testator had orally declared his intent that Frank take only a life estate and that Frank's children take the fee simple title.
The court heard the motion for summary judgment and argument of counsel. Fourteen *531 days later, the children filed their first amended original answer to Frank's original petition. By this answer, the children asserted that all issues and facts set forth in Frank's original petition were fully and finally litigated between the same parties in a judgment, a certified copy of which was attached, rendered in Cause No. 4827, and prayed that Frank's original petition be dismissed, res judicata.
Thereafter, the court rendered summary judgment. Reciting, inter alia, in the judgment that by virtue of the will and the operation of the rule in Shelley's case Frank was devised a fee simple title to the 167-acre tract, the court decreed that Frank owns a fee simple title to the real estate without limitation.[2]
Only the children have appealed from the judgment.[3] For reversal of the summary judgment, they submit that: (1) the former judgment rendered in Cause No. 4827 determined the ownership of the real estate and is res judicata of this action; and (2) the court erred in granting summary judgment because there are genuine issues of material facts. Under the latter submission, they narrow the consideration to the issue of the testator's intent, arguing that the will itself, together with the affidavits, conclusively show that the testator did not use the word "heirs" in its technical sense, and intended Frank to have a life estate only and his children to take the fee simple title.
Res judicata
Without academically discussing the children's contention that the doctrine of res judicata bars this action, it suffices to state that the affirmative defense of res judicata is not available for consideration as a ground for reversal of the summary judgment. This is for the reason that the defense was never presented to the trial court in avoidance of the summary judgment.
Res judicata is an affirmative defense which must be specifically pleaded, Tex.R.Civ.P. 94; otherwise, the defense is waived. Allandale Nursing Home, Inc. v. John Bremond Co., Inc., 514 S.W.2d 958, 959 (Tex.Civ.App.Austin 1974, writ ref'd n. r. e.). Although the children did, by an amended answer filed two weeks after the summary judgment motion hearing, seek the dismissal of Frank's original petition on conclusional allegations of res judicata, the defense of res judicata was not expressly presented to the trial court by written answer or other response to Frank's motion for summary judgment. Indeed, the children concede that res judicata was not affirmatively raised to defeat the summary judgment when, in their brief, they state, "We do not think the defendants were required to plead the judgment rendered at the prior hearing of the court in bar to further proceedings ...."
In the context of the summary judgment rule Tex.R.Civ.P. 166-A, an answer generally filed in response to a petition does not expressly present to the trial court any issue in response to a summary judgment motion; and, by the rule's explicit direction, any issue not expressly presented to avoid the movant's entitlement to summary judgment shall not be considered on appeal. The City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671 (Tex., 1979). The first point of error is overruled.
*532 Rule in Shelley's case
Frank moved for, and the court granted, summary judgment on the ground that the rule in Shelley's case operated on the language of the will to vest fee simple title in him. The rule is expressed in the landmark case of Hancock v. Butler, 21 Tex. 804, 808 (1858), from which the following, with omissions not material here, is quoted:
`[W]hen a person takes an estate of freehold, legally, or equitably, under a .. will ... and in the same instrument, there is a limitation, by way of remainder, either with or without the interposition of another estate, of an interest of the same legal or equitable quality, to his heirs, or heirs of his body, as a class of persons, to take in succession, from generation to generation, the limitation to the heirs entitles the ancestor to the whole estate.' 4 Kent, 215. This result would follow, although the [will] might express that the first taker should have a life estate only. It is founded on the use of the technical words, "heirs," or "heirs of his body," in the ... will.
The rule existed in Texas as a positive rule of law and not as a rule of construction, Sybert v. Sybert, 152 Tex. 106, 254 S.W.2d 999, 1000 (1953), until the legislature abolished the rule effective 1 January 1964. Tex.Rev.Civ.Stat.Ann. art. 1291a (Vernon Pamphlet Supp. 1963 to 1978). But the act of abolishment does not foreclose the application of the rule to W. A. Harbour's will, which was executed and probated before 1 January 1964, for section 3 of the act exempts its application to conveyances taking effect prior to the effective date of the act.
Given the language of the will and the viability of the rule in Shelley's case, Frank is vested with the fee simple title to the realty, even if the testator intended otherwise. It would be superfluous to comment on the merits or demerits of the rule's application to the will, for the case of Sybert v. Sybert, supra, is squarely in point, refutes all of the children's contentions for non-application of the rule, and dictates that the summary judgment must be affirmed.
In Sybert, the Court confronted the same situation which is presented in this appeal. By his will, Mr. Sybert left all of his property to his wife for life and, at her death, willed to one son a life estate in a tract of land which was, after the son's death, "to vest in fee simple in the heirs of his body." Later, Mrs. Sybert died, leaving a will disposing of the land in the same manner and by the identical words copied from Mr. Sybert's will. When the son died, litigation ensued to determine whether the wills vested in the son a life estate only or a fee simple title.
The court held that the rule in Shelley's case must apply to the language of the wills to vest fee simple title in the son because there was no language, and the court could supply none, qualifying the words "heirs of his body," it being immaterial whether or not the testator so intended. 254 S.W.2d at 1001. The concurring opinion points out that there can be no doubt the two testators intended to leave a life estate only to their son, and the application of the rule in Shelley's case results in setting aside this intention. In fact, the opinion continues, every case in which the rule is applied results in setting aside the intention of the person making the instrument; nevertheless, when wills come within the rule, there is no escape from the rule's application. 254 S.W.2d at 1002.
Here, despite the intent of testator W. A. Harbour, he used no language, and we cannot supply any for him, qualifying his word "heirs" so it will not be read in its technical sense. Thus, the rule in Shelley's case operates on the language of W. A. Harbour's will to vest in Frank A. Harbour a fee simple title to the realty devised in the fourth article of the testator's will. The second point is overruled.
The summary judgment is affirmed.
COUNTISS, J., not participating.
NOTES
[1] The original answer is shown in a supplemental transcript tendered after the submission of this cause by the children, who moved, and Frank opposed, its filing. The motion was carried forward for consideration with the merits of the appeal. Other than the original answer, the tendered supplemental transcript is composed of copies of some instruments filed in the receivership proceedings in Cause No. 4827 and in the probate proceedings in the Estate of W. A. Harbour, deceased. Except for the original answer, none of the instruments was a part of the summary judgment record before the trial court, and none of them enhances the merits of any point of error or affects the disposition of the appeal. In view thereof, the motion to file the supplemental transcript is granted only to the extent that the original answer is accepted for filing.
[2] The judgment is silent on the matter of the bank's prayer for disposition of the funds it holds as receiver. Under the rationale of North East Independent School District v. Aldridge, 400 S.W.2d 893 (Tex.1966), it will be presumed the prayer was denied; but, this is not tantamount to saying that the proper disposition of the funds cannot be ordered pursuant to Tex. Rev.Civ.Stat.Ann. art. 2320c, § 2C (Vernon 1971) in the receivership proceedings in Cause No. 4827.
[3] At the insistence of the children, the trial court made and filed eight findings of fact and seven conclusions of law. By the very nature of summary judgment proceedings, findings of fact are inappropriate, for the only issue is whether there is a genuine issue of material fact. Matter of Estate of Furr, 553 S.W.2d 676, 679 (Tex.Civ.App.Amarillo 1977, writ ref'd n. r. e.); Reynolds v. Park, 521 S.W.2d 300, 307 (Tex.Civ.App.Amarillo 1975, writ ref'd n. r. e.). Accordingly and because the particular findings are not mentioned on appeal, the factual findings are ignored. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571280/ | 589 S.W.2d 18 (1979)
Ginger SHIRAS and Arkansas Gazette Company, Petitioners,
v.
Henry M. BRITT, Circuit Judge, Respondent.
No. 78-34.
Supreme Court of Arkansas.
November 13, 1979.
Rehearing Denied January 7, 1980.
*19 Rose, Nash, Williamson, Carroll, Clay & Giroir, Little Rock, for petitioners.
Bill Clinton, Atty. Gen., by Martin J. Nevrla, Asst. Atty. Gen., Little Rock, for respondent.
BYRD, Justice.
During the conspiracy to murder trial of Rodney Coston, and out of the hearing of the jury, respondent Henry M. Britt, Circuit Judge, excluded the public and the press from a "Denno" hearing conducted pursuant to Ark.Stat.Ann. § 43-2105 (Repl.1977). The respondent, on one other occasion during a proffer for the record of testimony held to be inadmissible, ruled that petitioner Ginger Shiras could remain present during the proffer only upon condition that the respondent could censor any story written about the proffer. Petitioner would not submit to the censorship, and was accordingly excluded during the proffer. This petition was brought to challenge the actions of respondent.
We have reviewed the petition for mandamus, as an after-the-fact situation, for the reasons set forth in Commercial Printing Co. & Tosca v. Lee, 262 Ark. 87, 553 S.W.2d 270 (1977).
During oral argument, it was conceded by petitioner that she had no greater rights to attend the trial than any other member of the public. Consequently, we shall only deal with the rights of petitioner as a member of the public.
In asking for the issuance of a writ, petitioners contend that the exclusion from the "Denno" hearing, Ark.Stat.Ann. § 43-2105 (Repl.1977), and the proffer of proof by the witness was a violation of Ark.Stat.Ann. § 22-109 (Repl.1962) and Art. 2 § 6 of the Constitution of Arkansas and the First and Fourteenth Amendments to the Constitution of the United States. Respondent asserts that petitioner's legal rights were not violated since the press has only a limited right of access to in camera hearings and that the challenged action of respondent advanced the public interest in a fair and prompt criminal trial in which the rights of the accused were protected.
Most of the briefs of both petitioner and respondent are centered around her alleged Federal constitutional rights and the recent case of Gannett Co., Inc. v. DePasquale, County Court Judge of Seneca County, N.Y., ___ U.S. ___, 99 S. Ct. 2898, 61 L. Ed. 2d 608 (1979). However, we need not reach those issues, because as we view the issues before us, they are controlled by Ark. Stat.Ann. § 22-109 (Repl.1962) which provides:
"The sittings of every court shall be public, and every person may freely attend the same."
In Commercial Printing Co. & Tosca v. Lee, supra, after pointing to Ark.Stat.Ann. § 22-109 (Repl.1962), and the fact that the Constitution of Arkansas does not guarantee a private trial, we stated:
"This is no new premise. Probably the best known legal writer of all time, Sir William Blackstone, a member of His Majesty's Court of Common Pleas during the 18th Century, in his Commentaries on the Laws of England, Volume 4, Page 1428, Paragraph 5 (Lewis' Edition), stated:
*20 `Public wrongs or crimes and misdemeanors are a breach and violation of the public rights and duties due to the whole community in its social aggregate capacity.'
Lay citizens, in criticizing courts in reversing or dismissing criminal cases because of the state's failure to comply with some legal requirement (though perhaps thought to be technical), frequently comment that the courts scrupulously observe every right of a defendant, but sometimes seem to overlook that the public also is directly affected by criminal acts and has a direct interest in the outcome of the proceedings.
Additionally, the courthouses are paid for with public funds; the judges, jurors, state's attorney (and defense attorneys who have been appointed by the court because of the indigency of their clients) are paid with public funds. The public has every right to ascertain by personal observation whether its officials are properly carrying out their duties in responsibly and capably administering justice, and it would require unusual circumstances for this right to be held subordinate to the contention of a defendant that he is prejudiced by a public trial (or any part thereof).
As stated previously, we have only one question before us, viz, was the court's order excluding the public and press from the voir dire valid? It is clear by what has been said that we have answered with an emphatic `No!'"
Respondent contends that the challenged action actually advanced the public interest in a fair trial by protecting the rights of the accused. In this connection he points out that the most damaging outside information in a criminal trial comes from suppression hearings. He acknowledges that society benefits when there is access to all open court proceedings but concludes that the State's obligation to protect the right of the accused to a constitutionally fair, speedy and impartial trial must be given even greater consideration.
We cannot agree with respondent's emphasis on the rights of the accused for to do so puts the courts in the position of letting the tail wag the dog. Courts operate for the benefit of the public and like Caesar's wife should appear to be above reproach. When the public loses confidence in the ability of the courts to fully and impartially deal with those accused of crime, the public has a tendency to take the law into its own hands. In that case all of society is the loser because the innocent have no way of protecting themselves from their accusers.
Furthermore, the handling of the public's business in secret and behind closed doors not only causes the public to view the results with distrust, but it deprives the public of sufficient knowledge to make adjustments or reform in the law or the judiciary. Judicial reform does not necessarily come from within the judiciary. Just recently a farmer by trade introduced and put through the General Assembly a judicial redistricting of the several judicial circuits and districts in this State. Needless to say, we have concluded that the rights of the accused to a fair and impartial trial do not exceed the rights of the public to observe justice in progress.
Writ granted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571271/ | 272 Neb. 428
STATE OF NEBRASKA, APPELLEE,
v.
CARL M. HUMBERT, APPELLANT.
No. S-05-1221.
Supreme Court of Nebraska.
Filed October 6, 2006.
Daniel W. Ryberg for appellant.
Jon Bruning, Attorney General, and George R. Love for appellee.
WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.
WRIGHT, J.
NATURE OF CASE
Carl M. Humbert (Humbert) was charged by information with two misdemeanors and four felonies. He pleaded no contest to the misdemeanor charges and filed a plea in bar asserting that prosecution on the two corresponding felony charges in the information is barred by the Double Jeopardy Clauses of the state and federal Constitutions. The district court overruled Humbert's plea in bar, and he filed this interlocutory appeal.
SCOPE OF REVIEW
[1,2] Issues regarding the grant or denial of a plea in bar are questions of law. State v. Furrey, 270 Neb. 965, 708 N.W.2d 654 (2006). On a question of law, an appellate court is obligated to reach a conclusion independent of the determination reached by the court below. Id.
FACTS
The charges against Humbert were filed after his estranged wife, Mayra Humbert (Mayra), claimed that on the evening of April 27, 2005, Humbert had stabbed her and restrained her from leaving the residence the couple had previously shared in Bellevue, Nebraska. Humbert then allegedly tied Mayra to a chair or couch with an extension cord so he could retrieve her cellular telephone from her vehicle. After Humbert returned to the residence, he untied Mayra. At approximately 1:15 a.m., she escaped from the residence and was later treated at an Omaha hospital for her injuries.
Humbert told police that he and Mayra had argued on April 27, 2005. In order to scare Mayra, he picked up a "ceremonial type" knife that was on a counter in the residence. Humbert said that as Mayra approached him, she "walked into the knife." Humbert saw blood on Mayra's pants, but he did not ask her if she was hurt.
Humbert was charged by complaint in county court with four felonies: first degree false imprisonment, second degree assault (domestic violence), terroristic threats, and use of a weapon to commit a felony. After he was bound over to district court, an information was filed charging Humbert with the same four felony counts and two additional misdemeanors: second degree false imprisonment and third degree assault (domestic violence). At arraignment, Humbert stood mute. Counsel informed the district court that Humbert was filing a plea in abatement and a motion to quash on the four felony charges. Humbert then pleaded no contest to the misdemeanor charges.
The district court examined Humbert and determined that he understood the charges, the possible penalties, and his constitutional rights. Upon finding that Humbert's pleas of no contest were voluntarily, freely, and intelligently made, the court then found him guilty of the misdemeanor charges.
After his conviction on the misdemeanor charges, Humbert filed a plea in bar alleging that (1) second degree false imprisonment is a lesser-included offense of first degree false imprisonment; (2) third degree assault (domestic violence) is a lesser-included offense of second degree assault (domestic violence); (3) the charges of first degree false imprisonment and second degree assault (domestic violence) are barred by double jeopardy as set forth in article I, § 12, of the Nebraska Constitution and the Fifth Amendment to the U.S. Constitution; and (4) the use of a weapon to commit a felony charge is moot. The district court overruled the plea in bar.
ASSIGNMENT OF ERROR
Humbert claims the district court erred in overruling his plea in bar.
ANALYSIS
[3,4] In this interlocutory appeal, Humbert argues that his right not to be subjected twice to trial and conviction for the same crime has been violated. The Fifth Amendment to the U.S. Constitution and article I, § 12, of the Nebraska Constitution protect an individual from being subjected to the hazards of trial and possible conviction more than once for an alleged offense. State v. Marshall, 269 Neb. 56, 690 N.W.2d 593 (2005). The protection provided by Nebraska's double jeopardy clause is coextensive with that provided by the U.S. Constitution. Id.
[5] The Double Jeopardy Clause of the Fifth Amendment to the U.S. Constitution protects against three distinct abuses: (1) a second prosecution for the same offense after acquittal, (2) a second prosecution for the same offense after conviction, and (3) multiple punishments for the same offense. State v. Molina, 271 Neb. 488, 713 N.W.2d 412 (2006). Humbert argues that he is being threatened with multiple punishments for the same offense because all of the charges arose from the same incident. Humbert claims that the two misdemeanors to which he pleaded no contest are lesser-included offenses of first degree false imprisonment and second degree assault (domestic violence) and therefore prosecution on the corresponding felony charges is barred by these convictions.
The U.S. Supreme Court addressed this issue in Ohio v. Johnson, 467 U.S. 493, 104 S. Ct. 2536, 81 L. Ed. 2d 425 (1984). Respondent Kenneth Johnson was indicted by an Ohio grand jury for four offenses: murder, grand theft, involuntary manslaughter, and aggravated robbery, which resulted from the killing of the victim and the theft of property from the victim's apartment. Johnson offered to plead guilty to charges of involuntary manslaughter and grand theft, but he pleaded not guilty to charges of murder and aggravated robbery. The trial court accepted the guilty pleas and dismissed the remaining charges because it concluded that involuntary manslaughter and grand theft were lesser-included offenses of murder and aggravated robbery, respectively. The court determined that continued prosecution of murder and aggravated robbery charges after acceptance of Johnson's guilty pleas on involuntary manslaughter and grand theft was barred by the Double Jeopardy Clause. The Ohio Supreme Court affirmed, and the State appealed to the U.S. Supreme Court.
The U.S. Supreme Court noted the basic protections offered by the Double Jeopardy Clause and stated: "In contrast to the double jeopardy protection against multiple trials, the final component of double jeopardyprotection against cumulative punishmentsis designed to ensure that the sentencing discretion of courts is confined to the limits established by the legislature." Ohio v. Johnson, 467 U.S. at 499.
[6] The Court pointed out that the trial court's dismissal of the more serious charges completely halted the proceedings which would ultimately have led to a verdict of guilt or innocence on those charges. In the event of a guilty verdict, the trial court would have had to confront the question of cumulative punishments, but that stage of the prosecution was never reached because the trial court dismissed the more serious offenses. "While the Double Jeopardy Clause may protect a defendant against cumulative punishments for convictions on the same offense, the Clause does not prohibit the State from prosecuting [the defendant] for such multiple offenses in a single prosecution." Ohio v. Johnson, 467 U.S. at 500.
The Court noted that Johnson had not been exposed to conviction on the charges to which he pleaded not guilty, "nor ha[d] the State had the opportunity to marshal its evidence and resources more than once or to hone its presentation of its case through a trial." Ohio v. Johnson, 467 U.S. at 501.
The acceptance of a guilty plea to lesser included offenses while charges on the greater offenses remain pending, moreover, has none of the implications of an "implied acquittal" which results from a verdict convicting a defendant on lesser included offenses rendered by a jury charged to consider both greater and lesser included offenses. [Citations omitted.] There simply has been none of the governmental overreaching that double jeopardy is supposed to prevent. On the other hand, ending prosecution now would deny the State its right to one full and fair opportunity to convict those who have violated its laws.
Ohio v. Johnson, 467 U.S. 493, 501-02, 104 S. Ct. 2536, 81 L. Ed. 2d 425 (1984).
The Court stated, "Notwithstanding the trial court's acceptance of [Johnson's] guilty pleas, [Johnson] should not be entitled to use the Double Jeopardy Clause as a sword to prevent the State from completing its prosecution on the remaining charges." Ohio v. Johnson, 467 U.S. at 502. Thus, the Double Jeopardy Clause did not prohibit the State from continuing its prosecution of Johnson on the more serious charges.
In the case at bar, Humbert pleaded no contest to second degree false imprisonment and third degree assault (domestic violence), which may be lesser-included offenses of two of the felony chargesfirst degree false imprisonment and second degree assault. See, e.g., State v. Brownell, 11 Neb. Ct. App. 68, 644 N.W.2d 166 (2002); State v. Bachelor, 6 Neb. Ct. App. 426, 575 N.W.2d 625 (1998).
The State is not seeking a subsequent prosecution of Humbert for a greater offense after he had previously been tried for the lesser-included offense. There has been no trial on any of the charges. Humbert has pleaded no contest to the above-described misdemeanors, but he has not been sentenced and he has not been subjected to a trial on the felony charges.
This case is analogous to the situation presented in Ohio v. Johnson, supra. The State has not yet had an opportunity to prosecute Humbert on all of the charges. Humbert can assert his double jeopardy claims as to cumulative punishments based on convictions for greater and lesser offenses when and if that issue is presented. Based upon Ohio v. Johnson, we conclude the facts of this case do not demonstrate a present violation of the Double Jeopardy Clause.
Humbert relies upon State v. Vasquez, 271 Neb. 906, 716 N.W.2d 443 (2006), to support his contention that double jeopardy protections apply upon acceptance of a plea. In Vasquez, the State filed an exception to the order of the district court. State law provides that when the prosecuting attorney takes exception to a trial court decision pursuant to Neb. Rev. Stat. § 29-2315.01 (Cum. Supp. 2004), the judgment of the trial court "shall not be reversed nor in any manner affected when the defendant in the trial court has been placed legally in jeopardy." Neb. Rev. Stat. § 29-2316 (Cum. Supp. 2004).
We stated in Vasquez that jeopardy attaches (1) when the jury is impaneled and sworn in a case tried to a jury, (2) when a judge begins to hear evidence as to the guilt of the defendant in a case heard without a jury, or (3) at the time the trial court accepts the defendant's guilty plea. We held that jeopardy attached when the trial court accepted the defendant's guilty plea and that, therefore, the trial court's judgment could not be reversed or affected in any way by the State's filing of an exception to the district court's order. However, in the case at bar, the point at which jeopardy attaches is not the issue.
Issues regarding the grant or denial of a plea in bar are questions of law. State v. Furrey, 270 Neb. 965, 708 N.W.2d 654 (2006). On a question of law, an appellate court is obligated to reach a conclusion independent of the determination reached by the court below. Id. We conclude that the district court properly overruled Humbert's plea in bar. Double jeopardy protects a defendant against cumulative punishments for convictions on the same offense; however, it does not prohibit the State from prosecuting a defendant for multiple offenses in a single prosecution. See Ohio v. Johnson, 467 U.S. 493, 104 S. Ct. 2536, 81 L. Ed. 2d 425 (1984).
CONCLUSION
The judgment of the district court is affirmed.
AFFIRMED.
Hendry, C.J., not participating. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571236/ | 722 N.W.2d 243 (2006)
271 Mich. App. 425
James J. CARTER, Plaintiff-Appellant,
v.
ANN ARBOR CITY ATTORNEY, Defendant-Appellee.
Docket No. 258282.
Court of Appeals of Michigan.
Submitted June 15, 2006, at Detroit.
Decided June 27, 2006, at 9:00 a.m.
Released for Publication October 2, 2006.
*245 James J. Carter, Ann Arbor, in propria persona.
David W. Swan, Ann Arbor, for the defendant.
Before: FORT HOOD, P.J., and MARK J. CAVANAGH and SERVITTO, JJ.
SERVITTO, J.
Plaintiff appeals as of right a circuit court order granting summary disposition in favor of defendant and denying plaintiff's motion for summary disposition in this veterans preference act case. Because plaintiff failed to demonstrate his ability to perform the job of assistant city attorney at the level of skill and with the expertise required by the employer, the veterans preference act did not grant him preference in public service employment and we therefore affirm.
In response to a notice of job vacancies, plaintiff applied for a position as assistant city attorney for the city of Ann Arbor. *246 When two others were ultimately hired for the available positions, plaintiff filed a complaint for a writ of mandamus, seeking to compel the Ann Arbor City Attorney to employ him as an assistant city attorney. Plaintiff asserted that because he is a veteran and qualified for the position(s), he was entitled to preference for employment under the veterans' preference act, MCL 35.401 et seq. Plaintiff further claimed that in hiring nonveterans rather than him, defendant violated the act. The parties filed cross-motions for summary disposition and, as previously indicated, the trial court granted defendant's motion for summary disposition, ruling that plaintiff failed to establish a right to mandamus and further failed to submit materials or documentation demonstrating he had the requisite qualifications for the positions.
This Court reviews de novo a trial court's ruling on a motion for summary disposition. Corley v. Detroit Bd. of Ed., 470 Mich. 274, 277, 681 N.W.2d 342 (2004). Summary disposition may be granted pursuant to MCR 2.116(C)(8) on the ground that the opposing party "has failed to state a claim on which relief can be granted." Radtke v. Everett, 442 Mich. 368, 373, 501 N.W.2d 155 (1993). In assessing a motion brought under MCR 2.116(C)(8), all factual allegations are accepted as true, as well as any reasonable inferences or conclusions that can be drawn from the facts. Id. In considering a motion pursuant to MCR 2.116(C)(10), a court considers affidavits, pleadings, depositions, admissions, and other documentary evidence submitted by the parties in a light most favorable to the nonmoving party. Corley, supra, 470 Mich. at 278, 681 N.W.2d 342. If the proffered evidence fails to establish a genuine issue of material fact, the moving party is entitled to judgment as a matter of law. Maiden v. Rozwood, 461 Mich. 109, 120, 597 N.W.2d 817 (1999). Issues concerning the interpretation of a statute are questions of law that we also review de novo. Dressel v. Ameribank, 468 Mich. 557, 561, 664 N.W.2d 151 (2003).
Plaintiff raises several arguments on appeal, all turning upon the interpretation and application of the veterans' preference act (VPA). "`The primary goal of statutory interpretation is to give effect to the intent of the Legislature.'" Title Office, Inc. v. Van Buren Co. Treasurer, 469 Mich. 516, 519, 676 N.W.2d 207 (2004), quoting In re MCI Telecom. Complaint, 460 Mich. 396, 411, 596 N.W.2d 164 (1999). In construing a statute, "the [C]ourt must consider the object of the statute, the harm it is designed to remedy, and apply a reasonable construction that best accomplishes the statute's purpose." Morris & Doherty, PC v. Lockwood, 259 Mich.App. 38, 44, 672 N.W.2d 884 (2003) (citations omitted). "Unless defined in the statute, every word or phrase of a statute will be ascribed its plain and ordinary meaning." Robertson v. DaimlerChrysler Corp., 465 Mich. 732, 748, 641 N.W.2d 567 (2002).
"The veterans' preference act was enacted for the purpose of discharging, in a measure, the debt of gratitude the public owes to veterans who have served in the armed services in time of war, by granting them a preference in original employment and retention thereof in public service." Valentine v. McDonald, 371 Mich. 138, 144-145, 123 N.W.2d 227 (1963). Consistent with that purpose, the act provides, in relevant part:
In every public department and upon the public works of the state and of every county and municipal corporation thereof honorably discharged veteran [sic] . . . shall be preferred for appointment and employment. Age, loss of limb, or other physical impairment *247 which does not, in fact, incapacitate, shall not be deemed to disqualify them. . . . The applicant shall be of good moral character and shall have been a resident of the state for at least 2 years and of the county in which the office or position is located for at least one year, and possess other requisite qualifications, after credit allowed by the provisions of any civil service laws. . . . [MCL 35.401]
The VPA applies to veterans, like plaintiff, who served in the Vietnam era (see MCL 35.61[j]) and is to be liberally construed. Abt v. Wilcox, 264 Mich. 183, 185, 249 N.W. 483 (1933).
While the VPA clearly states that veterans shall be given a preference for appointment and employment, it does not describe the nature or strength of the preference. Further, the VPA provides that a veteran is not entitled to the preference unless he or she meets the residency requirements and possesses "other requisite qualifications." However, the VPA neither defines "other requisite qualifications" nor mandates who is responsible for determining what the requisite qualifications are and whether an applicant possesses those qualifications. This Court, then, must first examine the language of the VPA and determine whether the VPA grants an absolute hiring preference to a veteran who meets the minimum job requirements for a position in public employment (as claimed by plaintiff) or whether the public employer has discretion to hire a better qualified nonveteran over a veteran who possesses the minimum qualifications.
According to Random House Webster's College Dictionary (2000),[1] "prefer" means:
1. to set or hold before or above other persons or things in estimation; like better: I prefer school to work. 2. to give priority to, as to one creditor over another. 3. to put forward or present for consideration or sanction. 4. to put forward or advance, as in rank or office; promote.
Similarly, according to Black's Law Dictionary (8th ed.), "prefer" means "to give priority to." Further, Random House Webster's College Dictionary defines "requisite" as "required; necessary" and defines "qualification" as "a quality, accomplishment, etc., that fits a person for some function, office, or the like." Under the plain, ordinary meanings of the relevant words in the VPA, defendant had to hold plaintiff above, or give plaintiff priority over, other nonveteran applicants if he possessed the qualities or accomplishments that were required or necessary to fulfill the role of an assistant city attorney.
Plaintiff argues that he does not have to prove his relative qualifications because of amendments of the VPA that have taken place over the years. We disagree. Plaintiff specifically directs this Court's attention to 1923 PA 88, an earlier version of the VPA that provided:
That the applicant shall be of good moral character and shall have been a resident of the state for at least two years and of the county in which the office or position is located for at least one year, and possesses other requisite qualifications, which shall be at least equal to those of other applicants. [Emphasis added.]
Pursuant to 1939 PA 298, the language requiring that the veteran possess other requisite qualifications "which shall be at least equal to those of other applicants" *248 was deleted and no longer appeared in the statute. By deleting the phrase "which shall be at least equal to those of other applicants," the Legislature arguably evinced its intent that the preference not be triggered only when the veteran's qualifications were equal to the other applicants. See, e.g., Edgewood Dev., Inc. v. Landskroener, 262 Mich.App. 162, 167-168, 684 N.W.2d 387 (2004). However, though the Michigan Legislature did not intend for the preference to be triggered only when the veteran's qualifications are equal to or better than a nonveteran's qualifications, this does not mean that the Legislature intended for the VPA to provide an absolute preference, regardless of qualifications.
The Michigan Supreme Court decision in Patterson v. Boron, 153 Mich. 313, 116 N.W. 1083 (1908), proves instructive on this issue. In Patterson, the plaintiff, an honorably discharged Union soldier, sought a writ of mandamus compelling the defendant mayor to appoint him as a city attorney. The plaintiff based his right to the appointment on the VPA, as set forth in 1907 PA 329:[2]
In every public department, and all public departments in all municipal corporations. . . honorably discharged soldiers, sailors and marines of the late Rebellion . . . and the Spanish-American War shall be preferred for appointment and employment; age, loss of limb or other physical impairment which does not, in fact, incapacitate, shall not be deemed to disqualify them: Provided, however, That the applicant . . . shall have been a resident of the state for at least two years and of the county in which the office or position is located for at least one year, and possesses other requisite qualifications. [Id. at 313-314, 116 N.W. 1083.]
The Court noted that under the act, "discharged Union soldiers are not entitled to an appointment unless they possess the other requisite qualifications." Id. at 314, 116 N.W. 1083. The mayor refused to appoint the plaintiff to the position of city attorney because, in his estimation, the plaintiff did not possess the requisite qualifications for the position. Id. On appeal, the issue before our Supreme Court was whether the mayor had the right to make that determination. The Court noted that the mayor had the authority to appoint the city attorney and was likewise authorized to refuse to appoint the plaintiff as city attorney:
This right to appoint imposed on respondent the duty of determining that his appointee possessed the requisite qualifications for the office. He would have been faithless to that duty had he appointed an applicant whom he deemed disqualified. The law therefore made it his duty to determine whether relator an applicant for the office possessed the requisite qualifications, and no law authorizes a court to review his determination that relator lacked such qualifications. It must therefore be held that relator is not entitled to the appointment in question because it has been authoritatively determined that he does not possess the requisite qualifications therefor. [Id. at 314-315, 116 N.W. 1083.]
In Patterson, then, our Supreme Court clearly held that to be entitled to the veteran's preference, a veteran must possess the requisite qualifications for the position, as determined by the hiring authority.
*249 Here, the city of Ann Arbor granted defendant the authority to appoint assistant city attorneys.[3] As in Patterson, the right to appoint assistant city attorneys imposes on defendant the duty to determine that the applicants who are hired possess the requisite qualifications for the office. Today we reaffirm the principle set forth in Patterson and hold that notwithstanding the VPA, a hiring authority is authorized to refuse to hire a veteran if, in the authority's estimation, the veteran did not possess the requisite qualifications for the position.
We further clarify that the veteran's preference is not absolute. Although the veteran's qualifications need not be equal to the qualifications of a nonveteran to trigger the preference, his or her qualifications must be at least comparable. Other jurisdictions have applied their respective veterans' preference acts in a similar fashion.[4] For example, Pennsylvania's Veterans' Preference Act (PAVPA), like the VPA, confers a preference on those who meet certain established criteria: the applicant must be a veteran, must be honorably discharged, and must possess the other requisite qualifications to satisfactorily perform all of the duties which the position requires. 51 Pa. Cons. Stat. Ann. § 7101 et seq.
In Merrell v. Chartiers Valley School Dist., 579 Pa. 97, 855 A.2d 713 (2004), the Pennsylvania Supreme Court held that the PaVPA essentially provides for a tiebreaking preference for candidates with comparable qualifications and, therefore, the preference does not ripen until the veteran can establish the requisite qualifications for the position. 579 Pa. at 111-112, 855 A.2d 713. According to the Merrell court, the purpose of the PaVPA "is not to place veterans in a better position than other applicants simply because they are veterans . . . but to provide a preference in the final selection process among candidates of comparable quality." Merrell, supra, 579 Pa. at 112, 855 A.2d 713. In Brickhouse v. Spring-Ford Area School Dist., 540 Pa. 176, 656 A.2d 483 (1995), the Pennsylvania Supreme Court further recognized that, while it was lawful to prefer veterans in employment, "`there must be some reasonable relation between the basis of preference and the object to be obtained, the preference of veterans for the proper performance of public duties.'" Brickhouse, supra, 540 Pa. at 181-182, 656 A.2d 483, quoting Commonwealth ex rel Graham v. Schmid, 333 Pa. 568, 573, 3 A.2d 701 (1938). See also Gossage v. State, 112 Wash.App. 412, 422, 49 P.3d 927 (2002) (argument that veterans preference is absolute ignores that the preference requires that the applying veteran possess the capacity necessary to discharge the duties of the position involved).
We find the logic employed by the Pennsylvania Supreme Court persuasive and sound. Public employers should not be required to hire veterans who meet the bare minimum job qualifications if they do not believe the veteran is, in fact, qualified for the position or that the veteran does not possess the requisite experience. In this particular matter, hiring an assistant city attorney who does not possess the qualities found necessary by defendant could undermine the integrity of the position and have an undesirable impact on *250 Ann Arbor residents who rely on the city attorney's office to perform at a particular level of expertise so as to best serve the public's interests. To grant an absolute preference to veterans, then, would be to ignore the consequences of hiring unqualified persons in public employment.
In sum, although the veteran's qualifications need not be equal to the qualifications of a nonveteran to trigger the preference, the veteran's qualifications must be at least comparable in the estimation of the hiring authority. The veteran's preference, then, does not ripen until the veteran can establish that he or she possesses the requisite qualifications for the position and the VPA does not preclude a public employer from hiring a nonveteran applicant if the employer reasonably believes that the nonveteran applicant is substantially better qualified than the veteran.
Plaintiff's argument that defendant was obligated to hire him because he possessed the "must-have" qualifications posted in the job notice thus fails. Although those qualifications may have established plaintiff's eligibility to be considered for the position, those qualifications did not establish that he was "qualified" for the job. The minimum requirements are very basic (licensed to practice law in Michigan; two years' experience as an attorney; good research, writing, and oral advocacy skills; work well independently and learn quickly; familiarity with computer-based legal research and computer programs); therefore, to follow plaintiff's logic would leave defendant absolutely no discretion to consider specific experience or expertise that may be required to adequately perform the job. Again, defendant was given the discretion (and, indeed, had a duty according to Patterson) to set the requisite qualifications for a position and determine whether the candidates possessed such qualifications. Absent this discretion, and under plaintiff's reading of the VPA, any other part of the hiring process (interview, background check, etc.) would be rendered pointless, as once a veteran applicant met the bare minimum requirements, the hiring body would be compelled to hire the veteran and the hiring process would effectively cease. This would clearly be inconsistent with the policies and purposes behind the VPA.
The above being true, this Court turns its attention to whether plaintiff possessed the required qualifications for the position of assistant city attorney and whether his qualifications were comparable to those of the other applicants. The posting for the job of assistant city attorney reads as follows:
JOB SUMMARY The Assistant City Attorney is a staff attorney in the City Attorney's Office and serves as Attorney for the City. Specific assignments and other duties depend on the attorney's skills and the needs of the office, but will include review of legal documents, written and oral advice on a variety of legal issues, and representation of the City in court and/or administrative proceedings. This is a full-time position, however part-time placement will be considered.
EDUCATION AND EXPERIENCE Min[imum] of two (2) years of experience as an attorney. Experience in municipal law practice preferred. Experience desired in one or more of the following areas of law: collections; tax; planning and zoning; ordinance enforcement or other prosecution or defense experience; litigation; environmental, water and sewer utilities; labor and employment. Experience interacting with and advising public bodies such as boards and commissions desired. Must have good research, writing, oral advocacy, and interpersonal skills, must work well independently, and must be *251 able to learn new areas of law quickly. Must be able to do computer based legal research. Must have some familiarity with and ability to use word processing, database, spreadsheet and other computer programs desirable. Must be licensed to practice law in Michigan.
After submitting his application, plaintiff received correspondence from defendant indicating that he was going to collect and review resumes over the next few months and determine the specific needs of the office.[5] Defendant's affidavit indicates that he ultimately determined that the office required one attorney with experience in labor issues and one with experience in zoning and planning. Moreover, defendant established specific hiring criteria for each position. According to defendant, the minimum qualifications, although not specified in the initial general posting for the positions, were as follows:
Labor Law Attorney significant traditional labor experience with a high level of responsibility in a corporate or municipal setting and experience with arbitration hearings, the National Labor Relations Board and/or the Michigan Employment Relations Commission, labor negotiations, and collective bargaining agreement.
Zoning and Planning Attorney experience with zoning and planning issues, significant involvement with Planning Commission issues, ability to work well with Planning Commission, planning department, and community development staff.
Plaintiff's resume indicates his areas of expertise as including: all areas of real estate and construction law; general business, including contracts, partnerships, corporations and limited liability companies; tax law (particularly in the area of real estate); and employment law. While plaintiff's resume indicated that he "[c]ompleted courses and internship in public sector labor law," his application materials did not indicate that he had experience in labor law or zoning and planning law. In light of his application and resume, then, plaintiff did not have the requisite qualifications for either position.
The applicants who were ultimately hired, on the other hand, provided information demonstrating their qualifications for the positions. The applicant hired as a labor attorney, for example, had eight years of experience with Dykema Gossett PLLC representing public and private employers in traditional union matters, and an additional eight years of experience as a manager for labor and employment at DTE Energy and an attorney at Michigan Consolidated Gas Company, where she represented the companies before the National Labor Relations Board and negotiated collective bargaining agreements. The applicant hired for the zoning and planning position demonstrated experience in that area, including having held a position with the Ann Arbor Planning Commission for *252 five years and prior experience with federal housing law.
Defendant was seeking to hire two attorneys to practice in specific areas of the law: labor law and zoning and planning lawnot a general lawyer with experience in a multitude of practice areas. Therefore, regardless of plaintiff's experience in other areas of the law, plaintiff's lack of experience in labor law and zoning and planning law is fatal to his claim that his qualifications were comparable to or greater than those of the successful applicants. Because plaintiff failed to establish that he possessed the "other requisite qualifications" set forth by defendant, he was not entitled to the veteran's preference. In other words, plaintiff failed to demonstrate that he had the ability to perform the job at the level of skill and with the expertise demanded by defendant, the employer, and thus, the preference never ripened. And, because there was no preference for plaintiff to enforce, the trial court properly granted summary disposition in favor of defendant.
The trial court also properly found that plaintiff failed to establish a right to mandamus in this matter. A trial court's decision whether to issue a writ of mandamus is reviewed for an abuse of discretion. MCI, supra, 460 Mich. at 443, 596 N.W.2d 164. But whether defendant had a clear legal duty to perform and whether plaintiff had a clear legal right to the performance of that duty, thereby satisfying the first two steps in the test for assessing the propriety of a writ of mandamus, are questions of law, which this Court reviews de novo. Tuggle v. Dep't of State Police, 269 Mich.App. 657, 667, 712 N.W.2d 750 (2005), citing Citizens for Protection of Marriage v. Bd. of State Canvassers, 263 Mich.App. 487, 491-492, 688 N.W.2d 538 (2004). Moreover, an underlying issue of statutory interpretation is a question of law that is reviewed de novo on appeal. MCI, supra, 460 Mich. at 443, 596 N.W.2d 164.
In Vorva v. Plymouth-Canton Community School Dist., 230 Mich.App. 651, 655, 584 N.W.2d 743 (1998), this Court explained that the issuance of a writ of mandamus is only proper where:
(1) the plaintiff has a clear legal right to performance of the specific duty sought to be compelled, (2) the defendant has the clear legal duty to perform such act, and (3) the act is ministerial, involving no exercise of discretion or judgment. Bingo Coalition for CharityNot Politics v. Bd. of State Canvassers, 215 Mich.App. 405, 413, 546 N.W.2d 637 (1996). Mandamus is an extraordinary remedy that may lie to compel the exercise of discretion, but not to compel its exercise in a particular manner. Teasel v. Dep't of Mental Health, 419 Mich. 390, 409-410, 355 N.W.2d 75 (1984).
Plaintiff bears "the burden of demonstrating entitlement to the extraordinary remedy of a writ of mandamus." Citizens for Marriage, supra, 263 Mich.App. at 492, 688 N.W.2d 538.
The VPA provides:
In case the application of any such soldier, sailor or marine, shall be rejected by the person having the power of appointment to the position for which he has applied, he shall be entitled to remedy therefor by mandamus to enforce the provisions of this act. [MCL 35.404.]
Applying Vorva, supra, to the facts of this case, plaintiff failed to demonstrate that he was entitled to a writ of mandamus. First, plaintiff failed to establish that he had a clear legal right to be hired by defendant. As discussed above, he failed to demonstrate that he possessed the requisite qualifications for the position *253 and, therefore, he had no right to further consideration by defendant. Second, defendant did not have a clear legal duty to hire plaintiff. He did not have a duty to hire any individual whom he determined did not have the ability to perform the job at the level of skill and with the expertise demanded by defendant. Third, and most importantly, plaintiff failed to establish that the act of hiring an assistant city attorney was a ministerial task. An act is ministerial in nature if it is "`prescribed and defined by law with such precision and certainty as to leave nothing to the exercise of discretion or judgment.'" Beadling v. Governor, 106 Mich.App. 530, 533, 308 N.W.2d 269 (1981), quoting Oakland Schools Bd. of Ed. v. Superintendent of Pub. Instruction, 401 Mich. 37, 43-44, 257 N.W.2d 73 (1977).
In support of his contention that the act of hiring an assistant city attorney is a ministerial task, plaintiff cites McMullen v. Saginaw City Manager, 300 Mich. 166, 1 N.W.2d 494 (1942). In McMullen, the trial court issued a writ of mandamus requiring the managing officer of the city to appoint two civil service commissioners to regulate the employment of members of the city fire department. Id. at 167, 1 N.W.2d 494. Under a public act adopted and made operative in that city, the civil service commission was to consist of three members, two of whom were to be appointed by the person or group acting as a mayor, city manager, council, or common council. Id. at 169, 1 N.W.2d 494. The other member was to be selected by the paid members of the fire department. Id. The paid members of the fire department made their selection, but the city manager, by refusing to appoint the other two members of the commission, prevented operation of the act. Id. The city appealed the issuance of the writ arguing, among other things, that the writ "abridge[d] the right of municipal home rule." Id. at 168, 1 N.W.2d 494. Our Supreme Court held that the writ was properly issued because the act was operative in the city and the act "command[ed] appointment of commissioners by the city." Id. at 169-170, 1 N.W.2d 494.
McMullen is clearly distinguishable from the case at hand. The act in McMullen required the managing officer to appoint two commissionersan action that was mandatory and, thus, ministerial. The writ of mandamus did not, however, require appointment of any specific individuals (a decision presumably left to the discretion of the managing officer) but rather required simply that commissioners be appointed as required by the operative act.
In the instant case, neither the Ann Arbor charter nor the VPA required defendant to hire any assistant city attorneys at all. Instead, defendant had the discretion to hire the assistant city attorneys. Moreover, the writ sought by plaintiff was for appointment of himself, a specific individual, as assistant city attorney. The choice of an assistant, however, was discretionary. See, e.g., Patterson, supra, 153 Mich. at 314-315, 116 N.W. 1083.
The remaining cases cited by plaintiff for the proposition that the appointment of an assistant city attorney is a ministerial task are similarly distinguishable. As in McMullen, People ex rel. Attorney General v. Detroit Common Council, 29 Mich. 108 (1874) involved a writ compelling council to act on a clear legal duty (by considering nominations made by the mayor to establish a board of public works). Meiland v. Wayne Probate Judge, 359 Mich. 78, 101 N.W.2d 336 (1960), also cited by plaintiff, involved the reinstatement of an employee in a civil service position that he was clearly qualified to occupy. The ultimate decision in Meiland was based on *254 civil service rules, which are not applicable in this case.
A writ of mandamus is not appropriate when the act that the plaintiff seeks to compel the defendant to perform is a discretionary one. See Tuscola Co. Abstract Co., Inc. v. Tuscola Co. Register of Deeds, 206 Mich.App. 508, 512, 522 N.W.2d 686 (1994) ("mandamus was inappropriate[ ] because defendant's actions involved the exercise of discretion vested in a public official"). Because the hiring of assistant city attorneys is discretionary, and because plaintiff failed to establish that he had a clear legal right to be hired by defendant or that defendant had a clear legal duty to hire plaintiff, the writ of mandamus was properly denied.
Affirmed.
KAREN M. FORT HOOD and MARK J. CAVANAGH, JJ., concur.
NOTES
[1] This Court may examine dictionary definitions if a statute does not expressly define its terms. People v. Rutledge, 250 Mich.App. 1, 6, 645 N.W.2d 333 (2002).
[2] The language of the VPA at the time of Patterson, supra, was substantially similar to the current language.
[3] Section 5.2 of the charter for the city of Ann Arbor specifically provides that the city attorney may delegate one of more duties to an assistant "who shall be appointed by the Attorney. . . ." (Emphasis added.)
[4] Lacking guidance under Michigan law, we may look to other states' case law interpreting similar statutes. In re Turpening Estate, 258 Mich.App. 464, 466, 671 N.W.2d 567 (2003).
[5] While plaintiff contends defendant is bound by the wording of the official job posting, he has provided no relevant authority to support such a position. Moreover, plaintiff has failed to direct this Court's attention to any provision in the city's affirmative action plan tending to indicate that defendant must include every possible qualification in a job posting, prohibiting defendant from considering qualifications other than those set forth in the posting, or otherwise restricting the discretion of defendant in hiring assistants. A party may not merely announce its position and leave it to the court to discover and rationalize the basis for its claims, Wilson v. Taylor, 457 Mich. 232, 243, 577 N.W.2d 100 (1998), "nor may he give issues cursory treatment with little or no citation of supporting authority." Houghton v. Keller, 256 Mich. App. 336, 339, 662 N.W.2d 854 (2003). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571311/ | 562 F. Supp. 2d 1080 (2008)
In re ABBOTT LABORATORIES NORVIR ANTI-TRUST LITIGATION.
No. C 04-1511 CW.
United States District Court, N.D. California.
May 16, 2008.
*1081 Sharon Truluck Maier, Christopher T. Heffelfinger, Joseph J. Tabacco, Jr., Berman, Devalerio, Pease, Tabacco, Burt, et al., San Francisco, CA, Richard Roy Wiebe, Law Office of Richard R. Wiebe, San Francisco, CA, for John Doe.
James Christopher Magid, San Francisco, CA, Christopher T. Heffelfinger, Joseph J. Tabacco, Jr., Berman, Devalerio, Pease, Tabacco, Burt, et al., San Francisco, CA, Richard Roy Wiebe, Law Office of Richard R. Wiebe, San Francisco, CA, Bernard Persky, Hollis L. Salzman, Kellie Safar-Lerner, Natalie Marcus, Labaton Sucharow LLP, New York, NY, Craig L. Briskin, Mehri & Skalet, PLLC, Washington, DC, Dan Drachler, Attorney at Law, Seattle, WA, David S. Nalven, Steve W. Berman, Elaine T. Byszewski, Hagens, Berman, Sobol, Shapiro LLP, Cambridge, MA, Joseph Lipofsky, Zwerling, Schachter & Zwerling, LLP, New York, NY, for Service Employees International Union Health and Welfare Fund.
Charles B. Klein, Winston & Strawn LLP, Washington, DC, Michael Kip Maly, Nicole Michelle Norris, Winston & Strawn LLP, San Francisco, CA, Samuel S. Park, David J. Doyle, George C. Lombardi, James F. Hurst, Winston & Strawn LLP, Chicago, IL, Stephanie Suzanne McCallum, Chicago, IL, for Abbott Laboratories.
ORDER GRANTING IN PART ABBOTT'S MOTION FOR SUMMARY JUDGMENT AND GRANTING PLAINTIFFS' CROSS-MOTION FOR SUMMARY ADJUDICATION OF PATENT INVALIDITY
CLAUDIA WILKEN, District Judge.
Defendant Abbott Laboratories moves for summary judgment on all of the claims *1082 against it. Plaintiffs John Doe and Service Employees International Union Health and Welfare Fund oppose Abbott's motion and cross move for summary adjudication that Abbott's patents do not provide a defense to antitrust liability. The matter was heard on May 1, 2008. Having considered oral argument and all of the papers submitted by the parties, the Court grants Abbott's motion for summary judgment in part and grants Plaintiffs' motion for summary adjudication.
BACKGROUND
Protease inhibitors (PIs) are considered the most potent class of drugs to combat the HIV virus. In 1996, Abbott introduced Norvir as a stand-alone PI with a daily recommended dose of 1,200 milligrams (twelve 100-mg capsules a day), priced at approximately eighteen dollars per day. Norvir is the brand name for a patented compound called ritonavir.
After Norvir's release, it was discovered that, when used in small quantities with another PI, Norvir would "boost" the anti-viral properties of that PI. Not only did a small dose of Norvirabout 100 to 400 milligrams per daymake other PIs more effective and decrease the side effects associated with high doses, but it also slowed the rate at which HIV developed resistance to the effects of those PIs. The use of Norvir as a "booster" has enabled HIV patients to live longer. But the use of Norvir as a booster, and not a stand-alone PI, has also meant that the average daily price of Norvir has plummeted since Norvir was first introduced, because patients need a much smaller daily dose of Norvir when it is used as a booster compared to when it is used as a stand-alone PI. By 2003, the average price for a daily dose of Norvir was $1.71.
In 2000, Abbott introduced Kaletra, a single pill containing the PI lopinavir as well as ritonavir, which is used to boost the effects of lopinavir. Although effective and widely used, Kaletra causes some patients to experience significant side effects.
In 2003, two new PIs, Bristol-Myers Squibb's Reyataz and GlaxoSmithKline's Lexiva, were about to be introduced to the market. Studies showed that, when boosted with Norvir, the new PIs were as effective as Kaletra, and were more convenient. In July, 2003, Reyataz was successfully introduced to the market. As a result, Kaletra's market share fell more than Abbott had anticipated. The average daily dose of Norvir also fell. Before Reyataz's release, the most common boosting dose of Norvir ranged from 200 milligrams to 400 milligrams a day. Clinical trials, however, showed that a Norvir dose of only 100 milligrams a day effectively boosted Reyataz.
On December 3, 2003, Abbott raised the wholesale price of Norvir by 400 percent while keeping the price of Kaletra constant. Abbott contends that it did this so that the price of Norvir would be more in line with the drug's enormous clinical value. Plaintiffs contend that the Norvir price increase was an illegal attempt to achieve an anti-competitive purpose in the "boosted market," which Plaintiffs define as the market for those PIs, such as Reyataz, Lexiva and Kaletra, that are prescribed for use with Norvir as a booster. Plaintiffs sued for, among other things, monopolization and attempted monopolization in violation of the Sherman Act, 15 U.S.C. § 2.
LEGAL STANDARD
Summary judgment is properly granted when no genuine and disputed issues of material fact remain, and when, viewing the evidence most favorably to the nonmoving party, the movant is clearly entitled to prevail as a matter of law. Fed. *1083 R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir.1987).
The moving party bears the burden of showing that there is no material factual dispute. Therefore, the court must regard as true the opposing party's evidence, if it is supported by affidavits or other evidentiary material. Celotex, 477 U.S. at 324, 106 S. Ct. 2548; Eisenberg, 815 F.2d at 1289. The court must draw all reasonable inferences in favor of the party against whom summary judgment is sought. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558 (9th Cir.1991).
Material facts which would preclude entry of summary judgment are those which, under applicable substantive law, may affect the outcome of the case. The substantive law will identify which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
Where the moving party does not bear the burden of proof on an issue at trial, the moving party may discharge its burden of production by either of two methods:
The moving party may produce evidence negating an essential element' of the nonmoving party's case, or, after suitable discovery, the moving party may show that the nonmoving party does not have enough evidence of an essential element of its claim or defense to carry its ultimate burden of persuasion at trial.
Nissan Fire & Marine Ins. Co., Ltd., v. Fritz Cos., Inc., 210 F.3d 1099, 1106 (9th Cir.2000),
If the moving party discharges its burden by showing an absence of evidence to support an essential element of a claim or defense, it is not required to produce evidence showing the absence of a material fact on such issues, or to support its motion with evidence negating the non-moving party's claim. Id.; see also Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 885, 110 S. Ct. 3177, 111 L. Ed. 2d 695 (1990); Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir.1991). If the moving party shows an absence of evidence to support the nonmoving party's case, the burden then shifts to the non-moving party to produce "specific evidence, through affidavits or admissible discovery material, to show that the dispute exists." Bhan, 929 F.2d at 1409.
If the moving party discharges its burden by negating an essential element of the non-moving party's claim or defense, it must produce affirmative evidence of such negation. Nissan, 210 F.3d at 1105. If the moving party produces such evidence, the burden then shifts to the non-moving party to produce specific evidence to show that a dispute of material fact exists. Id.
If the moving party does not meet its initial burden of production by either method, the non-moving party is under no. obligation to offer any evidence in support of its opposition. Id. This is true even though the non-moving party bears the ultimate burden of persuasion at trial. Id. at 1107.
Where the moving party bears the burden of proof on an issue at trial, it must, in order to discharge its burden of showing that no genuine issue of material fact remains, make a prima facie showing in support of its position on that issue. UA Local 343 v. Nor-Cal Plumbing, Inc., 48 F.3d 1465, 1471 (9th Cir.1994). That is, the moving party must present evidence that, if uncontroverted at trial, would entitle it to prevail on that issue. Id. Once it *1084 has done so, the non-moving party must set forth specific facts controverting the moving party's prima facie case. UA Local 343, 48 F.3d at 1471. The non-moving party's "burden of contradicting [the moving party's] evidence is not negligible." Id. This standard does not change merely because resolution of the relevant issue is "highly fact specific." Id.
DISCUSSION
I. Sherman Act Claims
A monopolization claim under section 2 of the Sherman Act requires a plaintiff to prove "(1) possession of monopoly power in the relevant market, (2) willful acquisition or maintenance of that power, and (3) causal `antitrust injury.'" Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 736 (9th Cir.1987). An attempted monopolization claim requires "(1) specific intent to control prices or destroy competition in the relevant market, (2) predatory or anti-competitive conduct directed to accomplishing the unlawful purpose, and (3) a dangerous probability of success." Id. As the Ninth Circuit has noted, the requirements of both claims are similar, "differing primarily in the requisite intent and the necessary level of monopoly power." Image Technical Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1202 (9th Cir. 1997). Abbott argues that Plaintiffs have failed to make a showing that there is a triable issue of fact with respect to any of the elements of a Sherman Act claim.
A. Antitrust Injury
Abbott argues that Plaintiffs have failed to show that they have suffered an antitrust injury. The Court has rejected this argument in at least two previous orders. In ruling on Abbott's motion to dismiss, the Court found that, because Plaintiffs have been forced into a "Hobson's choice" of either "paying more for competing boosted regimens versus paying less for Defendant's Kaletra while accepting the drug's harmful side effects," Plaintiffs have stated an antitrust injury similar to the one identified by the Supreme Court in Blue Shield of Virginia v. McCready, 457 U.S. 465, 102 S. Ct. 2540, 73 L. Ed. 2d 149 (1982). Docket No. 63 at 8-9. In the Court's order denying Abbott's previous motion for summary judgment, it found that Plaintiffs' expert's finding that "Defendant's price increase harms HIV patients by creating another barrier to entry that hinders the introduction of new PIs from Defendant's competitors" also created a dispute of fact as to whether Plaintiffs have suffered an antitrust injury. Docket No. 256 at 12.
Abbott argues that, since the Court's previous rulings on the matter, Plaintiffs' expert has admitted that there is no evidentiary support for his assertion that potential competitors may have been excluded from the market. Specifically, Plaintiffs expert stated in his rebuttal report, "I do not think it is possible to prove that innovation would actually fall due to the price increase, and I did not pretend to offer any such proof." Hurst Dec. (Docket No. 440) Ex. I ¶ 103.
Abbott is incorrect in suggesting that Plaintiffs must offer direct proof that competitors have actually been excluded from the market. Doing so would be extremely difficult, if not impossible. A jury could infer from the disparity between the price of ritonavir when it is sold as a component of Kaletra and when it is sold independently as Norvir that Abbott has hindered competition in the boosted market. This would injure consumers in that market.
In addition, there is no basis for revisiting the Court's decision that the Hobson's choice consumers face could itself constitute *1085 an antitrust injury. Abbott is incorrect in suggesting that Plaintiffs must come forward with a patient who wanted to purchase a drug that competes with Kaletra but could not afford to do so. It is the "penalty" consumers pay, in the form of a disparately high price for Norvir when they choose to use one of the competing drugs, that gives rise to the injury. Cf. McCready, 457 U.S. 465, 102 S. Ct. 2540, 73 L. Ed. 2d 149 (where health plan reimbursed its members for psychotherapy treatment administered by psychiatrists but not psychologists, member who chose to forgo reimbursement and receive treatment from psychologist had suffered antitrust injury). And although Abbott maintains that requiring patients to pay a high price for a patented drug can never be an antitrust injury, the price of Norvir cannot be considered in a vacuum. It is the comparatively high price of Norvir in relation to the low price of Kaletra that is the crux of Abbott's alleged anticompetitive conduct.
B. Monopoly Power
Abbott argues that Plaintiffs have not come forward with evidence showing that it has monopoly power over the boosted market. Such evidence can be either direct or circumstantial.
1. Direct Evidence
In the Court's previous order denying Abbott's motion for summary judgment, it found that Plaintiffs had presented direct evidence that Abbott's price increase had a significant impact on the boosted market. Specifically, the Court stated:
One of Defendant's competitors in the boosted market, GlaxoSmithKline, the maker of Lexiva, believed that Lexiva's failure to meet forecasted expectations was due, in part, to the Norvir price hike. Professor Douglas F. Greer, Plaintiffs' expert, notes that, in the absence of the price hike, Defendant anticipated that Kaletra's market share would decline by ten percent in 2004. But, according to Professor Greer, following the price increase in December, 2003, sales of Kaletra essentially remained stable. Furthermore, Defendant's documents show that it knew that raising Norvir's price could result in formularies restricting access to Norvir and a potential increase in Kaletra's market share. As a result of increasing the price of Norvir, Defendant believed that at least one of its competitors in the boosted market "will need to give away significant rebates to be cost neutral to Kaletra."
Docket No. 256 at 7-8.
Abbott argues, as it has argued before, that this is not direct evidence of market power. It maintains that direct evidence must take the form of evidence of restricted output and consequent supracompetitive prices. However, Abbott does not point to any new facts or law which would support a motion for reconsideration. Moreover, Abbott has not cited any case holding that restricted output and supracompetitive prices are the only form direct evidence may take. In Rebel Oil Co., Inc. v. Atl. Richfield Co., 51 F.3d 1421, 1434 (9th Cir.1995), the Ninth Circuit noted, "One type of proof [of monopoly power] is direct evidence of the injurious exercise of market power. If the plaintiff puts forth evidence of restricted output and supracompetitive prices, that is direct proof of the injury to competition which a competitor with market power may inflict, and thus, of the actual exercise of market power." While this passage indicates that evidence of restricted output and supracompetitive prices is sufficient to demonstrate the injurious exercise of market power, it *1086 does not suggest that such evidence is necessary to make such a showing. Rebel Oil involved predatory pricing of a commodity. The concepts of restricted output and supracompetitive prices (i.e., prices higher than marginal cost) have little application to the boosted market, where each PI has only one manufacturer and prices are expected to be significantly above marginal cost.[1]
The defining characteristic of direct evidence is that it demonstrates actual injury to competition.[2] While the Court expresses no opinion as to the strength of the evidence described above, that evidence could support a jury finding that Abbott harmed competition in the boosted PI market by manipulating the price of Norvir. Accordingly, it constitutes direct evidence of monopoly power.
2. Circumstantial Evidence
To demonstrate monopoly power by circumstantial evidence, a plaintiff must "(1) define the relevant market, (2) show that the defendant owns a dominant share of that market, and (3) show that there are significant barriers to entry." Rebel Oil, 51 F.3d at 1434. To establish a prima facie case of market power, courts generally require a sixty-five percent market share. See, e.g., Kodak, 125 F.3d at 1206.
The parties dispute what Abbott's share of the boosted market is. Abbott claims that Plaintiffs' expert's method of calculating its market share is flawed. Specifically, it claims that the expert, Dr. Greer, both improperly counts prescriptions of Norvir as representing a share of the boosted market and improperly counts each prescription of Kaletra as representing two prescriptions in the boosted market.
In the Court's previous decision denying Abbott's motion for summary judgment, it found that there are triable issues of fact with respect to which party's method of calculating market share is appropriate. Abbott has not pointed to any new facts or law which would support a motion for reconsideration of that decision.
C. Anticompetitive Conduct
In its decision denying Abbott's motions to dismiss the recently filed related cases, Nos. 07-5985, 07-6010, 07-6118, 07-5470, 07-5702 and 07-6120, the Court found that the Ninth Circuit's recently developed test for identifying potentially exclusionary pricing in the context of bundled discounts, as set out in Cascade Health Solutions v. PeaceHealth, 515 F.3d 883 (9th Cir.2008), does not apply in the context of the particular antitrust theory asserted against Abbott. As a result, the Court found that the plaintiffs in the related cases need not demonstrate that the imputed price of the lopinavir portion of Kaletra is below Abbott's average variable cost of producing it. The Court incorporates that decision by reference and adheres to its conclusions for the reasons stated therein.
D. Patent Immunity
Abbott argues that its patents give it the right to a monopoly in the market for boosted PIs, and therefore it cannot be held liable for violating the Sherman Act. Plaintiffs dispute this assertion on a number of grounds, arguing generally that the patents are invalid and do not grant Abbott *1087 the exclusionary rights it asserts over the boosted market.
Although Abbott maintains that its patents contain "dozens of applicable claims" that "cover the boosted market," it relies on only two representative claims in its papers. The first is Claim 9 of U.S. Patent No. 6,037,157 (the '157 patent), which states:
A method for increasing human blood levels of a drug which is metabolized by cytochrome P450 monooxygenase comprising administering to a human in need of such treatment a therapeutically effective amount of a combination of said drug or a pharmaceutically acceptable salt thereof and ritonavir or a pharmaceutically acceptable salt thereof.
Hurst Dec. Ex. M at col. 14.
The second claim on which Abbott relies is Claim 22 of U.S. Patent No. 6,703,403 (the '403 patent), which is dependant on Claim 21 of the same patent. Claim 21 states:
A method for improving the pharmacokinetics of a drug which is metabolized by cytochrome P450 monooxygenase comprising administering to a human in need of such treatment an amount effective to inhibit cytochrome P450 monooxygenase of ritonavir or a pharmaceutically acceptable salt thereof.
Hurst Dec. Ex. K at col. 12. Claim 22 states, "The method of claim 21 wherein the drug which is metabolized by cytochrome P450 monooxygenase is an HIV protease inhibitor." Id.
Claim 21 of the '403 patent is similar in scope to Claim 9 of the '157 patent. The two primary differences are largely semantic: The preamble of Claim 9 refers to a method for "increasing human blood levels" of a drug metabolized by cytochrome P450 monooxygenase, whereas Claim 21 refers to a method for "improving the pharmacokinetics" of such a drug. But under Abbott's undisputed proposed claim construction, improving the pharmacokinetics of a drug is tantamount to increasing its blood levels. See Hurst Dec. Ex. T at 5. And while Claim 9 refers to administering ritonavir in combination with another drug whereas Claim 21 refers simply to administering ritonavir, it is clear that Claim 21's method of improving the pharmacokinetics of another drug would be effective only if the individual to whom ritonavir was administered was also taking the other drug.
Plaintiffs argue that these claims are invalid because they are anticipated by, among others, U.S. Patent No. 5,674,882 (the '882 patent). This patent claims, "A method of inhibiting an HIV infection comprising administering to a human in need thereof a therapeutically effective amount of [Norvir] or a pharmaceutically acceptable salt thereof in combination with a therapeutically effective amount of another HIV protease inhibiting compound." Wiebe Dec. of 2/10/06 (Docket No. 187) Ex. M at col. 112.
The parties appear to agree that, when written, this claim contemplated administering Norvir as part of a "cocktail" of PIs, not specifically as a boosting agent. However, any time Norvir is administered with another PI that is metabolized by cytochrome P450 monooxygenase, it will necessarily have the effect of boosting that PI; this is what makes Norvir particularly effective when administered as part of a PI regimen. "[T]he discovery of a previously unappreciated property of a prior art composition, or of a scientific explanation for the prior art's functioning, does not render the old composition patentably new to the discoverer." Atlas Powder Co. v. Ireco, Inc., 190 F.3d 1342, 1347 (Fed.Cir.1999). The claims of the '157 and '403 patent attempt to patent a resultboostingthat *1088 was an inherent function of the prior art's teaching of combining Norvir with other PIs. Because someone practicing the prior art by taking Norvir with a PI metabolized by cytochrome P450 monooxygenase would necessarily infringe the new claims, those claims are invalid as anticipated. Id. at 1346 ("[I]f granting patent protection on the disputed claim would allow the patentee to exclude the public from practicing the prior art, then that claim is anticipated, regardless of whether it also covers subject matter not in the prior art.").
Abbott argues that the asserted claims are not invalid because they include a limitation not found in the '882 patent: they encompass only the administration of ritonavir with the intent to improve the pharmacokinetics or increase the blood levels of another PI. Abbott relies primarily on Jansen v. Rexall Sundown, Inc., 342 F.3d 1329 (Fed.Cir.2003) in support of this argument. In that case, the court addressed a claim stating:
A method of treating or preventing macrocytic-megaloblastic anemia in humans which anemia is caused by either folic acid deficiency or by vitamin B12 deficiency which comprises administering a daily oral dosage of a vitamin preparation to a human in need thereof comprising at least about 0.5 mg. of vitamin B12 and at least about 0.5 mg. of folic acid.
Id. at 1330 (emphasis in Jansen). The plaintiff in Jansen sued the producer of an over-the-counter dietary supplement containing both vitamin B12 and folic acid within the claimed ranges, charging the defendant with inducement of and contributory infringement of the above claim.
In construing the claim, the Federal Circuit addressed the issue of whether "a human must know that he is in need of either treatment or prevention" of macrocytic-megaloblastic anemia in order to infringe the claim. Id. at 1333. The court noted that "the claim preamble sets forth the objective of the method, and the body of the claim directs that the method be performed on someone `in need.'" Id. The court found that
the claim['s] recitation of a patient or a human "in need gives life and meaning to the preamble['s] statement of purpose. The preamble is therefore not merely a statement of effect that may or may not be desired or appreciated. Rather, it is a statement of the intentional purpose for which the method must be performed."
Id.
The court also looked at the prosecution history of the plaintiff's patent. It noted that the plaintiff added the modifier, "macrocytic-megaloblastic" to the word, "anemia" and added the phrase, "to a human in need thereof" to render the claims not obvious in light of prior art, which taught administration of both folic acid and vitamin B12 alone to treat anemia generally. See id. at 1330-31. This bolstered the court's conclusion that "administering the claimed vitamins in the claimed doses for some purpose other than treating or preventing macrocytic-megaloblastic anemia is not practicing the claimed method, because Jansen limited his claims to treatment or prevention of that particular condition in those who need such treatment or prevention." Id. at 1334. The court thus rejected the plaintiffs argument that "those who do not affirmatively know that they do not need to take steps to prevent or treat macrocytic-megaloblastic anemia are still `in need thereof.'" Id.
Although there are similarities between the claims in this case and the claims at issue in Jansen, the court's construction of the claims in that case was informed by the specific facts and history surrounding them. The case did not purport to change *1089 the general rule for assigning meaning to a claim's preamble:
[A] preamble limits the invention if it recites essential structure or steps, or if it is necessary to give life, meaning, and vitality to the claim. Conversely, a preamble is not limiting where a patentee defines a structurally complete invention in the claim body and uses the preamble only to state a purpose or intended use for the invention.
Catalina Mktg. Int'l Inc. v. Coolsavings.com, Inc., 289 F.3d 801, 808 (Fed.Cir. 2002).
In Jansen, the preamble language was construed as a limitation because it disclosed a specific theretofore unknown use for taking a combination of folic acid and vitamin B12namely, the prevention and treatment of macrocytic-megaloblastic anemia. The preamble gave "life and meaning" to the claim because without it, the patent would simply recite a method that was already being practiced. Here, the preamble does not disclose a new use for the prior art, i.e., taking Norvir with a PI that is metabolized by cytochrome P450 monooxygenase. The use in both cases is to treat HIV. The preamble simply expresses one of the necessary results of practicing the existing method. Abbott cannot patent the practice of prior art by framing a necessary result of that practice as a claim-limiting purpose. "Newly discovered results of known processes directed to the same purpose are not patentable because such results are inherent." Bristol-Myers Squibb Co. v. Ben Venue Labs., Inc., 246 F.3d 1368, 1376 (Fed.Cir.2001). "[T]he claimed process here is not directed to a new use," no matter how it is styled; "it is the same use"here, the inhibition of HIV infection"and it consists of the same steps." Id. Accordingly, the claims on which Abbott relies for its patent immunity defense are anticipated by the '882 patent and are invalid.[3]
II. Unjust Enrichment Claim
In addition to Sherman Act claims for monopolization and attempted monopolization, Plaintiffs assert state law claims for fraudulent, unfair and deceptive business practices in violation of California Business and Professions Code § 17200 et seq. and for unjust enrichment.
Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707 (1977), bars indirect purchasers from recovering damages for violations of federal antitrust law. Abbott argues that a plaintiff may not avoid this holding by seeking restitution under the common law of unjust enrichment where the underlying claim is premised on a violation of federal antitrust law.[4] While there is no controlling case directly on point, Abbott cites two cases from federal district courts supporting its view. See In re New Motor Vehicles Canadian Export Antitrust Litig., 350 F. Supp. 2d 160, 211 (D.Me.2004) ("Certainly no restitutionary remedy can escape the limitations the United States Supreme Court imposed on federal antitrust recovery in Illinois Brick, and the plaintiffs do not argue that it can. Therefore, as indirect purchasers, the plaintiffs may not use state common law restitution to recover money from the defendants for violation of the federal antitrust laws."); In re Terazosin Hydrochloride Antitrust Litig., 160 *1090 F.Supp.2d 1365, 1380 (S.D.Fla.2001) (finding that allowing indirect purchasers to obtain restitution or a constructive trust under state common law would enable them to do "an end run around the policies" articulated in Illinois Brick).
The cases Plaintiffs cite in refuting Abbott's argument do not address the relevant legal issue. Rather, they address whether the plaintiffs in those cases had stated unjust enrichment claims independent of their antitrust claims. See In re Cardizem CD Antitrust Litig., 105 F. Supp. 2d 618, 668-71 (E.D.Mich.2000); In re K-Dur Antitrust Litig., 338 F. Supp. 2d 517, 543-46 (D.N.J.2004). And although Plaintiffs maintain that Abbott is attempting to rehash an argument that was rejected by the Court in granting class certification, the Court's order did not address the specific legal issue Abbott raises. Rather, the Court dealt only with whether Plaintiffs' unjust enrichment claims were amenable to adjudication in a class action. See Docket No. 345 at 16-20.
The Court agrees with the approach taken in In re New Motor Vehicles and In re Terazosin Hydrochloride and finds that, because Plaintiffs' unjust enrichment claim appears to be premised wholly on Abbott's alleged violation of federal antitrust law,[5]Illinois Brick bars them from obtaining restitution based on those claims.
III. Interlocutory Appeal and Continuance
Abbott asks the Court to certify the following question for interlocutory appeal:
Whether this case warrants an exception from the Ninth Circuit's decision in Cascade Health Solutions v. PeaceHealth, 515 F.3d 883 (9th Cir.2008), which held that the Supreme "Court's opinions strongly suggest that, in the normal case, above-cost pricing will not be considered exclusionary conduct for antitrust purposes," id. at 912, and "the appropriate measure of costs [in this context] is average variable cost ..." id. at 920.
Docket No. 491 at 4.
Although the Court will entertain the possibility of Abbott pursuing an interlocutory appeal in the related cases, which were filed recently and are still in the preliminary stages of discovery,[6] the present case is scheduled for a relatively short trial in approximately three months. At this late stage in the proceedings, even if an interlocutory appeal were ultimately granted, it would save a relatively small amount of the parties' resources. In addition, this case has been pending for more than four years, and waiting for the result of an interlocutory appeal would unjustifiably delay trial.
Abbott also seeks a continuance to allow it to conduct supplemental fact and expert discovery in light of the Court's decision that Cascade's below-cost pricing rule does not apply here. But as explained in an earlier order, see Docket No. 492, the need for additional discovery is premised on Abbott's mistaken view that the Court has established a new test for identifying exclusionary pricing. The Court's decision that Cascade does not apply maintained the status quo. There is no reason to permit additional discovery on matters that have been relevant all along.
*1091 CONCLUSION
For the foregoing reasons, the Court DENIES Abbott's motion for summary judgment on Plaintiffs' antitrust claims (Docket No. 445).[7] Those claims will proceed to trial. The Court GRANTS Abbott's motion for summary judgment on Plaintiffs' unjust enrichment claim. The Court GRANTS Plaintiffs' motion for summary adjudication on Abbott's defense of patent immunity (Docket No. 460).
IT IS SO ORDERED.
NOTES
[1] In contrast, if a producer of a single drug for which there was more than one manufacturer had market power, supracompetitive prices could be expected to follow the monopolist's decision to restrict output.
[2] Circumstantial evidence, in turn, demonstrates only that a defendant has the potential to inflict injury to competition.
[3] Having concluded that the claims are invalid, the Court need not address the merits of Plaintiffs' other arguments concerning Abbott's patent defense.
[4] While Abbott sometimes refers to Plaintiffs' state law claims generally, Abbott's Illinois Brick argument does not specifically address Plaintiffs' claim under California's Business and Professions Code § 17200 et seq.
[5] Plaintiffs appear to concede this point and have not articulated an alternate theory of liability.
[6] If Abbott wishes to move for an interlocutory appeal in the related cases, it should file a motion in those cases so that those plaintiffs will have an opportunity to respond.
[7] The Court DENIES Abbott's request to file supplemental material in support of its motion for summary judgment (Docket No. 495). The material is not necessary to the Court's decision. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1917802/ | 135 N.W.2d 228 (1965)
Application of Elmer Henry EWERT for a South Dakota Driver's License.
No. 10134.
Supreme Court of South Dakota.
May 19, 1965.
*229 Frank L. Farrar, Atty. Gen., Alfred E. Dirks, Asst. Atty. Gen., Pierre, for defendant-appellant.
John H. Zimmer, Zimmer & Connelly, Parker, for petitioner-respondent.
RENTTO, Judge.
The applicant having been denied a driver's license by the Department of Motor Vehicles because he failed its eyesight test, filed his petition in the County Court of McCook County for a hearing in the matter. Upon such hearing the court entered judgment ordering the issuance of a license to him. From this the department appeals. It complains that the court review afforded the applicant was too broad in its scope.
Before getting to the merits of the appeal we are faced with petitioner's contention that the right to appeal from such judgment has not been conferred upon the department.
The opportunity of the applicant to appeal to either the circuit or county court from the decision of the department is provided for in SDC 1960 Supp. 44.03B26. That section is silent as to the right of either the individual involved or the department to appeal to this court from the action of the trial court. Art. V, Sec. 20 of our Constitution vests in the legislature the power to prescribe the cases in which appeals may be taken from our county courts to this court. Art. V, Sec. 18 concerning appeals from circuit courts provides that they shall be allowed as prescribed by law. Since the legislature has nowhere indicated that such right is denied to either party in matters of this type we think the right exists under our general statutes concerning appeals. SDC 1960 Supp. 33.0701. See also SDC 1960 Supp. 33.4216.
The appeal provisions of SDC 1960 Supp. 44.03B26 are substantially the same as the provisions of our Implied Consent Law permitting persons deprived of their license thereunder by the Commissioner of Motor *230 Vehicles to appeal from such action to the circuit court. SDC 1960 Supp. 44.0302-2. Neither section makes mention of the right to appeal to this court from the trial court. Both were promulgated by the 1959 session of our legislature.
In Hanlon v. Commissioner of Motor Vehicles, S.D., 123 N.W.2d 136, we entertained an appeal by the Commissioner from a circuit court judgment entered under the implied consent law. On our own motion we questioned his right to appeal and were furnished supplementary briefs pertinent thereto by the parties. While not expressed in the opinion our conclusion was that he possessed that right. Two sessions of our legislature have been held since that decision with no indication of legislative disapproval thereof. We adhere to that conclusion and think it also applies to the statute here involved.
The applicant is 45 years of age, a married man with two children, and has been gainfully employed all his adult life as a farmer. Since he was 15 years of age he has operated motor vehicles upon our highways traveling at least 100,000 miles without mishap. In his farming activities he has constantly operated motor driven and propelled machinery, likewise without mishap. The court found that he had a congenital eye defect which affects his central vision, but that over a long period of time he has learned to compensate for this lack of central vision by using a shifting or searching gaze and that by employing this method he sees well enough to safely operate a motor vehicle upon the highways.
He passed that part of the examination given by the department testing his ability to read and understand highway signs regulating, warning and directing traffic and his knowledge of the traffic laws of the state. The record also shows that he had a valid operator's permit issued prior to July 1, 1959; that he has never been convicted of any motor vehicle law or ordinance violation within four years immediately preceding his application; and was involved in no accident resulting in personal injury or death, or real or personal property damage exceeding $100, within that period of time.
The department is directed by SDC 1960 Supp. 44.03B09 to examine every applicant for a license. That section also states that such examination shall include a test of applicant's eyesight. In administering the law the department had adopted a policy of requiring an applicant to have a minimum visual acuity of 20/70 in order to pass the visual portion of the driver's license examination. It is not a statutory requirement. This is the portion of the examination that the applicant failed. SDC 1960 Supp. 44.03B03 directs the department to deny a license to any person when the Commissioner has good cause to believe that the operation of a motor vehicle on the highways by such person would be inimical to public safety or welfare.
It further provides that the department shall not issue a license to "any person who is required by this chapter to take an examination, unless such person shall have successfully passed such examination". The department argues that under these statutory provisions and its policy, applicant's failure to pass the eyesight test required it to deny him a license. It asserts that its action was not unreasonable, arbitrary or capricious, and contends that upon review these are the only issues presented to the court and urges that the trial court erred in going beyond these limits in its determination that the applicant was entitled to a license.
The scope of court review in this area has been prescribed by the legislature. In SDC 1960 Supp. 44.03B26 it is provided that the court in which the petition is filed:
"is hereby vested with jurisdiction and it shall be its duty to set the matter for hearing within thirty days, written notice hereof to be given to the Commissioner, at least ten days in advance of the hearing date, and thereupon to take testimony and examine into the *231 facts of the case and to determine forthwith whether the petitioner is entitled to a license or is subject to suspension, cancellation or revocation of license under the provisions of this chapter."
In Stehle v. Department of Motor Vehicles, 229 Or. 543, 368 P.2d 386, 97 A.L.R. 2d 1359, a similar provision in their statute was held to provide for a trial de novo in the courts. See also Ledgering v. State, 63 Wash.2d 94, 385 P.2d 522. This we think is the intent of our statute.
In our Implied Consent Law, SDC 1960 Supp. 44.0302-2, the legislature stated the scope of court review in cases thereunder in this language:
"such Court is hereby vested with jurisdiction and it shall be its duty to set the matter for trial de novo upon ten days written notice to the Department, and thereupon to take testimony and examine into the facts of the case and to determine whether the petitioner's license is subject to cancellation, suspension, or revocation under the provisions of this section."
For all practical purposes this is what the legislature said about the scope of court review under the statute we are considering.
In Hanlon v. Commissioner of Motor Vehicles, supra, in construing the scope of court review in an implied consent case, we said that the hearing "is not in the nature of an appeal from an administrative hearing nor a judicial review of discretionary administrative action. It is a trial de novo whereat the circuit court is required to take testimony and made its own independent determination as to whether or not petitioner's license is subject to revocation." There is much decisional support for this view. 97 A.L.R. 2d 1367. It follows, we think, that this must also be the function of the trial court in deciding petitions of the kind here involved. While the contention of the department is the rule in some jurisdictions we think our construction effectuates the intent of our legislature.
The court's finding that the applicant sees well enough to safely operate a motor vehicle upon the highway is based on expert medical testimony that is conflicting. However, there is competent evidence in the record to support it. As the evidence does not preponderate against it we may not disturb the finding.
Affirmed.
HANSON, BIEGELMEIER and HOMEYER, JJ., concur.
ROBERTS, P. J., concurs in result. | 01-03-2023 | 10-30-2013 |
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