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https://www.courtlistener.com/api/rest/v3/opinions/530173/ | 886 F.2d 1317
Unpublished DispositionNOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.UNITED STATES of America, Plaintiff-Appellee,v.Marshall ALSTON, Defendant-Appellant.
No. 89-5104.
United States Court of Appeals, Sixth Circuit.
Oct. 2, 1989.
Before KENNEDY and WELLFORD, Circuit Judges, and LIVELY, Senior Circuit Judge.
PER CURIAM:
1
This appeal arises out of the conviction of defendant Marshall Alston by a jury on charges of possession of marijuana at the Memphis International Airport. Approximately nine pounds of marijuana was discovered in Alston's baggage which he was taking through Customs, having arrived on a flight from Jamaica.
2
Customs inspectors felt that circumstances pertaining to Alston were suspicious and took him to a private room to search his person. While Mr. Alston was being searched by one agent of the United States Customs another agent found the marijuana in a garment bag that Alston had been carrying and left on the counter. The marijuana had been sewn into the lining of the bag between two slabs wrapped in platic tape.
3
After his arrest Mr. Alston told Customs agents that a friend had borrowed the bag from him and had advised him that if he returned the bag to New York he would be paid $1,000.00. At trial Alston denied making this statement and his principal basis of appeal is that he was not personally present when the search took place and finding the quantity of marijuana valued at approximately $10,000.00.
4
We find the basis of Alston's defense to be without merit. Customs officials may conduct warrantless border searches at initial point of entry without probable cause or even articulate suspicion. United States v. Montoya deHernandez, 473 U.S. 531 (1985). There is no legal requirement that a search for contraband by Customs agents be conducted in the presence of the apparent owner of the item questioned. See United States v. Gonzalez, 483 F.2d 223 (2d Cir.1973).
5
Finding no error in the proceedings challenged and in the actions of the district court, we AFFIRM the conviction and the sentence in all respects. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/484447/ | 813 F.2d 401Unpublished Disposition
NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.Robert Clifton JOHNSON, Plaintiff-Appellant,v.Stuart SILVERS, Dr. Blumberg, Leo Brown, Defendants-Appellees.
No. 86-6718.
United States Court of Appeals, Fourth Circuit.
Submitted Oct. 23, 1986.Decided Dec. 17, 1986.
Before RUSSELL, WIDENER and PHILLIPS, Circuit Judges.
Robert Clifton Johnson, appellant pro se.
Susan Sugar Nathan, Office of the Attorney General, Craig Benton Merkle, Semmes, Bowen & Semmes, for appellees.
PER CURIAM:
1
Robert Johnson, an involuntarily committed patient at Clifton T. Perkins Hospital in Maryland, appeals the dismissal of his 42 U.S.C. Sec. 1983 complaint alleging that doctors and assistants at Perkins forcibly medicated him on several occasions, such medication causing several unpleasant side effects.
2
The district court initially dismissed Johnson's complaint as frivolous pursuant to 28 U.S.C. Sec. 1915(d). This Court remanded the case, however, finding that Johnson had stated a cognizable constitutional claim. Johnson v. Silvers, 742 F.2d 823 (1984). On remand, the district court dismissed Johnson's complaint on Eleventh Amendment grounds, finding that Johnson had sued the defendants in their official capacities. The court noted additionally that Johnson failed to allege any facts indicating lack of good faith, and that the defendants, even if sued in their individual capacities, would be entitled to good faith qualified immunity.
3
The defendants, and not Clifton T. Perkins Hospital, are named in the complaint. The language in the complaint does not specify either "official" or "individual" capacity. "Personal capacity suits seek to impose personal liability upon a government official for actions he takes under color of state law." Kentucky v. Graham, --- U.S. ----, 53 U.S.L.W. 4966, 4967 (June 28, 1985). Official capacity suits seek to impose liability on the governmental entity. Id. See also Brandon v. Holt, --- U.S. ----, 53 U.S.L.W. 4122 (Jan. 21, 1985). The question properly asked is whether the state is a real party in interest. Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 464 (1945). If the state will or must pay, then Eleventh Amendment immunity attaches. Papasan v. United States, 756 F.2d 1087 (5th Cir.1985), aff'd in part, remanded in part, --- U.S. ----, 54 U.S.L.W. 4939 (July 1, 1986).
4
Johnson seeks compensatory relief for harm done to him by doctors employed by the state at the time of injury. He alleges specific instances of individual, constitutionally impermissible conduct by the named defendants. The better view, we conclude, is that Johnson sued the named defendants in their individual capacities as individuals acting under color of state law.* This is all that is required in a personal capacity case. See Graham, supra at 4967-68.
5
Consequently, we vacate the decision below and remand the case for further proceedings. Because the dispositive issues recently have been decided authoritatively, we dispense with oral argument.
6
VACATED AND REMANDED.
*
Any potential good faith immunity defense must be pled and proven by the defendants. Gomez v. Toledo, 446 U.S. 635 (1980); Arebaugh v. Dalton, 730 F.2d 970 (4th Cir.1984) | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1547448/ | 15 F.2d 626 (1926)
RED WING MALTING CO.
v.
WILLCUTS, Collector of Internal Revenue.
No. 7242.
Circuit Court of Appeals, Eighth Circuit.
November 5, 1926.
*627 William H. Oppenheimer, of St. Paul, Minn. (Frederick N. Dickson, Frank C. Hodgson, Montreville J. Brown, and Stan D. Donnelly, all of St. Paul, Minn., on the brief), for plaintiff in error.
Floyd F. Toomey, Sp. Atty. Bureau of Internal Revenue, of Washington, D. C. (Lafayette French, Jr., U. S. Atty., and L. W. Scott, Asst. U. S. Atty., both of St. Paul, Minn., and A. W. Gregg, Solicitor of Internal Revenue, of Washington, D. C., on the brief), for defendant in error.
Before KENYON and VAN VALKENBURGH, Circuit Judges, and John B. SANBORN, District Judge.
KENYON, Circuit Judge.
This is an action brought by the Red Wing Malting Company, a corporation, plaintiff in error (designated for convenience as plaintiff), against Levi M. Willcuts, collector of internal revenue for the district of Minnesota, defendant in error (designated for convenience as defendant), for the recovery of $29,893.44, income and profits taxes alleged to have been erroneously assessed for the fiscal year ending August 31, 1918, and which were paid by plaintiff.
Plaintiff, prior to the advent of prohibition, was engaged in the business of manufacturing barley malt and selling the same to brewers engaged in the manufacture of fermented malt liquors. That was its sole business. Its market was destroyed as a result of the Prohibition Amendment and the acts of Congress relating to the manufacture and sale of intoxicating liquors. There is no dispute as to the facts. We set forth a number of the court's findings thereon, as follows:
"That on March 1, 1913, the plaintiff had built up a large and profitable business and had a good will of large value. That at said date, namely, March 1, 1913, the good will of the plaintiff's business was worth the sum of $153,618.75.
"11. That, by reason of the acts of Congress and the presidental proclamations thereunder, the business and trade of plaintiff, built up over a number of years, was totally destroyed, for, although the plaintiff still had the right to manufacture its malt, its customers were, by said acts of Congress and presidential proclamations thereunder, all put out of business and prohibited by law from using the products of this plaintiff. That as a result of this action the market for plaintiff's products was wholly destroyed, and as a result plaintiff closed its plant and ceased all manufacturing operations in May, 1918. That in December, 1918, plaintiff sold its plant, including its real estate, machinery, and equipment, to the Fleischmann Yeast Company under a contract, for $150,000.
"12. That, as plaintiff was forced out of business by reason of the foregoing facts, the good will of said business went with it and ceased to be."
For the fiscal year ending August 31, 1918, the Commissioner of Internal Revenue determined plaintiff's taxable net income to be $120,536.42. Plaintiff claims that in arriving at its taxable net income for said fiscal year a deduction for obsolescence of good will in the sum of $153,618.75, being the entire March 1, 1913, agreed value of its good will, should have been deducted. This would have left no taxable income for that year. Plaintiff seeks to recover the total income and profits taxes paid by it for said year.
The District Court held against the contention of the plaintiff, and from that holding this writ of error is prosecuted. The issue presented is a narrow and precise one, viz.: Is plaintiff, in computing its taxable net income for the fiscal year ending August 31, *628 1918, entitled to a deduction on account of obsolescence or loss of good will? The statute involved is the Revenue Act of 1918 (40 Stat. 1057, 1077). The particular portions thereof are parts of section 234 (a), being Comp. St. § 6336 1/8pp, reading as follows:
"That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions:
* * * * *
"(4) Losses sustained during the taxable year and not compensated for by insurance or otherwise;
* * * * *
"(7) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence."
It is the theory of plaintiff that the phrase in subsection (7) of said statute, "including a reasonable allowance for obsolescence," created a new and additional tax deduction to the "exhaustion, wear, and tear" clause of said subsection.
It is the contention of defendant that an allowance for obsolescence under the statute is merely supplementary to the allowance for "exhaustion, wear and tear," in those cases where by reason of economic circumstances the allowance for "exhaustion, wear and tear," based upon the estimated normal period of utility, would be insufficient to restore to the taxpayer the cost of the capital investment; that the allowance for obsolescence applies only to property of a depreciable character. It will thus be seen that the matter presented raises legal questions of far-reaching importance.
Plaintiff contends that the Treasury Department has established an interpretation of the various acts relating to depreciation for the purpose of arriving at taxable income through office decisions, Treasury decisions, an advisory tax board, and the committee on appeals and review, and that such construction has been that obsolescence of intangible property is permissible as a deduction in arriving at taxable income.
Article 163 of Regulations 45, promulgated by the Treasury Department, construing the Revenue Act of 1918, is as follows:
"Depreciation of Intangible Property. Intangibles, the use of which in the trade or business is definitely limited in duration, may be the subject of a depreciation allowance. Examples are patents and copyrights, licenses and franchises. Intangibles, the use of which in the business or trade is not so limited, will not usually be a proper subject of such an allowance. If, however, an intangible asset acquired through capital outlay is known from experience to be of value in the business for only a limited period, the length of which can be estimated from experience with reasonable certainty, such intangible asset may be the subject of a depreciation allowance, provided the facts are fully shown in the return or prior thereto to the satisfaction of the commissioner. There can be no such allowance in respect of good will, trade-names, trade-marks, trade brands, secret formulæ, or processes."
This would seem to indicate the attitude of the Treasury Department at that time. It is true that, after the promulgation of this Regulation, the Internal Revenue Bureau recognized for a time at least deductions for obsolescence of good will, the taxpayer having the burden of proving the beginning and end of the claimed obsolescence period. The deduction for good will was recognized only where it was assignable, as distinguished from good will attached to the owning or carrying on of the business, or connected with the premises on which the business was conducted. No allowance for good will was recognized, where it would be valuable in another business after the termination of the business in which the taxpayer was engaged.
The case of Rock Spring Distilling Company, 2 Board of Tax Appeals, Decision No. 207, was a case considering somewhat the question of obsolescence of good will, and the board held there was no such thing under the Revenue Act of 1916 (39 Stat. 756). It does not decide that such deduction was permissible under the Act of 1918. We have been unable to find any decision of the board of tax appeals passing directly upon the question of whether, under the act of 1918, a deduction could be allowed for obsolescence of good will.
In the decision on the appeal of the Brevoort Hotel Company Case before the committee on appeal and review, and in its holdings as to hotels operating bars, there is language justifying the claim that a good will value may be established, for the loss of which an allowance for obsolescence may be made as distinct from the good will of the hotel. In the hotel cases may be noted the following language of the opinion: "It is therefore held that hotels, which can establish a good will, value which might have been assigned separate and distinct from the good will of the hotel, are entitled to obsolescence for the loss of their good will due to national prohibition legislation."
We have examined the references in the brief of plaintiff to the Cumulative Bulletins *629 of the Treasury Department, and the tax rulings contained therein bearing on this question, the holdings of the committee on appeal and review, and the decisions of the tax appeals board, and conclude that either side to this controversy may find some comfort therein.
Courts have respect for and give weight to departmental construction of a statute, although such construction is not controlling. 22 Cyc. 1606; Baltzell v. Mitchell (C. C. A.) 3 F.(2d) 428. Certainly, however, there has been no such consistent and uniform construction of the statute in question as to be persuasive with the court or of appreciable assistance. Nor do we see much force in the claim that Congress has re-enacted in 1921, 1924 (Comp. St. § 6336 1/8pp), and 1926 (44 Stat. 42) the section under consideration substantially as in the act of 1918, and thereby has acquiesced in the interpretation by the Treasury Department of the congressional intent as to obsolescence of good will as a tax deduction entity. There is no decision of the Treasury Department construing the act of 1918 as authorizing a deduction for obsolescence of good will as a separate and distinct entity, nor is there any such definite and uniform construction of provisions in other statutes to warrant a conclusion that Congress was adopting any particular construction of the Treasury Department. The very claim here was denied by the committee on appeals and review. It may as well be argued, therefore, that Congress, in re-enacting the section after such action of the Treasury Department, has adopted its conclusion. Further, the revenue act of 1926 containing section 234 (a) (7), in substantially the same form as in the Revenue Act of 1918, was enacted after the decision of the lower court in the case at bar. Therefore, if there was a practice of the Treasury Department relied on in conflict with said decision, there would be no substance in the claim that Congress had ratified, by passing the Revenue Act of 1926, the practice of the Bureau.
We content ourselves with saying that in the confusion of rulings of the solicitors of the Treasury Department and the various boards created therein to pass on tax questions, or the decisions of the board of tax appeals, no long-continued and uniform construction of the statute here involved can be found. Therefore we pretermit this phase of the matter, calling attention to the language of the Supreme Court of the United States in Iselin v. United States, 270 U. S. 245, 251, 46 S. Ct. 248, 250 (70 L. Ed. 566): "It suggests that these facts imply legislative recognition and approval of the executive construction of the statute. But the construction was neither uniform, general, nor long-continued; neither is the statute ambiguous. Such departmental construction cannot be given the force and effect of law. Compare United States v. G. Falk & Brother, 204 U. S. 143, 27 S. Ct. 191, 51 L. Ed. 411; National Lead Co. v. United States, 252 U. S. 140, 146, 40 S. Ct. 237, 64 L. Ed. 496."
The only case cited or that we have been able to find which bears directly on the question at issue is Haberle Crystal Springs Brewing Co. v. Jesse W. Clark, Collector of Internal Revenue. A referee's opinion therein construes the statute as contended for by plaintiff. It is of note that the opinion of said referee has not as yet been adopted by the United States District Court of the Northern District of New York, where the case is pending. The case of Kentucky Tobacco Products Co. v. Lucas, Collector of Internal Revenue (D. C.) 5 F.(2d) 723, refers to the statute in question, but does not discuss the proposition here raised.
We are satisfied this case is one of first impression, and the question is squarely before this court as to the construction of subsection (7) of section 234 (a) of the Revenue Act of 1918. Some legal propositions argued are assumedly beyond controversy; e. g.:
(a) A statute should receive a natural, and not a strained, construction, and its plain, obvious, and rational meaning should be adhered to. Lynch v. Alworth-Stephens Co. (C. C. A.) 294 F. 190.
(b) Tax laws, if doubtful, are to be construed in favor of the taxpayer. Gould v. Gould, 245 U. S. 151, 38 S. Ct. 53, 62 L. Ed. 211; United States v. Merriam, 263 U. S. 179, 44 S. Ct. 69, 68 L. Ed. 240, 29 A. L. R. 1547.
(c) The term "property," in the act under consideration, is not used in a restricted sense. Lynch, Executrix, etc., v. Alworth-Stephens Co., 267 U. S. 364, 45 S. Ct. 274, 69 L. Ed. 660.
(d) Good will is property of an intangible nature, and the term "property" includes good will. 28 Corpus Juris, 730; Metropolitan Bank v. St. Louis Despatch Co., 149 U. S. 436, 13 S. Ct. 944, 37 L. Ed. 799; Coca-Cola Bottling Co. v. Coca-Cola Co. (D. C.) 269 F. 796; Washburn v. National Wall-Paper Co. et al., 81 F. 17, 26 C. C. A. 312.
(e) Good will has no existence, except in connection with a continuing business. Kaufmann v. Kaufmann, 239 Pa. 42, 86 A. 634; Metropolitan Nat. Bank v. St. Louis Dispatch Co. et al. (C. C.) 36 F. 722.
*630 (f) It may be bought and sold in connection therewith as an incident thereof. Camden v. Stuart, 144 U. S. 104, 12 S. Ct. 585, 36 L. Ed. 363; Coca-Cola Bottling Co. v. Coca-Cola Co. (D. C.) 269 F. 797, 805; Commonwealth v. Kentucky Distilleries & Warehouse Co., 132 Ky. 521, 116 S. W. 766, 21 L. R. A. (N. S.) 30, 136 Am. St. Rep. 186, 18 Ann. Cas. 1156; Sawilowsky v. Brown (C. C. A.) 288 F. 533.
With these general propositions in mind, we proceed to a discussion of the statute in question. No difficulty arises as to the first part of subsection (7) of section 234 (a), "a reasonable allowance for the exhaustion, wear and tear of property used in the trade or business." That is clear enough as defining the deduction. The controversy is over the part of the subsection following these words, viz. "including a reasonable allowance for obsolescence." Does this provide for a new, distinct deduction, or is it so attached and related to the previous phrase in subdivision (7) that it applies only to such property used in the business as is subject to exhaustion, wear, and tear?
The case relied on by plaintiff is Haberle Crystal Springs Brewing Co. v. Clarke, Collector of Internal Revenue (heretofore referred to) in the United States District Court, Northern District of New York, and the opinion of the Referee in said case is attached as an appendix to plaintiff's brief. Plaintiff there claimed it was entitled under the 1918 statute to a reasonable allowance for the obsolescence of its good will, liquor licenses, and national plant, for which items no deductions were allowed in the computation of the tax which the plaintiff paid, and the referee there held that good will was property used in the business, within the meaning of subsection (7) of section 234 (a) of the Revenue Act of 1918, and that the purpose of the language of the statute as to allowance for obsolescence was to create a new and additional deduction. The position taken by the referee is presented with clearness and fortified by substantial reasoning, and states that theory of construction as well, we think, as it can be done.
We are, however, unable to reach the same conclusion. If it had been intended by the Congress to create a new and additional deduction not connected with property used in the business subject to "exhaustion, wear and tear," it would have been very easy for Congress, instead of using the word "including," to have said, "a reasonable allowance for exhaustion, wear and tear and obsolescence of property used in the business." That would have made the matter clear.
The first part of the subsection provides for a deduction in arriving at tax income for the depreciation by exhaustion, wear, and tear of property used in the business. Depreciation was the matter sought to be remedied in order to restore to the owner the basis of original value. It is perfectly apparent that an allowance for depreciation due to exhaustion, wear, and tear of property might not sufficiently provide for the restoration of capital over the period of useful life of an asset, and it might be entirely inadequate to effect restoration of the March 1, 1913, value thereof. The meaning of the word "including," as used in the statute, is important. It evidently refers to the preceding part of the subsection, and must be recognized as occupying a significant and important place. It cannot be brushed aside and ignored. This court should not attempt to write new language into the statute, nor ignore language there used, but must endeavor, from the language of the statute itself, to arrive at the meaning of the Congress. This word has received considerable discussion in opinions of the courts. It has been productive of much controversy.
The word "include" is defined in the New Standard Dictionary as follows: "(1) To comprise, comprehend or to embrace as a component part, item or member; as, this volume includes all his works; the bill includes his last purchase; (2) to inclose within; contain; confine; as, an oyster shell sometimes includes a pearl."
It is defined by Webster as follows: "To comprehend or comprise, as a genus of the species, the whole a part, an argument or reason the inference; to take or reckon in; to contain; embrace; as, this volume includes the essays; to and including the tenth."
The Century Dictionary defines "including" thus: "To comprise as a part."
Perhaps the most interesting discussion of the word "including" is found in Montello Salt Co. v. State of Utah, 221 U. S. 452, 31 S. Ct. 706, 55 L. Ed. 810, Ann. Cas. 1912D, 633. There the court referred to and discussed some of the cases where the word "including" had been under consideration. For instance, the court pointed out in Brainard v. Darling, 132 Mass. 218, that a legacy of $100, "including money trusteed at a certain bank," could not be construed as meaning that the sum of $100 was in addition to the sum in bank. Also in Henry's Executor v. Henry's *631 Executor, 81 Ky. 342, "a bequest of $14,000, `including certain notes,' was held to mean that the notes formed a part of the $14,000, and were not in addition thereto." Also the case of Neher v. McCook County, 11 S. D. 422, 78 N. W. 998, where "it was held that a certain section of the laws of the state, which provided that the sheriff's fees should be $16 for summoning a jury, `including mileage,' did not entitle him to mileage in addition to the $16." And the Supreme Court, after its reference to these cases, says of the case before it: "The court also considered that the word `including' was used as a word of enlargement, the learned court being of opinion that such was its ordinary sense. With this we cannot concur. It is its exceptional sense, as the dictionaries and cases indicate. We may concede to `and' the additive power attributed to it." We refer to a few other cases.
In Sullivan Machinery Co. v. United States (C. C.) 168 F. 561, the word "including," used in the Tariff Act (30 Stat. 197), was construed as a word of addition. In Maben v. Rosser, 24 Okl. 588, 593, 103 P. 674, 676, the court, discussing the meaning of the word "including," says: "This word has also been defined as having an accumulative sense, and as classing that which follows with that which has gone before."
In Kennedy v. Industrial Accident Commission of California et al., 50 Cal. App. 184, 194, 195 P. 267, 271, the court says: "`Including' is not a word of limitation. Rather it is a word of enlargement, and in ordinary signification implies that something else has been given beyond the general language that precedes it. * * * As here employed, the word `including' is used to express the idea that the specific power to review, grant or regrant, diminish, increase, or terminate an award, upon the ground that the disability has recurred, increased, diminished, or terminated a particular power specifically referred to in the section of the present act is but a part of the larger and more comprehensive power conferred by the more general language of the immediately preceding clause of the section."
In Dumas v. Boulin (La.) McGloin, 274, 278, it is pointed out that the word "include" has two shades of meaning. The court says: "`Include' * * * has * * * two shades of * * * meaning. It may apply where that which is affected is the only thing included, * * * and it is also used to express the idea, that the thing in question constitutes a part only of the contents of some other thing." It is more commonly used in the latter sense.
That the word "includes" is a word of enlargement is held in Fraser v. Bentel et al., 161 Cal. 390, 119 P. 509, Ann. Cas. 1913B, 1062; Cooper v. Stinson, 5 Minn. 522; Calhoun v. Memphis & P. R. Co., 4 Fed. Cas. 1045, No. 2309.
Perhaps the most lucid statement the books afford on the subject is in Blanck et al. v. Pioneer Mining Co. et al., 93 Wash. 26, 30, 159 P. 1077, 1079, namely: "The word `including' is a term of enlargement and not a term of limitation, and necessarily implies that something is intended to be embraced in the permitted deductions beyond the general language which precedes it. But, granting that the word `including' is a term of enlargement, it is clear that it only performs that office by introducing the specific elements constituting the enlargement. It thus, and thus only, enlarges the otherwise more limited preceding general language. * * * The word `including' introduces an enlarging definition of the preceding general words, `actual cost of the labor,' thus of necessity excluding the idea of a further enlargement than that furnished by the enlarging clause so introduced. When read in its immediate context, as on all authority it must be read, the word `including' is obviously used in the sense of its synonyms `comprising; comprehending; embracing.'"
It seems to us that the language "including a reasonable allowance for obsolescence" is but a part of and an enlargement of the previous phrase of the said subsection (7) relating to exhaustion, wear, and tear, and that the first part of the sentence was intended to cover the subject-matter thereof. It does not add a new kind of deduction, but merely permits the inclusion of an additional element, namely, obsolescence of such property used in the business as is subject to exhaustion, wear, and tear. The allowance for obsolescence was intended to be in connection with the allowance for exhaustion, wear, and tear; that being at times insufficient to restore the proper basis of capital values.
The history leading up to the enactment of subsection (7) of section 234 (a) of the 1918 act is important. The Excise Tax Act of 1909 (36 Stat. 112) § 38, permitted deduction of "a reasonable allowance for depreciation of property, if any." Regulations of the Treasury Department provided that the deduction should be the loss "that arises from exhaustion, wear and tear, or obsolescence out of the uses to which the property is put." *632 The United States District Court for the Northern District of California, in San Francisco & P. S. S. Co. v. Scott, Collector, 253 F. 854, 855, discussed depreciation as used in that statute, and said: "It is intended to cover the estimated lessening in value of the original property, if any, due to wear and tear, decay, or gradual decline from natural causes, inadequacy, obsolescence, etc., which at some time in the future will require the abandonment or replacement of the property, in spite of ordinary current repairs."
The Revenue Act of 1913 (38 Stat. 172) had this provision: "A reasonable allowance for depreciation by use, wear and tear of property, if any." The regulations under this act recognized the interpretation put upon the word "depreciation" under the previous act, and made an allowance for obsolescence "out of the uses to which the property is put."
The 1916 act (Comp. St. § 6336f) dropped the word "depreciation," and the deduction permitted was "a reasonable allowance for the exhaustion, wear and tear of property within the United States arising out of its use or employment in the business or trade." After that there was no basis for a deduction for obsolescence, as the depreciation deduction under the 1916 act excluded obsolescence.
When the Revenue Act of 1918 was before the Congress, the House wrote a provision the same as in the 1916 and 1917 acts, providing an allowance for "exhaustion, wear and tear" of property. The Senate adopted an amendment substituting the word "depreciation" for "exhaustion, wear and tear." In conference, the word "depreciation" was stricken out, the words "exhaustion, wear and tear," restored, and the words "including a reasonable allowance for obsolescence" included. In this form the bill passed.
It would seem quite apparent, therefore, that Congress was not intending to add a new and independent deduction. It was merely trying to provide the restoration of capital value of a depreciable asset over the period of its useful life by allowing something, known as obsolescence, as an additional element to exhaustion, wear, and tear. This legislative history sustains, we think, the conclusion to which we are forced that the phrase "including a reasonable allowance for obsolescence" is one of specification and enlargement; that it is closely connected with and relates to the subject-matter of the other phrase of said subsection (7), and applies only to such property therein designated used in the business as is subject to exhaustion, wear, and tear.
That leads to the query, is good will such property? Good will is property of an intangible nature. It differs from such intangibles as patents, copyrights, licenses, and franchises, because, while in a certain sense it inheres in and is used in the business, it is not subject to depreciation, as that term is commonly understood and commonly used in the statutes. The Supreme Court of the United States in Metropolitan Bank v. St. Louis Dispatch Co., 149 U. S. 436, 446, 13 S. Ct. 944, 947 (37 L. Ed. 799) says:
"Undoubtedly, good will is in many cases a valuable thing, although there is difficulty in deciding accurately what is included under the term. It is tangible only as an incident, as connected with a going concern or business having locality or name, and is not susceptible of being disposed of independently. Mr. Justice Story defined good will to be `the advantage or benefit, which is acquired by an establishment, beyond the mere value of the capital, stock, funds, or property employed therein, in consequence of the general public patronage and encouragement which it receives from constant or habitual customers, on account of its local position, or common celebrity, or reputation for skill or affluence, or punctuality, or from other accidental circumstances or necessity, or even from ancient partialities or prejudices.' Story, Part. § 99."
The opinion of the referee in the case hereinbefore referred to, relied upon by plaintiff, of Haberle Crystal Springs Brewing Co. v. Jesse W. Clarke, Collector of Internal Revenue, so holds, because the referee says: "Ordinarily it has an indefinite existence and value."
Opinions of expert accountants are not without value in considering the peculiar nature and status of good will in business. In Montgomery's Auditing Theory and Practice, we find the following enlightening paragraph:
"This asset is in a class by itself. The question of depreciation certainly cannot be applied to it as to other items. If earnings decline for any reason, the value of good will declines correspondingly, because by its very nature its value depends on earnings of a certain amount being maintained. Good will, however, always appears, or should appear, on the balance sheet as a separate item, and well-established practice permits it to appear at cost, irrespective of fluctuations which affect its value. As a matter of fact, its actual *633 value changes from day to day, and there would be so much uncertainty in any attempt to adjust its book value that by common consent it is left alone, except in cases where earnings are unusually large, and it is considered advisable to write it off. In such cases, the very fact of there being sufficient earnings to write it off would justify its retention; whereas earnings not up to expectations, and insufficient to enable a concern to write it off, would indicate that its book value is inflated. As good will does not suffer wear and tear, does not become obsolescent, is not used up in the operation of the business, depreciation, as such, cannot be charged against it. * * * While good will does not depreciate, it is constantly liable to fluctuations. Good will is not usually written off, and the question of the amount at which it shall stand in the balance sheet was not formerly deemed to be within the scope of the auditor's work, but the present range of an auditor's duties compels him to give serious thought to this item."
In Higher Accountancy Principles and Practice (under supervision of William Arthur Chase) the following:
"The increased or decreased value of the good will does not show in any ordinary profit and loss account. Its growth cannot be attributed to any particular year. In a private concern, good will is only ascertainable by actually selling the business. In case of a public company, the good will is known from day to day. The whole question of good will is a difficult one, because each case stands by itself."
From Modern Accounting, by Henry Rand Hatfield:
"But in valuing good will for the inventory the limitation of its value to its cost must be most rigorously observed. It has been seen that the restriction of inventory value to cost price is of rather general application, but its force is much greater when the goods to be valued are immaterial. No one would object to the inclusion in the inventory of treasure trove, even though it cost the finder nothing. But good will is rigorously excluded, unless it has been secured at a cost. Hence it is recognized as legitimate for the purchaser of good will to include it among his assets, but accounting practice prudently, though perhaps illogically, forbids the firm which created the good will to place in the balance sheet any value on the clientèle which it has built up, and which it could at any moment sell for a large sum."
We are satisfied there can be no wear or tear of good will, or exhaustion thereof by use, and, even should we assume that good will, separate and distinct from tangible property, is property used in the business, section 234 (a), subsection (7), of the 1918 Revenue Act limits the allowance for obsolescence to such property as is susceptible to exhaustion, wear, and tear by use in the business, and good will is not such property.
We turn, therefore, to the question of whether the allowance claimed can be made under section 234 (a), subsection (4). It is suggested in the reply brief of plaintiff that, if defendant's argument be conceded to be correct as to the obsolescence feature of the statute, this court could decide the case under the loss section, section 234 (a), subsection (4), hereinbefore set out, and it is claimed that under the pleadings the requested allowance could be granted under that subsection as a loss sustained in plaintiff's fiscal year ending August 31, 1918.
Defendant in its brief states: "Plaintiff and defendant agree that, unless a deduction for obsolescence of good will is authorized by section 234 (a) (7) of the act, plaintiff's claim must of necessity be denied." Apparently this statement is incorrect. However, the case was tried and determined principally upon the question of the construction of section 234 (a), subsection (7). We refer to this suggested proposition briefly.
We have heretofore pointed out that good will has no existence separate and apart from an established business. With the termination of that business it is ended. While a capital asset, it is not the subject of purchase, sale, or assignment separate from the business itself. It is not an assignable asset distinct from the business. It is different in this respect from such intangibles as patents, contracts or franchises which may be sold. When a business is disposed of its value and realized selling price may be enhanced by the existence of good will. If sold at a loss, the loss of good will is reflected in the transaction. The claim is somewhat novel, therefore, and rather startling, that loss of good will can be made the subject of an independent claim for a tax deduction, separate and distinct from the business of which it is an incident.
When the property of the Red Wing Malting Company was sold at a depreciated value by reason of prohibition, the loss of good will was reflected in the general loss. This loss might possibly be a basis for a deduction under section 234(a), subsection (4), of the statute. We are not advised whether or not such allowance has been made. To *634 hold that a claimant is entitled to segregate good will from the property and business to which it is attached as an incident, and from which it is inseparable, and permit a separate deduction for its loss, might result in a double deduction and have far-reaching consequences. If the court is to open the door to claimants for tax deductions under the statute for the loss of good will apart from the tangible property with which it is connected, the right should clearly appear from the statute. We think it does not so appear.
While we have indicated our view of the matter, we are not confident that this question is before us. It does not appear from the record that any claim under subsection (4) for refund covering the loss of good will as a sustained loss during the taxable year was presented to the Commissioner of Internal Revenue prior to bringing this action, and a refund requested. The application for refund does not appear in the record. Such application is a condition precedent to the jurisdiction of this court in matters of this character. The precise ground upon which the refund is demanded must be stated in the application to the Commissioner, and we think, if that is not done, a party cannot base a recovery in the court upon an entirely different and distinct ground from that presented to the Commissioner.
We have reached the conclusion that the action of the trial court in dismissing plaintiff's petition and rendering judgment for defendant was correct, and the same is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547486/ | 867 A.2d 977 (2005)
In re David D. REYNOLDS, Respondent.
A Member of the Bar of the District of Columbia Court of Appeals.
No. 04-BG-452.
District of Columbia Court of Appeals.
Submitted December 3, 2004.
Decided February 10, 2005.
*978 Before TERRY, Associate Judge, and BELSON and NEBEKER, Senior Judges.
PER CURIAM.
On December 14, 2000, we suspended petitioner, David D. Reynolds, from practicing law for a period of six months with the requirement that he demonstrate his fitness to resume the practice of law as a prerequisite to reinstatement. In re Reynolds, 763 A.2d 713 (D.C.2000). Before us now is petitioner's request for reinstatement. See D.C. Bar R. XI, § 16(d) (2003). A hearing was conducted before a Hearing Committee which recommended to the Board on Professional Responsibility that the petition be denied. The Board in turn recommends that this court deny the petition because petitioner has not demonstrated by clear and convincing evidence that he is fit to resume practicing law. We agree with the Board and therefore deny his petition for reinstatement. See id. § 16(f).
To gain reinstatement, petitioner must establish by clear and convincing evidence that (1) he has the "moral qualifications, competency, and learning in law required for readmission," and (2) his resumption of the practice of law "will not be detrimental to the integrity and standing of the Bar, or the administration of justice, or subversive to the public interest." D.C. Bar R. XI, § 16(d). We consider these factors in light of the criteria set forth in In re Roundtree, 503 A.2d 1215, 1217 (D.C.1985):(1) the nature and circumstances of the misconduct for which the attorney was disciplined; (2) whether the attorney recognizes the seriousness of the misconduct; (3) the attorney's conduct since discipline; (4) the attorney's present character; and (5) the attorney's present qualifications and competence to practice law. Neither Bar Counsel nor petitioner filed objections or exceptions to the Board's report. "In such circumstances our review of the Board's recommendation is `especially deferential.'" In re Patkus, 841 A.2d 1268, 1268 (D.C.2004) (citing In re Delaney, 697 A.2d 1212, 1214 (D.C.1997)).
We note that although the burden is on petitioner to demonstrate by clear and convincing evidence that he has satisfied the Roundtree factors, he did not produce any witnesses or offer any exhibits to support his petition. Petitioner was originally disciplined for misdemeanor convictions in Virginia on two counts of driving while intoxicated, one count of eluding a police officer, and one count of hit and run. In re Reynolds, 763 A.2d at 713. His criminal conduct was accompanied by "an extended pattern of alcohol abuse over more than a decade." Id. at 714. Petitioner's conduct was certainly serious and, as the Board notes in its report and recommendation, *979 he has not proven by clear and convincing evidence that he recognizes the seriousness of that conduct. Petitioner's statement in his Post-Hearing Reply Brief that he acknowledges "the seriousness of his offenses in the eyes of the law" falls short of demonstrating that he has a full understanding of the nature and ramifications of his conduct. Moreover, petitioner produced no evidence to suggest that his conduct has improved since he was disciplined. In his petition, he claims that he has not consumed an alcoholic beverage in over three years. However, his claim is belied by the testimony of Dr. Stejskal, a clinical psychologist, who testified that on the one occasion he met with petitioner, he appeared to be intoxicated. Finally, petitioner failed to produce any witnesses to testify to his present character, and failed to provide any documentation of his present qualifications and competence to practice law.
In light of our standard of review, the Board's unchallenged report and recommendation, and the record herein, we conclude that petitioner has failed to establish by clear and convincing evidence his fitness to resume the practice of law. We therefore accept the Board's recommendation for the reasons stated in its report, which is appended to this opinion, and deny the petition for reinstatement.
So ordered.
APPENDIX
DISTRICT OF COLUMBIA COURT OF APPEALS BOARD ON PROFESSIONAL RESPONSIBILITY
In the Matter of: DAVID D. REYNOLDS, Petitioner.
Bar Docket No. 37-01
REPORT AND RECOMMENDATION OF THE BOARD ON PROFESSIONAL RESPONSIBILITY
This matter comes to the Board on Professional Responsibility ("the Board") from Hearing Committee Number Seven (the "Committee"), which concluded that Petitioner David D. Reynolds' Petition for Reinstatement should be denied. Bar Counsel does not except to the Committee's recommendation. Petitioner excepted, but filed no brief in support of his exceptions. In keeping with Board Rule 13.4(a), there was no oral argument. Upon review of the record, the Board agrees with the Committee and recommends that the Petition for Reinstatement be denied.
I. PROCEDURAL HISTORY
On January 30, 2001, Petitioner (who had been suspended with a fitness requirement on December 14, 2000)[1] filed a Petition for Reinstatement and the required Restatement Questionnaire. Bar Counsel filed an Answer to the Petition on March 12, 2001. A hearing was scheduled for sometime in April 2001, and a pre-hearing conference took place on March 26, 2001. See Transcript of Proceedings, dated March 26, 2001 ("Tr.I"). At that time, the parties sought a continuance because Bar Counsel had requested, and Petitioner had agreed to undergo, an evaluation by a psychologist, but the evaluation had not taken place; Petitioner had been in a nursing home recovering from an injury on the date the evaluation was to have taken place. Tr. I at 3-4. The Hearing Committee Chair granted the continuance and advised the parties that the hearing would be scheduled to take place within a week *980 or two of receipt of the doctor's report. Tr. I at 7. On May 10, 10, 2001, Bar Counsel filed a motion to dismiss the Petition for Reinstatement because Petitioner had not yet made an appointment for the evaluation by the psychologist. Petitioner did not respond to the motion. On June 19, 2001, the Hearing Committee Chair issued an Order requiring Petitioner to make an appointment with the psychologist within 30 days and stating that any failure in this regard would result in dismissal of the petition.
On July 23, 2001, Petitioner requested an additional 30-day extension of time in which to make his appointment with the psychologist. Respondent argued that he had attempted to contact the doctor on several occasions, but, because Petitioner was homeless and had no telephone number at which the doctor could return his calls, they were having difficulty getting in touch. Bar Counsel opposed the motion. On July 25, 2001, the Hearing Committee Chair issued an order requiring Petitioner to make his appointment by August 24, 2001, and to advise Bar Counsel of the date of the appointment by August 31, 2001. The Chair noted that failure to so advise Bar Counsel would result in a recommendation that the Petition be denied.
On August 27, 2001, Petitioner filed notice of his having made an appointment with the psychologist for September 10, 2001. On November 9, 2001, Bar Counsel advised the Hearing Committee of receipt of the doctor's report. On December 6, 2001, the Hearing Committee Chair issued an order setting the hearing for January 14, 2002. Bar Counsel timely served her proposed exhibits.
The hearing took place as scheduled. See Transcript of Proceedings, dated January 14, 2002 ("Tr.II"). [Petitioner] appeared pro se. He did not offer any exhibits. Bar Counsel offered Bar Exhibits ("BX") 1-13 into evidence. [Petitioner] objected to several of the documents on relevance grounds, which objection was denied. Tr II at 161-63. BX 1-13 were then received into evidence. Tr. II at 163. The only witnesses were Petitioner, see Tr. II at 112-160, and William J. Stejskal, Ph.D., who testified out of turn by agreement of the parties, see Tr. II at 6-111. Bar Counsel had called another witness via subpoena, but that witness did not testify because she was the author of a document entered into evidence (BX 11) and her testimony would merely be a reiteration of statements made in the document. See Tr. II at 160. At the time, Petitioner made no objection to the Hearing Committee's consideration of the exhibit without the opportunity for cross-examination. See Tr. II at 162 (Petitioner states his "primary objection was relevance" but articulated no other objections).
The parties filed their post-hearing briefs. The Hearing Committee issued its Report and Recommendation on May 21, 2002. On May 23, 2002, Bar Counsel advised the Board Office that she took no exception to the Hearing Committee's Report. On June 3, 2002, Petitioner advised the Board Office that he took exception to both the Hearing Committee's findings of fact and its recommendation. On June 28, 2002, Petitioner sent to the Board Office a motion for extension of time, seeking an additional week to file his objections to the Hearing Committee Report. Petitioner argued that his briefcase (containing the Hearing Committee Report) was stolen when Petitioner suffered a medical emergency and that he had just requested a new copy of the Report. Bar Counsel did not object to Petitioner's motion. On July 3, 2002, the Board's Executive Attorney advised Petitioner that his request for a week-long extension was granted and that he had until July 8, 2002, to file his brief *981 with the Board. By October 8, 2002, Petitioner had not filed anything with the Board and, as a result, the Board cancelled oral argument, pursuant to Board Rule 13.4(a). The Board has since reviewed the available record and makes the following findings and recommendation.
II. FINDINGS OF FACT
The Board has reviewed and adopts the Findings of Fact made by the Committee which are set forth here with minor changes. Pursuant to Board Rule 13.7, the Board has included additional findings to provide context and further support of its conclusions.[2]
1. Petitioner was admitted to the District of Columbia Bar on April 3, 1995, and was assigned Bar Number 446190. BX 5 at 2 (Hearing Committee Report in BDN 506-97, issued on January 19, 2000).
2. Petitioner was convicted on May 1, 1998, in the Circuit Court of Arlington County, Virginia, on two counts of driving while intoxicated ("DWI"), one count of eluding, and one count of hit and run. He was sentenced on June 6, 1998, to 12 months on each of the counts, to run consecutively. HC Rpt. Finding 1.
3. On July 14, 1998, Bar Counsel filed a certified copy of the judgment of conviction with the District of Columbia Court of Appeals (the "Court"). On July 30, 1998, the Court ordered Petitioner suspended pursuant to D.C.Bar. R. XI, § 10(c), and directed the Board to institute formal disciplinary proceedings. BX 5 at 1.
4. Prior to these convictions, Petitioner had been convicted of DWI in 1984, 1987, 1990, and 1995. A fifth DWI charge had been dismissed the day following the 1995 conviction. Following the first three convictions, Petitioner had been required to receive treatment for alcohol abuse. The sentence on the 1995 conviction placed him on probation for two years, required that he complete an alcohol program as directed, limited Petitioner's driving [to traveling] to and from work and to and from the court and the probation officer, and ordered that he not use an automobile other than one with an interlock ignition device. HC Rpt. Finding 2.
5. The 1998 DWI convictions were based on arrests made in October 1996 and September 1997. Following the 1996 arrest, Petitioner was incarcerated for five months for violation of the 1995 sentencing order. Petitioner had failed to complete the alcohol abuse program as had been ordered, and had operated an automobile without the interlock device. When he was interviewed by the Probation Department for its investigative report, although Petitioner was plainly drunk at the time of the 1996 and 1997 arrests, he denied use of alcohol on either occasion. His arrest in September 1997 followed by only two weeks his completion of the five months incarceration. HC Rpt. Finding 3.
6. Petitioner was in jail on his 1998 sentence until December 9, 1999, when he was released on probation. HC Rpt. Finding 5.
7. While he was incarcerated, on May 25, 1999, Respondent filed a petition with the Virginia State Bar Disciplinary Board requesting leave to surrender his license to practice law in Virginia. BX 8 at 2. On May 26, 1999, the Virginia Board issued an order revoking Petitioner's license and striking his name from the Roll of Attorneys in Virginia. Id. Virginia considers *982 such action the "[imposition] of public discipline." BX 8 at 1.
8. Petitioner's adjustment to parole supervision after his release was "unfavorable." BX 10 at 1. On January 5, 2000, he tested positive for alcohol. He was on court-ordered outpatient substance abuse treatment. On four occasions in January-February 2000, he refused to submit to urinalysis tests when ordered by his probation officer. HC Rpt. Finding 5.
9. Hearing Committee Number Two issued its Report and Recommendation in BDN 506-97 on January 19, 2000, finding that the 1998 convictions, in the context of the four previous convictions, showed a pattern of criminal acts that reflected adversely on Petitioner's fitness as a lawyer and therefore violated Rule 8.4(b).[3] BX 5 at 6; HC. Rpt. Finding 4.
10. On February 25, 2000, Petitioner tested positive for alcohol when meeting with his outpatient treatment counselor. He was then directed to enter and complete a detoxification program. He was in detoxification from February 26 to March 7, 2000. On March 10, 2000, Petitioner reported intoxicated to his substance abuse treatment program, and was shortly thereafter arrested for being drunk in public. On March 11, 2000, Petitioner re-entered detoxification and was taken to Phoenix House on March 20, 2000. On March 31, 2000, he absconded from Phoenix House. HC Rpt. Finding 5.
11. He returned the next day asking to be re-admitted. He was "obviously intoxicated," and tested positive for alcohol. BX 11 at 1. He also said he wanted to commit suicide. He was referred to Arlington Psychiatric Hospital. He was re-admitted to Phoenix House on April 10, 2000. His probation officer warned him that he would return to jail if he did not complete the Phoenix House program. On April 19, 2000, Petitioner was sent to CVS to refill some prescriptions. He left his escort and went to a bar, saying that he wished to use the men's room. After about an hour he returned to Phoenix House, and was again tested positive for alcohol. As on numerous other occasions, he denied using alcohol. The probation officer was informed, and Petitioner was arrested again on April 20, 2000. HC Rpt. Finding 6.
12. Petitioner "was very resistant to receiving substance abuse treatment" at Phoenix House. BX 11 at 1. Petitioner's "attitude and behavior while at the Phoenix Program indicated a great deal of denial and resistance to recognizing himself as an alcoholic who is in need of treatment." BX 11 at 2; HC Rpt. Finding 7.
13. Petitioner was incarcerated for parole violations from April 20, 2000, to September 13, 2000, when the Parole Board determined that the evidence was insufficient to sustain the charged parole violations. BX 9 (Jenkins Affidavit ¶ 14); HC Rpt. Finding 8.
14. During the time of this incarceration, on May 8, 2000, the Board issued its report in BDN 506-97, in which it agreed that the proved pattern of law-breaking, and violation of probation which led to incarceration, were sufficient to establish a Rule 8.4(b) violation. HC Rpt. Finding 4. 15. The Court of Appeals [agreed and suspended Petitioner] on December 14, 2000, on the grounds stated by the Board. Quoting a concurring opinion in In re Reynolds, 649 A.2d 818, 819 (D.C.1994) (per curiam) (Farrell, J., concurring), the Court observed that the focus of the Rule *983 "`is on whether the offense `indicate[s] lack of those characteristics relevant to law practice,' and `[a] pattern of repeated offenses, even ones of minor significance when considered separately, can indicate indifference to legal obligation.'" HC Rpt. Finding 4.
16. On December 21, 2000, Petitioner was hit by a car and hospitalized. He recovered in a nursing home until May 2001. HC Rpt. Finding 8.
17. During his recovery, on January 30, 2001, Petitioner filed with the Board Office his Petition for Reinstatement and the required Reinstatement Questionnaire. In the Petition for Reinstatement, Petitioner stated that he "has not consumed an alcoholic beverage in over three (3) years." Petition for Reinstatement at 2.
18. As evidenced by Findings 8, 10, and 11 above, Petitioner's statement that he had not had any alcohol in three years was false. See HC Rpt. at 7 n. 2 (the Hearing Committee expressly finds statement "not credible").
19. The Reinstatement Questionnaire submitted by Petitioner asked, "[h]ave there been or are there now any charges, complaints, grievances pending concerning your conduct as an attorney in any bar of which you are a member or have ever been a member other than the District of Columbia Bar." Petitioner answered "No." Reinstatement Questionnaire at 4. The Reinstatement Questionnaire stated: "List any discipline for misconduct of petitioner other than that which forms the basis for the suspension or disbarment involved in this petition, in any jurisdiction where petitioner has been admitted to practice law. A certified copy of any official action to that effect in any jurisdiction shall be attached to this questionnaire and petitioner shall also provide a description of the misconduct and the specific disciplinary action(s)." Petitioner Responded, "None." Reinstatement Questionnaire at 5.
20. In light of Finding 7, above, Petitioner's responses to the Reinstatement Questionnaire were, at best, incomplete.[4]
21. Since his release from the nursing home in May 2001, Petitioner has had no permanent residence. Tr. II at 120. At the time of the hearing, he was sleeping in an emergency shelter on a night-to-night basis. Tr. II at 121.
22. Since his release from jail in December 1999, Petitioner has not held steady employment, and he could not identify anyone for whom he has worked. Tr. II at 122, 138-41, 152. To the extent Petitioner has sought employment, he has focused his efforts on law-related employment, such as law clerk and paralegal work, but he has not been accepted for such positions. Tr. II at 151-52. Petitioner has made some effort at other employment, but no significant effort in that regard. Tr. II at 156, 158.
23. Petitioner has made little, if any, effort to utilize the services available to him through the Virginia and District of Columbia Bars or, even, to determine whether any services are available to him. Tr. II at 152-53. Petitioner has not attended any continuing legal education ("CLE") courses. See Tr. II at 151-52.
24. Petitioner stated, on several occasions during the hearing, that he did not consider his alcohol use, or his recovery therefrom, to be significant to the fitness hearing. Tr. II at 118-19 (he did not consider proof of attendance at AA meetings to be persuasive evidence); Tr. II at *984 132 ("[T]o me that is not the issue here. If I took a drink somewhere in the last year and a half or two years or whatever, I did not believe that that was the issue here on my fitness to practice law now.").
25. Petitioner was seen by a clinical psychologist, Dr. William J. Stejskal, on September 10, 2001. Petitioner exhibited symptoms of mild intoxication at that time. HC Rpt. Finding 9.
III. CONCLUSIONS OF LAW AND RECOMMENDATION
D.C. Bar R. XI, § 16(d), of the District of Columbia Court of Appeals Rules Governing the Bar, provides that
the attorney seeking reinstatement shall have the burden of proof by clear and convincing evidence. Such proof shall establish:
(1) that the attorney has the moral qualifications, competency, and learning in law required for readmission; and
(2) that the resumption of the practice of law by the attorney will not be detrimental to the integrity and standing of the Bar, or to the administration of justice, or subversive to the public interest.
Review of whether a petitioner has satisfied his burden of proof is conducted within the framework of the factors listed in In re Roundtree, 503 A.2d 1215 (D.C.1985); see In re Patkus, 841 A.2d 1268 (D.C.2004) (per curiam). The Roundtree factors are: (1) the nature and circumstances of the misconduct for which the attorney was disciplined; (2) the attorney's recognition of the seriousness of the misconduct; (3) the attorney's post-discipline conduct, including steps taken to remedy past wrongs and prevent future ones; (4) the attorney's present character; and (5) the attorney's present qualifications and competence to practice law. Roundtree, 503 A.2d at 1217. We address these factors in turn.
1. Nature and circumstances of misconduct
Petitioner was suspended for violation of Rule 8.4(b), criminal conviction reflecting adversely on his fitness to practice law. Specifically, Petitioner was convicted on two counts of DWI, one count of eluding a police officer, and one count of hit and run. He was sentenced to 12 months on each of the counts, to run consecutively. There is little doubt that Petitioner's conduct was serious. Further, as the Hearing Committee noted, "Petitioner's problems with the law have resulted from alcohol abuse. He has had seven arrests for DWI, and six convictions. The hit and run and eluding convictions were also alcohol-related, as have been his difficulties obeying court-ordered probation terms. But for the alcohol abuse, leading to the motor vehicle violations, Petitioner would not have been subjected to the disciplinary process." HC Rpt. at 4.
2. Recognition of seriousness of misconduct
This Roundtree factor has been consistently relied upon by the Court as a predictor of future conduct. If a petitioner does not acknowledge the seriousness of his or her misconduct, it is difficult to be confident that similar misconduct will not occur in the future. Failure to carry the burden on this factor has often been recited as a ground for denial of a reinstatement petition. See In re Molovinsky, 723 A.2d 406, 409 (D.C.1999) (per curiam); In re Lee, 706 A.2d 1032, 1035 (D.C.1998) (per curiam) (appended Board Report); In re Fogel, 679 A.2d 1052, 1055 (D.C.1996). The Hearing Committee concluded that Petitioner had not met his burden of proof on this factor. Specifically, the Committee concluded, and we agree, that there "is no *985 evidence that Petitioner has acknowledged the seriousness of the long pattern of unlawful conduct in which he has been engaged." HC Rpt. at 5.
Although Petitioner claims that he acknowledged "the seriousness of his offenses in the eyes of the law," which seriousness "manifested itself in substantial time of incarceration," Petitioner's Post-Hearing Reply Brief at 2, this is merely a statement that the crimes for which he was convicted are serious crimes. It is not his own recognition of the seriousness of his actions. Indeed, Petitioner attempted to diminish the seriousness of his conduct, referring to his crimes in his post-hearing brief to the Hearing Committee as mere "traffic violations." Petitioner's Post-Hearing Brief at 1.
Further, Petitioner fails to see the import of his alcohol abuse (which caused his criminal conduct) in relation to his fitness to practice law. When suspending Petitioner in 2000, the Court stated, "[w]hile as Respondent points out, Respondent's abuse of alcohol has not yet prompted a client to complain to Bar Counsel, it would be inappropriate to ignore the pattern of Respondent's inability to comply with his responsibilities under the law and the implications of that persistent failure for his fitness as an attorney." In re Reynolds, 763 A.2d at 714. Nonetheless, in these proceedings Petitioner once again highlighted the fact that no disciplinary complaints were raised against him by clients[5] and provided no credible evidence to indicate that he has taken the necessary steps to address his alcohol abuse. Even his own statements regarding his alcohol use are conflicting. Compare Reinstatement Questionnaire at 2 (as of January 2001 Petitioner had not consumed alcohol in three years) with Tr. II at 132 ("[T]o me that is not the issue here. If I took a drink somewhere in the last year and a half or two years or whatever, I did not believe that that was the issue here on my fitness to practice law now."). Petitioner has failed to meet his burden of proving that he recognizes the seriousness of his conduct, and the fact that it was caused by his alcohol abuse.
3. Post-discipline conduct
The Hearing Committee that initially recommended Respondent's suspension issued its report on January 19, 2000. Between that time and December 2000, when the Court issued its final opinion in the matter, Petitioner tested positive for alcohol use, in violation of the rehabilitation programs with which he was then involved, on three occasions. See Findings of Fact 8, 10, 11. Although there is no direct evidence of alcohol use or criminal conduct after that time, Bar Counsel is not required to prove improper post-suspension conduct. Rather, the burden rests on Petitioner to prove good conduct, specifically, improvement in the conduct that lead to his discipline. See Patkus, 841 A.2d at 1269 (petitioner who had been disbarred for misappropriation had obligation to prove improvement in his precarious personal financial situation that led to misappropriation). Petitioner has failed to meet this burden.
In his Post-Hearing Reply Brief, Petitioner stated that he "continues to seek" treatment for his alcohol abuse. Post-Hearing Reply Brief at 2. The Hearing Committee concluded that this "would appear to be an acknowledgment that Petitioner has not yet changed his pattern of alcohol consumption. Certainly there is no clear and convincing evidence that he has." HC Rpt. at 7. Petitioner provided no documentary *986 proof of successful attempts at rehabilitation, nor any witnesses who could testify to such attempts. The only witness other than Petitioner who testified as to Petitioner's post-discipline conduct, Dr. Stejskal, testified that Petitioner appeared to be intoxicated at his evaluation in September 2001. We agree with the Hearing Committee that Petitioner has not met his burden of proof on this Roundtree factor.
4. Present character
Petitioner is required to prove that:
those traits which led to the petitioner's disbarment no longer exist and, indeed, that petitioner is a changed individual having full appreciation of his mistake and a new determination to adhere to the high standards of integrity and legal competence which this Court requires.
In re Brown, 617 A.2d 194, 197 n. 11 (D.C.1992) (quoting In re Barton, 291 Md. 61, 432 A.2d 1335, 1336 (1981)). The Court has stressed the obvious importance of this factor, and the need for a petitioner to put on live witnesses familiar with the underlying misconduct who can provide credible evidence of a petitioner's present good character. See In re Tinsley, 668 A.2d 833, 838 (D.C.1995) (per curiam) (appended Board Report) (testimony of two character witnesses insufficient because not familiar with petitioner's misconduct); Fogel, 679 A.2d at 1056 (same). Petitioner failed to provide any witnesses to testify as to his character.
Further, the Court has recently reiterated that "evasiveness on the reinstatement questionnaire negatively reflects on present character to resume practice...." Patkus, 841 A.2d at 1270 (citing In re Robinson, 705 A.2d 687, 689-90 (D.C.1998)). Petitioner made at least one false statement in his Petition, see Finding 18, and also engaged in omissions that were misleading, even if not intentional, see Finding 20. As a result, we find Petitioner has failed to meet his burden of proving present good character.
5. Present qualifications and competence to practice law
This factor requires Petitioner to demonstrate by clear and convincing evidence that he is competent to practice law. The Roundtree court emphasized that, "[l]earning in the law is an important factor in every reinstatement case. A lawyer seeking reinstatement after a period of suspension or disbarment should be prepared to demonstrate that he or she has kept up with current developments in the law." Roundtree, 503 A.2d at 1217 n. 11 (D.C.1985); see also In re Anderson, 741 A.2d 37, 38 (D.C.1999) (per curiam) (considering "learning in the law required for re-admission").
The Court considers various factors when assessing competence. These include whether petitioner has furthered his legal education through CLE programs, see Roundtree, 503 A.2d at 1218 (considering petitioner's "participation in continuing legal education programs" and "acquisition of computer skills" when granting reinstatement); In re Blondes, 732 A.2d 262 (D.C.1999) (per curiam) (finding that auditing a two-credit CLE course on professional responsibility and ethics demonstrated petitioner's qualifications and competence to practice law); In re Bettis, 644 A.2d 1023, 1030 (D.C.1994) (finding that petitioner had established competence where he "worked as a law clerk ... and improved his legal research and writing skills" and witnesses testified to his "particular expertise" in medical malpractice and personal injury); or kept abreast of developments in the law by reading legal journals and periodicals. See In re Harrison, 511 A.2d 16, 19 (D.C.1986) (finding petitioner competent where he presented evidence that *987 he had kept up with developments in the law through reading and maintaining professional contacts).
Although Petitioner claims to have read publications related to his prior practice area, to have discussed cases with practicing attorneys he meets in the library, and to have provided assistance to clients on patent applications (which do not require a licensed attorney), he presented no documents or witnesses to support these contentions. See Petition for Reinstatement at 2; Tr. II at 138-41. Respondent has [neither] taken any CLE courses, nor engaged in any significant legal work. The record, thus, offers no evidence of Petitioner's current competence to practice law. Cf. Patkus, 841 A.2d at 1270 (petition for reinstatement denied where petitioner had taken no CLE courses since 1995, notwithstanding evidence that petitioner handled eight administrative matters that did not require representation by a licensed attorney). Indeed, the record offers no evidence of Petitioner's ability to hold any kind of employment whatsoever. Cf. In re Kerr, 675 A.2d 59, 61-62 (D.C.1996) (per curiam) (petitioner reinstated 19 years following disbarment upon proof that she had earned doctorate in psychology and practiced as a psychologist, taken over 30 hours of CLE courses, and acted as expert witness in psychology and thus came into contact with the courts); In re Smith, No. 89-428, Order (D.C. Oct. 9, 1990) (per curiam), In re Smith, No. 89-428, Order (D.C. Mar. 7, 1990); In re Smith, No. 89-428, Joint Recommendation (D.C. Apr. 6, 1990) (after a disability suspension, attorney who had managed mechanical contracting company and gave advice to former employees and attorney friends was initially denied reinstatement, but agreed to meet conditions including (i) proof of attendance at a six-part CLE "Bridge the Gap" course; (ii) six months of part-time work as a law clerk for two lawyers, in the areas of civil and criminal practice; and (iii) submission of affidavits from the lawyers confirming the hours the petitioner worked, the nature and duration of employment and whether he fulfilled his responsibilities in a satisfactory manner, and was, upon meeting such conditions, granted reinstatement). Petitioner has, thus, failed to meet his burden of proving competence necessary for reinstatement.[6]
IV. CONCLUSION
Having found that Petitioner has failed to meet his burden of proving his fitness by clear and convincing evidence, the Board recommends that the Petition for Reinstatement be denied.
BOARD ON PROFESSIONAL RESPONSIBILITY
By: s/Roger A. Klein
Roger A. Klein
*988 Dated: May 6, 2004
All members of the Board concur in this Report and Recommendation.
NOTES
[1] In In re Reynolds, 763 A.2d 713 (D.C.2000) (per curiam), the suspension was imposed nunc pro tunc to June 28, 1999, the date on which Petitioner had filed the affidavit required by D.C. Bar R. XI, § 14(g).
[2] We cite to the record before the Hearing Committee for findings made by the Board. Findings made by the Hearing Committee will be cited to the Hearing Committee Report ("HC Rpt.").
[3] Rule 8.4(b) provides that it is professional misconduct for a lawyer to "commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness, or fitness as a lawyer in other respects."
[4] Cf. Tr. II at 145 (Petitioner testified that he does not consider voluntary surrender of his license discipline in Virginia).
[5] See Tr. II at 113-14; Post-Hearing Brief at 1-2; Post-Hearing Reply Brief at 1-2.
[6] The testimony of Dr. Stejskal suggests that Petitioner would have significant difficulty practicing law. Specifically, Dr. Stejskal found that Petitioner suffers from neurological deficits that impair his judgment, analytical functioning, and ability to "think on his feet," Tr. at 93, and adjust to changing circumstances in such a way that it would be very difficult for Petitioner to function in the practice of law, and especially difficult for him to do so on his own. See generally Tr. II at 51-58, 93-98, 103-05. The Hearing Committee did not expressly accept or reject the doctor's testimony in its Report. Presumably, the Committee found it unnecessary to do so in light of Petitioner's failure to provide any evidence of competence. We agree that it is unnecessary to rely on Dr. Stejskal's testimony at this juncture. We note, however, that this conclusion is based solely on the lack of evidence presented by Petitioner and should not be interpreted as suggesting that the Board accepts Petitioner's post-hearing argument that such expert testimony was biased or unpersuasive because the expert did not know Petitioner when he was practicing law. Cf. Petitioner's Post-Hearing Brief at 2-3. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1016547/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-2539
BOWE BELL & HOWELL COMPANY,
Plaintiff - Appellee,
versus
ALBERT M. HARRIS; MICHAEL BROOKS; NIELS
ANDERSEN; JEFFREY LEUTNER; RICHARD A. NESTOR;
DAVID MEEHLING; DOCUMENT SERVICES,
INCORPORATED, d/b/a Trans-Print Software
Service, d/b/a Trans-Print Services,
Defendants - Appellants.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Richard D. Bennett, District Judge. (CA-
04-3418-RDB)
Argued: May 25, 2005 Decided: July 15, 2005
Before WILKINS, Chief Judge, and TRAXLER and KING, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Timothy Guy Smith, Silver Spring, Maryland, for Appellants.
Douglas Glenn Edelschick, MCDERMOTT, WILL & EMERY, L.L.P.,
Washington, D.C., for Appellee. ON BRIEF: Melise Blakeslee, Sarah
E. Hancur, MCDERMOTT, WILL & EMERY, L.L.P., Washington, D.C.; Scott
H. Phillips, SEMMES, BOWEN & SEMMES, Baltimore, Maryland, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
2
PER CURIAM:
Plaintiff Bowe Bell + Howell Company (BBH) brought an action
against Defendants, Document Services, Inc. d/b/a Trans-Print
Services (TPS) and several individuals associated therewith,
alleging federal copyright and trademark infringement and related
state law claims. BBH moved for a preliminary injunction to enjoin
Defendants from conducting any business related to a software
package called TransFormer. The district court granted BBH’s
motion and Defendants appeal from this order. We affirm.
I.
In 1997, BBH purchased the assets of The Harris Group for
$5,000,000. The Harris Group’s primary asset included TransFormer
and its intellectual property rights--such as the software’s
copyrights, trademarks, and exclusive right to license--and its
related trade secrets and software “know-how,” which included the
provision of software maintenance to TransFormer users. The
individual Defendants were all employees or shareholders of The
Harris Group. In fact, Defendants Albert Harris and Michael Brooks
originally developed TransFormer.
After BBH’s purchase, the individual Defendants continued to
work in some capacity for BBH. To protect TransFormer’s
intellectual property rights and trade secrets, BBH required its
employees and customers to agree to keep confidential all
3
proprietary information related to TransFormer. Employees signed
either a nondisclosure or a noncompetition agreement, or both.
Customers purchasing the product agreed to certain licensing terms,
which prohibited sharing the product with others without BBH’s
prior written consent.
Over time, the individual Defendants voluntarily resigned or
were terminated from their employment at BBH. Before Defendant
Brooks left BBH, however, he sent Defendant Harris, who had already
left the company, BBH’s 267-page customer list containing hundreds
of customer names, contact information, and service histories.
This list was saved on a password protected BBH server which was
securely stored in BBH’s Baltimore office and accessible only by
BBH employees.
After leaving BBH, Defendant Brooks incorporated TPS, and the
other individual Defendants associated themselves with TPS in some
capacity. TPS advertised itself in a press announcement as having
been formed by “the original developer and owner of The Harris
Group’s . . . software” and as “an alternative vendor for users of
the TransFormer . . . perform[ing] software maintenance and
provid[ing] programmer coding services.” J.A. 41. In all, the
announcement made eleven references to the registered trademark,
“TransFormer,” and also mentioned The Harris Group and BBH several
times.
4
After a two-day hearing, the district court issued a written
order granting BBH’s motion for a preliminary injunction and
enjoining Defendants from conducting any business relating to
TransFormer. In reaching its decision, the district court applied
the four-factor test relevant to determining whether injunctive
relief is appropriate in a given case. The district court examined
(1) the likelihood of irreparable harm to the plaintiff if
injunctive relief were denied; (2) the likelihood of harm to the
defendant if relief were granted; (3) the likelihood of success on
the merits; and (4) the public interest. See Blackwelder Furniture
Co. v. Seilig Mfg. Co., 550 F.2d 189, 195-97 (4th Cir. 1977).
In considering these factors, the district court found the
irreparable harm to BBH in denying the injunction substantially
greater than the harm to Defendants in granting the injunction.
The district court concluded that the balance of hardships plainly
favored BBH in large part because the evidence demonstrated a
likelihood of success on the merits as to several of BBH’s claims
for misappropriation of trade secrets, trademark and copyright
infringement, and breach of noncompetition and nondisclosure
agreements. Many of these violations, the district court noted,
could not be compensated by money damages alone. In contrast, the
district court determined that the harm to Defendants was
relatively small because TPS’s business was still evolving and
involved working with other software products aside from
5
TransFormer. The district court further pointed out that the
individual Defendants, who are well-educated, can work with other
types of computer software too.
Particularly with respect to BBH’s likelihood of success on
the merits, the district court determined that in “cop[ying] the
TransFormer source code from the licensee” onto the TPS computer
and using TransFormer to service customers, J.A. 1452, TPS likely
violated the TransFormer License Agreement. Further, in using the
registered trademark, “TransFormer,” eleven times in its press
announcement, TPS’s advertising was likely to cause, and continue
to cause, confusion in the marketplace. While employed by BBH,
moreover, Defendant Brooks’ transmission of BBH’s customer list to
Defendant Harris, who was no longer employed with BBH, likely
misappropriated a BBH trade secret. Finally, the district court
found that many of the individual Defendants’ association with TPS
likely violated either their noncompetition or nondisclosure
agreements with BBH.
The district court also determined that the public interest
favored granting the injunction. The district court reasoned that
the public has an interest in enforcing restrictive covenants that
protect business interests, and that the public has an interest in
preventing the misleading and deceptive use of trademarks or the
infringement of copyrights.
6
After having thoroughly analyzed the evidence presented by the
parties with respect to each factor, the district court concluded
that all the relevant factors weighed in favor of granting BBH’s
motion for preliminary injunction and, accordingly, issued an order
to that effect.
II.
“We review the grant or denial of a preliminary injunction for
abuse of discretion, recognizing that ‘preliminary injunctions are
extraordinary remedies involving the exercise of very far-reaching
power to be granted only sparingly and in limited circumstances.’”
MicroStrategy, Inc. v. Motorola, Inc., 245 F.3d 335, 339 (4th Cir.
2001) (quoting Direx Israel, Ltd. v. Breakthrough Med. Corp., 952
F.2d 802, 816 (4th Cir. 1991)). “We review factual determinations
under a clearly erroneous standard and legal conclusions de novo.”
Safety-Kleen, Inc. (Pinewood) v. Wyche, 274 F.3d 846, 859 (4th Cir.
2001).
After careful consideration of the parties’ positions, both as
presented in their briefs and at oral argument, we find nothing in
the record to suggest that the district court abused its discretion
in granting BBH’s motion for preliminary injunction. Defendants
have failed to demonstrate that any fact found by the district
court is clearly erroneous or that any conclusion of law drawn from
7
those facts is in error. Accordingly, we affirm based on the well-
reasoned opinion of the district court.
AFFIRMED
8 | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547487/ | 15 F.2d 899 (1926)
AMERICAN STATE BANK OF OMAHA, NEB.,
v.
MUELLER GRAIN CO.
No. 3433.
Circuit Court of Appeals, Seventh Circuit.
January 5, 1926.
*900 Theodore E. Rein, of Chicago, Ill., for plaintiff in error.
Walter H. Moses, of Chicago, Ill., for defendant in error.
Before ALSCHULER, EVANS, and PAGE, Circuit Judges.
PAGE, Circuit Judge.
From June to August 16, 1917, defendant in error, called plaintiff, at Peoria, sold grain on commission for one Richter, doing business as United States Commission Company, Omaha, Neb. Uniform order bills of lading were attached to drafts, drawn for an arbitrary amount, by Richter on plaintiff, in favor of plaintiff in error, called defendant, an Omaha *901 bank. Defendant gave credit to Richter for the drafts, and they were sent through the regular course of banking for collection and were paid by plaintiff at Peoria. Two such drafts were accompanied by bills of lading consigning grain to the order of A. L. Johnson, Peoria, "notify U. S. Commission Co." On each of the bills of lading was indorsed:
"A. L. Johnson."
"U. S. Commission Co., William R. Richter,"
"Pay to the order of any bank or banker, all prior endorsements guaranteed, July 18, 1917. American State Bank 27-61 Omaha 27-61 Neb. L. M. Swindler, Cashier."
"Notice. We hereby give notice to all parties concerned that this bank does not guarantee that this bill of lading is genuine and will not be responsible for the quantity, quality, condition, or delivery of the goods described therein. American State Bank, Omaha, Neb."
The first indorsement by the bank will be called the guaranty and the other the notice. Both indorsements were by rubber stamp. The guaranty was regularly used in the indorsement of checks, drafts, and notes, and the evidence shows that it appeared sometimes on bills of lading.
Plaintiff sought to recover on several grounds: (a) That the bills of lading were not genuine, but it contends that there was no evidence to support that claim; (b) that defendant guaranteed the genuineness of the indorsements on the bills of lading and that the indorsement, "A. L. Johnson," was a forgery; (c) that, because the signature of Johnson was a forgery, of which both parties were ignorant, the plaintiff should recover as for money paid under a mistake of fact.
Upon defendant's motion, at the close of plaintiff's case, for a directed verdict, the record shows the following:
"The Court: I presume that you want to argue this motion? (Argument.)
"The Court: Well, let us get the witness. Call him. Do you want the jury here?
"Mr. Bachrach: No.
"The Court: I think this is a case to be decided by the court; no matter how I decide it, it has got to go upstairs (meaning to the Circuit Court of Appeals).
"Mr. Rein: I think so.
"The Court: It need not be complicated by any instructions to the jury.
"Mr. Bachrach: That is agreeable to us.
"The Court: You can file your waiver of the jury later. (Whereupon the further proceedings were had before the court, the jury having been waived.) Thereupon the defendant, to maintain the issues on its part, introduced the following evidence, to wit."
The witness, thus called, testified only to the use of the guaranty stamp on the bills of lading. The plaintiff called a witness, whose testimony was rejected by the court, after which an adjournment was had. Upon the reconvening of court, the record shows the following:
"The Court: The whole thing resolves itself right into this: What did the rubber stamp mean? It is on the document. Two innocent persons have lost their money. Now, who must suffer? Who is the least innocent of the two? I think that the words, `Pay to any bank or banker,' might easily be construed to mean, `Deliver to any bank or banker.' The mere fact that no bank has indorsed it does not change the legal situation at all. It was presented to a bank in Chicago, presented by that bank to another bank in Peoria, and presented by that bank to Mueller. Mueller took it at its face value, with certain things on the bill of lading, printed in, stamped on. He had a right to consider the whole thing. I shall make a finding in this case for the plaintiff, with some misgivings, I tell you frankly.
"Mr. Rein: If the court please, may it be stipulated that the plaintiff and the defendant may submit propositions of law to be passed on by the court?
"The Court: We never have had them in the federal court. You may show that both sides offered them and the court refused to consider them.
"Mr. Rein: That is all right.
"The Court: The Circuit Court of Appeals has held that the federal courts do not have to subject themselves to examination at the hands of counsel. They do not follow the state procedure.
"Mr. Rein: I didn't know that.
"Mr. Bachrach: The amount of the claim, if the court please, with interest, is $6,490.46.
"The Court: That will be the amount of my finding, Mr. Clerk, with an exception on the part of the defense. (To which ruling of the court, the defendant, by its counsel, then and there duly excepted.)
"Mr. Rein: Yes; with motion for new trial.
"The Court: Yes; that is unnecessary. But go ahead. (Motion for new trial overruled; exception. To which ruling of the court the defendant, by its counsel, then and there duly excepted.)"
During the trial, the court made the following order: "The reporter will preserve *902 an exception to every ruling of the court, whether counsel ask for it or not."
At the close of plaintiff's case, the court suggested that the only question was one of law, and that, however it was decided, the defeated party would want to have it reviewed in this court. It is evident from the record that both parties intended to preserve that legal question for review. Yet, if plaintiff's contentions are true, the waiving of the jury and that which followed excluded every possibility of having that legal question reviewed by any court. Those matters present very strong equities in favor of the defeated party. In Liberty Oil Co. v. Condon Bank, 260 U. S. 235, 43 S. Ct. 118, 67 L. Ed. 232, the Supreme Court said:
"Under section 269 of the Judicial Code, as amended by the Act of February 26, 1919, c. 48, 40 Stat. 1181 [Comp. St. § 1246], appellate courts are enjoined to give judgment, after an examination of the record, without regard to technical errors, defects, or exceptions, which do not affect the substantial rights of the parties."
The 17 counts of the declaration in this case, by leaving out some of the exhibits, cover no less than 75 pages. Defendant pleaded the general issue, and set up the nature of its defenses by affidavit, and stated much immaterial matter and many conclusions. Nevertheless, plaintiff's claim, if it has one based on the guaranty, must be bottomed upon the proposition that plaintiff lost two cars of grain because of the forgery of the name Johnson upon the bills of lading, guaranteed by defendant to be genuine, and the proof could have been made under one paragraph of the consolidated common counts. When the plaintiff introduced in evidence the bills of lading, with the indorsements, and had shown payment of the drafts, its case was made out so far as it could be, except as to two matters, viz. the forgery of the Johnson name and the loss of the grain by reason thereof.
On the trial, much of the evidence was incompetent and immaterial, and in many instances prejudicial. A witness was asked:
"Q. Mr. Swindler, was the bank in good condition when you left it? A. Yes, sir."
Again:
"Q. Mr. Swindler, what was the course of business in July, 1917, of the American State Bank of Omaha in regard to putting these stamps, which I have just showed you, on the bills of lading which went through the American State Bank" (the stamps being the guaranty and the notice). A. Why, they seem to have been put there."
And, again:
"Q. Was that the general course of business? A. Yes; I think it was."
The witness Fred Mueller was asked about the nature of the business with Richter, and then:
"Q. State in a general way the nature of these transactions. You say that it was consigned on commission; state the nature of the transaction in each instance. A. Well, they shipped us corn, and made a draft on us, the draft to be presented with the bill of lading attached by Peoria banks at our office. We examine the draft and the bill of lading, see that it is properly indorsed, and we look back at the bills of lading, to see if they were indorsed by the bank of Omaha."
The witness Heyl testified about a visit to defendant's bank, in which he said:
"I told Mr. Shafer that it appeared from the facts that I had that there was no such person as A. L. Johnson, and that the name was a forgery, and that the instrument was spurious, and that he had lost by reason of a reliance upon the indorsement of the American State Bank of Omaha," etc.
A motion to strike out such parts of the witness' testimony, in which he told Shafer that the signature of Johnson was forged, etc., as being purely self-serving, was overruled. There were a number of inquiries as to whether plaintiff had received the grain called for in the bills of lading, all of which were permitted to be answered over objection, and then Mueller was asked:
"Q. What, if anything, was done by you for the Mueller Grain Company to obtain possession of the corn described in the bills of lading? A. Started tracer after those two cars, and finally wired the agent at the stations where they were supposed to be loaded, wired them to see if they ever left there, and he said never were loaded, and no record of them."
Whatever use was made of the guaranty stamp, it nevertheless appears beyond question that it was ordered for the purpose of indorsing drafts and bills of exchange, and not for the purpose of indorsing bills of lading. There was a controversy between Steinert and the president of the bank as to the wording of the guaranty. The controversy had nothing to do with the use of the guaranty stamp upon bills of lading. The following was admitted in evidence:
"Q. What did Mr. Swindler say to you when you said this ought not to be in the stamp? What were his exact words? I think you ought to remember them, don't you? You repeated them to me once. A. *903 He said he was going to order the stamp that way, and he wanted it in there.
"Q. Didn't he say, `God damn it, Mr. Steinert, I ordered it that way, and it is going to stay that way?'
"Mr. Rein: I don't see what that has got to do with this case at all.
"Mr. Beilenson: I want to show that Swindler had his attention especially called to this, your honor.
"The Court: Oh, I presume that the profanity is put in for emphasis. Profanity has been described, and well described, as the avenue of ignorance toward strong expression. Now, if you want it for emphasis, you may put it in.
"Mr. Beilenson: I want to know what Mr. Swindler said. Isn't that what he said?
"Mr. Rein: I object to that as not being touched at all on direct examination, not being proper cross-examination.
"The Court: He may answer.
"A. I believe he did."
There is much more in the record of like import, that does not tend in any way to support any issue in the case.
There was a motion for a directed verdict at the close of plaintiff's evidence. That, if not waived by subsequently calling the witness Steinert for the defendant, is available here. We are of opinion that it was not waived because:
(a) The evidence related solely to the purpose and use of the guaranty stamp. In the absence of proof to show that the plaintiff had notice or knowledge of such purpose or use, and there is none in the record, plaintiff was entitled to rely upon the indorsements for what they were worth as they appeared upon the bills of lading, and defendant's obligation thereunder was a question of law. Steinert's evidence was not only immaterial, but it did not change the situation as shown at the close of plaintiff's case.
(b) Defendant at all times stoutly contended that there was no legal liability. Though the record shows that Steinert was called by the defendant, it also shows that he had earlier testified for the plaintiff and was really a recalled witness. It also shows that, during or at the close of the argument upon the motion to direct a verdict, he was put upon the stand by direction of the court in a manner that indicates, not that the court was overruling the motion for a directed verdict, but rather that the decision thereon was postponed until after the court had heard that witness. After the Steinert testimony, plaintiff called a witness who was not permitted to testify. The parties had stipulated the amount of the damages, if the finding was for the plaintiff, and there was only a question of law, upon the uncontroverted facts, at the time the court suggested, "I think this is a case to be decided by the court," and that suggestion seems to have induced the waiving of a jury. Unquestionably the court and both parties intended that the legal question should be preserved for hearing in this court: There was no ruling upon that motion, unless it was in the final decision of the court, "I shall make a finding in this case for the plaintiff."
In Grand Trunk Ry. Co. v. Cummings, 106 U. S. 700, 1 S. Ct. 493, 27 L. Ed. 266, speaking of a motion made by defendant at the close of plaintiff's testimony, the court said:
"If he goes on with his defense, and puts in testimony of his own, and the jury, under proper instructions, finds against him on the whole evidence, the judgment cannot be reversed, in the absence of the defendant's testimony, on account of the original refusal, even though it would not have been wrong to give the instruction at the time it was asked." (Italics ours.)
In Lydia Cotton Mills v. Prairie Cotton Co. (4th C. C. A.) 156 F. 225, the court said:
"The reason for the principle laid down in the case last cited" (Grand Trunk) "is readily apparent: That although the testimony offered by plaintiff may not, in itself, have been sufficient to warrant a verdict, yet the court was entitled to see what effect the testimony of defendant, subsequently offered, may have had upon the issues involved, for it frequently occurs in the trial of causes that the testimony of the defendant, upon cross-examination of witnesses or disclosures otherwise made, has the tendency to strengthen rather than weaken plaintiff's case. It was therefore important that the defendant's testimony should be set out in the record, that the court might see and determine, upon all of the testimony, as to whether or not the case should have gone to the jury."
The court held that the defendant might have assigned for error the overruling of a motion to dismiss, made at the close of the plaintiff's evidence, under the circumstances there shown. In Lancaster v. Foster (5th C. C. A.) 260 F. 5, the court held that an exception to the denial of the motion for a directed verdict, made at the close of plaintiff's case, is not waived by defendant by subsequent introduction of evidence, where such evidence is all in the record and contains nothing *904 which strengthens plaintiff's case. Petition for certiorari was denied in that case.
It is urged that defendant was the negotiator of the bills of lading and that there was an implied warranty by it within the meaning of section 34 of the Bills of Lading Act (Comp. St. § 8604qq). We are of opinion that (a) defendant was not a negotiator, within the meaning of that section; (b) if it was, by the notice indorsed upon the bills of lading, the bank expressed its "contrary intention," within the meaning of that section, and did not by negotiating the bills warrant anything; (c) that defendant was, at most, a pledgee of the bills of lading within the meaning of section 36, and for that reason was not a warrantor under the statute. 39 Stat. at Large, pp. 543, 544 (Comp. St. § 8604rr).
To sustain the charge of forgery of the Johnson name, plaintiff relies upon the evidence that the same hand that wrote the Richter signature wrote the name Johnson on the bills of lading, and cites the following cases: Schroeder v. Harvey, 75 Ill. 638; Wizard Oil Co. v. U. S. Express Co., 265 Ill. 156, 106 N. E. 623; Foster v. Graf, 287 Ill. 559, 122 N.E. 845 to support their contention that that evidence was sufficient to show the forgery. Every charge of forgery of a signature and every definition of such a forgery must necessarily contain the elements (a) that the signature was not made by the hand of the person whose signature it purports to be; (b) that it was made by another wrongfully. Unless there is evidence in the record that the whole of the bills of lading, including the Johnson indorsement, are forgeries, the record is wholly without evidence that the name Johnson was forged. There is some evidence that there was no such person as Johnson, and that Richter used the name for his own purposes, which, without more, he might legally do, the same as he used the name United States Commission Company. Plaintiff contends that there is no evidence of forgery of the bills of lading.
Upon the question as to what caused the loss of the grain to the plaintiff, witness Heyl testified that it appeared from the evidence that there was no such person as A. L. Johnson, that that name was a forgery, and that the instrument, the bill of lading, was spurious. So far as the record shows, the only explanation of why plaintiff did not get the grain is to be found in the testimony of Heyl and in the following testimony of Mueller, plaintiff's secretary and treasurer, viz.:
"We started tracer after those two cars, and finally wired the agent at the stations where they were supposed to be loaded, and he said never were loaded and no record of them."
This evidence does not show that the grain was lost to plaintiff because of any forged indorsement of the Johnson name, but, on the contrary, tends to show that the bills of lading themselves were spurious.
We are of opinion that the guaranty, which called for a payment, appearing upon the back of an instrument that called for no payment, but for a delivery of property, was sufficient to put plaintiff upon inquiry as to why such indorsement appeared upon such an instrument.
The record shows that defendant put, not only the guaranty, but also the notice, upon the bills of lading, and, if there was nothing in the guaranty to put plaintiff upon inquiry, yet the two indorsements must be read together. The guaranty not only did not on its face guarantee the genuineness of the bills of lading, but the notice specifically said, "This bank does not guarantee that this bill of lading is genuine." The notice also excluded any idea of responsibility for the quantity, quality, condition, or delivery of the grain, so that, if there was any guaranty at all, it was merely that the Johnson signature was genuine, and defendant could only be held liable for any loss occasioned by its forgery. Johnson, if he existed and his name had been forged, would have been a very material witness for the plaintiff. Plaintiff charged that his name was forged, yet it did not call him as a witness, nor in any way account for his absence, except that Heyl said:
"I told Mr. Shafer that it appeared from the evidence that I had that there was no such person as Johnson."
If, then, the bills of lading were spurious, and Johnson was a fictitious person, it conclusively follows that there was no loss of the grain because the signature of Johnson was not genuine.
Plaintiff seeks to recover on the theory that, as both it and the defendant were ignorant of the forgery of the Johnson name, the money was paid by it under a mistake of fact. In Bartlett v. First Nat. Bank, 247 Ill. 490, 498, 93 N. E. 337, 340, cited by plaintiff, is laid down the rule:
"When one of two innocent parties must suffer loss by reason of the wrongful acts of a third party, the rule is almost universal that the party who has made it possible, by reason of his negligence, for the third party to commit the wrong, must stand the loss."
*905 No fault can be found with the rule laid down in that case and numerous other cases upon that point cited by plaintiff, among which is American Hominy Co. v. Milligan Nat. Bank (D. C.) 273 F. 550, 558. Those cases are not in point here, because they arose upon checks or bills of exchange, and negligence of defendant in each case was shown. This case arises upon bills of lading, no negligence is shown, and, if plaintiff waives the alleged guaranty, a wholly different question is presented.
Plaintiff seeks to sustain a recovery on the theory laid down in Leather Mfrs. Bank v. Merchants' Bank, 128 U. S. 26, 9 S. Ct. 3, 32 L. Ed. 342. The only question there under discussion was as to when the statute of limitations commenced to run, but that case pertained to a bill of exchange, and a bill of lading was in no way involved. The theory upon which plaintiff there was entitled to recover is that one who presents a forged paper, and procures payments thereof, in law represents that the paper is genuine, and, because it is not genuine, there is never, at any stage of the transaction, any consideration for the payment. In that case the forgery was proven. In the instant case the drafts that were paid by plaintiff made no reference to the bills of lading.
The Supreme Court, in Hoffman v. Bank of Milwaukee, 12 Wall. 181, 189 (20 L. Ed. 366), said:
"Money paid under a mistake of facts, it is said, may be recovered back as having been paid without consideration."
Then the court said that which is directly applicable here:
"The decisive answer to that suggestion, as applied to the case before the court, is that money paid, as in this case, by the acceptor of a bill of exchange, to the payee of the same, or to a subsequent indorsee, in discharge of his legal obligation as such, is not a payment by mistake, nor without consideration, unless it be shown that the instrument was fraudulent in its inception, or that the consideration was illegal, or that the facts and circumstances which impeach the transaction, as between the acceptor and the drawer, were known to the payee or subsequent indorsee at the time he became the holder of the instrument."
There is no contention here that the bill of exchange was not legal. The court further said:
"Such an instrument, as between the payee and the acceptor, imports a sufficient consideration, and in a suit by the former against the latter the defense of prior equities, as between the acceptor and the drawer, is not open unless it be shown that the payee, at the time he became the holder of the instrument, had knowledge of those facts and circumstances."
There is no claim that the defendant here had any such knowledge. There was in that case, as here, the claim that plaintiff had paid the bills of exchange upon the faith and security of the bills of lading. The court said:
"It is not perceived that the concession, if made, would benefit the plaintiffs, as the bills of exchange are in the usual form, and contain no reference whatever to the bills of lading, and it is not pretended that the defendants had any knowledge or intimation that the bills of lading were not genuine, nor is it pretended that they made any representation upon the subject to induce the plaintiffs to contract any such liability. * * * Beyond doubt, the bills of lading gave some credit to the bills of exchange beyond what was created by the pecuniary standing of the parties to the same; but it is clear that they are not a part of those instruments, nor are they referred to either in the body of the bills or in the acceptance, and they cannot be regarded in any more favorable light for the plaintiffs than as collateral security accompanying the bills of exchange."
That case was discussed at considerable length, and approved in Goetz v. Bank of Kansas City, 119 U. S. 551, 7 S. Ct. 318, 30 L. Ed. 515, and both cases are cited by plaintiff. See, also, Tapee v. Varley-Wolter Co., 184 Mo. App. 470, 171 S. W. 19, 22. The Court of Appeals of New York, in Spring v. Hanover Nat. Bank, 209 N. Y. 224, 103 N. E. 156, discussed the question of the right of recovery by one who had paid a draft accompanied by a forged bill of lading, and affirmed a directed verdict for defendant. The Hoffman and Goetz Cases are reviewed, and extensive quotations made from First Nat. Bank v. Burkham, 32 Mich. 328, where the opinion, rendered by Judge Cooley, goes at much length into a consideration of the question of the right of recovery of money by one who has paid a bill of exchange, accompanied by a forged bill of lading, and we are of opinion that that case is controlling here.
The judgment is reversed, and cause remanded, for proceedings in harmony herewith. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547512/ | 353 B.R. 428 (2006)
In re Joanna E. POSTLETHWAIT, Debtor.
No. 06-23027-TPA.
United States Bankruptcy Court, W.D. Pennsylvania.
September 12, 2006.
Robert R. Druzisky, Beaver, PA, for Debtor.
MEMORANDUM ORDER DENYING 11 U.S.C. § 109(h)(3)(A) WAIVER
THOMAS P. AGRESTI, Bankruptcy Judge.
The Debtor seeks approval of her Amended Certification of Exigent Circumstances under 11 U.S.C. § 109(h)(3)(A). She argues that, in light of the pending creditor sale of her automobile *429 six days following her filing, "exigent circumstances" existed and that her two, unsuccessful telephonic attempts to obtain the required 11 U.S.C. § 109(h) prepetition, credit counseling briefing ("credit briefing") minutes before her bankruptcy filing qualified her for a Section 109(h)(3)(A) "waiver" of the same. The Chapter 13 Trustee objected to approval of the Amended Certification seeking dismissal of the case due to the Debtor's lack of eligibility for failure to comply with 11 U.S.C. § 109(h).
Section 109(h)(3)(A) creates a limited exception to the prepetition counseling requirement for debtors. In order to qualify, at the time of filing a debtor must submit to the court a certification that: (1) describes "exigent circumstances" meriting a waiver of the requirement; (2) states that the debtor requested prepetition credit counseling services from an approved credit counseling agency but the debtor was "unable" to obtain those services during the "5-day period" beginning on the date which the debtor made the request; and, (3) is otherwise satisfactory to the court. See 11 U.S.C. §§ 109(h)(3)(A)(I), (ii) and (iii). The three Section 109(h)(3)(A) requirements for approval of such a waiver are written in the conjunctive.
Here, the Amended Certification recites that the Debtor made the first attempt at obtaining her required credit briefing on June 30, 2006 at 3:15 P.M. Since no counselors were available at that time, and the Debtor claims she had to file her bankruptcy before the July 6, 2006 creditor's sale of her vehicle, she made a second attempt at securing her briefing by contacting another, approved agency by phone at 3:30 P.M. that same day. When that second attempt also proved unsuccessful, she filed her petition some forty minutes later at 4:09 P.M. At the time of the September 6, 2006 hearing on this matter, the Court accepted, for purposes of argument only, that because of the scheduling issues described by Debtor's Counsel and the impending July 4th holiday, despite filing of the bankruptcy more than five days beforehand, the July 6th creditor sale was an "exigent circumstance" under Section 109(h)(3)(A)(I).
Pursuant to Section 109(h)(3)(A)(ii), a debtor's certificate of exigent circumstances must state that the debtor requested credit counseling services, but was "unable" to obtain those services. The statute does not define "unable." While the Debtor made two, prepetition requests, a question arises as to whether she was actually "unable" to timely obtain the credit briefing since her attempts were made only 15 minutes apart from each other on the same day as the filing of the. petition, more than five days in advance of the "exigent" event. American Heritage Dictionary of the English Language, (4th ed.2000) defines "unable" as "[L]acking the necessary power, authority, or means; not able; incapable;. . . ." Here, there is no claim or demonstration made in the Amended Certification that the Debtor was "unable" to timely obtain counseling services in advance of the creditor sale. Granted, she made two unsuccessful attempts in the span of 15 minutes. But no additional facts as to the Debtor's "inability" in this regard were identified in the Amended Certification or adduced at the time of hearing. Section 109(h)(3)(A)(ii) not only requires that a debtor "request" counseling services but also demonstrate that she was "unable" to timely receive them. The Amended Certification under review here failed to support any finding that the Debtor was "unable" to receive the required briefing. Since the "exigent" event was not to occur for at least another five days, no acceptable explanation was *430 given as to why the petition filing was not deferred for another 24 or 48 hours to allow additional opportunities to contact other providers.
Section 109(h)(1) specifically sanctions the practice of obtaining counseling briefings via the internet or telephone ("including a briefing conducted by telephone or on the Internet"); see In re Booth, 2005 WL 3434776, at *1 (Bankr.N.D.Fla. October 19, 2005); In re Talib, 335 B.R. 417 (Bankr.W.D.Mo.2005); 5 Collier's on Bankruptcy, ¶ 109.09[3] (Lawrence P. King ed., 2006) (". . . if services are available over the Internet and by telephone, there will rarely be a situation in which a debtor cannot obtain the necessary briefing within hours of seeking it"). At the hearing in this case, Debtor's Counsel acknowledged that the website of the U.S. Trustee for the Western District of Pennsylvania identifies numerous, approved credit counseling agencies available in this District offering the required credit briefing. A review of the website reveals that of those 19 agencies listed, 15 can be accessed via the internet. All 19 can be telephonically accessed.
Regardless of whether the Debtor's two attempts at requesting credit briefing meet the minimum threshold required by Section 109(h)(3)(A)(ii), it is this Court's belief that, under the specific facts of this case, the Debtor's efforts directed to obtaining her credit briefing were deficient and inadequate. To allow the Debtor to obtain a Section 109(h)(3)(A) waiver under these circumstances would reward "token effort." See In re DiPinto, 336 B.R. 693, 699 (Bankr.E.D.Pa.2006) (debtor's request for a waiver of the prepetition credit counseling requirements denied when he failed to timely obtain his credit briefing after contacting only one credit counseling agency despite availability of 13 other, approved credit agencies, all of which could be accessed either telephonically or through the Internet).
Here, the Debtor's minimal attempts at obtaining literal compliance with Section 109(h)(3)(A)(ii) are unsatisfactory. As such, the Debtor has failed to comply with the third prong of the Section 109(h)(3)(A) waiver requirement. In reaching this conclusion it is important to note that this is not a situation where a court decides whether "Is one not enough? Is three too many?" Matters concerning fulfillment of the requirements for a Section 109(h)(3)(A) waiver must be reviewed and analyzed on a case-by-case basis. In re Tomco, 339 B.R. 145 (Bankr.W.D.Pa. 2006).
It is reasonable to expect a good faith attempt to comply with the requirements of the statute. The facts of this case do not support such a finding. Under the right circumstances, two unsuccessful attempts at obtaining prepetition counseling may be all that is necessary to merit a waiver of the prepetition counseling requirement. But here, where two unsuccessful attempts are made in the span of a mere 15 minutes, and within an hour thereafter, the petition is filed more than five days before the "imminent," triggering, "exigent" event, to declare the Debtor has fulfilled her statutory obligation and that she merits a waiver would reward token and nominal effort which, in this Court's view, is unsatisfactory.
In light of the array of alternative, easily accessible sources available to her, this Court is not convinced that the Debtor's minimal, token attempts at securing her credit briefing as set forth in the Amended Certification sufficiently demonstrated that the Debtor was "unable" to timely obtain the credit counseling briefing required by 11 U.S.C. § 109(h)(3)(a)(ii). Even if her actions rose to that level, for the reasons stated, the Amended Certification is not *431 satisfactory to the Court pursuant to 11 U.S.C. § 109(h)(3)(A)(iii). Therefore,
It is hereby ORDERED, ADJUDGED and DECREED that the Trustee's Objection is SUSTAINED and the Debtor's request for approval of her Amended Certification of Exigent Circumstances under 11 U.S.C. § 109(h)(3)(A) is DENIED. Because the Debtor is ineligible to be a debtor due to her failure to comply with the requirements of 11 U.S.C. § 109(h), the case is DISMISSED without prejudice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1028431/ | 560 F.3d 246 (2009)
UNITED STATES of America, Plaintiff-Appellee,
v.
Derrick Jomell PERRY, a/k/a Mel, Defendant-Appellant.
No. 07-4727.
United States Court of Appeals, Fourth Circuit.
Argued: December 5, 2008.
Decided: March 23, 2009.
*249 ARGUED: Rudolph Alexander Ashton, III, McCotter, Ashton & Smith, P.A., New Bern, North Carolina, for Appellant. Banumathi Rangarajan, Office of the United States Attorney, Raleigh, North Carolina, for Appellee. ON BRIEF: George E.B. Holding, United States Attorney, Anne M. Hayes, Assistant United States Attorney, Office of the United States Attorney, Raleigh, North Carolina, for Appellee.
Before TRAXLER and AGEE, Circuit Judges, and Rebecca Beach SMITH, United States District Judge for the Eastern District of Virginia, sitting by designation.
Affirmed in part; vacated and remanded in part by published opinion. Judge TRAXLER wrote the opinion, in which Judge AGEE and Judge SMITH joined.
OPINION
TRAXLER, Circuit Judge:
Derrick Jomell Perry appeals his convictions and sentences for distribution of crack cocaine, possession with intent to distribute marijuana, and possession of a firearm during and in relation to a drug trafficking crime. We affirm Perry's convictions, but vacate the sentence and remand for resentencing.
I.
In May 2004, the Franklin County Sheriff's Department, working in cooperation with other law enforcement agencies, obtained a search warrant for Perry's Louisburg, North Carolina house and surrounding area, after receiving information from a reliable informant that the informant had personally observed cocaine and crack cocaine being prepared and sold there. Immediately prior to executing the warrant, two Franklin County officers conducted visual surveillance of Perry's house, a three-bedroom, double-wide mobile home. Over the course of approximately three hours, the officers observed ten cars being driven to the back of the house. Each car stayed no more than ten minutes. The officers observed Perry walking out of the house, into the woods, and back to the house. This activity was considered to be consistent with drug distribution.
During the ensuing search of Perry's house, officers found a small amount of marijuana in a jar in the kitchen and a brick of marijuana weighing approximately 373.5 grams, an amount consistent with distribution, in the kitchen island. Drug *250 paraphernalia, including a set of digital scales, a cutting agent, and a crystal scanner, were also found in the kitchen. In the master bedroom, officers found two pipes containing marijuana residue on the night stand and a set of digital scales on the dresser. A loaded SKS assault rifle and.25 caliber semiautomatic pistol were found in the master bedroom closet. A .38 caliber revolver with ammunition was also found in the master bedroom. Officers also discovered that Perry's house was equipped with a television surveillance system. Cameras on the front and back corners of the house allowed Perry to see vehicles as they entered his driveway and traveled to the back of the house. In the woods next to the house, officers found a bucket containing 73.9 grams of powder cocaine, also an amount consistent with distribution, and an additional quantity of marijuana.
In May and June of 2005, SBI Agent Timothy Gay and Franklin County law enforcement officers arranged for a different informant to make three purchases of crack cocaine from Perry as follows: 26.1 grams on May 5, 2005; 5.8 grams on May 18, 2005, and 52.9 grams on June 9, 2005. At trial, the informant testified that he had purchased crack, powder cocaine, and marijuana from Perry over the course of four years, both at Perry's house and at his place of business.
Perry was subsequently indicted on two counts of distribution of more than five grams of crack cocaine, in violation of 21 U.S.C.A. § 841(a)(1) (West 1999), arising from the controlled buys on May 5, 2005 (Count 1) and May 18, 2005 (Count 2), and one count of distribution of more than 50 grams of crack cocaine, in violation of 21 U.S.C. § 841(a)(1), arising from the controlled buy on June 9, 2005 (Count 3). Three additional counts arose out of the search of Perry's house in May 2004. Perry was indicted on one count (Count 4) of possession with intent to distribute a quantity of cocaine in violation of 21 U.S.C. § 841(a)(1), one count (Count 5) of possession with intent to distribute a quantity of marijuana, in violation of 21 U.S.C. § 841(a)(1), and one count (Count 6) of possessing firearms in furtherance of a drug trafficking crime, in violation of 18 U.S.C. § 924(c)(1)(A)(i) (West Supp.2008).
Prior to trial, Perry moved to suppress evidence of the marijuana and firearms found in his house during the search, as well as incriminating statements he made to officers that day. The district court denied the motion. At the conclusion of the government's case, Perry moved for a judgment of acquittal with respect to Count 6 on the ground that there was insufficient evidence that he possessed the firearms in furtherance of any drug trafficking crime. The district court denied this motion as well.
The jury found Perry guilty of the controlled buy on May 18, 2005 (Count 2), but acquitted Perry of the remaining two controlled buys (Counts 1 and 3). The jury also convicted Perry of possession with intent to distribute the marijuana found in May 2004 (Count 5), and of possession of a firearm in furtherance of a drug trafficking crime (Count 6). However, the jury acquitted Perry of possession with intent to distribute the cocaine found in May 2004 (Count 4). Perry was sentenced to concurrent 170-month sentences on Counts 2 and 5, a consecutive 60-month sentence on Count 6, and a five-year term of supervised release.
II.
On appeal, Perry first challenges the district court's denial of his motion to suppress the marijuana and firearms found during the search of his house, as well as the incriminating statements he made that *251 same day. On appeal from the district court's denial of such a motion, we review the district court's factual findings for clear error and its legal determinations de novo. See United States v. Kimbrough, 477 F.3d 144, 147 (4th Cir.2007); United States v. Stevenson, 396 F.3d 538, 541 (4th Cir.2005).
A.
We begin with Perry's challenge to the district court's refusal to suppress the marijuana and firearms found during the search of his house, in which Perry contends that the search warrant failed to describe the items to be seized with sufficient particularity and that there was insufficient probable cause to search for and seize those items
The Fourth Amendment provides that "no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized." U.S. Const. amend. IV. The requirement that the warrant describe with particularity the items to be seized ensures that persons are not subjected to "a general, exploratory rummaging in [their personal] belongings." Coolidge v. New Hampshire, 403 U.S. 443, 467, 91 S.Ct. 2022, 29 L.Ed.2d 564 (1971). "The magistrate issuing the search warrant must make a practical, common-sense decision whether, given all the circumstances set forth in the affidavit there is a fair probability that contraband or evidence of a crime will be found in a particular place." Owens ex rel. Owens v. Lott, 372 F.3d 267, 273 (4th Cir.2004) (internal quotation marks and ellipsis omitted).
In the instant case, a reliable, confidential informant personally observed crack cocaine and powder cocaine being prepared and sold at Perry's house. In addition, Perry had an established reputation as a drug dealer in Franklin County. Based upon this information, Detective William Mitchell of the Franklin County Sheriff's Office requested a search warrant, proposing as items to be seized, inter alia, "US coins and currency, proceeds from the sale and delivery of controlled substances, [c]rack [c]ocaine and other controlled substances, scales and measuring devices, ... drug paraphernalia, ... firearms and weapons, ... and fruits of the crimes listed in this application." J.A. 45 (emphasis added). The application listed as crimes Perry's possession with intent to sell and deliver cocaine and the maintenance of a dwelling to keep, sell, and store controlled substances. The detective also noted that, based on his training and experience, "drug traffickers typically possess numerous firearms and weapons for protection from other dealers, robbery from users, and from arrest for their criminal activities." J.A. 45. The warrant, as issued, authorized the seizure as requested, including "[c]rack [c]ocaine and other controlled substances," as well as "firearms and weapons." J.A. 45.
Like the district court, we conclude that the warrant was sufficiently particular to cover the marijuana, a "controlled substance[ ]," as well as the "firearms and weapons" found in the house. The seizure of the drugs and firearms was also supported by probable cause. Although the informant did not personally observe marijuana or firearms in the house, the informant's observation of cocaine being prepared and sold at the house, as well as the well-known and attested-to link between drug distribution and firearms, gave the officers probable cause to search for such controlled substances and firearms. See United States v. Ward, 171 F.3d 188, 195 (4th Cir.1999) ("Guns are tools of the drug trade and are commonly recognized articles *252 of narcotics paraphernalia."). In addition, the marijuana and firearms were found in the place where the cocaine and crack had been seen by the informant and, therefore, in a place where the officers unquestionably had probable cause to search. Accordingly, we affirm the district court's denial of Perry's motion to suppress the marijuana and firearms found during the search of his house.
B.
Perry also challenges the district court's denial of his motion to suppress several incriminating statements he made to the Franklin County officers on the day of the search.
During the search, Detective Mitchell asked Louisburg city police officers to go to Perry's place of business and ask Perry to return to the house while it was being searched by the Franklin County officers. Chief Lassiter and Captain Abbott of the Louisburg Police Department traveled to Perry's place of business near the end of the workday in plain clothes and an unmarked vehicle. Chief Lassiter went inside and asked to speak to Perry. Perry knew Chief Lassiter and asked him if he would wait for Perry to close up the business. Chief Lassiter agreed and the officers waited outside for Perry to finish his work. When Perry came outside, Captain Abbott told Perry that Detective Mitchell had "requested that [he] come out to the house." J.A. 90. Perry agreed and got into the front passenger seat of the unmarked vehicle. Perry was not handcuffed or otherwise restrained in any way. The three men then drove to the house.
After they arrived, Perry remained unrestrained in the front seat of the vehicle with the Louisburg police officers. However, when the searching officers found the cocaine in the woods, the Franklin County officers took Perry into custody.[1] At this point, Perry was handcuffed and placed in the back of a Franklin County patrol vehicle. Perry was visibly upset and crying, and spontaneously asked Detective Strickland, "[H]ow come you didn't warn me? I would have stopped." J.A. 271.[2]
Perry was then transported to the Franklin County Sheriff's Department where he was advised of his Miranda rights and interviewed by two detectives. Perry executed a written waiver of his rights, agreed to speak to the detectives, and prepared a handwritten statement. Perry admitted to selling marijuana, but told the detectives he had only done so occasionally to supplement his family's income and pay bills for his children. He also provided details about his drug supplier and deliveryman, and he admitted that the drugs found at his house were purchased from his supplier. In his written statement, Perry again admitted selling drugs, including a "small amount of powder." J.A. 48.
At the suppression hearing, Perry testified that the Louisburg police officers arrived at his place of business and instructed him to get in the front passenger seat. He testified that he thought they were just going to talk, but the officers drove off instead. Perry testified that when he asked where they were going, he was told they had been instructed to bring Perry to *253 the house. Perry testified that he felt like he was in custody at that point. He also testified that he felt threatened when, after their arrival at the house, he asked to go to the bathroom and a Franklin County officer participating in the search outside the vehicle made a remark about hunting. In addition to his own testimony, Perry relies upon an incident report of the search prepared by Detective Mitchell, which stated that "[t]he Louisburg Police took the target into custody and transported him back to his residence." J.A. 112 (internal quotation marks omitted). However, the report also stated that Perry was not arrested by the Franklin County officer until after the cocaine was found.
A "seizure" for purposes of the Fourth Amendment occurs when, under the totality of the circumstances, a reasonable person in the suspect's position "would not feel free to leave or otherwise terminate the encounter." United States v. Weaver, 282 F.3d 302, 309 (4th Cir. 2002).
Circumstances where the citizen would feel free to go, but stays and has a dialogue with the officer, are considered consensual, and therefore do not implicate the Fourth Amendment. While most citizens will respond to a police request, the fact that people do so, and do so without being told they are free not to respond, hardly eliminates the consensual nature of the response. In applying the totality of the circumstances test, courts look to numerous factors including the time, place and purpose of the encounter, the words used by the officer, the officer's tone of voice and general demeanor, the officer's statements to others present during the encounter, the threatening presence of several officers, the potential display of a weapon by an officer, and the physical touching by the police of the citizen.
Id. at 309-10 (internal quotation marks and citation omitted).
At the suppression hearing, Perry acknowledged that the Louisburg officers asked to speak to him and waited outside for him to complete his work. He also acknowledged that the officers were in plain clothes and in an unmarked vehicle, and that they never displayed weapons, handcuffed him, or otherwise restrained him. He also admits that he voluntarily got into the vehicle with the officers. However, he asserts that he was seized without a warrant and without probable cause when the officers drove away from his place of business and to his house and that this illegal seizure continued while he waited in the vehicle during the search. This assertedly illegal seizure, Perry contends, tainted the statement he allegedly made to Officer Strickland at the house after he was taken into custody by the Franklin County officers, as well as the confessions he made to the detectives after he was advised of his Miranda rights.
At the conclusion of the suppression hearing, the district court found that the encounter between the Louisburg officers and Perry was "something along the lines... of an invitation to come outside to talk with the officers [and] that [Perry] got into the car at the suggestion or request of the police officers." J.A. 166. The district court also found "nothing that suggests [Perry] was held against his will in the car, and ... certainly nothing on the record to suggest that he was the subject of any questioning" prior to his being given his Miranda warnings. J.A. 167. Accordingly, the district court denied the motion to suppress the spontaneous utterance as well as the post-Miranda confessions.
We cannot say that the district court's findings are clearly erroneous or that its denial of Perry's motion to suppress was erroneous as a matter of law. *254 The district court found that Perry was not seized at his place of business or otherwise prior to the execution of the search warrant. The Louisburg officers were not in uniform and they were traveling in an unmarked vehicle. They waited outside for Perry to close up his business, asked him to accompany them to the house, and never displayed a weapon or otherwise restrained him in any fashion. After Perry acceded to the officers' request and traveled to the house, he continued to remain voluntarily in the vehicle unrestrained. Although Perry asserts that he felt threatened by a Franklin County officer when he asked to go to the restroom, there is no evidence that he was denied this request by the Louisburg officers or the Franklin County officer. It is also clear, and indeed undisputed, that Perry was never subjected to any pre-arrest interrogation by either the Louisburg officers or the Franklin County officers. Perry's first incriminating statement was made spontaneously to Detective Strickland after the cocaine was found by the Franklin County officers and after he was taken into custody and handcuffed by them. The remainder of the incriminating statements occurred after he was arrested and after he was given and waived his Miranda rights. Accordingly, we affirm the district court's denial of Perry's motion to suppress his statements.
III.
A.
Perry next contends that the district court erred in denying his motion for acquittal on Count 6, the § 924(c) firearm count, because there was insufficient evidence that the firearms found in the house were possessed in furtherance of a drug trafficking crime. We disagree.
The indictment charged that Perry "knowingly possessed firearms, that is, an SKS 7.62mm rifle, a .38 caliber revolver, and a Raven Arms .25 caliber pistol, in furtherance of a drug-trafficking crime for which he may be prosecuted in a court of the United States, to wit, possession with the intent to distribute cocaine and marijuana." J.A. 18-19. In order to prove the § 924(c) violation, the government was required "to present evidence indicating that the possession of a firearm furthered, advanced, or helped forward a drug trafficking crime. However, whether the firearm served such a purpose is ultimately a factual question." See United States v. Lomax, 293 F.3d 701, 705 (4th Cir.2002). Factors that the jury may consider include: "the type of drug activity that is being conducted, accessibility of the firearm, the type of weapon, whether the weapon is stolen, the status of the possession (legitimate or illegal), whether the gun is loaded, proximity to drugs or drug profits, and the time and circumstances under which the gun is found." Id. (internal quotation marks omitted). We must affirm the jury's verdict against a sufficiency challenge "if there is substantial evidence, taking the view most favorable to the Government, to support [it]." United States v. Moye, 454 F.3d 390, 394 (4th Cir.2006) (en banc) (quoting Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942)).
We conclude that there was substantial evidence to support the jury's determination that Perry possessed a firearm to further, advance, or help forward his drug trafficking activities. The officers who conducted surveillance of Perry's house on the day of the search observed at least ten cars come to the house, travel to the back of the house, and stay no more than ten minutes. The house was equipped with a television surveillance system *255 that allowed Perry to observe such traffic from inside the house. The house itself was a relatively small, double-wide trailer with three bedrooms.
The quantity of the marijuana and drug paraphernalia found in the kitchen was consistent with drug trafficking, as was the drug paraphernalia and firearms found in the master bedroom. At least one of the firearms in the bedroom was loaded and in close proximity to drug paraphernalia, and the firearms were easily accessible in the event needed, particularly given the fact that the outside perimeter of the house was under video surveillance from the inside of the house. And, of course, both the firearms and the surveillance system are highly indicative of a drug dealer's attempts to protect his business dealings. Given the testimony and other evidence presented at trial, we conclude that a rational trier of fact could have found the essential elements of the § 924(c) offense beyond a reasonable doubt.
B.
Perry next contends that the § 924(c) count was constructively amended by the jury's verdict, rendering his conviction invalid under the Fifth Amendment.
The Fifth Amendment provides that "[n]o person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury...." U.S. Const. Amend. V. After the indictment is "returned[,] its charges may not be broadened through amendment except by the grand jury itself." Stirone v. United States, 361 U.S. 212, 216, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960). Thus, the "court cannot permit a defendant to be tried on charges that are not made in the indictment against him." Id. at 217, 80 S.Ct. 270. "A constructive amendment to an indictment occurs when either the government (usually during its presentation of evidence and/or its argument), the court (usually through its instructions to the jury), or both, broadens the possible bases for conviction beyond those presented by the grand jury." United States v. Floresca, 38 F.3d 706, 710 (4th Cir.1994) (en banc). Constructive amendments of an indictment are regarded "as fatal variances because `the indictment is altered to change the elements of the offense charged, such that the defendant is actually convicted of a crime other than that charged in the indictment.'" United States v. Foster, 507 F.3d 233, 242 (4th Cir.2007) (quoting United States v. Randall, 171 F.3d 195, 203 (4th Cir.1999)).
Here, Perry was charged with having "knowingly possessed [the three] firearms in furtherance of a drug-trafficking crime ..., to wit, possession with intent to distribute a quantity of cocaine and marijuana." J.A. 18-19 (emphasis added). At trial, however, the jury was instructed that it could convict if it found (1) "that the defendant committed a drug-trafficking offense charged in Count 4 [cocaine trafficking] or Count 5 [marijuana trafficking] of the indictment;" (2) that the defendant knowingly possessed one of the three firearms listed in the indictment; and (3) "that the defendant did so in furtherance of a drug-trafficking crime charged in Count 4 or Count 5 in the indictment." J.A. 609 (emphasis added). In other words, the jury was instructed that it could convict Perry of the § 924(c) count so long as it found that Perry knowingly possessed a firearm in furtherance of either of the drug-trafficking crimes charged in Count 4 or Count 5. The jury then convicted Perry of the Count 5 offense but acquitted him of the Count 4 offense.
Although Perry styles his argument as one of constructive amendment of the indictment by the jury's acquittal on the *256 marijuana-trafficking offense set forth in Count 4, we construe his claim to be that the district court constructively amended the indictment by instructing the jury in the disjunctive as to the predicate offenses, i.e., that it could convict so long as it found that Perry knowingly possessed a firearm in furtherance of either the drug-trafficking offense committed as charged in Count 4 or the one committed as charged in Count 5 of the indictment. This instruction, in turn, allowed the jury to convict on the § 924(c) count based upon a single predicate offense of marijuana trafficking. This instruction, however, did not result in a constructive amendment of the indictment.
It is well established that when the Government charges in the conjunctive, and the statute is worded in the disjunctive, the district court can instruct the jury in the disjunctive. See United States v. Montgomery, 262 F.3d 233, 242 (4th Cir.2001); United States v. Champion, 387 F.2d 561, 563 n. 6 (4th Cir.1967) (providing that an indictment worded conjunctively under a statute which uses disjunctive language may be disjunctively considered by the jury and that proof on any one of the allegations is sufficient to sustain a conviction); see also United States v. Farish, 535 F.3d 815, 823-24 (8th Cir.2008) (holding that it was not a constructive amendment for the government to indict in the conjunctive, but secure a conviction on proof of one act alone); United States v. Brown, 504 F.3d 99, 104 (D.C.Cir.2007) (same).
The same holds true in the instant case. The indictment charged both predicate offenses, placing Perry on notice of the specific charges against him. However, the § 924(c) count was not dependent upon the jury finding Perry guilty of both predicate offenses. In order to convict Perry of a § 924(c) crime, the government was only required to prove that Perry possessed a firearm in furtherance of a single drug-trafficking offense, and the district court properly instructed the jury to this effect. The instruction did not broaden the possible bases for conviction beyond those presented in the indictment, nor change the elements of the offense charged so as to result in Perry being convicted of a crime different from that charged in the indictment.[3] Accordingly, the district court's disjunctive instruction as to the predicate offenses did not result in a constructive amendment of the indictment as to the § 924(c) count.
C.
Perry's final challenge to his § 924(c) conviction is that the district court erred in instructing the jury in the disjunctive on both the firearms and the predicate offenses, and in not requiring the jury to be unanimous as to which firearm supported the § 924(c) conviction.
Prior to submission of the case to the jury, the district court rejected Perry's request that the jury be instructed that it must find that Perry knowingly possessed all three firearms in furtherance of both drug-trafficking offenses set forth in *257 Counts 4 and 5. Instead, the district court effectively instructed the jury that it need only find that Perry knowingly possessed one of the firearms in furtherance of one of the drug-trafficking offenses charged in Count 4 or Count 5.
As previously noted, the general rule is that the district court can instruct the jury in the disjunctive when the government charges in the conjunctive and, therefore, it was not error for the district court to charge the jury in the disjunctive as to the predicate offenses. It was likewise not error for the district court to charge the jury in the disjunctive as to the firearms allegedly possessed in furtherance of those predicate offenses. Additionally, where the charge involves multiple firearms, jury unanimity with respect to the particular firearm used or possessed in furtherance of a drug trafficking offense is generally not required for a § 924(c) conviction. See United States v. Hernandez-Albino, 177 F.3d 33, 40 (1st Cir.1999) (holding that "the jury need not reach unanimous agreement on the identity of the weapon when the defendant is charged with violating § 924(c) due to carrying more than one firearm," so long as "none of the weapons justifies more than the statutory minimum sentence"); United States v. Morin, 33 F.3d 1351, 1353-54 (11th Cir.1994) ("[T]o obtain a conviction under 18 U.S.C. § 924(c), the government needs to prove only that the defendant used one of the guns in relation to the drug trafficking" and "the jury is not required to reach a unanimous verdict as to which gun the defendant used."); United States v. Correa-Ventura, 6 F.3d 1070, 1087 (5th Cir.1993) (noting that "such determinations must be made on a case-by-case basis in light of the charges made, the evidence presented, and the likelihood of jury confusion," but holding that "a specific unanimity instruction was not required with respect to the identity of the firearm" at issue there).[4]
Perry's unanimity claim, however, is not limited to his claim that the jury should have been required to reach unanimity as to the specific firearm possessed for purposes of the § 924(c) charge. Rather, he contends that because the district court charged the jury in the disjunctive as to both the firearms and the two predicate drug-trafficking offenses, it is impossible to tell if the jury unanimously found that he possessed a firearm in furtherance of any particular drug trafficking crime. In *258 other words, endorsing such a multiple, disjunctive instruction would amount to a determination that the government can charge multiple firearms and multiple predicate offenses in a single count, but that juror unanimity is not required for either the firearm possessed or the predicate offense it is possessed in furtherance of in order to convict.
Although Perry's argument in this regard has some initial appeal to us, we need not decide the issue here because Perry was not convicted of the cocaine-trafficking offense set forth in Count 4. He was only convicted of one drug offensepossession with intent to distribute marijuana.
The jury was instructed that to convict on the § 924(c) count it had to find that Perry "committed a drug-trafficking offense charged in Count 4 or Count 5," and that Perry "possessed a firearm ... in furtherance of a drug-trafficking crime charged in Count 4 or Count 5." J.A. 609 (emphasis added). The evidence was that all three firearms were found in the same general location and at the same time. The predicate offenses were charged in two separate drug-distribution counts, but the single § 924(c) count incorporated both predicate offenses. Because the jury only convicted Perry of Count 5 (marijuana-trafficking), and acquitted Perry of Count 4 (cocaine-trafficking), it is easy to see that the marijuana-trafficking offense also served as the sole predicate offense for the single § 924(c) conviction.
Because juror unanimity was not required as to the specific firearm possessed and the jury unanimously convicted Perry only of the marijuana-trafficking offense, there is no possibility of jury disagreement creating "a reasonable doubt that [the defendant] used a firearm in committing a drug trafficking crime." Correa-Ventura, 6 F.3d at 1083.[5] Accordingly, even assuming that the district court should have required jury unanimity as to the predicate offense, the error was harmless.
IV.
Perry next contends that we should vacate and remand for resentencing because the district court included drug amounts related to acquitted conduct in the computation of the drug amounts for purposes of sentencing, arguing that the inclusion of these amounts resulted in a base offense level of 32 instead of 26. We disagree.
It has long been established that sentencing courts may consider acquitted conduct in establishing drug amounts for the purpose of sentencing, so long as the amounts are established by a preponderance of the evidence. See United States v. Watts, 519 U.S. 148, 155-56, 117 S.Ct. 633, 136 L.Ed.2d 554 (1997) (per curiam); see also United States v. Carter, 300 F.3d 415, 426 (4th Cir.2002) (per curiam). And, we reject Perry's assertion that this point is no longer valid in light of United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), as sentencing courts continue to make factual findings concerning sentencing factors, such as relevant conduct, by a preponderance of the evidence. See United States v. Brika, 487 F.3d 450, 459 (6th Cir.2007); see also United States v. Duncan, 400 F.3d 1297, *259 1304-05 (11th Cir.2005) (holding that Booker "does not suggest that the consideration of acquitted conduct violates the Sixth Amendment as long as the judge does not impose a sentence that exceeds what is authorized by the jury verdict" and instead "sentencing judges can continue to consider relevant acquitted conduct when applying the Guidelines in an advisory manner"). The district court found, by a preponderance of the evidence, that the drug amounts associated with the acquitted conduct are properly attributable to Perry, and we find no error in its determination.
We also reject Perry's request that we hold his case to be one of exceptional circumstances, warranting the imposition of an elevated clear and convincing evidence standard before acquitted conduct may be considered. See Watts, 519 U.S. at 156-57, 117 S.Ct. 633 (acknowledging "divergence of opinion among the Circuits as to whether, in extreme circumstances, relevant conduct that would dramatically increase the sentence must be based on clear and convincing evidence," but declining to address the issue because the case did "not present such exceptional circumstances"). Because Perry's asserted six-level increase fails to create an "exceptional circumstance," we find it unnecessary to consider the necessity of a higher standard of proof on this point.
Perry's assertion that the district court erred in failing to consider a variance based upon the 100:1 crack-to-powder ratio, however, has merit. The district court believed it was precluded from considering the request based upon our then-binding precedent. See United States v. Eura, 440 F.3d 625, 634 (4th Cir.2006) (holding that the 100:1 crack to powder cocaine sentencing ratio could not be a basis for a variance). Because Eura was overruled by the Supreme Court in Kimbrough v. United States, ___ U.S. ___, 128 S.Ct. 558, 169 L.Ed.2d 481 (2007), the parties agree that this case must be remanded for resentencing in light of Kimbrough. As a result, it is premature for us to consider Perry's remaining challenge to the district court's denial of his additional requests for a variance below the suggested guideline range.
AFFIRMED IN PART; VACATED AND REMANDED IN PART
NOTES
[1] For the safety of the officers during the search, several persons who were either at the house when the search began or who arrived at the house during the search were temporarily handcuffed to a trampoline. However, it is undisputed that Perry was not arrested or otherwise restrained until after the cocaine was found.
[2] Although it is not entirely clear, Perry apparently believed that Detective Strickland was related to him by marriage.
[3] Despite Perry's claim, our decision in United States v. Randall, 171 F.3d 195 (4th Cir. 1999), is not to the contrary. There, we found a constructive amendment where the indictment charged that the defendant carried a gun while distributing illegal drugs, but the jury was instructed that it could convict if it found that the defendant carried a gun based upon the uncharged predicate offense of possession with intent to distribute. See id. at 210. We held that the government does not have to specify a predicate offense, but if it does, it must prove the predicate offense. Unlike here, however, the predicate offense which served as the basis for the conviction in Randall was not charged in the indictment. Id.
[4] Perry's reliance upon United States v. Cappas, 29 F.3d 1187 (7th Cir.1994), for this point does not avail him. In Cappas, the Seventh Circuit held that a § 924(c) conviction is based upon the predicate offense, and not a particular gun. See id. at 1189. Because the court could not discern whether the defendant had been convicted multiple times for the same predicate offense, the district court dismissed the additional § 924(c) charges and upheld only one § 924(c) conviction. See id. at 1195. Cappas does not hold that the jury must be unanimous as to which firearm or firearms were possessed in furtherance of a single predicate offense. Perry's reliance upon United States v. Theodoropoulos, 866 F.2d 587 (3d Cir.1989) (overruled on other grounds), is also misplaced. In Theodoropoulos, the Third Circuit noted that the trial judge had "properly instructed the jury that they must unanimously agree on which weapon [the defendant] had used." Id. at 597. However, the court determined that only one of the four guns at issue could support the § 924(c) conviction as a matter of law and there was no way to determine which gun the jury had relied upon. See id. at 598. Recently, in United States v. Wise, 515 F.3d 207, 215 (3d Cir.2008), the court clarified that Theodoropoulos did not hold "that such an instruction is required in every case." On the contrary, the court, relying upon the precedents discussed above, held that "the jury was not required to unanimously agree on the type of weapon [defendant] possessed, because a specific firearm is not an element of a violation under 18 U.S.C. § 924(c)(1)(A)." Id. at 214 (emphasis added).
[5] In contrast, we can envision a scenario where § 924(c) counts alleging multiple firearms are not separately charged by the predicate offense, the jury is not instructed to unanimously agree upon the predicate offense, and the jury convicts of more than one predicate offense leaving the possibility that the jury arrived at a guilty verdict even though the jury members failed to unanimously agree upon either a firearm or the predicate offense that it was possessed in furtherance of. We leave the determination as to whether such a verdict would be proper to another day. | 01-03-2023 | 07-05-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/312219/ | 481 F.2d 185
UNITED STATES of America, Plaintiff-Appellee,v.Harvey Allen WARD, Defendant-Appellant.
No. 72-3040.
United States Court of Appeals,Fifth Circuit.
July 3, 1973.Rehearing Denied July 24, 1973.
John McGuigan, Atlanta, Ga. (Court-Appointed) for defendant-appellant.
John W. Stokes, U. S. Atty., E. Ray Taylor, Jr., Asst. U. S. Atty., Atlanta, Ga., for plaintiff-appellee.
Before AINSWORTH, DYER and INGRAHAM, Circuit Judges.
DYER, Circuit Judge:
1
Ward appeals from a judgment of conviction of interstate transportation of forged traveler's checks in violation of 18 U.S.C.A. Sec. 2314. He argues that he was denied an opportunity to impeach two key Government witnesses, and that the United States Attorney's final argument to the jury improperly commented on Ward's failure to take the stand. We affirm.
2
We can quickly dispose of Ward's first point. He argues that he was not allowed to question two key witnesses about whether they had recently been convicted of armed robbery. His position is that, even though the "convictions" had not yet been through the appellate process, our recent decision in United States v. Franicevich, 5 Cir. 1973, 471 F.2d 427, permits such convictions to be used for impeachment purposes. A reading of the record, however, discloses no convictions that fall within the Franicevich rule.
3
Six months before Ward's trial, the two witnesses involved had pleaded nolo contendere to armed robbery charges in North Carolina. The North Carolina court accepted their plea, but, at the time of Ward's trial, had not imposed sentence. On this record, the district court quite properly refused to allow impeachment. First, the Supreme Court has stated that, at least for certain purposes, it is the judgment of conviction and sentence, and not the tender and acceptance of the nolo contendere plea, that constitutes the "determination of guilt." Lott v. United States, 1961, 367 U.S. 421, 81 S.Ct. 1563, 6 L.Ed.2d 940. Secondly, even if we were to conclude that the mere acceptance of the plea was a sufficiently final conviction for impeachment purposes, Ward's argument would still founder on this Circuit's rule that a conviction based on a nolo contendere plea cannot be used for impeachment in a different proceeding. Piassick v. United States, 5 Cir. 1958, 253 F.2d 658; Mickler v. Fahs, 5 Cir. 1957, 243 F.2d 515; see Kilgore v. United States, 5 Cir. 1972, 467 F.2d 22; United States v. Driscoll, 5 Cir. 1972, 454 F.2d 792.
4
Ward's argument concerning the United States Attorney's comments in his closing remarks also leaves us unconvinced that reversible error occurred. This conclusion should not be taken as even tacit approval of the tactics of the United States Attorney. Instead our conclusion is reached by considering the combined effect of the inaction by defense counsel and the prompt action by the district court.
5
During the Government's summation Ward's counsel made only two objections. Each of these was directed not at an improper comment on Ward's failure to take the stand, but was an attempt to show that there was no testimony or reasonable inferences therefrom which would support that portion of the Government's argument immediately preceding the objection. Additionally, because none of the questioned comments by the United States Attorney were made until after these two objections, it cannot be said that Ward's counsel made an immediate objection to the comments. The first mention of this issue came after the conclusion of the summation and was in the form of a motion for a mistrial. This was too late.
6
This Court has considered this precise problem before and has concluded that,
7
[i]t is not sufficient to move for a mistrial after all the arguments are in. The purpose of requiring objections to be made while the argument is in progress is to give counsel making the argument a chance to withdraw or explain it and the court a chance to exclude it from the jury's consideration.
8
Fogarty v. United States, 5 Cir. 1959, 263 F.2d 201, 204, cert. denied, 360 U.S. 919, 79 S.Ct. 1437, 3 L.Ed.2d 1534. We cautioned in Samuels v. United States, 5 Cir. 1968, 398 F.2d 964, 967, cert. denied, 1969, 393 U.S. 1021, 89 S.Ct. 630, 21 L.Ed.2d 566, that the rule requiring a timely objection does not necessarily require an objection "to a comment upon the refusal of a defendant to testify at the precise moment such comment is made." Nevertheless, under the circumstances in our case we conclude, as we did in Samuels, that the defense counsel had ample opportunity to object to the questioned comments when made and that no viable excuse has been advanced for not doing so. As a result, Ward is entitled to relief only if he can show that the remarks, in the context of the trial, amounted to plain error under Rule 52(b), Fed.R.Crim.P. Samuels, supra.
9
That the trial was not infected with plain error is made clear by examining the precautionary and curative instructions given by the trial judge. As would be expected, in the district court's opening remarks to the jury he told them that arguments of and questions by counsel are not evidence, and that the defendant need not present any evidence but may rest on the presumption of innocence. Furthermore, after the closing arguments, the court in its charge to the jury stressed: (1) that the defendant had no duty to call witnesses or present evidence; (2) that the defendant need not take the stand and that the failure to do so does not raise any presumption; (3) that the statements and arguments of counsel are not evidence; and (4) that the presumption of innocence remains with the defendant throughout the trial.
10
We need not decide whether these general instructions alone would be sufficient to protect Ward's right to a fair trial because the district court, without a prior objection by Ward's counsel, gave an additional curative instruction in the middle of the United States Attorney's remarks. This is particularly significant because it came immediately after one of the comments now questioned by Ward; in fact the instruction came directly after the only comment1 which was referred to by Ward's counsel in his subsequent motion for a mistrial.
11
We are aware that in certain circumstances no amount of carefully drawn curative instructions can correct the damage done by extensive and repetitious comments on a defendant's failure to take the stand. See e. g., DeLuna v. United States, 5 Cir. 1962, 308 F.2d 140. No circumstances similar to those found in DeLuna are present in this case, however.
12
We therefore conclude that the district court acted correctly, and that it amply insulated from jury consideration Ward's failure to take the stand and the United States Attorney's comments thereon.
13
Affirmed.
1
MR. TAYLOR [United States Attorney]: . . . . There is no way we can pin anything on [Mr. Rosebury] unless Mr. Ward wants to get up and tell the whole story himself
THE COURT: Mr. Taylor, I think you are going far beyond inferences and deductions that the jury can draw. Now, I allowed you to do it the first time but I think you are arguing matters that are too conjectural and I will instruct you, ladies and gentlemen, that you will disregard those comments of counsel and argument and remember that only you are the ones who will determine the facts as you find them to be and it is up to you to determine whether or not you believe or disbelieve the witness. You are the sole judges of the credibility of every witness who has testified in this case. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1645205/ | Jose Perraza, Appellant,
v.
The State of Florida, Appellee.
No. 3D06-2749.
District Court of Appeal of Florida, Third District.
Opinion filed November 19, 2008.
Bennett H. Brummer, Public Defender, and Marti Rothenberg, Assistant Public Defender, for appellant.
Bill McCollum, Attorney General, and Lunar Claire Alvey, Assistant Attorney General, for appellee.
Before RAMIREZ and WELLS, JJ., and SCHWARTZ, Senior Judge.
PER CURIAM.
The cause is remanded to the trial court with directions to issue an order clarifying the exact amount of time with which the defendant is to be credited for time served.
Not final until disposition of timely filed motion for rehearing. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918992/ | 912 So.2d 82 (2005)
Melvin Robert SHORT, Plaintiff-Appellee
v.
Gloria Mae SHORT, Defendant-Appellant.
No. 40,136-CA.
Court of Appeal of Louisiana, Second Circuit.
September 23, 2005.
Rehearing Denied October 20, 2005.
*83 Joel L. Pearce, Shreveport, for Appellant.
Hani E. Dehan, Shreveport, for Appellee.
Before BROWN, WILLIAMS and MOORE, JJ.
WILLIAMS, J.
Appellant, Gloria Mae Short, appeals the judgment of the trial court granting the exception of no cause of action filed by the appellee, Cynthia B. Short, in her capacity as executrix/administratrix of the estate of Melvin Robert Short. Appellant sought to annul a November 7, 1974 judgment decreeing a final divorce between herself and Melvin Short, to terminate the community regime existing between her and Mr. Short, and to partition the community property. For the reasons assigned below, the judgment of the trial court is affirmed.
*84 FACTS
On June 17, 1974, Melvin Robert Short filed a petition in the 26th Judicial District Court in and for the Parish of Bossier, seeking a divorce from his wife Gloria Mae Short. The petition alleged that the parties were married in Bossier City on July 2, 1961 and that their last matrimonial domicile was in Bossier Parish. Mr. Short's petition further alleged that the parties separated on April 19, 1971, and had lived separate and apart without reconciliation since that date. The petition requested that Mr. Short be granted a judgment decreeing a divorce "a vinculo matrimonii."
On July 19, 1974, Gloria Mae Short, filed a pleading entitled "Peremptory Exception and Plea of Reconciliation." Therein she excepted to Mr. Short's petition on the basis that after the parties' separation, they cohabited and engaged in marital relations during the two years immediately preceding Mr. Short's filing for divorce. In conclusion, the pleading prayed that the "exception be deemed sufficient and the demands of Plaintiff be dismissed at his cost." The exception came for hearing on October 10, 1974, and pursuant to a judgment signed on November 7, 1974, was overruled by consent of the parties. A preliminary default on the petition for divorce was taken on October 31, 1974, and a judgment confirming the default was signed on November 7, 1974.
Thirty years later, on September 29, 2004, Gloria Short filed a pleading entitled "MOTION TO NULLIFY JUDGMENT OF DIVORCE, OR, IN THE ALTERNATIVE TO SHOW CAUSE WHY THE COMMUNITY OF ACQUETS AND GAINS SHOULD NOT BE TERMINATED AND PARTITIONED" and attached to it the November 7, 1974 divorce judgment. Named as a defendant in the action was Cynthia B. Short, the executrix/administratrix of Melvin Robert Short's estate. In her petition, Gloria Short sought to have the divorce judgment declared a nullity on the basis that she was "never served with either personal or domiciliary service with any Motions, Rules or similar documents necessary for the finalization of the Divorce." In the event that the judgment was not declared a nullity, the pleading sought to have the community regime between the parties terminated and the community property partitioned.
Cynthia B. Short, as executrix/administratrix of Melvin Robert Short's estate, responded by filing a peremptory exception of no cause of action with regard to Gloria Short's actions to have the judgment of divorce declared a nullity and to terminate the community regime allegedly existing between the parties. In support of the exception, Cynthia Short argued that other than the initial petition for divorce, there was no requirement in 1974 that a party seeking a divorce under then LSA-R.S. 9:301 serve a defendant who has failed to file an answer with any additional pleadings to obtain a final judgment of divorce. Furthermore, to the extent that Gloria Short's pleading was complaining that she had not been served with the original petition for divorce, her ability to object to the same was waived by virtue of her general appearance in filing a peremptory exception. Lastly, Cynthia Short argued that the alternative request to terminate the community property regime if the divorce judgment is upheld, was self-defeating. According to Cynthia Short, if the judgment of divorce was upheld, thus giving rise to the alternative pleading, then the law in 1974 provided that the community of acquets and gains would have been terminated as of the date of the filing of the petition pursuant to which the divorce was granted.
*85 The exception came for hearing on December 9, 2004. At the hearing, the court refused Gloria Short's request to introduce evidence regarding whether she was properly served with the petition for divorce and her intent in filing the peremptory exception in the 1974 proceedings. After the testimony was proffered, the trial court rendered judgment sustaining the exception of no cause of action, but recognizing that Gloria Short had a right to partition the marital property existing as of the time the community regime terminated. A written judgment granting the exception of no cause of action and recognizing the termination date of the community as June 17, 1974, was signed on December 30, 2004. Gloria Short appealed, assigning error to the trial court's failure to allow her to present evidence in opposition to the peremptory exception of no cause of action and in sustaining the exception.
DISCUSSION
The function of the peremptory exception of no cause of action is to question whether the law extends a remedy against the defendant to anyone under the factual allegations of the petition. The exception is triable on the face of the petition and, for the purpose of determining the issues raised by the exception, the well-pleaded facts in the petition and any annexed documents must be accepted as true. Kuebler v. Martin, 578 So.2d 113 (La.1991); Mayer v. Valentine Sugars, Inc., 444 So.2d 618 (La.1984). Generally, no evidence may be introduced to support or controvert the exception. However, a jurisprudentially recognized exception to this rule allows the court to consider evidence that is admitted without objection to enlarge the pleadings. Rogers v. Ash Grove Cement Company, 34,934 (La.App. 2 Cir 11/2/01), 799 So.2d 841.
In reviewing a trial court's ruling sustaining an exception of no cause of action, the appellate court should conduct a de novo review because the exception raises a question of law, and the trial court's decision is based only on the sufficiency of the petition. Adams v. Adams, 39,424 (La.App. 2 Cir. 4/6/05), 899 So.2d 726. When the grounds of the peremptory exception raising the objection of no cause of action may be removed by amendment of the petition, the judgment sustaining the exception shall order such amendment within the delay allowed by the court. If the grounds of the objection cannot be so removed, or if plaintiff fails to comply with the order to amend, the action shall be dismissed. LSA-C.C.P. art. 934; Adams, supra. The decision to allow amendment is within the sound discretion of the trial court. Downs v. Hammett Properties, Inc., 39,568 (La.App. 2 Cir. 4/6/05), 899 So.2d 792.
Gloria Short brought this action to have the 1974 divorce judgment declared an absolute nullity on the basis that she was never served with any motions, rules or similar documents necessary for the finalization of the divorce. In a liberal reading of this allegation, Gloria Short now argues that this factual allegation was intended to convey that she was never served with the original petition for divorce.
While our resolution of the question presented herein is not based on any policy considerations, we note the Louisiana Supreme Court's recognition in Wilson v. Calvin, 221 La. 451, 59 So.2d 451, 453 (1952), that:
[t]here is a strong public policy against disturbing a judgment of divorce, especially after a long period of time where the marital status of innocent parties who relied on the validity of that judgment would be disturbed, and more particularly where a decree would render *86 innocent parties guilty of bigamy and cast a cloud on the legitimacy of their children.
LSA-C.C.P. art. 2002(A)(2) currently allows the annulment of a final judgment if it is rendered against a defendant who has not been served with process as required by law and who has not waived objection to jurisdiction. LSA-C.C.P. art. 6 provides that jurisdiction over the person is acquired when the party submits to the jurisdiction of the court by failing to timely file a declinatory exception objecting to same. Under LSA-C.C.P. art. 928, the right to file a declinatory exception must be pleaded prior to or in an answer and prior to or along with any pleading seeking relief other than entry or removal of the name of an attorney as counsel of record, extension of time within which to plead, security for costs or dissolution of an attachment. Failure to timely plead a declinatory exception constitutes a waiver of same. LSA-C.C.P. art. 925(C).
Prior to Acts 1997, No. 578, which eliminated all statutory references to a "general appearance" and specifically its effect as a waiver of objection to the jurisdiction of the court, LSA-C.C.P. art. 2002(A)(2) provided that a final judgment should be annulled if rendered against a defendant who was not served with process as required by law and who did not enter a "general appearance," or against whom a valid judgment by default has not been taken. A general appearance was defined under former LSA-C.C.P. art. 7 as seeking any relief, either personally or through counsel, other than:
(1) Entry or removal of the name of an attorney as counsel of record;
(2) Extension of time within which to plead;
(3) Security for costs;
(4) Dissolution of an attachment issued on the ground of the nonresidence of the defendant; or
(5) Dismissal of the action on the ground that the court has no jurisdiction over the defendant.
In interpreting this prior statutory scheme, our courts held that any act of a defendant, except to object to jurisdiction over his person, which recognizes the case as in court, constitutes a general appearance, Bradley v. Theus, 28,714 (La.App. 2 Cir. 2/20/96), 668 So.2d 1304; Stanley v. Jones, 197 La. 627, 2 So.2d 45 (1941), and that a party who makes a general appearance waives any defects in the service of process and citation, including the right to pursue an action in nullity on those grounds. Stanley, supra.
We need not determine whether the repeal of the general appearance provisions was intended to effect a change in the law or which version is applicable to the case at hand. In reviewing Gloria Short's petition, we find that neither version of the law affords her a remedy to have the divorce judgment declared a nullity under the facts alleged therein.
The record and plaintiff's petition clearly indicate that a petition for divorce was filed on June 17, 1974 by Melvin Robert Short and that on July 19, 1974, a peremptory exception and plea of reconciliation to that petition was filed by Gloria Short. In her exception, Gloria Short argued that the parties had not lived separate and apart for the requisite two years prior to the filing of the petition on account of their cohabiting and engaging in marital relations during that time. Her petition for nullity indicates that the exception was ultimately overruled.
The petition fails to state a cause of action under the present version of LSA-C.C.P. art. 2002(A)(2) because it indicates that Gloria Short failed to timely file a *87 declinatory exception objecting to the jurisdiction of the court. As noted above, the declinatory exception must be filed prior to any pleading which seeks relief other than entry or removal of the name of an attorney as counsel of record, extension of time within which to plead, security for costs or dissolution of an attachment. Therefore, the peremptory exception filed by Gloria Short which requested none of the above-listed relief, waived her right to file a declinatory exception objecting to the jurisdiction of the court. Such a waiver defeats an action under LSA-C.C.P. art. 2002 as it currently reads.
The petition likewise fails to state a cause of action under the former version of LSA-C.C.P. art. 2002(A)(2) which limited the right to annul a final judgment to defendants who were not served with process as required by law and who did not enter a "general appearance." Even if we presuppose that Gloria Short was not properly served with process, she did enter a general appearance. It is undisputed and self-evident that the "peremptory exception" filed by Gloria Short did not request any of the relief enumerated in the first four paragraphs of former LSA-C.C.P. art. 7. It is equally clear, although disputed by appellant, that the pleading did not seek dismissal of the action on the ground that the court had no jurisdiction over the defendant.
A thorough reading of the pleading indicates that the issue of the trial court's power and authority to hear the divorce action between the parties is not raised therein. In fact, the word "jurisdiction" is not found anywhere in the pleading. Appellant's assertion that the purpose of her exception was to object to the court's jurisdiction over her or the divorce proceeding is disingenuous at best.
Gloria Short concedes in her brief that she never filed an answer to the petition. Therefore, Mr. Short was free to obtain a default judgment of divorce, which the record reflects he did on November 7, 1974.
For these reasons, we conclude that Gloria Short's petition fails to state a cause of action for nullity on the basis that she was not served with process in light of her general appearance and failure to file a timely declinatory exception to the court's jurisdiction.
Furthermore, our de novo review also supports the conclusion that Gloria Short's petition fails to state a cause of action for termination of the community property regime. At the time the divorce proceeding, which is the subject of the action in nullity, was pending, LSA-C.C. art. 159, which governs the effect of a divorce on a community property regime, read as follows:
The effects of a divorce shall not only be the same as are determined in the case of a separation from bed and board, but it shall also dissolve forever the bonds of matrimony, between the parties, and place them in the same situation with respect to each other as if no marriage had ever been contracted between them.
The effect of a judgment of legal separation from bed and board on the community regime was governed by the now repealed LSA-C.C. art. 155 which read in pertinent part:
The judgment of separation from bed and board carries with it the separation of goods and effects and is retroactive to the date on which the petition for same was filed ...
Accordingly, the effect of a judgment of divorce was to terminate the community regime retroactive to the date on which the petition for the same was filed. Therefore, the trial court was correct in determining that the community regime previously existing between the parties *88 had terminated on the date Mr. Short filed his petition for divorce and Gloria Short could not state an action for same.
In summary, we find the trial court correctly recognized that Gloria Short's petition failed to state any cause of action, other than an action to partition the property owned between her and Melvin Short as a result of the community regime that formerly existed between them and which was terminated effective June 17, 1974, as a result of the parties' divorce.
Gloria Short has failed to brief her assignment of error regarding the trial court's decision not to allow her the opportunity to present evidence in opposition to the exception of no cause of action. Nevertheless, we note that an exception of no cause of action is to be tried on the face of the petition and generally no evidence is admitted to support or contradict it. See LSA-C.C.P. art. 931. Gloria Short has cited no justification for departing from that general rule in the present case. Accordingly, the assignment is deemed abandoned.
CONCLUSION
For the reasons stated above, the judgment of the trial court sustaining the exception of no cause of action filed by Cynthia B. Short, in her capacity as executrix/administratrix of the estate of Melvin Robert Short, is hereby affirmed. Costs of this appeal are to be borne by Gloria Mae Short.
AFFIRMED.
APPLICATION FOR REHEARING
Before BROWN, WILLIAMS, STEWART, GASKINS, and MOORE, JJ.
Rehearing denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8304551/ | FA"W", P. J.
This case has been brought to this Court by the appeal of two of the defendants below, E. B. Harpole, Trustee, and Miss Doll Judkins, from the decree of the Chancery Court of Davidson County, Part Two, by which decree the complainant, W. W. Shea, was granted the relief sought by his bill.
For the purposes of the consideration of appellants’ assignments of error, the issues arising on the record and the facts disclosed by the proof are sufficiently stated in the memorandum opinion of the learned Chancellor filed in the cause, which is as follows:
“The bill in this case seeks to restrain the defendant Landis from encumbering the property involved with any lien superior to com*507plainant’s lien, and tbe defendant Lindsley, Trustee, from transferring, disposing of or enforcing tbe note and trust deed against said property, and to purge and reform tbe alleged forged clause in tbe mortgage from defendant Landis and wife to complainant and declare tbe same inferior to complainant’s lien. Tbe bill is answered and tbe material allegations challenged and denied.
“It is disclosed by tbe proof that tbe defendant, Robert E. Landis, who was a real estate agent in Nashville, Tennessee, procured from tbe complainant tbe listing of tbe property involved, with him for sale. He subsequently informed complainant that be would like to purchase this property himself, to which complainant assented. Upon ascertaining that complainant bad no regularly retained attorney, Landis suggested that be be allowed to prepare tbe necessary papers to carry out tbe transaction and this was agreed to by tbe complainant.
“On October 14, 1934, Landis submitted to tbe complainant, for bis approval, a warranty deed for tbe conveyance of tbe property by complainant to him and a separate trust deed securing to complainant tbe unpaid balance of tbe purchase price. Tbe terms of tbe sale provided for tbe payment of $400.00 cash and tbe balance in five annual installments. At tbe time said instruments were shown to complainant, tbe trust deed bad not been executed or acknowledged. Complainant examined tbe trust deed thoroughly on said day and noticed tbe omission of tbe provision for tbe payment of interest in semi-annual installments, and called this omission to tbe attention of said Landis. Landis took both instruments and on tbe following day, October 15, 1934, returned with them to tbe complainant. Tbe warranty deed was thereupon executed on that day by complainant and bis wife, and Landis showed complainant that be bad corrected tbe omission in the trust deed with reference to tbe payment of interest in semi-annual installments and complainant did not examine tbe instrument closely. At that time said trust deed bad been executed by Landis and wife. Complainant and said Landis thereupon, on tbe same day, went to tbe courthouse and Landis gave tbe trust deed to someone in tbe Register’s Office to be recorded.
“Approximately three days later complainant called at said Register’s Office to get the trust deed and was informed that said Landis bad taken it and receipted for it. He thereupon called at Landis’ office and Landis indicated to him that he bad mailed said trust deed to him. Complainant did not receive tbe trust deed and be called on Landis several times thereafter to no avail. Landis finally told him that be would procure a certified copy for him, but this was never done.
“On November 8, 1934, a deed of trust was executed by Robert E. Landis and wife conveying the land involved to John T. Lindsley, Trustee, to secure a note in tbe principal amount of $1500.00, and said deed of trust was recorded on November 9, 1934.
*508“Oil or about the first of February, 1935, the complainant learned through Mr. Robert Lusk, one of the attorneys representing John T. Lindsley, Trustee, of the above mentioned deed of trust to John T. Lindsley, Trustee, and upon investigation of the records in the Register’s Office ascertained that the deed of trust securing the balance of the deferred purchase money to him contained the following' provision which he had not until that time seen:
“ ‘Said notes are to be second to a first Mortgage, not to exceed two thousand dollars, which may hereafter be placed upon the within described property.’
“By section 10979 of the Code of Tennessee, forgery is defined as follows:
“ ‘Forgery is the fraudulent making or alteration of any writing to the prejudice of another’s rights.’ And in the following section of the Code it is provided in substance that any person who fraudulently passes or transfers, offers to pass or transfer any forged paper, knowing it to be forged with intent to defraud, is guilty of a felony.
“In the case of Garner v. State, 73 Tenn. (5 Lea), 213, page 216, Judge Cooper speaking for the Supreme Court in substance held: That the Code definition of forgery was the commbn law definition of that offense and would cover any form of the crime recognized by the common law which treated forgery as a cheat or attempt to cheat; and that forgery denotes a false making which includes every alteration or addition to a true instrument ... a making malo animo of any legal instrument for the purpose of fraud and deceit and that any alteration of a written instrument whereby its legal effect is varied, will constitute the offense. . . .
“To constitute forgery, three things must exist:
“ (a) There must be a false making or alteration of a written instrument.
“(b) There-must be a fraudulent intent, and (c) The instrument must be apparently capable of effecting a fraud. 26 Corpus Juris, ■Sec. 4, p. 897. On this page of Corpus Juris, note (c), Bacon is quoted' as defining forgery as follows:
“ ‘The notion of forgery doth not so much consist in the counterfeiting of a man’s hand and seal . . . but in the endeavouring to give an appearance of truth to a mere deceit and falsity, and either to impose that upon the world as the solemn act of another which he is in no way privy to, or at least to make a man’s own act appear to have been done at a time when it was not done, and by force of such falsity to give it an operation which in truth and justice it ought not to have. . . .’
“Coke lays down the doctrine in substance that an offender may be guilty of a false making of an instrument although he signed and executed it in his own name, in case it be false in any material part *509and calculated to induce another to give credit to it as genuine and authentic, when it is false and deceptive.
“Bishop on Criminal Law (9 Ed.), see. 584, p. 451.
“This doctrine has not apparently received much American adjudication, though in note four to Sec. 585, p. 452, Bishop stated:
“ ‘Luttrell v. State, 85 Tenn., 232, 1 S. W., 886, 4 Am. St. Rep., 760, would seem, however, to be a pretty direct affirmance of the English doctrine; it holds that a justice of the peace may commit forgery of a bill of costs due to himself and subscribed by his own name. ’
“In this same section under sub-division 3 thereof, the author states that the broad doctrine is not maintainable that a man cannot commit forgery of an instrument executed by himself. See p. 454.
“In the case of Luttrell v. State, 85 Tenn., 232, page 234, 1 S. W., 886, page 887, 4 Am. St. Rep., 760, Luttrell was a Justice of the Peace and was indicted and convicted for forging a bill of costs by incorporating and making out in his costs against the County of Knox, an item of cost for $10.95 which was false, fraudulent and felonious, and made and uttered to the prejudice of Knox County. It was insisted that no offense was charged and that a man could not be guilty of forgery in making a paper writing and signing his own name to it.
‘ ‘ The Supreme Court said:
“ ‘Neither of these positions is tenable. As to the first, we need only say that the charge is made with such deg'ree of certainty as to enable the court to pronounce a proper judgment in ease of conviction. Of this there can be no doubt, and that is all that is required. Code (M. & V.) 5946. The answer to the second is equally obvious and easy. By our statute “forgery is the fraudulent making or alteration of any writing to the prejudice of another’s rights.” Code, 5492. Forgery is one class of common-law cheats, and is by Bishop defined as “the false making or materially altering, with intent to defraud, of any writing which, if genuine, might apparently be of legal efficacy, or the foundation of legal liability.” . . .
“ ‘Manifestly, the bill of costs alleged to have been forged by Lut-trell is a “writing” within th,e scope of the definition given. It is a writing authorized, and in fact required, by law, to entitle a justice of the peace to receive payment of his costs in criminal cases. Code, 6450. His bill of costs is his demand for service rendered in legal proceedings before him. If it be genuine, it has undoubted “legal efficacy,” and is “the foundation of legal liability;” and if it be in due form, though not genuine, it may, and will, if used, operate “to the prejudice of another’s rights,” — in civil eases to the prejudice of the person against whom the costs are assessed; and in criminal cases, where the judgment is for the defendant, to the prejudice of the county. . . .
*510“ ‘Lord. Coke says that “forgery is properly taken when tbe act is done in tbe name of another person.” Yet there is a doctrine, stated also by Coke, which seems to rest on ancient adjudication, and is sustained by the English commissioners in their report of 1840, namely: “that (to use their own language) an offender may be guilty of a false making of an instrument, although he sign and execute it in his own name, in case it be false in any material part, and calculated to induce another to give credit to it as genuine and authentic.”
“ ‘ A conclusive illustration and demonstration of the fact that one may, in his own name and over his own signature, make a writing to the prejudice of another’s rights, are shown in the case before us.’
“In Abston v. State, 134 Tenn., 604, page 610, 185 S. W., 706, page 707, our Supreme Court ruled:
“ ‘Not only is the recording of a forged deed an uttering thereof, but so is the attempt to raise money on it, or making any other beneficial use of such an instrument.’
“The cases of Hill v. State, 9 Tenn. (1 Yerg.), 76, 24 Am. Dec., 441, and Austin v. State, 143 Tenn., 300, 228 S. W. 60, 14 A. L. R., 311, are neither decisive of the issue presented by this case. In the Hill case the party procured the signature to the note by fraudulently reading it for the real amount due, when in fact it contained a larger amount and procured the signature thereto by reason of such false representation. It was the genuine signature of the party to the note. And in the Austin case he procured the signature of the person to a deed by representing it to be an affidavit. In neither of these eases had the party who signed the paper had the paper in his possession and approved it before signing, and in both eases he was induced to sign by false representations. In the case at bar the mortgage from the defendant Landis and wife, to the complainant, was exhibited to the complainant the day before it was put to record, and just preliminary to its execution. At this time it did not contain the forged clause. The complainant read the paper over, evidently carefully, because he discovered that the interest payments were annual instead of semi-annual, and he asked that this correction be made. The mortgage was given back to Landis for correction in the particular named, and for execution. The next day, and when the papers were placed of record, Landis offered to exhibit to the complainant the mortgage with the correction, stating that he had made it. This mortgage had been formally approved and accepted by complainant, except for the correction as to the interest payments, the day before, and between that time and the next day, when the mortgage was exhibited, Landis changed it. This constitutes forgery under our Code definition of forgery, and under the principle recognized and given force in the case of Luttrell v. State, supra.
*511‘ ‘ That the title to property cannot be taken away by theft, is a principle well established, and although the mortgage was recorded with this forged provision therein, Lindsley acquired no title superior to complainant’s title. See. 1246, page 739, Vol. 2, Jones on Mortgages, 8 Ed.; Sec. 726, Devlin on Deeds, Vol. 2, 3 Ed.; Oswald v. Newbanks et al., 336 Ill., 490, 168 N. E., 340, page 343.
“The Court is of opinion that the defendant, Robert E. Landis was guilty of forgery by inserting the clause involved in the mortgage after it had been read over and accepted by the complainant; that the recording of this mortgage with the forged clause therein was no protection to Lindsley, Trustee, nor to the beneficiary under the trust deed to him, and that the indebtedness secured by such deed of trust is inferior and subject to the lien for the deferred purchase money notes secured by the mortgage executed by Robert E. Landis and wife to the complainant should be purged of said forged clause therein, and declared superior and paramount to the lien held by Lindsley, Trustee, on the property involved.
“Decree accordingly.
“Newman, Chancellor.”
It should be stated that John T. Lindsley who, as Trustee, was a defendant below, died while the cause was pending in the Chancery Court, and Mrs. E. B. Harpole was duly substituted as trustee in the place and stead of said John T. Lindsley, and the cause was, by consent and by order of the Court, revived against said Mrs. E. B. Har-pole, Trustee.
Pursuant to the foregoing findings and opinion of the Chancellor, a decree was entered adjudging (a) that the mortgage executed by Robert E. Landis and wife, Pauline A. Landis, to the complainant on October 15, 1934, etc., be purged of the following clause therein: “Said notes are to be second to a first mortgage, not to exceed two thousand dollars, which may hereafter be placed upon the within described property,” said clause being a forg'ery and of no effect; (b) that the deed of trust executed by Landis and wife to John T. Lind-sley, Trustee, on said property to secure the payment of a fifteen hundred dollar note to Miss Doll Judkins, is a valid deed of trust on the said property covered thereby, but secondary to the mortgage of Robert E. Landis and wife to the complainant.
The costs of the cause were adjudged against Robert E. Landis and wife, Pauline A. Landis, for which execution was awarded.
The defendants, Doll Judkins and E. B. Harpole, Trustee, excepted to the foregoing decree and prayed an appeal to this Court, which was granted by the Chancellor and perfected by said appellants.
The appellants’ assignments of error are four in number, but, in their final analysis, they are all directed to the proposition contained in the first assignment, which is, in substance, that the Trial Court *512erred in decreeing' and adjudging'that tbe lien of tbe deed of trust held by,complainant Sbea is superior to tbe lien of tbe deed of trust beld by defendant Harpole, Trustee, and Miss Doll Judkins.
Notwithstanding tbe clear statement of tbe facts and tbe able discussion of the law of forgery by tbe learned Chancellor, we are unable to ag'ree with bis conclusion that, upon tbe facts of this ease, tbe appellee’s lien is superior to tbe lien of tbe appellants. To so hold does not, in our opinion, give effect to tbe presumption arising from our registration laws, Code, Section 7664 et seq., Shannon’s Code, Section 3748 et seq.
The presumption, as a matter of public policy, must always be in favor of tbe bona fides of a deed as it is registered, and it is incumbent upon tbe defendant to show that tbe alterations appearing on tbe instrument were made after delivery. Branch v. Branch, 143 Tenn., 210, 225 S. W., 1038, 1040.
It is clear that the clause which gave rise to this litigation was in tbe trust deed executed by Landis and wife when it was delivered to Sbea. Tbe proof does not indicate whether it was or not in said trust deed when it was signed and acknowledged by Landis and wife.
Tbe case of Branch v. Branch, supra, involved a question of alleged forged alterations in a deed, and, after stating that the authorities on tbe subject are in irreconcilable conflict, tbe Court adopted tbe rule above stated, and, in concluding tbe opinion, tbe Court said:
"We think, therefore, as a matter of public convenience and safety, we must presume, when an altered deed appears to be registered as altered, such altered instrument expressed tbe true intention of tbe parties and that such alterations were made before delivery.
"Otherwise, under our prevailing course of business, when little attention is paid to tbe preservation of registered instruments, such papers might readily be picked up and mutilated, and those who have rested for years on tbe security of recorded titles be put to serious inconveniences. After tbe lapse of years, as in this case, it would frequently be impossible for one with record evidence of title to land to prove when alterations in title papers were actually made. A presumption that alterations in such documents were made after delivery, and before registration, and that tbe recorded instrument was invalid, would be contrary to tbe whole policy of our registration laws. ’ ’
We think it is a necessary corollary of tbe principles enunciated in the Branch case, supra, that, having accepted delivery of tbe Landis trust deed, with tbe reservation in question therein, and procured its registration in that form, complainant Sbea cannot successfully assert that bis mortgage is superior to tbe trust deed for tbe benefit of Miss Judkins, who, in good faith, relied upon tbe mortgage of Landis to Sbea as it appeared on the Register’s books. To hold otherwise "would be contrary to tbe whole policy of our registration laws. ’ ’
*513It results from tbe views we bave stated that tbe appellants’ assignment of error aforementioned is sustained, and tbe decree of tbe Chancery Court will be reversed in so far as it is thereby adjudged that tbe deed of trust executed by Robert E. Landis and wife, Pauline A. Landis, on November 8, 1934, to John T. Lindsley, Trustee, and registered in Book 783, page 633, in tbe Register’s Office of Davidson County, Tennessee, to secure tbe payment of a note of fifteen hundred dollars payable to Miss Doll Judkins, is secondary to the mortgage of Robert E. Landis and wife to tbe complainant W. W. Shea, recorded in Book 959, page 33 of tbe Register’s Office of Davidson County, Tennessee; and it will be adjudged and decreed that both said trust deed and mortgage are valid liens on tbe property therein described, but that said trust deed to secure tbe payment of tbe note to Miss Doll Judkins is superior to tbe aforesaid mortgage of Landis and wife to complainant W. W. Shea, and entitled to prior satisfaction out of tbe property therein described.
Tbe costs of the appeal will be adjudged against the appellee, W. W. Shea, and tbe surety on his cost bond in tbe Chancery Court. Gulf Refining Company v. Frazier, 15 Tenn. App., 662, 704.
Crownover and Felts, JJ., concur. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/789302/ | 398 F.3d 792
UNITED STATES of America, Plaintiff-Appellee,v.James Ronald HAZELWOOD, Defendant-Appellant.
No. 03-6232.
United States Court of Appeals, Sixth Circuit.
Argued: December 7, 2004.
Decided and Filed: February 23, 2005.
COPYRIGHT MATERIAL OMITTED ARGUED: Andrew M. Stephens, Andrew M. Stephens & Associates, Lexington, Kentucky, for Appellant. James E. Arehart, Assistant United States Attorney, Lexington, Kentucky, for Appellee. ON BRIEF: Andrew M. Stephens, Andrew M. Stephens & Associates, Lexington, Kentucky, for Appellant. James E. Arehart, Charles P. Wisdom, Jr., Assistant United States Attorney, Lexington, Kentucky, for Appellee.
Before: GUY and COLE, Circuit Judges; TARNOW, District Judge.*
OPINION
COLE, Circuit Judge.
1
Defendant-Appellant James Ronald Hazelwood pleaded guilty to charges of federal bank robbery and the use of a firearm to commit a violent felony. He now appeals three different sentencing enhancements applied by the district court. We find no error in the application of enhancements for reckless endangerment during flight and for Hazelwood's criminal history. However, because we find that the application of two separate penalties for making a "threat of death" and for the use of a firearm during a felony would constitute prohibited "double counting" under the Guidelines, and because we are not convinced that this error was harmless, we VACATE Hazelwood's sentence and REMAND for resentencing.
I.
2
The facts of this case, with only some minor sentencing-related exceptions, are undisputed. On December 16, 2002, Ronnie Hazelwood robbed a bank in Perryville, Kentucky. Pointing a semiautomatic pistol at the tellers, he stated, "Do what I say or I will kill you!" After taking $41,820 from the bank, he fled in a getaway car. The car was described over police radio, and an off-duty deputy (who happened to have his police radio on at the time) spotted the car and followed it. The officer was later joined by other police units. He testified that Hazelwood was traveling between 80 and 90 miles per hour. Hazelwood tossed the money out of the car, drove several miles down the road, abandoned the car, and escaped on foot. He was eventually apprehended later that afternoon at his girlfriend's house.
3
Hazelwood subsequently pleaded guilty to charges of federal bank robbery and use of a firearm to commit a violent felony. The plea agreement included sentencing recommendations, but did not include any explicit agreement on the length of the sentence itself. The agreement specifically stated that the two parties did not agree as to whether a "reckless endangerment during flight" enhancement was warranted. Although the agreement did include a waiver of Hazelwood's right to appeal his conviction, it did not include a waiver of his right to appeal his sentence.
4
The district judge sentenced Hazelwood in accord with the joint recommendation, but sua sponte applied the following enhancements not recommended in the agreement: (1) a "reckless endangerment during flight" enhancement; (2) criminal history enhancements based on what the district court found were four separate, unrelated convictions; and (3) an enhancement for the use of a threat of death during a felony. Hazelwood timely appeals each of these enhancements.
II.
5
When reviewing sentencing decisions, we review the district court's factual findings for clear error, while reviewing the district court's conclusions of law de novo. See, e.g., United States v. DeJohn, 368 F.3d 533, 544 (6th Cir.2004).
A. Reckless Endangerment Enhancement
6
Hazelwood first argues that he should not have received a two-point enhancement for "reckless endangerment during flight" under U.S.S.G. § 3C1.2 because the district court did not determine specifically who was endangered, under what circumstances they were endangered, or whether or not any risk created during the flight was "substantial." An officer on the videotape of the chase notes that Hazelwood is traveling in excess of 90 miles an hour, but Hazelwood argues there is no independent way to verify Hazelwood's speed during the entire chase. He also argues that there was no finding by the judge that the neighborhood was residential or that any other drivers were endangered by Hazelwood's conduct.
7
The district judge based his findings on a videotape of the police chasing Hazelwood's vehicle, noting that:
8
[T]here is no testimony or no proof other than what the officer said that the speed was in excess of 90 miles an hour on a wet road. I'm not sure if it was raining. I know the road was wet. It appeared to be raining. I saw the car cross the double yellow line on several occasions, and I saw a car getting out of his way as he turned about halfway through the tape, as he made the right turn. So I believe this conduct does require the two-level adjustment.
9
The judge thus found that at least one other driver (specifically, the driver who got out of Hazelwood's way as he was turning right) was endangered by Hazelwood's driving.
10
While the question of what constitutes endangerment is a mixed question of law and fact, it is highly fact-based. Therefore, significant deference to the district court is required. See, e.g., United States v. Ennenga, 263 F.3d 499, 502 (6th Cir.2001). Many courts have held that a defendant who led police on a high speed chase where others are likely to be nearby can properly be given a reckless endangerment enhancement. See, e.g., United States v. Mills, 1 F.3d 414, 420-23 (6th Cir.1993); United States v. Miner, 108 F.3d 967, 970 (8th Cir.1997); United States v. Alexander, 48 F.3d 1477, 1493 (9th Cir.1995). And though Hazelwood notes that no harm resulted to anyone from his driving, no actual harm is required to show reckless endangerment. See, e.g., United States v. Wright, No. 00-5623, 19 Fed. Appx. 230 (6th Cir. Aug 28, 2001) (per curiam order); United States v. Jimenez, 323 F.3d 320 (5th Cir.2003).
11
The district court found that the road was wet, that Hazelwood crossed the double yellow line several times while traveling at high speed, that there were numerous other vehicles on the road, and, most importantly, that at least one other car was forced to leave the pavement as Hazelwood abruptly turned right with his left blinker flashing. These findings, considered in toto, are sufficient to support a finding of reckless endangerment. Hazelwood has presented no evidence that would give us reason to disturb them. We therefore affirm the district court's finding that Hazelwood's driving recklessly endangered other drivers.
B. Criminal History Enhancements
1. Relevance of Three Prior Convictions
12
Hazelwood next argues that three of his prior convictions were "related," and that he thus should not have received separate criminal history points for each. The facts at issue in the three prior convictions are as follows:
13
First, on December 26, 1995, Hazelwood rented a kerosene heater from Philips Repair. However, he never made any of the required payments, and subsequently sold the heater to someone else without ever paying Philips. Philips Repair filed a criminal complaint in Marion County, Kentucky, on February 5, 1996. Second, sometime early that same month, Hazelwood test-drove a used Mercury Cougar, but did not return the keys to the vehicle at the end of the drive. On several occasions over the next two weeks, Hazelwood returned to the lot at night and took the car, always returning it before the lot opened the next morning. Finally, on February 13, 1996, Hazelwood and another man robbed a business in Springfield, Kentucky, using handguns. Part of the money handed over to Hazelwood was "bait" money with registered serial numbers.
14
The next day, Hazelwood was stopped in the Mercury Cougar for driving without a license plate. In his pocket, officers found some of the "bait" money. For the car theft, Hazelwood was charged in Marion County and convicted by a jury on June 20, 1996. For the theft of the heater, Hazelwood pleaded guilty in Marion County in July 1996, with the understanding that his sentence would run concurrently with his car theft sentence. For the robbery, Hazelwood pleaded guilty in Washington County pursuant to an agreement between the Marion and Washington County prosecutors that the sentences in all three cases would run concurrently. He then received (after some later amendments) a combined sentence of 14 years, including 14 years for the robbery and 5 years for the car theft, running concurrently.
15
Hazelwood argues that the car theft and robbery offenses were "related" under the Guidelines because they were part of the same course of conduct, because there was no intervening arrest, and because they were effectively consolidated for sentencing. In addition, he argues that the heater theft offense was effectively consolidated for sentencing, and thus that all three should be considered one felony offense for criminal history purposes.
16
Application Note 3 to U.S.S.G. § 4A1.2 defines "related" offenses for criminal history determination purposes as follows:
17
Prior sentences are not considered related if they were for offenses that were separated by an intervening arrest.... Otherwise, prior sentences are considered related if they resulted from offenses that (A) occurred on the same occasion, (B) were part of a single common scheme or plan, or (C) were consolidated for trial or sentencing.
18
We review a district court's determination of whether prior convictions are "related" for clear error, regardless of which prong of the relatedness test we are evaluating. See, e.g., United States v. Horn, 355 F.3d 610, 612-15 (6th Cir.2004). For two convictions to be related due to having been part of a single common scheme or plan, they must have been jointly planned or the commission of one offense necessarily requires the commission of the other. See, e.g., United States v. Irons, 196 F.3d 634, 638 (6th Cir.1999). The burden of showing such relatedness falls on the defendant. Id.
19
As to the issue of whether the car theft and robbery offenses were related conduct, the district court found that the two offenses were separate, because the car had been taken from the lot on previous occasions not related to the robbery, because the two crimes involved different victims and trials, and because there was another man involved in the robbery who was in no way connected to the car theft. None of these facts are disputed; all that Hazelwood argues is that the day of the robbery was also the day he stole the car from the lot. The district court conceded that if the car had been taken only on the day of the robbery, the offenses would have been related. However, since the car was taken on multiple occasions, the court found that the two offenses could not be said to have been part of a single common scheme or plan. This is in line with our holding in Irons; since the commission of the robbery did not necessarily require a stolen car, and since no evidence has been presented by Hazelwood to indicate that the car was stolen specifically in preparation for the robbery, the offenses cannot be viewed as "related." Id. As a result, the district court's determination on this point was not clear error.
20
Hazelwood also argues that all three of the relevant convictions here were "functionally consolidated" for sentencing, even if they were not explicitly consolidated. The Supreme Court has previously held that a district court's evaluation of the "functional consolidation" of two sentences is an inherently fact-specific determination and should be reviewed deferentially. Buford v. United States, 532 U.S. 59, 66, 121 S. Ct. 1276, 149 L. Ed. 2d 197 (2001); see also Horn, 355 F.3d at 613 (noting that the level of deference required by Buford is "clear error."). Though it is true that a formal consolidation order need not be entered in order for cases to be considered functionally consolidated for sentencing, see, e.g., United States v. Best, 250 F.3d 1084, 1095 (7th Cir.2001), this Court has held that sentences are not functionally consolidated "when offenses proceed to sentencing under separate docket numbers, cases are not related, and there was no formal order of consolidation." United States v. McAdams, 25 F.3d 370, 374 (6th Cir.1994); see also United States v. Carter, 283 F.3d 755, 758 (6th Cir.2002) ("The fact that judgment was pronounced on the same day with sentences to run concurrently, without more, does not establish that [the cases] were in fact consolidated.").
21
The district court noted that there was a guilty verdict in one case, as opposed to pleas in the other two, that each case proceeded to trial and sentencing under separate docket numbers, and that each case resulted in a separate, individualized sentence, despite the fact that they were to be served concurrently. As a result, the district court overruled Hazelwood's objection to the imposition of this enhancement. This conclusion was not clear error.
22
2. Prior Attempted Burglary Sentence.
23
Hazelwood also argues that another attempted burglary conviction should not be used against him because, based on its case number designation, it could not have been a felony conviction. The Government notes that this objection was not raised below; though Hazelwood did object to the use of this conviction at his sentencing, he did so on the basis that it did not involve any jail time. The district court found, on advice from the Probation Department, that the offense did involve jail time and that Hazelwood was merely given credit for time already served, which is why he did not serve any additional time for this offense.
24
Hazelwood never raised in district court the objection that this offense was not a felony, and has not pleaded any excuse for failing to do so. Though the Government argues that this means Hazelwood has waived this argument entirely, this Court will review a sentence enhancement not objected to below, but only for plain error. See, e.g., United States v. Swanberg, 370 F.3d 622, 627 (6th Cir.2004). However, Hazelwood has not presented evidence that would require us to vacate the sentence on this ground. The district judge found as a matter of fact that Hazelwood was sentenced to 120 days in prison (with credit for 120 days previously served), based on testimony from the Probation Officer. Hazelwood's mere assertion, without any documentation, that the case number designation on the conviction record means that he could not have been sentenced to jail time is not sufficient evidence to prove plain error as to this factual finding, and thus his objection to this enhancement must fail.
C. "Threat of Death" Enhancement
25
Hazelwood finally disputes the district court's imposition of a two-point enhancement for a "threat of death" under U.S.S.G. § 2B3.1(b)(2)(F), noting that the district judge had mentioned that, on this point, he had "certainly got an argument that [he could] make to the Court of Appeals." Hazelwood relies on an Eleventh Circuit opinion that states that sentences imposing an increase for "the use of a firearm or dangerous weapon, should not include an independent increase, whether by departure or otherwise, for an express threat of death." United States v. Bourne, 130 F.3d 1444, 1447 (11th Cir.1997) (citing United States v. LNU, 16 F.3d 1168, 1171 (11th Cir.1994)). In that case, the defendant had robbed a bank with a gun, and had also given a note to the tellers that stated he would kill them. The district judge there imposed both a "brandishing or possessing a dangerous weapon" three-point enhancement under U.S.S.G. § 2B3.1(b)(2)(E) and a "threat of death" two-point enhancement under U.S.S.G. § 2B3.1(b)(2)(F). The Eleventh Circuit held this to be improper, noting that "a threat of death is implicit when a dangerous weapon is displayed...." Bourne, 130 F.3d at 1447.
26
The Government has three responses to Hazelwood's argument. First, it notes that the "threat of death" enhancement here was made for the use of a threat separate from that implied by the brandishing of the firearm. Second, the Government notes that Hazelwood's "firearm enhancement" was not in fact a firearm enhancement under § 2B3.1(b)(2). Rather, it was a conviction on a separate "use of a firearm to commit a violent felony" charge, under 18 U.S.C. § 924(c)(1)(A). As a result, claims the Government, Hazelwood is not receiving two separate § 2B3.1(b)(2) enhancements. Finally, the Government argues that an application note that had previously forbidden the use of a "threat of death" enhancement in situations when a firearm-based enhancement or charge is applied has since been deleted from the Guidelines. Compare U.S.S.G. § 2K2.4 n.4 (2004) with U.S.S.G. § 2K2.4 n.4 (1998); see also United States v. Smith, 981 F.2d 887, 892-94 (6th Cir.1992).
27
In Smith, this Court held squarely that the 1992 version of the Guidelines (specifically, Application Note 2 to § 2K2.4) prohibited the use of a § 2B3.1(b)(2) enhancement in situations such as this one where a defendant has also been convicted of a firearm violation under 18 U.S.C. § 924(c).1 The Court noted that the defendant had made a threat that was technically separate from the act brandishing the firearm when he said "This is a stickup. Give me your money. Hurry up or you will be dead." Observing that § 2K2.2 n.4 prohibited the use of "specific offense characteristic" enhancements resulting from the "possession, brandishing, use, or discharge" of a firearm, the Court held that the defendant's express oral threat of death, while by nature a different act from brandishing the gun, was "related to the use of the firearm," since it would be obvious that the threatened killing would involve the use of the gun. Smith, 981 F.2d at 893. As a result, we held that the threat spoken by the defendant was related to the use of the firearm for which the 924(c) conviction was imposed, and thus that counting the threat separately would result in "double counting" that was explicitly impermissible under Application Note 2 to § 2K2.4. Id.
28
While most of the content of Application Note 2 was later moved to Note 4, its content has not been altered in any way that should affect the Smith Court's conclusion. Although the example specifically mentioning robbery and the "threat of death" enhancement was removed, new language was added that precluded the use of enhancements for any firearm-related conduct related to an underlying offense when a defendant is also convicted under § 924(c). Compare U.S.S.G. § 2K2.4 n.4 (2004) with U.S.S.G. § 2K2.4 n.4 (1998); see also United States v. Reevey, 364 F.3d 151, 158-59 (4th Cir.2004) (invalidating a sentence on exactly the same grounds as Smith, and rejecting the Government's argument that the 2000 amendments to the Guidelines should alter this conclusion). Every other circuit to review this or related questions has agreed with Smith. See, e.g., Reevey, 364 F.3d at 158-59 (4th Cir.2004); United States v. Franks, 230 F.3d 811, 813-14 (5th Cir.2000); United States v. Murray, No. 97-6735, 1999 WL 187192 (4th Cir. Apr.6, 1999) (unpublished opinion); United States v. Triplett, 104 F.3d 1074, 1082 (8th Cir.1997), cert. denied, 520 U.S. 1236, 117 S. Ct. 1837, 137 L. Ed. 2d 1042 (1997); United States v. Duran, 4 F.3d 800, 804 (9th Cir.1993); United States v. Farrier, 948 F.2d 1125, 1127 (9th Cir.1991). As the Fourth Circuit noted in Reevey, the relevant inquiry under the current version of Application Note 4 is:
29
whether the threat-of-death enhancement was applied `for possession, brandishing, use, or discharge of an explosive or firearm.' In [defendant Reevey's] case, both of the threats made by [Reevey] were to shoot Jones (with a handgun that Reevey had already displayed), and they involved the firearm Reevey was convicted of possessing under § 924(c).
30
364 F.3d at 158-59.
31
Hazelwood's case is no different from Reevey's, or, for that matter, Smith's. Reevey, Smith, and Hazelwood all brandished guns, and all verbally threatened to kill others while doing so, during the course of a felony. All three defendants' threats were directly related to the firearm each was brandishing, regardless of whether they said "I will shoot you" or more generally "I will kill you." See also Duran, 4 F.3d at 804 (reaching the same result where a defendant had merely said "Don't move or we'll kill you."). The current Application Note 4 is clear that enhancements stemming from the "possession, brandishing, use, or discharge" of a firearm related to the underlying offense cannot be imposed for acts related to the conduct for which a defendant was also convicted under 18 U.S.C. 924(c). See, e.g., Reevey, 364 F.3d at 158-59. We therefore find that the 2000 amendments to the Guidelines do not dissuade us from applying the holding of Smith to Hazelwood's case. As a result, since the threat of death in the instant case was related to Hazelwood's brandishing of a firearm, the imposition of the two-point threat enhancement in his case was improper. The removal of these two points would result in a sentencing range where the lowest point (100 months) would be lower than the 120-month sentence Hazelwood received for the count to which this enhancement applied. As a result, under Sixth Circuit jurisprudence prior to the issuance of United States v. Booker, 543 U.S. ___, 125 S. Ct. 738, ___ L.Ed.2d ___ (2005), Hazelwood's sentence would have been vacated and his case remanded for resentencing. See, e.g., Smith, 981 F.2d at 893-94 (citing United States v. Rosado-Ubiera, 947 F.2d 644, 646 (2d Cir.1991)).
III.
32
Subsequent to oral argument in the instant case, the Supreme Court issued its opinion in Booker, effectively rendering the Sentencing Guidelines "advisory" for the purposes of all cases currently on appeal. Booker, ___ U.S. at ___-___, ___-___, 125 S.Ct. at 764-65, 768-69. The parties submitted supplemental briefs regarding the applicability of Booker. Both parties directed their arguments to any potential Sixth Amendment violations in Hazelwood's case, and not to the applicability to Hazelwood's Guidelines-related assignments of error previously preserved for appeal. For example, the Government argues that Booker is not applicable to the instant case because Hazelwood did not raise a Sixth Amendment violation below, and because he has not shown plain error on appeal.
33
In the remedial opinion from Booker, the Supreme Court was very clear: "The district courts, while not bound to apply the Guidelines, must consult those Guidelines and take them into account when sentencing." Id. at 744-45; see also id. at 744 (requiring "judges to consider the Guidelines `sentencing range established for ... the applicable category of offense committed by the applicable category of defendant'" (citing 18 U.S.C. § 3553(a)(4))); 18 U.S.C. § 3553(a)(4). The portions of § 3553 on which these statements rely were not severed by Booker. Accordingly, insofar as Hazelwood is challenging the application of the Guidelines to his case, Booker does not affect the analysis of whether the district court erred in this case. Since, regardless of whether the Guidelines are mandatory or merely advisory, district courts are required by statute to consult them, and since a district court's misinterpretation of the Guidelines effectively means that it has not properly consulted the Guidelines, we hold that it was error for the district court to apply the threat of death enhancement in this case.
34
However, the fact that there was error in Hazelwood's sentencing does not necessarily mean that he is entitled to resentencing. See, e.g., Fed.R.Crim.P. 52(a). Because Hazelwood properly preserved his argument that the district court erred in applying the enhancement, we must determine whether any error in sentencing was harmless, as opposed to conducting a plain error analysis. Compare id. with Fed.R.Crim.P. 52(b); see also United States v. Olano, 507 U.S. 725, 731-32, 113 S. Ct. 1770, 123 L. Ed. 2d 508 (1993). Under the harmless error test, a remand for an error at sentencing is required unless we are certain that any such error was harmless — i.e. any such error "did not affect the district court's selection of the sentence imposed." Williams v. United States, 503 U.S. 193, 203, 112 S. Ct. 1112, 117 L. Ed. 2d 341 (1992).
35
Here, it is likely that the error in imposing the additional enhancement did affect the sentence imposed by the district court. Notably, the judge, in overruling Hazelwood's objection to the threat of death enhancement, stated that Hazelwood "certainly [had] an argument that [he] can make to the Court of Appeals." The judge later specifically noted in imposing the sentence that he had overruled Hazelwood's objections to the aforementioned enhancements. Further, as we have noted, had the threat-of-death enhancement not been applied, the lower limit of the applicable Guidelines range would have been below the 120-month sentence actually imposed on Hazelwood, where that sentence was already at the lowest limit of the Guidelines range as calculated by the sentencing judge. The sentencing judge did indicate that if he had sustained "some" of Hazelwood's objections to the pre-sentence report, he would not have sentenced Hazelwood to the low end of the applicable range. J.A. 59. However, the judge did not say which objections he would need to have sustained before sentencing Hazelwood above the lowest level permitted by the Guidelines, nor did he say what he would have done had he sustained only one objection. (It is worth noting that had all of Hazelwood's objections been sustained, the applicable range would have been 46-57 months.) As a result, it is at least possible, even under a non-mandatory guidelines system, that the judge, considering the proper Guideline range, would have sentenced Hazelwood to a sentence below that which he actually received. The district court's error thus cannot be considered harmless. See, e.g., Williams, 503 U.S. at 203, 112 S. Ct. 1112 (finding harmless error only where the reviewing court concludes the error did not affect the sentence imposed); United States v. Gill, 348 F.3d 147, 155 (6th Cir.2003). Therefore, a remand for resentencing is warranted.
36
Because a remand for resentencing is appropriate, we need not determine whether any Sixth Amendment violations at Hazelwood's sentencing constituted plain error. Cf. United States v. Oliver, 397 F.3d 369, 377-79 (6th Cir.2005); United States v. Bruce, 396 F.3d 697, 718-720 (6th Cir.2005).
IV.
37
For the preceding reasons, we VACATE Hazelwood's sentence and REMAND this matter for resentencing consistent with this opinion and Booker.
Notes:
*
The Honorable Arthur J. Tarnow, United States District Judge for the Eastern District of Michigan, sitting by designation
1
In between the briefing and opinion inSmith, the "threat of death" section was moved from § 2B3.1(b)(2)(D) to § 2B3.1(b)(2)(F) but the Smith court, along with every other court to consider the issue, has held that the move (and slight wording changes in both this and other portions of later Guideline versions) had no effect on its holding. See Smith, 981 F.2d at 892. | 01-03-2023 | 04-19-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1547506/ | 867 A.2d 208 (2005)
Robert GUEST, A/K/A Robert Gest, Appellant,
v.
UNITED STATES, Appellee.
No. 02-CF-1203.
District of Columbia Court of Appeals.
Submitted December 4, 2003.
Decided January 27, 2005.
*209 Joanne Vasco, appointed by the court, was on the brief for appellant.
Roscoe C. Howard, Jr., United States Attorney at the time the brief was filed, and John R. Fisher, Barbara J. Valliere, Ian P. Alberg, and Denise A. Simmonds, Assistant United States Attorneys, were on the brief for appellee.
Before WAGNER, Chief Judge, and TERRY and WASHINGTON, Associate Judges.
TERRY, Associate Judge.
After a jury trial, appellant was convicted of distributing cocaine. On appeal he makes a twofold claim under Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). First, he contends that he was denied due process because the trial court failed to ensure that the government complied with his Brady request. Second, he maintains that the Brady information that he sought was material to his case. We hold that there was no Brady violation because the information that appellant sought was not in the possession of the government. We therefore affirm appellant's conviction without reaching his materiality claim.
I
A. The Underlying Facts
In the early morning hours of August 18, 2001, appellant, Robert Guest,[1] was arrested for selling cocaine to Officers John Haines and James Koenig of the Metropolitan Police. The officers were working undercover, wearing plain clothes and driving an unmarked truck. They were patrolling an area in Southeast Washington where several nightclubs are located, on the lookout for "aggressive panhandlers,"[2] auto thefts, and robberies. Appellant approached the officers twice in the 100 blocks of K and L Streets, S.E., both times asking if they were interested in buying cocaine. Before approaching the officers' truck for the second time, appellant had been walking with two other men, later identified as Michael Simpson and Michael Scott. After the officers agreed to buy cocaine during the second encounter,[3] appellant motioned to Simpson, who was standing across the street. Simpson then came over and dropped a pink ziplock bag containing cocaine into the cab of the truck.[4] After calling for backup, Officer *210 Haines arrested appellant and Simpson.[5] Scott, who did not interact with the officers in any way, was initially stopped and questioned, but was released without being charged.
B. The Brady Request
About a month before trial, defense counsel wrote a letter to the prosecutor requesting, in addition to "all the discovery materials you have provided" (for which she expressed her thanks), that the government disclose (1) Michael Scott's criminal record, (2) Scott's "history of dealings with law enforcement authorities in relation to these 8/18/01 arrests and any other cases,"[6] (3) any information that Scott was "the source or conduit of any of the drugs" that were the subject of the pending indictment, and (4) "any information that ... Scott is known or was known in 2001 to police as a purveyor of cocaine." Such information, counsel wrote, "looks to me like Brady."
During a motion hearing just before the trial began, defense counsel told the court that the government had not complied with her Brady request. The prosecutor explained to the court that, after running Scott's name through the government's computers, the only information he was able to find was the police report in this case (Form PD-163) stating that Scott was present at the scene, which counsel already had. The prosecutor added that the officers had questioned Scott at the scene, but he was released because they determined that he had no apparent connection to the drug deal. The court concluded that if defense counsel had the police report, the government "didn't suppress anything," and ruled that "the government's disclosures [were] sufficient to deal with the specific Brady request." Nevertheless, the court suggested that the prosecutor make further inquiry of the officers, run a records check for Scott's last known address, and provide, if available, any information concerning Scott's address or criminal history. The prosecutor said he had already spoken to the officers "and they did not recall getting that information from him," but he agreed to "investigate about it a little further." The proceedings were then adjourned for the weekend.
The following Tuesday, after the jury had been selected and sworn, defense counsel again informed the court at a bench conference that the government still had not furnished Scott's address.[7] The court responded, "I can't create evidence out of non-evidence. All I can do is put the government to its constitutional obligation ... to make sure that [if] they have any information which could be exculpatory [under] Brady, [and if] it's material, that they disclose it." The prosecutor also stated that he had talked with and examined the notebooks of "every officer" who was on the scene, and that none of the officers even remembered Scott until the prosecutor pointed out his name in the PD-163.
*211 The trial proceeded, and at its conclusion the jury found appellant guilty of distributing cocaine.
II
Appellant contends that he was denied due process, in violation of Brady, because the trial court failed to ensure that the government had ascertained Scott's last known address. This claim is essentially a challenge to the court's finding that the government did not possess the information that appellant sought. We conclude that the trial court's determination was not plainly wrong. See D.C.Code § 17-305(a) (2001). After the prosecutor explained that the only information he had about Michael Scott was the police report containing his name, but no address, the court directed the prosecutor to conduct a records check and to inquire further with the police officers who were involved in this case. He did so, but was unable to find additional information about Mr. Scott, and defense counsel made no showing that either the individual prosecutor or the government as a whole possessed any information of the type that she sought. Nor, on appeal, has appellant made any showing or proffer that the government in fact had such information.
In Brady the Supreme Court held that "the suppression by the prosecution of evidence favorable to an accused upon request violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution." 373 U.S. at 87, 83 S.Ct. 1194. There are two requirements that must be met in order to establish a violation of Brady. First, the government, or those acting on its behalf,[8] must have failed "to disclose to the defense, upon request, evidence in its possession ...." Farley v. United States, 694 A.2d 887, 889 (D.C.1997) (emphasis added); see Velasquez v. United States, 801 A.2d 72, 81 (D.C.2002) (no Brady violation when the government does not possess the evidence sought); United States v. Caicedo-Llanos, 295 U.S.App. D.C. 99, 101, 960 F.2d 158, 160 (1992) ("Brady established the principle that a defendant has a due process right to request and receive evidence in the government's possession" (emphasis added)). Second, the undisclosed evidence in the government's possession must be "material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution." Brady, 373 U.S. at 87, 83 S.Ct. 1194. Materiality is the focus in most cases,[9] because Brady violations usually "involve[] the discovery, after trial, of information which had been known to the prosecution but unknown to the defense." United States v. Agurs, 427 U.S. 97, 103, 96 S.Ct. 2392, 49 L.Ed.2d 342 (1976). This case, however, does not present the usual Brady scenario because the government here did not have the information that appellant sought. Therefore, because the first requirement *212 was not met, we need not address materiality, the second requirement. See In re Sealed Case, 337 U.S.App. D.C. 332, 334, 185 F.3d 887, 889 (1999) (if the government has the Brady information, "the [trial] court must then determine whether that information is `material' within the meaning of Brady and its progeny" (emphasis added)).
Given the record before us, we hold that there was no Brady violation in this case because the government did not have any additional information about Mr. Scott. See Velasquez, 801 A.2d at 81 (no Brady violation when "the government tried, without success, to find" records that were requested). If the government does not possess the requested information, there can be no Brady violation. Velasquez, 801 A.2d at 81; Farley, 694 A.2d at 889. Appellant has not made even a threshold showing that the information he sought even existed or, if it did, whether it was in the government's possession. Moreover, the fact that the prosecutor, after searching his records and talking with the police, could not find the additional information that appellant requested does not mean that the government failed to satisfy Brady."The Brady principle does not imply [the government's] duty to investigate and come to know information which the defendant would like to have but the government does not possess." Lewis v. United States, 393 A.2d 109, 115 (D.C.1978); see Levin v. Katzenbach, 124 U.S.App. D.C. 158, 162, 363 F.2d 287, 291 (1966) ("we do not suggest that the government is required to search for evidence favorable to the accused").
Finally, with respect to the actions taken by the trial court, we emphasize that a Brady motion is not meant to serve as a "discovery device" that "impose[s] an undue burden upon the [trial] court" to satisfy a defendant's general request for information.[10]Smith v. United States, 665 A.2d 962, 969 (D.C.1995) (citation omitted); see also Weatherford v. Bursey, 429 U.S. 545, 559, 97 S.Ct. 837, 51 L.Ed.2d 30 (1977) ("There is no general constitutional right to discovery in a criminal case"). In this case the trial court acted appropriately when it conducted an inquiry into appellant's Brady request and made sure that the government performed an adequate search for the requested material. See Kleinbart v. United States, 426 A.2d 343, 360 (D.C.1981) ("the trial court [has] the obligation to conduct an inquiry as to the possible existence of [Brady material]" when defense counsel makes a Brady request). As we have pointed out, the fact that the requested information was not in the government's possession does not imply that the trial court failed to ensure that the government satisfied Brady. But once the court determined, after hearing what the prosecutor had to say, that the government did not have the information, there was nothing more for the court to do; as the court explained, it could not "create evidence out of non-evidence." The correctness of the court's ruling is reinforced by appellant's inability, both at the trial level and on appeal, to show that the information he sought was actually in the government's possession.
Appellant's conviction is therefore
Affirmed.
NOTES
[1] Appellant's surname is spelled "Gest" in the indictment; elsewhere in the record it appears as both "Gest" and "Guest." He states in his brief that the correct spelling is "Guest."
[2] According to the testimony of Officer Haines, aggressive panhandlers are individuals who attempt to "charge [people] to park on public space."
[3] The officers were not prepared to get involved in a drug deal when appellant first asked them if they were interested in buying cocaine. Officer Haines testified that he had never been part of an undercover narcotics operation, and that he was focused on arresting aggressive panhandlers when appellant first approached him.
[4] Officer Haines testified that he immediately recognized the substance in the bag as crack cocaine. A field test and a later laboratory analysis both confirmed that in fact it was cocaine.
[5] Simpson, charged as a co-defendant, was tried with appellant and was convicted of distributing cocaine and possessing marijuana. He did not note an appeal from his conviction.
[6] Counsel's letter also asked "specifically whether and under what circumstances [Scott] has failed to comply with requests for information by prosecutors, police, or other agents including probation officers. I demand to know all promises and assurances to him...."
[7] The previous day, before jury selection began, defense counsel told the court that the government had not yet provided Scott's address. The prosecutor replied that the only information he had about Scott was the police report, which listed only Scott's name. There was no further discussion of the matter at that time.
[8] Under Brady,"the individual prosecutor has a duty to learn of any favorable evidence known to the others acting on the government's behalf in the case, including the police." Kyles v. Whitley, 514 U.S. 419, 437, 115 S.Ct. 1555, 131 L.Ed.2d 490 (1995).
[9] Evidence will be deemed material "only if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different. A `reasonable probability' is a probability sufficient to undermine confidence in the outcome." Pennsylvania v. Ritchie, 480 U.S. 39, 57, 107 S.Ct. 989, 94 L.Ed.2d 40 (1987) (quoting United States v. Bagley, 473 U.S. 667, 682, 105 S.Ct. 3375, 87 L.Ed.2d 481 (1985)); see also Kyles, 514 U.S. at 435, 115 S.Ct. 1555 (evidence is material when it "could reasonably be taken to put the whole case in such a different light as to undermine confidence in the verdict").
[10] We conclude that appellant's request was a "general request," Pennsylvania v. Ritchie, 480 U.S. at 59, 107 S.Ct. 989, because he did not identify the source of the supposed information about Scott or demonstrate that the government had such information in its possession. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1016902/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-4973
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
YOUNG DOWELL, JR.,
Defendant - Appellant.
Appeal from the United States District Court for the Southern
District of West Virginia, at Bluefield. David A. Faber, Chief
District Judge. (CR-04-66)
Submitted: July 25, 2005 Decided: August 16, 2005
Before WILKINSON, MICHAEL, and GREGORY, Circuit Judges.
Affirmed in part, vacated in part, and remanded by unpublished per
curiam opinion.
Mary Lou Newberger, Federal Public Defender, Jonathan D. Byrne,
Appellate Counsel, Michael L. Desautels, Assistant Federal Public
Defender, Charleston, West Virginia, for Appellant. Kasey Warner,
United States Attorney, Miller A. Bushong, III, Assistant United
States Attorney, Beckley, West Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Young Dowell, Jr. appeals his 210 month sentence
resulting from his conviction for distribution of cocaine base in
violation of 21 U.S.C. § 841(a)(1) (2000). We affirm Dowell’s
conviction, but vacate and remand for resentencing.
Dowell pled guilty and does not challenge his conviction.
Dowell claims that the district court violated his Sixth Amendment
rights by enhancing his sentence by virtue of a designation of
career offender under U.S. Sentencing Guidelines Manual § 4B1.1
(2004), on facts not alleged in the indictment, not admitted by
Dowell, and not found by a jury beyond a reasonable doubt in
violation of United States v. Booker, 125 S. Ct. 738 (2005).
In order for Dowell to be designated a career offender,
the Government had to establish (1) that Dowell was at least 18 at
the time of the instant offense, (2) that the instant offense is a
felony that is either a “crime of violence” or a “controlled
substance offense,” and (3) that Dowell had at least two prior
felony convictions for either a “crime of violence” or a
“controlled substance offense.” USSG § 4B1.1(a); United States v.
Harp, 406 F.3d 242, 245 (4th Cir. 2005).
Dowell does not contest that he was fifty-one years old
at the time of the instant offense, satisfying the first
requirement for career offender status under USSG § 4B1.1(a). A
controlled substance offense is: “an offense under federal or
- 2 -
state law, punishable by imprisonment for a term exceeding one
year, that prohibits the . . . distribution, or dispensing of a
controlled substance . . . or the possession of a controlled
substance . . . with intent to manufacture, import, export,
distribute, or dispense.” USSG § 4B1.2(b). Here, Dowell pled
guilty to distribution of cocaine base in violation of 21 U.S.C.
§ 841(a)(1) (2000), a felony that carries a minimum sentence of ten
years in prison. As the indictment states, cocaine base is a
controlled substance within the meaning of 21 U.S.C. § 812 (2000).
Dowell pled guilty to a controlled substance offense punishable by
imprisonment exceeding one year, satisfying the second requirement
of USSG § 4B1.1(a).
Dowell had one prior felony controlled substance offense.
In 1998, Dowell pled guilty to delivery of cocaine base and was
sentenced to one to fifteen years imprisonment. Dowell also had
one prior felony crime of violence. Under USSG § 4B1.2(a)(1), a
“crime of violence” includes any offense “punishable by
imprisonment exceeding one year” that “has as an element the use
. . . of physical force against the person of another.” The
commentary to USSG § 4B1.2(a)(1) states that a “‘Crime of violence’
includes murder.” See United States v. Pierce, 278 F.3d 282, 285-
86 (4th Cir. 2002). In 1980, Dowell was convicted of second degree
murder and sentenced to five to eighteen years’ imprisonment.
Dowell does not dispute any facts related to his prior convictions.
- 3 -
Because Dowell had two prior felony convictions, one for a crime of
violence and one for a controlled substance offense, he satisfied
the third requirement of USSG § 4B1.1(a).
Dowell argues that the district court’s use of his prior
convictions constituted impermissible judicial fact-finding, but
Booker specifically excepted prior convictions from its requirement
that facts be admitted or proven to a jury beyond a reasonable
doubt. Booker, 125 S. Ct. at 756. Dowell’s prior convictions
qualified as a crime of violence and a controlled substance offense
as a matter of law; this conclusion required no further judicial
fact-finding. See United States v. Ward, 171 F.3d 188, 192 (4th
Cir. 1999) (court’s inquiry into career offender status generally
limited to “the fact of conviction and the statutory elements of
the prior offense”). The district court did not err in its ruling
that Dowell qualified for the career offender sentence enhancement.
Dowell claims that even if he qualified as a career
offender, the district court violated his Sixth Amendment rights
because his prior convictions were not admitted by him or found by
a jury beyond a reasonable doubt. In United States v. Harp, 406
F.3d 242 (4th Cir. 2005), this court, applying the plain error
standard, found that even if the district court committed plain
error when it determined that defendant was a career offender
without the elements of that designation having been charged in an
indictment, this court would not exercise its discretion to correct
- 4 -
that error. Harp, 406 F.3d at 247. In Almendarez-Torres v. United
States, 523 U.S. 224 (1998), the Supreme Court held that “the
government need not allege in its indictment and need not prove
beyond reasonable doubt that a defendant had prior convictions for
a district court to use those convictions for purposes of enhancing
a sentence.” Although the opinion in Apprendi v. New Jersey, 530
U.S. 466 (2000), expressed some uncertainty regarding the future
vitality of Almendarez-Torres, this court has concluded that
Almendarez-Torres was not overruled by Apprendi. See United
States v. Cheek, F.3d , 2005 WL 1669398 (4th Cir. July 19,
2005); United States v. Sterling, 283 F.3d 216, 220 (4th Cir.
2002).
Dowell finally maintains that even if the district court
did not err in designating him a career offender, it erred in
failing to treat the guidelines as advisory. As Dowell properly
raised this issue in the district court by objecting to his
sentence based on Blakely v. Washington, 124 S. Ct. 2531 (2004), we
review for harmless error. The Government bears the burden in
harmless error review of showing beyond a reasonable doubt that the
error did not affect the defendant’s substantial rights. United
States v. Mackins, 315 F.3d 399, 405 (4th Cir. 2003). The
Government did not meet this burden because the district court gave
no indication what the sentence would have been had the district
court appreciated that it was not bound by the guidelines. We
- 5 -
would have to speculate that the district court’s error in thinking
itself bound by the guidelines did not affect the sentence. In
light of Booker, we vacate Dowell’s sentence and remand the case
for resentencing.*
Although the sentencing guidelines are no longer
mandatory, Booker makes clear that a sentencing court must still
“consult [the] Guidelines and take them into account when
sentencing.” 125 S. Ct. at 767. On remand, the district court
should first determine the appropriate sentencing range under the
Guidelines, making all factual findings appropriate for that
determination. See United States v. Hughes, 401 F.3d 540, 546 (4th
Cir. 2005) (applying Booker on plain error review). The court
should consider this sentencing range along with the other factors
described in 18 U.S.C. § 3553(a) (2000), and then impose a
sentence. Id. If that sentence falls outside the Guidelines
range, the court should explain its reasons for the departure as
required by 18 U.S.C. § 3553(c)(2) (2000). Id. The sentence must
be “within the statutorily prescribed range and . . . reasonable.”
Id. at 546-47.
*
Just as we noted in United States v. Hughes, 401 F.3d 540,
545 n.4 (4th Cir. 2005), “[w]e of course offer no criticism of the
district judge, who followed the law and procedure in effect at the
time” of Dowell’s sentencing.
- 6 -
We dispense with oral argument because the facts and
legal contentions are adequately presented in the materials before
the court and argument would not aid the decisional process.
AFFIRMED IN PART,
VACATED IN PART, AND REMANDED
- 7 - | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4215804/ | Dismissed and Memorandum Opinion filed October 26, 2017.
In The
Fourteenth Court of Appeals
NO. 14-17-00808-CR
ARNECIA M. BAKER, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 184th District Court
Harris County, Texas
Trial Court Cause No. 1535848
MEMORANDUM OPINION
Appellant entered a guilty plea to the offense of assault—bodily injury. In
accordance with the terms of a plea bargain, on May 11, 2017, the trial court
sentenced appellant to confinement for 90 days in the Harris County Jail. No timely
motion for new trial was filed. Appellant’s notice of appeal was not filed until
August 3, 2017.
A defendant’s notice of appeal must be filed within 30 days after sentence is
imposed when the defendant has not filed a motion for new trial. See Tex. R. App.
P. 26.2(a)(1). A notice of appeal that complies with the requirements of Rule 26 is
essential to vest the court of appeals with jurisdiction. Slaton v. State, 981 S.W.2d
208, 210 (Tex. Crim. App. 1998). If an appeal is not timely perfected, a court of
appeals does not obtain jurisdiction to address the merits of the appeal. Under those
circumstances it can take no action other than to dismiss the appeal. Id.
In addition, the trial court entered a certification of the defendant’s right to
appeal in which the court certified that this is a plea bargain case, and the defendant
has no right of appeal. See Tex. R. App. P. 25.2(a)(2). The trial court’s certification
is included in the record on appeal. See Tex. R. App. P. 25.2(d). The record supports
the trial court’s certification. See Dears v. State, 154 S.W.3d 610, 615 (Tex. Crim.
App. 2005).
Accordingly, the appeal is ordered dismissed.
PER CURIAM
Panel consists of Justices Christopher, Brown, and Wise.
Do Not Publish — Tex. R. App. P. 47.2(b).
2 | 01-03-2023 | 10-30-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/2750076/ | Case: 14-10387 Date Filed: 11/10/2014 Page: 1 of 2
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 14-10387
Non-Argument Calendar
________________________
D.C. Docket No. 6:12-cr-00288-GAP-KRS-1
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
JAMES OLIVOS,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(November 10, 2014)
Before ROSENBAUM, JULIE CARNES and ANDERSON, Circuit Judges.
PER CURIAM:
Case: 14-10387 Date Filed: 11/10/2014 Page: 2 of 2
H. Kyle Fletcher, counsel for James Olivos, has moved to withdraw from
further representation of the appellant and filed a brief pursuant to Anders v.
California, 386 U.S. 738, 87 S. Ct. 1396, 18 L. Ed. 2d 493 (1967). Our independent
review of the entire record reveals that counsel’s assessment of the relative merit of
the appeal is correct. Because independent examination of the entire record reveals
no arguable issues of merit, counsel’s motion to withdraw is GRANTED, and
Olivos’s convictions and sentences are AFFIRMED.
2 | 01-03-2023 | 11-10-2014 |
https://www.courtlistener.com/api/rest/v3/opinions/727449/ | 97 F.3d 1447
NOTICE: Fourth Circuit Local Rule 36(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.George Timothy JOHNSON, Petitioner-Appellant,v.Robert E. WARD, Warden; Charles Molony Condon, AttorneyGeneral of the State of South Carolina,Respondents-Appellees.
No. 96-6552.
United States Court of Appeals, Fourth Circuit.
Submitted Sept. 5, 1996.Decided Sept. 17, 1996.
George Timothy Johnson, Appellant Pro Se. Donald John Zelenka, Chief Deputy Attorney General, Columbia, South Carolina, for Appellees.
Before WIDENER and WILKINS, Circuit Judges, and PHILLIPS, Senior Circuit Judge.
PER CURIAM:
1
Appellant seeks to appeal the district court's order denying his petition for habeas corpus relief under 28 U.S.C. § 2254 (1988), as amended by Antiterrorism and Effective Death Penalty Act of 1996, Pub.L. No. 104-132, 110 Stat. 1214. Appellant's case was referred to a magistrate judge pursuant to 28 U.S.C. § 636(b)(1)(B) (1988). The magistrate judge recommended that relief be denied and advised Appellant that failure to file timely specific objections to this recommendation could waive appellate review of a district court order based upon the recommendation.1 Despite this warning, Appellant failed to specifically object to the magistrate judge's recommendation.
2
The timely filing of specific objections to a magistrate judge's recommendation is necessary to preserve appellate review of the substance of that recommendation when the parties have been warned that failure to object will waive appellate review.2 Appellant has waived appellate review by failing to file specific objections after receiving proper notice. Accordingly, we deny a certificate of probable cause to appeal; to the extent that a certificate of appealability is required, we deny such a certificate. 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.
3
DISMISSED.
1
Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir.1982)
2
Wright v. Collins, 766 F.2d 841, 845-46 (4th Cir.1985). See generally Thomas v. Arn, 474 U.S. 140 (1985) | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1547530/ | 15 F.2d 1 (1926)
HARTFORD FIRE INS. CO.
v.
JONES et al.
No. 4603.
Circuit Court of Appeals, Sixth Circuit.
November 3, 1926.
Hite H. Huffaker, of Louisville, Ky. (Tye & Siler, of Williamsburg, Ky., on the brief), for plaintiff in error.
I. N. Steely, of Williamsburg, Ky. (Stephens & Steely, of Williamsburg, Ky., and Lewis, Begley & Lewis, of London, Ky., on the brief), for defendants in error.
Before DENISON, DONAHUE, and MOORMAN, Circuit Judges.
DENISON, Circuit Judge.
The insurance company, the defendant below, issued to the plaintiffs below a fire insurance policy, covering the furniture and fittings in plaintiffs' hotel. In this suit, brought to recover a loss thereon, it developed that the insured property comprised two lots of furniture; one lot had been purchased by the second predecessors of the insured in this hotel business for $2,300, and was incumbered by a title contract, equivalent to a purchase-money chattel mortgage, upon which $1,600 was still unpaid, and which the insured had assumed and agreed to pay. The other lot had been purchased by the immediate predecessor of the insured, and added to the outfit, and was unincumbered. From the judgment against it, the insurance company seeks relief for three reasons:
First, it is urged that the property was represented by the insured to be worth $6,000, while in fact it was worth $4,000 only. There was no written application, and the record contains no evidence of any such oral representation, even if it might be thought to be so material or fraudulent as to escape the force of the Kentucky statute (section 639, Ky. Stats.), which says that a misrepresentation in the application shall not avoid the policy unless it was material or fraudulent.
It is next urged that, by not disclosing the existence of the incumbrance, the insured concealed a material fact, and thereby the policy became void. If the mere nondisclosure of the incumbrance, lacking any inquiry on the subject, could ever be called a concealment, the point is immaterial here, because the policy makes on this subject the explicit provision which we next take up for consideration, and which would merge and *2 supersede any uncertain inference on the subject of concealment.
This brings us to the third defense, the really important one. The policy contained the usual clause that "the entire policy, unless otherwise provided by agreement indorsed herein and added hereto, shall be void * * * if the subject of insurance be personal property, and be or become incumbered by a chattel mortgage." The fact clearly is that a part of this property was at the date of the policy incumbered by a chattel mortgage, and the effect of an incumbrance upon a part, as distinguished from an incumbrance upon the whole, is first to be considered.
The policy was for a single amount, upon a group of property, described in one assembly, and for a single premium. It must be held nonseparable. See cases cited in R. C. L. vol. 14, p. 940. If the divisibility of the premium presented the only problem, that might perhaps be overcome by arithmetic, since the rate of premium would naturally be the same upon both lots of property, and the premium might be apportioned; but it is quite clear that the increased risk contemplated by this breach-condition affected both lots. If the fact that part of the goods were covered by mortgage for the greater part of their purchase price indicates, as seems to be the theory of the law, that the insured would take less care to prevent a loss, and so increases the hazard, the same considerations must apply to the unincumbered lot, mingled with the other in the same building, and naturally subject to the same risks. It follows that, if this defense is good as to the mortgaged lot, it is good as to the other.
It developed that, according to the values of the articles, as indicated by the proofs, the mortgage covered about seven-twelfths of the insured property, while five-twelfths were clear. The trial court treated this situation as if there had been a representation in the application to the effect that the property was unincumbered, and as if the question then arose, under the Kentucky statute, whether this misrepresentation was fraudulent or material. We do not see that materiality in that sense (of representation) was in issue. The doubt must be whether the policy became void by breach of condition subsequent (or contemporaneous). Hence the question must be whether the breach which did occur was the stipulated forfeiture-breach. The only matter of materiality that could be open would be as to whether the actual breach was so trifling or negligible as not to be the breach contemplated by the contract; this is quite a different question from the one which was submitted to the jury, and which was whether by the incumbrance the risk was so much increased that the insurer, if it had been informed, would not have issued the policy. It was not open for the jury to say that a mortgage upon seven-twelfths of the insured property, even though the items could be segregated, was not a breach of the condition that there should be no mortgage upon it, and it was error to submit that question to the jury.[1]
The insured now insists that the last specified defense should not be permitted to prevail, because the agent who wrote the policy had full knowledge of the existence of this mortgage, and, since he was the agent of the insurance company (Ky. Stats. § 633), it had his knowledge and is estopped to make this defense (Masonic Life v. Robinson, 149 Ky. 80, 147 S. W. 882, 41 L. R. A. [N. S.] 505). In Hartford Ins. Co. v. Nance (C. C. A.) 12 F.(2d) 575, we considered a question which, except for divisibility of property, was the same as the one just stated. We there cited the pertinent decisions, and felt constrained to follow what we thought was the rule of the Supreme Court of the United States upon a question of general law, rather than the state decisions not involving a statute. We must now adhere to that conclusion. It is evident here, as it was in that case, that, if the testimony for the insured is true, they are entitled in equity to a reformation of the contract, on the ground of mistake or fraud, and that they thereby may escape the otherwise harsh result.
The judgment must be reversed, and the case remanded for further proceedings.
NOTES
[1] An examination of all the Kentucky cases cited in the compiler's note to section 639 (to 1924), and those cited in the later case of Queen Co. v. Cummins, 206 Ky. 300, 267 S. W. 144, does not disclose any such clear and settled rule about the effect of an undisclosed incumbrance as would enable us satisfactorily to follow it, even if it were not a matter of general law. As to materiality, see, also, our discussions in New York Life v. Goerlich (C. C. A.) 11 F. (2d) 838, 841, and in Columbian Ins. Co. v. Harrison (C. C. A.) 12 F.(2d) 986, 988. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1591422/ | 14 So.3d 94 (2009)
ACE TITLE LOAN, INC.
v.
James Michael CRUMP and Denise Littleton, as bankruptcy trustee.
1050246.
Supreme Court of Alabama.
January 16, 2009.
*95 Jeffrey L. Ingram of Galese & Ingram, P.C., Birmingham, for appellant.
Jarrod J. White of Cabaniss, Johnston, Gardner, Dumas & O'Neal LLP, Mobile; and W. Bradford Kittrell of Lyons, Kittrell, Rowan & Horn, L.L.C., Mobile, for appellees.
PARKER, Justice.
Ace Title Loan, Inc. ("Ace"), appeals from a judgment of the Mobile Circuit Court awarding the plaintiffs, James Michael Crump and Crump's bankruptcy trustee, Denise Littleton (hereinafter referred to collectively as "Crump"), $50,000 in compensatory damages and $25,000 in punitive damages. The judgment was based on an arbitration award on James's assault-and-battery claim against Ace based on the action of Ace's repossession agents. Ace challenges the arbitrator's findings and the award, asserting that the arbitrator ignored Ace's valid defense of judicial estoppel and that he violated procedure by improperly recognizing that both the bankruptcy trustee and James could be plaintiffs.
Background and Procedural Posture
On November 19, 2002, two agents of Ace appeared at James's residence to repossess from James's yard the collateral for a loan James had negotiated with Ace. During the course of the repossession, the agents allegedly assaulted James. According to James's complaint, the attack "involved physical beating, cuts and bruises, pain and suffering, embarrassment, and humiliation, with the beating occurring in full view of [James's] young daughter." It is undisputed that James was in default on the loan and that the repossession was proper, but James claims that the repossession was improperly executed.
On March 19, 2004, James sued Ace and its agents, seeking compensatory damages, punitive damages, and costs. Ace answered, denying liability and stating that the action should be stayed and that James should be ordered to submit the dispute to binding arbitration pursuant to the "pawn agreement," the contract under which the action arises. Ace followed its answer on May 6, 2004, with a motion to stay and to submit the dispute to arbitration. James opposed the motion, and Ace filed its response on May 27, 2004, again arguing that the dispute should be submitted to binding arbitration. On February 4, 2005, the trial court issued its order compelling James to arbitrate the dispute. The arbitrator ruled in favor of Crump,[1] and Ace now appeals from the judgment of the trial court adopting the arbitrator's report and award.
In the Arbitration
The arbitration was held on September 29, 2005. The arbitration, and hence this appeal, was complicated by the fact that after the assault but before James filed the legal action based on the assault, James filed a petition in bankruptcy under Chapter 7 of the Bankruptcy Code. He failed to list as a contingent or unsecured claim in his bankruptcy petition the potential recovery in this action, and he did not report the existence of his claim until Ace moved the arbitrator for a summary judgment[2]*96 based on the doctrine of judicial estoppel, arguing that James's failure to mention the claim in his bankruptcy proceeding, which had been finalized, precluded his pursuing the claim. James then proceeded to reopen his bankruptcy proceeding on June 15, 2004, and Littleton, the bankruptcy trustee, was added to the arbitration proceeding as a plaintiff. Crump's brief, at 1-2.
The "Arbitration Judgment and Award," dated October 6, 2005, awarded Crump $50,000 in compensatory damages and $25,000 in punitive damages. The trial court entered its final judgment on October 21, 2005, adopting the arbitrator's award and incorporating it into its order. Ace filed its notice of appeal on November 15, 2005.
On Appeal
Ace appeals the trial court's order incorporating the arbitrator's judgment, arguing that the arbitrator's award is flawed because (1) its defense of judicial estoppel was improperly denied; (2) the bankruptcy trustee, a party over whom, Ace says, the arbitrator lacked personal jurisdiction, was impermissibly added as a party to the arbitration proceeding; (3) James was impermissibly retained as a party once the trustee was added as a plaintiff; and (4) the arbitrator failed to limit the award to the amount of the claims of the unsecured creditors in James's bankruptcy proceeding.
Crump answers, alleging that Ace's appeal should be dismissed as untimely filed and arguing that the arbitrator was correct on each issue raised on appeal. For the reasons presented below we pretermit discussion of the issues presented and remand the cause for further proceedings in the trial court.
Standard of Review
Our standard of review for an appeal from a trial court's order confirming an arbitration award is as follows:
"`"Where parties, as in this case, have agreed that disputes should go to arbitration, the role of the courts in reviewing the arbitration award is limited. Transit Casualty Co. v. Trenwick Reinsurance Co., 659 F.Supp. 1346 (S.D.N.Y.1987), affirmed, 841 F.2d 1117 (2d Cir.1988); Saxis Steamship Co. v. Multifacs International Traders, Inc., 375 F.2d 577 (2d [Cir.] 1967). On motions to confirm or to vacate an award, it is not the function of courts to agree or disagree with the reasoning of the arbitrators. Application of States Marine Corp. of Delaware, 127 F.Supp. 943 (S.D.N.Y.1954). Courts are only to ascertain whether there exists one of the specific grounds for vacation of an award. Saxis Steamship Co. A court cannot set aside the arbitration award just because it disagrees with it; a policy allowing it to do so would undermine the federal policy of encouraging the settlement of disputes by arbitration. United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960); Virgin Islands Nursing Association's Bargaining Unit v. Schneider, 668 F.2d 221 (3d Cir.1981). An award should be vacated only where the party attacking the award clearly establishes one of the grounds specified [in 9 U.S.C. § 10]. Catz American Co. v. Pearl Grange Fruit Exchange, Inc., 292 F.Supp. 549 (S.D.N.Y.1968)."'
"R.P. Industries, Inc. v. S & M Equipment Co., 896 So.2d [460,] 464 [Ala.(2004)] (quoting Maxus, Inc. v. Sciacca, 598 So.2d 1376, 1380-81 (Ala. *97 1992)). The standard by which an appellate court reviews a trial court's order confirming an arbitration award under the Federal Arbitration Act is that questions of law are reviewed de novo and findings of fact are reviewed only for clear error. See Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1289 (11th Cir. 2002)."
Hereford v. D.R. Horton, Inc., 13 So.3d 375, 378 (Ala.2009).
Necessity of Challenge in the Circuit Court
A challenge to an arbitration award is a prerequisite to an appeal. As we said in Horton Homes, Inc. v. Shaner, 999 So.2d 462 (Ala.2008):[3]
"The judgment entered by the circuit clerk on the arbitrator's award pursuant to § 6-6-15[, Ala.Code 1975,] is a conditional one; it does not become a final appealable judgment until the circuit court has had an opportunity to consider a motion to vacate filed by a party seeking review of the arbitration award. A party seeking review of an arbitration award is required to file a motion to vacate during this period while the judgment entered by the circuit clerk remains conditional in order to preserve its ability to later prosecute that appeal to an appellate court once the judgment becomes final. This is so not only because § 6-6-15 contemplates a party's first seeking relief from an award in the circuit court, but also because `[a]ny grounds not argued to the trial court, but urged for the first time on appeal, cannot be considered.' Lloyd Noland Hosp. v. Durham, 906 So.2d 157, 165 (Ala.2005)."
999 So.2d at 467.
Here, the record bears no evidence that such a motion was filed. A similar situation existed when Horton Homes was decided. Horton Homes, relying on this Court's decision in H & S Homes, L.L.C. v. McDonald, 910 So.2d 79 (Ala.2004), holding that a Rule 59(e), Ala. R. Civ. P., motion to vacate the award was not required before an arbitration award could be appealed, did not challenge the arbitration award in the circuit court, but timely filed its notice of appeal. In considering this failure in Horton Homes, this Court reviewed and then overruled McDonald, noting that a judgment on an arbitrator's award does not become a final appealable judgment "until the circuit court has had an opportunity to consider a motion to vacate." 999 So.2d at 467. We then held:
"Because the failure ... to file a motion to vacate the award with the circuit court was presumably in reliance on McDonald, it would hardly be just to deny relief in their appeals on that basis. For that reason, we now reverse the final judgment resulting from the passage of 10 days from the circuit clerk's entry of a conditional judgment, leaving in place the conditional judgment, and remand the cause for [the appellants] to file motions to vacate the award with the circuit court within 30 days of the date of this opinion. If, within the following 90 days, the circuit court denies those motions or otherwise allows the conditional judgment entered by the circuit clerk to become final by default, [the appellants] may engage in further appellate proceedings that permit us to review *98 the circuit court's action with new briefs and a record that includes grounds asserted in any subsequently filed motions to vacate."
999 So.2d at 468-469. Here, because Horton Homes was decided after Ace had filed its notice of appeal, the same reliance on McDonald may have influenced Ace's decision to appeal without filing a motion in the circuit court to vacate the judgment. Consequently, it would be unjust to deny Ace's appeal on that basis, and we, therefore, reverse the circuit court's judgment and remand the case to afford Ace the opportunity to present its motion to vacate the judgment in the circuit court.
REVERSED AND REMANDED.
COBB, C.J., and SEE, WOODALL, and SMITH, JJ., concur.
NOTES
[1] The bankruptcy trustee was added as a plaintiff during the arbitration proceeding. See infra.
[2] Although Ace's summary-judgment motion was denied, Ace makes no argument in its brief on appeal regarding that denial. Accordingly, for reasons presented infra, that issue is not before this Court.
[3] Rules 71B and 71C, Ala. R. Civ. P., were adopted, Rule 4(e), Ala. R.App. P., was adopted, and Rule 4(a)(1), Ala. R.App. P., was amended, all effective February 1, 2009, in response to Horton Homes, to clarify the procedure for taking an appeal from an arbitrator's award. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1591430/ | 563 F.Supp. 163 (1983)
WINE IMPORTS OF AMERICA, LTD., a New Jersey corporation, Plaintiff,
v.
GEROLMO'S LIQUORS, LTD., a Wisconsin corporation, Defendant.
GEROLMO'S LIQUORS, LTD., Plaintiff,
v.
RENFIELD, INC., and Wine Imports of America, Ltd., Defendant.
Nos. 81-C-1377, 81-C-1574.
United States District Court, E.D. Wisconsin.
April 29, 1983.
*164 Arthur J. Harrington, Charne, Glassner, Tehan, Clancy & Taitelman, Milwaukee, Wis., for Wine Imports.
Paul Gagliardi, Madirgrano, Warren, Bastian & Gagliardi, Kenosha, Wis., for Gerolmo's.
Michael A. Bowen, Foley & Lardner, Milwaukee, Wis., for Renfield.
DECISION AND ORDER
WARREN, District Judge.
These are consolidated cases before the Court pursuant to its diversity jurisdiction. Wine Imports of America, Inc. (Wine Imports) filed Case No. 81-C-1377 on October 26, 1981, against Gerolmo's Liquors, Inc. (Gerolmo) to recover amounts owed for goods sold and delivered. On October 29, 1981, Gerolmo filed No. 81-C-1574 in state court against Wine Imports and Renfield, Inc. (Renfield) alleging violations of the Wisconsin Fair, Dealership Law, Wis.Stat. Ch. 135. Gerolmo alleges that Wine Imports unlawfully terminated a franchise agreement with Gerolmo under which Wine Imports appointed Gerolmo as its wholesale distributor for Giacobazzi Lambrusco for Kenosha, Racine, and Walworth Counties, Wisconsin. Gerolmo also asserts a claim under the fair dealership law against Renfield, which purchased from Wine Imports the right to import Giacobazzi Lambrusco. On May 4, 1982, the Court ordered these cases consolidated.
*165 Presently pending before the Court are the following motions: (1) Renfield's motion for dismissal or summary judgment; (2) Wine Import's motion for summary judgment on its claim against Gerolmo; (3) Gerolmo's motion for a stay of execution of summary judgment; (4) Gerolmo's motion for a preliminary injunction; (5) Gerolmo's motion for leave to amend its complaint; and (6) Gerolmo's motion for a jury trial. The Court resolves these motions as indicated below.
Renfield's Motion for Dismissal or Summary Judgment
Renfield seeks an order pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure dismissing Gerolmo's complaint against it in No. 81-C-1574 for failure to state a claim upon which relief can be granted. Alternatively, Renfield seeks an order granting summary judgment in its favor against Gerolmo. In support of its summary judgment motion, Renfield has submitted the affidavit of its general counsel and secretary, Andrew M. Crisses.
Gerolmo's complaint alleges that in 1977, Wine Imports and Gerolmo entered into a franchise agreement whereby Gerolmo was appointed wholesale distributor for Giacobazzi Lambrusco for the above-mentioned Wisconsin counties. The complaint further alleges that, on September 9, 1981, Gerolmo was orally informed by Wine Imports that it had sold its distribution rights for Giacobazzi to Renfield. According to Gerolmo, Wine Imports never indicated it was terminating its franchise agreement with Gerolmo. Gerolmo alleges that Wine Imports wrongfully terminated their franchise agreement in violation of the Wisconsin Fair Dealership Law. In addition, Gerolmo alleges that Renfield, as a successor corporation of Wine Imports, wrongfully terminated it as a franchise distributor. The complaint seeks both injunctive and monetary relief.
The affidavit submitted by Mr. Crisses in support of Renfield's motion for summary judgment describes the transaction by which Renfield acquired the rights to distribute Giacobazzi. Renfield and Wine Imports entered into a written agreement under which Renfield purchased the exclusive right to import and distribute Giacobazzi wine in the United States. Under the terms of the agreement, Renfield did not undertake or assume any of the obligations of Wine Imports under any distributorship/dealership agreements which Wine Imports may have had with distributors throughout the United States. The agreement specifically provided for Renfield's assumption of Wine Imports' obligation to its Italian supplier and limited any further assumption of obligations with the following clause:
It is understood and agreed by the parties that Buyer is not assuming any obligations or liabilities of Seller, other than those expressly set forth above.
(Crisses Aff. ¶ 3.)
Mr. Crisses' affidavit further states that Renfield has never accepted or filled any orders for Giacobazzi placed by Gerolmo except for such purchase orders as Renfield was required to fill pursuant to a temporary restraining order issued by the Kenosha County Circuit Court (prior to the removal of No. 81-C-1574 to this Court). (Aff. ¶ 7.) The affidavit also states that the transaction between Wine Imports and Renfield represented the purchase of an intangible asset for cash only (Aff. ¶ 8), and that Wine Imports and Renfield are completely separate business entities. (Aff. ¶ 9.). Wine Imports has continued in business since Renfield's purchase of the Giacobazzi rights, and at no time has Renfield attempted to merge with or succeed in the corporate status or identity of Wine Imports. (Aff. ¶ 9.) Renfield has been engaged in the business of importing and distributing alcoholic beverages in the United States for over 30 years. It markets and distributes such alcoholic beverages in the United States through an established network of distributors. Since acquiring the rights to Giacobazzi, Renfield has distributed the wine in the United States through its established network. (Aff. ¶ 10.)
*166 Renfield contends that, as a matter of law, it cannot be held liable to Gerolmo under the Wisconsin Fair Dealership Law. The basic issue presented is whether Renfield succeeds to Wine Imports' obligations (assuming they existed) to Gerolmo under the Wisconsin Fair Dealership Law. For the reasons stated below, the Court resolves this issue in favor of Renfield.
As noted initially by Renfield in its argument, a dealership, as defined in Chapter 135, is a "contract or agreement ..." Wis. Stat. § 135.02(2). There is no allegation by Gerolmo that Renfield has ever made any contract or agreement with Gerolmo. Gerolmo's theory of liability against Renfield must be based, therefore, on some theory of successor corporation liability.
In Leannais v. Cincinnati, Inc., 565 F.2d 437, 439 (7th Cir.1977), the Seventh Circuit stated:
The general rule in the majority of American jurisdictions, including Wisconsin, is that a corporation which purchases the assets of another corporation does not succeed to the liability of the selling corporation.... [T]he general rule accords with the fundamental principle of justice and fairness, under which the law imposes responsibility for one's own acts and not for the totally independent acts of others.
The general rule cited in Leannais was applied in Armour-Dial, Inc. v. Alkar Engineering Corp., 469 F.Supp. 1198 (E.D.Wis. 1979), in which the district court ruled that the defendant had not succeeded to the bankrupt's contractual obligations when defendant purchased the bankrupt's assets. Similarly, in Cox v. Feeders Supply Co., 344 F.2d 924 (6th Cir.1965), the court applied the rule to foreclose the plaintiff from transferring a predecessor's statutory obligation under the Military Training and Service Act to its successor in interest. As pointed out by Renfield, the courts' decisions in Armour-Dial and Cox demonstrate that the general rule against successor liability applies to both contractual and statutory obligations, the kind of obligations involved in fair dealership cases. Thus, it appears that the general rule stated in Leannais would apply in the context of a Chapter 135 case, absent some exception.
As noted by the Leannais court, there are "four well-recognized exceptions to the general rule" against successor liability. 565 F.2d at 439. These include: (1) where the buyer expressly or implicitly assumes the seller's obligations; (2) where the transaction is a de facto merger or consolidation of the buying and the selling corporations; (3) where the buyer is merely a continuation of the seller; and (4) where the transaction is a fraud undertaken to evade the obligations in question. Id.
None of these recognized exceptions apply to the facts as they appear in the record of this case. First, there was neither an express nor implied assumption of Wine Imports' obligations to Gerolmo; indeed, the agreement between Renfield and Wine Imports expressly disavowed any succession of obligations other than those identified in the agreement. Second, the transaction between Renfield and Wine Imports was simply a cash sale of an asset, with each company continuing to operate as a separate business entity after the sale. Third, Renfield is not merely a continuation of Wine Imports; as indicated already, the companies are separate, ongoing business concerns with neither formal nor informal ties. Finally, there is no evidence in the record to suggest that the transaction between Renfield and Wine Imports was undertaken to evade Wine Imports' alleged obligations under the fair dealership law. Mr. Crisses specifically disavows any purpose of assisting Wine Imports in evading any responsibilities under Chapter 135. Thus, none of the recognized exceptions to the general rule stated in Leannais apply to the case at bar.
Gerolmo contends, however, that the purpose underlying the Wisconsin Fair Dealership Law would be frustrated by precluding successor liability in the context of this case. In particular, it notes Chapter 135's pronouncement that the law is to be "liberally construed and applied to promote its *167 underlying remedial purposes and policies." Wis.Stat. § 135.025. Successor liability is necessary, argues Gerolmo, to protect the dealer who has spent considerable time and money in building the product line of the grantor.
Yet, in the context of the instant case, Gerolmo is not left without a remedy. Wine Imports remains an ongoing business entity and a defendant in this suit. If, in fact, Wine Imports has a dealership agreement with Gerolmo and wrongfully terminated their relationship, Gerolmo may recover damages. See, e.g., Esch v. Yazoo Mfg. Co., 510 F.Supp. 53 (E.D.Wis.1981).
What Gerolmo seeks here is a special exception to the general rule stated in Leannais for fair dealership cases. But Chapter 135 simply provides no authority for establishing the exception Gerolmo seeks. Renfield is not a "grantor" within the meaning of the statute because it is not "a person who grants a dealership." Wis.Stat. § 135.02(3). As noted previously, there exists no "agreement" between Gerolmo and Renfield, which is a necessary part of a "dealership" as defined by the statute. Wis.Stat. § 135.02(2). The Wisconsin Supreme Court has cautioned that Chapter 135 is not to be interpreted expansively as to coverage. See, Foerster, Inc. v. Atlas Metal Parts Co., 105 Wis.2d 17, 31-32, 313 N.W.2d 60; Kania v. Airborne Freight Corp., 99 Wis.2d 746, 774-76, 300 N.W.2d 63. Gerolmo asks the Court to expand the coverage of the statute beyond its reasonable interpretation. This is a step the Court is unwilling to take.
The Court notes, however, that a dealer continues to be protected against the sale of a business from a grantor to a successor corporation where the grantor and successor enter into the transaction simply to evade the obligations of the fair dealership law. Such situations would come under the fourth exception recognized in Leannais. Presumably, the other exceptions identified in Leannais would also apply where the facts warranted their application. The Court simply holds in the instant case that there is no special exception to the general rule for Chapter 135 claims.
For the foregoing reasons, the Court will grant Renfield's motion for summary judgment.
Wine Import's Motion for Summary Judgment and Gerolmo's Motion for a Stay of Execution of Summary Judgment
In No. 81-C-1377, Wine Imports seeks an order granting summary judgment on its collection claim against Gerolmo. In support of its motion, Wine Imports has submitted Gerolmo's responses to requests for admissions. Gerolmo admits that it owes $24,859.38, plus interest at 1% per month from August 28, 1981, and $3,021.01, plus interest at 1.5% per month from October 31, 1981. Gerolmo has not opposed the motion for summary judgment. Because there appear to be no material facts at issue in regard to Wine Imports' collection claim, the Court will grant the motion for summary judgment.
Gerolmo has filed a motion to stay execution of summary judgment in the event summary judgment is granted. The motion is made pursuant to Rule 62(h) of the Federal Rules of Civil Procedure. Rule 62(h) provides:
(h) Stay of Judgment as to Multiple Claims or Multiple Parties. When a court has ordered a final judgment under the conditions stated in Rule 54(b), the court may stay enforcement of that judgment until the entering of a subsequent judgment or judgments and may prescribe such conditions as are necessary to secure the benefit thereof to the party in whose favor the judgment is entered.
Although the Court has granted Wine Imports' motion for summary judgment, as indicated above, it has not ordered the entry of judgment on Wine Imports' claim pursuant to Rule 54(b). This is, however, an appropriate instance for entry of judgment under the rule since Wine Imports' counterclaim is distinct from Gerolmo's fair dealership claim. Because the Court is of the opinion that there is no just reason for *168 delay, it will order the entry of judgment on the collection claim.[1]
The question then becomes whether the enforcement of that judgment should be stayed pending resolution of Gerolmo's claim against Wine Imports and, if so, upon what conditions. Gerolmo argues that the judgment should be stayed in view of the size of its claim against Wine Imports. Wine Imports argues that the stay should be denied because Gerolmo's claim presents a separate and independent cause of action. Both sides present cases to support their respective positions. Under the circumstances of this case, the Court believes it is appropriate to grant the requested stay. However, the Court will require as a condition of the stay that Gerolmo file a bond in the amount of $35,000.00 to secure payment of the judgment. See, Wright & Miller, Federal Practice and Procedure § 2909.
Motion for Leave to Amend Complaint
Gerolmo seeks leave to amend its complaint for the purpose of adding a common law cause of action to its original cause of action against Wine Imports under Chapter 135. Gerolmo does not state in so many words what theory of liability it relies upon in asserting its common law cause of action. Wine Imports opposes the motion for leave to amend on the ground that the new claim fails to state a claim upon which relief can be granted. Unfortunately, Gerolmo has not shed any light on this issue in its reply brief.
The Court has examined the proposed amended complaint and concludes that leave to amend should be denied. Although leave to amend should generally be freely given, the Court need not grant leave to amend where the proposed amendment fails to state a colorable claim for relief. The gist of Gerolmo's proposed amendment is that Wine Imports misrepresented to Renfield that Gerolmo had no dealership rights to distribute Giacobazzi wine. On the basis of that misrepresentation, alleges Gerolmo, Renfield wrongfully terminated Gerolmo's dealership rights. For relief, Gerolmo seeks reimbursement of amounts which it expended in promoting the sale of Giacobazzi. The Court fails to see how the foregoing states a common law cause of action against Wine Imports. Accordingly, the motion for leave to amend will be denied.
Motion for a Jury Trial
Gerolmo did not make a timely demand for a jury trial on its fair dealership claim after the case was removed to this Court. Gerolmo now seeks by way of motion an order that the case be tried to a jury.
A motion for a jury trial under Rule 39 of the Federal Rules of Civil Procedure is addressed to the discretion of the trial court. This Court generally takes the position that a motion for a jury trial should be granted in the absence of strong and compelling reasons to the contrary. See, Wright & Miller, Federal Practice and Procedure, § 2334 at 113. Here, the Court finds no compelling circumstances which would make a jury trial inappropriate. Accordingly, the Court will grant the motion for a jury trial.
Motion for a Preliminary Injunction
Gerolmo's seeks a preliminary injunction which would require Renfield and Wine Imports to fill Gerolmo's orders for Giacobazzi Lambrusco and to refrain from appointing any other distributors for Giacobazzi wine in Kenosha, Racine, and Walworth Counties. Of course, this request is now moot as against Renfield since Renfield's motion for summary judgment has been granted. Thus, the Court considers the preliminary injunction request only as it relates to Wine Imports.
*169 The parties have filed lengthy briefs in regard to the preliminary injunction motion, but the Court need only be brief in resolving the matter. The record before the Court indicates that Wine Imports no longer has the right to import and sell Giacobazzi wine. That right has been sold to Renfield. If the Court were to order Wine Imports to continue to fill Gerolmo's order for Giacobazzi, it would be ordering a party to do something which it is unable to do. This would work an unreasonable hardship on Wine Imports which would outweigh the harm caused to Gerolmo in denying the motion. In addition, it would be contrary to the public interest to order a party to do something which it is unable to do. Accordingly, the Court will deny the motion for a preliminary injunction.
Summary
For the foregoing reasons, the Court hereby:
(1) GRANTS Renfield's motion for summary judgment;
(2) GRANTS Wine Imports' motion for summary judgment against Gerolmo and ORDERS, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, that judgment be entered in favor of Wine Imports against Gerolmo in the amount of $33,750.07. Pursuant to Rule 62(h), such judgment shall be stayed pending the resolution of Gerolmo's claims against Wine Imports on the condition that Gerolmo files a bond with the Clerk of Court in the amount of $35,000.00 within thirty (30) days of the date of this order;
(3) DENIES Gerolmo's motion for leave to file an amended complaint;
(4) GRANTS Gerolmo's motion for a jury trial; and
(5) DENIES Gerolmo's motion for a preliminary injunction.
SO ORDERED this 29th day of April 1983, at Milwaukee, Wisconsin.
NOTES
[1] The judgment entered in favor of Wine Imports will be in the amount of $33,750.07. That amount has been arrived at as follows:
$24,859.38 (principal amount)
+ 5,046.45 (interest at 1% from 8/28/81)
__________
$29,905.83
plus
$ 3,021.02 (principal amount)
+ 823.23 (interest at 1½% from 10/31/81)
__________
$ 3,844.24 | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3347116/ | [EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] MEMORANDUM OF DECISION
The defendant, the State of Connecticut, moves for summary judgment based on the statute of limitations governing claims under CGS § 52-556. The plaintiff, Miriam Isidro, objects to this motion asserting that CGS § 52-593 applies.
The parties stipulate to the following facts:
The plaintiff alleges in her complaint that on February 12, 1995, she was injured by a vehicle owned by the State and operated by Roger Weissinger, a State Police Officer. On January 13, 1997, the plaintiff began a suit against Weissinger. On October 29, 1998, Weissinger moved for summary judgment based on CT Page 8961 the immunity conferred to him by CGS § 4-165. On December 14, 1998, the motion of summary judgment was granted. On December 23, 1998, the plaintiff initiated the present action against the state.
The complaint sets forth a cause of action for vicarious liability as the owner and insured, under § 52-556, for Weissinger's negligent operation of the vehicle in question. The statute of limitations governing such claims, CGS § 52-584, affords two years to commence suit from the date of the accident. Clearly, the present action began after that two-year period expired.
Section 52-593, however, provides an opportunity to avoid the effect of the statute of limitations if the plaintiff "failed to obtain judgment by reason of failure to name the right person as defendant" in an earlier action if the later action is brought within one year after the original suit terminated. This statute is remedial and should be liberally interpreted to effectuate the purpose of avoiding the hardship imposed by the usual application of the statute of limitations, Morrissey v. Board of Education,40 Conn. Sup. 266, 268 (1985). Our Supreme Court, nonetheless, has construed § 52-593 to apply only in circumstances where the original case ended because of failure to name the right defendant and for no other reason, Vessichio v. Hollenbeck,18 Conn. App. 515, 520 (1989); Perzanowski v. New Britain,183 Conn. 504, 507 (1981).
Resort to § 52-593 is typically made when a plaintiff sues A erroneously, believing that A operated or owned an offending vehicle or unsafe premises, when in actuality B operated or owned the vehicle or premises. The plaintiff makes no such claim in the present case. The original suit in this case was terminated because Weissinger, who was correctly alleged to be the operator, possessed immunity from liability for any negligent operation on his part under § 4-165.
The issue before the court is whether § 52-593 affords relief from the time constraints contained in the usual statute of limitations where it is the wrong legal theory, rather than the wrong defendant which resulted in the failure to obtain judgment in the first action. The court holds that § 52-593 is inapplicable in such cases.
No appellate level case directly addresses this precise CT Page 8962 point. Unsurprisingly, the trial court decisions divide on the resolution to this question. In a case nearly identical to the present one, Judge Wagner held that § 52-593 pertains and denied a motion for summary judgment based on the statute of limitations expiration, Fox v. State, Superior Court, Hartford J.D., d.n.CV94-540645 (November 22, 1995). In the same month, Judge Shelton ruled to the contrary on somewhat different facts, Turgeon v.Snap-On Incorporated, Superior Court, Hartford J.D., d.n. CV95-548488 (November 3, 1995).
The Turgeon case, supra, involved an original suit against retail sellers under the Product Liability Act. It developed that a defendant retailer never sold the product under scrutiny to the plaintiff's employer. The plaintiff then attempted to sue the manufacturer of the item rather than a retailer. In a typically well-written opinion, Judge Sheldon stated that § 52-593 "cannot be relied upon to save every late-filed action . . . Such a reading would plainly undermine the essential purpose of the statute of limitations, which is to prevent the unjustifiable prosecution of stale claims, for it would enable lazy, incompetent litigants to bring a series of unfounded, ill-planned or procedurally deficient actions," Id.
A plaintiff who fails to sue, timely, a potentially liable party can only rescue the cause under § 52-593 when that failure resulted from a mistaken belief that a defendant originally sued was that particular party and the original action terminated by virtue of that mistake. In the present case, the plaintiff was unmistaken about the identity of the purportedly negligent operator, Weissinger, and owner of the vehicle, the state. The plaintiff's error was in pursuing the actual operator who had immunity from liability.
While § 52-593 must be liberally viewed, the language of the statute cannot be ignored. The failure to obtain judgment must result from the "failure to name the right person," (emphasis added), rather than failure to sue the right person. The use of the word "name" indicates that misidentification of a party rather than misconception as to the liability of correctly identified persons is the target at which the statute aims. The plaintiff in the original action accurately identified Weissinger as the allegedly negligent operator. That action terminated because Weissinger was cloaked with immunity under § 4-165 and not because the operator was misidentified. CT Page 8963
In short, the Court concludes that § 52-593 redresses only factual errors, not faulty legal thinking. Consequently, the defendant's motion for summary judgment is granted.
Sferrazza, J. | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/1016890/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-6654
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
REGINALD LUCAS,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Terrence W. Boyle, Chief
District Judge. (CR-01-205)
Submitted: February 25, 2005 Decided: August 17, 2005
Before NIEMEYER, KING, and GREGORY, Circuit Judges.
Affirmed in part; dismissed in part by unpublished per curiam
opinion.
Reginald Lucas, Appellant Pro Se. Rudolf A. Renfer, Jr., Assistant
United States Attorney, Raleigh, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Reginald Lucas, a federal prisoner, appeals the district
court’s order denying his Fed. R. Civ. P. 60(b) motion* and
dismissing his action filed pursuant to the Freedom of Information
Act (FOIA). Lucas also seeks to appeal a separate district court
order denying relief on his motion filed under 28 U.S.C. § 2255
(2000).
An appeal may not be taken from the final order in a
§ 2255 proceeding unless a circuit justice or judge issues a
certificate of appealability. 28 U.S.C. § 2253(c)(1) (2000). A
certificate of appealability will not issue for claims addressed by
a district court absent “a substantial showing of the denial of a
constitutional right.” 28 U.S.C. § 2253(c)(2) (2000). A prisoner
satisfies this standard by demonstrating that reasonable jurists
would find both that the district court’s assessment of his
constitutional claims is debatable or wrong and that any
dispositive procedural rulings by the district court are also
debatable or wrong. See Miller-El v. Cockrell, 537 U.S. 322, 336-
38 (2003); Slack v. McDaniel, 529 U.S. 473, 484 (2000); Rose v.
Lee, 252 F.3d 676, 683 (4th Cir. 2001). We have independently
reviewed the record and conclude that Lucas has not made the
requisite showing. Accordingly, we deny a certificate of
*
The motion did not seek relief from any civil judgment, but
rather was an attack on Lucas’ drug conviction. Lucas filed the
motion before he filed his § 2255 action.
- 2 -
appealability and dismiss the appeal from the denial of the § 2255
motion.
Because Lucas did not raise his FOIA claim in his
informal brief to this court, the issue is waived. See 4th Cir.
Local R. 34(b). Further, in Lucas’ valid and binding plea
agreement, he waived his right to bring the FOIA claim as well as
the claim he raised in his Rule 60(b) motion. We accordingly
affirm the district court’s order denying the FOIA request and the
Rule 60(b) motion. The motion to compel the district court to
state its reason for denying a certificate of appealability and
the “Motion to Subtract Supplement Brief” are denied. We dispense
with oral argument because the facts and legal contentions 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/1016892/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-6468
GARY SWEETING,
Plaintiff - Appellant,
versus
SHERWOOD R. MCCABE, Correctional Administrator
at Harnett Correctional Institution; JERRY
MCQUEEN, Screening Officer at Harnett
Correctional Institution; NORMA WOOD, Case
Worker/Manager at Harnett Correctional
Institution; J. BAKER WILLIAMS, D.O.C.
Resolution Board Examiner; GEROTHA R. SPAIN,
D.O.C. Resolution Board Examiner; RON
MIRIELLO, Vice President for Education and
Student Support Services; DANIEL THOMAS,
Education Director for Central Carolina
Community College (CCCC) at HCI,
Defendants - Appellees.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Terrence W. Boyle,
District Judge. (CA-05-13-5-BO)
Submitted: August 3, 2005 Decided: August 17, 2005
Before MICHAEL and KING, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
Gary Sweeting, Appellant Pro Se.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
- 2 -
PER CURIAM:
Gary Sweeting appeals the district court’s order denying
relief on his 42 U.S.C. § 1983 (2000) complaint under 28 U.S.C.
§ 1915(e)(2) (2000). We have reviewed the record and find that
this appeal is frivolous. Accordingly, we affirm on the reasoning
of the district court.* See Sweeting v. McCabe, No. CA-05-13-5-BO
(E.D.N.C. Mar. 7, 2005). We dispense with oral argument because
the facts and legal contentions are adequately presented in the
materials before the court and argument would not aid the
decisional process.
AFFIRMED
*
In addition to seeking review of the district court’s
dismissal of his complaint, Sweeting also asserts on appeal that he
was not provided with the opportunity to amend his pleading, as
requested in his complaint. Generally, a pro se litigant’s
pleadings should be construed liberally to avoid inequity and the
complaint should not be dismissed unless it appears beyond doubt
that the plaintiff can prove no set of facts that would entitle him
to relief. See Gordon v. Leeke, 574 F.2d 1147, 1151 (4th Cir.
1978). Leave to amend a complaint “shall be freely given when
justice so requires,” Fed. R. Civ. P. 15(a), although the decision
to grant leave rests within the sound discretion of the district
court. Medigen of Ky., Inc. v. Pub. Serv. Comm’n of W.Va., 985
F.2d 164, 167-68 (4th Cir. 1993). If a pro se complaint contains
a potentially cognizable claim, the plaintiff should be given an
opportunity to particularize his allegations. See Coleman v.
Peyton, 340 F.2d 603, 604 (4th Cir. 1965) (per curiam). Because
Sweeting failed to state a potentially cognizable claim, the
district court did not err when it denied Sweeting the opportunity
to particularize or amend his complaint.
- 3 - | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1016914/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-4287
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
LYNN GARY SMITH,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Wilmington. James C. Fox, Senior
District Judge. (CR-03-93)
Submitted: August 15, 2005 Decided: August 26, 2005
Before WILLIAMS, KING, and GREGORY, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Walter H. Paramore, III, LAW OFFICES OF WALTER H. PARAMORE, III,
P.C., Jacksonville, North Carolina, for Appellant. Frank D.
Whitney, United States Attorney, Anne M. Hayes, Christine Witcover
Dean, Assistant United States Attorneys, Raleigh, North Carolina,
for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Lynn Gary Smith appeals his seventy-month sentence
imposed after he pled guilty to being a felon in possession of a
firearm (Count 1), in violation of 18 U.S.C. § 922(g)(1) (2000),
and possessing with intent to distribute at least five grams of
crack cocaine (Count 2) in violation of 21 U.S.C. § 841(a)(1)
(2000).1 Smith’s counsel has filed a brief, as supplemented,
pursuant to Anders v. California, 386 U.S. 738 (1967), asserting
that Smith’s sentence is unconstitutional in light of Blakely v.
Washington, 542 U.S. 296 (2004), and United States v. Booker, 125
S. Ct. 738 (2005). Counsel states, however, that in his view there
are no meritorious issues for appeal. Smith was informed of his
right to file a pro se supplemental brief but has not done so. We
affirm.2
Smith’s counsel first asserts that the district court
sentenced Smith in violation of the Sixth Amendment because the
court determined drug quantity by a preponderance of the evidence.
Because Smith did not raise this issue in the district court, we
review for plain error. See United States v. Hughes, 401 F.3d 540,
1
Smith also pled guilty to using or carrying a firearm during
and in relation to a drug trafficking crime, in violation of 18
U.S.C.A. § 924(c) (West 2000 & Supp. 2005). He does not challenge
on appeal his conviction or consecutive sixty-month sentence.
2
In light of our disposition of this case, we deny the
Government’s motion and supplemental motion for summary affirmance
as moot. See 4th Cir. R. 27(f).
- 2 -
547 (4th Cir. 2005). To demonstrate plain error, Smith must
establish that error occurred, that it was plain, and that it
affected his substantial rights. Id. at 547-48. If a defendant
establishes these requirements, the court’s “discretion is
appropriately exercised only when failure to do so would result in
a miscarriage of justice, such as when the defendant is actually
innocent or the error seriously affects the fairness, integrity or
public reputation of judicial proceedings.” Id. at 555 (internal
quotation marks and citation omitted).
In Booker, the Supreme Court held that the mandatory
manner in which the federal sentencing guidelines required courts
to impose sentencing enhancements based on facts found by the court
by a preponderance of the evidence violated the Sixth Amendment.
125 S. Ct. at 746, 750 (Stevens, J., opinion of the Court). The
Court remedied the constitutional violation by making the
Guidelines advisory through the removal of two statutory provisions
that had rendered them mandatory. Id. at 746 (Stevens, J., opinion
of the Court); id. at 756-67 (Breyer, J., opinion of the Court).
Here, the district court attributed to Smith 14.3 grams
of crack cocaine,3 thereby establishing a base offense level of
twenty-six under U.S. Sentencing Guidelines Manual § 2D1.1(c)(7)
(2003). With a criminal history category of II, the applicable
3
The court also attributed 9.7 grams of marijuana to Smith.
This amount does not affect the calculation of Smith’s offense
level.
- 3 -
guideline range was seventy to eighty-seven months of imprisonment.
Using only the amount of crack charged in Count 2 of the indictment
(i.e., five grams), the base offense level — and, consequently, the
guideline range — is the same as that established by the district
court. See USSG § 2D1.1(c)(7) (providing for base offense level of
twenty-six where offense involves at least five but less than
twenty grams of crack). We therefore find no plain error in
Smith’s sentence because the sentence does not violate the Sixth
Amendment.
Next, counsel asserts that Smith’s sentence violates
Booker because the district court sentenced Smith under the
mandatory sentencing guidelines scheme and did not consider the
factors in 18 U.S.C.A. § 3553(a) (West 2000 & Supp. 2005). We
review this claim for plain error and find none. See United
States v. White, 405 F.3d 208, 215 (4th Cir. 2005) (stating
standard of review). Although we held in White that treating the
guidelines as mandatory constitutes plain error, see id. at 216-17,
our review of the record leads us to conclude that there is no
nonspeculative basis on which we could conclude that the district
court would have sentenced Smith to a lesser sentence had the court
proceeded under an advisory guideline scheme. See id. at 223
(finding that defendant failed to meet burden of demonstrating
actual prejudice where “the district court made certain statements
suggesting that it was content to sentence [the defendant] within
- 4 -
the guideline range”). Thus, Smith has failed to demonstrate that
the plain error in sentencing him under a mandatory guidelines
scheme affected his substantial rights.
In accordance with Anders, we have reviewed the entire
record for any meritorious issues and have found none.
Accordingly, we affirm Smith’s convictions and sentence. This
court requires that counsel inform his client, in writing, of his
right to petition the Supreme Court of the United States for
further review. If the client requests that a petition be filed,
but counsel believes that such a petition would be frivolous, then
counsel may move in this court for leave to withdraw from
representation. Counsel’s motion must state that a copy thereof
was served on the client. We dispense with oral argument because
the facts and legal contentions are adequately presented in the
materials before the court and argument would not aid the
decisional process.
AFFIRMED
- 5 - | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1016931/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-6876
JAMES A.G. BUNCH, JR.,
Petitioner - Appellant,
versus
NORTH CAROLINA DEPARTMENT OF CORRECTION;
LAWRENCE SOLOMON, Superintendent at Odom
Correctional Institution; ATTORNEY GENERAL OF
THE STATE OF NORTH CAROLINA,
Respondents - Appellees.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Malcolm J. Howard,
District Judge. (CA-04-974-5-H)
Submitted: August 17, 2005 Decided: August 26, 2005
Before WILKINSON and KING, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Dismissed by unpublished per curiam opinion.
James A.G. Bunch, Jr., Appellant Pro Se. Clarence Joe DelForge,
III, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina,
for Appellees.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
James A.G. Bunch, Jr., a state prisoner, seeks to appeal
the district court’s order denying relief on his motion filed under
28 U.S.C. § 2254 (2000). An appeal may not be taken from the final
order in a § 2254 proceeding unless a circuit justice or judge
issues a certificate of appealability. 28 U.S.C. § 2253(c)(1)
(2000). A certificate of appealability will not issue for claims
addressed by a district court absent “a substantial showing of the
denial of a constitutional right.” 28 U.S.C. § 2253(c)(2) (2000).
A prisoner satisfies this standard by demonstrating that reasonable
jurists would find both that the district court’s assessment of his
constitutional claims is debatable or wrong and that any
dispositive procedural rulings by the district court are also
debatable or wrong. See Miller-El v. Cockrell, 537 U.S. 322, 336-
38 (2003); Slack v. McDaniel, 529 U.S. 473, 484 (2000); Rose v.
Lee, 252 F.3d 676, 683 (4th Cir. 2001). We have independently
reviewed the record and conclude that Bunch has not made the
requisite showing. Accordingly, we deny the motion for a
certificate of appealability and dismiss the appeal. We dispense
with oral argument because the facts and legal contentions are
adequately presented in the materials before the court and argument
would not aid the decisional process.
DISMISSED
- 2 - | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918983/ | 106 B.R. 334 (1989)
In re Larry & Cynthia MARTIN, d/b/a Martin's A & W Drive-in Restaurant and Martin's Exxon, Debtors.
William R. BLACK, Trustee, Plaintiff,
v.
PEOPLES HERITAGE SAVINGS BANK, Defendant.
Bankruptcy No. 284-00296, Adv. No. 88-2084.
United States Bankruptcy Court, D. Maine.
June 23, 1989.
*335 Bruce Hochman, Black Lambert Coffin & Haines, Portland, Me., for plaintiff.
Andrew A. Cadot, Perkins, Thompson, Hinckley & Keddy, Portland, Me., for defendant.
MEMORANDUM OF DECISION
FREDERICK A. JOHNSON, Chief Judge.
INTRODUCTION
In this adversary proceeding, the issue presented involves the proper priority which should be accorded unpaid postpetition real estate taxes.[1] The issue is before the court on the trustee's "object[ion] to the claim of the City of Portland [the City] for real estate taxes, interest and penalties [i.e. costs]"[2]
Hearing was held, and the parties had an opportunity to file briefs. The court concludes that the City's entitlement to secured status is dependent on strict compliance with the pertinent provision of Maine law, i.e. 36 M.R.S.A. § 942 (Supp.1988). As a result, for taxes assessed on April 1, 1988, the City holds a secured claim. For the pertinent dates of assessment prior to 1988, the City is entitled to payment of real estate taxes as unsecured administrative expenses, pursuant to 11 U.S.C. § 507(a)(1). This court further finds that the City is entitled to postpetition interest, but not costs.
*336 FACTS
On December 11, 1984, Larry T. and Cynthia J. Martin (collectively "the debtors") filed for relief under Chapter 11 of the Bankruptcy Code. In May 1985 the court approved the voluntary conversion of the case to a case under Chapter 7. No plan of reorganization was confirmed prior to the conversion of the case.
Property of the estate included real estate located at 258 Summit Street in Portland (the property). On or about September 16, 1988, the trustee entered into a contract for the sale of the property.
On September 21, 1988, the Chapter 7 Trustee filed a complaint to sell the property free and clear of liens and "for [a] determination of liens." On October 14, 1988 the trustee filed an amended complaint.
On October 24, 1988, the City filed a proof of claim in the principal amount of $6,858.19 and "additional charges", i.e. interest and costs, of $1,340.46. In its proof of claim, the City further indicated that the claim was founded on real estate taxes for the years 1986-1989, "which became due on [April 1, 1986]." The trustee indicated that tax liens forwarded to him on November 17, 1988 stated that the pertinent tax period began July 1, 1985 and ended June 30, 1988. Even if the earliest date of assessment was April 1, 1985, all of the taxes at issue are postpetition claims.
On October 12, 1988, the trustee filed a Notice of Intended Sale. The City filed a timely objection, in which it asserted the seventh priority for allowed unsecured claims of governmental units, pursuant to 11 U.S.C. § 507(a)(7)(B). Subsequently, on November 2, 1988, the City filed a motion for relief from stay, relative to its claimed right to lien the property. In pertinent part, the City stated in its motion that it "was prevented from filing . . . [tax] liens [pursuant to 36 M.R.S.A. § 942 (Supp. 1988)] . . . because of the automatic stay provided by the Bankruptcy Act."
On November 16, 1988, the court granted the City's motion. The trustee indicated that on November 17, 1988 the City forwarded tax lien certificates to him by certified mail.
By order of November 18, 1988, this court authorized the sale of the property. The City moved to amend the order to provide for payment to the City as a "secured priority creditor". The motion was denied. The property was sold on November 23, 1988, pursuant to this court's order. No disbursements have yet been made to the City. Remaining at issue is the trustee's objection to the City's claims for real estate taxes, interest and costs.
DISCUSSION
I. Effect of Automatic Stay on Secured Status
A. Tax Assessment
At the outset, the court finds that postpetition tax assessment by a municipality does not violate the automatic stay, provided for in § 362(a) of the Bankruptcy Code. See Md. Nat. Bank v. Mayor & City Council of Baltimore, 723 F.2d 1138 (4th Cir.1983).
Tax liability of the bankruptcy estate is predicated on the necessity of protection by the state or municipality. See Swarts v. Hammer, 194 U.S. 441, 24 S.Ct. 695, 48 L.Ed. 1060 (1904). Because the property still receives municipal services such as protection from vandalism and maintenance of streets and roads during the administration of the estate, assessment of real estate taxes is not stayed under section 362 of the Bankruptcy Code. See In re Klefstad, 95 B.R. 622, 625 n. 5 (Bankr.W.D.Wis.1988). To find otherwise would place too heavy a burden on each municipality, while permitting the debtor to enjoy the benefits of municipal services tax-free.
B. Tax Lien Enforcement
The City's tax liens "take precedence over all other claims on said real estate and shall continue in force until the taxes are paid or until said lien is otherwise terminated by law." 36 M.R.S.A. § 552 [tax lien]. Pursuant to 36 M.R.S.A. § 708, Maine law fixes April 1st as the date on which assessments are made. Conn. Bank *337 & Trust Co. v. City of Westbrook, 477 A.2d 269, 272 (Me.1984). A lien on real estate arises upon the date of assessment and is fully perfected from its inception. In re Wallingford's Fruit House, 30 B.R. 654, 655, 658 (Bankr.D.Me.1983).
A municipality may enforce and prevent the termination of its already fully perfected lien by complying with the requirements of 36 M.R.S.A. § 942 [Tax lien certificate; procedure] (Supp.1988).
It provides in pertinent part that
lien[s] on real estate created by section 552 [supra.] . . . may be enforced in the following manner.
The tax collector may, after the expiration of 8 months and within one year after the date of original commitment of a tax, . . . send by certified mail, return receipt requested . . . a notice in writing . . . alleging that a lien is claimed on the real estate to secure the payment of the tax, and demanding the payment of the tax within 30 days after . . . mailing of the notice . . .
After the expiration of the 30 days and within 10 days thereafter, the tax collector shall record in the registry of deeds of the county . . . where the real estate is situated a tax lien certificate . . . alleg[ing] that a lien is claimed on the real estate to secure the payment of the tax . . .
It is well-established that failure to follow strictly the time limitations contained in Maine's statutory scheme "will destroy the validity of the tax lien certificate and will prevent the town from acquiring title under the tax lien foreclosure procedures." In re Wallingford's Fruit House, 30 B.R. at 656 (quoting Blaney v. Inhabitants of Shapleigh, 455 A.2d 1381, 1387 (Me.1983)). However, it is also established that the filing of the sec. 942 lien certificate violates the automatic stay provision unless relieved from the stay.[3]See In re Wallingford's Fruit House, supra.
The court has applied these sometimes competing principles, relative to tax assessment and enforcement, to the facts of this proceeding. The court's conclusions depend primarily on whether the City has strictly complied with Maine law.
(1) Taxes Assessed on April 1, 1988.
The lien on the real estate arose and was fully perfected as of the date of assessment on April 1, 1988. According to the terms of sec. 942, the City need do nothing further to maintain perfection until after the expiration of 8 months and within one year from the date of assessment. As a result, the City was fully perfected as of November 23, 1988 when the property was sold.[4] For taxes assessed on April 1, 1988, the City holds a secured claim.
II. Tax Assessments For Years Prior to 1988
Relative to assessments made prior to April 1, 1988, it is undisputed that the City failed to satisfy the timing requirements of sec. 942. For taxes assessed on April 1, 1987, the City had to commence the enforcement procedure of sec. 942 before April 1, 1988 or the lien was terminated.[5] No valid notice was given prior to April 1, 1988.
However, the City essentially argues that the imposition of the automatic stay had the effect of tolling or otherwise extending the timing requirements of sec. 942. Under the facts of this case, the court rejects such reasoning. Sec. 362(a) does not stay the running of any time period, including the timing requirements of 36 M.R.S.A. § 942. See In re Thom, Inc., 95 B.R. 261, 263 (Bankr.D.Me.1989).
*338 No bankruptcy provision extended the applicable time limitations. Maine law controls, and the City had to strictly comply with the timing requirements of sec. 942. Having failed to do so, the lien terminated.
The City's claim is, however, entitled to an administrative expense priority for pre-1988 taxes, pursuant to section 507(a)(1) and section 503(b) of the Bankruptcy Code.
Sec. 507(a)(1) provides in pertinent part that
(a) The following expenses and claims have priority in the following order:
(1) First, administrative expenses allowed under section 503(b) of this title
. . .
11 U.S.C. § 507(a)(1).
Section 503(b) of the Bankruptcy Code (referred to in sec. 507(a)(1)) provides in pertinent part that
After notice and a hearing, there shall be allowed administrative expenses . . . including
* * * * * *
[1](B) any tax
(i) incurred by the estate, except a tax of a kind specified in section 507(a)(7) of this title . . .
* * * * * *
11 U.S.C. § 503(b)(1)(B)(i).
The exception for taxes specified in sec. 507(a)(7) does not apply to the facts of this proceeding. Real estate taxes covered by sec. 507(a)(7) have been determined to include only those incurred pre-petition.[6]See In re Mansfield Tire & Rubber Co., 85 B.R. 437, 442 (Bankr.N.D.Ohio 1987). As a result, the City is entitled to payment of the disputed real estate taxes as a first priority administrative expense, pursuant to sec. 507(a)(1).
III. Interest and Costs
The City also seeks to add interest and costs to the amount of the unpaid taxes.
(1) Taxes Assessed on April 1, 1988
Section 506(b) allows a holder of an oversecured claim to recover, in addition to the pre-petition amount of the claim, "interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose." United States v. Ron Pair Enterprises, Inc., ___ U.S. ___, 109 S.Ct. 1026, 103 L.Ed.2d 290, 18 BCD 1150, 1152 (1989) (quoting in part, 11 U.S.C. § 506(b). In Ron Pair Enterprises, the United States Supreme Court interpreted the language of sec. 506(b) as providing for postpetition interest, but not "fees, costs, or charges" to the holder of a nonconsensual lien, i.e. a judicial or statutory lienholder. Id., 109 S.Ct. at 1029-31, 18 BCD at 1152-53. This court believes that the reasoning of the United States Supreme Court in Ron Pair Enterprises applies to this proceeding even though the City's secured claim arose postpetition. Therefore, on its secured claim, the City is awarded postpetition interest as its only added recovery, but not costs.
(2) Tax Assessments For Years Prior to 1988
Section 503(b)(1)(C) accords administrative expense status to "any fine, penalty, or reduction in credit relating to a tax . . . [allowed as an administrative expense] . . . in subparagraph (B) [sec. 503(b)(1)(B)] of this paragraph." 11 U.S.C. § 503(b)(1)(C). The Bankruptcy Code does not expressly provide for interest on postpetition taxes to be treated as an administrative expense, and the courts have split on the issue. See 3 Collier on Bankruptcy *339 ¶ 503.04[c] (collecting cases). This court concludes that interest on postpetition taxes is allowable as an administrative expense pursuant to Section 503(b). See United States v. Friendship College, Inc., 737 F.2d 430, 433 (4th Cir.1984); In re General Polymerics Corp., 54 B.R. 523, 525-26 (Bankr.D.Conn.1985).
This court further concludes that the City is not entitled to costs. The one relevant discussion in the legislative history of sec. 503(b) states that "interest on tax liabilities and certain tax penalties incurred by the trustee are also included in this first priority." In re General Polymerics Corp., 54 B.R. at 525-26 (quoting S.Rep. No. 989, 95th Cong., 2d Sess. 66, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5852). Although "the only indication we have one way or the other suggests that interest should be first priority", United States v. Friendship College, Inc., 737 F.2d at 433, no such indication appears to exist for costs. Therefore, on its unsecured claim, the City is entitled to postpetition interest, but not costs.
CONCLUSION
For real estate taxes assessed on April 1, 1988, the City is entitled to payment as a secured creditor, plus interest. For taxes assessed prior to 1988, the City is entitled to payment as a first priority administrative expense, plus interest, pursuant to sec. 507(a)(1), as defined under sec. 503(b)(1)(B).
Counsel to submit an order which is in conformity with this opinion, including the computation of interest.
NOTES
[1] The parties did not indicate, in the briefs submitted to the court, the dates of assessment. However, as suggested in the text, the court has concluded as a factual finding that the taxes were assessed postpetition.
[2] In the facsimile tax bills attached to its proof of claim, the City itemized amounts due for real [taxes], interest and costs, but not penalties.
[3] This court routinely relieves municipalities from the automatic stay to permit them to comply with 36 M.R.S.A. § 942.
[4] On November 16, 1988, the City had obtained relief from stay, authorizing it to file § 942 tax lien certificates. However, as suggested in the text, when the property was sold, the lien was fully perfected by virtue of the assessment. The termination of the stay had no bearing on this finding.
[5] The court is using the assessment made on April 1, 1987 also as an illustration. The same reasoning and conclusion holds for all pertinent assessments made prior to 1987.
[6] The trustee relies on United States v. Redmond, 36 B.R. 932 (D.Kan.1984) for the proposition that postpetition claims were to be treated as pre-petition debts, entitled to seventh priority, pursuant to sec. 507(a)(7). Such reliance is misplaced. The reasoning in Redmond rested on the finding that confirmation vested all the property of the estate in the debtor and terminated administration of the estate by the trustee or debtor-in-possession. Id. at 934. In the case at bar, no plan was ever confirmed. Further sec. 348(d), which accords prepetition status to claims arising after the order for relief but before conversion, specifically excludes claims falling within sec. 503(b) from its operation. "Clearly then, section 348(d) does not operate to convert a debtor's Chapter 11 administrative expense into a pre-petition claim upon conversion." In re Hotel Nevada Corp., 75 B.R. 174, 176 (Bankr.D.Nev.1987). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3085720/ | Order entered February 27, 2014
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-13-01647-CR
JATHAN MEWBOURN, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the County Court at Law No. 2
Collin County, Texas
Trial Court Cause No. 002-80569-2013
ORDER
The clerk’s record filed in this appeal is incomplete and does not comply with Texas Rule
of Appellate Procedure 34.5(a). Specifically, the clerk’s record does not contain an index setting
forth the page numbers at which the pleadings are found. Moreover, although appellant’s notice
of appeal states that he is appealing his conviction following a jury trial, the clerk’s record does
not contain the documents related to jury selection or the jury charge, the trial court’s judgment,
appellant’s motion for new trial, appellant’s notice of appeal, the trial court’s certification of
appellant’s right to appeal, or appellant’s designations of the clerk’s and reporter’s records.
Accordingly, this Court ORDERS the Collin County Clerk to file within FIFTEEN
DAYS of the date of this order, a corrected clerk’s record that contains an index, all of the above
documents, and any other documents designated by appellant and required by rule 34.5(a)(2).
We ORDER appellant to file his brief within FORTY-FIVE DAYS of the date of this
order.
We DIRECT the Clerk to send copies of this order, by electronic transmission, to the
Honorable Barnett Walker, Presiding Judge, County Court at Law No. 2; Stacey Kemp, Collin
County Clerk; and to counsel for all parties.
/s/ LANA MYERS
JUSTICE | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1547579/ | 867 A.2d 479 (2005)
375 N.J. Super. 202
In the Matter of Mark HRUSKA.
Superior Court of New Jersey, Appellate Division.
Submitted December 14, 2004.
Decided February 8, 2005.
*480 John W. Spoganetz, attorney for appellant Mark Hruska.
Peter C. Harvey, Attorney General, attorney for respondent New Jersey Merit System Board (Todd A. Wigder, Deputy Attorney General, on the brief).
Genova, Burns & Vernoia, Livingston, attorneys for respondent Borough of Carteret (Brian W. Kronick, East Orange, on the brief).
Before Judges KESTIN, LEFELT and ALLEY.
The opinion of the court was delivered by
LEFELT, J.A.D.
Petitioner Mark Hruska appeals from a Merit System Board decision upholding respondent Borough of Carteret's refusal to appoint Hruska, under the "rule of three," from two Department of Personnel certified lists of eligible candidates for *481 Carteret's paid fire department. On appeal, Hruska makes three arguments for reversal of the Board's decision. He alleges that (1) Carteret refused to appoint him on August 17, 1998 and June 2, 1999 for discriminatory and retaliatory reasons, (2) Carteret failed to support its decision denying him appointment on June 2, 1999, and (3) both refusals to appoint were improper because Carteret modified the Department of Personnel eligibility criteria by adding a threshold requirement that applicants be active volunteer firefighters. We affirm, without further discussion, the Board's decision that Hruska failed to prove age discrimination and retaliation. R. 2:11-3(e)(1)(D). That decision was not arbitrary, capricious, or unreasonable and warrants our affirmance. Karins v. City of Atlantic City, 152 N.J. 532, 540, 706 A.2d 706 (1998). We find Hruska's second argument without sufficient merit to warrant further discussion. R. 2:11-3(e)(1)(E). However, we disagree with the Board's conclusion that Carteret properly utilized the "rule of three," and reverse on that basis.
Carteret has a combination Fire Department, consisting of two volunteer departments and one paid, or career, department. There are a maximum of seventy-four firefighters permitted to join the volunteer departments and only eighteen firefighters are allotted to the career department.
Hruska acquired his firefighting experience in Carteret by enrolling in the volunteer departments in 1980. He advanced as a volunteer until he became Chief of the volunteers in 1994, when he was about thirty-five years of age. In his fifteen years of fighting fires, Hruska was involved in seventy to seventy-five percent of all fire calls, thereby fighting from 300 to 500 fires each year. There is no question that Hruska's service as a volunteer firefighter was commendable and that he was the recipient of several awards and honors. In 1993, Hruska was awarded a certificate of exemption, which qualified him for various firefighter benefits. See N.J.S.A. 40A:14-56 to -65.
In 1994 or 1995, Hruska took a civil service exam and physical to become a paid firefighter in Carteret. After completing the exam and physical, the Department of Personnel told Hruska that he ranked number one on the certification list. In 1996, Hruska became an "inactive" volunteer firefighter and, though he remained inactive through all relevant dates, as openings in the paid firefighter service department occurred, he began to apply for appointment.
Carteret followed the normal civil service process to fill openings in the career service. As openings occurred, the Borough Council's Fire Committee requested from the Department of Personnel a certified list of candidates who had passed the physical and written exam and were eligible for appointment to the paid department. The Fire Committee considered the persons on the list and made recommendations to the Borough Council, which was responsible for making the final hiring determinations.
The Council denied appointment to Hruska three times, but he appeals from only the last two rejections. The circumstances surrounding the last two rejections, August 17, 1998 and June 2, 1999, are as follows. On August 17, 1998, the Department of Personnel certified a list of candidates and Hruska was ranked second. The Council appointed the first-ranked candidate and bypassed Hruska to appoint the third- and fifth-ranked candidates. On June 2, 1999, the Council once again bypassed Hruska on the certified list. This time, Hruska was ranked first, *482 but the Council appointed the second- and third-ranked candidates instead.
Hruska's objections to the Council's actions eventually came before Administrative Law Judge Joseph Lavery, who found that "[t]he Borough Council imposed a threshold requirement of active volunteer firefighting status which overrode any other consideration of suitability for appointment." The ALJ criticized Carteret for creating "a threshold, qualifying requirement for appointment of already-qualified, [Department of Personnel-]certified eligibles, of whom [Hruska] was one. This unlawful requirement was: active participation in volunteer firefighting." Because the judge concluded that the Council "had no legal authority" to "effectively eliminate[ ] [Hruska] from the certification," the "bypass under the rule of three was consequently invalid."
The Merit System Board rejected the ALJ's determination as a "legal conclusion." The Board explained that "under the Rule of Three, [an appointing authority like Carteret] may use any legitimate basis to bypass an individual in favor of lower-ranked eligibles." The Board reasoned that "[i]n this case, it was not illegal for the appointing authority to use active volunteer service in differentiating between the candidates. Such a distinction appears to be job-related and consistent with principles of merit and fitness, and does not present any form of illegal discrimination...."
We disagree with the Board and believe that the agency has misinterpreted Judge Lavery's fact finding and consequently reached the wrong legal conclusion. The ALJ found that Carteret had "created a threshold, qualifying requirement for appointment" that was not among the qualifying eligibility requirements developed by the Department of Personnel. This finding was based on the judge's credibility assessment of several lay witnesses who testified at the hearing, and focused on the Council's determination that in essence found Hruska ineligible for the position and not on the Council's differentiation among candidates on the eligibility list.
The ALJ's finding was, therefore, not a legal determination that could be reversed by the Board simply because it disagreed with the judge. The Board can only reverse fact findings based on the credibility of lay witnesses if the findings are "arbitrary, capricious or unreasonable or are not supported by sufficient, competent, and credible evidence in the record." N.J.S.A. 52:14B-10(c). If it wished to reverse the fact finding at issue, the Board had to state "with particularity" its reasons for rejecting the finding. Ibid. The Board may not simply recast the finding as a legal determination because it wishes to reach a different conclusion than the one reached by the ALJ. See Cavalieri v. Bd. of Trs. of PERS, 368 N.J.Super. 527, 534, 847 A.2d 592 (App.Div.2004).
Because the ALJ's fact finding distinguished between an appointing authority preferring active volunteers and using that criterion as an eligibility factor, the Board incorrectly reviewed the judge's fact finding. The Board not only improperly considered the fact finding a "legal conclusion," but also shifted the judge's finding from its eligibility context to the context by which active volunteer service was merely used to compare qualified candidates on the eligibility list. This also was improper.
The judge in essence found that the Council had disqualified Hruska and never compared or attempted to distinguish his service from others on the list. Hruska's candidacy was, therefore, not fairly reviewed by the Council because, according *483 to the ALJ, the Council concluded that Hruska failed to meet the threshold qualification of active volunteer service.
We also are bound by Judge Lavery's fact finding, In re Grossman, 127 N.J.Super. 13, 23, 316 A.2d 39 (App.Div.), certif. denied, 65 N.J. 292, 321 A.2d 253 (1974), and may reverse only if the finding is not supported by sufficient credible evidence in the record. In re Taylor, 158 N.J. 644, 656, 731 A.2d 35 (1999). Our review of the record has disclosed sufficient credible evidence supporting the judge's finding. For example, when Hruska was bypassed the first time[1] in favor of two older applicants who were ranked below him, a councilman advised Hruska that "the only reason why you were passed up is because these two guys were active and you weren't for the last three years. That's the only reason." Hruska then asked the councilman "[o]kay, so then that ... does exclude me from the rest of the hires then?" The councilman replied, "No, no, no, no, no." Hruska then interjected his concern by asking, "[c]ause what, we're gonna change criteria mid-stream?" The councilman told Hruska that the Council could change criteria mid-stream, and said "[c]ould. Sure. Sure. But that was in this case. Now the next hiring is a whole nother case."
Despite the councilman's assurance that the next hiring would be different, another councilman who testified about the August 1998 hiring explained that you had to be an active volunteer to be appointed to the position. "That was the criteri[on] that the committee and the chairperson set." If you were not an active volunteer, according to the councilman, you could not be appointed. When asked whether being an active volunteer was important to the Borough, the councilman replied "[t]hat was the prerequisite that the committee had set originally."
When the Department of Personnel informed Carteret that the Borough had failed to supply the Department with a statement of reasons for the June 2, 1999 hiring, Communications Workers of Am. v. N.J. Dep't of Pers., 154 N.J. 121, 129-30, 711 A.2d 890 (1998), the Borough Clerk replied that Hruska was bypassed in part because "[p]articular weight was given to the successful candidates' active volunteer status, in contrast to Mr. Hruska's inactive status over the past five (5) years." The only other reasons provided by the Clerk to the Department for bypassing Hruska were general statements regarding "personal interviews of the candidates and careful consideration of the experience and past work history as well."[2]
Accordingly, we accept the ALJ's fact finding that the Borough Council adopted and applied a new eligibility criterion after the Department of Personnel had certified lists of eligible candidates for appointment to the Carteret career firefighting service. We proceed to review the legal implications of such action.
A career civil service job, such as a paid firefighter in Carteret, is subject to competitive examination procedures. N.J.A.C. 4A:4-2.1 to -2.17; N.J.A.C. 4A:3-1.2(b). The minimum qualifications of candidates must be announced beforehand. N.J.A.C. 4A:4-2.1(c)3. The scope of requirements *484 that applicants must meet are established by the Department of Personnel and specified in the examination announcement. N.J.A.C. 4A:4-2.3. After the examination, the Department of Personnel may certify the names of eligibles for each position. N.J.A.C. 4A:4-4.2. Upon receipt of a certification, an appointing authority may, under the "rule of three," appoint "one of the top three interested eligibles" from the list, provided that preference is given to veterans and in the case of a tie, specific procedures are followed. N.J.A.C. 4A:4-4.8(a)3 i, iii; N.J.S.A. 11A:4-8. If a "higher ranked eligible" is bypassed by the appointing authority, the authority must advise the Department of Personnel of the persons appointed and explain "why the appointee was selected instead of a higher ranked eligible or an eligible in the same rank due to a tied score." N.J.A.C. 4A:4-4.8(b)4.
Under the rule of three, an appointing authority like Carteret has the statutory discretion to appoint any one of the top three candidates who the public employer considers best suited to fill the position. N.J.S.A. 11A:4-8; N.J.A.C. 4A:4-4.8(a); Nunan v. N.J. Dep't of Pers., 244 N.J.Super. 494, 497, 582 A.2d 1266 (App.Div.1990). Carteret could bypass Hruska for any legitimate reason based upon the candidate's merit. In re Crowley, 193 N.J.Super. 197, 214, 473 A.2d 90 (App.Div.1984).
However, the rule of three, while permitting a broad exercise of discretion, also operates to "narrow hiring discretion." Terry v. Mercer County Bd. of Chosen Freeholders, 86 N.J. 141, 149, 430 A.2d 194 (1981). Its "basic intent and effect[ ] acts to fetter the absolute discretion of government to hire." Id. at 150, 430 A.2d 194. "[T]he discretion of government to hire is not absolute," and "other important criteria in governmental employment practices" are still relevant. Ibid. Discretion may not be "exercised in a way inconsistent with `merit' considerations." Ibid. All civil service appointments must "be made according to merit and fitness to be ascertained, as far as practicable, by examination...." N.J. Const. art VII, § 1, ¶ 2.
So, for example, the Law Against Discrimination, N.J.S.A. 10:5-17, further limits the appointing authority's discretion during hiring determinations despite the rule of three. Terry, supra, 86 N.J. at 152, 430 A.2d 194. "Significant limitations, founded on constitutional and statutory principles, have always been an inherent concomitant of government's authority to employ." Id. at 150, 430 A.2d 194. "[T]here is nothing intrinsic in the `rule of three,' either in a constitutional sense or as a matter of legislative contemplation, that renders it totally impervious to reasonable modifications or influences." Id. at 151, 430 A.2d 194.
Here, the Department of Personnel job specifications for firefighters did not require applicants to be active volunteer firefighters. The requirements for the firefighter exam also did not mandate that candidates be active volunteers at the time of appointment. To qualify for the firefighter examination, an applicant needed to be a citizen, a High School or Vocational High School graduate, a licensed driver, and not less than 18 years of age. In addition, applicants needed to pass a medical and performance examination. There was no threshold requirement that applicants be active volunteer firefighters.
Considering the persons hired by Carteret, the criterion of active volunteer excluded only Hruska. In essence, Carteret removed Hruska from the eligibility list, without allowing any right to appeal the removal. N.J.A.C. 4A:4-4.7(d); see Nunan, supra, 244 N.J.Super. at 498, 582 A.2d 1266 (When a name is improperly deleted from the certified list of eligibles, *485 the proper remedy is "to revive an expired list and add appellant's name.").
Had the active volunteer criterion been included in the examination announcement, Hruska could have decided at that time whether he wanted to become active again or whether he wanted to forsake his goal of career service appointment and not take the examination.
Applying the unannounced threshold qualification after Hruska appeared on the list as eligible for appointment was unjust to Hruska and in violation of the pertinent regulatory framework. We do not intend by this decision to restrict the factors that may be considered by an appointing authority when utilizing the rule of three to only the criteria previously listed as eligibility factors. As the Board emphasized, the appointing authority could have compared the candidates on the list and for merit and fitness reasons selected those who were active volunteers. We merely conclude that there is a difference between comparing candidates on the list by carefully and in good faith evaluating their merit and fitness, as required by the Constitution and our civil service system, and excluding a candidate from any consideration or comparison with other candidates because of an unannounced, secret eligibility requirement. It is the latter that, according to the ALJ, occurred in this case, and that in our opinion warrants reversal.
The conditional appointments from the August 17, 1998 and June 2, 1999 lists are voided. The Department of Personnel is directed to reissue the certification as the list stood on August 17, 1998, and the Borough Council shall reconsider the appointments without applying the active volunteer firefighter status as an exclusive reason for bypass. The factor can be used as one factor in evaluating the merit and fitness of all of the certified candidates. Should the Council again decide to bypass Hruska, it must set forth the reasons for its action based on the merit and fitness of all of the certified candidates. N.J.A.C. 4A:4-4.8(b)4.
Affirmed in part, reversed in part and remanded for further proceedings consistent with this decision.
NOTES
[1] Hruska did not appeal the first rejection and, therefore, as we explained above, this appeal involves only the Council's failure to appoint Hruska from the certification lists of August 17, 1998 and June 2, 1999.
[2] We also note that the Borough failed to comply with N.J.A.C. 4A:4-4.8 in the August 17, 1998 certification. The record is devoid of any statement of reasons, provided the Department of Personnel, justifying the bypass of Hruska by a lower-ranked individual in that certification. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547582/ | 353 B.R. 94 (2006)
In re Sadie B. FAUST, Debtor.
Sadie B. Faust, Plaintiff,
v.
Deutsche Bank National Trust Company, Chase Manhattan Mortgage Corporation Advanta Corporation, and New World Mortgage, Inc., Defendants.
Bankruptcy No. 06-11599, Adversary No. 06-0253.
United States Bankruptcy Court, E.D. Pennsylvania.
September 26, 2006.
*95 *96 *97 *98 James P. McGarrity, Philadelphia, PA, for Debtor.
OPINION
STEPHEN RASLAVICH, Bankruptcy Judge.
Introduction
The Debtor has filed suit against Deutsche Bank National Trust Company (Deutsche), Advanta Corporation (Advanta), Chase Manhattan Mortgage Corporation (Chase) and New World Mortgage, Inc. (New World) under federal and state consumer lending law. Deutsche, Chase and New World have filed motions to dismiss the complaint. The Debtor opposes the motions. The motions were heard on July 25, 2006, after which the Court took them under advisement. For the reasons set forth below, the motion will be granted in part and denied in part.[1]
The Counts
The Complaint pleads four counts: rescission under the Unfair Trade Practices and Consumer Protection Law (UDAP),[2] violations of the Truth in Lending Act *99 (TILA),[3] a failure to disclose under the Real Estate Settlement Procedures Act (RESPA),[4] and common law fraud which constitutes violations of the Pennsylvania Credit Services Act and Loan Brokers Trade Practices Regulations.[5] The UDAP count is directed at Deutsche and Advanta.[6] The TILA count is directed solely at Deutsche. The RESPA claim is directed to Chase as servicer of the loan. Finally, the Credit Services Act and Loan Broker claims are directed to New World, the mortgage broker in this transaction.
Rule 12(b)(1) and Rooker-Feldman
All three movants argue that a prepetition foreclosure judgment effectively deprives this court of subject matter jurisdiction. Accordingly, they proceed under F.R.C.P. 12(13)(1)[7] which challenges the jurisdiction of the court to address the merits of the plaintiff's complaint. Vieth v. Pennsylvania, 188 F. Supp. 2d 532, 537 (M.D.Pa.2002). A motion to dismiss under Rule 12(b)(1) may present either a facial or factual challenge to subject matter jurisdiction. See Carpet Group Int'l v. Oriental Rug Imps. Ass'n, 227 F.3d 62, 69 (3d Cir.2000); 2 Moore's Federal Practice § 12.30[4] (Matthew Bender 3d ed.) (explaining the difference between a facial and factual challenge to subject matter jurisdiction pursuant to Rule 12(b)(1)). In this case, although the challenge to this Court's jurisdiction is based on a fact not alleged in the Complaint, it is essentially facial: Deutsche asserts that it obtained a prepetition judgment in mortgage foreclosure which operates to preclude the Plaintiff's claims. The Plaintiff may point out in her brief that the Complaint never mentions the foreclosure judgment; however, the point is never genuinely disputed and is implicitly admitted. See T-11, 12, 17, 20. Moreover, the fact that a foreclosure sale took place is easily established. See copy of state court docket attached to Deutsche Bank's brief. For purposes of this motion, it will be assumed. The question presented is what preclusive effect, if any, does that judgment have on this Court's competence to hear Plaintiffs claims?
Under the Rooker-Feldman[8] doctrine, "lower federal courts may not sit in direct review of the decisions of a state tribunal." Gulla v. North Strabane Township, 146 F.3d 168, 171 (3d Cir.1998). Because jurisdiction to review a state court's decision rests solely in the United States Supreme Court, see 28 U.S.C. § 1257, federal district courts lack subject matter jurisdiction "over challenges to state-court decisions in particular cases arising out of judicial proceedings even if those challenges allege that the state court's action was unconstitutional." D.C. Court of Appeals v. Feldman, 460 U.S. 462, 486, 103 S. Ct. 1303, 1317, 75 L. Ed. 2d 206 (1983). "Although § 1257 refers to orders and decrees of the highest state court, the Rooker-Feldman doctrine has been applied to final decisions of lower state courts." In re Knapper, 407 F.3d 573, 580 (3d Cir. 2005).
*100 Specifically, a claim is barred by the Rooker-Feldman doctrine if: (1) "the federal claim was actually litigated in state court prior to the filing of the federal action" or (2) "if the federal claim is inextricably intertwined with the state adjudication, meaning that federal relief can only be predicated upon a conviction that the state court was wrong." Id. In assessing whether a claim was "actually litigated" in state court, the court must look to the substance of the claims adjudicated in the state court compared to the plaintiffs claims in the federal action. Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 354 F.3d 102, 105 (3d Cir.2004), rev'd on other grounds, 544 U.S. 280, 125 S. Ct. 1517, 161 L. Ed. 2d 454 (2005). A federal claim is inextricably intertwined with a state adjudication when "(1) the federal court must determine that the state court judgment was erroneously entered in order to rant the requested relief, or (2) the federal court must take action that would negate the state court's judgment." Knapper, 407 F.3d at 581. Thus, a plaintiff is foreclosed from seeking relief in federal court that would "prevent a state court from enforcing its orders." Id.
In arguing that Rooker-Feldman applies, Deutsche and Chase maintain that all[9] of the Plaintiffs claims are "inextricably intertwined" with the state court foreclosure judgment. They explain that the UDAP claim is settled inasmuch as the state court found the mortgage to be valid; that the TILA claims are similarly judged as no defenses or offsets were raised as to the mortgage; and that the RESPA claims were extinguished along with the mortgage once the foreclosure judgment was entered. Finally, they direct the Court's attention to the Third Circuit's opinion Knapper, supra, which, they maintain, applied Rooker-Feldman to dismiss a challenge by a foreclosure judgment debtor from bringing an adversary proceeding in her bankruptcy to set aside that judgment. The Knapper Court explained that a federal court could set aside such judgment only where it found that the judgment was improperly obtained. That authority, Deutsche and Chase maintain, is on all fours with this case and is, therefore, dispositive of the Plaintiff's claims. See generally, Deutsche/Chase Brief.
Similarly, New World argues that the claims in the Complaint are "inextricably entwined" with the state court judgment. New World maintains that all of the factual allegations in this Complaint which are directed at it would have been defenses to the foreclosure action. The effect of allowing the Plaintiff to prosecute these claims would be to overrule the state court judgment. See generally New World's Brief.
The Plaintiff disagrees that Rooker-Feldman applies. She first maintains that her claims do not attack the state court judgment although she then concedes that her rescission claim indirectly does. T-12. Regardless, such claims were not actually litigated in the state court neither were they inherently part of that action. Debtor's Brief 4.
The Court finds neither party to be entirely correct. This is due, in large part, to the fact that the holder of the judgment is only one of the four defendants in this adversary proceeding. Beginning with Count I (rescission under UDAP), it is indisputable that rescinding the loan would negate the state court judgment. Thus, the Court must find that the hearing of the UDAP claim violates Rooker-Feldman. This Count, therefore, must be dismissed.
*101 But Count II (TILA) is a different matter. That claim seeks to recoup money damages against the amount of the judgment. As will be explained, infra, such claims could not have been litigated in the state court; neither would they negate the judgment. What Debtor seeks here is to reduce the amount of the judgment now a secured claim in this Chapter 13 proceeding with the money damages arising from the TILA violations. The Court has jurisdiction, therefore, to hear such claim, and the motion to dismiss will be denied.
The claims raised in Counts III and IV likewise would not compromise the integrity of the judgment. At the outset, the Court is struck by the fact that neither count is directed to Deutsche, the judgment holder. Count III asserts a claim under RESPA against the loan servicer, Chase. Count IV alleges that New World violated the state credit services act and the state code regulations which govern the practices of loan brokers. The Court wonders, how then, can these counts undo the prior judgment?[10] This is never explained and the Court concludes that these counts are similarly not barred under Rooker-Feldman.[11]
Dismissal Under Rule 12(b)(6)
Alternatively, the movants argue that under preclusionary rules of procedure, the counts must be dismissed under F.R.C.P. 12(b)(6).[12] They rely here on res judicata, collateral estoppel, and the statute of limitations. Although all three theories constitute affirmative defenses, each may be raised on a motion to dismiss for failure to state a claim if the defect appears on the face of the pleading. See Brody v. Hankin, 299 F. Supp. 2d 454, 458 (E.D.Pa.2004) rev'd on other grounds 145 Fed.Appx. 768 (3d Cir.2005) ("Although it is an affirmative defense, res judicata may be raised in a Rule 12(b)(6) motion and such a motion is particularly appropriate if the defense is apparent on the face of the complaint." citing Rycoline Prod's. v. C & W Unlimited, 109 F.3d 883, 886 (3d Cir. 1997)); see also W.G. Nichols, Inc. v. Ferguson, 2003 WL 22158794 *2 n. 5 (E.D.Pa.) ("Collateral estoppel may be raised upon a Rule 12(b)(6) motion if the facts are admitted, uncontroverted or conclusively established so that nothing further can be developed by a trial of the issue."); and see also Benak ex rel. Alliance Premier Growth Fund v. Alliance Capital Mgmt., LP, 435 F.3d 396, 400 n. 14 (3d Cir.2006)("A complaint *102 showing that the governing statute of limitations has run on the plaintiff s claim for relief is the most common situation in which the affirmative defense appears on the face of the pleading and provides a basis for a motion to dismiss under Rule 12(b)(6)"); Wright and Miller, 5B Federal Practice and Procedure Civil 3d § 1357 at 729 (2006)
In judging the legal sufficiency of a claim against such challenges, the usual presumptions apply: the complaint may not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-43, 78 S. Ct. 99, 101-02, 2 L. Ed. 2d 80 (1957); Rocks v. Philadelphia, 838 F.2d 644, 645 (3d Cir.1989). All well-pleaded factual allegations in the claim must be taken as true. Cruz v. Beto, 405 U.S. 319, 322, 92 S. Ct. 1079, 1081, 31 L. Ed. 2d 263 (1972); Rocks, 868 F.2d at 645. The court must draw all reasonable inferences from the allegations and view them in the light most favorable to the non-moving party. Rocks, 868 F.2d at 645.
Res Judicata
All three movants argue that the failure to raise such claims in the foreclosure proceeding renders them precluded here under res judicata. In Board of Trustees of Trucking Employees Welfare Fund, Inc. v. Centra, 983 F.2d 495 (3d Cir.1992), the Third Circuit explained that claim preclusion another name for res judicata "gives dispositive effect to a prior judgment if a particular issue, although not litigated, could have been raised in the earlier proceeding. Claim preclusion requires: (1) a final judgment on the merits in a prior suit involving; (2) the same parties or their privities; and (3) a subsequent suit based on the same cause of action." Centra, 983 F.2d at 504 (emphasis added). If these three factors are present, a claim that was or could have been raised previously must be dismissed as precluded.
Deutsche and Chase maintain that the rescission claim "should have been litigated in the foreclosure action." Deutsche/Chase Brief, 13. New World contends that the Amended Complaint constitutes "defenses to the state court action." New World Brief, 7. Implicit in both statements is the premise that Plaintiffs claims are compulsory counterclaims. On the question of whether claim preclusion applies to counterclaims, the Restatement of Judgments provides:
(1) Where the defendant may interpose a claim as a counterclaim but he fails to do so, he is not thereby precluded from subsequently maintaining an action on that claim, except as stated in Subsection (2).
(2) A defendant who may interpose a claim as a counterclaim in an action but fails to do so is precluded, after the rendition of judgment in that action, from maintaining an action on the claim if:
(a) The counterclaim is required to be interposed by a compulsory counterclaim statute or rule of court, or
(b) The relationship between the counterclaim and the plaintiff's claim is such that successful prosecution of the second action would nullify the initial judgment or would impair rights established in the initial action.
Restatement (Second) of Judgments § 22 (1982).[13]
As there is no compulsory counterclaim rule in Pennsylvania, see In re Soto, 221 *103 B.R. 343, 357 (Bankr.E.D.Pa.1998), subsection (2)(a) of the Restatement does not apply. Neither is there a relationship between Plaintiff's claims and Deutsche's judgment which would undermine that judgment were Plaintiff successful here. The most that can be said about her claims again, the rescission claim has already been determined to be barred under Rooker-Feldman is that they would reduce the amount of the judgment. Neither paragraph of subsection (2) would preclude Plaintiffs claims.
Moreover, as pertaining to actions in mortgage foreclosure, the applicable rule of procedure provides that "[a] defendant may plead a counterclaim which arises from the same transaction or occurrence or series of transactions or occurrences from which the plaintiffs cause of action arose." Pa.R.C.P. 1148. Pennsylvania courts have ruled that a defendant may not raise TILA as a counterclaim in a mortgage foreclosure action. New York Guardian Mortgage Corp. v. Dietzel, 362 Pa.Super. 426, 430, 524 A.2d 951, 953 (1987); Fleet Real Estate Funding Corp. v. Smith, 366 Pa.Super. 116, 530 A.2d 919 (1987). In New York Guardian the court explained that the interjection of a TILA counterclaim was incompatible with the foreclosure proceeding because the TILA claim was in personam in nature, whereas the foreclosure action was strictly in rem. 362 Pa.Super. at 430-31, 524 A.2d at 953. Given that authority, the Plaintiff's TILA claim is not barred under principles of claim preclusion. Indeed, this Court has previously addressed that very question. See In re Apaydin, 201 B.R. 716, 722 (Bankr.E.D.Pa.1996) (holding that TILA claims not raised in response to foreclosure may be raised in subsequent litigation)
Likewise, the claims in Counts III and IV are unaffected by the prior judgment. Those claims, too, are personal in nature: the RESPA claim is asserted against the loan servicer while the claims in Count IV are brought against the mortgage broker. Neither could have been brought in response to a mortgage foreclosure. For that reason, the res judicata arguments of Deutsche, Chase, and New World are not persuasive.[14]
Collateral Estoppel
The final preclusion argument made by all three movants is collateral estoppel, or issue preclusion. This doctrine "prevents the relitigation of issues that have been decided in a previous action." Hawksbill Sea Turtle v. Federal Emergency Management Agency, 126 F.3d 461, 474 (3d Cir.1997). See also Montana v. United States, 440 U.S. 147, 153, 99 S. Ct. 970, 59 L. Ed. 2d 210 (1979) ("Issue preclusion ensures that `once an *104 issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation.'"). "Issue preclusion is based upon the policy that `a losing litigant deserves no rematch after a defeat fairly suffered, in adversarial proceedings, on an issue identical in substance to the one he subsequently seeks to raise.'" Dici v. Commonwealth of Pennsylvania, 91 F.3d 542, 547 (3d Cir.1996) (quoting Astoria Fed. Say. & Loan Ass'n v. Solimino, 501 U.S. 104, 107, 121 S. Ct. 2166, 115 L. Ed. 2d 93 (1991)). See also Burlington N.R.R. Co. v. Hyundai Merchant Marine Co., 33 F.3d 1227, 1231 (3d Cir.1995) ("The doctrine [of issue preclusion] derives from the simple principle that later courts should honor the first actual decision of a matter that has been actually litigated."). As the Third Circuit. explained "[t]he doctrine of issue preclusion reduces the costs of multiple lawsuits, facilitates judicial consistency, conserves judicial resources, and `encourage[s] reliance on adjudication. " Dici v. Commonwealth of Pennsylvania, 91 F.3d 542, 547 (3d Cir.1996) (quoting Allen v. McCurry, 449 U.S. 90, 94, 101 S. Ct. 411, 415, 56 L. Ed. 2d 308 (1980)).
The general rule is that issue preclusion applies if the following four factors are met: (1) the issue sought to be precluded is the same as that involved in the prior action; (2) the issue was actually litigated; (3) there was a valid and final judgment; and (4) the determination was essential to the prior judgment. National Railroad Passenger Corp. v. Pennsylvania Pub. Util. Comm'n, 288 F.3d 519, 525 (3d Cir.2002). Not one of the three remaining counts involve issues that were part of the foreclosure proceeding, that were actually litigated, or that were essential to the foreclosure judgment. Each involved questions unrelated to Deutsche's right to foreclose. The TILA count pertained to how much the Debtor was charged for the loan; the RESPA count to what information the loan servicer was required to provide to the Debtor; and the last count to whether the mortgage broker disclosed his commission as required by law. The Amended Complaint does not indicate that any of these issues were adjudicated in the prior proceeding. Therefore, the collateral estoppel argument fails.
Statute of Limitations
Deutsche and Chase make one final argument in favor of dismissal. They argue that the claims in counts one, two, and four are time-barred.[15] Deutsche/Chase Brief, 17 According to the movants, the limitations period for both the TILA and UDAP claims commenced on the loan date, April 1, 2000. Id. 16. Neither claim having been brought within the required time one year under TILA and six years under UDAP both are now barred. Id. Remarkably, the Debtor is silent on this question and neither party addressed this precise question at the hearing. The Court turns to what the Amended Complaint shows in this regard.
The Amended Complaint alleges that the Debtor and her husband "entered into [the subject] transaction" on April 1, 2000. Amended Complaint ¶ 5. It is further alleged that the lender failed to disclose to *105 the Debtor and her husband certain finance charges, and the fact that the mortgage was a high cost loan as defined under TILA. Id. ¶¶ 22-24. A TILA violation gives rise to a claim for both actual and statutory money damages. See 15 U.S.C. § 1640(a)(1), (2). Such claims must be brought within one year of the violation. See 15 U.S.C. § 1640(e) (stating that claim may be brought "within one year from the date of the occurrence of the violation"). On the face of the Complaint, then, to the extent affirmative relief is sought, the TILA claim is barred.
However, while the applicable statute of limitations may preclude Debtor from asserting TILA violations affirmatively, it does not affect her right to assert them defensively, i.e., by recoupment. See In re Ross, 338 B.R. 266, 269 n. 9 (Bankr. E.D.Pa.2006). And it is recoupment which the Amended Complaint specifically seeks. Amended Complaint, p. 4, WHEREFORE clause. "Recoupment is a common law contract doctrine that allows `countervailing claims, which otherwise could not have been asserted together to be raised in a case based upon any one of them.'" Integra Bank/Pittsburgh v. Freeman, 839 F. Supp. 326, 330 (E.D.Pa.1993), (citing Lee v. Schweiker, 739 F.2d 870 (3d Cir.1984)). Unlike setoff, recoupment "lessens or defeats any recovery by the plaintiff." Algrant v. Evergreen Valley Nurseries L.P., 126 F.3d 178, 184 (3d Cir.1997) (quoting Household Consumer Discount Co. v. Vespaziani, 490 Pa. 209, 219, 415 A.2d 689, 694 (1980)). A party may assert recoupment as a defense after a statute of limitations period has lapsed. Beach v. Ocwen Fed. Bank 523 U.S. 410, 417-418, 118 S. Ct. 1408, 1412, 140 L. Ed. 2d 566 (1998). The defense must be related to the nature of the demand made by the other party, that is, it must arise from the same contractual transaction. Algrant, 126 F.3d at 184.
In this case, the TILA claims arise out of the mortgage loan. It is alleged that the lender failed to disclose certain finance charges and the "high cost" of the mortgage loan. Amended Complaint, ¶¶ 22-24. Although otherwise tardy, such claims may nevertheless be raised via recoupment.
The same however cannot be said of the UDAP count. No mention whatsoever is made of recoupment. For the relief under this count not already found to be precluded (i.e., rescission) what remains to be recovered is sought affirmatively: Plaintiff demands that the lender satisfy their security interest in her home; that it return all payments which she made to them; that this Court disallow their bankruptcy claim; and that it enter an award of damages, attorneys fees, and costs. The statute of limitations for a UDAP claim is six years. See Gabriel v. O'Hara, 368 Pa.Super. 383, 398, 534 A.2d 488, 496 (Pa.Super.1987); Keller v. Volkswagen of America, Inc., 733 A.2d 642, 646 n. 9 (Pa.Super.1999). Generally, a statute of limitations begins to run when the plaintiff's cause of action accrues. Leedom v. Spano, 436 Pa.Super. 18, 28, 647 A.2d 221, 226 (1994). Here, the UDAP cause of action accrued when the lender failed to give the rescission disclosure notice at the time the parties signed the contract. See 73 P.S. § 201-7(b) (requiring lender to disclose rescission right "at the time of the sale or contract"). The parties entered into the contract on April 1, 2000 thus the statute began to run as of that date. But this adversary proceeding was not commenced until May 5, 2006, which is more than six years from the date of the loan closing. Therefore, the remaining UDAP claims are time-barred and must be dismissed.[16]
*106 Summary
The UDAP rescission request in Count I of the Amended Complaint must be dismissed under the Rooker-Feldman doctrine. The remaining requests for relief under that count seek affirmative relief and must be dismissed on timeliness grounds. The claims under Count II shall survive dismissal to the extent that they seek recoupment damages only. Finally, Counts III and IV shall survive dismissal without qualification.
An appropriate order follows.
ORDER
AND NOW this 25th day of September, 2006, upon consideration of the Joint Motion of Deutsche Bank National Trust Company as Successor in Interest to Advanta Corporation and Chase Manhattan Mortgage Corporation to Dismiss Complaint, and the Motion of New World Mortgage, Inc. to Dismiss Amended Adversary Complaint, the Debtor's Opposition thereto, after a hearing he'd on July 25, 2006, and for the reasons set forth in the foregoing Opinion, it is hereby
ORDERED that the Motions are admitted in part and denied in part. The Motions are granted in their entirety as to all claims under Count of the Amended Complaint. The Motions will be granted as to Count II to the extent such count presses anything other than a recoupment claim. The Motions will be denied as to Counts III and IV.
NOTES
[1] Because the Complaint seeks to avoid a secured interest in the Debtor's property, it is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(K). That subparagraph includes among core proceedings "determinations of the validity, extent, or priority of liens."
[2] 73 P.S. § 201-1 et seq. The Court will refer to this law by the generic acronym UDAP as it is a law like those throughout the nation prohibiting unfair and deceptive acts and practices.
[3] 15 U.S.C. § 1601 et seq.
[4] 12 U.S.C. § 2601 et seq.
[5] 73 P.S. § 2181 and 37 Pa.Code § 305.1 et seq.
[6] Deutsche is the present holder; Advanta was its predecessor in interest. Amended Complaint, ¶ 4.
[7] Made applicable by B.R. 7012(b).
[8] The doctrine derives from two Supreme Court decisions: Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S. Ct. 149, 68 L. Ed. 362 (1923) and Dist.of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S. Ct. 1303, 75 L. Ed. 2d 206 (1983).
[9] Although Deutsche and Chase say that all claims are barred, they do not address count four which is addressed solely to New World, the broker.
[10] As to how Rooker-Feldman might preclude the RESPA claim, Chase starts from the premise that the applicable RESPA provision (§ 2605) is written in the present tense. Deutsche/Chase Brief, 9. The Plaintiff's mortgage, the argument continues, has been extinguished, or merged into the judgment. Id. citing In re Stendardo, 991 F.2d 1089, 1094-95 (3d Cir.I993). For the Court to grant RESPA relief, they conclude, it would have to "undo[]" the state court judgment. Id. At 10.
The Court must disagree. There is no indication in the statute nor is their case law offered which states that RESPA's requirement apply only to existing loans. Moreover, like the TILA claim, the RESPA could not be brought in response to a foreclosure action as it, too, constitutes an in personam action.
[11] Finally, the movants contentions that In re Knapper, 407 F.3d 573 (3d Cir.2005) is controlling here is rejected. What distinguishes the instant case from Knapper is the absence of any attempt excepting, of course, the rescission request in Count I to nullify the state court judgment. The Plaintiff in Knapper sought to overturn the foreclosure judgment alleging that the state court lacked personal jurisdiction over her on account of defective service of process. 407 F.3d at 577. That made Rooker-Feldman dispositive. That is not the case here. Other than the rescission request, this Plaintiff has not attacked the foreclosure judgment. Her claims seek to reduce that judgment and obtain damages for violations unrelated to the terms of the mortgage loan.
[12] Also made applicable by B.R. 7012(b).
[13] Pennsylvania courts have adopted this section of the Restatement. See Massullo v. Hamburg, Rubin et al, 1999 WL 313830 *6 (E.D.Pa.)
[14] Deutsche and Chase would also ascribe preclusive effect to Debtor's failure to object to the Deutsche Proof of Claim in her previous bankruptcy. See Deutsche/Chase Brief, 13-15. These movants cite a number of cases which hold that an allowed proof of claim is a final judgment for preclusion purposes.
In assessing this argument, the Court observes first that it involves matters outside the scope of the Amended Complaint. It is simply not appropriate in this context. Secondly, a little investigation on the Court's part reveals how distinguishable is the cited authority. In none of these cases was the prior action dismissed as this Debtor's was. So not only was there no Order expressly allowing the Deutsche claim, it cannot be inferred that such claim was allowed by implication. The Code expressly provides that the effect of dismissal of a case is without prejudice to a new filing. See 11 U.S.C. § 349(a); 3 Collier on Bankruptcy ¶ 349.02[1]. Dismissal restores the parties to the positions they were in at the time the dismissed case commenced. Id. ¶ 349.03[1]. Thus, whatever occurred (or failed to occur) in the prior case has no bearing on this pending proceeding.
[15] Given that count four is directed to the broker and neither Deutsche nor Chase, it is unclear why the latter two are pressing for dismissal of this count. In any event, New World does not raise the limitations defense to Count IV which is directed solely at it. Only New World has standing to make that challenge because only it is the real party in interest in that count; therefore, the Court will disregard the argument that Count IV is filed out of time.
[16] Neither does the Debtor enjoy the benefit of the extensions of time provided by bankruptcy Code § 108. For those extensions to apply (two years from the petition date for "commencement of actions") (subsection (a)) and six months to "file any pleading, demand, notice, or proof of claim or loss, cure a default or perform any similar act" (subsection (b)), the condition precedent is that such right under nonbankruptcy law has not yet expired at the time the bankruptcy was commenced. Here, such deadline had already passed: the UDAP claim should have been filed no later that March 31, 2006, but the bankruptcy case would not commence until April 20, 2006. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547583/ | 867 A.2d 230 (2005)
Frederic W. SCHWARTZ, Jr., and Cadeaux & Taglieri, P.C., Appellants
v.
Richard CHOW, Appellee.
No. 01-CV-133.
District of Columbia Court of Appeals.
Argued February 12, 2002.
Decided February 3, 2005.
*231 Frederic W. Schwartz, Jr., for appellants.
Martin F. McMahon, Washington, DC, for appellee.
Before TERRY, REID, and WASHINGTON, Associate Judges.
PER CURIAM.
Appellants seek to vacate a decision of the Attorney-Client Arbitration Board ("the Board"),[1] awarding them $26,000 in fees and $2,230 in expenses for their representation of appellee Richard Chow in litigation arising out of an automobile accident and in seven other unrelated matters. Appellants maintain that the Board exceeded its authority by retroactively applying a rule not in effect at the time they entered into their retainer agreement with Mr. Chow, with the result that they were not awarded their full fee. We agree that the basis for the Board's award is unclear, but for that very reason we reject appellants' argument. Because the law is well established that an arbitrator is not required to provide an explanation for a ruling, and because appellants have presented no other valid ground for relief, we decline to remand the case and thus affirm the trial court's decision upholding the award.
I
On May 28, 1982, Mr. Chow, then named Rong Yao Zhou, and his wife, Xiu Juan Wu, were involved in a serious automobile accident. Mr. Chow settled with the driver of the other car for $220,000, but filed suit against the owner of a restaurant who had served alcohol to the driver shortly before the accident occurred. See Zhou v. Jennifer Mall Restaurant, Inc., 534 A.2d 1268, 1269 (D.C.1987) ("Zhou I"); Zhou v. Jennifer Mall Restaurant, Inc., 699 A.2d 348, 350 (D.C.1997) ("Zhou II"). Although the case was originally dismissed by the trial court, Mr. Chow won reinstatement of his complaint on appeal. Zhou I, 534 A.2d at 1276. After a long litigation process, including another appeal, Mr. Chow obtained a judgment for $200,000 in 1997.[2]Zhou II, 699 A.2d at 350. Mr. Chow is now divorced from his wife, and, under their divorce agreement, he is entitled to half of the judgment.[3]
Throughout the litigation, Mr. Chow was represented by the law firm of Cadeaux & Taglieri, P.C. The law firm, in turn, engaged the services of Frederic Schwartz, Esquire, to assist in presenting both of Mr. Chow's appeals. The law firm and Mr. Schwartz agreed to divide the fee *232 from the case evenly. In this proceeding appellants claim $50,000 in legal fees from the 1997 judgment, based on a retainer agreement between Mr. Chow and Cadeaux & Taglieri that was signed shortly after the accident occurred. The agreement[4] states that the firm is entitled to:
a sum equal to 33 1/3 percent of any amount recovered or collected for or by [Chow], through or by compromise, settlement or otherwise before this suit is filed; in the event that the suit is filed, the sum shall be equal to 40 percent of any recovery; and in the event that it is necessary to prosecute an appeal, the sum shall be equal to 50 percent of any recovery.
Because the matter was not finally decided until the second appeal (Zhou II), appellants claimed they were entitled to a 50 percent fee on Mr. Chow's half of the $200,000 recovery, as well as $2,230 in costs.[5]
Mr. Chow denied signing the retainer agreement[6] and filed for arbitration pursuant to Rule XIII of the District of Columbia Bar Rules.[7] Appellants counterclaimed for $8,219 in fees relating to seven other matters on which they had done work for Mr. Chow, including a "domestic action" relating to his divorce in which they sought fees of $900.[8] The Board awarded appellants $26,000 in fees and $2,230 in expenses, but did not explain the reasons underlying its award.[9]
Appellants filed a motion in the Superior Court to vacate the award, asserting that the rationale of the award was apparent and that the Board exceeded its authority by retroactively applying rules that were not in effect at the time the retainer agreement was signed. The court found, however, that the rationale of the award was not apparent and therefore confirmed the award. This appeal followed.
*233 II
It is firmly established that "[j]udicial review of an arbitrator's decision is extremely limited, and a party seeking to set it aside has a heavy burden." Lopata v. Coyne, 735 A.2d 931, 940 (D.C.1999) (citations omitted); accord, e.g., Tauber v. Trammell Crow Real Estate Services, Inc., 738 A.2d 1214, 1216-1217 (D.C.1999). D.C.Code § 16-4311(a) (2001) sets forth the grounds on which a court is authorized to vacate an arbitration award.[10] In addition to those statutory grounds, we have also said that "[w]here it appears that the arbitrator manifestly disregarded the law, court inquiry may be undertaken." Lopata, 735 A.2d at 940 (citations omitted). The nature and extent of that inquiry may be limited, however, "particularly if the decision does not approach being arbitrary and capricious." Id. (footnote omitted).
Arbitrators, moreover, are not required to state the grounds for their decisions. Poire v. Kaplan, 491 A.2d 529, 534 (D.C.1985); see Sargent v. Paine Webber Jackson & Curtis, Inc., 280 U.S.App.D.C. 7, 10, 882 F.2d 529, 532 (1989), cert. denied, 494 U.S. 1028, 110 S. Ct. 1474, 108 L. Ed. 2d 612 (1990); Sobel v. Hertz, Warner & Co., 469 F.2d 1211, 1214 (2d Cir.1972) ("a requirement that arbitrators explain their reasoning in every case ... would undermine the very purpose of arbitration, which is to provide a relatively quick, efficient and informal means of private dispute settlement"). Therefore, unless manifest disregard of the law is clear, "courts will not look beyond the lump sum award in an attempt to analyze the reasoning process of the arbitrators." Kurt Orban Co. v. Angeles Metal Systems, 573 F.2d 739, 740 (2d Cir.1978) (citation omitted); see Kanuth v. Prescott, Ball & Turben, Inc., 292 U.S.App. D.C. 319, 323, 949 F.2d 1175, 1179 (1991).
Although the arbitration panel in this case gave no explanation for its decision, appellants contend that "the rationale of the Board is apparent." According to appellants' interpretation, the Board awarded fees only for the work of Cadeaux & Taglieri and not Mr. Schwartz because the retainer agreement did not provide written notice of Mr. Schwartz's participation in representing Mr. Chow, as is required by the current Rule 1.5(e)(2) of the District of Columbia Rules of Professional Conduct.[11] As a result, appellants *234 contend, the Board's award reflects $25,000 for the one-half of the work performed under the retainer agreement by Cadeaux & Taglieri, $900 for the divorce case because it was the only other claim for which there was an additional valid retainer agreement, and a "de minimis" extra $100.[12]
Under this rationale, appellants argue, the Board's decision was in error. The current District of Columbia Rules of Professional Conduct, including Rule 1.5(e), became effective on January 1, 1991, after Mr. Chow had entered into the retainer agreement. See DISTRICT of COLUMBIA RULES OF PROFESSIONAL CONDUCT, Preface (1996). Disciplinary Rule (DR) 2-107, which was the precursor of Rule 1.5 and was in effect at the time the retainer agreement was signed, did not require written notice of a fee-sharing agreement, as long as full disclosure was made and the client consented. See DISTRICT OF COLUMBIA CODE of PROFESSIONAL RESPONSIBILITY, DR 2-107(A) (1983).[13] Appellants contend that Mr. Schwartz's representation and fee sharing agreement were legitimate under the prior rules and that the Board thus exceeded its powers by not awarding them the full fee due under the retainer agreement.
Although appellants offer a possible explanation for the Board's award, that explanation is really nothing more than a good guess. Appellants' rationale itself, although suggesting a precise and detailed reason for the award, fails to account for $100 of it. This failure undermines their assertion that their theory is the only one that explains the award. More importantly, as the trial court pointed out, appellants' explanation overlooks "a host of variables that just as plausibly explain a fee award which was, after all, made in a lump sum to two claimants in eight cases."
Mr. Chow offers several alternative rationales for the award.[14] Although all of these explanations are plausible to one degree *235 or another,[15] none of them compels the conclusion that it was the basis for the Board's award. (On the other hand, neither does the one offered by appellants.) At least two of Mr. Chow's rationales provide a possible basis. Contrary to appellants' assertion, supra note 12, the Board was not prohibited from awarding a fee for the personal injury litigation if it found that Mr. Chow had not signed the contingency agreement. Instead, it could have awarded a fee based on the lodestar method. See Ginberg v. Tauber, 678 A.2d 543, 551-552 (D.C.1996), cert. denied, 519 U.S. 1077, 117 S. Ct. 738, 136 L. Ed. 2d 677 (1997). Alternatively, the Board could have based its award on a quantum meruit theory in the absence of a valid fee contract. Borrowing from the reasoning of the trial court, Mr. Chow now asserts:
The Board may ... have accepted Mr. Chow's contention that he signed no retainer agreement with Cadeaux & Taglieri, but it may also have determined that respondent knew of petitioners' fee-sharing agreement. The Board may have then calculated its award on, say, a quantum meruit basis or a discounted basis, and arrived at an award which embraced all legal services undertaken for respondent by petitioners.
We agree with Mr. Chow and the trial court that this analysis provides an acceptable alternative explanation for the Board's award. This means that there are at least two competing rationales which explain the award, and neither the trial court nor this court may speculate as to which of the two the Board actually adopted. "[S]o long as the record disclose[s] a permissible route to the [Board's] stated conclusion," there is "no need of further proceedings." Sargent, 280 U.S.App. D.C. at 10, 882 F.2d at 533; see Sobel, 469 F.2d at 1215. Nor is there any acceptable reason to remand the case to the Board for an explanation of its decision. Appellants have failed to establish "the probability of `manifest disregard' of the law," Sargent, 280 U.S.App. D.C. at 11, 882 F.2d at 534, and thus, as the trial court recognized, no further inquiry into the basis for the Board's decision can be allowed.
Reduced to essentials, appellants' challenge to the Board's award is founded entirely on speculation and conjecture. Given the "very limited" scope of review by a court of any arbitration award and the "heavy burden" on anyone who challenges it, Lopata, 735 A.2d at 940, we have no basis for concluding that the Board exceeded its powers or manifestly disregarded the law. The decision of the trial court confirming the award is therefore
Affirmed.
NOTES
[1] The Board is a subdivision of the District of Columbia Bar.
[2] The $200,000 resulted in a total recovery of $520,000 for the accident. In addition to the $220,000 settlement with the driver, the restaurant's insurance company had agreed to pay $100,000 of its $300,000 coverage after Mr. Chow won the first appeal. The $200,000 judgment in 1997 was the resolution of a dispute about whether the insurer was required to pay the remaining $200,000 in light of Mr. Chow's settlement with the driver. See Zhou II, 699 A.2d at 350.
[3] According to appellants, Mr. Chow's ex-wife has agreed to pay her half of the attorneys' fee, which amounts to $50,000.
[4] The copy of the agreement that is in the record on appeal contains uncompleted blank lines and is undated.
[5] Notwithstanding the agreement, the law firm charged only $40,000, or 18 percent, on the initial $220,000 settlement, and $37,960 (38 percent) on the initial $100,000 distribution from the restaurant's insurance company.
[6] Mr. Chow speculated that his brother signed his name while he was in a coma. The record contains a report from a handwriting analyst that lends support to this contention.
[7] Rule XIII provides that an attorney who is a member of the District of Columbia Bar
shall be deemed to have agreed to arbitrate disputes over fees for legal services and disbursements related thereto when such arbitration is requested by a present or former client ... if a substantial portion of the services were performed by the attorney in the District of Columbia, or if the services included representation before a District of Columbia court.... The arbitration provided under this rule shall be final and binding on the parties according to applicable law, and shall be enforceable in the Superior Court and in any other court having jurisdiction.
Unless the parties agree otherwise, the arbitration is conducted by the Attorney-Client Arbitration Board.
[8] Mr. Chow signed a separate retainer agreement which provided that fees for the domestic action would be paid out of the proceeds recovered from the accident. The record contains no written agreement for the six other matters, which were business and landlord-tenant cases, but appellants assert, without contradiction, that the parties agreed that the fees in those matters were also to be paid from the proceeds in the accident-related lawsuit.
[9] The Board's order stated: "Petitioner shall pay respondents $26,000 in fees and $2,230 in expenses out of the $100,000 in insurance proceeds to which he is entitled. This award makes no determination with respect to any claim to insurance proceeds Mr. Chow's ex-wife may have, or with respect to the distribution of any potential interest on the insurance proceeds."
[10] D.C.Code § 16-4311(a) states:
Upon application of a party, the Court shall vacate an award where:
(1) The award was procured by corruption, fraud or other undue means;
(2) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party;
(3) The arbitrators exceeded their powers;
(4) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of section 16-4315, as to prejudice substantially the rights of a party; or
(5) There was no arbitration agreement and the issue was not adversely determined in proceedings under section 16-4312 and the party did not participate in the arbitration hearing without raising the objection; but the fact that the relief was such that it could not or would not be granted by a Court of law or equity is not ground for vacating or refusing to confirm the award.
[11] Rule 1.5(e) provides:
(e) A division of a fee between lawyers who are not in the same firm may be made only if:
(1) The division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation;
(2) The client is advised, in writing, of the identity of the lawyers who will participate in the representation, of the contemplated division of responsibility, and of the effect of the association of lawyers outside the firm on the fee to be charged; (3) The client consents to the arrangement; and
(4) The total fee is reasonable.
[12] Appellants contend that no other rationale can explain the amount of the award. They argue that if the Board had accepted Mr. Chow's allegation that he did not sign the retainer agreement, the award should have been only the $900 payable under the divorce retainer. Further, if the court had used a lodestar method, appellants claim they would have been entitled to at least $262,500, significantly more than the $26,000 which the Board awarded.
[13] Former DR 2-107(A) provided:
A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of his law firm or law office, unless:
(1) The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.
(2) The division is made in proportion to the services performed and responsibility assumed by each.
(3) The total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they rendered the client.
[14] Mr. Chow argues that there are at least four other plausible explanations for the Board's award: first, that the Board was aiming to give appellants an overall contingency fee of 30 percent for the entire litigation; second, that the Board was awarding a 38 percent contingency fee, based on the entire fee gained from both Mr. Chow and his ex-wife for the $200,000 payment; third, that the Board performed a lodestar calculation in which it discounted the fee because of the allegedly forged retainer agreement and prior payments; and finally, that the Board calculated its award on a quantum meruit basis or on a discounted basis, again because of the allegedly forged retainer agreement.
[15] Mr. Chow's first two alternative explanations are the least plausible. Both include an assumed $50,000 fee from his former wife, but the Board's order plainly stated that the award "makes no determination with respect to any claim to insurance proceeds Mr. Chow's ex-wife may have...." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547588/ | 867 A.2d 666 (2005)
PITTSBURGH FIRE FIGHTERS, LOCAL NO. 1, by and through its Trustee Ad Litem, Pittsburgh Fire Fighters President Joseph KING; and Joseph King, in his capacity as a resident and taxpayer of the City of Pittsburgh, County of Allegheny, Commonwealth of Pennsylvania, Petitioners,
v.
Dennis YABLONSKY, in his capacity as Secretary, Commonwealth of Pennsylvania, Department of Community and Economic Development; Commonwealth of Pennsylvania, Department of Community and Economic Development; Public Financial Management; Eckert Seamans Cherin & Mellott L.L.C.; City of Pittsburgh; The Honorable Tom Murphy, in his capacity as Mayor of the City of Pittsburgh, Respondents.
Commonwealth Court of Pennsylvania.
Argued December 8, 2004.
Decided January 25, 2005.
*668 Joshua M. Bloom, Pittsburgh, for petitioners.
Clifford B. Levine and Susan E. Malie, Pittsburgh, for respondents.
BEFORE: COLINS, President Judge, and PELLEGRINI, Judge, and FRIEDMAN, Judge, and LEADBETTER, Judge, and COHN JUBELIRER, Judge, and SIMPSON, Judge, and LEAVITT, Judge.
OPINION BY President Judge COLINS.
Before the Court are the respondents' preliminary objections to the Second Amended Complaint filed by the Pittsburgh Fire Fighters, Local No. 1 (Fire Fighters).
Before addressing the preliminary objections we present the following factual and procedural background. On November 7, 2003, Mayor Murphy filed a request with the Secretary of the Department of Community and Economic Development seeking a determination that the City of Pittsburgh is financially distressed under the Municipalities Financial Recovery Act (Act 47), Act of July 10, 1987, P.L. 246, as amended, 53 P.S. §§ 11701.101 11701.501. Designation as a financially distressed municipality enables such entities to apply for special financial grants to aid in recovery from such financial condition. Once the Secretary receives a request he must make a determination as to whether the municipality is distressed. Before conducting a required public hearing on the issue, the Secretary may initiate an investigation into the status of the municipality. In this case, the Secretary retained respondent Public Financial Management (PFM) to assist in the evaluation of the City. Section 203(c) of Act 47, 53 P.S. § 11701.203(c), provides that such results become part of the record of the public hearing.
In this case the Secretary determined that the City was financially distressed, and in accordance with Section 221 the Secretary appointed PFM and respondent Eckert Seamans as joint coordinators (coordinator) to prepare recovery plan for the City. The coordinator filed a preliminary Plan with the City on May 26, 2004. Following a public comment period, which included a public meeting, and subsequent revisions to the Plan, the coordinator filed the final recovery Plan with the City on June 11, 2004.
The Plan included various provisions relating to the terms of agreements between the City and the Fire Fighters labor union to be included in any collective bargaining agreement between those parties. Although Act 47 precludes any plan from interfering with the terms of an existing collective bargaining agreement, the Act allows a coordinator to include in a recovery plan recommendations proposing changes to collective bargaining agreements that could alleviate a municipality's financial distress. Section 242(3), 53 P.S. § 11701.242(3). Further, once a plan is adopted, no collective bargaining agreement adopted thereafter may "violate, expand or diminish" the plan's provisions. Section 252 of the Act, 53 P.S. § 11701.252.
The Fire Fighters' present agreement is not set to expire until December 31, 2005; however, the Fire Fighters and the City agreed to "reopen" the agreement effective January 1, 2004 on the issues of wages, healthcare for active employees, and several other issues. The parties have exchanged proposals, but according to the respondents' memorandum they are still in negotiations. Under Section 4 of the Act of June 24, 1968 (Act 111), P.L. 237, No. 111, as amended, 43 P.S. § 217.4, which *669 sets forth the collective bargaining process for fire fighter unions, if the parties cannot agree, an impasse will be declared and they will have to submit their differences to arbitration.
The City Council officially adopted the Plan as Ordinance No. 10 on June 29, 2004. Hence, provisions contained therein may have an impact on the negotiations between the parties in seeking to come to terms in a collective bargaining agreement.
1. The Complaint
The complaint seeks a declaratory judgment that Section 252 Act 47, Act of July 10, 1987, P.L. 246, 53 P.S. §§ 11701.101 11701.501 does not apply to arbitration awards under Act 111, does not preclude Act 111 awards from affecting provisions in an Act 47 recovery plan, and that any provisions in the Plan the City adopted pursuant to Act 47 that violate or diminish the Fire Fighters' rights under Act 111 are null and void (Count I); that the coordinator exceeded its authority by including in the Plan provisions reorganizing the Pittsburgh Fire Bureau, and that such provisions are contrary to law, thereby rendering the provisions in the Plan relating to reorganization of the City's Fire Bureau unlawful (Count II); that the inclusion in the Plan of provisions limiting the subjects over which the City and the Fire Fighters may bargain, thus eliminating the opportunity for the parties to select their own means of accomplishing the Plan's financial goals for cost reduction, and those provisions that eliminate the right to bargain over subjects that are not relevant to the financial distress of the City, violates the law and are invalid as beyond the authority of the coordinator (Count III); that numerous provisions in the Plan, pertaining to the organization of the Bureau and cuts in staffing are invalid and contrary to the law (Count IV); that the Plan is invalid because it is the result of violations of the State Adverse Interest Act (SAIA), Act of July 19, 1957, P.L. 1017, as amended, 71 P.S. §§ 776.1 776.8 (Count V); that provisions adopted in purported reliance upon Section 241 of Act 47 effect an unlawful impairment of contracts in violation of the Home Rule Charter and Optional Plans Law, and the United States and Pennsylvania Constitutions (Count VI); and that the coordinator unlawfully delegated his duties under Act 47 to the Mayor of Pittsburgh with regard to the formulation and implementation of the Plan, such that the Court should void any provisions of the Plan relating to the Fire Bureau (Count VII).
2. The Preliminary Objections
The preliminary objections challenge Counts I, II, III, IV, VI, and VII for failure to state a claim against the following respondents: the Secretary of DCED, DCED, PFM, and Eckert Seamans; failure to state a cause of action in Count V under the SAIA; lack of ripeness as to Counts I, III, IV, and VI; failure to state a claim against any respondent for improper delegation in Count VII; failure to state a claim, lack of ripeness, and improper jurisdiction regarding the claim in Count II that the Plan improperly includes reorganization provisions; and lack of jurisdiction.
a. Failure to State a Claim against the Secretary, DCED, PFM, and Eckert Seamans
We address first the respondents' objection for failure to state a claim against the Secretary, DCED, PFM, and Eckert Seamans in Counts I, II, III, IV, VI, and VII. The respondents, relying upon the Supreme Court's decision in Wilkinsburg Police Officers Association v. Commonwealth, 535 Pa. 425, 636 A.2d 134 (1993), *670 argue that the claim fails because these non-City respondents did not enact the Plan. In Wilkinsburg, the Court held that a declaratory judgment action did not lie against the Commonwealth under Act 47 for a claim alleging that that municipality's recovery plan violated the provisions of the association's collective bargaining agreement. The Court agreed with this Court's earlier conclusion that no cause of action existed because Act 47 did not unconstitutionally delegate fiscal decision making authority, but rather left such authority with the municipality.
The Fire Fighters contend that Wilkinsburg is not applicable, arguing that the question of whether these defendants were involved in the enactment of the Plan is irrelevant to the cause of action. Rather, the Fire Fighters argue, the claims are addressed to the "formulation, preparation, and administration" of the Plan.
However, in Fraternal Order of Police, Fort Pitt Lodge No. 1 v. Yablonsky, (FOP), 867 A.2d 658 (Pa.Cmwlth. No. 443 M.D.2004, filed January 25, 2005), this Court addressed claims similar to those presented in this case, involving the same respondents, and arising from concerns about the impact of the Plan on the collective bargaining process between the Fraternal Order of Police and the City. As in that case, the underlying claims here concern the impact of the Plan on the bargaining process. Although the Fire Fighters are correct in asserting that these respondents were involved in the formation of the Plan, the Plan had no efficacy until the City adopted it, and the City was not required to adopt the plan. As noted above, the City could have developed its own plan. The crux of the claims in both this and the FOP case concerns the interplay between the collective bargaining and arbitration process provided under Act 111 and the Plan. In FOP, we held that the claims failed to state a cause of action against these respondents because the City retained decision-making authority. We further concluded that the administrative remedy of arbitration, with appeal to the common pleas court provided an adequate avenue to challenge the effect of the Plan on the ultimate award of an arbitrator. In accordance with our conclusions in FOP, we sustain the respondents' preliminary objection for failure to state a claim in Counts I, II, III, IV, VI, and VII against these non-City respondents.
b. Improper Delegation to the City
The Fire Fighters contend In Count VII that the Plan is invalid, alleging that the coordinator improperly delegated to the Mayor and City officials the task of preparing the Plan, thus violating the language of Act 47, which directs that the coordinator shall formulate and administer a plan. The respondents answer that part of the coordinator's role requires it to accept comments and suggestions. While the Act does rest the responsibility for the ultimate plan with a coordinator, there is nothing in Act that precludes the coordinator from receiving recommendations from others. The inclusion of provisions for public hearings supports that view. Section 242(c), (e), 53 P.S. § 11701.242(c), (e); Section 243(a), 53 P.S. § 11701.243. Even if the Fire Fighters' averment that the City was responsible for developing the provisions pertaining to the Fire Bureau that the Coordinator included in the proposed recovery plan, we cannot agree that that Plan in itself violates the language of Act 47. Accordingly, we sustain this objection to Count VII.
c. Lack of Actual Controversy
We now address the objections relating to Counts I, III, IV, and VI for failure to raise an actual controversy such that *671 would enable the Court to grant relief under the Declaratory Judgment Act, 42 Pa.C.S. §§ 7501-7541. Respondents contend that, until the collective bargaining and arbitration process is complete, there is no way to know if the Plan will have an adverse impact upon the Fire Fighters. We agree.
As noted above, Count I of the Complaint seeks clarification as to the interrelationship between Act 47 and Act 111. The Fire Fighters argue that the indefinite application of Act 47 to Act 111 creates a current, ripe controversy that must be resolved before arbitration can commence.[1] However, as we concluded in FOP the arbitration process is subject to review by the trial courts and then this Court. The decisions in FOP Lodge No. 19 v. City of Chester, 845 A.2d 230 (Pa.Cmwlth.2004), and Farrell indicate that the courts can and do address the interplay between Act 47 and Act 111 in appeals from arbitration awards.
The Fire Fighters argue that if the General Assembly intended for Section 252 of Act 47 to apply to Act 111 determinations, the result would be that any award that violated a provision of an existing Act 47 Plan would not be final and binding, as provided in Section 7 of Act 111. Thus, the Fire Fighters argue that, by interpreting Section 252 to apply to Act 111, we are concluding that Section 252 effected an implied repeal of Section 7 of Act 111. However, at this point there is neither an agreement nor a determination that we can consider in this context. Further, even if the Fire Fighters were correct in their analysis, we believe that the administrative remedy available in an arbitration proceeding would provide an adequate means of challenging this issue.
The Fire Fighters contend that, because Section 252 of Act 47 uses the term "arbitration settlement," rather than "arbitration determination," the General Assembly did not intend for Section 252 of Act 47 to apply to Act 111. The Fire Fighters contend that because the General Assembly provided for a clear distinction between arbitration settlements and arbitration determinations in Act 111, we should conclude that the use of the phrase "arbitration settlement" in Section 252 of Act 47 means that the legislature only intended that only arbitration settlements, as described in Act 111, should not "violate, expand or diminish" a plan's provisions. However, although the legislature did use the term "arbitration settlement" rather than "determination" as used in Act 111, Section 252 refers to both collective bargaining agreements and arbitration settlements. Because Act 111 describes the collective bargaining process as including the entering into settlements by way of written agreement, and arbitration determinations as a last resort, we believe the General Assembly, in referring to collective bargaining agreements or arbitration settlements in Act 47, was referring to arbitration awards, whether it used the word settlement or determination.
In Counts III and IV, the Fire Fighters generally contend that the provisions of the Plan (1) improperly prevent negotiation over terms of employment that Act 111 leaves to the bargaining parties and (2) improperly address the organization of the Bureau and staffing cuts. Because the Plan precludes the Fire Fighters from even negotiating certain terms, they argue that the Plan presents a current and actual controversy. The Fire Fighters, like the *672 petitioner in FOP, argue that, while Act 47 permits a coordinator to include provisions in a plan that impose some limits as to the ultimate award, the bargaining process itself should provide the parties with the opportunity to engage in negotiations as to how the bargaining unit and City accomplish the financial goals set forth in the Plan. As we noted in FOP, the administrative remedy of arbitration, and appeals therefrom, offer an adequate means to present these concerns.
The Fire Fighters argue that resolution of the issues in declaratory judgment is appropriate because an arbitrator who feels compelled to confine his award to the terms of the Plan may not mention the Act in the award, and the failure to mention the Plan may preclude consideration on appeal of the legality of the Plan's impact on the award. However, at present there is no way to know whether the Plan will have such effect. Accordingly, we conclude that the controversy is not ripe and therefore not justiciable. Further, an appeal to the common pleas court from an Act 111 arbitration award would provide the parties with an adequate remedy. Although Act 47 places limitations on the bargaining rights of parties, Act 111 still controls the procedure for resolution of bargaining disputes. Although there is reason to believe that the parties would not be able to reach an agreement in light of the provisions of the Plan, we have no definite way to know that this will be the outcome of the bargaining and arbitration. Act 111 sets forth the rights that unions such as the Fire Fighters have in the bargaining process; however, as a matter of legislative, rather than constitutional grace, the General Assembly may limit or contract the rights it has bestowed. Plans developed pursuant to Act 47 represent such a limitation.
Defendants rely on several arguments to support their preliminary objection to Count VI, which raises a claim that provisions in the Plan that will affect pension and leave rights constitute an unconstitutional impairment of contract. Most notable is the fact that the Complaint pleads no facts that allege a present taking from any union member. Accordingly, we cannot agree that the alleged prospective interference with rights the members presently enjoy presents an actual controversy at this time.
For these reasons and those stated in our decision in the FOP case, we conclude that the Fire Fighters have presented no justiciable controversy in Counts I, III, IV, and VI.
d. Jurisdiction
As to the respondents' challenge to the Court's jurisdiction to consider challenges to the Plan under Counts I, II, III, VI, and VII, we agree that the common pleas court has jurisdiction. Under Act 111, the Fire Fighters will have an opportunity to have that court consider the claims regarding the arbitration process only after arbitration has been completed. See FOP.
e. Failure to State a Claim and Lack of Jurisdiction as to Count II
We now consider the objections to Count II asserting failure to state a claim and lack of jurisdiction regarding the Plan's recommendations for Fire Bureau reorganization. The respondents contend that (1) the City has the power to effectuate changes within the Bureau pursuant to the adopted Plan that are not precluded under the Home Rule Charter, which specifically allows the City to reduce its police or firefighting force; (2) as municipal legislation, the Plan, adopted by the City as Ordinance No. 10, is accorded a presumption of validity; and (3) common pleas courts have jurisdiction over challenges to *673 municipal ordinances. Based upon the apparently unchallenged adoption by the City of the Plan-ordinance, and the City's inherent power to authorize changes in the organization and the size of the firefighter force, we sustain the respondents' objection.
f. Claims Under the SAIA
The defendants also object to Count V of the Complaint, which raises a claim under the State Adverse Interest Act, (SAIA). Section 3 of the SAIA provides that:
No State advisor or State consultant having recommended to the State agency which he serves, either the making of a contract or a course of action of which the making of a contract is an express or implied part, shall at any time thereafter, have an adverse interest in such contract.
71 P.S. § 776.3.
The Fire Fighters' claims under the SAIA suggest that the respondents acted improperly because PFM, which had conducted the pre-distressed status investigation for the Secretary ultimately obtained the contract to act as coordinator. However, we conclude this Count fails to state a claim.
Under Act 47, the Secretary must do more than simply conduct an investigation. Act 47 provides that information or reports conducted pursuant to the Secretary's authority become part of the record of the public hearing. Section 203(c), 53 P.S. § 11701.203(c). Hence, such information becomes only a part of the total evidentiary record the Secretary considers in making a determination of financially distressed status. Section 203(c), 53 P.S. § 11701.203(c). Neither this section nor any other provides that the information provided constitutes a recommendation. Following the issuance of the Secretary's determination, an aggrieved party has the right under Section 203(g) of Act 47 to appeal. We agree with the respondents that the study PFM conducted did not make a recommendation within the meaning of the SAIA. We also agree that Eckert Seamans made no recommendation to the Secretary or DCED.
Further, the SAIA has no provision for the type of declaratory relief that the FOP seeks here. Neither the Secretary nor the DCED is a state advisor or state consultant under the definitions in the SAIA. As the respondents point out, the City adopted the plan as an ordinance, but the FOP has not alleged that the City violated the SAIA.
In summary, because the PFM did not make a recommendation to the Secretary that expressly or impliedly included a contract, the SAIA is simply not applicable to the defendants named in Count V, and therefore, the objection to Count V is sustained.
g. Jurisdiction
Finally, we agree with the respondents that, because the Fire Fighters cannot state a claim against the Secretary or the DCED under any of the Counts, they cannot seek to have this Court address the merits of the Complaints with regard to the other defendants under 42 Pa.C.S. § 761(a)(1).
In summary, we sustain the defendants' preliminary objections in their entirety, and dismiss the Complaint.
Judge McGINLEY did not participate in this decision.
ORDER
AND NOW, this 25th day of January 2005, the preliminary objections filed by *674 the respondents are sustained. The Complaint is dismissed.
NOTES
[1] The Fire Fighters indicate that the City has refused to negotiate, that arbitration is inevitable, and that they have filed an unfair labor practice action against the City that is pending before the Pennsylvania Labor Relations Board. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547521/ | 15 F.2d 356 (1926)
TUCKER
v.
ALEXANDER, Collector of Internal Revenue.[*]
No. 7124.
Circuit Court of Appeals, Eighth Circuit.
October 27, 1926.
Charles H. Garnett, of Oklahoma City, Okl., for plaintiff in error.
Frederick W. Dewart, Sp. Atty. Bureau of Internal Revenue, of Washington, D. C. (Roy St. Louis, U. S. Atty., and William P. Kelley, Asst. U. S. Atty., both of Oklahoma City, Okl., and A. W. Gregg, Solicitor of Internal Revenue, of Washington, D. C., on the brief), for defendant in error.
Before STONE, VAN VALKENBURGH, and BOOTH, Circuit Judges.
STONE, Circuit Judge.
This is an action for refund of a portion of a tax, paid under protest, on the income of plaintiff in error (plaintiff below) for the year 1920. Plaintiff made a tax return for that year and paid upon the basis thereof. An investigation by an agent of the department, thereafter, resulted in an additional assessment, which was paid under protest. In due time after this last payment, plaintiff filed his claim for refund. After waiting 17 months, in vain, for some action thereon by the department, this action was brought. About 6 months after this action was begun and before trial thereof, the department made an allowance of $216.26 (a small part of the claim) and rejected the balance of the claim. From a judgment favoring defendant, but without prejudice to acceptance by plaintiff of the allowance of $216.26, this writ of error is sued out.
In the view which we take of the issues which must determine this case, an extended statement of fact is unnecessary.
Prior to 1913, plaintiff was half owner of the stock of a corporation which had, for some years, been engaged in a general merchandise business at Pawhuska, Okl. In 1920, the corporation was voluntarily dissolved and the assets distributed in kind to plaintiff and his brother (who owned the other half of the capital stock), the two men assuming the existing indebtedness of the corporation. As half owners, the brothers continued the business as a copartnership. The income upon which the additional tax (refund of which is now sought) was collected was the increased value of the corporate stock from March 1, 1913, to the date of liquidation in 1920.
There are two main contentions here. One is of minor importance, concerning costs herein.
The important contention is in respect to collection of an income tax assessed upon the liquidation of the Osage Mercantile Company, of which Tucker was a stockholder. The main grounds for recovery thereof, as stated in the petition, are:
"That the assessment and collection of said additional income tax was erroneous and illegal in that it is based upon alleged income accruing to the plaintiff from the liquidating dividend upon the dissolution of the Osage Mercantile Company, a corporation, in which he was a stockholder; that this corporation was chartered and organized in the year 1902 with a capital stock of $15,000 divided into 150 shares of the par value of $100 each; that thereafter in the year 1906 the capital stock of said corporation was increased to $30,000 divided into 300 shares of the par value of $100 each; that on March 1, 1913, the plaintiff was the owner and holder of 112 shares of the capital stock in said corporation and the same was of the fair market value of $500 a share on said date; that on July 22, 1920, said corporation was liquidated and dissolved and its assets were transferred and distributed in specie to its stockholders by a liquidating dividend; that the net actual and fair market value of the assets so distributed was $88,408.97 on that date; that the share of such assets received by the plaintiff was less in value by the sum of $5,491.84 than the fair market value on March 1, 1913, of the stock he then owned plus the cost of the stock he subsequently acquired and he, therefore, sustained an actual loss in said amount on the liquidation of said corporation; that in ascertaining *357 the gain or loss to the plaintiff upon the liquidation of said corporation the Commissioner of Internal Revenue erroneously, wrongfully and illegally assumed and took $356.86 per share, instead of the correct sum of $500 per share, as the fair market value of the plaintiff's stock on March 1, 1913, and $97,292.71, instead of the correct sum of $88,408.97, as the net actual and fair market value of the assets of said corporation distributed at the time of liquidation in excess of all its liabilities then outstanding and assumed by its stockholders."
The collector contends that the plaintiff cannot recover upon such grounds because they are different from those asserted in his claim of refund. The claim of refund is general in terms and is to the effect that there was a loss instead of a profit, but it is made specific through an incorporation, by reference, of a letter from the deputy Commissioner which sets forth the grounds of protest actually urged to payment of the tax. Those grounds were as follows:
"The taxpayer says that said revenue agent's report is erroneous (1) in that he used the book value of the taxpayer's stock in the Osage Mercantile Company on March 1, 1923, instead of the fair market value thereof as a basis for determining the gain derived therefrom at liquidation, and (2) in that he did not deduct from the capital and surplus of said company at date of liquidation, the full amount of its outstanding liability, and (3) in that he did not take into account the reduction of the value of the assets of said company at liquidation, its certain outstanding obligation to W. T. Mosier which the stockholders assumed upon liquidation. In all other respects the taxpayer accepts the revenue agent's report."
It appears, therefore, that the grounds relied upon in the petition for refund are entirely different from those contained in the claim for refund. Hence, the above point raised by the collector must be determined. We think the collector is right for the reasons following:
This is a suit against the government in connection with the imposition and collection of the general revenue, which is a prime governmental function; such character of actions can be maintained only when permitted by the sovereign and only upon the conditions imposed by the sovereign. Such character of action is permitted by the statute but certain conditions are required as a condition precedent thereto. One of these conditions is that a claim for refund shall first be made to the Commissioner of Internal Revenue and a period of six months allowed for his determination thereof. The evident purposes and objects of this condition are to afford the Commissioner an opportunity to correct errors made by his office and to spare the parties and the courts the burden of litigation in respect thereto. Unless the claimant were required to present to the Commissioner all of the grounds upon which he relies for refund, the above purposes and objects would be partially or entirely defeated. The resort to the courts is allowed only because the Commissioner will not correct the wrong claimed to have been done. The purposes of requiring the claim and the object of the resort to the courts would be in part or wholly defeated unless the claim contained all of the grounds relied upon by the claimant. Therefore, we think it is a required precedent or limitation that the action shall be upon the same grounds and only such as are presented in the claim. As no ground in this petition is stated in the claim for refund, we think this petition has no standing under the issues tendered by the petition and that the determination of the court as to this major claim was correct.
The minor claim affects only costs and arises out of the fact that the Commissioner allowed a refund of $216. The tax was paid, under protest, on October 30, 1923; the claim for refund was filed early in November, 1923; this action was filed October 7, 1924; the ruling and above refund on the claim was made by the Commissioner April 24, 1925. The Commissioner had, under the statute, six months after the claim was filed within which to determine the claim and within which time plaintiff could not bring suit. As the Commissioner did not act within that period, the plaintiff was within his rights in bringing suit. If he had based his suit upon any ground contained in the claim and the above refund had been all or a part of the sum claimed under such ground, we think the plaintiff would have been entitled to his costs herein. But no refund of the above sum could have been secured under this petition; it was not secured because of the suit nor would the early announcement of such refund have obviated necessity for the suit nor have prevented it being brought. Under these conditions, we think the plaintiff has no right to his costs herein.
The judgment should be and is affirmed.
NOTES
[*] Rehearing denied January 15, 1927. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1645202/ | 994 So.2d 1276 (2008)
In re Pamela VAN BUREN.
No. 2008-OB-2624.
Supreme Court of Louisiana.
November 19, 2008.
ORDER
Considering the Petition for Transfer to Disability Inactive Status filed by respondent, Pamela Van Buren, and the response thereto filed by the Office of Disciplinary Counsel,
IT IS ORDERED that Pamela Van Buren, Louisiana Bar Roll number 6633, be and she hereby is transferred to interim disability inactive status pending a hearing to determine the validity of her claim of inability to assist in her defense due to mental or physical incapacity, pursuant to Supreme Court Rule XIX, § 22(C). All disciplinary proceedings shall be stayed pending this determination.
Pursuant to Supreme Court Rule XIX, § 26(E), this order shall be effective immediately.
/s/ Bernette J. Johnson
Justice, Supreme Court of Louisiana
*1277 | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4558353/ | Fourth Court of Appeals
San Antonio, Texas
August 21, 2020
No. 04-20-00271-CV
IN THE INTEREST OF N.R.B-E., A.S.M.B.D., A.L.B-D., A.B., CHILDREN,
From the 438th Judicial District Court, Bexar County, Texas
Trial Court No. 2019-PA-00669
Honorable Charles E. Montemayor, Judge Presiding
ORDER
Appellee’s brief was originally due on August 18, 2020. On August 20, 2020, appellee
filed its brief and a motion requesting an extension of time to file the brief until August 20, 2020.
After consideration, appellee’s motion is granted. Appellee’s brief is deemed timely filed as of
August 20, 2020.
_________________________________
Beth Watkins, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 21st day of August, 2020.
___________________________________
MICHAEL A. CRUZ,
Clerk of Court | 01-03-2023 | 08-25-2020 |
https://www.courtlistener.com/api/rest/v3/opinions/1547587/ | 353 B.R. 534 (2006)
In re Robert J. LUPO, Debtor.
South Atlanta Neurology and Pain Clinic, P.C., Plaintiff,
v.
Robert J. Lupo, Defendant.
Bankruptcy No. 05-22285, Adversary No. 05-1738.
United States Bankruptcy Court, N.D. Ohio, Eastern Division.
October 31, 2006.
*535 *536 *537 *538 *539 *540 Stephen D. Hobt, Cleveland, OH, for Debtor.
Alan P. Digirolamo, Cleveland, OH, for Plaintiff.
MEMORANDUM AND ORDER
RANDOLPH BAXTER, Chief Judge.
This matter before the Court is South Atlanta Neurology and Pain Clinic, P.C.'s ("South Atlanta") complaint to determine dischargeability of debt against Robert J. Lupo ("Debtor" or "Lupo"). The Court acquires core matter jurisdiction over this proceeding under 28 U.S.C. 157(a) and (b)(2)(A), (I) and (0) and General Order No. 84 of this District. Upon an examination of the parties' respective briefs and supporting documentation, and after conducting a trial on the matter, the following findings of fact and conclusions of law are hereby rendered:
*
Infinite View, Inc. (hereinafter, "Infinite View"), an Ohio corporation owned by the Debtor, previously engaged in the business of brokering and remanufacturing MRI equipment, entered into a written purchase proposal (the "Proposal") and sales agreement ("Sale Agreement") with South Atlanta wherein Infinite View would sell a 1999 Hitachi Aris II Open MRI System (the "MRI System") to South Atlanta for the total purchase price of $385,000.00. Plaintiff's Exhibits 11 and 12. South Atlanta tendered $77,000.00 (the "Deposit") to Infinite View, representing the deposit due for the purchase of the MRI System. Id. Pursuant to the Agreement, Infinite View was to ship the MRI System to South Atlanta no later than June 1, 2005. Id. The delivery date was amended to June 20, 2005 by an addendum executed by the parties ("Addendum"). Plaintiff's Exhibit 26.
Prior the execution of the Proposal and the Agreement, Infinite View executed a Purchase Proposal to acquire a 1999 Hitachi Aris II Open MRI System from a third party known as Medical Arts Commack, for $300,000. Plaintiff's Exhibit 49. Subsequently, *541 Infinite View tendered to Medical Arts Commack a deposit of $10,000 for the purchase of 1999 Hitachi Aris II Open MRI System. Plaintiff's Exhibit 50.
Prior to the execution of the Proposal and Agreement with South Atlanta, Infinite View was a defendant in a civil action captioned River Radiology, PLLC v. Infinite View, Inc., which was filed in the Lake County, Ohio Court of Common Pleas. River Radiology, the plaintiff therein, obtained an agreed judgment against Infinite View in the amount of $95,000.00, plus interest. Plaintiff's Exhibit 3. Subsequently, on two separate occasions, River Radiology caused the Lake County Sheriff to perform a levy of execution upon the assets of Infinite View at its business address in Willoughby, Ohio. Plaintiff's Exhibit 4 and 6. Thereafter, River Radiology and Infinite View entered into a consent entry in the state court action, whereby River Radiology was permitted to sell the levied property towards the satisfaction of its judgment. Plaintiff's Exhibit 13.
Prepetition, South Atlanta filed a lawsuit against Infinite View and Lupo in Henry County, Georgia asserting claims of breach of contract, fraud and conversion. Therein, in the matter of South Atlanta Neurology & Pain Clinic, PC v. Infinite View, Inc. et al., the court entered an order granting default judgment in favor of South Atlanta against Infinite View, which included compensatory and punitive damages in the sum total of $541,000.00 plus interest (the "Georgia Judgment"). Plaintiff's Exhibits 37 and 46. The action, as it pertained to Lupo, was stayed due to his pending Chapter 7 case. Plaintiff's Exhibit 46.
* *
On August 16, 2005, Lupo filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. Lupo's Schedule F ("Creditors Holding Unsecured Nonpriority Claims") includes the claim of South Atlanta in the amount of $77,000.00, and notes that the claim was a corporate obligation only listed for precaution.
South Atlanta commenced the above captioned adversary proceeding, seeking to determine the dischargeability of its debt pursuant to 11 U.S.C. §§ 523(a)(2)(A), (a)(4) and (a)(6) (the "Complaint"). South Atlanta alleges in the Complaint that Infinite View did not operate as a corporation and was the alter ego of Lupo, and that Lupo should be held personally liable for the acts of Infinite View and its representatives. South Atlanta also alleges that Lupo owes debts to South Atlanta that are nondischargeable because: (1) the debts were obtained by false pretenses, false representations and/or actual fraud by Lupo, (2) the debts arise from Lupo's acts of larceny and fraudulent actions while acting in a fiduciary capacity; and (3) the debts arise from a willful and malicious injury resulting from a scheme of misconduct by Lupo.
In his Answer, Lupo admits that he was the sole shareholder and president of Infinite View. Notwithstanding, he asserts that it was one Kyle Lulow, on behalf of Infinite View, who entered into the Proposal, Agreement and Addendum with South Atlanta for the sale and delivery of the MRI System. Lupo asserts that it was Infinite View, as opposed to himself, which accepted the Deposit and promised delivery of the MRI System. Lupo denies South Atlanta's allegations and asserts that he is not personally liable for the debts of Infinite View. Additionally, he asserts that the debt allegedly owed by him to South Atlanta is fully dischargeable.
* * *
The contentions of the parties reveal two dispositive issues. First, should the Debtor *542 be held personally liable for the actions of Infinite View and its representatives. Second, has South Atlanta sufficiently met its burden, which would warrant a determination that its debts are nondischargeable pursuant to §§ 523(a)(2)(A), (a)(4) and/or (a)(6).
* * * *
I. Piercing the Corporate Veil
"A corporation is a separate legal entity from its shareholders, even where there is but one shareholder." LeRoux's Billyle Supper Club v. Ma, 77 Ohio App. 3d 417, 602 N.E.2d 685, 687 (6th Dist.1991). However, under Ohio law, circumstances may exist where courts will disregard the corporate form and hold an individual shareholder liable for corporate misdeeds. This is often referred to as "piercing the corporate veil." The corporate entity and the individual shareholder are then treated as a single entity and the corporate liabilities become the liabilities of the individual shareholder. In order to pierce the corporate veil, a plaintiff must prove by a preponderance of the evidence that:
(1) control' over the corporation by those to be held liable was so complete that the corporation has no separate mind, will, or existence of its own, (2) control over the corporation by those to be held liable was exercised in such a manner to commit fraud or an illegal act against the person seeking to disregard the corporate entity, and (3) injury or unjust loss resulted from such control and wrong.
Belvedere Condominium Unit Owners' Ass'n v. R.E. Roark Cos., 67 Ohio St. 3d 274, 617 N.E.2d 1075, 1086 (1993); Zimmerman v. Eagle Mortgage Corp., 110 Ohio App. 3d 762, 772, 675 N.E.2d 480, 486 (1996); see also Ferguson v. Strader, 94 Ohio App. 3d 622, 628, 641 N.E.2d 728, 731 (1994). The three-part Belvedere test is a conjunctive test, therefore requiring a plaintiff to satisfy all three prongs to pierce the corporate veil of a corporation.
The first prong of the piercing the corporate veil test is a restatement of the alter-ego doctrine, which requires a plaintiff "show that the individual and the corporation are fundamentally indistinguishable." Id. In deciding whether the company is an alter ego of the individual, Ohio courts consider such factors as:
(1) grossly inadequate capitalization, (2) failure to observe the corporate formalities, (3) insolvency of the debtor corporation at the time the debt is incurred, (4) shareholders holding themselves as personally liable for certain corporate obligations, (5) diversion of funds or other property of the company property for personal use, (6) absence of corporate records, and (7) the fact that the corporate was a mere facade for the operations of the dominant shareholder(s).
LeRoux's Billyle Supper Club, 602 N.E.2d at 689 (citation omitted). Notwithstanding the aforementioned factors, "because of the equitable nature of the veil-piercing doctrine, no list of factors can be exclusive or exhaustive." Carter-Jones Lumber Co. v. LTV Steel Co., 237 F.3d 745, 749 (6th Cir.2001) (applying Ohio law).
A corporation having one shareholder and officer does not, per se, signify that an individual shareholder exercised control and domination over a corporation. "A corporation is a separate legal entity from its shareholder even where there is only one shareholder in the corporation." Zimmerman v. Eagle Mtge. Corp., 110 Ohio App. 3d 762, 675 N.E.2d 480, 485 (2nd Dist.1996). Some courts have held that this fact, alone, is sufficient to meet the first prong of the Belvedere test. See, e.g. Zimmerman, at 485 (stating "[t]he record is uncontroverted that Musgrave was the sole stockholder and director of Eagle and, *543 as such, exercised complete control over Eagle's corporate affairs."); Stypula v. Chandler, No.2002-G-2468, 2003 WL 22844296, at *2 (Ohio App. 11 Dist. Nov.26, 2003) (sole shareholder and director held personally liable); Intergy, Inc. v. Carrigan, No. 62210, 1993 WL 127089, at *2 (Ohio App. 8 Dist. Apr.22, 1993). Notwithstanding the aforementioned holdings, the mere fact that all or almost all of the corporate stock is owned by one individual or a few individuals will not afford sufficient grounds for disregarding corporateness. See Belvedere Condominium Unit Owners' Ass'n, 67 Ohio St. 3d 274, 617 N.E.2d 1075.
The evidence presented at trial supports a finding that Lupo exercised complete control over Infinite View. The evidence includes an admission by Lupo that Infinite View was undercapitalized and insolvent. Specifically, between late February and early March 2005, Infinite View had liabilities totaling 54.4 million and assets with a value of $40,000. (Lupo, Cross-Examination). The evidence also established that Lupo disregarded corporate formalities by knowingly allowing Kyle Lulow to hold himself out as a corporate officer. Lupo testified that although Kyle Lulow signed the Agreement as vice-president, Lulow was not an officer of Infinite View. Id.; Plaintiff's Exhibit 39. Lupo testified that the position of vice-president was a nonchartered, in-house position/title given to Lulow by Lupo. Id. The evidence further illustrated a disregard of corporate formalities by Lupo where he admittedly used a checking account in the name of IVI Purchasing, a non-chartered, Ohio corporation, to conduct Infinite View business. He also testified that he established a checking account for WI Purchasing, using the Federal Taxpayer Identification Number of Infinite View. Id. Lupo admitted that he utilized the funds from the bank account of IVI Purchasing for his personal use. Id. He also admitted that the bank account of IVI Purchasing was the only bank account utilized by Infinite View from late 2004 to June 2005, when Infinite View ceased operations. Id. The trial record contains reliable, probative, and substantial evidence supporting the conclusion that Infinite View did not have a separate mind, will, or existence of its own and that Lupo alone controlled the corporation, thereby meeting the first prong of the Belvedere test.
The second prong of the Belvedere test requires the party seeking to pierce the corporate veil to establish that "control over the corporation by those to be held liable was exercised in such a manner to commit fraud or an illegal act against the person seeking to disregard the corporate entity." Belvedere Condominium Unit Owners' Ass'n, 617 N.E.2d at 1086. In support of its position, South Atlanta relies on the assertion that at the time the parties entered into the Agreement Infinite View was unable to meet the obligations of the Agreement, specifically as it related to the delivery of the MRI System. South Atlanta provides documents reflecting that the daily bank account balances of WI Purchasing utilized by Infinite View's did not exceed a daily balance of $100,000.00 between the dates of January 2005 and June 2005. Plaintiff's Exhibit 58. Infinite View entered into a Purchase Proposal with Medical Arts Commack to purchase a MRI system, which was similar in make and model to the MRI System that was the subject of the Agreement. Plaintiff's Exhibit 49. Lupo testified that he was aware that Infinite View did not have the necessary funds to purchase the MRI System from Medical Arts Commack. (Lupo, Cross-Examination). He further stated that the MRI System could only be purchased from Medical Arts of Commack, if Infinite View received the required funds *544 in advance from the buyer (South Atlanta). Id. In contrast, Lupo contends that the Medical Arts Commack transaction differed from the industry standard. Id. Lupo testified that the industry standard for the purchase of a used MRI machine, involved the end-user allowing a company like Infinite View to ship the machine to the destination location and participate in the sale before requiring payment. Id. Lupo testified that after the loss of the MRI machine in the Medical Arts Commack deal, Infinite View did not have a contract to purchase another MRI machine. Id.
Sufficient evidence was presented at trial to support a finding that Lupo personally, used his control of Infinite View to intentionally defraud or commit an illegal act against South Atlanta. Although Lupo exercised control over Infinite View, as determined supra, "mere control over a corporation is not in itself sufficient basis for shareholder liability." Belvedere 617 N.E.2d at 1086. South Atlanta presented evidence that there was an Agreement between it and Infinite View, which involved the purchase of a MRI System for the sum of $385,000.00. It was undisputed that South Atlanta paid to Infinite View the Deposit, which was never returned to South Atlanta when Infinite View failed to deliver the MRI System as contracted. However, "a simple breach of contract cannot suffice as the type of illegal or fraudulent act intended by the court in Belvedere." Taylor Steel, Inc. v. Keeton, 417 F.3d 598 (6th Cir.2005) (citing Wilton Corp. v. Ashland Castings Corp., 188 F.3d 670, 674 (6th Cir.1999)). Nonetheless, Lupo continued to enter into and/or allow Infinite View's agents to enter into proposals and agreements for the sale of equipment that was subject to a state court judgment. The evidence presented illustrates that Lupo was well aware of the unstable nature of Infinite View's financial situation, as evinced by Lupo's own testimony. (Lupo, Cross-Examination). Lupo's further conduct of allowing a purported agent of Infinite View to enter into the Agreement with South Atlanta with full knowledge that Infinite View did not have the financial wherewithal to fulfill the terms of the Agreement, is indicative of fraud. Also, Lupo failed to deliver the MRI System to South Atlanta or, alternatively, return the Deposit to South Atlanta pursuant to the Agreement. Lupo actions via his control of Infinite View support a finding that Lupo used his control over Infinite View in such a manner to commit fraud or an illegal act against South Atlanta. Thusly, South Atlanta has met its burden as to the second prong of the Belvedere test.
The third and final prong of the Belvedere test requires a determination of whether the plaintiff suffered an injury or unjust loss that was a result of the defendant's control of the corporation and wrongful act(s). In construing the last prong of Belvedere:
To the extent that such dominion exercised by [the defendant] was used in the present case to avoid paying for [corporate liabilities], a wrong has been committed and potential injury or unjust loss resulted to [the plaintiff] from such wrong, meeting the second and third prongs of the Belvedere Condominium Ass'n test.
Pritchett v. Pingue, Ohio App. No. 96APE11-1598, 1997 WL 578952 (10th Dist. Sept. 16, 1997). Ultimately, the third prong requires South Atlanta to demonstrate a causal connection between the Lupo's control of the corporation and the alleged injury or loss.
A review of the evidence presented at trial reveals that Lupo participated in the state court litigation that ultimately gave *545 the plaintiff therein, River Radiology, an agreed judgment in the amount of $95,000.00 plus interest. Plaintiff's Exhibit 3. The evidence further revealed that River Radiology caused the sheriff to levy the property of Infinite View hi satisfaction of the judgment. Plaintiff's Exhibit 4 and 6. Lupo testified that he understood that when the levies were executed by the sheriff, that Infinite View was prohibited from transferring any of its property and/or assets because it was subject to a levy of execution in the River Radiology litigation. (Lupo, Cross-Examination). Lupo further testified that he was aware as early as January of 2005 that Infinite View did not have the financial ability to purchase the MRI System required pursuant to the Agreement. Id. The evidence further reveals that neither Lupo nor the agents of Infinite View informed South Atlanta of the existence of the state court judgment and the execution of a levy upon the property and/or assets of Infinite View. Id. The concealment of Infinite View's precarious financial inability to honor the Agreement, coupled with a non-satisfied state court judgment that prohibited the transferring of Infinite View's property and/or assets, and Lupo's failure to return the Deposit (or cause Infinite View to return same) as required by the Agreement, resulted in sufficient injury and loss to South Atlanta that satisfies the third prong of the Belvedere test.
South Atlanta has met its burden of establishing the requisite basis to pierce the corporate veil of Infinite View and hold Lupo personally liable for the corporate debts of Infinite View. Thusly, Lupo is personally liable for the debts of Infinite View.
II. False Pretenses, False Representations or Actual Fraud Under 11 U.S.C. § 523(a)(2)(A)
South Atlanta cites § 523(a)(2)(A) as a basis upon which the debt owed to it by the Debtor should be held nondischargeable. Section 523(a)(2)(A) excepts an individual from discharge for any debt:
(2) for money, property, services or an extension, renewal or refinancing or 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.
11 U.S.C. § 523 (a) (2) (A). "The creditor has the burden of proving by a preponderance of the evidence that a debt is nondischargeable under § 523(a)(2)(A)". Providian Bancorp v. Shartz (In re Shartz), 221 B.R. 397, 399 (6th Cir. BAP 1998) (citing Grogan v. Garner, 498 U.S. 279, 286-287, 111 S. Ct. 654, 659, 112 L. Ed. 2d 755 (1991)).
A creditor seeking to except debt from discharge pursuant § 523(a)(2)(A) must prove: (1) the debtor obtained money through a material misrepresentation that, at the time, the debtor knew was false or made with gross recklessness as to its truth; (2) the debtor intended to deceive the creditor; (3) the creditor justifiably relied on the false representation; and (4) its reliance was the proximate cause of loss. Rembert v. AT & T Universal Card Servs., Inc. ( In re Rembert), 141 F.3d 277, 280-81 (6th Cir. 1998) (footnote omitted) (citing Longo v. McLaren (In re McLaren), 3 F.3d 958, 961 (6th Cir.1993)). In addition, the creditor's reliance on the false representations of the debtor must be justifiable as opposed to reasonable. Bernard Lumber Co. v. Patrick (In re Patrick), 265 B.R. 782, 786 (Bankr.N.D.Ohio 2001)(citing Field v. Mans, 516 U.S. 59, 116 S. Ct. 437, 133 L. Ed. 2d 351 (1995)). A plaintiff asserting a claim pursuant to § 523(a)(2)(A) must demonstrate that property was obtained by false pretenses, a false representation *546 or actual fraud, a showing of only one of the three conducts is required. James v. McCoy (In re McCoy), 114 B.R. 489, 498 (Bankr.S.D.Ohio 1990) "False pretenses" involves "an implied misrepresentation or conduct intended to create or foster a false impression." Id. While, "false representation" is defined as an expressed misrepresentation . . . [that] need not be written." Id.
South Atlanta asserts that infinite View, Lupo and its agents misrepresented to South Atlanta that Infinite View owned the MRI System and that it would provide South Atlanta with the MRI System in exchange for payment in the amount of $385,000. In addition, South Atlanta asserts that Lupo knew the representations to be false at the time they were made and that the misrepresentations were made with the intent to deceive South Atlanta. Further, South Atlanta asserts that Lupo concealed from South Atlanta that Infinite View, at the time of the Agreement, was subject to levy of execution, that Infinite View was subject to possible appointment of a receiver, and Infinite View was the target of a tax investigation by the Federal Bureau of Investigation (the "FBI") and the Internal Revenue Service (the "IRS"). South Atlanta also asserts that prior to the execution of the Addendum, Lupo and infinite View concealed from South Atlanta: (1) that the seller of the MRI System required the system to be shipped prior to June 1, 2005; (2) that Infinite View's only assets of value were subject to a consent judgment entry; and (4) that Infinite View had been under investigation by the FBI and the IRS.
Lupo testified that he was aware of the Agreement and the Addendum that were entered into by South Atlanta and Kyle Lulow on behalf of Infinite View. However, he did not have any direct contact with South Atlanta regarding the transaction. (Lupo, Cross-Examination). Dr. Brice Choi ("Dr. Choi"), the owner of South Atlanta, does not dispute Lupo's testimony. (Choi, Direct). Dr. Choi testified that he initially contacted Infinite View through the internet and that the majority of the transaction was negotiated between Kyle Lulow, on the behalf of Infinite View, and Michael Dillard, on the behalf of South Atlanta. Id. South Atlanta has established through the evidence presented, however, that Infinite View failed to honor its end of the bargain of the Agreement. It is also undisputed that the Deposit given to Infinite View by South Atlanta, pursuant to the Agreement, was not returned upon Infinite View's non-delivery of the MRI System. South Atlanta has demonstrated that Infinite View obtained the Deposit through a material misrepresentation that Infinite View had the financial means to execute the terms of the Agreement at the time the Agreement was executed. Lupo knew such was false or was made with gross recklessness as to its truth.
The second element of § 523(a)(2)(A) requires South Atlanta to establish that the representations made by the debtor must have been made with an "intent to deceive." Rembert, 141 F.3d at 280. When determining a debtor's intent to deceive pursuant to § 523(a)(2)(A), "the proper inquiry to determine a debtor's fraudulent intent is whether the debtor subjectively intended to repay the debt." Rembert, 141 F.3d at 281. It is unlikely that a debtor will admit a deceitful act to defraud. Therefore, all facts including circumstantial evidence may be considered, such as "a suspicious timing of events, insolvency, or transfers to family members or insiders." EDM v. Harrison (In re Harrison), 301 B.R. 849, 854 (Bankr. N.D.Ohio 2003); See Bernard Lumber Co. v. Patrick (In re Patrick), 265 B.R. 782, 786 (Bankr.N.D.Ohio 2001). An examination *547 of the evidence and the chronology of events herein are indicative of fraudulent intent. Specifically, at the time the Agreement was entered into, Infinite View did not have the financial ability to fulfill its obligation under the Agreement. It is unrefuted that Infinite View was insolvent and undercapitalized at the time the Agreement was executed. It is also uncontested that Infinite View's assets were subject to a consent judgment entry issued in a pending state court action and that Infinite View had been under tax investigation by the FBI and the IRS. It is also uncontested that, that upon South Atlanta's request for the return of the Deposit, pursuant to the Agreement, Lupo did not cause Infinite View to return the Deposit.
South Atlanta has produced evidence that proves by a preponderance of the evidence that Lupo through Infinite View intended to deceive the creditor. Therefore, South Atlanta has satisfied its burden of proof as it relates to the second element of § 523(a)(2)(A).
The third element of the § 523(a)(2)(A) dischargeability fraud test requires that a creditor establish that there was a justifiable reliance on the false representation made by the debtor. The Supreme Court in Field v. Mans, held that reliance pursuant to § 523(a)(2)(A) must be "justifiable." 516 U.S. 59, 116 S. Ct. 437, 133 L. Ed. 2d 351 (1995).
The evidence shows South Atlanta relied upon representations made by Kyle Lulow, an agent of Infinite View, which were memorialized in the Proposal, Agreement and Addendum as they related to South Atlanta's purchase of the MRI System. Specifically, Infinite View represented to South Atlanta in the Agreement that it was the owner of the MRI System. See Plaintiff's Exhibit 12. Also, Infinite concealed from South Atlanta that Medical Arts of Commack, the third party seller of a MRI machine to Infinite View, required the entire purchase price to be paid prior to delivery of the MRI machine. (Lupo, Cross-Examination). Infinite View further concealed that it did not have the funds necessary to purchase the MRI machine. (Lupo, Cross-Examination). South Atlanta justifiably relied upon the representations made by Lulow as contained in the transactional documents. Infinite View represented that it had the wherewithal to offer for sale to South Atlanta the MRI System. South Atlanta relied upon such representation and did so justifiably when the parties executed the subject documents. Lupo caused Infinite View to make assurances of performance on a future financial obligation while it was experiencing financial difficulties is relevant to his intent under § 523(a)(2)(A). See Bernard Lumber Co., et al. v. Billy Joe Patrick (In re Patrick), 265 B.R. 782, 787 (Bankr.N.D.Ohio 2001). Therefore, South Atlanta has met its burden as to the third element of the § 523(a)(2)(A) dischargeability fraud test.
The fourth and final element of the § 523(a)(2) dischargeability fraud test requires the plaintiff to show the false representation of the debtor was the proximate cause of its loss. "Proximate cause is something more than `speculation as to what the creditor might have done in hypothetical circumstances." Candland v. Insurance Company of North America (In re Candland), 90 F.3d 1466, 1470 (quoting Siriani v. Northwestern Nat'l Ins. Co. (In re Siriani), 967 F.2d 302, 306 (9th Cir.1992)). It depends "on whether the [debtor's] conduct has been so significant and important a cause that the [debtor] should be legally responsible." Britton v. Price (In re Britton), 950 F.2d 602, 604 (9th Cir.1991); see also United States v. Spicer, 57 F.3d 1152, 1157 (D.C.Cir.1995). In summary, there must be "a direct link *548 between the alleged fraud and the creation of the debt." McCrory v. Spigel (In re Spigel), 260 F.3d 27, 32 n. 7 (1st Cir.2001).
As proof that Lupo's misrepresentations were the proximate cause of South Atlanta's loss, Dr. Choi testified that he entered into the transaction with Infinite View based upon the misrepresentations of Lulow that were memorialized in the transactional documents. He subsequently learned the representations were false. (Dr. Choi, Direct) Dr. Choi further testified that he was never informed that Infinite View was insolvent, undercapitalized and was facing financial difficulties. Id. Dr. Choi also testified that after South Atlanta requested the return of the Deposit, it was never returned. Id. Dr. Choi testified that South Atlanta incurred loss of revenue because of non-delivery of the MRI System and additional costs to acquire a similar MRI System. There is a connection between the representations made by Infinite View and its agents and the claim asserted by South Atlanta. It is reasonable to surmise that had South Atlanta not relied upon the misrepresentations of Infinite View, South Atlanta would not have entered into the Agreement with Infinite View. Certainly, South Atlanta would not have paid the Deposit and incurred the additional costs necessary to obtain a similar MRI System. See Plaintiff's Exhibit 44.
Accordingly, South Atlanta has met its burden as it relates to excepting its debt from discharge pursuant to § 523(a)(2)(A). With no corporate shield, Lupo is denied the protection of the corporate shield for his own actions. Therefore, the debt is hereby determined to be his own, rather than a corporate one, and thereby nondischargeable.
Having determined that the subject debt is nondischargeable under § 523(a)(2)(A), it is unnecessary for the Court to consider the other dischargeability allegations set forth in the Complaint. To the extent, however, it may be deemed prudent to address §§ 523(a)(4) and (a)(6) allegations, the following findings and conclusions are made.
III. Fraud or Defalcation While Acting in a Fiduciary Capacity, Embezzlement or Larceny Under 11 U.S.C. § 523(a)(4)
As an individual chapter 7 debtor, Lupo is entitled to a discharge `of all of his prepetition debts, except for debts determined to be nondischargeable. South Atlanta asserts that the exception provided in § 523(a)(4) excepts its debt from discharge. Section 523(a)(4) provides:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt
. . . . .
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny
11 U.S.C. § 523(a)(4). Specifically, South Atlanta claims that Lupo committed a fraud or defalcation while acting in a fiduciary capacity and embezzlement.
In this case, in order to find a debt nondischargeable under § 523(a)(4) because of defalcation, a plaintiff must prove by a preponderance of the evidence "(1) a pre-existing fiduciary relationship; (2) breach of that fiduciary relationship; and (3) a resulting loss." Commonwealth Land Title Co. v. Blaszak (In re Blaszak), 397 F.3d 386, 393 (6th Cir.2035) (citing R.E. America, Inc. v. Garver (In re Garver), 116 F.3d 176, 178-79 (6th Cir.1997)). The term "fiduciary relationship, for the purpose of § 523(a)(4) is determined by federal, not state, law." Id. at 391 (citing *549 Carlisle Cashway, Inc. v. Johnson (In re Johnson), 691 F.2d 249, 251 (6th Cir. 1982)). The Sixth Circuit has defined the term "fiduciary capacity" as used in § 523(a)(4) narrowly, holding that the term applies only to express or technical trust relationships where a specific property is placed in the hands of the debtor as trustee. In re Garver, 116 F.3d at 179. Also, " § 523(a)(4) applie[s] to trustees who misappropriate funds held in trust, and not to those who fail to meet an obligation under a common law fiduciary relationship." Id. at 178-79. Therefore, South Atlanta must prove that a fiduciary relationship existed between Lupo and South Atlanta for the purposes of § 523(a)(4). The evidence presented by South Atlanta does not illustrate that a fiduciary relationship existed between South Atlanta and Lupo. The Agreement shows that there was a contract between Infinite View and South Atlanta for the purchase of an MRI System and Infinite View failed to meet its obligation under that Agreement, Plaintiff's Exhibit 12. There was no evidence presented to establish that there was an express or technical trust between Lupo and South Atlanta. Thusly, South Atlanta has failed to meet its burden of proof. Thusly, the elements of § 523(a)(4) are unsatisfied in this particular regard
Embezzlement is defined by federal common law as "the fraudulent appropriation of property by a person to whom such property has been entrusted or into whose hands it has lawfully come." Brady v. McAllister (In re Brady), 101 F.3d 1165, 1172-73 (6th Cir.1996)(internal quotation and citations omitted). In order to prove embezzlement under § 523(a)(4), a creditor must show that: "(1) he entrusted his property to the debtor; (2) the debtor appropriated the property for a use other than that for which it was entrusted; and (3) the circumstances indicate fraud." Aristocrat Lakewood Nursing Home v. Dryja (In re Dryja), 259 B.R. 629 (Bankr. N.D.Ohio 2001).
It is undisputed that South Atlanta gave the Deposit to Infinite View as required by the Agreement. See Plaintiff's Exhibits 12 and 51. There is ample evidence of record to support South Atlanta's allegation that it believed that the Deposit was fully refundable if the transaction did not close. See Plaintiff's Exhibit 12. Also, the evidence presented shows that the Deposit to be fully refundable if South Atlanta cancelled two days prior to the shipment of the MRI System. Id. The evidence further reveals that South Atlanta made several requests to Infinite View for the return of the Deposit. See Plaintiff's Exhibits 28, 33 and 34. The evidence illustrates that South Atlanta entrusted its property, the Deposit, to Lupo's company (Infinite View); and the Deposit was fully refundable to South Atlanta pursuant to the Agreement. Herein the corporate veil has been pierced. Lupo testified that he utilized funds from a checking account where the Deposit was placed for personal use. (Lupo, Cross-Examination). The Deposit, which are the funds that South Atlanta contends were embezzled, were paid to Infinite View pursuant to the Agreement. In accordance with the Agreement and upon South Atlanta's request, Lupo failed to cause Infinite View to return the Deposit. Further, Infinite View represented to South Atlanta in the Agreement that it was the owner of the MRI System, referenced therein. See Plaintiff's Exhibit 12. Therefore, the circumstances surrounding Infinite View's receipt of the Deposit and it's refusal to refund same to South Atlanta is fraudulent conduct.
Thusly, South Atlanta has met its burden by establishing embezzlement as a basis for excepting its debt from discharge *550 under 11 U.S.C. § 523(a)(4). With the corporate veil pierced, Lupo is denied the protection of the corporate shield for his own actions. Therefore, the debt is held to be his own, rather than merely a corporate one, and nondischargeable.
IV. Willful and Malicious Injury Under 11 U.S.C. § 523(a)(6)
Section 523(a)(6) of the Bankruptcy Code provides the following:
(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
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity.
11 U.S.C. 523(a)(6). A creditor has the burden of proving by a preponderance of the evidence that a debt is nondischargeable. Grogan v. Garner, 498 U.S. 279, 291, 111 S. Ct. 654, 112 L. Ed. 2d 755 (1991) (holding that the preponderance of the evidence standard applied to all of the § 523 dischargeability exceptions, including the fraud discharge exception); In re Stern, 345 F.3d 1036, 1043 (9th Cir.2003).
To except a debt from discharge under § 523(a)(6), a claimant must show "that the debtor caused an injury to another entity, or to the property of another entity, and that the debtor knew that his act would cause, or was substantially certain to cause, that injury." Aristocrat Lakewood Nursing Home v. Dryja (In re Dryja), 259 B.R. 629, 633 (Bankr.N.D.Chio 2001) (quoting In re Markowitz, 190 F.3d 455, 464 (6th Cir.1999)). "What constitutes `willful and malicious injury' under § 523(a)(6) is a matter of federal law." In re Baldwin, 249 F.3d 912, 917 (9th Cir. 2001); In re Taylor, 322 B.R. 306, 339 (Bankr.N.D.Ohio 2004). Following the decision in Kawaauhau v. Geiger, 523 U.S. 57, 118 S. Ct. 974, 140 L. Ed. 2d 90 (1998), "[t]he Sixth Circuit has held that a willful and malicious injury as defined under § 523(a)(6) is one where the debtor `desires to cause consequences of his act, or . . . believes that the consequences are substantially certain to result from it." In re Moffitt, 252 B.R. 916, 922 (6th Cir. 3AP 2003) (citing In re Markowitz, 190 F.3d 455, 464 (Gth Cir.1999)); In re Kennedy, 249 F.3d 576, 580 (6th Cir.2001).
Although the "willful" and "malicious" requirements will be found concurrently in most cases, the terms are distinct, and both requirements must be met under § 523(a)(6). In re Martin, 321 B.R. 437, 440 (Bankr.N.D.Ohio 2004). "The word `willful' in [§ 523](a)(6) modifies the word `injury,' indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury." Geiger, 523 U.S. at 61, 118 S. Ct. 974. Lack of excuse or justification for the debtor's actions will not alone make a debt nondischargeable under § 523(a)(6). In re Markowitz, 190 F.3d at 465 n. 10.
When determining whether a debtor's conduct was willful, "[i]n addition to what a debtor may admit to knowing, the bankruptcy court may consider circumstantial evidence that tends to establish what the debtor must have actually known when taking the injury producing action." In re Sicroff, 401 F.3d 1101, 1106 (9th Cir.2005)(quoting In re Su, 290 F.3d 1140, 1146 n. 6 (9th Cir.2002)); In re Wood, 309 B.R. 745, 753 (Bankr.W.D.Tenn.2004).
The term malicious is defined as conduct taken in conscious disregard of one's duties or without just case or excuse. Wheeler v. Laudani, 783 F.2d 610, 615 (6th Cir.1986)(quoting Tinker v. Colwell, 193 U.S. 473, 486, 24 S. Ct. 505, 48 L. Ed. 754 (1904)). An injury is defined as malicious under § 523(a)(6), when it is: "(1) a *551 wrongful act, (2) done intentionally, (3) which necessarily causes injury, and (4) is done without just cause or excuse." In re Sicroff 401 F.3d at 1106 (citation omitted). "[T]he definition of malice requires a heightened level of culpability transcending mere willfulness." In re Martin, 321 B.R. at 442. "Injuries within the meaning of § 523(a)(6) are not confined to physical damage or destruction but also include an injury to intangible personal or property rights." In re Ellis, 152 B.R. 211, 215 (Bankr.E.D.Tenn.1993) (citing 3 COLLIER ox BANKRUPTCY ¶ 523.16 (15th ed.1992)); In re Morris, 12 B.R. 509, 511 (Bankr.Nev. 1981).
Finally, "[f]or a debt to fall within this exception to discharge the creditor has the burden of proving that it sustained an injury as a result of a willful and malicious act by the debtor. Thus, a debtor's actions must be determined to be the cause of the creditor's injury." In re Smith, 249 B.R. 748, 750 (Bankr.S.D.Ohio 2000)(emphasis in original).
It is apparent that South Atlanta suffered an injury based on Infinite View's failure to honor the Agreement, through a scheme of misconduct orchestrated by Lupo. As determined above, the circumstances created, or allowed to be created by Lupo's conduct, clearly evinces he intended the result of his actions.
Accordingly, the subject debt is nondischargeable under 11 U.S.C. § 523(a)(6).
V. Collateral Estoppel
South Atlanta seeks a determination that its debt arising from the prepetition default judgment it obtained against Infinite View in the state court action in Henry County, Georgia in nondischargeable pursuant to §§ 523(a)(2)(A) and (a)(6). South Atlanta asserts that pursuant to the doctrine of collateral estoppel the Georgia state court default judgment entered against Infinite View should be given preclusive effects against Lupo in this dischargeability proceeding. Collateral estoppel prohibits the re-litigation of issues that have been adjudicated in a prior lawsuit, and collateral estoppel principles apply to dischargeability proceedings. Grogan v. Garner, 498 U.S. 279, 284 n. 11, 111 S. Ct. 654, 658 n. 11, 112 L. Ed. 2d 755 (1991).
A federal court must look to the law of the state in which the judgment was entered and give the order or judgment the same preclusive effect that it would receive in that state. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 380, 105 S. Ct. 1327, 1332, 84 L. Ed. 2d 274 (1985) (28 U.S.C. § 1738 commands a federal court to accept the rules chosen by the state from which the judgment is taken); see also Bay Area Factors v. Calvert (In re Calvert), 105 F.3d 315, 317 (6th Cir.1997). The Sixth Circuit employs a two-part test to determine the preclusive effect that a state court default judgments has on dischargeability hearing:
[First, the court should] consider . . . the law of the State in which the judgment was rendered to determine its preclusive effect. If the state court would not give preclusive effect to a default judgment, the analysis is complete. If, however, the state would accord the judgment preclusive effect, Marrese instructs that the federal court give preclusive effect to the judgment unless Congress has expressly or impliedly created an exception to [28 U.S.C.] § 1738 which ought to apply to the facts before the federal court.
In re Calvert, 105 F.3d at 317 (citing Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 380, 105 S. Ct. 1327, 1332, 84 L. Ed. 2d 274 (1985)). Accordingly, if the Georgia courts would give *552 preclusive effect to the default judgment in this case, then this Court is obligated under Calvert to do the same.
In determining the preclusive effect of a Georgia state court default judgment the court in Lusk v. Williams (In re Williams) held that:
[T]he five elements for the application of collateral estoppel under Georgia law are (1) identity of parties or their privies; (2) identity of issues; (3) actual and final litigation of the issue in question; (4) essentiality of the adjudication to the earlier action; and (5) full and fair opportunity to litigate the issues in question.
282 B.R. 267 (Bankr.N.D.Ga.2002) (drawing five individual elements from various decisions of Georgia courts); see also GA CODE ANN. § 9-12-40 (West 2006).
The first prong of the collateral estoppel test requires an identity of the parties or their privies in both the state court and dischargeability proceeding. "Generally speaking, privies are those legally represented at the trial. Privity connotes those who are in law so connected with a party to the judgment as to have such an identity of interest that the party to the judgment represented the same legal right; and where this identity is found to exist, all are alike concluded and bound by the judgment." Smith v. Wood, 115 Ga.App. 265, 269, 154 S.E.2d 646 (1967) (citations omitted). A stockholder may be in privity with his corporation, however, such that a judgment against the latter is res judicata as to the former, if the two are found to be alter egos. Of Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 108-111, 89 S. Ct. 1562, 23 L. Ed. 2d 129, 139-141 (1969). In Shamrock Oil and Gas Co. v. Ethridge, 159 F. Supp. 693, 697 (D.Colo.1958) the court stated:
The effect of applying the alter ego doctrine . . . is that the corporation and the person who dominates it are treated as one person, so that any act committed by one is attributed to both, and if either is bound, by contract, judgment, or otherwise, both are equally bound.
See also International Telephone and Telegraph Corp. v. General Telephone & Electronics Corp., 369 F. Supp. 316, 329 (M.D.N.C.1973); Hart v. Yamaha-Parts Distributors, Inc., 787 F.2d 1468, 1473 (11th Cir.1986). Lupo and Infinite View were both named plaintiff's in the Georgia state court lawsuit instituted by South Atlanta. (Lupo, Cross-Examination); See Plaintiff's Exhibits 37 and 46. It is also uncontested that Lupo was the president and sole shareholder of Infinite View. (Lupo, Cross-Examination). Having determined that Infinite View was the alter ego and that sufficient evidence exists to pierce the corporate veil, such is an adequate basis to support a finding that the identity of the parties or their privies are the same in both actions. Therefore the Georgia Judgment satisfies the identity of the parties' prong.
The second prong of collateral estoppel requires a finding of the identity of issues between the judgment of the state court and the claims raised in this adversary proceeding. South Atlanta asserts claims pursuant to § 523(a)(2)(A), (a)(4) and (a)(6) against Lupo in this adversary proceeding. Notwithstanding, South Atlanta asserts the applicability of the doctrine of collateral estoppel as to its claim for an exception to discharge pursuant to § 523(a)(2)(A). In order to prove that a debt was obtained by fraud pursuant to § 523(a)(2)(A), a creditor must prove: (1) the debtor obtained money through a material misrepresentation that, at the time, the debtor knew was false or made with gross recklessness as to its truth; (2) the debtor intended to deceive the creditor; (3) the creditor justifiably relied on the *553 false representation; and (4) its reliance was the proximate cause of loss. See Rembert, 141 F.3d at 280-81. "The tort of fraud under Georgia law requires: (1) a false representation made by the defendant; (2) which the defendant knew was false; (3) made with an intent to deceive the plaintiff on such representation; and (5) damages suffered by the plaintiff as a result." Lusk, 282 B.R. at 272 (quoting Sterling Factors, Inc. v. Whelan, 245 B.R. 698, 705 (N.D.Ga.2000)). The Sterling court held that the requirements to prove a fraud claim under Georgia law are sufficiently identical to the elements required for a showing of fraud pursuant to § 523(a)(2)(A) to meet the identical issues prong of the collateral estoppel test. Sterling, 245 B.R. at 705-06. The Georgia Judgment included a finding that Infinite View's actions constitute fraud. Plaintiff's Exhibit 46. Therefore, the identity of issues of the collateral estoppel test has been satisfied.
The third prong of the collateral estoppel test requires a showing that there was actual and final litigation of the issue in question. In deciding if a default judgment constitutes actual and final litigation the Sterling court provided:
Georgia courts have recognized default judgment as a decision on the merits. See Butler v. Home Furnishing Co., 163 Ga.App. 825, 296 S.E.2d 121 (1982); Fierer v. Ashe, 147 Ga.App. 446, 249 S.E.2d 270 (1978). At least two bankruptcy courts within the Eleventh Circuit have accordingly found the "actual litigation" requirement for purposes of a bankruptcy dischargeability proceeding satisfied by a default judgment rendered by a Georgia court. See Graham, 191 B.R. at 495; Hooks, 238 B.R. at 885. The court finds that the bankruptcy court did not err in finding the second prong of the Georgia collateral estoppel test satisfied.
245 B.R. at 706. The state court in the Georgia Judgment found, "by clear and convincing evidence the Defendant Infinite View, Inc.'s actions showed willful misconduct, malice, fraud, wantonness, oppression and an entire want of care." Plaintiff's Exhibit 46. Therefore, the issue of fraud was actually litigated because of the state court's specific finding. Thusly, the third prong of the collateral estoppel test has been satisfied.
The fourth prong of the collateral estoppel test requires a determination that the issue of fraud in this proceeding was also essential to the Georgia Judgment. The state court in the Georgia Judgment made a specific finding of fraud against Infinite View to whom Lupo is in privity with. Id; See Lusk, 282 B.R. at 274; Branton v. Hooks (In re Hooks), 238 B.R. 880, 885 (Bankr.N.D.Ga.1999). The state court determined that the evidence presented met the requirements to prove a fraud claim under Georgia law, which is sufficiently identical to the elements required for a showing of fraud pursuant to § 523(a)(2)(A). See Sterling, 245 B.R. at 705-06. Thusly, the state court with its finding of fraud against Infinite View essentially determined the identical issue of Lupo's fraud pursuant to § 523(a)(2)(A).
The final prong of the collateral estoppel test hinges upon a full and fair opportunity to litigate the issues in question. This factor "is rooted in due process concerns . . . [t]herefore, for purposes of collateral estoppel the key to full and fair opportunity analysis is determining whether the party had adequate notice of the issue and was afforded the opportunity to participate in its determination." Lusk, 282 B.R. at 277. Lupo testified that he received the South Atlanta's complaint in the state court action in the summer of *554 2005. (Lupo, Cross-Examination). He also testified that he understood the basis for South Atlanta's complaint was the return of the Deposit. Id. Lupo further testified that he filed a request for extension of time to file an answer to the complaint. Id. He also testified that he received a copy of South Atlanta's motion for default judgment against Infinite View; and that he was aware of the default judgment hearing. Id. Lupo admitted that he had an opportunity to participate in the default hearing to defend Infinite View. Id. Lupo received South Atlanta's complaint, motion for default judgment against Infinite View and notice of hearing. Additionally, Lupo requested additional time from the state court to file an answer to the complaint. The Georgia Judgment against Infinite View resulted from Lupo and Infinite View's own failure to act, not from a lack of opportunity to litigate the issue. See e.g., Hooks, 238 B.R. at 885; Sterling Factors, 245 B.R. at 712-13; In re Graham, 191 B.R. 489, 489 (Bankr.N.D.Ga. 1996); In re Bush, 62 F.3d 1319, 1325 (11th Cir.1995).
As determined above, under Georgia law, the default judgment issued by the Georgia state court against infinite View meets all the requirements under the doctrine of collateral estoppel.
CONCLUSION
Accordingly, South Atlanta's Complaint to Determine Discharge is well-premised and judgment is hereby rendered in favor of South Atlanta. Costs are awarded to the Plaintiff, South Atlanta.
IT IS SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1028435/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-5092
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
DAVID RAHEEM ANDERSON,
Defendant - Appellant.
Appeal from the United States District Court for the District of
South Carolina, at Greenville. Henry F. Floyd, District Judge.
(6:07-cr-00252-HFF-1)
Submitted: March 16, 2009 Decided: March 31, 2009
Before MOTZ and DUNCAN, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
David W. Plowden, Assistant Federal Public Defender, Greenville,
South Carolina, for Appellant. Maxwell B. Cauthen, III,
Assistant United States Attorney, Greenville, South Carolina,
for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
David Raheem Anderson pled guilty to being a felon in
possession of a firearm, in violation of 18 U.S.C. §§ 922(g)(1),
924(e) (2006), and was sentenced to the statutory mandatory
minimum term of 180 months’ imprisonment. Counsel for Anderson
has filed this appeal pursuant to Anders v. California, 386 U.S.
738 (1967), arguing there are no meritorious grounds for appeal,
but suggesting the district court erred in sentencing Anderson
pursuant to the Armed Career Criminal Act, 18 U.S.C. § 924(e)
(“ACCA”), because the prior convictions used to support that
designation were not set forth in the indictment. We have
reviewed the record and, finding no error, we affirm.
A defendant convicted of being a felon in possession
of a firearm who has three prior convictions for violent felony
or serious drug offenses is subject to treatment as an armed
career criminal. See 18 U.S.C. § 924(e)(1). A district court
may enhance a sentence based on the “fact of a prior
conviction,” whether or not it was admitted by the defendant or
found by a jury. United States v. Thompson, 421 F.3d 278, 282
(4th Cir. 2005). Therefore, a district court may determine if a
defendant has been convicted of the predicate offenses required
by the ACCA so long as the facts necessary to support the
enhancement “inhere in the fact of conviction” rather than being
“extraneous to it.” Id. at 283.
2
In Almendarez-Torres v. United States, 523 U.S. 224,
242-44 (1998), the Supreme Court held that prior felony
convictions are merely sentencing enhancements rather than
elements of an offense, and need not be charged in an
indictment. Because the Government was not required to charge
Anderson’s prior felony convictions in the indictment, the sole
issue raised in Anderson’s Anders brief fails.
Pursuant to Anders, we have reviewed the entirety of
the record and found no meritorious issues. * The district court
conducted a proper and thorough Fed. R. Crim. P. 11 hearing
prior to accepting Anderson’s guilty plea. The district court
advised Anderson of the rights he was foregoing by pleading
guilty, the charge against him, and the penalties for the
offense. Moreover, at both the Rule 11 hearing and at
sentencing, the district court proceeded with the utmost caution
to ensure that Anderson understood the 180-month statutory
mandatory minimum he faced if sentenced pursuant to the ACCA,
and the district court subsequently sentenced Anderson to that
term.
*
At the direction of the court, the parties provided
supplemental briefing on the issue of whether juvenile
convictions may be used to support the Armed Career Criminal
offender designation. In the supplemental briefs, the parties
agreed that the convictions relied on in Anderson's case were
not juvenile convictions. Therefore, the court need not further
consider this issue.
3
Because there was no error in either the conviction or
sentence, we affirm the district court’s judgment. We require
that counsel inform Anderson, in writing, of the right to
petition the Supreme Court of the United States for further
review. If Anderson requests that a petition be filed, but
counsel believes that such a petition would be frivolous, then
counsel may move in this court for leave to withdraw from
representation. Counsel’s motion must state that a copy thereof
was served on Anderson. We dispense with oral argument because
the facts and legal contentions are adequately set forth in the
materials before the court and argument would not aid the
decisional process.
AFFIRMED
4 | 01-03-2023 | 07-05-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1587833/ | 33 So.3d 1025 (2010)
STATE of Louisiana
v.
Richard W. BLACK.
No. KA 09-923.
Court of Appeal of Louisiana, Third Circuit.
March 31, 2010.
*1026 Van H. Kyzar, District Attorney, Cloyd Benjamin, Jr., Assistant District Attorney, Natchitoches, LA, for Appellee, State of Louisiana.
G. Paul Marx, Louisiana Appellate Project, Lafayette, LA, for Defendant-Appellant Richard W. Black.
Court composed of SYLVIA R. COOKS, JIMMIE C. PETERS, and BILLY H. EZELL, Judges.
COOKS, Judge.
FACTS AND PROCEDURAL HISTORY
The facts of the instant offense stem from those in a previous appeal. In State v. Black, an unpublished opinion bearing docket number 08-989 (La.App. 3 Cir. 3/4/09), Defendant, Richard W. Black, appealed his conviction for aggravated assault upon a peace officer with a firearm. In the lower court, the Defendant filed a "Motion for Post-Verdict Judgment of Acquittal and for New Trial" and a "Supplemental Motion for New Trial," attaching the affidavit of Ruth Ann Brimzy, and asked that she be examined at the hearing on the Defendant's post-trial motion. The affidavit indicated that Ms. Brimzy was with the victim, Wildlife Agent McAlpin, who reported that he and another game *1027 warden lied about the Defendant pointing a gun at them-the fact which formed the basis for his conviction. It is this affidavit which forms the basis for the instant convictions.
In the instant case, the State alleged in the bill of information that Defendant falsified the statements in the affidavit and then filed the affidavit in the record of the proceeding, along with his "Motion for Post Verdict Judgment of Acquittal and for New Trial," in an effort to manipulate the judicial process. At sentencing, the trial court confirmed that the affidavit was prepared by the Defendant with false statements, signed by Ms. Brimzy, and then presented to the court. The trial court stated:
The statement falsely impugned the integrity and the morality of uh, Wildlife Agent, David McAlpin, who was the victim of the aggravated assault conviction. And all of this was done with the intent of influencing the Court's decision uh... both, I think, on the Motion for New Trial, and (inaudible) that was denied ultimately on sentencing Mr. Black on that aggravated assault charge.
On March 4, 2008, Defendant was charged by bill of information with filing false public records, a violation of La. R.S. 14:133(A) and 14:24, and with perjury, a violation of La. R.S. 14:123 and 14:24. A motion for the appointment of a sanity commission was filed by Defendant. After a hearing, the motion was denied.
Defendant pled guilty to the charges in exchange for the State's agreement not to charge him as a habitual offender and that the sentences would run concurrently with each other. Defendant was subsequently sentenced to serve five years at hard labor for each conviction, to be served concurrently with each other, but consecutively to his prior sentence in an unrelated docket number. Defendant did not file a motion to reconsider his sentences.
Defendant is now before this court on appeal, asserting that his convictions violate double jeopardy and that the trial court erred in denying his motion for a sanity commission. After reviewing the record, we find Defendant's conviction and sentence for perjury should be affirmed; but his conviction and sentence for filing false public records should be reversed.
ASSIGNMENT OF ERROR NO. 1
By this assignment of error, Defendant argues the double jeopardy clauses of the federal and state constitutions protect against multiple punishments for the same offense. North Carolina v. Pearce, 395 U.S. 711, 89 S.Ct. 2072, 23 L.Ed.2d 656 (1969). Because his guilty plea for creating a false affidavit was taken under both perjury and filing a false public record, Defendant maintains his convictions violate double jeopardy. As such, Defendant argues his single act of filing a false affidavit cannot be the basis for two felony charges.
In opposition to Defendant's appeal, the State argues Defendant waived his right to appeal his convictions and sentences when he voluntarily entered his guilty plea, citing State v. Pickens, 98-1443 (La.App. 3 Cir. 4/28/99), 741 So.2d 696, writ denied, 99-1577 (La.11/5/99), 751 So.2d 232, writ denied, 01-2178 (La.4/19/02), 813 So.2d 1081. The State maintains Defendant read and signed a plea agreement which contained both charges and which expressly waived an appeal of his convictions and sentences.
As noted in State v. Crosby, 338 So.2d 584, 588 (La.1976), "[a] defendant normally waives any non-jurisdictional error by his plea of guilty." An unqualified plea of guilty, however, does not preclude review of jurisdictional defects, those which do not permit a defendant's conviction *1028 of the offense charged. According to Crosby, a conviction which represents double jeopardy, is an example of a jurisdictional defect. As such, we will review this assignment of error to determine if Defendant's convictions constitute double jeopardy.
In State v. Barton, 02-163, pp. 17-18 (La.App. 5 Cir. 9/30/03), 857 So.2d 1189, 1201-02, writ denied, 03-3012 (La.2/20/04), 866 So.2d 817, the court summarized the two tests used by Louisiana courts in examining violations of double jeopardy as follows:
The "distinct fact" test, commonly referred to as the Blockburger test, is taken from Blockburger v. United States, 284 U.S. 299, 304, 52 S.Ct. 180, 182, 76 L.Ed. 306 (1932) as follows:
The applicable rule is that where the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one, is whether each provision requires proof of an additional fact which the other does not.
Accord, State v. Knowles, 392 So.2d 651, 654 (La.1980).
The second test is the "same evidence" test. In State v. Steele, 387 So.2d 1175, 1177 (La.1980), the Louisiana Supreme Court explained that test as follows:
If the evidence required to support a finding of guilt of one crime would also have supported conviction of the other, the two are the same offense under a plea of double jeopardy, and a defendant can be placed in jeopardy for only one. The test depends on the evidence necessary for conviction, not all the evidence introduced at trial....
The "same evidence" test is broader than Blockburger, "the central idea being that one should not be punished (or put in jeopardy) twice for the same course of conduct." State v. Steele, 387 So.2d at 1177. Although the Louisiana Supreme Court has accepted both the Blockburger test and the same evidence test, it has principally relied on the "same evidence" test to evaluate double jeopardy claims. State v. Miller, 571 So.2d 603, 606 (La.1990).
The offense of filing or maintaining false public records is defined in La. R.S. 14:133, which reads in pertinent part:
A. Filing false public records is the filing or depositing for record in any public office or with any public official, or the maintaining as required by law, regulation, or rule, with knowledge of its falsity, of any of the following:
(1) Any forged document.
(2) Any wrongfully altered document.
(3) Any document containing a false statement or false representation of a material fact.
Perjury is defined in La. R.S. 14:123, which reads in pertinent part:
A. Perjury is the intentional making of a false written or oral statement in or for use in a judicial proceeding, any proceeding before a board or official, wherein such board or official is authorized to take testimony, or before any committee or subcommittee of either house or any joint committee or subcommittee of both houses of the legislature. In order to constitute perjury the false statement must be made under sanction of an oath or an equivalent affirmation and must relate to matter material to the issue or question in controversy.
B. It is a necessary element of the offense that the accused knew the statement to be false, but an unqualified statement of that which one does not know or definitely believe to be true is *1029 equivalent to a statement of that which he knows to be false.
To avoid double jeopardy under Blockburger, each provision must require proof of an additional fact which the other does not. In the instant case, perjury requires that the false statement be made under oath and be related to a material issue in the judicial proceeding. These elements are not required for filing false public records. As such, Defendant's convictions would not constitute double jeopardy using the Blockburger analysis.
Under the same evidence test, however, the evidence required to support a finding of guilt of one crime must not also support conviction of the other. In the instant case, the conception and subsequent utilization of Ms. Brimzy's affidavit was used to convict the Defendant of filing false public records and to convict him of perjury. Although the elements of the offenses are not identical, the evidence needed to convict Defendant of the offenses is the same. Thus, Defendant's convictions constitute double jeopardy using the same evidence test.
As noted by this court in State v. Pierce, 01-94, p. 29 (La.App. 3 Cir. 10/31/01), 799 So.2d 732, 750, writ denied, 01-3312 (La.1/10/03), 834 So.2d 427, "To remedy a violation of double jeopardy, this court must vacate the conviction and sentence of the less severely punishable offense and affirm the conviction and sentence of the more severely punishable offense. State v. Doughty, 379 So.2d 1088 (La.1980); State ex rel. Adams v. Butler, 558 So.2d 552 (La.1990)." See also State v. Cox, 07-774 (La.App. 3 Cir. 3/4/09), 4 So.3d 998, writ denied, 08-602 (La.9/4/09), 17 So.3d 948. In the instant case, a conviction of perjury is the more severely punishable offense, which carries a maximum hard labor sentence of five years or a maximum fine of $10,000, or both. La. R.S. 14:123(C)(3). Filing of false public records carries a maximum possible sentence of five years, with or without hard labor, or a fine of not more than $5,000, or both. La. R.S. 14:133(C). Accordingly, Defendant's conviction and sentence for perjury is affirmed and his conviction and sentence for filing of false public records is reversed.
ASSIGNMENT OF ERROR NO. 2
By this assignment of error, Defendant argues the trial court erred in not ordering a sanity commission despite objective medical evidence that he suffered from a neurological deficit and impaired memory. Further, Defendant contends the trial court unfairly considered his criminal conduct as somehow showing that he had no mental health problems.
On March 26, 2008, Defendant, while incarcerated in the Natchitoches Parish Detention Center, was arraigned by video. Defendant waived arraignment and entered a plea of not guilty to the charges. After the trial court advised him of his right to a jury trial and the date set for trial, Defendant advised the trial court he had no memory of what was going on and asked how he could get some kind of mental or physical help.
That same day, counsel for Defendant filed a "Motion for Psychiatric Examination," stating he believed that Defendant suffered a mild stroke while incarcerated on or about the second week of March, was held at LSU Medical Center for two days, and then returned to prison. According to defense counsel, when he spoke with Defendant on March 14, 2008, Defendant did not appear to have any recollection of his pending charges or why he was incarcerated, and could not intelligently communicate with defense counsel. A hearing on *1030 the motion was ordered to be held on April 16, 2008.
At the hearing, a three-page discharge summary from LSU Medical Center, dated March 13, 2008, was admitted into evidence. The discharge diagnoses were lumbar radiculopathy and neuropathy. The report indicates Defendant was transferred from another hospital to LSU Medical Center complaining of right-sided numbness and weakness and a throbbing headache all over his head. Defendant also complained of stabbing, substernal chest pain, that radiated to his back. Defendant stated he was unable to remember why he was in the hospital and that he thought the year was 1998. The laboratory data from the transferring hospital was reported to be within normal limits. His physical exam on admission reflects that he was disoriented to time, only, was cooperative with good eye contact, but "clearly unreliable." Although Defendant's neurological exam was normal, he reported decreased touch and pain sensation on the right upper and lower extremities and was unable to walk due to his weakness and lower back pain. The physician reported, again, that "the patient was unreliable on examination."
During the course of his hospitalization, Defendant was admitted to neurology. An MRI of the brain and lumbar spine, a carotid doppler and echocardiogram were all normal. After showing remarkable improvement, Defendant was discharged to be followed in the neurosurgery outpatient clinic.
At the hearing, the trial court heard the testimony of Defendant's sister, Aline Slaughter. In its written ruling denying Defendant's motion, the trial court referred to Ms. Slaughter's testimony about the Defendant's mental status during his hospitalization. According to Ms. Slaughter, when she went to visit Defendant with his wife, Patricia Black, Defendant believed that Mrs. Black was his girlfriend, not his wife. Also, the Defendant thought the year was 1998, and that his deceased father was still alive. Following his discharge, she stated she visited him twice and believed his mental status had not changed. According to Ms. Slaughter, Defendant continued to believe his father was alive. Ms. Slaughter indicated, however, that Defendant knew his wife and that he had the mental wherewithal to call Ms. Slaughter at home.
The trial court also considered the discharge summary regarding the Defendant's mental status, his negative test results, and his significant improvement during his hospital stay. The trial court noted that no other evidence was introduced.
In reaching its ruling, the trial court referred to La.Code Crim.P. arts. 641 and 643. Louisiana Code of Criminal Procedure Article 641 reads, "Mental incapacity to proceed exists when, as a result of mental disease or defect, a defendant presently lacks the capacity to understand the proceedings against him or to assist in his defense." Louisiana Code of Criminal Procedure Article 643 provides:
The court shall order a mental examination of the defendant when it has reasonable ground to doubt the defendant's mental capacity to proceed. Prior to the ordering of any such mental examination, the court shall appoint counsel to represent the defendant if he has not already retained counsel.
The trial court also relied on this court's ruling in State v. Normand, 04-840, pp. 3-4 (La.App. 3 Cir. 12/15/04), 896 So.2d 98, 100, writ denied, 05-231 (La.5/6/05), 901 So.2d 1094, which explains:
The appointment of a sanity commission "is not a perfunctory matter or a *1031 ministerial duty of the trial court nor is it guaranteed to every accused in every case." State v. Nix, 327 So.2d 301, 323 (La.1975); State v. Sepulvado, 93-2692 (La.4/8/96), 672 So.2d 158. The burden of proof lies with the defendant. The defendant must show "by a clear preponderance of the evidence reasonable grounds for the trial judge to believe he is mentally deficient." State v. Cyriak, 96-661, p. 8 (La.App. 3 Cir. 11/6/96), 684 So.2d 42, 47. Moreover, "[t]he fact that the defendant's capacity to proceed is called into question does not, for that reason alone, require the trial court to order a mental examination of the defendant." State v. Lott, 574 So.2d 417, 424 (La.App. 2 Cir.), writ denied, 580 So.2d 666 (La.1991), affirmed after remand, 27,849 (La.App. 2 Cir. 4/3/96), 671 So.2d 1182. The trial court has great discretion in ruling on a determination of competency, and its decision will not be overturned on appeal absent an abuse of discretion. State v. Comeaux, 514 So.2d 84 (La.1987); State v. Lowenfield, 495 So.2d 1245 (La.1985).
The trial court then concluded "[t]hat while there was some evidence of earlier mental confusion on defendant's part, defendant has not proven that as of the time of the hearing, he lacked the mental capacity to proceed as defined in Article 641."
On appeal, Defendant contends the trial court imposed the wrong burden on him, testing his request for a Sanity Commission as if it required him to prove incapacity. However, considering the limited evidence presented at the hearing, we find Defendant did not meet his burden of showing, by a clear preponderance of the evidence, reasonable grounds for the trial court to believe he was mentally deficient to proceed. Even if the trial court believed that Defendant suffered from some sort of medical event in March of 2008, which rendered him incapable of proceeding, there was no evidence that the Defendant suffered from any mental deficiency at the time of the hearing. Accordingly, this assignment of error is without merit.
DECREE
For the foregoing reasons, Defendant's conviction and sentence for perjury is affirmed. His conviction for filing false public records is reversed.
AFFIRMED IN PART; REVERSED IN PART. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1587876/ | 944 So.2d 1064 (2006)
Timothy PAVLAC, Appellant,
v.
STATE of Florida, Appellee.
No. 4D04-3359.
District Court of Appeal of Florida, Fourth District.
August 16, 2006.
Carey Haughwout, Public Defender, and Jeffrey N. Golant, Assistant Public Defender, West Palm Beach, for appellant.
Charles J. Crist, Jr., Attorney General, Tallahassee, and Myra J. Fried, Assistant Attorney General, West Palm Beach, for appellee.
ON MOTION FOR REHEARING
MAY, J.
We grant the State's motion for rehearing, withdraw the previous opinion, and replace it with the following.
The defendant appeals his conviction and sentence for aggravated fleeing and eluding and resisting an officer without violence. He argues the trial court erred in relying on acquitted conduct when imposing his sentence, and that the State failed to sufficiently prove the requisite prior criminal convictions to justify the court's imposition of a habitual felony offender sentence. We agree in part and reverse the sentence.
*1066 A trial court may sentence a defendant to an extended term if he qualifies as a habitual felony offender. § 775.084, Fla. Stat. (2003). Habitual felony offender sentencing is permissive, not mandatory. Ellis v. State, 816 So.2d 759, 760 (Fla. 4th DCA 2002). Section 775.084 outlines the requirements for imposition of such a sentence.
The court must find "[t]he defendant has previously been convicted of any combination of two or more felonies . . ." and the defendant has committed the felony he is to be sentenced for "[w]ithin 5 years of the date of the conviction of the defendant's last prior felony or other qualified offense, or within 5 years of the defendant's release from a prison sentence. . . ." § 775.084(1)(a)1., 2.b. And, the felony for which the defendant is to be sentenced and one of the prior felonies cannot be for the purchase or possession of a controlled substance. § 775.084(1)(a)3. The State must prove the defendant's criminal history satisfies the statutory requirements. Mitchell v. State, 780 So.2d 282, 283 (Fla. 4th DCA 2001).
Here, the record reflects the date of the current offense was August 24, 2003. The trial court found the defendant had been sentenced to seven years in Florida State Prison on May 15, 1990, which would have made his release date no later than May 15, 1997. However, the penitentiary packet reveals the defendant violated the terms of his conditional release on several occasions thereby extending his incarceration for the 1990 conviction until September 5, 2000. The 1990 conviction and his 2000 release from prison satisfied the requirements for habitual felony offender sentencing.
However, during the sentencing, the trial court referred to the defendant's violent behavior, using a beer bottle and grabbing the officer's neck, during his arrest. "It is a violation of due process for the court to rely on conduct of which the defendant has actually been acquitted when imposing the sentence." Doty v. State, 884 So.2d 547, 549 (Fla. 4th DCA 2004). Here, the State charged the defendant with resisting arrest with violence, but the jury acquitted him of that offense and found him guilty of resisting without violence. The court should not rely on that violence in sentencing the defendant.
We find no merit in the other issues raised and affirm the defendant's conviction. We reverse the defendant's sentence for the reason expressed and remand the case for re-sentencing.
STEVENSON, C.J., and SHAHOOD, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918986/ | 106 B.R. 540 (1989)
In re COMMUNICALL CENTRAL, INC., Debtor.
F.E. SCHWARTZ, Trustee of the Estate of Communicall Central, Inc., Plaintiff,
v.
C.M.C., INC., Defendant.
Bankruptcy No. 87 B 14262, Adv. No. 89 A 0573.
United States Bankruptcy Court, N.D. Illinois, E.D.
October 27, 1989.
*541 Jeffrey S. Firestone, Lawrence Liebman, Strange & Firestone, Chicago, Ill., for C.M.C., Inc., defendant.
Jay Weisman, Mitchell R. Nagorsky, Weisman & Weisman, Chicago, Ill., for F.E. Schwartz, trustee.
MEMORANDUM OPINION
JOHN H. SQUIRES, Bankruptcy Judge.
This matter comes before the Court on a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 filed by the defendant C.M.C., Inc. ("CMC"). For the reasons set forth herein, the Court having considered all the pleadings, exhibits and memoranda filed, does hereby grant the motion for summary judgment.
I. JURISDICTION AND PROCEDURE
The Court has jurisdiction to entertain this motion pursuant to 28 U.S.C. § 1334 and General Orders of the United States District Court for the Northern District of Illinois. The motion constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A), (K) and (O).
II. STANDARD FOR SUMMARY JUDGMENT
In order to prevail on a motion for summary judgment, the movant must meet the statutory criteria set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 56(c) reads in part:
[T]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c); see also Donald v. Polk County, 836 F.2d 376, 378-379 (7th Cir. 1988).
In 1986, the Supreme Court decided a trilogy of cases which encourage the use of summary judgment as a means to dispose of factually unsupported claims. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
"The primary purpose for granting a summary judgment motion is to avoid unnecessary trials when there is no genuine issue of material fact in dispute." Farries v. Stanadyne/Chicago Div., 832 F.2d 374, 378 (7th Cir.1987) (quoting Wainwright Bank & Trust Co. v. Railroadmens Federal Sav. & Loan Ass'n of Indianapolis, 806 F.2d 146, 149 (7th Cir.1986)). The burden is on the moving party to show that no genuine issue of material fact is in dispute. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514; Celotex, 477 U.S. at 322, 106 S.Ct. at 2552; Matsushita, 475 U.S. at 585-586, 106 S.Ct. at 1355-56. There is no genuine issue for trial if the record, taken as a whole, does not lead a rational trier of fact to find for the nonmoving party. Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356. However, "[i]f the evidence is merely colorable or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-250, 106 S.Ct. at 2511; see also Valley Liquors, Inc. v. Reinfield Importers, Ltd., 822 F.2d 656, 659 (7th Cir.1987), cert. denied, 484 U.S. 977, 108 S.Ct. 488, 98 L.Ed.2d 486 (1987).
Once the motion is supported by a prima facie showing that the moving party is entitled to judgment as a matter of law, a party opposing the motion may not rest upon the mere allegations or denials in its *542 pleadings, rather its response must show that there is a genuine issue for trial. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Celotex, 477 U.S. at 323, 106 S.Ct. at 2552-53; Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356. Moreover, all reasonable inferences to be drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Davis v. City of Chicago, 841 F.2d 186, 189 (7th Cir.1988); Marine Bank, National Association v. Meat Counter, Inc., 826 F.2d 1577, 1579 (7th Cir.1987); DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 811 F.2d 326, 329 (7th Cir.1987); Bartman v. Allis-Chalmers Corp., 799 F.2d 311, 312 (7th Cir.1986), cert. denied, 479 U.S. 1092, 107 S.Ct. 1304, 94 L.Ed.2d 160 (1987). Furthermore, the existence of a material factual dispute is sufficient only if the disputed fact is determinative of the outcome under the applicable law. Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.1983) (en banc), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983).
Rule 12(l) of the General Rules of the United States District Court for the Northern District of Illinois adopted by the General Order of the Bankruptcy Court on May 6, 1986, requires that the party moving for summary judgment file a detailed statement of material facts as to which they contend there is no genuine issue. Rule 12(m) in turn requires that the party opposing the motion file a statement of material facts as to which there is a genuine issue. If the Rule 12(m) statement fails to deny the facts set forth in the movant's statement, those facts will be deemed admitted.
The Court hereby allows the motion as there is no genuine issue of material fact in dispute and as a matter of law, CMC is entitled to judgment.
III. UNDISPUTED FACTS AND BACKGROUND
Due to the fact that the Trustee failed to file a Rule 12(m) statement contesting the asserted uncontested facts set forth in the Rule 12(l) statement, those facts are deemed admitted for purposes of this motion. On September 30, 1987, Communicall Central, Inc. (the "Debtor") filed a voluntary Chapter 7 petition. Prior thereto on February 13, 1987, the Debtor and CMC as Agent for American National Bank and Trust Company of Chicago, T/U/T dated July 17, 1985 and known as Trust No. 64970, executed a lease for the seventh floor of 180 West Washington Street, Chicago, Illinois. The lease was to run for a five year period commencing April 1, 1987 and terminating March 31, 1992. The lease required a security deposit in the amount of $10,000.00 which the Debtor tendered to CMC. It is undisputed that at all times CMC has retained possession of the money.
The lease further provided the Debtor with an option as to the first year's rent. The monthly rental for the period commencing April 1, 1987 through March 31, 1988 would be $4,000.00. This provision, however, was subject to a rider which provided that the "[l]andlord shall provide either 100% free rent for a period of six (6) months commencing April 1, 1987 and running through September 30, 1987, rent shall commence October 1, 1987; or, in lieu of free rent, Landlord will reduce the first year's rent by 50% making the first year's rent $2,000.00 instead of $4,000.00 as it appears in Exhibit C." The Debtor chose the first option and received free rent from the period April 1, 1987 through September 30, 1987, the date the petition was filed.
In addition, the lease stated in regard to the security deposit:
If Tenant has not defaulted hereunder or if Landlord has not applied said sum to said default, then said security deposit or any portion thereof not so applied by Landlord shall be paid to Tenant within forty-five (45) days after the expiration of this Lease and the vacation of an advance payment of Fixed Rent or measure of damages for any default by Tenant under this Lease, nor shall it be a bar or defense to any action which Landlord may at any time institute against Tenant.
At the time of the filing of the petition, there remained due under the lease the sum of $263,250.00 for rent through March 31, 1992. On October 14, 1987, CMC filed a motion to require the Trustee to assume or *543 reject the lease. Shortly thereafter, on October 23, 1987, Judge Katz entered an Order granting the Trustee leave to accept or reject the lease on or before November 4, 1987.[1]
On June 22, 1989, the Trustee commenced this adversary proceeding to obtain the return of the security deposit. CMC answered and denied that the Trustee was entitled to the security deposit. CMC asserted two affirmative defenses: 1) it has an allowable prepetition claim for rent pursuant to 11 U.S.C. § 502(g) as limited by 11 U.S.C. § 502(b)(6) of $50,250.00 which it is entitled to setoff; and 2) it has a perfected security interest in the security deposit it received from the Debtor.
On July 17, 1989 CMC filed the instant motion. CMC's bases for the motion are twofold: 1) the rejection of the lease by the Trustee created a prepetition claim for damages under the lease; and 2) CMC has a perfected security interest in the security deposit and the Trustee failed to offer adequate protection of its interest in said deposit. Additionally, CMC seeks to setoff its prepetition claim against the Trustee's claim for the return of the security deposit. The Trustee has failed to respond to the instant motion.
IV. DISCUSSION
A. 11 U.S.C. § 502
Section 502(g) provides:
A claim arising from the rejection, under section 365 of this title or under a plan under chapter 9, 11, 12 or 13 of this title, of an executory contract or unexpired lease of the debtor that has not been assumed shall be determined, and shall be allowed under subsection (a), (b), or (c) of this section or disallowed under subsection (d) or (e) of this section, the same as if such claim had arisen before the date of the filing of the petition.
11 U.S.C. § 502(g).
The legislative history indicates that "[s]ubsection (g) gives entities injured by the rejection of an executory contract or unexpired lease, either under section 365 or under a plan of reorganization, a prepetition claim for any resulting damages, and requires that the injured entity be treated as a prepetition creditor with respect to that claim." H.R.Rep. No. 595, 95th Cong., 1st Sess. 354 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 65 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5851, 6310. Thus, if an unexpired lease is rejected after the commencement of a case, it gives rise to a claim for damages sustained by the landlord, provided that there has not been a previous assumption by the trustee. The allowable amount for claims for damages resulting from rejection of same is limited by the provisions contained in section 502(b)(6).
Because the Trustee has rejected the lease, under section 365, the basis for calculating CMC's claim is to be determined pursuant to section 502(b)(6). Federal law does not provide a formula for ascertainment of a lessor's allowable damages. Rather, it merely qualifies and limits the claim to a maximum. See City Bank Farmers Trust Co. v. Irving Trust Company, 299 U.S. 433, 57 S.Ct. 292, 81 L.Ed. 324 (1937); In re Goldblatt Bros., Inc., 66 B.R. 337, 345 (Bankr.N.D.Ill.1986). The purpose of section 502(b)(6) and its predecessors is two-fold. First, it ensures that other creditors recover more than the minimal portion of their claims they would receive if landlord claims resulting from termination of leases were allowed in full. Second, it ensures that lessors obtain a reasonable portion of the damages they suffered as a result of an abandonment of a lease by a debtor. Goldblatt Bros., Inc., 66 B.R. at 346.
Section 502 was created and codified the holding in the controlling case of Oldden v. Tonto Realty Corp., 143 F.2d 916 (2d Cir. 1944). Section 502(b)(6) provides that a claim is to be allowed in full except as follows:
*544 (6) if such claim is the claim of a lessor for damages resulting from the termination of a lease or real property, such claim exceeds
(A) the rent reserved by such lease, without acceleration, for the greater of one year, or 15 percent, not to exceed three years, of the remaining term of such lease, following the earlier of
(i) the date of the filing of the petition; and
(ii) the date on which such lessor repossessed, or the lessee surrendered, the leased property plus
(B) any unpaid rent due under such lease without acceleration, on the earlier of such dates. . . .
11 U.S.C. § 502(b)(6).
This section is "designed to compensate the landlord for his loss while not permitting a claim so large . . . as to prevent other general unsecured creditors from recovering a dividend from the estate." H.R. Rep. No. 595, 95th Cong., 1st Sess. 353 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 63 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5849, 6309; see also In re Multech Corp., 47 B.R. 747, 751 (Bankr.N.D. Iowa 1985). Moreover, the legislative comments state that the landlord "will not be permitted to offset his actual damages against his security deposit and then claim for the balance under this paragraph. Rather, his security deposit will be applied in satisfaction of the claim that is allowed under this paragraph." H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 354 (1977); S.Rep. No. 95-989, 95th Cong., 2nd Sess. 63-64 (1978), U.S.Code Cong. & Admin. News 1978, pp. 5849, 5850, 6310.
Colliers states in this regard:
to the extent that a landlord will have a security deposit in excess of the amount of the claim allowed under section 502(b)(6), the excess will be turned over to the trustee to be administered as part of the debtor's estate. To the extent that the security deposit is less that the amount of the allowable claim as provided for by section 502(b)(6), the security deposit will be applied in satisfaction of the claim thus allowed.
3 Collier on Bankruptcy ¶ 502.02 at 502-62.1 (15th ed. 1989).
In calculating CMC's allowable claim under section 502(b)(6), the maximum amount is to be calculated as follows: the rent for the first year after the petition was filed is based on the sum of $4,000.00 per month for six months plus $4,375.00 per month for six months, which totals $50,250.00. This total is compared with fifteen percent of the remaining rent due under the lease, through the remaining term ending March 31, 1992, which amounts to $39,487.50 (15% of $263,250.00). Pursuant to section 502(b)(6)(A), the claim is to be allowed in an amount equal to the greater of these two figures. Thus, CMC's allowed claim is $50,250.00. CMC has furnished the bases for its correct calculations and the Trustee has failed to dispute same. Hence, pursuant to section 502(b)(6) CMC is a prepetition creditor of the estate in the allowed amount of $50,250.00 for the damages flowing from the rejection of the lease. See In re Strause, 40 B.R. 110, 112 (Bankr. W.D.Wis.1984).
B. FEDERAL RULE OF BANKRUPTCY PROCEDURE 3002(c)(4)
Federal Rule of Bankruptcy Procedure 3002(c)(4) provides:
(c) In a chapter 7 liquidation or chapter 13 individual's debt adjustment case, a proof of claim shall be filed within 90 days after the first date set for the meeting of creditors called pursuant to § 341(a) of the Code, except as follows:
(4) A claim arising from the rejection of an executory contract of the debtor may be filed within such time as the court may direct.
Fed.R.Bankr.P. 3002(c)(4).
The Court set July 7, 1988 as the last day for filing claims. For purposes of this matter, CMC's pleadings will be treated as its claim arising from the rejection of the lease.
C. 11 U.S.C. § 553
CMC asserts that it should be allowed to setoff the $10,000.00 security deposit it *545 held prepetition since February 17, 1987 against the amount of its allowed claim of $50,250.00. A creditor's right of setoff is set forth in section 553 which provides in relevant part:
Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case. . . .
11 U.S.C. § 553(a).
The right of setoff is within the discretion of the Court, exercised under the principles of equity. In re Southern Industrial Banking Corp., 809 F.2d 329, 332 (6th Cir.1987); In re Charter Co., 86 B.R. 280, 283 (Bankr.M.D.Fla.1988). The Seventh Circuit, in speaking to section 553 opined, "[t]he only sense we can make of the rule is that it recognizes that the creditor who owes his debtor money is like a secured creditor; indeed, the mutual debts, to the extent equal, secure each party against the other's default." In re Elcona Homes Corp., 863 F.2d 483, 485 (7th Cir.1988).
Section 553 requires that the debts be mutual and prepetition. Boston & Maine Corp. v. Chicago Pacific Corp., 785 F.2d 562, 565-566 (7th Cir.1986); In re Braniff Airways, Inc., 42 B.R. 443, 447 (Bankr.N. D.Tex.1984). The term "mutual debt" is not defined by the Bankruptcy Code. The mutuality requirement, however, is strictly construed. 4 Collier on Bankruptcy § 553.04 at 553-17 (15th ed. 1989). In order for debts to be mutual they must be in the same right and between the same parties, standing in the same capacity. Boston & Maine Corp. v. Chicago Pacific Corp., 785 F.2d at 566; In re Eggemeyer, 75 B.R. 20, 21 (Bankr.S.D.Ill.1987); In re National Structures, Inc., 74 B.R. 986, 989 (Bankr.E.D.Wis.1987); In re J.A. Clark Mechanical, Inc., 80 B.R. 430, 432 (Bankr. N.D.Ohio 1987); In re O.P.M. Leasing Services, Inc., 68 B.R. 979, 986 (Bankr.S.D.N. Y.1987).
The mutual debt and the mutual credit between the debtor and the creditor must exist at the time of the filing of the petition. In re Garcia, 23 B.R. 266, 268 (N.D.Ill.1982). A postpetition obligation may not be setoff against a prepetition obligation of the debtor because there is no mutuality of obligation. Westinghouse Electric Corp. v. Fidelity & Deposit Co., 63 B.R. 18, 20 (Bankr.E.D.Pa.1986); In re Hill, 19 B.R. 375, 380 (Bankr.N.D.Tex. 1982). A creditor may not offset its prepetition claims against a debt owed to the debtor which came into existence after the filing of the bankruptcy case. Cooper-Jarrett, Inc. v. Central Transport, Inc., 726 F.2d 93, 96 (3rd Cir.1984). Permitting the offset of prepetition debts owed by the debtor against postpetition debts owed to the debtor would frustrate the fresh start policy that underlies the Bankruptcy Code. In re Mohawk Industries, Inc., 82 B.R. 174, 177 (Bankr.D.Mass.1987).
A creditor must obtain relief from the automatic stay or must obtain an order allowing setoff prior to exercising any right of setoff. In re Garcia, 23 B.R. at 267; In re Academy Answering Services, Inc., 90 B.R. 294, 295 (Bankr.N.D. Ohio 1988). A right of setoff may be asserted in a proof of claim but cannot be exercised until the automatic stay is lifted. In re Britton, 83 B.R. 914, 919 (Bankr.E.D.N.C. 1988).
CMC's allowed claim as limited by section 506(b)(6)(A) is a prepetition claim for damages. It is also mutual for purposes of section 553. The security deposit was paid on the same lease. Therefore, the Court finds that CMC is entitled to setoff the $10,000.00 security deposit against its claim. The legislative comments to section 502 cited above are crystal clear on this point. When the security deposit is less than the amount of the allowed claim, it is to be applied in satisfaction of the allowed claim. See also Oldden v. Tonto Realty Corp., 143 F.2d 916 (2d Cir.1944); In re Scionti, 40 B.R. 947, 948 (Bankr.D.Mass. 1984). Thus, the Court allows the request for setoff pursuant to section 553. CMC's claim will be divided into a secured portion *546 for the amount covered by the security deposit to be setoff and the remaining portion of $40,250.00 is classified as an unsecured claim. See In re Zienel Furniture, Inc., 13 B.R. 264, 266 (Bankr.E.D.Wis. 1981).
V. CONCLUSION
For the foregoing reasons, the Court hereby grants the motion for summary judgment. CMC's claim is allowed in the amount of $50,250.00. The $10,000.00 security deposit will be applied in satisfaction of the secured portion of the claim. The balance thereof, namely $40,250.00, will be allowed as a prepetition unsecured claim.
This Opinion is to serve as findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.
NOTES
[1] The Honorable Frederick J. Hertz was originally assigned the case when it was filed in 1987. The Honorable Erwin I. Katz was assigned the case on November 2, 1987, upon Judge Hertz leaving the bench. Thereafter, the case was reassigned to this Judge on February 9, 1988. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2762880/ | Order filed, December 17, 2014.
In The
Fourteenth Court of Appeals
____________
NO. 14-14-00861-CV
____________
THERESA WASHINGTON-JARMON, Appellant
V.
ONEWEST BANK, FSB, Appellee
On Appeal from the 215th District Court
Harris County, Texas
Trial Court Cause No. 2012-24857
ORDER
The reporter’s record in this case was due December 01, 2014. See Tex. R.
App. P. 35.1. The court has not received a request to extend time for filing the
record. The record has not been filed with the court. Because the reporter’s record
has not been filed timely, we issue the following order.
We order Cantrece Addison, the official court reporter, to file the record in
this appeal within 30 days of the date of this order.
PER CURIAM | 01-03-2023 | 12-19-2014 |
https://www.courtlistener.com/api/rest/v3/opinions/1269444/ | 343 S.E.2d 551 (1986)
Elyse C. SCHMOYER, General Guardian and natural mother of Robert Wesley Harmon, Jr., minor child of Robert Wesley Harmon, Sr., Deceased, Plaintiff-Employee,
v.
CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS, Employer, Defendant-Employer,
United States Fidelity & Guaranty Insurance Company, Defendant-Insurance Carrier.
No. 8510IC1390.
Court of Appeals of North Carolina.
June 3, 1986.
*552 Nichols, Caffrey, Hill, Evans & Murrelle by Thomas C. Duncan, Greensboro, for plaintiff-appellant.
Adams, Kleemeier, Hagan, Hannah & Fouts by Clinton Eudy, Jr., Richard D. Ehrhart and George W. Jarecke, Greensboro, for defendants-appellees.
WELLS, Judge.
The essence of plaintiff's first argument is that the Commission erred in concluding and holding that Robert Harmon's injury by accident which caused his death did not arise out of and in the course of his employment. Plaintiff contends (1) that at the time of the accident which resulted in his death, Robert Harmon was on a "special errand" for the benefit of his employer and therefore the accident arose out of and was in the course of his employment or (2) that, at least, Harmon was on a "dual purpose" trip for the benefit of his employer and therefore the accident arose out of and was in the course of his employment. We disagree and affirm.
In order for a covered worker's injury to be compensable, it must be shown that the injury was caused by an accident arising out of the worker's employment and occurring in the course of the employment. N.C.Gen.Stat. § 97-2(6) (1985); Powers v. Lady's Funeral Home, 306 N.C. 728, 295 S.E.2d 473 (1982). Whether the injury arose out of and in the course of the worker's employment is a mixed question of law and fact. Hoffman v. Truck Lines, Inc., 306 N.C. 502, 293 S.E.2d 807 (1982); White v. Battleground Veterinary Hosp., 62 N.C.App. 720, 303 S.E.2d 547, disc. rev. denied, 309 N.C. 325, 307 S.E.2d 170 (1983). The two requirements are separate and distinct and both must be satisfied in order to render an injury compensable. Barham v. Food World, 300 N.C. 329, 266 S.E.2d 676 (1980). The term "arising out of" refers to the origin of the injury or the causal connection of the injury to the employment, while the term "in the course of" refers to the time, place and circumstances under which the injury occurred. Barham, supra; Gallimore v. Marilyn's Shoes, 292 N.C. 399, 233 S.E.2d 529 (1977).
As a general rule, injuries occurring while a covered worker is traveling to and from his place of employment do not *553 arise out of and are not in the course of employment and thus are not compensable. Powers, supra; Barham, supra. Equally well recognized as the general to and from rule is the "special errand" exception. Powers, supra. This exception provides that the injury is in the course of the employment if it occurs while the employee is engaged in a special duty or special errand for his employer. Pollock v. Reeves Bros., Inc., 313 N.C. 287, 328 S.E.2d 282 (1985). Plaintiff contends that this claim falls within the "special errand" rule because of the following evidence. On the afternoon of Sunday, 5 February 1984, before he left the church, plaintiff engaged in a conversation with Ms. Clara Campbell, a non-supervisory volunteer of the church, who usually went to the church on Tuesday mornings. Ms. Campbell told Harmon that she wanted to come in on Monday morning and that she would be there around 8:00 a.m. It was a part of Harmon's duty to open the church on Monday morning. A snowstorm was predicted for Sunday night. Harmon told Ms. Campbell that he would be at the church to let her in on Monday morning and that he would spend the night at the church if it snowed and the weather was bad. Also, when Harmon was at his parents' home on Sunday night, he told them that he was going to spend the night at the church because snow was predicted and he had to be at the church Monday morning to let someone in. The accident in which Harmon was killed was at a place on the usual route from his parents' home to the church. We cannot agree that this evidence, viewed in the light most favorable to plaintiff, was sufficient to establish that Harmon was on a special errand for his employer when he met his death, but at most shows that he may have exercised his discretion to go to the church in advance of the time he was required to be there. In that way, he accomplished no other purpose but to help ensure his timely arrival at his job. We fail to see how such circumstances differ in any meaningful way from the exercise of the judgment of any employee to depart for his work at an earlier time than usual in order to avoid possible late arrival associated with predicted inclement weather. Compare Powers, supra; Pollock, supra. In this case, Harmon's employer would have no more benefited by Harmon's late night endeavor to reach the church in time for work than it would have from Harmon's usual enterprise in getting himself to work on time.
As we have decided that Harmon was not on an errand for his employer when his injury occurred, we need not address plaintiff's contention that Harmon's trip to his fiancee's residence may have had a dual purpose, i.e., as both a personal trip and a special errand.
Our disposition of plaintiff's first argument makes it unnecessary for us to reach plaintiff's only remaining argument relating to the nature of the supervision of plaintiff's work at the church.
For the reasons stated, the opinion of the Full Commission is
Affirmed.
ARNOLD and BECTON, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1588844/ | 972 So.2d 387 (2007)
Leslie DUPLESSIS
v.
TULANE UNIVERSITY d/b/a Tulane University Hospital and Clinic d/b/a Tulane Institute of Sports Medicine.
No. 2007-CA-0647.
Court of Appeal of Louisiana, Fourth Circuit.
November 21, 2007.
*388 William E. Mura, Jr., Warren A. Forstall, Jr., New Orleans, LA, for Plaintiff/Appellant.
Ambrose K. Ramsey, III, Curry & Friend, New Orleans, LA, for Defendant/Appellee.
(Court composed of Judge DENNIS R. BAGNERIS, SR., Judge TERRI F. LOVE, and Judge LEON A. CANNIZZARO, JR.).
DENNIS R. BAGNERIS, SR., Judge.
Plaintiff, Leslie Duplessis, appeals a trial court judgment, which granted defendant's, University Healthcare System, L.C., d/b/a Tulane University Hospital and Clinic, exception of prematurity. For the following reasons, we reverse the judgment of the trial court.
FACTS AND PROCEDURAL HISTORY
On June 8, 2006, plaintiff filed this suit in the First City Court for the City of New Orleans against Tulane University d/b/a/ Tulane University Hospital and Clinic d/b/a Tulane Institute of Sports Medicine[1]. The petition alleges that plaintiff was injured on June 10, 2005, when an employee, who was performing an x-ray procedure, dropped the x-ray template onto her right foot and ankle.
On July 7, 2006, plaintiff filed a first supplemental and amending petition for damages and named as defendant the University Healthcare System, L.C. The first supplemental and amending petition alleged that University Healthcare System is the owner of Tulane University Hospital and Clinic and that the entity is jointly liable with Tulane University. University Healthcare System responded by filing a dilatory exception of prematurity to the plaintiff's petition on the basis that the plaintiff's claims sounded in medical malpractice, thus falling within the parameters of the Louisiana Medical Malpractice Act (LMMA) and, therefore, requiring review by a medical review panel before being brought to the First City Court.
Thereafter, plaintiff filed a second supplemental and amending petition for damages and removal asserting that the x-ray cassette fell onto her foot on its own due to a defect in the x-ray machine. Plaintiff alleges that the cause of this detachment was the failure of the University Healthcare System's maintenance department personnel to correctly repair and/or maintain the device after having been forewarned that it required repair. Plaintiff amended her petition to assert that her damages exceeded the jurisdictional limits of the First City Court and requested that the matter be removed to Civil District Court for the Parish of Orleans.
After the case was removed to District Court, the trial court granted University Healthcare System's dilatory exception of prematurity and dismissed all claims *389 against it. Plaintiff now appeals this final judgment.
DISCUSSION
On appeal, plaintiff argues that this case should be governed by the principles of general tort law and not by the LMMA because (1) her injury was due to the failure of the University Healthcare System's maintenance personnel to properly maintain, inspect, and/or repair the device that caused the injury despite having been forewarned of the dangerous/defective condition of the device, and (2) her injury was not caused by the negligence of a qualified health care provider while performing an action arising from medical care or treatment; rather, her injury resulted from an improperly maintained x-ray template holding device.
We must determine whether the plaintiff was required to convene a medical review panel to review her claim against the University Healthcare System prior to filing her suit against it. This is a question of law as well as of fact. Therefore, we must conduct a de novo review of this case to determine whether the trial court's ruling on the dilatory exception of prematurity was legally correct. See, e.g., Cleco Evangeline, LLC v. Louisiana Tax Commission, 2001-2162, p. 3 (La.4/3/02), 813 So.2d 351, 353, where the Louisiana Supreme Court stated with respect to an issue of law being reviewed on appeal that "[w]e review the matter de novo, and render judgment on the record, without deference to the legal conclusions of the tribunals below."
The LMMA was established by the Louisiana Legislature to govern all claims of medical malpractice asserted against healthcare providers who are qualified enrollees with the Louisiana Patient's Compensation Fund. The LMMA, under La. R.S. 40:1299.41(A)(8), defines "malpractice" in pertinent part, as:
any unintentional tort or any breach of contract based on health care or professional services rendered, or which should have been rendered, by a health care provider, to a patient, including failure to render services timely and handling of a patient, including loading and unloading of a patient, and also includes all legal responsibility of a health care provider arising from acts or omissions during the procurement of blood or blood components, in the training or supervision of health care providers, or from defects in blood, tissue, transplants, drugs, and medicines, or from defects in or failures of prosthetic devices implanted in or used on or in the person of a patient.
The LMMA, under La. R.S. 40:1299.41(A)(7), defines "tort" as:
"Tort" means any breach of duty or any negligent act or omission proximately causing injury or damage to another. The standard of care required of every health care provider, except a hospital, in rendering professional services or health care to a patient, shall be to exercise that degree of skill ordinarily employed, under similar circumstances, by the members of his profession in good standing in the same community or locality, and to use reasonable care and diligence, along with his best judgment, in the application of his skill.
The LMMA, under La. R.S. 40:1299.41(A)(9), defines "health care" as:
"Health care" means any act or treatment performed or furnished, or which should have been performed or furnished, by any health care provider for, to, or on behalf or a patient during the patients medical care, treatment, or confinement, or during or relating to or in connection with the procurement of human blood or blood components.
*390 The Louisiana Supreme Court, in Lacoste v. Pendleton Methodist Hospital, L.L.C. has recently addressed this issue and it "emphasized that the LMMA and its limitations on tort liability for a qualified health care provider apply only to claims `arising from medical malpractice,' and that all other tort liability on the part of the qualified health care provider is governed by general tort law." (emphasis in original). Lacoste, 07-0008, p. 2 (La.9/5/07), 966 So.2d 519. Further, the Louisiana Supreme Court stated that because the LMMA's limitations on the liability of health care providers were created by special legislation in derogation of the rights of tort victims, then any ambiguity should be resolved in favor of the plaintiff and against finding that the tort alleged sounds in medical malpractice. Id. at 521.
In Coleman v. Deno, 01-1517, pp. 17-18, (La.1/25/02), 813 So.2d 303, 315-16, the Louisiana Supreme Court set forth a six-part test to determine whether a claim sounds in medical malpractice and must proceed in accordance with the LMMA or whether the claim sounds in general negligence and should proceed under general tort law.
(1) whether the particular wrong is "treatment related" or caused by a dereliction of professional skill,
(2) whether the wrong requires expert medical evidence to determine whether the appropriate standard of care was breached,
(3) whether the pertinent act or omission involved assessment of the patient's condition,
(4) whether an incident occurred in the context of a physician-patient relationship, or was within the scope of activities which a hospital is licensed to perform,
(5) whether the injury would have occurred if the patient had not sought treatment, and
(6) whether the tort alleged was intentional.
Accordingly, we now apply the Coleman factors to the allegations asserted in the plaintiff's petition, as amended, which we accept as true for the purpose of resolving this issue.
(1) Whether the particular wrong is "treatment related" or caused by a dereliction of professional skill?
The University Healthcare System asserts that the falling of an x-ray cassette positioned there by the x-ray technician during the course of an x-ray is definitely "treatment related" because x-ray exams and the placement of an x-ray cassette in an x-ray machine during an x-ray exam are conducted only by licensed x-ray technicians, and not by unskilled employees. The plaintiff contends that the cassette was not dropped by the technician but fell from the holder device and that the maintenance department was negligent when it failed to repair the device after being warned of its defective condition. Thus, plaintiff argues that no professional skill or licensing is required of a hospital to maintain or repair the x-ray cassette holding device. We agree with plaintiff that the particular wrong alleged in her amended petition, i.e. that her injury "was due to the failure of Defendants maintenance personnel to properly maintain, inspect, and/or repair the device having been forewarned of the dangerous/defective condition of the device," does not result from any dereliction of professional skill that is treatment-related. Accordingly, we find this factor weighs in favor of plaintiff's position that the allegations sound in general negligence.
*391 (2) Whether the wrong requires expert medical evidence to determine whether the appropriate standard of care was breached?
The University Healthcare System asserts that the placement of an x-ray cassette in the x-ray machine is part of the entire process of x-raying a patient which is within the realm of professional knowledge of a licensed x-ray technician, and therefore, expert testimony is required to prove wrongdoing. The plaintiff contends that expert medical evidence will not be required to determine whether the standard of care to be taken in the repair and maintenance of the x-ray cassette holding device was breached. We, too, find no medical expert will be needed to determine whether the maintenance personnel was negligent when it failed to repair the x-ray device after having been forewarned of its dangerous condition. We find this factor as well weighs in favor of finding the allegations sound in general negligence.
(3) Whether the pertinent act or omission involved assessment of the patient's condition?
Although the University Healthcare System asserts that the diagnostic procedure of x-raying a patient involves an examination of the assessment of plaintiff's condition, we find the pertinent acts or omissions in this case do not implicate or require an assessment of plaintiff's medical condition. Therefore, we find this factor weighs in favor of finding the allegations sound in general negligence.
(4) Whether an incident occurred in the context of a physician-patient relationship, or was within the scope of activities which a hospital is licensed to perform?
The University Healthcare System argues that the rendition of x-ray services is definitely within the scope of activities which a hospital is licensed to perform. Plaintiff contends that the repair/maintenance of the x-ray cassette device is not an activity which requires licensing from the state. The amended petition alleges that plaintiff's injury was due to the failure of University Healthcare System's maintenance personnel to properly maintain, inspect and/or repair the x-ray device that was used to hold the x-ray film cassettes rather than in the context of a physician-patient relationship. Therefore, we find this factor weighs in favor of finding the allegations sound in general negligence.
(5) Whether the injury would have occurred if the patient had not sought treatment?
The University Healthcare System alleges that the falling of the x-ray cassette positioned by the x-ray technician onto plaintiff's leg would not have occurred had she not been undergoing x-rays. Thus, the University Healthcare System argues that the patient's injury was directly related to her medical treatment. However, plaintiff argues that a visitor to a hospital, who was near the faulty equipment, could have suffered the same injury. We agree. We find this factor, too, weighs in favor of finding the allegations sound in general negligence.
(6) Whether the tort alleged was intentional?
This factor is not an issue in this case as there are no allegations that the actions or inactions of the University Healthcare System or its staff were intentional.
We have applied the Coleman factors to the facts alleged in the plaintiff's petition as amended (i.e. allegations regarding the defective nature of the x-ray holder device due to lack of inspection, repair, and/or maintenance of the device) and we conclude that the claims as alleged do not fall within the provisions of the LMMA. Accordingly, because the claims do not *392 need to be submitted to a medical review panel, we find the trial court erred when it granted the exception of prematurity filed by the University Healthcare System. For these reasons, we reverse the judgment of the trial court.
REVERSED.
NOTES
[1] Defendant's proper name is University Healthcare System, L.C. d/b/a/ Tulane University Hospital & Clinic. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1587845/ | 33 So.3d 1102 (2010)
WILLWOODS COMMUNITY
v.
ESSEX INSURANCE COMPANY and R.S.U.I. Indemnity Company.
No. 09-CA-651.
Court of Appeal of Louisiana, Fifth Circuit.
April 13, 2010.
Rehearing Denied May 10, 2010.
*1105 William P. Connick, Attorney at Law, Metairie, LA, Patrick G. Kehoe, Jr., Attorney at Law, New Orleans, LA, for Plaintiff/Appellant/Cross-Appellee.
Jason P. Waguespack, Frederick W. Swain, III, Mary Lorenz, Attorneys at Law, New Orleans, LA, H. Alston Johnson, III, Attorney at Law, Baton Rouge, LA, for Defendant/Appellee/Cross-Appellant.
Panel composed of Judges CLARENCE E. McMANUS, JUDE G. GRAVOIS, and MARC E. JOHNSON.
JUDE G. GRAVOIS, Judge.
This appeal is taken from judgments of the trial court awarding penalties and attorneys' fees pursuant to LSA-R.S. 22:658,[1] and damages for delay in performance in the form of legal interest pursuant to La. C.C. art. 2000, to an insured against one of its excess insurance carriers. For the reasons that follow, we affirm in part, vacate in part, and remand.
FACTS AND PROCEDURAL HISTORY
Numerous properties owned by the plaintiff, Willwoods Community ("Willwoods"), were damaged by Hurricane Katrina on August 29, 2005. After receiving the policy limits from its primary insurer, Landmark American Insurance Company ("Landmark"), and several payments from its first excess insurer, Essex Insurance Company ("Essex"), Willwoods sought to recover the balance of its damages from its second excess insurer, R.S.U.I. Indemnity Company ("RSUI"). On August 28, 2006, Willwoods filed suit against Essex and RSUI, alleging in its petition for damages that the defendants "have failed to pay amount [sic] due under their policies issued to petitioner and are liable unto petitioner for all such damages as are reasonable and equitable, together with legal interest thereon from the date of judicial demand until paid and for all cost, penalties, attorney fee [sic] and all other relief provided by R.S. 22:658, R.S. 22:1220 and all other relevant statutes." Willwoods' petition further alleged that the defendants "have been provided with adequate proof of loss for damages caused by Hurricane Katrina, indicating damage to these eleven properties [owned by Willwoods] totaling over twenty five million dollars ($25,000,000.00)."
On November 30, 2006, Essex tendered the remainder of its policy limits to Willwoods and was subsequently dismissed from this suit.[2] This matter then proceeded solely against RSUI.
Because Willwoods and RSUI could not agree as to the value of Willwoods' property and the amount of Willwoods' remaining losses, they proceeded to follow the following appraisal process provided for in the RSUI policy, to-wit:
If we and you disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, *1106 either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding.
Willwoods selected James A. Conn as its appraiser, while RSUI selected Edward R. Reilly, Jr. as its appraiser. Since Mr. Conn and Mr. Reilly could not agree on the remaining losses due Willwoods and on the selection of an umpire to settle their differences, on January 18, 2007 the trial court appointed David J. Halpern to act as the umpire in this matter.
On July 2, 2007, RSUI tendered payments to Willwoods totaling $602,574.94. In accordance with the appraisal process, Mr. Conn and Mr. Reilly then proceeded to each submit separate documentation to Mr. Halpern as to the nature and extent of Willwoods' losses. Mr. Conn's damage appraisal report was submitted to Mr. Halpern on November 6, 2007. Mr. Reilly's damage appraisal report was submitted to Mr. Halpern on November 26, 2007, with a supplemental letter thereto dated November 29, 2007. In his detailed appraisal report, as supplemented, Mr. Reilly appraised Willwoods' remaining damages at $11,256,059.00. Based on Mr. Reilly's appraisal report, after subtracting the prior payments and applicable deductibles, the amount owed at that point by RSUI to Willwoods was $4,735,183.00. On January 29, 2008, RSUI made an additional "unconditional tender" of $4,708,865.00 to Willwoods, which is $26,318.00 less than the appraised value of Willwoods' remaining damages as found in Mr. Reilly's report, as adjusted for prior payments and applicable deductibles. On June 19, 2008, Mr. Halpern rendered a decision that additional sums were due Willwoods. On July 18, 2008, RSUI acknowledged that it would not appeal Mr. Halpern's award. On July 21, 2008, in accordance with Mr. Halpern's award, RSUI tendered a final additional payment of $4,552,076.74 to Willwoods.
On July 23, 2008, Willwoods filed a Motion for Partial Summary Judgment seeking penalties and attorneys' fees under LSA-R.S. 22:658 and 22:1220.[3] On August 6, 2008, Willwoods filed a second Motion for Partial Summary Judgment seeking damages for RSUI's delay in performance in the form of judicial interest under La. C.C. art. 2000. On August 20, 2008, RSUI filed a Cross-Motion for Summary Judgment regarding Willwoods' claim for penalties and attorneys' fees, and a second Cross-Motion for Summary Judgment regarding Willwoods' claim for damages for delay in performance in the form of judicial interest under La. C.C. art. 2000. The motions for summary judgment were heard by the trial court on September 26, 2008.
On March 27, 2009, the trial court rendered judgment granting Willwoods' Motion for Partial Summary Judgment against RSUI and awarded Willwoods $2,354,432.50 in penalties and $1,177,216.20 in attorneys' fees pursuant to LSA-R.S. 22:658. This judgment also found Willwoods' claim for damages for delay in performance in the form of judicial interest to be premature. This judgment correspondingly denied RSUI's Cross-Motions regarding Willwoods' claims for penalties, attorneys' fees and judicial interest.
*1107 Pursuant to a timely request made by RSUI, on April 20, 2009, the trial court issued written reasons for its March 27, 2009 judgment. The trial court found that RSUI was in receipt of sufficient proof of Willwoods' damages claim as of November 29, 2007, the date of Mr. Reilly's supplemental report. The trial court noted that Mr. Reilly's report was based on his research and analysis of volumes of documents. The trial court also found that RSUI's failure to pay to Willwoods the amount set forth in Mr. Reilly's report within the thirty-day payment period mandated by LSA-R.S. 22:658 was without any justification or reasonable cause and in violation of LSA-R.S. 22:658, thereby necessitating the imposition of penalties and attorneys' fees against RSUI in favor of Willwoods. The trial court questioned RSUI's payment prior to Mr. Halpern's award if RSUI truly felt that such payment was not due until Mr. Halpern's report was prepared. The trial court further found that RSUI failed to provide a good faith defense or reason why it failed to follow the report of Mr. Reilly, the appraiser that it had appointed as part of the appraisal process.
In its reasons for judgment, the trial court further found that, on the issue of judicial interest, La. C.C. art. 2000 does not require that a judgment be taken before imposition of judicial interest, noting that the payments made by RSUI to Willwoods were unconditional tenders, rather than payments made pursuant to a settlement or compromise agreement between the parties. The trial court further found that La. C.C. art. 2000 provides that interest be paid when an insurer delays payment owed pursuant to the insurance contract between the parties.
Also on April 20, 2009, the trial court rendered an additional judgment reaffirming its March 27, 2009 judgment, except with respect to the imposition of "damages" pursuant to La. C.C. art. 2000. The trial court found that RSUI was placed in default by the filing of the lawsuit against it by Willwoods, and that damages for delay in performance in the form of legal interest under La. C.C. art. 2000 in the amount of $1,430,377.70 was owed by RSUI to Willwoods, calculated from the date of filing by Willwoods of its petition for damages against RSUI until the dates the three unconditional tender payments were respectively made by RSUI to Willwoods.
On May 13, 2009, the trial court issued an order designating the March 27 and April 20, 2009 judgments as final under C.C.P. art. 1915(B)(1).
On May 22, 2009, Willwoods filed a Motion for Devolutive Appeal from the March 27 and April 20, 2009 judgments.
Additionally, pursuant to RSUI's motion, the trial court issued a judgment on June 4, 2009 explaining how the penalties, attorneys' fees and interest in its previous judgments were calculated, to-wit:
1. Penalties under LSA-R.S. 22:658 were calculated to be $2,354,432.50, being fifty (50%) per cent of the payment of $4,708,865.00 tendered by RSUI to Willwoods on January 29, 2008.
2. Attorneys' fees under LSA-R.S. 22:658 were calculated to be $1,177,216.20, being twenty-five (25%) per cent of the payment of $4,708,865.00 tendered by RSUI to Willwoods on January 29, 2008.
3. Damages for delay in performance in the form of legal interest under La. C.C. art. 2000 was calculated to be $1,430,377.78, broken down as follows:
a. Legal interest of $45,341.70 on the payment of the $602,574.94 tendered by RSUI to Willwoods on *1108 July 2, 2007, due from the date of judicial demand on August 28, 2006 until paid on July 2, 2007.
b. Legal interest of $609,098.33 due on the payment of the $4,708,865.00 tendered by RSUI to Willwoods on January 29, 2008, due from the date of judicial demand on August 28, 2006 until paid on January 29, 2008.
c. Legal interest of $775,937.75 due on the payment of the $4,552,076.74 tendered by RSUI to Willwoods on July 21, 2008, due from the date of judicial demand on August 28, 2006 until paid on July 21, 2008.
Finally, on June 9, 2009, RSUI filed a Motion for Suspensive Appeal from the March 27 and April 20, 2009 judgments.
PENALTIES UNDER LSA-R.S. 22:658 Review of denial of penalties on RSUI's July 21, 2008 tender
On appeal, in its only assignment of error, Willwoods argues that the trial court erred in awarding penalties only upon the $4,708,865.00 payment made by RSUI on January 29, 2008, rather than also on the additional $4,552,076.74 payment made by RSUI on July 21, 2008. Willwoods claims that LSA-R.S. 22:658 mandates that penalties be calculated on both of these payments. Willwoods argues that because RSUI did not engage in any further appraisals or inspections during the interim period between the January 29, 2008 and the July 21, 2008 payments, penalties are mandated on both payments.
A thorough review of the record leads us to the conclusion, however, that Willwoods' position on its assignment of error is without merit. In the memorandum filed in support of its Motion for Partial Summary Judgment, Willwoods only argued for penalties for RSUI's delay in making the January 29, 2008 payment. Willwoods argued that because RSUI unquestionably had proof of Willwoods' loss by November 26, 2007 (the date of Mr. Reilly's report) and nevertheless waited 63 days (until January 29, 2008) to tender that unconditional payment to Willwoods, RSUI was liable for penalties under the mandatory provisions of LSA-R.S. 22:658. The record further reflects that at the April 23, 2009 hearing on the motion to strike RSUI's appeal, counsel for Willwoods stated that they never filed anything addressing "the 606,000 and the 4.5 million as far as substantive issues as to why they were late," explaining that was the reason they moved for partial summary judgment. At that same hearing, the trial judge stated this motion "started with one thing and ended with something different and that's why I ruled the way I ruled the first time because I wasn't of the opinion that this case was over." Moreover, in its May 13, 2009 judgment, the trial court states that "this Court retains jurisdiction over the remaining pending bad faith claims." In said judgment, the trial court continued the trial that previously had been set, and stated that a new trial date would be scheduled on a later date. Furthermore, both parties acknowledged in their memoranda submitted in connection with RSUI's Motion for Order of Stay the proceedings pending the outcome of this appeal that the trial court had only ruled on Willwoods' bad faith claim concerning RSUI's January 28, 2008 tender to Willwoods and not on RSUI's two other tenders.[4] Thus, it is clear from the *1109 record that the trial court was never asked to rule and in fact never did rule on the issue of whether penalties pursuant to LSA-R.S. 22:658 should be assessed against RSUI on its July 21, 2008 tender to Willwoods. Accordingly, we find no merit to Willwoods' assertion that the trial judge erred in not awarding penalties on the final payment of $4,552,076.74 made by RSUI on July 21, 2008. Rather, we find the trial court has not ruled on this issue and as such that issue is not properly before this Court in the instant appeal.
Review of a ward of penalties on RSUI's January 28, 2008 tender
In its response to Willwoods' appeal and in its cross-appeal, RSUI addressed the merits of the award by the trial court to Willwoods of penalties on RSUI's January 28, 2008 tender to Willwoods. RSUI argues that the trial court erred in awarding penalties and attorneys' fees on this payment because there is no evidence that the delay in this payment was arbitrary, capricious or without probable cause. RSUI contends it did not have the burden of offering an explanation or justification for the late payment; rather, it was Willwoods' burden to establish that the alleged late payment was arbitrary. RSUI bases its argument on the fact that the policy in question called for an appraisal process to evaluate the loss if the insured and RSUI could not agree on the amount of Willwoods' losses. RSUI contends that Willwoods invoked this process. RSUI argues that Willwoods' claim rests upon the November 26, 2007 "preliminary" report from Mr. Reilly, the appraiser selected by RSUI. RSUI contends that since the estimate of damages contained in Mr. Reilly's report did not agree with the estimate of damages contained in Mr. Conn's report, Mr. Reilly's estimate of damages cannot be considered an undisputed amount. As such, RSUI contends that submission of Mr. Reilly's report was merely a step in the appraisal process, and that it would have been within its rights to wait until the results of the pending appraisal process were final before making any additional payments to Willwoods. RSUI claims, accordingly, that it should not be punished for choosing to tender a substantial portion of the claim to Willwoods five months before the appraisal process was completed. RSUI concludes that it was error for the trial court to conclude that RSUI's conduct was arbitrary, capricious and without probable cause.
Willwoods, in its response to RSUI's appeal, contends that there is no existing jurisprudence to hold or suggest that imposition of the appraisal process stays the application of LSA-R.S. 22:658. Willwoods contends that to adopt the position suggested by RSUI would in effect preempt this statute. Willwoods repeats its argument that since the $4,708,865.00 payment was paid more than two months after Mr. Reilly's November 26, 2007 report, it was not timely paid, and accordingly, the trial court properly awarded the penalty on said payment under LSA-R.S. 22:658.
All insurers shall pay the amount of any claim due any insured within thirty days after receipt of satisfactory proofs of loss from the insured or any party in interest. LSA-R.S. 22:658 A(1). Insurers are liable for penalties when the failure to *1110 make such payment within thirty days after receipt of satisfactory written proofs and demand therefor is found to be arbitrary, capricious, or without probable cause. LSA-R.S. 22:658 B(1). This statutory provision is penal in nature and, as such, must be strictly construed. Urology Clinic of New Orleans, Inc. APMC v. United Fire and Cas. Co., 08-0444, p. 3 (La.App. 4 Cir. 9/10/08), 993 So.2d 803, 807.
The Louisiana Supreme Court recently reviewed the elements necessary for prevailing on a cause of action for penalties under LSA-R.S. 22:658. Louisiana Bag Company v. Audubon Indemnity Co., XXXX-XXXX (La.12/2/08), 999 So.2d 1104. In order to prevail on a cause of action for penalties under this statute, the plaintiff is required to make a showing "that (1) an insurer has received satisfactory proof of loss, (2) the insurer fails to tender payment within thirty days of receipt thereof, and (3) the insurer's failure to pay is arbitrary, capricious or without probable cause." Id., at p. 6, 999 So.2d at 1109.
Our review of the record indicates that RSUI was in possession of substantial, detailed documentation describing the repair estimates for Willwoods' properties at the time the instant suit was filed. Thereafter, since an agreement could not be reached, the appraisal process provided for in the insurance policy was implemented. According to his November 26, 2007 appraisal report, Mr. Reilly, the "competent and impartial" appraiser chosen by RSUI for the appraisal review process, reviewed extensive documents from the other adjusters, contractors, analysts and engineers who rendered reports as to the amount of Willwoods' damages, including "a volume of photos of the exterior and interior of all the structures which were provided by the adjusters and experts." Mr. Reilly "also made a personal inspection of all of the buildings at the properties involved in the appraisal process over a three day period in October of 2007." In his detailed appraisal report, as supplemented, Mr. Reilly appraised Willwoods' remaining damages at $11,256,059.00. Based on Mr. Reilly's appraisal report, after subtracting the prior payments and applicable deductibles, the amount owed at that point by RSUI to Willwoods was $4,735,183.00. This was over and above the $10,000,000.00 that had previously been paid to Willwoods by its primary and first excess insurers and the initial payments of $602,574.00 made by RSUI to Willwoods on July 2, 2007. On January 29, 2008, RSUI made an additional "unconditional tender" of $4,708,865.00 to Willwoods, which, as noted above, is $26,318.00 less than the appraised value of Willwoods' remaining damages as found in Mr. Reilly's report, as adjusted for prior payments and applicable deductibles. It should also be noted that in his supplemental letter to Mr. Halpern dated November 29, 2007, Mr. Reilly stated that "Anticipating your agreement with our assessment which is supported by the overwhelming weight of evidence as per the various engineering expert reports previously forwarded to you, we are attaching our signed appraisal award to formalize the process." (Emphasis added.)
RSUI argues that it was not obligated to pay this amount ($4,708,865.00) at that point because the appraisal process was still ongoing.[5] We disagree. RSUI knew at that time that the damage amounts *1111 contained in Mr. Conn's report, as well as the damage amounts submitted by Willwoods much earlier in this claim process, including prior to Willwoods' filing of its Petition for Damages in this case, were substantially more than the damage amounts stated in Mr. Reilly's report. Furthermore, the record indicates that RSUI's unconditional tender on January 29, 2008 was based at least partly on Mr. Reilly's "suggested appraisal award."[6] Thus, the evidence submitted in support of Willwoods' Partial Motion for Summary Judgment and in opposition to RSUI's Motion for Summary Judgment confirms that RSUI had undisputed written proof that Willwoods suffered damages of at least an additional $4,708,865.00 upon its receipt of Mr. Reilly's report, yet it failed to pay this additional amount within thirty days of receipt of such proof, as mandated by LSA-R.S. 22:658.
Having found that RSUI did not pay Willwoods the amount set forth in Mr. Reilly's report within the thirty-day period mandated by LSA-R.S. 22:658, the question now becomes whether RSUI's delay in paying this loss within said thirty-day period was "arbitrary, capricious, or without probable cause." The phrase "arbitrary, capricious, or without probable cause" is synonymous with the word "vexatious." In Louisiana law, both terms describe an insurer whose willful refusal to pay a claim is not based on a good faith defense. Louisiana Maintenance Services, Inc. v. Certain Underwriters at Lloyd's of London, 616 So.2d 1250, 1253 (La.1993). An insurer's refusal to pay a claim is not arbitrary, capricious, or without probable cause where serious issues regarding the appellant's right to recovery are raised. B. Bennett Mfg. Co., Inc. v. S. Carolina Ins. Co., 96-731 (La.App. 5 Cir. 3/25/97), 692 So.2d 1258. When there is a reasonable and legitimate question as to the extent and causation of a claim, bad faith should not be inferred from an insurer's failure to pay within the statutory time limits when such reasonable doubts exist. Reed v. State Farm Mut. Auto. Ins. Co., XXXX-XXXX (La.10/21/03), 857 So.2d 1012, 1020. Whether or not a refusal to pay is arbitrary, capricious, or without probable cause depends on the facts known to the insurer at the time of its action. Id.
In the present case, we find that the trial court correctly questioned RSUI's payment prior to Mr. Halpern's award if RSUI truly felt that such payment was not due until Mr. Halpern's report was prepared. Also, we agree with the trial court's finding that RSUI failed to provide a good faith defense or reason why it failed to follow the report of Mr. Reilly, the "competent and impartial" appraiser that it had appointed as part of the appraisal process.
The documents submitted in support of Willwoods' Partial Motion for Summary Judgment indicate that, at the very latest, on November 29, 2007, the date of Mr. Reilly's report, as supplemented, RSUI was on notice that the losses sustained by Willwoods were significantly greater than RSUI's initial tender of $602,574.00. It is clear from the record that at least as of November 29, 2007, RSUI knew that it would have to pay Willwoods at least an additional $4,708,865.00 on Willwoods' damages claim. As such, because RSUI *1112 was in possession of satisfactory written proofs of Willwoods' losses and because RSUI's willful refusal to pay Willwoods' claim was not based on a good faith defense, RSUI's failure to pay at least an additional $4,708,865.00 on Willwoods' damages claim within thirty days of November 29, 2007 was clearly arbitrary, capricious, or without probable cause, thereby subjecting RSUI to the 50% penalty called for in LSA-R.S. 22:658. Louisiana Bag Company v. Audubon Indemnity Co., supra.
For the reasons set forth above, we agree with the trial court's finding that RSUI's failure to pay to Willwoods the additional $4,708,865.00 on Willwoods' damages claim within thirty days of November 29, 2007 was arbitrary, capricious, or without probable cause, and in violation of LSA-R.S. 22:658, thereby necessitating the imposition of penalties and attorneys' fees against RSUI in favor of Willwoods. As such, the trial court did not err in awarding penalties to Willwoods under LSA-R.S. 22:658 in the amount of $2,354,432.50 on the January 29, 2008 tender made by RSUI to Willwoods.
ATTORNEYS' FEES UNDER LSA-R.S. 22:658
The trial court awarded attorneys' fees to Willwoods under LSA-R.S. 22:658 in the amount of $1,177,216.20, being 25% of the payment of $4,708,865.00 tendered by RSUI to Willwoods on January 29, 2008. Attorneys' fees under LSA-R.S. 22:658 B(1) are mandatory, rather than discretionary, where a breach of LSA-R.S. 22:658 B(1) has occurred. Calogero v. Safeway Ins. Co. of Louisiana, XXXX-XXXX (La.1/19/00), 753 So.2d 170, 174. Thus, we agree with the trial court that RSUI's failure to tender $4,708,865.00 within thirty days of Mr. Reilly's report, as supplemented, also subjected RSUI to payment of attorneys' fees under LSA-R.S. 22:658.
When attorneys' fees are awarded pursuant to statute, the trial court must determine the reasonableness of the attorneys' fee to be awarded. Rivet v. State, Dept. of Transp. and Dev., 96-0145 (La.9/5/96), 680 So.2d 1154, 1161. Factors to be taken into consideration in determining the reasonableness of the attorneys' fees to be awarded include: (1) the ultimate result obtained; (2) the responsibility incurred; (3) the importance of the litigation; (4) the amount of money involved; (5) the extent and character of the work performed; (6) the legal knowledge, attainment, and skill of the attorneys; (7) the number of appearances involved; (8) the intricacies of the facts involved; (9) the diligence and skill of counsel; and (10) the court's own knowledge. Id.
While it is obvious from the record that Willwoods' attorneys have expended a significant amount of time and effort in representation of their client in this matter, our thorough review of the record before us does not indicate that the trial court considered the above-listed factors in determining the amount of attorneys' fees Willwoods is entitled to recover from RSUI in this case. Because the record does not adequately support the basis for the amount of the attorneys' fees awarded by the trial court to Willwoods, the portion of the trial court's March 27, 2009 judgment awarding $1,177,216.20 in attorneys' fees to Willwoods is hereby vacated. This matter is remanded to the trial court for an evidentiary hearing to determine a reasonable amount of attorneys' fees to be awarded to Willwoods in this case in accordance with the factors listed above and other applicable law.
INTEREST PURSUANT TO LA C.C. ART. 2000
RSUI argues on appeal that the trial court was without authority to award *1113 interest in the April 20, 2009 judgment because the prior judgment of March 27, 2008 was a final judgment not subject to modification in the absence of a motion for new trial being filed by Willwoods. We disagree.
Louisiana Code Civil Procedure articles 1841 and 1915(B)(2) allow the trial court to modify a prior interlocutory judgment at any time prior to rendition of a final judgment on the merits. LeBlanc v. Aysenne, XXXX-XXXX (La.1/19/06), 921 So.2d 85, 88. The March 27, 2008 judgment was not declared a final judgment when it was rendered and was thus an interlocutory judgment. As such, the trial judge had the authority to modify that judgment. Further, the April 20, 2009 judgment states "At the status conference held on April 8, 2009 with all parties, all parties agreed that the imposition of damages pursuant to La. C.C. art. 2000 present [sic] a purely legal question and the calculation should be determined by the Court." We thus find no merit to RSUI's argument that the trial court was bound by its March 27, 2008 judgment and was thus without authority to award interest in its April 20, 2009 judgment.
RSUI further argues that Willwoods cannot recover both damages for delay in performance under La. C.C. art. 2000 and penalties and attorneys' fees under LSA-R.S. 22:658. RSUI argues that a clear reading of the article 2000 supports its position. Article 2000 states, in pertinent part, that "damages for delay in performance are measured by the interest on that sum from the time it is due" and that the "obligee may recover these damages without having to prove any loss, and whatever loss he may have suffered he can recover no more." (Emphasis added.) RSUI argues that this emphasized portion of article 2000 allows for recovery of damages for delay in performance under La. C.C. art. 2000 or penalties and attorneys' fees under LSA-R.S. 22:658, if proven, but not both. We find this interpretation by RSUI to be without merit. In our view, this emphasized portion of article 2000 simply confirms that the obligee to the contract (Willwoods) does not have to prove its damages for delay in performance under the contract. Rather, under this statute, the obligee will be entitled to recover the amount of damages for delay in performance "at the rate agreed by the parties" in the contract, or "in the absence of agreement," the prevailing "rate of legal interest as fixed by R.S. 9:3500," no more or no less.
Furthermore, the enactment of special statutes such as LSA-R.S. 22:658 to award penalties and attorneys' fees in excess of damages for delay in performance recognizes that the insurer can be liable for penalties and attorneys fees in addition to legal interest. See, Litvinoff, 6 Louisiana Civil Law Treatise: The Law of Obligations, § 9.5 (2d ed.). The penalties and attorneys' fees allowed under LSA-R.S. 22:658 are statutorily imposed as a result of RSUI's failure to timely pay properly documented claims under the contract of insurance it issued to Willwoods. The damages for delay in performance, in the form of legal interest, payable pursuant to La. C.C. art. 2000, arise from RSUI's contract of insurance with Willwoods and would be payable whether or not penalties under LSA-R.S. 22:658 were imposable. Thus, even an insurer who delays payment in good faith can be subject to an award of damages for delay in performance under La. C.C. art. 2000. Because the penalties and attorneys' fees imposed pursuant to LSA-R.S. 22:658 are separate and distinct from the damages for delay in performance allowed under La. C.C. art. 2000, Willwoods can recover from RSUI penalties and attorneys' fees under LSA-R.S. *1114 22:658 and damages for delay in performance in the form of legal interest under La. C.C. art. 2000.[7]
RSUI argues that Willwoods is not entitled to an award of interest under La. C.C. art. 2000 because a judgment has never been rendered against it on the damage claims made by Willwoods. As the trial court correctly found, however, La. C.C. art. 2000 does not require that a judgment be rendered before judicial interest can be awarded. Willwoods' petition for damages specifically included a request for "legal interest" in addition to penalties and attorneys' fees. We agree with the trial court's finding that the payments made by RSUI to Willwoods were unconditional tenders, rather than payments made pursuant to a settlement or compromise agreement between the parties. As such, the trial court did not err in its April 20, 2009 judgment awarding legal interest to Willwoods on the three tender payments made from RSUI to Willwoods.
Since the contract of insurance that was issued by RSUI to Willwoods is void of any agreement between the parties as to a rate of interest to be imposed on RSUI in case of RSUI's failure to timely perform (pay) under the contract of insurance it issued to Willwoods, in accordance with La. C.C. art. 2000, Willwoods is entitled to interest at the rate of legal interest as fixed by R.S. 9:3500 on all sums due from RSUI "from the time it is due" until paid.
In making a determination as to when the payments in question were "due" from RSUI to Willwoods, we note that the insurance policy issued by RSUI to Willwoods specifically provides that "liability attaches to the Company [RSUI] only after the primary and underlying excess insurer(s) have paid or have admitted liability for the full amount of their respective ultimate net loss liability". At the time Willwoods filed suit against RSUI on August 28, 2006, the policy limits of the primary insurer, Landmark, had been exhausted. Essex, the first underlying excess insurer, was included in the suit because its policy limits had not yet been exhausted. As noted above, the Essex policy limits were exhausted on November 30, 2006 and Essex was thereafter dismissed from this suit on March 7, 2007. Although Willwoods alleges in its petition that it is entitled to legal interest "from date of judicial demand until paid", the policy itself clearly states that the liability of RSUI to Willwoods attaches only after the primary and underlying excess insurers have paid or have admitted liability for the full amount of their respective ultimate net loss liability.
The trial court calculated the legal interest awarded to Willwoods to run from the date of judicial demand until the three unconditional tenders were respectively made. We find this to be in error because RSUI is not obligated under the policy in question to pay Willwoods' losses until all of the underlying insurance coverage has been exhausted. Because the Essex policy limits were exhausted on November 30, 2006, we find that, for purposes of Willwoods' claims made pursuant to La. C.C. art. 2000, the payments from RSUI to Willwoods became "due" on November 30, 2006. For this reason, the portion of the trial court judgment awarding legal interest in the amount of $1,430,377.70 is hereby vacated. On remand, the trial court is instructed to recalculate the legal interest award from November 30, 2006, rather *1115 than from the date of judicial demand, until the date each tender was respectively paid.
CONCLUSION
For the foregoing reasons, the trial court's judgment of March 27, 2009 awarding penalties in the amount of $2,354,432.50 to Willwoods is hereby affirmed. The trial court's judgment of April 20, 2009 awarding judicial interest to Willwoods is hereby vacated and this matter is remanded for a calculation of legal interest to run from November 30, 2006 until the date each tender was respectively made. The trial court's judgment of March 27, 2009 awarding attorneys' fees in the amount of $1,177,216.20 to Willwoods is hereby vacated. On remand, the trial court is ordered to hold an evidentiary hearing for a determination of a reasonable amount of attorneys' fees due Willwoods from RSUI in accordance with this opinion.
AFFIRMED IN PART; VACATED IN PART; REMANDED.
NOTES
[1] This statute has been renumbered as LSA-R.S. 22:1892 but will be referred to in this opinion under the prior number 22:658, as the prior number was used in all of the briefs and judgments of the trial court.
[2] RSUI claims that Essex made final payments on July 2, 2007; however, there is no proof of this in the record and this is inconsistent with the dismissal of Essex from the suit on March 7, 2007.
[3] Willwoods' claim for penalties and damages under LSA-R.S. 22:1220 was denied in the trial court's judgment rendered on March 27, 2009. Willwoods has not assigned this denial as an error on appeal. Accordingly, the trial court's denial of Willwoods' claim under LSA-R.S. 22:1220 is not addressed in this appeal.
[4] In its Memorandum in Support of its Motion for Order of Stay, RSUI asserts: "Therefore, while the issue of bad faith regarding the January 2008 tender and judicial interest regarding all three (3) tenders is now before the appellate court, the issue of bad faith on the July 2007 and July 2008 tenders remains before this Court."
Likewise, in its Memorandum in Opposition to RSUI's Motion for Order of Stay, Willwoods acknowledges that "The Court further ordered that it would retain jurisdiction over the remaining claims for bad faith penalties on the Defendant's tenders of July 2, 2007 and July 21, 2008, as these claims had yet to be litigated." Willwoods goes on to argue against the stay order because the trial court had retained jurisdiction over these remaining bad faith claims.
[5] RSUI claims in its memorandum attached to its Cross-motion for Summary Judgment on the issue of bad faith penalties and attorneys' fees that that the unconditional tender of $4,708,865.00 made on January 29, 2008 was "a good faith effort to resolve the claim and move forward with the appraisal process[.]"
[6] In a letter to Willwoods' counsel dated March 25, 2008, in an effort to explain the basis for the January 29, 2008 tender by RSUI to Willwoods, RSUI's counsel stated that notwithstanding a reservation of rights, "RSUI made a good faith tender based on Ed Reilly's suggested appraisal award taking into consideration all previous payments and the applicable deductibles."
[7] See, Sanders v. Wysocki, 94-2062 (La.App. 4 Cir. 5/16/95), 655 So.2d 713; Porche v. Waldrip, 597 So.2d 536 (La.App. 1 Cir. 1992). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1588007/ | 33 So. 3d 43 (2010)
SNELL
v.
STATE.
No. 2D09-1835.
District Court of Appeal of Florida, Second District.
April 21, 2010.
Decision Without Published Opinion Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/789415/ | 399 F.3d 900
Sherneth Marcia RAFFINGTON, Petitioner — Appellant,v.Mark CANGEMI, District Director, U.S. Immigration and Customs Enforcement, et al., Respondents — Appellees.
No. 04-3672.
United States Court of Appeals, Eighth Circuit.
Submitted: December 15, 2004.
Filed: February 4, 2005.
Herbert A. Igbanugo, argued, Minneapolis, Minnesota (Riddhi Jani on the brief), for appellant.
Lonnie F. Bryan, Assistant U.S. Attorney, argued, Minneapolis, Minnesota (Thomas B. Heffelfinger on the brief), for appellee.
Before LOKEN, Chief Judge, JOHN R. GIBSON and HANSEN, Circuit Judges.
LOKEN, Chief Judge.
1
Sherneth Raffington, an alien in custody awaiting removal to Jamaica, appeals the district court's1 denial of her petition for a writ of habeas corpus. Raffington argues that the government is estopped to remove her because of its frivolous appeal of the Immigration Judge's grant of suspension of deportation, and that the district court erred in failing to consider the merits of her belated claim for relief under the Convention Against Torture. We granted the government's motion to expedite the appeal and now affirm.
2
These proceedings have a long history that we will briefly summarize. Raffington reentered the United States illegally in April 1988. The Immigration and Naturalization Service2 initiated deportation proceedings (now called removal proceedings) in October 1994. Raffington conceded deportability and applied for suspension of deportation. The Immigration Judge ("IJ") granted suspension of deportation in December 1996, and the INS appealed. In September 2001, the Board of Immigration Appeals sustained the appeal and denied Raffington's application for suspension of deportation, concluding that Raffington was not eligible for suspension because she did not satisfy the seven-year continuous presence requirement.
3
Raffington did not appeal the BIA's decision. Instead, she filed an application for asylum or withholding of removal and moved to reopen the case and remand to the IJ to consider this new application. The BIA denied that motion, concluding that Raffington failed to present a prima facie case that she will be persecuted upon her return to Jamaica on account of membership in a social group. Raffington appealed the denial of her motion to reopen. We affirmed. Raffington v. INS, 340 F.3d 720 (8th Cir.2003).
4
After Raffington was taken into custody pursuant to a warrant of removal, she petitioned for habeas corpus relief. The district court denied relief, concluding that the INS had a good faith basis to appeal the IJ's grant of suspension of deportation and that Raffington's attempt to assert a claim under the Convention Against Torture ("CAT") in her reply brief was untimely. Raffington moved to reopen the case to present her CAT claim. The district court denied leave to file a motion for reconsideration because "there is no evidence to suggest that Raffington could obtain relief under the Convention." She appeals both orders. The district court granted a stay pending appeal because removal is likely to cause irreparable injury and Raffington "raises a substantial question as to whether her Convention Against Torture claim has been adequately adjudicated."
5
1. The Estoppel Claim. Raffington argues that the government is estopped to remove her because the INS appeal of the IJ's order granting suspension of deportation was frivolous. This contention is unsound for many reasons. First, Raffington did not appeal the BIA's denial of suspension of deportation to this court. Under the immigration laws as amended by IIRIRA,3 an appeal to the court of appeals is the exclusive procedure for obtaining judicial review of removal orders. See 8 U.S.C. § 1252(b). Raffington did appeal the denial of her motion to reopen the removal proceedings to consider a new application for asylum or withholding of removal, but she did not raise the estoppel issue in that appeal. We recognize "that habeas jurisdiction under [28 U.S.C.] § 2241 was not repealed by ... IIRIRA." I.N.S. v. St. Cyr, 533 U.S. 289, 314, 121 S. Ct. 2271, 150 L. Ed. 2d 347 (2001). But St. Cyr granted § 2241 habeas review of an issue of law — legislative retroactivity — to an alien who had no right to judicial review under IIRIRA. Raffington cites no authority for the broader and more disruptive proposition that habeas relief is available for a claim that could have been raised on direct review of a removal order but was not. The case on which she bases her estoppel claim, Otarola v. INS, 270 F.3d 1272 (9th Cir.2001), involved direct review of a final order of removal.
6
Second, we agree with the district court that the INS appeal was not frivolous. IIRIRA modified the suspension-of-deportation criteria by enacting a "stop-time" rule which bars an alien from accruing time toward the continuous presence requirement after service of a "notice to appear." § 240A(d)(1), codified at 8 U.S.C. § 1229b(d)(1). The statute applied this new rule to "notices to appear issued before, on, or after the date of the enactment of this Act." IIRIRA § 309(c)(5), 110 Stat 3009-627, set forth at 8 U.S.C. § 1101 note (Supp. II 1997). After enactment, the INS argued that the stop-time rule should apply to orders to show cause as well as to notices to appear, and that the effective date of the rule was the date of enactment, not six months later like most other IIRIRA provisions. The IJ rejected this position and granted Raffington suspension of deportation, concluding that the stop-time rule did not apply during the six-month grace period. Raffington argues the IJ's decision was correct when issued and the INS should not have appealed it, as a divided panel of the Ninth Circuit ruled in Otarola, 270 F.3d at 1275-76, relying on an earlier Ninth Circuit decision. With due respect, we disagree with the panel majority in Otarola. The INS was well within its authority in pursuing this issue before the BIA despite a contrary Ninth Circuit decision. Within months of the IJ's decision in this case, the BIA issued an en banc decision agreeing with the INS's interpretation of the new statute. In re N-J-B-, 21 I. & N. Dec. 812 (1997). Later that year, Congress amended the statute to validate the N-J-B- decision, which ended the controversy in the agency's favor. See Nicaraguan Adjustment and Central American Relief Act ("NACARA") § 203, Pub L. No. 105-100, 111 Stat. 2193, 2196 (1997), set forth at 8 U.S.C. § 1101 note; Afolayan v. I.N.S., 219 F.3d 784, 787-88 (8th Cir.2000). In these circumstances, the INS decision to appeal the IJ's decision was not frivolous.
7
Third, even if the INS had filed a frivolous (but ultimately successful) appeal of the IJ's decision, this would not constitute the sort of "affirmative misconduct" that might estop the government to enforce the immigration laws as enacted by Congress. See United States I.N.S. v. Hibi, 414 U.S. 5, 7-9, 94 S. Ct. 19, 38 L. Ed. 2d 7 (1973).
8
2. The CAT Claim. Raffington argues that the district court erred in refusing to consider her request for relief under the CAT because that claim has never been adjudicated on the merits. At the outset, we seriously doubt whether this claim is even cognizable in habeas. As ratified by the United States, the CAT is a non-self-executing treaty, which means there is no direct right of action for violation of the treaty, only for violation of any domestic law implementing the treaty. The relevant statute provides that implementation of CAT shall be in accordance with non-reviewable agency regulations, and that judicial review of the denial of CAT relief must be "as part of the review of a final order of removal." Foreign Affairs Reform and Restructuring Act of 1998 ("FARRA") § 2242(d), Pub.L. No. 105-277, 112 Stat. 2681-761, 2681-822, set forth at 8 U.S.C. § 1231 note; see 8 C.F.R. § 208.18(e).
9
Following the Supreme Court's decision in St. Cyr, four circuits have held that an alien who has no right to judicial review of her removal order under IIRIRA may seek habeas review of the BIA's denial of CAT relief.4 We are inclined to agree with those decisions. But here, Raffington had a right to judicial review of her removal order. Her application for asylum and withholding of removal raised the CAT issue by stating that she feared torture because, "I will not be allowed medical treatment [in Jamaica]. And to me that is tantamount to torture because it will ultimately cause my death." But in moving to reopen her removal proceedings, she argued only asylum issues. She did not object when the agency denied that motion without discussing the CAT issue, and she did not raise that issue when she appealed to this court. As habeas is not a substitute for direct appeal, as Congress has granted the agency exclusive authority to implement the CAT, and as Raffington failed to present any newly discovered evidence to the district court, habeas relief should not be available.
10
The district court did not consider these threshold issues. Rather, the court denied Raffington's motion for leave to raise a belated CAT claim because that claim "is too speculative to warrant further proceedings. The Court has reviewed the entire record in this case and there is no evidence to suggest that Raffington could obtain relief under the Convention." After careful review of the record, we agree. Though Raffington may not have access to the same level of public and private mental health care in Jamaica as in the United States, that does not constitute torture within the meaning of the governing CAT regulations. See 8 C.F.R. §§ 1208.16(c)(2), 1208.18(a)(1)-(2).
11
The judgment of the district court is affirmed.
Notes:
1
The Honorable John R. Tunheim, United States District Judge for the District of Minnesota
2
The agency was renamed the Bureau of Immigration and Customs Enforcement after its transfer to the Department of Homeland Security
3
The Illegal Immigration Reform and Immigrant Responsibility Act of 1996, Pub.L. No. 104-208, 110 Stat 3009-546
4
See Singh v. Ashcroft, 351 F.3d 435 (9th Cir.2003); Ogbudimkpa v. Ashcroft, 342 F.3d 207 (3d Cir.2003); Saint Fort v. Ashcroft, 329 F.3d 191 (1st Cir.2003); Wang v. Ashcroft, 320 F.3d 130 (2d Cir.2003). | 01-03-2023 | 04-19-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1588340/ | 33 So.3d 36 (2010)
WILLIAMS
v.
RUTHERFORD.
No. SC09-2183.
Supreme Court of Florida.
March 22, 2010.
Decision Without Published Opinion Habeas Corpus dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1588024/ | 752 F.Supp. 173 (1990)
The SHIPPING CORPORATION OF INDIA, LTD., Plaintiff,
v.
The AMERICAN BUREAU OF SHIPPING, Defendant and Third-Party Plaintiff,
v.
BRODOGRADILISTE I TVORNICA DIESEL MOTORA-SPLIT (a/k/a Shipyard "Split"), A DIVISION OF the SHIPBUILDING AND ENGINEERING INDUSTRY "SPLIT" and a Member of the Associated Shipbuilding Industry "Jadranbrod" Shipbuilding Group, Third-Party Defendant.
No. 84 Civ. 1920 (CBM).
United States District Court, S.D. New York.
December 12, 1990.
*174 Healy & Baillie by Howard M. McCormack, William N. France, New York City, for plaintiff.
Kirlin, Campbell & Keating by Harry A. Gotimer, Michael J. Walsh, New York City, for defendant and third-party plaintiff.
Hill, Bates & Nash by Arthur J. Blank, Peter J. McHugh, John F. Keating, New York City, for third-party defendant.
MEMORANDUM OPINION REGARDING CERTIFICATION
MOTLEY, District Judge.
Plaintiff has moved this court for certification of an interlocutory appeal pursuant to 28 U.S.C. § 1292(b). This court will not certify such an appeal for the reasons stated below.
BACKGROUND
Plaintiff Shipping Corporation of India (SCI), the purchaser of several vessels, brought tort claims together with contractual claims against American Bureau of Shipping, a classification company. This court granted defendant's motion for summary judgement as to the tort cause of action. This court found that SCI's negligence claims were not cognizable in maritime tort. See The Shipping Corporation of India v. The American Bureau of Shipping, 744 F.Supp. 447 (S.D.N.Y.1990). This decision was based upon Supreme Court precedent as well as precedent from the Fifth Circuit. East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986); Employers Insurance of Wausau v. Suwannee River Spa Lines, Inc., 866 F.2d 752 (5th Cir.1989).
Plaintiff now asks this court to certify for an interlocutory appeal the question of whether a tort claim in negligence exists for economic loss and damage to a vessel.
DISCUSSION
28 U.S.C. § 1292(b) provides a means of appealing orders which would not otherwise be appealable. The statute provides:
When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order.
Thus the statute provides for the above three-part test, each prong of which the moving-party must meet. Herold v. Braun, 671 F.Supp. 936, 937 (E.D.N.Y. 1987); State Teachers Retirement Board v. Fluor Corp., 84 F.R.D. 38, 39 (S.D.N.Y. 1979). See e.g. Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21 (2d Cir.1990). In addition "the power [to certify an interlocutory appeal] must be strictly limited to the precise conditions stated in the law," Gottesman v. General Motors Corp., 268 F.2d 194, 196 (2d Cir.1959) and "only `exceptional circumstances [will] justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment.'" Id. (citing Coopers & Lybrand v. Livesay, 437 U.S. 463, 475, 98 S.Ct. 2454, 2461, 57 L.Ed.2d 351 (1978). In this case, plaintiff does not meet any of the prongs of the three prong test.
First, the issue of whether plaintiff could bring a tort claim, in admiralty, for damage to property does not involve a *175 controlling question of law. A controlling question can be one that substantially affects a large number of cases. See e.g. Department of Economic Development v. Arthur Andersen & Co., 683 F.Supp. 1463, 1486-87 (S.D.N.Y.1988); Herold v. Braun, 671 F.Supp. 936, 938 (E.D.N.Y.1987); Abortion Rights Mobilization, Inc. v. Regan, 552 F.Supp. 364, 366 (S.D.N.Y.1982). A controlling question, however, can also be one which would terminate the action if the district court's order was reversed. Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21.
In this case, plaintiff has failed to persuade the court that this issue either will have precedential value for a large number of cases or that it is an issue that would terminate the litigation if reversed. On the issue of precedential value, plaintiff has made no showing that there are other cases in this Circuit involving the same issue. Rather, it appears to this court that the issue is somewhat unique. Plaintiff also has argued that the issue should be deemed controlling because they assert that it is one of first impression. The court rejects this contention because, as previously stated, both the Supreme Court and Fifth Circuit have clearly spoken on issues that were substantially similar.
Finally, even if the appeal was heard and this court's decision reversed, the case would not be terminated. In such a situation, all that would occur is an additional theory of liability would be added to the case. Unlike the recent case of Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21 (2d Cir.1990), the issue in question does not involve the possibility of a party being dismissed from the case and therefore terminating the litigation as to that party.
The second prong of the § 1292(b) test requires that there be a substantial ground for difference of opinion regarding the law. "The legislative history indicates that to satisfy this prerequisite there must be `substantial doubt' that the district court's order was correct." Moll v. US Life Title Insurance Company of New York, 1987 WL 10026 (S.D.N.Y.1987). Once again plaintiff has failed to persuade the court that such an issue exists in this case. Plaintiff has not advanced any new argument that this court had not previously examined while ruling on defendant's motion for summary judgment. Plaintiff has also failed to demonstrate that there is any conflicting legal authority which would persuade this court that there could be a substantial doubt on this issue of law. See Moll v. US Life Title Insurance Company of New York; von Bulow By Auersperg v. von Bulow, 634 F.Supp. 1284, 1312 (S.D.N. Y.1986).
Finally plaintiff has failed to meet the third prong of the test which requires a showing that certification will materially advance the ultimate termination of the litigation. After years of preparation, the parties are very close to having the issue of damages heard and determined by the special master appointed by the court upon the cojoined request of the parties. An interlocutory appeal would only serve to further delay the ultimate resolution of the damages issue and would be the epitome of a piecemeal appeal. Furthermore, since plaintiff's damage claims will be heard by the special master, the only issue that such an interlocutory appeal would involve is upon what theory of liability such damage is predicated.
The court finds that an interlocutory appeal, in this case, would not serve to avoid protracted or expensive litigation. In taking the above considerations into account, it becomes clear to this court that it would be inappropriate to add this case to the already heavy docket of the Court of Appeals. See, Herold v. Braun, 671 F.Supp. at 938; Abortion Rights Mobilization, 552 F.Supp. at 366; State Teachers Retirement Board, 84 F.R.D. at 38.
For the above stated reasons, plaintiff's motion for certification of an interlocutory appeal is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918981/ | 106 B.R. 722 (1989)
In re William Thomas EVANS, Debtor.
Allan W. WINDMILLER, Plaintiff,
v.
William Thomas EVANS, Defendant.
Bankruptcy No. 88-5819-9P7, Adv. No. 89-075.
United States Bankruptcy Court, M.D. Florida, Fort Myers Division.
October 6, 1989.
Daniel Medeiros, Clearwater, Fla., for plaintiff, Allan W. Windmiller.
Bill Berke, for defendant, William Thomas Evans.
FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
ALEXANDER L. PASKAY, Chief Judge.
THIS is a Chapter 7 case and the matter under consideration is a Complaint to determine dischargeability filed by Allen W. Windmiller (Plaintiff). The Plaintiff's six-count Complaint requests this Court to determine the dischargeability of a debt pursuant to § 523 of the Bankruptcy Code and seeks a denial of the Debtor's discharge *723 pursuant to § 727 of the Bankruptcy Code. The Plaintiff has elected not to present evidence in support of Counts I, IV, V and VI and, therefore, those counts should be dismissed with prejudice. The remaining counts seek denial of the Debtor's discharge pursuant to § 727(a)(4) and (5) of the Bankruptcy Code for knowingly and fraudulently making a false oath in connection with a bankruptcy case, and failure to explain satisfactorily loss of assets or deficiency of assets.
The facts relevant to a resolution of this controversy as established at the final evidentiary hearing are as follows:
The Debtor filed a Voluntary Petition for Relief in this Chapter 7 case on September 30, 1988. The Statement of Financial Affairs which was signed under penalty of perjury indicated that the Debtor resides in Fort Myers, Florida, and that during the six years immediately preceding the filing of the Petition, his only other residence was in Colorado. However, on direct examination at the final evidentiary hearing, the Debtor indicated that he had maintained a residence in Costa Rica as well during the relevant time period.
The Statement of Financial Affairs further indicates that the only partnership or business with another in which the Debtor had been involved during the six years immediately preceding the filing of his original Petition was the 24-hour Nautilus Swim and Fitness Center, Inc., a corporation which owned 25 health clubs. However, it appears that the Debtor also was involved in several partnerships, including the San Marcos Partnership, King's Plaza Partnership, Elizabeth Street Partnership, and Sunset Shopping Center Partnership during the six years immediately preceding the filing of the original Petition in bankruptcy. The Debtor further admitted that he had been the chairman of the Board of Directors, vice-president and stockholder of Pike's Peak Ski Corporation.
Based on the foregoing facts, it is the Plaintiff's contention that the Debtor is not entitled to a discharge pursuant to § 727(a)(4), having committed false oath in bankruptcy. Counsel for the Debtor argues that the Debtor disclosed his Costa Rica address at the § 341 meeting and, therefore, his failure to disclose the address on the Statement of Financial Affairs should be excused. The Debtor further states that the partnership interests were not listed on the Statement of Financial Affairs because there were not current debts sought to be discharged which were related to the several partnerships. In addition, counsel for the Debtor argues that in any event the partnership interests were listed on his tax returns which were furnished at the § 341 meeting to the Trustee.
Under § 727 of the Bankruptcy Code, the burden is on the objecting party to prove that the debtor should be denied his discharge by clear and convincing evidence. Bankruptcy Rule 4005; In re Bernstein, 78 B.R. 619 (Bankr.S.D.Fla.1987). Further, § 727 must be construed liberally in favor of the debtors and strictly against the creditor. In re Greenwalt, 48 B.R. 804 (Bankr. Colo.1985).
It is well established that the Debtor may not hide behind the "invisible cloak of disclosure" by alleging that, although the required information was not listed in the appropriate schedules, the assets were revealed to the Trustee at the § 341 meeting of creditors, therefore, the initial failure to fully furnish the information was harmless. This simply is not the test. Sound policy considerations mandate that the requirements to list all assets and liabilities is an absolute obligation of those seeking discharge of their debts through bankruptcy. Any other result would put the debtor in the position of determining which assets are worthy of disclosure and which are not. Creditors are entitled to judge for themselves what will be of benefit and what will prejudice them. The veracity of the debtor's statements is essential to the successful administration of the Bankruptcy Code. In re Watkins, 84 B.R. 246, 250 (Bankr.S.D.Fla.1988); Diorio v. KreislerBorg Construction Co., 407 F.2d 1330 (2nd Cir.1969); Chalik v. Moorefield (In re Chalik), 748 F.2d 616 (11th Cir.1984).
As this Court held in In re Cutignola, 87 B.R. 702, 706 (Bankr.M.D.Fla.1988), the *724 debtors may be denied a discharge where they knowingly and fraudulently made a false oath in or in connection with the bankruptcy case pursuant to § 727(a)(4)(A). The purpose of this section is to provide the trustee and creditors with reliable information. In re MacDonald, 50 B.R. 255 (Bankr.Mass.1985). However, the discharge may not be denied where the untruth was a result of mistake or of inadvertence. Rather, the false statement must be made intentionally or in a manner evidencing a reckless and cavalier disregard for the truth with regard to a matter material to the case. In re Ellingson, 63 B.R. 271 (Bankr.N.D.Iowa 1986). It is clear that material admissions or untruthful answers to any of the questions by the Debtor on the Statement of Financial Affairs signed under penalty of perjury may constitute a false oath. In re Bobroff, 58 B.R. 950 (Bankr.E.D.Pa.1986), aff'd, 69 B.R. 295 (1987).
The Debtor in this case was a branch manager of the Burroughs Corporation for over twenty years and holds college degrees in physics and mathematics. He is fully conversant in the English language and undoubtedly understood the content of the questions to be answered in the Statement of Financial Affairs under oath. When the Debtor signed the Statement of Financial Affairs, he certified that all answers to the questions set forth in the Statement were true. This Court is satisfied that the Debtor's omission of his Costa Rica residence and his involvement in the several business ventures constituted false oaths, and with a reckless disregard for the truth concerning matters material to this case. Based on the foregoing, this Court is satisfied that due to the Debtor's false oaths made in this case, the Plaintiff is entitled to a judgment denying the Debtor his discharge pursuant to § 727(a)(4)(A) and (a)(5) of the Bankruptcy Code.
This leaves for consideration the claim based on § 727(a)(5) of the Bankruptcy Code. In order to sustain a claim under this Section the Plaintiffs must establish with the requisite degree of proof (1) that the Debtor had assets of substantial value not too far removed in time from the date of filing the bankruptcy case (2) was no longer property of the Debtor at the time of filing the bankruptcy case, and (3) Debtor was called upon to explain its disposition and was unable to furnish a satisfactory explanation. Due to the failure by the Plaintiff to call upon the Debtor to explain the alleged loss of any such assets, the claim based on § 727(a)(5) should be dismissed.
A separate Final Judgment will be entered in accordance with the foregoing. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919005/ | 912 So.2d 649 (2005)
Benjamin PARTRIDGE, Appellant,
v.
Margaret PARTRIDGE, Appellee.
No. 4D04-912.
District Court of Appeal of Florida, Fourth District.
September 21, 2005.
Rehearing Denied October 24, 2005.
Wayne R. McDonough of Wayne R. McDonough, P.A., Vero Beach, for appellant.
William F. Gallese of William F. Gallese, P.A., Stuart, for appellee.
FARMER, J.
In this appeal, we face still another episode in this family's post-dissolution saga. See Partridge v. Partridge, 790 So.2d 1280 (Fla. 4th DCA 2001). The former husband once again argues that the trial court erred as a matter of law in entering a final judgment of foreclosure on an equitable lien on his property to satisfy his unpaid support obligation. We affirm.
In the prior episode, we recognized that "homestead [property] can be the subject of an equitable lien and foreclosure by forced sale in an appropriate case." Partridge, 790 So.2d at 1283. We concluded that summary judgment in favor of the former wife was improper because her affidavit lacked sufficient facts to demonstrate that he "acted either egregiously, reprehensibly, or fraudulently so as to justify a forced sale of the homestead." Id. at 1284.
After a trial on remand, the trial court made these factual findings: husband had the ability to make support payments; he intentionally and contumaciously declined to do so; he opened various bank accounts in different names; and he was found in contempt on three separate occasions for failure to pay his support obligation. They are supported by the record. His defense was that the trial court lacked authority to foreclose an equitable lien on former marital property distributed to him because the home had previously been designated as homestead during the marriage. The trial court found that permitting him to rely on a constitutional homestead defense would violate the purpose of the exemption, particularly when the wife was a former joint owner of the homestead property. The court concluded that his flagrantly contemptuous conduct justified the forced sale of his homestead property.
On appeal he once again argues that the trial court erred in concluding that his *650 conduct justified a forced sale, that the court lacked legal authority under the text of the constitutional homestead exemption, that there was no finding of fraud, and that the property was designated homestead before the divorce. Although we review the issue de novo, we stress that this Court previously rejected the very same arguments in the prior appeal. Partridge, 790 So.2d at 1283.
In Gepfrich v. Gepfrich, 582 So.2d 743 (Fla. 4th DCA 1991) (forced sale of homestead property permitted where the former husband attempted to use the homestead exemption as an instrument to defraud his former wife and to escape his debt to her), we held that homestead property can be the subject of an equitable lien where fraud or reprehensible conduct is demonstrated. We explained our rationale thus:
"As the supreme court stated in Anderson v. Anderson, 44 So.2d 652 (Fla.1950), `[t]he Courts have taken the view that inasmuch as the purpose of the exemption statute is to protect not only the husband but also his family from destitution and becoming a public charge, the exemption statute will not, unless the contrary intention is clearly shown, be construed to enable the husband to claim its benefits against the very persons to whom he owes the obligation of support and maintenance, and that to construe the statute otherwise would, at least in part, defeat its avowed object'."
Gepfrich, 582 So.2d at 744. If our holding was not evident in the husband's previous appeal, we now make clear that the trial court had the legal authority to foreclose the lien.
Although the trial court did not make a specific finding of fraud, it did find that he had acted contemptuously. Contemptuous conduct may certainly be the functional equivalent of fraud, and it represents the kind of reprehensible conduct justifying foreclosure. See Gepfrich, 582 So.2d at 745 (Farmer, J., specially concurring) ("appellant's defenses to the contempt charge. . . establish . . . the functional equivalent of fraud or reprehensible conduct sufficient for an equitable lien."). The fact that the marital property was designated as homestead before the divorce does not bar imposition of a lien on marital property distributed to one of the partners any more than the previous homestead character bars the distribution itself or partition and sale. The record supports a finding that his conduct justified the forced sale of his property.
Affirmed.
STONE, and MAY, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919006/ | 421 Pa. 161 (1966)
Wilk, Appellant,
v.
Ensign-Bickford Co.
Supreme Court of Pennsylvania.
Argued March 16, 1966.
April 19, 1966.
Before MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.
*162 Tom P. Monteverde, with him Schnader, Harrison, Segal & Lewis, for appellant.
Arthur R. Littleton, with him Morgan, Lewis & Bockius, for appellees.
OPINION BY MR. JUSTICE ROBERTS, April 19, 1966:
The issue presented on this appeal is whether Rule 1252 of the Pennsylvania Rules of Civil Procedure authorizes the issuance of a writ of foreign attachment in an action brought in trespass to recover for injuries sustained in Pennsylvania where the negligent acts or omissions upon which the suit is predicated occurred without the State.
Plaintiff [appellant] instituted wrongful death[1] and survival[2] actions against defendant foreign corporations. Recovery was sought for injuries sustained by reason of the death of plaintiff's decedent in an industrial accident in Pennsylvania alleged to have been caused by the negligence of defendants in the manufacture in Connecticut of a product used by the decedent in the course of his employment.
Suit was begun pursuant to Rule 1252 by the issuance of a writ of foreign attachment and the filing of *163 a complaint in trespass. Assets of defendants located in Pennsylvania were attached.
Defendants entered appearances to challenge the attachment[3] and filed preliminary objections seeking to have the action dismissed on the ground that foreign attachment did not lie under the facts of the case. The preliminary objections were sustained and an order entered dissolving the attachment. This appeal followed.
Rule 1252 of the Pa. R.C.P. provides: "A foreign attachment may be issued to attach property of a defendant not exempt from execution, upon any cause of action at law or in equity, other than an action ex delicto arising from acts committed outside the Commonwealth, in which the relief sought includes a judgment or decree for the payment of money when . . . (3) the defendant is a foreign corporation . . . ." (Emphasis supplied.)[4]
The court below concluded that Rule 1252 could not be employed in this context by reason of the exception therein respecting actions ex delicto "arising from acts committed outside the Commonwealth." Since the alleged negligent acts of defendants in the manufacture of the instrumentality took place in Connecticut, the court held that the instant attachment was precluded, irrespective of the fact that the accident and injury which gave rise to the cause of action occurred in Pennsylvania. In this the court erred and its order dissolving the attachment may not be permitted to stand.
Prior to the promulgation of Rule 1252, foreign attachment in this Commonwealth was governed entirely by statute. Initially no provision was made for the *164 commencement of suit by foreign attachment in actions of trespass and so the matter continued until 1905 when the Legislature extended foreign attachment to "actions ex delicto for a tort committed within this Commonwealth." Act of June 13, 1836, P.L. 568, § 44, as amended and extended by the Act of March 30, 1905, P.L. 76, § 1, 12 P.S. § 2891; see Alpers v. New Jersey Bell Telephone Co., 403 Pa. 626, 628-30, 170 A. 2d 360, 361-62 (1961). At the time this amendment was added, a tort was viewed as having been committed at the place where the last act or injury occurred and the cause of action accrued. Cf. Openbrier v. General Mills, 340 Pa. 167, 169, 16 A. 2d 379, 380 (1940); Mike v. Lian, 322 Pa. 353, 356, 185 Atl. 775, 777 (1936). Thus, as the law stood prior to Rule 1252, foreign attachment was authorized to issue in an action brought in trespass against a foreign corporation when the injury sought to be redressed occurred in Pennsylvania.
Rule 1252 initially provided: "A foreign attachment may be issued to attach property of a defendant not exempt from execution upon any cause of action at law or in equity in which the relief sought includes a judgment or decree for the payment of money . . . ." In Alpers v. New Jersey Bell Telephone Co., 403 Pa. 626, 170 A. 2d 360 (1961), it was urged that the failure to include the statutory phrase "actions ex delicto for a tort committed within the Commonwealth" in Rule 1252 operated to extend the scope of foreign attachment to cases involving torts committed outside the State. There foreign attachment was sought to be employed to institute an action of trespass arising out of a motor vehicle accident in New Jersey. The trial court granted defendant's motion to strike the complaint and for judgment of non pros. on the ground that foreign attachment did not lie for a tort committed outside of Pennsylvania.
*165 In affirming that action, this Court stated: "In view of the clear restriction of the writ of foreign attachment in actions ex delicto to torts committed within the Commonwealth . . . prior to the promulgation of Rule 1252, it was . . . not intended by this Court that Rule 1252 change or alter a rule of law . . . so firmly established . . . . The court below very properly held that a writ of foreign attachment in an action ex delicto will not lie for torts committed outside the Commonwealth's boundaries." Alpers v. New Jersey Bell Telephone Co., supra at 630, 170 A. 2d at 362. (Emphasis supplied.)
Following the decision in Alpers v. New Jersey Bell Telephone Co., supra, the language of Rule 1252 was amended to its present form. Defendants, however, urge that the amendatory language, by adopting the phrase "acts committed" rather than "torts committed" outside the Commonwealth, was intended to restrict the scope of foreign attachment from that existing prior to Rule 1252. We do not agree. No more was intended by the amendment of Rule 1252 than to bring the provision into conformity with our decision in Alpers v. New Jersey Bell Telephone Co., supra, see 2 Goodrich-Amram, Pa. Std. Practice, Rule 1252 (Commentary) (Supp. 1965), and with the prior statutory law.
In Vant v. Gish, 412 Pa. 359, 194 A. 2d 522 (1963), decided subsequent to the amendment of Rule 1252 upon which defendants rely, foreign attachment was sought to be employed to institute an action of trespass to recover for an injury alleged to have been sustained in California. In affirming the dissolution of the attachment by the trial court, this Court made no reference to the amendatory language as restricting the scope of foreign attachment from that existing under prior statutory law. To the contrary, the Court stated: "[B]y subsequent amendment of Rule 1252 . . . jurisdiction to issue writs of foreign attachment in tort *166 cases is strictly limited to torts committed within this Commonwealth." Id. at 366, 194 A. 2d at 526. (Emphasis supplied.)
Moreover, an examination of the opinion clearly reveals that the Court's determination that jurisdiction to issue the writ was lacking under the facts alleged was based on its conclusion that the injury for which redress was sought occurred in California.
Defendants urge that we require plaintiff to seek them out in Connecticut even though the injury for which redress is sought occurred in Pennsylvania. Were we to adopt the construction of Rule 1252 urged by defendants, a foreign corporation which is not amenable to in personam jurisdiction under the provisions of the Business Corporation Law, Act of May 5, 1933, P.L. 364, as amended, 15 P.S. § 2852-1011B, and which places a defective instrumentality into the stream of commerce causing an injury in Pennsylvania, would be insulated from answering in our courts even though assets were available for attachment here. We reject such a construction. Since 1911,[5] when the writ of foreign attachment was first authorized to issue in actions ex delicto involving foreign corporations, it has been the law of this Commonwealth that a foreign corporation with assets located in Pennsylvania not exempt from attachment may be compelled to appear and defend on the merits, or failing that, to make redress to the extent of those assets,[6] for torts committed in Pennsylvania. Rule 1252 was not intended to change or alter that law.
*167 Accordingly, the order of the court below sustaining defendants' preliminary objections is reversed with a procedendo.
Mr. Justice JONES and Mr. Justice EAGEN dissent.
NOTES
[1] Act of April 15, 1851, P.L. 669, § 19, 12 P.S. § 1601.
[2] Act of April 18, 1949, P.L. 512, § 601, 20 P.S. § 320.601.
[3] "The defense of immunity or exemption of property from attaching. . . may be raised by the defendant without thereby subjecting himself to the jurisdiction of the court (1) by preliminary objection under Rule 1017(b) (1) . . . ." Pa. R.C.P. 1271.
[4] Adopted April 12, 1954 to become effective October 1, 1954, as amended, July 21, 1961 to become effective October 1, 1961.
[5] Act of June 21, 1911, P.L. 1097, § 1, amending the Act of June 13, 1836, P.L. 568, as amended by the Act of March 30, 1905, P.L. 76, 12 P.S. § 2891.
[6] See 2 Goodrich-Amram, Pa. Std. Practice, Rule 1269 (Commentary) (1962). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919019/ | 106 B.R. 507 (1989)
In re PIONEER INVESTMENT SERVICES CO. a.k.a. Premiere Restaurant Investment Co., Debtor.
PIONEER INVESTMENT SERVICES CO., Plaintiff,
v.
VALLEY FIDELITY BANK & TRUST CO. and Cain Partnership, Ltd., Defendants.
Bankruptcy No. 3-89-01058, Adv. No. 3-89-0088.
United States Bankruptcy Court, E.D. Tennessee.
September 12, 1989.
Craig J. Donaldson, Knoxville, Tenn., for plaintiff.
James S. Tipton, Jr., Knoxville, Tenn., for Valley Fidelity Bank & Trust.
Larry E. Parrish, Memphis, Tenn., for Cain Partnership, Ltd.
MEMORANDUM AND ORDER
JOHN C. COOK, Bankruptcy Judge.
This case is presently before the court upon the motion of First National Bank of Louisville (herein "First National") to intervene in this adversary proceeding. The defendants, Valley Fidelity Bank (herein "Valley") and Cain Partnership, Ltd. (herein "Cain"), jointly oppose First National's motion. A hearing on First National's motion was held August 28, 1989. Having considered the bank's motion, the joint response thereto and the arguments presented at the hearing, and having reviewed the record in this case, the court now enters this memorandum and order. For purposes of ruling on the motion to intervene, the court will treat certain factual allegations *508 contained in the pleadings as being true.
I.
The debtor-in-possession in this case, Pioneer Investment Services Company (herein "plaintiff"), is the current holder of a leasehold interest in a tract of real estate of at least 86.54 acres located in Knoxville, Tennessee. On April 12, 1989, the plaintiff filed a petition under chapter 11. Since filing its chapter 11 petition, the plaintiff has continued to operate its business and manage its property as a debtor-in-possession pursuant to 11 U.S.C.A. § 1107.
Prior to filing its petition, and since that time, the plaintiff has sought to commercially develop the tract of land mentioned above. One such attempt by the plaintiff to develop its property is evidenced by an agreement between plaintiff and Marriott Corporation (herein "Marriott"). The plaintiff has agreed to sublease 5.15 acres of the property to Marriott for construction of two hotels.
Cain is a limited partnership which originally leased the real estate in question from Lillie Mae Cain on April 27, 1973. Cain then executed a lease of the property to Colonial Enterprises, Inc. (herein "Colonial"). After several assignments of the Colonial lease, the plaintiff acquired its interest in the real property. After the death of Lillie Mae Cain, Valley, as successor testamentary trustee, became fee-simple owner of the real property.
This proceeding arose as a result of the defendants' alleged refusal to issue certain certificates and agreements necessary to consummate plaintiff's dealings with Marriott.[1] Relying on the course of dealing between the parties, an estoppel theory, and an implied contract theory, the plaintiff contends the defendants are obligated to provide the necessary certificates and agreements.[2] Further, the plaintiff maintains that its ability to obtain these documents from defendants is crucial to its efforts to develop the real estate holdings and to successfully reorganize. The defendants deny the plaintiff is entitled to the relief requested. The case is scheduled for trial on October 26, 1989, as set forth in the pretrial order entered July 27, 1989.
On July 26, 1989, First National, through counsel, filed a motion to intervene in this proceeding. First National's motion alleges that it has an interest in this proceeding as a secured creditor under a deed of trust on a portion of the real property in controversy. First National's motion is not accompanied by a pleading setting forth a claim or defense for which intervention is sought.
The defendants have jointly responded in opposition to First National's motion to intervene. The defendants argue that First National's interest as a secured creditor is not impaired by this proceeding and, alternatively, that the interests of First National are similar to and adequately represented by an existing party (the plaintiff) in this proceeding.
At the hearing on First National's motion to intervene, evidence was offered to establish First National's status as a secured creditor in the subject property. No evidence was presented by any party to suggest the interests of First National and those of the plaintiff are different in this proceeding. Nor did any evidence suggest the interests of First National are not being adequately represented.
II.
First National's motion is brought pursuant to the provisions of 11 U.S.C. § 1109 and Bankr.Rule 7024. 11 U.S.C.A. § 1109(b) provides:
(b) A party in interest, including the debtor, the trustee, a creditors' committee, an equity security holders' committee, a creditor, an equity security holder, or any indenture trustee, may raise and *509 may appear and be heard on any issue in a case under this chapter.
11 U.S.C.A. § 1109 (West 1979). Although § 1109(b) permits a "party in interest" to appear and be heard in bankruptcy cases under chapter 11, this court does not construe § 1109(b) to confer an unconditional right on such parties to intervene in adversary proceedings merely related to a case under chapter 11. See Fuel Oil Supply & Terminaling v. Gulf Oil Corp., 762 F.2d 1283 (5th Cir.1985); Sarah R. Neuman Foundation v. Garrity (In re Neuman), 103 B.R. 491 (Bankr.S.D.N.Y.1989); First Wisconsin Nat'l Bank v. Terex Corp. (In re Terex Corp.), 53 B.R. 616 (Bankr.N.D. Ohio 1985); Rollert Co. v. Charter Crude Oil Co. (In re Charter Co.), 50 B.R. 57 (Bankr.W.D.Tex.1985). But see Official Unsecured Creditors' Committee v. Michaels (In re Marin Motor Oil), 689 F.2d 445 (3d Cir.1982). Parties seeking intervention in a related adversary proceeding must do so pursuant to Bankr.R. 7024, which incorporates by reference Rule 24 of the Federal Rules of Civil Procedure. Fuel Oil Supply & Terminaling, 762 F.2d at 1287; In re Neuman, 103 B.R. 491.
Rule 24 of the Federal Rules of Civil Procedure provides:
(a) Intervention of Right. Upon timely application anyone shall be permitted to intervene in an action: (1) when a statute of the United States confers an unconditional right to intervene; or (2) 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.
(b) Permissive Intervention. Upon timely application anyone may be permitted to intervene in an action: . . . (2) when an applicant's claim or defense and the main action have a question of law or fact in common. . . . In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.
(c) Procedure. A person desiring to intervene shall serve a motion to intervene upon the parties as provided in Rule 5. The motion shall state the grounds therefor and shall be accompanied by a pleading setting forth the claim or defense for which intervention is sought. . . .
Fed.R.Civ.P. 24.
Under Rule 24(a)(2),[3] the movant has to show the following: (1) the motion is timely; (2) the movant has an interest relating to property or the transaction in dispute; (3) impairment of the movant's interest resulting from the proceeding in which movant wishes to intervene; and (4) a lack of adequate representation by existing parties. Fed.R.Civ.P. 24(a)(2); see 3B J. Moore & J. Kennedy, Moore's Federal Practice ¶ 24.07[1], at 24-50 (2d ed. 1987); Key Bank v. IRS (In re Lake Placid Co.), 78 B.R. 131, 133 (W.D.Va.1987). Without addressing the first three requirements, this court's focus is on whether the interests of First National are inadequately represented by the existing parties.
The Court of Appeals for the Sixth Circuit places upon the the party seeking intervention the burden of showing that representation by existing parties is inadequate. Triax Co. v. TRW, Inc., 724 F.2d 1224, 1227 (6th Cir.1984) (citing Goldberg v. Fisher Foods, 717 F.2d 290, 293 (6th Cir. 1983)); Grubbs v. Norris, 870 F.2d 343, 347 (6th Cir.1989). Though the movant's burden has been characterized as minimal, Grubbs, 870 F.2d at 347 (citing Trobvich v. United Mine Workers, 404 U.S. 528, 92 S.Ct. 630, 30 L.Ed.2d 686 (1972)), First National has produced no proof of inadequate representation, and there is nothing in the record to suggest that First National's interests will not be adequately and completely represented by the plaintiff. First, *510 the movant has made no showing that any claim it might wish to assert is not now before the court.[4] Second, the plaintiff has a significant interest in vigorously pursuing this lawsuit so that the real estate in question may be commercially developed and a successful reorganization accomplished. Third, the plaintiff is represented by competent and experienced counsel in this proceeding. See, e.g., Heyman v. Exchange Nat'l Bank, 615 F.2d 1190, 1193-94 (7th Cir.1980); Key Bank v. IRS (In re Lake Placid Co.), 78 B.R. 131 (W.D.Va. 1987); Baker v. Krauss (In re Baker), 22 B.R. 791 (Bankr.D.Md.1982).
Accordingly, First National will not be permitted to intervene in this lawsuit under Rule 24(a)(2) since there has been no showing that its interests will not be adequately represented and it offers nothing in the way of additional claims or theories. If the court were to allow First National to intervene, the only likely addition to this proceeding would be duplication of effort, costs, and delays.
Rule 24(c) requires that a motion to intervene be accompanied by a pleading asserting claims or defenses for which intervention is sought. Fed.R.Civ.P. 24(c). First National's motion to intervene is procedurally deficient for lack of the required pleadings. See In re Baker, 22 B.R. at 792. The failure of First National to assert any pleading on its behalf lends support to this court's finding that no additional purpose is served by allowing First National to intervene at this time.[5] Accordingly, the motion of First National to intervene is denied.
IT IS SO ORDERED.
NOTES
[1] These include Recognition, Non-Disturbance, Attornment, and Estoppel agreements/certificates.
[2] Another issue raised in this lawsuit is whether plaintiff's lease is terminable by Cain because of plaintiff's failure to pay rent. That issue has been litigated in the bankruptcy case and is presently under advisement.
[3] Rule 24(a)(1) would not be applicable here since the court does not construe § 1109(b) as conferring upon First National an unconditional right to intervene in this adversary proceeding.
[4] Because First National is only a secured creditor holding a deed of trust on the property, it is doubtful that First National could have brought this lawsuit in its own right at this time.
[5] For the reasons set forth herein, the court also declines to allow permissive intervention under Rule 24(b). See In re Lake Placid Co., 78 B.R. at 134. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918964/ | 106 B.R. 707 (1987)
In re James Steven CLEVELAND, Debtor.
No. 86-07202.
United States Bankruptcy Court, N.D. Florida, Tallahassee Division.
March 27, 1987.
*708 C. Edwin Rude, Jr., Tallahassee, Fla., for debtors.
Robert E. Gibson, Tallahassee, Fla., for trustee.
ORDER ON OBJECTION TO CLAIM AND MOTION TO COMPEL TURN OVER OF PROPERTY
LEWIS M. KILLIAN, Jr., Bankruptcy Judge.
THIS MATTER came on for hearing upon the trustee's objection to claim and motion seeking to compel General Motors Acceptance Corporation (GMAC) to turn over to the trustee title to a 1986 Nissan. The matter having been submitted to the Court on the basis of a Partial Stipulation of Facts and the deposition of Mrs. Joyce Hilton, and the Court having heard argument of counsel and being otherwise advised in the premises, finds that the trustee's objection and motion should be denied.
The facts as shown in the record reflect that within the ninety (90) day preference period under Section 547 of the Bankruptcy Code, the debtor purchased the Nissan from Courtesy Corporation, Inc. Tallahassee, Florida, giving GMAC a purchase money security interest therein. Within ten (10) days of the September 15, 1986, sale of the vehicle and creation of the security interest, and in accordance with routine procedures followed by the Leon County Tax Collector's office and by Courtesy Corporation, Inc., the application for certificate of title and vehicle registration for the Nissan purchased by the debtor and containing the notice of the lien of GMAC was delivered, together with other title applications, to the office of the Leon County Tax Collector. The application was submitted without the required application fees.
Upon receipt of the application on September 22, 1986, the Leon County Tax office prepared and maintained a log form reflecting the date of receipt of the title application, and began processing that application to the extent of computing the applicable titling fees for that particular vehicle together with all other vehicles submitted at the same time by the dealer. Thereafter, upon completion of that processing on September 29, 1986, the Leon County Tax office called Courtesy Corporation, Inc. to advise it of the total fees required for all transactions submitted at one time, and to request a check to cover those fees. This step in the processing occurred more than ten (10) days after the creation of the security interest; completion of the processing of the title application and recordation of that information in the central office of the Department of Highway Safety and Motor Vehicles did not occur until after receipt of the fees.
Courtesy Corporation, Inc. delivered its check to the Tax Collector's office on September 29, 1986, and the title information was recorded in the computers of the Department of Highway Safety and Motor Vehicles on October 1, 1986. Title information may be submitted to a fast title section of the Department of Highway Safety and Motor Vehicles and, for a higher fee, receive 72-hour service.
After resolving other defenses raised by GMAC to the trustee's motion, the sole issue remaining for determination by the Court in this proceeding is whether or not, pursuant to Section 319.27(3), Florida Statutes, and under the procedures followed by the Leon County Tax Collector's office, the lien of GMAC was perfected at the time the application for certificate of title reflecting the lien information thereon was received by the Leon County Tax Collector's office, or alternatively, perfected only upon receipt of the applicable fees. If the security interest was not perfected until the applicable fees were received and processing thereof completed, then the transfer of the security interest by the debtor to GMAC *709 within ninety (90) days of the petition for relief would constitute a preferential transfer not subject to the exception of § 547(c)(3). The security interest would thus be avoidable under Section 547 of the Bankruptcy Code.
The express language of Section 319.27(3), Florida Statutes, provides that a security interest in a motor vehicle is perfected upon the filing of the notice of lien, and that the date of filing of the notice of lien is the date of its receipt by one of the offices designated for receiving such notices. The Leon County Tax Collector's office is one of the designated locations. That section does not specify that the applicable filing fees have to be tendered at the time of receipt of the notice of lien. Furthermore, F.S. § 319.32 setting forth the requisite fees to be charged for title processing and recordation does not specify that said fee shall be collected at the time of receipt of the notice of lien. The procedure followed by the Leon County Tax Collector's office and by Courtesy Corporation, Inc. appears to be one which has been established for the convenience of automobile dealerships and the Tax Collector's office. It is a procedure that is followed with many of the dealerships served by the Leon County Tax Collector's office and is a long standing practice. After receipt of the title applications with notice of lien thereon at the Tax Collector's office, processing of the application is begun by that office. This ultimately results in the information contained on the application being submitted to the central office of the Department of Highway Safety and Motor Vehicles, thus completing the process of recording the motor vehicle liens. Since the Tax Collector's office at the time of receiving the title applications affirmatively documents the date and time of receipt thereof and thereafter takes some steps Court that for the purposes of perfection of liens, the date of receipt is the first date on which the Tax Collector's office indicates it has received the title application with notice of lien, notwithstanding that the fees may be paid on a subsequent date after the amount of such fees have been calculated by the Tax Collector's office and the dealership notified of the amount thereof. Accordingly, it is hereby
ORDERED AND ADJUDGED that the trustee's Objection to Claim and Motion to Compel GMAC to Turn Over Property free of liens be, and it hereby is, denied.
DONE AND ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1588879/ | 61 S.W.3d 885 (2001)
76 Ark.App. 121
Carl RUDD
v.
STATE of Arkansas.
No. CA CR 01-431.
Court of Appeals of Arkansas, Division III.
December 5, 2001.
*887 Law offices of Charles Karr, P.A., by: Shane Roughley, Fort Smith, for appellant.
Mark Pryor, Att'y Gen., by: Valerie L. Kelly, Ass't Att'y Gen., Little Rock, for appellee.
JOHN B. ROBBINS, Judge.
Appellant Carl Rudd appeals the revocation of his suspended sentence by the Crawford County Circuit Court, for which he was sentenced to ten years in the Arkansas Department of Correction. Appellant argues on appeal that (1) the circuit court lacked subject-matter jurisdiction to revoke his suspended sentence due to the improper passage of a constitutional amendment, and (2) there was insufficient evidence upon which to support revocation. We disagree and affirm.
Rudd pleaded nolo contendere to conspiracy to deliver methamphetamine and agreed to ten years of suspended imposition of sentence with one year of supervised probation and payment of a $20 monthly probation fee. As part of his agreed conditions, Rudd was required to attend drug counseling that would be monitored by the adult probation office by weekly reports to his probation officer, his driver's license was suspended for six months, and he was also subject to the condition of not violating any law punishable by imprisonment. The judgment and commitment order was filed of record on September 22, 2000. On January 5, 2001, the State petitioned to revoke Rudd's suspended sentence, alleging that Rudd had failed to report to the adult probation office as required, had failed to pay his probation fees, and had committed a new offense, terroristic threatening, on or about November 21, 2000. After a hearing, the trial court found that appellant failed to comply with the orders, specifically regarding drug rehabilitation, performing community service, and violating the law by forcibly taking money from the victim who was allegedly the subject of terroristic threatening.
We consider sufficiency of the evidence before addressing other alleged trial errors. Williams v. State, 338 Ark. 97, 106, 991 S.W.2d 565 (1999). We do so in order to preserve a defendant's right to freedom from double jeopardy. Rankin v. State, 329 Ark. 379, 948 S.W.2d 397 (1997); Williams v. State, 329 Ark. 8, 946 S.W.2d 678 (1997). See also Burris v. State, 330 Ark. 66, 70, 954 S.W.2d 209 (1997).
We address the sufficiency of the evidence in support of the State's petition for revocation, contrary to the State's assertion that this issue is not preserved for appellate review. The State argues that because Rudd failed to move for directed verdict in compliance with Ark. R.Crim. P. 33.1, we cannot do so. We disagree. Our supreme court recently decided in Barbee v. State, 346 Ark. 185, 56 S.W.3d 370 *888 (2001), that a defendant in a revocation proceeding is not required to comply with Ark. R.Crim. P. 33.1 regarding motions for directed verdict in order to preserve the issue of the sufficiency of the evidence for review, overruling Miner v. State, 342 Ark. 283, 28 S.W.3d 280 (2000), which had held otherwise.
To revoke probation or a suspension, the trial court must find by a preponderance of the evidence that the defendant inexcusably violated a condition of that probation or suspension. Ark.Code Ann. § 5-4-309 (Repl.1997); Brandon v. State, 300 Ark. 32, 776 S.W.2d 345 (1989). Of course, the State bears the burden of proof. Petty v. State, 31 Ark.App. 119, 788 S.W.2d 744 (1990). In order for appellant's suspended sentence to be revoked, the State need only prove that the appellant committed one violation of the conditions. Ross v. State, 22 Ark.App. 232, 738 S.W.2d 112 (1987). When appealing a revocation, the appellant has the burden of showing that the trial court's findings are clearly against the preponderance of the evidence. Ark.Code Ann. § 5-4-309(d) (Repl.1997); Tipton v. State, 47 Ark.App. 187, 887 S.W.2d 540 (1994); Russell v. State, 25 Ark.App. 181, 753 S.W.2d 298 (1988).
With these enunciated rules to guide our review, we examine the evidence presented against appellant Rudd at the revocation hearing. Appellant's probation officer, Jeffrey David Landers, testified that appellant was supposed to report to him on a weekly basis but that appellant reported only twice between pronouncement of his sentence to probation, September 11, 2000, and the date of the revocation hearing, January 22, 2001. Mr. Landers further testified the appellant had failed to pay his probation fees as ordered.
The alleged victim of the terroristic threat testified that appellant forcibly took $60 from her and asked her what she was going to do about it. A few days later, the victim saw appellant again and the two got into an argument, yelling at one another over the money, and appellant threatened to kill her.
Appellant testified in his own defense. Appellant did not contest that he had failed to report to his probation officer as required or that he had failed to pay his probation fees; he admitted as much. Appellant contested that he committed terroristic threatening. When appellant testified, he stated that he did take the victim's $60 and spent it under the pretext that he was going to buy her marijuana with it. Appellant stated that they saw each other again about five days later and argued about the money but that he had not ever threatened to kill her. The trial court announced that it was revoking appellant's probation at the conclusion of the hearing.
Appellant bases his argument on the sufficiency of the evidence as to the proof that he committed terroristic threatening. However, the State need prove only one violation of a condition of probation, which it accomplished and which was not contested but admitted. See Ramsey v. State, 60 Ark.App. 206, 209, 959 S.W.2d 765, 767 (1998). There was sufficient evidence upon which to revoke appellant's probation.
Appellant's alternative argument on appeal is that the trial court lacked jurisdiction[1] to enter a sentence on his *889 plea of nolo contendere to conspiracy to deliver methamphetamine, the underlying offense for his suspended sentence and probation that was later revoked. Appellant bases this argument on his assertion that Amendment 21 to the Arkansas Constitution was not adopted in compliance with constitutional requirements, and thus the trial court lacked the jurisdiction to prosecute him, as a defendant, upon an information filed by the prosecuting attorney, but could have only proceeded by a grand-jury indictment. Thus, appellant argues, because he was charged by information, an invalid means to be charged, the trial court lacked jurisdiction to convict him on his nolo contendere plea and, therefore, lacked jurisdiction to revoke any probation based upon that conviction.
The State counters by pointing out that if appellant's argument is that Amendment 21 is unconstitutional, then his argument is barred for failure to raise it to the trial court. With this, we agree. See, e.g., Woods v. State, 342 Ark. 89, 27 S.W.3d 367 (2000); Nance v. State, 339 Ark. 192, 4 S.W.3d 501 (1999); Tabor v. State, 333 Ark. 429, 971 S.W.2d 227 (1998); Claiborne v. State, 319 Ark. 537, 893 S.W.2d 324 (1995). Even constitutional arguments are waived when they are not argued below. Jordan v. State, 327 Ark. 117, 939 S.W.2d 255 (1997).
While it is true, as a general proposition, that the issue of subject-matter jurisdiction may be raised at any time, even for the first time on appeal, see Pike v. State, 344 Ark. 478, 40 S.W.3d 795 (2001), and Lambert v. State, 286 Ark. 408, 692 S.W.2d 238 (1985), appellant's contention that the trial court lacked jurisdiction is premised entirely upon the unconstitutionality of Amendment 21. However, Amendment 21 has never been adjudged to be constitutionally deficient and, for the reasons stated above, appellant may not now raise the issue of its constitutionality. Consequently, appellant has no basis for challenging on appeal the jurisdiction of the trial court in the proceedings below.
Moreover, even if the validity of Amendment 21 were properly before us, appellant is incorrect in his argument that it was not validly adopted. Section 22 of Article 19 of the Arkansas Constitution provides the manner in which proposals to amend the Constitution may be submitted to the people by the General Assembly. It reads as follows:
Sec. 22. Either branch of the General Assembly at a regular session thereof may propose amendments to this Constitution, and, if the same be agreed to by a majority of all members elected to each house, such proposed amendments shall be entered on the journals with the yeas and nays, and published in at least one newspaper in each county, where a newspaper is published, for six months immediately preceding the next general election for Senators and Representatives, at which time the same shall be submitted to the electors of the State for approval or rejection; and if a majority of the electors voting at such election adopt such amendments the same shall become a part of this Constitution; but no more than three amendments shall be proposed or submitted at the same time. They shall be so submitted as to enable the electors to vote on each amendment separately.
*890 See also McCuen v. Harris, 321 Ark. 458, 902 S.W.2d 793 (1995). It is compliance with Article 19, § 22, in the adoption of Amendment 21 that appellant questions. His specific contention is that the General Assembly did not agree to the proposed amendment until after the regular session had ended. In our review, we must necessarily have in mind the universal rule that, whenever a constitutional amendment is attacked as not constitutionally adopted, the question presented is not whether it is possible to condemn, but whether it is possible to uphold; every reasonable presumption, both of law and fact, is to be indulged in favor of the legality of the amendment, which will not be overthrown, unless illegality appears beyond a reasonable doubt. Chaney v. Bryant, 259 Ark. 294, 532 S.W.2d 741(1976).
Amendment 21 was proposed in the 1935 session of the General Assembly, which ran from January 14, 1935 through March 14, 1935, as noted in the 1935 edition of the Journal of the House of Representatives. We are permitted to take judicial notice of such Journals. See McAdams v. Henley, 169 Ark. 97, 273 S.W. 355 (1925). Amendment 21 was first designated House Joint Resolution Number 18, which was approved by the Arkansas House of Representatives on March 4, 1935, and the Arkansas Senate on March 13, 1935, as reflected in the Journal on page 1272. It is reflected again that both houses of the General Assembly passed this Joint Resolution in another entry in the Journal also dated March 13, 1935. See id. These were accomplished within the session dates and follow the dictates of Article 19, § 22.
Appellant asserts that the adoption of this constitutional amendment did not occur until March 20, 1935, outside the session dates, rendering it void. See id. at 995. We disagree because March 20 was the date that House Joint Resolution Number 18 was reported correctly enrolled and was delivered to the governor. See id. at 1440 and 1456. The governor's approval is not necessary for a constitutional amendment to be submitted to the citizenry for approval. See Coulter v. Dodge, 197 Ark. 812, 125 S.W.2d 115 (1939). Because this amendment was approved by the General Assembly within the regular session, and later by vote of the people of this state, the State was not limited to prosecuting appellant only by means of a grand jury indictment.
Affirmed.
NEAL and CRABTREE, JJ., agree.
NOTES
[1] Although appellant characterizes the trial court proceeding in his original prosecution, which was commenced by the prosecutor's information, as one without jurisdiction, he does not contend that the Crawford County Circuit Court lacked jurisdiction over criminal prosecutions. Because of our disposition of this case, it makes no difference whether the issue should more accurately be characterized as an improper exercise of jurisdiction rather than a lack of jurisdiction, so we also will refer to the issue as one pertaining to a lack of jurisdiction. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1589685/ | 972 So.2d 1156 (2008)
STATE ex rel. Andrea HALL
v.
STATE of Louisiana.
No. 2007-KH-0753.
Supreme Court of Louisiana.
January 11, 2008.
Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919031/ | 106 B.R. 666 (1989)
In re COLUMBIA RIVER BROADCASTING, INC., Debtor.
JOHN B. FRANZWA, INC., Trustee, Plaintiff,
v.
COMMUNITY GRESHAM BROADCASTING CORPORATION, an Oregon corporation; George O. DeWitz, an individual; Financial Factoring Corporation, an Oregon corporation; John E. Grant, an individual; GTE Leasing *667 Corporation; Key Bank of Oregon, an Oregon banking corporation; Multnomah County, Oregon; and Tualatin Valley Bank, an Oregon banking corporation, Defendants.
Bankruptcy No. 387-05943-S7, Adv. No. 88-0520-S.
United States Bankruptcy Court, D. Oregon.
September 6, 1989.
David A. Foraker, Portland, Or., Trustee.
Paul G. Mackey, Portland, Or., for Multnomah County.
MEMORANDUM GRANTING SUMMARY JUDGMENT TO PLAINTIFF
DONAL D. SULLIVAN, Bankruptcy Judge.
The parties filed cross-motions for summary judgment on the issue of the validity of Multnomah County's assessment of post-filing taxes on personal property of the estate. The litigants settled the issue of the validity of the County's assessment of pre-petition taxes and the appropriate valuation of the property. Summary judgment should be granted to the trustee. My reasons, which are based primarily upon the application of Oregon law, follow.
The remaining issue was considered in the light of California State Board of Equalization v. Sierra Summit, Inc., ___ U.S. ___, 109 S.Ct. 2228, 104 L.Ed.2d 910 (1989). In Sierra Summit, the Supreme Court held that the State of California may constitutionally impose a non-discriminatory sales tax on a chapter 7 liquidation of a debtor's inventory. In so deciding, they reversed the Ninth Circuit's interpretation of 28 U.S.C. § 960. The Ninth Circuit had construed Section 960 to prohibit taxes on the activities of a non-operating trustee.
Oregon, probably as a result of its historical antipathy to a sales tax, does not tax ". . . personal property owned by or in possession of the taxpayer, that are or will become part of the stock in trade of the taxpayer held for sale in the ordinary course of business." O.R.S. 307.400(3)(f). The Oregon Supreme Court has held that allowance of the inventory exemption for casual or sideline sales of equipment under this statute depends upon whether the taxpayer has "consistently and systematically undertaken to acquire and sell" the personal property for which the exemption is claimed. Simpson v. Depart. of Rev., 299 Or. 282, 702 P.2d 399, 402 (1985).
Classification of property as tax-exempt inventory may result from the taxpayer's conversion of its equipment into inventory held for resale before the July 1 assessment anniversary. O.R.S. 311.410(3). The Oregon Attorney General advised the legislature that such a conversion would occur *668 if a construction contractor "should discontinue the construction business and go into the business of selling used construction equipment using his own equipment as the nucleus of his inventory." 1984 Op. Att'y. Gen. # 5775 (Miller, 12-13-84). Similarly, local taxing authorities historically treated property owned by a liquidator as untaxable inventory "so long as that property is held for sale and does not become property used by the liquidator for the production of income." See, Christian affidavit filed by Multnomah County.
Inventory is property held for sale. The test is not who produced the property but for what purpose the property is held. Grant Oil Tool Company v. United States, 180 Ct.Cl. 620, 381 F.2d 389, 397-398 (1967); Hollywood Baseball Association v. C.I.R., 423 F.2d 494, 502 (9th Cir.1970); Drybrough v. C.I.R., 384 F.2d 715 (6th Cir.1967). Although this test was developed for the purpose of distinguishing a capital asset from inventory, it is a logical application of Simpson and is consistent with the Attorney General's pre-litigation interpretation of the statute in Opinion 5775. Property in a chapter 7 estate meets this test.
The filing of a voluntary chapter 7 bankruptcy imposes a drastic transformation on the debtor. The Code immediately transfers ownership of the debtor's property to a new entity under 11 U.S.C. § 541(a). The new entity is the bankruptcy estate. Unless an operating order under 11 U.S.C. § 721 interrupts the process, the debtor must stop operating the business and physically surrender all of the non-exempt property to the trustee under 11 U.S.C. §§ 521(4) and 542(a). The trustee, without an operating order, may not operate the debtor's business but must "collect and reduce to money the property of the estate" and close the estate "as expeditiously as is compatible with the best interests of parties in interest". 11 U.S.C. § 704(1). Absent an operating order, the only business of the estate is sales. The stock in trade of the estate is all of the debtor's non-exempt property. That stock in trade is held for sale in the ordinary course of business within O.R.S. 307.400(3)(f). The non-operating trustee does not normally hold the property for the production of income in other respects.
If "regularly," as opposed to "sporadically," or "ordinary," as opposed to "extraordinary," must characterize the sales to qualify as exempt inventory, the estate meets these tests. Under Simpson, the individual taxpayer's purpose in holding and selling personal property governs application of the tests. A non-operating chapter 7 estate, which is the taxpayer, has liquidation by sale as its only purpose in holding the property. Given the single purpose existence of a non-operating estate, sales are necessarily regular and ordinary and non-sporadic for the entity involved.
The County's argument in support of a contrary result is that "business" referred to in O.R.S. 307.400(3)(f) describes the debtor's, rather than the trustee's, business and thereby confers the debtor's tax character upon the estate. While not without difficulty, the argument must be rejected for three reasons.
The first reason is that the County's argument fails to take into account what the estate actually does. The non-operating chapter 7 estate is simply not in the business of the debtor and normally cannot do what the debtor did. Like a corporate entity, the estate must be characterized by the activities mandated by law on the person who is in control, which is the trustee. A non-operating trustee cannot continue the debtor's business but must conduct a liquidation business. O.R.S. 307.400(3)(f) cannot ignore this without erecting a special rule for bankruptcy.
The second reason for rejecting the County's argument is that federal law, for purposes of the allowance of administrative taxes, as here, treats the estate as a separate taxable entity. 11 U.S.C. § 503(b)(1)(B)(i). Again, state law may not ignore this. The new entity does not retain the same tax characteristics as the debtor unless one were to block out the transformation from operation to liquidation imposed by federal law. The exceptions to this transformation also support the general *669 rule which treats the chapter 7 estate as being in the liquidation business. One exception governs corporate income taxes under 11 U.S.C. §§ 346(c)(1) and 728, and the other exception governs the post-filing assessment of pre-petition priority taxes under 11 U.S.C. § 502(i).
A third reason to reject the County's interpretation is the possible discriminatory effect. If the County were to ignore the federally imposed transformation of a taxpayer's estate into a liquidation business, then a private liquidation business, as described in the Christian affidavit, would receive more favorable treatment under local tax law than a bankruptcy liquidation business. At the least, this strongly suggests discrimination within the prohibition noted in Sierra Summit. The Attorney General's latest opinion dealing with bankruptcy by not mentioning private liquidators dealt with in the earlier opinion seems to impermissibly suggest a less favorable rule for bankruptcy liquidation than for a private liquidation business.
The trustee in an operating chapter 7 case or the debtor-in-possession in a chapter 11 case does normally adopt the character of the debtor's business when he operates that business. As a consequence, he must pay taxes under 28 U.S.C. § 960 and 11 U.S.C. § 502(b)(1)(B)(i) on equipment and other personal property the same as the debtor. Application of the Simpson rules to the facts requires this result without the need under Oregon law of the statutory artifice suggested for liquidation cases. The County's argument that 11 U.S.C. § 363(b)(1) suggests that liquidation sales are not in the ordinary course of business because an order is unnecessary where the trustee operates the debtor's business, takes this subsection out of context. It is flawed by Sierra Summit's rejection of the Ninth Circuit's reasoning that because 28 U.S.C. § 960 authorizes taxation under one circumstance, it prohibits taxation under other circumstances. Congress's failure to characterize the business of a nonoperating trustee in 11 U.S.C. § 363(b)(1) does not mean that Congress intended that the estate, regardless of the facts, have no business for property tax purposes or that the estate must adopt the debtor's business.
For the foregoing reasons, a separate judgment should be entered setting aside the assessment and the liens claimed by the County for personal property taxes assessed after the filing of the petition for relief under Title 11, United States Code. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919083/ | 90 N.J. Super. 505 (1966)
218 A.2d 408
ROGER H. McGLYNN, RECEIVER OF NEPTUNE CENTER ASSOCIATES, PLAINTIFF,
v.
MORTIMER L. SCHULTZ, RICHARD W. SIEBERT, DAVID H. JACKSON, GERALD I. LEBAU, JACK E. PORTIS, ALEXANDER C. GREYSON, THOMAS H. VAUGHN, OTTO RUBENS, NORMAN R. BERSON, RAYMOND F. WHITE, AND SHERMAN I. HIRSCHFELD, DEFENDANTS.
Superior Court of New Jersey, Chancery Division.
Decided March 21, 1966.
*507 Mr. Albert G. Besser for plaintiff (Messrs. Hannoch, Weisman, Myers, Stern & Besser, attorneys).
Mr. Mortimer L. Schultz, pro se.
Mr. Louis Kraemer for defendants Richard W. Siebert, David H. Jackson, Gerald I. Lebau, Jack E. Portis, Alexander *508 C. Greyson, Thomas H. Vaughn and Sherman I. Hirschfeld.
Mr. George S. Hochberg for defendants Norman R. Berson and Raymond F. White (Messrs. Waldor, Beckerman, Hochberg & Franzblau, attorneys).
MINTZ, J.S.C.
Plaintiff, receiver of Neptune Center Associates (N.C.A.), a limited partnership of New Jersey, seeks damages from the defendants for their alleged active participation or negligent acquiescence in the diversion by Office Buildings of America, Inc. (O.B.A.) of $414,900 asserted to be trust funds belonging to the partnership. These funds consist of the moneys originally invested in the partnership by the partners for the specific purpose of acquiring title to premises known as Neptune City Shopping Center.
At all times hereinafter mentioned the following defendants were either officers and/or directors of O.B.A.:
Mortimer L. Schultz President, chairman of the board, director, member of the executive committee.
Richard W. Siebert Vice-president, director, member of the executive committee.
David H. Jackson Director, member of the executive committee.
Gerald I. Lebau Director, member of the executive committee.
Jack E. Portis Second vice president, director.
Alexander C. Greyson Director, member of the executive committee.
Thomas H. Vaughn Director.
Otto Rubens Director.
Norman R. Berson Director, member of the executive committee.
Raymond F. White Secretary.
Sherman I. Hirschfeld Comptroller, treasurer, director.
*509 Additionally, defendants Berson, Hirschfeld and White were president, treasurer and secretary, respectively, as well as directors of First Jersey Securities Corp. (First Jersey), a wholly owned subsidiary of O.B.A. Defendants Schultz, Siebert, Hirschfeld, Berson and White were part of the management team for O.B.A. and devoted their full time and efforts to the affairs of O.B.A. and First Jersey. The remaining defendants have outside interests and became board members of O.B.A. as a result of having invested in one or more of the O.B.A. syndicates, or through the purchase of O.B.A. stock. Defendant Schultz was the dominant personality in the conduct of the affairs of O.B.A. and First Jersey.
During trial, dismissals were entered as to defendants White and Portis. White was Schultz's personal secretary as well as secretary to O.B.A. He exercised no management functions, had no authority, and at all times was responsible to and followed the directions of defendant Schultz. Portis lives in Chicago and was not present at any of the important directors' meetings to be noted later. He did not exercise any of the functions normally reserved to directors nor was he in a position to know the details of the corporation's business. Cf. Ark-Tenn Distributing Corp. v. Breidt, 209 F.2d 359 (3 Cir. 1954). Prior to trial the attorney for the plaintiff-receiver accepted a settlement with Rubens for $500 on the grounds that Rubens as a director had done all that he could to see to it that the fund in question was preserved for the partnership, and a dismissal was entered. This amount was required to absorb the expenses to be incurred in connection with effecting the dismissal as against said defendant.
N.C.A. was organized by agreement dated March 20, 1963 and acknowledged on May 14, 1963 by defendant Schultz as general partner and defendants Berson and Siebert as original limited partners, and filed on May 21, 1963. O.B.A. was a New Jersey corporation engaged in the real estate syndication business. First Jersey was an underwriter for real estate syndications and was a wholly owned subsidiary of O.B.A. *510 O.B.A. would acquire an income-producing property which it would in turn convey, or assign its contract to purchase, at a profit to a limited partnership. O.B.A. would then take back a net lease from the partnership, the rental usually calculated to return 9% or 10% of the partner's investment. The N.C.A. arrangement was typical.
At the regular meeting of the O.B.A. executive committee on February 27, 1963, attended by Schultz, Lebau, Jackson, Siebert and Berson, as its members, Hirschfeld by invitation, and White as secretary, Siebert reported that negotiations were being conducted for the purchase of the Neptune City Shopping Center. The owners were asking $400,000 in cash over mortgages of approximately $1,850,000. It was unanimously agreed that the company look favorably toward the acquisition of this property.
The annual meeting of the board of directors was held on March 11, 1963. Schultz, Lebau, Vaughn, Greyson, Hirschfeld, Siebert and Rubens attended in their capacity as directors. White was present as secretary. The minutes of that meeting indicate that Siebert reported that the company had definitely decided to purchase the shopping center and would enter into a contract before the end of the week. They further indicate that the contract terms were explained and the attending members of the board were told that the property was to be syndicated for about $720,000. At this time the board approved the terms of the contract.
On March 19, 1963 O.B.A. executed two contracts to purchase the Neptune City Shopping Center. Two contracts were needed because the property was composed of two distinct parcels, each owned by separate entities. Altogether, $400,000 in cash was involved, the bulk of the purchase price being the assumption of existing mortgages. The contracts provided for September 25, 1963 as the closing date. A $100,000 deposit was paid by O.B.A. out of its general funds upon execution of the contract. This money had been borrowed by it from third persons for this specific purpose.
*511 N.C.A. was organized under O.B.A. auspices for the express purpose of acquiring title to the shopping center. First Jersey prepared an offering of limited partnership units for sale to the public. Capitalization was to be in the sum of $720,000, the amount O.B.A. desired for the assignment of its interest in the shopping center over and above the assumption of all existing and new mortgages by N.C.A. Thus, the gross profit to O.B.A. in this transaction was to approximate $320,000. Immediately after the execution of the contracts to acquire the properties a prospectus was prepared and circularized among all O.B.A. shareholders and investors in earlier syndications.
Using this prospectus as part of its sales technique First Jersey sold limited partnership shares in N.C.A. to the general public. From March 29, 1963 through May 29, 1963 First Jersey collected from the limited partners $414,900, which was deposited in its own account and later remitted to O.B.A. at the direction of defendant Schultz. This fund was deposited in the general O.B.A. bank account and was used to meet other O.B.A. obligations as they accrued. The N.C.A. limited partnership agreement expressly provided for a separate bank account. Paragraph 15 states:
"All funds of the Partnership are to be deposited in the Partnership name, in such bank account or accounts as shall be designated by the General Partner. Withdrawals from any such bank account or accounts shall be made upon such signing or signatures as the General Partner may designate."
However, no such individual bank account was opened for N.C.A. At this juncture all that existed was a contract between O.B.A. and the sellers of Neptune City Shopping Center, with a closing date set for September 25, 1963. O.B.A. did not assign this purchase contract to N.C.A., nor did it contract in writing to turn the property over to N.C.A. upon closing with the sellers. No arrangement was made to protect the interests of the N.C.A. partners. The best that can be said is that the directors of O.B.A. orally *512 agreed that title was to be transferred to N.C.A. Significantly, the investors in N.C.A. were not apprised respecting the "informality" of these arrangements.
Before title to the shopping center could be closed, O.B.A. on June 25, 1963 petitioned for an arrangement under Chapter XI of the Bankruptcy Act, and on August 26, 1963 was declared bankrupt. During March, April and May 1963 over $1,200,000 passed through O.B.A.'s general account, of which $414,900 was collected from the N.C.A. partners. On June 25, 1963, when O.B.A. filed its petition in bankruptcy, it had only about $7,000 in its bank account. If it were not for the influx of funds collected from N.C.A., O.B.A. would have overdrawn its bank account during March, April, May and June 1963 by about $400,000.
This failure to take steps to protect the interests of N.C.A. in the funds collected is the basis of plaintiff's attempt to hold the defendants individually liable. It is argued that their failure to assume the duty of assuring that N.C.A.'s funds were maintained and protected for the purpose for which they had been collected is actionable. Plaintiff urges that the evidence establishes that defendants either diverted trust moneys to other corporate purposes, Hirsch v. Phily, 4 N.J. 408 (1950), negligently performed their fiduciary duty so as to be the cause of the partnership's loss, or knowingly aided a fiduciary in the breach of his duty or ratified his actions. Williams v. McKay, 40 N.J. Eq. 189 (E. & A. 1885); Judson v. Peoples Bank & Trust Co., 25 N.J. 17 (1957). It matters not that the individual defendants did not personally benefit from any alleged conversion of trust funds and acted merely as agents for a corporation. Hirsch v. Phily, supra.
During trial it became clear that there were two pivotal issues in this case: (1) were the funds collected from the N.C.A. partners trust funds, and (2) if so, is the alleged advice of counsel a good defense considering all the facts of this case? Other facts in evidence will be disclosed as they become necessary to the discussion at hand.
*513 I.
At the outset it should be noted that the New Jersey Legislature enacted a Real Estate Syndication Offerings Law, L. 1963, c. 192, § 2; N.J.S.A. 49:3-27 through 49:3-44, effective as of January 1, 1964, which makes the trust issue moot for new real estate syndicates. The act explicitly provides that all funds raised for real estate syndicates, like those in question here, are trust funds until actually employed in connection with the consummation of the transaction. N.J.S.A. 49:3-40. However, the statute and its legislative history do not indicate whether this statute was creating new law or codifying the prevailing common law. Since the N.C.A. syndication was established prior to the effective date of this statute, it is no help in deciding this issue.
Defendants urge that real estate syndications are sui generis and that the syndicator or promoter owes no fiduciary duty to the syndication it creates. Hence, in the instant situation, the N.C.A. funds that came into the possession of O.B.A. were not trust funds. Defendants never articulated the significance of "sui generis" in the attendant circumstances of this case. While the precise situation here presented may be one of novel impression or "sui generis," it still remains the task of this court to resolve the issues upon established principles of law.
First, as to defendant Schultz. He was the general partner in N.C.A. and as such owed each limited partner a fiduciary duty which he violated. N.J.S.A. 42:2-13; N.J.S.A. 42:1-21. Cf. Cusano v. Cusano, 19 N.J. Super. 255 (App. Div. 1952). It is precisely this holding that was the basis for his being enjoined from exercising his powers as general partner in N.C.A. and other limited partnerships upon complaints filed by limited partners, some of whom are defendants in this case. The mere fact that limited partnerships were being utilized in the unusual setting of the real estate syndication field does not mean that the laws of this State concerning such partnerships may be disregarded. Additionally, *514 Schultz as general partner of N.C.A. was in a position of particular confidence which equity will treat as a trust relationship. Harrop v. Cole, 85 N.J. Eq. 32 (Ch. 1915), affirmed 86 N.J. Eq. 250 (E. & A. 1916); First Federal Savings & Loan Ass'n of Montclair v. Shaw, 142 N.J. Eq. 585 (E. & A. 1947). Clearly, defendant Schultz was a fiduciary for his limited partners in N.C.A., in addition to any fiduciary duty he may have owed to them as president and director of O.B.A.
O.B.A., its officers and directors owed N.C.A. a fiduciary duty in dealing with the partnership funds remitted to O.B.A. by First Jersey, without knowledge on the part of the public investors in N.C.A.O.B.A. caused N.C.A. to come into being. It did not provide N.C.A. with any independent counsel. First Jersey, at O.B.A.'s direction, sold partnership shares in N.C.A.O.B.A. caused the prospectus to be drawn and the partnership agreement for N.C.A. to be executed. Paragraph 35 of the partnership agreement identifies O.B.A. as the syndicator of the property in question. The books and records of N.C.A. were kept by O.B.A. officers on O.B.A. premises. The evidence sustains the conclusion that O.B.A. was the promoter of N.C.A. and as a consequence thereof assumed a fiduciary duty in its dealings with the partnership to the extent at least of assuring the application of N.C.A. funds for their intended purpose. Arnold v. Searing, 78 N.J. Eq. 146 (Ch. 1910); East Ridgelawn Cemetery v. Winne, 11 N.J. 459 (1953); Tilden v. Barber, 268 F. 587 (N.J.D.C. 1920).
Defendants contend that a debtor-creditor relationship existed between O.B.A. and N.C.A. since O.B.A. agreed to pay the partners in N.C.A. interest on their investment. The prospectus and partnership agreement stated that interest payments to the partnership would begin on April 10, 1963, although N.C.A. would not take title to the shopping center until September 25, 1963, and that distributions prior to that date were taxable income. These interest payments were in fact made prior to the filing of the petition in bankruptcy.
*515 As was said in State v. Atlantic City Electric Co., 23 N.J. 259 (1957):
"Whether a trust or a debt is created when one party pays money to another primarily depends upon their intentions. State v. United States Steel Co., 12 N.J. 51 (1953) Frequently there is no explicit understanding as to the terms upon which the payee is to hold the funds, and then the nature of the transaction must be divined through consideration of the parties' behavior and the attendant circumstances. State v. Western Union Telegraph Co., 17 N.J. 149 (1954); 1 Scott, Trusts, § 12.2 (1939 ed.); Restatement, Trusts, § 12, comment g. * * *" (at p. 266)
In the instant situation there was no explicit understanding as to the terms upon which First Jersey and O.B.A. was to hold the money until title to the shopping center passed to N.C.A.
The determinative intent where there is no explicit understanding is that of the owner of the money. Sayer v. Wynkoop, 248 N.Y. 54, 161 N.E. 417 (Ct. App. 1928); Brown v. J.P. Morgan & Co., 177 Misc. 626, 31 N.Y.S.2d 323 (Sup. Ct. 1941), reversed in part on other grounds 265 App. Div. 631, 40 N.Y.S.2d 229 (App. Div. 1943). The reasons for such a rule are particularly apparent in this case where O.B.A. was the "master" of the transaction. O.B.A. controlled what material was published and what representations were made upon solicitation of the funds in question. O.B.A. must be held to comply with the "intention" it induced the unprotected public to assume. It is clear that each limited partner was paying money for the specific purpose of purchasing an interest in real estate. The prospectus indicates that N.C.A. was "formed for the purpose of acquiring Fee Title to the land and buildings known as Neptune City Shopping Center * * *." Paragraph 3 of the limited partnership agreement states, "The purpose of the Partnership shall be to acquire for investment the fee to the premises and improvements described in the aforementioned Contracts."
The prospectus revealed that a contract to acquire the property had been filed and the closing of title set for September *516 25, 1963, suggesting perhaps that this was a contract between O.B.A. and N.C.A., which was not the case. The limited partnership agreement does disclose that O.B.A. entered into a contract with the sellers to acquire the shopping center, which contract it intended to assign, or to deliver a deed to the limited partnership, but no such formal steps were taken to protect the limited partners. Further confusing the issue, O.B.A. sent a covering letter over the stamped signature of defendant Berson to the limited partners with their partnership certificates, which said that N.C.A. owned the shopping center, which was not the fact. The limited partnership agreement expressly provides that if for any reason closing of title is not accomplished, then the contributions of the limited partners will be repaid to them. It further provides that all funds of the partnership are to be deposited in the partnership name in such bank account or accounts as shall be designated by the general partner. This was not done. It was urged that this provision was to apply only to funds of the partnership that might come into existence after the closing of title, but this is not what the agreement states. A limited partner might reasonably feel that he was amply protected as the funds he invested were being segregated in a special account to be held for a specific purpose, which was not the fact.
The limited partners were not aware nor did they intend to make payments that were to be used by O.B.A. to meet the general obligations of that corporation. They intended to contribute toward a fund to be utilized for the specific purpose of purchasing Neptune City Shopping Center. Under these circumstances this fund was a trust fund and O.B.A. owed N.C.A. a fiduciary duty "on the equitable principle that once moneys have been received or allocated for a certain purpose such moneys become impressed with a definite trust to be disbursed for that purpose only." National Surety Corp. v. Barth, 11 N.J. 506, 514 (1953).
Defendants rely upon State v. Atlantic City Electric Co., supra, and 1 Scott, Trusts (2d ed. 1956), § 12, for the proposition that the fact that the person receiving the money *517 agrees to pay interest is strong evidence that the parties intended to create a debt relationship and not a trust. However, interest is only one element of the parties' intentions and may be overcome by other evidence of their behavior and circumstances. The court in Atlantic City Electric also took into consideration as evidence of the intention of the parties the custom and usages of the business involved. The payee was a public utility that had commingled customer deposits with its general funds for over 30 years and never implied that the funds would be kept separate or dedicated to a specific purpose. The deposits were solely for its own benefit. The present circumstances are much different. N.C.A. was organized to take title to the shopping center, and participations were solicited to accumulate the amount required for the purchase price. Thus, the moneys were being deposited for a special purpose. If they were dissipated, the partnership purpose would be frustrated the shopping center would not be acquired by it. In contrast, if the utility lost the deposits, the consumer could still credit it against a debt owed to the utility and receive the benefit of his deposit. In sum, State v. Atlantic City Electric Co., supra, is factually distinguishable.
In Scott, Trusts, supra, it is said that:
"* * * But where the agreement is to pay interest at a fixed rate, regardless of whether the money is invested or not, it is almost certain that the payee is to have the use of the money and that a debt and not a trust is created. Even in such a case, nevertheless, it is within the realm of possibility that the payee is not to have the use of the money but is to invest it for the payor or a third person, the payee undertaking that the investment will yield a certain rate of return." (at pp. 105-106, emphasis supplied)
The interest to be paid prior to closing of title was 3/4ths of 1% per month; in other words, the monthly equivalent of 9% per year. The syndication arrangement was to guarantee to each investor the fixed rate of return of 9% per year, precisely the arrangement envisioned by the last quoted sentence from Scott.
*518 In many instances courts have held a trust rather than a debt was created, in spite of the fact that the alleged trust instrument provided for a fixed rate of interest regardless of investment yield. Fesenmeyer v. Salt Springs National Bank, 92 F.2d 599 (2 Cir. 1937); People ex rel. Nelson v. Illinois Bank & Trust Co. of Benton, 290 Ill. App. 521, 8 N.E.2d 953 (App. Ct. 1937); Thorton v. Koch, 317 Pa. 400, 176 A. 3 (Sup. Ct. 1935); City of Canby v. Bank of Canby, 192 Minn. 571, 257 N.W. 520 (Sup. Ct. 1934); Commonwealth v. Snow, 284 Mass. 426, 187 N.E. 852 (Sup. Jud. Ct. 1933); Reichert v. Guaranty Trust Co. of Detroit, 260 Mich. 504, 245 N.W. 785 (Sup. Ct. 1932); Spencer v. Clarke, 25 R.I. 163, 55 A. 329 (Sup. Ct. 1903). In all these cases the court considered the payment of interest as one of the evidentiary factors to be considered, but not as the conclusive determining factor. See Restatement, Trusts 2d, § 12, comment (g) for the seven factors recommended for consideration as indicators of the parties' intent.
Commonwealth v. Snow, supra, presents a situation closely analogous to the present case. There defendant was indicted for embezzlement on the grounds that he commingled trust funds with his general office funds in breach of his fiduciary duties. He contended that he did not owe a fiduciary duty to anyone, since the payment of the interest indicated that the relationship established was that of debtor-creditor. The facts were that defendant accepted money from investors with the express provision that he was to invest it in first mortgages and was to pay interest at the fixed rate of 7% per annum from the date indicated upon the deposit certificate, irrespective of when the funds were invested. The Supreme Judicial Court of Massachusetts upheld the trial court's finding of fact that a trust was created. It emphasized that this issue is one for the finder of fact to determine. The evidence that the depositors were turning over the funds to defendant for a specific purpose and that the depositors never authorized the use of said funds for any other purpose was deemed important. In the present case there is a greater degree of specificity present, *519 since the funds were earmarked to purchase an interest in specific realty not as in Snow, to be invested in any mortgages the defendant should select.
All the attendant corcumstances indicate that the $414,900 collected to purchase interests in N.C.A. were funds of that partnership to be held in trust for the specific purpose of acquiring title to the Neptune City Shopping Center.
II.
Defendants contend they relied upon the advice of counsel that they were under no duty to escrow or segregate the funds in question. In doing so they acted as reasonably prudent men and hence are not liable for any breach of trust. Plaintiff urges that advice of counsel is not available to a fiduciary as a defense when the breach complained of was a mistake as to the existence of duties or powers. Restatement, Trusts 2d, § 201 (1959); 2 Scott, Trusts, supra, § 201. The rule as articulated by the Restatement and by Professor Scott is based upon the fact that any doubt present as to the extent of trust duties or powers can be resolved by obtaining instructions from the court. Defendants argue that no court would entertain their complaint for instructions; that the rule enunciated in the Restatement is particularly applicable to testamentary trusts or express trusts, and is inapplicable in the instant situation.
Assuming, arguendo, the correctness of defendants' position, advice of counsel in itself is not an absolute defense. It is only to be considered in defense to negate the existence of criminal intent, bad faith or negligence. Note, "Reliance on Advice of Counsel," 70 Yale L.J. 978 (1961); Lynch v. Sapiro, 117 N.J. Eq. 485 (Ch. 1935); and see Spirt v. Bechtel, 232 F.2d 241 (2 Cir. 1956); Gilbert v. Burnside, 13 A.D.2d 982, 216 N.Y.S.2d 430 (App. Div. 1961), affirmed 11 N.Y.2d 920, 229 N.Y.S.2d 10, 183 N.E.2d 325 (Ct. App. 1962). Defendants must prove, to sustain their *520 burden in offering this defense, that they relied upon counsel's advice accurately and in good faith; that said advice was as to a matter of law and given by competent counsel. Note, "Reliance on Advice of Counsel," supra. Plaintiff contends that the decision not to segregate the funds in question was dictated by business necessity and not by reliance upon advice of counsel.
During the period immediately prior to the signing of the contract to purchase Neptune City Shopping Center, and at all times thereafter, O.B.A. was "cash shy." The syndicated properties were not producing enough income to pay the 9% or 10% guaranteed under the net leases to investors in the various syndications organized under the aegis of O.B.A.O.B.A. had to resort to other resources to pay these distributions, which resulted in a substantial cash drain. It was imperative that O.B.A. continue to syndicate new properties so that the exorbitant profits it made would be available to meet these various cash demands as well as their own huge operational expenses.
Dr. Otto Rubens, a director of O.B.A., was aware that the company had a cash problem. In an undated letter received by defendant Schultz on April 8, 1963, Dr. Rubens expressed concern over the proposed declaration of a cash dividend on the O.B.A. stock as he desired to be sure that "payment of a dividend does not jeopardize the liquidity of the company." He also suggested that the first $425,000 received from the sale of Neptune Center participation units be placed in an escrow account.
Defendant Schultz took this letter to the office of Fox & Schackner, attorneys for O.B.A., at which time Mr. Schackner told Schultz to answer the letter. Schultz, in Schackner's presence, dictated his reply in a letter dated April 8, 1963 in which he acknowledged his receipt of Dr. Rubens' letter and promised to bring the letter to the attention of the executive committee. He indicated that while the suggestion to escrow the fund was a good one, it should be coupled with "an affirmative commitment for turn-around cash or other cash requirements, *521 in the event the isolation of such moneys would tend to have an effect upon us."
Dr. Rubens called Dr. Lebau, a member of the executive committee, and asked him to see to it that this matter was discussed at the forthcoming April 10 executive committee meeting. Schultz, at this meeting with Lebau, Jackson, Siebert, Greyson, Schackner and Hirschfeld present, read into the record the Rubens letter and his reply thereto. The minutes specify in regard to the paragraph in the Rubens letter concerning escrowing funds that "it was unanimously agreed that although his point was well taken, it would be impracticable at this time for the company to adopt the suggestion." Several of the defendants testified that the decision was preceded by a discussion during the course of which Schackner told the committee that there was no legal or statutory requirement to escrow. Schackner categorically denied that he gave any such advice at this time.
On April 24, 1963 a special meeting of the full board of directors was held with directors Berson, Rubens and Vaughn present, in addition to those who were at the executive committee meeting. At the urging of defendant Vaughn, the Rubens letter and the Schultz reply were again read and a discussion ensued. At this time Schackner advised the board that to his knowledge there was no statute in New Jersey that required that such moneys be held in escrow. He testified that he informed them a statute had been proposed but not yet enacted which would require all proceeds from the sale of limited partnership interests be escrowed until title closed, not merely the amount needed to close title as Dr. Rubens proposed. No formal vote was taken, but clearly the board members, except for Rubens, ratified and approved the decision of Schultz and the executive committee not to escrow or segregate the N.C.A. funds. These discussions on April 10 and April 24 made it perfectly plain to all defendants that O.B.A. was using funds solicited from investors in N.C.A. to meet current operational expenses and distribution payments for other syndications, and that the only assurance *522 N.C.A. had that funds would be available to close title on September 25, 1963 was the integrity and financial responsibility of O.B.A.
In the spring of 1963 Schultz and Hirschfeld clearly knew of O.B.A.'s poor cash position. They knew that the Texas properties were doing badly and that the other properties not leased to O.B.A., except for one, were not generating enough income to cover all necessary charges and distributions. Schultz testified that O.B.A. was subsidizing the dividend or distribution payments to the various syndicates to the extent of about $250,000 per year. Hirschfeld testified that Schultz was disturbed by the fact that the daily cash position of O.B.A. was poor. Schultz had Hirschfeld prepare figures that they saw daily which indicated the daily cash position of O.B.A.
The members of the executive committee knew or should have known of O.B.A.'s cash problem. All of them had repeatedly been advised of the problems concerning the Texas properties. The minutes of the executive committee meeting of February 13, 1963 note a discussion concerning the vacancy problem with the San-Mac properties in Texas. Hirschfeld told the executive committee and the other directors that the various syndications were not producing enough income to cover all operational expenses and guaranteed distribution payments, although in the same breath he assured them there was no cause for concern. Both Hirschfeld and Schultz testified that the directors knew that it was necessary for O.B.A. to continue to syndicate property to stay in business. Additionally, Jackson admittedly knew the cash position of O.B.A. was "light," but he did not think it was so weak that the company would "fold." Greyson demanded that Schultz produce a breakdown of all operational expenses of O.B.A. because of his concern that with all the profits O.B.A. was making, there was little cash available. He received something from Schultz which he deemed inadequate. Each member of the management team, who are also members of the executive committee, namely Schultz, Berson, Siebert *523 and Hirschfeld, was aware of the cash problem as it was discussed at informal meetings held in the spring of 1963.
Berson, Dr. Vaughn and Dr. Rubens were present at the April 24 board of directors meeting in addition to those who were present at the April 10 executive committee meeting. Berson was a member of the management and, as already observed, knew of the cash plight of the corporation. Dr. Vaughn took a trip with defendant Schultz to Texas to review investment possibilities there, at which time Schultz informed him of the problems with the Texas properties. Despite the fact that Dr. Rubens was not elected a director until March 11, 1963, he knew of the cash problem, attempted to convince the board to escrow the first $425,000 of N.C.A. funds, and even voted on April 24 against declaring dividends on O.B.A. stock for fear that O.B.A.'s liquid position would be affected.
The members of the executive committee and the full board of directors knew or should have known that O.B.A. had to borrow $100,000 for the deposit on the contract to purchase the Neptune City Shopping Center. They knew or should have known that loans were routinely required to provide the down-payment for a property to be syndicated. These loans were always from private sources at generous interest rates. Additionally, in his letter reply to Dr. Rubens, which was read at the April 10 and April 24 meetings, Schultz expressed concern for "turn-around cash or other cash requirements in the event the isolation of such moneys would tend to have an effect upon us." These facts should have alerted the directors to the poor cash position of O.B.A.
Some of the defendants testified that Hirschfeld, in addition to explaining how O.B.A. handled funds received from N.C.A. through First Jersey, assured the board that O.B.A. had ample "economic profit." Previously they had seen financial statements for the past year that indicated that O.B.A. had made a substantial profit. In essence, these defendants charge that Hirschfeld misled them as to the financial picture of O.B.A. Each director had enough information to beware *524 of the phrase "economic profit" used to characterize the O.B.A. financial condition. They knew or should have known that not all O.B.A. syndications had been completely subscribed and that O.B.A. held a substantial portfolio of unsold participation units in various syndicates that constituted "paper profits." Additionally, other substantial assets were listed in the O.B.A. balance sheet for the year ending December 31, 1962 which had no apparent liquidity.
Certain defendants argue that the fact that they were prepared to make loans to O.B.A. indicated that they were not aware of O.B.A.'s poor financial position. However, these proposed loans were all of short term duration and at high interest rates. The funds loaned were to be used as deposits on contracts to purchase property for syndication and would be repaid from the proceeds of the first participation shares sold. Under these circumstances such defendants might well feel that the interest return was well worth the slight risk presented, for they anticipated O.B.A. would sell enough participation units to cover any "front money" advanced. Typical of these proposed loans was one actually made by David A. Jackson in May, 1963 in the sum of $25,000 to O.B.A. to be used as part of the down-payment for the proposed purchase of the Seaman Bros. warehouse. The ill-fated loan was to be for a period of three months. Jackson's remuneration was to be a one-half unit in the proposed partnership to take over the property, which was valued at $2,500, the equivalent of a 10% return on a three-month loan, or 40% per year.
I find that all the defendants knew or should have known of the dire cash position of O.B.A. in the spring of 1963, particularly at the time they sanctioned the use of N.C.A. funds to meet the general operational needs of O.B.A.
Plaintiff contends that defendants' knowledge of the poor cash position of O.B.A. plus the asserted "impracticability" in escrowing or segregating N.C.A. funds, and not the advice of counsel, were the determinative factors in the decisions reached at the April 10 and April 24 meetings. Hirschfeld at the April 10 meeting explained to the executive committee *525 how the books of O.B.A. were kept and how money was being handled. He told the committee that it would be "impracticable" from a bookkeeping standpoint to change the normal mode of procedure to segregate these funds. Hirschfeld testified that he remembered Schultz's saying it would be "economically impractical" to comply with the Rubens suggestion. As already observed, the minutes of this meeting state that the directors unanimously agreed that it was "impracticable at this time for the company to adopt this suggestion." Significantly, at the time of this meeting $165,000 had been received from various limited partners of N.C.A. and O.B.A. had a cash balance on hand of $52,212.42.
As previously noted, Schackner denied giving any legal advice to the executive committee on April 10. He admittedly rendered legal advice to the full board of directors on April 24. Plaintiff urges that the fact that the advice of counsel was not noted in the minutes of the April 10 or April 24 meeting indicates it was not an important factor in the decision. On prior occasions when advice of counsel was important, it was noted in the minutes. By the close of business on April 24, O.B.A. had received an aggregate of $257,400 of N.C.A. funds. On that date the O.B.A. bank balance was $52,422.31.
From all the foregoing it appears that the O.B.A. directors, in deciding not to segregate the N.C.A. funds, may have been motivated by the poor cash position of O.B.A. and the alleged "impracticality" of segregating these funds. Reliance upon the advice of counsel may have also played a role in this decision. However, under applicable legal principles, it is unnecessary to determine the import of the various factors involved and whether or not defendants in good faith relied upon the advice of counsel, and I make no such findings.
III.
As already observed, the funds in question were trust funds and could only properly be used to acquire title to the *526 Neptune City Shopping Center. These funds were not so used and, in fact, were converted to O.B.A. purposes. Conversion is defined as "an unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of an owner's rights." 89 C.J.S. Trover and Conversion § 1, p. 531; Mueller v. Technical Devices Corp., 8 N.J. 201 (1951).
The elements of good faith, intent or negligence do not play a part in an action for damages in conversion. As is said in 89 C.J.S. § 7, supra:
"* * * While an intent to convert consummated by some positive act, is necessary to constitute conversion, it is very generally held that it is not essential to conversion that the motive or intent with which the act was committed should be wrongful, or willful or corrupt, although, as in actions for damages for torts generally, * * * factors of this character may be taken into consideration in determining whether exemplary damages shall be allowed.
It is sufficient if the owner has been deprived of his property by the act of another assuming an unauthorized dominion and control over it. It is the effect of the act which constitutes the conversion. In consequence * * * it has very generally been held that the question of good faith, and the additional questions or elements of motive, knowledge or ignorance, or care or negligence, are not involved in actions for conversion.
* * * * * * * *
The general rule is that one who exercises unauthorized acts of dominion over the property of another, in exclusion or denial of his rights or inconsistent therewith, is guilty of conversion although he acted in good faith and in ignorance of the rights or title of the owner. The state of his knowledge with respect to the rights of such owner is of no importance, and cannot in any respect affect the case. * * *" (at pp. 536-537)
Since good faith is not a defense to an action for conversion, it follows that good faith reliance upon advice of counsel is likewise no defense. Spirt v. Bechtel and Gilbert v. Burnside, supra, and the other cases relied upon by defendants are easily distinguishable. They were stockholders' derivative actions seeking to hold directors liable for misconduct in office in breach of their fiduciary duty or for waste in the management of the corporation. In such situations directors *527 are charged with the duty to act in good faith and as reasonably prudent men. The relevancy of reliance upon advice of counsel in such situations is obvious.
The tort of conversion has been committed by O.B.A. in diverting the N.C.A. funds. What remains to be determined is whether personal liability can be imposed upon defendant officers and directors of the corporation which committed the tort.
"A director or officer of a corporation does not incur personal liability for its torts merely by reason of his official character, but a director or officer who commits the tort or who directs the tortious act to be done, or participates or cooperates therein, is liable to third persons injured thereby, even though liability may also attach to the corporation for the tort. * * *" (Sensale v. Applikon Dyeing & Printing Corp., 12 N.J. Super. 171, 175 (App. Div. 1951))
Any officer or director who participates by aid, instigation or assistance in a conversion is liable. Fidelis Factors Corp. v. Du Lane Hatchery Ltd., 47 N.J. Super. 132 (App. Div. 1957); Rose v. Bernhardt, 107 N.J.L. 501 (E. & A. 1931); Reliable Woodworking Co. v. Lindeman, 105 N.J.L. 121 (E. & A. 1928). As was said in 3 Fletcher Cyclopedia Corporations (perm. ed. 1965), § 1140:
"An officer or agent of a corporation is liable for conversion of property belonging to a third person, notwithstanding that, in disposing of it or otherwise dealing with it, he was acting for the corporation, since `any person who, however innocently, obtains possession of the goods of a person who has been fraudulently deprived of them, and disposes of them, whether for his own benefit or that of any other person, is guilty of a conversion.' They may be guilty of conversion and fraudulent mismanagement, even though the act constituting such was done for and on behalf of the corporation. * * *"
It does not matter that the conversion was for the benefit of the corporation and that the individual defendants did not personally benefit. Hirsch v. Phily, 4 N.J. 408 (1950).
Schultz and Hirschfeld clearly knew the N.C.A. funds were being used to meet the general operating needs of O.B.A. In authorizing and approving this use of the *528 N.C.A. funds, they participated in the conversion. Additionally, Schultz as general partner in N.C.A., plainly violated his fiduciary duty in permitting these funds to be diverted from their intended purpose.
All defendants present at the executive committee meeting on April 10, 1963 knew as of that date that these funds were being converted to O.B.A. use. They ratified and acquiesced in this conversion. On April 10, if they had acted promptly, they could have taken steps to avoid or at least mitigate any losses that occurred. Failing to have done so, they are individually liable for the losses sustained. Braman v. Westaway, 60 N.Y.S.2d 190 (Sup. Ct. 1945), modified on other grounds 59 N.Y.S.2d 509 (Sup. Ct. 1946); Walker v. Man, 142 Misc. 277, 253 N.Y.S. 458 (Sup. Ct. 1931); Spiegel v. Beacon Participations, 297 Mass. 398, 8 N.E.2d 895 (Sup. Jud. Ct. 1937); Metropolitan Casualty Ins. Co. v. First State Bank, 54 S.W.2d 358 (Tex. Ct. Civ. App. 1932), reversed on other grounds 125 Tex. 113, 79 S.W.2d 835, 98 A.L.R. 1256 (Sup. Ct. 1935); 3 Fletcher, supra, § 1100.
By the same rationale, defendants Berson and Vaughn are personally liable for their participation in the conversion of N.C.A. funds. Each of them on April 24 approved and ratified the action of Schultz and the executive committee in permitting the N.C.A. funds to be used by O.B.A. for O.B.A. purposes. Additionally, Berson knew all along that the funds collected from N.C.A. were not being escrowed or segregated. It was this knowledge that led him to deliberately refrain from making any representations about escrowing upon solicitation of sales of N.C.A. participation units. It is noteworthy that funds received through the sale of participation units in N.C.A. after May 29, 1963 were in fact segregated and returned to the owners. Obviously, prompt and similar action on April 24, 1963 by defendants, in accordance with the Rubens suggestion, could have substantially averted the losses suffered by the N.C.A. investors.
Schultz was the dominant figure in the conversion of the N.C.A. funds. The codefendants participated in varying degrees *529 of culpability. Perhaps one or more of the codefendants was deceived by Schultz and Hirschfeld respecting the true financial situation of O.B.A. Perhaps one or more of the co-defendants may have been influenced by the advice of counsel, a point I am not required to resolve. The significant facts are simply that innocent investors in N.C.A. entrusted their funds for a specific purpose, and that defendants participated in the diversion of these funds.
Plaintiff's claim is for $414,900 plus interest. Prior to trial, the receiver attempted to secure for the partnership the contract between O.B.A. and the sellers of Neptune City Shopping Center on which $100,000 had been paid. However, the trustee in bankruptcy of O.B.A. refused to convey or assign this contract to N.C.A., claiming it as an asset of O.B.A. Suits were started by representatives of N.C.A. to impose a constructive trust upon this contract and to enjoin the sellers from making time of the essence on the contract. The end result of these disputes was that the purchase contract was sold for $41,000, and the receiver of N.C.A. and the trustee in bankruptcy settled for $23,000 and $18,000, respectively. Additionally, the receiver settled his claim against the purchaser of the contract from the bankruptcy trustee for $3,000. To the extent of the $26,000 recovered, the damages suffered by plaintiff have been mitigated and this amount shall be deducted from plaintiff's claim. The receiver settled with Dr. Rubens for $500, which was designed to cover the expense incidental to entering such a dismissal. He correctly concluded that he did not have a case against Dr. Rubens, who did not participate in the diversion of N.C.A. funds but rather endeavored to preserve said funds for their intended purpose. Defendants are not entitled to a set-off for this amount, and the cross-claims against Dr. Rubens for contribution are dismissed. Accordingly, plaintiff is entitled to a judgment against all defendants for $388,900.
The allowance of interest in equity is discretionary. Deerhurst Estates v. Meadow Homes, Inc., 64 N.J. Super. 134 (App. Div. 1960), on remand 71 N.J. Super. 255 (Law *530 Div. 1961); Kleinert v. DeChiaro, 44 N.J. Super. 365 (App. Div. 1957). Under all the stated circumstances, interest at 6% will be allowed as against defendant Schultz from September 25, 1963, and disallowed as to the remaining defendants. Cf. Brown v. Home Development Co., 129 N.J. Eq. 172 (Ch. 1941).
A form of judgment shall be submitted, consented to as to form or to be settled on notice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919092/ | 46 N.J. 479 (1966)
218 A.2d 129
ROBERT D. SPIEGLE AND DORIS LORRAINE SPIEGLE, HIS WIFE, PLAINTIFFS-APPELLANTS,
v.
BOROUGH OF BEACH HAVEN, IN THE COUNTY OF OCEAN, A MUNICIPAL CORPORATION, DEFENDANT-RESPONDENT.
The Supreme Court of New Jersey.
Argued November 9, 1965.
Decided March 21, 1966.
*482 Mr. James Mercer Davis, Jr., argued the cause for appellants.
Mr. Franklin H. Berry, Jr., argued the cause for respondent (Mr. Franklin H. Berry, Jr., of counsel; Messrs. Berry, Whitson & Berry, attorneys).
The opinion of the court was delivered by HANEMAN, J.
Judgments were entered in the Superior Court, Law Division, in two separate cases, holding, inter alia, that two ordinances as amended (which, for convenience, we shall hereafter refer to as (1) "fence ordinance" and (2) "dune ordinance") and adopted by defendant were constitutional. The separate appeals, limited to the constitutional issues, which were taken to the Appellate Division, were consolidated. Before argument in the Appellate Division, this Court certified the appeals on its own motion, R.R. 1:10-1.
Plaintiffs are the owners of four ocean front tracts of land in the Borough of Beach Haven. The tracts are subdivided into building lots. The first tract is bounded on the northerly and southerly sides by Jefferis and Kentford Avenues respectively and is unimproved. The second tract is bounded by Kentford and Leeward Avenues and upon this tract plaintiffs have erected a residence. The third tract is bounded on the north by Leeward Avenue and on the south by Merivale Avenue. Upon this tract plaintiffs have erected a small two-story frame apartment house. The fourth tract is bounded by Merivale and Nelson Avenue and is unimproved.
On June 13, 1962 plaintiffs erected fences extending oceanward across the beach. On June 18, 1962 defendant razed the fences, leaving the posts lying on the beach. On July 31, 1962 defendant adopted Ordinance No. 62-10 (fence ordinance) which, as amended by Ordinance No. 62-14, provides in pertinent part:
"SECTION 1. Hereafter it shall be unlawful for any person, firm or corporation to erect, to cause to be erected or to maintain on any privately owned beach in the Borough of Beach Haven, east of the *483 dune line as established by the Borough's engineers, any fence, wall, post, piling, stake, or structures of any sort or which will in any way interfere with or impede any public official, public employee or contractor employed by any public body in the performance of work on any such beach to repair or prevent storm damage, without first obtaining a permit therefor from the Board of Commissioners of the Borough of Beach Haven.
SECTION 2. The permit referred to in Section 1 hereof shall be issued only after public hearing at a regular meeting of said governing body held at least seven days after publication of notice of such hearing in the Beach Haven Times."
Plaintiffs filed suit seeking recovery of damages for the demolition of the fence and challenging the constitutionality of the fence ordinance. Judgment was entered after trial, awarding plaintiffs $300 damages for the fence removal and upholding the constitutionality of the fence ordinance.
At the oral argument before this Court, defendant admitted that plaintiffs had a right under the several ordinances to a permit to erect a fence on their lands from the mean high water mark landward, subject, however, to the condition that the fence be not so designed as to impede or prevent beach protection work, including the passage of vehicles for such purposes. So construed, we conclude that the provision is a lawful and reasonable exercise of police power for the protection of public health and safety. This is especially so in light of N.J.S.A. 40:92-9 which grants the governing body power to protect its ocean and beach front. Cf. United States v. Caltex, Inc., 344 U.S. 149, 73 S.Ct. 200, 97 L.Ed. 157 (1952); Rohrs v. Zabriskie, 102 N.J.L. 473 (Sup. Ct. 1926); Caldwell v. Saul, 5 N.J. Misc. 165, 135 A. 691 (Sup. Ct. 1927); Myers v. State, 4 N.J. Misc. 251, 132 A. 335 (Sup. Ct. 1926); Manning v. Hague, 3 N.J. Misc. 329, 128 A. 375 (Sup. Ct. 1925); Annotation "Zoning regulation prohibiting or limiting fences, hedges or the like," 66 A.L.R.2d 1294 (1959). No cross-appeal is taken from the judgment of $300.
The fence ordinance thus disposed of, we come to a consideration of the dune ordinance which constitutes the balance of this appeal.
*484 On April 23, 1963 defendant adopted Ordinance No. 63-4 (dune ordinance) which was amended by Ordinance No. 63-5 and Ordinance No. 64-17. By amendment of the above referred to fence ordinance complaint, plaintiffs also challenged the constitutionality of the dune ordinance. The court below upheld its constitutionality. Summary judgment was also entered against plaintiffs in a separate suit challenging the constitutionality of Ordinance No. 64-17 which amended the dune ordinance.
The amended ordinance reads as far as here material:
"ORDINANCE No. 63-4
An ordinance to Define and Delineate the Beach and Dune Areas of the Borough of Beach Haven, and Establish Regulations for the Use and Protection Thereof, and Providing Penalties for the Violation Thereof.
The Board of Commissioners of the Borough of Beach Haven, in the County of Ocean, do Ordain:
SECTION 1. SHORT TITLE: This ordinance shall be known as the Borough of Beach Haven Beach Protection Ordinance.
SECTION 2. FINDINGS AND DECLARATION:
(a) It has been clearly demonstrated that well established and protected sand dunes, together with berms, beaches and underwater slopes of suitable configuration and of proper grade and height, are a durable and effective protection against high tides and flooding, and against damage by the ocean under storm conditions, and are the natural protections of the coastal areas adjacent thereto, and the State and its subdivisions and their inhabitants have an interest in the continued protection thereof, and in the right to restore them in the event of damage or destruction.
(b) Said dunes are vulnerable to erosion by both wind and water, but primarily by wind, since its attacks against the dunes are sustained for substantial and frequently recurring periods of time whereas, if protected by typical berms, beaches and underwater slopes, the dunes are attacked by water only at infrequent intervals. The best available means of protecting said dunes against wind erosion is by preventing indiscriminate trespassing, construction or other acts which might destroy or damage said dunes, and through the use of native plantings, supplemented by sand fencing and other devices designated to prevent the free blowing of sand and the maintenance of the surface tensions, root accumulations, normal contours and other features found in typical natural dunes.
(c) The immediate dune and beach area is not capable of rigid definition or delineation, or of completely firm stabilization, so that particular sites, at one time free of dunes, may, as a result of natural *485 forces, become part of the dune area necessary for the continuation of the protection above outlined, and persons purchasing or owning such property do so subject to the public interest therein.
(d) It is the purpose of this Ordinance to define the areas so affected and to establish regulations to assure their continued effectiveness. This Ordinance is declared to be an exercise of the police power in the interest of safety and welfare and for the protection of persons and property.
(e) The erosion of the beachfront during the storm of March 6th and 7th, 1962, has created an immediate and imminent threat and danger to life of persons and property in the Borough of Beach Haven by reason of the destruction of the sand barriers which protect the Borough's oceanfront to the end that it has become necessary to the health, safety and welfare of the Borough to repair, restore, replace or construct protective barriers on both public and private property within the Borough of Beach Haven.
(f) The interference with or the depletion of the beach and sand dunes tends to permit encroachment by the sea and the conditions above recited make it imperative that the governing body regulate and control the removal of sand from the beach or dunes or any other interference with or depletion of the protective barrier on the oceanfront of the Borough of Beach Haven.
SECTION 3. DEFINITIONS:
Backshore: That zone of the shore or beach lying between the foreshore and dune area, and normally acted upon by waves only during severe storms, especially when combined with exceptionally high water.
Beach: The zone of unconsolidated material that extends landward from the low water line to the place where there is marked change in the material of physiographic form, i.e. dune or bulkhead. Includes Foreshore and Backshore.
Strand: The same area included within the definition of Beach.
Beach-Dune Area: The district set off by this Ordinance, to include the dunes, beaches, strand, backshore and foreshore, and the areas where, according to a normal beach profile, the same would or should exist. The Beach-Dune area, as defined therein has been established by Taylor, Wiseman, Taylor and Sleeper, Consulting Engineers, and constitutes all that area lying eastwardly of the Building Line as hereafter defined.
Boardwalk: This shall include the term `walkway' and shall mean a walk or promenade of planking built across the dune line or berm(s) to connect the street ends or other property with the open beach. These shall be perpendicular to the western boundary of the dune zone, and in no case shall a wooden promenade parallel to or along the beach be permitted. The height, width, length and type of construction of these must be approved by the Borough Engineer.
Dunes: A hill of sand accumulated along the beach front, usually by natural means. It shall extend from the backshore to the line where the normal leeward slope intersects the established grade of the hinterland.
*486 Dune Area: The area actually or normally occupied by dunes. For purposes of this Ordinance it shall be construed to include its actual dimensions or according to a computed profile with a height of 14' above mean sea level, a crest of 20' and a leeward slope of 1:5, whichever shall be greater, but not greater than 50' from the average seaward side of the dune crest as computed by the Borough Engineer and provided further that the leeward slope shall in no case be made steeper than 1:5.
Dune Line: This shall mean a row of dunes, which may blend in with a berm, or berms, which blend in with each other, are roughly parallel to the ocean, and serve as a protective barrier against the elements.
Foreshore: The part of the shore, lying between the crest of the seaward berm and the ordinary low water mark, that is ordinarily traversed by the uprush and backrush of the waves.
Mean Sea Level: This shall include the term `sea level' and shall refer to the 1929 Sea Level Datum established by the U.S. Coast and Geodetic Survey, or, such other datum as may be established by the U.S. Army Corps of Engineers or other properly authorized agencies.
Natural Dune: A dune created by natural forces, or one that has developed the contours, vegetation, root systems, etc., characteristic of dunes so created.
Natural Vegetation: This shall include the terms `native vegetation' or `indigenous vegetation.' Specifically it shall mean such plants as beachgrass (Ammophila breviligulata), dusty miller (Artiemisia stelleriana), hudsonia (Hudsonia tomentosa), sea rocket (Cakile endentula), seaside goldenrod (Solidago sempervirens), bayberry (Myrica Pennsylvanica), or beach plum (Prunus maritima) which normally grow, or may be planted on the slopes of dunes or behind them; no distinction is made as to how such plants are introduced into their locations.
Sand Fence: This shall include the term `snow fence' and may mean either of two types of barricade established in a line or a pattern to accumulate sand and aid in the formation of a dune.
(a) brush type This consists of dead bushes, trees, reeds or similar debris collected in bundles and fixed by stakes or similar means.
(b) picket type This shall be the commercial variety of light wooden fence, held together by wire and secured by posts.
Slope, leeward: This shall be the face or surface of the dune or berm going from its crest or plateau away from the ocean.
Bulkhead Line and Building Line: The lines so designated on maps entitled Bulkhead and Building Line at Atlantic Ocean, Chatsworth Avenue to North Borough Line, Borough of Beach Haven, Ocean County, New Jersey, and Bulkhead and Building Line at Atlantic Ocean, Chatsworth Avenue to South Borough Line, Borough of Beach Haven, Ocean County, New Jersey, both prepared by Taylor, Wiseman, Taylor and Sleeper, Consulting Engineers, dated June 1964 and on file in the office of the Borough Clerk.
*487 SECTION 4. A. This Ordinance shall be applicable to the beach-dune area as hereinbefore defined.
B. No construction of any sort shall be allowed in the foreshore or backshore areas thereof excepting protective works undertaken by the Borough with the approval of the Bureau of Navigation of the State of New Jersey and/or the U.S. Army Corps of Engineers, as applicable.
C. No construction of any sort shall be allowed in the remainder of the Beach-Dune Area except the following:
1. Any use mentioned in paragraph B above.
2. Boardwalks and steps to permit access across the dunes or berms to the open beach, without damage to the dunes themselves.
3. Sand fences to encourage the accumulation of sand.
4. Pavilions or similar small platforms of less than 300 square feet in area, provided they do not have more than 40% solid walls, are mounted on suitable pilings, and the area for 20 feet around them is suitably planted with beach grass or other natural vegetation capable of stabilizing the sand in such area, provided further it shall be established to the satisfaction of the Borough Engineer that the proposed design and construction methods as applied to the particular site situation and time will not:
(a) unreasonably disturb the existing dunes.
(b) be likely to create wind currents detrimental to the existing dunes.
(c) be likely to create, increase, or prolong any other hazard.
The design and construction of any such pavilion or platform shall include any feature, device or provision required by the Borough Engineer to carry out the intent of this Ordinance.
5. A bulkhead designed to replace or supplement dunes as herein described, provided that, before any permit shall issue or be effective for the construction of any such bulkhead it shall be demonstrated by competent engineering studies and design that such bulkhead will:
(a) In every respect provide as much protection as the dunes intended to be in such area, in optimum condition, would provide.
(b) Create, increase, or prolong no condition likely to be detrimental to the maintenance of an adequate dune line.
(c) Conform adequately with the overall beach protection plans of the Borough, the Bureau of Navigation, and the U.S. Army Corps of Engineers.
(d) No bulkhead shall be constructed eastwardly of the bulkhead line as defined in Section 3 hereof.
The Governing Body shall conduct or require such hearings, and the production of such proofs as it shall reasonably consider necessary to establish the foregoing.
D. Access to the open beach in this zone shall be obtained only across street ends or along properly constructed and authorized boardwalks and steps. Where boardwalks and steps are constructed in street end extensions, access shall be across such boardwalks and steps only.
*488 E. The Borough may erect or require the construction of fencing along the western limits of the backshore and dune areas and provide or require suitable markings to identify the same. Persons may enter such areas only to carry out the purposes of this Ordinance. Where walkways or boardwalks exist, the same shall be suitably bordered with fences to prevent damage to the dunes or berms which they cross.
F. No individual, firm or corporation shall authorize or participate in any manner in the moving or displacement of sand within the beach-dune area unless a permit therefor shall have been issued pursuant to an application in writing to the Board of Commissioners. Said application shall contain the following information.
1. Name and address of the applicant.
2. Location of sand to be moved or displaced.
3. The nature and purpose of the proposed moving or displacement.
4. Proposed method by which the applicant desires to move or displace the same, including a description of the equipment, machinery or other apparatus to be used.
5. Estimate in terms of cubic yards as to the quantity of sand to be moved or displaced.
6. Such other information as may be required by the Board of Commissioners.
No such permit shall be issued without a determination by the Board of Commissioners based upon an inspection of the area involved and a report thereon by the Borough Engineer that such removal will not create or increase a danger or hazard to life or property. No permit will be granted if the proposed moving or displacement will:
1. Adversely affect the littoral drift on the beach-dune area.
2. Result in a reduction of dune protection and the dune-area as defined in Section 3 of this Ordinance; and
3. Interfere with the general configuration of the beach-dune area of the subject property or neighboring properties.
G. No permit will be granted and it shall be unlawful for any individual, firm or corporation to authorize or participate in:
1. The removal of sand from the beach-dune area or from any street end.
2. The removal or destruction of natural vegetation within the beach-dune area.
H. Where by the action of high winds and/or tides, sand is blown or washed upon the lands, including street ends, lying westwardly from the dune line, such sand shall not be removed from said lands unless a permit therefor shall have been issued pursuant to and in full compliance with the requirements set out in Paragraph F above."
Under the amended dune ordinance there is created a Foreshore Area encompassing the lands between the mean low and high water lines. Landward of the Foreshore lies a Backshore Area which extends from the mean high water line to a Bulkhead *489 Line. The Bulkhead Line was established by and is shown on a map prepared by Wiseman, Taylor and Sleeper, consulting engineers, which map is incorporated into the ordinance by reference. Landward and 20 feet distant from the Bulkhead Line lies a Building Line also established by said engineers and shown on said map. The stretch of land lying between the Bulkhead and Building Lines is designated as a Dune Area.
From the mean low water line to the Building Line, no construction is permitted except for fences, sand fences, boardwalks and steps to permit access to the beach over the Dune Area, pavilions or similar small platforms of less than 300 square feet, and bulkheads. Plaintiffs' first tract is almost entirely oceanward of the Building Line. Although the second tract lies on both sides of the Building Line the residence constructed on said tract lies wholly landward. The Building Line cuts through the third tract in such a way as to diagonally bisect the apartment house from its southeast to its northwest corner. The fourth tract of land is completely oceanward of the Building Line. In brief, plaintiffs own property on both sides of the Building Line.
Plaintiffs argue that the ordinance, as applied to them, constitutes a taking of their property for public purposes without just compensation. They rationalize that the regulations are so onerous that the uses to which their lands may now be put are minimal. They conclude that this barring of any real beneficial use constitutes a taking under the police power and is unconstitutional. They argue as well that the ordinance is unreasonable, vague and indefinite both in purpose and standards and hence unconstitutional.
Generally, it must be recognized that private property cannot be taken for public use without compensation. N.J. Const., Art. 1, par. 20; U.S. Const. Amend. XIV.
Ordinarily the question arises in eminent domain cases where the property has been taken directly. However, the right to compensation has been held as viable where the property *490 has been indirectly taken through excessive regulation under the police power.
In Morris County Land, etc. v. Parsippany-Troy Hills Tp., 40 N.J. 539 (1963), Mr. Justice Hall said, at p. 554:
"* * * The measures here adopted to accomplish public benefits do not amount to a direct or outright taking, as were those struck down in Grosso v. Board of Adjustment of Millburn Township, 137 N.J.L. 630 (Sup. Ct. 1948), where use of the plaintiff's property was precluded by placing the lot in the bed of a proposed street on the official map; in Hager v. Louisville & Jefferson County Planning & Zoning Commission, 261 S.W.2d 619 (Ky. Ct. App. 1953), where the plaintiff's land was rendered useless by zoning it as ponding areas for temporary storage basins in accordance with a flood control plant; and in Miller v. City of Beaver Falls, 368 Pa. 189, 82 A.2d 34 (Sup. Ct. 1951), where private utilization of the tract was inhibited for a period of years, pursuant to a statute, by its inclusion in a territory encompassed by an ordinance adopting a general plan for present and future parks.
But a taking may as well occur indirectly through excessive regulation under the police power. Thus, in Yara Engineering Corp. v. City of Newark, 132 N.J.L. 370 (Sup. Ct. 1945), a so-called airport zoning ordinance which restricted the height of structures within designated distances of an airport and otherwise regulated use of such property so as not to endanger or interfere with the landing or take-off of aircraft, was held unconstitutional as amounting to an appropriation of rights in private property which could only be acquired by eminent domain. And in Joint Meeting of the City of Plainfield v. Borough of Middlesex, 69 N.J. Super. 136 (Law Div. 1961), defendant zoned plaintiff's property exclusively for school, park and playground use as a method of depreciating its value for purposes of municipal purchase. The zoning was held invalid as unconstitutionally depriving the owner of the full value of its property. The universal truth of the pithy observation of Mr. Justice Holmes in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S.Ct. 158, 160, 67 L.Ed. 322, 326 (1922), must not be disregarded:
`The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking. * * * We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.'"
The problem of how far a governmental agency may restrict the use of lands without breaching the constitutional *491 mandates against taking without compensation is a most confused and troublesome one. It is unclear from the cases when the economic loss suffered by a private citizen ceases to be regarded as a mere incident of the lawful exercise of police power and becomes an unconstitutional deprivation of property. No plain and catholic formula exists to ascertain the outside limits to which a regulation upon the use of land under the police power without compensation may extend. United States v. Caltex, Inc., 344 U.S. 149, 156, 73 S.Ct. 200, 97 L.Ed. 157, 163 (1952); Goldblatt v. Town of Hempstead, 369 U.S. 590, 594, 82 S.Ct. 987, 8 L.Ed.2d 130 (1962); Sax, "Taking and the Police Power," 74 Yale L.J. 36 (1964); Dunham, "Griggs v. Allegheny County in Perspective; Thirty Years of Supreme Court Expropriation Law," 1962 Supreme Court Review 63. We, however, do not reach this problem in the case sub judice.
Here, plaintiffs assert that the ordinance is unconstitutional because if the regulations were enforced against their particularly described land they would be deprived of its use. No objection is grounded on an arbitrary or unreasonable exercise of police power because of the lack of necessity for action or erroneous means adopted to accomplish that result. They do not contest either the municipal finding that a condition exists which constitutes a present public danger or that the means set forth in the ordinance for alleviating or remedying that condition are suitable for the accomplishment of that purpose, nor do they suggest any other effective or less burdensome means capable of counteracting the danger. Rather, the contest of the constitutionality is based solely on the impact that the regulations have upon the useability of plaintiffs' lands.
To sustain such an attack, the burden is cast upon a plaintiff to prove that the ordinance unduly burdens his beneficial use of the land. Goldblatt v. Hempstead, 369 U.S. 590, 82 S.Ct. 987, 8 L.Ed.2d 130 (1962). It follows that an essential element of plaintiff's proof is the existence of *492 some present or potential beneficial use of which he has been deprived.
Plaintiffs failed to adduce proof of any economic use to which the property could be put. The borough, on the other hand, adduced unrebutted proof that it would be unsafe to construct houses oceanward of the building line (apparently the only use to which lands similarly located in defendant municipality have been put), because of the possibility that they would be destroyed during a severe storm a result which occurred during the storm of March 1962. Additionally, defendant submitted proof that there was great peril to life and health arising through the likely destruction of streets, sewer, water and gas mains, and electric power lines in the proscribed area in an ordinary storm. The gist of this testimony was that such regulation prescribed only such conduct as good husbandry would dictate that plaintiffs should themselves impose on the use of their own lands. Consequently, we find that plaintiffs did not sustain the burden of proving that the ordinance resulted in a taking of any beneficial economic use of their lands.
Plaintiffs additionally argue that the denial of the right of promiscuous pedestrian crossing of the dunes and the obligation to construct boardwalks or steps for access to the beach are an unlawful taking. The answer to that contention is that the restriction is sustained by the proof as necessary to maintain a dune line and the curtailment of plaintiffs use of their land in that respect is also de minimis, and must be suffered in the interest of public good. Fred v. Mayor and Council, Old Tappan Borough, 10 N.J. 515 (1952).
Plaintiffs also assert that the ordinance prevents the use of so much of their apartment house as lies within the Dune Area. The ordinance was not intended to nor does it apply to the use and occupancy of buildings existing on its effective date and lying within the Dune Area. It is prospective only and relates to construction thereafter undertaken.
*493 Plaintiffs have failed to demonstrate that the ordinances result in a taking and hence are unconstitutional.[1]
We come to plaintiffs' final argument that the ordinances are unreasonable and void because they are indefinite both in standards and purposes.
They point first to the definitions as not setting forth tests with mathematical certainty. Plaintiffs seem to object to the ordinance because the various zones are not described by metes and bounds. The very nature of the subject matter of the definitions prevents more specific language than that employed. The shifting and unstable high water line and Dune Area are not susceptible of more particular description. The definitions are sufficiently clear and definite to furnish adequate information as to what was intended and to act as a restraint against arbitrary enforcement.
The standards furnished by the ordinance for the guidance of the borough engineer in passing upon an application for leave to erect one of the permitted types of construction which plaintiffs secondly argue are vague and uncertain, although in general terms, are also as precise as the situation permits. The ordinances furnish an adequate standard against which to measure official action and to prevent the exercise of unbridled and arbitrary power in the enforcement thereof by the municipal government. See Ward v. Scott, 11 N.J. 117, 123 (1952); Bechler v. Parsekian, 36 N.J. 242, 255 (1961); Switz v. Kingsley, 37 N.J. 566, 581 (1962).
*494 Affirmed without prejudice, however, to any further proceedings based upon a claim and showing of an actual taking of a beneficial use.
HALL, J., concurring in result.
For affirmance Chief Justice WEINTRAUB and Justices JACOBS, FRANCIS, PROCTOR, HALL, SCHETTINO and HANEMAN 7.
For reversal None.
NOTES
[1] We have not mentioned Lorio v. Sea Isle City, 88 N.J. Super. 506 (Law Div. 1965), where a trial court held there was a taking requiring condemnation by reason of governmental construction of a protective sand dune on the plaintiffs' property. Beyond the conclusory statement that the dune denied all use of the land, no facts are given in the opinion as to the nature or location of the property, the extent of the dune thereon or what beneficial use the property was or could be put to previously which is now prevented. We therefore express no view on the result there reached or the relation of the decision to what we have said in the instant case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919096/ | 218 A.2d 487 (1966)
POLAND TELEPHONE COMPANY
v.
The PINE TREE TEL. & TEL. CO.
Supreme Judicial Court of Maine.
April 5, 1966.
Skelton, Taintor & Abbott, by Frederick G. Taintor, Lewiston, for plaintiff.
McLean, Southard & Hunt, by Frank E. Southard, Jr., Augusta, for defendant.
Before WILLIAMSON, C. J., and WEBBER, TAPLEY, MARDEN, RUDMAN and DUFRESNE, JJ.
WILLIAMSON, Chief Justice.
The Pine Tree Telephone and Telegraph Company (Pine Tree) appeals from the denial by the Public Utilities Commission of its request for an order that Poland Telephone Company (Poland) cease and desist from providing telephone service in a certain area (the disputed area) in Gray. The Commission in its decree said: "* * * we find that the Commission has no statutory authority to issue any order to any utility created by private and special act of the legislature and issued a franchise thereunder, to cease and desist from providing a service so authorized within its franchised area."
The facts are not in dispute. Poland first initiated service into the disputed area in 1927 and is at the present time providing the only available telephone service. Pine Tree has furnished telephone service in the Town of Gray since before 1927, but not within the disputed area, and states that it is willing and able to provide service therein. It contends that the service by Poland in Gray from its inception has been unlawful.
Pine Tree is a corporation organized in 1899 under the general laws of the State relating to the incorporation and control *488 of telephone and telegraph companies. P. L.1895, c. 103. Its authority to serve Gray is unquestioned.
Poland was chartered by special act of the Legislature, P. & S.L.1901, c. 322, § 2, which provides as follows:
"Section 2. Said corporation is hereby authorized to construct, own, maintain and operate telephone line or lines anywhere in the counties of Androscoggin, Oxford and Cumberland in the state of Maine, having obtained consent of the several municipalities, and said company shall have a right to locate and construct its lines upon and along any public highway or bridge in said counties, but in such a manner as not to incommode or endanger the customary public use thereof." (Gray is within Cumberland County.)
The pertinent statutes are as follows:
"§ 2301. Organization
Corporations for the operation of telegraphs or telephones, and corporations for the operation of both telegraphs and telephones, and corporations for the transmission of television signals by wire, and corporations for the purpose of making, generating, selling, distributing and supplying gas or electricity, or both, for lighting, heating, manufacturing or mechanical purposes, in any city or town, or 2 or more adjoining cities or towns, within the State, or for either or any of such purposes, may be organized under Title 13, sections 71 to 79. No corporation so organized or person or association shall have authority, without the consent of the Public Utilities Commission, to furnish its service in or to any city or town in or to which another corporation, person or association is furnishing or is authorized to furnish a similar service. Any corporation authorized to make, generate, sell, distribute and supply electricity may sell and distribute electricity to any other corporation similarly authorized.
"§ 2302. Consent only after hearing
No consent, authorized in section 2301, and no license, permit or franchise shall be granted to any person, association or corporation to operate, manage or control any public utility of the kind named in section 2301 in any city or town where there is in operation a public utility engaged in similar service or authorized therefor, until the Public Utilities Commission has made a declaration, after a public hearing of all parties interested, that public convenience and necessity require such second public utility."
"§ 2303. Consent only to Maine corporations
No consent authorized in section 2301 to operate, manage or control any public utility shall be hereafter granted to a corporation unless such corporation is duly organized under the laws of this State or authorized by such laws to do business in this State." 35 M.R.S.A. §§ 2301, 2302, 2303.
The decisive question is whether Poland may provide its services in the disputed area without a certificate of public convenience and necessity issued under Section 2302 by the Commission after hearing.
In our opinion Sections 2301 and 2302 are not applicable to a corporation specially chartered by the Legislature, as is Poland. In Section 2301 the phrase "no corporation so organized" plainly refers to corporations organized under 13 M.R.S.A. §§ 71-79 (the general law). Under Section 2302 the "consent" required is only that authorized in Section 2301. The two sections must be read together. The provisions for issuance of "no license, permit or franchise" in Section 2302 are not applicable. It is with "consent" that we are concerned.
Pine Tree urges that the regulation of the telephone business requires the judgment and decision of the Public Utilities Commission with reference to the authority of a second or competitive public utility. *489 The statutes should in Pine Tree's view be so construed. In short, Pine Tree's position is that there is no difference under the second public utility section between the corporation organized under general law and the corporation, such as Poland, specially chartered by the Legislature.
The regulation of public utilities is a function of the Legislature. In 1913 broad powers were delegated to the Public Utilities Commission in "An Act to Create a Public Utilities Commission, Prescribe its Powers and Duties, and Provide for the Regulation and Control of Public Utilities." P.L.1913, c. 129. The delegation of power, however, was not in 1913, and never has been, all inclusive but limited as the statutes have from time to time provided. Auburn Water District v. Public Utilities Commission et al, 156 Me. 222, 163 A.2d 743.
Section 2301 is unchanged from Section 27 in the 1913 Act with the exception of the inclusion of "and corporations for the transmission of television signals by wire" in the first sentence, and the addition of the last sentence relating to the sale and distribution of electricity. Section 2302 is Section 28 of the 1913 Act with inconsequential changes. "No such consent" has become "no consent, authorized in Section 2301." Sections 27 and 28 of the 1913 Act come to us as Sections 2301 and 2302, unchanged in scope and meaning insofar as Pine Tree and Poland are concerned.
Prior to 1895 it would appear that all telephone companies were specially chartered by the Legislature. P.L.1895, c. 103, the first statute permitting their organization under general law, reads in part:
"Sect. 3. Corporations organized under the provisions of this act shall have authority, except as herein limited, to construct, maintain and operate its lines upon and along the route or routes and between the points stated in its certificate of incorporation. But no corporation organized hereunder shall have authority without special act of the legislature, to construct its lines along the route or routes, used or authorized to be used, by any other telegraph or telephone company, person or firm, or between points connected, or authorized to be connected, by the lines of any such company, person or firm, unless it shall first obtain the consent of such other company, person or firm." (Emphasis supplied)
The second sentence of Section 3 prohibiting construction of lines along routes of certain other companies without special act of the Legislature unless consent of the other company had been obtained was stricken from the law in 1903. P.L.1903, c. 141. In R.S.1903, c. 55, § 1, from which Section 27 of the 1913 Act was drawn, prohibition against infringement upon territories served by another utility was made applicable only to gas and electric companies. With the 1913 Act provision for consent of the Public Utilities Commission, analogous to the requirement of a special act of the Legislature or consent of a competing company, was made applicable to corporations organized under general law and to persons and associations.
Until the 1913 Act there is no suggestion that the Legislature had not reserved full authority over competition in telephone service. By the Act persons and associations not hitherto covered by laws relating to corporations in the field were brought within the scope of the second public utility section. We are of the opinion that in the 1913 Act the Legislature did not alter or restrict the franchise rights which had been granted by the Legislature. "But in towns where a gas or electric company is supplying, or is authorized to supply, either or both kinds of light, another corporation organized under the general law cannot operate until the Legislature has determined whether the public good requires it, and has authorized it, precisely as was done prior to 1895." Twin Village *490 Water Co. v. Damariscotta Gas Light Co., 98 Me. 325, 56 A. 1112.
The language, adding the provision for competitive service by consent, is equally applicable to the telephone company. P. L.1895, c. 103, § 3, supra.
In holding the prohibition against competition in the generation and sale of electricity did not apply to an individual, our Court said in Crawford Electric Co. v. Knox County Power Co. and Shaw, 110 Me. 285, 289, 86 A. 119:
"* * * The statute [R.S.1903, c. 55, § 1 now Sec. 2301], is confined to corporations subsequently organized under the general law and without express legislative authority."
See also Haines v. Crosby, 94 Me. 212, 47 A. 137, and East Boothbay Water Dist. v. Inhabitants of Town of Boothbay Harbor, 158 Me. 32, 177 A.2d 659.
The distinction between the telephone company specially chartered by the Legislature and that organized under general law has continued from 1913. In 1955, for example, the Legislature authorized the Public Utilities Commission to extend the service of a public utility beyond the territorial limitations of the specal act of the Legislature by which it was organized. 35 M.R.S.A. § 294. The statute provides, it may be noted, for the extension but not for the restriction of the authorized service area.
Section 2303 (Section 29 in the 1913 Act) is said to compel the construction of Sections 2301 and 2302 to cover Poland. We are of the view, however, that the limitation of Section 2301 to "No corporation so organized" eliminates effectively the corporation authorized under special act of the Legislature from its operation. We need not read Section 2303 to create a confusion not otherwise existing in Sections 2301 and 2302.
We may readily agree that a neat and orderly system of public utility regulation covering service of a second public utility in a city or town in which there is a public utility engaged in similar service or authorized therefor, should be applicable to the utility, as here Poland, created under special act of the Legislature. It seems strange to us, accustomed to the regulation of public utilities by a commission for half a century, that such provision was not made. The statute, however, was not so written in 1913 and no significant changes have since been made.
Poland does not escape regulation by the Public Utilities Commission by virtue of its charter. What it gained from the Legislature, and what is not available to the utility organized under general law, is the right to serve competitively within the area covered by its charter without consent of the Commission.
Poland comes within the following definitions which have remained without significant change since 1913.
35 M.R.S.A. § 15 provides:
"13. Public utility. `Public utility' in-includes * * * telephone company * * *, as those terms are defined in this section, and each thereof is declared to be a public utility and to be subject to the jurisdiction, control and regulation of the commission, and to chapters 1 to 17."
* * * * * *
"19. Telephone company. `Telephone company' includes every corporation or person, their lessees, trustees, receivers or trustees appointed by any court whatsoever, owning, controlling, operating or managing any telephone line for compensation within this State."
It does not follow, in our view, from the definitions that the language of Sections 2301 and 2302 should be construed to extend the requirements of "consent" beyond corporations organized under the general law.
*491 Pine Tree, on the record before us, has not complained of the service of Poland in the disputed area until now. Poland suggests that Pine Tree has waived any right to object to the service in light of this long period of nearly forty years of allegedly unlawful intrusion. In reaching our decision we find it unnecessary to consider, and we have not considered, issues touching waiver or abandonment of part of its service area by Pine Tree.
A certificate or declaration of public convenience and necessity under Section 2302 is not required to permit Poland to serve the disputed area in Gray. The Commission had no jurisdiction to consider the issue, and properly denied the request for a cease and desist order.
The entry will be
Appeal denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1587989/ | 944 So. 2d 167 (2006)
THE FLORIDA BAR, Complainant,
v.
Jerry Arthur RIGGS, Sr., Respondent.
No. SC05-973.
Supreme Court of Florida.
October 5, 2006.
Rehearing Denied November 30, 2006.
*168 John F. Harkness, Jr., Executive Director, and Kenneth L. Marvin, Director of Lawyer Regulation, The Florida Bar, Tallahassee, FL; and Lorraine Christine Hoffmann and Lillian Archbold, Bar Counsel, The Florida Bar, Fort Lauderdale, FL, for Complainant.
Kevin P. Tynan of Richardson and Tynan, PLC, Tamarac, FL, for Respondent.
PER CURIAM.
We have for review a referee's report recommending that Jerry Arthur Riggs, Sr., be found guilty of professional misconduct and suspended from the practice of law for three years. We have jurisdiction. See art. V, § 15, Fla. Const. We approve the referee's findings and recommendations.
FACTS
The Florida Bar filed a complaint against Riggs, alleging that he engaged in misconduct regarding client funds, committed acts involving dishonesty and misrepresentation, and violated trust account requirements. After holding a hearing, the referee issued a report in which he made the following findings and recommendations.
Count I, Rafael and Maria Suncar. Riggs represented Rafael and Maria Suncar in a Miami-Dade County residential real estate transaction. The Suncars, through Argent Mortgage, financed the purchase of a foreclosed home from the seller's lender, U.S. Bank. In November 2003, upon receipt of the funds from Argent Mortgage, Riggs was obligated to satisfy the U.S. Bank mortgage, a second mortgage to American General Home Equity, and certain other obligations. However, after Argent Mortgage wired $171,174.58 to Riggs's trust account for the purposes of closing, he failed to pay the $118,000 U.S. Bank mortgage. Riggs did not and has not remitted these proceeds. The Suncars did not receive satisfaction of the U.S. Bank mortgage, although they did receive satisfaction on a second mortgage through American General Home Equity for $9000.
In February 2004, Riggs learned that a third-party bidder was attempting to purchase the Suncars' home in accordance with U.S. Bank's foreclosure. Riggs contacted the Attorneys' Title Insurance Fund (ATIF), of which he was a member, to inform it that he no longer possessed the Suncars' funds to satisfy the U.S. Bank mortgage. He claimed that a dishonest employee had victimized him. After numerous hearings, ATIF satisfied the U.S. Bank mortgage and suspended Riggs's ability to underwrite title insurance. Riggs has repaid ATIF approximately $10,000 of the $118,000 debt.
Based on these findings, the referee found that Riggs violated the following provisions of the Rules Regulating the Florida Bar: rules 4-1.3(a lawyer shall act with reasonable diligence and promptness when representing a client); 4-8.4(c) (a lawyer shall not engage in conduct involving dishonesty, fraud, deceit, or misrepresentation); 5-1.1(b)(client money or other property that the lawyer has in his control, which is not subject to setoff for attorneys fees, shall be accounted for and delivered to the client; if not, it shall be deemed conversion); and 5-1.1(e)(upon receiving *169 client funds, the lawyer shall promptly notify the client and render full accounting).
Count II, Other Transactions. After Riggs failed to respond to the Bar's request for his Bank of America (Bank) records for his "Client Account," the Bar subpoenaed the Bank. Riggs requested that the Bank deny the requested records. Thereafter, Riggs sought representation by an attorney, who tendered some of the trust account records to the Bar and lifted the restrictions on the Bank's subpoena. As a result, the Bar completed an audit reviewing Riggs's bank accounts, but primarily reconstructing his real estate trust account and IOTA trust account for the period of October 2002 through December 2003.
The Bar's audit revealed various incidents of account mishandling. Based solely on the Suncar matter, there was a $108,836 shortage in Riggs's real estate trust account as of December 2003. The real estate trust account only had a balance of $15,194, while Riggs still had a $124,030.71 liability to the Suncars. Also, Riggs failed to remit over $1300 in insurance concerning another matter, identified as the "Batista/Rutledge" closing, which he handled in December 2003. Furthermore, Riggs deposited several "fees" or "attorney fees" checks into the trust accounts during the audit period. Depositing earned fees into a trust account is a violation of the Rules Regulating Trust Accounts. Additionally, Riggs deposited checks concerning personal matters into his real estate trust account. Riggs paid personal expenses totaling $18,959 from his trust accounts, including payments for employee salaries, furniture, office equipment, automotive repairs, cabinets, and a gift to a relative. The audit also revealed Riggs transferred and commingled funds between multiple accounts for no apparent reason. For example, Riggs transferred a $4000 fee related to the "Murphy case" from the IOTA account to the real estate trust account without explanation. Riggs also deposited escrow funds from various other clients into his operating account and savings account and made numerous online transfers between accounts.
Because the account transfers were not fully identified by name or purpose, the Bar's auditor was sometimes unable to identify the case related to the transfers. As a result, the Bar requested by letter in August 2004 that Riggs identify the client names and matters relating to the transfers. Riggs did not provide a complete written response. Thus, Riggs's noncompliance with the Bar's request renders him in violation of rule 4-8.4(g)(a lawyer shall not fail to respond in writing to any official inquiry by bar counsel or disciplinary agency).
In addition, during December 2003 to March 2004, Riggs's trust account balances were negative, sometimes by over $9700. As a result, trust account checks were returned for insufficient funds. Riggs had overdraft protection on his real estate trust account, which was linked to his savings account. The Florida Bar Rules Regulating Trust Accounts prohibit overdraft protection. Rule 5-1.2(c)(4) states that a lawyer shall authorize and request any bank where the lawyer is a signatory on a trust account to notify the Bar's staff counsel of any trust check returned due to insufficient or uncollected funds. Riggs did not direct the Bank to follow this requirement. Also, Riggs did not notify the Bar of any trust check returned for insufficient or uncollected funds, as is required pursuant to the rules. Although Riggs was not in compliance with the rules applicable to lawyer trust accounts, he certified on his 2001-2002 and 2003-2004 Florida Bar Annual Membership Fees Statements *170 that he read and was in compliance with such rules.
Based on these facts, the referee found Riggs violated rules 4-1.15 (a lawyer shall comply with the Florida Bar Rules Regulating Trust Accounts), 4-8.4(c)(a lawyer shall not engage in conduct involving dishonesty, fraud, deceit, or misrepresentation), 5-1.1(a)(1)(no commingling of funds), 5-1.1(g)(2)(all nominal and client short-term funds shall be placed in an IOTA and each Florida lawyer must annually certify, in writing, that he is in compliance with or exempt from the rule provisions), and 5-1.2(b)(1) and (c)(noncompliance with minimum trust accounting records).
Riggs testified that the trust account shortages were due to a $13,902.87 overpayment to Dr. Rex Allen for a real estate closing and the misconduct of his former employee, Tammy Campbell. Riggs claimed Campbell stole the account funds. The referee did not find that Campbell was responsible for the missing funds. The facts found by the referee demonstrate that Riggs handled the refinancing of Campbell's home in December 2003, approximately one month after the Suncars' closing. Riggs asserted that Campbell was able to steal the funds due to the refinancing. To support this argument, he testified that he filed an incident report with the police alleging Campbell engaged in theft and forgery. However, Riggs did not file the report with police until August 2005, which was two months after the Bar filed the disciplinary complaint and over eighteen months after the Suncars' funds disappeared in 2003. After considering the evidence, the referee concluded that Riggs failed to adequately supervise Campbell and failed to properly maintain his trust account.
Sanction. With regard to recommending a disciplinary sanction, the referee found three mitigating and three aggravating factors. In aggravation, the referee found: (1) prior discipline; (2) dishonest or selfish motive; and (3) substantial experience in the practice of law. In mitigation, the referee found: (1) character or reputation; (2) imposition of other penalties or sanctions; and (3) remorse.
As to discipline, the referee recommended that Riggs (1) receive a three-year suspension; (2) undergo probation for three years from the date of reinstatement, during which he must hire a certified public accountant to conduct monthly reviews of his trust accounts, submit quarterly reports to the Bar certifying that he is in compliance with trust accounting requirements, submit to random audits of his accounts by the Bar, and bear the costs associated with these terms of probation; (3) pay for and attend The Florida Bar's Trust Accounting Workshop as a condition precedent to reinstatement; and (4) pay the Bar's costs of $13,729.65.
Riggs petitioned for review of the referee's report.
ANALYSIS
First, Riggs challenges the referee's findings of fact and conclusion that he violated rule 4-8.4(c)(a lawyer shall not engage in conduct involving dishonesty, fraud, deceit or misrepresentation). Riggs claims the Suncar mortgage was not satisfied because of insufficient funds in the trust account. He continues to argue the shortage was due to theft by his former paralegal, Campbell, and an overpayment to Dr. Allen. Although Riggs admits that he had an obligation to properly supervise Campbell, he asserts that he should not be found guilty of violating rule 4-8.4(c) because his failure to supervise Campbell was unintentional conduct.
Generally, a referee's finding of fact regarding guilt carries a presumption of correctness that should be upheld unless *171 clearly erroneous or without record support. Fla. Bar v. Vining, 761 So. 2d 1044, 1047 (Fla.2000). Riggs concedes that he is guilty of some rule violations involving commingled funds, trust account procedures, and record maintenance. However, Riggs disputes the referee's finding of a violation of rule 4-8.4(c). He claims that a rule 4-8.4(c) violation requires intent, and he asserts that he did not have intent. We agree that intent is an element of a violation of rule 4-8.4(c). We disagree, however, with Riggs's narrow interpretation of intent under the rule. Further, and contrary to Riggs's continuing arguments, the referee did not find that Campbell stole the funds.
In Florida Bar v. Fredericks, 731 So. 2d 1249 (Fla.1999), the Court stated that "in order to satisfy the element of intent it must only be shown that the conduct was deliberate or knowing." Id. at 1252; see also Fla. Bar v. Brown, 905 So. 2d 76, 81 (Fla.2005); Fla. Bar v. Barley, 831 So. 2d 163, 169 (Fla.2002). In Fredericks, the motive behind the attorney's action was not the determinative factor. Rather, the issue was whether the attorney deliberately or knowingly engaged in the activity in question. Here, Riggs's failure to supervise his employee constitutes intent because he knowingly assigned his trust account responsibilities to Campbell and then failed to manage her activities. Knowingly or negligently engaging in sloppy bookkeeping amounts to intent under rule 4-8.4(c). See Fla. Bar v. Smith, 866 So. 2d 41, 46 (Fla.2004) (holding that the respondent had the requisite intent and therefore violated rule 4-8.4(c) because she had deliberately or knowingly engaged in negligent bookkeeping). Thus, the referee's finding that Riggs violated rule 4-8.4(c) is supported by evidence in the record.
Second, Riggs argues that the referee's recommended sanction of a three-year suspension is not supported by existing case law. He claims that a ninety-day suspension is appropriate. He bases this argument on his version of the facts, which is that Campbell stole the funds. As stated above, the referee did not find that Campbell committed theft of the funds. Further, the record does not clearly demonstrate that she absconded with the account money.
In reviewing a referee's recommended discipline, this Court's scope of review is broader than that afforded to the referee's findings of fact because, ultimately, it is the Court's responsibility to order the appropriate sanction. See Fla. Bar v. Anderson, 538 So. 2d 852, 854 (Fla.1989); see also art. V, § 15, Fla. Const. However, generally speaking, this Court will not second-guess the referee's recommended discipline as long as it has a reasonable basis in existing case law and the Florida Standards for Imposing Lawyer Sanctions. See Fla. Bar v. Temmer, 753 So. 2d 555, 558 (Fla.1999).
It is well settled that the misuse of funds held in trust is one of the most serious offenses a lawyer can commit and that disbarment is presumed to be the appropriate sanction. Fla. Bar v. Travis, 765 So. 2d 689, 691 (Fla.2000); see also Fla. Bar v. Tillman, 682 So. 2d 542 (Fla.1996). However, there are cases involving attorney misconduct relating to client funds in which the attorneys were disciplined by lengthy suspensions instead of disbarments. See Fla. Bar v. Whigham, 525 So. 2d 873 (Fla.1988)(three-year suspension). In light of the facts of this case, a lengthy suspension is the appropriate sanction.
The record indicates that Riggs commingled funds, maintained shortages in the accounts, and failed to keep adequate records. Further, the record demonstrates that Riggs failed to adequately supervise Campbell and failed to properly maintain *172 his trust account. The attorney in Whigham also failed to properly manage his trust accounts; he received a three-year suspension. Because Whigham supports the instant referee's recommended sanction of a three-year suspension, the sanction has a reasonable basis in existing case law. See Fla. Bar v. Temmer, 753 So. 2d 555 (Fla.1999). Accordingly, we approve the referee's recommended discipline.
CONCLUSION
Jerry Arthur Riggs, Sr., is hereby suspended for three years, effective nunc pro tunc, May 6, 2005, the effective date of the emergency suspension in Florida Bar v. Riggs, 901 So. 2d 121 (Fla.2005)(table). Also, Riggs shall pay for and attend The Florida Bar's Trust Accounting Workshop as a condition precedent to reinstatement. He shall be placed on probation for three years from the date of his reinstatement, during which he must hire a certified public accountant to conduct monthly reviews of his trust accounts, submit quarterly reports to the Bar certifying that he is in compliance with trust accounting requirements, submit to random audits of his accounts by the Bar, and bear the costs associated with these terms of probation. Riggs shall accept no new business until he is reinstated.
Judgment is entered for The Florida Bar, 651 East Jefferson Street, Tallahassee, Florida XXXXX-XXXX, for recovery of costs from Jerry Arthur Riggs, Sr., in the amount of $13,729.65, for which sum let execution issue.
It is so ordered.
LEWIS, C.J., and WELLS, ANSTEAD, PARIENTE, QUINCE, CANTERO, and BELL, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1587985/ | 33 So. 3d 1279 (2009)
Ex parte Antonio JACKSON, Jr.
(In re Antonio Jackson, Jr.
v.
State of Alabama).
1080390.
Supreme Court of Alabama.
August 28, 2009.
*1280 Erskine R. Mathis, Birmingham, for petitioner.
Troy King, atty. gen., and Michael G. Dean, asst. atty. gen., for respondent.
WOODALL, Justice.
Antonio Jackson, Jr., was convicted of the murder of Willie Jennings and was sentenced to life imprisonment. He appealed to the Court of Criminal Appeals, alleging, among other things, that the trial court had erred in overruling his motion to prohibit the State from introducing evidence of his prior conviction for the capital murder of Tavares Cotrell. The Court of Criminal Appeals affirmed the trial court's judgment, by an unpublished memorandum from which Judge Welch dissented. Jackson v. State, [Ms. CR-06-1019, September 26, 2008] 33 So. 3d 1277 (Ala.Crim. App.2008). Jackson petitioned this Court for the writ of certiorari, which we granted to address whether the Court of Criminal Appeals' judgment conflicts with Robinson v. State, 528 So. 2d 343 (Ala.Crim.App. 1986), and Averette v. State, 469 So. 2d 1371 (Ala.Crim.App.1985). We hold that it does; consequently, we reverse the judgment of the Court of Criminal Appeals and remand the case.
Facts and Procedural History
In its unpublished memorandum, the Court of Criminal Appeals provided the following facts regarding Jennings's murder:
"The evidence at trial tended to show the following: Sometime after 6:00 a.m. on December 22, 2004, Willie Jennings and his girlfriend, Ladreka Davis, saw Efferman Moore (`Efferman') and Antonio Jackson, Jr., at Western Hills Mall. Jennings told Davis that Efferman did not like him because they had disagreed `about some weed or some stuff.' Jackson had been charged with the capital murder of Jennings's cousin, Tavares Cotrell. Jennings was wearing a sweatshirt that memorialized his cousin. Jackson approached and denied committing the murder, and Jennings responded, `Man, whatever.'
"When Jennings and Davis left the mall, they saw Jackson and his girlfriend, Jerita Smith, sitting in a gray car. As they drove down Third Avenue, Davis heard bullets strike their car. She saw that a peppermint-green car with tinted windows was following them and that two people were firing from inside. Jennings attempted to elude the shooters and crashed into a fence. He fled into a nearby yard and sent Davis to find his mother. As she fled, Davis saw that Efferman was the driver of the green car, that Jackson and a man in a *1281 red toboggan hat were passengers, and that Jackson was armed with a gun. The men told Efferman to shoot Davis and put her into the car. They then stated to Jennings: `Told you you was [sic] going to get this.' Davis got a ride to the home of Jennings's mother. A few minutes earlier, a peppermint-green car with tinted windows had pulled into the driveway and had driven away. The two women went to the scene and learned that Jennings was dead.
"Sandra Meyer testified that at approximately 8:00 on the morning of December 22, 2004, she saw a brown car knock Willie Jennings down in the street. The car drove through a yard and a driveway and struck a parked car. Jennings fled, and Jackson followed him, armed with a gun. Jackson fired three shots, and two of them struck Jennings, causing him to fall. While Jennings was on the ground, Jackson kicked him in the head. Jennings died from internal injuries caused by a gunshot wound. Mrs. Meyer said that a second man was with Jackson and that a third person drove the car away. Her husband, Louie Meyer, ran outside with a rifle when he heard the shots. He saw a brown car with a small spare tire on the right front side, coming up the street. Jackson and a companion walked out and pointed guns at Mr. Meyer; he fired three shots at them; and they fled. Mr. Meyer stated that Jackson's companion was not Efferman. Shortly after the shooting, Detective Herman Harris showed two photo spreads to the Meyers. They were not able to identify pictures of Jackson and Efferman. A few weeks later, they called him to report that they had seen a photograph of Jackson in the newspaper and had recognized him as the man who killed Jennings. The defense introduced a copy of an article that appeared in the Birmingham News on January 10, 2005, which stated that Jackson and Efferman were wanted for the Jennings killing. Next to the article were photographs of both men.
"On December 30, 2004, police arrested Christopher Parson, Ronnie Ball and Darrell Moore (`Darrell'), Efferman's brother, on a robbery charge. They recovered a Bursa [brand] pistol with a missing magazine spring. That type of spring had been found near Willie Jennings's body. Forensic tests revealed that a shell casing found at the Jennings shooting had been fired from the recovered gun. Parson testified that Darrell and Ball came to his house on the morning of December 22, 2004, and told him that they had killed Willie Jennings. They said that they and Efferman chased Jennings because he had stolen a pound of marijuana from Efferman and his mother; that Efferman ran over Jennings; that Ball shot Jennings; and that they struck Jennings in the head with the gun. Parson told police that Darrell and Ball had arrived in Efferman's brown Honda [automobile] and that there was damage to the front. Darrell and Ball were arrested for Jennings's murder a few weeks before Jackson and Efferman went to trial.
"Charles Mosley (`Charles') testified that Jennings and Cotrell had sold pills for Jackson and that `the word around the street' was that Cotrell had stolen the cell phone Jackson used to make drug sales. Charles said that a few days before Cotrell's death, Jackson had threatened to kill Cotrell. The State introduced a certified copy of Jackson's conviction for the capital murder of Cotrell. Charles's brother, Larles Mosley (`Larles'), testified that he had taken some marijuana from Efferman and a woman at gunpoint; that Cotrell's father *1282 told him the marijuana belonged to Jackson; and that Ladreka Davis told him that Efferman thought Willie Jennings had taken the marijuana.
"Jackson's girlfriend, Jerita Smith, testified that Jackson was with her from the time they saw Jennings at the mall until about noon, when they heard that Jennings was dead ...."
After Jennings was killed and before the case relating to Jennings's death was tried, Jackson was convicted of the capital murder of Tavares Cotrell. Before jury selection in the case involving Jennings, Jackson moved the trial court to prohibit the State from introducing any evidence related to his capital-murder conviction. Jackson argued that
"such evidence ... is inadmissible by virtue of the general exclusionary rule of character.... [Jackson's] character is not in evidence and the fact that he was convicted of that other case, or even charged with it, ... is highly prejudicial. The prejudice far outweighs any probative value ... that the State may derive from it."
The State responded that "the murder [of Tavares Cotrell] is so intertwined in this murder it's virtually impossible to try the case without bringing up that case"; that the evidence of Jackson's capital-murder conviction was related to motive in this case; and that the evidence was not so prejudicial to Jackson that it should be excluded. In reply, Jackson argued that nothing in this case would "have anything to do with whether Willie Jennings was a witness in the other case or whether the fact that Willie Jennings [was] wearing that shirt [depicting Tavares Cotrell] had anything to do with him getting killed." The trial court indicated that it would rule on the admissibility of the evidence of Jackson's conviction for Cotrell's murder later, and it instructed the parties not to mention the conviction or the conversation between Jennings and Jackson at the mall during voir dire examination of the jury venire.
After voir dire examination, but before the State had called its first witness, Jackson renewed his motion in limine. The State again argued that "there is absolutely no way ... that we can try this case and not talk about [Cotrell's] murder, because it goes to motive all the way through the case. That's how everything started." Jackson continued to argue that there was no connection between Cotrell's death and Jennings's death and that evidence of his prior conviction for Cotrell's death would be extremely prejudicial to him in the trial for Jennings's death. The trial court then denied Jackson's motion in limine, indicating that it would allow the evidence to be admitted. However, the trial court instructed Jackson to renew his objection when the evidence was offered.
Jackson renewed his objection to evidence of his capital-murder conviction just before the State called Charles Mosley to testify. The State had indicated that Mosley would "explain why Antonio Jackson killed Tavares Cotrell." Jackson objected, arguing again that "the prejudicial value [of the evidence relating to Cotrell's killing] far outweigh[ed] any probative value it may have." Jackson further argued that he was
"being attacked primarily on ... [his] character, in an effort to say that `If he did this one time, now, he has probably done it again.' ... [T]hey [the State] are saying that they are bringing this... evidence in to prove motive but they have no evidence, whatsoever, of motive, as far as this case is concerned."
The trial court again overruled the objection, stating that it had made its ruling and would allow the evidence to be introduced. The State then solicited testimony from *1283 Mosley regarding Jackson's conviction for the capital murder of Tavares Cotrell, introducing into evidence a certified copy of Jackson's capital-murder conviction.
Jackson was convicted of murdering Jennings. He appealed that conviction to the Court of Criminal Appeals, arguing, among other things, that the trial court had erred in allowing the State to introduce evidence of his prior conviction for capital murder. The Court of Criminal Appeals affirmed the trial court's judgment, concluding as follows in its unpublished memorandum:
"Rule 404(b), Ala. R. Evid., provides, in pertinent part: `Evidence of other crimes ... is not admissible to prove the character of a person in order to show action in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, preparation, plan, knowledge, identity, or absence of mistake or accident....' The murder conviction tended to show that Jackson had a motive to kill Willie Jennings because, shortly before the shooting, the two of them had a confrontation about the Cotrell case.
"....
"The evidence of the Cotrell murder was necessary because Jackson's girlfriend stated that the meeting with Jennings in the mall was not a `confrontation.' She also stated that Jackson was with her when Jennings was killed. The evidence was not unfairly prejudicial because the State did not offer any details that could have inflamed the jury and the trial court specifically instructed [the jury] that [it] could consider [the evidence] only as evidence of motive. Therefore, the trial court did not abuse its discretion in admitting evidence of Jackson's conviction for killing Cotrell."
We granted Jackson's petition for the writ of certiorari to determine whether the Court of Criminal Appeals' conclusion conflicts with its holdings in Robinson and Averette.
Analysis
Jackson argues that the judgment of the Court of Criminal Appeals conflicts with Robinson and Averette, because, he again argues, the trial court erred in allowing the State to "introduce ... [his] prior conviction for capital murder as an improper attack on his character." Jackson's brief, at 16. Before we reach the merits of Jackson's argument, however, we will address the State's argument that Jackson did not preserve this issue for appellate review.
I.
We have stated:
"`An appellant who suffers an adverse ruling on a motion to exclude evidence, made in limine, preserves this adverse ruling for post-judgment and appellate review only if he objects to the introduction of the proffered evidence and assigns specific grounds therefor at the time of the trial, unless he has obtained the express acquiescence of the trial court that subsequent objection to evidence when it is proffered at trial and assignment of grounds therefor are not necessary.'"
Baldwin County Elec. Membership Corp. v. City of Fairhope, 999 So. 2d 448, 454 (Ala.2008) (quoting Owens-Corning Fiberglass Corp. v. James, 646 So. 2d 669, 673 (Ala.1994)). "[U]nless the trial court's ruling on a motion in limine is absolute or unconditional, the ruling does not preserve the issue for appeal." Perry v. Brakefield, 534 So. 2d 602, 606 (Ala.1988).
The State argues that Jackson failed to preserve this issue for review because he did not object when Davis "testified that Jackson had approached [Jennings] *1284 and discussed the capital murder case." State's brief, at 28. We disagree. Davis testified that Jackson approached Jennings at the mall and told Jennings that he did not kill Cotrell. Davis did not mention anything about Jackson's being charged with, tried for, or convicted of Cotrell's murder. Although Jackson initially argued to the trial court that both the conversation between Jackson and Jennings at the mall and Jackson's conviction for capital murder should be excluded, his argument to this Court is that the trial court erred in allowing the State to present evidence of his conviction. Jackson's brief, at 16. Davis provided no testimony regarding Jackson's conviction for capital murder; therefore, Jackson's failure to object to her testimony does not prevent him from presenting to this Court the issue whether the trial court erred in admitting evidence of his prior conviction.
The State also argues that Jackson has not preserved this issue for review because he failed to object "when the State actually offered ... the certified copy of his capital murder conviction." State's brief, at 28. "Thus," according to the State, "because Jackson did not renew his objection at trial, this issue was not preserved for review." Id. Again, we disagree.
The certified copy of the capital-murder conviction was introduced at the close of Charles Mosley's testimony. Immediately before Mosley's testimony, Jackson stated for the third time his objection to the introduction of evidence related to his capital-murder conviction. Jackson's counsel argued that
"the prejudicial value [of evidence of the conviction] far outweighs any probative value it may have, and I believe he is being attacked primarily on ... [his] character, in an effort to say that `If he did this one time, now, he has probably done it again.' And I think the law is contrary to that and says that the State cannot do it."
The trial court stated that it would allow the evidence to be introduced. Jackson continued to object, arguing that Mosley's testimony "has nothing to do with the facts of this case. It has nothing to do with a motive, as far as this case is concerned." The trial court responded: "I'm going to allow it in. I made my ruling." Contrary to the State's argument, it is clear that Jackson timely renewed his objections at trial, assigning specific grounds for his objections to the introduction of evidence concerning his capital-murder conviction. Nothing more was required to preserve his arguments for appellate review.
II.
We now address Jackson's argument that the Court of Criminal Appeals' judgment conflicts with that court's holdings in Robinson and Averette. In those cases, the Court of Criminal Appeals addressed the admissibility of evidence of a defendant's prior criminal acts. In Robinson, the Court of Criminal Appeals stated:
"`"On the trial of a person for the alleged commission of a particular crime, evidence of his doing another act, which itself is a crime, is not admissible if the only probative function of such evidence is to show his bad character, inclination or propensity to commit the type of crime for which he is being tried. This is a general exclusionary rule which prevents the introduction of prior criminal acts for the sole purpose of suggesting that the accused is more likely to be guilty of the crime in question."' Pope v. State, 365 So. 2d 369, 371 (Ala.Crim. App.1978), quoting C. Gamble, McElroy's Alabama Evidence § 69.01. (3d ed. 1977) `"This exclusionary rule is simply an application of the character rule which forbids the State to prove the *1285 accused's bad character by particular deeds. The basis for the rule lies in the belief that the prejudicial effect of prior crimes will far outweigh any probative value that might be gained from them. Most agree that such evidence of prior crimes has almost an irreversible impact upon the minds of the jurors."' Ex parte Arthur, 472 So. 2d 665, 668 (Ala. 1985), quoting McElroy's supra, § 69.01(1)....
"... The well-established exceptions to the exclusionary rule include: (1) relevancy to prove identity; (2) relevancy to prove res gestae; (3) relevancy to prove scienter; (4) relevancy to prove intent; (5) relevancy to show motive; (6) relevancy to prove system; (7) relevancy to prove malice; (8) relevancy to rebut special defenses; and (9) relevancy in various particular crimes. Willis v. State, 449 So. 2d 1258, 1260 (Ala.Crim. App.1984); Scott v. State, 353 So. 2d 36 (Ala.Crim.App.1977). However, the fact that evidence of a prior bad act may fit into one of these exceptions will not alone justify its admission. `"Judicial inquiry does not end with a determination that the evidence of another crime is relevant and probative of a necessary element of the charged offense. It does not suffice simply to see if the evidence is capable of being fitted within an exception to the rule. Rather, a balancing test must be applied. The evidence of another similar crime must not only be relevant, it must also be reasonably necessary to the government's case, and it must be plain, clear, and conclusive, before its probative value will be held to outweigh its potential prejudicial effects."' Averette v. State, 469 So. 2d 1371, 1374 (Ala.Crim.App.1985), quoting United States v. Turquitt, [557 F.2d 464] at 468-69 [(5th Cir.1977)]."
528 So.2d at 347. Jackson argues here, as he did at trial, that evidence of his capital-murder conviction is not related to motive or to any other exception to the general exclusionary rule and that the prejudicial effect of admitting that evidence far outweighs any probative value it might serve. We agree, and we hold that the trial court erred in denying Jackson's motion to prohibit evidence of his prior conviction.
As Jackson pointed out at trial, the only link between Cotrell's death and Jennings's death is that, on the morning he was killed, Jennings was walking at a mall, wearing a T-shirt with Cotrell's picture on it, when Jackson, who had been charged with Cotrell's murder, approached him and told him that he did not kill Cotrell. Although this conversation could be relevant to show that Jackson had a motive to kill Jennings, evidence of Jackson's capital-murder conviction for killing Cotrell which conviction occurred after Jennings was killedis irrelevant to the issue of motive in this case. Contrary to the State's argument, evidence of Jackson's conviction for Cotrell's murder is not necessary to give context to the conversation between Jennings and Jackson at the mall.[1]
Finally, even if we were to conclude that evidence of Jackson's capital-murder conviction somehow fell within one of the exceptions *1286 in Rule 404(b), Ala. R. Evid., to the general exclusionary rule, the State has not demonstrated that the evidence was reasonably necessary to its case. In fact, the State argued and presented evidence indicating that Jennings's death was related to his involvement with Jackson's illegal drug business. In order to prove a drug-related motive for the murder, it was not reasonably necessary to prove that Jackson, after Jennings's murder, was convicted of capital murder for the killing of Cotrell. Therefore, the prejudicial impact of that conviction outweighs any probative value provided by the evidence. See Robinson, 528 So.2d at 347 ("`"It does not suffice simply to see if the evidence is capable of being fitted within an exception to the rule. Rather, a balancing test must be applied. The evidence of another similar crime must not only be relevant, it must also be reasonably necessary to the government's case, and it must be plain, clear, and conclusive, before its probative value will be held to outweigh its potential prejudicial effects."'" (quoting Averette v. State, 469 So.2d at 1374, quoting in turn United States v. Turquitt, 557 F.2d 464, 468-69 (5th Cir.1977))).
We hold that the trial court exceeded its discretion in allowing the State to introduce evidence of Jackson's capital-murder conviction and that the Court of Criminal Appeals' judgment affirming the trial court's judgment conflicts with the principles set forth in Robinson and Averette. We, therefore, reverse the Court of Criminal Appeals' judgment and remand the case to that court for it to remand the case for a new trial.
REVERSED AND REMANDED.
COBB, C.J., and LYONS, STUART, SMITH, PARKER, and MURDOCK, JJ., concur.
BOLIN, J., dissents.
SHAW, J., recuses himself.[*]
NOTES
[1] The State also argues that evidence of the conviction was admissible as part of the res gestae. In Johnson v. State, 272 Ala. 633, 638, 133 So. 2d 53, 58 (1961), this Court stated: "In homicide cases all the surroundings and circumstances attending the killing, the declarations of the accused at and after the killing, and his conduct at or near the scene are admissible and form part of the res gestae." Although Jackson's statement to Jennings that he did not kill Cotrell may form part of "the surroundings and circumstances attending the killing," we cannot agree that Jackson's conviction for Cotrell's murder, which occurred after Jennings was killed, falls within that definition.
[*] Justice Shaw was a member of the Court of Criminal Appeals when that court considered this case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2194312/ | 697 N.W.2d 127 (2005)
STATE v. McKINNEY
No. 04-0543.
Court of Appeals of Iowa.
March 16, 2005.
Decision without published opinion. Reversed and Remanded. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1588925/ | 61 S.W.3d 481 (2001)
In the Interest of T.S.S., a Child.
No. 04-00-00431-CV.
Court of Appeals of Texas, San Antonio.
June 20, 2001.
Dissenting Opinion on Overruling of Rehearing October 24, 2001.
*482 Jerry N. Dennard, Reginald E. Mullins, Law Offices of Reginald Mullins, San Antonio, for Appellant.
Yvonne J. Trevino, Law Offices of Yvonne J. Trevino, James E. Monnig (Ad Litem), San Antonio, for Appellee.
Sitting: ALMA L. LÓPEZ, Justice, PAUL W. GREEN, Justice, and KAREN ANGELINI, Justice.
Dissenting Opinion on Overruling of Rehearing En Banc October 24, 2001.
OPINION
Opinion by: ALMA L. LÓPEZ, Justice.
This appeal of a summary judgment concerns a petition for voluntary termination of parental rights, filed by appellant, Franklin Simmons, alleging that he is not the biological father of T.S.S., born during his marriage to Tamara Simmons Hessler. We affirm the summary judgment.
Factual and Procedural Background
Simmons and Hessler were divorced in 1989. The decree of divorce, approved by the parties, found them to be T.S.S.'s parents, a child born of the marriage. The parents were appointed joint managing conservators and Simmons was ordered to pay child support and was granted visitation rights. In January of 1999, Hessler informed Simmons that she would seek an increase in the $300 a month support payment, since their son, now 13, had increased needs. On September 16, 1999, Simmons filed a petition to modify, seeking to change the primary residence of the child to his home and to terminate his obligation to make child support payments to the mother. Hessler agreed to the motion and an order was entered accordingly.
While T.S.S. was living with him, Simmons arranged for tests for him and T.S.S. *483 and obtained a DNA report that he claims proves that he is not the biological father of T.S.S. He requested that Hessler take T.S.S. back, which she did and subsequently filed her petition to modify, seeking to reinstate Simmons' child support obligation and to return primary residency of the child to her home. On November 23, 1999, Simmons filed a plea in abatement and a petition to terminate the parent-child relationship, seeking to voluntarily terminate his parental rights to T.S.S. because he is not the biological father and that the prior adjudication of parentage in the decree of divorce resulted from fraud. Simmons further alleged that once he learned this, his attitude toward T.S.S. changed to such an extent that it is not in the child's best interest to continue the parent-child relationship.
Hessler answered with a general denial and raised as affirmative defenses that this action was barred by the doctrines of res judicata and collateral estoppel. Following discovery, Hessler moved for summary judgment on these defenses. Simmons objected to Hessler's summary judgment evidence and filed a response supported by evidence. Visiting Judge Solomon Casseb, Jr. conducted a hearing on May 16, 2000, and granted the summary judgment on Hessler's affirmative defenses on June 12, 2000.
Standard of Review
Appellate review of a summary judgment is conducted de novo. American Broadcasting Cos. v. Gill, 6 S.W.3d 19, 27 (Tex.App.-San Antonio 1999, pet. denied). In doing so, we apply the following standards: (1) The movant has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. (2) In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true. (3) Every reasonable inference must be indulged in favor of the non-movant and doubts resolved in its favor. See Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). The dispositive question for the courts in each instance is not whether the summary judgment proof raises fact issues, but whether the summary judgment proof establishes as a matter of law that there is no genuine issue of material fact. See Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex.1970).
Simmons assigns one broad issue whether the trial court erred in granting summary judgment. See Malooly Brothers, Inc. v. Napier, 461 S.W.2d 119 (Tex. 1970). The crux of his argument is that the court erred in failing to address the best interest of the child in reaching its judgment. Simmons asserts that the doctrines of res judicata and collateral estoppel should not apply because the "best interest" issue concerning Simmons' changed attitude toward the child was never litigated. That issue, he argues, is to be determined by the trier of fact, precluding summary judgment.
Voluntary Termination
Simmons seeks to terminate his parental responsibilities under a rarely-used provision[1] of the Family Code, Section 161.005(a), which provides:
A parent may file a suit for termination of the petitioner's parent-child relationship. The court may order termination *484 if termination is in the best interest of the child.
Tex. Fam.Code § 161.005(a) (Vernon 1996). Although this provision was enacted in 1973[2], only two reported cases briefly discuss its implications. See Nichols v. Nichols, 803 S.W.2d 484 (Tex.App.-El Paso 1991, no writ); Linan v. Linan, 632 S.W.2d 155 (Tex.App.-Corpus Christi 1982, no writ). Under circumstances similar to this case, Carlene and Scott Nichols obtained an agreed decree of divorce in 1986. In the decree, the court found that the parties were the parents of a child, named the mother managing conservator, the father possessory conservator, and set child support payments. No appeal of this decree was taken. Three years later, Scott filed a petition to terminate his parent-child relationship. He alleged that he was not the biological father, that another man was, and that voluntary termination of the current relationship was in the best interest of the child. Nichols, 803 S.W.2d at 484-85. Here the similarity to this case ends. Although Carlene had been served, she did not appear at the trial. The trial court failed to appoint an ad litem and granted Scott a default judgment. The court of appeals reversed, finding the failure to appoint an ad litem to represent the best interest of the child to be fundamental error. Id. at 485.
The El Paso court of appeals construed this provision as permitting a parent to petition the court to terminate its own rights and responsibilities in the parent-child relationship, "but the petition is to be granted only if the courts finds that the termination is in the best interest of the child." Id. (emphasis added). In dicta, the court recognized that a child under such circumstances might want to raise defenses "such as res judicata or collateral attack on the prior divorce decree." Id. at 486. Although the concept is not fully developed in Nichols, the opinion implies that while "best interest" analysis is required to grant a termination, other legal doctrines, such as res judicata and collateral estoppel, may operate to bar or defeat termination.
In the Linan case, the Linans had married, adopted a child, and ultimately divorced. The father was in arrears on his child support payments when he filed a motion to terminate parental rights. See Linan, 632 S.W.2d at 155-56. The motion to voluntarily terminate parental rights was heard at the same time as the mother's motion for contempt concerning failure to make timely support payments. The trial court denied the motion for termination, found the father in contempt, but reduced his payments by $10.00 a week. Linan appealed the denial of termination raising as error an abuse of discretion and factual sufficiency. Linan claimed it was in his daughter's best interest to terminate because the mother prevented him from seeing his daughter in accordance with the visitation rights afforded him in the divorce decree. He also testified to his financial condition and his health. Under cross-examination, Linan also admitted that a termination would leave his daughter without a father and without financial support. Id. at 157 (op. on rehearing). The appellate court held that a refusal to follow the decree on visitation rights was not in itself justification for termination. Id. at 156. The issue of res judicata was not raised.
The preclusive effect of paternity findings in divorce decrees is becoming a common issue in matters raised by former husbands, usually as a defense to child *485 support litigation or by bringing a paternity suit. The vast majority of states hold that the divorce decree bars the former husband from relitigating the paternity issue.[3] In a well-reasoned opinion, the Ohio Court of Appeals, reviewing circumstances similar to those presented here, discussed the effect of declaring "static a state of facts that reliable scientific evidence contradicts." Leguillon v. Leguillon, 124 Ohio App. 3d 757, 707 N.E.2d 571 (1998)(quoting Strack v. Pelton, 70 Ohio St. 3d 172, 637 N.E.2d 914 (1994)).[4] The Strack decision placed the goal of "finality above perfection in the hierarchy of values," finding finality to be particularly compelling where determinations of parentage, visitation, and support of a minor child are involved. Strack, 637 N.E.2d at 916. Like the Leguillon court, Texas courts are not free to adopt a rule that an adjudicated father may be relieved of his support obligations anytime he comes forward with DNA evidence post-decree that tends to exclude him as the biological father. This argument is all the more compelling where the adjudicated father has had reason to suspect paternity from the outset. Accord Leguillon, 707 N.E.2d at 577 & n. 5.
Collateral Estoppel
To bar an action on the basis of collateral estoppel, the movant must prove the following elements: (1) the same fact issue sought to be litigated in the second suit; (2) the fact issue was essential to the judgment in the first suit; and (3) the parties were cast as adversaries in the first suit. See Johnson & Higgins, Inc. v. Kenneco Energy, 962 S.W.2d 507, 521 (Tex.1998). A finding of fact by the trial *486 court in a divorce judgment that a child was born to the marriage of the parties is equivalent to a finding that the husband is the father of the child. See Thompson v. Thompson, 572 S.W.2d 761, 764-65 (Tex. Civ.App.-Tyler 1967, no writ). The doctrine of collateral estoppel bars relitigation of that fact issue in a subsequent suit. See id.; Walters v. Walters, 565 S.W.2d 586, 586-87 (Tex.Civ.App.-Austin 1978, no writ); see also Dreyer v. Greene, 809 S.W.2d 262, 263 (Tex.App.-Houston [1st Dist.] 1991), aff'd, 871 S.W.2d 697, 698 (Tex.1993)(wife barred by statutory res judicata from asserting parentage contrary to trial court's findings in her divorce decree); Byrd v. Travelers Ins. Co., 275 S.W.2d 861, 863 (Tex.App.-San Antonio 1955, writ ref'd n.r.e.)(res judicata barred parents of deceased worker from attacking a divorce decree finding that their son fathered a son during marriage); Espree v. Guillory, 753 S.W.2d 722, 724 (Tex.App.-Houston [1st Dist.] 1988, no pet.) (third party's paternity action barred by finding in divorce decree that H & W were parents of child); Villanueva v. Office of the Atty. Gen., 935 S.W.2d 953, 956 (Tex. App.-San Antonio 1996, writ denied)(nonparentage not defense to Uniform Interstate Family Support Act action if party's parentage previously determined); Tex. Fam.Code Ann. § 159.315 (same).
These holdings in the face of DNA evidence contrast with the situation where parentage was not clearly determined in a prior decree. In Attorney General of Texas v. Duncan, the decree recited that the two children were born to the wife during the marriage. There was no finding in the decree that the husband was the father of the children. A statement entered into evidence in the divorce proceeding said that the husband and wife had lived apart for more than three years, and that she had not seen him since 1978. The children were born in 1981 and 1982. Ten years later, the Attorney General sued Duncan to establish paternity and recover retroactive child support and health care expenses. Duncan moved for summary judgment on several grounds, including res judicata. See Attorney Gen. of Texas v. Duncan, 929 S.W.2d 567, 570 (Tex. App.-Fort Worth 1996, no writ). The court of appeals held that the principles of res judicata did not bar litigation of that issue. "The decree contained no findings of paternity, did not address visitation or support, did not sever any parent-child relationship, or state that the children were born to the marriage." Under the circumstances, the court of appeals concluded that the issue of paternity had simply not been litigated. Id. at 572.
Hessler supported her motion for summary judgment with a copy of the decree of divorce, evidencing that Simmons had been adjudicated the father of T.S.S. in 1989. Further support was offered in the order Simmons obtained in 1999, which modified the child's residency to Simmons' home. Simmons and Hessler were adversaries in both suits. Moreover, Hessler's uncontroverted affidavit established that Simmons was aware of the possibility that he was not the biological father at the time they married. A few months before she was due to deliver he forced her to move to a home for unwed mothers and permitted her to return to their home after the birth of the child. At the time of the divorce, when the child was two years old, Simmons sought sole custody. In spite of this history, Simmons never raised the issue of paternity during the divorce proceedings. Simmons provided emotional and financial support to the child for 13 years, until Hessler informed him of her intention to seek an increase in payments due to his increased earning capacity and the child's increased needs.
*487 Although Simmons casts Hessler as a perpetrator of fraud, he had ample notice and opportunity to contest paternity dating back to 1989, and did not. In response to the motion for summary judgment, he attached a lab report purporting to conclude that DNA excluded him as the biological father of T.S.S. However, the lab report does not meet the requirements of testing to be probative on the issue of paternity.[5]
Simmons filed his own affidavit which related that upon learning of this development, "not only did my attitude toward my relationship with [T.S.S.] change, but my life also drastically changed because of this information.... I am not emotionally or morally capable of carrying on the charade that his mother has created for the child." Even if the DNA evidence noted met the standards of relevance and reliability, see Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 721 (Tex.1998), sufficient to raise a material fact issue as to paternity, the report is not sufficient to raise an issue as to a mother's alleged fraud in order to defeat the application of estoppel under these circumstances. Accord Serrano v. Serrano, 2000 WL 1862098 (Conn.Super.Nov.27, 2000)(DNA evidence does not prove mother knowingly made a misstatement of paternity).
In the present action, Simmons seeks to terminate his future responsibilities to a child he has raised for fourteen years because he says he now has proof that he is not the biological father and this has destroyed his paternal feelings toward the child. This was an issue that could have been litigated in 1989 at the time of the divorce. He had already demonstrated that he did not believe he was the biological father at that time. Yet, he initially challenged custody, and eventually agreed to a finding that determined his parental rights and responsibilities. Now he has responded to a motion to modify child support with his own independent action to terminate the parent-child relationship. *488 The basis of the action is alleged DNA evidence that he is not the biological father. That evidence could have been obtained in 1989 before the divorce decree was entered. Simmons attempts to do an end-run around a final decree by filing this action, and he seeks to relitigate a fact issue that was essential to the judgment in the prior decree.
Conclusion
Simmons' contention that it is in the best interest of the child for his parent-child relationship to be terminated is based solely on his claim that he is not the biological father. That being the case, and because the issue of parentage is precluded by collateral estoppel, there is no other basis upon which to support a best-interest determination. Appellant's issue is overruled, and the judgment of the trial court is affirmed.
DISSENTING OPINION ON DENIAL OF REHEARING EN BANC
Sitting: PHIL HARDBERGER, Chief Justice, TOM RICKHOFF, ALMA L. LÓPEZ, CATHERINE STONE, PAUL W. GREEN, SARAH B. DUNCAN and KAREN ANGELINI, Justices.
Dissenting opinion by: SARAH B. DUNCAN, Justice, joined by Justice TOM RICKOFF.
I respectfully dissent to the denial of rehearing en banc. The panel holds Simmons' suit is barred by the doctrine of collateral estoppel, which precludes relitigation of previously-adjudicated issues of fact essential to a prior judgment. But Simmons' suit does not seek to relitigate the finding in the divorce decree establishing a parent-child relationship between him and T.S.S. Indeed, the statute under which Simmons suessection 161.005(a) of the Texas Family Codepresumes an existing parent-child relationship and provides for its termination if it is in the child's best interest. T.S.S.'s best interestthe only material issue in this case was not addressed by Hessler's motion for summary judgment. Accordingly, we should grant the motion for reconsideration en banc, reverse the trial court's summary judgment and remand the cause for further proceedings.
Factual and Procedural Background
Admitting he is T.S.S.'s adjudicated father as a result of an earlier divorce decree, Franklin R. Simmons filed a petition to terminate the parent-child relationship pursuant to section 161.005(a) of the Texas Family Code, which provides:
A parent may file a suit for termination of the petitioner's parent-child relationship. The court may order termination if termination is in the best interest of the child.
Tex. Fam.Code Ann. § 161.005(a) (Vernon 1996). In response, T.S.S.'s mother, Tamara K. Hessler answered and moved for summary judgment under Rule 166a(c), Tex.R. Civ. P., on two groundsestoppel and res judicata. Hessler's motion does not address whether termination of the parent-child relationship between Simmons and T.S.S. would be in T.S.S.'s best interest. The trial court granted Hessler's motion without stating a ground for its ruling. A panel of this court granted Hessler's motion without stating a ground for its ruling. A panel of this court affirmed, and Simmons moved for rehearing en banc.
Standard of Review
We review a summary judgment de novo. See Valores Corporativos, S.A. de C.V. v. McLane Co., 945 S.W.2d 160, 162 (Tex.App.-San Antonio 1997, writ denied). We will thus affirm a traditional summary judgment under Rule 166a(c) *489 only if the summary judgment evidence establishes there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law on a ground set forth in the motion. See Tex.R. Civ. P. 166a(c).
DISCUSSION
As the panel opinion states, res judicata and collateral estoppel may bar an adjudicated father's attempt to relitigate his paternity in a later suit. See Espree v. Guillory, 753 S.W.2d 722, 724 (Tex.App.-Houston [1st Dist.] 1988, no writ). However, as Simmons states in his brief to this court, he "did not and does not seek to set aside the adjudication of parentage established by the [divorce decree]." Rather, he seeks to terminate what he admits is the parent-child relationship established by that decree. Under these circumstances, the doctrines of res judicata and collateral estoppel simply do not apply. The trial court thus erred in granting Hessler's motion for summary judgment. Therefore, we must reverse the trial court's judgment and remand the cause to that court for further proceedings.
NOTES
[1] In Texas, this provision is most commonly used when the birth mother wants to place her baby for adoption. See Robinson C. Ramsey, Termination of Parental Rights, 4 Texas Family Law Service, § 33.8 (6th ed.1997).
[2] Act of June 15, 1973, 63rd Leg., R.S., ch. 543, § 15.01, 1973 Tex. Gen. Laws 1411, 1426 (amended 1995)(current version at Tex. Fam.Code Ann. § 161.005(a) (Vernon 1996)).
[3] See Nadine E. Roddy, "The Preclusive Effect of Paternity Findings in Divorce Decrees," 10 Divorce Litig. 169 (Sept.1998) (citing decisions from the following states: Alabama, Colorado, Georgia, Illinois, Indiana, Iowa, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, New Mexico, Ohio, Pennsylvania, Virginia, Vermont, West Virginia, Washington, and Wyoming). But see Ex Parte Jenkins, 723 So. 2d 649 (Ala.1998)(permitting reopening of final judgment of paternity based on scientific evidence that adjudged father not biological father, provided court first determines evidence to be scientifically valid and reliable, and noted that respondent may be entitled to relief under state equivalent of federal rule of procedure 60(b)(6) requiring petitioner to bring issue to court within reasonable time).
[4] Part of the conflict is the result of inadequate definitions of fatherhood. As Justice Herbert Brown discussed in his concurring opinion in Hulett v. Hulett, 45 Ohio St. 3d 288, 544 N.E.2d 257 (1989):
A father-child relationship encompasses more (and greater) considerations than a determination of whose genes the child carries. Sociological and psychological components should be considered. The laws governing adoptions have acknowledged that parentage is comprised of a totality of factors, the least significant of which is genetics.... [T]here is a need to separate issues of paternity from issues of fatherhood. The present statutory scheme blurs these issues and lumps them into one pot.
Id. at 263. The Supreme Court of Maine agrees, pointing out the importance of recognizing the contributions of both the biological father and that of the presumed father:
Although DNA testing may provide a bright line for determining the biological relationship between a man and a child, it does not and cannot define the human relationship between a father and child. When a man has been newly determined to be the biological father of the child, the courts have a responsibility to assure that the child does not, without cause, lose the relationship with the person who has previously been acknowledged to be the father both in the law, through marriage, and in fact, through the development of the parental relationship over time. In this developing area of law, and in the absence of legislative action, many questions remain unanswered.
Stitham v. Henderson, 768 A.2d 598, 606 & n. 16 (Me.2001)(recognizing the ALI's concept of de facto parent and its attendant equitable parental rights).
[5] The family code contemplates that such evidence shall be structured by court order to test the mother, the alleged father, and the child. See Tex. Fam.Code Ann. § 160.102(a)(Vernon 1986). The order must require that such "tests exclude at least 99 per cent of the male population from the possibility of being the father of the child, except that the court shall permit the omission of any further testing if the testing has been conducted sufficiently to establish that an alleged father is not the father of the child...." Id. at § 160.103. The lab report Simmons attached to his response shows that the mother was not tested, that eleven alleles were compared on body samples taken from the child and the alleged father. An unknown lab technician's interpretation of the results notes that "four different genetic systems analyzed ... [for] the alleged father... failed to match the obligate paternal allele present in the child." The analyst concludes that Simmons is excluded as being the father of T.S.S. This report is accompanied by a standard business records affidavit sworn to by the custodian of records for the laboratory. There is no expert opinion affidavit to provide the necessary assurances of qualification, proper testing procedures, and interpretation of the results. See id. at § 160.104. Section 160.109 contemplates that such tests conducted in accordance with a court order or by agreement of the parties will meet the necessary reliability requirement. See id. at § 160.109(d). At least one other jurisdiction does not allow the results of an unauthorized DNA test to be admitted into evidence. See Brian B. v. Dionne B., 267 A.D.2d 188, 699 N.Y.S.2d 491, 492 (N.Y.App.Div.1999) (trial court properly declined to consider results of privately arranged genetic testing); Department of Social Services v. Joseph N., 159 Misc. 2d 833, 606 N.Y.S.2d 962, 963 (N.Y.Fam.Ct.1993)(DNA testing not done by duly approved facility may not be considered by court). In addition to concerns for reliability, there are legitimate public policy concerns over privacy interests such as the dangers of unauthorized disclosure of genetic information and possible genetic discrimination by entities such as insurance companies and employers. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919051/ | 106 B.R. 623 (1989)
In the Matter of George JOHNSON and Dorothy Johnson, Debtors.
Bankruptcy No. BK89-40146.
United States Bankruptcy Court, D. Nebraska.
September 28, 1989.
Geraldine Clanton, Omaha, Neb., U.S. Trustee.
MEMORANDUM
JOHN C. MINAHAN, Jr., Bankruptcy Judge.
The United States Trustee ("U.S.T.") has requested reconsideration (Fil. # 32) of my Order of May 10, 1989 (Fil. # 31) denying the Trustee's Application for Order Directing Debtor to Imprint Checks with "Debtor In Possession" and Bankruptcy Case Number (Fil. # 23). Such imprinting is required by the Trustee's Guidelines.
The motion for reconsideration is granted. However, for the reasons stated herein, the court concludes that its May 10, 1989 order denying the U.S.T.'s Application for Order Directing Debtors to Imprint Checks with "Debtor In Possession" and Bankruptcy Case Number should not be altered.
FACTS
Debtors, George and Dorothy Johnson filed Chapter 11 bankruptcy on February 10, 1989. Shortly thereafter, the U.S.T. informed the debtors of the U.S.T.'s Guidelines for Debtors-In-Possession, instructed the debtors to immediately close all existing bank accounts, to establish separate debtor-in-possession bank accounts, and to have the phrase "debtor-in-possession" and the bankruptcy case number imprinted on the face of the checks for the new debtor-in-possession account.
Debtors subsequently opened a new checking account in the name of George and Dorothy Johnson. However, at the § 341 meeting in this matter, debtors informed the U.S.T. that debtors refused to have the phrase "debtor-in-possession" and the bankruptcy case number imprinted on the face of their checks. Upon debtors' failure to follow the U.S.T.'s Guidelines, the U.S.T. filed the application for order directing the debtors to imprint their checks with "debtor-in-possession" and the bankruptcy case number. After a hearing, the court denied the application.
At the hearing on the U.S.T.'s original application, debtors asserted that imprinting "debtor-in-possession" on the face of debtors' checks would create a "stigma of bankruptcy" against the debtors. Further, debtors argued that imprinting the phrase on their checks would interfere with their ability to reorganize. Debtors asserted that the phrase "debtor-in-possession" on the face of their checks would cause the public to hesitate or refuse to accept their checks.
The U.S.T. argued that debtors should be compelled to imprint the phrase "debtor-in-possession" and bankruptcy case number on their checks for two reasons. First, the U.S.T. asserted that debtors should be required to comply with the U.S.T.'s Guidelines which direct debtors to imprint the material on their checks. The U.S.T. stated that 28 U.S.C. § 586(a) imposes on the U.S.T. a statutory duty to administer and *624 monitor bankruptcy cases. The U.S.T. contends that the Guidelines were promulgated pursuant to this authority and that debtors are required to cooperate with the U.S.T. under Bankruptcy Rule X-1007. Second, the U.S.T. asserted that reasons exist independent of the Guidelines to require debtors to imprint "debtor-in-possession" and bankruptcy case number on their checks. The U.S.T. argued that imprinting "debtor-in-possession" on debtors' checks will provide banks and third parties with knowledge of the pending bankruptcy case. The U.S.T. contends that this knowledge will enable the banks and third parties to act in accordance with bankruptcy rules and regulations governing their actions.
DISCUSSION
Two related issues are presented in this case. First, should the debtor-in-possession be ordered to imprint the checks because the Guidelines of the U.S. Trustee require imprinting? Second, should the debtor-in-possession be required to imprint checks for other reasons?
I conclude that debtors, George and Dorothy Johnson should not be required to imprint "debtor-in-possession" and their bankruptcy case number on their checks.
The U.S.T. argues that debtors should be required to follow the Guidelines because the Guidelines were promulgated pursuant to the U.S.T.'s authority under § 586(a) to monitor bankruptcy cases. I conclude, however, that the Guidelines themselves cannot require bankruptcy debtors to comply with their provisions because the Guidelines do not carry the force or effect of law. The Guidelines do not constitute laws of the United States and they are not legally binding on bankruptcy debtors. Congress has the authority to delegate rule-making authority to third parties or agencies, and such delegation is strictly construed. See Industrial Union Department, AFL-CIO v. American Petroleum Institute, 448 U.S. 607, 100 S. Ct. 2844, 65 L. Ed. 2d 1010 (1980); Addison v. Holly Fruit Products, Inc., 322 U.S. 607, 64 S. Ct. 1215, 88 L. Ed. 1488 (1944). Congress has not expressly delegated rule-making authority to the Office of the U.S.T. Although § 586(a) sets forth duties of the U.S.T., and grants the U.S.T. certain powers, none of the sections of § 586 authorize the U.S.T. to promulgate rules or impose substantive or administrative requirements on bankruptcy debtors. See 28 U.S.C. § 586; In re Crosby, 93 B.R. 798, 802 (Bkrtcy.S.D.Ga.1988). Further, bankruptcy courts which have addressed certain requirements under the U.S.T.'s Guidelines have not treated the Guidelines as controlling. See, e.g., In re Crosby, 93 B.R. at 805 ("Rather than assisting debtors in reorganizing as Congress intended, unchecked United States Trustee requirements could frustrate Congressional intentions by torpedoing reorganization efforts with onerous paperwork."); In re Cohoes Industrial Terminal, Inc., 65 B.R. 918 (Bkrtcy.S.D.N. Y.1986) (failure to comply with U.S.T.'s Guidelines is not ground for dismissal or conversion); In re Denrose Diamond, 49 B.R. 754, 759 (Bkrtcy.S.D.N.Y.1985) ("Though Debtor's post-petition financials fail to satisfy the U.S.T.'s guidelines, no authority for converting a case on the basis of unsatisfactory financial records alone has been called to our attention.") (citing In re Larmar Estates, 6 B.R. 933 (E.D.N.Y.1980)); In re Pappas, 17 B.R. 662 (Bkrtcy.D.Mass.1982) (cause independent of U.S.T.'s requirements existed to dismiss case). Therefore, if the court is to require debtors to comply with particular provisions of the U.S.T.'s Guidelines, it must be for a reason independent of the Guidelines themselves.
The U.S.T. asserts that reasons exist independent of the Guidelines to require debtors to imprint "debtor-in-possession" on their checks. The U.S.T. argues that such imprinting will provide debtors' bank and third parties knowledge of the bankruptcy case. I conclude that this is insufficient ground on which to require debtors to comply with the U.S.T.'s Guidelines.
Imprinting "debtor-in-possession" on debtors' checks is not required to provide debtors' and third parties with knowledge of debtors' bankruptcy case. First, creditors are required to be listed and scheduled and they receive actual notice of the bankruptcy *625 filing. Second, debtors' bank and third parties have constructive knowledge of the bankruptcy case. Third, debtors' bank and third parties are bound by the bankruptcy laws whether or not they have actual knowledge of the bankruptcy filing. For example, all parties are bound by the automatic stay upon the filing of a bankruptcy case whether or not a party has actual notice of a bankruptcy filing. Fourth, the court must weigh debtors' legitimate interest in opposition to imprinting "debtor-in-possession" on checks against the U.S.T.'s interest in having "debtor-in-possession" imprinted on checks. I conclude that the benefit the U.S.T. may gain is insufficient to compel debtors to imprint the phrase "debtor-in-possession" on their checks. Further, there are less onerous methods by which debtors' bank may be made aware of debtors' bankruptcy case. For instance, the U.S.T. may write appropriate letters to debtors' bank. Therefore, I conclude that debtors should not be required to imprint either "debtor-in-possession" or their bankruptcy case number on their checks.
Although I have concluded that the U.S.T.'s Guidelines do not have the effect of law and that the provision requiring debtors to imprint "debtor-in-possession" on their checks should not be enforced in this case, I nevertheless conclude that Guidelines can serve a useful and beneficial purpose. The Guidelines advise parties of the U.S.T.'s position on numerous issues and they should diminish potential conflicts between the U.S.T., debtors and other parties. Specific provisions of the Guidelines may be upheld and enforced by the court in particular cases. Other provisions of the Guidelines restate existing law. Conduct inconsistent with the Guidelines may be cause for corrective action by the court, not because there has been a failure to comply with the Guidelines, but because the conduct is inconsistent with law.
IT IS HEREBY ORDERED, that
1. Motion for Reconsideration (Fil. # 32) is granted;
2. Upon reconsideration, the court's May 10, 1989 order (Fil. # 31) denying the United States Trustee's Application for Order Directing Debtors to Imprint Checks with "Debtor in Possession" and Bankruptcy Case Number (Fil. # 23) shall not be altered; and
3. Debtors, George and Dorothy Johnson shall not be required to imprint either the phrase "Debtor in Possession" or their bankruptcy case number on their checks. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2085247/ | 2 N.Y.3d 148 (2004)
809 N.E.2d 645
777 N.Y.S.2d 416
KAREN BROADNAX et al., Appellants,
v.
FREDERICK A. GONZALEZ et al., Respondents.
DEBRA A. FAHEY et al., Appellants,
v.
ANTHONY C. CANINO et al., Respondents.
Court of Appeals of the State of New York.
Argued February 12, 2004.
Decided April 1, 2004.
*149 Margaret C. Jasper, South Salem, for appellants in the first above-entitled action.
Hancock & Estabrook, LLP, Syracuse (Janet D. Callahan of counsel), for respondents in the first above-entitled action.
*150 O'Connor, Gacioch, Leonard & Cummings, LLP, Binghamton (Patricia A. Cummings of counsel), for appellants in the second above-entitled action.
Hancock & Estabrook, LLP, Syracuse (Janet D. Callahan of *151 counsel), for respondents in the second above-entitled action.
Chief Judge Kaye and Judges G.B. Smith, Ciparick, Graffeo and R.S. Smith concur with Judge Rosenblatt; Judge Read dissents and votes to affirm in a separate opinion.
OPINION OF THE COURT
ROSENBLATT, J.
These two cases call upon us to revisit a question we last addressed in Tebbutt v. Virostek (65 NY2d 931 [1985]): whether, absent a showing of independent physical injury to her, a mother may recover damages for emotional harm when medical malpractice causes a miscarriage or stillbirth.
I.
A. Broadnax
While pregnant, plaintiff Karen Broadnax was under the care of defendants Frederick Gonzalez, an obstetrician, and Georgia Rose, a certified nurse-midwife. On September 25, 1994, at 1:45 A.M., plaintiff telephoned Rose to say that her water had broken *152 and that she had expelled a large amount of blood. Rose advised plaintiff and her husband, Jeffrey, to meet her at defendant Westchester Birth Center. When she arrived there, at approximately 3:00 A.M., plaintiff again experienced vaginal bleeding. She and her husband asked Rose whether they should go across the street to St. John's Riverside Hospital for immediate treatment. Rose telephoned Dr. Gonzalez, who directed that plaintiff be transported to the Columbia Presbyterian Allen Pavilion in Manhattan.
Accompanied by Rose, the Broadnaxes reached the Allen Pavilion at about 3:45 A.M. Dr. Gonzalez had not yet arrived. In his absence, however, Rose did not contact the on-call doctor. About 45 minutes lateralmost two hours after plaintiff arrived at the Westchester Birth CenterDr. Gonzalez examined plaintiff and detected fetal heart rate decelerations. Rather than performing an emergency cesarean section, Dr. Gonzalez conducted a vaginal and pelvic examination. He then performed a sonogram, but could no longer detect a fetal heartbeat. Approximately half an hour later, around 5:15 A.M., Dr. Gonzalez undertook a cesarean section, delivering a full-term stillborn girl. Autopsy reports indicated that a placental abruption caused the fetus to die before delivery.
The Broadnaxes sued defendants, alleging that their failure to recognize and properly treat plaintiff's placental abruption supported a cause of action for medical malpractice and related claims. At the close of plaintiffs' case, Supreme Court granted defendants' motion pursuant to CPLR 4401 for judgment as a matter of law. The Appellate Division affirmed, holding that Tebbutt v. Virostek barred plaintiff from recovering damages for emotional or psychological harm stemming from the stillbirth because she adduced no evidence of having suffered a legally cognizable physical injury distinct from the fetus's.
B. Fahey
Plaintiff Debra Ann Fahey became an obstetrical patient of Dr. Anthony C. Canino, of defendant OBGYN Health Care Associates, P.C. (OBGYN). In August 1999, Dr. Canino informed her that she was carrying twins. On October 28, 1999, on a follow-up visit with Dr. Canino's partner, defendant Dr. Patrick F. Ruggiero, plaintiff complained of lower abdominal pains and cramping. Based on an ultrasound, Dr. Ruggiero concluded that one of the twins was pressing against plaintiff's sciatic nerve. Two days later, during the eighteenth week of pregnancy, *153 plaintiff called Dr. Canino and complained of increasingly intense pain along with nausea. Relying on Dr. Ruggiero's examination, Dr. Canino advised plaintiff to lie down, explaining that the pain was likely related to her sciatic nerve and the nausea probably resulted from something she ate for lunch. Less than two hours later, while sitting on the toilet, plaintiff gave birth to one of the twins. Still linked to the fetus by the umbilical cord, she went by ambulance to the hospital, where she delivered the second twin. Neither twin survived.
Other doctors later diagnosed plaintiff as having an "incompetent cervix." In a subsequent pregnancy, she underwent a cerclage procedure to suture her cervix, and thereby prevent the premature expulsion of the fetus. Plaintiff delivered a six-week premature daughter the following year.
The Faheys brought this action for medical malpractice asserting that defendants negligently failed to diagnose and treat plaintiff's cervical condition. Supreme Court granted defendants' motion for summary judgment dismissing the complaint. With one Justice dissenting, the Appellate Division, also citing Tebbutt, affirmed on the ground that defendants' alleged malpractice did not cause the mother an independent physical injury.
We now reverse the Appellate Division orders in both cases.[1]
II.
In Tebbutt v. Virostek (65 NY2d 931 [1985]), we held that a mother could not recover for emotional injuries when medical malpractice caused a stillbirth or miscarriage, absent a showing that she suffered a physical injury that was both distinct from that suffered by the fetus and not a normal incident of childbirth. Plaintiffs assert that Tebbutt is arbitrary and unfair, and should be overturned.
Tebbutt reflected our longstanding reluctance to recognize causes of action for negligent infliction of emotional distress, especially in cases where the plaintiff suffered no independent physical or economic injury. Its holding was in keeping with our view that tort liability is not a panacea capable of redressing every substantial wrong. Although these concerns weigh heavily on us today, we are no longer able to defend Tebbutt's logic or reasoning.
*154 As its dissenters recognized, the rule articulated in Tebbutt fits uncomfortably into our tort jurisprudence. Infants who are injured in the womb and survive the pregnancy may maintain causes of action against tortfeasors responsible for their injuries (see Woods v. Lancet, 303 NY 349 [1951]). Further, a pregnant mother may sue for any injury she suffers independently. A parent, however, cannot bring a cause of action for wrongful death when a pregnancy terminates in miscarriage or stillbirth (see Endresz v. Friedberg, 24 NY2d 478 [1969]).
Injected into this common-law framework, Tebbutt engendered a peculiar result: it exposed medical caregivers to malpractice liability for in utero injuries when the fetus survived, but immunized them against any liability when their malpractice caused a miscarriage or stillbirth. In categorically denying recovery to a narrow, but indisputably aggrieved, class of plaintiffs, Tebbutt is at odds with the spirit and direction of our decisional law in this area. The Endresz court, for example, justified its holding barring parents from suing in wrongful death on behalf of an unborn childin part on the assumption that parents would have some legal recourse for a miscarriage or stillbirth resulting from negligent conduct (id. at 486).[2]
On its own terms, Tebbutt may make formal sense, but it created a logical gap in which the fetus is consigned to a state of "juridical limbo" (65 NY2d at 933 [Jasen, J., dissenting]). It is time to fill the gap. If the fetus cannot bring suit, "it must follow in the eyes of the law that any injury here was done to the mother" (65 NY2d at 940 [Kaye, J., dissenting]).
Defendants maintain that Tebbutt states a sensible rule, one worth preserving, because the defendant physician in that case did not violate a duty to the expectant mother. We are not persuaded. In Ferrara v. Bernstein (81 NY2d 895 [1993]), we permitted a plaintiff to recover damages for emotional distress when she miscarried, following an unsuccessful abortion, on the ground that the treating physician violated a duty of care to his patient. Defendants would have us distinguish Ferrara, arguing that, in the cases before us, their alleged conduct injured only the fetuses, and, accordingly, they did not violate a duty to the expectant mothers. Defendants' reasoning is tortured. Although, *155 in treating a pregnancy, medical professionals owe a duty of care to the developing fetus (as we impliedly recognized in Woods v Lancet, 303 NY 349 [1951]), they surely owe a duty of reasonable care to the expectant mother, who is, after all, the patient. Because the health of the mother and fetus are linked, we will not force them into legalistic pigeonholes.[3]
We therefore hold that, even in the absence of an independent injury, medical malpractice resulting in miscarriage or stillbirth should be construed as a violation of a duty of care to the expectant mother, entitling her to damages for emotional distress.[4]
*156 Our dissenting colleague has expressed concern over the possible repercussions of what she concedes to be a "modest" advance in our tort jurisprudence. Significantly, on this appeal, no one from any quarter came forward to support any such concerns. While we are well aware of the importance of precedent, Tebbutt has failed to withstand the cold light of logic and experience. To be sure, line drawing is often an inevitable element of the common-law process, but the imperative to define the scope of a dutythe need to draw difficult distinctions does not justify our clinging to a line that has proved indefensible.
Accordingly, the orders of the Appellate Division should be reversed, with costs, and the cases remitted to Supreme Court for further proceedings consistent with this opinion.
READ, J. (dissenting).
In 1985, we were asked whether a woman may recover damages for emotional distress where medical malpractice causes her to suffer a stillbirth. We concluded in Tebbutt v. Virostek (65 NY2d 931 [1985]) that no recovery could be had in the absence of an independent physical injury, thus clearly and reasonably circumscribing a medical caregiver's duty to a pregnant patient. Appellants now invite us to reconsider and revise our holding in Tebbutt. Unlike the majority, I would decline the invitation.
True, the new rule articulated by the majority expands existing law sparingly. The new rule does not alter the legal rights or status of a fetus; it does not create any new duties on the part of a physician. Nonetheless, the majority's justification for redefining the duty of care owed to a pregnant woman by her medical caregivers is insufficient for me to vote to overrule a 20-year-old precedent.
Stare decisis teaches that "common-law decisions should stand as precedents for guidance in cases arising in the future" for substantial reasons of stability and legitimacy (People v Damiano, 87 NY2d 477, 488 [1996] [Simons, J., concurring]). As Judge Simons also observed, however, stare decisis is not "inflexible," and our holdings are "always open to reexamination if there is some evidence that the policy concerns underlying them are outdated or if they have proved unworkable" (id. at 489). Here, there is no suggestion that the Tebbutt rule is unworkable. To the contrary, Tebbutt established a bright-line rule, which is easily applied. The majority considers Tebbutt outdated, however, because a "narrow, but indisputably aggrieved, *157 class of plaintiffs" (majority op at 154) is denied recovery, creating a gap in the law. But this same gap was manifest in 1985 when we decided to limit a physician's exposure to damages for emotional distress to those cases in which the woman sustains a physical injury distinct from that suffered by the fetus. Nor does the majority's new rule do away with all seeming gaps. As we acknowledged in Bovsun v. Sanperi (61 NY2d 219, 228 [1984]), "arbitrary distinctions are an inevitable result of the drawing of lines which circumscribe legal duties."
Today's ruling exposes medical caregivers to additional liability for the treatment they provide to pregnant women. Juries will be asked to quantify the emotional distress that a woman feels upon suffering a miscarriage or stillbirth. Importantly, there is no way for us to predict or assess the potential effect of this expansion of liability, however modest it may appear, on the cost and availability of gynecological and obstetrical services in New York State.
No one disputes the heartache experienced by a woman who miscarries or delivers a stillborn fetus. Nonetheless, Tebbutt established a rational and workable rule to limit the scope of duty in obstetrical malpractice. I see insufficient reason to overrule Tebbutt and create a different rule. Accordingly, I would affirm the orders of the Appellate Division.
In Broadnax v. Gonzalez: Order reversed, with costs, and case remitted to Supreme Court, Westchester County, for further proceedings in accordance with the opinion herein.
In Fahey v. Canino: Order reversed, with costs, and the motion of defendants Canino and Ruggiero for summary judgment denied.
NOTES
[1] We take no position on the ultimate merits of either case. We note only that, on the records before us, the cases were sufficient to withstand respectively a motion for a trial order of dismissal and a motion for summary judgment.
[2] In Endresz, an automobile accident both caused injuries to the mother and resulted in her miscarrying. The Court reasoned that no cause of action should lie in wrongful death because the damages recoverable by the mother for her independent physical injuries would "afford ample redress for the wrong done" (id.).
[3] The treating physician owes no duty of care to the expectant father. It of course remains true that, where the mother has a cause of action, her husband may recover for loss of services and consortium if the facts support such a claim.
[4] In rejecting Tebbutt, we recognize that a majority of jurisdictions permit some form of recovery for negligently caused stillbirths or miscarriages (see e.g. Eich v. Town of Gulf Shores, 293 Ala 95, 300 So 2d 354 [1974]; Summerfield v. Superior Ct. In & For Maricopa County, 144 Ariz 467, 698 P2d 712 [1985]; Gorke v. Le Clerc, 23 Conn Supp 256, 181 A2d 448 [Super Ct, Hartford County 1962]; Worgan v. Greggo & Ferrara, Inc., 50 Del 258, 128 A2d 557 [Super Ct, New Castle County 1956]; Simmons v. Howard Univ., 323 F Supp 529 [D DC 1971]; Shirley v. Bacon, 154 Ga App 203, 267 SE2d 809 [1980]; Seef v Sutkus, 205 Ill App 3d 312, 562 NE2d 606 [1st Dist 1990]; Bolin v. Wingert, 764 NE2d 201 [Ind 2002]; Hale v. Manion, 189 Kan 143, 368 P2d 1 [1962]; Mitchell v. Couch, 285 SW2d 901 [Ky 1955]; State, Use of Odham v. Sherman, 234 Md 179, 198 A2d 71 [1964]; Wascom v. American Indem. Corp., 383 So 2d 1037 [La App, 1st Cir 1980]; Mone v. Greyhound Lines, Inc., 368 Mass 354, 331 NE2d 916 [1975]; O'Neill v. Morse, 385 Mich 130, 188 NW2d 785 [1971]; Verkennes v. Corniea, 229 Minn 365, 38 NW2d 838 [1949]; Rainey v. Horn, 221 Miss 269, 72 So 2d 434 [1954]; Strzelczyk v. Jett, 264 Mont 153, 870 P2d 730 [1994]; White v. Yup, 85 Nev 527, 458 P2d 617 [1969]; Poliquin v. MacDonald, 101 NH 104, 135 A2d 249 [1957]; Giardina v. Bennett, 111 NJ 412, 545 A2d 139 [1988]; Salazar v. St. Vincent Hosp., 95 NM 150, 619 P2d 826 [Ct App 1980]; Hopkins v. McBane, 427 NW2d 85 [ND 1988]; Werling v. Sandy, 17 Ohio St 3d 45, 476 NE2d 1053 [1985]; Evans v. Olson, 1976 OK 64, 550 P2d 924 [1976]; Libbee v. Permanente Clinic, 268 Or 258, 518 P2d 636 [1974]; Amadio v Levin, 509 Pa 199, 501 A2d 1085 [1985]; Presley v. Newport Hosp., 117 RI 177, 365 A2d 748 [1976]; Fowler v. Woodward, 244 SC 608, 138 SE2d 42 [1964]; Parvin v. Dean, 7 SW3d 264 [Tex Ct App 1999]; Vaillancourt v. Medical Ctr. Hosp. of Vt., Inc., 139 Vt 138, 425 A2d 92 [1980]; Moen v. Hanson, 85 Wash 2d 597, 537 P2d 266 [1975]; Baldwin v. Butcher, 155 W Va 431, 184 SE2d 428 [1971]; Kwaterski v. State Farm Mut. Auto. Ins. Co., 34 Wis 2d 14, 148 NW2d 107 [1967]). Unlike most of these jurisdictions, however, we limit a mother's recovery only to damages for the emotional distress attending a stillbirth or miscarriage caused by medical malpractice. We do not depart from our holding in Endresz v. Friedberg (24 NY2d 478 [1969]) barring wrongful death actions under these circumstances. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1589046/ | 14 So.3d 1003 (2009)
BARBER
v.
STATE.
No. SC08-2035.
Supreme Court of Florida.
July 14, 2009.
Decision without published opinion Review denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918994/ | 106 B.R. 462 (1989)
AMBROSE BRANCH COAL CO., INC., Plaintiff,
v.
Glenn R. TANKERSLEY, Trustee, Defendant.
Civ. A. No. 89-0083-B.
United States District Court, W.D. Virginia, Big Stone Gap Division.
October 23, 1989.
*463 Phillip D. Payne, IV, Roanoke, Va., for plaintiff.
John M. Lamie, Abingdon, Va., for defendant.
MEMORANDUM OPINION
GLEN M. WILLIAMS, Senior District Judge.
This matter comes before the court on appeal from the United States Bankruptcy Court for the Western District of Virginia. Double O Coal Corporation ("Double O") is a debtor in bankruptcy. Glenn R. Tankersley ("Tankersley") serves as Chapter 7 trustee for the Double O estate. Tankersley brought an adversary proceeding against Ambrose Branch Coal Co., Inc. ("Ambrose") and others on August 9, 1988. Ambrose now appeals to this court, under 28 U.S.C. §§ 158(a) and 1334(a), from the denial of its motion to dismiss the complaint as untimely.
FACTUAL BACKGROUND
Double O filed a petition for bankruptcy relief under Chapter 11 on November 10, 1982. On February 22, 1983, as debtor in possession, Double O filed a complaint ("the 1983 complaint") against Ambrose and others. The 1983 complaint detailed an agreement, by which Double O was to mine coal at mines owned by Ambrose. The 1983 complaint contained allegations that the agreement was wrongfully terminated and that after November 4, 1982, Double O was prevented from recovering its equipment which remained in the Ambrose mines. R. 127.[1] In the prayer for relief of the 1983 complaint, Double O sought a temporary restraining order to prevent destruction *464 of its property, return of its equipment, and an award of damages for the defendants' use of the equipment. R. 128-29.
By its amended order of April 4, 1983, the bankruptcy court denied the temporary restraining order and transferred Double O's complaint to this court to permit it "to file a new complaint for recovery of designated property alleged to be held by the defendant as the plaintiff may deem appropriate." R. 131. Double O never filed a complaint with this court. Consequently, with nothing before it to decide, this court dismissed the case without prejudice on April 25, 1983. R. 133. On April 29, 1983, the bankruptcy court authorized conversion of the Double O bankruptcy case to Chapter 7.
Tankersley became trustee of the Double O estate in 1984. On October 18, 1984, Tankersley filed a complaint ("the 1984 complaint") against the same parties, including Ambrose, which were defendants named in the 1983 complaint. The 1984 complaint essentially replicated the averments of the 1983 complaint.
The United States intervened in the proceeding begun by the 1984 complaint. On March 7, 1988, the bankruptcy court entered an order granting the motion of the United States for voluntary dismissal of its complaint in intervention. R. 122. The March 7 order gave Tankersley a week in which to determine whether the case begun by the 1984 complaint should go to trial. Tankersley moved for voluntary dismissal of the case. The bankruptcy court proceeded to dismiss the case without prejudice on March 21, 1988. R. 124.
Tankersley filed his current complaint against Ambrose on August 9, 1988 ("the 1988 complaint"). The 1988 complaint does not refer to or seek relief for the breach of contract which was the focus of the 1983 and 1984 complaints. The prayer for relief of the 1988 complaint also differs from the 1984 complaint's prayer in that it seeks not only the return of the equipment but also damages for conversion of the equipment.
LEGAL CONCLUSIONS
The Bankruptcy Code explicitly provides for an extension of the time within which a trustee may act upon the causes of action of his debtor which were not time-barred before the debtor entered bankruptcy. The Code provides that a trustee has the longer of two periods within which to commence an action. The trustee has either two years from the order for relief, or such longer period in which to bring suit as the "applicable law" may allow. 11 U.S.C. § 108(a).[2] More than two years lapsed after Double O's original petition as well as after the conversion of Double O's case before Tankersley filed the 1988 complaint. Consequently, the 1988 complaint is timely if at all under the "applicable law" incorporated by section 108(a).
Tankersley's tort claims arise under Virginia law rather than the Bankruptcy Code. Virginia law provides that an action for injury to property must be brought within five years of the accrual of the cause of action. Va.Code § 8.01-243 B. A cause of action for injury to property accrues at the time of the alleged breach of duty or contract. Va.Code § 8.01-230. The conduct by Ambrose of which Tankersley complains occurred in 1982. Consequently, the limitations period for Tankersley's claims expired in 1987 unless some tolling provision applies.
The bankruptcy court concluded that Tankersley's 1988 complaint was timely by the operation of section 8.01-229 E 3 of the Virginia Code. Section 8.01-229 E 3, at the time Tankersley's cause of action accrued, read as follows:
If a plaintiff suffers a voluntary nonsuit as prescribed in § 8.01-380, the statute of limitations with respect to such action shall be tolled by the commencement of the nonsuited action, and the plaintiff may recommence his action within six months from the date he suffered such nonsuit, or within the original period of limitation, whichever period is longer.
*465 Va.Code § 8.01-229 E 3 (1977). The bankruptcy court followed Sherman v. Hercules, 636 F.Supp. 305 (W.D.Va.1986) and Scoggins v. Douglas, 760 F.2d 535 (4th Cir.1985), which held that voluntary dismissal under Rule 41(a) of the Federal Rules of Civil Procedure was equivalent to a voluntary nonsuit under Va.Code § 8.01-380 for the purposes of applying subsection 229 E 3 in federal court. Less than six months passed after the voluntary dismissal of Tankersley's 1984 complaint before he filed the 1988 complaint. The bankruptcy court concluded, therefore, that the 1988 complaint was timely.
Ambrose raises four issues on appeal. First, Ambrose distinguishes Sherman and Scoggins as non-bankruptcy cases and argues that uniform tolling rules should apply in bankruptcy cases. Second, Ambrose contends that the Virginia tolling rule for nonsuits applies to extend the limitations period only after the first nonsuit, and that the dismissal of the 1984 complaint was, in effect, the second nonsuit. Third, Ambrose protests that the nonsuit tolling provision does not apply to the conversion claim of the 1988 complaint because it was not raised previously. Finally, Ambrose argues that Tankersley's 1988 complaint was untimely under the doctrine of laches.
Ambrose's first argument is entirely without merit. It conflicts with the language of 11 U.S.C. § 108(a)(1). Section 108(a)(1) allows the trustee the benefit of any period fixed by applicable law which extends beyond the two-year minimum of Section 108(a)(1).
"[S]ection 108 clearly allows for the commencement or continuation of an action beyond two years from the order for relief if applicable nonbankruptcy law fixes a time period which extends beyond that two year limitation."
2 Collier on Bankruptcy ¶ 108.02.[3] The law applicable to Tankersley's complaint is Virginia law, which includes Virginia's limitations law and subsection 229 E 3 as construed in Sherman and Scoggins. On this reading, section 108(a) alone rebuts Ambrose's argument that bankruptcy policy requires uniform tolling rules for trustee actions.
The constitutional requirement of uniformity does not require a different result. "A bankruptcy law may be uniform and yet `may recognize the laws of the State in certain particulars, although such recognition may lead to different results in different states.'" Railway Labor Executives' Ass'n v. Gibbons, 455 U.S. 457, 469, 102 S.Ct. 1169, 1176, 71 L.Ed.2d 335 (1982) (quoting Stellwagen v. Clum, 245 U.S. 605, 613, 38 S.Ct. 215, 217, 62 L.Ed. 507 (1918)). The court believes that section 108(a) requires application of applicable state tolling rules. Even if it does not, under more general principles, state tolling statutes should apply to a trustee's state law claims in the absence of any conflict between the state laws and bankruptcy law. Neither section 108 nor any other provision of the Bankruptcy Code prohibit the application of Virginia's tolling law.
In Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979), the Supreme Court observed:
Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding. Uniform treatment of property interests by both state and federal courts within a State serves to reduce uncertainty, to discourage forum shopping, and to prevent a party from recovering `a windfall merely by reason of the happenstance of bankruptcy.'
Id. at 55, 99 S.Ct. at 918 (citations omitted). The same reasoning applies to Tankersley's interest in the application of the Virginia tolling rule, whether or not it is a "property interest." The 1988 complaint raises common law tort claims "created and defined by state law." At least in diversity cases, application of state law includes application of state statutes of limitation, which in turn includes tolling rules which are "integral part[s] of the several policies served *466 by the statute of limitations." Walker v. Armco Steel Corp., 446 U.S. 740, 751, 100 S.Ct. 1978, 1985, 64 L.Ed.2d 659 (1980). In Yarber v. Allstate Ins. Co., 674 F.2d 232 (4th Cir.1982), the Virginia tolling rule for nonsuit and its requirements were held to be integral parts of Virginia's statute of limitations policy. Id. at 236-37.
Ambrose dwells at length in its brief on the point that Erie doctrine cases like Yarber and Sherman and civil rights cases like Scoggins and Cramer v. Crutchfield, 648 F.2d 943 (4th Cir.1981), all of which applied section 8.01-229 E 3, are not binding precedents. Ambrose's position is correct only to the extent that Congress, if it chose, could adopt a uniform tolling rule of the sort which Ambrose urges. See Herget v. Central Bank Co., 324 U.S. 4, 6-8, 65 S.Ct. 505, 506-07, 89 L.Ed. 656 (1945); see especially Isaacs v. Neece, 75 F.2d 566, 569 (5th Cir.1935) and Engebretson v. West, 133 Neb. 846, 277 N.W. 433, 466 (1938) (cases cited in Herget, 324 U.S. at 6 n. 4, 65 S.Ct. at 507 n. 4, for the proposition that section 11(d) of the original Bankruptcy Act of 1898 provided a uniform two-year limitation for all trustee actions). "Congress is not required to direct the federal courts to look to state law for the definition of state-created rights in bankruptcy, as it is when federal jurisdiction vests solely on diversity of citizenship. The question is of intent, not power." Fore Improvement Corp. v. Selig, 278 F.2d 143, 147 (2d Cir.1960) (Friendly, J., concurring).
In terms of congressional intent with regard to state tolling statutes, section 108(a) is significantly similar to 42 U.S.C. § 1988. Like section 1988, section 108(a) incorporates applicable state law to complement the provisions of federal law. With regard to civil rights claims to which section 1988 applies, the Supreme Court has rejected the argument that "although the duration of the limitation period is bottomed on state law, it is federal law that governs other limitations aspects, such as tolling. . . ." Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 463, 95 S.Ct. 1716, 1721, 44 L.Ed.2d 295 (1975). The Court in Johnson held that application of the whole limitations law of the states would be appropriate for civil rights claims except "where their application would be inconsistent with the federal policy underlying the cause of action under consideration." Id. at 465, 95 S.Ct. at 1722. Inconsistency between state limitations law and section 108(a) is not possible, as Congress has specifically defined the federal policy to incorporate state law.
Ambrose suggests that the Erie doctrine has no application except where federal jurisdiction rests on diversity. "[D]espite repeated statements implying the contrary, it is the source of the right sued upon, and not the ground on which federal jurisdiction over the case is founded, which determines the governing law. Thus, the Erie doctrine applies, whatever the ground for federal jurisdiction, to any issue or claim which has its source in state law." Maternally Yours v. Your Maternity Shop, 234 F.2d 538, 539 n. 1 (2d Cir. 1956) (emphasis in original). Congress has the authority to preempt state law regarding bankruptcy. Even with regard to purely federal causes of action, however, the Supreme Court has stated that preemption of state statutes of limitations should not be inferred from congressional silence. Agency Holding Corp. v. Malley-Duff & Associates, 483 U.S. 143, 162, 107 S.Ct. 2759, 2770, 97 L.Ed.2d 121 (1987) (Scalia, J., concurring); Campbell v. Haverhill, 155 U.S. 610, 616, 15 S.Ct. 217, 219, 39 L.Ed. 280 (1895). In section 108(a), Congress has not been silent, but has chosen to follow Erie principles and require application of state limitations law to the extent it does not conflict with the two-year minimum extension of time required by section 108(a)(2).
From this analysis, this court concludes that it should follow the prior decisions which have held that voluntary dismissal in federal court tolls the running of Virginia's statutes of limitations under section 8.01-229 E 3 of the Virginia Code. This holding is also consistent with the few bankruptcy cases the court has found which deal with tolling. See Buchman v. American Foam Rubber Corp., 250 F.Supp. 60, 72 (S.D.N.Y. 1965) (holding that "the Trustee is entitled *467 to the benefit of the infancy provision of the applicable statute of limitations" as to a fraudulent conveyance action in which the trustee asserted the rights of infant creditors); In re Discount Plywood Centers, Inc., 11 B.R. 866, 868 (Bankr.E.D.Pa. 1981) (holding that a court of appeals decision in a section 1983 case controlled the issue in bankruptcy proceedings as to the tolling effect of prior state court proceedings). The Hewlett case, on which Ambrose relies, is presently distinguishable for the same reason which led the court in deciding Hewlett to distinguish it from Scoggins. Hewlett v. Russo, 649 F.Supp. 457, 460 (E.D.Va.1986) ("Here, however, plaintiff's suit is controlled by . . . a federal statute which does indeed contain a limitation period" (emphasis in the original)).
Ambrose's second argument requires characterization of the dismissal of the 1983 complaint as voluntary or involuntary. The significance of the voluntariness distinction lies in the particular provisions of the Virginia statutes. Cf. Dupree v. Jefferson, 666 F.2d 606, 611 (D.C.Cir.1981) (under District of Columbia law as to the tolling effects of a prior dismissal, "the pivotal question is whether the dismissal was with or without prejudice, not whether it was voluntary or involuntary"). The court concludes that the dismissal of the 1983 complaint was not the equivalent of a "voluntary nonsuit" for the purpose of applying section 8.01-229 E 3.
Section 8.01-229 E 3 specifically modifies "nonsuit" with "voluntary" in describing the application of the tolling rule. In addition, the meaning of "nonsuit" itself, as it appears in section 8.01-229 E 3, derives from the provisions of section 8.01-380. "[S]ubsection E(3) must be read in light of § 8.01-380 which provides the plaintiff with one opportunity to take a nonsuit without the defendant's permission or without the court's approval." Boyd, Graves & Middleditch, Virginia Civil Procedure 166-67.
"Nonsuit," as a statutory term in section 8.01-380, refers to "voluntary termination by the plaintiff of pending litigation not precluding a later lawsuit upon the same cause of action." Moore v. Moore, 218 Va. 790, 795 n. 4, 240 S.E.2d 535, 538 (1978). Significantly, section 8.01-380 pertains exclusively to limitations on the plaintiff's ability to obtain a nonsuit. Moreover, the organization of section 8.01-229 E supports the conclusion that section 8.01-229 E 3 applies only where the plaintiff has voluntarily dismissed an action. Subsection 8.01-229 E 1 provides a tolling rule for other types of dismissals.[4]
Ambrose does not assert that the dismissal of the 1983 complaint was the result of any conduct on the part of Double O other than the failure to file a new complaint with this court. Without any greater showing of "voluntariness," this court is unwilling to characterize its action in 1984 as other than an involuntary dismissal. Consequently, the dismissal of the 1983 complaint does not count as a "voluntary nonsuit" for the purposes of applying section 8.01-229 E 3.
The third argument Ambrose raises is that Tankersley's request for conversion damages is time-barred because it was not raised before the expiration of the five-year limitations period. This argument conflicts sharply with the federal theory of pleading. The court concludes that Tankersley's conversion claim is not time-barred.
Despite the state law character of Tankersley's claims, federal law determines the sufficiency and effect of his pleadings. See Wright & Miller, Federal Practice and Procedure: Civil § 1204. All the federal rules "require is a `short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957); Fed.R.Civ.P. 8(a)(2). Rule 8 does not require an election of remedies. Whatever their historical and technical differences, conversion and detinue are simply alternative remedies "for the redress of a single right." Grogan v. Garner, 806 F.2d 829, 939 (8th Cir.1986). "The sufficiency of a *468 pleading is tested by the statement of the claim and the demand for judgment is not considered part of the claim." Wright & Miller, supra at § 1255.
This court believes that the 1984 complaint and the 1988 complaint state the same "claim" within the meaning of Rule 8. The claim is for the wrongful taking or retention of the Double O equipment located in the Ambrose mines. The addition of the term "conversion" and a request for conversion damages in the 1988 complaint does not mean that the 1988 complaint raises new claims. As the Fourth Circuit stated, a plaintiff in federal court
need not set forth any theory or demand any particular relief for the court will award appropriate relief if the plaintiff is entitled to it upon any theory. Under this liberalized practice, a party's misconception of the legal theory of his case does not work a forfeiture of his rights.
New Amsterdam Casualty Co. v. Waller, 323 F.2d 20, 24-25 (4th Cir.1963). The 1988 complaint merely seeks an additional remedy for the same claim raised by the 1984 complaint. The court believes, therefore, that the statute of limitations was tolled not only as to detinue but also as to conversion and any other remedy to which Tankersley may be entitled on the basis of the alleged wrongful conduct of Ambrose.
Ambrose's final argument concerns laches. The court concludes that in view of the holding that Tankersley's complaint is within the statute of limitations the doctrine of laches cannot apply.
CONCLUSION
For the reasons stated herein, the decision of the bankruptcy court is AFFIRMED.
NOTES
[1] References to the record are designated "R. ___."
[2] The current statute reads "applicable nonbankruptcy law." 11 U.S.C. § 108. The amendment which added the word "nonbankruptcy" does not apply to this case.
[3] See supra note 2.
[4] The court offers no opinion as to the applicability of section 8.01-229 E 1 to this case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919087/ | 106 B.R. 251 (1989)
In re Danny L. STEFANOFF, Debtor.
FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, as Receiver for Victor Savings and Loan Association, Plaintiff,
v.
Danny L. STEFANOFF, Defendant.
Bankruptcy No. 88-00700-C, Adv. No. 88-0193-C.
United States Bankruptcy Court, N.D. Oklahoma.
October 3, 1989.
*252 George deVerges, Tulsa, Okl., for plaintiff.
Steven M. Harris, Tulsa, Okl., for defendant.
MEMORANDUM OF INTERLOCUTORY OPINION AND ORDER
STEPHEN J. COVEY, Bankruptcy Judge.
On July 31, 1989, the Court heard this adversary proceeding brought under 11 U.S.C. § 523(a)(2)(A) and § 523(a)(6) to determine the dischargeability of certain debts owed by the Defendant, Danny L. Stefanoff ("Stefanoff"), to Plaintiff, Federal Savings and Loan Insurance Corporation ("FSLIC"), as receiver for Victor Savings and Loan Association ("Victor Savings"). *253 Plaintiff's complaint raised objections to the discharge of debts arising out of three transactions the Burgundy Place, Town & Country Bank, and Sallisaw RV Park transactions, respectively. Prior to trial, the allegations with regard to the Burgundy Place transaction were dismissed. At trial, for the reasons stated on the record, the Court granted Defendant's motion for directed verdict as to the dischargeability of the debt arising out of the Town & Country transaction. Also at trial, for the reasons stated on the record, the Court ruled that Plaintiff had failed to establish a prima facie case under 11 U.S.C. § 523(a)(6) regarding the dischargeability of the debt arising out of the Sallisaw RV Park transaction. The Court took under advisement the issue of Plaintiff's objection under 11 U.S.C. § 523(a)(2)(A) regarding the dischargeability of the debt arising out of the Sallisaw RV Park transaction. With regard to this count, after considering the evidence and the arguments and authorities presented by counsel, the Court finds as follows:
FACTS
In the spring of 1986, Stefanoff and Bill Walsh ("Walsh") agreed to form a partnership known as the Sallisaw R.V. Limited Partnership for the purpose of (1) purchasing real estate in the area of Sallisaw, Oklahoma, in the vicinity of the Blue Ribbon Downs Racetrack, and (2) constructing on such real estate a recreational vehicle park ("Sallisaw RV Park"), including pads, clubhouse, swimming pool and other amenities. Walsh and Stefanoff intended to finance the acquisition and development of Sallisaw RV Park through a loan from Victor Savings. At this time, Walsh had just resigned as an officer and member of the Board of Directors of Victor Savings. Stefanoff was an advisory member of Victor Savings' Board, was a member of Victor Savings' Executive Committee and had previously borrowed from Victor Savings between $12 and $14 million for other projects in which he was involved. Victor Savings' Executive Committee was responsible for approving approximately 75% of the loans made during this period and was primarily involved in disposing of real estate projects which Victor Savings had foreclosed upon or otherwise repossessed ("REO's").
Walsh originated the idea and developed the plan and budget related to the construction of Sallisaw RV Park. Stefanoff's role was to aid in securing the financing for the project through Victor Savings. Also, one of Stefanoff's businesses was to be employed as the contractor to construct the improvements at Sallisaw RV Park.
Stefanoff informed Walsh that he could arrange $2.5 million in financing from Victor Savings for the Sallisaw RV Park project. Based on Walsh's cost projections and income pro formas, $1.4 would be loaned for construction and the remaining $1.1 million would be used to purchase the real estate. Both Stefanoff and Walsh anticipated that they could purchase the real estate for much less than $1.1 million, but they planned to arrange a straw man or turnaround sale to make it appear that the purchase price was approximately $1.1 million. Stefanoff and Walsh agreed that they would split the excess loan proceeds not necessary to purchase the real estate.
Stefanoff also informed Walsh that, as a condition to obtaining the Sallisaw RV Park financing, Walsh individually would have to assume the ownership and liability for a Victor Savings' REO in Commerce, Texas, consisting of an apartment complex, and also pay approximately $300,000.00 in interest on other defaulted loans. Walsh agreed to this condition believing that he could use his share of the excess loan proceeds on the Sallisaw RV Park project to fulfill these obligations until he was able to make the REO's profitable.
With this plan in mind, in early June of 1986, Walsh contacted William Boyd ("Boyd"), who was doing business as Executive Realty, and hired him to locate and purchase as a straw man 90 to 100 acres of suitable real estate for the Sallisaw RV Park. Walsh agreed to pay Boyd a fee of $100,000.00. Boyd in turn contacted J.J. Hight ("Hight"), who was doing business as Valley Land Title Company, and hired *254 him to locate the property and agreed to pay him $25,000.00. Hight located suitable real estate consisting of two tracts of land, one owned by the Pennys and one by the Bagleys. On June 23, 1986, Boyd entered into contracts to purchase the real estate with the Pennys and Bagleys for a total price of $270,000.00.
Prior to or during June of 1986, Stefanoff arranged for approval of the Sallisaw RV Park loan. In June, when Walsh first met with one of Victor Savings' loan officers, Jim Eaton, the loan had already been informally approved although no loan application had been made and Victor Savings had no written information concerning the project. At this meeting, Walsh delivered to Jim Eaton his cost projections and income pro formas, a copy of the uncompleted Sallisaw R.V. Park certificate of limited partnership (Exhibit 7), and a copy of a real estate sales contract between Boyd and Sallisaw R.V. Limited Partnership (Exhibit 18). The real estate sales contract indicates that the purchase price of the Sallisaw RV Park property is $1.116 million. Following this meeting, on June 30, 1986, Walsh received a letter from Victor Savings signed by Don Vale, Senior Vice President, confirming approval of the $2.5 million loan. Prior to finally approving the loan, Victor Saving hired Mr. Stansifer, an M.A.I. certified appraiser, to value the Sallisaw RV Park property. At the time the loan was finally approved, the written appraisal report had not been completed, but Victor Savings was aware of Mr. Stansifer's valuation. As reflected in the written appraisal report dated July 15, 1986, Mr. Stansifer valued the real estate at $1.1 million and the proposed improvements at $2.224 million, a total value of $3.324 million for the completed project.
On July 17, 1986, the Sallisaw R.V. Limited Partnership filed its certificate of limited partnership (Exhibit 7) with the Oklahoma Secretary of State. Walsh was listed as general partner and a limited partner and Stefanoff was listed as a limited partner of the partnership.
On July 23, 1986, the $2.5 million loan from Victor Savings to Sallisaw R.V. Limited Partnership was closed in Hight's offices in Sallisaw, Oklahoma. Walsh, as general partner, executed a Construction Loan Agreement (Exhibit 26), Construction Mortgage and Security Agreement (Exhibit 24), and Promissory Note in the amount of $2.5 million (Exhibit 22). Prior to the closing, Walsh obtained a check in the amount of $1.116 million (Exhibit 8) from Victor Savings payable to Victor Savings and endorsed to Valley Land Title Company, Hight's business, which was acting as closing agent for the purchase of the Sallisaw RV Park property. In connection with the loan closing, Victor Savings either prepared a settlement statement or obtained a settlement statement prepared by Walsh on HUD Standard Form 1A (Exhibit 16) which indicated that $1.116 million of the $2.5 million loan was made to pay the Pennys and Bagleys a contract sales price of $1.116 million to purchase the Sallisaw RV Park property.
Also on July 23, 1986, the purchase of the Sallisaw RV Park property by Boyd from the Pennys and Bagleys and then the purchase by Sallisaw R.V. Park Limited Partnership from Boyd were closed simultaneously in Hight's offices in Sallisaw, Oklahoma. The Pennys, the Bagleys, Boyd, Hight, and Walsh all attended the closing and the following events occurred:
(1) the Pennys received $120,000.00, less closing costs, and tendered a warranty deed for their 80.16 acres to Boyd. See Exhibit 2 and 3;
(2) the Bagleys received $150,000.00, less closing costs, and tendered a warranty deed for their 13.29 acres to Boyd. See Exhibit 1 and 3;
(3) Hight received a consulting fee of $23,500.00 and Willie B. Hale/Pat Coleman received a consulting fee of $10,000.00. See Exhibit 3;
(4) Boyd, through Executive Realty, received $812,005.02 (Exhibit 19 and 20), and Boyd tendered a warranty deed for the Sallisaw RV Park property to the Sallisaw R.V. Park Limited Partnership (Exhibit 9);
(5) Boyd, Walsh, the Pennys and Bagleys signed the settlement statement on HUD Standard Form 1A (Exhibit 16) which indicates *255 that $1.116 million of the $2.5 million loan from Victor Savings was used to pay to the Pennys and Bagleys for the purchase of the Sallisaw RV Park property.
Shortly after the closing, Boyd disbursed the $812,005.02 as follows: Executive Realty retained its agreed fee of $100,000.00; $8,752.00 was paid to Walsh as reimbursement for expenses incurred in the real estate transaction; and, of the remaining $703,253.02, Walsh received $351,626.51 and Stefanoff received $351,626.51. See Exhibit 20. Also sometime following the closing, the HUD Standard Form 1A settlement statement (Exhibit 16) was given or returned to Victor Savings, but the other settlement statements prepared at the closing (Exhibits 1-4) were retained by Hight. Finally, Victor Savings had Walsh complete a loan application (Exhibit 17) following the actual closing of the loan.
In the Fall of 1987, the Federal Home Loan Bank Board appointed FSLIC as receiver for Victor Savings, at that time known as Victor Federal Savings and Loan Association. At that time, the only documents relating to the Sallisaw RV Park loan transaction in the loan files were the Promissory Note (Exhibit 22), Construction Mortgage and Security Agreement (Exhibit 24), Construction Loan Agreement (Exhibit 26), the appraisal of Mr. Stansifer (Exhibit 29) and the HUD Standard Form A1 settlement statement (Exhibit 16) showing the sale of the property from the Pennys and Bagleys to Sallisaw R.V. Limited Partnership for $1.116 million. The other settlement statements (Exhibits 1-4), the original loan application (Exhibit 17), and the real estate contract between Boyd and Sallisaw R.V. Limited Partnership were not in the loan file when FSLIC originally took over Victor Savings, but were later recovered after FSLIC investigated the loan transaction.
On July 29, 1988, the Federal Home Loan Bank Board again appointed FSLIC as receiver for Victor Savings. FSLIC foreclosed upon the Sallisaw RV Park and has been unable to sell the project to a third party.
On the 18th day of March 1988, an Involuntary Petition was filed against Stefanoff and on the 18th day of April 1988, an Order for Relief under Chapter 7 was entered. On the 22nd day of July, 1988, the FSLIC filed this Complaint asking the Court to determine the dischargeability of its debt.
LEGAL ANALYSIS
In order to prevail under 11 U.S.C. § 523(a)(2)(A), FSLIC must prove by clear and convincing evidence the following elements:
(1) Stefanoff made a materially false representation (other than a statement respecting Stefanoff's or an insider's financial condition);
(2) Such false representation was made with the requisite moral turpitude or intentional wrong;
(3) FSLIC or Victor Savings reasonably relied on such false pretenses, false representation, or intentional wrong;
(4) Money, property, services, or an extension, renewal, or refinancing of credit was obtained; and
(5) Stefanoff owes FSLIC a debt for such money, property, services, or extension, renewal, or refinancing of credit.
See In re Black, 787 F.2d 503 (10th Cir. 1986) and In re Mullet, 817 F.2d 677 (10th Cir.1987).
The Court finds that Stefanoff, through his partner Walsh, made a materially false representation that the purchase price of the Sallisaw RV Park property was $1.116 million. The conduct of Walsh may be imputed to Stefanoff since Stefanoff not only knew of the false representation but also authorized it and condoned it. In re Paolino, 75 B.R. 641 (Bankr.E.D.Pa.1987); In re Cecchini, 780 F.2d 1440 (9th Cir. 1986).[1]
*256 The Court further finds that the false representation was made with the requisite moral turpitude or wrongful intent. Walsh and Stefanoff engaged in the straw man or turnaround sale deliberately to deceive Victor Savings and Victor Savings' examiners and regulators by making it appear that the purchase price of the Sallisaw RV Park property was $1.116 million rather than $270,000.00.
The Court further finds that $1.116 million was in fact obtained from Victor Savings in connection with the Sallisaw RV Park real estate purchase with the remainder of the $2.5 million loan to be used for construction of the improvements thereon. Prior to making the loan, Victor Savings knew that the purpose of the loan was to buy real estate in Sallisaw. Through the real estate contract between Boyd and Sallisaw R.V. Limited Partnership (Exhibit 18), Victor Savings believed the cost of the real estate would be $1.116 million. Also, the HUD Standard Form 1A settlement statement (Exhibit 16) indicates that Victor Savings loaned $1.116 million so that Sallisaw R.V. Limited Partnership could purchase the Sallisaw RV Park real estate for this amount.
Additionally, Stefanoff owes a debt for this money obtained. Although Stefanoff was in name a limited partner and therefore not liable on the promissory note, the evidence indicated that, with regard to decisions concerning the financing for Sallisaw RV Park, Stefanoff took part in the control of the business of the limited partnership to such an extent as to make him liable as a general partner in this regard. 54 O.S. § 148. Alternatively, the Court holds that even a limited partner who actively participates in perpetrating a fraud, false pretenses, or the making of a false representation under 11 U.S.C. § 523(a)(2)(A) becomes personally indebted for the money obtained by the partnership thereby. Levy v. Runnells, 66 B.R. 949, 960 (Bankr.E.D.Va.1986).
Thus it is clear that Plaintiff has established elements 1, 2, 4, and 5 discussed above and the Court arrives at the issue most vigorously disputed by the parties whether Victor Savings relied on the false representation. The Court first finds that the evidence is not clear and convincing to show that Victor Savings actually relied on the false representation in making the loan. First, Stefanoff, as a member of the Executive Committee, arranged for approval of the loan and Stefanoff himself was aware that the representation as to the purchase price of the property was false. Therefore, Victor Savings cannot be said to have relied on the false representation. Furthermore, to the extent that other officers may have been involved in the loan approval or review process, it is not clear what, if anything, they relied on. It appears that Victor Savings made the loan because the Sallisaw RV Park property appeared to provide adequate collateral, Walsh and Stefanoff were well known and trusted individuals, and Victor Savings, by making the loan, was able to dispose of one of its REO's in Commerce, Texas, thereby improving its own poor financial position.
However, FSLIC need not prove actual reliance by Victor Savings to establish its case under 11 U.S.C. § 523(a)(2)(A). Rather, FSLIC is deemed as a matter of law to have relied solely on the written records of Victor Savings as they existed at the time FSLIC was appointed receiver for the institution. D'Oench, Duhme & Co., Inc. v. Federal Deposit Insurance Corporation, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942) originating the doctrine that the FDIC is not bound by secret agreements concerning the repayment of loans; Langley v. Federal Deposit Insurance Corporation, 484 U.S. 86, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987) expanding the D'Oench doctrine to situations where bank made misrepresentations inducing a borrower to enter into loan; In re Cerar, 97 B.R. 447 (C.D.Ill.1989) applying the D'Oench doctrine in the context of the reliance requirement under 11 U.S.C. § 523(a)(2)(A); Federal Deposit Insurance Corporation v. Galloway, 856 F.2d 112 (10th Cir.1988) applying the D'Oench doctrine in cases of fraudulent inducement; and Mainland Sav. Ass'n v. Riverfront Associates, Ltd., 872 F.2d 955 (10th Cir. *257 1989) applying the D'Oench doctrine to cases involving the FSLIC.
The Court finds the evidence is clear and convincing that, at the time FSLIC was originally appointed receiver for Victor Savings, the loan files of Victor Savings indicated that the purchase price of the Sallisaw RV Park property was $1.116 million and nothing in such loan files showed that the purchase price had been artificially inflated by a straw man or turnaround sale. Thus, under the authorities cited above and particularly Cerar, FSLIC is deemed to have relied on the truth of the representation in the loan files as to the purchase price of the Sallisaw RV Park property and, thus, has met its burden of proof on the issue of reliance.
Another way of analyzing the D'Oench doctrine as applied in proceedings under 11 U.S.C. § 523(a)(2)(A) is to begin with the loan files themselves. Any representations contained in the loan files are deemed made to the FSLIC once the FSLIC is appointed receiver for the financial institution. If there is a materially false representation in the loan files, FSLIC has a potential action under 11 U.S.C. § 523(a)(2)(A). As a matter of law, FSLIC is entitled to rely on the truth of the representations made in the loan files and is not bound by agreements, misrepresentations or fraud not apparent from the loan files themselves.
The Court concludes that FSLIC has established its case under 11 U.S.C. § 523(a)(2)(A). The evidence is both clear and convincing. In addition to the credibility of Walsh's testimony, as corroborated by other witnesses, the Court finds particularly compelling the undisputed fact that Stefanoff received $351,626.51, half of the excess loan proceeds obtained as a result of the straw man scheme. It is inconceivable to the Court that an innocent investor would share so generously in the fruits of the sham. Rather, the strong inference from this fact is that Stefanoff played a key and valuable role in perpetrating the deception.
At trial, the Court reserved for later hearing a determination of the exact amount of FSLIC's claim arising out of the Sallisaw RV Park debt. Accordingly, on the 26th day of October, 1989, at 9:30 a.m. the Court shall conduct a hearing to determine this amount.
NOTES
[1] Walsh testified that Stefanoff originated the idea of the straw man or turnaround sale to disguise the purchase price of the Sallisaw RV Park property. Stefanoff denied any knowledge of the false sales price. On the whole, the Court finds Walsh's testimony is credible and consistent in light of the testimony of other witnesses. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1744710/ | 998 So. 2d 623 (2008)
MARIMON
v.
STATE.
No. 5D08-3697.
District Court of Appeal of Florida, Fifth District.
December 23, 2008.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1588165/ | 33 So.3d 724 (2010)
Gary Fontaine BELL, Appellant,
v.
STATE of Florida, Appellee.
No. 1D08-5315.
District Court of Appeal of Florida, First District.
March 25, 2010.
Rehearing Denied April 22, 2010.
*725 Michael R. Rollo of Michael R. Rollo, P.A., Pensacola, for Appellant.
Bill McCollum, Attorney General, and Anthony J. Golden, Assistant Attorney General, Daytona Beach, for Appellee.
WOLF, J.
Appellant raises several issues concerning his convictions for lewd and lascivious battery and failure to appear. Because we find no error, we affirm; however, we write to address two of appellant's arguments.
In appellant's first issue, he asserts the trial court erred in failing to grant his motion to sever the lewd and lascivious charge from the failure to appear charge. In determining whether severance is warranted, a court must consider several factors including the temporal and geographic association of the crimes, the nature of the crimes, and the manner in which the crimes were committed. Garcia v. State, 568 So.2d 896, 899 (Fla.1990); see also Domis v. State, 755 So.2d 683, 685 (Fla. 4th DCA 1999); Sule v. State, 968 So.2d 99, 103 (Fla. 4th DCA 2007) (discussing when severance is appropriate). "[F]or joinder to be appropriate, the crimes must be linked in a significant way." Domis, 755 So.2d at 685. In Ellis v. State, 622 So.2d 991, 999-1000 (Fla. 1993), the supreme court summarized the types of acts that could be deemed connected from just those occurring in an episodic sense by stating:
Our recent opinion in Fotopoulos also sheds light on the proper standard for joinder. . . . While there was a substantial lapse of time in Fotopoulos, it was clear that the two crimes were linked in a causal sense: One was used to induce the other. That causal link was sufficient to permit joinder, since one crime could not properly be understood without the other. Fotopoulos, 608 So.2d at 790. In sum, the two crimes Fotopoulos helped commit constituted a single episode because of their obvious causal link and despite a lapse of time. . . .
*726 There are several rules that can be distilled from . . . earlier cases. First, for joinder to be appropriate the crimes in question must be linked in some significant way. This can include the fact that they occurred during a "spree" interrupted by no significant period of respite, Bundy [v. State, 455 So.2d 330 (Fla.1984)], or the fact that one crime is causally related to the other, even though there may have been a significant lapse of time. . . .
(Emphasis supplied). See also Fotopoulos v. State, 608 So.2d 784 (Fla.1992). In the instant case, the record evidences there was a significant separation in time from the date the lewd and lascivious battery occurred to the date appellant failed to appear. However, the two charges are "causally linked" to one another. It is undisputed appellant did not make an appearance at crucial court proceedings on the lewd and lascivious charge. Because the lewd and lascivious charge was the but-for cause of the failure to appear, based on the language in Ellis and Fotopoulos, the two counts were "causally linked" and were properly joined.
In his third issue, appellant asserts improper comments made during closing argument warrant reversal. During the first phase of closing argument, the prosecutor stated:
As to count 1 the State must prove 2 elements beyond and to the exclusion of every reasonable doubt in order for you to convict the defendant. The first element is that [the victim] was under the age of 12. The evidence that we presented that was the testimony of her mother who testified as to her date of birth and importantly the testimony of [the victim] who you obviously could tell she was a young girl and told her her date of birth was [] so without any evidence contradicting that the State has proven to you beyond a reasonable doubt the first element of the charge.
In cases like this, it is always a[sic] one-person's word against another. In these particular casesIn this particular case it is the word of Mikayla against the plea of not guilty that [appellant] entered. . . . So if you are looking for a reason to not believe [the victim] there isn't one. Because there is no evidence that she would have made this up at this particular time under these particular circumstances. And that's the consideration you should make in deciding whether or not her testimony is credible.
(Emphasis added). These comments were objected to contemporaneously, and thus, the issue was properly preserved. A comment suggesting a witness gave "uncontradicted" or "uncontroverted" evidence is an impermissible comment on appellant's right to remain silent in those cases where the defendant is the only individual who can contradict the evidence. Hill v. State, 980 So.2d 1195 (Fla. 3d DCA 2008) (holding the State's comment that the only witness gave "uncontradicted and uncontroverted" testimony establishing appellant's guilt was an impermissible comment on appellant's right to remain silent where appellant was the only individual capable of refuting the witness's testimony); see also Watts v. State, 921 So.2d 722, 724 (Fla. 4th DCA 2006) (same); Smith v. State, 843 So.2d 1010 (Fla. 1st DCA 2003) (holding the State's comment that "[n]obody testified he wasn't the guy" was an impermissible comment on appellant's right to remain silent in a case in which the only individual who could have contradicted the State's evidence was the appellant). Here, the first comment, "so without any evidence contradicting that the State has proven to you beyond a reasonable doubt the first element of the charge," was made in reference to the State's burden *727 to prove the age of the victim. Because this was not an issue which only appellant was capable of refuting, this comment could not be construed as a comment on appellant's right to remain silent.
The second comment, "In this particular case it is the word of [the victim] against the plea of not guilty that [appellant] entered," if considered out of context is more problematic. However, "[w]here there is an allegation of improper comments by a prosecutor, we do not consider the comments themselves in a vacuum; rather, we view the allegedly-wrongful comments in context." McKenney v. State, 967 So.2d 951, 955 (Fla. 3d DCA 2007).
When reading the statement in context it becomes clear the prosecutor was not commenting on appellant's silence; instead, the prosecutor was arguing that no evidence had been offered to suggest the victim had a motive to lie. Witnesses other than appellant could have been called to testify regarding the victim's alleged motive to lie, and thus, the prosecutor's comment is not fairly susceptible to being interpreted as an erroneous comment on appellant's right to remain silent. Specifically, the comment did not point out a lack of testimony on an issue only appellant was capable of contradicting. For the foregoing reasons, we affirm.
AFFIRMED.
VAN NORTWICK and ROBERTS, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1588175/ | 752 F.Supp. 1326 (1990)
In re AIRCRAFT CRASH LITIGATION FREDERICK, MARYLAND, MAY 6, 1981.
No. C-3-82-195.
United States District Court, S.D. Ohio, W.D.
August 21, 1990.
*1327 *1328 *1329 Marc S. Moller, Kreindler & Kreindler, New York City, Joseph M. Juergens, Springfield, Ohio, Robert Farquhar, Arthur Ames, Carmine Garofalo, Thomas A. Hansen, Dayton, Ohio, John J. Kennelly, Chicago, Ill., Robert A. Marcis, Craig Spangenberg, Spangenberg, Shilbey, Traci & Lancione, Cleveland, Ohio, Thomas M. Green, Green & Green, Richard G. Snell, Jeffrey, Snell, Rogers & Greenberg, Dayton, Ohio, William R. Coen, Kettering, Ohio, George B. Herndon, Jr., Fayetteville, N.C., for plaintiffs.
David C. Greer, Howard Krisher, Bieser, Greer & Landis, Dayton, Ohio, Richard C. Coyle, Perkins Coie, Seattle, Wash., for defendant Boeing Co.
Craig D. Andrew, James M. Wiles, Wiles, Doucher, Van Buren, Boyle & Casey, Columbus, Ohio, Neil F. Freund, Freund, Freeze & Arnold, Dayton, Ohio, for defendant Lear Siegler, Inc.
Herbert L. Lyons, Sr. Aviation Counsel, Dept. of Justice, Torts Branch, Civ. Div., Major Derrence Fivehouse, Aviation/Admiralty Law Section, Washington, D.C., Patrick Quinn, Asst. U.S. Atty., Dayton, Ohio, for defendant U.S.
RICE, District Judge.
DECISION AND ENTRY SUSTAINING MOTIONS FOR SUMMARY JUDGMENT FILED IN CONSOLIDATED CASE; MOTION FOR SUMMARY JUDGMENT OF DEFENDANT BOEING (DOC. # 150) SUSTAINED; RENEWED MOTION FOR SUMMARY JUDGMENT OF DEFENDANT McDONNELL DOUGLAS (DOC. # 215) SUSTAINED; RENEWED MOTION FOR SUMMARY JUDGMENT OF DEFENDANT LEAR (DOC. # 217) SUSTAINED; JUDGMENT TO BE ENTERED IN FAVOR OF MOVING DEFENDANTS AND AGAINST PLAINTIFFS IN CONSOLIDATED CASE AND IN ALL CASES CONSOLIDATED THEREIN (Darling v. The Boeing Co., et al., C-3-82-195; Hodge v. The Boeing Co. et al.,-C-3-82-196; Wetzel v. The Boeing Co., et al., C-3-82-197; Resides v. The Boeing Co., et al., C-3-82-198; Frederick v. The Boeing Co., et al., C-3-82-199; Middleton v. The Boeing Company, et al., C-3-82-200; Harris v. The Boeing Company et al., C-3-82-201; Bayliss v. The Boeing Company, et al., C-3-82-202; Ross v. The Boeing Company, et al., C-3-82-206; Presley v. The Boeing Company, et al., C-3-82-208; Fonke v. The Boeing Company, et al., C-3-82-365; (in behalf of David Fonke estate); Masters v. The Boeing Co., et al., C-3-82-785; Juergens v. The Boeing Company, et al., C-3-83-407; Bernhold v. Boeing Co., et al., C-3-82-204; Riley v. Boeing Co., et al., C-3-82-211; Fonke v. Boeing Co., et al., C-3-82-366, (on behalf Linda Fonke estate); FOLLOWING ENTRY OF JUDGMENT, CASES C-3-82-204, C-3-82-211, AND C-3-82-366 ARE TO BE SEVERED FROM THE OTHER 13 CASES; TRIAL UPON THE MERITS OF THE SEVERED CASES REMAINS SET FOR FEBRUARY 19, 1991; FINAL JUDGMENT TO BE ENTERED IN CASE NOS. C-3-82-195; C-3-82-196; C-3-82-197; C-3-82-198; C-3-82-199; C-3-82-200; C-3-82-201; C-3-82-202; C-3-82-206; C-3-82-208; C-3-82-365; C-3-82-785; AND C-3-83-407
*1330 These consolidated cases are the result of a true catastrophethe crash of an Air Force EC-135N jet aircraft, and the loss of all on board, on May 6, 1981. The Plaintiffs, who are the personal representatives of certain military and civilian decedents, have filed suit on alternative theories of strict liability, breach of express and implied warranty and negligence in connection with the design and testing process for the aircraft, and seek damages from the Boeing Company ("Boeing"), which designed and manufactured the aircraft pursuant to an Air Force contract, Lear Siegler, Inc. ("Lear"), which, also pursuant to an Air Force contract, designed and manufactured the aircraft's autopilot system, and McDonnell Douglas Corporation ("MDC"), which modified the aircraft under an Air Force contract some six years after its original construction.[1] The United States is also a Defendant in three cases filed by the representatives of civilian decedents (Case Nos. C-3-82-204, C-3-82-211, and C-3-82-366).
This case is currently before the Court on Boeing's Motion for Summary Judgment (Doc. # 150) and the renewed Memorandum of Law in support thereof (Doc. # 221) ("Boeing Memorandum"), on MDC's Renewed Motion for Summary Judgment and Memorandum in support thereof (Doc. # 215) ("MDC Memorandum"), and on Lear's Renewed Motion for Summary Judgment and Omnibus Memorandum in Support thereof ("Lear Memorandum") (Doc. # 217). All three Defendants have invoked the government contractor defense set forth in Boyle v. United Technologies Corp, 487 U.S. 500, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988), as grounds for their respective motions.[2]
I. BACKGROUND
A. The Accident
On May 6, 1981, at 10:05 a.m., an Air Force EC-135N aircraft departed Wright Patterson Air Force Base, Dayton, Ohio, on a round-trip training flight scheduled to last approximately five hours. On board were a crew of seventeen, and four authorized *1331 observers, including two wives of crewmembers participating in the Air Force Systems Command's Have Partner spouse orientation program. The pilot in command was Captain Joseph C. Emilio. No stressful or unusual training requirements were planned for the flight. Air Force Systems Command Press Briefing, June 12, 1981, Plaintiffs' Exhibit # 2.
The aircraft was cruising eastward near Walkersville, Maryland, at approximately 29,000 feet when, at 10:49 a.m. (some 45 minutes into the flight) Federal Aviation Administration air traffic control lost radar contact with it. No distress calls or emergency transmissions were received from the aircraft, which crashed at approximately 10:51 a.m. There were no survivors. USAF Aircraft Accident Investigation IAW AFR 110-14, Plaintiffs' Exhibit # 1 [hereinafter AF Investigation Report].
At the time of the crash the left pilot seat was occupied by Mrs. Peggy Emilio, one of the participants in the Have Partner spouse program, and the right pilot seat was occupied by Captain Emilio. Two navigators and two passengers were also in the crew compartment. The locations of other persons in the aircraft could not be determined. Id. Examination of the wreckage resulted in the recovery of the actuator which controlled the stabilizer trim, the moveable leading edge of the horizontal portion of the aircraft's tail which, in conjunction with the elevators located at the trailing edge of the horizontal tail section, controls the aircraft's "pitch," or nose-up/nose down position. The position in which the actuator was found corresponded to the full aircraft nose-down position. Id. at Tab 2.5; Boeing Memorandum at 8. The cockpit pitch trim indicator and the horizontal stabilizer trim jackscrew were also recovered from the wreckage, and each was found to indicate full nose-down trim. AF Investigation Report, at Tab. 3.2.1.[3]
The position of the aircraft's horizontal stabilizer can be adjusted in three ways. It can be controlled electrically, by means of an AC motor, which is in turn controlled by identical switches located on each pilot's control wheel. Id. It can also be controlled manually, by means of a pitch trim wheel. Id. In the EC-135N this wheel is located on the left side of the aisle console placed between the two pilot's seats. Boeing Memorandum, Doc. # 221, at 10 and Appendix 1. Use of the trim wheel is a "laborious" process requiring the pilot to turn the wheel thirty-five full revolutions to retrieve the trim from full nose down to zero. AF Investigation Report at Tab 3.2.1. It is undisputed that the horizontal stabilizer can also be controlled by an autopilot such as the one with which the aircraft in this case was equipped.
The Air Force's analysis of possible causes of the crash led it to conclude that
[f]or undetermined reasons, the aircraft pitch trim moved to the full nose down position. The aircraft then rapidly pitched over, most likely upon release of the auto-pilot, and induced sufficient negative "G" forces to cause [its AC] generators to trip off line, resulting in the loss of all AC electrical power. The pitch trim could not then be moved electrically. This condition, while unusual, can be controlled [manually, by use of the trim wheel] if prompt corrective action is taken; however, if corrective action is delayed approximately 8 seconds, the aircraft pitch angle will be greater than 30 degrees nose-down and the airspeed in excess of 350 knots indicated airspeed. Under these conditions, the aircraft cannot be controlled until the pitch trim is moved toward neutral.[4] While it is evident that recovery was delayed, the reason for the delay is unknown. The aircraft *1332 became uncontrollable and entered a steep descent. During the rapid descent, an explosion occurred at approximately 1300 feet above ground level followed immediately by catastrophic failure, and complete break-up of the aircraft.
AF Investigation Report at "Synopsis" and Tab 3.3. It is not disputed that rapid pitchover of the aircraft could and did result in loss of AC electrical power so that the pitch trim could not be corrected electrically. It is also not disputed that after approximately eight seconds of full nose-down pitch, the aircraft pitch angle and airspeed would be such as to make manual recovery of the aircraft impossible.
B. The Parties' Contentions Concerning the Accident's Cause
The parties to the instant Motions differ markedly in their theories of the cause of the aircraft's pitch-over and succeeding events leading to loss of the airplane. Plaintiffs contend that the aircraft's sudden pitch-over was the result of a "flight control system malfunction," most probably in the autopilot. Plaintiffs' "Omnibus" Memorandum of Law in Opposition to Defendants' Motions for Summary Judgment [hereinafter Plaintiffs' Memorandum], Doc. # 219, at 3-5. They claim that the aircraft's automatic flight control system was designed to be capable on its own (i.e., without a command from the flight crew) of moving the pitch trim to the full nose down position while the autopilot is in altitude hold mode. Plaintiffs' Liability Contentions, Doc. # 31 at ¶ 1. They contend that the flight control system was defective in that the autopilot was "failure prone" and because "single point failures in the system [that] caused uncommanded trim inputs which threatened the safe operation of the plane were commonplace." Plaintiffs' Memorandum at 12. Plaintiffs' contend that the design of the aircraft's autopilot was defective in several respects, id. at 12-14 (quoting Plaintiffs' Responses to Liability Discovery Requests, Doc. # 144 at 35-38).[5]
*1333 Plaintiffs allege that the aircraft was defectively designed such that the combination of unanticipated trim malfunction leading to full nose-down attitude and complete loss of electrical power [as a result of the aircraft's AC generators' characteristic of tripping off a few seconds following the sustained negative gravity or "G" forces attendant upon a dive such as that experienced by the aircraft in this case] led to a "failure mode" from which a reasonably qualified pilot such as Captain Emilio could not recover the aircraft. Plaintiffs' Memorandum at 16.[6] They also contend that the location of the single manual trim wheel (by means of which the pitch trim might have been corrected after loss of electrical power) was a design defect, in that "[t]he aircraft could not be operated in a flight control systems emergency as safely from the right [pilot's] seat as from the left [pilot's] seat when a full range of motion of the mechanical trim wheel was necessary." Id. at 15. Plaintiffs further contend that the aircraft was defectively designed in that (1) it lacked visual and/or aural warning systems to alert the crew that the pitch trim was in motion or in an abnormal position for a given phase of flight; (2) its flight manuals did not disclose how quickly the aircraft would could become unrecoverable after entering the full nose-down trim position; (3) the aircraft was inherently defective because it was unrecoverable once eight seconds had elapsed following a flight control system malfunction; (4) it lacked devices to prevent trim malfunctions and/or warnings of those malfunctions' impending occurrence. Id. at 16-17.
Defendants contend that the aircraft's pitch-over was caused when Mrs. Emilio, seated in the left pilot's seat, inadvertently activated the trim stabilizer switch located on the left pilot's control wheel, and that the failure to correct the pitch-over in the time period before the situation became irremediable was due to human error attributable to Captain Emilio. Boeing Memorandum, Doc. # 221, at 8; Lear Memorandum, Doc. # 217, at 14; MDC Memorandum, Doc. # 215, at 23. Nevertheless, Defendants assume, per arguendo, that Plaintiffs' contentions are correct, for purposes of their Motions for Summary Judgment. Boeing Memorandum, Doc. # 221 at 10; Lear Memorandum, Doc. # 217 at 19. MDC Memorandum, Doc. # 215 at 29.
II. THE GOVERNMENT CONTRACTOR DEFENSE
A. Boyle v. United Technologies Corp.
As noted above, Boeing, Lear and MDC argue that they are entitled to absolute immunity under Boyle v. United Technologies Corp., 487 U.S. 500, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988). The Court now turns to a discussion of the elements of the Boyle defense.
*1334 In Boyle, a United States Marine helicopter pilot was killed when his helicopter crashed off the coast of Virginia during a training mission. 487 U.S. at 502, 108 S.Ct. at 2513. The pilot survived the impact, but he drowned when he was unable to open the escape hatch, which had been designed pursuant to a government contract to open outward, thereby rendering it ineffective against water pressure once the helicopter was submerged. Id. at 502-03, 108 S.Ct. at 2513. The pilot's father sued the helicopter's manufacturer, Sikorsky Division of United Technologies Corporation ("Sikorsky"), alleging that Sikorsky had defectively repaired the component of the helicopter's automatic flight control system that allegedly caused the crash and alleging that Sikorsky had defectively designed the emergency escape hatch. Id. at 503, 108 S.Ct. at 2513. Plaintiff had argued that state tort law imposed a duty upon Sikorsky to design the escape hatch to open inward and to position the escape hatch handle so that access to it would not be obstructed by other equipment. Id; see also Boyle v. United Technologies Corp., 792 F.2d 413, 414 (4th Cir.1986). Following a general verdict for the Plaintiff, the district court denied Sikorsky's motion for a judgment notwithstanding the verdict. Boyle, 487 U.S. at 503, 108 S.Ct. at 2513.
The Fourth Circuit reversed and remanded, directing that judgment be entered for Sikorsky. It held, as a matter of federal common law, that Sikorsky could not be held liable for the alleged defect in the design of the escape hatch, because it had satisfied the elements of the military contractor defense, as set forth in Tozer v. LTV Corp., 792 F.2d 403 (4th Cir.1986).[7] On appeal, the United States Supreme Court considered the question whether there was a basis in federal law for immunizing government contractors from liability under state tort law for design defects in military equipment, and the question whether the Fourth Circuit's formulation of the defense was appropriate. Boyle v. United Technologies Corporation, 487 U.S. 500, 503, 108 S.Ct. 2510, 2513, 101 L.Ed.2d 442 (1988). The Court held that the government contractor defense does exist as a matter of federal common law.[8] The basis for such a defense, the Court reasoned, lies in the "discretionary function" exception to the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2680(a), which protects the United States from liability for its agents' performance of duties involving discretionary decisions. Id. at 511-13, 108 S.Ct. at 2517-19. In the absence of the defense, the Court reasoned, the government's own immunity in tort for its actions taken pursuant to its discretionary functions would be undermined. Contractors held liable for design features which had been approved pursuant to an exercise of governmental discretion would inevitably pass the costs of liability on to the government, thereby imposing costs on the government which the FTCA was enacted to prevent. Id. at 512, 108 S.Ct. at 2518.
Under Boyle, state tort law is displaced where the liability it would impose touches upon an area that is of "uniquely federal interest." Id. at 504-07, 108 S.Ct. at 2514. The procurement of military equipment, the Boyle Court held, is an interest that is "uniquely federal." Id. at 507, 108 S.Ct. at 2515. A second condition to the displacement of state law under Boyle is that there exist a "significant conflict" between the area of uniquely federal concern and the operation of state law. Id. The Boyle *1335 Court provided three scenarios to illustrate the parameters of this "conflict" requirement. Where, for example, the duty imposed by state law is contrary to the duty imposed by the government contract, the requisite significant conflict exists. Id. at 509, 108 S.Ct. at 2516. This was true in Boyle itself, where the design of the escape hatch mechanism, which Plaintiff asserted was defective under state law, was mandated by specifications in the government contract. Id. Where, however, the government merely orders a particular piece of equipment from stock, the requisite conflict does not exist, the Supreme Court reasoned, because it cannot be said that the federal government has a significant or unique interest in the design features of that piece of equipment. Id. Similarly, state tort law requiring a particular safety feature is not preempted where a government contract for a piece of equipment specifies a particular operational characteristic but does not mandate "the precise manner of construction" and therefore does not preclude the inclusion of that safety feature. Id. (emphasis added).
The Boyle Court held that the FTCA "suggests the outlines of" its "significant conflict" requirement. Id. at 511, 108 S.Ct. at 2517. That Act provides a private cause of action for damages, stemming from the negligent or wrongful conduct of federal employees, that is coextensive with a private person's liability under state law, 28 U.S.C. § 1346(b), except where the claim is "based upon [the federal employee's or agency's] exercise or performance or ... failure to exercise or perform a discretionary function or duty...." 487 U.S. at 511, 108 S.Ct. at 2517 (quoting 28 U.S.C. § 2680(a)). The Court went on to state
We think that the selection of the appropriate design for military equipment to be used by our Armed Forces is assuredly a discretionary function within the meaning of [the FTCA's "discretionary function" exception]. It often involves not merely engineering analysis but judgment as to the balancing of many technical, military, and even social considerations, including specifically the trade-off between greater safety and greater combat effectiveness.
Id. at 511, 108 S.Ct. at 2517.
In setting forth the scope of the defense it enunciated, the Court adopted the elements of the defense employed by the Fourth Circuit in Tozer and by the Ninth Circuit in McKay v. Rockwell International Corporation, 704 F.2d 444, 449 (9th Cir.1983), cert. denied, 464 U.S. 1043, 104 S.Ct. 711, 79 L.Ed.2d 175. See 487 U.S. at 512-13, 108 S.Ct. at 2518-19. According to Boyle, "liability for design defects in military equipment cannot be imposed, pursuant to state law, when (1) the United States approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States." Id. at 512, 108 S.Ct. at 2518.
The Boyle Court intended both that the immunity provided by the defense it enunciated be broad and that active participation of the contractor in the design process not be preclusive of that defense. This is clear from the Court's stated reasons for its formulation of the elements of the defense:
The first [two elements] assure that the suit is within the area where the policy of the "discretionary function" would be frustratedi.e., they assure that the design feature in question was considered by a Government officer, and not merely by the contractor itself. The third condition is necessary because, in its absence, the displacement of state tort law would create some incentive for the manufacturer to withhold knowledge of risks, since conveying that knowledge might disrupt the contract but withholding it would produce no liability. We adopt this provision lest our effort to protect discretionary functions perversely impede them by cutting off information highly relevant to the discretionary decision.
487 U.S. at 512-13, 108 S.Ct. at 2518 (emphasis added). The Court rejected an alternative formulation of the elements of the *1336 defense that would have provided immunity only if the contractor did not participate in, or only minimally participated in, the design process or if the contractor, in effect, warned the government of all design defects. Id. (citing Shaw v. Grumman Aerospace Corp., 778 F.2d 736, 746 (1985).
In this Court's view, Boyle means that the defense applies where the "discretionary function" exception to the FTCA would prevent liability on the part of the federal government in the area of military procurement. Thus, where the government exercises its discretion with regard to the design of a particular piece of equipment (instead of simply ordering it from stock), discretion expressed through "engineering analysis" and the exercise of judgment regarding technical and military factors, and trade-offs between safety and mission effectiveness, see Boyle, 487 U.S. at 500, 108 S.Ct. at 2510, and where the three Boyle elements are satisfied, a military contractor is entitled to immunity from suit under state tort law. If state law would impose liability where the three Boyle elements are met, the requisite "significant conflict" is present, and state law is preempted.
There is no doubt that the Boyle defense can be established as a matter of law. Cases following Boyle have so held, either in the context of a motion for summary judgment, see, e.g., Kleeman v. McDonnell Douglas Corp., 890 F.2d 698 (4th Cir.1989), cert. denied, ___ U.S. ___, 110 S.Ct. 2219, 109 L.Ed.2d 545 (1990); Ramey v. Martin-Baker Aircraft Co., 874 F.2d 946 (4th Cir. 1989); Smith v. Xerox Corp., 866 F.2d 135 (5th Cir.1989); Niemann v. McDonnell Douglas Corp., 721 F.Supp. 1019 (S.D.Ill. 1989); Nicholson v. United Technologies Corp., 697 F.Supp. 598 (D.Conn.1988), or in the context of a judgment notwithstanding the verdict, see e.g., Boyle, 487 U.S. at 514, 108 S.Ct. at 2519; Harduvel v. General Dynamics Corp., 878 F.2d 1311 (11th Cir. 1989), cert. denied, ___ U.S. ___, 110 S.Ct. 1479, 108 L.Ed.2d 615 (1990). Although Boyle itself involved claims brought on behalf of a military serviceman, the defense also applies to claims brought against military contractors by or on behalf of civilians. Boyle, 487 U.S. at 510-11, 108 S.Ct. at 2517-18 (dicta); Garner v. Santoro, 865 F.2d 629 (5th Cir.1989); Ramey v. Martin Baker Aircraft Co Ltd., 874 F.2d 946 (4th Cir.1989); Nicholson v. United Technologies Corp., 697 F.Supp. 598 (D.Conn.1988).
Boyle holds that the government contractor defense is applicable to claims based upon design defects, 487 U.S. at 512, 108 S.Ct. at 2518, and most cases following Boyle have involved strict liability and/or negligence claims arising from design defects. See, e.g., Harduvel v. General Dynamics Corp., 878 F.2d 1311 (11th Cir. 1989), cert. denied, ___ U.S. ___, 110 S.Ct. 1479, 108 L.Ed.2d 615 (1990); Kleeman v. McDonnell Douglas Corp., 890 F.2d 698 (4th Cir.1989), cert. denied, ___ U.S. ___, 110 S.Ct. 2219, 109 L.Ed.2d 545 (1990); Ramey v. Martin-Baker Aircraft Co., 874 F.2d 946 (4th Cir.1989); Smith v. Xerox Corp., 866 F.2d 135 (5th Cir.1989); Niemann v. McDonnell Douglas Corp., 721 F.Supp. 1019 (S.D.Ill.1989); Nicholson v. United Technologies Corp., 697 F.Supp. 598 (D.Conn.1988). The Boyle defense has been applied to claims of breach of warranty in tort arising from design defects. Ramey, 874 F.2d at 948. See also Crossan v. Electron Tube Division of Litton Systems, Inc., 693 F.Supp. 528, 529 (E.D.Mich.1986) (government contractor defense applies to strict liability, negligence and breach of warranty claims) (citing Tozer v. LTV Corp., 792 F.2d 403 (4th Cir.1986) and applying the McKay formulation of the elements of the defense). Several courts had held that the defense may be applied to failure to warn claims. See, e.g., In re Joint Eastern & Southern District New York Asbestos Litigation, 897 F.2d 626, 629 (2d Cir.1989); Dorse v. Eagle-Picher Industries, Inc., 898 F.2d 1487 (11th Cir. 1990); Garner, 865 F.2d at 635; Niemann, 721 F.Supp. at 1024-25; Nicholson, 697 F.Supp. at 604 (claims arising out of alleged omissions in landing gear service manuals).
Plaintiffs allege that all three Defendants herein were negligent in failing to conduct certain tests of the airplane and its autopilot. See Plaintiffs' Liability Contentions, Doc. # 31, at 12-15; Plaintiffs' Memorandum, *1337 Doc. # 219, at 21-34, 56. In one sense, such claims are clearly related to Plaintiffs' general negligent design claims, since the flight testing of the KC-135a, the C-135A and the EC-135N was an integral part of the process culminating in the ultimate configuration of the accident aircraft. On the other hand, Plaintiffs' negligence-in flight-testing claims can be viewed as setting forth a tort theory arguably separate from their negligent design claims. Therefore, the Court briefly addresses the applicability of Boyle, a design defects case, to Plaintiffs' flight testing claims.
The Court is unaware of any case applying Boyle to claims of negligence in testing a product pursuant to a government contract, and the parties have cited none to the Court. Where, as here, the testing of an aircraft produced pursuant to government contract is itself governed by that contract, the rationale of Boyle dictates that the defense be available to claims arising from alleged omissions in the testing process. Thus, if a military contractor were to be held liable for what is in effect a defect in the "Government-ordered design," Boyle, 487 U.S. at 512, 108 S.Ct. at 2518, of the testing program associated with a product designed under government contract, such liability would be as subversive of the Government's relationship with its contractors, and of the Government immunity under the "discretionary function" exception to the FTCA, as contractor liability for defects in government-ordered product design. In terms of the applicability of Boyle, therefore, this Court holds that Plaintiffs' flight testing claims are indistinguishable from their other claims related to the design of the accident aircraft.
Several courts following Boyle have been called upon to interpret the meaning of the elements of the government contractor defense. Boyle did not elaborate upon the meaning of government "approval of reasonably precise specifications," the first element of the defense. The Eleventh Circuit addressed this requirement in Harduvel v. General Dynamics Corp., 878 F.2d 1311, 1320 (11th Cir.1989), cert. denied, ___ U.S. ___, 110 S.Ct. 1479, 108 L.Ed.2d 615 (1990). Harduvel was a products liability action brought by the widow of an Air Force pilot killed when his F-16 fighter jet crashed. Plaintiff's theory of liability centered on defects in the F-16's all-electric control system. Id. at 1316. The jury returned a verdict for Plaintiff and the district court denied Defendant's motion for a judgment notwithstanding the verdict, which was based upon the version of the government contractor defense that the Supreme Court ultimately rejected in Boyle. The Eleventh Circuit reviewed the district court's decision in light of Boyle, which had been decided in the interim. Id. at 1315. The Harduvel Court described the "continuous back and forth" in the design process which it held satisfied the first element of Boyle as follows:
The Air Force initiated the F-16 project in the early 1970's by issuing a Request for Proposals.... General Dynamics responded with proposed Air Vehicle Specifications, that were evaluated by the Air Force System Program Office. The Office conducted an extensive review of the aircraft, including the electrical system, examining specifications, drawings and blueprints.... One group of Air Force engineers was specifically assigned to review the electrical system.... The Air Force conducted independent review and analysis of the electrical system design ... and evaluated designs in a Preliminary Design Review, Critical Design Review, and later Physical Configuration Audit that took place ... prior to the start of production.... Government review and approval of design and production methods continued after production began. Indeed, the Air Force requested an increase in wiring capacity on the particular block of F-16's from which Harduvel's came....
Id. at 1320 (citations omitted).
"[W]here, as here, the contractor incorporated government performance specifications into a design that the government subsequently reviewed and approved," the Court held, the first element of the Boyle defense is satisfied as a matter of law. Id. (quoting Smith v. Xerox Corp., 866 F.2d 135, 138 (5th Cir.1989).
*1338 The Harduvel Court distinguished the Fifth Circuit's decision in Trevino v. General Dynamics Corps, 865 F.2d 1474, 1480 (5th Cir.), cert. denied, ___ U.S. ___, 110 S.Ct. 327, 107 L.Ed.2d 317 (1989), upon which Plaintiffs in the instant case rely for the proposition (which this Court accepts) that mere "rubber stamp" government approval does not satisfy the first element of the Boyle defense. See, e.g., Plaintiffs' Memorandum at 81-83. Trevino was an action brought under the Death on the High Seas Act, 46 U.S.C.App. § 761 et seq., and under federal admiralty law, 28 U.S.C. § 1333, against General Dynamics by the survivors of Navy personnel who died when a vacuum formed in their submarine's diving chamber. 865 F.2d at 1476. The trial court held that General Dynamics was not entitled to the Boyle defense, and the Fifth Circuit affirmed. Id. The Court described the design and procurement process thus:
The contracts required General Dynamics to produce working drawings of the [diving chamber] and the lock in/lock out system and to assume full responsibility for all necessary technical research, to review its work product to assure compliance with the [Navy's handbook of for modifications to the submarine], and to conduct all quality assurance, including inspection of the end product, before issue to the Navy. General Dynamics supplied 37 employees, who worked on-site at [the Navy shipyard] and produced 71 pages of detailed working drawings. Each of the drawings was signed by a government employee in a box marked "approved." After General Dynamics completed the drawings, their employees left [the shipyard], and the Navy performed all the manufacturing and conversion work on the [submarine].... The Navy never performed nor required a formal design/safety review of the [submarine's] diving system prior to the accident.
Id. at 1477 (emphasis added). It is in reference to this process that the Trevino Court held that the first element of Boyle was not satisfied and that "[a] rubber stamp is not a discretionary function; therefore, a rubber stamp is not `approval' under Boyle. Id. at 1480. Harduvel also sheds light on the "conformity" element of the Boyle defense, by stating that the question whether this element is satisfied is answered by distinguishing between a manufacturing defect and a design defect. 878 F.2d at 1321. The distinction drawn by the Court is one between "an unintended configuration" i.e., a defect in the workmanship of the particular product which failedand "an intended configuration that may produce unintended and unwanted results" i.e., a defect inherent in the design of the product the government has approved. Id. at 1317.
In Kleeman v. McDonnell Douglas Corp., the Fourth Circuit also addressed the meaning of conformity and "reasonably precise specifications" under Boyle. 890 F.2d 698 (1989), cert. denied, ___ U.S. ___, 110 S.Ct. 2219, 109 L.Ed.2d 545 (1990). In Kleeman, a Navy pilot was killed when his F/A-18 aircraft went out of control during landing. Id. at 700. Plaintiffs brought a wrongful death action against McDonnell Douglas, alleging that the landing gear, which the Navy had implicated in the accident, failed to conform to the general performance specifications in McDonnell Douglas' contract with the Navy. The district court had held that the operative specifications to which the landing gear must conform under the first two elements of the Boyle defense were the "ultimate design specifications" that result from the design process, and not the "qualitative, precatory specifications used in [in the initial phases of] the procurement process." Id. The Fourth Circuit affirmed. Since there was no evidence in the record that the landing gear had failed to conform to "the precise quantitative specifications embodied in the totality of documents exchanged between the parties," id. at 702, the Court rejected Plaintiff's argument that the first element of Boyle had not been met. Failure of performance of the landing gear did not "equate as a matter of law with an absence of conformity" under Boyle. Id. at 700.
*1339 The Kleeman Court described the design and production process for the F/A-18, which closely mirrored that for the F-16 in Harduvel.[9] The Court stated that it is the "salient fact of governmental participation in the various stages of the aircraft's development that establishes the military contractor defense." Id. at 701. "[A]ctive governmental oversight," the Court reasoned, "is relevant to all three elements of defendant's burden" under the defense. Id. The Court continued
Where, as here, the Navy was intimately involved at various stages of the design and development process, the required government approval of the alleged design defect is more likely to be made out.... Similarly, the Navy's extensive participation, including reservation of the power to approve or disapprove design modifications, enhances the likelihood of final product conformity. Government involvement in the process also makes it more likely, though not certain, that a sharing of information will occur with respect to potential dangers in the use of the equipment. As a final matter, extensive governmental participation provides tangible evidence of the strong federal interest which justifies the creation of a federal common law defense for government contractors in the first place.
Id.
The third element of the Boyle defense, the requirement that the contractor "warned the United States about the dangers in the use of the equipment that were known to the [contractor] but not to the United States," Boyle 487 U.S. at 512, 108 S.Ct. at 2518 requires the least discussion by this Court. The language of Boyle indicates that this element requires actual knowledge by the contractor. Id. Several Courts following Boyle have so held. Harduvel, 878 F.2d at 1321; Trevino, 865 F.2d at 1487; Niemann, 721 F.Supp. at 1028. As the Kleeman, Court stated, where there is evidence of pervasive government involvement in the procurement and design process, this element of the Boyle defense is more likely (though not certain) to be established. 890 F.2d at 701. In this Court's view, if Defendants actually knew of an asserted defect and alerted the Air Force thereto, or if the Air Force knew of the defect independently of anything the Defendants did or did not do, this element is established. Harduvel, 878 F.2d at 1322.
B. Affidavits of Colonel C. Russell Webb
From July, 1954, through July, 1959, Colonel C. Russell Webb was Development Command Chief of the Air Force's Joint Weapons System Project Office for the KC-135A. Three affidavits executed by Colonel Webb are in the record before this Court. The first, dated July 10, 1984 ("July Affidavit"), forms the basis of Boeing's chronology of events surrounding the procurement of the KC-135A and its autopilot. Doc. # 151, Exhibit accompanying Boeing's original Motion for Summary Judgment. The second Webb affidavit, dated January 25, 1985 ("January Affidavit"), was obtained by Plaintiffs. Doc. # 159, Exhibit # 6. The third Webb affidavit, obtained by Boeing, is dated February 22, 1985 ("February Affidavit"). Doc. # 227, Appendix 1.
Plaintiffs contend that the January Affidavit "is sufficient standing by itself" to defeat the three instant Motions for Summary Judgment. Plaintiffs' Memorandum at 73. Without adverting to the February Affidavit, Plaintiffs also argue that the January Affidavit creates an issue of fact *1340 as to the Air Force's "reliance" upon Defendants' "greater knowledge" about the 135 aircraft. Id. Plaintiffs also argue that the January Affidavit demonstrates that the Defendants, and not the Air Force, "designed" the aircraft and the components that Plaintiffs allege to be defective. See, e.g., Plaintiffs' Memorandum at 46. The Court disagrees with these contentions. The January Affidavit consists of a series of terse, and the Court believes potentially misleading, statements giving the appearance of inconsistency with the earlier July Affidavit. Indeed, at oral argument on the instant motions, held on June 4, 1990, Plaintiffs' counsel maintained that all three Webb affidavits are internally inconsistent.[10] In order to demonstrate the lack of inconsistency among the Webb affidavits, the Court provides the following examples of statements which Plaintiffs claim give rise to a genuine issue of material fact.
Example One
In the July Affidavit, Col. Webb states:
"As Chief of the Weapons System Project Office I participated actively in the development and negotiation of the initial `Detail Specification' of the KC-135 in the summer and fall of 1954. The Detail Specification spelled out just what sort of aircraft the Air Force wanted. This specification incorporated by reference a large number of military specifications, military drawings, and Boeing drawings...."
July Affidavit at ¶ 9.
In the January Affidavit, Col. Webb states:
"Boeing, not the Air Force, prepared the Detail Design Specification for KC-135 airplanes."
January Affidavit at ¶ 2.
In the February Affidavit, Col. Webb states:
"In stating in my January affidavit (¶ 2) that `Boeing, not the Air Force, prepared the Detail Design Specification for KC-135A airplanes,' I intended to say that Boeing typed and printed the Detail Specification. It is also true that Boeing prepared much of the initial draft for the Detail Specification. The Final Detail Specification, as approved by the Air Force, however, was the product of a very substantial amount of Air Force input and many Air Force directed revisions. As I stated in my affidavit of July 10, 1984, the Air Force `negotiated' the Detail Specification with Boeing."
February Affidavit at ¶ 2
Example Two
In the January Affidavit, Col. Webb states:
"The Air Force relied on Boeing's representations to the degree approved by the Air Force."
January Affidavit at ¶ 9.
In the February Affidavit, Col. Webb states:
"I said in my January affidavit (¶ 9) that "the Air Force relied on Boeing's representations to the degree approved by the Air Force" (emphasis added). Boeing's representations were simply input to the decision-making process. It was certainly input that I came to have a great deal of confidence in, but I was required always to make my decisions in terms of the effect on the military mission. I was required also to take into account Air Force policy and the judgments of Air Force engineers and pilots. Indeed, the Air Force "relied" on input from its own people in the same way that it relied on Boeing's input. The only input that would ultimately control a decision was a command input from my Air Force superiors."
February Affidavit at ¶ 8.
As these examples demonstrate, the February Affidavit, which is explanatory in nature, merely provides a clarification of what Colonel Webb meant by each statement set forth in the affidavit he executed for Plaintiffs. There is no inconsistency *1341 between the January and February Affidavits; the statements set forth in each are based upon identical, and not opposing, premises. See Boeing's Reply Memo, Appendix 2, Doc. # 227. When read together, these affidavits are wholly consistent (and for the same reason) with the July Affidavit. Their statement to the contrary notwithstanding, Plaintiffs' January Webb Affidavit does not, therefore, create a genuine issue as to any fact, whether related either to Boeing's or to Lear's Motion, that is set forth in Colonel Webb's July Affidavit.
Finally, the Court is bemused by Plaintiffs' suggestion, Doc. # 219 at 73, that the January Affidavit could defeat MDC's Motion. None of the Webb affidavits concerns MDC; all merely concern the design of the C-135 and its autopilot, years before the A/RIA modifications were contemplated. As noted above, Colonel Webb left the KC-135A program in July 1959, before the A/RIA contract was awarded to MDC. January Affidavit, Doc. # 159, at ¶ 1.
As noted above, by introducing their January, 1985, Webb Affidavit, and by citations to the depositions of other Air Force personnel, Plaintiffs seek to inject into this case the issue of Air Force reliance upon Boeing's and Lear's expertise and "higher knowledge" concerning the KC-135A and its autopilot. Plaintiffs assert that "the United States relied upon Boeing's and Lear's expertise in designing the KC-135 and its flight control system." Plaintiffs' Memorandum at 51. Indeed, Colonel George Leslie[11] and Wilson Hale[12] testified in depositions that the Air Force had relied on the expertise of Boeing and Lear, respectively, in designing the aircraft and autopilot. Id. at 51-53 (quoting Leslie Deposition at 19-20; Hale Deposition at 64-65). In his January Affidavit, Colonel Webb also stated that the Air Force "relied" upon Lear's higher knowledge and expertise. Doc. # 159, Exhibit # 6. Plaintiffs also quote the deposition testimony of Maurice L. Fowler, the Air Force's contracting officer for the A/RIA program, that the Air Force relied on MDC to "meet its contract." Id. at 55 (quoting Fowler Deposition at 23, 26-28). The issue whether the Air Force relied upon these Defendants' expertise and "higher knowledge" as aircraft designers and manufacturers, however, is not relevant to the Boyle defense, and is therefore not an issue of fact material to the instant Motions.[13] The Air Force's reliance is, in fact, beside the point, for Boyle fully contemplates such reliance as necessary to the military procurement process. 487 U.S. at 512-13, 108 S.Ct. at 2518-19. The Boyle Court sought to encourage the active involvement of military contractors in the design process, and held that such contractors are immune from suit under state tort law, as long as the design features at issue had been considered by the Government and not solely by the contractor. Id. at 512, 108 S.Ct. at 2518.
Plaintiffs have repeatedly sought to structure the Court's inquiry under Boyle so as to require the Court simply to determine who, as between the Defendant contractors and the Air Force, "designed" the KC/C-135, its autopilot and the A/RIA modifications. Relying upon the deposition testimony of Air Force personnel, Plaintiffs assert, specifically, that Boeing (and not the Air Force) "prepared" the Detail Specification for the KC-135 series aircraft, Plaintiffs Memorandum at 45 (quoting Leslie Deposition at 20, 33, 118), and that Boeing "prepared" the specifications for the autopilot, which specifications were incorporated into the contract between Lear and the Air Force, id at 48 (quoting Hale Deposition at 59-60). Plaintiffs also quote the *1342 testimony of Mr. Wilson Hale that "Lear had to design the detailed components of the autopilot." Id (emphasis added). Plaintiffs further assert that MDC (and not the Air Force) "designed" the A/RIA modifications, and "MDC's design concept" was incorporated into its contract with the Air Force. Id. at 53.[14]
Plaintiffs misconstrue the focus of this Court's inquiry under Boyle. The principal issue for this Court is not who "designed" the particular features of the EC-135N which Plaintiffs assert were defective, but whether the Air Force approved specifications for those features which were reasonably precise. Therefore, the argument that a Defendant's "design" or "design concept" became part of its contract with the Air Force, supports, rather than vitiates, the Boyle defense. It is necessary under Boyle merely that a contractor incorporate the government's performance specifications into "a design that the government subsequently review[s] and approve[s]." Harduvel, 878 F.2d at 1320. If this occurs in the context of a design process marked by continuous interchange between the contractor and the government (and subject to government final approval of the design), the fact that the particular "design concept" at issue was the contractor's does not of itself defeat the defense.[15]
*1343 III. PROCUREMENT, DESIGN AND DEVELOPMENT HISTORY OF THE EC-135N
A. Introduction
The following chronology of the procurement, design and development of the EC-135N is derived from uncontroverted facts set forth by Defendants in support of their Motions for Summary Judgment. The aircraft involved in the tragic accident giving rise to this litigation was manufactured and delivered by Boeing to the Air Force in 1961 as a C-135A personnel and materiel transport. Smith Affidavit at ¶ 16;[16] Shanks Affidavit at ¶ 31.[17] As delivered, the C-135A was equipped with an automatic flight control system (hereinafter "autopilot" or "MC-1") designed and built pursuant to specifications in a contract between the Air Force and Lear's predecessor, Lear, Inc., and supplied to Boeing by the Air Force as Government Furnished Aeronautical Equipment ("GFAE") for installation in the aircraft by Boeing. Webb Affidavit at ¶ 20;[18] Utterstrom Affidavit at ¶ 7;[19] Hale Affidavit at ¶¶ 8, 16.
The C-135A is a modified KC-135A jet tanker. In 1952, Boeing had begun work on its model 367-80 ("Dash 80"), a prototype four-engine jet transport having potential for both military and commercial use. Shanks Affidavit at ¶ 4. In 1954, the Air Force announced a design competition for a new jet tanker to be used for mid-air refueling of its B-52 bomber, and Boeing submitted a proposal based on the Dash 80. Webb Affidavit at ¶¶ 2, 6-7. Although Boeing did not win that competition, the advanced stage of development of the Boeing proposal resulted in, first, the selection of the Boeing proposal for an "interim" order for tankers, to be designed and delivered on an expedited basis, and denominated KC-135A's. Shanks Affidavit, ¶ 31. Second, when the Air Force decided to employ KC-135As as its B-52 refueling tankers, Boeing was awarded the long-term contract for their design and manufacture. Smith Affidavit at ¶ 15; Webb Affidavit at ¶ 8. In 1961, seven KC-135A jet tankers in production, including the accident aircraft, were modified by Boeing, again pursuant to a contract with the Air Force, to convert them into personnel and material transports. Shanks Affidavit at ¶ 31. The C-135A is (for all intents and purposes relevant to the instant litigation) simply a KC-135A with its air refueling boom and certain fuel tanks removed. Smith Affidavit at ¶ 16; Shanks Affidavit at ¶ 31.
In 1965, MDC was awarded an Air Force contract to modify the accident aircraft and seven other Air Force C-135s (to convert them for use in the Apollo Space Program) by installing electronic telemetry equipment and by making certain modifications to the aircraft's interior and nose to accommodate that equipment. Barnes Declaration ¶ 2;[20] MDC Exhibit A-1 at 16. As *1344 modified by MDC, the aircraft was designated an EC-135N and redelivered to the Air Force in late 1967. Barnes Declaration at ¶ 25.
B. Procurement and Design of the KC-135A
As the Court understands it (and as has been amply documented by Boeing by means of affidavits of various Boeing and Air Force personnel and accompanying exhibits), the procurement process leading to the final design and configuration of the KC-135A was a cumulative one which lasted through the flight testing phase. Thus, Boeing's original design proposal, based on its "DASH 80" prototype, submitted to the Air Force in the design competition phase of procurement, was not the ultimate design of the KC-135A. Many systems on the KC-135A, and particularly those which Plaintiffs have implicated herein, differed from those on the Boeing prototype. Webb Affidavit (February 22, 1985), Doc. # 227, Appendix 1, at ¶ 5.[21] Item-by-item negotiations ensued between the Air Force and Boeing, with the Air Force having the final decision as to each design item. Webb Affidavit at ¶¶ 10-11; Smith Affidavit ¶¶ 2, 4-5, 7, 9, 10, 24-25; Shanks Affidavit ¶¶ 10, 12, 14-15, 20, 22. These negotiations resulted in the KC-135A Detail Specification, i.e., the specification which, along with the documents and drawings it incorporates, told Boeing exactly how to build the aircraft.
Air Force responsibility for supervision, control and direction of the KC-135A design and manufacturing effort lay in a joint Systems Project Office. Shanks Affidavit, Exhibit N-10. Within the Systems Project Office, responsibility was shared by the Air Force Material Command, which was in charge of coordinating and overseeing manufacturing and matters relating to maintenance and support, and the Development Command, in charge of design development. Webb Affidavit at ¶ 4. The Chief of the Development Command was supported by the laboratories and engineers of the Wright Air Development Center ("WADC"). Id. at ¶ 5. A large number of Air Force engineers having expertise in the entire range of aeronautical specialties participated in the technical reviews of the KC-135A project. Id. at 10; Leslie Deposition, Doc. # 222, Exhibit 4, at 45-47, 89.
Once the initial draft of the Detail Specification was agreed upon in the summer of 1954, procedures were developed for implementing Air Force concerns or evaluations regarding design development through the Engineering Change Proposal ("ECP") process. Shanks Affidavit at ¶ 3; Webb Affidavit at ¶ 11. It was only through this process that Boeing could submit to the Air Force its suggestions for deviations from, i.e., design changes in, the Detail Specification for the aircraft. ECPs did not become effective absent Air Force approval thereof. Leslie Deposition at 20. There were bimonthly design-related meetings between Boeing and Air Force personnel at which ECPs were considered and approved or disapproved by the Air Force; these meetings began in the fall of 1954 and continued to take place throughout the production phase of the process. Shanks Affidavit at ¶¶ 7, 10 and accompanying Exhibits C-1 and C-2.
In the course of KC-135A development, mock-up inspections of the cockpit, Townsend Affidavit at ¶ 3, and ultimately a full-scale mockup of one side of the aircraft, Smith Affidavit at ¶¶ 6, 7; Shanks Affidavit at ¶¶ 13-14, as well as other technical reviews and inspections, were conducted by Air Force personnel including pilots, officers, engineers and contract personnel. Shanks Affidavit ¶¶ 11-13, 16. A Development Engineering Inspection, conducted by fifty Air Force engineers under the direction of Colonel C. Russell Webb, Chief of the Development Command, took place on March 8-10, 1955. Shanks Affidavit at ¶ 12. This inspection involved evaluation *1345 of the design's conformity to Air Force requirements; and where Boeing and Air Force engineers differed on aspects of the design, Colonel Webb made the final design determination. Smith Affidavit at ¶ 5. The full-scale mock-up conducted by Air Force personnel involved inspection of the model and relevant drawings, again with the Air Force as final arbiter of design disputes between Boeing and Air Force personnel. Webb Affidavit, ¶ 13. The final Air Force review of the KC-135A before flight testing, the Contract Technical Compliance Inspection ("CTCI") or "rollout conference," took place in July, 1956. Smith Affidavit at ¶ 9. The CTCI's purpose was to assure that the aircraft complied with the Detail Specification, as it had evolved, to conduct design analysis and to recommend changes if necessary. Shanks Affidavit Exhibit I. This extensive review resulted in a number of Air Force requests for design changes. See, e.g., Shanks Affidavit, Exhibit J. After requiring those changes, the Air Force CTCI Board accepted the KC-135A as being manufactured in compliance with its Detail Specification. Smith Affidavit at ¶ 9; Shanks Affidavit, Exhibits J and K.
There was, throughout the design and manufacturing process, a steady stream of correspondence between the Air Force and Boeing. Webb Affidavit at ¶ 23. From 1956 to 1965 an Air Force engineering section office was located at the Boeing plant in Seattle. Smith Affidavit at ¶ 3. This office monitored Boeing compliance with design specifications under the contract and was involved in the process by which design changes in those specifications were approved or disapproved by the Air Force. Id. at ¶¶ 4-10. It was also involved in the design of the aircraft's flight test program and in analysis of test data. Id. at ¶ 11. Flight tests were carried out by Air Force personnel, and by Boeing and Air Force personnel jointly. Id; Webb Affidavit at ¶¶ 18-19.
C. Procurement and Design of the MC-1 Autopilot
The Boeing DASH-80 prototype from which the Detail Specification for the KC-135A was developed did not have an autopilot. Webb Affidavit (February 22, 1985), Doc. # 227, Appendix 1, at ¶ 5. The Air Force determined that an automatic flight control system was "mission essential" for the KC-135A, because the jet tanker would necessarily fly long missions during which an autopilot could provide relief for the crew. Hale Affidavit at ¶ 13. As noted above, the Air Force procured the MC-1 autopilot with which the accident aircraft was equipped from Lear and supplied it to Boeing as Government Furnished Aeronautical Equipment ("GFAE"). In the 1950s, the Air Force procured subsystems, including automatic flight control systems, as GFAE directly from the subsystem manufacturer, for installation by the aircraft ("airframe") manufacturer, because, inter alia, the GFAE process allowed the Air Force to be directly involved in design and development of such subsystems. Id. at ¶¶ 8-9.[22]
Pursuant to its contract with the Air Force, Boeing prepared the performance specification[23] for the jet tanker's autopilot (this document is designated D10-2572). Id. at ¶ 14 and accompanying Exhibit A. Also pursuant to its Air Force contract, Boeing prepared document D-14095, which defined characteristics of the aircraft necessary for the design and analysis of the autopilot. Id. and accompanying Exhibit B (which incorporates document D10-2572 by reference). Both the performance specification and document D-14095 were the result of detailed discussions between Air Force personnel and Boeing. Id. Although the performance specification, as initially drafted by Boeing, gave Boeing a role in approving the autopilot's Detail Specification and in qualifying the autopilot, the Air Force ordered a revision of the *1346 performance specification that denied Boeing any such role. Utterstrom Affid. at ¶ 4-5.
The Air Force initially sought to acquire an "off-the-shelf" autopilot system, and pursuant to that interest Boeing undertook a study of several existing autopilots, including one manufactured by Lear, the Lear L-10. Hale Affid. at ¶ 10 and accompanying Exhibit C. Although it felt that both the L-10 and an autopilot produced by Minneapolis-Honeywell ("MH-43") would serve the purpose equally well, Boeing recommended the MH-43 over the L-10. Hale Affidavit, Exhibit C. Ultimately, in any event, the Air Force rejected Boeing's recommendation. The Air Force's own analysis led it to conclude that new autopilot system development, and not an "off-the-shelf" autopilot, was called for. Hale Affidavit at ¶ 15.
On March 4, 1955, the Air Force issued a Request for Proposals ("RFP") for development of an autopilot system to major manufacturers of automatic flight control systems. Id. at ¶ 20; C. Brown Affidavit at ¶¶ 5-6.[24] The RFP incorporated both document D-14095 and the performance specification (D10-2572), which had undergone review by Air Force entities including the Strategic Air Command (the user command), the Air Logistics Command, and other Air Force engineering groups. Hale Affidavit at ¶ 19. The Systems Project Office's autopilot contracting office had also made revisions in the performance specification. Id. Thus, the performance specification was approved by the Air Force for procurement of the autopilot before Lear's selection as the contractor. Id. at 16.
On April 3, 1955, Lear submitted its proposal in response to the RFP. C. Brown Affidavit at ¶ 7. The Air Force conducted both contracting reviews and technical reviews of all proposals. Technical feasibility studies were conducted by the automatic flight control system group as well as Air Force engineers in other aeronautical disciplines. Hale Affidavit at ¶¶ 23-25. After these reviews were completed, Lear was awarded the contract for the autopilot, which the Air Force denominated "MC-1," in June of 1955. Id. at ¶ 26; C. Brown Affidavit at ¶ 7.[25]
As was true for the procurement of the KC-135A, the awarding of the contract to Lear does not signify that the autopilot's design was at that point set in concrete. Indeed, once the contract was awarded, negotiations began among Boeing, Lear and the Air Force, the purpose of which was to develop the detail specification for the autopilot by expanding upon and refining the requirements of the performance specification (D10-2572) and document D-14095. Hale Affidavit at ¶¶ 28, 30; C. Brown affidavit at ¶ 10. These discussions continued through the fall of 1955. The Air Force set up offices, staffed by full-time Air Force personnel, at both Boeing's and Lear's production facilities in order to oversee the autopilot's design and development. Hale Affidavit at ¶ 28.
Lear prepared draft detailed specifications for each autopilot component after *1347 consultation with Boeing and the Air Force. Id. at ¶ 30; C. Brown Affidavit at ¶ 11. In December, 1955, having concluded that the detailed specification for the autopilot was in a sufficiently advanced state of development, the Air Force authorized Lear to building four prototypes. The first of these was delivered to Boeing in January, 1956. Hale Affidavit at ¶ 31. It was subjected to flight simulator testing by Boeing, which testing necessitated design changes. Id.
In the course of the autopilot's design development, the ECP process was employed. Thus, where Lear or Boeing suggested changes in the developing autopilot detailed specification, the Air Force had first to give its approval for a request for an ECP. If that approval was given, Lear then had to submit the ECP to the Air Force for a second level of review. Id. at ¶ 31-¶ 32; C. Brown Affidavit at ¶¶ 15-16. The Air Force had the final decision regarding all design changes. Once the design changes necessitated by flight simulator testing had been effectuated, the prototype autopilot was installed in Boeing's prototype aircraft and flight tested, by Boeing and the Air Force, from April to August, 1956. Hale Affidavit at ¶ 33. Lear employees were observers to the flight testing, and made recommendations as to testing content. Further changes in the autopilot following flight testing were also handled by the ECP procedure, with Air Force final approval a continuing requirement. Id.
After flight testing by Boeing and the Air Force in August, 1956, was complete, the Air Force ordered Lear to start production of the MC-1 for installment into KC-135As as they were produced. Id. at ¶ 34. Additional changes to the autopilot were required by the Air Force (as a result of Air Force testing and analysis) during the production phase, which changes were incorporated into the detail specifications for the components. C. Brown Affidavit at ¶ 18. The first KC-135A to have an MC-1 in its final configuration was flight tested by the Air Force in 1958. Hale Affidavit at ¶ 37. After it flight-tested this aircraft, the Air Force determined that no further development was required for the autopilot. Id. Once the Air Force had determined that the detail specifications for the components were in their final form, Lear was required to retrofit autopilots produced in advance of that determination. C. Brown Affidavit at ¶ 18.[26] The retrofitting was completed in 1959. Id. With the incorporation of these changes, the Air Force determined that the autopilot met its detail specifications, which were incorporated into the Detail Specification for the aircraft. The Air Force approved the Detail Specifications for each component and designated the autopilot as standard equipment. Hale Affidavit at ¶ 40.
D. Procurement and Design of the C-135A
As noted above, the C-135A is essentially a KC-135A with its refueling boom removed. Shanks Affidavit at ¶ 31. In 1960, the Air Force determined that it had the need, on an expedited basis, for a jet transport aircraft. Smith Affid. at ¶ 16. Given the perceived urgency of this need, the Air Force determined to make modifications to KC-135A's that were already in production. The Air Force executed a contract (No. AF33(600)-41979) with Boeing for production of seven modified KC-135A's, designated C-135As. Shanks Affid. at ¶ 31 and accompanying Exhibit U at "Administrative Commitment Document." This contract required that the modified aircraft be designed and manufactured in accordance with the Detail Specification for the KC-135A. Id. at ¶ 32 and Exhibit V. The accident aircraft (Serial # 61-0328) was supplied to the Air Force pursuant to this contract. Id. at ¶ 31.
Negotiations between Air Force personnel (including engineers representing the Systems Procurement Office and the Military Air Transport Service) and Boeing, structured by the ECP process, led to a *1348 Detail Specification for the C-135A aircraft. Smith Affid. at ¶ 16. Twenty ECP's approved by the Air Force comprised the basic differences between the Detail Specification for the KC-135A and that for the C-135A. Id. The Air Force had final authority regarding all design choices in the C-135A Detail Specification. Id. at ¶¶ 16, 19; Shanks Affid. at ¶¶ 10, 12, 21, 32.
A CTCI was conducted by the Air Force for the C-135A in 1961, for the purpose of evaluating whether the aircraft was in compliance with its Detail Specification, and with particular emphasis upon safety of flight considerations. Smith Affid. at ¶ 19. After requiring certain design changes, the CTCI Board accepted the C-135A as conforming with its Detail Specification. Id. Each individual C-135A was further subjected to both ground inspection by the Air Force after rollout from the production line and Air Force flight testing, to insure compliance with the contract. This process was overseen by the Air Force Quality Control Division, and compliance with the Detail Specification was a prerequisite for acceptance and purchase of each C-135A by the Air Force. Id. at ¶ 21. Occasionally, Air Force acceptance was authorized subject to correction of specified deficiencies uncovered in this final review and testing process. Id. and accompanying Exhibit A.[27]
E. Procurement and Design of the A/RIA Modifications
On October 4, 1965, MDC was awarded an Air Force contract to convert eight Air Force C-135As into Apollo Range Instrumented Aircraft ("A/RIA") by installing communications and telemetry equipment and performing certain modifications to the interior and nose of the aircraft. Barnes Declaration at ¶ 8; MDC Exhibit A-9. As Plaintiffs note, the process by which MDC was awarded its contract with the Air Force was much the same as that leading to the awarding of Boeing's contract for the KC-135A. Plaintiffs' Memorandum at 55. Since the Air Force intended that the C-135As be modified on an expedited basis, it employed its "Series 375" procurement regulations, which called for Air Force control of contractors' efforts at all levels. Barnes Declaration at ¶ 3.
The salient features of the procurement process as it relates to MDC are as follows. On January 18, 1965, the Air Force issued a RFP from contractors for installation of electronic equipment on eight C-135As, including the accident aircraft, and for modifications to accommodate that equipment. Barnes Declaration at ¶ 2; MDC Exhibit A-1. The RFP was itself the result of intensive Air Force research and development and contained performance and design specifications for the A/RIA aircraft.[28]See MDC Exhibits A-2 (Performance and Design Requirements); A-3 (Statement of Work); and A-5 (Engineering Specification). In the course of its own development of the A/RIA modifications, the Air Force set up a Systems Program Office staffed with engineers and technical advisors, whose function would be to review and assist in development of A/RIA contract proposals. MDC Exhibit B, Fowler Deposition, at 30, 65-67.
*1349 Based upon proposals submitted in response to the RFP, MDC and a second contractor were given fixed-price contracts to refine the A/RIA specifications and develop cost and scheduling proposals. Barnes Declaration at ¶ 5. During this "Definition Phase" of the procurement process, MDC consulted with the Systems Project Office in the development of its design refinements and that Office, in turn, conducted frequent technical and design reviews. Id. at ¶ 6. MDC submitted sixty-three volumes of reports in support of its design approach for the A/RIA system; the Air Force ordered changes to those specifications, some of which "significantly altered" MDC's proposals. Id. at ¶ 7.
MDC was awarded the A/RIA contract on October 4, 1965. Id. at ¶ 8; Exhibit A-9 (Contract # AF 19(628)-4888). There then ensued the intensive design phase of the A/RIA project, during which MDC submitted specifications, drawings and designs for Air Force approval. Barnes Declaration at ¶ 9; MDC Exhibits A-10, A-11. The contract, in terms, prohibited design changes not approved by the Air Force. Exhibit A-9 at 22. The ECP process described above in the discussion of the KC-135A and C-135A procurement was also employed in the A/RIA development process. Thus, Air Force consent was required for design changes and deviations from Air Force-approved performance specifications. Barnes Declaration at ¶¶ 10-11; Exhibits A-12-A-15.
The involvement of Air Force personnel in the manufacturing and installation phases of the A/RIA project was pervasive and included numerous technical reviews and inspections to assure compliance with specifications under the contract. Air Force personnel were assigned to MDC's plant in Tulsa, Oklahoma. Barnes Declaration at ¶¶ 12-13. When, following a First Article Configuration Inspection, the Air Force determined that a deviation from the specifications was warranted, or that a particular aspect of the modifications was not in compliance with the specifications, MDC was required to make the appropriate adjustments before the item under consideration was deemed acceptable to the Air Force. Id. at ¶ 14. As in the case of the C/KC-135A procurement and manufacture, the was a constant flow of communication between MDC and the Air Force on even the minutest of issues. Under the contract, MDC was required to submit extensive monthly reports outlining such matters as progress in engineering, design and installation. Id. at ¶¶ 16-17. The contract imposed strict and exhaustive requirements concerning the testing of components by MDC and the reporting of test results to the Air Force. Id. at ¶¶ 17-18, Exhibits A-21, A-22. Finally, as will be developed more fully below, MDC's contract with the Air Force governed MDC's testing of the modified aircraft, designated an EC-135N. Flight testing was accomplished by MDC alone (with Air Force monitoring), by MDC and the Air Force jointly, and finally by the Air Force alone. Barnes Declaration at ¶¶ 20-22. MDC delivered the accident aircraft (A/RIA # 8) to the Air Force in December, 1967. After a final inspection, the Air Force indicated its formal acceptance of the aircraft by executing a Department of Defense Form 250 (Material Inspection and Receiving Report). Id. at ¶ 25.[29]
IV. ANALYSIS
As an initial matter, the Court sets forth the relative burdens of the parties once a motion for summary judgment is made. On a motion for summary judgment, the moving party "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The burden then shifts to the non-moving party who "must set forth specific facts showing that there is a genuine *1350 issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986) (quoting Fed.R. Civ.P. 56(e)). Summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 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.Civ.P. 56(c). Having set forth the applicable analytical framework, the Court now turns to analysis of the instant Motions for Summary Judgment.[30]
A. Plaintiffs' Design Defect Claims
1. Boeing
For the following reasons, the Court holds that Boeing is entitled to immunity under Boyle from Plaintiffs' design defect claims. The procurement and design process culminating in the December, 1961, delivery of the accident aircraft to the Air Force as a C-135A demonstrates the active governmental involvement and oversight which is the hallmark of the defense. Kleeman, 890 F.2d at 701; Harduvel, 878 F.2d at 1320. The Detail Specifications for the KC-135A and the C-135A were the products of constant interaction and negotiation between Boeing and the Air Force, always subject to Air Force's final judgment. The Air Force contract pursuant to which the accident aircraft was manufactured required that the aircraft be built to conform to the Detail Specification for the KC-135A. Shanks Affidavit at ¶ 32 and Exhibit U. Air Force approval was required for all Boeing designs and drawings, and Boeing was not free to deviate from the Detail Specification, absent Air Force-ordered changes and/or Air Force approval of changes Boeing recommended. Id. and Exhibit V. The specificity with which the Detail Specification set forth the details of the KC-135A's design was such that it could have been used as a blue print by any aircraft manufacturer to build the same aircraft. Webb Affidavit at ¶ 9; Leslie Deposition, Doc. # 222, Appendix 4, at 43, 68.
The principal design features alleged by Plaintiffs to be defects in the aircraft were required by the Detail Specification. Setting aside for the moment Plaintiffs' allegations concerning the EC-135N's autopilot, Plaintiffs have implicated the placement of the single manual trim wheel on the left side of the aisle stand between the pilots' seats (and the fact that there was only one such wheel); the placement of the electrical trim switches on the pilot's control wheel; the rate of trim movement and the amount of movement allowed the horizontal stabilizer by its trim limit switches; the type and location of indicators and warning lights related to trim motion; and the AC electrical generators' inability to function after a very few seconds under zero or negative gravity conditions. See Plaintiffs' Liability Contentions, Doc. # 31, passim; Plaintiffs' Responses to Liability Discovery Requests, Doc. # 144, at 10-11, 31-36, 44.
The Detail Specification called for one manual trim to be placed on the left side of the aisle stand. Shanks Affidavit Exhibit V at 63, Exhibit W. The decision to employ one manual trim wheel rather than two (as on the DASH 80 Boeing prototype) was made by the Air Force, which ordered the second wheel removed so that a radar scope could be installed in its place, despite Boeing's suggestion that the scope be placed elsewhere. Townsend Affidavit at *1351 ¶¶ 2, 4, 6; Shanks Affidavit Exhibit B at 8, 54; Shanks Affidavit Exhibit O-2. In making this decision, the Air Force took safety-of-flight considerations into account. Townsend Affidavit at ¶ 6; Shanks Affidavit Exhibit N-1. The placement of the electrical trim switches on the pilot's control wheel (also a change from the clutch-operated trim on the DASH 80) was called for in the Detail Specification, as the Air Force required. Shanks Affidavit Exhibits O-2, O-3, and V at 63. Similarly, the Detail Specification required that the trim limit switches be "placed at the extremes of the stabilizer's travel." Shanks Affidavit Exhibit V at 63.
The rate of trim movement was set according to the Air Force's order. The trim rate of the DASH 80 was felt by test pilots of the Air Force's Strategic Air Command to be too slow for the KC-135A's proposed mission; and after testing a faster rate on the DASH 80, the Air Force required it for the KC-135A. Smith Affidavit at ¶ 12; Shanks Affidavit Exhibit N-17 at 4. Plaintiffs contend that an indicator should have been located in the EC-135N pilot's line of sight to alert the pilot that the trim was moving toward a dangerous out of trim position. Doc. # 144 at 44-45. Such an indicator was not provided for in the Detail Specification, which controlled the types and placement of warning devices and indicators on the aircraft. The extant autopilot trim indicator was required by the Detail Specification to the in an overhead panel. Shanks Affidavit Exhibit V at 64, 87-88.
Plaintiffs allege that the constant speed drives (CSD) characteristic of tripping off when deprived of oil for two or three seconds was a result of defective design. Doc. # 144 at 10. This characteristic, however, was also approved by the Air Force through the Detail Specification, which called for a government-furnished CSD having an oil tank whose design limited the CSD's ability to function in negative gravity conditions. Myers Affidavit at ¶ 5 and accompanying Exhibit B. The Air Force was told of the negative gravity capabilities of the CSD and its oil tank during qualification testing of this equipment, and the Air Force accepted this equipment, as designed, for installation in the aircraft. Id. at ¶ 6-7. Finally, it is undisputed that the Detail Specification for the KC-135A incorporated the autopilot performance specification drawn up by Boeing. The Detail Specification for the aircraft also required the installation of the MC-1 as Government Furnished Aeronautical Equipment. Shanks Affidavit Exhibit V. As detailed above by this Court, the decision to use the MC-1 was made not by Boeing but by the Air Force, which negotiated the autopilot's Detail Specification with Lear. Utterstrom Affidavit at ¶ 6.
In approving the Detail Specification for the KC-135A and the C-135A the Air Force approved each of these allegedly defective features of the aircraft. Moreover, the Air Force's approval was given in the context of the "continuous back and forth," Harduvel, 878 F.2d at 1320 (quoting Koutsoubos v. Boeing Vertol, 755 F.2d 352, 355 (3d Cir.), cert. denied, 474 U.S. 821, 106 S.Ct. 72, 88 L.Ed.2d 59 (1985)) of the procurement and design process for the aircraft as a whole that this Court has previously described and which the Eleventh and Fourth Circuits have held satisfies the first element of the Boyle defense as a matter of law. To the extent that, by way of general language in their Liability Contentions, Doc. # 31 passim, Plaintiffs seek to implicate other, non-specified equipment on the aircraft as a "defect," the Court holds that it is sufficient that the Air Force negotiated and approved the Detail Specification for the aircraft as a whole in order that the first element of Boyle be satisfied. Niemann v. McDonnell Douglas Corp., 721 F.Supp. 1019, 1022-23 (S.D.Ill.1989).
Although the DOD Form 250 for the accident aircraft as a C-135A is not before the Court, Boeing has come forward with Fed.R.Civ.P. 56 materials demonstrating that, with regard to Plaintiffs' design defect claims, there is no genuine issue of fact material to the second element of the Boyle defense. The Affidavits of Air Force personnel involved in the testing and approval process and in measuring the aircraft's compliance with the Detail Specification *1352 demonstrate that the accident aircraft conformed with that document. See Smith Affidavit ¶¶ 9, 19, 21; Webb Affidavit ¶ 22. In contrast, Plaintiffs have come forward with no Fed.R.Civ.P. 56 materials that create a triable issue as to the aircraft's conformity with the Detail Specification.[31]
The core of Plaintiffs' "nonconformity" argument is their contention that Boeing, Lear, and MDC breached their duty under their contracts to produce a safe aircraft. Plaintiffs' Memorandum at 39-42. The source of this duty, according to Plaintiffs, lies in the general dictates of the Air Force's Handbook of Instructions for Aircraft Designers ("HIAD"), which is incorporated by reference into Defendants' contracts with the Air Force. Plaintiffs cite, inter alia, the HIAD sections requiring that "there be incorporated in each U.S. Air Force aircraft those safety measures which have been deemed essential to any other military or commercial aircraft having similar safety requirements" and proclaiming that
[t]he designer must recognize the importance of providing insofar as practicable, margins of stability and control sufficient to maintain flight when the aircraft had sustained damage partially destroying the flight controls or other stabilizing structure.
Id. at 40-41 n. 11 (quoting HIAD, Doc. # 159, Plaintiffs' Exhibit 7, §§ 0.16, 0.163). Plaintiffs assert that "[t]he existence of `failure-modes' [identified by Plaintiffs] confirms that the defendants violated HIAD. The proof demonstrates that the failure-modes which resulted in the crash were not even identified by the defendants. This violates HIAD." Id. at 41. Plaintiffs further argue that the fact that the May 6, 1981 accident occurred "demonstrates that Defendants breached the `mandatory [HIAD] standard' to `make the aircraft safe, dependable and reliable.'" Id.
*1353 The problem with Plaintiffs' argument, however, is that the contractual provisions to which Plaintiffs point to demonstrate nonconformity are not the specifications that are relevant to the Boyle defense. As the Kleeman Court held, the specifications to which a military contractor's product must conform under Boyle are not the "general qualitative specifications" emanating from the initial stages of the procurement process, 890 F.2d at 703, such as this general language from HIAD. The specifications relevant to the Boyle defense, under Kleeman, are the "precise, quantitative specifications which [evolve] out of the continuous exchange" between the government and the contractor, id. at 700, i.e., the final Detail Specifications for the aircraft and its autopilot. Boeing has demonstrated that both the KC-135A and the C-135, as a series, and the accident aircraft in particular, were accepted by the Air Force, after the requisite Air Force flight testing, as conforming to their respective Detail Specifications. Smith Affidavit at ¶¶ 9, 19-21. Plaintiffs have come forward with no Fed.R.Civ.P. 56 materials to the contrary.
Boeing has also come forward with Fed. R.Civ.P. 56 materials demonstrating the requisite facts under the third element of the Boyle defense, which requires that a military contractor warn the Government of dangers in the use of contracted-for equipment that are known to the contractor but not to the Government. 487 U.S. at 512, 108 S.Ct. at 2518. First, as will presently be discussed, the principal defects of which Plaintiffs complain were either made known to the Air Force by Boeing and/or Lear or were independently ascertained by the Air Force. Second, Plaintiffs are entitled to every reasonable inference to be drawn in their favor from the undisputed facts of the process by which the aircraft and its autopilot were designed and manufactured (which process, it must be emphasized, Plaintiffs do not dispute); however, based upon those undisputed facts, it is unreasonable to infer that the Defendants would have known of any danger in the use of the aircraft and its autopilot of which the Air Force would have had no knowledge.
Thus, as a result of flight testing in 1957, and pursuant to its flight test reporting requirements under the contract, Boeing reported the problem of "trim stall," (i.e., the fact that if the horizontal stabilizer is severely mistrimmed, it cannot be retrimmed, either electrically or manually, due to aerodynamic forces on the stabilizer) to the Air Force. McPherson Affidavit and accompanying Exhibit A.[32] The Air Force elected to address "trim stall" by means of instructions in the KC-135 flight manual, rather than through an equipment change. Jacobsen Affidavit at ¶ 5 and accompanying Exhibit A.[33] Similarly, the problem of "trim runaway," i.e., uncommanded movement of the horizontal stabilizer, was known to the Air Force, which conducted its own study of the problem in 1959 and determined that "if handbook procedures are followed, adequate airplane control can be maintained in all conditions." Shanks Affidavit Exhibit O-1 at 3. On three occasions, the Air Force rejected design changes recommended by Boeing which would have decreased the likelihood of occurrence of "trim runaway." See Smith Affidavit at ¶ 22; Shanks Affidavit Exhibit N-6 (1965 Boeing suggestion that trim brakes be added rejected by Air Force); Smith Affidavit at ¶¶ 24-25; Shanks Affidavit Exhibits N-7 and N-8 (Boeing suggestion that trim limit switches be designed to preclude stabilizer from being electrically forced to the extremes of its potential movement rejected by the Air Force in 1964 and 1972).
As noted above, Plaintiffs have alleged that the accident aircraft's AC generator system was defectively designed due to its inability to function after a brief interval of zero or negative gravity. The record in this case shows that the Air Force approved *1354 of the particular design configuration of which Plaintiffs complain despite several warnings of its deficiencies from Boeing. Boeing warned the Air Force three times in 1958 (before the accident aircraft was built)on January 17, August and in Octoberthat operating the aircraft in zero gravity could result in total loss of AC electrical power. Shanks Affidavit Exhibits N-11, N-13 and O-6. Boeing recommended that the Air Force use an "all-attitude" CSD oil tank to give the airplane extended zero gravity capability, Shanks Affidavit Exhibit 0-5, 0-6, but the Air Force rejected that proposal. Shanks Exhibit N-12. In fact, Boeing warned the Air Force, in the strongest terms, of the very combination of effects which Plaintiffs assert contributed to the accident in this case. In recommending an all-attitude tank, Boeing stated, inter alia, that "[l]oss of the electrical system caused by a zero-G pushover condition compounded by stabilizer out of trim condition could result in loss of the airplane." Shanks Affidavit Exhibit 0-6 (emphasis added). Boeing also warned the Air Force that if the aircraft experienced zero gravity conditions for more than two or three seconds all primary AC electrical power would be lost, with resulting loss of electrical trim and autopilot. Boeing told the Air Force that "the loss of electrical power during an emergency condition could compound the effects, perhaps beyond the point of recovery. This would be particularly true if [manual] stabilizer trim control were needed to recover." Shanks Affidavit Exhibit N-13.
The record before this Court also shows that the safety and reliability of the MC-1 autopilot, the component which lies at the heart of Plaintiffs' design defect claims, were suspect from the earliest stages of the KC-135 project, that the Air Force had knowledge of this fact, and that Boeing brought its safety concerns about the MC-1 to the Air Force's attention. In 1956 Boeing compiled a "history of failures" of MC-1 components and wrote the Air Force of those failures. Doc. # 159, Plaintiffs' Exhibit # 17.[34] In January of 1958, an Air Force production engineer wrote a memo to Air Force procurement personnel entitled "Sub-Standard Quality of MC-1 Autopilot Components." Doc. # 159, Plaintiffs' Exhibit # 20. The memo related that "[t]he GFAE components of the MC-1 Autopilot on the KC-135A have a dismal history of malfunctions and faulty workmanship" and warned of "the serious situation of a possible acceptance of KC-135A aircraft in such a condition as to reduce the mission effectiveness of SAC [the user of the KC-135A]." Id.
Plaintiffs correctly state that "in January, 1958 the Lear MC-1 was declared unsafe," Plaintiffs' Memorandum at 28 (emphasis in original), but Plaintiffs do not state that it was Boeing that made this judgment, in a telex to the Air Force. Doc. # 159, Plaintiffs' Exhibit 19. In so doing, Boeing was in accord with the judgment of Air Force quality control personnel stationed in Boeing's Renton, Washington, facility, who had discovered problems in workmanship of certain components and "decreed that the autopilot is not safe for installation until rework of GFAE components is accomplished." Id. The record also shows that the Air Force, through WADC and the SAC, had conducted its own flight testing of the KC-135A and had uncovered malfunctions and failures in the manual, electric and autopilot stabilizer trim systems (including "trim runaway") by May 18, 1959, when a meeting was held at WADC to discuss Air Force testing related to those problems. Shanks Affidavit Exhibit 0-1 (also submitted as Lear Exhibit # 6, Doc. # 217); Hale Affidavit at ¶ 39.[35] Finally, Plaintiffs have sought, by means *1355 of the January Webb Affidavit, to demonstrate that neither Boeing nor Lear told the Air Force that the autopilot was capable of causing "spontaneous uncommanded pitchover and subsequent electrical failure," Doc. # 159, Plaintiffs' Exhibit # 6, at ¶ 18. Yet Colonel Webb also testified that in so stating he had not intended to imply that the Air Force's safety analysis of the autopilot did not assume that such "hard over autopilot signals" could take place. Webb Affidavit (February 22, 1985), Doc. # 227, Appendix 1, at ¶ 17.
As the Court in Kleeman v. McDonnell Douglas Corp. noted, Government involvement in the design process "makes it more likely, though not certain," that the contractor will have shared information regarding potential dangers in the use of contracted-for equipment with the Government. 890 F.2d at 701. It is clear to this Court, that as to the specific dangers outlined in the preceding discussion, Boeing has come forward with Fed.R.Civ.P. 56 materials demonstrating that there is no genuine issue as to facts required by the third element of the Boyle defense, and Plaintiffs have come forward with no contradictory Rule 56 materials. To the extent that Plaintiffs' broadly worded Liability Contentions, Doc. # 31, and Responses to Liability Discovery Requests, Doc. # 144, implicate other dangers in the use of the EC-135N and its autopilot, the Fed.R. Civ.P. 56 materials before this Court similarly demonstrate no genuine issue of fact material to the third Boyle element. As the parties against whom the instant motions are directed, the Plaintiffs are entitled to every reasonable inference to be drawn from the undisputed facts concerning the pervasive involvement of the Air Force with Boeing in the design and testing of the aircraft. Those facts, however, make it unreasonable to infer that Boeing could have known of a danger of which the Air Force was unaware.
Boeing's flight testing of the aircraft was governed by its contract with the Air Force, and Air Force pilots were abroard Boeing test flights. The Air Force also conducted its own flight tests. Webb Affidavit at ¶¶ 18-19; Smith Affidavit at ¶ 11. Under the contract, Boeing held debriefings with the Air Force after flight tests and prepared Flight Test Activities Reports summarizing all findings and performance data obtained in testing. McPherson Affidavit at ¶¶ 8-10 and accompanying Exhibit A. The Air Force had full access to Boeing test data and engineering analysis. Smith Affidavit at ¶ 26; Webb Affidavit at ¶ 23. Moreover, it must not be forgotten that the Air Force flew KC-135As for five years before the accident aircraft was built as a C-135A, and flew the accident aircraft for twenty years before the fatal accident in this case. The Air Force, therefore, had a wealth of experience with the aircraft from which to gain knowledge of any design defects independent of Defendants herein. For the foregoing reasons, the Court holds that Boeing is entitled to immunity under Boyle with regard to Plaintiffs' design defect claims.
2. Lear
For the following reasons, the Court holds that Lear is entitled to immunity under Boyle from Plaintiffs' negligence and strict liability claims based upon alleged design defects in the MC-1 autopilot. It is undisputed that, pursuant to its contract with the Air Force for the KC-135A, Boeing drafted a performance specification for that aircraft's autopilot. As noted earlier, the Air Force had considered employing a pre-existing autopilot, and Boeing had recommended the Honeywell MH-43 rather than the Lear L-10, despite the fact that those two autopilots were closely equivalent. Hale Affidavit at ¶ 10 and accompanying Exhibit C. The Air Force rejected the Boeing recommendation and elected to embark upon the development of a new autopilot system, which it ultimately designated the MC-1. Hale Affidavit at ¶ 15.
Plaintiffs assert that the MC-1 autopilot was an "off-the-shelf" product and that, therefore, Boyle does not immunize Defendants from claims arising from the asserted defects in the MC-1. See, e.g., Plaintiffs' Memorandum at 49, 74. In support of this contention, Plaintiffs assert that "L-10 was Lear's designation for the autopilot prior to the time it became known as *1356 the MC-1." Id. at 50 n. 16. Plaintiffs cite no authority for this proposition, however, and the Court has searched the record in vain for corroborative documentation. As additional support, Plaintiffs cite to language in a "representative" Lear component specification stating that "The Lear Model 1462B Trim Coupler covered by this specification is intended for use in conjunction with an automatic pilot system." Doc. # 159, Plaintiffs' Exhibit 11, at Tab 6.1. Plaintiffs also cite an excerpt from the deposition of John R. Utterstrom, the Boeing employee who oversaw the preparation of the performance specification for the autopilot, wherein Mr. Utterstrom testified that he did not think that the autopilot had been "designed uniquely" for the KC-135, that it had been designed for an F-84 fighter. Plaintiffs' Memorandum at 50 n. 17 (quoting from Utterstrom deposition, Doc. # 159, Plaintiffs' Exhibit 3).
Plaintiffs do not cite the Court to Mr. Utterstrom's statement, made in response to a question posed immediately before the question and answer which Plaintiffs do quote, that he had never examined or reviewed the detailed engineering drawings for the MC-1 components. Utterstrom deposition, Doc. # 159, Exhibit 3, at p. 110, 1. 17-21. To constitute evidence that can be considered in determining whether there exists a genuine issue of material fact herein, a statement made either in a deposition or in an affidavit must be admissible. See Fed.R.Civ.P. 56(e); Fed.R.Evid. 602. The two statements just discussed, when read together in context, demonstrate that Mr. Utterstrom had no first hand knowledge of the MC-1 as ultimately designed for the KC-135A. Therefore, Mr. Utterstrom's statement, relied upon by Plaintiffs, that the MC-1 shared an identity with the autopilot designed for the pre-existing F-84, cannot be considered by this Court in ruling upon the instant motions.
There is, additionally, evidence in the record tending to show that the L-10 and the MC-1 are not the same autopilot. In Boeing's letter to the Air Force recommending the MH-43, Boeing states that neither the L-10 nor the MH-43 conformed to certain aspects of the autopilot performance specification and that both Lear and Minneapolis-Honeywell had indicated that with further development the performance specification could be met. Hale Affidavit, Exhibit C. In this Court's view, the evidence upon which Plaintiffs' rely for their "off-the-shelf" argument does not demonstrate that there exists a triable issue as to that fact, in light of the overwhelming evidence in the record, discussed above, of Air Force involvement in all phases of the MC-1's design and development. The Court need only briefly summarize that involvement and control here.
Boeing's autopilot performance specification, together with Boeing document D-14095 (setting forth aircraft characteristics relevant to autopilot design) were part of the Air Force RFP in response to which Lear submitted its autopilot proposal. See generally C. Brown Affidavit. The performance specification, which had been subjected to Air Force review and revision, formed the basis of extensive negotiation between Air Force engineering personnel and Lear, negotiations that led to the detail specifications for the MC-1 components (filed as Exhibits C1-C16 to the C. Brown Affidavit). Hale Affidavit ¶¶ 16, 19, 28, 30; C. Brown Affidavit ¶ 10. The development process leading from performance specification to the ultimate design of the MC-1 components involved communication among Boeing, Lear and the Air Force. Hale Affidavit at ¶¶ 28, 30; C. Brown Affidavit at ¶ 10. See also Doc. # 218, Lear Appendix 6.
Air Force approval was required for any and all changes in the detail specifications. Hale Affidavit at ¶¶ 31-32. Based upon Lear's draft detail specifications for the autopilot's components, the Air Force ordered the production and testing of prototypes. Id. at ¶ 31. Simulator and flight testing of the prototype by Boeing and the Air Force necessitated design changes, subject always to Air Force consent. Id. at ¶¶ 33-34. C. Brown Affidavit at ¶¶ 12-13, 15, 17. The Air Force's monitoring of the MC-1's design and production (begun in August, 1956) to insure compliance included the stationing of Air Force personnel at *1357 Lear's production facility. Hale Affidavit at ¶ 28; C. Brown Affidavit at ¶¶ 10-11. The Air Force ordered additional design changes in the MC-1 system following its own flight testing; some of these changes required the elimination of specific features of the prototype. Hale Affidavit at ¶ 34; C. Brown Affidavit at ¶ 17.
It is clear that the MC-1's design and development were characterized by the same level of Air Force oversight and involvement that took place in the process leading to the KC-135A's design. The detailed specifications for the MC-1's components were approved by the Air Force, which approval was signified by the Air Force's designating those components as "standard" equipment for installation in the KC-135A. Hale Affidavit at ¶ 40; C. Brown Affidavit at ¶ 17. With that designation, the component specifications were incorporated into the Detail Specification for the aircraft. Id. In light of the Fed.R. Civ.P. 56 materials submitted by Lear demonstrating the Air Force's ultimate control over design decisions at every stage of the MC-1's development, and given the specificity of the specifications for the autopilot components which the Air Force approved, the Court holds that Lear has met its burden under the first element of the Boyle defense. Plaintiffs have come forward with no Fed.R.Civ.P. 56 materials creating a genuine issue of fact material to that element of the defense.
That the Air Force had final say as to design changes in the MC-1 specifications is also relevant to the second element of the Boyle defense. Where, as here, there is "extensive participation" by the government in the design, testing and review process, and the government reserves the right finally to approve or disapprove modifications in design, the likelihood of "final product conformity" is enhanced. Kleeman, 890 F.2d at 701. Wilson E. Hale stated that individual autopilot production units were produced in conformance with the detail specification. Hale Affidavit at ¶ 40. Plaintiffs have not contended, and have produced no Fed.R.Civ.P. 56 materials indicating, that the MC-1 in the accident aircraft did not conform to the detailed component specifications approved by the Air Force. They simply contend that the May 6, 1981, accident demonstrates that the autopilot was defectively designed and unreliable. See, e.g., Plaintiffs' Memorandum at 41. The Court holds that the MC-1's conformity with the design specifications relevant to the second element of the Boyle defense has been demonstrated by Lear, by way of uncontradicted Fed.R. Civ.P. 56 materials.
Similarly, Lear has come forward with Fed.R.Civ.P. 56 materials, uncontradicted by Plaintiffs, demonstrating the absence of a genuine issue of fact material to the third element of the Boyle defense, with respect to Plaintiffs' autopilot design defect claims. That element requires that the contractor have alerted the government to dangers in the use of its equipment of which it has actual knowledge and of which the Air Force has no knowledge. Boyle, 487 U.S. at 512, 108 S.Ct. at 2518. This Court has previously discussed evidence in the record of the Air Force's independent knowledge of problems in the production of autopilot components, problems that called into question the autopilot's reliability, absent reworking of those components. The Air Force was also made aware, through Boeing and Lear, of deficiencies in the autopilot as a result of simulator testing of its components, and through its own flight-testing of the autopilot system. Hale Affidavit at ¶¶ 30-32. According to Wilson E. Hale, both Boeing and Lear "fully apprised" the Air Force of the results of testing that pointed to "shortcomings" in the MC-1. Id. at ¶ 42. As previously noted, in its own flight testing of the KC-135A, the Air Force encountered, inter alia, malfunctions in the autopilot stabilizer trim system. The Air Force decided to "isolate" any aircraft having such problems for correction thereof, and further decided that despite the existence of such problems, procedures in the aircraft's manual, if followed, would adequately address the general problem of runaway stabilizer trim. Doc. #218, Lear Appendix # 6.
It is undisputed that Lear made two design suggestions which directly relate to *1358 enhancing the safety features of the autopilot, and that the Air Force rejected those suggestions. Plaintiffs contend that the autopilot was defective, in part, because it used a vacuum tube system instead of a solid state system. Doc. # 144 at 38. In 1958, Lear recommended that the autopilot's yaw axis components be transistorized to improve the autopilot's reliability and hence the KC-135A's lateral stability when the autopilot was engaged. See Shanks Affidavit Exhibit N-24 (also submitted as Lear Appendix # 4, Doc. # 218). The Air Force rejected this proposal to transistorize the autopilot. Shanks Affidavit Exhibit N-26. Plaintiffs also contend that the autopilot should have been accompanied by additional warning lights and aural signals to alert the crew to autopilot malfunction. Doc. # 144 at 38. Lear's recommendation that such additional warning and monitoring systems be included was likewise rejected by the Air Force as unnecessarily complicating the autopilot's design. Doc. # 218, Lear Appendix 5; Hale Affidavit at ¶ 36.
As this Court stated in its discussion of the design process for the KC-135A aircraft as a whole, of which the testing of the autopilot was but a part, Plaintiffs are entitled to every reasonable inference to be drawn in their favor from the undisputed facts herein. Based upon the undisputed facts demonstrating the Air Force's own extensive testing and review procedures, it is un reasonable to infer that the Air Force could have been unaware of any danger in the autopilot that was known to Lear. There is, moreover, ample evidence in the record demonstrating both that Lear alerted the Air Force to safety-related problems in the autopilot (by way of design suggestions to enhance its safety) and that the Air Force had independent knowledge of potential dangers in the autopilot's use in the KC-135A and C-135A. To the extent that Plaintiffs contend that Lear knew or should have known of dangers in the use of the autopilot in the EC-135N, that contention is without merit. Lear was not consulted by the Air Force in the latter's decision to modify the C-135A for the A/RIA program. Hale Affidavit at ¶ 44; C. Brown Affidavit at ¶ 20. Moreover, the record is clear that the Air Force had acquired millions of flight hours using the MC-1 in its 135 series aircraft, Hale Affidavit at ¶ 41, and flew the accident aircraft for years prior to the accident herein. The Air Force was therefore in a position to become aware of any limitations in the MC-1, independent of Lear, not already known to it, and this experience with the autopilot is directly relevant to the establishing of the third element of Boyle. Zinck v. ITT Corporation, 690 F.Supp. 1331, 1337-38 (S.D.N.Y.1988). For all of these reasons, the Court holds that, with respect to Plaintiffs' autopilot design defect claims, the Fed.R.Civ.P. 56 materials submitted by Lear, which are uncontradicted by Plaintiffs, demonstrate both the requisite facts and the absence of a genuine issue of material fact under the third element of Boyle.
3. MDC
Plaintiffs' design defects claims against MDC may be briefly summarized as follows. Plaintiffs first contend that MDC "negligently and defectively" designed, manufactured and tested its A/RIA modifications to the aircraft. Plaintiffs' Liability Contentions, Doc. # 31 at 8. Plaintiffs assert that the modifications were defective in that they failed to provide an "active" warning system to the pilot and crew that the horizontal trim was nearing a dangerous, uncommanded full nose down position. Id. at 9. It is also Plaintiffs' contention that the A/RIA modification which added the bulbous nose radome to the aircraft "dangerously altered the high speed flight characteristics of the aircraft," Plaintiffs' Responses to Liability Discovery Requests, Doc. # 144, at 28, and that the A/RIA modifications, writ large, "caused dangerous and excessive vibration and buffeting of the airplane during high speed flight, changed some of the aerodynamic characteristics of the aircraft relevant to recovery from a high speed dive." Id.
There is scant evidence in the record before this Court to support Plaintiffs' contention that the A/RIA modifications were defectively designed or that they contributed *1359 to the accident on May 6, 1981; and what evidence there is does not create a triable issue as to the existence of such asserted defects.[36] Plaintiffs' contentions that the modifications affected the aircraft's high speed flight characteristics and dangerously affected the aircraft's recoverability from a high speed dive are, precisely, nothing more than contentions. They are filed with this court as affirmative answers to Defendants' interrogatory asking, in part, whether Plaintiffs claim that the MDC's structural modifications to the C-135A were defectively designed. Doc. # 144 at 26. In further answer to the interrogatory, Plaintiffs state that the documentary basis of their contentions is to be found in "[a]ll of the documents produced in this case by defendants" and principally in a list of eleven documents or categories of documents, only one of which, the aircraft's flight manuals, arguably relates to the A/RIA modifications. Id. at 13.
With the exception of their interrogatory response (which, the Court would reemphasize, is merely a statement of Plaintiffs' theory of the modifications' relationship to the accident), Plaintiffs rely solely upon the deposition testimony of their expert Mark Connelly, who said
The problem is that you [MDC] received a product [the C-135A] that had this rapid pitchover hazard built into it, and it passed through your hands, you made major modifications to it, and the product which came out was your product, and it still had this major hazard attached to it, and perhaps even worse because of your aerodynamic changes. I can't conceive of it being better, but there is a possibility that it was somewhat better but still a hazard. I think in my mind, the problem here is that you did nothing about correcting this problem. It was still there when the product passed out of your hands.
Connelly Deposition, Doc. # 159, Exhibit 3, p. 556.[37] The record is devoid of a report by Mr. Connelly that would support this opinion, which in the Court's view is skeletal, at best. This opinion, which is Plaintiffs' sole submission under Rule 56 on the issue of a design defect in the A/RIA modifications, does not create a triable issue on this point. Nor does it create a triable issue as to whether those modifications dangerously affected the EC-135N's handling characteristics, when viewed in light of the Rule 56 materials submitted by MDC which demonstrate that MDC's flight testing of the EC-135N showed that it had handling substantially similar to those of the C-135A. Barnes Declaration at ¶ 27; Odgers Deposition, MDC Exhibit D, at 12-13.[38] General Odgers, an Air Force test pilot having 2000 hours' experience on the KC-135A and EC-135N, testified that there was "no difference" in the handling characteristics of the C-135A and the EC-135N, and that there was, therefore, no need to specially qualify C-135A pilots to fly the EC-135N. Odgers Deposition, MDC Exhibit D, at 13, 142. Finally, the Air Force's experience with the bulbous nose, which "indicated the radome introduced no adverse handling quality effects *1360 on the EC-135," led it to employ that modification when, in the mid-1980s, it updated its A/RIA fleet by modifying Boeing 707s. MDC Exhibit G.[39]
The Court would note that even if Plaintiffs had adduced, by way of Fed.R.Civ.P. 56 materials, facts indicative of a defect in MDC's A/RIA modifications to the C-135A, MDC would be entitled under Boyle to absolute immunity from suit on Plaintiffs' design defect claims. As was true in their arguments regarding Boeing's and Lear's duties under their contracts with the Air Force, Plaintiffs refer to MDC's "contractual commitment to high standards of performance" as set forth in the HIAD. Plaintiffs' Memorandum at 39. Plaintiffs also cite to portions of other documents related to the early phases of the procurement process, such as the Program Acquisition Phase Statement of Work, id. at 56 (citing sections 1.1, 5.2.2, and 5.2.3 of MDC Exhibit A-2, resubmitted as MDC Exhibit A-3), and the Amended Statement of Work, Project Definition Phase, for the proposition that MDC had a "primary obligation" under the contract to assure the EC-135N's "best control and stability." Id. at 57-58 (citing sections 1.2, 1.7 and 5-1.3 of MDC Exhibit A-4, originally submitted as MDC Exhibit A-3).[40]
Plaintiffs cite these contractual provisions in support of their contention that there is no "significant conflict," under Boyle, between the specifications in MDC's contract and its duty under Ohio tort law, which Plaintiffs define as a duty to "design and deliver aircraft with safe and reliable flight control and electrical systems which would allow control of the aircraft to be maintained in an emergency." Plaintiffs' Memorandum at 78. The specifications to which Plaintiffs point as sources of MDC's duty to the Air Force are not, however, the specifications which are relevant to the Boyle defense. Kleeman, 890 F.2d at 703. The relevant specifications are those contained within the Detail Specification for the modifications, as it ultimately evolved through the design and development process whose details, as previously described by this Court, are uncontroverted by Plaintiffs. The pervasive Air Force involvement in the A/RIA design and development process satisfies the first element of the Boyle defense as a matter of law. Harduvel, 878 F.2d at 1320. The A/RIA modifications were "designed through the cooperative `back and forth' that is the `reality of the procurement process, as well as a valuable part of that process.'" Id. at 1321 (quoting Tozer v. LTV Corp., 792 F.2d 403, 407 (4th Cir.1986).
Although Plaintiffs assert that the MDC A/RIA modifications "did not conform to specifications," Plaintiffs' Memorandum at 86, there is simply no evidence in this record to support that claim, when the relevant specifications are taken into account. As this Court has previously related, at nearly every step of the design and development process the A/RIA modifications were subjected to Air Force review for conformity with the evolving Detail Specification. At the end of that lengthy process, Air Force officials signed the DOD 250 form for the accident aircraft, thereby signifying that aircraft's conformity with the requirements of the contract. Barnes Declaration *1361 at ¶ 25. Given the pervasive Air Force involvement and oversight in design and manufacture of the A/RIA-modified EC-135Ns, including substantive Air Force review of all design decisions, the signing of the DOD 250 form was not "rubber stamp" approval. Trevino, 865 F.2d at 1480.
Finally, with regard to the third element of the Boyle defense, Plaintiffs have not shown by way of Rule 56 materials any danger inherent in the A/RIA modifications themselves. Plaintiffs have argued that MDC knew or should have known that problems with the aircraft's autopilot, and/or trim and electrical systems "could render the aircraft uncontrollable." Doc. # 144 at 71. As the following discussion of the testing regime to which the A/RIA modifications were subjected will show, MDC's contract with the Air Force prevented the sort of testing which would have given MDC such knowledge. Moreover, this Court has previously noted the Air Force's awareness of problems with those systems, knowledge which predates MDC's involvement in the A/RIA program by many years. Plaintiffs have come forth with no Rule 56 materials creating a genuine issue of fact as to the extent of MDC's alleged actual knowledge of the defects Plaintiffs allege caused the loss of the accident aircraft.[41] Therefore, the Court holds that MDC is entitled to absolute immunity under Boyle from Plaintiffs' design defect claims.[42]
B. Plaintiffs' Flight Testing Claims
Plaintiffs have alleged that Boeing, Lear and MDC were negligent in failing to flight test for the "failure modes" which Plaintiffs assert caused the May 6, 1981 accident. Doc. # 31 at 12-15. Specifically, Plaintiffs claim that Boeing, Lear and MDC were negligent in their design-related testing, in that they failed to test generally for "failure modes" and to conduct failure modes and effects analysis with regard to the automatic flight control system, the mechanical and electrical trim systems, and the electrical system. Id. at 14-15. Plaintiffs further allege that Boeing, Lear, and MDC were negligent in failing to test whether the aircraft was recoverable from a sudden pitch down due to uncommanded full nose down trim coupled with failure of the AC power generators, and in failing to evaluate crew response to malfunctions in the autopilot system, and to the extreme conditions which Plaintiffs assert contributed to or cause the accident, including total electrical failure due to negative *1362 "G" forces, sudden pitch down following autopilot disconnect, and runaway nose down trim coupled with failure of the aircraft's electrical system. Id. at 12-14. The record shows, however, that Boeing's and MDC's flight testing of the aircraft was tightly controlled by the Air Force, pursuant to the contracts for both the KC-135A and the C-135A. Moreover, although Plaintiffs flight testing claims are also aimed at Lear, there is nothing in the record before this Court to indicate that Lear conducted any flight testing independently of Boeing and the Air Force. In fact, the only reference to Lear's involvement in flight testing is in the affidavit of Wilson E. Hale, who states that Lear made "suggestions" as to the type of testing to be conducted, and that Lear employees were "observers" on Boeing and Air Force test flights. Hale Affidavit at ¶ 33. As the ensuing discussion will show, Boeing and MDC have come forward, by way of Fed.R.Civ.P. 56 materials uncontradicted by Plaintiffs, with facts demonstrating the Air Force's involvement in the flight testing process, which involvement is a requisite of the first element of the Boyle defense.
1. Boeing
Boeing argues that under its contracts with the Air Force it was not free to design its own flight test program and that the Air Force controlled the content of its flight testing. Boeing Memorandum at 72. The record in this case fully supports that argument. See, e.g., McPherson Affidavit at ¶¶ 6-7; Shanks Affidavit at ¶ 27; Webb Affidavit at ¶¶ 18-19. Boeing had no authority to flight test the C/KC-135 aircraft independent of Air Force control. McPherson Affidavit at ¶ 6; Webb Affidavit at ¶ 18; Shanks Affidavit at ¶ 27. In addition to the flight testing in which Boeing was involved, the Air Force conducted its own (and far more extensive) flight testing program. Smith Affidavit at ¶ 11.
Boeing's flight testing contracts for the KC-135A incorporated military flight testing specifications. Shanks Affidavit at ¶¶ 25-26. Boeing prepared drafts of test specifications to be incorporated into its contract, subject to Air Force review and approval. Id. at ¶¶ 24, 30 and accompanying Exhibit P. Each flight test followed a "point-by-point" script or plan which was subject to change by the Air Force and which had to be approved by the Air Force prior to take-off. McPherson Affidavit at ¶ 7; Shanks Affidavit Exhibit N-5 (example of Air Force testing plan change). Boeing was required to submit detailed and frequent (including daily) results of its testing to the Air Force. The Air Force required only limited flight testing of the C-135A, because of its essential identity to the KC-135, and Boeing's testing responsibilities for the C-135A were limited by contract to testing flight characteristics affected by removal of the refueling boom and the C-135's different weight distribution. The results of those tests were evaluated by the Air Force for compliance with the Detail Specification and "mission requirements." Smith Affidavit at ¶ 20. As was true of the KC-135A testing program, the Air Force conducted its own extensive testing independent of Boeing. The Air Force controlled the scope of this testing, and at times rejected Boeing's proposals for further testing. Id. at ¶ 20; Shanks Affidavit at ¶ 30. As previously discussed by this Court, no individual C-135 aircraft could be purchased by the Air Force without the Air Force's determination, through, inter alia, flight testing, that it conformed to the Detail Specification. Smith Affidavit at ¶ 21.
2. MDC
Plaintiffs assert that MDC was negligent in that it breached "contractual duties," including the duty "to evaluate the compatibility of the aircraft's flight control systems with the A/RIA modifications" and the duty to "recognize, appreciate and warn about the inherent deficiencies and dangers in the 135's [including] the aircraft's flight control systems."[43] Plaintiffs' *1363 Memorandum at 56-58. Finally, Plaintiffs assert that MDC violated its obligation to "identify those things which affect" the aircraft's aerodynamics, including its stability in normal and emergency flight modes. Id. at 58.
MDC's duties with regard to testing were tightly controlled by the Air Force, as the following facts, uncontroverted by the Plaintiffs, demonstrate. MDC's contract with the Air Force set forth the parameters of MDC's testing responsibilities. In the most general terms, the Preliminary A/RIA Engineering Specification, which was incorporated into the RFP for the A/RIA modifications, required that
[f]light tests shall be performed on the airplane to prove all newly installed and modified systems operational, to demonstrate the structural and operational compatibility of the contractor installations with the aircraft, and to determine the effects of the installations on essential take-off and landing parameters, airspeed calibration, endurance, range, climb, and stability and control.
MDC Exhibit A-5 at 16, § 3.8. This document, which was ultimately incorporated by reference in MDC's contract with the Air Force, further required that the contractor submit all proposed flight test procedures to the Air Force 45 days prior to a scheduled test, and that no flight tests could proceed without Air Force approval. Id.
The contract required extensive testing of all A/RIA components, and Air Force approval was contingent upon a component's "passing" the required tests. Barnes Declaration at ¶ 18. The Contract called for three stages of testing. MDC Exhibit A-3 at 18-23. Category I testing involved a wide range of ground testing of individual components, subsystems, including engineering and laboratory tests and certain "performance," i.e., functional, and environmental testing. Id. at 18-19. Category I testing was conducted solely by MDC, which was required to submit all test procedures for pre-test approval by the Air Force. Barnes Declaration at ¶ 20. The contract also required that all test results be submitted to the Air Force, which could, and did, order the retesting of items, if it found the test results unacceptable. Id; MDC Exhibits A-24, A-25.
Category II testing included testing of subsystems, in preparation for final aircraft systems tests, and flight testing "to demonstrate that all requirements are achieved and that the system is acceptable to the Air Force." MDC Exhibit A-3, at 21, § 5.8.1.3. This testing was accomplished by a joint "test force" comprising MDC employees, and representatives of NASA and the Air Force, under overall Air Force direction. Barnes Declaration at ¶ 21. Category II test plans were required to be drafted by MDC for Air Force approval. The Air Force could, and did, require changes in such test plans. Id.; MDC Exhibit A-26. The purpose of Category II testing was, in part, "to verify safety of flight, to record and evaluate aircraft performance data, and to establish the validity of aircraft aerodynamics, stability and handling characteristics, and [to] calibrate all instrumentation." MDC Exhibit A-3, at 22 § 5.8.1.3.2. The Air Force alone conducted Category III flight testing, which included implementation testing intended "to demonstrate to the Air Force that the contractor has complied with all system level performance requirements, providing the basis for final acceptance [by the Air Force]." Id. at 23 § 5.8.2.2; Barnes Declaration at ¶ 22. Problems identified by the Air Force during Category III testing were corrected, again subject to Air Force approval, by MDC. Barnes Declaration at ¶ 22.
The scope of MDC's testing of the EC-135N was also dictated by its contract with the Air Force. Id. at 23. While MDC was required to demonstrate through testing that all newly installed and modified systems were operational, MDC Exhibit A-5 at 16, and that the structural modifications to the C-135A did not significantly degrade flight and handling characteristics of the aircraft, MDC Exhibit A-3 at 3-4, it was neither authorized nor required to conduct a full battery of flight tests. Barnes Declaration at ¶ 23. Its testing, all of which was monitored by the Air Force, was limited *1364 by contract to systems affected by the A/RIA modifications. Id.; MDC Exhibit A-27.
Most important for purposes of the Boyle defense, MDC had no authority to undertake testing of, or to modify, the C-135A's autopilot or the flight control systems related to the autopilot, and in fact did not modify or test those systems. Barnes Declaration at ¶ 28; MDC Exhibit A-9 at 59-60; Barnes Deposition, MDC Exhibit C, at 29-30. The statement of Edward M. Barnes, MDC's A/RIA Program Director, that MDC had no knowledge of alleged defects pre-existing in the C-135A, Barnes Declaration at ¶ 28, is uncontradicted by Fed.R.Civ.P. 56 materials. Plaintiffs simply argue by way of memorandum that MDC "had to know" of such defects. Plaintiffs' Reply Memorandum, Doc. # 224, at 12-13. Furthermore, MDC had no authority to test for the extreme conditions related to rapid pitchover in a full nose down attitude, and so did not flight test the aircraft's handling or aerodynamic characteristics under those conditions. Barnes Declaration at ¶ 27 (MDC flight tests "did not include testing the aircraft's handling characteristics outside the acceptable performance envelope"). It is for this reason that John E. Allavie, MDC's Chief Test Pilot for the A/RIA Program, stated in his deposition that MDC did not test to evaluate pilot response to a malfunction of the autopilot system, or to electrical failure following a negative G occurrence. Allavie Deposition, Doc. # 159, Plaintiffs' Exhibit 3, at 40. Nor did MDC flight test the EC-135N's response to a full nose down trim condition. According to Allavie, there "was no need" to test of this condition. Id. at 33. In fact, Allavie had "never heard of a full nose-down trim condition in an airplane ...." Id.
Pursuant to its contract, and within the aircraft's normal "performance envelope," MDC evaluated the compatibility of the A/RIA modifications with the pre-existing aircraft. MDC's flight testing showed that the handling characteristics of the EC-135N were similar to those of the C-135A. Barnes Declaration at ¶ 27. In fact, the handling characteristics of the EC-135N were so similar to those of the unmodified C-135A that the Air Force deemed it unnecessary to requalify C-135A pilots to fly the EC-135N. Odgers Deposition, MDC Exhibit D, at 12-13. Given the limitations on its authority to flight test the EC-135N, MDC could have had no actual knowledge of how the aircraft handled under, or how its crew might have reacted to, sudden pitch-over conditions caused by full nose down stabilizer trim, such as Plaintiffs' allege caused the accident herein. Under Boyle, a contractor has no duty to warn the government of dangers in the use of its equipment of which it has no actual knowledge. The Court holds that MDC is entitled to immunity under Boyle with respect to Plaintiffs' negligence-in-testing claims.
C. Plaintiffs' Flight Manual Claims
It is important to distinguish Plaintiffs' failure to warn claims from their claims that the contractor defendants have not satisfied the third element of the Boyle defense. Plaintiffs' claims under Boyle are that the contractors had actual knowledge of the relevant "failure modes" and "failed to warn" the Air Force of those defects. Plaintiffs' failure to warn claims, in contrast, stem from alleged failures by the Defendants to warn the Plaintiffs' decedents of dangers in the use of the aircraft, or so the Court must assume, since it is with regard to the accident aircraft's flight manuals that Plaintiffs state their failure to warn claims. See Liability Contentions, Doc. # 31, at 15-16. Plaintiffs assert that the EC-135N's flight manuals were defective, in that they failed to describe the precise "failure modes," that caused the accident in this case (e.g., the uncommanded mistrim with the autopilot in the altitude hold mode), failed to warn of the consequences of sudden pitchover with trim in full nose down position, and failed to warn that the aircraft was not recoverable within seconds after pitch down with the trim in the full nose down position. Doc. # 31 at 14-17.[44] Although Plaintiffs use the generic *1365 term "Defendants" in stating their failure to warn claims, there is no evidence in the record before this Court that Lear directly participated in the production of the EC-135N's manuals. According to Wilson E. Hale, Air Force Control Systems engineer in the Automatic Flight Control Section, Air Research and Development Command, it was Boeing's responsibility to "[prepare] handbook data" on the autopilot. Hale Affidavit at ¶ 29. Plaintiffs have adduced no evidence to the contrary. Therefore, the Court considers Plaintiffs' failure to warn claims as stated against Boeing and MDC.
Plaintiffs principally rely upon In re Joint Eastern and Southern District New York Asbestos Litigation, 897 F.2d 626 (2d Cir.1989), in which the Court held that the manufacturer of asbestos-containing cement procured by the Navy for ship building and repair was not entitled to immunity under Boyle from Plaintiffs' failure to warn claims resulting from their exposure to that cement at the Brooklyn Navy Yard in the 1940's. Plaintiffs argued that nothing in the Navy specifications for the packaging and labeling of the cement precluded a warning as to the dangers of asbestos exposure, and the district court agreed, denying the manufacturer's motion for summary judgment on grounds that there was no "significant conflict" under Boyle between the manufacturer's labelling duty under the contract and its duty to warn under state law. 897 F.2d at 628. The Second Circuit affirmed, stating that there was no indication in the record "that the Government controlled or limited the ability of contractors like [Defendant] themselves to warn those who would come into contact with [their] product." Id. at 632.
Plaintiffs rely on Asbestos Litigation for the proposition that if there is no conflict between the warning requirements in a military contractor's contract and the contractor's duty to warn under state law, Boyle requires that state law governing failure to warn claims must be applied. Plaintiffs' Memorandum at 79. Asbestos Litigation is not the only case to so interpret Boyle in a failure to warn case involving asbestos-containing cement manufactured pursuant to government contract. See, e.g., Dorse v. Eagle-Picher Industries, Inc., 898 F.2d 1487 (11th Cir.1990) (three-part test of Boyle need not be reached in failure to warn case where no conflict exists between state law duty to warn and labeling duty under contract). This Court is not convinced, however, that the Second Circuit and Eleventh Circuits are correct in treating the "significant conflict" requirement of Boyle as a factual element of the defense. In this Court's view, the requisite "significant conflict" under Boyle is present when state law would impose liability where the three Boyle elements are satisfied. Even if, however, the Second and Eleventh Circuits' view of Boyle is accepted, the Asbestos Litigation and Dorse cases are distinguishable on their facts from those at issue in the instant case. Whereas in those cases the government contractors were not prevented by their contracts from providing the warnings that Plaintiffs therein argued were called for by state law, Defendants in the instant case had no leeway where the content of the accident aircraft's manuals was concerned, as the following uncontroverted facts demonstrate.
The flight manuals for the KC-135 and C-135 were published by the Air Force as "technical orders." Lee Affidavit at ¶ 2.[45] In 1956, Boeing drafted a preliminary KC-135A flight manual, based largely on engineering data, before flight testing of the aircraft. Id. at ¶ 3. This preliminary draft was written to conform to military format specifications. Id. After flight testing, the Air Force ordered hundreds of changes in the manual before approving it for final publication. Id. The KC-135 manual was the product of yearly Command Review *1366 Conferences, with Boeing personnel and Air Force engineers and representatives of the SAC (the use command). Jacobsen Affidavit at ¶ 2. Disputes between Boeing and the Air Force as to the content of the manuals were always resolved in favor of the Air Force's view. Id. at ¶ 4. As Erling H. Jacobsen, the Boeing employee responsible for Boeing's role in the development of the KC-135 series manual from 1954-1969 stated, "Boeing's task was to assist the Air Force in producing manuals that say what the Air Force want[ed] them to say." Id. at ¶ 2. From the time of its initial release in September, 1956 the KC-135A flight manual was revised and reissued by the Air Force several times a year. Lee Affidavit at ¶ 4.
Pursuant to its 1961 contract with the Air Force to manufacture the C-135A, Boeing prepared a draft of the C-135A flight manual. Id. at 5. The contract required that the KC-135A flight manual be used as the basis of the C-135A manual, with changes commensurate with its new usage as requested by the using command (Military Airlift Command or MAC). Id. at ¶ 7. After review of the preliminary C-135A manual draft, the Air Force initiated hundreds of changes before publishing it in September, 1961. This, manual, like that for the KC-135A, was subjected to Command Review Conferences at which the Air Force made decisions concerning the manual's content, based upon user command review and Boeing's technical advice regarding the manual. Id. at ¶ 8. The C-135A flight manual in effect on May 6, 1981, had undergone 54 changes since a complete reissue by the Air Force in 1964, all of which changes were "directed by the Air Force, with the Air Force maintaining complete control over content." Id. at ¶ 9 (emphasis added).
A similar process was involved in the drafting and publication of the EC-135N manual. MDC's contract with the Air Force required it to make revisions in the C-135A manual relevant to aspects of the aircraft modified under the A/RIA program. Barnes Declaration at ¶ 24; MDC Exhibit A-9 at 108. As was typical of Air Force practice, prepublication reviews of all the supplemental manuals were conducted to insure compliance with "technical direction" given MDC by the Air Force. Barnes Declaration at ¶ 24. The exchange of information between the Air Force and MDC concerning the supplemental manuals is amply demonstrated by the correspondence in MDC Exhibit A-28. As Edward M. Barnes, MDC's A/RIA Program Director stated, "MDC could not put anything into the manual without the express approval of the Air Force." Barnes Declaration at ¶ 24 (emphasis added).
It is clear to this Court that the Air Force tightly controlled the content of the flight manuals in effect on May 6, 1981. Plaintiffs do not allege that the manuals did not conform to Air Force specifications; they simply allege that the manuals were "defective" because they lacked certain warnings. Doc. # 31 at 15-16. The Court finds persuasive the reasoning in Nicholson v. United Technologies Corp., 697 F.Supp. 598 (D.Conn.1988), a case involving failure to warn claims based upon asserted omissions in the manual accompanying an army helicopter. In Nicholson, Plaintiff, a federal civil service mechanic, was injured while repairing an Army CH-54B helicopter's landing gear. Id. at 599. Plaintiff argued, inter alia, that the failure of United Technologies Corp (UTC) to include adequate warnings and instructions regarding the repair and disassembly of the landing gear in the CH-54B maintenance manual was a proximate cause of his injury. Id. at 603. In holding that the Boyle defense barred Plaintiff's failure to warn claim, the Nicholson Court noted that
UTC undertook no action with respect to the CH-54B manuals other than that under contract with the government and in conformity with government specifications.... The government maintained control over the contents of the manual and made revisions to the contents with out the consultation or knowledge of UTC.... Further, in connection with revisions made pursuant to government contract, government personnel, including users of the manual, contributed the majority of expertise into the proposed *1367 changes to the manual.... The Specifications [under which UTC acted in revising the manual] outline the requested changes to the manual and then identify each specific page requiring change.... The specifications also refer to government furnished data which is used in developing the manuals. Lastly, such revisions were subject to government review and approval.
Id. at 604. These uncontroverted facts, the Court held, satisfied the first two elements of the Boyle defense. Id. at 604-05. The Court also held that since UTC had come forward with evidence that it had no knowledge of the asserted defects in the landing gear when it drafted the manual, and since Plaintiff had come forward with no evidence to the contrary, the third Boyle element was also satisfied. Id. at 605.
In the instant case, as the uncontradicted Fed.R.Civ.P. 56 materials submitted by Boeing and MDC show, there is no material difference between the Air Force's involvement and control in the process surrounding the production of the accident aircraft's manuals and the Army's involvement in Nicholson. The first and second elements of the Boyle defense, as it relates to the EC-135N's manuals, are therefore satisfied herein. Boeing and MDC have demonstrated that they could not, absent Air Force approval, have added a warning such as those Plaintiffs allege were required. Plaintiffs herein have come forward with no evidence creating a triable issue as to the Air Force's complete control over the manuals' content. Furthermore, Plaintiffs have come forward with no Fed.R.Civ.P. 56 materials demonstrating that Boeing and MDC had actual knowledge of a danger of which the Air Force was unaware and which should have been referred to in the manuals. Therefore, the Court holds that Boeing and MDC are entitled to immunity under Boyle from Plaintiffs' failure to warn claims.
D. Plaintiffs' "Fleet Support" and Maintenance Contracts Claims
Plaintiffs assert that Boeing breached its Fleet Support Contracts with the Air Force, contracts which, Plaintiffs claim, required Boeing to "review failure data concerning the 135's reliability." Plaintiffs' Memorandum at 60-61 (emphasis in original). This claim, qua contract claim, makes its first appearance in this litigation through Plaintiffs' Memorandum. It is not to be found in any complaint filed herein, nor has the Court located it in Plaintiffs' Responses to Liability Discovery Requests (Doc. # 144). Similarly, no breach of Fleet Support Contract claim, qua contract claim, appears in Plaintiffs' Liability Contentions, Doc. # 31, filed pursuant to this Court's order. Doc. # 27.
Plaintiffs' Liability Contentions do state, however, that "[i]n general terms ... Boeing, Lear and MDC ... carelessly and negligently monitored, advised, serviced and consulted in the maintenance and repair of [the 135 series aircraft and its subsystems]." Doc. # 31 at 7-8. Additionally, Plaintiffs' Liability Contentions state that by virtue of their "ongoing service agreements" with the Air Force, Boeing, Lear and MDC had a "continuing obligation to monitor the maintenance and repair of the subject airplane...." Id. at 19. Plaintiffs have apparently abandoned their claims against Lear and MDC based on "ongoing service agreements," as there is no mention of such claims by Plaintiffs in either their "Omnibus" Memorandum Contra the Defendants' Motions for Summary Judgment, Doc. # 219, or in their "Omnibus" Reply, Doc. # 224. In fact, there is no evidence in the record before this Court that Lear had such a contract with the Air Force. Moreover, MDC has established, by way of Rule 56 materials, that once it accepted delivery of the accident aircraft "the Air Force ... operated, maintained and repaired the aircraft with no assistance from MDC." Barnes Declaration at ¶ 26 (emphasis added). Plaintiffs have come forward with no facts creating a triable issue on this point.
Furthermore, the Plaintiffs strenuously argue that "[n]o maintenance deficiency caused or contributed to this tragedy," and that "[w]hen [the accident aircraft] departed Wright-Patterson Air Force Base on May 6, 1981 the aircraft was praised as an *1368 exceptionally well maintained aircraft." Doc. # 219 at 24 (citing testimony of Air Force personnel). Therefore, as Plaintiffs' own evidence indicates, even if the record before this Court showed that "ongoing service agreements" requiring Lear and MDC to "monitor the maintenance and repair of the subject airplane" existed, Plaintiffs' own submissions to this Court demonstrate no breach of that obligation, with respect to the accident aircraft, by those Defendants.
The Court next turns to the question whether the evidence submitted by Plaintiffs in support of their Fleet Support contract claim against Boeing is potentially supportive of their negligence claims against Boeing. Plaintiffs cite the Court to language in Contract No. F34601-81-C-0108, obligating Boeing to "[p]rovide engineering services to maximize the reliability and operational effectiveness of the C/KC-135 weapon system and to integrate changes/modifications thereto in an orderly and timely manner." Plaintiffs' Exhibit 13 at 1.[46] The contract was executed in December of 1980. Plaintiffs do not expressly explain how the contractual provisions they cite were breached or how the cited language relates to a duty to review "failure data."
Plaintiffs do, however, quote from the deposition testimony of Harry Mankins, Boeing's Chief of Fleet Support Contracts, to the effect that the Fleet Support contracts required Boeing to store "reliability information," or "66-1 data," sent to it by the Air Force and that Boeing stored, but did not evaluate maintenance information about the C-135 and its components (including the autopilot) received from the Air Force. Plaintiffs' Memorandum at 62-63 (quoting excerpts from Mankins Deposition, Doc. # 159, Exhibit 3) (emphasis added). Plaintiffs quote the following colloquy from the deposition:
Q. After you receive maintenance information on the components and systems of the 135 series airplane, including the components of the autopilot, do you evaluate that information on a periodic basis?
A. No.
Q. What do you do with that information, do you just store it?
A. We just store it, until it is needed.
Exhibit 3, Mankins Deposition at p. 57, lines 14-24. Plaintiffs then proceed to quote a question concerning the length of time for which Boeing received maintenance information, which appears at page 61, lines 16-21 of the deposition. Plaintiffs' Memorandum at 63. Plaintiffs do not quote (and fail to indicate the omission by means of ellipsis) the colloquy immediately preceding that question, at page 61, lines 4-6:
Q. So, if the Air Force does not direct you to do anything, you just receive that information and hold it; is that correct?
A. That is true.
Doc. # 159, Plaintiffs' Exhibit 3, Mankins Deposition at p. 61, 1. 4-6.
The Court points to this language in the deposition for two reasons. First, to the extent that Plaintiffs' are arguing that Boeing breached a duty (having origins in the Fleet Support Contract) to evaluate "failure data" about the autopilot, the question and answer cited by this Court (and omitted by Plaintiffs in their Memorandum) give rise to the inference that Boeing was not so required, absent Air Force authorization. At the very least, it suggests Mankins' statement that Boeing had not evaluated such data is not indicative of negligence on Boeing's part.
Second, this language, together with Mankins' statements that Boeing received the information referred to from the Air Force, is relevant to the third prong of the Boyle defense. In essence, Plaintiffs' would appear to be arguing that Boeing breached its duty to evaluate data known to the Air Force concerning reliability problems with the autopilot. Thus, the deposition testimony cited does not give rise to an *1369 inference that, as far as this data is concerned, Boeing withheld information, unknown to the Air Force, concerning safety-related defects. See Boeing's Reply, Doc. # 226, at 35.
V. CONCLUSION
As the uncontroverted facts before this Court establish, the Air Force's involvement in the design and development processes for the KC-135A, C-135A, the MC-1 autopilot, and the A/RIA modifications resulting in the accident aircraft's EC-135N configuration was both far-reaching and authoritative. Air Force engineers had decisive input into the design process culminating in the Detail Specifications for the Boeing-manufactured KC-135A and C-135A aircraft. These Detail Specifications, themselves the product of negotiations between the Air Force and Boeing, incorporated the specifications for the MC-1 autopilot, as negotiated between the Air Force and Lear. The design of the A/RIA modifications was likewise a joint effort of the Air Force and MDC. With respect to all three moving Defendants, the Air Force exercised final authority over the design it ultimately approved and over modifications in that design.
The Air Force's control over the scope and design of the testing programs associated with the design effort for each Defendant's equipment was equally pervasive, as was Air Force control of the content of the manuals in effect on the day the accident aircraft was lost. The process leading to final Air Force acceptance of the accident aircraft in its C-135A and EC-135N configurations, as set forth in uncontradicted Fed.R.Civ.P. 56 materials, satisfies the first element of the Boyle defense as a matter of law. Harduvel, 878 F.2d at 1320. Indeed, the pervasiveness of Air Force oversight and control of the design efforts described herein far exceeds the literal requirement of Boyle that the government, and not solely the contractor, merely have considered the design features at issue in this case. Boyle, 487 U.S. at 512, 108 S.Ct. at 2518.
Defendants have also demonstrated, again by way of Fed.R.Civ.P. 56 materials that are uncontradicted by Plaintiffs, the absence of a genuine issue of fact material to the second element of the Boyle defense, with respect to all of Plaintiffs' claims. Plaintiffs have come forward with no evidence whatsoever that the accident aircraft, or its autopilot, failed to conform to their respective Detail Specifications. Plaintiffs have strenuously argued that the accident aircraft did not conform to the general hortatory language of requirements in the moving Defendants' contracts calling for the delivery of a safe, reliable aircraft. It is, however, the Detail Specifications, as ultimately evolved through the give and take between the Air Force and its contractors, to which Defendants' equipment must conform under Boyle. Kleeman, 890 F.2d at 702. Plaintiffs argue that the May 6, 1981, accident itself demonstrates that the aircraft and its autopilot were unsafe and, therefore, not in conformity with the moving Defendants' contract specifications. In the absence of Fed.R. Civ.P. 56 materials showing that the accident aircraft and its autopilot failed to conform to the relevant specifications, however, that argument amounts to no more than the assertion that the aircraft's "intended configuration" produced, in this case, "unintended and unwanted results." Harduvel, 878 F.2d at 1317. Where equipment manufactured in conformity with a government-directed design produces such results, causation having been assumed herein for the purposes of the instant motions for summary judgement, there exists no genuine issue of fact material to the second element of the Boyle defense.
The Court also holds that all three moving Defendants have demonstrated, by way of Fed.R.Civ.P. 56 materials that are uncontradicted by Plaintiffs, that there exists no triable issue of fact material to the third element of the Boyle defense, as same applies to all of Plaintiffs' claims. As the record shows, Boeing repeatedly warned the Air Force of safety-related problems in the KC-135A's AC generator system, warned of the potential compounding effects on safety of total loss of electric *1370 power, a mistrimmed stabilizer and zero-gravity conditions (such as are encountered in a sudden pitch over into full nose down position), and made design suggestions (rejected by the Air Force) to decrease the likelihood of a runaway trim condition. In 1958, Boeing also warned the Air Force of problems in the production of the MC-1 which, in Boeing's view, rendered it unsafe and required reworking of various components. Similarly, Lear made design recommendations which would have enhanced the autopilot's safety and reliability, but the Air Force rejected same. Deficiencies in various autopilot components were also made known to the Air Force through Boeing and Lear's simulator tests.
The Defendants' uncontradicted Fed.R. Civ.P. 56 materials also show that as early as 1959 the Air Force had independently encountered the problem of runaway trim, and had experienced failures and malfunctions in the manual, electrical and autopilot trim systems, the very systems implicated by Plaintiffs as playing a crucial role in the May 6, 1981 accident. This knowledge predated MDC's contract for the A/RIA modifications by several years. There is no evidence in the record herein demonstrating a danger in those modifications, nor is there evidence, by way of Fed.R.Civ.P. 56 materials, that MDC had actual knowledge of the dangers which Plaintiffs allege were inherent in the C-135As, including the accident aircraft, which MDC contracted to modify.
Relying upon the uncontradicted Fed.R. Civ.P. 56 materials submitted by Boeing, Lear, and MDC, this Court has described in exhaustive detail the procurement and design processes that led to the accident aircraft's configuration as an EC-135N. The Plaintiffs, as the parties against whom the instant motions are directed, are entitled to every reasonable inference in their favor to be drawn from those undiputed facts. On the basis of those facts, however, it is unreasonable to infer that the Air Force would not have known of a danger in the use of the accident aircraft that was known to the Defendant contractors herein. Certainly, the Plaintiffs have come forward with no facts to indicate that any Defendant withheld such knowledge. Moreover, the undisputed facts document the Air Force's own independent experience with KC-135As, C-135As, and EC-135Ns in general, and with the accident aircraft in particular. On the basis of those facts, it is likewise unreasonable to infer that the Defendants could know of a danger of which the Air Force was unaware by the time the tragic accident in this case took place.
The instant case is, in this Court's view, precisely the kind of case to which the government contractor defense was intended to apply. The KC-135 and its autopilot were procured for the purpose of serving the needs of a major component of the government's defense strategy, the B-52 bomber. The C-135A and the EC-135N were likewise developed to serve the government's highly complex military and scientific needs. Trade-offs between the required military mission's effectiveness, its cost, and safety concerns are a necessary part of the government's procurement and design activities in projects such as these. It is this sort of balancing which the Boyle defense protects, by providing for contractor immunity where state tort law would hold contractors liable for injuries resulting from the government's design decisions. As Former Justice Powell stated in Harduvel, "[a]lthough the defense may sometimes seem harsh in its operation, it is a necessary consequence of the incompatibility of modern products liability law and the exigencies of national defense." 878 F.2d at 1322. That rationale is, of course, controlling of the legal issues in this case. It cannot, however, be comforting to the Plaintiffs in this case, whose grievous loss is felt not only by this Court, but surely by all those who value the men and women who devote, and often sacrifice, their lives to the service of this country.
For the foregoing reasons, this Court holds that the government contractor defense set forth in Boyle v. United Technologies Corportion, 487 U.S. 500, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988), applies to all of the Plaintiffs' claims herein, and that the *1371 moving Defendants have demonstrated, by way of uncontradicted Fed.R.Civ.P. 56 materials, that there exists no genuine issue of fact material to any element of that defense. Therefore, the Court finds well taken, and sustains in their entirety, Boeing's, MDC's and Lear's Motions for Summary Judgment (Doc. # s 150, 215, 217, respectively).
This Court orders the Office of the Clerk of Courts to enter judgment in favor of the moving Defendants and against the Plaintiffs in the consolidated case (C-3-82-195) and in the above captioned 15 cases which have been consolidated therein. Following the entering of judgment as aforesaid, cases C-3-82-204, C-3-82-211 and C-3-82-366 are to be severed from the other 13 cases in which judgment has been entered. Judgment in those 13 cases is to be final, the three Defendants in whose favor summary judgment is granted being the only three Defendants in those cases. The three cases to be severed represent suits on behalf of civilian Plaintiffs against not only the three moving Defendants herein but against the United States of America as well. Those three to be severed cases will remain consolidated with each other, following the severance. Trial upon the merits of the three severed cases will be had during the week of February 19, 1991, before the Court sitting as the trier of fact. In this fashion, since final judgment will have been entered in favor of all Defendants and against Plaintiffs, in the 13 cases in which the Government is not a party, an immediate appeal can be taken on those cases.
There will be no Fed.R.Civ.P. 54(b) certification (no just reason for delay) on the three severed cases. Although an argument could be made that an interlocutory appeal by the Plaintiffs on those severed cases would, nonetheless, permit jurisdiction to remain in this Court for purposes of the Plaintiffs' trial against the Government, it is also true that any decision by the appellate court on the thirteen cases in which the Government is not a party (and in which final judgment is being entered by separate entry) will act as a collateral estoppel in the three severed cases as well.
APPENDIX A
For certain background regarding alleged inconsistencies among the three Webb affidavits in the record in this case, the Court sets forth the following:
In his February Affidavit (Doc. # 227, Appendix 1) [obtained by Boeing], Colonel Webb states:
¶ 16 In stating in my January affidavit [Doc. # 159, Exhibit 6] (¶ 16) that "Boeing ... never told the Air Force that several seconds after a full nose down trim pitch-over and electrical failure KC-135A airplanes are not recoverable," I carefully added the phrase "to the best of my knowledge." I have now refreshed my memory with a document in which Boeing substantially makes the point in question:
Loss of the electrical system caused by a zero-G push-over condition compounded with stabilizer out of trim condition could result in loss of the airplane.
(Agenda Item for Weapons System Phasing Group Meeting of August 12-13, 1958, attached as Exhibit A hereto). Mr. Rosenberg did not inform me of the existence of this document in asking me to affirm this paragraph of my January affidavit. After reviewing this document I now recall this Boeing warning. I still do not recall any occasion on which a Boeing representative said in so many words that "several seconds after a full nose down trim pitch-over" the aircraft would become unrecoverable. Indeed, that is almost too obvious to require saying. Any pilot would know that several seconds after a full nose down trim pitch-over the aircraft would exceed its "placard speed" its fastest permissible operating speed. Like any other Air Force pilot I would not have assumed that I could recover after exceeding the placard speed of the aircraft in a dive.
¶ 18. In my January affidavit (¶ 19) I stated that "Boeing to the best of my knowledge ... never told the Air Force that the manual trim system in the KC-135A *1372 airplanes is insufficient as an emergency back-up trim system to recover the airplane from a full nose down trim pitch-over and subsequent electrical failure." When Mr. Rosenberg asked me to affirm this statement he did not bring to my attention the following language from a 1958 letter from Boeing to the Air Force through Boeing's representative in Dayton (attached hereto as Exhibit B):
The loss of electrical power during an emergency condition could compound the effects, perhaps beyond the point of recovery. This would be particularly true if stabilizer trim control were needed to recover.
As I interpret these words, Boeing was warning the Air Force that the manual trim system might not always be sufficient to recover in an emergency accompanied by an electrical failure. I believe, however, that the Air Force was already aware of this fact. We knew of the slow speed of the manual trim wheel and of the phenomenon of "stabilizer stall." When a pilot is holding the control column with significant force because of a mistrimmed stabilizer, the air load on the stabilizer will make it impossible for the stabilizer to be retrimmed....
¶ 20. I am not a partisan in these legal actions. I have not accepted, asked for or been offered remuneration by any party to these actions. I have attempted to be open and cooperative with opposing parties. That is why I felt it was appropriate for me to give an affidavit to plaintiffs as well as to Boeing. I objected to certain of the statements in my January affidavit because they are potentially misleading. In particular, I objected that certain of the items as to which I recalled no Boeing warning in fact required no warning. They were obvious to the Air Force; they were certainly obvious to me. Mr. Rosenberg urged me not to cross out any statement from his draft that I thought was literally true to the best of my knowledge at the time.
¶ 21. I showed Mr. Rosenberg my affidavit of July 1984 and indicated to him that I was not retracting anything that I stated in that affidavit. Nothing in my affidavit of January 1985, as I understand and intended it, contradicts anything in my earlier affidavit....
APPENDIX B
The decision on these pending motions for summary judgment has been unconscionably delayed. While not intending to shift the blame for the delay, this Court's efforts have been hampered by what it feels are egregious deficiencies in the Plaintiffs' submissions on the pending motions. These deficiencies, many of which require the Court to literally "search for a needle in a haystack," either because of citation to an incorrect document number, citation to statements whose import the Court cannot readily discern or as the result of the Plaintiffs' blithe references to the entirety of mega-hundred page documents, with no more specific cite given, as documents allegedly creating a genuine issue of material fact, have increased the workload of this Court in well-nigh exponential fashion in dealing with these motions. Several such deficiencies have been referred to in the text of the Court's opinion; a smattering of others follows:
1. Plaintiffs allege that MDC's "failure to test and evaluate the consequences of full nose-down trim ... violates § 3.1.3.7 of the A/RIA specification [MDC Exhibit A-1, previously submitted]." Plaintiffs' Memorandum, Doc. # 219, at 65. In response to this Court's order, Doc. # 213, that the parties resubmit their motions for summary judgment and memoranda, MDC submitted a set of renumbered exhibits. Plaintiffs' Memorandum does not take account of this renumbering. Old MDC Exhibit A-1 was resubmitted as MDC Exhibit A-2.
The language quoted by Plaintiffs as located in Section 3.1.3.7, Plaintiffs' Memorandum at 65 n. 24, does not appear in Section 3.1.3.7 of MDC Exhibit A-2 (formerly MDC Exhibit A-1). The Court has searched Exhibit A-2 in vain for the language quoted by Plaintiffs, as well as for a *1373 comparable "Section 3.1.3.7" in other exhibits.
2. Plaintiffs allege that "[t]he following sections of specification number CP100001A also were violated [by MDC]," and enumerates several provisions of a general nature, much like the sections of the HIAD they rely upon elsewhere. Plaintiffs' Memorandum at 66-68. Plaintiffs do not cite the Court to an Exhibit number, nor do they allege any facts indicating how "specification number CP100001A" was violated, which facts might have given the Court a clue as to the location of the cited language. Once again, the Court has searched the entire record in this case in vain for a document, or section thereof, with this title.
3. Plaintiffs allege that the MC-1 autopilot's "lack of `reliability' was a breach of contract" and cite the Court to certain numbered sections of an unnamed document without providing an Exhibit number. Plaintiffs' Memorandum at 60 and 60 n. 21. This, too, sent the Court upon the proverbial search for a needle in a haystack, a needle which the Court has been unable to find.
NOTES
[1] In the course of their twenty-page list of liability contentions, Plaintiffs have also asserted that each Defendant negligently manufactured the particular system and/or components for which it was responsible. Doc. # 31 passim. Plaintiffs have not come forward, by way of Fed.R.Civ.P. 56 materials, with any specific facts indicative of such negligent manufacture of the accident aircraft and/or its components, by any of these Defendants.
[2] As additional grounds for its Motion, Lear asserts that Plaintiffs' claims against it are barred by Section 707 of the Defense Production Act of 1950, 50 U.S.C.App. § 2157 (Supp.1990). Doc. # 217 at 68-71. Although Boeing asserted the same defense in its original memorandum in support of its Motion, Doc. # 151 at 80-85, it has not raised the Defense Production Act as a bar to Plaintiffs' claims either in its renewed memorandum, Doc. # 221, or in its Reply, Doc. # 226.
Lear's contract with the Air Force was drafted pursuant to the Defense Production Act. W.D. Brown Affidavit at ¶ 8. It was a "rated" contract, which required its priority over other Lear contracts. The Act subjected contractors to criminal penalties for failure to perform any act required under their contracts with the government. 50 U.S.C.App. § 2073. Lear argues that Section 707 of the Act should be construed to provide a complete bar to tort claims against manufacturers having such "rated" contracts. Doc. # 217 at 70. Section 707 provided, in pertinent part:
No person shall be held liable for damages or penalties for any act or failure to act resulting directly or indirectly from compliance with a rule, regulation, or order issued pursuant to this Act ... notwithstanding that any such rule, regulation, or order shall thereafter be declared by judicial or other competent authority to be invalid....
50 U.S.C.App. § 2157.
The classic situation in which Section 707 applies is where a manufacturer who is party to a contract under the Act is sued by a third party whose contract with the manufacturer has been adversely affected by the contract's defense rating. In re Agent Orange Product Liability Litigation, 597 F.Supp. 740, 844 (E.D.N.Y.1984). This Court has found no case holding that Section 707 immunity extends to third parties' tort claims. The legislative history does not affirmatively support such a conclusion. Id. at 844-45. One Court has stated in dicta that Section 707 immunity, if it applies at all in tort cases, would apply only to strict liability claims. In re Agent Orange, 597 F.Supp. at 845. In view of the manner in which this Court has resolved Lear's Motion for Summary judgment, it declines to reach Lear's argument under the Defense Production Act.
[3] The Air Force Aircraft Accident Investigation indicates that the position of the jackscrew and the accuracy of the cockpit pitch trim indicator would not have been affected by impact forces associated with the crash. Id.
[4] The difficulty of this maneuver is demonstrated by Air Force simulator runs, which resulted in the conclusion that "[w]hen recovery was delayed beyond 8 seconds and until the aircraft was 30 degrees nose-down with airspeed greater than 350 Knots Indicated Airspeed (KIAS), recovery was impossible." AF Investigation Report at Tab 3.2.5.2 (footnote by the Court).
[5] Plaintiffs' expert, Dr. Richard C. Lathrop, opined that the accident was caused by one or more of the alleged defects to which Plaintiffs refer in their Responses to Liability Discovery Requests (Doc. # 144). Dr. Lathrop's statement, which quotes verbatim the relevant excerpts from Plaintiffs' contentions, is unaccompanied by an expert's report. Plaintiffs contend that the autopilot was defectively designed in that it
a. it can cause spontaneous uncommanded trim changes that are dangerous and adversely affect airplane safety;
b. the autopilot by design can fail in such manner as to cause the aircraft to experience .2g's or less resulting in electrical failure and violent pitch down. The autopilot can also be rendered inoperative as a result of an electrical failure in normal flight if the aircraft briefly experiences .2g's for 2 or 3 seconds or less;
c. the autopilot can fail in such manner as to cause full or close to full nose down trim during flight conditions which do not require that trim setting;
d. the autopilot failure can trigger a violent pitchover while the autopilot is in altitude hold mode during routine cruise phases of flight;
e. the autopilot failure can cause the aircraft to enter regimes of flight where it will lose aileron control and spoiler effectiveness and encounter Mach tuck;
f. the autopilot can fail and force the flight crew to rely on a dangerous and inadequate backup mechanical trim system;
g. the autopilot has the capacity to mask out almost full horizontal stabilizer nose down trim thus creating an unsafe condition and potential emergency without warning to crew member [sic];
h. the elevator servo clutches can slip while the autopilot is engaged in the altitude hold mode and precipitate a sudden pitch down;
i. failures of the trim coupler and control amplifier can precipitate nose-down trim conditions during regimes of flight that do not require that setting thus creating an unsafe condition;
j. the autopilot did not have an effective stopping mechanism, loading sensing device and/or redundancy to prevent a mistrim or nose-down runaway trim condition;
k. the autopilot pitch axis does not fail passively;
l. no elevator channel and pitch trim failure monitoring was provided to 135 aircraft flight crew members;
m. no warning systems were provided to bring to a flight crew's attention the fact the autopilot was malfunctioning and/or in a dangerous out-of-trim condition;
n. the MC-1 autopilot was comprised of too many individual components such that by reason of the excessive interconnections of numerous components the potential for electrical malfunctions within the system was maximized;
o. the MC-1 autopilot and its components were not assigned a meaningful service life, and could fail suddenly, unpredictably and without warning;
p. by reason of its design the MC-1 autopilot becomes progressively unreliable, unsafe and logistically unsupportable [sic];
q. by reason of its design and the frequency of failure of individual components and replacements of the autopilot system maximized [sic] the potential for errors in the course of maintenance and repair of the system and replacement of component parts, errors which could weaken the integrity and functional capability of the system.
(1) Lathrop Affidavit, Doc. # 159, Exhibit 15 at ¶ 6 (quoting Doc. # 144, at 35-38).
[6] The reason that all electrical power is lost when the aircraft enters zero or negative gravity conditions, as when the aircraft experiences a pitch over, is as follows. Each of the aircraft's AC electrical generators receives its rotational energy from the aircraft engine with which it is associated by means of a constant speed drive ("CSD"), which is a hydraulic device. Affidavit of Dudley K. Myers, Boeing's engineer responsible for the KC-135A's CSD specifications ("Myers Affidavit"), at ¶¶ 2-3. In zero or negative gravity, the CSD's hydraulic oil is dispersed into air in the CSD, and does not circulate properly within the system. If this results in insufficient oil for proper CSD operation, the associated generator trips off. Id. at ¶ 3. The geometry of the oil tank determines how long the AC generators will function in zero or negative gravity Id. at ¶ 5. Plaintiffs' precise contention regarding the CSD's is that they were designed to cause the AC generators to trip off once the aircraft has experienced zero or negative gravity for two seconds, a period of time which Plaintiffs contend is defectively brief. Doc. # 144 at 32.
[7] The Fourth Circuit also held that the Plaintiff had failed to demonstrate that repairs done by Sikorsky, and not those done by the Navy, had caused the malfunction in the automatic flight control system, and ordered that judgment be entered for Sikorsky on the defective repair claim. Id. (citing 792 F.2d at 414-15).
[8] In its opinion, the Court of Appeals had stated that "[b]ecause Sikorsky has satisfied the requirements of the military contractor defense, it can incur no liability for ... the allegedly defective design of the escape hatch." Id. at 514, 108 S.Ct. at 2519 (quoting 792 F.2d at 415). Petitioner argued before the Supreme Court that the Fourth Circuit had conducted its own evaluation of the facts. Suggesting that the Court of Appeals had merely held that no reasonable jury could have found for the petitioner on the facts presented, the Court nevertheless vacated the Fourth Circuit's judgment and remanded for the purpose of clarification of the basis of its decision. Id.
[9] The Court related the following:
Beginning with bids for what would become the F/A-18, teams of Navy engineers met with each contractor for extended discussion of their submissions. When the Navy selected MDC to develop and build the F/A-18, the final design contracts for the aircraft incorporated MDC's original proposal as modified during the extensive negotiations between the parties. During design development, MDC was required to submit detailed engineering drawings to the Navy for approval. All changes to the design or specifications of the aircraft, required Navy approval, including proposals to address problems with the allegedly defective landing gear. The government also maintained an extensive staff of aircraft engineers on site at MDC's facilities in St. Louis.
Id. at 701.
[10] For background regarding these alleged inconsistencies, see materials set forth in Appendix A.
[11] Colonel George A. Leslie was the Air Force's Chief of Procurement for the KC-135A.
[12] Wilson E. Hale was an Air Force flight control systems engineer, and Unit Chief, Cargo Transport and Miscellaneous Air Craft Unit, Automatic Flight Control Section, Air Research and Development Command, stationed at WADC. Mr. Hale's section was responsible for design and development of the automatic flight control system for the jet tanker project. Id at ¶¶ 4-5, 10.
[13] The issue whether any Defendant in this case actually knew of alleged design defects of which the Air Force was unaware is, of course, directly relevant to the Boyle defense.
[14] Plaintiffs also assert that "full design discretion was allowed to potential A/RIA contractors" and as support for this proposition cite the Court only to the following excerpt from the record:
Q. 17. Format B
1. To what extent can contractor deviate [from] this format?
* * * * * *
A. Full contractor discretion is allowed in accomplishing Format B. The assumptions and basis used should, however, be indicated.
After considerable effort, this Court has located the referenced excerpt, not in "Exhibit 14," as Plaintiffs would have it, Plaintiffs' Memorandum at 54 n. 18, but in MDC's original Exhibit A, resubmitted as MDC Exhibit A-1, at 79.
The Court can only conclude that by referencing this minute excerpt, Plaintiffs hope to create in the Court's mind a triable issue related to "full contractor discretion." The Court does not follow Plaintiffs' lead, however, for the following reasons. This excerpt, as the Court has discovered and Plaintiffs have neglected to state, is from a transcript of questions submitted by potential contractors in a conference with the Air Force during the earliest stage of the A/RIA procurement process, the Request for Proposal (RFP) stage. The contractors' questions, and the answers thereto that were ultimately provided by the Air Force, were incorporated into the RFP for the modifications. MDC Exhibit A-1. The record does not disclose, and Plaintiffs have not alluded to, the meaning of the term "Format B." It is therefore impossible to guess the import of this excerpt. It is, however, obvious to this Court, based upon uncontested facts set forth by MDC in support of its Motion for Summary Judgment, that MDC was given anything but "full design discretion" in the A/RIA program, as the Court's discussion below fully indicates.
[15] In support of their argument that the instant Motions for Summary Judgment should be overruled, Plaintiffs rely upon the opinion in Deniston v. The Boeing Company, No. 87-CV-1205, slip op., 1990 WL 37621 (N.D.N.Y. March 28, 1990) (available on LEXIS, 1990 U.S. Dist. LEXIS 3509). Plaintiffs' Omnibus Reply Memorandum, Doc. # 224, Appendix A. Deniston, a case brought under the Death on the High Seas Act, 46 U.S.C.App. § 761 et seq., involved the crash at sea of a Navy helicopter whose stabilization augmentation system was implicated as a cause of the crash. The Deniston Court overruled Boeing's motion for summary judgment based on the Boyle defense, in part because a statement in the helicopter's manual described the helicopter as "a twin-turbine-powered dualpiloted tandem-rotor helicopter, designed by Boeing Vertol Company." Slip op. at 13. This statement, the Court held, was sufficient alone to raise an issue of material fact as to who designed the helicopter. Id. The Court also held that, in part because Plaintiffs' theories of recovery had not been clearly defined, the record was not sufficiently developed to enable the Court to determine whether the section of the helicopter's Detail Specification relied upon by Boeing was the relevant "reasonably precise" specification, within the meaning of Boyle. Id. at 15.
Plaintiffs in the instant case argue that, "[l]ike in Deniston," the Defendants herein "designed" the KC-135A, its MC-1 autopilot and the A/RIA modifications and that, therefore, their Motions for Summary Judgment must be overruled. Doc. # 224 at 17-18. As an initial matter, the record in the instant case contains no document containing a statement comparable to that found partially dispositive by the Deniston Court. Even if the record contained such a statement, this Court would respectfully disagree with the Deniston Court's assessment of its import. As previously stated, this Court does not view the question of who "designed" the accident aircraft and its autopilot to be material to the Boyle defense. The issue material to the first Boyle element is whether the government has approved reasonably precise specifications. Indeed, the Deniston Court itself stated as much, when it held that it would find the requisite government approval "if either the government itself selected or proposed the allegedly defective design features or if those design features were approved by the government following active consideration, which may be demonstrated by a `back and forth' between the government and the contractor." Slip op. at 12. As this Court's discussion will show, the record in this case establishes that just such "back and forth" took place between the Air Force and the Defendants herein.
[16] From 1956-65, Lawrence F. Smith was head of the engineering section of the Air Force office located in Boeing's Seattle, Washington facility. The engineering section monitored compliance of the KC-135A and its modifications to the Detail Specification. Id. at ¶¶ 3, 4-11.
[17] From 1954-57, Robert G. Shanks was Boeing's Contract Specification Engineer for the KC-135A. From 1957-65, Mr. Shanks was the C/KC-135 Project Group Engineer concerned with contracts, general administration and testing. Id. at ¶ 3.
[18] Unless otherwise specified in text, citations to the Webb Affidavit refer to Colonel Webb's July 10, 1984 affidavit, unnumbered Exhibit accompanying Doc. # 151.
[19] From 1954-55, John R. Utterstrom was the Boeing employee in charge of the technical aspects of autopilot acquisition. Mr. Utterstrom oversaw preparation of the KC-135A performance specification for the autopilot (D10-2572). Id. at ¶ 3.
[20] From October, 1965 to February, 1967, Edward M. Barnes was the MDC Program Director for the A/RIA Program. Id. at ¶ 1.
[21] The "DASH 80" had no autopilot, no alternating current electrical system, AC generators or constant speed drives. Id. Furthermore, it had two manual trim wheels. Id; Affidavit of Guy M. Townsend, at ¶ 2. Mr. Townsend was an Air Force test pilot stationed at the Boeing facility in Seattle during the initial development of the KC-135A. Since 1970, he has been Boeing's Military Program Manager. Id. at ¶¶ 1, 3.
[22] The alternative, allowing the aircraft manufacturer to subcontract out a given subsystem, apparently provided for less Air Force control in the design and development process. Id. at ¶ 9.
[23] A performance specification sets forth general performance requirements, and not complete precise quantitative manufacturing requirements, for a given piece of equipment.
[24] Charles H. Brown was a Lear project engineer who reported to the Chief Project engineer during the preparation of Lear's autopilot proposal, and later became Chief Project Engineer in Lear's autopilot program. Id. at ¶ 7.
[25] Plaintiffs argue that Lear cannot, "as a matter of law," prove any element of the Boyle defense because it has not produced either its contract with the Air Force or a specification for the autopilot as a whole. Plaintiffs' Memorandum at 89. The Court views this argument as nothing more than a red herring. There is no serious dispute that Lear was a party to a contract with the Air Force for the design and development of the KC-135A's autopilot system. Indeed, Charles Brown, Lear's autopilot project engineer, sets forth the contract number (AF 33(600)-30586) and the date it was awarded. C. Brown Affidavit at ¶ 7. Mr. Brown's affidavit explains that neither the original development/production contract, nor subsequent production contracts, have been retained by Lear over the twenty-five years since issuance of same and the initiation of this lawsuit. More important, in this Court's view, is the presence in the record of the detail specifications, with attendant Air Force-approved revisions thereto, for the autopilot's components. Id., accompanying Exhibits C1-C16. The Court has found no case, and Plaintiffs cite none, standing for the proposition that these detail specifications are not "specifications" within the meaning of Boyle.
[26] The detail specifications for the autopilot components, which are Exhibits C1-C16 to the C. Brown affidavit, are in their final form.
[27] Exhibit A accompanying the Smith Affidavit is an example of a Department of Defense ("DOD") Form 250 which, when signed by Air Force personnel, indicates Air Force acceptance of a contracted-for item as being in compliance with the contract. The DOD Form 250 for the accident aircraft, SN61-0328 as an unmodified C-135A is not in the record before this Court. See Boeing Memorandum, Doc # 221, at 33 n. 14. Plaintiffs do not, however, dispute that the Air Force accepted the accident aircraft as conforming. Plaintiffs do contend, however, that the Air Force's approval and acceptance of the accident aircraft was vitiated, for purposes of the Boyle defense, because the Defendants "misled" the Air Force, or allegedly did not alert the Air Force, to the defects which Plaintiffs assert contributed to the accident herein. Thus, according to Plaintiffs, the Air Force would not have accepted the aircraft had it known of these alleged defects. See, e.g., Plaintiffs' Memorandum at 87-88. The Court has found no evidence in this record that any of the Defendants misled the Air Force as to any alleged defect herein.
[28] This Air Force research included a Feasibility Study by the Air Force Oklahoma City Air Materiel Area ("OCAMA") suggesting the bulbous nose configuration for the C-135A that ultimately became part of MDC's modifications. MDC Exhibit A-31.
[29] The DOD Form 250 for the accident aircraft is not before the Court, MDC having destroyed it long ago in accordance with its document retention policies. Id.
[30] Relying on Deniston v. The Boeing Company, No. 87-CV-1205, slip op., 1990 WL 37621 (N.D. N.Y. March 28, 1990) (also available on LEXIS, 1990 U.S. Dist. LEXIS 3509), Plaintiffs assert that since Boeing, Lear, and MDC would have the burden of persuasion as to all elements of the Boyle defense at trial, they must "establish" that there is no material issue of fact with respect to each element of that defense in order to prevail on their Motions for Summary Judgment. Plaintiffs' Omnibus Reply Memorandum, Doc. # 224 at 17. This Court understands the relative burdens of the parties to the instant motions to be otherwise. Once the moving defendants have come forward with facts demonstrating the absence of a genuine issue of fact material to each element of the Boyle defense, the non-moving Plaintiffs must come forward with specific facts demonstrating that such issues exist in order to defeat the instant motions. Nonetheless, as the ensuing discussion will show, Boeing, Lear, and MDC have met their burden even under the standard articulated by the Plaintiffs.
[31] Plaintiffs argue that the EC-135N was not the Air Force's "intended configuration," because the Air Force would not have accepted the design of the aircraft or its autopilot had it known of the defects which Plaintiffs allege caused the accident herein. Plaintiffs' Memorandum at 87. In support of this contention Plaintiffs rely on statements in Colonel Webb's January Affidavit. Colonel Webb states, for example, that "the United States ... would not have accepted the Boeing Detail Specification for KC-135 airplanes if Boeing and Lear had told the Air Force that there were safety-of-flight failure modes in the constant speed drives and MC-1 autopilot." Doc. # 159, Exhibit # 6, at ¶ 14. Colonel Webb also states that "the United States would not have accepted delivery of KC-135A airplanes if Boeing and Lear had told the Air Force that there were safety-of-flight modes in the autopilot and generator constant speed drives which could cause in-flight problems and cause a crash." Id. at ¶ 15.
Taken alone, these statements imply both that such "failure modes" existed and that the Air Force had no knowledge of them. When read together with Colonel Webb's February Affidavit, however, the implication of lack of Air Force knowledge is dispelled. Thus, in the February Affidavit Colonel Webb states that in making the above-referenced statements he did not intend to imply that there were such "failure modes." With reference to the statement in paragraph 14 of the January Affidavit, Colonel Webb explains:
"The Air Force was well aware that the constant speed drive on the KC-135A would cease to function, taking the alternating current generator off line, after a short period of zero or negative gravity. The Air Force did not believe that even a hard over signal from the autopilot would produce a safety of flight hazard, because an attentive pilot would overpower and then disconnect the autopilot before the aircraft entered an unrecoverable flight regime. That remains my belief today." Doc. # 227, Appendix 1, at ¶ 13.
With regard to his statement in paragraph 15 of the January Affidavit, Colonel Webb explains:
"The Air Force would not accept delivery of any aircraft if informed by competent authority, within or without the Air Force, that there were hazards associated with the aircraft that could cause a crash. My only intent in agreeing to that language in my January affidavit was to affirm that the Air Force would not knowingly accept an unsafe aircraft design. The Air Force, as always, made its own assessment of risk in light of the requirements of the military mission. I do not believe that the Air Force accepted an unacceptable hazard or that the Air Force lacked any information possessed by Boeing with respect to potential autopilot or constant speed drive hazards." Doc. # 227, Appendix 1, at ¶ 14.
Plaintiffs also allege that Boeing "intentionally mislead" [sic] the Air Force about the seriousness of "problems," presumably problems in the aircraft's flight control system and autopilot. Plaintiffs' Memorandum at 87. Plaintiffs provide no documentation for this contention, and, after thorough perusal of the extensive record herein, the Court has found none.
[32] From 1951-82, Raymond L. McPherson was a Boeing test pilot. He was Boeing's Senior test pilot on the KC-135A project from 1956-58. Id. at ¶¶ 4-5.
[33] From 1954-69, Erling H. Jacobsen was the Boeing employee in charge of Boeing's participation in the development of the KC-135 and C-135 flight manuals. Id. at ¶ 1.
[34] Plaintiffs citation of this Boeing document is misleading. Plaintiffs state that Boeing's Senior Project Engineer "wrote" of the MC-1 failures, but neglect to tell the Court that he wrote the Air Force. Plaintiffs' Memorandum at 27.
[35] It was at that meeting that the Air Force's Captain Bunn stated that the Air Force had determined that runaway stabilizer trim could be dealt with, and "adequate airplane control can be maintained under all conditions," if procedures in the flight manual were followed. Id. at 3. Thus, the Air Force made the decision not to redesign the relevant components of the aircraft.
[36] As noted earlier, there is no evidence in the record to support Plaintiffs' claims, Doc. # 31 at 7-8, that any component or structural feature of the accident aircraft was negligently manufactured.
[37] In their Omnibus Reply Memorandum, Plaintiffs cite the Court to the Connelly deposition, as a whole, for support for their contention that the MDC A/RIA modifications were defectively designed. Doc. # 224, ¶ 8. The Court does not bear the burden of searching that deposition, which runs to some 663 pages, for more testimony from Mr. Connelly which might flesh out the statement which Plaintiffs have chosen to stand or fall on its own as a basis for defeating MDC's Motion on Plaintiffs' design defect claims related to the A/RIA modifications. Plaintiffs also refer the Court to the depositions of its experts Dr. Richard C. Lathrop and Robert B. Picht, again by citing those depositions in toto. Doc. # 224, ¶ 8. The Court declines Plaintiffs' invitation to look for their "needle in a haystack." The Court has, however, read the excerpt from the Picht deposition, Doc. # 159, Plaintiffs' Exhibit 9, and Dr. Lathrop's affidavit, Doc. # 159, Plaintiffs' Exhibit 15. Neither of these exhibits contains any discussion of the A/RIA modifications.
[38] General Peter William Odgers was Commander, Air Force Flight Test Center, and Commander of the Air Force's 49-50th Wing (the user command for the EC-135N). MDC Exhibit D, at ¶ 7.
[39] Although Plaintiffs contend that the EC-135N should have had an "active" warning system to alert the crew to dangerous horizontal stabilizer movement, that contention, as directed against MDC, is without merit. It is undisputed that the A/RIA modifications did not change the pilots' instrumentation panels (where such a warning system would have been located). The C-135A's cockpit configuration was not modified in the course of the A/RIA program. Allavie Deposition, MDC Exhibit E, at 63-64.
[40] An example of the kind of language relied upon by the Plaintiffs appears in Amended Statement of Work, Project Definition Phase, Section 1.7 which, as is true of the other documents relied upon by Plaintiffs, became part of MDC's contract with the Air Force:
Characteristics
The A/RIA System shall be designed to meet all of the varied characteristics and performance requirements specified. The requirements of the A/RIA/ALOTS system may require aerodynamic refinements heretofore not incorporated in this type(s) of aircraft. Primary emphasis shall be placed in obtaining the best control and stability with minimum overall degradation of existing C-135 performance characteristics.
MDC Exhibit A-4, at 11.
[41] Plaintiffs have, however, asserted that "[t]here is simply no evidence in this record that MDC even appreciated the magnitude of the risks in the 135/MC-1 design...." Plaintiffs' Memorandum at 38. That assertion cuts against Plaintiffs' argument that MDC cannot satisfy the third element of Boyle, which would require MDC to alert the Air Force to dangers of which its has actual knowledge.
[42] In addition to arguing that it is entitled to immunity under Boyle from Plaintiffs' design defect claims, MDC asserts that it had no duty under Ohio law to detect and/or warn of design defects alleged to be pre-existing in the C-135As that it modified. MDC Memorandum, Doc. # 215, at 27-29. Specifically, MDC argues that as a modifier and supplier of components, it may not be held liable for "general design defects" in the aircraft as a whole. Id. at 28 (citing Searls v. Doe, 29 Ohio App.3d 309, 312, 505 N.E.2d 287, 289 (1986). MDC cites Searls for the proposition that a modifier/repairer is not required to secure plans for the entire system it is employed to modify and to determine if the modification will function safely in the system as a whole. Id.
The Court holds that Searls is not controlling in the instant case. Searls holds that manufacturers of components have no duty to warn of defects in the system, where they are not responsible for the entire system, their components are not themselves defective and are manufactured in accordance with specifications set forth by the designer/manufacturer of the system. 29 Ohio App.3d at 312, 505 N.E.2d at 290. Searls is distinguishable on its facts from the instant case, because the component manufacturers therein, who supplied subsystems for an assembly line, had no responsibility for the assembly line system as a whole. Id. at 311, 505 N.E.2d at 289. In the instant case, however, MDC had responsibility, subject to the strictures set forth in its contract, to test for the compatibility of its components and modifications with the aircraft. MDC Exhibit A-5 at 16.
MDC's testing responsibilities with respect to alleged pre-existing defects was controlled by its contract with the Air Force. As the Court's ensuing discussion will show, this fact entitles MDC to immunity under Boyle from Plaintiffs' flight testing claims.
[43] Plaintiffs cite no contractual provision giving rise to the latter duty, and the Court has found none.
[44] Plaintiffs also refer to Defendants' "contract specification warning requirements," which Plaintiffs assert do not conflict with any state law duty to warn. Plaintiffs' Memorandum at 79. Plaintiffs do not, however, cite the Court to such requirements in the contracts, nor do they provide any clue in the text of their submissions to this Court as to the content of such "requirements."
[45] Harry S. Lee was Boeing's Flight Publication Supervisor.
[46] Page one of Plaintiffs' Exhibit 13 is illegible. At footnote 23 to their Memorandum, Plaintiffs also cite the Court to Sections of a document which Plaintiffs have neglected to cite either by name or by document number. The Court has located the cited language, however, imbedded within an attachment to Plaintiffs' Exhibit 13, Attachment I, revised March 15, 1980, at p. 4. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1589044/ | 972 So.2d 106 (2007)
Robert G. PEDEN
v.
Hazel (Penny) Dunn PEDEN.
2050924.
Court of Civil Appeals of Alabama.
May 11, 2007.
*107 Gary L. Jester and Patrick J. Thomas of Jester & Jenkins, Florence, for appellant.
Rodney B. Slusher, Florence, for appellee.
THOMAS, Judge.
Robert G. Peden ("the husband") and Hazel (Penny) Dunn Peden ("the wife") were married in September 1995. Before the marriage, the parties executed an antenuptial agreement. According to the parties' handwritten financial statements appended to that agreement, the wife's net worth was approximately $10 million. The parties separated in June 2003. The wife moved for a summary judgment on most issues in the divorce action, arguing that they were governed by the parties' antenuptial agreement. The husband responded to the wife's motion by arguing that the agreement was ambiguous in certain respects; that, under the terms of the agreement as he read them, certain property was not solely the wife's; and that he was entitled to a constructive trust on the wife's personal property because it had been paid for by his separate property (i.e., his income from his medical practice and/or his disability checks). The trial court entered a summary judgment in favor of the wife, holding that the antenuptial agreement controlled the disposition of the parties' assets. After a short trial primarily concerning whether the husband should be responsible for the payment of two promissory notes that he had allegedly executed in favor of the wife, the trial court entered a judgment divorcing the parties, incorporating the antenuptial agreement, awarding the wife all the assets in her name, and making the husband responsible for all debts to the wife for which he had contracted.
The husband appealed that judgment, and this court dismissed the husband's appeal as being from a nonfinal judgment because the trial court had not definitively addressed whether the debts allegedly owed by the husband to the wife had been contracted for by the husband or whether they were in fact still owed. See Peden v. Peden, 931 So.2d 721 (Ala.Civ.App.2005). Upon remand, the wife gave up any claim to the debts she had argued were owed to her, and the trial court entered a judgment reflecting that the debts were no longer an *108 issue; the original divorce judgment was then made final. The husband again appeals.
The husband's appeal requires us to interpret the parties' antenuptial agreement. That antenuptial agreement provides, in pertinent part, as follows:
"ESTABLISHMENT OF SEPARATE PROPERTY
"7. Except as otherwise provided in this agreement, the respective Property of each party owned by each party upon the date of execution of this agreement, together with any property that the party may have omitted inadvertently, together with all income and increases in value arising from that property during marriage regardless of the reason for the income or increase, and together with any property subsequently acquired and titled in the respective name of each party, whether before or after the marriage, shall be owned as the separate property of that party during marriage. All property that either party may acquire by way of gift or inheritance, whether under a Will or intestate distribution, is similarly the separate property of the owner-party.
"Each party shall have the absolute and unrestricted right to manage, control, dispose of, or otherwise deal with his or her separate property free from any claim that may be made by the other by reason of their marriage and with the same effect as if no marriage had been consummated between them.
"Each party hereby waives, discharges and releases all right, title and interest in and to the separate property that the other party now owns or acquires after the execution of this agreement, or acquires from the proceeds of any property now owned.
"MARITAL PROPERTY
"8. (a) During the course of the marriage, the Parties shall make periodic contributions to a jointly owned fund entitled the `Household Account' for the maintenance of their household and, potentially, for the purpose of marital investments. All property purchased with the proceeds of the Household Account shall be deemed Marital Property. Each party shall have equal rights in regard to the management of and disposition of all Marital Property.
"(b) Notwithstanding any provision to the contrary contained herein, any and all household furniture, furnishings, accessories, art work, automobiles, jewelry, cash on hand, appliances, china, crystal, silver, or any other type or description of tangible personal property acquired by the parties prior to or during marriage shall be considered the sole and separate property of the wife regardless of how titled.
"(c) Additionally, other than property which is acquired and denominated as Marital Property as described under the provisions of 8(a), above, all stocks, bonds, securities and any other instrument evidencing (showing) ownership or interest of any kind or nature acquired by the parties during the marriage shall be considered the sole and separate property of the wife regardless of how titled.
"(d) Furthermore, notwithstanding anything contained in paragraph 7, above, any interest in the property located at 2415 Helton Drive, Florence, Alabama, owned by Husband shall be considered Marital Property."
During the marriage, the husband consented to the placement of most of his assets in the wife's sole name because, he said, she was concerned about the possibility *109 that those assets may be subject to seizure by the husband's ex-wife or other potential creditors. In addition, the husband allowed the wife to place his salary checks into an account maintained in her sole name. Although the parties opened a joint account after the husband began receiving disability checks in 2000, most of the funds in that account, including funds generated by the liquidation of the husband's $200,000 retirement account, were routinely transferred into an account maintained in the wife's sole name as well.
The husband, who had been a physician specializing in the treatment of the ear, nose, and throat (often referred to as an "ENT"), was prevented from practicing in his subspecialty microscopic surgery when he suffered what the parties refer to as a stroke that affected his left eye[1] in May 2000. Before that, the husband earned, on average, over $500,000 per year. The husband's disability insurance policy began paying him benefits of $15,000 per month, tax free, in October 2000. The wife was not employed and had no employment income. However, she was able to live comfortably on the interest and dividends earned by her significant assets.
The parties lived well, traveled, and purchased expensive jewelry and gold and silver coins. At the time of the divorce, however, neither party claimed to have possession of the gold and silver coins. The wife testified in her deposition and at trial that the husband's money had been dissipated on living expenses, trips, and expensive gifts; she answered many questions concerning the whereabouts of the funds or other assets contained in several accounts she had maintained during the marriage with the words "I don't know" or "I have no clue." The husband testified in his deposition that he was sure that his money had been used to purchase many assets that the wife titled in her sole name and claimed pursuant to the antenuptial agreement. However, he presented no documentary evidence indicating that his money had been used for any purchase.
The husband and another doctor, Dr. Walker, had formed a partnership called Peden & Walker in order to purchase a building, referred to as the Helton Drive property by the parties, in which to house their respective medical practices. The husband owned a 52% interest in the partnership. The antenuptial agreement indicated that any interest the husband may have in the Helton Drive property would be considered as marital property. However, during the marriage, the wife paid off the mortgage on the property and a 52% interest in the property was deeded by the partnership to the wife, in her sole name. The husband disputes the wife's assertion that she paid the mortgage with her personal funds; instead, he contends that the money used to pay off the mortgage was from his income, which he had entrusted to her for safekeeping for the mutual benefit of the parties.
The husband argues that the antenuptial agreement is ambiguous because of what he perceives as a conflict between paragraph 7 and paragraph 8(b). According to the husband, paragraph 7 provides that each party is to retain their separate property and that any property acquired by a party and titled in their name is that party's separate property, provided that the property was purchased with that party's separate property. The husband maintains that any property purchased by *110 one party with commingled funds or with the separate property of the other party does not become the sole property of the purchasing party, regardless of how the property is titled. The wife, however, maintains that any property titled in her name and, specifically, any of the items enumerated in paragraph 8(b), are her separate property irrespective of whose funds financed the purchase.
To determine whether the antenuptial agreement is ambiguous, the trial court was required to review the agreement to determine if "`the intent of the parties c[ould] be fairly and reasonably gleaned from the four corners of the document.'" Stacey v. Saunders, 437 So.2d 1230, 1234 (Ala.1983) (quoting Schmidt v. Ladner Constr. Co., 370 So.2d 970, 972 (Ala.1979)). The trial court's summary judgment in favor of the wife and its incorporation of the antenuptial agreement into the divorce judgment indicates that the trial court found the agreement to be unambiguous. We agree with that conclusion.
The interpretation of a provision in an antenuptial agreement, like the interpretation of any provision in any contract, is a question of law for the trial court. Laney v. Laney, 833 So.2d 644, 646 (Ala. Civ.App.2002). The trial court concluded that the effect of the antenuptial agreement was to make all personal property originally owned or later acquired by the parties, jointly or separately, the wife's separate property despite the indication in paragraph 7 that each party would retain his or her separate property. This construction is supported by the language of the agreement and appears to reflect the intent of the parties as gleaned from the agreement itself. Notably, paragraph 8(b) begins with the phrase "Notwithstanding any provision to the contrary contained herein," indicating that the provision might conflict with another provision in the agreement. Thus, paragraph 8(b) controls over another contrary provision insofar as the enumerated personal property is concerned. Thus, the trial court's judgment insofar as it concluded that the antenuptial agreement was unambiguous and should be enforced according to it terms is affirmed.
The husband also argues that the trial court erred in determining that the wife was entitled to a summary judgment declaring that the Helton Drive property is her sole property under the antenuptial agreement. He contends that the property was marital property under the antenuptial agreement and that the wife failed to establish that the 52% interest in the Helton Drive property was converted to her sole property because, he alleges, she did not present sufficient evidence indicating that the mortgage on the Helton Drive property was satisfied with her personal funds. The wife argues that the husband never had an interest in the Helton Drive property because it was owned by the partnership, Peden & Walker. See Ala. Code 1975, § 10-8A-203 (providing that "[p]roperty acquired by a partnership is property of the partnership and not of the partners individually"). She further argues that the plain language of the antenuptial agreement does not require that the assets titled in her name be purchased with her personal funds or separate property before they are considered her sole property. We agree with the wife on both counts.
The deed to the wife from the partnership indicates that the Helton Drive property was indeed owned by the partnership and not by the husband and Dr. Walker as individuals. Under § 10-8A-203, the husband, as a partner, had no individual interest in the Helton Drive property. Because the husband had no interest in the property, *111 the Helton Drive property never became marital property. In addition, as noted above, we agree with the wife that paragraph 7, contrary to the husband's argument, simply does not contain a requirement that the property acquired by a spouse after the execution of the agreement and titled in that spouse's sole name must be purchased with that spouse's separate funds in order for the property to be considered the separate property of the purchasing spouse. Thus, the interest in the Helton Drive property, which was deeded in the wife's sole name, is her separate property under the agreement.
The final argument asserted by the husband is that he was entitled to a constructive trust on the wife's assets because he had not transferred his assets to her to be her separate property but, instead, had allowed the wife control over his separate property for the mutual benefit of the parties. This creative argument is, however, unavailing. The husband correctly explains that a constructive trust may "`be imposed upon property whenever the circumstances under which it was acquired make it inequitable that it should be retained by the holder of legal title provided some confidential relationship exists. . . .'" Herston v. Austin, 603 So.2d 976, 979 (Ala.1992)(quoting Cole v. Adkins, 358 So.2d 447, 450 (Ala.1978)). We also agree that the husband presented sufficient evidence to overcome the wife's summary-judgment motion as to the intent of the parties concerning the wife's control of the husband's money for the benefit of both parties. See Putnam v. Putnam, 274 Ala. 472, 475-76, 150 So.2d 209, 213 (1963) (quoting 26 Am.Jur. Husband and Wife, § 102, at 729) (noting that a constructive trust in favor of a husband may arise when a wife uses the husband's income to "`purchase[ ] property with the understanding that it is to be for the benefit of both of them'").
However, the husband's failure to adequately prove that specific items of property were purchased with his separate property (i.e., his salary or funds from his disability payments) is fatal to his constructive-trust claim. "[T]o enforce a constructive trust there must have been a tangible form of identifiable property which was received as consideration for the sale of trust property or into which it may be otherwise traced and identified." Ex parte Morton, 261 Ala. 581, 593, 75 So.2d 500, 512 (1954). The husband has not definitively traced the wife's expenditures of what he claims to have been his separate property into any particular assets; thus, he has not established a "tangible form of identifiable property" upon which a constructive trust in his favor could be imposed. Therefore, we conclude that the trial court did not err by entering a summary judgment in favor of the wife on the husband's constructive-trust claim.
AFFIRMED.
THOMPSON, P.J., and PITTMAN, BRYAN, and MOORE, JJ., concur.
NOTES
[1] The husband testified at trial that he had been diagnosed with ischemic optic neuropathy. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1588098/ | 752 F.Supp. 620 (1990)
Professor Michael LEVIN, Plaintiff,
v.
Bernard W. HARLESTON, President of the City College of the City University of New York, individually and in his official capacity; Leonard Roellig, individually and in his official capacity; Michael Arons, individually and in his official capacity; Max Bond, individually and in his official capacity; Juan Flores, individually and in his official capacity; Janice R. Joy, individually and in her official capacity; Marlene MacLeish, individually and in her official capacity; Sheldon Weinbaum, individually and in his official capacity; and Paul Sherwin, Dean of the City College of the City University of New York, individually and in his official capacity, Defendants.
No. 90 Civ. 6123 (KC).
United States District Court, S.D. New York.
December 13, 1990.
Scott M. Univer, New York City, for plaintiff.
Clement J. Colucci, New York State Dept. of Law and Jane Denkensohn, New York City, for defendants.
*621 MEMORANDUM AND ORDER
CONBOY, District Judge:
This action challenges a university's effort to define the circumstances in which it may limit the academic freedom of its professors to express and exchange controversial and offensive ideas in a university setting. Plaintiff Michael Levin is a tenured professor of philosophy at City College who holds controversial views, expressed in his writings and public statements, about race, feminism and homosexuality. Levin's writings and statements, in particular those concerning his view that blacks are intellectually inferior to whites, have led to protests and demonstrations in his classes and on the City College campus.
In response to Levin's statements and the resulting campus unrest, defendant Bernard W. Harleston, President of City College, named a faculty committee[1] "to review the question of when speech both in and outside the classroom may go beyond the protection of academic freedom or become conduct unbecoming a member of the faculty, or some other form of misconduct." Complaint, Exhibit A (letter dated May 4, 1990 from Bernard W. Harleston to the College Community). The Committee was also asked to "review information concerning Professor Michael Levin of the Department of Philosophy, and Professor Leonard Jeffries, Chair of the Black Studies Department,[2] and to include in its report its recommendations concerning what the response of the College should be." Id.
In addition, defendant Paul Sherwin, Dean of the City College, established certain "shadow sections" of Levin's required introductory philosophy course. Complaint ¶ 30. By letter dated February 1, 1990, Sherwin informed Levin's students that, because of Levin's controversial and, to some, offensive views, they were being given the option of enrolling in a newly opened second section of Levin's course to be taught by a different instructor. Id.
In his complaint, which states claims pursuant to 42 U.S.C. § 1983 and for breach of contract, Levin alleges that the defendants' actions have had a "chilling effect" on his First Amendment right to freedom of speech. He claims that he has felt compelled, because of the Committee's investigation, to turn down numerous speaking and writing opportunities. Levin further alleges that his reputation has been damaged by the stigmatizing effect of the shadow sections. Finally, Levin alleges that he has been harmed by defendants' unwillingness to discourage and punish student demonstrators who disrupt his classes and threaten his safety. Levin seeks compensatory damages[3] and a permanent injunction preventing the defendants from inhibiting his First Amendment rights.
Defendants move to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, for lack of subject matter jurisdiction, on the ground that Levin's fears about what the Committee might do in the future do not create a presently justiciable controversy. Defendants argue that because the Committee is purely advisory, without power to institute tenure revocation proceedings, it presents no threat to Levin. Defendants also move to dismiss pursuant to Rule 12(b)(6), for failure to state claims for which relief can be granted.
On December 3, 1990, the Court heard oral argument on the motions. Because the nature and scope of the Committee's charge remained unclear, and because the parties disputed whether the Committee is, as defendants suggest, "purely advisory" (Affidavit of Bernard W. Harleston, sworn to on October 31, 1990, ¶ 3), or, as Levin claims, "a first step to determine whether [Levin] could be removed from the faculty" (Complaint ¶ 36), the Court scheduled an *622 evidentiary hearing on December 6, 1990, to resolve, for the limited purpose of determining justiciability, these and other factual issues. See Land v. Dollar, 330 U.S. 731, 735 n. 4, 67 S.Ct. 1009, 1011 n. 4, 91 L.Ed. 1209 (1947) ("when a question of the District Court's jurisdiction is raised ... the court may inquire by affidavits or otherwise, into the facts as they exist"); 2A J. Moore & J. Lucas, Moore's Federal Practice ¶ 12.07[2.-1] at 12-47 (2d ed. 1990) (if truth of jurisdictional facts is challenged, "court may receive any competent evidence, such as affidavits, deposition testimony and the like, in order to determine the factual dispute"). At the conclusion of the hearing, the Court ruled orally that it has subject matter jurisdiction. This Memorandum and Order sets forth the basis for that determination.[4]
As to the nature and scope of the Committee's charge, Professor Leonard Roellig, the Chairman of the Committee, confirmed that the Committee views part of its charge, in addition to examining the parameters of academic freedom, as defining "conduct unbecoming" a member of the faculty, that is, conduct which triggers tenure revocation proceedings. (Tr. 124)[5] Roellig also testified that the Committee has received and is examining certain of Levin's writings and statements (Tr. 121-22), and that the Committee's report, in defining the limits of academic freedom, will make specific reference to Levin's writings. (Tr. 122) The report may thereby "in fact amount to a criticism of some kind of Professor Levin." (Tr. 125) Roellig then conceded that the Committee's findings with respect to its review of the writings of Levin and Jeffries could lead to the institution of tenure revocation proceedings against Levin and Jeffries. (Tr. 128) Thus, despite its asserted advisory nature, the Committee's mission has an unmistakable punitive aspect directed specifically at Levin.
President Bernard Harleston's testimony illuminated the close connection between the Committee's work and Levin's tenure. Harleston explained that he himself established the Committee and selected its members. (Tr. 137-39) The Committee is thus serving as an arm of his office; it is acting under his charge to them, and will report directly and solely to him. (Tr. 141, 143, 149) Harleston also testified that he, as President of City College, has the sole authority to initiate tenure revocation proceedings. (Tr. 146) When asked how he would respond to the Committee's report, Harleston affirmed, in emphatic terms, that he was "certainly not going to ignore it." (Tr. 146) It would be reasonable to infer from this statement that if the Committee finds that Levin's statements constitute "conduct unbecoming" a professor, Harleston will initiate tenure revocation proceedings.
As to Levin's claim that the City College has failed to follow university guidelines for disciplining student demonstrators, Harleston was unable to address, in concrete and specific terms, the City College's responses to the demonstrations and disturbances in Levin's classes. (Tr. 149-152) According to Professor Levin, the response of Campus Security to a disruption by several dozen persons of one of his classes in progress was to urge that he terminate the class and leave his classroom in their protective custody. (Tr. 87-88) Harleston could not address whether any investigation of this incident was undertaken by the college. (Tr. 152)
Dean Paul Sherwin, answering questions about the decision to create "shadow sections" of Levin's introductory philosophy class, confirmed that never before in his experience at City College have such parallel sections been established. (Tr. 107) Shadow sections have not been offered to students enrolled in classes taught by professors *623 with controversial views about, for example, religion or evolution. Nor have any shadow sections been offered to students in Jeffries' classes (although it is not clear whether Jeffries teaches any required courses). Sherwin further testified that he viewed Levin's situation as presenting singular and unique circumstances requiring the creation of parallel sections. (Tr. 108-109) Although we make no finding as to whether Levin has been, as he himself claims, stigmatized by the creation of the shadow sections, Levin has been singled out by Sherwin for special treatment.
As to the actual harm Levin claims to have suffered as a result of defendants' actions, Levin testified that he had turned down approximately sixteen invitations to speak or write outside the City College community on differences in intelligence between the races and the sexes. (Tr. 62-63) Levin asserted that he feared that making further statements of his controversial views would simply add "fuel to the fire" of the Committee's investigation, giving them more reason to find his conduct unbecoming that of a professor. The State[6] chose not to challenge Levin or cross-examine him on the number and nature of the invitations to speak and write that he has declined, or his reasons for declining them.
To meet his burden of establishing subject matter jurisdiction based on the asserted "chilling effect" defendants' actions have had on his First Amendment rights, Levin points to (1) the close connection between the Committee's investigation and Harleston's potential decision to initiate tenure revocation proceedings against him; (2) the speaking and writing engagements he has declined; and (3) the stigmatizing effect of the shadow sections. Based on these facts, Levin contends that he has established an objectively reasonable basis for his claim that defendants have "chilled" his right to freedom of speech. Defendants respond that Levin has shown at best a solely subjective "chill" insufficient to create a presently justiciable controversy.
Article III of the Constitution limits the judicial power of the federal courts to actual cases and controversies. This limitation has been interpreted to bar a party from maintaining a lawsuit unless he has a sufficient stake in the outcome "as to assure that concrete adversariness which sharpens the presentation of issues upon which the Court so largely depends for illumination of difficult constitutional questions." Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663 (1962). To establish such an interest, a litigant must show that he or she has personally suffered some actual or threatened injury from the putatively illegal conduct, and that it would be redressed by a favorable decision. Valley Forge Christian College v. Americans United for Separation of Church and State, 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982). The challenged conduct must cause or threaten to cause a direct injury, Laird v. Tatum, 408 U.S. 1, 14, 92 S.Ct. 2318, 2326, 33 L.Ed.2d 154 (1972), which injury must be distinct and palpable. Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984).
In cases involving the deterrent or "chilling" effect of governmental actions that fall short of a direct prohibition against the exercise of First Amendment rights, see, e.g., Baird v. State Bar of Arizona, 401 U.S. 1, 91 S.Ct. 702, 27 L.Ed.2d 639 (1971); Keyishian v. Board of Regents, 385 U.S. 589, 87 S.Ct. 675, 17 L.Ed.2d 629 (1967); Lamont v. Postmaster General, 381 U.S. 301, 85 S.Ct. 1493, 14 L.Ed.2d 398 (1965); Baggett v. Bullitt, 377 U.S. 360, 84 S.Ct. 1316, 12 L.Ed.2d 377 (1964), the same principle applies. That is, "to invoke the judicial power to determine the validity of executive or legislative action [an individual] must show that he has sustained, or is immediately in danger of sustaining, a direct injury as the result of that action...." Ex parte Levitt, 302 U.S. 633, 634, 58 S.Ct. 1, 1, 82 L.Ed. 493 (1937), quoted in Laird v. Tatum, 408 U.S. at 13-14, 92 S.Ct. at 2325. Thus, no justiciable controversy was presented by a group of citizens who challenged the existence of the United States Army's data-gathering system without articulating *624 "a claim of specific present objective harm or a threat of specific future harm." Laird v. Tatum, 408 U.S. at 13-14, 92 S.Ct. at 2326. Because the "chilling effect" alleged by the citizens in Laird arose from their distaste for the Army's assumption of a role in civilian affairs or from their apprehension that the Army might at some future date "misuse the information in some way that would cause direct harm to [them]," id. at 13, 92 S.Ct. at 2325, the Court held the "chilling effect" allegations insufficient to establish a case or controversy.
In Socialist Workers Party v. Attorney General, 419 U.S. 1314, 95 S.Ct. 425, 42 L.Ed.2d 627 (1974), on the other hand, a justiciable controversy was stated by individuals seeking an order barring government agents and informants from attending or otherwise monitoring a national convention of the Young Socialist Alliance ("YSA"), on the ground that the monitoring activities would dissuade some YSA delegates from participating actively in the convention and would lead to possible loss of employment for those who were identified as being in attendance. Id. at 1319, 95 S.Ct. at 428. Justice Marshall, writing as a Circuit Justice, found the allegations in Socialist Workers Party much more specific and direct than those in Laird, and therefore sufficient to satisfy the requirements of Article III. Id. at 1319, 95 S.Ct. at 428. Significantly, Justice Marshall distinguished the threshold jurisdictional question from his decision on the merits. "Whether the claimed `chill' is substantial or not is still subject to question, but that is a matter to be reached on the merits, not as a threshold jurisdictional question." Id.
Bearing in mind that a federal claim should be dismissed for lack of subject matter jurisdiction only if the federal claim is clearly frivolous or wholly insubstantial, Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946), we conclude, based on the pleadings, the documents appended thereto, and the testimony and exhibits presented at the hearing, that the federal constitutional claim in this case presents a justiciable controversy. Professor Levin is faced with an ad hoc committee which is specifically focusing on his writings and statements in determining "when speech may go beyond the protection of academic freedom or become conduct unbecoming a member of the faculty." The threat to Levin from that Committee, with its broad charge and close connection to the President, is sufficiently direct and specific to create a justiciable controversy over Levin's claim that the defendants' actions are "chilling" his First Amendment rights. Whether the claimed "chill" is sufficient to warrant the relief sought in this case is a matter to be reached on the merits, not as a threshold jurisdictional question.
Accordingly, the motion to dismiss the complaint pursuant to Rule 12(b)(1), on the ground that the Court lacks subject matter jurisdiction, is denied. The motion to dismiss under Rule 12(b)(6), on the ground that the complaint fails to state claims for which relief can be granted, is, upon careful review of the pleadings, also denied.
SO ORDERED.
NOTES
[1] Defendants Roellig, Arons, Bond, Flores, Joy, MacLeish, and Weinbaum are the seven members of the Committee.
[2] Professor Jeffries also has controversial and well-publicized views on racial issues.
[3] The Court notes that the Eleventh Amendment may bar an action for damages against some or all of the defendants here. See Byrne, Academic Freedom: A "Special Concern of the First Amendment", 99 Yale L.J. 251, 303 n. 206 (1989). The parties have not yet addressed this issue.
[4] The Court makes no factual findings as to the merits of Levin's First Amendment claim that he has been and is continuing to be "chilled" and stigmatized by defendants' actions. Based on the limited record before us from a hearing held on short notice to the parties, we make only provisional findings solely for the purpose of determining whether the Court has subject matter jurisdiction.
[5] "(Tr. )" indicates a reference to the transcript of the December 6, 1990 hearing.
[6] The Attorney General's Office for the State of New York is representing the defendants. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2319196/ | 23 A.3d 649 (2011)
DUNCAN
v.
BOARD OF LICENSE AND INSPECTION REVIEW.
No. 1612CD10.
Commonwealth Court of Pennsylvania.
June 15, 2011.
DECISION WITHOUT PUBLISHED OPINION
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919044/ | 106 B.R. 1008 (1989)
In re Ben P. GAINES and Shelba Jean Gaines, Debtors.
Bankruptcy No. 88-05043-S-7-KMS.
United States Bankruptcy Court, W.D. Missouri.
November 6, 1989.
*1009 *1010 Mark E. Fitzsimmons, Danny R. Nelson, Fitzsimmons, Schroeder & Nelson, Springfield, Mo., for petitioner.
Gregory A. Dorshorst, Craig A. Smith, Daniel, Clampett, Lilley, Dalton, Powell & Cunningham, Springfield, Mo., for respondent.
AMENDED MEMORANDUM OPINION
KAREN M. SEE, Bankruptcy Judge.
Pending is the Chapter 7 Trustee's objections to exemptions in a pension plan and IRAs, totaling $231,125.17, claimed by debtors, Dr. Ben Gaines and Shelba Jean Gaines. The court's original Opinion, issued on September 27, 1989, is hereby withdrawn and the following Amended Opinion is entered. The issues are: (1) whether debtors should be denied any exemption in the funds due to intentional concealment of information concerning a business they were operating at the time they filed bankruptcy; (2) whether debtors can permissibly exempt all the funds under the Missouri exemption statutes, which debtors contend grant a complete exemption to any property, including funds in an ERISA plan, which is not subject to execution under state or federal law outside bankruptcy; and (3) whether debtors can exempt all or part of the funds under the Missouri statute governing exemption of pension plans. The court has jurisdiction over this matter pursuant to 11 U.S.C. § 522 and enters its final order and judgment pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(B).
PROCEDURAL BACKGROUND
On November 21, 1988 debtors filed a Chapter 7 petition, Statement of Affairs for Debtors Not Engaged in Business and Schedules of Assets and Liabilities, all signed by debtors under penalty of perjury. Debtors filed amendments to their Schedules on January 4, January 19, February 7, March 15, and June 7, 1989. Debtors' Section 341 Meeting of Creditors was convened on December 16, 1988; an additional Section 341 Meeting was held February 3, 1989.
On January 11, 1989, the trustee filed objections to debtors' exemptions claimed in a pension plan, real property, and an automobile. On January 24, debtors filed suggestions in opposition asserting that Dr. Gaines' interest in his pension plan was exempt under Missouri law, that Dr. Gaines held only bare legal title in the real property, and that debtors would redeem their interest in the automobile.
The objections to exemptions were set for hearing on February 7, 1989; debtors, their counsel, and the trustee appeared. On that date, debtors filed amended Schedules that added two Individual Retirement Accounts ("IRAs") as property of the estate and exempt. The only issue heard was the objection to exemption of debtors' interests in the pension plan and IRAs. After testimony, written evidence and argument, at the conclusion of the hearing the court entered an oral ruling on the record. From a pension plan and IRAs which totaled $231,125.17 when bankruptcy was filed, the court allowed debtors a partial exemption in the amount of $50,000.00, based on factors such as age, health, ability to accumulate additional retirement funds and reasonable need in the future at time of retirement.
On July 17, 1989, before a written order had been entered on the original hearing, trustee filed his motion to reconvene the hearing on his objections to debtors' exemptions. The motion was based on the trustee's discovery of previously undisclosed business interests of debtors. On July 21, debtors filed a response objecting to the trustee's motion to reconvene the hearing on the objections to exemptions. Debtors' arguments were that: 1) they lacked sophistication and sufficient understanding of the Bankruptcy Code such that they failed to realize that they had to reveal an allegedly profitless business operation; 2) the business had been openly operated; 3) the bankruptcy estate had not been deprived of any assets; 4) the trustee had been provided with information other than the debtors' Schedules that disclosed the business; and 5) the trustee *1011 waived the objection when he failed to litigate the issue at the February 7 hearing. Debtors' arguments against reopening the hearing for submission of additional evidence are without merit.
A hearing on the trustee's motion to reconvene was held on August 9, 1989. After additional testimony, written evidence, and argument, the court entered its ruling on the record, superseding the findings made at the conclusion of the original hearing. After considering the testimony and other evidence, the demeanor and credibility of the witnesses, the court's file, and the record of these proceedings, the court hereby memorializes its rulings for both the February 7 and August 9 hearings pursuant to Bankruptcy Rules 9014, 9021, and 7052.
FINDINGS OF FACT
Debtors reside in the resort community of Branson, Missouri. Dr. Gaines is a dentist employed by Ben P. Gaines, D.D.S., Inc., a professional corporation. Dr. Gaines is the sole shareholder, director, and owner of Ben P. Gaines, D.D.S., Inc. He has been a practicing dentist for more than 30 years and the sole shareholder of Ben P. Gaines D.D.S., Inc. since incorporation in 1966. Ben P. Gaines D.D.S., Inc. established a pension plan under the provisions of the Employees Retirement Income Security Act of 1974 ("ERISA") for which Dr. Gaines is the sole member and beneficiary.
Dr. Gaines, who gives the appearance of an affluent, sophisticated professional person, has been involved in numerous and varied business transactions and business ventures unrelated to bankruptcy. In fact, he seeks to discharge debts from some of those business ventures in this bankruptcy proceeding. He is highly educated, holding both Bachelors and Doctor of Dentistry degrees. Likewise, Mrs. Gaines is educated and has business experience as evidenced by her work in her husband's dental office and as the operator of the bed and breakfast business conducted in debtors' home. Accordingly, the court finds that both debtors and especially Dr. Gaines have a great deal of business experience and a degree of sophistication in business matters above the level of the average person.
In their original Schedules and all subsequent amendments, debtors listed Dr. Gaines' interest in the pension plan as property of the estate. The IRAs were first listed as property of debtors' estate on February 7, 1989, the day of the first hearing of this matter. The pension plan interest was valued by debtors at $198,759.49; the IRAs were valued at $32,365.68. Dr. Gaines has exclusive control over the contributions to the pension plan, investment of the funds in the plan, and the rights to amend or terminate the plan. Debtors have similar rights and powers over their IRAs.
Dr. Gaines is 58 years old; Mrs. Gaines is 49. Both are in good health. Although Dr. Gaines testified that as a dentist, his income would be reduced if he lost the use of his hands, he also testified there was nothing wrong with his hands and his concern was mere speculation about any possible mishap that could occur in the future. There was no evidence of anything that presently impairs his ability to work. Debtors have between $700 and $800 in excess income over their monthly living expenses of $2,200.
In 1986, debtors reported $80,339.00 in gross income to the IRS; in 1987, they reported $46,218.00; in 1988, they reported $40,455.00 in adjusted gross income.
In July 1988, five months before filing their petition, debtors began a bed and breakfast business, known as Gaines Landing, in their home. Gaines Landing was run primarily by Mrs. Gaines. An accounting system was established and business records were kept. In 1988, in a period of about four months, before the bankruptcy was filed, 104 guests stayed at Gaines Landing. After starting the business, debtors purchased items which they used both personally and in the business, including an expensive hot-tub spa, a freezer and a sofa. Debtors included income and *1012 expenses from the operation of Gaines Landing (including the spa and the other purchases) in their 1988 income tax return.
In their Statement of Affairs filed November 21, 1988, debtors did not disclose that they owned and operated Gaines Landing; Mrs. Gaines listed her occupation as housewife. In their Schedules and subsequent amendments filed November 21, 1988, and January 4, January 19, February 7, and March 15, 1989, debtors did not disclose that they owned and operated Gaines Landing. In their two Section 341 Meetings, debtors did not disclose that they owned and operated Gaines Landing, despite questions from the trustee that gave them the opportunity to disclose any information that had been previously omitted from the Schedules and Statement of Affairs. In the hearing on February 7, debtors did not disclose that they owned and operated Gaines Landing.
The court concludes that the business was affirmatively concealed at that hearing. It is noteworthy that in the Statement of Affairs and at the February 7 hearing, Mrs. Gaines testified that she was a housewife and her only work experience was in her husband's dentistry office. Mrs. Gaines' testimony that she was solely a housewife is wholly inconsistent with the later evidence, presented at the second hearing, that she was primarily responsible for operation of the bed and breakfast business and had 104 paying guests in the latter part of 1988 before the bankruptcy was filed in November.
Immediately before debtors amended their Statement of Affairs and Schedules to disclose ownership of the Gaines Landing business, a newspaper feature story about debtors' operation of Gaines Landing was published in the Springfield newspaper. Debtors first contacted their attorney, seeking to amend the statement of affairs to disclose the Gaines Landing Business after publication of the feature story. Immediately after publication of the article, debtors' attorney contacted the trustee.[1] Debtors testified that they had not disclosed information regarding the Gaines Landing business prior to June 7 in their Statement of Affairs and Schedules, at the Section 341 meetings, or at the first hearing on objections to exemptions because: 1) they thought it was not important; 2) they started the business to test the waters and to see if it would "fly"; 3) they allegedly were not making a profit in the business when the bankruptcy as filed; and 4) they forgot to list the business because it simply did not occur to them to disclose it.
After observing the testimony and demeanor of the debtors, the court finds their explanations for the failure to disclose the Gaines Landing business until after publication of the newspaper story to be untenable, incredible, and unbelievable. The court further notes that one of the stated reasons that debtors forgot about the business is inconsistent with all the other reasons they offered, all of which required an evaluation of the information and a reasoned decision to omit it. The assertion that debtors forgot about the business is simply not believable. It is not credible that debtors could forget that 104 people had paid to stay in debtors' home shortly before the time the bankruptcy was filed. It is also noteworthy that debtors did not forget to disclose information about any other business ventures, even though some were much older, such as Strand Investments, which was formed for investment in motel property.
Arguments that the business, which was an asset of the estate, was not disclosed because it was allegedly not yet making a profit or because debtors did not think it was important are also without merit. As previously noted, both debtors possess greater knowledge of and experience in *1013 business matters greater than the average person. It is not credible that debtors thought the existence of an operating business, in which they invested money and from which they received income from 104 clients, was not important enough to disclose.
It is also not credible that because debtors thought the business was not yet profitable that they could make the unilateral determination that its existence need not be disclosed for scrutiny by the trustee. Regardless of whether it was currently operating at a profit and constituted a valuable asset of the estate, operation of the business was obviously relevant to income-earning potential in connection with allowance of exemptions which were at issue in the February hearing.
It is elementary that the purpose of disclosing all assets, liabilities and business operations in the schedules is so the trustee can fully investigate the business affairs of debtors, including determining whether crimes have been committed, whether objections to exemptions should be filed, and whether property should be claimed for the estate or abandoned. Without full disclosure by debtors, the trustee cannot perform his statutory duties. After observing debtors during their testimony at two hearings, the court finds without credibility the assertion that debtors may not have understood that they must disclose all information in order for the trustee to have the ability to evaluate it.
The court finds the actions of the debtors evidenced their intent to fraudulently conceal the operation of Gaines Landing from the court and the trustee, and that they decided to disclose the business interest only after it was clear that the trustee would learn of the business from the newspaper feature story.
CONCLUSIONS OF LAW
The analysis applied to exemption questions such as this one involves three steps:
1) The bankruptcy estate of a debtor is comprised of all legal and equitable interests of the debtor pursuant to 11 U.S.C. § 541(a);
2) The interests of a debtor in a spendthrift trust shall be excluded from the bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2), thus never becoming part of the debtor's bankruptcy estate under 11 U.S.C. § 541(a);
3) The interests that have become part of the estate (those not excluded by 11 U.S.C. § 541(c)(2)) may be exempted from the estate pursuant to 11 U.S.C. § 522(f).
In re Graham, 726 F.2d 1268, 1271-1272 (8th Cir.1984); In re Swanson, 873 F.2d 1121 (8th Cir.1989).
The parties agree that Dr. Gaines' interest in the pension plan and debtors' interests in the IRAs are property of the bankruptcy estate pursuant to 11 U.S.C. § 541(a), and also agree that the interests are not excluded from the estate pursuant to 11 U.S.C. § 541(c)(2). Therefore, the court is not faced with spendthrift trust issues like those in In re Graham; In re Swanson; In re O'Brien, 94 B.R. 583 (W.D.Mo.1988); and In re Gallagher, 101 B.R. 594 (Bankr.W.D.Mo.1989). The only issue before the court is the third step in the analysis whether debtors are entitled to exempt their interests in the pension plan and the IRAs from the bankruptcy estate.
For reasons stated below, the court concludes that debtors' exemption of their interests in the pension plan and the IRAs will not be allowed. This determination is founded on three independent reasons: (A) exemptions should be disallowed where debtors intentionally concealed the existence and operation of a business which was an asset of the estate and which was relevant to the issue of debtors' ability to earn income for retirement; (B) debtors have not demonstrated any permissible statutory basis to allow the exemption; and (C) alternatively, even if it should be found that the first two bases are not applicable, the funds in debtors' pension plan and IRAs are not reasonably necessary for the support of debtors.
A. CONCEALMENT OF INFORMATION
Exemptions can be disallowed if a debtor has engaged in fraudulent conduct. *1014 Hanson v. First National Bank, 848 F.2d 866, 868 (8th Cir.1988); Matter of Doan, 672 F.2d 831, 833 (11th Cir.1982). Concealment of assets can be grounds for disallowance of exemptions. Matter of Doan, 672 F.2d 831, 833 (11th Cir.1982); In re Howard, 6 B.R. 220, 223 (Bankr.S.D.Ohio).
Debtors intended to fraudulently conceal the existence of the Gaines Landing business from the trustee and the court. Evidence of this intent is shown through debtors' repeated failure to disclose this business in their Schedules and amendments, in both of their Section 341 Meetings, and in testimony given to this court on February 7. In each situation, debtors provided information under penalty of perjury, and in each case the debtors concealed their interest in Gaines Landing. The most egregious instance of this intent to conceal occurred before the court in the February 7 hearing. At that time, the court was attempting to determine the extent of debtors' exemptions under Mo.Rev. Stat. § 513.430(10)(e). One of the crucial factors under that section is evidence of the debtor's opportunities to provide future financial support for himself and his family. In re Bartlett, 67 B.R. 455, 457 (Bankr. W.D.Mo.1986). The operation of Gaines Landing, a bed and breakfast facility in a resort community, would be critical evidence of debtors' income-earning potential. In this case, the court has no choice but to conclude that the debtors intended to conceal this business from the court.
Debtors' explanations for the failure to disclose do not provide any justification for their actions in failing to disclose the Gaines Landing business. None of the explanations offered by debtors are credible. Unlike the debtor in In re Doan, there was no evidence that debtors were acting upon advice of counsel in concealing Gaines Landing from the trustee and the court. Thus, no sufficient proof of circumstances has been offered that would allow the court to excuse debtors' behavior. In re Doan, 672 F.2d at 833-834. Debtors had numerous opportunities to disclose the operation of Gaines Landing. Debtors' conduct shows that but for publication of the newspaper article featuring Gaines Landing, debtors never would have reported its existence as part of their bankruptcy proceedings. This conduct cannot be tolerated. For the court to allow the $50,000 exemption initially determined at the first hearing, after discovering the debtors' intentional misrepresentations and omissions under oath and under penalty of perjury, would make the court a participant in misuse of the judicial system and would constitute a stamp of approval on fraud by debtors in this case and other cases. Accordingly, the court concludes that interests in the pension plan and the IRAs are not exempt due to debtors' actual intent to fraudulently conceal assets and information from the trustee and the court.
B. PERMISSIBLE EXEMPTIONS UNDER MISSOURI LAW
The second independent factor for disallowing debtors' exemptions in the pension plan and IRAs is that there is not a permissible Missouri exemption for these interests. In the hearing held February 7, debtors took the position that their interests in the pension plan and IRAs were exempt pursuant to Mo.Rev.Stat. § 513.430(10)(e). At the conclusion of that hearing, the court allowed debtors to exempt $50,000.00 of their interests based upon a determination that was the amount necessary for their support in the future at time of retirement, taking into account factors such as age, health and income-earning ability to replenish retirement funds prior to retirement.
Subsequent to the February 7 hearing, debtors took the position that under the precedent established by In re Sanders, 69 B.R. 569 (Bankr.E.D.Mo.1987) and In re Mitchell, 73 B.R. 93 (Bankr.E.D.Mo.1987) and the provisions of Mo.Rev.Stat. § 513.427, debtors were entitled to exempt their entire interests in the pension plan and IRAs. For the reasons stated below, the court disallows the exemptions under Mo.Rev.Stat. §§ 513.427 and 513.430(10)(e), finds that Sanders is inapplicable to the *1015 present matter, and is unpersuaded by the Mitchell reasoning.
The provisions of Mo.Rev.Stat. § 513.427[2] limit debtors to exemptions allowed by the laws of the state of Missouri and, except for those allowed under the Bankruptcy Code, exemptions permitted under federal law. Debtors rely upon Sanders and Mo.Rev.Stat. § 513.427 for the proposition that the state of Missouri may choose to grant debtors in bankruptcy exemptions that arise out of either state or federal law, and that the state of Missouri has in effect incorporated all federal exemptions (but for those listed in 11 U.S.C. § 522(d)) into the Missouri exemption scheme. This argument is based on language in § 513.427 that refers to property that is exempt from attachment or execution under state or federal law.[3]
Debtors contend that under ERISA, their pension funds are not subject to execution under federal law outside bankruptcy and, therefore, under the exemption provisions of Mo.Rev.Stat. § 513.427, pension plans and IRAs are totally exempt in bankruptcy.
Mo.Rev.Stat. § 513.427 is the enabling statute that both empowers and limits individuals who are proceeding as debtors under the Bankruptcy Code. As an enabling provision, it is not effective without reference to some other statutory provision. For example, in In re Kendrick, 106 B.R. 605 (Bankr.W.D.Mo.1988) debtors made a similar argument to the one presented to this court. Kendrick recognized the enabling and dependent nature of Mo.Rev. Stat. § 513.427 when it held:
Mo.Rev.Stat. § 513.427 is merely reinforcement of the Missouri opt-out from the Federal Bankruptcy exemptions and thus adds nothing to Mo.Rev.Stat. § 513.430.
With respect to the interest in the pension plan, Debtors' position is that the provisions of Mo.Rev.Stat. § 513.427 convert the ERISA anti-alienation provisions found at 29 U.S.C. § 1056(d)(1) into a Missouri ERISA exemption that is available to Missouri individuals proceeding under Title 11. Whether debtors' argument is based on a correct statutory construction of Mo. Rev.Stat. § 513.427 is irrelevant because Mo.Rev.Stat. § 513.427 is invalid to the extent that it relates to or is connected with the provisions of ERISA. A state may not grant rights to protect pension plans that relate to ERISA. Mackey v. Lanier Collections, 486 U.S. 825, 108 S. Ct. 2182, 100 L. Ed. 2d 836 (1988). In Mackey, the Supreme Court invalidated a Georgia statute protecting an ERISA welfare plan from garnishment although the intent of the state was to help effectuate ERISA's underlying purpose, stating at 108 S. Ct. at 2185:
Legislative "good intentions" do not save a state law within the broad preemptive scope of § 514(a) [29 U.S.C. § 1144(a)].
Numerous courts, including the Eighth Circuit, have held in nonbankruptcy situations that state law that refers to or that is connected with ERISA is preempted and invalid. Pilot Life Insurance v. Dedeaux, 481 U.S. 41, 107 S. Ct. 1549, 95 L. Ed. 2d 39 (1987); Baxter v. Lynn, 886 F.2d 182 (8th Cir.1989); Cefalu v. B.F. Goodrich, 871 F.2d 1290 (5th Cir.1989).
Debtors' theory is that 29 U.S.C. § 1056(d)(1) exempts ERISA plans from attachment and execution under "federal law" and therefore, Missouri debtors are *1016 authorized to use this federal law exemption pursuant to the language in Mo.Rev. Stat. § 513.427. Although there is not a specific reference in Mo.Rev.Stat. § 513.427 to ERISA, this argument is based upon the conclusion that Mo.Rev.Stat. § 513.427 is dependent upon and connected with ERISA. Based on the precedent established in the Supreme Court and the reasoning applied by subsequent lower courts, the court concludes that Mo.Rev.Stat. § 513.427 cannot and does not create a Missouri ERISA exemption.
The provisions of Mo.Rev.Stat. § 513.430(10)(e)(c)[4], which provide for exemption of certain pension funds to the extent necessary for support, as discussed later in this opinion, specifically designate those pensions or other similar plans that are exempt from attachment and execution in the state of Missouri. Pursuant to the same reasoning that invalidates Mo.Rev. Stat. § 513.427, § 513.430(10)(e)(c) is also invalid to the extent that it refers, relates or applies to ERISA, thus making it unnecessary to reach the issue of application of the terms of this statute to debtors' financial situation. This Missouri statutory provision purports to provide exemption protection only to certain pensions based upon compliance with federal tax provisions; pensions or other plans that are not qualified under 26 U.S.C. §§ 401(a), 403(a), 403(b), 408 or 409 are not exempt from execution and attachment in Missouri.[5] These federal tax provisions describe the requirements necessary for a plan to enjoy preferred ERISA status. Federal law prohibits any attempt by the Missouri legislature to incorporate ERISA plans into its exemption scheme, regardless of good intentions. Mackey, supra. Therefore, the analysis of Mo.Rev. Stat. § 513.430(10)(e)(c) is no different than that applied to Mo.Rev.Stat. § 513.427; neither section can refer or relate to ERISA. Indeed, as stated in In re Brown, 95 B.R. 216, 218-219 (Bankr.N.D.Okla.1989):
The exemptions provided in Tit. 60 of the Oklahoma Statutes make a debtor's interest in a pension plan exempt from garnishment or the claims of creditors if such a plan cannot be alienated, encumbranced or levied upon. ERISA provides unequivocally that in order for the plan to be qualified the benefits provided under the plan may not be assigned or alienated. The Internal Revenue Code also provides that in order to qualify as an ERISA trust the plan must provide that the benefits are nonalienable or nonassignable. It is clear that Tit. 60, supra., refers to and is connected with ERISA qualified pension benefit plans and are, therefore, also void because of the ERISA preemption clause. In short, states cannot make the debtor's interest in these plans exempt; only Congress can do this. (Emphasis added.)
In addition to Brown, this reasoning is supported by a majority of the courts reviewing state exemption provisions that relate to or incorporate ERISA. In re Seigel, 105 B.R. 556 (D.Ariz.1989, J. Carroll); In re Flindall, 105 B.R. 32 (Bankr.Ariz.1989, J. Mooreman); In re McLeod, 102 B.R. 60 (Bankr.S.D.Miss.1989).
*1017 Therefore, debtors' pension plan interests cannot be exempted pursuant to Mo. Rev.Stat. § 513.430(10)(e)(c), regardless of the necessity of the funds for debtors' support, because the Missouri exemptions are preempted by federal ERISA laws.
Debtors also rely on In re Sanders, 69 B.R. 569 (Bankr.E.D.Mo.1987) and In re Mitchell, 73 B.R. 93 (Bankr.E.D.Mo. 1987) in support of the exemption of their interests in the pension plan and IRAs. This court's conclusion is not inconsistent with Sanders, which involved the trustee's objections to exemption of the debtor's earned but unpaid wages that had accrued at the time of bankruptcy. The trustee's primary argument was that Mo.Rev.Stat. § 513.427 limited debtor to only those exemptions expressly listed in Chapter 513, Mo. Rev.Stat. Sanders held that other statutory exemptions outside the confines of Chapter 513 were available to the debtor. Sanders, 69 B.R. at 571-573. However, Sanders did not hold that Mo.Rev.Stat. § 513.427 provides a blanket exemption that can be applied without reference to other statutory provisions. Accordingly, the court concludes that even if Sanders is a correct recitation of Missouri law, it is not applicable to the present matter because debtors have relied upon a statutory provision that is prohibited under United States Supreme Court precedent relating to ERISA preemption and have not provided any other applicable statutory provision in connection with Mo. Rev.Stat. § 513.427.[6]
Debtors also rely on the Mitchell, which Mitchell allowed the debtor to exempt an unliquidated personal injury cause of action under Mo.Rev.Stat. § 513.427. Mitchell concluded that Sanders allowed exemptions under Mo.Rev.Stat. § 513.427 that were not limited by other statutory provisions of Missouri law, and reasoned that unliquidated personal injury causes of action were free from attachment and assignment and thus could be exempted from the bankruptcy estate. Mitchell essentially held that a type of blanket exemption existed for Missouri debtors in bankruptcy who hold unliquidated personal injury causes of action.
Debtors rely on Mitchell for the proposition that because under federal law, i.e. ERISA, their interests in the pension plan and IRAs would be exempt from attachment and execution outside of bankruptcy, they should be afforded the same treatment regardless of the filing of debtors' petition. For the reasons stated below, the court declines to follow Mitchell.
First, as stated above, the court concludes that the Sanders decision does not hold that a blanket exemption is given to Missouri debtors under Mo.Rev.Stat. § 513.427. It is clear that Sanders required the debtor to show a specific state or federal provision along with the enabling provisions of Mo.Rev.Stat. § 513.427 before property could be exempted. As explained above, Mo.Rev.Stat. § 513.427 is an enabling provision that allows a Missouri resident in bankruptcy to exempt property that is not subject to attachment or execution. In and of itself, Mo.Rev.Stat. § 513.427 does not define the type of property that is free from attachment and execution, but rather, depends upon other provisions of state and federal law to provide that status. Thus, unlike Mitchell, this court concludes that the provisions of Mo. Rev.Stat. § 513.427 require an additional statutory provision granting property exempt status from attachment and execution before the court may allow the exemption to a Missouri debtor proceeding under Title 11.
Mitchell, which held exempt an unliquidated personal injury cause of action under 513.427, was decided by the Bankruptcy *1018 Court for the Eastern District of Missouri. It was affirmed by the Eighth Circuit in an unpublished per curiam decision. In re Mitchell, No. 87-2633 (8th Cir. June 24, 1988) [855 F.2d 859 (table)]. (8th Cir.1988.) The unpublished Eighth Circuit affirmance of the Mitchell decision is binding only on the parties and cannot be binding precedent pursuant to Eighth Circuit Rule of Appellate Procedure 8(i) and Eighth Circuit Rule of Appellate Procedure Appendix 2.3.[7]In re Leimer, 724 F.2d 744, 745-46 (8th Cir.1984). Since publication of Mitchell, many debtors have attempted to expand its holding beyond the original facts concerning an unliquidated personal injury cause of action to exempt many other types of property including, all types of unliquidated causes of action, such as lender liability actions,[8] and as here, debtors' substantial interests in IRAs and an ERISA pension plan. In light of the non-binding effect of the bankruptcy court opinion, affirmed without published opinion by the Eighth Circuit, and the recent development of the ERISA preemption cases cited above, it is appropriate to re-examine Mitchell at this time.
Mitchell reasoned that the debtor's interest was exempt because the unliquidated personal injury cause of action was not subject to attachment by creditors, nor could it be assigned by debtor. Mitchell supported this reasoning by determining that the exempt treatment of the cause of action would allow debtors and non-debtors to share the same benefits. The court questions these premises underlying this aspect of the Mitchell holding, and further concludes that rather than treating debtors and non-debtors alike, the true effect of Mitchell is to grant debtors a greater right than that which is available to non-debtors.
The reasons for granting exemption rights to debtors in bankruptcy have been summarized as follows:
1) To provide the debtor with property necessary for his physical survival; 2) To protect the dignity and the cultural and religious identity of the debtor; 3) To enable the debtor to rehabilitate himself financially and earn income in the future; 4) To protect the debtor's family from the adverse consequences of impoverishment; and 5) To shift the burden of providing the debtor and his family with minimal financial support from society to the debtor's creditors.
Resnick, Prudent Planning or Fraudulent Transfer, 31 Rutgers L.R. 615, 621 (1988). The policy of the exemption statues is to prevent the loss of the necessities of life. Forsberg v. Security State Bank, 15 F.2d 499 (8th Cir.1926).
The reasoning relied upon in Mitchell appears to be based on the timing of the bankruptcy filing rather than a determination that is consistent with these factors. It is true that personal injury claims cannot be attached by a creditor of the claimant until such time as the cause becomes a certain debt owing to the debtor.[9] However, this is because it is legally impossible to attach a contingent liability,[10] not because the cause of action is one of the debtor's basic life necessities. *1019 Furthermore, there are exceptions to this rule in that certain contingent interests can be attached and executed upon in Missouri. ReMax of Blue Springs v. Vajda, 708 S.W.2d 804, 805 (Mo.App.1986); Ragan v. Looney, 377 S.W.2d 273, 281 (Mo.1964). Although the assignability of property is not an element in determining whether property may be exempted under Mo.Rev. Stat. § 513.427, an individual may assign a personal injury claim which has been reduced to judgment and all other unliquidated non-personal injury causes of action. Gold Medal Products v. Love, 766 S.W.2d 759 (Mo.App.1989); Beall v. Farmers' Exchange Bank of Gallatin, 76 S.W.2d 1098 (Mo.1934). Under both of the premises relied upon by Mitchell (that personal injury causes of action cannot be attached and that they cannot be assigned), the debtor would not be able to protect the judgment from his creditors if it had been rendered prior to the filing of bankruptcy.
The real effect of Mitchell is to grant greater rights to debtors in bankruptcy than to non-debtors, rather than to treat them equally. The non-debtor holding an unliquidated personal injury cause of action will eventually reduce that claim to judgment of a settlement and that once that happens, the judgment is subject to the claims of creditors. On the other hand, the debtor in bankruptcy, if allowed the Mitchell blanket exemption, would reduce the personal injury claim to judgment after the filing of his bankruptcy petition. Because he would not be liable for any of his debts after his bankruptcy discharge, he would take the judgment free and clear of the claims of his creditors.[11] Thus, the debtor who is allowed a blanket exemption under Mitchell would receive more than the similarly situated non-debtor. This court does not believe the Missouri legislature intended to grant greater exemptions to debtors in bankruptcy than to individuals who do not file bankruptcy. The opt-out and enabling statute, Mo.Rev.Stat. § 513.427, was intended only to give bankruptcy debtors in Missouri the same state law exemptions which individuals outside bankruptcy would receive.
Accordingly, the court declines to follow Mitchell because the property at issue here, $231,125 in funds, is not the type of property that is consistent with providing debtors with life's necessities. Furthermore, under Mitchell the contingent claims held by a debtor are not protected from attachment and execution based upon a determination by the Missouri legislature that such property is necessity of life, but rather, based solely upon the time at which the bankruptcy petition is filed, and as such, the underlying basis for the Mitchell holding is questionable. Finally, the court concludes that the true effect of Mitchell is to grant bankruptcy debtors greater rights than non-debtors, and therefore, it effectively allows debtors a head start rather than the fresh start envisioned by the Bankruptcy Code.
*1020 C. EXEMPTION UNDER MO.REV. STAT. § 513.430(10)(e): "REASONABLY NECESSARY" FOR SUPPORT
The court has already determined that exemption is not possible under 513.430(10)(e) because ERISA plans may not be the subject of or affected by any state statutes due to preemption by federal law. However, in the event that a higher court should determine that debtors are not disqualified from seeking exemption of pension funds due to fraudulent concealment of information and that ERISA plans may be the subject of Missouri exemption statutes, the court makes the following alternative findings after analyzing debtors' financial situation in light of the terms of the exemption statute. Assuming that Mo. Rev.Stat. § 513.430(10)(e) allows an exemption that is not preempted by 29 U.S.C. § 1144, the court in its discretion must determine whether the funds at issue are "reasonably necessary" for support of the debtors.[12] Based on evidence presented at both the February 7 and August 9 hearings, the court concludes that debtors' interests in the plan and IRAs are not reasonably necessary for their support.
This court referred to the following guidelines for determining whether pension plans are reasonably necessary for the support of a debtor pursuant to Mo. Rev.Stat. § 513.430(10)(e) in In re Bartlett, 67 B.R. 455, 457 (Bankr.W.D.Mo.1986):
1) Debtor's present and anticipated living expenses;[13]
2) Debtor's present and anticipated income from all sources;
3) Age of Debtor and dependents;
4) Health of the debtor and all dependents;
5) Debtor's ability to work and earn a living;
6) Debtor's job skills, training, and education;
7) Debtor's other assets, including exempt assets;
8) Liquidity of other assets;
9) Debtor's ability to save for retirement;
10) Special needs of debtor and dependents; and
11) Debtor's financial obligations, e.g., alimony or support payments.
These guidelines are reviewed within the context that exemptions are not intended to *1021 insure against all future contingencies that could possibly lower the debtor's standard of living, and that if the funds are accessible outside of bankruptcy, the debtor must show a present need for the funds. Bartlett, 67 B.R. at 457.
At the time of hearings of this matter, debtors' monthly income exceeded their monthly expenses by more than $700. Dr. Gaines has been a licensed dentist for more than thirty years, evidencing an ability to work and a high level of job skills, training and education. Dr. Gaines is 58 years old; there was no evidence presented that there is an age limitation on his ability to remain a licensed dentist in the state of Missouri. Dr. Gaines is the sole shareholder of Ben P. Gaines, D.D.S., Inc., which pays him the monthly salary of $3,000. Although debtors did not place a value on the stock of Ben P. Gaines, D.D.S., Inc., it certainly has value if debtors choose to sell the dental practice. In addition, there do not appear to be any limitations on Dr. Gaines' employment in other fields of endeavor. Mrs. Gaines, who is 49 years old, has started a new business Gaines Landing. At this point in time, debtors are not able to project the long term impact that Gaines Landing will have on their income. However, the fact that debtors started a new business at this point in their lives shows that debtors have the ability to continue to earn substantial income and rebuild their retirement funds. Additionally, the fact that in the first few months of operation debtors lodged 104 guests indicates the potential for earning significant income from this bed and breakfast business in a resort community. In certain circumstances debtors' age would not allow a sufficient time in which to rebuild a retirement fund. This case is not one of those circumstances since debtors have substantial discretionary income and earning power. Debtors have not presented any evidence of health problems that would cause them to be unemployed.
Given these factors and the lack of evidence of debtors' present need for the benefits, debtors' interests in the pension plan and IRAs are not exempt under Mo.Rev. Stat. § 513.430(10)(e). At the first hearing in February, the court found that $50,000 was exempt as necessary to assist in funding debtors' retirement years. However, that conclusion is no longer appropriate, taking into account the evidence of debtors' ability to earn additional income by operating a busy bed and breakfast business out of their home in a popular resort community, which information was concealed at the first hearing.
WHEREFORE, IT IS HEREBY ORDERED that the trustee's objections to debtors' exemptions are sustained; it is further
ORDERED that debtors, their employees, agents, or assigns shall turn over the proceeds of debtors' interests in the pension plan and IRAs, plus all interest accrued since the date of the bankruptcy petition, within 10 days of the entry of this Order; it is further
ORDERED that the trustee shall pay from the non-exempt pension and IRA funds all tax obligations and penalties arising as a result of the turnover ordered herein.
NOTES
[1] There was no evidence that counsel advised debtors to omit information regarding the business from the schedules and statement of affairs or at any point during these proceedings. In fact, it is the court's understanding that debtors' counsel first became aware of the business when the newspaper story was published and thereafter, debtors contacted him to amend the statement of affairs to disclose the business.
[2] Mo.Rev.Stat. 513.427 states: "Every person against by or against whom an order for relief is sought under Title 11, United States Code, shall be permitted to exempt from property of the estate any property that is exempt from attachment and execution under the law of the state of Missouri or under federal law, other than Title 11, United States Code Section 522(d), and no such person is authorized to claim as exempt the property that is specified under Title 11, United States Code." (Emphasis added.)
[3] The Eighth Circuit has held that the term "exempt under federal law" as used in 11 U.S.C. § 522(b)(2)(B) provides protection only for programs created by federal law or receiving traditional protection from the federal government, but provides no bankruptcy exemption protection for private pensions created under ERISA. In In re Graham, 726 F.2d at 1274, the Eighth Circuit expressly held as a matter of law that ERISA could not be considered a federal law which provided exemption protection for debtors in bankruptcy. See also, In re Goff, 706 F.2d 574, 585 (5th Cir.1983).
[4] "The following property shall be exempt from attachment and execution to the extent of any person's interest therein:
* * * * * *
(10) such person's right to receive: . . .
(e) A payment under a stock bonus, pension profit sharing, annuity or similar plan contract on account of illness, disability, death, age or length of service, to the extent reasonably necessary for the support of such person and any dependent of such person unless:
* * * * * *
c. Such plan or contract does not qualify under section 401(a), 403(a), 403(b), 408 or 409 of the Internal Revenue Code of 1954 (26 U.S.C. 401(a), 403(a), 403(b), 408 or 409)."
[5] The express reference to these ERISA-related tax provisions in Mo.Rev.Stat. 513.430(10)(e) undercuts debtors' argument that ERISA plans were intended to be wholly exempt under a blanket exemption provided by Mo.Rev.Stat. 513.427, as discussed earlier. Application of both statutes to ERISA plans is not possible, and to apply a blanket exemption from the general preamble statute, 413.427, would render meaningless the more specific statute, 513.430(10)(e), which expressly references an exemption for funds in ERISA plans based on debtors' need for support.
[6] Given the "opt-out" exemption option of the Bankruptcy Code, the exercise of the "opt-out" and implementation of exemption schemes by the states, development of court decisions involving the Bankruptcy Code (e.g., Graham and Swanson) and the preemptive nature of ERISA (i.e., Mackey), it appears that only Congress, and not the states, may have the power to protect debtor's interests in ERISA plans. Accord, In re Brown, 95 B.R. at 218. Clearly, the states' attempts to exempt ERISA plans run afoul of Mackey.
[7] Rule 8(i) provides: "No party may cite an opinion that was not intended for publication by this or any federal or state court, except when the cases are related by virtue of an identity between the parties or the causes of action. See Plan for Publication of Opinions, § 3.
Appendix 2, Plan for Publication of Opinions, § 3 provides, in part: "Unpublished opinions, since they are unreported and not uniformly available to all parties, may not be cited or otherwise used in any proceedings before this `court or any district court in this circuit' except when the cases are related by virtue of an identity between the parties or the causes of action."
[8] See In re Jones, 102 B.R. 730 (Bankr.W.D.Mo. 1989), where debtors contended a cause of action against a bank for alleged fraud in making a loan should be exempt, and not subject to the claims of the bankruptcy trustee, thus giving the debtors a windfall and depriving creditors of the only significant asset in the estate if debtors' theory were followed.
[9] 6 Am.Jur.2d, Attachment and Execution, § 126, 132. However, the application of this rule depends upon the interpretation of the relevant state's attachment statute. See, Woody's Olympia Lumber v. Roney, 9 Wash.App. 626, 513 P.2d 849 (1973) (Medical malpractice claim was subject to attachment under Washington law).
[10] Raithel v. Hamilton-Schmidt, 48 S.W.2d 79, 81-82 (Mo.App.1932).
[11] The following hypothetical illustrates the disparate treatment. Two individuals, A and B, each have causes of action for personal injuries. Both A and B have no other significant assets. Dr. Jones provided $100,000 in medical services to each in treatment of their personal injuries. Dr. Jones has claims against both A and B for the services he provided. Both decline to pay the medical bills, so he sues them.
When A receives Dr. Jones' complaint and summons, he files a Chapter 7 bankruptcy, claiming his unliquidated personal injury cause of action as exempt. Since A has no other significant assets, his creditors receive zero distribution and he receives a discharge of his debts plus the right to pursue his exempt personal injury action. B does not file bankruptcy. Both individuals are successful in their actions and obtain one million dollar judgments on their personal injury claims.
Dr. Jones cannot collect from A, even though A now has a one million dollar judgment, because Dr. Jones' claim was discharged in Chapter 7 and A's personal injury claim was exempt. Dr. Jones can collect his $100,000 debt from B because B did not file bankruptcy, so after his personal injury claim is reduced to judgment, it is subject to the claims of creditors and is not exempt under Missouri exemption statutes. In summary, if Mitchell is followed, A, the debtor in bankruptcy, receives a windfall, taking his judgment free of the claims of all creditors, including Dr. Jones, who is prevented from collecting due to the bankruptcy discharge, whereas B, the non-debtor, takes his judgment subject to the claims of all its creditors, including Dr. Jones. Thus, the effect of Mitchell is to provide more to the debtor in bankruptcy compared to the similarly situated non-debtor.
[12] Mo.Rev.Stat. § 513.430(10)(e)(c) is ambiguous in its application to IRAs. The first portion of the statute contains a general description of the types of payments that are exempt from attachment and execution. Standing alone, it appears that IRAs would not be consistent with and would not be categorized with stock bonus, pension, profit-sharing, and annuity plans. Indeed, these plans involve complex transactions with numerous contractual and fiduciary relationships among various parties, and with restrictions on access to funds, whereas an IRA is a simple savings device which grants certain tax benefits to an individual for savings deposits made by the individual in an IRA account.
IRA funds are not subject to the restrictions that ERISA and tax laws impose on other pension plans and there is no requirement that the funds be set aside until retirement. An IRA owner can withdraw the funds at any time and spend them for any reason so long as he is willing to pay the current taxes plus a 10% penalty on the withdrawn funds. For example, in a bankruptcy setting, even if the funds are exempt under state statute, after the bankruptcy proceeding the debtor is not compelled to retain the funds for retirement, but can withdraw the funds and use them without restriction as to amount or time for any purpose even for a non-retirement purpose such as a trip to Las Vegas. The funds are, for practical purposes, not much different than a regular savings account which is not exempt.
However, the second part of Mo.Rev.Stat. § 513.430(10)(e)(c) creates by implication an interpretation that IRAs may be exempted. The second portion of this section specifically describes plans or contracts that shall not be exempt from execution and attachment. Excluded from exemption protection are plans and contracts that do not comply with 26 U.S.C. § 408, which contains the statutory requirements for IRAs. Therefore, it must be assumed that the Missouri legislature intended the reach of the first portion of Mo.Rev.Stat. § 513.430(10)(e)(c) to include IRAs.
[13] As to the first guideline, it is noted that present need is relevant only if the funds are presently accessible by debtor outside bankruptcy, such as funds in an IRA or funds which a debtor could receive by terminating involvement in a plan. See, e.g. In re Swanson, 873 F.2d 1121 (8th Cir.1989), in which debtor could obtain the funds in a state teachers' retirement plan by terminating employment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1515607/ | 535 S.W.2d 95 (1975)
KENTUCKY BAR ASSOCIATION, Complainant,
v.
John W. COLLIS, Respondent.
Court of Appeals of Kentucky.
May 9, 1975.
Rehearing Denied June 27, 1975.
Certiorari Denied January 12, 1976.
Gentry E. McCauley, Jr., Versailles, Leslie G. Whitmer, John T. Damron, Kentucky Bar Ass'n, Frankfort, David T. Enlow, Lexington, for complainant.
R. J. Turley, Turley, Savage & Moore, Lexington, for respondent.
Certiorari Denied January 12, 1976. See 96 S. Ct. 775.
PER CURIAM.
This is a disciplinary proceeding in which the Board of Governors of the Kentucky Bar Association found respondent guilty of unprofessional conduct and recommended that he be permanently disbarred from the practice of law.
A six-count charge was filed against respondent by the Kentucky Bar Association. A trial committee appointed in accordance with the rules heard the testimony of witnesses and after finding the respondent guilty on all counts recommended a reprimand. The Board of Governors at a subsequent meeting considered the record, found the respondent guilty on all counts, and recommended that the respondent be permanently disbarred from the practice of law. In response to the rule issued in accordance with the recommendation of the Board of Governors, respondent moved for an extension of time to file a supplemental brief after the taking of additional evidence and issued a subpoena duces tecum served on the secretary of the Kentucky Bar Association to produce all records relating to the disciplinary proceeding against the respondent, including the minutes of the meeting of the Board of Governors together with a notice to the secretary *96 of the Kentucky Bar Association to take his deposition. A motion to quash the subpoena and notice was granted by this court.
Respondent alleges that some sinister influence was at work because of the wide disparity between the recommendation of the trial committee and that of the Board of Governors. We consider the taking of further evidence and examination of the records of the meeting of the Board of Governors as to the reasons, if any, for the disparity between the recommendation to be irrelevant. We again point out that "the report and recommendations of the trial committee are only advisory to the Board of Governors, as are the Board's recommendations to this court. * * * This means, of course, that in the end this court must be judge of the factual as well as the legal issues and of the final action to be taken." Kentucky State Bar Association v. Stivers, Ky., 475 S.W.2d 900, 903 (1972).
We review the record and arrive at our own conclusion as to the proper disposition of the case. The record here is voluminous and covers in minute detail every aspect of the counts contained in the charge. Without a tedious detailing of the facts, the record clearly discloses that in three cases the respondent wrongfully withheld his clients' funds for varying periods of time, and in each case one or more times issued checks which were returned for "insufficient funds." The respondent's conduct as revealed in this record is so bizarre that we cannot imagine any reasonable explanation, and the attempted explanation for the conduct strains the bounds of credulity. In short, we find no satisfactory explanation which could mitigate the seriousness of respondent's conduct. We are of the opinion that the conduct of respondent portrays such a pattern of dishonesty and lack of ethical standards in dealing with his clients, that he is no longer fit to be a member of the bar. See Kentucky Bar Association v. Tucker, Ky., 535 S.W.2d 97 (rendered May 9, 1975).
The only inference which can be drawn from the testimony in this record is that the respondent converted his clients' funds to his own use. The checks returned for "insufficient funds" from different bank accounts in the circumstances presented here, without any credible explanation, can only mean that the clients' funds were no longer intact and were converted by the respondent to his own use. This conduct warrants the permanent disbarment of an attorney from the practice of law. In re Waxman, 290 Ky. 277, 160 S.W.2d 587 (1942).
When an attorney converts his client's funds to his own use, he commits an offense greater and broader than a mere injury to his client, he brings the entire bar into disrepute in the eyes of the public. Such conduct evinces the unfitness of the attorney to be a member of the legal profession and an officer of the court.
Respondent's argument that his clients did not suffer a loss and that all funds were finally paid cannot be considered mitigating in the circumstances presented here.
The public is entitled to rely on an attorney's admission to the practice of law as a certification of the attorney's honesty, high ethical standards and good moral character. If the public's confidence in the legal profession is to be maintained, it is the duty of the Kentucky Bar Association and this court to remove those attorneys who by their dishonest actions in dealing with clients' funds and otherwise demonstrate a lack of these qualities. Respondent's conduct in our opinion is so reprehensible as to make him unworthy of public confidence and unfit to be an officer of the court.
Accordingly, it is ordered that respondent be and he is hereby permanently disbarred from the practice of law in this *97 Commonwealth, and he is required to pay the costs of this proceeding.
All concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2859425/ | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-93-00519-CR
James Edward Brown, Appellant
v.
The State of Texas, Appellee
FROM THE DISTRICT COURT OF BELL COUNTY, 27TH JUDICIAL DISTRICT
NO. 42,897, HONORABLE JOE CARROLL, JUDGE PRESIDING
James Edward Brown appeals from his conviction for burglary of a habitation. See
Tex. Penal Code Ann. § 30.02 (West 1994). (1) Appellant pleaded true to enhancement allegations
and the jury assessed punishment at fifty-five years confinement in the Texas Department of
Criminal Justice--Institutional Division. See Act of May 18, 1983, 68th Leg., R.S., ch. 339, §
1, 1983 Tex. Gen. Laws 1750 (Tex. Penal Code Ann. § 12.42, since amended). We will affirm
the trial-court judgment.
THE CONTROVERSY
On April 7, 1993, appellant broke into the private residence of Ella Combs,
manager of the Motel Westerner in Temple, Texas. Combs's residence was connected to the
motel office by a glass door and window. On hearing the sound of her window being shattered,
Combs locked herself in her daughter's bedroom and telephoned the Temple police department.
The police arrived shortly thereafter. They found appellant in an intoxicated state with a five
dollar bill and a roll of stamps lying on the floor at his feet. Some articles in the room had also
been rearranged.
DISCUSSION AND HOLDINGS
During closing arguments in the punishment phase, the prosecutor wrote on a chart
the years of appellant's prior convictions and the number of times he had been incarcerated. In
addition, the prosecutor attempted to paraphrase appellant's testimony by writing on the chart:
"I ONLY GET INTO TROUBLE WHEN I DRINK. I ONLY STAY SOBER IN PRISON."
Defense counsel objected to the prosecutor's summation as a misstatement of appellant's
testimony. The trial court sustained the objection and promptly instructed the jury to recall the
testimony as they remembered it and not as the prosecutor or defense counsel paraphrased the
testimony. The jury later requested and improperly received the prosecutor's chart during their
deliberations. The bailiff testified that she delivered the chart to the jury, but that it was only in
the jury room for approximately two minutes before the judge realized what had happened and
ordered the chart removed. In his first and second points of error, appellant complains the trial
court erred in overruling his subsequent motion for mistrial and motion for new trial.
Appellant argues that "other evidence" was introduced when the jury was permitted
to take the chart into the jury room for deliberations, and rule 30(b)(7) of the Texas Rules of
Appellate Procedure thus required a new trial. Rule 30(b)(7) provides that the defendant shall
have a new trial "[w]here after retiring to deliberate the jury has received other evidence." Tex.
R. App. P. 30(b)(7). Under rule 30(b)(7), appellant must show that (1) "`other evidence' was
actually received by the jury, and (2) that such evidence was detrimental to the appellant." Garza
v. State, 630 S.W.2d 272, 274 (Tex. Crim. App. 1981). The character of the evidence, in light
of the issues before the jury, is the controlling factor in our determination, rather than the effect
of such evidence upon the jurors. Id. Whether the jury has received "other evidence" is a
question for the trial court and will not be overturned absent an abuse of discretion. Freeman v.
State, 838 S.W.2d 772, 777 (Tex. App.--Corpus Christi 1992, pet. ref'd).
The State argues the chart did not constitute "other evidence" because the
information on the chart had already been admitted into evidence, the chart itself would have been
admitted into evidence had it been offered, the chart had been in front of the jury during argument
for a considerable amount of time, and the jury did not have time to examine the chart during the
two minutes it was in the jury room.
Appellant admitted to each and every conviction listed on the prosecutor's chart.
During cross-examination, the following exchange occurred:
Q: [Prosecutor] Let me take you back to 1976.
. . . .
Q: [Prosecutor] Are you one and the same person who was
previously convicted under the name Jesse E. Baird of
burglary and sentenced to one to three years confinement in
the Illinois Department of Corrections of Joliet?
A: [Appellant] Not Jesse, no.
Q: Excuse me.
A: Not Jesse, no.
Q: James E. Baird.
A: Yes, James E. Baird. Yes, I was.
Q: Moving forward a couple of years, July 18th, 1978, are you
one and the same person who under the name of James E.
Baird was sentenced to one to three years for burglary and did
some time at the Menard Correctional Center?
A: Yeah. That was the same offense as happened in 1976. It
was the same offense.
Q: Was it a parole violation?
A: It was a parole violation, yes, due to my drinking.
Q: Moving forward to March 9th of 1983, are you one and the
same person who under the name of James E. Brown was
convicted of the offense of residential burglary and sentenced
to a term of four years confinement?
A: Yes, sir. I broke into my girl friend's house.
Q: You have seen the pen packs that were previously admitted
out of Illinois, and we are talking about those offenses at this
time, are we not?
A: Yes, sir. I was. That was a misdemeanor theft that was
enhanced due to my prior conviction. I was intoxicated.
Q: In May of '87 was there another--
A: No. There was another parole violation.
Q: Because?
A: Of my drinking, sir.
Q: In 1987, August 20th, 1987, under the name of James Edward
Brown in Lawrence, Kansas, were you convicted of burglary
and sentenced to a term of one to seven years confinement?
A: Yes, sir. I broke into a bar. I was drunk.
Q: January 10th, 1989, Gregg County, Texas, are you one and
the same James Edward Brown who was convicted of the
offense of theft over 20 and sentenced to 30 days in jail?
A: Yes, I am. It was cigarettes from Kroger's store.
Q: Then in April of '89 and July of 9 [sic] the prior felonies pled
in the indictment that you have plead [sic] true to you were
sent to prison again and again, correct?
A: Yes, sir.
. . . .
Q: 1991, that is McLennan County, five [years] for robbery?
A: Yes, sir.
Q: Seventh, or excuse me. Seventh offense, tenth trip [to
prison]?
A: Yes, sir.
Q: Are you telling these ladies and gentlemen of the jury you
have never had a chance to straighten out your drinking?
A: I have had a chance to get sober. I have never been taught
how to live sober outside of prison. Every time I have come
out of prison or in an incarcerated period the first option I
was always went and got something to drink; and within a
short period of time it has always put me back in prison.
(Emphasis added.)
Appellant cites Chew v. State, 804 S.W.2d 633, 639 (Tex. App.--San Antonio 1991,
pet. ref'd), and Willmann v. State, 720 S.W.2d 543, 545 (Tex. App.--San Antonio 1986, pet.
ref'd), for the proposition that evidence not properly admitted at trial that is taken into the jury
room constitutes "other evidence," and that if the other evidence is detrimental, the defendant need
not show he was harmed by the evidence because he is entitled to a new trial as a matter of law.
In Chew, the defendant was charged with kidnapping aggravated by an intent to
commit sexual assault, a charge he defended on the ground that the complainant had consented
to the event and to sexual intercourse. Due to an oversight, the jurors were permitted to take into
the jury room an item not admitted in evidence--the complainant's affidavit that she did not wish,
because of media harassment, to prosecute the case. The appellate court concluded the affidavit
constituted "other evidence" because the central issue was consent; the defendant contended
throughout the trial that the complainant wished to conceal her nymphomania, which was the true
reason she did not wish to prosecute; and the affidavit would have justified the admission, for
impeachment purposes, of previously excluded evidence of the alleged nymphomania. Chew, 804
S.W.2d at 639.
Unlike the jury in Chew, the jury in the present cause had already seen the State's
demonstrative exhibit and heard appellant's admission concerning the very information written
on the chart. Thus, no new information regarding appellant's criminal history was permitted to
enter the jury room.
In Willmann, defense counsel loaded a gun in front of the jury and argued that the
trace of gunshot residue found on the palms of the deceased's hands was not the result of the
deceased having his hands out in self-defense, as testified by the medical examiner, but was the
result of the deceased loading a clip in order to shoot the defendant. Willmann, 720 S.W.2d at
544-47. On appeal, the defendant complained that a juror who claimed to know about firearms,
demonstrated to the other jurors in the jury room how to load and unload a pistol clip, thus
introducing "other evidence." The Willmann court disagreed, stating that by loading the gun, the
jurors were simply doing what defense counsel had already done in their presence. Id. at 547.
Both cases state the general rule that the information improperly considered by the
jury must be detrimental in order to constitute "other evidence." Furthermore, in each case cited
by appellant, jurors involved in the alleged misconduct either testified in person or by affidavit
concerning what was said during jury deliberations. No jurors testified in the present cause. (2) We
conclude that the chart listing appellant's criminal history and summarizing appellant's testimony
is not "other evidence," and that no new evidence was given to the jury. See Garza, 630 S.W.2d
at 274; Freeman, 838 S.W.2d at 777-78. The chart had been before the jury during closing
argument and the jury had been admonished to recall appellant's testimony and not counsel's
summary of appellant's testimony. We overrule appellant's first and second points of error.
In his fourth point of error, appellant contends the trial court erred when it denied
appellant's motion for mistrial based on the prosecutor's improper argument at the punishment
phase. (3) Specifically, appellant complains about the following:
[Prosecutor:] . . . What do you do with a man who has committed 7 offenses
within the last 16 years and been to the penitentiary? What do you do with him?
The answer is a harsh one, but it is a simple one because [appellant] tells
you in his own words. [Appellant] told you yesterday that he only gets into trouble
when he drinks. This case is a good demonstration. So are the other ten trips he
made to the penitentiary. Each time he says he got into trouble because he drank.
He says he can only stay sober in prison.
[Defense Counsel:] Your Honor, I object to that. That is a misstatement of the
testimony.
[The Court:] All right. Ladies and gentlemen, let me give you a little lecture on
that. You have to remember the testimony. It is not what [the Prosecutor] says
it is. It is not what [the Defense Counsel] says it is. It is not what I say it is. The
testimony is what you remember. And the lawyers are going to argue what they
think the testimony is, but you just remember it the way you remember it, and that
is your job. And they have got a lot of other things to do in court besides
remember the testimony so I will sustain your objection and instruct the jury to
remember the testimony as they remember it. The attorneys are entitled to
comment on what they think the testimony shows.
[Defense Counsel:] Your Honor, we respectfully move for a mistrial.
[The Court:] All right. Overruled.
. . . .
[Prosecutor:] At any rate, paraphrasing, at least, a reasonable deduction from the
evidence, and what he said on the stand is, "I only get into trouble when I drink."
And he did say that I stay sober when I am in prison. I stay clean.
[Defense Counsel:] Your Honor, I, again object to the misstatement of testimony.
[The Court:] All right. Again, I will instruct the jury just remember the testimony
that--[the Prosecutor], I don't believe, is intentionally misstating the testimony. He
is trying to paraphrase it, and under those circumstances he can do that as long as
the jury understands that is what he trying [sic] to do.
Appellant must obtain an adverse ruling as to each portion of the prosecutor's
alleged improper argument in order to preserve error for our review. Ethington v. State, 819
S.W.2d 854, 858-60 (Tex. Crim. App. 1991); Dickerson v. State, 866 S.W.2d 696, 698-99 (Tex.
App.--Houston [1st Dist.] 1993, no pet.). Although appellant objected and asked for a mistrial in
the first instance, the prosecutor continued with the same line of argument; appellant has
preserved for review only the first portion of the prosecutor's complained of jury argument.
Dickerson, 866 S.W.2d at 698.
We conclude, however, that any error was cured by the trial court's admonishment.
"Ordinarily, any injury from improper jury argument is obviated when the court instructs the jury
to disregard the argument, unless the remark is so inflammatory that its prejudicial effect cannot
reasonably be removed by such an admonishment." Brown v. State, 692 S.W.2d 497, 502 (Tex.
Crim. App. 1985) (quoting Blansett v. State, 556 S.W.2d 322, 328 (Tex. Crim. App. 1977)).
We overrule appellant's fourth point of error.
In his third point of error, appellant complains the trial court erred in denying
appellant's motion to testify free from impeachment with prior convictions. The trial court
overruled appellant's motion before the trial began and again after it was re-urged during trial.
Appellant argued at trial and on appeal that rule 609 of the Texas Rules of Criminal Evidence and
Theus v. State, 845 S.W.2d 874 (Tex. Crim. App. 1992), justified his motion. See Tex. R. Crim.
P. 609(a) (evidence that witness has been previously convicted of felony may be admitted to attack
the credibility of the witness if "the court determines that the probative value of admitting the
evidence outweighs its prejudicial effect to a party"). In Theus, the Court of Criminal Appeals
explained that in balancing the competing considerations of rule 609 the following factors should
be considered: (1) the impeachment value of the prior crime; (2) the temporal proximity of the
past crime relative to the charged offense and the witness's subsequent history; (3) the similarity
between the past crime and the offense being prosecuted; (4) the importance of the defendant's
testimony; and (5) the importance of the credibility issue. Theus, 845 S.W.2d at 880. Theus is
distinguishable from the present cause in that Theus was convicted for delivery and possession of
cocaine and was attempting to keep out evidence of a previous arson conviction. (4) The court,
holding that even though four of the five factors favored admissibility, stated as follows:
[T]he unique facts of this case compel the conclusion that the lack of impeachment
value overrides the other four factors. . . . because: (1) the arson conviction had
so little probative value on the question of appellant's credibility and had much
prejudicial effect against him, and (2) the trial judge failed to dispel the prejudicial
effect when presented with the opportunity.
Id. at 881-82.
The trial court, after weighing the Theus factors, determined that it could not grant
a blanket motion forbidding the State from impeaching appellant under any circumstance; instead
the trial court decided it would hear the testimony and then rule on the evidence of prior
convictions as the testimony emerged. We conclude the trial court did not abuse its discretion and
overrule appellant's third point of error.
In his fifth point of error, appellant complains that the prosecutor's improper
statement during voir dire, concerning circumstantial evidence of appellant's intent to steal,
resulted in appellant receiving an unfair trial. Appellant has failed to preserve error by not calling
the matter to the trial court's attention. See Tex. R. App. P. 52(a); Felder v. State, 848 S.W.2d
85, 96 (Tex. Crim. App. 1992), cert. denied, 114 S. Ct. 95 (1993). We overrule appellant's fifth
point of error.
In his sixth point of error, appellant complains the evidence is legally insufficient
to support his conviction. Appellant admits he entered a habitation without the effective consent
of the owner; however, he complains the evidence supported the reasonable hypothesis that
appellant entered the motel to sleep and lacked the requisite intent to commit theft.
The evidence shows that Combs was awakened at two in the morning on April 7,
1993, by a noise outside her window. Moments later she heard the sound of glass breaking. She
grabbed a cordless telephone and ran to her daughter's room to call the police. The police arrived
three to five minutes later. Appellant was found inside Combs's cluttered laundry room in an
intoxicated state. On the floor near where appellant was apprehended were a five-dollar bill and
a roll of stamps. Initially Combs could not tell if anything was missing; however, she later told
the police the stamps were hers and had been taken from her desk in the motel office. A few
items including an old toilet seat and a pillow had been moved around the room. Combs testified
that the laundry room where appellant was apprehended and a bathroom are the side of her
bedroom where the window was broken. On the other side of her bedroom is a living room,
kitchen, and hallway to her daughter's bedroom. From the living room, one can go through a
door, up some stairs, and into the motel office. Someone standing in the office can see down into
the living room of the private residence. The window to the laundry room appeared from the
outside to be the window of a motel room.
Sam Adams had driven appellant to several bars that night. Adams had last
dropped appellant off at the Western Corral, a bar located a couple of blocks from the motel, and
had arranged to pick up appellant at two in the morning when the bar closed. Terri Wilson,
appellant's girlfriend and roommate, testified that although she and appellant had argued earlier
that evening, she expected him to come home that night.
In assessing the legal sufficiency of the evidence, "the relevant question is whether
after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact
could have found the essential elements of the crime beyond a reasonable doubt." Jackson v.
Virginia, 443 U.S. 307, 318 (1979); Geesa v. State, 820 S.W.2d 154, 162 (Tex. Crim. App.
1991) (rejecting the reasonable hypothesis analytical construct). It is well established that the
question of the intent with which a person enters a building is a fact question which the trier of
fact can resolve from the surrounding circumstances. Ortega v. State, 626 S.W.2d 746, 749 (Tex.
Crim. App. 1991); Bailey v. State, 722 S.W.2d 202, 204 (Tex. App.--San Antonio 1986, no pet.).
The evidence that police found appellant with a five-dollar bill and a roll of stamps belonging to
Combs at his feet permitted the jury reasonably to infer that appellant intended to commit theft.
Appellant also contends that the evidence is factually insufficient, citing Stone v.
State, 823 S.W.2d 375, 381 (Tex. App.--Austin 1992, pet. ref'd untimely filed). In a factual-sufficiency review, we must presume the evidence supporting the verdict to be legally sufficient,
but may not view the evidence in a light favorable to the prosecution. Id. We may "consider the
testimony of defense witnesses and the existence of alternative hypotheses." Id. The verdict will
not be set aside unless "it is so contrary to the overwhelming weight of the evidence as to be
clearly wrong and unjust." Id. (citing Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) and In re
King's Estate, 244 S.W.2d 660, 661 (Tex. 1951)). Although appellant testified that he only broke
into the motel because he was looking for a place to sleep, evidence that Adams was to pick him
up from the bar at closing time and drive him home where Wilson expected him to sleep, along
with evidence of the money and stamps at his feet and his previous convictions for burglary,
reasonably support the jury's verdict. We cannot say that appellant's conviction was contrary to
the overwhelming weight of the evidence. We therefore overrule appellant's sixth point of error.
We affirm the trial-court judgment.
John Powers, Justice
Before Justices Powers, Aboussie and B. A. Smith
Affirmed
Filed: July 12, 1995
Do Not Publish
1. The offense took place before September 1, 1994, and is governed by the law in effect at
the time the offense was committed. Penal Code, 73d Leg., R.S., ch. 900, § 1.18, 1993 Tex.
Gen. Laws 3586, 3705. Because the Code amendments effective September 1, 1994, have no
substantive effect on this offense, the current Code is cited for convenience.
2. At the hearing on the motion for new trial, appellant attached the affidavit of Mona
Deorsam, defense counsel's legal secretary, stating that she had spoken with Juror Genevieve
Jarma Pitcock. See Dugard v. State, 688 S.W.2d 524, 528 (Tex. Crim. App. 1985),
overruled on other grounds, Williams v. State, 780 S.W.2d 802, 803 (Tex. Crim. App. 1989)
(affidavit of juror or person with knowledge of facts must be attached to motion for new trial
alleging jury misconduct, or affidavit must explain why such affidavit could not be obtained).
The affidavit stated:
[T]he chart was used to determine the defendant's criminal history and the length
of time he was incarcerated on each charge. She also stated that, though
previously undecided, the chart helped her decide what sentence to impose and
that the chart helped her with information upon which to base the sentence.
I asked Ms. Pitcock to sign an affidavit relating the above facts. However, she
informed me that she felt that she had done her civic duty and stated she did not
want to sign an affidavit.
Appellant's affidavit is insufficient to show that the jury received "other evidence" because the
defendant's criminal history and length of incarceration were already admitted into evidence.
3. The prosecutor's jury argument complained of is the same argument defense counsel
objected to with regard to the writing on the chart discussed above.
4. In Theus, the defendant
after a domestic dispute with his girlfriend, had taken a beer can
filled with gasoline, poured the gasoline through her postal slot,
and then set fire to the postal slot. . . . [Theus] was not ordered
to pay any restitution in that case. In ruling that the arson
conviction was admissible, the trial judge said "I don't think
there will be any need to go into all the details of that case other
than there has been a conviction."
Theus, 845 S.W.2d at 882. The Court of Criminal Appeals agreed with Theus "that the
potential for prejudice was great because `arson' potentially conjures up images of burning
buildings and insurance fraud." Id. at n.9. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1589089/ | 61 S.W.3d 714 (2001)
Abolhassan AHADI, Appellant,
v.
Soudabeh AHADI, Appellee.
No. 13-01-222-CV.
Court of Appeals of Texas, Corpus Christi.
November 8, 2001.
Rehearing Overruled December 13, 2001.
*717 Jeffrey L. Jackson, Harlingen, John Haywood, Law Offices of John Haywood, P.C., Port Isabel, for Appellant.
Chris A. Brisack, Neil E. Norquest, Norquest & Brisack, LLP, McAllen, Mitchell C. Chaney, Rodriguez, Colvin & Chaney, Brownsville, for Appellee.
Before Justices DORSEY, YAÑEZ, and RODRIGUEZ.
OPINION
Opinion by Justice DORSEY.
Appellant, Abolhassan Ahadi, sued Alma Investments, Inc. d/b/a Texas Alma Investments, Inc., Soudabeh Ahadi, and Khalil Pakideh in the 404th District Court of Cameron County, Texas for breach of a contract to transfer fifteen percent of Alma Investments's stock to appellant. Only Soudabeh, a Michigan resident, contested personal jurisdiction through special appearance. After a hearing the trial court sustained the special appearance, and appellant brought this accelerated interlocutory appeal pursuant to Texas Civil Practices and Remedies Code section 51.014(a)(7) (Vernon Supp. 2001). The question raised on appeal is whether the district court has jurisdiction over Soudabeh Ahadi. We reverse.
I. APPELLANT'S EVIDENCE
Appellant, to whom we refer by his nickname, Eddie, testified at the special-appearance hearing and filed his affidavit in support of jurisdiction. Eddie has lived in Texas since 1983. His sister, Soudabeh, is a physician and resides in Michigan where she has a lucrative practice. Soudabeh and her husband, Khalil Pakideh, invested in distressed real estate, and in December, 1991, Khalil successfully bid $530,000 for the Bahia Mar Resort Hotel located on South Padre Island. He offered Eddie a fifteen-percent ownership interest in the hotel and $50,000 per year to manage the property. Eddie accepted the offer, but when Khalil refused to timely put the agreement in writing, Eddie refused to move to South Padre to manage the property. Afterwards Soudabeh called Eddie at his home in Dallas to recruit him to manage the Bahia Mar property and to convince him to accept the oral contract. She understood that he was to have a fifteen-percent ownership interest in the project and that the purchase price for his ownership interest was fifteen percent of the price paid for the property. Eddie stated:
[Soudabeh] gave me her personal word, as my sister, that, if I move[d] to South Padre and perform[ed] as agreed, our contract including my compensation and ownership interest would be reduced to writing within three or four months. Based solely upon her promise and the trust I had in her, I accepted her renewed offer....
In January, 1992, Alma Investments was incorporated in Michigan and owned the Bahia Mar as its sole asset. On April 7, 1992, Khalil was at the Bahia Mar and signed a statement indicating that he had received $15,000 from Eddie as a down payment for fifteen percent of Alma Investments's stock. Eddie moved to South Padre Island and for the next eight years managed the Bahia Mar until Khalil fired him. Eddie has never received any stock in Alma Investments.
*718 II. SOUDABEH'S EVIDENCE
In support of her special appearance Soudabeh filed the affidavits of herself, Khalil, and Marianne Mitchell, who had worked at the Bahia Mar for approximately sixteen years. The gist of these affidavits is that Soudabeh (1) did not own any assets or property in Texas, (2) was never a Texas resident, (3) had never visited Texas for business purposes, (4) had no involvement in the ownership or management of Alma Investments at any time, (5) was never a shareholder, officer, director, employee, or agent of Alma Investments, (6) had no involvement in the resort's operations, and (7) had not participated in any decisions concerning the hiring or firing of employees or any financial or operational issues.
III. STANDARD OF REVIEW
The existence of personal jurisdiction is a question of law, but proper exercise of that jurisdiction must sometimes be preceded by the resolution of underlying factual disputes. Happy Industrial Corp. v. American Specialties, Inc., 983 S.W.2d 844, 847 (Tex.App.-Corpus Christi 1998, pet. dism'd w.o.j.). We determine the appropriateness of the trial court's resolution of those disputes by an ordinary sufficiency of the evidence review based on the entire record. Conner v. ContiCarriers & Terminals, Inc., 944 S.W.2d 405, 411 (Tex.App.-Houston [14th Dist.] 1997, no writ). If the trial court's order is based on undisputed or otherwise established facts we conduct a de novo review of the order. Id. A defendant who challenges a court's exercise of personal jurisdiction through a special appearance carries the burden of negating all bases of personal jurisdiction. Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex.1985).
IV. PERSONAL JURISDICTION
By six issues Eddie argues that the evidence shows that the district court had both general and specific jurisdiction over Soudabeh. Texas courts may assert jurisdiction over a nonresident defendant only (1) when the Texas long-arm statute authorizes the exercise of jurisdiction and (2) when the exercise is consistent with the due process guarantees embodied in both the United States and Texas Constitutions. CSR Ltd. v. Link, 925 S.W.2d 591, 594 (Tex.1996) (orig. proceeding); Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991). The long-arm statute authorizes jurisdiction over a nonresident defendant "doing business" in Texas. TEX. CIV. PRAC. & REM. CODE ANN. § 17.042 (Vernon 1997 & Supp. 2001); Guardian Royal, 815 S.W.2d at 226. Relevant to this case the Texas Civil Practices and Remedies Code characterizes nonresident activity as "doing business" in Texas when the nonresident: (1) contracts by mail or otherwise with a Texas resident and either party is to perform the contract in whole or in part in this state; and (2) recruits Texas residents, directly or through an intermediary located in this state, for employment inside or outside this state. TEX. CIV. PRAC. & REM. CODE ANN. § 17.042 (Vernon 1997 & Supp. 2001).
Here the record reflects that Soudabeh called Eddie in Texas in order to recruit him to manage the Bahia Mar. She told him that if he moved to South Padre Island and performed as agreed, the contract including his compensation and ownership interest would be reduced to writing within three or four months. Based solely upon her promise and the trust Eddie had in her, he accepted her offer. Thus Soudabeh was "doing business" in Texas because she (1) contracted with Eddie, a Texas resident, and he was to perform the contract in this state, and *719 (2) she recruited him for employment inside Texas. We hold that Eddie has satisfied the requirement for jurisdiction under the Texas long-arm statute. See TEX. CIV. PRAC. & REM. CODE ANN. § 17.042 (Vernon 1997 & Supp. 2001).
Our next inquiry is whether an extension of jurisdiction would overstep the bounds of due process. The language of the long-arm statute allows an expansive reach, limited only by the federal constitutional requirements of due process. Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990). Therefore when the exercise of personal jurisdiction comports with federal due process limitations, requirements of the Texas long-arm statute are satisfied. Guardian Royal, 815 S.W.2d at 226.
The federal due process clause protects a person's liberty interest in not being subject to binding judgments of a forum with which that person has established no meaningful contacts, ties, or relations. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985). Under the federal constitutional test of due process a state may assert personal jurisdiction over a nonresident defendant only if (1) the defendant has purposefully established minimum contacts with the forum state, and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. Id. at 476, 105 S. Ct. 2174; CSR, 925 S.W.2d at 594.
A nonresident establishes minimum contacts in Texas by purposefully availing itself of the privileges and benefits inherent in conducting business within the state. CSR, 925 S.W.2d at 594; Schlobohm, 784 S.W.2d at 357-58. This requirement ensures that a nonresident defendant will be haled into court only as a result of its intentional activities, so that it is reasonable for the nonresident defendant to expect the call of a Texas court. Guardian Royal, 815 S.W.2d at 226; Schlobohm, 784 S.W.2d at 357-58.
Personal jurisdiction, therefore, does not emerge from the nonresident's random, fortuitous, or attenuated contacts with the forum, or from another's acts. Guardian Royal, 815 S.W.2d at 226. Rather the nonresident must take some action or engage in some conduct creating its own "substantial connection" with the forum state. Id.
A. Specific Jurisdiction
A defendant's minimum contacts with a forum state can produce either general or specific jurisdiction. CSR, 925 S.W.2d at 595. Specific jurisdiction is established if the defendant's alleged liability arises from or is related to an activity conducted within the forum. CSR, 925 S.W.2d at 595. See Guardian Royal, 815 S.W.2d at 227. The defendant must have purposefully directed his activities toward the forum state. Id. at 228. The number of the defendant's contacts with the forum is not controlling; rather, the importance lies with the quality and nature of these contacts. Texas Commerce Bank v. Interpol `80 Ltd. Partnership, 703 S.W.2d 765, 772 (Tex.App.-Corpus Christi 1985, no writ). The minimum-contacts analysis focuses on the relationship among the defendant, the forum, and the litigation. Guardian Royal, 815 S.W.2d at 226.
Even when a nonresident has a single contact with Texas our courts can exercise specific jurisdiction if the suit arises out of that sole contact. Memorial Hosp. Sys. v. Fisher Ins. Agency, Inc., 835 S.W.2d 645, 650 (Tex.App.-Houston [14th Dist.] 1992, no writ). A substantial connection must exist between the contact and the cause of action in the forum state. Id. The concept of "foreseeability" is implicit in the requirement that there be a "substantial *720 connection" between the nonresident defendant and Texas arising from action or conduct of the nonresident defendant purposefully directed toward Texas. Guardian Royal, 815 S.W.2d at 227.
For instance when a nonresident defendant sends false information into a state, knowing that a resident of the forum will rely upon it, there is a foreseeable consequence of direct economic injury to the resident at its domicile. Memorial Hosp. Sys., 835 S.W.2d at 650. Therefore if the tort-feasor knows that the brunt of the injury will be felt by a particular resident in the forum, it must reasonably anticipate being haled into court there to answer for its actions. Id. (citing Calder v. Jones, 465 U.S. 783, 789, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984)).
Here, Soudabeh purposefully directed her activities toward Texas by calling Eddie at his home in Dallas. Eddie relied to his detriment on her promise that, if he moved to South Padre Island and performed as agreed, the contract including his compensation and ownership interest, would be reduced to writing. Based upon her promise Eddie accepted her offer and moved to South Padre. Although Eddie paid Khalil a $15,000 down payment for his ownership interest he never received any stock in Alma Investments. Thus Eddie's breach-of-contract suit arose out of Soudabeh's contact with Texas. Further a substantial connection existed between her contact and the cause of action because she should have known that Eddie would rely on the information in deciding to move to South Padre Island and manage the Bahia Mar. Therefore Soudabeh is not denied due process by being subject to suit in Texas, because she allegedly entered into a contract with a foreseeable economic injury in Texas. The fact that the information was sent over the phone does not prevent jurisdiction, nor does it make a difference that only one telephone call was involved with respect to this action. See Memorial Hosp. Sys., 835 S.W.2d at 651 (citing McGee v. International Life Ins. Co., 355 U.S. 220, 223, 78 S. Ct. 199, 2 L. Ed. 2d 223 (1957)). We conclude that the alleged cause of action against Soudabeh arose out of and was related to her contact with Texas, as required for the exercise of specific jurisdiction. See CSR, 925 S.W.2d at 594-95.
B. General Jurisdiction
General jurisdiction is present when a defendant's contacts are continuous and systematic, allowing the forum to exercise personal jurisdiction over the defendant even if the cause of action did not arise from or relate to activities conducted within the forum state. CSR, 925 S.W.2d at 595. See Schlobohm, 784 S.W.2d at 357. General jurisdiction requires a showing that the defendant conducted substantial activities within the forum, a more demanding minimum-contacts analysis than for specific jurisdiction. CSR, 925 S.W.2d at 595. See Guardian Royal, 815 S.W.2d at 228.
Here Alma Investments made over $1 million in renovations to the Bahia Mar and bought fifty additional condominiums in the Bahia Mar complex. The International Bank of Commerce (IBC) in Brownsville, Texas financed a portion of these expenditures. IBC based its decision to make these loans on Alma Investment's financial statements and those of Khalil and Soudabeh. Both Khalil and Soudabeh individually guaranteed all the loans made at South Padre Island for Alma Investments. From November 1, 1994 to April 15, 1999, Soudabeh guaranteed approximately twenty-three loan transactions. These guarantee agreements reflect that IBC and Soudabeh will use arbitration to settle any controversies *721 between them and that venue for arbitration will lie in Cameron County, Texas. Although Soudabeh executed the bulk of the guarantees in Michigan, this fact is not determinative of jurisdiction. In Burger King the United States Supreme Court stated that as long as a commercial actor purposefully directs its efforts toward residents of another state "we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction." Id. at 475, 105 S. Ct. 2174.
Soudabeh cites several cases which stand for the proposition that a guarantee agreement signed by a nonresident guarantor does not constitute sufficient contact with the forum upon which to base in personam jurisdiction over the guarantor.[1] These cases, however, concern one or a small number of guarantee agreements and therefore do not control the determination of jurisdiction in this case. Here Soudabeh executed approximately twenty-three guarantee agreements which were used to finance improvements to the Bahia Mar.
Accordingly Soudabeh's activities did not constitute random, fortuitous, or attenuated contacts with Texas. These guaranty agreements purposefully caused business activity in Texas, which was foreseeable to Soudabeh. We hold that Soudabeh had continuous and systematic contacts with Texas sufficient to support a finding of general jurisdiction.
V. FAIR PLAY AND SUBSTANTIAL JUSTICE
Having found that Soudabeh had sufficient minimum contacts with Texas we consider five factors to determine whether the exercise of jurisdiction in Texas is reasonable: (1) the burden on the appellee, (2) Texas's interest in adjudicating the dispute, (3) appellant's interest in obtaining convenient and effective relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental substantive social policies. Burger King, 471 U.S. at 477, 105 S. Ct. 2174; Guardian Royal, 815 S.W.2d at 228. Only in rare cases, however, will the exercise of jurisdiction not comport with fair play and substantial justice when the nonresident defendant has purposefully established minimum contacts with the forum state. Burger King, 471 U.S. at 477-78, 105 S. Ct. 2174.
1. Soudabeh's burden and Eddie's interest in obtaining convenient and effective relief.
Soudabeh is a Michigan resident who works full time as a sole practitioner in obstetrics and gynecology. She spends on the average 70-80 hours per week working on her practice. She and Khalil owned property worth several million dollars. Eddie, on the other hand, earned *722 $50,000 per year. Most of the potential witnesses resided in Cameron County, and most of the documentation was in Cameron County. Eddie stated that because he did not have the financial resources, he and his family would endure a great hardship if he had to travel to Michigan and take all of the witnesses there for depositions and trial. There is no evidence showing that litigation in Texas would be unfair or unreasonable to Soudabeh. Based on the facts and equities of this case we conclude that any inconvenience Soudabeh may suffer defending this suit in Texas would not amount to a denial of due process.
2. Texas's interest in adjudicating the dispute.
Texas has a strong interest in adjudicating this dispute because it involves a contract with a Texas resident, who performed the contract in Texas. Michigan's interest in adjudicating this dispute is limited to the extent that Soudabeh is a resident there. While we agree Michigan has an interest in this suit we conclude that it is overridden by Texas's special interest in this matter. See Burger King, 471 U.S. at 472, 105 S. Ct. 2174 (State generally has manifest interest in providing its residents with convenient forum for redressing injuries inflicted by nonresidents); Texas Commerce Bank, 703 S.W.2d at 773-74 (Texas has legitimate and special interest in suit arising from contract performable there).
3. The interstate judicial system's interest in obtaining the most efficient resolution of the controversy.
Other than Texas and Michigan no other state serves as a possible forum for handling this dispute. Accordingly Texas is the appropriate choice as a forum.
4. The shared interest in furthering fundamental substantive social policies.
Soudabeh entered into a contract with Eddie, who was to perform the contract in Texas. This suit arose out of the performance of this contract and was brought pursuant to the contract. Requiring litigation of this dispute in Texas furthers the social policy of the states in protecting their residents from economic loss resulting from a breach of contract.
We hold that the exercise of jurisdiction over Soudabeh by a Texas court does not offend traditional notions of fair play and substantial justice. Accordingly we sustain Eddie's six issues.
We REVERSE the judgment and REMAND the case for trial.
NOTES
[1] See Swensen v. Murchison, 507 F. Supp. 509, 512 n. 3 (N.D.Cal.1981); Bank of Louisville v. California First Bank, 641 F. Supp. 59, 61 (W.D.Ky.1986); Bond Leather Co. v. Q.T. Shoe Mfg. Co., 764 F.2d 928, 934 (1st Cir.1985); Ferrante Equip. Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280, 258 N.E.2d 202, 309 N.Y.S.2d 913 (N.Y.Ct.App.1970); Misco Leasing, Inc. v. Vaughn, 450 F.2d 257, 260 (10th Cir.1971); Algemene Bank Nederland, M.V.-Atlanta Agency v. Mattox, 611 F. Supp. 144, 145 (N.D.Ga. 1985); Reverse Vending Assocs. v. Tomra Sys. U.S., Inc., 655 F. Supp. 1122, 1127 (E.D.Pa. 1987); Edwards v. Geosource, Inc., 473 So. 2d 36, 37 (Fla.App. 1st Dist. 1985); Delro Indus., Inc. v. Evans, 514 So. 2d 976 (Ala. 1987); Liberty Leasing Co. v. Milky Way Stores, Inc., 352 F. Supp. 1210 (N.D.Ill.1973); All Lease Co. v. Betts, 294 Minn. 473, 199 N.W.2d 821 (1972); Basic Food Indus., Inc. v. Eighth Judicial Dist. Court of Nevada, 94 Nev. 111, 575 P.2d 934 (1978); FDIC v. Hiatt, 117 N.M. 461, 872 P.2d 879 (1994); J.C. Snavely & Sons, Inc. v. Springland Assocs., Inc., 411 Pa.Super. 1, 600 A.2d 972 (1991). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1588106/ | 752 F.Supp. 54 (1990)
SUFFIELD BANK
v.
David F. LaROCHE.
Civ. A. No. 90-0038L.
United States District Court, D. Rhode Island.
December 6, 1990.
*55 *56 *57 Gerald J. Petros, Hinckley Allen Snyder & Comen, Providence, R.I., for plaintiff.
Barry J. Kusinitz, Providence, R.I., for defendant.
MEMORANDUM AND ORDER
LAGUEUX, District Judge.
The matter presently before the Court revolves around the counterclaim of defendant David LaRoche ("LaRoche") for setoff against his debt to plaintiff Suffield Bank ("Bank"). On May 9, 1990, this Court granted the Bank's motion for partial summary judgment on the question of LaRoche's liability to the Bank for default on a promissory note. The only questions remaining were the amount of recovery by plaintiff on the complaint and the amount of set-off, if any, on the counterclaim. The parties waived a trial on those issues and instead submitted an agreed statement of facts. The Court took the matter under advisement.
As collateral for a loan from Suffield Bank, LaRoche pledged shares of stock of NECO Enterprises ("NECO"), a corporation of which he is chief executive officer. LaRoche later defaulted on the loan and the Bank sold those shares. As a result of the sales, LaRoche may have incurred liability to the NECO stockholders under the "Short-Swing Profits" provision of the Securities Exchange Act. LaRoche now counterclaims to set off this possible liability to NECO against his debt to the Bank.
Whether a debtor may set-off shortswing profits liability is a question of first impression. For the reasons set forth below, defendant LaRoche cannot prevail on his counterclaim.
I. BACKGROUND
On November 4, 1988, LaRoche signed and delivered a promissory note in the amount of $685,004.75 to Suffield Bank, a Connecticut savings bank. The note was signed as part of a comprehensive settlement of litigation then outstanding between the Bank and LaRoche in this Court.
The note was secured by a pledge and security agreement under which LaRoche pledged 13,782 shares of NECO stock and 6000 shares of Homeowners Federal Savings Bank ("Homeowners") stock. The note was also secured by a second mortgage on land known as "Sherwood Plat," which is located in Portsmouth, Rhode Island.
The pledge provided that, on LaRoche's default, the Bank could accelerate the note such that all interest, principal and late payments would become due immediately, and the Bank could then sell all pledged collateral in any manner permissible under applicable Rhode Island law. At the time of the pledge, LaRoche notified the Bank that because he was a director and an officer of NECO and because he owned more than ten percent of all NECO stock, the 13,782 shares were "control stock" subject to the restrictions of § 16(b) of the Securities Exchange Act of 1934 ("§ 16(b)"). 15 U.S.C. § 78p(b).
LaRoche failed to make the interest payments due under the note on November 1, 1989, and December 1, 1989. On January 1, 1990, LaRoche failed to make both the interest payments and the first principal payment. The Bank wrote to LaRoche on January 5, 1990, to notify him of his default and of its decision to accelerate the note. The Bank also advised LaRoche that if it did not receive full payment of all interest, principal and late charges due by *58 January 15, 1990, it planned to exercise its right to sell the NECO and Homeowners stock. The NECO stock was, by this time, the only collateral pledged from which the Bank was able to recover any part of LaRoche's debt. Sherwood Plat could not be reached because it was entangled in litigation; the Homeowners stock had virtually no value and Homeowners was being operated by an agency of the federal government.
LaRoche did not respond to the Bank's letter with payment and did not make any attempt to renegotiate the terms of the note. After being notified of his default, LaRoche continued to purchase shares of NECO stock on the American Stock Exchange. LaRoche wrote to the Bank, on January 15, 1990, to warn that NECO stock must be "liquidated in a commercially reasonable manner" and stated that "my stock is deemed 144 stock, or control stock, and must be liquidated in accordance with relative [sic] rules and reporting requirements." Defendant's Trial Memo, page 2.
On January 16 and 17, the Bank sold 13,682 shares of the NECO stock through a broker-dealer at the market price on the American Stock Exchange. In response to this sale, several shareholders of NECO brought an action against LaRoche to recover any short-swing profits made on the 13,682 shares sold, under Section 16(b) of the Securities and Exchange Act of 1934. For the purposes of the present litigation, the Bank and LaRoche agree that LaRoche's potential short-swing profit liability (the difference between the purchase and sale prices if both transactions take place within six months) totals $74,584.33.[1]
On January 29, 1990, the Bank filed suit against LaRoche to recover the balance due on the promissory note. LaRoche counterclaimed in February, 1990, requesting set-off for the potential short-swing profit liability he incurred as a result of the Bank's sale of the collateral. On May 9, 1990, this Court granted the Bank's motion for partial summary judgment, ruling that LaRoche was liable to the Bank for his default on the promissory note. The amount of recovery and the amount of set-off are presently in order for decision.
An additional issue concerns NECO stock generated by a stock split. In the spring of 1990, NECO stock split, two and one half new shares for every share owned. NECO's issuing agent issued the 4680 newly-created shares directly to LaRoche. LaRoche has not responded to several demands by the Bank to turn over these shares as required by the terms of the pledge agreement. The Bank has requested an order issue to LaRoche to transfer those shares to the Bank.
II. DISCUSSION
Defendant LaRoche alleges that he is entitled to set-off because the Bank's sale of the collateral was not "commercially reasonable." This argument fails because under Rhode Island's version of the Uniform Commercial Code ("U.C.C."), a sale of collateral on a "recognized market" is irrefutably commercially reasonable.[2] R.I.Gen. Laws § 6A-9-507(2) (1985).
LaRoche raises several arguments that set-off should nevertheless be allowed because the recognized market exemption is inapplicable to this case. The Court finds none of these arguments persuasive. Allowing set-off would permit LaRoche to transfer his liability to the corporation and other shareholders to plaintiff Bank. This would frustrate the very purpose of § 16(b) of the Securities and Exchange Act. Further, Article Nine of the U.C.C. does not provide the debtor who sustains secondary injuries the recourse of set-off. Finally, in *59 selling the stock the Bank met the standard of "good faith" required by the U.C.C.
A. COMMERCIAL REASONABLENESS
In his counterclaim, LaRoche asserts that because the Bank's sale of the pledged NECO stock created his liability to the NECO stockholders pursuant to § 16(b), it was not a "commercially reasonable" sale, and he is therefore entitled to set off that liability against his outstanding debt to the bank.
Under Article Nine of the U.C.C., the proceeds of the disposition of collateral are applied to reduce the obligation of the debtor. Id. at § 6A-9-504(1). To protect the debtor's interest in a high sale price, Article Nine requires that "every aspect of the disposition including the method, manner, time and place must be commercially reasonable." R.I.Gen.Laws § 6A-9-504(3). Furthermore, if the secured party does not make a reasonable effort to sell the collateral at its fair market value, "the debtor is entitled to set off or counterclaim for the amount which a reasonable disposition would have realized." Matter of Deephouse Equip. Co., 38 B.R. 400 (Bankr.D. Conn.1984) (Citing U.C.C. § 9-507(1)).
LaRoche suggests that this Court has great discretion as to the factors it may consider in determining the commercial reasonableness of a secured party's sale. While this may be true in some circumstances, the Court's discretion is very limited where, as in the case at bar, the secured party sold the collateral on a "recognized market."
The drafters of the U.C.C. reasoned that selling to the highest bidder on a publicly recognized market will yield the fair market price. Accordingly, Article Nine provides that a secured party by selling collateral on a recognized market renders the sale commercially reasonable and thus shields itself from liability.
The plain language of the relevant U.C.C. portion states that: "If the secured party sells the collateral in the usual manner in any recognized market ... he has sold it in a commercially reasonable manner." R.I.Gen.Laws § 6A-9-507(2). Major stock exchanges are clearly recognized markets. See Ocean National Bank v. Odell, 444 A.2d 422, 426 (Me.1982). Therefore, by selling the NECO stock on the American Stock Exchange, the Bank ensured that its sale was commercially reasonable and beyond the scrutiny of this Court.
B. TRANSFER OF LIABILITY
LaRoche argues that the "recognized market" provision is inapplicable to this case and therefore cannot render the Bank's sale commercially reasonable. He contends that the Bank's sale was prohibited under the Short-Swing Profit provision of the Securities Exchange Act and that there can be no "recognized market" for a prohibited sale.
1. Short-Swing Liability under § 16(b)
LaRoche's claim that the sale of the collateral stock by the Bank was commercially unreasonable depends upon his mistaken assertion that the sale was prohibited under § 16(b) of the Securities Exchange Act of 1934. 15 U.S.C. § 78p(b).
There are two flaws in LaRoche's argument. First, LaRoche attempts to support his argument that the Bank's sale was prohibited under § 16(b) by pointing to a case in which the sale of collateral by any party was prohibited, In re Umbles DrewHale Pharmacy, Inc., 80 B.R. 421 (Bankr. N.D.Ohio 1987). Umbles can be distinguished from the case at bar because the sale of control stock is nowhere prohibited by § 16(b). Section 16(b) merely permits the shareholders of any corporation whose stock is bought and sold within six months by an "insider" to bring a private cause of action to reclaim the insider's profit for the corporation. No other party is prohibited from buying and selling these shares, and no affirmative fines or penalties are imposed. Allis-Chalmers Manufacturing Co. v. Gulf & Western Indus., Inc., 527 F.2d 335 (7th Cir.1975), cert. denied, 423 U.S. 1078, 96 S.Ct. 865, 47 L.Ed.2d 839.
*60 In Umbles, the collateral which the secured party sold was the inventory of a defaulting pharmacy. The secured party's sale of the inventory was stalled by health regulations which required the permission of a state regulatory board prior to any sale. The pharmacy's counterclaim alleged that since the delay decreased the final sale price to one-third of its original value, the sale was commercially unreasonable. The Umbles court rejected the pharmacy's argument because it would penalize the secured party for its compliance with the regulatory procedures which caused the delay.
Contrary to LaRoche's characterization, Umbles merely stands for the proposition that where compliance with regulations delays a sale, the secured party is not liable for a resulting decline in value. Clearly, Umbles has no bearing on the case at bar since Suffield Bank's sale of the NECO stock collateral was not prohibited by § 16(b).
The second flaw in LaRoche's argument is that it would be contrary to the purpose of § 16(b) to permit LaRoche to shift his liability to plaintiff Bank. Congress created § 16(b) to control the securities trading of "corporate insiders," not their secured creditors. As the United States Supreme Court has explained, § 16(b) was enacted to "curb the evils of insider trading [by] taking the profits out of a class of transactions in which the possibility of abuse was believed intolerably great." Reliance Electric Co. v. Emerson Elec. Co., 404 U.S. 418, 422, 92 S.Ct. 596, 599, 30 L.Ed.2d 575 (1972) (emphasis added).
The drafters of § 16(a) defined an insider, subject to short-swing liability, as "[e]very person who is directly or indirectly the beneficial owner of more than 10 per centum of any class of any equity security ... or who is a director or an officer." 15 U.S.C. § 78p(a). Defendant LaRoche concedes that he met all three definitions since he was, at the time of the pledge, a director, the Chief Executive Officer and an owner of well over 10 per centum of the shares of NECO common stock. Conversely, the plaintiff Bank met none of these definitions of an insider.
The policy of § 16(b) requires that the debtor bear all liability for the disposition of the collateral by the secured party. In the leading case on this issue, Alloys Unlimited, Inc. v. Gilbert, 319 F.Supp. 617 (S.D.N.Y.1970), the New York District Court reached the same conclusion.
We are not here dealing with a transaction where there is no possibility of speculation based upon inside information. ... If a sale of pledged collateral were to be excluded from the prohibition of § 16(b), an insider after a sharp increase in the market price of shares recently purchased by him, could, upon receiving inside information likely to depress the market price of his stock, pledge it for a loan and, when the market price declined, simply default in his obligation to put up more collateral and allow the lender to sell the collateral to satisfy the loan.... We must, therefore, conclude that the bank's sale of the shares owned by defendant and held in his name constitutes a "sale" [by the debtor] within the meaning of § 16(b).
Id., at 619-620. The Proposed Securities Regulations of the American Law Institute support this position. According to commentary by Thomas L. Hazen: "the Proposed Code would codify the Alloys Unlimited approach in every such case by attributing the pledgee's [secured party's] sale or purchase to the pledgor [debtor]." The New Pragmatism Under § 16(b) of the Securities Act, 54 N.C.L.Rev. 1, 38 (1975). If § 16(b) liability were not attributed to the debtor, he would need only default on his obligation and compel the secured party to sell the collateral stock at foreclosure to avoid the intended penalties of the Act.
Responsibility for the sale of the collateral must remain with the debtor not only because this will ensure that he cannot evade § 16(b) by forcing the secured party to sell the collateral stock as his proxy, but also because it is the debtor who retains the greatest degree of control over the collateral. In the instant case, for example, *61 LaRoche could have bargained for restrictions on the sale of collateral stock when he negotiated the pledge agreement. He could also have prevented the Bank's sale of the NECO stock if he had made payments on the note. Instead he defaulted on the note while at the same time purchasing additional shares of the stock.
Finally, as the debtor is the beneficiary of any short-swing profits after the sale of the collateral, to require anyone but him to disgorge those profits would be inequitable. Short-swing profits are the amount by which the sale price of the collateral stock exceeds its purchase price if both purchase and sale take place within a six month period. Once a secured party sells collateral stock it must apply the entire sale price, including the value which exceeds the original purchase price, toward reducing the debtor's obligation to the secured party. R.I.Gen.Laws § 6A-9-504(1). If the short-swing profits portion of the sale price were later set off against the debtor's liability to the secured party, the debtor would receive the benefit of that portion of the sale price twice.
Consequently, to require the Bank to bear the short-swing profits liability would be unfair and contrary to the purposes of § 16(b) of the Securities Exchange Act of 1934. More importantly, nothing in § 16(b) prohibited the Bank's sale of the collateral stock. Therefore, the collateral was sold on a recognized market and this ensured that it was a commercially reasonable sale under Article Nine of the Uniform Commercial Code.
2. Secondary Injuries
Even if the Bank had not shielded itself from liability by selling the stock on a recognized market, LaRoche's counterclaim would fail because the U.C.C. provides no relief for the secondary injuries which he allegedly sustained. Article Nine Section 507(1) provides the debtor with the remedy of set-off only where the secured party fails to employ commercially reasonable procedures in conducting the disposition of collateral. R.I.Gen.Laws § 6A-9-507(1). Those procedures define the degree of effort which the secured party is required to make to obtain the fair market value of the collateral. See United States v. H & S Realty, 647 F.Supp. 1415 (D.Me.1986), aff'd, 837 F.2d 1 (1st Cir.1987).
The concept of commercial reasonableness ensures that the court must determine whether the secured party sold the debtor's collateral at the fair market price not by reference to the price itself, but by examination of the secured party's practices leading up to the sale. The District Court for the Southern District of New York has stated: "[T]he primary focus of commercial reasonableness is not the proceeds received from the sale but rather the procedures employed for the sale." In re Zsa Zsa Ltd., 352 F.Supp. 665, 671 (S.D.N. Y.1972) (emphasis in original), aff'd without opinion, 475 F.2d 1393 (2d Cir.1973).[3]
LaRoche does not contest that the procedures employed by the Bank realized the fair market value of the collateral. Instead LaRoche requests relief for his short-swing profit liability which is clearly an aftereffect of the sale. LaRoche's alleged injuries are secondary injuries for which he is entitled to no relief under Article Nine.
In Fort Knox National Bank v. Gustafson, the Kentucky Court of Appeals held that, where a bank properly repossesses the collateral, it incurs no liability for disruption of the debtor's business. A secondary injury, such as disruption of a debtor's business due to sale of collateral, was held to be a "result which Gustafson [the debtor] impliedly consented to in the security agreement." 385 S.W.2d 196, 202 (Ky. 1964). Similarly where the secured party's sale of collateral complies with the procedures required by Section 9-504(3) the secured party is not liable for the mental anguish which the sale causes the debtor. Umbaugh Pole Building Co. v. Scott, 58 *62 Ohio St.2d 282, 390 N.E.2d 320, 324 (1979).[4] In essence, the secondary injuries for which LaRoche attempts to recover are beyond the limited recourse which Article Nine grants the debtor.
Furthermore, by requesting set-off based on his injuries consequent to the Bank's sale of the NECO stock, LaRoche is asking this Court to grant him consequential damages, that is "[s]uch damage, loss or injury as does not flow directly and immediately from the act of the party, but only from some of the consequences or results of such acts." BLACK'S LAW DICTIONARY 352 (5th ed.1979) citing Richmond Redevelopment v. Laburnum Const. Corp., 195 Va. 827, 80 S.E.2d 574, 580 (1954). The Rhode Island Supreme Court has made clear its position that: "[W]e must follow the Code's directive in Article One that: `neither consequential or special nor penal damages may be had except as specifically provided in Title 6A or by any other rule of law'." Associates Capital Services Corp. v. Riccardi, 122 R.I. 434, 438, 408 A.2d 930, 933 (1979) (emphasis added).
Even if the Bank's sale of the NECO stock had been commercially unreasonable, LaRoche would be permitted to recover only the difference between the fair market price and the sale price which the Bank received. R.I.Gen.Laws § 6A-9-507(1). Consequential damages clearly are not provided as a remedy for the commercially unreasonable sale of collateral. Id. Therefore, LaRoche seeks relief which is simply not available to him under the U.C.C.
3. Good Faith
Defendant LaRoche also contends that the U.C.C. requirement that all parties act in good faith and deal fairly, R.I.Gen.Laws § 6A-1-203, "means that sometimes a Bank must refrain from immediate exercise of its rights if it will create unnecessary obligations or consequences for others" and that the Bank's refusal to sell the collateral stock by the method he requested demonstrates the Bank's bad faith. Defendant's Trial Memorandum, page 5.
The Rhode Island Supreme Court has reaffirmed that "there is an implied covenant of good faith and fair dealing between parties to a contract." Ide Farm & Stable, Inc. v. Cardi, 110 R.I. 735, 739, 297 A.2d 643, 645 (1972). Additionally, Article Nine states that in the specific context of a disposition of collateral, "[t]he principal limitation on the secured party is the requirement that he proceed in good faith and in a commercially reasonable manner." § 6A-9-507 Official Comment, 1.
While the Rhode Island Supreme Court has not gone further in defining the standard of good faith required of a secured party when selling collateral, courts elsewhere have generated three different standards. Some courts have found the requirement redundant, holding that:
[I]n the context of a sale of collateral after default, the duty to act in good faith is covered by the requirement that the sale be made in a commercially reasonable manner. There is no additional requirement that the secured party have a specific mental attitude.
Lamb Brothers, Inc. v. First State Bank, 285 Or. 39, 52, 589 P.2d 1094, 1101 (1979). According to this standard, if the secured party follows the procedures of a commercially reasonable sale, as the Bank did in the case at bar, the debtor has no basis to claim that the secured party acted in bad faith.
Other courts have considered the behavior of the secured party toward the debtor in order to ascertain the secured party's good faith. Under this objective standard, it does not constitute bad faith for a bank to reject a debtor's post-default request for restrictions on the sale of collateral when those requests exceed the restrictions in *63 the loan agreement. See Layne v. Fort Carson Nat. Bank, 655 P.2d 856 (Colo. App.1982). Nor is the fact that the secured party's action caused economic hardship to the debtor sufficient to show a lack of good faith. See Flagship National Bank v. Gray Distrib. Sys., Inc., 485 So.2d 1336 (Fla.App.1986).
In the instant case, the Bank chose to liquidate the NECO stock expeditiously because that stock was the only pledged collateral retaining any value three months after default. Therefore, when analyzed under an objective standard, neither the Bank's refusal to sell the NECO stock according to the schedule LaRoche requested nor LaRoche's resulting secondary injuries indicate that the Bank acted in bad faith.
The most stringent good faith standard is the subjective requirement of "honesty in fact" set forth in §§ 1-201(19) § 1-203. See, e.g., United States v. H & S Realty Co., 647 F.Supp. at 1415. Even under this standard, however, LaRoche cannot show that the Bank lacked good faith as he has not alleged that the Bank was in any way dishonest. The Bank demonstrated its good faith by giving LaRoche notice of its plans to sell the NECO stock, though this was not strictly required by the U.C.C. See R.I.Gen.Laws § 6A-9-507(2). In sum, the Bank's sale of the collateral met all of the existing standards of good faith required for such sales under the U.C.C.
III. CONCLUSION
LaRoche's counterclaim stumbles on each step of its journey. Suffield Bank's sales of the NECO stock were conducted on a "recognized market." Thus, under the Rhode Island U.C.C., the sales were commercially reasonable. The Bank's proper sales of collateral are not rendered commercially unreasonable because they caused an indirect injury to LaRoche. Nor do these secondary injuries indicate any lack of good faith on the Bank's part. Furthermore, the transfer of short swing profit liability from LaRoche, the "insider," to the Bank would contradict the central purpose of the Short-Swing Profits Act.
To settle previous debts to the Bank, LaRoche negotiated the pledge and granted the Bank the right to dispose of the collateral upon his default. He then defaulted on the loan. For the Court to allow him now to evade the statutory consequences of these actions would be contrary to the law as well as public policy.
IV. ORDER
The Bank requests an order compelling defendant LaRoche to deliver the 4680 shares of NECO created by the NECO stock split. However, the doctrine of election of remedies provides that pursuit of one remedy excludes pursuit of other inconsistent remedies. Silva v. Silva, 122 R.I. 178, 404 A.2d 829 (1979); City of Pawtucket v. Pawtucket Lodge No. 4, 545 A.2d 499, 502 (R.I.1988).
The Bank elected to pursue its money judgment remedy when it filed its motion for partial summary judgment. It would be inconsistent for the Court to give the Bank a judgment now by which it may collect the full amount of LaRoche's debt and, at the same time, also grant the Bank permission to acquire and sell collateral. The time to resort to collateral to reduce the debt has long since passed. In short, by pursuing this remedy for money damages the Bank has waived its right to the 4680 split shares in LaRoche's possession. Thus, the Bank's request for an order transferring those shares is denied.
On May 9, 1990, this Court granted plaintiff Bank's motion for "partial" summary judgment on the issue of defendant LaRoche's liability for default on the note. The amount of the judgment is now ascertained. The judgment will consist of $448,137.33, the amount which the parties have stipulated as the original principal amount of the loan reduced by the net proceeds of the Bank's sales of NECO stock collateral; plus $3,490.42 in late charges; plus interest. The interest equalled $59,840.73 as of August 8, 1990, the date of the filing of the agreed statement of facts. A per diem interest charge of $149.38, as provided by the note, continues to accrue from August 9, 1990, until the date the judgment is *64 entered. The pledge agreement also requires LaRoche to pay the Bank's attorneys' fees of $20,052.00, and collection expenses of $1,137.82. Those amounts are reasonable. Therefore, the clerk will enter judgment forthwith for the plaintiff on the complaint in the total amount set forth above, $532,658.30, plus the per diem interest charges accrued from August 9, 1990.
Defendant LaRoche's counterclaim, which seeks to reduce this liability to the Bank by set-off of his alleged short-swing profits liability to NECO, is without merit. The clerk will also enter judgment forthwith for the plaintiff on defendant's counterclaim.
It is so ordered.
NOTES
[1] After the original pledge, LaRoche delivered an additional 3120 shares of NECO stock to the Bank in accordance with the terms of the pledge agreement. On June 22, 1990, the Bank sold the additional 3120 shares of NECO stock. LaRoche makes no claim concerning the Bank's sale of these shares because LaRoche bears no short-swing liability for them since his original purchase price exceeded the sale price which the Bank received on June 22, 1990.
[2] Rhode Island has incorporated the Uniform Commercial Code verbatim into Title 6A of the Rhode Island General Laws (1985 Reenactment). Thus, all references to the Uniform Commercial Code refer to the corresponding section of Title 6A.
[3] Moreover, the Rhode Island Supreme Court has held that a secured party is required only to observe the procedures specified by the U.C.C. and is not required to respect the debtor's instructions for conducting the sale. Rhode Island Hospital Trust National Bank v. National Health Found., 119 R.I. 823, 827, 384 A.2d 301, 304 (1978).
[4] The concept of secondary injuries to a debtor resulting from the disposition of collateral has also been discussed in commentary under the rubric of "causation." See generally R. Anderson, Uniform Commercial Code § 9-507:11 (3d ed. 1985) ("[W]hen the creditor has initially acted in a proper manner, he will not be held liable for unforeseen consequences of his action.") | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918997/ | 106 B.R. 246 (1989)
In re Donald Myron CRESS, Barbara Lu Cress.
No. 88-1311-C.
United States District Court, D. Kansas.
October 6, 1989.
*247 Clifford L. Bertholf, Wichita, Kan., for plaintiffs.
Mary May, Wichita, Kan., for defendant. Edward J. Nazar, trustee, Wichita, Kan.
MEMORANDUM AND ORDER
CROW, District Judge.
The case comes before the court on appeal of the bankruptcy court's memorandum of decision and judgment of decision which were both filed on May 4, 1988. The bankruptcy court therein granted the motion for summary judgment brought by Agristor Leasing, Inc. (Agristor), finding the agreement between Agristor and the debtors, Donald Myron Cress and Barbara Lu Cress, to be a lease and not a secured transaction. The debtors appeal contending the bankruptcy court erred in discerning what were the uncontroverted facts, in granting summary judgment when discovery was incomplete, and in finding itself bound to the decision of Agristor Leasing v. Meuli, 634 F.Supp. 1208 (D.Kan.1986).
A lower court's grant of summary judgment is reviewed de novo, and the same summary judgment standards are applied on appeal. Burnette v. Dow Chemical Co., 849 F.2d 1269, 1273 (10th Cir.1988); Wheeler v. Hurdman, 825 F.2d 257, 260 (10th Cir.), cert. denied, 484 U.S. 986, 108 S.Ct. 503, 98 L.Ed.2d 501 (1987). This same rule governs the review of a bankruptcy court's grant of summary judgment. In re Stuerke, 61 B.R. 623, 625 (Bankr. 9th Cir.1986).
Because this bankruptcy appeal includes several procedural challenges to the summary judgment order, a detailed statement of the applicable standards is necessary. In ruling on a motion for summary judgment, the trial court conducts a threshold inquiry of the need for a trial. Without weighing the evidence or determining credibility, the court grants summary judgment when no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-252, 106 S.Ct. at 2512.
An issue of fact is "genuine" if the evidence is sufficient significantly probative or more than merely colorable for a reasonable jury to return a verdict for the nonmoving party. Id. at 248, 106 S.Ct. at 2510. An issue of fact involves "material" facts when proof thereof might affect the outcome of the lawsuit as determined by the controlling substantive law. Id. 477 U.S. at 249, 106 S.Ct. at 2510-2511. Where there is but one reasonable conclusion as to the verdict and reasonable minds would not differ as to the import of the evidence, summary judgment is appropriate. 477 U.S. at 250, 106 S.Ct. at 2511.
The movant's burden under Fed.R. Civ.P. 56 is to make an initial showing of the absence of evidence to support the nonmoving party's case. Windon Third Oil and Gas v. Federal Deposit Ins., 805 F.2d 342, 345 (10th Cir.1986), cert. denied, 480 U.S. 947, 107 S.Ct. 1605, 94 L.Ed.2d 791 (1987). The movant must specify those portions of "`the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits if any,'" which demonstrate the absence of a genuine issue of fact. Windon, 805 F.2d at 345 *248 (quoting Fed.R.Civ.P. 56(c)). The movant, however, does not have the burden to prove a negative, that is, to disprove the nonmoving party's evidence. Id. at 346. Nor do the claims need be proven false; the movant must only establish that the factual allegations are without legal significance. Dayton Hudson Corp. v. Macerich Real Estate Co., 812 F.2d 1319, 1323 (10th Cir. 1987).
The opposing party may not rest upon mere allegations or denials in the pleadings but must set forth specific facts supported by the kinds of evidentiary materials listed in 56(c). Anderson, 477 U.S. at 250, 106 S.Ct. at 2511. These facts must demonstrate a genuine issue remaining for trial and not just "some metaphysical doubt as to the material facts." Matsushita Elec. Ind. Co. v. Zenith Radio, 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986). The evidence of the nonmoving party is deemed true and all reasonable inferences are drawn in his favor. Windon, 805 F.2d at 346. "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.' Fed.R.Civ.P. 1." (citation omitted.) Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2554-55, 91 L.Ed.2d 265 (1986).
Agristor moved for summary judgment arguing that there were no genuine issues of material fact and that the lease agreement attached to its motion was a true lease and not a disguised financing arrangement. In opposing the motion, the debtors first noted that their discovery requests were still outstanding because the bankruptcy court had extended Agristor's response deadline until 20 days after the court's entry of an order on Agristor's motion for summary judgment. Debtors also stated:
This brief sets out the facts that debtors have evidence to support. Additional facts that support debtors' case can be developed through discovery; however, Agristor has not provided even the initial information requested.
(Bankr.Dk. # 81). Debtors then set forth their statement of facts in the next five pages of their brief without any citation to evidence of record and without submitting any affidavits or documentary evidence other than the two purchase orders, the lease agreement, the acceptance supplement, and a letter dated April 2, 1980, from Agristor approving the debtors' lease application.
Bankruptcy Rule 7056 provides that Fed.R.Civ.P. 56 applies in all adversary proceedings. Debtors' memorandum in opposition filed with the bankruptcy court failed to comply with Fed.R.Civ.P. 56. First, the debtors' argument on incomplete discovery was not properly supported by an affidavit setting forth the reasons that certain facts, essential to the debtors' opposition, could not be presented by affidavit. Fed.R.Civ.P. 56(f). If they had submitted their affidavit, then the bankruptcy court would have had the discretion to order a continuance to permit additional discovery. Gray v. Udevitz, 656 F.2d 588, 592 (10th Cir.1981). Debtors made no request to continue the summary judgment proceedings until further discovery could be completed. Their failure to comply with 56(f) or to seek a continuance precludes debtors from raising as an issue on appeal the necessity of discovery before summary judgment. Brown v. Chaffee, 612 F.2d 497, 504-05 (10th Cir. 1979).
Next, the debtors in their opposition ignored the requirement of 56(c) and (e) to serve opposing affidavits or submit additional discovery which would show the existence of specific factual issues for trial. The debtors were required to "go beyond the pleadings and by [their] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file, designate `specific facts showing that there is a genuine issue for trial.'" Celotex Corp., 477 U.S. at 324, 106 S.Ct. at 2553 (quoting Rule 56(e)). Even on appeal, debtors still consider it appropriate to rest upon mere allegations in opposing a summary judgment motion, as shown by the following argument in their reply brief: "Even with the disputed facts and undisputed facts, the Court *249 listed only part of the facts alleged by debtors." (Dk. 17 at p. 4) (emphasis added). Consequently, the debtors' allegations do not present material issues of fact which have yet to be decided. The only evidence "on file" is those documents attached to the parties' summary judgment pleadings, and it is upon this evidence alone that the decision must be made whether the transaction between the parties was intended to be a lease or a secured arrangement.
From the evidence of record, the relevant uncontroverted facts include.
1. On March 8, 1980, Donald Cress and Mid-America Harvestore, Inc. executed two purchase orders for a 2560 Harvestore with Goliath unloader, an auger, a conveyor, belts and bunks. One of the purchase orders named Agristor as the "Lending Facility." The purchase order for the larger ticket items described the terms of payment as a yearly lease, required debtor to pay a security deposit, and further provided for the debtor's acknowledgement on the following language: "To the above named dealer: I hereby purchase, or authorize Agristor-Leasing to purchase, the above described (sic) equipment conditioned upon my finalizing acceptable financing [or] entering into a lease agreement with Agristor Leasing." Donald Cress signed this acknowledgment on the line marked "Lessee" rather than the line marked "Buyer."
2. In a letter dated April 2, 1980, from Agristor, debtors were informed that their lease application had been approved. In pertinent part, the letter stated:
Agristor Leasing has agreed to lease the equipment as listed above for a term of 8 years, with rental payment in the amount of $16,413.91 annually. Equipment cost will be $91,017.00. The Lessee acknowledges that Lessee is not entitled to investment tax credit or depreciation, since Agristor Leasing is the owner-lessor of the equipment.
The letter also conditioned Agristor's approval on, inter alia, debtors' execution of the UCC financing statements and the lease agreement.
3. On April 11, 1980, the debtors and Lee Bertholf and Ruth Alice Bertholf executed the agricultural equipment lease on the 2560 Harvestore System with Goliath Unloader and the other items. The term of the lease ran from April 11, 1980 to May 1, 1988, and the lessee was required to make 8 consecutive annual payments of $16,162.78, commencing on May 1, 1981.
4. The debtors and Lee Bertholf and Ruth Alice Bertholf also executed on April 11, 1980, an acceptance settlement which confirmed delivery of the equipment and acknowledged their obligations under the lease agreement.
To determine the relationship between the parties, the court must consider and construe the written documents pursuant to some relevant principles. When "two or more documents are executed by the same parties at or near the same time in the course of the same transaction and concern the same subject matter they will be read and construed together." Atlas Industries, Inc. v. National Cash Register Co., 216 Kan. 213, 219-220, 531 P.2d 41 (1975) (citation omitted). "[T]he true nature and character of a document is not determined by the name attached thereto but by the intent of the parties as reflected by the terms or the contents thereof." Id. at 220, 531 P.2d 41 (citation omitted).
The starting point in analyzing the lease/sale question is the applicable Uniform Commercial Code provision of Kansas, K.S.A. 84-1-201(37) (1988 Supp.) which states, in relevant part:
"Security interest" means an interest in personal property or fixtures which secures payment or performance of an obligation. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer . . . is limited in effect to a reservation of a "security interest." . . . Unless a lease or consignment is intended as security, reservation of title thereunder is not a "security interest." . . . Whether a lease is intended as security is to be determined by the facts of each case; however, (a) the inclusion of an option to purchase does not of itself make the *250 lease one intended for security, and (b) an agreement that upon compliance with the terms of the lease the lessee shall become or has the option to become the owner of the property for no additional consideration or for a nominal consideration does make the lease one intended for security.
Kansas employs the "economic realities" approach in determining whether a transaction labelled a lease is actually a sale. K-B Trucking Co. v. Riss Intern. Corp., 763 F.2d 1148, 1164 (10th Cir.1985); Agristor Leasing v. Meuli, 634 F.Supp. 1208, 1214 (D.Kan.1986). As the language of 1-201(37) indicates, the most significant factor in evaluating the economic reality of an arrangement is whether the purchase option price at the expiration of the lease term is nominal. See Meuli 634 F.Supp. at 1214. Even if the option price is more than an inconsequential sum, the courts may still view the lease as a sale if "no lessee in its right mind would fail to exercise the option" under the economic realities of the transaction. Clark B., The Law of Secured Transactions Under the Uniform Commercial Code ¶ 1.5[3] at 1-27 (1980).
In Atlas Industries, the Kansas Supreme Court applied the following factors in finding the lessor was actually the financing agency in a sale: (1) the lessor did not select, inspect, ship or install the equipment; (2) the lessor was not a manufacturer or dealer in like equipment; (3) the lease payments were calculated to return to the lessor the purchase price, sales tax, and interest; (4) the lease did not contemplate the return of equipment to the lessor; and (5) the renewal rental was a nominal sum and extended for a period beyond the usable life of the equipment. 216 Kan. at 220, 531 P.2d 41. More recently, the Kansas Supreme Court again found a sale rather than a lease upon the weight of the following facts: (1) the option price for the equipment was nominal as compared to its anticipated market value at the end of the lease term; (2) the lease agreement created a security interest; (3) the lessor filed UCC financing statements on the equipment; and (4) the lessor was not a manufacturer or dealer in like equipment and never took possession of the equipment. Executive Financial Services, Inc. v. Pagel, 238 Kan. 809, 813, 715 P.2d 381 (1986). In contrast to the above factors the Kansas Court of Appeals specified these factors in upholding a trial court's finding of a lease: (1) the lessor stipulated it was in the business of purchasing and leasing such equipment; (3) the lease and financing statements stated the transaction was a lease; (3) the financing agreement between the supplier and the lessor allowed for the lessor to either finance the sale or purchase the equipment for lease; and (4) the title remained with the lessor if and when the equipment was purchased for subsequent leasing.
Two federal courts in this district have addressed the very issue of whether a lease agreement between Agristor and a farmer, which was for all relevant purposes identical to the agreement in the instant case, was a lease or a disguised sale. Agristor Leasing v. Meuli, 634 F.Supp. at 1214-1215; and Wight v. Agristor Leasing, 652 F.Supp. 1000, 1008-1009 (D.Kan.1987). This court agrees with the conclusions of Judge Kelly and Judge Saffels in Meuli and Wight respectively, that on the balance the transaction between the parties, as evidenced by the pertinent documents, was a true lease and not a financing agreement. The factors supporting this conclusion include: (1) the express terms of the agreement state it is a lease and not a sale; (2) the term of the lease is eight years, which is approximately one-half of the useful life of the Harvestore (The court takes judicial notice that the equipment has a useful life of over 15 years as mentioned in Meuli, 634 F.Supp. at 1214.); (3) title remains with lessor; (4) the lease restricts the location of the equipment to that described therein; (5) the lessor retains the right to dismantle and remove the equipment upon termination of the lease at the lessor's expense; (6) the lessee is required during the lease term to maintain the equipment in its original condition absent ordinary wear and tear; (7) at the expiration of the term, the lessee has the option to purchase the equipment for a price equal to the "fair market value" of *251 the equipment; (8) the lease defines "fair market value" as that price which would be reached in an arms length transaction between an informed and willing buyer, "other than . . . a lessee currently in possession and . . . a used equipment dealer," and an informed and willing seller; (9) the lessor is obligated to carry casualty insurance on the equipment and lessee is to carry liability insurance; (10) the lease includes an option to renew for a 5-year term with rent in an amount equal to the "Fair Market Rental Value" of such equipment as determined in an arm's length transaction; and (11) Agristor is in the business of purchasing and leasing Harvestores or similar equipment. See Wight, 652 F.Supp. at 1008.
The court agrees the weight of these factors is partially offset by several points indicating a sale. First, the rent over the eight-year term appears to equal the purchase price, sales tax, and interest. The lessee is liable for taxes and assessments. Agristor did not select, ship or install the equipment. Finally, Agristor filed UCC financing statements on the equipment.
The weight of the respective factors leans in favor of finding a true lease. The critical factor is that the option purchase price equals the market value of the equipment at the time the option is exercised. Because over one-half of the Harvestore's useful life remains at the end of the lease term, it is a reasonable inference, uncontradicted by any evidence of record, that neither the market value nor the option price is nominal. The remaining useful life also sustains the reasonable inference that Agristor will be retaining substantial residual value in the Harvestore system. It is difficult to overlook in the pertinent documents the parties' express statements of their intent to create a lease, particularly when the transaction as written embodies the critical features of a lease. In addition, the court has little cause to question the parties' expressed intentions when the Achilles' heel to disguised leases, a nominal purchase option price, is not shown to be present. On these facts and the precedential authority of Meuli and Wight, the court finds no error in the bankruptcy court's order of summary judgment.
IT IS THEREFORE ORDERED that the bankruptcy court's memorandum of decision and order of decision filed May 4, 1988, are affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918999/ | 106 B.R. 136 (1989)
In re Michael Lee MILLER and Carolyn Sue Miller, Debtors.
Bankruptcy No. B89-0214.
United States Bankruptcy Court, N.D. Ohio, E.D.
September 18, 1989.
David C. Barrett, Jr., Arnold & Barrett, Toledo, Ohio, for debtors.
*137 Kenneth J. Nordstrom, Nordstrom & Locke, Ashland, Ohio, for Federal Land Bank Ass'n of Fostoria.
Michael V. Demczyk, Akron, Ohio, Chapter 12 Trustee.
MEMORANDUM OF OPINION AND ORDER
RANDOLPH BAXTER, Bankruptcy Judge.
The Federal Land Bank Association of Fostoria (FLB), a successor in interest to the Farm Credit Bank of Louisville, seeks amended findings of fact and alteration or amendment of this Court's judgment entered on April 6, 1989, which confirmed the Chapter 12 Plan (the Plan) of reorganization filed by Michael L. and Carolyn S. Miller (Debtors). 98 B.R. 311.
FLB, in its objection to plan confirmation, contested (1) the Plan's proposed rate of interest to be paid on its secured claim and (2) the Plan's treatment of certain FLB stock. Specifically, objections on which FLB now seeks supplemental findings of fact are as follows:
1) FLB, as a holder of a secured claim, did not accept the plan of reorganization of the Debtors.
2) The evidence which supports an 11% fixed interest rate as the appropriate rate to be paid to FLB.
3) The evidence which fulfills the Court's criteria that the "prevailing market rate on similar loans is 11% fixed interest."
In substantial part the thrust of the FLB's request is to have the Court reconsider that which was initially heard and considered at the confirmation hearing on the Debtor's Plan. Upon consideration of FLB's present motion and upon reconsideration of the April 6, 1989 judgment, the following amended findings and conclusions are hereby made.
FLB, an oversecured creditor of the Debtors, holds a first mortgage lien on the Debtors' 96.75 acre farm in Lorain County, Ohio. As of the petition date, the principal balance due on the mortgage note was $94,044.40. The Debtors' appraisal of the farm was $121,000.00. The FLB's appraisal was $129,000.00. As such, both appraisals reflected FLB as an oversecured claimant. The original mortgage note required an 8.75% fixed rate of interest to be paid. At the time of the Plan's confirmation, and since 1985, the Debtors were paying a variable rate of interest. At Plan confirmation, the Debtors were paying 12.75% variable interest rate. For reasons set forth in this Court's confirmation ruling issued on April 3, 1989, a fixed interest rate of 11% was determined to be an appropriate interest rate throughout the Plan.
Reconsideration is given in view of the Sixth Circuit's recent clarification of its earlier decisions regarding the issue of present value. In U.S. v. Arnold, 878 F.2d 925 (6th Cir.1989), the Sixth Circuit re-examined its rulings in In re Colegrove, 771 F.2d 119 (6th Cir.1985) and in Memphis Bank & Trust Co. v. Whitman, 692 F.2d 427 (6th Cir.1982) to see if a conflict existed between those decisions. In conclusion, it held that the two earlier rulings were clearly distinguishable. Id. 878 F.2d at p. 930. Unequivocally, that Court held that "where a `cramdown' occurs under section 1225(a)(5)(B) and a creditor is forced to write-down a portion of its note, a creditor is entitled to receive its current market rate on the `new loan.'" Id.
At bar, it is undisputed that the FLB is an oversecured creditor. It is further apparent that the FLB, by its objection to the Plan, did not accept the Plan as proposed. Thusly, the Plan's confirmation over FLB's objection resulted in a cramdown effect as allowed by § 1225(a)(5)(B) of the Bankruptcy Code [11 U.S.C. 1225(a)(5)(B)]. Accordingly, FLB was allowed to retain its lien securing its claim and was allowed the value of its lien as of the Plan's effective date. See, 11 U.S.C. 1225(a)(5)(B)(i) and (ii). In Memphis Bank, a Chapter 13 case, the Sixth Circuit held that "§ 1325(a)(5) requires the Bankruptcy Court to assess interest on an allowed secured claim for the present value of the collateral in order to avoid dilution of the value of the claim through the delay in payment." Id. at p. 928. The Court further *138 held that in the absence of special circumstances bankruptcy courts should use the current market rate of interest for similar loans in the region. Memphis Bank, supra, at 431. At bar, FLB's claim is oversecured and is not threatened by dilution. With an FLB appraisal value of $129,000.00 against the farm's $94,044.00 mortgage balance, there exists a substantial equity cushion to deter any dilution of value. In Arnold, as noted above, the Sixth Circuit requires a creditor to receive its current market rate of interest only where that creditor was forced to "write-down" a portion of its note by reason of a cramdown. Because of FLB's oversecured claimant status, no write-down was necessitated by FLB, forced or otherwise.
The Sixth Circuit in Memphis Bank held that the undersecured creditor was entitled to interest at the current market rate, even if the current market rate exceeded the contract rate. In Colegrove, however, the Sixth Circuit held that a current market rate is proper with a "maximum limitation" on the interest rate to be awarded being the underlying contract rate of interest. The creditor in Colegrove was fully secured and was not required to undergo a write-down of its claim, whereas the creditor in Memphis Bank was undersecured and was forced into a write-down situation by operation of law.
At the time of the present Debtors' Plan confirmation, FLB's interest rate on the Debtors' farm mortgage was a 12.75% variable rate. Variable rates are permissible under the subject mortgage agreement and thusly may constitute a contract rate of interest. As earlier determined, the initial rate of interest under the mortgage agreement was 8.75% which was applied in 1978. (See, FCB Ex. 1). The variable interest rate charged has been as high as 14.75% as a default interest rate. Due to their delinquent payment record, the Debtors were charged and paid a 14.75% default interest rate during most of 1987. At other times in 1987 they were charged a rate of 12.75%. Throughout 1988, they were charged a default interest rate of 14.75%, until September 5, 1988 when their interest rate again reverted to 12.75%. They have been charged no less than 12.00% interest on their mortgage since an announced rate change occurred on September 1, 1981. On the petition date, January 19, 1989, the applicable interest rate was 12.75% (FCB Ex. 2). Postpetition, on March 1, 1989, the interest rate remained at 12.75%. At the time of Plan confirmation, the same interest rate was applied by the FLB. Thusly, 12.75% is the focal rate to be considered. In view of these additional findings, and upon reconsideration, a fixed rate of 12.75% interest is hereby approved as the contract rate for the term of the Debtor's approved Plan. The allowed interest rate for the plan is a fixed rate, as opposed to a variable rate as the value must be fixed as of the Plan's effective date. See, U.S. v. Neal Pharmacal Co., 789 F.2d 1283 (8th Cir.1986). See also, In re Janssen Charolais Ranch, Inc., 83 B.R. 743 (Bankr.Mont. 1987). The interest rate previously approved at Plan confirmation is hereby vacated.
Stock Abandonment
The matter, sub judice, is more akin to the Colegrove situation where the creditor was fully secured. Although there exists no apparent write-down on the farm mortgage, per se, due to the FLB's oversecured status, there is some diminution of its security. As argued by the FLB, there is a Farm Credit Administration (FCA) requirement for borrowers to own a certain amount of stock to partially collateralize a loan. 12 U.S.C. 2034(a). In the Debtors' confirmed Plan, a provision calls for abandonment of their required FCA stock shares. See, Plan. That abandonment effectively diminishes, in part, the FLB's security although it remains oversecured.
The Plan, as confirmed, allowed the Debtors to abandon certain shares of stock which they were required to purchase pursuant to a requirement of the Farm Credit Administration (FCA). Upon reconsideration, that specific Plan provision allowing such abandonment and the pertinent portion of the judgment entered thereon is hereby vacated. The applicable provision of the former Farm Credit Act, which disallowed such a unilateral abandonment of *139 stock by a borrower, were recodified into the present Agricultural Credit Act of 1987, Pub.L.No. 100-233, 101 Stat. 1568 (1988), which effectively maintained the requirement of allowing the lenders sole discretion regarding stock retirement. See, 12 U.S.C.A. 2154a(c)(1)(I); See also, In re Shannon, 100 B.R. 913, 920 (S.D.Ohio 1989). Accordingly, the instant Debtors cannot abandon their stock shares without the FLB's approval.
CONCLUSION
Accordingly, the movant's motion is granted, and this Court's Memorandum of Opinion and Order and Judgment confirming the Debtors' Plan entered on April 6, 1989 is hereby altered and amended to the extent addressed herein.
IT IS SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919008/ | 106 B.R. 632 (1989)
In re Jack Elvin LITTLETON & Karen Littleton, Debtors.
BORG-WARNER ACCEPTANCE CORPORATION, Appellant,
v.
Jack Elvin LITTLETON & Karen Littleton, Appellees.
In re Joel Dean MOORE & Eunice Eileen Moore, dba K & V Applied Music, Debtors.
BORG-WARNER ACCEPTANCE CORPORATION, Appellant,
v.
Joel Dean MOORE & Eunice Eileen Moore, dba K & V Applied Music, Appellees.
BAP No. EC 88-1935-AsPMo, Bankruptcy Nos. 286-05604-B-7, 287-02677-B-11, Adv. Nos. 287-0570, 287-0282.
United States Bankruptcy Appellate Panel of the Ninth Circuit.
Argued and Submitted May 24, 1989.
Decided October 26, 1989.
*633 Ronald H. Sargis, Hefner, Stark & Marois, Sacramento, Cal., for appellants.
Mark W. Briden, Redding, Cal., for appellees.
Before ASHLAND, PERRIS and MOOREMAN, Bankruptcy Judges.
ASHLAND, Bankruptcy Judge:
Transamerica Commercial Finance Corporation appeals from the bankruptcy court's determination that the debts owed by Jack Littleton, Joel Moore, and Eunice Moore did not result from the willful and malicious conduct of the debtors as required by Bankruptcy Code § 523(a)(6) [11 U.S.C. § 523(a)(6)] and were, therefore, dischargeable. We affirm.
FACTS
Transamerica Commercial Finance Corporation is a commercial financing company that provides inventory financing to retail businesses. The debtors, Jack Littleton, Joel Moore, and Eunice Moore, were officers, directors and shareholders of Jacob's Appliance and TV, Inc. (Jacob's). Jacob's sold and serviced appliances. In February 1985, Jacob's entered into an "Inventory Security Agreement and Power of Attorney" with Transamerica to provide the financing of inventory purchases. Transamerica was given a security interest in both the inventory purchased by Jacob's, and the proceeds from the sale of the inventory.
The security agreement required Jacob's to pay the cost price of each item of financed inventory to Transamerica as sales occurred. The payments to Transamerica were to be made in one of two ways. Jacob's was to report sales of inventory on a weekly basis and remit payment for the cost of sold inventory each week. In addition, Transamerica conducted monthly inspections of the inventory. If an item of inventory was not on the premises and not listed on a weekly sales report, Jacob's was required to pay Transamerica the cost of the item, it being presumed that the item had been sold without being reported.
The security agreement also provided that in the event of a default by Jacob's, Transamerica was entitled to immediate possession of its collateral. A default under the security agreement was defined as, among other things, the failure to pay amounts due to Transamerica as they became due. Jacob's made the required payments *634 to Transamerica up to and including June 5, 1986. On July 11, 1986 when Transamerica inspected the premises it was determined that inventory with a cost price of $63,422.63 was sold. Jacob's was not able to pay Transamerica the full amount, but was able to pay $27,039.95, leaving a balance due of $36,382.68. This constituted a default by Jacob's under the security agreement. Transamerica inspected the inventory again prior to the July 24, 1986 bankruptcy filing, and determined that additional inventory with a cost of $33,685.34 had been sold by Jacobs without making payment to Transamerica. On the date of bankruptcy, the balance owing was $70,068.02.
The debtors did not guarantee the debts of the corporation, thus the debtors would not ordinarily be liable for the corporate debt. Transamerica contends that as a result of Jacob's failure to pay the proceeds of the inventory sales when due, the debtors converted proceeds of the sales, or in the alternative embezzled the proceeds, and therefore the debts are not dischargeable pursuant to § 523(a)(6) or (a)(4).
The trial court found that Transamerica did not meet its burden of proof on the § 523(a)(4) embezzlement claim. On the claim of conversion, the bankruptcy court held that the method by which the payments were made and the inventory was handled, although intentional, did not constitute acts that necessarily produced harm, and that were without just cause or excuse, and therefore were not malicious under § 523(a)(6).
ISSUE
Whether corporate officers who fail to disburse to a secured creditor proceeds from the sale of inventory, in which the creditor has a secured interest, incur a debt in the personal bankruptcies of the officers that is nondischargeable under § 523(a)(4) or (a)(6).
STANDARD OF REVIEW
Findings of fact by the bankruptcy court are not set aside unless clearly erroneous while conclusions of law are reviewed independently. In re Posta, 866 F.2d 364, 366-67 (10th Cir.1989). In this case, the facts are relatively undisputed. The primary question is whether the debtors' conduct was malicious as that term is used in § 523(a)(6).
DISCUSSION
Transamerica argues that the debtors' intentional sale of inventory and consequent failure to remit payment to Transamerica in violation of the terms of the security agreement was by its nature malicious. Section 523(a)(6), the relevant provision in the Bankruptcy Code, provides:
(a) A discharge under section 727 . . . of this title does not discharge an individual debtor from any debt
(6) for willful and malicious injury by the debtor to another entity or the property of another entity;
11 U.S.C. § 523(a)(6).
Generally, such injury includes the conversion of property subject to a creditor's security interest. Posta, 866 F.2d at 367; In re Rebhan, 842 F.2d 1257 (11th Cir.1988); In re Long, 774 F.2d 875 (8th Cir.1985). For the debt to be nondischargeable under § 523(a)(6) the debtors' conversion of property must have been both willful and malicious. The creditor objecting to the discharge of the debt has the burden of proving both elements by clear and convincing evidence. In re Tilbury, 74 B.R. 73, 77 (9th Cir. BAP 1987), aff'd, 851 F.2d 361 (9th Cir.1988); see Posta, 866 F.2d at 367.
The first question is whether there was a wrongful act by the debtors, in this case conversion. Wachovia Bank and Trust Co. v. Banister, 737 F.2d 225 (2nd Cir.), cert. denied, 469 U.S. 1035, 105 S.Ct. 509, 83 L.Ed.2d 400 (1984). In California the elements of a conversion cause of action are (1) plaintiff's ownership or right to possession of the property at the time of the conversion; (2) defendant's conversion by a wrongful act or disposition of plaintiff's property rights; and (3) damages. Baldwin v. Marina City Properties, Inc., *635 79 Cal.App.3d. 393, 145 Cal.Rptr. 406 (1978).
The third element, damages, is straightforward. If a conversion occurred, Transamerica was damaged in that it lost collateral from which to satisfy its debt. The first and second elements present a more difficult question. As a secured party, although not an owner, under California law Transamerica has a special interest in the collateral securing its debt, and consequently may bring an action for conversion, only if upon default the security agreement allows them to take possession. Baldwin, 79 Cal.App.3d at 410, 145 Cal.Rptr. 406; see Everfresh, Inc. v. Goodman, 131 Cal. App.2d 818, 281 P.2d 560 (1955). The security agreement in this case provides that Transamerica, in the event of a default, has the right to take immediate and exclusive possession of the collateral. Collateral as defined in the security agreement includes proceeds. Thus under California law Transamerica has a sufficient possessory interest to state a cause of action for conversion.
Finally, money cannot be the subject of conversion unless a specific, identifiable sum is involved. 5 B. Witkin, Summary of California Law, Torts § 614, p. 710 (9th ed. 1988). As a general rule, "where the relationship of debtor and creditor only exists, conversion of the funds representing the indebtedness will not lie against the debtor, unless he holds the deposit in a fiduciary capacity, and is bound to return to the owner the identical money." Watson v. Stockton Morris Plan Co., 34 Cal.App.2d 393, 403, 93 P.2d 855 (1939); accord Haigler v. Donnelly, 18 Cal.2d 674, 681, 117 P.2d 331 (1941) ("money cannot be the subject of an action for conversion unless a specific sum capable of identification is involved (Baxter v. King, 81 Cal.App. 192 [253 P. 172])"). In this case Transamerica asserts that the diversion of proceeds to pay other creditors of the business constituted the act which forms the basis for the claim that the debtors converted Transamerica's property. The act complained of was not the sale of the inventory or the depositing of the funds in a corporate account, but the failure by the debtors to remit the proceeds to Transamerica at the end of the month per their agreement.
The Second Circuit addressed the question of whether proceeds subject to a security interest may be the subject of conversion. Wachovia Bank and Trust Co. v. Banister, 737 F.2d 225 (2nd Cir. 1984). In Banister the bank argued that a corporate officer who failed to disburse to the bank, a secured creditor, proceeds from the sale of inventory in which the bank had a security interest, incurred a debt that was non-dischargeable in the personal bankruptcy of the officer. The debtor was the president and sole stockholder of the business and had entered into a floor financing agreement in order to finance purchases of inventory.
The Second Circuit applying New York law held that in the absence of a duty imposed upon the corporation to segregate proceeds and remit those very funds to the bank, the president did not commit the tort of conversion by diverting the proceeds to the corporation's general business purposes, even though the corporation ultimately defaulted on its obligation to pay the bank. Banister, 737 F.2d at 227. The language used in the security agreement that created the obligation in Banister is virtually identical to the language of the agreement in this case. The Banister court also stated that the New York state law coincides with its view of federal law, that the bank, by achieving a secured interest in the proceeds that entitled it to priority against other creditors did not thereby become entitled to pierce the barrier of a bankruptcy discharge. Id. at 228; cf. In re Simmons, 9 B.R. 62, 64-65 (Bankr.S.D.Fla. 1981).
Some bankruptcy courts have impliedly rejected the Banister court's approach. These courts have merely stated in conclusory fashion that the conduct complained of, for example, failure to pay the secured creditor, proceeds derived from the sale of collateral, is tortious conduct. See In re Branch, 54 B.R. 211, 216 & 218 (Bankr.D. Colo.1985); In re Emporelli, 42 B.R. 814 *636 (Bankr.W.D.Pa.1984); Matter of Klix, 23 B.R. 187 (Bankr.E.D.Mich.1982); In re Penning, 22 B.R. 616 (Bankr.E.D.Mich. 1982). These courts tend to focus on whether the conduct was malicious without first analyzing whether the tort of conversion has been committed.
There are no California cases directly on point. However, several recent cases at least implied that cash "proceeds", as that term is used in Cal.Com.Code § 9306, may be the subject of a conversion. See American Nat'l Bank v. Cloud, 201 Cal.App.3d 766, 247 Cal.Rptr. 325 (1988); Producers Cotton Oil Co. v. Amstar Corp., 197 Cal. App.3d 638, 242 Cal.Rptr. 914 (1988).
We find the language of Cal.Com.Code § 9306 to be particularly instructive in this case. Section 9306 which defines proceeds and a secured party's rights on disposition of collateral provides:
(2) . . . a security interest continues in collateral notwithstanding sale, exchange or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor.
Cal.Com.Code § 9306(2) (West 1989) (emphasis added). The debtors in this case returned all inventory subject to the security interest to Transamerica, therefore, Transamerica's claim encompasses only cash proceeds derived from the sale of inventory.
The security agreement executed by the parties provides that the cash proceeds of each sale of inventory financed by Transamerica would be held in a segregated account. The testimony, in this case, evidences that: 1) a separate account was never established; 2) Transamerica was aware that a separate account was never established; and 3) Transamerica accepted payments by way of checks drawn from the debtors' general business accounts. In short, through its course of dealing with the debtors, Transamerica never required the proceeds to be deposited into a segregated account.
In the recent case of In re Shah (Borg-Warner Acceptance Corporation v. Shah), 96 B.R. 290 (Bankr.C.D.Cal.1989) the bankruptcy court determined that a secured creditor was not entitled to a non-dischargeability judgment under § 523(a)(6) because "Defendants deposited Plaintiff's cash proceeds collateral in their general business account, as they had always done. They used those commingled funds to pay ordinary expenses of their business, including, at one point, completely repaying Plaintiff." Shah, 96 B.R. at 295 (emphasis added). In addition, the bankruptcy court held that the secured creditor, through its course of dealing, had waived its "cash segregation protections." Id. The Shah court reasoned that since the cash proceeds were not segregated and not otherwise identifiable they were not subject to the security interest and, therefore, the creditor had no personal property interest that could be converted. Id. at 293-94.
The facts in Shah are almost identical with those of this case. The debtors were allowed to place proceeds of inventory sales into the same general account from which they paid their ordinary business expenses. By waiving the protection of a segregated account, Transamerica made it impossible to identify cash proceeds, as required by § 9306(2). Transamerica cannot now be heard to complain that the disposition of funds in the general business account to pay ordinary business expenses constituted willful and malicious conduct with respect to its security interest in the inventory proceeds.
We, therefore, adopt the reasoning in Shah and hold that the disposition of Transamerica's cash proceeds collateral was not malicious under § 523(a)(6), and that even if the conduct were malicious the alleged conversion was excused by Transamerica's waiver of its contracted for protection in the form of a segregated account. Shah, 96 B.R. at 295; accord In re Sharp, 102 B.R. 764 (9th Cir. BAP 1989).
Even if Transamerica's waiver of the contract provision for a segregated account were not fatal and consequently the proceeds of inventory sales could be identified, *637 there would still be serious questions about the application of § 523(a)(6) to the facts in this case. The leading Ninth Circuit case defining the terms willful and malicious is In re Cecchini, 780 F.2d 1440 (9th Cir. 1986). The Cecchini court stated that the word willful means deliberate or intentional. Id. at 1443 (quoting 3 L. King, Collier on Bankruptcy § 533.16 at 523-118 (15th ed. 1983)). Thus, the willful element is straightforward. It simply addresses whether the debtors performed the acts complained of intentionally, as opposed to unintentional or accidental conduct. There is little question that the debtors in this case knew and understood how they were to make payments under the floor financing agreement, and further understood that writing checks for other business debts while Transamerica remained unpaid was in violation of the security agreement.
The issue here is whether in acting in violation of the agreement the debtors acted maliciously. In Cecchini the court held that the creditor need not show a specific intent to injure, but rather, the intent may be inferred from the nature of the act. Id. at 1443. The court stated:
When a wrongful act such as conversion, done intentionally, necessarily produces harm and is without just cause or excuse, it is "willful and malicious" even absent proof of a specific intent to injure.
Id. In other words, malice may be implied from the wrongful act.
On the issue of whether the debtors conduct was malicious, the bankruptcy court held:
. . . I had some question about the liability of individuals, shareholders, or officers of a corporation for the debts of a corporation where there has not been a guarantee or similar arrangement that we usually see in the context of the methods by which owners of corporations are made to be liable for debts. . . .
The next requirement is malice. Under In re Cecchini, malice is in effect implied. It is implied by the requirement that a wrongful act, such as conversion which is done intentionally, if it necessarily produced harm, and is without [just] cause, or excuse, then it is malicious, even absent specific proof of intent to injure.
And that's where I believe this case is to be decided today.
I have found that the defendants at all times were acting with the hope and expectation, perhaps improvidently, but sincerely hoped that they could keep the business going. They cooperated with the plaintiff until the time of the filing of the bankruptcy of Jacobs Appliance and TV.
. . . And indeed at the time of the filing of the bankruptcy petition for Jacobs Appliance and TV, Inc., it was filed as a Chapter 11, and an attempt was made to continue in business.
That leads me to conclude that the method by which the payments were made, and the inventory was handled, although it was intentional, did not constitute acts that necessarily produced harm, and that were without just cause or excuse. It turned out that they produced harm when the end of the line was reached. But there was a real expectation, including an expectation on the part of, at least some actors with the plaintiff, until very nearly the end that there was a chance that things would be worked out.
So based upon that, I conclude that the debts are dischargeable and the judgment should be entered for the defendants.
Transamerica argues that if the act complained of, in this case conversion, is done intentionally and causes injury, then the resulting debt is nondischargeable. While this is a correct statement of law, it is not a complete statement of the law as it now stands. The decision in Cecchini does not stand for the proposition that any disposition of collateral in violation of the security agreement creates a nondischargeable debt. Such a reading would put Cecchini in direct conflict with the Supreme Court's holding in Davis v. Aetna Acceptance Co., 293 U.S. 328, 55 S.Ct. 151, 79 L.Ed. 393 (1934). See In re Hodges, 83 B.R. 25 (Bankr.N.D.Cal.1988).
*638 In Davis, an auto dealer held its inventory under trust receipts forbidding sale without the consent of the secured creditor. One of Davis' salesmen sold an auto without obtaining the consent of the secured creditor. Davis proffered testimony that in the past the company had been allowed to sell cars without the express consent of the secured creditor and simply account for the proceeds. However, on this occasion Davis was unable to make payment to the secured creditor and filed bankruptcy.
The Supreme Court reiterated the rule enunciated in McIntyre v. Kavanaugh, 242 U.S. 138, 37 S.Ct. 38, 61 L.Ed. 205 (1916) and Tinker v. Colwell, 193 U.S. 473, 24 S.Ct. 505, 48 L.Ed. 754 (1904), both of which were relied on by the Cecchini court, but refused to hold the debt nondischargeable. Instead the Supreme Court concluded:
[A] wilful and malicious injury does not follow as of course from every act of conversion, without reference to the circumstances. There may be a conversion which is innocent or technical, an unauthorized assumption of dominion without wilfulness or malice. There may be an honest, but mistaken belief, engendered by a course of dealing, that powers have been enlarged or incapacities removed. In these and like cases, what is done is a tort, but not a wilful and malicious one. . . . The discharge will prevail as against a showing of conversion without aggravated features.
Davis, 293 U.S. at 332-33, 55 S.Ct. at 153 (citations omitted).
Thus it appears under Davis that a simple interference with legal rights is not enough in and of itself to prevent discharge of a debt. There must be some "aggravated features," associated with the conversion. Id. at 333, 55 S.Ct. at 153. It has not been clearly established precisely what type of conduct is sufficiently egregious to constitute malice in this context. See In re Long, 774 F.2d 875, 879 (8th Cir.1985). There is clearly a tension between the holding in Davis and that of the Ninth Circuit in Cecchini. This tension has lead to divergent results in cases dealing with security agreements that have been breached by the debtor.
As pointed out by the appellant, one line of cases views the breach of a security agreement, if knowingly done, as an obvious intentional harm to the rights of the secured creditor; and therefore, characterizes the conduct as "willful and malicious". See Chrysler Credit Corp. v. Rebhan, 842 F.2d 1257 (11th Cir.1988); In re Branch, 54 B.R. 211 (Bankr.D.Colo.1985); In re Emporelli, 42 B.R. 814 (Bankr.W.D.Pa.1984); Matter of Klix, 23 B.R. 187 (Bankr.E.D. Mich.1982); Matter of Ries, 22 B.R. 343 (Bankr.W.D.Wis.1982).
Other bankruptcy courts treat the breach of the security agreement as a "technical conversion" under Davis, and require a stronger showing of malice than may simply be inferred from the breach. See In re Posta, 866 F.2d 364 (10th Cir.1989); In re Long, 774 F.2d 875 (8th Cir.1985); In re Gallaudet, 46 B.R. 918 (Bankr.D.Vt.1985); In re Levitan, 46 B.R. 380 (Bankr.E.D.N.Y. 1985).
In defining the level of culpability necessary to bar a debtor's discharge, the standard formulated by the Cecchini court is that: 1) the act must be wrongful, 2) the act must be done intentionally, 3) the act must necessarily produce harm and be without just cause or excuse. Cecchini, 780 F.2d at 1443. In order to reconcile Davis with Cecchini, it is necessary to read the words "necessarily produces harm" to mean that the act must be targeted at the creditor, at least in the sense that the conduct is certain or almost certain to cause financial harm. Accord Long, 774 F.2d 881. In Cecchini the two partners who misappropriated prepayment checks apparently intended to convert the money to their own use.
In this case there was evidence that the debtors cooperated with the plaintiff in seeking additional financing that would allow the company to remain in business. Additionally, the debtors offered a third trust deed on their residence as additional security for the loan. There was no evidence that the debtors used any of the corporate funds for their personal benefit, *639 and there is no evidence that any other creditor was paid other than in the ordinary course of business in the month before bankruptcy was filed.
In addition, there was evidence that Transamerica was aware of the sold-out-of-trust situation for some time and that the condition had in fact existed for over a year. These facts suggest Transamerica's acquiescence, at least to some extent, in the conduct of the debtors with respect to the sold-out-of-trust condition. As such, Transamerica fits within the Davis fact pattern, and should not now prevail against the bankruptcy discharge.
The bankruptcy, court was entitled to rely on the debtors' testimony as to their intent to benefit Transamerica and other creditors of the company. While the debtors' conduct must be disapproved, there was not error below in ruling that the debtors did not act maliciously, as that term is used in § 523(a)(6).
Transamerica also argues that the debtors embezzled the proceeds of the inventory sales. Transamerica relies on Cal. Penal Code § 504b which states:
Where under the terms of a security agreement, as defined in Section 9105 of the Commercial Code, the debtor has the right to sell the property covered thereby and is to account to the secured party for, and pay to the secured party the indebtedness secured by the security agreement from, the proceeds of the sale of any of the said property, and where such debtor, having sold the property covered by the security agreement and having received the proceeds of such sale, willfully and wrongfully, and with the intent to defraud, fails to pay to the secured party the amounts due under the security agreement, or the proceeds of the sale, whichever is the lesser amount, and appropriates such money to his own use, said debtor shall be guilty of embezzlement and shall be punishable as provided in Section 514.
Cal.Penal Code § 504b (emphasis added).
Assuming all other elements of embezzlement are met under § 504b, Transamerica's contention fails because the bankruptcy court found that at all times the debtors intended to benefit the corporation by securing financing so that the company could pay all its debts. Section 504b requires Transamerica to prove as an element of embezzlement the intent to defraud. As discussed above, the bankruptcy courts' finding that at all times the debtors acted with the intent to benefit the corporation was supported by the record. This finding negates any contention that the debtors intended to defraud Transamerica when they diverted the proceeds in violation of the security agreement.
CONCLUSION
The judgment of the bankruptcy court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919026/ | 106 B.R. 58 (1989)
NEW YORK CITY SHOES, INC.
v.
BEST SHOE CORP.
Civ. A. No. 89-4246.
United States District Court, E.D. Pennsylvania.
September 22, 1989.
*59 Pauline K. Morgan, Philadelphia, Pa., for debtor.
Lawrence J. Lichtenstein, Bradley K. Moss, Philadelphia, Pa., for defendants.
MEMORANDUM
GILES, District Judge.
I. FACTUAL AND PROCEDURAL BACKGROUND
This is an appeal from an April 14, 1989 order of the bankruptcy court 98 B.R. 725. Jurisdiction to hear an appeal from a bankruptcy court's final judgment is found in 28 U.S.C. § 158.
New York City Shoes (debtor) instituted an action in an effort to recover $178,544.75 which it claims were preferential transfers made by it to Best Shoe Corp. (creditor) and $3,600.00 which the creditor transferred to First Footwear Corp. (First Footwear). Below, the parties were able to stipulate to the liability of Best Shoe and First Footwear (collectively referred to as the defendants) as to all monies claimed except to a $100,000.00 payment made by New York City Shoes to Best Shoe on April 15, 1987. The parties further stipulated that all elements of a preference, as set forth in 11 U.S.C. § 547(b) were made out except whether a "transfer of the interest of the debtor in property" had occurred. Best Shoe contends that the $100,000.00 payment was earmarked for a third party and is, therefore, excluded from avoidance.
At trial George Miller, the debtor's accountant, testified that New York City Shoes made the $100,000.00 payment of April 15, 1987 because of antecedent debts owed to Best Shoe. The transaction is reflected that way on the books of both companies. Both Miller and Earl Shub, the debtor's former Chairman of the Board of Directors and Trustee of the Jesse R. Shub Trust (the "Trust"), testified that the Trust had lent $100,000.00 to New York City Shoes in return for a sixty day promissory note. Both testified that the debtor then issued a cashier's check for $100,000.00, payable to Best Shoe. Shub testified that he authorized the loan on behalf of the Trust and that he regularly authorized such loans from the Trust to New York City Shoes. Paul Short, creditor's former President, testified that Terry Rakoff, debtor's President, hand-delivered the cashier's check to the creditor.
II. $100,000.00 LOAN CHARACTERIZATION
The question of how the $100,000.00 loan should be characterized presents a mixed *60 question of law and fact. This means that the factual determinations by the bankruptcy court are unassailable by the reviewing district court, unless the findings are clearly erroneous. Fed.R.Civ.P. 52(a). U.S. v. U.S. Gypsum Co., 333 U.S. 364 at 394, 68 S.Ct. 525 at 541, 92 L.Ed. 746 (1948). "A finding is `clearly erroneous' when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Id. at 394, 68 S.Ct. at 541. If the trial court's factual determination is supported by the record, then an analysis of the legal aspects of the findings must be examined to determine whether the findings were legally sufficient. Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98 at 102 (3d Cir.1981) citing Smith v. Harris, 644 F.2d 985 at 990 n. 1 (3d Cir.1981) (Aldisert, J., concurring).
In this appeal, the underlying facts were those presented by the testimony of Messrs. Shub, Miller, and Short. The bankruptcy court characterized the transaction, based upon the descriptions of these witnesses, as other than an "earmarked" loan, and as such found that it did not meet the exception of 11 U.S.C. § 547(b).
Review shows that the factual finding below is supported by the record. The bankruptcy court based its finding that the transfer was voidable on evidence showing that the Jesse R. Shub Trust Fund lent New York City Shoes $100,000.00 to improve the debtor's cash flow and not so an antecedent debt could be satisfied. Shub testified that he often made loans to the debtor on behalf of the Trust to improve the debtor's cash flow. Trial transcript at 47; Doc. 3, pp. 10-11. Shub also stated that when he authorized this loan to New York City Shoes, he was aware of debt to Best Shoe, but that he did not know the amount of that debt. Trial Transcript at p. 43. The bankruptcy court inferred from this testimony that the debtor had the power to use these funds of $100,000.00 to diminish debt that had been incurred by the debtor other than the money owed to Best Shoe Corp. This court finds that inference rational and based on the record evidence. Therefore, this court is not "left with the definite and firm conviction that a mistake has been committed." Gypsum, 333 U.S. at 394, 68 S.Ct. at 541.
The fundamental inquiry in a case, such as this, is whether the transfer diminished or depleted the debtor's estate. 3 Collier on Bankruptcy, ¶ 547.03, at 547-23. If the transfer is made so that the distribution to other creditors is not adversely affected in any way, then no basis exists to justify avoidance of the transfer as a preference for the benefit of other creditors. See e.g. In re Hartley, 825 F.2d 1067, 1070-72 (6th Cir.1987); Coral Petroleum, Inc. v. Banque Paribas-London, 797 F.2d 1351, 1355-56 (5th Cir.1986).
The bankruptcy court held that, while the rationale behind the earmarking doctrine was persuasive, its reasoning should extend only to cases where the lack of diminution of the debtor's estate is clearly due to the transfer record. The bankruptcy court emphasized that the doctrine should not be extended "to provide a windfall to a creditor, thus allowing the creditor to sidestep the disgorgement of an otherwise clearly-preferential payment just because the debtor has utilized a third party as a source of the funds for payment." R. at Doc. 3, p 9. The court agreed with the reasoning of the bankruptcy court in In re Villars, 35 B.R. 868, 872 (Bankr.S.D.Ohio 1983), which held that the mere fact that funds disbursed by a debtor can be traced to a third party does not, in itself, exempt the transfer from the voidable preference doctrine.
The creditor's argument that the preference is not voidable seems to be premised on the fact that Shub knew that the loaned money would be used to pay the creditor or that he knew that the money served ultimately to reduce the debtor's debt owed to the creditor. The standard outlined in the case law to determine when loans are "earmarked" is one of control, not subjective knowledge. In In re Villars, 35 B.R. 868 (Bankr.S.D.Ohio 1983) the court stated that in order for a loan to be "earmarked" the lender must choose the recipient of the loans. Id. at 872. Likewise in Grubb v. *61 General Contract Purchase Corp., 94 F.2d 70 (2d Cir.1938) the lender drafted the check payable to the creditor, so that the debtor never received the loaned money. The court determined that the loan was "earmarked" and, therefore, not preferential.
For funds to be "earmarked" the third party lender must exercise strict control over the distribution of the funds which it advances to the debtor. Absent such control, the debtor may retain the funds in question and, in deciding to disperse them, act to diminish the assets of the debtor's estate. R. at Doc. 3, p. 10.
Best Shoe does not dispute the bankruptcy court's conclusions of law on this point because it cites cases which determine that voidable preferences exist on the ground that the third party lender substituted itself for the creditor by actively controlling the loan (Appellant's brief pg. 14-19) The facts of In re Hartley, 825 F.2d 1067 (6th Cir.1987) are illustrative. In that case the lender, debtor and creditor had a meeting to discuss the payment of the debt, at which time the lender agreed to do so by sending the money directly to the creditor. Id. at 1068. The lender wired money to the creditor directly from its bank account. Id. at 1069. In Hartley the court concluded that the loan was not owned by the estate because it was not controlled by the estate. The case law, therefore, supports the legal sufficiency of the bankruptcy court's finding. Moreover, the bankruptcy court specifically found that the debtor exercised such control over the Trust that any argument that the Trust controlled the money at any point in time is purely illusory, elevating form over substance. See Adjudication, Findings of Fact, pp. 9, 10 and Discussion, p. 11. Even the form was not pure. Rakoff, the debtor's president, had check signing powers with respect to the Trust, and had the power to use and had by practice, used, the Trust to augment the debtor's cash flow. No reversible error exists on the ultimate factual finding that the $100,000.00 payment to Best Shoe is a voidable preference pursuant to 11 U.S.C. § 547(b).
III. INVOCATION OF THE FIFTH AMENDMENT
The creditor argues that the court erred in its conclusion that Rakoff properly invoked his fifth amendment privilege against self-incrimination. In order to prevail, appellant must show that the court erred and that the error was not harmless. Fed.R.Civ.P. 52(a). U.S. v. U.S. Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746 (1948).
The fifth amendment affords protection to parties and witnesses in both criminal and civil proceedings. McCarthy v. Arndstein, 266 U.S. 34, 45 S.Ct. 16, 69 L.Ed. 158 (1924). The privilege protects the witness from compelled answers to questions that would themselves support a conviction for a crime or that would lead to evidence supporting a prosecution for a crime. Blau v. U.S., 340 U.S. 159, 71 S.Ct. 223, 95 L.Ed. 170 (1950).
The privilege may only be invoked where the witness has reasonable cause to fear self-incrimination if the question is answered. Mason v. U.S., 244 U.S. 362, 37 S.Ct. 621, 61 L.Ed. 1198 (1917), U.S. v. Apfelbaum, 445 U.S. 115, 100 S.Ct. 948, 63 L.Ed.2d 250 (1980). A witness may be compelled to answer a question if it is clear that she or he is mistaken with regard to the justification for the privilege. Hoffman v. U.S., 341 U.S. 479, 71 S.Ct. 814, 95 L.Ed. 1118 (1951). In assessing whether a witness has properly invoked the amendment's protection, the trial court must assess the circumstances under which the witness is testifying. The court "must be governed as much by his personal perception of the peculiarities of the case as by the facts actually in evidence". Id. at 487, 71 S.Ct. at 818. See Malloy v. Hogan, 378 U.S. 1 at 13, 84 S.Ct. 1489 at 1496, 12 L.Ed.2d 653 (1964).
The bankruptcy court determined that Rakoff properly invoked the protection of the fifth amendment based on an analysis of the circumstances of the case and Rakoff's previous appearance before that court in matters related to this case. The *62 court in a previous opinion, In re New York Shoes, Inc., 84 B.R. 947 at 953 (Bankr.E.D.Pa.1988), found that Rakoff had such unbridled control over the debtor's financial affairs that he had the power to "do what he liked without detection". Id. R. at Doc. 3, p. 11. Therefore, in assessing the circumstances surrounding this matter, the court determined that Rakoff reasonably feared self-incrimination. The trial judge can permissibly rely on facts not in the record. See e.g., In re Morganroth, 718 F.2d 161 (6th Cir.1983).
The creditor's counsel asked that the court direct Rakoff to justify his decision to invoke the privilege, after he stated that he believed answers to the questions asked may provide a "link in the chain" of the evidence against him. Trial Transcript at p. 75. The court found such an inquiry troublesome because Rakoff would have to say why he would be incriminated. In Hoffman the court was fearful of the paradox facing witnesses seeking the privilege's protection who must incriminate themselves to show that a response to a question may be incriminating. "To sustain the privilege, it need only be evident from the implications of the question, in the setting in which it is asked, that a responsive answer to the question or an explanation of why it cannot be answered might be dangerous because injurious disclosure might result". Hoffman v. U.S., 341 U.S. 479 at 486, 71 S.Ct. 814 at 818, 95 L.Ed. 1118 (1951). Thus, the bankruptcy court exercised its discretion permissibly in finding that a justification for invoking the privilege would compromise the protection of that privilege.
Even if the bankruptcy court erred in its refusal to compel Rakoff's testimony, the error was harmless. Shub, Short and Miller all agreed on Rakoff's participation in the $100,000.00 loan transaction. Rakoff's signature on the Trust check was identified by Shub and Miller. Additionally, Best Shoe has not supplied any factual foundation for its argument that Rakoff could supply information that would change the characterization of the loan to "earmarked" money. As stated previously in this opinion, the lender's control of the loan provides the litmus test by which the transaction is categorized. The record clearly establishes Rakoff's control of the loan proceeds.
IV. REFERENCE TO PREVIOUS TRIAL
The creditor argues that the bankruptcy court opinion improperly relies on observations made at a previous trial, involving the debtor's principals, In re New York Shoes, Inc., 84 B.R. 947 (Bankr.E.D.Pa.1988). As stated throughout this opinion, appellant must demonstrate that the finding cannot be sustained on the facts before the court. The creditor does not meet this burden.
The bankruptcy court's opinion specifically states that it relies on the record before it, as well as its prior opinion. R. at Doc 3, p. 10, 11. The trial transcript is replete with examples of the debtor's control of the funds here in issue. Thus, the finding is sufficiently supported by testimony made at trial and cannot, therefore, be reversed.
ORDER
AND NOW, this 21st day of September, 1989, it is hereby ORDERED that the bankruptcy court's opinion in the above captioned matter is affirmed in all respects. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547673/ | 144 F.2d 338 (1944)
NEWELL et al.
v.
PHILLIPS PETROLEUM CO. et al.
No. 2778.
Circuit Court of Appeals, Tenth Circuit.
August 14, 1944.
*339 Harry O. Glasser, of Enid, Okl., and Henry S. Johnston, of Percy, Okl., for appellants.
Rayburn L. Foster, of Bartlesville, Okl. (Don Emery and D. E. Hodges, both of Bartlesville, Okl., and E. G. DeParade, of Oklahoma City, Okl., on the brief), for appellees.
Before PHILLIPS, BRATTON, and HUXMAN, Circuit Judges.
BRATTON, Circuit Judge.
A. Mae Newell owned 22 lots in Armourdale Addition to Oklahoma City, Oklahoma. She executed an oil and gas lease covering the premises which contained the conventional royalty provision of 1/8th of the oil and gas produced. By various assignments, Phillips Petroleum Company acquired lease; and it was consolidated or communitized for oil and gas purposes, which had the effect of limiting the royalty rights of A. Mae Newell in the entire area to 11/12ths of 1/8th royalty interest. In December, 1930, Phillips completed a producing well on the premises. A. Mae Newell sold and conveyed to a third person her royalty interest in the well, effective January 1, 1935. A. Mae Newell joined by her husband John Q. Newell, instituted this action against Phillips and Standish Pipe Line Company. The purposes of the action were an accounting for oil and gas produced from the well, damages for the wrongful conversion of oil and gas taken from the well, and damages against Phillips for failure diligently and prudently to operate the well. Defendants prevailed, and plaintiffs appealed.
The issues tendered by the amended complaint on which the case was tried were broad in scope, but the case here falls within a relatively narrow compass. The primary contention advanced for reversal of the judgment is that Phillips failed to operate the well in a prudent manner prior to April 10, 1933, resulting in damage to A. Mae Newell. Beginning in 1931, the Corporation Commission of Oklahoma entered certain proration orders from time to time in which it fixed the maximum quantities of oil which could be taken from the wells, respectively, in the Oklahoma City field, but all of the orders entered prior to April 10, 1933, were determined to be void. H. F. Wilcox Oil & Gas Co. v. Walker, 168 Okl. 355, 356, 32 P.2d 1044. Though subsequently determined to be void, about ninety per cent of the operators in the field, including Phillips, complied with the orders of proration. It was conceded in the trial court that the orders entered after April 10, 1933, were valid and effective and that there was no basis for recovery of any oil produced during that time. The well in question was high on the structure. Phillips drilled more than thirty wells in the field. Twenty-two in the general vicinity of this well were below it on the structure. They averaged more in production than did this well. This well was operated intermittently. It was closed down part of the time. It was the duty of Phillips to operate this well prudently and with reasonable diligence. The relationship of the parties created an implied obligation to do so. Its duty in that respect was not affected in any manner by its ownership of other wells in the vicinity. And its failure to discharge that duty, whether motivated by its interest in wells located lower on the structure, or otherwise, would render it liable in damages for any injury suffered by the owner of the royalty interest. Operating a well prudently and with reasonable diligence means the doing of that which an experienced operator of ordinary care and prudence would do in the same or similar circumstances, or the failure to do that which such an operator would not do in the same or similar circumstances, having due regard for the rights, interests, and advantages of both lessor and lessee. Much evidence, including testimony given by experts, was introduced at the trial in respect to conditions existing in the field and to the manner of operation of this well during the period involved. Broadly, the evidence related to gas-oil ratios in the operation of producing wells, the widely fluctuating ratio of this well, production, particularly in Oklahoma and Texas, commodity demands, available markets, price levels, and other factors. There is no need to review the evidence at length. It is enough to say that it presented material issues of fact *340 for the trial court. The court found that from December 21, 1930, to January 1, 1935, this well produced 463,311 barrels of oil; that from January 4, 1931, to April 10, 1933, it was operated in compliance with the proration orders of the Commission, and that Phillips accounted to A. Mae Newell for her interest the oil produced during that period; that the well was high on the structure on a facing fault; that a comparison of the production from it with that of the adjacent wells, their respective and relative locations in distance and structure considered, failed to disclose or show that there had been any appreciable drainage of oil from the lease; that by May, 1933, the production of the well had decreased to a large extent; that there were numbers of wells on adjacent leases, the unrestricted operation of which would have materially affected the capability or capacity of this well to produce; that there was no basis for the belief that the well would have produced more oil under conditions of unrestricted operations in the field than the actual production under restrictions imposed by the Commission; that from the time of the completion of the well to April 10, 1933, there was a surplus of oil in Oklahoma and in the United States; that large quantities were in storage in Oklahoma and in the United States; that there was not available tankage for storage during most of the period; that purchasers for storage in Oklahoma were unwilling to buy or would buy only at low prices which would not permit the operator to realize a profit from the production of oil; and that, though the proration orders entered during that period were void, there existed sound reason for the exercise of the authority of the Commission to curtail production in the Oklahoma City field. And from these findings, the court concluded that Phillips produced oil from the well prudently and with reasonable diligence. The findings are supported by substantial evidence. They are not clearly erroneous, due regard being had for the opportunity of the trial court to see and judge of the credibility of the witnesses. Therefore they cannot be overturned on appeal. Prudential Ins. Co. v. Carlson, 10 Cir., 126 F.2d 607. Since there was no failure to operate the well in a prudent manner and with reasonable diligence, it follows that plaintiffs did not suffer any injury for which Phillips is liable in damages.
It is urged that the court improvidently denied recovery for the balance due for royalty gas taken from the well. Plaintiffs tendered requested findings of fact that the average price of wet gas produced during the period involved was two cents per 1000 cubic feet, as metered at the mouth of the well; that computed on that basis, Phillips was indebted to plaintiffs in the total sum of $2360.67; that $723.93 had been paid to them; and that they were entitled to recover the balance, $1633.74. But the court found that there was no evidence of the value of the gas, and the record supports the finding. The measure of recovery for the gas was the market value of such gas, less the amount already paid. And in the absence of any evidence establishing value, the court properly denied recovery.
Long in advance of the trial, plaintiffs filed in the cause 352 interrogatories in discovery and accounting, with the request that the defendants make joint and separate answers to them. The court required the defendants to answer some of the interrogatories but not others. That action is challenged. Rule of Civil Procedure 33, 28 U.S.C.A. following section 723c, authorizes any party to an action to propound interrogatories to an adverse party, provides that objections to any of such interrogatories may be presented to the court, and further provides that answers shall be deferred until the objections are determined, which shall be as early as is practicable. While the rule should be accorded a liberal rather than a narrow interpretation, still the trial court is vested with reasonable discretion in determining whether a party is entitled to have interrogatories answered, and the action of the court in respect thereto will not be disturbed except in case of abuse of the discretion. Some of the interrogatories to which the court sustained objections appear on their face to be wholly immaterial, some cumulative, some onerous, and some unreasonably burdensome. On the whole, it cannot be said that the court abused its discretion in determining that they should not be answered.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1017402/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-5077
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
KAMAL MABREY,
Defendant - Appellant.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Richard D. Bennett, District Judge. (CR-
03-511-RDB)
Submitted: September 9, 2005 Decided: October 20, 2005
Before MICHAEL, KING, and GREGORY, Circuit Judges.
Affirmed in part, vacated in part, and remanded by unpublished per
curiam opinion.
James Wyda, Federal Public Defender, John H. Chun, Assistant
Federal Public Defender, Baltimore, Maryland, for Appellant.
Allen F. Loucks, United States Attorney, John F. Purcell, Jr.,
Assistant United States Attorney, Baltimore, Maryland, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Kamal Mabrey pled guilty to being a felon in possession
of a firearm, in violation of 18 U.S.C. § 922(g)(1) (2000), and the
district court sentenced him to 188 months of imprisonment, the
bottom of the applicable Sentencing Guidelines range. The district
court also announced an alternate sentence of 180 months, the
statutory mandatory minimum sentence, if the Sentencing Guidelines
were advisory only. On appeal, Mabrey asserts that the district
court erred in classifying him as an armed career criminal under 18
U.S.C.A. § 924(e) (West 2000 & Supp. 2005), that his sentence
violates the Sixth Amendment because the predicate offenses used to
enhance his sentence were neither submitted to a jury nor admitted
by him, and that the court erred by sentencing him under a
mandatory Sentencing Guidelines scheme. Mabrey does not challenge
his conviction on appeal. We affirm Mabrey’s conviction, vacate
Mabrey’s sentence, and remand for resentencing.1
Mabrey first asserts that the district court erred in
concluding that his Maryland conviction for second-degree burglary
qualified as a violent felony under § 924(e). “[I]n reviewing a
district court’s application of [§ 924(e)(1)], we review its legal
determinations de novo and its factual findings for clear error.”
1
Just as we noted in United States v. Hughes, 401 F.3d 540,
545 n.4 (4th Cir. 2005), “[w]e of course offer no criticism of the
district judge, who followed the law and procedure in effect at the
time” of Mabrey’s sentencing.
- 2 -
United States v. Wardrick, 350 F.3d 446, 451 (4th Cir. 2003), cert.
denied, 541 U.S. 966 (2004). We recently stated that determining
whether a prior felony qualified as a violent felony under § 924(e)
is a legal determination. United States v. Thompson, __ F.3d __,
__, 2005 WL 2128957, at *1, *4 (4th Cir. Sept. 6, 2005)
(No. 04-4678).
In Taylor v. United States, 495 U.S. 575 (1990), the
Supreme Court held that a defendant “has been convicted of burglary
for purposes of a § 924(e) enhancement if he is convicted of any
crime, regardless of its exact definition or label, having the
basic elements of unlawful or unprivileged entry into, or remaining
in, a building or structure, with intent to commit a crime.” Id.
at 599. Generally, a sentencing court need only consider the fact
of the prior conviction and the statutory definition of the prior
offense to determine whether the prior offense was a burglary
within the meaning of § 924(e)(2)(B)(ii). Taylor, 495 U.S. at 602.
If, however, the statutory definition of the offense includes
conduct which would not constitute burglary under § 924(e), such as
unlawful entry into an automobile, a boat, or a vessel, the court
may examine the indictment or information and the jury instructions
to determine if the jury had to find all the elements of generic
burglary to convict the defendant. Id. at 599, 602; see Shepard v.
United States, 125 S. Ct. 1257, 1263 (2005) (holding that
sentencing court cannot look to police reports or complaint
- 3 -
applications to determine whether prior offense is generic burglary
but may “examin[e] the statutory definition, charging document,
written plea agreement, transcript of plea colloquy, and any
explicit factual finding by the trial judge to which the defendant
assented” or “some comparable judicial record of this
information”).
Here, second-degree burglary in Maryland has as elements
the unprivileged entry into a building for the purpose of
committing a crime. See Md. Ann. Code art. 27, § 30 (2000)
(prohibiting “break[ing] and enter[ing] the storehouse of another
with the intent to commit theft”) (repealed 2002) (current version
at Md. Code Ann., Crim. Law § 6-203 (2002)); Md. Ann. Code art. 27,
§ 28(e) (2000) (defining storehouse) (repealed 2002) (current
version at Md. Code Ann., Crim. Law § 6-201(h) (Supp. 2004)).
Because the state statutes cover conduct that does not constitute
generic burglary under Taylor, we next examine the state court
indictment.
Although Mabrey contends, as he did in the district
court, that the state court indictment to which he pled guilty was
ambiguous, we disagree. The indictment alleged that Mabrey
unlawfully broke and entered into the “storehouse of Woodbridge
Elementary School.” (JA-I at 26). By defining the storehouse as
Woodbridge Elementary School, the indictment charged Mabrey with
unlawfully breaking and entering a building. Because the
- 4 -
second-degree burglary conviction satisfied the definition of
generic burglary set forth in Taylor, as determined by reference to
documents approved in Shepard, we find that the conviction
qualified as a violent felony under § 924(e).2 Thus, the district
court properly designated Mabrey as an armed career criminal.
Next, citing Blakely v. Washington, 542 U.S. 296 (2004),
Mabrey contends that sentencing him as an armed career criminal
violated his Sixth Amendment rights. Because Mabrey raised this
issue in the district court, we review his claim de novo. See
United States v. Mackins, 315 F.3d 399, 405 (4th Cir. 2003)
(stating standard of review). Mabrey’s argument is foreclosed by
our decisions in Thompson, __ F.3d at __, 2005 WL 2128957, at *2
n.2, *4, *6 (holding that nature and occasion of offenses are facts
inherent in convictions and those facts need not be alleged in
indictment or submitted to jury), and United States v. Cheek, 415
F.3d 349, 350 (4th Cir. 2005) (holding that application of armed
career criminal enhancement falls within exception for prior
convictions where facts were undisputed, making it unnecessary to
engage in further fact finding about a prior conviction). Thus,
there is no Sixth Amendment error in this case.
Finally, Mabrey asserts that his sentence violates United
States v. Booker, 125 S. Ct. 738 (2005), because the district court
2
Mabrey conceded that he had two other qualifying predicate
convictions.
- 5 -
sentenced him under a mandatory Sentencing Guidelines scheme. We
have held that treating the Guidelines as mandatory is error under
Booker. United States v. White, 405 F.3d 208, 216-17 (4th Cir.
2005). Our review of the record convinces us that there is a
nonspeculative basis on which we could conclude that the district
court would have sentenced Mabrey to a lower sentence had the court
proceeded under an advisory Sentencing Guideline scheme. See id.
at 223. Thus, we find that sentencing Mabrey under a mandatory
Sentencing Guidelines scheme affected his substantial rights. See
id. (noting that substantial rights inquiry under plain or harmless
error is the same and that only difference is who bears burden of
proof).
Accordingly, we vacate Mabrey’s sentence and remand for
resentencing.3 We also affirm Mabrey’s conviction. We dispense
with oral argument because the facts and legal contentions are
3
Although the Guidelines are no longer mandatory, Booker makes
clear that a sentencing court must still “consult [the] Guidelines
and take them into account when sentencing.” 125 S. Ct. at 767
(Breyer, J., opinion of the Court). On remand, the district court
should first determine the appropriate sentencing range under the
Guidelines, making all factual findings appropriate for that
determination. Hughes, 401 F.3d at 546. The court should consider
this sentencing range along with the other factors described in 18
U.S.C.A. § 3553(a) (West 2000 & Supp. 2005), and then impose a
sentence. Hughes, 401 F.3d at 546. If that sentence falls outside
the Guidelines range, the court should explain its reasons for the
departure as required by 18 U.S.C.A. § 3553(c)(2) (West 2000 &
Supp. 2005). Hughes, 401 F.3d at 546. The sentence must be
“within the statutorily prescribed range and . . . reasonable.”
Id. at 547.
- 6 -
adequately presented in the materials before the court and argument
would not aid the decisional process.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
- 7 - | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1017435/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-4195
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
ALEJANDRO GARCIA,
Defendant - Appellant.
Appeal from the United States District Court for the District of
South Carolina, at Columbia. Cameron McGowan Currie, District
Judge. (CR-04-815)
Submitted: September 28, 2005 Decided: October 18, 2005
Before LUTTIG and TRAXLER, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
John H. Hare, Assistant Federal Public Defender, Columbia, South
Carolina, for Appellant. Jonathan Scott Gasser, Acting United
States Attorney, Anne Hunter Young, OFFICE OF THE UNITED STATES
ATTORNEY, Columbia, South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Alejandro Garcia appeals his conviction and twenty-four-
month sentence imposed after he pled guilty to being a felon in
possession of a firearm, in violation of 18 U.S.C. § 922(g)(1)
(2000). Garcia’s counsel has filed a brief pursuant to Anders v.
California, 386 U.S. 738 (1967), raising as potential issues the
district court’s compliance with Fed. R. Crim. P. 11 in accepting
Garcia’s guilty plea and the reasonableness of Garcia’s sentence.
Counsel states, however, that in his view, there are no meritorious
issues for appeal. Garcia was informed of his right to file a pro
se supplemental brief but has not done so. We affirm.
Counsel asserts that the district court committed three
errors in accepting Garcia’s guilty plea: (1) the court did not use
the exact language of Rule 11 when informing Garcia of the
consequences of providing false information during the plea
hearing, see Fed. R. Crim. P. 11(b)(1)(A); (2) the court failed to
advise Garcia of any applicable forfeiture, see Fed. R. Crim. P.
11(b)(1)(J); and (3) the court did not inform Garcia that it still
may be obligated to apply the Sentencing Guidelines, see Fed. R.
Crim. P. 11(b)(1)(M). Because Garcia did not move in the district
court to withdraw his guilty plea, we review his challenge to the
adequacy of the Rule 11 hearing for plain error. United States v.
Martinez, 277 F.3d 517, 525 (4th Cir. 2002) (holding that “plain
- 2 -
error analysis is the proper standard for review of forfeited error
in the Rule 11 context”).
We have carefully reviewed the transcript of the Rule 11
hearing and conclude that the alleged violations of Rule
11(b)(1)(A) and (M) are refuted by the record. With regard to the
district court’s failure to inform Garcia of any applicable
forfeiture, we find that the error did not affect Garcia’s
substantial rights. We therefore find no plain error in the
court’s acceptance of Garcia’s guilty plea.
Counsel also raises as a potential issue the
reasonableness of Garcia’s twenty-four-month sentence in light of
United States v. Booker, 125 S. Ct. 738 (2005). Although the
Sentencing Guidelines are no longer mandatory, Booker makes clear
that a sentencing court “must consult [the] Guidelines and take
them into account when sentencing.” 125 S. Ct. at 767 (Breyer, J.,
opinion of the Court). The court should consider this sentencing
range along with the other factors described in 18 U.S.C.A.
§ 3553(a) (West 2000 & Supp. 2005), and then impose a sentence.
See United States v. Hughes, 401 F.3d 540, 546 (4th Cir. 2005)
(applying Booker on plain error review). The sentence must be
“within the statutorily prescribed range and . . . reasonable.”
Id. at 546-47 (citations omitted).
In sentencing Garcia, the district court considered the
properly calculated advisory Sentencing Guidelines range and all of
- 3 -
the factors in § 3553(a). Because the court sentenced Garcia at
the low end of the advisory Guideline range and well below the ten-
year statutory maximum, see 18 U.S.C.A. § 924(a)(2) (West 2000 &
Supp. 2005), we conclude that the sentence is reasonable.
In accordance with Anders, we have reviewed the entire
record for any meritorious issues and have found none.
Accordingly, we affirm Garcia’s conviction and sentence. This
court requires that counsel inform his client, in writing, of his
right to petition the Supreme Court of the United States for
further review. If the client requests that a petition be filed,
but counsel believes that such a petition would be frivolous, then
counsel may move in this court for leave to withdraw from
representation. Counsel’s motion must state that a copy thereof
was served on the client. We dispense with oral argument because
the facts and legal contentions are adequately presented in the
materials before the court and argument would not aid the
decisional process.
AFFIRMED
- 4 - | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918991/ | 218 A.2d 461 (1966)
John SHAHINIAN
v.
Harold V. LANGLOIS, Warden.
M. P. No. 1744.
Supreme Court of Rhode Island.
April 13, 1966.
*462 John Shahinian pro se, petitioner.
J. Joseph Nugent, Attorney General, Corrine P. Grande, Special Counsel, for respondent.
POWERS, J.
This petition for a writ of habeas corpus is predicated on the petitioner's claim that he is being unlawfully deprived of his liberty by the respondent warden of the adult correctional institutions. We issued the writ and in his return the warden admitted having custody of the petitioner, but denied the illegality thereof, based on the records accompanying his return.
It appears from the petition and the records that on October 26, 1955, petitioner was arraigned before a superior court justice on two companion indictments for forgery and a criminal appeal from a district court conviction of passing a worthless check. He pleaded nolo contendere to all three charges and was sentenced to serve a five-year term on indictment No. 27,546 and, consecutive to that, a three-month term on the criminal appeal. On the recommendation of the attorney general said justice deferred sentence on indictment No. 27,547, petitioner having executed a deferred sentence agreement[1] as provided in now G.L. 1956, § 12-19-19.[2]
It further appears that petitioner was paroled on February 11, 1959 at which time, he agrees the five-year period provided for in the statute began to run. Thereafter, on April 29, 1960 petitioner, using the name "John Marieo," was sentenced to serve thirty days on a charge of stealing, to which he pleaded guilty before the municipal court in Chillicothe, Ohio. Then followed a series of convictions after trial or on petitioner's pleas of nolo contendere on divers offenses in the states of New York and Massachusetts.[3] Significantly, he served a three-month *463 sentence, less credits for good behavior, in the house of correction at Billerica, Massachusetts, from June 20 to September 10, 1963.
On March 24, 1965 he was arraigned before a superior court justice for violation of the terms of the deferred sentence agreement entered into on October 26, 1955 in connection with his plea of nolo contendere in indictment No. 27,547. He was ordered held without bail and committed to the adult correctional institutions pending receipt of a presentence report. On April 5, 1965 he was arraigned before the superior court for sentence, at which time he was represented by two attorneys. The transcripts of those proceedings are a part of the record accompanying the respondent's return.
It appears therefrom that an assistant attorney general related to the court the record of petitioner's convictions and incarcerations since his release from the adult correctional institutions on February 11, 1959, establishing that there was no five-year period within which petitioner was not imprisoned, and moved for imposition of sentence for violation of the deferred sentence agreement in indictment No. 27,547. The motion was predicated on petitioner's conduct as reflected by the convictions in other states and his association with a known criminal under suspicious circumstances.[4]
Counsel for petitioner made representations to the court that a hearing relative to some of the allegations made by the attorney general and those contained in the presentence report on the issue of improper association would establish facts as distinguished from hearsay and that the facts thus established would be favorable to petitioner. Urging such a hearing, they outlined what they expected a hearing would disclose.
The superior court justice, indicating that such a hearing would be controlled by credibility and commenting on the record of convictions as well as the presentence report, refused counsel's request and sentenced petitioner to a term of three years on his October 26, 1955 plea of nolo to indictment No. 27,547. It is from this sentence that petitioner seeks relief in these proceedings.
Basically, it is his position that the superior court justice was without jurisdiction to impose sentence and in support thereof he makes several contentions, invoking throughout the constitutional guarantees set forth in articles V, VI, VIII and XIV of the amendments to the United States constitution and art. I, §§ 8, 10 and 13, of the constitution of this state. However, because petitioner has misconceived the import of both the agreement executed with the attorney general and the statute pursuant to which the agreement was executed, the constitutional provisions on which he relies are of no assistance to him on the facts as they appear in the record.
It is petitioner's first contention that the provision of the agreement into which he entered with the attorney general, namely, "and so long as the Attorney General is satisfied that the defendant has broken *464 none of the criminal laws of this State, since the date of this agreement," was not within the authority conferred upon the attorney general by G.L. 1956, § 12-19-19. That it was not, he argues, flows from the proposition that a grant of such authority by the legislature would be an invalid delegation of the judicial power. This argument, however, presupposes that, in arraigning petitioner before a justice of the superior court for violation of the deferred sentence agreement, the attorney general purports to make a judicial determination that petitioner had in fact violated a criminal law of the state.
Such is not the case. It is a well-settled principle of law that one who has been convicted of a crime, or pleaded guilty or nolo contendere to a criminal charge, is entitled to have sentence pronounced within a reasonable time, but he may voluntarily waive such right. Orabona v. Linscott, 49 R.I. 443. That case was decided on a practice which then prevailed whereby, on the recommendation of the attorney general as the state's chief law enforcement officer, justices of the superior court were deferring the imposition of sentence, so that the accused would be at liberty on a condition of good conduct. The practice was comparable to that in other states. See Commonwealth v. Dowdican's Bail, 115 Mass. 133; Murphy v. State, 171 Ark. 620; People ex rel. Forsyth v. Court of Sessions, 141 N.Y. 288; Commonwealth ex rel. Wilhelm v. Morgan, 278 Pa. 395; Ex Parte Samber, 13 N.J. Super. 410; and Couture v. Brown, 82 N.H. 459, 135 A. 530.
There was, however, no limitation as to the time within which sentence might be imposed. Thus a person at liberty, under sufferance as it were, could theoretically at least, be sentenced by the court on the original offense after many years of good conduct on the representation of the attorney general that there had been a violation of the good-conduct condition on which the deferring of sentence was predicated. Even then, however, it was for the court to pass upon the actuality and/or gravity of the circumstances which motivated the attorney general.
In 1927, the general assembly taking cognizance of the situation enacted the basic provisions of what is now G.L. 1956, § 12-19-19.[5] Its purpose was and is to limit the time within which sentence could be imposed if, during the effective period of limitation, the accused demonstrated his right to liberty. It placed within his control the opportunity for rehabilitation. See Powers v. Langlois, 90 R.I. 45, 153 A.2d 535.
Thus the statute in question does not vest the attorney general with judicial power. Rather, believing an accused to be a good risk and having executed an agreement pursuant to the statute, the attorney general in recommending that the imposition of sentence be deferred assumes the duty, in the interest of society, to make known to the court such circumstances as may subsequently come to his attention which now cause him to believe that the interest of society would be best served by the imposition of sentence for the offense on which sentence was deferred. These circumstances may consist of imprisonment in this state or elsewhere during the statutory five-year period which unquestionably establishes a failure of continuing good behavior, or association with a known criminal under suspicious circumstances, Broccoli v. Kindelan, 80 R.I. 436, or evidence of such behavior as on hearing by a superior court justice would lead the court to conclude that the doubts of the attorney general were well founded, such conclusion not being arbitrary. Broccoli v. Kindelan, supra.
In moving for sentence, however, on a presentation of any of these circumstances, *465 the attorney general is not exercising a judicial function. He is simply conforming to the duty which he assumed in entering into a deferred sentence agreement. We have heretofore held that a legislative enactment vesting the attorney general with authority to move for sentence does not constitute a delegation of the judicial power. See State v. Fay, 65 R.I. 304.
The petitioner's next contention is that the record discloses that he did not violate the terms of his agreement, even if the latter were not an unconstitutional exercise of the judicial power. He argues, as we understand him, that within the period during which the agreement was effective, he has not violated any of the laws of this state and appears to consider this as controlling by reason of the last proviso in the agreement which he signed. The lack of merit in this argument is readily apparent from the discussion relating to his first contention.
If, however, we were to determine, as we do, that his first two contentions are without validity, petitioner further contends that the jurisdiction of the superior court to impose sentence terminated on February 11, 1964, this being five years from the date on which he was released from the adult correctional institutions. It was necessary, he argues, for him to have been arraigned after his return to Rhode Island following his release from prison in New York on December 7, 1962, and on such arraignment that sentence be again deferred for the Rhode Island court to retain its jurisdiction. In making this argument, petitioner completely misreads that provision of G.L. 1956, § 12 19-19, which is as follows: "* * * unless during said period, such prisoner shall be sentenced to imprisonment in this or in any other state, in which event the court may impose sentence at any time within five (5) years from and after the termination of such sentence of imprisonment * * *."
In Giroux v. Superior Court, 86 R.I. 48, cited with approval in Almeida v. Langlois, 97 R.I. 325, 197 A.2d 498, this court impliedly declared, and we now categorically hold, that the quoted language results in an automatic reinstatement of a five-year period of conditional liberty, commencing with a release from a prison sentence served within the original five-year period. Such a holding is not, as petitioner argues, an unconstitutional exercise of the legislative power. Rather, it results from petitioner's agreement to waive his right to be sentenced within a reasonable time. The provisions of the statute on which the agreement is predicated are as much a part of the agreement as is any condition expressed therein. If the protest be made that too much is demanded, the short answer is that much is given and it was for petitioner to decide before entering into an agreement whether to choose liberty so conditioned or submit to sentence when arraigned on indictment No. 27.547, there being no question of guilt.
Having made his decision, petitioner waived those rights for which he now contends. He makes no contention that this waiver was not a voluntary relinquishment of known rights intelligently made and indeed it would be difficult for him to do so.
Notwithstanding that all of his previously-considered contentions are without merit, petitioner further contends that he was denied due process and equal protection of the law when sentence was imposed without the benefit of a hearing at which he could have adduced evidence challenging the accuracy of the information on which the superior court justice relied. In advancing this argument, petitioner refers our attention to Townsend v. Burke (1948), 334 U.S. 736, 68 S.Ct. 1252, 92 L.Ed. 1690.[6]*466 That case is clearly distinguishable on its facts and is of no assistance to him.
The record before us discloses that on his arraignment, petitioner was represented by two attorneys who argued in detail and at length that some of the information contained in the presentence report was false or open to interpretations other than those placed upon it by the probation officer who prepared it after an investigation ordered by the court. The superior court justice noted that the nature of the evidence counsel would adduce had been clearly established by them. He indicated that it lacked credibility but expressly stated that he was imposing sentence solely on the grounds that petitioner had violated the good-behavior proviso of the deferred-sentence agreement as evidenced by his convictions out of state and association with a known criminal under suspicious circumstances. The trial justice's refusal to grant counsel's request, they not contesting the authenticity of the records relating to petitioner's convictions in Ohio, New York and Massachusetts, under such circumstances here present was not an abuse of discretion.
Nor assuming without deciding that unreasonable delay by the attorney general in moving for sentence may constitute a lack of due process or equal protection as petitioner further contends, the record discloses that there was no unreasonable delay in the instant cause.
The petitioner was arraigned for violation of his agreement March 24, 1965 and committed without bail pending receipt of a presentence report. As heretofore noted he had been released on September 10, 1963 after serving a three-month sentence in Massachusetts. Between that day and March 24, 1965 he was again in trouble in Massachusetts. On April 29, 1964 he was convicted after trial in the Boston municipal court on a charge of having stolen men's clothing from the Jordan Marsh Company. He appealed to the Massachusetts superior court. Suffolk county, from a six-month sentence and this appeal was pending when petitioner received the sentence he is currently serving. The record appears to establish as a fact that petitioner spent much of his time in Massachusetts.
However, it was in connection with petitioner's association with at least one known and wanted criminal who was suspected of involvement in a $50,000 break in a Woonsocket store between January 30 and February 1, 1965 which motivated the attorney general in arraigning petitioner and moving for sentence. Clearly, if relevant, the attorney general cannot be said to have delayed unreasonably.
Lastly, petitioner notes that he was required by the attorney general to report regularly to a probation officer, with which order it appears he complied. He argues, however, that the record will disclose that he was not placed on probation by the superior court justice who deferred sentencing on October 26, 1955. Thus, he apparently contends, that the order of the attorney general constituted an unwarranted assumption of judicial power. Just how this would aid him, even if correct, in these proceedings we are at a loss to understand. However, his basic contention is unsound. He bases it on the proposition that probation is a sentence, which it has been universally held is not the case. Commonwealth ex rel. Paige v. Smith, 130 Pa. Super. 536; Adamo v. *467 McCorkle, 26 N.J. Super. 562; People ex rel. Schurman v. Ashworth, 67 N.Y.S.2d 179; and People ex rel. Lehman v. Hunt, 255 App. Div. 931.
The petition for habeas corpus is denied and dismissed, the writ heretofore issued is quashed, and the petitioner is ordered remanded to the custody of the respondent warden.
NOTES
[1] Agreement under which sentence is deferred, October 26, 1955: "It Is Hereby Agreed that sentence may be deferred on the above entitled indictment, upon payment of all costs, during the good behavior of the defendant, and so long as the Attorney General is satisfied that the defendant has broken none of the criminal laws of this State, since the date of this agreement."
[2] § 12-19-19. "Whenever any prisoner shall be arraigned before the superior court, and shall plead guilty, or refuse to contend with the state, he may be at any time sentenced by the court; provided, that if at any time the court formally defers sentencing the defendant, and thereupon a written agreement concerning said deferring of sentence is entered into between the attorney-general and the prisoner, and filed with the clerk of said court, thereafter the court may only impose sentence within five (5) years from and after the date of said written agreement, unless during said period, such prisoner shall be sentenced to imprisonment in this or in any other state, in which event the court may impose sentence at any time within five (5) years from and after the termination of such sentence of imprisonment, or unless at the time such sentence is formally deferred such prisoner shall be serving a term of imprisonment under sentence previously imposed in another case, in which event the court may impose sentence at any time within five (5) years from and after the date on which such prisoner is released from prison either on parole or at the termination of such sentence of imprisonment, whichever first occurs."
[3] May 13, 1960 released from jail and balance of Ohio sentence suspended so that petitioner would be transported to New York to answer criminal charges placed against him, he having waived extradition.
September 20, 1960, petitioner was convicted of conspiracy, burglary in third degree and grand larceny in the first degree after a jury trial in Dutchess County, New York.
October 29, 1962 appealed above new trial ordered. On remand petitioner pleaded guilty and received a suspended sentence.
May 16, 1963 petitioner charged in Massachusetts with larceny of property exceeding $100, to wit, 53 phonograph records and two men's suits.
June 6, 1963 pleaded guilty and sentenced to one year. Appealed sentence and on June 20, 1963 was sentenced to three months in house of correction in Billerica and fined $300.
April 29, 1964 in municipal court for city of Boston charge of larceny exceeding $100, to wit, five men's suits each of the value of $28, all of the value of $140 and the property of Jordan Marsh Company. Petitioner was found guilty and sentenced to six months at the house of correction on Deer Island in the city of Boston. Appealed and still pending.
[4] The presentence report, considered by the court, contains a voluminous account of petitioner's association with one Robert Charbonneau, a known criminal and wanted by the Providence police. On one occasion, January 22, 1965, Charbonneau was picked up while standing in front of the Carriage Trade while Shahinian was inside. The Carriage Trade shop was broken into between January 30 and February 1, 1965 and Charbonneau was a prime suspect.
On another occasion Charbonneau was apprehended by the Grafton police for larceny. He had been driven to the scene by Shahinian and when he was apprehended Shahinian departed in an auto R.I. registration GA817 registered to the subject's girl friend.
[5] See footnote 2.
[6] Townsend pleaded guilty to two charges of burglary and two charges of robbery in a Pennsylvania court and was sentenced thereon. He was not represented by counsel and it is apparent from the record that the sentencing justice was influenced by three alleged convictions which in fact were for offenses in which the charge had either been dismissed or Townsend found to be not guilty. The court held that sentence based on a foundation so extensively false constituted a denial of due process. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919032/ | 218 A.2d 517 (1966)
Marie W. CARROLL, Appellant,
v.
A. Edwin SPARKS, Appellee.
No. 3833.
District of Columbia Court of Appeals.
Argued February 28, 1966.
Decided April 15, 1966.
John J. Donnelly, Washington, D. C., for appellant.
Blaine P. Friedlander, Washington, D. C., with whom Mark P. Friedlander, Mark P. Friedlander, Jr., Washington, D. C., and Harry P. Friedlander, Arlington, Va., were on the brief, for appellee.
Before HOOD, Chief Judge, and QUINN and MYERS, Associate Judges.
QUINN, Associate Judge:
Appellee, a real-estate broker licensed in the District of Columbia, was engaged by *518 appellant to sell two houses which she owned on Rhode Island Avenue, N.E. Buyers were procured for both properties, and contracts of sale were executed, but neither transaction reached settlement. Appellee instituted this action against appellant, claiming the commissions which he alleged were due him under the contracts. Appellant filed counterclaims alleging that appellee had breached his fiduciary duties to her, thus causing her damages. Appellee's claim for commissions went to the jury which found for appellant. At the conclusion of all the evidence the trial court, however, directed a verdict against appellant on the counterclaims and she appeals from this judgment.
Appellant claims that appellee induced her to sign a contract which, she alleges, was no contract at all. The basis for this allegation seems to be that the signature on one of the contracts, "B. C. Gogos Inv. Co. by P. Gogos," did not represent any identifiable purchaser. The evidence, however, clearly established that the actual purchaser was Basil C. Gogos who was trading as B. C. Gogos Investment Co. and who authorized his mother, Pandora Gogos, to sign the contract on his behalf. The fact that the purchaser used a trade name in no way made the agreement void or unenforceable. "A contract entered into under an assumed, ficititious, or representative name is generally valid and binding. * * * Individuals may be bound contractually though not named in the contract but merely described by a trade or partnership or association name or otherwise." 17 Am.Jur.2d Contracts § 295, p. 712 (1964); see Members of B. & C. W. Union, etc. v. Hall Baking Co., 320 Mass. 286, 69 N.E.2d 111, 167 A.L.R. 986 (1946); 87 C.J.S. Trade-Marks, Etc. § 178 (1954). And there is no question that an agent may sign a contract for a principal, whether disclosed or undisclosed. As the United States Court of Appeals stated in Lenman v. Jones, 33 App.D.C. 7, 20-21 (1909), aff'd 222 U.S. 51, 32 S.Ct. 18, 56 L.Ed. 89 (1911):
"* * * It is well settled that an agent may enter into a contract for the purchase of real estate for an undisclosed principal, and that such principal can enforce specific performance of the contract against the vendor. * * * In Pomeroy on Contracts, 2d ed. sec. 89, page 128, it is said: `When the agreement is executed by an agent in his own name, he appearing to be the contracting party, the requisite as to parties is complied with. * * *'"
So whether or not appellant knew she was contracting with Basil C. Gogos at the time she signed the agreement, a valid contract for the sale of one of her houses existed. Moreover, not only did she not show any breach of duty on the part of appellee with regard to this contract, she also failed to prove any element of damages flowing from the alleged breach. The sale went uncompleted because of a dispute which arose between appellant and the purchaser, not because of an unenforceable contract.
Appellant's second counterclaim alleged that appellee had misrepresented the financing arrangements on the second contract. Although there was a conflict in the testimony about this issue, appellant did not present any evidence of damages which might have resulted from the alleged misrepresentations. Nor was there any significant proof that appellee had acted willfully or maliciously for purposes of punitive damages. The trial court correctly did not allow the issue to go to the jury.
The second contract also provided that appellee would hold certain funds paid by the purchasers in escrow until $1,000 had been accumulated for a down payment. If the purchasers defaulted, the entire amount was subject to forfeiture. Appellant *519 and the purchasers, however, decided to mutually terminate the contract, and appellant expressly stated that she did not wish to declare a forfeiture of the escrow money. Buyers and seller then jointly requested the surrender of the money from appellee, but he refused to honor this request. The escrow money was turned over to his attorney who, pursuant to a directive from the Real Estate Commission, returned to money to the buyers. As the contract of sale was voided without a forfeiture, appellee was correct in returning the money to the purchasers and appellant cannot claim damages for this action.
We find no error in the trial court's exclusion of certain evidence as irrelevant. Nor did the pretrial judge abuse his discretion in refusing to allow the insertion of an additional item of damages in the counterclaims.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/437758/ | 738 F.2d 383
35 Fair Empl.Prac.Cas. 565,26 Wage & Hour Cas. (BN 1360,34 Empl. Prac. Dec. P 34,515,101 Lab.Cas. P 34,584
Linda LOVE, Plaintiff-Appellee,v.RE/MAX OF AMERICA, INC., Defendant-Appellant.
No. 82-1576.
United States Court of Appeals,Tenth Circuit.
July 3, 1984.
Dan S. Cross, Denver, Colo. (Catherine M. Meyer, Denver, Colo., with him on the brief) of Gorsuch, Kirgis, Campbell, Walker & Grover, Denver, Colo., for defendant-appellant.
Leslie M. Lawson, Denver, Colo. (Lynn D. Feiger, Denver, Colo., with her on brief), for plaintiff-appellee.
Before McWILLIAMS, McKAY and SEYMOUR, Circuit Judges.
SEYMOUR, Circuit Judge.
1
Linda Love brought this action against RE/MAX of America, Inc. (RE/MAX) pursuant to 42 U.S.C. Sec. 2000e et seq. (1976) (Title VII), and 29 U.S.C. Sec. 201 et seq. (1982) (Fair Labor Standards Act) as modified by 29 U.S.C. Sec. 206(d) (1982) (Equal Pay Act). Love alleged that RE/MAX violated Title VII by discriminating against her on the basis of sex, violated the Equal Pay Act by failing to give her equal pay for equal work, and retaliated against her in violation of both Title VII and the Fair Labor Standards Act. After a trial to the bench, the judge rendered an oral decision in which he determined that RE/MAX had not discriminated against Love or violated the Equal Pay Act with respect to her salary.1 However, the court decided that Love's discharge by RE/MAX was retaliatory and directed an award of damages and attorneys fees. RE/MAX appeals and we affirm.
I.
2
The claim of retaliatory discharge is based on the following undisputed facts. Love was hired by RE/MAX in February 1978 as director of advertising. She was named vice president for advertising in February 1979, but was not given a raise in pay until April 1979. During this time Love discovered that male vice presidents had received larger starting salaries than she. In December 1979, Love was told that her projects were unacceptably over budget, and that if she went over budget again she would be fired. Love agreed to keep costs down. In March 1980, Love learned that male employees of RE/MAX in positions she believed were comparable to hers had been given substantial raises the previous November although she had not. Love asked the company president, Gail Main, for a performance review and indicated her desire for a pay raise. She was told at the end of March that the company was not happy with her work and that she would not get a raise. On April 18, 1980, Love wrote a memo to the president requesting a raise. She attached a copy of the Equal Pay Act to the memo. Within two hours the chief executive officer of RE/MAX, Dave Liniger, went to her office with the memo and fired her.
3
The district court found that Love had made a legitimate good faith assertion of a statutory right by sending the memo and attaching to it a copy of the Equal Pay Act. The court held that Love was entitled to recover for retaliation because one of the dominant reasons for her discharge was the assertion of that statutory right. The court did not specify whether it found retaliation under the Fair Labor Standards Act, Title VII, or both.
4
On appeal, RE/MAX contends that the claim of discriminatory retaliation should be analyzed exclusively under the Title VII standards set out in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973), and its progeny, and that the district court misapplied the McDonnell Douglas test. Love argues that the court's decision is sustainable if it is correct under the Fair Labor Standards Act. We need not resolve this dispute because in our view Love met the standards for proving retaliation under either Act.
II.
Title VII provides in pertinent part:
5
"It shall be an unlawful employment practice for an employer to discriminate against any of his employees ... because [the employee] has opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter."
6
42 U.S.C. Sec. 2000e-3(a) (emphasis added). This circuit applies to retaliation claims the approach to Title VII suits established in McDonnell Douglas. See Burrus v. United Telephone Co., 683 F.2d 339 (10th Cir.), cert. denied, 459 U.S. 1071, 103 S.Ct. 491, 74 L.Ed.2d 633 (1982). In Burrus we held that the elements of a prima facie case of retaliation are: (1) protected opposition to Title VII discrimination or participation in a Title VII proceeding; (2) adverse action by the employer subsequent to or contemporaneous with such employee activity; and (3) a causal connection between such activity and the employer's action. Id. at 343.
7
RE/MAX argues that under the language of the statute, opposition is not protected unless the conduct opposed is in fact unlawful. Given the district court's finding that RE/MAX did not discriminate against Love on the basis of sex, RE/MAX contends that Love's good faith belief was not legally sufficient to state a retaliation claim under the opposition clause. Every circuit that has considered the issue, however, has concluded that opposition activity is protected when it is based on a mistaken good faith belief that Title VII has been violated. See, e.g., Rucker v. Higher Educational Aids Board, 669 F.2d 1179, 1182 (7th Cir.1982); Sisco v. J.S. Alberici Construction Co., 655 F.2d 146, 150 (8th Cir.1981), cert. denied, 455 U.S. 976, 102 S.Ct. 1485, 71 L.Ed.2d 688 (1982); Payne v. McLemore's Wholesale & Retail Stores, 654 F.2d 1130, 1137-40 (5th Cir.1981), cert. denied, 455 U.S. 1000, 102 S.Ct. 1630, 71 L.Ed.2d 866 (1982); Parker v. Baltimore & Ohio Railroad Co., 652 F.2d 1012, 1019 (D.C.Cir.1981); Monteiro v. Poole Silver Co., 615 F.2d 4, 8 (1st Cir.1980); Sias v. City Demonstration Agency, 588 F.2d 692, 695 (9th Cir.1978); see also Mitchell v. Visser, 529 F.Supp. 1034, 1043 (D.Kan.1981). We agree that a good faith belief is sufficient.
8
RE/MAX also argues that the district court committed reversible error by improperly shifting to it the burden of proving the absence of retaliatory motive. As discussed in Burrus,
9
"If a prima facie case is established, then the burden of production shifts to the defendant to articulate a legitimate, nondiscriminatory reason for the adverse action.... The defendant need not prove the 'absence of retaliatory motive, but only produce evidence that would dispel the inference of retaliation by establishing the existence of a legitimate reason.' ... If evidence of a legitimate reason is produced, the plaintiff may still prevail if she demonstrates the articulated reason was a mere pretext for discrimination. The overall burden of persuasion remains on the plaintiff."
10
683 F.2d at 343 (citations omitted).
11
We are not persuaded that the district court misunderstood the nature of the burden of production that shifts to a defendant in a Title VII case. Indeed, after observing that the facts were very close on the disparate treatment claim, the court found the evidence to be "inconclusive" and denied Love relief on that claim. See rec., vol. VII, at 7. We believe the court's resolution of the disparate treatment claim indicates that the judge properly placed on Love the overall burden of persuasion in the Title VII claims.
12
RE/MAX contends alternatively that the record does not support the trial court's decision. RE/MAX argues that Love did not present a prima facie case because the evidence does not establish that she asserted her rights in good faith or that a causal connection existed between her conduct and the employer's action. RE/MAX further argues that Love failed to rebut its legitimate business reasons with sufficient evidence of pretext.
13
Once the trial court declines to dismiss a Title VII claim for failure to make a prima facie case and the defendant proceeds to present evidence of a legitimate business reason, the court then must decide the ultimate fact issue--"which party's explanation of the employer's motivation it believes." United States Postal Service Board of Governors v. Aikins, 460 U.S. 711, 103 S.Ct. 1478, 1482, 75 L.Ed.2d 403 (1983). In some cases a "plaintiff's initial evidence, combined with effective cross-examination of the defendant, will suffice to discredit the defendant's explanation." Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 255 n. 10, 101 S.Ct. 1089, 1095 n. 10, 67 L.Ed.2d 207 (1981).
14
In deciding that Love had asserted her rights in good faith, the trial court found that RE/MAX, and particularly Mr. Liniger, "would put up with more from men in the company than from women." Rec., vol. VII, at 6. The court further found that "the looseness and the lack of precision of managerial concepts has caused an atmosphere to exist in which any sensitive thinking woman would consider that there was discrimination," id. at 8, and that "she would see other vice-presidents and consider that she was sharing the same or even greater moments of pressure than they were and think that she should be paid to the extent that they should." Id. The court found that Love's feeling of gender discrimination also was justified by "the churlish remarks that were made around the office." Id. at 10.
15
With respect to a causal connection between the protected activity and the adverse employment action, the evidence shows that Liniger fired Love within two hours of receiving her memo containing a raise request and a copy of the Equal Pay Act. "The causal connection may be demonstrated by evidence of circumstances that justify an inference of retaliatory motive, such as protected conduct closely followed by adverse action." Burrus, 683 F.2d at 343. Love demonstrated to the satisfaction of the trial court that the reasons offered by RE/MAX for her termination were unconvincing "afterthoughts," rec., vol. VII, at 2, and not worthy of belief.
16
We may set aside these determinations on appeal only if they are clearly erroneous. Fed.R.Civ.P. 52(a); see Aikins, 103 S.Ct. at 1482-83.
17
"Findings are not to be determined clearly erroneous unless, after a review of the entire record, we are left with a definite and firm conviction that a mistake has been made.... As an appellate court, it is not for us to determine whether the trial court reached the correct decision, but whether it reached a permissible one in light of the evidence. 'When a case is tried to the district court, the resolution of conflicting evidence and the determination of credibility are matters particularly within the province of the trial judge who heard and observed the demeanor of the witnesses.' "
18
Higgins v. Oklahoma ex rel. Oklahoma Employment Security Commission, 642 F.2d 1199, 1202 (10th Cir.1981) (citations omitted) (quoting Dowell v. United States, 553 F.2d 1233, 1235 (10th Cir.1977)). We have carefully reviewed the entire record and we are not left with a definite and firm conviction that a mistake has been made. The finding of unlawful retaliation by RE/MAX is sustainable under Title VII.III.
19
The retaliation holding is equally sustainable under the Fair Labor Standards Act. That Act, of which the Equal Pay Act is a part, provides that it shall be unlawful for any person
20
"to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter, or has testified or is about to testify in any such proceeding, or has served or is about to serve on an industry committee ...."
21
29 U.S.C. Sec. 215(a)(3). In this section, Congress "sought to foster a climate in which compliance with the substantive provisions of the Act would be enhanced" by recognizing that "fear of economic retaliation might often operate to induce aggrieved employees quietly to accept substandard conditions." Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 292, 80 S.Ct. 332, 335, 4 L.Ed.2d 323 (1960).
22
When the "immediate cause or motivating factor of a discharge is the employee's assertion of statutory rights, the discharge is discriminatory under Sec. 215(a)(3) whether or not other grounds for discharge exist." Brennan v. Maxey's Yamaha, Inc., 513 F.2d 179, 181 (8th Cir.1975); see also Marshall v. Parking Co. of America-Denver, 670 F.2d 141, 143 (10th Cir.1982) (citing Maxey's Yamaha with approval); Bonham v. Copper Cellar Corp., 476 F.Supp. 98, 103 (E.D.Tenn.1979). The section protects conduct based on a good faith, although unproven, belief that the employer's conduct is illegal. See Maxey's Yamaha, 513 F.2d at 181. The Act also applies to the unofficial assertion of rights through complaints at work. Copper Cellar, 476 F.Supp. at 103; accord Parking Co., 670 F.2d at 142 (plaintiff fired for refusing to release his back pay claim); Maxey's Yamaha, 513 F.2d at 182 (plaintiff asserted right at work and was fired immediately). The trial court correctly analyzed the facts under the above legal standards in holding that Love's discharge was retaliatory.
23
In sum, we affirm the trial court's decision that Love was illegally discharged in retaliation for the good faith assertion of her statutory rights.
1
Love does not challenge these rulings on appeal | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1017491/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-4537
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
STEVEN CARLIE CARTER,
Defendant - Appellant.
Appeal from the United States District Court for the Middle
District of North Carolina, at Durham. William L. Osteen, District
Judge. (CR-04-446)
Submitted: October 20, 2005 Decided: October 26, 2005
Before NIEMEYER and SHEDD, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
Louis C. Allen, III, Federal Public Defender, William C. Ingram,
Jr., First Assistant Federal Public Defender, Greensboro, North
Carolina, for Appellant. Anna Mills Wagoner, United States
Attorney, L. Patrick Auld, Assistant United States Attorney,
Greensboro, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Steven Carlie Carter appeals from his 180-month sentence
entered following his guilty plea to being a felon in possession of
a firearm. Carter contends that his designation as an armed career
criminal is precluded by the Supreme Court’s decisions in Apprendi
v. New Jersey, 530 U.S. 466 (2000), Blakely v. Washington, 542 U.S.
296 (2004), and United States v. Booker, 125 S. Ct. 738 (2005).
Carter’s claim is foreclosed by circuit precedent.
See United States v. Thompson, 421 F.3d 278, 286 (4th Cir. 2005)
(holding that prior convictions could not be severed from their
essential components, including integral facts such as the
statutory violation and date of offense, and that these facts were
inherent to convictions not extraneous to them); United States v.
Cheek, 415 F.3d 349, 350 (4th Cir. 2005) (holding that defendant’s
Sixth Amendment right to trial by a jury was not violated by
district court’s reliance on his prior convictions for purposes of
sentencing under the Armed Career Criminal Act). Moreover, Carter
did not challenge any factual findings regarding the prior
convictions, and he does not dispute the factual basis for the
district court’s conclusions that he was an armed career criminal.
Accordingly, Carter’s assertion that his sentence violated the
Sixth Amendment is without merit. See United States v. Collins,
412 F.3d 515, 523 (4th Cir. 2005) (holding that, where defendant
did not dispute any of the facts supporting the career offender
- 2 -
status in district court, there is no constitutional violation in
relying on defendant’s prior convictions).
Accordingly, we affirm Carter’s sentence. We dispense
with oral argument because the facts and legal contentions are
adequately presented in the materials before the court and argument
would not aid the decisional process.
AFFIRMED
- 3 - | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1017492/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-1334
CHELLY SUMARLIN,
Petitioner,
versus
ALBERTO R. GONZALES, Attorney General of the
United States,
Respondent.
On Petition for Review of an Order of the Board of Immigration
Appeals. (A95-254-696)
Submitted: September 19, 2005 Decided: October 26, 2005
Before NIEMEYER, MICHAEL, and SHEDD, Circuit Judges.
Petition denied by unpublished per curiam opinion.
Howard T. Mei, LAW OFFICES OF HOWARD T. MEI, Bethesda, Maryland,
for Petitioner. Peter D. Keisler, Assistant Attorney General, M.
Jocelyn Lopez Wright, Assistant Director, Office of Immigration
Litigation, Civil Division, Chris K. Gober, Office of Legal Policy,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
Respondent.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Chelly Sumarlin, a native and citizen of Indonesia,
petitions for review of a decision of the Board of Immigration
Appeals (Board) affirming without opinion the ruling of the
immigration judge finding Sumarlin removable and denying his
applications for asylum, withholding of removal, and protection
under the Convention Against Torture.* We deny the petition for
review.
We will reverse a determination denying eligibility for
asylum “only if the evidence presented was so compelling that no
reasonable fact finder could fail to find the requisite fear of
persecution.” Rusu v. INS, 296 F.3d 316, 325 n.14 (4th Cir. 2002)
(internal quotations omitted). Credibility findings are reviewed
for substantial evidence. A trier of fact who rejects an
applicant's testimony on credibility grounds must offer specific,
cogent reasons for doing so. Figeroa v. INS, 886 F.2d 76, 78 (4th
Cir. 1989). The immigration judge did so in this case.
We have reviewed the evidence of record and find that
substantial evidence supports the immigration judge’s conclusion
that Sumarlin failed to establish either past persecution or a
well-founded fear of future persecution. Accordingly, we uphold
*
Sumarlin does not challenge the immigration judge’s denial of
protection under the Convention Against Torture. Therefore, this
claim is waived. Edwards v. City of Goldsboro, 178 F.3d 231, 241
n.6 (4th Cir. 1999).
- 2 -
the immigration judge’s denial of asylum relief, as affirmed by the
Board.
As Sumarlin failed to sustain his burden on the asylum
claim, he cannot establish his entitlement to withholding of
removal. “Because the burden of proof for withholding of removal
is higher than for asylum--even though the facts that must be
proved are the same--an applicant who is ineligible for asylum is
necessarily ineligible for withholding of removal under [8 U.S.C.]
§ 1231(b)(3).” Camara v. Ashcroft, 378 F.3d 361, 367 (4th Cir.
2004). Therefore, we deny the petition for review. We dispense
with oral argument because the facts and legal contentions are
adequately presented in the materials before the court and argument
would not aid the decisional process.
PETITION DENIED
- 3 - | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1918975/ | 106 B.R. 344 (1989)
In re PARIS INDUSTRIES CORPORATION, Vitro Agate Corporation, Otselic Enterprises, Inc., Stylecrafters Corporation, Gladding Cordage Corporation, Debtors.
Stephen S. GRAY, Chapter 11 Trustee, Plaintiff,
v.
BILL CIACCIA AND ASSOCIATES, INC., Defendant.
Bankruptcy Nos. 87-20111 through 87-20115, Adv. No. 89-2032.
United States Bankruptcy Court, D. Maine.
October 4, 1989.
Jonathan D. Yellin, Kaye Fialkow, Richmond & Rothstein, Boston, Mass., Dennis Bezanson, So. Portland, Me., for plaintiff.
Richard C. Davis, Davis & Davis, Largo, Fla., for defendant.
ORDER
FREDERICK A. JOHNSON, Chief Judge.
On April 10, 1987, the debtor filed for relief under Chapter 11 of the Bankruptcy Code. On May 15, 1989, the trustee filed a complaint seeking to avoid and recover an alleged preferential payment made by the Debtor to Defendant Bill Ciaccia and Associates, Inc. In its responsive pleading, filed on July 20, 1989, Defendant "demand[ed] a jury trial of all issues herein pursuant to the Seventh Amendment of the U.S. Constitution", apparently relying on the recent Nordberg decision, Granfinanciera v. Nordberg, ___ U.S. ___, 109 S. Ct. 2782, 106 L. Ed. 2d 26 (1989).
"In suits at common law, where the value in controversy shall exceed twenty dollars, the right to trial by jury shall be preserved . . ." U.S. Const. Amend. VII. The Nordberg case involves a fraudulent conveyance proceeding, which is designated as a "core" proceeding by 28 U.S.C. § 157(b)(2)(H). In Nordberg, the Supreme Court concluded that in a proceeding involving a fraudulent monetary transfer, a person who has not submitted a claim against a bankruptcy estate is entitled under the Seventh Amendment to a trial by jury. This court believes that the analysis in Nordberg applies as well to a preference proceeding, which is also designated as a "core" proceeding by 28 U.S.C. § 157(b)(2)(F). See Granfinanciera v. Nordberg, ___ U.S. at ___, 109 S.Ct. at 2793, 2798 n. 13, 106 L. Ed. 2d at 45, 51 n. 13 (Discussing prior decisions to effect that where no claim filed in preference proceeding, defendant entitled to jury trial). See also Katchen v. Landy, 382 U.S. 323, 86 S. Ct. 467, 15 L. Ed. 2d 391 (1966); Schoenthal v. Irving Trust Co., 287 U.S. 92, 94-95, 53 S. Ct. 50, 51-52, 77 L. Ed. 185 (1932).
*345 In Katchen v. Landy, supra., the Supreme Court concluded that under the Seventh Amendment a creditor who had filed a claim was not entitled to a jury trial on a preference issue raised as a counterclaim. See id. 382 U.S. at 336, 86 S. Ct. at 476. See also Granfinanciera v. Nordberg, ___ U.S. at ___, 109 S.Ct. at 2798, 106 L. Ed. 2d at 50.
Essentially, "under the Seventh Amendment, a creditor's right to a jury trial on a bankruptcy trustee's preference claim depends upon whether the creditor has submitted a claim against the estate." Granfinanciera v. Nordberg, ___ U.S. at ___, 109 S.Ct. at 2799, 106 L. Ed. 2d at 51 (Dictum explaining the decisions in Katchen and Schoenthal, supra.)
In this proceeding, a review of the records indicates that on June 22, 1987, Defendant Bill Ciaccia and Associates, Inc. did file a claim, designated as claim no. 489 in the claims register of the Debtor Paris Industries Corporation.
As a result, consistent with the Supreme Court's ruling in Katchen and in accord with the recent ruling in Nordberg, it is hereby
ORDERED
that Defendant's request for a jury trial pursuant to the Seventh Amendment is DENIED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919048/ | 106 B.R. 517 (1989)
In re Jeffrey Chris WEBB, Sandra Kay Pate Webb, Debtors.
John P. NEWTON, Jr., Plaintiff,
v.
FIRST AMERICAN NATIONAL BANK and Scott Lewis Chevrolet & Subaru, Inc., Defendants.
Bankruptcy No. 3-88-02115, Adv. No. 3-89-0050.
United States Bankruptcy Court, E.D. Tennessee, S.D.
October 25, 1989.
*518 John P. Newton, Jr., pro se.
Mary M. Farmer, for First American Nat'l. Bank.
Frank P. Cantwell, for Scott Lewis Chevrolet & Subaru, Inc.
MEMORANDUM
JOHN C. COOK, Bankruptcy Judge.
The issue presented in this case is whether the bankruptcy trustee may avoid a lien on an automobile because the name of the lienholder listed on the certificate of title was not the name of the true lienholder. The parties have submitted the case for decision on stipulated facts.[1] This is a core proceeding. 28 U.S.C.A. § 157(b)(2)(K) (West Supp.1989).
I.
On or about September 30, 1987, defendant Scott Lewis Chevrolet & Subaru (Scott Lewis) sold a 1988 Chevrolet Beretta to *519 debtors Jeffrey C. Webb and his wife, Sandra Kay Webb. To purchase and finance the vehicle, the debtors executed a sales contract and security agreement dated September 30, 1987, with Scott Lewis. The sales contract and security agreement was then assigned to defendant First American National Bank (First American) on September 30, 1987.
On October 6, 1987, Scott Lewis made application for a certificate of title on the debtors' vehicle. As a result of a clerical mistake by Scott Lewis, the Bank of East Tennessee was unintentionally listed on the application as the lienholder instead of First American.
Sometime after October 6, 1987, the Tennessee Motor Vehicle Division issued a certificate of title on the 1988 Chevrolet Beretta listing Jeffrey C. Webb and/or Sandra Kay Webb as owners and the Bank of East Tennessee as first lienholder. The certificate of title was sent to the Bank of East Tennessee which never had a claim against the debtors or the debtors' vehicle.
On August 25, 1988, the debtors filed their bankruptcy petition in this court under the provisions of chapter 7 of the Bankruptcy Code. The plaintiff became the chapter 7 trustee of the bankruptcy estate.
After debtors' bankruptcy petition was filed, the defendants discovered the error in the name of the lienholder on the certificate of title.[2] Defendant Scott Lewis retrieved the vehicle certificate of title from the Bank of East Tennessee and applied for a new title to correct the clerical mistake. The plaintiff did not authorize, however, any correction or change in the notation on the certificate of title concerning the lienholder nor did the plaintiff authorize any postpetition transfer of its interest in the 1988 Chevrolet Beretta by First American or Scott Lewis.
On October 24, 1988, a new title was issued by the Tennessee Motor Vehicle Division listing First American as the proper lienholder.
The joint pretrial statement submitted by the parties summarizes the parties' contentions and the issues to be decided. Essentially, the plaintiff contends the security interest of First American remained unperfected prior to the time the debtors filed their bankruptcy petition and that postpetition action to perfect the lien was ineffective. The plaintiff seeks to avoid the alleged unperfected security interest of First American pursuant to 11 U.S.C.A. § 544 (West Supp.1989). Alternatively, the plaintiff relies upon the statutory sections permitting avoidance of preferences, 11 U.S.C.A. § 547 (West 1979 and Supp.1989), and postpetition transfers, 11 U.S.C.A. § 549 (West Supp.1989).
The defendants contend the security interest of First American was perfected at the time the state motor vehicles division noted a lien in favor of the Bank of East Tennessee on the original certificate of title notwithstanding the error in the lienholder's name. The defendants also rely upon the postpetition correction of the lienholder's name on the certificate of title.
II.
The trustee, acting as a hypothetical lien creditor under § 544(a)(1) of the Bankruptcy Code,[3] claims its rights in the debtors' *520 automobile are superior to that of First American. If First American's security interest in the automobile was not perfected prior to the filing of debtors' bankruptcy petition, the trustee will prevail. See Tenn. Code Ann. § 47-9-301(1)(b) (Supp.1988); id. § 55-3-126 (1988); Waldschmidt v. Associates Commercial Corp. (In re Groves), 64 B.R. 329 (Bankr.M.D.Tenn.1986); Still v. Commerce Union Bank (In re Custom Caps, Inc.), 1 B.R. 99 (Bankr.E.D.Tenn. 1979).[4]
Under Tennessee law, perfection of a security interest in a motor vehicle is accomplished by notation of the lien on the vehicle's certificate of title in accordance with Tennessee certificate of title laws. Tenn.Code Ann. § 47-9-302(3) (Supp.1988); id. § 55-3-126 (1988); Apex Oil Co. v. Tims (In re Armstrong), 56 B.R. 781, 786 (W.D.Tenn.1986); In re Wallace, 251 F. Supp. 581 (E.D.Tenn.1966); In re Crosson, 226 F. Supp. 944 (E.D.Tenn.1963); Waldschmidt v. Associates Commercial Corp. (In re Groves), 64 B.R. at 329; Still v. Commerce Union Bank (In re Custom Caps, Inc.), 1 B.R. at 99. This method of perfection applies to all security interests in motor vehicles except security interests in vehicles classified as inventory or security interests whose existence depends exclusively on possession, i.e., an artisan's lien. See In re Vaughn, 283 F. Supp. 730 (M.D. Tenn.1968) (security interest in motor vehicles held as inventory may be perfected by filing a financing statement); Waldschmidt v. Associates Commercial Corp. (In re Groves), 64 B.R. at 330 & n. 3 (liens whose existence depends upon possession are excluded from requirement of lien notation on the certificate of title).
In this case, it is undisputed that the lien of First American was not listed on the certificate of title in accordance with Tennessee law. Nonetheless, the defendants argue that since the Bank of East Tennessee was listed as a lienholder, anyone examining the certificate of title would be placed on notice that a security interest existed in the vehicle. Hence, the defendants contend the mistake in this case should not render First American's interest unperfected because notice of a security interest was given.
A mistake made in the notation of the lienholder's name on a certificate of title is not unlike a mistake made in a financing statement filed pursuant to the provisions of the Uniform Commercial Code (UCC). There is authority suggesting that the UCC standard governing mistakes in financing statements should be applied, at least by analogy, to mistakes made in noting liens on certificates of title. See Coble Systems v. Coors of the Cumberland (In re Coors of the Cumberland), 19 B.R. 313, 321 (Bankr.M D.Tenn.1982); Roberts v. International Harvester Credit Corp., 143 Ga. App. 206, 237 S.E.2d 697 22 U.C.C.Rep. Serv. (Callaghan) 1087, 1088 (1977).
Section 9-402(8) of the UCC enacted in Tennessee at § 47-9-402(8) of the Tennessee Code provides in part:
(8) A financing statement substantially complying with the requirements of this section is effective even though it contains minor errors which are not seriously misleading.
Tenn.Code Ann. § 47-9-402(8) (Supp.1988). In Brown v. Belarus Machinery (In re Service Lawn & Power), 83 B.R. 515 (Bankr.E.D.Tenn.1988), this court had occasion to comment upon the policy underlying § 9-402(8):
*521 Minor mistakes in financing statements are not fatal because Article 9 of the Uniform Commercial Code was intended to provide merely a system of notice filing. The financing statement was designed to be a statement filed publicly which would alert credit searchers that a certain security agreement may exist. Thus, even though there may be errors or deficiencies in descriptions, addresses, names, and even signatures, such errors will not destroy the effectiveness of a financing statement so long as they do not frustrate the underlying purpose of the filing requirements in affording notice to creditors of the possible existence of security interests.
Id. at 517.
Although § 9-402(8) evidences a policy that substance is preferred over form in regard to the formal requirements of a financing statement, even when one applies the § 9-402(8) standard to the mistake made here in the certificate of title, it cannot be said the mistake was minor and not seriously misleading. A review of the case law reveals that most of the cases upholding the validity of financing statements despite minor errors in the information given have generally found that the information, albeit erroneous, was nevertheless sufficient to enable the inquiring party to discover the true state of affairs regarding the security interest. See, e.g., Corwin v. RCA Corp. (In re Kitty Hawk Television Corp.), 516 F.2d 24 (6th Cir.1975); In re Southern Supply Co., 405 F. Supp. 20 (E.D.N.C.1975); In re Platt, 257 F. Supp. 478 (E.D.Pa.1966); see also 2 J. White & R. Summers, Uniform Commercial Code § 24-18, at 375 (3d ed.1988); Annotation, Sufficiency of Designation of Debtor or Secured Party in Security Agreement or Financing Statement Under UCC § 9-402, 99 A.L.R. 3d 478 (1980); cf. Coble Systems v. Coors of the Cumberland (In re Coors of the Cumberland), 19 B.R. at 321 (notation of lienholder as owner on certificate of title not seriously misleading). The mistake in the instant case, however, was not some minor mistake in listing the name of First American on the certificate of title; the mistake, a major one, was listing an entity with no lien or interest in the automobile whatsoever. An inquiry made to one who has no connection to the debtor or to the secured party relative to the security interest in question could not be expected to result in a discovery of the actual secured creditor's lien. The stranger to the secured transaction could merely state that it has no lien or security interest in the collateral and that any notation to the contrary is simply false. Listing this third party as the lienholder when in fact it is a stranger to the entire transaction cannot be characterized as anything but a major mistake which is seriously misleading.[5]
The issue presented in this case is similar to the issue presented in Headlee v. Ferrous Financial Servs. (In re Butler's Tire & Battery Co.), 17 U.C.C.Rep.Serv. (Callaghan) 1363 (Bankr.D.Or.1975), aff'd, 18 U.C.C.Rep.Serv. 1302 (D.Or.1976) (subsequently withdrawn and appeal dismissed), appeal dismissed, 592 F.2d 1028 (9th Cir. 1979). In Headlee, the bankruptcy trustee challenged the perfection of a security interest in a 1974 Chevrolet truck. The application for certificate of title submitted to the state motor vehicles division by the secured party erroneously listed the debtor's name in the position designated for the first lienholder. The mistake in the application caused the motor vehicles division to issue the certificate of title showing the debtor as holding the security interest. Because the true security interest holder was not listed as required by the certificate of title law in Oregon, the bankruptcy court concluded the security interest was not perfected. Id. at 1368.
Likewise, the failure of Scott Lewis to list First American as the lienholder in the application for certificate of title resulted in the issuance of a certificate of title that did not list First American's lien. Because *522 the lien was not noted on the title in accordance with Tennessee's certificate of title laws, and because the mistake made in this case cannot be characterized as a minor mistake which is not seriously misleading, the court concludes the lien of First American was unperfected at the time of the bankruptcy filing.
An appropriate order will enter granting judgment in favor of the trustee.[6] A further hearing will be set on the pending cross-claim.
NOTES
[1] Defendant Scott Lewis Chevrolet & Subaru, Inc. has filed a cross-claim against defendant First American National Bank. The cross-claim is not before the court at this time.
[2] Although the stipulations of fact submitted by the parties do not expressly state the error was discovered after the filing of the debtors' bankruptcy petition, a reading of the parties' briefs indicates this fact is not in dispute. More importantly, it appears from the briefs of the parties that at least nothing was done prepetition to correct the error in the lienholder's name. See Tenn.Code Ann. § 55-3-126 (1988); In re Ridley, 50 B.R. 51 (Bankr.M.D.Tenn.1985) (creditor retains lien where application for lien on title properly submitted before bankruptcy petition was filed and lien noted on certificate of title subsequent to filing of petition).
[3] Section 544(a)(1) provides:
(a) The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by
(1) a creditor that extends credit to the debtor at the time of the commencement of the case, and that obtains, at such time and with respect to such credit, a judicial lien on all property on which a creditor on a simple contract could have obtained such a judicial lien, whether or not such a creditor exists. . . .
11 U.S.C.A. § 544(a)(1) (West Supp.1989).
[4] The postpetition attempt by Scott Lewis to correct the name of the lienholder on the certificate of title had no effect on the status of the lien as of the filing date of the bankruptcy petition. Although Tennessee Code Annotated § 55-3-126(a) (1988) allows constructive notice of a perfected lien to relate back to the date of the filing of the application for notation of the lien, this rule would not be relevant here since the prepetition application for notation of the lien did not properly list the lien to be noted. See supra note 2; cf. In re Ridley, 50 B.R. 51 (Bankr.M.D.Tenn.1985). Moreover, the postpetition attempt to perfect the lien appears to have been a violation of the automatic stay provisions of 11 U.S.C.A. § 362(a)(4) (West 1979 & Supp.1989) (the filing of a bankruptcy petition operates as a stay of "any act to create, perfect, or enforce any lien against property of the estate").
[5] According to Professors White and Summers, § 9-402(8) may be construed as containing two conditions as it relates to errors in financing statements. One condition is that the error be "minor" and the other is that the error not be "seriously misleading." 2 J. White & R. Summers, supra, § 24-18, at 371. In this case, the error does not satisfy either condition.
[6] It is not necessary to address the plaintiff's contentions under 11 U.S.C.A. §§ 547 or 549. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919050/ | 912 So. 2d 283 (2005)
Clarence BATAIN, Sr.
v.
Katrina BATAIN.
2030907.
Court of Civil Appeals of Alabama.
May 13, 2005.
W. Gregory Hughes, Mobile, for appellant.
Thomas E. Harrison, Mobile, for appellee.
CRAWLEY, Presiding Judge.
Clarence Batain, Sr. ("the father"), and Katrina Batain ("the mother") were married in May 1999. The parties separated sometime before September 2002. In December 2003, the mother gave birth to the parties' child. After a short trial in June 2004 at which only the parties testified, the trial court divorced the parties, divided their property, awarded custody of the child to the mother, and ordered the father to pay $1,000 per month in child support. The father appeals the child-support award, arguing that the trial court abused its discretion in setting child support without receiving evidence concerning the needs of the five-month-old child.
*284 The evidence in the record is sparse. The father is a self-employed brickmason; the mother is an optometrist clerk. The father did not file a CS-41 Child Support Obligation Income Statement/Affidavit form as required by Rule 32(E), Ala. R. Jud. Admin.; he did file a CS-42 Child Support Guidelines form indicating that his monthly gross income was $2,917. The mother filed both a CS-41 income affidavit[1] and a CS-42 form indicating that her monthly gross income was $1,600. The mother also testified that her income was $1,600 per month. The father, however, presented his 2003 tax return, which listed his yearly income as only $10,000. He further testified that his business earned $40,000 in 2002. The father admitted that, based on his bank statement from May 2004, he spent $14,154.92 on personal expenses in a 25-day period. He denied, however, that he earned over $14,150 per month or a yearly income of over $169,800.
The trial court's judgment regarding child support reads:
"The Court will order [the father] to pay the amount of $1,000 per month as child support. (Child support is in excess of the Guidelines of Rule 32, [Ala. R. Jud. Admin.,] and is based on the relative financial positions of the parties and the difficulty in ascertaining the [father's] true income.) . . ."
The trial court did not complete a CS-42 form, nor does its judgment indicate what it determined the father's monthly income to be; the monthly child-support obligation ordered by the trial court does not comport with either of the parties' respective CS-42 forms. Because the trial court stated that it had purposefully deviated from the child-support guidelines in setting the father's child-support obligation, it must have concluded that the parties' combined income was less than $10,000 per month and thus that the child-support award was subject to the guidelines.
On appeal, the father argues that a child-support award in cases where the parties' combined gross income exceeds $10,000 per month is left to the discretion of the trial court. See Rule 32(C)(1), Ala. R. Jud. Admin., and Dyas v. Dyas, 683 So. 2d 971, 973 (Ala.Civ.App.1995). The father correctly points out that a child-support award in such situations must "relate to the reasonable and necessary needs of the children as well as to the ability of the obligor to pay for those needs." Dyas, 683 So.2d at 973. The father complains that the $1,000 monthly child-support obligation does not relate to the needs of the five-month-old child of the parties. Thus, he argues that we should reverse the child-support award on that basis.
We disagree. Although the father correctly states the law on this issue, the trial court, arguably, has not determined that the parties' monthly gross income exceeds $10,000. As noted above, it appears that the trial court concluded that the guidelines did apply to the child-support determination in the present case. In light of this fact, we cannot base our reversal of the trial court's judgment on Dyas.
As noted above, the trial court did not complete a CS-42 form and the child-support obligation set by the court does not correspond to either of the CS-42 forms contained in the record. Rule 32(E) requires that a CS-42 form be incorporated into every child-support judgment, and *285 we have reversed trial courts for failing to complete CS-42 forms when we could not discern the basis for the child-support award from the record. See Kirkland v. Kirkland, 860 So. 2d 1283, 1291 (Ala.Civ. App.2003); Fomby v. Fomby, 840 So. 2d 919, 921 (Ala.Civ.App.2002); Fowler v. Fowler, 773 So. 2d 491, 495 (Ala.Civ.App. 2000), overruled in part by J.L. v. A.Y., 844 So. 2d 1221, 1225 (Ala.Civ.App.2002); and Dunnavant v. Dunnavant, 668 So. 2d 851, 853 (Ala.Civ.App.1995), overruled in part by J.L. v. A.Y., 844 So. 2d 1221, 1225 (Ala.Civ.App.2002). Because we cannot discern the basis for the trial court's child-support judgment in the present case, we reverse the judgment and remand this cause for further proceedings.
On remand, the trial court should order that the father complete a CS-41 income affidavit with supporting documentation and complete a CS-42 form indicating what it determines the father's monthly income to be. The trial court should then award child support accordingly, either in compliance with the guidelines, in compliance with Dyas,[2] or, if the trial court believes a deviation from the guidelines is warranted, with the necessary statement of reasons for the deviation as required by Rule 32(A)(1).
REVERSED AND REMANDED WITH INSTRUCTIONS.
THOMPSON, PITTMAN, MURDOCK, and BRYAN, JJ., concur.
NOTES
[1] The mother's CS-41 income affidavit was unsigned; however, because the mother's testimony concerning her income was identical to the information provided on the CS-41 income affidavit and was undisputed, we conclude that the lack of her signature is inconsequential.
[2] We note that, if the parties' combined gross monthly income exceeds $10,000, the filing of CS-41 income affidavits and CS-42 forms are not necessarily required because an award of child support in that circumstance would not be governed by Rule 32. See Floyd v. Abercrombie, 816 So. 2d 1051, 1057 (Ala.Civ.App. 2001); see also O'Neal v. O'Neal, 678 So. 2d 161, 165 (Ala.Civ.App.1996). However, in Floyd and O'Neal, the fact that the parties' combined monthly gross income exceeded $10,000 was undisputed. In the present case, the father's income is heavily disputed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919053/ | 912 So. 2d 134 (2005)
MONSANTO COMPANY
v.
Bobby G. HALL, et al.
No. 2004-IA-00918-SCT.
Supreme Court of Mississippi.
October 6, 2005.
*135 James Lawrence Jones, Bradley S. Clanton, Scott W. Pedigo, Robert M. Arentson, Jr., Robert H. Bass, Jackson, attorneys for appellant.
Stacey L. Sims, Anthony Sakalarios, Hattiesburg, attorneys for appellees.
Before WALLER, P.J., EASLEY and CARLSON, JJ.
CARLSON, Justice, for the Court.
¶ 1. This asbestos product liability case is before us on Monsanto Company's appeal from an interlocutory order denying Monsanto's motion for summary judgment. A three-justice panel of this Court previously granted Monsanto's petition for an interlocutory appeal. See M.R.A.P. 5. Today's case arises from the same litigation which was the subject of our recent opinion in Gorman-Rupp Co. v. Hall, 908 So. 2d 749 (Miss.2005). Consistent with our decision in Gorman-Rupp, we reverse the trial court's denial of summary judgment and render judgment here in favor of Monsanto.
FACTS AND PROCEEDINGS
*136 IN THE TRIAL COURT[1]
¶ 2. Bobby G. Hall, Thurman Ferguson, Delano Reeves, Israel Stewart, Jr., Wilbert White, Aubrey Arnold, and James Hemphill worked in at least one common work site, International Paper in Natchez, Mississippi, and filed this suit against more than 270 defendants, including Monsanto, for injuries allegedly resulting from exposure to asbestos products, some of which were Monsanto's products present at IP in Natchez.[2] Monsanto filed a motion for summary judgment, claiming that the plaintiffs did not offer sufficient probative evidence regarding the necessary elements to establish a prima facie case. The trial judge denied summary judgment, and Monsanto now comes before us on interlocutory appeal as to whether the trial court's decision was proper.
¶ 3. Monsanto argues that the plaintiffs failed to prove the three elements necessary in a products liability action to survive summary judgment; namely, sufficient evidence of product identification, exposure, and proximate cause. See Miss.Code Ann. § 11-1-63 (Rev.2002). Monsanto relies on Lohrmann v. Pittsburgh Corning Corp., 782 F.2d 1156, 1162-63 (4th Cir.1986), arguing that, although Mississippi had not yet explicitly adopted the specific "frequency, regularity, and proximity" test from that Fourth Circuit case prior to the commencement of this litigation, this test embodies Mississippi law on products liability in asbestos cases and is proper in proving all three of the required elements; namely, product identification, exposure, and proximate cause. Because the plaintiffs' evidence did not consist of certain identification of Monsanto's products (but rather general descriptions of products like Monsanto's), Monsanto argues that the plaintiffs fail this test.
¶ 4. The plaintiffs argue that because summary judgment deals with existence of genuine issues of material facts, Monsanto's argument that a new legal standard should be officially adopted in Mississippi is misguided. The plaintiffs further assert that Monsanto must show first that no genuine issue of material fact existed and that it is entitled to a judgment as a matter of law. Miss. R. Civ. P. 56(c).
DISCUSSION
¶ 5. The standard of review in considering on appeal a trial court's grant or denial of summary judgment is de novo. Hataway v. Nicholls, 893 So. 2d 1054, 1057 (Miss.2005); Miller v. Meeks, 762 So. 2d 302, 304 (Miss.2000) (citing Short v. Columbus Rubber & Gasket Co., 535 So. 2d 61, 63 (Miss.1988)). See also McCullough v. Cook, 679 So. 2d 627, 630 (Miss.1996). In considering this issue, we must examine all the evidentiary matters before us, including admissions in pleadings, answers to interrogatories, depositions, affidavits, etc. Id. at 630. The movant carries the burden of demonstrating that no genuine issue of material fact exists, and the nonmoving party is given the benefit of the doubt as to the existence of a material fact. Id. If no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law, summary judgment should be entered in that party's favor. Id.
¶ 6. Monsanto argues that the plaintiffs failed to submit sufficient probative evidence to create a genuine issue of material fact to establish the requisite *137 product identification and exposure requirements and the requisite proximate cause in an asbestos products liability action to thereby warrant the denial of summary judgment.[3] In determining this issue, Monsanto asks this Court to adopt the Lohrmann standard, arguing that the plaintiffs must show the frequency, regularity, and proximity of Monsanto's actual product and its exposure to the plaintiffs. 782 F.2d at 1162-63.
¶ 7. We dealt with this precise issue in another interlocutory appeal which arose directly from this exact litigation in Gorman-Rupp, which was handed down on Aug. 11, 2005. Both Gorman-Rupp and Monsanto are among the 274 corporate defendants whom the plaintiffs sued. Like Monsanto, Gorman-Rupp filed a motion for summary judgment, which the trial judge denied. Gorman-Rupp alleged improper use of unauthenticated documents by Hall and sought adoption by this Court, in the context of summary judgment for asbestos cases, of the "frequency, regularity, proximity" standard in Lohrmann. Gorman-Rupp, 908 So.2d at 751. Gorman-Rupp also contended that the plaintiffs did not establish that any Gorman product used at IP in Natchez actually contained any asbestos. Id.
¶ 8. Monsanto urges this Court to follow the trend of adopting the Lohrmann test, which was not expressly adopted by this Court until Gorman-Rupp.[4] The Third, Fourth, Fifth, and Eighth Circuits, as well as state courts in Arkansas, Maryland, and New Jersey, have all adopted Lohrmann. We joined these jurisdictions in Gorman-Rupp, expressly adopting the Lohrmann test. Id. at 754-57 Monsanto correctly points out that Mississippi law in asbestos cases embodies that test. Indeed, before this Court had adopted the Lohrmann test in Gorman-Rupp, we had noted it as "persuasive." Prescott v. Leaf River Forest Prods., Inc., 740 So. 2d 301, 311 (Miss.1999). The plaintiffs argue that this Court should not adopt this test, at least not in this case, because that test lays out a standard for substantial causation not at issue here. However, because of our recent decision in Gorman-Rupp, the plaintiffs' position is without merit. Thus we again hold that in asbestos litigation cases, the frequency, regularity, and proximity test is the proper standard in determining exposure and proximate cause. So that there can be no question, we today add product identification to that standard as well.
¶ 9. Because the plaintiffs have failed to prove product identification, exposure, and proximate cause of Monsanto's products with any regularity, frequency, or proximity to the plaintiffs, consistent with our holding in Gorman-Rupp, the plaintiffs' case fails.
CONCLUSION
¶ 10. In asbestos litigation in Mississippi, the proper test to be used is the frequency, regularity, and proximity standard to show product identification of the defendants' actual products, exposure of the plaintiffs to those products, and proximate causation as to the injuries suffered by the plaintiffs. Without question, today's plaintiffs have fallen well short of meeting the Lohrmann test as adopted by this Court *138 in Gorman-Rupp. For these reasons, we reverse the Adams County Circuit Court's denial of summary judgment and render judgment here in favor of Monsanto finally dismissing the plaintiffs' complaint and this action with prejudice.
¶ 11. REVERSED AND RENDERED.
SMITH, C.J., WALLER AND COBB, P.JJ., EASLEY AND DICKINSON, JJ., CONCUR. GRAVES, J., DISSENTS WITHOUT SEPARATE WRITTEN OPINION. DIAZ AND RANDOLPH, JJ., NOT PARTICIPATING.
NOTES
[1] A more detailed account of the facts, claims of the plaintiffs, and procedural history may be found in Gorman-Rupp Co. v. Hall, 908 So. 2d 749, 751-53 (Miss.2005).
[2] These plaintiffs are the same plaintiffs identified in Gorman-Rupp. Id. at 751.
[3] The only difference in the issues in Gorman-Rupp and today's case is that in Gorman-Rupp, there was the added issue of unauthenticated documents, whereas in today's case, there is the added issue of product identification.
[4] Of course, Monsanto filed its petition for interlocutory appeal and subsequent briefs prior to our recent decision in Gorman-Rupp. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4558355/ | Fourth Court of Appeals
San Antonio, Texas
August 21, 2020
No. 04-19-00575-CV
IN THE ESTATE OF CARLOS AGUILAR, DECEASED,
From the County Court at Law No 2, Webb County, Texas
Trial Court No. 2012-PB4-000048-L2
Honorable Victor Villarreal, Judge Presiding
ORDER
The Appellant’s Unopposed Third Motion for Extension of Time to File Brief is hereby
GRANTED. The appellant’s brief is due on September 14, 2020. No further extensions, absent
extraordinary circumstances.
_________________________________
Liza A. Rodriguez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 21st day of August, 2020.
___________________________________
MICHAEL A. CRUZ,
Clerk of Court | 01-03-2023 | 08-25-2020 |
https://www.courtlistener.com/api/rest/v3/opinions/370182/ | 606 F.2d 106
HECTOR MARTINEZ AND COMPANY, Plaintiff-Appellant,v.SOUTHERN PACIFIC TRANSPORTATION CO., Defendant-Appellee.
No. 77-2793.
United States Court of Appeals,Fifth Circuit.
Nov. 8, 1979.
Paul J. Chitwood, Dallas, Tex., for plaintiff-appellant.
Howard P. Newton, San Antonio, Tex., for defendant-appellee.
Appeal from the United States District Court for the Western District of Texas.
Before WISDOM, HILL and VANCE, Circuit Judges.
VANCE, Circuit Judge:
1
Martinez appeals the trial court's dismissal of his claim under 49 U.S.C. § 20(11) (Carmack Amendment to the Interstate Commerce Act) for losses resulting from delay and damage in transportation by carrier Southern Pacific. The district court granted Southern Pacific's motion under Rule 12(b)(6) to dismiss the claim for delay damages. It held that such damages are special and Martinez failed to allege that the carrier had any notice of the possibility that such damages would accrue upon a breach of the contract between the parties. We reverse and remand for trial on the claim for some but not all of the damages sought.
2
Martinez's agent delivered a 2400 Lima Dragline, Model 66, to the Penn Central Railroad, the origin carrier, on February 11, 1974, for shipment from New Philadelphia, Ohio to Eagle Pass, Texas. The dragline was loaded onto five separate railroad cars. A single uniform bill of lading, which described the dragline as "used strip mining machinery and parts," was issued by Penn Central, listing Martinez's agent in Eagle Pass as the consignee.
3
The last of the five cars, which were shipped separately, arrived in Eagle Pass on April 2, 1974. Martinez had to make reasonable repairs in the amount of $14,467.00 because the dragline was damaged in transit. These repairs were not completed until June 20, 1974. Martinez also alleges delay damages in the amount of $117,600.00 because the dragline could not be used from March 1, when he contends that the last of the cars should have arrived, until June 20. The claimed sum represents the dragline's fair rental value during this period.
4
After filing a claim as prescribed by the bill of lading, Martinez sued Southern Pacific, which as delivering carrier is liable for all recoverable damages. Martinez framed his original complaint to allege three separate claims under the Carmack Amendment. First, Martinez sought recovery of the cost of repairing the damage to the dragline. Second, he sought the refund of certain demurrage or storage charges assessed by Southern Pacific and paid at the time of delivery. Third, Martinez sought compensation for wrongful deprivation of the dragline's use during the periods of delay in transit and of repair.
5
Martinez and Southern Pacific had already settled the first two of these claims, when Southern Pacific filed its Rule 12(b)(6) motion to dismiss the third claim for loss of use. Southern Pacific argues that, because such damages are special, they are not recoverable under the Carmack Amendment absent notice of the possibility of such damages. The trial court denied this motion upon condition that Martinez amend his complaint to allege such notice. When Martinez refused, the district court granted Southern Pacific's motion under Rule 12(b)(6). This ruling, which had the effect of dismissing all that remained of Martinez's suit, is the basis of this appeal.
6
Martinez's delay claim involves two very different items. Lost use during the period of March 1 until April 2 resulted from a delay in transit. Lost use from April 2 until June 20 resulted from repair of the damaged goods. Neither the parties nor the district court have focused on the full import of this distinction. Martinez's claimed loss during repair is not severable from the physical damage to the dragline but is a part of the same legal claim. Thus Martinez necessarily settled his claim regarding damages for the repair period when he settled his first claim for damages to the dragline. The surviving issue is the appropriate measure of damages for the claimed loss resulting from Southern Pacific's unreasonable delay in transportation.
7
The Carmack Amendment1 governs Martinez's claim for damages resulting from the delay in transit. That amendment incorporates common law principles for damages. F. J. McCarty Co. v. Southern Pacific Co., 428 F.2d 690, 693 (9th Cir. 1970); L. E. Whitlock Truck Service, Inc. v. Regal Drilling Co., 333 F.2d 488, 491 (10th Cir. 1964); J & H Flyer Inc. v. Pennsylvania Rr., 316 F.2d 203, 205 (2d Cir. 1963). In applying that statute, we first examine the extent to which the innocent party actually has been injured by the alleged breach. This inquiry assists in determining how the innocent party can be restored to the position in which he would have been had the contract been fully performed. See Liberty Navigation & Trading Co. v. Kinoshita & Co., 285 F.2d 343, 350 (2d Cir. 1960) (Lumbard, C. J., concurring in relevant part), Cert. denied, 366 U.S. 949, 81 S. Ct. 1904, 6 L. Ed. 2d 1242 (1961); 11 Williston on Contracts § 1338, at 198 (3d ed. W. Jaeger 1968).
8
Normally, the remedy is an award of money damages to the aggrieved party as compensation for his economic injury.2 This rule in effect protects the innocent party's expectation interest, giving him the " benefit of the bargain."3 Martinez's alleged injury in this case was deprivation of the dragline's use between March 1, when it should have been delivered, and April 2. Besides compensating the injured plaintiff, the common law also seeks to protect the defendant from unforeseeable large losses to the plaintiff.4 This limitation makes good sense. An award of full compensation for all of the plaintiff's losses due to the breach, no matter how unforeseeable or bizarre these losses are, would simply be unfair to the defendant as well as possibly paralyzing to commerce.
9
We next assess the reasonable foreseeability of the plaintiff's actual injury at the time of entry into the contract here the bill of lading. Globe Refining Co. v. Landa Cotton Oil Co., 190 U.S. 540, 544, 23 S. Ct. 754, 47 L. Ed. 1171 (1903); De Fore v. United States, 145 F. Supp. 484, 491 (M.D.Ga. 1956), Aff'd sub nom. Georgia Kaolin Co. v. United States, 249 F.2d 148 (5th Cir. 1957). Our analysis on this point begins with Hadley v. Baxendale, 9 Ex. 341, 156 Eng.Rep. 145 (1854). There, mill operators were forced to close operations to ship a broken shaft for repairs, and the carrier negligently delayed shipment. The carrier, however, had not been informed of the situation at the mill. The court refused to award profits lost during the period of delay because such damages were not in the contemplation of the parties. The court articulated the rules, still almost universally followed,5 that general damages are awarded only if injury were foreseeable to a reasonable man and that special damages are awarded only if actual notice were given the carrier of the possibility of injury.6 Damage is foreseeable by the carrier if it is the proximate and usual consequence of the carrier's action. 11 Williston on Contracts, supra § 1344, at 226.
10
Martinez asserts that his loss resulting from the delay in shipment was reasonably foreseeable when he entered the contract to transport his dragline. Hadley held that the damages arising from an inoperative mill were not foreseeable results of delayed shipment of a shaft, without specific notice. It was not obvious that the shaft in Hadley was an indispensable element of a mill. In the instant case, however, it was obvious that the dragline is a machine which of itself has a use value. Some cases after Hadley have suggested that the injury resulting from loss of a machine's use are not foreseeable results of delayed transport, because it is not a usual consequence although it is a proximate consequence. See 11 Williston on Contracts, supra § 1344, at 226-27. These decisions are unwarranted extensions of Hadley and employ arbitrary and inflexible definitions of foreseeability. Capital goods such as machinery have a use value, which may equal the rental value of the equipment or may be an interest value. The latter is ordinarily interest at the market rate on the value of the machine. It might be quite foreseeable that deprivation of the machine's use because of a carriage delay will cause a loss of rental value or interest value during the delay period.7 See generally F. Kessler & G. Gilmore, Contracts 1042 (2d ed. 1970). We must not lose sight of the basic common law rule, enunciated in Hadley, of damages for foreseeable loss. The amount of damages that was reasonably foreseeable involves a fact question that Martinez is entitled to present to a jury.
11
Southern Pacific replies that it was as foreseeable that the goods were to be sold as that they were to be used. This contention proves too much because Hadley allows recovery for harms that should have been foreseen. The general rule does not require the plaintiff to show that the actual harm suffered was the Most foreseeable of possible harms. He need only demonstrate that his harm was not so remote as to make it unforeseeable to a reasonable man at the time of contracting. Even if the dragline were being shipped for sale it does not follow that delay in shipment would cause no recoverable loss.
12
Southern Pacific argues that, because only market value damages are foreseeable under common law, damages for lost rental value must be special and therefore require notice by Martinez. This argument confuses one common law method for computing damages with the underlying common law rule of awarding reasonable compensation for foreseeable injury from a contract's breach.
13
The common law employs a number of methods for computing damages recoverable for unreasonable delay in shipment. One of these is the market value test that measures damages by the diminution in the goods' value between the time of dispatch and the time of actual delivery. See 11 Williston on Contracts, supra § 1342, at 223. That test, however, "is merely a method," and it "is not applied in cases where . . . another rule will better compute actual damages." Great Atlantic & Pacific Tea Co. v. Atchison, T. & Ste. F. Ry., 333 F.2d 705, 708 (7th Cir. 1964), Cert. denied, 379 U.S. 967, 85 S. Ct. 661, 13 L. Ed. 2d 560 (1965). Accord, Olsen v. Railway Express Agency, Inc., 295 F.2d 358, 359 (10th Cir. 1961). Cf. Illinois Cent. Ry. v. Crail, 281 U.S. 57, 64-65, 50 S. Ct. 180, 74 L. Ed. 699 (1930) (Cummins Amendment). Lost rental value is frequently an appropriate measure of damages from a delay in shipment of machinery.8 See Resolute Ins. Co. v. Percy Jones, Inc., 198 F.2d 309, 312 (10th Cir. 1952). E. g., Burlington Northern Inc. v. United States, 462 F.2d 526, 529-30, 199 Ct. Cl. 143 (1972); New Orleans & N. E. R. v. J. H. Miner Saw Mfg. Co., 117 Miss. 646, 78 So. 577, 578 (1918). In deciding which measure of damage to apply, courts look to the actual loss suffered by the plaintiff and the common law rule of compensating that loss.
14
There is only one rule, of universal application, . . . and that is to give compensation for the loss suffered. Frequently, this ideal is found impossible of complete attainment; perhaps generally the market value rule is found to be the nearest approach to reaching the actual loss. But the market value rule is inapplicable when, on the facts, it is not the nearest practicable approach to an ascertainment of the actual loss. Each case must be governed by its own facts.
15
United States v. Palmer & Parker Co., 61 F.2d 455, 459 (1st Cir. 1932). The Carmack Amendment, in compensating the aggrieved party's "full actual loss," does not restrict the measure of damages solely to the diminution in value of the goods involved. Great Atlantic & Pacific Tea Co. v. Atchison, T. & Ste. F. Ry., 333 F.2d at 708-09.9
16
Martinez has stated a claim for damages resulting from the delay in shipment. We reverse the district court's order of dismissal on this point, and remanded for trial. We affirm, however, the district court's decision to dismiss Martinez's claim for damages resulting from the delay during repair.
17
REVERSED AND REMANDED IN PART; AFFIRMED IN PART.
1
The Carmack Amendment, 49 U.S.C. § 20(11), provides that any common carrier subject to the provisions of the Interstate Commerce Act, such as Southern Pacific, who receives property for transportation in interstate commerce shall be liable for damages it causes in the amount of "the full actual loss, damage or injury" suffered. Federal law controls our determination of liability and the measure of damages, Dublin Co. v. Ryder Truck Lines, Inc., 417 F.2d 777, 778 (5th Cir. 1969), although it adopts common law principles
2
In some situations in which money damages cannot adequately compensate the innocent party, the court may order specific performance of the contract
3
Damages may be awarded for the expectation interest, the reliance interest, or the restitution interest of the aggrieved party. Fuller & Perdue, The Reliance Interest in Contract Damages (pts. 1-2), 46 Yale L.J. 52, 373 (1936-1937); J. Calamari & J. Perillo, Contracts § 205, at 328-29 (1970). If it is impossible to calculate a plaintiff's expectation interest, courts award damages to protect his reliance interest, to restore him to his position before the contract was entered. If reliance damages do not represent a fair measure of recovery, courts calculate damages on the basis of the restitution interest, to restore the benefit received from the plaintiff's performance
4
In addition to the foreseeability limitation, damages may also be limited because of uncertainty, E. g., United States v. Huff, 175 F.2d 678, 680 (5th Cir. 1949), or because of failure to mitigate damages, E. g., De Fore v. United States, 145 F. Supp. 484, 493 (M.D.Ga.1956), Aff'd sub nom. Georgia Kaolin Co. v. United States, 249 F.2d 148 (5th Cir. 1957)
5
J. Calamari & J. Perillo, Supra note 3, at 329. As Professor Gilmore admonished, Hadley "has meant all things to all men." G. Gilmore, The Death of Contract 50 (1974)
6
There are two tests for determining special damages. The more restrictive test requires proof both that notice was given of special circumstances and that the defendant impliedly or expressly assented to bearing the risk of these damages. Globe Refining Co. v. Landa Cotton Oil Co., 190 U.S. 540, 23 S. Ct. 754, 47 L. Ed. 1171 (1903). The more common test rejects the added showing of a tacit agreement for special damages. E. g., L. E. Whitlock Truck Svc., Inc. v. Regal Drilling Co., 333 F.2d at 492; U.C.C. § 2-715, Comment 2
7
Unlike loss of use, Martinez would have had to plead notice had he sought to recover for a variety of damages that could not have been foreseeable here such as lost profits, the cost of idle labor hired to operate the dragline, the cost of idle equipment that had been rented to be used with the dragline, or the daily royalties Martinez was paying for the land on which he planned to run his dragline. Cf. Texas Instruments, Inc. v. Branch Motor Express Co., 308 F. Supp. 1228, 1230 (D.Mass.), Aff'd, 432 F.2d 564 (1st Cir. 1970) (unforeseeable consequences of delay due to total destruction of machinery in transit). Thus Martinez may recover for lost use of the machine but not for the costs of the mining operations in which the machine was to be involved. Similarly, Hadley held that one cannot equate a shaft with the operation of an entire mill unless notice of the shaft's use had been given to the carrier. The result in Hadley might have been different had the plaintiff sought to recover solely for the loss of use of the shaft
8
Diminution in market value is a proper measure of damages from a delay in carriage of food and other non-rentable goods. E. g., Gulf, C., & Ste. F. Ry. v. Texas Packing Co., 244 U.S. 31, 37, 37 S. Ct. 487, 61 L. Ed. 970 (1917) (poultry); Fort Worth & D. Ry. v. United States, 242 F.2d 702, 705 (5th Cir. 1957) (livestock feed); Reider v. Thompson, 197 F.2d 158, 160 (5th Cir. 1952) (sheepskins). However, this test is generally not as accurate a measure of injury from a delay in transport of capital goods, with an ascertainable rental value for the machinery or interest value of the invested sum. Otherwise, a carrier could breach its contractual duties with impunity as long as the market value of the equipment did not drop, even though the shipper might lose a substantial use value or pay high installment purchase costs
9
This holding should hardly surprise Southern Pacific. F. J. McCarty Co. v. Southern Pacific Co., 428 F.2d 690 (9th Cir. 1970) (rejecting Southern Pacific's arguments for market value test and against "special damages") | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/2319198/ | 35 A.3d 488 (2012)
424 Md. 291
AYUSO
v.
GIBSON.
Pet. Docket No. 418.
Court of Appeals of Maryland.
Denied January 23, 2012.
Petition for writ of certiorari denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2319200/ | 643 A.2d 843 (1993)
Roger LUSSIER, et al.
v.
Paul W. and Colleen M. TRUAX, et al.
No. 93-187.
Supreme Court of Vermont.
December 22, 1993.
Reargument Denied January 12, 1994.
*844 Before ALLEN, C.J., and GIBSON, DOOLEY, MORSE and JOHNSON, JJ.
ENTRY ORDER
Defendants appeal from partial summary judgment entitling plaintiffs to possession of premises occupied by defendants as tenants. Defendants sought to avoid eviction by claiming that the parties' most recent agreement was a financing arrangement requiring plaintiffs to proceed by foreclosure rather than eviction proceedings. On appeal, defendants argue reversal is required because (1) the affidavits and documents they submitted were sufficient to create a genuine issue of material factwhether the parties' agreement was a financing arrangement that created a mortgagee-mortgagor relationship rather than a landlord-tenant relationship; (2) by granting summary judgment, the judge improperly reversed another superior court judge who had denied plaintiffs' first motion for summary judgment approximately a year earlier; and (3) the court failed to hold a hearing before granting plaintiffs' motion for summary judgment. We affirm.
In reviewing an order granting summary judgment, we apply the same standard of review as that applied by the trial court. Morrisville Lumber Co. v. Okcuoglu, 148 Vt. 180, 182-83, 531 A.2d 887, 888-89 (1987). We conclude, as did the trial court, that defendants' affidavits and documents, which for the most part consist of self-serving opinions as to the legal nature of the parties' transaction and of unrecorded or undelivered documents, are wholly insufficient to survive plaintiffs' motion for summary judgment. See V.R.C.P. 56(e) (affidavits opposing motion must demonstrate that admissible evidence raises genuine issue of material fact); Cohen v. Ayers, 449 F.Supp. 298, 321 (N.D.Ill.1978) (affidavit opposing summary judgment "may be disregarded if it contains conclusions of law or of ultimate fact"), aff'd, 596 F.2d 733 (7th Cir.1979).
In support of their motion, plaintiffs submitted unrefuted documentsthe parties' agreements and court and land records demonstrating that title in the property resided solely with plaintiffs, that defendants had no ownership interest in the property, and that the parties' 1986 agreement was an unconsummated purchase and sale agreement. Construction of the legal effect of the parties' agreements is a question of law appropriate for resolution by summary judgment. See Vermont Nat'l Bank v. Chittenden Trust Co., 143 Vt. 257, 266, 465 A.2d 284, 290 (1983) ("It is hornbook law that construction of contract terms is a matter of law and not a factual determination."); Orkin Exterminating Co. v. Federal Trade Comm'n, 849 F.2d 1354, 1360 (11th Cir.1988) (determination of ambiguity of contract and of legal effect of unambiguous contract are questions of law that may be resolved summarily), cert. denied, 488 U.S. 1041, 109 S.Ct. 865, 102 L.Ed.2d 989 (1989); Hadley v. Gerrie, 124 B.R. 679, 683 (D.V.I.) (fundamental principle of contract law is that disputes involving interpretation of unambiguous contracts are appropriate cases for summary judgment), aff'd, 952 F.2d 1392 (3d Cir.1991). We agree with the trial court that the affidavits and documents submitted by the parties warrant summary judgment in favor of plaintiffs.
The other two issues raised by defendants merit only a brief response. The *845 court's grant of summary judgment was not a horizontal reversal of the first judge, considering that the first judge gave no indication of what genuine issues of material fact were in dispute, and plaintiffs had submitted relevant "additional materials" to the court. See Morrisville Lumber Co., 148 Vt. at 182, 531 A.2d at 888. Further, no hearing was required. Id.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1593166/ | 453 So.2d 375 (1984)
George F. DeClaire, Petitioner,
v.
Donna DeClaire YOHANAN, Respondent.
No. 63012.
Supreme Court of Florida.
June 7, 1984.
*376 Montgomery, Lytal, Reiter, Denney & Searcy, and Edna L. Caruso, West Palm Beach, for petitioner.
James M. Tuthill of Christiansen, Jacknin & Tuthill, West Palm Beach, for respondent.
OVERTON, Justice.
This is a petition to review a decision of the Fourth District Court of Appeal reported as Yohanan v. DeClaire, 421 So.2d 551 (Fla. 4th DCA 1982). The district court held that the petitioner-husband's filing of a false financial affidavit in the parties' dissolution action constituted "fraud on the court" and was grounds for setting aside a property settlement agreement approved in the final judgment of dissolution entered three years prior to the commencement of this action. We find direct conflict with Truitt v. Truitt, 383 So.2d 276 (Fla. 5th DCA 1980); Erhardt v. Erhardt, 362 So.2d 70 (Fla. 2d DCA 1978), review denied, 368 So.2d 1366 (Fla. 1979); August v. August, 350 So.2d 794 (Fla. 3d DCA 1977); and Kimbrough v. McCranie, 325 So.2d 70 (Fla. 1st DCA 1976). We have jurisdiction, article V, section 3(b)(3), Florida Constitution. We find that the conduct in this case did not constitute fraud on the court, as such fraud has been defined and applied, and we quash the decision of the district court.
In the instant case, the petitioner-husband and the respondent-wife dissolved their marriage on October 27, 1977. The final judgment of dissolution incorporated a property settlement agreement entered into between the parties. The record reflects that this was a contested dissolution with substantial discovery and multiple proceedings before and after the entry of final judgment. Three years after the entry of the final judgment, the respondent-wife petitioned for an increase in child support. She later amended her petition, seeking to have the final judgment of dissolution set aside and to have the property settlement agreement declared void on the ground that the petitioner had fraudulently misrepresented his net worth in a financial affidavit on which the respondent allegedly relied in entering into the property settlement agreement.
Following an evidentiary hearing, the trial court (1) granted an increase in child support; (2) found that the financial affidavit executed by the petitioner was false in that it did not accurately reflect the petitioner's assets and liabilities or petitioner's net worth at the time of the dissolution; and (3) denied respondent's request that the property settlement agreement be declared void because the respondent knew or should have known of her former husband's true net worth as she had previously co-signed financial statements presented to a bank for the purpose of obtaining a loan and because information concerning the petitioner's true net worth could have been and should have been brought to the trial court's attention.
The district court reversed the trial court's refusal to set aside the property settlement agreement, finding that petitioner's conduct was fraud on the court. The district court recognized that the application of the concept of fraud on the court is restricted because public policy favors the termination of litigation, but held that "the public policy favoring the termination of litigation must yield in the present case to the public policy favoring the filing of accurate financial affidavits in dissolution actions." 421 So.2d at 553. According to the district court, the petitioner's "fraudulent affidavit constituted fraud upon the court because a trial court cannot properly determine what to award the parties or whether to approve a property settlement agreement without a true understanding of the parties' financial condition." Id. We disagree.
At the outset we must distinguish between extrinsic fraud and intrinsic fraud *377 because only extrinsic fraud may constitute fraud on the court. Extrinsic fraud involves conduct which is collateral to the issues tried in a case. The definition of extrinsic fraud was specifically articulated in United States v. Throckmorton, 98 U.S. 61, 65-66, 25 L.Ed. 93 (1878), in which the United States Supreme Court said:
Where the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court, a false promise of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority assumes to represent a party and connives at his defeat; or where the attorney regularly employed corruptly sells out his client's interest to the other side these, and similar cases which show that there has never been a real contest in the trial or hearing of the case, are reasons for which a new suit may be sustained to set aside and annul the former judgment or decree, and open the case for a new and a fair hearing. (Citations omitted.)
Consistent with the general rule, this Court has defined extrinsic fraud as the
prevention of an unsuccessful party [from] presenting his case, by fraud or deception practiced by his adversary; keeping the opponent away from court; falsely promising a compromise; ignorance of the adversary about the existence of the suit or the acts of the plaintiff; fraudulent representation of a party without his consent and connivance in his defeat; and so on.
Fair v. Tampa Electric Co., 158 Fla. 15, 18, 27 So.2d 514, 515 (1946). See Black's Law Dictionary 595 (rev. 5th ed. 1979). In other words, extrinsic fraud occurs where a defendant has somehow been prevented from participating in a cause.
Intrinsic fraud, on the other hand, applies to fraudulent conduct that arises within a proceeding and pertains to the issues in the case that have been tried or could have been tried. This Court, consistent with the general rule, has expressly held that false testimony given in a proceeding is intrinsic fraud. We have stated that
[i]f a judgment was obtained upon false testimony or a fraudulent instrument and the parties were heard, the evidence submitted to and received consideration by the court, then it may be said that the matter has been actually tried, or was so in issue that it might have been tried and the parties are estopped to set up an intrinsic or direct fraud to vitiate the judgment, because the judgment is the highest evidence and cannot be contradicted by the parties to it.
Johnson v. Wells, 72 Fla. 290, 299, 73 So. 188, 191 (1916) (citation omitted).
The concept of fraud on the court has historically been limited in its application to ensure the finality of judgments and to avoid frequent attacks against final judgments. Prior to the adoption of Florida Rule of Civil Procedure 1.540(b), only what was defined as "extrinsic fraud" could, in reality, form the basis for relief from a judgment. Johnson v. Wells; Fair v. Tampa Electric Co. Further, such relief could be obtained only by an independent action in equity. There was no practical basis for relief from a judgment obtained by intrinsic fraud. Rule 1.540(b) was adopted in 1962 as Florida Rule of Civil Procedure 1.38(b) and was modeled on Federal Rule of Civil Procedure 60. The Committee Note to rule 1.540 indicates that the rule is "[s]ubstantially the same as Federal Rule 60." In re Florida Rules of Civil Procedure 1967 Revision, 187 So.2d 598, 631 (Fla. 1966). See 7 J. Moore & J. Lucas, Moore's Federal Practice ¶ 60.31-33 (2d ed. 1983). The Florida rule was not intended to restrict the existing remedies. Like the federal rule, it was intended to provide a modern, simplified procedure for seeking relief from judgments. Further, the rule expanded, to a limited extent, the grounds for setting aside a judgment. Immediately following its adoption, it was explained that the rule
*378 abolished the use of the ancillary writs of coram nobis and audita querela as legal remedies and bills of review and bills in the nature of bills of review in equity... . The rule was not intended to diminish the substantive remedial law but only to provide that certain remedies may be applied for by motion.
Barns & Mattis, 1962 Amendments to the Florida Rules of Civil Procedure, 17 U.Miami L.Rev. 276, 291 (1963) (footnote omitted). See also 33 Fla.Jur.2d Judgments and Decrees § 352; Trawick, Florida Practice and Procedure § 26.8 (1982).
Under rule 1.540(b)[*] as it is presently written, a party may, by motion, seek to set aside a final judgment, decree, order, or proceeding on numerous grounds not previously available, including intrinsic fraud. Where the basis of the motion is mistake, inadvertence, surprise, excusable neglect, newly discovered evidence, intrinsic or extrinsic fraud, misrepresentation, or other misconduct of an adverse party, such motion must be made within a reasonable time and in no event more than one year from the entry of the final judgment. Prior to the adoption of rule 1.540(b), none of the stated grounds for a motion to set aside a judgment, with the exception of extrinsic fraud presented in an action in equity, could be used as the basis for seeking relief from a judgment. The writs of coram nobis and audita querela were available prior to the adoption of the rule, but for practical purposes these writs, because of their requirements, were not available for relief. The one-year limitations period of rule 1.540(b) does not apply where a judgment is void, where a judgment has been satisfied, released, or discharged, or where it is no longer equitable for a judgment to have prospective application. Further, the rule "does not limit the power of a court to entertain an independent action to relieve a party from a judgment, decree, order or proceeding or to set aside a judgment or decree for fraud on the court." Therefore, the rule clearly preserves the equitable remedy of an independent action where extrinsic fraud is established.
Where relief from a judgment is sought by motion, "[t]he motion is filed in the action in which the judgment was rendered." Trawick, Florida Practice and Procedure § 26.8 (1982). Where relief is sought by independent action, however, "[t]he action is not a continuation of the action in which the judgment ... under attack was entered. A new complaint is filed, service of process is made and the new action follows the same procedure as other civil actions." Id.
For better understanding, the circumstances under which a judgment may be challenged are set forth as follows:
Within One Year under Rule 1.540(b)
1) Mistake, inadvertence, surprise, or excusable neglect.
2) Newly discovered evidence which could not have been discovered in time to move for a new trial.
3) Any type of fraud, misrepresentation, or other misconduct of an adverse party including intrinsic fraud which occurs *379 during the proceeding such as false testimony.
No Time Limitation under Rule 1.540(b) or Independent Action
1) Where the judgment is void.
2) Where it can be established that the judgment has been satisfied, released, or discharged.
3) Where the judgment has prospective application and equity should now require relief from its present enforcement.
4) Extrinsic fraud which prevents a party from having an opportunity to present his case in court.
It should be clearly understood that rule 1.540(b) broadened the grounds upon which a final judgment could be attacked, but created a one-year limitations period within which such an attack must be made. The rule does not change the existing definitions of intrinsic and extrinsic fraud or change the type of conduct which constitutes fraud on the court.
Since the adoption of rule 1.540(b), all of the case law interpreting it concerns actions attacking a judgment more than one year old. In Alexander v. First National Bank, 275 So.2d 272 (Fla.4th DCA 1973), the original plaintiff in the case sought to enforce a final judgment of foreclosure and a deficiency judgment. Alexander, as original defendant, filed a counterclaim which alleged that in the prior action the plaintiff had misstated the amount of Alexander's indebtedness. The counterclaim further alleged that the final judgment of foreclosure and the deficiency judgment were in error and that the plaintiff's conduct was fraud on the court. The district court found that the misstatement of the indebtedness did not constitute fraud on the court and stated:
"Fraud on the court" is a somewhat elusive concept.... If it is given a broad application so as to comprehend any type of misrepresentation by a witness or party which induced an incorrect factual determination by the trier of fact, judgments would be subject to frequent attack by independent actions, and the time for such attacks would be limited only by laches. The policy of the law which favors the termination of litigation suggests that such a broad application of the concept is unwarranted. So too does the policy of Rule 1.540(b), RCP, which promotes non-appellate attacks on a final judgment by motion in the original action not by independent actions.
275 So.2d at 274.
In Truitt v. Truitt, 383 So.2d 276 (Fla.5th DCA 1980), the wife brought suit more than two years after the entry of final judgment of dissolution on the grounds that her former husband had perjured himself in his deposition testimony. The district court concluded that the husband's perjury in his deposition did not constitute fraud on the court and could not be the basis for setting aside the judgment. In August v. August, 350 So.2d 794 (Fla.3d DCA 1977), the wife filed a motion eighteen months after the entry of the final judgment of dissolution seeking to set aside the judgment on the grounds that her husband had concealed his assets and used duress and undue influence in obtaining a settlement from her. The district court held that the husband's conduct did not constitute fraud on the court. In Erhardt v. Erhardt, 362 So.2d 70 (Fla.2d DCA 1978), review denied, 368 So.2d 1366 (Fla. 1979), the husband filed a motion for relief from a final judgment of dissolution almost two years after its entry, alleging that the wife had fraudulently misrepresented the husband's income in the dissolution proceeding. The district court affirmed the trial court's holding that the wife's conduct was not fraud on the court. And in Kimbrough v. McCranie, 325 So.2d 70 (Fla.1st DCA 1976), the district court held that allegations that the plaintiff had falsely stated in the trial the amount of damages he sustained did not constitute fraud on the court.
In the recent decision of Brown v. Brown, 432 So.2d 704 (Fla.3d DCA 1983), the Third District Court of Appeal extensively reviewed the history of rule 1.540(b) and the case law relating to attacks on final judgments. In its analysis, the Third *380 District did not fully agree with the reasoning of the decisions in the cases discussed above. In Brown, the wife alleged that her husband had fraudulently induced her, as part of a property settlement agreement, to give him a note and mortgage in exchange for assets which the husband had allegedly over-valued. The wife filed a motion under rule 1.540(b) seeking relief from the final judgment. The trial court denied the motion because it was not filed within the one-year limitations period of the rule. The wife again challenged the final judgment of dissolution in a counterclaim to an action brought by her former husband to foreclose the mortgage given by her as part of the property settlement agreement. In Brown the district court found that rule 1.540(b) "permits an independent action to be relieved from a judgment upon allegations of extrinsic fraud or an independent action to set aside the judgment upon allegations of fraud upon the court." 422 So.2d at 714. The Brown court then determined that, although the wife's allegations did not show fraud upon the court, the allegations did establish extrinsic fraud which would allow relief outside the one-year limitations period.
Determining the conduct that constitutes intrinsic fraud, which requires action under the rule within one year of the entry of a final judgment, and the conduct that constitutes extrinsic fraud, for which an action may be brought at any time, is the critical issue in the instant case. The cases distinguish between false and misleading information being presented on an issue to be tried and conduct which prevents a party from trying the issue. When an issue is before a court for resolution, and the complaining party could have addressed the issue in the proceeding, such as attacking the false testimony or misrepresentation through cross examination and other evidence, then the improper conduct, even though it may be perjury, is intrinsic fraud and an attack on a final judgment based on such fraud must be made within one year of the entry of the judgment.
It is clear that the false financial affidavits submitted by the petitioner-husband were part of the record in this case. The issue of the husband's net worth was, therefore, a matter before the court for resolution and could have been tried. There were multiple proceedings in this cause before and after the entry of the final judgment. In addition, the trial judge found that the respondent-wife had information which should have given her notice of the falsity of the husband's financial information. In our view, this conduct is intrinsic fraud and the trial judge correctly determined that there was no fraud on the court in this case. To approve the asserted public policy decision expressed by the district court in this case would require a change in the definitions of intrinsic fraud and extrinsic fraud. The district court's holding could not logically be restricted to false financial disclosures in dissolution proceedings. Such a holding would necessarily require an inclusion of false testimony given in affidavits, depositions, or at trial as fraud on the court. It would permit any final judgment to be attacked at any time if a party could allege that an intentional misrepresentation was made by affidavit, deposition, or testimony presented in the case. By so expanding the definition of fraud on the court, we would also be substantially expanding the grounds on which final judgments may be attacked. The Brown decision and the Fourth District's decision in the instant case raise a major public policy question relating to how final judgments may be attacked and set aside. Public policy has always favored the termination of litigation after a party has had an opportunity for a trial and an appeal of the trial court's judgment. Consequently, the grounds upon which a final judgment may be set aside, other than by appeal, are limited in order to allow the parties and the public to rely on duly entered final judgments. Rule 1.540(b) broadened the grounds upon which final judgments may be attacked but we do not find it appropriate to further broaden these grounds by decision of this court. If there *381 is to be any change, it should be achieved through the rule-making process.
For the reasons expressed, we quash the decision of the district court of appeal and remand the case with directions to reinstate the judgment of the trial court. We also disapprove the Third District's decision in Brown to the extent that it conflicts with our decision in the instant case.
It is so ordered.
ALDERMAN, C.J., and BOYD, McDONALD, EHRLICH and SHAW, JJ., concur.
ADKINS, J., concurs in result only.
NOTES
[*] Rule 1.540(b) reads, in pertinent part, as follows:
(b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud, etc. On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, decree, order or proceeding for the following reasons: (1) mistake, inadvertence, surprise or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial or rehearing; (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party; (4) the judgment or decree is void; (5) the judgment or decree has been satisfied, released or discharged or a prior judgment or decree upon which it is based has been reversed or otherwise vacated or it is no longer equitable that the judgment or decree should have prospective application. The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, decree, order or proceeding was entered or taken. A motion under this subdivision does not affect the finality of a judgment or decree or suspend its operation. This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, decree, order or proceeding or to set aside a judgment or decree for fraud upon the court. | 01-03-2023 | 10-30-2013 |
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