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https://www.courtlistener.com/api/rest/v3/opinions/1594404/ | 896 F. Supp. 35 (1995)
LEASETEC CORPORATION By and Through its division, LEASETEC SYSTEMS CREDIT, Plaintiff,
v.
INHABITANTS OF the COUNTY OF CUMBERLAND, By and Through the CUMBERLAND COUNTY REGISTRY OF DEEDS, John O'Brien, Register, Defendants, Third-Party Plaintiffs,
v.
COMPUTERVISION CORPORATION, Third-Party Defendant.
Civ. No. 95-18-P-C.
United States District Court, D. Maine.
July 28, 1995.
*36 John P. McVeigh, Preti, Flaherty, Beliveau & Pachios, Portland, ME, for plaintiff.
Peter B. Lanfond, Jensen, Baird, Gardner & Henry, Portland, ME, for defendants/third-party plaintiffs.
Gerald F. Petruccelli, James B. Haddow, Petruccelli & Martin, Portland, ME, for third-party defendant.
MEMORANDUM AND ORDER GRANTING THIRD-PARTY DEFENDANT COMPUTERVISION CORPORATION'S MOTION TO DISMISS THIRD-PARTY COMPLAINT
GENE CARTER, Chief Judge.
The present action originated as a breach-of-contract claim brought by Plaintiff Leasetec Corporation ("Leasetec") against the Inhabitants of Cumberland County, by and through its Registry of Deeds ("the County") for unpaid lease payments for a computer system installed by Computervision Corporation ("Computervision") and leased by the County through Leasetec. The County filed an answer and counterclaim (Docket No. 2) and also filed a third-party complaint against Computervision (Docket No. 3). Now before the Court is Computervision's Motion to Dismiss *37 Third-Party Complaint (Docket No. 9). After consideration of the arguments presented in the briefing and oral argument on this motion, the Court concludes that the Third-Party Complaint was improperly brought under Rule 14(a) of the Federal Rules of Civil Procedure and grants Computervision's motion. The facts of the case, as stated in the County's third-party complaint, follow.
I. FACTS
This case originates in a complex relationship among these three parties created through a series of contracts in August, 1990. In 1990, the County sought to computerize the Registry of Deeds ("the Registry") for improved convenience and efficiency for those using the Registry. The County entered negotiations with Computervision, which was known at that time as "Prime Computer, Inc.," for the acquisition of equipment and software for use in the Registry. In April 1990 Computervision submitted a proposal to the County outlining the equipment, software, and consulting and maintenance services it would provide. In August 1990, the County informed Computervision that the County had selected Computervision to provide the equipment and services needed to provide computer services in the Registry. At the end of August, the County executed three contracts (collectively "the Contract") which, as a whole, addressed all of the services to be provided by Computervision through the installation and service of the new computers. Each agreement incorporated the terms of the proposal and certain supplemental terms provided through a letter submitted by Computervision just prior to the execution of the agreements.[1]
Although the Contract appeared to create a straightforward contract regarding the purchase of equipment and accompanying services that was not the extent of the arrangements worked out on August 30, 1990. On that same day, the County executed and delivered to Leasetec (then known as "Primetec Leasing, Inc."), an Assignment of Purchase/License Agreement through which the County assigned certain of its rights under the Contract with Computervision while retaining certain other rights, including any rights with respect to warranties made by Computervision. Also on August 30, 1990, the County further executed an Equipment Lease ("the Lease Agreement") under which it secured the right to acquire from Leasetec the same equipment and software it had "purchased" through its contracts with Computervision.
In short, this series of contracts and assignments established that Leasetec purchased the equipment specified by the County in its acceptance of Computervision's proposal and then leased that equipment to the County. The County's obligations ran to Leasetec to whom it was required to make lease payments. Computervision continued to have obligations under the Contract with the County under which it had made certain warranties and was obligated to provide certain services.
The parties agree to the background of the dispute but the allegations begin to diverge on matters regarding the conduct of the parties after August 30, 1990. In its third-party complaint, the County alleges that, although the equipment specified in the contract with Computervision was delivered to and installed in the Registry, the equipment "never performed as represented by Computervision." Third-Party Complaint at ¶ 15. Specifically, the County alleges that "[m]any times, the equipment and software did not work at all or only in a limited fashion," and that "[w]hen it did work, it often did so in an inaccurate manner and/or in a manner which was too slow to accommodate the needs of the Registry and members of the public." Id. The County further alleges that, although Computervision tried to correct the flaws in the equipment and software, the problems were never corrected to the degree required to be used as the County specified in the Computervision Contract.
The County states in the third-party complaint that, because the equipment was never operational to the satisfaction of the County, it was forced to terminate the Contract and *38 obtain replacement equipment, software, and accompanying services from another vendor at a cost which exceeded the contract price for the equipment and services. Although it is not stated expressly in the Third-Party Complaint, it appears to be undisputed among these three parties that at or near the time that the County terminated the Contract with Computervision it also stopped making any additional lease payments to Leasetec under the Lease Agreement.
Leasetec brought the present action to collect unpaid lease payments due under the Lease Agreement with the County. The County has denied liability under the Lease Agreement and, in addition, alleges in a third-party complaint against Computervision that Computervision's failure to provide the equipment, software, and services as represented constitutes a breach of the Contract, and further that "[b]ecause of its breach of the Contract, Computervision is liable for any damages to the County for any amounts for which the County would otherwise be liable under the terms of the [Lease] Agreement." Id. at ¶ 22. The County further alleges in its third-party complaint that Computervision was acting as an agent of Leasetec. Id. at ¶ 24. The County seeks this relief on the basis of several legal theories: breach of contract (Count I); indemnity (Count II); contribution (Count III); negligence (Count IV); negligent misrepresentations (Count V); non-acceptance of equipment and services (Count VI); failure to act in accordance with good faith and fair dealing (Count VII); breach of implied and express warranties (Count VIII); and unfair trade practices in violation of Mass.Gen.Laws Ann. ch. 93A, § 11.
II. DISCUSSION
To resolve Computervision's Motion to Dismiss, the Court must accept as true all factual allegations in the Third-Party Complaint, construe the record in favor of the County as Third-Party Plaintiffs, and decide whether, as a matter of law, the County could prove no set of facts which would entitle it to relief. Snyder v. Talbot, 836 F. Supp. 19, 22 (D.Me.1993).
A. Indemnity and Contribution
(Counts II and III)
At the outset, this Court notes that, although it will grant Computervision's motion on the basis that the Third-Party Complaint was not properly brought in the present action, the Court must, as a necessary predicate to the discussion of the application of Rule 14(a), address the merits of those counts in the Third-Party Complaint asserting the County's alleged rights to indemnification and contribution. Computervision argues here that the County has not properly stated claims for either indemnification or contribution by Computervision in the event that the County is liable under its contract with Leasetec for the unpaid lease payments. Specifically, Computervision asserts that the third-party claim here does not arise out of the prerequisite circumstances upon which to base such relief. The County responds that it may seek this relief upon a breach of warranty basis and that it is entitled to such relief since it was forced to terminate the Lease Contract as a result of Computervision's failure to supply the proper equipment and services.
Under Massachusetts law,[2] there are three different sets of circumstances giving rise to a right of indemnification. Araujo v. Woods Hole, Martha's Vineyard, Etc., 693 F.2d 1, 2 (1st Cir.1982). The first is the presence of an express agreement between the parties establishing a right to indemnification. Id. The County has not made any allegations or argument that the Contract at issue here provided for such a right.
The second set of circumstances is where a "contractual right to indemnification may be implied from the nature of the relationship between the parties." Id. To determine whether the relationship gives rise to such a right, a court must determine if *39 either of two sets of circumstances are present: (1) when "`there are unique special factors demonstrating that the parties intended that the putative indemnitor bear the ultimate liability,'" Fireside Motors, Inc. v. Nissan Motor Corporation, 395 Mass. 366, 479 N.E.2d 1386, 1391 (1985) (quoting Decker v. Black & Decker Mfg. Co., 389 Mass. 35, 449 N.E.2d 641, 644 (1983)) or (2) "`when there is a generally recognized special relationship between the parties.'" Fireside Motors, Inc., 479 N.E.2d at 1391 (quoting Araujo, 693 F.2d at 2-3). Here, the County has not even hinted at whether there are any "special factors" or whether there is a "special relationship" giving right to an implied contractual right to indemnification, nor can this Court envision any upon these facts.[3]
The third and final basis for indemnification, and the only basis to assert a right to contribution, is when the parties are joint tortfeasors. Araujo, 693 F.2d at 2; Fireside, 479 N.E.2d at 1388. Clearly the final basis for indemnification is not present since Leasetec is suing the County under a simple breach-of-contract theory without any allegations of tortious conduct. The County has not demonstrated any authority for its proposition that a breach of warranty creates indemnification rights.[4]
The absence of any tort-based theory of indemnification is also fatal to the County's claim for contribution since by statute, recovery of contribution is only permitted among joint tortfeasors. Mass.Gen.Laws Ann. ch. 231B, § 1 ("The right to contribution shall exist only in favor of a joint tortfeasor ... who has paid more than his pro rata share of the common liability."). Accordingly, the County may not, under either an indemnity or contribution theory, recover from Computervision for the amounts the County owes under the Lease Agreement.
B. Rule 14(a)
Computervision asks this Court to dismiss all counts of the Third-Party Complaint on the basis that it was not properly brought under Rule 14(a). Rule 14(a) provides, in pertinent part:
At any time after commencement of the action a defending party, as third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff.
Fed.R.Civ.P. 14(a). Specifically, Computervision argues that the third-party complaint filed by the County fails to allege that Computervision may be liable for all or part of *40 Leasetec's claim against the County and that the County's claim states a claim wholly independent of the claim brought by Leasetec.
Federal courts have characterized Rule 14(a) requirements in several ways. The United States District Court for the Eastern District of Pennsylvania has held, "To assert a claim properly under Rule 14, a third-party plaintiff must implead a person against whom it can assert joint or secondary liability arising from the original plaintiff's claim against the third-party plaintiff." Resolution Trust Corp. v. Farmer, 836 F. Supp. 1123, 1129 (E.D.Pa.1993). Another court characterized the rule similarly and stated that 14(a) permits impleading "only in cases in which the third-party defendant would be liable secondarily to the original defendant in event it is held liable to plaintiff." United States v. Berk & Berk, 767 F. Supp. 593, 604 (D.C.N.J. 1991).
Although most of the reported cases analyzing 14(a) occur in joint tortfeasor contexts, the language of Rule 14 does not itself limit impleading to cases involving joint liability. The rule is characterized as restricting the assertion of a third-party complaint to cases in which "the third party's liability is in some way dependent on the outcome of the main claim or when the third party is secondarily liable to defendant." 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure, § 1446 at 355-356 (1990). This secondary or derivative liability is the primary factor in a 14(a) analysis and the requirement that it exist may be satisfied "of the third-party claim indemnity, subrogation, contribution, express or implied warranty, or some other theory." Id. at 361-64. One court stated, "Rule 14(a) does not allow the defendant to assert a separate and independent claim even though the claim arises out of the same general set of facts as the main claim." United States v. Olavarrieta, 812 F.2d 640, 643 (11th Cir.1987). The United States Supreme Court has stated that a third-party complaint brought under 14(a) "depends at least in part upon the resolution of the primary lawsuit.... Its relation to the original complaint is thus not mere factual similarity but logical dependence." Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 376, 98 S. Ct. 2396, 2404, 57 L. Ed. 2d 274 (1978). In disputes regarding whether a third-party complaint is properly asserted, "the burden [is] on the third-party plaintiff to show that if it is found to be liable to the third-party plaintiff, the third-party defendant will in turn be liable to the third-party plaintiff." Massachusetts Laborers' Health and Welfare Fund v. Varrasso, 111 F.R.D. 62, 63 (D.Mass.1986).
In this case, although the County seeks to recover from Computervision on its indemnity and contribution claims, those claims, as discussed supra, are not properly asserted bases for relief. The remaining counts of the Third-Party Complaint are clearly independent claims that, in no way, depend upon the outcome of Leasetec's claims against the County. Regardless of whether the County is or is not liable on the Lease Agreement, Computervision may nonetheless be liable to the County on one or more of the claims. If Computervision did breach the Contract or did engage in any tortious conduct, then Computervision is liable to the County now for damages. Similarly, the breach of express warranty claim does not state the proper dependence on the claims brought by Leasetec against Computervision. The claim asserted here should be compared with one in which the County claims that Computervision breached an express warranty made to Leasetec rather than the County. It may be that the County seeks to include its liability on the rental contract as an element of damages in its contract claims against Computervision but the question of Computervision's liability is not tied to the outcome of the original claim by Leasetec.[5] If Leasetec is successful in its claims against the County it will be because of the terms of and performance of the parties under the Lease Agreement, and not due to any actions of Computervision. Under the facts asserted in the *41 Third-Party Complaint, there simply is no basis upon which Computervision can be held liable in whole or in part for Leasetec claim's against the County on the Lease Agreement.
The resolution of this procedural issue presents a challenge to the Court since this case involves an unusual set of facts and relationships. The Court has reviewed, however, a case in which a comparable thirdparty claim was dismissed as improperly brought under Rule 14(a). In Unilease Computer Corp. v. Major Computer Inc., 126 F.R.D. 490 (S.D.N.Y.1989) the district court there was also faced with a computer-leasing fact pattern, but the relationships and claims were different from those presented here. Unilease, the plaintiff there had brought a complaint against Major Computing, the defendant and third-party plaintiff, seeking damages for Major Computing's alleged failure to make rental payments on computer parts leased by it from Unilease. The parts were then subleased by Major Computing to another company, Stat Tab, the third-party defendant. A disagreement arose between Major Computing and Stat Tab in which Stat Tab claimed that the parts were not of the type ordered and which resulted in Stat Tab refusing to pay Major Computing and bringing an action against Major Computing.
Major Computing, presumably stopped making its required payments to Unilease when it stopped receiving payments from Stat Tab. When Unilease brought the action seeking to recover the unpaid lease payments, Major Computing filed a third-party complaint against Stat Tab asserting a claim based on Stat Tab's failure to pay Major Computing. The district court granted Stat Tab's motion to dismiss the third-party complaint on the basis that the claim was "neither derivative of, nor dependent on the outcome of Unilease's claim against Major [Computing]." Id. at 493. The court found no contractual provision stating that Major Computing's obligation to pay Unilease was somehow dependant upon Stat Tab's sublease payments. Id.
In Unilease and the present case, the third-party claims are similar in that they both assert a claim that "you owe me because your breach of our contract caused me to breach my contract with the plaintiff." In neither case, however, was the third-party plaintiff's breach actually caused by or excused as a result of the third-party defendant's actions. As stated above, the fact that the County may have an action against Computervision in which it could recover, as an element of damages, payments it made to Leasetec for the faulty equipment does not make the third-party claim dependent on the initial claim. Since the Third-Party Complaint fails to comply with the requirements of Rule 14(a), it must be dismissed and the County must seek relief against Computervision in a wholly separate action.[6]
III. CONCLUSION
Accordingly, Computervision's Motion to Dismiss Cumberland County's Third-Party Complaint is GRANTED and it is ORDERED that Counts II and III of the Third-Party Complaint be, and they are hereby, DISMISSED with prejudice and that all other counts thereof be, and are hereby, DISMISSED without prejudice.
So ORDERED.
NOTES
[1] The group of contracts consisted of: (1) a Purchase and License Schedule; (2) a Master Service Agreement; and (3) an Agreement for Professional services.
[2] The parties do not dispute that, as expressly provided in the Contract, Massachusetts law applies to the determination of the County's entitlement to any indemnification or contribution from Computervision and that, in any event, the result would be the same under the application of the law either of Massachusetts or of Maine.
[3] The Massachusetts Supreme Judicial Court has concluded that such special factors were present in at least two cases. Monadnock Display Fireworks, Inc. v. Andover, 388 Mass. 153, 445 N.E.2d 1053 (1983) (holding that the town's promise to provide police protection during a fireworks display created an implied promise to indemnify the fireworks company for damages paid to a spectator injured during the display); Great Atl. and Pac. Tea Co. v. Yanofsky, 380 Mass. 326, 403 N.E.2d 370 (1980) (holding that a lessor's promise to make all outside repairs to the lease property created an implied promise to indemnify lessee for any damages arising from lessor's failure to make such repairs.). The facts here are in no way comparable to either of these cases.
The Massachusetts high court rejected a finding of an implied contractual right to indemnification from a sales agreement alone. Decker v. Black and Decker Mfg. Co., 389 Mass. 35, 449 N.E.2d 641, 643 (1983). The high court also held in that case, "[The] right to indemnity is limited to those cases in which the would-be indemnitee is held derivatively or vicariously liable for the wrongful act of another." Id. 449 N.E.2d at 645.
[4] The Court has reviewed and considered the cases cited by the County and concludes that none is squarely on point. None of the opinions was issued in the context of a third-party action. The cases address either the proper inclusion of settlement fees previously paid to third persons in separate actions or claims as an element of damages resulting from a breach of warranty, City Welding and Mfg. Co. v. Gidley-Eschenheimer Corp., 16 Mass.App.Ct. 372, 451 N.E.2d 734, 737 (1983); Royal Paper Box Co. v. Munro & Church Co., 284 Mass. 446, 188 N.E. 223, 225 (1933); Moore-McCormack Lines, Inc. v. Boston Line and Service Co., Inc., 286 F. Supp. 399, 401 (D.Mass. 1968) (applying admiralty law), or the entitlement to indemnification when it is provided as an implied contractual right, such as the right of a buyer to recover medical expenses for injuries to the buyer's wife resulting from the defendant's breach of warranty, Paradis v. A.L. Nichols Co., 299 Mass. 364, 12 N.E.2d 863, 864 (1938), neither of which applies here.
[5] In fact, language in the Third-Party Complaint indicates that the County envisions a recovery under a damages theory rather than on any legal concept of indemnification or secondary liability: "Because of its breach of the Contract, Computervision is liable in damages to the County for any amounts for which the County would otherwise be liable under the terms of the [Lease] Agreement." Third-Party Complaint at ¶ 22.
[6] Computervision asks this Court to grant this motion on the merits of the individual counts in the Third-Party Complaint since it anticipates that, after dismissal of the Third-Party Complaint, the County will simply file with the Court an identical complaint in a separate action. The County chose this forum, Computervision argues, and presumably the pleadings will not be any more meritorious in any separate action.
This Court disagrees. Since, as this Court concludes, the Third-Party Complaint is not properly before the Court, it would be improper for the Court to address the merits of the pleadings, the resolution of which is unnecessary for the disposition of the present motion. Accordingly, the motion is granted without prejudice to the individual counts, with the exception of the counts asserting the County's entitlement to contribution and indemnification (Counts II and III), the resolution of which was a predicate to a determination of the Rule 14(a) analysis. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2441031/ | 966 N.E.2d 603 (2008)
381 Ill. App. 3d 1135
359 Ill. Dec. 282
PEOPLE
v.
GIVENS.
No. 1-06-2606.
Appellate Court of Illinois, First District.
June 10, 2008.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3070941/ | Order entered July 7, 2014
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-14-00815-CV
IN RE RIGOBERT CHAVEZ, Relator
Original Proceeding from the County Court at Law No. 5
Dallas County, Texas
Trial Court Cause No. CC-13-06446-E
ORDER
Based on the Court’s opinion of this date, we DENY relator’s petition for writ of
mandamus. We ORDER relator to bear the costs of this original proceeding.
/s/ ADA BROWN
JUSTICE | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1594353/ | 19 So. 3d 509 (2009)
STATE of Louisiana
v.
Derwin SMITH.
No. 09-KA-168.
Court of Appeal of Louisiana, Fifth Circuit.
June 23, 2009.
Harry J. Morel, Jr., District Attorney, Juan Byrd, Assistant District Attorney, Hahnville, LA, for Plaintiff/Appellee.
Michael H. Idoyaga, Attorney at Law, New Orleans, LA for Defendant/Appellant.
Panel composed of Judges MARION F. EDWARDS, CLARENCE E. McMANUS, and MARC E. JOHNSON.
*510 CLARENCE E. McMANUS, Judge.
STATEMENT OF THE CASE
The St. Charles' Parish district attorney's office filed a bill of information charging defendant, Derwin Smith, with second offense possession of marijuana in violation of LSA-R.S. 40:966(E)(2). He pled not guilty and filed a motion to suppress the evidence. The following facts were elicited at the motion to suppress. On May 19, 2008, Detectives Richard Dubus and David Ehrmann, with the St. Charles Parish Sheriffs Office, were patrolling the 300 block of LA52 in Luling when they observed what they believed to be a hand-to-hand transaction between defendant and Jarman Stewart outside a white Honda in the parking lot of an apartment complex. When the detectives approached, defendant, Stewart and a third person, entered the vehicle at which time the detectives conducted an investigatory stop and asked the occupants to exit and identify themselves.
According to Detective Dubus, while standing outside the vehicle, he saw a small black ziplock baggy on the floorboard behind the driver's seat. He retrieved the baggy and discovered it contained a green substance that field tested positive for marijuana. He then searched the car and found two more small plastic baggies on the floorboards under some debris.
A hearing was held on the motion to suppress and the trial court denied the motion. Defendant subsequently entered a guilty plea to the charged offense and was sentenced, in accordance with a plea agreement, to five years in the Department of Corrections with all but six months suspended, three years of active probation, and a $500.00 fine.
Defendant obtained an out-of-time appeal and seeks review of the trial court's denial of his motion to suppress the evidence.
ASSIGNMENT OF ERROR NUMBER ONE
Defendant argues the trial court erred in denying his motion to suppress the evidence. First, defendant claims there was no reasonable suspicion for the investigatory stop. He contends the officers' suspicions were not reasonable because the alleged incident occurred in the open and defendant did not have any drugs or money on his person at the time of his arrest. Next, defendant alleges the baggy was not in plain view. He points to the fact the incident occurred at night and there was no mention of a flashlight. He further maintains the officer could not see the contents of the baggy and challenges the opening of the closed baggy. Finally, defendant asserts he did not have constructive possession of the drugs found in the vehicle. He claims he was merely sitting next to a pile of trash in the car as it was exiting the driveway and contends his mere presence near the drugs was insufficient to show he possessed the drugs.
We find defendant did not preserve his right to raise this issue on appeal. Defendant, who pled guilty to second offense possession of marijuana, seeks review of the trial court's denial of his motion to suppress the evidence. A guilty plea normally waives all non-jurisdictional defects in the proceedings prior the entry of the guilty plea, and precludes review of such defects either by appeal or post-conviction relief. State v. King, 99-1348, p. 3 (La.App. 5 Cir. 5/17/00), 761 So. 2d 791, 793, writ denied, 00-1824 (La.6/29/01), 794 So. 2d 822. A defendant may be allowed appellate review if at the time he enters a guilty plea, he expressly reserves his right to appeal a specific adverse ruling in the case. State v. Crosby, 338 So. 2d 584 *511 (1976). A defendant who fails to specify which pre-trial ruling he wishes to reserve for appeal as part of a guilty plea entered under Crosby, is not precluded from review altogether, but his appellate review may be limited in scope. State v. Joseph, 03-315 (La.5/16/03), 847 So. 2d 1196 (per curiam).
We find the defendant, who was represented by counsel, did not enter his guilty plea under Crosby. During the plea colloquy, the trial judge informed defendant that, by pleading guilty, he was waiving his right to appeal and defendant acknowledged he understood. Additionally, defendant initialed and signed a waiver of constitutional rights form which reflects defendant understood that by pleading guilty, he was waiving his right to appeal. There was no mention that the guilty plea was being entered pursuant to Crosby either during the plea colloquy or on the waiver of constitutional rights form. Thus, at the time he entered his plea, he made no reservation of his rights pursuant to Crosby.
The record shows defendant was sentenced, pursuant to the terms of the plea agreement, one week after he entered his guilty plea. The transcript of the sentencing hearing does not reveal any discussion of a Crosby plea. However, the October 30, 2008 minute entry of the sentencing hearing states defendant's plea, which was entered one week earlier, was amended to read, "plea of guilty entered under Article 893 and under State v. Crosby." Generally, the transcript prevails where there is an inconsistency between the minute entry and the transcript. State v. Lynch, 441 So. 2d 732, 734 (La.1983). The transcript of that date is completely devoid of any mention of amending defendant's guilty plea, Article 893, or Crosby.
In addition to this minute entry, there are two other references to Crosby in the record. The first was made during a status conference approximately one month prior to the entry of defendant's guilty plea when defense counsel requested a continuance "in anticipation of a Crosby plea being entered." The trial court allowed the continuance and rescheduled the status conference for October 23, 2008, at which time defendant pled guilty without any reference to a Crosby plea.
The second mention of Crosby is found on a "Guilty Plea and Sentence" form defendant signed on the date he was sentenced. The form indicates that defendant will enter a guilty plea to possession of marijuana, second offense, and sets forth the sentence recommended by the district attorney, including the special conditions of probation. At the bottom of the form, there is a handwritten notation that reads, "concurrent w/ Div E probation pursuant to State v. Crosby." This form is signed by defendant, his counsel and the trial judge. Although there is a signature line for the assistant district attorney, it was not signed by him. In sentencing defendant, the trial court followed this form in setting forth the conditions of probation but did not expressly reference the form and made no mention of Crosby.
Although there are these three references to Crosby in the record, at the time defendant entered his plea, no mention was made of Crosby. A comment by defense counsel that she anticipated a Crosby plea would be entered has no bearing on whether such a plea was actually entered. Additionally, the transcript prevails over a minute entry. The minute entry that references an amendment of defendant's plea to be under Article 893 and Crosby is not supported by the transcript. And, the "guilty plea and sentence" form was never referenced during the plea colloquy or the sentencing. Further, the form is not complete in that it is missing the signature of the assistant district attorney and the reference to Crosby on the form seems misplaced. *512 The form appears to refer to Crosby in the context running defendant's sentence concurrently to another case and not in the proper context of reserving defendant's right to appeal a specific pre-trial ruling.
This Court has found that a defendant's failure to reserve the right to appeal under Crosby at the time he enters his guilty plea, precludes his right to appeal the trial court's ruling on a motion to suppress. See State v. Cox, 02-333, pp. 4-5 (La.App. 5 Cir. 9/30/02), 829 So. 2d 521, 524; State v. Raines, 00-1942 (La.App. 5 Cir. 5/30/01), 788 So. 2d 630, 632; State v. King, 99-1348, pp. 3-4 (La.App. 5 Cir. 5/17/00), 761 So. 2d 791, 793, writ denied, 00-1824 (La.6/29/01), 794 So. 2d 822; and, State v. Barousse, 442 So. 2d 1220, 1220-21 (La.App. 5 Cir.1983).
We find that, because defendant did not enter his guilty plea under Crosby, he has not preserved his rights to appeal the denial of his motion to suppress. Thus, he is precluded from raising this issue on appeal. Accordingly, this appeal is dismissed.
APPEAL DISMISSED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594389/ | 432 N.W.2d 45 (1988)
230 Neb. 460
Cindy McLAUGHLIN, Appellant and Cross-Appellee,
v.
Daniel McLAUGHLIN, Appellee, and
Great West Casualty Company, Appellee and Cross-Appellant.
No. 88-037.
Supreme Court of Nebraska.
November 23, 1988.
Joy Shiffermiller, of Atkins Ferguson Zimmerman Carney P.C., Scottsbluff, for appellant and cross-appellee.
James J. DeMars, of Barlow, Johnson, DeMars & Flodman, Lincoln, for appellee and cross-appellant Great West Cas.
HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.
PER CURIAM.
On rehearing in the Nebraska Workers' Compensation Court, Cindy McLaughlin was awarded benefits for injuries sustained when she fell while loading trucks for her husband's business, McLaughlin Trucking, for which Great West Casualty Company provided workers' compensation insurance coverage.
The Workers' Compensation Court awarded Cindy McLaughlin benefits for both temporary total disability and permanent partial disability to the body as a whole. See Neb.Rev.Stat. § 48-121(2) (Cum.Supp.1986).
Plaintiff appeals, and defendant Great West cross-appeals. Plaintiff claims that the amount awarded was incorrect. The defendant Great West claims that plaintiff *46 was not an employee entitled to benefits under the Workers' Compensation Law.
We affirm the decision of the Workers' Compensation Court.
Findings of fact made by the Nebraska Workers' Compensation Court after rehearing have the same force and effect as a jury verdict in a civil case. [Citations omitted.] In testing the sufficiency of evidence to support findings of fact made by the Nebraska Workers' Compensation Court after rehearing, the evidence must be considered in the light most favorable to the successful party. [Citations omitted.] Factual determinations by the Workers' Compensation Court will not be set aside on appeal unless such determinations are clearly erroneous. Regarding facts determined and findings made after rehearing in the Workers' Compensation Court, § 48-185 precludes the Supreme Court's substitution of its view of facts for that of the Workers' Compensation Court if the record contains evidence to substantiate the factual conclusions reached by the Workers' Compensation Court. [Citations omitted.] As the trier of fact, the Nebraska Workers' Compensation Court is the sole judge of the credibility of witnesses and the weight to be given testimony.
Fees v. Rivett Lumber Co., 228 Neb. 617, 620, 423 N.W.2d 483, 486 (1988). See, also, Neb.Rev.Stat. § 48-185 (Reissue 1984); Thom v. Lutheran Medical Center, 226 Neb. 737, 414 N.W.2d 810 (1987); Norris v. Iowa Beef Processors, 224 Neb. 867, 402 N.W.2d 658 (1987); Mendoza v. Omaha Meat Processors, 225 Neb. 771, 408 N.W.2d 280 (1987).
The record shows conflicting evidence concerning the errors alleged by the parties. Conflicts in the evidence were resolved by the Workers' Compensation Court. It is not the province of this court to disturb findings by the Workers' Compensation Court unless those findings are clearly erroneous. The record substantiates the fact findings made by the Workers' Compensation Court. Finding no clear error regarding the award, we affirm the judgment of the Workers' Compensation Court.
AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594426/ | 19 So. 3d 1114 (2009)
George Wilber AGENT, III, Appellant,
v.
STATE of Florida, Appellee.
No. 2D08-4161.
District Court of Appeal of Florida, Second District.
October 9, 2009.
George Wilber Agent, III, pro se.
DAVIS, Judge.
George W. Agent, pro se, challenges the summary denial of his postconviction motion, which he filed pursuant to Florida Rule of Criminal Procedure 3.850. We reverse.
In 2006, Agent entered an open no contest plea to carjacking with possession of a firearm, and the trial court sentenced him to ten years' imprisonment in June 2006.[1] He then filed his rule 3.850 motion in June 2008. The sole allegation raised in that motion was phrased as follows: "Whether defense counsel promised defendant that he would receive youthful offender sanction, rather than adult sanctions, in exchange for his plea." The postconviction court summarily denied this claim, attaching a copy of the sentencing hearing transcript and concluding as follows:
Defendant was present when the court explained that he would not receive a youthful offender sentence, and having been so advised Defendant entered his plea. Accordingly, Defendant's claim that his plea was involuntary is conclusively refuted, because after being informed by the Court that he would not be sentenced as a youthful offender, Defendant still chose to enter his plea.
*1115 The transcript of the sentencing hearing, however, does not support this conclusion. It is clear from the transcript that Agent entered his plea before he was made aware that he would receive a ten-year sentence. Because Agent's claim is not conclusively refuted by the postconviction court's record attachments, we must reverse the summary denial of his rule 3.850 motion.
However, our review of the record also indicates that Agent's rule 3.850 motion was facially insufficient because it does not include an affirmative request to withdraw the plea, nor does Agent allege that he would not have entered his plea absent counsel's promise that he would receive a youthful offender sentence. See Warner v. State, 916 So. 2d 879, 881 (Fla. 2d DCA 2005) ("In his postconviction motion, he failed to request that his plea ... be vacated or to allege that he would not have agreed to the plea ... had he known about the double jeopardy violation. This omission renders his claims facially insufficient."). Accordingly, the postconviction court should have stricken Agent's facially insufficient claim but, pursuant to Spera v. State, 971 So. 2d 754 (Fla.2007), given him at least one opportunity to amend the motion.
We therefore reverse the summary denial of Agent's rule 3.850 motion and remand the case to the postconviction court with instructions to strike the claim with leave to amend within a specific reasonable period of time as set forth in Spera. See Howard v. State, 17 So. 3d 774 (Fla. 2d DCA 2009).
Reversed and remanded.
CASANUEVA, C.J., and FULMER, J., Concur.
NOTES
[1] Agent did not take a direct appeal of his conviction and sentence. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594408/ | 432 N.W.2d 784 (1988)
Albert WILLE, et al., Respondents,
v.
FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant.
No. C7-88-1096.
Court of Appeals of Minnesota.
December 13, 1988.
Richard A. Williams, Jr., Hvass, Weisman & King, Chartered Minneapolis, for respondents.
*785 Kenneth R. White, Farrish, Johnson & Maschka, Mankato, for appellant.
Heard, considered and decided by SCHUMACHER, P.J., FOLEY and HUSPENI, JJ.
OPINION
SCHUMACHER, Judge.
Respondent Albert Wille brought a declaratory judgment action seeking to stack underinsured benefits of separate insurance policies on his two vehicles. Farm Bureau Insurance Co., appellant, brought a summary judgment motion. The trial court denied Farm Bureau's motion and granted summary judgment for Wille. Farm Bureau appeals.
FACTS
On December 24, 1984, in Janesville, Minnesota, respondent Albert Wille was struck by a vehicle owned by Rick Scholl and driven by Raymond Scholl. Both the Scholls were residents of the State of Minnesota. Wille was visiting his daughter at the time. He was getting into his automobile when he was struck and sustained personal injuries as a result.
Wille was a resident of Williamsburg, Iowa and also worked in Iowa. He owned two vehicles, a 1979 Ford and a 1979¾ ton pick-up truck that were registered in Iowa and principally garaged in Iowa. Each vehicle was insured through a separate policy by appellant Farm Bureau Mutual Insurance Company ("Farm Bureau"). Each policy has underinsured motorist coverage limits of $25,000 per person and $50,000 per accident. The policies contained language prohibiting stacking of benefits.
Compensation is available to Wille from various insurance policies. Rick Scholl, owner of the vehicle that struck Wille, and Raymond Scholl, the driver of the vehicle, both have automobile insurance with policy limits of $25,000 for liability. The trial court found that Wille has received thus far the $25,000 underinsured limits on the policy covering his 1979 Ford and the $25,000 liability limits on the Raymond Scholl vehicle.
Wille brought an action against Farm Bureau in December, 1986 seeking a declaratory judgment permitting him to recover the $25,000 underinsured benefits available under the policy on his truck. Wille alleged that his damages were greater than the sums he has already received. In February 1988, Farm Bureau brought a summary judgment motion on Wille's complaint. On April 7, 1988 the trial court granted Wille summary judgment.
ISSUE
Does Iowa law or Minnesota law apply to the enforcement of anti-stacking provisions in Wille's insurance policy with Farm Bureau?
ANALYSIS
When reviewing an award for summary judgment, this court must determine whether there are any genuine issues of material fact and whether appellant is entitled to summary judgment as a matter of law. Betlach v. Wayzata Condominium, 281 N.W.2d 328, 330 (Minn.1979). In the present case, the parties do not dispute the facts. This court is not bound by the trial court's conclusions of law. A.J. Chromy Construction Co. v. Commercial Mechanical Services, Inc., 260 N.W.2d 579, 582 (Minn.1977).
This is a choice-of-law case. Iowa law would enforce the anti-stacking provisions of Farm Bureau's policy issued to Wille. Minnesota law at the time of the accident would deny enforcement of those provisions. See Hague v. Allstate Insurance Co., 289 N.W.2d 43, 49 (Minn.1978) aff'd on rehearing, 289 N.W.2d at 50 (Minn.1979) cert. granted 444 U.S. 1070, 100 S. Ct. 1012, 62 L. Ed. 2d 750 (1980) aff'd 449 U.S. 302, 101 S. Ct. 633, 66 L. Ed. 2d 521 (1981) reh'g denied 450 U.S. 971, 101 S. Ct. 1494, 67 L. Ed. 2d 623 (1981).
*786 The first step in analyzing this choice-of-law question is to determine whether the forum state and the alternative state have sufficient contacts to pass constitutional due process demands. Neither party charges that contacts with either Minnesota or Iowa are so insufficient as to forbid application of that state's law to the case. Minnesota is the site of the accident, the resident state of the other vehicle involved and a state in which Farm Bureau is licensed to do business. Similar contacts were held sufficient in Hime v. State Farm Fire & Casualty Co., 284 N.W.2d 829, 832 (Minn.1979), cert. denied 444 U.S. 1032, 100 S. Ct. 703, 62 L. Ed. 2d 668 (1980).
The second step requires the court to examine five factors, namely:
1) predictability of results;
2) maintenance of interstate and international order;
3) simplification of the judicial task;
4) advancement of the forum's governmental interest;
5) application of the better rule of law
Hime, 284 N.W.2d at 833 (quoting Milkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408, 412 (1973)).
1.) Predictability of results
The supreme court has applied this factor "primarily to consensual transactions where the parties desire advance notice of which state law will govern in future disputes." Hime, 284 N.W.2d at 833. The policy in the present case does not require that Iowa's law be used in interpreting the policy's provisions.
An automobile insurer has no reasonable expectation that the law of the issuing state will govern the policy.
When an insurance company doing business in a number of states writes a policy on an automobile, the company knows the automobile is a movable item which will be driven from state to state. The company, therefore, accepts the risk that the insured may be subject to liability not only in the state where the policy is written, but also in states other than where the policy is written, and that in many instances those states will apply their own law to the situation.
Hague, 289 N.W.2d at 50.
2.) Maintenance of interstate and international order
This factor requires sufficient contacts between the state whose law is applied and the transaction. Hague, 289 N.W.2d at 48. The accident occurred in Minnesota with a Minnesota resident and a vehicle licensed in Minnesota. Farm Bureau is licensed to do business in Minnesota. These contacts are sufficient to warrant application of Minnesota law. See Hime, 284 N.W.2d at 833.
3.) Simplification of the judicial task
There is no difficulty in applying the law of either state as both parties agree that in 1984, Minnesota law would permit stacking and Iowa law would not.
4.) Advancement of the forum's governmental interest
"Minnesota's governmental interest will most clearly be advanced by application of Minnesota law." Hague, 289 N.W.2d at 49. Application of Minnesota law will have little effect on the advancement of a significant state interest.
5.) Better Rule of Law
We hold that the better rule is Minnesota law. "We believe that it is preferable to compensate victims of accidents to the full extent of their injuries * * *." Hague, 289 N.W.2d at 49.
However, Farm Bureau argues that statutory amendments subsequent to the accident should determine this court's analysis and in support of its position cites Stenzel v. State Farm Mutual Automobile Insurance Co., 379 N.W.2d 674 (Minn. Ct.App.1986) pet for rev. denied (Minn. 1986). The Minnesota legislature amended *787 the underinsured statute in 1985 to prohibit stacking of underinsured benefits. 1985 Minn.Laws, 1st Spec.Sess. ch. 10 § 68. This provision was expressly made effective October 1, 1985 for:
all insurance policies providing benefits for injuries arising out of the maintenance or use of a motor vehicle or motorcycle that are executed, issued, issued for delivery, delivered, continued, or renewed in this state after September 30, 1985.
1985 Minn.Laws, 1st Spec.Sess. ch. 10, § 125.
Farm Bureau's argument is similar to that of appellant in AMCO Insurance Co. v. Lang, 420 N.W.2d 895 (Minn.1988). In AMCO, Maxine O'Laughlin was killed in an auto accident on October 24, 1985 in Minnesota. Maxine and her husband Thomas were residents of Minnesota. The O'Laughlins insured their two vehicles through AMCO Insurance Co., and had policies that covered a one-year period from November 5, 1984 to November 5, 1985. AMCO refused to stack the underinsured benefits available under the two policies relying on the anti-stacking language contained in the policies. AMCO claimed that the October 1, 1985 amendments applied to the policies and therefore the anti-stacking amendments were enforceable. AMCO, an Iowa corporation, brought a declaratory judgment action in federal district court based on diversity jurisdiction. The federal court certified the question of the enforceability of the anti-stacking provisions to the Minnesota Supreme Court.
The supreme court refused to apply the amendments in AMCO's case. Although AMCO was not a choice-of-law case, we find the court's reasoning in AMCO dispositive of Farm Bureau's argument in the present case.
Like Farm Bureau, AMCO contended that:
once the legislature's expression of public policy went into effect AMCO was no longer precluded from enforcing the anti-stacking * * * provisions of its policy.
AMCO, 420 N.W.2d at 900.
In its opinion, the supreme court recalled its earlier ruling that first party coverages follow the person, not the vehicle and therefore stacking was permitted. See Van Tassel v. Horace Mann Insurance Company, 296 Minn. 181, 207 N.W.2d 348 (1973). The court also pointed out that the No-Fault Act as originally written was silent on the stacking issue. However, the court continued:
Whatever may have been the legislature's intent when it enacted the No-Fault Act in 1974 and during the intervening years, these 1985 amendments declare a public policy plainly at variance with that articulated in the case law. Does this new statement of public policy affect the enforceability of anti-stacking and reduction of benefits clauses in policies issued prior to the effective date of these amendments? We think not.
AMCO, 420 N.W.2d at 897-898. (emphasis added)
The court further discussed the effect of an apparent change in public policy on insurance contracts written prior to the policy change:
[T]his court had declared that anti-stacking provisions and reduction-of-benefits provisions were void as against public policy when the insured had paid separate premiums for first party coverages with respect to more than one vehicle. * * * It is well established that contract provisions which conflict with statutory law `or the well clarified and clearly expounded rules set forth by judicial decision' will not be enforced. (citations omitted) And a subsequent change in public policy does not validate insurance contract provisions which violated public policy and were, therefore, invalid when the insurance policy was issued. (citations omitted).
AMCO, 420 N.W.2d at 900.
We believe the court in AMCO declared that a subsequent public policy change does not affect the enforceability of insurance policy provisions. Therefore, we cannot agree that in a choice-of-law analysis, a change in Minnesota's public policy requires *788 enforcement of a provision that violated public policy when the insurance contract was issued.
DECISION
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594422/ | 432 N.W.2d 774 (1988)
Robert LARSON, as trustee for the heirs and next of kin of Barbara Ann Larson, Appellant,
v.
The POWDER RIDGE SKI CORPORATION, Respondent.
No. C6-88-781.
Court of Appeals of Minnesota.
December 13, 1988.
Joe E. Thompson, Schmidt, Thompson, Thompson, Johnson & Moody, P.A., Willmar, for appellant.
Louis R. Tilton, Pustorino, Pederson, Tilton & Parrington, Minneapolis, for respondent.
Heard, considered and decided by SCHUMACHER, P.J., and FOLEY and HUSPENI, JJ.
OPINION
FOLEY, Judge.
This appeal is from the denial of a motion for a new trial made on the basis of the failure of the trial court to give certain requested jury instructions and an alleged error in admitting a ski tow ticket. We affirm.
FACTS
On January 25, 1986, Barbara Larson was a paying patron at respondent The Powder Ridge Ski Corporation. While using a rope tow, she fell, struck her head *775 and died. Appellant Robert Larson, as trustee for the heirs and next of kin of Barbara Ann Larson, commenced suit against Powder Ridge.
At trial, the jury found by special verdict that Powder Ridge was not negligent in its care of the rope tow or its path and that decedent was negligent, but that her negligence was not a direct cause of her fall. Larson moved for a new trial, alleging the trial court erred in admitting a ski tow ticket into evidence and in refusing to give requested jury instructions. Larson's motion was denied. He now appeals.
ISSUES
1. Did the trial court err in admitting the ski tow ticket into evidence?
2. Did the trial court err in refusing to give the requested jury instructions?
ANALYSIS
1. Larson argues that the trial court erred in admitting a ski tow ticket into evidence and claims that the admission of the ticket was prejudicial error. We disagree. Minn.R.Evid. 103(a) provides in part:
Error may not be predicated upon a ruling which admits or excludes evidence unless a substantial right of the party is affected, and
(1) Objection. In case the ruling is one admitting evidence a timely objection or motion to strike appears of record, stating the specific ground of objection, if the specific ground was not apparent from the context;
Here, Larson's objection was timely, and the specific ground of objection was found in the record. Larson, however, has failed to show that admission of the ticket into evidence affects a substantial right. The ticket reads as follows:
The purchaser and user of this ticket assumes and understands that skiing is a hazardous sport, that bare spots, variations in snow, ice and terrain along with bumps, moguls, stumps, forest growth and debris and rocks and many other hazards or obstacles exist within this ski area. In using the ticket and skiing at the area, such dangers are recognized and accepted whether they are marked or unmarked. The skier realizes that falls and collisions do occur and injuries may result, and therefore assumes the burden of skiing under control at all times.
Larson argues that there was no evidence that decedent saw or read the material printed on the ticket.
We observe, however, that decedent was aware of the risks inherent in the sport of skiing, as the record reflects that she had been a skier for 20 years and she had skiied at Powder Ridge for many years. It would have been reasonable for the jury to have found that she was aware of the hazards connected with skiing and use of the tow.
Larson also argues that by offering the ticket into evidence, Powder Ridge was attempting to show that decedent not only assumed the risk "involving patrons of inherently dangerous sporting events," Wagner v. Thomas J. Obert Enterprises, 396 N.W.2d 223, 226 (Minn.1986) (citing Springrose v. Willmore, 292 Minn. 23, 24, 192 N.W.2d 826, 827 (1971)), but also the risk of injury as a result of Powder Ridge's "duty to safely supervise [rope tow] activities or to maintain the premises in a safe condition." Wagner, 396 N.W.2d at 226. "Negligent maintenance and supervision of a [ski resort] are not inherent risks of the sport itself," and it is clear that the language of the ticket does not relieve Powder Ridge of its duty to safely supervise rope tow activities or to maintain the ski area in a safe condition. Id.
Further, the trial court's instruction with respect to the ticket demonstrates its limited use: "Exhibit E (lift ticket) was received only as it might relate to decedent's knowledge of the risk." Accordingly, the trial court properly received the tow ticket into evidence, and Larson's request for a new trial was correctly denied.
2. Larson next argues that the trial court erred by refusing to give his requested jury instructions. When reviewing jury instructions on appeal, we consider the following:
*776 Jury instructions must be construed as a whole and tested from the standpoint of total impact on the jury. Errors are fundamental or controlling if they "destroy the substantial correctness of the charge as a whole," cause a miscarriage of justice or result in substantial prejudice. The granting of a motion for a new trial on the ground of erroneous instructions to the jury rests largely in the sound discretion of the court, and its decision will not be disturbed on appeal unless there has been a clear abuse of that discretion. In the absence of an objection, an error in the instruction may be assigned as a ground for a new trial only if the error is one of "fundamental law or controlling principle."
Smits v. E-Z Por Corp., 365 N.W.2d 352, 354 (Minn.Ct.App.1985) (citations omitted).
Duty to Inspect Instruction
Larson requested the following instruction regarding the duty to inspect:
The defendant in this case has a duty to use reasonable care to inspect and repair his premises, which includes the tow path used by skiers using the tow rope, and to warn the skiers of any conditions of which they have no knowledge and which may affect their safety, in order to protect them from an unreasonable risk of harm caused by the condition of the premises while they are on the premises.
The trial court refused to give the requested instruction verbatim and instead gave the following instruction:
The defendant had a duty to use reasonable care to maintain the tow path to protect the decedent from an unreasonable risk of harm caused by its condition.
In determining the reasonable care of the Defendant, the following factors may be considered:
* * * * * *
5. The reasonableness of the inspection, repair, or warning.
6. The opportunity and ease of repair or correction or the giving of the warning.
We hold that the trial court did not err in refusing to give this instruction. The Minnesota Supreme Court has held:
In general, it is not error to refuse instructions whose substance is adequately contained in the general charge or instructions without support in the evidence.
Woodrow v. Tobler, 269 N.W.2d 910, 917 (Minn.1978).
Here, the trial court's jury instruction clearly conveys the substance of the requested instruction regarding inspection and repair. If a trial court's instruction contains a complete and correct statement of the law, denial of the requested instruction, even if such instruction accurately states the law, is not ground for a new trial. Gleeman v. Triplett, 301 Minn. 504, 506-07, 222 N.W.2d 787, 788 (1974).
Degree of Care Instruction
Larson argues that it was error for the trial court to refuse to instruct the jury that Powder Ridge, as a ski rope tow operator, owed decedent a high degree of care. The trial court instead gave the following reasonable care instruction:
The Defendant had a duty to use reasonable care to maintain the tow path to protect the decedent from an unreasonable risk of harm caused by its condition.
The trial court gave the following reasons for refusing to hold Powder Ridge to the higher degree of care standard:
The instructions pertained to Plaintiff's contention that Defendant's tow rope operation should be classified as a common carrier that owed the Plaintiff a higher duty of care. Relying on McDaniel v. Dowell, 26 Cal Rptr. 140, 210 Cal. App. 2d 26 (1962), the Court refused to give the requested instructions. In McDaniel, the Court held that a tow rope was not a common carrier because the skier's feet remained in contact with the ground and the skier's body remained under her control. Given the factual similarities between McDaniel and the case at bar, the Court finds Plaintiff's argument to be without merit.
*777 We concur with the reasoning of the learned trial judge and adopt the decision of the California court in McDaniel v. Dowell, 210 Cal. App. 2d 26, 26 Cal. Rptr. 140 (1962). There, the court found that a rope tow does not physically carry a skier to the top of a slope, but it is merely an aid furnished to skiers to ease the burden of moving the skier's body up the hill while the skier's feet were still in contact with the ground and the skier's body remained under the skier's control. The court held that the operation was not in the nature of a common carrier. Id. at 31, 26 Cal.Rptr. at 143. Accordingly, we hold that the trial court did not err in refusing to instruct the jury that Powder Ridge owed decedent a higher degree of care.
Conditional Higher Degree of Care Instruction
Although the trial court had already chosen to give the reasonable care instruction based on the McDaniel analysis, Larson nonetheless requested the following instruction which the trial court also refused:
One of the issues in this case is whether the tow path at the place and time of Mrs. Larson's fall was in a condition that made it difficult for Mrs. Larson to maintain reasonable control and balance on her skis. If you find this claim more likely true than not true then you are instructed that the defendant owed to her a high degree of care to make a reasonable inspection to discover any dangerous conditions that may affect her safety and to warn her of the particular hazards created by them or to repair the conditions that caused the hazard.
For the same reasons given for the denial of the higher degree of care instruction, we hold that the trial court's refusal to hold the rope tow operator to the higher standard of care was proper here also.
Jury instructions should be construed as a whole and tested from the standpoint of total impact on the jury. We will not disturb the instructions of the trial court here because there has been no clear abuse of discretion. Larson had the opportunity to argue his motion for a new trial to the trial court, and the trial court, after reviewing the entire trial and Larson's arguments for a new trial, exercised sound discretion. See Smits, 365 N.W.2d at 354. As a result, Larson was not prejudiced by the trial court's refusal to give the requested instructions.
DECISION
AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594441/ | 147 Wis. 2d 185 (1988)
432 N.W.2d 654
STATE of Wisconsin, Plaintiff-Respondent,
v.
Donald MORRICK, Defendant-Appellant.[]
No. 88-0128-CR.
Court of Appeals of Wisconsin.
Submitted on briefs August 31, 1988.
Decided October 20, 1988.
For the defendant-appellant the cause was submitted on the briefs of Ben Kempinen, of Madison.
For the plaintiff-respondent the cause was submitted on the brief of Donald J. Hanaway, attorney general, and Paul Lundsten, assistant attorney general.
Before Gartzke, P.J., Dykman and Eich, JJ.
*186 EICH, J.
Donald Morrick appeals from an order denying his postconviction motion for sentence credit. While the precise issue is difficult to determine from the briefs, we perceive it to be whether sec. 973.155(1)(a), Stats., which allows sentence credit for time spent in custody "in connection with the course of conduct" underlying the sentence imposed, requires credit for such incarceration when the same time has already been credited to a previously-served sentence. We answer the question in the negative and affirm the order.
The sentence for which Morrick claims credit was imposed on October 12, 1987, when, after revocation of his probation, he was sentenced to sixty days in jail for criminal damage to property. He was initially arrested on the charge on March 5, 1987, and was allowed to sign a signature bond. However, he was on probation from an earlier unspecified conviction at the time and, as often is the case, as a result of the arrest he was detained in jail on a "hold" filed by his probation agent. Thirty-three days later, on April 7, 1987, the earlier probation was revoked and Morrick was sentenced to 100 days in jail. He received a credit on the sentence for the thirty-two day period of his presentence incarceration, and he served the remainder of the sentence to its completion.
Then, on June 25, 1987, Morrick pleaded no contest to the criminal damage to property charge. The court did not sentence him at that time but instead placed him on probation for one year. Several weeks later, on September 17, 1987, Morrick was arrested againthis time for disorderly conductand proceedings were instituted to revoke his probation on the criminal damage to property charge. Revocation was accomplished and, on October 12, 1987, he was *187 sentenced to sixty days in jail. The trial court credited that sentence with twenty-five days, representing the time he had been held in jail since his September 17 arrest. Morrick then moved the court to also allow him credit for an additional thirty-two days, representing his incarceration between March 5 and April 7, 1987the same time credited to the 100-day jail sentence he received on the earlier, unrelated charge. The trial court denied the motion, and this appeal followed.
Morrick first suggests that our inquiry should be a simple onethat we only need consider whether the trial court, when it sentenced him on October 12, 1987, stated on the record that the sentence was to be served "consecutively" to the unrelated, previously-completed sentence imposed on April 7, 1987. If the court did not so state, Morrick contends that the sentence must be considered to be "concurrent" with the prior sentence and thus properly credited with the same thirty-two days. Morrick bases the argument on a statement in a 1922 case that "in the absence of a statute to the contrary, or judicial declaration in the sentence imposed, where there is a present sentence for another offense of one then actually or constructively serving a former sentence, the two sentences run concurrently." Application of McDonald, 178 Wis. 167, 171, 189 N.W. 1029, 1030 (1922). Whatever the vitality of that "rule" today, it is inapplicable here for Morrick was neither "actually [n]or constructively serving a former sentence" on October 12, 1987, the date he was sentenced on the criminal damage to property charge. His 100-day sentence for the earlier offense had long since been completed.
Morrick's next argument is more complex. It proceeds as follows: (1) sec. 973.15(2), Stats., the *188 general sentencing statute, authorizes trial courts to impose "as many sentences as there are convictions," and to "provide that any such sentence [may] be concurrent with or consecutive to any sentence imposed at the same time or previously"; (2) this statutory language gives sentencing courts only two "options"to impose a sentence that is either concurrent with a former sentence, or consecutive to it; (3) under sec. 973.15(1), a concurrent sentence commences "at noon on the day of sentence," and a consecutive sentence commences at the expiration of the term it is consecutive to; (4) because his earlier 100-day sentence had been completed several months earlier, the October 12 sentence could not possibly commence at its completion; (5) as a result, the October 12 sentence cannot be considered consecutive to the former sentence and thus must be considered concurrent for sentence credit purposes.
The argument is longer in its exposition than in its resolution. Morrick would have us interpret the October 12, 1987, sentence as concurrent to an independent and unrelated sentence that had been served to completion months before. The argument strains the imagination, but it strains the law even more. There was no sentence in existence on October 12, 1987, with which the sentence imposed on that day could be concurrent; and we decline Morrick's invitation to create an improbable legal fiction in order to allow him a second credit for his thirty-two day incarceration in early 1987.
As we see it, the real crux of Morrick's argument is that, given the state's stipulation that the thirty-two day incarceration was "in connection with" both the earlier 100-day sentence and the October, 1987, sentencepresumably because the probation "hold" *189 which kept him in jail even though he was released on bond on the criminal damage charge was placed on him because of his arrest on the latter chargesec. 973.155, Stats., mandates "dual" credit. While we do not here decide the issue stipulated by the state,[1] we accept that stipulation for purposes of this appeal.
Section 973.155, Stats., is modeled after the federal rule, 18 U.S.C. sec. 3568, which contained nearly identical language.[2] Any federal cases interpreting that rule have been described by the Wisconsin Supreme Court as "firm and unanimous that there *190 shall be no dual credit for the same presentence time served." State v. Boettcher, 144 Wis. 2d 86, 95, 423 N.W.2d 533, 537 (1988). Indeed, the Boettcher court considered the federal cases persuasive authority on the interpretation of sec. 973.155. We believe they dictate the result in this case as well.
In Wolcott v. Norton, 365 F. Supp. 138 (D. Conn.), Aff'd 487 F.2d 513 (2d Cir.), cert. denied, 414 U.S. 1114 (1973), the defendant spent time in state custody during the pendency of federal parole violation charges and was given credit for that time against a contemporaneously-imposed state sentence. He later claimed credit for the time against the remainder of his sentence, which he was ordered to serve after revocation of his federal parole. The court rejected the claim, stating that:
[The defendant] did receive credit for pretrial detention time against his state sentence. What he now seeks is to have his state pretrial detention time credited twice: once against his state sentence and a second time against the balance of his federal sentence. There is no basis for concluding that Congress [in enacting 18 U.S.C. sec. 3568] intended such a result. Other courts faced with this claim have likewise declined to award double credit.
Id., 365 F. Supp. at 140. See also McIntyre v. United States, 508 F.2d 403, 404 (8th Cir.), cert. denied, 422 U.S. 1010 (1975) ("This Court has held unequivocally that a state prisoner who is also on detainer for federal violations should not receive credit on his federal sentence when he was given credit on the state sentence for the same period of time.").
*191 Morrick claims credit for a period of incarceration which, although conceded by the state to have been "in connection with" the course of conduct for which he was sentenced on October 23, 1987, was also time for which he received day-for-day credit in connection with an earlier sentence. We agree with the Boettcher court that sec. 973.155, Stats., requires that "[t]he total time in custody should be credited on a day-for-day basis against the total days imposed in the consecutive sentences." Boettcher, 144 Wis. 2d at 100, 423 N.W.2d at 539. And we see no difference in principle between consecutive sentences and the two separate and distinct sentences at issue here with respect to computation of presentence detention credit. Were we to adopt Morrick's position, we would be authorizing double credit for time served in violation of the letter of the federal cases discussed above, and in violation of the spirit, it not the letter, of Boettcher. Morrick is entitled to day-for-day credit for the time served, no more and no less; and that is what he received. On the facts of this case, the trial court correctly denied Morrick's request for sentence credit for time previously credited to an unrelated sentence.
By the Court.Order affirmed.
NOTES
[] Petition to review denied.
[1] Indeed, there is authority for the proposition that even where a probation or parole "hold" is placed on a defendant as a result of his or her arrest for another offense while under supervision, the resulting incarceration is not considered to be "in connection with" the course of conduct leading to the conviction and sentence for the second offense. In Chaplin v. United States, 451 F.2d 179 (5th Cir. 1971), per curiam, for example, the defendant claimed that because his arrest for a federal offense was the cause of his state parole violation, any time spent in state custody because of the violation and the subsequent revocation proceedings was time spent in custody "in connection with" the offense under 18 U.S.C. sec. 3568. The court disagreed, stating that, "[w]hile the argument has some superficial appeal," it was not consistent with the purposes of the statute: "[Defendant's] state custody was predicated upon his violation of a parole condition, while the federal sentence was imposed for violation of ... federal ... laws. The fact that [his] federal arrest was one reason assigned for revocation of his state parole, does not make sec. 3568 applicable." Id. at 181 (footnote omitted).
[2] 18 U.S.C. sec. 3568 has since been amended and renumbered to 18 U.S.C. sec. 3585(b). The rule no longer contains the "in connection with" language, but rather mandates credit for detention time served "as a result of the offense for which the sentence was imposed ...." In addition, the amended rule expressly adopts the holdings in several federal cases, discussed infra, interpreting the prior language as disallowing any credit for time credited to another sentence. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594403/ | 172 Mich. App. 688 (1988)
432 N.W.2d 400
BOOTH NEWSPAPERS, INC.
v.
12TH DISTRICT COURT JUDGE
Docket Nos. 101685, 101784.
Michigan Court of Appeals.
Decided November 7, 1988.
Aymond, Sullivan, Whedon & Thompson, P.C. (by Dennis E. Whedon), for Booth Newspapers, Inc.
Butzel, Long, Gust, Klein & Van Zile (by Richard E. Rassel, James E. Stewart, and J. Michael Huget), for Detroit News, Inc.
Honigman, Miller, Schwartz & Cohn (by Herschel P. Fink and Brian D. Figot), for Detroit Free Press, Inc.
Joseph S. Filip, Prosecuting Attorney, and Jerrold Schrotenboer, Chief Appellate Attorney, for the 12th District Court Judge.
Before: KELLY, P.J., and SULLIVAN and M.J. SHAMO,[*] JJ.
SULLIVAN, J.
Plaintiffs Detroit News and Detroit Free Press appeal as of right a June 15, 1987, circuit court order dismissing their complaint for superintending control. Plaintiff Booth Newspapers, Inc., doing business as the Jackson Citizen Patriot, appeals by leave granted the same circuit court order which also denied its emergency appeal of a district court order. These appeals were consolidated. We reverse.
This case arises out of the May 8, 1987, district *691 court suppression order closing the preliminary examination of Edward C. Hill to the public and press. Hill was a prison inmate at the State Prison of Southern Michigan who was accused of sexually assaulting and murdering a corrections officer at the prison. Upon the request of the victim's family and the accused, the district court closed the accused's preliminary examination under MCL 750.520k; MSA 28.788(11).
A few days before the preliminary examination, the Jackson Citizen Patriot made a motion to intervene, in district court, in order to challenge the suppression order. After a hearing was conducted, the district court took the matter under advisement. In the meantime, prior to the district court's decision, all the plaintiffs filed a complaint for superintending control in circuit court, requesting that the court vacate the district court's suppression order. Plaintiffs' argument to both the district and circuit courts was that MCL 750.520k; MSA 28.788(11), the statute on which the district court relied in closing the preliminary examination, is unconstitutional. US Const, Ams I, XIV.
On the morning of the preliminary examination, the district court ruled that MCL 750.520k; MSA 28.788(11) is constitutional and refused to lift the suppression order. Later that same day, the circuit court addressed plaintiffs' complaint for superintending control, but considered the complaint as to the Jackson Citizen Patriot as an application for an emergency appeal. The circuit court upheld the district court's suppression order in the order from which plaintiffs now appeal.[1]
The accused's preliminary examination was *692 closed under MCL 750.520k; MSA 28.788(11), which provides:
Upon the request of the counsel or the victim or actor in a prosecution under sections 520b to 520g [codifying various types of criminal sexual conduct and respective penalties] the magistrate before whom any person is brought on a charge of having committed an offense under sections 520b to 520g shall order that the names of the victim and actor and details of the alleged offense be suppressed until such time as the actor is arraigned on the information, the charge is dismissed, or the case is otherwise concluded, whichever occurs first.
This statute implicitly requires that, upon a proper request, the preliminary examination be closed to the public. In re Midland Publishing Co, Inc, 420 Mich. 148, 159, n 13, 175; 362 NW2d 580 (1984). Plaintiffs contend that this statute violates the First Amendment as applied to the states through the Fourteenth Amendment. We agree.
Our Supreme Court previously upheld the constitutionality of MCL 750.520k; MSA 28.788(11) in In re Midland Publishing, supra, wherein the Court held that the public has no common-law or constitutional right of access to preliminary examinations. Id., pp 162, 164. In concluding that the public has no common-law right of access to preliminary examinations, the Court relied on the historical analyses of prior United States Supreme Court cases. In concluding that the public has no federal constitutional right of access to preliminary examinations, the Court cited the Fifth *693 Amendment reference to "presentment or indictment of a Grand Jury" and, then, noted that "[s]ince grand jury proceedings have historically been conducted in the absence of the public, there is no precedent for the United States Supreme Court, pursuant to an historical analysis, to extend the public's First Amendment right of access to probable cause determinations." Id., p 174.
However, the United States Supreme Court subsequently held that a First Amendment right of access, in fact, applies to preliminary hearings as conducted in California. Press-Enterprise Co v Superior Court, 478 U.S. 1, 13; 106 S. Ct. 2735; 92 L. Ed. 2d 1 (1986) (Press-Enterprise II). In Press-Enterprise II, the accused's forty-one-day preliminary hearing was closed to the public upon the accused's request under a California statute which required such proceedings to be open unless "exclusion of the public is necessary in order to protect the defendant's right to a fair and impartial trial." Id., p 4. The transcripts of the preliminary hearing were not released until the accused waived his right to a jury trial.
Two "complementary considerations" are emphasized when determining whether a First Amendment right of access attaches to the criminal proceeding at issue: (1) "whether the place and process have historically been open to the press and general public," and (2) "whether public access plays a significant positive role in the functioning of the particular process in question." Id., p 8. If the particular proceeding at issue passes these tests of "experience and logic," a qualified First Amendment right of public access attaches.
The Press-Enterprise II Court found that preliminary hearings conducted before neutral and detached magistrates have traditionally been open to the public and that preliminary hearings as conducted *694 in California are sufficiently like a trial to justify the conclusion that public access to them is essential to the proper functioning of the criminal justice system. Id., pp 10-12. Because preliminary hearings as conducted in California pass the tests of "experience and logic," a qualified First Amendment right of access applies. Id., p 13.
Because a qualified First Amendment right of access applies to preliminary examinations, the proceedings cannot be closed unless "specific, on the record findings are made demonstrating that `closure is essential to preserve higher values and is narrowly tailored to serve that interest.'" Id., pp 13-14, citing Press-Enterprise Co v Superior Court, 464 U.S. 501, 510; 104 S. Ct. 819; 78 L. Ed. 2d 629 (1984). If the interest asserted is the accused's right to a fair trial, the preliminary hearing shall be closed only if specific findings are made showing that (1) there is a substantial probability that the accused's right to a fair trial will be prejudiced by publicity that closure would prevent, and (2) reasonable alternatives to closure would not adequately protect the accused's fair trial right. Press-Enterprise II, p 14.
Preliminary hearings as conducted in California are substantially similar to those conducted in Michigan. See, for example, Press-Enterprise II, p 12; People v Bellanca, 386 Mich. 708; 194 NW2d 863 (1972); People v Charles D Walker, 385 Mich. 565, 575; 189 NW2d 234 (1971); People v Thomas, 96 Mich. App. 210, 216; 292 NW2d 523 (1980). Therefore, under Press-Enterprise II, a qualified First Amendment right of access applies to preliminary examinations as conducted in Michigan. Because closure is mandatory under MCL 750.520k; MSA 28.788(11) upon the request of the victim or the accused without first requiring specific findings *695 to be made, the statute is unconstitutional on its face as violative of the public's First Amendment right of access. See Globe Newspaper Co v Superior Court, 457 U.S. 596; 102 S. Ct. 2613; 73 L. Ed. 2d 248 (1982).
Perhaps in anticipation of this conclusion, the district court balanced the competing interests involved in this case. It found that the accused's right to a fair trial and protecting the victims of a crime are legitimate and compelling governmental interests and that these interests have a higher value than the news media's First Amendment right of access.
However, under MCL 750.520k; MSA 28.788(11) and the terms of the district court's order, the suppression was to be lifted, at the latest, when the accused was arraigned on the information. At that time, the transcript of the preliminary examination would be made available. Hence, the extent of the closure would not even prevent pretrial publicity and pretrial publicity is what the district court was trying to avoid for the benefit of both the accused and the victim's family. Moreover, voir dire was available as a reasonable alternative to eliminate any prejudice to the accused. Finally, in order to protect the victim's family, the district court could have closed only that part of the preliminary examination in which the victim's husband testified.
Because the suppression order did not serve the interests sought to be protected and, even if it did, it was not narrowly tailored and because a reasonable alternative existed which would have protected the accused's fair trial right, the circuit court should have lifted the district court's suppression order. Accordingly, we reverse.
Reversed.
NOTES
[*] Recorder's Court judge, sitting on the Court of Appeals by assignment.
[1] Because the accused's preliminary examination and arraignment on the information have already been conducted and because the transcript of the preliminary examination was apparently released following the arraignment on the information, the issue on appeal appears moot. However, we will consider it if it is of public significance and is likely to recur, yet evade judicial review. Press-Enterprise Co v Superior Court, 478 U.S. 1, 6; 106 S. Ct. 2735; 92 L. Ed. 2d 1 (1986); In re Midland Publishing Co, Inc, 420 Mich. 148, 151-152, n 2; 362 NW2d 580 (1984). Plaintiffs might be subjected to a similar suppression order and, because criminal proceedings are typically of short duration, such an order will likely evade review. Press-Enterprise, 478 U.S. 6. Therefore, we will consider the issue. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594488/ | 19 So. 3d 473 (2009)
STATE of Louisiana
v.
Allen D. DAVENPORT.
No. 2009-KO-0158.
Supreme Court of Louisiana.
October 16, 2009.
Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594589/ | 426 F. Supp. 301 (1977)
James BEAVER and Doris Beaver, Plaintiffs,
v.
Bernard CAREY et al., Defendants.
No. 76 C 3340.
United States District Court, N. D. Illinois, E. D.
January 18, 1977.
*302 Jeffrey Schulman, Joseph L. Dombrowski, Chicago, Ill., for plaintiffs.
J. Marvin Montgomery, Baton Rouge, La., John Dienner, III, Chicago, Ill., for defendants.
MEMORANDUM AND ORDER
ROBSON, Senior District Judge.
This cause is before the court on the motions of defendants to dismiss plaintiffs' complaint for failure to state a claim. For the reasons hereinafter stated, the complaint shall be dismissed.
The plaintiffs have invoked this court's jurisdiction under 28 U.S.C. §§ 1343 and 1331. It is alleged that defendants Bernard Carey, Timothy Higgins, and Lonnie Miles violated 42 U.S.C. §§ 1983 and 1985 and the fourth, fifth, and fourteenth amendments to the United States Constitution. Plaintiffs further allege an amount in controversy in excess of $15,000 (sic) and that defendants committed the following actions under color of state law and in their official capacity.
Defendants Higgins and Miles are public defenders and were appointed to represent a client in a criminal action in Louisiana. Pursuant to the defense of their client, they filed motions in Louisiana to obtain the plaintiffs as witnesses there. These motions, filed pursuant to the "Uniform Act to Secure the Attendance of Witnesses from Within or Without a State in Criminal Proceedings,"[1] (Uniform Act), were granted by Judge Leon Ford, III who then issued certificates recommending that plaintiffs be taken into custody. Said certificates were forwarded to defendant Carey, State's Attorney of Cook County, or one of his associates, who then presented same to Judge Richard J. Fitzgerald, presiding judge of the Criminal Division of the Circuit Court of Cook County, Illinois. Judge Fitzgerald issued summonses and orders directing that plaintiffs be taken into custody and, as a result, plaintiffs were placed in Cook County Jail.
Plaintiffs complain because the motions filed by Higgins and Miles failed to allege any facts showing plaintiffs were material and necessary witnesses in the Louisiana action. Plaintiffs further allege that these two defendants recommended that plaintiffs be taken into immediate custody without probable cause or verification to believe that plaintiffs would not attend the Louisiana trial unless they were in custody. In addition, plaintiffs assert that Carey, or one of his agents, presented the aforementioned certificates signed by Judge Ford to Judge Fitzgerald without knowledge of the truth of said certificates.
Plaintiffs maintain that the aforesaid actions of Higgins, Miles, and Carey resulted in plaintiffs' arrest and incarceration without bond or a hearing. Plaintiffs further allege that they were required to employ legal counsel to secure their release and suffered humiliation and degradation as a result of their incarceration without being charged with a crime. Actual damages in the amount of $100,000 are sought as well as punitive damages in the amount of $1,000,000.
Defendant Carey has moved to dismiss the complaint for failure to state a claim. He argues that there are no allegations of personal involvement on his part and that the complaint should be dismissed as the doctrine of respondeat superior is inapplicable *303 to the instant complaint.[2] Carey further maintains that he is immune from liability. Finally, he contends that plaintiffs have admitted that they have no cause of action against him.[3]
Defendants Higgins and Miles have likewise moved to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. They maintain that they have not acted under color of state law.[4] Alternatively, Higgins and Miles contend that they are immune.
In response to defendants' motions, plaintiffs assert that they have stated a claim as defendants failed to properly allege any facts before Judges Ford and Fitzgerald showing the necessity of taking the plaintiffs into custody. They further argue that defendants are not immune from liability as they were not conducting themselves within their traditional roles.
Accepting plaintiffs' factual allegations as true, the court is of the opinion that a claim has not been stated against Higgins, Miles, or Carey. Plaintiffs maintain that defendants' actions pursuant to the Uniform Act caused plaintiffs to be arrested without probable cause and without due process. A review of the Act and relevant cases reveals, however, that it was Judges Ford and Fitzgerald who had the authority to issue the certificates, summonses and orders which resulted in the "arrests". The judges alone determine materiality and necessity. See State v. Chavers, 294 So. 2d 489, 493 (La.1974), cert. denied, 419 U.S. 1111, 95 S. Ct. 786, 42 L. Ed. 2d 808 (1975); People v. Nash, 36 Ill. 2d 275, 280-81, 222 N.E.2d 473, 476 (1966), cert. denied, 389 U.S. 906, 88 S. Ct. 222, 19 L. Ed. 2d 223 (1967); Proceedings to Compel Attendance of Grothe, 59 Ill.App.2d 1, 208 N.E.2d 581 (1st Dist. 1965).
Assuming arguendo that a claim has been stated under 42 U.S.C. § 1983[5] and/or 28 U.S.C. § 1331, the court is further of the opinion that these defendants are immune from monetary damages on the facts pleaded. Plaintiffs allege that Higgins and Miles filed motions to secure plaintiffs as defense witnesses in Louisiana in the course of defendants' official duties thereby causing a deprivation of constitutional rights. Public defenders, however, enjoy a qualified immunity for acts performed within the scope of their official duty. John v. Hurt, 489 F.2d 786 (7th Cir. 1973). That is, public defenders are immune from damage actions which seek relief for acts which were performed in the discharge of their duty as public defenders. Id. at 788 and cases cited. Such is clearly the situation here. Plaintiffs' complaint specifically alleges that plaintiffs were sought as witnesses by Higgins and Miles pursuant to the defense of their client.
The fact that the instant suit has been filed pursuant to the fourth, fifth, and fourteenth amendments is not sufficient to distinguish the instant case from those referred to above. The immunity enjoyed by public defenders does not depend upon which constitutional right is allegedly violated. Nor is the instant case controlled by Hampton v. City of Chicago, Cook County, Illinois, 484 F.2d 602 (7th Cir. 1973), cert. denied, 415 U.S. 917, 94 S. Ct. 1413, 39 L. Ed. 2d 471 (1974). In that case, the court refused to apply the immunity doctrine as it *304 was unclear that the prosecutors were performing their traditional "quasi-judicial" duties. Id. at 608-09. Here, on the other hand, it is clear from the face of plaintiffs' complaint that Higgins and Miles were in fact so doing.
Plaintiffs allege that Carey presented the certificates issued by Judge Ford to Judge Fitzgerald without knowledge of their truth thereby causing a deprivation of plaintiffs' constitutional rights. For the reasons stated above, the court concludes that this defendant is likewise immune. Clearly the state's attorney was also exercising duties within the scope of his normal function. Imbler v. Pachtman, 424 U.S. 409, 96 S. Ct. 984, 47 L. Ed. 2d 128 (1976); Tyler v. Witkowski, 511 F.2d 449 (7th Cir. 1975).
For the reasons stated, it is therefore ordered that defendants' motions shall be, and the same are hereby, granted and the action is dismissed.
NOTES
[1] See Ill.Rev.Stat. ch. 38, § 156-1 et seq. and La.C.Cr.P. art. 741 et seq.
[2] Carey has filed an affidavit in support of his position. The court will ignore it. See Fed.R. Civ.P. 12(b)(6).
[3] In their memorandum in opposition to defendants, plaintiffs state that Judge Fitzgerald could not be a proper defendant as he was bound by Illinois law, Ill.Rev.Stat. ch. 38, § 156-2, to accept the Louisiana action as true. Carey contends that he was similarly bound.
[4] Defendants' argument appears to be that Judges Ford and Fitzgerald were responsible for the actions of which plaintiffs complain and that the judges, if anyone, are therefore the proper defendants here.
[5] The court need not assume arguendo that a claim has been stated under 42 U.S.C. § 1985. Plaintiffs do not allege a conspiracy. There are no allegations as to the denial of equal protection nor of class-based invidiously discriminatory animus. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594605/ | 426 F. Supp. 41 (1976)
Hazel DUNCAN
v.
UNITED STATES CIVIL SERVICE COMMISSION.
Civ. A. No. 76-792.
United States District Court, E. D. Louisiana.
July 29, 1976.
*42 Nelson, Nelson & Lombard, Ltd., Patricia E. Saik, New Orleans, La., for plaintiff.
Ford J. Dieth, Asst. U.S. Atty., New Orleans, La., for defendant.
ALVIN B. RUBIN, District Judge.
The sole issue in this Freedom of Information case is whether an employee who has a case pending before the Civil Service Commission and who has been furnished her entire file as well as all other material she requested is also entitled under the Act *43 to an appendix to a report made concerning the office where she was employed.[1]
The court has reviewed the appendix in camera. It is a single sheet of 8½ × 11 paper. Apart from its caption and other uninformative matter, it contains, first, the names and positions of four employees who worked in the same office as the plaintiff, then 7 lines of comment stating that these employees appeared to be classified in a higher civil service grade than their duties warranted, and an additional 5 lines recommending a study be made to determine whether or not these four were correctly classified.
In support of her suit for this information, the plaintiff argues its relevancy to her other pending claim. The Freedom of Information Act expressly provides (5 U.S. C.A. § 552(b)(6)) that it does not apply to matters that are "personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy". The file in question cannot be said to be a personnel or medical file, but the information contained in it relates entirely to whether or not four persons who are not involved in any litigation were correctly classified for civil service purposes. To disclose their names and the remainder of the brief report would invade their personal privacy without public necessity or statutory warrant.
The intention of the Act was to avoid the disclosure of personal and private material. This is demonstrated by the provision in Section 552(a)(2) permitting deletion of identifying details from opinions, statements of policy, interpretations, staff manuals, and instructions.
The information in the appendix clearly is personal to the four persons mentioned. It is not the kind of data that ought to be disclosed under the Freedom of Information Act.
As part of her case before the Civil Service Commission, the plaintiff may be entitled to compare her employer's treatment of her with the treatment accorded her fellow workers. This may or may not indicate discrimination against her. However, such a comparison may be obtained by various discovery devices. This does not mean that these records are required to be disclosed by the Freedom of Information Act. That Act is designed to make records available to the public, not to broaden the scope of discovery in pending litigation.
That the Freedom of Information material may be useful in pending litigation may not bar a litigant's invocation of that Act. See Cessna Aircraft Co. v. N. L. R. B., D.C.Kan.1975, 405 F. Supp. 1042; Title Guarantee Co. v. N. L. R. B., S.D.N.Y.1975, 407 F. Supp. 498. But it is a non sequitur to conclude that the utility of the information in a pending suit warrants its production under the Act.
The plaintiff argues that the Civil Service Commission was not concerned about her privacy as if that argument warrants invasion of the privacy of others. The violation of the Act and the disclosure of personal information about other persons would merely compound the problem.
For these reasons, judgment is rendered in favor of the defendant and against the plaintiff dismissing the plaintiff's action at plaintiff's cost.
NOTES
[1] The excellent briefs that have been filed by counsel for the plaintiff dispose of any question concerning the court's jurisdiction of this matter. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595023/ | 621 N.W.2d 689 (2000)
STATE of Iowa, Plaintiff-Appellee,
v.
Liborio MARTINEZ, Defendant-Appellant.
No. 99-0831.
Court of Appeals of Iowa.
August 30, 2000.
*691 Linda Del Gallo, State Appellate Defender, and Nan Jennisch, Assistant State Appellate Defender, for appellant.
Thomas J. Miller, Attorney General, Denise A. Timmins, Assistant Attorney General, Thomas S. Mullin, County Attorney, and Mark Campbell, Assistant County Attorney, for appellee.
Considered by SACKETT, C.J., and STREIT and VAITHESWARAN, JJ.
SACKETT, Chief Judge.
Defendant-Appellant, Liborio Martinez, appeals following his conviction for three counts of possession with intent to deliver and three drug count violations. Defendant contends the district court (1) should have admitted an exculpatory statement in the form of a letter written to his attorney by a witness who refused to testify and consequently is unavailable, and (2) should not have admitted evidence he used aliases in the past. We affirm.
Defendant and Sandra Guadarrama were arrested in the evening hours of December 11, 1998, following a search in which police officers found methamphetamine, cocaine hydrochloride, cocaine and marijuana in an apartment occupied by Guadarrama and her children. Guadarrama had given permission for the search, and defendant, the father of Guadarrama's children, was in the apartment at the time. The officers went to Guadarrama's apartment after Elaine Walker, arrested for passing $100 counterfeit bills, told police she purchased drugs with a counterfeit bill at the apartment. At the time of arrest defendant admitted the drugs were his, *692 and Guadarrama denied ownership of them.
On January 26, 1999, Guadarrama wrote the following letter to defendant's attorney:
To: Douglas Roehrich 1-26-99
Attorney at Law
I Sandra Guadarrama willingly & knowingly plead guilty & possession of all drugs that was seized from my home 90512th St. # 2.
Liborio Martinez, has nothing! nothing! to do with these drugs there [sic] were in my house and in my possession.
I've told the officers (police) that he don't live with me he came to visit his children and asked if he could spend the night I said it was ok. He had his duffle bag out in the hallway with him and they were there when the police came and I even showed them he didn't live here. I said just me and my kid. This is a true statement.
Sandra Guadarrama
((nobodys putting me up to this! Its all on my own. This is my confession.
Sandra Guadarrama
Defendant sought to admit the letter at trial after Guadarrama testified she wrote it but exercised her right against self-incrimination as to further testimony. The district court denied defendant's request but accepted the letter as an offer of proof. Defendant contends it was error for the court to refuse to admit the letter in evidence.
Defendant testified in his own behalf denying ownership or knowledge of the drugs and contending he initially admitted the drugs were his to prevent the children from being removed from their mother's care.
Defendant, while appearing to concede the letter written by Guadarrama is hearsay, contends it is admissible as a statement against penal interest under Iowa Rule of Evidence 804[1], because Guadarrama, having exercised her privilege against self-incrimination, was not available to testify. The State agrees as do we that because Guadarrama exercised her privilege against self-incrimination she was not available to testify. See State v. DeWitt, 597 N.W.2d 809 (Iowa 1999). The State further agrees as do we that the letter is a statement against her penal interest.
The State contends the district court was correct in not admitting the letter because there are no corroborating circumstances showing the trustworthiness of the letter.
We review rulings on the admission of hearsay evidence for correction of errors of law. See State v. Ross, 573 N.W.2d 906, 910 (Iowa 1998). In addressing defendant's argument we need to focus on that part of Iowa Rule of Evidence 804(b)(3) that provides: "[a] statement tending to expose the declarant to criminal liability and offered to exculpate the accused is not admissible unless corroborating circumstances clearly indicate the trustworthiness of the statement."
The rule imposes a showing that corroborating circumstances clearly indicate the trustworthiness of the statement when the statement exculpates the accused. Iowa R.Evid. 804(b)(3). The letter, if believed, would exculpate the defendant. Therefore we need to examine whether corroborating circumstances *693 clearly indicate the trustworthiness of the letter. See id.
Defendant contends the necessary corroborating circumstances have been shown to allow the jury to make a determination of whether the statements made in the letter are true. In support of this argument defendant points to the following facts: (1) Guadarrama admitted writing the letter; (2) she rented the apartment; (3) there were drugs found in a purse with other possessions of hers; and (4) he testified and denied ownership of the drugs and testified he made the earlier statements as to ownership so the children would not be taken from their mother.
The State contends the following facts support its position: (1) defendant was in the apartment at the time of the search; (2) at the time of arrest he admitted the drugs were his; (3) Guadarrama at the time of arrest denied ownership of the drugs; (4) Guadarrama gave permission to search the apartment first by officers and then by officers using a drug dog;[2] (5) the letter was not written until almost two months following the event; (6) defendant and Guadarrama are the parents of four children; (7) defendant was identified by Elaine Walker as the person who sold her drugs; (8) the counterfeit bill Walker gave defendant was found in the search.
Federal courts have noted that statements exposing the declarant to criminal liability but exculpating the accused are suspect. United States v. Salvador, 820 F.2d 558, 561 (2d Cir.1987), cert. denied, 484 U.S. 966, 108 S. Ct. 458, 98 L. Ed. 2d 398 (1987). In order for a declaration against penal interest to be trustworthy evidence, the declarant must actually have made the statement, and it must afford a basis for believing the truth of the matter asserted. United States v. Bagley, 537 F.2d 162, 167 (5th Cir.1976), cert. denied, 429 U.S. 1075, 97 S. Ct. 816, 50 L. Ed. 2d 794 (1977).
Actually the factors identified by the defendant and the State go to both the trustworthiness of the letter and the weight it should be given. In DeWitt the Iowa court noted the following observation made in United States v. Garcia, 986 F.2d 1135, 1141 (7th Cir.1993) to the federal counterpart of the Iowa rule:
[T]he corroboration requirement of 804(b)(3) is a preliminary question as to the admissibility of evidence, not an ultimate determination as to the weight to be given such evidence. The district judge does not need to be completely convinced that exculpatory statements are true prior to their admission. Such a high burden was not intended by the corroboration requirement of 804(b)(3). The district court must find only that sufficient corroborating circumstances exist and then permit the jury to make the ultimate determination concerning the truth of the statements.
Garcia, 986 F.2d at 1141 (footnote omitted).
We look first to the factors that need be weighed on the issues of admissibility. Are there sufficient corroborating circumstances to show the letter is trustworthy? We find some guidance in State v. Weaver, 554 N.W.2d 240, 248 (Iowa 1996) where the Iowa court talked of factors to consider in making a trustworthiness determination under rule 803(24)[3] to *694 include: the declarant's propensity to tell the truth, whether the alleged statements were made under oath, assurance of declarant's personal knowledge, the time lapse between the alleged event and the statement concerning the event, and the motivations of the declarant to make the alleged statements. See id. The court related additional circumstances to consider include corroboration, reaffirming or recanting the statement by the declarant, credibility of the witness reporting the statement, and availability of the declarant for cross-examination. See id. (citing 7 James A. Adams & Kasey W. Kincaid, Iowa PracticeEvidence 463-64 (1988); 2 Kenneth Broun et al., McCormick on Evidence § 324, at 363-65 (John W. Strong ed., 4th ed.1992)). Many of the above factors go not only to trustworthiness but also to the weight given hearsay evidence. Yet the underlying factor on admissibility under Iowa Rule of Evidence 804(b)(3) is whether a reasonable person could conclude the statement, the letter here, could be true. See 5 Jack B. Weinstein & Margaret A. Berger, Weinstein's Federal Evidence, § 804.06(5)(6), at XXX-XX-XX (Joseph M. McLaughlin, ed., Matthew Bench 2d ed.1997) .04.06(5)(b) (1997).
We conduct an examination to first determine whether the statement is what it purports to be, "A statement written by Guadarrama". Guadarrama testified she wrote the letter, and there is no evidence she did not nor is there any evidence she wrote it under some type of duress, threat or intimidation. Consequently a reasonable person could conclude she wrote it in good faith.
The inquiry, however, does not end there but requires that we determine if the circumstances permit a reasonable person to believe that statements made in the letter as to ownership of the drugs could be true. See, generally, id. The following factors indicate the statements made in the letter might be true and Guadarrama's earlier denial might be false: (1) defendant's testimony the drugs were not his and he was not aware the drugs were in the apartment; he originally admitted the drugs were his to keep the State from taking his children from their mother; (2) the drugs were found in an apartment where Guadarrama lived with her children; (3) drugs were found underneath the mattress of the bed where Guadarrama's children slept; (4) drugs were found in a purse with other possessions of Guadarrama's; (5) Guadarrama was present when the drugs were found; (6) defendant testified he was at the apartment only to visit his four children; (7) defendant had another address; (8) while defendant had $600 in cash in his billfold, the counterfeit bill was found in the apartment not his billfold.
The following factors indicate the statements made in the letter may be false: (1) defendant's presence in the apartment; (2) his initial admission as to ownership of the drugs; (3) Walker's testimony she purchased drugs from defendant; (4) Guadarrama's initial denial of ownership; and (5) the relationship between defendant and Guadarrama. These facts both support a finding defendant had an ownership interest in the drugs and impeach the credibility of Guadarrama's statement.
The difficult question is whether the evidence indicating the letter is false is so strong that a reasonable fact finder would not find it trustworthy, even though there is other substantial evidence in the record which if believed would support the statements in Guadarrama's letter. See Garcia, 986 F.2d at 1141.
Federal courts have said statements exposing the declarant to criminal liability but exculpating the accused are suspect. Salvador, 820 F.2d at 561. And the inference of trustworthiness from the proffered corroborating circumstances must be strong, not merely allowable. Id. The conflicting facts as to the trustworthiness of Guadarrama's statement would best be explored through cross-examination. The evidence of corroborating circumstances is not sufficient to establish an *695 inference the statement is trustworthy. We affirm the district court on this issue.
Defendant's second contention is the State should not have been allowed to introduce evidence defendant has used other names or aliases. Defendant contends the evidence was not relevant, and if it were relevant, it was more prejudicial than probative. The State points out the only objection raised in district court is that the evidence was not relevant.
On evidentiary issues we review for an abuse of discretion. State v. Most, 578 N.W.2d 250, 253 (Iowa App. 1998). In order to show an abuse of discretion, one generally must show the court exercised its discretion on grounds or for reasons clearly untenable or to an extent clearly unreasonable. Id. Prior case law does not clearly delineate when a simple relevancy objection is sufficient to preserve a more specific argument on appellate review. State v. Mulvany, 603 N.W.2d 630, 632 (Iowa App.1999). However, the Iowa Supreme Court has recently held an objection on general relevancy grounds did preserve error on a challenge to probative value. See State v. Sallis, 574 N.W.2d 15, 17 (Iowa 1998). We find error was preserved by the defendant's motion in limine.
Federal courts have examined the issue of the admissibility of defendants' use of aliases under Federal Rule of Evidence 608(b). Federal interpretation of Federal Rules of Evidence can provide us with guidances in interpreting the Iowa counterpart to the federal rule, Iowa Rule of Evidence 608(b)[4]. Federal Rule of Evidence 608(b) provides similarly to Iowa Rule of Evidence 608(b) that specific instances of the witness' conduct may "in the discretion of the court, if probative of truthfulness or untruthfulness, be inquired into on cross-examination of the witness (1) concerning the witness' character for truthfulness or untruthfulness ...". See Fed.R.Evid. 608(b) (1999).
Courts have held that "[a] witness' use of false names or false identities is a proper subject of cross-examination under Fed.R.Evid. 608." United States v. Mansaw, 714 F.2d 785, 789 (8th Cir.1983), cert. denied, 464 U.S. 964, 104 S. Ct. 403, 78 L. Ed. 2d 343 (1983); see also Young v. Calhoun, 1995 WL 169020 at *5 (S.D.N.Y. Apr.10, 1995) (holding a witness' use of false names or identities is the proper subject of cross-examination under Rule 608). The United States Court of Appeals for the Ninth Circuit has reasoned:
The issue is whether the use of false names bears directly enough upon the witness' veracity as to outweigh the general prohibition against cross-examining about particular acts of misconduct other than convictions of a crime. We think it does. If a man lies about his own name, might he not tell other lies?
Lyda v. United States, 321 F.2d 788, 793 (9th Cir.1963).
In Fletcher v. City of New York, 54 F. Supp. 2d 328 (S.D.N.Y.1999), defendant sought to introduce into evidence eighteen aliases used by plaintiff. Plaintiff used the aliases in connection with other criminal activity for which he was convicted. Plaintiff expressed concern that defendant's effort to introduce all eighteen aliases into *696 evidence would simply alert the jury to certain arrests and/or convictions that would not otherwise be admissible. Fletcher, 54 F.Supp.2d at 333. The district court ruled all eighteen of plaintiff's aliases were admissible under Federal Rule of Evidence 608(b) with the limitation that defendants may inquire into plaintiff's use of aliases, "without eliciting the fact that plaintiff was arrested and/or convicted for prior criminal conduct in connection with the use of these aliases." Id.; Young v. Calhoun, 1995 WL 169020 at *5.
The State cross-examined the defendant in regard to his prior use of aliases in order to impeach his credibility for honesty and truthfulness. Evidence of defendant's use of aliases in the past is highly probative in regards to credibility and truthfulness of the defendant. Evidence of defendant's use of aliases was a permissible method of impeachment by the State. The prejudicial effect of such evidence was minimal in comparison to its probative value for which it was offered. The trial court did not abuse its discretion in admitting evidence of defendant's prior use of aliases. The judgment and sentence entered is affirmed.
AFFIRMED.
NOTES
[1] Iowa Rule of Evid. 804(b) provides:
The following are not excluded by the hearsay rule if the declarant is unavailable as a witness:
(3) Statement against Interest. A statement which was at the time of its making so far contrary to the declarant's pecuniary or proprietary interest, or so far tended to subject him to civil or criminal liability, or to render invalid a claim by him against another, that a reasonable man in his position would not have made the statement unless he believed it to be true. A statement tending to expose the declarant to criminal liability and offered to exculpate the accused is not admissible unless corroborating circumstances clearly indicate the trustworthiness of the statement.
[2] The State argues that this fact indicates the drugs were not hers because she would not have allowed the search had she known the drugs were there. However; the placement of the drugs in the apartment make it highly unlikely that a person living in the apartment would not have been aware of their presence.
[3] Iowa R. of Evid. 803(24) allows for admission not specifically covered by foregoing exceptions where availability of the declarant is immaterial and provides in relevant part: "A statement not specifically covered by any of the foregoing exceptions but having equivalent circumstantial guarantees of trustworthiness, if the court determines that...." Whether this establishes a greater degree of trustworthiness than is required for admission under Iowa R. of Evid. 804(b)(3) could be questioned but we do not do so.
[4] Iowa R.Evid. 608(b) "Specific Instances of Conduct" provides:
"Specific instances of the conduct of a witness, for the purpose of attacking or supporting his credibility, other than conviction of crime as provided in Iowa Evid.R. 609, may not be proved by extrinsic evidence. They may, however, in the discretion of the court, if probative of truthfulness or untruthfulness, be inquired into on cross-examination of the witness (1) concerning his character for truthfulness or untruthfulness, or (2) concerning the character for truthfulness or untruthfulness of another witness as to which character the witness being cross-examined has testified.
The giving of testimony, whether by an accused or by any other witness, does not operate as a waiver of his privilege against self-incrimination when examined with respect to matters which relate only to credibility." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594512/ | 954 So.2d 1153 (2005)
CURTIS WARE
v.
STATE
No. CR-05-0253.
Court of Criminal Appeals of Alabama.
November 10, 2005.
Decision without opinion. Dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/512748/ | 859 F.2d 149Unpublished 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.BALLAST NEDAM GROEP, N.V., Plaintiff-Appellant,v.COMPUTER SCIENCES CORPORATION, Defendant-Appellee.
No. 87-3187.
United States Court of Appeals, Fourth Circuit.
Argued July 5, 1988.Decided Sept. 19, 1988.
James Aubrey Pemberton, Jr. (Paul E. McNulty, King & King, Chartered on brief) for appellant.
Millard F. Ottman, Jr. (Robert D. Sweeney, Jr., Jones, Day, Reavis & Pogue on brief) for appellee.
Before HARRISON L. WINTER, Chief Judge, and MURNAGHAN and SPROUSE, Circuit Judges.
PER CURIAM:
1
Ballast Nedam Groep, N.V. (Ballast) appeals the judgment of the district court dismissing its breach of contract action against Computer Sciences Corporation (CSC). This is the second time we have reviewed this action. In our prior decision,1 we reviewed the district court's judgment which dismissed the action on the ground that the parties had agreed to a Saudi Arabia forum for resolution of contract disputes. It held as a matter of law that the parties had agreed that CSC was to have the option of selecting Saudi Arabia as the forum and that it had exercised that option. On review, however, we held that the contractual language was ambiguous and remanded the case for consideration of parol evidence to determine the parties' intent regarding choice of forum. On remand, the district court, after receiving parol evidence, again dismissed the action because it found the parties intended CSC to have its choice of forum. Ballast now challenges that decision, arguing that it is unsupported by the evidence. We agree. In addition, we find that the contract as clarified by parol evidence requires that the dispute be governed by the contract's arbitration provision.
2
In 1981, Ballast and CSC contracted for Ballast to perform construction work on a project for CSC in Saudi Arabia. Among the contract's terms was a provision requiring CSC to make partial payments upon the completion by Ballast of various parts of the project referred to as "milestones." Another provision called for CSC to reimburse Ballast for certain customs duties paid on imported materials. The contract contained the following provisions relevant to the settlement of disputes:
3
22.1 All claims, disputes and other matters in question between the Contractor and the Company arising out of, or relating to, the Contract documents or the breach thereof, shall at the sole discretion of the Company be decided either under applicable Saudi Arabia law and procedure or by arbitration in accordance with the Rules of Arbitration and Conciliation then obtaining of the International Chamber of Commerce. In the event the Company chooses arbitration, the arbitrator(s) shall apply the substantive laws of the Commonwealth of Virginia, U.S.A., in interpretation of the Contract. The Contractor shall carry on the Works and maintain its progress during any arbitration proceedings, and the Company shall continue to make payments to the Contractor in accordance with the Contract.
4
22.2 Arbitration shall be held in Paris, France.
5
22.3 The language of the arbitration proceedings shall be English.
6
24.17 The Contract shall be governed and interpreted in accordance with the substantive laws of the Commonwealth of Virginia, United States of America.
7
In 1986, Ballast filed suit in the United States District Court for the Eastern District of Virginia, alleging that CSC had failed to make the milestone payments as required by the contract and to reimburse Ballast for customs duties. Ballast sought to recover the funds owing, exemplary damages, and finance costs which it asserted it was forced to incur because of CSC's failure to make the scheduled payments. In the alternative, Ballast asked the court to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. Sec. 4, as provided for in the contract. CSC responded by moving to dismiss the action. It argued that a federal court in Virginia was an improper forum because the contract provided CSC with the option to choose a Saudi forum.
8
When the action was originally before it, the district court found that paragraph 22.1 is a choice of forum clause. Because it also found the paragraph to be "clear on its face," it refused to consider parol evidence on the parties' intentions concerning choice of forum. It held that paragraph 22.1 gave CSC the option to choose a Saudi forum, and since it found CSC had exercised that option, it dismissed the suit. On appeal from the dismissal, we examined the disputed language and observed:
9
When read alone, or even against the clause, quoted ante [paragraph 24.17], making Virginia law the parties' choice, clause 22.1 is hopelessly ambiguous on its face. Although it clearly refers to international arbitration as one choice by CSC for dispute resolution, it nowhere mentions the words court, forum, arbitration, or any other like language in connection with Saudi Arabia in a way unambiguously demonstrating that a Saudi forum choice was given contractually to CSC.
10
Ballast Nedam Groep, No. 86-3134, slip op. at 4. Accordingly, we remanded the case to the district court to conduct an evidentiary hearing and to determine the parties' contractual intentions.
11
On remand, testimonial evidence and affidavits established that agents of the parties discussed paragraph 22.1 in a meeting held in Virginia and again just prior to the signing of the contract in Saudi Arabia. Four representatives participated in the meetings: Bernard Kral, a Ballast employee who served as Ballast's chief contract negotiator; Mr. Griffith, an employee of a contract management firm under contract to Ballast; Stanley Forbes, an employee of CSC who served as CSC's chief negotiator; and William Kline, another CSC employee. Kral and Kline testified at the hearing, and both Ballast and CSC submitted affidavits from Forbes who was no longer in CSC's employ at the time of the hearing.
12
At the hearing, Ballast relied on the Forbes affidavits and Kral's testimony.2 Forbes stated in his affidavit that he recalled discussing at the meetings "what contractual issues or possible disputes would be covered by United States law and which would be subject to applicable Saudi Arabia law and procedure." According to Forbes, the parties agreed that,
13
as the construction work was to be performed in Saudi Arabia, certain activities related to contract performance, such as employment and compensation of direct labour, social insurance requirements, safety, permits, traffic and other police regulations, would be necessarily be [sic] governed by the applicable laws of Saudi Arabia. Any questions or disputes that might arise with respect to such matters, or as a direct consequence of the requirements of the law of Saudi Arabia, would therefore be settled or decided under applicable Saudi Arabia law and procedure. With respect to the types of issues or disputes that might arise between the parties under any construction contract, such as interpretation of the requirements of the plans and specifications, payments for work performed, claims for changed or extra work, design defects or deficiencies, etc., I advised Mr. Kral that such disputes or issues would be decided under the law of Virginia, United States of America.
14
Forbes also stated, "I do not recall any specific discussion ... with respect to where or how the resolution of disputes or claims of either party that would be covered by Virginia law would take place." Kral testified that he generally agreed with Forbes' account, but added that their agreement extended not only to the type of law that would apply to various kinds of disputes but also to the forum in which the disputes would be settled. Thus, local regulatory matters would be resolved under Saudi law in Saudi courts, while disputes relating to the interpretation and performance of the contract would be settled under Virginia law outside Saudi Arabia. Kral testified that the parties discussed and agreed to this interpretation of the contract:
15
[W]e explained quite clearly how we had read this article. And when CSC confirmed they had read it in the same way, our fear of ending up for all kinds of matters in a Saudi court were disappeared [sic]. So, we said, fine, gentlemen, we have no objection.
16
According to Kral, he explained Ballast's interpretation of paragraph 22.1 at both meetings, and Forbes agreed with it on both occasions.
17
CSC presented testimony by Kline and by CSC's president, Thomas Robinson. Kline provided no helpful testimony concerning the parties' discussions at the meeting, stating only that he did not recall ever having discussed paragraph 22.1 with any Ballast representative. Both Kline and Robinson, however, testified that CSC always intended to reserve for itself the option of choosing a Saudi forum. They stated that CSC had a longstanding policy of matching the terms of subcontracts to those in the general contract to which the subcontract related. They explained that their construction contract with the Saudi Ministry of Interior, of which their agreement with Ballast was a part, subjected them to dispute resolution in Saudi Arabia. They testified that they therefore had wanted to have the option of resolving in the same Saudi forum any contractual disputes with Ballast related to their project for the Saudi government. Robinson and Kline each testified to internal communications in which CSC officers discussed their intention to reserve the choice of a Saudi forum for any and all claims, and they documented their testimony with minutes and memoranda. CSC presented no evidence, however, that its intention to reserve to itself the choice of a Saudi forum for all disputes was ever communicated to Ballast.
18
In reviewing the evidence, the district court relied heavily on the testimony of Kline and Robinson concerning CSC's intent. It accepted CSC's explanation that paragraph 22.1 was written specifically to conform the forum for dispute resolution to that established for disputes arising out of CSC's contract with the Saudi government. In regard to Ballast's intentions, the district court found that Ballast "understood clause 22.1 could subject [Ballast] to having all disputes resolved in Saudi Arabia," but "never took exception to this possibility." The court concluded that the evidence showed the parties always intended CSC to have its choice of forum, and it again dismissed the action.
19
The district court's opinion rests on two significant errors. First, in determining the parties' mutual intentions, it relied on evidence concerning internal discussions between CSC employees and the resulting policy determinations made by CSC's executives that were never communicated to Ballast. Second, it misconstrued Kral's testimony. The court stated that Kral's testimony showed he understood that the contract might subject Ballast to a Saudi forum for all disputes but failed to object. Kral testified, however, that he was concerned about what paragraph 22.1 meant, and so he explained Ballast's interpretation "quite clearly" to Forbes. He testified that "when CSC confirmed they had read [paragraph 22.1] in the same way, [Ballast's] fear of ending up for all kind of matters in a Saudi court were disappeared [sic]." Kral's testimony was not directly challenged by any of the other persons who attended the meetings, and it unequivocally demonstrated that Ballast understood it would not be forced to submit its contractual disputes to resolution in a Saudi forum.
20
The district court's interpretation of the parol evidence to determine the parties' intentions was, of course, a factual determination. See Combs v. Dickenson-Wise Medical Group, 355 S.E.2d 553, 557 (Va.1987); Main-Atlantic v. Francis I. duPont & Co., 191 S.E.2d 211, 215 (Va.1972). We conclude, however, that the district court's findings were clearly erroneous. The only evidence in the record concerning the parties' mutually expressed intentions is the testimony of Kral and Forbes. Kral testified that he explained to Forbes and Kline that Ballast understood paragraph 22.1 to provide for settlement of disputes concerning local regulatory matters in Saudi Arabia and for settlement of all substantive contractual disputes under Virginia law outside Saudi Arabia. According to Kral, Forbes agreed that this was also CSC's understanding, and Kline at least offered no objection. While Forbes could not recall discussing where resolution of disputes under Virginia law would occur, his testimony concerning what types of issues would be settled under Virginia law matched Kral's, and he did not contradict Kral's testimony regarding the limited types of issues for which a Saudi forum would be used. Thus, the only direct evidence concerning whether the parties intended that CSC could choose to have substantive contractual disputes litigated in Saudi Arabia was Kral's testimony.
21
In addition to being uncontroverted, Kral's testimony is supported by the other relevant evidence. Both Forbes and Kral agreed that the parties intended substantive contractual issues to be resolved under Virginia law, and paragraph 24.17 specifically states that the contract "shall be governed and interpreted in accordance with the substantive laws of [Virginia]." The only mention of the possibility of applying Saudi law is in paragraph 22.1, and even CSC's negotiator, Forbes, testified that in discussing that paragraph the parties agreed that they intended Saudi law to apply only to local regulatory matters. While Forbes' statement is not an explicit declaration that the parties reached a similar agreement regarding the use of a Saudi forum, we think the statement supports Kral's testimony that the parties in fact reached this agreement.3
22
We think the evidence relating to the parties' intention of choosing a Saudi forum vel non is susceptible to only one interpretation--that they intended to utilize a Saudi forum for resolution of local matters, but they specifically rejected the Saudi forum for resolution of substantive contract disputes. The contract, thus clarified by parol evidence, can only be interpreted as expressing an agreement to resolve such contract disputes by arbitration. Paragraph 22.1 provides that disputes shall be resolved "either under applicable Saudi Arabia law and procedure or by arbitration in accordance with the Rules of Arbitration and Conciliation then obtaining of the International Chamber of Commerce." Parol evidence established that the reference to Saudi Arabia law and procedure related only to local Saudi Arabia matters. The only language remaining in the contract susceptible of interpretation as other forum selection language refers to resolution of substantive disputes by arbitration under the rules of the International Chamber of Commerce.
23
The parties were given the opportunity to present all of their evidence relating to their intentions on the meaning of the language they used in paragraph 22.1 of their contract. They apparently have done so, and no useful purpose would be served by further adversarial proceedings in the district court. Because the only provision in the contract regarding the resolution of disputes, other than those disputes involving local matters to be governed by Saudi law, provides for arbitration--we conclude that the parties intended to settle the type of claims presented in this case in arbitration utilizing the substantive law of Virginia.
24
Accordingly, we reverse the judgment of the district court and remand with instructions that it issue an order, pursuant to 9 U.S.C. Sec. 4, directing the parties to submit their dispute to arbitration as provided by paragraphs 22.1-22.3 of their contract.
25
REMANDED WITH INSTRUCTIONS.
1
Ballast Nedam Groep, N.V. v. Computer Sciences Corp., No. 86-3134 (4th Cir. June 16, 1987) (unpublished)
2
Although the Forbes affidavit submitted by Ballast was slightly more detailed than the one submitted by CSC, the two affidavits by Forbes were substantially the same
3
We also note that the uncontroverted evidence in the record, consisting of the affidavit of a Saudi law expert submitted by Ballast pursuant to Fed.R.Civ.P. 6(d), reflects that "No Saudi Arabia court would adjudicate claims ... on the basis that" the contract would be governed by Virginia law | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1024017/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-6537
OSCAR ELISEO MEDELIUS-RODRIGUEZ,
Petitioner - Appellant,
versus
BONNIE STRICKLAND,
Respondent - Appellee,
and
UNITED STATES OF AMERICA,
Respondent.
No. 07-6846
OSCAR ELISEO MEDELIUS-RODRIGUEZ,
Petitioner - Appellant,
versus
BONNIE STRICKLAND,
Respondent - Appellee.
Appeals from the United States District Court for the Eastern
District of North Carolina, at Raleigh. James C. Dever III,
District Judge. (5:06-hc-02123-D)
No. 07-6997
In Re: OSCAR ELISEO MEDELIUS-RODRIGUEZ,
Petitioner.
On Petition for Writ of Prohibition.
Submitted: September 24, 2007 Decided: October 15, 2007
Before MOTZ and TRAXLER, Circuit Judges, and WILKINS, Senior
Circuit Judge.
Nos. 07-6537 and 07-6846 affirmed; No. 07-6997 petition denied by
unpublished per curiam opinion.
Oscar Eliseo Medelius-Rodriguez, Appellant/Petitioner Pro se. Eric
David Goulian, OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North
Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
- 2 -
PER CURIAM:
In these consolidated appeals, Oscar Eliseo
Medelius-Rodriguez (Medelius) appeals the district court’s order
denying relief on his petition under 28 U.S.C. § 2241 (2000), in
which he sought review of a magistrate judge’s order authorizing
his extradition to Peru (No. 07-6537). He also appeals the
district court’s order denying a stay of judgment pending appeal
(No. 07-6846) and seeks a writ of prohibition (No. 07-6997) to
prevent the extradition process from going forward during the
pendency of his habeas appeal. We conclude that the magistrate
judge did not err in finding Medelius extraditable, and we affirm
the district court’s orders denying habeas relief and a stay
pending appeal. We likewise deny the petition for writ of
prohibition.
The United States government seeks to extradite Medelius,
a Peruvian national and former member of Peru’s congress, to face
charges in Peru of falsification of documents and documentary
evidence, misrepresentation, embezzlement, and delinquent
association. The charges against Medelius arise from a scheme to
forge the signatures and fingerprints of actual voters to register
a political party and take part in the 2000 presidential election
to support former Peruvian president Alberto Fujimori.
Upon the filing of a complaint in the district court
seeking certification of the fugitive’s extraditability, a district
- 3 -
court judge or magistrate judge conducts a hearing to determine
whether (1) there is probable cause to believe that the fugitive
has violated one or more of the criminal laws of the country
requesting extradition; (2) the alleged conduct would have been a
violation of criminal law if committed in the United States; and
(3) the requested individual is the one sought by the foreign
nation for trial on the charge at issue. See Peroff v. Hylton, 542
F.2d 1247, 1249 (4th Cir. 1976). A writ of habeas corpus is the
only available means to challenge a magistrate judge’s
certification order. Ordinola v. Hackman, 478 F.3d 588, 598 (4th
Cir. 2007). The scope of habeas corpus review in extradition is
limited, and the magistrate judge’s findings are accorded
substantial deference. Id. at 599. In considering such a habeas
petition, the district court generally determines only whether the
magistrate judge had jurisdiction, whether the charged offense is
within the scope of the applicable treaty, and whether there was
any evidence supporting the probable cause finding. Id.
In his appeal, Medelius’s primary contentions are:
(1) the evidence submitted by the Peruvian government does not
support a finding of probable cause; (2) the charged crimes are not
extraditable offenses; (3) the offenses fall within the political
offense exception; and (4) extradition would violate his
- 4 -
constitutional rights.1 We have considered these claims and
conclude the district court did not err in upholding the magistrate
judge’s probable cause determination and affirming the magistrate
judge’s conclusion that the charged offenses are within the scope
of the Extradition Treaty. We also conclude the district court and
magistrate judge both properly concluded that the offenses do not
fall within the political offenses exception to extradition, and
extradition would not violate Medelius’s constitutional rights.
Accordingly, we affirm the district court’s denial of habeas relief
(No. 07-6537).
Medelius’s second appeal (No. 07-6846) challenges the
district court’s order denying a stay of judgment pending his
habeas appeal.2 In light of our affirmance of the district court’s
denial of habeas relief, we also affirm that court’s denial of
Medelius’s motion for stay pending appeal.
Medelius has also filed a petition for a writ of
prohibition (No. 07-6997), requesting an order prohibiting the
1
To the extent that Medelius raises other issues in his
informal brief on appeal, we conclude those issues lack merit.
2
Although Medelius did not note an appeal from the district
court’s June 8, 2007 order denying a stay pending appeal, his
informal brief challenging that order may properly be considered
the functional equivalent of a notice of appeal from the district
court’s June 8 order. See Smith v. Barry, 502 U.S. 244, 248-49
(1992). Because Medelius filed his informal brief within the
thirty-day appeal period following the June 8 order, we have
jurisdiction to consider the issues he raises therein. Smith, 502
U.S. at 248-49.
- 5 -
Secretary of State from making a decision on his extradition, or if
a final decision has been made, prohibiting his surrender to Peru
while his habeas appeal is pending. Again, in light of our
decision in Medelius’s habeas appeal, we deny his petition for a
writ of prohibition.
In sum, we affirm the district court’s orders denying
Medelius’s § 2241 petition (No. 07-6537) and denying a stay of
judgment pending appeal (No. 06-6846). In Appeal No. 07-6537, we
also deny Medelius’s motion to appoint counsel, motion for a
hearing en banc, motion for a stay of judgment, petition for a writ
of prohibition, two motions for emergency relief, and motion for
release on bail pending appeal. In Appeal No. 07-6997, while we
grant Medelius’s motion for leave to proceed in forma pauperis, we
deny his petition for a writ of prohibition and his motion for
emergency relief. 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.
Nos. 07-6537 and 07-6846 AFFIRMED
No. 07-6997 PETITION DENIED
- 6 - | 01-03-2023 | 07-05-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1922143/ | 413 B.R. 843 (2009)
In re Robert E. GOSS, Debtor.
No. 06-31932-rld13.
United States Bankruptcy Court, D. Oregon.
April 29, 2009.
*845 Anthony V. Albertazzi, Bend, OR, for Debtor.
MEMORANDUM OPINION
RANDALL L. DUNN, Bankruptcy Judge.
On March 13, 2009, I heard evidence and argument at the final evidentiary hearing (the "Hearing") on 1) the Motion for Relief from Stay ("Stay Motion") filed by Candace M. Goss ("Ms. Goss") to pursue collection of her state court property division judgment against her former husband, the debtor Robert E. Goss ("Mr. Goss"); and 2) Mr. Goss's objections (collectively, "Claim Objections") to Claim Nos. 11 and 14 filed by Ms. Goss in Mr. Goss's chapter 13 case.[1] Following the Hearing, I allowed the parties until April 17, 2009 to file supplemental memoranda in support of their respective positions, and thereafter, I took the Stay Motion and the Claim Objections under submission.
In deciding these contested matters, I have considered carefully the testimony presented and exhibits admitted at the Hearing, as well as the arguments of counsel presented orally and in their memoranda filed with the court. I also have taken judicial notice of the docket and documents filed in Mr. Goss's chapter 13 case for the purposes of ascertaining the timing and status of events in the case and facts not reasonably in dispute. Federal Rule of Evidence 201; In re Butts, 350 *846 B.R. 12, 14 n. 1 (Bankr.E.D.Pa.2006). I further have reviewed applicable legal authorities beyond those cited to me by the parties. In light of that consideration and review, this Memorandum Opinion sets forth the court's findings of fact and conclusions of law under FRCP 52(a), applicable with respect to these contested matters under FRBP 9014 and 7052.
Factual Background
Unfortunately, the matters before me are only the latest battles in a long-term domestic relations war between the parties. Mr. and Ms. Goss were married for approximately 25 years. Mr. Goss filed a separation petition that ultimately ripened into a marital dissolution proceeding ("Marital Dissolution Proceeding") with the Deschutes County, Oregon Circuit Court ("Circuit Court") on August 20, 2004. Before trial in the Marital Dissolution Proceeding, Mr. Goss filed a petition under chapter 13 of the Bankruptcy Code on July 5, 2006. Docket No. 1.
On August 18, 2006, Ms. Goss filed a motion for relief from stay ("First Stay Motion") to allow the Marital Dissolution Proceeding to proceed before the Circuit Court. Docket No. 16. Mr. Goss opposed the First Stay Motion, arguing that all property issues between him and Ms. Goss had been resolved by a property settlement agreement that he proposed to assume in his chapter 13 plan. He admitted in his response to the First Stay Motion that Ms. Goss had "an unliquidated claim for attorney's fees in the divorce case." Docket No. 21, at p. 2.
Following an evidentiary hearing before Judge Perris on September 5, 2006, relief from stay was granted. Docket No. 46. The order, entered on September 14, 2006, provided that relief from stay immediately was granted "to complete dissolution of [marriage] proceedings in the ... Circuit Court ... on all issues." Docket No. 48.
Mr. Goss's chapter 13 plan, dated December 28, 2006 (the "Plan"), provides that nonpriority unsecured creditors "will receive a minimum 100% of their claims" plus "interest of 3% from the time of confirmation." Docket No. 53, at pp. 2-3. The Plan term is 60 months. Id. at p. 3. The Plan was confirmed by order entered on January 22, 2007. Docket No. 54. Ms. Goss did not appeal the confirmation order. The minimum 100% payment provision, plus interest, of the Plan for nonpriority unsecured creditors has not been modified.
Following a trial ("Trial") in the Marital Dissolution Proceeding on September 3, 2008, Circuit Court Judge A. Michael Adler entered a General Judgment of Dissolution of Marriage and Money Awards on November 25, 2008, including a property division judgment ("Property Division Judgment") in favor of Ms. Goss against Mr. Goss in the amount of $181,080. See Exhibit 1, at pp. 1, 8. Thereafter, in December 2008, Judge Adler entered a Supplemental Judgment and Money Award Re: Attorney fees and Costs, awarding $32,046.55 (the "Attorney Fees Judgment") in favor of Ms. Goss against Mr. Goss. See Exhibit 2.
Following the Trial, Judge Adler prepared and sent to the parties' counsel a letter, dated September 23, 2008 ("Judge's Letter"), explaining in part the basis for his judgments. See Exhibits A and 4. Judge Adler found the following with respect to the parties' relative earning capacity and incomes:
Wife suffers from a permanent disability which limits her earning capacity to that of minimum wage. Husband is self employed with his own automobile repair business. Although it is somewhat difficult to determine husband's income due to his accounting practices over the past several years, the credible evidence presented *847 supports a finding that the husband's income is $60,000 per year.
Judge's Letter, Exhibit A, at p. 1. Based upon a property distribution table showing values and distributions (see Exhibit 4), Judge Adler awarded Ms. Goss an "equalizing judgment" in the amount of $181,080 and required that it be paid no later than December 31, 2008. See Exhibit A, at p. 1. With respect to attorneys fees, Judge Adler made the following findings and conclusions:
The court finds that the attorney fees incurred by wife in this case have been increased significantly due to the husband's conduct in this litigation, causing significant delay and increased attorney fees. Therefore, the court finds that the husband shall be required to pay one half of wife's attorney fees incurred in this case. This amount shall be determined pursuant to ORCP 68.
Exhibit A, at p. 2. To date, Mr. Goss has paid no part of the Property Division Judgment or the Attorney Fees Judgment to Ms. Goss.
On February 2, 2009, counsel for Ms. Goss filed two proofs of claim in her behalf: Claim No. 11 is identified as a claim secured by real property in the amount of $181,080 and is identified as a "Money award Dissolution Judgment." Claim No. 14 is identified as an unsecured priority claim and domestic support obligation in the amount of $37,054.55 from a "Spousal and Child Support Dissolution Judgment." Also, on February 2, 2009, Ms. Goss filed the Stay Motion to enforce the Property Division Judgment "and perhaps to enforce support arrearages from debtor's property or income." See Docket Nos. 78 and 79.
Mr. Goss responded to the Stay Motion on February 13, 2009, asserting that there were no support arrearages and objecting to Ms. Goss's claims. See Docket No. 81. On February 19, 2009, Mr. Goss objected to Ms. Goss's Claim No. 11, accepting the amount of the claim but asserting that it should be treated as unsecured. See Docket No. 83. On the same date, he objected to Ms. Goss's Claim No. 14, again accepting the amount of the claim, but asserting that it should be treated as nonpriority unsecured. See Docket No. 82.
I scheduled the Hearing at a preliminary hearing on the Stay Motion on February 24, 2009.
Jurisdiction
I have core jurisdiction to decide the Stay Motion and the Claim Objections under 28 U.S.C. §§ 1334 and 157(b)(2)(B), (G) and (O).
Issues
1) Should the Property Division Judgment claim be allowed as a claim secured against Mr. Goss's real property?
2) Should relief from stay be granted to allow Ms. Goss to enforce the Property Division Judgment claim?
3) Should the Attorney Fees Judgment be treated as a claim?
4) Is Mr. Goss's objection to the Attorney Fees Judgment claim ripe for determination?
Discussion
a) Objection to Claim No. 11
Mr. Goss raises three objections to treating Ms. Goss's Property Division Judgment claim as secured:
2. The creation of a post-judgment lien on Debtor's real property violated the automatic stay and is thus void;
3. The underlying debt upon which the Claimant's judgment lien is based was a pre-petition debt and not excepted from discharge, therefore, the lien did not attach;
4. The creation of a post-judgment lien on Debtor's real property was the equivalent *848 of converting an unsecured claim into a secured claim, thereby constituting an avoidable preferential transfer....
Debtor's Supplemental Brief Re Objection to Claims 11 and 14, Docket No. 95, at p. 1.
Mr. Goss's objections reflect a misunderstanding as to how marital dissolution property claims that are unresolved on the date of a bankruptcy filing are treated. It is a fundamental interpretive principle in bankruptcy that "Congress has generally left the determination of property rights in the assets of a bankrupt's estate to state law." Butner v. United States, 440 U.S. 48, 54, 99 S. Ct. 914, 59 L. Ed. 2d 136 (1979).
Mr. Goss initiated the Marital Dissolution Proceeding in 2004, almost two years prior to his chapter 13 bankruptcy filing. Under Oregon law, when the Marital Dissolution Proceeding was filed, the property of each spouse in the marital community was subject to a vested, but inchoate claim of the other spouse.
There is a rebuttable presumption that both spouses have contributed equally to the acquisition of property during the marriage, whether such property is jointly or separately held. Subsequent to the filing of a petition for annulment or dissolution of marriage or separation, the rights of the parties in the marital assets shall be considered a species of coownership, and a transfer of marital assets under a judgment of annulment or dissolution of marriage or of separation entered on or after October 4, 1977, shall be considered a partitioning of jointly owned property.
Oregon Revised Statutes § 107.105(1)(f) (emphasis added); In re Engle, 293 Or. 207, 646 P.2d 20 (1982). Consequently, at the time of Mr. Goss's bankruptcy filing, the property interests of the Gosses were "vested but subject to subsequent definition." White v. Bell (In re White), 212 B.R. 979, 983 (10th Cir. BAP 1997).
As noted above, Judge Perris granted relief from stay to the Gosses "to complete dissolution of [marriage] proceedings in the ... Circuit Court ... on all issues." In the general dissolution of marriage judgment subsequently entered by the Circuit Court, Mr. Goss was awarded title to the residence and business real properties listed in his bankruptcy schedules (see Exhibit 1, at p. 7), but Ms. Goss was awarded the Property Division Judgment (see Exhibit 1, at p. 8). Under Oregon law, the Property Division Judgment became a lien on the subject real properties upon its entry by the Circuit Court. See Oregon Revised Statutes § 18.150. Ms. Goss's prepetition inchoate co-ownership interest in the real properties was converted through entry of the Property Division Judgment into a secured claim.
This result was authorized by Judge Perris's order granting relief from the automatic stay. Thus, there is no violation of the stay. Since the Property Division Judgment created a new property interest in place of the prepetition co-ownership interest, I am dealing neither with a prepetition claim nor a preferential transfer. See, e.g., Farrey v. Sanderfoot, 500 U.S. 291, 299, 111 S. Ct. 1825, 114 L. Ed. 2d 337 (1991). I conclude that Ms. Goss's claim for payment of the Property Division Judgment is secured, and Mr. Goss's objection to Claim No. 11 is not well taken. I will overrule Mr. Goss's objection to Claim No. 11.
b) Relief from Stay will not be granted at this time
Ms. Goss has moved for relief from stay for cause because the Property Division Judgment was due and payable in full by December 31, 2008, and no part of the Property Division Judgment has been paid. She further argues that she has the right to collect support arrearages, and she needs the money that she could collect *849 from Mr. Goss to pay her attorneys fees generated in the Marital Dissolution Proceeding.
Mr. Goss testified that he is current in paying his support obligations, and no evidence was submitted to contradict that testimony. He further testified that he generates the income to fund his Plan and support payments from his automotive repair business that he operates on the business property on which Ms. Goss would execute the Property Division Judgment lien if she were granted relief from stay. There is evidence in the record tending to suggest that there is enough equity in Mr. Goss's real property to pay the Property Division Judgment. See, e.g., Exhibit 4. However, Mr. Goss testified that he was not sure in the current real estate market whether his business real property was even sellable, and it might end up in the hands of the bank.
Section 362(d)(1) provides that, "On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay ... such as by terminating, annulling, modifying, or conditioning such stay (1) for cause, including the lack of adequate protection of an interest in property of such party in interest." "Cause" for granting relief from stay is not defined in the Bankruptcy Code. The nonexclusive listing of forms of potential relief ("such as by terminating, annulling, modifying, or conditioning" the stay) underlines the discretion of the court in crafting an order tailored to the particular circumstances of the case before it. See 3 Collier on Bankruptcy ¶ 362.07[1] (15th ed. rev.2009).
Mr. Goss testified that if he lost his business property to execution by his wife, he would have to shut down his automotive repair business, and he would have no source of income to make his Plan or support payments. On the other hand, in the Marital Dissolution Proceeding that has been pending since August 20, 2004, as noted above, the Property Division Judgment was due and payable in full by December 31, 2008, and no part of it has been paid. After more than four years of litigating with Mr. Goss in the Marital Dissolution Proceeding, Ms. Goss has obtained the Property Division Judgment, and she is ready for closure. However, also as noted above, there is evidence that there is equity in Mr. Goss's real property adequate to pay the Property Division Judgment, and if some time is allowed for the real estate market to improve, Ms. Goss may continue to receive support payments and Plan payments (as discussed below) and ultimately, receive payment in full of the Property Division Judgment as well.
Mr. Goss's confirmed Plan makes no provision for payment of Ms. Goss's secured judgment lien claim. "Absent some action by the representative of the bankruptcy estate, liens ordinarily pass through bankruptcy unaffected...." County of Ventura Tax Collector v. Brawders (In re Brawders), 503 F.3d 856, 867 (9th Cir.2007). Work v. County of Douglas (In re Work), 58 B.R. 868, 871 (Bankr. D.Or.1986) ("Since Plaintiffs[ ] made no provision for the Defendant's lien in their plan, the residence which vested in Plaintiffs after confirmation remains subject to Douglas County's lien."). In light of those authorities, since the Property Division Judgment lien will "ride through" completion of the Plan, I find that as long as Mr. Goss's Plan is not modified to Ms. Goss's disadvantage, her lien will be adequately protected over the slightly more than two years remaining before the deadline for completing the Plan.
In these circumstances, I do not find "cause" to grant relief from stay at this time and will deny the Stay Motion, without prejudice to renewal if Mr. Goss becomes delinquent in his support payments or seeks to modify the Plan to the detriment of Ms. Goss.
*850 c) The Attorney Fees Judgment is a "Claim"
In Creditor-Wife's Supplemental Memorandum-Following 03/13/2009 Hearing (Docket No. 105, at pp. 2-5), Ms. Goss argues that the Attorney Fees Judgment should not be treated as a "claim" in Mr. Goss's bankruptcy case because it did not arise prepetition.
A bankruptcy "claim" is broadly defined in relevant part in § 101(5)(A) as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured...." It is true that any claim that either of the Gosses had to an award of attorney fees in the Marital Dissolution Proceeding was not determined until Judge Adler entered the Attorney Fees Judgment in December 2008. So, until that time any such claim was both inchoate and unliquidated. However, that does not mean that Ms. Goss did not have a prepetition claim for attorney fees for purposes of § 101(5)(A).
The Marital Dissolution Proceeding was filed on August 20, 2004. Oregon Revised Statutes § 107.105(1)(j) provides:
Whenever the court renders a judgment of marital annulment, dissolution or separation, the court may provide in the judgment: ... (j) For an award of reasonable attorneys fees and costs and expenses reasonably incurred in the action in favor of a party or in favor of a party's attorney.
Accordingly, from the prepetition date that the Marital Dissolution Proceeding was filed, Ms. Goss had a potential claim for attorney fees and costs clearly recognized under Oregon law.
In the Judge's Letter, Judge Adler stated that his award of attorney fees to Ms. Goss "shall be determined pursuant to ORCP 68." Judge's Letter, Exhibit A, at p. 2. ORCP 68C(2)(a) provides that, "A party seeking attorney fees shall allege the facts, statute or rule that provides a basis for the award of such fees in a pleading filed by that party." The parties' pleadings in the Marital Dissolution Proceeding were not submitted as exhibits at the Hearing. However, since Judge Adler awarded the Attorney Fees Judgment to Ms. Goss "pursuant to ORCP 68," I infer that Ms. Goss made a claim for an award of attorney fees in her pleadings filed in the Marital Dissolution Proceeding. Mr. Goss admitted as much in his response to the First Stay Motion, when he asserted that Ms. Goss had "an unliquidated claim for attorney's fees in the divorce case." Docket No. 21, at p. 2. In addition, in spite of counsel's argument that Ms. Goss's proofs of claim were filed "at the insistence of debtor's counsel" (Docket No. 105, at p. 2), the fact remains that Ms. Goss's attorney filed Claim No. 14 in her behalf for allowance of a claim in the amount of $37,054.55 as a priority claim in Mr. Goss's bankruptcy case. Based on the record before me, I conclude that the award of attorney fees to Ms. Goss in the Attorney Fees Judgment is appropriately treated as a "claim" in Mr. Goss's chapter 13 bankruptcy case.
d) The issue as to whether Ms. Goss's Attorney Fees Judgment Claim should be treated as a priority domestic support obligation or as a nonpriority unsecured claim is not ripe for determination
Mr. Goss's confirmed Plan provides that all allowed priority claims will be paid in full. See Docket No. 53, at p. 2. The confirmed Plan further provides that all allowed nonpriority unsecured claims will be paid "a minimum 100%" plus 3% interest. See id. at pp. 2-3. In his objection to Ms. Goss's Claim No. 14, Mr. Goss does not object to the amount of the claim, *851 he simply objects to its treatment as a priority domestic support obligation and submits that it should be allowed as a nonpriority unsecured claim in the full amount claimed. See Docket No. 82.
Since Mr. Goss is not entitled to a discharge in chapter 13 under the terms of his confirmed Plan until he has paid all allowed unsecured claims a minimum of 100% of the amount allowed plus 3% interest, he has to pay Ms. Goss's Attorney Fees Judgment claim in full in his chapter 13 case, whether it is treated as a priority domestic support obligation or as a nonpriority unsecured claim. In these circumstances, based on the record before me, I find that Mr. Goss's objection to Claim No. 14 attempts to establish a distinction without a difference in terms of how he is required to treat Ms. Goss's Attorney Fees Judgment claim under his confirmed Plan. If Mr. Goss moves to modify the Plan in the future, such a motion could present a live controversy, but in the present circumstances, I conclude that Mr. Goss's Objection to Claim No. 14 is not ripe for determination at this time. However, whatever the status of Claim No. 14 ultimately is determined to be, it is allowed as an unsecured claim in the amount of $37,054.55.
Conclusion
Based on the foregoing findings of fact and conclusions of law, I will overrule Mr. Goss's Objection to Claim No. 11; I will deny Ms. Goss's Stay Motion at this time, without prejudice to renewal if Mr. Goss becomes delinquent in his support obligations or seeks to modify his confirmed Plan to the detriment of Ms. Goss; and I decline to decide Mr. Goss's Objection to Claim No. 14 as not ripe for determination. The Court will enter an order consistent with this Memorandum Opinion.
NOTES
[1] Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and to the Federal Rules of Bankruptcy Procedure ("FRBP"), Rules XXXX-XXXX. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1922229/ | 413 B.R. 96 (2009)
In re Bernard T. GRUCZA, Heather R. Grucza, Debtors.
No. 09-11140 K.
United States Bankruptcy Court, W.D. New York.
September 9, 2009.
Paul M. Pochepan, Buffalo, NY, for Debtors.
ORDER AND OPINION
MICHAEL J. KAPLAN, Bankruptcy Judge.
This case presents a question that seems to have no precedent in New York law (perhaps because a five-fold increase in the state homestead exemptionfrom $10,000 to $50,000was enacted just four years ago, thereby making more of such issues worth arguing).
When $7,000 worth of cement block (the Chapter 7 Trustee has a bid in that amount for the block) is sitting on the Debtor's homestead land, but not yet installed as a retaining wall necessary to prevent severe damage to the home, is it non-exempt personalty that the Trustee may sell, or is it part of the Debtors' exempt homestead? (Perhaps importantly, the block was bought pre-petition with the Debtors' tax refund; it was not bought on credit from a lender whose debt will be *97 discharged, as discussed later.)[1]
The Court finds that the New York homestead exemption, construed liberally (as it must be construed[2]), is broad enough to encompass the block.
FACTS
The evidence is clear that the Debtors' home is greatly threatened by the erosion of a massive dirt cliff, topped by large trees, within a few yards of the rear foundation of the house. The house is truly endangered. Though conceivably worth $ 436,000 but for that condition, any possible purchaser of the house would have to remediate that condition, and so would pay less.
The Debtors bought the blocks with tax refund money just prior to filing their Chapter 7 petition. It was their intention to move and install the block themselves. It simply didn't get done before the petition was filed.
Now the Trustee wishes to sell the blocks for $ 7,000.00.
The Debtors argue that it is "equitably" part of their exempt homestead, even though it is not "in-place" and, thus not yet a "fixture" on their homestead.
The Court agrees with the Debtors, but wishes to articulate a very narrow set of factors, for future cases that might involve a myriad of possible similar claims for other types of materials or devices not yet permanently "affixed" to the land.
NEW YORK EXEMPTION LAW AND LAW OF FIXTURES
New York C.P.L.R. § 5206 provides New York's homestead exemption. It simply states, "property of one of the following types, not exceeding $50,000 in value above liens and encumbrances, owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof: (1) a lot of land with a dwelling thereon, (2) shares of stock in a cooperative apartment corporation, (3) units of a condominium apartment, or (4) a mobile home."
The statute is silent as to the matter of appurtenances, whether they be affixed to the land (such as, perhaps, a free standing garage built upon a foundation) or not affixed to the land (such as a free standing tool shed, perhaps). New York exemptions must be construed liberally in favor of the debtor.[3]
Initially, we turn to the New York State Law of Fixtures. Doing so, we find that what had begun a long time ago as a black letter principle that something that is not physically attached to the realty could not be a fixture, "has been enlarged to include items that are `constructively annexed' to the land." In re City of New York, 11 N.Y.3d 353, 870 N.Y.S.2d 827, 899 N.E.2d 933 (N.Y.2008). Chattels that have been examined by the New York Courts under the doctrine of "constructive annexation" range from the drawers that slid into built-in cabinets in a country store (Tabor v. Robinson, 1862 WL 4457 (N.Y. General Term 1862)), wherein the drawers were found to be part of the realty that the plaintiff had purchased from the defendant, *98 to power tools in a woodworking shop (In re City of New York, supra) which were found not to be part of the real estate for purposes of a condemnation award. Most useful for current purposes are cases that examined chattels that were so heavy as not to need any type of affixation to the realty.
Thus in the case of Snedeker v. Warring, 12 N.Y. 170 (N.Y.1854) the defendant had purchased from the County Sheriff a home, in the yard of which stood a three ton ornamental statue of George Washington and a 200 pound sundial. They were in place on the land when the land was purchased by the defendant at a foreclosure sale. Later the Sheriff sought to levy on the items to satisfy an unrelated judgment, and the new landowner refused to permit it. The highest court of the state ruled that "a thing may be as firmly affixed to the land by gravitation as by clamps or cement. Its character may depend much upon the object of its erection. Its destination [and] the intention of the person making the erection often exercise a controlling influence, and its connection with the land is looked to principally for the purpose of ascertaining whether the intent was that the thing in question should retain its original chattel character, or whether it was designed to make it a permanent accession to the lands."
The author of the opinion found irrelevant the fact that the original owner of the land, who also sculpted the statue, testified that he intended to sell the statue when an opportunity arose. The court stated "his secret intention in that respect can have no legitimate bearing on the question. He clearly intended to make use of the statue to ornament his grounds, when he erected for it a permanent mound and base; and a purchaser had a right so to infer and to be governed by the manifest and unmistakable evidences of intention."[4]
The court further stated that the question of "whether the pyramids of Egypt or Cleopatra's Needle are real or personal property, does not depend on the result of a inquiry by the antiquarian whether they were originally made to adhere to their foundations with wafers, or ceiling wax or a handful of cement. It seems "... puerile to make the title to depend upon the use of such or any other adhesive substances, when the great weight of the erection is a much stronger guarantee of permanence." (Snedeker, supra)
The court also ruled that the sundial was part of the realty.
This leaves no doubt in this writer's mind that if the block in question today were stacked layer upon layer, and without any fixation whatsoever, in such a way as to protect the house from the eroding cliffside, it would be found to be part of the exempt homestead, despite the fact that there would be no actual attachment to the *99 land, but rather merely permanence afforded by the wall's great weight.
This leaves, then, only the question of whether the fact that the debtor had yet to move the stack of block from "here" to "there" is dispositive.
Anyone who has ever owned a suburban single family dwelling and who does the work on it himself or herself knows that such good fortune involves a constant movement of personalty into the realty. Lumber becomes basement or garage shelving, or a sun deck. Shrubs become landscaping. Posts and rails become a fence. A pallet of asphalt shingles becomes a new roof, and so forth. More importantly, for purposes of today's analysis, is that it is just as common for something that is affixed to the real estate to be temporarily "unaffixed" in order to accomplish repairs or improvements. Thus, for example, valuable paneling in a "finished" basement might be totally removed in order to accomplish foundation repairs or waterproofing, and then the paneling is reinstalled. Shrubs may be dug up in order to repair the sewage line connection to the house, and then the shrubs are replanted. Valuable paving blocks may be temporarily removed so that the surface thereunder may be re-graded to improve drainage, and then the block re-installed. Thousands of dollars of kitchen cabinets or other semi-"built-ins" may be removed in connection with a reconfiguration or upgrading of the space, then reinstalled. There are, of course, many other illustrations, but the foregoing list makes the point.
It is hard to imagine that the State Legislature in providing an exemption for "a lot of land with a dwelling thereon" intended that a judgment creditor would be able to levy upon such items between the time that they have been "unaffixed" and the moment that they are reinstalled.
Assuming that to be the case, and given the fact that these blocks would be "constructively affixed" to the realty by "gravitational force" if they were stacked in a location useful to protect the dwelling from the cliff, they would be exempt as part of realty. And if they had once been so stacked, and now were disassembled in order to be relocated to a more effective position, they would remain exempt during the interim.
This analysis leads this Court to conclude that although the law of fixtures is useful in interpreting the phrase "a lot of land with a dwelling thereon," it is not always dispositive. Rather, a liberal interpretation of the statutory definition of the homestead exemption requires a common sense interpretation that is informed by the law of fixtures, but also requires consideration of the totality of circumstances.
In this case, the necessity of the blocks to abate a hazardous condition that threatens the dwelling is the most significant factor. A similar circumstance might exist where, at the time of the filing of the petition in bankruptcy, the debtor has removed a rotted roof on the dwelling and has covered over the dwelling with a tarpaulin, and has the requisite load of plywood and shingles sitting in the garage. If this were a humid, southern state, a similar case might be made for a new central air conditioning unit sitting in the garage, to replace one that has ceased functioning, given that such units are necessary in some climates to prevent ruination of the house through mold. In our own climate, no one would doubt that detachable storm windows are part of the realty when they are in place during the winter months, but what is their status when they are leaning against the garage wall in July? If a rotted overhead garage door has been removed, and panels and parts for the new $3,000 garage door have *100 been delivered to the premises but not yet installed by the homeowner, is that the same as the case of the house with no roof?
It seems to the Court that the matter is not susceptible of general principles, but must be addressed on a case-by-case basis in light of a number of different factors.
These questions should be asked as to the materials/equipment/items sitting on the premises at the time of the filing of the petition:
Are they to make a new improvement or to replace something that no longer serves their purpose? For example, was the load of lumber bought to build a deck where there was none, or to replace a rotten one, or to build a wheelchair ramp to accommodate a family member who has become wheelchair bound?
Was the work in progress? (For example, the house with the roof already removed.)
Is there a hazard to be remedied by a permanent placement not yet achieved? (Such is the case here.)
Do the items' use change seasonally? (Such as the storm windows in the garage in summer or a patio awning in winter.)
Were they previously affixed but temporarily removed? (The kitchen cabinets during remodeling.)
Is it (or are they) reasonably necessary to the normal use of the dwelling? (Such as a new furnace or water heater, about to be installed as a replacement for one that is failing or has failed.)[5]
Is the project an improvement or upgrade rather than maintenance or repair? There are at least two categories as to this factor: extravagance and aesthetics. For example, a newer/bigger/better hot tub to replace the one already installed, or a whirlpool bath to replace a perfectly serviceable tub still able to serve the resident well, would be extravagance. Ceramic tile or hardwood to replace a vinyl tile or carpet might simply be an aesthetic upgrade. (A harder question might be presented as to paneling and light fixtures to be installed to turn a basement into a playroom for growing children.)
Is there any evidence of fraudulent intent? Many types of exemptions may be tainted by bad faith. "Bankruptcy planning," of itself, is not necessarily fraudulent. The typical indicia of fraud or bad faith would be as applicable to the homestead exemption discussed here, as they are to other exemption claims. Whether the pertinent items were charged to accounts that will be discharged, rather than bought with savings, a tax refund, or with exempt income or a loan from a retirement fund, may be considered. (But see Footnote 1, supra.) Changing residency to "create" a homestead where there was none might not pass the "smell test:" e.g., moving into an investment property that is in the process of rehabilitation, in contemplation of availing oneself of the benefits of today's ruling. (There is no hint of fraud or bad faith in the case at Bar.)
Is the personalty reasonably necessary to the regular and proper enjoyment of the realty? The trite illustration of this factor under the doctrine of "constructive annexation" is that of the keys to the locks on the doors: they are part of the "realty," under the doctrine.[6] A more substantial example might be the detachable storm windows that are in storage in the garage *101 in summer (and conversely, detachable screens in winter), or a wooden stairway built down a steep incline to the pond or stream access, from the yard.
This list of factors is not meant to be complete. The recent five-fold increase in New York's homestead exemption[7] set the stage for the case at Bar. $100,000 in exempt equity provides a lot of room for seeking to claim that what seemingly is simply non-exempt personal property, is part of the homestead exemption, at law. As such cases arise, other factors might be derived.
CONCLUSION
The block is part of the "lot of land with a dwelling thereon" that is the Debtors' exempt homestead. This is because that phrase is merely informed by the law of "fixtures," and not determined by it, and exemptions are to be liberally construed in favor of a debtor. The fact that the block has not yet been moved into a place where it would clearly be a fixture (by virtue of constructive annexation) is too slender a need to distinguish this case from one in which the wall was constructed pre-petition, but had to be disassembled in order to be moved to a more effective placement.
SO ORDERED.
NOTES
[1] One ought not to emphasize this distinction because from one philosophical perspective, using free cash to make purchases instead of paying debt is spending "borrowed money."
[2] "[E]xemption laws, though in derogation of the common law, are to be liberally construed in favor of the beneficiary in order to carry out their apparent beneficent purpose." McKinney's Statutes § 291, Special Privileges and Exemptions.
[3] Id.
[4] The case rested on the sufficiency of the evidence of intent to make the sculpture a permanent ornament. The sculptor/prior owner had built an elevated mound upon which to set the statue. That was one factor bearing on intent.
This writer deems it to be of no moment in the present case that whatever "pad" or foundation slab the block was to be moved to had yet to be constructed. The fact that some homeowners know that the best method of building an important retaining wall is to lay a foundation and reinforce the block with steel bars and with concrete fill, does not change the result. The fact that the railroad ties this writer once installed to "terrace" foundation plantings and walkways failed miserably in a heavy rain did not make the railroad ties "personalty." The decision as to what is personalty and what is an exempt homestead ought not to rest on engineering principles. Rather (as the cases say) it is intent, and the right of a purchaser to infer an intention of permanence (Snedeker).
[5] One "stockpiled" for future use might not pass muster.
[6] Beardsley & Kirkland v. Ontario Bank, 31 Barb. 619, 1859 WL 8074 (N.Y.Sup.1859); Walker v. Sherman, 20 Wend. 636, 1839 WL 3283 (N.Y.Sup. 1839).
[7] It went from $10,000 to $50,000 in August of 2005; $100,000 for husband and wife owners filing jointly. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594464/ | 954 So. 2d 28 (2007)
VAN POYCK
v.
McDONOUGH.
No. SC07-66.
Supreme Court of Florida.
March 14, 2007.
Decision without published opinion. Hab.Corp.denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594443/ | 954 So. 2d 43 (2007)
LANDMARK TOWERS, LLC, and Aequicap Insurance Company/Claims Control, Appellants,
v.
Francisco IBARGUEN, Appellee.
No. 1D06-607.
District Court of Appeal of Florida, First District.
March 13, 2007.
Rehearing Denied April 26, 2007.
*44 H. George Kagan of Miller, Kagan, Rodriguez & Silver, P.L., West Palm Beach, for Appellants.
Barbara B. Wagner of Waggenheim & Wagner, P.A., Fort Lauderdale; and Rodrigo L. Saavedra, Jr., Fort Lauderdale, for Appellee.
THOMAS, J.
Appellants-Employer/Carrier (E/C) appeal the Judge of Compensation Claims' (JCC) determination that Claimant's workplace injury is the major contributing cause of his need for knee surgery. Although we might reach a different result were we the factfinder, we cannot exercise that authority and must affirm because the JCC's conclusion is supported by competent, substantial evidence.
Claimant was injured when an air conditioning unit he was installing fell on him. E/C accepted the accident as compensable, but denied further treatment, contending that Claimant's preexisting osteoarthritis was the major contributing cause of his current need for knee replacement surgery.
Testimony at the merits hearing established that knee replacement surgery was medically necessary only because Claimant had ongoing knee pain and evidence of arthritis. Claimant testified that he had no pain before the workplace accident and was able to fully perform his duties as a maintenance worker. E/C introduced an emergency room record, admitted only as fact evidence, showing that Claimant received emergency room treatment one time in 1988. Claimant then admitted that a knee inflammation precipitated this visit, but said this was a minor injury, explaining that he occasionally had pains requiring emergency room visits due to his work as a manual laborer. Claimant testified that this was his only occurrence of knee pain before the accident. No other records were introduced showing that he received treatment at any other time on his knee, and the JCC found that any knee pain Claimant suffered was resolved shortly after the emergency room visit.
The JCC accepted the testimony of Dr. Babak Sheikh, orthopedic surgeon, that the workplace accident is the major contributing cause of Claimant's need for surgery. Dr. Sheikh testified that he based his opinion on Claimant's self-reported asymptomatic history of knee pain and admitted that if medical records showed that Claimant had received prior treatment for arthritis, such as injections, his opinion might change. E/C argues that Dr. Sheikh's conclusion regarding major contributing cause was not based on logic and reason, and thus must be rejected.
While we might disagree with the JCC's conclusion regarding major contributing cause and choose to accept other medical testimony introduced below which conflicts with Dr. Sheikh's testimony, we cannot substitute our conclusions for that of the JCC. It is within the JCC's discretion to resolve a conflict in the evidence and make credibility determinations. Stacy v. Venice Isles Mobile Home Park, 635 *45 So.2d 1039, 1042 (Fla. 1st DCA 1994). Dr. Sheikh's testimony is not unsupported by logic and reason, as Claimant testified that he had no prior knee complaints, other than one minor injury, and no evidence was introduced to show that he experienced any arthritic pain prior to the accident. Cf. Arkin Constr. Co. v. Simpkins, 99 So. 2d 557, 559, 561 (Fla.1957) (rejecting deputy commissioner's determination that a minor fall caused claimant's husband to suffer a fatal heart attack when the expert's medical opinion was based on an assumption, for which there was no record support, that the husband experienced symptoms between the fall and the fatal heart attack occurring two days later). The JCC, as factfinder, accepted Claimant's testimony as truthful, and we must therefore affirm.
BARFIELD and VAN NORTWICK, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594482/ | 19 So. 3d 347 (2009)
Aniceto JAIMES, Appellant,
v.
STATE of Florida, Appellee.
No. 2D07-2482.
District Court of Appeal of Florida, Second District.
April 29, 2009.
*348 James Marion Moorman, Public Defender, and Bruce P. Taylor, Assistant Public Defender, Bartow, for Appellant.
Bill McCollum, Attorney General, Tallahassee, and Tonja Rene Vickers, Assistant Attorney General, Tampa, for Appellee.
PER CURIAM.
In July 2004, Aniceto Jaimes was involved in a barroom brawl that resulted in charges against him for aggravated battery with a deadly weapon on two victims and simple battery on a third. At trial in January 2007, the jury returned the following verdicts: count one, guilty as charged of aggravated battery with a deadly weapon on Michael Proctor; count two, guilty as charged of simple battery on John Hornsby; and count three, guilty of aggravated battery by causing great bodily harm on Richard Miller. Mr. Jaimes now appeals, raising two issues. First, he claims that he was found guilty in count three of aggravated battery by causing great bodily harm on Mr. Miller when the information did not charge him with causing great bodily harm. Second, he claims that the circuit court erred in sentencing him to concurrent terms of twenty-five years' incarceration for the two counts of aggravated battery when the statutory maximum for this degree of crime is fifteen years. The State properly concedes error on the second issue, and we reverse his sentences for the two counts of aggravated battery. Although we recognize that it was error to convict Mr. Jaimes of aggravated battery by causing great bodily harm on Mr. Miller when that crime was not charged in the information, we affirm because defense counsel failed to preserve the issue for review on appeal. Defense counsel made no objection to the jury instructions or verdict form, and we conclude such error is not fundamental in Mr. Jaimes's circumstances. See State v. Weaver, 957 So. 2d 586 (Fla.2007).
We write briefly to explain the sentencing error, despite the State's concession, hoping that in the future such errors will be avoided. On March 6, 2007, the circuit court sentenced Mr. Jaimes to concurrent terms of twenty-five years' incarceration for the two counts of aggravated battery. Aggravated battery is a second-degree felony punishable by up to fifteen years. See § 784.045, Fla. Stat. (2004). Thus the sentences are an upward departure from the statutory maximum. The *349 court explained at the sentencing hearing that this departure from the guidelines[1] was due to what the court believed was an escalating pattern of criminal behavior. Defense counsel filed a motion for resentencing, citing Florida Rule of Criminal Procedure 3.800(a), claiming that the court had neglected to put in writing its reasons for exceeding the statutory maximum. As grounds for this motion, counsel cited section 921.0016(3), Florida Statutes (2004), which was repealed effective October 1, 1998, by chapter 97-194, section 1, at 3674, Laws of Florida. Two days later, defense counsel filed a timely notice of appeal. On May 7, 2007, while the appeal was pending, the circuit court, citing the same repealed section mandating written reasons for departing from the guidelines, filed a "Sentencing Statement" explaining in writing its reasons for departing upward.
On April 15, 2008, appellate counsel filed an amended motion to correct sentencing error, this time citing rule 3.800(b), pointing out the clear error of sentencing Mr. Jaimes above the statutory maximum under the Criminal Punishment Code without sufficient justification.[2] The circuit court, recognizing its error, corrected the sentences to concurrent terms of fifteen years' incarceration, but it did so on July 18, 2008, well beyond the sixty-day time limit for ruling. Thus its correction is a nullity. See Pearce v. State, 968 So. 2d 92 (Fla. 2d DCA 2007). Therefore, we must vacate the sentencing order filed on July 18, 2008.
Convictions affirmed, sentences on counts one and three reversed, and cause remanded for resentencing.
DAVIS and KELLY JJ., Concur.
CASANUEVA, J., Concurs with opinion.
CASANUEVA, Judge, Concurring.
I fully concur with the court's opinion. I write only to discuss the unpreserved issue that was raised in this appeal and its ramifications.
Facts
Mr. Jaimes was convicted following a jury trial of committing an aggravated battery on Richard Miller. The information charged the crime as follows:
Aniceto B. James, Sr. ... did unlawfully commit a battery upon Richard Miller, by actually and intentionally touching or striking said person, against said person's will, or by intentionally causing bodily harm to said person, and in committing said battery did use a deadly weapon, to-wit: wooden club or stick, contrary to Florida Statute 784.045.
Although section 784.045, Florida Statutes (2004), provides the offense of aggravated battery occurs when a defendant causes great bodily harm or uses a deadly weapon, the information here alleged only the use of a deadly weapon. However, the verdict form allowed the jury to chose between great bodily harm aggravated battery and deadly weapon aggravated-battery. *350 The jury instructions tracked the verdict form rather than the information. Mr. Jaimes, through counsel, failed to object to either the jury instructions or the jury verdict form. By their verdict, the jury found Mr. Jaimes guilty of aggravated battery by causing serious bodily harm. He was not found guilty of aggravated battery by using a deadly weapon, the crime charged by the information.
Analysis
To warrant relief, Mr. Jaimes must demonstrate that the unpreserved, unobjected-to jury instruction and verdict form are fundamental error; more specifically, that his conviction for the uncharged alternative theory of the offense of aggravated battery by great bodily harm constitutes fundamental error. "Instructions, however, are subject to the contemporaneous objection rule, and, absent an objection at trial, can be raised on appeal only if fundamental error occurred." State v. Delva, 575 So. 2d 643, 644 (Fla.1991); see also State v. Weaver, 957 So. 2d 586, 588 (Fla. 2007) (same); Reed v. State, 837 So. 2d 366, 370 (Fla.2002) (same).
Following the rationale of Delva, Weaver, Reed, and this court's analysis in Sanders v. State, 959 So. 2d 1232 (Fla. 2d DCA 2007), it is clear that instructing the jury that the State could prove aggravated battery in count three by proving "great bodily harm"where the State's information charged aggravated battery in that count only by the use of a deadly weaponwas error. However, this error was not fundamental. In these instances, "fundamental error occurs only in those trials where the uncharged theory included in the jury instruction was actually relied upon by the State and was contested by the defense." Jomolla v. State, 990 So. 2d 1234, 1238 (Fla. 3d DCA 2008) (citing Weaver, 957 So.2d at 586).
Here, the record demonstrates that the State did not argue the "great bodily harm" theory to the jury for count three or introduce testimony concerning Mr. Miller's injuries for that purpose. Rather, the testimony showed and the State argued that Mr. Jaimes committed aggravated battery only by using the club as a deadly weapon.
A final unpreserved issue about count three merits comment. The jury's verdict indicates that it rejected the deadly weapon theory of aggravated battery on Mr. Miller and that Mr. Jaimes inflicted great bodily harm instead. The State's evidence established that Mr. Jaimes struck Mr. Miller twice on the head, first with his fist, after which Mr. Miller staggered but was able to exit the bar, where Mr. Jaimes then hit him on the head with the wooden club or bat. The second strike opened a gash on Mr. Miller's head which required stitches (staples) to close. Because the jury rejected the deadly weapon version, the remaining evidence on this count proved only a misdemeanor battery by the fist strike. Because the jury verdict on this count was not supported by the evidence, a postverdict motion for judgment of acquittal on this felony count pursuant to Florida Rule of Criminal Procedure 3.380 was in order, at least to reduce it to a misdemeanor battery offense. See State v. Shearod, 992 So. 2d 900 (Fla. 2d DCA 2008). Our record does not disclose that defense counsel made such a motion, either at trial or afterwards.
In summary, three opportunities to avoid error were missed: first, to instruct the jury correctly on the proper charge that the State levied against Mr. Jaimes in count three; second, to present the jury with a proper verdict form for count three; and third, to correct the result of the first two after the fact.
NOTES
[1] We believe that the court merely misspoke when it announced that it was departing upward from the guidelines because the sentencing guidelines were repealed and rendered inapplicable to crimes committed after October 1, 1998, the effective date of the Criminal Punishment Code. See ch. 97-194, §§ 1-2, at 3674, Laws of Fla.
[2] In this amended motion, appellate counsel also cited as error the verdict and adjudication of guilt under count three for a crime not charged in the information. The circuit court did not address this claim in its subsequent order on the motion. We note that this procedure also did not preserve the conviction error for review on appeal because it is a type of error not cognizable in a motion filed pursuant to rule 3.800(b). See Jackson v. State, 983 So. 2d 562 (Fla.2008); Griffin v. State, 946 So. 2d 610 (Fla. 2d DCA 2007), quashed in part on other grounds, 980 So. 2d 1035 (Fla. 2008). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594489/ | 954 So. 2d 876 (2007)
STATE of Louisiana
v.
Claudius FORD, Jr.
No. 06-1435.
Court of Appeal of Louisiana, Third Circuit.
April 4, 2007.
*877 Michael Harson, District Attorney, Keith A. Stutes, Assistant District Attorney, Fifteenth Judicial District, Lafayette, LA, for Appellee State of Louisiana.
Alfred F. Boustany, II, Attorney at Law, Lafayette, LA, for Defendant/Appellant Claudius Ford, Jr.
Court composed of JIMMIE C. PETERS, BILLY H. EZELL, and JAMES T. GENOVESE, Judges.
PETERS, J.
The defendant, Claudius Ford, Jr., pled guilty to vehicular homicide, a violation of La.R.S. 14:32.1. Thereafter, the trial court sentenced him to serve ten years at hard labor without benefit of probation, parole, or suspension of sentence. He now appeals both his conviction and sentence.
DISCUSSION OF THE RECORD
The defendant's conviction arises from an accident which occurred on October 29, 2004, on Sixteenth Street in Lafayette, Louisiana, when his motor vehicle struck McDaniel Landry, who was riding a bicycle. The defendant, who had been smoking marijuana earlier in the day, fled the scene and was arrested later. Mr. Landry died from the injuries he sustained.
The defendant was initially charged by the State of Louisiana (state) with one count of vehicular homicide, a violation of La.R.S. 14:32.1; one count of hit-and-run driving, a violation of La.R.S. 14:100; one count of operating a vehicle while intoxicated, a violation of La.R.S. 14:98; and one *878 count of operating a vehicle without a valid driver's license, a violation of La.R.S. 32:52. Pursuant to a plea agreement whereby the state dismissed the remaining charges, the defendant entered a guilty plea to the single count of vehicular homicide.
After the trial court sentenced the defendant, he filed a motion to reconsider his sentence wherein he stated that the trial court "failed to order [him] to participate in a court-approved substance abuse program," and that the trial court had failed to consider several mitigating factors in imposing sentence. The trial court clarified its sentence, stating that "the Court recommends the Defendant be confined to a facility where he can receive substance abuse treatment." The trial court denied the motion in all other respects. Thereafter, the defendant filed a motion to vacate his guilty plea. After a hearing, the trial court also denied this motion. The defendant then perfected this appeal, asserting four assignments of error.
OPINION
Assignment of Error Number One
In his first assignment of error, the defendant asserts that the trial court failed to advise him during the plea proceedings that he had the right, through compulsory process, to compel witnesses to appear at his trial. This error, according to the defendant, precluded a knowing and voluntary guilty plea.
Although the defendant's right to compulsory process in a criminal proceeding is guaranteed by U.S. Const. amend. VI, an inquiry of the understanding of that right has not been required for a knowing and intelligent waiver of rights in a guilty plea proceeding. La.Code Crim.P. art. 556.1; Boykin v. Alabama, 395 U.S. 238, 89 S. Ct. 1709, 23 L. Ed. 2d 274 (1969); State v. Lane, 40,816 (La.App. 2 Cir. 4/12/06), 927 So. 2d 659, writ denied, 06-1453 (La.12/15/06), 944 So. 2d 1283.
However, even assuming that the trial court is required to inquire as to the defendant's understanding of the right of compulsory process, a colloquy between the trial court and the defendant is not indispensable when the record contains an affirmative showing of proper waiver. State v. Nuccio, 454 So. 2d 93 (La.1984). Here, the record establishes that the trial court informed the defendant that he had the right to call witnesses in his defense, and that by pleading guilty he was waiving that right. However, the trial court did not inform the defendant that he had the right to compel these witnesses to appear as provided for in U.S. Const. amend. VI.
Although the trial court did not emphasize the right of compulsory process, the defendant's written plea agreement specifically did. In that plea agreement, signed by the defendant and his attorney and entitled "PLEA OF GUILTY/NOLO CONTENDRE," the defendant acknowledged that he had been informed of, and understood, among other rights, "[his] right to have compulsory process to require witnesses to testify." The preprinted form also contains the notation that the defendant has a tenth grade education and can read and write. Furthermore, the defendant responded to the trial court's questions at the plea hearing by stating that he could read and write the English language, that he read the preprinted form before signing it, and that he understood its content.
Thus, we need not consider the trial court's failure to advise the defendant of his right to compulsory process because the record contains adequate evidence of his waiver of that right. Therefore, we find no merit in this assignment of error.
*879 Assignment of Error Number Two
The defendant asserts that the trial court failed to inform him that causation was an essential element of vehicular homicide and that, because of this failure, the trial court should have granted his motion to vacate his guilty plea. This error, according to the defendant, also precluded a knowing and voluntary guilty plea.
In a felony guilty plea proceeding, La. Code Crim.P. art 556.1 requires the trial court to address the nature of the charge against the defendant. Before accepting a felony guilty plea, the trial court must address the defendant "personally in open court and [inform] him of, and [determine] that he understands . . . [t]he nature of the charge to which the plea is offered." La. Code Crim.P. art. 556.1(A)(1).
Here, the state charged the defendant with the offense of vehicular homicide as defined by La.R.S. 14:32.1(A)(3). That statute specifically provides:
A. Vehicular homicide is the killing of a human being caused proximately or caused directly by an offender engaged in the operation of . . . any motor vehicle . . . whether or not the offender had the intent to cause death or great bodily harm, whenever any of the following conditions exists:
. . . .
(3) the operator is under the influence of any controlled dangerous substance listed in Schedule I, II, III, IV, or V as set forth in R.S. 40:964.
(Emphasis added.)
Thus, causation is an essential element of the offense.
The record of the plea proceedings establishes that the trial court informed the defendant that he was charged with vehicular homicide, but did not inform him of the nature of the charge by explaining its elements. Thus, the trial court failed to comply with its obligations pursuant to La.Code Crim.P. art. 556.1(A)(1). However, in State v. Longnon, 98-551, p. 7 (La. App. 3 Cir. 10/28/98), 720 So. 2d 825, 829, writ denied, 98-2969 (La.3/19/99), 739 So. 2d 781, this court concluded that because the requirement of La.Code Crim.P. art. 556.1(A)(1) "is a statutory requirement rather than a constitutional requirement (as is the requirement that the trial court inform the Defendant of the three Boykin rights)" it is subject to a harmless error analysis. See also State v. Roe, 05-116 (La.App. 3 Cir. 6/1/05), 903 So. 2d 1265, writ denied, 05-1762 (La.2/10/06), 924 So. 2d 163; State v. Morrison, 99-1342 (La. App. 3 Cir. 3/1/00), 758 So. 2d 283; State v. Whiddon, 99-1 (La.App. 3 Cir. 6/2/99), 741 So. 2d 797. In reviewing the record before us, we find that the trial court's failure to comply with La.Code Crim.P. art. 556.1(A)(1) is not harmless error. The record contains nothing that would give notice to the defendant of the specific elements of the offense for which he was charged. In fact, the only other reference in the record to the nature of the offense is found in an inadequate factual basis presented by the state to the trial court during the plea proceedings. That factual basis presented is as follows:
The State would prove, on October 29th, 2004, [the defendant] was the operator of a motor vehicle in the approximate 200 block of 16th Street, in Lafayette. Also in and around that area was a bicycle being operated by McDaniel Landry.
Mr. Ford collided with and struck the bicycle being maneuvered by Mr. McDaniel Landry. The impact caused Mr. Landry to travel across the top of the defendant Mr. Ford's vehicle. He landed face down in the roadway about 25 feet away.
*880 Mr. Ford was had been smoking marijuana and was smoking marijuana at the time of the crash. This, he admitted to Officer Chad Fontenot. Mr. Landry died as a result of the injuries that were suffered during the course of this accident.
. . . .
No question that the accident was proximately caused by the operation of that motor vehicle while he was under the influence of marijuana.
This factual basis established only that an accident involving the defendant and the victim occurred on October 29, 2004, and that the victim died as a result of the injuries he sustained therein. It is silent as to the particulars of the accident and does not impart knowledge of the elements of the offense to the defendant. That is to say, the record contains nothing to suggest who caused the accident.[1] As pointed out by the defendant on appeal, this factual basis coupled with the trial court's failure to inquire into his understanding of the nature of the charge would lead the defendant to conclude that he was guilty of vehicular homicide by having been involved in an accident which resulted in a fatality after having smoked marijuana sometime in the immediate past. Such an understanding does not address who caused the accident as is a required element of La.R.S. 14:32.1.
We find merit in this assignment of error. The noncompliance with La.Code Crim.P. art. 556.1(A)(1) requires that we vacate the defendant's conviction and sentence and remand this matter to the trial court for further proceedings.
Assignments of Error Number Three and Four
Both of these assignments of error address the sentence imposed. Because we have found merit in the defendant's second assignment of error and have vacated his conviction and sentence, we need not consider these assignments of error.
DISPOSITION
For the foregoing reasons, we vacate the defendant's conviction and sentence and remand this matter to the trial court for further proceedings.
CONVICTION AND SENTENCED VACATED, AND REMANDED.
NOTES
[1] The last comment of the state concerning causation is nothing more than an unsubstantiated conclusion if based on the factual basis presented. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594504/ | 954 So. 2d 627 (2005)
EX PARTE EDWARD CALHOUN
No. 1050111.
Supreme Court of Alabama.
December 2, 2005.
Decision without opinion. Cert. denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594537/ | 954 So.2d 1174 (2007)
ISAAC
v.
STATE
No. 5D06-3201.
District Court of Appeal of Florida, Fifth District.
April 24, 2007.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/360854/ | 586 F.2d 959
99 L.R.R.M. (BNA) 3263, 84 Lab.Cas. P 10,893
NATIONAL LABOR RELATIONS BOARD, Petitioner,v.LOCAL UNION NO. 25, INTERNATIONAL BROTHERHOOD OF ELECTRICALWORKERS, and Nassau-Suffolk Chapter of the NationalElectrical Contractors' Association, Inc., and AlcapElectrical Corporation, Respondents.
No. 45, Docket 78-4082.
United States Court of Appeals,Second Circuit.
Argued Oct. 10, 1978.Decided Nov. 3, 1978.
Marjorie S. Gofreed, Atty., N.L.R.B., Washington, D.C. (John S. Irving, Gen. Counsel, John E. Higgins, Jr., Deputy Gen. Counsel, Carl L. Taylor, Associate Gen. Counsel, and Elliott Moore, Deputy Associate Gen. Counsel, N.R.L.B., Washington, D.C., on the brief), for petitioner.
Ralph P. Katz, New York City (Delson & Gordon and Jeffrey S. Dubin, New York City, on the brief), for respondent Local Union No. 25, International Brotherhood of Electrical Workers.
Terence F. Gaffney, Garden City, N.Y., for respondents N.E.C.A. and Alcap.
Before LUMBARD, MANSFIELD and OAKES, Circuit Judges.
LUMBARD, Circuit Judge:
1
The National Labor Relations Board, pursuant to section 10(e) of the National Labor Relations Act, 29 U.S.C. § 151 et seq. (NLRA), petitions for enforcement of its supplemental order issued against respondents Local 25, the Nassau-Suffolk Chapter of the National Electrical Contractors' Association, and Alcap Electrical Corporation. The order, which invalidates part of Local 25's collective-bargaining agreement, was issued August 31, 1977 and reported at 231 NLRB No. 170.
2
The collective-bargaining agreement between Local 25 and the other respondents first received the attention of the NLRB on June 6, 1973 when one Ernesto Flores, an American citizen of Puerto Rican ancestry, filed a complaint with the NLRB alleging that the union had engaged in unfair labor practices by failing to provide him with job referrals because he was not a member of the union. Later, in an amended consolidated complaint, the NLRB alleged that the union had also failed to provide job referrals to one George Colletti because he too was not a member of the union. In a decision announced June 28, 1974, Administrative Law Judge Samuel Ross found that the union had referred union members to jobs to which Flores and Colletti had equal or superior claims, and that the union had done so not for lawful reasons, but solely in order to favor union members over non-members and to encourage union membership, thereby engaging in unfair labor practices.
3
Although this ruling disposed of the issues raised by the NLRB complaint, Judge Ross went beyond the complaint to consider the legality of Article XI of the collective-bargaining agreement, which provides that an applicant
4
who has registered for referral but who thereafter is employed in the building and construction trade in Nassau and Suffolk Counties as an electrician for an employer who does not pay the wage rates and fringe benefits contained in this Collective Bargaining Agreement, shall be ineligible for referrals . . . for a period of one year following the termination of such employment.
5
The question of Article XI's legality was not raised in the amended complaint, in the briefs, or in oral argument, and no evidence was presented concerning this issue. Judge Ross nevertheless concluded, Sua sponte, that Article XI is illegal on its face under sections 8(b)(1)(A) and (2) of the NLRA because it unlawfully encourages unionism. The NLRB contends that this court should enforce its order embodying the findings and conclusions of Judge Ross invalidating Clause XI.
6
In their original statement of exceptions to Judge Ross's decision, respondents objected to his holding with respect to Article XI not because they had been denied a fair hearing with respect to that provision, but because they believed that his decision was legally incorrect. At oral argument before this court, however, respondents for the first time argued that his decision with respect to Article XI violated the Administrative Procedure Act, 5 U.S.C. § 554, and therefore denied them due process, because that decision was rendered without informing respondents that the legality of Article IX was to be an issue in this case. Section 554 of the Administrative Procedure Act requires, in relevant part, that "persons entitled to notice of an agency hearing shall be timely informed of . . . the matters of fact and law asserted. . . . (t) he agency shall give all interested parties opportunity for . . . the submission and consideration of facts, arguments, offers of settlement, or proposals of adjustment when time, the nature of the proceeding, and the public interest permit . . . " Since the question of Article XI's legality was not raised in the amended complaint, in the briefs, or in oral argument, and no evidence was presented concerning that issue, we agree with respondents that they did not receive the notice required by the APA and that the decision of the Administrative Law Judge, as well as the order of the NLRB adopting that decision, cannot stand. See Montgomery Ward & Co. v. NLRB, 385 F.2d 760, 763 (8th Cir. 1967). See also Engineers and Fabricators, Inc. v. NLRB, 376 F.2d 482, 485 (5th Cir. 1967); NLRB v. Majestic Weaving Co., 355 F.2d 854, 861 (2d Cir. 1966).
7
Because the Administrative Procedure Act contention was not urged below, petitioner argues that section 10(e) of the NLRA prevents respondents from pressing that point here. Section 10(e) provides that "(n)o objection that has not been urged before the Board . . . shall be considered by the court, unless the failure or neglect to urge such objection shall be excused because of extraordinary circumstances." But we find petitioner's reliance on an apparent procedural defect unavailing for several reasons. First, while they have since added to the ground on which their objection rests, respondents did object to the Administrative Law Judge's holding with respect to Article XI before his decision was reviewed and adopted by the Board. Respondents have not slept on their rights and the NLRB has not been prejudiced. Second, the record discloses that on at least one occasion the Board refused to hear respondents' objections. Third, where an administrative law judge reaches a factual and legal conclusion without the benefit of the views of the parties concerned, without any evidence, and without conforming to the procedure mandated by the Administrative Procedure Act, we do not feel that a failure to object below would necessarily require that this court affirm a decision rendered under such circumstances. At oral argument before this court respondents claimed that at an evidentiary hearing they would have introduced evidence that might have influenced the Administrative Law Judge's ruling on the legality of Article XI. Fourth, the Administrative Law Judge and the NLRB may have exceeded their statutory authority in passing upon the validity of Article XI when no party to the proceeding complained of its operation or alleged harm therefrom. See NLRB v. Industrial Union, 391 U.S. 418, 424, 88 S.Ct. 1717, 20 L.Ed.2d 706 (1968). Certainly a failure to object below on the precise grounds later urged before this court does not require this court to affirm an administrative ruling suffering from as many infirmities as this one. We therefore decline to order enforcement of so much of the Board's supplementary order as deals with Article XI but express no views with respect to the legality of that Article.
8
Because the Board's order that the union maintain "permanent hiring records" relates to the Board's finding of other violations of the NLRA which respondents have not appealed from, we grant enforcement to that order but only as modified to require that records be kept for two years.
9
With respect to the Board's award of back pay, the money has already been paid and the matter is therefore moot. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1594551/ | 432 N.W.2d 50 (1988)
Ervin MUND, Jerome Voegele and Dr. Louis Tepoel, Plaintiffs and Appellees,
v.
Helen A. RAMBOUGH, Defendant and Appellant, and
The State of North Dakota and all persons unknown claiming any estate or interest in, or lien or encumbrance upon the property described in the Complaint, Defendants.
Civ. No. 880072.
Supreme Court of North Dakota.
November 10, 1988.
*51 Vogel Law Firm, Mandan, for defendant and appellant; argued by Colette N. Bruggman.
Lucas & Smith, Bismarck, for plaintiffs and appellees; argued by Sheldon A. Smith.
Thomas B. Tudor, Bank of North Dakota, Bismarck, for defendants. No appearance.
ERICKSTAD, Chief Justice.
The plaintiffs initiated this action to quiet title to real property in Burleigh County. Helen Rambough claimed an interest in the property as the previous owner. The district court granted the plaintiffs' motion for partial summary judgment and Helen appeals. We reverse in part and remand.
The land in question was purchased by Dale and Helen Rambough of Braddock, North Dakota, in 1940 at a sheriff's sale. They bought a total of 640 acres split into four parcels located in Burleigh County. They farmed the land until 1972 when it was leased to their son, Rassen Rambough, on a one-fourth to the owner, three-fourths to renter, crop share basis. Dale passed away in 1978, and Helen is now dependent on the crop share income and a social security check for her support. Helen paid the taxes on the land until the year 1980 when Rassen paid the taxes. Helen assumed Rassen would continue to pay the taxes in subsequent years while Rassen assumed his mother would pay the taxes. As a result of this misunderstanding, the taxes became delinquent in 1981.
On December 13, 1982, the Burleigh County Auditor's Office issued a county certificate of sale for taxes to Burleigh County for each of the four parcels of land, in the amount of the delinquent taxes. Unless the land was redeemed in the manner provided for by law, after three years the auditor's office would issue a deed to the county.[1]
*52 Helen did not redeem the property, and in late May of 1986, the Burleigh County Auditor's Office sent a notice of expiration of the period of redemption for each parcel of land to both Helen Rambough at Braddock, North Dakota, and to the Bank of North Dakota which was mortgagee in connection with a mortgage on the property. Helen was out of the state visiting family, and, as arranged, Rassen regularly picked up her mail at the post office. On the day the notices were received, Rassen's daughter, Audrey, appeared at the Braddock post office, and signed for the notices which had been sent by certified mail to Helen Rambough, return receipt requested. Apparently without opening the envelopes or notifying her grandmother, who is visually handicapped as a result of cataracts and deteriorating retinas, Audrey took the notices to her grandmother's home and placed them on the kitchen table along with the rest of the mail.
When no response was made to the notices of expiration of the period of redemption, the Burleigh County Auditor's Office issued tax deeds to the county on October 15, 1986. Burleigh County, at a tax sale on November 18, 1986, then sold the land, four parcels in all, in Township 137 North of Range 75 West in Burleigh County, to Ervin Mund, Jerome Voegele, and Dr. Louis TePoel (plaintiffs). The Northwest Quarter (NW¼) of Section Twenty-Five (25), on which taxes, interest, and penalties were due in the amount of $1,541.06, was sold for $4,200.00. Land described as the North Half of the Northeast Quarter (N½ NE¼), the Southeast Quarter of the Northeast Quarter (SE¼NE¼), and the Northeast Quarter of the Southeast Quarter (NE¼SE¼) of Section Twenty-Six (26), on which taxes of $1,573.97 were due, was sold for $3,100.00. The Southeast Quarter (SE¼) of Section Twenty-Five (25), on which taxes were due in the amount of $1,469.52, was sold for $4,400.00. These lands were bought by Mund and Voegele. TePoel bought the Southwest Quarter (SW¼) of Section Twenty-Five (25), on which taxes were due in the amount of $1,484.61, for $3,500.00. The total sum of the delinquent taxes, plus interest and penalties, was $6,069.16. The total purchase price for the 640 acres amounted to $15,200.00. Mund and Voegele brought this action to quiet title to the land in them and TePoel was later added as a plaintiff by stipulation. Helen answered and counter-claimed, claiming an interest in the property by virtue of the fact that she was the previous owner and had not received proper notice. The district court granted the plaintiffs' motion for partial summary judgment and Helen brought this appeal.
On appeal, Helen asserts:
The district court erred in granting plaintiffs' motion for summary judgment as there existed the following material questions of fact concerning the following:
1. Whether or not Helen Rambough received notice of the expiration of the period of redemption; and
2. Whether or not the Burleigh County Auditor's Office actually deposited in the *53 United States mail letters containing Notices of Expiration of Period of Redemption to Helen Rambough.
Additionally, Helen contends:
Sections 57-28-04 and 57-27-02 of the North Dakota Century Code do not meet the requirements of Equal Protection and Due Process as guaranteed by the State and Federal Constitutions.
Summary judgment is a procedural device available for promptly and expeditiously disposing of a controversy without a trial if there is no dispute as to either the material facts or the inferences to be drawn from the undisputed facts, or whenever only a question of law is involved. Williston Co-op. Credit Union v. Fossum, 427 N.W.2d 804, 806 (N.D.1988) (citing Umpleby By And Through Umpleby v. State, 347 N.W.2d 156 (N.D.1984)). On appeal from a summary judgment we view the evidence in the light most favorable to the party against whom the summary judgment was granted. Id.
Helen claims that there are material issues of fact as to whether or not she received proper notices from the Burleigh County Auditor's Office of the expiration of the periods of redemption. She maintains that she had no actual notice of the expiration of the period of redemption and did not realize that her land would be sold for nonpayment of taxes or that it had been sold until she was notified by a neighbor shortly after the sale. Helen did not sign the receipt required to be signed in conjunction with receipt of registered mail; it was instead signed by her granddaughter, and Helen now contends that this is one factor which caused the notice to be improper. Helen also claims that the discrepancy between the date on the affidavits of service and the dates the notices were actually mailed results in a statutory violation by the county auditor and gives rise to a question of fact as to when the notices were actually mailed.
The general rule is that in the absence of custom, express contract or statute, notice sought to be served by mail is not effective until it is received by the one sought to be served. General Factors, Inc. v. Beck, 99 Ariz. 337, 409 P.2d 40, 43 (1966); Boeck v. State Highway Commission, 36 Wis.2d 440, 153 N.W.2d 610 (1967) (in absence of statute, service of notice not effective until receipt). In North Dakota, where the county has acquired title to property after sale to it for delinquent taxes, section 57-28-04, N.D.C.C., provides for service of notice by registered or certified mail and states in relevant part:
"The county auditor shall serve the notice of the expiration of the period of redemption upon the owner of the record title of the real estate sold to the county for taxes .... Said notice shall be served by registered or certified mail, and a registry and return receipt shall be demanded and filed with proof of service."
In this state the right of redemption has been assiduously guarded. Griffeth v. Cass County, 244 N.W.2d 301, 304 (N.D.1976). Service of the notice of the expiration of the period of redemption in the form, substance and kind prescribed by statute is jurisdictional. Brink v. Curless, 209 N.W.2d 758, 767 (N.D.1973), overruled in other part by City of Bismarck v. Muhlhauser, 234 N.W.2d 1, 5 (N.D.1975). The requirements of the statute as to the service and proof of service of the notice required to terminate an owner's right to redeem from a tax sale are considered "mandatory, are construed strictly in favor of the owner and generally no presumptions with regard to proper service and return thereof will be indulged in." Wilke v. Merchants' State Bank of Richardton, 61 N.D. 351, 237 N.W. 810 at 812 (1931); 72 Am.Jur.2d § 1019.
According to the Burleigh County Auditor's Office, all notices of expiration of periods of redemption were targeted for mailing on May 30, 1986, and the affidavits of service were so dated. Some notices, including the ones sent to Helen Rambough, were apparently delivered to the post office prior to May 30, causing a discrepancy in the date on the affidavit of service and the date the notice was actually mailed. Helen asserts that this discrepancy results in an improper service of the *54 notices and is a violation of section 57-28-04, N.D.C.C., which requires proof of service. While we do not condone the practice of the Burleigh County Auditor's Office in predating affidavits of service, and thus putting the validity of such documents in question, we conclude that the discrepancies in the affidavits and actual mailing dates are not determinative of the issue here as there is no question in this case that the notices were actually and timely received at the Braddock post office. Helen does not contend that the notices were not mailed during the time period specified by statute. She merely asserts that they were not mailed on the dates the affiant claims they were mailed. This does not raise a question of material fact which precludes summary judgment.
It is the general rule that where the service of notice by mail or registered mail is expressly required or authorized by statute in tax proceedings, and the conditions precedent to mailing, such as determination of sendees, proper addressing, and timeliness have been fulfilled, the service is complete and constitutes a legal service when the notice is mailed, or registered and mailed, according to the United States postal laws and regulations, by depositing it in a place of mailing, and that actual receipt thereof is not essential. Cota v. McDermott, 73 N.D. 459, 16 N.W.2d 54 (1944); 155 A.L.R. 1279, 1283. "Where the officer charged with the duty of giving notice of expiration of the period of redemption to delinquent taxpayers follows the letter of the statute in so doing, ... the requirement as to service of notice is satisfied although the taxpayer does not receive such notice." McDonald v. Abraham, 75 N.D. 457, 28 N.W.2d 582, 585 (1947).
The record indicates that the notices were certified and deposited in the mail, delivered to the Braddock post office, correctly addressed to Helen Rambough, actually received and signed for by Helen's granddaughter and placed on Helen's kitchen table in her home with the rest of her mail.[2] Section 57-28-04, N.D.C.C., requires the county auditor to notify the landowner of the expiration of the period of redemption by means of registered or certified mail, return receipt requested. We said in Brown v. Otesa, 80 N.W.2d 92, 99 (N.D.1957), that
"[w]here the law prescribes a written notice as a method of giving information, the receipt of a letter containing the information is conclusive proof of knowledge of the purpose thereof. Whether as a matter of fact the recipient reads or takes notice of the letter makes no difference, because the notice contemplated has been given."
The Burleigh County Auditor's Office fulfilled the statutory notice requirements of section 57-28-04, N.D.C.C., when it mailed the notices, by certified mail,[3] return receipt requested, to Helen's address as found on the certificate of title filed with the Register of Deeds of Burleigh County. The fact that Helen did not actually receive the notices in her hand, or read them if she actually did see them, or have them read to her because of her visual handicap, does not cause the service by the county auditor's office to be improper.
Helen next contends that, even if service were made pursuant to section 57-28-04, N.D.C.C., the statute is unconstitutional as a violation of equal protection of the laws under Article I, Sections 21 and 22 *55 of the North Dakota Constitution[4] and Amendment Fourteen, Section 1 of the United States Constitution, and also as a violation of due process of law under Article I, Section 9 of the North Dakota Constitution[5] and Amendment Fourteen, Section 1 of the United States Constitution.
Helen claims that permitting service of notice by registered mail under section 57-28-04, N.D.C.C., while requiring personal service under section 57-27-02, N.D.C.C., results in differentiated treatment of service of the notice of expiration of the period of redemption based solely on the classification of ownership of the tax certificates. In the first instance the title has been transferred to the county, while in the second instance the title is still in the delinquent taxpayer. She contends this classification violates her right to equal protection under the law.
Every legislative enactment is presumed to be valid, and will be upheld unless it is clearly shown that the statute contravenes the State or Federal Constitution. Patch v. Sebelius, 320 N.W.2d 511 (N.D.1982). To determine the constitutionality of section 57-28-04, N.D.C.C., we must first attempt to ascertain the appropriate standard of review to determine whether or not the equal protection of the laws has been violated.
We have previously discussed the three standards of review applicable in determining equal protection issues relevant to the Federal Constitution and to our State Constitution. Nygaard v. Robinson, 341 N.W.2d 349 (N.D.1983). When a fundamental right or an inherently suspect classification is involved, courts have required strict judicial scrutiny under which a statute will be held invalid unless it is shown that the statute promotes a compelling governmental interest and the distinctions drawn by the statute are necessary to further the purpose of the statute. Nygaard, supra, 341 N.W.2d at 358. "The intermediate standard of review is usually applied when `an important substantive right' is involved." Hanson v. Williams County, 389 N.W.2d 319, 325 (N.D.1986) citing Heath v. Sears, Roebuck & Co., 123 N.H. 512, 464 A.2d 288 (1983). When the intermediate standard of review is applied, this standard requires a close correspondence between statutory classifications and legislative goals. Hanson, supra, 389 N.W.2d at 324. When statutes govern the rights of parties with respect to business and commercial affairs, courts have usually or commonly applied the rational basis test. Nygaard, supra. The burden is then on the challenger to establish "that the classification bears no reasonable relation to a conceivable legislative purpose." Id. at 359, quoting Newman Signs, Inc. v. Hjelle, 268 N.W.2d 741, 758 (N.D.1978).
Helen asserts the classification we found unconstitutional in Christman v. Emineth, 212 N.W.2d 543 (N.D.1973), is analogous to her situation. There the classification established in sections 47-10-21 and 47-10-22, N.D.C.C., distinguished transfers of coal by direct grant from transfers of coal by reservation or exception. It placed a burden upon the latter type of transfer *56 that it didn't place upon the former. We said:
"If the manner or method by which mineral rights are severed from the surface cannot be the basis of a classification for taxation purposes [referring to our holding in Northwestern Improvement Co. v. Morton County, 78 N.D. 29, 47 N.W.2d 543 (1951)], it is inconceivable that the method by which title to coal is acquired could be a basis for classification for assessment purposes or any other purpose." Christman, supra, 212 N.W.2d at 555.
"We can conceive of no reasonable basis for requiring that the nature, length, width and thickness of coal reservations be described when such a description is not required of grants of coal. It would seem that if the description was of value it would be so regardless of how title to the coal was acquired." Id. at 556.
We concluded that the classification inherent in sections 47-10-21 and 47-10-22, N.D.C.C., was unreasonable and the resulting discrimination invidious, and therefore the statutes were unconstitutional as a violation of equal protection.
If we were to apply the rational basis standard what we said in Snyder's Drug Stores, Inc. v. North Dakota State Board of Pharmacy, 219 N.W.2d 140, 148 (N.D.1974), would be pertinent:
"`It is also well established that a classification although discriminatory is not arbitrary nor violative of the Equal Protection Clause of the Fourteenth Amendment if any state of facts reasonably can be conceived that would sustain it. [Cites omitted.] Furthermore, a court need not know the special reasons, motives, or policies of a State legislature in adopting a particular classification, so long as the policy is one within the power of the legislature to pursue, and so long as the classification bears a reasonable relation to those reasons, motives, or policies.' Signal Oil and Gas Company v. Williams County, 206 N.W.2d 75 at 83 (N.D.1973)."
It is not inconceivable to us that the Legislature could have discerned a rational basis for requiring a county owning tax certificates and holding title to give notice of the expiration of the period of redemption to the landowner by one means while requiring a private person owning tax certificates to give notice by another means. Accordingly, under that scope of review, we do not find the classification to be arbitrary or unreasonable, nor do we find the discrimination from the classification to be invidious.
However, our analysis in this case cannot end with the rational basis inquiry, for it appears to us that an inference exists that the property in question concerns a homestead which,[6] in our state, involves an "important substantive right" which requires an examination of this matter under the intermediate standard of review that we have applied in Johnson v. Hassett, 217 N.W.2d 771 (N.D.1974); Arneson v. Olson, 270 N.W.2d 125 (N.D.1978); Herman v. Magnuson, 277 N.W.2d 445 (N.D.1979); and Patch v. Sebelius, supra.
Our state has long recognized the significance of a homestead as evidenced by Article XI, Section 22 of our state constitution dating back to its original adoption in 1889.[7] Except in specific cases,[8] a *57 homestead is statutorily exempt from a judgment lien, execution or forced sale.[9] In Federal Land Bank of St. Paul v. Gefroh, 418 N.W.2d 602 (N.D.1988) and Podoll v. Brady, 423 N.W.2d 151 (N.D.1988), we held that section 47-18-04, N.D.C.C., permitting the enforcement of a mortgage on a homestead, is not an unconstitutional violation of Article XI, Section 22 of the North Dakota Constitution. Unlike the issue in those two cases, the issue in this case does not arise over the voluntary encumbrancing of the homestead.[10]
Crucial as homes are to the well-being of our people, the right not to be easily deprived of a home seems obviously to rise to the level of an "important substantive right." Under these circumstances unless there is a close correspondence between the statute herein under attack and the legislative object of the statute, the statute must be stricken as unconstitutional. We have been shown no close correspondence and we can conceive of none other than expedition of the tax processes. Under these circumstances we are convinced that the rights of the homeowner must prevail over the expedition of the processes, and personal service by the sheriff must be required of the notice of the expiration of the period of redemption upon a resident of this state as is now required by section 57-27-02(2), N.D.C.C. This requirement will not unduly burden the tax processes.
Under this analysis the notice provided under section 57-28-04, N.D.C.C., is insufficient as to the homestead but sufficient as to the other real property. In effect, we hold that as to the homestead, section 57-28-04, N.D.C.C., is violative of Article I, Section 21 of the North Dakota Constitution.
In this light, the judgment must be reversed to the extent that it affects a homestead and the case must be remanded for a determination of the homestead and modification of the judgment accordingly.
To avoid the repercussions that might otherwise occur from this decision, we will apply a modification of the "Sunburst Doctrine" as we did in Kitto v. Minot Park District, 224 N.W.2d 795 (N.D.1974).[11] The rule we have laid down here shall apply to this case and to tax proceedings which occur thirty days subsequent to the date the mandate is issued in this case.
This does not yet end our review as Helen also claims that service of notice by registered or certified mail as provided for *58 in section 57-28-04, N.D.C.C., results in a denial of due process. In order to be given a meaningful opportunity to be heard, Helen contends she must receive actual notice of the expiration of the period of redemption. Helen asserts that, as section 57-27-02(2), N.D.C.C.,[12] requires personal service, its provisions are reasonably calculated to provide the notice essential to meet the requirements of due process. Therefore, all holders of tax certificates, both county and private persons, should be required to give personal notice of the expiration of the period of redemption to the landowner.
Procedural due process requires the right to notice and a meaningful opportunity for a hearing appropriate to the nature of the case. Logan v. Zimmerman Brush Co., 455 U.S. 422, 102 S.Ct. 1148, 71 L.Ed.2d 265 (1982); Powell v. Hjelle, 408 N.W.2d 737 (N.D.1987). The Legislature has determined that when title to property subject to delinquent taxes has been transferred to the county, service of notice of the expiration of the period of redemption by registered or certified mail, return receipt requested, is the means reasonably calculated to inform the landowner of the expiration of the period of redemption. The Legislature may have been influenced by the fact that further notices are required pursuant to sections 57-28-06, and 57-28-14, N.D.C.C., before the property may be sold to the public.[13] The fact that a private person owning a tax certificate must give notice by means of personal service does not make inadequate the service by registered mail when the county has acquired the title. In either case, the landowner then has an opportunity to redeem prior to the land being sold to the public at a tax sale.[14]
The Legislature has devised a scheme by which a landowner is given notice and has a meaningful opportunity to be heard prior to his property being sold at a tax sale for delinquent taxes. The fact that the Legislature does not require the county to personally serve notice, or give actual notice, to the landowner of the expiration of the period of redemption when the title has been transferred to the county does not render this statutory scheme violative of due process.
For the reasons stated herein, we reverse the judgment as it relates to the equal protection of the laws argument as it affects a homestead and remand for determination of the homestead and for modification of the judgment accordingly.
GIERKE, VANDE WALLE and MESCHKE, JJ., concur.
LEVINE, Justice, concurring and dissenting.
I concur in all of the majority opinion that supports affirming the summary judgment. I dissent from that portion which declares NDCC § 57-28-04 unconstitutional as applied to a homestead. I would affirm the judgment.
Issues concerning a homestead are ordinarily fact-dependent, unless there is no dispute over the facts or the inferences that may be drawn from those facts; see Farmers State Bank v. Slaubaugh, 366 N.W.2d 804 (N.D.1985). See also Brokken *59 v. Baumann, 10 N.D. 453, 88 N.W. 84 (1901). Here, no issue was raised that a homestead right existed. Such a claim would require supporting facts relating to the debtor's intent and conduct. See Farmers State Bank v. Slaubaugh, supra at 808.
In a summary judgment proceeding, the party against whom summary judgment is sought must raise a genuine issue of material fact to defeat the motion. Rambough did not plead homestead, did not in affidavit claim homestead and did not allude to any issue of homestead, either at the trial court level or, to my knowledge, on appeal. Consequently, there is no genuine issue or reasonable inference of material fact and summary judgment was appropriately granted by the trial court. See First National Bank & Trust Co. of Williston v. Jacobsen, 431 N.W.2d 284 (N.D.1988). I believe the majority's constitutional analysis of § 57-28-04, NDCC, as it applies to a homestead is, therefore, advisory only.
I would affirm the judgment.
NOTES
[1] Section 57-27-05, N.D.C.C., provides:
"Tax deed to be issued. At the expiration of the period of redemption, and after the filing of the proof of service of the notice of expiration of such period, the county auditor, if no redemption has been made, on surrender of the certificate of tax sale to him, shall execute to the owner of the certificate, his heirs and assigns, in the name of the state, a deed of the land remaining unredeemed, which shall vest in the said certificate owner, his heirs and assigns, an absolute estate in fee simple in such lands, subject to the claims of the state or other taxing districts on account of taxes or other liens or encumbrances, including installments of special assessments certified or to be certified to the county auditor or which may become due subsequent to the time of the service of the notice of expiration of the period of redemption. Such deed shall be executed by the county auditor under his hand and seal. Such deed shall be prima facie evidence of the truth of all facts therein recited and of the regularity of all the proceedings from the assessment and valuation of the land by the assessor up to the execution of the deed."
The period of redemption is specified in § 57-28-01, N.D.C.C., which provides:
"Notice of expiration of period of redemption to be given. On or before June first in each year, the county auditor shall give notice of the expiration of the period of redemption as to all tracts of real estate sold to the county, where three or more years have expired from the date of the original, or any subsequent, tax sale certificates issued or deemed to have been issued to the county, which have not been redeemed or assigned." [Emphasis added.]
Section 57-28-09, N.D.C.C., further provides in relevant part:
"Tax deed to be issued. After the expiration of the period of redemption, the county auditor shall issue a tax deed to the county, in the usual form, for all real estate which was not redeemed within the period of redemption."
[2] Only one case was found during our research which would support Helen's position that service of notice by registered mail, return receipt requested, is improper when the receipt is signed by another member of the family. In Fowler v. Stubbings, 203 Mich. 383, 169 N.W. 17, 18 (1918), the court found it doubtful that a notice sent by registered mail correctly addressed to William Stubbings but received by and receipted for by his son, William Stubbings, Jr., where the notice was not brought to the attention of the senior Mr. Stubbings, was prima facie evidence of service upon the proper person. We do not find this case persuasive here because of the great weight of precedent in support of the plaintiffs' position, and the antiquity of the Fowler decision with no indication of trend in the Fowler direction after 70 years.
[3] While the Affidavits of Service make reference to service by registered mail, the return receipts indicate the notices were actually sent by certified mail. (Plaintiff's Exhibits 1-4).
[4] The North Dakota Constitutional provision guaranteeing equal protection of the laws is Article I, Section 21, which reads:
"Section 21. No special privileges or immunities shall ever be granted which may not be altered, revoked or repealed by the legislative assembly; nor shall any citizen or class of citizens be granted privileges or immunities which upon the same terms shall not be granted to all citizens."
Rambough also relies on Article I, Section 22 of the North Dakota Constitution, which reads:
"Section 22. All laws of a general nature shall have a uniform operation."
[5] Article I, Section 9 of the North Dakota Constitution reads:
"Section 9. All courts shall be open, and every man for any injury done him in his lands, goods, person or reputation shall have remedy by due process of law, and right and justice administered without sale, denial or delay. Suits may be brought against the state in such manner, in such courts, and in such cases, as the legislative assembly may, by law, direct."
Rambough might also have had in mind the following part of Article I, Section 12, of the North Dakota Constitution which guarantees due process of law:
"No person shall ... be deprived of life, liberty or property without due process of law."
[6] Dale and Helen farmed the land from 1940 until 1972, although Helen now has a residence in Braddock.
[7] Article XI, Section 22 of our State Constitution reads in part:
"Section 22. The right of the debtor to enjoy the comforts and necessaries of life shall be recognized by wholesome laws, exempting from forced sale to all heads of families a homestead, the value of which shall be limited and defined by law; ..."
[8] Section 47-18-04, N.D.C.C., provides:
"When homestead subject to execution. A homestead is subject to execution or forced sale in satisfaction of judgments obtained in the following cases:
1. On debts secured by mechanics' or laborers' liens for work or labor done or performed or material furnished exclusively for the improvement of the same.
2. On debts secured by mortgage on the premises executed and acknowledged by both husband and wife, or an unmarried claimant.
3. On debts created for the purchase thereof and for all taxes accruing and levied thereon.
4. On all other debts when, upon an appraisal as provided by section 47-18-06, it appears that the value of said homestead is more than eighty thousand dollars over and above liens or encumbrances thereon, and then only to the extent of any value in excess of the sum total of such liens and encumbrances plus said eighty thousand dollars."
[9] Section 47-18-01, N.D.C.C., provides:
"Homestead exemptionArea and value. The homestead of any person, whether married or unmarried, residing in this state shall consist of the land upon which the claimant resides, and the dwelling house on that land in which the homestead claimant resides, with all its appurtenances, and all other improvements on the land, the total not to exceed eighty thousand dollars in value, over and above liens or encumbrances or both. The homestead shall be exempt from judgment lien and from execution or forced sale, except as otherwise provided in this chapter. In no case shall the homestead embrace different lots or tracts of land unless they are contiguous."
Further, section 28-22-02(7), N.D.C.C., provides:
"Absolute exemption. The property mentioned in this section is absolutely exempt from all process, levy, or sale:
* * * * * *
7. The homestead as created, defined, and limited by law."
[10] In fact, the record indicates the only lien on the entire 640 acres is a mortgage from the Bank of North Dakota alleged to be approximately $18,600.00. The record does not indicate the value of the land; however, counsel for Helen asserted that the land "if it is worth a penny, it is worth a hundred and fifty to two hundred dollars an acre." Transcript of Proceedings at 6.
[11] See Walker v. Omdahl, 242 N.W.2d 649 (N.D.1976) (explaining a modification of the "Sunburst Doctrine" named after an opinion by Justice Cardozo in Great Northern Ry. Co. v. Sunburst Oil and Refining Co., 287 U.S. 358, 53 S.Ct. 145, 77 L.Ed. 360, 85 A.L.R. 254 (1932)); 60 Harv.L.Rev. 437 (1947); 71 Yale L.J. 907 (1962).
[12] Section 57-27-02(2), N.D.C.C., provides in relevant part:
"Notice of expiration of period of redemption Contents of notice. The procedure upon presentation of a tax sale certificate shall be as follows:
"2. A notice of expiration of the period of redemption shall be delivered to the sheriff who shall serve it or cause it to be served personally upon the owner, if known to be a resident of this state, but if the owner is a nonresident of this state, the notice shall be served by registered or certified mail addressed to the owner at his last known post-office address and by publication...."
[13] Section 57-28-06, N.D.C.C., requires the county auditor to publish notice of the expiration of the period of redemption as to all tracts of real estate upon which notice was served by registered or certified mail.
Section 57-28-14, N.D.C.C., requires a notice of the annual sale of land acquired by tax deed to be posted on the front door of the courthouse and also published in the county newspaper, such notice describing all real estate to be sold, along with the minimum sale price.
[14] Section 57-27-04, N.D.C.C., provides that the time for redemption of lands from a tax sale expires ninety days after the contemplated service of the notice of expiration of the period of redemption. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594562/ | 954 So.2d 1171 (2007)
DEROSIER
v.
COOPER TIRE & RUBBER CO.
No. 4D05-4759.
District Court of Appeal of Florida, Fourth District.
May 14, 2007.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594595/ | 426 F. Supp. 127 (1976)
CARGILL, INCORPORATED, Plaintiff,
v.
The UNITED STATES, Defendant.
No. 4-74 Civ. 67.
United States District Court, D. Minnesota, Fourth Division.
November 29, 1976.
*128 Robert L. Lowe, Karlins, Grossman, Karlins, Siegel & Brill, Minneapolis, Minn., for plaintiff.
Stephen G. Palmer, Asst. U. S. Atty., District of Minnesota, Minneapolis, Minn., for defendant.
MEMORANDUM
ROSS, Circuit Judge, Sitting by Designation.
This matter comes before the court pursuant to a stipulation of facts and the submission of trial and post-trial briefs by the parties.
Cargill, a grain importer, brings this suit against the United States under the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 1346(b) and 2671 et seq., claiming that the government was negligent in handling and processing its request for certain amendments to its import permits. The plaintiff seeks damages in the amount of $112,284.41.
On January 29, 1971, Cargill wrote to the United States Department of Agriculture and requested that its "* * * import permit 41-376 * * * be revised to include importation of shelled hybrid seed corn from South Africa through the seaports of New York and New Orleans." In a letter dated February 12, 1971, the U.S.D.A. responded to the request in the following words: "Since your letter of January 29 * * * requested authorization for corn seed from South Africa through the ports of New Orleans and New York, we have today revised permit number 41-692 to include the port of New York." The revised *129 permits, which were attached to the U.S. D.A. letter, were not amended to authorize the importation of seed corn from South Africa. The U.S.D.A.'s letter failed to advise Cargill of an unwritten U.S.D.A. policy prohibiting the importation of seed corn from South Africa.[1]
Mr. Kendall Hayes, a representative of Cargill, received the letter of February 12 and attached permits. He read the letter but did not examine the permits. Relying on the communication contained in the letter, Hayes caused a shipment of seed corn consigned to Cargill to leave South Africa on February 16, 1971. The shipment arrived on March 1, 1971, at which time the United States customs officials notified Cargill that the permits it held did not allow the entry of the seed corn. On that date, Cargill requested correction of the permits to allow entry but the permits were not revised. On March 30, 1971, the U.S. D.A. issued an order for disposal of the seed corn. The seed corn was destroyed because of the possibility that the injurious plant disease sclerospora philippinesis Weston (commonly known as downy mildew disease) existed in the seed corn. Although the stipulation of facts does not so state, it may be inferred that the unwritten policy of the U.S.D.A. prohibiting the importation of seed corn from South Africa was based on the same reason.
In Count I of its complaint, Cargill alleges that a government agent negligently and carelessly failed to perform the operational task of amending the permits to authorize the entry of the seed corn into the country. In Count II, the plaintiff further alleges that it complained to the U.S.D.A. about the mistake, received assurances that corrective action would be forthcoming, but never received corrective action. Count III alleges that the government knew for several months prior to the permit application that the seed corn would be prohibited from entering the country, but negligently failed to warn the company of the prohibition.
Before this case was submitted on stipulation, the government moved to dismiss the complaint on the grounds, inter alia, that the claim was based on misrepresentation and was thus precluded under 28 U.S.C. § 2680(h). This court denied the motion stating that whether or not this action falls within the § 2680(h) exclusion could best be determined after a trial on the merits. After reviewing the stipulation of facts, the trial briefs and the relevant authorities, this court concludes that the plaintiff's complaint is barred under § 2680(h).
Section 2680(h), which precludes recovery on certain claims under the FTCA, reads as follows:
The provisions of this chapter and section 1346(b) of this title shall not apply to
* * * * * *
(h) Any claim arising out of assault, battery, false imprisonment, false arrest, malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference with contract rights * * *. (Emphasis added.)
The court must look beyond the literal language of the complaint to ascertain whether, in substance, the cause of action is one for misrepresentation. See Hall v. United States, 274 F.2d 69, 71 (10th Cir. 1959).
The leading case on what is a misrepresentation under § 2680(h) is United States v. Neustadt, 366 U.S. 696, 81 S. Ct. 1294, 6 L. Ed. 2d 614 (1961). In Neustadt, the United States was sued under the FTCA by a purchaser of real property who claimed that he had been furnished a statement reporting the results of a negligently inaccurate inspection and appraisal of the property. The inspection and appraisal were made by the Federal Housing Administration for mortgage insurance purposes. The Fourth Circuit held that the claim was not barred *130 by § 2680(h). The court of appeals reasoned that, even though the claim could be characterized as an action for misrepresentation, the misrepresentation was "merely incidental" to the gravamen of the complaint which was the negligent and careless making of an excessive appraisal. The Supreme Court reversed, holding that the misrepresentation exclusion under § 2680(h) barred recovery. The Court held that § 2680(h) applies to negligent as well as intentional misrepresentations and reasoned as follows:
To say, as the Fourth Circuit did, that a claim arises out of "negligence," rather than "misrepresentation," when the loss suffered by the injured party is caused by the breach of a "specific duty" owed by the Government to him, i.e., the duty to use due care in obtaining and communicating information upon which that party may reasonably be expected to rely in the conduct of his economic affairs, is only to state the traditional and commonly understood legal definition of the tort of "negligent misrepresentation," as is clearly, if not conclusively, shown by the authorities set forth in the margin and which there is every reason to believe Congress had in mind when it placed the word "misrepresentation" before the word "deceit" in § 2680(h).
Id. at 706-707, 81 S.Ct. at 1300-1301 (footnote omitted and emphasis added). The Court emphasized that even though FHA owed a specific duty to carefully inspect and appraise the property in question, and even though such carelessness by the government could not be condoned, the plain words of § 2680(h) precluded recovery. Id. at 710-711, 81 S. Ct. 1294.
In Anglo-American & Overseas Corp. v. United States, 242 F.2d 236, 237 (2d Cir. 1957) (per curiam), the plaintiff, a merchant engaged in the purchase and sale of imported food products, contracted with the United States to sell tomato paste which had to be ordered from overseas. As a condition precedent, the contract required that the paste meet the standards of the Food and Drug Administration. The paste was imported and, after sampling it, the FDA issued "release notices" that notified customs officials to allow the paste to enter the country. Plaintiff accepted delivery and in turn delivered the paste to the government. Subsequently, the government inspected the paste again, found that it was adulterated, and ordered it destroyed. The Second Circuit held that the plaintiff's claim, based on the allegedly negligent first inspection, arose out of misrepresentation and was barred by § 2680(h). Significantly, the Second Circuit's reasoning in Anglo-American was cited with approval by the Supreme Court in Neustadt. 366 U.S. at 704 n.13, 81 S. Ct. 1294.
In Rey v. United States, 484 F.2d 45 (5th Cir. 1973), the plaintiffs sued the United States for damages flowing from the deaths of several hundred hogs. A government doctor told the plaintiffs that their hogs were infected with cholera and should be vaccinated. The hogs were given a highly dangerous live virus vaccine to combat hog cholera and several hundred died. The doctor's diagnosis was wrong and there was no reason to vaccinate the hogs. The plaintiffs sued alleging negligence in both the diagnosis of the disease and the testing of the hogs. The Fifth Circuit held that the claim was based on misrepresentation and therefore barred by § 2680(h). The court reasoned:
Whatever the additional allegations of negligence in the defendant United States' operations, the negligently erroneous transmission of misinformation is the crucial element in the chain of causation from defendant's negligence to plaintiffs' damages. It is the key fact to be established, the sine qua non, of the theory of the amended complaint.
Id. at 49; see also Saxton v. United States, 456 F.2d 1105, 1106 (8th Cir. 1972). The court relied heavily on Hall v. United States, supra, 274 F.2d 69, in which an identical claim of a cattleman was also barred under § 2680(h). Hall was also cited with approval in Neustadt v. United States, supra, 366 U.S. at 703, 81 S. Ct. 1294.
*131 In Marival, Inc. v. Planes, Inc., 306 F. Supp. 855 (N.D.Ga.1969), the defendant, an airplane dealer, filed a third party complaint against the United States alleging that it suffered liability to an airplane purchaser by reason of an allegedly negligent inspection of the aircraft and certification of its airworthiness by the Federal Aviation Agency. The court dismissed the third party complaint reasoning as follows:
In the instant action, the third-party plaintiff does not complain of a direct injury to person or property as a result of the alleged negligent inspection by the FAA mechanic. Rather, Planes, Inc. contends that its statements to the plaintiff concerning the condition of the aircraft were made in reliance upon the certification of airworthiness made by the FAA inspector. The negligence of the inspection is purely secondary, for it is the misrepresentation of the aircraft's condition upon which defendants relied in their commercial transaction with the plaintiff.
Id. at 859.
In O'Donnell v. United States, 166 Ct. Cl. 107 (1964), a congressional reference case, plaintiffs sued the United States on an alleged misrepresentation by a government agent that certain potato shipments would meet the import requirements of Sweden. The Court of Claims noted that even if a government employee negligently misrepresented the import requirements of Sweden, no legal liability would exist against the United States under § 2680(h). Id. at 109.
These authorities, and others,[2] strongly support the government's position that the plaintiff's cause of action is for misrepresentation and is therefore barred under § 2680(h). Stripped to its essentials, Count I of Cargill's complaint is that the U.S.D.A.'s letter of February 12 led the company to believe that its import permits would be or had been amended to allow entry of the South African seed corn into the country. As in the cases cited above, the misinformation contained in the February 12 letter is the crucial element in the chain of causation between any negligence on the part of the United States and the plaintiff's damages; the misinformation is the sine qua non of the plaintiff's complaint.[3] Count II of the complaint, which is based on false assurances of corrective action on the part of the U.S.D.A., is also based on misrepresentation. Count III is based on the government's failure to warn the company of the seed corn prohibition and is likewise based on misrepresentation.
Cargill strongly argues that the damages resulted from the failure of the U.S.D.A. to perform the operational task of revising the permits to allow entry of the South African seed corn. Cargill cites a line of authority which holds:
Where the gravamen of the complaint is the negligent performance of operational tasks, rather than misrepresentation, the government may not rely upon § 2680(h) to absolve itself of liability.
Ingham v. Eastern Airlines, Inc., 373 F.2d 227, 239 (2d Cir.), cert. denied, 389 U.S. 931, 88 S. Ct. 295, 19 L. Ed. 2d 292 (1967) (emphasis added); see also Hicks v. United States, 167 U.S.App.D.C. 169, 511 F.2d 407, 414 *132 (1975); United Air Lines, Inc. v. Wiener, 335 F.2d 379, 398 (9th Cir.), cert. dismissed, 379 U.S. 951, 85 S. Ct. 452, 13 L. Ed. 2d 549 (1964); cf. Indian Towing Co. v. United States, 350 U.S. 61, 64, 69, 76 S. Ct. 122, 100 L. Ed. 48 (1955).[4]
The court rejects this argument. It was the failure of the U.S.D.A. to cite its unwritten seed corn prohibition in the February 12 letter, its misrepresentation respecting the importability of South African seed corn and the indication in the letter that the permits had been amended, upon which Cargill relied in shipping the seed corn from South Africa. It is undisputed that Cargill's representative, Hayes, relied only on the February 12 letter; he did not read the attached permits. Thus, it is the failure of the U.S.D.A. "* * * to use due care in obtaining and communicating information upon which [Cargill] may reasonably be expected to rely in the conduct of [its] economic affairs * * *" about which the company is complaining. United States v. Neustadt, supra, 366 U.S. at 706, 81 S.Ct. at 1300; cf. Marival, Inc. v. Planes, Inc., supra, 306 F.Supp. at 859; Anglo-American & Overseas Corp. v. United States, supra, 242 F.2d at 237.
The complaint is not actionable under the FTCA and is, therefore, dismissed.[5]
NOTES
[1] The parties stipulated that the seed corn prohibition was not set forth in any ruling or regulation of the U.S.D.A. At all material times, the importation of South African seed corn was not prohibited by any statute or regulation governing such importations.
[2] The reasoning of Neustadt has been applied in a myriad of other contexts. See, e.g., Scanwell Laboratories, Inc. v. Thomas, 172 U.S.App. D.C. 281, 521 F.2d 941, 947 (1975), cert. denied, 425 U.S. 910, 96 S. Ct. 1507, 47 L. Ed. 2d 761 (1976) (FAA misrepresented that it would accept the most competitive bid on defense contract); Redmond v. SEC, 518 F.2d 811, 814-815 (7th Cir. 1975) (misrepresentation by government respecting honesty of a securities dealer); Fitch v. United States, 513 F.2d 1013, 1016 (6th Cir.), cert. denied, 423 U.S. 866, 96 S. Ct. 127, 46 L. Ed. 2d 95 (1975) (wrongful misrepresentation of obligation to enter armed forces); Reamer v. United States, 459 F.2d 709, 711 (4th Cir. 1972) (government misrepresentation as to time of induction); Nat'l Mfg. Co. v. United States, 210 F.2d 263, 275-276 (8th Cir.), cert. denied, 347 U.S. 967, 74 S. Ct. 778, 98 L. Ed. 1108 (1954) (misrepresentation of weather and flood information); Jones v. United States, 207 F.2d 563, 564 (2d Cir. 1953), cert. denied, 347 U.S. 921, 74 S. Ct. 518, 98 L. Ed. 1075 (1954) (misrepresentation by government of amount of oil on land, resulting in sale of stock at loss).
[3] Another causative link may be characterized as the U.S.D.A.'s failure to inform Cargill in the February 12 letter of the unwritten prohibition respecting the South African seed corn.
[4] The cases cited by Cargill involve familiar forms of negligent operational conduct and have been distinguished from misrepresentation cases such as this which involve "* * * the invasion of interests of a financial or commercial character, in the course of business dealings." United States v. Neustadt, 366 U.S. 696, 711 n.26, 81 S. Ct. 1294, 1303 n.26, 6 L. Ed. 2d 614 (1966), quoting Prosser, Torts, § 85 at 702-703 (1941 ed.).
[5] The above and foregoing memorandum, together with the stipulation of facts contained therein, constitute the court's findings of fact and conclusions of law as required by Rule 52, Federal Rules of Civil Procedure. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594606/ | 432 N.W.2d 211 (1988)
230 Neb. 397
J.Q. OFFICE EQUIPMENT OF OMAHA, INC., a Nebraska Corporation, Appellee and Cross-Appellant,
v.
Mort D. SULLIVAN and Mort Associates, Ltd., Appellants and Cross-Appellees.
No. 86-1068.
Supreme Court of Nebraska.
November 23, 1988.
*212 Dennis L. Wills, Omaha, for appellants and cross-appellees.
Paul R. Stultz, of Martin & Martin, Omaha, for appellee and cross-appellant.
HASTINGS, C.J., BOSLAUGH, WHITE, CAPORALE, SHANAHAN and GRANT, JJ., and COLWELL, District Judge, Retired.
WHITE, Justice.
Appellants, Mort D. Sullivan and Mort Associates, Ltd., appeal from a Douglas County District Court order enjoining them from issuing any telephone or telecommunications messages or any unsolicited communications concerning the appellee, J.Q. Office Equipment of Omaha, Inc. The appellee cross-appeals the district court's award of $456.54 in damages for services rendered by appellee to appellant Mort Associates.
In December of 1984, Mort Associates purchased a Ricoh photocopying machine from appellee, which at that time was the authorized dealer for Ricoh in Omaha. The purchase included a 90-day warranty for parts and labor. Between January 23 and August 1, 1985, Sullivan, president and sole shareholder of Mort Associates, experienced numerous difficulties with the copier and requested appellee to service the machine.
The record shows that appellee provided Mort Associates with paper products, which were not included under the warranty, and made several service calls after the warranty period had expired. Invoices for these items, which were never paid for by Mort Associates, totaled $865.42.
On August 1, 1985, appellee's service technician informed Sullivan that a drum located in the interior of the copier was damaged and replacement was necessary. Sullivan, believing that the damage to the drum was caused by a service technician on a prior visit, requested that it be replaced at the expense of the appellee. When appellee refused to replace the drum at its expense, Sullivan told appellee that he had access to automatic telephone dialing machines and that he would use the machines to make public his belief concerning the damage to the copier. The evidence shows that the dialing machines had the capability of making 6,000 calls a day, though the record is not specific on how many calls the machines actually made when Sullivan turned them on.
Colin Hurley, a 16-year-old area resident and the recipient of a phone call from an automatic dialing machine, testified that the machine played the following message: "I am Mort Sullivan and I am a businessman. I just recently purchased a Ricoh copier from Joe Quirk [of J.Q. Office Equipment]. This machine broke down. I think they are the worst copiers, repeat, the worst copiers and I advise you not to purchase one." The record also reflects that Sullivan had used similar methods to induce settlement of disputes with a Ford dealership and a John Deere tractor dealership.
In September of 1985, appellee learned that Sullivan had made plans to attend an *213 exhibitors' show for office equipment in Omaha and publicize his dispute with the appellee. Sullivan's plan was to "congest the area" around appellee's booth with 15 friends equipped with bullhorns that also played the "Go Big Red" theme, and to have them broadcast a message that Ricoh copiers were bad machines and not to buy them from J.Q. Office Equipment. Appellee then filed suit in the district court requesting an injunction be issued against appellants and praying for $865.42 in damages for services rendered. The court, without citing any reason, awarded $456.54 in damages. The court also issued an injunction enjoining appellants from "instigating, promoting, or in any manner issuing derogatory messages concerning the plaintiff or plaintiff's merchandise by any other automatic device, or by bullhorn, or any other loud or disruptive device."
Appellants assign two errors. First, the issuance of the injunction by the district court was an unconstitutional prior restraint of the appellants' right of freedom of speech guaranteed by the first amendment to the U.S. Constitution and by art. I, § 5, of the Nebraska Constitution. Second, the appellee failed to establish at trial that it had no adequate remedy at law. We vacate the district court's injunction on constitutional grounds and therefore do not address the appellants' second assignment of error. We also note that neither party raises the possible applicability of Neb.Rev. Stat. §§ 87-307 to 87-311 (Reissue 1987), regulating automatic dialing machines, and therefore limit our discussion to constitutional issues.
A prior restraint is not per se unconstitutional, but there is a "heavy presumption" against its constitutional validity. Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 95 S. Ct. 1239, 43 L. Ed. 2d 448 (1975); Organization for a Better Austin v. Keefe, 402 U.S. 415, 91 S. Ct. 1575, 29 L. Ed. 2d 1 (1971). The U.S. Supreme Court has not set out a test to determine the validity of prior restraints. Rather, to be lawful a prior restraint must fit within one of the narrowly defined exceptions to the prohibition against prior restraints. Southeastern Promotions, Ltd. v. Conrad, supra. Those exceptions include speech or activity not protected under the first amendment and expressions that would impact "military security" such that disclosure would "`surely result in direct, immediate, and irreparable damage to our Nation or its people'" or "`inevitably, directly, and immediately cause the occurrence of an event kindred to imperiling the safety of a transport already at sea...'." (Emphasis omitted.) Nebraska Press Assn. v. Stuart, 427 U.S. 539, 593, 96 S. Ct. 2791, 2819, 49 L. Ed. 2d 683 (1976) (Brennan, J., concurring).
Other exceptions recognized by the courts are that the restraint is reasonably incidental to the achievement of another valid governmental purpose and that the activity restrained poses a serious and imminent threat to some protected competing public interest or will irreparably damage a private interest. Rodgers v. United States Steel Corp., 536 F.2d 1001 (3d Cir.1976); CBS Inc. v. Young, 522 F.2d 234 (6th Cir. 1975); K.D. v. Educational Testing Service, 87 Misc. 2d 657, 386 N.Y.S.2d 747 (1976). Justice Brennan further noted that as a matter of procedural safeguards and burden of proof, prior restraints, even within a recognized exception to the rule against prior restraints, will be extremely difficult to justify. Nebraska Press Assn. v. Stuart, supra.
In the case at bar there is no evidence in the record establishing the existence of a recognized exception. However, appellee, in its brief, argues that the speech enjoined was "commercial speech" and therefore not subject to the full protection of the first amendment and the narrow rules relating to prior restraints and the attendant exceptions. Appellee is correct in that content-based restrictions on commercial speech are permissible, Posadas de Puerto Rico Assoc. v. Tourism Co., 478 U.S. 328, 106 S. Ct. 2968, 92 L. Ed. 2d 266 (1986), and Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 103 S. Ct. 2875, 77 L. Ed. 2d 469 (1983), but here the speech enjoined is not commercial speech. The U.S. Supreme Court has defined commercial *214 speech as expression which is related solely to the economic interests of the speaker and the audience or speech which does no more than propose a commercial transaction. Posadas de Puerto Rico Assoc. v. Tourism Co., supra; Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n, 447 U.S. 557, 100 S. Ct. 2343, 65 L. Ed. 2d 341 (1980).
Sullivan's message is not a solicitation for the sale or purchase of a product or service, nor is the message a mere advertisement, since it is not being published for profit. See Matter of Nat. Service Corp., 742 F.2d 859 (5th Cir.1984). Sullivan's message is not related to a commercial transaction, but is the communication of an opinion or the propagation of a view, i.e., "I think they are ... the worst copiers and I advise you not to purchase one," and therefore falls under the full protection of the first amendment and the prohibition against prior restraints. State v. Monastero, 228 Neb. 818, 424 N.W.2d 837 (1988).
Finally, appellee argues that Sullivan's speech is "designed to coerce and blackmail appellee" into settlement of the dispute and is therefore not protected under the Constitution. Brief for appellee at 11. Protection of coercive speech under the first amendment has been addressed by the U.S. Supreme Court. In Organization for a Better Austin v. Keefe, 402 U.S. 415, 91 S. Ct. 1575, 29 L. Ed. 2d 1 (1971), respondent, a real estate broker, tried to enjoin the petitioners from distributing leaflets critical of respondent's real estate practices. For example, some leaflets contained alleged quotes by the respondent such as "I only sell to Negroes." 402 U.S. at 417, 91 S.Ct. at 1576. Other leaflets contained respondent's home phone number and urged recipients to call respondent and demand he sign an agreement not to solicit property by phone, flyer, or visit in the community. The Court stated:
The claim that the expressions were intended to exercise a coercive impact on respondent does not remove them from the reach of the First Amendment. Petitioners plainly intended to influence respondent's conduct by their activities; this is not fundamentally different from the function of a newspaper. [Citations omitted.] Petitioners were engaged openly and vigorously in making the public aware of respondent's real estate practices. Those practices were offensive to them, as the views and practices of petitioners are no doubt offensive to others. But so long as the means are peaceful, the communication need not meet standards of acceptability.
... No prior decisions support the claim that the interest of an individual in being free from public criticism of his business practices ... warrants use of the injunctive power of a court.
402 U.S. at 419, 91 S.Ct. at 1577. Accordingly, the injunction issued by the Douglas County District Court is vacated.
Addressing appellee's cross-appeal for damages, we note that even though there was no contract, appellee is entitled to receive reasonable market value for goods and services provided to appellants. Senften v. Church of the Nazarene, 214 Neb. 708, 335 N.W.2d 753 (1983). At trial appellee put on testimony and introduced evidence showing that appellant Mort Associates owed appellee $865.42 for goods and services provided which were not covered by warranty. Appellants offered no evidence at all with respect to the amount of money due. The court, in awarding appellee only $456.54, did not explain why appellee's claim was not allowed in full. We believe the district court's determination is incorrect based on the evidence in the record, and therefore modify the court's award to $865.42.
AFFIRMED IN PART AS MODIFIED, AND IN PART REVERSED.
BOSLAUGH, Justice, concurring.
I concur in the judgment of the court but on a different ground.
Injunction is an extraordinary remedy available in the absence of an adequate remedy at law and where there is a real and imminent danger of irreparable injury. Grein v. Board of Education, 216 Neb. 158, 343 N.W.2d 718 (1984).
*215 The purpose of an injunction is preventive, protective, and prohibitory. It will not issue against discontinued acts unless there are probable grounds to believe there will be a resumption of the activity to be enjoined. Johnson v. NM Farms Bartlett, 226 Neb. 680, 414 N.W.2d 256 (1987).
The motivation for the defendant's threatened activities, some of which were carried out, was to force a settlement of a claim he or his corporation had relating to an alleged defective copying machine that had been purchased from the plaintiff. After the action had been commenced, but before the trial on the merits in the district court, the defendant completed a settlement with the manufacturer of the copying machine.
The evidence shows that all of the threats and telephone calls which the defendant made were made before the settlement took place. As I view the record, it fails to show probable grounds to believe that the defendant will resume the activities which the plaintiff sought to enjoin. As in Stuthman v. Lippert, 205 Neb. 302, 287 N.W.2d 80 (1980), the alleged activities have ceased and are not likely to be resumed. For that reason, that part of the judgment of the district court granting the injunction should be reversed.
HASTINGS, C.J., and GRANT, J., join in this concurrence. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594958/ | 172 Mich. App. 421 (1988)
432 N.W.2d 324
KILBRIDE
v.
KILBRIDE
Docket No. 95295.
Michigan Court of Appeals.
Decided October 18, 1988.
Carole L. Chiamp, for plaintiff.
Ronald Zajac, for defendant.
Before: GILLIS, P.J., and GRIBBS and SAWYER, JJ.
PER CURIAM.
Defendant appeals as of right from the trial court's judgment of divorce awarding plaintiff partial attorney fees, alimony, and one-half of defendant's pension. We affirm in part and reverse in part.
The parties married on June 5, 1958, and separated on September 3, 1984. The parties had four children, all of whom had reached the age of majority prior to the entry of the judgment of divorce.
Defendant was born on November 10, 1935. Before the marriage, defendant earned his bachelor of science degree in mechanical engineering at the University of Notre Dame. Defendant began working for Ford Motor Company in 1958. He earned his master of business administration degree from the University of Detroit (U of D) in 1963. Defendant earns in excess of $60,000 per year, including his bonus. Defendant also receives other fringe benefits, including medical insurance, life insurance, and a pension and participates in various stock purchase programs.
*425 Plaintiff was born on March 11, 1936. Before the marriage, she earned a degree in education from U of D. Plaintiff also received a fellowship to pursue her master's degree; however, the parties decided that plaintiff should give up the fellowship because it did not pay a salary. Plaintiff then accepted a position with the Detroit School District. Plaintiff gave up her position shortly after the marriage because she became pregnant.
In 1970, plaintiff began working as a teacher's aide in the Ferndale adult education program. Plaintiff earned $4 per hour. The next year, plaintiff actually taught the class and earned $8 per hour. Thereafter, plaintiff claims that she was offered a full-time teaching position; however, she did not accept that position because defendant allegedly objected. Had plaintiff accepted the position, she might now be earning $39,000 per year as a tenured teacher. In 1977, however, plaintiff began working at U of D because the parties needed money for their children's educations. Plaintiff earned $9,000 per year and received free tuition for herself and one of the parties' children. Plaintiff earned her master's degree in remedial reading. When plaintiff left her position in 1985, she was earning $10,000 per year. Plaintiff left her position on May 1, 1985, to join a business venture. Plaintiff was to earn $20,000 per year for teaching English to foreign businessmen. Plaintiff left this job after ten months when it appeared that no one was interested in the service to be offered.
Defendant testified that plaintiff drank heavily; however, he conceded that her problem has subsided since she began taking Antabuse in 1982. In 1981, the parties began having problems with their youngest child, Sheila, who was born on April 3, 1967. Plaintiff sought counseling with *426 Maria Brane, a psychologist. Although plaintiff first consulted with Brane regarding her daughter, she later sought counseling for herself. Ultimately, it was determined that plaintiff suffered from depression. In fact, plaintiff's depression was so severe that she was hospitalized in September, 1984, for five weeks and, again, in April, 1986, for three weeks. Plaintiff currently uses medication to control her depression and takes Antabuse.
Since she left her last position, plaintiff has applied for substitute teaching positions in three school districts; however, when asked to work by one of those districts, plaintiff became so nervous and depressed that she became ill and could not work. When plaintiff was called again, she did not report because there was a show cause hearing involving the present divorce case on that same day. A substitute teacher makes $45 per day.
After plaintiff's April hospitalization, she was offered the chance to interview for the position of a remedial reading instructor. Plaintiff did not interview because her psychologist and Dr. Rhona B. Ahmad, a psychiatrist who treated plaintiff during her April hospitalization, felt that her depression was too severe and that, if she failed to obtain the job, she would become more depressed.
Plaintiff intended to continue her search for teaching employment or to seek other nonstressful work. Brane testified that plaintiff's prognosis is guarded and that she is limited in her ability to work because she might require extensive absences due to her hospitalizations and lack of energy because of her depression. Brane believed that plaintiff's depression was in part biological.
Dr. Paul Guerrero, who worked with Brane, testified that plaintiff's prognosis was fair to good with treatment. He did not believe that plaintiff could handle a job unless it was nonstressful. *427 Guerrero suggested that plaintiff do volunteer work instead.
Ahmad also testified that plaintiff's prognosis was fair with continued treatment and that plaintiff would be employable with continued treatment. Ahmad believed that employment for plaintiff would be therapeutic, but Ahmad recognized that if plaintiff became severely depressed, she would require acute treatment either at her home or in the hospital.
The parties began to have marital problems shortly after the birth of their first child. They sought counseling for a time, but soon stopped. Plaintiff sought the divorce because defendant allegedly objected to her attempts to pursue activities outside the home throughout the marriage and because she could no longer tolerate defendant's allegedly domineering attitude.
Plaintiff testified that her attorney charged $100 per hour. Plaintiff paid her attorney fees until February, 1986. Plaintiff estimated that she owed between $4,000 and $5,000 in attorney fees. Plaintiff's two older children had offered to help pay these fees. Plaintiff did not want to ask these children to help pay her attorney fees because they were already helping to pay her living expenses. Plaintiff's mother was also sending her money. Plaintiff had been receiving $125 per week in temporary alimony.
After hearing the testimony, the trial court awarded plaintiff $3,000 in attorney fees as well as $500 per week alimony until further order of the court. The alimony award was made on the basis of testimony by plaintiff's experts that plaintiff would have difficulty finding and maintaining employment because of her depression. Plaintiff also received one-half the proceeds from the sale of the marital home, a $3,000 bank account, an automobile, *428 a $3,000 Individual Retirement Account, one-half of the value of the parties' life insurance policies and stocks. Defendant received essentially equivalent assets. Defendant estimates the value of these assets to be approximately $95,000. The trial court also ordered defendant's pension divided under a formula suggested by plaintiff.
Defendant first claims that the trial court abused its discretion when it ordered him to pay $3,000 of plaintiff's attorney fees. An award of attorney fees in a divorce case is within the discretion of the trial court; however, attorney fees should be awarded only if necessary to enable a party to carry on or defend the litigation. MCL 552.12; MSA 25.93 and MCR 3.206(A). See also Ozdaglar v Ozdaglar, 126 Mich. App. 468, 472-473; 337 NW2d 361 (1983). Defendant argues that, because plaintiff received substantial assets in the property settlement and alimony awards, she was not entitled to attorney fees. We disagree and find no abuse of discretion under these facts. See and compare Atkinson v Atkinson, 160 Mich. App. 601, 612; 408 NW2d 516 (1987), lv den 429 Mich. 884 (1987); Rapaport v Rapaport, 158 Mich. App. 741, 751-752; 405 NW2d 165 (1987), modified on other grounds 429 Mich. 876 (1987); Rethman v Rethman, 156 Mich. App. 74; 401 NW2d 314 (1986), vacated in part on other grounds 429 Mich. 868 (1987); Bone v Bone, 148 Mich. App. 834, 840; 385 NW2d 706 (1986); Fulton v Fulton, 143 Mich. App. 187, 192-193; 371 NW2d 522 (1985); Carlson v Carlson, 139 Mich. App. 299, 305; 362 NW2d 258 (1984); Ozdaglar, supra at 472-473; Vaclav v Vaclav, 96 Mich. App. 584, 593; 293 NW2d 613 (1980); Radway v Radway, 81 Mich. App. 328, 333; 265 NW2d 202 (1978); Abadi v Abadi, 78 Mich. App. 73, 79-80; 259 NW2d 244 (1977), lv den 402 Mich. 870 (1978); Gove v Gove, 71 Mich. App. 431, 434-436; *429 248 NW2d 573 (1976); Mixon v Mixon, 51 Mich. App. 696, 702-703; 216 NW2d 625 (1974); Pinney v Pinney, 47 Mich. App. 290; 209 NW2d 467 (1973), lv den 391 Mich. 767 (1974); Schaffer v Schaffer, 37 Mich. App. 711, 715; 195 NW2d 326 (1972).
Defendant next claims that the trial court abused its discretion when it awarded plaintiff $500 per week in alimony because it failed to: (1) consider his ability to pay that amount, (2) consider defendant's "obligation" to pay for Sheila's college education in light of plaintiff's testimony that she had told Sheila that there would be sufficient money in the parties' assets for Sheila to attend school, and (3) restrict defendant's payment of alimony to a certain time in the future to motivate plaintiff to seek employment.
An award of alimony is within the discretion of the trial court. Cloyd v Cloyd, 165 Mich. App. 755, 759; 419 NW2d 455 (1988). This Court reviews such an award de novo and exercises its independent judgment in reviewing the evidence, but gives grave consideration to the trial court's findings and will not reverse unless convinced it would have come to a different conclusion had it been sitting in the trial court's position. Id. Factors to be considered in determining whether alimony should be awarded in a judgment of divorce include: (1) the past relations and conduct of the parties, (2) the length of the marriage, (3) the ability of the parties to work, (4) the source and amount of property awarded to the parties, (5) the age of the parties, (6) the ability of the parties to pay alimony, (7) the present situation of the parties, (8) the needs of the parties, (9) the health of the parties, (10) the prior standard of living of the parties and whether either is responsible for the support of others, and (11) general principles of equity. Id.
*430 We reject defendant's claim that the trial court failed to consider his ability to pay in awarding plaintiff alimony. Reviewing the trial court's opinion, we believe that the trial court did consider defendant's ability to pay. On these facts, an alimony award of $500 per week was not an abuse of discretion. Compare Giesen v Giesen, 140 Mich. App. 335; 364 NW2d 327 (1985), with Fulton, supra.
Although defendant concedes that the trial court could not have ordered either of the parties, absent a consent judgment, to pay child support to be used for Sheila's college education because she was over the age of majority, Felcoski v Felcoski, 159 Mich. App. 762; 407 NW2d 11 (1987); Kalter v Kalter, 155 Mich. App. 99, 105; 399 NW2d 455 (1986), lv den 428 Mich. 862 (1987), reconsideration den 428 Mich. 904 (1987); Arndt v Kasem, 135 Mich. App. 252, 258-259; 353 NW2d 497 (1984), he claims that plaintiff's testimony confirms that she told Sheila that her college education would be paid out of the parties' assets. Therefore, defendant contends that he is merely fulfilling a contractual and moral obligation on the part of the plaintiff by providing such support and that the trial court should have considered his support of Sheila in setting alimony. Defendant relies on Parrish v Parrish, 138 Mich. App. 546; 361 NW2d 366 (1984).
MCL 552.23(1); MSA 25.103(1) provides:
Upon entry of a judgment of divorce or separate maintenance, if the estate and effects awarded to either party are insufficient for the suitable support and maintenance of either party and any children of the marriage as are committed to the care and custody of either party, the court may further award to either party the part of the real and personal estate of either party and alimony out of the estate real and personal, to be paid to *431 either party in gross or otherwise as the court considers just and reasonable, after considering the ability of either party to pay and the character and situation of the parties, and all other circumstances of the case.
In Parrish, the parties had a child who was eighteen years old and suffered from cerebral palsy. The trial court awarded the plaintiff mother $25 per week as alimony as long as the child was alive and in the plaintiff's care, custody, and control and the plaintiff assumed the child's expenses. While this Court held that the trial court could not order the defendant father to pay child support for a child beyond the age of eighteen unless the court had previously obtained jurisdiction over the child while that child was a minor, this Court also held that the trial court did not err when it considered the plaintiff's assumed responsibility for her handicapped daughter's support in determining the alimony award. Id. This Court noted that the trial court was not precluded from considering the plaintiff's voluntary assumption of her handicapped daughter's support, even though there was no legal obligation for the plaintiff to do so. This Court also noted that in the predecessor to MCL 522.23; MSA 25.103, the Legislature had not used the term "minor children" as it had in the child support statute and, therefore, the alimony statute was not so limited. Id.
We believe that Parrish is distinguishable. We do not believe that Sheila was committed to the care and custody of either party, as was the child in Parrish, or that either party was "responsible" for her support. Consequently, the trial court did not err when it failed to consider defendant's voluntary assumption of this obligation in determining the amount of plaintiff's alimony and, *432 instead, held that the parties could independently agree to share Sheila's college expenses. Fulton, supra at 191.
Moreover, the trial court did not abuse its discretion when it provided that defendant pay alimony until further order of the court. We note that defendant could move to modify the alimony award upon new facts or changed circumstances arising since the judgment which would justify revision. MCL 552.28; MSA 25.106. See also Eckhardt v Eckhardt, 155 Mich. App. 314, 316-317; 399 NW2d 68 (1986).
Defendant also claims that he will be unable to exercise his ability to move for modification because he will be unable to discover plaintiff's condition given the physician-patient privilege, MCL 600.2157; MSA 27A.2157, and the psychologist-patient privilege, MCL 333.18237; MSA 14.15(18237). Thus far, plaintiff has waived these privileges and has not indicated an intent to invoke them. If problems arise in the future, defendant may certainly bring them to the trial court's attention.
Finally, defendant claims that the trial court violated MCL 552.18(1); MSA 25.98(1) when it awarded plaintiff pension benefits pursuant to the following formula: the percentage of the pension awarded to plaintiff by the trial court multiplied by a fraction, the numerator of which was the total period of time defendant was a participant in the plan while married and the denominator of which was the total period of participation in the pension plan by defendant at his date of retirement or the date upon which he could begin to receive benefits, at plaintiff's option, multiplied by defendant's monthly pension benefits on the date which plaintiff elects to receive benefits. For example, if defendant retired at age fifty-five after *433 thirty years of service and the parties had been married for twenty-eight of those thirty years and the trial court awarded plaintiff one-half of a monthly pension benefit of approximately $1,800, plaintiff would receive 1/2 x 28/30 x 1800 = $840.
John Bremer, defendant's expert, testified that the present value of defendant's pension was $77,335 if defendant retired at age sixty-two, but $54,447 if he retired at sixty-five. Charles Monroe, plaintiff's expert, testified that defendant's pension had a present value of $84,300 if he retired at age sixty-two. Monroe also testified that defendant's pension had several present values, which depended upon the date defendant retired. The earlier defendant's retirement date, the larger the present value of the pension.
Marvin Dery, the records supervisor of Ford Motor Company's pension department as well as its pension plan administrator, testified that if defendant terminated his employment on December 31, 1985, he would be entitled to receive a pension of $1,829.51 at age sixty-five. If defendant retired at age fifty-two, he would receive either $1,122 each month with survivorship benefits or $1,156 each month without survivorship benefits. In addition, defendant would receive $710 per month supplemental allowance until age sixty-two; at that time, defendant's minimum life income benefit, which had been reduced, returned to its original level. Dery further testified that defendant's pension benefits would increase if he continued to work; however, they would decrease if he retired earlier.
MCL 552.18(1); MSA 25.98(1) provides:
Any rights in and to vested pension, annuity, or retirement benefits, or accumulated contributions in any pension, annuity, or retirement system, *434 payable to or on behalf of a party on account of service credit accrued by the party during marriage shall be considered part of the marital estate subject to award by the court under this chapter. [Emphasis supplied.]
MCL 552.101(4); MSA 25.131(4) provides:
Each judgment of divorce or judgment of separate maintenance shall determine all rights of the husband and wife in and to all of the following:
(a) Any pension, annuity, or retirement benefits.
(b) Any accumulated contributions in any pension, annuity, or retirement system.
(c) Any right or contingent right in and to unvested pension, annuity, or retirement benefits.
Defendant argues that by using the formula suggested by plaintiff the trial court allowed her to continue to accrue retirement benefits in direct proportion to his postmarriage contributions, salary increases, future years of service, and any revised methods of determining defendant's average compensation for pension purposes. Defendant claims that plaintiff is entitled to receive one-half of the accrued monthly benefit to which he was entitled on the date of divorce.
Plaintiff, on the other hand, claims that MCL 552.18(1); MSA 25.98(1) was not intended to limit the discretion of the trial court in dividing a pension which is a marital asset. Plaintiff notes that MCL 552.18(1); MSA 25.98(1) was enacted in conjunction with MCL 28.110(2), 38.40(2), 38.559(7), 38.826(2), 38.927(2), 38.1057(2), 38.1346(4), 38.1553(2) and 552.101(4); MSA 3.340(2), 3.981(40)(2), 5.3375(9)(7), 27.125(26)(2), 27.3178(60.27)(2), 2.169(57)(2), 15.893(156)(4), 5.4001(53)(2) and 25.131(4). Plaintiff argues that the first eight statutes allowed trial courts to *435 reach state employees' retirement plans by providing that benefits from such plans "shall be subject to award by a court pursuant to section 18 of chapter 84 of the Revised Statutes of 1846, being section 552.18 of the Michigan Compiled Laws, and to any other order of a court pertaining to child support." Furthermore, plaintiff argues that MCL 552.101(4); MSA 25.131(4) merely requires a trial court to ensure that the parties' respective rights in a marital pension are provided for in the divorce or separate maintenance judgment. Defendant disagrees and contends that MCL 552.18(1); MSA 25.98(1) would be unnecessary unless it was intended to limit the trial court's discretion in distributing a marital pension because MCL 552.101(4); MSA 25.131(4) already allows the trial court to exercise discretion.
We agree with defendant that the trial court erred in dividing the pension. The trial court's method of division and distribution is dependent, at least in part, on the future accrual of pension benefits by defendant after the divorce. MCL 552.18(1); MSA 25.98(1) clearly provides that a pension may be distributed as part of the marital estate to the extent of service credit accrued by a party during the marriage. It therefore follows that the portion of a pension attributable to service credit earned before the marriage or after the divorce is not distributable as part of the marital estate. We also find objectionable the fact that the amount awarded to plaintiff has not been reduced to a sum certain at the time of divorce and is contingent upon various actions and choices made by the parties following the divorce: specifically, defendant's decision as to how much longer he will continue working with his employer and the fact that the judgment gives plaintiff the option of when to start receiving benefits. Inasmuch *436 as the above-mentioned statute directs the courts to treat pensions as part of the marital estate, that is to say, as property, we believe that the value of that property, the pension, must, as with any other property, be valued at the time of divorce and a fixed distribution achieved between the parties.
To equitably distribute the pension, it is necessary for the trial court to determine the value of the pension at the time of divorce. This is achieved by reducing the pension to its present value.[1] Reduction to present value is, as is often the case in divorce matters, a somewhat complex matter which lends itself to manipulation and exaggeration by the parties to achieve a low or high figure as their respective interests may demand. Accordingly, courts must take care to avoid adopting an exaggerated valuation figure proffered by the expert of one party or the other. See Troyan, Pension Evaluation and Equitable Distribution, 10 Fam L Rep (BNA) No. 4, Monograph No. 1, at 3001, November 22, 1983. However, as Troyan points out, it is possible to achieve a neutral and objective present value of a pension. While we find much guidance in the Troyan article, there are some aspects which do not comport with our interpretation of Michigan law. Accordingly, we offer the following guidelines for the trial court in determining the present value of the pension in accordance with the statute.
To begin, we believe that an equitable distribution under the pension statute requires that the method employed reflect the fact that the value of the pension for distribution purposes in a divorce *437 proceeding is only that value which accrued during the course of the marriage. Any accrual of value before or after the marriage may not be considered. Furthermore, the decisions of the parties following the judgment of divorce must not affect the value of the distribution of a portion of the pension to the nonemployee spouse. With these principles in mind, we may establish some guidelines to be employed in determining the present value of the pension.
In order to reduce a pension to present value, it is necessary to know (1) the amount of the monthly benefit subject to division, (2) the percentage of that benefit to be awarded to the nonemployee spouse, and (3) when that benefit would begin payment. See Troyan, supra. While it cannot be known what these variables will be until the employee spouse actually retires and begins to receive retirement benefits, it is unnecessary, indeed improper, to wait until the employee spouse actually retires and use the actual amounts received by the employee spouse. Rather, the amount of the pension benefit can, and should, be determined at the time of divorce based upon three assumptions: (1) that the employee spouse will retire at the earliest date permitted under the plan, (2) that the pension is based upon the employee spouse's salary at the time of divorce, and (3) that the pension is based upon the number of years of credited service earned up to the date of divorce.
The reason for the first assumption, that the employee spouse will retire at the earliest retirement date permitted under the plan, was explained by Troyan, supra at 3013-3014:
For valuation purposes assume the employee spouse will retire at the earliest retirement date. *438 That is the point at which the benefit is totally under the control of the employee spouse. That is, the employee spouse may unilaterally elect to start receiving the benefit at a time of his choosing. If the earliest retirement date is prior to the date of the valuation then the commencement of action date is to be considered the earliest retirement date. [Emphasis in original.]
Use of the earliest retirement date is desirable because that date is independent of any decision by either party subsequent to the judgment of divorce. That is, the employee spouse may choose to continue working rather than retiring at the earliest allowable date without that choice affecting the value of the portion of the pension distributed to the nonemployee spouse.
Under the second assumption, the trial court should base the pension benefits on the employee spouse's salary at the time of the divorce. There should be no projection of future salary.[2] This assumption is necessary since any future increase in salary is based upon events which happen following the judgment of divorce rather than events occurring during the course of the marriage. The benefits accrued during the course of the marriage are only those benefits which are related to the salary earned during the course of the marriage.
The final assumption to be employed by the trial court, the number of years of credited service to the employee, is relatively straightforward. The trial court must base the pension benefit for valuation purposes on the number of years the employee spouse worked up until the time of divorce. *439 The benefit must not be based upon any speculation as to how long the employee spouse will continue to work following divorce because any increase in pension benefits attributable to the employee spouse's continued employment following the judgment of divorce are benefits which accrue after marriage and not during the course of the marriage.
With the above assumptions, the trial court can determine the monthly pension benefit the employee spouse would receive for purposes of the divorce. However, that amount must nevertheless be reduced by two factors. The first is what Troyan refers to as the coverture factor. That factor simply adjusts the benefit to reflect any time for which the employee spouse was a member of the pension system before the marriage.[3] Once the coverture factor is determined, the pension benefit calculated above must be reduced by multiplying it times the coverture factor.[4] Second, the benefit has to be reduced by the distribution percentage to the nonemployee spouse. For example, if the trial court is distributing marital assets evenly, fifty percent of the benefit would be awarded to the employee spouse and fifty percent to the nonemployee spouse. Thus, the monthly benefit for valuation purposes must be reduced by fifty percent to reflect the distribution amount.[5]
*440 Having determined the monthly pension benefit to be awarded to the nonemployee spouse, the trial court must next reduce that benefit to present value. This is achieved by employing generally accepted actuarial methods. Troyan, supra, describes a method using tables prepared by a government agency, the Pension Benefit Guarantee Corporation, which greatly simplifies the process of determining the present value when the amount of the monthly benefit is known and when distribution of that benefit would begin. The trial court could also, of course, consider testimony by expert witnesses. However, care should be taken to ensure that the expert's opinion of the present value of the pension is based upon a monthly benefit calculated with the assumptions outlined above.[6]
After going through the above steps, the amount to be distributed to the nonemployee spouse is determined and the trial court must next devise a distribution method. The preferred method is an immediate offset of assets. See Troyan, supra. However, an immediate offset of assets is not always feasible as the present value of the pension may far exceed the remaining marital assets. Id. In such cases, we leave the distribution method to the trial court's discretion to employ an appropriate method consistent with the principles outlined above.
*441 In any event, whatever method is employed by the trial court must be consistent with the principles that the amount to be distributed should be determined at the time of divorce and should not be influenced by any actions or decisions of the parties following the judgment of divorce. While such determinations are always difficult, they are not unknown in domestic relations matters. For example, there are occasions where the primary marital asset is the marital home. When possession of the home is awarded to one spouse, it is not always feasible to compensate the other spouse for his or her equity interest in the home. In these situations, although the amount of that equity interest is known at the time of divorce, the trial court must nevertheless devise a viable means of distributing that equity interest at some point in the future. Whether that method is a future lump-sum payment, a current smaller payment coupled with installment payments, or future installment payments, or some other method, we leave that determination to the trial court's discretion. We only direct that the method employed not be dependent upon the amount of the future benefit actually paid to the employee spouse.[7]
*442 For the above reasons, we reverse the trial court's division of the pension and remand to the trial court for redetermination of the distribution of the pension plan in a manner consistent with this opinion. Otherwise, we affirm.
Affirmed in part and reversed in part.
NOTES
[1] Various experts did testify as to the present value of defendant's pension at trial. However, the trial court apparently rejected use of these present value figures, relying instead on the distribution method which ultimately found its way into the divorce judgment.
[2] Where the pension benefit is based upon an average of the employee's salary for a certain period of time prior to leaving his employment, rather than the amount of salary at the time of leaving employment, then it would be the average of the employee spouse's salary for the required period of time immediately preceding the divorce.
[3] This is best explained by use of an example. If the employee spouse worked at his place of employment for twenty-five years prior to the divorce, but was only married during twenty of those years, that portion of the pension which accrued during the course of the marriage was 20/25 or eighty percent of the pension benefit to which the employee spouse would be entitled at the time of the divorce.
[4] We would note that where the employee spouse joined the pension system during the course of the marriage, the coverture factor would always be one hundred percent. This is true since one hundred percent of the pension, in that situation, would have accrued during the course of the marriage until the time of divorce.
[5] A brief example might be in order. If the monthly benefit, after employing the enumerated assumptions, is $800 and the coverture factor is eighty percent and the assets are divided evenly, then the nonemployee's spouse's share would be $320 per month ($800 times eighty percent times fifty percent.)
[6] We note another possible means of determining a present value for distribution purposes: namely, once having determined the monthly benefit under the procedure outlined above, it could be determined how much it would cost to purchase an annuity policy which would pay that monthly benefit beginning on the date of earliest possible retirement. Indeed, present value of the pension is, in essence, the amount of money necessary now to fund a future distribution of a known monthly benefit amount beginning on a date certain.
[7] We note one possible method for consideration by the trial court if an immediate offset of assets is not feasible. Taking the monthly benefit determined under the procedures outlined above, prior to its reduction to present value, but including the reduction for the coverture factor and a reduction for the amount to be distributed to the nonemployee spouse, the trial court could order the employee spouse to begin installment payments to the nonemployee spouse in the amount of that benefit to commence on the earliest retirement date and to proceed until death. Those payments would begin on the earliest retirement date, regardless of whether the employee spouse actually retired since the earliest retirement date is the date assumed for purposes of evaluation. While this method has the disadvantage of there being no present determination of the number of payments to be made, the amount of those payments is fixed at the time of divorce based upon the assumptions we have outlined and the date those payments are to begin is also fixed based upon the assumptions made. The ending date, while unknown, is fixed by a future event, death, which is explicitly specified in the judgment and is, presumably, outside the parties' control. Furthermore, the actual present value could always be determined at any given point since the amount of the benefit and when the benefit would begin is known. We would point out that the employee spouse could redeem that payment obligation at any time by tendering to the nonemployee spouse the amount of money necessary to purchase an annuity contract that would pay the same monthly benefit beginning at the same time. (It would, of course, be up to the nonemployee spouse to determine if he or she actually wished to purchase such a contract.) Similarly, the payment of those installments could be secured by the purchase of life insurance. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3345350/ | FACTS
The following facts are based on the contents of the record. On March 5, 1992, the Probate Judge for the District of Middletown issued a decree allowing the appeal of the plaintiff, Patricia Baranowsky Esposito, from the Probate Court's decrees of January 13, 1992 and February 15, 1992, accepting a final accounting and supplemental accounting and awarding executrix's fees in regard to the Estate of Peter Baranowsky. The plaintiff filed the decree allowing the appeal in the Superior Court on March 6, 1992.
The Probate Court's order of notice provides:
Ordered that notice of the appeal be given to Linda Pierce and Robert Baranowsky, co-executors of the Estate of Peter Baranowsky, by some proper officer serving each of them in the manner prescribed for the service of civil process a true and attested copy of the motion for appeal and of this order at least twelve days before the return date of the appeal, and that due return of such service be made to the Superior Court and to this court.
Neither the motion for appeal nor the decree allowing the appeal have been returned to the Superior Court. Linda Pierce now moves to dismiss the present action on the ground that the plaintiff has not caused the motion for appeal or the decree allowing the appeal to be served on her as required by the order of notice.
DISCUSSION
Although "[a]n appeal from a Probate Court to the Superior Court is not an ordinary civil action;" Bishop v. Bordonaro,20 Conn. App. 58, 64, 563 A.2d 1049 (1989), quoting Kerin v. Stangle,209 Conn. 260, 263, 550 A.2d 1069 (1988) (citations and internal quotation marks omitted); "[f]or purposes of mesne process, a probate appeal is considered a civil action." Bergin v. Bergin, 3 Conn. App. 566, 568, 490 A.2d 543, cert. denied, 196 Conn. 806, CT Page 5336494 A.2d 903 (1985). Accordingly, "the court may not proceed with the action until the return of process is made to court." Arpaia v. Corrone, 18 Conn. App. 539, 541,559 A.2d 719 (1989).
CONCLUSION
The court defers ruling on the defendant's motion to dismiss because the action has not been returned to court. | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/304577/ | 463 F.2d 783
3 ERC 1126, 149 U.S.App.D.C. 380, 1Envtl. L. Rep. 20,469
The COMMITTEE FOR NUCLEAR RESPONSIBILITY, INC., et al., Appellants,v.Glenn T. SEABORG et al.
No. 71-1732.
United States Court of Appeals,
District of Columbia Circuit.
Argued Sept. 22, 1971.Decided Oct. 5, 1971.As Amended Nov. 2, 1971.
Mr. David Sive, New York City, a member of the bar of the Supreme Court of New York, pro hac vice, by special leave of court, with whom Mr. Harold P. Green, Washington, D. C., was on the brief, for appellants.
Mr. Edmund B. Clark, Atty., Department of Justice, with whom Messrs. Shiro Kashiwa, Asst. Atty. Gen., and Thomas L. McKevitt, Atty., Department of Justice, were on the brief, for appellees.
Before BAZELON, Chief Judge, and LEVENTHAL and ROBINSON, Circuit Judges.
PER CURIAM:
1
Plaintiffs seek to enjoin an underground nuclear test, code-named Cannikin, to be conducted by the defendant Atomic Energy Commission (A.E.C.). The district court granted summary judgment for defendants, and plaintiffs appealed.1 The case came on for consideration of plaintiffs' motion for a stay pending appeal and expedited consideration of the appeal. The parties stipulated at the time of oral argument that since briefs on the merits had already been submitted by both parties, the case should be heard on the merits. Accordingly, we consider in this opinion the substantive questions presented. We reverse, and remand the case to the district court for continued proceedings consistent with this opinion.I
2
The A.E.C. is completing plans for an underground test of a nuclear warhead on Amchitka Island, Alaska.2 As required by the National Environmental Policy Act (NEPA), 42 U.S.C. 4331 et seq. (1970), the Commission issued an impact statement evaluating the environmental effects of the test. Plaintiffs, seven conservation groups, seek to enjoin the test primarily on the grounds that the impact statement did not satisfy NEPA's requirements.3
3
Plaintiffs commenced discovery proceedings in an effort to establish the deficiency of the impact statement's treatment of potential dangers of the test. Defendants moved for dismissal of the complaint or in the alternative for summary judgment, and all discovery was stayed pending the outcome of the motion to dismiss. Immediately at the conclusion of the argument on the motion, the district court denied the motion to dismiss but granted summary judgment for defendants. This appeal followed.
II
4
The district court specifically upheld the sufficiency of the motion to dismiss. The court did not articulate its reasons for granting summary judgment, but from the record in the case, including the expedition with which the motion for summary judgment was granted, we conclude that the district court accepted the validity of the contention that was most strongly pressed by the Government: that Congress's passage of authorization and appropriations bills for the test represented a conclusive determination of the sufficiency of the impact statement. This contention was, in our view, erroneous, and in order to avoid the continuance of an order that was predicated on an impermissible basis, the judgment of the District Court must be reversed. See Delaware and Hudson Ry. Co. v. United Transportation Union, 1971, 146 U.S.App.D.C. 142, 450 F.2d 603.
5
Congress could, of course, withdraw the question of the statement's compliance from the courts by repealing NEPA as it applied to the Cannikin test. But it is well settled that repeal by implication is disfavored, and the doctrine applies with full vigor when, as here, the subsequent legislation is an appropriations measure,4 and when the prior Act is to continue in its general applicability, as construed by the courts, but the claim is made that it is to be subject to a particularized legislative exception.5 Congress must be free to provide authorizations and appropriations for projects proposed by the executive even though claims of illegality on grounds of noncompliance with NEPA are pending in the courts. There is, of course, nothing inconsistent with adoption of appropriations and authorizations measures on the pro tanto assumption of validity, while leaving any claim of invalidity to be determined by the courts.6 That is the effect of the authorization and appropriations measures relating to the Cannikin test. This conclusion is established by the general principles just discussed. Nothing in the legislative history leads to a different result. On the contrary, there is an affirmative indication that at least some of the Congressmen voting for the authorization and appropriations measures specifically contemplated that the claim of illegality remained for resolution by the courts.7 The legislative history indicates that while the impact statement was used as reference material by both proponents and opponents of the test, Congress did not purport to make a binding determination on the issue whether the statement was in compliance with NEPA.
6
Thus, plaintiffs clearly presented a cognizable claim under NEPA,8 and summary judgment would be appropriate only if they failed to provide any factual underpinning for their claim.9
III
7
Section 102 of NEPA requires, inter alia, that an impact statement assess adverse environmental effects and discuss alternatives to the proposed action.10 On the ultimate issue whether a project should be undertaken or not, a matter involving the assessment and weighing of various factors, the court's function is limited. However, the court has a responsibility to determine whether the agencies involved have fully and in good faith followed the procedure contemplated by Congress: that is, setting forth the environmental factors involved in order that those entrusted with ultimate determination whether to authorize, abandon or modify the project, shall be clearly advised of the environmental factors which they must take into account. See Calvert Cliffs' Coordinating Committee v. United States Atomic Energy Commission, 146 U.S. App.D.C. 33, 449 F.2d 1109 at 1114.
8
The statement has importance in focusing the environmental factors involved even when the officials ultimately responsible are in, or more likely the head of, the office or agency that prepared the report. The ultimate decision must of course take into account matters other than environmental factors, but insofar as staff has prepared the environmental statement for transmission and consideration throughout the entire executive process, the officials making the ultimate decision, whether within or outside the agency, must be informed of the full range of responsible opinion on the environmental effects in order to make an informed choice. Moreover, the statement has significance in focusing environmental factors for informed appraisal by the President, who has broad concern even when not directly involved in the decisional process, and in any event by Congress and the public.
9
When, as here, the issue of procedure relates to the sufficiency of the presentation in the statement, the court is not to rule on the relative merits of competing scientific opinion. Its function is only to assure that the statement sets forth the opposing scientific views, and does not take the arbitrary and impermissible approach of completely omitting from the statement, and hence from the focus that the statement was intended to provide for the deciding officials, any reference whatever to the existence of responsible scientific opinions concerning possible adverse environmental effects.11 Only responsible opposing views need be included and hence there is room for discretion on the part of the officials preparing the statement; but there is no room for an assumption that their determination is conclusive. The agency need not set forth at full length views with which it disagrees, all that is required is a meaningful reference that identifies the problem at hand for the responsible official. The agency, of course, is not foreclosed from noting in the statement that it accepts certain contentions or rejects others.12
10
By means of discovery and the introduction of the affidavit of a scientific expert, plaintiffs attempted to prove that the requirement of the law was not met "fully and in good faith" by the A. E.C. The district court's grant of summary judgment erroneously foreclosed this line of inquiry to plaintiffs.
11
Summary judgment is only appropriate when there is no bona fide material issue, and Rule 56 clearly contemplates that the parties shall have opportunity for deposition in order to establish the existence of a material issue.13 Here, plaintiffs sought to establish that there was responsible scientific opinion as to possible adverse environmental consequences, a fact that would be material in support of their legal claim that omission of all reference to such scientific opinion was contrary to the process prescribed by NEPA.14
12
Plaintiffs also alleged the existence of reports by federal agencies recommending against Cannikin specifically because of potential harm to the environment. NEPA clearly indicates that the agency responsible for a project should obtain and release such adverse reports.15 If these reports exist, and they are not subject to some statutory exemption, plaintiffs must prevail on this contention as well.16 Plaintiffs attempted, through deposition of the A.E. C. and through attempted deposition of the agencies whom they believed to have such reports, to uncover facts supporting their claim. The grant of summary judgment prematurely terminated the discovery process and foreclosed plaintiffs' opportunity to substantiate their allegations.
13
Since unresolved questions of fact existed as to both of plaintiffs' arguments under NEPA, summary judgment was plainly inappropriate. On remand, plaintiffs' discovery--subject of course to the possible interposition of valid claims of privilege--should be allowed to continue.17
14
Reversed and remanded.
1
For purposes of this opinion we refer to appellants in this court as "plaintiffs" and appellees as "defendants."
2
The test was originally scheduled for October, 1971. Congress has provided that it may not take place unless the President gives his direct approval. Pub. L. No. 92-134, 85 Stat. 365 (1971)
3
Appellants also rested their claim for injunctive relief on three other grounds, asserted violations of:
(1) The Nuclear Test Ban Treaty,
(2) Various statutes designed to protect wildlife, and
(3) The rights under the Fifth and Ninth Amendments of citizens endangered by Cannikin.
4
See, e. g., United States v. Langston, 118 U.S. 389, 6 S. Ct. 1185, 30 L. Ed. 164 (1886)
5
C.f., D. C. Federation Civic Assns. v. Volpe, 140 U.S.App.D.C. 162, 434 F.2d 436, 444-447 (1970)
6
That was precisely the conclusion as to the intent of Congress reached in another NEPA case by the court in Environmental Defense Fund, Inc. v. Corps of Engineers, 325 F. Supp. 749, 762-763 (E.D.Ark.1971)
7
Thus, Representative Price, in voting for the project, stated concerning the issue of whether the impact statement complied with NEPA: "This matter is before the court. I submit that if there has been any violation of the law, the court will supply the appropriate remedy." 112 Cong.Rec. 6785, July 15, 1971
8
In view of our disposition of the case, it is not necessary to rule on whether any of plaintiffs' other three grounds for relief state a claim on which relief can be granted. Our order does not foreclose the district court, on remand, from striking any or all of those grounds for failure to state a claim
9
Rule 56, Fed.R.Civ.Pro., permits summary judgment only when no material issue of fact is in dispute and the moving party is by law entitled to judgment. See Sartor v. Arkansas Natural Gas Corp., 321 U.S. 620, 627, 64 S. Ct. 724, 88 L. Ed. 967 (1944)
10
NEPA, section 102, 42 U.S.C. Sec. 4332 (1970):
The Congress authorizes and directs that, to the fullest extent possible: (1) the policies, regulations, and public laws of the United States shall be interpreted and administered in accordance with the policies set forth in this chapter, and (2) all agencies of the Federal Government shall--
(A) utilize a systematic, interdisciplinary approach which will insure the integrated use of the natural and social sciences and the environmental design arts in planning and in decisionmaking which may have an impact on man's environment;
(B) identify and develop methods and procedures, in consultation with the Council on Environmental Quality established by subchapter II of this chapter, which will insure that presently unquantified environmental amenities and values may be given appropriate consideration in decisionmaking along with economic and technical considerations;
(C) include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official on--
(i) the environmental impact of the proposed action,
(ii) any adverse environmental effects which cannot be avoided should the proposal be implemented,
(iii) alternatives to the proposed action,
(iv) the relationship between local short-term uses of man's environment and the maintenance and enhancement of long-term productivity, and
(v) any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented.
Prior to making any detailed statement, the responsible Federal official shall consult with and obtain the comments of any Federal agency which has jurisdiction by law or special expertise with respect to any environmental impact involved. Copies of such statement and the comments and views of the appropriate Federal, State, and local agencies, which are authorized to develop and enforce environmental standards, shall be made available to the President, the Council on Environmental Quality and to the public as provided by section 552 of Title 5, and shall accompany the proposal through the existing agency review processes; * * *
11
Compare Environmental Defense Fund, Inc. v. Corps of Engineers, 325 F. Supp. 749, 759 (E.D.Ark.1971)
12
Compare Environmental Defense Fund, Inc. v. Corps of Engineers, 325 F. Supp. 749, 759 (E.D.Ark.1971)
13
Cf. Rule 56(f), Fed.R.Civ.Pro., Berne Street Enterprises, Inc. v. American Export Isbrandtsen Co., Inc., 298 F. Supp. 195 (S.D.N.Y.1968), 6 Moore's Federal Practice, Sec. 56.24
14
We do not here decide that the statement is inadequate, but only that the district court is not to foreclose an opportunity to plaintiffs to make their submission on this point
15
42 U.S.C. Sec. 4332 (1970)
16
We do not consider whether the court may decline to order the release of agency comments on the ground that they are not so related to the impact statement as to require their inclusion therein, or on the ground that they are exempt from public disclosure by virtue of exemptions set forth in the Freedom of Information Act, 5 U.S.C. Sec. 552 (1970), which should be transported into NEPA. No such grounds were presented to us at this time, and accordingly we express no opinion thereon
17
Since defendants stated that the test would not take place without ample notice to the plaintiffs, we see no need to consider whether or not to issue a stay pendente lite. If the need arises, the question of a stay may, of course, be addressed to the district court | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/672147/ | 26 F.3d 1089
29 Fed. R. Serv. 3d 832
WORLDWIDE PRIMATES, INC., Plaintiff-Appellee,Paul H. Bass, Respondent-Appellee,v.Shirley McGREAL, Defendant-Appellant.
No. 93-4094.
United States Court of Appeals,Eleventh Circuit.
July 25, 1994.
Thomas R. Julin, Steel, Hector & Davis, P.A., Miami, FL, for appellant.
Edgar Miller, Kenneth L. Paretti, Coral Gables, FL, for appellee.
Appeal from the United States District Court for the Southern District of Florida.
Before TJOFLAT, Chief Judge, DUBINA, Circuit Judge, and RONEY, Senior Circuit Judge.
RONEY, Senior Circuit Judge:
1
In this appeal, we reverse the district court's denial of a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure.
2
On August 3, 1990, Worldwide Primates, Inc. (Worldwide), a Florida corporation engaged in the commercial wildlife trade, sued Dr. Shirley McGreal in Florida state court for tortious interference with an advantageous business relationship. The single count complaint alleged that McGreal, an animal rights activist and the chairperson of the International Primate Protection League, intentionally and unjustifiably damaged Worldwide's relationship with one of its clients, Delta Primate Center (Delta), by sending two letters critical of Worldwide to Delta's director, Dr. Peter Gerone. The first letter was dated January 15, 1989, and read as follows:
Dear Dr. Gerone:
3
The International Primate Protection League has just learned that the Delta Primate Center may be attempting to import no less than 150 sooty mangabeys for leprosy experiments, and that a Florida animal dealer (who even attempted to enter the gorilla trade some years ago) has been hired to obtain the animals.
4
This dealer's firm is Worldwide Primates. The firm has received very damning criticisms from the Department of Agriculture inspectors and has tried to undermine inspectors' authority by going over their heads.
5
I enclose some relevant documents.
6
Will you please provide IPPL with answers to the following questions:
7
1) Is Delta planning to import wild-caught sooty mangabeys?
8
2) Is the quoted number (150) exact and how was it chosen?
9
3) In what country will the animals be caught?
10
4) What capture methods will be used?
11
5) What price will be paid for these animals?
12
6) Why does Delta work with commercial wildlife traffickers?
13
These endangered primates would be far better off living in the wild than in your institution, wouldn't you agree if you were a nonhuman primate?
14
Yours sincerely,
15
/s/ Shirley McGreal
Chairwoman, IPPL
16
A copy of this letter was attached to the complaint. Significantly, however, the enclosures mentioned in the letter were not attached to the complaint. Those enclosures included a memorandum from the United States Department of Agriculture, which, consistent with McGreal's assertions, detailed "major deficiencies" in Worldwide's operation, including unsanitary, inadequate, and damaged animal cages, as well as other deficiencies "too numerous to mention." The memorandum also stated that "[s]o far, Matthew Block has avoided allegations of violation of the Animal Welfare Act by successfully involving seven levels of government in this agency, by invoking complaints, and allegations of everything from over-inspection to bigotry." McGreal's second letter was dated June 18, 1990, approximately 18 months after the first. This is its entire text:
Dear Dr. Gerone:
17
Should Delta patronize the company Worldwide Primates, we invite you to peruse this animal dealer's notice from the Centers for disease Control suspending his license to import primates.
18
Yours sincerely,
19
/s/ Shirley McGreal
Chairwoman, IPPL
20
This letter, like the first, was attached to the complaint without the document that was enclosed in the letter. That document, a letter from the United States Department of Health and Human Services, notified Worldwide's president, Matthew Block, that "your registration to import nonhuman primates into the United States is revoked for failure to implement appropriate isolation and quarantine procedures." The letter specified no fewer than 46 procedural violations.
21
McGreal, a South Carolina resident, promptly removed the case to federal court based on diversity jurisdiction, and filed a motion to dismiss the complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. McGreal argued that her letters, being "nonviolent, truthful speech on matters of public concern" were protected by the First Amendment, and therefore could not provide a basis for tort liability. On November 1, 1990, Worldwide filed a memorandum opposing dismissal. The district court, without the benefit of McGreal's enclosures, denied the motion to dismiss on the ground that the letters' truthfulness could not be determined from the face of the complaint.
22
McGreal thereafter moved for summary judgment, arguing not only that the letters were protected speech, but also that they had caused no damage to Worldwide. When Worldwide failed to file a timely response to that motion, McGreal requested a default. Shortly thereafter, Worldwide moved to voluntarily dismiss the case under Fed.R.Civ.P. 41(a)(2), stating that its president, Matthew Block, had recently been indicted for violating federal laws relating to the sale of animals, and that it could not participate in discovery without potentially affecting the criminal matter. The district court granted Worldwide's motion, over McGreal's objection, and dismissed the lawsuit with prejudice.
23
Before the dismissal, McGreal had filed a motion for sanctions against Worldwide under Rule 11 of the Federal Rules of Civil Procedure, arguing that the lawsuit was legally and factually baseless and that it had been filed to harass McGreal for exercising her right to free speech. Noting that the dismissal did not foreclose the imposition of sanctions, Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 398, 110 S. Ct. 2447, 2457, 110 L. Ed. 2d 359 (1990), the district judge referred the matter to a magistrate judge for a report and recommendation. Following oral argument, the magistrate judge recommended the motion be denied. The district judge, over McGreal's objections, accepted the recommendation and denied the motion for sanctions. This appeal challenges that ruling.
24
The Rule 11 in place at the time of these proceedings provided that the district court shall impose sanctions when a party files a pleading that has no reasonable factual or legal basis or when the party files a pleading in bad faith for an improper purpose. Pelletier v. Zweifel, 921 F.2d 1465, 1514 (11th Cir.), cert. denied, --- U.S. ----, 112 S. Ct. 167, 116 L. Ed. 2d 131 (1991). The district court's standard for evaluating an alleged violation is reasonableness under the circumstances. Didie v. Howes, 988 F.2d 1097, 1104 (11th Cir.1993). We review the district court's ruling for abuse of discretion. Cooter & Gell, 496 U.S. at 405, 110 S.Ct. at 2460.
25
Where, as here, a case is removed from state court, Rule 11 does not apply to pleadings filed before removal. Griffen v. City of Oklahoma City, 3 F.3d 336, 339 (10th Cir.1993). The rule, however, is applicable to papers filed in federal court after removal. Fed.R.Civ.P. 81(c). Thus, although Worldwide's complaint, which was filed in state court, cannot be the basis of a Rule 11 violation, any subsequent federal court filings, such as those in opposition to a motion to dismiss, are sanctionable if they resulted in the continuation of a baseless lawsuit.
26
In denying McGreal's motion the magistrate judge's report and recommendation recited the following:
27
Although this Court is sympathetic to the position of Defendant, and agrees that there is a suggestion that Plaintiff may have been motivated by a desire to chill Defendant from expressing her views concerning Plaintiff's activities, there is no evidence of record which would support the imposition of Rule 11 sanctions. Defendant has been unable to establish that Plaintiff's Complaint had no reasonable legal basis, had no reasonable factual basis, or was filed for an improper purpose. Defendant has been unable to provide, and this court has been unable to find, any case which allowed the imposition of Rule 11 sanctions on similar facts.
28
Contrary to this assessment, the record amply supports the imposition of sanctions because it reflects no basis, either factual or legal, for Worldwide's lawsuit. Worldwide's claim arises under Florida law. An integral element of a claim of tortious interference with a business relationship requires proof of damage to the plaintiff as a result of the breach of the relationship. Tamiami Trail Tours, Inc. v. Cotton, 463 So. 2d 1126, 1127 (Fla.1985).
29
The evidence shows Worldwide knew from the beginning that the letters had not harmed its business relationship with Delta. In January 1992, McGreal deposed the recipient of her letters, Dr. Peter Gerone. When asked about his reaction to McGreal's first letter and the enclosed reports, Gerone stated unequivocally that he considered the information "ancient history", and that it did not change his perception of Worldwide as a "legitimate importe[r]". Gerone further testified that he advised Worldwide's president, Matthew Block, of his reaction. Upon receiving the letter, he faxed a copy of it to Block, along with a handwritten note reading "Matt, I have no intention of dignifying this letter with a response, Pete." Thereafter, Gerone spoke with Block on the telephone and reiterated his lack of concern about agency reports that were three or four years old.
30
Regarding the second letter, Gerone characterized his reaction as the same as it had been to the first. He stated that, in his view, the license revocation did not reflect negatively on Worldwide's "capability of handling nonhuman primates." He added that he believed such revocations were common in the industry because the Government was conducting inspections with "no guidelines or standards." Again, Gerone faxed a copy of the letter to Block. Although he could not recall any specific conversation with Block regarding the letter, he stated that he was "sure" there had been such a conversation, and that he probably told Block of having "heard about other facilities that had undergone the same kind of inspection."
31
The record shows that Delta continued to do business with Worldwide even after it received the letters. Worldwide argues that even without proof of actual losses, it could have recovered nominal damages. This is an incorrect assessment of Florida law, which, as previously mentioned, requires proof of damages as an essential element of a tortious interference claim. Tamiami Trail Tours, 463 So. 2d at 1127. "Unsuccessful interference is simply not the kind of interference upon which a tort may be founded...." American Medical Int'l, Inc. v. Scheller, 462 So. 2d 1, 9 (Fla.Dist.Ct.App.1984), review denied, 471 So. 2d 44 (1985), cert. denied, 474 U.S. 947, 106 S. Ct. 345, 88 L. Ed. 2d 292 (1985).
32
In any event, it is important to note that throughout the course of this action, Worldwide has never alleged anything contained in McGreal's letters was false. The letters did nothing more than accurately describe the accompanying governmental reports. Worldwide could establish no cause of action for interference with its business relationship with Delta when all McGreal did was give Dr. Gerone truthful information. This common sense rule is set forth at Sec. 772 of the Restatement (Second) of Torts:
Advice as Proper or Improper Interference
33
One who intentionally causes a third person not to perform a contract or not to enter into a prospective contractual relation with another does not improperly interfere with the other's contractual relation, by giving the third person
34
(a) truthful information, ....
35
The comment to Sec. 772 provides further explanation:
36
There is of course no liability for interference with a ... prospective contractual relation on the part of one who merely gives truthful information to another. The interference in this instance is clearly not improper. This is true even though the facts are marshaled in such a way that they speak for themselves and the person to whom the information is given immediately recognizes them as a reason for ... refusing to deal with another. It is also true whether or not the information is requested.
37
This rule seems to reflect the law of Florida. See Gutierrez v. Ocean Bank, 594 So. 2d 827, 828 (Fla.Dist.Ct.App.1992) (per curiam); Rose v. Stroock & Stroock & Lavan, 441 So. 2d 172 (Fla.Dist.Ct.App.1983) (per curiam); see also The Florida Bar Standard Jury Instructions Civil 85-1, 475 So. 2d 682, 691 (Fla.1985).
38
With this view of the case, it becomes unnecessary to consider whether McGreal's letters are protected by the First Amendment under NAACP v. Claiborne Hardware Co., 458 U.S. 886, 102 S. Ct. 3409, 73 L. Ed. 2d 1215 (1982), as McGreal argues, or whether the suit was prosecuted in bad faith for the purpose of punishing McGreal for exercising her First Amendment rights. See Pelletier v. Zweifel, 921 F.2d at 1514 (Rule 11 may be violated "when the party files a pleading in bad faith for an improper purpose.").
39
The undisputed facts were apparent to Worldwide when it opposed McGreal's motion to dismiss and pursued this action in federal court. Worldwide could not reasonably have believed, as required by Rule 11, that its claim was well grounded in fact or law.
40
Because Worldwide pursued this claim in federal court when it knew, or should have known, that its claim was legally and factually baseless, this case is remanded to the district court for the determination and imposition of an appropriate sanction against Worldwide. Because there is some confusion regarding whether sanctions were initially sought against counsel, and what effect, if any, that may have had on the district court's denial of sanctions against counsel, and whether sanctions against counsel would be appropriate in any event, the court should also consider whether a sanction should be imposed against Worldwide's counsel.
41
REVERSED and REMANDED. | 01-03-2023 | 04-16-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1594615/ | 432 N.W.2d 189 (1988)
THE MINNESOTA DAILY, Appellant,
v.
The UNIVERSITY OF MINNESOTA, Respondent.
Nos. CX-88-2095, CX-88-2114.
Court of Appeals of Minnesota.
November 18, 1988.
Review Denied January 25, 1989.
Marshall H. Tanick, Martin Munic, Tanick & Heins, Minneapolis, for appellant.
*190 Thomas Tinkham, Janet S. Sanderson, Dorsey & Whitney, Minneapolis, for respondent.
Mark R. Anfinson, Minneapolis, for amicus curiae, Minnesota Newspaper Assn.
Heard, considered and decided by WOZNIAK, C.J., and HUSPENI and SCHUMACHER, JJ.
OPINION
WOZNIAK, Chief Judge.
The Minnesota Daily sought injunctive relief to compel the University of Minnesota Presidential Search Advisory Committee (PSAC) to hold open meetings. By order on September 30, 1988, the trial court denied injunctive relief, holding that PSAC is not subject to the Minnesota Open Meeting Law. The Daily appealed,[1] and this court expedited briefing and argument. We affirm.
FACTS
The Board of Regents is the governing body of the University of Minnesota. The regents are in the process of selecting a new university president. On May 12, 1988, the regents decided that an advisory committee should be established.
The University Senate is a representative body of faculty, students, and staff. The University Senate Consultative Committee is a standing subcommittee of the University Senate. According to minutes of regents' meetings submitted to the trial court, the Senate Consultative Committee recommended and suggested PSAC members for approval by the regents. On June 9, 1988, the regents requested that additional members be added to represent the Crookston and Waseca campuses, as well as the agricultural extension programs, and they approved the names submitted.
PSAC is comprised of faculty, student, and staff members. No regents serve on PSAC. It is to provide advice and consultation to the regents on the selection of the president. PSAC will assume an active role in screening applicants and narrowing the field to a short list of finalists, but its decisions are subject to review by the regents. Staff support and payment of expenses are provided by the regents.
Early meetings of PSAC were open. After the committee had established general procedures and adopted a rating scale for evaluating candidates, it announced that future meetings, at which specific candidates would be discussed, would be closed to the public and media. The Minnesota Daily, a newspaper staffed primarily by University of Minnesota students, brought suit, seeking a declaration that such meetings are covered by the Minnesota Open Meeting Law. It also sought injunctive relief.
The trial court held that PSAC is not subject to the open meeting law because it is not the governing body of a public body or a committee of a governing body.[2] On appeal, the Minnesota Daily argues PSAC is a committee of the regents, the governing body of the University.
ISSUE
Did the trial court err in concluding that PSAC is not subject to the open meeting law?
ANALYSIS
A. Standard of Review.
On appeal from the denial of injunctive relief, this court must view the facts *191 and evidence in the light most favorable to the prevailing party and determine whether the trial court abused its discretion. OT Industries, Inc. v. OT-tehdas Oy Santasalo-Sohlberg Ab, 346 N.W.2d 162, 165 (Minn.Ct.App.1984). However, this case does not turn on application of the factors for injunctive relief. Like the trial court in OT Industries, the trial court here held that appellant failed to establish it was entitled to the benefits of a specific statute. The appellate courts need not defer to a trial court's decision on a legal issue.
B. Applicable Statute.
Except as otherwise expressly provided by statute, all meetings, including executive sessions, of any state agency, board, commission or department when required or permitted by law to transact public business in a meeting, and the governing body of any school district * * * or other public body, and of any committee, subcommittee, board, department or commission thereof, shall be open to the public[.]
Minn.Stat. § 471.705, subd. 1 (1986). The statute excepts meetings of the board of pardons and commissioner of corrections, as well as labor negotiation strategy sessions. Id., subds. 1, 1a. The supreme court has also approved a limited exception, based on the attorney-client privilege, for meetings to discuss litigation strategy. Minneapolis Star & Tribune Co. v. Housing & Redevelopment Authority, 310 Minn. 313, 251 N.W.2d 620 (1976). Beyond this exception, founded on the supreme court's obligation to regulate the practice of law, judicially created exceptions are generally not permitted. Channel 10, Inc. v. Independent School District No. 709, 298 Minn. 306, 215 N.W.2d 814 (1974). Specifically, a judicial exception for interviews of prospective employees for administrative or other sensitive positions is impermissible. Id. at 320-21, 215 N.W.2d at 825.
The Minnesota Open Meeting Law was enacted in 1957. 1957 Minn.Laws ch. 773. The law furthers three purposes: (1) to prevent public bodies from acting secretly without the public having an opportunity to detect improper influences, (2) to assure the public's right to be informed, and (3) to afford an opportunity for members of the public to present their views. St. Cloud Newspapers, Inc. v. District 742 Community Schools, 332 N.W.2d 1, 4 (Minn.1983), quoted in Itasca County Board of Commissioners v. Olson, 372 N.W.2d 804, 806-07 (Minn. Ct.App.1985) (citations omitted). The law is to be construed in favor of public access, with only limited exceptions. Id. at 4-5.
The presumption of openness is not absolute, and it may be outweighed by other concerns. The supreme court has endorsed a balancing test between "the public's right to be informed" and its "right to the effective and efficient administration of public bodies." Moberg v. Independent School District No. 281, 336 N.W.2d 510, 517 (Minn.1983). However, adopted procedures which foreclose "public discussion altogether," which effectively permit the final decision to be made in private, or which conceal "improper influences such as the personal or pecuniary interest of a public official," cannot be tolerated in furtherance of efficient administration. Id. at 517-18.
Prior to 1973, the open meeting law required that "all meetings, including executive sessions of the governing body of a school district * * * and of any board, department or commission thereof, shall be open to the public[.]" Minn.Stat. § 471.705 (1971). The statute applied primarily to local governments and to school boards.
The statute was amended in 1973 to require that "all meetings, including executive sessions, of any state agency, board, commission or department when required or permitted by law to transact public business in a meeting, and the governing body of any school district * * * or other public body, and of any committee, subcommittee, board, department or commission thereof, shall be open to the public[.]" 1973 Minn.Laws ch. 680, § 1 (emphasis added). (The 1973 legislation also added civil penalties for violations.)
The amendment extended the open meeting law to state agencies and other public *192 bodies, clarified that access to meetings at which public business could be transacted was the primary objective, and brought committee meetings within the statute for the first time. Senator Hubert H. Humphrey, III, one of the authors of the 1973 legislation, explained, at a hearing before the Senate Governmental Operations Committee, that the amendment would prevent a public body from routinely resolving "itself into a committee of the whole" to avoid the requirement that meetings of the body remain open to the public. Hearings on S.F. 1480 Before the Senate Governmental Operations Committee, 68th Minn.Legis., 1973 Session (April 20, 1973).
The supreme court has explained that "[t]he statute, by expressly including meetings of committees and subcommittees, gives fair warning that the deliberations of governing bodies are included within its proscription." St. Cloud Newspapers, Inc. v. District 742 Community Schools, 332 N.W.2d 1, 7 (Minn.1983) (emphasis added). This statement echoes Senator Humphrey's concern that a governing body not be permitted to simply call itself a "committee" and thereby exclude the public from meetings at which important decisions are made.
We turn next to an application of the statute to the facts of this case.
C. Application to PSAC.
It is undisputed that PSAC is not the governing body of the university. It is less clear whether it is a "committee thereof." The Daily points to the regents' influence over the composition, duties, and funding of PSAC. However, the trial court found PSAC is not a committee of the regents because its members were chosen by the University Senate Consultative Committee, and not by the regents. In addition, no regent is actually a member of PSAC. In a literal sense, it is not a committee of regents. For that reason, much of our discussion will involve the functions of PSAC.
Because the statute, in its current form, focuses on meetings where public business is transacted, and the supreme court has indicated that inclusion of committees is intended to extend the presumption of openness to deliberations of governing bodies, resolution of this case turns on whether PSAC meetings are, in effect, the deliberations of the regents. Although few decisions of the supreme court have applied the "committee thereof" portion of the statute to advisory bodies, cases defining what constitutes a "meeting of the governing body" are illustrative.
The supreme court has held that a discussion between two city council members over lunch on a matter pending before the council is not a meeting of the governing body. Hubbard Broadcasting, Inc. v. City of Afton, 323 N.W.2d 757 (Minn.1982). On the other extreme, any scheduled gathering of all members of a governing body is a meeting of the governing body, even if it is unrelated to specific pending matters. St. Cloud Newspapers, Inc. v. District 742 Community Schools, 332 N.W.2d 1 (Minn. 1983).
Both of these cases emphasized the identity and number of attendees at a meeting. As previously noted, PSAC meetings are not a gathering of any of the regents (no regents are actually members of PSAC). Under this analysis, PSAC meetings are not, in effect, meetings of the governing body.
The Daily speculates that PSAC recommendations will strongly influence the regents' final decision. However, the supreme court's opinion in Minnesota Education Association v. Bennett, 321 N.W.2d 395 (Minn.1982), indicates that the opportunity to influence the governing body is not dispositive. The court there held that a phone conversation between a school board chairman and the superintendent of schools was not a meeting of the governing body. The superintendent was an ex-officio member of the board. He was required to report to the board and make recommendations. The supreme court found "it is the power to decide, as opposed to the right to recommend, that determines whether one is a member of a governing body." Id. at 397. The term "governing body" was construed to mean only elected school board members with voting rights. Id. at 398.
*193 Like the school superintendent, PSAC has the power to make recommendations, and the obligation to report, but no power to decide who the next president will be. It has no authority to set policy or make the final decision. It cannot "transact public business" because that power is vested in the regents. Participation in the process, alone, was insufficient to bring the superintendent within the ambit of the statute in Bennett, and participation, without more, will not bring PSAC within the statute.
The facts presented in Moberg v. Independent School District No. 281, 336 N.W. 2d 510 (Minn.1983), are closely analogous to this case. A school board had become deadlocked on which high school to close. The board created a factfinding panel, comprised of nonmembers of the school board, to meet in closed sessions, gather information, and make a recommendation to the board. That recommendation was immediately adopted by the school board.
The supreme court held that numerous informal discussions among school board members did not violate the open meeting law, and it clarified that a "meeting" is a gathering of a quorum "at which members discuss, decide, or receive information as a group on issues relating to the official business of that governing body." Id. at 518.
By focusing on the quorum requirement, the supreme court again emphasized the importance of the power of the governing body to actually transact business, as they had in Bennett a year earlier. See Minnesota Education Association v. Bennett, 321 N.W.2d 395, 397 (Minn.1982). The emphasis on a quorum of members also reflects the earlier reliance on the number and identity of attendees, critical in St. Cloud Newspapers, Inc. v. District 742 Community Schools, 332 N.W.2d 1 (Minn. 1983), and Hubbard Broadcasting, Inc. v. City of Afton, 323 N.W.2d 757 (Minn. 1982).[3]
As noted in our preliminary discussion of the statute, the supreme court in Moberg, in holding that informal discussions among board members were not "meetings of the governing body," also approved a balancing of the public's right to be informed "against the public's right to the effective and efficient administration of public bodies." Moberg, 336 N.W.2d at 517. The University has asserted that disclosure of candidate names will hamper the presidential search, while the trial court recognized that this claim is disputed by the Daily. In light of our holding that PSAC meetings are not covered by the statute, we decline to speculate on the effect open meetings would have upon the search.
The names of job applicants are private data. Minn.Stat. § 13.43, subd. 3 (1986). For that reason, the regents decided not to discuss the candidates at their meetings, which are open. A meeting which is required by statute to be open may not be closed just because the Data Practices Act applies to matters which will be discussed at the meeting. Itasca County Board of Commissioners v. Olson, 372 N.W.2d 804 (Minn.1985); but see Minn.Stat. § 471.705, subd. 1b (1986) (copy of printed materials relating to agenda items at open meeting must be available to public unless materials contain data which is not public under Data Practices Act).
The supreme court in Moberg found the school board's "decision to hire a factfinding panel was a neutral, fair-minded solution with no foreordained result." Moberg, 336 N.W.2d at 517. The court endorsed the advisory function of the panel, concluding it was proper for the school board to "listen to a group of non-members on important matters," but warning that a governing body cannot abdicate its responsibility to make difficult decisions to an outside *194 panel and should not "adopt such a panel's recommendation without affording an opportunity to the public to react to the recommendation." Id. at 517 and n. 5.
Similarly, there is no allegation the regents have adopted this procedure only to achieve a preordained result. They have stated that finalists' names will be announced and final interviews will be conducted in public. In short, the procedure adopted in this case seems to balance the public's right to information with efficient administration, as permitted by Moberg.
The members of the panel in Moberg were chosen exclusively by the school board. They met in private. Their recommendation on a very important issue pending before the board was immediately adopted. The supreme court did not find that advisory panel to be a committee of the governing body within the meaning of the open meeting law, and, accordingly, we cannot agree with the Daily's assertion that PSAC is a committee of the regents.
The Daily also relies upon a 1975 opinion of the Minnesota Attorney General, which concluded that meetings of advisory panels to the State Arts Council must be open to the public, because the panels were "committees" of the governing board of a state agency. Op.Atty.Gen. 10-b (Feb. 5, 1975). The opinion noted that a "major" purpose behind creation of advisory bodies "is to free the parent body from the necessity of examining each proposal in full detail." Id. at 5. Thus, the attorney general concluded that an advisory panel which was (a) merely sanctioned by the governing body and not established by it, (b) comprised entirely of persons who were not members of the parent body, and (c) unable to make final decisions but authorized only to discuss and make recommendations, was a committee of the governing body.
"While the attorney general's opinions are entitled to careful consideration at all times, they are not binding upon the courts." Village of Blaine v. Independent School District No. 12, 272 Minn. 343, 353, 138 N.W.2d 32, 39 (1965). The legislature did not confer the judicial function of statutory interpretation and construction upon the attorney general (an executive officer) and opinions of the attorney general do not foreclose such construction by this court. Lindquist v. Abbett, 196 Minn. 233, 236, 265 N.W. 54, 55 (1936).
The construction of the open meeting law reflected in the 1975 opinion is not consistent with the supreme court's approval, in the 1983 decision in Moberg, of the use of a nonmember factfinding panel, or its heavy reliance, in the 1982 decision in Bennett, on the power to actually decide matters rather than make recommendations.
The supreme court's warning in Moberg that a governing body may not abdicate its responsibilities to an outside panel is equally applicable here. The regents cannot avoid public comment on a controversial matter by delegating the choice of a president to PSAC. We are mindful of the Daily's concern that PSAC will recommend only one finalist, thereby effectively closing the entire selection process. The University's counsel has assured this court that will not occur and all finalists will be interviewed at an open meeting.
Establishment of PSAC appears to have been "a neutral, fair-minded solution with no foreordained result," Moberg, 336 N.W.2d at 517, and we are compelled to agree with the trial court that PSAC is not within the statutory definition of a committee of the governing body.
DECISION
The trial court correctly held that meetings of the University of Minnesota Presidential Search Advisory Committee are not within the purview of the Minnesota Open Meeting Law, and properly denied injunctive relief.
AFFIRMED.
NOTES
[1] Appeal CX-88-2095, seeking review of the September 30 order, was served and filed on October 3. An order denying injunctive relief is generally appealable. Minn.R.Civ.App.P. 103.03(b). However, an order for judgment in an injunction action is not appealable or effective until judgment is actually entered, and the proper appeal is then from the judgment. Holliston v. Ernston, 120 Minn. 507, 139 N.W. 805 (1913). The trial court's September 30 order specifically directed that judgment be entered. Judgment was entered on October 4, and appeal CX-88-2114, seeking review of the judgment, was filed on October 5. We consolidated the appeals.
[2] Although the matter originally came before the trial court on a motion for temporary injunction, it appears the trial court effectively decided the entire action on the merits, without objection by the parties. See Minn.R.Civ.P. 65.02(3) (trial on merits may be advanced and consolidated with hearing on motion for temporary injunction). It is unclear what, if anything, remains to be decided by the trial court.
[3] The Daily's continued reliance on a 1974 opinion of the Minnesota Attorney General is puzzling, since that opinion has little persuasive value after Moberg. See Op.Atty.Gen. 63-a-5 (Oct. 28, 1974). That opinion indicated that conversations between two city council members (fewer than constituted a quorum) were "meetings" subject to the open meeting law. In 1982, Hubbard held that a gathering of two council members was not a "meeting," and in 1983 Moberg clearly held that such conversations are not within the purview of the statute where no quorum able to transact business has gathered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594620/ | 432 N.W.2d 46 (1988)
230 Neb. 462
In re Interest of Roderick JONES, a Child Under 18 Years of Age.
STATE of Nebraska, Appellee,
v.
Roderick JONES, Appellant.
No. 88-345.
Supreme Court of Nebraska.
November 23, 1988.
*47 Dennis R. Keefe, Lancaster County Public Defender, and Craig L. Nelson, Lincoln, for appellant.
Robert M. Spire, Atty. Gen., Royce N. Harper and Melanie Whittamore, Lincoln, for appellee.
Before HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.
WHITE, Justice.
This is an appeal from a disposition of the separate juvenile court of Lancaster County of Roderick Jones, a child under 18 years of age, on a petition alleging sexual penetration of another in violation of Neb. Rev.Stat. § 28-319(1)(a) and (b) (Reissue 1985).
On March 2, 1988, a petition was filed in the juvenile court of Lancaster County charging that Jones
on or between the 1st day of July, 1987, and the 7th day of September, 1987 ... did subject [T.G.] to sexual penetration and overcame [T.G.] by force, threat of force, expressed or implied, coercion or deception or did subject [T.G.] to sexual penetration and knew or should have known that [T.G.] was mentally or physically incapable of resisting or appraising the nature of her conduct, in violation of the provisions of Neb.Rev.Stat. Section 28-319(1)(a), (b)....
Jones entered a plea of no contest to the charge made in the petition at an adjudication hearing on March 23, 1988. Evidence was introduced showing that Jones did sexually penetrate T.G. and that Jones was approximately 16 years of age and T.G. was approximately 10 years of age when the incident set forth in the petition occurred.
The juvenile court accepted Jones' no contest plea, adjudicated him to be a child as defined by Neb.Rev.Stat. § 43-247(2) (Cum.Supp.1986), and ordered that a predisposition investigation be completed, as well as ordering the juvenile probation officer to attempt to obtain an evaluation of Jones at the Child Guidance Center for inclusion in the predisposition report.
The evaluation recommended that Jones be placed on probation and be allowed to remain in the home of his mother and stepfather. Jones would be required to participate in the adolescent offenders group counseling program at the Child Guidance Center.
On April 15, 1988, the juvenile court found that Jones had attained the age of 12 years or more and should be committed to the custody of the Department of Correctional Services, State of Nebraska, for placement at the Youth Development Center *48 in Kearney, Nebraska, there to remain until duly paroled or discharged. The court, in determining Jones' sentence, took into consideration the tender years of the victim, her resulting pregnancy, Jones' average intelligence and lack of any mental disability, Jones' knowledge of sex, the seriousness of the offense under the law, and that any lesser sentence would tend to depreciate the seriousness of the crime.
Jones filed a notice of appeal and motion to suspend execution of disposition on April 19, 1988. The motion to suspend execution was overruled on April 21, 1988.
Jones assigns three errors, which can be consolidated as follows: The juvenile court erred by imposing a disposition which was excessive, and as such an abuse of discretion, and by abusing its discretion in overruling Jones' motion to suspend execution of the disposition pending appeal.
Treating both assignments together, we note the applicable standard of review is as follows:
"An appeal of a juvenile proceeding to this court is heard de novo upon the record; and the findings of fact by the trial court will be accorded great weight because the trial court heard and observed the parties and witnesses. Also, the trial court's findings will not be set aside on appeal unless they are against the weight of the evidence or there is a clear abuse of discretion."
In re Interest of Biesecker, 214 Neb. 425, 429, 333 N.W.2d 923, 925-26 (1983).
"[A] juvenile court has broad discretion as to the disposition of a child found to be delinquent." The juvenile judge has broad discretion under Neb.Rev.Stat. § 43-286 (Reissue 1984), the disposition statute. Section 43-286(1)(c) provides that a juvenile adjudicated to be a juvenile described in § 43-247 ... (2)... may be placed in an institution.
In re Interest of J.M., 223 Neb. 609, 613-14, 391 N.W.2d 146, 150 (1986).
We cannot find that the disposition or overruling of Jones' motion to suspend execution of disposition pending appeal was erroneous. The juvenile court adjudicated Jones as a child within the meaning of § 43-247(2). Jones' commitment to the Youth Development Center in Kearney is a disposition specifically authorized by statute. See Neb.Rev.Stat. § 43-286(2) (Supp. 1987). The record reveals no abuse of discretion on the part of the juvenile court in overruling Jones' motion to suspend execution of disposition pending appeal.
Accordingly, the judgment of the juvenile court is affirmed.
AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594625/ | 172 Mich. App. 524 (1988)
432 N.W.2d 721
DUKESHERER FARMS, INC
v.
DIRECTOR OF THE DEPARTMENT OF AGRICULTURE
Docket No. 98291.
Michigan Court of Appeals.
Decided July 26, 1988.
H. James Starr, for plaintiffs.
Frank J. Kelley, Attorney General, Louis J. Caruso, Solicitor General, and David W. Silver, Assistant Attorney General, for defendants.
Before: SHEPHERD, P.J., and SAWYER and K. MacDONALD,[*] JJ.
PER CURIAM.
The Agricultural Commodities Marketing Act (ACMA or Commodities Act), MCL 290.651 et seq.; MSA 12.94(21) et seq., authorizes Michigan agricultural commodities producers to form marketing programs to promote their products. Pursuant to the regulations, the producers may establish advertising and market development programs, conduct research, disseminate market information, set quality standards, inspect and grade commodities, institute surplus controls and provide for payment to producers according to established grades. See generally Old Orchard Brands, Inc v Dep't of Agriculture, 152 Mich App 274, 275-276; 393 NW2d 608 (1986), lv den 426 Mich 873 (1986). Such programs must be renewed by referendum every five years. MCL 290.671; MSA 12.94(41).
*527 The act provides that the Director of the Michigan Department of Agriculture must give notice of a public hearing on a proposed marketing program or proposed amendments to an existing program after receiving a petition signed by the lesser of twenty-five percent or two hundred of the producers of an agricultural commodity. See MCL 290.660(a); MSA 12.94(30)(a). The director is required to make findings and issue a recommendation, based on the hearing record, within forty-five days of the close of the hearing.
The Michigan Cherry Commodity Committee was approved by the requisite number of cherry producers in a referendum conducted in March, 1972. The cherry program was renewed by a referendum in 1977. The instant case involves a challenge to the referendum in 1982 to continue the program and to increase the assessment on cherry production.
Shortly following a February 19, 1982, public hearing, the Director of the Michigan Department of Agriculture issued his findings and recommendation based on evidence presented at the public hearing. The director found that increasing supplies of Michigan cherries are expected in the next few years and that per capita consumption of cherries in the United States has been declining. The director further found that other commodity promotion programs have promotion and advertising budgets far in excess of the promotion budget for Michigan cherries and that the increased cost of the promotional programs have limited the ability of Michigan cherry producers to affect the market. The director further found that nearly one hundred percent of the proposed assessment increases, if passed, would be devoted to increasing promotional efforts. The director recommended that the amendment to the Michigan cherry promotion *528 development program, which would increase per ton assessments against producers, be put to the producers and ordered a referendum held.
The recommended program, or in this case amendment, goes into effect if "more than 50% by number of those voting representing more than 50% of the volume of the affected commodity produced by those voting assent to the proposal." MCL 290.661(1); MSA 12.94(31)(1).
In 1982 there were two issues confronting cherry producers. The first was the standard fifth year renewal of the program. The second question concerned a proposed increase in the rate of the cherry assessment. A referendum was conducted from April 5 to April 19, 1982. During the week of April 5, 1982, plaintiffs' counsel contacted the Attorney General and objected to the referendum claiming the ballot was defective and the findings issued by the director were not in compliance with the Administrative Procedures Act, MCL 24.201 et seq.; MSA 3.560(101) et seq.
The alleged ballot defect was that voting was to be based upon volume of cherries "sold," as opposed to "produced." Although not concurring with plaintiffs that the ballots were facially defective, the Attorney General agreed that there was a possibility for the ballot to be misunderstood by the electorate.
Subsequent to being so advised by the Attorney General, the Director of the Michigan Department of Agriculture decided to resubmit the question to cherry producers in a revised ballot. The returned April ballots were sealed and, on May 5, 1982, a revised ballot was mailed to all cherry producers. The second ballot asked for volume in number of tons "produced."
Plaintiffs commenced this action on May 5, 1982, *529 alleging various violations of the ACMA in the conduct of the referendum. The court denied a preliminary injunction. The May ballots were counted and the cherry referendum passed among those submitting ballots by a very large margin.
On June 13, 1983, the trial court issued its opinion, finding that the public hearing, findings of fact and conclusions of law issued by the Director of the Michigan Department of Agriculture were supported by the administrative record and in concert with the Administrative Procedures Act. With respect to the ballots, the trial court ruled that the department lacked authority to impound the April, 1982, ballots and ordered that the first ballots be tabulated and the results submitted to the court.
Thereafter, the April, 1982, ballots were tabulated and the director reported to the trial court in August, 1983, results indicating an overwhelming approval of continuing the cherry program and increasing the assessment.
In December, 1983, another hearing was held in Berrien Circuit Court. Plaintiffs sought reconsideration of the court's prior ruling on the adequacy of the director's findings and recommendations. Plaintiffs further sought a determination on the validity of the two ballots.
The trial court issued an opinion some fifteen months later, in February, 1985, which concluded that plaintiffs were entitled to have the court determine the validity of the ballots. Plaintiffs were denied other relief.
Defendants next moved to have the trial judge disqualified for bias. That motion was eventually declared moot due to his retirement. In November, 1986, plaintiffs moved to amend their complaint and for summary disposition. The new trial judge denied plaintiffs' motion for summary disposition, *530 denied plaintiffs' motion to amend the complaint, and granted summary disposition in favor of defendants on the basis of MCR 2.116(I)(2), which allows the court to grant summary disposition in favor of the opposing party where that party is so entitled.
I
Plaintiffs first argue on appeal that their motion to amend the complaint was improperly denied in the absence of prejudice to defendants. The court rule states that leave to amend "shall be freely given" when justice so requires. MCR 2.118(A)(2). Nevertheless, the trial court does not abuse its discretion in refusing to permit an amendment when the amendment would be futile. Ben P Fyke & Sons v Gunter Co, 390 Mich 649, 656; 213 NW2d 134 (1973); Ray v Taft, 125 Mich App 314, 324; 336 NW2d 469 (1983). The additional paragraphs plaintiffs seek to add to the complaint were already pled in the original complaint. The new allegations add nothing new although, in some cases, plaintiffs have gone into slightly greater detail in their allegations. To add allegations which merely restate allegations already made is futile. We affirm the trial court's denial of plaintiffs' motion to amend.
II
Plaintiffs next argue that the director failed to properly carry out the referendum by established rules promulgated under the Administrative Procedures Act and, more specifically, the APA'S definition of "rule" contained in § 7 of the APA and, therefore, that the referendum was void. We note initially that the provisions of the Commodities *531 Act have been deemed sufficiently detailed and specific to pass constitutional due process muster. See Dukesherer Farms, Inc v Director of the Dep't of Agriculture (After Remand), 405 Mich 1, 29-30; 273 NW2d 877 (1979). Plaintiffs initially argue that there is no definition of "volume"; that the director's use of "ton" as the volume measurement is not guided by a department rule complying with the APA. Section 12 of the Commodities Act provides that "[t]he director shall establish procedures for determination of volume for the conduct of referendums." We believe the issue of how "volume" is measured is one of arithmetical importance only. Plaintiffs do not dispute that tonnage is the standard business unit of measurement for cherry production. We do not see error in the director's failure to adopt a rule on volume.
Plaintiffs next argue that the director erred in permitting producers to vote on the basis of their highest tonnage produced in any one of three years, 1979, 1980 and 1981. Plaintiffs argue that such a decision was a policy of the director which fell within the definition of "rule" under the APA and therefore required compliance with that act prior to its adoption.
Defendants concede that the statute does not have a specific voting provision, but argue that the voting requirement is grounded in the Commodities Act. Section 12 specifically provides that a "producer" is entitled to one vote. "Producer" is defined in § 2 of the act:
(b) "Producer" means a person engaged in the business of producing, or causing to be produced for any market, an agricultural commodity in quantity beyond that person's own family use, and having a value at first point of sale of more than $800.00 for the agricultural commodity in any 1 *532 growing and marketing season within the last 3 years.
Defendants claim the voting requirement flows from the definition.
We believe the voting standard is a reasonable interpretation of the statutory language although not the only interpretation possible. Plaintiffs do not allege any arbitrary action on the part of the director such as changing the standard from year to year in order to favor one group or another. Plaintiffs do not argue that the standard was adopted to favor one group or another. The standard has been consistently used in past referendums. Furthermore, plaintiffs cannot point to any way in which they have been damaged by the method used. Because the voting standard is grounded in the statute, we believe no rule was necessary.
Plaintiffs also argue that the referendum was conducted without rules promulgated under the APA. Plaintiffs questioned the method of determining who should be sent ballots, verification and disqualification procedures, and the contents of the ballot itself. The act itself governs the conduct of the referendum, including the necessary percentage to pass a proposal, MCL 290.661; MSA 12.94(31), and who is entitled to vote, see § 12 of the act, and includes requisite definitions, see § 2 of the act. There apparently is no mystery as to the director's disqualification standards as they would seemingly apply to any election: ballots not signed, ballots not voted, and ballots failing to indicate volume produced so that the ballot can be given appropriate weight.
Plaintiffs next complain that the act requires rules and regulations for the marketing program and disbursement of funds. In fact, there are such rules. See 1979 AC, R 285.301.1 285.301.40.
*533 III
Plaintiffs next argue that the ACMA provides for voting procedures on the basis of volume "produced." The first ballot was mislabeled and was marked tons "sold." Since the amount produced could well have been substantially different from the amount of cherries sold, plaintiffs argue that the first ballot was in violation of the statute. Therefore, that ballot should not have been used as a basis for continuation of the program and the increased assessment levied against plaintiffs. Plaintiffs also argue that the second ballot was sent out beyond the forty-five-day time limit imposed by the statute and beyond the five-year period in which renewal of the program must take place.
The act requires the director to issue a recommendation approving or disapproving the proposed marketing program within forty-five days of the public hearing. If the director recommends a particular marketing program, a referendum of affected producers is required within forty-five days of the recommendation. The recommended program goes into effect if "more than 50% by number of those voting representing more than 50% of the volume of the affected commodity produced by those voting assent to the proposal." MCL 290.661(1); MSA 12.94(31)(1). All marketing programs under the act are subject to a renewal referendum each fifth year of operation. MCL 290.671; MSA 12.94(41). In this case, the initial ballot was conducted from April 5 through April 19, 1982. Plaintiffs' counsel contacted the Attorney General and indicated the alleged problem with the ballot language. The Attorney General apparently advised the director that the ballot could be misleading. The director then ordered a second *534 referendum, held in May, 1982. Both votes resulted in overwhelming approval of the renewal and new proposed assessment.
The trial court initially concluded that the director was without statutory power to order the second ballot. A subsequent trial court opinion indicated that the plaintiffs were entitled to have a court determine the validity of the ballots. Summary judgment was granted defendants on the issue in a subsequent hearing by a successor judge.
We initially conclude that the first trial judge was in error when he stated that the director could not issue a second ballot. When a potentially misleading error was pointed out to the director, he immediately moved to send out a subsequent ballot. No prejudicial delay was involved. The corrected ballots were sent to the identical voters. We find no error in the procedure followed by the director.
Although the subsequent balloting fell outside the forty-five-day time limit, the initial ballot was within the time limit. We believe the director's correction of the error amounted to substantial compliance with the forty-five-day limit. Furthermore, nothing in the statute provides that the program must be renewed within five years of the date of the previous renewal. The statute only requires that marketing programs are subject to a renewal referendum each fifth year of operation. MCL 290.671; MSA 12.94(41). We believe the director has complied with the statute here.
IV
Finally, plaintiffs challenge the findings of fact made by the director from the public hearing and published in his recommendation. Generally, administrative *535 decisions are to be affirmed if they are supported by material, competent and substantial evidence on the record as a whole. Const 1963, art 6, § 28; MCL 24.306(1)(d); MSA 3.560(206)(1)(d). Substantial evidence is such evidence as a "reasonable mind" would accept as adequate to support the decision. Parnis v Civil Service Comm, 79 Mich App 625, 629-630; 262 NW2d 883 (1977). An administrative decision is subject to reversal by the courts of this state only where the evidence firmly establishes that the agency has abused its discretion by arbitrary action. Crider v Michigan, 110 Mich App 702, 716; 313 NW2d 367 (1981), lv den 414 Mich 953 (1982).
As pointed out by the trial court, eighteen of the nineteen persons attending the public hearing spoke in favor of the proposed assessment increase and that the proposal be submitted on a referendum vote. There was substantial testimony to support each of the findings made by the director. We therefore find that the decision was supported by the record and affirm the trial court's ruling.
Affirmed.
NOTES
[*] Circuit judge, sitting on the Court of Appeals by assignment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1922222/ | 413 B.R. 438 (2009)
In re THE HERITAGE ORGANIZATION, L.L.C., Debtor.
Dennis Faulkner, Trustee, Plaintiff,
v.
Gary M. Kornman, et al., Defendants.
Bankruptcy No. 04-35574-BJH-11. Adversary No. 06-3377-BJH.
United States Bankruptcy Court, N.D. Texas, Dallas Division.
May 11, 2009.
*450 Laurie Dahl Babich, Baker & McKenzie LLP, Cynthia Williams Cole, Beirne Maynard & Parsons, LLP, Dennis S. Faulkner, Lain Faulkner & Company, PC, David William Parham, Baker & McKenzie LLP, Dallas, TX, for Debtor.
*451 Elizabeth Banda, Perdue, Brandon, Fielder, Collins & Mott, Frank Hill, Hill & Gilstrap, Arlington, TX, John C. Bjorkman, Holly A. Harris, Preston Gates Ellis, LLP, Michael J. Gearin, Kirkpatrick & Lockhart Preston Gates Ellis LLP, Seattle, WA, Dan S. Boyd, The Boyd Law Firm, P.C., Jay A. Brandt, Jay A. Brandt, P.C., John Mark Chevallier, McGuire, Craddock & Strother, Perry J. Cockerell, Cantey & Hanger, Scott W. Everett, Haynes & Boone, LLP, Donald H. Flanary, Jr., The Flanary Group, Nancy E. Freeman, Law Office of Nancy E. Freeman, P.C., Thomas Michael Herrin, Department of Justice, Richard H. London. Vinson & Elkins, LLP, Peter Malouf, The Law Office of Steven Malouf, P.C., Stephen F. Malouf, Law Offices of Stephen F. Malouf, P.C., William Brian Memory, Haynes & Boone, LLP, Kim E. Moses, Wright Ginsberg Brusilow, PC, Patrick J. Neligan, Jr., Neligan Foley LLP, Holland N. O'Neil, Gardere, Wynne and Sewell, Rosa R. Orenstein, Looper Reed & McGraw, Meredyth A. Purdy Donna Bice Read, IRS Office of Chief Counsel, John E. Richards, Richards & Valdez, Laurie A. Spindler, Linebarger Goggan Blair & Sampson, LLP, Jeffrey M. Tillotson, Lynn Tillotson & Pinker, L.L.P., Cliff A. Wade, Settle & Pou, P.C., Amy M. Walters, Haynes & Boone, LLP, Dallas, TX. Shawn M. Christianson, Buchalter Nemer, San Francisco, CA, Amy Catherine Dinn, Gardere Wynne Sewell, LLP, Houston, TX, Lawrence R. Elleman, Dinsmore and Shohl, Cincinnati, OH, Julie C. John, Forshey & Prostok, LLP, (Hay M. Taylor, Kelly, Hart & Hallman, Ft. Worth, TX, David N. Neale, Levene, Neale. Bender, Rankin & Brill, Los Angeles, CA, Toni Price, Jackson Walker, LLP, San Antonio, TX, John J. Schmidt, Dinsmore and Shohl, LLP, Cincinnati, OH, Robert E. Winter, Milbank, Tweed, Hadley and McCloy, LLP, New York, N.Y. for Creditor.
Carol E. Jendrzey, Cox & Smith, San Antonio, TX, Kevin M. Lippman, Munsch, Hardt, Kopf & Harr, P.C., M. David Bryant, Jr., Cox Smith Matthews Incorporated, Dallas, TX, for Spec. Counsel.
Mark H. How, Short, How, Frels & Heitz, Dallas, TX, Gilbert A. Lazarus, Lazarus & Lazarus, P.C., J. David Leamon, Cadwalader, Wickersham & Taft LLP, New York, NY, for Interested Party.
MEMORANDUM OPINION
BARBARA J. HOUSER, Bankruptcy Judge.
The Court tried this adversary proceeding on January 7-16, 2009. At the conclusion of the evidence, certain parties asked for the opportunity to file post-trial briefs and revised proposed findings of fact and conclusions of law. Pursuant to an agreed schedule, the last of those pleadings was filed on February 5, 2009. Due to scheduling complications with the parties, closing arguments did not occur until February 26, 2009. At the conclusion of closing arguments, the Court took the matter under advisement.
The Court has jurisdiction over the parties and the issues in accordance with 28 U.S.C. §§ 1334 and 157(b). This Memorandum Opinion contains the Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.
I. FACTUAL BACKGROUND
A. Heritage
The Heritage Organization, L.L.C. ("Heritage") is a Delaware limited liability company formed in 1994. Pretrial Order, docket no. 537 ("Pretrial Order"), Stipulation *452 1; Defendants' Exhibit ("D.Ex.") 91.[1] After operating for ten years, on May 17, 2004, Heritage filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, thereby commencing the above bankruptcy case (the "Case"). Pretrial Order, Stipulation 95. Prior to its bankruptcy filing, Heritage advised[2] extremely high net worth individuals regarding estate planning, business planning, tax planning and asset planning. D.Ex. 23, DFT-0872.
The information and strategies about which Heritage advised its clients were enormously complex and individualized. Of particular relevance here, and for certain clients during the period 1998 to 2001, Heritage included a version of an investment transaction using a strategy involving § 752 of the Internal Revenue Code (the "752 Transaction") as part of an overall group of estate and tax planning strategies it presented to its clients.[3] According to the Defendants, a 752 Transaction generally worked as follows:
The client would deposit money into a brokerage account having a margin feature. The client would then utilize margin to make an investment by executing a short sale of treasury notes. The cash proceeds from the short sale would then be combined into the brokerage account with the cash deposited by the client.
At this point in time, the brokerage account would have within it (a) assets consisting of the cash deposited into the account and the proceeds from the short sale, and (b) an obligation consisting of the obligation to return the treasury notes that had been borrowed to execute the short sale.
Once the short sale was executed, the client would then transfer the brokerage account, with its assets and liabilities, to a partnership ("Partnership A"). In return, the client would receive a limited partnership interest in Partnership A. Partnership A would thus be liable for the obligation to return the treasury notes that had been borrowed from the brokerage to execute the short sale.
After the transfer to Partnership A, the client would contribute its limited partnership interest in Partnership A to a second partnership ("Partnership B"). In return, the client would receive a limited partnership interest in Partnership B. Thus, the client would own a partnership interest in Partnership B, which owned a partnership interest in Partnership A, which owned the brokerage account consisting of cash and the *453 obligation to return the property in the form of treasury notes.
Following these transactions, Partnership B would sell its interest in Partnership A to a third party. The third party, thus, would own Partnership A, including the resulting brokerage account with the total amount of cash and the obligation to return the property in the form of treasury notes. The third party would then use the cash from the brokerage account to close the short sale by buying the treasury notes necessary to return them to the brokerage. The third party would then have a profit or loss depending on the fluctuation of the treasury notes which had been sold short.
Defendants' First Amended Updated Proposed Findings of Fact and Conclusions of Law ("Defendants' Proposed Amended Findings and Conclusions"), docket no. 564, at pp. 14-15. See also P.Ex. 73; Testimony of Czerwinski (1/16/09) 22:2-27:21.
According to the Defendants, the tax treatment that Heritage and its Chief Executive Officer, Gary M. Kornman ("Kornman"), believed to be appropriate for a 752 Transaction is generally described as follows:
1. Partnership B has an outside basis in its purchase of Partnership A in the amount that it paid for the interest (the value of the cash in the brokerage account that was Partnership A's only asset).
2. Partnership B sells its interest in Partnership A to the third party, and its basis is the entirety of the amount that it paid for the Partnership A interest, less the amount paid by the third party. Partnership B does not have to offset its basis by the amount necessary to close the short sale and return the property in the form of treasury notes.
3. Partnership B's outside basis in Partnership A would normally have to be adjusted for any liability that is contained with Partnership A i.e., the obligation to return the property in the form of treasury notes. But Partnership A's obligation was not ascertainable at the time of the sale to the third party. Since the transaction had not yet closed, the amount of the obligation was not ascertainable. See I.R.C. Sec. 1233[4]. Therefore, Partnership A's obligation is a "contingent liability" and is not a "liability" for purposes of Section 752. Since it is not a liability, Partnership B does not have to take the liability into account in computing outside basis under that section of the Code.[5]
*454 4. As a result, the outside basis for Partnership B is a great deal larger than the amount it receives from the third party. The net effect is a tax loss for Partnership B that it can then use to offset capital gains in that tax year and in subsequent years.
Defendants' Proposed Amended Findings and Conclusions, at pp. 15-16.
The tax returns of many of Heritage's clients who had implemented a 752 Transaction were either audited by the Internal Revenue Service ("IRS") or the clients chose to "unwind" the transactions and settle with the IRS by paying the taxes owed, together with interest and penalties on the unpaid taxes. As a result of the failure of the 752 Transactions (or other strategies) to achieve the desired tax savings (and certain other alleged actions or inactions by Heritage), a number of Heritage's former clients asserted claims against Heritage in the Case (the "Client Claimants").
On the motion of Ralph Canada ("Canada"), a former Heritage employee, and after notice and a hearing, the Court ordered the appointment of a Chapter 11 trustee in the Case. See docket no. 151 in 04-35574-BJH-11. On August 16, 2004, the U.S. Trustee appointed Dennis S. Faulkner as the Chapter 11 trustee of Heritage (the "Trustee"), which appointment was confirmed by order entered on August 18, 2004. Pretrial Order, Stipulation 2. On May 16, 2006, the Trustee commenced the above-captioned adversary proceeding.
On March 10, 2007, the Trustee and the Client Claimants jointly proposed a plan of liquidation for Heritage (the "Plan"). See docket no. 1020 in Case No. 04-35574-BJH-11. Canada,[6] Kornman and other Kornman affiliates objected to confirmation of the Plan. See docket nos. 1139, 1141, 1147 in Case No. 04-35574-BJH-11. Following hotly contested confirmation hearings, the Court confirmed the Plan by Memorandum Opinion and Order entered on September 12, 2007. See docket no. 1281 in Case No. 04-35574-BJH-11. Pursuant to the Plan, a creditors' trust was created (the "Plan Trust"). See docket no. 1201 in Case No. 04-35574-BJH-11 (the "Confirmed Plan"), Art. 6.1. The Trustee became the trustee of the Plan Trust. Id., Art. 6.1.7. Various Heritage assets, including the claims asserted in this adversary proceeding, were transferred to the Plan Trust. Id., Art. 6.1.2; 1.17; 1.29. Similarly, the claims of various creditors, including the Client Claimants and Canada, were also transferred to the Plan Trust. Id., Art. 6.1.3. Those creditors are the beneficiaries of the Plan Trust and any recovery here. Id., Art. 4.4.1.
While the Trustee asserted numerous claims against the Defendants in this adversary proceeding originally, through a combination of Daubert and summary judgment motions, the claims remaining for trial are more limited. See Pretrial Order, pp. 2-6. First, the Trustee seeks to avoid and then recover various distributions that Heritage made to its members from April 2001 through February 2003 as actual fraudulent transfers. Second, the Trustee seeks to avoid and then recover various payments that Heritage made to Kornman and/or the Supplier Defendants during the 90-days prior to Heritage's bankruptcy filing as preferences. Finally, the Trustee seeks to hold Kornman and the Entity Defendants liable to Heritage's *455 creditors through two distinct veil piercing theoriesi.e., alter ego and sham to perpetrate injustice.
B. The Individual Defendant
Kornman is an individual residing in the State of Texas. Pretrial Order, Stipulation 3. Kornman has been in the estate planning, business planning, tax planning and asset planning business for over 40 years. Utilizing various insurance, financial, and tax strategies, Kornman built several businesses over his career, culminating in the formation of Heritage. Kornman has a law degree from the University of Alabama, passed the Alabama bar exam, but has never practiced law. Testimony of Kornman (1/12/09) 6:4-12; See Pretrial Order, Stipulation 5. Kornman obtained a B.A. degree from Vanderbilt University, with a double major in business and economics and psychology. Testimony of Kornman (1/12/09) 6:4-12. At all relevant times, Kornman controlled, directly or indirectly, each of the Entity Defendants, Pretrial Order, Stipulation 32, except Strategic Leasing L.P. and Leasecorp, Inc., which were controlled by his son, Michael Kornman ("Michael"). Testimony of Kornman (1/8/09) 12:13-14:16; Pretrial Order, Stipulation 32.
C. The Entity Defendants
1. Steadfast LP, Tikchik LP, and GMK Family (collectively, the "Member Defendants")
Defendant Steadfast Investments LP ("Steadfast") is a Delaware limited partnership with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 7. Steadfast is an investment partnership whose primary investment was a membership interest in Heritage. Testimony of Kornman (1/8/09) 53:13-54:15. From 2001-2003, Steadfast owned 87% of Heritage. Id. In turn, 99% of Steadfast was owned by Defendant Ettman Family Trust I ("Ettman Trust") and 1% was owned by Defendant Kornman & Associates, Inc. ("Kornman Associates"). Testimony of Kornman (1/8/09) 63:23-64:23.
Defendant GMK Family Holdings LLC ("GMK Family") is a Delaware limited liability company with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 8. GMK Family was the Manager of Heritage beginning in 1998. Pretrial Order, Stipulation 25. Kornman was the Manager of GMK Family, Pretrial Order, Stipulation 31, and thereby controlled it. Testimony of Kornman (1/8/09) 54:23-25. From 2001-2003, GMK Family owned 5% of Heritage. Testimony of Kornman (1/8/09) 54:16-22.
Defendant Tikchik Investments Partnership, LP ("Tikchik") is a Delaware limited partnership with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 9. Tikchik was formed in 1999 by Kornman and Ted Mann ("Mann"), an unrelated third party, for the purpose of holding an interest in Heritage. See Pretrial Order, Stipulation 91. At its formation, Tikchik had two general partnersi.e., Defendant GMK Corp., which was the managing general partner, and an entity controlled by Mann. See Pretrial Order, Stipulation 27. On January 15, 2001, Mann died, triggering Kornman's obligation to buy out Mann's interest in Tikchik, which he did.[7]See Pretrial Order, *456 Stipulation 93. Kornman controls GMK Corp., which controls Tikchik. Pretrial Order, Stipulations 42 & 44.
2. GMK Corp. and Ettman Trust
Defendant GMK Corp. is a Delaware corporation with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 11. GMK Corp. is the managing general partner of Tikchik. Pretrial Order, Stipulation 44. GMK Corp. is owned by Kornman. See Testimony of Kornman (1/8/09) 66:1-20.
Defendant Ettman Trust is a trust formed in 1991, Testimony of Kornman (1/8/09) 15:4-6, with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 12. Kornman is the Trustee of the Ettman Trust, Testimony of Kornman (1/8/09) 14:17-15:6, which held investments for the benefit of Kornman and his family. Defendants' Proposed Amended Findings and Conclusions, p. 4, ¶ 8.
3. The Supplier Defendants
Defendant Leasecorp, Inc. ("Leasecorp") is a Delaware corporation with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 14. Leasecorp is the Managing General Partner of Strategic Leasing LP ("Strategic"). Pretrial Order, Stipulation 46. Kornman has no ownership interest in, or control over, Leasecorp or Strategic. See Testimony of Kornman (1/8/09) 12:13-14:16. As noted previously, Michael controls both entities.
Defendant Strategic is a Delaware limited partnership with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 13. Strategic leased office equipment, computers, and software to Heritage. Pretrial Order, Stipulation 45.
Defendant Valiant Leasing, LLC ("Valiant") is a Delaware limited liability company with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 15. Valiant leased office equipment, software, and furniture to Heritage. Pretrial Order, Stipulation 45.
Defendant Executive Aircraft Management, LLC ("XAM") is a Delaware limited liability company with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 16. XAM leased aircraft to Heritage. Pretrial Order, Stipulation 45.
Defendant Executive Air Crews, LLC ("XAC") is a Delaware limited liability company with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 17. XAC provided pilot services to Heritage. Pretrial Order, Stipulation 45.
Defendant Heritage Advisory Group, LLC ("Advisory") is a Delaware limited liability company with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 22. Advisory was the general partner of, and provided investment advisory services to, two investment funds. Defendants' Proposed Amended Findings and Conclusions at p. 5, ¶ 14.
Defendant The Heritage Organization Agency, Inc. ("Agency") is a Delaware corporation with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 19. Agency leased real property (office space) from a third party and then subleased that property to Heritage. See Pretrial Order, Stipulation 45.
*457 Defendant Kornman & Associates, Inc. ("Kornman Associates") is a Tennessee corporation with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 10. Kornman Associates is the general partner of Steadfast, Pretrial Order, Stipulation 44, and the Manager of XAM, XAC, Properties, Valiant, and Vehicle. Pretrial Order, Stipulation 46. Kornman owns 100% of the stock of Kornman Associates. See Testimony of Kornman (1/8/09) 54:12-13.
Defendant Heritage Properties, LLC ("Properties") is a Delaware limited liability company with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 20. Properties owned a building in Tennessee, which it leased to Heritage for office space. Pretrial Order, Stipulation 45.
Defendant Vehicle Leasing, LLC ("Vehicle") is a Delaware limited liability company with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 18. Vehicle leased automobiles to Heritage. Pretrial Order, Stipulation 45.
Defendant Financial Marketing Services, Inc. ("FMS") is a Texas corporation with its principal place of business in Dallas County, Texas. Pretrial Order, Stipulation 21. FMS owned a database of prospective and current client information that it made available to Heritage for a fee. Pretrial Order, Stipulation 45.
4. The Relationships Between the Entity Defendants and Heritage
As found previously, at all relevant times, Kornman controlled, directly or indirectly, each of the Entity Defendants, except for Leasecorp and Strategic, which were controlled by Michael. Kornman also controlled Heritage, through his control of Heritage's Manager, GMK Family. Pretrial Order, Stipulation 31. From 2000 until his resignation on April 23, 2004, Kornman served as Chief Executive Officer and a Vice President of Heritage. Pretrial Order, Stipulation 33. During the four years prior to Heritage's bankruptcy filing, Kornman served as a Director (until April 4, 2002), President, and Chief Executive Officer of Steadfast; Manager (until April 20, 2004) and President of GMK Family (the Manager of Heritage); and Director and President of Tikchik. Pretrial Order, Stipulation 44.
Walker directed the accounting and administrative functions of the Entity Defendants and Heritage. Pretrial Order, Stipulation 43; Testimony of Walker (1/12/09) 179:17-20. From 2000 until April 2004, Walker served as Secretary and Treasurer of Heritage. Pretrial Order, Stipulation 34. Walker was identified as the Chief Financial Officer of Heritage in its Statement of Financial Affairs filed in the Case. Pretrial Order, Stipulation 35. During the four years prior to Heritage's bankruptcy filing, Walker served as a Director, Secretary and Treasurer of Steadfast and Tikchik, and as Treasurer of GMK Family. Pretrial Order, Stipulation 44.
During the four years prior to Heritage's bankruptcy filing, the officers of the Supplier Defendants were, in varying configurations, Michael, Walker, Claudia McElwee ("McElwee," who was also an officer and/or a director of Steadfast and GMK Family), Kornman (with respect to Agency beginning in July 2002), and Canada (with respect to Agency until July 2002). Pretrial Order, Stipulations 44 & 46.
Other than XAC, none of the Entity Defendants had employees. Pretrial Order, Stipulation 55. The officers and/or employees of Heritage who performed services for the benefit of the Entity Defendants, including the Supplier Defendants, *458 generally did not receive compensation from those other entities, although Michael did. Pretrial Order, Stipulations 47 & 48. Many of the Supplier Defendants had the same office address as Heritage, although certain of them had separate office addresses. Pretrial Order, Stipulations 49-54. For example, XAM and XAC had hangar space separate from Heritage and the other Supplier Defendants. Pretrial Order, Stipulation 49.
According to Kornman and Walker,[8] the Entity Defendants (i) maintained the corporate formalities, Testimony of Kornman (1/12/09) 92:24-93:7 and Testimony of Walker (1/14/09) 68:22-69:17; (ii) maintained separate books and records from Heritage and from each other, Testimony of Kornman (1/12/09) 92:9-23 and Testimony of Walker (1/14/09) 88:1-11; 91:4-12; (iii) prepared their own financial statements, and were not consolidated on Heritage financial statements or on any other consolidated basis, Testimony of Kornman (1/12/09) 92:9-23 and Testimony of Walker (1/14/09) 88:1-11; 91:4-12; and (iv) filed tax returns separate from Heritage and from each other, Testimony of Kornman (1/12/09) 92:9-23 and Testimony of Walker (1/14/09) 88:1-11; 91:4-12. Moreover, according to Walker: (i) Heritage and the Supplier Defendants entered into contracts upon arms-length terms that were double-checked for fairness against terms Heritage would have been able to obtain from a third party, Testimony of Walker (1/14/09) 69:20-72:16; see also, Testimony of Kornman (1/12/09) 91:23-92:8; and (ii) these contractual arrangements between the Supplier Defendants and Heritage were often documented in written contracts, written consents of Heritage and the applicable Supplier Defendant, and/or both, Testimony of Walker (1/14/09) 88:1-91:12. Finally, Walker or Kornman testified that (i) assets owned by the Supplier Defendants were not commingled with the assets of Heritage or each other, Testimony of Walker (1/14/09) 69:6-7; (ii) each of the Supplier Defendants maintained separate bank accounts, Testimony of Walker (1/14/09) 69:7-8; (iii) office equipment and fixtures in Heritage offices that were owned by Strategic or Valiant were marked with inventory stickers denoting that they were assets of Strategic or Valiant, not Heritage, Testimony of Kornman (1/12/09) 86:11-16; and (iv) transfers between Heritage and the Supplier Defendants were documented by detailed invoices, checks, receipts and accounting records.[9]
*459 II. LEGAL ANALYSIS
A. Fraudulent Transfer Claims
The largest claims asserted by the Trustee in the amended complaint seek avoidance, under § 544 of the Bankruptcy Code and the Texas Uniform Fraudulent Transfer Act ("TUFTA"), of distributions made from April 2001 through February 2003 in the aggregate amount of $46 million to insiders of Heritage (collectively, the "Transfers"). The legal and factual issues before the Court with respect to the TUFTA claims are (1) is there a "triggering creditor" that gives the Trustee standing to pursue claims under TUFTA to avoid and recover the Transfers; (2) does limitations bar avoidance of any of the Transfers; (3) who bears the ultimate burden of persuasion and what is the standard of proof; (4) did the Trustee meet his burden by presenting evidence that the Transfers were made with actual intent to hinder, delay, or defraud any Heritage creditor by either direct evidence or by establishing one or more "badges" or other indicia of fraud as to any of the Transfers; (5) if the Trustee has met his burden of proof, have the Member Defendants met their burden to prove a legitimate purpose for each Transfer and/or otherwise establish, by a preponderance of the credible evidence, the lack of fraudulent intent; and (6) what Transfers, if any, are avoidable and, if any are avoidable, from whom can the Trustee recover. Each of these issues is addressed in turn below.
1. Standing
Section 544(b) of the Bankruptcy Code grants the Trustee the power to avoid "any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502...." 11 U.S.C. § 544(b)(1). The Trustee relies on TUFTA as his "applicable law," alleging that the transfers made to GMK Family, Tikchik and Steadfast were made "with actual intent to hinder, delay, or defraud any creditor of the debtor." TEX. BUS. & COM.CODE § 24.005(a)(1).
A trustee's right to avoid a transfer is derivative of an actual unsecured creditor's right and, therefore, to establish standing under § 544(b), the Trustee must show the existence of an actual unsecured creditor holding an allowable claim that could avoid the challenged transfer. See Ries v. Wintz Props., Inc. (In re Wintz Cos.), 230 B.R. 848, 858-59 (8th Cir. BAP 1999) (citing Sender v. Simon, 84 F.3d 1299, 1304 (10th Cir.1996)); Smith v. Am. Founders Fin., Corp., 365 B.R. 647, 659 (S.D.Tex.2007). While the Trustee must demonstrate the existence of this "golden creditor," see Turner v. Phoenix Fin., LLC (In re Imageset, Inc.), 299 B.R. 709, 715 (Bankr.D.Me.2003), the Trustee need not specifically identify the creditor by name; as long as the Trustee establishes that such unsecured creditors exist, he can assume the mantle of any one of them. Leibowitz v. Parkway Bank & Trust Co. *460 (In re Image Worldwide, Ltd.), 139 F.3d 574, 577 (7th Cir.1998); see also Stalnaker v. DLC, Ltd. (In re DLC, Ltd.), 295 B.R. 593 (8th Cir. BAP 2003), aff'd, 376 F.3d 819 (8th Cir.2004). Only one triggering creditor is required, and the amount of its claim is unimportant. See Abramson v. Boedeker, 379 F.2d 741, 748 n. 16 (5th Cir.1967) ("[I]f the transfer is avoidable at all by any creditor, it is avoidable in full for all creditors regardless of the dollar amount of the prevailing claim."); Acequia, Inc. v. Clinton (In re Acequia), 34 F.3d 800, 809-10 (9th Cir.1994). Moreover, the unsecured creditor need not exist at the time the avoidance action is filed, so long as that creditor existed on the date the bankruptcy petition was filed. See, e.g., In re DLC, Ltd., 295 B.R. at 605 ("we hold, as have other courts analyzing this issue, that the trustee must identify a creditor with an allowable unsecured claim who had an allowable claim against the debtor on the date the bankruptcy petition was filed.") (citing Acequia, 34 F.3d 800, 807 (9th Cir.1994)).
So, the question becomes, which Heritage creditor serves as the triggering creditor here?[10] To answer this question, we start with the basics. TUFTA defines "creditor" as "a person ... who has a claim." TEX. BUS. & COM.CODE § 24.002(4). In turn, TUFTA defines "claim" as "a right to payment ..., whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured." Id. at § 24.002(3).
The parties have stipulated that the IRS is a creditor of Heritage, holding an allowed unsecured claim in the Case for unassessed social security taxes for tax periods including the first calendar quarter of 2001. Pretrial Order, Stipulations 96 & 97. Thus, the IRS was a creditor of Heritage prior to the time that Heritage made any of the Transfers at issue here, the first of which was made on April 16, 2001 and the last of which was made on February 18, 2003. Thus, the IRS is a triggering creditor with respect to each of the Transfers.
The parties have also stipulated that Canada holds an allowed unsecured claim in the Case. Pretrial Order, Stipulation 98. Canada testified that his claim against Heritage arose in August of 2000 and that Kornman knew about his claim no later than the fall of 2000. Testimony of Canada (1/15/2007) at 46:4-51:14; P.Ex. 266.
However, the Defendants argue that Canada should not be permitted to serve as a triggering creditor until at least July 2002 when his employment with Heritage ended. See Defendants' Post-Trial Brief at p. 12 ("It cannot be disputed that Ralph Canada was not a `triggering creditor' related to the Distributions prior to his departure in July 2002.") The premise of the Defendants' argument is that Canada
continued to work at Heritage, and received millions of dollars in compensation, all while supposedly being a `creditor' of Heritage. If he truly thought he had a claim, why would he work there for another two years before leaving?
Id.
The Court rejects the Defendants' argument for several reasons. First, remaining employed and earning "millions of dollars in compensation" does not preclude the existence of a dispute over how many more millions of dollars in compensation the employee may be entitled to receive. *461 In other words, having a dispute with your employer and remaining employed are not mutually exclusive. The fact that an employee chooses to remain employed does not suggest that the employee has no claim against his employer. Second, the fact that Canada was well compensated by Heritage does not mean that Canada had no claim for additional compensation, as the arbitrators ultimately concluded. Third, the arbitrators ultimately found that Kornman orally promised Canada additional compensation in connection with the Larry Flinn ("Flinn") 752 Transaction in 2000, which Heritage failed to pay to him. That oral promise, as found by the arbitrators, was made before the first Transfer at issue here was made. Finally, the Defendants' overlook TUFTA's broad definition of "creditor" and "claim."[11] As defined by TUFTA, "claim" includes an unliquidated and disputed right to payment. Canada's alleged right to payment for his involvement in the Flinn 752 Transaction was an unliquidated and disputed "claim" from late summer/early fall 2000 until April 14, 2004, when the arbitrators liquidated Canada's "claim" and resolved the dispute in Canada's favor. See Pretrial Order, Stipulation 84 (date of arbitration award). Whether liquidated or unliquidated, and whether disputed or undisputed, Canada clearly held a "claim" against Heritage within the meaning of TUFTA from late summer/early fall of 2000 through confirmation of the Plan, at which time Canada's allowed claim in the Case was assigned to the Plan Trust.
For all of these reasons, this Court concludes that Canada held a claim against Heritage prior to April 16, 2001 (the date of the first Transfer at issue here), which claim was ultimately allowed in the Case. Thus, Canada is also a triggering creditor with respect to each of the Transfers.
Accordingly, because the Trustee can stand in the shoes of the IRS (with respect to its allowed claim for unassessed taxes) and/or Canada (with respect to his allowed claim for unpaid compensation), this Court concludes that the Trustee has standing to challenge the Transfers under § 544(b) of the Bankruptcy Code and TUFTA.
2. Limitations
TUFTA provides a statute of repose of four years. Tex. Bus. & Com.Code § 24.010(a)(1). The Defendants argue that the Delaware Limited Liability Company Act reduces the lookback period for fraudulent transfers under TUFTA from four years to three years. See 6 Del Code § 18-607(c). While the Delaware statute does limit the liability of a member for wrongful distributions to three years, for the reasons explained more fully below, this Court concludes that the Delaware legislature cannot limit the reach of TUFTA.
Turning first to the Defendants' arguments, citing ASARCO LLC v. Am. Mining Corp., 382 B.R. 49, 60-61 (S.D.Tex.2007), they assert that "[b]ankruptcy courts apply the choice-of-law rules of the forum in which they sit." Defendants' Post-Trial Brief at p. 4. The Defendants then assert that "[i]n Texas, when deciding which state's law to apply in determining the liability of an interest holder, the court looks to the law of the jurisdiction of formation of the entity which is *462 involved," citing, inter alia, Alberto v. Diversified Group, Inc., 55 F.3d 201, 203 (5th Cir.1995) and ASARCO, 382 B.R. at 64-65. Id. In criticizing the Trustee's choice of law analysis, the Defendants argue that it is the "Texas `internal affairs' doctrine that controls the determination," and that under V.A.T.S. Tex. Bus. Corp. Act, art. 8.02
only the laws of the jurisdiction of incorporation of a foreign corporation shall govern (1) the internal affairs of the foreign corporation, including but not limited to the rights, powers, and duties of its board of directors and shareholders and matters relating to its shares, and (2) the liability, if any, of shareholders of the foreign corporation for the debts, liabilities, and obligations of the foreign corporation for which they are not otherwise liable by statute or agreement.
Id. at p. 5. Thus, according to the Defendants, Del.Code § 18-607 governs here because
the Trustee seeks to declare prior distributions from Heritage as fraudulent ...; the Delaware statute expressly limits liability for distributions to three years; and ... a distribution from an entity to its owners is a matter falling under the `internal affairs of a foreign corporation....
Id.
While the Court agrees with the Defendants' starting pointi.e., bankruptcy courts apply the choice of law rules of the forum in which they sit, for the reasons explained more fully below, this Court disagrees with the balance of the Defendants' contentions. First, in making their arguments and in relying on ASARCO and Alberto,[12] the Defendants ignore the fact that the ASARCO court discussed choice-of-law rules in two different contextsi.e., once in the context of fraudulent transfer claims and then again in the context of alter ego or veil piercing claims. Of significance here, however, with respect to the fraudulent transfer claims before it, the ASARCO court stated
A claim for fraudulent transfer arises in tort. Texas choice-of law rules for causes of action in tort apply section 145 of the Restatement (Second) Conflict of Laws, also described as the `most significant relationship test.' According to section 145, the local law of the state which has the `most significant relationship to the occurrence and the parties' will govern the claim. In applying the Restatement's `most significant relationship test,' this Court considers the following factors: (1) the place where the injury occurred; (2) the place where the conduct causing the injury occurred; (3) the domicile, residence, nationality, place of incorporation, and place of business of the parties; and (4) the place where the relationship between the parties is centered. When weighing these four factors, it is not the number of contacts, but the qualitative nature of those particular contacts that determines which state has the most significant relationship to the occurrence and the parties.
ASARCO, 382 B.R. at 61-62. See also De Aguilar v. Boeing Co., 47 F.3d 1404, 1413 (5th Cir.1995) (noting the application of these four factors and stating that "[t]hese contacts are to be evaluated according to their relative importance with respect to the particular issue.").
Here, the only connection the Trustee's fraudulent transfer claims have to Delaware is that Heritage and the Member Defendants are Delaware entities (albeit headquartered in Texas). The other factors point to the application of Texas (or at least, non-Delaware) law. For example, *463 the uncontroverted evidence is that (i) the principal places of business for Heritage and the Member Defendants are in Dallas County, Texas, and (ii) during the time period in question, all of those entities maintained their offices in the same physical location in Dallas. Pretrial Order, Stipulation 9, 51.[13] Moreover, each of the Member Defendants was controlled, directly or indirectly, by Kornman, a Texas resident. Pretrial Order, Stipulations 3 & 28. Walker and/or McElwee actually carried out the decision of Heritage's Manager (GMK Family acting through its manager, Kornman) to make the distributions, apparently from their offices at Heritage in Dallas. See Testimony of Walker (1/13/09) 79:15-80:1; Testimony of McElwee (1/15/09) 7:19-8:16. The July 2001 distribution check to Steadfast was drawn on a Texas bank and deposited into a Texas bank. P.Ex. 5 at 2. Many of the distributions to GMK Family were also payable by banks in Texas. See, e.g., P.Ex. 22 at 22-23. Finally, there is no evidence to suggest that any of the relevant decision-making occurred outside of Texas, much less in Delaware. So, as relevant here, the injury occurred in Texas; the conduct causing the injury occurred in Texas; the principal place of business of the Member Defendants and Heritage is in Texas, and the parties' relationship is centered in Texas.
Second, the Texas "internal affairs" doctrine does not mandate the application of Delaware law to the Trustee's fraudulent transfer claims. Notwithstanding the fact that the Trustee seeks to recover distributions to Heritage's members (and thus, according to the Defendants' the claims involve a "matter relating to [Heritage's] shares"), fraudulent transfer claims like those at issue here involve the rights of creditors, and not the internal corporate governance issues that are the subject of the "internal affairs" doctrine. See Stanziale v. Dalmia (In re Allserve Systems Corp.), 379 B.R. 69, 79-80 (Bankr.D.N.J. 2007) (interest of New Jersey in protecting its creditors outweighs interest of Delaware in regulating its entities); Drenis v. Haligiannis, 452 F. Supp. 2d 418, 425-28 (S.D.N.Y.2006) (interest of jurisdiction where fraudulent transfer occurred outweighs interest of partnership in having internal relationships governed by law of state under which it is organized); Weinman v. Fidelity Capital Appreciation Fund (In re Integra Realty Resources, Inc.), 198 B.R. 352, 360-63 (Bankr.D.Colo. 1996), aff'd 354 F.3d 1246 (10th Cir.2004) (holding that the Texas four-year limitations period applies to a fraudulent transfer claim for a Delaware entity based in Texas). The Trustee does not challenge Heritage's ability to properly pay distributions to its members as a matter of corporate law. Nor does the Trustee seek to hold the Member Defendants liable for Heritage's debts, which is the other purported statutory predicate under the Texas internal affairs doctrine for the application of Delaware law. See pp. 454-55, supra. Rather, the Trustee seeks to recover monies Heritage transferred to the Member Defendants with the alleged actual intent to hinder, delay or defraud its creditors.
For at least these reasons, this Court concludes that Texas law applies and the Delaware three-year limitation period is simply inapplicable to the Trustee's TUFTA claims.
3. Burden of Proof/Persuasion
In order to prevail on his fraudulent transfer claims, the Trustee must prove that Heritage made the Transfers *464 "with actual intent to hinder, delay or defraud any creditor" of Heritage, Tex. Bus. & Com.Code § 24.005(a)(1), and "[i]ntent to hinder, delay or defraud may be established by circumstantial evidence." In re GPR Holdings, L.L.C. v. Duke Energy Trading and Marketing, LLC (In re GPR Holdings, L.L.C.), No. 03-3430, 2005 WL 3806042, at *9 (Bankr.N.D.Tex. May 27, 2005) (citing Sherman v. FSC Realty, LLC (In re Brentwood Lexford Partners, LLC), 292 B.R. 255, 262-63 (Bankr.N.D.Tex. 2003)); see also In re Reed, 700 F.2d 986, 991 (5th Cir.1983). Circumstantial evidence of actual fraudulent intent under TUFTA, "commonly known as `badges of fraud,'" In re Soza, 542 F.3d 1060, 1066 (5th Cir.2008), are codified in a non-exclusive list set forth in § 24.005(b) of the Texas Business and Commerce Code, which provides:
In determining actual intent under Subsection (a)(1) of this section, consideration may be given, among other factors, to whether:
(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of the property transferred after the transfer;
(3) the transfer or obligation was concealed;
(4) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;
(5) the transfer was of substantially all the debtor's assets;
(6) the debtor absconded;
(7) the debtor removed or concealed assets;
(8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
(9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
(10) the transfer occurred shortly before or shortly after a substantial debt was incurred; and
(11) the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.
TEX. BUS. & COM.CODE ANN. § 24.005(b) (Vernon 2002 & Supp.2008).
So, as relevant here, the Trustee bears the burden of proof and must show, by a preponderance of the evidence, that the Transfers were made by Heritage with the actual intent to hinder, delay or defraud any Heritage creditor. And, the Trustee may prove actual intent to hinder, delay or defraud through either direct evidence or circumstantial evidencei.e., by establishing sufficient badges of fraud that the fact-finder is satisfied that the requisite intent has been shown.
But, once sufficient direct evidence or circumstantial evidence has been introduced, who bears the ultimate burden of persuasion? The Eighth Circuit has held that the party seeking to avoid a transfer must establish, by a preponderance of the evidence, the presence of multiple badges of fraud. Once that occurs, the burden shifts to the defendant to show, again by a preponderance of the evidence, that the defendant had a legitimate purpose in making the transfer. Kelly v. Armstrong, 141 F.3d 799, 802-03 (8th Cir.1998). In Kelly, the court stated:
Kelly [the trustee] argues that the district court erred in failing to instruct the jury that, if it were to find multiple badges of fraud with regard to any transfer, the burden would shift to the defendants to establish a legitimate supervening purpose for making that transfer. The district court instructed the jury that it could "give the presence *465 or absence of [badges of fraud] such weight as [the jury thought] the[ir] presence or absence deserve[d]." Kelly contends that the common law of fraudulent conveyances shifts the burden of both production and persuasion to the defendants once multiple badges of fraud have been established, and furthermore, that Federal Rule of Evidence 301 should not be applied to change this allocation of burdens. We agree.
Id. at 802 (footnote omitted, bracketed portions in original). As the Kelly court further explained:
The instruction given by the district court-that badges of fraud, if found, could be given whatever weight the jury thought they warranted-could potentially have resulted in the jury's improper allocation of the burden of proof. As the case was submitted, the jury was free to return a verdict in favor of the defendants, despite finding the existence of multiple badges of fraud and disbelieving the defendants' explanations for the transfers. The district court's failure to instruct the jury properly regarding the burden of proof constitutes reversible error.
Id. at 803. See also Acequia, 34 F.3d at 806 ("once a trustee establishes indicia of fraud in an action under section 548(a)(1), the burden shifts to the transferee to prove some `legitimate supervening purpose' for the transfers at issue."); Crawforth v. Bachman (In re Bachman), Adv. No. 06-6027, 2007 WL 4355620 at *15 (Bankr.D.Idaho December 10, 2007) (failure "to show a legitimate supervening purpose for the transfers," in the face of multiple badges of fraud means that trustee may avoid transfers). The Fifth Circuit, in an older line of cases, has stated that once there are badges of fraud sufficient to "make out a strong prima facie case of fraud," then the "burden of showing good faith [is] shifted to the parties to such conveyances." Duncan v. First Nat'l Bank of Cartersville, Ga., 597 F.2d 51, 56 (5th Cir.1979); U.S. v. Hickox, 356 F.2d 969, 974 (5th Cir.1966). Analogously, the Fifth Circuit has held that in determining actual intent under § 727(a)(2)(A) of the Bankruptcy Code, a showing by the plaintiff of a gratuitous transfer by the debtor to his children creates a presumption of intent to defraud and shifts "the burden of demonstrating that he lacked fraudulent intent" to the debtor/defendant. Pavy v. Chastant (In re Chastant), 873 F.2d 89, 91 (5th Cir. 1989).
Thus, as relevant here, this Court concludes that if the Trustee establishes the existence of several badges of fraud by a preponderance of the evidence, the Defendants will bear the burden of persuasion on any "legitimate supervening purpose" for each of the Transfers. Kelly, 141 F.3d at 802-03; Acequia, 34 F.3d at 806. Further, this Court, as the finder of fact, is the sole judge of the credibility of the witnesses[14] and can reject any explanations *467 found to be not credible. See Freeland v. Enodis Corp., 540 F.3d 721, 733-34 (7th Cir.2008) (applying burden-shifting, and finding no error in trial court's finding of actual fraudulent intent where trial court did not believe defendant's excuse that transfers were made to save taxes); Aptix Corp. v. Quickturn Design Systems, Inc., 148 Fed.Appx. 924, 928-29 (Fed.Cir.2005) (fraudulent intent not rebutted because the trial court made factual findings that the reasons offered for the transfer were "not as innocent as [defendant] suggests."); In re Maronde, 332 B.R. 593, 600-01 (Bankr.D.Minn.2005) (trustee showed badges of fraud, court did not believe defendant's excuse of an "innocent act of bankruptcy planning," fraudulent intent found); Kaler v. McLaren (In re McLaren), 236 B.R. 882, 900-901 (Bankr.D.N.D.1999) (trustee showed at least three badges of fraud, court did not believe defendants' excuse, fraudulent intent found).
One final preliminary matter must be addressed. The Defendants assert, without citation to any legal authority, that before the Trustee can prevail here, Heritage must have intended to hinder, delay or defraud one of the triggering creditors instead of some other Heritage creditor. See Defendants' Post-Trial Brief at pp. 8-10. In other words, as relevant here, the Defendants argue that actual intent to hinder, delay or defraud a non-triggering creditori.e., Koshland Family Partnership, L.P. ("KFP") and/or its principal, Dr. Daniel E. Koshland, Jr. ("Koshland"), should not be "used to extrapolate intent to other creditors." Id. at 8. Thus, according to the Defendants, if Heritage was unaware of the triggering creditor's claimi.e., the IRS' claim for unassessed taxes, or if Heritage believed the triggering creditor's claim was not legally or factually supportablei.e., Canada's claim for monies due to him under an oral modification to his employment agreement, it is legally impossible for Heritage to have made a transfer with the "actual intent to hinder, delay or defraud" that creditor. See id. at pp. 10-13. As a result, the Defendants assert that the Trustee's fraudulent transfer claims fail as a matter of law:
Where, as here, there is no constructive fraudulent transfer issue left to determine,[15] then it is a legal impossibility for the Court to find that actual intent as to one person (who is not a creditor) can be attached to another entity that is a creditor.
Id. at 9.
While the Court has not been able to find any cases addressing this issue either, the Court disagrees with the Defendants' legal contention for at least two reasons. First, the premise of that contention is legally flawed. The Defendants argue that it is a "legal impossibility ... to find that actual intent as to one person [KFP/Koshland] (who is not a creditor) can be attached to another entity [IRS and/or Canada] that is a creditor." Id. (emphasis added). What the Defendants overlook in making this argument is that *468 KFP/Koshland is a "creditor" as defined by TUFTA. As noted previously, TUFTA defines "creditor" as "a person ... who has a claim." TEX. BUS. & COM.CODE § 24.002(4). In turn, TUFTA defines "claim" as "a right to payment ...., whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured." Id. at § 24.002(3). Contrary to the Defendants' assertion, KFP/Koshland held a "claim" and was a "creditor" of Heritage until the statute of limitations ran on its securities fraud claims, which Heritage was advised by its lawyer was anywhere from three to five years after the sale of securities to Koshland/KFP i.e., by no later than January 2004. P.Ex. 163. So, at the time of the Transfers, KFP/Koshland was a creditor of Heritage whom Heritage could have been attempting to hinder, delay or defraud in making the Transfers, even though the statute of limitations on KFP/Koshland's claim ran before Heritage filed bankruptcy, thus precluding KFP/Koshland from being a triggering creditor for § 544(b) purposes.
Second, the Defendants' argument is inconsistent with the plain language of the statute itself. As relevant here, § 24.005(a)(1) provides that
[a] transfer made ... by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or within a reasonable time after the transfer was made ..., if the debtor made the transfer...:(1) with the actual intent to hinder, delay or defraud any creditor of the debtor; ...
TEX. BUS. & COM.CODE § 24.005(A)(1) (Vernon 2002)(emphasis added). Contrary to the Defendants' argument, the statute provides that a transfer can be fraudulent as to a creditor (whose claim does not even have to exist at the time of the transfer), so long as the transfer was made with the "actual intent to hinder, delay or defraud any creditor of the debtor." Id. (emphasis added). If the Texas legislature intended that the triggering creditor must also be the creditor who was actually hindered, delayed or defrauded before avoidance of the transfer was possible, the statute should so provide.
For at least these reasons, this Court concludes that if each of the Transfers was made by Heritage with the actual intent to hinder, delay or defraud any Heritage creditor, irrespective of whether that creditor can serve as a triggering creditor, the Transfer(s) is avoidable under TUFTA by the Trustee.
4. Evidence of Fraudulent Intent
a. Direct Evidence
The concept of "badges of fraud" developed because it is often difficult to find direct evidence that a transfer was made with the actual intent to "hinder, delay or defraud" a creditor. Here, however, Canada[16] provided just thati.e., *469 some direct evidence of Heritage's actual intent to at least "hinder" or "delay" KFP from its efforts to recover its original investment in Heritage.
A brief explanation is warranted. Effective January 1, 1999, KFP became a 5% member of Heritage by making a $15 million investment in Heritage. Pretrial Order, Stipulation 85. Prior to making its investment, Kornman provided KFP (through its principal, Koshland) with a Private Placement Memorandum. D.Ex. 23. Moreover, on April 26, 1999, the terms of KFP's investment were memorialized in a letter drafted by Kornman for Koshland to sign and send to Heritage, which Kornman then signed on behalf of Heritage. P.Ex. 65; Pretrial Order, Stipulation 88. Six months later, on October 26, 1999, Koshland wrote a letter requesting information regarding KFP's investment in Heritage. P.Ex. 77; Pretrial Order, Stipulation 89. Other requests for information were made by KFP/Koshland, but Heritage never responded to the various requests. Deposition Testimony of James Esposto ("Esposto") (11/8/06) 36:19-37:4; 69:21-71:25; 72:16-73:19 & P.Ex. 193.
On December 22, 2000, lawyers representing Koshland and KFP sent a letter to Kornman at Heritage demanding the return of KFP's $15 million investment, together with interest at the rate of 10% from January 27, 1999 (the date KFP's check cleared) until the date of the return of its monies (the "Koshland Demand Letter"). P.Ex. 119. According to the Koshland Demand Letter, Koshland understood his investment to be in an "intermediate Limited Partnership which you [Kornman] represented were to be promptly converted to the common stock of a publically traded company." Id. at DFT-1219. Heritage hired Michael Wortley of the Vinson & Elkins law firm ("Wortley") to respond on its behalf and on January 3, 2001, Walker forwarded the Koshland Demand Letter to Wortley. Id. at DFT-1218. On January 16, 2001, Wortley received a further letter from Koshland/KFP's lawyers, expressing increasing irritation over the absence of an adequate response by Heritage and reiterating the seriousness of the Koshland Demand Letter. P.Ex. 122.
While it appears that Kornman and Koshland were close for a period of time, as Koshland made Kornman an officer of one of his affiliated entitiesi.e., Koshland Investment Corporation,[17] on March 31, 2001, Koshland removed Kornman from all offices he held with Koshland Investment Corporation and moved its office to California, where Koshland lived. P.Ex. 129; *470 Pretrial Order, Stipulation 90. On June 27, 2001, Kornman received a letter from James Koshland, Koshland's son (who is an attorney), acknowledging receipt of the two $250,000 distribution checks from Heritage and advising that while KFP/Koshland intended to deposit the checks, they did so without waiving their rights to "rescind the pertinent investment or take other action to recover its investment."[18] P.Ex. 140. This letter is written on the letterhead of James Koshland's law firm and further requested an in-person meeting at his law office in Palo Alto, California to "discuss the relationship between my father, the Koshland Family Partnership, L.P. and Koshland Investment Corporation on the one hand and the Heritage Organization and related entities on the other hand." Id. That meeting never occurred. Testimony of Kornman (1/8/09) 177: 9-14. See also Deposition Testimony of Reposto (11/8/06) 52:19-25.
At trial, Canada testified that Kornman discussed the Koshland Demand Letter with him. Specifically, Canada testified that Kornman asked him if Heritage had any moral or legal obligation to return the monies KFP had invested in Heritage, Testimony of Canada (1/15/09) 29:25-30:11, which obligations Canada did not believe existed. See Testimony of Canada (1/15/09) 65:19-21. But, Canada further testified that during their conversation, Kornman asked if it would "look better" if Heritage was making distributions to its members if Koshland chose to institute a lawsuit or take other legal action to try to recover his money. Testimony of Canada (1/15/09) 28:24-29:13. In other words, according to Canada, Kornman thought that making distributions to KFP might "diffuse the Koshland situation." Testimony of Canada (1/15/09) 53:8-13.
Canada's testimony makes sense.[19] Even without his direct testimony, however, it is reasonable to infer Heritage's intent to at least hinder or delay KFP's attempts to recover its $15 million investment from other evidence in the trial record. Specifically, (i) KFP had gone over two years without any return on its $15 million investment, Pretrial Order, Stipulations 85, 86, 102, & 111; (ii) Koshland, KFP's principal, requested financial information so that he could evaluate KFP's investment in Heritage in October 1999, Pretrial Order, Stipulation 89, which Heritage ignored; (iii) KFP's attorney demanded the return of KFP's original investment in Heritagei.e., $15 million, plus interestin December 2000, P.Ex. 111, and followed up on that demand in January 2001, P.Ex. 122; (iv) Koshland removed Kornman from all offices Kornman held with an affiliated Koshland entity, Koshland Investment Corporation, in March 2001, Pretrial Order, Stipulation 90; (v) distributions began flowing to KFP in April 2001, Pretrial Order, Stipulation 111; Testimony of Kornman (1/8/09) 59:15-25; (vi) while KFP cashed the distribution checks, it specifically reserved its rights against Heritage by letter dated June 27, 2001, P.Ex. 140; (vii) Kornman received a letter from Wortley at Vinson & Elkins regarding the limitations period on KFP's potential securities fraud claims on March *471 22, 2002, advising Kornman that the relevant statutes of limitation would expire anywhere from three to five years after the sale of securities to Koshland/KFP i.e., by no later than January 2004, P.Ex. 163;[20] and (viii) Heritage continued its distributions to its members, including KFP, in 2002 and 2003, Pretrial Order, Stipulation 111. A logical inference from just these facts is that Heritage decided to make distributions to its members in April 2001 and thereafter to attempt to defuse KFP/Koshland's growing concerns about its investment in Heritage and to hinder or delay KFP's efforts to recover that investment.
In In re Bayou Group, LLC, 372 B.R. 661, 663 (Bankr.S.D.N.Y.2007), the court concluded that a transfer made merely to buy time by keeping claimants happy while continuing fraudulent conduct could constitute a transfer made with fraudulent intent. Accordingly, this Court concludes that the Transfers made to the Member Defendantsi.e., Steadfast, GMK Family, and Tikchik, were made with the actual intent to hinder or delay KFP from pursuing the recovery of its $15 million investment from Heritage.
b. Circumstantial Evidence;[21] Badges of Fraud
Even absent the direct evidence of actual intent to hinder or delay KFP/Koshland just discussed, the Trustee has demonstrated, by a preponderance of the credible evidence, the presence of multiple badges of fraud. The Court will discuss each of the badges of fraud established by the Trustee at trial below.
i. Transfers to Insiders
With respect to this badge of fraud, there is no dispute that the Transfers were made by Heritage to insiders of Heritage. The evidence establishes that Heritage made the Transfers to the following entities on the dates and in the amounts reflected below:
----------------------------------------------------
DATE AMOUNT RECIPIENT
----------------------------------------------------
April 13, 2001 $250,000 GMK Family
----------------------------------------------------
*472
" $250,000 Koshland Family
Partnership
----------------------------------------------------
" $4,350,000 Steadfast
----------------------------------------------------
" $150,000 Tikchik
----------------------------------------------------
April 25, 2001 $250,000 GMK Family
----------------------------------------------------
" $250,000 Koshland Family
Partnership
----------------------------------------------------
" $4,350,000 Steadfast
----------------------------------------------------
$150,000 Tikchik
----------------------------------------------------
July 20, 2001 $600,000 GMK Family
----------------------------------------------------
" $600,000 Koshland Family
Partnership
----------------------------------------------------
" $10,440,000 Steadfast
----------------------------------------------------
" $360,000 Tikchik
July 26, 2002 $500,000 GMK Family
----------------------------------------------------
" $500,000 Koshland Family
Partnership
----------------------------------------------------
" $8,700,000 Steadfast
----------------------------------------------------
" $300,000 Tikchik
----------------------------------------------------
January 2, 2003 $500,000 GMK Family
----------------------------------------------------
" $500,000 Koshland Family
Partnership
----------------------------------------------------
" $8,700,000 Steadfast
----------------------------------------------------
" $300,000 Tikchik
-----------------------------------------------------
February 18, 2003 $4,000,000 Steadfast
----------------------------------------------------
See P.Ex. 317 (establishing $42 million of the above Transfers); see also pp. 490-94, infra (discussing the additional $4 million in U.S. currency in Heritage's safe deposit boxes that was distributed to Steadfast, and then transferred to Ettman Trust).
Moreover, in the Pretrial Order, the parties stipulated that Steadfast, GMK Family and Tikchik are "insiders" of Heritage as that term is defined by Tex. Bus. & Com.Code § 24.002(7) and 11 U.S.C. § 101(31). Pretrial Order, Stipulation 38.
ii. Inadequate Consideration
According to the Trustee, Heritage received nothing in exchange for the Transfers to its members. Alternatively, the Trustee asserts that Heritage did not receive value "reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred." Tex. Bus. & Com.Code, § 24.005(b)(8).
In response, the Defendants argue that, in exchange for the Transfers, Heritage's members released their claims of entitlement to a distribution that they contend arose once Kornman made the decision that excess cash was available within Heritage. See, e.g., Testimony of Kornman (1/8/09) at 103:19-25; Defendants' Post-Trial Brief at pp. 26-28. In other words, and according to the Defendants, once Kornman determined that Heritage had excess cash, "then the Distributions had to be made" in accordance with § 5.02(A) of the Heritage Operating Agreement. Defendants' Post-Trial Brief at p. 28. Moreover, according to the Defendants, Heritage's members became creditors "to the extent that they are entitled to receive a distribution of excess cash," and that under TUFTA § 24.004(a)(2), "payment of an antecedent debt constitutes value." Id. at pp. 26-27.
For the reasons explained more fully below, this Court rejects the Defendants' arguments. First, the purported "obligation" that was created when Kornman determined that "excess cash" was available within Heritage was completely illusory, and subject to manipulation by Kornman. Under the terms of the Heritage Operating Agreement, Heritage's Manager (GMK Family acting through its manager, Kornman) had "sole, unlimited and absolute discretion" in determining whether excess cash was available within Heritage from which to make such distributions. D.Ex. 90 at DFT-0983-0984; Pretrial Order, Stipulation 26. So, the very duty that the Defendants rely upon to create their "obligation" was only triggered when Kornman decided to trigger it.
The fact that Kornman had the absolute discretion to decide what amount of excess cash, if any, was available for distribution under the Heritage Operating Agreement, coupled with the fact that Kornman ignored (i) the clear requirement of that agreement to make such a determination at least once each quarteri.e., "[f]rom *473 time to time (but at least once each calendar quarter) the Manager shall determine...", D.Ex. 90, § 5.02(A) at DFT-0983, and (ii) the disputed claims of KFP, Canada, and others when making his "excess cash" determination, causes this Court to conclude that Kornman did not feel "obligated" to cause Heritage to make distributions to its members. Rather, this Court concludes that Kornman is attempting to create consideration for the Transfers when none exists through clever lawyering.
Even assuming, however, that the Transfers retired a Heritage obligation which arose when GMK Family (Heritage's Manager who acted through its manager, Kornman) made its determination that excess cash was available, that "obligation" was created without Heritage receiving "consideration ... reasonably equivalent to the ... amount of the obligation incurred." Tex. Bus. & Com.Code, § 24.005(b)(8). Thus, in making their argument, the Defendants appear to have overlooked the fact that TUFTA addresses the avoidance of both transfers and obligations. Id., § 25.005(a). So, even assuming that Heritage received "value" for the Transfers by the satisfaction of Heritage's "obligation" to pay out the excess cash once Kornman made the required determination that excess cash was available within Heritage for distribution, the simple fact remains that "the value of the consideration received by [Heritage]" was not "reasonably equivalent to the ... amount of the obligation incurred," at the time that obligation was incurred. Id. at § 24.005(b)(8). In other words, Heritage received nothing from its members when the obligation was incurred. See, e.g., Sherman v. FSC Realty LLC (In re Brentwood Lexford Partners, LLC), 292 B.R. 255, 267 (Bankr.N.D.Tex.2003)(holding that distributions made on account of equity ownership in an L.L.C. are not made for reasonably equivalent value); see also Fisher v. Hamilton (In re Teknek, LLC), 343 B.R. 850, 861 (Bankr.N.D.Ill.2006) ("Similarly, a distribution of profits or dividends to L.L.C. members that is not compensation or salary for services rendered is not a transfer in exchange for reasonably equivalent value under the Uniform Fraudulent Transfer Act.")(citing Brentwood).
iii. Heritage was Sued or Threatened with Suit
Based upon the credible evidence at trial, Heritage was threatened with multiple suits prior to any of the Transfers at issue here, and Canada and Anthony Bird ("Bird") actually filed suit in July 2002. Pretrial Order, Stipulation 82 (regarding actual suit). Turning first to the "threatened" suits, the earliest threat of suit faced by Heritage also relates to claims by Canada and Bird. Canada testified at trial that Kornman knew no later than the fall of 2000 that Bird and he were asserting, and continued to assert throughout the relevant time period, multi-million dollar claims arising out of Heritage's business dealings with a 752 Transaction client in Connecticut named Flinn. Testimony of Canada (1/15/2009) at 46:4-51:14. The fact that Heritage/Kornman disputed their claims and believed them to lack legal merit is irrelevant. As noted previously, unliquidated and disputed claims are still "claims" under TUFTA, making both Canada and Bird "creditors" as defined under TUFTA by the fall of 2000.
Moreover, there is no question that Kornman knew of a threat of suit by KFP/Koshland no later than December 22, 2000. As noted previously, on that date, Kornman received a demand letter from Jeffrey W. Shopoff, KFP/Koshland's lawyer, demanding the return of KFP's original investment in Heritagei.e., $15 million, plus interest. P.Ex. 111. These threats alone are sufficient to satisfy this badge of fraud as to each Transfer. See, *474 e.g., Daniels v. Keenen, 19 B.R. 724, 731 n. 30 (Bankr.W.D.Mo.1982) ("The transfer after collection demands, even though those demands may not have explicitly threatened suit, may reasonably be considered as part of the evidence tending to prove an intent to hinder, delay, and defraud creditors."); In re Jacobs, 394 B.R. 646, 665 (Bankr.E.D.N.Y.2008) (badge of fraud due to "Timing and Sequence of the Events" based on, inter alia, "the proximity of the [challenged transfer] to the demand for payment by Congress" on a guarantee about a month before the challenged transfer); In re Unglaub, 332 B.R. 303, 318 (Bankr.N.D.Ill.2005) (there was evidence that the transfer was made shortly after a demand was made by a creditor on the debtor to pay the substantial debt he had incurred personally as a result of the guarantees). A threat can also be inferred from circumstances existing at the time of the transfer. Connell Chevrolet, Inc. v. Carter, No. 01-94-00595-CV, 1994 WL 525902 (Tex.App.-Houston [1st Dist.] Sept. 29, 1994) ("A reasonable inference could be made that Connell knew that he would be sued on the underlying note before he set up his estate plan and began transferring assets .... the evidence "tends to indicate that Connell began transferring his assets after he had been sued or threatened with suit."); Dime Savings Bank v. Butler, No. CV XXXXXXXXXS, 1997 WL 112776 (Conn.Super. February 21, 1997) (debtor who had defaulted on three mortgage loans "was certainly threatened with suit" at the time of the transfer).
But, another threatened suit is supported by the evidence at trial. Specifically, it can be reasonably inferred that the IRS had threatened Heritage with suit by February 2001.[22] The February 2001 letter to Heritage from the IRS (and the similar letter that followed in May 2001)[23] carried the threat of suit. The IRS wrote, "we request that you identify all of those *475 customers of your firm or of any related person ... who entered into a transaction described above." P.Ex. 287. The testimony of Daniel Baucum, the Trustee's expert, established that upon Heritage's receipt of the February 2001 letter, the best-case outcome for Heritage was the disclosure of the identities of all Heritage 752 Transaction clients. Testimony of Baucum (1/7/09) 177:13-22, 189:12-190:5. Baucum further testified that while the IRS might be slow to get therei.e., "[i]t oftentimes takes a number of different efforts that I've talked about before," further enforcement action would followi.e., "[t]hey may even have to go ask a district judge to enforce a summons.... The odds of the IRS being able to gain whatever information the person being summoned has, is very, very good, because they have recourse to the federal district court to do so." Testimony of Baucum (1/7/09) 189:17-190:1. Moreover, Anthony Ellis ("Ellis"), an IRS revenue agent, testified that the failure to respond to the IRS' initial letters, referred to by the parties at trial as "soft letters," would ultimately lead to a "promoter penalty investigation" under §§ 6700 and 6708 of the Internal Revenue Code. Testimony of Ellis (1/7/09) 37:14-21. That is, of course, exactly what happened here. Heritage ignored the IRS' 2001 letters,[24] Testimony of Ellis (1/7/09) 40:10-18, 47:1-12, which led the IRS to take further enforcement action by early 2002.
No inference of a threat of suit by the IRS is required by the time of the 2002 Transfersthe threat at that point was explicit. Specifically, on February 14, 2002, the IRS issued an information document request (the "IDR") to Heritage. P.Ex. 287 at IRS-010 ("To date, you have neither responded to our initial letter nor provided the requested information."). In the IDR, the IRS put Heritage on formal notice that
[o]ur examination may result in further action, including, but not limited to, the imposition of penalties, the filing of a petition to enjoin you from any further such activities, and the issuance of pre-filing notices to participants. Potentially applicable penalties may include the penalty authorized by section 6708 for failure to maintain and provide to the Secretary upon request a list of investors in a potentially abusive tax shelter as required by section 6112 and the penalty authorized by section 6700 for false or fraudulent statements made in connection with the organization or sale of such an arrangement.
P.Ex. 287 at IRS-010.
According to Ellis, after having attempted to reach McElwee twice by phone on March 15, 2002 unsuccessfully, Heritage's initial response to the IDR was a call from Walker, who identified herself as Heritage's Secretary and Treasurer, later that same day. Ellis' notes reflect that Walker told him that Heritage was in the process of seeking counsel to respond and that counsel should be hired within the next 30 days. P.Ex. 287 at IRS-129. Instead, *476 over nine months later, and after being served with an IRS summons, Heritage finally retained the Sutherland, Asbill and Brennan ("Sutherland") law firm in late December 2002/early January 2003 to assist it in its dealings with the IRS. See P.Ex. 192 (Power of Attorney and Declaration of Representative signed January 7, 2003 appointing Sutherland as Heritage's attorney in fact); P.Ex. 343 (January 9, 2003 retention letter between Sutherland and Heritage); P.Ex. 344 (January 6, 2003 check drawn on Heritage account for payment of $100,000 to Sutherland). Heritage finally disclosed client names and began producing documents to the IRS in March 2003, some two years after the IRS first attempted to get such disclosures.[25]
iv. Cumulative Effect of the Course of Conduct.
In In re Soza, 542 F.3d 1060, 1067 (5th Cir.2008), the Fifth Circuit noted that "the existence or cumulative effect of the pattern or series of transactions or course of conduct after the incurring of debt, onset of financial difficulties, or pendency or threat of suits by creditors" can be relevant to a finding of fraudulent intent. Such a pattern of conduct is apparent here, giving rise to a further inference of fraudulent intent.
By way of background, Heritage book net income for 2000 was approximately $10.5 million. P.Ex. 114. Heritage had cash on hand at the end 2000 of approximately $22.5 million. P.Ex. 113. Yet, Heritage made no distribution to its members in 2000 or in the first quarter of 2001. But, starting in April 2001,[26] Heritage began making significant distributions to its members, including KFP. And, between April 16, 2001 and February 18, 2003, Heritage distributed $46 million to its members. P.Ex. 317 (establishing $42 million in distributions); see also pp. 490-94, infra (regarding additional $4 million of cash distributed to Steadfast and then to Ettman Trust from Heritage safe deposit boxes).
So, what happened to cause distributions to begin flowing to Heritage's members? The evidence supports an inference that a series of events caused Heritage to begin to have concerns about (i) its business practices generally, (ii) the long-term viability of that portion of its business relating to 752 Transactions specifically (which had been very lucrative for it), and (iii) the potential for substantial claims against Heritage by a disgruntled investor, disgruntled clients (to whom Heritage had sold 752 Transactions), and disgruntled former employees. Specifically, among other things, (i) in February 2000, the law firm which had introduced Heritage to the 752 Transactions (Aherns & DeAngeli ("A & D")), and to which Heritage was indirectly paying what it described as "royalties" or "licensing or consulting fees,"[27]*477 Testimony of Kornman (1/8/09) 144:24-145:25, informed Heritage that it "was no longer providing opinion letters regarding transactions that included a 752 strategy,"[28] Pretrial Order, Stipulation 69; P.Ex. 94; (ii) the IRS published Notice 2000-44, 2000 WL 1138430 on August 10, 2000, Pretrial Order, Stipulations 70 & 71, making it clear what the IRS thought of transactions like the 752 Transactions; (iii) multi-million dollar disputes with Canada and Bird arose in the fall of 2000, see pp. 460 & 473 supra; (iv) the decision of the Tax Court in the Salina Partnership case was handed down in November 2000, Pretrial Order, Stipulation 73; P.Ex. 302, in which the court ruled against the IRS on the economic substance issue (regarding the basis boost transaction at issue there) and against the taxpayer on the liability issue, holding that a short sale is a liability under § 752 of the Internal Revenue Code, which decision at least undercut the viability of Heritage's 752 Transactions; (v) Koshland/KFP demanded: (a) the return of KFP's $15 million investment plus interest in December 2000, P.Ex. 111, (b) further documents and reiterated the seriousness of its previous demand in January, 2001, P.Ex. 122, and (c) an in-person meeting, which never occurred, in June, 2001, P.Ex. 140; and (vi) the IRS asked Heritage to identify all of its clients who had implemented what the IRS thought to be *478 an abusive tax shelteri.e., a 752 Transaction, in February 2001i.e., a "soft letter," and then again in May 2001i.e., a second "soft letter," and then again in February 2002i.e., the IDR, and then again in December 2002i.e., the summons. P.Ex. 287. The cumulative effect of these events is striking.
Is it simply a "coincidence" then that while Heritage reported taxable ordinary income of approximately $15.1 million from 2001-2003, P.Ex. 117, 157, & 189, it distributed cash to its members totaling over three times that amounti.e., $46 million, of which $43.9 million went to the Member Defendants?[29] Are Kornman's denials of concern about any of the events outlined above credible? Was Kornman so caught up in the Kornman "vortex,"[30] that he did not realize that Heritage's business practices were highly questionable and that by distributing much of Heritage's cash to its members (most of which went to other Kornman-controlled entities), that cash would be out of the immediate reach of Heritage's creditors? Based upon the credible evidence at trial, this Court concludes that: (i) it was not a coincidence, (ii) Kornman's denials of concern are not credible,[31] and (iii) the Kornman "vortex," if it existed at all, did not prevent Kornman from understanding exactly what was going onboth within Heritage and without.[32]
*479 While Kornman offers explanations for the distributions and why no fraudulent intent should be inferred from them, which explanations will be addressed below, see pp. 484-90, infra; for now, this Court concludes that a reasonable inference from these facts is that the Transfers were made with the intent to at least hinder or delay Heritage creditors.[33]
*480 v. Other Indicia of Fraudulent Intent
As TUFTA expressly provides, the badges of fraud delineated in the statute are not exclusive; courts can consider other factors in determining whether fraudulent intent has been established. Here, the evidence at trial includes a number of other indicia of fraudulent intent.
For example, Kornman testified at great length about the information he reviewed and the "back-of-an-envelope or cocktail napkin" estimate he made of "what was likely to come in and what was likely not to, and that's what I used to make these judgments. And that's exactly what [deciding whether there was excess cash available for distribution] was, was a judgment." Testimony of Kornman (1/9/09) 77:24-80:13. However, other than the QuickBooks financial records (a summary of which Kornman claimed to be incapable of understanding),[34] no contemporaneous financial calculations of Kornman were produced at trial. Nor did Kornman attempt to replicate his distribution analysis or his prior calculations at trial, other than to generally describe the process that he went through in deciding that a distribution was appropriate. And, while Walker attempted to replicate at least the financial information she likely gave Kornman from Heritage's books and records at the time Kornman made the various decisions to cause Heritage to make distributions to its members, Kornman simply could not recall any specifics of his decisions other than the general process that he went throughi.e., he looked at the financial information given to him by Walker, he considered anticipated revenues in the pipeline and anticipated expenses, etc.
In Acequia, 34 F.3d at 806, the Ninth Circuit found that the failure to produce documentation of so-called "innocent" explanations for transactions supported "an inference of actual fraudulent intent." Here, Kornman's inability to recall any specifics of his decisions to distribute millions of dollars to Heritage's members is troubling. Even more troubling and incredible is his apparent inability at trial to understand Heritage's financial records and what they meant in the context of his *481 decisions to distribute millions of dollars to Heritage's members. Thus, the Defendants' failure to produce Kornman's calculations or other documentation supporting his explanations supports an inference of fraudulent intent.
Heritage's/Kornman's entire pattern of conduct also supports an inference of actual intent to at least hinder or delay Heritage creditors when Kornman made the decisions to distribute millions of dollars out of Heritage. In In re Reed, 700 F.2d 986, 991 (5th Cir. 1983), the court relied upon the debtor's "whole pattern of conduct" to establish fraudulent intent. See also Leonard v. Coolidge (In re National Audit Defense Network), 367 B.R. 207, 222 (Bankr.D.Nev.2007) ("the manner in which the defendants ran NADN . . . also demonstrated the requisite intent to hinder, delay or defraud creditors."). Heritage's pattern of questionable or surprising business practices will be discussed more fully below.
For example, the Private Placement Memorandum that Kornman provided to Koshland makes it clear why Kornman was worried about when the limitations period for KFP's potential securities fraud claims would run. D.Ex. 23; Testimony of Kornman (1/12/09) 57:21-58:5. See also P.Ex. 163. The Private Placement Memorandum appears to have misrepresented Heritage's 1998-1999 income to Koshland/KFP. Compare D.Ex. 23, p. DFT-0904 (Pro Forma Statement of Earnings) and DFT-0906 (Bar Graph) with P.Ex. 41. The Private Placement Memorandum also stated that Heritage had "enjoyed profitability since its inception," although Heritage lost money in 1998. Compare D.Ex. 23, p. DFT-0876 with P.Ex. 41, p. DFT-1839. The Private Placement Memorandum also failed to disclose that transactions with "affiliates" would include millions of dollars of loans to such affiliates. D.Ex. 23, DFT-0890 & DFT-0923.
The Private Placement Memorandum contained other potentially problematic statements. For example, the Private Placement Memorandum states that in "contrast to other firms competing in this area, the Company bases its fees on the amount of assets that are committed by clients in the implementation of the complex tax reduction strategies modeled by the Company." D.Ex. 23 p. DFT-0869. While this may be accurate with respect to "an estate-type or a business-type planning transaction," the fees paid in connection with 752 Transactions were "twenty five percent of the projected tax savings that would have been there without the their implementation." Testimony of Kornman (1/12/09) 14:16-15:3; see also P.Ex. 304, Section 4.01. Moreover, KFP/Koshland was informed in the Private Placement Memorandum that the "Company requires that its clients get independent opinions from legal counsel regarding the tax avoidance strategies that the Company models and explains."[35]*482 D.Ex. 23, p. 6, DFT-0872. As is now clear, however, the "independence" of at least one of those firms was a farce.[36] That firm Aherns and DeAngeli ("A & D") was receiving what Kornman called a "royalty" or "licensing or consulting fee" (the Court would call it a "kickback") from Heritage based upon the fees Heritage received from its clients the same clients for which A & D was simultaneously serving as "independent" counsel. See pp. 476-77, supra.
Not only did KFP invest $15 million in Heritage based upon what may have been a false or misleading Private Placement Memorandum, the "unfair or fraudulent conduct" continued even in petty ways. For example, KFP did not receive its share of distributions made by Heritage in early 1999, even though it became a member of Heritage effective January 1, 1999 and § 3.25 of the Heritage Operating Agreement provided for a pro rata sharing of distributions by all Heritage members. See D.Ex. 90, § 3.25; see also P.Ex. 173 at p. TRU 05033 (consent document for July 26, 2002 distribution to Heritage's members and directing that "[t]his distribution shall be made among all members in accordance with their pro-rata percentage of ownership pursuant to the terms of said Operating Agreement."). While Walker testified that KFP's $15 million investment in Heritage was not actually received until after the January 1999 distributions were made, thereby explaining why KFP did not receive its share of (i) the $125,000 distributed to GMK Family on January 12, 1999, and (ii) the $2.375 million distributed to Steadfast on that same date, P.Ex. 317, *483 even Walker could not explain why Tikchik, KFP, and even GMK Family failed to receive their pro rata share when $2.2 million was distributed to Steadfast on February 15, 1999. P.Ex. 317; see also Testimony of Walker (1/12/09) 206:5-24. To make matters worse, Heritage did not even list KFP as having a claim for its pro rata share of the missed distribution(s) in its bankruptcy schedules (listing it instead as having a zero dollar contingent claim in Amended Schedule F at p. 89).
Of course, and as noted previously, KFP made numerous attempts to get financial information from Heritage with respect to its $15 million investment. No such financial information was ever provided to KFP. See pp. 476-77, supra.
The pattern of unfair or fraudulent conduct by omission continued with Heritage clients and prospective clients. It appears that Kornman never told a client or prospective client that the IRS was demanding the identity of Heritage clients who participated in a 752 Transaction. Testimony of Kornman (1/8/09) 34:15-37:16 (Kornman does not remember telling clients or prospective clients about the IDR, and disputes having any duty to do so); Deposition Testimony of Kornman (7/21/08) at 178:8-179:7 (Kornman does not remember telling anyone about the IDR); Testimony of Canada (1/15/09) 94:3-18 (Canada did not know about IDR and does not know of any time Kornman disclosed it to a client or prospective client). There is no evidence suggesting that the other Heritage principals selling 752 Transactions to clients i.e., Canada and Bird, knew about the IRS "soft letters" or the IDR.[37] In fact, Canada specifically denied knowing about either the IDR or the earlier IRS "soft letters." Testimony of Canada (1/15/09) 31:14-34:22; 94:13-18. However, Canada went on to testify that the IRS' investigation of Heritage should have been disclosed to Heritage clients and prospective future clients for several reasons, including because it was directly relevant to the likelihood of an IRS audit of their tax returns i.e., in his words "they might as well write `Please audit me' in red ink on the front of their tax return."[38] Testimony of Canada (1/15/09) 36:6-38:20 (quote at 37:17-18).
In addition, in In re Sissom, 366 B.R. 677, 700-701 (Bankr.S.D.Tex.2007), the court found that the debtor's "pattern of sharp dealing" prior to bankruptcy supported an inference of actual fraudulent intent. Clear evidence of sharp dealing was presented throughout the eight days of trial. A few examples include: (i) Heritage's failure to make pro-rata distributions to all of its members in 1999 (after its first non-insider members were admitted) in accordance with the terms of the Heritage Operating Agreement (Pre-Trial Order, *484 Stipulations 85 & 101); (ii) refusing to provide financial information about Heritage to KFP/Koshland as required by the Heritage Operating Agreement, resulting, at least in part, in KFP demanding the return of its $15 million investment; (iii) fostering or ignoring the conflict of interest between A & D and its clients, while knowing that the clients needed an opinion from an "independent" law firm to avoid the payment of penalties to the IRS if the clients' tax returns were successfully challenged by the IRS, see, e.g., P.Ex. 47 (decision of Tax Court in Heckler, et al v. Commissioner (holding that reliance on independent professional may be defense, but that reliance on someone with inherent conflict of interest is not), Testimony of Kornman (1/9/09) at 82:11-88:19 (discussing Heckler decision and impact on Heritage); (iv) continued selling of 752 Transactions after receipt of the May 2001 IRS letter without disclosing such letter to prospective clients; (v) telling prospective 752 Transaction clients that the risk of audit was "very low," P.Ex. 138 at DFT-6037, -6043, while believing that Heritage's clients were certain to be audited if their transactions became visible to the IRS, Testimony of Kornman (1/9/09) at 32:2-10); (vi) telling prospective clients that the 752 Transactions could be hidden to reduce the risk of audit, after Heritage had received the IRS demand that Heritage disclose the names of all of its clients who had implemented a 752 Transaction, see, e.g., P.Ex. 138 at DFT-6039-40, -6044-45 ("never shows up on your tax return"); and (vii) telling prospective client Carl Icahn that Heritage was "below [the IRS's] radar screen," after Heritage had received the IRS demand that Heritage disclose the names of all of its clients who had implemented a 752 Transaction, P.Ex. 151 at DFT-2384-85 (transcript of recorded meeting with Icahn).
This conduct or pattern of conduct supports an inference of actual intent to at least hinder or delay Heritage's creditors, if not defraud them, as "creditor" and "claim" are defined under TUFTA.
5. The Defendants' Alleged Legitimate Business Purposes and Other Contentions
The Defendants initially argue that there were legitimate business purposes for each of the Transfers. Each purpose advanced by the Defendants is discussed below. However, before reaching those alleged legitimate business purposes, a preliminary matter must be discussed i.e., the credibility of the witness offering the alleged business purposes. Specifically, Kornman's credibility as a witness is critical with respect to these alleged business purposes, as he is the sole person who made the decision to transfer millions of dollars out of Heritage each time a distribution was made by Heritage to its members, and he is the sole person who decided the timing of those Transfers. Accordingly, the Court will address Kornman's credibility first.
Kornman's credibility as a witness is problematic for several reasons. First, "[o]n April 9, 2007, Kornman pled guilty to one aspect of one count alleging false statements to the Securities and Exchange Commission in United States v. Gary M. Kornman, No. 3:05-CR-0298P (N.D.Tex.)." Pretrial Order, Stipulation 4. Specifically, Kornman pled guilty to violating 18 U.S.C. § 1001, and was convicted of making a false statement to the SEC. Testimony of Kornman (1/8/09) 10:22-11:7. In the factual resume that Kornman signed accompanying his plea agreement, he admitted making a false statement to the SEC, that he knew the statement was false when he made it, and that he made the statement intentionally for the purpose of misleading the SEC and its investigation into securities trading activity. Testimony of Kornman (1/8/09) 11:8-22. Kornman's *485 admitted act of lying to the SEC makes it clear that he is capable of lying when it is advantageous for him to do so, a troubling premise here when his testimony is so critical.
Second, irrespective of his criminal conviction, some of Kornman's trial testimony was simply incredible. For example, it is not credible that Kornman was unaware of the IRS investigation of Heritage for promoting abusive tax shelters until February 2002. See pp. 474-75, supra.
Third, Kornman's memory of events at trial was convenient at best. While he can recall exculpatory facts, or what he perceives to be exculpatory facts, quite well, his recollection of potentially prejudicial events is not nearly so good. While not surprising, Kornman's convenient recollection also casts doubt upon the veracity of his testimony.
With these observations about Kornman's credibility in mind, we turn next to the Defendants' claimed legitimate business purposes for the Transfers. The parties agree that if the Defendants established, by a preponderance of the credible evidence, that a legitimate business purpose existed for each Transfer, that Transfer is not avoidable. See, e.g., ASARCO LLC v. Ams. Mining Corp., 396 B.R. 278, 391 (S.D.Tex.2008) (where the plaintiff demonstrates several badges of fraud, the burden is on the defendants to demonstrate a legitimate purpose for the transfer); accord, Flanigan v. DeFeo (In re DeFeo Fruit Co.), 24 B.R. 220, 222-23 (Bankr.W.D.Mo.1982) (burden on defendants). So, two questions must be addressed. First, what legitimate business purposes do the Defendants assert; and second, did they prove any legitimate business purpose by a preponderance of the evidence? According to the Defendants: (1) Heritage was "obligated" to make a distribution to its members under the Heritage Operating Agreement, and (2) the distributions were made so that the members could pay their taxes, given that Heritage was a pass-through entity for tax purposes. For the reasons explained more fully below, this Court concludes that the Defendants failed to carry their burden of proof to establish a legitimate business purpose for each of the Transfers.
a. The Alleged "Obligation" to Make Distributions
As noted previously, it is true that the Heritage Operating Agreement required Heritage's Manager (GMK Family acting through its Manager, Kornman) to make a determination of whether to distribute "excess cash" to Heritage's members "at least once each calendar quarter." D.Ex. 90, § 50.2 at p. DFT-0983-0984. However, the Heritage Operating Agreement also provided that Heritage's Manager had "sole, unlimited and absolute discretion" in determining whether excess cash was available within Heritage from which to make such distributions. Id. So, the very duty that the Defendants rely upon to create their "obligation" was only triggered when Heritage's Manager i.e., GMK Family, acting through its Manager, Kornman, decided to trigger it.
Moreover, even assuming that the Heritage Operating Agreement created a real "obligation" on Heritage's part to evaluate whether distributions of excess cash were warranted, Kornman was certainly inconsistent in his efforts to fulfill any such "obligation." Kornman did not evaluate Heritage's excess cash on a quarterly basis as the Heritage Operating Agreement required. See, e.g., P.Ex. 317 (showing no regular schedule of distributions). In fact, Kornman admitted that he did not consider whether to make a distribution to Heritage's members on any sort of regular basis when he testified that there was just "no rhyme or reason" or "pattern" to the timing of the Transfers. Testimony of *486 Kornman (1/8/09) 81:22-23; 70:5-9. Rather, according to Kornman, he caused Heritage to make distributions "when we got around to it." Testimony of Kornman (1/8/09) 70:9.
And, as noted previously, Kornman's "back-of-an-envelop" or "cocktail napkin" calculations, which led to his determination that excess cash was available within Heritage, no longer exist. See pp. 46-47, supra. In fact, there is no contemporaneous documentation supporting Kornman's determination of what excess cash was available within Heritage for distribution at the time of any of the Transfers. And, there seems to be little connection between Heritage's annual net income, the decision to make distributions, and the amount of the distribution. P.Ex. 41, 114, 155, 117, 189, D.Ex. 179.12 at p. WP0006932 (generally showing the lack of connections between income and distributions).
The fact that Heritage's Manager (indirectly Kornman) had the absolute discretion to decide what amount of excess cash, if any, was available for distribution under the Heritage Operating Agreement, coupled with the fact that (i) Kornman ignored the clear requirement of that agreement to make such a determination at least once each quarter, and (ii) simply dismissed the claims that had been asserted against Heritage in making his "calculations," causes this Court to conclude that Kornman did not feel "obligated" to cause Heritage to make distributions to its members. Rather, this Court concludes that Kornman is attempting to concoct, after the fact, a legitimate business purpose from a contractual provision in the Heritage Operating Agreement that he often ignored and, when it was not ignored, he failed to honor faithfully.
b. The Need for Distributions to Pay Taxes
The Defendants next argue that
[t]he requirement for distributions of net income to Heritage's members was necessary for Heritage, a limited liability company, to facilitate pass-through taxation treatment and to permit its members access to the funds on which they would be required to pay taxes. Thus, not only was there a legitimate business reason for making each distribution, Heritage's manager was required to make the distributions to members pursuant to the Operating agreement, once it was determined that excess cash existed.
Defendants' Post-Trial Brief at p. 40 (emphasis in original).
In response, the Trustee argues that the Defendants failed to prove that Heritage's members actually needed Heritage's cash in order to pay their tax liability on Heritage's income. In addition, the Trustee points out that if the Member Defendants really needed Heritage's cash in order to pay their share of the tax on Heritage's reported income, one would have expected to see Kornman cause regular distributions to be made to Heritage's members at the time estimated tax payments were due each year. Finally, the Trustee points to the fact that this purported "legitimate business reason" is inconsistent with the fact that Heritage made no distributions to its members in 2000, when it had over $10 million in book net income. Compare P.Ex. 317 with P.Ex. 114 at p. 2.
After carefully considering the evidence and the parties' arguments, the Court finds certain of the Trustee's arguments persuasive. While it makes sense that Heritage's members would expect Heritage to distribute sufficient cash to them from which they, in turn, could pay their tax liability on their share of Heritage's taxable income if Heritage had "excess cash" i.e., cash it did not need in its business operations and/or to pay its creditors, *487 for the reasons explained more fully below, this Court concludes, once again, that Kornman is attempting to concoct, after the fact, a reason for the Transfers that did not exist at the time of the Transfers.
First, if the actual reason the Transfers were made was to assist Heritage's members in paying their share of the tax on Heritage's taxable income, then one would have expected to see regular distributions of "excess cash" to Heritage's members when those estimated or actual tax payments were due. However, as noted previously, Heritage's financial condition was not evaluated quarterly by Kornman as the Heritage Operating Agreement provided. Rather, as noted previously and as Kornman admitted on cross-examination, there was just "no rhyme or reason" or "pattern" to the timing of those distributions, they were made "when we got around to it." Testimony of Kornman (1/8/09) 81:22-23; 70:5-9.
Second, the Transfers substantially exceeded Heritage's total taxable income in each of the years at issue here i.e., 2001-2003, which means, of course, that the amounts of the distributions each year were even more out of line with the members' actual tax liability on Heritage's income. In other words, since the members' actual pass-through tax liability would be a fraction of Heritage's total taxable income in any given year, if this purported reason was the real reason for the distribution of funds from Heritage to its members, the distribution should have been substantially less than Heritage's total taxable income in a given year, not more. So, for example, why did Heritage distribute $22 million to its members in 2001, when its ordinary income was less than $10 million (and, of course, the members' actual tax liability on even $10 million of Heritage income would be substantially less than $10 million)? P.Ex. 117 at DFT-11664 (lines 1 & 22). Similarly, why did Heritage distribute $10 million to its members in 2002, while reporting only $6.7 million of ordinary income? P.Ex. 157 at DFT-11701 (lines 1 & 22). And, why did Heritage distribute $10 million to its members in 2003, while reporting an ordinary loss of approximately $1.4 million?[39] P.Ex. 189 at DFT-11740 (lines 1 & 22). The only credible answer to these questions from the evidence at trial is that the amounts Kornman decided to distribute out of Heritage from 2001-2003 had, in actuality, nothing to do with the members' actual or potential tax liability on Heritage's taxable income.[40]
Finally, the Defendants' reliance on Pher Partners v. Womble (In re Womble), *488 289 B.R. 836, 855 (Bankr.N.D.Tex.2003), aff'd 299 B.R. 810 (N.D.Tex.2003) to support their contention is misplaced, as that case is distinguishable for the following reasons: (i) there is no evidence of a "standard business practice" with respect to the distributions, as Kornman made distributions when he "got around to it," Testimony of Kornman (1/8/09) 70:5-9; (ii) 95% of the distribution amounts were from Heritage to another Kornman-controlled entity so there is no evidence of an "arms-length" transaction, (iii) other than Kornman's own self-serving testimony, there is no contemporaneous documentary evidence supporting the appropriateness of the distributions or the members' need for the distributions to make tax payments, and (iv) Heritage received nothing in consideration for the distributions. Applying the Womble factors here causes this Court to conclude that there was no legitimate business purpose for the distributions.
For at least these reasons, the Court concludes that the "need-the-money-to-pay-tax" argument, like the "obligation" argument, is an after-the-fact contrivance by Kornman to attempt to justify the Transfers. The credible evidence contradicts, rather than supports, these alleged legitimate business purposes.
c. Other Reasons Advanced to Establish a Lack of Fraudulent Intent
The Defendants next argue that certain other facts demonstrate a lack of fraudulent intent on Heritage's part, including the fact that Kornman: (i) denies having actual knowledge of claims against Heritage (such as the IRS claims for withholding taxes or the potential for IRS promoter penalties until February 2002); (ii) asserts that he believed that the claims were completely unfounded and could not be successfully asserted against Heritage (such as Canada's claim or any potential claims by Heritage clients); and/or (iii) asserts that the claimant was "confused," Testimony of Kornman (1/8/09) 72:16-18, thereby explaining why he discounted KFP/Koshland's claim. In other words, according to Kornman, he could not have caused Heritage to make a transfer with the actual intent to hinder, delay or defraud creditors because he either did not know about them or he did not believe that their claims were real. In the alternative, the Defendants assert that even if Heritage knew about the possibility of claims being asserted against it (such as by disgruntled Client Claimants, disgruntled investors like KFP/Koshland, disgruntled former employees like Canada, and the IRS), Heritage (acting through its Manager, GMK Family/Kornman) must have believed that the claims were valid or viable before it could have had the requisite intent under TUFTA when it made the Transfers. And, according to the Defendants, even if the claims turned out to be meritorious (regardless of Kornman's belief to the contrary), until the claims were actually liquidated, Heritage could not have had the requisite intent under TUFTA when it made the Transfers. These arguments, some of which are facially appealing, are not legally sound as they misapprehend the statutory requirements of TUFTA in several material respects.
First, as noted previously, Heritage did not have to act with fraudulent intent with respect to one of the triggering creditors. See pp. 467-68, supra. All that TUFTA requires is that Heritage have acted with the actual intent to hinder, delay or defraud any of its creditors at the time each Transfer at issue here was made. So, while the IRS's claim for unassessed taxes satisfies TUFTA's triggering creditor requirement, the Trustee does not need to establish that Heritage acted with the actual intent to hinder, delay or defraud the IRS with respect to that claim when it *489 made a Transfer. It is enough that Heritage acted with the actual intent to hinder, delay or defraud any of its creditors at the time of each Transfer. See pp. 467-68, supra.
Second, Heritage did not need to act with the actual intent to defraud a known creditor with a liquidated claim, it is enough under TUFTA that Heritage acted with the actual intent to hinder or delay a person who held a contingent, disputed and/or unliquidated right to payment. See p. 467, supra.
Third, with respect to the Defendants' "we-couldn't-believe-we'd-lose" argument regarding Canada and the Client Claimants, that argument runs counter to case law and ignores the plain language of the statutory badges of fraud. As the court held in Nisselson v. Empyrean Investment Fund, L.P. (In re MarketXT Holdings Corp.), 376 B.R. 390, 408-09 (Bankr.S.D.N.Y.2007), (relying upon Shapiro v. Wilgus, 287 U.S. 348, 354, 53 S. Ct. 142, 77 L. Ed. 355 (1932)), even genuine or well-founded beliefs that "there are defenses to the creditors' claims . . . are not sufficient to protect a scheme otherwise designed to hinder or delay creditors." A court, in determining fraudulent intent, need consider only whether, "before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit." Tex. Bus. & Com. Code § 24.005(b)(4) (emphasis added). In other words, there is simply no requirement under TUFTA that the threatening creditor ultimately file suit or be successful in that suit if one is filed. Again, that is why persons with disputed, unliquidated, and contingent rights to payment hold "claims" and are "creditors" as those terms are defined in TUFTA. See pp. 467-68, supra.
Similarly, while Kornman asserts that he did not believe that KFP had a right to a return of its $15 million investment, substantial funds were distributed out of Heritage after KFP's lawyer demanded that relief. Moreover, well after Kornman testified that "we sent him the information that showed that what the letter was saying was totally erroneous and. . . they never requested any additional we never heard from them again," Testimony of Kornman (1/8/09) 13:7-12; 137:13-15, thus suggesting that he thought KFP's claim was resolved, Kornman admitted on cross-examination that (i) Heritage's lawyer, Wortley, had received further correspondence from KFP/Koshland's lawyer, id. at 176:5-11, (ii) Heritage received further requests for financial information from Esposto of KFP, id. at 175:1-7, and (iii) he remained concerned about potential litigation with KFP/Koshland as late as March 2002, id. at 182:12-183:11. Finally, the evidence also established that Kornman received a letter from Heritage's lawyer, Wortley, advising when the limitations period on potential KFP securities fraud claims would run, which indicated that the outside date for the assertion of such claims was January, 2004. P.Ex. 163. The fact that Kornman was concerned enough to ask Heritage's lawyers for advice about the statute of limitations on KFP's potential securities fraud claims suggests that notwithstanding his testimony about Koshland's "confusion" and the lack of any factual basis for KFP's claims, Kornman continued to be concerned about those claims. And, in the meantime, millions of dollars continued to flow out of Heritage to its members.
The Defendants also argue that Heritage could not have made the Transfers with the actual intent to hinder, delay or defraud current or former Heritage clients because, once again, Heritage (acting through its Manager, GMK Family, who acted through its Manager, Kornman) believed that the clients were precluded from pursuing claims against it under the terms *490 of Heritage's agreements with those clients. The only evidence offered for this belief is Kornman's testimony and the content of the client agreements.
It is true that many of the client agreements contain provisions which, if enforceable, would preclude the clients from successfully prosecuting claims against Heritage. However, those provisions would only be enforceable if the clients were unsuccessful in establishing that they were fraudulently induced by Heritage into entering into the client agreements.[41] Moreover, not all of the client agreements had such "no inducement" provisions.[42] And, we know that Heritage settled with certain 752 Transaction clients and returned fees to those clients.[43]
But, irrespective of whether the Client Claimants could successfully assert claims against Heritage or not, the Defendants' arguments miss the basic point of TUFTA. The fact remains that the Client Claimants had "claims" against Heritage and were "creditors" as those terms are defined under TUFTA, as they held contingent, unliquidated and disputed rights to payment against Heritage. See p. 467, supra.
Because the Defendants have not met their burden of persuasion (by a preponderance of the credible evidence) with respect to a legitimate business purpose in making the Transfers, the Court concludes that the Transfers are avoidable under § 544(b) of the Bankruptcy Code and TUFTA.
6. Amount of Avoidable Transfers and Recovery
One last issue must be addressed i.e., what is the amount of the Transfers that are avoidable by the Trustee? In other words, were there $46 million in distributions to Heritage members from April 16, 2001 through February 18, 2003, or just $42 million in distributions during that time period? To answer this question, further explanation is required.
It is undisputed that Heritage made distributions to its members totaling $42 million from April 16, 2001 to February 18, 2003, of which $39.9 million went to the Member Defendants i.e., Steadfast, Tikchik, and GMK Family. P.Ex. 317. However, there is another $4 million in alleged distributions in dispute between the parties. Specifically, the Court must decide whether $4 million in U.S. currency in Heritage safe deposit boxes was transferred to Steadfast on July 26, 2002 as part of an $8.7 million distribution to Steadfast by Heritage. If Steadfast received *491 the $4 million in U.S. currency, a total of $46 million was distributed to Heritage's members, of which $43.9 million was received by the Member Defendants.
Needless to say, the parties have different perspectives regarding whether Steadfast received the currency in July 2002. According to Walker and Kornman, ownership of the Heritage safe deposit boxes and the $4 million in U.S. currency contained in those boxes was not transferred to Steadfast on July 26, 2002. While they admit that Heritage attempted to transfer ownership of the safe deposit boxes and the currency on that date, Kornman testified that the bank refused to allow the transfer of the safe deposit boxes from Heritage to Steadfast. Testimony of Kornman (1/8/09) 110:3-16; 114:3-17. So, according to Kornman, the transfer of the safe deposit boxes and the $4 million in U.S. currency contained in the boxes was not concluded, notwithstanding the fact that Kornman signed receipts for the cash on behalf of Steadfast and, ultimately, Ettman Trust, to which Steadfast appears to have further transferred the cash on that same date. Id.; P.Ex. 173. Rather, Kornman testified that the $4 million in U.S. currency remained in the safe deposit boxes in Heritage's name at the bank until April 28, 2004, when it was taken out of the safe deposit boxes, was deposited into Heritage's payroll account at the bank, and was used to purchase cashier's checks, which were, in turn, used to pay various Heritage debts. Michael corroborated portions of his father's testimony i.e., the currency remained in Heritage's safe deposit boxes until March, April or May 2004 (he couldn't recall exactly when it was removed), when it was deposited and used to pay bills. Deposition Testimony of Michael Kornman (7/11/09) 230:10-232:5. While Walker attempted to corroborate Kornman's testimony, her testimony is not helpful, because she had no personal knowledge of what happened, other than what Kornman told her. Testimony of Walker (1/13/09) 86:6-10. At most, Walker had personal knowledge that $4 million in cash was deposited into Heritage's payroll account on April 28, 2004 and was then used to purchase cashier's checks that were used to pay various outstanding Heritage payables.
In response, the Trustee contends that (i) on July 26, 2002, Heritage transferred the safe deposit boxes and their contents ($4 million in U.S. currency) to Steadfast as part of an $8.7 million distribution, P.Ex. 173; (ii) Steadfast, through Kornman, acknowledged receipt of the $4 million in U.S. currency, id.; and (iii) Steadfast then transferred the $4 million in U.S. currency to the Ettman Trust, for which Kornman, Trustee, again acknowledged receipt of the currency in writing on July 26, 2002, id. According to the Trustee, (i) the transfer of that $4 million in U.S. currency was completed on July 26, 2002; (ii) Heritage recorded the transfer of that "Investment" to Steadfast on its books and records i.e., in QuickBooks, on that date; and (iii) applicable law provides that a transfer of personal property is complete when a written instrument evidences the transfer and the transferee is effectively in control of the property. Trustee's Brief in Support of Closing Argument at p. 29. And, according to the Trustee, because Kornman admitted in his testimony that there was never any re-transfer of ownership of the $4 million in U.S. currency in the safe deposit boxes from Ettman Trust (or Steadfast) back to Heritage, see Testimony of Kornman (1/8/09) 114:8-17, the $4 million in U.S. currency was the property of Ettman Trust as of July 26, 2002 (the date of the transfer) until it was deposited in the Heritage payroll account on or about April 28, 2004. And, according to the Trustee, since the $4 million in U.S. currency deposited in the Heritage payroll account on April 28, 2004 was Ettman *492 Trust property, what occurred on that date can only be characterized as an advance or loan of $4 million by Ettman Trust to Heritage. Trustee's Brief in Support of Closing Argument at p. 31. Thus, the Trustee concludes that: (i) Walker should never have "adjusted" Heritage's QuickBook records to add $4 million as an "Investment" on February 18, 2003; (ii) Walker should have instead recorded a $4 million liability to Ettman Trust when the $4 million in U.S. currency was deposited into the Heritage payroll account on April 28, 2004 (because Ettman Trust must have made a loan to Heritage in that amount on that date); and (iii) the fact that Walker failed to make these accounting entries does not change the reality that Heritage transferred $4 million in U.S. currency to Steadfast on July 26, 2002, who in turn transferred it to Ettman Trust on that same date. Id.
Deciding what really happened here is difficult, because the facts and circumstances are unusual and the documents created contemporaneously with the alleged transfer paint a different picture from what Kornman now says happened. The fact that Kornman caused Heritage to place $4 million in U.S. currency in safe deposit boxes is unusual. The thought that $1 million in cash would sit idle in a safe deposit box from late 1999 (shortly before Y2K) until April 28, 2004, and that another $3 million in cash would be added to it and sit idle in safe deposit boxes from shortly after the terrorist attack of September 11, 2001 until April 28, 2004, is also unusual. However, the Court is satisfied from the evidence that Kornman caused a total of $4 million in U.S. currency belonging to Heritage to be placed in safe deposit boxes in Heritage's name and that the cash remained in the boxes throughout that period. But, the fact that the cash remained in safe deposit boxes in Heritage's name does not address ownership of the cash.
Under Texas law, the lessee of a safe deposit box (here, Heritage) is considered for all purposes to be in possession of the box and its contents. Tex. Fin. Code § 59.103 (Vernon 2008). Since ownership is a usual concomitant of possession, possession of personal property raises an inference of ownership, 59 Tex. Jur. Property § 9; Continental Credit Corp. v. Norman, 303 S.W.2d 449 (Tex.Civ.App. 1957). However, possession is not dispositive of the question of title to the personal property. 59 Tex. Jur. Property § 11; Mehan v. WAMCO XXVIII, Ltd., 138 S.W.3d 415 (Tex.App.Fort Worth 2004). Further, title to personal property may pass without a change in possession. Continental Credit Corp., 303 S.W.2d at 454. Under Texas law,
the common use of the word `transfer' is to denote the passing of title in property, or an interest in property, from one person to another, and in this sense, the term means that the owner of the property delivers it to another person with the intent of passing the rights that he or she had in it to the latter.
59 Tex. Jur. Property § 12. Texas law recognizes the doctrines of constructive possession, see Blankenship v. Citizens Nat'l Bank of Lubbock, 449 S.W.2d 77 (Tex.Civ.App.1970), and constructive delivery. Nipp v. Broumley, 285 S.W.3d 552 (Tex.App.Waco 2009) (interpreting the "delivery" element of the evidence required to establish a gift and stating that delivery of a gift may be accomplished by actual or constructive delivery). Constructive possession is defined as
that possession which the law annexes to ownership of property when there is a right to the immediate and actual possession of such property. Constructive possession is that which exists without actual . . . personal present control over *493 a chattel, but with an intent and capability to maintain control and dominion.
Blankenship v. Citizens Nat'l Bank of Lubbock, 449 S.W.2d at 79. Constructive delivery is an "act that amounts to a transfer of title by operation of law when actual transfer is impractical or impossible." Black's Law Dictionary 461 (8th ed.2004). In fact, the example given to illustrate a constructive delivery is "the delivery of a deposit-box key by someone who is ill and immobile may amount to a constructive delivery of the box's contents even though the box may be miles away." Id.[44] No particular form of words or action is necessary to accomplish a constructive delivery. Rather, any act or declaration showing an intention to give effect to an executed conveyance is sufficient; "there must be an intention to deliver and acts sufficient to show a constructive delivery." Cecil v. Smith, 790 S.W.2d 709, 711 (Tex.App. Tyler 1990), rev'd on other grounds, 804 S.W.2d 509 (Tex.1991).
Here, given the Court's previously expressed concerns over witness credibility in this lawsuit, the Court finds contemporaneous documentary evidence most persuasive. And, here, the contemporaneous documentation supports the Trustee's theory of what happened i.e., that ownership of the contents of the safe deposit boxes (the cash) was transferred i.e., constructively delivered to Steadfast on July 26, 2002, and that Steadfast turned around and immediately transferred ownership of the cash to Ettman Trust on that same date. Kornman's signed written receipts prove as much. P.Ex. 173.
But, Kornman wants this Court to believe his oral testimony, which contradicts his signed written receipts for the cash on behalf of Steadfast and Ettman Trust. According to Kornman, "ownership" of the safe deposit boxes and their contents never transferred because the bank refused to allow Heritage to change the name on the account. From the Court's perspective, however, the right to possess a safe deposit box as lessee and ownership of the contents of that box are two distinct legal issues. See, e.g., Estate of Silver, 299 Mont. 506, 1 P.3d 358 (2000) (safe deposit box lease does not establish title to contents); Estate of Finkelstein, 817 P.2d 617 (Colo.Ct.App.1991) (distinguishing title to a safe deposit box from title to its contents). Personal property belonging to one person can be kept in a safe deposit box leased by a bank to another person. And, if a dispute as to ownership later arises, that dispute will have to be resolved based on documentary and other evidence of ownership of the contents of the leased box.
In this case, we have contemporaneous documents establishing an intent to transfer ownership of the cash i.e., a "Consent of Manager in Lieu of Special Meeting of Manager of [Heritage]" dated July 26, 2002, which resolves that the ownership of the contents of the box be transferred to Steadfast, and the written receipts for the cash signed by Kornman on behalf of Steadfast and Ettman Trust. In addition, Kornman controlled both the boxes and *494 their contents. So, on whose behalf was Kornman exercising control over the boxes and/or their contents? Heritage, because the boxes were leased to it and Kornman was an officer of Heritage (for most of the relevant time period), or Ettman Trust, because Kornman had acknowledged receipt of the cash as its Trustee and remained its Trustee throughout the relevant time period, or both?
After carefully considering these issues and the evidence, the Court concludes that the $4 million in U.S. currency was legally transferred (via constructive delivery coupled with an intent to transfer ownership) to Steadfast on July 26, 2002, who in turn transferred it to Ettman Trust on that same date, and that the Trustee of the Ettman Trust i.e., Kornman had control over the cash following the transfer. Accordingly, legal title to the cash passed to Ettman Trust on July 26, 2002.
Accordingly, this Court concludes that Heritage distributed a total of $46 million to its members from April 16, 2001 through February 18, 2003, of which $43.9 million was received by the Member Defendants. Specifically, during this time period, Steadfast received Transfers totaling $40.54 million, GMK Family received Transfers totaling $2.1 million, and Tikchik received Transfers totaling $1.26 million. Because Heritage made each of the Transfers with the actual intent to hinder or delay a Heritage creditor, the Transfers are avoidable by the Trustee.
Section 550(a) of the Bankruptcy Code permits the Trustee to recover the property transferred or its value from "(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee." Section 550(b) provides a good faith defense to immediate or mediate transferees but not to initial transferees or benefitted entities. Accordingly, the Trustee is entitled to recover the Transfers from the initial transferees i.e., Steadfast (to the extent of $40.54 million), GMK Family (to the extent of $2.1 million), and Tikchik (to the extent of $1.26 million). And, since the $4 million in U.S. currency in Heritage's safe deposit boxes was transferred from Heritage to Steadfast to Ettman Trust, the Trustee may also recover that $4 million from Ettman Trust as a subsequent transferee.[45]See p. 495, infra.
However, the Trustee also seeks to recover the Transfers from "all . . . persons for whose benefit the transfers were made. . . ." See Second Amended Adversary Complaint, ¶ 56. The Trustee's Amended Proposed Findings of Fact and Conclusions of Law (the "Trustee's Amended Proposed Findings") assert that
the Distributions resulted in property being transferred from one entity indirectly owned and controlled by Kornman to other entities under his ownership and control. Courts view `control' for purposes of these fraudulent transfer claims with a substantive, equitable lens. For Kornman, the Distributions were essentially transfers from one pocket to another. Kornman directly or indirectly owned and controlled both the transferor and the transferees, therefore he effectively maintained possession and control of the property transferred.
Trustee's Amended Proposed Findings, pp. 46-47. Thus, according to the Trustee, judgment should be awarded "in the full amount of the Distributions against Defendants Steadfast, GMK Family and Tikchik, and to [sic] Kornman as the person for whose benefit such transfers were made." Id. at p. 54.
It is not always simple to determine who is an initial transferee or an *495 entity for whose benefit a transfer was made. A party who receives a transfer directly from the debtor will not be considered the initial transferee unless that party gains dominion or control over the funds. Matter of Coutee, 984 F.2d 138 (5th Cir.1993). In other words, when the entity acts merely as a conduit, and exercises no dominion or control over the funds while those funds are in its hands, it is not a transferee. The dominion and control required in order to make an entity a transferee, refers to "dominion and control over the funds after the disputed transfer, not dominion and control over the transferor before the transfer." Rupp v. Markgraf, 95 F.3d 936, 940 (10th Cir.1996).
The phrase "entity for whose benefit such transfer was made" does "not simply reference the next pair of hands; it references entities that benefit as guarantors of the debtor, or otherwise, without ever holding the funds." In re Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey, 130 F.3d 52, 57 (2d. Cir.1997). As noted in the seminal case of Bonded Financial Services, Inc. v. European American Bank, 838 F.2d 890 (7th Cir.1988):
The `entity for whose benefit' is different from a transferee, `immediate' or otherwise. The paradigm `entity for whose benefit such transfer was made' is a guarantor or debtor someone who receives the benefit but not the money . . . Section 550(a)(1) recognizes that debtors often pay money to A for the benefit of B; that B may indeed have arranged for the payment (likely so if B is an insider of the payor); that but for the payment B may have had to make good on the guarantee or pay off his own debt; and accordingly that B should be treated the same way initial recipients are treated. If B gave value to the bankrupt for the benefit, B will receive credit in the bankruptcy, and if not, B should be subject to recovery to the same extent as A sometimes ahead of A, although § 550 does not make this distinction. Someone who receives the money later on is not an `entity for whose benefit such transfer was made'; only a person who receives a benefit from the initial transfer is within this language.
Bonded, 838 F.2d at 895-896. In other words, subsequent transferees cannot be an "entity for whose benefit" the initial transfer was made, even if the subsequent transferee actually receives a benefit from the initial transfer. In re Consolidated Capital Equities Corp., 175 B.R. 629 (Bankr.N.D.Tex.1994). Moreover, as a general rule, initial transferees and entities for whose benefit the initial transfer was made are mutually exclusive, In re Red Dot Scenic, Inc., 293 B.R. 116 (S.D.N.Y.2003). Nor is an unquantifiable advantage the sort of "benefit" contemplated by § 550. In re International Management Assoc., 399 F.3d 1288 (11th Cir.2005). Rather, the common example of the sort of "benefit" contemplated by Congress in enacting § 550 is the benefit to a guarantor by the payment of the underlying debt of the debtor. Id.
Here, as noted previously, the Trustee seeks recovery of the Transfers from Kornman as the person for whose benefit such transfers were made or, in the alternative, as a subsequent transferee. The Trustee did not brief this application of § 550 in his many briefs filed both prior to and after trial. The Trustee cites,[46] however,
*496 evidence showing that Steadfast transferred $10.44 million to Kornman on July 20, 2001 (noted on the notation portion of the check as a "loan"), the same date that Steadfast received a distribution from Heritage in an identical amount;
evidence showing that $600,000 was transferred from GMK Family to Kornman on July 20, 2001 (noted on the notation portion of the check as "distribution"), the same date that GMK Family got a distribution from Heritage in the identical amount;
evidence showing that Ettman Trust received $4 million from Steadfast on the same date that Steadfast received a $4 million distribution from Heritage.
The Trustee also cites to certain of Kornman's trial testimony which establishes that (i) at various points in time, Steadfast transferred some funds to the Ettman Trust; (ii) Kornman owned or controlled 92% of Heritage and was the person who directed the Transfers; (iii) the major portion of Heritage's income ended up on Kornman's personal tax return, by way of various pass-through entities; and (iv) the bulk of Kornman's assets were in the Ettman Trust, of which Kornman was trustee.
However, none of this evidence supports a finding that Kornman was the "entity for whose benefit" the Transfers were made. There is simply no showing that Kornman received any benefit at all from the initial transfers. In re International Management Assoc., 399 F.3d 1288 (11th Cir.2005) ("the fact that Reilly attained complete control over the debtors' assets does not give rise to a quantifiable benefit or one bearing the `necessary correspondence to the value of the property transferred or received.'") (quoting Mack v. Newton, 737 F.2d 1343, 1359-60 (5th Cir.1984)). The fact that Heritage's income passed through various entities and ended up on Kornman's personal tax return does nothing to change the analysis with respect to the Transfers at issue.
Accordingly, the Court concludes that the Transfers may not be recovered from Kornman as the person for whose benefit the Transfers were made.
However, the Trustee also seeks to recover the Transfers from Kornman as a subsequent transferee in accordance with § 550(a)(2) of the Bankruptcy Code. Two of the Transfers appear to be at issue here i.e., (i) the $600,000 transferred from Heritage to GMK Family and then on to Kornman on July 20, 2001, and (ii) the $10.44 million transferred from Heritage to Steadfast and then on to Kornman on that same date. Each will be addressed further below.
Subsequent transferees, as opposed to initial transferees, are entitled to assert protection as a good faith transferee for value under § 550(b). Matter of Criswell, 102 F.3d 1411 (5th Cir.1997). Here, Kornman bears the burden of proving the requirements of § 550(b)(1) i.e., that he took "for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided." In re Consolidated Capital Equities Corp., 175 B.R. 629, 637 (Bankr.N.D.Tex.1994).
As noted previously, neither side briefed the application of § 550. However, Kornman's counsel argues that the $10.44 million was a loan from Steadfast to Kornman to enable him to purchase an interest in Tikchik, which he then transferred to Steadfast to pay off the loan. As such, Kornman's counsel asserts, without citation *497 to any authority, that "obviously, a secured loan which was paid back to Steadfast LP was not a `transfer' under Section 550." See e-mail from Brant Martin to H. Meister, 4/20/09 (on file with the Court).
It is true that the documentary evidence establishes that the $10.44 million was transferred to Kornman as a "loan." See P.Ex. 6; D.Ex. 43. In exchange for the loan proceeds, Kornman executed a "Note and Security Agreement" in favor of Steadfast. D.Ex. 145. In satisfaction of the obligation to repay the note, Kornman entered into a Partnership Transfer Agreement which, among other things, recited that Kornman owed $10.44 million (plus interest) to Steadfast and, in partial payment thereof, Kornman transferred a 99.8% interest in Tikchik to Steadfast. D.Ex. 177.[47]
Thus, given these facts, this Court must first decide if Steadfast's loan to Kornman is a "transfer" under § 550. What constitutes a "transfer" is a matter of federal law. Southmark v. Schulte, Roth & Zabel, L.L.P., 242 B.R. 330 (N.D.Tex.1999). The Bankruptcy Code defines a transfer as "each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with (i) property; or (ii) an interest in property." 11 U.S.C. § 101(54). As money was disbursed from Steadfast to Kornman, a transfer occurred. Barnhill v. Johnson, 503 U.S. 393, 398, 112 S. Ct. 1386, 118 L. Ed. 2d 39 (1992) (once a debtor, or drawer of a check, has directed the drawee bank to honor a check and the bank does so, the drawer of the check has implemented a mode of disposing of property under § 101(54)); In re Equator Corp., 362 B.R. 326 (Bankr.S.D.Tex.2007). Thus, the Court concludes, contrary to Kornman's argument, that there was in fact a subsequent "transfer" of the $10.44 million to Kornman which the Trustee may attempt to recover under § 550(a)(2).
Kornman next argues that
the exhibits establish that Gary Kornman gave value to Steadfast in the form of a promissory note, without knowledge at the time that the transfer was subject to voidability. In addition, Mr. Kornman used the proceeds to purchase the Mann interests in Heritage, and then transferred the Mann interests to Steadfast to satisfy the promissory note. Therefore, Mr. Kornman should not be liable for the $10.44 million pursuant to Section 550(b).
E-mail from Brant Martin to H. Meister, 4/20/09 (on file with the Court). The Court agrees that Kornman's execution of a promissory note in favor of Steadfast at the time he received the $10.44 million loan constitutes value. However, that is only one of the three elements of the § 550(b)(1) defense. Kornman must also prove that he received the transfer in good faith, and without knowledge of the voidability of the transfer avoided. The term "good faith" under § 550(b) "is an ordinary business transaction concept," and is "a separate concept from knowledge of the voidability of the transfer." Southmark Corp. v. Schulte, Roth & Zabel, 217 B.R. 499, 507 (Bankr.N.D.Tex.1997), rev'd on other grounds, 242 B.R. 330 (N.D.Tex. 1999). A creditor can act in "good faith" even with knowledge that a transfer may *498 be avoidable in the event of a bankruptcy. Id. The phrase "knowledge of the voidability of the transfer avoided" means that the transferee "knew facts that would lead a reasonable person to believe that the property transferred was recoverable. When in possession of facts which suggest the existence of others, a transferee may not close its eyes to the remaining facts and deny knowledge." Id. Further, the term "knowledge" does "not require `complete understanding of the facts and receipt of a lawyer's opinion that such a transfer is voidable.'" In re Consolidated Capital Equities Corp., 175 B.R. 629 (Bankr. N.D.Tex.1994) (quoting Bonded Fin'l Svcs., Inc. v. European American Bank, 838 F.2d 890, 898 (7th Cir.1988)).
As the Defendants admit, Kornman caused Heritage to make the Transfers at issue here. As previously found, Kornman did so at a time when he knew that (i) Canada, Bird, and Koshland/KFP were demanding that Heritage pay them millions of dollars in satisfaction of their disputed claims against Heritage, and (ii) the IRS was demanding that Heritage disclose the names of its clients who had implemented a 752 Transaction and thus, was threatening a substantial source of Heritage's ongoing business revenues. See pp. 474-75, supra. Moreover, on July 20, 2001, Kornman, as the Manager of GMK Family, caused it to distribute the $600,000 on to him that Heritage had just distributed to it. Finally, Kornman controlled Steadfast (through his control of Ettman Trust and Kornman Associates) and caused Steadfast to loan him the $10.44 million that Heritage had distributed to it on that same day. Obviously, when Kornman accepted the $600,000 distribution from GMK Family and the $10.44 million loan from Steadfast, he knew all of the facts that caused this Court to conclude that the underlying Transfers were made with the intent to at least hinder or delay a Heritage creditor and thus, were avoidable under § 544 and TUFTA. Therefore, the Court concludes that Kornman knew sufficient facts to put him on notice of the voidability of the Transfers. Moreover, Kornman's receipt of the funds was not in good faith. Accordingly, Kornman has failed to prove the statutory defense provided by § 550(b)(1).
And, under the Bankruptcy Code, that is the only defense available to subsequent transferees. The fact that Kornman repaid the Steadfast loan is irrelevant, as § 550 does not recognize a repayment defense. This makes sense because while Kornman's repayment of the loan may have made the initial transferee i.e., Steadfast whole, it did nothing to restore lost value to the Heritage bankruptcy estate. In short, the Heritage bankruptcy estate, which is the intended beneficiary of any avoidance and recovery of the Transfers, was not benefitted by the loan repayment, and the Trustee is entitled to recover the $10.44 million from Steadfast as the initial transferee and Kornman as the subsequent transferee. Of course, § 550(d) only permits the Trustee a single satisfaction.
Accordingly, the Court concludes that the Trustee is entitled to recover, from Kornman as a subsequent transferee in accordance with § 550(a)(2) of the Bankruptcy Code, the (i) $600,000 Heritage distributed to GMK Family on July 20, 2001, which funds were then distributed on to Kornman on that same date, and (ii) $10.44 million Heritage distributed to Steadfast on July 20, 2001, which funds were then loaned to Kornman on that same date.
B. Preference Claims
1. In General
The Trustee contends that certain transfers made to Kornman and the Supplier Defendants within the 90-days preceding the filing of the Case were preferential *499 payments avoidable under § 547(b) of the Bankruptcy Code.[48] The Trustee has the benefit of the statutory presumption of insolvency during that 90-day period. 11 U.S.C. § 547(f).
In response, Kornman and the Supplier Defendants contend that they have rebutted the presumption of insolvency, thereby shifting the burden back to the Trustee to establish, by a preponderance of the evidence, Heritage's lack of solvency during that 90-day period. Moreover, Kornman and the Supplier Defendants contend that even if they did not successfully rebut the presumption of insolvency, the Trustee may not avoid at least certain of the challenged transfers because they were made in the ordinary course of business. See 11 U.S.C. § 547(c)(2).[49]
To prevail on his preference claims, the Trustee must prove that: (1) there was a transfer of an interest of Heritage in property, (2) to or for the benefit of a creditor, (3) for or on account of an antecedent debt owed by Heritage before such transfer was made, (4) made while Heritage was insolvent, and (5) the transfer enabled the creditor to receive more than such creditor would receive (i) if Heritage filed under Chapter 7, and (ii) the transfer had not been made. See 11 U.S.C. § 547(b); see also Cage v. Wyo-Ben, Inc. (In re Ramba, Inc.), 437 F.3d 457, 459 (5th Cir.2006). The only element of the Trustee's preference claims in dispute here is the solvency element. And, as noted previously, § 547(f) of the Bankruptcy Code provides that "[f]or the purposes of this section, the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition." 11 U.S.C. § 547(f).
This "presumption imposes on the party against whom it is directed the burden of going forward with evidence to rebut or meet the presumption, but does not shift to such party the burden of proof in the sense of the risk of nonpersuasion." Louis Dreyfus Natural Gas Corp. v. Herod (In re GasMark Ltd.), 158 F.3d 312, 315 (5th Cir.1998) (quoting FED.R.EVID. 301). In other words, the "effect of this presumption is to shift the burden to the transferee to produce evidence of the debtor's solvency as of the transfer date." In re Ramba, Inc., 416 F.3d 394, 403 (5th Cir.2005) (citing GasMark, 158 F.3d at 315); see also Smith v. KKM P'ship (In re Quality Woodwork Interiors, Inc.), Nos. 06-3032, 06-3033, 2007 WL 1662635, at *2 (Bankr.S.D.Tex. June 4, 2007) (the defendant is required to "prove solvency with respect to transfers made during the 90-days preceding the petition date."). However, "mere speculative evidence of solvency is not enough." GasMark, 158 F.3d at 315.
Kornman and the Supplier Defendants contend that they introduced sufficient evidence at trial to rebut the statutory presumption of insolvency, thus shifting the burden back to the Trustee to produce evidence of Heritage's insolvency on each of the applicable transfer dates. If the Defendants are correct and they have successfully rebutted the presumption of insolvency, the Trustee's preference claims *500 fail as a matter of law because he offered no proof of insolvency. However, for the reasons explained more fully below, this Court concludes that Kornman and the Supplier Defendants failed to rebut the statutory presumption of insolvency.
2. Rebutting the Presumption of Insolvency
The Bankruptcy Code defines "insolvent" as "financial condition such that the sum of such entity's debts is greater than all of such entity's property, at a fair valuation. . . ." 11 U.S.C. § 101(32)(A). Thus, in order to rebut the statutory presumption of insolvency, Kornman and the Supplier Defendants were required to produce non-speculative evidence that would support a finding that the "fair" value of Heritage's property exceeded Heritage's debts[50] on the relevant transfer dates.
So, what types of evidence have been found to be sufficient to rebut the statutory presumption of insolvency? In In re GasMark Ltd., 158 F.3d at 315-17, the Fifth Circuit found three items of evidence too speculative to rebut the statutory presumption of insolvency: (1) expert testimony that a potential purchaser would have attributed value to the debtor in excess of its liabilities, (2) a third party memo stating that the debtor produced a return on an investment, and (3) an investment banker's letter noting that the debtor's equity had a positive value in the merger market. Unpersuaded by such "solvency" evidence, the court affirmed a finding that the debtor was insolvent at the time of the transfer. Id.
Similarly, in Baker Hughes Oilfield Operations, Inc. v. Cage (In re Ramba, Inc.), 416 F.3d 394 (5th Cir.2005), the court held that an income statement showing positive operating income and an expenditures summary showing a small net loss does "not address [the debtor's] overall balance of debts and assets, and thus, [does] not raise genuine questions of fact as to [the debtor's] solvency." Id. at 403. Further, regarding positive balance sheets for periods of time prior to the transfer date, such evidence "does not create a genuine issue of fact as to whether a debtor was insolvent as of the transfer date." Id.
Conversely, the Eighth Circuit, on appeal from a judgment in favor of the preference defendant, found a "financial statement showing positive net worth [] sufficient to rebut the presumption of insolvency." Jones Truck Lines, Inc. v. Full Serv. Leasing Corp., 83 F.3d 253, 258 (8th Cir.1996) (citing Chaitman v. Paisano Auto. Liquids, Inc. (In re Almarc Mfg., Inc.), 60 B.R. 584, 586 (Bankr.N.D.Ill.1986)); see also Silverman Consulting, Inc. v. Hitachi Power Tools, U.S.A. Ltd. (In re Payless Cashways, Inc.), 290 B.R. 689, 698 n. 10 (Bankr. W.D.Mo.2003) (citing Jones Truck Lines, 83 F.3d at 258). However, unaudited financial statements have been found insufficient to rebut the presumption of insolvency because unaudited statements "do not reflect the `fair valuation' of assets and do not include contingent liabilities." Katz v. Wells (In re Wallace's Bookstores, Inc.), 316 B.R. 254, 259 (Bankr.E.D.Ky. 2004) (citing cases) (holding that the financial statements offered by the preference defendant "are insufficient per se to rebut the presumption of insolvency").
Here, Kornman and the Supplier Defendants rely upon the trial testimony of Kornman and Walker, along with certain documentary evidence, to support their contention that they have successfully rebutted *501 the presumption of insolvency. Specifically, through the testimony of Walker and Kornman and data from Heritage's quickbook financial records as turned over to the Trustee (the "QuickBooks"), P.Ex. 289, the Defendants created two solvency calculations for the 90-day period prior to Heritage's bankruptcy filing i.e., from February 17, 2004 through May 17, 2004. See D.Ex. 281. The first of those calculations compared the value of two categories of Heritage property i.e., cash plus client notes receivable to Heritage's total liabilities (as shown on QuickBooks) plus the Canada arbitration award (in the amount ultimately entered on April 14, 2004). The second of those calculations compared the value of two different categories of Heritage property i.e., total assets (as shown on QuickBooks (which included the cash)) plus client notes receivable to Heritage's total liabilities (as shown on QuickBooks) plus the Canada arbitration award (in the amount ultimately entered on April 14, 2004). Walker's testimony addressed the financial information from QuickBooks, the amount of the Canada award, and certain information regarding the client notes receivable, while Kornman's testimony purported to value the client notes receivable, which, for some reason, were not reflected on QuickBooks.[51] Through these solvency calculations, the Defendants contend that they have rebutted the presumption of insolvency during most, if not all, of the 90-day preference period. Specifically, the Defendants contend that (i) the first calculation (cash plus client notes receivable) shows Heritage to be solvent through April 27, 2004, and (ii) the second calculation (total book assets plus client notes receivable) shows Heritage to be solvent throughout the entire preference period.
So, the question becomes, did either of these calculations rebut the statutory presumption of insolvency, to which we now turn. The second calculation (total book assets plus client notes receivable) can be quickly disposed of. Those calculations are legally insufficient to rebut the statutory presumption that Heritage was insolvent for at least one reason.[52] Specifically, there is no evidence that the book value of Heritage's "Total Assets" as shown on QuickBooks reflects the "fair" value of those assets. And, as noted previously, to determine whether Heritage was solvent, the Bankruptcy Code requires that the "fair" value of Heritage's property exceed its debts. See 11 U.S.C. § 101(32A); see also p. 499, supra. The failure to fairly value property has led numerous courts to find that the statutory presumption of insolvency has not been rebutted. See, e.g., In re Wallace's Bookstores, Inc., 316 B.R. 254, 259 (Bankr. E.D.Ky.2004) (citing cases); Hoffinger, 313 B.R. at 812. As stated in Devan v. The CIT Group (In re Merry-GoRound Enters., Inc.):
The balance sheets do not satisfy [the plaintiff]'s burden for two reasons . . . First, the balance sheets do nor [sic] purport to value the Debtor's assets according to the fair valuation standard required by 11 U.S.C. [§] 101(32)(A). Second, the balance sheets do not value all of the Debtor's debts to the extent that some of the Debtor's contingent liabilities are not assigned a dollar value. Without evidence of the fair valuation of *502 the Debtor's assets and of the sum of the Debtor's debts as defined by 11 U.S.C. § 101(12), the court cannot find either that there is no genuine issue of material fact or that [the defendant] is entitled to a judgment as a matter of law.
229 B.R. 337, 342 (Bankr.D.Md.1999).
Turning next to the Defendants' first solvency calculation i.e., cash plus client notes receivable minus total book liabilities together with the Canada award, the Trustee contends that there are problems with this calculation on both sides of the hypothetical balance sheet. Turning first to the asset side, there is no dispute that the "fair" value of cash is its face amount. However, that assumes the cash is really Heritage's cash. Recall the $4 million in U.S. currency in the safe deposit boxes that Heritage attempted to distribute to Steadfast on July 26, 2002 as part of the $8.7 million distribution that we discussed in connection with the fraudulent transfer section of this Memorandum Opinion? See pp. 490-94, supra. As noted previously, Walker and Kornman contend that "ownership" of the safe deposit boxes and their contents was never transferred to Steadfast (or subsequently to Ettman Trust) in July 2002. Rather, they claim that the $4 million in U.S. currency remained in the safe deposit boxes in Heritage's name until April 28, 2004, when it was taken out of the safe deposit boxes, was deposited into Heritage's payroll account at the bank, and was used to purchase cashier's checks, which were, in turn, used to pay various Heritage debts. Testimony of Walker (1/14/09) 190:15-192:4. Thus, according to Walker and Kornman, the $4 million in U.S. currency remained Heritage property during most of the preference period i.e., from February 17, 2004 through April 27, 2004, and it is "fairly" valued at $4 million.
In response, the Trustee contends that QuickBooks, as maintained by Walker, overstates Heritage's cash position by $4 million during most of the preference period i.e., from February 17, 2004 through April 27, 2004 because Walker accounted for the $4 million in U.S. currency in the safe deposit boxes as a Heritage asset when, in reality, it had been effectively transferred to Steadfast on July 26, 2002 as part of Heritage's $8.7 million distribution to Steadfast, and then transferred on to Ettman Trust by Steadfast on that same date. In addition, the Trustee contends that QuickBooks, as maintained by Walker, understate Heritage's liabilities by $4 million on and after April 28, 2004, because they fail to recognize what must have been a $4 million loan to Heritage by Ettman Trust on that date. In other words, the Trustee concludes that Walker should never have "adjusted" the Heritage books to add $4 million as an "Investment" on February 18, 2003 (when the $4 million check was written to Steadfast), and should have instead recorded a $4 million liability to Ettman Trust when the currency was deposited into the Heritage payroll account on April 28, 2004 (because Ettman Trust was the owner of the currency on that date and must have loaned it to Heritage). Thus, as relevant here and according to the Trustee: (i) Heritage's assets were overstated on QuickBooks by $4 million from February 17, 2004 through April 27, 2004; and (ii) Heritage's liabilities should be increased by $4 million on and after April 28, 2004 to reflect the $4 million loan from Ettman Trust.
The Trustee also contends that no credible evidence of the "fair" value of the client notes receivable has been offered by the Defendants. As noted previously, the client notes receivable are not reflected on Heritage's books and records i.e., QuickBooks. However, in creating their solvency calculations, the Defendants add the *503 client notes receivable to the asset side of their hypothetical balance sheet. The question thus becomes, at what "fair" value should the client notes receivable be reflected? According to Kornman, the client notes receivable are "fairly" valued at their face amount plus accrued interest and any costs of collection. See, e.g., Testimony of Kornman (1/16/09) 58:11-15 (Berg note); 61:8-11 (Love note); 67:1-12 (Schuler note). However, on cross-examination, the Trustee established that many of the client notes were in default when the Case was filed and that the makers of all of the notes asserted various defenses to the collection of those notes. Testimony of Kornman (1/16/09) 79:25-81:3; P.Ex. 308. Notwithstanding the defaults and defenses, Kornman remained unwavering in his belief that the client notes receivable were worth their face amounts, plus interest and collection costs. See, e.g., Testimony of Kornman (1/16/09) 81:25-82:8 (Love note); 83:13-16 (all notes "[s]o the fact that I knew the notes were good, that I knew these people had the money, that I didn't believe there were any defenses to any of these notes, made me think these notes had full value."). So, according to the Trustee, Kornman's testimony about the value of the client notes receivable is simply incredible; and thus, is not sufficient, non-speculative evidence from which the Court can find the statutory presumption of insolvency rebutted.
The Trustee finds a further problem with the liability side of the Defendant's solvency calculations as well (in addition to failing to reflect the alleged $4 million loan from Ettman Trust on and after April 28, 2004). Specifically, and relying on the unaudited financial statement cases as his legal authority, the Trustee contends that there are contingent client claims that have not been taken into account by the Defendants, rendering their solvency calculations legally insufficient evidence to rebut the statutory presumption of insolvency.[53] At a minimum, the Trustee contends that Heritage's potential liability with respect to the Howard Jenkins ("Jenkins") lawsuit has to be accounted for in the Defendants' calculations.[54]
In response, the Defendants argue that they have adduced sufficient evidence to rebut the statutory presumption of insolvency, reminding the Court that they do not have to prove Heritage solvent in order to rebut the presumption, they are simply required to produce evidence of Heritage's solvency as of the transfer dates, which they believe they have done at least through April 27, 2004, which shifts the burden back to the Trustee to prove Heritage's lack of solvency. With respect to the Jenkins claim and the other potential client claims, the Defendants contend that
*504 those claims were also without merit and not subject to valuation, based upon the existence of the risk disclosure, release, and indemnity language contained in each of the Client Agreements. Accordingly, there is no basis to assign any value to such claims prior to the time Heritage filed for bankruptcy relief.
Defendants' Post-Trial Brief at p. 47.
After carefully considering the parties' arguments and the evidence, and recognizing that "mere speculative evidence is not enough" to rebut the statutory presumption, GasMark, 158 F.3d at 315, this Court concludes that the Defendants failed to rebut the statutory presumption of insolvency. The Court comes to this conclusion for two reasons.
First, the asset side of the Defendants' solvency calculation is overstated by the $4 million in cash, which this Court has concluded was legally transferred to Steadfast (and then to Ettman Trust) on July 26, 2002. See pp. 490-94, supra. So, the Defendant's solvency calculation from February 17, 2004 through April 27, 2004 must be reduced by the $4 million of cash which belonged to Ettman Trust during that entire period.
Second, Kornman's testimony regarding the "fair" value of the client notes receivable is not credible. Kornman's refusal to acknowledge that at least some discount off face value plus accrued interest and collection costs was appropriate (particularly given the fact that the notes were in default and the clients had numerous defenses to the collection of those notes), renders his testimony of "fair" value for the client notes receivable speculative at best and incredible at worst.[55]
Accordingly, the Court concludes that the Defendants failed to rebut the statutory presumption of insolvency and that the Trustee has proven that Kornman and the Supplier Defendants received various preferences that will be quantified hereinafter. See pp. 508-09, infra.[56]
3. Ordinary Course of Business Defense
The Court must next address the Defendants' alleged defense to avoidance of certain of the challenged transfers under § 547(c)(2). The parties agree that the Defendants must prove their defense by a preponderance of the evidence, as they have the "burden of proving the nonavoidability of a transfer" under § 547(c). See 11 U.S.C. § 547(g). So, to prevail on their § 547(c)(2) ordinary course of business defense, Kornman and the Supplier *505 Defendants were required to prove that the challenged transfers were:
(A) in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee; (B) made in the ordinary course of business or financial affairs of the debtor and the transferee; and (C) made according to ordinary business terms.
11 U.S.C. § 547(c).[57]See also Matter of Gulf City Seafoods, Inc., 296 F.3d 363 (5th Cir.2002) (holding that "the creditor must show that as between it and the debtor, the debt was both incurred and paid in the ordinary course of their business dealings and that the transfer of the debtor's funds to the creditor was made in an arrangement that conforms with ordinary business terms-a determination that turns the focus away from the parties to the practices followed in the industry." (emphasis in original)). The Defendants bear the burden of proof with respect to all three elements. See 11 U.S.C. § 547(g).
It is the third element of the ordinary course defense that is in dispute here. As explained by the Fifth Circuit in Gulf City,
[n]early all other circuits have held that a payment is "according to ordinary business terms" if the payment practices at issue comport with the standard of the industry. Under the holdings of these cases, the relevant inquiry is "objective"; that is to say, we compare the credit arrangements between the other similarly situated debtors and creditors in the industry to see whether the payment practices at issue are consistent with what takes place in the industry. By consistent, we do not necessary mean identical.
296 F.3d at 367-68 (citations omitted). According to the Gulf City court, in order to satisfy the third element,
[the creditor] should provide some evidence of credit arrangements of other creditors and debtors in the industry. Following the Second, Sixth and Seventh Circuits, we hold that [the creditor] cannot meet its burden under this objective test by simply showing that (1) its arrangement with [the debtor] is similar to the credit arrangements [the creditor] has with other debtors, or (2) the arrangement is similar to [the debtor's] arrangements with other creditors.
296 F.3d at 368, n. 5 (emphasis in original). The test requires a focus "away from the parties," Gulf City Seafoods, 296 F.3d at 367, and, as applied here, a focus instead on what Properties' competitors and what Heritage's competitors in the industry do. Id.; Fiber Lite Corp. v. Molded Acoustical Prods. Inc. (In re Molded Acoustical Prods. Inc.), 18 F.3d 217, 227 (3rd Cir. 1994) (section 547(c)(2)(C) requires the court to "look first at the range of terms on which firms comparable to [the creditor] on some level provide credit to firms comparable to the debtor on some level"); Lawson v. Ford Motor Co. (In re Roblin Indus., Inc.); 78 F.3d 30, 42 (2d Cir.1996) (court should look at "those terms employed by similarly situated debtors and creditors facing the same or similar problems"); Logan v. Basic Distribution Corp. (In re Fred Hawes Organization, Inc.), 957 F.2d 239, 245-46 (6th Cir.1992) (affirming *506 bankruptcy court's conclusion that creditor must adduce evidence as to similar and independent creditors' dealings with similar and independent customers).
While the Defendants asserted the ordinary course defense more broadly before trial, they now contend that they have introduced sufficient evidence to prove the ordinary course defense as to payments Heritage made to Agency and Properties during the 90-days prior to the filing of the Case.[58] Heritage's payments to Agency were for its sublease of office space in Dallas and Heritage's payments to Properties were for its lease of office space in Tennessee.
In the Defendants' Proposed Amended Findings and Conclusions, they assert that the transfers to Agency for the sublease of office space were made in the ordinary course of business or financial affairs of Heritage and Agency and according to ordinary business terms. As evidentiary support for this statement, the Defendants cite the following trial testimony of Walker:
Q: Was the entirety of the space that [Agency] leased before Heritage came into existence subleased to Heritage?
A: I think I understand your question, and if I do, then answer would be yes. The space changed from time to time. There were additions or changes in which suites there were. But yes, when Heritage, L.L.C. came into existence, it leased all of the space from Agency that Agency was leasing. Is that is that what you're asking?
Q: That's what I'm looking for. . . .
Testimony of Walker (1/13/09) 67:7-15. As evidentiary support for their assertion that the 10% markup over the prime lease on the sublease from Agency to Heritage is "ordinary for the relevant industry," Defendants' Proposed Amended Findings and Conclusions, ¶ 142, the Defendants cite solely to a summary of the transactions *507 contained in Heritage's QuickBooks electronic records.
In the Defendants' Amended Proposed Findings and Conclusions, they also assert that the transfers to Properties for the lease of office space were made in the ordinary course of business or financial affairs of Heritage and Properties and according to ordinary business terms. As evidentiary support for this statement, the Defendants cite the following trial testimony of Walker:
Q: All right. If you go further down the page to Heritage Properties, L.L.C., you see a series of four payments. Do you see those?
A: Yes.
Q: Were those payments on account of amounts owed by the debtor to Heritage Properties, L.L.C.?
A: I would assume so.
Testimony of Walker (1/13/09) 93:2-8.
This evidence does not support a finding of ordinary business terms in the relevant industry. Moreover, at trial, the Trustee's counsel asked Walker what experience she had in each of the industries in which the Supplier Defendants operated, other than her experience at Heritage, and in each case, her response was "none." With respect to her specific experience in the leasing of office space, her testimony was as follows:
Q: Okay. Other than your experience in with between Heritage and Heritage Properties and THO Agency, what is your experience, if any, in leasing of office space?
A: Well, I've been involved in various lease negotiations with for space with at different points in time with different companies.
Q: But is that on behalf of entities owned or controlled by Mr. Gary Kornman?
A: Yes, I believe so.
Audiotape of hearing held 1/13/09, 12:13:24-12:14:02 (on file with Court).[59] Walker thus testified that her only experience in the leasing of office space was the experience she had with companies controlled by Kornman.
With respect to Heritage's payments to Agency, the only other evidence at trial regarding the third prong of the ordinary course defense is as follows:
Q. And was the manner in which Heritage paid and an agency [sic] received payment common in the industry?
A. Yes.
Q. And how do you know that?
A. Because that's my understanding of what industry standard is.
Testimony of Walker (1/14/09) 107:19-24. Similarly, with respect to Heritage's payments to Properties, the only other evidence in the trial record is as follows:
Q. Ms. Walker, with respect to Properties, what was the protocol for how bills were paid, invoices sent from Properties and that invoice paid by Heritage?
A. It would be on around the 25th of the month an invoice would be sent for the coming month to Heritage and Heritage would pay the invoice shortly thereafter.
Q. Was that conduct maintained both prior to and after February 17, 2004.
A. Yes.
Q. Ms. Walker, you just described various protocols with respect to . . . Properties.. . .
*508 A. Yes.
Q. Based upon those protocols that you've stated, can you tell the Court whether or not those protocols were common in the industry in which each one of those business were operating?
A. It is my understanding that they were.
Q. And what do you base those opinions, and if separate, please state so.
A. On the research that I did which which I have which I have previously discussed. . . . With respect to the office space leases, every office space lease that I've ever seen the rent is due on the 1st of the month for that month and that applies to commercial as well as residential, as I said, for everything I have ever seen. . . .
Q. What experience do you have, aside from the research, that you believe enables you to state that the terms and the protocols were protocols that were industry standard?
A. As I said previously, every lease that I've ever seen, and I have executed a number of them in my lifetime, for real property the rent is due on the 1st. I've never seen anything different unless it's at the very first month when you start in the middle of the month and it's pro-rated. Thereafter, its' due on the 1st of the month. . . . Every office building that I've ever seen the lease for, it's due on the 1st of the month. So as to the leases for office space, I've never seen it done any differently.
Testimony of Walker (1/14/09) 112:25-113:8; 115:9-116:1; 116:25-117:12.
When this testimony is taken in context with her other testimony, it is clear that Walker's only experience with real property leases is in connection with a Kornman-controlled company. Walker does not address what other lessors of office space do, or what other lessees of office space do she simply testified as to what a Kornman-controlled company does.[60] This testimony is insufficient to establish what arrangements are "ordinary" as between "other debtors and creditors in a similar market, both geographic and product." Gulf City Seafoods, 296 F.3d at 368 n. 5.
After carefully considering the trial record, the Court concludes that the Defendants have failed to carry their burden of proof with respect to the third prong of the ordinary course defense.
4. The Amount of Avoidance and Recovery
The Court must now decide the amount of the preferential payments made to each of the Supplier Defendants. Based upon the parties factual stipulations, during the 90-days prior to the filing of the Case: (i) XAC received payments totaling $197,822.60,[61] Pretrial Order, Stipulation 116 P.Ex. 290; (ii) XAM received payments totaling $719,137.03, Pretrial Order, Stipulation P.Ex. 291; (iii) FMS received payments totaling $63,643.89, Pretrial Order, Stipulation 118; P.Ex. 292; (iv) Properties received payments totaling $4,000.00, Pretrial Order, Stipulation 119; *509 P.Ex. 294; (v) Strategic received payments totaling $42,829.40, Pretrial Order, Stipulation 120; P.Ex. 336; (vi) Agency received payments totaling $300,945.02, Pretrial Order, Stipulation 121; P.Ex. 296; (vii) Valiant received payments totaling $230,817.93, Pretrial Order, Stipulation 122; P.Ex. 337; (viii) Vehicle received payments totaling $7,920.00, Pretrial Order, Stipulation 123; P.Ex. 338; (ix) Heritage paid employees at Kornman's home a total of $19,697.08, Pretrial Order, Stipulation 124; P.Ex. 293; (x) Heritage paid $11,256.61 under the "wellness" account for vitamins, dietary supplements, and related health products and services for the benefit of Kornman, Pretrial Order, Stipulation 125; and (xi) Heritage paid $137,728.06 to credit card issuers on cards in Kornman's name, Pretrial Order, Stipulation 126; P.Ex. 293.
Each of the above payments was made by Heritage to the identified Defendant or third party on account of an antecedent debt while Heritage was insolvent and the payment enabled that entity to receive more than it would have received if Heritage had filed under Chapter 7 and the payment had not been made. Testimony of Trustee (1/15/09) 123:15-125:16. Accordingly, each of the above payments is avoided.
Because each of the above payments has been avoided, the Trustee is entitled to recover the payments from the Defendant who initially received it in accordance with § 550(a)(1) of the Bankruptcy Code. Moreover, the Trustee is entitled to recover the payments Heritage made to Kornman's credit card issuers and household employees, and under the "wellness account," from Kornman as the person for whose benefit each of those transfers were made. 11 U.S.C. § 550(a)(1); Rupp v. Markgraf, 95 F.3d 936, 940 (10th Cir.1996).
The Trustee also asserts that he may recover payments to the Supplier Defendants from Kornman, because Kornman was the entity for whose benefit those transfers were made. In support, the Trustee appears to assert that simply because the Supplier Defendants were entities that were "set up" to further Kornman's estate planning goals, all payments to those entities must have been of benefit to Kornman. The Court rejects this argument as overbroad. In re International Management Assoc., 399 F.3d 1288, 1292 (11th Cir.2005) ("this sort of unquantifiable advantage is not the sort of `benefit' contemplated by" Section 550).
C. Veil Piercing Claims, Including Sham to Perpetrate Injustice
1. In General
The Trustee contends that
Kornman operated Heritage and the Supplier Defendants as a single economic entity, moving revenue through Heritage to the Supplier Defendants, with the intent to leave Heritage creditors without effective redress. In addition, Kornman controlled and dominated Heritage, its members, and the remaining entity Defendants. Kornman used the entity Defendants as a façade for the purpose of perpetrating a fraud or injustice on Heritage, its clients, and creditors. Kornman controlled these entities for the purpose of avoiding any financial liability for his promotion of unlawful tax shelters. Heritage and the entity Defendants were merely alter egos of Kornman.[62] Through these entities, the *510 Trustee asserts that Kornman executed a scheme which maximized and protected proceeds from the 752 transactions. Because Kornman used the nominal separateness of Heritage and the entity Defendants to engage in and profit from unlawful activities, he abused the corporate form. Under principles of equity, Kornman and the entity Defendants are liable for the debts of Heritage.
Pretrial Order, pp. 5-6.
The Defendants deny these allegations. Rather, according to the Defendants, the "relationships between the Supplier Defendants and Heritage were extensively documented. . . and each of the separate companies had a separate business purpose, separate books and records, and separate revenue streams." Id. at p. 11. The Defendants also assert that the corporate formalities were maintained. While Kornman admits that he controlled all of the Entity Defendants except Leasecorp and Strategic, he denies that he misused the corporate form of any of the Entity Defendants. Rather, according to Kornman, each of the entities had a separate business purpose. Finally, Kornman contends that the Trustee has failed to satisfy his burden of proof to pierce any of the Entity Defendants' veil so as to impose liability on their respective owners or, ultimately, him.
The Court will begin its analysis with the requirements for the Trustee's veil-piercing theories under the applicable state law. Bankruptcy courts apply the choice-of-law rules of the forum in which they sit. ASARCO LLC v. Am. Min. Corp., 382 B.R. 49, 60-61 (S.D.Tex.2007). In Texas, when deciding which state's law to apply in determining the liability of an interest holder for a corporation's debts i.e., a veil piercing claim, the court looks to the law of the jurisdiction of formation. See Alberto v. Diversified Group Inc., 55 F.3d 201, 203 (5th Cir.1995); The Richards Group, Inc. v. Brock, No. 06-0799, 2008 WL 2787899, at *2 (N.D.Tex. July 18, 2008); ASARCO LLC v. Am. Min. Corp., 382 B.R. 49, 64-65 (S.D.Tex.2007); see also, Tex. Bus. Corp. Act Ann. § 8.02 ("only the laws of the jurisdiction of incorporation of a foreign corporation shall govern (1) the internal affairs of the foreign corporation . . . and (2) the liability, if any, of shareholders of the foreign corporation for the debts, liabilities, and obligations of the foreign corporation for which they are not otherwise liable by statute or agreement."). Since Heritage and most of the Entity Defendants were formed in Delaware, the Court will apply Delaware law, except as to FMS (where Texas law applies) and Kornman Associates (where Tennessee law applies).
Two equitable doctrines form the basis for the Trustee's attempts to hold Kornman and the Entity Defendants liable for Heritage's debts i.e., alter ego and sham to perpetrate injustice. As this Court concluded in the Prior Memorandum Opinion, courts applying Delaware law have not separately recognized "sham to perpetrate injustice" as a veil piercing theory. Rather, courts applying Delaware law use the term "sham" when analyzing the alter ego theory. See, e.g., Crosse v. BCBSD, Inc., 836 A.2d 492, 497 (Del. Supr.2003) ("To state a `veil-piercing claim,' the plaintiff must plead facts supporting an inference that the corporation, through its alter-ego, has created a sham entity designed to defraud investors and creditors."); Wallace ex rel. Cencom Cable Income Partners II, Inc., L.P. v. Wood, 752 A.2d 1175, (Del.Ch.1999) ("Piercing the corporate veil under the alter ego theory `requires that the corporate structure cause fraud or similar injustice.' Effectively, the corporation must be a sham and *511 exist for no other purpose than as a vehicle for fraud.") (quoting Outokumpu Eng'g Enter., Inc. v. Kvaerner Enviropower, Inc., 685 A.2d 724, 729 (1996)).
As noted previously, Tennessee is the state of incorporation for Kornman Associates. Like Delaware, the term "sham" is used when analyzing an alter ego veil-piercing claim in Tennessee. See, e.g., Boles v. Nat'l Development Co., 175 S.W.3d 226, 244-45 (Tenn.Ct.App.2005) ("Our courts will disregard the corporation as a separate entity upon a showing that the corporation is a sham or dummy or such action is necessary to accomplish justice," and "[n]o one factor is conclusive in determining whether or not to disregard a corporate entity; rather, courts should rely upon a combination of factors in deciding such an issue.") (citing VP Buildings, Inc. v. Polygon Group., No. M2001-00613, 2002 WL 15634, at *4-5 (Tenn.Ct. App. Jan.8, 2002)).
And, as noted previously, Texas is the state of incorporation for FMS. In contrast to Delaware and Tennessee law, the "sham to perpetuate injustice" (or "sham to perpetrate fraud") theory has been recognized in Texas as a distinct method by which to pierce the corporate veil. See 20 TEX. PRAC. BUSINESS ORGANIZATIONS § 26.17 (2d ed.) (citing Texas cases); see Castleberry v. Branscum, 721 S.W.2d 270, 273 (Tex.1986), superceded by statute as recognized in Western Horizontal Drilling, Inc. v. Jonnet Energy Corp., 11 F.3d 65, 68 (5th Cir.1994). Under Texas law, the sham theory "is an equitable doctrine, and Texas courts take a `flexible fact-specific approach focusing on equity.' The Texas Supreme Court has also noted that the variety of shams is infinite, and that the purpose of the doctrine should not be thwarted by adherence to any particular theory of liability." Permian Petroleum Co. v. Petroleos Mexicanos, 934 F.2d 635, 643-44 (5th Cir.1991) (internal citations and quotations omitted); see also Mims v. Brunswick Homes, LLC (In re Moore), 379 B.R. 284, 294 (Bankr.N.D.Tex. 2007) (Jernigan, B.J.) (discussing post-Castleberry Texas case law and noting Texas's recognition of sham to perpetrate a fraud as a separate theory).
Because all of the Entity Defendants, except FMS, are Delaware or Tennessee entities, requiring the application of Delaware or Tennessee law, and neither Delaware nor Tennessee recognizes a separate "sham to perpetrate injustice (or fraud)" theory of liability, the Court will address the Trustee's alter ego theory and "sham" theories together as a single veil-piercing claim with respect to those entities. With respect to FMS, Texas law governs and both theories i.e., alter ego and sham to perpetuate injustice or fraud apply and will be separately addressed.
Under the Trustee's alter ego veil piercing theory, the Court is asked to disregard the limited liability company or corporate entity to impose liability on the entity's owner(s). However, "persuading a Delaware Court to disregard the corporate entity is a difficult task. The legal entity of a corporation will not be disturbed until sufficient reason appears." Mason v. Network of Wilmington, Inc., No. 194340NC, 2005 WL 1653954, at *3 (Del.Ch. July 1, 2005) (citing David v. Mast, 1999 WL 135244, at * 2 (Del.Ch. March 2, 1999) (internal quotations omitted)). "Nonetheless, in appropriate circumstances, the distinction between the entity and its owners `may be disregarded' to require an owner to answer for the entity's debts." NetJets Aviation, Inc. v. LHC Communications, LLC, 537 F.3d 168, 176 (2d Cir.2008) (hereinafter "NetJets Aviation") (citing Pauley Petroleum Inc. v. Continental Oil Co., 43 Del. Ch. 516, 239 A.2d 629, 633 (Del. 1968)). And, while Heritage is a Delaware limited liability company, not a corporation, *512 "[g]iven the similar liability shields that are provided by corporations and LLCs to their respective owners, [e]merging case law illustrates that situations that result in a piercing of the limited liability veil are similar to those that warrant piercing the corporate veil." NetJets Aviation, 537 F.3d at 176 (internal quotations omitted) (citing J. Leet, J. Clarke, P. Nollkamper & P. Whynott, The Limited Liability Company, § 11.130, at 11-7, 11-9 (rev. ed. 2007) ("Every state that has enacted LLC piercing legislation has chosen to follow corporate law standards and not develop a separate LLC standard.")).
2. Veil Piercing under Delaware Law
Delaware law provides clear requirements for veil piercing, and the case law reveals that to pierce the corporate veil based upon an alter ego theory, a plaintiff must demonstrate a misuse of the corporate form along with an overall element of injustice or unfairness. NetJets Aviation, 537 F.3d at 176 (citing Harco Nat'l Ins. Co. v. Green Farms, Inc., No. 1131, 1989 WL 110537, at *4 (Del. Ch. Sept. 19, 1989)). However, the plaintiff need not prove actual fraud "the standard may be restated as whether the two entities operated as a single economic entity such that it would be inequitable for the Court to uphold a legal distinction between them." Id. at 177 (internal quotations omitted) (citing Mabon, Nugent & Co. v. Texas Am. Energy Corp., No. 8578, 1990 WL 44267, at *5 (Del.Ch. Apr.12, 1990)). In short, the test applied under Delaware law is two pronged: (i) whether the entities in question operated as a single economic entity, and (ii) whether there was an overall element of injustice or unfairness. See id.; Medi-Tec of Egypt Corp. v. Bausch & Lomb Surgical, No. Civ.A. 19760-NC, 2004 WL 415251, at *7 (Del.Ch. Mar.4, 2004) (citing Mobil Oil Corp. v. Linear Films, Inc., 718 F. Supp. 260, 265 (D.Del.1989)); Cf. Alberto v. Diversified Group, Inc., 55 F.3d 201, 205-06 (5th Cir. 1995).[63] This two pronged test was recently described by the Second Circuit as follows:
Stated generally, the inquiry initially focuses on whether those in control of a corporation did not treat the corporation as a distinct entity; and, if they did not, the court then seeks to evaluate the specific facts with a standard of fraud or misuse or some other general term of reproach in mind, such as whether the corporation was used to engage in conduct that was inequitable, or prohibited, or an unfair trade practice, or illegal.
NetJets Aviation, 537 F.3d at 178 (internal citations and quotations omitted) (citing and quoting Mobil Oil Corp. v. Linear Films, Inc., 718 F. Supp. 260, 269 (D.Del. 1989); David v. Mast, No. 1369-K, 1999 WL 135244, at *2 (Del.Ch. Mar.2, 1999); and Martin v. D.B. Martin Co., 88 A. 612, 615 (1913)).
With respect to the first prong of the veil piercing test i.e., whether the entities operated as a single economic entity, the factors to be considered in deciding this question include: (1) whether the entity was adequately capitalized for the corporate undertaking; (2) whether the entity *513 was solvent; (3) whether dividends were paid, corporate records kept, officers and directors functioned properly, and other corporate formalities were observed; (4) whether the dominant interest holder siphoned corporate funds; and (5) whether, in general, the corporation simply functioned as a facade for the dominant interest holder. Alberto v. Diversified Group, Inc., 55 F.3d 201, 205 (5th Cir.1995) (citing Harco Nat'l Ins. Co. v. Green Farms, Inc., No. 1131, 1989 WL 110537, at *5 (Del.Ch. Sept.19, 1989)); see also NetJets Aviation, 537 F.3d at 177-78. No single factor can justify a decision to disregard the corporate entity, see Harco, 1989 WL 110537, at *5, and Delaware law requires a "strong case to induce a court of equity to consider two corporations as one." Alberto v. Diversified Group, Inc., 55 F.3d at 205 (citing Martin v. D.B. Martin Co., 102 A. 373 (1913) and Harco, 1989 WL 110537, at *4). In applying an alter ego veil piercing analysis when one of the entities in question is a LLC, "somewhat less emphasis is placed on whether the LLC observed internal formalities because fewer such formalities are legally required." NetJets Aviation, 537 F.3d at 178 (citing Delaware Limited Liability Company Act, DEL.CODE. ANN. tit. 6, § 18-101, et seq.). But, "if two entities with common ownership `failed to follow legal formalities when contracting with each other it would be tantamount to declaring that they are indeed one in the same.'" Id. (quoting Trustees of Village of Arden v. Unity Constr. Co., No. C.A. 15025, 2000 WL 130627, at *3 (Del.Ch. Jan.26, 2000)).
And, with respect to the second prong of the alter ego veil piercing test i.e., whether there was an overall element of injustice or unfairness, the "`underlying cause of action, at least by itself, does not supply the necessary fraud and injustice'." Trevino v. Merscorp, Inc., 583 F. Supp. 2d 521 (D.Del.2008) (quoting In re Foxmeyer Corp., 290 B.R. 229, 236 (Bankr.D.Del.2003)). The party seeking to pierce the corporate veil "need not prove that the corporation was created with fraud or unfairness in mind. It is sufficient to prove that it was so used." NetJets Aviation, 537 F.3d at 177 (also stating that the "corporate form may be disregarded `when used as a shield for fraudulent or other illegal acts, though it does not appear that the arrangement was originally intended to perpetrate a fraud.'" Id. (quoting Sonne v. Sacks, No. CIV.A 4416, 1979 WL 178497, at *2 (Del.Ch. June 12, 1979))). As explained by the Second Circuit in NetJets Aviation:
the claimed injustice must consist of more than merely the tort or breach of contract that is the basis of the plaintiff's lawsuit: The underlying cause of action does not supply the necessary fraud or injustice. To hold otherwise would render the fraud or injustice element meaningless. This proposition has been endorsed by the Delaware courts. But nothing prevents a court, in determining whether there is sufficient evidence of fraud or unfairness, from taking into account relevant evidence that is also pertinent to the question of whether the two entities in question functioned as one.
537 F.3d at 183 (internal citations and quotations omitted).
Applying the Delaware two-pronged test here reveals various problems with the Trustee's veil piercing claims. Significantly, the first problems are conceptual in nature. As noted previously, veil piercing theories seek, as the name implies, to pierce an entity's veil in order to hold the owners of that entity liable for the entity's debts. So, with respect to Heritage, a proper veil piercing claim would seek to hold Heritage's members i.e., Steadfast, Tikchik, and GMK Family, liable for Heritage's debts. Then, to the extent there was a basis upon which *514 to pierce the entity veil of Steadfast, Tikchik, and/or GMK Family, a plaintiff could seek to hold the extent that the owners of Steadfast, Tikchik, and GMK Family include other entities, the veils of those entities could only be pierced so as to hold their respective owners liable if the Delaware two-pronged test could be satisfied as to those entities.[64] In other words, and assuming each of the entities is a Delaware entity, the Delaware two-pronged test must be applied to, and satisfied at, each level or layer of ownership applicable within the multi-faceted entity structure.
Here, however, the Trustee largely glosses over these details. Rather, the *515 Trustee simply seeks the global application of alter ego to all of the Entity Defendants so as to collapse the Kornman-controlled empire into Kornman, thereby making all of those entities (including Kornman) liable for Heritage's debts, along with whatever debts each of those other entities has, if any, in its own right. However, from the Court's perspective, the alter ego theory relied upon by the Trustee does not work on such a global basis. Rather, even assuming that the Trustee proved his alter ego claims with respect to the first level of ownership of Heritage i.e., as to Steadfast, Tikchik, and GMK Family, which will be discussed further below, the Trustee offered no evidence with respect to the operations of Steadfast, Tikchik, and/or GMK Family from which this Court could conclude that (i) they operated as a single economic entity with their respective owners,[65] and (ii) there was an overall element of injustice or unfairness with respect to their operations. Accordingly, there is no basis in the record upon which the Court could possibly pierce the veil past Heritage's immediate members.
This same problem exists, along with some others, with respect to the Supplier Defendants. To pierce the corporate (or entity) veil of any of the Supplier Defendants so as to make its respective owner(s) liable for its debts, the Court would have to be able to identify who the direct owners of each of the Supplier Defendants are. However, with the exception of Kornman Associates,[66] there is no evidence in the record identifying the owners of each of the Supplier Defendants. Moreover, there is no evidence to suggest that each of the *516 Supplier Defendants was operated as a single economic entity with its respective owners or that there was an overall element of injustice or unfairness with respect to its business operations.[67] As such, there is no basis upon which to pierce the veil of any of the Supplier Defendants so as to make its owner(s) liable for its respective debts. And, of course, to the extent that any of the Supplier Defendants' owner(s) are themselves entities, and the Trustee wishes to impose liability back to the next level or layer of ownership, he was required to satisfy the Delaware two-pronged test at each level or layer of ownership (assuming those entities are Delaware corporations), which he utterly failed to do.
The next conceptual problem with the Trustee's veil piercing claims is that the Trustee is attempting to hold non-owners of Heritage liable for Heritage's debts pursuant to an alter ego theory. For example, the Trustee seeks to hold the Supplier Defendants liable for Heritage's debts. However, no Supplier Defendant, except Kornman Associates, is a Heritage member, directly or indirectly, based upon the evidence at trial. The only connection that the Supplier Defendants, except Kornman Associates, have to Heritage based upon the trial record is that (i) they supplied goods and/or services to Heritage for which they were paid, and (ii) Kornman controlled each of the entities, directly or indirectly. Neither connection is sufficient as a matter of law for a Supplier Defendant to be found to be Heritage's alter ego.
Finally, even assuming that Kornman is the ultimate owner of Heritage and each of the Supplier Defendants, which has not been established on this record,[68] in order to hold the Supplier Defendants liable to Heritage's creditors, the Trustee would first have to pierce the veils of the Supplier Defendants and the various entities who own the Supplier Defendants, directly or indirectly, up to Kornman's ultimate ownership of them, such that all of the entities in the chain were essentially collapsed into Kornman. Then, the Trustee would have to pierce Heritage's veil and the veils of the various entities who own Heritage, directly or indirectly, up to Kornman's ultimate ownership of them (assuming that Kornman is, in fact, the ultimate owner), such that all of the entities in the chain were essentially collapsed into Kornman as well. And, of course, the only way the Trustee could do this is if he was able to satisfy the Delaware two-pronged test (or other applicable test if a non-Delaware entity is in the ownership chain) at each level of ownership of the Supplier Defendants and Heritage, all the way up to the assumed ultimate owner, Kornman. Suffice it to say, the Trustee failed in his required proof.
For at least these reasons, the Trustee's alter ego claims against all of the Delaware Entity Defendants, except the Member Defendants, fail. The Court will next address the Trustee's alter ego claim against the Member Defendants. For the reasons explained more fully below, the Court concludes that the Trustee failed to *517 carry his burden of proof under Delaware law with respect to the Member Defendants.
With respect to the first prong of the Delaware veil piercing test i.e., whether Heritage and its members operated as a single economic entity, the Trustee failed to prove that (i) Heritage was inadequately capitalized, (ii) Heritage failed to keep corporate records, (iii) other formalities were not observed, and (iv) Steadfast (as Heritage's dominant member), Tikchik, GMK Family, and/or Kornman (as the alleged ultimate owner) siphoned[69] off Heritage funds. However, the Trustee did establish that McElwee (an officer of Heritage and between 50 and 100 other Kornman-controlled entities), failed to function properly. In short, McElwee essentially testified that she signed anything or did anything she was asked to sign or do by either Walker or Kornman, generally without question. She signed documents and checks without undertaking any due diligence or developing an understanding of why she was signing them, or what signing them meant for the entity on whose behalf she was signing. She had no idea what the business of the Member Defendants was, or if they had any day-to-day business operations at all. So, as noted previously, while Kornman and Walker testified that all the "corporate" formalities were followed, that testimony is tarnished by McElwee's testimony. For example, while consent documents may have been signed (as Kornman and Walker testified), to the extent those consents were signed by McElwee, they are meaningless given her lack of diligence. However, there is insufficient evidence to suggest that Walker, Michael, and Kornman (the other officers of Heritage and/or the Member Defendants) were not sufficiently diligent in their performance on behalf of the relevant entities. And, while the Trustee presented some evidence that Heritage functioned as a facade for Kornman, that evidence was equivocal. Finally, the Trustee offered no evidence regarding Heritage's solvency or insolvency at any time prior to its bankruptcy filing.
Accordingly, after carefully considering the factors relevant to a determination of the single economic entity issue, and after weighing the evidence introduced at trial, the Court concludes that the Trustee failed to prove that Heritage and its members operated as a single economic entity.[70]
With respect to the second prong of the veil piercing test i.e., whether there was an overall element of injustice or unfairness with respect to Heritage's operations, the Court is unable to find that the Trustee carried his burden of proof here either. According to the Trustee, the alleged injustice or unfairness is that Heritage continued to promote "unlawful tax shelters" i.e., 752 Transactions. Pretrial Order at p. 5. Moreover, the Trustee asserts that "Kornman executed a scheme which maximized and protected proceeds from the 752 transactions. Because Kornman *518 used the nominal separateness of Heritage and the entity Defendants to engage in and profit from unlawful activities, he abused the corporate form." Id. at p. 6. Or, as described in the Trustee's proposed findings of facts and conclusions of law,
Kornman used Heritage and the Entity Defendants to perpetrate a fraud or injustice on creditors. Kornman caused Heritage to continue to sell the 752 Shelter, without disclosing material information to clients, and effectively stripped Heritage of the majority of its assets by transferring them to Kornman-controlled entities so that he could engage in and profit from unfair or fraudulent conduct.
Trustee's Proposed Amended Findings at pp. 57-58.
So, the Trustee asks this Court to find that Heritage's continued promotion of the 752 Transactions "perpetrate[d] a fraud or injustice on [Heritage] creditors." Id. The Court struggles with such a finding on this record for several reasons. First, the IRS never asserted a promoter penalty claim against Heritage in the Case.[71] In other words, Heritage has never been held liable to the IRS or anyone else for wrongful promotion of an illegal tax shelter. Second, the Heritage creditors to benefit from this finding are the Client Claimants (most of whom voluntarily chose to implement a 752 Transaction)[72] and Canada (who "sold" most of the Client Claimants on implementing the 752 Transaction). In other words, the Trustee asks this Court to decide that the Client Claimants were defrauded by Heritage, acting through Canada, Kornman, and/or Bird. Given (i) the terms of the client agreements, which include a variety of provisions that, if enforceable, would make such a conclusion legally impermissible,[73] (ii) the Trustee's prior position in the Case and related adversary proceedings that such provisions (of the client agreements) were enforceable against the Client Claimants precluding the allowance of their claims in the Case,[74] and (iii) the absence of any direct evidence in the trial record i.e., testimony from a Client Claimant regarding the alleged "fraud" or other alleged "inequitable" conduct,[75] it is difficult to come to such a conclusion here.
*519 The Client Claimants were all extremely wealthy (and in some instances sophisticated) individuals who chose to implement an obviously risky tax strategy, thereby attempting to save themselves millions of dollars of tax liability to Uncle Sam i.e., the United States treasury. While it is true that Kornman should have told those clients who were considering the implementation of a 752 Transaction after February 2001 that the IRS had asked Heritage to disclose the names of its clients who had implemented such strategies, the record is clear that notwithstanding this failure, Kornman was diligent in discussing the relevant legal authorities with actual Heritage clients.[76] Even Canada so testified on cross-examination. Specifically, Canada testified that Kornman was more detailed than he was in going through the legal authorities with Heritage clients. Testimony of Canada (1/15/09) 91:20-24 ("Kornman did it whether they wanted to hear it or not. I played to the audience."). In fact, the clients acknowledged that they had been told of the risks of implementation and the possible need for court proceedings to defend the tax savings in the client agreements they chose to sign with Heritage. Pretrial Order, Stipulation 58 (specifically §§ 5.1 & 5.2 of the client agreements).
Obviously, the continued sale of the 752 Transactions by Heritage did not work an injustice on Canada. He profited substantially from the sale of those strategies, as his allowed claim in the Case, which arises from Heritage's sale of a 752 Transaction to Flinn, demonstrates.
While the Court does not condone Heritage's failure to disclose the IRS investigation of it to its prospective clients, having previously found that failure to constitute a "sharp practice," see pp. 483-84, supra, the simple fact remains that there are no truly "innocent" creditors here and the Client Claimants were aware of the significant risks associated with implementation of a 752 Transaction.[77] In other words, from the Court's perspective, the Client Claimants hoped to avoid paying millions of dollars of tax liability they otherwise admittedly owed from a transaction that they were told had a 50.1% chance of working i.e., was "more likely than not" *520 to withstand scrutiny. While it is true that Heritage (and, indirectly, Kornman) profited from its client's hopeful thinking, it is also true that Kornman thought the 752 Transactions would withstand IRS challenge in the courts, as he chose to implement such a strategy himself.[78]
There is nothing inequitable or unfair about selling a risky product so long as the client is made aware of the risks. Here, the risks of this product were well-known. The clients were aware that the IRS believed basis boost transactions (like the 752 Transactions) to be invalid. Heritage told them this fact as did the lawyers providing them with the "more likely than not" opinion letters. Moreover, the risk of audit and potential disallowance was disclosed in both the Heritage client presentations and in the lawyer's opinion letters, which risk the clients acknowledged and assumed. For these reasons, the Court concludes that the Trustee failed to prove that there was an overall element of injustice or unfairness with respect to Heritage's continued sale of the 752 Transactions to its clients.
In sum, and as noted previously, to prevail on his alter ego claim against the Member Defendants, the Trustee had to prove that (i) Heritage and the Member Defendants operated as a single economic entity, and (ii) that there was an overall element of injustice or unfairness with respect to Heritage's continued sale of the 752 Transaction to its clients. The test is conjunctive i.e., both elements are required. Because the Trustee failed to prove either element here, the Trustee's alter ego claims against the Member Defendants fail.
3. Veil Piercing under Tennessee Law
Turning next to the Trustee's alter ego claims against Kornman Associates, as noted previously, Tennessee law applies. In Foster Wheeler Energy Corp. v. Metro. Knox Solid Waste Auth., Inc., 970 F.2d 199, 203 (6th Cir.1992), the Sixth Circuit explained that an alter ego claim under Tennessee law applies "primarily to prevent fraud or other tortious wrongdoing." Moreover, in Southeast Texas Inns, Inc. v. Prime Hospitality Corp., 462 F.3d 666 (6th Cir.2006), the Sixth Circuit noted that Tennessee courts gauge the necessity of piercing the corporate veil by using comparable factors to those applied under Delaware law. Specifically, the court listed the relevant factors under Tennessee law as:
(1) whether there was a failure to collect paid in capital; (2) whether the corporation was grossly undercapitalized; (3) the nonissuance of stock certificates; (4) the sole ownership of stock by one individual; (5) the use of the same office or business location; (6) the employment of the same employees or attorneys; (7) the use of the corporation as an instrumentality or business conduit for an individual or another corporation; (8) the diversion of corporate assets by or to a stockholder or other entity to the detriment of creditors, or the manipulation of assets and liabilities in another; (9) the use of the corporation as a subterfuge in illegal transactions; (10) the formation and use of the corporation to transfer to it the existing liability of another person or entity; and (11) the failure to maintain arms length relationships among related entities.
462 F.3d at 676. However, citing Oceanics Schools, Inc. v. Barbour, 112 S.W.3d 135 (Tenn.Ct.App.2003), the Southeast Texas Inns court cautioned that "[i]t is not necessary that all of these factors weigh in a *521 plaintiff's favor in order to justify the piercing of the corporate veil." 462 F.3d at 676.
Applying these factors here, the Court concludes that the Trustee has failed in his proof. At the outset, the Court finds that the Trustee failed to prove that (i) Kornman Associates failed to collect paid in capital; (ii) Kornman Associates was grossly undercapitalized; (iii) Kornman Associates failed to issue stock certificates; (iv) Kornman Associates was used as an instrumentality or business conduit for Kornman or another Kornman-controlled entity; (v) there was a diversion of Kornman Associates assets by or to Kornman or another Kornman-controlled entity to the detriment of creditors, or the manipulation of assets and liabilities in another; (vi) Kornman Associates was used as a subterfuge in illegal transactions; (vii) Kornman Associates was formed and used to transfer to it the existing liability of another person or entity; and (viii) Kornman Associates failed to maintain arms length relationships among other Kornman-controlled entities.
The evidence regarding employees of Kornman Associates is virtually non-existent. While Walker testified that she worked for Kornman Associates from 1977-1980, Testimony of Walker (1/12/09) 180:4-5; 181:14-15, there is no other evidence in the record with respect to whether Kornman Associates had or has employees and/or who those employees might be. And, while the Trustee did prove that (i) Kornman owned 100% of the stock of Kornman Associates, and (ii) Kornman Associates used the same office or business location as Heritage, compare P.Ex. 178 at p. CRD 005731 (showing Kornman Associates address as "5001 Spring Valley Rd, Suite 800E, Dallas Tx 75244") with P.Ex. 257 (showing Heritage's address as the same), the Court concludes that that is an insufficient basis upon which to pierce the corporate veil and hold Kornman liable for Kornman Associates' debts.[79]
Finally, even assuming that a legal basis exists to hold Kornman liable for Kornman Associates' debts, there is no basis upon which to hold Kornman Associates liable for Heritage's debts. Kornman Associates was not a member of Heritage; at most, it owned a 1% interest in Steadfast, one of Heritage's members.
4. Veil Piercing under Texas Law
Turning next to the Trustee's alter ego claims against FMS, as noted previously, Texas law applies. As explained by the Texas Supreme Court in Lucas v. Texas Industries, Inc., 696 S.W.2d 372 (Tex.1984):
Generally, a court will not disregard the corporate fiction and hold a corporation liable for the obligations of its subsidiary except where it appears the corporate entity of the subsidiary is being used as a sham to perpetrate a fraud, to avoid liability, to avoid the effect of a statute, or in other exceptional circumstances. There must be something more than mere unity of financial interest, ownership and control for a court to treat the subsidiary as the alter ego of the parent and make the parent liable for the subsidiary's tort. The corporate entity of the subsidiary must have been used to `bring about results which are condemned by the general statements of public policy which are enunciated by the courts as `rules' which determine whether the courts will recognize their own child.' The plaintiff must prove that he has fallen victim to a basically unfair device by which a corporate entity *522 has been used to achieve an inequitable result.
Id. at 374 (citations omitted). Or, as stated by the Texas Supreme Court in Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986), superseded on other grounds by Tex.Bus.Corp.Act Ann. art 2.21A (West Supp.1992):
Alter ego applies when there is such unity between corporation and individual that the separateness of the corporation has ceased and holding only the corporation liable would result in injustice. It is shown from the total dealings of the corporation and the individual, including the degree to which corporate formalities have been followed and corporate and individual property have been kept separately, the amount of financial interest, ownership and control the individual maintains over the corporation, and whether the corporation has been used for personal purposes. Alter ego's rationale is: `if the shareholders themselves disregard the separation of the corporate enterprise, the law will also disregard it so far as necessary to protect individual and corporate creditors.'
Id. at 272 (citations omitted).
Applying these principles here, the Court concludes that the Trustee has failed in his proof for several reasons. First, there is no evidence in the record identifying the shareholder(s) of FMS. Second, there is insufficient evidence in the record to establish that FMS is being used to avoid liability, to avoid the effect of a statute, or to achieve an inequitable result. Third, it appears from the evidence in the record that the corporate formalities have been followed. Finally, even assuming that a legal basis exists to hold FMS's shareholder(s), who ever that may be, liable for its debts, there is no basis upon which to hold FMS liable for Heritage's debts, as FMS was not a member of Heritage.
Finally, turning to the Trustee's sham to perpetrate injustice claim against FMS, as noted previously, under Texas law, the sham theory is an equitable doctrine, and Texas courts take a flexible fact-specific approach focusing on equity; the variety of shams is infinite, and the purpose of the doctrine should not be thwarted by adherence to any particular theory of liability. See pp. 510-11, supra. As further explained by the Fifth Circuit in Fidelity & Deposit Co. v. Commercial Casualty Consultants., Inc., 976 F.2d 272 (5th Cir.1992),
[t]he focus under the sham to perpetrate a fraud theory is on injustice or unfairness to the claimant caused by the corporation and its owners. For a claimant to establish such unfairness, he must ordinarily demonstrate that he relied on the financial backing of the owners. `Without reliance, the contract claimant cannot avoid the risk of insolvency that it originally accepted as part of the bargain.'
Id. at 275 (citation omitted). So, notwithstanding the apparent broadness of this equitable doctrine under Texas law, it is still a theory upon which to disregard the corporate form and hold the owners of a corporation liable for the corporation's debts.
Here, even assuming that FMS's corporate form is a sham that was used to perpetrate an injustice, the Court does not know who to hold liable for that sham, since there is no evidence in the record as to who owns FMS. Moreover, there is no evidence that the claimant herei.e., the Trustee (on behalf of Heritage)relied on the financial backing of FMS' owners in deciding to do business with FMS. In short, given the evidentiary record made at trial, this theory is simply inapplicable.
For all of these reasons, the Trustee's alter ego claims against Kornman and the Entity Defendants fail under Delaware, *523 Tennessee and Texas law, as applicable, as does the Trustee's sham to perpetrate injustice claim under Texas law against FMS.
III. CONCLUSION
The Transfers were made with at least the actual intent to hinder or delay Heritage's creditors. Accordingly, the Trustee is entitled to avoid the Transfers and recover them from (i) the initial transfereesi.e., Steadfast (to the extent of $40.54 million), Tikchik (to the extent of $1.26 million), and GMK Family (to the extent of $2.1 million), as applicable; and (ii) the subsequent transfereesi.e., Ettman Trust (to the extent of $4 million), and Kornman (to the extent of $600,000 and $10.44 million).
Moreover, the Trustee is entitled to avoid, as preferences, the payments made to, or for the benefit of, Kornman and/or the Supplier Defendants during the 90-day period prior to the filing of the Case. Specifically, the Trustee is entitled to recover the payments Heritage made to each of the Supplier Defendants during this period from the applicable Supplier Defendant. See pp. 508-09, supra (listing the aggregate amount of payments during the preference period to each Supplier Defendant). Moreover, the Trustee is entitled to recover the payments Heritage made to (i) Kornman's credit card issuers (to the extent of $137,728.06), and (ii) Kornman's household employees (to the extent of $19,697.08) from Kornman, as the person for whose benefit the payments were made. The Trustee is also entitled to recover the $11,256.61 Heritage paid under the "wellness" account from Kornman, as the person for whose benefit that payment(s) was made.
Finally, with regard to the Trustee's alter ego and sham to perpetrate injustice claims, those claims fail on the evidentiary record adduced at trial.
A separate Judgment will be entered based upon the findings of fact and conclusions of law contained in this Memorandum Opinion.
NOTES
[1] Similarly, references to Plaintiff's Exhibits at trial will be indicated by the abbreviation P.Ex. followed by the exhibit number. References to witness testimony at trial will be indicated by the identification of the witness's name, followed by the date of his/her testimony, followed by the page and line number of the relevant trial transcript. Deposition testimony offered at trial will be identified in a fashion similar to live trial testimony.
[2] Kornman prefers the description educate. In other words, according to Kornman, Heritage merely educated its clients about these various matters. Interestingly, when the one witness at trial who was involved in Heritage's client activities and who does not have a financial interest in the outcome of this litigation was asked if "somebody said to you that during the period that you were at Heritage that all that Heritage ever did was to `educate' perspective clients about the Section 752 transactions, would you say that that is fully accurate," his response was a simple "no." Testimony of Czerwinski (1/16/09) 38:17-21. However, as relevant here, whether Heritage advised its clients or educated its clients is immaterial.
[3] See, e.g., D.Ex. 136 (Heritage Presentation to the Troutt Family dated September 26, 2000); D.Ex. 142 (Heritage Presentation to the Bickell Family dated December 14, 1999); D.Ex. 147 (Heritage Presentation to the Rainwater Family dated August 30, 2000).
[4] Defendants note that "Section 1233(a) states that, `gain or loss from the short sale of property shall be considered as gain or loss from the sale or exchange of a capital asset to the extent that the property ... used to close the short sale constitutes a capital asset in the hands of the taxpayer.' I.R.C. § 1233(a)(emphasis added). A corresponding regulation, Reg. 1.1233-1(a)(1), states that `for income tax purposes, a short sale is not deemed to be consummated until delivery of property to close the short sale.' Treas. Reg. 1.1233-3 (emphasis added)." Defendants' Proposed Amended Findings and Conclusions at p. 15 n. 64.
[5] Defendants further note that "[a]t the time of the transactions of Heritage's clients, § 752 did not contain a definition of `liability.' In fact, in 1989, the IRS published proposed regulations under § 752 that contained a definition of `liability,' but that definition was not adopted. It was not until 2005 that regulations were adopted that actually contained a definition of liability that would definitively apply to these types of transactions and would foreclose the tax benefits of the Heritage transactions. See Treas. Reg. 1.752-0 (effective May 26, 2005)." Defendants' Proposed Amended Findings and Conclusions at p. 15 n. 65.
[6] The proponents of the Plan settled with Canada on the eve of the commencement of the confirmation hearing.
[7] On July 20, 2001 Steadfast loaned Kornman $10.4 million. Pretrial Order, Stipulation 113. On that same day, Kornman wired approximately $12.7 million to Mann Investment Company, L.P. as consideration for the purchase of its interest in Tikchik. Pretrial Order, Stipulation 114. Kornman used the proceeds of the Steadfast loan and some additional funds to make the purchase. Testimony of Kornman (1/8/09) 55:8-56:8. At the conclusion of the transaction, Kornman testified that "basically, Steadfast ended up owning Tikchik." Testimony of Kornman (1/8/09) 56:1-2. Later Kornman testimony elaborated on Tikchik's ownership. Specifically, Kornman testified that Steadfast owned 98% of Tikchik, GMK Corp. owned 1 % of Tikchik, and MICC owned 1 % of Tikchik. Testimony of Kornman (1/8/09) 65:7-25.
[8] Although much of this testimony regarding the manner in which the Entity Defendants' maintained their separateness rings a bit hollow in light of McElwee's testimony. See pp. 465-66, n. 14, infra.
[9] See, e.g., P.Ex. 289; D.Ex. 65 (organizational documents and consents for GMK Family and Heritage); D.Ex. 67 (organizational documents and consents for Agency); D.Ex. 68 (Management and Service Agreement ("MSA") between Heritage and Valiant); D.Ex. 69 (chart evidencing numerous MSAs between Heritage and other companies); D.Ex. 70 (organizational documents of XAC and checks between XAC and Heritage); D.Ex. 75 (corporate documents for Leasecorp and leases between Heritage and Leasecorp); D.Ex. 76 (corporate bid policy requiring 3 competing bids); D.Ex. 99 (invoices between FMS and Heritage); D.Ex. 100 (checks between FMS and Heritage); D.Ex. 101 (consents and corporate documents of Agency); D.Ex. 103 (checks and corporate documents of Properties); D.Ex. 106 (organizational consents of Holdings); D.Ex. 110 (organizational consent of Vehicle); D.Ex. 111 (consent of Directors of Kornman Associates as managing member of Vehicle); D.Ex. 112 (consent of GMK Family, as managing member of Heritage); D.Ex. 113 (checks from Heritage to Agency); D.Ex. 114 (MSA between Heritage and Agency); D.Ex. 115 (consents of directors of FMS); D.Ex. 116 (checks between Heritage and XAC); D.Ex. 117 (consent of Kornman Associates as managing member of XAM); D.Ex. 194-195 (Letters from Heritage to XAC regarding crew requirements); D.Ex. 196 (consent of Kornman Associates as managing member of Vehicle); D.Ex. 197 (consent of Kornman Associates as managing member of XAM); D.Ex. 198 (corporate documents of GMK Family); D.Ex. 199 (release and settlement agreements); D.Ex. 200 (consent of Vehicle); D.Ex. 201 (corporate documents of XAM); D.Ex. 202 (corporate documents of XAC); D.Ex. 204 (corporate documents of Properties); D.Ex. 205 (corporate documents of Valiant); D.Ex. 206 (corporate documents of Vehicle); D.Ex. 207 (corporate documents of Strategic); D.Ex. 208 (corporate documents of Leasecorp); D.Ex. 209 (corporate documents of FMS); D.Ex. 210 (corporate documents of Kornman Associates); D.Ex. 211 (corporate documents of Agency).
[10] The Defendants correctly note that Dan Koshland and/or the Koshland Family Partnership, L.P. cannot serve as a triggering creditor as a matter of law, having failed to timely file a proof of claim in the Case. See Defendants' Post-Trial Brief at pp. 7-8.
[11] This will be a continuing problem for the Defendants, who consistently overlook the fact that a person with even a contingent, unliquidated and disputed right to payment holds a "claim" and is a "creditor" under TUFTA. Another continuing problem is that throughout their briefs, the Defendants focus on whether Heritage/Kornman acted with the actual intent to defraud creditors. However, TUFTA is broader than thatit permits the avoidance of transfers where the debtor acted with the actual intent to hinder or delay a creditor, as well as where the debtor acted with the actual intent to defraud a creditor.
[12] Alberto was an alter ego/veil piercing case as well. We will apply Delaware law when we reach the Trustee's alter ego claim. See pp. 509-10, infra.
[13] Tikchik's principal place of business is in Dallas; there is no evidence in the record as to the physical location of its office.
[14] Credibility of various trial witnesses has been called into question by one or more of the parties. The Court will provide its initial assessments of such witnesses' credibility here. As a preliminary matter, the Court notes that the Trustee's case relies primarily upon documentary evidence and the testimony of adverse witnesses, since the Trustee was not a party to any of the acts giving rise to his claims. Kornman is the central figure in the Trustee's claims. And, Kornman's credibility as a witness has been compromised for several reasons that are addressed in the text beginning on page 484 of this opinion and will not be repeated here.
Other former Heritage employees also testified at trial, including Michael, Walker, McElwee, Czerwinski, and Canada. Several of those parties were initially named as defendants in this adversary proceeding, but have settled with the Trustee.
Michael served as Chief Operating Officer of Heritage for a time and then served as Heritage's Chief Executive Officer (after his father resigned his officer positions shortly before Heritage's bankruptcy filing). While Michael may be a very nice young man, the Court's impression of him from his testimony here is that he was young, inexperienced, held surprisingly significant titled positions at Heritage (Chief Operating Officer as an example) for his age, education, and experience levels, and was substantially overpaid by Heritage while employed there. For example, on March 1, 2002 Michael's compensation at Heritage increased from $12,750 a month to $18,083.33 per month because he "was told I was doing a good job." Deposition Testimony of Michael (7/11/08) 116:8-10. Michael got another raise on August 6, 2003 and his salary increased to $22,333.33 per month. Id. at 119:1-5. In addition to these amounts, Heritage paid Michael $9,000 a month for a covenant not to compete, and on October 13, 2003, those payments increased to $11,000 per month. Michael testified that the covenant not to compete payments were made to him to be consistent company-wide, as he was not likely to go out and compete with Heritage in any event. Id. at 125:21-126:13. So, Michael was making anywhere from $252,000 to $400,000 a year while employed by Heritage. Heritage also paid some of his personal expenses and he received compensation from other Kornman-controlled entities as well. Michael's loyalty to his father is unquestioned. As he testified, "I did what dad told me and that's probably about as accurate as I can be." Id. at 39:11-12. When asked who made the decision to take the cash out of Heritage's safe deposit boxes and use it to pay Heritage's bills, see pp. 64-66, infra, Michael testified that "Dad did," notwithstanding the fact that Kornman had resigned his officer positions with Heritage at that point in time. Id. at 232:13-14. When asked who made the decision that Heritage would file bankruptcy in May 2004 (after Kornman had resigned his officer positions at Heritage), Michael testified that "[u]litmately I did so at dad's instruction." Id. at 91:7-9.
Walker is obviously a bright woman who, having no formal education beyond high school, taught herself sufficient accounting and bookkeeping skills to ultimately be promoted to the position of Chief Financial Officer of Kornman's multi-faceted empire. Like Michael, Walker is extremely loyal to Kornman, which causes at least some concern with respect to the objectivity of her testimony. Or, as characterized by the Trustee, Walker is a "[l]ong time loyal and unquestioning soldier; [a] `true believer' in everything said by Gary Kornman." Trustee's Closing Argument powerpoint presentation at p. 3.
While McElwee was completely unimpressive as a witness, the substance of her testimony was shocking. McElwee was openly hostile to the Trustee and could recall almost nothing at the outset of her testimony. After being encouraged by the Court to try to be a bit more forthcoming, Testimony of McElwee (1/14/09) 209:12-15, her "recollection" improved, but her testimony reflected a complete submissiveness to Kornman and/or Walker. While McElwee was an officer of Heritage and many of the Defendant Entities, she had no idea what offices she held or how she came to hold them. Testimony of McElwee (1/14/09) 196:7-16; (1/15/09) 11:1-15. And, when asked how she would go about determining what positions she held with those entities, she testified that she would simply ask Walker. Testimony of McElwee (1/15/09) 10:3-9. From her testimony, it appears that McElwee consistently signed checks and other documents as an officer of Heritage or one of the Defendant Entities without having read such documents. See, e.g., Testimony of McElwee (1/15/09) 15:19-18:11. She had no idea of what obligations she owed to any of the entities for which she held an officer position and appeared startled that she might have owed any such obligations. It is clear that she did whatever she was asked to do by Walker and/or Kornman, without question.
Czerwinski clearly took action while at Heritage that he now regrets, including having served as the "independent" third party purchaser in connection with the Ettman Trust's implementation of a 752 Transaction ultimately found to be an abusive tax shelter by the Fifth Circuit. Testimony of Czerwinski (1/16/09) 30:10-14. His regret seemed sincere. His only explanation for taking such actions is that he was young and felt that he had to take such actions in order to further his career with the Kornman-controlled companies. Testimony of Czerwinski (1/16/09) 32:12-19. Czerwinski is now self-employed and is no longer affiliated with a Kornman-controlled entity. Testimony of Czerwinski (1/16/09) 5:2-6. He has nothing to gain or lose by his testimony here. The Court found his testimony credible.
Canada's credibility as a witness is complicated. He, like Kornman, has a financial interest in the outcome of this litigation. He is a direct beneficiary of any recovery here, while Kornman or a Kornman-controlled entity will be subjected to liability if a judgment is entered in the Trustee's favor. Canada, like Kornman, sold 752 Transactions that have now been found to be completely without merit. D. Ex. 5 (Kornman & Assoc. v. U.S., 527 F.3d 443, 462 (5th Cir.2008)) (stating that the "transactions have absolutely no economic substance") (King, concurring). After having made millions of dollars selling 752 Transactions while employed by Heritage, after leaving Heritage, Canada switched sides and began suing promoters of such tax strategies, making substantial sums from the prosecution of such suits. As a result of these and other concerns, the Court will carefully consider what weight to afford Canada's testimony here.
[15] The Court granted the Defendants' Daubert motion regarding the Trustee's solvency expert, the effect of which was to preclude the Trustee from pursuing his constructive fraudulent transfer claims.
[16] The Defendants argue that Canada's testimony should be discounted because "the Trustee's star witness is the one person that will (a) benefit the most from this litigation if a judgment is recovered, (b) sold the same services that the Trustee now claims was doomed from the start, (c) made millions of dollars doing so but was not sued by the Trustee, (d) sued on an oral promise that contravened an employment agreement that he wrote, and (e) `switched sides' and began suing other firms for the exact same services that he once sold himself." Defendants' Post-Trial Brief at p. 12. According to the Defendants, Canada's "bias is nothing less than obvious" and "there is no documentary evidence" supporting Canada's testimony. Id. at p. 18. So, while expressing great ire that the Trustee has attempted to "throw enough evidence of questionable business dealings [by Kornman] against the wall to see what sticks," id. at p. 21, and commenting that "[s]ensing the weakness of his theory, the Trustee finally resorts to a `kitchen sink' tactic of relating to the Court every bad act that Gary Kornman or any other Defendant may have ever done, to try and right the ship," the Defendants essentially resort to the same tactics of which they accuse the Trustee. Ironically, the Defendants attack Canada's testimony because of a lack of documentary evidence to corroborate it, when much of Kornman's critical testimony suffers from the same malady. Of course, like their complaint that Canada will "benefit the most" if the litigation is successful, it is axiomatic that Kornman will "benefit the most" if the litigation is unsuccessful, as he controls, directly or indirectly, virtually all of the Defendants from whom the Trustee seeks to recover millions of dollars.
The good news, if there is any in this case, is that the Court will ignore the parties' rhetoric, focus instead upon the evidence introduced at trial, and evaluate the witnesses' credibility for itself. See n. 14, supra.
[17] Comments made by Kornman during his trial testimony suggested a closeness to their relationship as well. Although not responsive to the question asked of him by his counsel, Kornman added the gratuitous comment that "Koshland was one of my favorite people. He reminded me very much of my own father and he was just a great guy." Testimony of Kornman (1/8/09) 72:20-22. It became clear from other testimony, however, that Koshland likely did not continue to view Kornman as a son (assuming he ever did). Deposition Testimony of Reposto (11/8/06) 23:1-6; 52:19-25; 53:6-10.
[18] Kornman minimized the significance of the reservation of rights language in this letter, describing it as "just a cover your ass letter that most lawyers would put in a letter [sic]." Testimony of Kornman (1/8/09) 180:13-14.
[19] Canada's testimony in this regard is credible. While there is obviously "bad blood" between Kornman and Canada, and it is true that Canada has a financial interest in the outcome of this litigation as a beneficiary of the Plan Trust, it makes sense that Kornman would discuss the Koshland Demand Letter with Canada, who served as one of Heritage's outside lawyers prior to joining Heritage in a non-legal capacity.
[20] While Kornman initially testified to the effect that Heritage responded to the Koshland Demand Letter through Wortley and heard nothing further, leaving the Court with the impression that Kornman thought Koshland/KFP had gone away, later testimony revealed continuing concerns and reasons to continue to be concerned about potential litigation with Koshland/KFP. In fact, further letters were received from Koshland/KFP. See, e.g., P.Ex. 122 and 140. And, later in his testimony, Kornman admitted that as of March 2002, he was still concerned enough about the possibility that Koshland/KFP would sue Heritage over the $15 million investment that he asked Wortley for advice regarding the statute of limitations on potential Koshland/KFP securities claims. Testimony of Kornman (1/8/09) 182:12-183:11 ("I guess you'd say with my legal background, I was always concerned with what could happen... there's always a possibility [of a threat of claims against Heritage by Koshland]. You can sue anybody for anything.")
[21] The Defendants argue vehemently in their post-trial brief that the Trustee has taken multiple disparate bad acts in his effort to establish a circumstantial case of transfers made with actual intent to hinder, delay or defraud Heritage creditors. See, e.g., Defendants' Post-Trial Brief at p. 21 ("The problem, however, is that all of the questionable conduct, even if given full credence (which Defendants do not concede) suffers from the same lack of foundationthere is absolutely no connection to the conduct at issue and the Distributions which are being sued upon in this case."). The Court rejects this argument for at least two reasons. First, that is, by definition, what a circumstantial case often depends upon. Second, the allegedly disparate acts are not as disparate as the Defendants argue. The common thread running through all of the acts relied upon by the Trustee are Heritage's questionable business practices and the fact that problems with those practices were beginning to come to light, thus prompting the withdrawal of substantial sums of money from Heritage.
[22] The Court rejects the Defendants' contention that the February 2001 letter from the IRS was not received by Heritage. While a certified mail receipti.e., the "green card," was never returned to the IRS reflecting delivery to Heritage, the original letter and envelop were produced to the Trustee during discovery in the Case. Specifically, the Trustee testified that P.Ex. 2 (the February 2001 letter from the IRS and its original envelop) was turned over to the Trustee in the March 16, 2006 delivery of documents from the Lynn Tillotson law firm, who represented Kornman and various of the Entity Defendants, to the Munsch Hardt law firm, the Trustee's general counsel in the Case. Testimony of Trustee (1/15/09) 119:19-120:3. Of course, the fact that the IRS never received a signed green card back reflecting Heritage's acceptance of its certified letter is explained by Canada's description of Heritage's policy of generally refusing certified mail. See n. 24 infra.
[23] Anthony Ellis, the revenue agent assigned to Heritage's case, testified that because (i) no green card was returned with respect to the February 2001 letter that he mailed to Heritage, and (ii) Heritage had not disclosed its clients' names to the IRS, he hand-delivered the May 2001 letter to McElwee, a Heritage officer, at Heritage's office in Dallas on May 2, 2001. Testimony of Ellis (1/7/09) 40:19-46:12. While Kornman claims that he was never made aware of this letter, the Court finds that testimony incredible. It is undisputed that McElwee informed Walker, Heritage's Chief Financial Officer, of the letter. Testimony of Walker (1/12/09) 238:18-25. The evidence clearly establishes that Walker was a trusted officer of Heritage and the various affiliated Kornman-controlled entities, many of which are Defendants in this action. It is clear that she was one of the few people that Kornman trusted. In fact, Walker and Kornman (and perhaps Michael) are the only individuals who had regular access to the financial records of Heritage (and the other Kornman-controlled entities). From the Court's perspective, nothing of significance happened at Heritage without either Kornman's knowledge and consent or his express direction. Given what the Court has learned about the operations of Heritage and the affiliated Kornman-controlled entities, it is simply incredible to think that a matter of such potential significance to Heritage, which threatened a substantial source of its annual revenues, was not immediately communicated to Kornman by Walker. While the Defendants point to Canada's testimony that he would have expected Kornman to tell him about the "soft letters" if Kornman had known about them as some corroboration of Kornman's denials of knowledge about either "soft letter," the Court is not persuaded that Kornman was unaware of the May 2001 letter from the IRS.
[24] Canada testified that a common practice at Heritage when he arrived was to refuse to accept service of process and/or certified mail deliveries. See, e.g., Testimony of Canada (1/15/09) 39:23-40:13 (throwing service or certified mail "back in the elevator"). It thus appears that process servers and/or mailmen were informed that officers of Heritage were not in or available if the "delivery" was not expected.
[25] In their post-trial brief, the Defendants emphasize the fact that once Heritage had its tax counsel "file powers of attorney, the subpoena was withdrawn, and months and months of negotiation and document production then ensued." Defendants' Post-Trial Brief at p. 33 (emphasis in original). The fact that the subpoena was withdrawn once Heritage's lawyers were cooperating with the IRS is of no particular significance here. The issue is whether Heritage had been threatened with suit at the time of the Transfers. The answer is clearly yes, notwithstanding the withdrawal of the subpoena once Heritage finally began cooperating. Moreover, the fact that the subpoena was withdrawn did not eliminate the threat of a potential promoter penalty suit against Heritage by the IRS.
[26] The Defendants correctly note that the April 16, 2001 distributions (totaling $5 million) were made just after the deadline for the filing of fiscal year 2000 tax returns, and that another $5 million was distributed on April 25, 2001.
[27] These "royalties" or "licensing or consulting fees" were paid to FWP Technology, Inc. ("FWP"), an entity created by the senior partners of A & D, Edward Aherns ("Aherns") and Darin DeAngeli ("DeAngeli"), pursuant to an oral agreement Kornman reached with Aherns. Testimony of Kornman (1/8/09) 140:3-142:5. According to Kornman, pursuant to this agreement, which Kornman declined to reduce to writing, FWP was entitled to a "fee of five percent of the gross revenues received by Heritage after deducting some certain other expenses...." Testimony of Kornman (1/8/09) 140:14-18. Interestingly, Aherns testified that he "thought he understood at least the general parameters of how [Heritage] computed [the fees]," Deposition Testimony of Aherns (5/20/08) 45:1-7, but that he never saw any calculations of the amounts owing to him and that he "simply relied on the good faith in [sic] Mr. Kornman that that was a correct computation." Id. at 44:9-10. In addition to Aherns and DeAngeli receiving these "fees" from Heritage (through FWP), A & D simultaneously served as "independent" counsel to certain Heritage clients who implemented 752 Transactions; and thus, A & D also received attorneys' fees for providing legal advice and writing a "more likely than not" opinion letter in favor of the legitimacy of the clients' 752 Transactions. With the possible exception of Jenkins, the existence of FWP and Heritage's payments to it were not disclosed to any of Heritage's clients who were referred to A & D for "independent" tax advice. Of course, because Aherns and DeAngeli were receiving a share of Heritage's fees if the client implemented a 752 Transaction (through their ownership of FWP), A & D's "independence" in advising those same clients with respect to the legitimacy of the 752 Transactions was a farce.
[28] The parties disagree over why A & D decided to stop writing opinion letters. While the Defendants essentially contend that writing those opinions "no longer fitted A & D's business model," Aherns himself testified that the firm "came to the conclusion that we thought there are certain criteria that should be followed or otherwise we would be unwilling to do so." Deposition Testimony of Aherns (5/20/08) 61:5-7. This testimony is consistent with the explanation provided in P.Ex. 94, wherein A & D stated that "[b]ased primarily on the environment as discussed above, we have concluded that we need to be extremely careful about structuring future 752 transactions. We have further concluded that we will not undertake any further loss generation transactions regardless of the situation involved. We have decided that we would need the following elements in order for our law firm to prepare an opinion letter at this time: ... significant, documented business purposes beyond the hedging purpose we have observed previously and ... any hedged position must be held open for at least 15 days...." P.Ex. 94 at Tee Priv 000020. Heritage obviously disagreed with A & D's assessment of the "environment" for the 752 Transactions, as it continued to sell them to clients.
[29] Steadfast received $40.54 million; GMK Family received $2.1 million; and Tikchik received $1.26 million. P.Ex. 317; see also pp. 490-94, infra (regarding additional $4 million distribution to Steadfast). And, from there, at least some of the distributions moved into Defendant Ettman Trust, which contains spendthrift provisions providing at least some asset protection for the beneficiaries of that trust. See Testimony of Kornman (1/8/09) 18:3-8; 85:22-25; 101:16-22.
[30] In attempting to explain why it was possible that Kornman did not know about the IRS letter hand-delivered to McElwee in May 2001, Walker explained that she became aware of the letter from McElwee, but she did not specifically recall what she did once she learned of that letter. She did testify what her general practice was, however. According to Walker, her general practice was to make a copy of such things and "put them in an envelope and secure it and mark it Personal and Confidential, GMK and put it on [Kornman's] desk." Testimony of Walker (1/12/09) 238:18-241:8. However, later in her testimony, on examination by Defendants' counsel, Walker further testified that she doesn't recall if she put a copy of the May 2001 IRS letter on Kornman's desk. Walker went on to explain that Kornman traveled extensively, that when he was in the office he was "swarmed" by people and that he often didn't get to all of the documents on his desk. So, according to Walker, documents were often swept off his desk into multiple briefcases, some of which documents might never be seen again or some of which might be found months if not years later in one of his many briefcases. Testimony of Walker (1/13/09) 188:2-190:20. She described this as the "Kornman vortex," and left the impression through her testimony that the "vortex" was well known to other Heritage personnel. See id. Interestingly, Czerwinski had never heard the term when asked about it during the trial, notwithstanding the fact that he had worked for Heritage for years and continued to work for other Kornman-controlled entities upon Heritage's bankruptcy filing. Testimony of Czerwinski (1/16/09) 8:4-5.
[31] For example, while Kornman denied that KFP/Koshland had any meritorious claims against Heritage, and explained that Koshland "didn't seem to be playing with a full deck," (Testimony of Kornman (1/8/09) 181:16-25), Kornman sought and received advice from Wortley at Vinson & Elkins regarding the statute of limitations for potential securities fraud claims by KFP against Heritage. P.Ex. 163.
[32] From the Court's observations of him, Kornman is highly intelligent. He used both his legal training and his psychology training in his daily business affairs. His closest allies within Heritage were his son, Michael, who he paid far more generously than a young man of his experience and educational background (not having finished college) could expect to receive elsewhere, and Walker and McElwee. Walker, while obviously smart, had no formal education beyond high school, making her rise to her positions of trust within Heritagei.e., Chief Financial Officer, Secretary, and Treasurerand the other Kornman-controlled entities at least surprising, given the nature and extent of their operations and holdings. It thus appears that she too achieved a level of business success within Heritage and the other Kornman-controlled entities beyond what would normally be expected of someone with her level of education. She is extremely loyal to Kornman, who she described as "straightforward and honest ... I respect him more than anybody I can think of." Testimony of Walker (1/14/09) 8:1-3. One has to question whether this loyalty was similarly acquired through compensation levels that she could not attain elsewhere. Finally, there is McElwee, whose educational background and experience was not adduced at trial. However, what was established at trial is that McElwee, a Heritage vice-president (and an officer of many of the other Kornman-controlled entities, including many of the Entity Defendants), was an officer of between fifty and a hundred Kornman-controlled entities, Testimony of McElwee (1/15/09) 10:13-22, although she wasn't sure which ones or how or why she became such an officer, see, e.g., Testimony of McElwee (1/14/09) 196:7-16 & (1/15/09) 11:1-15 (she would learn that she was an officer or director of the various companies when "Vickie or Gary would tell me."), did what ever she was told, without question and without even bothering to read documents that she signed. See, e.g., Testimony of McElwee (1/15/09) 17:4-18:11 (testifying that she didn't prepare consent statements for the entities that she served as an officer of, but that she signed them without reading them when either Kornman or Walker asked her to sign them, and describing that as "just part of the normal course of business;") (1/14/09) 210:4-215:12 & (1/15/09) 9:1-10:1. When asked what the business of GMK Family was, an entity for which she served as Secretary for the four years prior to Heritage's bankruptcy filing and who was the Manager of Heritage, she responded: "II don't know, as far as business, ifif they carried on a day-to-day business operation. I'mI'm not that familiar with it." Testimony of McElwee (1/15/09) 11:20-23. When asked what her responsibilities were as Secretary of GMK Family, she could only recall having to sign "checks or perhaps an occasional document." Id. at 11:24-12:2. Moreover, as Secretary, she couldn't recall a single meeting that she attended with the other officers of GMK Family to discuss its business. Id. at 12:3-6. McElwee testified similarly when asked about each of the other Entity Defendants for which she also served as an officeri.e., she didn't know what its operations entailed, her responsibilities were signing checks and an occasional document, and she never attended any meeting with any other officer to discuss the business of that entity. Testimony of McElwee (1/5/09) 12:7-13:23. When asked by the Court why she would simply sign documents that were put in front of her without question, and whether she thought that fulfilled her obligations as an officer, she simply looked dumbfounded and replied that "I don'tI don'tI honestly don't know how to answer your question." Testimony of McElwee (1/15/09) 18:16-19:23. From the Court's perspective, and based upon the evidence adduced at trial, Kornman surrounded himself with people that he could control and who he expected to do as he wished, without question. It appears that they did just that. Or, in Michael's words, "I did what dad told me and that's probably about as accurate as I can be." Deposition Testimony of Michael (7/11/08) 39:11-12.
[33] In coming to these conclusions, the Court is not focusing on the Client Claimants. Rather, the Court is focused on KFP/Koshland (potential securities fraud claims), Canada (potential compensation claim under his employment agreement), and the IRS (potential promoter penalty claims). It is not necessary to rely upon the Client Claimants here. However, the Court does not find Kornman's denials of concern about potential client claims credible. Heritage had, if fact, refunded fees to 752 Transaction clients who became concerned about the transactionsi.e., the Toll brothers; although, according to Kornman, for reasons related to the Martha Stewart case. Testimony of Kornman (1/9/09) 98:21-102:4. Moreover, Kornman clearly hoped to preclude the assertion of such claims by Heritage's wealthy clients by including waiver, release, indemnity, and no reliance provisions in its agreements with its clients. If Heritage/Kornman were truly unconcerned about potential client claims arising from its sale of risky tax strategies (or educating clients regarding risky tax strategies as Kornman prefers), why did Heritage go to such lengths to attempt to preclude them contractually?
[34] Specifically, when a demonstrative exhibit containing net income numbers from other Heritage financial records was shown to Kornman to assist the Trustee's counsel in examining him with respect to why distributions were made in specific amounts in specific years, Kornman testified as follows: "I have no idea where these numbers came from. And I didn't keep the books. This might as well be Greek to me. I have no I'm not trying to be difficult. I just don't know. I was out trying to raise revenue, and Ms. Walker, it was up to her. And she's the only one that can explain this. I couldn't begin to explain anything about this." Testimony of Kornman (1/9/09) 71:2-16. Furthermore, when asked why he made the decision to distribute $22 million in 2001, which was more than the combined net income for Heritage in 2000 and 2001, Kornman responded: "You're asking me to deal with these numbers. I'm not trying to be evasive, but I don't have any knowledge of where these numbers came from, what they mean. They couldn't be more abstract to me. I haveI just don't understand them. If you want to talk about whether these are the distributions that were made, I mean, I can't evenit's like the 2003 distribution was part of possibly 2002 or 2001. I just don't understand this. It makes no sense to me. I'm sorry, I justthis was not my function within the company." Testimony of Kornman (1/9/09) 72:5-19. Of course, as he admitted, the decision to make distributions was his alone within Heritage. Testimony of Kornman (1/8/09) 57:22-25.
[35] An opinion from an independent professional was a key component of the 752 Transaction. This is so because the presence of such an opinion was thought to shield the Heritage client from potential liability to the IRS for penalties in connection with any audit finding unpaid taxes due to the IRS. In other words, if the client had an opinion from an independent law firm that the transaction was "more likely than not" to be lawful, the worst thing that should happen to the client from implementation of the 752 Transaction is that it would not be allowed, the taxes would be owed to the IRS along with interest at the statutory rate. However, of significance, the client would not be liable for penalties to the IRS. So, for whatever period of time the client kept its potential tax liability in its coffers instead of the IRS's coffers, the total cost to the client was interest on those funds at the statutory rate. Because the Heritage clients were sheltering millions of dollars of potential tax liability, and because those clients expected to be able to earn substantially more on their investments than the interest they might be required to pay to the IRS, it made business sense to attempt the 752 Transactions even if you assumed you would be audited and the transaction would be disallowed. The difference between the clients' internal rate of return on their investments and statutory interest would be theirs to keep. Or, as Kornman explained it to prospective clients how big a loan do you want from the government at 7 or 8% interest? See, e.g., P.Ex. 138 at pp. DFT-6040-6043.
[36] Other of those lawyers had relationships with Heritage or Kornman that raise questions about their "independence" as well. For example, Jonathan Blattmachr ("Blattmachr") was another tax lawyer Heritage referred its clients to for "independent" advice in connection with 752 Transactions. Blattmachr was a senior partner at the Milbank Tweed law firm in New York City. Kornman wrote four personal checks in the amount of $10,000 each to the Alaska Trust Company, Trustee of the Jeffrey Blattmachr Trust. According to Kornman, Jeffrey Blattmachr is the disabled son of Blattmachr. Interestingly, however, each of those four checks contained a further designation "FBO Jonathan Blattmachr, Betsy Blattmachr (Blattmachr's wife), John Blattmachr (another son), Jeffrey Blattmachr (the disabled son)," see, e.g., P.Ex. 286 at p. ACI-37, which meant for the benefit of the named individual; and, according to Kornman, permitted the named individual to withdraw the funds from the trust within a specified period if they chose to do so. Testimony of Kornman (1/12/09) 134:23-138:23. While these checks may simply reflect Kornman's charitable largess as he claims, it is odd that Kornman felt the need to give money to help support Jeffrey, given the amounts of income one would expect his father to have made as a "top attorney" at Milbank Tweed. Id. at 137:12-16. And, of course, these payments were not disclosed to any Heritage client that was referred to Blattmachr for "independent" advice. Id. at 138:1-5.
In addition, Heritage had a business relationship with Blattmachr's brother, Douglas, who was the CEO of the Alaska Trust Company. According to Kornman, "Alaska was trying to establish itself as the . . . Delaware of estate planning. And they were constantly doing new documents and new laws, and we paid Douglas Blattmachr consulting fees to keep us up to date on what was going [sic] there because a lot of our estate transactions used Alaska domiciles." Id. at 160:23-161:3. The upshot of this testimony is that Blattmachr's brother, who was not shown to have any independent tax knowledge or expertise, was paid $20,000 a month starting December 15, 1999 and ending on January 23, 2004, or over $ 1 million, for these "consulting" services. See id. at 162:12-16.
[37] Obviously, Kornman did not tell Canada or Bird about the "soft letters," as he denies knowing about them.
[38] Of course, the Court recognizes that it is easy for Canada to now say that he would have disclosed that information to Heritage clients and prospective clients if he had only known about it. Given that he was unaware of the IRS' investigation of Heritage prior to his departure from Heritage, we will never know if he would have made full disclosure or not. In other words, the Defendants' observations about Canada's credibility are not lost upon the Court. However, what is important here is that the person at Heritage who did know about the IRS investigation chose not to tell existing clients or prospective clients about that investigation, claiming that it was unnecessary because he did tell them that they were likely to be audited. However, from the Court's perspective, there is a difference between telling the clients that the 752 Transaction was risky and that the IRS was likely to audit their returns, and telling them that the IRS had demanded that Heritage disclose the identity of every client who had implemented such a transaction. Kornman's apparent inability to see that distinction may explain at least part of the problem here.
[39] While the 2003 tax return only shows $10 million in distributions to members in 2003, $14 million was actually distributed. The $4 million difference relates to the dispute over the $4 million of cash in the safe deposit boxes discussed in detail later in this opinion. See pp. 490-94, infra.
[40] Moreover, Kornman could have easily offered evidence of what the Member Defendants' actual tax liability on Heritage's taxable income was in each of the years in question here, as 95% of the distribution amounts were from Heritage to Kornman-controlled entities i.e., the Member Defendants. If the actual tax liability of GMK Family, Tikchik and Steadfast bore any real relationship to the amounts distributed, the Court would have expected to see such evidence at trial. However, the trial record is silent with respect to the Member Defendants' actual tax liability in 2001, 2002, and/or 2003. Moreover, to the extent that the Defendants argue that the amount of the distributions that exceeded the potential or actual tax liability of Heritage's members was distributed because of the purported "obligation" Heritage had under its Operating Agreement to make such distributions, the Court notes its earlier finding that any such "obligation" was completely illusory as Kornman had the "sole, unlimited and absolute discretion" to make or not make distributions as he wished.
[41] Many of the Clients Claimants, with whom the Trustee settled pursuant to the terms of the Plan, defended against the Trustee's objection to the allowability of their claims by asserting fraudulent inducement defenses. Testimony of Trustee (1/15/09) 145:14-148:20; P.Ex. 308.
[42] For example, the Kunau client agreement, executed in November of 1999, did not have a "no inducement" provision. P.Ex. 304 at 6 (Article XI). Neither did the June 2000 Rainwater client agreement. D.Ex. 132 at 6. Interestingly, by October 25, 2000 (and thereafter), a "No Prior Inducements" section appears in the client agreements. See, e.g., P.Ex. 327, § 11.2 at "BURCHETT 06538" (Penske agreement); D.Ex. 130, § 6.2 (Fluharty agreement dated June 2001); P.Ex. 325, § 11.2 (Schuler agreement dated January 2002). Something happened between June and October 2000 to cause Heritage to strengthen its protections against a potential fraudulent inducement claim by its clients.
[43] Two of these clients were the Tolls, who entered into 752 Transactions in 2000 and 2001. The Trustee proved that Heritage paid the Toll brothers over $878,000 as part of a settlement and release arising out of a 752 Transaction. Testimony of Kornman (1/9/09) 98:18-102:4. See D.Ex. 182.04 at 65 (Bates WP0012706); P.Ex. 281 (showing that "bet2003" is Bruce E. Toll).
[44] Black's Law Dictionary identifies three traditional types of constructive delivery. One of them is a type of constructive delivery in which mediate possession is transferred while the immediate control or custody remains in the transferor. "Anything may be effectually delivered by means of an agreement that the possessor of it shall for the future hold it no longer on his own account but on account of someone else. If I buy goods from a warehouseman, they are delivered to me as soon as he has agreed with me that he will hold them as warehouseman on my account. The position is then exactly the same as if I had first taken actual delivery of them, and then brought them back to the warehouse, and deposited them there for safe custody." Black's Law Dictionary 332 (8th ed.2004) (quoting John Salmond, Jurisprudence 306 (Glanville L. Williams Ed., 10th ed.1947)).
[45] Of course, § 550(d) prevents the Trustee from receiving a double recovery.
[46] The Court was unable to locate any briefing with respect to the application of § 550 to Kornman (as the entity for whose benefit the Transfers were made), and thus e-mailed the parties, asking them to "point [the Court] to where we might locate such briefing?" The Trustee responded (also by e-mail) that no such briefing had been filed, but he proceeded to cite the Court to evidence in the record which he believed supported his proposed § 550 findings. Defendants were then given an opportunity to respond to the Trustee's e-mail.
[47] Kornman testified that "basically, what happened was I borrowed money from Steadfast to buy plus some of my own cash by buy the Tikchik interest from Mr. Mann's we say his estate, it was a family trust. And then I to pay off the loan I returned the interest that I had purchased along with whatever equity I had in the thing. I think I paid a couple of million dollars more, actually, I'm not sure of the terms. But, basically, Steadfast ended up owning Tikchik." Tr. 1/8/09 55:18-56:2.
[48] Initially, the Trustee sought to avoid transfers both within and without the 90-day period preceding the filing of the Case. However, following this Court's Daubert ruling (finding the testimony of the Trustee's solvency expert unreliable and therefore excluding such testimony), the Trustee agreed that he could only proceed to trial on his 90-day preference claims.
[49] While the Defendants pled other statutory defenses to the Trustee's recovery of the alleged preference payments, their counsel admitted during closing arguments that they had not introduced evidence at trial necessary to prove the required elements of any other defense.
[50] "Debt" is defined in the Bankruptcy Code as "liability on a claim." 11 U.S.C. § 101(12). In turn, "claim" is defined as "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured. . . ." 11 U.S.C. § 101(5).
[51] While Walker attempted to explain why the client notes receivable were not shown on QuickBooks, Testimony of Walker (1/13/09) 185:10-187:7, the Court did not completely understand her explanation.
[52] While there are other potential problems with the second calculation, those issues will be discussed in connection with the Court's analysis of the first calculation and whether it is legally sufficient to rebut the statutory presumption of insolvency.
[53] As stated in Lids Corp. v. Marathon Investment Partners, L.P. (In re Lids Corp.):
Unlike assets, debts are measured at their face value and not at market value. Debts are measured at face value because the language `at fair valuation' in section 101(32)(A) applies only to the valuation of assets; it does not apply to the valuation of debts . . . Contingent liabilities must be included in total debt.
281 B.R. 535, 545-46 (Bankr.D.Del.2002) (internal quotations omitted); see also Hoffinger Indus., Inc. v. Leesa Bunch and McMasker Enters., Inc. (In re Hoffinger Indus., Inc.), 313 B.R. 812, 819-20 n. 4 (Bankr.E.D.Ark.2004) (fair market value of assets compared to face value of liabilities); Silverman Consulting, Inc. v. Hitachi Power Tools, U.S.A., Ltd. et al. (In re Payless Cashways, Inc.), 290 B.R. 689, 700 n. 29 (Bankr.W.D.Mo.2003) (same).
[54] While other former clients had not sued Heritage prior to its bankruptcy filing, a number of Client Claimants asserted claims in the Case, which claims were ultimately allowed in agreed upon amounts pursuant to the Trustee's settlement with the Client Claimants under the Plan.
[55] The Court discussed the clients' defenses to the Trustee's attempts to collect the client notes receivable in its Memorandum Opinion confirming the Plan and authorizing the Trustee to settle with the Client Claimants. See In re Heritage Organization, L.L.C., 375 B.R. 230 (Bankr.N.D.Tex.2007). While Kornman simply dismissed the clients' defenses out of hand, the Court, after having studied the legal issues raised by the clients, was unable to do so, finding approval of the settlements to be in the best interests of the Heritage estate.
[56] The Court does not need to reach the liability side of the Defendants' solvency calculation. However, to facilitate appellate review, the Court concludes that the Trustee's objections are not well taken. First, while Ettman Trust could have loaned the $4 million in cash to Heritage on April 28, 2004, the monies could also have been provided to Heritage as a capital contribution by Steadfast (after Steadfast received a loan from Ettman Trust). In other words, there is simply no evidence establishing the basis on which these funds were provided to Heritage. Second, (and regarding the Defendants' purported failure to account for the contingent client claims, including the Jenkins litigation claim), the Court is satisfied that the Defendants' evidence regarding the defenses available to Heritage in the client agreements is sufficient non-speculative evidence of a lack of value to those claims to satisfy their burden in this context.
[57] This lawsuit is governed by the pre-Bankruptcy Abuse Prevention and Consumer Protection Act version of the Bankruptcy Code because the Case was filed on May 17, 2004, prior to the effective date of the reform act. See Chase Manhattan Mtg. Corp. v. Shapiro (In re Lee), 530 F.3d 458, 463 n. 1 (6th Cir.2008)(stating, regarding section 547, "[b]ecause the Debtor filed his bankruptcy case prior to the effective date of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), the pre-amendment law applies.").
[58] In the Defendants' Post-Trial Brief, the Defendants only address the ordinary course defense with respect to payments Heritage made to Agency and Properties. Defendants' Post-Trial Brief at p. 48. However, in the Defendants' Proposed Amended Findings and Conclusions, the Defendants address the ordinary course defense with respect to two additional groups of payments i.e., to Kornman's credit card issuers and to Kornman's household employees. Defendants' Proposed Amended Findings and Conclusions at pp. 73-74, ¶¶ 234 & 235. The payments to credit card issuers were on Kornman's personal credit cards, which he and Walker testified were used for both Heritage business expenses and Kornman personal expenses. According to both Kornman and Walker, Heritage did not issue business credit cards to its employees; so, Kornman and others used Kornman's personal credit cards to pay for Heritage business expenses. Heritage would pay Kornman's credit card statements in full and then charge back the personal items to Kornman, which he would repay periodically. According to Walker and Kornman, the payments made by Heritage to Kornman's household employees reflected the fact that Kornman transacted significant business activities at his home and these employees were required to support those business activities. According to Walker and Kornman, the portion of the employee's salary not allocated to Heritage business was charged back to Kornman, which he would repay periodically.
At closing arguments, the Court understood counsel for the Defendants to agree that they had not put on evidence to satisfy the third element of the ordinary course defense as to the last two groups of payments i.e., to Kornman's credit cards issuers and household employees. However, if no such concession was made, the Court concludes that the Defendants failed to carry their burden of proof with respect to the third prong of the ordinary course defense as to those payments. The Defendants put on no evidence of credit arrangements of other creditors and debtors in the industry. In fact, the Defendants put on no evidence of what the relevant industry was.
[59] The transcript of the hearing reflects that the Trustee's counsel's second question was "But I said on behalf of entities under control by Mr. Gary Kornman." However, the Court listened to the actual audio recording of the testimony, and it is clear that the Trustee's counsel instead asked "but is that on behalf of entities owned or controlled by Mr. Gary Kornman?"
[60] The testimony regarding Properties originally came in on an offer of proof for all of the remaining Supplier Defendants, which offer of proof the Court admitted as to Properties without objection by the Trustee. A review of the offer of proof in its entirety makes it clear that the reference to "common in the industry in which each one of those businesses was operating" is a reference to Strategic's, Properties', Valiant's, Vehicle's, Air Crews', Aircraft Management's, and FMS's industries. See Testimony of Walker (1/14/09) 115:9-17.
[61] In the Pretrial Order, the parties stipulated to each of the individual payments made to Kornman and each of the Supplier Defendants during the 90-day period prior to Heritage's bankruptcy filing, which the Court has aggregated here for the sake of simplicity. To be clear, however, the Court is adopting the parties' factual stipulations in their entirety.
[62] This statement typifies a major flaw in the Trustee's veil piercing theories. Alter ego is a theory pursuant to which an entity's owner is held liable for the entity's debts. While Kornman can be found to be the alter ego of an entity that he owns (and perhaps vice versa see, e.g., Mobil Oil Corp. v. Linear Films, Inc., 718 F. Supp. 260, 269, n. 12 (D.Del. 1989)), the Trustee attempts to apply this theory to the various Kornman-controlled entities on an oversimplified basis, as will be explained more fully hereinafter.
[63] In Alberto v. Diversified Group, Inc., the Fifth Circuit stated that "Delaware law makes clear that to pierce the corporate veil on an alter ego theory, a plaintiff must demonstrate a `misuse' of the corporate form or `an overall element of injustice or unfairness.'" 55 F.3d 201, 205-06 (emphasis added) (quoting Irwin & Leighton, Inc. v. W.M. Anderson Co., 532 A.2d 983, 989 (Del.Ch.1987) and Harco Nat'l Ins. Co. v. Green Farms, Inc., No. 1131, 1989 WL 110537, at *5 (Del.Ch. Sept.19, 1989)). While the Fifth Circuit stated the test as disjunctive, both Delaware cases relied upon by the Fifth Circuit applied the test in the conjunctive. Based upon this Court's review of current Delaware law, and those cases applying it, the test is conjunctive. See, e.g., NetJets Aviation, 537 F.3d at 175-178.
[64] Although not addressed by the parties at all, there is a further problem with the Trustee's alter ego claims with respect to Steadfast and Tikchik. Those entities are Delaware limited partnerships. It is unclear if the alter ego theory applies to limited partnerships in Delaware. The Court's research did not find a single case in Delaware in which the alter ego doctrine was applied to a limited partnership so as to hold its limited partners individually liable for the partnership's debts. Of course, as a matter of partnership law, the general partner of a limited partnership is liable for the partnership's debts. As a matter of statutory law in Delaware, a limited partner is liable for the debts of the limited partnership where he or she participates in the control of the partnership and transacts business with parties who reasonably believe, based upon the limited partner's conduct, that the limited partner is a general partner. Del. Code Ann. Tit. 6, § 17-303 (2008).
Although not directly relevant, in Pinebrook Properties, Ltd. v. Brookhaven Lake Property Owners Assoc., 77 S.W.3d 487 (Tex.App.-Texarkana 2002), the court addressed the question of whether the alter ego theory applied to a Texas limited partnership. In concluding that it did not, the court explained:
The trial court erred in its application of law. The theory of alter ego, or piercing the corporate veil, is inapplicable to partnerships. Under traditional general partnership law, each partner is liable jointly and severally for the liabilities of the partnership. The Texas Legislature has altered this general scheme and statutorily created limited partnerships which are governed by [statute cites]. Under [the statute], `a general partner of a limited partnership has the liabilities of a partner in a partnership without limited partners to persons other than the partnership and the other partners.' Under the Texas Revised Partnership Act, `all partners are liable jointly and severally for all debts and obligations of the partnership. . . .' Therefore, in a limited partnership, the general partner is always liable for the debts and obligations of the partnership. Limited partners are not liable for the obligations of a limited partnership unless the limited partner is also a general partner or, in addition to the exercise of a limited partner's rights and powers as a limited partner, the limited partner participates in the control of the business. However, if the limited partner does participate in the control of the business, the limited partner is liable only to persons who transact business with the limited partnership reasonably believing, based on the limited partner's conduct, that the limited partner is a general partner.
Id. at 499 (citations omitted). See also, Asshauer v. Wells Fargo Foothill, 263 S.W.3d 468 (Tex.App.-Dallas 2008) (same holding).
Similarly, under Delaware's limited partnership law, see Del.Code Ann. Tit. 6, § 17-303(a) (2008), a limited partner's liability is limited to the amount of its investment. However, if the limited partner participates in the control of the limited partnership, it risks losing limited liability unless its activities fall within a statutory safe harbor. See id. § 17-303(b)(1)-(10). If the safe harbor applies, the activities are deemed not to constitute participation in control. Id. And, under Delaware's General Partnership Act, § 17-403(b), general partners always remain fully liable for the partnership's obligations.
The Texas courts' analysis of the application of veil piercing theories like alter ego to limited partnerships makes sense. Given the similarity of the Texas and Delaware statutory schemes for limited partnerships, this Court concludes that the alter ego theory cannot be used to attempt to pierce the entity veil of Steadfast or Tikchik to reach their respective limited partners. However, the general partner(s) of Steadfast and Tikchik are liable for that entity's debts.
[65] Kornman testified at trial that Defendant Ettman Trust owns 99% of Steadfast, as a limited partner, and that Defendant Kornman Associates owns 1% of Steadfast. Testimony of Kornman (1/8/09) 63:23-64:23. In turn, the evidence at trial established that Kornman is the Trustee of Ettman Trust and a beneficiary of the trust, see id. at 14:17-15:6; 85:22-86:14, and that Kornman owns 100% of the stock of Kornman Associates, which is the general partner of Steadfast. Id. at 54:12-13; Pretrial Order, Stipulation 44. It is not clear if Kornman is the only beneficiary of the Ettman Trust. Since Steadfast is a Delaware limited partnership, however, this Court has concluded that veil piercing theories do not apply. See n. 64, supra. However, under Delaware partnership law, Kornman Associates, as Steadfast's general partner, is liable for Steadfast's debts as a matter of law. Del.Code Ann. Tit. 6, § 17-403 (2008) ("a general partner of a limited partnership has the liabilities of a partner in a partnership that is governed by the Delaware Uniform Partnership Law in effect on July 11, 1999 . . . to persons other than the partnership and the other partners. . . ."); Sandvik AB v. Advent Intern. Corp., 83 F. Supp. 2d 442, 448 (D.Del. 1999), aff'd 220 F.3d 99 (3rd Cir.2000).
With respect to Tikchik, the evidence at trial establishes that Defendant Steadfast owns 98% of Tikchik, an entity referred to as MICC owns 1 % of Tikchik, and Defendant GMK Corp. owns 1 % of Tikchik. The owners of Steadfast are as found above. Kornman testified that MICC was a Mann entity that was acquired when Mann's interest in Tikchik was acquired, and that he thought that it had elected tax treatment as a S-corp and that if that was correct, it would be reported on his personal tax return, from which the Court infers that Kornman owns MICC, a corporation. See Testimony of Kornman (1/8/09) 66:1-67:5. Kornman also owns GMK Corp., which is the managing general partner of Tikchik. Testimony of Kornman (1/8/09) 66:1-20; Pretrial Order, Stipulation 44. But, on this record it is not clear if Steadfast and MICC are limited partners or general partners of Tikchik. As just noted, because Tikchik is a Delaware limited partnership, veil piercing theories do not apply.
Finally, with respect to GMK Family, there is no evidence in the record as to who its owners are. While there is evidence in the record that Kornman controlled GMK Family, control is different than ownership.
[66] As noted previously, Kornman owns 100% of the stock of Kornman Associates. See p. 457, supra.
[67] One of the Supplier Defendants, Strategic, is a Delaware limited partnership. For the reasons explained above, this Court concludes that the Trustee's veil piercing claims against Strategic fail as a matter of law. See n. 64, supra.
[68] While the parties' stipulated in the Pretrial Order that Kornman controlled, directly or indirectly, all of the Entity Defendants, except Strategic and Leasecorp, from the Court's perspective, that is different than being the ultimate owner of each of the entities. As noted previously, the Trustee did prove that Kornman owns Kornman Associates. While Kornman may be the ultimate owner of all of the Supplier Defendants, the Trustee failed to prove that fact at trial.
[69] From the Court's perspective, siphoning funds is different than making distributions to members that are permitted by law. Siphoning suggests the improper taking of funds that the owner was not legally entitled to receive. Distributions to members are legally permissible. The fact that this Court has concluded that the distributions at issue here were fraudulent transfers does not make them unauthorized distributions from a corporate law standpoint. It simply means that the Trustee can avoid and recover them because they were made with the intent to hinder, delay or defraud Heritage creditors.
[70] Irrespective of the conceptual problems surrounding the alter ego claims against the Supplier Defendants, the Court finds that the Trustee failed to prove that any of the Supplier Defendants and its owners (i.e., members or shareholders) operated as a single economic entity.
[71] The Court is unaware of whether such a promoter penalty claim has been asserted by the IRS against Kornman. There is no evidence in the record with regard to this.
[72] The Sandwith/Mikron Industries claim relates to the implementation of an estate plan, not a 752 Transaction.
[73] The client agreements include provisions (i) making it clear that the clients were not obligated to implement a 752 Transaction, (ii) acknowledging the risks of implementation, including audit by the IRS and the possible disallowance of the large tax savings claimed from implementation, (iii) releasing Heritage (and others) from claims arising out of the implementation of the 752 Transaction and indemnifying such parties from such claims, and (iv) acknowledging that the clients were not relying on Heritage (and its affiliates) with respect to the decision to implement a 752 Transaction. See Pre-Trial Order, Stipulation 58.
[74] While the Client Claimants hold allowed claims in the Case, they do so by virtue of a settlement that the Trustee reached with them, which was approved by the Court along with the Plan. In re The Heritage Organization, L.L.C., 375 B.R. 230 (Bankr.N.D.Tex.2007). Accordingly, the Court never had to address the merits of the client claims and the Trustee's defenses to the allowance of those claims, which defenses Kornman and the Entity Defendants believe would have prevailed resulting in the disallowance of those claims in the Case. Needless to say, Kornman vigorously objected to confirmation of the Plan and the Trustee's proposed settlement with the Client Claimants.
[75] The Trustee implicitly asserts that Heritage's prospective clients would not have paid Heritage for access to the secret strategies (or otherwise implemented the strategies) if they had known about the IRS investigation of Heritage. On this record, there is no evidence to support such a contention. While the Court agrees that the information should have been disclosed and was material, there is no testimony from even a single client that the client would have declined to proceed further with Heritage because of Heritage's likely disclosure of its name to the IRS. The fact that the IRS didn't like these types of transactions was well known to everyone including the Client Claimants. Moreover, given the significant tax savings to be claimed by the clients, it seems unlikely that the clients truly expected to escape IRS scrutiny whether through routine audit or Heritage disclosure of its name. Accordingly, it seems the real issue is whether the clients were prepared to litigate the validity of the strategies when challenged. The only evidence in this record is that the clients were told by Heritage not to implement the strategies unless they were prepared to litigate validity with the IRS. No client testified to the contrary.
[76] In connection with its fraudulent transfer analysis, the Court has found that Heritage engaged in sharp practices which included minimizing the risks of implementation and overstating Heritage's alleged "low profile" with the IRS. However, those sharp practices largely address Heritage's tactics with prospective clients. It appears that once the fish was hooked, Heritage was significantly more candid in disclosing the risky nature of the transactions and the likelihood that the IRS would challenge the substantial tax savings the clients were claiming from implementation.
[77] While there were a handful of other creditors in the Case, their claims were small and they were paid by the Trustee shortly after the Plan went effective. The only remaining creditors to benefit from a recovery here are the Client Claimants and Canada.
[78] Of course it did not withstand court scrutiny, but that was not known at the times relevant to this dispute. D.Ex. 5 (Kornman & Assoc., Inc. v. U.S., 527 F.3d 443 (5th Cir. 2008)).
[79] There is no evidence in the record establishing what the business of Kornman Associates is, other than it served as the manager of several of the Supplier Defendants. Pretrial Order, Stipulation 46. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1922236/ | 413 B.R. 1 (2009)
In re Vivian J. CLEMENTE, Debtor.
David M. Nickless, Trustee, Plaintiff
v.
Gerald A. Clemente, a.k.a Gerald Clemente Jr., and Martha W. Clemente, Defendants.
Bankruptcy No. 07-42648-JBR. Adversary No. 07-04160.
United States Bankruptcy Court, D. Massachusetts.
August 12, 2009.
*2 David M. Nickless, Nickless & Philips, PC, Fitchburg, MA, pro se.
Walter Oney, Attorney at Law, Fitchburg, MA, Mark I. Zarrow, Lian, Zarrow, Eynon & Shea, Worcester, MA, for Defendants.
MEMORANDUM OF DECISION
JOEL B. ROSENTHAL, Bankruptcy Judge.
This matter came before the Court for trial on Counts I and II of the Complaint filed by the Plaintiff, David M. Nickless (the "Trustee"), alleging: a) that Vivian Clemente (the "Debtor"), fraudulently transferred her interest in 10 Cutler Street (the "Cutler property") to the Defendant, Gerald Clemente, pursuant to Massachusetts General Laws Chapter 109A; and b) that the Debtor is the equitable owner in whole or in part of 9 Camden Avenue (the "Camden property"), which is currently owned by the Defendant, Martha Clemente. Having considered the testimony, demeanor, and credibility of witnesses, the following constitutes the Court's findings of fact and conclusions of law in accordance with the Federal Rules of Bankruptcy 7052.
Count I Fraudulent Transfer
FACTS:
On May 11, 1989, the Debtor, the Defendant ("Gerald"), and the Defendant's brother ("Joseph") acquired title to the Cutler property as joint tenants with rights of survivorship.[1] The Cutler property *3 included a three family house located on the approximately 9,000 square foot parcel. In January 2003 the owners of the funeral home located next to the Cutler property sought to acquire a portion of the land behind the dwelling to use as a parking lot but no sale occurred at that time. By a deed dated March 4, 2003, the Debtor, Gerald, and Joseph transferred a portion of the Cutler property, described as "Lot 1 on a plan entitled `Plan of Land in Worcester, MA, Prepared for: John J. Kazluaskas'" dated January 7, 2003, made by B & R Survey, Inc., recorded in the Worcester County Registry of Deeds in Plan Book, Plan, ("Lot 1") to Gerald and his wife, Teresa, as tenants by the entirety, for the stated consideration of $1.00 ("the First Deed"). That Deed, however, was never recorded. On May 23, 2003 Gerald alone signed a mortgage on the property in favor of CIT Group/Consumer Finance in the amount of $140,000. See Pl.'s Ex. 8. Gerald used the proceeds of this mortgage to pay off an existing mortgage, of which approximately $140,000 was outstanding; Gerald received no cash proceeds. Nearly six months later, on November 6, 2003, both the Debtor and Teresa executed the same document. See Pl.'s Ex. 8.
On January 7, 2004, Teresa died. On January 23, 2004, the Debtor, Gerald, and Joseph executed a quitclaim deed transferring all of the Cutler property, including Lot 1, to Gerald for stated consideration of less than $100.00 ("the Second Deed"). See Pl.'s Ex. 2. On the same date, Gerald executed a mortgage on the Cutler property in favor of Sherwood Mortgage Group, Inc. to secure repayment of a $151,000 note.[2] The Second Deed and the mortgage were recorded in Registry of Deeds on January 28, 2004.
According to the document styled "Plan of Land in Worcester, MA, Prepared for: John J. Kazluaskas dated January 7, 2003, made by B & R Survey, Inc." (the "Plot Plan"), the Cutler property was divided into two lots: Lot 1, the front portion of the Property, which was approximately 7,350 square feet and included the three-family house, and Lot 1A, an approximately 1,650 square foot parcel located at the rear of the property. The Plot Plan was recorded at the Registry of Deeds on December 30, 2004.
On June 3, 2004, Gerald sold Lot 1A to the owners of the funeral home for consideration which, according to the deed, was $15,000. See Pl.'s Ex. 10. The Trustee asserts that the consideration was $20,000, of which $5,000 was an offset for funeral services rendered in connection with Teresa's death. See Pl.'s Ex. 12. On January 5, 2005, Attorney Simsarian disbursed the proceeds of the sale of Lot 1A. According to the admitted evidence, $1,360.40 of the proceeds was used for title and recording fees, and Gerald received the balance of $13,639.60. See Pl.'s Ex. 12.
On January 12, 2006, Gerald sold the property, minus Lot 1A, for $325,000. See Pl.'s Ex. 3. At some unspecified point prior to the sale, he refinanced the Cutler property with a $222,000 mortgage. After paying the mortgage and closing expenses, Gerald received $93,000, of which neither the Debtor nor Joseph received any portion. Gerald testified that $25,000 of the sale proceeds went into an escrow account for the real estate he purchased in Phillipston, *4 MA.[3] Gerald also testified that he used the remainder of the sale proceeds to "pay off existing debt," particularly debt incurred for home improvements made to the Cutler property such as, painting and repairing the apartments on the first and second floor, re-siding the property, and building a handicapped ramp for his son. He did not, however, provide an itemization of all the improvements.
At some unspecified point in time, the Debtor started gambling. Although it is unclear, it appears that the Debtor's gambling precipitated the filing of her Chapter 7 bankruptcy petition on July 12, 2007. Documents she supplied to the Trustee and attached to the Trustee's Affidavit indicate that the Debtor received social security income of $13,339.20 in 2004; $13,694.40 in 2005, and $14,262.00 in 2006.
DISCUSSION
The Uniform Fraudulent Transfer Act (UFTA) is codified in Chapter 109A of the Massachusetts General Laws. Section 5(a)(1) of Chapter 109A provides that a transfer is fraudulent as to a creditor if made "with actual intent to hinder, delay, or defraud any creditor of the debtor." Actual intent is commonly shown through circumstantial evidence and inference. To assess the transferor's actual intent, the Court must consider several factors, as set forth in section 5(b), such as whether:
(1) "the transfer or obligation was to an insider";
(2) "the debtor retained possession or control of the property transferred after the transfer";
(3) the debtor "disclosed or concealed" the transfer;
(4) the debtor was subject to or threatened with a lawsuit before the transfer was made;
(5) "the transfer was of substantially all the debtor's assets";
(6) "the debtor absconded";
(7) "the debtor removed or concealed assets";
(8) "the value of the consideration received... was reasonably equivalent to the value of the asset transferred";
(9) "the debtor was insolvent or became insolvent shortly after the transfer was made";
(10) "the transfer occurred shortly before or shortly after" the debtor incurred a "substantial debt"; and
(11) the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.
M.G.L. ch. 190A, § 5(b).
Applying each of the foregoing factors to this case, the Court finds that the Trustee has not satisfied his burden of proof that the Debtor conveyed the Cutler property to her son, Gerald, with the actual intent to hinder, delay, or defraud creditors.
Admittedly, the Debtor's transfer to her son was to an insider. However, the mere conveyance of property by a parent to a child, standing alone, is not conclusive of intent to defraud creditors. See Chase v. Horton, 143 Mass. 118, 9 N.E. 31 (Mass.1886).
At trial, the Debtor testified that she did not retain any possession, interest, or control over the Cutler property after transferring it to Gerald. In fact, the Debtor stated that the property was Gerald's, "to do whatever he wanted." The Trustee did not challenge or otherwise contradict this testimony. It is also undisputed that she *5 did not reside at the Cutler property after the transfer.
The evidence at trial and the Debtor's own testimony disclosed that the Second Deed was recorded in the Worcester District Registry of Deeds; thus, there is no question that the Debtor did not conceal the transfer.
The Trustee proffered no evidence as to whether the Debtor was subject to or threatened with a lawsuit at the time of the transfer. On the contrary, the Debtor testified that she was current on all her obligations at the time of the transfer. Further, the Debtor's credit report (at least as of May 2007) indicates that she was "never late" on any of her credit card payments; therefore, the Court finds that she apparently had the financial wherewithal to satisfy her obligations.
The Debtor testified that she maintained approximately $10,000 in savings and the Trustee submitted no evidence as to the value of the Debtor's car, jewelry, or any other assets as of January 2004. As such, it is uncertain whether the transfer of the Cutler property was a transfer of substantially all of the Debtor's assets.
Because the Debtor has been residing at the Camden property with her other son, Joseph, there is no evidence that she absconded.
The Trustee failed to introduce any evidence that the Debtor removed or concealed her assets.
Where, as here, there is an "intra-family transaction," the Court places a heavier burden on the transferee to establish fair consideration. See Campana v. Pilavis (In re Pilavis), 233 B.R. 1, 11 (Bankr.D.Mass.1999) (quoting Pryor v. Fair (In re Fair), 142 B.R. 628, 631 (Bankr.E.D.N.Y.1992)). To establish the adequacy of consideration, Gerald must demonstrate that the transfer was made in good faith and not in the "shadow of an imminent bankruptcy filing." See Harman v. Sorlucco (In re Sorlucco), 68 B.R. 748, 754 (Bankr.D.N.H.1986).
There is simply no indication that the transfer occurred on the eve of bankruptcy because the Debtor did not file her bankruptcy petition until July 12, 2007, almost three years and seven months after the transfer date.
The remaining question then is whether the transfer was made in good faith. The issue of good faith depends on whether the transaction carries the "earmarks of an arms-length bargain." See In re Pilavis, 233 B.R. at 11. Not only does the Second Deed reflect that the transfer was "in consideration of less than $100.00 dollars," see Pl.'s Ex. 2, but the Debtor also testified that there was no actual monetary exchange between her and Gerald. Furthermore, Gerald testified that he believed the Cutler property was worth $180,000 at the time of the transfer. With a $140,000 mortgage already encumbering the property, Gerald received approximately $40,000 in equity and provided nothing in return. While there is doubt that the Debtor intended to make a gift to her son, the Court cannot ignore that there was nothing arms-length about the transfer. Consequently, the Court concludes that the Debtor did not receive, in exchange for the property, any documented consideration of reasonably equivalent value for the Cutler property.
The presence of a single badge of fraud raises a mere suspicion; the confluence of several badges, however, offers conclusive evidence of actual intent to defraud. See Hasbro Inc. v. *6 Serafino, 37 F. Sup.2d 94, 98 (D.Mass. 1999). Without additional badges of fraud to support the Debtor's intent, the lack of consideration in this case is not dispositive. See id.
Any evidence supporting the Trustee's contention that the Debtor was insolvent or became insolvent shortly after the transfer is thin. While the unsecured claims itemized on the Schedule F correspond to the credit card balances reflected on the Debtor's credit report, those claims are accurate only as of April 2007. Relying on account balances that existed nearly three years and three months following the transfer date is hardly sufficient to establish the Debtor's insolvency at the time of the transfer. Recognizing the difficulties posed by this gap in the record, the Trustee instead relied on the "balance history," as identified in the Debtor's credit report. As a result, the Trustee ascertained that the Debtor's total unsecured claims amounted to approximately $33,800; notably, however, this information is only accurate as far back as May 2005, nearly one year and five months after the transfer to Gerald. Accordingly, the Court finds that such untimely data is not sufficient to assess the Debtor's insolvency at the time of transfer.
There is also insufficient evidence in the record to determine whether the transfer occurred shortly before or shortly after the Debtor incurred a substantial debt. Despite the Trustee's assertion that the Debtor maintained a rolling balance on several credit cards prior to the January 2004 transfer, two of the five accounts (e.g., American Express account ending in 4702 and Bank of America account ending in 5416) identified on Schedule F came into existence well after the transfer date. Relying on the Trustee's own calculations, these two accounts comprised approximately 63% of the Debtor's outstanding unsecured claims as of May 2005. Again, given the lapse of almost a year and five months, the Court cannot determine that the transfer occurred shortly before or after the Debtor incurred a substantial debt.
Lastly, it is uncontested that the Debtor did not transfer any essential assets of a business to a lienor, who then transferred the assets to an insider.
Accordingly, the Court finds that the Trustee did not satisfy his burden on actual intent.
Section 5(a)(2) of the UFTA permits a creditor to set aside a transfer without regard to when the claim arose, provided that the transfer was made "without receiving a reasonably equivalent value in exchange for the transfer" and the debtor either (i) "engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small" or (ii) "intended to incur, or believed or reasonably should have believed that [s]he would incur, debts beyond [her] ability to pay as they became due."
As a threshold matter, the Court will first consider whether the Debtor received a fair value for her interest in the Cutler property. To determine reasonably equivalent value, the Court must consider all of the facts and circumstances of the case. See In re Tri-Star Technologies Co., 260 B.R. 319, 325 (Bankr.D.Mass. 2001). Accordingly, the Court must compare what was given with what was received, taking into account both direct and indirect benefits. See id. Although reasonably equivalent value does not require an exact exchange, the Court must consider the degree to which the Debtor's net *7 worth was preserved. See id. As noted above, see supra discussion regarding 109A § 5(a)(1), the Debtor clearly did not receive reasonably equivalent value for the transfer. Moreover, the degree to which her net worth was preserved remained unclear since the Trustee did not definitively establish that she transferred substantially all of her assets.
The Trustee asserts that there was ample equity in the Cutler property as of the transfer date because Gerald sold Lot 1A for $20,000 in June 2004 and received an additional $93,000 when he eventually sold the property in January 2006. The Court, however, does not find the value of the property as of the January 2006 transfer date probative for three reasons. First, in assessing reasonably equivalent value, the Court looks to the value of the property as of the date when the Debtor transferred the Culter property to Gerald, not when Gerald transferred it to a third party. See Grochocinski v. Eckert (In re Eckert), 388 B.R. 813, 835 (Bankr.N.D.Ill.2008); see also Pergament v. Reisner (In re Reisner), 357 B.R. 206, 211 (Bankr. E.D.N.Y.2006) (finding that reasonably equivalent value is determined as of the time of the underlying transaction). Notably, at trial, the Trustee neither contradicted nor challenged Gerald's testimony that he believed the Property to be worth $180,000 in January 2004. Second, general market appreciation contributed to the increase in property value. Without any additional evidence, the Court can neither guess the value of nor discount such appreciation. Third, the Court cannot ignore Gerald's testimony that he made significant improvements to the property such as, re-siding the property and remodeling the kitchen. While $25,000 of the 2006 sale proceeds went into an escrow account for Gerald's new home (in Phillipston, MA), Gerald testified that there was "nothing left," after paying all expenses, including the lien incurred for the home improvements. The Trustee also notes that, between January 2004 and January 2006, Gerald refinanced the property several times. In fact, Gerald testified that at some unspecified time he took out a $222,000 first mortgage. Here, the Court finds that there is insufficient evidence to support Trustee's argument with respect to equity in the property as of the date that Gerald transferred it. Nevertheless, the Debtor did not receive reasonably equivalent value for the transfer of the property.
Even though the Debtor did not receive reasonably equivalent value for the transfer, the Court considers the remaining two disjunctive elements of section 5(a)(2). The Trustee neither alleged nor presented any evidence suggesting that the Debtor engaged in or was about to engage in a business or transaction for which her remaining assets would be unreasonably small. As a result, the issue before the Court is a narrow one: whether the Debtor believed or reasonably should have believed that she would incur debts beyond her ability to pay as they became due.
The Trustee sought to substantiate the Debtor's testimony that she periodically transferred balances between credit cards with the Debtor's credit report, evidencing that she maintained a rolling balance on several credit cards. However, the credit report failed to demonstrate what the Debtor's account balances were and her ability (or lack thereof) to satisfy those obligations as of or shortly after the transfer date. Moreover, the Court cannot ignore the Debtor's testimony that she was current on all her obligations at that time and that, over a two to three year period, she "zeroed-out" existing credit card balances by opening new cards. The Debtor also testified that, on a monthly basis, she receives a steady stream of income consisting *8 of approximately $300 from her pension and an additional $1,100 from social security. Prior to the transfer, the Debtor received approximately $1,400 in rental income ($400 from each of her two sons and an additional $600 from a third tenant), which she applied towards other monthly expenses such as the mortgage, insurance, heat, and utilities. Following the transfer, the Debtor's expenses were limited to assisting with rent, heat, and cable expenses at the Camden property, which varied on a monthly basis from $400 to $650. With a fixed stream of income and negligible expenses prior to and shortly after the transfer, the Debtor had no reason to believe that she would incur the $64,000 credit card debt that remains outstanding.
The only evidence that lends support to the allegation that the Debtor reasonably should have believed that she would incur such debts is her testimony that she "got caught in gambling." The Court, however, finds that this argument lacks merit. The Trustee failed to demonstrate that the Debtor was predisposed to gambling prior to the transfer. Nor did the Trustee elicit any testimony as to the time frame for the Debtor's gambling. Thus, without any evidence as to the frequency or dollar amount with which the Debtor gambled, the Court cannot conclude that the Debtor reasonably should have anticipated incurring debts beyond her ability to pay. Subsequently, the Court concludes that the Trustee has not satisfied his burden under section 5(a)(2).
Finally, section 6 of Massachusetts General Laws Chapter 109A provides that a debtor's transfer is fraudulent "as to a creditor whose claim arose before the transfer was made." As noted above, see supra regarding 109A § 5(a)(1), the Debtor's credit report did not identify even a single creditor with an outstanding claim at the time of the transfer. Although the creditor report discloses that the Debtor had several credit cards open, there is no evidence of any balances on those cards as of January 2004. Instead, the credit report only provides account balances dating as far back as May 2005, which is simply too far removed from the transfer date to determine whether there was an outstanding claim at the time of the transfer. Without any evidence of an existing creditor or that the Debtor's liabilities exceeded her assets as of the transfer date, the Court finds that the Trustee failed to satisfy his burden under section 6. See Kerrigan v. Fortunato, 304 Mass. 617, 24 N.E.2d 655 (1939); cf. Fleet Nat. Bank v. Booth, 2001 WL 292417 (Mass.Super.Feb.28, 2001) (stating that the plaintiff must demonstrate that, at the time of the transfer, the debtor was unable to satisfy existing debts to support a finding of fraudulent conveyance).
Count II Equitable Title
FACTS:
By a deed dated February 7, 2002, the Debtor transferred the Camden property to her daughter-in-law, Martha Clemente ("Martha"). The stated consideration for this transfer was $100. As of the transfer date, a $57,000 mortgage already encumbered the Camden property. Since the transfer, Martha refinanced the mortgage on the Camden property on three occasions, obtaining a $115,000 mortgage on February 15, 2002, a $135,000 mortgage on December 24, 2002, and a $143,000 mortgage on November 14, 2004. None of the proceeds from these refinancing transactions were shared with the Debtor.
After the transfer, the Debtor continued to reside at the Camden property. As part of the transfer, there was a mutual understanding between the Debtor, Martha, and Joseph that the Debtor would live with her son and daughter-in-law provided that they built an "in-law" apartment for *9 her. Martha and Joseph paid approximately $43,000 for the construction of the apartment primarily by the February 15th refinancing of the property. To help contribute to household bills, the Debtor pays approximately $375-$400 in rent and $90 for cable. Notably, there was no change in the Debtor's financial condition because she continued to make the same exact payments that she made when she was paying her own mortgage. Furthermore, the Debtor also contributes to the payment of the monthly oil bill as she does not have her own utilities.
DISCUSSION:
At the time the Debtor transferred the Camden property, she was living at that property with her son and daughter-in-law, Joseph and Martha. She continued to live there after the transfer. Because the Debtor's financial arrangement with respect to the Property has not undergone any discernable change since the transfer, the Plaintiff alleges that the Debtor retained equitable title to the Camden property and therefore, it is property of the estate.
Under Massachusetts law, a debtor holds an equitable interest under an oral express trust, or in the alternative, under a resulting trust or a constructive trust. See Lassman v. McQuillan (In re Charles River Press Lithography, Inc.), 338 B.R. 148, 160 (Bankr.D.Mass.2006). An express trust, often created by an oral statement, depends primarily on the manifestation of intent to create a trust. A party seeking to establish a trust need not use specific terminology; instead, the party must unequivocally intend that the estate vest in one person to be held in some manner or for some purpose on behalf of another. See Ventura v. Ventura, 407 Mass. 724, 555 N.E.2d 872 (1990). Here, there is simply no indication that the Debtor created an express trust. Her intent is anything but unequivocal as she testified that she "gave" the property to her son and daughter-in-law because it is "better to do [so] when you are alive than when you are dead." The Trustee does not contend nor proffer any testimony that the deed to Martha, or any other written instrument, established an express trust between the parties. Therefore, if a trust exists, it is by implication of law.
Unlike an express trust, resulting and constructive trusts are remedial devices, imposed by courts. See Lassman, 338 B.R. at 160. A court may apply a constructive trust to avoid the unjust enrichment of one party at the expense of another only where the transferee acquired the property in dispute (a) by fraud or (b) in violation of a fiduciary relation or (c) where information confidentially given or acquired was used to the advantage of the recipient at the expense of the one who disclosed the information. See Kelly v. Kelly, 358 Mass. 154, 260 N.E.2d 659, 661 (1970).
The Plaintiff proved none of the criteria necessary to establish a constructive trust. First, the Trustee does not allege nor do the facts of this case indicate that Martha obtained the Camden property by fraud. In fact, the Debtor repeatedly stated that she "gave" the property to her daughter-in-law. Second, there was no evidence of a fiduciary relation between Martha and the Debtor. A fiduciary relationship does not arise simply because a conveyance is made between members of the same family. See Kelly, 260 N.E.2d at 661; see also Meskell v. Meskell, 355 Mass. 148, 243 N.E.2d 804, 807 (1969) (stating that there is no fiduciary relation between family members even where the transferee promised to hold the conveyed property in a trust). Instead, to determine the existence of such a relationship, the Court *10 must focus on whether there was a "dependency in business, property, or financial matters." See Collins v. Huculak, 57 Mass.App.Ct. 387, 783 N.E.2d 834, 841 (2003). In the instant case, there is no evidence that the Debtor ever relied on or placed her trust and confidence in Martha in important financial matters. See Kelly, 260 N.E.2d at 661. To the contrary, the Debtor stated that she "never discussed [her] finances with any[one]." Presumably the Debtor trusted her daughter-in-law, but it does not appear that she was dependent on her in business or property matters prior to the transfer. Finally, there is no contention that Martha used any information confidentially imparted to her by the Debtor for her own advantage and to the disadvantage of the Debtor. Without any evidence of fraud, breach of fiduciary duty or other misconduct, the Court cannot impose a constructive trust.
As a result, the Court limits its analysis to determining whether the imposition of a resulting trust is appropriate. A resulting trust arises presumptively where a person conveys property under circumstances that raise an inference that he does not intend that the transferee should retain the beneficial interest in the property. See City of Springfield v. LAN Tamers, Inc. (In re LAN Tamers), 281 B.R. 782, 792 (Bankr.D.Mass.2002); Reilly v. Wheatley, 68 F.2d 297, 299 (1st Cir. 1933). Where one purchases property and directs that it be transferred to another, the Court infers that the purchaser intended that the grantee should hold the property for the benefit of the purchaser. See In re Moodie, 362 B.R. 554, 561 (Bankr. S.D.Fla.2007). The inference or presumption is to the contrary, however, when a parent conveys property to a child; rather, there is a presumption that a gift was intended. See Nichols v. Edwards, 33 Mass. 62, 16 Pick 62 (1835). However, that presumption is weaker when the relationship involves in-laws and can be rebutted by the evidence. See In re Jewett, 2007 WL 1288740 at *5 (Bankr.D.N.H. May 2, 2007).
To rebut the presumption of a gift, Trustee must establish "full, clear, and decisive proof" that the Debtor intended for Martha to acquire title to the Camden property for the benefit of the Debtor and to hold it for her in a trust. See Dwyer v. Dwyer, 452 Mass. 1030, 898 N.E.2d 504, 506 (2008); Cormerais v. Wesselhoeft, 114 Mass. 550, 552 (Mass.1874). A debtor's intent may be implied from the conduct of the parties to the transfer. See Dwyer, 898 N.E.2d at 506. Accordingly, the Court must look at the "indicia of ownership and not the form in which the property is held." See In re Tougas, 338 B.R. 164, 174 (Bankr.D.Mass.2006). To the extent that a transferor "directs [the] management" of the property or "otherwise acts as an owner would act, especially with the transferee's acquiescence," there is sufficient evidence to rebut the presumption of a gift. See In re Cunningham, 2008 WL 2746023 at * 4 (Bankr.N.D.Ohio July 11, 2008) (citing RESTATEMENT (THIRD) OF TRUSTS § 9, cmt. c (2003)).
For the following reasons, the Court finds that the conduct of the parties corroborates the fact that Martha held the property for the Debtor in a resulting trust.
While there is no explicit showing that the Debtor conveyed the Camden property to Martha in order to preserve any interest that the Debtor had in the property, the Debtor's actions indicate that she retained a beneficial interest in the property.
Although the Debtor testified that the property belonged to Martha and Joseph and that they could "do what they wanted" with it, the transfer was *11 conditional. At the time of the transfer, there was an implicit understanding that Martha and Joseph would take care of the Debtor given their relationship. By her own testimony, the Debtor "agreed to sign the house over to" them provided that they construct an apartment for her on the second floor of the property.
The evidence indicates that on February 15, 2002, Martha refinanced the Camden property for approximately $115,000. See Def.'s Ex. 13. From that loan, she used approximately $57,065 to "pay off the existing mortgage" and retained at least $43,000 for the construction of the in-law apartment. See id. Although the Debtor did not directly receive any proceeds from this refinancing, the Court cannot ignore the fact that a significant portion, if not all, of it was used for her benefit pursuant to the understanding with Martha and Joseph.
Not only did the Debtor continue to reside at the Camden property, but she also retained sufficient control over it. See In re Beatrice, 277 B.R. 439 (Bankr.D.Mass.2002) (finding that a debtor-father controlled property that he transferred for less than $100.00 to a trust for his children even though he used refinancing proceeds for the exclusive benefit of his children).
Additionally, the Court finds that by contributing to household bills such as cable and heat, the Debtor reserved to herself a right to treat the property as her own.
At trial, Martha testified that, "almost immediately" after the transfer, she assumed all the related household obligations including the mortgage, property taxes, water, and utilities. Notably, however, the Debtor continued to pay "rent" in an amount equivalent to her previous mortgage payment. By her own admission, she thought it was "only fair" that she continue to make the same mortgage payments because the first mortgage was her responsibility. Cf. McGavin v. Segal (In re McGavin), 189 F.3d 1215, 1218 (10th Cir.1999) (finding a resulting trust where the debtor resided in the home and paid bills).
The Debtor's testimony that Martha and Joseph were free to sell the Camden property if they wished and that she would move into a "high rise" was very self-serving. There was no evidence that this was the "understanding" when she transferred the property. Instead, she qualified the transfer by requesting that they build an in-law apartment for her.
The Court finds that the Debtor transferred the Camden property for no consideration. See Fleet Nat'l Bank v. Valente (In re Valente), 360 F.3d 256, 264 (1st Cir.2004) (evaluating lack of consideration in count for resulting trust).
Moreover, as in Dwyer v. Dwyer, see 452 Mass. 1030, 898 N.E.2d 504, 507 (2008), the fact that the Debtor did not file a gift tax return declaring the transfer a gift only undermines the presumption that she intended to gift the property to Martha.
In conclusion, the Debtor retained the benefits and burdens of ownership because she remained in continuous possession and occupancy of the Camden property, using it as her primary residence before and after the time of the transfer. Accordingly, the Court finds that the Debtor does have an equitable title in the Camden property. Therefore, judgment will enter *12 declaring the Debtor as the equitable owner in part of the Camden property.
A separate order will issue.
NOTES
[1] Although there was no direct testimony that a mortgage was taken out to purchase the property, the Court infers that one was because the $140,000 mortgage taken out by Gerald on May 23, 2003 was used to pay off a prior mortgage.
[2] Neither the Trustee nor the Defendant proffered any evidence to explain the $11,000 increase in the mortgage note between May 23, 2003 and January 23, 2004.
[3] Based on the testimony that was heard and the evidence admitted, it is unclear when Gerald purchased the property in Phillipston, MA. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594609/ | 19 So. 3d 310 (2009)
FAIRCLOTH
v.
STATE.
No. SC09-1674.
Supreme Court of Florida.
September 17, 2009.
Decision without published opinion review dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594610/ | 954 So. 2d 52 (2007)
STATE of Florida, Appellant,
v.
Xiomara Aracely LEBRON, Appellee.
No. 5D06-1035.
District Court of Appeal of Florida, Fifth District.
March 16, 2007.
Rehearing Denied April 25, 2007.
*53 Bill McCollum, Attorney General, Tallahassee, and Mary G. Jolley, Assistant Attorney General, Daytona Beach, for Appellant.
James S. Purdy, Public Defender, and Michael S. Becker, Assistant Public Defender, Daytona Beach, for Appellee.
MONACO, J.
The sole issue on this appeal is whether the trial court erred in dismissing the State's charges against Xiomara Lebron for vehicular homicide pursuant to section 782.071, Florida Statutes (2004). Because we conclude that the State presented at least a prima facie case, we reverse.
The State initiated this proceeding by filing an information against Ms. Lebron charging her with two counts of vehicular homicide. The charging affidavit, filed by the investigating officer from the Florida Highway Patrol, indicated that at approximately 4:55 p.m. on a weekday Ms. Lebron was driving her car in the middle northbound lane of SR 423 in Orange County at 81 miles per hour in a 55 mile per hour zone. Ms. Lebron approached a slower moving vehicle in the same lane, and anticipating Ms. Lebron's approach, the slower moving vehicle began to enter into the right outside lane to allow her to move past. At the same time, Ms. Lebron also began to move to the right outside lane in an apparent attempt to pass the slower moving vehicle. The nearly simultaneous movements of the vehicles kept Ms. Lebron's vehicle behind the slower moving vehicle as the distance between them quickly decreased. When Ms. Lebron was then forced to take quick evasive action, she veered sharply to the left causing her to lose control of her vehicle. Her vehicle began to rotate counter-clockwise and traveled into the grass median. The vehicle continued to rotate in the median and upon reaching the opposite embankment became airborne. Ms. Lebron's vehicle traveled into the southbound lanes directly in the path of Lionel Otero. The left front of Ms. Lebron's vehicle struck the left front of Mr. Otero's vehicle. As a result, both Mr. Otero and Olga Otero, a passenger in his vehicle, sustained fatal injuries.[1]
When the State charged Ms. Lebron with vehicular homicide, she filed a motion to dismiss the charges pursuant to Florida Rules of Criminal Procedure 3.190(c)(4). The crux of the motion was that the undisputed facts did not establish a prima facie case of guilt against her. The only disputed fact in the cause, according to Ms. Lebron, was the speed of her vehicle at the time she lost control of it. The motion indicated that the driver of the slower vehicle in front of Ms. Lebron had related in a sworn statement that he did not recall if he signaled prior to making his lane change to the right. The passenger in the slower vehicle stated in a sworn statement that she did not believe the driver of that vehicle signaled prior to beginning the lane change. The facts demonstrated that when both vehicles noticed they were going into the right lane at the same time they both attempted to correct back to the middle lane, however, Ms. Lebron over *54 corrected and lost control of her vehicle. The driver of the slower vehicle indicated that apart from Ms. Lebron's speed he did not notice anything erratic about her driving patterns. In addition, the motion claimed that no witnesses testified that Ms. Lebron was driving in an aggressive manner prior to the crash and no other pre-crash violations were indicated apart from her speed.
The State filed a traverse noting that the driver of the slower vehicle stated that traffic on the day of the accident was mediocre to moderate. According to the State:
The defendant was speeding at least 27 miles per hour over the speed limit during rush hour while attempting to weave around other traffic, therefore, she could reasonably foresee that driving in such a manner and under such conditions was likely to cause death or great bodily harm.
The State argued that the accident was caused by the combination of Ms. Lebron's speeding and attempting to weave in and out of traffic during rush hour. The State also suggested that because Ms. Lebron regularly traveled this particular route to work at approximately 5:00 p.m., her familiarity with the conditions would mean that she knew that during rush hour, traffic would be "moderate to heavy." Finally, the State pointed to section 316.084(2), Florida Statutes (2005), which provides that a driver of a vehicle may overtake and pass another vehicle on the right side only under conditions permitting such movement in safety.
At the hearing on the motion to dismiss defense counsel pointed to the arresting officer's testimony that apart from her speed, there was no other improper or unlawful driving and that the traffic at that time was moderate. In other words, according to the defense, but for the simultaneous nature of the lane change, even given the speed, this accident would probably not have occurred. Moreover, the defense argued the term "rush hour traffic" was irrelevant because the driver of the slower vehicle had testified that there were no vehicles immediately to his right, left, in front of or behind him except for Ms. Lebron. Finally, defense counsel indicated that the reason the driver of the slower vehicle believed that Ms. Lebron didn't pass to the left was because the left hand lane immediately became a merge lane to the middle lane.
The trial court thereafter entered an order granting Ms. Lebron's motion to dismiss. The court noted that vehicular homicide cannot be proven without also proving the elements of reckless driving or that the defendant was driving with a willful, wanton disregard for safety. In addition, a defendant must reasonably foresee that the manner and conditions under which he or she was driving could cause death or great bodily harm. The court indicated that because the courts of Florida have thus far decided that speed alone is insufficient to establish reckless driving, then speed alone cannot, accordingly, support vehicular homicide.
When a defendant moves to dismiss a charge pursuant to Florida Rules of Criminal Procedure 3.190(c)(4), the State is required to show only a prima facie case, since the purpose of the motion is to allow a pretrial determination of the law of the case when material facts are not in dispute. The standard of review of a trial court's order in this connection is de novo. See State v. Williams, 918 So. 2d 400 (Fla. 2d DCA 2006). The State, however, is entitled to the most favorable construction of the evidence and all inferences should be resolved against the defendant. Only when the most favorable construction to the State would not establish a prima facie *55 case of guilt should a rule 3.190(c)(4) motion to dismiss be granted. See State v. Pasko, 815 So. 2d 680 (Fla. 2d DCA), review denied, 835 So. 2d 268 (Fla.2002).
Vehicular homicide, pursuant to section 782.071, Florida Statutes (2004), is the killing of a human being, or the killing of a viable fetus by any injury to the mother, caused by the operation of a motor vehicle by another in a reckless manner likely to cause the death of, or great bodily harm to, another. In D.E. v. State, 904 So. 2d 558, 561 (Fla. 5th DCA 2005), this court discussed "vehicular homicide."
Vehicular homicide is the killing of a human being, or the killing of a viable fetus by any injury to the mother, caused by the operation of a motor vehicle by another in a reckless manner likely to cause the death of, or great bodily harm to, another. See § 782.071, Fla. Stat. (2003). By definition, the crime cannot be proved without also proving the elements of reckless driving. See State v. Del Rio, 854 So. 2d 692, 693 (Fla. 2d DCA 2003). Reckless driving is defined as driving with a willful or wanton disregard for safety. See Lewek v. State, 702 So. 2d 527, 530 (Fla. 4th DCA 1997); § 316.192(1), Fla. Stat. (2003). "Willful" means "intentional, knowing, and purposeful," and "wanton" means "with a conscious and intentional indifference to consequences and with knowledge that damage is likely to be done to persons or property." See W.E.B. v. State, 553 So. 2d 323, 326 (Fla. 1st DCA 1989). . . .
As set out by the Florida Supreme Court in McCreary v. State, 371 So. 2d 1024 (Fla.1979), the degree of culpability required to find reckless driving is less than that required for culpable negligence (the standard for manslaughter), but more than a mere failure to use ordinary care.
Although a person does not have to foresee the specific circumstances causing the death of a victim in order to be guilty of vehicular homicide, the person must have reasonably foreseen that the same general type of harm might occur if he or she knowingly drove a vehicle under circumstances that would likely cause death or great bodily harm to another.
D.E., 904 So.2d at 561. The analysis first involves a determination of what the circumstances were at the time the defendant was driving. Once the circumstances are understood, the analysis concludes by asking if it was reasonably foreseeable under those conditions that death or great bodily harm could occur.
A number of appellate courts in Florida have held that speed alone is insufficient as a basis for reckless driving. See, e.g., House v. State, 831 So. 2d 1230 (Fla. 2d DCA 2002); W.E.B. v. State, 553 So. 2d 323 (Fla. 1st DCA 1989); Hamilton v. State, 439 So. 2d 238 (Fla. 2d DCA 1983). The origin of this maxim seems to have been obscured by time. This court, however, has never directly said that speed alone is not enough. When confronted with the issue, we, as most other appellate courts of this state, have found that speed was not alone in what amounted to reckless driving. Perhaps it is because excessive speed for the prevailing conditions is rarely without other circumstances. Even Hamilton, the most recent progenitor of this line of cases, found that excessive speed was accompanied by other circumstances so that in combination it amounted to reckless driving.
In any event, in the present case, we are once again not compelled to hold that speed alone is enough. We arrive at this conclusion because of the posture in which this case finds itself. This is an appeal from an order granting a motion made by Ms. Lebron pursuant to Florida *56 Rules of Criminal Procedure 3.190(c)(4). In order to survive this motion, the State, given the benefit of a view of the evidence and inferences most favorable to it, is required to make out only a prima facie case. See Brinkley v. State, 874 So. 2d 1199 (Fla. 5th DCA 2004); State v. Patel, 453 So. 2d 218 (Fla. 5th DCA 1984). It does not have to show guilt beyond a reasonable doubt, nor produce evidence sufficient to sustain a conviction. See State v. Bonebright, 742 So. 2d 290 (Fla. 1st DCA 1998).
Given this rather low bar, we conclude that the trial court erred in granting the motion. The State traversed the motion with specific evidence that Ms. Lebron had operated her automobile at an excessive rate of speed at a time and under circumstances when traffic conditions might well make her operation of the vehicle reckless. In addition, her decision to attempt a pass of the slower vehicle on the right may have been improper in view of section 316.084(2), previously noted. Thus, at least for the purposes of the motion to dismiss, we think the State made out a prima facie case.
REVERSED and REMANDED.
PALMER and TORPY, JJ., concur.
NOTES
[1] The charging affidavit noted that Ms. Lebron had a restriction for corrective lenses on her driver's license and would normally wear contact lenses to correct her eyesight. On the morning of the crash she may not have been wearing a contact lens in her right eye because she was suffering from a case of pink eye. As this matter was not argued to the trial court, however, we do not consider it here. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549760/ | 256 B.R. 712 (2000)
In re RAND ENERGY CO., Debtor.
Rand Energy Co., Plaintiff,
v.
Del Mar Drilling Co., Inc., Defendant.
Bankruptcy No. 98-80004-SAF-11. Adversary No. 00-3323.
United States Bankruptcy Court, N.D. Texas, Dallas Division.
November 7, 2000.
*713 Adam Voyles and Rick Knight, Ware, Snow, Fogel, Jackson & Greene, Houston, TX, for Plaintiff.
Robert Blanc and Nancy J. Brown, Gardere, Wynne, Sewell & Riggs, LLP, Houston, TX, for Defendants.
MEMORANDUM OPINION AND ORDER
STEVEN A. FELSENTHAL, Bankruptcy Judge.
Rand Energy Company, the reorganized debtor, brought this adversary proceeding to obtain a turnover of $471,752.93 plus interest from Del Mar Drilling Company, Inc. Rand filed a motion for summary judgment seeking a turnover judgment. Del Mar opposed Rand's motion and filed a counter motion for summary judgment and for retroactive approval of a setoff and for an award of administrative expenses. In its response to Del Mar's motion for summary judgment, Rand contends, for the first time, that Rand's transfer of $471,752.93 to Del Mar can be avoided as a fraudulent transfer.
The court held a hearing on the motions on September 14, 2000. At the hearing, *714 the parties contested whether Rand could raise a claim for recovery based on a fraudulent transfer in its response to a summary judgment motion. The court provided Del Mar with an opportunity to address the issue in a post-hearing brief. Del Mar submitted its brief on September 25, 2000, and Rand responded on October 2, 2000.
Actions to recover property of a bankruptcy estate and to determine, avoid, or recover fraudulent transfers constitute core matters over which this court has jurisdiction to enter a final order. 28 U.S.C. §§ 157(b)(2)(E) and (H) and 1334. The allowance or disallowance of an administrative expense and determination of setoff rights constitute core matters over which this court has jurisdiction to enter a final order. 28 U.S.C. §§ 157(b)(2)(A), (B), (O) and 1334.
Under Fed.R.Civ.P. 56(c), made applicable by Bankruptcy Rule 7056, summary judgment may be granted if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that the moving party is entitled to judgment as a matter of law because no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The court must draw inferences in the light most favorable to the party opposing the motion. Anderson, 477 U.S. at 255, 106 S. Ct. 2505. The respondent may not rest on the mere allegations or denials in its pleadings but must set forth specific facts showing a genuine issue for trial. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). Except for Del Mar's motion for administrative expenses, the parties agree that this matter may properly be resolved on summary judgment. Indeed, except for facts pertaining to the motion for administrative expenses, there are no genuine issues of material fact concerning the transactions and occurrences which gave rise to this action and are chronicled below.
Rand was an oil and gas exploration and production company. Del Mar was a drilling company. Del Mar and Rand had affiliated and common ownership. Rand contracted with Del Mar for drilling services for a well known as the Dyess Well. By mistake, on October 9, 1998, Rand overpaid Del Mar for invoices for services on the Dyess Well. Rand made the overpayment by two checks on October 9, 1998, on invoices that Rand had previously paid. Rand filed its petition for relief under Chapter 11 of the Bankruptcy Code on October 21, 1998. On the petition date, Rand had overpaid Del Mar $471,752.93 on invoices for the Dyess Well.
Del Mar did not return the overpaid funds to Rand. Del Mar did not advise Rand of the overpayment. Instead Del Mar used the funds to pay six post-petition invoices Del Mar had issued to Rand. Three of the invoices covered pre-petition services by Del Mar for a well known as the Mary Williamson # 1 Well, totaling $161,661.93. Del Mar applied the balance of the overpayment, $310,091.00, to post-petition services for the Mary Williamson # 1 Well.
Rand contends that at the time of the filing of the bankruptcy petition, the overpayment constituted property of the bankruptcy estate requiring that Del Mar turn the funds over to Rand, as the reorganized debtor. 11 U.S.C. § 542(b). Del Mar, in turn, requests that the court annul the automatic stay to permit a set-off to cover the services provided pre-petition at the Mary Williamson # 1 Well, 11 U.S.C. §§ 362 and 553, and that the court allow payment of the post-petition services as an administrative expense. 11 U.S.C. § 503. In turn, Rand contends that the transfers of October 9, 1998, should be avoided as fraudulent transfers, allowing for the recovery as a money judgment. 11 U.S.C. §§ 548 and 550.
*715 Fraudulent transfer and setoff
Rand did not allege a claim for recovery of a fraudulent transfer under 11 U.S.C. §§ 548 and 550 in its complaint and Rand did not request summary judgment on a fraudulent transfer claim in its motion. But in its response to Del Mar's motion for summary judgment, Rand contends that it may avoid the October 9, 1998, transfers as fraudulent transfers. Rand argues that there are no genuine issues of material fact concerning the elements of recovery under § 548 and that Rand is entitled to a money judgment under § 550.
Even though not plead in the complaint or raised in its summary judgment motion, Rand contends that the court may grant judgment for Rand on legal principles that differ from those urged by the litigants.
In Apex Oil Co. v. Archem Co., 770 F.2d 1353, 1356 (5th Cir.1985), the Fifth Circuit considered an issue notwithstanding the plaintiff's failure to plead it. The Court cited Wright & Miller for the proposition that:
[o]nce it is determined that there is no genuine issue as to any material fact and that a party is entitled to the benefit of a judgment as a matter of law, judgment should be entered even though the legal principles relied upon by the court may differ from those that have been urged upon it by the litigants.
Apex Oil, 770 F.2d at 1356 n. 3 (citing 10A [Charles Alan] Wright, [Arthur R.] Miller & [Mary Kay] Kane, Federal Practice and Procedure § 2725, at 112 (1983)).
In its post-hearing brief, Del Mar does not contest the application of that holding nor does Del Mar contend that the court may not consider a legal theory of recovery if not plead as a claim for relief. Rather, in its post-hearing brief, Del Mar contests the merits of the avoidance issue. Consequently, although the court considers the procedural issue problematic, the court holds that Del Mar has waived any objection to the court considering the avoidance claim on its merits.
Rand claims that it transferred the $471,752.93 on October 9, 1998, while it was insolvent and that Del Mar did not provide reasonably equivalent value of the transfer. Under § 548,
(a)(1) [Rand] may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily-
* * * * * *
(B)(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation . . .
11 U.S.C. § 548. Value does not include an unperformed promise to furnish support to the debtor. 11 U.S.C. § 548(c)(2)(A).
Rand invokes the doctrine of collateral estoppel to establish that Rand was insolvent on October 9, 1998.
Collateral estoppel is appropriate only if the following four conditions are met. First, the issue under consideration must be identical to the issue litigated in a prior action. Second, the issue must have been fully and vigorously litigated in the prior action. Third, the issue must have been necessary to support the judgment in the prior case. Fourth, there must be no special circumstance that would render preclusion inappropriate or unfair. If these conditions are satisfied, issue preclusion prohibits a party from seeking another determination of the litigated issue in the subsequent action.
United States v. Shanbaum, 10 F.3d 305, 311 (5th Cir.1994) (internal citations omitted).
*716 In adversary proceeding no. 99-3262, Rand and Del Mar actually litigated as part of an avoidance action under 11 U.S.C. § 547 the issue of Rand's insolvency for a series of dates from one year before the filing of the bankruptcy petition to the date of the filing. Insolvency is a requisite element for a recovery under § 547 and was therefore necessary to support the judgment in the prior case. In a preference action, for the 90 days prior to the filing of the petition, the Bankruptcy Code presumes insolvency. 11 U.S.C. § 547(f). For the period of one year to the 90 days, the Code does not presume insolvency. The issue of insolvency had been actually litigated and Del Mar had the incentive to fully and vigorously litigate it in the prior action. The parties were the same. The court's findings covered October 9, 1998. The court found Rand to be insolvent. See Rand Energy Co. v. Del Mar Drilling Co., Inc. (In re Rand Energy Co.), no. 99-3262, slip op. at 16 (Bankr.N.D.Tex. Aug. 1, 2000). Del Mar does not point to any circumstances which would render preclusion inappropriate or unfair.[1] Applying the doctrine of collateral estoppel, the court holds that Rand was insolvent on October 9, 1998.
The transfers on October 9, 1998, obviously occurred within one year of the filing of Rand's bankruptcy petition on October 21, 1998.
There is no genuine issue of material fact that Rand transferred its money to Del Mar on October 9, 1998, and, therefore, the court finds that Rand transferred an interest of the debtor in property.
There is no genuine issue of material fact that Rand had already paid for Del Mar's services on the Dyess Well when it made the transfers. There is no genuine issue of material fact that the transfers were an overpayment.
Del Mar presents summary judgment evidence that after realizing the error, Del Mar reversed the transaction on its books and established a deposit for Rand, which it applied post-petition to invoices for drilling services on the Mary Williamson # 1 Well. This position concedes that on the day of the transfer, Rand received no property and Rand did not owe for services on the Dyess Well. The transfer did not secure a present or antecedent debt. Only later, post-petition, did Del Mar reverse its books to establish a deposit to pay for drilling services on the other well. The court holds that on the day of transfer Rand received no value for the transfer.
Del Mar likens the transfer to a retainer for services to be rendered by professional persons. The transfer was not a retainer. Del Mar also likens the transfer to an opportunity to receive economic benefit in the future. But Rand made the transfer to pay for services that had already been paid. Rand did not make the transfer as a deposit for drilling services to be provided to the Mary Williamson # 1 Well. Del Mar does not present summary judgment evidence that it would provide services for other wells if Rand overpaid for services to the Dyess Well. Del Mar does not provide summary judgment evidence that it performed services under its contract with Rand for the Mary Williamson # 1 Well because Rand overpaid the Dyess Well. Del Mar contends, instead, that it did not even realize the overpayment was made until after Rand filed its bankruptcy petition. Accordingly, the court finds that there is no genuine issue of material fact of value and that Rand did not receive reasonably equivalent value in exchange for the transfers.
Rand is therefore entitled to summary judgment avoiding the transfers of the $471,752.93 on October 9, 1998, pursuant to 11 U.S.C. § 548(a)(1)(B).
Del Mar moves the court, however, to allow a retroactive approval of a setoff. Del Mar may not, however, invoke the *717 setoff doctrine to a fraudulent transfer. In Mack v. Newton, 737 F.2d 1343, 1366 (5th Cir.1984), the Fifth Circuit pointed out that "[i]t would defeat the purpose of the Bankruptcy Act's provisions relating to fraudulent transfers to allow [creditors] to offset the value of the property thus transferred to them by the amount of their unsecured claim against [the debtor]." Although developed under the Bankruptcy Act, the rule and its rationale apply under the Bankruptcy Code as well. See In re J.R. McConnell, Jr., 934 F.2d 662, 667 (5th Cir.1991). In J.R. McConnell, the Fifth Circuit held that although a creditor could not set off the value of property deemed transferred as a fraudulent conveyance against its claim, it could offset the trustee's, or in this case, the reorganized debtor's, recovery if the creditor's actions satisfy the conditions for the doctrine of recoupment. Id. The court cited its opinion in In re Holford, 896 F.2d 176, 178 (5th Cir.1990), which provided that "[r]ecoupment allows a defendant to reduce the amount of a plaintiff's claim by asserting a claim against the plaintiff which arose out of the same transaction to arrive at a just and proper liability on the plaintiff's claim." "There need not have been any express contractual right to withhold payments for the transaction to be a recoupment." In re Holford, 896 F.2d at 178. Moreover, a recoupment is not subject to the provisions of the automatic stay. Id. at 179.
Del Mar has not asserted a recoupment right. Del Mar has not offered summary judgment evidence in support of recoupment. Even if the court addressed the issue sua sponte, the court would have to draw inferences from the summary judgment evidence in the light most favorable to Rand. Rand entered separate contracts with Del Mar for drilling services at various wells. Rand overpaid Del Mar for drilling services at the Dyess Well. Del Mar applied the Dyess overpayment to pay for drilling services at the Mary Williamson # 1 Well. The court infers that Del Mar's claim for services for the Mary Williamson Well does not arise out of the same transaction as the services for the Dyess Well. The court therefore has no basis to consider sua sponte the application of the recoupment doctrine.
Based on this analysis, Rand is entitled to a summary judgment avoiding the transfers of $471,752.93 under 11 U.S.C. § 548(a)(1)(B)(i) and (ii)(I) with a money judgment in that amount under 11 U.S.C. § 550.
Turnover and Setoff
For purposes of completeness of adjudication, the court addresses Rand's motion for summary judgment for a turnover and Del Mar's motion for summary judgment for the retroactive application of setoff. The parties agree that at the time of the filing of the bankruptcy petition, Del Mar held the overpayment which Rand erroneously paid. Del Mar's summary judgment evidence suggests that Del Mar took steps post-petition to correct its books. That summary judgment evidence establishes that Rand retained an interest in the overpayment at the time of the bankruptcy petition. That interest became property of the bankruptcy estate, 11 U.S.C. § 541, subject to a turnover under 11 U.S.C. § 542(b). See United States v. Whiting Pools, Inc., 462 U.S. 198, 204-05 n. 8, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983); In re Leff, 88 B.R. 105, 107-08 (Bankr. N.D.Tex.1988), aff'd as modified 93 B.R. 91 (N.D.Tex.1988), aff'd 878 F.2d 1432 (5th Cir.1989) (table).
But Del Mar had possession of the funds. Del Mar contends that it could have applied the funds to invoices for services at the Mary Williamson # 1 Well by setoff. However, Del Mar could not effectuate a setoff pursuant to 11 U.S.C. § 553 without obtaining relief from the automatic stay imposed by 11 U.S.C. § 362. The automatic stay may be annulled for cause. 11 U.S.C. § 362(d)(1). Del Mar seeks that relief retroactively.
*718 As discussed above, Del Mar issued three invoices post-petition for services performed pre-petition. Del Mar's motion to annul the stay to allow a setoff comes too late in the case. The provisions of § 362 no longer apply, as the debtor's plan of reorganization has been confirmed and consummated. Upon consummation, the property of the estate has been transferred to reorganized Rand and pre-petition claims discharged with a permanent injunction.
However, Del Mar did in fact implement the setoff post-petition but pre-confirmation without obtaining relief from the automatic stay. Actions taken in violation of the automatic stay are voidable, not void, in the Fifth Circuit. See Sikes v. Global Marine, Inc., 881 F.2d 176, 178 (5th Cir.1989). The summary judgment evidence reveals genuine issues of material fact concerning when Del Mar learned of the overpayment and how and why Del Mar acted as it did. Consequently, if an appellate court reversed this court on the fraudulent transfer summary judgment and remanded to this court for further proceedings, the court would set the stay violation issue for trial.
Del Mar also issued three invoices post-petition for post-petition services. Under § 553, Del Mar cannot setoff post-petition invoices with pre-petition overpayments by the debtor. Del Mar recognizes that rule of law. Consequently, for post-petition services, Del Mar moves the court for the allowance of administrative expenses.
Administrative Expenses
Del Mar provided drilling services to Rand for the Mary Williamson # 1 Well post-petition. Del Mar applied Rand's pre-petition overpayment for the Dyess Well to the invoices for the post-petition services for the Mary Williamson # 1 Well. If Del Mar must return the overpayment, Del Mar contends that the post-petition services would be left unpaid. Del Mar requests that the court award administrative expenses for the services and direct that the overpayment be applied to cover those services.
At the hearing to confirm Rand's plan, the court found that Rand would pay all administrative expenses. 11 U.S.C. § 1129(a)(9)(A). By court order, the court set a bar date of December 18, 1999, for motions for administrative expenses. Del Mar did not move for administrative expenses until September 25, 2000. Rand contends that the motion must be denied as untimely. The court may grant relief from a deadline set by court order upon a showing of excusable neglect. Bankruptcy Rule 9006(b)(1); Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 395-96, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993). There are genuine issues of material fact concerning excusable neglect.
Del Mar provided post-petition services to the Mary Williamson # 1 Well. Rand does not contest that as a general proposition. Rand does, however, question the extent of the services and payment terms and conditions under its contract with Del Mar. Del Mar has not presented summary judgment evidence regarding the contract and the specific services provided post-petition. The court therefore cannot resolve the administrative expenses motion on summary judgment.
Rand contends that even if Del Mar establishes the administrative expenses, the expenses must be disallowed if Del Mar fails to pay any judgment under § 550, relying on 11 U.S.C. § 502(d). Section 502(d) provides, as here relevant, that the court "shall disallow any claim" of an entity that does not turn over property of the estate pursuant to 11 U.S.C. § 542 or pay an avoidance judgment pursuant to 11 U.S.C. §§ 548 and 550. Section 502 provides for the allowance of claims or interests. Section 502(d) expressly addresses the disallowance of any "claim." Claims against a bankruptcy estate arise and exist at the time of the filing of the bankruptcy petition. In this motion, Del Mar seeks *719 recovery for services provided to Rand after the filing of the bankruptcy petition. The Bankruptcy Code treats post-petition services as administrative expenses under 11 U.S.C. § 503, not as pre-petition claims under § 502. See In re Phones for All, Inc., 249 B.R. 426, 428-29 (Bankr.N.D.Tex. 2000); In re T & T Roofing and Sheet Metal, Inc., 156 B.R. 780, 782 (Bankr. N.D.Tex.1993). Accordingly, § 502(d) does not apply to motions for administrative expense under § 503. If Del Mar establishes excusable neglect and a basis for an award of administrative expenses, the court may allow the expenses and provide for payment as part of the final judgment in this adversary proceeding.
Miscellaneous Matters
Del Mar objects to a supplemental statement regarding summary judgment submitted by Rand. Rand objects to signature pages of a contract submitted late by Del Mar. Because the court has allowed additional briefing on issues going beyond the claim plead in the complaint, the court will consider both items and overrules the objections.
Orders
Based on the foregoing,
IT IS ORDERED that Rand shall have a summary judgment for $471,752.93 pursuant to 11 U.S.C. §§ 548 and 550.
IT IS FURTHER ORDERED that Del Mar's motion for summary judgment for setoff is DENIED and Rand shall have a summary judgment denying Del Mar setoff rights.
IT IS FURTHER ORDERED that Del Mar's motion for summary judgment for administrative expenses is DENIED and the motion for administrative expenses shall be set for trial.
NOTES
[1] In so holding, the court notes and preserves for this record Del Mar's position in the prior record concerning evidence and expert opinion regarding insolvency. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549774/ | 56 N.J. 203 (1970)
265 A.2d 675
WILLIAM BAUGH, PLAINTIFF-APPELLANT,
v.
EDGAR G. THOMAS, INDIVIDUALLY AND AS PASTOR OF THE FIRST BAPTIST CHURCH OF SOUTH ORANGE, NEW JERSEY, HENRY WALDEN, ALEXANDER REAVES, GILBERT CARTER, ARTHUR SMITH, JUANITA MILES, LORRAINE McMILLAN, CATHERINE BOND, INDIVIDUALLY AND AS TRUSTEES OF THE FIRST BAPTIST CHURCH OF SOUTH ORANGE, NEW JERSEY, DEFENDANTS-RESPONDENTS.
The Supreme Court of New Jersey.
Argued November 18, 1969.
Reargued May 4, 1970.
Decided June 1, 1970.
*205 Mr. Benjamin P. Michel argued the cause for the plaintiff-appellant (Messrs. Riker, Danzig, Scherer & Brown, attorneys; Mr. Everett M. Scherer of counsel; Mr. Benjamin P. Michel on the brief).
Mr. Emil Oxfeld argued the cause for the defendants-respondents (Messrs. Rothbard, Harris & Oxfeld, attorneys).
The opinion of the court was delivered by PROCTOR, J.
This case involves the expulsion of a member of a church. Plaintiff brought suit for reinstatement in the Chancery Division which dismissed his complaint on the ground that it lacked jurisdiction to consider questions of church membership. The Appellate Division affirmed in an unreported opinion and we granted plaintiff's petition for certification. 54 N.J. 501 (1969).
This case arose out of a dispute over plaintiff's right to be a member of the Board of Trustees of the First Baptist Church of South Orange. During this dispute it was alleged that plaintiff uttered "a profane statement" by characterizing an accusation that he threatened to sue the Church as "a lie." As a result of a vote by the members of the Church, "the right hand of fellowship" was withdrawn, i.e., the plaintiff was expelled from the Church. Plaintiff filed a complaint against the pastor and the members of the Board of Trustees seeking to be reinstated and to be recognized as a member of the Board. Subsequently, the attorneys for the parties agreed upon terms of a settlement whereby the plaintiff would send a letter of apology to the Board of Trustees and the congregation, and the matter would be presented at a meeting of the members of the Church. It further provided that the plaintiff would be reinstated and eligible to run for election as a trustee at a subsequent special *206 meeting if the congregation voted to accept his letter of apology.
Thereafter, plaintiff submitted a written apology to the Board but qualified it by failing to admit that he had done anything wrong. The congregation convened to consider plaintiff's reinstatement and attorneys for both sides were present at the meeting. According to plaintiff's amended complaint there were 31 votes against him and 25 in his favor. One vote against him was disqualified because the voter was delinquent in the payment of her dues. Plaintiff alleges that two other members who voted against him should also have been disqualified for the same reason. This would change the vote to 28 against reinstatement and 25 in favor. He further alleges that there were four members present who abstained. He contends that the votes of these four members should have been counted for him in accordance with the Constitution of the Church since that document requires that abstentions should be counted as affirmative votes. Thus, by plaintiff's count, he should have been reinstated by a vote of 29 to 28. Upon defendants' refusal to recognize plaintiff as a member of the Church, plaintiff filed the amended complaint which is the subject of this action.
In rejecting plaintiff's claim, both the trial court and the Appellate Division relied on Moorman v. Goodman, 59 N.J. Super. 181 (App. Div. 1960), which held that the expulsion of members from churches is not a proper subject for judicial consideration. Id. at 186.
In Moorman, a dispute arose between two factions in a Baptist Church. One faction filed a suit contending the Church's pastor had been ousted by a vote of the membership but refused to leave the pulpit. In response, the other faction brought a suit against the plaintiffs in the first action for interfering with the orderly conduct of church affairs and for being guilty of other improprieties. The actions were consolidated in the Chancery Division, and at the suggestion of counsel, a consent order was entered by *207 the court appointing a commission of three Baptist ministers to consider the charges and countercharges. The commission submitted a report stating, inter alia, that the meeting ousting the pastor was illegal, and that the tenure of the pastor could only be determined by a vote of the duly constituted membership of the Church. The commission recommended that a meeting of the members be held to determine the disposition of the charges against the plaintiffs in the first suit, and to determine whether the tenure of the pastor should continue. The court accepted the recommendations, and members of the congregation met under the supervision of the commission and voted to exonerate the pastor and to "withdraw the hand of fellowship" from ten members of the first faction, i.e., the ten were ousted from the Church. Upon receiving the commission's report of the elections and its recommendations that the elections be sustained, the trial court entered a judgment adopting the commission's report and recommendations. On appeal to the Appellate Division, the ten members contended that their ouster was illegal because it was not in accord with proper Baptist Church practices and procedures. The Appellate Division held that the issue was not a proper one for judicial consideration. 59 N.J. Super. at 186.
In reaching this decision, the Appellate Division relied on earlier cases which held that courts lack jurisdiction over spiritual matters and the administration of church affairs which do not affect the civil or property rights of individuals, Jennings v. Scarborough, 56 N.J.L. 401 (Sup. Ct. 1894); Livingston v. Rector, etc., of Trinity Church, 45 N.J.L. 230 (Sup. Ct. 1883); Everett v. First Baptist Church of Sussex, N.J., 6 N.J. Misc. 640 (Sup. Ct. 1928); Cabinet v. Shapiro, 17 N.J. Super. 540 (Law Div. 1952), and declined to follow Hughes v. North Clinton Baptist Church, 75 N.J.L. 167 (Sup. Ct. 1907).
It must be emphasized that there is no question of spiritual matters or church doctrine in the present case, compare Presbyterian Church v. Hull Church, 393 U.S. *208 440, 21 L.Ed.2d 658 (1969), and Watson v. Jones, (13 Wall.) 679, 20 L.Ed. 666 (1872), and insofar as the above New Jersey decisions stand for the proposition that there is no jurisdiction in such cases, we are in agreement. Indeed, the constitutional principles of religious liberty and separation of church and state mandate such a position. Presbyterian Church v. Hull Church, supra; see also Annotation, "Suspension or Expulsion From Church or Religious Society and the Remedies Therefor," 20 A.L.R.2d 421, 435.
We cannot, however, accept the proposition that civil courts lack jurisdiction to determine whether established procedures of a religious organization, as proved, have been followed where a member is expelled from that organization. Earlier decisions of this state which reject such jurisdiction are overruled.
We believe that expulsion from a church or other religious organization can constitute a serious emotional deprivation which, when compared to some losses of property or contract rights, can be far more damaging to an individual. The loss of the opportunity to worship in familiar surroundings is a valuable right which deserves the protection of the law where no constitutional barrier exists. See Chafee, "The Internal Affairs of Associations Not for Profit," 43 Harv. L. Rev. 993 (1930).
Moreover, except in cases involving religious doctrine, we can see no reason for treating religious organizations differently from other non-profit voluntary associations. In the context of other voluntary associations, we have held that there need not be a property right at stake for a court to assume jurisdiction. The status of membership in a voluntary association is sufficient to warrant at least limited judicial examination of the reason for expulsion. Higgins v. American Society of Clinical Pathologists, 51 N.J. 191 (1968). Other jurisdictions have extended judicial review to ousters of church members where the actions show a departure from the rules and regulations of the church. See Taylor v. Jackson, 50 U.S. App. D.C. 381, 273 F. 345 *209 (1921); Walker Memorial Baptist Church v. Saunders, 285 N.Y. 462, 35 N.E.2d 42 (1941); David v. Carter, 222 S.W.2d 900 (Tex. Ct. Civ. App. 1949); Randolf v. First Baptist Church, 120 N.E.2d 485 (Ohio Ct. C.P. 1954); cases collected in 20 A.L.R.2d, supra at 462-66. Cf. Bouldin v. Alexander, 82 U.S. 131 (15 Wall.), 21 L.Ed. 69 (1872); Linke v. Church of Jesus Christ of Latter Day Saints, 71 Cal. App.2d 667, 163 P.2d 44 (1945). This position was taken in Hughes v. North Clinton Baptist Church, supra, 75 N.J.L. 167 (Sup. Ct. 1907) which the Appellate Division declined to follow.
In the present case, the plaintiff urges that the vote for reinstatement was improperly counted because it did not accord with established Church procedure. He alleges that members who were ineligible to vote were included in the tally against him and persons who abstained were not counted for him. In short, he contends that a tabulation of the votes which comported with Church procedure would result in his reinstatement. In view of the trial judge's position on the jurisdictional issue, there was no proof taken on the procedures utilized by the Church. Moreover, at the argument before us, there was some confusion regarding the form of the resolution put to the members for a vote on plaintiff's reinstatement. Since the tabulation of the votes apparently depends primarily on whether the resolution was phrased in the positive or the negative, there must be a remand. On this remand, the procedure which defendants allegedly breached must, of course, be proved by plaintiff. Finally, we note that a Baptist Church is an independent self-governing body whose affairs are administered by the membership acting together, and whose will is expressed by a majority vote of its members. Reverend Edward S. Hiscox, New Directory for Baptist Churches P. 144 (1945); New Manual for Baptist Churches P. 13 (1931). See Harrison v. Floyd, 26 N.J. Super. 333, 337 (Ch. Div. 1953). Thus, there is no problem of exhaustion of remedies.
*210 We conclude that plaintiff's amended complaint states a cause of action which our courts may properly hear in that it alleges an expulsion in violation of the Church's established procedures.
The judgment of the Appellate Division is reversed and the matter is remanded to the Chancery Division for trial.
For reversal and remandment Chief Justice WEINTRAUB and Justices JACOBS, FRANCIS, PROCTOR, SCHETTINO and HANEMAN 6.
For affirmance. None. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594638/ | 954 So.2d 622 (2005)
EX PARTE CURTIS M. MAGOUIRK.
No. 1041168.
Supreme Court of Alabama.
December 9, 2005.
Decision without opinion. Cert. denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594738/ | 954 So.2d 2 (2005)
JOSHUA WALLER
v.
DANA WALLER.
No. 2030924.
Court of Civil Appeals of Alabama.
September 2, 2005.
Decision without published opinions. Reh. denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594672/ | 28 So. 3d 800 (2009)
Timothy Charles BARNES
v.
Brenda Bonham BARNES.
2080278.
Court of Civil Appeals of Alabama.
July 17, 2009.
Dale Rouse Waid, Clanton, for appellant.
Brenda Bonham Barnes, pro se.
MOORE, Judge.
Timothy Charles Barnes ("the former husband") appeals from a judgment of the Chilton Circuit Court that, among other things, directed the former husband to, within 120 days from the date of the entry of the judgment, take all steps necessary to have Brenda Bonham Barnes's name removed from all debt associated with the parties' former marital residence.
The husband and Brenda Bonham Barnes ("the former wife") were divorced by a judgment entered by the Chilton Circuit Court on June 21, 2006, as amended on July 28, 2006. The July 28, 2006, amended divorce judgment provided, in pertinent part:
"8. The [former h]usband shall have sole and exclusive ownership, use, and possession of the [former marital residence]. The [former w]ife shall execute a quit claim deed in favor of the [former h]usband upon presentment of same. The [former h]usband shall be solely liable for the mortgages secured by the [former marital residence], thereby indemnifying and holding the [former w]ife harmless for same. The [former *801 w]ife shall execute all documents presented to her by the [former h]usband or his agent relating to any refinancing on the [former marital residence] necessary to fulfill the [former h]usband's obligations to the [former w]ife."
On January 10, 2008, the former wife filed a "petition for contempt/rule nisi and/or modification" requesting, among other things, that the former husband be ordered to appear and show cause why he should not be found in contempt of court for his failure to comply with certain provisions of the amended divorce judgment. Specifically, the former wife alleged that the former husband had not refinanced the mortgages on the marital residence solely in his name. On February 7, 2008, the former husband filed an answer to the former wife's petition in which he, among other things, denied that the amended divorce judgment required him to have the mortgages secured by the marital residence refinanced to remove the former wife's name from the same.
The case was called for trial on May 16, 2008; however, the trial court entered an order on the case-action-summary sheet, which states: "Case called. Parties present with counsel.... [The former husband] to go attempt and bring documentation of refinance attempt.... Case reset for July 7, 2008 @ 9:00." The case was subsequently reset for October 6, 2008. On that date, the trial court entered the following judgment:
"Case called.... Issue of [the former husband] and the refinance of the [former] marital residence argued.... Consistent with the obligation of holding [the former] wife harmless on the debt of marital residence and spirit of [the former] husband refinancing marital residence, the [former] husband shall have 120 days in which to get all debt out of [the former wife's] name associated with [the former marital residence]."
The former husband filed a motion to alter, amend, or vacate the judgment asserting that the trial court had lost jurisdiction to modify the terms of the amended divorce judgment 30 days after its entry and that, accordingly, the trial court's October 6, 2008, judgment directing the former husband to refinance the mortgages within 120 days was an impermissible modification of the amended divorce judgment. The former wife filed a response to the motion on October 14, 2008. Following oral argument on November 17, 2008, the trial court entered an order denying the former husband's motion to alter, amend, or vacate. The former husband filed his notice of appeal to this court on December 17, 2008.
The former husband argues that the trial court erred by modifying the property-settlement provisions of the parties' amended divorce judgment because, he says, the trial court lost jurisdiction to modify the amended divorce judgment 30 days after it was entered on July 28, 2008.
"A trial court loses jurisdiction to modify a property division in a divorce judgment 30 days after the entry of the judgment. Hocutt v. Hocutt, 491 So. 2d 247, 248 (Ala.Civ.App.1986). This court has held, however, that if the provisions of a property settlement are vague or ambiguous, a judgment interpreting or clarifying the property settlement does not constitute a modification of the property settlement. Williams v. Williams, 591 So. 2d 879, 880 (Ala.Civ.App.1991); see also Granger v. Granger, 804 So. 2d 217, 219 (Ala.Civ.App.2001); Grayson v. Grayson, 628 So. 2d 918 (Ala.Civ.App. 1993). Further, a trial court has the inherent power to interpret, clarify, and enforce its orders and judgments. Granger v. Granger, supra; Patterson *802 v. Patterson, 518 So. 2d 739, 742 (Ala.Civ. App.1987)."
Dunn v. Dunn, 12 So. 3d 704, 709 (Ala.Civ. App.2008).
Although Alabama courts have not decided the specific question whether ordering a party to refinance a mortgage is an impermissible modification of a divorce judgment or whether it can be a means of enforcing a provision in a divorce judgment that requires that party to hold the other party harmless from that debt, the Superior Court of New Jersey addressed this issue in Eaton v. Grau, 368 N.J.Super. 215, 845 A.2d 707 (App.Div.2004). In Eaton, Cynthia Eaton sought an order requiring Justin G. Grau to refinance the mortgage on the parties' former marital home. The parties had been divorced by a January 31, 2000, judgment that had incorporated the parties' settlement agreement. According to the court in Eaton:
"The [settlement agreement] ... confirmed the transfer of [Eaton's] interest in the marital home to [Grau] which had already taken place by quit claim deed recorded on December 2, 1997. At the time of divorce, however, the marital residence was in foreclosure. Thus, the parties incorporated into the [settlement agreement] a provision ... requiring [Grau] to pay the mortgage arrears and bring the loan obligation current. The [settlement agreement] also contained a provision ... addressing [Grau's] continuing financial obligation as to the mortgage on the former marital residence, requiring [Grau] to hold [Eaton] harmless for obligations arising out of his ownership. Specifically, the provision states:
"`The parties agree that [Eaton] shall have no further liability with respect to the mortgage indebtedness on the [marital home], the repairs thereon or any other obligations whatsoever. [Grau] shall continue to be fully and solely responsible for all future payments of the Note and Mortgage due on the property, together with real estate taxes and all other expenses related thereto. [Grau] agrees to indemnify and hold [Eaton] harmless from any and all further obligations from ownership of the property including, but not limited to, future claims of creditors, state, federal and municipal taxing authorities and the first mortgagee which are related to the property previously conveyed by [Eaton].'
"[(Emphasis added).]
"Significantly, for present purposes, the [settlement agreement] does not require [Grau] to remove [Eaton's] name from the mortgage. Neither does the [settlement agreement] require [Grau] to refinance or sell the former marital residence...."
368 N.J.Super. at 219, 845 A.2d at 709-10.
After the entry of the divorce judgment, Grau paid the arrearage on the mortgage and brought the former marital residence out of foreclosure. In 2001, however, Grau became unable to make the monthly mortgage payments and was served with a complaint for foreclosure, which also named Eaton. Eaton then filed a motion requesting that the trial court order Grau to remove her name from the mortgage on the former marital residence within 30 days by either refinancing it or selling it. The trial court denied Eaton's motion, and she appealed.
On appeal, the court in Eaton reasoned:
"The issue in this case arises out of the not uncommon divorce situation where, for consideration, ownership of the former marital residence is turned over to one party while both remain on the mortgage and accompanying note and are thus liable for payment thereon. *803 This is because it is not likely that the financial institution that holds the mortgage will readily agree to take the non-owner party's name off the loan documents. And while it is possible to stipulate in the [settlement agreement] who is to make the monthly payment, that does not absolve the other party from his or her obligation to the lender. Thus, if the party who is supposed to make the monthly payment defaults, not only will the other party be responsible for the amount dueplus late charges but his or her credit rating could be significantly damaged. One way to address such situations is for the parties to agree in advance that the owner will refinance or take out a mortgage in his or her own name and pay off the existing mortgage on the property within a specified period of time. Of course, if the single party cannot afford or qualify for refinancing, both parties may agree to remain owners until a date certain within which either the mortgage is refinanced or the house is sold.
"Needless to say, neither remedy was provided for in the [settlement agreement] at issue in this case. Instead, the parties settled on a `hold harmless' provision wherein `[Grau] agrees to indemnify and hold [Eaton] harmless from any and all further obligations from ownership of the property....' By forcing [Grau] now to either refinance or sell the property, [Eaton] in effect seeks to expand the `hold harmless' clause to incorporate remedial measures neither bargained nor provided for in the [settlement agreement]. This she cannot do."
368 N.J.Super. at 221-22, 845 A.2d at 711. Noting that the "hold harmless" provision was part of a property settlement and, thus, was not modifiable, the court in Eaton affirmed the trial court's judgment denying Eaton's requested relief. 368 N.J.Super. at 222, 845 A.2d at 711.
Similarly, in the present case, the parties' divorce judgment provided that the former husband would "be solely liable for the mortgages secured by the [former marital residence], thereby indemnifying and holding the [former w]ife harmless for same." Although the divorce judgment required the former wife to execute "all documents presented to her by the [former h]usband or his agent relating to any refinancing on the [former marital residence] necessary to fulfill the [former h]usband's obligations to the [former w]ife," the judgment did not require the former husband to refinance the mortgages. By requesting that the former husband be required to refinance the mortgages on the former marital residence, the former wife "in effect seeks to expand the `hold harmless' clause to incorporate remedial measures [not] ... provided for in the [divorce judgment]." Eaton, 368 N.J.Super. at 221-22, 845 A.2d at 711. Just like the court in Eaton, we conclude that ordering the former husband to refinance the mortgages on the former marital residence constitutes an impermissible modification to the property-division provisions of the amended divorce judgment.
Based on the foregoing, we reverse the trial court's judgment and remand the cause for the entry of a judgment consistent with this opinion.
The former husband has filed a motion to strike Exhibits A, B, and C attached to the former wife's brief and the parts of her brief that argue facts not in the record. That motion is granted.
REVERSED AND REMANDED.
THOMPSON, P.J., and PITTMAN and THOMAS, JJ., concur.
BRYAN, J., dissents, with writing.
*804 BRYAN, Judge, dissenting.
The parties' amended divorce judgment of July 28, 2006, provides, in pertinent part:
"The [former h]usband shall be solely liable for the mortgages secured by the [former marital residence], thereby indemnifying and holding the [former w]ife harmless for same. The [former w]ife shall execute all documents presented to her by the [former h]usband or his agent relating to any refinancing on the [former marital residence] necessary to fulfill the [former h]usband's obligations to the [former w]ife."
The amended divorce judgment contemplates that the former husband would necessarily refinance the mortgages in order to fulfill his obligations to the former wife. Therefore, the trial court's judgment of October 6, 2008, merely enforced the amended divorce judgment and did not constitute an impermissible modification of that judgment. Accordingly, I respectfully dissent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594700/ | 28 So. 3d 301 (2009)
The PARISH OF JEFFERSON
v.
Melanie KENNEDY, wife of/and Christopher Kennedy.
No. 09-CA-145.
Court of Appeal of Louisiana, Fifth Circuit.
October 27, 2009.
*302 Mitchell W. Gibbs, Attorney at Law, Jefferson, Louisiana, for Plaintiff/Appellee.
Philip H. Kennedy, Attorney at Law, New Orleans, Louisiana, for Defendants/Appellants.
Panel composed of Judges MARION F. EDWARDS, CLARENCE E. McMANUS, and JUDE G. GRAVOIS.
MARION F. EDWARDS, Judge.
Defendants/appellants, Melanie Kennedy, wife of/and Christopher Kennedy ("the Kennedys"), appeal a judgment by the Twenty-Fourth Judicial District Court dismissing their appeal. For the reasons to follow, we reverse.
The Kennedys were cited for violation of the Code of Ordinances of the Parish of Jefferson ("the Parish") for storing a boat on a trailer in the driveway of their home. Following a hearing, the administrative hearing officer found them to be in violation of the ordinance and fined them $200 for each day the violation remained in existence after a compliance period of five days. The order also operated as a lien and privilege against the property and determined that failure to pay the lien would result in the sale of the property under the laws of adjudicated tax sales. The order concluded by stating:
Defendants have the right to appeal this decision to the 24th Judicial District Court for the Parish of Jefferson within thirty (30) days of the signing of this Order and after posting a bond with the Bureau of Administrative Adjudication pursuant to Section 2.5-10 of the Jefferson Parish Code of Ordinances.
The ruling was issued on July 22, 2008, and the Kennedys filed a Petition for Judicial Review on August 20, 2008. The Parish filed a Motion and Order to Dismiss with Prejudice the application for judicial review. The Parish contended that the Kennedys had failed to post the bond as required by the Order. The trial court granted the order, dismissing the appeal. The Kennedys appeal that judgment, contending that both Section 2.5-10 of the Jefferson Parish Code of Ordinances and La. R.S. 49:964 are unambiguous and do not require an appeal bond in order to perfect an appeal. Rather, they urge that any bond involved merely stays the enforcement of an agency determination pending judicial review.
Section 2.5-10 reads as follows:
Any person determined by a final order of the hearing officer to be in violation of a public health, housing, fire code, environmental, or historic district ordinance ... or any other ordinance that may be determined by the Jefferson Parish Council, may appeal this determination to the Twenty-Fourth Judicial District Court for the Parish of Jefferson. Such appeal shall be instituted by filing, within thirty (30) days of the hearing officer's order, a petition with the clerk of the Twenty-Fourth Judicial District Court along with payment of such reasonable costs as may be required by the clerk of court. On the same day as the petition for appeal *303 is filed, the violator shall serve a copy on the director of the appropriate enforcement agency or department and a copy on the parish attorney. After the petition for appeal has been filed, the clerk of court shall schedule a hearing and notify all parties of the date, time and place of such hearing. Service of notice of appeal under this paragraph shall not stay the enforcement and collection of the order or judgment unless the person, prior to filing notice of appeal in the Twenty-Fourth Judicial District Court, furnishes to the parish, for deposit in escrow by the director of finance, security sufficient to assure satisfaction of the finding of the hearing officer relative to the fine and costs of the hearing and costs, if any, of correcting the violation. Security may be waived in the case of those entitled to proceed in forma pauperis or if in the opinion of the hearing officer the requirement of security would impose unreasonable hardship on the violator or some other person.
Section 2.5-7(i) requires that the final order notify the violator of his right of appeal. Section (j) states the hearing officer may order the payment of fines and hearing costs, which costs are to be paid into the general fund unless otherwise provided by laws. Section (k) states that the hearing officer may suspend all or a portion of his final order and may make any suspension contingent on the fulfillment of some reasonable condition.
The Administrative Procedure Act, specifically La. R.S. 49:964, provides that proceedings for review may be instituted by filing a petition in the district court of the parish in which the agency is located within thirty days after mailing of notice of the final decision by the agency. The filing of the petition does not itself stay enforcement of the agency decision; however, the agency may grant, or the reviewing court may order, a stay ex parte upon appropriate terms. La. R.S. 13:2575 provides municipalities with authority to enact ordinances relative to public health, housing, and environmental violations. As with the statutes above, an appeal is instituted by filing the petition within thirty days of the hearing officer's order, along with payment of such reasonable costs as may be required by the clerk of court, and security is necessary only to stay the administrative order.
The rules of statutory construction are designed to ascertain and enforce the intent of the Legislature.[1] The appropriate starting point in statutory interpretation is a consideration of the language of the statute itself.[2] When a statute is clear and unambiguous and its application does not lead to absurd consequences, the statute is applied as written.[3] Those who enact statutory provisions are presumed to act deliberately and with full knowledge of existing laws on the same subject, with awareness of court cases and well-established principles of statutory construction, and with knowledge of the effect of their acts and a purpose in view.[4] Where it is possible, courts have a duty in the interpretation of a statute to adopt a construction which harmonizes and reconciles it with other provisions dealing with the same subject matter.[5] On occasion, our *304 courts have varied from the literal language of a statute and found "room for construction" or interpretation of the statute very infrequently and only under limited circumstances.[6] One of the limited circumstances in which the court has varied from the literal language of a statute is the case in which there is an obvious omission of language, as opposed to the case in which a word or phrase, taken literally, is clear and unambiguous.[7] The courts have also varied from the literal language of statutes when such an interpretation clearly was unintended and would defeat the purpose of the statute.[8]
The applicable laws clearly hold that an appeal is instituted when the petition is filed. Although the hearing officer is permitted to assess fines and hearing costs, only the clerk of court is authorized to require costs for appeal. The laws require security be paid to the Parish in order to stay enforcement and collection. In addition, under La. R.S. 49:964, the court, not the agency, may require that a stay be granted in accordance with the local court rules pertaining to injunctive relief and the issuance of temporary restraining orders.
While the Parish argues that not requiring a bond defies common sense because the order can otherwise be executed, we find the relief granted to a defendant in these cases is a devolutive appeal unless the appropriate costs are paid prior to filing the petition. An appeal is the exercise of the right of a party to have a judgment of a trial court revised, modified, set aside, or reversed by an appellate court. La. C.C.P. art. 2082. This particular action appears to be no different from any other devolutive appeal involving a money judgment that has or may already have been dispersed to the winning party before the appellate decision has been rendered. As devolutive appeals are provided for in our Code of Civil Procedure, applying the law as written does not lead to absurd consequences, nor does such interpretation fall under the limited exceptions above.
For these reasons, the judgment granting the Motion To Dismiss is reversed, and the matter is remanded to the trial court with instructions to reinstate the Kennedy appeal.
REVERSED AND REMANDED WITH INSTRUCTIONS.
NOTES
[1] M.J. Farms, Ltd. v. Exxon Mobil Corp., 07-2371 (La.7/1/08), 998 So. 2d 16.
[2] Hunter v. Morton's Seafood Restaurant & Catering, 08-1667 (La.3/17/09), 6 So. 3d 152.
[3] Id.; La. R.S. 1:4; La. C.C. art. 9.
[4] Hunter v. Morton's Seafood Restaurant & Catering, supra.
[5] M.J. Farms, Ltd. v. Exxon Mobil Corp., supra.
[6] Louisiana Mun. Ass'n v. State, 00-0374 (La. 10/6/00), 773 So. 2d 663.
[7] Id. (referring to State v. Bennett, 610 So. 2d 120 (La. 1992)).
[8] Id. (referring to Dore v. Tugwell, 228 La. 807, 84 So. 2d 199 (1955) and Cousins v. City of New Orleans, 580 So. 2d 536 (La.App. 4th Cir.1991)). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595193/ | 954 So. 2d 624 (2005)
EX PARTE M.M.
No. 1041693.
Supreme Court of Alabama.
December 9, 2005.
Decision without opinion. Writ of cert. quashed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594654/ | 432 N.W.2d 876 (1988)
In the Interest of J.A.L., A Child.
Addie JACOBSON, Petitioner and Appellee,
v.
J.A.L., a child; D.L., Mother; and his Guardian ad Litem, LaRoy Baird, Attorney, Respondents and Appellants.
Civ. No. 880112.
Supreme Court of North Dakota.
December 6, 1988.
*877 Patricia L. Burke (argued), State's Atty., Bismarck, for petitioner and appellee.
Wheeler, Wolf, Peterson, Schmitz, McDonald & Johnson, Bismarck, for respondents and appellants, argued by William D. Schmidt; appearance by LaRoy Baird III, Guardian ad Litem.
LEVINE, Justice.
D.L. (hereinafter Donna, a pseudonym), the mother of the minor child J.A.L. (hereinafter John, a pseudonym), appeals from a juvenile court order terminating her parental rights. We affirm.
John was born on March 7, 1987 to Donna, who is mentally retarded. John has been diagnosed as having cerebral palsy. On March 23, 1987, the Burleigh County juvenile court issued an emergency temporary order placing John in the temporary custody of Burleigh County Social Services. Both mother and child were then placed in the foster home of Delores Roe on April 7, 1987. Roe was licensed for adult and child foster care and provided foster care to both Donna and John. Roe attempted to train Donna in parenting skills. She also assisted and supervised Donna in self-care and in the care of John.
Burleigh County Social Services filed a petition for termination of Donna's parental rights and a hearing was held on February 11, 1988. The juvenile court terminated parental rights after finding that John was a "deprived child" because of Donna's present inability to provide even minimal care, and that Donna's condition would not improve. Donna appealed.
Donna contends that: (1) the juvenile court erred in terminating her parental rights because the evidence was not sufficient to establish that the conditions of deprivation of the child are likely to continue; (2) a developmentally disabled person such as Donna should be afforded an opportunity to properly care for her child through "appropriate services" as required by NDCC § 25-01.2-02; and (3) the Uniform Juvenile Court Act, NDCC ch. 27-20, violates the equal protection clause and the due process clause of the United States Constitution and the Constitution of North Dakota.
Our statute governing the termination of parental rights is part of the Uniform Juvenile *878 Court Act, codified at NDCC ch. 27-20. In order for the court to terminate parental rights, the State must show by clear and convincing evidence that: (1) the child is a "deprived child"; (2) the conditions and causes of deprivation are likely to continue or will not be remedied; and (3) by reason of the continuous and irremediable conditions and causes, the child is suffering or will probably suffer serious physical, mental, moral or emotional harm. See NDCC § 27-20-44; Bernhardt v. K.Q., 423 N.W.2d 803 (N.D.1988) [citing In Interest of J.N.R., 322 N.W.2d 465, 468 (N.D.1982)]. Donna argues that the State failed to establish by clear and convincing evidence the second prerequisite for terminating parental rights, namely, that the conditions and causes of deprivation are likely to continue or will not be remedied.
In reviewing decisions of the juvenile court under NDCC ch. 27-20, we examine evidence in a manner similar to trial de novo. In Interest of C.S., 417 N.W.2d 846, 847 (N.D.1988). Our review is based upon "files, records, and minutes or transcript of the evidence of the juvenile court." NDCC § 27-20-56(1). We give appreciable weight to the juvenile court's findings and recognize the trial court's opportunity to observe the demeanor of witnesses, but we are not bound by the juvenile court's findings. See In Interest of A.M.C., 391 N.W.2d 178, 179 (N.D.1986); In Interest of J.S., 351 N.W.2d 440, 441 (N.D.1984).
The court found that the conditions of deprivation were likely to continue because of Donna's incapacity to function independently for herself or her child, and her inability to "consistently feed, bathe or discipline" John. Relying on expert testimony, the court concluded that Donna's condition would not improve. The court also found that John is a special needs child with cerebral palsy and that his needs will increase.
There is clear and convincing evidence to support the juvenile court's finding that the conditions and causes of deprivation are likely to continue. Dr. Steven Rosenberg, a clinical psychologist who testified on behalf of Donna, concluded Donna was mildly retarded, with daily living skills comparable to a seven-year-old child. Dr. Rosenberg stated that John is at risk in Donna's care alone and that "there will always be a need for supervision." He could not predict whether the need for supervision would decrease, but concluded that supervision would be needed "forever."
Two psychiatrists and a clinical psychologist who evaluated Donna each testified that Donna would never be able to parent the child without constant supervision. They concluded that although a person with an IQ of 53 may be able to learn some rudimentary parenting skills such as feeding and diapering the child, Donna has not shown any indication that she is trainable. All predicted her skills will not improve.
Delores Roe, the foster mother, testified that she believed that Donna required constant supervision to parent John and that Roe provided such constant supervision. She testified that at least daily since April 1987 she taught Donna skills such as diapering and mixing formula and Donna was not able to perform these skills adequately. Roe testified that there was no improvement in Donna's parenting skills and that John needed physical and occupational therapy at home, which Donna was unable to perform.
Prognostic evidence may be relied upon in termination proceedings. In re H., 206 N.W.2d 871, 873 (N.D.1973). Prognostic evidence must show that the parent is presently unable to supply physical and emotional care for the child, with the aid of available social agencies if necessary, and that this inability of a parent will continue for time enough to render improbable the successful assimilation of the child into a family if the parent's rights are not terminated. Interest of R.W.B., 241 N.W.2d 546, 552 (N.D.1976).
The evidence clearly and convincingly supports the finding that Donna is presently *879 unable to adequately provide physical and emotional care for John, and furnishes the basis for a reasonable prediction that Donna's parenting skills will not improve and that constant supervision will always be needed for her to parent John. See In Interest of J.S., supra.
This is not a case where supplemental services provided for a reasonable time would assist the parent in maintaining fundamental parental rights while protecting the welfare of the child. To the contrary, it is clear that constant supervision, that is, supervision at all times and on a permanent basis, is necessary to maintain Donna's parental rights. We do not believe that such extravagant assistance is required by law.
Donna contends that a developmentally disabled person is entitled to appropriate services under NDCC § 25-01.2-02 to enable her to properly care for her child, and the juvenile court erred in not applying the statute. NDCC § 25-01.2-02 provides:
"All persons with developmental disabilities have a right to appropriate treatment, services, and habilitation for those disabilities. Treatment, services, and habilitation for developmentally disabled persons shall be provided in the least restrictive appropriate setting."
The essence of Donna's argument is that "appropriate services" means constant supervision in a foster home for both Donna and her child if that is what it takes to enable her to act as a parent. We agree with the juvenile court that providing foster care for both Donna and John in order to enable Donna to maintain her parental rights is an extreme not required by the law. Even if chapter 25-01.2 does apply to parental termination proceedings, an issue we need not decide, the chapter does not entitle Donna to services that consist of constant supervision in order for her to parent the child.
An amicus curiae brief filed with this court by the North Dakota Protection and Advocacy Project raises the issue of the constitutionality of the Uniform Juvenile Court Act, codified at NDCC ch. 27-20. Donna relies on the brief of the amicus. We will not consider an issue raised by an amicus when that issue was not raised in the lower court. See Szarkowski v. Reliance Ins. Co., 404 N.W.2d 502, 503 (N.D.1987). Cf. State v. Slapnicka, 376 N.W.2d 33, 36 (N.D.1985).
Accordingly, we affirm.
ERICKSTAD, C.J., and VANDE WALLE, GIERKE and MESCHKE, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1922100/ | 413 B.R. 191 (2008)
In re Brian K. HOFFMAN, Debtor.
Roberta DeAngelis, Acting United States Trustee, Plaintiff,
v.
Brian K. Hoffman, Defendant.
No. 1:07-03771MDF.
United States Bankruptcy Court, M.D. Pennsylvania.
September 22, 2008.
*192 Keith B. DeArmond, DeArmond and Associates, York, PA, for Debtor.
OPINION
MARY D. FRANCE, Bankruptcy Judge.
This matter is before the Court on the Motion of the United States Trustee ("UST") to dismiss the within case under 11 U.S.C. § 707(b)(3) of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8, 119 Stat. 23 ("BAPCPA"). For the reasons that follow, I will grant the motion.
*193 Factual Findings and Procedural History
Brian K. Hoffman ("Debtor") filed a chapter 7 petition on November 28, 2007. He is thirty-three (33), single, has no dependents, and lives with his girlfriend in a home that he owns in Hanover, Pennsylvania. Debtor and his former wife purchased the home in October 2003 for approximately $232,000.00, and it is valued on Debtor's schedules at $285,000.00. Debtor obtained sole title to the home as part of the property settlement in connection with his divorce. On the date of the filing of the petition, the residence was subject to first and second mortgages with an aggregate balance due of $296,708.00. The monthly payments on the two mortgages total $2,272.00. When real estate taxes are included, Debtor has a total monthly housing expense of $2,338.00. Including his housing expenses, as reported on his amended schedule "J," Debtor's current monthly expenses are $4,904.90. Therefore, Debtor's housing expenses accounts for 48% of his monthly budget.
Debtor is employed as an "Auto Technician" in Linthicum, Maryland. His monthly net income from his employment is $4,982.29.[1] In addition to his earned income, Debtor's schedule "I" showed additional monthly income of $271.08 from tax over-withholdings and $78.30 from Debtor's live-in girlfriend.[2] These two other amounts were added to Debtor's base monthly income of $4,982.29 to calculate the total net monthly income of $5,331.67 for Debtor's household.
The Court notes that the evidence presented at the hearing regarding Debtor's earnings was less than crystalline. Debtor received a raise less than two weeks before he filed his petition that was not included in Debtor's income calculation, but was considered by the UST when the Motion to Dismiss was filed. Although in the pleadings the UST advanced a base monthly income of $4,982.29, at various points in the hearing, the UST stated that the base monthly income was $4,979.00 (See, e.g., N.T. 25).
In July 2006, Debtor was severely injured in a motorcycle accident, suffering fractures to his back, ribs, legs and hips. As a result, he was unable to work for approximately three (3) months. Debtor was uninsured at the time of the accident. All but $7,600.00 of the $139,638.09 in unsecured debt listed on Debtor's schedules was incurred for medical expenses related to treatment Debtor received after the motorcycle accident.
On the date of his petition, Debtor owned certain Snap-on tools and two toolboxes, which he testified were worth approximately $15,000.00. Neither the tools nor the toolboxes were reported on Debtor's schedules. Debtor testified that these items were omitted from his schedules because they were used in his work and were not household goods. After filing his case Debtor sold one of the toolboxes with an estimated value of $4,000.00 for $1,500.00.
On March 21, 2008, the UST filed the motion sub judice to dismiss the case under *194 11 U.S.C. § 707(b)(1) and (3). A hearing was held on the motion on April 14, 2008, and the matter is ready for decision.[3]
Discussion
Section 707(b)(1) of BAPCPA provides that "the court ... may dismiss a [chapter 7] case ... if it finds that the granting of relief would be an abuse of the provisions of this chapter." 11 U.S.C. § 707(b)(1). When deciding whether granting relief would be abuse of the Bankruptcy Code, a court must consider: (1) whether the case was filed in bad faith or (2) whether "the totality of the circumstances ... of the debtor's financial situation demonstrates abuse." 11 U.S.C. § 707(b)(3).
Prior to the enactment of BAPCPA, when a motion to dismiss under § 707(b) was filed, the burden of proof was on the UST to demonstrate substantial abuse by a preponderance of the evidence. In re Miller, 335 B.R. 335 (Bankr.E.D.Pa. 2005). Not only was the UST required to prove that the abuse was substantial, there also was a statutory presumption in favor of granting relief to a chapter 7 debtor. As amended by BAPCPA, the Bankruptcy Code no longer incorporates a presumption in favor of granting relief and abuse, if found, no longer is required to be substantial. 11 U.S.C. § 707(b)(1). Nonetheless, the burden remains with the UST to prove that the Debtor's filing constitutes an abuse of the bankruptcy process. See In re Colgate, 370 B.R. 50, 57 (Bankr. E.D.N.Y.2007).
Before the passage of BAPCPA, once the UST demonstrated that a debtor had the ability to make a significant payment on his unsecured debt, the burden shifted to the debtor to demonstrate that granting relief would not be a substantial abuse of the bankruptcy system. I concur in Judge Sigmund's observation that there is nothing in the statute or its legislative history that suggests that this shifting in the burden has been altered. In re Lenton, 358 B.R. 651, 664-65 (Bankr.E.D.Pa. 2006). Although the Bankruptcy Courts are not in agreement as to whether a debtor's ability to pay alone may justify dismissal under § 707(b)(3), there is overwhelming support for consideration of this factor within an analysis of the totality of the circumstances. See In re Zaporski, 366 B.R. 758, 771 (Bankr.E.D.Mich.2007) (§ 707(b)(3)(B) does not preclude consideration of ability to pay in totality of circumstance analysis); In re dePellegrini, 365 B.R. 830, 832-33 (Bankr.S.D.Ohio 2007) (ability to pay may be considered but does not dictate dismissal if other factors weigh against it); In re Pfiefer, 365 B.R. 187, 193 (Bankr.D.Mont.2007) (debtor's ability to pay is important factor under § 707(b)(3)); In re Henebury, 361 B.R. 595, 607 (Bankr. S.D.Fla.2007) (ability to pay alone is sufficient to warrant dismissal); In re McUne, 358 B.R. 397 (Bankr.D.Or.2006) (debtor's ability to pay a portion of unsecured debts may be considered as part of the totality of the circumstances of debtor's financial situation); In re Paret, 347 B.R. 12 (Bankr. D.Del.2006) (totality of circumstances test includes consideration of ability to pay); In re Pak, 343 B.R. 239, 244 (Bankr. N.D.Cal.2006) (debtor's ability to repay debts may be considered as part of the totality of circumstances of his financial situation).
*195 In a pre-BAPCPA decision rendered by this Court, In re Miller, 302 B.R. 495 (Bankr.M.D.Pa.2003), I adopted the "hybrid approach" to analyze the totality of the circumstances under § 707(b) used by the Sixth Circuit in In re Krohn, 886 F.2d 123, 126 (6th Cir.1989). In Krohn, the Sixth Circuit considered a variety of factors in its analysis, but it also held that a case may be dismissed solely because the debtor has the means to repay his debts, although dismissal is not mandated on this factor alone. In Miller, I used the Krohn test supplemented with additional factors considered by the Fourth Circuit in In re Green, 934 F.2d 568 (4th Cir. 1991). The factors applied in Miller included: (1) whether the bankruptcy petition was filed because of sudden illness, calamity, disability, or unemployment; (2) whether the debtor made consumer purchases far in excess of his ability to repay; (3) whether the debtor's proposed family budget is excessive or unreasonable; (4) whether the debtor's schedules and statements of current income and expenditures reasonably and accurately reflect his true financial condition; (5) whether the bankruptcy petition was filed in bad faith; (6) whether the debtor had engaged in eve of bankruptcy purchases; (7) whether the debtor enjoys a stable source of future income; (8) whether he is eligible for adjustment of his debts through chapter 13 of the Bankruptcy Code; (9) whether there are state remedies with the potential to ease his financial predicament; (10) the degree of relief obtainable through private negotiations; and (11) whether the debtor's expenses can be reduced significantly without depriving him of adequate food, clothing, shelter and other necessities. In re Miller, 302 B.R. at 499.
In Miller, I indicated that although I would examine the totality of the circumstances, an ability to repay debt need not be accompanied by proof of misconduct, impropriety or bad faith for the filing of the petition to constitute substantial abuse. Id. Although Miller was decided before the enactment of BAPCPA, this approach is consistent with the specific statutory provisions of § 707(b)(3), which provide that bad faith and the totality of the circumstances are separate, distinct bases for a finding of abuse. Therefore, when considered within the totality of the circumstances, a case may be dismissed on the sole basis that a debtor has the means to repay his debts, although dismissal is not mandated on this factor alone.[4] Accordingly, I will apply the factors I considered in Miller to the evidence presented in the within case.
a. Factors that do not support a finding of abuse
In the two years prior to the filing of his bankruptcy petition, Debtor experienced two significant financial setbacks. He was divorced, and he was injured in a serious motor vehicle accident. The occurrence of only one of these events often is the precipitating cause for a bankruptcy filing. Thus, Debtor's divorce and injury were calamities that justified Debtor seeking relief under the Bankruptcy Code. Also, Debtor did not engage in practices prior to filing for bankruptcy that demonstrate bad faith. No evidence was presented *196 that Debtor made consumer purchases far in excess of his ability to repay, that he engaged in eve-of-bankruptcy purchases and, other than his mortgage payments, that his proposed budget was excessive or unreasonable.
b. Factors that support a finding of abuse
Debtor's schedules and statements of current income and expenditures, while not woefully deficient, failed to reflect his true financial condition. The UST established through the admission of Debtor's payment advice for the period ending February 8, 2008 that Debtor's monthly income was $5,331.67 ($4,982.29 in base income plus additional income as reported on schedule "I"). Debtor, however, was unable to explain why the income was only reported at $4,973.89. Other deficiencies in the schedules were present as well. Although not directly related to the issue of disposable income, Debtor omitted from his schedules tools and two toolboxes that he used in connection with his work.
The Court also considers that Debtor is eligible for adjustment of his debts through chapter 13. He enjoys a stable and relatively lucrative source of future income. The UST has established that Debtor's post petition income exceeds his monthly expenses by at least $426.77 ($5,331.67-$4,904.90). Thus, Debtor is capable of funding a chapter 13 plan.[5]
The UST argues, however, that Debtor could provide an even greater return to creditors if his excessive housing costs were reduced. In support of this position, the UST points to the standard housing allowance for York County, Pennsylvania promulgated by the Internal Revenue Service ("IRS"), which is used by the IRS when compromising an individual's tax liability and which has been grafted onto the Bankruptcy Code through the means test calculation set forth in § 707(b)(2). The standard monthly housing allowance for a single-person household in York County is $983.00. Therefore, if this standard were applicable, Debtor's expenses could be reduced significantly. The UST does not suggest that this standard is binding on the Court, but that it should be used as a reference when determining whether Debtor's expenses are reasonable.
The use of IRS standards in the § 707(b)(3) context has been addressed recently by several bankruptcy courts. See In re Talley, 389 B.R. 741 (Bankr. W.D.Wash.2008) (abuse found where housing expense three times the IRS standard); In re Kaminski, 387 B.R. 190 (Bankr.N.D.Ohio 2008) (abuse found where housing expense more than twice the IRS standard); but see In re Seeburger, 392 B.R. 735 (Bankr.N.D.Ohio 2008) (IRS standards of minimal value in determining reasonableness of mortgage expense). In Kaminski, the debtors, a married couple with two children, had net household income of $6,058.35 and monthly expenses of $6,297.19. Their monthly housing expense, comprising a mortgage payment, taxes and insurance, was $1,856.16. The relevant IRS housing expense standard for the debtors was $841.00 per month. While finding that it was not bound by the IRS standards, the bankruptcy court determined that the standards were useful as a guideline when assessing whether a debtor's housing expense was reasonable and necessary. The Court observed:
*197 [T]he goal of the IRS housing allowance generally aligns itself with the Court's aim in a § 707(b)(3) analysis: to ensure that a debtor, while afforded with the means by which to obtain adequate shelter, is not devoting excessive financial resources toward their housing to the detriment of the debtor's creditors.... [T]herefore, when a debtor's housing allocation significantly exceeds the IRS allowance, a viable justification for the necessity and reasonableness of that housing expense should be offered.
In re Kaminski, 387 B.R. at 196 (citation omitted). See also In re Nissen, 2007 WL 2915648, *3 (Bankr.D.Neb. Aug. 21, 2007) (§ 707(b) motions granted in part because debtors could substantially reduce housing expense without being deprived of adequate housing or other necessities).[6] In Kaminski the court determined that the housing expense was excessive considering the debtors' failure to articulate any special circumstances to justify the expense.
I find Kaminski's observation to be persuasive. While this Court is loathe to impose subjective personal standards on individual debtor's choices (see Miller, 302 B.R. at 500), it is not unreasonable to expect a debtor to provide a reasonable explanation for choices that detrimentally impact the creditors whose debts will be discharged. Such an expectation is in keeping with the shifting burden of proof referenced in Lenton, supra. Debtor's only justification for retaining his home was that he was "proud of it." Debtor's rationale is insufficient to overcome the evidence presented that he is dedicating an unreasonable amount of his income to maintain this investment to the detriment of his creditors. This is especially true when considering that Debtor has no equity in the property.
Thus, while Debtor is not required to reduce his housing expense to the IRS standard of $983.00 a month, Debtor's current monthly housing expense of $2,338.00 is excessive. Although I decline to dictate a precise amount that the Court would find to be reasonable, if Debtor spent even twice the IRS standard, he would have approximately $800.00 a month to devote to repaying his creditors. Accordingly, based upon a consideration of the totality of the circumstances, I find that the filing of this case constitutes an abuse of chapter 7. An order will be entered dismissing the case unless Debtor elects to convert the case to chapter 13 as set forth in the Order issued in connection with this Opinion.[7]
NOTES
[1] Monthly net income was calculated based on a pay advice introduced into evidence at the hearing showing weekly income of $1,149.76. When Debtor's weekly net income is multiplied by 52 it shows that he has an annual income of $59,787.52. By then dividing the annual income by twelve, a "base" monthly income of $4,982.29 is demonstrated.
[2] Debtor testified that his girlfriend did not contribute to household expenses, but this representation was contradicted by his representation on schedule "I" that she contributed $78.30 to the support of the household.
[3] I have jurisdiction to hear this matter pursuant to 28 U.S.C. §§ 157 and 1334. This matter is core pursuant to 28 U.S.C. § 157(b)(2)(A) and (J). This Memorandum Opinion and Order constitutes findings of fact and conclusions of law made pursuant to Federal Rule of Bankruptcy Procedure ("FRBP") 7052, which is applicable to contested matters pursuant to FRBP 9014.
[4] At least one bankruptcy decision issued after the passage of BAPCPA, In re Nockerts, supra, has held that because of the addition of means testing for abuse under 11 U.S.C. § 707(b)(2), something in addition to the ability to pay must be present to warrant dismissal under the totality of the circumstances analysis under § 707(b)(1) and (3). I disagree. Simply because Congress established financial thresholds at which abuse is to be presumed under § 707(b)(2) does not preclude a court from determining that a debtor's ability to pay demands dismissal of a case under § 707(b)(3)(B).
[5] For purposes of estimating the total plan payout, payments of $400.00 for sixty (60) months would yield approximately $24,000.00 (less the Trustee's commission) for unsecured creditors. A payout of $24,000 on unsecured debt of almost $140,000.00, however, would produce less than a 17% return to unsecured creditors.
[6] But see In re Beitzel, 333 B.R. 84 (Bankr. M.D.N.C.2005) (Chapter 7 debtor's housing expense was reasonable, for purposes of determining whether his case should be dismissed for "substantial abuse" of the Bankruptcy Code, where debtor only used 36% of his monthly income to pay his mortgages, size of house, 2,000 square feet, was not large for a family of five, it was unlikely that debtor would be able to find suitable housing for his family that would cost significantly less than his current home, debtor and his family had lived in the house for over four years, and the disruption caused by moving would have constituted an undue hardship on them). None of the factors present in Beitzel are relevant in the within case.
[7] The UST has advanced the argument that Debtor's failure to obtain health insurance when it was offered by his employer, which, presumably, would have satisfied many of his unsecured claims, constituted evidence of abuse under § 707(b)(3). While I apprehend the UST's argument, I am disinclined to find that a debtor may be rendered ineligible for chapter 7 relief because his actions proved foolhardy even catastrophically so in retrospect. The bankruptcy's safety net was created to enable persons to rehabilitate themselves not only after they suffer misfortune not of their own making, but also after they make unwise choices. I cannot perceive how the denial of relief under these circumstances would serve either of bankruptcy's purposes a fresh start for the honest, but unfortunate (albeit, unwise) debtor and the equal and fair treatment of creditors. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1922105/ | 413 B.R. 215 (2009)
In re Ray F. GARMAN, III, Debtor.
No. 05-37483BF.
United States Bankruptcy Court, E.D. Pennsylvania.
July 6, 2009.
*216 Walter Weir, Jr., Weir and Partners LLP, Philadelphia, PA, for Debtor.
MEMORANDUM
BRUCE FOX, Bankruptcy Judge.
Presently before me is the motion of the chapter 7 trustee, Gary F. Seitz, Esq., to enforce a settlement agreement entered into in March 2007 with, inter alia, Ms. Mia Mayer. Upon such enforcement, the trustee seeks to "preclude" Ms. Mayer from receiving any distribution on her asserted priority claim and to strike Ms. Mayer's objection to the trustee's pending final application for compensation under 11 U.S.C. §§ 326 and 330. The trustee's enforcement motion is "joined" by Ms. Waverly Deans, the other party to the March 2007 settlement agreement.[1] The trustee's motion also has the support of an unsecured creditor, Weir & Partners, LLP, as well as the debtor.
Ms. Mayer opposes the trustee's present motion. She contends that she is in full compliance with the terms of the March 2007 settlement, in that her assertion of a priority claim as well as her objection to the trustee's compensation request do not contradict its express terms. Therefore, she maintains that the trustee's enforcement motion must be denied.
An evidentiary hearing was held, during which the parties offered testimony regarding the negotiations surrounding the settlement agreement to the extent its terms are ambiguous.[2] They also agreed that I could take judicial notice of my decision approving the March 2007 settlement agreement, docket entries, certain orders entered in this chapter 7 case, and the proof of claim filed by Ms. Mayer. I shall also take judicial notice of the proof of claim filed by Ms. Deans.
I.
A.
For purposes of this contested matter, the following facts were proven, as detailed in narrative format.
Mr. Garman filed a voluntary petition in bankruptcy under chapter 7 on October 14, 2005. At the time of his bankruptcy filing, he was involved in a long-pending divorce proceeding in state court concerning his former spouse, Ms. Mia Mayer (a/k/a Mia Mayer Garman). Ex. T-1, ¶ 2. In connection with that divorce litigation, Ms. Mayer asserted, inter alia, that Mr. Garman misused her individual as well as their marital *217 property for his own purposes, and sought recovery against him for this misuse. The state court agreed, awarding Ms. Mayer certain property titled in the name of Mr. Garman. Ex. T-1, ¶ 3.
While that divorce proceeding was pending, Mr. Garman entered into a relationship with Ms. Waverly Deans. Ex. T-1, ¶ 6. During the divorce proceeding, Ms. Mayer learned that Ms. Deans held title to a certain asset, and Ms. Mayer contended that this asset should be transferred to her. Ex. T-1, ¶¶ 4, 5, and 7. The Pennsylvania Supreme Court vacated various trial court orders directed against Ms. Deans, based upon lack of service and due process. See Mayer v. Garman, 590 Pa. 268, 912 A.2d 762 (2006). Thereafter, in August 2006, Ms. Mayer filed a civil action in state court against Mr. Garman and Ms. Deans. This lawsuit sought to recover the proceeds of sale of that asset. Ex. T-1, ¶ 12.
The August 2006 lawsuit by Ms. Mayer against Mr. Garman and Ms. Deans was removed to this court under 28 U.S.C. § 1452(a) and docketed at Adv. No. 06-0608. Ex. T-1, ¶ 15. The chapter 7 trustee was then added as a plaintiff in that litigation. Ex. T1, ¶¶ 13-14. This adversary proceeding concerned the disputed ownership of the proceeds of the sale by Ms. Deans in April 2006 of an interest in PMA Capital Management Ltd., which interest was held in the name of Ms. Deans. Ex. T-1, ¶ 8. Upon the sale of this interest, Ms. Deans had received approximately $7.4 million, of which about $7 million in cash or cash equivalents remained in her possession or control as of March 2007. Ex. T1, ¶¶ 8, 15.
In response to Ms. Mayer's complaint, Ms. Deans asserted that the PMA sale proceeds belonged to her. Ms. Mayer countered that the PMA sale proceeds should be considered the property of Mr. Garman that had been titled to Ms. Deans improperly, and, as such, had been awarded to Ms. Mayer by the state court. The bankruptcy trustee took the position that the PMA sale proceeds actually belonged to Mr. Garman, had not been awarded to Ms. Mayer by the state court, and so were property of the bankruptcy estate and thus available for distribution in this chapter 7 case.
Although Ms. Mayer claimed ownership of the PMA sale proceeds, she also asserted that she was a creditor of Mr. Garman. Her attorney signed and filed a proof of claim on her behalf, dated March 7, 2006, and docketed on the claims register as claim # 5. In this claim, her attorney averred that Ms. Mayer held an unsecured claim in the amount of $500,000, a secured claim in the amount of $15,300,000 and a priority claim in the amount of $15,300,000. The total amount claimed as owing was, however, $15,800,000.
These claims were allegedly based upon "Domestic Support Obligations" dated July 23, 2003 and June 8, 2004, and the proof of claim checked off a priority obligation under section 507(a)(1)(A) or (B). Ms. Mayer's proof of claim also included a cramped handwritten statement that appears to read: "All property owned in debtor's name belongs to creditor Mia Mayer. To the extent the debtor's property is not owned by creditor Mayer, creditor Mayer has scheduled priority interest in the property." No party in interest thereafter objected to this claim; nor has it been withdrawn.
The chapter 7 trustee conducted a meeting of creditors under section 341. Ms. Mayer, through her counsel, was present at that creditors' meeting and provided the trustee with information concerning the possible existence of non-exempt assets. Thereafter, the trustee filed an application *218 seeking court approval to engage bankruptcy counsel in September 2006.
The bankruptcy trustee sought to engage counsel on a contingency basis "of forty percent (40%) of net recovery, after reimbursement of necessary expenses." Docket entry # 56. After comment from Ms. Mayer's counsel at a status hearing, an order was entered without opposition permitting the trustee to engage the law firm of Fox Rothschild LLP "to be compensated on a contingency fee of a floor amount of thirty percent (30%) and a maximum amount of forty percent (40%) of net recovery of funds collected, after reimbursement of necessary expenses." See docket entry #61.
After the trustee engaged bankruptcy counsel, he and Ms. Mayer sought to restrict Ms. Deans' use of the remaining PMA sale proceeds in her possession. Various injunction hearings were held on that issue. Although Ms. Mayer and the trustee were both seeking restrictions against Ms. Deans, they were not in accord regarding the rightful ownership of the PMA sale proceeds.
B.
Against this backdrop, the trustee, Ms. Mayer and Ms. Deans entered into a settlement agreement to resolve their ownership dispute over the PMA sale proceeds held by Ms. Deans. That agreement, exhibit T-1, was approved by this court on March 27, 2007, for reasons stated in a lengthy memorandum.
After recitation of certain background facts, the settlement agreement contained the following relevant provisions, all found after recital paragraph 17:
a. Immediately upon approval by the Bankruptcy Court of this Settlement Agreement, Deans shall cause all remaining Proceeds [i.e., approximately $7 million] to be wired to the Trustee (the "Settlement Payment") to be distributed as set forth herein.
b. Immediately upon the Order approving this Settlement Agreement becoming a final order, and upon the funds clearing the Trustee's account, the Trustee shall distribute $1,125,000.00 to Deans.. . .
c. Immediately upon the Order approving this Settlement Agreement becoming a final order, and upon the funds clearing the Trustee's account, the Trustee shall distribute $3,875,000,00 [sic] to Mayer as an equitable distribution pursuant to paragraph 5 of the June 2004 [state court] Order.
d. The Trustee shall prepare and file all tax returns required to be filed with respect to the liquidation of the PMA asset and will utilize the Settlement Payment to pay any and all taxes due with respect to the liquidation of the PMA asset, estimated to be $969,000.00.
e. Fox Rothschild LLP ("Fox"), counsel for the Debtor [sic], shall be entitled to receive a fee equal to 30-40% of the Settlement Payment pursuant to the provisions of the Employment Order dated October 18, 2006. It is agreed, however, that Fox shall accept as a fee an amount not to exceed $500,000.00.
f. The Trustee shall be entitled to his statutory commission but has agreed that in no event will he receive more than $175,000.00 commission related to the recovery of the Settlement Payment.
g. The limits on the Trustee's counsel fees and on the Trustee's commissions as set forth herein shall apply only to the recovery of the Settlement Payment and not to any other recovery of assets in this bankruptcy case.
* * *
i. All remaining funds shall be distributed by the Trustee in accordance with *219 the distribution scheme set forth in the Bankruptcy Code. For the purpose of distributions to unsecured general creditors, Mayer shall be allowed a general unsecured claim against the Debtor's estate in the amount of $7,500,000.00 on account of her prepetition claim and Deans shall be entitled to a assert an unsecured prepetition claim of $2,500,00.00. The Trustee agrees not to object to the allowance of the proofs of claim of Deans and Mayer. Both Deans and Mayer shall be entitled to participate pro rata in any distribution to unsecured creditors of the Debtor's estate, to the extent of their allowed general unsecured claims as set forth herein, after holders of other Allowed Unsecured Claims receive a distribution of ten (10%) per cent. The amount of the allowed claims set forth herein shall apply only to the distribution of the remaining portion of the Settlement Payment and not to any other assets that may be recovered by the Trustee.
* * *
q. This Settlement Agreement contains the entire agreement between [sic] the parties and may only be amended in writing executed by both [sic] parties hereto and approved by the Bankruptcy Court.
* * *
u. This Settlement Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing the document to be drafted. Each party warrants that it has been represented and advised by counsel or has had full opportunity to be represented and advised by counsel with respect to this Settlement Agreement and all matters covered by it.
v. This Settlement Agreement shall be interpreted and construed in accordance with the provisions of the Bankruptcy Code and, where not inconsistent, the laws of the Commonwealth of Pennsylvania, without regard to the Commonwealth's rules regarding conflict of laws.
Ex. T-1.
After court approval of this settlement agreement, Ms. Deans transferred the roughly $7 million settlement payment to the trustee as required by paragraph (a). The trustee paid approximately $1 million tax liability on the sale proceeds and then distributed $1,125,000 to Ms. Deans and $3,875,000 to Ms. Mayer. Ms. Deans, through her attorney, also filed an unsecured proof of claim in the amount of $2,500,000 dated April 16, 2007 and docketed as claim # 6. This claim states that it is based upon the March 27, 2007 settlement agreement.
The docket entries also disclose that in July 2007, trustee's counsel was awarded $500,000 in attorneys' fees.[3] Docket entry # 98. The chapter 7 trustee also sought interim compensation in May 2007, which request was granted without opposition in July 2007. The trustee was allowed an interim commission in the amount of $90,115.00 and reimbursement of expenses totaling $122.48. Docket entry # 99. After payment of certain other administrative expenses, the trustee has about $368,000 remaining for distribution. See Formerly Proposed Final Report, exhibit C.
*220 C.
As expressed in the settlement agreement itself, Ms. Mayer, Ms. Deans and the bankruptcy trustee were all represented by counsel who negotiated its terms.[4] Various discussions took place and draft versions of the agreement were circulated among counsel.
The parties do not dispute that an initial settlement discussion considered payments to Ms. Mayer of more than $4 million and to Ms. Deans of more than $1.2 million from the PMA sale proceeds. Upon hearing testimony about those negotiations, I find that trustee's counsel was insistent that some portion of the settlement proceeds be paid to general unsecured creditors as well as administrative creditors. Ms. Dean's counsel concurred in that position, and I also find that Ms. Mayer's counsel was well aware of this intention. Various provisions of the settlement agreement, including the distribution figures to Ms. Deans and Ms. Mayer, were intended by the trustee and Ms. Deans to reflect those concerns.
Similarly, the provisions of settlement paragraphs (e) and (f), quoted earlier, specifying payments to the trustee and trustee's counsel, were also negotiated among the parties and contained ceilings that, in part, were designed to insure some distribution to general unsecured creditors. Furthermore, the subordination provisions of paragraph (i) also reflected that intention. The allowed unsecured claim amounts in favor of Ms. Deans and Ms. Mayer found in paragraph (i) were the product of this overall compromise.
Ms. Mayer's counsel acknowledges that he knew at the time the settlement was reached that the trustee and his counsel believed that the entire PMA settlement proceeds would be treated as though they were property of the bankruptcy estate. Although Ms. Mayer's counsel disagreed, he never expressed that disagreement to the other attorneys.
I further find that Ms. Mayer did not raise during settlement negotiations the $15,300,000 priority component asserted in her proof of claim. That priority claim was never discussed by any of the parties to the agreement. Nor was there any discussion that Ms. Mayer was waiving her priority claim.
Finally, I find that Ms. Mayer believed and, through her attorney, raised to the trustee and Ms. Deans her expectation that the trustee would recover substantial additional assets from Mr. Garman that would be distributed to creditors. Unfortunately for Mr. Garman's creditors, the trustee only recovered a very modest amount in addition to the disputed PMA sale proceeds. See docket entries # # 44, 49 (sale of vehicles).
II.
The instant dispute arises from the trustee's proposed report of final distribution to creditors and his application for final compensation in the amount of $175,000 (less the interim allowance he already received). This proposed final distribution of approximately $368,000 contained no provision for payment to Ms. Mayer of any priority claim.[5]
Ms. Mayer objected to the proposed final distribution as failing to provide any payment to her as a priority creditor, as required by section 726(a)(1). She also *221 objected to the trustee's final fee application and thus to the proposed distribution to the trustee of an additional $86,476.90 in compensation. As to the latter, Ms. Mayer asserted that the trustee is wrongfully including as estate property the sums distributed by him to Ms. Mayer and Ms. Deans under the March 2007 settlement agreement. She considers those payments as representing "property returned to its rightful owner(s) that was not property of the estate." Thus, in Ms. Mayer's opinion, the trustee is seeking compensation beyond the ceiling established by section 326(a) of the Bankruptcy Code. In addition, she maintains that the amount sought by the trustee is not fair and reasonable, as required by section 330(a).
For reasons unrelated to Ms. Mayer's objections, the trustee withdrew his proposed final report, but not his application for final compensation. His present enforcement motion, however, does not seek any final award of compensation. Instead, he seeks an interpretation of the settlement agreement: (1) that Ms. Mayer is not entitled to payment on her priority claim from the funds remaining in his possession; and (2) that Ms. Mayer is not entitled to object to the trustee's final application for compensation. Both contentions are derived from the trustee's construction of the March 2007 settlement agreement. Ms. Deans, the debtor and Weir & Partners, LLP support the trustee's position on both issues.
Although the trustee has withdrawn his request to approve his final distribution report, I conclude that the instant contested matter is ripe for adjudication on these issues. First, the trustee's final compensation request and Ms. Mayer's objection thereto have not been withdrawn. Ms. Mayer's right to raise her objection requires an interpretation of the settlement agreement. Second, the trustee's instant motion, insofar as prospective final distribution is concerned, may be analogized to a request for a declaratory judgment. Such a request is considered ripe based upon "(1) the adversity of the parties' interests, (2) the conclusiveness of the judgment, and (3) the utility of the judgment." Pic-A-State Pa., Inc. v. Reno, 76 F.3d 1294, 1298 (3d Cir.1996); see, e.g., NE Hub Partners, L.P. v. CNG Transmission Corp., 239 F.3d 333, 342 (3d Cir.2001).[6]
Here, resolution of this dispute would be conclusive as to both the right of Ms. Mayer to object to the trustee's final application for compensation and to as certain aspects of his intended final distribution report. Moreover, the evidence is fully developed and involves no contingent or uncertain events. Its resolution will greatly assist in the final administration of this long-standing chapter 7 case, with creditors receiving the distributions to which they are entitled. Thus, there is a substantial controversy among parties having adverse legal interests of sufficient immediacy and reality to warrant the consideration of a declaratory judgment. See Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S. Ct. 510, 85 L. Ed. 826 (1941); RLI Ins. Co. v. Regulus Group, LLC, 2005 WL 1388630 (E.D.Pa. 2005).
*222 III.
Consistent with the terms of the settlement agreement, the parties acknowledge that Pennsylvania law primarily governs the resolution of their dispute. I turn to contract interpretation principles as enunciated by Pennsylvania courts (and followed when relevant by federal courts), as settlement agreements are considered to be contracts. See, e.g., Consolidated Rail Corp. v. Portlight, Inc., 188 F.3d 93, 96 (3d Cir.1999); Mastroni-Mucker v. Allstate Ins. Co., 976 A.2d 510, 2009 WL 1497107, at *7 (Pa.Super.2009) ("The enforceability of settlement agreements is determined according to principles of contract law."); Thompson v. T.J. Whipple Const. Co., 2009 WL 807467, at *3 (Pa.Super.2009) ("Settlement agreements `are regarded as contracts and must be considered pursuant to general rules of contract interpretation.'") (quoting Friia v. Friia, 780 A.2d 664, 668 (Pa.Super.2001)).
The basic principles of contract interpretation under Pennsylvania law are well-understood.
"The fundamental rule in interpreting the meaning of a contract is to ascertain and give effect to the intent of the contracting parties." Murphy v. Duquesne Univ. of the Holy Ghost, 565 Pa. 571, 590-91, 777 A.2d 418 (2001), see also Robert F. Felte, Inc. v. White, 451 Pa. 137, 143, 302 A.2d 347 (1973). The intent of the parties is to be ascertained from the document itself when the terms are clear and unambiguous. Steuart v. McChesney, 498 Pa. 45, 48-49, 444 A.2d 659 (1982). However, a contract is ambiguous if it is capable of being understood in more than one sense. Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 201, 519 A.2d 385 (1986); see also Kripp v. Kripp, 578 Pa. 82, 91, 849 A.2d 1159 (2004). A court can find a contract ambiguous if a provision "could arguably be interpreted" as either party urges. Hutchison, 513 Pa. at 201, 519 A.2d 385. A contractual term is not ambiguous, however, if the term can only mean one thing. Kripp, 578 Pa. at 91, 849 A.2d 1159.
As the Third Circuit Court of Appeals has explained:
Pennsylvania courts apply the "plain meaning rule" of interpretation of contracts which assumes that the intent of the parties to an instrument is "embodied in the writing itself, and when the words are clear and unambiguous the intent is to be discovered only from the express language of the agreement." County of Dauphin v. Fidelity & Deposit Co., 770 F. Supp. 248, 251 (M.D.Pa.) (quotation omitted), aff'd, 937 F.2d 596 (3d Cir.1991). Nevertheless, a determination whether the language of an agreement is unambiguous may not be possible without examining the context in which the agreement arose. Steuart v. McChesney, 498 Pa. 45, 444 A.2d 659, 662 (1982). Thus, a court is not always confined to the four corners of the written document in determining whether ambiguity exists. Mellon, 619 F.2d at 1011. Rather, the judge must "consider the words of the contract, the alternative meaning suggested by counsel, and the nature of the objective evidence to be offered in support of that meaning." Id.
Hullett v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d Cir.1994); see also Friia v. Friia, 780 A.2d 664, 668 (Pa.Super.2001):
"The fundamental rule in construing a contract is to ascertain and give effect to the intention of the parties." Amerikohl Mining, 727 A.2d at 1182. Thus, "the court will adopt an interpretation which under all circumstances ascribes the most reasonable, probable, and natural conduct of the parties, bearing in mind the objects manifestly to be accomplished." Charles D. Stein Revocable *223 Trust v. General Felt Industries, Inc., 749 A.2d 978, 980 (Pa.Super.2000). "If the language appearing in the written agreement is clear and unambiguous, the parties' intent must be discerned solely from the plain meaning of the words used." Id. Contractual language is ambiguous only if it is "reasonably susceptible of different constructions and capable of being understood in more than one sense." Purdy v. Purdy, 715 A.2d 473, 475 (Pa.Super.1998). "A contract is not rendered ambiguous by the mere fact that the parties do not agree upon its proper construction." Riccio v. American Republic Ins. Co., 453 Pa.Super. 364, 683 A.2d 1226, 1233 (1996). Moreover, the court may not ignore otherwise clear language merely because one of the parties did not anticipate related complications prior to performance. See In re St. Mary Hospital, 157 B.R. 235, 238 (E.D.Pa.1993).
In addition, "[c]ontracts are best read as a whole and `clauses seemingly in conflict [should be] construed, if possible, as consistent with one another. Terms in one section of the contract should not be interpreted in a manner which nullifies other terms.'" Universal Underwriters Ins. Co. v. A. Richard Kacin, Inc., 916 A.2d 686, 692 (Pa.Super.2007) (quoting AK Steel Corp. v. Viacom, Inc., 835 A.2d 820, 824 (Pa.Super.2003) (internal quotation marks and citation omitted)). The Third Circuit Court of Appeals observed in this regard:
In Pennsylvania, [c]ontract interpretation is a question of law that requires the court to ascertain and give effect to the intent of the contracting parties as embodied in the written agreement. Courts assume that a contract's language is chosen carefully and that the parties are mindful of the meaning of the language used. When a writing is clear and unequivocal, its meaning must be determined by its contents alone.
Dep't of Transp. v. Pa. Indus. for the Blind & Handicapped, 886 A.2d 706, 711 (Pa.Cmwlth.2005) (internal citations and quotation marks omitted).
A contract is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense. The court, as a matter of law, determines the existence of an ambiguity and interprets the contract whereas the resolution of conflicting parol evidence relevant to what the parties intended by the ambiguous provision is for the trier of fact.
Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385, 390 (Pa.1986) (internal citations omitted). However, "[a]n appellate court may draw its own inferences and arrive at its own conclusions when a finding of fact is simply a deduction from other facts and the ultimate fact in question is purely a result of reasoning." Id. at 391 n. 6. A court always may consider the course of performance as evidence of the intent of the parties. Atlantic Richfield Co. v. Razumic, 480 Pa. 366, 390 A.2d 736, 741 n. 6 (Pa.1978).
In re Old Summit Mfg., LLC, 523 F.3d 134, 137-38 (3d Cir.2008).
One final aspect of contract interpretation should be mentioned. Section 20 of the Restatement (Second) of Contracts, states, in pertinent part, that
(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if
(a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
(b) that party has no reason to know of any different meaning attached by *224 the other, and the other has reason to know the meaning attached by the first party.
Restatement (Second) Contracts, § 20 "Effect of Misunderstanding" (1981).
This principle, as originally espoused in the Restatement Contracts, § 71 (1932), has been cited approvingly by a Pennsylvania appellate court:
The arbitrators could have based their finding that there was a valid contract on either of two grounds: (1) both parties may have attached the same meaning to Alternate # 4; or (2) if appellee knew of the ambiguity and appellant did not, and appellee did nothig [sic] to clarify it although he knew that appellant might attach the other meaning to Alternate #4, he would be bound by appellant's interpretation. Restat. Contracts, Sec. 71, Comment (a), particularly Illustration 1 (1932). Goddard v. Holland Transportation Co., 84 N.Y.S.2d 410 (N.Y.Sup.1948), affirmed 277 A.D. 755, 97 N.Y.S.2d 372. See Restat. Contracts 2d (1964) Tentative Draft § 21A and the sources cited therein.
Framlau Corp. v. Upper Dublin School Authority Bd., 219 Pa.Super. 369, 372, 281 A.2d 464 (1971).
More recently, the Third Circuit stated that "it is a central principle of contract interpretation that if a party knew or had reason to know of the other parties' interpretation of terms of a contract, the first party should be bound by that interpretation." Bohler-Uddeholm America, Inc. v. Ellwood Group, Inc., 247 F.3d 79, 99 (3d Cir.2001); see also Emor, Inc. v. Cyprus Mines Corp., 467 F.2d 770, 775 (3d Cir. 1972) ("[T]he meaning given to the words by one party should be given effect if the other party knew or had reason to know that it was in fact given.") (quoting 3 Corbin, On Contracts § 537, at 51 (1960)).
IV.
With these principles in mind, I now turn to the two issues posed by the parties: (1) whether Ms. Mayer is entitled to payment on her priority claim from funds remaining in the trustee's possession; and (2) whether Ms. Mayer is entitled to object to the trustee's final application for compensation. I shall take them in reverse order.
A.
A trustee's right to compensation stems from 11 U.S.C. §§ 326 and 330. This chapter 7 case commenced on October 14, 2005, just prior to the effective date of most of the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Thus, the pre-BAPCPA version of section 330 is applicable to the trustee's request for compensation. See In re Lan Associates XI, L.P., 192 F.3d 109, 115 n. 7 (3d Cir.1999); In re Goucher, 378 B.R. 445, 447 (Bankr. M.D.Pa.2007); In re Holland, 374 B.R. 409 (Bankr.D.Mass.2007).
Section 326 provides in relevant part for this contested matter:
(a) In a case under chapter 7 or 11, the court may allow reasonable compensation under section 330 of this title of the trustee for the trustee's services, payable after the trustee renders such services, not to exceed 25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000, upon all moneys disbursed or turned over in the case by the trustee to parties *225 in interest, excluding the debtor, but including holders of secured claims.
Section 330(a), as pertinent, provides:
(a)(1) After notice to the parties in interest and the United States Trustee and a hearing, and subject to sections 326, 328, and 329, the court may award to a trustee, an examiner, or a professional person employed under section 327 or 1103
(A) reasonable compensation for actual, necessary services rendered by the trustee, examiner, professional person, or attorney and by any paraprofessional person employed by any such person; and
(B) reimbursement for actual, necessary expenses.
* * *
3) In determining the amount of reasonable compensation to be awarded, the court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including
(A) the time spent on such services;
(B) the rates charged for such services;
(C) whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title;
(D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed; and
(E) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title.
In fixing compensation for a bankruptcy trustee, the Third Circuit Court of Appeals has provided the following instructions:
Sections 326(a) and 330 of the Bankruptcy Code "control the determination of the amount of compensation to be awarded trustees appointed in a case under Chapter 7 or Chapter 11." In re Biskup, 236 B.R. 332, 335 (Bankr. W.D.Pa.1999). Section 330 authorizes bankruptcy courts to award reasonable compensation to trustees. . . . Section 330's allowance of reasonable compensation is subject to the maximum percentages set forth in § 326(a). . . . Courts have emphasized repeatedly that a trustee is not entitled to the maximum fee allowed under § 326(a); "[t]he maximum compensation allowable under § 326(a) is awarded to a . . . trustee only in cases in which the result obtained and the benefit realized by the estate are exemplary." Narragansett Clothing, 210 B.R. at 496; see also Biskup, 236 B.R. at 336 ("The language of § 326 is permissive rather than mandatory in that it fixes the maximum compensation of a trustee, and it is not to be construed as an entitlement to the maximum fee specified.");. . . . H.R.Rep. No. 95-595, at 329 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6286 ("Section 330 authorizes compensation for services and reimbursement of expenses of officers of the estate. . . . [T]he compensation allowable under this section is subject to the maxima set out in section[] 326.").
In re Lan Associates XI, L.P., 192 F.3d at 115-16 (footnote and citations omitted).
Pursuant to section 326(a), computation of the statutory ceiling for trustee compensation is based upon "cash or its equivalent which the trustee actually disburses to parties in interest." Id., at 119. Ms. Mayer asserts that:
*226 the $5,000,000 surrendered by the Trustee to Deans and Mayer were not disbursements to "parties in interest". The $5,000,000 represented property returned to its rightful owner(s) that was not property of the [bankruptcy] estate.
Mayer Objection, at 3 (citations omitted).
In other words, Ms. Mayer maintains that the PMA sale proceeds distributed by the trustee to herself and to Ms. Deans, which total $5,000,000 ($3,875,000 plus $1,1,25,000), should be considered as a return of their own property rather than property of the bankruptcy estate, and thus excluded from the statutory ceiling established by section 326(a). See generally In re Market Resources Development Corp., 320 B.R. 841, 847 (Bankr.E.D.Va. 2004):
[F]or purposes of § 326(a), the phrase "moneys disbursed or turned over in the case by the trustee to parties in interest" requires several elements:
* * *
3. The money must be property of the estate. "[T]he base will exclude property (or monies attributable to such property) returned to a third party after a determination (whether by agreement of the parties or by court order) (a) that the property in question came into the hands of the estate by means of fraud or illegality or (b) that the property is not property of the estate and should be returned to its rightful owner(s)." Citi-Toledo Partners II at 161; North American Oil & Gas at 478.
See also Collier Handbook For Trustees and Debtors in Possession, ¶ 9.02 (1997) ("Compensation [historically] was directly tied to the trustee's success in bringing property into the estate, liquidating that property and distributing the proceeds to creditors.").
In addition, Ms. Mayer argues in her objection that "the amount requested [by the trustee in his final application] does not represent reasonable compensation for actual, necessary services rendered." Mayer Objection, at 4.
The trustee in the present contested matter asserts that the parties intended for all of the PMA sale proceeds paid to him by Ms. Deans to be considered part of the bankruptcy estate, and that any objection to the reasonableness of his present fee request was waived by Ms. Mayer as a component of the March 2007 settlement. He relies upon the language of paragraph (f):
The Trustee shall be entitled to his statutory commission but has agreed that in no event will he receive more than $175,000.00 commission related to the recovery of the Settlement Payment.
In so doing, the trustee emphasizes the use of the word "entitled," as well as the compromise represented by the amount mentioned: $175,000.
Ms. Mayer essentially asserts two arguments in support of her interpretation of the settlement agreement that would allow her to object to the trustee's final application for compensation request. First, she notes that paragraph (f) of that agreement does not explicitly prohibit such an objection; and given the presence of language in paragraph (i) stating that the trustee had no right to object to the unsecured claims provided therein to Ms. Deans and Ms. Mayer, the absence of similar language in paragraph (f) is reflective of the parties' intention. Second, Ms. Mayer contends that the $175,000 amount in paragraph (f) was intended only as a ceiling upon the trustee's commission, which ceiling actually exceeded that permitted by section 326(a) (for reasons noted above, given her interpretation of the scope of the bankruptcy estate).
*227 For the following reasons, I find the trustee's position that Ms. Mayer agreed in March 2007 not to object to the trustee's compensation, if limited to $175,000, more persuasive than Ms. Mayer's argument that there was no such accord.
Under the trustee's interpretation of the March 2007 settlement agreement, he was to distribute about $7 million, all of which was to be treated as property of the bankruptcy estate for purposes of section 326(a). If so, his commission ceiling would have been about $233,000. By virtue of paragraph (f), he agreed to reduce his compensation to $175,000 in order to help fund a distribution to general unsecured creditors.
Ms. Mayer's interpretation is that the parties intended that $5 million of the funds held by Ms. Deans would not be considered estate property. If so, then the $175,000 amount mentioned in paragraph (f) is meaningless, as the commission ceiling imposed by section 326(a) on trustee distributions of about $2 million would be only $83,250. Given the intention of the trustee to provide some dividend to unsecured creditors, construing the $175,000 amount as a compensation reduction is an "interpretation which under all circumstances ascribes the most reasonable, probable, and natural conduct of the parties, bearing in mind the objects manifestly to be accomplished." Charles D. Stein Revocable Trust v. General Felt Industries, Inc., 749 A.2d 978, 980 (Pa.Super.2000).
Other terms of the settlement agreement further support this result. Paragraph (a) required Ms. Deans to turn over all $7 million of the PMA sale proceeds in her possession to the trustee, referred to as the "settlement payment." If the parties intended that only $2 million be treated as estate property to be distributed by the trustee, it is more likely that the settlement would have provided for Ms. Deans to retain her own distribution under paragraph (b), pay Ms. Mayer her agreed amount directly under paragraph (c), and tender only $2 million to the trustee. Furthermore, paragraph (d) required that the trustee pay the tax obligation arising on the entire "settlement payment." Such a trustee tax liability would only arise from administration of property of the bankruptcy estate. See In re Card, 114 B.R. 226, 228 (Bankr.N.D.Cal.1990) ("Higher courts ruled that a liquidating trustee in bankruptcy is in fact liable for capital gains tax on the sale of estate assets."); see generally S.Rep. No. 95-989, 95th Cong., 2d Sess. 66 (1978) ("In general, administrative expenses include taxes which the trustee incurs in administering the debtor's estate, including taxes on capital gains from sales of property by the trustee and taxes on income earned by the estate during the case.").
I also note that paragraph (e) provides that the trustee's bankruptcy counsel is "entitled to receive a fee equal to 30-40% of the Settlement Payment pursuant to the provisions of the Employment Order dated October 18, 2006." Bankruptcy counsel, however, agreed to limit its compensation to no more than $500,000. The October 2006 engagement order referred to allowed for a contingency fee upon the "net recovery of funds collected" by the trustee. Thus, paragraph (f), along with the others just mentioned, equates the $7 million "settlement payment" with assets collected by the trustee: i.e., estate property.
In addition, paragraphs (a), (b), and (c) all refer to "distributions" to be made by the trustee pursuant to the settlement agreement. The most logical interpretation of the term yields an intent by the parties for these distributions to be viewed as disbursements under 11 U.S.C. *228 § 326(a). Indeed, Ms. Deans so agrees and Ms. Mayer's counsel conceded that he understood the trustee to have so intended in executing this agreement. If Ms. Mayer intended otherwise, that should have been communicated to the trustee when the settlement agreement was being negotiated. See, e.g., Framlau Corp. v. Upper Dublin School Authority Board, 219 Pa.Super. 369, 372, 281 A.2d 464 (1971).
In other words, in reviewing all of the terms of the settlement agreement in a consistent manner, the most reasonable and probable interpretation is that the parties intended that the entire $7 million settlement payment be treated as estate property to be distributed by the chapter 7 trustee. Alternatively, if the March 2007 settlement were ambiguous, the evidence presented as to the purpose of those aspects of the agreement and Ms. Mayer's knowledge, through her attorney, of that unchallenged purpose, yields a similar result.
Accordingly, Ms. Mayer, in signing the March 2007 accord, consented to the trustee's treatment of the settlement payment as property of the estate. Therefore, I agree with the trustee that she cannot recant that agreement in objecting to the trustee's compensation by now arguing that only a small fraction of the settlement payment should be considered estate property for purposes of the ceiling established by section 326(a).
B.
As noted earlier, a bankruptcy trustee's allowed compensation must not exceed the section 362(a) ceiling, but must also be reasonable under section 330(a). See In re Lan Associates XI, L.P. Ms. Mayer's objection contends that $175,000 is unreasonable for the services rendered by the trustee in this chapter 7 case. The trustee responds that Ms. Mayer agreed not to raise such an objection (as well as the aforementioned issue under section 326(a)).
Again, paragraph (f) stated: "The Trustee shall be entitled to his statutory commission but has agreed that in no event will he receive more than $175,000.00 commission related to the recovery of the Settlement Payment." In support of his waiver argument against Ms. Mayer on the question of reasonableness, the trustee emphasizes that this provision contains the word "entitled," as well as the fact that $175,000 represented a concession by the trustee to limit his permissible compensation.
I agree that the inclusion of the word "entitled" does support the trustee's understanding that, in return for his compromise of the ceiling amount, the other parties to the settlement agreement (Ms. Mayer and Ms. Deans) would not seek any further reductions. See generally DeGeorge v. Young, 892 A.2d 48, 52 (Pa. Cmwlth.2006) ("The trial court appropriately turned to Black's Law Dictionary for guidance in defining the term `entitle,' which means `[t]o grant a legal right to or qualify for.' Black's Law Dictionary 573 (8th ed.2004)."); In re Mondal's Estate, 41 Pa. D. & C.2d 570, 574 (Pa.Orph.1967) ("Our research has failed to disclose any decisions in which this word has been defined by a Pennsylvania court except Commonwealth v. Moorhead, 7 Pa. C.C. 513, 517 (1890), in which the late Judge Endlich, who was one of the State's most respected and erudite jurists, said: `Entitled is a strong word, and signifies a claim or right: Conoly v. Gayle, 54 Ala. 269.'"); Compare Jordan v. Michigan Conference of Teamsters Welfare Fund, 2000 WL 33321350, at *1 (E.D.Mich.2000) (settlement agreement provided: "Counsel for Plaintiffs shall be entitled to seek and receive an award of reasonable attorney fees *229 from defendant MCTWF to be determined by the Court. . . . Nothing in this paragraph shall be deemed a waiver of any right of any Settling Party or participant/beneficiary to object to the reasonableness of the fees."). Otherwise, the trustee would receive no entitlement.
Moreover, the phrase "entitled to his statutory commission" provides further support for the trustee's contention.
Section 330(a) of the Bankruptcy Code was amended effective October 17, 2005 to add the following provision:
(7) In determining the amount of reasonable compensation to be awarded to a trustee, the court shall treat such compensation as a commission, based on section 326.
11 U.S.C. § 330(a)(7). Prior to the enactment of this provision, the Bankruptcy Code did not use the word "commission" in connection with a bankruptcy trustee's compensation.
In addition to the addition of section 330(a)(7), the BAPCPA amendments modified section 330(a)(3). It now reads:
In determining the amount of reasonable compensation to be awarded to an examiner, trustee under chapter 11, or professional person, the court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including
The underlined clause was added. And this clause makes reference only to trustees serving in chapter 11 cases. As a result of these two amendments, one commentator observed:
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 amended section 330(a)(3) to provide that the five listed factors to be used "[i]n determining the amount of reasonable compensation" expressly apply to "an examiner, trustee under chapter 11, or professional person[.]" . . . .
Under prior law, the listed factors applied to all awards of compensation under section 330. The amendment has one notable effect. While a chapter 11 trustee's reasonable compensation is to be determined "taking into account" the listed factors, those factors are no longer expressly applicable to trustees appointed in cases under chapter 7, chapter 12 or chapter 13.
The 2005 amendment also changed the standard for determining the compensation of a trustee. New section 330(a)(7) provides that "[in] determining the amount of reasonable compensation to be awarded to a trustee, the court shall treat such compensation as a commission, based on section 326." Section 326 limits the compensation of trustees under chapter 7 and 11 cases to a percentage of moneys distributed, and of trustees chapter 12 and 13 cases to a percentage of payments made under a plan.
Under prior law, a trustee was entitled to reasonable compensation, and was limited by the percentage formulae in section 326. Courts had generally applied the same standard to trustees in business cases as they have to counsel for a trusteethe application contained a detailed daily summary of the trustee's activities, and a narrative description explaining what was accomplished in the case and the trustee's role in those accomplishments. The purpose of the description and narrative was to demonstrate a "reasonable" fee as required by section 330. As originally enacted, the percentage formulae in section 326 were intended to serve as an upper limit on a trustee's fee.
New section 330(a)(7) changes current law by providing that the compensation *230 of a trustee is to be treated as a commission, based on the formulae in section 326(a). The primary effect of the change should be that, in the majority of cases, a trustee's allowed fee will presumptively be the statutory commission amount.
Collier on Bankruptcy, ¶ 330.03[1][a] (15th ed. rev.2009) (footnotes omitted) (emphasis added).
As noted earlier, this chapter 7 case predates the BAPCPA amendments to section 330(a). Therefore, I need not now determine whether Congress intended to alter the traditional method to fix compensation of chapter 7 trustees by presumptively using the percentages established in section 326(a) as a "statutory commission." But the current chapter 7 trustee, Mr. Seitz, is also a trustee in bankruptcy cases governed by the BAPCPA amendments. He certainly would have been familiar with compensation issues raised by the BAPCPA amendments to section 330. Thus, the use of the phrase "entitled to his statutory commission" found in paragraph (f) of the settlement agreement most likely was a reference to current section 330(a)(7), and was intended to foreclose the settling parties from raising questions of the reasonableness of his compensation so long as the trustee limited his compensation request to the compromise section 326(a) ceiling.
That does not mean that other parties in interest, i.e., the United States trustee, other creditors, or this court sua sponte, see In re Busy Beaver Building Centers, Inc., 19 F.3d 833 (3d Cir.1994), could not challenge the reasonableness of the commission sought by the trustee. However, I agree with the trustee that Ms. Mayer cannot object to the trustee's commission on the grounds that the amount sought, as specified in paragraph (f), is unreasonable, consistent with her settlement.[7]
C.
Finally, the trustee argues that paragraph (i) of the March 2007 settlement agreement limits Ms. Mayer to now holding only a partially subordinated $7,500,000 general unsecured claim, after she received her $3,875,000 distribution as provided in paragraph (c). He reasons that to conclude otherwise would render meaningless the provision of paragraph (i) establishing that other unsecured creditors would receive a 10% dividend, since Ms. Mayer's $15,300,000 priority claim would preclude such a dividend.
Ms. Mayer counters that paragraph (i) (and the rest of the settlement agreement) contain no waiver of any priority claim. Indeed, she emphasizes that paragraph (i) begins with the sentence: "All remaining funds [after the distributions in paragraphs (b) and (c)] shall be distributed by the Trustee in accordance with the distribution scheme set forth in the Bankruptcy Code." As Ms. Mayer had filed a proof of claim asserting priority status under section 507(a), if the parties had intended any waiver by her then their settlement would have so stated.
For a number of reasons, I find the trustee's interpretation of the March 2007 settlement agreement more reflective of the parties' intentions.
First, it is clear that this settlement was intended to resolve all possible disputes *231 over the disposition of the PMA sale proceeds that could involve the trustee, Ms. Deans and/or Ms. Mayer. Consistent with such intent, the parties agreed to fix in paragraph (i) the amount of the post-distribution claims held by Ms. Deans and Ms. Mayer, as well as their status as general unsecured creditors, with the trustee promising not to contest such claims. However, if Ms. Mayer's interpretation of the settlement agreement were correct, the issue of her priority claim status and the amount of such priority would be open to future litigation.
Second, if Ms. Mayer were permitted to assert a challengeable priority claim as to the PMA settlement proceeds, such priority could indeed nullify the provisions providing a 10% dividend to unsecured creditors other than Ms. Deans or Ms. Mayer, and also render Ms. Deans' subordinated unsecured claim meaningless. Under Pennsylvania law, when "determining the intent of the contracting parties, all provisions in the agreement will be construed together and each will be given effect. . . . Thus, we will not interpret one provision of a contract in a manner which results in another portion being annulled." LJL Transportation, Inc. v. Pilot Air Freight Corp., 599 Pa. 546, 559-60, 962 A.2d 639 (2009); see, e.g., Cerceo v. De Marco, 391 Pa. 157, 162, 137 A.2d 296 (1958).
Third, the promise of a 10% dividend to general unsecured creditors, along with a partially subordinated unsecured claim for Ms. Deans, was clearly a factor in the willingness of Ms. Deans and the trustee to enter into the March 2007 settlement with Ms. Mayer, as well as in the granting of concessions by the trustee and trustee's counsel regarding their compensation from the PMA sale proceeds. It may also have been a factor in Weir & Partners withdrawing its opposition to the settlement.
Fourth, the provisions of the settlement agreement, including those of paragraph (i), state that their terms "shall apply only to the distribution of the remaining portion of the Settlement Payment and not to any other assets that may be recovered by the Trustee." As noted earlier, Ms. Mayer was asserting in March 2007, and the other parties may have anticipated, that the trustee would recover additional assets from the debtor. The language of the settlement agreement thus reflects an intention that Ms. Mayer could assert her priority claim as to the proceeds of those non-PMA settlement proceeds, and the trustee could object thereto. Accordingly, there would be no understanding that Ms. Mayer withdrew her priority claim by virtue of the March 2007 accord; only that she not assert that claim against the settlement payment made to the trustee.[8]
Fifth, in my memorandum approving the March 2007 settlement, I analyzed the reasonableness of the proposed settlement agreement based upon Ms. Mayer holding only a partially subordinated general unsecured claim as to the undistributed portion of the settlement payment. Neither she nor any other party seeking approval of that agreement offered evidence or argument that the distribution provisions of paragraph (i) would be primed by her priority claim.
Finally, to the extent that paragraph (i) of the settlement agreement is considered ambiguous, I find credible the testimony offered by the trustee and Ms. Deans that they negotiated the provisions of paragraph (i) and entered into this settlement in the belief that Ms. Mayer would not *232 assert any priority claim against the undistributed PMA sale proceeds remaining in the trustee's possession. Such a belief should have been readily apparent to her (through her counsel). If she intended otherwise, she should have so informed them at that time. See Framlau Corp. v. Upper Dublin School Authority Bd., 219 Pa.Super. 369, 372, 281 A.2d 464 (1971).
Accordingly, although I agree that Ms. Mayer never agreed to withdraw her priority claim in this chapter 7 case, she did agree not to assert such a claim against the PMA sale proceeds that were the subject of the March 2007 settlement agreement, and is now precluded from doing so.
V.
In conclusion, based upon the language of the March 2007 settlement approved by this court, I shall strike the objection of Ms. Mayer as to the trustee's final fee application. Furthermore, I have determined that the chapter 7 trustee, in preparing his final distribution report, need not consider Ms. Mayer's priority claim, but only as to the PMA settlement proceeds remaining in his possession.[9] Those funds held by the chapter 7 trustee that are not derived from the settlement proceeds can be distributed to Ms. Mayer on a priority basis (unless her priority claim is disallowed upon future objection).
An appropriate order shall be entered.
NOTES
[1] I view Ms. Dean's joinder pleading as supportive of the trustee's requested relief, rather than seeking actual joinder under Fed. R. Bankr.P. 7019 or 7020. Neither procedural rule is automatically incorporated into contested matters such as this. See Fed. R. Bankr.P. 9014(c).
[2] Although both the trustee as well as Ms. Mayer argue that the relevant terms of the settlement agreement are unambiguous.
[3] An objection by Ms. Mayer to counsel's fee application was withdrawn. See docket entry # 89.
[4] Indeed, Ms. Mayer was represented by the law firm handling her state court divorce litigation, as well as a law firm specializing in bankruptcy law.
[5] The report does, however, provide a distribution to Ms. Mayer on her unsecured claim as provided by paragraph (i) of the settlement agreement.
[6] Under Federal Rule of Bankruptcy Procedure 7001, a declaratory judgment action should be brought via an adversary proceeding. However, such a requirement can be waived where, as here, all parties had adequate notice and opportunity to participate in the hearing and no procedural objection is raised. See In re Wegscheid, 361 B.R. 144, 146 n. 4 (Bankr.D.Ariz.2007); see generally In re Cannonsburg Environmental Associates, Ltd., 72 F.3d 1260, 1265 (6th Cir.1996); Matter of Village Mobile Homes, Inc., 947 F.2d 1282, 1283 (5th Cir.1991); In re Orfa Corp., 170 B.R. 257, 275 (E.D.Pa.1994).
[7] As will be discussed below, this settlement agreement was limited to resolving issues arising from the PMA settlement proceeds. Thus, Ms. Mayer retained the right to object to the trustee's compensation to the extent it is based upon non-settlement distributions of estate property. Here, however, while there will be small distributions from non-settlement funds, the trustee seeks no fee founded upon them.
[8] Thus, as to the limited non-settlement proceeds to be distributed by the trustee in this case, Ms. Mayer's priority claim is unaffected.
[9] Given Ms. Mayer's large allowed unsecured claim in paragraph (i), it appears that she will still receive the majority of the final distribution made to creditors, even though her priority claim will be limited, as set out above. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1922112/ | 413 B.R. 633 (2009)
In re Gregorio B VILLARREAL; dba Greg's Ballroom; aka Villarreal, et al., Debtor(s).
Gregorio B Villarreal; aka Villarreal; dba Greg's Ballroom, et al., Plaintiff(s)
v.
David W Showalter, et al., Defendant(s).
Bankruptcy No. 08-70002. Adversary No. 08-7001.
United States Bankruptcy Court, S.D. Texas, McAllen Division.
August 6, 2009.
*634 Antonio Villeda, Attorney at Law, McAllen, TX, for Plaintiff(s).
Andrew Karl Rozell, Attorney at Law, Harlingen, TX, Edward L. Rothberg, Hugh Massey Ray, III, Weycer Kaplan Pulaski & Zuber, Houston, TX, Ric Palacios, McAllen, TX, for Defendant(s).
MEMORANDUM OPINION
MARVIN ISGUR, Bankruptcy Judge.
Gregorio B. Villarreal and Estela Villarreal, the debtors in this chapter 13 case, filed this adversary proceeding in which they seek to avoid the foreclosure of their real property. Although the foreclosure was conducted in accordance with state law, it enabled Showalter to receive more than he would have received in a hypothetical liquidation under chapter 7 of the Bankruptcy Code. Accordingly, the Court avoids the transfer made to Showalter at foreclosure.
Jurisdiction and Venue
The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334. The adversary proceeding is a core matter under 28 U.S.C. § 157. Venue is appropriate in this District pursuant to 28 U.S.C. § 1409.
*635 Facts
Undisputed Facts
Most facts are undisputed or have been resolved by this Court's prior opinions.
The Villarreals owned property, located at 4000 W. Expressway 83, Mission, Hidalgo County, Texas that primarily consisted of a restaurant and a ballroom. The property is commonly known as "Greg's Ballroom."
The Villarreals had a long-standing dispute with Armando Orta and other parties that arose out of a commercial relationship involving the ballroom. The dispute was ultimately resolved by a settlement agreement executed on April 24, 2007. As part of the settlement agreement, Mr. Villarreal agreed to make deferred payments of $70,000 (plus interest) to the Orta parties, with the deferred payments secured by a third lien on Greg's Ballroom. The third lien was executed by both Mr. and Ms. Villarreal. Showalter is the trustee for the holders of the third lien.
The Villarreals defaulted on their payments under the settlement agreement. Showalter, in his capacity as trustee, gave notice of default and posted Greg's Ballroom for foreclosure. On November 6, 2007, David Showalter, Trustee, foreclosed on Greg's Ballroom. Showalter was the successful bidder at the foreclosure sale, who credit bid the full amount of the Villarreals' $70,000 debt. On January 4, 2008, the Villarreals filed their chapter 13 bankruptcy petition.
A more detailed background of the origins of the dispute and the execution of the original settlement documents is provided in this Court's February 3, 2009 Memorandum Opinion Relating to Objections Against Debtors' Homestead Exemption Claims, issued in case 08-70002. The factual background set forth in the February 3, 2009 Memorandum Opinion is incorporated in this opinion by reference.
Disputed Facts
There are three major disputed factual issues. The first is whether the November 6, 2007 foreclosure was conducted at the proper location at the Hidalgo County Courthouse and in the proper manner. The second is whether the Villarreals were insolvent such that they could avoid the foreclosure pursuant to § 522 and § 547 of the Bankruptcy Code. The third is whether the foreclosure resulted in Showalter receiving more than he would have received in a hypothetical liquidation under chapter 7 of the Bankruptcy Code. This latter issue is a mixed question of law and fact.
With regard to the first issue, the Villarreals seek to set aside the foreclosure under Texas law by demonstrating an inadequate sale price along with an irregularity in the conduct of the sale. There are two alleged irregularities. First, the Villarreals allege that the foreclosure took place at the wrong part of the Courthouse property. Second, the Villarreals allege that the sale was not "called out" properly in accordance with Texas law.
A substantial amount of trial time was dedicated to determining the actual location of the sale. It is undisputed that the sale was required to take place at the location designated by the Hidalgo County Commissioners. The Hidalgo County Commissioners adopted a resolution on November 9, 1987 providing "that the steps or terrace immediately adjacent to the east entrance to the lobby of the Hidalgo County Courthouse is designed as the area at the Hidalgo County Courthouse where sales of real property are to take place pursuant to a Deed of Trust or other contract lien." Def. Ex. 19.
Part of Plaintiffs' exhibit 6 included a photograph of the East Side of the Hidalgo County Courthouse and the other part included a schematic drawing of that same *636 East Side. Numerous witnesses described where foreclosure sales normally occurred. There was varying testimony concerning the precise location at which this particular foreclosure sale occurred. Having considered the entirety of the testimony, the Court has concluded that the sale occurred at a proper location. It most likely took place on the tile area within 20 feet of the area labeled on the schematic as "Entrance to County Clerks Office", generally in the area marked with an "X" inside of a square on the schematic attached to Exhibit 6. The Court also finds that there is some reasonable probability that the foreclosure sale occurred between that area and the area marked "Main Doors", but finds only an insignificant probability that the foreclosure sale occurred in any other area. Accordingly, the Court finds that the sale occurred at the proper location authorized by Texas law.
With respect to the second alleged irregularity, the Court finds that the actual "call" of the sale was made by substitute trustee Sandra Falcon. Ms. Falcon testified at the hearing and the Court found her testimony credible. The Court finds that she called the sale in a loud voice, with no attempt to hide the conduct of the sale from any person. The Court recognizes that certain witnesses testified that they did not notice that Ms. Falcon was conducting the sale. The mere fact that people did not notice Ms. Falcon conducting the sale does not amount to an irregularity if she properly called the sale. Sales on "the courthouse steps" occur at a public forum and, by their very nature, may be accompanied by other activities and distractions. Buyers, for example, may be pre-occupied with other sales in which they have a greater interest. The Court has carefully considered the "call" of the sale and finds that it was accomplished by Ms. Falcon without irregularity.
The second factual dispute concerns whether the foreclosure sale occurred while the Villarreals were insolvent. 11 U.S.C. § 547. In determining whether the Villarreals were insolvent, the Court excludes consideration of the Villarreal's exempt property. 11 U.S.C. § 101(32)(A)(ii). Because debtors exempt only the equity that they have in property (i.e., the property remains subject to liens), the Court has evaluated the amount of debt owed by the Villarreals, excluding debt secured by the property listed on their exemption schedules.
The only evidence of the Villarreal's debt is found in Defendant's Exhibit 23, largely comprised of the Debtors' schedules and statements. Taken in the light least favorable to the Debtors, the Court concludes that the Debtors had liabilities of $42,428.00. This amount excludes the amounts listed in the Debtors' schedules that appeared to duplicate claims or have a statute of limitations defense. With respect to assets, the Debtors' schedules list only $3,105 of property to which a monetary value is attributed and that is not claimed as exempt. The testimony at trial indicated that there could be some value to the Debtors' general reputation in the community or to some causes of action, but the Court found such evidence to be insufficient to attribute a particular value to those assets.
Moreover, the Debtors were presumed insolvent on the date of the transfer, which was within the 90 day period immediately preceding the date of the filing of the bankruptcy petition. 11 U.S.C. § 547(f). In light of that presumption, the burden was on Mr. Showalter to prove that the Debtors were solvent at the time of the transfer. Given the limited evidence introduced at the trial, the Court concludes that the evidentiary presumption in § 547(f) was not overcome. Accordingly, the Court *637 finds that the Villarreals were insolvent on the date of the foreclosure sale.
The third disputed evidentiary issue is whether the foreclosure sale enabled Showalter to receive more than he would have received if the foreclosure had not occurred and Showalter had been paid under chapter 7 of the Bankruptcy Code. The Court will evaluate this issue in two parts. First, the Court will determine the value that was actually received by Showalter at the foreclosure sale. Second, the Court will determine from both a factual and legal standpoint the amount that Showalter would have received in a hypothetical chapter 7 liquidation.
The Value Received by Showalter
Mr. Showalter's appraiser valued the property at $4,020,000 shortly after the foreclosure sale. That amount is not inconsistent with all other value testimony given at the trial. Although there is some ambiguity as to the amount of debt at the time of the sale, it is clear that the total debts against the property were less than $750,000. Accordingly, when the property was sold at foreclosure, Mr. Showalter as the creditor/bidder received at least $3,250,000 to satisfy the remainder of his $70,000 claim.
Amount to Have Been Received in a Hypothetical Chapter 7 Liquidation
The factual determination of the amount that would have been paid to Showalter in a hypothetical chapter 7 liquidation is quite straightforward. That analysis is set forth below. The difficult task is determining whether the Court should undertake such an analysis or whether the analysis is precluded, as a matter of law, by the Supreme Court's decision in BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994).
Because this Court concludes that BFP does not apply in this case, the Court analyzes the amount that would have been paid to Showalter in a hypothetical chapter 7 liquidation and concludes that Showalter would have been paid approximately $100,000. Because this amount is dramatically less than the $3,250,000 in value actually received by Showalter, the Court avoids the transfer at the foreclosure sale.
Under 11 U.S.C. § 547(b), a trustee[1] may avoid any transfer of an interest of the debtor in property as a preference if the transfer was:
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) that enables such creditor to receive more than such creditor would receive if
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
*638 (C) such creditor received payment of such debt to the extent provided by the provisions of this title.
11 U.S.C. § 547(b).
For the reasons set forth earlier in this opinion, subsections 1-4 of § 547(b) are satisfied. Subsection 1 is satisfied because Greg's Ballroom was transferred to Showalter in his capacity as a Villarreal creditor. Subsection 2 is satisfied because the transfer was in satisfaction of the antecedent $70,000 debt owed to Showalter. Subsection 3 is satisfied because (for the reasons set forth above), the Villarreals were insolvent on the date of the transfer. Subsection 4 is satisfied because the transfer occurred on November 6, 2007, a date within 90 days of the date on which the Villarreals filed their bankruptcy petition.
The balance of this opinion will evaluate whether the transfer satisfies the requirements of subsection 5 of § 547(b) of the Bankruptcy Code.
Prior to the Supreme Court's decision in BFP, courts generally held that § 547(b)(5) applied to credit bids at foreclosure sales. If the credit bid was for less than what the property would have generated in a hypothetical chapter 7 proceeding, courts held that the creditor received "more" than he would have in a hypothetical chapter 7 liquidation. Winters v. First Union Nat'l Bank of Fla., 119 B.R. 283, 284 (Bankr.M.D.Fla.1990); see also In re Wheeler, 34 B.R. 818, 822 (Bankr.N.D.Ala.1983); Park N. Partners, Ltd. v. Park N. Assocs. (In re Park N. Partners, Ltd.), 80 B.R. 551, 555 (N.D.Ga. 1987). After the Supreme Court's decision in BFP, courts split in their application of § 547(b)(5).
BFP considered whether a mortgage foreclosure sale that produced less than fair market value was a fraudulent conveyance under 11 U.S.C. § 548. In BFP, an individual purchased the debtor's home for $435,000 pursuant to a non-collusive foreclosure sale undertaken in accordance with applicable state foreclosure laws. BFP, 511 U.S. at 534, 114 S. Ct. 1757. The debtor alleged that the transfer was an avoidable fraudulent transfer under § 548. Under a fraudulent transfer theory, the plaintiff must prove (among other things) that the debtor received "less than a reasonably equivalent value in exchange for such transfer." 11 U.S.C. § 548. In BFP, the debtor alleged that the foreclosure sale produced "less than a reasonably equivalent value" because the home's fair market value was $725,000 at the time that the home was sold at foreclosure for $435,000. Id. at 535, 114 S. Ct. 1757.
The Supreme Court rejected the debtor's argument and held that the amount obtained from a non-collusive foreclosure sale conducted in accordance with applicable state law was, as a matter of law, "reasonably equivalent value." Id. at 545, 114 S. Ct. 1757. The Court held that specifying a federal "reasonable" foreclosure-sale price would interfere with the essential state interest of ensuring the "security of the titles to real estate." Id. at 544, 114 S. Ct. 1757 (quoting Am. Land Co. v. Zeiss, 219 U.S. 47, 60, 31 S. Ct. 200, 55 L. Ed. 82 (1911)). "To displace traditional state regulation in such a manner, the federal statutory purpose must be `clear and manifest.'" Id. at 544, 114 S. Ct. 1757 (quoting English v. Gen. Elec. Co., 496 U.S. 72, 79, 110 S. Ct. 2270, 110 L. Ed. 2d 65 (1990)). Finding no "clear and manifest" federal statutory purpose for the choice of another "reasonably equivalent value" standard under § 548, the court held that "a fair and proper price, or a `reasonably equivalent value,' for foreclosed property, is the price in fact received at the foreclosure sale, so long as all the requirements of the State's foreclosure [laws had] been complied with." Id. at 545, 114 S. Ct. 1757.
*639 The essential determination in BFP was that § 548 requires courts to examine value at the moment of and in the context of the state law foreclosure bid. Crucial to the Court's holding was the focus on "value" at the time of the transfer. The Court noted that the statute does not modify "value" with "fair market" or any other adjective suggesting that value should be considered outside the context of the actual transfer. Id. at 538, 114 S. Ct. 1757. If a Court compared the foreclosure proceeds to what the debtor could have received outside a foreclosure proceeding, then the Court would be considering something akin to "market value" and adding language to § 548 that Congress chose to omit. Id. With the focus limited to the amount of and in the context of a state law foreclosure bid, the amount bid at foreclosure is per se "reasonably equivalent value" so long as state law foreclosure procedures were followed. Id.
The language of § 547 does not allow this Court to compare values at the moment of the foreclosure. Rather, § 547(b)(5) avoids transfers that enable a creditor to receive "more" than the creditor would have received under a hypothetical chapter 7 liquidation. 11 U.S.C. § 547(b)(5). Accordingly, § 547 mandates the comparison of values at different points in time by requiring the Court to compare the actual value received by the creditor at the moment of foreclosure with the amount that the creditor would have received if "the transfer had not been made." 11 U.S.C. § 547(b)(5). Section 547(b)(5)(A) and (C) require the consideration of a hypothetical transfer not at a foreclosure sale but "to the extent provided by the provisions of this title." Accordingly, the Court must determine how distributions in this case would have been made in a hypothetical chapter 7 liquidation.
Under Chapter 7 of the Bankruptcy Code, distributions to an oversecured creditor would be made pursuant to § 506 and § 363 of the Bankruptcy Code. Section 506 would govern the amount to which Showalter was entitled. Under § 506(b), Showalter's claim would have been increased by the amount of his interest and his "reasonable fees, costs and charges" determined in accordance with state law. 11 U.S.C. § 506(b).
The chapter 7 trustee would be authorized to sell the property under § 363(f)(3), a provision of the Bankruptcy Code that authorizes the trustee to sell property free and clear of all liens if the price at which the property is sold is greater than the aggregate value of all liens. As set forth above, there is no bona fide dispute that the value of the property was in excess of $4,000,000, that Showalter's claim was less than $100,000, and that all liens were less than $750,000. With such disparate amounts, the Court has no doubt that a chapter 7 trustee in a hypothetical liquidation would have sold the property pursuant to § 363(f)(3). Having converted the asset to cash, Showalter would have been paid approximately $100,000 in principal, interest, fees and expenses. The transfer at the foreclosure sale allowed Showalter to receive far more than he would have received in a hypothetical chapter 7 liquidation.
This result a different economic result than would occur under § 548 arises because a chapter 7 liquidation does not have the same constraints as a foreclosure sale. A chapter 7 liquidation affords the trustee the time to orchestrate an orderly sale that produces a greater value than would be received at a foreclosure sale.
The Fifth Circuit has never considered whether BFP should apply to controversies under § 547 of the Bankruptcy Code. Nevertheless, the Fifth Circuit has applied *640 BFP to one case arising under § 549 of the Bankruptcy Code. In re T.F. Stone Co. v. Harper, 72 F.3d 466 (5th Cir.1995). In Stone, the court compared § 548 and § 549 to determine the meaning of "present fair equivalent value" in § 549, within the context of a tax foreclosure sale. The court found no meaningful difference between "present fair equivalent value" in § 549(c) and "reasonably equivalent value" in § 548 as applied in the context of a forced-sale case. Id. at 470.
Stone is instructive in this case. The Fifth Circuit did not automatically determine that BFP's analysis would apply to every avoidance action under the Bankruptcy Code. Instead, it evaluated the structure and language of § 549 and compared that structure and language to § 548. This Court will follow the Fifth Circuit in determining whether the structure and logic of § 547 is similarly comparable. As set forth in this opinion, this Court concludes that § 547 does not have the same or similar language as either § 548 or § 549. Instead, the plain language of § 547 compels a different result.
Unlike § 548(a)(1)(B)(i)'s "reasonably equivalent value" and § 549(c)'s "present fair equivalent value", § 547(b)(5) asks whether a creditor has received "more than such creditor would receive" in a hypothetical chapter 7 liquidation. Determining what constitutes "more" is a simple mathematical determination that can be easily calculated by a "reasonable [businessperson]." In re FIBSA Forwarding, Inc., 230 B.R. 334, 337-38 (Bankr. S.D.Tex.), aff'd, 244 B.R. 94 (S.D.Tex. 1999).
Nevertheless, several courts have since extended BFP's rationale to § 547. In re FIBSA Forwarding, Inc., 230 B.R. 334, 337 (Bankr.S.D.Tex.), aff'd, 244 B.R. 94 (S.D.Tex.1999); In re Pulcini, 261 B.R. 836, 844 (Bankr.W.D.Pa.2001); In re Cottrell, 213 B.R. 378, 383 (Bankr.M.D.Ala. 1996); In re Glaser, 2002 WL 32375007 (Bankr.E.D.Va. Oct.25, 2002). The Courts suggest that a chapter 7 liquidation would produce the same proceeds as a foreclosure, and they note that the Supreme Court's federalism concerns with respect to state property laws apply equally to § 547.
Before proceeding with this analysis, the Court must address whether it is bound by stare decisis to follow the decision in In re FIBSA Forwarding, Inc., 230 B.R. 334, 337 (Bankr.S.D.Tex.), aff'd, 244 B.R. 94 (S.D.Tex.1999). FIBSA is a decision reached by United States Bankruptcy Judge Steen and affirmed by United States District Judge Ellison of this District. This Court concludes that although such an opinion deserves great deference it is not binding on this Court. Consequently, the Court which gives great deference to the FIBSA opinions is nevertheless mandated to undertake its own analysis of the application of BFP to § 547.
Showalter contends that the "decisions from a United States District Court in the same District on appeal are binding precedent on bankruptcy courts in the same district." Creditor's Response Brief on the Application of 11 U.S.C. § 547 at 3; see 28 U.S.C. § 151. Although there is support for that position, this court finds that it is not so bound.
There are two significant opinions by bankruptcy courts in this Circuit that have reached opposite conclusions on this question. In re Romano, 350 B.R. 276, 281 (Bankr.E.D.La.2005) holds that stare decisis does not apply; In re Rand Energy Co., 259 B.R. 274, 276 (Bankr.N.D.Tex. 2001) holds that stare decisis does apply. Showalter contends that the Fifth Circuit opinion in Carrieri v. Jobs.com, Inc., 393 F.3d 508 (5th Cir.2004) impliedly affirmed the Northern District position. The *641 Court's review of In re Jobs lends no credence to Showalter's position; he is simply incorrect.
This Court does not understand how stare decisis could apply to decisions made by the District Court. Here is the rubit is unambiguous that one district judge is not bound by the decisions of the other district judges of the district court. As the Third Circuit noted:
[I]t is clear that there is no such thing as "the law of the district." Even where the facts of a prior district court case are, for all practical purposes, the same as those presented to a different district court in the same district, the prior "resolution of those claims does not bar reconsideration by this Court of similar contentions. The doctrine of stare decisis does not compel one district court judge to follow the decision of another." State Farm Mutual Automobile Insurance Co. v. Bates, 542 F. Supp. 807, 816 (N.D.Ga.1982).FN7 Where a second judge believes that a different result may obtain, independent analysis is appropriate. Id.
Threadgill v. Armstrong World Indus., Inc., 928 F.2d 1366, 1371 (3d Cir.1991).
Accordingly, two district judges from the same district court could reach opposite conclusions on the same difficult question of law. Pending resolution by the Circuit Court, what should the bankruptcy judge do? Should the rule be that the first opinion be followed or the second opinion? There is no answer to that question.
In Romano, Judge Brown was concerned that "[s]uch a rule effectively makes the random assignment of appeals determinative for stare decisis purposes, and leaves no room for differing opinions of other judges in the district." In re Romano, 350 B.R. 276, 281 (Bankr.E.D.La. 2005).
The decisions of one district judge do not bind another judge of the same court. Threadgill, 928 F.2d at 1371. This Court operates as a unit of the District Court. 28 U.S.C. § 151. The majority of courts that have considered the issue have concluded that stare decisis does not apply to the decisions of the district court. In re Romano at 279. This Court will follow the majority rule.
Nevertheless, FIBSA (and its appeal) are carefully considered opinions by highly qualified jurists. Although neither the bankruptcy nor district court opinions are binding on this Court, this Court will nevertheless give the opinions great deference.
The opinions that apply BFP in § 547 cases assume that a chapter 7 liquidation would realize no greater value than a forced foreclosure. In those cases, there may have been merit to that assumption. But, the Court cannot make such an assumption in this case.
As discussed above, a chapter 7 trustee has the time and incentive to promote a competitive auction or to find a buyer willing to pay a fair market value. As the court in In re Rambo stated, "clearly there are circumstances where the value a Chapter 7 trustee could secure is greater [than] the aggregate of all liens, costs of sale and the debtor's exemption, and the trustee would seek to sell the asset to provide a dividend to unsecured creditors. In such instances, the price the trustee could secure could not be the equivalent of the amount bid-in at a foreclosure sale." In re Rambo, 297 B.R. 418, 432 (Bankr.E.D.Pa. 2003).
The Court acknowledges that the policy concerns expressed in BFP would have equal applicability to § 547if the law allowed this Court to ignore the statute and impose its own policy. In BFP, the Supreme Court was required to consider policy *642 issues because it needed to resolve how to interpret the "reasonably equivalent value" standard in the statute. It applied its policy concerns in determining that "reasonably equivalent value" must be determined at the time of and in the context of a state law foreclosure sale.
This Court does not have that luxury. Section 547 does not lend itself to such an interpretation and the Court may not ignore Congressional language in favor of judicial policy.
The rules of statutory construction require courts to end their judicial inquiry when a statute is found to be plain and unambiguous on its face. Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 S. Ct. 843, 136 L. Ed. 2d 808 (1997). "When we find the terms of the statute unambiguous, judicial inquiry is complete except in rare and exceptional cases." Demarest v. Manspeaker, 498 U.S. 184, 190, 111 S. Ct. 599, 112 L. Ed. 2d 608 (1991). As the Fifth Circuit recently reaffirmed:
When interpreting the [Bankruptcy] Code, courts should begin where they would when interpreting any statute: its plain language. See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989). If the statute is clear, the inquiry is at its end, and we enforce the statute on its terms. See id. That rule should inform the reading of Code provisions...
In re Miller, 570 F.3d 633 (5th Cir.2009).
Section 547, in straightforward language, requires the avoidance of transfers that allowed the creditor to receive more than the creditor would have received in a hypothetical chapter 7 liquidation. There is nothing in § 547 equivalent to § 548's ambiguous use of "value." BFP noted that the bankruptcy courts should not interpret a Code provision in a manner that interferes with state real property concerns absent unambiguous statutory language. BFP, 511 U.S. at 544, 114 S. Ct. 1757 ("To displace traditional state regulation in such a manner, the federal statutory purpose must be `clear and manifest'"). There is no ambiguity about the meaning of "more" or "chapter 7 liquidation" or the clear purpose of § 547.
Determining the value of a foreclosed property may prove to be a fact intensive inquiry in some future case. In this case, there is no factual ambiguity. Even if there were factual ambiguity, that is not the equivalent of a statutory ambiguity. Showalter asks this Court to apply a policy analysis (which would be appropriate only when there is a statutory ambiguity), when the only ambiguity that could exist would relate to the underlying facts. "The plain meaning of legislation should be conclusive, except in rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters." U.S. v. Ron Pair Enters., Inc., 489 U.S. 235, 242, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989). This Court has been unable to locate any authority (and Showalter supplies none) that allows the Court to vary the terms of a statute merely because a Court might have to resolve a contested factual matter over which there was ambiguity.
Conclusion
In this case, the transfer of Greg's Ballroom at the November 6, 2007 foreclosure sale satisfies each of the requirements of § 547(b) of the Bankruptcy Code. Section 522(h) of the Bankruptcy Code requires the Court to avoid certain transfers of exempt property if the transfer meets the requirements of § 547. Accordingly, the Court will issue a judgment that avoids the transfer.
NOTES
[1] The debtors not the trustee are the plaintiffs in this lawsuit. Debtors bring this cause of action pursuant to § 522(h) of the Bankruptcy Code. Section 522(h) allows the plaintiffs to avoid a transfer of exempt property if (i) the trustee could have avoided the transfer under § 547 of the Bankruptcy Code; and (ii) the trustee does not seek to avoid the transfer. The Court has previously held that the property is exempt and the parties do not dispute that the trustee has not acted to avoid the transfer. Accordingly, the sole issue under § 522(h) is whether the transfer could be avoided under § 547. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1922243/ | 413 B.R. 137 (2009)
In re BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Debtor.
Diane Peskin, et al., Plaintiffs,
v.
Irving H. Picard, as Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, Defendant.
Bankruptcy No. 08-01789 (BRL). Adversary No. 09-01272 (BRL).
United States Bankruptcy Court, S.D. New York.
September 10, 2009.
*139 Baker & Hostetler LLP by David J. Sheehan, Marc E. Hirschfield, Oren J. Warshavsky, Seanna R. Brown, New York, NY, for Defendant Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff.
Securities Investor Protection Corporation by Josephine Wang, General Counsel, Kevin H. Bell, Hemant Sharma, Washington, DC, for the Securities Investor Protection Corporation.
Phillips Nizer LLP by Helen Davis Chaitman, New York, NY, for Plaintiffs Diane and Roger Peskin and Maureen Ebel.
Milberg LLP by Jonathan M. Landers, Matthew Gluck, Lois F. Dix, Joshua E. Keller, New York, NY, for Intervenors Dr. Gerald Blumenthal, Robert Horowitz, Lester Kolodny, and Paul J. Robinson.
Before: Hon. Burton R. Lifland, United States Bankruptcy Judge.
MEMORANDUM DECISION AND ORDER GRANTING TRUSTEE'S MOTION TO DISMISS PLAINTIFFS' COMPLAINT
BURTON R. LIFLAND, Bankruptcy Judge.
With more than 15,000 claims filed in the Madoff proceeding and multi-billions of dollars at stake, the issue of how the Trustee determines claimants' "net equity" for distribution purposes is a central question to be determined in this SIPA liquidation.
Before this Court is the motion ("Motion to Dismiss") brought by defendant Irving H. Picard, trustee ("Trustee" or "Defendant") for the substantively consolidated Securities Investor Protection Act ("SIPA"), 15 U.S.C. § 78aaa et seq.,[1] liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff (collectively, "Debtors") seeking to dismiss the complaint (the "Complaint") filed by plaintiffs Diane Peskin, Roger Peskin, and Maureen Ebel (collectively, "Plaintiffs") pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable herein by Rule 7012 of the Federal Rules of Bankruptcy Procedure, or in the alternative, to strike certain portions of the Complaint. Trustee asserts that the Complaint should be dismissed because 1) it violates this Court's order of December 23, 2008 (the "Claims Procedure Order" or the "Order");[2] 2) Plaintiffs lack standing to bring the current application; 3) Plaintiffs' claims with regard to preferences and *140 breach of fiduciary duty fail as a matter of law and are currently moot; and 4) Plaintiffs' counsel is operating under a conflict of interest.[3] Significantly, the Trustee's Motion to Dismiss did not seek to resolve the issue of how net equity should be determined. In addition to the Securities Investor Protection Corporation ("SIPC"), a number of customers of Bernard L. Madoff Investment Securities LLC ("BLMIS"), who were also victims of Madoff's Ponzi scheme and whose interests are aligned in many ways with the Plaintiffs, fully support the Trustee's Motion to Dismiss,[4] and generally express a preference to have the issues determined in accordance with the procedures established in the pending scheduling motion[5] (see infra at Section III, subsection a, "The Scheduling Motion").
The Complaint seeks declaratory relief and damages for breach of fiduciary duty. Plaintiffs seeks declarations that 1) Trustee is obligated to recognize Plaintiffs' claims based on their November 30, 2008 account balances (the "Net Equity Issue"); 2) Trustee has no right to seek recovery of preferences received within 90 days of the institution of this proceeding; and 3) the Court must void the Partial Assignment and Release executed by Mrs. Ebel. Plaintiffs seek compensatory damages against the Trustee for the losses Plaintiffs have suffered due to the Trustee's alleged failure to promptly pay their claims in breach of his fiduciary duty.
At bottom, the Complaint is essentially seeking an accelerated resolution of the Net Equity Issue and more specifically, seeking a declaration that net equity should be determined by looking at customers' account balances as of November 30, 2008. The thrust of the Trustee's Motion to Dismiss is that the Complaint violates the Claims Procedure Order, which has been established to address the exact issues and provide the same relief as that sought in the adversary proceeding. In response to Plaintiffs' assertion that customer claims should be allowed in the amount shown on the November 30, 2008 BLMIS statements, the Trustee contends that the "cash in/cash out" approach[6] should be employed instead because fictitious profits should not compete with claims based on real money invested with BLMIS. Upon a complete review of the record, the Trustee's Motion to Dismiss is hereby granted.
BACKGROUND
I. Procedural History
The Complaint arises in connection with the infamous Ponzi scheme perpetrated by Bernard L. Madoff through his investment company, BLMIS. On December 11, 2008, Madoff was arrested by federal agents and *141 charged with securities fraud in violation of 15 U.S.C. §§ 78j(b), 78ff and 17 C.F.R. § 240.10b-5, in the United States District Court for the Southern District of New York ("District Court"). United States v. Madoff, No. 08-MJ-02735. That same day, the Securities and Exchange Commission (the "SEC") filed a civil complaint in the District Court, alleging, inter alia, that Madoff and BLMIS were operating a Ponzi scheme through BLMIS's investment advisor activities. S.E.C. v. Madoff, et al., No. 08-CV-10791 (the "Civil Action").
On December 15, 2008, SIPC filed an application in the Civil Action seeking a decree that the customers of BLMIS are in need of the protections afforded under SIPA. The District Court granted SIPC's application and entered an order on December 15, 2008, placing BLMIS's customers under the protections of SIPA (the "Protective Order"). The Protective Order appointed Defendant as trustee for the liquidation of the business of BLMIS and removed the SIPA liquidation proceeding to this Court pursuant to SIPA § 78eee(b)(3) and (b)(4), respectively.
On March 12, 2009, Madoff pled guilty to an 11-count criminal indictment filed against him and admitted that he "operated a Ponzi scheme through the investment advisory side of [BLMIS]." See United States v. Madoff, No. 09 CR 213(DC), Docket NO. 57, Plea Hr'g Tr. at 23:14-17. On June 29, 2009, Madoff was sentenced to 150 years in prison.
II. Plaintiffs' Customer Claims Filed with the Trustee
Diane and Roger Peskin and Maureen Ebel are customers of BLMIS and have filed the current application, seeking declaratory judgment and compensatory damages, in connection with customer claims that they have already filed with the Trustee. The following Plaintiffs' "account" background is essentially undisputed.
a. The Peskin Account
Diane and Roger Peskin are investors in BLMIS. On or about October 18, 2005, the Peskins invested $2,586,412.99 into a BLMIS account. In early May 2008, the Peskins invested approximately $181,000 therein. In the ordinary course, the Peskins regularly withdrew funds from that account.
On or about September 15, 2008, the Peskins received a check from BLMIS for $50,000, which cleared their account on or about September 17, 2008. On or about October 1, 2008, the Peskins received a check from BLMIS for $33,000. On or about November 6, 2008, the Peskins received a check from BLMIS for $30,000. On or about November 12, 2008, the Peskins invested $470,265.98 into their BLMIS account.
The Peskins filed a SIPC claim in February 2009. Plaintiffs allege that they were contacted on June 3, 2009 by one of the Trustee's attorneys who informed them that they were entitled to receive $387,000 as their full SIPC payment because the Trustee was entitled to deduct the $113,000 that they withdrew from their BLMIS account in the 90-day preference period. Plaintiffs assert that they pointed out to the attorney that although they had withdrawn $113,000 from their BLMIS account during the preference period, they had also invested $470,265.98 with BLMIS on November 12, 2008, constituting the infusion of new value. As such, their net position in the last 90 days before the SIPA liquidation was positive $357,265.98. They asked the attorney if they weren't entitled to the full $500,000 SIPC payment since they had invested more than they withdrew in the last 90 days. Plaintiffs claim that they were told that the law was *142 clear that they were not entitled to credit for the money they deposited.
By letter dated June 26, 2009, the Trustee acknowledged that the Peskins did not receive any preference payments and were therefore entitled to the full $500,000 SIPC payment. As a result, on or about July 16, 2009, the Trustee sent the Peskins a Notice of Trustee's Determination of Claim (the "Notice") and a Partial Assignment and Release in the amount of $2,310,191.25, which reflected the amount of money deposited with BLMIS, less subsequent withdrawals. The Notice informed the Peskins that upon execution of the Assignment and Release, the Trustee would make a partial satisfaction of the allowed claim by sending the Peskins a check for $500,000, with the funds advanced by SIPC. On August 8, 2009, the Peskins received the check for $500,000.[7]
b. Mrs. Ebel's Accounts
Maureen Ebel is a Madoff investor who opened two BLMIS accounts. The first account she opened was a direct IRA account. On or about February 24, 2003, Mrs. Ebel invested $1,348,877.12 therein. Mrs. Ebel never withdrew any money from this account. On November 30, 2008, it reflected a balance of $2,532,140.66.
The second account Mrs. Ebel opened was a direct investment account in which she invested a total of $3,831,387.49 beginning on or about March 17, 2003 and ending on or about July 23, 2004. Mrs. Ebel regularly withdrew funds from this account. On or about September 15, 2008, Mrs. Ebel received a check from BLMIS dated September 11, 2008 in the amount of $102,000, which she deposited in her account that day. As of November 30, 2008, the balance reflected on this account was $4,729,125.04.
Mrs. Ebel filed her SIPC claim for both accounts in February 2009. On or about May 20, 2009, the Trustee sent Mrs. Ebel a Notice of Trustee's Determination of Claim and a Partial Assignment and Release with regard to her IRA account, allowing her claim in the amount of $1,348,877.12, which reflected the amount of money deposited with BLMIS[8]. On or about June 6, 2009, she received a check from SIPC for $500,000 with respect to this account. On or about May 22, 2009, the Trustee sent Mrs. Ebel another Notice of Determination with regard to her direct investment account, allowing her claim in the amount of $2,290,387.49, which reflected the amount of money deposited with BLMIS less withdrawals. The Notice of Determination also informed Mrs. Ebel that upon execution of the Assignment and Release, the Trustee would make a partial satisfaction of the allowed claim by sending her a check for $398,000, with the funds being advanced by SIPC. The reduction in the SIPC advance represented an offset of the $102,000 withdrawal from Mrs. Ebel's account that cleared on September 16, 2008, within the 90-day preference period. On or about June 9, 2009, the Trustee sent Mrs. Ebel a second Notice of Trustee's Determination of Claim and a revised Partial Assignment, reflecting that she could accept the $398,000 while reserving her rights as to the disputed portion of the SIPC advance. According to Mrs. Ebel, she had not received the check for $398,000 as of the filing of Plaintiffs' Opposition brief. According *143 to the Trustee, Mrs. Ebel has now been paid the $500,000 SIPC advance with respect to her direct investment account, thereby totaling a $1 million SIPC advancement for her two accounts.
DISCUSSION
I. Rule 12(b)(6) of the Federal Rules of Civil Procedure
When considering a motion to dismiss under Federal Rule 12(b)(6), a court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007); E.E.O.C. v. Staten Island Sav. Bank, 207 F.3d 144, 148 (2d Cir.2000). However, the factual allegations in a complaint may not be supported by mere conclusory statements. Rather, they must be sufficient "to raise a right to relief above the speculative level," and provide more than a "formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555, 127 S. Ct. 1955. "[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 129 S.Ct. at 1950. For the following reasons, the Complaint fails the survivability test.
II. The Claims Procedure Order
On December 23, 2008, this Court approved the Claims Procedure Order, which sets forth a methodical and systematic framework for the filing, determination and adjudication of claims in the BLMIS liquidation proceeding. The procedures therein have been consistently approved and utilized in SIPA proceedings since its enactment in 1970.[9] Pursuant to this order, all claims by customers must be filed with the Trustee. (Order at 3; SIPA at § 78fff-2(a)(2)). The Trustee satisfies customer claims by allocating customer property supplemented by SIPC advances. (Order at 5; SIPA at § 78fff-2(b)). If the Debtors' books and records fail to support a claim or the claim is not otherwise established to the Trustee's satisfaction, he may deny it and is obligated to notify the claimant of the determination in writing (the "Trustee Determination"). If the claimant does not object to the Trustee Determination, it is deemed approved by the Court and binding on the Claimant. If the claimant objects and files an opposition, the Trustee must obtain a hearing date and notify the claimant thereof. (Order at 6-7). The Trustee may decide to settle the claim, if appropriate. (Order at 6). This process provides a practical and efficient way to resolve a large number of claims without burdening the court or draining its resources. The Trustee can resolve most of the claims, leaving only those incapable of resolution for this Court.
III. Portion of Plaintiffs' Complaint Related to the Net Equity Issue ("Count I") Should Be Dismissed Pursuant to Rule 12(b)(6) Because It Violates the Claims Procedure Order.
Plaintiffs chose to seek declaratory relief in connection with the Net Equity Issue through the institution of an adversary proceeding in this Court. Yet, Plaintiffs, like all other customers, must adhere *144 to the procedures set forth in the Claims Procedure Order because (i) the Order plainly applies to Plaintiffs' claim in Count I of the Complaint; (ii) the Order does not harm Plaintiffs as it provides for the same relief, if warranted, as that sought in the Complaint; and (iii) Plaintiffs' failure to follow the procedures is fundamentally unfair to other objecting customers and allowing such conduct to proceed would wreak havoc on the claims adjudication process. Accordingly, Count I of Plaintiffs' Complaint is in direct contravention of the Claims Procedure Order[10] and must therefore be dismissed pursuant to Rule 12(b)(6).
First, the Claims Procedure Order clearly applies to Count I of the Complaint because Count I relates to the Trustee's determination of Plaintiffs' customer claims. Courts have a duty to enforce their orders and ensure that all parties under their jurisdictions follow them. Negron-Almeda v. Santiago, 528 F.3d 15, 23 (1st Cir.2008) citing United States v. Spallone, 399 F.3d 415, 421 (2d Cir.2005) ("[U]nless and until a clear and unambiguous order is amended or vacated ... a court must adopt, and give effect to, [the order's] plain meaning."). Therefore, it is this Court's responsibility to require Plaintiffs to adhere to the claims determination process that is already in place.[11]
Second, Plaintiffs are not prejudiced by comporting with the Order because the relief sought in Count I is exactly the relief available to the Plaintiffs under the Order. Plaintiffs can argue the same points, allege the same facts, and obtain the same result by following these procedures. Nonetheless, Plaintiffs have ignored this Court's Order and failed to demonstrate that there is any sound basis for the institution of an adversary proceeding. In a case with substantially similar facts, also within the context of a SIPA liquidation, the United States District Court for the District of New Jersey granted the Trustee's motion to dismiss the adversary proceeding on the basis that the Trustee should be able to "consider the merits of [the creditor's] claim in the normal course [of] the claims process previously established in the [claims procedure] order." In re Bevill, Bresler & Schulman, Inc., No. 85-1728 (D.N.J. May 22, 1989).[12] Similarly, the Plaintiffs here may not preempt the Claims Procedure Order by bringing an adversary proceeding.
*145 Third, and most importantly, Plaintiffs' failure to comply with the Order is fundamentally unfair to other customers and permitting such a course of action would lead to an unwieldy process of adjudicating claims. With regards to fairness, the filing of this suit is unjust as it appears to be Plaintiffs' way to jump the line and obtain priority of their claims over the claims of other customers. "[I]nstead of standing in line with other claimants, the Plaintiffs have chosen to rush to judgment, thereby muddying the framework of the claims process." (SIPC Memo of Law in Support at p. 9). The Customers voiced this same deep concern "about the unfairness of permitting the Peskin Plaintiffs to effectively short circuit the claims process and jump the gun to obtain a resolution, when other customers have followed the rules." (See Customers' Statement in Support of Trustee's Motion to Dismiss at pp. 7-8). These Customers, who were also deceived and suffered the same misfortunes as the Plaintiffs, if not worse, have therefore urged this Court "to require that all customers play by the same rules to determine the critical net equity issue." (Id. at p. 8).
With respect to wreaking havoc on the claims adjudication process, condoning this type of conduct will not only invite a "chaotic race to the courthouse" by other customers, Secs. Investor Prot. Corp. v. S.J. Salmon & Co., Inc., No. 72 CV 560 (Bankr. S.D.N.Y. June 1, 1972), but will also lead to an enormous drain on the Trustee's resources. To date, the Trustee has received over 15,000 claims. If each customer decided to file a lawsuit instead of an objection to the Trustee Determination, the claims adjudication process would become cumbersome, ungainly and unmanageable and would lead to the expenditure of an unfathomable amount of judicial resources. The Trustee would be forced to divert substantial resources to the task of defending against this and other similar cases in court, while simultaneously litigating with customers and creditors within the confines of the Claims Procedure Order. In other words, an "avalanche of similarly disruptive suits" would descend upon the Court if Plaintiffs were allowed to proceed. (SIPC Memo of Law in Support at p. 9). However, in an effort to expedite the resolution of the Net Equity Issue in an efficient manner while affording all claimants the opportunity to be heard, the Trustee has proposed a briefing schedule (the "Scheduling Motion") on the Net Equity Issue.
a. The Scheduling Motion
The Trustee has recently submitted the Scheduling Motion, which is an amplification of the Claims Procedure Order and establishes a procedural framework to allow all parties in interest to participate in the litigation of the Net Equity Issue. The Scheduling Motion will address the concerns of a variety of customers with different account histories and balances, including both net winners and net losers, and will provide everyone involved with the benefits from the submission of a comprehensive and complete record on this issue. Allowing Plaintiffs, who represent only one group of customers (namely, the net losers), to proceed with the adversary proceeding to determine the Net Equity Issue that will apply to all customer claims will yield an incomplete record that might result in piecemeal litigation on this issue. Moreover, Plaintiffs will suffer no prejudice in having the Net Equity Issue decided pursuant to the Scheduling Motion while other customers will suffer great harm if Plaintiffs are permitted to proceed without their participation.
Five responses to the Scheduling Motion have been filed by various parties (collectively, the "Responses"). Specifically, responses were filed on behalf of the following parties: (i) the James H. Cohen *146 Special Trust and its nine beneficiaries (the "Trust Respondents"); (ii) Mary Albanese, the Brow Family Partnership, Allan Goldstein, Laurence Kaye, Suzanne Kaye, Rose Less and Gordon Bennett (the "Class Action Respondents"); (iii) Martin Rappaport, Paul J. Robinson, Judith Rock Goldman, Anita Karimian and Albert J. Goldstein U/W FBO Ruth E. Goldstein TTEE (the "Rappaport Respondents"); (iv) Marsha Peshkin IRA, Michael Mann, and Barry Weisfeld (the "Weisfeld Respondents") and (v) James Newman, pro se (collectively, the "Respondents"). Aside from the Class Action Respondents, who oppose the Scheduling Motion,[13] the other Respondents support in large part the procedures set forth therein and only offer slight modifications.
Upon consideration of the filed Responses, the Trustee submitted a revised scheduling order (the "Revised Order"), which attempts to modify the original Scheduling Motion. It limits the scope of the Net Equity Issue by excluding discussion of certain ancillary matters[14] but permitting the discussion of other ancillary matters.[15]
In light of the filed Responses, the Trustee's Revised Order, a complete review of the record and arguments heard at the hearing of September 9, 2009, it is in the best interests of all customers for this Court to limit the Net Equity Issue to the determination of the definition of net equity (cash in/cash out vs. account statement balance as of November 30, 2008 vs. cash in plus interest minus cash out), without any ancillary matters, in accordance with a final scheduling order (the "Final Scheduling Order"), to be submitted to this Court in due course. Narrowing the briefing schedule in this manner will most efficiently and expeditiously resolve this key issue. Ancillary matters raised by various parties will be the subject of separate scheduling orders, similar to the protocols established in the Final Scheduling Order. To the extent that the Responses are not in accordance with the Final Scheduling Order, they are overruled. In recognition of the Claims Procedure Order and in approving the Final Scheduling Order, Count I of Plaintiffs' Complaint must be dismissed.[16]
IV. Plaintiffs' Claims With Regard To Preferences And Breach Of Fiduciary Duty Should Also Be Dismissed.
Besides the Net Equity Issue, Plaintiffs' Complaint essentially contains two other *147 claims. The first is for a declaratory judgment that the Trustee may not assert preference claims against Plaintiffs or deduct preferences from their SIPC advances ("Preference Claim"). The second is for compensatory damages against the Trustee for breach of his fiduciary duties by failing to promptly pay Plaintiffs' SIPC advances of $500,000 ("Breach of Fiduciary Duty Claim").
a. Preference Claim ("Count II")
The Complaint seeks a declaratory judgment that the Trustee is not permitted to assert preference claims against Plaintiffs or deduct such amounts from their SIPC advances. The Trustee alleges that Plaintiffs' Preference Claim has been rendered moot since the Complaint was filed because the issue has been resolved. First, with respect to the Peskins, the Trustee acknowledges that they never received a preferential transfer. Second, with respect to Mrs. Ebel, the Trustee asserts that he recently paid her the full $500,000 SIPC advance, despite her receipt of a transfer during the preference period. As such, the Trustee believes that there is no more relief that Plaintiffs can obtain with regard to Count II. This Court finds that the Preference Claim is not ripe. It should be dealt with either under its own separate briefing schedule (see supra at Section III, subsection a, "The Scheduling Motion") or, if and when Defendant brings a preference action, under the Bankruptcy Code. Accordingly, the Preference Claim is dismissed.
b. Breach of Fiduciary Duty Claim ("Count III")
Plaintiffs' claim for breach of fiduciary duty should be dismissed because it is premature. Plaintiffs have alleged breach of fiduciary duty claims relating to the alleged failure of the Trustee to promptly pay the SIPC advances[17] and his "invention" of a new definition of net equity.[18] In light of entry of the Scheduling Motion, Plaintiffs' claim for breach of fiduciary duty is not yet ripe. Given that the Plaintiffs' fiduciary duty claim hinges on resolution of the Net Equity Issue, it is only logical that this Court resolve the Net Equity issue first. In other words, whether the Trustee has breached a fiduciary duty cannot be decided until the appropriateness of the net equity methodology is resolved.[19] Accordingly, this Court will dismiss this portion of the Complaint without prejudice with leave to refile pending the outcome of the Net Equity Issue determination.[20]
CONCLUSION
For the reasons set forth below and at oral argument, the Trustee's Motion to *148 Dismiss is hereby granted with respect to Counts I and II of the Complaint. With respect to Count III, the Motion to Dismiss is granted without prejudice to refile pending the outcome of the Net Equity Issue. In granting the Trustee's Motion to Dismiss, this Court is simultaneously adopting the Final Scheduling Order with regard to resolution of the Net Equity Issue. In addition, the Customers' Motion to Intervene is granted.
IT IS SO ORDERED.
The parties shall contact chambers to schedule separate briefing schedules to deal with those ancillary matters raised by parties to the Scheduling Motion (see Transcript of Hearing on September 9, 2009). The Trustee is directed to settle the Final Scheduling Order consistent with this decision on all interested parties.
NOTES
[1] Subsequent references to SIPA shall omit "15 U.S.C."
[2] Order on Application for an Entry of an Order Approving Form and Manner of Publication and Mailing of Notices, Specifying Procedures for Filing, Determination, and Adjudication of Claims; and Providing Other Relief, filed on December 23, 2008 (Adv. Pro. No. 08-01789, Docket # 12).
[3] This Court is on notice of the Trustee's (and SIPC's) allegations that Plaintiffs' counsel is operating under a conflict of interest because she not only represents individual customers with conflicting interests but has also filed her own objection to the claims determination for an account in which she has a personal interest.
[4] Dr. Gerald Blumenthal, Robert Horowitz, Lester Kolodny, and Paul J. Robinson (collectively, the "Customers") filed a Memorandum of Law in Support of Their Motion to Be Heard on Trustee's Motion to Dismiss and on the Net Equity Issue in Adversary Proceeding No. 09-1272 ("Customers' Motion to Intervene"), along with a Statement in Support of Trustee's Motion to Dismiss.
[5] This Court has approved the Trustee's scheduling motion as modified per the record of the hearing held on September 9, 2009.
[6] The Trustee is allowing claims in the amount that a customer actually deposited with BLMIS minus the amounts that the customer withdrew from the account, often referred to as the "cash in/cash out" approach.
[7] Although not alleged in the Complaint, the Peskins claim for the first time in their Opposition brief that they are entitled to a SIPC payment of $1,000,000 instead of $500,000. (See Plaintiffs' Memorandum of Law in Support of their Opposition to the Trustee's Motion to Dismiss, at p. 19).
[8] Mrs. Ebel never withdrew any funds from this account.
[9] See e.g., Secs. Investor Prot. Corp. v. Saxon Secs. Corp., 1975 WL 444 (S.D.N.Y.1975) (applying claims procedure substantially similar to one entered here); Secs. Investor Prot. Corp. v. Stratton Oakmont, Inc., 229 B.R. 273, 275-76 (Bankr.S.D.N.Y.1999) (setting forth claims process and relevant order substantially similar to one entered here); In re A.R. Baron Co., Inc., 226 B.R. 790, 792-93 (Bankr. S.D.N.Y.1998) (same); In re Adler Coleman Clearing Corp., 211 B.R. 486, 490 (Bankr. S.D.N.Y.1997) (same).
[10] Although the principal moving party, the Trustee, has not raised this issue, SIPC has pointed out that the filing of the Complaint violates the stay imposed by the District Court Order, dated December 15, 2008, which placed BLMIS in liquidation and removed the liquidation proceeding to this Court. (S.E.C. v. Madoff, et al., No. 08-CV-10791, Docket # 4). In relevant part, under SIPA section § 78eee(b)(2)(B)(i), the District Court ordered "any other suit against any ... trustee of the Defendant ... is stayed." (Order, p. 3 ¶ V). In the absence of a request for modification of the stay, SIPC asserts that this action should not be permitted to proceed. In view of this Court's dismissal determination on other grounds, there is no need to reach the issue of a stay violation.
[11] As a side note, the procedures set forth in the Order do not seem difficult to follow as evidenced by the many customers who have received claim determinations from the Trustee and have objected in accordance with the Order's procedures. Among these objectors is Plaintiffs' counsel herself, who filed objections on behalf of her own personal account, and on behalf of clients she represents.
[12] The order dismissing the complaint in In re Bevill is not reported. Nonetheless, the procedural history above is discussed in a subsequent opinion, a copy of which was provided to this Court as Exhibit A to the Declaration of David J. Sheehan in Support of Motion to Dismiss the Peskin Complaint, or, in the Alternative, to Strike.
[13] The Class Action Respondents oppose the Scheduling Motion and seek to have the Net Equity Issue decided within the context of their putative class action adversary proceeding instead. This Court finds no merit to this objection because, inter alia, litigation on the merits on behalf of a class should only proceed if, and after, a class is certified, which has not yet taken place (putative members of the class may or may not be homogenous), and to postpone resolution of the Net Equity Issue until after class discovery and certification briefing is concluded would unduly delay adjudication of this issue to the detriment of all customers.
[14] These ancillary matters include (i) transfers from a former to a current BLMIS customer; (ii) BLMIS accounts with more than one owner; and (iii) BLMIS accounts held in the name of feeder funds.
[15] These ancillary matters include, but are not limited to, (i) the effect of the knowledge a customer may have had about the operation of BLMIS; (ii) the Trustee's avoidance powers; and (iii) the effect on a determination where the BLMIS customer account history includes a transfer from another account at BLMIS.
[16] As per the Trustee's request in his Memorandum of Law in Support of his Motion to Dismiss, this Court will allow this adversary proceeding to be converted into an objection on Mrs. Ebel's behalf, which would be deemed filed the date of the filing of the adversary proceeding.
[17] It should be noted that at the September 9, 2009 hearing, it was revealed that the Trustee has already disbursed some $350 million to claimant customers following the March and July expiration of the claims filing bar dates.
[18] Most recently, a form of the net investor method (cash in/cash out) has been considered by the District Court (see S.E.C. v. Byers, 637 F. Supp. 2d 166 (S.D.N.Y.2009)).
[19] Even assuming arguendo that this Court finds that the Trustee employed the incorrect net equity definition, such a finding does not necessarily amount to a ruling that the Trustee has breached his fiduciary duty.
[20] Plaintiffs have also sought a declaration that Mrs. Ebel is entitled to void the partial assignment and release she executed with regard to Account No. 1ZR318, alleging that the Trustee is not entitled to require her to sign a release as a condition of receipt of property. As this is contradicted by the plain terms of SIPA, this argument fails as a matter of law. See § 78fff-2(b) of SIPA ("Any payment or delivery of property pursuant to this subsection may be conditioned upon the trustee requiring claimants to execute ... releases[] and assignments"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1922266/ | 254 B.R. 296 (2000)
In re Milton SCHNEIDERMAN, Debtor.
No. 99-00521.
United States Bankruptcy Court, District of Columbia.
October 17, 2000.
*297 Nelson C. Cohen, Zuckerman, Spaeder, Goldstein, Taylor & Kolker, L.P., Washington, DC, for debtor.
Lance W. High, Kirkpatrick & Lockhart LLP, Washington, DC, for creditor.
ORDER ADDRESSING MOTION FOR STAY PENDING APPEAL
S. MARTIN TEEL, Jr., Bankruptcy Judge.
The Chase Manhattan Bank ("Chase") seeks a stay pending appeal of the portion of the court's Order Approving Compromise and Settlement of Claims and Sale of Assets that required Chase to dismiss its pending Motion to Satisfy a Judgment by Garnishment Pursuant to Section 16-579 of the District of Columbia Code ("the Garnishment Motion") pending in the case of The Chase Manhattan Bank v. Milton Schneiderman, Case No. 1:97CV02719 (TFH), in the United States District Court for the District of Columbia. The Garnishment Motion seeks to enforce a judgment Chase recovered against the debtor, Schneiderman, by holding the debtor's employer, Madison Residential Development Company ("Madison"), liable under D.C.Code Ann. § 16-579. The court will address Chase's stay motion by employing the usual four-factor approach employed in this circuit, and deny the request for a stay, except for a 15-day stay conditioned on the posting of a bond of $20,000, to permit seeking a stay in the district court.
I
Chase has not shown any likelihood of succeeding on appeal. Chase has raised a frivolous issue. Chase has raised no issue regarding the court's order requiring Chase to take steps to obtain a dismissal of its Garnishment Motion so far as it concerns prepetition employment of the debtor.[1] Instead, Chase's Statement of Issues to be Presented filed on September 1, 2000, frames the issue on appeal as:
Whether the Bankruptcy Court erred in concluding that the injunction created by the Debtor's discharge bars Chase from pursuing a garnishment action under District of Columbia Code section 16-579 against [Madison] for the recovery of unpaid post-petition wages of the Debtor, and thus that Chase should be required to dismiss its action against Madison, where such an action is not an action against the Debtor, the Debtor's property, or the property of the Debtor's bankruptcy estate?
Chase's argument that it does not seek to collect from the debtor's property and that it does not seek to enforce the debtor's liability was rejected by this court's Supplemental Decision at pp. 25-27 (footnote omitted):
Chase's contention that it seeks only to recover from Madison's own property and not the debtor's disregards the fact that § 16-579 is intended to protect against frustration of the attachment remedy. The debtor's discharge bars Chase from collecting the debt via attachment, and the § 16-579 remedy designed to protect against frustration of that attachment remedy thus does not apply.
. . .
. . . Chase improperly seeks to pursue collection of its judgment against *298 Schneiderman via employer liability of Madison arising out of postpetition services. Chase incorrectly contends that it is merely pursuing a separate claim . . . against Madison because Madison is independently liable to it under § 16-579. As discussed above, § 16-579 is not an independent cause of action, rather, the liability of Madison under § 16-579 is predicated upon the existence of the judgment against the debtor. Because the judgment against the debtor was extinguished by virtue of his discharge, there is currently no debt upon which to base a § 16-579 garnishment proceeding.
The court thought that succinct analysis sufficient to demonstrate that Chase's argument was meritless. But the court will elaborate to show that the analysis is supported by the plain language of the Bankruptcy Code and by a Supreme Court decision decided in 1934 which Chase has failed to acknowledge.
A.
Chase seeks to collect its claim from Madison under D.C.Code Ann. § 16-579 with respect to the debtor's postpetition employment by Madison. Chase never obtained the issuance of a writ of garnishment against Madison. For the reasons explained in part IV of the Supplemental Decision at pp. 10-13, the issuance of a writ of attachment is the necessary predicate to create any rights under D.C.Code Ann. § 16-579 with respect to the debtor's postpetition employment.
The debtor has received a discharge pursuant to 11 U.S.C. 727(a) which discharged Chase's claim.[2] Under 11 U.S.C. § 524, that discharge
voided the judgment against the debtor as a determination of his personal liability (§ 524(a)); and
enjoined the employment of process to collect the debtor's debt as a personal liability of the debtor (§ 524(b)).
Unless the debtor's discharge is later revoked under 11 U.S.C. § 727(d), the discharge injunction will continue to bar Chase from enforcing its prepetition judgment by obtaining issuance of a writ of garnishment. Without a writ of garnishment, Chase cannot pursue any § 16-579 remedy in aid of that writ. Chase's appeal is thus plainly frivolous.
B.
Chase might argue that its Garnishment Motion was the equivalent of a writ of attachment. Such an argument would be frivolous. The Garnishment Motion requested that the district court direct the clerk to issue a writ of attachment. There is no attachment until a writ of attachment is issued and served. See D.C.Code Ann. §§ 16-521(a) (interrogatories may inquire about any "indebtedness of [the garnishee] to the defendant at the time of the service of the attachment" (emphasis added)) and 16-546 ("[a]n attachment shall be levied upon credits of the defendant, in the hands of a garnishee, by serving the garnishee with a copy of the writ of attachment" (emphasis added)).
C.
But even if the Garnishment Motion were the equivalent of a writ of attachment, that would not alter the outcome. Had Chase served a writ of garnishment prepetition, Chase could have acquired in rem rights or third-party liability rights prepetition with respect to the debtor's prepetition employment by Madison namely, either a *299 garnishment lien on unpaid wages or, instead, a right to assert § 16-579 rights against Madison in lieu of a garnishment lien because the debtor had frustrated the writ by working for inadequate compensation.[3]
But as this court observed in the Supplemental Decision at p. 25 n. 12 (emphasis in original):
Had Chase recovered a § 16-579 order applicable to future services, it stands to reason that the intervention of bankruptcy would bar enforcement of the § 16-579 order as to any postpetition services. The debtor is free to work postpetition for a salary without those creditors holding discharged claims being able to reach the salary. Those creditors ought not be able to collect from the employer an imputed wage they would have been unable to collect from the debtor had he been taking a wage.
This is because the debtor's postpetition employment necessarily gave Chase no in rem or third-party liability rights that were already in existence prepetition.
The Supreme Court's holding in Local Loan Co. v. Hunt, 292 U.S. 234, 54 S. Ct. 695, 78 L. Ed. 1230 (1934), compels this interpretation of the Code. In Hunt, the debtor filed a voluntary petition under the Bankruptcy Act, thereby adjudicating himself a bankrupt (the term applied to a debtor under the Bankruptcy Act). The Court addressed whether his prepetition assignment of future wages, as security for a debt, was enforceable as to postpetition wages despite the discharge of the underlying debt pursuant to statutory discharge provisions that do not materially differ from the Bankruptcy Codes. The Court considered Bankruptcy Act § 67d, 11 U.S.C. § 107(d) (edition in effect in 1934), under which liens given for present consideration generally were unaffected by a bankruptcy case. The Court, 292 U.S. at 242, 54 S. Ct. 695, cited approvingly In re West, 128 F. 205 (D.Or.1904). In West, the court observed that a lien can only attach to property if there is a debt when the property comes into existence, and then reasoned (in language embraced by the Court in Hunt, 292 U.S. at 242-43, 54 S. Ct. 695) that:
The discharge in bankruptcy operated to discharge these obligations as of the date of the adjudication [the petition date], so that the obligations were discharged before the wages intended as security were in existence. The law does not continue an obligation in order that there may be a lien, but only does so because there is one. The effect of the discharge upon the prospective liens was the same as though the debts had been paid before the assigned wages were earned. The wages earned after the adjudication became the property of the bankrupt clear of the claims of all creditors.
West, 128 F. at 206 (emphasis added). The Court then ruled:
The earning power of an individual is the power to create property; but it is not translated into property within the meaning of the Bankruptcy Act until it has brought earnings into existence. An adjudication of bankruptcy, followed by a discharge, releases a debtor from all previously incurred debts, with certain exceptions not pertinent here; and it logically cannot be supposed that the act nevertheless intended to keep such debts alive for the purpose of permitting the creation of an enforceable lien upon a subject not existent when the bankruptcy became effective or even arising from, or connected with, *300 preexisting property, but brought into being solely as the fruit of the subsequent labor of the bankrupt.
Hunt, 292 U.S. at 243, 54 S. Ct. 695 (emphasis added).
Hunt has continued vitality under the Bankruptcy Code. In re Miranda Soto, 667 F.2d 235 (1st Cir.1981). Accordingly, although a writ of attachment seizes both present wages and future wages, the writ is unenforceable to collect a discharged debt from the fruits of any postpetition employment, just as in the case of any similar lien that outside bankruptcy would attach to property acquired by the debtor in the future. In re Baker, 217 B.R. 609, 610-11 (Bankr.N.D.Cal.1998) (garnishment lien that judgment creditor obtained prepetition, as result of its service of earnings withholding order on Chapter 7 debtor's employer, did not survive debtor's bankruptcy discharge as lien that was enforceable against debtor's postpetition wages).[4]
Even without resorting to Hunt's rationale, 292 U.S. at 242-43, 54 S. Ct. 695, that the discharge of a debt is effective as of the petition date, the outcome would be the same: the Bankruptcy Code plainly requires rejection of any Chase argument based on a prepetition writ of attachment. Upon the commencement of the debtor's bankruptcy case, the automatic stay of 11 U.S.C. § 362(a):
barred the continuation of Chase's employment of process in Chase's prepetition judicial action against the debtor (§ 362(a)(1));
barred the enforcement against the debtor of Chase's prepetition judgment (§ 362(a)(2)); and
barred any act by Chase to collect its claim against the debtor (§ 362(a)(6)).
Although the debtor's discharge terminated the automatic stay with respect to acts against the debtor, 11 U.S.C. § 362(c)(2)(C), the automatic stay and the discharge injunction, acting as a continuum, would have rendered any prepetition writ of attachment unemployable with respect to Madison's postpetition employment of the debtor's services:
the continued employment of a writ during the postpetition-predischarge period in order to assert § 16-579 rights with respect to employment during that period would have been barred by the automatic stay; and
upon discharge of the judgment liability there was no longer any debt to be collected pursuant to any writ, such that the writ would have become a nullity with respect to postdischarge employment.
And without being able to employ a writ (even if one had been served prepetition) with respect to postpetition employment, Chase could not invoke § 16-579 against Madison with respect to postpetition employment.
Without violating the automatic stay, Chase could no more have enforced any writ of attachment served prepetition than it could have obtained the issuance of and served a new writ. Accordingly, it would be absurd for Chase to contend that now *301 that the automatic stay has terminated, any writ it served prepetition should be enforceable against Madison with respect to the postpetition-predischarge period. During that postpetition-predischarge period, the automatic stay barred enforcement of Chase's judgment (§ 362(a)(2)) and barred any employment of a writ of attachment (§ 362(a)(1)). Any attempt by Chase to enforce the writ during that period would have been a void act (subject to the voidness being set aside by annulment of the automatic stay). Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969 (1st Cir.1997) (collecting cases).[5] So Chase cannot maintain that the pendency of any writ during the postpetition-predischarge period should now be given effect: the enforceability of a writ during that period was suspended by the automatic stay,[6] and the discharge injunction now bars any effort to enforce the writ. Therefore, since the petition date, and unless and until the debtor's discharge is revoked, Chase has had and will have no right to enforce a prepetition writ of attachment, and this includes any right to assert § 16-579 against Madison to prevent frustration of such a writ by the debtor's working for an inadequate wage.
II
Chase has pointed to no substantial hardship it will suffer from dismissal of the Garnishment Motion. Any such dismissal will be subject to vacating of the dismissal under F.R.Civ.P. 60(b) in the event that Chase secures a reversal of this court's order. The burden of filing a Rule 60(b) motion in the exceedingly unlikely event of this court's order being reversed is not a substantial hardship.
III
The debtor is entitled to the protection of the fresh start embodied in the discharge injunction and which this court's order was designed to effectuate. He should not see his employer subjected to the burden of monitoring the Garnishment Motion proceeding pending the outcome of Chase's appeal. The discharge injunction requires Chase not to pursue the Garnishment Motion. The debtor is entitled to see the Garnishment Motion dismissed. Having been mandatorily enjoined by this court to dismiss the Garnishment Motion, Chase seeks to stay that injunction. Chase has not justified the extraordinary remedy of this court's enjoining its own injunction designed to protect the debtor's fresh start.
IV
The public interest is often neutral in a private dispute, but the public interest in debtors being afforded a fresh start by the discharge injunction weighs in favor of the debtor here. Moreover, the court is concerned that Chase may be pursuing the debtor out of animus instead of a good faith belief that it has a legitimate basis for an appeal. Plainly its appeal is frivolous and would likely subject Chase to sanctions under F.R.Bankr.P. 9011. For this reason, the court will require Chase to post a bond of $20,000 (to cover the costs, fees, and damages recoverable by reason of any prosecution of a motion in the district court for a stay pending appeal) as a *302 condition to this court's staying its order for 15 days to permit Chase to seek a stay from the district court.
Conclusion
Based on the foregoing, it is
ORDERED that the part of this court's judgment that required Chase to take steps to dismiss its Garnishment Motion is stayed for 15 days, on the condition that Chase post a bond of $20,000 to cover the costs, fees, and damages recoverable by reason of any prosecution of a motion in the district court for a stay pending appeal,[7] but Chase's Motion for Stay of Judgment Pending Appeal is otherwise DENIED.
NOTES
[1] Chase apparently recognizes that the trustee had authority to compromise whatever rights Chase had under § 16-579 with respect to Madison's prepetition employment of the debtor. See this court's Supplemental Decision entered August 17, 2000 ("Supplemental Decision") at pp. 2, 23-24, and 25 n. 12.
[2] Chase failed to file a timely complaint objecting under 11 U.S.C. § 727(b) to the debtor's being granted a discharge, and failed to file a timely complaint under 11 U.S.C. § 523(c) to determine that Chase's claim was nondischargeable under 11 U.S.C. § 523(a)(1), (2), (4), (6), or (15). Its claim similarly is not nondischargeable under other provisions of § 523(a).
[3] Neither the automatic stay nor the discharge injunction would have extinguished such rights: the automatic stay only preserved the status quo, and the discharge injunction extinguished the debtor's debt only as a personal liability. Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991) (prepetition lien on property in existence on the petition date remains an enforceable in rem claim postpetition despite the debtor's discharge).
[4] See also United States v. Sanabria, 424 F.2d 1121 (7th Cir.1970) (by virtue of discharge, tax lien, which outside bankruptcy attaches to all property acquired by the debtor in the future, did not attach to property acquired postpetition); In re Braund, 289 F. Supp. 604 (C.D.Cal.1968), aff'd sub nom. United States v. McGugin (In re Braund), 423 F.2d 718 (9th Cir.), cert. denied, 400 U.S. 823, 91 S. Ct. 44, 27 L. Ed. 2d 51 (1970) (same); In re Dinatale, 235 B.R. 569, 575 (Bankr.D.Md.1999) (prepetition tax lien did not attach to debtor's postpetition wages); In re Rumker, 184 B.R. 621 (Bankr.S.D.Ga.1995) (bank's security interest in debtor's accounts receivable did not attach to amounts payable for services which were contracted for prepetition and unperformed as of petition date); United States v. Fuller (In re Fuller), 134 B.R. 945 (9th Cir. BAP 1992) (lien did not attach to postpetition inheritance brought into bankruptcy estate on ground that it was received within 180 days of filing of petition); In re Thomas, 102 B.R. 199 (Bankr.E.D.Cal.1989) (a judgment recorded prepetition for debt discharged in bankruptcy case was ineffective to attach lien to real property acquired by the debtor postpetition).
[5] Even if such an act would have been merely voidable under the minority view of Bronson v. United States, 46 F.3d 1573 (Fed.Cir.1995); and Picco v. Global Marine Drilling Co., 900 F.2d 846 (5th Cir.1990), there were no equities here to warrant treating prosecution of a postpetition writ of attachment as a valid act.
[6] The court need not decide whether the writ was void during the postpetition-predischarge period or whether instead its enforceability was simply suspended, an issue that would have an impact on an employer's decision whether it is free to disregard a prepetition writ of attachment once the debtor files a bankruptcy petition. If a creditor's claim were of a nondischargeable character, the automatic stay could be lifted or annulled under 11 U.S.C. § 362(d) such as to permit enforcement of a prepetition writ of attachment with respect to postpetition predischarge employment. But Chase's debt was discharged.
[7] Because the court is denying a stay beyond a 15-day stay, the court has no occasion to address what would be the appropriate amount of a bond if the court were to stay its judgment during the pendency of the entire appeal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594704/ | 426 F. Supp. 1380 (1977)
Mary TALIFERO, Plaintiff,
v.
Joseph A. CALIFANO, Jr., Secretary of Health, Education, and Welfare, Defendant.
Civ.A. No. 75CV795-W-4.
United States District Court, W. D. Missouri, W. D.
March 9, 1977.
*1381 *1382 Mary Christine Hodgson, Legal Aid & Defender Society, Kansas City, Mo., for plaintiff.
Frederick O. Griffin, Jr., Asst. U. S. Atty., Kansas City, Mo., for defendant.
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND ACTION TO THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE AND, ACCORDINGLY, DIRECTING SECRETARY TO TAKE ADDITIONAL EVIDENCE AND MAKE NEW FINDINGS
ELMO B. HUNTER, District Judge.
This is a petition for review, under the provisions of § 405(g), Title 42, United States Code, of a denial of disability benefits to plaintiff by the Secretary of Health, Education, and Welfare. Under the governing provisions of § 405(g), supra, it is the function of this court to review the administrative record, primarily to determine whether the decision of the Secretary that the plaintiff suffers no medically determinable physical or mental impairment (which has lasted, or can be expected to last, 12 months or more and which prevents her engaging in substantial gainful activity[1]) is supported by substantial evidence.[2]
The administrative record which has been submitted[3] to the court in the action *1383 at bar shows the following: Plaintiff filed her application for disability benefits with the Social Security Administration on June 25, 1974. Therein, she alleged that she became unable to work on April 15, 1973, at the age of 55 years, because of "surgery for polyps on intestines [and] high blood pressure." (Tr. 48.) The application was successively denied throughout the preliminary administrative processes within the Social Security Administration.[4] Thereupon, plaintiff requested a hearing and determination of her application by an administrative law judge. The requested hearing was held on May 23, 1975, and the following evidence was presented to the administrative law judge in connection therewith:
(1) Plaintiff appeared at the hearing, without counsel, and testified that she has tried, without success, to drive the family car[5]; that she has completed the 11th grade in her education (Tr. 29) and has no training of any other kind (Tr. 30); that she is unable to bend and therefore cannot perform any "of the jobs here" (Tr. 30); that her work experience includes 6 years at the Continental Hotel and 1 year at the Phillips Hotel, experience as a waitress and dishwasher in several restaurants[6] (Tr. 31) and she last worked at "washing [and ironing] clothes for doctors and nurses" at this "Emergency Hospital on 39 and Bell" (Tr. 32); that she has not attempted to work since that time because "I don't care how light a job is, you do have to bend, and I have quite a lot of trouble with my heart" (Tr. 34); that her upper left chest had been "hurting" for about 3 or 4 months (Tr. 35); that she also has arthritis in her left foot which causes her knee to swell up if she does "a lot of walking"[7] (Tr. 35); that she has solicited for a job as a dishwasher or a maid, but now is generally told that she is "too old" for that type of work (Tr. 37); that she fixes breakfast for her husband and son, does the housework (except the sweeping of the floors, which her husband does[8]) (Tr. 40), sometimes sews, and sometimes "walk[s] through the stores," fixes other meals (Tr. 41-42) and reads (Tr. 42); that, at the time of the hearing, "I'm some better because . . . before I was operated on, my stomach hurt all the time [and] I'm suffering most now just shortness of breath" due to high blood pressure (Tr. 43); and that she is unable to perform the physical activity required of a maid or dishwasher (Tr. 44-45).
(2) The following medical evidence was presented to the administrative law judge:
(a) Medical records of the University of Kansas Medical Center pertaining to plaintiff's intermittent admissions to that institution from July 24, 1957, to July 16, 1964. These records show that plaintiff was admitted on July 24, 1957, "for delivery of a full term infant" (Tr. 75); that she had previously been pregnant some 13 times; that plaintiff then had "cardiac symptoms and probable digitalis intoxication" (Tr. 75); *1384 that plaintiff ultimately "delivered twins" and suffered several minor post-partum effects including "[i]ntestinal polyposus" (Tr. 76); that, on July 31, 1957, she was the subject of a "[s]mall bowel decompression resection [of the] small bowel" (Tr. 77) in the course of which some of the polyps were excised (Tr. 78) and plaintiff was diagnosed as having symptoms "compatible with Peutz-Jegher syndrome" (Tr. 80); that she was again admitted to the medical center "with a five day history of right lower abdominal pain with radiation in the leg" on April 24, 1958; that "[s]he had a history of eclampsia" (Tr. 81); that, throughout her subsequent stay in the hospital until April 27, 1958, her "symptoms and signs were vague and did not follow any anatomical or physiological pattern"; that, accordingly, she was released on April 27, 1958, without diagnosis; that plaintiff was again admitted to the medical center on May 8, 1958, after an "incomplete abortion" for "dilatation and curettage" (Tr. 82); that she was again admitted on July 8, 1964,[9] reporting constant menstruation with "lower abdominal pain, worse in the right lower quadrant radiating to the right leg" (Tr. 84); that tests showed her to have "Grade II hypertensive retinopathy" and "a grade II systolic murmur along with the left sternal border" (Tr. 84); that "[a]bdominal examination revealed some tenderness in the lower abdomen [and] no palpable masses or organs" (Tr. 84); that "[p]elvic examination revealed a first degree cystocele and descensus" (Tr. 84); and that her "final diagnosis" was:
"Post menopausal bleeding.
Squamous metaplasia of cervix.
Cystocele.
Descensus.
Arteriosclerotic heart disease.
Essential hypertension." (Tr. 85.)[10]
(b) Medical reports of the University of Kansas Medical Center show that plaintiff was hospitalized there from April 15, 1973, to April 23, 1973, with a diagnosis of "Peutz-Jeghers syndrome"[11] (Tr. 90). During her stay in the hospital an "exploratory laparotomy with colotomy and multiple polypectomies" was performed and she was released on April 23, 1973, to "[r]eturn to clinic in three weeks" with "[e]xcellent prognosis." (Tr. 90.)[12]
(c) On June 6, 1974, plaintiff returned to the medical center complaining of shortness of breath, "difficulty getting breath," swelling of her legs, and frequent coughing. She was given some pain medications and advised to "lose weight"[13] (Tr. 95).
(d) A report of E. L. Slentz, M.D., dated June 25, 1974, was to the following effect: that plaintiff claimed that she is disabled "by reason of pain in her left foot and knee, residual abdominal problems from prior surgery and shortness of breath"; that "[m]enstrual history reveals that she has had 22 pregnancies, eleven of which ended in miscarriages and one of which was a still birth"; that she has symptoms "typical of the Puetz-Jeghers syndrome"; that her pulse is 72 and blood pressure 150/95; that she has "a normal chest x-ray with the cardiac shadow being at the upper limits of *1385 normal in size"; that she "has a congenital condition with recurrent polyps of the colon [which] is dangerous in that they may undergo malignant degeneration" but "[a]t the present time there is actually no disability from this condition"; and that:
"She does have a mild degree of osteoarthritis involving her knee and has flat feet which she indoubtedly has had all her life. She may very well have angina pectoris although her electrocardiogram did not confirm this conclusively. She does have chest pain on rather minimal exertion and she does have definite pain with exertion with relief by rest. She does have a mild degree of hypertension." (Tr. 99-100.)
(e) She returned again to the medical center on July 25, 1974, whereupon her "major complaint" was constant dull aching pain with slight swelling" of the left foot. It was the "impression" of the attending physician that plaintiff was "probably" suffering from "sprain" and it was "plan[ned]" to x-ray the painful area. (Tr. 96.)
(f) Again, on September 23, 1974, plaintiff was cursorily examined in the medical center, still complaining of pain in her left foot. It was noted that the "5th toe deviated laterally"; that the "foot [is] painful to palpation"; and that "motion [is] limited in all directions by pain." (Tr. 97.) The diagnosis was "gout," "structural abnormality," and "strain." (Id.)
(g) Subsequently in 1974, plaintiff was treated on an outpatient basis in the University of Kansas Medical Center for her foot and chest pains, her shortness of breath, and varicose veins (Tr. 105-113). She continued to report "chronic ankle pain" and was prescribed the painrelieving drug, Darvon (Tr. 106). She continued to have a grade II systolic murmur and there was A-V nicking. (Id.) In October 1974, x-rays led to a diagnosis of "mild degenerative arthritis" in the left ankle. (Tr. 107.) Her pain in the ankles and swelling tended to increase throughout 1974 and early 1975. (Tr. 108.) She had episodes of chest pain, culminating in new diagnosis of "probable angina" and "essential hypertension" requiring "no medications at present." (Tr. 109.) A radiology consultation on March 27, 1975, resulted in findings that "[t]he heart is at the upper limits of normal in size; [t]he lungs are clear [and] [n]o congestive failure is demonstrated." (Tr. 113.)
(h) David M. Pugh, M. D., Associate Professor of Medicine at the University of Kansas Medical Center, rendered a written report under the date of April 14, 1975. (Tr. 114-115.) He stated that plaintiff suffers from "documented essential hypertension"; that she "has a history of two months of exertional chest pain brought on by walking 3 blocks on level ground"; that "blood pressure is 140/85 and pulse 82 and regular with rare extra systole"; that "[t]here is a grade II hypertensive change in the fundi and the remainder of the HENT is normal"; that "[t]here is a grade II systolic ejection murmur along the upper left sternal border"; that a recent chest x-ray showed "the heart to be at the upper limits of normal in size with slight left ventricular prominence" and, on a treadmill exercise test, normal results were obtained; that she suffers, with her "mild hypertension," "probable recent onset of angina pectoris"; and that:
"We believe that she could participate in mild physical activity such as caring for herself and light household duties or sedentary work elsewhere. She should not be required to perform moderate or heavy physical activity." (Tr. 115.)
(i) On April 2, 1974, the Social Security Administration contacted W. R. Jewell, M. D., of the University of Kansas Medical Center staff. According to the report of the "disability interviewer, the following was the substance of Dr. Jewell's oral report:
"Claimant's impairments should not prevent all SGA.[14] She made a satisfactory recovery from surgery at AOD, and can *1386 engage in average work activity not requiring protracted bending or lifting heavy weights. Claimant is only 56 years of age and has a good education, and states she has no regular type of job. We note claimant states she has a cough, but hospital reports indicate there is no abnormality of the lungs. Therefore, we assume plaintiff has the residual capacity to do light/sedentary work, and use the upper extremities in a normal fashion." (Tr. 71.)
This "report of contact" was made the sole basis for initial denial of plaintiff's application, together with information which was apparently taken from an encyclopedia of job descriptions to the following effect:
"Examples of unskilled jobs, sedentary, that can be learned in up to 30 days on the job training or by a short demonstration are: Polisher (optical goods, 713.884); Hinge assembler (jewelry cases, 692.885); and Cuff folder (knit goods 685.887). Therefore, we find claimant under no disability." (Tr. 71.)[15]
On the basis of the foregoing evidence, the administrative law judge issued his decision on June 25, 1975, denying disability benefits to plaintiff. In evaluating the evidence, he stated in part as follows:
"The medical evidence shows that the claimant has had multiple surgeries including a laparotomy in 1973 for multiple colon polyps, but she has recovered satisfactorily from these operations. She complained of chest pains and was on medication starting April 3, 1975, of Propranolol 20 mg. q. i. d. . . . The heart [was] in the upper limits of normal size with slight ventricular prominence. She also had a treadmill exercise test and at the time of this her resting tracing was within normal limits and she walked a total of nine minutes . . . The doctor [David M. Pugh, M.D., see pp. 1385-1386, supra] stated that the claimant has mild hypertension with most readings over the past years in the 152/90 range and has probable recent onset of angina pectoris [and that] . . .:
`She would be Class II based on the Guide to the Evaluation of Impairment, American Medical Association, with symptoms, angina, produced after 3 to 4 blocks of level walking. We believe that she could participate in mild physical activity such as caring for herself and light household duties or sedentary work elsewhere. She should not be required to perform moderate or heavy physical activity.'
"Thus, the better medical evidence shows that the claimant does have a mild heart condition with increased blood pressure. However, the evidence does not show that the claimant has sufficient handicaps as a result thereof to prevent her from engaging in all forms of substantial gainful activity. It is noted the claimant complained additionally of difficulty in bending because of her feet and legs which hurt her. However, the overall evidence does not substantiate a severe impairment that would prevent the claimant from doing light housework or washing dishes, which was her former occupation. It is noted that she worked at the Hotel Phillips until i[t] closed, then she worked at Nichols' Luncheon washing dishes. She subsequently worked at Putsch's for a period of time. She stated she left the job because she worked so good the other workers did not contribute and she had it all to do. She asked for more money from her employer because the other employees did not cooperate or do what she thought was a fair share of the work and the supervisor told her no. So she left that job.
"It is interesting to note, too, that since her last operation, she has applied for jobs but was not hired because they told her she was too old to do the work. This indicates the claimant felt that she was *1387 able to do the work and was attempting to obtain employment.
"In summary, the claimant has had multiple surgeries from which she recovered and has a mild condition as a result of hyperten[s]ion at the present. However, she recently had a treadmill exercise test which was considered normal. The medical evidence does not show that the claimant has a severe cardiovascular condition. In reference to her pain in legs and back, there is no medical evidence to show any reason for such pain. Furthermore, the claimant states she can walk three or four blocks before she has any chest pain which is relieved by rest."
On September 29, 1975, the Appeals Council of the Social Security Administration affirmed the decision of the administrative law judge without further opinion. "Accordingly, the hearing decision stands as the final decision of the Secretary in [her] case."[16]
Judicial Review of the Secretary's Decision
As noted above, the principal mission of the federal district court is to determine whether the Secretary's decision is supported by substantial evidence. But, to constitute evidence which will result in a judicial affirmance of the Secretary's decision, the evidence must be such that a reasonable man would accept as supporting the decision.[17] And the entire administrative record must be considered. It does not suffice to sequester a portion of that record which may support a finding of non-disability and consider it in isolation from the remainder of the record.[18]
Therefore, it is incumbent upon the administrative law judge to apply correct legal standards in making his decision and to make all the findings of fact which are necessary to resolve the material factual issues. See, e. g., Pollard v. Gardner, 267 F. Supp. 890, 893 (W.D.Mo.1967). It is fundamental that, in determining whether a claimant suffers an inability to engage in any substantial gainful activity, the Secretary is to consider the cumulative effects of all of the claimant's impairments. "In evaluating whether a claimant is capable of engaging in any gainful activity it is essential that the Secretary view the individual as a whole. It is senseless to view several disabilities as isolated from one another . . ." Landess v. Weinberger, 490 F.2d 1187, 1190 (8th Cir. 1973). "`All complaints must be considered together . . . in determining work capacity.'" Haskins v. Finch, 307 F. Supp. 1272, 1279 (W.D.Mo. 1969). In the administrative action here under review, the claimant complained of hypertension, recurring pain in her abdomen (which she claims prevented her from accomplishing almost any "bending" of her body), pain and swelling in her left foot and knee, shortness of breath, recurrent polyps of the colon, a systolic murmur with AV nicking, degenerative arthritis in the left ankle and a heart which borders on being enlarged. Further, with respect to each of her complaints, the medical reports which were submitted in the administrative proceedings tend to show that they result from "anatomical, physiological, or psychological abnormalities which are demonstrable by medically acceptable clinical and laboratory diagnostic techniques." Section 423(d)(3), Title 42, United States Code. Nevertheless, in determining that the severity of plaintiff's impairments would prevent her from engaging in substantial gainful activity, the administrative law judge considered them singly, rather than in combination. In fact, *1388 in making his determination, he relies almost wholly upon the medical report and opinion of David M. Pugh, M. D., whose examination and findings were devoted solely to determining the degree of hypertension and angina pectoris which the plaintiff might suffer. There is no indication that the administrative law judge considered the cumulative effect of all plaintiff's complaints and ailments. And, in fact, he purports to find only that she "does have a mild heart condition with increased blood pressure." For this reason alone, therefore, remand of this action to the Secretary of Health, Education, and Welfare for the application of the proper legal standard in making his findings is warranted.
It appears, further, that if plaintiff's hypertension and angina pectoris are viewed properly under the regulations of the Secretary of Health, Education, and Welfare, she may be able to produce evidence that she suffers from one of the types of impairments listed by the Secretary in Subpart P, Appendix, Title 20, Code of Federal Regulations. If so, she would be entitled without a further showing to a period of disability.[19] See Section 404.1506(a), Title 20, Code of Federal Regulations, providing that:
"The Listing of Impairments describes, for each of the major body systems, impairments which
(1) Are of a level of severity deemed sufficient to preclude an individual from engaging in any gainful activity; and (2) Are expected to result in death or to last for a continuous period of not less than 12 months."
The following diseases are listed by the Secretary in Subpart P, supra, which may be applicable to plaintiff:
"4.03 Hypertensive vascular disease (apply this section if diastolic pressures are consistently in excess of 100 mm. Hg.). With:
A. Hypertensive retinopathy evidenced by hemorrhages, or cotton wool patches, with reduction in the caliber of the arterioles and arteriovenous crossing defects (or papiledema); or
B. Impaired renal function as described under the criteria in § 6.02; or
C. Cerebrovascular damage as described under the criteria in § 11.04; or
D. Congestive heart failure as described under the criteria in § 4.02; or
E. Angina pectoris as described under the criteria in § 4.06, § 4.07, or § 4.08. "4.07 Angina Pectoris (as defined in § 4.00D) associated with the standardized ECG exercise test abnormalities (see § 4.00E) in the absence of digitalis (in the presence of digitalis, the predigitalis ECG should be evaluated), showing one of the following:
A. Development of depression of ST segment to more than 0.5 mm. which lasts for at least 0.12 seconds and appears in at least 2 consecutive complexes in any lead; or
B. Development of bundle branch block
Plaintiff, on the evidence which is presently in the administrative record, shows some, but not all, of these requirements.[20] Such *1389 evidence as has been submitted, however, shows that the other necessary evidence may be readily available or "readily obtainable" within the meaning of Hess v. Secretary of Health, Education, and Welfare, 497 F.2d 837 (3d Cir. 1974). Therefore, "[c]laimant should be entitled to have the views of her treating physicians more fully developed." Landess v. Weinberger, supra, at 1189.[21] And remand is therefore proper for this separate and independent reason. This is particularly so when the onset of plaintiff's angina pectoris was relatively recent at the time the administrative decision was made on September 29, 1975, and plaintiff met the "earnings requirement" until September 30, 1976, and thus might claim a period of disability commencing on or before that date.[22]
Further, the administrative law judge makes no specific finding regarding whether he has accepted or rejected the plaintiff's subjective complaints of pain and, if he accepts them, whether he has considered them in combination with the other impairments in determining whether plaintiff is able to engage in any substantial gainful activity. If plaintiff's complaints are true, and she suffers pain with the slightest bending of her body and increasing pain in walking and other body movements, her ability to perform even sedentary work must be regarded as highly questionable. Further, the medical evidence which has been submitted to date shows considerable clinical support for plaintiff's subjective complaints.[23] The governing cases are clear to the effect that "[p]ain, in itself, may be a disabling condition." Baerga v. Richardson, 500 F.2d 309, 312 (3d Cir. 1974), cert. denied, 420 U.S. 931, 95 S. Ct. 1133, 43 L. Ed. 2d 403 (1973). "Symptoms which are real to the claimant, although unaccompanied by objective medical data, may support a claim for disability benefits, providing, of course, the claimant satisfies the requisite burden of proof." Bittel v. Richardson, 441 F.2d 1193, 1195 (3d Cir. 1971).[24] When no finding is made respecting the credibility of the plaintiff's subjective complaints, remand to the Secretary for proper assessment of the pain factor is proper.[25]
*1390 Remand is also proper to grant the Secretary the opportunity to call a vocational expert, if necessary,[26] and to make a showing of the availability of jobs which plaintiff can perform in the national economy.[27] The finding of the administrative law judge, on the basis of the evidence currently in the administrative record, that plaintiff could return to work as a dishwasher or waitress is not supported by any substantial evidence. All of the subjective and objective evidence is in agreement that plaintiff suffers pain, shortness of breath, and other symptoms from sustained walking and that she cannot be expected to perform the repeated lifting and other movements required by dishwashing.[28] Even Dr. Pugh, whose report, as noted above, focuses only upon plaintiff's hypertension and angina pectoris, concludes that she could not be expected to perform even "moderate . . . physical activity." And, when a social security disability claimant makes a showing of her inability to return to her former type of work by reason of her impairments, that shifts to the Secretary the burden "of coming forward . . . with proof that there are substantial job opportunities in the national economy." Meneses v. Secretary of Health, Education and Welfare, 143 U.S.App.D.C. 81, 442 F.2d 803, 807 (1971); Lund v. Weinberger, 520 F.2d 782, 785 (8th Cir. 1975); Garrett v. Richardson, 471 F.2d 598, 603 (8th Cir. 1972). Remand is proper for this purpose also.[29]
Finally, remand is necessary for the purpose of granting the Secretary an opportunity to correct the application of improper legal standards by the administrative law judge. In evaluating the evidence, the administrative law judge draws inferences adverse to plaintiff from (1) her possible ability to perform housework and (2) her unsuccessful attempts to obtain employment. The authorities are clear, however, that the ability to perform sporadic and infrequent household tasks cannot be equated with the ability necessary to perform substantial gainful activity.[30] And, with respect to a claimant's unsuccessful attempts to work, it has been variously held that evidence of such constitutes proof in favor of disability[31] and that it is irrelevant,[32] but it has never been held that a claimant should be penalized for attempting to obtain and perform compensable work.
Further, the plaintiff has moved for remand of this action and has shown good cause[33] therefor. It is therefore
*1391 ORDERED that plaintiff's motion to remand this action to the Secretary of Health, Education, and Welfare be, and it is hereby, granted and this action is accordingly remanded to the Secretary of Health, Education, and Welfare for the taking of additional evidence and the making of new findings in accordance with the foregoing considerations.
NOTES
[1] "Disability" is defined in the Act, as pertinent to this action, as "inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months." Section 423(d)(1)(A), Title 42, United States Code.
[2] "The findings of the Secretary as to any fact, if supported by substantial evidence, shall be conclusive . . ." Section 405(g), Title 42, United States Code.
[3] "As part of his answer the Secretary shall file a certified copy of the transcript of the record including the evidence upon which the findings and decision complained of are based." Section 405(g), Title 42, United States Code.
[4] The initial determination of disability vel non on the application for benefits is ordinarily made by the state vocational rehabilitation agency, see Section 421(a), Title 42, United States Code, or by the Secretary "in accordance with regulations prescribed by him," see Section 421(g) of the same title, and it may then be reconsidered by the Secretary. See Section 421(c) of the same title. Thereafter:
"Any individual dissatisfied with any determination . . . shall be entitled to a hearing thereon by the Secretary . . . and to judicial review of the Secretary's final decision after such hearing as is provided in section 405(g) of this title."
Section 421(d), Title 42, United States Code. See also Section 405(b) of the same title.
[5] Even if she had been successful, "the mere fact that plaintiff can drive a car and is mobile does not establish that he can engage in substantial gainful activity." Robinson v. Richardson, 360 F. Supp. 243, 250 (E.D.N.Y.1973), quoted in Yawitz v. Weinberger, 498 F.2d 956, 960 (8th Cir. 1974).
[6] Plaintiff stated that she worked at Nichols' Cafeteria, Putsch's and Sidney's in the Kansas City area. (Tr. 31.)
[7] Plaintiff further stated that, if she did a lot of walking, "my knees swell up" and that "that'd be why I left Continental Hotel because my knee stayed swelled, you know, all the time, and I just couldn't work on it." (Tr. 35.)
[8] Her sons also aid her in sweeping and housecleaning. (Tr. 41.)
[9] The medical records show that plaintiff stayed in the hospital some eight days before being discharged on July 16, 1964. Examinations and tests conducted during this period of time showed plaintiff to have a blood pressure level of 160/90, a pulse rate of 84 per minute, a "Grade II hypertensive retinopathy, "a grade II systolic murmur along the left sternal border," and a "chest film (which) showed minimal cardiac enlargement." (Tr. 84.) A biopsy performed after her cervical operation resulted in a diagnosis of "Acute and chronic ulcerative cervicitis with focal atypical basal cell hyperplasis." (Tr. 88.)
[10] See note 9, supra.
[11] This diagnosis is one of some longstanding. It was initially made in June 1957. See pages 1383-1384 of the text of this memorandum, supra.
[12] The prognosis is apparently intended to be restricted to the polypectomy which plaintiff had undergone. The report in the administrative record which concerns this hospitalization does not make any mention of plaintiff's other multiple afflictions.
[13] Tests conducted during this hospitalization revealed plaintiff's blood pressure to be 160/100 and her heart rhythm to be "76 and occasional PAC." (Tr. 95.)
[14] Apparently, this abbreviation is intended to stand for the phrase, "substantial gainful activity."
[15] This report does not purport to constitute evidence of the existence of the jobs thus mentioned "in significant numbers either in the region where (plaintiff) lives or in several regions of the country." Section 423(d)(2)(A), Title 42, United States Code.
[16] This statement was made by the Appeals Council in their letter of September 29, 1975, notifying plaintiff of their action on her request for review. (Tr. 3.)
[17] "Substantial evidence" means "evidence that `a reasonable mind might accept as adequate to support a conclusion'." Miranda v. Secretary of Health, Education and Welfare, 514 F.2d 996, 998 (1st Cir. 1975).
[18] "But in determining whether there is substantial evidence to support the examiner's finding a reviewing court must consider both evidence that supports, and evidence that detracts from, the examiner's conclusion. We cannot affirm the examiner's conclusion simply by isolating a specific quantum of supporting evidence." Day v. Weinberger, 522 F.2d 1154, 1156 (9th Cir. 1975).
[19] In fact, in order to obtain disability benefits, it would not be necessary to show a degree of severity equal to or greater than that described in the listings. In Section 404.1506(a), Title 20, Code of Federal Regulations, it is noted that the impairments which are listed by the Secretary in Subpart P, Appendix, of the same title are deemed to be "of a level of severity deemed sufficient to preclude an individual from engaging in any gainful activity." (Emphasis added.) In order to be entitled to disability benefits, however, (as opposed to widow's benefits and certain other types of social security benefits), a claimant need only meet the lesser standard of showing that he or she is unable to engage in any substantial gainful activity. See Hollis v. Mathews, 520 F.2d 338, 340 (5th Cir. 1975). Therefore, if plaintiff can show that she meets the requirements of the listing, she must automatically thereby show that she meets the requirements of Section 423(d)(1), Title 42, United States Code, pertaining to ordinary disability.
[20] With respect to the listing relating to "hypertensive vascular disease," the medical evidence which is in the administrative record does not show that she suffers "diastolic pressures which are consistently in excess of 100 mm. Hg." but it does show an increase over the past several years in her average blood pressure and heart rate. For example, her pulse was 72 in June 1974 and 82 in April 1975. During 1974 and 1975, her blood pressure appeared to be variously measured at 150/95 and 140/95 and, on one occasion, had previously been measured at 160/100. See note 13, supra. Further, her angina pectoris is reported to have some recent onset. Thus, when the administrative hearing was held on May 23, 1975, and plaintiff met the earnings requirements through that date and was entitled to show a disability having an onset date on or before September 30, 1976, a remand is warranted to give her an opportunity to make the required showing. See note 21, infra.
[21] While plaintiff may well be able to show that she suffers from a listed impairment, she need not necessarily do so to be entitled to a period of disability. See note 19, supra. She may well show that, by reason of impairments which approach the listings in the degree of their severity plus other impairments, considered in combination, she suffers from the inability to engage in any substantial activity.
[22] See note 20, supra.
[23] "She states that the foot hurts when she walks as much as two blocks and that the pain eases off with rest . . . She does have a mild degree of osteoarthritis involving her knee . . ." Report of Dr. Slentz, June 25, 1974, Tr. 99-100. (See and compare Thorne v. Weinberger, 530 F.2d 580, 582 (4th Cir. 1976), to the effect that "all of the medical testimony connects Ms. Thorne's unquestionable pain to her deteriorating back condition.") Dr. Slentz also notes that she has had "pain in her left foot and knee" for "at least 8 years." (Tr. 98.) Plaintiff may also suffer pain for other reasons which are perhaps attributable to her angina pectoris, hypertension, or other ailments.
[24] Some cases have held that the claimant's subjective complaints alone cannot, without more, be the sole basis of a finding of disability; that there must be some corroboration by medical evidence. Landess v. Weinberger, 490 F.2d 1187, 1189 (8th Cir. 1974). But cf. Wilson v. Weinberger, 398 F. Supp. 1071, 1074 (E.D.Pa. 1975) ("As we understand the law in this field, no medical or clinically observable symptomatology is necessary for a finding of disability based on subjective complaints.") All the cases agree, however, that subjective complaints cannot wholly be ignored and must be evaluated with other, corroborating medical evidence.
[25] The administrative law judge may not ignore the claimant's subjective complaints of pain. DePaepe v. Richardson, 464 F.2d 92, 94 (5th Cir. 1972). But he may elect to disbelieve them if he specifically finds them incredible. Reyes Robles v. Finch, 409 F.2d 84, 87 (1st Cir. 1969). Failure to make explicit findings on this issue, however, may lead to the conclusion by the court that the complaints of pain were ignored. Baerga v. Richardson, 500 F.2d 309, 312 (5th Cir. 1974), cert. denied, 420 U.S. 931, 95 S. Ct. 1133, 43 L. Ed. 2d 403 (1973); Chester v. Mathews, 403 F. Supp. 110, 114 (D.Md.1975).
[26] "Where . . . the essential issue relates to the capacity of the claimant to perform a specific job and there is no other evidence directly on that issue, in order for the record to be fully and fairly developed, a vocational expert should be called." Johnson v. Richardson, 486 F.2d 1023, 1025 (8th Cir. 1973).
[27] See note 15, supra.
[28] See note 23, supra.
[29] Willem v. Richardson, 490 F.2d 1247, 1249 (8th Cir. 1974).
[30] See Willem v. Richardson, supra note 29, at 1249, n. 4.
[31] In Walston v. Gardner, 381 F.2d 580, 586, 587 (6th Cir. 1967), it was held that the unsuccessful seeking of employment can be considered and, in effect, lighten the claimant's burden of producing evidence. ("Where an applicant has unsuccessfully attempted to secure employment, less evidence is needed to support a finding of disability than where the applicant has failed to make such an effort.") But see, apparently to the contrary, Bartell v. Cohen, 445 F.2d 80, 82 (7th Cir. 1971) ("Plaintiff's attempts to secure employment are relevant only to her motivation and not to whether she was, in fact, disabled . . .")
[32] See note 31, supra.
[33] Remand is proper within the meaning of Section 405(g), Title 42, United States Code, when "the evidence gathered by the examiner" from the claimant's physicians "does not in any way develop the extent of her disability." Landess v. Weinberger, 490 F.2d 1187, 1189 (8th Cir. 1974) (Emphasis in original.). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594769/ | 426 F. Supp. 708 (1976)
John D. MARKS, Plaintiff,
v.
CENTRAL INTELLIGENCE AGENCY
and
William E. Colby, Director, Central Intelligence Agency, Defendants.
Civ. A. No. 75-1735.
United States District Court, District of Columbia, Civil Division.
November 3, 1976.
*709 David A. Barrett, John H. F. Shattuck, Melvin L. Wulf, American Civil Liberties Union Foundation, New York City, Jerry J. Berman, Washington, D. C., for plaintiff.
John K. Villa, Sp. Asst. U. S. Atty., Robert N. Ford, Asst. U. S. Atty., Earl J. Silbert, U. S. Atty., Washington, D. C., for defendants.
MEMORANDUM AND ORDER
CORCORAN, District Judge.
A. Background
The plaintiff, John D. Marks, on October 20, 1975, brought this action pursuant to the Freedom of Information Act, 5 U.S.C. § 552 (1970), as amended, 5 U.S.C. § 552 (Supp. IV 1974) [FOIA]. He seeks disclosure of "all files, dossiers, communications, computer printouts and other documents" concerning him which defendant Central Intelligence Agency [CIA] then, or in the past, maintained.
Forty-one documents were identified by the CIA as responsive to Marks' FOIA request. According to affidavits filed by the defendants, these materials were largely generated in the course of a national security intelligence investigation of the plaintiff, a former State Department employee with access to classified materials. That investigation was undertaken by the Office of Security, CIA, "when it learned that he [Marks] planned to publish a substantial quantity of classified information and when it was reported by sources that he was contacting present and former government employees in sensitive positions in an attempt to secure specific classified information from them." Twenty-seven of the items identified have been released to the plaintiff in their entireties or with uncontested deletions. Consequently, fourteen documents remain in issue, viz., Documents Nos. 6, 7, 10, 14, 16, 19, 20, 21, 22, 23, 25, 26, 27 and 29.[1]
Presently before the Court are plaintiff's motion for in camera review and defendants' motion for summary judgment.
B. In Camera Review
Addressing first the motion for in camera review of the records in question, the Court rejects as unpersuasive plaintiff's suggestion that the various affidavits submitted in support of defendants' summary judgment motion are insufficiently detailed under the standards articulated in Vaughn v. Rosen, 157 U.S.App.D.C. 340, 484 F.2d 820 (1973), cert. denied, 415 U.S. 977, 94 S. Ct. 1564, 39 L. Ed. 2d 873 (1974). The Court of Appeals concluded in the Vaughn case that in order to test properly the classification of claims to exemptions under the FOIA, the government must provide to the district court (a) a "relatively detailed" analysis, in manageable segments, specifying the justifications for refusing to disclose information and (b) an itemization and indexing which would "correlate statements made in the Government's refusal justification with actual portions of the *710 document."[2] 157 U.S.App.D.C. at 346-48, 484 F.2d at 826-28.
For the purposes of this litigation, defendants have numbered and concisely identified relevant agency records and exemptions invoked in the affidavit of Robert S. Young. A reasonably detailed statement of the nature of information relied upon as justification for non-disclosure of all or specific segments of each document, correlated to the numbering system of the Young affidavit, is contained in the affidavits of Robert W. Gambino and Charles W. Briggs. After careful review of these submissions and comparison with defendants' answers to interrogatories, the CIA's letters to plaintiff, and portions of the ten articles in issue which have been released to Marks, we are satisfied that the defendants' efforts to itemize and index relevant materials and to justify nondisclosure with reference to particular information are sufficient under the Vaughn criteria. Accordingly, in camera review is unnecessary[3] and the motion therefore is denied.
C. Summary Judgment
Turning to defendants' motion for summary judgment, we note that the CIA has invoked three FOIA exemptions with respect to the fourteen relevant documents, viz., 5 U.S.C. § 552(b)(1) [exemption 1], (b)(3) [exemption 3], and (b)(7) [exemption 7]. Marks has challenged the latter two exemptions as unavailable to the CIA as a matter of law.
(1) Exemption 3 5 U.S.C. § 552(b)(3)
Section 552(b)(3) provides that the FOIA's mandatory disclosure provisions do not apply to matters which are "specifically exempted from disclosure by statute." The defendants claim this exemption upon the authority of section 102(d)(3) of the National Security Act of 1947, 50 U.S.C. § 403(d)(3) [NSA], or section 7 of the Central Intelligence Agency Act of 1949, 50 U.S.C. § 403g [CIAA], or both.[4] Marks concedes that section 7 of CIAA falls within the purview of the exemption but contends that section 102(d)(3) of NSA does not. However, plaintiff fails to recognize that both the Senate and Conference Reports on the 1974 FOIA amendments explicitly state the Congressional intent that section 102(d)(3) of NSA shall be considered an exemption 3 statute.[5] S.Rep. No. 93-854, *711 93d Cong., 2d Sess. at 16 (1974); S.Rep. No. 93-1200, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S.Code Cong. & Admin.News at p. 6290; see FAA Administrator v. Robertson, 422 U.S. 255, 95 S. Ct. 2140, 45 L. Ed. 2d 164 (1975); Weissman v. CIA, Civil Action No. 75-1583 (D.D.C. April 14, 1976); Phillippi v. CIA, Civil Action No. 75-1265 (D.D.C. December 1, 1975), appeal docketed, No. 76-1004 (D.C.Cir. December 3, 1975); Richardson v. Spahr, 416 F. Supp. 752 (W.D. Pa.1976). The Court therefore finds, contrary to the position taken by the plaintiff, that both sections 102(d)(3) of NSA and 7 of CIAA are "statute[s]" within the purview of exemption 3 of the FOIA.
(2) Exemption 7 5 U.S.C. § 552(b)(7)
Section 552(b)(7) provides, inter alia, that public disclosure under the FOIA is not required where the matters involved are:
investigatory records compiled for law enforcement purposes, but only to the extent that the production of such records would (A) interfere with enforcement proceedings, (B) deprive a person of a right to a fair trial or an impartial adjudication, (C) constitute an unwarranted invasion of personal privacy, (D) disclose the identity of a confidential source and, in the case of a record compiled by a criminal law enforcement authority in the course of a criminal investigation, or by an agency conducting a lawful national security intelligence investigation, confidential information furnished only by the confidential source, (E) disclose investigative techniques and procedures, or (F) endanger the life or physical safety of law enforcement personnel . . ..
Marks has attacked the defendants' claim to exemption 7 arguing that materials generated in the course of a CIA national security intelligence investigation are not "investigatory records compiled for law enforcement purposes." Nothing we read in either the National Security Act or the FOIA, however, requires the suggested interpretation, and the language and legislative history of exemption 7 strongly suggest a different result.
Subsection (b)(7)(D) of the FOIA provides that a "lawful national security intelligence investigation" conducted by "an agency" is proper under exemption 7. Since (b)(7)(D) contains specific language which limits the more general terms of section (b)(7), the inclusion of such language in (b)(7)(D) indicates that Congress considered a "lawful national security investigation" conducted by an agency to be a "law enforcement purpose" for exemption 7 purposes.
Moreover, in the legislative history of the 1974 FOIA amendments, Congress acknowledged the validity of the CIA's use of national security intelligence investigations to protect sensitive information and endorsed the applicability of exemption 7 to records compiled in the course of such activities:
The conference added language also protecting confidential sources by a criminal law enforcement authority in the course of a criminal investigation, or by an agency conducting a lawful national security intelligence investigation.
The attempt here was to protect Federal Bureau of Investigation records, Central Intelligence Agency records, and the files of other Federal law enforcement agencies. "National security" was to be strictly construed to refer to military security, national defense, or foreign policy. The term "intelligence" was intended to apply to positive intelligence gathering activities, counter intelligence activities, and background security investigations by governmental units authorized to perform such functions. The Freedom of Information Act Amendments of 1974, "A History of the Legislative Proceedings," U.S.Cong. Joint Comm. Print, Sub-Comm. on Administrative Practice and *712 Procedure, 94th Cong., 1st Sess. (1975), at 115-116 (emphasis supplied).
The record in this action reflects that the national security intelligence investigation of the plaintiff was undertaken pursuant to the authority of 50 U.S.C. § 403(d)(3) to protect "intelligence sources and methods from unauthorized disclosure" by a former, highly placed government employee with Top Secret and Code Word clearances who had access to highly classified materials and who "has demonstrated and continues to demonstrate a predilection to divulge such material." The Court is of the opinion that records generated by the defendants in the course of that investigation are "investigatory records compiled for law enforcement purposes" under exemption 7.
(3) Exemption 1 5 U.S.C. § 552(b)(1)
Finally Marks has challenged certain deletions made by the CIA from materials supplied to him. The agency relies on exemption 1.
Exemption 1 permits non-disclosure of matters which are "specifically authorized under criteria established by an Executive order to be kept secret in the interest of national defense or foreign policy" and which are "in fact properly classified pursuant to such Executive order." 5 U.S.C. § 552(b)(1)(A) & (B). Nine of the documents[6] sought by Marks contain information which has been classified pursuant to Executive Order 11652, 3 C.F.R. 339, which authorizes non-disclosure where disclosure "could reasonably be expected to cause damage to the national security."[7] In eight instances,[8] defendants have deleted certain non-substantive information such as agency file numbers and markings, internal organizational ratings, communications transmission data, classification markings and sensitivity indicators, and the locations of foreign CIA stations. Plaintiff, on the other hand, insists that the CIA is required to divulge the locations of foreign agency installations to or from which these materials were sent since, in Marks' opinion "[s]uch information is unlikely to reveal anything not already known about CIA operations" and, thus, could result in no harm to foreign relations, or threat to national security.
We conclude, however, that official, public recognition of the locations of CIA stations abroad clearly "could be reasonably expected" to jeopardize the lives of American intelligence and diplomatic personnel in foreign nations and/or precipitate the expulsion of personnel and elimination of such stations, thereby resulting in palpable injury to the foreign relations of the United States. See Knopf, Inc. v. Colby, 509 F.2d 1362, 1366 (4th Cir.) cert. denied, 421 U.S. 992, 95 S. Ct. 1999, 44 L. Ed. 2d 482 (1975). Accordingly, defendants' invocation of exemption 1 in such circumstances is justified.
D. ORDER
In light of the foregoing, it is hereby
ORDERED that plaintiff's motion for in camera review of the documents in question be and the same is hereby denied; it is further
ORDERED that the motion of the defendants for summary judgment be and the same is hereby granted.
NOTES
[1] Of these documents, ten have been released by the CIA with deletions (Nos. 10, 16, 19, 20, 21, 22, 23, 25, 26 and 27), and four have been withheld in toto (Nos. 6, 7, 14 and 29).
[2] The Court in Vaughn noted in a caveat of particular relevance to the instant litigation that "[a]n analysis sufficiently detailed would not have to contain factual descriptions that if made public would compromise the secret nature of the information, but could ordinarily be composed without excessive reference to the actual language of the document." 157 U.S. App.D.C. at 346-47, 484 F.2d at 826-27 (footnote omitted).
[3] Plaintiff's effort to impute an absence of good faith and due diligence to the defendants finds no support in the record of this action. Quite to the contrary, it is apparent that the CIA and its employees have consistently made reasonable, bona fide efforts to accommodate plaintiff's rights under the FOIA with legitimate national security interests. Moreover, where agency error in labeling or identification of records has resulted in delay, the defendants have promptly and voluntarily acknowledged and remedied discrepancies.
[4] Section 102(d)(3) of the National Security Act of 1947, 50 U.S.C. § 403(d)(3) provides in pertinent part:
. . . that the Director of Central Intelligence shall be responsible for protecting intelligence sources and methods from unauthorized disclosure.
Section 7 of the Central Intelligence Agency Act of 1949, 50 U.S.C. § 403g provides, in pertinent part, that
In the interests of the security of the foreign intelligence activities of the United States and in order to further implement the proviso of section 403(d)(3) of this title that the Director of Central Intelligence shall be responsible for protecting intelligence sources and methods from unauthorized disclosure, the Agency shall be exempted from the provisions of section 654 of Title 5, and the provisions of any other law which require the publication or disclosure of the organization, functions, names, official titles, salaries, or numbers of personnel employed by the Agency . . ..
[5] The plaintiff has further argued that unless documents have been properly classified under Executive Order 11652, disclosure is permissible under sections 403(d)(3) and 403g. Stated differently, it is suggested that the CIA's exemption 3 claims must also meet the standards of exemption 1. We conclude, however, that the two exemptions are independent rather than interdependent and where exemption 3 has been properly invoked, exemption 1 need not be considered. See Bachrack v. CIA, No. CV 75-3727-WPG (N.D.Calif. May 10, 1976); cf. Halperin v. Colby, Civil Action No. 75-676 (D.D.C. June 4, 1976); United States v. Richardson, 418 U.S. 166, 178, n. 11, 94 S. Ct. 2940, 41 L. Ed. 2d 678 (1974).
[6] Documents Nos. 16, 19, 20, 21, 22, 23, 25, 26 and 27.
[7] "National security" is defined in section 1(c) of Executive Order 11652 as the "national defense or foreign relations of the United States."
[8] Documents Nos. 19, 20, 21, 22, 23, 25, 26 and 27. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/343339/ | 550 F.2d 435
1 Fed. R. Serv. 492
UNITED STATES of America, Plaintiff-Appellee,v.Scott WOOD, Defendant-Appellant.UNITED STATES of America, Plaintiff-Appellee,v.Jose BELTRAN-LEON, Defendant-Appellant.UNITED STATES of America, Plaintiff-Appellee,v.George L. MARTINEZ, Defendant-Appellant.UNITED STATES of America, Plaintiff-Appellee,v.Jose VELASQUEZ-LEDESMA, Defendant-Appellant.
Nos. 76-1538, 76-1482, 76-1425 and 76-1350.
United States Court of Appeals,Ninth Circuit.
Dec. 23, 1976.As Amended on Denial of Rehearing and Rehearing En Banc March 1, 1977.
Paul J. Fisher, Seattle, Wash., for Scott Wood.
Philip A. DeMassa (argued), San Diego, Cal., for Jose Beltran-Leon.
James M. McCabe, appointed (argued), San Diego, Cal., for George L. Martinez.
Thomas M. Geisness (argued), of Geisness & Day, Seattle, Wash., for Jose Velasquez-Ledesma.
J. Ronald Sim, Asst. U. S. Atty. (argued), Stan Pitkin, U. S. Atty., Seattle, Wash., for the United States.
Appeal from the United States District Court for the Western District of Washington.
Before ELY, CARTER, and GOODWIN, Circuit Judges.
JAMES M. CARTER, Circuit Judge:
1
This is a consolidated appeal by four defendants convicted by a jury of various counts involving the importation, possession, and distribution of nine tons of marijuana. Appellants claim numerous errors by the trial court. We dismiss the appeal of one appellant and affirm the convictions of the others.
Facts
2
On October 22, 1975, Drug Enforcement Administration (DEA) agents arrested Hector Lazos and George Martinez, both citizens of Mexico, in Seattle. Lazos soon began to reveal the details of a shipment of nine tons of marijuana smuggled from Mexico to Seattle on a fishing boat. Based on this information, a search warrant was obtained and a search conducted of a ranch located near Black Diamond, Washington, where about four and one-half tons of marijuana were found.
3
Under the direction of DEA officials, Lazos cooperated by making telephone calls to several of the other defendants to arrange sales of the marijuana. These conversations were taped and played at trial. Lazos called appellant Jose Velasquez-Ledesma in San Francisco. Velasquez was staying in a hotel with appellant Jose Beltran-Leon. An arrangement was made for Velasquez and Beltran to come to Seattle to pick up the money from the sales.
4
Lazos and appellant Scott Wood picked up Velasquez and Beltran at the airport in Seattle and drove back to a hotel. A tape was made of the conversation during this trip, although the quality of the recording was quite poor. A copy was later made available to the defendants. During the conversation, a sale was planned involving two DEA agents posing as customers.
5
Velasquez and Beltran checked into their hotel. Lazos and Wood went to an isolated house where more marijuana was stored and made the "sale" to DEA agents. Velasquez, Beltran, and Wood were then arrested. A subsequent search of the boat used for the job revealed traces of marijuana and maps and charts indicating a route from Mexico prepared by Wood, who operated the boat.
6
Lazos testified at trial that the criminal scheme began in September 1975. He met with Velasquez, Martinez, and Beltran's brother-in-law, "Noe," in Los Angeles to plan the operation. Velasquez told Lazos that the marijuana was owned by Roberto Beltran, Beltran's uncle, that Wood would supervise transportation, that Martinez would buy the load, and that Beltran would be picking up the money from the sale. This testimony constituted the principal part of the government's case.
7
Appellants were charged along with 10 other defendants in a 10-count indictment. After a two and one-half week trial, all of the appellants were convicted of some counts and acquitted of others. Two defendants were acquitted of all counts. Wood and Velasquez received 10-year sentences; Beltran got six years; Martinez received four. Velasquez and Martinez are serving their sentences. Beltran is free on bail. Wood is a fugitive.
Dismissal of Wood's Appeal
8
Appellant Wood is currently a fugitive from justice. The trial court has issued a bench warrant for his arrest for failure to comply with the conditions of his bail. His attorney was advised that his appeal was in jeopardy unless he surrendered himself. He has not. There is no indication that he would do so upon a decision adverse to him. Dismissal of an appeal of a fugitive under these circumstances is appropriate. See Molinaro v. New Jersey, 396 U.S. 365, 366, 90 S. Ct. 498, 24 L. Ed. 2d 586 (1970); United States v. Villegas-Codallos, 543 F.2d 1124 (9 Cir. 1976); Johnson v. Laird, 432 F.2d 77, 79 (9 Cir. 1970). Wood's appeal is therefore dismissed.
Probable Cause to Search
9
Following the arrests of Lazos and Martinez, the government procured two search warrants. The first authorized the search of the ranch near Black Diamond, Washington, where the marijuana was found. This warrant was based upon the affidavit of a DEA agent who received his information from Lazos. The second warrant was issued for the search of the vessel used in the smuggling operation.1
10
Appellants argue that the search warrant issued for the search of the ranch failed to meet the two-pronged test of Aguilar v. Texas, 378 U.S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723 (1964). Under Aguilar, a warrant must be based on an affidavit which informs the magistrate of (1) some of the underlying circumstances from which the informant's information is drawn, and (2) some basis for determining that the informant is credible. 378 U.S. at 114, 84 S. Ct. 1509. See also United States v. Harris, 403 U.S. 573, 91 S. Ct. 2075, 29 L. Ed. 2d 723 (1971).
11
The affidavit in this case detailed the DEA's knowledge of the Beltran drug-smuggling organization. It contained a detailed description of the residence where the marijuana was stashed, as well as the identity of at least one of the occupants. This information alone meets the first prong of the Aguilar test.
12
But the informant also disclosed his personal role in the smuggling operation. He admitted participation in illegal activities. Such statements against one's own penal interest are a sufficient indication of reliability by themselves. As the Chief Justice said for the plurality in Harris :
13
"Quite apart from the affiant's own knowledge of respondent's activities, there was an additional reason for crediting the informant's tip. Here the warrant's affidavit recited extrajudicial statements of a declarant . . . that over the past two years he had many times and recently purchased 'illicit whiskey.' These statements were against the informant's penal interest. . . .
14
"Common sense in the important daily affairs of life would induce a prudent and disinterested observer to credit these statements. People to not lightly admit a crime and place critical evidence in the hands of the police in the form of their own admissions. Admissions of crime, like admissions against proprietary interests, carry their own indicia of credibility sufficient at least to support a finding of probable cause to search." 403 U.S. at 583, 91 S.Ct. at 2082.
15
We believe this reasoning is compelling here. The informant's admissions, coupled with his specific information, combine to form more than an adequate basis of reliability of the affidavit. Thus, the second prong of the Aguilar test is met and probable cause is established for the warrant. See also United States v. Carmichael, 489 F.2d 983 (7 Cir. 1973) (unsworn statements of secondary informant establish probable cause).
Beltran's Motion for Severance
16
On the morning of the trial, counsel for Beltran represented to the court that if he were granted severance, both Wood and Velasquez would testify on behalf of his client. No affidavits were presented nor was additional proof that this testimony would be forthcoming offered despite the opportunity given for this purpose by the district court. However, counsel for both Wood and Velasquez were present during this discussion and neither objected to counsel's representations.
17
A motion for severance under Fed.R.Crim.P. 14 is committed to the sound discretion of the trial court and will not be disturbed on appeal absent a showing of abuse. United States v. Olson, 504 F.2d 1222, 1224 (9 Cir. 1974). Beltran failed to demonstrate that co-defendants Wood and Velasquez actually would testify at a severed trial. There was no offer of proof as to what testimony, if any, they would give. Under these circumstances there was no abuse of discretion by the district court. Cf. United States v. Cruz, 536 F.2d 1264, 1268 (9 Cir. 1976); United States v. Ellsworth, 481 F.2d 864 (9 Cir. 1973).
Post-Arrest Activity of Informant Lazos
18
After his arrest, Lazos began assisting the DEA in gathering evidence against his co-conspirators. He made telephone calls, recorded with his consent, to several of the defendants as well as to the wife of Velasquez. Velasquez argues that these calls indirectly interfered with the attorney-client privilege. He admits that there are no cases holding that post-arrest contact by the government with a defendant's wife is a basis for reversal.
19
There was not the type of interference here as seen in Hoffa v. United States, 385 U.S. 293, 87 S. Ct. 408, 17 L. Ed. 2d 374 (1966), where the government directly invaded the defense camp to obtain information about trial strategy. However, we are inclined to agree with appellant that the government acted improperly in arranging these calls. Any delay caused by or lack of trust resulting from these contacts could be a violation of a defendant's right to counsel and require reversal. But Velasquez has failed to show that any of the informant's calls to his wife prejudiced him in any way.
20
Absent such a showing, the argument must fail. This is not a case such as Massiah v. United States, 377 U.S. 201, 84 S. Ct. 1199, 12 L. Ed. 2d 246 (1964), where post-arrest conversations were used as evidence against the defendant. The government here did not offer evidence of any of the post-arrest conversations at the trial. Velasquez does not claim that other evidence may
21
be a fruit of this activity. Accordingly, there was no
22
reversible error. The District Court's Refusal to
23
Hold a Hearing on the Legality of Martinez' Arrest
24
Martinez argued before trial that his Miranda warnings were inadequate. The court ruled that the question would be reserved for determination during trial when the officer who arrested Martinez testified. As the trial went on, the government announced that it would not attempt to introduce any of Martinez' post-arrest statements, thus obviating the need for any Miranda hearing. Counsel for Martinez made no objection to this procedure at that time.
25
During the trial, counsel argued for the first time that certain exhibits were the product of an unlawful seizure. He moved to suppress four exhibits (out of over 100 presented). This motion was untimely under Fed.R.Crim.P. 12(b)(3), which requires motions to suppress to be made before trial. The trial court refused to hold a hearing on the motion.
26
There was no excuse for not making a timely motion. Counsel represented appellant at the preliminary hearing at which time it became known that the arrest was made without a warrant. And even if the claim of surprise on that date is accepted, counsel was inexcusably dilatory in not making the motion until four days after receipt of the government's evidence list. See United States v. Barclift, 514 F.2d 1073 (9 Cir. 1975) (three-day delay found inexcusable). Thus, the court acted within its discretion in denying the motion.
27
But even assuming, arguendo, that the court abused its discretion, appellant would have to show substantial prejudice in light of this failure to make a timely motion. He does not. The post-arrest statements of Martinez were not used. The government's case was based on evidence untainted by any questionable arrest or seizure. Martinez does not show where or how he was prejudiced. No reversible error could have occurred.
Restrictions on Cross-Examination
28
Appellants Beltran and Velasquez contend that the trial court unduly restricted cross-examination of Lazos. Both sought to impeach the credibility of Lazos by references to past narcotics dealings, outstanding warrants in other places, and possible "deals" with the DEA. Appellants are correct in asserting that because Lazos was the government's crucial witness and an informant, wide latitude was required on cross-examination. See Gordon v. United States, 344 U.S. 414, 417, 73 S. Ct. 369, 97 L. Ed. 447 (1953); United States v. Marshall, 526 F.2d 1349, 1361 (9 Cir. 1975).
29
This does not mean that the scope of cross-examination is unlimited. The scope of examination is a matter of discretion for the trial court. United States v. Haili, 443 F.2d 1295, 1299 (9 Cir. 1971). An examination of the record in this case suggests that a wide-ranging cross-examination was conducted by six attorneys with over 300 pages of transcript. Lazos was questioned about his use and distribution of drugs, his experience with firearms, and his past confrontations with the law. The district court allowed greater cross-examination than is required.
30
The decisions of this court support this conclusion. In United States v. Carrion, 463 F.2d 704 (9 Cir. 1972), an accomplice testified concerning a conspiracy to import marijuana from Mexico. The court rejected appellant's contention that the trial court improperly restricted his right of cross-examination. The court stated:
31
"The trial judge acted within the scope of his discretion in limiting cross-examination. While the questioning was undoubtedly designed to impeach the witness, the transcript reveals that appellant's counsel began to range too far afield of issues to be determined by the jury. One duty of the trial court is to limit cross-examination at that point to prevent defense counsel from confusing the jury with a proliferation of details on collateral matters." 463 F.2d at 707.
32
See also United States v. Marshall, supra, at 1361; Enciso v. United States, 370 F.2d 749, 751 (9 Cir. 1967).
33
Beltran claims he was improperly denied discovery of notes of interviews with Lazos taken by the United States Attorney. This court in United States v. Harris, 543 F.2d 1247 (9 Cir., 1976), held that rough interview notes are discoverable. However, this rule was given prospective effect only, and the court there determined whether failure to produce the notes in that case resulted in prejudice. United States v. Parker, 549 F.2d 1217 (9 Cir. 1977). See also United States v. Robinson, et al., 546 F.2d 309 (9 Cir. 1976).
34
Here appellant sought interview notes of Lazos. But appellant's conviction rests on more evidence than the testimony of Lazos. As indicated in the discussion of sufficiency of evidence, infra, there was ample evidence other than this testimony connecting Beltran with the conspiracy. Therefore, non-production of these notes would at most be harmless error.
35
However, the only evidence in the record indicates that these materials did not relate to the subject matter of direct examination, and therefore did not fall within the purview of the Jencks Act. This conclusion is supported by an in camera inspection by the court of certain materials sought by the defense. Goldberg v. United States, 425 U.S. 94, 96 S. Ct. 1338, 47 L. Ed. 2d 603 (1976), does not compel discovery here because the notes involved in that case were written in part by the witness himself and related to the subject matter of the direct examination.
Evidentiary Rulings
36
Beltran argues that he was denied due process by the court's refusal to permit the introduction of certain evidence. He sought to introduce the full tapes of telephone conversations between Lazos and Velasquez' wife to show the bias of Lazos against him. It is clear that Lazos had only contempt for Beltran. However, a reading of Lazos' comments suggests that his "revenge" took the form of telling the truth about Beltran's role. Moreover, counsel was permitted to use the transcript of the tape during cross-examination, so that its contents were revealed to the jury anyway. Although the full transcript probably should have been admitted, its insignificant addition to Beltran's case falls short of requiring reversal. "Irreparable prejudice" did not result. See United States v. Hibler, 463 F.2d 455, 462 (9 Cir. 1972).
37
Beltran sought to call a Mexican police officer as a witness. The district court refused to allow this testimony. The officer allegedly would have testified that Lazos was wanted for auto theft in Mexico, contrary to Lazos' own testimony. This is extrinsic proof offered on a collateral matter, and is barred under Fed.R.Evid. 608(b), which prohibits the use of specific instances of a witness' conduct to attack credibility. In any event, evidence regarding past criminal acts of Lazos was brought to the jury's attention via cross-examination.
38
Beltran called Teresa Cabrero to the stand to impeach Lazos. Because of a narcotics charge against her, she invoked the privilege against self-incrimination. The court erroneously ruled that this did not make her "unavailable" as a witness for purposes of allowing hearsay testimony under Fed.R.Evid. 804(a)(1). See United States v. Matlock, 415 U.S. 164, 94 S. Ct. 988, 39 L. Ed. 2d 242 (1974). The court did not allow the interpreter with whom she had spoken to testify under a hearsay exception. The question before this court is whether appellant suffered substantial prejudice by this erroneous ruling.
39
Appellant claims that Cabrero would have testified that Lazos told her he was coming to Seattle to purchase wood, that she never heard the name Beltran, and that she was not charged in Seattle because Lazos interceded on her behalf and made another "deal" with the DEA. All of those statements would be contrary to the testimony of Lazos. But none are surprising. Lazos would have every reason to keep his real purpose and his co-conspirators' names quiet. And since Cabrero was Lazos' girlfriend, she naturally would want to exonerate him while negating her own role. Simply put, she would not have been a credible witness. Appellant suffered little prejudice by the absence of her testimony.
40
Sufficiency of the Evidence Against Beltran
41
Appellant does not contest the proof establishing a conspiracy to smuggle marijuana, but only the evidence connecting him with that conspiracy. His argument fails to account for the lower standard of proof for the latter once the conspiracy has been proved beyond a reasonable doubt. Once the existence of a conspiracy is established, then only slight evidence is necessary to link a particular defendant to that conspiracy. United States v. Nunez, 483 F.2d 453, 460 (9 Cir.), cert. denied, 414 U.S. 1076, 94 S. Ct. 594, 38 L. Ed. 2d 483 (1973). The record shows the following links between Beltran and the conspiracy:
42
1. Beltran was in San Francisco with Velasquez when Lazos telephoned, staying at the same hotel;
43
2. He accompanied Velasquez to Seattle from San Francisco;
44
3. There were extensive telephonic communications between Beltran and Velasquez in Seattle;
45
4. Beltran discussed picking up the money in Seattle with Lazos in a taped telephone conversation;2
46
5. Beltran's uncle was the purported owner of the marijuana and kingpin of the smuggling operation;6. Beltran's brother-in-law helped plan the smuggling operation; and
47
7. Lazos testified at length that he knew Beltran served as "bag man" for the whole operation.
48
There was thus both direct and circumstantial evidence linking Beltran to the conspiracy. It was more than adequate to support the jury's determination. See United States v. Turner, 528 F.2d 143, 162 (9 Cir. 1976) (conspiracy conviction may rest on circumstantial evidence alone).
49
Admission of the Statements of a Co-Conspirator Against Beltran
50
Beltran attacks the introduction of Lazos' hearsay testimony that Velasquez told him that Beltran's role was to "pick up the money for his uncle." He complains that it was not properly admitted as a statement of a co-conspirator and that it violated his rights under the confrontation clause.3
51
In order for such a statement to be admissible as a statement of a co-conspirator, the government need only establish through independent evidence a prima facie case of a conspiracy between the declarant and the defendant. See United States v. Calaway, 524 F.2d 609 (9 Cir. 1975); Carbo v. United States, 314 F.2d 718 (9 Cir. 1963), cert. denied, 377 U.S. 953, 84 S. Ct. 1626, 12 L. Ed. 2d 498 (1964). Based on evidentiary items already listed, this burden was met.
52
Under Dutton v. Evans, 400 U.S. 74, 91 S. Ct. 210, 27 L. Ed. 2d 213 (1970), the question whether statements of co-conspirators are admissible under the confrontation clause must be answered on a case-by-case basis. Four factors were listed in Dutton and have been followed by this court in its analysis. See United States v. Snow, 521 F.2d 730 (9 Cir. 1975); United States v. Baxter, 492 F.2d 150, 177 (9 Cir. 1973), cert. denied, 416 U.S. 940, 94 S. Ct. 1945, 40 L. Ed. 2d 292 (1974). These criteria are met here:
53
(1) The statement about what role Beltran was to take in the upcoming operation is not an "assertion of past fact";
54
(2) Velasquez had personal knowledge of the participants in the conspiracy since he was directing the distribution of the marijuana;
55
(3) There is no indication that Velasquez was relying upon faulty recollection; and
56
(4) The evidence does not support any reason for Velasquez to make misrepresentations to Lazos.
57
Therefore, the Dutton criteria are met. Moreover, factors (2) and (3) alone would have been sufficient.
Beltran's Motion for Mistrial
58
Beltran contends that certain prejudicial remarks by Lazos tainted the verdict against him so that the district court should have declared a mistrial. During the trial, his uncle was identified as the owner of the marijuana. This remark should have had no independent significance for the jury. Moreover, Beltran did not object to the identification of his brother as another participant in the conspiracy. We thus cannot say that this was so prejudicial as to warrant a mistrial.
59
Beltran also objects to testimony connecting him with heroin. Only one remark of this nature was made during the three days of Lazos' testimony, and it was entirely unsolicited by the government. And whatever prejudice might have resulted was cured by an instruction from the judge to the jury to disregard the statement. There was no error in denying the motion for a mistrial.
Jury Instructions
60
Beltran finally objects to the district court's instruction on false exculpatory statements.4 In essence, the court said that when a statement is made alleging innocence which later is shown to be false, it is ordinary to infer a consciousness of guilt. See E. Devitt and C. Blackmar, Federal Jury Practice and Instructions No. 11.20 (Rev. ed. 1970).
61
Beltran told a DEA agent that he met Velasquez in Seattle "by chance." This was false, since he stayed with him in San Francisco and traveled with him to Seattle. The instruction given was therefore appropriate since there was evidence in the record of a false exculpatory statement. Cf. United States v. Leysith, 411 F.2d 1184 (4 Cir. 1969).
Conclusion
62
The appeal of Wood is dismissed. The judgment as to the other appellants is affirmed.
1
If the first warrant was based on probable cause, it necessarily follows that probable cause also existed for the second warrant. The affidavit in support of it incorporated the prior affidavit and cited the successful execution of the first warrant in support of the informant's reliability
2
Beltran disputes the translation of this taped conversation. He claims the word "feria" means "fair" rather than "money," so that he thought Lazos was talking about going to a fair rather than picking up the money. This translation is strained at best. But it need not be disputed since the evidence is to be taken in the light most favorable to the government. Glasser v. United States, 315 U.S. 60, 80, 62 S. Ct. 457, 86 L. Ed. 680 (1942)
3
Under Fed.R.Evid. 801(d)(2)(E), a statement of a co-conspirator in furtherance of a conspiracy is not considered hearsay
4
The government argues that appellant is barred from raising this argument on appeal because he did not object to it at trial. But the other defendants did. The question of whether these objections preserve the issue for Beltran need not be reached, since the instruction was proper | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1594636/ | 954 So.2d 1240 (2007)
Jeffrey CHODOROW and Linda Chodorow, Appellants,
v.
PORTO VITA, LTD., Turnberry Court Corp.; Green Development Associates, Inc.; Bella Vista Mid-Rise South Condominium Association, Inc.; Porto Vita Construction Co.; Robert M. Swedroe Architect-Planners A.I.A., P.A.; and Robert M. Swedroe, Appellees.
No. 3D05-2303.
District Court of Appeal of Florida, Third District.
April 25, 2007.
*1241 Murai, Wald, Biondo, Moreno & Brochin and Gerald Wald, Coral Gables and Allen P. Pegg; Levey, Airan, Shevin, Roen, Kelso, Corona, Herrera, Miami, for appellants.
Becker & Poliakoff and Steven Lesser and Daniel L. Wallach and Neil H. Levinson, Fort Lauderdale; Daniels, Kashtan, Downs, Robertson & Magathan and Madelyn Simon Lozano and Joseph G. Weiss, Coral Gables, for appellees.
Before GREEN, RAMIREZ, and CORTIÑAS, JJ.
RAMIREZ, J.
Jeffrey Chodorow and Linda Chodorow appeal the dismissal of their complaint with prejudice and the final judgment entered against them in their action arising from an underlying claim for construction defects. We reverse, finding that the trial court incorrectly engaged in fact finding and summary adjudication during its review of the motion to dismiss.
The Chodorows are the owners of a penthouse unit. They sued the appellees, including the developer/seller, developers' general partners, builder, condominium association, and the architect and his architectural firm, as a result of the Owners' discovery of interior water leaks, which caused damage to the unit and its contents.
The original complaint contained eight counts. Four amended complaints followed, all of which were the subject of multiple defense challenges. The defense challenged the timeliness of the Owners' claims in the form of multiple motions to dismiss, arguing that the claims were time-barred because the Owners filed their action more than four years after the discovery of the initial water intrusion. The trial court entered numerous dismissal orders in which it directed the Owners to revise their pleadings. This led to the filing of a fifth amended complaint, including forty-five counts that involved segregated defect references based upon different theories and defendants.
The Owners alleged that, throughout their ownership of the unit, they experienced multiple incursions of water. They claim that these incursions occurred at different times, in different places, and for completely different and unrelated reasons, each of which manifested itself differently from the others. The cause of each was latent and hidden. They also alleged that they first noticed a water incursion a month after they moved into the unit, and that the remaining leaks surfaced thereafter.
The trial court dismissed with prejudice the Owners' claim against all of the parties *1242 as to defect one, concluding that the Owners' suit was untimely and that the Owners knew or should have known that they had a cause of action for that defect upon its discovery.[1] The trial court subsequently dismissed the claims against all of the parties as to defects two through six, except the claims filed against the architect and the association, which remain pending.
We agree with the Owners' argument that the trial court failed to confine itself to the facts alleged in the four corners of the complaint as the trial court is required to do on the review of a motion to dismiss. The trial court exceeded the restrictive scope of review of a motion to dismiss when it dismissed the complaint with prejudice.
A motion to dismiss is designed to test the legal sufficiency of a complaint and not to determine any factual issues. The Fla. Bar v. Greene, 926 So.2d 1195, 1199 (Fla.2006). Unlike a motion for summary judgment, the trial court may not rely on facts adduced in depositions, affidavits, or other proofs. Jordan v. Griley, 667 So.2d 493 (Fla. 3d DCA 1996). All allegations of the complaint must be taken as true and all reasonable inferences drawn therefrom must be construed in favor the non-moving party. Greene, 926 So.2d at 1199; Susan Fixel, Inc. v. Rosenthal & Rosenthal, Inc., 842 So.2d 204, 206 (Fla. 3d DCA 2003).
The trial court here considered factual material beyond the facts alleged in the four corners of the complaint. Whether or not the Owners knew or should have known that they had a cause of action for the first defect upon its initial discovery is a fact that did not affirmatively appear on the face of the complaint. It is thus a question of fact that should be raised by affirmative defense and decided by a jury. Whether or not there was an act or omission that served to toll the statute of limitations period is yet another fact that did not affirmatively appear on the face of the complaint. This fact determination is likewise one that should be determined by the trier of fact.
Additionally, if the analysis of a claim is factually intensive, it is better addressed on a summary judgment motion, or at trial, but certainly not on a motion to dismiss. Susan Fixel, 842 So.2d at 208. This case is indeed factually intensive. It calls for an in-depth analysis of the limitations defense, and this inquiry and fact-finding process cannot be accomplished on a motion to dismiss. We therefore reverse the orders under review, and remand this cause to the trial court for further proceedings consistent with this opinion.
Reversed and remanded.
NOTES
[1] The Owners initially appealed the trial court's dismissal with prejudice of the claim as to defect one and this Court dismissed the appeal without prejudice. See Chodorow v. Porto Vita, Ltd., 883 So.2d 807 (Fla. 3d DCA 2004). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594637/ | 28 So.3d 71 (2009)
M & H PROFIT, INC., a Florida corporation, Appellant,
v.
CITY OF PANAMA CITY, a Florida municipal corporation, Appellee.
No. 1D08-4983.
District Court of Appeal of Florida, First District.
December 14, 2009.
Rehearing Denied February 18, 2010.
*73 Margaret L. Cooper of Jones, Foster, Johnson & Stubbs, P.A., West Palm Beach; W. Douglas Harris, Ft. Walton Beach; Joseph Anthony Morris of Morris, Cary, Andrews, Talmadge, Jones & Driggers, Dothan, Alabama, for Appellant.
David A. Theriaque, Brent Spain and Leslie E. Bryson of Theriaque, Voreck & Spain, Tallahassee, for Appellee.
WOLF, J.
We decide for the first time whether a property owner can state a cause of action under section 70.001, Florida Statutes (2006), otherwise known as the "Bert J. Harris, Jr., Private Property Rights Protection Act" (Bert Harris Act), based upon mere adoption of an ordinance of general applicability pursuant to the police powers of a city in a situation where that municipality has taken no further action concerning application of the ordinance to a particular piece of property. We determine the specific language of the Bert Harris Act does not contemplate facial challenges to general, health, safety, and welfare ordinances of a municipality. In addition, any attempt to broadly extend the application of the Bert Harris Act to these circumstances would unduly constrain the exercise of municipal home rule pursuant to article VIII, section 2 of the Florida Constitution. We, therefore, affirm the decision of the trial court.
Facts and Procedural History
Appellant, M & H Profit, Inc. (M & H), purchased the subject property on Highway 98 in Panama City in February 2005, when the property was zoned General Commercial (GC-1) with no height or setback restrictions. M & H intended to build a 20-story residential condominium building on the property.
Approximately six weeks after M & H purchased the property, the City of Panama City (the City) passed an ordinance which was subsequently codified in its Land Development Regulation Code. The new ordinance imposed a 120-foot height restriction with additional setbacks and an absolute 150-foot limit on structures in the GC-1 zoning district. At the time the ordinance was passed, M & H had not filed a development application with the City.
In October 2005, M & H participated in an informal pre-application conference with the City Planning Manager. According to M & H, such informal conferences were the City's customary way of handling the construction permitting process. M & H alleged that it is the City Planning Manager's duty and authority to make determinations on informal applications before the filing of a formal building application. M & H asserted that for many years the City Planning Manager had held such informal pre-application meetings to review conceptual plans as a matter of custom in order to avoid unnecessary expenses.
Following informal discussions, the City Planning Manager sent a letter to M & H stating, "After a cursory review of the submittal, it is clear that it will not meet the pertinent requirements ... as they relate to setbacks and height." Months later, M & H wrote the City Attorney asking "if there is some other action [M & H] could take that might overrule [the City's] letter of Oct. 25, 2005?" The City replied that "[a]ny variance ... must be approved by the Board of Architects and the City Commission."
In March 2007, less than one year after receiving the City's latest letter, M & H submitted a Notice of Intention to File a Claim under the Bert Harris Act, along with appraisals supporting its claimed loss in the property's fair market value. The City sent a Ripeness Determination to M *74 & H, stating M & H's Notice of Claim did not fall within the scope of the Bert Harris Act.
M & H then filed a complaint in Bay County Circuit Court pursuant to the Bert Harris Act, claiming the enactment of the relevant ordinance had caused a significant loss of value in its property. M & H alleged (1) it purchased the property in reliance on the GC-1 zoning classification, which then had no height or setback restrictions; (2) M & H's reasonable investment-backed expectations were to develop the property "in accordance with the local rules and regulations for GC-1 zoning as then administered by the [City], which created an `existing use' in the Subject Property as defined in F.S. § 70.001(3);" and (3) the City had "applied its new Ordinance to the Subject Property and/or take[n] the position that the new Ordinance is applicable" to the property.
The City filed a Motion to Dismiss for failure to state a cause of action under the Bert Harris Act, arguing the Act pertains only to as-applied challenges, not facial ones, and M & H never applied for a development order or building permit. Thus, the City argued, the mere enactment of the ordinance was not a legally sufficient ground to state a cause of action under the Act. In addition, the City pointed out that a 20-story residential condominium was not an "existing use" under the Act because the City's Comprehensive Plan did not allow residential uses of the property in the GC-1 zone, nor did M & H have a vested right in its plan to develop the project merely by virtue of purchasing the property in February 2005.[*] Moreover, the City argued, M & H had no reasonable investment-backed expectation that it could develop a 20-story residential condominium project on the property.
The trial court granted the City's Motion to Dismiss, finding the mere passage of the ordinance was a general action, not a specific governmental action which is required to trigger the Act.
Nature of Ordinance at Issue
The ordinance at issue in the present case sets general standards applicable throughout an entire zoning category; in this particular instance, it sets height and setback requirements. The ordinance does not change the land use classification or zoning category on any particular piece of property.
District-wide height and setback restrictions are normally considered to be enactments related to the general welfare of the community. WCI Cmtys., Inc. v. City of Coral Springs, 885 So.2d 912, 915 (Fla. 4th DCA 2004); Moviematic Indus. Corp. v. Bd. of County Comm'rs of Metro. Dade County, 349 So.2d 667, 669 (Fla. 3d DCA 1977).
Applicability of the Bert Harris Act
A trial court's ruling on a motion to dismiss is subject to de novo review. See Extraordinary Title Servs., LLC v. Fla. Power & Light Co., 1 So.3d 400, 402 (Fla. 3d DCA 2009). We consider whether the trial court's order dismissing the case for failure to state a cause of action is correct as a matter of law.
We quote the Bert Harris Act at length to properly analyze the Legislature's intent regarding its enforcement:
(1) ... The Legislature recognizes that some ... ordinances of the ... political entities in the state, as applied, may inordinately burden, restrict, or limit private property rights without amounting to a taking under the State Constitution or the United States Constitution. *75... Therefore, it is the intent of the Legislature that, as a separate and distinct cause of action from the law of takings, the Legislature herein provides for relief, or payment of compensation, when a[n] ... ordinance of ... a political entity in the state, as applied, unfairly affects real property.
(2) When a specific action of a governmental entity has inordinately burdened an existing use of real property or a vested right to a specific use of real property, the property owner of that real property is entitled to relief....
(3) For purposes of this section:
. . . .
(b) The term "existing use" means an actual, present use or activity on the real property, including periods of inactivity which are normally associated with, or are incidental to, the nature or type of use or activity or such reasonably foreseeable, nonspeculative land uses, which are suitable for the subject real property and compatible with adjacent land uses and which have created an existing fair market value in the property greater than the fair market value of the actual, present use or activity on the real property.
. . . .
(d) The term "action of a governmental entity" means a specific action of a governmental entity which affects real property, including action on an application or permit.
(e) The terms "inordinate burden" or "inordinately burdened" mean that an action of [a] ... governmental entit[y] has directly restricted or limited the use of real property such that the property owner is permanently unable to attain the reasonable, investment-backed expectation for the existing use of the real property or a vested right to a specific use of the real property with respect to the real property as a whole, or that the property owner is left with existing or vested uses that are unreasonable such that the property owner bears permanently a disproportionate share of a burden imposed for the good of the public, which in fairness should be borne by the public at large....
§ 70.001(1)-(3), Fla. Stat. (2006) (emphasis added).
It is well settled that legislative intent is the polestar that guides a courts statutory construction analysis. See Knowles v. Beverly Enters.-Fla., Inc., 898 So.2d 1, 5 (Fla.2004). To discern legislative intent, courts must look first and foremost at the actual language used in the statute. See Borden v. East-European Ins. Co., 921 So.2d 587, 595 (Fla.2006). "When the language of the statute is clear and unambiguous and conveys a clear and definite meaning, there is no occasion for resorting to the rules of statutory interpretation and construction; the statute must be given its plain and obvious meaning." Holly v. Auld, 450 So.2d 217, 219 (Fla.1984) (quoting A.R. Douglass, Inc. v. McRainey, 102 Fla. 1141, 137 So. 157, 159 (1931)). Courts are not at liberty to add words that were not placed there by the legislature. See Hayes v. State, 750 So.2d 1, 4 (Fla.1999); see also Karell v. Miami Airport Hilton/Miami Hilton Corp., 668 So.2d 227, 229 (Fla. 1st DCA 1996) ("Our task is to interpret and apply the statutes as written... and not as one party or the other would like to have them written.").
As reflected above, the plain and unambiguous language of the Bert Harris Act establishes the Act is limited to "as-applied" challenges, as opposed to facial challenges. Indeed, section 70.001(1), Florida Statutes, states the Bert Harris Act provides for relief "when a new law, rule, regulation, or ordinance ..., as applied, *76 unfairly affects real property." (Emphasis added); cf. Taylor v. Village of N. Palm Beach, 659 So.2d 1167, 1170-73 (Fla. 4th DCA 1995) (explaining a facial challenge is based on the mere enactment of a regulation, whereas an as-applied claim is based on a specific application for development).
Legal commentators, including those involved in drafting the Bert Harris Act, have also recognized the Bert Harris Act is limited to "as-applied" challenges and does not provide for facial challenges based on the mere enactment of a new ordinance or regulation:
The Harris Act authorizes compensation only for as-applied challenges to governmental actions. This limitation can been [sic] seen in several provisions. For example, the statement of legislative intent makes clear that the Harris Act provides compensation "when a new law, rule, regulation, or ordinance of the state or a political entity in the state, as applied, unfairly affects real property."
Accordingly, the Harris Act may not be used to bring a facial challenge to a statute, rule, regulation, or ordinance; the governmental entity must specifically apply the statute, rule, regulation, or ordinance to the owners property in order for the owner to have a Harris Act claim.
David L. Powell, et al., A Measured Step to Protect Private Property Rights, 23 Fla. St. U.L. Rev. 255, 289 (Fall 1995) (emphasis added); see also Ronald L. Weaver, 1997 Update on the Bert Harris Private Property Protection Act, 71 Fla. Bar J. 70, 72 (Oct. 1997) ("The governmental action in question must have been `applied' to the subject real property because the act does not apply to facial attacks.").
Simply put, until an actual development plan is submitted, a court cannot determine whether the government action has "inordinately burdened" property:
Without the benefit of an actual development application and expert staff review to determine how the general requirement applies to a particular property, how can the impact of a density limitation be determined? It is common to find that a particular piece of property cannot develop to the maximum extent theoretically permitted by the code, when all of the setbacks, landscaping requirements, preservation of environmentally sensitive areas, traffic flow and parking requirements, etc., are taken into account. In that event, the financial effect of a downzoning could be overstated if it is measured with respect to the theoretical maximum density and not the density actually achievable on the property.
The actual achievable density cannot be known until one does the work of applying the regulations to the property. If claims are to be allowed under the act based on the mere enactment of a general density limitation, and the owner has not done this work, is the government now forced to site plan the property for the owner in order to figure it out? That seems to go beyond what should reasonably be expected of government....
Susan L. Trevarthen, Advising the Client Regarding Protection of Property Rights: Harris Act and Inverse Condemnation Claims, 78 Fla. B.J. 61, 63-64 (July/Aug. 2004); see also Ronald L. Weaver and Joni Armstrong Coffey, Private Property Rights Protection Legislation: Statutory Claims for Relief from Governmental Regulation, Florida Environmental & Land Use Law at 30.3-8 (June 2007) (stating the plain language of the Bert Harris Act supports the conclusion that "a jurisdiction-wide piece of legislation would not become *77 actionable under the Act until a property owner has applied for development approval and been denied under the provisions of the legislation"). Thus, the trial court properly held the mere enactment of a general police power ordinance or regulation does not give rise to a Bert Harris Act claim.
The decision not to broadly construe the Bert Harris Act in a manner which would expand its scope beyond its literal terms is also supported by basic principles of municipal home rule. In adopting article VIII, section 2 of the Florida Constitution, the citizens of this state expressed a desire that municipalities have broad home rule powers to protect the general health, morals, safety, and welfare of the residents of the municipality. Boca Raton v. Gidman, 440 So.2d 1277 (Fla.1983). In 1973, the Legislature implemented the will of the people and made clear its intent to allow broad exercise of home rule powers granted by the constitution. The Municipal Home Rule Powers Act, section 166.021(4), Florida Statutes (1979), provides in part that
[i]t is the further intent of the Legislature to extend to municipalities the exercise of powers for municipal governmental, corporate, or proprietary purposes not expressly prohibited by the constitution, general, or special law, or county charter and to remove any limitations, judicially imposed or otherwise, on the exercise of home rule powers other than those so expressly prohibited.
(Emphasis added).
Thus, an interpretation of state statutes which would impede the ability of local government to protect the health and welfare of its citizens should be rejected unless the Legislature has clearly expressed the intent to limit or constrain local government action. See Pinellas County v. City of Largo, 964 So.2d 847, 853-54 (Fla. 2d DCA 2007) (rejecting use of implied preemption where the State legislation was not so pervasive as to evidence an intent to be the sole regulator); Phantom of Clearwater, Inc. v. Pinellas County, 894 So.2d 1011, 1019-20 (Fla. 2d DCA 2005) (finding that state fireworks regulation was not so pervasive as to suggest implied preemption); GLA & Assoc., Inc. v. City of Boca Raton, 855 So.2d 278, 282 (Fla. 4th DCA 2003) (finding the Florida Beach and Shore Preservation Act did not so pervasively legislate the area of beach conservation as to preempt local protective ordinances); Palm Beach County v. Bellsouth Telecomm., Inc., 819 So.2d 876, 878 (Fla. 4th DCA 2002) (finding local ordinance charging Bellsouth a land occupation fee was not impliedly preempted by State legislation); Lowe v. Broward County, 766 So.2d 1199, 1207 (Fla. 4th DCA 2000) (finding a county ordinance recognizing domestic partner relations and allowing for benefits to be paid to domestic partners of county employees was not impliedly preempted by state marriage laws), rev. denied, 789 So.2d 346 (Fla.2001).
The protection of the welfare of the local citizenry through the adoption of generally applicable land development regulations has been exclusively within the province of local government. Implied constraints within these particular areas should be even more carefully scrutinized. Cf. HTS Ind., Inc. v. Broward County, 852 So.2d 382 (Fla. 4th DCA 2003) (recognizing that in areas historically legislated by the states, the courts must narrowly construe any express preemption clauses so that if an ambiguity exists as to preemption, non-preemption should be found).
Applying the sanctions of the Bert Harris Act to local governments for the mere passage of ordinances dealing with the general police power needs of its citizens will severely limit the willingness of local *78 government to act. This clearly was not the intent of the people in adopting article VIII, sections 1 and 2 of the Florida Constitution. We decline to tie local governments' hands in this matter, especially in light of the express language of the Bert Harris Act indicating its applicability to as applied challenges only.
Appellant also urges us to adopt the position that its informal discussions with the City Planning Manager and receipt of a letter constituted a specific application of the city ordinances to its particular property. We decline to do so for several reasons. First, these were informal communications with the City. Second, they constituted nothing more than statements that the general restrictions throughout the zoning district applied to appellant's property just as they applied to every other property within the zoning classification. These statements did not constitute an application or a specific action as to a particular piece of property.
Finally, appellant argues this case is controlled by Citrus County v. Halls River Development, Inc., 8 So.3d 413 (Fla. 5th DCA 2009). It is unnecessary for us to address the correctness of that decision because we find it inapplicable in this case. Citrus County involved an amendment to a comprehensive plan which reclassified the land use category on a particular piece of property. In this case, we are dealing with adoption of a general land development regulation effective throughout an entire zoning district. Citrus County is, therefore, not controlling.
We AFFIRM.
PADOVANO, J., concurs; THOMAS, J., dissents with opinion.
THOMAS, J., dissenting.
I respectfully dissent. I would hold that the City's enactment of the ordinance, and the informal conceptual denial of the building plan, can form the basis of a cause of action under the Bert Harris Act. I see no conflict between the statute and Article VIII, section 2 of the Florida Constitution. The Bert Harris Act simply requires local governments to compensate a property owner where the governmental entity enacts a law or acts to reduce the property value to the extent defined by the Legislature. I think the Legislature has the authority to require compensation for private property owners whose property is unfairly burdened by local ordinances. I do not express a view, however, whether M & H can establish an existing use, as required by the Act, nor do I think we need to decide whether the ordinance of general applicability has imposed a burden on M & H's use of the property that is disproportionate to the public at large.
The City asserts the Act's language expressly limits claims challenging specific governmental actions affecting the subject property, not facial challenges. Conversely, M & H maintains, sub judice, that the informal pre-application conceptual review process constitutes specific action by the City.
I disagree with the City's view because, under some circumstances, it is possible that a governmental ordinance or regulation can provide grounds for a cause of action under the Bert Harris Act. The plain language of the statute applies to more than specific government actions denying development requests. The Act defines "action of a government entity" as "including action on an application or permit." § 70.001(3)(d), Fla. Stat. (2006) (emphasis added). Thus, this definition can apply where a law, ordinance or regulation so adversely affects a property owner that the owner is inordinately burdened. See Citrus County v. Halls River Dev., Inc., 8 So.3d 413, 422-23 (Fla. 5th DCA 2009) *79 (finding that amendment to a comprehensive plan which reclassified property was sufficient governmental action to start the one-year time requirement for a property owner to seek relief under the Act because the impact of the change was "readily ascertainable").
Furthermore, as argued by M & H, the Bert Harris Act specifically provides that claims made under it are separate and distinct from the law of takings. § 70.001(1), Fla. Stat. The Act envisions compensation for losses that need not meet the threshold of inverse condemnation or regulatory-taking claims. Thus, court decisions in takings claims, which require a claimant to demonstrate deprivation of all economically beneficial uses of the property, are not relevant in analyzing a Bert Harris Act claim.
I note, however, that due to its failure to file any type of site plan, building permit application or variance request, M & H's intended property use could be challenged as speculative, which the statute specifically excludes from protection. See Palm Beach Polo, Inc. v. Vill. of Wellington, 918 So.2d 988, 995 (Fla. 4th DCA 2006) (finding that a property owner could not show a "reasonable investment-backed expectation" for an existing use). In addition, the City's Comprehensive Plan prevails over conflicting zoning regulations. See Halls River, 8 So.3d at 420-21 (citing § 163.3167(1), Fla. Stat. (2005), and Machado v. Musgrove, 519 So.2d 629, 631-32 (Fla. 3d DCA 1987)).
Regardless, I think M & H is entitled to attempt to establish the facts necessary to prevail in its claim under the Bert Harris Act.
The Act establishes broad protection for property owners who suffer economic loss from governmental property regulations and actions that attempt to impose societal costs onto property owners. I do not think we have the authority to evaluate the merits of this policy enacted by the Legislature, but we must simply enforce the plain terms of the statute. Where the government enacts laws which reduce a property owner's value, in my view, that is an "action of a governmental entity" that can "inordinately burden, restrict, or limit private property rights without amounting to a taking under the State Constitution or the United States Constitution...." § 70.001(1)-(3), Fla. Stat.
It seems quite clear to me that this legislation has not excluded an ordinance of general applicability, and the majority opinion does not cite to any such language. I would reverse the trial court's order dismissing the complaint.
NOTES
[*] In light of our ruling, it is unnecessary for us to reach this issue. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594906/ | 172 Mich. App. 476 (1988)
432 N.W.2d 736
PEOPLE
v.
WOODS
Docket No. 100722.
Michigan Court of Appeals.
Decided October 18, 1988.
Frank J. Kelley, Attorney General, Louis J. Caruso, Solicitor General, William F. Delhey, Prosecuting Attorney, and David A. King, First Assistant Prosecuting Attorney, for the people.
Marilyn Kelly & Associates (by Mary J. Ironside), for defendant on appeal.
Before: DANHOF, C.J., and CYNAR and G.R. DENEWETH,[*] JJ.
PER CURIAM.
A Washtenaw Circuit Court jury convicted defendant of being an habitual offender, second offense, MCL 769.10; MSA 28.1082. Defendant appeals as of right claiming that his constitutional and statutory rights to be present at his trial were violated. We affirm.
Defendant was not present at his habitual offender trial. A prosecution witness testified, outside *478 of the jury's presence, that she contacted the control center at the Huron Valley Men's Facility about five minutes earlier and was told that defendant could not be brought to court because he had barricaded himself in his cell and jammed the lock. She further testified that defendant was informed of the date and time for his habitual offender trial and would not come out of his cell willingly. Defense counsel declined to cross-examine, offered no evidence regarding defendant's absence, and did not move for an adjournment. The court noted that defendant was twenty-five minutes late for his trial and that the testimony indicated that it was impossible for him to appear. The court proceeded with defendant's trial after finding that his absence was voluntary. The court instructed the jury not to consider defendant's absence for any reason.
The day before defendant's habitual offender trial, the same jury convicted him of assault of a prison employee, MCL 750.197c; MSA 28.394(3). The court took judicial notice of testimony from defendant's assault-of-a-prison-employee trial. At that trial, defendant testified that he was imprisoned at the Huron Valley Men's Facility because of his 1979 conviction for assault with intent to commit criminal sexual conduct. Documents from defendant's prison record, regarding his commitment to prison and identification, were admitted into evidence without objection. The supervisor of the records office at the Huron Valley Men's Facility testified about the documents. Defense counsel cross-examined her only about the prisons in which defendant had resided.
Defense counsel presented no evidence in defendant's habitual offender trial. He admitted defendant's two convictions.
A criminal defendant has a statutory right to be *479 present at his trial. MCL 768.3; MSA 28.1026. An accused's right to be present at trial is also impliedly guaranteed by the federal and state constitutions and grounded in common law. People v Mallory, 421 Mich. 229, 246, n 10; 365 NW2d 673 (1984).
A defendant may waive his right to be present by failing to appear for trial. People v Swan, 394 Mich. 451, 452; 231 NW2d 651 (1975), cert den 423 U.S. 990; 96 S. Ct. 402; 46 L. Ed. 2d 308 (1975); People v Gross, 118 Mich. App. 161, 164; 324 NW2d 557 (1982). A valid waiver of a defendant's presence at trial consists of a specific knowledge of the constitutional right and an intentional decision to abandon the protection of the constitutional right. People v Travis, 85 Mich. App. 297, 301; 271 NW2d 208 (1978), lv den 405 Mich. 831 (1979). There can be no waiver if either of these elements is missing. People v Springer (On Remand), 123 Mich. App. 203, 206; 333 NW2d 224 (1983).
The record in this case demonstrates that defendant's absence at his habitual offender trial was voluntary. However, the record fails to disclose whether defendant knew that he had a constitutional right to be present at the trial. We cannot presume waiver from a silent record. Springer, supra, p 206; People v Ewing, 48 Mich. App. 657, 660; 211 NW2d 56 (1973). We conclude that defendant did not waive his right to be present at his trial.
Defendant relies on People v Medcoff, 344 Mich. 108, 117-118; 73 NW2d 537 (1955), for the proposition that injury should be conclusively presumed from his absence at trial. Our Supreme Court overruled Medcoff's automatic reversal rule in People v Morgan, 400 Mich. 527, 535-536; 255 NW2d 603 (1977), cert den sub nom Cargile v Michigan, 434 U.S. 967; 98 S. Ct. 511; 54 L. Ed. 2d 454 *480 (1977), reh den 434 U.S. 1041; 98 S. Ct. 783; 54 L. Ed. 2d 791 (1978). The proper test for determining whether a defendant's absence from a part of a trial requires reversal of his or her conviction is whether there is any reasonable possibility of prejudice. Morgan, supra, p 536; People v Kvam, 160 Mich. App. 189, 197; 408 NW2d 71 (1987).
The record shows that defendant was properly convicted of being an habitual offender, second offense, because he committed two felonies. MCL 769.10; MSA 28.1082. The trial court instructed the jury not to consider defendant's absence for any reason. Defendant has failed to demonstrate any reasonable possibility of prejudice on appeal. Defendant's absence made no difference in the result reached. Therefore, we will not reverse his conviction. Morgan, supra, p 537.
Affirmed.
NOTES
[*] Circuit judge, sitting on the Court of Appeals by assignment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594941/ | 28 So. 3d 465 (2009)
Michelle DUFRENE, et al
v.
GAUTHREAU FAMILY LLC, Gulf South Management, Inc. & Lafayette Insurance Company.
No. 09-CA-153.
Court of Appeal of Louisiana, Fifth Circuit.
November 10, 2009.
Writ Denied February 12, 2010.
*466 Richard C. Trahant, T. Peter Breslin, Attorneys at Law, Metairie, LA, For Plaintiff/Appellee.
Raymond A. Pelleteri, Jr., Russell B. Ramsey, Pelleteri & Wiedorn Law Firm, Attorneys at Law, New Orleans, LA, for Defendant/Appellant.
Panel composed of Judges CLARENCE E. McMANUS, WALTER J. ROTHSCHILD, and FREDERICKA HOMBERG WICKER.
*467 CLARENCE E. McMANUS, Judge.
Defendant, Lafayette Insurance Company, appeals from a trial court judgment finding that it violated LSA-C.C.P. art. 863 and 1471 and awarding to plaintiff sanctions of $60,000. We affirm the decision of the trial court.
This is defendant's second appeal. The events that led to this appeal were set forth in our prior opinion, Dufrene v. Gautreau Family, LLC, 07-467 (La.App. 5 Cir. 2/22/08), 980 So. 2d 68, 72-73, writ denied, 08-0629 (La.5/9/08), 980 So. 2d 694, and 08-0628 (La.5/9/08), 980 So. 2d 698, as follows:
Plaintiff, Michelle Dufrene Lassley, filed suit for damages on May 21, 2002, for injuries received when she fell in a stairway in Independence Mall, 4241 Veterans Blvd, Metairie, LA. Named as defendants in this suit were Gautreau Family, LLC ("Gautreau"), owner of the property; SRSA Gulf South Management. Inc. ("Gulf South"), responsible for the management and maintenance of the property; and United Fire and Casualty Co. ("United Fire/Lafayette"), Commercial General Liability insurance carrier for Gautreau Family, LLC.[1] After a four day trial on the merits, the jury found that the stairway contained a defect which presented an unreasonable risk of harm, and that defendants knew or should have known of the defect, that the defect contributed to plaintiffs accident, and that the accident caused plaintiffs injuries. The jury further found that plaintiff was 10% at fault in the cause of the accident. The jury awarded damages totaling $3,206,000.00. The jury verdict was made the judgment of the court. After the denial of defendants' motion for JNOV/remittitur on December 21, 2006, defendants appealed.
After the trial court granted defendants' motion for appeal, plaintiff filed two motions for sanctions against United Fire/Lafayette. These motions alleged that defendants Gulf South and United Fire/Lafayette failed to identify and/or produce two applicable insurance policies until after trial, and only after the jury had returned a verdict in excess of the only insurance policy that had been produced. The first motion sought sanctions pursuant to C.C.P. arts. 863 and 1471 for discovery abuses. The second motion sought penalties pursuant to LSA-R.S. 22:1220. The trial court rendered judgment on plaintiffs motion for sanctions pursuant to R.S. 22:1220. In the judgment, the trial court imposed sanctions of $10,000.00 against United Fire/Lafayette for its failure to produce the two policies. Defendants appealed from the award of sanctions.
Both the damage award and the award for sanctions pursuant to LSA-R.S. 22:1220[2] were affirmed by this court on appeal. The record indicates that both of these judgments have been satisfied.
On September 22, 2008, the court heard plaintiffs motion for sanctions pursuant to LSA-C.C.P. art. 863 and 1471. The court granted the motion and awarded sanctions of $60,000.00, plus costs of the motion. In *468 oral reasons for judgment, the court said United Fire and Casualty knew about the policies, and should have but failed to produce them in discovery in a timely manner. It is this judgment that is currently on appeal.
At the time of the accident, Gautreau (the owner) was insured by United Fire and Casualty Co. under a GCL liability policy that also provided coverage for SRSA Gulf South (property manager) (hereinafter "Gulf South"). In addition Gulf South was insured by Lafayette Insurance Company, a subsidiary of United Fire, under both a GLC policy and an excess umbrella policy. United Fire/Lafayette contends that when Gautreaux first notified it of plaintiffs claim, it determined that Gulf South was a named insured under Gautreaux's policy and therefore no claim filed was ever opened for Gulf South under its own coverage polices. United Fire/Lafayette contends that the discovery requests were issued to Gautreaux and itself only, and not to Gulf South. During pretrial settlement negotiations, when it became apparent that liability exposure could be in excess of the $1,000,000.00 policy limit, Gulf South submitted a claim for its own defense, and sought indemnity under its own policy. Near or at the end of trial, United Fire/Lafayette supplemented the prior discovery request to furnish the Gulf South liability policies to plaintiff.
On appeal, defendant first alleges that the trial court erred in imposing sanctions pursuant to LSA-C.C.P. art. 863 and 1471 because it had already imposed sanctions pursuant to LSA-R.S. 22:1220. It argues that LSA-R.S. 22:1220 and LSA-C.C.P. art. 863 and 1471 address the same conduct and that LSA-R.S. 22:1220, as the more specific statute, applies to the exclusion of LSA-C.C.P. art. 863 and 1471.
The rules of statutory construction were set out by the Louisiana Supreme Court in LAGC v. LA. Dept. of Agr. and Forestry, 05-0131 (La.2/22/06), 924 So. 2d 90, 97-98, as follows:
"When a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written and no further interpretation may be made in search of the intent of the legislature." La. C.C. art. 9. "When the language of the law is susceptible of different meanings, it must be interpreted as having the meaning that best conforms to the purpose of the law." La. C.C. art. 10. "Laws on the same subject matter must be interpreted in reference to each other." La. C.C. art. 13. Further, "[w]hen the wording of a Section is clear and free of ambiguity, the letter of it shall not be disregarded under the pretext of pursuing its spirit." La. R.S. 1:4. Finally, the rules of statutory construction provide that, where two (or more) statutes deal with the same subject matter, they should be harmonized if possible; but, that, if there is a conflict, that statute specifically directed to the matter at issue must prevail as an exception to the statute more general in character. Esteve v. Allstate Ins. Co., 351 So. 2d 117 (La.1977); State v. Maduell, 326 So. 2d 820 (La.1976); Teachers' Retirement System of Louisiana v. Vial, 317 So. 2d 179 (La.1975).
LSA-R.S. 22:1220 provides penalties for an insurer's breach of its duty of good faith and fair dealing, evidenced in this case by its actions which suggested that the insurance coverage afforded to plaintiffs claim was much lower that it actually was (and which had the potential to affect the plaintiffs trial strategy.) LSA-C.C.P. art. 863 provides sanctions for misrepresentations of law or fact, or assertions in bad faith, made by a party or attorney in pleadings. In addition, the plaintiff cites *469 C.C.P. art 1471, relative to failure to comply with orders compelling discovery.
Therefore, while R.S. 22:1220 penalizes an insurer's failure to deal fairly with its claimants, C.C.P. art. 863 penalizes any party's actions in its litigation conduct, in the filing of its pleadings and discovery responses. We find that the two statutes do not deal with the same subject matter, and do not address the same issues.
Next, defendant alleges that the trial court erred in finding a violation of 863 and 1471, because it was not in bad faith, and because plaintiffs proved no damages as a result. Under article 863 there is an affirmative duty imposed on attorneys and litigants to make an objectively reasonable inquiry into the facts and the law. Subjective good faith will not satisfy the duty of reasonable inquiry. Sternberg v. Sternberg, 97-101 (La.App. 5 Cir. 5/28/97), 695 So. 2d 1068, 1071, writ denied, 97-1737 (La.10/13/97), 703 So. 2d 618. Among the factors to be considered in imposing sanctions for a party's failure to comply with a discovery request are the prejudice to the other party and the willfulness of the noncomplying party. Richardson v. Amos, 42,948 (La.App. 2 Cir. 3/19/08), 978 So. 2d 1184, 1187, citing Horton v. McCary, 93-2315 (La.4/11/94), 635 So. 2d 199;
A trial court's imposition of sanctions pursuant to LSA-C.C.P. art. 863 will not be reversed unless clearly wrong or manifestly erroneous. Thibodeaux v. Billiott, 04-1308 (La.App. 5 Cir. 3/1/05), 900 So. 2d 110, 113. In this case, the trial court found that Lafayette knew of the claims against both Gautreaux and Gulf South and knew it had issued policies covering both parties, and that it failed to name all relevant policies in discovery. In fact, it did not name the additional policies until the end of the trial. The court further found that this behavior was serious and warranted the imposition of sanctions. Lafayette defended its actions by stating that only Gautreaux had filed a claim, thus a claims file was only opened on the policy issued by Gautreaux, and that this was standard industry practice. However, Lafayette knew of the claims against Gulf South as it was providing a defense to Gulf South. Based on our review of the record, we cannot say that the trial court was manifestly erroneous in its determination that Lafayette's conduct in failing to reveal the insurance policies it issued to Gulf South in response to discovery warranted sanctions.
Appellant further argues that the award of $60,000.00 was excessive. Once the court determines that sanctions are appropriate the trial court has considerable discretion as to the type and severity of sanctions to be imposed. Alombro v. Alfortish, 02-1081 (La.App. 5 Cir. 4/29/03), 845 So. 2d 1162, 1169-1170, writ denied, 03-1947 (La.10/31/03), 857 So. 2d 486, citing Armond v. Fowler, 96-398 (La.App. 5 Cir. 11/26/96), 694 So. 2d 358, 361. In our review of the record, we find no error in the trial court's assessment of sanctions.
Finally, in brief to this Court, plaintiff alleges that she should be awarded attorney fees for this appeal. Because no appeal, or answer to the appeal filed by Lafayette, was filed by plaintiff, this Court cannot consider that request. LSA-C.C.P. art. 2133.
For the above discussed reasons, the trial court's ruling assessing penalties of $60,000.00 is affirmed. All costs are assessed against defendant/appellant, Lafayette Insurance Company.
AFFIRMED.
NOTES
[1] Lafayette Insurance Company was the named defendant in plaintiffs petition. United Fire and Casualty Co., Gautreau's insurer, answered the petition and defended both Gautreau and Gulf South. Lafayette Insurance Company is a subsidiary of United Fire, and had issued two liability policies for Gulf South. As United Fire provides coverage by its own policy and through policies issued by its subsidiary Lafayette Insurance Company, these defendants will be referred to as United Fire/Lafayette.
[2] LSA-R.S. 22:1220 was re-enacted as LSA-R.S. 22:1973 by Acts 2008, No. 415, § 1, eff. Jan. 1, 2009. Re number change | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1024210/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-2098
CENTENNIAL BROADCASTING, LLC,
Plaintiff - Appellee,
versus
GARY E. BURNS; 3 DAUGHTERS MEDIA,
INCORPORATED,
Defendants - Appellants.
Appeal from the United States District Court for the Western
District of Virginia, at Lynchburg. Norman K. Moon, District
Judge. (6:06-cv-00006-nkm)
Submitted: September 19, 2007 Decided: November 16, 2007
Before WILLIAMS, Chief Judge, SHEDD, Circuit Judge, and Joseph F.
ANDERSON, Jr., United States District Judge for the District of
South Carolina, sitting by designation.
Affirmed by unpublished per curiam opinion.
Mark J. Prak, Coe W. Ramsey, Charles E. Coble, BROOKS, PIERCE,
MCLENDON, HUMPHREY & LEONARD, L.L.P., Raleigh, North Carolina, for
Appellants. Virginia W. Hoptman, Jerry W. Boykin, Erin Roberts,
WOMBLE, CARLYLE, SANDRIDGE & RICE, Tysons Corner, Virginia, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Appellants Gary E. Burns and 3 Daughters Media, Inc. (“3
Daughters”) (collectively “Appellants”) appeal the district court’s
grant of a permanent injunction to Centennial Broadcasting, LLC
(“Centennial”) enforcing a covenant not to compete between Burns
and Centennial. Appellants argue that the district court erred in
concluding that the covenant’s terms are unambiguous and that Burns
failed to comply with those terms. They also challenge the
validity of the non-competition agreement on a number of grounds.
For the reasons that follow, we affirm.
I.
In October 2004, Centennial and Burns entered into an
agreement (the “Asset Purchase Agreement” or “APA”) pursuant to
which Burns was to sell Centennial substantially all of the assets,
property, and rights of the radio station WLNI-FM (“WLNI”),
“licensed by the Federal Communications Commission (“FCC”) to
Lynchburg, Virginia.”1 (J.A. at 10.)2 On February 28, 2005,
Centennial closed on the purchase of WLNI for approximately $4.4
1
The APA initially provided for the sale of two additional
radio stations, WMNA-FM and WMNA-AM, “licensed by the FCC to
Gretna, VA” (the “Gretna stations”) as well. (J.A. at 10.) In
January 2005, however, the parties amended the APA to exclude the
Gretna stations from the transaction.
2
Citations to the “J.A.” refer to the contents of the joint
appendix filed by the parties to this appeal.
2
million. The parties allocated $4.135 million for WLNI’s FCC
license, $180,000 for the broadcasting equipment, $50,000 for the
tower antenna, and $35,000 for office and miscellaneous equipment.
As a condition of the sale, the parties entered into an
ancillary agreement entitled the “Non-Solicitation and Consulting
Agreement.” Centennial paid Burns $25,000 as consideration for his
compliance with the covenants contained in the agreement. Only one
of the Non-Solicitation and Consulting Agreement’s three primary
restrictions is relevant to this appeal. Paragraph 2 (“the non-
competition agreement”) provides that:
Except as provided in the next sentence, Covenantor
[Burns] further agrees that at no time during the
Restricted Period will he directly or indirectly, whether
as owner licensee, principal, agent, consultant,
employee, proprietor, partner, lender, or shareholder,
director or officer of a corporation (or similar position
in any other entity), or in any other capacity, other
than as employee or contractor of Buyer, engage in, own,
manage, operate, control or otherwise participate in or
be in any manner connected with the ownership, operation,
management or control of any commercial AM or FM
broadcast business at any radio broadcasting station that
is included in the Roanoke-Lynchburg Arbitron Metro radio
market if such station utilizes a programming format
substantially similar to any format used by the Station
on the date Buyer acquires the Station; provided,
however, that ownership of less than 5% of the
outstanding stock of any publicly traded corporation
shall not be prohibited solely by reason thereof.
Covenantor’s ownership and operation of Radio Stations
WMNA-FM and WMNA(AM), Gretna, Virginia, are specifically
excluded from the restrictions in this paragraph.3
3
The “Restricted Period” represents a five-year period running
from the date the parties signed the Non-Solicitation and
Consulting Agreement until the fifth anniversary of the closing
under the APA.
3
(J.A. at 23 (emphasis added).) At the time of the sale, WLNI’s
programming consisted primarily of talk shows, although the station
also sometimes broadcasted sports events.
In November 2005, Centennial learned through a newspaper
article that Burns, acting through 3 Daughters, a company he owns,
had purchased the radio station WBLT-AM (“WBLT”) in Bedford,
Virginia. WBLT’s signal reached into the area encompassed by the
Roanoke-Lynchburg Arbitron Metro radio market.4 And, although WBLT
had been one of the few music stations remaining on the AM dial,
Burns shifted its programming to primarily talk radio upon
purchasing the station. Burns told the article’s author that he
instituted the format change because he had “been very successful
with news and talk radio.” (J.A. at 40.)
Centennial believed that Burns’s operation of WBLT as a talk
radio station violated the non-competition agreement. Accordingly,
on February 17, 2006, Centennial filed a complaint for damages and
injunctive relief against Appellants in the United States District
Court for the Western District of Virginia, claiming diversity of
citizenship between itself and Appellants and an amount in
controversy over $75,000. Centennial’s complaint asserted claims
4
“‘Arbitron’ is a national radio audience measurement company”
that relies on biannual “sweeps” of radio listeners to measure the
market share of radio stations. (J.A. at 301.) Arbitron defines
the Roanoke-Lynchburg radio market “as encompassing the cities of
Roanoke, Lynchburg, Bedford, and Salem, and six Virginia counties:
Roanoke, Boutetourt, Bedford, Campbell, Amherst and Appomattox.”
(J.A. at 301.)
4
against Burns for breaches of the non-competition agreement, the
APA, and the APA’s implied covenant of good faith and fair dealing
(Counts I-III) and a claim against 3 Daughters for violations of
Centennial’s rights under the APA and the non-competition agreement
(Count IV). On the same day, Centennial filed a Motion for
Temporary Restraining Order (TRO) and a Motion for Preliminary
Injunction enjoining Appellants “from further use of a Talk
programming format” on WBLT. (J.A. at 28, 30.)
On March 13, 2006, the district court conducted a hearing on
Centennial’s motions for a TRO and for a preliminary injunction.
Centennial provided evidence that it had monitored WBLT for 24
hours and learned that “it ha[d] 21 hours of syndicated talk and
three hours of music.” (J.A. at 128.) Moreover, WBLT was
“duplicating a number of talk show programs broadcast on WLNI.”
(J.A. at 35.) Burns did not dispute that a number of the talk
programs aired on WBLT were the same as those aired on WLNI. He
also admitted that the bulk of WBLT’s programming on Monday through
Friday was syndicated talk shows. (J.A. at 240.) Burns took
issue, however, with Centennial’s assertion, grounded in a list of
radio formats set forth in “Radio & Records” (which Centennial
described as “the leading magazine in the radio industry,” (J.A. at
138)), that there existed a single talk radio format which both
WLNI and WBLT employed. Burns supplied an article from “Talkers
Magazine” (whose slogan is “the [B]ible of the talk radio
5
business,” (J.A. at 207)) that “broke[] down on-air talk talent to
nine major categories,” (J.A. at 73); he argued that each category
represented a distinct radio format and that when these categories
were used to define WBLT and WLNI’s respective formats, the two
were not substantially similar. At the close of the hearing, the
district court determined that Burns had clearly violated the non-
competition agreement and issued a TRO. On March 20, 2006, the
district court granted Centennial’s motion for a preliminary
injunction.
Prior to the March 13, 2006 hearing, the district court had
notified the parties that it would “be considering the possibility
of consolidating the request for a preliminary injunction with
trial on the merits of the request for a permanent injunction,” but
understood that because expert witnesses might be unavailable at
the hearing, the parties might need to submit deposition testimony
relevant to the merits within a reasonable period after the
hearing.5 (J.A. at 326.) A subsequent Opinion and Order provided
that in considering whether consolidation was appropriate, the
district court would consider only the evidence offered at the
March 13, 2006 hearing, the deposition testimony of Appellants’
expert witness, and Centennial’s rebuttal evidence, if any was
5
Pursuant to Fed. R. Civ. P. 65(a)(2), “Before or after the
commencement of the hearing of an application for a preliminary
injunction, the court may order the trial of the action on the
merits to be advanced and consolidated with the hearing of the
application.”
6
offered. If, after considering that evidence, the district court
concluded that the language of the non-competition agreement was
unambiguous, it would decide the merits of the request for a
permanent injunction. If, however, it determined that disposition
of the merits required further development of the record, it would
permit the parties to conduct further discovery.
Accordingly, Burns submitted the deposition testimony of
expert witness Michael Harrison, publisher of “Talkers Magazine.”
Harrison identified eleven different talk radio formats, but
suggested that there were “probably more.” (J.A. at 576.)
According, to Harrison, “radio is a minute to minute competition,”
so stations should be compared on a minute to minute basis. (J.A.
at 599.) He had not, however, compared WLNI and WBLT in this
manner. When asked if it was “a fair statement to say that both of
these formats for WBLT and for WLNI are general issues political
talk even under [Harrison’s] definitions,” (J.A. at 612), Harrison
acknowledged that “[i]t [wa]s possible,” (J.A. at 613), but stated
that “it all depends on actually analyzing the actual number of
hours that they do the different shows,” and that he had not
conducted that analysis. (J.A. at 612-13.)
As rebuttal evidence, Centennial submitted the deposition
testimony of Walter Sabo, CEO of Sabo Media, a programming and
management company specializing in profitable contents solutions
for talk-radio stations. Sabo listed five formats that he believed
7
existed within the talk radio format and indicated that there were
“probably more.” (J.A. at 733.) Sabo opined that WLNI and WBLT
had substantially similar formats, basing his conclusion on “[t]wo
things” -- “that many of the[] shows cover the same subject area,
and . . . the way the shows are scheduled.” (J.A. at 707.) He
described the content of both stations as being primarily political
and the structure of the two stations as “amazingly similar.”
(J.A. at 709.)
After the deposition testimony was taken, Centennial filed a
Motion for a Permanent Injunction Pursuant to [Federal Rule of
Civil Procedure] 65(a)(2) and to Render Final Judgment in Favor of
Plaintiffs on the Merits. On September 29, 2006, the district
court granted Centennial’s motion to consolidate trial on the
merits with the preliminary injunction hearing and issued an
opinion and order permanently enjoining Burns from “participating
in or being in any manner connected with the ownership, operation,
management or control of any commercial AM or FM broadcast business
at any broadcasting station that is included in the Roanoke-
Lynchburg Arbitron Metro radio market for a period of five years if
that business station uses the following programming formats . . .
: All talk, News/Talk, Full Service Talk, or Specialized Talk with
a focus on current events and/or politics.” (J.A. at 941-42.)6 3
6
In crafting the injunction, the district court sought to use
terms that reflected Burns’s understanding of the different types
of radio station programming formats. The district court’s Opinion
8
Daughters Media was permanently enjoined “from the same” so long as
Burns remained affiliated with the company. (J.A. at 942.) In a
separate order, the district court referred Centennial’s claim for
costs and attorneys’ fees to a magistrate judge.
Burns and 3 Daughters timely appealed the district court’s
order granting Centennial a permanent injunction. We have
jurisdiction pursuant to 28 U.S.C.A § 1292(a)(1) (West 2006).
II.
“[W]e review the grant of a permanent injunction for abuse of
discretion.” Virginia Soc’y for Human Life, Inc. v. F.E.C., 263
F.3d 379, 392 (4th Cir. 2001). In so doing, we review the district
court’s underlying factual findings for clear error and its
conclusions of law de novo. Id. “[A] mistake of law by a district
court is per se an abuse of discretion.” Dixon v. Edwards, 290
F.3d 699, 718 (4th Cir. 2002).
Appellants argue that the district court abused its discretion
in granting Centennial a permanent injunction because the district
and Order defined, in a footnote, the formats that Burns was
enjoined from using. It took both the format categories and their
definitions from a website on which Burns had relied in an
affidavit supporting his response in opposition to Centennial’s
motion for a preliminary injunction. In the affidavit, Burns used
the website in asserting that “All Talk” and “News Talk” were
distinct formats and that WLNI used an “All Talk” format at the
time that he sold it. Accordingly, the district court concluded
that Burns “accept[ed] [the website]’s breakdown of talk
programming formats into All Talk, News/Talk, Full Service,
Specialized, and Sports.” (J.A. at 933.)
9
court’s decision rests on erroneous legal conclusions.
Specifically, Appellants contend that the district court erred in
concluding that the non-competition agreement’s reference to a
“programming format substantially similar [to that of WLNI],” (J.A.
at 23), was unambiguous. The ambiguity of the contract language,
according to Appellants, not only compels reversal of the district
court’s conclusion that no reasonable jury could find that WLNI and
WBLT did not have substantially similar programming formats, but
also renders the non-competition agreement unenforceable as
violative of Virginia public policy and Burns’s First Amendment
rights. Appellants further contend that the Federal Communications
Act (“FCA”), 47 U.S.C.A. § 310(d) (West 2001), and FCC decisions
and policy preempt enforcement of the non-competition agreement.
Because Appellants’ contention that the non-competition agreement
is ambiguous permeates their arguments on appeal, we first address
Appellant’s challenge to the district court’s conclusion to the
contrary before considering the question of preemption.
A.
Because this is a diversity suit, we apply the substantive law
of the state of Virginia. See Wells v. Liddy, 186 F.3d 505, 527-28
(4th Cir. 1999).7 Under Virginia law, when the terms of a contract
are clear and unambiguous, the interpretation of those terms
7
The Non-Solicitation and Consulting Agreement contains a
choice of law provision specifying that Virginia law governs the
parties’ disputes.
10
presents a question of law. Musselman v. Glass Works, L.L.C., 533
S.E.2d 919, 921 (Va. 2000). Whether a contractual provision is
ambiguous is also a question of law. Id.
Virginia considers the language of a contract ambiguous “if it
may be understood in more than one way or when it refers to two or
more things at the same time.” Video Zone, Inc. v. KF & F
Properties, L.C., 594 S.E.2d 921, 923 (Va. 2004) (internal
quotation marks omitted). “Such an ambiguity, if it exists, must
appear on the face of the instrument.” Id. at 924. “Parol
evidence cannot be used to first create an ambiguity and then
remove it.” Cohan v. Thurston, 292 S.E.2d 45, 46 (Va. 1982).
Moreover, “a document is not ambiguous merely because the parties
disagree as to the meaning of the language employed by them in
expressing their agreement.” Amos v. Coffey, 320 S.E.2d 335, 337
(Va. 1984) (internal quotation marks omitted).
Appellants argue that the district court’s finding that the
relevant sworn statements and expert testimony were “mutually
incompatible and irreconcilable” reveals that the term “programming
format” in the non-competition agreement is ambiguous. (J.A. at
939.) For further support, they cite to F.C.C. v. WNCN Listeners
Guild, 450 U.S. 582 (1981), in which the Supreme Court upheld the
FCC’s decision to abandon regulation of radio station formats, a
policy change grounded in part in the difficulty the FCC had
experienced in defining and categorizing programming formats. See
11
Dev. of Policy re: Changes in the Entm’t Formats of Broad.
Stations, 57 F.C.C.2d 580, 583 ¶ 12 (1976) (concluding that
labeling radio station formats is a difficult task because
“[d]istinctions in this field are extremely hazy and subjective”).
The district court rejected Appellants’ invitation to look to
external sources, rather than the contract itself, to resolve the
issue. It found that “[t]he contract refers to the programming
format of [WLNI] on the date of transfer of ownership,” and “[o]n
that date, [WLNI] had a programming format known to both parties.”
(J.A. at 939.) Accordingly, the district court concluded that just
because “the experts . . . [did] not agree on the proper pigeonhole
into which that format should be placed d[id] not make the contract
ambiguous.” (J.A. at 939.) The court reasoned that “[WLNI]’s
format may (or may not) defy categorization, but it is possessed of
some format which Burns is forbidden to imitate.” (J.A. at 939.)
It further determined that the phrase “substantially similar” was
unambiguous, as “[i]ts ordinary and plain meaning can be gleaned by
resort to dictionary definitions and common usage.” (J.A. at 939.)
We agree with the reasoning of the district court. The
dictionary defines “format” in the media context as a “general plan
of organization, arrangement, or choice of material (as for a
television show).” Merriam-Webster’s Collegiate Dictionary 492
(11th ed. 2004). The non-competition agreement identified a
particular general plan of organization or choice of material –-
12
that of WLNI’s programming format on the date Burns sold the
station to Centennial -- with which both parties were familiar.
The difficulty of affixing a mutually-agreeable label to the
programming format identified in the non-competition agreement does
not render the agreement itself ambiguous.
We also agree with the district court that, however the two
stations’ formats are categorized, no reasonable jury could find
that they are not substantially similar. Appellants argue that,
under Harrison’s approach to format categorization, the stations’
programming formats could be found to differ because Harrison’s
testimony indicates that WLNI and WBLT broadcasted substantially
different programs during as many as eleven hours of the day. They
offer no basis, however, on which to refute the district court’s
finding that because “‘programming’ is distinct from ‘programming
format,’” different programs may share the same programming format.
(J.A. at 933.) That the two stations did not air the same programs
at the same time during a substantial portion of the day does not
demonstrate that they do not utilize the same or substantially
similar programming formats. The district court found that, under
Harrison’s approach, “both WLNI and WBLT use a General
Issues/Political Talk programming format, because each airs talk
shows with current events and politics subject matters for a
majority of the time and with significant hour-by-hour overlap.”
(J.A. at 934.) Appellants’ arguments regarding the differences
13
between the particular programs do not render this finding clearly
erroneous.
We therefore agree with the district court that Appellants
breached the non-competition agreement, and the differences in the
format definitions and modes of comparison advanced by the parties
do not render the violation any less clear. Because we conclude
that the language of the non-competition agreement is unambiguous,
we need not address Appellants’ argument that, under Virginia law,
an ambiguous restrictive covenant offends public policy and cannot
be enforced. For the same reason, we decline to address
Appellants’ contention that the non-competition agreement
represents a waiver of their First Amendment rights that cannot be
enforced because it is ambiguous.
B.
We next address Appellants’ contention that federal law
preempts the enforcement of the non-competition agreement under
state contract law. Under the Supremacy Clause, federal statutes
and regulations displace conflicting state law. See U.S. Const.
art. VI, cl. 2; English v. Gen. Elec. Co., 496 U.S. 72, 79 (1990)
(explaining that “state law is pre-empted to the extent that it
actually conflicts with federal law”). Such a conflict exists in
two circumstances -- where “compliance with both federal and state
regulations is a physical impossibility,” Florida Lime & Avocado
Growers, Inc. v. Paul, 373 U.S. 132, 142-43 (1963), and where state
14
law “stands as an obstacle to the accomplishment and execution of
the full purposes and objectives of Congress,” Hines v. Davidowitz,
312 U.S. 52, 67 (1941); Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505
U.S. 88, 103 (1992).
Burns argues that both circumstances are present in this case
because enforcement of the non-competition agreement would (1)
conflict with and frustrate the purpose of § 310(d) of the FCA and
(2) violate the FCC policy of prohibiting contractual restrictions
on radio-formatting discretion. Section 310(d) of the FCA provides
that “[n]o construction permit or station license, or any rights
thereunder, shall be transferred, assigned, or disposed of in any
manner, voluntarily or involuntarily, directly or indirectly, . .
. to any person except upon application to the Commission and upon
finding by the Commission that the public interest, convenience,
and necessity will be served thereby.” 47 U.S.C.A § 310(d).
Further, the FCC has a longstanding policy of requiring that a
licensee “retain control over programming content at all times.”
In re Cosmopolitan Broadcasting Corp., 59 F.C.C.2d 558, 561 (1976).
Accordingly, it will not grant licenses to applicants whose
contractual obligations limit their ability to maintain ultimate
control over programming decisions. See Cumulus Licensing L.L.C.,
21 F.C.C.R. 2998, 3005 (2006) (finding that a contractual provision
prohibiting a buyer of a radio station (and any successor in
interest) from “instituting an adult contemporary or country
15
program format, or any similar or derivative format . . . for a
period of five years” improperly infringed upon the buyer’s
programming responsibilities and conditioning approval of the
parties’ application to transfer the station’s license on the
deletion of the restriction).
The district court rejected both arguments. It concluded that
neither the FCA nor FCC policy preempts the enforcement of the non-
competition agreement, because although the FCC will not approve
license applications from or transfers to would-be licensees whose
programming discretion is unduly inhibited by contractual terms, no
FCC rules or decisions purport to alter state contract law or to
bind the courts. (J.A. at 937.) To the contrary, the FCC has
stated that “there is no conflict between State and Federal policy
as to the covenant not to compete.” (J.A. at 937 (quoting In re
Roman, 38 F.C.C. 290 (1965)); see also In re Cmty. Broad. of
Coastal Bend, Inc., 4 F.C.C.R. 3619, 3621 (1989) (stating that
“there is no conflict between state and federal policy as to a
covenant not to compete”).
Again, we agree with the reasoning of the district court. As
the district court explained, the FCC has conditioned approval of
license transfers on the transferee’s ability to extract himself
from non-competition agreements that limit programming discretion
precisely because these types of agreements are enforceable. See
Regents of Univ. Sys. of Ga. v. Carroll, 338 U.S. 586, 600 (1950)
16
(stating that “[t]he [FCC] may impose on an applicant conditions
which it must meet before it will be granted a license, but the
imposition of the conditions cannot directly affect the applicant’s
responsibilities to a third party dealing with the applicant”).8
Thus, whether the non-competition agreement would unduly
infringe upon Appellants’ ability to program WBLT was a question
for the FCC to resolve in determining whether to approve the
transfer of the station’s license. It is not a ground to
invalidate the non-competition agreement. We agree with the
district court that any conflict between 3 Daughters’s duties as a
licensee and Burns’s contractual obligations resulted from
Appellants’ failure to inform the FCC of the non-competition
agreement’s restrictions and is thus of their own making. We
8
Appellants rely heavily on In re Citicasters Co., 16 F.C.C.R.
3415 (2001). Citicasters, however, is not contrary to Regents of
University System of Georgia v. Carroll, 338 U.S. 586 (1950). In
Citicasters, the FCC stated that
Where a contractual dispute is before a court, the
licensee must retain actual control of essential station
functions unless the Commission gives prior consent to
the assignment or transfer of control of the station.
Thus, it is a violation of the Communications Act to
invoke remedies for breach, including injunctive or other
equitable relief, that impinge on such control, without
obtaining prior Commission consent.
16 F.C.C.R. at 3420. That a party may violate the FCA by invoking
equitable remedies for breach of contract without obtaining the
FCC’s consent has no bearing on the enforceability of the
underlying contract.
17
therefore conclude that the district court did not abuse its
discretion in granting Centennial a permanent injunction.
III.
In sum, we conclude that the non-competition agreement’s
reference to a “programming format substantially similar to [that
of WLNI on the date of its sale to Centennial],” (J.A. at 23), was
unambiguous. We further conclude that no reasonable jury could
find that WBLT’s format was not substantially similar to WLNI’s
programming format, and that federal law does not preempt
enforcement of the non-competition agreement. Accordingly, the
judgment of the district court is
AFFIRMED.
18 | 01-03-2023 | 07-05-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1024217/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-4244
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
KELVIN LORENZO SPEARMAN,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. Richard L. Williams, Senior
District Judge. (3:05-cr-00060-RLW)
Argued: September 26, 2007 Decided: November 15, 2007
Before WILLIAMS, Chief Judge, SHEDD, Circuit Judge, and Joseph F.
ANDERSON, Jr., United States District Judge for the District of
South Carolina, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: John Bertram Mann, CANFIELD, BAER, HELLER & JOHNSTON,
L.L.P., Richmond, Virginia, for Appellant. Charles Everett James,
Jr., Assistant United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Richmond, Virginia, for Appellee. ON BRIEF: Chuck
Rosenberg, United States Attorney, Alexandria, Virginia, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Appellant Kelvin Spearman (“defendant”) was charged in a four-
count superseding indictment for conspiracy to possess with intent
to distribute cocaine base (“crack cocaine”), in violation of 21
U.S.C. § 846 (“Count One”), possession with intent to distribute
cocaine base, in violation of 21 U.S.C. §§ 841(a)(1),
841(b)(1)(B)(iii) and 860 (“Count Two”), as well as two other
counts not at issue on appeal. Following the denial of his motion
to suppress evidence of crack cocaine discovered during the course
of a search of defendant’s vehicle, a jury convicted defendant on
all four counts. Defendant timely appeals his convictions on
Counts One and Two, arguing that the district court erred when it
denied the suppression motion and that the evidence did not support
his conviction on the conspiracy count. For the reasons that
follow, we affirm.
I.
Defendant first raises a Fourth Amendment challenge to the
traffic stop1 that preceded the seizure of crack cocaine from
underneath the driver’s seat of the vehicle that he was driving.
Defendant contends that the police officer who initiated the
1
This opinion uses the term “traffic stop” because the
parties’ briefs refer to the subject event as a traffic stop.
However, the parties conceded at oral argument that the police did
not effect a traffic stop, but that the defendant stopped his car
and the police pulled in behind him after he stopped, as described
more fully infra at page 4.
2
traffic stop lacked probable cause or reasonable suspicion to stop
the vehicle and, therefore, any evidence derived from that stop
should have been suppressed.
A.
At a hearing on the suppression motion, Richmond City Police
Detective Rahmel Logan testified that, with the use of a
confidential source, he and other officers conducted an undercover
buy operation on July 15, 2004 in the West Moore Street area of
Richmond, Virginia. Detective Logan testified that he observed
defendant’s maroon Cadillac slowly cruise through the block and
stop in the middle of the street. Detective Logan saw an
individual approach the vehicle and engage the driver in
conversation through the car window.
The confidential source milled around the area and returned to
Detective Logan’s car without making a drug purchase. The
confidential source informed Detective Logan that he attempted to
purchase drugs from an individual who did not have any to sell, but
who told him that he could get some from the maroon Cadillac. The
confidential source stated that he did not feel comfortable going
to the maroon Cadillac to buy drugs, so he left the area and was
picked up by Detective Logan at the other end of the block.
Detective Logan testified that he put the information from the
confidential source over the police radio. Richmond City Police
Detective Chris Salyer testified that he and Detective Michael
3
McCray were in their vehicle when they received the radio
transmission from Detective Logan about drugs being available from
the maroon Cadillac. Upon receiving the radio transmission,
Detective Salyer’s unmarked vehicle and the maroon Cadillac passed
one another going in opposite directions. While passing
defendant’s maroon Cadillac, Detective Salyer observed that the
driver was a black male whom Detective Salyer believed was another
individual known to be an armed drug dealer with a suspended
license.
Approximately half a block separated the vehicles when
Detective Salyer turned to follow defendant. After traveling
through a stop sign, defendant pulled to the shoulder of the curb
and parked within a row of parked vehicles. Detective Salyer also
drove through the stop sign, and, unable to observe the tag of
defendant’s vehicle, pulled to the shoulder and parked immediately
behind defendant. Detective Salyer did not activate his blue
lights. Both Detective Salyer and Detective McCray then observed
defendant looking in his rear-view mirror toward the detective’s
unmarked vehicle. As Detective Salyer exited the vehicle, he
pulled his badge from under his shirt and, at that point, observed
defendant’s left shoulder make a downward motion, as if defendant
were reaching under the seat with his left hand. As Detective
Salyer approached the driver’s side door, defendant still was
reaching under his seat and looking in his rear-view mirror, which
4
showed Detective McCray approaching from the defendant’s passenger
side.
Detective Salyer tapped on defendant’s driver-side window and
identified himself as a Richmond Police officer. Defendant then
pulled his hand out from under the seat. Detective Salyer asked
what defendant was doing under the seat, and defendant stated that
he dropped his cell phone and made a motion like he was going to
reach back under the seat. Detective Salyer, however, observed
that a cell phone was already in defendant’s lap and testified that
he believed defendant might be reaching for a weapon. Detective
Salyer asked defendant to step out of the vehicle and conducted a
pat-down search that did not reveal any contraband. Detective
Salyer guided defendant to the rear of the vehicle where defendant
produced identification. Detective Salyer returned to the vehicle
and, during a protective sweep under the driver’s seat, found a
plastic bag of individually-bagged rocks totaling 5.6 grams of
crack cocaine. Meanwhile, Detective McCray ran defendant’s
information, which revealed an outstanding arrest warrant.
Defendant was arrested for conspiracy to distribute, as well as for
a subsequently-discovered outstanding arrest warrant.
Defendant subsequently moved to suppress the admission of the
crack cocaine found under the driver’s seat. The district court
denied defendant’s motion. The court found that, based on the
information transmitted over the radio by Detective Logan,
5
Detective Salyer had information that the maroon Cadillac was a
vehicle in which drug transactions could take place. Therefore,
given the totality of the circumstances, a reasonable officer had
probable cause to stop and search the vehicle.
B.
“The Supreme Court has recognized three distinct types of
police-citizen interactions: (1) arrest, which must be supported by
probable cause; (2) brief investigatory stops, which must be
supported by reasonable articulable suspicion; and (3) brief
encounters between police and citizens, which require no objective
justification.” United States v. Weaver, 282 F.3d 302, 309 (4th
Cir. 2002) (citations omitted). In reviewing a denial of a motion
to suppress, “we review the factual findings of the district court
for clear error and its legal conclusions de novo.” See United
States v. Brown, 401 F.3d 588, 592 (4th Cir. 2005) (internal
quotation marks omitted).
The Fourth Amendment requires that a brief, investigatory stop
of an individual be supported by reasonable, articulable suspicion
that criminal activity is afoot. Terry v. Ohio, 392 U.S. 1, 30, 88
S. Ct. 1868, 20 L. Ed. 2d 889 (1968). The reasonable suspicion
standard “is a less demanding standard than probable cause and
requires a showing considerably less than a preponderance of the
evidence.” Illinois v. Wardlow, 528 U.S. 119, 123, 120 S. Ct. 673,
145 L. Ed. 2d 570 (2000).
6
In deciding whether an officer had the requisite reasonable
suspicion to conduct an investigatory traffic stop, courts apply an
objective test rather than examining the subjective beliefs of the
investigating officer. Id. The “reasonable suspicion standard is
a commonsensical proposition. Courts are not remiss in crediting
the practical experience of officers who observe on a daily basis
what transpires on the street.” United States v. Lender, 985 F.2d
151, 154 (4th Cir. 1993). The Supreme Court has recognized that
individual factors consistent with innocent travel can, when taken
together, give rise to reasonable suspicion. United States v.
Sokolow, 490 U.S. 1, 9, 109 S. Ct. 1581, 104 L. Ed. 2d 1 (1989).
Here, Detective Salyer initially approached defendant in
response to a radio transmission that drugs were available from the
maroon Cadillac defendant was driving. Even if Detective Salyer
did not have reasonable suspicion for a Terry stop at that time,
cf. Florida v. J.L., 529 U.S. 266, 271-72, 120 S. Ct. 1375, 146 L.
Ed. 2d 254 (2000), the circumstances evolved to present a more
suspicious and dangerous climate when the detectives saw defendant
observing them approach his vehicle and ducking his left shoulder,
apparently reaching under his driver’s seat. Detective Salyer had
received a report over the police radio that drugs were available
from defendant’s car, and Detective Salyer thought, though
mistakenly, that defendant was another individual whose license had
been suspended, who was involved in drug trafficking, and who was
7
known to carry weapons. Defendant’s fixation in his rear-view
mirror on the detectives while reaching under his car seat created
heightened tension in an already-known high-crime area. When
defendant engaged in activity which Detective Salyer reasonably
perceived to be potentially dangerous in nature—-seeing the
detectives approach, unarmed, while reaching for a weapon under the
seat—-the totality of the facts known to Detective Salyer combined
to create a reasonable, articulable suspicion that he and Detective
McCray were in danger and that defendant was armed and dangerous.
As we have previously stated, “the very point of Terry was to
permit officers to take preventive action and conduct investigative
stops before crimes are committed, based on what they view as
suspicious-albeit even legal-activity.” United States v. Perkins,
363 F.3d 317, 326 (4th Cir. 2004)(emphasis in original). “We cannot
afford to read the Fourth Amendment to require officers to wait
until criminal activity occurs, and perhaps until innocent
bystanders are physically harmed, before taking reasonable,
preventive measures.” Id. at 328; see Adams v. Williams, 407 U.S.
143, 145, 92 S. Ct. 1921, 32 L. Ed. 2d 612 (1972) (“The Fourth
Amendment does not require a policeman who lacks the precise level
of information necessary for probable cause to arrest to simply
shrug his shoulders and allow a crime to occur or a criminal to
escape. On the contrary, Terry recognizes that it may be the
essence of good police work to adopt an intermediate response.”).
8
Given the totality of the circumstances, we agree with the
district court that Detective Salyer was justified in seizing
defendant, and conducting a pat-down search and protective sweep
for weapons. We conclude that an officer in Detective Salyer’s
position would have had an objectively reasonable suspicion that
the maroon Cadillac that defendant was driving was connected with
illicit drug activities. The radio transmission had occurred only
minutes earlier. Independently, Detective Salyer thought the driver
was a known drug dealer who carried weapons and whose license had
been suspended. Finally, defendant made furtive movements under
the driver’s seat when he saw the detectives approaching his
vehicle and provided a unlikely excuse for his movements. We
conclude that these factors, taken together, give rise to
reasonable suspicion sufficient to justify the stop and search
under Terry.
Further, we find that the search under the defendant’s
driver’s seat for weapons was permissible as an extension of the
legitimate Terry stop. See Michigan v. Long, 463 U.S. 1032
(1983)(search of the passenger compartment of an automobile,
limited to those areas in which a weapon may be placed or hidden,
is permissible if the police officer possesses a reasonable belief
based on specific and articulable facts which, taken together with
the rational inferences from those facts, reasonably warrant the
officers in believing that the suspect is dangerous and the suspect
9
may gain immediate control of weapons). We find the district court
did not err in admitting evidence of the crack cocaine discovered
during Detective Salyer’s search for weapons under the seat. Id.
at 1050 (if while conducting a legitimate Terry search of the
interior of the automobile, the officer should discover contraband
other than weapons, he clearly cannot be required to ignore the
contraband, and the Fourth Amendment does not require its
suppression in such circumstances).
For the foregoing reasons, we affirm defendant’s conviction on
Count Two.
II.
Defendant next challenges the sufficiency of the evidence
underlying his conviction on the conspiracy charged in Count One.
The evidence at trial as to the conspiracy count included testimony
by a confidential informant named Chris Cox (“Cox”) who testified
that he purchased crack cocaine from defendant 60 to 70 times in
varying amounts, including amounts as large as one quarter ounce or
approximately seven (7) grams. Cox testified that when he bought
an amount that large, he and a group of people would pool their
money to purchase the crack. Cox also attempted two recorded
controlled crack cocaine buys of $200 each for law enforcement,
resulting in actual purchases of $80 and $150 worth. The
10
government expert testified that 5.6 grams2 of crack cocaine was
not a typical personal use amount, and that based on his training
and experience, such an amount of crack would be packaged for
resale. Cox testified that he met defendant through defendant’s
uncle, Sonny, who served as Cox’s former supplier. Cox testified
that the three of them met together at a Fourth of July block
party, where Sonny told Cox that defendant would “take care of him
if he needed anything” while Sonny was in Las Vegas for the week.
(J.A. 141).
A defendant challenging the sufficiency of the evidence to
support his conviction “bears a heavy burden.” United States v.
Beidler, 110 F.3d 1064, 1067 (4th Cir. 1997). Where, as here, the
motion was based on a claim of insufficient evidence, “[t]he
verdict of a jury must be sustained if there is substantial
evidence, taking the view most favorable to the Government, to
support it.” Glasser v. United States, 315 U.S. 60, 80 (1942).
This court “ha[s] defined ‘substantial evidence’ as ‘evidence that
a reasonable finder of fact could accept as adequate and sufficient
to support a conclusion of a defendant's guilt beyond a reasonable
doubt.’” Alerre, 430 F.3d at 693 (quoting United States v. Burgos,
94 F.3d 849, 862 (4th Cir. 1996) (en banc)). In evaluating the
2
The amount of crack found under defendant’s driver’s seat was
5.6 grams. The proof of the conspiracy did not involve the crack
seized from the car, but the expert testimony that 5.6 grams of
crack is not for personal use likewise supports the inference of
distribution for the 7 gram sale.
11
presence of substantial evidence, we “consider circumstantial as
well as direct evidence, and allow the government the benefit of
all reasonable inferences from the facts proven to those sought to
be established.” United States v. Tresvant, 677 F.2d 1018, 1021
(4th Cir. 1982). This court “may not weigh the evidence or review
the credibility of the witnesses.” United States v. Wilson, 118
F.3d 228, 234 (4th Cir. 1997).
A.
To prove conspiracy to possess cocaine with intent to
distribute in violation of 21 U.S.C. §§ 841(a)(1), 846, the
government “must establish that: (1) an agreement to possess
cocaine with intent to distribute existed between two or more
persons; (2) the defendant knew of the conspiracy; and (3) the
defendant knowingly and voluntarily became a part of this
conspiracy.” Burgos, 94 F.3d at 857.
Defendant contends that the evidence showed only that he and
Cox shared a buyer-seller relationship, not “an agreement to
possess cocaine with intent to distribute.” Id. Viewing the
evidence in the light most favorable to the government, we find
substantial evidence to support a finding that defendant's
involvement went beyond that of a buyer-seller. Cox specifically
testified as to his and defendant's involvement with defendant’s
uncle Sonny, including the three of them meeting to orchestrate the
details of who would be available when to distribute cocaine to
12
Cox.3 See United States v. Brown, 332 F.3d 363, 373 (6th Cir.
2003) (“[E]vidence of repeat purchases provides evidence of more
than a mere buyer-seller relationship.”); United States v.
Bourjaily, 781 F.2d 539, 545 (6th Cir. 1986) (“A large volume of
narcotics creates an inference of a conspiracy.”).
The court finds a conspiracy was established because (a) Cox’s
purchases were of an amount too great to be for only personal use,
even if the drugs were to be shared with friends (whose money was
pooled to make the purchase), thereby sufficiently establishing
intent to distribute; and (b) testimony that Cox purchased from
both defendant and his uncle, Sonny, and testimony that all three
of them met together at a Fourth of July block party and discussed
purchasing drugs from defendant establishes the existence of an
agreement.
For the foregoing reasons, the court finds no error in the
district court’s denial of defendant’s suppression motion and finds
that the evidence supports defendant’s conviction on the conspiracy
count. Accordingly, the judgment is affirmed.
AFFIRMED
3
Defendant also attacks on appeal the credibility of Cox.
However, “[t]he jury, not the reviewing court, weighs the
credibility of the evidence and resolves any conflicts in the
evidence presented.” United States v. Murphy, 35 F.3d 143, 148
(4th Cir. 1994). We find no reason to disturb the jury's
credibility determinations here.
13 | 01-03-2023 | 07-05-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594714/ | 954 So.2d 234 (2007)
Leila WELLS, Plaintiff-Applicant
v.
STATE of Louisiana, DEPARTMENT OF PUBLIC SAFETY AND CORRECTIONS, et al., Defendants-Respondents.
No. 41,836-CW.
Court of Appeal of Louisiana, Second Circuit.
March 7, 2007.
*235 Anthony J. Bruscato, Monroe, Raymond L. Cannon, Tallulah, Catherine Leary, New Orleans, for Applicant.
Laurel I. White, Assistant Attorney General, for Respondent, State of Louisiana, DPSC.
Usry, Weeks & Matthews, by Freeman R. Matthews, Craig E. Frosch, Tim R. Richardson, New Orleans, for Respondents, Madison Parish Sheriff, Madison Parish Law Enforcement District, and Charles R. Harmon, Jr.
David E. Verlander, III, Monroe, Counsel for Respondents, LSU Health Sciences Center-Shreveport and E.A. Conway Medical Center.
Before BROWN, DREW, and MOORE, JJ.
BROWN, Chief Judge.
Plaintiff, Leila Wells, filed a writ application with this court following the trial court's denial of her motion to compel the Madison Parish Sheriff's Office ("MPSO") to answer certain interrogatories. This court granted certiorari, obtained the entire record from the trial court, and had the parties address the issue fully in brief. For the reasons set forth below, we find no error in the trial court's ruling and therefore, the writ is denied.
Facts and Procedural History
This is a long-running civil action by plaintiff, Leila Wells, the mother of now-deceased Kerry Scarborough, against the Louisiana Department of Public Safety and Corrections ("DPS")/Department of Corrections ("DOC"), the MPSO, and E.A. Conway Hospital in Monroe. The issue before this court is the scope of the discovery to be allowed Mrs. Wells-specifically, whether the trial court erred by denying plaintiff's motion to compel the MPSO to answer certain interrogatories.
In 1993, Kerry Scarborough was sentenced to seven years imprisonment at hard labor with the DOC on a variety of charges. The DOC elected to house Scarborough with the MPSO at the Madison Parish Detention Center from August 1993 *236 to January 1995. The detention center is run by the MPSO.
While at the detention center, Scarborough developed serious health problems, including tuberculosis and cancer, that required diagnosis and treatment at E.A. Conway. Mrs. Wells has alleged that defendants were negligent in failing to ensure that her son got adequate medical care and treatment for these conditions and that this failure allowed both conditions to worsen, resulting ultimately in his death.[1]
Mrs. Wells sued the DOC, MPSO and E.A. Conway in March 1996. The minutes of record and index indicate that while plaintiff was busy with discovery efforts, defendants were filing various motions and exceptions, attempting to extricate themselves from this matter. Specifically, the MPSO filed a motion for summary judgment on March 31, 2004, urging that the MPSO satisfied its duty to provide reasonable medical care to Kerry Scarborough. In response, Mrs. Wells served a variety of discovery requests upon the MPSO asking for, inter alia, the sheriff's "understanding" of the relationship between the DOC and the MPSO. Thereafter, the DOC filed a motion for summary judgment on December 8, 2004, asserting that the MPSO, not the DOC, was responsible for Scarborough's medical care. This motion was denied on March 28, 2005.
The sheriff's responses to a number of plaintiff's interrogatories, which stated that the sheriff was not an attorney and referred plaintiff to the relevant statutes, did not satisfy plaintiff, so she filed several motions to compel,[2] which the sheriff opposed. A hearing on the motion(s) to compel was held on August 24, 2006, and the trial court found that plaintiff's discovery requests sought a legal opinion from the sheriff, something he was not required to provide.[3] This ruling is the subject of plaintiff's writ application.
Discussion
Louisiana Code of Civil Procedure article 1422 provides in part that:
Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.
The trial court has broad discretion in regulating pretrial discovery, and its decision will not be disturbed on appeal absent a clear abuse of that discretion. Moak v. Illinois Central Railroad Company, 93-0783 (La.01/14/94), 631 So.2d 401.
*237 Louisiana Revised Statute 15:824, which provides for overcrowding contracts between the DPS and local sheriffs, states in part:
(B)(1)(a) In the event any individual has been committed to the department for confinement . . . when the individual is not institutionalized in a state penal or corrections institution because of lack of facilities under the control of the department . . . which resulted or has resulted in the individual being confined in a parish jail or institution after final sentence . . . the department shall pay to each parish sheriff, or to the governing authority of those parishes in which the governing authority operates the parish jail, for keeping and feeding the individual in the parish jail the sum of twenty-two dollars and thirty-nine cents per day from date of sentencing until the individual is confined in a penal or correctional institution under the supervision of the department.
In addition to statutory provisions which govern the relationship between the DOC and the sheriff vis-a-vis DOC prisoners housed in a parish facility, the DOC and sheriff may enter into a contract which expressly addresses the responsibilities and duties of each entity regarding, among other things, the medical care to be provided to DOC prisoners. See Jackson v. State, Department of Corrections, 00-2882 (La.05/15/01), 785 So.2d 803. In the instant case, no contract between DOC and MPSO has been produced through discovery or as evidentiary support for DOC's contention that, by housing Scarborough with the MPSO, it was no longer responsible for Scarborough's medical care.[4] However, as noted by the court in Jackson, supra, the DOC is not necessarily immune from a suit for damages if treatment is not timely provided by the sheriff.
We have reviewed the interrogatories and requests for admission that plaintiffs want answered by the sheriff. In a nutshell, plaintiffs are seeking the sheriff's "understanding" of: (1) the legal relationship between the DOC and the MPSO; (2) whether Scarborough was under the custody and control of the DOC and/or the MPSO while housed in the detention center; (3) whether the sheriff was responsible for furnishing necessary[5] medical care to Scarborough while he was in the detention center; and (4) whether the DOC had a duty to provide necessary medical care should the sheriff be unable to provide necessary medical care since Scarborough was a DOC prisoner.
The issue of the existence and extent of the DOC's and/or the MPSO's responsibility or duty to provide medical care to Kerry Scarborough is clearly a question of law. See Harper v. Goodwin, 35,584 (La. App. 2d Cir.05/17/06), 930 So.2d 1160. The questions that the plaintiff have posed to the sheriff under the guise of discovering his "understanding" are to be answered not by the sheriff, but by the trial court ultimately when it makes its findings of law. Plaintiff's requests do not seek the sheriff's opinion as to facts upon which his claims or defenses are based, but call for legal conclusions and/or interpretations based upon statutory or contractual law, i.e., La. R.S. 15:824 and La. R.S. 15:703-15:706, which govern the legal relationship between and responsibilities of the custodians of persons in the custody of the DOC *238 but who must be held in parish facilities until they can be transferred to a DOC facility, and are therefore inappropriate. The trial court did not err in denying plaintiff's motion to compel. For this reason, plaintiff's writ is denied and this matter is remanded to the trial court for further proceedings.
WRIT DENIED; REMANDED.
MOORE, J., dissents with reasons.
MOORE, J., dissents.
I respectfully dissent. This court granted a writ to address the plaintiff's contention that her discovery requests, seeking the sheriff's "understanding" of his agreement with the Department of Corrections, were permissible as contention interrogatories. Now a majority of the panel has dismissed the plaintiff's application without discussing or even acknowledging this novel and important issue.
The Code of Civil Procedure provides for "discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action[.]" La. C.C.P. art. 1422. One appellate court has already recognized, "The fact that interrogatories may to a degree call for an expression of opinion or judgment * * * does not necessarily render them objectionable." Gaudet v. Lawes, 166 So.2d 337 (La.App. 1 Cir.1964). Notably, art. 1422 mirrors FRCP 26, which was widely understood to allow contention interrogatories even prior to the adoption of FRCP 33(c). See Moore's Federal Practice, Civil § 33.02 (Matthew Bender & Co., 2006). I would grant this writ and recognize the validity of contention interrogatories under art. 1422.
Even under the district court's narrow view of discovery, I would find these interrogatories and requests for admission proper. They seek not so much a legal conclusion as the sheriff's version of the oral agreement that must have existed before he would accept Scarborough in the Madison Parish Jail. Any agreement between the sheriff and the Department of Corrections is obviously relevant and would be admissible at trial.
For these reasons I would grant the writ and remand the case with an order for the sheriff to respond, in full, to each of the contested discovery requests, without framing the responses as legal conclusions.
NOTES
[1] Scarborough was moved out of the detention center in January 1995 and into another facility where he received medical treatment, but he died in March 1995 from the tuberculosis and cancer.
[2] Plaintiff took the position that she was unable to effectively oppose the MPSO's motion for summary judgment without the sheriff's complete answers to the interrogatories propounded.
[3] In this judgment, the trial court gave plaintiff 15 days from this court's ruling on her writ application to file any additional memoranda opposing the MPSO's motion for summary judgment, and the sheriff was given 10 days thereafter.
[4] As noted above, the motion for summary judgment filed by the DOC was denied by the trial court.
[5] Prison authorities have an obligation or duty to provide reasonable medical treatment and care to inmates. Harper v. Goodwin, 41,836 (La.App. 2d Cir.05/17/06), 930 So.2d 1160. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595327/ | 621 N.W.2d 86 (2000)
260 Neb. 937
STATE of Nebraska, Appellee,
v.
Duane D. DALLMANN, Appellant.
No. S-99-1411.
Supreme Court of Nebraska.
December 22, 2000.
*91 Dennis R. Keefe, Lancaster County Public Defender, and Kristi J. Egger Brown, Lincoln, for appellant.
Don Stenberg, Attorney General, and Marilyn B. Hutchinson, Lincoln, for appellee.
*92 HENDRY, C.J., and WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.
CONNOLLY, J.
The appellant, Duane D. Dallmann, was convicted of possession of a controlled substance. On appeal, Dallmann argues that police officers stopped his vehicle as a pretext to search for drugs, that various searches violated his Fourth Amendment rights, that he was not given Miranda warnings, and that his sentence is excessive.
Although the substantive issues raised on appeal are significant, this appeal also requires us to address whether a poverty affidavit that fails to state the nature of the action and that the appellant is entitled to redress is sufficient under Neb.Rev. Stat. § 25-2301.01 (Cum.Supp.2000) to vest this court with jurisdiction. When Dallmann filed his notice of appeal, he also filed a motion for leave to proceed in forma pauperis. In the poverty affidavit filed in support of the motion, Dallmann stated that he was unable to pay the costs of appeal but did not list the nature of the action or that he believed he was entitled to redress. We determine these requirements are not jurisdictional. We further determine that Dallmann's assignments of error are without merit. Accordingly, we affirm.
ASSIGNMENTS OF ERROR
Dallmann assigns, rephrased, that the district court erred in (1) overruling his motions to suppress, (2) finding that the evidence was sufficient to find Dallmann guilty beyond a reasonable doubt, and (3) imposing an excessive sentence.
BACKGROUND
On June 14, 1999, an information was filed charging Dallmann with possession of a controlled substance, a Class IV felony. Dallmann filed motions to suppress evidence and statements he made to various police officers. A hearing was held on the motions, and three police officers testified.
Jeff Bliemeister, a deputy sheriff and narcotics investigator, testified that on May 13, 1999, he and another investigator, Forrest Dean Dalton, Jr., were on their way to conduct surveillance on the residence of Nancy Thurman. Neither investigator was in uniform, and they were driving an unmarked vehicle. On the way to the residence, the investigators saw Thurman in a car leaving the area. The investigators then followed Thurman to a convenience store, where she parked her car. The investigators parked in a church parking lot across the street and observed Thurman. Thurman sat in her car and did not enter the convenience store. A few minutes later, another car pulled into the convenience store parking lot. A man, later identified as Dallmann, got out of the car, put the hood up, and stood there for a couple of seconds. Thurman then got out of her car and met Dallmann in between the two cars. The investigators observed Thurman and Dallmann walk to the passenger side of Dallmann's vehicle and talk. The two talked for less than 5 minutes, then returned to their cars. Dallmann and Thurman remained in their cars for about 30 seconds, then they both got out of the cars again, met briefly, and left. The investigators did not observe any objects change hands between Thurman and Dallmann and did not see anything dropped or picked up by either of them. During the time Dallmann and Thurman were talking, the investigators radioed for a uniformed police unit to come into the area.
Based on the investigators' suspicions that a drug transaction had taken place, they decided to follow Dallmann. In Bliemeister's police report, he wrote that the officers planned to stop Dallmann. As Dallmann pulled out of the convenience store, the investigators observed that he was driving without the headlights of his vehicle on. It was approximately 9 p.m. and completely dark. The investigators informed the uniformed unit that Dallmann *93 was driving without his headlights on. One of the uniformed officers, Danny Reitan, then stopped Dallmann about three blocks away.
Reitan asked Dallmann to step out of the vehicle. After Dallmann had exited the vehicle, Reitan asked him if he had any weapons. Dallmann replied, "No." Reitan asked if he could check, and Dallmann replied, "Yes." At approximately the same time, Bliemeister asked Dallmann if he could search the car for weapons, and Dallmann said, "Go ahead. Yes." Reitan conducted a pat-down search and did not find any weapons. Reitan next asked Dallmann if he had any narcotics. Dallmann replied, "No." When asked by Reitan if he could search, Dallmann said, "Yes." During the search, Reitan pulled a cigarette package out of Dallmann's pocket. Dallmann stated that he did not know what was in it. When Reitan opened it, he found cigarettes and a small amount of cash. Dallmann then stated, "Oh, that's what's in there."
Reitan began to search Dallmann's pockets and pant cuffs and then asked if he could search Dallmann's shoes. Dallmann replied, "Yes." Dallmann was wearing leather moccasin-type shoes and was able to simply lift his feet out of them. As Dallmann lifted his left foot out of the shoe, he tried to kick it under the car and then, using his foot, pulled it back toward Reitan. Reitan then observed a white napkin in the bottom of the shoe. Reitan asked Dallmann what was in the shoe, and Dallmann replied, "That just fell out of the tire." Dalton then came over and removed the napkin from the shoe. Inside the napkin was a clear plastic baggie containing an off-white substance. Believing the substance to be methamphetamine, Reitan placed Dallmann under arrest and led him back to the police cruiser. After the drugs were found, Bliemeister expanded the scope of his search of the car for not only weapons, but contraband and drugs. No drugs were found in the car, but an address book was found containing several names and telephone numbers of people Bliemeister and Dalton had arrested in the past on narcotics-related charges or who were currently being investigated. The address book was found in the pocket of a denim jacket in the backseat.
After learning that drugs had likely been found, Bliemeister attempted to talk to Dallmann. Dallmann, however, refused to talk to Bliemeister and stated that he wanted an attorney. Bliemeister stopped questioning Dallmann at that point. Bliemeister testified that he did not read Dallmann Miranda warnings because Dallmann had invoked his right to counsel. The record also indicates that none of the investigating officers advised Dallmann of his Miranda rights at any time. The substance that was found was then pretested, and a positive result was obtained. After the substance tested positive, Dallmann was handcuffed and placed in the back of Reitan's cruiser. As Bliemeister was writing a citation for Dallmann to sign, he told Dallmann that the charge was for possession of methamphetamine. Dallmann then stated that the methamphetamine was not for him, that the officers could "piss test" him, and that he was just going to sell the drugs to make a little extra money. Bliemeister testified that Dallmann's statements were unsolicited.
Dallmann was charged by information with possession of a controlled substance pursuant to Neb.Rev.Stat. § 28-416(3) (Cum.Supp .1998). Dallmann filed a motion to suppress statements because he had not been advised of his rights pursuant to Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). Dallmann also filed a motion to suppress evidence on the bases that the investigators did not have probable cause to stop his vehicle and conduct searches, that the searches were not incident to a lawful arrest, and that there was no valid consent to search. A hearing was held, and the motions were overruled. In overruling the motions, the district court found that Dallmann's consents to search were made freely *94 and voluntarily. The court further found that any expansion of the search of the vehicle was a search incident to arrest. The court found that Dallmann was not in custody when he made statements about the napkin in his shoe and the contents of his package of cigarettes. The court determined that Dallmann was in custody when he made the statement that he had planned to sell the drugs. However, the court determined that the statement was not the product of any police interrogation, but, instead, was volunteered.
After a stipulated trial consisting of the suppression hearing testimony and a laboratory report, at which Dallmann preserved his objections to the evidence, Dallmann was convicted. The district court sentenced Dallmann to not less than 18 months' nor more than 36 months' incarceration, with credit given for 209 days already served. The sentence was to run consecutively to any other sentence that Dallmann was already serving.
Dallmann appealed. Along with his notice of appeal, Dallmann also filed a motion for leave to proceed in forma pauperis and an affidavit in support of the motion. The affidavit stated that Dallmann was unable to pay the costs of appeal but did not state the nature of the action or state that Dallmann believed he was entitled to relief. The record contains an order of the district court sustaining Dallmann's motion to proceed in forma pauperis. The State filed a motion for summary dismissal because the affidavit failed to include statements required by § 25-2301.01.
STANDARD OF REVIEW
A trial court's ruling on a motion to suppress, apart from determinations of reasonable suspicion to conduct investigatory stops and probable cause to perform warrantless searches, is to be upheld on appeal unless its findings of fact are clearly erroneous. State v. Bjorklund, 258 Neb. 432, 604 N.W.2d 169 (2000).
In reviewing a motion to suppress statements to determine whether an individual was in custody for purposes of Miranda, findings of fact as to the circumstances surrounding the interrogation are reviewed for clear error, and the determination of whether or not a reasonable person would have felt that he or she was free to leave is reviewed de novo. See State v. Burdette, 259 Neb. 679, 611 N.W.2d 615 (2000).
In reviewing a district court's ruling on a motion to suppress evidence obtained through a warrantless search or seizure, an appellate court conducts a de novo review of reasonable suspicion and probable cause determinations, and reviews factual findings for clear error, giving due weight to the inferences drawn from those facts by the trial judge. State v. Lara, 258 Neb. 996, 607 N.W.2d 487 (2000); State v. Bartholomew, 258 Neb. 174, 602 N.W.2d 510 (1999).
ANALYSIS
MOTION FOR SUMMARY DISMISSAL
BECAUSE OF LACK OF JURISDICTION
The State has filed a motion for summary dismissal because the poverty affidavit in support of Dallmann's motion to proceed in forma pauperis failed to include statements required by § 25-2301.01. Specifically, Dallmann provided a motion and affidavit stating that he was unable to pay the cost of the appeal, but did not provide a statement of the nature of the action or a statement that he believed was entitled to redress. The State contends that because the poverty affidavit serves as a substitute for the docket fee, the failure to strictly comply with all statutory provisions governing poverty affidavits is jurisdictional.
This court generally does not acquire jurisdiction of an appeal unless a notice of appeal is filed and the docket fee is paid within 30 days of the final order. See Neb.Rev.Stat. § 25-1912 (Cum.Supp.2000). Under § 25-2301.01, an indigent appellant *95 can avoid paying the docket fee by requesting to proceed in forma pauperis. Section 25-2301.01 states in part:
An application to proceed in forma pauperis shall include an affidavit stating that the affiant is unable to pay the fees and costs or give security required to proceed with the case, the nature of the action, defense, or appeal, and the affiant's belief that he or she is entitled to redress.
Before August 28, 1999, Neb.Rev.Stat. § 29-2306 (Reissue 1995), which pertains specifically to in forma pauperis criminal appeals, stated only that the affiant must state that "he or she is unable by reason of poverty to pay the costs" of the appeal. Section 29-2306 did not require that the affiant state the nature of the action, defense, or appeal, and the belief that he or she was entitled to redress. Effective August 28, 1999, however, § 29-2306 was amended and provides:
If a defendant in a criminal case files, within thirty days after the entry of the judgment, order, or sentence, an application to proceed in forma pauperis in accordance with sections 25-2301 to 25-2310 with the clerk of the district court, then no payment of the docket fee shall be required of him or her unless the defendant's application to proceed in forma pauperis is denied. The clerk of the district court shall forward a certified copy of such application, including the affidavit, to the Clerk of the Supreme Court. If an application to proceed in forma pauperis is filed and granted, the Court of Appeals or Supreme Court shall acquire jurisdiction of the case when the notice of appeal is filed with the clerk of the district court. In cases in which an application to proceed in forma pauperis is granted, the amount of the costs shall be endorsed on the mandate and shall be paid by the county in which the indictment was found.
(Emphasis supplied.) § 29-2306 (Cum. Supp.2000). Thus, under the amended version of § 29-2306, a request to proceed in forma pauperis in a criminal appeal must be filed in accordance with § 25-2301.01.
Neb.Rev.Stat. § 25-2301.02 (Cum.Supp. 2000), a new statutory section that was also effective August 28, 1999, provides in part:
(1) An application to proceed in forma pauperis shall be granted unless there is an objection that the party filing the application: (a) Has sufficient funds to pay costs, fees, or security or (b) is asserting legal positions which are frivolous or malicious. The objection to the application shall be made within thirty days after the filing of the application. Such objection may be made by the court on its own motion or on the motion of any interested person. The motion objecting to the application shall specifically set forth the grounds of the objection. An evidentiary hearing shall be conducted on the objection unless the objection is by the court on its own motion on the grounds that the applicant is asserting legal positions which are frivolous or malicious. If no hearing is held, the court shall provide a written statement of its reasons, findings, and conclusions for denial of the applicant's application to proceed in forma pauperis which shall become a part of the record of the proceeding. If an objection is sustained, the party filing the application shall have thirty days after the ruling or issuance of the statement to proceed with an action or appeal upon payment of fees, costs, or security notwithstanding the subsequent expiration of any statute of limitations or deadline for appeal.
We have never addressed whether all the exact requirements of the former version of § 25-2301.01, see Neb.Rev.Stat. § 25-2301 (Reissue 1995), had to be met in order to vest this court with jurisdiction over an appeal. However, in State v. Schmailzl, 248 Neb. 314, 534 N.W.2d 743 (1995), we held that a poverty affidavit *96 must assert that the defendant is unable by reason of poverty to pay the costs of the appeal in order to vest jurisdiction with an appellate court. We have also dismissed for lack of jurisdiction when the appellant failed to properly sign the poverty affidavit under oath. In re Interest of T.W. et al., 234 Neb. 966, 453 N.W.2d 436 (1990); State v. Hunter, 234 Neb. 567, 451 N.W.2d 922 (1990); In re Interest of K.D.B., 233 Neb. 371, 445 N.W.2d 620 (1989).
In In re Interest of Noelle F. & Sarah F., 249 Neb. 628, 544 N.W.2d 509 (1996), we addressed a case in which the district court had denied the appellant's motion to proceed in forma pauperis, stating that if the poverty affidavit is not sufficient to meet the statutory requirements of § 25-2301 or is found to be untrue, the appeal has not been perfected. Thus, in Noelle F. & Sarah F., we held that an in forma pauperis affidavit which is found by the trial court to be not well taken is insufficient to perfect an appeal on the merits.
Under the amended statutes, however, we now conclude that the plain language of § 29-2306, as amended, and §§ 25-2301.01 and 25-2301.02 make clear that the absence of language in a poverty affidavit stating the nature of the action and that the affiant is entitled to redress will not divest this court of jurisdiction. Section 29-2306 clearly states that if in forma pauperis status is sought and granted, the Nebraska Court of Appeals or Supreme Court shall acquire jurisdiction of the case when the notice of appeal is filed with the clerk of the district court. Under § 29-2306, when a request to proceed in forma pauperis is granted, the amount of the costs "shall be paid by the county in which the indictment was found." With the exception of the 30-day filing requirement, § 29-2306 does not make any exceptions for in forma pauperis status that may have been improperly granted or granted in error. Thus, in a criminal case, once in forma pauperis status has been granted by the district court, the appellate court will be entitled to receive the docket fee.
Section 25-2301.02 makes clear that challenges to the ability of a defendant to proceed in forma pauperis are to occur in the district court and that the district court is charged with the responsibility of granting or denying the motion to proceed in forma pauperis. We have previously stated:
We have uniformly held that lower courts are divested of subject matter jurisdiction over a particular case when an appeal of that case is perfected.... [W]e [have] held that an in forma pauperis appeal is perfected when the appellant timely filed a notice of appeal and an affidavit of poverty.
Although jurisdiction is vested in the appellate court upon timely filing of a notice of appeal and an affidavit of poverty, some duties are still required of the lower court.... For example, the lower court must forward to the appellate court the notice of appeal, requests for the transcript and the bill of exceptions, and the docket fee or poverty affidavit. Sections 25-2301 and 25-2308 require the lower court to act if it determines that the allegations of poverty are untrue or if it determines that the appeal is not taken in good faith.
Generally, appellants are entitled to the benefits of an in forma pauperis appeal when the affidavit of poverty and notice of appeal are filed and stand uncontradicted and unobjected to. If there is no hearing on the poverty affidavit and the appeal, or when there is a hearing and the evidence is uncontradicted, the trial court has a duty to allow the appellant to proceed in forma pauperis.
Flora v. Escudero, 247 Neb. 260, 264-65, 526 N.W.2d 643, 646-47 (1995). It is not a function of this court to determine whether an affidavit to proceed in forma pauperis contains specific language stating the nature of the case and that the affiant is entitled to redress. These determinations *97 must be made by the district court. Thus, any objection that the poverty affidavit fails to state the nature of the action, defense, or appeal, and the belief that the affiant is entitled to redress, must also be raised in the district court. As indicated in Flora, supra, such objections may be waived.
Accordingly, we determine that if a request to proceed in forma pauperis is granted by the district court, this court obtains jurisdiction when the notice of appeal is timely filed, and any failure of the affidavit to state the nature of the action or that the affiant is entitled to redress under § 25-2301.01 will not divest this court of jurisdiction. In Dallmann's case, the record contains an order from the district court sustaining his motion to proceed in forma pauperis. Thus, Dallmann was granted in forma pauperis status, and we have jurisdiction over the appeal.
STOP OF VEHICLE
Dallmann contends that the officers stopped his vehicle in violation of the Fourth Amendment to the U.S. Constitution and article I, § 7, of the Nebraska Constitution. Dallmann contends that the investigators had decided, without probable cause, to follow and stop him before he left the convenience store and that the stop based on his failure to turn on his headlights was a pretext to obtain consent to search the vehicle. This contention is without merit.
In Whren v. United States, 517 U.S. 806, 116 S.Ct. 1769, 135 L.Ed.2d 89 (1996), the Court addressed the argument that a stop made pursuant to a traffic violation was actually a pretext for a search. The Court made clear that the standard to be applied is whether the officers had probable cause to stop the vehicle and that the constitutional reasonableness of a traffic stop does not depend on the actual motivations of the officers involved. The Court further explained that prior cases involving a pretext to search were cases in which the Court was addressing the validity of a search in the absence of probable cause.
Based in part on Whren, supra, we recently held that a traffic violation, no matter how minor, creates probable cause to stop the driver of a vehicle. State v. Bartholomew, 258 Neb. 174, 602 N.W.2d 510 (1999). If an officer has probable cause to stop a violator, the stop is objectively reasonable, and any ulterior motivation on the officer's part is irrelevant. Id.
The officers in this case stopped Dallmann because he was driving at night without headlights. Whether the officers would have had probable cause to stop Dallmann if he had not violated a traffic regulation is irrelevant. Thus, the district court was correct in concluding that the officers had probable cause to stop Dallmann's vehicle.
SEARCH OF DALLMANN AND VEHICLE
Dallmann next contends that his consent to the search of his clothing and his vehicle was not voluntarily given. In particular, Dallmann argues that he was in a "custodial atmosphere," brief for appellant at 29, that he was unaware he had the right to refuse to consent, and that under the totality of the circumstances, his consent was the result of duress or coercion.
The right to be free from an unreasonable search and seizure, as guaranteed by the 4th and 14th Amendments to the U.S. Constitution and by article I, § 7, of the Nebraska Constitution, may be waived by the consent of the citizen. State v. Ready, 252 Neb. 816, 565 N.W.2d 728 (1997). In order for a consent to search to be effective, it must be a free and unconstrained choice and not the product of a will overborne. Id.; State v. Prahin, 235 Neb. 409, 455 N.W.2d 554 (1990). The consent must be given voluntarily and not as the result of duress or coercion, whether express, implied, physical, or psychological. Id. The Fourth Amendment, however, does not require that a lawfully seized defendant be advised that he or she *98 is legally "free to go" before the defendant's consent to search will be recognized as voluntary. Ready, supra, citing Ohio v. Robinette, 519 U.S. 33, 117 S.Ct. 417, 136 L.Ed.2d 347 (1996). In addition, an officer need not give any warning to a citizen that he or she may freely refuse a request to search. State v. Aguirre-Rojas, 253 Neb. 477, 571 N.W.2d 70 (1997).
We agree with the district court that under the totality of the circumstances, Dallmann's consent to search his clothing for drugs and his vehicle for weapons was voluntary. Nothing in the record indicates that the investigating officers used coercion or threats of force, either express or implied, to obtain Dallmann's consent. The officers were not required to inform Dallmann that he had a right to refuse the request to search.
Although Dallmann consented to a search of his vehicle for weapons, the address book was found in a place where a weapon could be concealed. In addition, the expanded scope of the search of the vehicle took place when Dallmann was placed under arrest. When a police officer has made a lawful custodial arrest of the occupant of a vehicle, the officer may, as a contemporaneous incident of the arrest, search the passenger compartment of that vehicle. The officer may also examine the contents of any containers found within the passenger compartment. State v. Roth, 213 Neb. 900, 331 N.W.2d 819 (1983). We conclude that the evidence was obtained through lawful searches. Thus, the district court did not err in overruling Dallmann's motion to suppress evidence.
MOTION TO SUPPRESS STATEMENTS
Dallmann contends that his statements to the officers should have been suppressed because he was not advised of his Miranda rights.
Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), prohibits the use of statements stemming from the custodial interrogation of a defendant unless the prosecution demonstrates the use of procedural safeguards effective to secure the privilege against self-incrimination. State v. Cody, 248 Neb. 683, 539 N.W.2d 18 (1995); State v. Brunzo, 248 Neb. 176, 532 N.W.2d 296 (1995). Thus, in order to safeguard an uncounseled individual's Fifth Amendment privilege against self-incrimination, suspects interrogated while in police custody must be apprised of certain rights. Specifically, suspects must be told that they have a right to remain silent, that anything they say may be used against them in court, and that they are entitled to the presence of an attorney, either retained or appointed, at the interrogation. State v. Veiman, 249 Neb. 875, 546 N.W.2d 785 (1996).
Miranda warnings are required only where there has been such a restriction on one's freedom as to render one "in custody." State v. Burdette, 259 Neb. 679, 611 N.W.2d 615 (2000). Further, Miranda does not require that volunteered statements be suppressed in the absence of the warnings. Any statement given freely and voluntarily without compelling influences is admissible in evidence. State v. Taylor, 221 Neb. 114, 375 N.W.2d 610 (1985), citing Miranda, supra. See, also, State v. Buckman, 259 Neb. 924, 613 N.W.2d 463 (2000) (volunteered statement admissible in evidence). Thus, an in-custody statement voluntarily made without the benefit of Miranda warnings is admissible if it is not the product of interrogation. Taylor, supra.
In this case, Dallmann was under arrest when he stated that he was not going to use the drugs himself, but had planned to sell them. One is in custody for Miranda purposes when there is a formal arrest or a restraint on one's freedom of movement of the degree associated with such an arrest. See Burdette, supra. Dallmann, however, did not make the statement in response to any questions or actions on the part of the investigating officers. The record shows that Dallmann *99 spontaneously made the statement. Thus, we agree with the district court that the statement was volunteered. Because the statement was volunteered, it was admissible into evidence even though it was made without Dallmann's having been advised of his Miranda rights.
The district court concluded that Dallmann's statements about the item in his shoe and the contents of his cigarette package were made when he was not in custody and, thus, were admissible on that basis. Two inquiries are essential to the determination of whether an individual is in custody for Miranda purposes: (1) an assessment of the circumstances surrounding the interrogation and (2) whether a reasonable person would have felt that he or she was not at liberty to terminate the interrogation and leave. Burdette, supra. What is dispositive in determining whether Miranda warnings should have been given is whether a reasonable person would have felt free to leave under the circumstances. Id.
We have held that an individual temporarily detained pursuant to an investigatory traffic stop is not in custody for purposes of Miranda. State v. Bowers, 250 Neb. 151, 548 N.W.2d 725 (1996); State v. Holman, 221 Neb. 730, 380 N.W.2d 304 (1986). See, also, Berkemer v. McCarty, 468 U.S. 420, 104 S.Ct. 3138, 82 L.Ed.2d 317 (1984) (drawing analogy between stop under Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968), and traffic stop and indicating that Terry stops are not subject to dictates of Miranda); U.S. v. Sullivan, 138 F.3d 126 (4th Cir.1998); U.S. v. Boucher, 909 F.2d 1170 (8th Cir.1990). Further, Miranda warnings are not required for general on-the-scene questioning as to facts surrounding a crime. U.S. v. Klein, 13 F.3d 1182 (8th Cir.1994). When a person is detained pursuant to a traffic stop, there must be some further action or treatment by the police to render the driver in custody and entitled to Miranda warnings. Bowers, supra.
A brief, voluntary pat-down search generally does not constitute custody for purposes of Miranda. See, e.g., U.S. v. Wyatt, 179 F.3d 532 (7th Cir.1999); State v. Graca, 142 N.H. 670, 708 A.2d 393 (1998). Further, the detainment of an individual during the consensual search of his or her vehicle has also been held not to constitute custody for Miranda purposes. See, e.g., May v. Commonwealth, 3 Va. App. 348, 349 S.E.2d 428 (1986) (person not in custody when he consented to search of trunk of his vehicle). Although courts have indicated that Miranda warnings may be required under some circumstances before a suspect is actually arrested, where police officers use no coercion or threat of force and any continued detention is at the consent of the suspect, Miranda warnings are not required. See U.S. v. Ritchie, 35 F.3d 1477 (10th Cir. 1994) (Miranda warnings not required when suspect consented to search of his home by multiple police officers). Compare U.S. v. Perdue, 8 F.3d 1455 (10th Cir.1993) (Miranda warnings required where police forced suspect out of vehicle at gunpoint and held him face down on the ground at gunpoint during questioning, while police helicopters hovered overhead). Thus, it is where a suspect is detained only to an extent analogous to an arrest that Miranda warnings are required. See Sullivan, supra.
In this case, Dallmann was initially stopped for a traffic violation and then consented to a search of his vehicle for weapons and a search of his clothing for drugs. Although there were multiple police officers present, the officers used no threats of force or coercion to obtain Dallmann's consent to search. Nothing in the record indicates that Dallmann believed he was under arrest when he consented to the searches or that Dallmann was not free to leave. We conclude that under the circumstances of this case, Dallmann was not in custody when he made the statement that the item in his shoe fell out of the tire *100 and when he made the statement about the contents of the cigarette package. Accordingly, the officers were not required to advise Dallmann of his Miranda rights before these statements were made. The district court did not err in overruling Dallmann's motion to suppress statements. Furthermore, the evidence was sufficient beyond a reasonable doubt to sustain the conviction.
SENTENCING
Dallmann contends that the district court erred in imposing an excessive sentence. A sentence imposed within statutory limits will not be disturbed on appeal absent an abuse of discretion. State v. Wells, 257 Neb. 332, 598 N.W.2d 30 (1999). An abuse of discretion occurs when the sentencing court's reasons or rulings are clearly untenable and unfairly deprive a litigant of a substantial right and a just result. Id.
Dallmann was convicted of a Class IV felony. See § 28-416. A Class IV felony carries a statutory maximum of 5 years' imprisonment, a $10,000 fine, or both, and no minimum. Dallmann's sentence was within the statutory limits, and we conclude that the district court did not abuse its discretion when sentencing Dallmann. Accordingly, Dallmann's assignment of error regarding sentencing is without merit.
CONCLUSION
We determine that an appellate court acquires jurisdiction of an in forma pauperis criminal appeal when the notice of appeal is filed. When a request to proceed in forma pauperis has been granted, the failure of the affidavit to state the nature of the action or a statement that the affiant is entitled to redress will not divest the appellate court of jurisdiction. We conclude that Dallmann's assignments of error are without merit. Accordingly, we affirm.
AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594992/ | 954 So. 2d 1150 (2005)
EX PARTE ROBBIE LEON HURST
No. CR-04-2579.
Court of Criminal Appeals of Alabama.
October 17, 2005.
Decision without opinion. Mand. pet. denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594749/ | 172 Mich. App. 650 (1988)
432 N.W.2d 390
PEOPLE
v.
ROBINSON
Docket No. 100123.
Michigan Court of Appeals.
Decided November 7, 1988.
Frank J. Kelley, Attorney General, Louis J. Caruso, Solicitor General, G. Michael Hocking, Prosecuting Attorney, and William M. Worden, Assistant Prosecuting Attorney, for the people.
*652 Douglas R. Mullkoff, for defendant.
Before: McDONALD, P.J., and GILLIS and R.L. TAHVONEN,[*] JJ.
McDONALD, P.J.
Defendant was convicted by a jury of assault with intent to commit armed robbery, MCL 750.89; MSA 28.284. Defendant later pled guilty to habitual offender, third offense, MCL 769.11; MSA 28.1083, and received a sentence of 80 to 120 years in prison. Defendant appeals from his conviction and sentence as of right. We affirm in part and reverse in part.
Defendant first claims error in the trial court's imposition of an 80 to 120 year prison sentence. We agree.
Defendant was sentenced as a third-felony offender under the habitual offender act, which provides:
If the subsequent felony is punishable upon a first conviction by imprisonment for life, then the court, except as otherwise provided in this section or section 1 of chapter 11, may sentence the person to imprisonment for life or for a lesser term.
Under the "lifer law," a person sentenced to life or a term of years may become eligible for parole in ten years. MCL 791.234(4); MSA 28.2304(4). However, a person convicted and sentenced for a crime listed in "Proposal B" is not eligible for parole until he has served the minimum sentence, less any disciplinary credits. MCL 791.233b; MSA 28.2303(3). Assault with intent to commit armed robbery is a Proposal B offense. MCL 791.233b(d); MSA 28.2303(3)(d).
In People v Johnson, 421 Mich. 494, 497-498; 364 *653 NW2d 654 (1984), our Supreme Court held that "Proposal B" only applied to indeterminate sentences:
Accordingly, when a statute authorizes the imposition of a sentence of "life or any term of years" it allows the imposition of a fixed sentence life or an indeterminate sentence any number of years. We observed in People v Blythe, 417 Mich. 430, 434-435; 339 NW2d 399 (1983), that the Legislature viewed the phrase "life or any term of years" as descriptive of the maximum sentence only. The sentence concepts "life" and "any term of years" are mutually exclusive and a sentencing judge may (in the appropriate case) opt for either but not both.
In the present case, defendant's sentence of 80 to 120 years in prison means he will not be eligible for parole as soon as if he had been sentenced to life imprisonment. In effect, defendant has been sentenced to life without parole, since the minimum sentence of eighty years far exceeds his life expectancy.
Although there is a conflict in this Court on whether it shocks the conscience to sentence people to terms of years greater than their life expectancies,[1] that is not the issue in this case.
The instant case involves a sentence imposed pursuant to the habitual offender act which specifically mandates a sentence of life imprisonment or any "lesser term." Thus, as defendant was neither sentenced to life imprisonment nor a lesser term, 80 to 120 years exceeding defendant's life expectancy, *654 defendant's sentence must be vacated and the case remanded for resentencing.
Defendant's remaining issues pertain to alleged errors which occurred during defendant's trial. Although we find them to be without merit, we will address each one briefly.
Defendant first claims the trial court erred in requiring defendant to wear ankle restraints in the courtroom during trial. We disagree.
In order to justify reversal based on the presence of shackles or restraints during trial, the defendant must show that prejudice resulted. People v Herndon, 98 Mich. App. 668; 296 NW2d 333 (1980). In the instant case, the record indicates defendant was an escape risk because of previous escapes. Moreover, no objection was made to the presence of the restraints during trial. Prior to trial, defense counsel merely requested an attempt be made to cover the restraints to prevent the jury from viewing them. Thereafter, the trial judge inspected the restraints and stated on the record, after turning the locking device to the back side and adjusting defendant's pant legs, that the restraints did not show.
We find no prejudice because there was reason to believe defendant was an escape risk and the leg restraints were unobtrusive. See People v Jankowski, 130 Mich. App. 143; 342 NW2d 911 (1983).
Defendant next claims error in the admission of evidence of three prior convictions for purposes of impeachment.
MRE 609 governs the determination whether evidence of prior convictions is admissible to impeach a witness. MRE 609 was recently amended by our Supreme Court in People v Allen, 429 Mich. 558; 420 NW2d 499 (1988). Although the amended rule did not become effective until March 1, 1988, and is, therefore, inapplicable to the instant case, *655 the Court's clarification of the balancing test employed under the old rule was given limited retroactive effect and does apply.
Since the prior convictions in the present case are theft related, the wording of the theft "balancing test" portion of the new rule is directly relevant to the present case:
If it is a theft crime and it is punishable by more than one year's imprisonment, the trial judge would exercise his discretion in determining the admissibility of the evidence by examining the degree of probativeness and prejudice inherent in the admission of the prior conviction. For purposes of the probativeness side of the equation, only an objective analysis of the degree to which the crime is indicative of veracity and the vintage of the conviction would be considered, not either party's need for the evidence. For purposes of the prejudice factor, only the similarity to the charged offense and the importance of the defendant's testimony to the decisional process would be considered. The prejudice factor would, of course, escalate with increased similarity and increased importance of the testimony to the decisional process. Finally, unless the probativeness outweighs the prejudice, the prior conviction would be inadmissible. [429 Mich 605-606.]
The trial court ruled that evidence of 1980 convictions of breaking and entering of an occupied dwelling and larceny from a building along with a 1986 conviction for grand larceny were admissible for impeachment purposes. The defendant did not testify. The prosecution presented a strong case for conviction. Having reviewed the trial court's decision to allow evidence of the defendant's prior convictions under the clarified balancing test, we find no abuse of discretion.
Defendant last claims the prosecutor improperly *656 vouched for a witness' credibility during closing arguments and, therefore, a new trial is required.
Defendant's failure to object to the alleged error at trial precludes review of the issue by this Court absent a miscarriage of justice. People v Dalessandro, 165 Mich. App. 569; 419 NW2d 609 (1988). We find no such miscarriage of justice.
Defendant's conviction is affirmed, his sentence vacated, and the matter remanded for resentencing.
GILLIS, J., concurred.
R.L. TAHVONEN, J. (concurring).
I write separately to distinguish this case from People v Oscar Moore, 164 Mich. App. 378; 417 NW2d 508 (1987), and to explain my concurrence here in the face of my dissent there.
In Moore, the defendant was convicted of a number of crimes, among them armed robbery. He was sentenced to a term of one hundred to three hundred years in prison for armed robbery. The pertinent statute provided that armed robbery was "punishable by imprisonment in the state prison for life or for any term of years." MCL 750.529; MSA 28.797. On appeal to this Court, the majority vacated the sentence, holding that as a matter of statutory construction a term of years sentence must be less than the defendant's life expectancy at the time of sentencing.[1] I dissented, writing that the Legislature had unambiguously authorized a *657 sentence for any term of years and that restrictive judicial construction was neither necessary nor appropriate.
In this case, the Legislature unambiguously expressed a contrary intent. The pertinent habitual offender statute authorizes imprisonment "for life or for a lesser term." MCL 769.11; MSA 28.1083. The same regard for a simple reading of plain language that prompted my dissent in Moore commands my concurrence here. If any term of years means "any" in Moore, then a lesser term of years must mean less than life here. That being so, I join the majority's opinion and the result it requires.[2]
NOTES
[*] Circuit judge, sitting on the Court of Appeals by assignment.
[1] See People v Martinez, 147 Mich. App. 94; 382 NW2d 741 (1985), and People v Harden, 166 Mich. App. 106; 420 NW2d 136 (1988), for cases finding that such sentences do not "shock the conscience." Contra, see, People v Oscar Moore, 164 Mich. App. 378; 417 NW2d 508 (1987).
[1] Neither opinion in Moore addressed the question whether the one hundred to three hundred year sentence should shock the conscience of the Court. People v Coles, 417 Mich. 523; 339 NW2d 440 (1983). Obviously, a sentence that bears no reasonable relationship to any legitimate sentencing goal should be vacated on appeal. For that reason, a truly Draconian term of years sentence is better theater than law.
[2] The incongruity created by taking the Legislature at its word is apparent. An armed robber can receive a longer sentence than a third-felony offender. Nonetheless, I do not view the judiciary as possessing a general commission to bring order to legislative chaos in the guise of "statutory construction." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3085768/ | Fourth Court of Appeals
San Antonio, Texas
JUDGMENT
No. 04-13-00792-CV
Richard LARES,
Appellant
v.
Martha FLORES,
Appellee
From the 45th Judicial District Court, Bexar County, Texas
Trial Court No. 2006-CI-15663
Honorable Solomon Casseb, III, Judge Presiding
BEFORE CHIEF JUSTICE MARION, JUSTICE BARNARD, AND JUSTICE CHAPA
In accordance with this court’s opinion of this date, the trial court’s order is AFFIRMED.
We order that no costs be assessed against appellant Richard Lares because he is indigent.
SIGNED February 11, 2015.
_____________________________
Marialyn Barnard, Justice | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1594762/ | 172 Mich. App. 592 (1988)
432 N.W.2d 369
ALLISON
v.
CITY OF SOUTHFIELD
Docket No. 94643.
Michigan Court of Appeals.
Decided November 7, 1988.
Carson, Fischer & Potts (by David William Potts and Harry Joel Newman), for plaintiffs.
Susan P. Ward, Assistant City Attorney, for defendants.
Before: GRIBBS, P.J., and HOLBROOK, JR., and W. MOORE, JR.,[*] JJ.
HOLBROOK, JR., J.
Defendants, the City of Southfield, its director of public safety, and its former chief of police, appeal from an order granting a declaratory judgment that PR 3.01, an internal police rule regulating secondary employment, was unconstitutional as applied to plaintiff police officers employed by the city. Secondary employment *594 refers to the practice of public employees holding an additional, part-time job. We reverse.
Plaintiffs desire to conduct a part-time business as private investigators in addition to their employment as police officers. To that end, they formed a corporation and applied for a private investigator license. Their stated business purpose was to serve civil process and to perform preemployment investigations of their clients' prospective employees. Despite plaintiffs' assurances that they would conduct their business to avoid any conflict of interest with their duties as police officers and that they would not compromise confidential police information, the chief of police advised plaintiffs that they were denied permission to engage in their proposed secondary employment. After unsuccessfully exhausting grievance procedures, plaintiffs instituted this action for declaratory judgment.
At issue is the constitutionality of PR 3.01, which was the stated policy relied upon by defendants in denying plaintiffs permission to engage in secondary employment. This rule states in pertinent part:
Members of the Southfield Police Department shall devote their entire time and attention to the service of the Department. They are expressly prohibited from engaging in any other business or employment during ON or OFF DUTY hours, while on leave or furlough, unless approval has been granted by the Chief of Police or his duly authorized representative in writing.
A. Definition of business activity
1. Business activity includes participation in or affiliation with any commercialized business activity, except solely by investments, for the purpose of financial gain.
B. Members desiring outside employment
*595 1. Members of the Department who desire to engage in outside employment or business activities must request authorization by submitting an application through channels, to the Chief of Police. Application must contain:
a. The nature of employment or business activity.
b. The nature of duties to be performed, including the number of hours per day which will be worked.
c. The anticipated length of time such member expects to engage in outside employment or business activity.
d. Whether the officer submitting the request will be available for call-back emergency duty.
C. Certain types prohibited: Request for permission will not be granted in the following cases:
1. Engaging in employment or business that is licensed by the State of Michigan Liquor Control Commission.
2. Employment where the Uniform of the Department would be worn (unless otherwise authorized by Council action).
3. When the employment or business activity is of such nature or is so located that the officer would not be available for call-back emergency duty.
4. Employment of personnel working in the capacity of private "Security Guard" where a conflict of interest or separation of authority would exist. [Emphasis in the original.]
The circuit court invalidated the rule on the ground that it was impermissibly vague because plaintiffs were unable to discern what types of secondary employment are prohibited. The court further stated that "[w]ithout sufficient guidelines, the decision making process becomes arbitrary, capricious and infringes upon Plaintiffs' right to due process under the law."
A statute or, in this case, a regulation is violative *596 of due process on the ground of vagueness when it "either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application." People v Biegajski, 122 Mich. App. 215, 225; 332 NW2d 413 (1982), lv den 417 Mich. 1080 (1983) (quoting Lanzetta v New Jersey, 306 U.S. 451, 453; 59 S. Ct. 618; 83 L. Ed. 888 [1939]). Essentially, the doctrine of vagueness ensures that a regulation give its readers fair notice of what types of conduct are prohibited. People v Webb, 128 Mich. App. 721, 725-727; 341 NW2d 191 (1983), lv den 418 Mich. 966 (1984). Here the meaning of what the regulation prohibits is not at all obscure police employees are unambiguously prohibited from secondary employment unless prior approval is obtained. Thus, this case lacks the vagueness problems presented by regulations prohibiting conduct unbecoming a police officer. See Sponick v Detroit Police Dep't, 49 Mich. App. 162, 174-176; 211 NW2d 674 (1973); Golembiowski v Madison Heights Civil Service Comm, 93 Mich. App. 137, 153-156; 286 NW2d 69 (1979), lv den 408 Mich. 893 (1980). But cf. Rinaldi v Livonia, 69 Mich. App. 58, 65-68; 244 NW2d 609 (1976). Even if one of the evils sought to be prevented by the vagueness doctrine is the vesting of unstructured discretion and the resultant arbitrary and discriminary enforcement of the law, see People v McCumby, 130 Mich. App. 710, 713-714; 344 NW2d 338 (1983), lv den 419 Mich. 911 (1984), the doctrine is not triggered unless the wording of the promulgation is itself vague. We conclude that, whatever constitutional deficiencies may be presented in this case, PR 3.01 is not void for vagueness.
Plaintiffs argue in the alternative that PR 3.01 violates their right to substantive due process. We look to Kelley v Johnson, 425 U.S. 238; 96 S Ct *597 1440; 47 L. Ed. 2d 708 (1976), for the standard to evaluate a due process challenge to the power of a police department to regulate its officers. In Kelley, the Supreme Court held that the right to due process is violated if the party challenging the regulation "can demonstrate that there is no rational connection between the regulation, based as it is on the county's method of organizing its police force, and the promotion of safety of persons and property." Id., p 247. Thus, the burden of proof rests with plaintiffs here. See also Local No 201 (AFL-CIO) v Muskegon, 369 Mich. 384, 392; 120 NW2d 197 (1963), cert den 375 U.S. 833; 84 S. Ct. 54; 11 L. Ed. 2d 64 (1963). The Court in Kelley upheld the validity of a police regulation governing the length of officers' hair. The Court noted that the paramilitary nature of a police force commands a more deferential approach to the constitutional protections of police officers than those afforded the general public, particularly when the Fourteenth Amendment liberty interest at stake is not a recognized right of a fundamental nature, but merely implicates "the more general contours of the substantive liberty interest." Kelly, supra, p 245. Therefore, the Court held that the state interest in requiring a uniform appearance of police officers was justified by the need to make officers recognizable as such to the public or the need to enhance esprit de corps. Either was a "sufficiently rational justification" to defeat a due process challenge, notwithstanding the lower court's finding that the police force had failed to demonstrate a public need for the regulation. Id., p 248.
Plaintiffs do not controvert the authority of the chief of police under city ordinances to regulate secondary employment so that legitimate police interests are not impeded. We think that it is beyond peradventure that regulation of police secondary *598 employment is within the constitutionally permissible scope of regulation recognized in Kelley. This position is also in accord with the weight of authority from other jurisdictions. See 94 ALR3d 1230, §§ 2-3, 5, pp 1233-1240, 1242-1245.
In support of PR 3.01, defendants asserted that the operation of a private investigation business would present potential conflicts of interest between plaintiffs' employment as police officers and their secondary employment as private investigators. Defendants particularly emphasized the potential for misuse of confidential police information in furtherance of private investigatory activities. Defendants also feared that the operation of a joint enterprise among police officers holding different ranks on the force would create the appearance of favoritism when the same officers exercised their supervisory authority over each other in the course of police duties. Other reasons cited by defendants included the possible pursuit of police time to pursue private investigatory functions and the potential civil liability of the city for acts committed by plaintiffs acting as private investigators. We conclude that these concerns amount to a sufficiently rational justification to uphold PR 3.01 against an asserted due process deficiency. In so deciding, we do not suggest that the circuit court's finding that plaintiffs' proposed business does not interfere with the effective performance of their duties as police officers was clearly erroneous. See Saunders v Dearborn, 107 Mich. App. 499, 507; 309 NW2d 641 (1981). Rather, that finding was beside the point. Once a rational justification for PR 3.01 was established, judicial inquiry could advance no further. The courts may not second-guess its wisdom. Shavers v Attorney General, 402 Mich. 554, 613-615; 267 NW2d 72 (1978). Plaintiffs' burden was to demonstrate that the policy judgment underlying *599 PR 3.01 was wholly "without rational basis" or that there was a lack of "any reasonable state of facts on the record which can be produced in support of the legislative judgment." Id., p 615. (Emphasis in the original.) Plaintiffs could not carry this burden by merely controverting whether the potential problems asserted by defendants would in fact impede plaintiffs from exercising their duties as police officers.
Plaintiffs also argue that PR 3.01 is unconstitutional as applied because the decision withholding permission for secondary employment, viewed in the context of prior permission granted to other officers, discriminated against plaintiffs, thereby depriving them of their equal protection rights. Although an equal protection theory was not explicitly advanced in the proceedings below, thus precluding the necessity for us to consider it now, see Barnes v Double Seal Glass Co, Inc, 129 Mich. App. 66, 77; 341 NW2d 812 (1983), we exercise our discretion to address this issue on its merits in view of its similarity to other constitutional issues properly raised and because all necessary facts have been established of record.
Since plaintiffs have not demonstrated an abridgement of any fundamental right sufficient to invoke a strict scrutiny analysis, we employ the traditional approach to equal protection claims, which requires us to determine whether the asserted distinction made by defendants between plaintiffs and other employees receiving secondary employment permission was rationally related to a legitimate government interest. Shavers, supra, p 613; Michigan Ed Ass'n v State Bd of Ed, 163 Mich. App. 92, 96; 414 NW2d 153 (1987). Plaintiffs make reference to other police officers who received permission to work as an administrator (limited to noninvestigatory duties) for a firm engaged in *600 security work, as an accident reconstruction expert, as a consultant for a security alarm business, and as an attorney practicing civil law. Based on the record, we conclude that defendants could have reasonably believed that the nature and extent of plaintiffs' proposed activities were more conducive to potential abuse of police prerogatives and to potential interference with police duties than those activities for which permission had previously been granted. For instance, one of plaintiffs' primary expectations of business activity, the performance of preemployment investigations, would require information that could tempt even the most honest police officer to misappropriate or misuse police resources. We think it rational to conclude that private investigatory work overlaps with the normal duties of a police officer to an extent not implicated by the more specialized functions practiced by the other officers engaged in secondary employment. Thus, the denial of plaintiffs' request for permission to become employed as private investigators, viewed in conjunction with permission granted for other types of secondary employment, does not lack a rational basis.
Plaintiffs argue that the lack of guidelines in PR 3.01 governing the determination of the chief of police to grant or deny permission to engage in secondary employment subjects police officers to the possibility of arbitrary, capricious, and discriminatory treatment, thus violating their due process rights. "Underlying due process safeguards is the right not to have determinations made in an arbitrary and capricious manner without reasonable standards." Casad v City of Jackson, 79 Mich. App. 573, 577-578; 263 NW2d 19 (1977). However, those standards need only be "as reasonably precise as the subject matter requires or permits." Osius v St *601 Clair Shores, 344 Mich. 693, 698; 75 NW2d 25 (1956). The mere possibility of a misapplication of a discretionary exemption from a prohibitory rule is not enough to per se render the rule constitutionally invalid. Williams v Civil Service Comm of Detroit, 383 Mich. 507, 515-518; 176 NW2d 593 (1970).
In view of the sweeping powers accorded to the police to maintain internal discipline in accordance with the paramount necessity of public safety, we are not persuaded that the standards here are insufficient. Although PR 3.01 does not explicitly provide standards, we find standards readily inferable from the contents of the required application for permission (PR 3.01[B]) and from the listing of activities for which permission will not be granted (PR 3.01[C]). The underlying policy of PR 3.01 is clearly to ensure that police officers are not distracted from performance of their duties by conflicts of interest and other competing situations created by secondary employment. Given the diverse types of secondary employment in which police officers could potentially engage, we think it would be difficult, if not impossible, to more precisely delineate between the permissible and the impermissible. A case-by-case approach is warranted, and the flexibility entailed by the discretionary authority exercised by the chief of police is justified. This is not a case involving a delegation of legislative power without standards to regulate the general public, but is rather a matter of the internal governance of police discipline, exercised by a supervisor over subordinate public employees. Cf. Westervelt v Natural Resources Comm, 402 Mich. 412; 263 NW2d 564 (1978). Given the strong governmental interest for refusing police officers permission to work as private investigators, we also conclude that the actual exercise of discretion *602 in this case was not arbitrary or capricious. Harmon v Southfield, 91 Mich. App. 731, 735; 284 NW2d 170 (1979), lv den 408 Mich. 862 (1980).
We also reject the contention that PR 3.01 is impermissibly overbroad. No constitutionally protected conduct is impermissibly chilled by the requirement that a police officer obtain prior permission before engaging in secondary employment. McCumby, supra, pp 713-716. This aspect of our decision inevitably follows from our holding that the power of the city to regulate secondary employment as exercised in PR 3.01 does not contravene constitutional limitations. Unlike Sponick, supra, p 179, PR 3.01 circumscribes the freedom to engage in secondary employment only to the extent reasonably and narrowly related to the effective performance of a police officer's duties.
It is our conclusion that the trial court erred by deciding that PR 3.01 was void for vagueness and unconstitutional as applied. We further hold that PR 3.01 did not infringe in an unconstitutional manner on plaintiffs' due process and equal protection rights.
Reversed.
W. MOORE, JR., did not participate.
NOTES
[*] Recorder's Court judge, sitting on the Court of Appeals by assignment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594803/ | 172 Mich. App. 450 (1988)
432 N.W.2d 733
ESTABROOK
v.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
Docket No. 97728.
Michigan Court of Appeals.
Decided October 18, 1988.
Libner, Van Leuven & Kortering, P.C. (by John A. Braden), for plaintiff.
*451 Susan B. Flakne, for defendant.
Before: SULLIVAN, P.J., and MacKENZIE and G. SCHNELZ,[*] JJ.
PER CURIAM.
Plaintiff appeals as of right from an order granting summary disposition in favor of defendant pursuant to MCR 2.116(C)(10), no genuine issue of material fact. We affirm.
On August 9, 1985, plaintiff was injured when the motorcycle he was riding collided with a pickup truck driven by Terry Huffman. Pursuant to subsection 3114(5) of the no-fault act, MCL 500.3114(5); MSA 24.13114(5), Huffman's insurer, Valley Forge Insurance Company, paid to plaintiff no-fault benefits including medical expenses.
At the time of the accident, plaintiff was covered through his employer by a group disability insurance policy issued by defendant. Plaintiff also applied to defendant for payment of medical expense benefits under this group policy. Defendant rejected plaintiff's claim, based on the group policy's coordination of benefits clause, which provides:
SECTION 4 COORDINATION OF BENEFITS (COB)
COB may limit benefits when an individual is entitled to benefits from more than one source. It does this by relating an individual's total benefits from various sources to his or her total expenses. The COB provision is widely used in the insurance industry. Its purpose is to keep the cost of insurance down by limiting benefits to no more than 100% of his or her eligible expenses. Therefore, the benefits payable under this policy may be reduced, as appropriate under the rules set out below, so that from all sources, an insured individual should not be paid for more than 100% of his or her eligible expenses.
COB takes into consideration benefits from many *452 sources, but COB does not apply to individual policies. (Except that, Lincoln National does coordinate with individual no-fault auto insurance policies, by whatever name called, as shown below.)
Following is a list of the sources (plans) with which this policy coordinates:
* * *
13. Individual no-fault auto insurance, by whatever name called. Except that, this will not apply to the extent that any auto insurance policy issued pursuant to the Automobile No-Fault Insurance Act of the State of Michigan contains a deductible or is by its terms secondary to (or excess over) the benefits provided under this policy. [Emphasis added.]
When defendant continued to reject plaintiff's repeated demands for payment, plaintiff commenced the instant action for benefits under the group policy issued by defendant. On defendant's motion for summary disposition, the trial court concluded that, as a matter of law, plaintiff was not entitled to medical benefits in light of the coordination of benefits provision of the policy.
On appeal, plaintiff first argues that the coordination of benefits provision contained in defendant's group policy is invalid under § 3(2) of the Coordination of Benefits Act, MCL 550.253(2); MSA 24.13673(2). That statute provides:
(2) Any such [group disability benefit] policy or certificate which contains a coordination of benefits provision shall provide that benefits under the policy or certificate shall not be reduced or otherwise limited because of the existence of another nongroup contract which is issued as a hospital indemnity, surgical indemnity, specified disease, or other policy of disability insurance as defined in section 3400 of the insurance code of 1956, Act No. 218 of the Public Acts of 1956, being section *453 500.3400 of the Michigan Compiled Laws. [Emphasis added.]
Plaintiff maintains that since a no-fault policy insures against accidental bodily injury, see MCL 500.3105; MSA 24.13105, such a policy falls within the definition of "policy of disability insurance" set forth at MCL 500.3400; MSA 24.13400 ("any policy or contract of insurance against loss resulting from ... bodily injury ... by accident ..."). Plaintiff thus concludes that, under the Coordination of Benefits Act, defendant is prohibited from coordinating its group disability policy with a nongroup no-fault policy such as Huffman's policy with Valley Forge.
The flaw in plaintiff's argument is that the Legislature expressly made enactment of the Coordination of Benefits Act contingent upon the enactment of SB 562, enacted as 1984 PA 65, MCL 500.3610a; MSA 24.13610(1). See MCL 550.255; MSA 24.13675. MCL 500.3610a; MSA 24.13610(1) provides in relevant part:
(1) A group disability insurance policy may contain provisions for the coordination of benefits otherwise payable under the policy with benefits payable for the same loss under other group insurance; automobile medical payments insurance; or coverage provided on a group basis by hospital, medical, or dental service organizations, by union welfare plans, or employee or employer benefit organizations. [Emphasis added.]
Since the Legislature specified that enactment of this provision was necessary before the Coordination of Benefits Act could become effective, we think it clear that the Legislature intended § 3610a to control the coordination of group disability policies with nongroup no-fault policies *454 notwithstanding the more general provisions of the Coordination of Benefits Act. This conclusion is consistent with the well-settled rule of statutory construction that, when there is an apparent conflict between two statutes, the specific statute controls and must be viewed as an exception to the general statute. In re Johnson Estate, 152 Mich. App. 200; 394 NW2d 136 (1986). Since § 3610a is an exception to the Coordination of Benefits Act's prohibition against coordination provisions in group disability policies, the group policy issued by defendant could properly coordinate with a nongroup no-fault automobile policy.
Plaintiff alternatively argues that the policy issued by defendant does not coordinate with Huffman's no-fault policy under the express language of defendant's coordination of benefits provision. According to plaintiff, the language in the coordination of benefits provision that defendant "does coordinate with individual no-fault automobile insurance policies" creates an ambiguity as to the meaning of the word "individual." Plaintiff argues that the word should be construed to mean "the insured" and that the policy language should be read to mean that defendant "does coordinate with the group disability policyholder's no-fault automobile insurance policies." Plaintiff reasons that, had defendant intended coordination with no-fault policies purchased by third parties, it would have made that intent explicit, citing American & Foreign Ins Co v Allied Plumbing & Heating Co, 36 Mich. App. 561; 194 NW2d 158 (1971), lv den 387 Mich. 753 (1972).
Plaintiff's contention that the use of the word "individual" is ambiguous is without merit. It is clear when reading both the policy at issue in the present case and the insurance code itself that, in the juxtaposition of the terms "individual" and *455 "group," "individual" is intended to indicate "nongroup." Had the term "individual" been intended to indicate the named insured, it seems likely that the policy would refer to "the individual's," "the insured individual's," or "the named insured's" no-fault auto insurance if seeking to limit coordination of benefits in that manner, especially given the standard rules of construing policies against the insurer.
A fair reading of this coordination of benefits clause leads inexorably to the conclusion that any no-fault benefits, by whatever name called and regardless of their source, payable to plaintiff, were subject to coordination of benefits payable under his coverage by defendant's policy. Accordingly, we find no error in the trial court's order granting summary disposition in favor of defendant.
Affirmed.
NOTES
[*] Circuit judge, sitting on the Court of Appeals by assignment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594936/ | 28 So. 3d 562 (2009)
Raquel MUNOZ
v.
Mayfield NORDEN, The Sewerage & Water Board of New Orleans and National Union Fire Insurance Company.
No. 2008-CA-1130.
Court of Appeal of Louisiana, Fourth Circuit.
December 16, 2009.
Stephen P. Bruno, Bruno & Bruno, New Orleans, LA, for Plaintiff/Appellant.
*563 Terrill W. Boykin, Kriste Talton Utley, Boykin & Ehret, New Orleans, LA, for The Sewerage and Water Board of New Orleans and Norden Mayfield.
Robert I. Siegel, Rachel G. Webre, Gieger, Laborde & Laperouse, L.L.C., New Orleans, LA, for National Union Fire Insurance Company.
(Court Composed of Judge MICHAEL E. KIRBY, Judge DAVID S. GORBATY, Judge ROLAND L. BELSOME).
MICHAEL E. KIRBY, Judge.
This is a personal injury case arising from a vehicular accident. Plaintiff, Raquel Munoz, appeals the trial court judgment rendered in favor of defendants, Norden Mayfield[1]; his employer, the Sewerage & Water Board of New Orleans ("S & WB"); and its insurer, National Union Fire Insurance Company of Louisiana. Upon review, we conclude the evidence clearly supports the trial court's finding that Ms. Munoz was at fault, and, therefore, affirm the judgment.
The accident occurred at the intersection of Earhart Boulevard and Eagle Street during early morning rush hour traffic. Earhart, the favored street, is a two-way boulevard with a median separating the two eastbound lanes from the two westbound lanes. Eagle, a single lane, two-way street, runs north and south. The Earhart/Eagle Street intersection has no control signal light, but one block to the east, at the intersection of Earhart and Leonidas Street, there is one. At the time, Ms. Munoz was driving her car eastbound on Earhart when she struck a S & WB pick-up truck traveling south on Eagle driven by Mr. Mayfield.[2]
Ms. Munoz alleged that Mr. Mayfield, while attempting to make a left turn onto Eagle from the westbound lane of Earhart, failed to yield the right-of-way to her vehicle. Defendants, on the other hand, claimed that Mr. Mayfield had already crossed safely through the intersection at Earhart when Ms. Munoz's vehicle stuck the right passenger side bed of his work truck. They argued that Ms. Munoz was illegally traveling in the eastbound shoulder lane of Earhart and violated New Orleans Municipal Code Sec. 154-482[3], subsection b, by failing to yield to *564 Mr. Mayfield, who had pre-empted the intersection.
In reasons for judgment, the trial court characterized the case as a "swearing contest.'" Notably, he gave no weight to the testimony of the accident investigator, Officer Mason Suell, who had admitted that the accident report contained numerous errors, e.g., he mislabeled the streets and vehicles and failed to indicate the shoulder lane on Earhart. The trial court found defendants' account of the accident more consistent with the facts and physical evidence, particularly the location of the vehicles and place of impact. Contrary to Ms. Munoz's claim, the trial court found no evidence that Mr. Mayfield was attempting to make a left turn from westbound Earhart. Rather, he found that Mr. Mayfield was traveling straight on Eagle and had already crossed both eastbound lanes of Earhart when the accident occurred. The trial court determined that Ms. Munoz had the duty to yield the right-of-way to Mr. Mayfield, citing New Orleans Municipal Code Sec. 154-182. (Emphasis added).
On appeal, Ms. Munoz argues that, as a matter of law, the trial court erroneously applied New Orleans Municipal Code Sec. 154-182, which has no legal effect, as it is currently an undesignated section reserved for a future-enacted municipal ordinance. Defendants concede that the trial court referenced Sec. 154-182 in its reasons for judgment; however, they contend it was merely a typographical error that should have read "Sec. 154-482." We agree.
The record discloses that throughout the trial and post-trial the defense had argued that Sec. 154-482 was the applicable ordinance. In the reasons for judgment, the trial court stated, in pertinent part, "Mr. Mayfield had lawfully entered the intersection and, thus; plaintiff had the duty to yield the right-of-way to him." We conclude from that statement that the trial court relied on Sec. 154-482 (see n. 1, infra) in finding Ms. Munoz at fault.
Ms. Munoz next argues that trial court erred by shifting the duty to yield from Mr. Mayfield to her, considering she was traveling on the favored street and the local ordinance requires that a motorist turn right from the area closest to the curb, in this case the shoulder lane, citing New Orleans Municipal Code Sec. 154-436(1)[4] and Winfield v. Dih, XXXX-XXXX, p. 1 (La.App. 4 Cir. 4/24/02), 816 So. 2d 942[5]. To the contrary, defendants contend that the evidence supports the conclusion that Ms. Munoz was neither turning nor attempting to turn right onto Eagle but rather was traveling illegally in the shoulder, a violation of La. R.S. 32:74(B)[6].
*565 Nothing in the reasons for judgment indicates the trial court found that Ms. Munoz was, in fact, attempting a right turn from the shoulder lane. Rather, the trial court found Mr. Mayfield was traveling straight on Eagle and had already crossed both eastbound lanes of Earhart when the accident occurred. The issue, therefore, is whether or not the trial court's factual finding was reasonable and supported by evidence in the record. See Hanks v. Entergy Corp., XXXX-XXXX, p. 22-23 (La.12/18/06); 944 So. 2d 564, 580.
Mr. Mayfield testified that he was traveling south on Eagle, had crossed the westbound lanes of Earhart, and then stopped in the median to assess whether he could safely cross the eastbound lanes. Before proceeding from the stop, he looked left (east) to insure that the traffic light at Leonidas had turned red, and then looked right to insure that the traffic in eastbound lanes of Earhart had stopped to allow him to pass. When the intersection cleared, he slowly crossed eastbound Earhart. As he crossed, the two lines of vehicles that had backed up in the eastbound lanes were obstructing his view of Ms. Munoz's oncoming vehicle. Mr. Mayfield corroborated Ms. Munoz's testimony that she was traveling approximately 20-25 m.p.h. when her vehicle struck the right passenger side of the S & WB pick-up truck. According to Mr. Mayfield, the collision happened too fast for him to take any evasive action.
Mr. Mayfield's supervisors, Lester Caruso and David Gagliano, testified that they went immediately to the accident scene. According to them, Ms. Munoz's vehicle was stopped in the shoulder area of the intersection, not near the curb, while the front end cab of the S & WB truck was stopped in the middle of Eagle well past the shoulder area of the intersection. They testified that the damage to the S & WB truck was on the right passenger side of the bed between the cab and rear tire. The photograph in evidence corroborates the defense witnesses' testimony that Ms. Munoz's vehicle hit the S & WB pick-up on the right passenger side of the bed.
After reviewing the entire record, we conclude that trial court's findings that Mr. Mayfield had already safely crossed the two eastbound lanes of Earhart when the accident occurred and that Ms. Munoz was at fault for failing to yield the right-of-way to him were reasonable in view of the evidence. Although the trial court expressed no finding regarding whether Ms. Munoz was making a legal right turn from the shoulder lane, it is reasonable to conclude, based upon her own admission that she was traveling 20-25 m.p.h. when the accident occurred, that she was not making a right turn at that speed.
Accordingly, for the above reasons, we affirm the trial court judgment.
AFFIRMED.
BELSOME, J. dissents with reasons.
As the majority acknowledges, Plaintiff was traveling on Earhart Boulevard, the favored street. Defendant Norden Mayfield simply failed to yield to Ms. Munoz as he was crossing the favored street.[1] Ms. Munoz reasonably assumed that Mr. Mayfield, traveling from the less favored street, would stop for the intersection and yield the right-of-way. See Rivers v. Alexander, 560 So. 2d 999, 1002-03 (La.App. 4 *566 Cir.1990)(citing Willis v. Everett, 359 So. 2d 1080, 1085 (La.App. 3 Cir.), writ denied, 362 So. 2d 800 (La.1978))(quoting Welch v. Welch, 169 So. 2d 713 (La.App. 4 Cir.1964)). "A motorist on a right-of-way street is entitled to assume that motorists on the unfavored street approaching a stop sign will obey the traffic signal and will stop, look and yield the right of way to traffic proceeding on the favored street." Edwards v. Pierre, XXXX-XXXX, p. 7 (La.App. 4 Cir. 9/17/08), 994 So. 2d 648, 655 (quoting Fernandez v. General Motors Corp., 491 So. 2d 633, 636-37 (La.1986)). Furthermore, Ms. Munoz testified that she was making a legal right-hand turn from the shoulder of the road. See Winfield v. Dih, XXXX-XXXX, p. 6 (La.App. 4 Cir. 4/24/02), 816 So. 2d 942, 947. The trial court thus erred in shifting the duty to yield from Mr. Mayfield to Ms. Munoz, as a motorist is required by law to make a right turn from the area closest to the curb. See Winfield, XXXX-XXXX, p. 6, 816 So.2d at 947; New Orleans Municipal Code Sec. 154-436(1). Notably, this Court recently recognized that "it is only in the exceptional case where the right of way motorist could have avoided the accident by the exercise of the very slightest degree of care that he will be considered guilty of negligence." Edwards, XXXX-XXXX, p. 8, 994 So.2d at 655 (holding that driver who crossed the favored street was 80% at fault for failing to see the approaching vehicle in oncoming traffic).
I cannot agree that the trial court's factual findings were reasonable and supported by the record in this case. Nor can I agree that Ms. Munoz, rather than Mr. Mayfield, had the duty to yield under these facts and circumstances. Therefore, I respectfully dissent.
NOTES
[1] The original petition, answer and judgment refer to the defendant as "Mayfield Norden." However, the trial transcript and other evidence indicate that the defendant's name is Norden Mayfield.
[2] In her original petition, Ms. Munoz alleged only that she was traveling in the right eastbound lane of Earhart when the accident occurred. At trial, she testified that she was in the right eastbound lane of Earhart trying to turn right onto Eagle when the accident occurred. Yet, in her appeal brief, while never admitting to traveling in the shoulder lane, Ms. Munoz alludes to lawfully being there because the local ordinance requires a right-turning driver to turn as close as practicable to the right curb.
[3] New Orleans Municipal Code Sec. 154-482 provides:
Vehicles entitled to right-of-way on certain intersections streets.
(a) Upon entering or crossing a boulevard from any street on which no traffic control sign or signal is erected, the driver or a vehicle or operator of a streetcar shall proceed cautiously, yielding to vehicles which are within the intersection or approaching so closely as to constitute an immediate hazard.
(b) The driver of a vehicle approaching an intersection shall yield the right-of-way to a vehicle which has entered the intersection from a different highway.
(c) When two vehicles enter an intersection from different highways at approximately the same time, the driver of the vehicle on the left shall yield the right-of-way to the vehicle on the right.
(d) The right-of-way rules declared in subsections (b) and (c) of this section are modified at through streets and otherwise as stated in this chapter.
[4] New Orleans Municipal Code Sec. 154-436 provides:
Required position and method of turn at intersection.
The driver of a vehicle intending to turn at any intersection shall proceed as follows:
(1) Right turns. Both the approach for a right turn and a right turn shall be made as close as practicable to the right-hand curb or the edge of the roadway.
[5] In Winfield, the collision occurred when two vehicles were simultaneously turning right onto the same street, one from the far right travel lane and one from the right shoulder lane. We concluded that the driver turning right from the shoulder lane closest to the curb did so legally under Sec. 154-436, but, nonetheless, both drivers were equally at fault for being inattentive. XXXX-XXXX, at pp. 12-13, 816 So.2d at 950-951.
[6] La. R.S. 32:74(B), provides:
The driver of a vehicle may overtake and pass another vehicle upon the right only under conditions permitting such movement in safety. In no event shall such movement be made by driving off the pavement or main traveled portion of the highway.
[1] Subsequent to the accident, Ms. Munoz received treatment for cervical and lumbar spine injuries, as well as shoulder pain, muscle spasm, cervical disc disease, left knee pain, and temporomandibular joint disorder ("TMJ"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594852/ | 954 So. 2d 880 (2007)
Peter OLIVIER
v.
AFTER CRASH, INC.
No. 06-1481.
Court of Appeal of Louisiana, Third Circuit.
April 4, 2007.
*881 H. Douglas Hunter Guglielmo, Lopez, Tuttle, Hunter & Jarrell, Opelousas, LA, for Defendant/Appellant: After Crash, Inc.
Kevin L. Camel Cox, Cox, Filo & Camel, Lake Charles, LA, for Secondary Plaintiff/Appellant: Peter Olivier.
Court composed of OSWALD A. DECUIR, ELIZABETH A. PICKETT, and J. DAVID PAINTER, Judges.
DECUIR, Judge.
In this workers' compensation case, the claimant, Peter Olivier, Sr., appeals the denial of his motion to accelerate benefits. The employer, After Crash, Inc., and its insurer, Louisiana United Business Association and Self-Insured Fund, also appeal, alleging error in the denial of their motion to amend the judgment awarding benefits to the claimant and in the award of penalties and attorney fees. For the following reasons, we affirm.
Mr. Olivier was injured on October 12, 1998 while in the course and scope of his employment with After-Crash, Inc. Its insurer, LUBA, has paid compensation benefits to Mr. Olivier since the accident and the parties stipulated that he is totally and permanently disabled. In 2002, Mr. Olivier began receiving Social Security benefits. LUBA took a statutorily authorized reverse offset and reduced benefits based on the amount of Social Security payments. The parties disagreed on the appropriate amount of the offset. Mr. Olivier filed a disputed claim with the Office of Workers' Compensation, requesting benefits in the amount of $952.00 per month and past due benefits of $24,349.83. On May 4, 2005, this court rendered a decision affirming a judgment, dated August 4, 2004, which awarded the claimant $221.40 per week, or $952.00 per month, in total and permanent disability benefits, as well as past due benefits, penalties, and attorney fees. See Olivier v. After-Crash, Inc., 04-1655 (La. App. 3 Cir. 5/4/05), 901 So. 2d 1214.
Several weeks after this court's judgment became final, LUBA increased Mr. *882 Olivier's weekly benefits to only $219.69, rather than $221.40, and paid a portion of the past due amounts awarded in the judgment. A balance of $2,142.74 remained on the past due amount. On August 1, 2005, Mr. Olivier filed a disputed claim seeking penalties and attorney fees pursuant to La.R.S. 23:1201(G) and moved for an acceleration of benefits under La.R.S. 23:1333. In November of 2005, LUBA converted Mr. Olivier's benefits from weekly payments to monthly payments of $952.00. The motions for acceleration of benefits and for penalties and attorney fees were heard on December 8, 2005, and taken under advisement. The following year, on June 5, 2006, LUBA filed a motion to modify the August 4, 2004 judgment, arguing for the first time that the trial court erred in its calculation of the offset; LUBA proposed that the proper amount of benefits is actually $912.00 per month.
The trial court issued its ruling on July 27, 2006. The court denied the claimant's motion for acceleration of benefits and LUBA's motion for modification of the 2004 judgment. The court ordered LUBA to pay the past due amount of $2,161.55 owed under the 2004 judgment. The claimant was also awarded a $5,843.55 penalty and attorney fees of $7,000.00. Both Mr. Olivier and LUBA have appealed.
LUBA'S APPEAL
LUBA seeks a modification of the 2004 judgment awarding benefits to Mr. Olivier. He was awarded a monthly benefit of $952.00; LUBA contends the proper amount should have been $912.00 per month. LUBA bases its position on an error in the paperwork from 2001 when the Office of Workers' Compensation and the Social Security Administration were calculating the ratio of benefits to be paid to Mr. Olivier. The alleged error was never corrected, and LUBA asserts that, as a result, the judgment contains a mere error in calculation which can be corrected by amendment at any time. To the contrary, the workers compensation judge characterized the error as substantive and declined to amend the judgment as requested.
We agree with the decision rendered below. The amount awarded by the trial court, $952.00 per month, was a figure discussed by the parties, contained in numerous documents, never objected to by the defense when approving the form of the proposed judgment, and reviewed by this court on appeal. While it may well be that an error occurred at some point in the completion of certain paperwork, there is no indication that an error of calculation exists in the judgment itself.
Similarly, we find no error in the workers' compensation award of past due benefits of $2,161.55, a penalty of $5,843.55, and a $7,000.00 attorney fee. The record clearly reflects LUBA's inexplicable delay in initiating payment under the judgment and its blatant disregard for accuracy, timeliness, and responsibility; hence, we find no error in these awards.
CLAIMANT'S APPEAL
Nevertheless, we decline to grant Mr. Olivier's motion for acceleration of benefits. La.R.S.23:1333(A) provides in part, "If the employer against whom an award awarding compensation has been rendered becomes insolvent or fails to pay six successive installments as they become due, the installments not yet payable under the award shall immediately become due and exigible and the award shall become executory for the whole amount." The courts have interpreted this provision to require a willful refusal to pay benefits. Wyble v. Tunica Biloxi Gaming Econ. Dev., 00-0534 (La.App. 3 Cir. 11/2/00), 776 So. 2d 501, citing Duncan v. State of Louisiana, Dep't of Transp. and Development, 615 So. 2d 305 (La.1993).
*883 Finding insufficient proof of a willful refusal to pay benefits, the trial court held that this case was not "the sort of situation that the jurisprudence, taken as a whole, suggests an acceleration is the proper remedy or response." We agree. While the record clearly reflects inattention and neglect in the handling of Mr. Olivier's file, it does not reflect a willful refusal to pay benefits. In fact, LUBA has consistently paid benefits, albeit in the wrong amount. We, therefore, affirm the denial of Mr. Olivier's motion to accelerate benefits.
As an appellant, Mr. Olivier has asked for attorney fees for work performed in defending LUBA's appeal. Because he has successfully defeated that appeal and has properly requested relief, we award attorney fees in the amount of $1500.00. For the above and foregoing reasons, the judgment before us is amended so as to award attorney fees in the amount of $1500.00 to Peter Olivier. The judgment is otherwise affirmed in all respects. Costs of this appeal are assessed to the defendants.
AFFIRMED AS AMENDED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3353364/ | [EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]
[MEMORANDUM OF DECISION RE: DEFENDANT'S MOTION TO STRIKE]
By amended three-count complaint filed November 8, 1993, the plaintiffs, Nancy M. Markham ("Markham") and Edwin Summer ("Summer"), have instituted this action to recover for injuries and damages allegedly sustained as a result of an automobile accident which occurred on or about May 19, 1991, in Groton, Connecticut. The plaintiffs allege that on May 19, 1991, defendant suddenly and without warning crashed into the rear of the automobile operated by Markham. As a result of defendant's negligence, Markham and Summer, a passenger in the automobile at the time of the accident, allegedly sustained numerous personal injuries.
In count one of the plaintiffs' amended complaint, Markham seeks monetary damages resulting from the defendant's negligence. In count two of the plaintiffs' amended complaint, Summer incorporates the factual allegations contained in count one and seeks monetary damages resulting from the defendant's negligence. In count three of the plaintiffs' amended complaint, the plaintiffs allege that the defendant "operated his motor vehicle deliberately and/or with reckless disregard of Connecticut General Statutes § 14-218a and § 14-222, and the defendant's violation of these statutes was a substantial factor in causing the injuries to plaintiffs."
On February 14, 1994, the defendant filed a motion to strike count three of the plaintiffs' amended complaint and the corresponding prayer for relief seeking double or treble damages in accordance with General Statutes § 14-295.1 The defendant submitted a memorandum of law to support his contention that these allegations are legally insufficient.
On March 11, 1994, the plaintiffs filed a memorandum of law in opposition to the defendant's motion to strike.
The function of a motion to strike is to test the legal sufficiency of a pleading. [Ferryman v. Groton], 212 Conn. 138,142, 561 A.2d 432 (1989). The motion to strike admits all facts well pleaded. Id. "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint. [GordonCT Page 4637v. Bridgeport Housing Authority], 208 Conn. 161, 170,544 A.2d 1185 (1988).
Upon deciding a motion to strike, the trial court must construe the "plaintiff's complaint in [a] manner most favorable to sustaining its legal sufficiency." [Bouchard v.People's Bank], 219 Conn. 465, 471, 594 A.2d 1 (1991). "[I]f the facts provable under the allegations would support a defense or a cause of action, the demurrer [motion to strike] must fail." (Citations omitted; internal quotation marks omitted.) [Ferryman v. Groton], supra, 142.
Count one of the plaintiffs' amended complaint contain allegations of negligence. The defendant moves to strike count three of the plaintiffs' amended complaint on the ground that the same facts cannot support a cause of action sounding in negligence and recklessness.
"There is a wide difference between negligence and a reckless disregard of the rights or safety of others. . . ." [Brock v. Waldron], 127 Conn. 79, 81, 14 A.2d 713 (1940); see [Dubay v. Irish], 207 Conn. 518, 532-33, 542 A.2d 711 (1988). "The reiteration of acts previously asserted to support a cause of action in negligence, without more, cannot be transformed into a claim of reckless misconduct by mere nomenclature." [Comparone v. Cooper], 7 CSCR 1108 (August 27, 1992, Lewis, J.); see [Minervini v. Pierce], Superior Court, Judicial District of Waterbury, Docket No. 11 19 87 (January 22, 1993); [Anderson v.Ansaldi], 8 Conn. L. Rptr. 242 (January 22, 1993, Berger, J.); [Allen v. Lazzari], Superior Court, Judicial District of Ansonia/Milford at Milford, Docket No. 03 73 36 (May 5, 1992); but see [Spencer v. King], 8 CSCR 1024 (September 16, 1993, Higgins, J.) (General Statutes § 14-295 requires plaintiff to plead only that another party, with reckless disregard, operated his motor vehicle in violation of General Statutes § 14-218a and § 14-222).
Count three of the plaintiffs' amended complaint merely incorporates the factual allegations contained in count one of the plaintiffs' amended complaint. Therefore, because the plaintiffs cannot reiterate facts to support their cause of action grounded in recklessness based on facts previously asserted to support their cause of action grounded in negligence, count three of the plaintiffs' amended complaint must be stricken. See [Minervini v. Pierce], supra; [Anderson v.Ansaldi], supra. CT Page 4638
Accordingly, the defendant's motion to strike the third count and the portion of the plaintiffs' prayer for relief seeking double or treble damages pursuant to General Statutes § 14-295 is granted.
Leuba, J. | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/1594921/ | 954 So.2d 1166 (2007)
HUMPHREY
v.
STATE
No. 2D06-5525.
District Court of Appeal of Florida, Second District.
April 18, 2007.
Decision without published opinion. Mand. denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594926/ | 432 N.W.2d 281 (1988)
Virginia K. Getman DONOHUE, Plaintiff and Appellant,
v.
Richard E. GETMAN, Defendant and Appellee.
No. 15836.
Supreme Court of South Dakota.
Considered on Briefs September 2, 1988.
Decided November 30, 1988.
Albert C. Jones and Krista H. Clark of Dakota Plains Legal Services, Mission, for plaintiff and appellant.
Richard L. Johnson, Sioux Falls, for defendant and appellee.
*282 MILLER, Justice.
Virginia Getman Donohue appeals from an order which set Richard Getman's child support payments at $120 per month. We reverse.
FACTS
Richard and Virginia were divorced in 1982. At that time, Richard received physical custody of their three children. Both parties subsequently remarried, and their new spouses either have custody of or pay child support for children from prior marriages.
In 1986 the trial court reexamined the custody situation and awarded sole legal and physical custody of the parties' three children to Virginia. The court denied Virginia's request for child support, finding that Richard did not have the means or ability to make support payments.
Shortly thereafter, Virginia petitioned the trial court for child support based on the guidelines set forth in SDCL 25-7-7, since Richard was receiving worker's compensation and social security disability benefits totalling $1,405.33 per month. The trial court found that Richard is totally disabled within the meaning of worker's compensation and social security law. Richard has a severe degenerative condition of the spine and a herniated disc; as a result, he suffers pain, has occasional blackouts, and is experiencing atrophy of his arms. Richard has undergone surgery at least four times due to these problems, and his present wife cannot work because she must stay at home to take care of him. The trial court also found that the children of Richard's new spouse are experiencing medical problems which will require surgery, and Richard will be obligated to pay those medical bills. The trial court concluded that even though the statutory guidelines would require Richard to pay between $539 and $578 per month in child support (based on a monthly income of $1,405.33), he should pay only $120 per month. The trial court gave the following reasons for its deviation from the guidelines: Richard's medical condition and total disability; his monthly expenses and large indebtedness; his future medical expenses; his inability to hold any kind of gainful employment; and the medical condition of his stepchildren, which will require further expenditures of money.
ISSUE
Did the trial court abuse its discretion by deviating from the child support guidelines found at SDCL 25-7-7?
DECISION
This court will not disturb an award of child support unless it clearly appears that the trial court abused its discretion. Saint-Pierre v. Saint-Pierre, 357 N.W.2d 250 (S.D.1984); Rykhus v. Rykhus, 319 N.W.2d 167 (S.D.1982). Virginia argues that the trial court abused its discretion when it failed to enter findings with regard to all five factors listed in SDCL 25-7-7 before deviating from the guidelines. Virginia also contends that it was an abuse of discretion to allow expenses from Richard's second family to be used as a reason for deviation from the guidelines. We agree.
SDCL 25-7-7 states in part:
These guidelines shall be used in setting child support. Deviation from the guidelines may be made only upon the entry of specific findings based upon the following factors:
(1) Financial condition of the parents, including, but not limited to, income of a new spouse or contribution of a third party to the income or expenses of that parent;
(2) The standard of living of the child;
(3) The age and special needs of the child;
(4) The effect of provisions relating to custody and visitation; or
(5) Child care. (emphasis added)
Very recently, in Bruning v. Jeffries, 422 N.W.2d 579 (S.D.1988), we addressed the guidelines set forth in SDCL 25-7-7 and stated:
As the above quoted portion of SDCL 25-7-7 indicates, there may be no deviation from the guidelines unless there is *283 an entry of specific findings regarding the five listed factors. The question becomes whether Secretary (and hearing examiner) must consider these factors in every case he hears. We conclude, from a reading of this statute in its entirety, that the legislature intended that these factors be considered in each proceeding.
422 N.W.2d at 580. (emphasis added)
Here, the trial court entered findings regarding the financial condition of Richard and his second family, but none on the financial condition of Virginia or the other four factors listed in SDCL 25-7-7. We hold that the failure of the trial court to address these factors constitutes an abuse of discretion. The trial courts of this state must consider the totality of both parents' financial condition and the needs of the children, as required by SDCL 25-7-7, before deviating from the statutory guidelines. Bruning, supra.
Furthermore, it is well settled that a parent's responsibility to support his children is paramount; other debts are secondary. This includes obligations resulting from remarriage. Brunick v. Brunick, 405 N.W.2d 633 (S.D.1987). See also Hrdlicka v. Hrdlicka, 310 N.W.2d 160 (S.D.1981); Park v. Park, 309 N.W.2d 827 (S.D.1981). In this case the trial court failed to address the financial needs of Richard's natural children, while focusing on the needs of Richard's stepchildren by his second marriage and his other debts. The trial court then used the stepchildren's needs as a basis for reducing Richard's support for his natural children. This is contrary to our holdings in Brunick and Park and constitutes a further abuse of the trial court's discretion.
We therefore reverse the order of the trial court and remand for reconsideration of Richard's child support obligations pursuant to SDCL 25-7-7.
WUEST, C.J., and MORGAN and SABERS, JJ., concur.
HENDERSON, J., concurs specially.
HENDERSON, Justice (specially concurring).
Although I agree that $120 per month is inadequate child support, I disagree that the rationale for the reversal should be based upon artificial guidelines established by the State Legislature.
Trial judges, in this state, should not be systematized whereby they are schedule-automatons, i.e., read a schedule, push a button, out comes the answer. Rather, our trial judges should be imbued with discretionary power springing from experience and legal education. They are constitutional officers. S.D. Const. art. V, §§ 1, 3, and 5. As such, this Court has recognized that they are entrusted to be the guardians of children and to protect their welfare. See Jameson v. Jameson, 306 N.W.2d 240, 243 (S.D.1981); Blare v. Blare, 302 N.W.2d 787, 791-92 (S.D.1981); Houghton v. Houghton, 37 S.D. 184, 188-89, 157 N.W. 316, 317 (1916) (children are "wards of the court").
With a total monthly income of $1,405.33, this father should pay more than $120 per month.[*] A reversal should be premised upon honored precedent in this Court, not an artificial schedule. We should review these facts from this standpoint: Under the facts before us, did the trial court abuse its discretionary power in setting child support at the sum of $120, employing the holding in Hrdlicka, found in footnote below? Any discretion exercised must have a sound basis in the evidence presented. Masek v. Masek, 89 S.D. 62, 228 N.W. 2d 334 (1975).
In my opinion, the needs of the children were not considered; rather, the court centered its decision on a list of nineteen expenses of his present family plus eleven *284 existing debts. Also, in Findings of Fact VIII and IX, the trial court rather extensively considered the medical expenses of appellee's second wife and her son, who was to undergo knee surgery. There was a lack of expression by the trial court on its findings on the needs of the very children whose child support was at issue; their ages were 17, 14, and 13. Needs of the children are the most important factor for trial courts in setting a child support obligation. Hood v. Hood, 335 N.W.2d 349 (S.D.1983). Thus, under Hood, and the other precedent set forth hereinbefore, I would likewise reverse.
Now, having agreed with the majority court's ruling, I wish to express the primary reason for my special concurrence which, essentially, is to attack the nightmare, created in South Dakota, which establishes dollar amounts for minimum and maximum support depending upon income: SDCL 25-7-7. In Bruning v. Jeffries, 422 N.W.2d 579, 582 (S.D.1988), this author wrote a concurrence in result which, inter alia, attacked the general scheme of creating "mini-judges" in South Dakota. As recently as 1981, citing Houghton above, in Blare v. Blare, 302 N.W.2d 787, 791-92 (S.D.1981), this Court reflected upon its very special and awesome responsibility for the care and welfare of children. The South Dakota State Legislature saw fit, through the rainbow of federal government dollars offered unto it, to create these "mini-judges" and to further establish these guidelines. In Bruning, 422 N.W.2d at 582, recognizing that our courts were getting a double shuffle and being eroded in their constitutional power, I saw fit to diagram, via my concurrence in result, the breakdown of constitutional powers and to decry an unlawful intermixture of judicial administrative power and a violation of the Doctrine of Separation of Powers. S.D. Const. art. II. In said diagram, I drew attention to the Child Support Enforcement Amendments of 1984 (Pub.L. No. 98-378), U.S.Code Cong. & Admin.News 1984, p. 2397, which might well require guidelines but permits tolerates authorizes guidelines to be created by statute, judicial action, or administrative action. This public law, namely a Congressional act of the United States, does not mandate mini-judges nor does it require any legislature to establish guidelines. Guidelines, in whatever form, may be established by judicial action. Let us, then, in this state on the Plains, recognize that we can, by judicial action, decide how child support may be established. Let not the Legislature tell our state judges how to decide child support cases. Our escutcheon, our integrity, is on the line. Federal government dollars, thrust upon the people of the State of South Dakota, create more "Statism," and are further tentacles emanating from Washington, D.C., to strangle the power of the judiciary of each state in this Republic. The "mini-judge" concept is still unpalatable; these guidelines, enmeshed and intertwined with the "mini-judges," still create an unholy mixture and marriage between the judicial branch and the Department of Social Services, all fashioned by a well-meaning but misdirected Child Support Commission. As I said in Bruning, 422 N.W.2d at 583, it is a continuation of a wrongful dejudicialization of the judiciary. Where will amorphous engulfing by the legislative will end?
Rather than to submit the trial judges of this state, or any state, to being schedule-automatons, I would pursue a judicial philosophy of recognizing fundamental law. Organic law. Judges should be imbued with judicial discretionary power springing from experience, clothed with constitutional power, and centered on vibrant blood cells stimulating the brain. Then, when one of these damnable schedules makes no sense, as they do in so many factual situations, the judge can trigger his brain rather than to push a button. His Honor belongs to the judiciary and has the right, belonging to the judiciary, to be a full participant in the Doctrine of Separation of Powers. He or she need not, because the Legislature says so, make decisions affecting the lives of children, and mothers, and fathers, by employing the rigidity of mathematical analysis by percentages; nor need His Honor decide the fate of human beings by sterile, mathematical extrapolation of tables foisted upon him by a new mood swing in Congress sugarcoated with dollars. I question, under Marbury v. Madison, 5 *285 U.S. (1 Cranch) 137, 179-80, 2 L.Ed. 60, 74 (1803), whether judicial automatons may be created by a state legislature.
South Dakota's statutory scheme of setting child support by artificial schedules violates the Separation of Powers Doctrine of the United States Constitution. One branch is not permitted to encroach on the domain of another. The United States Constitution is a charter of government derived from the people, and all officers of government must respect it, each branch respecting the other branch's authority. The South Dakota Legislature cannot usurp the discretionary power of the judges of this state wherein and whereby a schedule is implemented in lieu of the mentality of an elected constitutional officer with brains and education.
Lastly, no pretense is made that I am a federal scholar. The Federal Code of Regulations, U.S.Code Annotated, and the multitude of rulings thereunder are a Byzantine maze to my limited mentality. However, I note that Part D of title IV of the Social Security Act was amended by the Child Support Enforcement Amendments of 1984, which added a new section entitled "STATE GUIDELINES FOR CHILD SUPPORT AWARDS," which provides:
SEC. 467. (a) Each State, as a condition for having its State plan approved under this part, must establish guidelines for child support award amounts within the State. The guidelines may be established by law or by judicial or administrative action.
(b) The guidelines established pursuant to subsection (a) shall be made available to all judges and other officials who have the power to determine child support awards within such State, but need not be binding upon such judges or other officials.
Child Support Enforcement Amendments of 1984, Pub.L. No. 98-378, § 18, 98 Stat. 1305, 1321-22 (1984) (emphasis added). Further, special writer sayeth not.
NOTES
[*] Dividing this amount by three children is tantamount to $40 a month. In Ostwald v. Ostwald, 331 N.W.2d 64, 67 (S.D.1983), we reversed a $50 per month child support award for two children and drew upon Hrdlicka v. Hrdlicka, 310 N.W. 2d 160, 161 (S.D.1981), wherein we reversed a $40 per month child support award. These reversals were based upon the trial court's abuse of discretion with citations galore for the same proposition involving child support. Old fashioned. Time honored precedent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594886/ | 172 Mich. App. 783 (1988)
432 N.W.2d 439
GREATER FLINT HMO
v.
ALLSTATE INSURANCE COMPANY
McCLELLAND
v.
ALLSTATE INSURANCE COMPANY
Docket Nos. 99859, 99860.
Michigan Court of Appeals.
Decided November 8, 1988.
Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. (by William J. Brickley), for appellant.
Charles F. Filipiak, for Mid-Century Insurance Company.
Jonathan M. Jaffa, for The National Ben Franklin Insurance Company.
*785 Before: KELLY, P.J., and SULLIVAN and M.J. SHAMO,[*] JJ.
PER CURIAM.
Allstate Insurance Company appeals as of right a circuit court order granting summary disposition under MCR 2.116(C)(10) as to the third-party defendants, Mid-Century Insurance Company and the National Ben Franklin Insurance Company. We reverse.
A brief recitation of the facts and procedure below is helpful. On Sunday afternoon, August 26, 1984, an unidentified semitrailer truck traveled into the left-hand lane of southbound I-75 at the Zilwaukee Bridge in Saginaw. This maneuver forced the vehicle behind the truck to suddenly stop. An unidentified driver in the chain of traffic was unable to respond in time and, as a result, there were multiple rear-end collisions down the line to the appellees' insureds, Kirby Hull and Barbara Grossman. Both the trucker and the unidentified driver left the scene.
Robert Buda, Allstate's insured, saw the taillights in front of him and came to a sudden stop approximately ten feet behind the unidentified vehicle. Buda then felt a slight impact from behind, but saw no contact between his car and the oncoming motorcycles directly behind, nor could he say definitely that any motorcycle hit his vehicle. Unfortunately, as the motorcyclists attempted to stop, they collided. Plaintiffs Donald and Marjorie McClelland were among the motorcyclists injured.
The McClellands, also insured by Allstate, and their subrogee, Greater Flint HMO, each sued Buda. Allstate, the insurer of the vehicle operated by Buda, defended against the claims. Allstate *786 brought third-party claims against Mid-Century and National Ben Franklin, the insurers of Hull and Grossman, respectively, on a theory of joint liability under the no-fault act.
The parties filed various motions for summary disposition, agreeing, however, that the dispositive issue was whether any of the cars were sufficiently "involved" in the motorcycle collisions to trigger no-fault liability in their insurers.
After hearing a lengthy discussion on the merits and considering submitted deposition testimony, the court denied Allstate's motion and, also, plaintiffs' cross-motion for summary disposition against Buda. The court's decision was premised on a finding that a question of material fact existed whether there was an impact between Buda's vehicle and the motorcycles. This ruling is not challenged on appeal. However, on the basis of the absence of contact between the vehicles driven by Grossman and Hull, and the vehicle driven by Buda or the motorcycles, the court granted summary disposition as to third-party defendants, Mid-Century and National Ben Franklin. In essence, the court concluded that there was no evidence of any "involvement" of those vehicles. It is this ruling that is challenged by Allstate on appeal.
The no-fault act provides coverage for accidental bodily injury "arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle." MCL 500.3105(1); MSA 24.13105(1). Under the act, motorcycles are excluded from the definition of motor vehicles. MCL 500.3101(2)(c); MSA 24.13101(2)(c). However, § 3114(5) permits a motorcyclist who suffers accidental bodily injury arising from a motor vehicle accident to claim no-fault benefits from the insurers of the motorists and vehicle owners "involved in the accident," and sets forth a priority scheme for determining the *787 insurers' order of priority. "Motor vehicle accident" as used in the act "means a loss involving the ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle regardless of whether the accident also involves the ownership, operation, maintenance, or use of a motorcycle as a motorcycle." MCL 500.3101(2)(f); MSA 24.13101(2)(f).
Thus, the issue to be resolved is whether the third-party defendants' insureds' motor vehicles might be found to have been sufficiently "involved" in a "motor vehicle accident" in which plaintiffs were injured to trigger liability under the no-fault act.
The test for determining motor vehicle "involvement" for no-fault liability purposes was set forth in Kangas v Aetna Casualty & Surety Co, 64 Mich. App. 1, 17; 235 NW2d 42 (1975), lv den 395 Mich. 787 (1975), in the context of a pre-no-fault insurance contract:
[W]e conclude that while the automobile need not be the proximate cause of the injury, there still must be a causal connection between the injury sustained and the ownership, maintenance or use of the automobile and which causal connection is more than incidental, fortuitous or but for. The injury must be foreseeably identifiable with the normal use, maintenance and ownership of the vehicle.
Recently, our Supreme Court appeared to adopt the Kangas test for purposes of no-fault liability. Thornton v Allstate Ins Co, 425 Mich. 643; 391 NW2d 320 (1986).
In this case, the court granted summary disposition as to the third-party defendants, Mid-Century and National Ben Franklin, based on the absence of physical contact between the vehicles of their *788 insureds, Grossman and Hull, and the vehicle of Buda or the motorcycles. However, the court's reliance on a requirement of "physical contact" is inconsistent with the Kangas test. Moreover, it is not difficult to imagine a situation in which there may be a causal nexus between a motorist's conduct and an accidental injury quite apart from any physical contact between the insured vehicle and the other vehicles involved. See Bromley v Citizens Ins Co of America, 113 Mich. App. 131, 135; 317 NW2d 318 (1982) (fact that insured's car did not actually touch plaintiff's motorcycle held irrelevant as long as the causal nexus between the accident and the car is established.)
The relevant inquiry then is whether a causal nexus can be established that would link the injuries incurred in the accident to a motor vehicle. Here, the deposition testimony supports a reasonable inference that a sudden lane change of the lead vehicle, the semitrailer truck, caused every driver in the chain of traffic, which included Grossman and Hull, to make an emergency stop which contributed to plaintiffs' injuries.
When according Allstate the benefits of any reasonable doubt when reviewing the record, as we must in a motion for summary disposition premised on MCR 2.116(C)(10), the evidence does not preclude a finding that the trucker's action caused everyone in the chain of traffic to react to a single hazard which, in turn, created a risk for each motorist in the line. If indeed the trier of fact would so find, then the insurer of each motorist so "involved" would share in the liability to injured plaintiffs in accordance with § 3114(5). Thus, there remains a question of fact whether the Hull and Grossman vehicles in these circumstances were sufficiently "involved" in the accident to trigger *789 liability under the no-fault act. Accordingly, summary disposition was improper.
We note in passing that under the no-fault act fault is irrelevant, that is, the issue is not guilt or innocence but, rather, whether one fits within the protected class. Sanford v Ins Co of North America, 151 Mich. App. 747, 753; 391 NW2d 473 (1986), lv den 426 Mich. 876 (1986).
Reversed.
NOTES
[*] Recorder's Court judge, sitting on the Court of Appeals by assignment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594865/ | 146 Wis. 2d 804 (1988)
432 N.W.2d 609
Donald MENTZEL, Petitioner-Respondent,
v.
CITY OF OSHKOSH, Appellant.
No. 87-1607.
Court of Appeals of Wisconsin.
Argued August 24, 1988.
Decided October 12, 1988.
*805 On behalf on the defendant-appellant, their were briefs and oral argument by John W. Pence, city attorney, Oshkosh.
On behalf of the petitioner-respondent, their was a brief and oral argument by Eugene A. Bartman, of Curtis-Wilde Law Offices of Oshkosh.
Before Scott, C.J., Brown, P.J., and Nettesheim, J.
BROWN, P.J.
This is a review of a trial court's conclusion that an inverse condemnation occurred. The city of Oshkosh claims that it did not "take" Donald Mentzel's property, and that the trial court misread the law in deciding otherwise. We hold that the trial court's findings of fact are not clearly erroneous and that the court correctly applied the *806 law. We affirm the trial court's finding of inverse condemnation and assessment of attorney fees.
Pursuant to this court's order, the trial court on remand set forth detailed findings of fact and conclusions of law. Such findings are of particular importance in cases involving a taking. Burrows v. City of Keene, 432 A.2d 15, 20 (N.H. 1981). We therefore reproduce them in some detail.
Mentzel owns a building in the 100 block of North Main Street in downtown Oshkosh. At least from the mid-fifties, the property had been operated as a tavern. However, Mentzel himself never held a liquor license; he rented out the property to a series of tenants who obtained licenses and operated the premises as a tavern. In 1985, the city notified Mentzel that his property was in a designated redevelopment area. At that time, Mentzel received information from the city related to his property, including his rights as a landowner under condemnation proceedings.
In April of 1986, Mentzel was told by the city that he should repair a wall on his property. City officials also discussed with him the purchase of his property. No deal was struck.
In the summer of 1986, Mentzel received a raze or repair order from the city, which cited the dilapidated wall. At about the same time, the city negotiated with Mentzel's tenants a surrender of the liquor license in exchange for an agreement not to prosecute a complaint against the tenants. Mentzel was advised by the tenants that they had been offered relocation payments by the city before the license was surrendered.
On the same day that the license was surrendered, Mentzel applied for a license. He was unsuccessful. He subsequently reapplied and was again denied. Never before had a liquor license been denied *807 to the owner or operator of this particular property. City council members informed Mentzel that the license was denied because the city planned to acquire the property.
Expert testimony established that denial of a liquor license rendered the property economically worthless, especially given the historical use of the property as a tavern. Hence, it was economically not feasible for Mentzel to repair the wall; he would have no way to recoup his investment.
The city has acquired other properties in the North Main Street area. Its intent to acquire property in the redevelopment area is a matter of public record. The trial court's final finding of fact was that the city's actions as to Mentzel's property were taken for the purpose of affecting the relative bargaining positions of Mentzel and the city. As a matter of law, it concluded that the city's action constituted a taking by the city of Mentzel's property.
[1]
We address first the proper standard of review, An inverse condemnation action must be pursued when the condemnor's actions amount to a taking even though the condemnor has failed to exercise its condemnation powers. Maxey v. Redevelopment Auth. of Racine, 94 Wis. 2d 375, 387, 288 N.W.2d 794, 799 (1980). These actions must be in the form of a legal restraint imposed by the condemning authority. Howell Plaza, Inc. v. State Highway Comm'n, 92 Wis. 2d 74, 88, 284 N.W.2d 887, 893 (1979). The legal restriction must practically or substantially render the land useless for all reasonable purposes. Id. at 85, 284 N.W.2d at 892.
*808 [2]
Whether a property owner has been deprived of substantially all of the beneficial use of the property is a question of law. Id. at 80, 284 N.W.2d at 889. When reviewing questions of law, we owe no deference to the trial court. Katze v. Randolph & Scott Mut. Fire Ins. Co., 111 Wis. 2d 326, 330, 330 N.W.2d 232, 234 (Ct. App. 1983), rev'd on other grounds, 116 Wis. 2d 206, 341 N.W.2d 689 (1984).
[3, 4]
Even though we are ultimately dealing with a question of law, we note that the parties dispute certain facts and the inferences drawn from the facts. That being the case, we observe that we are really dealing with a mixed question of fact and law requiring findings as to what happened and a conclusion as to the legal significance of those facts. Findings of fact made by a trial court sitting without a jury shall not be set aside unless they are clearly erroneous. Sec. 805.17(2), Stats. When more than one inference can be drawn from the credible evidence, the reviewing court must accept the inference drawn by the trier of fact. Cogswell v. Robertshaw Controls Co., 87 Wis. 2d 243, 250, 274 N.W.2d 647, 650 (1979). The appellate court will search the record for evidence to support the trial court's findings of fact. In re Estate of Becker, 76 Wis. 2d 336, 347, 251 N.W.2d 431, 435 (1977).
The trial court found that inverse condemnation had taken place because of the effect of actions taken by the city upon the property. These actions consisted of denial of a liquor license to Mentzel and a raze or repair order on the property. The trial court accepted the testimony of Mentzel's expert witness and determined that Mentzel's property had only one reasonable *809 useas a tavern. Such testimony is credible in view of the record as a whole. The inside of the building was modeled as a tavern. The building could be remodeled to fit another purpose only at great expense to Mentzel. Even if remodeled to suit another purpose, it would only be used to house a small retail store like a shoe store, a store selling specialty clothes, or something similar. The building had only 1200 to 1300 square feet of usable space. Yet, downtown Oshkosh has many vacancies for small retail operations. Because the supply of available space far outstrips the demand for such space, the rents for these small stores are low. Therefore, the cost of remodeling would be much greater than the rental obtained. The result would be an economic disaster for Mentzel were he to remodel the building. The trial court's conclusion that the only reasonable use would be as a tavern is sustained.
The trial court then concluded that denial of the liquor license and issuing the raze or repair order, considered within the totality of the circumstances, "demonstrate that the city's actions were taken for the purpose of affecting the relative bargaining positions of the parties." The totality considered also included: appraisal of the property, notification to Mentzel of his condemnation rights, attempts to negotiate a purchase from Mentzel of the property, and negotiating the surrender by Mentzel's tenants of the liquor license.
The city disputes the conclusion, arguing that "intent" is irrelevant to the analysis of what constitutes a taking. The city asserts that the licensing denial and the raze or repair order are exercises of the police power that rest within the government's discretion. The city then asserts that the denial of the *810 license and the issuance of the raze or repair order had nothing whatsoever to do with the redevelopment project and that the latter is separate from and coincidental to the city orders of which Mentzel complains.
[5]
Intent to use a legal restriction to effectuate a taking is not a prerequisite for finding that a taking has occurred. In Zinn v. State, 112 Wis. 2d 417, 430, 334 N.W.2d 67, 73 (1983), our supreme court quoted the United States Supreme Court with approval. It wrote:
It is well established that "`the constitution measures a taking of property not by what a state says, or by what it intends, but by what it does.'" San Diego, 450 U.S. at 652-53, (Brennan, J. dissenting), quoting Hughes v. Washington, 389 U.S. 290, 298 (1967) (Stewart, J., concurring). It is the effect of the state's action that triggers the Just Compensation Clause, not the intent of the government in taking the action which led to the deprivation of private property rights. If government action has the effect of taking private property for public use, just compensation must be made. Decisions of this court make it clear that the intent of the government has never been the test, rather we look to whether the impact on the property owner was to deprive him or her of substantially all beneficial use of the property or render the land useless for all reasonable purposes. [Emphasis in original.]
But while intent does not determine a taking absent the necessary impact, the purpose of governmental action is a relevant subject of inquiry. See, e.g., State v. Herwig, 17 Wis. 2d 442, 450, 117 N.W.2d 335, 339-40 (1962) ("Both the purpose and the effect of *811 Rule, sec. WCD 11.06(6)(a), 1 Wis. Adm. Code, were to utilize the defendant's farmland for the support of wildfowl as well as to protect the wildfowl from hunting. In the stipulation of facts, the purpose of the closed-area device is described as including a place where the wildfowl will `stop for awhile and rest and feed.'") (emphasis added); see also Burrows, 432 A.2d at 20 ("The purpose of the regulation is an element to be considered.").
Here, the trial court found that the purpose of the city's actions in negotiating the license surrender with Mentzel's tenants, denying Mentzel a license, and issuing the raze or repair order, was to manipulate the market value of Mentzel's property, in the city's favor. Further, it found that the city planned to acquire Mentzel's property. The impact of the city's actions, as found by the trial court, was a complete loss to Mentzel of all viable economic use of his property.
Following similar findings of fact, our supreme court found a taking in Maxey v. Redevelopment Auth. of Racine, 94 Wis. 2d 375, 288 N.W.2d 794 (1980). The facts chosen as relevant by the Maxey court are as follows.
Defendant, a governmental agency, negotiated a purchase of property with some of those who held an ownership interest in it. The agency was unable to reach agreement with all interested parties; Maxey, the lessor of a theater operator, rejected their offer. Meanwhile, the city council denied Maxey a renewal of a theater license pursuant to a newly-enacted moratorium on such licenses. City agents contacted tenants in the building and encouraged or caused them to vacate. The city again made an offer to Maxey, who again declined and instead instituted an action for inverse condemnation.
*812 The court found denial of the license resulted in a complete loss to Maxey of all beneficial use of the property. Bolstered by evidence of the purpose behind the agency's actions, the court found a taking.
While we conclude that the failure to renew the theater license in itself supports the finding of a taking, the City additionally stipulated that ... it contacted the tenants in the building and encouraged or caused them to vacate, and that it made statements to the press that the building "would" be taken through eminent domain proceedings. The City's conduct went beyond mere notification of a possible taking. The City caused the tenants to vacate and stated the property "would" be taken.
Maxey at 391-92, 288 N.W.2d at 802.
The city attempts to distinguish the instant case from Maxey. It argues that while in Maxey, revocation of the theater license was for the purpose of obtaining the property, here, denial of the license and other city actions were taken to effect legitimate city goals: well-maintained buildings and law-abiding tavern businesses.
The distinction does not exist, however, under the facts as found by the trial court. The court found evidence of the city's intent to obtain the property. It also found that the city's actions were taken for the purpose of affecting property values: in this case, driving down the value of Mentzel's property. This purpose also directed the governmental actions in the Maxey case.
A similar question to that posed here is addressed in San Antonio River Auth. v. Garrett Bros., 528 S.W.2d 266 (Tex. Ct. App. 1975). "The question before us is whether prohibitions on use of property which *813 have as their purpose the prevention of private development that would increase the cost of planned future acquisition of such property by the government is the type of case in which payment of compensation is required." Id. at 273. That court answered affirmatively; and as its reasoning is particularly apropos, we set it forth here:
When government, in its role as neutral arbiter, adopts measures for the protection of the public health, safety, morals or welfare, and such regulations result in economic loss to a citizen, a rule shielding the agency from liability for such loss can be persuasively defended, since the threat of liability in such cases could well have the effect of deterring the adoption of measures necessary for the attainment of proper police power objectives, with the result that only completely safe, and probably ineffective, regulatory measures would be adopted. But where the purpose of the governmental action is the prevention of development of land that would increase the cost of a planned future acquisition of such land by government, the situation is patently different. Where government acts in this context, it can no longer pretend to be acting as a neutral arbiter. It is no longer an impartial weigher of the merits of competing interests among its citizens. Instead, it has placed a heavy governmental thumb on the scales to insure that in the forthcoming dispute between it and one, or more, of its citizens, the scales will tip in its own favor . . . .
To hold a governmental agency liable under [these] facts . . . will not cause the heavens to fall. . . . The only result will be that it will not be able to "rig" the market in its favor. That is, government will merely be discouraged from giving itself, under the guise of governing, an economic *814 advantage over those whom it is pretending to govern.
Id. at 274.
Maxey teaches that in Wisconsin, the value of land is not assessed in a vacuum. It includes a reflection of the highest and best economic use of a particular structure in a particular area. When a government entity, seeking a different use for the land, prevents the owner from making any economically feasible use of the land, a taking can be found.
Similarly, the New Hampshire Supreme Court found a taking when, following the city's unsuccessful attempt to purchase plaintiff's land at less than its economic value, it rezoned plaintiff's property to preclude planned development. That court reasoned as follows:
From the outset, it was plain that the city wished that the plaintiffs' land be devoted to open space. . . . The city, however, would not pay a reasonable price for the property, electing instead to offer to purchase the property for a sum representing the land's value based on the city's intended use of the land rather than the price to which the plaintiffs were entitled, which was one reflecting its highest and best use. . . .
Instead of acquiring the plaintiffs' land by paying just compensation as required by [the New Hampshire] constitution, however, the city, when it found that it was unable to acquire it for little more than half its value, elected to accomplish its purpose by regulating the use of the property so as to prohibit all "normal private development." It is plain that the city and its officials were attempting to obtain for the public the benefit of having this land remain undeveloped as open space without *815 paying for that benefit in the constitutional manner. . . . The trial court found . . . that the uses permitted were "so restrictive as to be economically impracticable, resulting in a substantial reduction in the value of the land" and that they prevented a private owner from enjoying "any worthwhile rights or benefits in the land."
. . . .
The purpose of the regulation is clearly to give the public the benefit of preserving the plaintiffs' land as open space.
Burrows, 432 A.2d at 21 (emphasis added).
Maxey teaches that governmental purpose can be learned from the actions of its agents, as well as from legislative and quasi-legislative actions such as the enactment of ordinances, rules and statutes. Hence, it was relevant in Maxey that city officials made statements to the press regarding the city's intent to take the property, and relevant that city agents encouraged tenants to vacate the coveted property. So too is it relevant here that city agents made it a matter of public record that they intended buying property in the redevelopment area, that they negotiated a buy-out of Mentzel's tenants before they negotiated a license surrender, and that members of the city council informed Mentzel that he was denied a liquor license because the city wanted his land.
[6]
Considering all the facts and circumstances, the trial court determined that the city's actions regarding the liquor license and that timing of the raze or repair order during the negotiation stage for the land was a taking. The trial court found that the city intended to impact upon the negotiation process. And in fact, the impact of the city's actions during the *816 beginning stages of the eminent domain were then found to have upset the balance in bargaining. The ultimate result was a taking: a complete loss to Mentzel of the beneficial use of his property. While we might have made different findings of fact based upon the historical facts presented, such is not our standard of review. Rather, we may only decide whether the trial court's determination is clearly erroneous. It is not.[1]
The result requested by the city might well be cost efficient for it, but the consequence is a reduction in the appraisal of the property. It is an inefficient transfer of land because the compensation is not equal to the opportunity costs of the land seized. The maximum benefit is to the city which is able to largely avoid both the market place of negotiation or the consequences of a normal eminent domain action. In return, there is no benefit to Mentzel. The intent and spirit of sec. 32.10, Stats., forbids that eventuality.
By the Court.Order affirmed.
NOTES
[1] At oral argument, counsel for the city took issue with several of the trial court's findings of fact. Specifically, the city argued that: (1) Mentzel's property at one point had been used as residential housing and therefore could be so used again; and (2) evidence of the city's negotiation with the tenants regarding surrender of the liquor license, the evidence of the city council's motives in denying Mentzel a license, and the evidence of relocation payments offered to the tenants was all hearsay.
The city's arguments concerning the findings of fact are well taken. Nonetheless, the record contains unobjected to testimony from which a factfinder could draw the conclusions reached by the trial court. Given the record made, our standard of review compels a determination that the court's findings of fact are not clearly erroneous. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594891/ | 28 So. 3d 342 (2009)
STATE of Louisiana
v.
Alton MARKS.
No. 09-KA-260.
Court of Appeal of Louisiana, Fifth Circuit.
October 27, 2009.
*344 Paul D. Connick, Jr., District Attorney, Terry M. Boudreaux, Desiree Valenti, Appellate Counsel, Vincent Paciera, Trial Counsel, Assistant District attorneys, Gretna, Louisiana, for Appellee, The State of Louisiana.
Michael J. Rocks, Attorney at Law, Gretna, LA, for Appellant, Alton Marks.
Panel composed of Judges MARION F. EDWARDS, SUSAN M. CHEHARDY, and WALTER J. ROTHSCHILD.
SUSAN M. CHEHARDY, Judge.
On July 7, 2008, the Jefferson Parish District Attorney filed a bill of information charging defendant, Alton Marks, with possession of a firearm by a convicted felon, a violation of La. R.S. 14:95.1. Defendant pled not guilty at arraignment.
Defendant filed various pre-trial motions, including a motion to suppress evidence. The Court heard and denied the motion to suppress evidence on August 22, 2008.
Defendant was tried by a twelve-person jury on October 22 and 23, 2008. The jury returned a verdict of guilty as charged. On November 6, 2008, the trial court sentenced *345 defendant to 15 years at hard labor without benefit of parole, probation, or suspension of sentence. Defendant filed a timely motion for appeal, which was granted on December 5, 2008.
The State filed a habitual offender bill of information alleging defendant to be a second felony offender. On March 11, 2009, defendant entered an admission to the allegations in the habitual offender bill. The trial court vacated the original sentence and imposed a habitual offender sentence of 15 years at hard labor, without benefit of parole, probation, or suspension of sentence. Defendant has not appealed his habitual offender adjudication and sentence.
Facts
At trial, defendant stipulated that he was the same person who was previously convicted of attempted possession of heroin, a violation of La. R.S. 40:966 and 40:979, in case number 468-029 in Orleans Parish Criminal District Court. The trial court admitted State's Exhibit 1, in globo, a certified copy of the conviction in Orleans Parish case number 468-029. The documents in that exhibit show defendant pled guilty to the offense on August 21, 2007, that he received a suspended sentence of two years, and that he was placed on one year of active probation and one year of inactive probation.
Kawauna Ceasor testified at trial that she is a probation officer with the State of Louisiana's Division of Probation and Parole. She is assigned to the Jefferson Parish district. Although defendant's case was originally assigned to Patrick Green in the Orleans Parish District, his supervision was transferred to Ms. Ceasor after he changed his physical address to 1665 Alexander Street, Apt. A in Terrytown on August 31, 2007.
Ms. Ceasor testified that her records show defendant was advised of the conditions of his probation when he initially reported to Mr. Green on August 27, 2007. Among those conditions was the requirement that defendant not be in any residence, structure, or vehicle that contains a firearm. Further, a probationer is prohibited from storing weapons on his premises, and he must ensure that visitors do not bring weapons into his home.
Ms. Ceasor testified that she visited defendant at the Alexander Court address on October 10, 2007, and he allowed her into the apartment. He stated he was on home incarceration with a 6:00 p.m. curfew, and that he was complying with the restrictions imposed by Orleans Parish Drug Court. Ms. Ceasor visited defendant again at the Alexander Court apartment on January 8, 2008, and defendant again allowed her into the residence. There were some occasions when Ms. Ceasor attempted to make official visits to the apartment, and defendant was not at home. In those instances, Ms. Ceasor left her card, and defendant responded by telephoning her.
Ms. Ceasor testified that she spoke with defendant by telephone on April 24, 2008, and he informed her he was having trouble accessing his mailbox at 1665 Alexander Court, and that he wanted Ms. Ceasor to mail future correspondence to his mother's Charbonnet Street address. He also indicated that he had no other changes to report, including his physical address.
In January, 2008, Ms. Ceasor was in an accident, and limited to desk duty. While she was on limited duty, Agent Bryan Poison assisted her in monitoring defendant's case. Mr. Poison testified that he had tried to contact defendant at the Alexander Court apartment three times since January of 2008. When Mr. Poison visited 1665 Alexander Court, Apartment A, on May 16, 2008, at 11:40 a.m, he knocked at *346 the door, and Danielle Jones responded. Mr. Poison identified himself as a probation officer and explained that he was there as a courtesy to Ms. Ceasor to supervise the defendant. Ms. Jones responded that defendant had already left for a drug court meeting in New Orleans. Mr. Poison stepped inside the apartment to look around.
As he walked into the apartment, he could see into every room on the first floor. Mr. Poison noticed an open pantry door next to the kitchen. On one of the shelves inside the pantry, Mr. Poison saw four boxes of ammunition inside another open cardboard box. Based on experience, he knew that two of the boxes contained AK47 ammunition, one box was .9 millimeter hollow point, and the remaining box was .45 caliber hollow point ammunition. Mr. Poison testified that the ammunition caused him concern, since a probationer is not allowed to have a dangerous weapon or ammunition. He stated that his visit turned from an observation into a more thorough investigation once he saw the ammunition.
Next, in order to protect himself and the child that resided in the apartment, Mr. Poison went upstairs to check the master bedroom. He opened the top drawer of a dresser next to the bed and found another box of .45 caliber hollow point bullets, with 11 rounds missing.
At that point, Ms. Jones became very nervous. She was speaking to defendant on the telephone, and she gave the phone to Mr. Poison. Mr. Poison told defendant why he was at the apartment, and asked defendant to come there. Defendant said he could not go there because he had just finished with drug court, and he was on his way to work. Defendant telephoned the apartment two more times and stated that he was at work, but he refused to give Mr. Poison the address of his jobsite.
As Poison was finishing his third telephone conversation with defendant, Ms. Jones headed toward the bathroom. Mr. Poison asked her to stop because he had not searched the bathroom yet, and, with five boxes of ammunition already found, he was concerned for his safety. Ms. Jones refused to comply. Mr. Poison handcuffed her, placed her on the end of the bed, and told her to stay there. He told her she was not under arrest, but was being detained for his safety as well as her own.
Mr. Poison testified that he opened a closet door in the bedroom, and immediately saw the butt of a gun on the top shelf, partially covered by a pair of jeans and some hats. He took the gun and cleared it. There were ten rounds in the magazine and one in the chamber. The bullets were .45 caliber hollow points.
Mr. Poison asked Ms. Jones several times whether she knew who owned the gun, and she said she did not. Mr. Poison asked Ms. Jones who was living in the apartment, and she responded that no one lived there except defendant, herself, and her child.
Mr. Poison testified that he continued to search, but did not seize anything else. He called 9-1-1 and asked for a Jefferson Parish deputy. When the deputy ran a trace on the gun, the records did not show that the gun was reported stolen. Mr. Poison identified State's Exhibit 12 as a photograph of the .45 caliber handgun he seized.
Captain Ralph Dunne of the Jefferson Parish Sheriffs Office testified he is the commander of the Jail Management Section. He maintains records pertaining to arrestees and was formerly the supervisor at Intake Booking for the Jefferson Parish Correctional Center. Captain Dunne identified State's Exhibit 5 as an appearance bond that defendant completed and signed *347 at the correctional center upon his release from the facility on March 10, 2008. Captain Dunne noted that the address given on the bond is 1665 Alexander Court, Apartment A, in Gretna. He stated that the signer writes the address on the form. There is a provision on the form that states the signer swears, under penalty of law, that the information is true and correct, and that the signer is obligated to notify the court of any change of address.
During his cross-examination of Captain Dunne, defense counsel produced Defense Exhibit 1. The officer identified it as a restraining order issued by a criminal commissioner against defendant in an unrelated domestic violence matter. The order commands defendant to stay away from 1665 Alexander Court, Apartment A. The restraining order was issued on February 29, 2008, and the expiration date was listed as May 29, 2008.
Danielle Jones testified for the defense at trial. She stated she lived with defendant at 1665 Alexander Court, Apartment A from October, 2007 through February, 2008. Her five-year-old daughter also lived there. Defendant did not rent the apartment with her, but he did stay there. In late February, 2008, Ms. Jones had a falling out with defendant. As a result, defendant was removed from her home and placed under a restraining order that prohibited him from going to her apartment.
Ms. Jones testified that in May of 2008, a probation officer came to her house and asked her if defendant was there. She told him defendant did not live there anymore. The probation officer asked her if he could look around the apartment, and she said, "[F]ine." When the officer began searching her things, she told him to stop. The officer became upset and handcuffed her. He told her if she did not allow him to do his job, she would go to jail for obstruction of justice.
Ms. Jones testified that the probation officer found bullets in the downstairs pantry. He found a gun under some of defendant's clothes. Ms. Jones testified that her child's father had given her the gun and ammunition for protection after her neighbor's house was burglarized. She got the gun sometime in early to mid-May of 2008. Ms. Jones testified that when the probation officer asked her who the gun belonged to, she told him it was hers.
On cross examination, Ms. Jones stated that she had never fired the weapon. She also stated that she did not know how to load the bullets into the weapon.
In his first assignment of error, defendant contends that the State failed to prove his guilt beyond a reasonable doubt, arguing that the State did not prove he had constructive possession of the gun found in the Alexander Court apartment.[1] The State responds that strong circumstantial evidence showed defendant was residing at the apartment at the time of the search, and that he had the requisite general intent to possess the weapon. In his reply brief, defendant argues the circumstantial *348 evidence was not sufficient to prove guilty knowledge.
Under Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979), the evidence is sufficient if the conviction was based on proof sufficient for any rational trier of fact, viewing the evidence in the light most favorable to the prosecution, to find the essential elements of the crime beyond a reasonable doubt.[2]
In order to convict a defendant of violating La. R.S. 14:95.1, the State must prove: 1) the defendant possessed the firearm; 2) the defendant had a prior conviction for an enumerated felony; 3) the defendant possessed the firearm within ten years of the prior conviction; and 4) the defendant had the general intent to commit the offense.[3] At trial, the parties stipulated to defendant's prior felony conviction. Here, defendant does not challenge the evidence as to his prior conviction or the ten-year cleansing period.
On appeal, defendant disputes the sufficiency of the evidence of possession and intent, i.e., guilty knowledge. Constructive possession is sufficient to satisfy the possessory element of La. R.S. 14:95.1.[4] The question of whether there is sufficient "possession" to convict is dependent on the facts of each case.[5] Constructive possession of a firearm exists when a firearm is subject to a person's dominion and control.[6] Even where a person's dominion over the weapon is only temporary in nature and control is shared, constructive possession exists.[7] But the mere presence of a defendant in the area of the seized contraband does not, by itself, prove he exercised dominion and control over the item such that it was in his constructive possession.[8]
To establish possession of a firearm by a convicted felon, proof is required that the offender was aware that a firearm was in his presence, and that he intended to possess the weapon.[9] Such guilty knowledge may be inferred from the circumstances and proved by direct or circumstantial evidence.[10]
Defendant argues the evidence at trial did not connect him with the gun found in the Alexander Court apartment. He maintains that he was not a lessee; and the evidence did not show he lived in the apartment after January of 2008, when his probation officer, Ms. Ceasor, visited with him there. Defendant further notes that the restraining order, which was issued following his dispute with Ms. Jones, prohibited him from going to the apartment after February 29, 2008.
*349 First, under the existing case law, a defendant does not to be co-lessee of an apartment to have constructive possession of contraband found in the apartment.[11] Next, the testimony and evidence showed defendant lived there with Ms. Jones as early as August 31, 2007, when he reported it as his residence to Mr. Green, his Orleans Parish probation officer. Defendant allowed Ms. Ceasor into the apartment on October 10, 2007 and January 8, 2008. Further, defendant listed his address as Alexander Court on an appearance bond signed when he was released from the correctional center on March 10, 2008.
On April 24, 2008, defendant reported to Ms. Ceasor that he was still living at the Alexander Court address. Further, defendant was monitored on house arrest at the Alexander Court residence.
Mr. Poison testified that, while he was at the Alexander Court apartment on May 16, 2008, Ms. Jones did not give him any reason to believe defendant was not currently living there. On the contrary, Ms. Jones told Mr. Poison that defendant had just left the apartment to go to drug court. Ms. Jones also told Mr. Poison that she lived in the apartment with her daughter and defendant. Further, Ms. Jones testified that she did not own the gun or know that the gun was in the apartment.
Furthermore, Mr. Poison stated that the gun was found in a bedroom closet, which also contained men's clothing. More specifically, the gun was found under a large pair of men's shorts and a pile of baseball caps. Ms. Jones stated during trial that the gun was under "Alton's pants."
Ms. Jones also testified at trial that defendant lived with her in the apartment at one time, but that he moved out in late February, 2008 after the couple had a falling out. She testified she obtained the gun from her daughter's father, Darrell Keys. She stated that when Mr. Poison asked her who the gun belonged to, she told him it was hers. Ms. Jones also admitted that she did not take lessons in how to operate the gun; and when the prosecutor questioned her on cross-examination regarding how the gun worked, Ms. Jones could not show him. Ms. Jones stated that any discrepancy between her testimony and Mr. Poison's testimony was caused by Mr. Poison being untruthful.
Here, the jury apparently found the testimony of the State's witnesses to be more credible, and discredited Ms. Jones's testimony that the gun was hers and that defendant did not live in her apartment after February, 2008. The credibility of witnesses is within the sound discretion of the trier of fact, who may accept or reject, in whole or in part, the testimony of any witness.[12] The credibility of witnesses will not be re-weighed on appeal.[13] Based on the State's evidence, the jury could have reasonably inferred that defendant was living at the Alexander Court apartment in circumvention of the restraining order, and that he knew the gun was in the bedroom closet.
Courts have generally found evidence of constructive possession when a gun is found in an area customarily occupied by the defendant. For instance, in State v. Jackson, 97-1246 (La.App. 5 Cir. 4/13/98), 712 So. 2d 934, writ denied, 98-1454 (La.10/16/98), 726 So. 2d 37, this Court held the evidence was sufficient to prove the defendant knowingly possessed the gun *350 found in his bedroom under the mattress where he regularly slept. Despite the argument that other friends and relatives had stayed in the defendant's bedroom during a recent visit, and the gun could have belonged to them, this Court found the evidence was sufficient to affirm the defendant's conviction for possession of a firearm by a convicted felon.
In State v. Paul, 05-612 (La.App. 5 Cir. 2/14/06), 924 So. 2d 345, 349-50, this Court found the State proved beyond a reasonable doubt that the defendant knowingly possessed a gun found between the pillows in the room where he slept when he stayed at the residence. Similarly, in this case, it appears the State put on sufficient evidence that defendant lived at the Alexander Court address at the time of the search, and that the gun found in the closet with his clothes was under his dominion and control.
Here, the State was required to prove that defendant had dominion and control over the gun. Our review reveals that the State provided proof sufficient for any rational trier of fact, viewing the evidence in the light most favorable to the prosecution, to find the essential elements of possession and intent, beyond a reasonable doubt.
In his second assignment of error, defendant complains that the trial court erred in denying his motion to suppress evidence. He argues the evidence was suppressible because Mr. Poison had neither consent nor reasonable suspicion to enter the Alexander Court apartment. Defendant further contends that Mr. Polson's discovery of ammunition in the kitchen pantry did not give rise to reasonable suspicion of criminal activity that would allow him to conduct a more thorough search of the residence. The State responds that Mr. Poison conducted a lawful search of the residence in furtherance of his duties as a probation officer, and that the gun was legally seized.
The Fourth Amendment of the United States Constitution and Article I, § 5 of the Louisiana Constitution protect individuals from unreasonable searches and seizures. Warrantless searches and seizures are unreasonable per se unless justified by a specific exception to the warrant requirement.[14] When the constitutionality of a warrantless search or seizure is placed at issue by a motion to suppress the evidence, the State bears the burden of proving the admissibility of any evidence seized without a warrant.[15]
This Court has recognized that:
[a]n individual on parole or probation does not have the same freedom from governmental intrusion into his affairs as does the average citizen. A probationer must necessarily have a reduced expectation of privacy, which allows for reasonable warrantless searches of his person and residence by his probation officer, even though less than probable cause may be shown.
Saulsby, 04-880, p. 4 (La.App. 5 Cir. 12/28/04), 892 So. 2d 655, 657-58. The reduced expectation of privacy derives from the probationer's conviction and his agreement to allow a probation officer to investigate his activities in order to confirm that he is abiding by the provisions of his probation. Id. Simply stated, a probationer's *351 freedom is conditioned upon the provisions of his probation.[16]
A probationer has essentially the same status as a parolee.[17] A parolee agrees to submit to unannounced visits from his parole officer as a condition of parole.[18] While the decision to search must be based on something more than a mere hunch, probable cause is not required, and only a reasonable suspicion that criminal activity is occurring is necessary for a probation officer to conduct the warrantless search.[19]
A probation officer, however, may not use his authority as a subterfuge to help another police agency that desires to conduct a search, but lacks probable cause.[20] The parole or probation officer must believe the search is necessary in the performance of his duties and is reasonable in light of the total circumstances.[21] In determining whether a warrantless search by a probation or parole officer was reasonable, the court must consider: 1) the scope of the particular intrusion; 2) the manner in which it was conducted; 3) the justification for initiating it; and 4) the place in which it was conducted.[22]
At the hearing on defendant's motion to suppress evidence, the State produced the testimony of probation officer Bryan Polson. Mr. Poison stated that he visited 1665 Alexander Court, Apartment A, in Gretna, on May 16, 2008, in order to assist defendant's probation officer, Kuawana Ceasor. Mr. Poison had been to the apartment on three or four other occasions, but no one had responded when he knocked on the door.[23] This was intended as a supervisory visit, since defendant had not been seen in four months. A copy of defendant's probation record, introduced at trial, shows defendant was instructed that he was required to submit to a home visit by his probation officer "each and every month" as a condition of his probation.
Mr. Poison testified that defendant's probation file indicated he had been using the Alexander Court apartment as his official address. When Mr. Poison knocked on the door this time, a woman asked who was there. He responded that he was a probation officer.
Several moments passed, and Danielle Jones opened the door. She questioned Mr. Poison about who he was and what he was doing there. He explained that he was a probation officer, and he was conducting a courtesy supervision of defendant *352 as a favor to Ms. Ceasor, defendant's assigned probation officer. Ms. Jones then opened the door wider, and Mr. Polson stepped inside the apartment. Ms. Jones told Mr. Poison that defendant was not in the apartment at that time. When Mr. Poison asked Ms. Jones who lived in the apartment, she told him that only she, her daughter, and defendant lived there.
During a cursory walk-through on the first floor of the residence, Mr. Poison noticed the door to the kitchen pantry was open. Through the open doorway, Mr. Poison saw four boxes of ammunition on one of the pantry shelves. Based on that finding, as well as defendant's background, Mr. Poison decided to conduct a more indepth search of the apartment. He went upstairs and discovered a gun on a closet shelf in the master bedroom. The butt of the weapon was sticking out from a pair of men's blue jeans and some hats.
In denying the suppression motion, the trial court commented that Mr. Poison did not overstep his authority in entering the residence to check on a probationer. Once the officer saw the ammunition (i.e. contraband) in plain view, he was justified in continuing the search.
Defendant maintains that Mr. Poison did not have reasonable suspicion to enter the apartment, and that Ms. Jones did not consent to a search of her apartment. Therefore, defendant argues, the officer's entry was unlawful, and the evidence seized by Mr. Poison was suppressible.
Consent to search constitutes one of the exceptions to the probable cause and warrant requirements of the Fourth Amendment when it is freely and voluntarily given by a person who possesses common authority over or other sufficient relationship to the premises or effects sought to be inspected.[24] The State bears the burden of proving the consent has been freely and voluntarily given.[25] Voluntariness is a question of fact to be determined by the trial court based on the totality of the circumstances.[26]
In the instant case, Mr. Poison knocked on the apartment door, and Ms. Jones, a resident of the apartment, responded by opening the door.[27] Mr. Polson testified that when he told Ms. Jones he was there for a supervisory visit, she opened the door wider and allowed him to step inside. More importantly, Ms. Jones testified at trial that Mr. Poison asked if he could step inside that apartment, and she responded, "[F]ine." Ms. Jones further testified that when Mr. Poison asked her if he could look around, she again responded, "[F]ine." At that point, Ms. Jones verbally consented for Mr. Poison to enter the premises.
After entering the apartment, Mr. Poison saw the ammunition in plain view in the open pantry. Under the "plain view" exception to the warrant requirement, police may seize evidence in plain view when: 1) there is prior justification for an intrusion into the protected area and 2) it is immediately apparent, without *353 close inspection, that the items seized are evidence or contraband.[28]
In the instant case, Mr. Poison was rightfully in the area where he spotted the ammunition, and he immediately recognized it as contraband. He testified at trial that he was concerned when he saw the ammunition, because it was a violation of defendant's probation to possess dangerous weapons, including ammunition. Once Mr. Poison saw the ammunition, he had reasonable suspicion to conduct a more thorough search of the apartment. Thus, it appears Mr. Poison lawfully seized the gun he found in the bedroom closet. Based on the foregoing, we cannot say that the trial court erred in denying defendant's motion to suppress the evidence.
Finally, as is our routine practice, the record was reviewed for errors patent. La. C. Cr. P. art. 920.[29] The minute entry for August 20, 2008 (R., p. 6) is duplicative of the minute entry for August 22, 2008. (R., p. 9). Based on the motion hearing transcript, which is dated August 22, 2008, it appears the minute entry bearing that date is the correct one.[30] Additionally, there are two different minute entries for August 21, 2008. (R., pp. 7-8). One of those (R., p. 8), is duplicative of the minute entry for August 22, 2008. We instruct the district court to order the correction of the minute entries to accurately reflect the court proceedings on those days. Defendant's conviction is hereby affirmed.
AFFIRMED.
NOTES
[1] When the issues on appeal relate to both the sufficiency of evidence and one or more trial errors, the reviewing court should first determine the sufficiency of the evidence by considering the entirety of the evidence. State v. Hearold, 603 So. 2d 731, 734 (La. 1992). If the reviewing court determines that the evidence was insufficient, then the defendant is entitled to an acquittal, and no further inquiry as to trial errors is necessary. Id. Alternatively, when the entirety of the evidence, both admissible and inadmissible, is sufficient to support the conviction, the defendant is not entitled to an acquittal, and the reviewing court must consider the assignments of trial error to determine whether the accused is entitled to a new trial. Id.
[2] Jackson, 443 U.S. at 319, 99 S.Ct. at 2789; State v. Ortiz, 96-1609, p. 12 (La. 10/21/97), 701 So. 2d 922, 930, cert, denied, 524 U.S. 943, 118 S. Ct. 2352, 141 L. Ed. 2d 722 (1998); State v. Polizzi, 05-478, p. 9 (La.App. 5 Cir. 2/14/06), 924 So. 2d 303, 310, writs denied, 06-1052 (La.11/3/06), 940 So. 2d 660, and 08-2006 (La. 1/30/09), 999 So. 2d 751.
[3] State v. Watson, 08-214, p. 7 (La.App. 5 Cir. 8/19/08), 993 So. 2d 779, 784.
[4] State v. Mose, 412 So. 2d 584, 586 (La.1982); State v. Ware, 01-194, pp. 4-5 (La.App. 5 Cir. 8/28/01), 795 So. 2d 495, 499.
[5] State v. Johnson, 03-1228, p. 5 (La.4/14/04), 870 So. 2d 995, 998.
[6] Id.
[7] Johnson, 03-1228 at 5, 870 So.2d at 999; State v. Blount, 01-844, p. 4 (La.App. 5 Cir. 12/26/01), 806 So. 2d 773, 775.
[8] Johnson, 03-1228 at 6, 870 So.2d at 999.
[9] State v. Lee, 02-0704, p. 5 (La.App. 5 Cir. 12/30/02), 836 So. 2d 589, 593, writ denied, 03-0535 (La.10/17/03), 855 So. 2d 755.
[10] Johnson, 03-1228 at 5, 870 So.2d at 998.
[11] State v. Ware, 795 So.2d at 499.
[12] State v. Lathers, 03-941, p. 7 (La.App. 5 Cir. 2/23/04), 868 So. 2d 881, 886.
[13] Id.
[14] State v. Manson, 01-159, pp. 8-9 (La.App. 5 Cir. 6/27/01), 791 So. 2d 749, 757, cert. denied, 01-2269 (La.9/20/02), 825 So. 2d 1156.
[15] La. C. Cr. P. art. 703(D); State v. Parnell, 07-37, p. 9 (La.App. 5 Cir. 5/15/07), 960 So. 2d 1091, 1097, writ denied, 07-1417 (La. 1/7/08), 973 So. 2d 733.
[16] State v. Young, 07-988, p. 6 (La.App. 5 Cir. 6/19/08), 988 So. 2d 759, 763, writ denied, 08-1599 (La.3/27/09), 5 So. 3d 139, citing United States v. LeBlanc, 490 F.3d 361 (5th Cir. 2007).
[17] State v. Malone, 403 So. 2d 1234, 1238 (La.1981); State v. Saulsby, 04-880 at 4, 892 So.2d at 657.
[18] State v. Robertson, 06-167, p. 13 (La.App. 3 Cir. 7/16/08), 988 So. 2d 294, 303; State v. Wesley, 28,941, p. 8 (La.App. 2 Cir. 12/13/96), 685 So. 2d 1169, 1174, writ denied, 97-0279 (La.10/10/97), 703 So. 2d 603.
[19] State v. Robertson, supra; State v. Epperson, 576 So. 2d 96, 99 (La.App. 2 Cir. 1991), writ denied, 580 So. 2d 920 (La.1991).
[20] State v. Malone, 403 So.2d at 1238.
[21] State v. Saulsby, 04-880 at 4, 892 So.2d at 658.
[22] State v. Malone, 403 So.2d at 1239; State v. Young, 07-988 at 8, 988 So.2d at 763-764.
[23] Defendant's probation record shows Ms. Ceasor visited with defendant at the Alexander Court apartment on January 8, 2008. After that, Mr. Poison made three unsuccessful attempts to find defendant there. Thus, May 16, 2008 was Mr. Poison's fourth attempt to visit Mr. Poison at that address.
[24] State v. Robinson, 08-25, p. 6 (La.App. 5 Cir. 5/27/08), 986 So. 2d 716, 720, writ denied, 08-1527 (La.3/4/09), 3 So. 3d 470.
[25] State v. Owen, 453 So. 2d 1202, 1206 (La. 1984).
[26] State v. Gomez, 06-417, p. 7 (La.App. 5 Cir. 11/28/06), 947 So. 2d 81, 86.
[27] When a door is opened in response to a knock, it signifies the occupant's consent to confront the caller, and there is no compulsion, force or coercion involved. State v. Warren, 05-2248, pp. 6-7 (La.2/22/07), 949 So. 2d 1215, 1222; State v. Haywood, 00-1584, p. 6 (La.App. 5 Cir. 3/28/01), 783 So. 2d 568, 575.
[28] Horton v. California, 496 U.S. 128, 135-136, 110 S. Ct. 2301, 2307, 110 L. Ed. 2d 112 (1990).
[29] State v. Oliveaux, 312 So. 2d 337 (La. 1975); State v. Weiland, 556 So. 2d 175 (La.App. 5 Cir. 1990)
[30] Where there is a discrepancy between the transcript and the minute entry, the transcript prevails. State v. Lynch, 441 So. 2d 732, 734 (La. 1983). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594899/ | 147 Wis. 2d 64 (1988)
432 N.W.2d 617
AMERICAN INDUSTRIAL LEASING COMPANY, Plaintiff-Respondent,
v.
Steven and Lilah MODEROW, Defendants-Appellants.
No. 88-0025.
Court of Appeals of Wisconsin.
Submitted on briefs September 6, 1988.
Decided October 12, 1988.
*65 For the plaintiff-respondent the cause was submitted on the briefs of Prieve, Meyer & Nestingen, S.C. by Robert H. Storm and Nancy M. Bonniwell, of Milwaukee.
For the defendants-appellants the cause was submitted on the briefs of Schober & Ulatowski, S.C. by Thomas L. Schober, of Green Bay.
Before Moser, P.J., Sullivan and Fine, JJ.
MOSER, P.J.
Appellants Steven and Lilah Moderow (Moderows) appeal from a judgment and order of the trial court finding them in default of their lease with American Industrial Leasing Company (American), and awarding American replevin, money damages, actual costs and attorney's fees. We hold that the trial court was correct in its analysis and application of the law, and therefore we affirm.
On September 23, 1981, the Moderows entered into a transaction with American. They agreed to make eighty-four payments of $619.22 for the use of a mono-slope hog confinement building in their farming operation. The Moderows were required to make an initial payment of $1,857.66, or the sum of three monthly payments, prior to installation of the building. This initial payment was to be wholly applied toward the Moderows' obligation to American. Furthermore, the terms of the lease provided that title to the building would remain with American and that the building would be returned to American upon expiration of the lease.
American purchased the hog confinement building for $25,100, received the initial payment from the Moderows, and installed the building on their farm. The building consisted largely of concrete blocks, and could not be removed or served without sustaining *66 significant damage. In late 1983 or early 1984, the Moderows ran into financial difficulties and defaulted on their payments. Appellants and American engaged in negotiations to work out another payment arrangement, but to no avail. American filed a complaint to obtain money damages and replevin of the building on March 27, 1986. The Moderows counterclaimed, alleging that the transaction was submitted to the Wisconsin Consumer Act (Act), chs. 421-27, Stats., and that American had violated several provisions of the Act and was thus liable for damages.
The case was scheduled to be tried to the court on January 29, 1987. However, respondent elected to proceed on that day in the context of a hearing on the merits. Both parties filed briefs, and the court issued a written decision on September 14, 1987. The trial court held that the transaction was not subject to the Act, found the Moderows in default of their lease, and entered judgment in favor of American for replevin, actual costs, attorney's fees and money damages. The total monetary award was $35,082.32, which included the principal sum still owed on the building of $29,080.28. This appeal arises from the judgment and order for judgment dated December 1, 1987. The Moderows claim that (1) the transaction is subject to the Act; (2) the transaction was a consumer credit sale disguised as a lease; and (3) American violated the Act by failing to disclose certain payment information, by obtaining a security interest in their land and crops, and by assessing an excessive finance charge on their transaction. *67 I. IS THE AMERICAN-MODEROW TRANSACTION SUBJECT TO THE WISCONSIN CONSUMER ACT?
Whether or not the American-Moderow transaction is subject to the Act involves an application of the Act to the facts of this case. The application of a statute to a particular set of facts is a question of law.[1] An appellate court decides questions of law without deference to the trial court.[2]
Appellants contend that because they paid three monthly payments totaling $1,857.66 prior to accepting the hog confinement building, its purchase price of $25,100 was reduced by that amount, and therefore the transaction was valued at $23,242.34. This valuation would bring the transaction within the $25,000 limit of the Act.
Section 421.202, Stats., provides:
Exclusions. Chapters 421 to 427 do not apply to:
. . . .
(6) Consumer credit transactions in which the amount financed exceeds $25,000.00 or other consumer transactions in which the cash price exceeds $25,000.00
Section 421.301, Stats., provides definitions of the terms used in sec. 421.202(6) as follows:
(5) "Amount financed" in a consumer credit transaction means the total of the following items *68 from which any prepaid finance charge or required deposit balance has been excluded:
(a) In a consumer credit sale, the cash price of the real or personal property or services, less the amount of any downpayment whether made in cash or in property traded in, or, in a consumer loan, the amount paid to, receivable by or paid or payable to the customer or to another person in his behalf;
(b) In a consumer credit, sale, the amount actually paid or to be paid by the creditor pursuant to an agreement with the customer to discharge a security interest in or a lien on property traded in; and
(c) To the extent not included in par. (a) or (b):
1. Any applicable sales, use, excise or documentary stamp taxes;
2. Amounts actually paid or to be paid by the creditor for registration, certificate of title or license fees; and
3. Additional charges permitted by s. 422.202.
. . . .
(7) "Cash price" means the price at which property or services are offered, in the ordinary course of business, for sale for cash, and may include:
(a) The cash price of accessories or services related to the sale such as delivery, installation, alternations, modifications and improvements; and
(b) Taxes, to the extent imposed on the cash sale.
. . . .
(13) "Consumer transaction" means a transaction in which one or more of the parties is a customer for purposes of that transaction.
*69 . . . .
(38) "Required deposit balance" means any deposit balance or any investment which the creditor requires the customer to make, maintain or increase in a specified amount or proportion as a condition to the extension of credit except:
. . . .
(b) A deposit balance which will be wholly applied toward satisfaction of the customer's obligation in the transaction;
[1]
In the case at hand, the Moderows agreed to make eighty-four payments of $619.22 to American for a mono-slope hog confinement building. American purchased the building for $25,100 and required an initial payment from the Moderows, totaling three monthly payments, prior to installing the building. The initial payment was wholly applied toward satisfaction of the Moderows' obligation in the transaction. The $25,100 figure represents the cash price for the building, and the initial payment represents three installment payments on the eighty-four month agreement, and not a "down payment" intended to reduce the purchase price. The cash price in this transaction thus exceeds the $25,000 limit of the Act. Therefore, this transaction is excluded from the Act, and the trial court was correct in its application of the law.
Because this case is not bound by the Act, appellants' third issue fails as well. We cannot determine whether American violated a statute which does not apply to its transaction with the Moderows. The trial court thus was correct in not determining whether American violated the Act by (1) failing to disclose payment information to the Moderows, (2) obtaining a security interest in their land and crops, *70 or (3) assessing an excessive finance charge on their transaction.
II. DID THE AMERICAN-MODEROW TRANSACTION INVOLVE A TRUE LEASE?
Appellants' one remaining issue involves whether the agreement between them and American was a consumer credit sale or a lease. Appellants assert that this court should characterize the American-Moderow transaction as a credit sale. Such a characterization would possibly have worked to the Moderows' benefit had their case been subject to the Act. While this case is not subject to the Act, we conclude that the trial court correctly treated the transaction as a lease agreement.
Whether or not the lease in question constituted a true lease, as opposed to a disguised credit sale, is a question of law. This court may review questions of law without deference to the decisions of a trial court.[3]
[2]
In this case, the Moderows rely on sec. 421.301(9), Stats., in support of their argument that their transaction with American was a disguised credit sale. Section 421.301(9) provides that:
(9) "Consumer credit sale" means a sale of goods, services or an interest in land to a customer on credit where the debt is payable in instalments or a finance charge is imposed and includes any agreement in the form of a bailment of goods or lease of goods or real property if the bailee or lessee pays or agrees to pay as compensation for use a sum substantially equivalent to or in excess of the aggregate value of the goods or real property *71 involved and it is agreed that the bailee or lessee will become, or for no other or a nominal consideration has the option to become, the owner of the goods or real property upon full compliance with the terms of the agreement.
However, the Moderows' lease did not give them the option to become the owner of the confinement building at the end of the lease period. Also, title to the building remained with American, and American was to regain possession of the building after the lease period terminated. The Wisconsin Supreme Court has held that "[u]nless the parties' complete agreement contains provisions, either oral or written, for the vesting of title to the goods in their user, the parties' agreement must be considered a true lease as opposed to a conditional sales contract or a chattel mortgage disguised as a lease."[4] Therefore, the American-Moderow transaction was based upon a true lease, and the trial court was correct in reaching this conclusion.
By the Court.Judgment and order affirmed.
NOTES
[1] Neis v. Board of Educ. of Randolph School Dist., 128 Wis. 2d 309, 313, 381 N.W.2d 614, 616 (Ct. App. 1985).
[2] Muggli Dental Studio v. Taylor, 142 Wis. 2d 696, 699, 419 N.W.2d 322, 323 (Ct. App. 1987).
[3] Id.
[4] Dairyland Equip. Leasing Inc. v. Bohen, 94 Wis. 2d 600, 609-10, 288 N.W.2d 852, 856 (1980). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8304593/ | HOWELL, J.,
The bill in this case was filed by the complainants Oscar Mayes and his wife Mary Mayes, against J. S. Crain, Jr. and his wife Martha Crain and alleges that the parties are owners of adjoining tracts of land in Warren County and that a dispute has arisen between them as to whether or not there is a lane or public road between the two tracts of land and also as to the exact location of the dividing line. The bill prays for an injunction against the defendants from interfering with the fence between them and that at the hearing this fence be located on the line as contended for by the complainants and that the Court decree that a public road or .lane does not exist between the two tracts of land.
The defendants filed an answer which they prayed be treated as a cross-bill if necessary and that the Court established the dividing line and the location of the road or passway as insisted upon by them.
The cause was heard by the Chancellor upon the entire record including a number of deeds and maps as exhibits and upon the testimony of witnesses in open Court. The evidence appears in the record in narrative form.
Upon the hearing the Chancellor found the facts and decreed in part as follows:
“The boundary line between the lands of the parties is along a fence running in an easterly direction from the Shellsford public road to the extremity of same at a fence post, same having agreed to be such by Complainant, Oscar Mayes, and J. S. Crain, Sr. husband of *252Goldie Bonner Crain, the then owner of the lands, same having been agreed to be snch by J. S.' Crain, Sr., with the implied consent of the said Goldie Bonner Crain.
“There now exists a public road along the south side of said fence, of a width of 12 feet, from said Shellsford road to its eastern extremity and beyond to the mountain.
“It is, therefore, ordered, adjudged and decreed by the Court that said boundary line runs along said fence which runs in an easterly direction from the Shellsford public road to its eastern extremity at a fence post, and it is also ordered, adjudged and decreed by the Court that there now exists a public road of a width of 12 feet along the south side parallel and adjoining said fence from said Shellsford road to the eastern extremity of said fence and beyond to the mountain. Complainants will be permitted to erect and maintain gates across said road at the points where Complainants ’ fences now cross said road.
“Complainants will be perpetually enjoined from interfering with Defendant’s free use of all of said Public road, and Defendants will be perpetually enjoined from interfering with Complainants’ erection and maintenance and use of said gates and the costs are adjudged one-half against Complainants and one-half against Defendants.”
Both the complainants and the defendants excepted to certain parts of the decree and have perfected appeals to this Court and assigned errors.
Complainants’ assignments of error insist that the Chancellor erred in holding that the road in question between the lands of the parties was dedicated and was accepted and used by the public for more than twenty years and is now a public road.
*253Defendants’ assignments of error insist that the Chancellor erred in holding that the boundary line between the lands of the parties was the fence involved which had been agreed upon as the boundary line and in permitting complainants to erect gates across the road and enjoining defendants from interfering with such gates and not holding that complainants were estopped to deny that the line was as contended by defendants and in not establishing this line as the true line.
In this cause the Chancellor had the parties and the witnesses before him in open Court and heard them testify and explain the descriptions in the deeds and heard their explanation of the surveyors plats exhibited. This testimony is before this Court in narrative form. The cause must be determined principally upon the facts as found from the testimony and exhibits. Under Sec. 10622 of the Code there is a presumption that the facts were correctly found by the Chancellor unless the evidence preponderates against such findings. We cannot say that in this case the evidence does preponderate against the finding of facts and decree of the Chancellor.
The record discloses that the parties had a full and fair hearing of their contentions before the Chancellor and that the decree reaches the merits of the controversy.
We fully concur with facts as found by the Chancellor.
The assignments of error filed by both complainants and defendants are overruled and the decree of the Chancery Court in all respects affirmed.
The costs will be paid one-half by the complainants and one-half by the defendants.
Hickerson, J., and Kizer, Special Judge, concur. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/1594959/ | 954 So. 2d 1145 (2005)
RONNIE KARL MIMS
v.
STATE
No. CR-04-1865.
Court of Criminal Appeals of Alabama.
November 18, 2005.
Decision without opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594946/ | 172 Mich. App. 519 (1988)
432 N.W.2d 311
MESSECAR
v.
CITY OF GARDEN CITY
Docket No. 96985.
Michigan Court of Appeals.
Decided July 21, 1988.
Bloom, Prahler & Kavanaugh (by James M. Prahler), for plaintiff.
Cummings, McClorey, Davis & Acho, P.C. (by Timothy Young), for defendant.
Before: DANHOF, C.J., and MAHER and C.W. SIMON, JR.,[*] JJ.
PER CURIAM.
Defendant, Garden City, appeals as of right from a jury verdict and judgment which awarded plaintiff, Albert Messecar, damages for injuries sustained by Clayton Messecar as a result *521 of a fall on a sidewalk in Garden City. On appeal, defendant contends that plaintiff's claims are barred by governmental immunity, the trial court abused its discretion in allowing plaintiff to amend his complaint to allege intentional nuisance, and plaintiff did not properly plead and prove his intentional nuisance claim. We affirm.
On August 25, 1982, eighty-three-year-old Clayton Messecar was walking along Henry Ruff Road in Garden City. After crossing Dawson Street, he walked about eight to ten feet on a path before reaching the sidewalk. Defendant owned the berm between Dawson Street and the sidewalk. When the sidewalk was installed in 1958, it was level with the berm. The path eroded, leaving a six- to eight-inch rise between it and the sidewalk.
Clayton Messecar lost his balance while stepping up onto the sidewalk from the path. He fell on his forehead. The fall produced a subdural hematoma (blood clot on the brain). The hematoma caused Clayton Messecar's death.
Plaintiff filed a negligence complaint against defendant. Defendant's motion for summary disposition based upon governmental immunity was denied. Plaintiff was allowed to amend his complaint to allege intentional nuisance. The jury returned a verdict in favor of plaintiff on the negligence count, but found that the conditions about which he complained did not constitute an intentional nuisance.
We first consider whether plaintiff's claims are barred by governmental immunity. The defective highway exception to governmental immunity exists where a governmental agency's failure to maintain a highway under its jurisdiction in reasonable repair causes bodily injury or property damage. MCL 691.1402; MSA 3.996(102). This exception applies to municipal corporations such as *522 defendant. MCL 691.1401(a) and (d); MSA 3.996(101)(a) and (d). The term "highway" includes sidewalks. MCL 691.1401(e); MSA 3.996(101)(e).
Under MCL 691.1402; MSA 3.996(102), municipalities are liable for the defective construction or maintenance of public highways, roads, and streets open for public travel, including bridges, sidewalks, crosswalks, and culverts on the highway. Davis v Chrysler Corp, 151 Mich. App. 463, 469; 391 NW2d 376 (1986), lv den 428 Mich. 869 (1987). The defective highway exception extends to berms. Michonski v Detroit, 162 Mich. App. 485, 494-495; 413 NW2d 438 (1987). Defendant is liable for the defective construction and maintenance of the sidewalk and berm that produced the drop-off where Clayton Messecar fell.
Defendant claims that plaintiff failed to plead facts in avoidance of governmental immunity because he did not allege a defect in the sidewalk itself. A plaintiff must plead facts in his or her complaint in avoidance of immunity. Hoffman v Genesee Co, 157 Mich. App. 1, 6; 403 NW2d 485 (1987), lv den 428 Mich. 902 (1987). In his complaint, plaintiff alleged that the sidewalk was defective and that the approach to the sidewalk from the curb or edge of the street was negligently constructed in such a way as to be subject to erosion or washout, constituting a hazard to travel. Plaintiff pled sufficient facts in avoidance of immunity.
Defendant's next contention is that the trial court abused its discretion in allowing plaintiff to amend his complaint to allege intentional nuisance. Defendant further contends that plaintiff did not properly plead and prove his intentional nuisance claim. Our Supreme Court recently announced that there is no intentional nuisance *523 exception to governmental immunity. Hadfield v Oakland Co Drain Comm'r, 430 Mich. 139, 172; 422 NW2d 205 (1988). We decline to further discuss Hadfield or defendant's arguments about plaintiff's intentional nuisance claim because the jury found in defendant's favor on that claim. Any error would be harmless and not constitute grounds for reversal. MCR 2.613(A).
Affirmed.
NOTES
[*] Circuit judge, sitting on the Court of Appeals by assignment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1594966/ | 426 F. Supp. 812 (1976)
UNITED STATES of America
v.
SAKS & COMPANY et al., Defendants.
No. 74 Cr. 940 (HFW).
United States District Court, S. D. New York.
December 14, 1976.
As Amended December 20, 1976.
*813 Antitrust Division, Dept. of Justice, New York City, by Bernard Wehrmann, Melvin Lublinski, Edward F. Corcoran, New York City, of counsel, for the Antitrust Division.
Federal Trade Commission, New York City, by Robert J. Lewis, Gen. Counsel, Gerald P. Norton, Deputy Gen. Counsel, Gerald Harwood, Asst. Gen. Counsel, Washington, D.C., Richard A. Givens, Regional Director, Kew Garden Hills, N.Y., for the Federal Trade Commission.
Wormser, Kiely, Alessandroni & McCann, New York City, for Bergdorf Goodman, Inc.
Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for defendant Leonard Hankin.
Dewey, Ballantine, Bushby, Palmer & Wood, New York City, for Elizabeth Arden, Inc.
Gould & Wilkie, New York City, for Lord & Taylor and Peter Torrey.
Arnold & Porter, Washington, D.C., for Bloomingdales.
Donovan, Leisure, Newton & Irvine, New York City, for defendant Genesco, Inc.
Solinger & Gordon, New York City, for defendant Saks & Co.
OPINION
WERKER, District Judge.
With leave of the court, each of corporate and individual defendants in this criminal antitrust action pleaded nolo contendere and, thereafter, was sentenced. Now, the Federal Trade Commission (FTC) has applied for an order permitting it to inspect and copy all of the documents produced "pursuant to subpoenas issued in connection with the grand jury's investigation which resulted in the indictment in this case." The FTC contends that it needs these documents *814 as part of an ongoing, nationwide investigation of practices in the women's clothing industry. Several of the defendants and other individuals and corporations which were not parties to either this action or related civil actions ("third parties") have raised objections to the FTC application.
The grand jury documents which the FTC seeks were impounded at the direction of this court on February 25, 1976, but counsel for the plaintiff class action representatives and the defendants in several companion treble damage actions[1] were permitted to inspect and copy the documents with certain named exceptions.[2] Under the terms of the court's February 25, 1976 order, the FTC cannot gain access without leave of the court to the impounded grand jury documents which are now held by the Antitrust Division of the Department of Justice.
The indictment in this action charged that the corporate defendants, retailers of women's clothing in the New York metropolitan area, and the individual defendants, officers of the corporate defendants, combined and conspired with other unnamed co-conspirators to unreasonably restrain trade in violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1970). In essence, it was alleged that the defendants and others had conspired to fix the prices of women's clothing. The current FTC investigation seeks to determine whether "various manufacturers, distributors and retailers of women's apparel and other persons . . may be engaged in unfair methods of competition and unfair acts or practices which may be in violation of Section 5 of the Federal Trade Commission Act, [as amended, 15 U.S.C. § 45 (1970),] including but not limited to resale price maintenance and conspiracy to cause boycotts in connection with the sale and marketing of such products in the United States." The FTC maintains that the corporate defendants in the instant action are not included among the eighty manufacturers, distributors and retailers presently under investigation.
An applicant must generally demonstrate, with particularity, its need for subpoenaed grand jury documents in order to overcome the secrecy requirements imposed by Rule 6(e) of the Federal Rules of Criminal Procedure. United States v. Procter & Gamble Co., 356 U.S. 677, 48 S. Ct. 983, 2 L. Ed. 2d 1077 (1958). However, Rule 6(e) is not intended to insulate from all future discovery documents which were presented to the grand jury. As Judge Lumbard, formerly the Chief Judge for this circuit, observed in United States v. Interstate Dress Carriers, Inc., 280 F.2d 52, 54 (2d Cir. 1960):
". . . [I]t is not the purpose of the Rule to foreclose from all future revelation to proper authorities the same information or documents which were presented to the grand jury. Thus, when testimony or data is sought for its own sake for its intrinsic value in the furtherance of a lawful investigation rather than to learn what took place before the grand jury, it is not a valid defense to disclosure that the same information was revealed to a grand jury or that the same documents had been, or were presently being, examined by a grand jury."
It is evident from the representations of the FTC that it is pursuing an investigation well within its statutory authority. See Federal Trade Commission v. Cement Institute, 333 U.S. 683, 68 S. Ct. 793, 92 L. Ed. 1010 (1948). Similarly, since the corporate defendants in the instant action are not included among the many corporations *815 presently under investigation by the FTC it is apparent that the FTC has not made its request merely to learn what took place before the grand jury. Indeed, in the absence of a request to inspect the minutes of the grand jury, the FTC will not be able to determine which documents the grand jury considered significant. I conclude, therefore, that the FTC application is made pursuant to an independent lawful investigation and that it may be granted.
Entry of the requested order will not impede any activities of the grand jury as the defendants have already pled and been sentenced. Moreover, since the FTC can inspect and copy the requested documents in any event under section 9 of the Federal Trade Commission Act, 15 U.S.C. § 49 (1970), it is in the public interest to enter this order so that the FTC can proceed with its investigation at a minimum of expense to the taxpayers.
Several of the third parties contend that discovery of the documents they submitted should be denied because the parties to the treble damage action were previously denied access to such documents. However, the present application is made by a government agency empowered to enforce federal laws and it presents additional public policy considerations not raised by prior discovery requests. Consequently, the court will not deny access to the documents on this ground.
Some of the third parties also object to the present application because they have not been advised that they are presently under investigation by the FTC. Under section 9 of the Federal Trade Commission Act, the FTC
"shall at all reasonable times have access to, for the purpose of examination, and the right to copy any documentary evidence of any corporation being investigated or proceeded against; and the Commission shall have power to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation."
The third parties apparently believe that the power to compel the production of "such documentary evidence" must be read in tandem with the prior reference to "documentary evidence of any corporation being investigated or proceeded against." However, in view of the legislative history of the Federal Trade Commission Act, it has been held that the statute grants the FTC two entirely distinguishable powers. The second of these powers is contained in the phrase following the semicolon in the statutory excerpt above and it enables the FTC to subpoena documentary evidence relating to any matter under investigation without first demonstrating that the owner of the document is under investigation. Federal Trade Commission v. Tuttle, 244 F.2d 605, 615 (2d Cir.), cert. denied, 354 U.S. 925, 77 S. Ct. 1379, 1 L. Ed. 2d 1436 (1957). By entering this order, therefore, the court is not enabling the FTC to obtain documents it could not otherwise require the third parties to produce.
Two modifications of the proposed FTC order, requested by firms responding to the motion papers, seem appropriate and have been made. First, the court will require the FTC to inform each person or corporation that submitted documents to the grand jury of any documents copied by the FTC as part of its present inspection. Second, the FTC will be required to give any person or corporation that submitted documents to the grand jury and the defendants ten days notice and an opportunity to object before such documents are made public.
As modified, the order will be entered.
SO ORDERED.
NOTES
[1] These actions are Siskind v. Goodman, 74 Civ. 4413 (HFW); Dennis v. Saks & Co., 74 Civ. 4419 (HFW); Walcavage v. Saks & Co., 74 Civ. 4491 (HFW); Fleischman v. Genesco, Inc., 74 Civ. 4502 (HFW); Levanne v. Saks & Co., 75 Civ. 180 (HFW); Price v. Goodman, 75 Civ. 268 (HFW).
[2] The February 24, 1976 order denied access to documents submitted to the grand jury by John Merrick, Lord & Taylor and Bloomingdales. Subsequent orders denied access to documents submitted by Elizabeth Arden, Inc., Henri Bendel, Inc., Geraldine Stutz, John Boland, William Fine and B. Altman, Inc. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595048/ | 28 So. 3d 1105 (2009)
STATE of Louisiana
v.
Gerald GREEN.
No. 09-KA-309.
Court of Appeal of Louisiana, Fifth Circuit.
November 24, 2009.
*1106 Paul D. Connick, Jr., District Attorney, Terry M. Boudreaux, Juliet Clark, Assistant District Attorneys, Gretna, LA, for Plaintiff/Appellee, The State of Louisiana.
Rudy W. Gorrell, Attorney at Law, New Orleans, LA, for Defendant/Appellant, Gerald Green.
Panel composed of Judges MARION F. EDWARDS, SUSAN M. CHEHARDY, and MARC E. JOHNSON
SUSAN M. CHEHARDY, Judge.
Gerald Green appeals the trial court's order that he pay restitution to an insurance company for his theft from his former employer. We affirm the sentence in part, vacate it in part, and remand for resentencing.
On April 8, 2008, the Jefferson Parish District Attorney filed a bill of information charging Gerald Green with violation of La. R.S. 14:67 by theft of $25,000 in United States currency from Fitness Expo between December 1, 2006 and May 15, 2007.[1] Defendant pleaded not guilty at arraignment.
*1107 On June 5, 2008 Defendant withdrew his not guilty plea, waived his rights, and entered a plea of guilty. The State advised the court that the parties were admitting the theft was over $500.00, the theft charge was valued at approximately $25,000, and defense counsel had asked for restitution to be established. The prosecutor stated he would have to check with the victim to determine the exact amount of restitution.
In beginning the plea colloquy, the trial court stated to Defendant, "I understand, sir, you wish to plead guilty to theft in excess of $25,000." Defendant replied, "Yes, sir." The court advised Defendant of the sentencing range for the offense, and of the rights he would be waiving by his guilty plea.
The court then told Defendant his sentence would be two years in the Department of Corrections, suspended, and five years of active probation. In addition, the court informed Defendant, "You will also be required to make restitution roughly in the amount of $25,000 and we will have a restitution hearing for you, but if you make restitution and two years have passed I will terminate your probation after two years." Defendant responded, "Yes, sir."
After inquiry into Defendant's understanding of other rights affected by the plea, the court found a factual basis for the plea and accepted the plea as having been "knowingly, intelligently, freely, and voluntarily made."
Defendant waived all delays and was sentenced to two years in the Department of Corrections, suspended, and five years of active probation. The court directed Defendant to comply with the conditions of probation as outlined on the Conditions of ProbationFelony form Defendant had signed, "which will include but not be limited to a fine, various fees, and court costs." The court set a restitution hearing for a subsequent date.
The "Conditions of ProbationFelony" form states in pertinent part, "It is the order of the court that you shall comply with the following conditions of probation:... 8. Make restitution to the aggrieved party for damage or loss, if any, caused by your offense(s) in an amount determined by the court, as follows: 7/24/08."[2]
At the restitution hearing, Rod Rice, Sr. of Fitness Expo, Inc. testified he contacted the Jefferson Parish Sheriffs Office to report a theft by one of his employees, Gerald Green. Rice testified that his insurer, Zurich American Insurance Company, compensated him for the theft in two payments, one for $27,935.00 and the other for $6,304.51, totaling $34,239.41. He was not compensated for his deductible of $1,000.00, however. The prosecutor asked, "So, your only loss at this time is $1,000.00 attributed to the defendant?" and Rice responded, *1108 "That we know of, yes, sir." Rice acknowledged he had been paid in full by Zurich "on everything that we've filed with them...."
Rice testified further he assigned all Fitness Expo's rights to Zurich American Insurance Company in an "Amended Release and Assignment" agreement signed on January 5, 2009.
The State submitted State Exhibit 1, copies of two checks issued to Fitness Expo by Zurich American Insurance Company, in the amounts of $27,935.00 and $6,304.51, identified by Rice; State's Exhibit 2, the Amended Release and Assignment, signed by Rice and identified by him at the hearing; and State's Exhibit 3, a copy of the affidavit and arrest warrant, by stipulation with defense counsel. The exhibits were admitted and defense counsel stated, "No objections, Your Honor, and also to the stipulation we agreed to."[3]
The court ordered Defendant to pay Zurich Insurance Company $26,935.00 and Fitness Expo $1,000.00. The defense objected on the ground that Zurich Insurance Company was not the victim and had not made a claim. The judge overruled the objection by advising defense counsel to "take a writ," stating, "[W]e have the release in here. The release subrogates Zurich ... for the victim."
Defendant takes this timely appeal.
ASSIGNMENT OF ERROR NUMBER ONE
On appeal Defendant contends the district court erred in ordering him to pay restitution to Zurich American Insurance Company because the insurance company was not the actual victim of the theft and it did not formally request reimbursement in a separate subrogation action.
Prior to reaching the merits, we address an issue raised by the State. The State asserts the record is insufficient to determine whether the trial court erred, because Defendant failed to designate the guilty plea transcript of June 5, 2008, as part of the appellate record. (Defendant requested that only the transcript of the January 8, 2009 restitution hearing be included in the record on appeal.) The State contends Defendant has failed to demonstrate he is entitled to relief.
After the record was lodged, however, on our own motion this Court ordered the record supplemented with the June 5, 2008 sentencing transcript. Because we ordered the record supplemented and the transcript of the sentencing is now before us for review, the State's argument does not apply.
As to the merits, Defendant asserts that the trial court erred in ordering him to pay restitution to the insurance company, and in ordering him to pay the victim a $1,000.00 out-of-pocket deductible when the victim had already been paid an amount greater than the amount stated in the bill of information. Defendant argues he should not have to pay Fitness Expo the $1,000 deductible because it would be "double dipping" by the victim, which Defendant *1109 says "appears to have reported to their insurance company more than the actual amount of theft."
The State contends that the category of victims a defendant may be ordered to compensate as a term of his plea agreement was broadened by a 2007 amendment to La. C. Cr. P. art. 883.2, so that the trial court did not err in ordering Defendant to pay Zurich Insurance Company $26,935.00.
The State further argues the trial court did not err in ordering Defendant to pay Fitness Expo its $1,000 deductible. The State asserts the total amount paid by the insurance company excluded the deductible, so that the $1,000 deductible was an unreimbursed pecuniary loss sustained by Fitness Expo.
"When the court places a defendant on probation ... it may impose any specific conditions reasonably related to his rehabilitation, including ... reasonable reparation or restitution to the aggrieved party for damage or loss caused by his offense in an amount to be determined by the court." La. C. Cr. P. art. 895(A)(7).
When a court places the defendant on probation, it shall, as a condition of probation, order the payment of restitution in cases where the victim or his family has suffered any direct loss of actual cash, any monetary loss pursuant to damage to or loss of property, or medical expense. The court shall order restitution in a reasonable sum not to exceed the actual pecuniary loss to the victim in an amount certain.
La. C. Cr. P. art. 895.1(A)(1).
La. C. Cr. P. art. 883.2, as amended by Acts 2007, No. 22, § 1, states:
A. In all cases in which the court finds an actual pecuniary loss to a victim, or in any case where the court finds that costs have been incurred by the victim in connection with a criminal prosecution, the trial court shall order the defendant to provide restitution to the victim as a part of any sentence that the court shall impose.
B. Additionally, if the defendant agrees as a term of a plea agreement, the court shall order the defendant to provide restitution to other victims of the defendant's criminal conduct, although those persons are not the victim of the criminal charge to which the defendant pleads. Such restitution to other persons may be ordered pursuant to Article 895 or 895.1 or any other provision of law permitting or requiring restitution to victims. [Emphasis added].[4]
Pursuant to the 2007 amendments to La. C. Cr. P. art. 883.2, therefore, a defendant can agree to provide restitution to "other victims," as part of a plea agreement, although the "other victims" are not part of the criminal charge to which the defendant pleaded guilty.
The issue of restitution to other victims has not been presented to this Court since the 2007 amendments to La. C. Cr. P. art. 883.2 were enacted.[5] Other appellate courts have addressed it, however.
*1110 In State v. Perez, 06-436, pp. 2-3 (La. App. 3 Cir. 9/27/06), 939 So. 2d 733, 735 (hereafter "Perez I"), the defendant pleaded guilty pursuant to State v. Crosby,[6] reserving his right to appeal the issue of payment of restitution to the victims' insurance companies if that condition were made part of his sentence. On appeal the court noticed that the defendant had agreed to the terms of a plea agreement in which the trial court imposed restitution to victims of offenses to which the defendant had not pleaded guilty. The court of appeal vacated the condition as a patent error.
Because the specific terms of the plea agreement were not clear from the record, the court remanded the case for an evidentiary hearing to determine the specific elements of the plea agreement and whether the entire plea agreement was invalidated by the vacation of the restitution to victims of the offenses to which the defendant did not plead guilty. Perez I, 06-436 at 3-4, 939 So.2d at 736. The court pretermitted the defendant's claim that the trial court erred in ordering him to pay restitution to the victims' insurance companies as part of his plea agreement. Perez I, 06-436 at 4, 939 So.2d at 736.
On appeal following the remand, the defendant claimed the trial court erred in ordering him to pay restitution to the victims' insurers for damages paid to the victim. State v. Perez, 07-229, p. 1 (La. App. 3 Cir. 10/3/07), 966 So. 2d 813, 813-14 (hereafter "Perez II"). The court of appeal noted that the trial court failed to determine whether the entire plea was invalidated. The appellate court pointed out, however, that during the hearing the State indicated it intended that the defendant make full restitution in all cases in which he was the defendant. Perez II, 07-229 at 2, 966 So.2d at 815. In addition, the defendant acknowledged he agreed to pay full restitution to all individuals in the cases that were dismissed as part of the plea agreement. Perez II, 07-229 at 2-3, 966 So.2d at 815.
The appellate court found that, while the plea agreement with the State was predicated on the defendant's restitution to all victims, requiring restitution to the victims of the dismissed cases was patently erroneous. Therefore, the appellate court again remanded the matter for the trial court to determine whether the invalidation of the restitution order invalidated the plea agreement. Perez II, 07-229 at 3, 966 So.2d at 815. In addition, the appellate court instructed the trial court not to order restitution to the victim's insurer if it imposed restitution as a condition of probation. Perez II, 07-229 at 5, 966 So.2d at 816.
In State v. Smith, 08-1030 (La.App. 3 Cir. 3/4/09), 6 So. 3d 309, the defendant pleaded guilty and agreed to make restitution to one of the victims. The trial court ordered the State to verify the amount of restitution owed to the victim and to ensure that defense counsel was in agreement with the amount. Smith, 08-1030 at 1, 6 So.3d at 310. At sentencing, the defendant was ordered to make restitution of $1,250.00 to the victim and $781.56 to the victim's insurance company for the amount paid to the victim. Smith, 08-1030 at 1, 6 So.3d at 311.[7] The defendant filed a motion to reconsider sentence, which was denied without reasons. Smith, 08-1030 at 2, 6 So.3d at 311.
*1111 On appeal, the defendant claimed the trial court erred in ordering him to pay restitution to the insurance company for the amount it paid to the insured victim. Smith, 08-1030 at 6, 6 So.3d at 313. The appellate court found that no evidence or caselaw was provided to show whether an insurance company is a victim and whether an insurance company can or should be considered a victim of criminal conduct. Smith, 08-1030 at 8, 6 So.3d at 315. The appellate court affirmed the defendant's sentences for theft over $500.00, but vacated the probationary condition ordering restitution to the insurance company as a special condition of probation. Smith, 08-1030 at 8, 6 So.3d at 315.
In the present case, the defendant agreed to pay restitution of approximately $25,000 to the "aggrieved party" for damage or loss to be determined by the court on a later date. In order for the trial court to order Defendant to provide restitution to "other victims" of the defendant's criminal conduct pursuant to La. C. Cr. P. art. 883.2(B), Defendant would have had to agree to the term as part of his plea agreement. Nothing in the transcript of the plea colloquy, the documents signed in connection therewith, or the commitment, indicates such an agreement.
Accordingly, we conclude the trial court erred in ordering Defendant to pay restitution to the insurance company. The condition requiring payment to the insurance company must be vacated because the record does not contain a specific agreement by Defendant as a condition of his plea agreement to pay restitution to "other victims of the defendant's criminal conduct, although those persons are not the victim of the criminal charge to which the defendant" has pleaded. La. C. Cr. P. art. 883.2(B).
Regarding Defendant's other contention, we find no merit to the claim that restitution to Fitness Expo for its $1,000 deductible would be "double dipping," because Rice testified Fitness Expo was not compensated by Zurich American Insurance Company for its $1,000 deductible. The $1,000.00 was "an actual pecuniary loss" to the victim and restitution for that amount is appropriate under La. C. Cr. P. art. 883.2(A).
ERROR PATENT DISCUSSION
Pursuant to our standard procedure, we reviewed the record for patent errors, according to La. C. Cr. P. art. 920; State v. Oliveaux, 312 So. 2d 337 (La.1975); State v. Weiland, 556 So. 2d 175 (La.App. 5 Cir.1990). Our review disclosed one patent error that requires action. Specifically, the sentence is indeterminate.
La. C. Cr. P. art. 879 states, "If a defendant who has been convicted of an offense is sentenced to imprisonment, the court shall impose a determinate sentence." La. C. Cr. P. art. 895.1 provides, "The restitution payment shall be made, in discretion of the court, either in a lump sum or in monthly installments based on the earning capacity and assets of the defendant." This Court has found a trial court's failure to set a determinate payment schedule for restitution payments is patent error requiring that the sentence be vacated and the case remanded for resentencing. State v. Echeverria, 03-898 (La.App. 5 Cir. 11/25/03), 862 So. 2d 163; State v. Berkeley, 00-1900 (La.App. 5 Cir. 5/30/01), 788 So. 2d 647, writ denied, 01-1659 (La.4/26/02), 814 So. 2d 549. Accordingly, we remand the case for resentencing relative to La. C. Cr. P. arts. 879 and 895.1.
DECREE
For these reasons, we affirm the sentence as to the award of restitution to Fitness Expo in the amount of $1,000.00. We vacate the sentence in all other respects *1112 and remand for resentencing as directed in the Error Patent Discussion, above.
SENTENCE AFFIRMED IN PART AND VACATED IN PART; REMANDED.
NOTES
[1] La. R.S. 14:67 provides, in pertinent part:
A. Theft is the misappropriation or taking of anything of value which belongs to another, either without the consent of the other to the misappropriation or taking, or by means of fraudulent conduct, practices, or representations. An intent to deprive the other permanently of whatever may be the subject of the misappropriation or taking is essential.
B. (1) Whoever commits the crime of theft when the misappropriation or taking amounts to a value of five hundred dollars or more shall be imprisoned, with or without hard labor, for not more than ten years, or may be fined not more than three thousand dollars, or both.
* * *
C. When there has been a misappropriation or taking by a number of distinct acts of the offender, the aggregate of the amount of the misappropriations or taking shall determine the grade of the offense.
[2] The restitution hearing originally was set for July 24, 2008 ("7/24/08"), but was continued several times, and finally was held on January 8, 2009.
[3] We note a discrepancy between the payor listed on the checks and on the release form. The checks (Exhibit 1) were issued by Zurich American Insurance Company, while the Amended Release and Assignment (Exhibit 2) states that "Fidelity and Deposit Company of Maryland," as issuer of a Commercial Crime Policy for loss caused by employee theft, made payments to the Insured (Fitness Expo) for losses in the amounts of $28,935 and $6,304,51, subject to a $1,000 deductible, applied on the initial covered loss of $28,935.00. There is nothing in either the release document or the record to establish any connection between Fidelity and Zurich. As noted, however, the defense did not object to admission of State's Exhibit 2 and raised no issue regarding the name discrepancy.
[4] The 2007 amendment added Paragraph B to Article 883.2.
[5] Prior to the 2007 amendment, this Court found that the primary focus of restitution pursuant to La. C. Cr. P. art. 895.1 is restitution for "pecuniary losses caused by the criminal activity and not on providing criminal sanctions to enforce collection of civil damages." State v. Devare, 03-610, p. 5 (La.App. 5 Cir. 10/28/03), 860 So. 2d 191, 194, citing State v. Diaz, 615 So. 2d 1336, 1337 (La.1993). We also found that case law and La. C. Cr. P. art. 895.1 both indicated that the trial court could only order restitution to compensate the victim, not the victim's insurance company. State v. Devare, 03-610 at 6, 860 So.2d at 195.
[6] State v. Crosby, 338 So. 2d 584 (La.1976).
[7] The defendant was also ordered to make restitution to six victims totaling $4,925.00 upon his release. State v. Smith, 08-1030 at 1-2, 6 So.3d at 311. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595047/ | 426 F. Supp. 1272 (1976)
Ronald J. AIELLO, Plaintiff,
v.
The CITY OF WILMINGTON, DELAWARE, et al., Defendants.
Civ. A. No. 74-216.
United States District Court, D. Delaware.
December 28, 1976.
*1273 *1274 *1275 John S. Grady and Sheldon N. Sandler of Bader, Dorsey & Kreshtool, Wilmington, Del., for plaintiff.
James W. Semple of Flanzer & Isaacs, Perry F. Goldlust, Asst. City Sol., Wilmington, Del., for defendants.
Roger P. Sanders of Prickett, Ward, Burt & Sanders, Wilmington, Del., for defendant Malloy.
OPINION
MURRAY M. SCHWARTZ, District Judge.
Ronald J. Aiello ("Aiello") is a former fireman for the City of Wilmington. He has brought this action on behalf of himself and "all other persons similarly situated" against the City of Wilmington, Delaware, and Thomas C. Maloney in his official capacity as mayor; the City's Department of Public Safety and Norman Levine, individually and as Commissioner of the Department of Public Safety; as well as against the Wilmington Bureau of Fire and several of its officers in either their individual or official capacities or both. The action seeks declaratory and equitable relief in addition to damages for the alleged deprivation through the Bureau of Fire's disciplinary rules, regulations, and procedures of rights secured by the First, Ninth and Fourteenth Amendments and 42 U.S.C. § 1983. Aiello also asserts a cause of action for himself and the purported class for breach of a contract between the firefighters union and the City, and for violation of the Delaware Minimum Wage Law, 19 Del.C. § 901 et seq.[1] Jurisdiction is asserted pursuant to 28 U.S.C. §§ 1331, 1337, 1343, and the principle of pendent jurisdiction.
Presently before the Court are three motions: a Motion to Certify Class by plaintiff Aiello; a Motion for Partial Summary Judgment, also by the plaintiff; and a Motion for Summary Judgment by defendants. It is first necessary to describe the factual context in which this case arises prior to a detailed consideration of the plaintiff's claims and the present motions.
Facts
Plaintiff Aiello was employed as a fireman for the City of Wilmington from June 3, 1966, until November 7, 1975, when he voluntarily took retirement. His career as a firefighter was essentially undistinguished until the night of January 30, 1973, when the catalytic events for this lawsuit transpired. Aiello spent that evening in Wilmington traveling from bar to bar, consuming alcoholic beverages in quantities sufficient to induce intoxication, although the level and duration of his intoxication is unclear. His memory of his activities that evening is hazy, but he does not dispute that sometime after midnight he gained entrance to the Record Museum, a retail establishment located on Wilmington's Market Street, by breaking a glass panel in its front door. He was subsequently found lying face down on the floor near a counter by two policemen sent to investigate an alarm which he had triggered. Aiello recalls that as he was taken into custody he stated he was a city fireman and asked that *1276 he not be arrested. Aiello First Deposition, Docket No. 33 at 12.[2]
Following his arrest, Aiello was taken to the "lock up" in City Hall. The ranking fire bureau official then on duty, Assistant Fire Chief Francis H. DiMichele ("DiMichele") (named as a defendant in his official capacity) arrived shortly thereafter, having been notified that a fireman was in trouble. According to DiMichele, he "spoke to some of the police officers there" and ascertained the charge on which Aiello was being held. DiMichele Deposition, Docket No. 34 at 3. Having learned that the charge was burglary, DiMichele then confronted Aiello at least twice, seeking a statement concerning the incident. Although there are some minor disputes over the exact chronology and circumstances of the confrontations, it is clear that Aiello limited himself to a statement that "it was a physical and mental problem." First Aiello Deposition, Docket No. 33 at 6.[3] There is no dispute that DiMichele later returned and informed Aiello that he was forthwith suspended from the Bureau of Fire pursuant to sections 169.16 and 169.23 of its Rules and Regulations. They provide as follows:
"169. Under penalty of suspension, fine, overtime, reprimand, or dismissal, every member of the Bureau of Fire is ordered to perform all of the following Rules and Regulations:
* * * * * *
16. To refrain from conduct unbecoming a fireman and a gentleman whether on or off duty.
* * * * * *
23. Be governed by the customary rules of good behavior observed by law-abiding and self-respecting citizens. Regardless of the time or place, whether in uniform or not, members shall conduct themselves in a manner that will not bring discredit to themselves or to the Department."[4]
Also, there is no dispute that as part of the suspension Aiello's pay was withheld in accordance with Bureau of Fire Rule 206.[5]
It is at this point that the recollections and assertions of the parties begin to diverge. While Aiello concedes a lack of personal knowledge of the matter, he asserts that his suspension was ordered by John J. Malloy ("Malloy"), named in this suit as a defendant in his official capacity, and serving at the time of Aiello's arrest as Chief of the Bureau of Fire. This assertion is apparently based on Aiello's understanding of the requirements of the Bureau's "chain of command." First Aiello Deposition, Docket No. 33 at 20. While Malloy admits that he was contacted by DiMichele about the events unfolding with respect to Aiello, he characterizes the conversation as only informational in purpose. Malloy Deposition, Docket No. 35 at 16-17. Neither Malloy nor Norman Levine ("Levine"), Malloy's superior *1277 as Commissioner of Public Safety, countermanded the suspension the following day when afforded the opportunity to review the available information. Levine Deposition, Docket No. 64 at 50; Malloy Deposition, Docket No. 35 at 16; see Docket No. 29, Exhibits (Report from DiMichele to Malloy dated January 30th concerning Aiello's arrest and suspension).
Aiello by his own account was subsequently instructed in early February, 1973, by Bureau of Fire Chief Malloy to report to his fire station twice a day for the entirety of his suspensiona requirement then imposed on suspended firemen pursuant to regulation.[6] He further alleges that Chief Malloy warned him that outside employment was barred while on suspension, and that a subsequent request the following month (March, 1973) to James P. Blackburn ("Blackburn"), Malloy's successor as Fire Bureau Chief (named as a defendant in both his individual and official capacities), for relief from the ban on outside employment on the grounds that Aiello's financial position was becoming increasingly dire met with a negative response. Plaintiff's Answers to Defendants' First Set of Interrogatories, Docket No. 40 at 9. The second request, conveyed by Father Burke, the Department Chaplain, was assertedly followed by a third and personal request by Aiello for permission to undertake outside employment or apply for welfare. According to Aiello, this request was also rejected. Id. The defendants, for their part, do not deny that a Bureau of Fire rule required Aiello "to report to his assigned fire department twice each day until April 4, 1973, while he was under suspension." Answer to Amended Complaint, Docket No. 87, ¶ 11. However, they deny that he was ordered not to seek outside employment. Id. Commissioner Levine testified that if Aiello had requested permission not to report so that he could obtain supplemental employment, it would have been granted. Levine Deposition, Docket No. 64 at 48.[7]
The distress to Aiello caused by his unpaid suspension and its alleged accompanying strictures may have been exacerbated by the unusually long hiatus between his suspension and his formal hearing before a Bureau of Fire Trial Board. While Aiello was suspended on January 30, 1973, his Trial Board hearing did not take place until May 8, 1973. According to Commissioner Levine and other defendants, the Trial Board hearing was held in abeyance pending resolution of the state criminal charges arising out of the Record Museum break-in which were then pending against Aiello. Levine testified on his deposition that the hiatus was based on a desire to protect Aiello's constitutional rights and was predicated on an informal oral opinion obtained from the then-City Solicitor to the effect that the Trial Board hearing should be delayed until the criminal charges had been resolved. Levine Deposition, Docket No. 64 at 47.
Notification of resolution of the criminal charges came in a letter dated April 11, 1973, from a Delaware Deputy Attorney General to Richard Allen Paul, an Assistant Public Defender and Aiello's attorney in the criminal matter. The letter stated that the State would proceed no further against Aiello because he "was not responsible for his acts on January 28, 1973 [sic]." Docket No. 29, Exhibit. Aiello subsequently received two "Charge and Specification" forms dated April 25th, signed by Assistant Chief DiMichele, which alleged violations of Rules 169.16 and 169.23 respectively. The detailed specification paragraph of the 169.16 charge stated that Aiello's behavior reflected "on his creditability as an employee of the Department of Public Safety as required by the Rules and Regulations of the *1278 Bureau of Fire."[8] In a similar vein, the 169.23 charge noted, inter alia, that Aiello's "failure to observe rules of law-abiding citizens created distrust in performance of duty in the eyes of all members of the Department of Public Safety."[9] Both documents *1279 informed Aiello of the composition of the Trial Board which was to hear the charges and recited the date and location set for hearing. Amended Complaint, Docket No. 83, Exhibit A. See Plaintiff's Answers to Defendants' First Set of Interrogatories, Docket No. 40, # 16.[10] In addition, Aiello received a formal memorandum from Chief Blackburn regarding the "forthcoming Department Trial," which restated the Rules and Regulations alleged to have been violated and notified him of his right to be represented by legal counsel and to subpoena witnesses for his defense. Amended Complaint, Docket No. 83, Exhibit A.
There is no clear explanation in the record as to why the Trial Board hearing was delayed for nearly a month after the criminal charges were dropped, although the defendants' brief infers from Commissioner Levine's deposition testimony that it was "arranged so as to meet with the convenience of Aiello's counsel." Defendants' Brief, Docket No. 71 at vii, citing Levine Deposition, Docket No. 64 at 51. Aiello's criminal defense attorney, acted as his spokesman at the Trial Board hearing. The Bureau of Fire was represented by an attorney from the City Solicitor's office. The Trial Board consisted of Deputy Chief Francis X. Malloy, a defendant in his official capacity; and Assistant Chief Francis DiOrio and Captain F. Thomas Savage both named as defendants individually and in their official capacities. At the hearing, Aiello entered a plea of not guilty to the two charges and specifications read to him by the Board, but did not contest the allegation that he had been found inside the Record Museum without permission. He argued in defense that the acts had not been performed with any intention or effect of violating the "high standard" required of firemen and had not brought discredit upon Wilmington's fire department. As the nature of Aiello's defense indicates, and as his legal spokesman specifically conceded to the Trial Board, the "not guilty" plea might have better been stated as "guilty with explanation." Trial Board Hearing Transcript, Docket No. 53 at 11. In addition to basically uncontroverted testimony by police personnel and Assistant Chief DiMichele concerning the circumstances of Aiello's arrest and suspension, the Bureau of Fire's legal representative introduced as exhibits two contemporaneous newspaper reports of the incident as evidence that there had been some resultant discredit to the fire department. Id. at 49.[11] Aiello himself also testified. The main import of Aiello's own testimony was that personal problems stemming from family conflicts had placed him under heavy emotional stress, resulting in excessive drinking and culminating in the Record Museum incident. He also offered medical evidence to show that his current mental condition was not such that he could not competently perform his duties *1280 as a fireman. It was additionally noted that he was undergoing therapy on an ongoing basis to prevent any similar occurrence.
After retiring for deliberations, the Trial Board found Aiello guilty on both charges. As punishment, the Board imposed the following sanctions: (1) that he be given one thousand hours penalty time on each of the two charges for a total of two thousand penalty hours; (2) that his salary be forfeited from the date of the suspension, January 30th, through the date of the hearing, May 8th; and (3) that he be reinstated as of May 9th but placed on probationary status until all penalty hours had been expended, with the stipulation that the probation period would not in any event be less than two years from May 9, 1973. Finally, the Board warned that any further violation of the two rule provisions under which he has been charged during the probationary period would result in his dismissal. Id. at 85-87; see Amended Complaint, Docket No. 83, Exhibit B.
In accordance with the Bureau of Fire's procedures, Aiello was permitted to choose whether to take the penalty hours as an outright suspension or to work them off without pay in concert with his normal paid duty hours. The record is unclear concerning the exact sequence of intervening events, but Aiello ultimately signed a document committing himself to work the penalty hours without pay. Plaintiff's Answers to Defendants' First Set of Interrogatories, Docket No. 40, # 18. The document also recited that Aiello understood the consequences of his suspension without pay (which had just ended) including the resultant loss of time credited toward pension eligibility, loss of pay for holidays while suspended, and pro rata reduction in his clothing allowance and vacation days. It further provided that Aiello agreed by his signature to work the penalty hours "whenever and wherever ordered to do so by the Wilmington Bureau of Fire." Id., First Complaint, Docket No. 1, Exhibit B, page 3.
Aiello completed working a large portion of the penalty hours without pay prior to his retirement due to psychiatric disability in November, 1975. In the interim, on October 21, 1974, he filed the Complaint which initiated this lawsuit. That Complaint was succeeded by an extensively revised Amended Complaint filed with leave of the Court one year later on October 22, 1975. In it, seven causes of action are alleged:
Count I: That the "suspension procedure of defendants violates procedural due process in that plaintiff has been deprived of property and liberty without a pretermination hearing." Docket No. 83, ¶ 13.
Count II: "The Trial Board which considered the charges against plaintiff on May 8, 1973, and other Trial Boards of defendants are not impartial and therefore plaintiff and the members of his class have been denied a fair hearing in violation of the due process clause." Docket No. 83, ¶ 19.
Count III: "Rule 169.16 and Rule 169.23 are unconstitutional in that they constitute an invasion of privacy in violation of the First, Ninth, and Fourteenth Amendments and furthermore they are overly broad and vague in violation of the First and Fourteenth Amendments." Docket No. 83, ¶ 27.
Count IV: Bureau of Fire Rule 170.7, which bans gossiping about a member of the Department of Public Safety, and Rule 170.8 which prohibits criticizing an official action of a superior officer are unconstitutional in that they are vague and overbroad in violation of the First and Fourteenth Amendments." Docket No. 83, ¶ 31.[12]
*1281 Count V: The City is and has been in breach of its contractual agreement with the firefighters union of which the plaintiff and the members of the class are third party beneficiaries.
Count VI: This count, alleging violation of 29 U.S.C. § 206, has been conceded by the plaintiff. See p. 1275, n. 1, supra.
Count VII: "By its failure to pay plaintiff and the members of the class he represents for work required to be done by it, the defendant city has violated and is violating 19 Del.C. § 902 in that it has not and is not paying $1.60 per hour." Docket No. 83, ¶ 49.
These skeletal contentions will be fleshed out in considering the parties' motions below.
Motion to Certify Class
The parties have charted a meandering and sometimes perplexing course in the litigation thus far. Several pleadings have been followed by partial amendments or outright withdrawals.[13] Some further modifications of the pleadings are found in the briefs. This has clouded the case's procedural posture and impeded efforts to define the parties' relevant contentions. It is noted in this connection that two of the four briefs filed with the Court on the pending motions were submitted prior to the filing of the Amended Complaint. None of the briefs treat in detail the significance of Aiello's voluntary retirement from the Bureau of Fire, although its effect was explored subsequently by the Court at oral argument.
The only outstanding Motion to Certify Class was filed almost four months prior to the date the present Amended Complaint was filed. It has presumably been superceded by the class action allegation found in paragraph 4(a) of the Amended Complaint which is couched in variant terms and encompasses a broader scope:
"All firemen except the named defendants employed by the City of Wilmington who have been or will be or are subject to suspension without notice or an opportunity for a hearing and all firemen except the named defendants who have been or will be or are subject to disciplinary action pursuant to Rule 169.16 and 169.23 and Rule 170.7 and Rule 170.8 and all firemen except the named defendants who have been or are subject to a hearing before the Trial Board by defendants and by all firemen except the named defendants employed by the City of Wilmington who who have been or will be or are subject to work without compensation."
Plaintiff has given the Court the following description of the claims and jurisdictional bases upon which he seeks to represent the class:
"First, plaintiff's class urges that the suspension procedure is violative of procedural due process. Insofar as the claim rests upon 42 U.S.C. § 1983, and its jurisdictional counterpart, 28 U.S.C. § 1343, relief is sought against Messrs. Blackburn, Levine and Maloney in their official capacities only.
"Second, plaintiff's class urges that the Trial Board is inherently unfair and violates procedural due process. This claim rests on 28 U.S.C. § 1343 and 42 U.S.C. § 1983. Plaintiff's class is seeking: a) injunctive relief against Messrs. Blackburn, Levine, Maloney in their official capacities only; b) monetary relief against the City for all members who worked without pay or have been suspended as a result of a Trial Board hearing in an amount equivalent to the number of hours worked or suspended times the members' hourly rate of pay.
"Third, plaintiff claims that the class he seeks to represent has been deprived of its First, Ninth and Fourteenth Amendment rights by Rules 169.16 and 169.23. Rules 169.16 and 169.23 improperly *1282 infringe upon plaintiff's Civil Rights in violation of 42 U.S.C. § 1983. Plaintiff acknowledges that the City of Wilmington is not a person for purposes of 42 U.S.C. § 1983. Insofar as this claim is based upon § 1983, plaintiff is seeking injunctive relief against Messrs. Blackburn, Levine and Maloney in their official capacities only.
"Fourth, plaintiff's class attacks Rules 170.7 and 170.8 as violative of the First Amendment. Insofar as this claim is based upon 28 U.S.C. § 1343 and 42 U.S.C. § 1983, plaintiff's class is seeking injunctive relief against Messrs. Blackburn, Levine and Maloney in their official capacities only.
"If any member of the class has been penalized for violation of these regulations, or damaged by an illegal suspension said members of the class should receive incidental monetary relief subject, of course, to any available defenses. [Footnote omitted.]
"Fifth, plaintiff attacks the procedure whereby individuals are suspended or given an option to work without pay, as violative of the collective bargaining agreement, state, and federal law. Plaintiff's class alleges that this procedure is so unreasonable that it constitutes arbitrary and capricious conduct in violation of substantive due process. Insofar as this action is based upon 28 U.S.C. § 1343 and a denial of due process, plaintiff is seeking injunctive relief against Messrs. Maloney, Blackburn, and Levine in their official capacity only and compensatory relief against the City of Wilmington.
"Insofar as the action is based upon the collective bargaining agreement and state law, plaintiff's class is seeking compensatory damages against the City of Wilmington. Plaintiff is requesting that the Court take penddnt [sic] jurisdiction of the statutory and contract claims. [Footnote omitted.]
"The above summarizes all of the class claims and sets out the names of the defendants whom plaintiff alleges are liable." [Emphasis in original.] Plaintiff's Reply Brief and Answering Brief on Defendants' Motion for Summary Judgment, Docket No. 90 at 3-5.
The requirements for class action certification are found in Fed.R.Civ.P. 23(a):
"(a) Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if
(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class."
A decision on whether the specific criteria of Rule 23(a)(4) have been met may not rest on the Court's prospective view of the case's merits. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177, 94 S. Ct. 2140, 40 L. Ed. 2d 732 (1974); Scott v. University of Delaware, 68 F.R.D. 606, 609 (D.Del.1975). However, a court may consider whatever information exists in the record relating to the four threshold requisites for class certification.
1. Numerosity
Plaintiff concedes the Bureau of Fire has no more than approximately 250 members.[14] Only seven firemen including Aiello have been suspended without pay during the past five years. Three of the seven are no longer firemen.[15] Only four firemen including Aiello have been charged under Rule 169.16 during the past five years. Three other firemen, plus Aiello, have been charged with violation of Rule 169.23 over the same five year period. *1283 Charges under Rules 170.7 and 170.8 have been brought only once in the last five years against an individual fireman. As a counter to these insubstantial numbers, plaintiff points to the fact that over 100 firemen have appeared before the allegedly biased Trial Boards over the past five years and approximately 89 of those firemen have been either suspended or worked penalty hours.
Faced with these figures, I do not believe that plaintiff has met the numerosity requirement of Rule 23(a)(1). Even the largest of the numbers mentioned above would not necessarily render joinder or intervention impracticable. See, e. g., Al Barnett & Son, Inc. v. Outboard Marine Corp., 64 F.R.D. 43, 49 (D.Del.1974) (and cases cited therein). Moreover, as a practical matter, "the number of class members who would seek to join the suit if class certification were denied would be far fewer than the numbers alleged," id., perhaps as few as the handful of firemen suspended without pay or charged under the rules which Aiello challenges.
2. Common questions of law or fact
The constitutional propriety of various of the Bureau of Fire's regulations and procedures is placed in issue by the class as well as the individual claims contained within the Amended Complaint. As a consequence, there are common questions of law and fact.
3. Typicality
Substantial problems exist with respect to the third prerequisite of Rule 23(a): that Aiello's claims be typical of those of the class. Each fireman, and Aiello in particular, faces a different Trial Board, on different charges, and receives a variant penalty albeit under the same general rules and procedures. As a result, the idiosyncratic nature of each hearing makes every disciplinary action virtually unique a point further illustrated by the extreme facts of Aiello's case. Cf. Paton v. LaPrade, 524 F.2d 862, 875 (3d Cir. 1975).
A more serious typicality flaw arises out of a jurisdictional defect cognizable at this early stage in the proceedings. The Amended Complaint fails to allege the existence of the $10,000 jurisdictional amount in controversy for each member of the purported class. This allegation is necessary for the class to succeed in its effort to recover "compensatory damages against the City of Wilmington . . ." (Amended Complaint ¶ 50(g) at 13) because a "city" is not a person within the meaning of 42 U.S.C. § 1983 and therefore a damage award against it cannot be predicated upon a section 1983 cause of action. In this Circuit the Fourteenth Amendment presents a viable alternative base for an action arising out of the violation of constitutional rights, but jurisdiction for the action must be predicated upon 28 U.S.C. § 1331, the general federal question jurisdiction statute which requires an amount in controversy exceeding $10,000. This is in contrast to 28 U.S.C. § 1343, § 1983's companion jurisdictional statute, which requires no amount in controversy. Skehan v. Board of Trustees of Bloomsburg State College, 501 F.2d 31 (3d Cir. 1974), vacated on other grounds 421 U.S. 983, 95 S. Ct. 1986, 44 L. Ed. 2d 474 (1975); Samluk v. City of Wilmington, C.A. No. 75-139 (D.Del. March 11, 1976) (and cases cited therein). Moreover, the class members' claims may not be aggregated to make up the required amount, nor can they rely upon Aiello's individual $10,000 allegation to meet the $10,000 requirement of section 1331.[16]Zahn v. International Paper Co., 414 U.S. 291, 94 S. Ct. 505, 38 L. Ed. 2d 511 (1973); Rauch v. United Instruments, 405 F. Supp. 435, 438 (E.D.Pa.1975). Thus, only Aiello may properly assert a constitutionally-based claim for monetary damages against the City, while the class' ability to obtain damages depends upon the Court's willingness *1284 to consider, in its discretion, entirely separate claims based largely on claims asserted under state law. Conversely, while the class may seek to enjoin the operation of certain of the Bureau of Fire's rules and practices, Aiello, as a former fireman, may not be in a position to request or gain that type of specific relief, especially with regard to regulations under which he never was and now never can be charged.[17]
Given differing trial boards, charges and penalties accompanied by the jurisdictional problems inhering in Aiello's prospects for monetary relief from a defendant against whom the remainder of a class most likely could not recover, it is concluded that the typicality requirement of Rule 23(a) has not been satisfied.
4. Fair and Adequate Representation
A subtle antagonism exists between Aiello's interests and those of the class which he seeks to represent. For example, as a former fireman, he is insulated from the consequences of his attempt to label the "election" of penalty hours worked without pay or simple suspension as nothing more than a Hobson's choice. However, active firemen in whose behalf Aiello presumably seeks to act could well take a different view of the system and oppose abolition of what might be perceived as a desirable option. This possible divergence of interests is underscored by the realization that only a handful of penalties have even arguably, remotely approached the severity of those meted out to Aiello.
A representation problem such as the one presented has its roots in the larger question raised by Aiello's status as a former fireman attempting to represent a class composed largely of current members of the Bureau of Fire. This need not be a fatal defect in all cases and has been permitted in several suits based on race or sex discrimination. See, e. g., Wetzel v. Liberty Mutual Insurance Co., 508 F.2d 239, 247 (3d Cir. 1975); Dickerson v. U.S. Steel Corp., 64 F.R.D. 351, 355 (E.D.Pa.1974); Mack v. General Electric Co., 329 F. Supp. 72, 76 (E.D.Pa.1971). In Wetzel, the Third Circuit pointed out in the context of a Title VII suit that "[w]hether a party adequately represents a class depends on all the circumstances of the particular case [citation omitted]," noting that the fact that a person was no longer employed with the defendant company was only one of the circumstances to be considered on a Rule 23(a)(4) determination. Id. In Wetzel, neither the district court nor the Court of Appeals perceived any antagonism between the interests of the former and present female employees, all presumably victims of the same discrimination. The factual milieu in which this case arises, quite different than ones in which ongoing discriminatory practices based on broad categories of race or sex are alleged, creates a contrary perception which Aiello has been unable to dispel.[18]
Finally, one further consideration militates strongly against certification of a class in this action. If Aiello is successful on his individual claims, that success can be expected to redound collaterally to the benefit of the purported class. Such an eventuality would render superfluous a class action seeking primarily injunctive and declaratory relief. If, on the other hand, Aiello is not successful, it may be assumed either that Aiello's claims were not representative of the class in the first instance or that the class could not have prevailed in any event. See duPont v. Woodlawn Trustees, Inc., 64 F.R.D. 16, 22 (D.Del.1974); Ihrke v. Northern States Power Co., 459 F.2d 566, 572 (8th Cir. 1972); District of Columbia Podiatry Society v. District of *1285 Columbia, 65 F.R.D. 113, 144 (D.D.C.1974); cf. Martinez v. Richardson, 472 F.2d 1121, 1126 (10th Cir. 1973). But see Fujishima v. Board of Education, 460 F.2d 1355, 1360 (7th Cir. 1972). Failure in this instance to certify the class in no way prejudices the rights of the arguable class members whereas certification of a class whose representative's interests may not be consonant with the remaining class members is clearly prejudicial to the interests of the class.
For all of the reasons discussed above and in light of the over-all circumstances of this case, it is concluded that the plaintiff has not met the requirements for certification of a class pursuant to Rule 23(a) and furthermore that this case is not appropriate for certification as a class action.[19] The motion to certify the class is denied.
Motions for Summary Judgment
Defendants have requested summary judgment without qualification,[20] while Aiello has moved for "partial summary judgment" on behalf of "himself and all others similarly situated" on three specific issues: (1) the constitutionality of the Bureau's suspension procedure; (2) the constitutionality of Rules 169.16 and 169.23; and (3) whether the putative choice between suspension and working without pay offered to firemen who receive penalty hours from a Trial Board violates state law and the provisions of the collective bargaining agreement between the City and the firefighters union. Two issues are added by Aiello's second brief, submitted after the filing of the motion and the Amended Complaint, in which he seeks summary judgment that Rules 170.7 and 170.8 are unconstitutional and that the Trial Board structure is inherently unfair.[21] Although the introduction to his opening brief indicates that the summary judgment motion is restricted "to those aspects of the case which clearly apply to the entire class,"[22] in the absence of class certification, the Court will consider plaintiff's motion only to the extent that the issues which it raises survive.[23]
The standard to be applied on a motion for summary judgment pursuant to Fed.R. Civ.P. 56 is clear and will govern the resolution of the parties' motions:
"[S]ummary judgment is never warranted except on a clear showing that no genuine issue of any material fact remains for trial after considering the pleadings and proof in the form of depositions, affidavits, and admissions on file. In determining the presence of a disputed issue of material fact on motion for summary judgment, `all inferences, doubts and issues of credibility' should be resolved against the moving party. Smith v. Pittsburgh Gage & Supply Co., 464 F.2d 870, 874 (3d Cir. 1972)." Suchomajcz v. Hummel Chemical Co., 524 F.2d 19, 24 (3d Cir. 1975); see Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970).
Property Interest
Plaintiff alleges that his on-the-spot suspension by Assistant Chief DiMichele violated procedural due process in that he was "deprived of property and liberty without a pretermination hearing."[24] Turning first to the property claim, a threshold question arises as to whether Aiello at the time of suspension possessed any cognizable property *1286 interest entitled to due process protection.
The presence of a property interest is not normally of constitutional dimension. Property interests "are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law . . .." Board of Regents v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 2709, 33 L. Ed. 2d 548 (1972); accord Bishop v. Wood, 426 U.S. 341, 343, 96 S. Ct. 2074, 2077, 48 L. Ed. 2d 684 (1976) (ultimate arbiter of "the sufficiency of the claim of entitlement [to a property interest is] . . . state law"). Although there is no direct pronouncement of Delaware statutory or decisional law concerning a public employee's claim of entitlement to continued employment, prediction of Delaware law on this question is not particularly difficult. Cf. Cofrancesco v. City of Wilmington, 419 F. Supp. 109 at 111 (D.Del. 1976). Despite defendants' protestations to the contrary, a property interest clearly can be found in Aiello's acknowledged status as a permanent employee entitled to continue in his job absent violation of specific rules.
According to defendant Blackburn, Bureau of Fire Chief, a fireman is deemed to be a permanent employee, not susceptible to dismissal without cause, after successful completion of an initial six month probationary period.[25] The Chief further conceded upon questioning that Aiello was a "permanent employee" at the time of the events giving rise to this lawsuit.[26] Moreover, the permissible causes for a suspension of a permanent fireman pending Trial Board Action are not so nebulous as to make his job dependent on the Bureau's "will and pleasure."[27] Rule 40 of the Bureau's Rules and Regulations authorizes suspension from duty pending the action of the Trial Board of any Bureau member "who has violated any Law, Ordinance, or Rules or Regulations. . . ."[28] Finally, all of the Bureau's Rules were incorporated by reference into the collective bargaining agreement between the firefighters union and the City of Wilmington which was in effect at the time of Aiello's suspension, Docket No. 83, Exhibit C, Article XXIII, it being well established that a property interest such as the one claimed in this case "can be created by an express contract, a clearly implied promise . . . or administrative standards. . . ." New Castle-Gunning Bedford Educ. Assoc. v. Board of Educ., 421 F. Supp. 960 at 963 (D.Del.1976), citing Morris v. Board of Educ., 401 F. Supp. 188, 208 (D.Del.1975).[29] Moreover, collective bargaining agreements by public employers are expressly authorized by state law. 19 Del.C. § 1301 et seq.
The collective bargaining agreement, the Bureau's own Rules and Regulations, and the uncontroverted understanding of the Bureau of Fire Chief support Aiello's assertion that the security of his position was not subject to whimsical vagaries of any sort, but vulnerable only on specified grounds shown through pre-ordained procedures. In this context, Aiello's interest in his continued employment was accorded such a high degree of recognition *1287 that it rose to the level of one entitled to constitutional protection.[30]
This conclusion is not altered by the defendants' interpretation of Bishop v. Wood, supra. Defendants urge that Bishop permits this Court to construe the collective bargaining agreement (as authorized by state law), the Bureau's Rules and Regulations, and other data supporting Aiello's expectancy of a property interest "as granting no right to continued employment [at all,] but merely conditioning [the] employee's removal [up]on compliance with [the] specified procedures."[31]
It is indisputable that the district court in Bishop adopted this stance in granting the defendants' motion for summary judgment against the plaintiff, a policeman discharged without a hearing who claimed that his employment status was a property interest entitled to due process protections. "Based on his understanding of state law, he [the district judge] concluded that petitioner `held his position at the will and pleasure of the city.'" 426 U.S. at 345, 96 S.Ct. at 2078. The Supreme Court accepted the lower court's interpretation of North Carolina law in which the lower court had considerable expertise, noting that the interpretation was tenable and had been concurred in, albeit narrowly, by the court of appeals. "These reasons are sufficient to foreclose our independent examination of the state law issue." Id. at 347, 96 S.Ct. at 2079. Bishop's acceptance of the lower court's construction of North Carolina law does not require a similar construction of Delaware law as applied to facts completely different from that found in Bishop v. Wood, supra. The fact that North Carolina state law does not accord North Carolina public employees a property interest in their continued employment in no way forecloses the finding of a property interest in the case of the present Delaware plaintiff.
As a back-up argument in its effort to characterize Bishop as a radical departure from previous law, defendants further assert that "Bishop suggests that due process is satisfied by following the procedures set forth in the statute, ordinance, or contract allegedly conferring the right."[32] This is, in essence, the theory advanced in Mr. Justice Rehnquist's plurality opinion in Arnett v. Kennedy, 416 U.S. 134, 153-54, 94 S. Ct. 1633, 1644, 40 L. Ed. 2d 15 (1974): "[W]here the grant of a substantive right is inextricably intertwined with the limitations on the procedures which are to be employed in determining that right, a litigant in the position of appellee must take the bitter with the sweet." If the Bishop court intended to adopt the Arnett plurality position, one would think it would have so indicated. In the absence of any meaningful statement to that effect, such portentous meaning should not be read into Bishop's unassuming language. The Court in Bishop did not recognize some hybrid form of "bittersweet" right. It merely acquiesced in the district court's holding that plaintiff had no property interest at all. In so doing, Arnett was properly distinguished as a case in which six members of the Court had found a property interest in the fact that plaintiff could only be discharged for cause. 426 U.S. at 345 n.8, 96 S. Ct. 2078. Bishop, on the other hand, presented a situation in which the district court's "holding *1288 that as a matter of state law the employee `held his position at the will and pleasure of the city' necessarily establishes that he had no property interest." Id. The plurality opinion in Arnett, rejected by a majority of the Court in Bishop,[33] is left in its previous non-controlling posture. See Muscare v. Quinn, 520 F.2d 1212, 1216 n.4 (7th Cir. 1975), cert. dismissed as improvidently granted, 425 U.S. 560, 96 S. Ct. 1752, 48 L. Ed. 2d 165 (1976); Mattern v. Weinberger, 519 F.2d 150, 160 n.20 (3d Cir. 1975); but cf. Bishop v. Wood, supra, 426 U.S. at 353-362, 96 S. Ct. 2074 (White, J. dissenting).
Liberty Interest
Although Aiello's assertion of infringement of a liberty interest stands on less secure footing than his property claim, it is doubtful whether this claim can be resolved on a motion for summary judgment. Assuming the current viability of a liberty interest based on damage to reputation and impairment of plaintiff's ability to seek other employment,[34] serious factual questions remain unresolved on the present record as to whether the defendants were responsible for the alleged deleterious effects which the suspension, Trial Board charges and the subsequent adjudication on them may have had.[35] While Aiello proffers the two newspaper accounts of his Record Museum arrest as examples of such deleterious effects, the defendants argue that the articles focus on the "police-blotter" story inherent in the burglary arrest, rather than on Aiello's suspension from the Bureau of Fire.[36] Aiello also references Rule 220, which requires a decision of the Trial Board to be read at all Bureau of Fire Roll Calls in addition to mandating that the decision be made part of the fireman's service record. However, any damage to Aiello engendered by the dissemination of the Trial Board adjudication of guilty on both charges may possibly be attributed to Aiello's own admission to the actions which brought on the charges. The damage to his reputation and opportunities for employment, if any, may have resulted from the nature of his acknowledged actions rather than from the Trial Board's determination that the actions were violative of two Bureau rules. Nor is there conclusive evidence in the record to indicate whether and how the mandates of Rule 220 were carried out. These disputes are illustrative of the uncertainty in the present record concerning whether the damage to Aiello's liberty interests, if any, was self-inflicted, how the damage was ultimately manifested,[37] and the manner and degree in which the defendants contributed to that damage. The present incomplete record coupled with the nature and origin of the alleged infringement make summary judgment singularly inappropriate on Aiello's claims of deprivation of a liberty interest without due process. *1289 Final resolution of this claim must be deferred until trial.
The Suspension
Even if it can be established (or assumed) that Aiello was imbued with a constitutionally-protected property interest and possibly a liberty interest at the time of his suspension, this Court still would be obliged to grant defendants' motion for summary judgment if convinced that Aiello had been accorded the requisite due process guaranteed by the Fourteenth Amendment. In determining whether he had been deprived of his constitutionally-protected property and liberty interests in a manner not comporting with the due process protections of the Fourteenth Amendment, three distinct factors must be considered:
"[F]irst, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and, finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. See, e. g., Goldberg v. Kelly, [397 U.S. 254, 263-71, 90 S. Ct. 1011, 1018-1022, 25 L. Ed. 2d 287 (1970)]." (Mathews v. Eldridge, 424 U.S. 319, 335, 96 S. Ct. 893, 903, 47 L. Ed. 2d 18 (1976).
Even conceding that Aiello's private interests in, inter alia, unbroken employment and a clean record are not de minimus, no violation of due process can be found in the manner and timing of his suspension. Although his suspension was not attended by a formalistic observance of procedural niceties, there were present the rudiments of due process. By Aiello's own account, Assistant Chief DiMichele confronted him at least twice seeking a statement clarifying the circumstances of his arrest. Aiello made only a limited response to the effect that the matter was a physical and mental problem. He has acknowledged that he was drunk on the evening in question and that he "was wiped out" and "wasn't functioning."[38] Viewing the facts in a light most favorable to Aiello, he was either unwilling or too incapacitated to respond to DiMichele's questions concerning the "problem" which apparently brought him to the Record Museum after hours culminating in his arrest. Either circumstance placed the Bureau of Fire and Assistant Chief DiMichele in an untenable position. Due process does not require a governmental bureau charged with the protection of life and property to retain a member on active duty in the face of indications that he may be a danger to himself, others, or their property when the member, upon informal confrontation, fails to proffer an explanation or scintilla of reassurance concerning the situation in which he is found. The concept of due process has never been inflexible, and leaves sufficient ground for summary action in extreme situations. The possibility of a "continuing danger to persons or property," Goss v. Lopez, 419 U.S. 565, 582, 95 S. Ct. 729, 740, 42 L. Ed. 2d 725 (1975), outweighs the interests which might have called for delay. Compare Muscare v. Quinn, supra, 520 F.2d at 1216 (fireman suspended without prior process for violation of a regulation); Anapol v. University of Delaware, 412 F. Supp. 675 at 680 (D.Del. 1976) (University professor terminated for falsifying documents).[39]
However, this determination does not necessarily end the due process inquiry. While a rudimentary confrontation may satisfy the dictates of due process for the purpose of a short suspension in an "emergency" case, more may be required prior to an extended unpaid suspension of the type Aiello underwent.
*1290 Delay Between Initial Suspension and Hearing
Aiello ultimately received a Trial Board hearing, and apart from his claim concerning the alleged bias of its members, to be discussed infra, he does not complain of the procedural safeguards which he was afforded. His complaint centers upon the lengthy gap between the date of his suspension, January 30th, and the date of his Trial Board hearing, May 8, 1973. Aiello's contention is that the initial confrontation could not and did not satisfy the minimum due process requirements necessary to justify a 98 day suspension, during which time he was admittedly unpaid and allegedly under instructions not to seek outside employment. He further argues the hearing could not retroactively satisfy the demands of due process.
The interplay between temporal delay and denial of due process is significant. However, case law addressing the issue in the form that it has taken in this case is scarce. In most cases the issue is framed and decided in terms of the constitutionality per se of the procedure which permitted or sanctioned the delay of the hearing, and not whether the delay viewed in the particular circumstances considered resulted in a denial of due process. The issue in the instant matter encompasses the latter: whether due process delayed is due process denied. Or more formally put, two questions are presented: (1) can a mere delay in providing a hearing rise to the level of a constitutional deprivation if the hearing, when finally provided, otherwise procedurally satisfied the requirements of due process; and (2) if so, on the facts of this case, did the delay of 98 days from the time of Aiello's suspension until the hearing impermissibly deny Aiello his right to due process?
An analysis of the first question must start with the premise that the fundamental requirement of due process is the opportunity to be heard "at a meaningful time and in a meaningful manner." Armstrong v. Manzo, 380 U.S. 545, 552, 85 S. Ct. 1187, 1191, 14 L. Ed. 2d 62 (1965) (emphasis added). Elaboration on this general principle has been forthcoming on a number of occasions by both the Supreme Court and lower federal courts. In the context of a suspension of a student from public school for no more than ten days, for which notice and a rudimentary hearing followed rather than preceded the actual suspension (as occurred here), the Supreme Court held the student was entitled to the necessary notice and rudimentary hearing "as soon as practicable," following the actual suspension.[40]Goss v. Lopez, 419 U.S. 565, 583, 95 S. Ct. 729, 42 L. Ed. 2d 725 (1975) (emphasis added).
In another factual context, the Supreme Court was confronted with a lower court decision invalidating certain Connecticut procedures sanctioning pre-hearing suspension of unemployment compensation benefits. While vacating and remanding for reconsideration in light of intervening state law changes, the Supreme Court clearly shared the lower court's concern about the role of delay in the context of the overall scheme of due process:
"Prompt and adequate administrative review provides an opportunity for consideration and correction of errors made in initial eligibility determinations. Thus, the rapidity of administrative review is a significant factor in assessing the sufficiency of the entire process." Fusari v. Steinberg, 419 U.S. 379, 389, 95 S. Ct. 533, 540, 42 L. Ed. 2d 521 (1975).[41]
*1291 Finally, in Muscare v. Quinn, 520 F.2d 1212 (7th Cir. 1975), cert. dismissed as improvidently granted, 425 U.S. 560, 96 S. Ct. 1752, 48 L. Ed. 2d 165 (1976), the Seventh Circuit held that a fireman suspended for 29 days without a prior hearing for claimed violations of departmental hair regulations was denied due process of law.[42]
Although these decisions addressed the constitutionality per se of suspension or termination procedures, their language and reasoning support the conclusion that timing nonetheless is an important element of due process. Nor should such a conclusion be surprising since the basic right which the courts have been seeking to protect is the right to a hearing "as soon as it is practicable" after a suspension has occurred, when legitimate considerations have excused the failure to provide a hearing prior to the actual suspension. However, this timing component of procedural due process, where a suspension precedes a hearing, must of necessity be flexible. A finding of a constitutional deprivation should be made after consideration of such factors as (1) the actual duration of delay between the suspension and hearing; (2) the degree of potential deprivation resulting from the suspension; (3) the adequacy of administrative review procedures utilized prior to the suspension; (4) the adequacy of the post-suspension hearing with concomitant time constraints and restraints; and (5) the extent to which the individual suspended contributed to or otherwise knowingly and wilfully acquiesced in the delay.[43]
Whether Aiello was accorded a hearing as soon as was practicable after his suspension in this case involves essentially a factual determination. It is undisputed that for most of the suspension period Aiello was required to report to his fire station twice a day a requirement which in itself might have precluded opportunities for outside employment even in the absence of a specific directive to that effect. On the other hand, Commissioner Levine contradicted Aiello's assertion that he was told not to seek other employment by stating that Aiello would have been permitted to seek outside employment if the request had been made. In addition, the present record leaves unclear whether all or part of the delay between the suspension and the Trial Board hearing may have been at the behest of Aiello or his counsel or at least with their acquiescence in light of the pendency of criminal charges arising out of the same incident. The record finally suggests an inference that the particular delay between dismissal of the state criminal charges and the Trial Board hearing may have occurred in part to accommodate the schedule of Aiello's legal representative at the hearing. These disputed issues preclude summary judgment for any of the litigants. A mature resolution of the factual issues raised here must await trial. Yet, some of those issues are sufficient to demonstrate that serious deprivations of Aiello's due process rights may have been implicated in the chronology of his suspension and Trial Board hearing.
*1292 Trial Board Bias
Aiello attacks the impartiality of the Trial Board which considered the charges against him on two grounds. One is more individual in nature, resting on an alleged bias on the part of at least one member of the Trial Board which heard Aiello's case, Thomas Savage, and on the part of his superiors, Chief Blackburn and Commissioner Levine.[44] While this allegation may appear somewhat ironic in light of the virtual admission by Aiello's counsel at the Trial Board hearing that his plea was, for all practical purposes, one of "guilty with explanation," the operative facts are sufficiently in dispute at least in regard to the penalty which the Board imposed to render summary judgment on this point inappropriate.[45]
Similar restraint is not required with regard to the second ground of Aiello's bias allegation. It is based on a tenuous chain of reasoning: Trial Boards are made up of senior members of the Bureau of Fire picked by the Bureau Chief; the Boards frequently impose penalty hours; firemen frequently "work off" their penalty hours without pay; the "free labor" gained by the Bureau through the imposition of penalty hours constitutes an incentive for their imposition by the members of the Board. Aiello contends that free labor from a penalized fireman such as himself assists the Bureau of Fire in remaining within its budget and eases the overall responsibilities of the senior officers. According to Aiello, this is the type of temptation which the Supreme Court found to signify a lack of due process in Ward v. Village of Monroeville, 409 U.S. 57, 93 S. Ct. 80, 34 L. Ed. 2d 267 (1972). There the Monroeville mayor, with wide executive authority and responsibility for the village finances, also served as a judge with power to levy fines for violation of ordinances and traffic offenses. Assuming arguendo that Ward's due process standard for mayors functioning as judicial officers in a court of law is controlling in this essentially administrative setting, its teaching has not been violated. The bias interest alleged here is far less direct than that found in Ward, especially in light of the absence of an allegation that the members of the Trial Board bear any responsibility for the Bureau of Fire's budget.[46] Even under the rigorous standard operative on a motion for summary judgment, viewing the facts and reasonable inferences arising from the record in the light most favorable to Aiello, his allegations of Trial Board bias based on Ward are as a matter of law too attenuated to fall within its purview. Cf. Withrow v. Larkin, 421 U.S. 35, 47 and n.14, 95 S. Ct. 1456, 43 L. Ed. 2d 712 (1975) (and cases cited therein); Tumey v. Ohio, 273 U.S. 510, 47 S. Ct. 437, 71 L. Ed. 749 (1927). See generally Hortonville Joint School District No. 1 v. Hortonville Education Association, 426 U.S. 482, 96 S. Ct. 2308, 49 L. Ed. 2d 1 (1976).
Rule 169.16, 169.23: Vagueness and Overbreadth[47]
While they may not be models of precision, Rules 169.16[48] and 169.23[49] belong *1293 to a genre not unknown in the realm of public employment, particularly with reference to the uniformed services.[50] Their imprecision may admit of a successful constitutional challenge on vagueness grounds, but Aiello's individual attempt to do so, based on the circumstance of the charges brought against him, cannot succeed. The conduct which precipitated his suspension falls within the narrow category of acts so egregious that, despite any protestations to the contrary, he could have had no doubt that they were proscribed.[51] In his posture, as the perpetrator of "hard cord conduct which any reasonable person must know would be cause for discipline or dismissal from employment," Aiello has no standing to challenge Rules 169.16 and 169.23 for vagueness.[52]
Aiello's claim that Rules 169.16 and 169.23 are overbroad must also fail. One of the few exceptions to the general rule that an individual may not assert the rights of others in challenging the propriety of statutory or administrative prohibitions applied to him has been etched by the Supreme Court in the realm of First Amendment activities. As the Court explained in Broadrick v. Oklahoma, 413 U.S. 601, 611-12, 93 S. Ct. 2908, 2915, 37 L. Ed. 2d 830 (1973):
"It has long been recognized that the First Amendment needs breathing space and that statutes attempting to restrict or burden the exercise of First Amendment rights must be narrowly drawn and represent a considered legislative judgment that a particular mode of expression has to give way to other compelling needs of society. [Citations omitted.] As a corollary, the Court has altered its traditional rules of standing to permit in the First Amendment area `attacks on overly broad statutes with no requirement that the person making the attack demonstrate that his own conduct could not be regulated by a statute drawn with the requisite narrow specificity.' Dombrowski v. Pfister [380 U.S. 479, 486, 85 S. Ct. 1116, 1121, 14 L. Ed. 2d 22 (1965)]. Litigants, therefore, are permitted to challenge a statute not because their own rights of free expression are violated, but because of a judicial prediction or assumption that the statute's very existence may cause others not before this court to refrain from constitutionally protected speech or expression."[53]
Aiello's assertion that Rules 169.16 and 169.23 are overbroad fails to satisfy the prerequisites for overbreadth consideration in two respects. First, it is questionable whether his conduct fell within the purview of First Amendment activities, the cornerstone of the overbreadth doctrine. More *1294 importantly, even if his claim colorably involved First Amendment rights, facial invalidation by application of the overbreadth doctrine is inappropriate if the provision in question applies to a "substantial number of situations to which it might be validly applied," Parker v. Levy, 417 U.S. 733, 760, 94 S. Ct. 2547, 2563, 41 L. Ed. 2d 439 (1974), or if the overbreadth is not real and substantial, "judged in relation to the statute's plainly legitimate sweep." Broadrick v. Oklahoma, supra, 413 U.S. at 615, 93 S.Ct. at 2918; accord, CSC v. Letter Carriers, 413 U.S. 548, 580-81, 93 S. Ct. 2880, 37 L. Ed. 2d 796 (1973). There is little doubt that in the present case Rules 169.16 and 169.23 legitimately apply to a substantial amount of conduct or number of activities which properly may be proscribed, and the overbreadth, if any, of the rules is marginal.[54]
Rules 169.16, 169.23, 170.7, 170.8: Chill
Aiello has also asserted that following the Trial Board hearing, he was "forced to live under the chilling umbrella of [Rules 169.16 and 169.23]"[55] as well as under Rules 170.7 and 170.8.[56] In particular, he claims that the regulations (under which he no longer lives) had an "inhibiting" effect upon his private, personal conduct and in his relations with his family, in addition to making him reluctant to avail himself of the Bureau of Fire's post-Trial Board appeal procedures or to complain in either public or private about his treatment by superior officers.[57] Weighing against these claims is the bare fact that Aiello was never charged with a violation of any of these rules subsequent to his Trial Board experience despite his admitted engagement in activities which come within the letter or spirit of his allegations of a chilling effect. The description of a pall cast over his life by operation of the regulations is just not consonant with his own deposition testimony concerning his activities during the probationary period. For example, his once monthly night of drinking while on probation[58] the very activity which by his own admission had precipitated his prior difficulties saps the force of his "chill" complaint. Moreover, despite his broad assertion of a fear to appeal his Trial Board sentence, Aiello admits sending a letter to Chief Blackburn several months after the Trial Board hearing requesting payment for the time during which he was suspended.[59] In addition, it is clear that he did not hesitate in attempting to enlist the firefighters union's assistance in his behalf.[60]
In order to prevail on a claim of "chill" concerning protected First Amendment activities and speech,[61] a party must *1295 first establish that it has suffered actual injury or harm. "Allegations of a subjective `chill' are not an adequate substitute for a claim of specific present objective harm or a threat of specific future harm." Laird v. Tatum, 408 U.S. 1, 13-14, 92 S. Ct. 2318, 2325, 33 L. Ed. 2d 154 (1972); accord Paton v. LaPrade, 524 F.2d 862, 873-74 (3d Cir. 1975); cf. O'Shea v. Littleton, 414 U.S. 488, 94 S. Ct. 669, 38 L. Ed. 2d 674 (1974). Given this requirement, Aiello's vague allegations of subjective chill, perhaps questionable on their face, and further undermined by his testimony which documented the absence of a specific inhibiting effect exerted by the Rules on his activities, are insufficient to sustain a claim of unconstitutional chill.[62] Accordingly, defendants' motion for summary judgment on this issue is granted.[63]
The State Law Claim
Count V of plaintiff's Amended Complaint alleges that certain activities of the Bureau of Fire with respect to Aiello, including the "requirement" that he work penalty hours without pay, were in violation of the collective bargaining agreement between the City and the firefighters union. Count VII alleges that the failure to pay plaintiff for penalty hours worked was in violation of 19 Del.C. § 902. Resolution of the contract questions raised under Count V is essentially a matter of state law. Similarly, Count VII will require the Court to engage in interpretation of a state statute with little guidance from the state courts on knotty issues such as whether the statute is applicable to the City of Wilmington, a public employer. Since these issues are pendent to Aiello's federal claims, they need not be considered at all if the Court, in light of principles of comity, declines to hear them, and, in any event, may not be considered unless they arise from a "common nucleus of operative facts." See United Mine Workers v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966). Here, the common nucleus is uncertain since, although the general milieu is the same, the facts necessary to a resolution of the "federal" constitutional claims can form a discrete package separate from those directly relevant to the state law claims. In addition, there is not present any reason to venture forth upon uncharted state law waters where the voyage is not required. Such incursions into the domain of unsettled state law are best left to the state courts in the first instance, particularly where they do not entail federal constitutional considerations. See Trivits v. Wilmington Institute, 417 F. Supp. 160 (D.Del. 1976); cf. Cofrancesco v. City of Wilmington, 419 F. Supp. 109 (D.Del.1975). Therefore, the Court will decline to take pendent jurisdiction of Counts V and VII of the Amended Complaint.[64]
*1296 Punitive Damages
A plaintiff is not entitled to an award of punitive damages unless there is "an indication of bad faith by the defendants sufficient to justify such an award." Rappaport v. Little League Baseball, Inc., 65 F.R.D. 545, 548 (D.Del.1975). While the defendants argue that the present record is devoid of the required indication of bad faith, this cannot be said to the certainty required on a motion for summary judgment. Therefore, the issue of whether punitive damages may be appropriate on any of the causes of action remaining in the case must be held in abeyance pending trial.
Official Immunity
The individual defendants have argued strongly that they are entitled to official immunity with respect to the actions complained of by Aiello. The prevailing Third Circuit view of official immunity for state non-judicial officials was set forth in Skehan v. Board of Trustees, 538 F.2d 53 (3d Cir. 1976) (en banc), which in turn relied extensively on Wood v. Strickland, 420 U.S. 308, 95 S. Ct. 992, 43 L. Ed. 2d 214 (1975). In Skehan the Third Circuit indicated that in order to avail himself of the official immunity defense, the burden was on the state official to make the dual showing: (1) that he acted without malice or the awareness that his conduct violated the plaintiff's rights, and (2) that he did not know, nor reasonably should have known that his conduct violated the constitutional rights of the party affected. Skehan, supra, 538 F.2d at 60-61. Although there is some language in Skehan suggesting that Wood's application only would be appropriate in the context of school officials, the subsequent discussion of immunity is couched in more general terms, indicating an intended broad application of the principles enunciated. Moreover, a recent opinion by Judge Stapleton in this District applied a Skehan-type analysis in the context of a damage suit against a prison official. Johnson v. Anderson, 420 F. Supp. 845 (D.Del.1976). Since the record as it presently stands contains numerous factual doubts and disputes regarding both showings mandated by Skehan, it is not possible for the Court to rule on the immunity issue at the summary judgment stage of these proceedings.
Conclusion
A number of questions by both parties have been submitted to the Court for consideration. Plaintiff's Motion for Class Certification and Plaintiff's Motion for Partial Summary Judgment are denied. Defendants' Motion for Summary Judgment is denied except as to the following enumerated particulars. Without passing on plaintiff's claims that the actual suspension and the actual composition of the Trial Board in this case denied him his constitutional rights, defendants' Motion for Summary Judgment is granted as to plaintiff's general claims that the suspension procedure is unconstitutional per se and that the Trial Board system of review is inherently biased. Defendants' Motion for Summary Judgment also is granted as to certain of plaintiff's allegations that Rules 169.16 and 169.23 are unconstitutional; this Court holding that as a matter of law the Rules are not unconstitutionally overbroad and that Aiello has failed to demonstrate the presence of any actual chilling effect of his First Amendment right of expression. Aiello's claim that Rules 169.16 and 169.23 are vague is dismissed for want of standing. Finally, Aiello's failure to demonstrate an actual chill also results in the granting of summary judgment in favor of defendants on Aiello's claim that Rules 170.7 and 170.8 unconstitutionally chilled his First Amendment right of expression.
Submit order on notice.
NOTES
[1] Plaintiff also asserted in Count VII of his amended complaint a cause of action against the City under the federal Fair Labor Standards Act, 29 U.S.C. § 201 et seq. However, he has since conceded by letter to the Court dated July 14, 1976, that a recent decision of the Supreme Court, The National League of Cities v. Usery, 426 U.S. 833, 96 S. Ct. 2465, 49 L. Ed. 2d 245 (1976), has effectively disposed of this claim. The Court concurs in this conclusion and will make no further reference to any of the plaintiff's Fair Labor Standards Act contentions throughout the remainder of this opinion.
[2] One of the arresting officers later testified that a search of Aiello's pockets revealed several rolls of coins with a total value of nine dollars and some bracelets of a type sold by the Record Museum. In addition, three eight track tapes and an empty money bag were found in the immediate area of the floor where Aiello was found. See Transcript of Aiello's Trial Board Hearing, Docket No. 53 (produced in response to a request for production by plaintiff and admissible pursuant to Fed.R.Evid. 803(8)). The arresting officer's contemporaneous report is attached as an exhibit to Defendants' Answers to Plaintiff's First Set of Interrogatories, Docket No. 29.
[3] In response to an interrogatory questioning "whether plaintiff was given opportunity to explain his actions" prior to his suspension, Aiello responded in the negative:
"No. Chief DiMichele asked plaintiff if he wished to make any written statement. Plaintiff answered that the matter was personal. Chief DiMichele then returned and suspended plaintiff[.]" Docket No. 40, # 14(f).
[4] See Docket No. 31. A copy of the Rules and Regulations of the Wilmington Bureau of Fire was produced by the defendants in response to plaintiff's request for production.
[5] Id. Rule 206 provides that:
"From the time of suspension the salary of the member so suspended shall be withheld pending the trial of the person suspended, and the Trial Board shall recommend to the Commissioner the disposition of the salary of the suspended member as well as its recommendation on the charge."
[6] Id., Rules 169.10 and 221.
[7] The twice daily reporting requirement for suspended firemen embodied in Rules 169.10 and 221 was rescinded by Chief of Fire Blackburn's General Order 73-9 dated April 4, 1973. The General Order appears to contemplate the possibility of outside employment for suspended firemen in that it lays down requirements for notice to the department "immediately upon outside employment." Docket No. 29, Exhibits.
[8] The Charge and Specification on Rule 169.16 provided as follows:
CHARGE AND SPECIFICATION PREFERRED AGAINST
FIREMAN RONALD J. AIELLO ENGINE CO. # 9 "A" PLATOON =============================================================
CHARGE Failure to refrain from conduct unbecoming a fireman and a gentleman whether on or off duty.
In violation of Rule # 169, Section # 16 of the Rules and Regulations
SPECIFICATIONS ==============
On January 30, 1973, at 12:55 A.M. Fireman Ronald Aiello was found inside the Record Museum located at 419 North Market Street by Officers of the Wilmington Bureau of Police.
Fireman Ronald Aiello failed to conduct himself in a manner conducive to good conduct and behavior. This unprofessional action reflects on his creditability as an employee of the Department of Public Safety as required by the Rules and Regulations of the Bureau of Fire.
TO APPEAR BEFORE THE TRIAL BOARD CONSISTING OF DEPUTY CHIEF F. MALLOY, PRESIDENT OF TRIAL BOARD, ASSISTANT CHIEF DI ORIO AND CAPTAIN SAVAGE IN CENTER CITY FIRE STATION CONFERENCE ROOM AT 8:15 A.M. ON TUESDAY, MAY 8, 1973."
[9] The Charge and Specification on Rule 169.23 provided as follows:
CHARGE AND SPECIFICATION PREFERRED AGAINST ==========================================
FIREMAN RONALD J. AIELLOENGINE CO. # 9, "A" PLATOON ============================================================
CHARGE Failure to be governed by the customary rules of good behavior observed by law-abiding and self-respecting citizens.
In violation of Rule # 169, Section # 23 of the Rules and Regulations
SPECIFICATIONS ==============
On January 30, 1973, at 12:55 A.M. Fireman Ronald Aiello was found inside the Record Museum located at 419 Market Street by Officers of the Wilmington Bureau of Police. Fireman Ronald Aiello did not govern himself by the customary rules of good behavior observed by law-abiding and self-respecting citizens, but instead, conducted himself in a manner that brought discredit both to himself and to the Department of Public Safety.
All members of the Bureau of Fire must at all times maintain the highest standard of respect for others, both in nature of trust and confidence. By being found inside the Record Museum, after they were closed for business, you have in the eyes of the public and department, placed an obstacle to total trust and confidence so urgently needed in our line of duty.
Above action has damaged the good name of the Department by failure to observe rules of law-abiding citizens, created distrust in performance of duty in the eyes of all members of the Department of Public Safety.
TO APPEAR BEFORE THE TRIAL BOARD CONSISTING OF DEPUTY CHIEF F. MALLOY, PRESIDENT OF TRIAL BOARD, ASSISTANT CHIEF DI ORIO AND CAPTAIN SAVAGE IN CENTER CITY FIRE STATION CONFERENCE ROOM AT 8:15 A.M. ON TUESDAY, MAY 8, 1973."
[10] Some unexplained confusion exists in the record concerning the charge and specification forms upon which the Trial Board proceeded. Those described above are dated April 25, 1973. They apparently superceded an earlier set also signed by DiMichele dated January 30th, prepared while criminal charges were still pending against Aiello, which charged violation of the same rules, but in which the specifications were couched in terms more attuned to a violation of the criminal law. For example, DiMichele charged that Aiello had violated Rule 169.23 "when he wilfully committed a felony to wit burglary 4th, degree did break and enter the Record Museum located at 419 Market Street Wilm. with intent to commit larceny" thus bringing "discredit to himself and the Department." Defendants' Answers to Plaintiff's First Set of Interrogatories, Docket No. 29, Exhibits. Similarly, DiMichele's original January 30th report to Chief John J. Malloy was succeeded by a revised version addressed to Malloy's successor, James P. Blackburn and dated April 25, 1973.
[11] Aiello's legal representative at the Board hearing conceded in comments to the Trial Board that the department had been held "in some disrepute" as a result of the articles, but noted that the newspapers had been unfair in neglecting to report the subsequent dropping of criminal charges by the State. Id. at 64-65.
[12] The exact nature of plaintiff's objection to Rules 170.7 and 170.8 is somewhat confused. See p. 1294, n.56, infra.
[13] See, e. g., Docket No. 15, Defendants' Notice to Withdraw Motion to Dismiss; Docket No. 38, Plaintiff's Motion to Certify Class; Docket No. 59, Plaintiff's Motion to Certify Class; Docket No. 61, Withdrawal by Plaintiff of Motion to Certify Class Filed on or about April 9, 1975; Docket No. 78, Plaintiff's Notice and Motion to Amend Complaint with Amendments.
[14] See, e. g., Plaintiff's Reply Brief and Answering Brief on Defendants' Motion for Summary Judgment, Docket No. 90 at 11.
[15] Docket No. 57, # 4. No firemen have been suspended with pay according to defendants. Docket No. 57, # 5.
[16] A review of Docket No. 57, Exhibit J, reveals that out of a total of 266 charges brought against firemen over the past five years, there have been no more than twelve penalties of 100 hours or more imposed for a single charge in addition to the two 1000 hour penalties which Aiello received.
[17] See infra pp. 1292-1293 for a discussion of Aiello's standing to raise certain of his individual claims. Creation of a more limited class or subclass of former firemen would not materially enhance Aiello's efforts to obtain a class certification since the numerosity of such a class would be even lower than that discussed supra.
[18] In light of this conclusion, no discussion will be devoted to defendants' assertion that Aiello's psychiatric disability, the basis for his retirement from the Bureau of Fire, negatively affects his ability to properly represent the class.
[19] In light of this determination that the threshold requirements for the maintenance of any class action have not been met, there is no need to resolve the question of whether the action could have been maintained pursuant to Rule 23(b)(1), (2) or (3).
[20] Docket No. 62.
[21] Docket No. 90 at 13.
[22] Docket No. 67 at viii.
[23] A question arose at oral argument as to whether plaintiff might have desired to shift his position to urge that all of his individual claims had been encompassed by the motion. However, in the absence of a formal pleading to that effect, the motion will not be extended beyond the bounds of the formal pleading and accompanying briefs.
[24] Docket No. 83, ¶ 13.
[25] Blackburn Deposition, Docket No. 88 at 22-23.
[26] Id.
[27] Bishop v. Wood, supra.
[28] Rule 40 reads in full as follows:
"40. He [the Bureau of Fire Chief] may suspend from duty pending the action of the Trial Board, any member of the Bureau of Fire who has violated any Law, Ordinance or Rules and Regulations when, in his opinion, it is for the best interest of the Bureau of Fire. A written report of the suspension, together with a full statement of the facts pertaining thereto, must be filed in duplicate, immediately with the Commissioner of Public Safety."
[29] See also Bishop v. Wood, supra, 426 U.S. at 343, 96 S.Ct. at 2077, ("[a] property interest in employment can . . . be . . . created . . . by an implied contract"); Perry v. Sindermann, 408 U.S. 593, 601, 92 S. Ct. 2694, 2699, 33 L. Ed. 2d 570 (1972) ("[a] person's interest in a benefit is a `property' interest for due process purposes if there are . . . rules or mutually explicit understandings that support his claim of entitlement to the benefit . . ..").
[30] One way in which defendants have attempted to refute the existence of this cognizable property interest is by arguing that Aiello's failure to exhaust the administrative appeal avenues afforded him by the Bureau's Rules and Regulations and the collective bargaining agreement deprives this Court of jurisdiction to entertain Aiello's claims. This argument is not persuasive. At a minimum, it is clear that such exhaustion is not required where, as has been alleged here, resort to administrative remedies would have been futile. Moreover, exhaustion is not an indispensable requirement even in the absence of futility. See Hochman v. Board of Education, 534 F.2d 1094 (3d Cir. 1976); cf. O'Brien v. Galloway, 362 F. Supp. 901, 906 (D.Del.1973).
[31] Letter from defense counsel dated July 16, 1976. Bishop v. Wood was handed down almost two months subsequent to the oral argument on the parties' motions, sparking an exchange of views between counsel addressed to the Court concerning the impact of that case on the instant matter.
[32] Letter from defense counsel dated July 16, 1976.
[33] The Third Circuit has yet to speak directly on the meaning of Bishop other than to offer a few words of cryptic guidance in its most recent opinion in Skehan v. Board of Trustees, 538 F.2d 53, 63 (3d Cir. 1976):
"We also call the district court's attention to the Supreme Court's recent decision in Bishop v. Wood, 426 U.S. 341, 96 S. Ct. 2074, 48 L. Ed. 2d 684 (1976), a decision considering or perhaps reconsidering the scope of the protection afforded public employment by the due process clause. We leave it to the district court in the first instance to decide whether or to what extent that decision bears upon this litigation."
[34] The current validity of this assumption is questionable. Compare Board of Regents v. Roth, 408 U.S. 564, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972) and Goss v. Lopez, 419 U.S. 565, 575, 95 S. Ct. 729, 42 L. Ed. 2d 725 (1975) with Paul v. Davis, 424 U.S. 693, 96 S. Ct. 1155, 47 L. Ed. 2d 405 (1976); see Bishop v. Wood, supra, 426 U.S. at 351 n.1, 96 S. Ct. 2074 (Brennan, J. dissenting).
[35] See Bishop v. Wood, supra, 426 U.S. 347, 350, 96 S. Ct. 2074; Paul v. Davis, supra.
[36] See Docket No. 29 Exhibits (newspaper articles). The Court also notes in this context that there is general agreement that at the time of his arrest Aiello himself announced his status as a fireman and asked not to be arrested.
[37] Compare Velger v. Cawley, 525 F.2d 334, 335 (2d Cir. 1975), cert. granted, 427 U.S. 904, 96 S. Ct. 3188, 50 L. Ed. 2d 1197 (1976) (stigma clearly manifested itself in foreclosure of employment in both public and private sectors).
[38] Docket No. 33 at 99.
[39] This conclusion should in no way be construed as a blanket endorsement of Rule 205 which permits temporary suspension, pending final hearing of a fireman accused of violating a Rule or Regulation when the suspension is judged to be in the best interest of the Department of Public Safety. Rather, it is limited to the "emergency" facts of the present case.
[40] The primary holding of Goss was that even for student suspensions from public schools of no more than ten days, due process required notice and a rudimentary hearing. Although the Court preferred that the notice and hearing precede the suspension, it did recognize that when the continued presence of a student "poses a continuing danger to persons or property or an ongoing threat of disrupting the academic process," 419 U.S. at 582, 95 S.Ct. at 740, then the hearing could permissibly follow the suspension. The Court also indicated without further elaboration that suspensions of longer duration may require "more formal procedures." Id. at 584, 95 S. Ct. 729.
[41] Admittedly the significance of the lower court holding in Fusari was somewhat eroded by Mathews v. Eldridge, 424 U.S. 319, 96 S. Ct. 893, 47 L. Ed. 2d 18 (1976), in which the Supreme Court held termination of disability payments under the Social Security Act prior to an evidentiary hearing does not violate the requirements of due process. However, the administrative review procedures which had to be satisfied before the termination could be effectuated greatly exceeded the "seated interview" in Fusari and the confrontation between Assistant Chief DiMichele and Aiello in the present case. Moreover, as the Court in Mathews observed in evaluating the significance of a delay, "the degree of potential deprivation that may be created by a particular decision is a factor to be considered in assessing the validity of any administrative decision-making process." 424 U.S. at 341, 96 S.Ct. at 906, citing Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970). In Aiello's case the degree of deprivation was extremely high; he was for all intent and purposes deprived of what was his present source of income and possibly precluded from pursuing alternate sources of employment.
[42] See also Moody v. Daggett, 429 U.S. 78, 95, 97 S. Ct. 274, 283, 50 L. Ed. 2d 236 (1976) (Stevens, J. dissenting) ("[d]elay will therefore violate the `. . . fundamental requirement of due process . . ..'"); Johnson v. Anderson, 370 F. Supp. 1373, 1380 (D.Del.1974) (Stapleton, J.) ("when the reason for the emergency exception to the hearing requirement is no longer apposite, the exception is no longer apposite").
[43] The above listing is in no way intended to be exhaustive.
[44] Docket No. 41, # 21.
[45] Aiello believes based on second-hand information that Savage took part in the investigation of his case prior to sitting on the Trial Board which adjudicated it. There is, however, barely a scintilla of support for this belief in the present record. See Docket No. 33 at 50, 53. Aiello further alleges encounters with Savage after the Trial Board hearing which, if factual, would lend substance to his allegation. See, e. g., Docket No. 40, # 17.
His bias allegations against Levine and Blackburn stem partly from an encounter prior to the Trial Board hearing in which an officer in the Bureau suggested that he resign. Aiello believes that the remark was instigated from above. Id. at 31, 51-52.
[46] Carried to its logical extension, Aiello's arguments might require the importation of outside adjudicators in every disciplinary case since lower-ranking firemen arguably could be presumed to suffer from analogous impairments of judgment stemming from competitive jealousies in a Bureau where promotions may be hotly contested.
[47] Aiello challenges these two rules in a dual capacity: as an individual charged under them, and as an individual who was living under the rules (but not further charged with a specific violation) after the Trial Board hearing. This section will discuss the former; the latter is discussed infra at pp. 1294-1295 in the section on "chill."
A close reading of Aiello's contention that the two rules unconstitutionally infringed his right of privacy discloses that it is nothing more than a reformulation of his vagueness and overbreadth objections. Accordingly, it is not separately addressed.
[48] See p. 1276, supra.
[49] See p. 1276, supra.
[50] At least as applied to uniformed employees such as police and firemen, rules of this type may derive from military origins. See e. g., Arnett v. Kennedy, supra; cf. Parker v. Levy, 417 U.S. 733, 94 S. Ct. 2547, 41 L. Ed. 2d 439 (1974); Bence v. Breier, 501 F.2d 1185, 1194-95 (7th Cir. 1974) (Jameson, D. J., concurring in part, dissenting in part).
[51] See Parker v. Levy, 417 U.S. 733, 94 S. Ct. 2547, 41 L. Ed. 2d 439 (1974); Herzbrun v. Milwaukee County, 504 F.2d 1189, 1193 (7th Cir. 1974); Allen v. City of Greensboro, 322 F. Supp. 873 (M.D.N.C.1971), aff'd, 452 F.2d 489 (4th Cir. 1971); Compare Bence v. Breier, supra, 501 F.2d at 1193. Cf. Arnett v. Kennedy, 416 U.S. 134, 94 S. Ct. 1633, 40 L. Ed. 2d 15 (1974).
[52] Herzbrun v. Milwaukee County, supra, 504 F.2d at 1193; see Broadrick v. Oklahoma, 413 U.S. 601, 608, 93 S. Ct. 2908, 37 L. Ed. 2d 830 (1973); Parker v. Levy, 417 U.S. 733, 754-57, 94 S. Ct. 2547, 41 L. Ed. 2d 439 (1974); Michini v. Rizzo, 379 F. Supp. 837, 850-51 (E.D.Pa.1974), aff'd, 511 F.2d 1394 (3d Cir. 1975) (judgment order); Allen v. City of Greensboro, supra; Paulos v. Breier, 507 F.2d 1383 (7th Cir. 1974); cf. Smith v. Goguen, 415 U.S. 566, 94 S. Ct. 1242, 39 L. Ed. 2d 605 (1974).
[53] See also Parker v. Levy, supra; Herzbrun v. Milwaukee County, supra, 504 F.2d at 1197-98 (Stevens, J., concurring); Paulos v. Breier, supra.
[54] This is not to say that there may not be isolated instances in which the Rules improperly restrict protected First Amendment activities. The express holding is only that application of the overbreadth doctrine is not appropriate given the circumstances of this case.
[55] Plaintiff's Reply Brief, Docket No. 90 at 30.
[56] Rules 170.7 and 170.8 are contained in a section labeled "Acts Forbidden" and provide that:
"170. Under penalty of suspension, fine, overtime, reprimand, or dismissal, every member of the Bureau of Fire is forbidden to be guilty of violations of any of the Rules and Regulations governing the Bureau of Fire:
. . . . .
7. Gossiping about a member of the Department of Public Safety concerning either his personal character or conduct to the detriment of the member.
8. Criticizing the official action of a superior officer."
The exact nature of plaintiff's objection to Rules 170.7 and 170.8 is somewhat unclear. In the amended complaint, the objection is stated to be one of overbreadth and vagueness. Docket No. 83, ¶ 31. In Plaintiff's Reply Brief, Docket No. 90 at 46-49, the objection is labeled and substantively argued as one of unconstitutional chill. Since plaintiff has never been charged with violating either rule, it is appropriate to treat plaintiff's objection as one of chill, rather than that of overbreadth and vagueness, which are applicable when the challenging party actually has been charged with a violation of the provision in question.
[57] Docket No. 83, ¶¶ 25-27, 30.
[58] Docket No. 91 at 12.
[59] Id. at 19.
[60] Id. at 21.
[61] Many of the specific instances of chill alleged by Aiello, e. g., that he refrained from (1) playing the stereo too loud (Docket No. 91 at 5); (2) arguing with or correcting his children (Id.); (3) getting involved in controversies with his neighbors (Id.); (4) adulterous conduct (Id. at 11); and (5) "Kitchen talk" (use of vulgar language) (Id. at 17-18) do not even constitute the types of expression for which the First Amendment was primarily intended as a guarantor.
[62] Philadelphia Yearly Meeting v. Tate, 519 F.2d 1335 (3d Cir. 1975), cited by plaintiff, is clearly distinguishable on its facts. There, non-subjective harm sufficient to support standing was found in respect to concrete police actions involving surveillance and dissemination of surveillance information. Here, the harm, so far as it existed at all, can be found only in Aiello's subjective apprehensions.
[63] Alternatively the Court possibly could have treated defendants' motion for summary judgment as a motion to dismiss for want of subject matter jurisdiction under F.R.Civ.P. 12(b)(3) and dismissed plaintiff's claim either for want of a justiciable controversy or want of standing. See Laird v. Tatum, supra; Paton v. LaPrade, supra. Nevertheless the Court is convinced that a decision on the merits is appropriate since matters outside of the pleadings (and affidavits) have been considered, unlike the situation in Laird v. Tatum.
[64] To the extent plaintiff contends that imposition of penalty hours violates federal constitutional strictures, this assertion is erroneous. See Ahearn v. DiGrazia, 429 U.S. 876, 97 S. Ct. 225, 50 L. Ed. 2d 160 (1976), summarily aff'g 412 F. Supp. 638 (D.Mass.1976). Implicit in the Court's holding that application of a penalty hour sanction to some but not all types of municipal employees does not violate the Equal Protection Clause of the Fourteenth Amendment is the determination that imposition of penalty hours is not itself inconsistent with constitutional requirements. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595039/ | 28 So. 3d 496 (2009)
STATE of Louisiana
v.
John E. MURPHY.
No. 09-KA-432.
Court of Appeal of Louisiana, Fifth Circuit.
November 24, 2009.
*497 Paul D. Connick, Jr. District Attorney, Twenty-Fourth Judicial District Parish of Jefferson, Terry M. Boudreaux, Anne Wallis, Michael Morales, Assistant District Attorneys, Gretna, LA, for Plaintiff/Appellee.
Holli A. Herrle-Castillo, Attorney at Law, Louisiana Appellate Project, Marrero, LA, for Defendant/Appellant.
Panel composed of Judges EDWARD A. DUFRESNE, JR., WALTER J. ROTHSCHILD, and FREDERICKA HOMBERG WICKER.
WALTER J. ROTHSCHILD, Judge.
Defendant was charged with possession of clonazepam, a violation of LSA-R.S. 40:969 C, and pled not guilty at his arraignment. Defendant's motion to suppress was denied by the trial court and defendant was tried by a six-person jury which found defendant guilty as charged. Thereafter, the trial court sentenced defendant to four years at hard labor.[1] Defendant now appeals on the basis of two assignments of error.
Evidence presented at trial revealed the following:
Detective Leon James testified he is assigned to the Street Crimes Unit of the Jefferson Parish Sheriffs Office. On the evening of May 29, 2008, he and his partner, Detective Daniel Kerr, were on duty in an unmarked vehicle. While stopped at the intersection of Garden Road and the Westbank Expressway, Detective James saw a silver vehicle traveling eastbound on the Expressway. The officer could see the vehicle's driver was not wearing a seatbelt. Detective James followed the car and activated his unit's overhead lights and siren. The driver of the silver car pulled over and stopped.
The officers exited their vehicle. Detective James approached the driver's side of the silver car, while Detective Kerr approached on the passenger side. Detective James testified the car had three occupants, and defendant was sitting in the back seat. Based on the number of people in the vehicle, Detective James radioed for additional officers.
Detective James asked the car's driver, Shawn Allen, for his driver's license and proof of insurance. Allen was unable to produce either of those items. Detective *498 James began to write Allen a traffic citation.[2] At that point, Detective Kerr told James he saw drug paraphernalia and suspicious substances on the front passenger floorboard, where Robert Jones was sitting. Detective Kerr testified he saw a plastic bag containing a white/brown powder which he believed was either cocaine or heroin. Kerr also saw a syringe and a packet of Kool-Aid on the floorboard.
The officers ordered the three men to exit the car and told them they were being detained. Detective James testified that he ran the three subjects' names on the police database and learned there were outstanding attachments on both defendant and Allen. Detective James arrested defendant and Allen on the warrants, handcuffed them, and advised them of their rights.
Deputy Eric Blandford testified that he searched defendant incident to his arrest. In defendant's right shoe he found a clear plastic bag containing yellow pills and several plastic bags containing white and off-white powder as well as a rock-like substance. Deputy Blandford turned those items over to Detective Kerr.
Detective Kerr testified he field-tested the substances recovered from the floorboard and from defendant, with the exception of the pills. The powder and rock-like substances tested negative for narcotics. Rather than perform chemical tests on the pills, Detective Kerr consulted a drug directory in order to identify them. Detective Kerr did not specify in his testimony what he determined the pills to be.
Daniel Waguespack testified at trial he is a forensic scientist with the Jefferson Parish Sheriffs Office. The trial court accepted him as an expert in the testing, analysis, and identification of controlled dangerous substances. Mr. Waguespack testified that in connection with this case, he examined nine round, yellowish, tablets marked R-34. He did not perform any chemical tests on the pills. Instead, he conducted a visual inspection. Based on the color and shape of the tablets and the numbering on them, Mr. Waguespack determined they were clonazepam, a Schedule IV drug. He included his findings in a lab report.
Mr. Waguespack testified he performed chemical tests on the other substances seized in this case, and those tests were negative for controlled dangerous substances. Mr. Waguespack found they consisted of caffeine, acetaminophen, aspirin, and soap.
By this appeal, defendant first argues the evidence at trial was insufficient to prove he possessed clonazepam, since the State's witnesses only performed visual inspections of the pills seized from his shoe, and no chemical testing was done. The State responds that the identification of a controlled dangerous substance at trial does not require direct scientific evidence when circumstantial evidence establishes the identity of the substance beyond a reasonable doubt. In this case, the State argues, the testimony at trial was sufficient to prove beyond a reasonable doubt that the pills recovered from defendant's shoe were clonazepam.
Mr. Waguespack, an expert in forensic chemistry, testified he has worked in that field for 40 years. He has been employed by the Jefferson Parish Sheriff's Office since 1994, and prior to that he worked in the New Orleans Police Department's Crime Laboratory. He has had extensive *499 specialized training, and has taught at the police academy.
Mr. Waguespack testified he did not perform any chemical tests on the pills. Upon performing a visual examination, he determined the pills looked alike, and they were manufactured pharmaceuticals. He consulted a logo index issued by the Drug Enforcement Administration and an internet website called Just Drug Identification. Based on the color and shape of the tablets, as well as the numbering on them, Mr. Waguespack determined they were clonazepam, a Schedule IV drug. Mr. Waguespack indicated in his Scientific Analysis Report that the tablets were "Positive for Clonazepam."
Like Mr. Waguespack, Detective Kerr used a reference book to identify the pills by their shape, color, and markings. However, the prosecutor failed to elicit from Detective Kerr what he determined the pills to be.
The constitutional standard for testing the sufficiency of the evidence, as enunciated in Jackson v. Virginia,[3] requires that a conviction be based on proof sufficient for any rational trier-of-fact, viewing the evidence in the light most favorable to the prosecution, to find the essential elements of the crime beyond a reasonable doubt. State v. Ortiz, 96-1609, p. 12 (La.10/21/97), 701 So. 2d 922, 930, cert, denied, 524 U.S. 943, 118 S. Ct. 2352, 141 L. Ed. 2d 722 (1998); State v. Miller, 06-451, pp. 7-8 (La.App. 5 Cir. 10/31/06), 945 So. 2d 773, 778. Where circumstantial evidence forms the basis of the conviction, the rule is, "assuming every fact to be proved that the evidence tends to prove, in order to convict, it must exclude every reasonable hypothesis of innocence." LSA-R.S. 15:438. This is not a separate test from the Jackson standard; rather, it provides a helpful basis for determining the existence of reasonable doubt. State v. McFarland, 07-26, p. 7 (La.App. 5 Cir. 5/29/07), 960 So. 2d 1142, 1146, writ denied, 07-1463 (La.1/7/08), 973 So. 2d 731. Ultimately, all evidence, both direct and circumstantial, must be sufficient to support the conclusion that the defendant is guilty beyond a reasonable doubt. Id.
To support a conviction for possession of a controlled dangerous substance, the State must prove that the defendant knowingly possessed an illegal drug. State v. Decay, 07-966, p. 7 (La.App. 5 Cir. 6/19/08), 989 So. 2d 132, 137, writ denied, 08-1634 (La.4/13/09), 5 So. 3d 161. The identity of the drug is an essential element of the charged offense. State in the Interest of J.W., 597 So. 2d 1056, 1058 (La.App. 2 Cir.1992); State v. James, 517 So. 2d 291, 293 (La.App. 1 Cir.1987).
Even without the benefit of direct scientific evidence, we find that the expert testimony of Mr. Waguespack was sufficient to show the pills contained clonazepam. The Louisiana Supreme Court has adopted the view of the federal courts that the "`government need not introduce scientific evidence to prove the identity of a substance... as long as there is sufficient lay testimony or circumstantial evidence from which a jury could find that a substance was identified beyond a reasonable doubt, the lack of scientific evidence does not warrant reversal.'" State v. Harris, 02-1589, p. 6 (La.5/20/03), 846 So. 2d 709, 713 (quoting United States v. Sanchez DeFundora, 893 F.2d 1173, 1175 (10th Cir.1990), cert. denied, 495 U.S. 939, 110 S. Ct. 2190, 109 L. Ed. 2d 518 (1990)). The supreme court further found, "[identification based upon familiarity through law enforcement coupled with present observation of the substance at hand will suffice to establish *500 the illicit nature of a suspected substance." Harris, 02-1589 at 6, 846 So.2d at 714 (citing United States v. Harrell, 737 F.2d 971, 978-79 (11th Cir.1984)).
Further, in a case factually similar to the instant matter, the Third Circuit found the evidence at trial was sufficient to support the defendant's conviction for possession with intent to distribute hydrocodone. State v. Carter, 07-1237 (La.App. 3 Cir. 4/9/08), 981 So. 2d 734, writ denied, 08-1083 (La.1/9/09), 998 So. 2d 712. In that case, officers recovered pills from under the back seat of a police car after the defendant exited the vehicle. Id., 07-1237 at 14, 981 So.2d at 743. At trial, an expert in forensic chemistry testified that the pills contained hydrocodone. He stated he had not performed chemical analysis on the pills, but had identified them by visual inspection and comparison to pictures in a book. Id., 07-1237 at 14, 981 So.2d at 744. Additionally, a police officer testified he had seen similar pills in the past in connection with his job, and that the pills at issue were hydrocodone pills. Id. Relying in part on State v. Harris, the Third Circuit found there was sufficient lay and expert testimony from which the jury could find beyond a reasonable doubt that the pills at issue were hydrocodone. Carter, 07-1237 at 16, 981 So.2d at 745.
Based on the foregoing, we conclude that the expert testimony of Mr. Waguespack was sufficient to support a finding beyond a reasonable doubt that the pills seized from defendant were clonazepam.
Defendant next argues the trial court erred in allowing the State to introduce evidence of the counterfeit substances retrieved from defendant's shoe, as those substances constituted inadmissible "other crimes" evidence. The State contends the evidence at issue was admissible as res gestae.
During a bench conference at the beginning of trial, defense counsel asked the court to prohibit any mention of the "bunk" substances seized from defendant's shoe. Defense counsel argued such mention would constitute inadmissible "other crimes" evidence. The prosecutor responded that in order to show that defendant possessed the clonazepam pills illegally (i.e., without a prescription), it was necessary for the State to explain the circumstances in which the officers found the pills. Defense counsel also pointed out that simple possession of counterfeit drugs is not a crime.[4] The Court initially ruled that the evidence at issue was inadmissible, since its prejudicial effect would outweigh its probative value. But after further consideration, the judge reversed himself and ruled that the evidence was admissible as res gestae, and that it was also admissible to show knowledge and intent. The court based its ruling on this Court's opinion in State v. Hopson, 97-509 (La.App. 5 Cir. 11/25/97), 703 So. 2d 767.
Generally, evidence of other crimes or bad acts committed by a criminal defendant is not admissible at trial. LSA-C.E. art. 404 B; State v. Prieur, 277 So. 2d 126, 128 (La.1973). But evidence of other crimes, wrongs, or acts may be introduced when it is independently relevant or when it relates to conduct, formerly referred to as res gestae, that "constitutes an integral part of the act or transaction that is the subject of the present proceeding." LSA-C.E. art. 404 B(1). In State v. Taylor, 01-1638, pp. 10-11 (La.1/14/03), 838 So. 2d 729, 741, cert. denied, 540 U.S. 1103, 124 S.Ct. *501 1036, 157 L. Ed. 2d 886 (2004), the Louisiana Supreme Court discussed the admissibility of "other crimes" evidence categorized as res gestae:
Res gestae events constituting other crimes are deemed admissible because they are so nearly connected to the charged offense that the state could not accurately present its case without reference to them. A close proximity in time and location is required between the charged offense and the other crimes evidence "to insure that `the purpose served by admission of other crimes evidence is not to depict defendant as a bad man, but rather to complete the story of the crime on trial by proving its immediate context of happenings near in time and place.'" State v. Colomb, 98-2813, p. 3 (La.10/1/99), 747 So. 2d 1074, 1076 (quoting State v. Haarala, 398 So. 2d 1093, 1098 (La. 1981)). The res gestae doctrine in Louisiana is broad and includes not only spontaneous utterances and declarations made before or after the commission of the crime, but also testimony of witnesses and police officers pertaining to what they heard or observed during or after the commission of the crime if a continuous chain of events is evident under the circumstances. State v. Huizar, 414 So. 2d 741, 748 (La.1982); State v. Kimble, 407 So. 2d 693, 698 (La.1981). In addition, as this court recently observed, integral act (res gestae) evidence in Louisiana incorporates a rule of narrative completeness without which the state's case would lose its "narrative momentum and cohesiveness, `with power not only to support conclusions but to sustain the willingness of jurors to draw the inferences, whatever they may be, necessary to reach an honest verdict.'" Colomb, 747 So.2d at 1076 (quoting Old Chief v. United States, 519 U.S. 172, 117 S. Ct. 644, 136 L. Ed. 2d 574 (1997)).
In the instant case, we find that the State showed the requisite connexity between the charged conduct and the uncharged conduct. The "bunk" substances at issue here were recovered together with the pills that were the subject of the instant charge. This Court has found evidence of other crimes or bad acts was admissible as res gestae under circumstances similar to those in this case.
In State v. Hopson, supra, police officers stopped the defendant for driving a vehicle without a license plate. The officers saw the defendant throw something out of the car's window. On further inspection, the officers found the defendant had discarded two envelopes containing marijuana and a rock of crack cocaine wrapped in plastic. Hopson, 97-509 at 2, 703 So.2d at 768. The trial court allowed the marijuana evidence to be admitted at the defendant's trial for possession of cocaine. Id. at 4, 703 So.2d at 770. An officer testified at trial that the rock of crack was two to four feet away from the envelopes. On appeal, the defendant argued the marijuana was improperly admitted at trial, as it was impermissible other crimes evidence. This Court found that the marijuana evidence and the testimony about it were admissible as res gestae. Id. at 5, 703 So.2d at 770.
In State v. Snavely, 99-1223 (La.App. 5 Cir. 4/12/00), 759 So. 2d 950, writ denied, 00-1439 (La.2/16/01), 785 So. 2d 840, officers found a handgun in the defendant's pocket after they arrested him for possession with intent to distribute cocaine. The defendant was tried on the cocaine charge, and the gun was admitted into evidence at his trial. This Court found that the evidence pertaining to the discovery of the gun constituted an integral part of the crime of possession with intent to distribute cocaine, and was thus admissible as res gestae. This Court noted that the "evidence *502 was used merely to complete the story of the crime on trial and allow the state to accurately present its case." Snavely 99-1223 at 7, 759 So.2d at 956.
In State v. Colomb, supra, the Louisiana Supreme Court found that the marijuana recovered from the defendant's person at the same time officers discovered a gun in the van he was driving was admissible as res gestae evidence at the defendant's trial for possession of a firearm by a convicted felon. The supreme court reasoned that
evidence of the defendant's marijuana possession contemporaneous with the police discovery of the firearm in his truck provided not only narrative completeness to a case which began as a narcotics stop but also formed an integral part of the context facts in which jurors evaluated the state's case for defendant's exercise of dominion and control over the weapon found under the passenger seat of the van.
Colomb, 98-2813 at 4, 747 So.2d at 1076.
Based on the foregoing, we find the evidence at issue was admissible as res gestae. However, even if the trial court erred in allowing admission of the counterfeit materials, the erroneous admission of other crimes evidence is subject to harmless error analysis. State v. Williams, 05-318, p. 4 (La.1/17/06), 921 So. 2d 1033, 1036, writ denied, 06-0973 (La.11/3/06), 940 So. 2d 654. An error is harmless when the verdict is "surely unattributable to the error." Id. The evidence against defendant at trial was overwhelming, even without the admission of the counterfeit substances. Uncontroverted testimony showed the clonazepam was found inside of defendant's shoe. In view of the strong evidence against defendant, it can be said that any error the trial court made in admitting the counterfeit substances into evidence was harmless beyond a reasonable doubt.
Defendant requests an error patent review. This Court routinely reviews the record for errors patent in accordance with LSA-C.Cr.P. art. 920, regardless of whether defendant makes such a request. State v. Oliveaux, 312 So. 2d 337 (La.1975); State v. Weiland, 556 So. 2d 175 (La.App. 5 Cir. 1990). Upon inspection of the record, no errors patent were found.
Accordingly, for the reasons assigned herein, the conviction and sentence of defendant, John E. Murphy, are affirmed.
AFFIRMED.
NOTES
[1] It appears from the record that the State subsequently filed a habitual offender bill of information in this case. The habitual offender proceedings are not included in the record, and they are not part of this appeal.
[2] Allen was ultimately cited for failure to wear a seatbelt, driving without a license, and failure to provide proof of insurance.
[3] Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979).
[4] While it is not illegal under Louisiana law to simply possess "bunk," or counterfeit drugs, it is illegal to possess with intent to distribute counterfeit narcotics. See, e.g., LSA-R.S. 40:967 A(2); LSA-R.S. 40:971.1 | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595014/ | 954 So.2d 455 (2006)
Billy ESTES and Phillys Estes, Appellants,
v.
Daniel BRADLEY, Jerome Schmidt and Bonita Schmidt, Appellees.
Jerome Schmidt and Bonita Schmidt, Appellants,
v.
Daniel Bradley, Appellee.
Joe Schicke and Jean Schicke, Appellants,
v.
Jerome Schmidt and Bonita Schmidt, Appellees.
Nos. 2004-CA-02124-COA, 2005-CA-01264-COA.
Court of Appeals of Mississippi.
December 12, 2006.
Rehearing Denied April 24, 2007.
*458 Phil R. Hinton, Corinth, attorney for appellants in No. 2004-CA-02124-COA.
John A. Ferrell, Booneville, Donald Ray Downs, Corinth, William Wayne Smith, Booneville, attorneys for appellees in No. 2004-CA-02124-COA.
Tommy Dexter Cadle, Kenneth Eugene Floyd, attorneys for appellants in No. 2005-CA-01264-COA.
William Wayne Smith, Booneville, attorney for appellees in No. 2005-CA-01264-COA.
Before MYERS, P.J., SOUTHWICK and BARNES, JJ.
SOUTHWICK, J., for the Court.
¶ 1. The suit involves claims arising from defects in the construction of a home. The current owner (the third since construction) sued both of the previous owners as well as the contractor. Cross-claims were then filed. Claims against the original owners were dismissed, and summary judgments were granted the contractor. Other claims remain pending below.
¶ 2. The trial court ruled that the statute of repose applicable to claims regarding construction defects had run and barred claims against the builder and against the original owners. Further, the court found no personal jurisdiction existed for the current and second owners' claims against the original owners, who now reside out-of-state. We disagree with the analysis on *459 the statute of repose and on in personam jurisdiction. We therefore reverse those judgments and remand. However, the original owners' appeal of summary judgment denying their claims against the builder has not been perfected. We dismiss that appeal.
FACTS
¶ 3. Jerome and Bonita Schmidt moved to Corinth, Mississippi in early 1994. The Schmidts purchased a lot in Corinth and contracted with Daniel Bradley to construct a house on the lot. The Schmidts moved into the completed home in the latter part of October 1994. In 1996, the Schmidts discovered that a brick above a window on the north side of the house had become loose. They asked Bradley to repair the problem. In February or December 1996, Bradley went to the Schmidts' home, dug up the foundation, poured concrete and placed concrete piers below the house. Jerome Schmidt claimed that he did not know the specifics of Bradley's work on the home, though he knew the work was related to the loose brick and was for "fortifying" the foundation. Later, Schmidt discovered a crack about one-quarter of an inch in width in the floor of the house's game room. The Schmidts again called Bradley, and Bradley made repairs.
¶ 4. In 1997, the home was sold to Caterpillar, Inc., Jerome Schmidt's employer, and the family moved to Illinois. The Schmidts executed what in essence was a blank warranty deed and special power of attorney naming an agent to execute documents in connection with the eventual sale of the home. This document was dated on October 17, 1997. In 1998, Joe and Jean Schicke purchased the home. Their names were inserted into the warranty deed earlier signed by the Schmidts. The Schickes received a "homeowner's disclosure statement" executed by the Schmidts on October 9, 1997 in which the Schmidts denied knowledge of any defects in the foundation, slabs, or floors of the house. Caterpillar is not a party in this litigation.
¶ 5. In 2001, Billy Estes contracted to purchase the home from the Schickes. Billy and Phillys Estes are the plaintiffs. Attached to the contract was a "seller's disclosure statement" in which the Schickes asserted that they were unaware of any prior repairs made to the foundation of the home. They also stated that the house's foundation was not in need of repair. The Esteses executed warranty deeds on June 29, 2001. Later, with the aid of engineers, the Esteses discovered a number of defects in the foundation which they allege were known to the Schickes but not disclosed.
¶ 6. The Esteses filed suit on June 27, 2002 naming as defendants their sellers, the Schickes; the original owners, the Schmidts; and the builder, Bradley. The Esteses claimed that the Schickes made fraudulent representations that the house was in good condition, when they knew that there were "material and substantial defects and deficiencies in the foundation." Also claimed was that the Schmidts knew of defects in the house's foundation when they placed the house on the market, and their disclosure statement misrepresented to prospective buyers the condition of the house. The Esteses also alleged that Bradley made repairs in such a way as to hide the flaws in the foundation.
¶ 7. The Schickes (second owners) cross-claimed against their sellers, the Schmidts, for indemnification. The Schmidts made a cross-claim against the builder for indemnification.
¶ 8. The court granted summary judgment or dismissed certain claims, as follows:
*460 (1) On September 17, 2004, summary judgment was granted against the claims by the present owners, the Esteses, against the builder Bradley. No certification of this judgment as final for purposes of appeal was then made, but that certification was entered on September 11, 2006.
(2) On September 17, 2004, an order of dismissal was entered against the claims brought by the second and third owners, the Schickes and the Esteses, against the original owners, the Schmidts. A certification that this judgment should be treated as final was entered as part of the original order.
(3) On December 2, 2004, summary judgment was granted the builder Bradley against the claim brought by the Schmidts, who had contracted with Bradley for the construction of the home. There is a still-pending motion at the trial court for findings on this summary judgment, and there is no Rule 54(b) certification. This judgment is not properly before us.
¶ 9. The Esteses and the Schickes are properly before us on their challenges to the dismissal of their claims against the original owner, the Schmidts. The Esteses also have validly presented their appeal that entering summary judgment on their claims against the builder Bradley was error.
DISCUSSION
I. Dismissal of Estes claim against Schmidt
¶ 10. The Esteses' assert error in the dismissal of the claims against the Schmidts. We will discuss the personal jurisdiction point first and later address the statute of repose.
¶ 11. The Schmidts are now residents of Illinois. They properly raised the absence of personal jurisdiction in their first responsive pleading. M.R.C.P. 12(h)(1). In determining whether one of our state courts may exercise personal jurisdiction over a nonresident defendant, we first examine whether the defendant is amenable to suit by virtue of the Mississippi "long-arm statute." Horne v. Mobile Area Water & Sewer Sys., 897 So.2d 972, 976 (Miss.2004). If the defendant is included within the reach of the statute, we examine whether the grant of personal jurisdiction is consistent with the due process clauses of both the state and federal constitutions. Id.
A.1. Long-arm statute
¶ 12. In the complaint, the Esteses alleged that when "Mr. and Mrs. Schmidt, placed the real estate in question on the market, they executed and delivered to prospective buyers, including the Defendants, Mr. and Mrs. Schicke, a Seller's Disclosure Statement denying knowledge of the defects to the property which were either made by them or with their knowledge." The Schmidts contend that this language does not state a claim by the Esteses against them since it only alleges that the Schmidts made a misrepresentation to their buyers, the Schickes, and not that they made a misrepresentation to the Estes plaintiffs, who were the next buyers.
¶ 13. Measuring whether these assertions are enough under the Mississippi long-arm statute starts with examining the relevant language of the statute:
Any nonresident person, firm, general or limited partnership, or any foreign or other corporation not qualified under the Constitution and laws of this state as to doing business herein, who shall make a contract with a resident of this state to be performed in whole or in part by any party in this state, or who shall commit a tort in whole or in part in this state *461 against a resident or nonresident of this state, or who shall do any business or perform any character of work or service in this state, shall by such act or acts be deemed to be doing business in Mississippi and shall thereby be subjected to the jurisdiction of the courts of this state.
Miss.Code Ann. § 13-3-57 (Rev.2002).
¶ 14. Under this statute, a tort is committed in Mississippi if the acts that cause the injury occur in this state, or if the injury itself occurs here. Mobile Area Water & Sewer System, 897 So.2d at 977. The current owners, the Esteses, contend in their first amended complaint that the Schmidts committed the tort of fraudulent or negligent misrepresentation. There is no dispute that all actions that would support the commission of such a tort would have occurred in Mississippi, and the injury arose here too. The objection raised by the Illinois-residing Schmidts, who moved out of state in 1997 even before selling the house, is that the Estes complaint does not allege they misrepresented anything to anyone except to the Schickes. A claim of a tort by the Schmidts against the Esteses is more explicit in an offered second amended complaint, though no ruling on the 2004 motion for leave to file that amendment was ever made because of the judgment dismissing the claim. The second amended complaint alleged that the failure of the Schmidts to make accurate disclosure, and their complicity with the builder Bradley in making hidden repairs that did not cure the defects, meant that "the Schickes and therefore the [Esteses] did not have information which the Schmidts, the Schickes and the realtor had a duty to disclose" when the Esteses bought the property.
¶ 15. The second amended complaint would have fleshed out the claim that misrepresentations by the Schmidts prevented their buyers from being able to reveal the foundation defects when they later sold to the plaintiffs. This in essence is a claim of a continuing or renewed tort arising from the effects of an earlier failure to disclose. There are legal authorities relevant to whether faulty information provided by a party in one transaction can be the basis of liability if relied upon in a later transaction by someone else. E.g., Strickland v. Rossini, 589 So.2d 1268 (Miss.1991); Hosford v. McKissack, 589 So.2d 108 (Miss.1991); RESTATEMENT (2D) OF TORTS 552 (1977). These authorities appear to conclude that a misrepresentation may be the basis for a claim when used in a transaction in which the creator of the information (1) intends it to be used, or (2) knows or should know that the recipient intends it to be used, or (3) it is used in a substantially similar transaction to those described in (1) and (2). RESTATEMENT (2D) OF TORTS § 552, comment j.
¶ 16. We do not decide whether the Esteses' complaint describes a tort by the Schmidts against them. That is because their motion to dismiss was under Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. They did not allege a failure to state a claim under Rule 12(b)(6). Regardless of whether the complaint validly asserted that the Schmidts committed a tort against the plaintiffs, it did assert that the Schmidts committed a tort in Mississippi. Under earlier versions of the long-arm statute, its applicability was limited to "actions or proceedings accrued or accruing from such act or acts, or arising from or growing out of such contract or tort, or as an incident thereto." 1980 Miss.Laws ch. 437, § 1, language deleted in 1991 Miss. Laws ch. 573, § 98, codified Miss. Code Ann. § 13-3-57 (Rev.2002). The removal of the language regarding a nexus between the tort that confers personal jurisdiction and the claim made in the suit makes a nexus unnecessary. Due process *462 still must be satisfied if jurisdiction in this situation is allowed.
¶ 17. Having asserted that the Schmidts committed a Mississippi tort, regardless of whether it was a tort against the Esteses, the complaint sustains personal jurisdiction under the long-arm statute.
A.2. Due process
¶ 18. Since the long-arm statute would allow personal jurisdiction over the claim, we now turn to whether the out-of-state defendant's due process rights would be infringed.
The United States Supreme Court has held: "[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" A defendant has "minimum contacts" with a state if "the defendant has `purposefully directed' his activities at residents of the forum and the litigation results from alleged injuries that `arise out of or relate to' those activities."
Horne, 897 So.2d at 979 (internal citations omitted).
¶ 19. The Schmidts do not seriously contest that, at the time the alleged misrepresentation was made, they had substantial contacts with Mississippi. The Schmidts lived in Mississippi for several years, owned the house in question, and executed the disclosure statement which is at the heart of the present litigation. In essence, they allege that allowing a claim that they tortiously wronged the Schickes to be the source of personal jurisdiction in a suit against them by the Esteses is contrary to "traditional notions of fair play and substantial justice." We find, though, no unfairness in requiring that the Schmidts respond to the claims of the present homeowner since the Schmidts will need to respond to the second owners' claims involving the same property and the same alleged misconduct.
¶ 20. Personal jurisdiction over the Schmidts exists. We reverse that judgment.
B. Statute of repose
¶ 21. The trial court also based its dismissal of the Esteses' claim against the Schmidts because it was time-barred under the following statute:
No action may be brought to recover damages for injury to property, real or personal, or for an injury to the person, arising out of any deficiency in the design, planning, supervision or observation of construction, or construction of an improvement to real property, and no action may be brought for contribution or indemnity for damages sustained on account of such injury except by prior written agreement providing for such contribution or indemnity, against any person, firm or corporation performing or furnishing the design, planning, supervision of construction or construction of such improvement to real property more than six (6) years after the written acceptance or actual occupancy or use, whichever occurs first, of such improvement by the owner thereof.
Miss.Code Ann. § 15-1-41 (Rev.2003). The Schmidt's argument is that since they supplied their builder Bradley with house plans from a magazine, that they were engaged in "design, planning, supervision or observation of construction, or construction of an improvement to real property" in the present case. To the contrary, the statute protects "parties such as architects, contractors, and engineers who are *463 engaged in the construction business." McIntyre v. Farrel Corp., 680 So.2d 858, 861 (Miss.1996). The Esteses claim that the Schmidts misrepresented the condition of the home, not that they defectively designed it. The misrepresentation claim is not in repose.
¶ 22. Alternatively, the Schmidts argue that this claim should be time-barred pursuant to the general three-year statute of limitations. Miss.Code Ann. § 15-1-49 (Rev.2003). The trial judge never ruled on the basis of this statute, as he instead applied the statute of repose for construction claims. We find potential fact questions of the time when the plaintiff reasonably should be held to have knowledge of the alleged misrepresentation. Owens-Illinois, Inc. v. Edwards, 573 So.2d 704, 709 (Miss.1990). Neither party's brief gives meaningful attention to the issues of the general limitations statute. This statute is appropriately addressed in the first instance below on remand.
C. Conclusion
¶ 23. We find that the trial court erred in dismissing the Esteses' claims against the Schmidts on the grounds raised by this defendant. We reverse and remand this judgment.
II. Summary Judgment for Bradley against Estes
¶ 24. In addition to the grant of judgment to the Schmidts, the trial court also granted summary judgment to the builder Bradley against the claims of the second and of the current owners, the Schickes and the Esteses, respectively. The court applied the statute of repose. Miss.Code Ann. § 15-1-41 (Rev.2003). Bradley as the builder is a proper party at least to raise this statute. In this section of the opinion, we will discuss only the dismissal of the Schicke claims.
¶ 25. There is no doubt that more than six years passed after actual occupancy of this residence before suit was filed. The statute of repose applies even if the claimant had no reason to know of the defect in the structure before the period for suit expired. Reich v. Jesco, Inc., 526 So.2d 550, 552 (Miss.1988). The legal dispute concerns whether the running of the statutory period should nonetheless be stopped because of alleged misrepresentations and concealment. In one case, the issue that fraudulent concealment would toll the running of this statute of repose was not resolved because no authority was cited. Ferrell v. River City Roofing, Inc., 912 So.2d 448, 456 (Miss.2005). The court nonetheless examined whether there was any evidence of such concealment and found none. Id. at 456-57. Still not having any clear authority, we also move on to whether there is any evidence that Bradley concealed something relevant to the claims against him.
¶ 26. Since the trial court granted summary judgment and did not dismiss based on the pleadings, we re-examine the evidence that was presented in the light most favorable to the non-moving party. Baldwin v. Holliman, 913 So.2d 400, 406 (Miss.Ct.App.2005). Summary judgment is proper 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." M.R.C.P. 56(c).
¶ 27. There is no evidence that Bradley was involved with the alleged misrepresentations by the Schmidts. Instead, the Esteses argue that Bradley made repairs after construction that attempted to hide a serious foundation problem. Bradley said the work was done in February 1996, while Schmidt's deposition said it may have been in December 1996. The latter date is less than six years prior to the suit. Bradley *464 discussed the 1996 work on the foundation, which included putting down piers and jacking up a part of the house that had sunk. Bradley said that he noticed the hairline cracks in some walls of the house, and made these repairs without telling anyone. Bradley said that the digging to allow the piers was done with a shovel, and then said that a backhoe may also have been used. Some dirt was taken from beneath the footing for the foundation, and the pier was then poured. Other fill was also added. There was also, apparently later, an effort to repair a crack in the slab, which involved pulling up the floor covering and laying a concrete patch.
¶ 28. Bradley's 1996 work has been characterized as negatively as possible, including that he "snuck in there" to make repairs. There is evidence that Bradley initiated repairs in 1996 without first discussing the work with the then-owners, the Schmidts. There is a dispute as to whether the work was done in February or December, so it is possible that suit was brought within six years of the work. The new work would independently be subject to the statute of repose if, among other things, the work was "an amelioration in [the improvement's] condition, amounting to more than mere repairs . . . and intended to enhance its value, beauty or utility. . . ." Ferrell, 912 So.2d at 454 (new roof was an "improvement"). There was not proof sufficient to grant summary judgment that no harm arose solely from the 1996 work, that the work was definitely a repair and not a significant "amelioration," and that the work occurred more than six years before suit.
¶ 29. Of broader significance is the relevance of Bradley's alleged fraudulent concealment of a defect. There was testimony about somewhat secretive actions in 1996 to correct the very problem that underlies the complaints here, namely, a faulty foundation. The argument posed is that the poorly explained repairs constitute evidence of concealment. What we see generically, though, is work done on something that was not to be left exposed, so a necessary covering over of the work occurred. These facts disclose one of the immediate problems with trying to apply concealment tolling to a statute that affects construction work that often is hidden, to the extent that the next part of the construction will hide a flaw. If a contractor is aware during initial construction that there is a large or small defect in the foundation yet proceeds to build the remainder of the structure on top of it, is the statute of repose unusable because of intentional concealment? To open the door to extending the statute of repose due to any evidence of concealment is to eliminate any repose on a large number of construction projects, at least without a trial court's making a quite exhaustive factual inquiry as to a defendant's knowledge and intent.
¶ 30. Certainly the legislature may write a statute that in fact creates only a very limited bar to a construction claim. It might provide that there is no repose relating to any defect recognized by a builder, architect, or other relevant party at the time of construction yet which was allowed to be covered over. Our statute of repose has been interpreted much more broadly.
A statute of limitation is distinguishable from a statute of repose in the sense that the latter "cuts off the right of action after a specified period of time measured from the delivery of a product or the completion of work. [Statutes of repose] do so regardless of the time of the accrual of the cause of action or of notice of the invasion of a legal right." Universal Engineering Corp. v. Perez, 451 So.2d 463, 465 (Fla.1984).
*465 Evans v. Boyle Flying Serv., 680 So.2d 821, 827 (Miss.1996).
¶ 31. The Supreme Court once made some general comments in a statute of repose precedent about concealment but was only describing the plaintiff's arguments without applying them to this statute. The court stated that to prove "fraudulent concealment in this state, there must be shown some act or conduct of an affirmative nature designed to prevent and which does prevent discovery of the claim." Reich, 526 So.2d at 552. The court cited statutory authority:
If a person liable to any personal action shall fraudulently conceal the cause of action from the knowledge of the person entitled thereto, the cause of action shall be deemed to have first accrued at, and not before, the time at which such fraud shall be, or with reasonable diligence might have been, first known or discovered.
Miss.Code Ann. § 15-1-67 (Rev.2003). This statute tolls the period in which to sue if there is concealment of a "cause of action." Inconsistently, a statute of repose will bar a claim for defects even if they are unknown during the time period that the statute is running. Smith v. Fluor Corp., 514 So.2d 1227, 1231-32 (Miss.1987). The statute is like a warranty, which expires even if there is a yet-undiscovered problem. Reich, 526 So.2d at 552. Section 15-1-67 says that the cause of action accrues on the date that the effect of the concealment ends. The statute of repose operates independently of causes of action and by its nature bars hidden claims. Accruals of causes of action are irrelevant to its operation. Thus, the concealment statute will not affect the statute of repose.
¶ 32. As to any defects arising from the initial construction, the statute of repose bars claims against Bradley. We find the evidence to be unclear, though, as to whether some defects may have arisen due to the 1996 work, and that the six-year statute of repose might not bar such claims. We therefore reverse the summary judgments granted Bradley to the extent that the Schickes or Esteses present evidence that some independent injury arose strictly due to the work done within six years of suit being filed, and remand for further proceedings.
III. Summary Judgment for the Schmidts against the Schickes
¶ 33. In the same September 17, 2004 order that granted the Schmidts judgment against the current owners of the house, the Esteses, the court granted judgment for the Schmidts against the second owners, the Schickes. After the decision, the Schickes filed a motion for the trial judge to make findings to explain his fairly short judgment. The court denied that motion on May 26, 2005. It was only after that denial that the Schickes filed their notice of appeal. We have entered an order consolidating the Schickes later-filed appeal with the earlier appeals by the Esteses and the Schmidts.
A. Refusal to make detailed findings of fact and conclusions of law
¶ 34. The only issue presented to us by the Schickes is that the trial court erred in refusing to enter more detailed findings of fact and conclusions of law. The Schickes filed a timely motion for fact-findings, had their motion denied, and now argue this refusal constitutes reversible error. The rule relied upon by the Schickes states that in "actions tried upon the facts without a jury the court may, and shall upon request of any party to the suit or when required by these rules, find the facts specially and state separately its conclusions of law" in support of its judgment. M.R.C.P. 52(a).
*466 ¶ 35. We find no authority to make Rule 52(a) applicable to summary judgments or other matters that have not gone to trial. Fact-finding after a bench trial reveals how the evidence was weighed and thereby allows an appellate court to review whether any defect in the evaluation of the evidence exists. In the de novo review applicable to appeals from summary judgment or dismissals on jurisdictional grounds, there is no discretionary fact-finding. Indeed, if on consideration of a motion for summary judgment it is determined that there are facts to be tried, the motion must be denied. M.R.C.P. 56(c).
¶ 36. Having neither been cited to any contrary authority nor finding any, we conclude that Rule 52 applies only to decisions made after some proceeding in which contested facts need to be evaluated. It does not apply to a summary judgment. The applicability of Rule 52 is the premise for the only argument made by the Schickes on appeal. We find no reversible error in the refusal to enter further findings than those that appeared in the initial order on summary judgment.
¶ 37. The Schicke appeal concerns the judgment in their cross-claim for indemnity against the Schmidts. The trial court disposed of the claims of both the Esteses and the Schickes against the Schmidts in the same order of September 17, 2004. We have reversed the part of the judgment affecting the Esteses, finding the later buyers properly asserted personal jurisdiction because of the alleged tort committed by the Schmidts against the Schickes. Even more clearly, the Schickes may use the claimed misrepresentation made to them as a basis for personal jurisdiction in their suit against the Schmidts. The Schickes initially seek a better understanding of the trial court's reasoning so that, as the Schicke brief states, a more effective challenge could then be made to the dismissal. The Schickes were not knowingly forfeiting their right to challenge what occurred.
¶ 38. We find it an overly artificial result to affirm the judgment against the Schickes because of a shortcoming in their statement of the appellate issues after we have found that there was personal jurisdiction for other parties' claims due to the alleged tort against the Schickes. This court has the right when an issue has not been identified in an appellant's brief, to "notice a plain error not identified or distinctly specified." M.R.A.P. 28(a)(3). In the unusual posture of the Schicke appeal, we conclude that we should exercise our discretion under this rule. We will analyze the two grounds used by the trial court to dismiss the Schickes' claims and determine whether to reverse.
B. Personal jurisdiction
¶ 39. The trial court concluded that there was no personal jurisdiction for the claims of either the Esteses or the Schickes against the non-resident Schmidts. As we discussed earlier, a resolution of this personal jurisdiction issue requires consideration of whether the long-arm statute would allow the claim because the defendant committed a tort in the state against a resident, and then whether due process rights are violated by allowing suit here. Horne, 897 So.2d at 976.
¶ 40. We have already discussed these issues when we reviewed personal jurisdiction for the claims of the Esteses against the Schmidts. The long-arm statute will also allow the Schickes' claim that the Schmidts made misrepresentations in a transaction with them, even though the indemnity claim is contingent on the Schickes' first being found liable to another party.
*467 ¶ 41. Even though the long-arm statute would allow personal jurisdiction over the claim, the out-of-state defendant's due process rights must not be infringed. As with the claims by the Esteses, we find no offense to "traditional notions of fair play and substantial justice" by allowing this claim. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
¶ 42. There is personal jurisdiction over the Schickes' claim against the Schmidts.
C. Application of statute of repose to the Schickes' claim against the Schmidts
¶ 43. The trial court also dismissed the Schickes' claim against the Schmidts because it was barred under the statute of repose. For the same reason that we rejected this ground for dismissal of the claim made by the Esteses against the Schmidts, we conclude that the Schickes' claims against the Schmidts should not have been dismissed. The statute of repose sets a definite time period starting with completion of a real property improvement in which to complain of defects. Those protected by that statute are those who have been responsible for the "design, planning, supervision or observation of construction, or construction" of the improvement. Miss.Code Ann. § 15-1-41. We also do not analyze the general three-year statute of limitations since there was no appreciable factual presentation and no ruling on that statute below. Miss.Code Ann. § 15-1-49 (Rev.2003).
D. Conclusion
¶ 44. We find plain error in the trial court's reliance on an absence of personal jurisdiction and the statute of repose to dismiss the Schickes' claims against the Schmidts. We reverse and remand.
IV. Summary Judgment for Bradley against the Schmidts
¶ 45. The Schmidts also have filed an appeal to contest the dismissal of their claims based on the statute of repose against the builder Bradley. Summary judgment was granted Bradley on the Schmidts' claims on December 2, 2004. On December 13, 2004, the Schmidts moved for findings of fact on this order. On the same day, the Schmidts also filed a notice of appeal. After we had evaluated some of the procedural issues raised by the appeals, we entered an order on June 30, 2006, pointing out certain defects and requesting supplementation of the appellate record with any orders that resolved certain pending motions. In response, the trial court entered a helpful order which we have already described. That order referred to the judgment dated September 17, 2004, filed on September 23, involving the Estes and Schicke claims against Daniel Bradley. No supplemental order was entered and presented to us involving the later Schmidt judgment of December 2, 2004, against which a motion for findings is still pending, and for which no Rule 54(b) certification has been made. Of some relevance, perhaps, the trial court on September 11, 2006, when it referred to the judgments filed on September 23, 2004, and dated September 17, said that those judgments were "final and appealable . . . as to the Defendant Daniel Bradley, and as to all claims against him." It appears to us that the parties and trial court were not considering that there was another judgment that also should be mentioned, and the pending motions regarding it should be resolved.
¶ 46. Because the trial court's December 2004 order did not adjudicate all of the claims of all the parties, and did not contain an "expressed determination that there is no just reason for delay," it was *468 purely interlocutory, subject to revision, and is not an appealable judgment. M.R.C.P. 54(b); see Salts v. Gulf Nat. Life Ins. Co., 849 So.2d 848, 850-51 (Miss.2002).
¶ 47. The judgment that resolved the Schmidts' claims against Bradley is not before the court. Since the judgment favoring Bradley over the claims made by the Schmidts is not final, it remains subject to revision at any time before final judgment. M.R.C.P. 54(b). The trial court can consider the proper remedies in light of the remand of the remainder of the suit.
¶ 48. THE JUDGMENTS OF THE CIRCUIT COURT OF ALCORN COUNTY OF SEPTEMBER 17, 2004, DISMISSING THE CLAIMS OF BILLY AND PHILLYS ESTES AGAINST DANIEL BRADLEY, AND DISMISSING THE CLAIMS OF BILLY AND PHILLYS ESTES AGAINST JEROME AND BONITA SCHMIDT, ARE REVERSED AND THE CAUSES ARE REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. ALL COSTS OF THOSE APPEALS ARE ASSESSED TO THE ESTESES. THE APPEAL OF THE JUDGMENT OF DECEMBER 2, 2004, DISMISSING THE CLAIMS OF JEROME AND BONITA SCHMIDT AGAINST DANIEL BRADLEY IS DISMISSED, AND ALL COSTS OF THAT APPEAL ARE ASSESSED TO THE SCHMIDTS. THE JUDGMENT OF THE CIRCUIT COURT OF ALCORN COUNTY OF MAY 25, 2005, DISMISSING THE CLAIMS OF JOE AND JEAN SCHICKE AGAINST JEROME AND BONITA SCHMIDT, IS REVERSED AND THE CAUSE IS REMANDED FOR PROCEEDINGS CONSISTENT WITH THIS OPINION. ALL COSTS OF THAT APPEAL ARE ASSESSED TO THE SCHMIDTS.
KING, C.J., LEE AND MYERS, P.JJ., IRVING, CHANDLER, GRIFFIS, BARNES, ISHEE AND ROBERTS, JJ., CONCUR. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595045/ | 28 So. 3d 1011 (2010)
Paula Horn GREENLAND
v.
Richard L. GREENLAND.
No. 2010-C-0004.
Supreme Court of Louisiana.
March 5, 2010.
Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1342159/ | 295 S.E.2d 912 (1982)
STATE ex rel. A. James MANCHIN, Secretary of State, etc.
v.
James E. LIVELY, et al.
No. 15599.
Supreme Court of Appeals of West Virginia.
September 20, 1982.
*913 Timothy N. Barber, Chauncey H. Browning, Jr., Atty. Gen., Charleston, for petitioner.
Gene Carte, Asst. Pros. Atty. and Paul M. Blake, Jr., Pros. Atty., Fayetteville, for respondents.
MILLER, Chief Justice:
This is an original petition for a writ of mandamus in which the petitioner, Secretary of State A. James Manchin, requests that we require the respondents to recount the votes in the Fayette County June primary election in compliance with the procedures required in W.Va.Code, 3-4A-28(4) [1982]. Respondents contend that the petitioner has no standing to bring this action and that because the effective date of the statutory changes occurred after the June 1, 1982 primary, the new statute is not controlling. We disagree with respondents' position.[1]
On March 13, 1982, the West Virginia Legislature amended Article 4A of Chapter 3 of the West Virginia Code. Among the changes, the new law provides in Section 28(4) that in any requested recount, where there has been electronic voting, five percent of the precincts shall be randomly selected and the ballot cards manually counted.
The effective date of the new act, which was June 11, 1982, was ninety days from passage. Proximate to that date, a candidate for the State Senate, Andrew McClung, requested a recount and that the recount be conducted under the requirements of the newly effective provision of W.Va.Code, 3-4A-28(4). Thereafter, the Secretary of State was contacted and, being of the view that the recount provision of the new act was applicable, the Secretary of State brought this action in his capacity as chief elections official under W.Va.Code, 3-1A-6, seeking to compel enforcement of the new Code provision.[2]
I. STANDING
We have recently delineated the function and use of the writ of mandamus and have noted that cases involving election controversies are frequently the subject of mandamus proceedings due to a need for prompt disposition. Smith v. The W.Va. State Board of Education, W.Va., 295 S.E.2d 680 (1982). E.g., State ex rel. Bromelow v. Daniel, W.Va., 258 S.E.2d 119 (1979); State ex rel. Maloney v. McCartney, W.Va., 223 S.E.2d 607 (1976), appeal dismissed, Moore v. McCartney, 425 U.S. 946, 96 S. Ct. 1689, 48 L. Ed. 2d 190; State ex rel. Cline v. Hatfield, 145 W.Va. 611, 116 S.E.2d 703 (1960).
Whether the Secretary of State has standing to obtain what amounts to a construction of the applicability of the new election statute is essentially resolved by *914 examining his official duties. He is denominated in W.Va.Code, 3-1A-6, as "the chief election official of the State." Under this Code provision, he has the power and duty to "investigate the administration of election laws" and "[i]t shall be his further duty to advise with election officials."[3] Furthermore, the Secretary of State is given under this statute, after consultation with the State election commission, the authority "to make, amend and rescind such rules, regulations and orders as may be necessary to carry out the policies of the Legislature" as they pertain to the election laws. The statute also goes on to provide that all election officials shall abide by such regulations and orders.[4]
It is apparent that the Legislature, by designating the Secretary of State as the chief election official and by recognizing that his office should advise local election officials as to the election laws, intended to give him some position or standing in the election law field. There are obviously those occasions when local election officials will seek his guidance as to proper election *915 practices or interpretations of the election laws. Where, as here, there exists some ambiguity as to whether a given provision of the election law is applicable, we believe that it is only common sense to permit the Secretary of State to have standing to resolve the question by bringing an appropriate action. Moreover, as stated in 67 C.J.S. Officers § 250 (1978), "[g]enerally, public officers have capacity to sue commensurate with their public trust or duties without express statutory authority."
The general reason advanced for the above-stated rule is that the capacity to sue is an important incident to the duties of public officers and it is often necessary that such an official be able to ensure that he is acting properly by seeking court guidance. E.g., Carter v. Blaine Casualty Investment Company, 45 F.2d 643 (D.Idaho 1930); Auditor General v. Lake George & Michigan Railroad Company, 82 Mich. 426, 46 N.W. 730 (1890); City of Wilburton v. King, 162 Okl. 32, 18 P.2d 1075 (1933); Industrial Accident Board v. Texas Workmen's Compensation Assigned Risk Pool, 490 S.W.2d 956 (Tex.Civ.App.1973). In State ex rel. Carman v. Sims, 145 W.Va. 289, 115 S.E.2d 140 (1960), we permitted the West Virginia State Tax Commissioner to bring an original mandamus in this Court against the auditor to compel payment of certain travel vouchers submitted by employees of the tax commissioner.
Of particular relevance is the case of Brown v. Superior Court of Los Angeles County, 5 Cal. 3d 509, 487 P.2d 1224, 96 Cal. Rptr. 584 (1971), where the Secretary of State of California brought an original mandamus in the California Supreme Court to challenge a ruling that had declared an election statute to be unconstitutional. The court recognized that the Secretary of State had a beneficial standing in his role of chief election official which required him to advise other election officials on the meaning of the election laws. The court concluded that this role necessitated his ability to obtain court interpretation of election laws in order to properly administer them:
"His beneficial interest is amply demonstrated by a showing that he bears overall responsibility for administering the disclosure laws the constitutionality of which is now challenged. The uncertainty engendered by the respondent court's order of dismissal requires final resolution in order that the Secretary of State may be properly and fully informed with respect to these public responsibilities." 5 Cal.3d at 514, 487 P.2d at 1227, 96 Cal. Rptr. 587.
We, therefore, conclude that, under the foregoing authorities, the Secretary of State of West Virginia does have standing to bring an action to obtain a constructive enforcement of the State's election laws by virtue of his role as chief election official and the powers given to him in W.Va.Code, 3-1A-6.[5]
II. EFFECTIVE DATE OF STATUTE
The respondents contend that although the effective date (June 11, 1982) of the amendments to W.Va.Code, 3-4A-1, et seq., was ninety days from the date of passage, the act should not have any applicability to any aspect of the June 1, 1982 election. This argument would have merit if new amendments were being applied to a voting transaction that was completed prior to June 11, 1982. However, the formal recount based on Candidate McClung's request was not scheduled to begin until June 15, 1982.
The particular section relied upon, W.Va.Code, 3-4A-28 [1982], amended the existing section to provide for a right upon the canvass and any requested recount, where voting was done by electronic voting, to have five percent of the precincts randomly selected and their ballots subject to a manual count.[6] We find that this provision has *916 nothing to do with the initial voting procedures but is designed as a procedural device to come into play upon the canvass or any requested recount as a means of testing the accuracy of the tabulation obtained through the electronic voting device.
There is nothing within the terms of the new amendments which specifically exclude their applicability to the June 1982 primary election. The Legislature in 1978 changed the date of the primary election from the second Tuesday in May to the first Tuesday in June as of the year 1980. W.Va.Code, 3-5-1 [1978]. We must assume that, when the Legislature set the ninety-day effective date when the bill was passed in March of 1982, they were aware of the June 1982 primary date. Moreover, it is common knowledge that the recount provisions are typically post-election procedures. Consequently, we believe that the Legislature, acting with this knowledge, must have realized that the new amendments could well impact on recount procedures arising from the 1982 election. The Legislature's failure to specifically exclude the 1982 primary from the operation of the new amendments is contrasted with the fact that when the Legislature reset the primary date in W.Va.Code, 3-5-1 [1978], it made clear the particular primary on which the act would have its impact.[7] Consequently, we cannot imply any legislative intent to exclude this particular section from operating on the recount in this case.
Statutes are ordinarily given prospective operation as we have stated in Syllabus Point 3 of Shanholtz v. Monongahela Power Co., W.Va., 270 S.E.2d 178 (1980): "A statute is presumed to operate prospectively unless the intent that it shall operate retroactively is clearly expressed by its terms or is necessarily implied from the language of the statute." We acknowledged this rule in Woodring v. Whyte, W.Va., 242 S.E.2d 238, 244 (1978), and said that: "There may be some relaxation of this rule for a statute which is purely procedural or remedial in nature." Certainly, the particular provision of W.Va.Code, 3-4A-28(4), involves a purely procedural rule, that is, how the recount is to be conducted. Of even more significance is the rule contained in Syllabus Point 3 of Sizemore v. State Workmen's Compensation Commissioner, W.Va., 219 S.E.2d 912 (1975), which states:
"A law is not retroactive merely because part of the factual situation to which it is applied occurred prior to its enactment; only when it operates upon transactions which have been completed or upon rights which have been acquired or upon obligations which have existed prior to its passage can it be considered to be retroactive in application."
See also Devon Corporation v. Miller, W.Va., 280 S.E.2d 108 (1981); Lester v. State Workmen's Compensation Commissioner, W.Va., 242 S.E.2d 443 (1978).
In State ex rel. Kittle v. Ritchie County Court, 84 W.Va. 212, 99 S.E. 439 (1919), the Legislature had enacted a statute which required all public funds coming into the *917 hands of a sheriff to be deposited in an interest bearing account. The statute further provided that the interest so obtained should be credited to the general county fund. The interest on funds derived from the sale of road bonds was acknowledged as included in such funds. Subsequently, the Legislature enacted a provision which required interest from funds derived from the sale of road bonds to be credited to the district road fund held by the sheriff. The argument was made that the new statute could not be construed to apply to interest arising from funds previously obtained from the sale of road bonds prior to the enactment of the new statute, because such construction would give the new statute retroactive effect. This court rejected the retroactive argument and stated that the statute applied only to interest accruing after the date of its enactment.
In the present case, the new amendment relative to the recount procedure operates only on a recount that has occurred after the effective date of the act. The recount provision is completely severable and has no impact on any substantive right that existed prior to the effective date of the enactment. The particular amendment operates prospectively on a procedural matter involving the mechanism of the recount. Clearly, Sizemore and our related cases are applicable and the new amendment should be utilized on the recount.
For these reasons a writ of mandamus is issued against respondents.
Writ Granted.
NOTES
[1] Because of the urgency of the matter, we initially issued an order upholding the petitioner's prayer for relief, indicating in the order that a written opinion would follow. This is a practice we have followed in other cases where time was of the essence. E.g., State ex rel. Board of Education v. Rockefeller, W.Va., 281 S.E.2d 131 (1981); West Virginia Libertarian Party v. Manchin, W.Va., 270 S.E.2d 634 (1980); State ex rel. Bromelow v. Daniel, W.Va., 258 S.E.2d 119 (1979).
[2] A writ of mandamus was originally sought by the petitioner in the Circuit Court of Fayette County and was apparently denied on the standing issue. Although the issue is not raised in this case as to whether an appeal rather than an original mandamus should be utilized, in a similar situation we permitted the filing of an original mandamus. In Syllabus Point 2, in part, of State ex rel. Bromelow v. Daniel, supra, we held that an election mandamus proceeding is not held "to the same degree of procedural rigor as an ordinary mandamus case."
[3] The full text of W.Va.Code, 3-1A-6, is:
"The secretary of state shall be the chief election official of the State. He shall have authority, after consultation with the state election commission, of which he is a member, to make, amend and rescind such rules, regulations and orders as may be necessary to carry out the policy of the legislature, as contained in this chapter. It shall be the duty of all election officials, county courts, clerks of county courts, clerks of circuit courts, boards of ballot commissioners, election commissioners and poll clerks to abide by such rules, regulations and orders, which shall include:
"(a) Uniform rules of procedure for registrars and other registration officials in the performance of their duties, as to time and manner of performance;
"(b) Uniform rules for the purging of registration records;
"(c) Uniform rules for challenging registrants; and
"(d) Any other rules, regulations or directions necessary to standardize and make effective the administration of the provisions of this chapter.
"The secretary of state also shall have authority to require collection and report of statistical information and to require other reports by county courts, clerks of county courts and clerks of circuit courts.
"It shall be his further duty to advise with election officials; to furnish to the election officials a sufficient number of indexed copies of the current election laws of West Virginia and the administrative orders and rules and regulations issued or promulgated thereunder; to investigate the administration of election laws, frauds and irregularities in any registration or election; to report violations of election laws to the appropriate prosecuting officials; and to prepare an annual report.
"The secretary of state shall also have the power to administer oaths and affirmations, issue subpoenas for the attendance of witnesses, issue subpoena duces tecum to compel the production of books, papers, records, registration records and other evidence, and fix the time and place for hearing any matters relating to the administration and enforcement of this chapter, or the rules, regulations and directions promulgated or issued hereunder by the secretary of state as the chief election official of the State. In case of disobedience to a subpoena or subpoena duces tecum, he may invoke the aid of any circuit court in requiring the attendance, evidence and testimony of witnesses and the production of papers, books, records, registration records and other evidence.
"All powers and duties vested in the secretary of state under this article may be exercised by appointees of the secretary of state at his discretion, but the secretary of state shall be responsible for their acts."
[4] We note that in at least two instances the Attorney General has issued opinions pertaining to the powers of the Secretary of State as to election matters under W.Va.Code, 3-1A-6, and has recognized that this Code section gives him rather broad powers. Ops. Att'y Gen. July 28, 1981, and October 22, 1979. In the former opinion, this language is found:
"It is a long-standing policy of this office that we do not take issue with administrative findings of fact and policy decisions made by other state executive officers acting within their proper spheres of authority. Our policy is particularly applicable to determinations by fellow constitutional officers such as the Secretary of State. In this instance, the Secretary of State has made a finding that the use of voting machines and electronic voting systems would be impracticable for this special one-issue election. The Secretary of State is the chief election official of the State (Code 3-1A-6). In that capacity he has made a finding on a matter squarely within his scope of authority. In accordance with our policy, the Attorney General will not question the accuracy or wisdom of that finding."
[5] We recognize that W.Va.Code, 3-1A-6, provides that the Secretary of State should "report violations of the election laws to the appropriate prosecuting officials," which of course means that such criminal prosecutions are handled by the prosecuting attorneys.
[6] The full text of W.Va.Code, 3-4A-28(4) [1982], is:
"During the canvass and any requested recount, at least five percent of the precincts shall be chosen at random and the ballot cards cast therein counted manually. The same random selection shall also be counted by the automatic tabulating equipment. If the variance between the random manual count and the automatic tabulating equipment count of the same random ballots, is equal to or greater than one percent, then a manual recount of all ballot cards shall be required. In the course of any recount, if a candidate for an office shall so demand, or if the board of canvassers shall so elect to recount the votes cast for an office, in any precinct shall be recounted by manual count."
[7] W.Va.Code, 3-5-1 [1978], states:
"Primary elections shall be held at the voting place in each of the voting precincts in the state, for the purposes set forth in this article, on the first Tuesday in June in the year one thousand nine hundred eighty and in each second year thereafter.
"At such election the polls shall be opened and closed at the hours provided for opening and closing the polls in a general election."
See also W.Va.Code, 3-5-9, where the Legislature used the same provision making the amendments "apply to the primary election held in the year one thousand nine hundred eighty." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595043/ | 954 So. 2d 1143 (2005)
JAMES ELBERT DUBOSE
v.
STATE
No. CR-04-1371.
Court of Criminal Appeals of Alabama.
December 16, 2005.
Decision without opinion. Dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595055/ | 954 So. 2d 1145 (2005)
MICHAEL ROBIN BAREFIELD
v.
STATE
No. CR-04-1881.
Court of Criminal Appeals of Alabama.
October 21, 2005.
Decision without opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595077/ | 954 So. 2d 1156 (2007)
PAULCIN
v.
STATE.
No. SC07-511.
Supreme Court of Florida.
March 23, 2007.
Decision without published opinion. Rev. dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595129/ | 426 F. Supp. 85 (1976)
UNITED STATES of America
v.
Grace SHERMAN, Defendant.
Nos. 76 Cr. 383 (HFW), 76 Cr. 641 (HFW).
United States District Court, S. D. New York.
November 4, 1976.
*86 *87 Robert B. Fiske, Jr., U. S. Atty., S. D. N. Y., New York City, for the United States by Joel N. Rosenthal, Asst. U. S. Atty., New York City, of counsel.
Arnold D. Levine, Tampa, Fla., for petitioner Grace Sherman.
MEMORANDUM DECISION
WERKER, District Judge.
The defendant, Grace Sherman, is charged in two separate indictments, 76 Cr. 383, and 76 Cr. 641, with several counts of aiding and abetting William Sherman in the attempted evasion and defeating of income tax.
The court has before it a series of pretrial motions brought on by the defendant Grace Sherman seeking rulings on discovery requests as well as with regard to substantive matters.
MOTIONS TO COMPEL DISCLOSURE OF EVIDENCE FAVORABLE TO THE DEFENDANT
The government consents to the motion to compel the disclosure of all evidence favorable to the defendant.
MOTION FOR INQUIRY-ELECTRONIC SURVEILLANCE
The government opposes the motion for an inquiry to ascertain whether any mechanical or electronic surveillance was conducted by its various investigative agencies. The government indicates that it is unaware of any use of electronic surveillance. The Assistant United States Attorney further indicates that the IRS agents who investigated the case have assured him that they have no knowledge of any electronic surveillance of the defendant. The defendant's motion is devoid of any statement of facts which would serve as a basis for believing that Grace Sherman was the subject of electronic surveillance. The motion is therefore denied.
*88 MOTION PURSUANT TO 18 U.S.C. § 3504
As to defendant's motion pursuant to 18 U.S.C. § 3504,[1] the government has denied it committed any unlawful act in the nature of electronic surveillance conducted with reference to this defendant. By inference, the government similarly denies that it has obtained inadmissible evidence as a product of such an act. The government's response therefore resolves this motion.
REQUEST FOR DISCOVERY AND INSPECTION
With respect to the defendant's motion requesting disclosure, the government consents to furnishing statements of the defendant within the possession of the government as requested in paragraph (a) of the motion. The government raises an objection however to the production of the substance of any witness's testimony on the grounds that this constitutes trial evidence. There is no disagreement on this point; the language used in the motion tracks the language of Rule 16(a)(1)(A) of the Federal Rules of Criminal Procedure exactly and, the defendant requests only the statements of the defendant, not those of any other witnesses.
The government declines to provide statements of the defendant made to persons not government agents on the grounds that such statements are the substance of the testimony of those persons and that the defendant is not entitled to discover evidentiary matter, citing United States v. Politi, 334 F. Supp. 1318, 1321 (S.D.N.Y.1971). That case stands for the proposition that the government is not compelled to produce statements of non-government agent witnesses if they are not written or recorded. However, the discovery requested by the defendant relates to statements which were made in response to interrogation either before or after arrest. This discovery request has not therefore been specifically addressed by the Assistant United States Attorney and citation to United States v. Politi is unilluminating. If such statements are in existence, the government is directed to produce them in accordance with Rule 16(a)(1)(A) of the Federal Rules of Criminal Procedure.
The government consents to furnishing a copy of the defendant's prior criminal record. It also consents to permit the inspection and copying of photograph books, papers, etc. within the possession of the government and which are material to the preparation of the defense or are intended for use by the government as evidence or were obtained from the defendant. The government further consents to the inspection and copying of the results of any examinations or scientific tests made in connection with the case.
WITNESS LIST
The defendant has sought a list of witnesses the government intends to call together with the addresses and records of felony convictions of these persons. The government's opposition to this request is based on the contention that there has been no showing of particularized need for this information and that there is a risk of harassment to these witnesses by the defendants or others. The government notes that these indictments arise out a massive narcotics operation and that William Sherman, a man with a history of violent crimes and narcotics offenses, may obtain this information *89 and may threaten witnesses or that others of the many people involved in the alleged narcotics operation could try and affect the testimony of government witnesses. The government alleges that Grace Sherman has herself swayed the testimony of at least one grand jury witness her sister in the past. The basis for the final allegation is that when Ms. Sherman's sister was subpoenaed to testified before the grand jury in New York, that Grace Sherman accompanied her, consulted with her, and did in fact, in the opinion of the Assistant United States Attorney, cause an alteration in her sister's testimony.
It is within the court's discretion to grant or deny a request for the list of witnesses of the government. United States v. Payseur, 501 F.2d 966, 972 (9th Cir. 1974); United States v. Addonizio, 451 F.2d 49, 62 (3d Cir. 1971), cert. denied, 405 U.S. 936, 92 S. Ct. 949, 30 L. Ed. 2d 812 (1972); United States v. Persico, 425 F.2d 1375, 1378 (2d Cir.), cert. denied, 400 U.S. 869, 91 S. Ct. 102, 27 L. Ed. 2d 108 (1970); Cf. 18 U.S.C. § 3432. The principle to be followed, however, is that the defendant be permitted a fair and reasonable opportunity to prepare his defense. United States v. Palmisano, 273 F. Supp. 750, 752 (E.D.Pa. 1967).
The defendant indicated that such information would enable a proper and intelligent preparation of the case and eliminate surprise at the trial. She also claims that she does not know the people whose names are reflected in the indictment nor the community in which they reside or how they may be contacted. In United States v. Cannone, 528 F.2d 296, 302 (2d Cir. 1975), cited by defendant, the Second Circuit noted that a mere abstract conclusory claim that such disclosure is necessary to the proper preparation for trial is not a basis for granting such discovery at least where the government advanced specific grounds (that the defendants had been indicted for obstruction of justice by beating a grand jury witness) for denying the discovery request. The defendant has made no showing of a particularized need for this information and has not met her burden of proof in this respect. United States v. Payseur, supra.
MOTION TO DISMISS ON STATUTE OF LIMITATIONS GROUNDS
The defendant's contentions in her motion to dismiss on statute of limitations grounds is based on the contention that in order for a crime to constitute an offense under 26 U.S.C. § 7201 that there must be a positive act of evasion. Defendant therefore argues that the statute of limitations should run from the time of the commission of the affirmative act instead of from the date upon which a tax return for the year in question would have been due. The cases do indicate that in order for there to be a crime in the nature of attempting to defeat or evade taxes that there must be an affirmative act of evasion aside from an omission of the duty to make a return. United States v. Ming, 466 F.2d 1000, 1004 (7th Cir.), cert. denied, 409 U.S. 915, 93 S. Ct. 235, 34 L. Ed. 2d 176 (1972); United States v. Mesheski, 286 F.2d 345, 346 (7th Cir. 1961); United States v. Jannuzzio, 184 F. Supp. 460, 464 (D.Del.1960). However, in a case cited by the government, United States v. Myerson, 368 F.2d 393, 395 (2d Cir. 1966) (per curiam), cert. denied, 386 U.S. 991, 87 S. Ct. 1305, 18 L. Ed. 2d 335 (1967), the Second Circuit, in calculating the running of the statute of limitations on a crime charged under 26 U.S.C. § 7201 noted that the six year statute of limitations as provided in 26 U.S.C. § 6531 runs from the last date upon which the tax return was due. It seems clear that the completion of the offense of attempting to defeat and evade taxes necessitates the filing of the return and thus depends upon the day when the return is in fact due. Cf. United States v. Kafes, 214 F.2d 887, 890 (3d Cir.), cert. denied, 348 U.S. 887, 75 S. Ct. 207, 99 L. Ed. 697 (1954) (the statute of limitations for this offense under the predecessor statute to § 6531 commenced running the day when payment became due). In United States v. Mahler, 181 F. Supp. 900 (S.D.N.Y.1960) (Weinfeld, J.), moreover, the defendants were charged with conspiracy to willfully evade taxes, *90 and as one of the overt acts the filing of a tax return was alleged. The issue in part was whether the date of mailing or the date of receipt of the tax return was the relevant date for the commencement of the running of the statute of limitations. The court determined that the relevant date was the date of receipt of the return. One of the acts which is alleged in the case at bar to be the violation of the tax statute is the failure to make an income tax return. Thus, the evasion of taxes would have been completed with the failure to make the income tax return, and the relevant date for the commencement of the running of the statute of limitations should be April 15, 1970. The filing of the indictment on April 15, 1976 was thus within the statute of limitations.
MISCELLANEOUS MOTIONS TO DISMISS
Without addressing the manner in which the indictments in this case are specifically defective the defendant baldly makes the following contentions. Without specifying which of the two indictments to which she refers, defendant claims that all counts of the indictment are vague and ambiguous and that she may not therefore adequately prepare her defense as well as that the judgment in this case could not be pleaded as a bar to a later proceeding as a result. Secondly, she claims that the vagueness of the counts in the indictment (again the specific indictment is not alleged) deprives her of due process and is in violation of her sixth amendment right to be informed of the nature of the crime with which she is charged. Third, she claims that the indictment (again which one is not clear) joins offenses so as to prejudice the defendant in violation of her sixth amendment right to a fair trial and in violation of the due process clause of the fifth amendment. The indictment is said to be based on an unconstitutional statute or in the alternative, the statute upon which the indictment is based is unconstitutional as applied to the facts of this case. The provisions of the constitution allegedly violated are the fourth, fifth, sixth and fourteenth amendments. The defendant further alleges that the indictment fails to state facts sufficient to constitute a crime or offense against the United States and that the facts do not constitute the violation of any statute that could be enacted. The defendant further seeks to have the indictment dismissed on the basis that illegal evidence was presented to the grand jury in violation of 18 U.S. § 119 [sic]. The defendant also alleges that the indictment is based on matters that were obtained as the consequence of an illegal search and that the indictment should therefore be dismissed. Finally, she alleges that the potential penalties that may be imposed under the allegedly unconstitutional statute constitute cruel and unusual punishment.
As far as vagueness of the various counts of the two indictments is concerned, there is little doubt that the indictments here meet the standard required of an indictment in that they inform the defendant of "what he must be prepared to meet." United States v. Salazar, 485 F.2d 1272, 1277 (2d Cir. 1973), cert. denied, 415 U.S. 985, 94 S. Ct. 1579, 39 L. Ed. 2d 882 (1974). The criteria for measuring the sufficiency of the indictment are:
"[W]hether the indictment `contains the elements of the offense intended to be charged, "and sufficiently apprises the defendant of what he must be prepared to meet,"' and, secondly, `"in case any other proceedings are taken against him for a similar offense, whether the record shows with accuracy to what extent he may plead a former acquittal or conviction." Cochran and Sayre v. United States, 157 U.S. 286, 290, 15 S. Ct. 628, 630, 39 L. Ed. 704; Rosen v. United States, 161 U.S. 29, 34, 16 S. Ct. 434, 480, 40 L. Ed. 606.' Hagner v. United States, 285 U.S. 427, 431, 52 S. Ct. 417, 419, 76 L. Ed. 861. See Potter v. United States, 155 U.S. 438, 445, 15 S. Ct. 144, 146, 39 L. Ed. 214; Bartell v. United States, 227 U.S. 427, 431, 33 S. Ct. 383, 384, 57 L. Ed. 583; Berger v. United States, 295 U.S. 78, 82, 55 S. Ct. 629, 630, 79 L. Ed. 1314; United States v. Debrow, 346 U.S. 374, 277-378, 74 S. Ct. 113, 115-116, 98 L. Ed. 92." *91 Russell v. United States, 369 U.S. 749, 763-64, 82 S. Ct. 1038, 1047, 8 L. Ed. 2d 240 (1962).
As noted in United States v. Salazar, supra, it is sufficient if the indictment tracks the language of the statute and as in this case specifies the amount of money allegedly earned and the amount of taxes that were allegedly evaded. See also United States v. Fortunato, 402 F.2d 79, 82 (2d Cir. 1968), cert. denied, 394 U.S. 933, 89 S. Ct. 1205, 22 L. Ed. 2d 463 (1969).
As far as the defendant's conclusory claim that the joining of the offenses charged is prejudicial, it is hard to imagine the line of reasoning underlying this contention. The various counts in indictment number 76 Cr. 641 charge the defendant with aiding and abetting the attempted evasion and defeating of taxes for the calendar years 1970, 1971 and 1972. Joined in that indictment are counts charging William Sherman with attempted evasion and defeating of income taxes during the same years and also charging him on three counts of willful failure to file a return. The indictment in 76 Cr. 383 charges Grace Sherman with aiding and abetting William Sherman in attempting to evade and defeat income taxes for the calendar year of 1969 and also charges William Sherman in count 2 with failure to make an income tax return for the calendar year of 1969. No basis for prejudice would appear to exist on the basis of the kinds of counts which are joined here since the same proof would support the counts alleging her aiding and abetting the attempted evasion of taxes as would support the counts alleging the willful failure of William Sherman to file income tax returns for the same calendar years.
The various claims with respect to the unconstitutionality of the statute under which the defendant is charged are wholly frivolous. The constitutionality of the section is not in doubt. No basis is set forth as to why the statute is so characterized. United States v. Coppola, 425 F.2d 660, 661 (2d Cir. 1969) (per curiam). Cf. United States v. Sullivan, 274 U.S. 259, 47 S. Ct. 607, 71 L. Ed. 1037 (1927) (upholding the constitutionality of former sections of the Revenue Act of 1921 proscribing the willful refusal to make a return).
Finally, as to the allegation that illegally obtained evidence was presented to the grand jury, no factual basis is set forth in support of this contention. As contended by the Assistant United States Attorney, even if the indictment was issued on the basis of illegally obtained evidence, this would not be a basis for the dismissal of the indictment. United States v. Calandra, 414 U.S. 338, 334-345, 94 S. Ct. 613, 38 L. Ed. 2d 561 (1974); Costello v. United States, 350 U.S. 359, 76 S. Ct. 406, 100 L. Ed. 397 (1956).
REQUEST FOR NOTICE OF INTENTION TO USE EVIDENCE
With regard to defendant's request for notice of intention to use evidence, the government has consented to disclose the evidence which could be the subject of a motion to suppress.
MOTION TO COMPEL DISCLOSURE OF PROMISES OF IMMUNITY, ETC.
The government has similarly consented to the motion to compel disclosure of the existence of and substance of promises of immunity, leniency of preferential treatment but with the provision that such material be provided on the evening prior to the trial day of the expected testimony of such witnesses. The defendant asks that this information be provided within ten days after this court's ruling with respect to this motion. The basis for the request for early disclosure is the claim that such commitments and promises made to government witnesses may have been communicated to attorneys or representatives of the witnesses rather than to the witnesses themselves and that therefore, it may not be possible to elicit such information during cross-examination of these individuals. The mere statement of the argument demonstrates its absurdity. The information which would be of concern to the defense attorney would be the information which the particular witness had as to any promises *92 made to him. If the promise was never conveyed to the witness himself, the fact that the attorney or representative had received the information would be irrelevant. It seems to this court that providing the information sought on the eve of the day any particular witness is to testify is adequate notice to the defendant.
MOTION FOR SEVERANCE
Finally, defendant Grace Sherman moves to have her trial severed from that of William Sherman. The defendant claims that her defenses and the defenses of William Sherman would be inconsistent. Moreover, defendant claims that testimony which William Sherman would offer at a separate trial which he would not testify to at a joint trial would wholly exonerate Grace Sherman. Finally defendant claims that a substantial amount of evidence admissible against William Sherman would be inadmissible against Grace Sherman and that the likelihood of guilt by association would therefore be great.
The claims that prejudice will arise due to inconsistent defenses and that prejudice will also accrue as a result of the inadmissibility with respect to Grace Sherman of evidence which is admissible against William Sherman are meritless. These arguments can be made in any case where more than one defendant is involved, and the defendant has set forth no facts to show that the effect of a joint trial in this particular case as a result of these factors would be prejudicial.
It is the defendant's burden of demonstrating sufficient prejudice to warrant a severance, United States v. Finkelstein, 526 F.2d 517, 525 (2d Cir. 1975), and the defendant has failed to carry her burden of proof on this motion.
An affidavit by William Sherman is affixed to the motion papers setting forth the fact that William Sherman is willing to testify in a separate trial that Grace Sherman never assisted in the concealment of income by William Sherman in the years charged, but also stating that he would not so testify in a joint trial. The affidavit also indicates that William Sherman has no intention of pleading guilty but that he intends to go to trial. The court has not been advised beyond the conclusory statements contained in the affidavit, of the nature of the testimony which is said to exculpate Grace Sherman. Without any information at this time as to the nature of the proof the government intends to put forth at the trial, and without any knowledge of the nature of the evidence which William Sherman could provide in rebuttal, there is no way for the court to evaluate the importance of this evidence to the defendant.
This case is distinguishable in this respect from a number of decisions in which a severance has been held to be appropriate. In United States v. Shuford, 454 F.2d 772 (4th Cir. 1971), for example, severance was found warranted to enable one defendant to take advantage of the testimony of a co-defendant where that person's testimony would be the only testimony available to rebut the statements of the key government witness. The specific content of the exculpatory testimony was known and was crucial to the defendant's defense. Similarly, in United States v. Echeles, 352 F.2d 892 (7th Cir. 1965), the court found severance to be required when the testimony of a co-defendant specifically refuted the facts upon which a charge of obstruction of justice was based. The statement of the co-defendant had been made several times in the context of an earlier trial of that co-defendant on a different offense, and thus the exact nature and significance of that testimony was known. Also in United States v. Gleason, 259 F. Supp. 282 (S.D.N.Y.1966), Judge Frankel severed the trial of two co-defendants where oral and written statements had been made by one co-defendant specifically supporting the main defendant's defense of lack of criminal intent in an income tax evasion case. By way of contrast, in United States v. Crisona, 271 F. Supp. 150 (S.D. N.Y.1967), where the significance and content of the alleged exculpatory testimony of a co-defendant could not be determined in advance of the trial, the court denied the motion for separate trials.
*93 Furthermore, the likelihood of William Sherman's testifying as indicated in his affidavit has become subject to question. In a letter sent by the attorney for William Sherman to the attorney for Grace Sherman, a copy of which was sent to the court, William Sherman's attorney takes the position that he would not have advised his client to execute the affidavit in question.
The general rule in cases of defendants jointly charged in one indictment is that they be tried together. Kroll v. United States, 433 F.2d 1282 (5th Cir. 1970), cert. denied, 402 U.S. 944, 91 S. Ct. 1616, 29 L. Ed. 2d 112 (1971). A motion for severance is addressed to the discretion of the court under Rule 14, Federal Rules of Criminal Procedure. Byrd v. Wainwright, 428 F.2d 1017 (5th Cir. 1970); Barton v. United States, 263 F.2d 894 (5th Cir. 1959). The defendant has not overcome the burden required to persuade the court otherwise by failing to make a clear showing as to what William Sherman would testify to. Byrd v. Wainwright, supra at 1020.
The motion for severance is therefore denied with leave to renew at the close of the government's case when the value of William Sherman's testimony can be better evaluated.
THE GOVERNMENT'S MOTIONS
The government is entitled to reciprocal discovery under Rule 16(b) of the Federal Rules of Criminal Procedure and such discovery is hereby directed.
The motion by the government for consolidation of the two indictments under Rule 13 of the Federal Rules of Criminal Procedure is granted. There is no reason why the offenses could not originally have been joined in a single indictment, the earlier numbered indictment charging the identical offenses in relation to an earlier year.
SO ORDERED.
NOTES
[1] 18 U.S.C. § 3504 provides in pertinent part:
§ 3504. Litigation concerning sources of evidence
(a) In any trial, hearing, or other proceeding in or before any court, grand jury, department, officer, agency, regulatory body, or other authority of the United States
(1) upon a claim by a party aggrieved that evidence is inadmissible because it is the primary product of an unlawful act or because it was obtained by the exploitation of any unlawful act, the opponent of the claim shall affirm or deny the occurrence of the alleged unlawful act;
. . . . .
(b) As used in this section `unlawful act' means any act the use of any electronic, mechanical, or other device (as defined in section 2510(5) of this title) in violation of the Constitution or laws of the United States or any regulation or standard promulgated pursuant thereto." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595192/ | 621 N.W.2d 811 (2001)
Steve WEAR, et al., Appellants,
v.
BUFFALO-RED RIVER WATERSHED DISTRICT, Defendant and Third-Party Plaintiff, Respondent,
v.
Houston Engineering, Inc., Third-Party Defendant, Respondent,
Lyle Wilkens, Inc., Third-Party Defendant, Respondent.
No. C0-00-908.
Court of Appeals of Minnesota.
February 13, 2001.
*812 Dan D. Plambeck, Stefanson, Plambeck & Foss, Moorhead, MN, for appellants.
Dan T. Ryerson, John E. Varpness, Gislason, Martin & Varpness, P.A., Edina, MN, for respondent Buffalo Red River Watershed District.
Duane R. Breitling, Ohnsdtad Twichell, P.C., Fargo, ND, for respondent Houston Engineering, Inc.
Barton J. Cahill, Cahill & Maring P.A., Moorhead, MN, for respondent Lyle Wilkens, Inc.
Considered and decided by TOUSSAINT, Presiding Judge, ANDERSON, Judge and MULALLY, Judge.[*]
OPINION
G. BARRY ANDERSON, Judge.
Appellant property owners contend that respondent watershed district negligently improved a ditch where, after heavy rainfall, the ditch overflowed, causing property damage. Because the watershed district did not breach its duty by improving the ditch to withstand a ten-year event, we affirm.
FACTS
On May 17, 1996, over four inches of rain fell in the Buffalo Red River Watershed District in Clay County, Minnesota. As a result of the heavy rainfall, water ran over the west bank of Clay County Ditch No. 2 causing damage to nearby property owned by appellants Steve Wear and Wayne and Donna Moll.
Clay County Ditch No. 2, originally constructed in 1905, is approximately nine miles long, with lateral arms collecting drainage through natural and man-made waterways. Over time, the ditch fell into disrepair. As a result, in May 1995, respondent Buffalo Red River Watershed District (BRRWD) entered into a contract with Lyle Wilkens, Inc. (Wilkens) to improve the ditch.
Respondent Houston Engineering, Inc. (Houston) designed the ditch to withstand a ten-year event, that is, a rainstorm of a severity occurring, on average, once every ten years. The Engineer's Final Report, outlining the ditch improvements, stated that "[f]or this area we have found that a ditch designed to carry a 10 year storm is the most cost effective." To avoid significant landowner assessments, Houston and BRRWD also decided that culvert replacement work for the ditch would be completed at a later date, funded by a state bridge-bonding program.
After the construction was completed in late 1995, appellant Wear noticed that the *813 new spoil bank was lower than the old bank, and expressed his concerns to BRRWD. Wear testified that he observed water spill over the previous bank at that location several times, added more dirt to the previous spoil bank to direct any overflow across the highway, and requested to BRRWD that similar action be taken to raise the spoil bank again. The minutes from a BRRWD board meeting reflect that the BRRWD had "directed" Wilkens to raise the spoil bank. BRRWD, however, repudiated this statement at trial, contending it never actually directed Wilkens to raise the spoil bank, and "directed" was a poor word choice for the meeting minutes.
Engineer testimony at trial contradicted Wear's claim that the spoil banks should have been raised. Houston's engineer testified that the new spoil banks were designed so that excess water would overflow onto fields, rather than over public roads. The Clay County Engineer agreed, testifying that public policy requires that spoil banks be lower than road elevations. The county engineer also stated that no one, including Wear, had permission to raise spoil banks to direct water across a public road.
On May 16, 1996, just prior to the flooding, Houston and BRRWD inspected the ditch to determine whether any further work was needed to satisfy the contract, and noted, in writing, Wear's concerns about the lowered spoil bank. The spoil bank, however, was not raised.
On the evening of May 17, 1996, water from the heavy rain ran over the west bank of Clay County Ditch No. 2 and damaged appellants' property. Appellants sued, alleging negligence. After a bench trial, the district court concluded that appellants failed to establish negligence or any other viable theory for recovery.[1] The district court denied appellants' motion for amended findings, and this appeal followed.
ISSUE
Did the district court err in concluding that appellants did not prove Buffalo Red-River Watershed District was negligent in failing to construct a higher spoil bank of a county ditch?
ANALYSIS
Appellants claim their flood damage stems from respondents' negligent improvement of Clay County Ditch No. 2. To prevail on a negligence claim, appellants must establish (1) the existence of a duty; (2) breach of that duty; (3) that the breach proximately caused the injury; and (4) injury in fact. Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn.1995).
The district court did not provide a detailed explanation for its conclusion that appellants failed to establish liability. Appellants do not challenge the district court's finding that heavy rainfall caused the ditch to overflow and damage appellants' property, so the questions of causation and damages are not at issue. Accordingly, the critical questions are whether a duty existed and, if so, whether that duty was breached.
A. Duty
The existence of a legal duty is generally a question of law, subject to de novo review. ServiceMaster v. GAB Bus. Servs., Inc., 544 N.W.2d 302, 307 (Minn. 1996). The plaintiff in a negligence action has the burden of proof. Marlow v. City of Columbia Heights, 284 N.W.2d 389, 392 (Minn.1979).
Appellants claim Minn.Stat. § 103D.631, subd. 1 (1996) gives rise to a duty; that statutory provision requires watershed districts to maintain projects in a condition to *814 accomplish the purposes for which they were constructed. Appellants also note that an engineer has the ability to modify plans and specifications as the work proceeds and as circumstances require. Minn.Stat. § 103E.501, subd. 4 (1996).
Appellants correctly point out that BRRWD has a duty to maintain its ditches, and to complete the "purpose" of any construction. The "purpose" of the construction in this case, however, is disputed.
Appellants, pointing to language in the Engineer's Final Report, contend that the purpose of the construction was to "prevent crop loss in [an] area which has been subject to several fairly high rainfall years recently." Although the background section of the Engineer's Final Report contains that language, it appears as part of a general explanation concerning the necessity of improvements to Ditch No. 2. BRRWD maintains that the purpose of the construction was to create a ditch system that could handle the run-off occurring during a ten-year event.
At trial, an engineer testified regarding the purpose of the project:
Q: In other words, the purpose of this project was to increase the flow of water through the ditch and do some badly needed repairs, prevent some crop losses [to] farmers. And whether or not this particular spoil bank was raised[,] or lowered[, or] remains the same has nothing to do with the purpose of that project, right?
A: Essentially, what we were trying to do in the design of the ditch is to pick a specific rain event, in this case it was a 10 year event or a storm that would happen on average once every ten years, and we try to get the water surface profile in the ditch below the elevation of the fields so that the fields will be able to drain into the ditch, the ditch will transport water away[,] and standing water will not kill the crops.
Although the district court did not make a specific finding on the purpose of the construction, the engineer's testimony was uncontradicted. The purpose of the improvements was to allow the ditch to handle the run-off created by a ten-year event. Implicitly, the improved ditch would prevent crop-loss from overflow caused by less severe storms, but nothing in the record established that prevention of all crop losses was the purpose of this project.
Because it is clear that the ditch was designed and constructed to handle a ten-year event, the next question is whether BRRWD had a duty to improve the ditch to handle a more severe rainfall. An engineer on the project analyzed the total expense of constructing a ditch that would never overflow. His analysis is reflected in the final report:
[F]or this area we have found that a ditch designed to carry a 10-year storm is the most cost effective. For example, to construct a ditch that would contain the discharge from a storm that will probably be exceeded only once every 25 years would result in a well functioning project, however, since the cross-section of the ditch would be extremely large, the cost of the ditch would be more than the benefits that could be derived from it. Therefore, the ditch has been designed to have a capacity equal to the ten-year storm.
Appellants failed to provide expert or other testimony establishing that the ten-year event standard was inappropriate, that respondents failed to design and construct the ditch improvements to specifications, or that such improvements must be designed and constructed to prevent all crop losses. Thus, on this record, we conclude that BRRWD's duty, pursuant to Minn.Stat. § 103D.631, subd. 1, was to improve Ditch No. 2 to withstand a ten-year event.
B. Breach
Appellants argue that BRRWD breached its statutory duty to maintain the ditch. Specifically, appellants argue that *815 BRRWD (1) knew of Wear's concerns that the spoil bank was lowered as a result of the improvements and failed to correct the problem and (2) could have ordered the county to replace the culverts, but did not. But appellants' arguments are based on a flawed premise: that the purpose of the improvements was to prevent all crop losses.
In a negligence action, whether a breach of a duty occurred is a question for the fact finder. Smith v. Carriere, 316 N.W.2d 574, 575 (Minn.1982). A district court's findings of fact will not be reversed on appeal unless clearly erroneous. Minn. R.Civ.P. 52.01. A clearly erroneous finding is one that is palpably and manifestly against the weight of the evidence. Enderson v. Kelehan, 226 Minn. 163, 169, 32 N.W.2d 286, 289-90 (1948) (involving surface drainage rights).
Appellants have not shown that BRRWD failed to fulfill its duty to improve Clay County Ditch No. 2 to handle a ten-year event, the purpose of the construction. Appellants also do not dispute the engineer's testimony that over four inches of rain in one evening exceeds the "ten-year event" standard. BRRWD's failure to do what Wear requested, in addition to appellants' property damage, does not establish any breach of BRRWD's duty to maintain the ditch to withstand flooding up to and including a ten-year event.
Appellants cite Hansen v. City of St. Paul, 298 Minn. 205, 214 N.W.2d 346 (1974) to support the theory that respondents breached their duty by failing to raise the spoil banks. In Hansen, the supreme court concluded that a city could be held liable in tort for permitting dogs the city knew to be dangerous, vicious, and impoundable to prowl uncontrolled on public sidewalks. Id. at 209-10, 214 N.W.2d at 349. Because the city knew of the danger and waited too long to apprehend the dogs, the court concluded that the city could be held liable to a victim of the attack. Id. But Hansen is distinguishable. While the plaintiff in Hansen proved that the city failed to maintain safe streets for its citizens, appellants have not shown that BRRWD failed to maintain the ditch in accordance with its duty.
Appellants also contend that BRRWD breached its duty by not compelling immediate replacement of culverts or an increase in the hydraulic capacity of existing culverts. But Minn.Stat. § 103E.525, subd. 3 (1996), states that a proper road authority must construct required culverts within a reasonable time and only if the road authority does not, the drainage authority "may" order culverts constructed. "May" is permissive, not mandatory. See Minn.Stat. § 645.44, subd. 15, 16 (2000). In addition, even if true, these alleged failures would not constitute a breach of BRRWD's duty to improve Ditch No. 2 to withstand a ten-year event; appellants failed to establish that new culverts or increased hydraulic capacity were necessary to equip the ditch system to handle a ten-year event. Accordingly, appellants' argument fails.
C. Reasonable Use Doctrine
Appellants also rely on the reasonable use doctrine, which states that if certain conditions are met, a landowner acting in good faith has the right to drain surface water across the land of a neighbor. Matter v. Nelson, 478 N.W.2d 211, 214 (Minn. App.1991) (citations omitted). Appellants argue that respondents failed to analyze the benefits and harms associated with lowering the spoil bank before the new culverts were installed, and failed to analyze the risks and benefits of any possible solutions in response to Wear's concerns about the height of the spoil banks.
Respondents challenge this theory on procedural grounds, stating that it was not argued at trial. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn.1988) (issues not raised in district court generally may not be considered for first time on appeal). Appellants correctly note that they referred *816 to the reasonable use doctrine in their pretrial statement. But appellants did not argue this theory during trial. The reasonable use doctrine again was raised in appellants' post-trial motion. Because the district court was faced with the arguments for the first time in a post-trial brief, we conclude they were not adequately raised in the district court and are not properly before us.
Even if this issue were properly before this court, appellants' argument focuses on BRRWD's failure to take action. BRRWD, however, discharged any duty it had to improve Ditch No. 2 and was not required to take actions inconsistent with the purpose of the project and inconsistent with public policy and public safety.
DECISION
The watershed district did not breach its duty to improve a ditch by constructing it to withstand a ten-year event. The district court properly rejected the landowner's negligence claim.
Affirmed.
NOTES
[*] Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
[1] The district court's findings and conclusions do not address respondent's assertion of statutory immunity. Because we have determined that the district court did not err in concluding that respondent was not negligent, and because the parties did not argue immunity on appeal, we do not address it. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595117/ | 28 So. 3d 388 (2009)
STATE of Louisiana
v.
Shawn MURPHY a/k/a Don Murphy.
No. 09-KA-139.
Court of Appeal of Louisiana, Fifth Circuit.
October 27, 2009.
*389 Paul D. Connick, Jr., District Attorney, Twenty-Fourth Judicial District, Parish of Jefferson, Terry M. Boudreaux, Anne Wallis, Vincent Paciera, Jr., Assistant District Attorneys, Gretna, Louisiana, for Plaintiff/Appellee.
Margaret S. Sollars, Attorney at Law, Louisiana Appellate Project, Thibodaux, Louisiana, for Defendant/Appellee.
Panel composed of Judges, MARION F. EDWARDS, CLARENCE E. McMANUS and FREDERICKA HOMBERG WICKER.
CLARENCE E. McMANUS, Judge.
Defendant, Shawn Murphy, a/k/a Don Murphy, pled guilty to possession of cocaine in violation of LSA-R.S. 40:967(C), reserving his right to appeal pursuant to State v. Crosby[1]. He was sentenced as a second felony offender, to ten years imprisonment at hard labor, concurrent with his sentence imposed in case number 08-4532, and concurrent with a sentence for contempt of court for failure to appear. This timely appeal follows.
Defendant pled guilty and did not proceed to trial. As such, the facts were taken from the bill of information, which provides that on or about January 4, 2008, defendant and co-defendant Jodylynn Fussell "knowingly and intentionally possess[ed] a controlled dangerous substance, to wit: Cocaine."
In this appeal, the defendant alleges that the trial court erred by not hearing any pre-trial motions prior to accepting his Crosby plea and without first ascertaining that a legal, factual basis existed to support the pleas.
On February 19, 2008, defense counsel filed omnibus motions on defendant's behalf including motions for discovery, motions for preliminary hearing and bond reduction, and motions to suppress evidence, inculpatory statements, and identifications.
By order of the court on March 12, 2008, the trial judge granted the motion for discovery and set the remaining motions for hearing on April 8, 2008. In the order, the trial court cautioned that failure to appear might result in dismissal or waiver of motions, and the court also further directed counsel to amend the motions to suppress to allege facts that would require the granting of relief, and cautioned that failure to do so could result in dismissal.
Defendant failed to appear for court on April 8, 2008, although his counsel did appear. The trial judge granted the State's oral motion for bond forfeiture, and an attachment was issued for defendant's arrest. The trial court also dismissed defendant's pending motions, including the motions to suppress and the motion for preliminary examination. According to the minute entry, defense counsel objections were noted.
On August 14, 2008, defendant appeared for an adjudication for contempt of court for his failure to appear on April 8th. He was found to be in contempt and sentenced to serve six months "flat time" in parish prison. At that time, the trial court also granted counsel's motion to withdraw.
After defense counsel was allowed to withdraw, on August 28, 2008, new counsel from the Public Defender Office filed what he referred to as "standard IDB" omnibus *390 motions, which included motions to suppress statements, evidence, and identification, and motions for discovery and for preliminary examination. On September 11, 2008, the trial judge ruled that the discovery motion was moot because it had been previously satisfied. The court further denied the motion for preliminary examination and motions to suppress as untimely and without good cause under LSA-C.Cr.P. art. 521, and also noted that the same motions had been denied on April 8, 2008, and that the current motions to suppress did not allege facts specific to the case. The court provided that defendant's motion for an evidentiary hearing was denied until the facts requiring relief were alleged in the motion to suppress.
On October 21, 2008, defendant entered a Crosby plea, but did not specify the particular ruling he was reserving for review. Instead, defendant pled guilty to possession of cocaine under Crosby, reserving the right to appeal "any denial of his motions."
In this appeal, defendant alleges that the trial court erred in dismissing his motion for preliminary examination, and his suppression motions, without first conducting a hearing. He requests withdrawal of his pleas and that the State be required to prove the legality of the investigatory stop. He also alleges that the trial court erred in accepting his guilty plea without engaging him in any colloquy regarding the factual basis for the pleas.
A guilty plea normally waives all non-jurisdictional defects in the proceedings leading up to the guilty plea, and precludes review of such defects. However, upon entering a plea of guilty, a defendant may be allowed appellate review if he expressly reserves his right to appeal a specific adverse ruling. State v. Landry, 02-1242, p. 6 (La.App. 5 Cir. 4/29/03), 845 So. 2d 1233, 1236, writ denied, 03-1684 (La.12/19/03), 861 So. 2d 556.
In this case, the defendant pled guilty, reserving his rights with regard to the dismissal/denial of his suppression motions. Defense counsel stated that defendant had pled guilty in two separate proceedings (this one and one other), and that his plea in the other proceeding should also be subject to this appeal. The State agreed, stating that
... it is the State's position and agreement that if the Court takes the Crosby plea that's fine but we also then reserve our right to go forwardeffectively withdraw his plea in 08-4532 if for any reason he would be successful in 08-632 [the current case]. In other words, if the Court of Appeal says that his evidence should have been suppressed in the older case [the current case] then the defendant's plea is negated in 08-4532, and we start from scratch in that case.
Thereafter, the State introduced the police report and the transcript of co-defendant's motion to suppress into evidence, because as the assistant district attorney stated "... just so that a review in (sic) court would have facts to look at."
From the above discussion, it appears that defendant entered his guilty plea in the present case reserving his right to appeal the issue of whether the evidence against him was lawfully seized, and whether is would be admissible at trial, in addition to the issue of whether the court erred in dismissing his motions without a hearing. Because the trial court dismissed defendant's motions to suppress, it did not rule on the admissibility of the evidence.
The issue of admissibility was raised in appellant's brief, where he contends that the trial court erred in failing to make the State prove the admissibility of evidence thereby depriving him of his constitutional *391 due process rights, and appellee's brief, where the state contends that any error in the trial court's procedural rulings is harmless because (the State contends) the officers had reasonable suspicion to believe that the defendant had engaged in illegal drug activity and based on this, the stop and subsequent arrest was legal, and the trial court's failure to grant the motion to suppress was harmless. However, despite the State's exhibits at trial, this Court cannot rule on the admissibility of the evidence as a matter of first impression.
The Louisiana Supreme Court, in State v. Floyd, 07-0216 (La.10/5/07), 965 So. 2d 865, set forth the procedure to follow where a reviewing court cannot consider the merits of a defendant's suppression claim because there was no ruling by the trial court on the admissibility. In that case, the appellate court had vacated defendant's guilty plea where the trial court failed to complete the hearing and rule on defendant's motion to suppress evidence. After reversing the ruling of the appellate court, the Supreme Court remanded the matter, stating that:
This case is remanded to the district court for purposes of completing the hearing on the motion to suppress and for a ruling on the merits of the search issue. If the court rules favorably to the defendant on the motions, it shall provide him with the opportunity of withdrawing his guilty plea and pleading anew. In the event of an adverse ruling on his motion the trial court shall maintain the guilty plead defendant may again appeal his conviction and sentence to the court of appeal on the basis of his original Crosby reservation.
At page 865. See also State v. Walton, 06-2553 (La.6/10/07), 957 So. 2d 133, State v. Guillory, 06-2544 (La.6/1/07), 957 So. 2d 132.
For the above discussed reasons, this matter is remanded for further proceedings consistent with this opinion.
REMANDED WITH INSTRUCTIONS.
NOTES
[1] State v. Crosby, 338 So. 2d 584 (La.1976). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549986/ | 262 B.R. 407 (2001)
In re Jill T. THOMPSON, Debtor.
Robert R. Helfrich, Plaintiff-Appellee,
v.
Jill T. Thompson, Defendant-Appellant.
No. 00-8004.
United States Bankruptcy Appellate Panel of the Sixth Circuit.
Argued March 7, 2001.
Decided May 17, 2001.
*408 Charles D. Underwood, Jr., argued and on brief, Whitehall, Ohio, for Appellant.
Mark Albert Herder, argued and on brief, Columbus, Ohio, for Appellee.
Before BROWN, HOWARD, and MORGENSTERN-CLARREN, Bankruptcy Appellate Panel Judges.
OPINION
HOWARD, Bankruptcy Appellate Panel Judge.
The Defendant/Appellant herein appeals the bankruptcy court's Order and Judgment that a debt alleged to be owed to the Plaintiff/Appellee is nondischargeable pursuant to 11 U.S.C. § 523(a)(4). We reverse on the issue of whether a state court magistrate's decision constituted a final judgment and was therefore entitled to preclusive effect, and remand for further proceedings.
I. ISSUES ON APPEAL
Whether the bankruptcy court erred in giving a state court magistrate's decision preclusive effect in a dischargeability proceeding, and whether it made sufficient findings of fact to independently conclude that the subject debt was nondischargeable pursuant to 11 U.S.C. § 523(a)(4).
II. JURISDICTION AND STANDARD OF REVIEW
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Southern District of Ohio has authorized appeals to the BAP. The "final order" of a bankruptcy court may be appealed by right under 28 U.S.C. § 158(a)(1). Determinations of nondischargeability are final orders for purposes of appeal. Nat'l City Bank v. Plechaty (In re Plechaty), 213 B.R. 119 (6th Cir. BAP 1997).
Findings of fact are reviewed under the clearly erroneous standard. Fed. R.Bankr.P. 8013; Fed.R.Civ.P. 52(a). "`If the bankruptcy court's factual findings are silent or ambiguous as to an outcome determinative factual question, the [reviewing court] may not engage in its own fact-finding but, instead, must remand the case to the bankruptcy court for the necessary factual determination.'" Hardin v. Caldwell (In re Caldwell), 851 F.2d 852, 857 (6th Cir.1988) (quoting Newton v. Johnson (In re Edward M. Johnson & Assocs., Inc.), 845 F.2d 1395, 1401 (6th Cir.1988) (quoting Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th Cir.1987) (citations omitted))).
Conclusions of law are reviewed de novo. Nicholson v. Isaacman (In re Isaacman), 26 F.3d 629 (6th Cir.1994). "De novo review requires the Panel to review questions of law independent of the bankruptcy court's determination." First Union Mortgage Corp. v. Eubanks (In re Eubanks), 219 B.R. 468, 469 (6th Cir. BAP 1998) (citing In re Schaffrath, 214 B.R. 153, 154 (6th Cir. BAP 1997)). "The availability of collateral estoppel is a mixed question of law and fact which we review de novo." United States v. Sandoz Pharmaceuticals Corp., 894 F.2d 825, 826 (6th Cir.1990) (citing Plaine v. McCabe, 797 F.2d 713, 718 (9th Cir.1986)). See also Gonzalez v. Moffitt (In re Moffitt), 252 B.R. 916 (6th Cir. BAP 2000).
III. FACTS
This is an appeal from the Order and Judgment of the bankruptcy court entered on December 22, 1999, in an adversary proceeding in which the Plaintiff/Appellee, Robert R. Helfrich ("Helfrich"), sought to have a debt alleged to be owed to him by *409 the Debtor, Defendant/Appellant Jill Thompson ("the Debtor"), declared to be nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) and (4). After trial on the matter, the court ruled that the subject debt as set out in a state court "judgment" was nondischargeable. Upon receipt of the record on appeal, the panel determined that the case needed to be remanded for the limited purpose of having the bankruptcy court file supplemental findings of fact and conclusions of law. Those were filed on August 8, 2000.
The record before the panel shows that Helfrich brought suit against the Debtor in the Court of Common Pleas of Franklin County, Ohio, and that a magistrate of that court conducted a trial on February 26 and 27, 1998. The magistrate found that Helfrich and the Debtor entered into an arrangement under which she agreed to write checks on her credit union checking account for Helfrich, and he agreed to deposit sufficient funds into her account to cover those checks. Helfrich was involved in a divorce proceeding at the time. The Debtor leased property from Helfrich and he decided to compensate her for this arrangement by reducing her monthly rent payment from $450.00 to $200.00. The Debtor's credit union began placing holds on the third party checks which Helfrich deposited into her account, and Helfrich deposited $7,786.00 into the account to cover the checks. Helfrich also delivered five cashier's checks (totaling $10,733.00) to the Debtor, instructed her to hold them, and never authorized her to negotiate them. The magistrate rendered her Decision Following Jury-Waived Trial on June 9, 1998, granting a "judgment" against the Debtor in the principal amount of $18,519.00, plus interest. There is nothing in the record which indicates that the state trial court judge entered a judgment following the magistrate's decision.
The Debtor filed a Chapter 7 petition on June 23, 1998, and Helfrich filed his Complaint to Determine Dischargeability on September 28, 1998. The complaint refers to the debt owed to Helfrich by the Debtor as a judgment debt resulting from the state court magistrate's decision. In a two-part trial on the matter, on April 27, 1999, and December 13, 1999 (the Debtor had apparently not received notice of the first trial), the bankruptcy court heard testimony from Helfrich and the Debtor. At the conclusion of these proceedings, the court held that the debt was nondischargeable pursuant to 11 U.S.C. § 523(a)(4), based on the state court "judgment." The court made no findings of fact.
The bankruptcy court's Supplemental Findings of Fact and Conclusions of Law, provided after remand, state that Helfrich obtained a judgment against the Debtor in state court and that this judgment was entitled to preclusive effect as to the amount and nature of the debt. The bankruptcy court noted that "[t]he magistrate specifically found that the defendant had converted [$18,519] from the plaintiff. The magistrate, in declining an award of punitive damages, did not conclude that the defendant had acted fraudulently or with actual malice in converting the plaintiff's money." In referring to the trial it conducted in this matter the bankruptcy court went on to state:
In rendering its judgment, the Court concluded that the state court judgment was entitled to preclusive effect as to the amount and nature of the debt. The Court further concluded that under the facts of this case, the conversion amounted to "embezzlement" for purposes of 11 U.S.C. § 523(a)(4).
and
The defendant's fraudulent intent in taking the plaintiff's money was established by her actions after the plaintiff had *410 informed her that his divorce proceedings were over and that he would now be handling his own finances. The defendant not only put off the plaintiff's request for return of the cashier's checks at that time, but actually cashed the last of these checks subsequent to the plaintiff's request. Moreover, the defendant's testimony that the plaintiff gave her permission to cash these checks if she needed the money was not credible, and, therefore, constitutes further evidence of her fraudulent intent.
The latter was the bankruptcy court's only finding in regard to the testimony offered at trial.
IV. DISCUSSION
The state court magistrate's decision was not a final judgment and is not entitled to preclusive effect.
Normally the question of whether to give preclusive effect to a state court judgment in a dischargeability proceeding arises in the context of a motion for summary judgment. Here, however, a trial was conducted and the bankruptcy court failed to make any significant findings of fact. On remand for the purpose of providing supplemental findings of fact and conclusions of law, the bankruptcy court explained its reliance on the magistrate's decision ("judgment") and its findings and conclusions regarding the fraud necessary to find a debt nondischargeable pursuant to 11 U.S.C. § 523(a)(4).
A federal court is required to give a state court judgment the same preclusive effect that the judgment would have in state court. Corzin v. Fordu (In re Fordu), 201 F.3d 693 (6th Cir.1999); Rally Hill Prods., Inc. v. Bursack (In re Bursack), 65 F.3d 51 (6th Cir.1995). Here Ohio law controls. Recently, the Court of Appeals of Ohio in Harkai v. Scherba Industries, Inc., 136 Ohio App. 3d 211, 736 N.E.2d 101 (2000), addressed the question of whether a magistrate's decision was a final appealable order. The court discussed the difference between a judgment and a decision under Ohio law:
[A] "judgment" must be distinguished from a "decision." See Sup.R. 7(A); Civ.R. 58(A); William Cherry Trust v. Hofmann (1985), 22 Ohio App. 3d 100, 104, 22 OBR 288, 292, 489 N.E.2d 832, 835. Indeed, pursuant to Civ.R. 54(A), a judgment "shall not contain a recital of pleadings, the magistrate's decision in a referred matter, or the record of the prior proceedings." These matters are properly placed in the "decision." A decision announces what the judgment will be. The judgment entry unequivocally orders the relief. See St. Vincent Charity Hosp. v. Mintz (1987), 33 Ohio St. 3d 121, 123, 515 N.E.2d 917, 919.
Id. at 105. The court further stated:
Whereas Civ.R. 53(C)(2) permits magistrates to enter certain interlocutory orders that "regulate [the] proceedings," Civ.R. 53(E)(1) permits a magistrate only to "prepare, sign, and file a magistrate's decision," not a "judgment." See Barker v. Barker (1997), 118 Ohio App. 3d 706, 711, 693 N.E.2d 1164, 1167. Once a magistrate's decision has been filed and served upon the parties, the trial court must then act upon the decision. The parties are given the opportunity to object to the decision either before entry of judgment or within fourteen days thereafter. Although the judge entirely agrees with the decision of the magistrate, the judge must still separately enter his or her own judgment setting forth the outcome of the dispute and the remedy provided. See, e.g., Wellborn v. K-Beck Furniture Mart, Inc. (1977), 54 Ohio App. 2d 65, 66, 8 O.O.3d 93, 94, 375 N.E.2d 61, 62; Pace v. Pace (Oct. 8, 1996), Gallia App. No. 95 *411 CA 17, unreported, 1996 WL 595846. The judge is not permitted to conclude the case by simply referring to the magistrate's decision, even though it may appear more expedient to do so. (Footnote omitted)
Id. at 106. The Debtor filed her Chapter 7 petition fourteen days after entry of the magistrate's decision and nothing in the record indicates that a judgment was entered. Whatever the reason for the failure, the fact remains that there is no final, appealable state court judgment in the record which is entitled to preclusive effect and which may serve as a basis for the bankruptcy court's decision as to the amount and nature of the debt.
The bankruptcy court's findings of fact were insufficient to support the conclusion that the debt was nondischargeable pursuant to 11 U.S.C. § 523(a)(4).
Having concluded that the bankruptcy court erred in giving preclusive effect to the state court magistrate's decision, the panel next considers the question of whether the bankruptcy court made sufficient findings of fact to support the conclusion that the subject debt was nondischargeable as embezzlement. Section 523(a)(4) provides that a debtor does not receive a discharge of any debt "for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny[.]" 11 U.S.C. § 523(a)(4). Any finding based on the premise that there was a state court "judgment" is based on the bankruptcy court's continued "erroneous view of the law." Pullman-Standard v. Swint, 456 U.S. 273, 291, 102 S. Ct. 1781, 72 L. Ed. 2d 66 (1982).
The bankruptcy court's only independent finding from its trial of the matter did not address all the elements necessary to establish nondischargeability for embezzlement pursuant to 11 U.S.C. § 523(a)(4). In Brady v. McAllister (In re Brady), 101 F.3d 1165, 1172-73 (6th Cir.1996), the court stated the definition of and the elements necessary to prove embezzlement:
Federal law defines "embezzlement" under section 523(a)(4) as "the fraudulent appropriation of property by a person to whom such property has been entrusted or into whose hands it has lawfully come." Gribble v. Carlton (In re Carlton), 26 B.R. 202, 205 (Bankr.M.D.Tenn. 1982) (quoting Moore v. United States, 160 U.S. 268, 269, 16 S. Ct. 294, 295, 40 L. Ed. 422 (1895)). A creditor proves embezzlement by showing that he entrusted his property to the debtor, the debtor appropriated the property for a use other than that for which it was entrusted, and the circumstances indicate fraud. Ball v. McDowell (In re McDowell), 162 B.R. 136, 140 (Bankr. N.D.Ohio1993).
There are no factual findings regarding: (1) what property was entrusted to the Debtor[1]; (2) what property the Debtor appropriated and how it was misused; or (3) the amount of the debt. "Rule 52(a) does not require an exhaustive determination of all the facts. It simply requires that the findings be sufficient to indicate the factual basis for the court's conclusion." Semaan v. Allied Supermarkets, Inc. (In re Allied Supermarkets, Inc.), 951 F.2d 718, 726 (6th Cir.1991). The bankruptcy court must make factual findings addressing each of these elements in order *412 for its findings to be sufficient for purposes of review.
V. CONCLUSION
The decision of the bankruptcy court that the state court magistrate's decision is entitled to preclusive effect is REVERSED and the remainder of the judgment is VACATED for the reason that the findings of fact, as supplemented, are not sufficient to permit appellate review. The case is REMANDED for further proceedings consistent with this opinion.
NOTES
[1] Although the bankruptcy court's December 21, 1999 order and judgment refers to "an entrusted sum of $18,519.00," it is not clear that this is an independent finding. That court's erroneous reliance upon the magistrate's decision prevented the bankruptcy court from making sufficient independent findings of the required elements except for fraudulent intent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1024552/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-7028
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
JEFFREY A. PLEASANT, aka Jeffrey A. Pleasants,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. Robert E. Payne, Senior
District Judge. (3:00-cr-00071-REP; 3:06-cv-00366-REP)
Submitted: December 13, 2007 Decided: December 19, 2007
Before NIEMEYER, MOTZ, and SHEDD, Circuit Judges.
Dismissed by unpublished per curiam opinion.
Jeffrey A. Pleasant, Appellant Pro Se. Stephen Wiley Miller,
OFFICE OF THE UNITED STATES ATTORNEY, Richmond, Virginia, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Jeffrey A. Pleasant seeks to appeal the district court’s
order treating his Fed. R. Civ. P. 60(b) motion as a successive 28
U.S.C. § 2255 (2000) motion, and dismissing it on that basis. The
order is not appealable unless a circuit justice or judge issues a
certificate of appealability. 28 U.S.C. § 2253(c)(1) (2000);
Reid v. Angelone, 369 F.3d 363, 369 (4th Cir. 2004). A certificate
of appealability will not issue 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 that any assessment of the
constitutional claims by the district court is debatable or wrong
and that any dispositive procedural ruling by the district court is
likewise debatable. 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, 683-84 (4th Cir. 2001). We have independently
reviewed the record and conclude that Pleasant has not made the
requisite showing. Accordingly, we deny Pleasant’s motion for a
certificate of appealability, deny Pleasant’s motion for
appointment of counsel and dismiss the appeal.
Additionally, we construe Pleasant’s notice of appeal and
informal brief as an application to file a second or successive
motion under 28 U.S.C. § 2255. United States v. Winestock, 340
F.3d 200, 208 (4th Cir. 2003). In order to obtain authorization to
- 2 -
file a successive § 2255 motion, a prisoner must assert claims
based on either: (1) a new rule of constitutional law, previously
unavailable, made retroactive by the Supreme Court to cases on
collateral review; or (2) newly discovered evidence, not previously
discoverable by due diligence, that would be sufficient to
establish by clear and convincing evidence that, but for
constitutional error, no reasonable factfinder would have found the
movant guilty of the offense. 28 U.S.C. §§ 2244(b)(2), 2255
(2000). Pleasant’s claims do not satisfy either of these criteria.
Therefore, we deny authorization to file a successive § 2255
motion.
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
- 3 - | 01-03-2023 | 07-05-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/409118/ | 689 F.2d 72
Bennie BRYANT, Plaintiff-Appellee,v.TRW, INC., Defendant-Appellant.
No. 80-1380.
United States Court of Appeals,Sixth Circuit.
Argued Oct. 9, 1981.Decided Sept. 20, 1982.
Roselyn C. Komisar, Sidney L. Frank, Frank & Stefani, Troy, Mich., Eric D. Green (argued), Boston University School of Law, Boston, Mass., for defendant-appellant.
Forrest Walpole (argued), Walpole, Holmes & Schrope, Caro, Mich., Sidney L. Frank, Troy, Mich., for plaintiff-appellee.
Before EDWARDS, Chief Judge, ENGEL, Circuit Judge, and PHILLIPS, Senior Circuit Judge.
GEORGE CLIFTON EDWARDS, Jr., Chief Judge.
1
Defendant, a credit reporting agency, appeals from an adverse judgment based on a jury verdict of $8,000 in actual damages and an attorney's fee award of $13,705, which resulted from a suit prosecuted by plaintiff, an individual who was seeking credit for the purchase of a house. The verdict represented a finding that defendant had supplied inaccurate information to a mortgage company and had thereby caused the denial of plaintiff's home loan application. The home loan was eventually approved.
2
The credit reporting agency was TRW Inc., an Ohio corporation; the prospective mortgagor was an individual named Bennie E. Bryant; and the mortgage company was the Hammond Mortgage Corporation of Southfield, Michigan.
3
The central issue in this case-which has stirred considerable interest in the credit industry-is whether or not defendant violated section 607(b) of the Fair Credit Reporting Act (FCRA),1 15 U.S.C. § 1681e(b), which reads:
4
Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.
5
Negligent noncompliance with any requirement of the FCRA gives rise to liability for "any actual damages" and "reasonable attorney's fees," FCRA § 617, 15 U.S.C. § 1681o; willful noncompliance, in addition, gives rise to liability for punitive damages, FCRA § 616, 15 U.S.C. § 1681n.
6
* The dispute that resulted in this appeal began to form in August 1976, when plaintiff applied to the Hammond Mortgage Corporation for a federally-insured home loan under a program administered by the Veterans' Administration. At the request of Hammond, defendant prepared a "consumer report"2 on plaintiff. For the background and outline of the instant litigation, we rely on the opinion of the District Judge:
7
Beginning sometime in the early 1970's defendant, one of the largest consumer reporting agencies in Michigan, issued consumer reports on plaintiff. On a number of occasions these consumer reports were inaccurate and on a number of occasions plaintiff discussed in person with representatives of defendant his concerns and also went to his creditors, principally retail merchants, in an endeavor to straighten out information sent to defendant on his accounts.
8
In May of 1976 defendant issued a consumer report in the form of a mortgage report on plaintiff in connection with a mortgage application on a house purchase. This consumer report contained inaccurate information on plaintiff's account with a retail merchant. Plaintiff went to defendant and called its attention to the inaccuracy. The mortgage loan did not close for unrelated reasons.
9
In August, 1976 plaintiff again signed a mortgage loan application for a home purchase. On September 7 the mortgage company ordered a consumer report in the form of a mortgage report. On September 28 an employee of defendant called the mortgage company to advise that the mortgage report would contain four items of derogatory information on plaintiff. The mortgage company immediately advised plaintiff. Plaintiff the same day went to defendant's office and discussed in detail the four items. Three of these items did not appear in the May report even though at least one of these items related to events prior to May, 1976 and logically should have been part of the May report. Subsequent to September 28 the creditors involved advised defendant the information they previously furnished was erroneous.
10
At the September 28 personal meeting between plaintiff and a representative of defendant, a memorandum was placed in plaintiff's file which reads:
11
"9-28-76 Cus' wanted us to re-check Ford Mtr Credit.-showed 616 late charges on most recent clearing (read to mortg. company-file not typed yet). Recleared thru adjuster FMC.-wanted it shown as pd. acc't.-Gone to Mabel. Told cus. I would review file before it was sent. Also gave him copy of Mgr. attention which is read to creditors. JJW."
12
The mortgage report was sent to the mortgage company on September 30 in its original form without any further attempt on defendant's part to verify the derogatory items.3
13
The mortgage loan was initially denied on the basis of the mortgage report. Subsequently, with a revision in the mortgage report and through plaintiff's personal efforts the mortgage loan closed.
14
Plaintiff testified as to the embarrassment, anxiety, humiliation and emotional stress he suffered as a consequence of his difficulties over the two reports. No out-of-pocket expenses or actual dollar losses were proven.
15
Bryant v. TRW, Inc., 487 F.Supp. 1234, 1346-37 (E.D. Mich. 1980).
16
At the close of evidence, the District Judge read the following, and we think correct, instructions to the jury:
17
The Fair Credit Reporting Act required that TRW, Inc., when it prepared a consumer report on Bennie Bryant, follow reasonable procedures to assure maximum possible accuracy of the information concerning Mr. Bryant.
18
If you find that TRW, Inc. was negligent in following the requirements of the law, you should award Mr. Bryant the actual damages sustained by him because of such negligence.
19
If you find TRW, Inc. willfully failed to follow the requirements of the law, Mr. Bryant is entitled to his actual damages and you may also award punitive damages.
20
If you find TRW, Inc. followed reasonable procedures you should find for it.
21
App. 355-56.
22
The jury returned a verdict of $8,000 in actual damages; it awarded no punitive damages. The trial judge granted plaintiff's motion for attorney's fees in the amount of $13,705, which was calculated on the basis of an hourly rate.
23
Defendant filed a motion for judgment n.o.v. and an alternative motion for a new trial, arguing principally that section 607(b) of the FCRA does not give rise to liability when a consumer reporting agency, like defendant, accurately reports the information it receives from a consumer's creditors. The motions were denied. Bryant v. TRW, Inc., 487 F.Supp. 1234 (E.D. Mich. 1980).
II
24
The September 30 mortgage report, as noted by the District Judge in his factual summary, contained "four items of derogatory information on plaintiff." They were:
25
Ford Motor Credit 4-72 high $3700 auto reported
3-75 paid account, was 17
times 30 days late.
Hughes & Hatchers open for over 10 years limit
$700 high $174 balance $159
was 30 days delinquent is now
current.
J.L. Hudsons-time pay opened 3-75 limit & high $500
balance $285 $22.00 past due 30
days delinquent.
Grinnells opened 3-76 high $231.16 24 @
$11.96 last paid 8-15-76 due
for 7-22-76, as of 9-2-76.
26
App. 390.
27
A review of the testimony in this record indicates to us that in the instance of at least two of the four entries set out immediately above, Hudson's and Grinnell's, plaintiff presented evidence from which the jury could have found inaccuracies that contributed meaningfully to the October 26, 1976, denial of plaintiff's home loan application.
28
Based on the testimony of Joseph L. Busher, Jr., the manager of Hudson's Customer Credit Relations Department, we think the Hudson's entry was an inaccurate (and misleading) description of plaintiff's status with Hudson's. Busher explained that a customer with a time payment account is obligated to make a minimum payment every month. App. 151. A payment in excess of the minimum would not affect that obligation. If no payment is made in a given month, the account is considered to be "one payment delinquent" on the first day of the following month. App. 158. Payments made thereafter are credited first to the delinquency and then to the current monthly obligation.
29
Plaintiff's minimum monthly payment was $22 in 1976. As his payment record, App. 362, indicates, he missed his payments in December 1975 and February 1976. Those delinquencies were made up with double payments in April and May 1976. He then made his June payment, so as of that time plaintiff was paying as agreed and was not delinquent.
30
Plaintiff made two $22 payments in July, which, of course, satisfied his July obligation. However, they did not cancel his August obligation. No payment was made in August, so as of September 1 plaintiff's account was one payment delinquent. A $22 payment was made September 2. Although this rectified the August delinquency, App. 159-60, the September payment remained due. However, plaintiff had until the last day of September to make his September payment, App. 160, and thus, the account could be considered delinquent again no earlier than October 1.
31
On September 28, defendant's tentative report listed plaintiff's account as 30 days delinquent. And on September 30 the mortgage report indicating the same was issued.
32
The Hudson's entry was inaccurate for two reasons. First, on September 30 Bryant's account was not delinquent. Second, as Busher testified, delinquencies in time payment accounts are measured in terms of payments, not days:
33
Q As of the 1st day of September he was delinquent for the August payment, right?
34
A Right, sir.
35
Q At that point isn't he one day delinquent?
36
A No, he is delinquent a payment.
37
App. 159.
38
Turning to the Grinnell's entry, it is clear that plaintiff disputed the information when he met with the manager of defendant's consumer relations department, Jan Wilkins, on September 28. Wilkins called Grinnell's, and Grinnell's confirmed the information as well as the date on which it was issued: the printout containing the information was dated September 2. App. 328. Accurate on September 2, the printout became stale and on September 28 was plainly inaccurate, for plaintiff had made payments on September 3 and September 20.4
39
As to Hughes & Hatcher and Ford Motor Credit, while plaintiff presented testimony as to some inaccuracies, it seems doubtful to us that this testimony could have affected the verdict. In any event, plaintiff's claims of inaccuracies and damage which flowed therefrom along with defendant's rebuttal on both scores were all fully submitted to the jury for its consideration. We feel the submission was appropriate and that the balance between the competing factual claims was properly struck by the jury in its relatively modest verdict in favor of plaintiff.
III
40
The critical issue in this appeal, however, is whether or not the case should have been submitted to the jury at all. Defendant does not contest many of the inaccuracies. Its basic defense is that the inaccuracies were those of plaintiff's creditors and that, under section 607(b), all it had to do was report accurately whatever information the creditors furnished.
41
Thus, it appears to this court that the critical legal issue in this case is whether or not section 607(b) requires a consumer reporting agency to do more than correctly report the information supplied to it by creditors. Reviewing the language and legislative history of the statute, we answer this question affirmatively.
In this regard, section 607(b) provides:
42
Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.
43
15 U.S.C. § 1681e(b).
44
Acceptance in full of the position urged on this court by defendant and amicus curiae Associated Credit Bureaus, Inc. would, we believe, serve essentially to repeal by judicial decree a statute that Congress adopted after much consideration in lengthy hearings. Congress chose to require consumer reporting agencies to "follow reasonable procedures to assure maximum possible accuracy of the information about whom the report relates."
45
Although the legislative history of section 607(b) is sketchy and compels neither acceptance nor rejection of defendant's position, two aspects of that history dealing with amendments to the original Senate bill insisted on by the House conferees support a broad reading of the duties imposed by the statute:
46
(1)
47
procedures to insure accuracy
48
The Senate bill required reporting agencies who prepared investigative reports to follow reasonable procedures to assure the maximum possible accuracy of such report. The House conferees felt that this requirement should be extended to all reporting agencies, whether they prepared investigative reports or conventional credit reports. The Senate conferees felt that this was a reasonable requirement and accepted the House amendment.
49
116 Cong. Rec. 35940 (1970) (remarks of Sen. Proxmire introducing the conference report).
50
Investigative consumer reports contain "information on a consumer's character, general reputation, personal characteristics, or mode of living," which is gathered through personal interviews. 15 U.S.C. § 1681a(e). These reports are generally used by employers in their hiring practices and by insurance companies and are put together with greater care than conventional credit reports because of the sensitive and subjective nature of the information involved and the manner in which the information is obtained. See generally Millstone v. O'Hanlon Reports, Inc., 383 F.Supp. 269, 275 (E.D. Mo. 1974), aff'd, 528 F.2d 829 (8th Cir. 1976). We are persuaded that by extending to conventional credit reports the requirement of "reasonable procedures to assure maximum possible accuracy," Congress evinced its desire that agencies that assemble conventional credit reports be more than conduits of information and its belief that accurate credit information is as important as accurate personal information.
51
(2)
CIVIL LIABILITY FOR NEGLIGENT NONCOMPLIANCE
52
The House amendment to section 617 (15 U.S.C. § 1681o ), which was agreed to by the conferees, would establish liability for actual damages sustained as a result of ordinary negligence, instead of only as a result of gross negligence as provided in the Senate bill.
53
Conf. Rep. No. 1587, 91st Cong., 2d Sess., reprinted in 1970 U.S. Code Cong. & Ad. News 4411, 4416.
54
This tends to show, we believe, that Congress rejected the imposition of only a nominal standard of care on the credit reporting industry.
55
In sum, we hold that a consumer reporting agency does not necessarily comply with section 607(b) by simply reporting in an accurate manner the information it receives from creditors.
IV
56
Each case under this statute will vary on the facts, and each must be judged on its own merits. It is clear, as defendant contends, that liability does not flow automatically from the fact that a credit reporting agency, such as defendant, reports inaccurate information. Hauser v. Equifax, Inc., 602 F.2d 811, 814-15 (8th Cir. 1979); see Austin v. Bankamerica Service Corp., 419 F.Supp. 730, 733 (N.D. Ga. 1974). Instead, liability flows from failure to follow "( (1) ) reasonable procedures ( (2) ) to assure maximum possible accuracy of the information ( (3) ) concerning the individual about whom the information relates." We agree with the Fifth Circuit and the District Judge that "(t)he standard of conduct by which the trier of fact must judge the adequacy of (consumer reporting) agency procedures is what a reasonably prudent person would do under the circumstances." Thompson v. San Antonio Retail Merchants Association, 682 F.2d 509, 513 (5th Cir. 1982) (per curiam) (citing Bryant v. TRW, Inc., 487 F.Supp. 1234, 1242 (E.D. Mich. 1980)).
57
The salient facts with respect to the question whether defendant followed reasonable procedures before it issued the mortgage report on September 30 include (1) defendant's prior contact with plaintiff and, in particular, its familiarity with plaintiff's troubled credit history with Hudson's, which centered on two disputes arising from errors made by Hudson's, see App. 359-61, 375, and (2) the September 28 meeting between plaintiff and defendant's consumer relations manager, at which plaintiff fervently complained about three and perhaps all four of the four pieces of derogatory information on the tentative report furnished to the Hammond Mortgage Corporation. Absent these facts, we would have a quite different case. However, they exist and are relevant to this case, and the District Judge was correct in admitting them into evidence.
58
Defendant's effort to "assure maximum possible accuracy of the information" in the mortgage report comprised two phone calls, the record indicates. The calls, one to Hudson's, the other to Grinnell's, simply reconfirmed the information-inaccurate information it turns out-furnished earlier to defendant by the creditors concerned.
59
On the record of this case, we believe that defendant was required to do more under section 607(b). It would have taken little added effort immediately to advise the creditors of plaintiff's complaints and to request investigation and re-evaluation based on the most recent data. And it would have taken little added effort to ask Hudson's how they calculated that defendant was 30 days delinquent or to ask Grinnell's if any payments had been made after September 2. Although the inaccuracies were eventually corrected, the corrections were made after the rejection of plaintiff's home loan application, his consequent frustration, and the denigration of his name and creditworthiness.
60
In this record, we call attention to the language of one of the House sponsors of the FCRA. On October 13, 1970, Representative Sullivan said concerning the Act:
61
It would be difficult to predict which of the many provisions of H.R. 15073 will turn out to be the most significant from a long-range standpoint; all of the sections of H.R. 15073 have importance to some aspect of our economy and to the public interest. But in an era of expanding consumer credit and proliferating techniques for managing or handling such extension of credit, and in view of the increasing importance to the individual of having access to insurance as well as the vital necessity of being able to find employment, I believe that the sections of this bill dealing with credit and personal data reporting will have the greatest overall impact. The reason I say that is that with the trend toward computerization of billings and the establishment of all sorts of computerized data banks, the individual is in great danger of having his life and character reduced to impersonal "blips" and key-punch holes in a stolid and unthinking machine which can literally ruin his reputation without cause, and make him unemployable or uninsurable, as well as deny him the opportunity to obtain a mortgage to buy a home. We are not nearly as much concerned over the possible mistaken turn-down of a consumer for a luxury item as we are over the possible destruction of his good name without his knowledge and without reason.
62
The loss of a credit card can, of course, be expensive, but, as Shakespeare said, the loss of one's good name is beyond price and makes one poor indeed. This bill's title VI deals with that problem.
63
116 Cong. Rec. 36570 (1970) (emphasis added).
64
We have no doubt from this record that plaintiff offered proofs from which the jury could properly have found that defendant's failure in timely fashion to use "reasonable procedures to assure maximum possible accuracy" occasioned damage to plaintiff's name and consequent anguish and humiliation.
V
65
Furthermore, we do not find any reason to set aside the District Judge's award of attorney's fees. It appears that he followed this court's standards in Northcross v. Board of Education, 611 F.2d 624 (6th Cir. 1979), cert. denied, 447 U.S. 911, 100 S.Ct. 2999, 64 L.Ed.2d 862 (1980). We have no doubt that Congress intended in authorizing attorney's fees in lawsuits under the FCRA, 15 U.S.C. §§ 1681n, 1681o, to make use of the private attorney general concept. Cf. Albermarle Paper Co. v. Moody, 422 U.S. 405, 415, 95 S.Ct. 2362, 2370, 45 L.Ed.2d 280 (1975) (Title VII of the Civil Rights Act of 1964); Northcross v. Board of Education, 412 U.S. 427, 428, 93 S.Ct. 2201, 2202, 37 L.Ed.2d 48 (1973) (per curiam) (Emergency School Aid Act of 1972); Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 401-02, 88 S.Ct. 964, 965-66, 19 L.Ed.2d 1263 (1968) (per curiam) (Title II of the Civil Rights Act of 1964); see also Northcross v. Board of Education, 611 F.2d 624, 633 (6th Cir. 1979) (Civil Rights Attorney's Fee Award Act of 1976), cert. denied, 447 U.S. 911, 100 S.Ct. 2999, 64 L.Ed.2d 862 (1980).
66
The fact that the attorney's fees in this case, $13,705, exceeded plaintiff's actual damages, $8,000, does not argue for a reduction of the former. The fees were calculated on the basis of an hourly rate, but defendant contends that the purpose of the FCRA's allowance for attorney's fees could be as efficaciously achieved by calculating fees on the basis of a contingent fee.
67
We reject this contention because we believe that the policies informing the Civil Rights Attorney's Fee Award Act of 1976, 42 U.S.C. § 1988, which led this court in Northcross to "conclude that a fee calculated in terms of hours of service provided is the fairest and most manageable approach," 611 F.2d at 636, apply with equal force to the FCRA. In a recent housing discrimination case, this court observed:
68
The purpose of Section 1988 is to encourage lawyers to accept civil rights cases in which damages may be small, nominal or nonexistent. Northcross has the effect of guaranteeing that a lawyer will be awarded fees for all of his hours reasonably spent in presenting the issues on which his side prevailed. Greatly reduced fees, such as were awarded in this case, will discourage lawyers from accepting housing discrimination cases and vindicating the rights Congress had in mind. Another reason for following Northcross is the need for consistency in determining attorney fees.
69
Kinney v. Rothchild, 678 F.2d 658, 660 (6th Cir. 1982) (per curiam).
VI
70
While other issues are argued with vigor by defendant and amici, we feel they are adequately answered in the District Court opinion. For the reasons given above and those further explicated in Judge Cohn's opinion, the judgment of the District Court is affirmed.
1
The Fair Credit Reporting Act, Pub. L. No. 91-508, 84 Stat. 1127 (1970), is codified at 15 U.S.C. §§ 1681-81t
2
Although the document prepared by defendant is known in the industry as a "mortgage report," it is a "consumer report" within the meaning of the FCRA
The term "consumer report" means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for (1) credit or insurance to be used primarily for personal, family, or household purposes ....
FCRA § 603(d), 15 U.S.C. § 1681a(d).
3
We do not entirely agree with the District Judge's conclusion in this paragraph and elsewhere in his opinion that, aside from whatever effort it made to check the Ford Motor Co. entry, defendant made no attempt between September 28 and September 30 to verify or recheck the derogatory information contained in the mortgage report. Bryant v. TRW, Inc., 487 F.Supp. 1234, 1237, 1239 (E.D. Mich. 1980). The record reflects that the manager of defendant's consumer relations department telephonically contacted at least two of the four creditors involved after the meeting of September 28 and before the report was issued. App. 328-29. The two creditors repeated the same information they had conveyed earlier, see id., and defendant, therefore, did not amend the report. But, in addition, the record shows that defendant's employee made no effort to confirm the accuracy of their representations, see id., which were later found by the jury to be inaccurate
4
Not only was the Grinnell's entry inaccurate because it was stale, it was inaccurate because it did not reflect the information transmitted to defendant by Grinnell's. Although the entry reads in part, "last paid 8-15-76 due for 7-22-76," Wilkins' testimony included the following exchange:
Q Did you call Grinnell's?
A Yes, I did.
Q What information did you receive from them?
A My notes show:
"Last paid 7-22, due 8-15 as of 9-30," and that was a printout from 9-2.
Q What does that all mean in everyday language?
A Well, it meant as of a printout that they had dated 9-2 Mr. Bryant had last paid on his account 7-22, and he was still due for 8-15, for his August 15th payment.
App. 328. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/2300773/ | 43 A.3d 519 (2012)
COM.
v.
YOUNG.
No. 743 WDA 2011.
Superior Court of Pennsylvania.
January 13, 2012.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1595156/ | 954 So. 2d 10 (2005)
Cedric E. JOHNSON, Sr.
v.
Terri POPE.
No. 2040860.
Court of Civil Appeals of Alabama.
July 12, 2005.
Decision without published opinions. Transferred to Sup. Ct. for lack of subject-matter jurisdiction. | 01-03-2023 | 10-30-2013 |
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